author: TELESCA, District Judge.

text:
    ROCHESTER RADIOLOGY ASSOCIATES, P.C., Contractholder, and Arthur J. Segal, M.D., Robert M. Spitzer, M.D., and Kenneth E. Robinson, M.D., Trustees of and Participants in the Rochester Radiology Associates, P.C. Profit-Sharing Plan, Plaintiffs, v. AETNA LIFE INSURANCE COMPANY, Defendant.
    No. CIV-84-742T.
    United States District Court, W.D. New York.
    May 14, 1985.

      Goldstein, Goldman, Kessler & Under-berg, Rochester, N.Y. (Sharon Stiller, Rochester, N.Y., of counsel), for plaintiffs.
    Nixon, Hargrave, Devans & Doyle, Rochester, N.Y. (William S. Brandt, Rochester, N.Y., of counsel), Finley, Kumble, Wagner, Heine, Underberg, Manley & Casey, Miami, Fla. (James F. Jorden, Miami, Fla., of counsel), for defendant.
   DECISION and ORDER

TELESCA, District Judge.

INTRODUCTION

This action is before me by way of defendant Aetna’s motion for judgment on the pleadings. Plaintiffs have brought three causes of action, sounding in breach of contract, breach of fiduciary duty, and violation of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Chapter 18, subchapter 1. Defendant has moved to dismiss the action, claiming that it did not breach the contract, there was no common-law fiduciary duty, and the ERISA cause of action is barred by the ERISA statute of limitations. Plaintiffs have cross-moved for summary judgment, although oral argument was heard only on defendant’s motion to dismiss. I hold that defendant’s motion to dismiss should be granted.

FACTS

On November 21, 1979, plaintiffs entered into a Group Annuity Contract with Aetna for purposes of funding plaintiffs’ retirement income plan. Under Contract Section 4A-1, plaintiffs as contractholders had the right at any time to withdraw funds from Aetna’s general asset account to make member' withdrawals, transfers, etc. Under Contract Section 9, plaintiffs had the right to discontinue the Contract and receive their account balance. If plaintiffs elected to receive this balance in a lump sum, a Market Value Adjustment was applied to the balance, under Contract Sections 9D-2 and 4B-2(a).

The Market Value Adjustment operated to increase or reduce, depending on prevailing interest rates at the time of a withdrawal, a payment from the Contract so as to approximate the effect of the withdrawal upon Aetna’s general asset account’s earnings. Section 1A-6 of the Contract provided that the Market Value Adjustment:

shall be computed by Aetna according to rules and formulas which Aetna shall have established from time to time and which will be furnished to the Contract-holder.

Attached to the Contract was a letter with three exhibits. Exhibit 3 contained the then-current Market Value Adjustment formula. The letter itself stated that any change to the formula would become effective no earlier than ninety days following the date Aetna notified a Contractholder, and then only with respect to withdrawal requests made subsequent to that effective date.

Additionally, Section 8 of the Contract set forth the procedures for amending the Contract. Under Section 8A-3, upon advance notice of not less than 60 days to the Contractholder, Aetna could initiate an amendment to any provision of the Contract for which unilateral amendment procedures were not specifically set forth in Section 8A-2. Any amendment proposed by Aetna under Section 8A-3 would not become effective, however, if the Contract-holder notified Aetna in writing, prior to the expiration of the sixty-day notice period, that the amendment was not acceptable to the Contractholder.

In September of 1980, Aetna sent the plaintiffs a letter announcing a change in the Market Value Adjustment formula because of prevailing high interest rates. This change, effective in December, 1980, made the value of any money withdrawn from the contract less, at least during times of high or volatile interest rates.

On June 9, 1983, plaintiffs notified Aetna of their desire to terminate the contract. The new Market Value Adjustment formula was applied to the funds withdrawn upon termination. Plaintiffs subsequently determined that they had received $85,-173.37 less than they would have received had the old Market Value Adjustment formula been applied.

On June 19, 1984 plaintiffs filed their complaint in this action.

DISCUSSION

I. Breach of Contract.

Plaintiffs argue that the contract does not provide that the Market Value Adjustment formula can be unilaterally changed by Aetna. Plaintiffs point to paragraph 8A-2 of the contract in which Aetna specifically retained the right to unilaterally change certain contract provisions if it chose to do so, and claim that there is no similar language in the Contract with respect to the Market Value Adjustment formula.

