author: MANSMANN, District Judge.

text:
    AMALGAMATED COTTON GARMENT & ALLIED INDUSTRIES FUND, Plaintiff, v. J.B.C. COMPANY OF MADERA, INC., Joseph Campolong, Betty Campolong, and David Campolong, Defendants.
    Civ. A. No. 81-1610.
    United States District Court, W.D. Pennsylvania.
    Jan. 26, 1984.

      Alan F. Markovitz, Trevose, Pa., for plaintiff.
    Henry C. Woicik, New York City, for defendant.
   OPINION

MANSMANN, District Judge.

Plaintiff Amalgamated Cotton Garment & Allied Industries Fund (the “Fund”) brought this action to recover contributions allegedly due the Fund on behalf of the employees of Campo Slacks, Inc. (“Campo Slacks”) and J & E Sportswear, Inc. (“J & E Sportswear”). The Fund seeks to recover these contributions from Defendants J.B.C. Company of Madera, Inc. (“J.B.C.”), Joseph Campolong, Betty Campolong and David Campolong, all of whom are allegedly jointly and severally liable for said contributions. The case was tried before this Court nonjury. We hereby make the following findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a):

FINDINGS OF FACT

The Fund is an “employee benefit plan” within the meaning of § 3(3) of the Employee Retirement Security Act of 1974, as amended (“ERISA”), 29 U.S.C. § 1002(3).

J.B.C. is a Pennsylvania corporation.

Joseph Campolong, Betty Campolong and David Campolong are officers of J.B.C. and reside in this District.

Joseph Campolong is and was the president and sole shareholder of J.B.C. during all times pertinent to this action. Betty Campolong, wife of Joseph Campolong, is and was the secretary of J.B.C. during all times pertinent to this action. David Campolong, the son of Joseph Campolong, is and was the vice-president of J.B.C. during all times pertinent hereto. None of them, however, are or were the “alter egos” of J.B.C.

On or about October 1, 1973, Joseph Campolong, in his capacity as president of J.B.C., Campo Slacks, J & E Sportswear and Madera Business Systems, Inc., and Betty Campolong, in her capacity as secretary of those corporations, executed Articles of Merger (“Articles”) which were filed with the Pennsylvania Department of State on or about January 21, 1974.

Under the Articles, Campo Slacks, J & E Sportswear and Madera Business Systems, Inc. merged into J.B.C., with J.B.C. being the surviving corporation. All assets and liabilities of the merging corporations were transferred or assumed by J.B.C. The employees of Campo Slacks and J & E Sportswear effectively became the employees of J.B.C.

The Articles have remained effective to this date. Thus, Campo Slacks and J & E Sportswear have not legally existed as separate corporate entities since at least January 21, 1974. Further, the former employees of Campo Slacks and J & E Sportswear are and have been employees of J.B.C. since at least 1974.

Nevertheless, Joseph Campolong continued to use the names of the defunct corporations, Campo Slacks and J & E Sportswear, for certain purposes. For example, during the period following the merger, Joseph Campolong executed collective bargaining agreements with the Amalgamated Clothing and Textile Workers Union (the “Union”) to cover persons allegedly employed by Campo Slacks and J & E Sportswear. Pursuant to those agreements, Campo Slacks and J & E Sportswear, as the “employers,” were obligated to make certain contributions to the Fund on behalf of “their” employees. Quarterly reports were prepared and sent to the Fund for these employees. Mr. Campolong signed the summary sheets which accompanied the reports.

The reports indicate that no contributions were made to the Fund for these employees for the period April 1979 through August 21, 1981 (Campo Slacks) and for the period February 25, 1979 through August 11, 1979 (J & E Sportswear).

The auditor for the Fund audited the “books” of J.B.C. at J.B.C.’s offices, examining records and reports supplied to him by J.B.C. His audit confirmed the delinquency already indicated by the quarterly reports. The total amount in delinquency is $70,191.12.

In the meantime, the Fund, pursuant to the collective bargaining agreements, initiated several arbitration proceedings against Joseph Campolong and J.B.C., as “alter egos” of Campo Slacks and J & E Sportswear, to recover delinquent contributions. The arbitrator found that due notice was given to the parties for each proceeding yet neither Mr. Campolong nor J.B.C. entered an appearance at any of the arbitration hearings.

The arbitrator issued four arbitration awards in which he found Joseph Campolong and J.B.C. jointly and severally liable for the delinquent contributions. Specifically, the arbitrator found as a factual matter that Joseph Campolong, J.B.C., Campo Slacks and J & E Sportswear constitute a single joint enterprise.

Joseph Campolong and J.B.C. did not move to vacate or to modify any of the arbitration awards until filing a counterclaim to this action more than a year after the fourth arbitration decision.

Joseph Campolong and J.B.C. have failed and refused to pay the amount of the delinquency.

The Fund brought the present action to confirm the arbitration awards pursuant to § 301 of the Labor Management Relations Act of 1947, as amended (“LMRA”), 29 U.S.C. § 185. Jurisdiction is also predicated upon ERISA and the Federal Arbitration Act, 9 U.S.C. § 1 et seq. Furthermore, the Fund seeks to hold the three individual Defendants liable pursuant to the Pennsylvania Wage Payment and Collection Law (“WPCL”) 43 P.S. § 260.1 et seq. (Purdon 1964).

Defendants have counterclaimed to vacate the arbitration awards. In addition, at trial, the three individual Defendants orally moved for dismissal of the case against them.

We find that Defendants are indeed jointly and severally liable for the amount of the delinquency, $70,191.12, as more fully explained in our conclusions of law.

CONCLUSIONS OF LAW

I. RES JUDICATA AND COLLATERAL ESTOPPEL DEFENSES

Defendants contend that the Fund is barred from pursuing this action by the doctrines of res judicata and collateral estoppel. According to Defendants, the claim(s) underlying this action have been litigated previously in the New York state courts, the Pennsylvania state courts and certain federal courts.

Under the doctrine of res judicata, a final judgment on the merits of an action precludes the parties or those in privity with the parties from relitigating issues that were or could have been raised in that action. Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414, 66 L.Ed.2d 308 (1980).

For res judicata to apply, it is necessary that “between the previous action and the present action there (is) an identity in the thing sued on, identity of the cause of action, identity of the persons and parties to the action, and identity of the quality or capacity of the parties suing or sued.” Davis v. United States Steel Supply, 688 F.2d 166, 170-71 (3d Cir.1982), cert. denied, 460 U.S. 1014, 103 S.Ct. 1256, 75 L.Ed. 484 (1983), quoting Duquesne Slag Products Co. v. Lench, 490 Pa. 102, 105, 415 A.2d 53, 55 (1980).

Under the doctrine of collateral estoppel, a court’s decision on an issue of fact or law necessary to its judgment may preclude relitigation of that issue in a suit on a different cause of action involving a party to the first case. Allen v. McCurry, supra at 94, 101 S.Ct. at 414.

The doctrine of collateral estoppel will apply when (1) the issue decided in the prior litigation is identical to the issue here, (2) the prior litigation resulted in a final judgment on the merits, (3) the party against whom the estoppel is asserted is a party, or in privity with a party, to the prior proceeding, and (4) the opportunity to present the claim in the prior proceeding was full and fair. Scooper Dooper, Inc. v. Kraftco Corp., 494 F.2d 840, 844 (3d Cir.1974).

The burden of establishing preclusion is placed on the party claiming the defense. 18 Wright, Miller and Cooper, FEDERAL PRACTICE AND PROCEDURE § 4405 at 38 (1981). Ordinarily, sufficient evidence must be introduced to show litigation of the claim or issue involved. Id.

In the instant case, the defense of res judicata was at least partially resolved by the withdrawal of Campo Slacks and J & E Sportswear from this suit since the record suggests that they were the parties to almost all of the prior judgments. In our previous Opinion on Defendants’ Motion to Dismiss, we stated that if the remaining Defendants wished to pursue this defense, they would be required to set forth the pertinent facts with greater clarity and completeness.

Defendants have provided little of the requisite information with the exception of one case. In this regard, the Court of Common Pleas of Clearfield County, Pennsylvania, on May 15, 1981, dismissed an action brought by the Fund against Joseph Campolong pursuant to the Pennsylvania WPCL. By letter dated August 11, 1982, Plaintiff’s counsel agreed that the amount sought in the Common Pleas action was included in the amount sought here.

The Court of Common Pleas premised its dismissal on the doctrine of res judicata. On July 22, 1983, however, the Superior Court of Pennsylvania reversed the Order of the Common Pleas Court and remanded the case for further proceedings. That case is now pending before the Common Pleas Court awaiting further proceedings.

A judgment that has been reversed on appeal is thereby deprived of all conclusive effect for purposes of both res judicata and collateral estoppel. Moitie v. Federated Dept. Stores, 611 F.2d 1267, 1269 (9th Cir.1980). See also 18 Wright, Miller and Cooper, FEDERAL PRACTICE AND PROCEDURE § 4432 at 303 (1981) (“Reversal and remand for further proceedings on the entire case defeats preclusion entirely until a new final judgment is entered by the trial court or the initial judgment is restored by further appellate proceedings.”).

Hence, the judgment entered by the Clearfield Court of Common Pleas does not bar the instant action nor does it preclude the litigation of any issue contained therein. Further, Defendants have failed to provide the information concerning other prior judgments that is necessary to sustain the defense of res judicata or collateral estoppel.

Thus, we must conclude that Defendants have not met their burden on these defenses.

II. CLAIM UNDER THE FEDERAL ARBITRATION ACT

Plaintiff continues to assert claims against J.B.C. and Joseph Campolong under the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the “Act”) even though we indicated in our previous Opinion that the Act may be inapplicable to the labor-management area.

We again note that in a recent case, the United States Court of Appeals for the Third Circuit strongly suggested that the Act is inapplicable to suits brought to enforce labor arbitration agreements under § 301. See Service Employees Int’l Union, Local No. 36 v. Office Center Services, Inc., 670 F.2d 404, 406-08 n. 6 (3d Cir.1982) (dictum).

Thus, it is possible that § 301 of the LMRA and the cases decided thereunder provide the federal law for the enforcement of labor agreements and that it is unnecessary to resort to the Federal Arbitration Act in these cases. See Wilkes-Barre Publishing Co. v. Newspaper Guild of Wilkes-Barre, Local 120, 559 F.Supp. 875, 879-80 (M.D.Pa.1982). The Act itself expressly excludes “contracts of employment of ... any ... workers engaged in foreign or interstate commerce” from its embrace. See 9 U.S.C. § 1.

In light of the above and because the LMRA and ERISA provide sufficient basis for the exercise of this Court’s jurisdiction, it is unnecessary to reach any issues raised in connection with the Federal Arbitration Act.

