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November 5, 1986


The opinion of the court was delivered by: NEWCOMER


 The Court has now considered the testimony that has been presented in this case, as well as arguments of counsel for both sides, and is prepared to make its Findings of Fact and Conclusions of Law and Decision.


 1. Defendant, Edward Gregory Redovan, M.D., is a thirty year-old doctor serving a pre-residency fellowship in ophthalmology at Soll Eye Associates in Philadelphia, Pennsylvania.

 2. On April 10, 1979, Redovan, then a medical student at the Temple University School of Medicine, applied for a scholarship award through the National Health Service Corps (NHSC) Scholarship Program.

 3. The Scholarship Program was established by Section 751 of the Public Health Act, currently codified at 42 U.S.C. § 2541.

 4. Also on April 10, 1979, Redovan intelligently and voluntarily executed a NHSC Scholarship Program Contract in which he agreed to serve one year of obligated service for each year the scholarship award was provided, with a minimum obligation of 2 years. The contract also specifically provided and Redovan agreed to:

4. Serve in the full time clinical practice of his or her profession (a) as a commissioned officer in the Regular or Reserve Corps of the Public Health Service or as a civilian member of the Corps in a health manpower shortage area designated under Section 332 of the Public Health Service Act to which the applicant is assigned.

 5. Redovan subsequently applied for continuation of the NHSC Scholarship for the academic years of July 1, 1980 through June 30, 1981 and July 1, 1981 through June 30, 1982. In accordance with the scholarship application and continuation applications, scholarship awards were made by the NHSC totalling $42,846.00.

 6. Under the terms of the Scholarship Contract, Redovan was obligated to serve three (3) years in the National Health Service Corps following completion of his academic training.

 7. Redovan graduated from medical school in June 1982 and commenced a one year post graduate clinical program in general surgery at Albert Einstein Hospital. The NHSC granted Redovan a one year deferment of the commencement of his service obligation for the period of July 1, 1982 through June 30, 1983. Before Redovan began his general surgery residency, he knew that the residency program entitled him only to a one year deferment in his service obligation to NHSC.

 8. At the time of the agreement to the deferral, NHSC advised Redovan that scholarship recipients who request one year deferments to train in general surgery must provide documentation that the surgery rotation included at least 3 months of primary care rotations in internal medicine, pediatrics or emergency room. Redovan was specifically advised that, "No more than one year of general surgery training will be approved."

 9. In July or August, 1982, Redovan was provided by the NHSC with a Site Selection questionnaire so that he could indicate his placement preference for serving his obligation to the Public Health Service upon expiration of his one year deferral.

 10. Redovan failed to complete the site selection questionnaire and submit it to the NHSC until late February 1983. Seven months elapsed between the time Redovan received the site selection questionnaire and the time he submitted the completed questionnaire to NHSC. By the time NHSC received Redovan's site selection questionnaire NHSC had, for some months, been involved in assigning other scholarship participants to NHSC sites. Thus, when Redovan finally submitted his questionnaire, most, if not all, of the popular regions within the NHSC had been filled. As a consequence, Redovan was assigned to the Indian Health Service ("IHS"), in the North Dakota, South Dakota and Montana region. The public health service believed that this assignment allowed the best use of Redovan's qualifications to fill the greatest need.

 11. Redovan was assigned to the IHS and that particular geographic area according to the normal procedures of the Public Health Service for those individuals not otherwise assigned at that late date.

 12. On March 9, 1983, Redovan was notified of his assignment to the Indian Health Service in the IHS Aberdeen, South Dakota or Billings, Montana areas. Redovan was advised to contact recruiters in the two areas to complete the placement process, and was advised of his options to serve either in the Commissioned Corps of the Public Health Service or under the Civil Service.

 13. On June 13, 1983, Redovan informed the NHSC, through John T. Gimon, Acting Chief, Physician Recruitment, Retention and support Branch of the NHSC Program, of his intention to default on his service obligation.

 14. On July 20, 1983, upon Redovan's failure to commence his service obligation on July 1, 1983, Redovan was placed in default of his service contract.

 15. On July 20, 1983, Redovan was advised that, due to his default, he was required to pay three times the amount of all NHSC Scholarship funds paid to him or on his behalf plus interest, subject to credits for service actually performed. Redovan was also advised that, pursuant to the Scholarship Contracts he had entered into, that interest accrued from the date of each scholarship payment made to him or on his behalf, said interest accruing at the maximum prevailing rate as determined by the Treasurer of the United States. As of the date of default, July 1, 1983, Redovan owed $172,041.92 representing $125,538.00 in tuition, stipends and other costs, plus interest of $46,503.92. Redovan was requested to repay this amount by June 30, 1984, i.e. within one year of the default, in accordance with the Contracts he had signed.

 16. Redovan did nothing to attempt to cure his default or work out some arrangement to do so agreeable to the NHSC for nine months. Finally, by letter dated April 27, 1984, Redovan acknowledged his breach of contract and expressed his wish to complete his service obligation after the completion of his five year surgical residency, in blatant disregard of the known policy to allow only one year of deferral for surgical residencies.

 17. Redovan was advised on June 14, 1984, that the NHSC might permit him to serve in lieu of repayment if he agreed to accept an assignment within 6 months, at a site selected by the NHSC, and if he completed a Forebearance Agreement and returned same to the NHSC within two weeks. Redovan did not return the Forebearance Agreement as specified.

 18. On November 30, 1984, Redovan was again reminded that he was in default, that his financial obligation, by then $202,853.28 was due by December 30, 1984. Another Forebearance Agreement was sent him, if he wishes to serve his obligation with the NHSC instead of financial repayment.

 19. By letter dated January 18, 1985, Redovan again requested that he be permitted to serve his obligation in lieu of repayment. By letter dated February 12, 1985 from the NHSC, Redovan was again advised that he would have to submit a notarized Forebearance Agreement within 2 weeks, Redovan was also advised that, "Your signed and notarized FA means that you agree to fulfill your obligation as a primary care health professional in a high priority health manpower shortage area to be determined by NHSC," and that, pending receipt of the Forebearance Agreement and acceptance of the agreement by the Division of Health Services Scholarships (DHSS) he would remain in a ...

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