Plaintiffs did not draw the Court’s attention to the language in the 1979 letter to which the original formula was attached as Exhibit “3”, even though plaintiffs allege in paragraph 14 of their complaint that the exhibits attached to that letter formed a part of the contract. The 1979 letter states that:

Aetna will determine market value adjustments on the basis described in Exhibit 3. This basis will remain in effect until further notice. Any change will become effective no earlier than 90 days following the date Aetna notifies you, and then only with respect to withdrawal requests made subsequent to such effective date.

Plaintiffs argue that in their complaint they relied only upon the exhibits attached to the 1979 letter (and thus attached to the Contract), and not upon the 1979 letter itself. Such an argument is disingenuous at best. The 1979 letter was not merely a cover letter for the exhibits, but was instead an informational letter for Contract-holders, with exhibits attached, informing the Contractholder how Aetna computed, inter alia, the Market Value Adjustment formula. If plaintiff wishes to rely on the exhibits to the letter, the Court will not ignore the letter itself so that plaintiffs can survive a motion for judgment on the pleadings. As the Seventh Circuit stated in Chicago Board Options Exchange v. Connecticut General Life Ins. Co., 713 F.2d 254, 258 (1983), a case upon which plaintiffs themselves rely greatly, “[w]e will not bend the language of a contract to create an ambiguity when none exists____”

I agree with defendant that Section 1A-6 and the 1979 letter clearly gave Aetna the right to unilaterally modify the Market Value Adjustment formula on ninety days advance notice to plaintiffs. In accordance with Section 1A-6 and the 1979 letter, Aetna notified plaintiffs of a modification of the formula by its September, 1980 letter. This revised formula was applied when plaintiffs discontinued the contract more than three years later. Plaintiffs could have avoided the application of the revised formula by terminating the Contract under the existing formula within ninety days of the notification. Because I hold that the modification of the formula was made in accordance with Section 1A-6 of the Contract, I need not reach Aetna’s argument that the modification of the formula was a permissible amendment of the Contract in conformance with Section 8A-3 of the Contract, nor need I reach plaintiffs’ argument that the December, 1980 letter did not constitute sufficient notification under Section 8A-3.

II. Breach of Fiduciary Duty.

It is conceivable that Aetna’s conduct, although it was in conformity with the Contract, could still amount to a breach of a fiduciary duty established either by common law or by ERISA. Aetna argues, however, that it was not a fiduciary under common law, because under common law, the relationship between an insurance company and its contractholders is contractual. Therefore, the rights and duties of the contracting parties are to be governed and determined by the terms of the policy, and the insurance company is not in any sense a trustee or fiduciary of any particular fund for the contraetholder. See Uhlman v. New York Life Insurance Co., 109 N.Y. 421, 429, 17 N.E. 363 (1888); Equitable Life Assurance Society of the United States v. Brown, 213 U.S. 25, 46, 29 S.Ct. 404, 410, 53 L.Ed. 682 (1909). Aetna also points to New York Insurance Law Section 4240(12) which provides that:

[Ajmounts allocated by the insurer to separate accounts shall be owned by the insurer, the assets therein shall be the property of the insurer and no insurer by reason of such accounts shall be or hold itself out to be a trustee____

Plaintiffs argue that, because they had a beneficial interest in the funds Aetna was holding, Aetna was at least a constructive trustee with respect to those funds, citing Sonnenschein v. Reliance Insurance Co., 353 F.2d 935 (2d Cir.1965); U.S. v. AugsPurger, 452 F.Supp. 659, 668 (W.D.N.Y. 1978); Diesel Motors Co., Inc. v. Kaye, 74 Misc.2d 302, 345 N.Y.S.2d 870 (Nassau County Court 1973); In re Anjopa Paper and Board Mfg. Co., 269 F.Supp. 241 (S.D. N.Y.1967); and New York Insurance Law Section 2120(a). Aetna responds that the Sonnenschein and Diesel Motors cases pertain to the predecessor to New York Insurance Law Section 2120, which makes insurance agents and brokers responsible in a fiduciary capacity for all funds received or collected as insurance agents or brokers, but that the statute and caselaw do not affect Aetna because Aetna was an issuer of insurance contracts, not an insurance agent or broker. Aetna also argues that the AugsPurger and Anjopa Paper cases involved the imposition of constructive trusts as an equitable remedial tool of the court, but that a constructive trust does not create a fiduciary relationship where none existed before, citing Restatement of Restitution Section 160 Comment a (1937).

