author: SHADUR, District Judge.

text:
    RICHLAND INDUSTRIES, LTD., Plaintiff, v. Loran ROBBINS, et al., Defendants.
    No. 84 C 10105.
    United States District Court, N.D. Illinois, E.D.
    Sept. 4, 1985.
    Michael H. Auen, Foley & Lardner, Madison, Wis., for plaintiff.
    Alan M. Levy, John E. Bardgett and Thomas J. Angelí, Chicago, 111., for defendants.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Richland Industries, Ltd. (“Richland II”) sues the Trustees (“Trustees”) of the Central States, Southeast and Southwest Areas Pension Fund (the “Fund”) to recover withdrawal liability payments made under Section 4062 of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended by the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA” or simply the “Act”), 29 U.S.C. § 1362. Richland II argues Trustees erroneously calculated the amount of withdrawal liability Richland II owed to the Fund by including the contribution history of Richland Industries, Inc. (“Richland I”), the corporation whose assets Richland II purchased.

Richland II and Trustees have filed cross-motions for summary judgment under Fed.R.Civ.P. (“Rule”) 56. For the reasons stated in this memorandum opinion and order, Richland IPs motion is granted and Trustees’ is denied.

Facts

From February 1, 1975 through July 11, 1979 Richland I submitted contributions to the Fund pursuant to a series of collective bargaining agreements (“CBAs”) with Teamsters Local 695 (“Local 695”). Rich-land I was a wholly-owned subsidiary of TSC Industries, Inc. (“TSC”),.which was in turn owned and controlled by Fuqua Industries, Inc.

On July 12, 1979 — before the Act became effective — Dallman Investments, Inc. (the same corporation that later, by name change, became Richland II) purchased the operating assets (both tangible and intangible, including good will) of Richland I in a going-concern transaction. Before that time Richland II and Richland I had been entirely separate, independent corporate entities (no officers, directors or stockholders of Richland II had been employees, officers or directors of Richland I). Nor did either acquire any stock of the other as a result of the asset transaction. After the sale Richland I ceased its business activities, stopped contributing to the Fund and changed its name to R.I. Liquidating, Inc. In 1981 it merged into TSC.

As part of its asset purchase, Richland II acquired the right to use the trade name “Richland Industries.” It changed its corporate name to Richland Industries, Ltd. and continued production of the same products as Richland I, in the same facility and with the same employees. Under the purchase agreement, Richland II assumed all Richland I’s future obligations under its CBA with Local 695. It immediately began contributing to the Fund as required by the CBA.

On November 30, 1981 the CBA Richland II had inherited expired. When the parties failed to negotiate a new agreement, on February 6, 1982 Local 695 went out on strike. On December 10, 1982 the NLRB decertified Local 695. That decertification permanently terminated Richland IPs obligation to contribute to the Fund, a cessation that constituted a “complete withdrawal” within the meaning of Act § 1383.

In late December 1982 Richland II re-, ceived from Trustees a request to file a “Statement of Business Affairs.” Though the request was addressed to Richland I rather than Richland II, the latter timely filed the statement. It did so however on behalf of Richland I, at the same time advising Trustees Richland II was an employer different from Richland I.

In December 1983 Trustees sent Rich-land II a notice and “Demand For Payment of Withdrawal Liability.” Again the notice was addressed to Richland I not Richland II. Trustees’ “Demand” claimed a withdrawal liability in the amount of $35,378.69, based on the contribution history of Rich-land I dating back to 1975. Trustees later recalculated the liability to $37,717.97.

Richland II objected to the inclusion of Richland I’s contribution history in the calculation of Richland II’s withdrawal liability and filed a Request for Review. Trustees denied the request on the grounds that (Stip. Ex. G):

(5) ERISA section 4204, as amended by MPPAA, contains successorship provisions for assets sales on and after the effective date of MPPAA but contains no provisions for pre-MPPAA assets sales. (6) With respect to pre-MPPAA assets sales involving labor law successors and the purchase of an on-going business, the Pension Fund has followed a consistent policy of including the seller’s contributions in any determination of the buyer’s withdrawal liability.
* * Jfs * * Is
For all of the reasons stated above, the Board of Trustees rejects the employer’s position and reaffirms the policy with respect to pre-MPPAA assets sales involving on-going businesses.

Richland II paid the Fund (under protest) over $17,000 on the disputed liability. Trustees have denied Richland II’s demands for a refund of those payments.

If Richland I’s contribution history were not attributed to Richland II, the latter would face no withdrawal liability at all (any liability attributable solely to Richland II falls below the de minimis threshold established by the Act). And Richland II has not challenged Trustees’ calculations except insofar as they include Richland I’s contribution history. Thus the cross-motions pose a sole — an all-or-nothing — issue: whether Richland II may be held liable under the Act for unfunded vested liabilities that accrued during Richland I’s regime.

Relevance of NLRA Successorship Doctrines

Trustees’ contention is that:

1. Nothing in the Act speaks to a pre-Act asset purchaser’s liability under the Act for the seller’s contribution history-
2. That silence justifies decision of the issue by reference to successorship doctrines developed under the National Labor Relations Act (“NLRA”).

But the NLRA cases and doctrines cited by Trustees really do not bear on the question here at all. Indeed, one of the cases Trustees themselves cite (Mem. 5), Howard Johnson Co. v. Detroit Local Joint Executive Board, 417 U.S. 249, 262-63 n. 9, 94 S.Ct. 2236, 2243-44 n. 9, 41 L.Ed.2d 46 (1974) (citations omitted and adapted to this case) emphasizes that Gertrude Stein’s “A rose is a rose is a rose” analysis does not apply here:

The question whether [Richland II] is a “successor” is simply not meaningful in the abstract. [Richland II] is of course a successor employer in the sense that it succeeded to operation of a [business] formerly operated by [Richland I]. But the real question in each of these “successorship” cases is, on the particular facts, what are the legal obligations of the new employer to the employees of the former owner or their representative? The answer to this inquiry requires analysis of the interests of the new employer and the employees and of the policies of the labor laws in light of the facts of each case and the particular legal obligation which is at issue, whether it be the duty to recognize and bargain with the union, the duty to remedy unfair labor practices, the duty to arbitrate, etc. There is, and can be, no single definition of “successor” which is applicable in every legal context. A new employer, in other words, may be a successor for some purposes and not for others.

Trustees first cite a host of NLRA cases for the noncontroversial proposition that when a successor employer voluntarily assumes the predecessor’s labor agreement, the successor is “fully responsible for the whole obligation” or “fully bound to every aspect of that agreement” (Trustees Mem. 7). That truism leads nowhere, for Rich-land II has concededly performed its only relevant obligation under the CBA: paying contributions into the Fund at a specified rate (Stip. Ex. A, Art. XXIV). No provision of the CBA even arguably deals with withdrawal liability payments. As such cases as Debrecini v. Healthco-D.G. Stoughton Co., 579 F.Supp. 296, 297-98 (D.Mass.1984) and T.I.M.E.-DC, Inc. v. Trucking Employees of North Jersey Welfare Fund, Inc., 560 F.Supp. 294, 297 (E.D.N.Y.1983) have recognized, withdrawal liability arises from the statute, not the CBA.

Trustees attempt to avoid the force of the Debrecini-T.I.M.E-DC line of cases by arguing NLRA also renders a successor liable for its predecessor’s statutory obligations, citing cases in which successors have been required to implement remedies imposed on their predecessors for the latters’ unfair labor practices. Richland II argues forcefully the NLRA policies motivating those decisions are inapplicable here. But there is an even more fundamental problem with Trustees’ approach: Richland I had no statutory liability for withdrawal payments at all. And because it did not, there was no derivative liability to be imposed on Richland II.

Thus Trustees miscast the issue when they speak in terms of forcing Richland II to shoulder Richland I’s obligations, for the latter had neither a statutory nor a contractual obligation to pay Fund any more than it did. Hence the current question is solely a matter of Richland II’s own obligations under the Act’s formulas, and that question can be decided only by reference to the Act itself and its legislative history.