III. SECTION 301 CLAIM

Defendants assert that the Fund lacks standing to sue under § 301 of the LMRA and that this Court is therefore without subject matter jurisdiction under § 301.

We have already addressed this contention in our previous Opinion. We held that the Fund does have standing to pursue its claim under § 301. Defendant has proffered no cases to the contrary. Furthermore, we perceive no significant distinction between the Fund and its trustees, at least for the purpose of maintaining this suit under § 301. Any concern in this regard may be remedied by a simple amendment to the Complaint that adds the names of the trustees to the case caption. We will therefore permit Plaintiff to amend the Amended Complaint, adding the names of the trustees to the caption.

A.

Plaintiff postured this action as an action to confirm or enforce arbitration awards pursuant to § 301 of the LMRA.

This Court has the jurisdiction and power to confirm and enforce arbitration awards pursuant to § 301. See Sheet Metal Ass’n of N.Y. City v. Local Union No. 28 of Sheet Metal Workers, 301 F.Supp. 553, 555 (S.D.N.Y.1969).

We held in our previous Opinion that we must look to Pennsylvania law to determine the appropriate limitations period(s) for Plaintiff’s action to confirm and any action to vacate the arbitration awards. Since Pennsylvania provides a 30-day statute of limitations for actions to vacate an arbitration award, Defendants’ counterclaim to vacate the arbitration awards would ordinarily be time-barred.

Regardless, we cannot enforce an arbitration award where the evidence does not establish that the parties did in fact receive proper notice and the opportunity to be present at the arbitration proceeding. In this regard, it is axiomatic that all parties to an arbitration hearing must be given an opportunity to be heard, which implies the right to receive notice of the hearing. See Ryan-Walsh Stevedoring Co. v. General Longshore Workers Union, Local No. 3000, 509 F.Supp. 463, 467 (E.D.La.1981); Wright-Bernet, Inc. v. Amalgamated Local Union No. 41, 501 F.Supp. 72, 74 (S.D. Ohio 1980).

We believe that failure to receive proper notice precludes our enforcement of the arbitration awards in question regardless of whether Pennsylvania law or New York law applies to our review of the awards. See generally Local 149, Boot and Shoe Workers Union v. Faith Shoe Co., 201 F.Supp. 234 (M.D.Pa.1962).

In Local 149, Boot and Shoe Workers Union v. Faith Shoe Co., supra, the court, in an action to enforce an arbitration award, examined the question of whether an ex parte arbitration award was void and unenforceable. The court essentially held that an ex parte award was enforceable if the other side received notice of the time and place of the hearing but did not request an adjournment or otherwise object. Since the court was considering the matter on a Fed.R.Civ.P. 12(b) Motion to Dismiss, the court took the allegations of the Complaint as stating the facts. The Complaint alleged that formal notice of the hearing had been given to Defendant and Defendant’s counsel. The Complaint further alleged that on the day of the hearing, Defendant’s counsel was notified again of the arbitration hearing. Upon being informed by Defendant’s counsel that Defendant would not appear or be represented at the hearing, the other party advised that the hearing would proceed without representation by the Defendant. The court therefore concluded that the absent party had waived its right to be present and heard.

In the instant case, we cannot conclude that Joseph Campolong and J.B.C. waived their right to be present and heard at the arbitration hearings since the evidence at trial did not establish that Mr. Campolong and J.B.C. received notice of the arbitration proceedings. In this regard, there is no evidence that personal service was made or that the Fund telephonically contacted Defendants or their counsel regarding the arbitration proceedings. Moreover, the certified notices sent to Mr. Campolong and J.B.C. were never claimed and were therefore returned to the Fund.

Since the evidence does not show that the absent parties received notice of the arbitration hearings, we cannot find that they waived their right to be present. Therefore, we cannot enforce the ex parte arbitration awards as requested by the Fund.

B.

Although this Court declines to enforce the arbitration awards as requested by the Fund, the Fund may maintain a direct action under § 301 to recover the unpaid contributions from the employer. See Trustees of the Local 478 Trucking and Allied Industries Pension Fund v. Siemens Corp., 721 F.2d 451 (3d Cir.1983); Bugher v. Consolidated X-Ray Service, 705 F.2d 1426 (5th Cir.1983), petition for cert. filed, 52 U.S.L.W. 3191 (Sept. 20, 1983).

Since we have already found that J.B.C. is and has been the employer of the employees in question, J.B.C. is directly liable under § 301 for the delinquent contributions.

The three individual Defendants, however, are not liable under § 301 unless they were acting as “alter egos” of J.B.C. See Carpenters Health and Welfare Fund of Philadelphia v. Ambrose, 727 F.2d at 283-284. Their status as officers of J.B.C. does not, in and of itself, confer liability. See id. See also Combs v. Indyk, 554 F.Supp. 573, 574-75 (W.D.Pa.1982).

“A finding of an alter ego situation is a factual one and must be supported by the record.” Carpenters Health and Welfare Fund of Philadelphia, supra at 283. The burden of proof rests with the party attempting to pierce the corporate veil. Id. at 284. See also Publicker Industries, Inc. v. Roman Ceramics Corp., 603 F.2d 1065, 1069 (3d Cir.1979).

Certain factors are relevant in determining whether the alter ego theory should be used to disregard the corporate entity, including:

(F)ailure to observe corporate formalities, non-payment of dividends, the insolvency of the debtor corporation at the time, siphoning of funds of the corporation by the dominant stockholder, non-functioning of other officers or directors, absence of corporate records and the fact that the corporation is merely a facade for the operations of the dominant stockholder or stockholders.

Carpenters Health and Welfare Fund of Philadelphia, supra at 284, quoting United States v. Pisani, 646 F.2d 83, 88 (3d Cir.1981). Undercapitalization is an additional factor which may be considered. Id.

In the instant case, the record before us does not support a finding that any of these factors exist. For example, there is no evidence that any of the individual Defendants took corporate money for their own personal use. Nor is there any evidence that J.B.C. does not maintain corporate records.

Thus, we must conclude that Joseph, Betty and David Campolong are not personally liable under § 301 of the LMRA.

IV. ERISA CLAIM

Defendants assert, similar to their assertion under § 301, that the Fund lacks standing to sue under ERISA and that this Court is therefore without subject matter jurisdiction under ERISA.

Consistent with our resolution of this issue under § 301, we see little difference between the Fund and its trustees, at least for the purpose of maintaining this suit under ERISA. Nevertheless, we believe the better practice is to include the names of the trustees in the case caption. We will therefore permit Plaintiff to amend the Amended Complaint accordingly.

Section 515 of ERISA provides:

Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.

29 U.S.C. § 1145 (1980).

An employer may be sued to redress violations of ERISA or to enforce the terms of an employee benefit plan. See 29 U.S.C. § 1132 (1974).

An “employer” is “any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan.” 29 U.S.C. § 1002(5) (1974).

A “person” includes “an individual, partnership, joint venture, corporation, mutual company, joint-stock company, trust, estate, unincorporated organization, association, or employee organization.” 29 U.S.C. § 1002(9) (1974).

Under the definitions provided by ERISA and consistent with our previous findings, J.B.C. is clearly an employer. Therefore, J.B.C. is directly liable under ERISA for the unpaid contributions.

As with § 301, however, the three individual Defendants are not liable unless they were acting as “alter egos” of J.B.C. Their status as officers of J.B.C. does not, in and of itself, confer liability. See Combs v. Indyk, 554 F.Supp. at 575. See also 29 U.S.C. § 1002(9) (1974). (The definition of “person” omits mention of corporate officers).

The same factors used to determine alter ego status under § 301 apply equally well here. Applying those factors, we again find that an alter ego situation does not exist in this case.

Therefore, we must conclude that Joseph, Betty and David Campolong are not personally liable under ERISA.

V. CLAIM UNDER THE PENNSYLVANIA WAGE PAYMENT AND COLLECTION ACT

Defendants challenge the jurisdictional basis for the Fund’s claim under the Pennsylvania WPCL. Defendants also contend that the provisions of the WPCL are preempted by ERISA.

With regard to the preemption argument, the U.S. Court of Appeals for the Third Circuit recently stated, in a similar case, that such a contention was without merit. See Carpenters Health and Welfare Fund of Philadelphia, 727 F.2d at 282 n. 5 (dictum).

With respect to the jurisdictional challenge, a federal court has the power to exercise pendent jurisdiction when the state and federal claims derive from a common nucleus of operative fact such that a plaintiff would ordinarily be expected to try them all in one judicial proceeding, and when the federal claims have sufficient substance as to confer subject matter jurisdiction on the court. United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966); Berry v. Cadence Industries Corp., 552 F.Supp. 1284, 1291 (E.D.Pa.1982).

In this case, it is clear that the state claim and the federal claims derive from a common nucleus of operative fact. It is also clear that the federal claims have sufficient substance as to confer subject matter jurisdiction on this Court. Indeed, this Court has pendent jurisdiction over the state claim against the individual Defendants even though we did not find them liable under the federal claims because the federal claims against the individual Defendants were non-frivolous and sufficiently substantial as to confer subject matter jurisdiction. See Kerry Coal Co. v. United Mine Workers, 637 F.2d 957, 965 (3d Cir.), cert. denied, 454 U.S. 823, 102 S.Ct. 109, 70 L.Ed.2d 95 (1981); Lentino v. Fringe Employee Plans, Inc., 611 F.2d 474, 478-79 (3d Cir.1979). Hence, we may exercise pendent jurisdiction over the Fund’s claim under the Pennsylvania WPCL.

The WPCL permits civil actions against employers to recover unpaid wages, including fringe benefits. See 43 P.S. §§ 260.9a and 260.2a (Purdon Supp.1983-84).

The definition of fringe benefits includes “all monetary employer payments to provide benefits under any employee benefit plan” as defined by ERISA. 43 P.S. § 260.2a (Purdon Supp.1983-84).

The definition of employer under the WPCL includes:

every person, firm, partnership, association, corporation, receiver or other officer of a court of this Commonwealth and any agent or officer of any of the above-mentioned classes employing any person in this Commonwealth.

43 P.S. § 260.2a (Purdon Supp.1983-84).

The first published state court decision to impose civil liability on corporate officers as employers under the WPCL was Ward v. Whalen, 18 Pa.D. & C.3d 710 (1981).

The ruling by the Common Pleas Court in Ward was followed by the U.S. Bankruptcy Court in In Re Johnston, 24 B.R. 685, 686-87 (1982).

Since then, the U.S. Court of Appeals for the Third Circuit has predicted that the Pennsylvania Supreme Court would find at least the highest ranking corporate officers personally liable for unpaid benefit contributions under the WPCL. See Carpenters Health and Welfare Fund of Philadelphia, 727 F.2d at 282-283. In Carpenters Health and Welfare Fund, the Court of Appeals upheld the imposition of civil liability on the defendants, Mr. and Mrs. Ambrose, since they occupied corporate executive positions.