Again, I must agree with Aetna. I find nothing in the caselaw or New York statutes to indicate that an insurance company is a fiduciary for its policyholders; in fact, the law appears to be to the contrary. In addition, even if I felt that a constructive trust should be imposed in this case, a constructive trust, unlike an express trust, is not a genuine fiduciary relationship but a remedial device imposed by courts in order to prevent fraud or unjust enrichment. Matter of Kawczynski, 442 F.Supp. 413, 416 (W.D.N.Y.1977). A constructive trust cannot itself serve as the basis for a substantive claim or right. Ashton v. Chrysler Corp., 261 F.Supp. 1009 (E.D.N.Y.1965). In order to find a constructive trust there is the critical requirement that a confidential or fiduciary relationship be present. Sharp v. Kosmalski, 40 N.Y.2d 119, 121, 386 N.Y.S.2d 72, 351 N.E.2d 721 (1976); Bontecou v. Goldman, 103 A.D.2d 732, 477 N.Y.S.2d 192 (2d Dept.1984); Pontillo v. Home Federal Savings & Loan Association of East Rochester, 57 A.D.2d 1066, 395 N.Y.S.2d 821 (4th Dept.1977). That element is lacking here. If the relationship is not of a confidential or fiduciary nature, so “pregnant with opportunity for abuse and unfairness” as to require equity to intervene and scrutinize the transaction, a constructive trust cannot be imposed. Bontecou v. Goldman, supra, 103 A.D.2d at 733, 477 N.Y.S.2d 192, citing Sharp v. Kozmalski, supra, 40 N.Y.2d at 123, 386 N.Y.S.2d 72, 351 N.E.2d 721. Accordingly, plaintiffs’ second cause of action for breach of a fiduciary duty is also dismissed.

III. ERISA Violation.

Finally, Aetna argues that the third cause of action (for breach of a fiduciary duty under ERISA) should be dismissed because the statute of limitations for bringing such a cause of action had run. Aetna relies on Dameron v. Sinai Hospital of Baltimore, Inc., 595 F.Supp. 1404, 1411 (D.Md.1984), which held that ERISA’s three (3) year statute of limitations begins to run at the time a plaintiff learns of the alleged breach.

ERISA provides for two limitations periods:

(1) Six years after (A) the date of the last action which constituted a part of the breach or violations, or (B) in the case of an omission, the latest date on which the fiduciary could have cured the breach or violation, or (2) three years after the earliest date (A) on which the plaintiff had actual knowledge of the breach or violation ...

whichever is earlier, “except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violations.” 29 U.S.C. Section 1113.

Although plaintiffs allege in their complaint that Aetna concealed the consequences of its 1980 notice, and allege that plaintiffs did not know of Aetna’s breach until Aetna actually applied the new formula in 1983, it is clear that plaintiffs had notice of any alleged breach in December, 1980. Aetna’s notice, which was mailed September 10,1980 and effective December 15, 1980, set forth the complete Market Value Adjustment formula. Although the notice did not specify the impact of the change in formula on plaintiffs’ funds in particular, it did not conceal the impact: the notice indicated that the revised formula was developed so that those Contract-holders who withdrew funds during a time of volatile interest rates would not receive a windfall based on a market value formula which was itself based on an unrealistically low interest rate projection.

Thus the general impact of the change in formula was discussed in the notice. It can hardly be said that Aetna concealed any sort of breach from plaintiffs; rather, it appears only that plaintiffs failed to assess the exact impact upon them of the change in formula. Under 29 U.S.C. Section 1113, then, the statute of limitations can be said to have run three years after the earliest date on which the plaintiffs had actual knowledge of the breach or violation. Although plaintiffs claim not to have had knowledge of the effect of the change in formula upon them, they clearly had knowledge of the change itself (which is the alleged breach) in December, 1980. Accordingly, plaintiffs’ ERISA cause of action is dismissed as time-barred.

Defendant has also sought leave to amend to assert this ERISA statute of limitations defense. For the reasons set forth in defendant’s Reply Memorandum of Law, filed May 6, 1985, Aetna’s motion to amend its answer is granted. Aetna’s counter-claims, which are in the nature of claims for contribution from the trustees of the retirement plan if Aetna is found to be a “fiduciary” in this action, are dismissed as moot.