Pre-Act Employer Withdrawals

To understand the Act, it is necessary to look first at the provisions of ERISA that preceded it. Pension Benefit Guaranty Corp. [“PBGC”] v. R.A. Gray & Co., — U.S. -, 104 S.Ct. 2709, 2713-15, 81 L.Ed.2d 601 (1984) explained both the structure of ERISA and the transition to the Act as to employers’ withdrawal liability.

ERISA was enacted in 1974, largely in response to the increasing number of terminations of pension plans before sufficient funds had been accumulated to pay vested benefits. One aspect of the legislation was the creation of PBGC, an insurer that collects premiums from covered plans and pays benefits to participants in those plans if the plans terminate with insufficient funds to cover guaranteed benefits.

Although PBGC automatically provided benefits to single employer plans, ERISA deferred its effective date for comparable automatic coverage of multiemployer plans. In the interim PBGC had discretion whether to provide benefits to beneficiaries of underfunded multiemployer plans upon termination of those plans. Employers participating in such plans were not necessarily liable, after withdrawal from the plans, for the underfunding of their employees’ vested benefits. For any withdrawing employer, such liability was contingent on:

1. the plan’s termination within five years of the employer’s withdrawal; and
2. PBGC’s discretionary decision to make payments to the employees after termination.

Only if PBGC exercised its discretion to insure employees of the terminated plan would PBGC assess withdrawal liability against any employer who had participated in the plan at any time in the last five years of its existence. That meant an employer escaped withdrawal liability altogether under ERISA if either (1) the plan continued in existence for five years after the employer’s withdrawal or (2) PBGC declined to provide benefits on plan termination. And in any event the employer’s liability was limited to 30% of the employer’s net worth.

Congress commissioned PBGC in 1978 to prepare a comprehensive report on the problems with ERISA’s treatment of multiemployer plans, in the meantime further deferring the mandatory coverage of such plans. PBGC’s July 1978 report, which provided the impetus for the Act, found ERISA failed adequately to protect plans from the adverse consequences of employer withdrawal. In fact ERISA actually encouraged early withdrawal from troubled plans because of:

1. the chance the contingent liability would never be triggered;
2. the fact the withdrawing employer could in any event defer liability until plan termination; and
3. the formulation under which the earlier an employer withdrew, the smaller its post-plan-termination liability would be.

And of course the 30%-of-net-worth cap on withdrawal liability also factored into the equation, for it allowed some employers to avoid paying even their otherwise-calculated share of unfunded vested liability.

On February 27, 1979 PBGC recommended to Congress a new system, under which an employer withdrawing from a multiemployer plan would be automatically liable for whatever share of the plan’s unfunded vested liability was attributable to that employer’s participation in the plan. Because Congress feared the prospect of such legislation would prompt a massive withdrawal from existing plans to avoid the proposed withdrawal liability, Congress early announced that whatever legislation it enacted would be retroactive to February 27, 1979, the date of PBGC’s proposal. Ultimately that retroactive date was changed to April 29, 1980.

Withdrawal Liability Under the Act

One of the Act’s provisions creates automatic withdrawal liability extending back even to an employer’s pre-Act contribution history. That retroactive application was upheld in Gray, 104 S.Ct. at 2717-20. But even though an employer may be held liable for its own pre-Act contribution history, it may not be held liable under most circumstances for the pre-Act contribution history of other employers. In particular, Act § 1384 clearly establishes that a purchaser of assets may not be held liable for the seller’s contribution history, absent a special arrangement with the seller by which the purchaser voluntarily assumes that liability. No such arrangement was made here. Under the unambiguous provisions of the statute, there is really no room to argue Richland II is liable for Richland I’s contribution history.

1. Application of the Act’s Formula to Richland II

Trustees’ basic position is that the Act’s silence as to the treatment of a pre-Act asset sale represents a “gap” that must be filled in by the courts. Examination of the Act, however, discloses no gap at all in its prescribing how to compute the liability of an asset purchaser that withdraws after the effective date of the Act. Instead the Act provides crystal-clear (albeit complex) formulas for calculating that liability.

Act § 1391(c) establishes a formula that precludes any consideration of the unfunded vested liabilities of Richland I, which concededly withdrew from the Fund upon its sale of assets in 1979. Under that formulation, Act § 1391(c)(2) calls for calculation of the total amount of the Fund’s unfunded vested liabilities for its last fiscal year ended before April 29,1980. Richland II’s liability is then computed by multiplying that figure by the following fraction (Act § 1391(c)(2)(B)(ii)(I) and (II)) (emphasis added):

the sum of all contributions required to be made by the employer under the plan for the last 5 plan years ending before April 28, 1980
[divided by]
the sum of all contributions made for the last 5 plan years ending before April 29, 1980 by all employers who had an obligation to contribute under the plan for the first plan year ending after April 29, 1980 and who had not withdrawn from the plan before such date.

It is plain “the employer” referred to in the numerator means the current employer whose liability is being calculated. And the denominator deals only with employers participating in the plan after the effective date of the Act. Thus each part of the fraction by its terms excludes Richland I’s contribution history.

Trustees do not dispute that clear reading of the formula’s language. Rather they seem to contend alternatively:

1. Richland I and Richland II should be considered a single “employer” for purposes of the formula.
2. General policy considerations behind the Act compel the inclusion of Richland I’s liability in the calculations.

Those arguments will be dealt with in turn (although neither requires extended discussion).

2. “Single Employer” Issue

There are explicit statutory provisions defining when successive employers can be considered a single “employer” for purposes of calculating withdrawal liability. ERISA § 1362(d) (left unchanged by the Act, and made applicable to multiemployer plans by Act § 1398) provides successor corporations will be liable for the contribution history of their predecessors after certain events:

(d) For purposes of this section the following rules apply in the case of certain corporate reorganizations:
(1) If an employer ceases to exist by reason of the reorganization which involves a mere change in identity, form, or place of organization, however effected, a successor corporation resulting from such reorganization shall be treated as the employer to whom this section applies.
(2) If ah employer ceases to exist by reason of a liquidation into a parent corporation, the parent corporation shall be treated as the employer to whom this section applies.
(3) If an employer ceases to exist by reason of a merger, consolidation, or division, the successor corporation or corporations shall be treated as the employer to whom this section applies.

It would distort that statute, with its specific enumeration of the kinds of acquisitions (ERISA § 1362(d)(3)) as well as the kinds of corporate restructurings (ERISA § 1362(d)(1) and (2)) to which a “single employer” rule applies, to insert a sale-of-assets acquisition — conspicuously absent from ERISA § 1362 and hence from Act § 1398.

In fact, the Act explicitly treats asset sellers and purchasers as separate employers. Section 1384 (in tandem with Section 1383(a)) establishes that an arms’ length sale of assets normally occasions a complete withdrawal from the plan by the seller. That subjects the seller to full withdrawal liability. And the purchaser undertakes no liability at all for the seller’s contribution history, unless the purchaser posts a special bond and the seller agrees contractually to assume secondary liability for its contribution history.

Although that statutory framework of Act § 1384 was not in effect at the time of the Richland I-Richland II asset sale, it is instructive for two reasons:

1. It wholly forecloses the possibility of considering Richland I and Richland II jointly as “the employer” under Act § 1391(c)(2)(B)(ii)(I).
2. It underscores just how implausible Trustees’ position is.

That last point may need a bit of explication. Trustees must concede that had the Act never become law, Richland II would not have been liable for Richland I’s unfunded vested liabilities under ERISA. And had the Act been enacted before the asset sale here, Act §§ 1383 and 1384 would have protected Richland II from liability for Richland I’s history (unless of course Richland II voluntarily assumed such liability, as it did not). It is thus wholly bizarre for Trustees to contend that although neither statute by its terms would saddle Richland II with Richland I’s liability, the transition from one statute to the other somehow (sub silentio) rendered Richland II so liable.