In the instant case, there is no question that the individual defendants occupied corporate executive positions. Indeed, the evidence suggests that Joseph, Betty and David Campolong are the only officers of J.B.C.

Thus, we must conclude that Joseph, Betty and David Campolong are liable under the Pennsylvania WPCL for the delinquent contributions.

VI. DAMAGES

In light of our disposition of Plaintiffs federal claims and state claim, the Defendants are jointly and severally liable for the unpaid benefit contributions.

The Defendants are also jointly and severally liable for costs, including reasonable attorney’s fees, since both ERISA and the WPCL provide for the award of attorney’s fees. See 29 U.S.C. § 1132(g)(2)(D) (1980); 43 P.S. § 260.9a(f) (Purdon Supp. 1983-84).

Section 502(g)(2)(B) of ERISA provides for the award of interest. 29 U.S.C. § 1132(g)(2)(B) (1980). Therefore, the Fund is entitled to recover interest on the unpaid contributions but only from J.B.C. since the individual Defendants are not liable under ERISA.

Both ERISA and the WPCL provide for liquidated damages but each uses a different standard. Specifically, ERISA permits the award of liquidated damages in an amount equal to the greater of the interest on the unpaid contributions or as provided for under the employee benefit plan but not in excess of 20 percent of the unpaid contributions. 29 U.S.C. § 1132(g)(2)(C) (1980). The WPCL provides for liquidated damages in an amount equal to 25 percent of the unpaid contributions or $500, whichever is greater. 43 P.S. § 260.10 (Purdon Supp. 1983-84). Therefore, Plaintiff can elect to take liquidated damages as provided by ERISA or can take them as provided by the WPCL.

Accordingly, Plaintiff is entitled to judgment in the amount of the unpaid contributions, namely, $70,191.12, as well as attorney’s fees and costs, liquidated damages, and interest against the appropriate party.

      . Campo Slacks and J & E Sportswear were originally named as parties to this action. By letter dated August 27, 1982, Plaintiff voluntarily withdrew Campo Slacks and J & E Sportswear from this lawsuit.

      . In a nonjury trial, the functions of finder of fact and decider of law are merged in the trial judge. As finder of fact, the judge must pass upon the credibility of the witnesses and must draw reasonable inferences from the evidence presented. Ruiz v. Estelle, 679 F.2d 1115, 1131 (5th Cir.1982); Charles Schmitt & Co. v. Barrett, 670 F.2d 802, 805 (8th Cir.1982). We note for the record that this Court carefully evaluated the credibility of the witnesses based upon, inter

        alia, their demeanor on the stand, the possibility of interest, bias and prejudice, and the consistencies and inconsistencies in the testimony.

      . The evidence at trial showed that for each arbitration proceeding, a notice of intention to arbitrate was sent by certified mail to Joseph Campolong and J.B.C. In every instance, the certified mail was marked "unclaimed” and returned to the Fund.

      . The evidence showed that upon the issuance of each arbitration award, the Fund mailed a copy of the award to Joseph Campolong and J.B.C. by certified mail. Each arbitration award, as with the notices of intention to arbitrate, was returned unclaimed.

      . At trial, the Fund further amended its Amended Complaint to allege, inter alia, that J.B.C. and the three individual defendants are also liable as "employers” under the LMRA and under ERISA.

      . Although these defenses have been raised, neither side has briefed the legal issues involved.

      . With one exception, Defendants do not identify which New York state courts, which Pennsylvania state courts and which federal courts rendered judgments. For example. Defendants' Exh. No. 5 does not identify the county or the district in which the judgments were rendered.

      . Specifically, we required the names of the courts, cases and parties; the monies and issues involved; the extent to which the cases coincide with this case in terms of parties, issues and monies; and the resolution of those cases. See Opinion of October 20, 1982, n. 15 at 12.

      . Plaintiffs Amended Complaint, setting forth additional claims under the Act, was filed on March 28, 1983 after our decision was issued in October 1982.

      . We note that in a very recent case, Carpenters Health and Welfare Fund of Philadelphia v. Ambrose, 727 F.2d 279 (3d Cir.1983), a Fund similar to the one at bar maintained a § 301 action in its own name with the name of the trustee added as trustee ad litem ie.g., "CARPENTERS HEALTH AND WELFARE FUND OF PHILADELPHIA AND VICINITY By Robert Gray, Trustee Ad Litem”). It is clear from the Opinion issued by the Third Circuit that the Court considered the Fund to be the named plaintiff. No mention was made of a standing problem in that case. Subject matter can be raised sua sponte by the court. See Fed.R.Civ.P. 12(h)(3). Certainly, if the Fund’s status as the named plaintiff actually destroyed subject matter jurisdiction, the district court and the court of appeals would not have been empowered to adjudicate the merits of the suit. The absence of any mention of such a problem suggests that subject matter jurisdiction may not be affected. Therefore, we believe that any concern with the use of the Fund's name in the case caption before us can be remedied by including the trustees' names as well.

      . See Western Kraft East, Inc. v. United Paperworkers Int'l Union, Local 375, 531 F.Supp. 666, 668-69 n. 1 (E.D.Pa.1982).

      . See 42 Pa.C.S.A. § 7314(b) (Purdon 1981).

      . It could be argued that failure to receive notice of the arbitration awards should toll the time for filing actions to vacate. In this event, however, the statute of limitations would at least commence running on the date Defendants did receive notice of the arbitration awards. In this case, we find that Plaintiff's evidence did not establish that Defendants received timely notice of the arbitration proceedings or of the arbitration awards. Nonetheless, the evidence presented at trial did not show when Defendants actually did receive notice of the awards.

      . Under Pennsylvania law, Defendants’ failure to timely file an action to vacate the awards would preclude them from challenging the merits of the arbitration awards. See Service Employees Int’l Union, Local No. 36 v. Office Center Services, Inc., 670 F.2d at 412; Western Kraft East, Inc. v. United Paperworkers Int’l Union, Local 375, 531 F.Supp. at 671.
      Under New York law, Defendants may make certain challenges to the arbitration awards in an action to confirm brought by the other party even if Defendants failed to file a timely action to vacate the awards. See §§ 7510 and 7511 of the New York Civil Practice Law and Rules.

      . See also Truck Drivers, Chauffeurs and Helpers, Local Union No. 384 v. Stearly Motor Freight, Inc., 544 F.Supp. 623, 625 (E.D.Pa.1982) (It is unfair to bind a party to an arbitration award “where that party has not had a voice in the proceedings from start to finish.”).

      . We note in this regard that the certified notices were not marked "refused” as they could have been if Defendants had received them but refused to accept them. Rather, they were marked "unclaimed.”

      . We note that the Trust Agreement also permits the trustees to take whatever steps they desire, including the initiation of proceedings at law, in equity or in arbitration, in order to collect employer contributions. See Plaintiff's Exh. No. 3.

      . But see Pressroom Unions-Printers League Income Security Fund v. Continental Assurance Co., 700 F.2d 889 (2d Cir.1983), cert. denied, — U.S. -, 104 S.Ct. 148, 78 L.Ed.2d 138 (1983); Amalgamated Industrial Union Local 44-A Health and Welfare Fund v. Webb, 562 F.Supp. 185 (N.D.Ill.1983).

      . See Carpenters Health and Welfare Fund of Philadelphia, 727 F.2d at 283-284; United States v. Pisani, 646 F.2d at 88.

      . Mr. and Mrs. Ambrose were the sole officers of the corporate defendant.

      . Although J.B.C. is also clearly an "employer" under the WPCL, the Fund did not bring a claim against J.B.C. under the WPCL. Therefore, we shall limit our finding of liability under the WPCL to the individual defendants.

      . The LMRA makes no provision for attorney’s fees. Sharron v. Amalgamated Ins. Agency Services, Inc., 704 F.2d 562, 569 (11th Cir.1983).


source: Caselaw Access Project

author: FISH, District Judge.

license: Public Domain

text:
    Irene Risser MILLER, Plaintiff, v. INTERFIRST BANK DALLAS, N.A., et al., Defendants.
    Civ. A. No. CA 3-82-1263-G.
    United States District Court, N.D. Texas, Dallas Division.
    Jan. 30, 1985.
    Ben L. Krage, Kasmir, Willingham & Krage, Dallas, Tex., for plaintiff & intervenor Johnson.
    Ed T. Smith, Bonham, Tex., for intervenor Johnson.
    Robert Harms Bliss, Richard S. Golombeck, Bliss & Hughes, Dallas, Tex., for Richard Golombeck and Carl M. McWherter III.
    John H. Hall, Dallas, Tex., for J.J. French, Jr.
    Louis P. Bickel, Linda G. Moore, Bickel & Case, Dallas, Tex., for Southwest Pump Co., Inc.
    John L. Hauer, Michael Byrd, Clarice M. Davis, Akin Gump Strauss Hauer & Feld, Dallas, Tex., for Interfirst Bank Dallas N.A., Joe D. Nelson and Robin M. Kain.
    Fletcher L. Yarbrough, Barbara M.G. Lynn, Lindsay H. Lew, Carrington Coleman Sloman & Blumenthal, Dallas, Tex., for defendants S.R. Estes, W.C. Estes, W.T. Moody, B. Cole, J.A. Rodgers, L. Donaghey, O.M. Weaver and G.Y. Danner.
   MEMORANDUM ORDER

FISH, District Judge.

This case is before the court on motions to dismiss, filed by defendants InterFirst Bank Dallas, N.A. (“InterFirst”), Southwest Pump Company, Incorporated (“Southwest”), and eleven individuals, for failure to state a claim upon which relief can be granted. For the reasons stated below, all of the motions to dismiss are granted and plaintiffs claims are dismissed in their entirety.

Allegations of the Complaint

Plaintiff’s first amended complaint asserts both a derivative federal claim for Southwest’s benefit and several pendent state claims belonging to plaintiff. According to plaintiff’s allegations, defendant Sally R. Estes began a campaign, as early as 1975, to obtain ownership or control of the stock in Southwest, a closely held corporation. At all times relevant here, plaintiff was a minority shareholder in Southwest. From 1977 through 1981, it is alleged, Sally R. Estes controlled the Board of Directors of Southwest by controlling a majority of the shares entitled to vote at stockholders meetings and through other means. During the same time period, defendant Inter-First was a substantial lender to Southwest. As of 1980, InterFirst, as successor trustee for the Joe A. Risser Estate Trusts, controlled 968½ shares (“the Risser shares”) out of the 3,000 shares of Southwest then issued and outstanding.

