author: RAYMOND J. BRODERICK, District Judge.

text:
    Michael WEISS and Blanche G. Weiss v. ADVEST, INC. and the United States Trust Company of New York v. Jacqueline CUSHMAN, Ronald G. Beard and Mobile Home Materials.
    Civ. A. No. 82-4049.
    United States District Court, E.D. Pennsylvania.
    Aug. 30, 1984.

      See also, 607 F.Supp. 803.

      Arthur L. Pressman, Philadelphia, Pa., for Weiss.
    Guy A. Cellucci, Philadelphia, Pa., for Advest.
    Hayt, Hayt & Landau, Philadelphia, Pa., Clifford J. Chu, Great Neck, N.Y., Scudder G. Stevens, Philadelphia, Pa., of counsel.
    Jonathan Wheeler, Philadelphia, Pa., for Cushman.
    P. Joseph Pascoff, Detroit, Mich., for Mobile Home Materials.
   MEMORANDUM

RAYMOND J. BRODERICK, District Judge.

This action is brought by Michael and Blanche Weiss against defendants Advest, Inc., an investment company, and United States Trust Company of New York (U.S. Trust), a bank. The plaintiffs, customers of Advest, requested that Advest issue three checks totaling $85,000, which were to be charged against their account with Advest and drawn on Advest’s account maintained at U.S. Trust. The checks were issued on September 26, 1980 and made payable to Mobile Home Materials (MHM) and Ronald G. Beard, whom Advest has joined as third-party defendants. The checks were to be used to pay for two show horses which the plaintiffs’ daughter, Jacqueline Cushman, sought to purchase from MHM and Beard. Advest has also joined Ms. Cushman as a third-party defendant.

On March 6, 1984, this Court entered an order, with an accompanying memorandum, denying Advest’s motion for summary judgment, denying Ms. Cushman’s motion to dismiss Advest’s third-party complaint against her; granting Beard’s motion for summary judgment on the claims in Advest’s third-party complaint against him; and denying MHM’s motion to dismiss Advest’s third-party complaint against it, without prejudice to the filing of a motion for summary judgment on the claims in the third-party complaint. MHM’s motion for summary judgment is now before the Court. Ms. Cushman has answered Advest’s third-party complaint and cross-claimed against MHM; MHM has moved to dismiss this cross-claim. Ms. Cushman has moved to separate the trial of her cross-claim from the trial of the plaintiffs’ claim against the defendants. Finally, U.S. Trust has moved for summary judgment on the plaintiffs’ claims and on Advest’s cross-claim. For the reasons which follow, MHM’s motion for summary judgment on the claims in Advest’s third-party complaint will be granted; MHM’s motion to dismiss Ms. Cushman’s cross-claim will be granted and Ms. Cushman’s motion for a separate trial of her cross-claim will be dismissed; and U.S. Trust’s motion for summary judgment will be denied.

MHM’s Motion for Summary Judgment

As set forth in this Court’s March-6 memorandum at 8, the allegations in Ad-vest’s third-party complaint that MHM received $30,000 upon resale of the horses in addition to the $75,000 it received from the checks drawn on the plaintiffs’ account as proceeds from the sale of the horses to Ms. Cushman, and that Advest would be entitled to the $30,000 as subrogees of the plaintiffs in the event Advest is held liable to the plaintiffs, are sufficient to survive a motion to dismiss. MHM’s motion for summary judgment sets forth the affidavit of its president, Harry Nederlander, and portions of the depositions of Ms. Cushman and Ms. Weiss. Ms. Weiss states that following the sale of the horses to Ms. Cush-man, the Weisses, who loaned the money used for the sale, obtained possession of the horses, which were resold through the Weiss’ attorney. The Weisses received about $38,000 as the proceeds of this resale. Ms. Cushman’s deposition affirms that her parents received the proceeds of the resale. Mr. Nederlander avers that MHM received $75,000 as the proceeds of the sale to Ms. Cushman, but received no further sums, and was not involved in any resale of the horses. Advest has not pointed to any evidentiary material of record to contradict these assertions, and this Court’s review of the summary judgment record discloses that there is no genuine issue as to the fact that MHM did not receive any proceeds from the resale of the horses.

Advest has responded to MHM’s motion to dismiss by pointing to a statement in Ms. Cushman’s deposition which Advest contends raises genuine issues of fact as to whether MHM’s contract with Ms. Cush-man to sell the horses was valid. The validity or invalidity of the contract between Ms. Cushman and MHM are not material facts in connéction with the claims set forth by Advest in its amended third-party complaint against MHM. Advest has not alleged in its amended third-party complaint any basis for a subrogation claim against MHM other than its allegation that MHM improperly received $30,000 from the resale of the horses. With respect to the claims asserted in the amended third-party complaint, the material facts of record as to which there are no genuine issues establish that MHM is entitled to judgment as a matter of law. Accordingly, MHM’s motion for summary judgment on the claims asserted against it in Advest’s third-party complaint will be granted.

MHM’s Motion to Dismiss Ms. Cushman’s Cross-Claim

Ms. Cushman’s answer to Ad-vest’s third-party claim against her alleges that she was induced to enter into the transaction to buy the horses by fraudulent misrepresentations and further alleges that she lacked the capacity to enter into the contract and was induced to enter into it through coercion and duress. She has also cross-claimed against MHM based on these allegations. MHM has moved to dismiss this cross-claim. Because the cross-claim is not proper under Fed.R.Civ.P. 13(g), the motion to dismiss will be granted.

Rule 13(g) permits a cross-claim “by one party against a co-party arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein or relating to any property that is the subject matter of the original action.”

Ms. Cushman’s cross-claim is not one relating to property which is the subject matter of the original action; it is a claim relating to a contract. Hence, it is permissible under Rule 13(g) only if it arises “out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein.” A cross-claim arises out of the same transaction or occurrence as another claim if it bears a logical relationship to that claim. Jefferson Standard Insurance Co. v. Craven, 365 F.Supp. 861, 867 (M.D.Pa.1973); See 6 C. Wright & A. Miller, Federal Practice and Procedure § 1432 at 171 (1971). A logical relationship exists where trial on the claims separately would involve a substantial duplication of time and effort by the parties and the courts because the claims involve many of the same factual or legal issues. Id.; See Great Lakes Rubber Corp. v. Herbert Cooper Co., Inc., 286 F.2d 631, 634 (3d Cir.1961). If the factual or legal issues are not the same or closely related, a cross-claim is not permissible. Allstate Insurance Co. v. Daniels, 87 F.R.D. 1, 5 (W.D.Okla.1978).

The plaintiffs’ claims seek damages for the failure of Advest and U.'S. Trust to complete a stop payment order. The plaintiffs have at no time challenged the validity of Ms. Cushman’s contract with MHM; nor, indeed, have they alleged that it has any relevance to their claim. Ms. Cush-man’s motion for a separate trial pursuant to Fed.R.Civ.P. 42(b) admits that the trial of the plaintiffs’ claims involves factual and legal issues separate from those of the cross-claim. The motion also states that the proof required to support the allegations of the cross-claim is “separate and distinct” from the proof required by trial of the plaintiffs’ claims and that the issues of the “existence, effect or enforceability” of the contract to buy the horses which underlie the cross-claim are only “indirectly and hypothetically connected to the principal cause of action.” Moreover, the issues of the existence and enforceability of Ms. Cushman’s contract with MHM are not relevant to the validity of Ms. Cushman’s debt obligation to the plaintiffs, which would form the basis of the subrogation claim by Advest in the event Advest is found liable to the plaintiffs. In the event Advest is subrogated to the plaintiffs’ right to recover their loan to Ms. Cushman, the issue of the validity of the contract for the purchase of the horses would not be relevant. For the reasons stated above, Ms. Cush-man’s cross-claim will be dismissed, and the motion for a separate trial of the cross-claim will also be dismissed.