3. Policy Considerations

Finding no support at all in the language of the Act, Trustees attempt to override the statute by resort to its legislative history. That effort calls into play the reverse principle of statutory interpretation criticized by Justice Stevens, dissenting in Kosak v. United States, 465 U.S. 848, 104 S.Ct. 1519, 1531, 79 L.Ed.2d 860 (citation omitted):

Therefore, this is “a case for applying the canon of construction of the wag who said, when the legislative history is doubtful, go to the statute.”

Trustees urge a primary purpose of the Act was to render each employer liable for its proportionate share of liability. From that they reason it would be unfair to saddle the Fund’s other contributing employers with unfunded vested liability left by Richland II’s predecessor. Such fairness considerations, however, cut both ways. It would be at least equally unfair to saddle Richland II with Richland I’s liability, when it was the latter that obviously reaped the benefits of underfunding.

In all events, though, such policy considerations are far more appropriately addressed to Congress in the first instance than to the courts. And Congress specifically recognized, when it passed the Act, that plans would carry over unfunded vested liabilities from the ERISA withdrawal regime. When Congress moved the effective date of the Act forward from 1979 to 1980, it acknowledged that plans would necessarily bear the burden of swallowing the unfunded vested liability of employers (such as Richland I) who withdrew during that interim period {Gray, 104 S.Ct. at 2715, quoting 126 Cong.Rec. 510101 (July 29, 1980) (statement of Sen. Javits)):

The committees decided in part to move up. the date from February 27, 1979, the date contained in earlier versions of the bill, because the original purpose of a retroactive effective date — namely, to avoid encouragement of employer withdrawals while the bill was being considered — has been achieved. It should also be noted that the April 29 effective date is the product of strong political pressures by certain withdrawing employers who were caught by the earlier date. I realize that permitting these employers to avoid liability only increases the burdens of those employers remaining with the plans in question, but it appears necessary to accept the April 29 date in order to enact the bill before the August 1 deadline for action.

If any inference is to be drawn from legislative history, it is precisely the opposite of what Trustees claim. Congress deliberately chose to remove transactions in the gap period — February 27, 1979 to April 29, 1980 — from the impact of the Act. It would be irresponsible, in policy terms as well as in terms of statutory construction, to subvert the effects of that legislative choice as Trustees would ask. Effectively Congress opted to let Richland I off the hook, and Richland II cannot be forced to pay the price.

Indeed Congress was even willing to release employers withdrawing after the Act’s effective date from liability for certain of their own employees’ unfunded vested benefits that had accrued before the Act took effect. Thus Act § 1397 excludes from consideration in determining such an employer’s liability:

1. contributions made under a CBA under which the contribution obligation expired before the Act; and
2. contributions made for work performed at a facility if before the Act became effective;
(a) the facility had ceased operations or
(b) the contribution obligation with respect to the facility’s employees had ceased.

Plainly, then, Congress did not intend that the Act immediately eliminate all unfunded vested liabilities then in existence. Rather, the Act’s withdrawal liability provisions reflect a congressional attempt to institute a fair and prudent method for dealing with future withdrawals. And Trustees have failed to produce even a shred of evidence Congress intended to hold pre-Act arms’ length asset purchasers liable for the contribution histories of their predecessors.

4. Effect of Trustees’ Construction

One final point bears brief mention. Trustees try to engage in a bit of bootstrap-lifting by urging deference for their own reading (or as this opinion has demonstrated, misreading) of the operative rules of law. To that end they call on Wardle v. Central States, Southeast and Southwest Areas Pension Fund, 627 F.2d 820, 823-24 (7th Cir.1980). But Wardle simply gives strong credence to trustees’ readings of the plans they administer, for purposes of granting or denying plan benefits. That unexceptable principle does not extend to the interpretation of statutes, a task for which trustees are scarcely suited as experts generally (and for which Trustees here have shown they are specifically unqualified).

Conclusion

There is no genuine issue of material fact, and Richland II is entitled to a judgment as a matter of law. Trustee’s cross-motion for summary judgment is of course denied. This Court further finds Trustees’ legal position to have been sufficiently empty to justify the award to Richland II of the costs and expenses incurred in this action, including reasonable attorneys’ fees (Act § 1451(e)). Because the ultimate relief requested by the Complaint cannot be calculated from the Stipulation alone, this case is set for a further status report at 9:00 a.m. September 12, 1985.

      . All citations to Title 29 will take the form "Act § —” or "ERISA § — ’’ (in each instance using Title 29's numbering rather than the statute's internal numbering), depending on whether the provision was or was not modified or inserted anew by the Act.

      . Because the parties have stipulated to the facts, there is no need to apply the familiar rule requiring the drawing of inferences in favor of the party opposing summary judgment.

      . When Trustees advert to Richland II’s contractual undertaking as to the CBA, they conveniently omit or pass over the relevant limitation (Stip. Ex. B, Acceptance and Assumption of Collective Bargaining Agreement, emphasis added):

        In consideration of the above Assignment, the undersigned, [Richland II] hereby represents and agrees that it has examined the Agreement, that it accepts this Assignment of the said Agreement, and that it hereby assumes and agrees to perform, discharge and keep all promises, covenants, conditions and agreements under said Agreement on the part of [Richland I] to be performed, discharged and kept from and after the date hereof.

      Nothing in those future obligations spoke of, or even hinted at, withdrawal liability. And if they had, they would have embraced no more than an undertaking to pay Richland I’s liability— which the following text discussion explains was wholly nonexistent.


source: Caselaw Access Project

author: H. FRANKLIN WATERS, Chief Judge.

license: Public Domain

text:
    Cheryl Lynn JACKSON, Plaintiff, v. WARNER HOLDINGS, LTD., A Canadian Corporation, and Ruth Singer, Defendants.
    Civ. No. 85-2102.
    United States District Court, W.D. Arkansas, Fort Smith Division.
    Sept. 5, 1985.
    Buddy Garner, Fort Smith, Ark., for plaintiff.
    G. Alan Wooten, Warner & Smith, Fort Smith, Ark., for defendants.
   MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

The court has reviewed the file in this case and is prepared to rule on defendants’ 12(b)(6) motion. The facts as stated in the complaint allege that plaintiff, Cheryl Lynn Jackson, was a tenant in unit number 4400 of the Yorkshire Apartments owned by defendants herein when Charles Issac Wilson, Jr., entered her apartment without her consent and sexually assaulted and repeatedly raped her. Plaintiff asserts that she suffered damages as a result of the attack and that certain acts of negligence by the defendants were a proximate cause of her damages. The specific acts of negligence alleged by plaintiff are:

(a) In failing to provide reasonable and adequate security to prevent unauthorized persons from entering said apartments;
(b) In failing to provide adequate security devices such as dead bolt or tamperproof locks;
(c) In failing to provide adequate curtains or other devices to insure the privacy of the tenants of said apartments, and specifically, plaintiff herein;
(d) In failing to otherwise exercise ordinary care to insure the safety of plaintiff from criminal attacks;
(e) In failing to warn plaintiff that she should secure, for her own protection, adequate security devices;
(f) In failing to inspect and correct said apartments for adequate security devices.

Whether a landlord has a duty to provide adequate security in the form of door locks, lighting and security devices to protect tenants from criminal attacks by third persons has not been specifically decided by the courts in Arkansas. In diversity cases such as this, it is the duty of this court to apply the law of Arkansas and if no definitive rule regarding the issue at bar exists, it is the obligation of this court to rule as the Arkansas Supreme Court would rule if presented with the same question. See Erie Railroad Company v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Under the law of Arkansas, the question of what duty is owed is always a question of law and never one for the jury. W. Prosser, Law of Torts § 45; Keller v. White, 173 Ark. 885, 293 S.W. 1017 (1927); Missouri Pacific Railroad Co. v. Harelson, 238 Ark. 452, 382 S.W.2d 900 (1964). While there is no case directly on point with this issue, there are some Arkansas cases which address analogous issues and thereby provide the court with some guidance.