InterFirst and the other defendants are alleged to have conspired with one another to install Sally R. Estes as the dominant owner of Southwest and to improve the security of InterFirst’s loans to Southwest. In furtherance of this conspiracy, Inter-First is alleged to have clandestinely sold the Risser shares to Southwest in December, 1980 for $341,600 in cash (which Inter-First loaned to Southwest) and stock in the Bonham State Bank (for which Southwest paid $18,000).

It is thus alleged that Southwest gave InterFirst consideration for the Risser shares totalling only $359,600, at a time when the Risser shares had a fair market value of at least $3,868,382. Southwest purportedly purchased the Risser shares in order to retire this stock, but plaintiff maintains that the sale was intended solely to benefit Sally R. Estes by giving her control of the Risser shares and, ultimately, of Southwest. The details and purpose of this transaction were, plaintiff maintains, kept from her and the other minority shareholders.

In November of 1981, again according to plaintiff, Southwest sold the Risser shares to Sally R. Estes in furtherance of the conspiracy. Although the stated price for the sale of the Risser shares was $542,360, Southwest received property in exchange for the stock worth less than half the stated price. Moreover, at the time Sally R. Estes purchased the Risser shares, those shares had a fair market value of at least $12,261,210.

Relief Sought

For these alleged wrongs, plaintiff seeks the following relief on behalf of Southwest:

(1) rescission of the sale of the Risser shares from Southwest to Sally R. Estes or, in the alternative, compensatory damages in the sum of at least $12,003,400 and punitive damages in the sum of at least $24,006,800; and
(2) damages resulting from the waste and misuse of the assets of Southwest.

On behalf of herself and the other minority shareholders similarly situated, plaintiff seeks damages from Southwest resulting from the malicious suppression of dividends of at least $440.70 per share. For herself alone, plaintiff seeks punitive damages from Southwest of $372,832, arising from the suppression of dividends; from InterFirst she seeks actual damages of $8,273,002 and exemplary damages of $16,-546,004 resulting from the alleged breach of agreement and fiduciary duty.

Plaintiff seeks to litigate the corporate wrongs derivatively, on behalf of Southwest, under the federal securities laws. Rule 23.1 of the Federal Rules of Civil Procedure establishes the procedure governing derivative actions by shareholders of corporations, i.e., actions by one or more stockholders to enforce a corporate cause of action. Any relief awarded in such a suit takes the form of a judgment against the defendants, secured by the stockholders, in favor of the corporation. See Price v. Gurney, 324 U.S. 100, 105, 65 S.Ct. 513, 516, 89 L.Ed. 776 (1945); Lewis v. Knutson, 699 F.2d 230, 237-39 (5th Cir.1983); 7A Wright and Miller, Federal Practice and Procedure § 1821 at 294 (1972).

Defendants contend that this case cannot be maintained as a derivative action because plaintiffs first amended complaint does not state a claim upon which this court can grant the relief sought by plaintiff on behalf of Southwest. Persuaded that defendants’ position is sound, the court has concluded that Southwest should be barred from recovery on its federal securities claim by the equitable doctrine of in pari delicto. In the absence of any other basis for federal subject matter jurisdiction, plaintiff’s pendent state law claims should then be dismissed without prejudice.

Legal Analysis

In determining whether to grant a motion to dismiss for failure to state a claim, the court must assume the truth of the facts alleged in the complaint. Cooper v. Pate, 378 U.S. 546, 84 S.Ct. 1733, 12 L.Ed.2d 1030 (1964). The motion should not be granted unless it appears beyond doubt that the plaintiff can establish no set of facts which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957).

In the derivative portion of her suit, plaintiff claims a violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (“Section 10(b)”) and Rule 10b-5 promulgated thereunder, as well as violations of various state laws. Derivative suits for violations of the federal securities laws are brought rather infrequently; nevertheless,

when [corporate] officers and directors have defrauded a corporation by causing it to issue securities for grossly inadequate consideration to themselves or [to] others in league with them or [to] the one controlling them, the corporation has a federal cause of action under § 10(b) and Rule 10b-5, notwithstanding [the fact] that the perpetrators of the fraud are corporate insiders liable under state law.

Wolf v. Frank, 477 F.2d 467, 477 (5th Cir.), cert. denied, 414 U.S. 975, 94 S.Ct. 287, 38 L.Ed.2d 218 (1973) (quoting Rekant v. Desser, 425 F.2d 872, 882 (5th Cir.1970)). This situation is precisely that alleged in plaintiff’s complaint as a basis for recovery by Southwest, in defense of which the defendants have raised the issue of in pari delicto.

Generally, a court has discretion to bar recovery under the doctrine of in pari delicto only where the plaintiff’s conduct has been unconscionable and is immediately and necessarily related to the matter for which the plaintiff seeks relief. Woolf v. S.D. Cohn & Company, 515 F.2d 591, 601-03 (5th Cir.), reh’g denied, 521 F.2d 225 (5th Cir.1975) (per curiam opinion), vacated and remanded on other grounds, 426 U.S. 944, 96 S.Ct. 3161, 49 L.Ed.2d 1181 (1976). The Fifth Circuit has upheld the in pari delicto defense in securities fraud cases despite the apparent tension between the objectives of the federal securities regulatory scheme and this common law equitable defense. Kuehnert v. Texstar Corporation, 412 F.2d 700, 704 (5th Cir.1969). See also Wolfson v. Baker, 623 F.2d 1074, 1082-83 (5th Cir.1980), cert. denied, 450 U.S. 966, 101 S.Ct. 1483, 67 L.Ed.2d 615 (1981); Woolf, 521 F.2d at 226-27 (5th Cir.1975).

The Fifth Circuit cases have resolved this tension in the securities law context by requiring, as a prerequisite to application of the in pari delicto defense, that (1) the fault of the parties must be clearly mutual, simultaneous, and relatively equal; (2) the plaintiff must be an active, essential, and knowing participant in the illegal activity; and (3) the effect on the investing public or on the regulatory scheme, caused by permitting the defense, must be so slight that it does not interfere with the objectives of the securities laws. For a discussion of these requirements, see Fogarty v. Securi ty Trust Company, 532 F.2d 1029, 1033 (5th Cir.1976); Woolf, 515 F.2d at 604; James v. DuBreuil, 500 F.2d 155, 158 (5th Cir.1974). The third element also encompasses the requirement that the court consider and give substantial weight to the impact, if any, which the violation itself has had upon the investing public. Woolf, 515 F.2d at 604-05.

Conceptually, permitting the in pari delicto defense to bar recovery by the corporation in a case such as this would seem at first glance always to preclude the use of a derivative suit to deter wrongdoing by corporate insiders. Nevertheless, while the courts in this circuit have not actually applied the defense against a corporation in a derivative action, the Fifth Circuit has recognized its potential for application in this context under appropriate circumstances. See Hooper v. Mountain States Securities Corporation, 282 F.2d 195, 207-08 (5th Cir.1960), cert. denied, 365 U.S. 814, 81 S.Ct. 695, 5 L.Ed.2d 693 (1961) (civil action by trustee of bankrupt corporation to recover for violation of § 10(b)). Viewing the transaction here at issue both in its entirety and as two distinct parts of an overall scheme to defraud, as alleged in the complaint, the court is convinced that the defense of in pari delicto is appropriate under the circumstances of this case.

The allegations in paragraphs 18 through 22 of the plaintiffs amended complaint implicate the corporation as a participant in a scheme to place Sally Estes in control of Southwest, without the knowledge or consent of the minority shareholders, by defrauding the beneficiaries of the Joe A. Risser Estate Trusts. This plan required two steps. In the first step, InterFirst “clandestinely” sold to Southwest the Risser shares at a price far below their fair market value. In the second, Southwest resold the Risser shares to Sally Estes, again at a price far below their fair market value. Yet plaintiffs derivative claim focuses solely on step two of the transaction.

In essence, plaintiff is seeking to recover, for the benefit of Southwest, the increased value of stock which the corporation fraudulently obtained in a transaction inextricably intertwined with the stock transaction for which the corporation now seeks to recover. The plaintiff here is not seeking to rescind, cancel, or disavow the stock purchase from the trust executed as step one of the fraudulent scheme. On the contrary, plaintiff is seeking to obtain for Southwest the benefit of that fraud which it conspired to perpetrate upon the trust.

Southwest is equally at fault with the other defendants herein since it embarked upon a mutual plan to defraud the trust beneficiaries. Moreover, the acts of Southwest were clearly simultaneous with the transgressions of the defendants since Southwest and at least some of the defendants were parties to the sale of the Risser shares. See Woolf, 515 F.2d at 604. Southwest was also actively involved with the defendants in repurchasing the Risser shares; indeed, Southwest was an essential participant since it had acquired the financial resources with which the shares were purchased. See Wolfson, 623 F.2d at 1082; DuBreuil, 500 F.2d at 159; Kuehnert, 412 F.2d at 703-04.

Finally, this case presents strong justifications for applying the in pari delicto defense because the dispute involves a relatively small number of persons concerning two transactions in the stock of a close corporation. Because Southwest’s stock is not publicly traded, it does not appear this particular violation of the securities laws has had any appreciable impact upon the investing public. Thus, neither the investing public, nor the implementation of the securities laws, will be adversely affected by upholding the defense in this case. Cf. Wolfson, 623 F.2d at 1082; DuBreuil, 500 F.2d at 160; Kuehnert, 412 F.2d at 705. In sum, the court finds that the defense of in pari delicto is applicable to bar Southwest’s recovery under Section 10(b) with respect to the transaction at issue herein. Consequently, plaintiff has failed to state a federal claim on which relief can be granted.

Pendent State Claims

After dismissal of plaintiff’s Section 10(b) claim, only state claims remain for adjudication. In the exercise of the court’s discretion, therefore, the plaintiff’s pendent state claims should be dismissed without prejudice. United Mine Workers of America v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966) (“if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well”).

Conclusion

The motions to dismiss for failure to state a claim upon which relief may be granted filed by defendants InterFirst, Southwest and eleven individuals are GRANTED. Plaintiff’s claim under Section 10(b) and Rule 10b-5 is DISMISSED with prejudice. Plaintiff’s pendent state law claims are DISMISSED without prejudice.

SO ORDERED.

      . William C. Estes, Sally R. Estes, Gene V. Danner, O.M. Weaver, James A. Rodgers, W.T. Moody, Buster Cole, Lewis Donaghey, J.J. French, Jr., Joe D. Nelson and Robin M. Kain.

      . The objectives of implied private rights of action under the securities laws are two-fold: (1) deterrence of future violations and (2) compensation to those who have been damaged as a result of past violations. Woolf, 515 F.2d at 604.