U.S. Trust’s Motion for Summary Judgment

U.S. Trust has filed a motion for summary judgment, contending that the undisputed facts of record show that it never received a stop payment request from Advest. Advest has responded with material from depositions and an affidavit from one of its employees, which Advest contends are sufficient to raise a genuine issue of material fact as to whether a stop payment order was transmitted from Ad-vest to U.S. Trust. Based on depositions, affidavits and other evidentiary material of record, U.S. Trust has not carried its burden of showing that there is no genuine issue of material fact and that it is entitled to summary judgment on Advest’s cross-claims and the plaintiffs’ claims. U.S. Trust’s motion for summary judgment will be denied.


source: Caselaw Access Project

license: Public Domain

text:
    Michael WEISS and Blanche G. Weiss v. ADVEST, INC. and the United States Trust Company of New York v. Jacquelyn CUSHMAN.
    Civ. A. No. 82-4049.
    United States District Court, E.D. Pennsylvania.
    March 28, 1985.
    See also D.C., 607 F.Supp. 799.

      Arthur L. Pressman, Philadelphia, Pa., for Weiss.
    Guy A. Cellucci, Philadelphia, Pa., for Advest.
    Hayt, Hayt & Landau, Philadelphia, Pa., Clifford J. Chu, Great Neck, N.Y., Scudder G. Stevens, Philadelphia, Pa., of counsel.
    Jonathan Wheeler, Philadelphia, Pa., for Cushman.
   MEMORANDUM

RAYMOND J. BRODERICK, District Judge.

This action was brought by Michael and Blanche Weiss against defendants Advest, Inc. (Advest), an investment company, and United States Trust Company of New York (U.S. Trust), a bank, seeking damages on the ground that the negligence of either Advest or U.S. Trust proximately caused the failure of U.S. Trust to stop payment on three checks. Advest joined Mrs. Jacquelyn Cushman, the plaintiffs’ daughter, for whose benefit the checks were drawn, as a third-party defendant.

The plaintiffs, customers of Advest, requested that Advest issue three checks totaling $85,000.00 to be charged against a loan in connection with a margin account which was opened for them at Advest. The checks were to be drawn on Advest’s account maintained at U.S. Trust. The plaintiffs had agreed to lend the $85,000.00 to their daughter, Jacquelyn Cushman, to enable her to purchase two show horses. Mrs. Cushman had assured the plaintiffs that she would repay the loan in full within a few days. The checks were issued on Friday, September 26,1980, and were made payable to the two sellers of the show horses. On Monday morning, September 29, 1980, Mrs. Cushman’s husband notified Blanche Weiss that her daughter, Mrs. Cushman, would not be financially able to repay the loan. Sometime between 8:55 and 9:00 a.m., Blanche Weiss telephoned Advest and requested that payment on the three checks be stopped. Advest subsequently informed Blanche Weiss that when it communicated the stop payment request to U.S. Trust, U.S. Trust stated that it was too late to stop payment because the checks had already been cashed. In fact, the plaintiffs later learned, none of the checks had been cashed or approved for payment at the time Advest claimed that it had telephoned the stop payment request to U.S. Trust. Payment on the checks was never stopped, and the payees later cashed all three checks.

In the liability segment of a bifurcated trial, the jury answered “yes” to the following interrogatory: “Do you find that it has been proven by a preponderance of evidence that Advest was negligent in failing to communicate the plaintiffs’ stop payment request to United States Trust and that Advest’s negligence was the proximate cause of the failure to stop payment on the plaintiffs’ checks?” In the trial on damages, plaintiffs presented evidence that they had suffered losses in the amount of $45,000.00 on the resale of the show horses, $2,000.00 in attorney’s fees, $1,375.00 for insurance on the horses, and $3,665.58 in interest payments on the loan from Ad-vest. The jury awarded plaintiffs the full amount of the damages claimed, $52,-030.58.

In a Memorandum and Order dated January 31,1985, this Court entered its findings of fact and conclusions of law with respect to Advest’s equitable third-party claim against Mrs. Cushman. The Court found that Jacquelyn Cushman had been unjustly enriched by Advest’s discharge of her indebtedness to her parents, and that Advest was entitled to subrogation in the amount of the balance of the original loan which was outstanding after the horses were resold, $45,000.00. Advest and Mrs. Cush-man have filed post-trial motions which are now before this Court.

I. Advest’s Motion for Judgment N.O.V. and/or A New Trial (Weiss v.- Advest)

Advest advances three contentions in support of its motion for judgment notwithstanding the verdict and/or a new trial: (1) there was insufficient evidence for the jury to find that Advest was negligent in carrying out the plaintiffs’ stop payment order, or this verdict was against the clear weight of the evidence; (2) Advest owed no duty to the plaintiffs to communicate their stop payment order; and (3) the failure to stop payment did not cause harm to the plaintiffs.

A. Sufficiency of the Evidence
Motions for a new trial require the exercise of discretion by the Court, whose “duty is essentially to see that there is no miscarriage of justice.” 6A Moore’s Federal Practice II 59.08[5], at 59-160 (footnote omitted) (2d ed. 1974); Thomas v. E.J. Korvette, Inc., 476 F.2d 471, 474-75 (3d Cir.1973). The jury’s verdict may be set aside only if manifest injustice will result if it were allowed to stand. The Court may not substitute its own judgment for that of the jury merely because the Court may have reached a different conclusion. To grant a motion for judgment n.o.v., the Court must find as a matter of law that the plaintiff failed to adduce sufficient facts to justify the verdict. Neville Chemical Co. v. Union Carbide Corp., 422 F.2d 1205, 1210 (3d Cir.), cert. denied, 400 U.S. 826, 91 S.Ct. 51, 27 L.Ed.2d 55 (1970). Such a motion “may be granted only when, without weighing the credibility of the evidence, there can be but one reasonable conclusion as to the proper judgment.” 5A Moore’s, supra, II 50.07[2], at 50-77 (footnote omitted); Korvette, supra, at 474.

Douglas W. Randall, Inc. v. AFA Protective Systems, Inc., 516 F.Supp. 1122, 1124 (E.D.Pa.1981), aff'd mem. 688 F.2d 820 (3d Cir.1982).

The plaintiffs produced evidence which was more than sufficient, under either the JNOV or the new trial standard, to support the jury’s verdict that Advest’s negligence was the proximate cause of the plaintiffs’ losses.

By about 9:20 a.m. on Monday, September 29, 1980, Advest had reported to Blanche Weiss that it had learned from U.S. Trust that it was too late to stop payment on the checks. In fact, the first of the three checks was not presented until 10:16 a.m. that morning. Prior to cashing the check, the U.S. Trust teller ran a status check and learned that no stop payment order had been placed. The check was cashed. The payee on the two other checks deposited them in its account, and they were processed for collection and paid through normal banking channels.