SO ORDERED.


source: Caselaw Access Project

author: DUHE, District Judge.

license: Public Domain

text:
    HOUSTON OIL & MINERALS CORPORATION v. SEEC, INC., et al.
    Civ. A. No. 83-0922 L.
    United States District Court, W.D. Louisiana, Lafayette-Opelousas Division.
    May 30, 1985.
    On Motions for Rehearing and Reconsideration Aug. 12, 1985.
    Edward C. Abell, Jr., Lafayette, La., Guy Matthews, Houston, Tex., for plaintiff.
    Albert B. Kimball, Jr., Royce R. Till, Houston, Tex., and Anthony M. Fazzio, Lafayette, La., for defendants.
   MEMORANDUM RULING

DUHE, District Judge.

Presently before the Court is defendant Harold Davenport’s motion pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss plaintiff’s third cause of action in its second amended complaint. In this cause of action the plaintiff, Houston Oil and Minerals, Inc. (“HOMC”) alleges that Davenport and other defendants tortiously induced its employee Lilly to breach an agreement not to disclose trade secrets and certain confidential and proprietary information. Movant Davenport argues that no such cause of action exists under Louisiana law, and that while such a cause of action is actionable in Texas, no such underlying agreement existed.

I. LOUISIANA LAW

In D’Antoni v. D’Antoni, 432 So.2d 926 (La.App. 4th Cir.1983), the plaintiffs contended (as does the plaintiff in the instant case) that under La.Civil Code Art. 2324 the defendants were liable for their inducement of a third party to breach its contract with plaintiff. Article 2324 provides that:

He, who causes another person to do an unlawful act, or assists, or encourages in the commission of it, is answerable in solido, with that person, for the damages caused by such act.

In D’Antoni, the Court held that “[t]he ‘unlawful’ act referred to in Art. 2324 means a tort, not a breach of contract,” 432 So.2d at 928, and refused to recognize plaintiff’s cause of action for inducing a breach of contract. D Antoni exemplifies the rule of the Louisiana jurisprudence. Hence, if Louisiana law governs this question, Davenport’s motion is well-taken.

II. TEXAS LAW

Both parties agree that Texas law does permit a cause of action for the tortious inducement of a contractual breach. What is at issue if Texas law governs is whether there existed an underlying contract between Lilly and Houston Oil and Minerals.

III. CHOICE OF LAW

Since this action was brought pursuant to 28 U.S.C. § 1338 for patent infringement, there is federal question subject matter jurisdiction. The state law tort claim which is the subject of the instant motion is before the Court by virtue of the pendent jurisdiction doctrine. That is, the state law tort claim and the federal patent infringement claim derive from a common nucleus of operative fact. United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).

Under the principles enunciated by the Supreme Court in Erie R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) and its progeny, this Court is bound in diversity actions to apply state substantive law. This action, however, is not one based on diversity. Nevertheless, the Erie doctrine of state substantive law governing non-federal claims is still applicable. See, e.g., First Southern Federal Savings and Loan of Mobile v. First Southern Savings and Loan of Jackson, 614 F.2d 71, 73 (5th Cir.1980); Starkenstein v. Merrill Lynch, 572 F.Supp. 189, 191 (M.D.Fla.1983). Thus, the pendent tort claim will be resolved by the application of state law.

The alleged tort in the instant case occurred in Texas. Not surprisingly, the parties disagree over which state’s substantive law is to be applied. This necessitates an examination of the relevant principles of the law of conflicts.

This action was originally brought in the Houston Division of the Southern District of Texas. It was subsequently transferred to this Court pursuant to 28 U.S.C. § 1406(a) (transfer based not on the inconvenience of the original forum but on the impropriety of that forum). In Ellis v. Great Southwestern Corporation, 646 F.2d 1099 (5th Cir.1981), the Court held that “... following a section 1406(a) transfer, regardless of which party requested the transfer or the purpose behind the transfer, the transferee court must apply the choice of law rules of the state in which it sits.” Id. at 1109-10. It is clear, then, that this Court must apply Louisiana conflicts rules to determine the applicable substantive law.