      . The defendant in Hooper claimed that the trustee could not bring suit on behalf of the corporation because the corporation was in pari delicto with the alleged conspirators. 282 F.2d at 207. Although the court found that defendant’s argument was meritless because the corporation had been unknowingly duped into losing the value of 700,000 shares exchanged in a fraudulent scheme, the court did not reject the defense as inappropriate in the context of a derivative suit. Id. at 208.

      . Kuehnert teaches that whether or not in pari delicto should be applied in a given case depends on "which decision will have the better consequences in promoting the objectives of the securities laws by increasing the protection to be afforded the investing public." 412 F.2d at 704. Here, denial of the in pari delicto defense would appear to reward, rather than punish or deter, Southwest’s participation in the conspiracy to purchase the Risser shares at a price far below market value. To that extent, denial of the defense would frustrate, rather than promote, the objectives of the securities laws.

      . Cf. Kuehnert at 704: "Thus, when plaintiff and defendant had conspired together to cheat plaintiff’s creditors, and instead the defendant cheated the plaintiff, no relief was given.”

      . See Kuehnert at 703: “In private SEC violations] the degree of public interest is not comparable to that made apparent by the triple damage provision; we see no sufficient public interest when the only question is one of accounting between joint conspirators" (emphasis added).


text:
    MAURICE PIERCE & ASSOCIATES, INC., Plaintiff, v. COMPUTERAGE, INC. and The Korner Company, Defendants.
    Civ. A. No. CA 3-84-1341-G.
    United States District Court, N.D. Texas, Dallas Division.
    Feb. 8, 1985.

      Charles H. Await, Dallas, Tex., for plaintiff.
    Joseph A. Fitzpatrick, Jr., Gardner, Racines, Plunkett, Sheetz & Fitzpatrick, Allentown, Pa., for Computerage, Inc.
    John Gitlin, Fisher, Gitlin, Sanger & Breeden, Dallas, Tex., for Korner Co.
   MEMORANDUM ORDER

FISH, District Judge.

This case is before the court on the motion of defendant Computerage, Inc. (“Computerage”) to dismiss for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2) or, in the alternative, to transfer for improper venue under 28 U.S.C. § 1404(a). For the reasons which follow, the court is of the opinion that the motion to dismiss for lack of personal jurisdiction should be granted.

I. Factual Summary

In January 1983, William Korner (“Korner”), acting on behalf of the Korner Company, a Pennsylvania corporation, initiated negotiations by mail and by telephone with Maurice Pierce & Associates, Inc. (“Pierce”) in Dallas, Texas. The parties subsequently entered into a contract whereby Pierce was to render design services to Korner and the Korner Company for the design of a retail store in Pennsylvania. Virtually all of the design work by Pierce was conceived of and performed in Texas.

On June 3, 1983, subsequent to the parties’ agreement that Pierce would design the Pennsylvania store, Korner incorporated Computerage for the purpose of managing the retail store. Since the spring of 1983, Pierce had been aware of both Korner’s plan to incorporate Computerage and the proposed purpose of the corporation.

Pierce continued to perform design services pursuant to the contract through November, 1983, and received partial payment for its services; a significant portion of the contract price, however, remains unpaid. As a result, Pierce filed suit in this court on August 15, 1984. An interlocutory default judgment was entered against the Korner Company on November 21, 1984. It appears that the Korner Company has terminated its business operations and that its assets were sold in June, 1984. William Korner is no longer involved with Computerage.

II. Legal Analysis

The burden of establishing that personal jurisdiction exists over a non-resident defendant rests upon the party seeking to invoke the jurisdiction of the federal court. Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 490 (5th Cir.1974). In a case such as this, in which subject matter jurisdiction is based upon diversity of citizenship, the plaintiff must establish that a state statute confers jurisdiction over the non-resident defendant and that asserting such jurisdiction complies with the requirements of due process. Id. at 489.

Pierce, the plaintiff here, relies on such a statute, Art. 2031b, TEX.REV.CIV.STAT. ANN. (Vernon 1964 & Supp.1985), which provides that a foreign corporation or nonresident natural person which does business in Texas is amenable to process “in any action arising out of such business done in this State.” Section 4 of Article 2031b provides that “any foreign corporation ... or non-resident natural person shall be deemed doing business in this State by entering into [a] contract by mail or otherwise with a resident of Texas to be performed in whole or in part by either party in this State____”

In order to make the requisite prima facie showing that jurisdiction exists under this provision of the statute, the plaintiff must demonstrate that: (1) a contract existed between the plaintiff and the defendant which was at least partially performable in Texas; and (2) the instant action arose out of that contract. Cousteau, 495 F.2d at 491; Walker v. Newgent, 583 F.2d 163, 166 (5th Cir.1978), cert. denied, 441 U.S. 906, 99 S.Ct. 1994, 60 L.Ed.2d 374 (1979).

In this case, it is undisputed that the only parties to the design contract herein were Pierce and the Korner Company. Nevertheless, Pierce seeks to have this court exercise personal jurisdiction over Computerage on the basis of this contract. The issue, therefore, is whether one foreign corporation’s (or non-resident individual’s) contacts with the forum may be imputed to a second foreign corporation so as to subject the second corporation to in personam jurisdiction under Article 2031b, even though the second corporation was non-existent at the time the contract was entered into.

Two theories have been employed by the courts in determining whether the business, activities of one corporate entity may be imputed to a related corporate entity for purposes of personal jurisdiction. Walker, 583 F.2d at 167; In re Ocean Ranger Sinking Off Newfoundland on February 15, 1982, 589 F.Supp. 302, 310 (E.D.La. 1984). These theories are (1) the “agency” theory and (2) the “control” or the “alter-ego” theory. See Cousteau, 495 F.2d at 493; Walker, 583 F.2d at 167; In re Ocean Ranger, 589 F.Supp. at 310.

A. Agency

In order for the agency theory to apply, a plaintiff must make a prima facie showing that an agency relationship exists. Walker, 583 F.2d at 167; Cousteau, 495 F.2d at 493. Under either Texas or Pennsylvania law, however, an individual who contracts on behalf of a proposed corporation, i.e., a promoter, cannot be treated as an agent because the nominal principal is not then in existence. RKO-Stanley Warner Theatres, Inc. v. Graziano, 467 Pa. 220, 355 A.2d 830 (1976); J.D. Cavaness v. General Corporation, 272 S.W.2d 595, 598 (Tex.Civ.App. — Dallas 1954), aff'd, 155 Tex. 69, 283 S.W.2d 33 (1955). Consequently, whether Pierce is asserting that the Korner Company or Korner individually was acting as an agent for Computerage, the agency theory is inapplicable to support personal jurisdiction in.this ease because Computer-age did not exist when the contract was entered into.

Moreover, Pierce has not alleged that the contract was entered into on behalf of Computerage. Indeed, Pierce did not know of Korner’s intent to form Computerage until early spring, after Pierce had already begun rendering the design services. Thus, personal jurisdiction may not be asserted over Computerage under the theory that Korner’s or the Korner Company’s contacts with Texas were in furtherance of an agency relationship with Computerage.

B. Control or Alter-Ego

In order to assert personal jurisdiction over a “related” corporation on the theory that it was under the control of another corporation or individual, plaintiff must make a prima facie showing that the “related” corporation was so extensively controlled by the first corporation or individual that it was a mere instrumentality of the other. Walker, 583 F.2d at 167; Cousteau, 495 F.2d at 493; In re Ocean Ranger, 589 F.Supp. at 310-11; Docutel Corporation v. S.A. Matra, 464 F.Supp. 1209, 1218 (N.D.Tex.1979).

First of all, Pierce has offered no evidence to establish that Computerage and the Korner Company were even related companies, such as parent-subsidiary or sibling corporations. Moreover, Pierce’s evidence is insufficient to establish that Computerage was the alter-ego of William Korner. That evidence indicates that Korner represented that he intended to form a subsidiary corporation to the Korner Company; that Korner represented that he was in complete control of both corporations; that Korner was president and chairman of the board of both corporations; that Computerage paid one of Pierce’s invoices for the design work; and that Korner wrote a letter on Computerage letterhead thanking Pierce for his work on the store.

Without additional evidence, however, such as the nature of the stockholdings in Computerage and the make-up of its Board of Directors, which would tend to show Korner’s or the Korner Company’s influence over Computerage’s affairs, Pierce has failed to sustain his burden of establishing that Computerage was under the control of either Korner or the Korner Company. Compare In re Ocean Ranger, 589 F.Supp. at 310 (plaintiff met burden of showing control) with Walker, 583 F.2d at 167 (plaintiff failed to meet burden of showing control) and Murdock v. Volvo of America Corp., 403 F.Supp. 55, 57 (N.D.Tex.1975) (plaintiff failed to meet burden of showing control) and Docutel Corporation, 464 F.Supp. at 1218 (plaintiff failed to meet burden of establishing control). Thus, the “control” or “alter-ego” theory will not support an assertion of personal jurisdiction over Computerage in this action.

C. Ratification

Pierce’s final argument is that Computerage should be subject to personal jurisdiction in Texas because it impliedly ratified the contract between Pierce and the Korner Company. Although Pierce has cited no Fifth Circuit authority for this particular argument, ratification of the contract may support an assertion of personal jurisdiction over Computerage. See Cousteau, 495 F.2d at 493 n. 15.

Both Texas and Pennsylvania recognize that where a promoter executes a contract on behalf of a proposed corporation, the contract is enforceable against the corporation if the corporation subsequently comes into existence and ratifies or otherwise accepts the benefits of the contract. Solomon v. Cedar Acres East, Inc., 455 Pa. 496, 317 A.2d 283 (1974); J.D. Cavaness, 272 S.W.2d at 598-99. In this case, Pierce has offered no evidence establishing that the contract at issue was entered into on behalf of Computerage. In fact, it seems clear that the contract was entered into solely between Pierce and the Korner Company, and that at the time of contract formation, Computerage was not even contemplated.

Even if the contract was made on behalf of Computerage, the corporation must ratify the contract in order for liability to attach to the corporation. Id. “Ratification of a contract by one not a party to the contract requires that the ratifying party be in possession of all the material facts and act with such knowledge.” Solomon, 317 A.2d 283; see Star Corporation v. General Screw Products Company, 501 S.W.2d 374, 380 (Tex.Civ.App.—Houston [1st Dist.] 1973, writ ref’d, n.r.e.). Pierce, however, has failed to make a sufficient showing that Computerage ratified the design contract either expressly or impliedly by accepting the benefits of the contract with knowledge of all the material facts. See Solomon, 317 A.2d 283.