All parties agreed that if Advest had made the call to U.S. Trust between 9:00 and 9:20 a.m., then U.S. Trust would have had sufficient time to .effectively stop payment on the checks. Because U.S. Trust did not effectuate a stop payment order, the essential inquiry was whether Advest negligently failed to make the proper phone call to U.S. Trust, or whether U.S. Trust failed to effectuate a properly transmitted stop payment order. Advest presented testimony concerning a chain of communications among its Philadelphia, Hartford, and New York City offices. There was also testimony concerning Ad-vest’s normal procedure for telephoning stop payment orders to U.S. Trust. However, the testimony concerning the actual phone call to U.S. Trust was vague at best. The employee who should have called U.S. Trust had no recollection of ever having made the call. Her co-worker’s testimony at trial conflicted with her prior deposition testimony regarding what, if anything, was done to contact U.S. Trust. Further, Ad-vest had no record showing that the call had been made. On the other hand, the U.S. Trust clerk who would normally have handled such a call testified that he never received this call from Advest. U.S. Trust had no record of such a call. The U.S. Trust clerk further testified that if the call had been received by U.S. Trust, not only would there be a record of the call, but payment on the checks would surely have been stopped.

In sum, the testimony presented the jury with a question of credibility: Was the call made by Advest to U.S. Trust at the time Advest claimed? The jury found that Ad-vest had negligently failed to make the call. Since there was ample evidence for the jury to find Advest negligent and that its negligence was the proximate cause of the failure to stop payment, the Court is precluded from granting Advest’s motion for JNOV or a new trial on the ground of sufficiency of the evidence.

B. Advest’s Duty to Mr. and Mrs. Weiss

Advest contends that the Court erred in its instruction fo the jury concerning the issue of whether Advest negligently failed to communicate the plaintiffs’ stop payment order to U.S. Trust. The Court charged the jury as follows on the duty of care Advest owed when it undertook to communicate the plaintiffs’ stop payment order:

The mere fact that an undesirable result was reached such as in this case that the checks were cashed, or that [this] occurred standing alone, that does not permit you to draw the inference that the result was caused by negligence. Only if you find a standard of care- which one party owed to another party which standard of care was breached can you then find negligence on the part of that party to the action so let’s talk first about Advest.
Advest, I think we could refer to them as an investment company. They may have other ways of describing what they are, but they owe a duty to their customer, its customers I should say and who are the customers here? The Weisses. I don’t know whether they call them customers or clients, whatever they are, but they owe a duty and what is that duty? It is to conform to a standard of reasonable care in the services it undertakes to provide for its customers. Advest is required to perform services which it undertakes for its customers with reasonable skill, reasonable care, reasonable diligence and what kind of reasonable care and skill? Well, that of a company that holds itself out as an investment broker, and if an investment broker or an investment company fails to comply with the standard of reasonable skill, care and diligence of one practicing such a speciality, it will be liable for any damage to its customers or its clients which proximately results from the breach of that duty.
The plaintiffs bear the burden of proving that Advest failed to use such care to effectively communicate the stop payment request to the bank, in this case United States Trust, and if you find that the defendant Advest was negligent, before you answer yes to that first question, the law says you must also find that their negligence, whatever you find that they failed to do [and] they should have done, was a proximate cause of the failure to stop payment on the checks.

N.T. 360-61.

Advest asserts that this charge imposed upon Advest the same standard of care that is owed by an investment company that regularly provides checking and stop payment services. Advest contends that it should not have been judged by this standard because it was acting as a “volunteer” on behalf of the Weisses, in effect going out of its way to provide checking and stop payment services as a completely gratuitous undertaking for these valued customers!

The Court does not agree that the record shows that Advest’s undertaking to provide checking and stop payment services for the Weisses was “purely gratuitous.” Advest provided such services as an inducement to customers to continue doing business with Advest. Moreover, Advest wrote the checks pursuant to a loan to the Weisses, for which loan Advest charged the Weisses interest. Furthermore, the record shows that Advest had established procedures for transmitting stop payment orders to U.S. Trust. On the basis of the record, there is no question that Advest held itself out as a brokerage business which maintained a checking account at U.S. Trust for the purpose of providing checking services for the benefit of its customers. It was abundantly clear that Advest was not acting as a volunteer. Advest’s contention of error in the Court’s charge on Advest’s duty to the plaintiff is without merit.

C. Advest’s Negligence as a Proximate Cause of Plaintiff s Losses

Advest contends that the plaintiffs were obligated, as implied sureties, to answer for the debt of their daughter to the sellers of the show horses, Ronald Beard and Mobile Home Materials (MHM). Because the checks Advest issued were used to extinguish plaintiffs’ alleged surety obligation, Advest contends that they have suffered no legal harm as a proximate result of Advest’s negligence. Advest raised the same contention in a motion for summary judgment, which this Court denied on the following grounds:

... Advest has not offered any affidavits or other evidentiary material of record in support of its contention that the plaintiffs agreed to act as sureties for Ms. Cushman or agreed to undertake to perform her obligations under her contract with MHM and Beard. The plaintiffs have responded to the motion for summary judgment with an affidavit in which they aver that they did not enter into any contract of purchase with Beard or MHM, and that they have not entered into any contract with Ms. Cushman, MHM, or Beard to act as sureties for any obligation owed by Ms. Cushman to MHM or Beard. The Court cannot, on the basis of this record, hold that the plaintiffs entered into a binding, non-revocable agreement to assume liability for any debt of Ms. Cushman to MHM or Beard and that Advest is, therefore, entitled to judgment as a matter of law on the plaintiffs’ claims against it. Since Advest has failed to carry its burden of showing that there is no genuine issue of material .fact and that it is entitled to judgment as a matter of law, Advest’s motion for summary judgment will be denied.

Memorandum and Order of March 6, 1984, at 3-4.

At trial, Advest introduced no evidence in support of its contention that plaintiffs were sureties or implied sureties on the contract between Mrs. Cushman, Beard and MHM. There was Ho evidence that Mrs. Weiss intended to assume any obligation on behalf of her daughter. Blanche Weiss testified, “I did not intend to do anything more than make my daughter a loan. I was not purchasing horses.” N.T. at 68-69. Mrs. Weiss further testified that she agreed to make the loan to Mrs. Cushman only after her daughter assured .her that the loan would be repaid within four days. Mrs. Weiss did not communicate directly with MHM or Beard. There is no basis whatsoever in this record to imply a surety relationship.

Finally, the validity of the underlying contract between Mrs. Cushman, Ronald Beard, and MHM is a disputed matter, and one which was not the subject of this lawsuit. The existence, effect, and enforceability of the contract to buy the horses are not relevant to the issue of whether Advest breached a duty of care owing to plaintiffs with respect to their stop payment order: For all of these reasons, Ad-vest’s contention that the plaintiffs suffered no legal harm as a proximate result of Advest’s negligence is without merit.

Advest’s motions for JNOY and/or a new trial are denied.

II. Jacquelyn Cushman’s Motions for JNOV and/or a New Trial (Advest v. Cushman)

On January 31,1985, the Court filed findings of fact and conclusions of law with respect to Advest’s equitable claim for sub-rogation from Jacquelyn Cushman. The Court found that Mrs. Cushman had been unjustly enriched in the amount of $45,-000.00 as a result of Advest’s discharge of her indebtedness to her parents. The amount by which Mrs. Cushman had been unjustly enriched was the amount which Mrs. Cushman would still owe her parents, i.e., the balance of the $85,000.00 loan which the Weisses were unable to recover after reselling the horses.

Mrs. Cushman makes what are essentially two arguments in asking this Court to grant judgment notwithstanding the verdict and/or a new trial: (1) that Advest did not discharge any legal obligation on behalf of Jacquelyn Cushman because her contract with the sellers of the horses was unenforceable due to the statute of frauds and void due to fraud and duress; and (2) that equitable considerations preclude a subrogation award in favor of a negligent party.