In resolving conflicts of laws in tort actions, Louisiana courts apply the “interests analysis” of the Restatement of Conflicts, 2d (1971). See, e.g., Burns v. Holiday Travels, Inc., 459 So.2d 666 (La.App. 4th Cir.1984); Shaw v. Ferguson, 437 So.2d 319 (La.App. 2d Cir.1983); Jones v. Ameri can Fire-Indemnity Insurance Co., 442 So.2d 772 (La.App. 2d Cir.1983).

IV. THE INTERESTS ANALYSIS: LOUISIANA vs. TEXAS

§ 6 of the Restatement provides, in pertinent part:

(2) When there is no such [statutory] directive, the factors relevant to the choice of the applicable rule of law include
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to be applied.
§ 6(2) Factors

Whatever the needs of the interstate and international system of § 6(2) may be, it doesn’t appear to this Court that they weigh in favor of either party.

The second consideration of § 6(2) is the relevant policy of the forum state—Louisiana. As noted earlier, the Louisiana jurisprudence holds that a third party’s inducement of an obligor to breach its contract does not give rise to a delictual cause of action. Davenport, citing NCH Corp. v. Broyles, 749 F.2d 247 (5th Cir.1985) and Brinkley & West, Inc. v. Foremost Insurance Company, 499 F.2d 928 (5th Cir. 1974), argues that the very strong Louisiana policy of protecting job mobility and voiding covenants not to compete requires the application of Louisiana law. This argument fails because what is at issue in the instant motion is not a claim that the defendants are liable for having induced Lilly to leave the service of HOMC. Rather, the plaintiff’s third cause of action in its second amended complaint is that the defendants induced Lilly to breach his agreement not to disclose or disseminate proprietary and confidential information seen in the course of his employment at HOMC. There is no Louisiana public policy against such agreements—indeed, Louisiana law recognizes and enforces covenants not to disseminate proprietary and confidential information. See, e.g., NCH Corporation, supra, 749 F.2d at 253. Louisiana law merely doesn’t recognize a delictual cause of action for contractual interference.

The third factor for consideration is the policy of Texas and the relative interest of Texas in the determination of this issue. Texas law permits both covenants not to disclose confidential information and tort claims against third parties for contractual interference. The relative interest of Texas in this matter is greater than that of Louisiana, as the covenant was executed in Texas, and its breach was induced there as well.

The fourth § 6 factor is the protection of justified expectations. This Court thinks that a Texas corporation wronged in Texas is justified in expecting that the legal remedies the State of Texas provides will be available to it.

The fifth factor under § 6 is the certainty, predictability and uniformity of result. These certainly augur in favor of the application of Texas law. Certainty, predictability, and uniformity of result are not enhanced if individuals can escape the consequences of their tortitous acts because of federal procedural rules for venue.

The final factor for consideration under § 6 is the ease in the determination and application of the law to be applied. This factor is neutral since there is no real dispute as to what Louisiana and Texas law respectively provide for the instant motion.

§ 145 of the Restatement provides:

(1) The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6.
(2) Contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:
(a) the place where the injury occurred
(b) the place where the conduct causing the injury occurred,
(c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and
(d) the place where the relationship, if any, between the parties is centered. These contacts are to be evaluated according to their relative importance with respect to the particular issue.

A. The Place of Injury

The place of injury—Lilly’s breach of the alleged covenant not to disclose or disseminate confidential information of HOMC— occurred in Texas. This began before Lilly moved to Louisiana.

B. Place of Conduct Causing the Injury

Davenport, through his offices and activities in Houston and in conjunction with Paul Adair, committed the alleged acts of inducement in Texas.

C. The Domicile, Residence, and Place of Business of the Parties

Plaintiff HOMC has its principal place of business in Houston. Defendant Adair is a Houston domiciliary, while defendants Lilly and Davenport are Louisiana domiciliaries. At the time of his initial breach of the covenant not to disclose, however, Lilly was a Texas domiciliary.

D. Place Where the Relationship Between the Parties Is Centered

It is clear that the relationship between HOMC and its employee Lilly was centered in Houston. Lilly then resigned from HOMC and began to work for Davenport and Adair in Houston. At the time of the inducement of Lilly’s breach of his covenant not to disclose, the relationship of the parties was centered in Houston.