The only basis for ratification is Computerage’s alleged use of the store facilities and Korner’s knowledge of the contract. The facts indicate that Computerage was formed in order to manage the store. Although the assets of the Korner Company have apparently been liquidated, the pleadings do not indicate whether the contract rights were transferred to Computerage or whether it obtained any interest in the retail store itself. In addition, without more evidence as to the Korner Company’s or Korner’s stockholdings in and actual control over Computerage, the court cannot conclude that the knowledge of either Korner or the Korner Company concerning the material facts of the contract should be imputed to Computerage. See Solomon, 317 A.2d 283; Star Corp., 501 S.W.2d at 380.

Conclusion

Based upon the foregoing analysis, the court finds that Pierce has not offered sufficient evidence to justify the assertion of personal jurisdiction over Computerage in this action under the Texas long-arm statute. Since no state law provides for the assertion of jurisdiction in this case, it is unnecessary to analyze the assertion of jurisdiction over Computerage under principles of due process. In conclusion, Computerage’s motion to dismiss for lack of personal jurisdiction is GRANTED.

SO ORDERED.

      . Article 2031b(3) provides in pertinent part: Any foreign corporation ... or non-resident natural person that engages in business in this State, irrespective of any Statute or law respecting designation or maintenance of resident agents, and does not maintain a place of regular business in this State or a designated agent upon whom service may be made upon causes of action arising out of such business done in this State, the act or acts of engaging in such business within this State shall be deemed equivalent to an appointment by such foreign corporation ... or non-resident natural person of the Secretary of State of Texas as agent upon whom service of process may be made in any action ... arising out of such business done in this State, wherein such corporation ... or non-resident natural person is a party____


author: ARONOVITZ, District Judge.

text:
    SPANISH INTERNATIONAL COMMUNICATIONS CORPORATION, SIN, INC., Bahia De San Francisco Television Company and the Seven Hills Television Company, Plaintiffs, v. Matthew L. LEIBOWITZ, Defendant.
    No. 84-0655-CIV-Aronovitz.
    United States District Court, S.D. Florida.
    Feb. 26, 1985.

      Daniel R. Shulman, Gray, Plant, Mooty, Mooty & Bennett, Minneapolis, Minn., Joseph M. Alioto, Alioto & Alioto, San Francisco, Cal., R. Randall Wolley, II, Neal & Wolley, Dallas, Tex., Angel Castillo, Morgan, Lewis & Bockius, Miami, Fla., for plaintiffs.
    Edward P. Henneberry, Eberhard W. Pfaller, Jr., Howrey & Simon, Washington, D.C., James J. Kenny, Kenny, Nachwalter & Seymour, Miami, Fla., for defendant.
   ORDER GRANTING DEFENDANT’S MOTION TO DISMISS AND DISMISSING THE FEDERAL CLAIMS IN THE AMENDED COMPLAINT WITH PREJUDICE

ARONOVITZ, District Judge.

THIS CAUSE came on for a hearing before the Court upon Defendant MATTHEW L. LEIBOWITZ’ Motion to Dismiss Plaintiff’s First Amended Complaint (D.N. 26). Counsel for the various parties appeared at the hearing on January 7, 1985, and presented their views regarding the pending motion. The Court heard argument by counsel and carefully considered the motion, the supporting and opposing memoranda filed thereto, the pertinent portions of the record, the applicable law and being otherwise fully advised in the premises, it is thereupon

ORDERED AND ADJUDGED that said motion be, and the same is, hereby GRANTED. As to all federal claims asserted herein, those claims of the Amended Complaint are hereby DISMISSED WITH PREJUDICE. As to all state claims asserted herein, those claims of the First Amended Complaint are hereby DISMISSED WITHOUT PREJUDICE for reassertion in state court pursuant to the decision of United Mine Workers of America v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).

This action alleges violations of federal antitrust laws against an individual attorney who represents an organization by the name of Spanish Radio Broadcasters of America, Inc. (“SRBA”). More specifically, the Amended Complaint speaks to Defendant LEIBOWITZ’ conduct in his representation of SRBA in a Federal Communications Commission (“FCC”) proceeding wherein claims were filed against Plaintiffs in the instant suit including SPANISH INTERNATIONAL COMMUNICATIONS CORPORATION (“SICC”). In essence, the Amended Complaint alleges that Defendant LEIBOWITZ has filed “baseless and repetitive claims” with the FCC. [Amended Complaint at Paragraph 22(b).]

There exist two separate and several grounds upon which the instant dismissal is predicated. First, a lawyer, such as Defendant LEIBOWITZ, cannot be held personally liable for acts undertaken in the normal course of representing a client. Second, the Amended Complaint at bar fails to allege facts which support a claim that Defendant LEIBOWITZ engaged in any activity not constitutionally protected and immune from an antitrust attack under the Noerr-Pennington doctrine. Under either of these two grounds, the Court finds that dismissal of the instant Amended Complaint is warranted.

1. The Amended Complaint Fails to Negate Defendant’s Status as an Attorney, Who, at All Material Times Was Engaged in Representation of His Client

An examination of the Amended Complaint reveals a lack of sufficient factual allegations which negate Defendant’s status as an attorney. Moreover, given the factual circumstances alleged in the Amended Complaint, the Court finds that Plaintiff cannot allege with requisite suffieieney any acts undertaken by Defendant which could render him personally and individually liable for actions taken in a capacity apart and distinct from his role as an attorney. At Paragraph 4 of the Amended Complaint, it is alleged that “Defendant is and has been counsel” at all material times. Yet, at Paragraph 22(f), the Amended Complaint states that Defendant LEIBOWITZ acted “not solely as an attorney providing legal service, but as a person involved in the formulation of policy for the conspirators, as a planner of the conspiracy, and one of the prime implementors and actors in the eonspiracy[.]” The Amended Complaint then proceeds to list thirteen “acts”, none of which negate Defendant’s status as an attorney acting within the scope of his profession. In fact, each of the enumerated alleged acts constitutes duties performed during the course of representing a client before an administrative agency.

Quite simply, there are no factual allegations which would support the contention that Defendant had any interest in the proceedings before the Federal Communications Commission other than an interest as an attorney representing his client. The Amended Complaint alleges no financial, business or economic interest held by Defendant. Moreover, the Amended Complaint does not allege that Defendant enjoyed a status as a principal in the matter at hand.

In Invictus Records, Inc. v. American Broadcasting Companies, Inc., 98 F.R.D. 419 (E.D.Mich.1982), a district court granted summary judgment in favor of attorney/defendants in an antitrust case, despite allegations (as here) of sham lawsuits, holding that defendants acted merely as legal advisors:

That [the attorney/defendants] participated in negotiations on [their client’s] behalf with ABC, expressed a legal opinion that his contract with plaintiffs was not binding and planned a law-suit to test that opinion, which is all the facts alleged by plaintiffs demonstrate, is not inconsistent with their role as legal advisors to [their client]. That they were apparently successful or at least vigorous and persistent on behalf of their client does not take them beyond the protection of Tillamook Cheese. [358 F.2d 115 (9th Cir.1966)] They were, at least as has been shown on this record, acting as legal advisors and nothing more. Only by engaging in speculation rather than reasonable inference can an antitrust violation be found.

98 F.R.D. at 429-430. Although Plaintiffs’ Amended Complaint cosmetically states that “[t]he actions of LEIBOWITZ for which Plaintiffs seek to impose liability ... do not include the providing of legal advice as an attorney” (Amended Complaint at Paragraph 4), the centerpiece of Plaintiffs’ Amended Complaint is the filing of a lawsuit (Amended Complaint at Paragraph 22), which Invictus states is acting as “legal advisor”. From the allegations in the instant Amended Complaint then, the Court can only surmise that Plaintiffs are improperly claiming that Defendant gave legal advice which somehow gives rise to personal liability. In short, it affirmatively appears that the claim against the defendant alleges a status that is wholly and solely as an attorney. According to the Amended Complaint, there was nothing other than legal advice involved. Therefore, the instant Amended Complaint in failing to negate Defendant’s status as an attorney warrants dismissal under the rationale of Invictus. Further, the instant Amended Complaint is properly subject to dismissal pursuant to the instant Motion to Dismiss in view of the fact that Plaintiffs have already been afforded an opportunity to correct this deficiency.

2. The Amended Complaint Fails to Support a Claim that Defendant Engaged in Any Activity Not Constitutionally Protected and Immune from Antitrust Attack Under the Noerr-Pennington Doctrine.

The instant Amended Complaint also warrants dismissal on a constitutional level. If the allegations against Defendant, essentially contained in Paragraph 22 of the Amended Complaint, are closely scrutinized, they can be broken down as follows. Paragraph 22(a) alleges that “other named conspirators have collectively boycotted and refused to do business with Plaintiff.” This Paragraph of the Amended Complaint expressly exempts Defendant as a participant in the alleged boycott. As to all the remaining subparagraphs under Paragraph 22, there are no sufficient statements of fact to establish antitrust violations. Instead these allegations are wholly conclusory and hence insufficient from a pleading standpoint. See California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972).

As the Court views it, the thrust of Plaintiffs’ action goes to Defendant’s activities in instituting and maintaining the FCC action. The Court takes judicial notice of the fact that the pleadings filed by Defendant LEIBOWITZ were not “baseless” as alleged by Plaintiffs because as a result of pleadings filed by Defendant LEIBOWITZ, the SRBA succeeded in having an investigation into the SICC/Spanish International Network, Inc. (“SIN”) relationship conducted by the FCC which ultimately and unanimously designated Plaintiffs’ licenses for hearing:

2. ... As a result of information provided in SRBA’s filings, an investigation was conducted into the SRBA allegations
3. Information obtained by the Commission’s staff as a result of the investigation raises a serious question as to whether the captioned stations are under alien control in violation of [federal law].

In re SICC, MM Docket No. 83-540, Memorandum Opinion and Order at Paragraphs 2, 3 (adopted May 26, 1983; released June 16, 1983); 48 Fed.Reg. 28,549 (June 23, 1983).

As such, the formal order by the full commission leaves no doubt that the pleadings filed by Defendant LEIBOWITZ are far from “baseless”. Moreover, Plaintiffs’ conclusory allegations concerning supposed “ex parte contacts” and recruitment of FCC attorneys actively involved in the administrative proceedings are nothing more than red herrings. The Court is entitled to, and in fact does, take judicial notice of the fact that the presiding administrative law judge in the FCC proceeding held that no improper influence was exerted on the Commission’s decision to designate the licenses because “[t]hat order was adopted by the Commission without dissent, and SICC’s largely speculative allegations are insufficient to warrant an inquiry into the propriety of that action.” In re SICC, MM Docket No. 83-540, Order issued March 14, 1984 at page 2.