A. Enforceability/Validity of the Contract Between Mrs. Cushman and the Sellers of the Horses

As the Court’s Memorandum of January 31, 1985 clearly states, Advest’s sub-rogation award was based upon the discharge of Mrs. Cushman’s loan obligation to her parents. Therefore, Mrs. Cushman’s contention that her contract to buy horses from MHM and Beard was unenforceable and void is irrelevant in this lawsuit. Because the Court has repeatedly-stated that issues relating to the existence and enforceability of the contract to buy horses are not relevant to the issues surrounding the loan by the Weisses to Mrs. Cushman, no further discussion is necessary.

B. Advest’s Negligence as a Bar to Subrogation

Mrs. Cushman contends that this Court erred in awarding subrogation in favor of Advest because she contends the net loss of $45,000 was suffered as a result of Advest’s negligence. While it is true that a party seeking equitable relief such as subrogation must behave equitably, Mrs. Cushman’s argument on countervailing equities is flawed in several respects.

First, the negligence of Advest is the breach of duty owing to the plaintiffs to effectively communicate their stop payment order. Advest did not owe a duty to Mrs. Cushman. Advest’s negligence cannot be said to have caused Mrs. Cushman to incur the $85,000.00 debt to her parents. Moreover, Mrs. Cushman received precisely what she requested from her parents, i.e., payment for the horses. Mrs. Cushman will not be heard to claim that her debt to her parents should be borne by Advest. “[I]n the absence of supervening equities, negligence by the party asserting the right of subrogation will not bar him from relief.” Kaplan v. Walker, 164 N.J.Super. 130, 395 A.2d 897 (1978) (further citations omitted) (Second lender who negligently failed to perfect lien is subrogated to the rights of original lienholder who was paid with proceeds of second loan).

While all of the other contentions of alleged error raised by the third-party defendant, Jacquelyn Cushman, have not been discussed, each and every allegation of error has been considered. The Court holds that none of them, singly or collectively, is of sufficient substance to merit any further discussion as a basis for granting a new trial in this case.


author: RAFEEDIE, District Judge.

text:
    JOHN S. GRIFFITH CONSTRUCTION CO., a California corporation, Plaintiff, v. SOUTHERN CALIFORNIA CEMENT MASONS NEGOTIATING COMMITTEE, an unincorporated association; Cement Masons Local Union No. 893, an unincorporated association, Defendants.
    No. CV 84-3546-ER(KX).
    United States District Court, C.D. California.
    Sept. 24, 1984.

      Wayne A. Hersh, Hersh & Stoll, Newport Beach, Cal., for plaintiff.
    Jeffrey L. Cutler, Davis, Frommer & Jes-inger, Los Angeles, Cal., for defendants.
   MEMORANDUM DECISION

RAFEEDIE, District Judge.

Plaintiff, Griffith Construction Company, filed this action against defendants Southern California Cement Masons Negotiating Committee and Cement Masons Local Union No. 893 seeking a declaration that it had validly repudiated its pre-hire agreement (“PHA”) with defendants and therefore was not obligated to defendants in any way under the terms of the PHA. Defendants moved that this Court dismiss this action for lack of subject matter jurisdiction, pursuant to Federal Rules of Civil Procedure, Rule 12(b)(1). Plaintiff contends that the Ninth Circuit decision Todd v. Jim McNeff, Inc., 667 F.2d 800 (9th Cir.1982), aff'd. 461 U.S. 260, 103 S.Ct. 1753, 75 L.Ed.2d 830 (1983), establishes jurisdiction to determine whether plaintiff validly repudiated its PHA before defendants achieved majority status. Plaintiff also asks this Court to impose sanctions upon defendants for bringing this motion.

FACTUAL BACKGROUND

During January through October 1983, plaintiff was the owner/builder of a project in Glendale, California. Griffith had a construction contract with Stolte, Inc., to act as a general contractor on the project. In July, 1983, several unions, including the defendants, engaged in a strike action and picketed the Glendale site. All construction stopped. On July 13, 1983, plaintiff was advised that work could resume if it signed an interim agreement and removed Stolte as general contractor. Plaintiff signed the PHA with defendants on July 14,1983. It had no employees and no other collective bargaining agreement with a construction union when it signed the PHA.

Work at the site resumed and plaintiff employed union members for a period of about three weeks. After this, Stolte, Inc., executed its own agreement with the union, returned to the project as general contractor, and employed union members. The construction project ended around November 1, 1983.

On November 1, 1983, plaintiff allegedly repudiated the PHA by a letter to defendant union. The union notified plaintiff that it felt the repudiation was ineffective.

On November 23, 1983, plaintiff petitioned the National Labor Relations Board (“NLRB”), Region 21 for an election to determine the status of the agreement between plaintiff and defendants — whether a majority of employees were members of or supported the union. The NLRB regional director dismissed the petition, deciding that plaintiff did “not currently employ any employees, nor has it employed employees during a representative period of time.” Plaintiff appealed and the decision was upheld in the NLRB appeal process.

Plaintiff then filed this action for declaratory relief. Its complaint asserted that this Court has jurisdiction under both § 301 of the Labor Management Relations Act, 29 U.S.C. § 185(a) and 28 U.S.C. § 1334.

Plaintiff has only relied upon the former basis in its opposition to this motion.

Jurisdiction Under Section 301(a)

Section 301(a) of the LMRA provides: Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.

29 U.S.C. § 185(a)

The Ninth Circuit has interpreted § 301 to include the “jurisdictional requisites” that there be “(1) a contract; (2) a claim of violation; and (3) a ‘between’ employer and labor organization or a ‘between’ labor organizations element.” Alvares v. Erickson, 514 F.2d 156, 161 (9th Cir.1975), cert. denied, 423 U.S. 874, 96 S.Ct. 143, 46 L.Ed.2d 106 (1975); accord McCauslin v. FMC Corp., 728 F.2d 1275 (9th Cir.1984) (“To establish district court jurisdiction pursuant to § 301 of the LMNR, a plaintiff must allege only that a contract between an employer and a union has been breached.”); Painters and Decorating Contractors Ass’n v. Painters and Decorators Joint Comm., 707 F.2d 1067, 1070 (9th Cir.1983) (“To assert jurisdiction under § 301(a), a litigant must allege a breach of contract between an employer and a labor organization or between labor organizations in an industry affecting commerce.”) cert. denied, — U.S. -, 104 S.Ct. 1709, 80 L.Ed.2d 182 (1984); Atchison, Topeka and Sante Fe Railway v. Locals No. 70, 511 F.2d 1193, 1195 (9th Cir.1975) (same).

There are in fact two parts to the question whether this Court has jurisdiction under § 301(a). The first is whether the plaintiff has met the jurisdictional requisites of § 301(a) as described above. The second is whether, even though the requisites are met, this Court lacks jurisdiction because the NLRB has preempted the district court, a concept referred to as primary jurisdiction. See generally San Diego Building Trades Council v. Garmon, 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775 (1959). In most opinions, these two aspects of jurisdiction are not separated, because the existence of the former is undisputed. In other cases, the two aspects are so intertwined that it may be pointless to separate them. In this case, however, distinguishing the two separate questions clarifies that this Court lacks subject matter jurisdiction over the action.

The first and third jurisdictional requisites are met in this case as there is or was a contract (the PHA) between plaintiff and defendants. But in neither plaintiff’s complaint nor its opposition to this motion does it even allege a breach of this PHA or refer to its terms. Plaintiff is not seeking to enforce the PHA; quite the contrary, he wishes this Court to pronounce that the PHA is dead. Nor can this suit be considered one to interpret the terms of the PHA. There is no disagreement as to what it means or to whom would be a party to it if the PHA is in effect. There is only the question whether it is in effect.