CONCLUSION

When the interests analysis of the Restatement is applied to the facts at bar, it is apparent to this Court that Texas has far greater interest than Louisiana in the resolution of plaintiff’s claim for contractual interference. The injury that plaintiff seeks redress for occurred in Texas, the inducement for that breach occurred in Texas, and all parties save Davenport were Texans at the time of the alleged tort. Davenport participated through his offices, agents, and activities in Texas. Louisiana’s only interest in this claim for contractual interference is that Davenport has been a Louisiana domiciliary throughout this affair, and the fact that this Court sits in Louisiana. Accordingly, this Court will apply Texas law.

V. TEXAS LAW AND THE MERITS OF DAVENPORT’S MOTION

As noted hereinabove, both parties agree that Texas law permits a cause of action for the inducement of the breach of an obligation. Davenport, however, contends the document signed by Lilly setting forth HOMC’s trade secret and proprietary information policy was not a contract.

Both parties have made reference to this policy statement signed by Lilly (plaintiff’s exhibit “A” to its second amended complaint). The Court finds that Davenport’s 12(b)(6) motion has thus been converted into a motion for summary judgment. See FRCP 12(b); 5 Wright & Miller, Federal Practice and Procedure § 1366.

The Fifth Circuit recently admonished that:

In a ruling on a motion for summary judgment, ‘the court must indulge every reasonable inference from those facts in favor of the party opposing the motion.’ (citation omitted) A granting of summary judgment is appropriate only where it appears from the pleadings, depositions, admissions, answers to interrogatories, and affidavits—considered in the light most favorable to the opposing party— that there is ‘no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.’ (citation omitted) Any doubt as to the existence of a material fact is to be resolved against the moving party. Al day v. Patterson Truck Line, Inc., 750 F.2d 375, 377 (5th Cir.1985). (emphasis in the original)

In this Court’s mind, there does exist a very real question of fact as to whether the HOMC policy statement signed by Lilly constituted a contract. Thus, the motion of Davenport must be and is therefore denied.

ON MOTIONS FOR REHEARING AND RECONSIDERATION

On May 3, 1985, this Court ruled on a motion by defendant, Paul Adair, a Texas resident, to dismiss all claims against him in this matter for lack of subject-matter jurisdiction, or alternatively, improper venue. The motion was denied on the grounds that Adair was the alter ego of SEEC, Inc., a purported Louisiana Corporation, and that accordingly as a partner of a Louisiana business proprietorship Adair had availed himself of the laws of Louisiana— and thus the jurisdiction of this Court.

Adair and co-defendant, Harold Davenport now move to reconsider the finding that Adair is the alter ego of SEEC, Inc., and Adair further reurges his motion to dismiss. Adair cites additional facts on the issue of under-capitalization and the eo-mingling of funds, while Davenport addresses the issue of the disregard of corporate formalities.

A.

Undercapitalization/Co-Mingling of Funds

On June 29,1981, SEEC commenced operations as a Louisiana business proprietorship. On that date Adair made a capital contribution of $50,000. On March 31, 1982, Robert Lilly made a capital contribution of $40,000. With singular irony, SEEC was incorporated under the laws of Louisiana the next day—April Fool’s Day.

April Fool’s Day was also the day that Davenport paid with personal funds a $205,122.01 carryover debt of SEEC’s. There is no evidence of any debt instrument issued by SEEC to Davenport for this payment. Some three months later Allied Bank extended a $300,000 credit line to SEEC, Inc., and out of this Davenport was repaid $155,122.01. The $50,000 difference between this and the earlier SEEC debt that Davenport paid is purported to be his capital contribution.

SEEC could not pay this $300,000 note and its continuing operating expenses. On June 10, 1984, Lilly, Adair and Davenport executed a $600,000 note payable to the Allied Bank. This $600,000 was used to pay off the earlier $300,000 note to Allied and to permit SEEC to continue to meet its operating expenses. It is illuminating that Messrs. Lilly, Adair, and Davenport were the principal makers of this note—and not merely the guarantors of a note made by SEEC. Furthermore, there is no evidence of any debt instrument(s) issued by SEEC to Lilly, Adair, and Davenport for this transaction.

Thereafter, on October 22, 1984, Adair and Davenport each “loaned” SEEC $375,-000. Neither was issued a debt instrument. Indeed, at his January 17, 1985 deposition Adair testified that “nothing” was given to him for the $375,000 “loan.” It was only after this disturbingly frank testimony, on January 29, that a SEEC promissory note payable to Adair was executed. Davenport asserts in an affidavit that the “press of business” prevented an earlier execution of this note. This “press of business” must have only partially relented, since there is still no evidence of any SEEC debt instrument issued to Davenport for his $375,000 “loan.”