Three cases decided by the Arkansas Supreme Court between 1932 and 1983 reflect the progression of the law generally in regard to the extracontractual duties owed by landlords to their tenants.

In Joseph v. Riffel, 186 Ark. 418, 53 S.W.2d 987 (1932), the court held that “in the absence of statute or agreement, the landlord is under no legal obligation to light common passageways for the benefit of tenants.” See 186 Ark. at 420, 53 S.W.2d 987. The court did not equivocate in so ruling, and merely stated that its holding was in conformity with the “general rule.”

In Kilbury v. McConnell, 246 Ark. 528, 438 S.W.2d 692 (1969), the court followed Joseph, but not without some reluctance. In Kilbury the court held that in the absence of an express or implied agreement, a landlord is under no obligation or duty to remove such temporary hazards as a natural accumulation of ice and snow from a common stairway for the common use of his tenants. However, the court did not arrive at its decision without some reluctance. The court noted that “many courts have found favor with this rule which imposes upon the landlord the duty to exercise reasonable care with respect to keeping the premises free from accumulations of ice and snow.” In conclusion, the court stated “having previously held that a landlord is not obligated to light that portion of the premises reserved for common use, we cannot say that a landlord owes a duty to remove such temporary hazards as a natural accumulation of ice and snow from a common stairway____ There is no evidence at bar of any agreement or assumption of duty that removes the appellant from the general rule to which we are committed.” 246 Ark. at 532-33, 438 S.W.2d 692.

The law in this area has rapidly progressed in the past few years and that progression is reflected in Keck v. American Employment Agency, Inc., 279 Ark. 294, 652 S.W.2d 2 (1983).

In Keck the plaintiff sought employment through American Employment Agency and was referred to Gregory Devon Joiner who was pretending to be an employer. When Keck went to work, Joiner abducted and raped her. Reversing a directed verdict in favor of the defendant, the Arkansas Supreme Court held that the employment agency is burdened with the duty of exercising ordinary care in its relationship with Keck. “The employment agency created its relationship with Mrs. Keck by offering its services and thereby put itself in the position of owing a duty to her; and that duty in this case went beyond merely producing a man who claimed to be an employer.”

The court’s progression away from the older line of conservative cases is especially evident in the analogies drawn by the court which are very closely on point with the case now at bar.

Specifically, where a victim of a rape can show that a defendant who owed some duty to the victim, breached that duty, and could foresee that the breach might result in injury to the victim, and that breach was a significant factor in a rape, then a jury question of negligence exists. In other words, such cases should not be automatically dismissed. In O’Hara v. Western Seven Trees Corp. Intercoast, 75 Cal.App.3d 798, 142 Cal. Rptr. 487 (1977), a woman was raped in her apartment and she sued the landlord and rental agent for failing to take reasonable steps to protect her. The trial court sustained the defendant’s demurrer and dismissed the action. On appeal, the case was reversed holding that the plaintiff had a cause of action. See also Holley v. Mt. Zion Terrace Apts., 382 So.2d 98 (Fla.App.1980).
In Butler v. Acme Markets, Inc., 177 N.J.Super. 279, 426 A.2d 521 (1981), aff'd, 89 N.J. 270, 445 A.2d 1141 (1982), a woman who was assaulted in a supermarket parking lot, sued the store, and received a jury verdict, but the trial judge granted the defendant’s motion for a judgment notwithstanding the verdict. On appeal, the judge’s action was reversed, the court finding that liability for criminal attacks may be imposed where the harm is foreseeable and a reasonable person would have taken precautions against it.
In Duarte v. State [84 Cal.App.3d 729, 148 Cal.Rptr. 804 (1978)], supra, a student was raped in a university residence hall and sued the university. The university’s demurrer was sustained. On appeal the court reversed, holding that a cause of action was stated based on the duty of the university to anticipate the danger.
Of course, the Restatement of Torts and the cases cited do not demand a finding that the agency’s action in this case was negligence which was a significant cause of the rape. But what those authorities do indicate is that such situations can state a cause of action and may present a question for the jury.
A jury question is presented ... “In any case where there might be reasonable difference of opinions as to the foreseeability of a particular risk, the reasonableness of the defendant’s conduct with regard to it, or the normal character of an intervening cause.” W. PROSSER, supra, p. 290. This description fits exactly the facts in this case.

The progression of the law in Arkansas, as evidenced by the cases discussed above and in other jurisdictions, combined with the analogy to O’Hara mentioned in Keck, and the liberal rules regarding motions to dismiss, persuasively indicate that the Arkansas Supreme Court, if presented with the issue at bar would recognize a duty owed by a landlord to his or her tenants to employ reasonable security measures to avoid foreseeable criminal attacks by third persons.

A Rule 12(b)(6) motion is to be read as a whole, Continental Ore Co. v. Union Carbide and Carbon Corp., 370 U.S. 690, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962), and it is to be denied unless “it appears beyond doubt that the plaintiff can prove no set of facts in support of its claim which would entitle him to relief,” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); Bennett v. Berg, 710 F.2d 1361, 1363 (8th Cir.1983). Furthermore, complaints are to be “liberally construed in favor of the plaintiff.” See Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 1849, 23 L.Ed.2d 404 (1969), and United States v. Advance Machine Company, 547 F.Supp. 1085, 1088 (D.Minn. 1982). It has also been said that all facts pleaded in the complaint are taken to be true, for 12(b)(6) purposes. Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 740, 96 S.Ct. 1848, 1850, 48 L.Ed.2d 338 (1976), and all reasonable inferences from facts pleaded in the complaint are to be drawn and deemed to be true. See 5 Wright & Miller, Federal Practice and Procedure § 1363 at 667 (1969).

Based on the facts alleged in the complaint, the court cannot say that “it appears beyond doubt that the plaintiff can prove no set of facts in support of her claim which would entitle her to relief.” Therefore, the motion to dismiss will be denied.

A separate order in accord with this memorandum opinion will be entered contemporaneously herewith.


author: TASHIMA, District Judge.

text:
    BROWN & CALDWELL, etc., Plaintiff, v. INSTITUTE FOR ENERGY FUNDING, LTD., et al., Defendants.
    No. CV 84-5871 AWT.
    United States District Court, C.D. California.
    Sept. 5, 1985.

      H. James Wulfsberg, Jeffrey A. Sykes, Mama E. Mignone and Randall L. Kiser, Lempres & Wulfsberg, Oakland, Cal., for plaintiff, counter-defendant and third party plaintiff Brown & Caldwell.
    Richard C. Greenberg, David A. Gauntlett, Burkley, Moore, Greenberg & Lyman, Torrance, Cal., for third party defendant Grefco, Inc.
   MEMORANDUM OPINION AND ORDER

TASHIMA, District Judge.

This is a diversity action for breach of contract and quantum meruit in which counterclaims have been filed against plaintiff Brown & Caldwell, alleging breach of contract and negligence in connection with the performance of energy audit services at various facilities. Subsequently, Brown & Caldwell, as third-party plaintiff, filed a third-party complaint against three parties, including the movant Grefco, Inc. (“Grefco”), under F.R.Civ.P. 14. Claim One of the third-party complaint alleges that if Brown & Caldwell is liable to counterclaim-ants, then Grefco would be obligated to indemnify Brown & Caldwell. Claim Two alleges a similar claim against Grefco for partial indemnity. Grefco has moved to dismiss the third-party complaint for lack of subject matter jurisdiction, i.e., lack of diversity of citizenship between it and Brown & Caldwell. It is uncontroverted that both Brown & Caldwell and Grefco are citizens of California under 28 U.S.C. § 1332(c); therefore, that no diversity of citizenship exists between them.

Two issues are raised by this motion. First, whether Brown & Caldwell’s third-party complaint in the circumstances here is within the Court’s ancillary jurisdiction under Ninth Circuit precedent. Second, assuming the Court otherwise would have ancillary jurisdiction, whether, as Grefco contends, Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978), precludes Brown & Caldwell, as the original plaintiff, from filing a third-party complaint against a non-diverse third-party defendant. Since, as discussed below, the Ninth Circuit has consistently upheld ancillary jurisdiction under circumstances comparable to those here and since Owen Equip, is factually distinguishable from the case at bench, I conclude that Grefco’s motion should be denied.