The only cases this Court has found in which plaintiff sought only to determine the validity of a contract are Hernandez v. National Packing Co., 455 F.2d 1252 (1st Cir.1972) and NDK Corp. v. Local 1550 of the United Food Commercial Workers International Union, 709 F.2d 491 (7th Cir.1983). Those Courts decided to “adhere to the plain language of § 301 and hold that it provides jurisdiction for suits for violation of contracts but not for determinations of the validity of contracts where validity is the ultimate issue.” 709 F.2d at 493.

Faced with this case law that plaintiff must allege a breach of contract or attempt to interpret its terms to have jurisdiction under § 301, plaintiff asserts that the Ninth Circuit case of McNeff provides this Court with jurisdiction.

In that case, trustees sued in federal court a subcontractor who had signed a PHA but failed to make the trust fund contributions it required. The plaintiff based jurisdiction on § 301. The major question presented by the case was the enforceability of PHA’s. The Court held that “§ 8(f) pre-hire contracts are voidable by the employer until the union attains majority support. Until such a repudiation, however, the contract is fully enforceable in an action under § 301 of the L.M.R.A.” 667 F.2d at 803-04.

The Ninth Circuit then stated:

McNeff, Inc. has argued that this holding creates a conflict in the law, since it will require the District Courts to make determinations regarding the majority status of a union at different times once it has made the finding that there has been a repudiation. It cites South Prairie Construction Co. v. Local 627, International Union of Operating Engineers (Peter Kiewit), 425 U.S. 800, 96 S.Ct. 1842, 48 L.Ed.2d 382 (1976) for the proposition that these determinations are solely the province of the N.L.R.B. Peter Kiewit is, however, not controlling here. The Board has expertise in determining the majority status of a union at any given time. It has no apparatus for determining a union’s past status. If there has been a repudiation, the crucial question is whether the union had previously attained majority status. Re-creation of past relationships for the purpose of resolving factual disputes is one of the traditional functions of a trial court, and not a process in which the N.L.R.B. has any extraordinary expertise. Therefore, in this opinion we do not extend the District Court’s jurisdiction into an area in which the N.L.R.B. exercises exclusive authority.
We need not resolve this issue, however, because it is clear that in this case the employer never repudiated the contract.

667 F.2d at 804.

When the Supreme Court affirmed McNeff, it made no mention of this argument, but only held:

A § 8(f) prehire agreement is subject to repudiation until the union establishes majority status. However, the monetary obligations assumed by an employer under a prehire contract may be recovered in a § 301 action brought by a union prior to the repudiation of the contract, even though the union has not attained majority support in the relevant unit. There having been no repudiation in this case, the judgment of the Court of Appeals is Affirmed.

461 U.S. at 271, 103 S.Ct. at 1759.

Nowhere in either opinion is there any indication that the Court’s holding would increase a district’s jurisdiction, or that either modified the three jurisdictional requisites. Once the hurdle of whether PHA’s could be enforced in the same manner as any other collective bargaining agreement, McNeff was a classic § 301 case: there was a contract, McNeff breached the contract, and the contract was between an employer and a union. Even if repudiation and majority status had been issues, which they were not, they would have been merely threshold issues reached by the court as it attempted to enforce the contract.

It is at this point that the distinction between the two aspects of jurisdiction in cases under § 301—that of the requisites as set out in Alvares as opposed to that of the NLRB’s primary jurisdiction—becomes important. While it is arguable that the dicta in McNeff upon which plaintiff relies might have some effect as to the latter issue, it has no effect upon the requirement that the plaintiff allege a breach of the PHA to establish jurisdiction under § 301. Therefore, this court does not have jurisdiction under § 301.

That plaintiff brings this action for declaratory relief does not change the foregoing analysis. The Declaratory Judgment Act, 28 U.S.C. § 2201, creates no independent basis of jurisdiction, but only provides an additional remedy. E.g., Shelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 70 S.Ct. 876, 94 L.Ed. 1194 (1950); California Dump Truck Ass’n v. Associated General Contractors, 562 F.2d 607 (9th Cir.1977). Thus, if there is no jurisdiction under § 301 because the requisites are not met, seeking declaratory relief does not provide jurisdiction.

One of the few Ninth Circuit decisions to mention both declaratory judgments and jurisdiction under § 301 did so in an ambiguous fashion. The Court said that if the plaintiff union had “stated an actual controversy” and requested a finding that was not barred by the NLRB’s primary jurisdiction, the district court would have jurisdiction to give declaratory relief. Brotherhood of Teamsters, Local No. 70 v. California Consolidators, 693 F.2d 81, 83-84 (9th Cir.1982) U.S. appeal pending. Whether the “controversy” referred to is an actual breach of contract or a “case or controversy” in the constitutional sense is not clear. But either meaning would bar this plaintiff.

Plaintiff has not alleged a breach of contract. Nor has it presented any showing that there is an actual case or controversy in this case. While plaintiff and defendants disagree as to whether plaintiff successfully repudiated the PHA, that is not sufficient to create a case or controversy. “Basically, the question in each case is whether ... there is a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512, 85 L.Ed. 826. Plaintiff does not now employ any workers who might be covered by the agreement, nor has it alleged that it plans to do so. Plaintiff never alleged in either its papers nor in oral argument that it intended in near future to do anything which would or could violate the PHA. There is no showing that is in danger of suffering any direct injury. Therefore, the action is not ripe. See also Stewart v. M.M. & P. Pension Plan, 608 F.2d 776 (9th Cir.1979) (case against trust plan under § 301 and § 1337 not ripe where plaintiff never alleges intent to retire in the near future). Because, however, argument has focussed on § 301, the Court prefers to rest its dismissal primarily upon that ground.

PRIMARY JURISDICTION

Assuming that the jurisdiction requisites had some how been met, this Court would still lack jurisdiction under the doctrine of primary jurisdiction. “Primary jurisdiction is a recognition of congressional intent to have matters of national labor policy decided in the first instance by the National Labor Relations Board.” See Glaziers & Glass Workers Local Union # 767 v. Custom Auto Glass Distributors, 689 F.2d 1339, 1342 (9th Cir.1982). Questions of representation by and certification of a union are vested exclusively in the NLRB by § 9(b), 29 U.S.C. § 159(b) of the NLRA. Accomodating § 301 jurisdiction and NLRB’s exclusive domain has been a troublesome aspect of § 301 jurisdiction.

In Local No. 3-193 International Woodworkers v. Ketchikan Pulp, 611 F.2d 1295 (9th 1980), plaintiff sought a declaratory judgment that a provision of the agreement between plaintiff and defendant meant that plaintiff’s present bargaining representative also represented employees of defendant’s subsequently acquired companies. The Ninth Circuit raised the jurisdiction issue of its own accord, and stated “we conclude that Congress did not intend by enacting § 301 to vest in the courts initial authority to consider and pass upon questions of representation and determination of appropriate bargaining unit.” Id. at 1301. (emphasis added)

In reaching this holding, the court said:

Undoubtedly in recognition of this conception of Congressional policy, the labor bar has processed almost all representation problems administratively through the NLRB, and such problems have been given review of NLRB action....
In the present case the Union is attempting an end run around Section 9 of the Act and under the guise of contract interpretation wants to avoid self-determination of a bargaining agent by a substantial number of employees and determination of an appropriate bargaining unit by the NLRB, which has primary authority in this area. This cannot be countenanced.

Id. at 1299-1300.