On a more substantive constitutional level, the Amended Complaint must fail under established antitrust doctrine. A trilogy of cases decided by the Supreme Court has established an exemption from the antitrust laws for solicitation of government action, known as the “Noerr-Pennington” exemption. Eastern Railroad President’s Conference v. Noerr Motor Freight Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961); United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965); California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972). As expressly recognized in California Motor Transport, the primary basis for the Noerr-Pennington exemption rests on fundamental First Amendment freedoms:

We conclude that it would be destructive of rights of association and of petition to hold that groups with common interest may not, without violating the antitrust laws, use the channels and procedures of state and federal agencies and courts to advocate their causes and point of view respecting resolution of their business and economic interest vis-a-vis their competitors.

404 U.S. at 510-511, 92 S.Ct. at 611-612.

Plaintiffs seek to impose liability on Defendant LEIBOWITZ for allegedly filing pleadings with the federal government, and supposedly communicating the essence of such pleadings to third parties. The NoerrPennington doctrine has more than a passing effect on such a situation where an attorney representing a party before an administrative board is involved. In fact, the Court can think of no specific set of facts which could be more appropriate for invocation of the Noerr-Pennington doctrine than the set of facts at bar. Accordingly, in obvious recognition of the fact that the conduct allegedly engaged in by Defendant LEIBOWITZ is constitutionally protected activity immune from Sherman Act attack, Plaintiffs’ Amended Complaint plainly seeks to implicate the so-called “sham” exception to the Noerr-Pennington doctrine.

In California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972), the Supreme Court construed the “sham exception” as encompassing:

a pattern of baseless, repetitive claims ... effectively barring respondents from access to the agencies and courts ... [which] cannot acquire immunity by seeking refuge under the umbrella of “political expression.”

404 U.S. at 513, 92 S.Ct. at 613. It is clear that the actions allegedly undertaken by Defendant LEIBOWITZ are immune from antitrust attack under the Noerr-Pennington doctrine, unless Plaintiffs properly plead facts sufficient to bring Defendant LEIBOWITZ’ activity under the “sham exception”. In fact, the Amended Complaint states only legal conclusions rather than facts and thus this Court dismisses the Amended Complaint in the interests of promoting judicial economy and to prevent the infliction of needless expense on the parties.

3. The Instant Amended Complaint Warrants Dismissal Pursuant to a Motion to Dismiss Rather Than a Motion for Summary Judgment.

Although the Court is keenly aware of the liberal pleading standards set forth in Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), as well as its edict that motions to dismiss should not be taken lightly, the instant Amended Complaint is clearly ripe for dismissal with prejudice on Defendant’s Motion to Dismiss. Allegations of conduct violative of the antitrust laws without a statement of the facts constituting such conduct is a mere allegation of a legal conclusion and is therefore insufficient to state a claim under the antitrust laws. See United States v. Air Florida, Inc., 534 F.Supp. 17, 20 (S.D.Fla.1982) (“the Court need not accept conclusions of law or sweeping legal conclusions cast in the form of factual allegations”). The inadequacy of conclusory pleading of antitrust claims is even more striking, however, when the conclusory pleading involves, as here, an attempt to invoke the “sham exception” to Noerr-Pennington antitrust immunity. The presence of protected First Amendment freedoms has caused many courts to require specific factual pleading. When complaints have failed to live up to these standards, many courts have dismissed them pursuant to Federal Rule of Civil Procedure 12(b)(6).

The seminal case in this regard is Franchise Realty Interstate Corp. v. San Francisco Local Joint Executive Board of Culinary Workers, 542 F.2d 1076 (9th Cir.1976), cert. denied, 430 U.S. 940, 97 S.Ct. 1571, 51 L.Ed.2d 787 (1977). Franchise Realty involved an antitrust complaint by two McDonald’s Corp. subsidiaries, alleging a conspiracy between two hotel and restaurant associations and a labor union. Plaintiffs alleged that the defendant employee organizations conspired to oppose, repeatedly, baselessly and in bad faith, the granting of building permits by a San Francisco city agency. 542 F.2d at 1078. Defendants filed a motion under Rule 12(b)(6) to dismiss the complaint in Franchise Realty for failure to state a claim.

The Franchise Realty plaintiffs argued that the “sham exception” applied, but the court rejected plaintiffs’ bald allegation:

This is not an ordinary case. The Supreme Court has recognized that the right to associate and to petition an administrative agency to take official action in the exercise of its powers is guaranteed by the First Amendment ... Yet McDonald’s would have us hold, in effect, that a claim for relief under the Sherman Act is stated by a mere conclusory allegation that this right is being exercised for the purpose of barring a competitor from access to the agency. We decline this invitation because to condition the right to associate and petition on the motivations of the petitioners would have a chilling effect on exercise of this fundamental First Amendment right, and such a ruling would in a practical sense render the Trucking Unlimited exception coextensive with the Noerr immunity.

542 F.2d at 1082 (citation omitted). In order to prevent such a chill from being imposed upon antitrust defendants and to preclude the sham exception from swallowing the Noerr-Pennington rule, the Court then held that for conduct presumptively protected by the First Amendment, a complaint seeking to invoke the sham exception “requires more specific allegations than would otherwise be required.” 542 F.2d at 1083. The concomitant rigorous scrutiny of the plaintiff’s complaint in Franchise Realty caused the Ninth Circuit to affirm the dismissal of McDonald’s First Amended Complaint with prejudice. 542 F.2d at 1078.

The rationale proffered by the Franchise Realty court illuminates the necessity for requiring more specific allegations supporting application of the sham exception. Actions presumptively protected under the First Amendment, such as the pleadings and communications that Plaintiffs attribute to Defendant LEIBOWITZ, are likely to be chilled by the mere pendency of legal actions attacking such conduct:

Regardless of what the actual facts might be, what plaintiff interested in deterring his competitors’ opposition before a governmental body would fail to recite in its complaint the conclusory “access-barring” incantation? And what competitor, knowing that its participation in administrative proceedings might result in expensive and burdensome litigation, which would drag on through the discovery stage at least, would not thereby feel pressured to forego presenting its views to the government? Particularly in antitrust litigation, the long drawn out process of discovery can be both harassing and expensive. When this well known fact is combined with the large damages usually claimed (here at $11,-100,000.00) and sometimes awarded, an action like this one can be, from the very beginning, a most potent weapon to deter the exercise of First Amendment rights.

Franchise Realty, 542 F.2d at 1082. Notably, Plaintiffs in the instant action allege damages of “at least $10 million.” [Amended Complaint at Paragraph 23.] Plaintiffs, through the vehicle of complex antitrust actions alleging huge damages, have attacked the SRBA, the only party in an adversarial posture to Plaintiffs in the FCC action, and Defendant LEIBOWITZ, who was and continues to be an attorney for the SRBA.

Significantly, a growing number of jurisdictions have engaged in analyses similar to the Franchise Realty court in confronting assertions of the sham exception to the Noerr-Pennington doctrine. In Bethlehem Plaza v. Campbell, 403 F.Supp. 966 (E.D.Pa.1975), the district judge granted a Rule 12(b)(6) motion to dismiss an antitrust complaint brought by a shopping center developer against two other developers:

... in a general, conclusory and unspecific fashion, the complaint alleges other organizational activities committed in furtherance of the conspiracy. We cannot assume the truth of this allegation for there are no supporting facts which can be taken as true for the purpose of our ruling. We recognize, of course, the plaintiff’s sincere hopes and expectations that the discovery process will yield concrete factual data to fill these voids and the principles of notice pleading in the Federal Rules, but we cannot ignore important countervailing constitutional principles. To allow the complaint to stand on the basis of these expectations and otherwise privileged conduct under the Sherman Act would certainly deter antitrust violators, but would at the same time seriously endanger the exercise of protected statutory and constitutional rights, a result which has been countermanded in Noerr.

403 F.Supp. at 971.

In Mark Aero Inc. v. Trans World Airlines, Inc., 580 F.2d 288 (8th Cir.1978), the Court granted the defendant’s motion to dismiss an amended complaint alleging antitrust claims concerning opposition by competitive airlines to the plaintiff’s use of an old municipal airport in Kansas City. Similar to Plaintiffs’ claims here, the plaintiff alleged that the defendant airlines engaged in a publicity campaign, induced the local aviation authority to refuse to apply to the Federal Aviation Administration for approval of a security plan, and made and induced others to make false and misleading statements to the City Council. 580 F.2d at 297. The Court brushed aside the plaintiff’s assertion of the sham exception and held that “what is being complained about is genuine political activity, protected by the first amendment rights of free speech and freedom of petition.” Id.

Finally, the case of City of Gainesville v. Florida Power & Light Co., 488 F.Supp. 1258, 1266 (S.D.Fla.1980), is instructive. In that case, pursuant to Rule 12(b)(6), the Court sitting in this District granted a motion to dismiss an antitrust counterclaim which alleged sham litigation. The Court held, much like this Court holds today, that the claims contained in the antitrust counterclaim were “entirely eonclusory”.

Plaintiffs’ Amended Complaint fails to state facts, as opposed to legal conclusions, which would invoke the “sham exception” to Noerr-Pennington immunity. Far from stating concrete facts, Plaintiffs have attempted to invoke the “sham exception” by repeating talismanic phraseology. In their Amended Complaint, Plaintiffs refer to the pleadings filed by Defendant LEIBOWITZ by utilizing the words “sham” thirteen times, “false” or “falsely” eleven times, and the phrase “baseless and repetitive” no less than fourteen times. Nor does the Amended Complaint state facts to buttress the naked allegations of sham pleadings. Such eonclusory pleading is not sufficient to withstand a motion to dismiss. In short, it is precisely the type of complaint which courts have repeatedly dismissed as failing to state a claim, in order to preclude unwarranted antitrust attacks on the exercise of basic First Amendment rights.

4. The Pendent State Claims Warrant Dismissal for Refiling in State Court.

Plaintiffs’ Amended Complaint also appears to allege at Subparagraphs 22(b) through 22(f) common law claims under Florida law. Specifically, these subparagraphs appear to allege the common law claim of tortious interference. This tort theory of recovery has long been recognized under Florida law. Dade Enterprises, Inc. v. Wometco Theatres, 119 Fla. 70, 160 So. 209 (1935); See Royal Typewriter Company, a Division of Litton Systems, Inc. v. Xerographic Supplies Corporation, 719 F.2d 1092 (11th Cir.1983); Manfacturing Research Corp. v. Greenlee Tool Co., 693 F.2d 1037 (11th Cir.1982).

Such state claims would necessarily be properly before this Court under its pendent jurisdiction. However, due to the preceding dismissal of the federal antitrust claims, those pendent state claims contained in the Amended Complaint are hereby DISMISSED WITHOUT PREJUDICE pursuant to United Mine Workers of America v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). Such state claims are therefore subject to refiling in state court should Plaintiffs desire to so refile.