Brown & Caldwell’s indemnity claims are ancillary to the original action. The Ninth Circuit has held consistently that a federal court may properly take jurisdiction over a party against whom a third-party claim for indemnity or contribution is asserted. See Burke v. Ernest W. Hahn, Inc., 592 F.2d 542 (9th Cir.1979) (jurisdiction proper over third-party complaint for indemnity ancillary to main action); Glens Falls Indem. Co. v. United States, 229 F.2d 370, 374 (9th Cir.1955) (where indemnity claim is ancillary to underlying action, no independent basis of jurisdiction need be asserted). However, in Safeco Ins. Co. v. Guyton, 692 F.2d 551, 555 (9th Cir.1982), the court expressed hostility towards the joinder of parties where there is no independent jurisdictional basis: “We have repeatedly held that parties may not be added to an action absent an independent jurisdictional base for inclusion and that pendent party jurisdiction will not substitute for complete diversity or a federal question.” (Footnote omitted.)

After a close reading of Safeco, I conclude that it does not constitute a bar to ancillary jurisdiction here. As an initial matter, the court in Safeco was not faced with an ancillary claim and did not discuss ancillary jurisdiction in its analysis. In fact, although reference is made in the text to a “third party complaint,” it is clear that the third-party defendant there was an additional defendant joined in a counterclaim under F.R.Civ.P. 13(h) and not a third-party defendant impleaded under Rule 14, as is the case here. 692 F.2d at 555 & n.4. Second, as noted above, jurisdiction over ancillary parties has been upheld consistently by this Circuit. Finally, since ancillary claims arise out of the subject matter of the original action and depend at least in part upon its resolution, substantial economies may result to the parties and the courts from hearing the ancillary claims together with the original action. Under these circumstances, it would be unwise to read Safeco as inconsistent with or narrowing this Circuit’s prior position on ancillary jurisdiction, at least with respect to Rule 14 impleader. The rule of Safeco should not be extended to the circumstances of this case. See Ahern v. Gaussoin, 104 F.R.D. 37 (D.Or.1984) (postNa/eeo case holding that court had ancillary jurisdiction over third-party complaint for contribution, but exercising discretion to dismiss).

The other issue raised by this motion is whether Owen Equip, applies to the instant case so as to deprive the Court of subject matter jurisdiction of the third-party complaint against Grefco. The Court’s jurisdiction over the primary action is premised on diversity pursuant to 28 U.S.C. § 1332(a)(1), which requires complete diversity between each plaintiff and each defendant. Owen Equip., 437 U.S. at 373, 98 S.Ct. at 2402. In Owen Equip., the plaintiff attempted to amend its complaint to assert a state law claim against a non-diverse third-party defendant whom the original defendant had impleaded. The Court was concerned that if plaintiff were permitted to assert such claims, the statutory requirement of complete diversity could be defeated “by the simple expedient of suing only those defendants who were of diverse citizenship and waiting for them to implead nondiverse defendants.” Id. at 374, 98 S.Ct. at 2402-03. The Court distinguished the situation before it from those involving ancillary jurisdiction over non-federal claims in situations involving impleader, cross-claims or counterclaims. The Court focused on two factors. First, the claim in Owen Equip, was not ancillary to the federal claim in terms of being dependent, at least in part, on the resolution of the primary lawsuit. Id. at 376, 98 S.Ct. at 2403-04. Second, the non-federal claim “was asserted by the plaintiff, who voluntarily chose to bring suit upon a state-law claim in a federal court. By contrast, ancillary jurisdiction typically involves claims by a defending party haled into court against his will....” Id.

Unlike the circumstances in Owen Equip., the indemnity claims asserted by Brown & Caldwell against Grefco are clearly ancillary to defendants’ counterclaim against Brown & Caldwell. The third-party complaint for indemnity is dependent, at least in part, upon the resolution of the underlying counterclaim and its relation to defendants’ counterclaim “is thus not mere factual similarity but logical dependence.” Id. at 376, 98 S.Ct. at 2403-04. Second, although like the plaintiff in Owen Equip., Brown & Caldwell is the plaintiff who commenced the original action, with respect to Grefco it is in fact a third-party plaintiff. In essence, Brown & Caldwell is impleading Grefco as part of its defense to defendants’ counterclaim. Impleader is one of the types of non-federal claims specifically mentioned in Owen Equip, as falling within a court’s ancillary jurisdiction. Id. at 375 n. 18, 98 S.Ct. at 2403 n. 18. Unlike the circumstance in Owen Equip., where the court noted that the only barrier to the naming of the impleaded defendant as defendant in the original action was the diversity statute, in the instant case, there was no logical reason for plaintiff to include Grefco as a defendant in the initial action because Grefco’s alleged liability to Brown & Caldwell is contingent on Brown & Caldwell’s liability to defendants on their counterclaim. Thus, unlike the plaintiff in Owen Equip., Brown & Caldwell is not strategically attempting to circumvent the requirements of the diversity statute. Accordingly, I conclude that this Court’s ancillary jurisdiction has been invoked properly and that Owen Equip, does not control in light of the circumstances here.

IT IS ORDERED that Grefco’s motion to dismiss Brown & Caldwell’s third-party complaint is denied. Grefco’s third-party answer shall be filed and served within 30 days.


author: COHILL, Chief Judge.

text:
    Linda T. LOPER, Plaintiff, v. ADVEST, INC., Defendant.
    Civ. A. No. 84-1819.
    United States District Court, W.D. Pennsylvania.
    Sept. 6, 1985.
    Alan C. Swensen, Swensen & Perer, Pittsburgh, Pa., for plaintiff.
    William S. Smith, Gondelman, Baxter, McVerry, Mulvihill, Smith, Yatch & Trimm, Pittsburgh, Pa., for defendant.
   OPINION

COHILL, Chief Judge.

Plaintiff has sued Defendant in this action for violations of federal securities law and various state laws in connection with the alleged wrongful liquidation of Plaintiff’s margin account. Presently before us is Defendant’s motion to dismiss, pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6). Defendant moves, alternatively, for a more definite statement pursuant to Rule 12(e).

Plaintiff, Linda Loper, is a citizen of Pennsylvania. Defendant Advest, Inc. (“Advest”) is a corporation organized under the laws of the State of Connecticut with its principal place of business in Hartford, Connecticut. Plaintiff’s claims are based on § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240, 10b-5 (1984), breach of contract, misrepresentation, and misrepresentation through nondisclosure. Plaintiff demands actual and punitive damages, as well as attorneys’ fees. Jurisdiction is based on diversity of citizenship, 28 U.S.C. § 1332 and federal question jurisdiction, 28 U.S.C. § 1331. FACTS

Advest is a brokerage firm which conducts securities transactions on behalf of its customers. It is a member of the New York Stock Exchange and is licensed as a broker-dealer by the Securities and Exchange Commission.

The amended complaint alleges that, on or about November 28, 1983, Plaintiff opened a margin account with Advest. Amended Complaint, ¶¶ 5, 6. On or about February 29, 1984, Plaintiff purchased 12,-000 shares of common stock of Gulf Oil Corporation (“Gulf”) through Advest, acting as Plaintiffs broker. Id. 117. On or about the same date, Plaintiff also purchased 120 Gulf “put” option contracts and sold 120 Gulf “call” option contracts. Id. 118.

Plaintiff alleges that, subsequent to these transactions, Defendant made a margin call on Plaintiff, allegedly advising Plaintiff that she had to deposit money or property in her account by March 9,1984 to cover the stock purchase, and by March 12, 1984 to cover the put and call option contracts. Id. ¶¶ 10, 11. Plaintiff alleges that this notification was made March 2, 1984.