The Eighth Circuit has advanced another test which has been approved by the Ninth Circuit. See California Consolidators, 693 F.2d at 83 n. 4. In Local Union 204 v. Iowa Electric, 668 F.2d 413 (8th Cir.1982) the Court held that there was no jurisdiction in a case in which a union sued for breach of collective bargaining agreement and the issue was whether it included some professionals. In reaching the decision the court said:

We believe the appropriate line between those cases where the district court has jurisdiction under section 301 and those in which it does not is to be determined by examining the major issues to be decided as to whether they can be characterized as primarily representational or primarily contractual. See Cappa v. Wiseman, 659 F.2d 957 (9th Cir.1981).

668 F.2d at 419.

What the plaintiff seeks in this case is a determination that it is no longer obligated under the PHA. This determination would normally be obtained by it petitioning the NLRB, pursuant to the last clause in § 8(f), 29 U.S.C. § 158(f), to hold an election under section 9, 29 U.S.C. § 159. The plaintiff made such a petition, which the NLRB refused. Thus, the plaintiff, in an “end run” around the NLRB is attempting to secure from the Court the same result it wanted to obtain from the NLRB. Plaintiff attempts to distinguish Ketchikan on the ground that it first went to the NLRB, and that this is therefore not an “initial” determination. But whether plaintiff seeks Court aid first or after being refused by the NLRB, the result is the same.

Plaintiffs argument that McNeff establishes that whether a union achieved majority status prior to repudiation is for the district court to determine ignores many facts. McNeffs comments were dicta, as the Court itself realized. 667 F.2d at 804. The Court did not reach the question because the employer had not repudiated the PHA. Second, the plaintiff in McNeff was a trustee, and could not bring an action before the NLRB. The Ninth Circuit has held that a trust’s inability to bring an action before the NLRB can make the rule in Ketchikan inapplicable. Laborers Health & Welfare Trust Fund v. Kaufman & Broad, 707 F.2d 412, 415 (9th Cir.1983). Thirdly, in McNeff, or a suit like McNeff, the Court would examine the majority status of a union in the context of enforcing the PHA and determining whether to enforce one of the PHA’s terms. Here the plaintiff wishes the Court to examine the majority status of the PHA only to decide whether plaintiff is still bound by the PHA and whether the defendants would represent its employees.

Finally, the Ninth Circuit has, in the context of collective bargaining agreements rather than PHA’s, found that a defendant’s assertion that a union did not have majority status to be outside the jurisdiction of the district court. See Glaziers & Glassworkers Local Union # 767 v. Custom Auto Glass Distributors, 689 F.2d 1339 (9th Cir.1982). McNeff does not mention or distinguish this case or its holding and therefore this court is reluctant to rely upon McNeff’s dicta. Custom Auto interpreted Ninth Circuit case law to:

distinguish [ ] between alleged unfair labor practices that involved interpretations of the terms of the contract as opposed to those that were an attack on the validity of the contract itself. The former were generally considered to be within the jurisdiction of the district court as well as the NLRB whereas the latter were within the primary jurisdiction of the NLRB.

Id. at 1343. Because “the employers are not seeking to interpret the terms of a collective bargaining agreement, but rather to avoid the entire agreement,” the court found the district court had no jurisdiction. The same argument is applicable here.

Custom Auto also teaches that jurisdiction cannot be created because plaintiff cannot convince the NLRB to hear its complaint. In Custom Auto, the court refused jurisdiction even though the employer was precluded from bringing a suit before the NLRB and was asserting the question of majority status as a defense to the union’s section 301 suit, rather than as an independent action. Similarly, in San Diego Building Trades Council v. Garmom, 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775 (1959), one of the cases establishing the doctrine of primary jurisdiction, the Supreme Court held that there was no jurisdiction, even though the NLRB had previously declined jurisdiction of a representation proceeding.

PLAINTIFF’S MOTION FOR SANCTIONS

Plaintiff, in its opposition to the motion to dismiss, moved that this Court impose sanctions upon defendant’s for bringing this motion, pursuant to Federal Rule of Civil Procedure 11. As this Court grants defendants motion, it surely cannot regard the defendants’ motion as frivolous. Even if it had not granted the motion, however, this is a question of first impression and can in no way be considered such a settled area of the law. Sanctions would be inappropriate for a motion where the moving party relied upon the Ninth Circuit case law and had a reasoned response to the opposition.

While this Court has and will grant sanctions for bringing frivolous motions, parties should remember that the motion for sanctions under Rule 11 is itself subject to Rule 11.

The Court therefore grants defendants’ motion to dismiss for lack of subject matter jurisdiction and denies plaintiff’s motion for sanctions.

      . Castaneda v. Dura-Vent Corp., 648 F.2d 612 (9th Cir.1981), contains some language which could be read to change the jurisdictional requirements for declaratory relief:
      The fact that the claim does not allege a violation of the collective gargaining agreement does not automatically take it out of the scope of Section 301. Section 301 is not restricted to suits for damages or specific performance.... Parties may seek declaration of their rights under collective bargaining agreements.

        Id. at 616 n. 1 (citations omitted). But as the Court explains jurisdiction under section 301 exists only "to the extent that the dispute is focused upon and governed by the terms” of the contract. Here, the dispute is not focused upon the contract terms, but upon whether the contract exists. Additionally, the employees’ claim in Castaneda that the employer coerced employees to ratify the contract could be seen as a breach of the contract, though not plead in such terms. Cf. Seay v. McDonnell Douglas Corp., 427 F.2d 996 (9th Cir.1970).

      . This analysis also prevents this court from having jurisdiction pursuant to 28 U.S.C. § 1337. "The National Labor Relations Act preempts state and federal court jurisdiction to remedy conduct that is arguably protected or prohibited by the Act," and so § 1337 jurisdiction does not exist in such cases. Atchison, Topeka & Sante Fe Railway Co. v. Local Nos. 70, 511 F.2d 1193, 1194 (9th Cir.1975).


author: BUA, District Judge.

text:
    Robyn DOUGLASS, Plaintiff, v. HUSTLER MAGAZINE, INC., and Augustine Gregory, Defendants.
    No. 81 C 6939.
    United States District Court, N.D. Illinois, E.D.
    Sept. 24, 1984.
    Reversed and remanded, 7th Cir., June 17, 1985.

      William D. Serpico, Robert A. Novelle, Serpico, Novelle, Dvorak & Navigato, Ltd., Chicago, Ill., for plaintiff.
    Peter G. Bell, Cassidy, Schade & Gloor, Glen H. Kanwit, Peter F. Lovato, III, Jerome E. Boyle, Hopkins & Sutter, Chicago, Ill., for defendant Hustler Magazine, Inc.
    A. Mark Ialongo, Chicago, Ill., for defendant Augustine Gregory.
   MEMORANDUM ORDER

BUA, District Judge.

Before the Court are motions by defendant Hustler Magazine, Inc. (“Hustler”) for judgment notwithstanding the verdict, or, in the alternative, for a new trial. For the reasons stated herein, Hustler’s motion for judgment notwithstanding the verdict is denied. Hustler’s motion for a new trial will be denied if plaintiff accepts remittitur in the amount of $600,000. In the event plaintiff refuses remittitur, Hustler’s motion for a new trial will be granted.

I. FACTS

Plaintiff Robyn Douglass brought suit against defendant Hustler and defendant Augustine Gregory, a photographer and former employee of Hustler, alleging invasion of privacy, false light, and wrongful appropriation of plaintiff’s likeness by publishing photographs of Douglass without her consent. After trial on the merits, the jury found for Douglass and against both defendants. Hustler was assessed $500,-000 in compensatory damages and $1,500,-000 in punitive damages; Gregory was assessed $500,000 in compensatory damages.