Even more revealing was the purpose of the $750,000 “loan” from Davenport and Adair to SEEC. SEEC turned around and used the bulk of this money to pay off the $600,000 debt of Davenport, Adair and Lilly to the Allied Bank (which as observed above was a principal debt). The remainder was presumably used for operating expenses.

Finally, there is evidence that Adair’s Red Adair Company paid $3,878.72 for SEEC personnel to travel to Venezula on July 13, 1984. No SEEC debt instruments were issued for this expense.

From the foregoing it is obvious that there has been a pattern of co-mingling of the corporate funds of SEEC with that of the personal funds of Davenport, Adair, and Lilly, as well as another corporation owned by Adair. This co-mingling has taken place at least in part due to the undercapitalization of SEEC. At any rate, this Court is satisfied that the co-mingling of personal and corporate funds is standing alone sufficient to have warranted the piercing of SEEC’s corporate veil.

B. Self-Dealing

In 1983 Davenport advanced $100,-000 to SEEC, but a debt instrument was not issued to him because it would have been disadvantagous for his personal tax situation. This is a classic case of self-dealing by an officer and shareholder of a corporation which further supports this Court’s finding that SEEC, Inc., was a sham corporation.

C. Adherence to Corporate Formalities

In his deposition testimony Adair testified that he didn’t know if there had been regular director’s meetings. Indeed, he testified he couldn’t remember if there had ever been a director’s meeting. He testified that he didn’t know if he was a director, and that he thought he might be an officer (vice-president). But he qualified this by declaring he was not a functional vice-president. And in an affidavit supporting his original motion, Adair testified. “I am an investor in SEEC, Inc., and have not taken an active role in the business of SEEC, Inc.” This Court concluded these statements revealed a fatal disregard for corporate formalities.

Now, however, Adair seems to have concluded that he distanced himself too far from SEEC. In his motion for rehearing Adair adopted the arguments of Davenport on the issue of adherence to corporate formalities. Davenport, in his motion to reconsider, responded to this Court’s ruling by attaching copies of minutes of directors’ meetings on November 1, 1984; June 4, 1984; November 1, 1983; and November 2, 1982; and shareholders’ meetings on November 1, 1984; November 1, 1983; and November 2, 1982. Paul Adair was purportedly present at all of these meetings.

Given the conflict between the sworn deposition and affidavit testimony of Adair and the uncertified minutes of meetings, this court has little difficulty in giving more credence to the former. The original finding, then, of a disregard of corporate formalities is reaffirmed. This reaffirmation is unnecessary, however, to reach the result the Court does today, since the finding of co-mingling of corporate and personal funds was sufficient standing alone to pierce the corporate veil of SEEC.

CONCLUSION

Since SEEC, Inc., existed in reality as the alter ego of Adair, Davenport and Lilly, this Court’s previous decision to pierce the corporate veil of SEEC and find Red Adair as a proprietor of a Louisiana business proprietorship was sound. As such, Adair has purposely availed himself of the laws of Louisiana and is thus subject to this Court’s jurisdiction. Accordingly, the motions for rehearing by Adair and reconsideration by Davenport are hereby denied.


author: JOHN GARRETT PENN, District Judge.

text:
    Rayne J. FARRELL, Plaintiff, v. POTOMAC ELECTRIC POWER COMPANY, Defendant.
    Civ. A. No. 84-3254.
    United States District Court, District of Columbia.
    June 10, 1985.

      Margaret A. Beller, Washington, D.C., for plaintiff.
    Susan S. Sauntry, Washington, D.C., for defendant.
   MEMORANDUM

JOHN GARRETT PENN, District Judge.

The plaintiff filed this action pursuant to the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e, et seq. She contends that the defendant discriminated against her because of her race (black) and her sex.

Plaintiff alleges that she was employed by defendant for a period of nine years and that on or about May 1, 1983, she was involved in an automobile accident which resulted in her hospitalization for serious bodily injury. She states that, by virtue of her employment with the defendant, she was entitled to health benefits that included medical coverage and similar pay benefits and that the defendant demanded medical records from the plaintiff which it did not demand of other persons similarly employed, persons who are male Caucasians. Complaint ¶ 9. She further contends that the defendant denied her medical and sick pay benefits because of her race and sex and that the defendant retaliated against her by suspending her and thereafter terminating her employment on August 25, 1983.