Plaintiff alleges that, upon receipt of the margin call, she advised Defendant that all monies necessary to meet the margin requirements would be deposited in her account on March 7, 1984; she allegedly directed Defendant not to liquidate any open positions prior to that date. Id. 1112. Plaintiff alleges that Advest represented that this was satisfactory and that no action would be taken on the account before March 7.

Plaintiff further alleges that, on March 1, 1984, prior to the margin call on March 2, Defendant liquidated the put and call options at a loss to Plaintiff. Id. 111111, 13. Plaintiff then alleges that on or about March 2, 1984, Defendant liquidated “all of Plaintiffs open positions.” Id. 111113, 14. The stock margin account was also liquidated at a loss to Plaintiff. Id. ¶ 16.

Shortly after the liquidation, the price of Gulf common stock increased significantly. A tender offer was made by Gulf to its stockholders on March 5, 1984 to purchase the stock at a price significantly higher than that Plaintiff paid.

Plaintiff alleges that Advest falsely represented a material fact in violation of § 10(b) and Rule 10b-5 by advising Plaintiff that her positions would not be liquidated if she satisfied the margin calls by March 9 and 12, respectively, and assuring Plaintiff that, in no event, would action be taken before March 7, 1984. Plaintiffs accounts were apparently liquidated on March 1 and 2, 1984.

Defendant has moved 1) to dismiss Count 1, the federal securities claim, for failure to state a claim; 2) to dismiss the state law claims pursuant to the arbitration provision of the Customer Agreement; and, alternatively, for a more definite statement pursuant to Fed.R.Civ.P. 12(e). Defendant moves the court to stay or dismiss the Complaint pending outcome of the arbitration proceedings, if arbitration is ordered.

The Federal Securities Claim

Defendant argues that Count I fails to state a cause of action for several reasons: first, Defendant argues that Plaintiff never alleged that she was ready, willing and able to meet the margin call on March 9, 1984 with respect to the Gulf common stock or on March 12, 1984 with respect to the put and call options. Motion to Dismiss, at 2. Second, Defendant argues that pursuant to the terms of the Customer Agreement, Defendant had the right to sell any and all securities in Plaintiffs accounts without demand for margin or additional margin, notice of sale or purchase, or any other notice or advertisement. Id. (citing Customer Agreement, 116, Amended Complaint, Ex. A). Third, Defendant argues that the Agreement further provided that any prior demand, call or notice of the time and place of any such sale or purchase shall not be considered a waiver of the Defendant’s right to sell or buy without demand, call or notice. Id. Fourth, Defendant argues that the alleged reneging of an oral promise by Defendant does not constitute a violation of § 10(b). Finally, Defendant argues that Plaintiff’s complaint establishes that she did not rely on Defendant’s misrepresentation because she alleges that the securities were sold on March 1 or 2, prior to the alleged misrepresentation on March 2, 1984. Amendment to Defendant’s Motion to Dismiss, at 1-2.

DISCUSSION

In evaluating a motion to dismiss, the allegations of the complaint and all reasonable inferences must be accepted as true and viewed in the light most favorable to the nonmoving party. Miree v. DeKalb County, 433 U.S. 25, 27 n. 2, 97 S.Ct. 2490, 2492 n. 2, 53 L.Ed.2d 557 (1977); Empire Abrasive Equipment Corp. v. H.H. Watson, Inc., 567 F.2d 554, 557 (3d Cir.1977). A complaint should not be dismissed unless it appears that plaintiff could prove no set of facts that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

The gist of Plaintiffs Complaint is the alleged wrongful liquidation of her margin account. The “fraud” alleged is the statement of the broker that he would not liquidate Plaintiffs account before a certain date, in light of the contemporaneous or subsequent liquidation.

Section 10(b) of the Securities Exchange Act of 1934 makes it unlawful “to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange ... any manipulative or deceptive device or contrivance in contravention” of SEC rules or regulations. 15 U.S.C. § 78j(b) (1982). Here, Plaintiff argues a violation of Rule 10b-5, which states:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange,
(a) to employ any device, scheme, or artifice to defraud,
(b) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) to engage in any ad, practice, or course of business which operates or would operate as a fraud or deceit upon any person in connection with the purchase or sale of any security.

17 C.F.R. § 240.10b-5 (1984).

Assuming, as we must, all the facts alleged as true, we hold that, on the facts before us, no claim is stated for violation of the federal securities laws; at most, Plaintiff has stated a claim for breach of contract. The facts alleged point to no acts which are either “manipulative” or “deceptive” as those terms are used and defined in cases construing § 10(b) and Rule 10b-5. See Bosio v. Norbay Securities, Inc., 599 F.Supp. 1563, 1565-68 (E.D.N.Y.1985); Pross v. Baird Patrick & Co., Inc., 585 F.Supp. 1456, 1459-61 (S.D.N.Y.1984) (citing cases); Blanes v. Paine Webber Jackson & Curtis, Inc., 593 F.Supp. 458, 462 (D.P.R.1984); Lichter v. Paine, Webber, Jackson & Curtis, Inc., 570 F.Supp. 533, 535 (N.D.Ill.1983); Zerman v. Jacobs, 510 F.Supp. 132, 134-35 (S.D.N.Y.), aff'd, 672 F.2d 901 (2d Cir.1981); Cortlandt v. E.F. Hutton, Inc., 491 F.Supp. 1, 4 (S.D.N.Y. 1979).

In so finding, we do not hold that securities violations cannot occur in the management of margin accounts, or that wrongful liquidations of such accounts cannot play a part in securities frauds. Cf. Angelastro v. Prudential-Bache Sec. Inc., 764 F.2d 939, 942 (3d Cir.1985) (finding misrepresentation or nondisclosure of credit terms of margin account “in connection with” purchase or sale of security; purpose underlying § 10(b) and rules adopted under section is to insure that investors obtain disclosure of material facts in connection with their investment decisions regarding the purchase or sale of securities); Modern Settings v. Prudential-Bache Sec. Inc., 603 F.Supp. 370, 373-75 (S.D.N.Y.1985) (plaintiffs stated claim for violations of federal securities laws where alleged wrongful liquidations of plaintiffs margin account part of scheme by which defendants attempted to depress and artificially manipulate market in order to then purchase undervalued securities to sell at profit).

Here, however, the SEC claim doesn’t pass muster.

Arbitration of State Law Claims

The Customer Agreement between Plaintiff and Defendant provides that all disputes, with the exception of those arising under the federal securities laws, shall be submitted to arbitration. See Customer Agreement, ¶ 13, Amended Complaint, Ex. A.

The Federal Arbitration Act, 9 U.S.C. § 1-14, reflects a strong national policy in favor of arbitration. See Moses H. Cone Memorial Hospital v. Mercury Construction, 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765, 785 (1983); Sharon Steel Corp. v. Jewell Coal & Coke Co., 735 F.2d 775, 777 (3d Cir.1984). The Act sets forth two prerequisites for arbitration. First, the agreement must be in writing and must involve a maritime transaction or contract evidencing a transaction in commerce. 9 U.S.C. § 2. See Bernhardt v. Polygraphic Co., 350 U.S. 198, 202, 76 S.Ct. 273, 275, 100 L.Ed. 199, 204 (1956). Second, the underlying dispute must involve an issue which, under the terms of the arbitration clause, is referable to arbitration. 9 U.S.C. § 3. Both requirements are satisfied in this case: the Customer Agreement is in writing, see Amended Complaint, Ex. A. ¶ 13, and the transaction is clearly one involving commerce.

In Dean Witter Reynolds Inc. v. Byrd, — U.S.-, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985) the Supreme Court held that, when a complaint raises both federal securities claims and pendent state claims, the Federal Arbitration Act requires district courts to compel arbitration of pendent arbitrable state claims when one of the parties files a motion to compel, even where the result would be the possibly inefficient maintenance of separate proceedings in different forums. At-, 105 S.Ct. at 1242, 84 L.Ed.2d at 165. Accordingly, we will direct that Counts 2 to 6 be dismissed and the parties proceed to arbitration.


author: BARBOUR, District Judge.

text:
    May Bell SCHMID, Plaintiff, v. ROEHM GMBH, a Foreign Corporation and Liberty Organization, Inc., a Corporation, Defendants.
    Civ. A. No. J84-0611(B).
    United States District Court, S.D. Mississippi, Jackson Division.
    Sept. 6, 1985.