II. DISCUSSION

A. Covenant Not to Execute Judgment

After trial it was revealed to this Court and to Hustler that Douglass had entered into an agreement with Gregory which stipulated she would not execute any judgment against Gregory as long as Gregory’s testimony remained consistent with a previous affidavit. Hustler requests post-trial relief on the grounds that Douglass’ agreement with Gregory to enter into a covenant not to execute judgment at the close of trial deprived the trial of its adversary character. Hustler further argues that because the agreement was not disclosed to the Court and the jury at the time it was made, the trial was tainted, a defect which can be cured only by a new trial. Although there is some confusion as to whether or not the oral agreement was actually disclosed to Hustler’s counsel, the Court, having reviewed the affidavits of the parties and their attorneys, finds that Douglass’ failure to disclose the oral agreement was, at worse, harmless error. Fed. R.Civ.P. 61.

The controlling law on procedures in fed eral courts is federal law. In this Circuit the most recent case resolving an issue similar to this one is Quad/Graphics, Inc. v. Myron Fass, 724 F.2d 1230 (7th Cir.1983). In Quad/Graphics, which involved a pretrial settlement between the plaintiff and one defendant, the court stated that “nonsettling defendants who are not prejudiced by a partial settlement have no standing to challenge it.” Id. at 1232. See also In Re Beef Industry Antitrust Litigation, 607 F.2d 167, 172 (5th Cir.1979). The court concluded that a “nonsettling party must demonstrate plain legal prejudice in order to have standing to challenge a partial settlement.” Quad/Graphics, 724 F.2d at 1233. By applying the standard of plain legal prejudice to challenges to partial settlements, the Quad/Graphics court stressed that:

... the court should not intercede in the plaintiff’s decision to settle with certain parties, unless a remaining party can demonstrate plain legal prejudice. This standard should strike the proper balance between the policy consideration of encouraging voluntary resolution of litigation and the court’s duty to protect the rights of the parties before it. Id. 1233.

In this case, the covenant not to enforce judgment entered into between Douglass and Gregory is a type of settlement agreement. It is therefore appropriate to apply the standard of plain legal prejudice articulated in Quad/Graphics. Although the interests of justice would best have been served had the oral agreement been precisely communicated during the trial to Hustler and to this Court, Hustler has not shown plain legal prejudice as a result of Douglass’ failure to do so. Clearly, there is no evidence in the record to indicate that Gregory’s testimony at trial was influenced by the prospective covenent. In fact, the record shows Gregory’s testimony substantially agrees with his affidavit given well before the time of trial.

Although the jury should have as much relevant information presented to it as possible, the absence of one fact is not necessarily prejudicial. Indeed, in Quad/Graphics, the court indicated that a showing of injury in fact or the creation of a tactical advantage is insufficient to establish plain legal prejudice. Quad/Graphics, 724 F.2d at 1233. There is nothing in the record to indicate, and defendant Hustler has not shown, that the jury would have brought in a different verdict had it been informed of the oral agreement between Douglass and Gregory.

Because Hustler has not demonstrated plain legal prejudice due to the unrevealed oral agreement between Douglass and Gregory or due to the covenant not to execute judgment signed by Douglass and Gregory, it is unlikely the jury would have reached a different conclusion had information concerning the covenant been revealed. Therefore, the trial was not tainted and a new trial is not necessary on the grounds of an undisclosed agreement.

Hustler next claims its liability for Douglass’ injuries is wholly derivative from its employee Gregory under the theory of “respondeat superior.” Therefore, according to Hustler, the covenant not to execute judgment against Gregory eliminated Douglass’ right of recovery against Hustler.

Douglass’ complaint, however, stated separate causes of action against Hustler as well as those derivative from Hustler’s employee Gregory. Furthermore, the jury was properly instructed on the law concerning the relationship between a corporation and its officers and employees. The jury was instructed:

The defendant Hustler is a corporation and can act only through its officers and employees. If you find against defendant Hustler on either of plaintiffs claims and determine that plaintiff is entitled to an award of compensatory damages, you may award punitive damages against Hustler only if you find that a superior officer of the corporation acted with actual malice and ordered, participated in or ratified the conduct upon which an award of punitive damages must be based. R. 134, p. 30.

The jury awarded relatively large punitive damages against Hustler and none against Gregory. Therefore, the jury must have found that activities of one or more superior officers of Hustler were such as to warrant the award. The jury is the finder of fact in this case and this Court will not disturb the jury’s determination of Hustler’s independent liability to Douglass.

B. Standard of Burden of Proof

Hustler argues that a new trial is warranted because the jury was improperly instructed as to the burden of proof. Hustler claims that instructing the jury that a preponderance of the evidence standard applied is inconsistent with the New York Times actual malice standard in privacy cases.

The central tension in the law of libel is between the necessity for strong First Amendment protection in order to guarantee the freedom of expression essential to a democratic government and the “strength of the legitimate state interest in compensating private individuals for wrongful injury to reputation.” Gertz v. Robert Welch, Inc., 418 U.S. 323, 348, 94 S.Ct. 2997, 3011, 41 L.Ed.2d 789 (1973). The Supreme Court in Gertz established the method to be used in balancing these competing concerns. Id. at 342-351, 94 S.Ct. at 3008-3013.

Ten years prior to Gertz, the Supreme Court, in New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), established that public officials may recover damages for defamation only upon proof that “the statement was made with ‘actual malice’ — that is, with knowledge that it was false or with reckless disregard of whether it was false or not.” Id. at 279-280, 84 S.Ct. at 725-726. In Gertz, the Supreme Court applied the New York Times standard to public persons:

... who, by reason of the notoriety of their achievement or the vigor and success with which they seek the public’s attention, are properly classed as public figures and those who hold governmental office may recover for injury to reputation only on clear and convincing proof that the defamatory falsehood was made with knowledge of its falsity or with reckless disregard for the truth.

Gertz, 418 U.S. at 342, 94 S.Ct. at 3008. The Court went on to conclude that, because there is a limited state interest in libel actions brought by public persons, the protection of the New York Times privilege should be available to publishers and broadcasters of defamatory falsehood concerning public officials and public figures. Id. at 343, 94 S.Ct. at 3008.

When allegations against publishers and broadcasters are made for “invasion of privacy,” “false light,” or “appropriation,” the same constitutional protections apply as do to allegations of defamatory falsehood. Braun v. Flynt, 726 F.2d 245 (5th Cir.1984). See also Cantrell v. Forest City Publishing Co., 419 U.S. 245, 95 S.Ct. 465, 42 L.Ed.2d 419 (1974); Time Inc. v. Hill, 385 U.S. 374, 87 S.Ct. 534, 17 L.Ed.2d 456 (1966).

At trial, the jury was instructed as to Hustler’s claim that Douglass is a limited public figure (R. 134, p. 19) and the constitutional privileges Hustler is entitled’ to assert in connection with publishing materials relating to a limited public figure. R. 134, p. 17-19. In finding for Douglass and assessing compensatory and punitive damages, the jury clearly rejected Hustler’s claim of privilege and was convinced that Hustler acted with actual malice — reckless disregard for the truth. R. 134, p. 39.

Although no invasion of privacy cases have been found in which courts have mandated a particular standard for the burden of proof needed to show actual malice for punitive damages, two important decisions have allowed a “preponderance of the evidence” standard to remain undisturbed.