In conclusion, based on the allegations of the First Amended Complaint, it is apparent that Defendant is representing a client before the FCC and that the pendency of the instant litigation offers opportunities for the opposition to claim a conflict of interest and thereby compel disqualification of Defendant LEIBOWITZ as counsel for the SRBA. This smacks of a legal ploy which this Court refused to condone. Inasmuch as Defendant is the attorney for the SRBA in a pending Texas action of a strikingly similar nature, the instant ruling regarding the Noerr-Pennington doctrine and/or the legal effect of the action against the instant Defendant may or may not have legal significance on the pending motions for summary judgment in said Texas action.

      . It should be noted that a prior Motion to Dismiss was filed by Defendant and thereafter granted by the Court (Order entered July 3, 1984 — D.N. 31) with leave to the Plaintiffs to file an amended complaint so that Plaintiffs could correct the deficiencies noted in their initial complaint and addressed herein.

      . For further discussion of the "sham” exception to the Noerr-Pennington doctrine and Plaintiffs’ lack of a sufficient basis to invoke the sham exception under the alleged facts, see the next section of the instant Memorandum Opinion. Section 3 infra.


author: ALSOP, District Judge.

text:
    FEDERAL SAVINGS & LOAN INSURANCE CORPORATION; Mutual Development Corporation; and Mortgage Services, Inc., Plaintiffs, v. COMMISSIONER OF REVENUE FOR the STATE OF MINNESOTA, Defendant.
    No. 3-84-CIV 83.
    United States District Court, D. Minnesota, Third Division.
    Feb. 27, 1985.
    Hopkins & Sutter by Michael F. Duhl, Chicago, Ill, and Popham, Haik, Schnobrich, Kaufman & Doty, Ltd. by D. William Kaufman, Minneapolis, Minn., for plaintiffs.
    Hubert H. Humphrey, III, Atty. Gen. by James W. Neher, Sp. Asst. Atty. Gen., St. Paul, Minn., for defendant.
   FINDINGS OF FACT

CONCLUSIONS OF LAW

ORDER FOR JUDGMENT

ALSOP, District Judge.

The above-entitled matter came on for trial by the court before the undersigned on the 6th day of November, 1984. The court appreciates the excellent manner in which the issues in the action were framed and the facts submitted by able counsel on both sides. Having considered the records and files, the stipulated facts of the parties, the testimony and exhibits received into evidence, and the briefs and arguments of counsel, the court makes the following findings of fact, conclusions of law and order for judgment.

FINDINGS OF FACT

1. The court adopts herein by reference as if fully set forth the stipulation of facts entered into by the parties as contained in Docket Entry No. 17 in the Clerk of Court’s file. In addition, the court makes the findings of fact enumerated below.

2. When the Federal Savings and Loan Insurance Corporation (FSLIC) makes assistance payments to a private savings and loan (S & L) to facilitate a merger with a failing S & L, those payments are made from the FSLIC’s insurance fund. All asset recoveries by the FSLIC are returned to the insurance fund. As of the date of the trial, the insurance fund had reserves totaling $6.5 billion which were insuring savings of approximately $670 billion.

3. When the FSLIC acquires the assets of a failing S & L in an assisted merger, it seeks to liquidate the assets and to return the resulting cash to the insurance fund. Pursuant to FSLIC policy, this procedure is followed whether the assets are acquired in corporate form or as individual properties.

4. As a part of the assistance agreement with First Federal Savings & Loan Association of Minneapolis (First Federal), the FSLIC purchased all of the capital stock of Mutual Development Corporation (Mutual Development) and Mortgage Services, Inc. (Mortgage Services). These subsidiaries of Home Savings Association (Home Savings) had been investigated by First Federal, which determined that it would be prudent to reject them. In particular, First Federal was concerned that the potential liabilities and the extent of the contractual commitments of each subsidiary was unclear.

5. Since the date of purchase, Mutual Development and Mortgage Services have been run by the FSLIC as separate corporate entities. FSLIC has been managing these entities for the sole purpose of liquidating the assets to reimburse the insurance fund. Initially, FSLIC entered into a contract with First Federal to have First Federal provide management supervision of the day-to-day operations of Mutual Development and Mortgage Services. Frank Augustine has managed the business affairs of Mutual Development and Mortgage Services from January, 1981 through the present. At the time Frank Augustine assumed his management responsibilities, he was a vice president at First Federal. He is now an independent consultant and manages Mutual Development and Mortgage Services pursuant to a contract directly with FSLIC. In managing Mutual Development and Mortgage Services, Frank Augustine has utilized the expertise of other businesses and professionals.

Upon the foregoing Findings of Fact, the court makes the following:

CONCLUSIONS OF LAW

1. This court has jurisdiction of this case pursuant to 28 U.S.C. § 1331 because this is a civil action arising under the Constitution and laws of the United States. This court also has jurisdiction pursuant to 28 U.S.C. § 1345 and 12 U.S.C. § 1730(k)(1), because this is an action in which FSLIC is a party. This court finally has jurisdiction pursuant to 28 U.S.C. § 2201 because this is an action for a declaratory judgment in a case in actual controversy between the parties.

2. Tax immunity under the Supremacy Clause of the United States Constitution is appropriate only:

... when the levy falls on the United States itself, or on an agency or instrumentality so closely connected to the Government that the two cannot realistically be viewed as separate entities, at least insofar as the activity being taxed is concerned.

United States v. New Mexico, 455 U.S. 720, 735, 102 S.Ct. 1373, 1383, 71 L.Ed.2d 580 (1982). Minnesota is attempting to collect state corporate income tax from Mutual Development and Mortgage Service. Minnesota’s levy does not fall on the United States itself, rather it falls upon the two corporate entities. Therefore, this court must determine if these corporate instrumentalities are “so closely connected to the Government that the two cannot realistically be viewed as separate entities, at least insofar as the activity being taxed is concerned.” Id.

By reviewing some of its prior cases, the Supreme Court in United States v. New Mexico, provided some guidance as to when a private entity is so closely connected to the government as to qualify for immunity from state taxation. The Court noted that “to resist the State’s taxing power, a private taxpayer must actually ‘stand in the Government’s shoes.’ ” Id. at 736, 102 S.Ct. at 1383 (quoting City of Detroit v. Murray Corp., 355 U.S. 489, 503, 78 S.Ct. 458, 491, 2 L.Ed.2d 441 (1958) (opinion of Frankfurter, J.)). The Court further stated that the entity must be:

“virtually ... an arm of the Government,” Department of Employment v. United States, 385 U.S. [355] at 359-360 [87 S.Ct. 464, 467-68, 17 L.Ed.2d 414]; “integral parts of [a governmental department],” and “arms of the Government deemed by it essential for the performance of governmental functions,” Standard Oil Co. v. Johnson, 316 U.S. 481, 485 [62 S.Ct. 1168, 1170, 86 L.Ed. 1611] (1942).

United States v. New Mexico, 455 U.S. at 736-37, 102 S.Ct. at 1383-84.

In New Mexico, three private corporations that had contracted to provide management, construction, and maintenance functions at facilities of the Atomic Energy Commission sought immunity from certain taxes levied by the state of New Mexico. The Supreme Court found that the private corporations were not entitled to state tax immunity. In doing so, the court noted that the corporations were distinct entities with private business goals and were carrying on their commercial activities for profit. Id. at 739, 102 S.Ct. at 1385. As privately owned corporations, the government neither ran their day-to-day operations nor retained any ownership interest in them. Id. at 740, 102 S.Ct. at 1385. In conclusion, the Court stated:

The congruence of professional interests between the contractors and the Federal Government is not complete; their relationships with the Government have been created for limited and carefully defined purposes.

Id. at 740-41, 102 S.Ct. at 1385-86.

The case before this court presents considerably different facts. The stock of both Mutual Development and Mortgage Services have been acquired by the FSLIC to facilitate the merger of a failing S & L, Home Savings, with a healthy S & L, First Federal. The Boards of Directors of both Mutual Development and Mortgage Services are now made up of FSLIC officials. FSLIC has contracted with an individual to manage these two corporations on a day-today basis, but the management goals of the corporation are being set by the FSLIC. Mutual Development and Mortgage Services both are being managed in a manner so their assets may be quickly liquidated to replenish the FSLIC insurance fund. Neither of these corporations has any private, profit-making, commercial goals. Upon these facts, it seems clear that the congruence of the professional interests of Mutual Development and Mortgage Services, and the federal government is complete. See id. at 740-41, 102 S.Ct. at 1385-86. This court can only conclude that these two corporate instrumentalities are ”... so closely connected to the government that ... [they] cannot realistically be viewed as separate entities____” See id. at 735, 102 S.Ct. at 1383.

This case is quite similar to Clallam County v. United States, 263 U.S. 341, 44 S.Ct. 121, 68 L.Ed. 328 (1923). In Clallam County, the federal government had formed a corporation under Washington law to manufacture weapons for use in World War I. The corporation was formed and operated by the United States for the convenience of the United States and to carry out its ends. At the conclusion of its work, the corporation was liquidated by the United States with the realized assets going to the United States. Id. at 344, 44 S.Ct. at 121. In finding that state tax immunity was appropriate, the Court noted:

This is not like the case of a corporation having its own purposes as well as those of the United States and interested in profit on its own account. The incorporation and formal erection of a new personality was only for the convenience of the United States to carry out its ends.

Id. at 345, 44 S.Ct. at 122. In the case before this court the two corporations, Mutual Development and Mortgage Services, were initially private corporations. However, they became wholly owned and operated by the United States when the FSLIC purchased their stock as a part of the Home Savings/First Federal merger agreement. Since acquisition, the FSLIC has operated these two corporations to further its goal of replenishing the insurance fund. The two corporations have had no private purposes separate from those of the FSLIC. The FSLIC is now in the process of completing the liquidation of both corporations and the resulting assets will become a part of the insurance fund.

Therefore, based upon the holdings and rationales of the United States Supreme Court in United States v. New Mexico and in Clallam County v. United States, this court concludes that Mutual Development and Mortgage Services are immune from the corporate income tax sought to be imposed by the State of Minnesota pursuant to the Supremacy Clause of the United States Constitution.

3. Because of the court’s holding under the Supremacy Clause, the court need not address the statutory issue raised by the parties.

Upon the foregoing Conclusions of Law,

IT IS ORDERED:

1. That the Clerk enter judgment as follows:

IT IS ORDERED, ADJUDGED AND DECREED That the Federal Savings and Loan Insurance Corporation, Mutual Development Corporation, and Mortgage Services, Inc. are immune from Minnesota corporate income tax under the Supremacy Clause of the United States Constitution.

2. That an injunction issue, enjoining the Commissioner of Revenue for the State of Minnesota, his officers, agents or employees from any further attempts to effect collection of the Minnesota state corporate income tax from any of these plaintiffs.