      William Larry Latham, Jackson, Miss., Lynn R. Johnson, Shawnee Mission, Kan., for plaintiff.
    Jackson H. Abies, Jackson, Miss., Steven D. Ruse, Overland Park, Kan., E. Clark Rumfelt, J. Jerry Langford, Jackson, Miss., for defendants.
   MEMORANDUM OPINION AND ORDER

BARBOUR, District Judge.

This matter is before the Court on the Motions of both Defendants to Dismiss this action for lack of in personam jurisdiction pursuant to F.R.Civ.P. 12(b)(2) and for insufficiency of process pursuant to F.R. Civ.P. 12(b)(4).

FACTS

On August 16, 1978, Plaintiff was injured when a .38 caliber derringer allegedly fell to the floor in her husband’s place of business in Kansas City, Kansas, and accidentally discharged. The gun in question was manufactured by Defendant Roehm GmbH (Roehm) sometime prior to 1966 and was imported and distributed in the United States in 1966 by Defendant Liberty Organization, Inc. (Liberty) or one of its predecessors. The gun was then sold to a firearms dealer in Paducah, Kentucky, and was purchased at a later date by the Plaintiff’s husband.

The Plaintiff is a resident of Missouri. As shown above, the injury complained of by Plaintiff occurred in Kansas. Both Defendants are non-resident corporations, not qualified to do business in the State of Mississippi. Defendant Roehm is incorporated in the Federal Republic of Germany. Defendant Liberty is a California corporation. Neither of the Defendants have had offices, agents, bank accounts nor other physical presence in the state of Mississippi at any time pertinent to this action. Defendant Liberty has, at least since 1981, sold firearms or related products to Mississippi retailers, but Liberty conducts its wholesale business entirely from California through a mail order system based on catalog listings. While it appears that the gun in question was manufactured by Roehm and subsequently imported into this country, there is no evidence that any guns manufactured by Roehm have been or are being sold in the State of Mississippi.

On April 25, 1980, Plaintiff filed suit against the Defendants in the United States District Court for the District of Kansas. That action was subsequently dismissed as to Defendant Roehm on the basis of improper service of process. See Schmid v. Roehm GmbH, 544 F.Supp. 272 (D.Kan.1982). Summary Judgment was entered in that action as to a third Defendant, R.G. Industries, a Florida corporation. Id. That action is still pending in the United States District Court for the District of Kansas, Civil Action No. 80-2159, as to Defendant Liberty. Any further action against Roehm in a Kansas Court is now barred by the applicable 2-year statute of limitations.

The instant suit was filed in this Court on August 15, 1984, in an apparent attempt to take advantage of the generous 6-year statute of limitations of this state. Subject matter jurisdiction is based upon complete diversity pursuant to 28 U.S.C. § 1332. Plaintiff asserts that personal jurisdiction may properly be asserted over the non-resident Defendants because they are or were “doing business” in Mississippi.

When faced with a motion to dismiss for lack of in personam jurisdiction, the plaintiff bears the burden of establishing the jurisdiction of the district court over the non-resident defendants. See Thompson v. Chrysler Motors Corporation, 755 F.2d 1162, 1165 (5th Cir.1985). A non-resident defendant in a diversity suit is amenable to the personal jurisdiction of a federal court only to the extent permitted the state court in the state where the federal court sits. See DeMelo v. Toche Marine, Inc., 711 F.2d 1260, 1264 (5th Cir.1983). Amenability to jurisdiction thus depends on whether a defendant is within substantive reach of the jurisdiction of the forum state under the applicable state law. In the ordinary case, the applicable law would be the Mississippi long arm-statute, Miss. Code Ann. § 13-3-57, but Plaintiff in the instant case disclaims reliance on § 13-3-57 and instead urges this Court to assert personal jurisdiction over the Defendants under the authority of Miss. Code Ann. § 79-1-27. Section 79-1-27 provides:

Any corporation claiming existence under the laws of any other state or of any other country foreign to the United States, found doing business in this state, shall be subject to suit here to the same extent that corporations of this state are, whether the cause of action accrued in this state or not.

Both this statute and the Mississippi long arm statute apply to non-resident corporations “doing business” in Mississippi. Plaintiff’s reliance upon § 79-1-27 tacitly recognizes the futility of seeking, to establish jurisdiction over the Defendants in this case pursuant to the Mississippi long-arm statute. Federal courts construing the “doing business” portion of that statute have consistently held that it is for the sole use and protection of Mississippi residents who seek to establish jurisdiction over nonresidents who are not available for personal service of process and are involved in a controversy with a resident of Mississippi. See Smith v. Dewalt Products Corporation, 743 F.2d 277 (5th Cir.1984); Golden v. Cox Furniture Manufacturing Company, Inc., 683 F.2d 115 (5th Cir.1982); Washington v. Norton Manufacturing, Inc., 588 F.2d 441 (5th Cir.), cert. denied 442 U.S. 942, 99 S.Ct. 2886, 61 L.Ed.2d. 313 (1979); Breeland v. Hide-a-Way Lake, Inc., 585 F.2d 716 (5th Cir.1978), modified on reh’g. on other grounds 593 F.2d 22 (5th Cir.1979) (per curiam);. Thompson v. F.W. Woolworth Co., 508 F.Supp. 522 (N.D.Miss.1981). Thus, regardless of whether or not the Defendants could be said to be “doing business” in Mississippi, the non-resident plaintiff in this case cannot avail herself of the “doing business” provision of § 13-3-57, the long-arm statute, to establish this Court’s jurisdiction over the non-resident defendants. Plaintiff therefore urges that § 79-1-27 is controlling and that its provisions authorize this Court to assert personal jurisdiction over the non-resident Defendants.

Plaintiff’s argument must fail for two reasons. The first is that Miss.Code Ann. § 79-1-27 has not been construed to authorize the assertion of jurisdiction over suits brought by non-resident plaintiffs against non-qualified/non-resident corporations. See Smith v. DeWalt, 743 F.2d 277, 281 (5th Cir.1984). While a good deal of confusion has been generated by the Mississippi Supreme Court’s statement that § 79-1-27 and the long arm statute must be construed together and harmonized, see Arrow Foods Distributors, Inc. v. Love, 361 So.2d 324, 377 (S.D.Miss.1978), no court has yet interpreted that statement to mandate an enlargement of the jurisdiction authorized by the long arm statute. The Court of Appeals for the Fifth Circuit has recently certified a question to the Mississippi Supreme Court dealing with this issue, see Manookian v. A.H. Robins Company, Inc., 760 F.2d 567 (5th Cir.1985), but Plaintiff incorrectly assumes that resolution of that question would be dispositive in the instant case.

The question certified to the Mississippi Supreme Court in Manookian is “whether a nonresident plaintiff asserting a cause of action based upon a tort which wholly occurred outside of the State of Mississippi can rely on Miss.Code Ann. § 79-1-27 (1972) to secure jurisdiction over a foreign corporation which does business in Mississippi, but is exempt from the qualification requirements.” 760 F.2d at 567. (emphasis added). The issue thus framed presupposes that the corporation meets the “doing business” provision of the statute. As hereinafter stated, the Defendants in the instant case are not doing business in Mississippi.