The Supreme Court’s opinion in Cantrell v. Forest City Publishing Co., 419 U.S. 245, 95 S.Ct. 465, 42 L.Ed.2d 419 (1974), commented favorably on jury instructions which used “preponderance of the evidence” as the standard for the plaintiff to sustain her burden of proof for liability and actual malice in a false light, invasion of privacy case. Id. at 249-250, 95 S.Ct. at 468-469. More recently, in a defamation, invasion of privacy case, the United States Court of Appeals for the Fifth Circuit did not quarrel with a “preponderance of the evidence” standard for the plaintiff’s burden of proof as to liability and actual malice necessary for punitive damages. Braun v. Flynt, 726 F.2d 245, 248 (5th Cir.1984). The above two cases are the only cases brought to the attention of this Court where the preponderance of. the evidence standard for the plaintiff’s burden of proof is apparent. Neither the Supreme Court in Cantrell nor the United States Court of Appeals for the 5th Circuit in Braun saw fit to take issue with this standard. Therefore, the standard of “preponderance of the evidence” was correct and the jury in this case was properly instructed as to its use in determining whether Hustler acted with actual malice.

C. Jury Awards

Hustler argues that the jury’s damage award was excessive and was influenced by passion and prejudice, therefore necessitating a new trial. The award for Douglass assessed against Hustler was $500,000 in compensatory damages and $1,500,000 in punitive damages.

Compensatory Damages

In determining whether an award of compensatory damages is excessive, the decision of the jury as the finder of fact is given substantial deference especially, as here, in cases involving intangible injuries. Mary Beth G. v. City of Chicago, 723 F.2d 1263, 1275 (7th Cir.1983). “The jury is the collective conscience of the community, and its assessment of damages must be given particular weight when intangible injuries are involved.” Id. at 1276. Unless the Court is convinced an award is “grossly excessive,” “inordinate,” “monstrous,” or “shocking to the conscience,” will the finding of the jury be distrubed. Huff v. White Motor Corp., 609 F.2d 286, 296 (7th Cir.1979); Gruenthal v. Long Island Rail Road Co., 393 U.S. 156, 159 n. 4, 89 S.Ct. 331, 333 n. 4, 21 L.Ed.2d 309 (1968); Dagnello v. Long Island Rail Road Co., 289 F.2d 797, 802 (2d Cir.1961).

In this case the jury could reasonably assess $500,000 in compensatory damages against Hustler based upon Douglass’ evidence presented at trial. The jury was properly instructed that compensatory damages include mental anguish and suffering, injury to reputation, personal embarrassment, humiliation, loss of income and security expenses. R. 134, p. 26. See also Gertz v. Robert Welch Inc., 418 U.S. 323, 350, 94 S.Ct. 2997, 3012, 41 L.Ed.2d 789 (1974).

The jury’s award of compensatory damages in the amount of $500,000 cannot fairly be “described as ‘grossly excessive’ or ‘monstrous’ or with similar perjorative adjectival terms.” Huff, 609 F.2d at 297. Therefore, this Court will not disturb the finding of $500,000 in compensatory damages against Hustler. As the jury’s determination was reasonable, it could not have been influenced by passion or prejudice. Therefore, a new trial on the issue of compensatory damages is not warranted.

Punitive Damages

Hustler claims that the $1,500,000 in punitive damages assessed against it are grossly excessive, shock the judicial conscience, and require a new trial. Hustler points out that, after the appellate review, previous awards in libel or invasion of privacy cases are significantly less than the jury award in this case. Hustler states, and Douglass does not dispute, that the largest awards to date upheld on appeal are $400,000 in Gertz v. Robert Welch, Inc., 680 F.2d 527 (7th Cir.1982), rev’d., 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974), and $485,000 in Phoenix Newspapers, Inc. v. Church, 103 Ariz. 582, 447 P.2d 840 (1968), on remand, 24 Ariz.App. 287, 537 P.2d 1345 (1975), cert. denied, 425 U.S. 908, 96 S.Ct. 1502, 47 L.Ed.2d 759 (1976). Hustler also asserts that the size of the punitive damage award against it is due to passion and prejudice on the part of the jury resulting from plaintiffs color slides showing features from Hustler Magazine and Playboy Magazine and expert testimony from Douglass’ witness as to the differences between the two publications.

This Court agrees that the punitive damages assessed against Hustler are excessive. This Court, however, does not agree that the amount is a result of passion or prejudice on the part of the jury. The jury was correctly instructed as to the appropriate standards for awarding punitive damages and that the amount “must be fixed with calm discretion and sound reason, and must never be either awarded or fixed in amount, because of any sympathy, or bias, or prejudice with respect to any party to the case.” R. 134, p. 27, 28. In order to assess punitive damages against defendant Hustler the jury had to find “that the act or omission” ... “which proximately caused actual injury or damage to the plaintiff was done with actual malice ...”. R. 134, p. 27. No one can know exactly how the jury arrived at this particular punitive damage amount.

Punitive damages are not compensation for injury. Instead, they are private fines levied by civil juries to punish reprehensible conduct and to deter its future occurrence. Gertz, 418 U.S. at 350, 94 S.Ct. at 3012. If a jury award exceeds the amount required to serve the two objectives of punishment and deterrence, the Court must reject it. McKinley v. Trattles, 732 F.2d 1320, 1327 (7th Cir.1984); Lenard v. Argento, 699 F.2d 874, 890 (7th Cir.1983). Damages should not go beyond deterrence and become a windfall. Lenard, 699 F.2d at 890. Therefore, it is important that courts exercise control over excessive awards.

As the Court stated in Curtis Publishing Co. v. Butts, 388 U.S. 130, 160, 87 S.Ct. 1975, 1994, 18 L.Ed.2d 1094 (1967):

We think the constitutional guarantee of freedom of speech and press is adequately served by judicial control over excessive jury verdicts, manifested in this instance by the trial court’s remittitur....

The correct standard is to award reasonable damages “considering the purpose to be achieved as well as the corporate defendant’s wanton or reckless indifference to the plaintiff’s rights.” Curtis Publishing Co. v. Butts, 351 F.2d 702, 719 (5th Cir.1965), rev’d., 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d 1094 (1967). An excessive damage award can chill the First Amendment rights of not only the particular defendant involved but of other publishers and broadcasters as well. The Supreme Court in Gertz expressed concern that juries might assess large punitive damages in order to punish expression of unpopular views as well as “unnecessarily exacerbate the danger of media self-censorship....” Gertz, 418 U.S. at 350, 94 S.Ct. at 3012.

On hearing a motion for a new trial, if the district court determines that a properly instructed jury has awarded excessive damages, the court may grant a new trial unless the plaintiff agrees to a remittitur of a stated amount. If the plaintiff does agree to accept the reduced amount, the motion for a new trial is denied. Linn v. United Plant Guard Workers of America Local 114, 383 U.S. 53, 65-66, 86 S.Ct. 657, 664-665, 15 L.Ed.2d 582 (1966).

In this case, the jury’s award of $1,500,000 in punitive damages against Hustler shocks the conscience of the Court as it far exceeds the necessary and permissible level which would reasonably provide punishment and deterrence. Taking into consideration all relevant factors, it is the opinion of this Court that $100,000 in punitive damages is a reasonable amount.

III. CONCLUSION

For the reasons stated above, this Court denies Hustler’s motion for judgment notwithstanding the verdict. The Court, however, will grant Hustler’s motion for a new trial unless Douglass agrees to remittitur of $600,000. If Douglass accepts remit-titur within 30 days from entry of this order, Hustler’s motion for a new trial will be denied.

IT IS SO ORDERED.

      . Even assuming that it was error to fail to instruct the jury on the "clear and convincing” standard, such error was harmless. Fed.R. Civ.P. 61. The Court is convinced that the evidence produced at trial clearly and convincingly establishes actual malice on the part of Hustler.

      . The Court has considered Hustler's remaining arguments on post-trial motions and finds them to be without merit.