Thus the second and more fundamental reason that Plaintiff’s argument must fail is that § 79-1-27 applies only to non-resident corporations “found doing business” in Mississippi. Irrespective of Plaintiff’s non-resident status, the Defendants in this case have insufficient contacts with Mississippi to be considered to be “doing business” in the state for purposes of asserting personal jurisdiction over them in an action having no connection with Mississippi. While the defendant in Manookian employed sales representatives who resided in Mississippi and solicited business in the state along with other non-resident sales representatives, see Manookian v. A.H. Robins Company, Inc., 580 F.Supp. 877, 878 (S.D.Miss.1984), the uncontested facts in this case clearly show that neither defendant corporation has any employees or representatives in Mississippi. In addition, neither corporation has any offices, bank accounts or other property in this state. While Liberty does distribute its products nationally through telephone and catalog orders and has sold its products to Mississippi retailers, these contacts alone are insufficient to support a finding that Liberty is or has been “doing business” in Mississippi. See Smith v. DeWalt, supra at 279-80 (the fact that a defendant markets its products nationally and that some of these products find their way into Mississippi is not a sufficient nexus to subject a non-resident corporation to in personam jurisdiction under the “doing business” provision of the Mississippi long arm statute).

Defendant Roehm apparently lacks even these tenuous contacts with the State of Mississippi. The Affidavit filed in support of its Motion to Dismiss states that Roehm has never sold any of its products at wholesale or retail in the State of Mississippi. Plaintiff has produced no counter-affidavits or evidence to refute this statement and thus there is no basis in law or fact to support Plaintiff’s allegation that Roehm is or has been “doing business” in Mississippi.

Because there is no basis under Mississippi law for the exercise of personal jurisdiction over the non-resident Defendants in this case, there is no reason for this Court to consider the due process issue.

Defendants’ Motions to Dismiss for lack of in personam jurisdiction are hereby granted and this cause is dismissed.

      . Defendant Liberty Organization, Inc., has also asked for alternate relief in the form of a Motion to Transfer and a Motion for Leave to Amend. Since the Court’s ruling moots the issues raised in those motions, they will not be addressed.

      . In an attempt to meet the allegations contained in Roehm’s affidavits, Plaintiff has come forward with invoices showing sales of RG products by Liberty to Mississippi retailers. While there are notations on these invoices indicating that RG Industries and Roehm are the same entity, this conclusion is not supported by the evidence.


author: HOBBS, Chief Judge.

text:
    Charles SMITH; et al., Plaintiffs, v. Edwin W. MEESE, III, Attorney General of the United States; et al., Defendants.
    Civ. A. No. 85-H-752-N.
    United States District Court, M.D. Alabama, N.D.
    Sept. 6, 1985.

      Ira A. Burnim, Deborah A. Ellis, Dennis S. Sweet, Montgomery, Ala., Neil Bradley, Laughlin McDonald, Atlanta, Ga., for plaintiffs.
    Richard K. Willard, David J. Anderson, R. John Seibert, Washington, D.C., and Kenneth E. Vines, Montgomery, Ala., for all defendants.
   ORDER

HOBBS, Chief Judge.

Plaintiffs are nine Alabama voters who live in Lowndes, Greene, Perry, Sumter and Wilcox Counties. Plaintiffs seek to bring this action on behalf of themselves and a class of all registered black voters in these counties against the Attorney General of the United States, officials of the United States Department of Justice, and the United States Attorneys for the three federal districts in Alabama. Plaintiffs allege that defendants are deliberately pursuing a discriminatory policy of ignoring complaints about unlawful electoral conduct by white public officials, while initiating major investigations of offenses allegedly committed by black citizens, in violation of plaintiffs’ rights under the First, Fifth and Fifteenth Amendments, and 42 U.S.C. §§ 1983 and 1985. They have asked this Court to order defendants to investigate allegations of election crimes in a nondiscriminatory fashion.

Defendants have filed a motion to dismiss. They contend that the Court lacks jurisdiction to review the Attorney General’s prosecutorial actions directed against non-parties, and that plaintiffs lack standing to bring this action. A hearing on this motion, set for August 15, 1985, was can-celled at plaintiffs’ request. The Court is of the opinion, however, that the briefs filed by the parties are adequate for this Court to rule on defendants’ motion.

In regard to whether the separation of powers doctrine precludes this Court’s review of the Attorney General’s decision to initiate or decline a prosecution, the Court notes that the Attorney General, as part of the executive branch of the government, has the duty to see that the “laws are faithfully executed.” United States Constitution Art. II, § 3. Under the authority of Art. II, § 2, Congress has given the Attorney General the power to conduct the criminal litigation of the United States government. United States v. Nixon, 418 U.S. 683, 694, 94 S.Ct. 3090, 3100, 41 L.Ed.2d 1039 (1974); 28 U.S.C. § 516. The judiciary’s appreciation of the role accorded the executive under the Constitution has led to the recognition that “it is not the function of the judiciary to review the exercise of executive discretion [in the area of prosecution] whether it be that of the President himself or those to whom he has delegated certain of his powers.” Newman v. United States, 382 F.2d 479, 482 (D.C.Cir.1967). For this reason, the Court concludes that it lacks jurisdiction to conduct an overall review of the Attorney General’s use of his discretion, which would be necessary in order to provide the remedy sought by plaintiffs.

The Court does not believe, however, that the Constitution provides no remedy for the type of abuses alleged by plaintiffs. A defendant in a criminal case who feels that he has been unjustly accused of a crime may assert these claims as part of a defense of selective prosecution. Oyler v. Boles, 368 U.S. 448, 456, 82 S.Ct. 501, 505, 7 L.Ed.2d 446 (1962); Murguia v. Municipal Court, 15 Cal.3d 286, 124 Cal.Rptr. 204, 540 P.2d 44 (1975). Plaintiffs lack standing to use this remedy, however, because they have not been charged with any crime.

The standing problems inherent in this type of case were discussed by the Supreme Court in Two Guys v. McGinley, 366 U.S. 582, 81 S.Ct. 1135, 6 L.Ed.2d 551 (1961). In Two Guys, a department store sought to restrain a district attorney from enforcing a state Sunday closing law against its employees. The Court ruled that the store was asserting claims which should be raised as part of a criminal proceeding involving the employees. The Court stated:

Since appellant’s employees may defend against any such proceeding that is actually prosecuted on the ground of unconstitutional discrimination, we do not believe that the court below was incorrect in refusing to exercise its injunctive powers [to restrain the criminal prosecutions]

366 U.S. at 588-89, 81 S.Ct. at 1138-39. See also Linda R.S. v. Richard D., 410 U.S. 614, 619, 93 S.Ct. 1146, 1149, 35 L.Ed.2d 536 (1973).

Plaintiffs contend that they have standing to raise claims normally raised in a criminal proceeding because they allege that such criminal investigations have injured them personally in their roles as officeholders and voters. To satisfy the standing requirements of the “cases or controversy” requirement of Art. Ill of the Constitution, plaintiffs must show (1) an injury in fact to their own interests, that (2) is “fairly traceable” to defendants’ conduct, and that (3) is sufficiently likely to be redressed in a tangible way by available judicial relief. Common Cause v. Dept. of Energy, 702 F.2d 245, 250 (D.C.Cir.1983).

In applying these principles to the question of plaintiffs’ standing, the Court has accepted as true all material allegations of the complaint, and has construed the complaint in favor of plaintiffs. Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45 L.Ed.2d 343 (1975). In regard to plaintiffs’ roles as elected officials, the Court concludes that the possibility that plaintiffs may in the future be subject to selective prosecution is at this point a matter of speculation and conjecture, and is not sufficient to confer standing upon plaintiffs. O’Shea v. Littleton, 414 U.S. 488, 497, 94 S.Ct. 669, 676, 38 L.Ed.2d 674 (1974). Plaintiffs’ allegation that the prosecution of other individuals has resulted in the dilution of their votes, and chilled their associational activities, is a “ ‘generalized grievance’ shared in substantially equal measure by all or a large class of citizens,” Warth v. Seldin, 422 U.S. 490, 499, 95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975), that is not “fairly traceable” to the actions of defendants. Finally, as noted above, the Court is unable to provide relief to plaintiffs, due to the separation of powers doctrine.

For the foregoing reasons, it is hereby ORDERED that defendants’ motion to dismiss is granted, and this cause is dismissed.

All other motions pending in this matter are hereby denied as moot.