The case is now before the Court on defendant’s motion for summary judgment.

I

The underlying facts are as follows: The plaintiff was employed by the defendant as a Customer Service Representative in the Customer Credit Department for approximately nine years. Defendant’s Statement of Undisputed Pacts (Defendant’s Statement) ¶ 1. On or about May 1, 1983, she was involved in an automobile accident in which the driver of the other automobile was killed. Id. 11 2. As the result of that accident, the plaintiff received serious injuries for which she was hospitalized. Id. 113. The plaintiff applied for and received such pay as was provided for by Article 13 of the Agreement between the defendant, Potomac Electric Power Company (PEPCO) and Local 1900 of the International Brotherhood of Electrical Workers (Agreement). Id. 114. and Motion Exhibit 2 (Wolverton Affidavit, Attachment E.)

Shortly after the accident, a PEPCO employee read a newspaper article which reported that plaintiff was intoxicated while driving on the day of the accident. Id. 11 5. On July 13, 1983, the plaintiff was contacted by a representative of the defendant and told to release the medical records containing her level of intoxication at the time she was taken to the emergency room after the accident. Id. 11 6. Mr. Wolverton, the Manager of Industrial Relations at PEPCO was advised by one employee of PEPCO that a newspaper article had reported that the plaintiff had been drinking at the time of the accident, and another employee had reported that her husband had been at the scene of the accident and had seen “a lot of beer cans” there. The plaintiff was given until July 18, 1983, to produce the necessary report or to sign a release which would allow the defendant to have access to the report. Wolverton Affidavit ¶ 6. Mr. Wolverton spoke with the union representative on July 18, 1983, and explained why PEPCO requested the report. Id. 117. When the plaintiff did not sign the release or produce the report by July 18th her disability pay was discontinued. Id. ¶ 8. The Union filed a grievance on July 19, 1983, in which it protested the termination of disability pay and on July 20, PEPCO suspended the plaintiff for one day for her continued refusal to sign a medical release. Id. 119 and Attachments B and C. On July 28,1983, Wolverton spoke with the plaintiff on the telephone and explained why PEP-CO was seeking medical records concerning her blood alcohol level on the day of the accident. He explained that under the terms of the collective bargaining agreement, employees are ineligible for sick leave if they are injured due to “general acts of misconduct”. He advised her that if her state of intoxication led to her injury, PEPCO felt she would not be entitled to sick leave. Id. If 10. The plaintiff became belligerent and stated that she was refusing to provide the information on the advice of her doctor and lawyer. Wolverton informed her that, due to her failure to supply the information, he was preparing a Notice of Disciplinary Action suspending her for three days. Id. ¶ 11.

On August 1, 1983, the plaintiff was suspended for three days and warned that she was likely to be terminated if she persisted in her refusal to provide the information. Id. ¶ 12 and Attachment D. PEPCO instituted its procedures for termination under Article 16 of the Agreement on August 17, 1983. Plaintiff was suspended for a period of five days during which she could seek a hearing. Such a hearing was held on August 23, 1983, at which plaintiff was represented by the Union. Id. ¶ 13. On September 2, PEPCO decided that the plaintiff should be terminated. Id. ¶ 14. The Union exercised its right to demand arbitration on September 9, 1983. Id. ¶ 15. On September 14, 1983, the plaintiff filed a charge of discrimination alleging that she had been discriminated against because of her race and sex. The Union demanded arbitration under the American Arbitration Association Expedited Labor Arbitration Rules on December 7, 1983. Id. ¶ 17.

Arbitration was held in September 1984, in a hearing that lasted five days, during which the arbitrator heard the sworn testimony of plaintiff, her supporting witnesses, and witnesses called by the defendant. Id. 1118. On October 5 the arbitrator issued a decision finding that PEPCO had just cause to terminate the plaintiff due to her refusal to supply the medical information. Id. ¶ 19 and Attachment E.

The company “frequently” asks employees to submit medical evidence in support of their claim for sick pay and other medical benefits, and it is believed that no other employee has refused to supply this information to the point where discipline was necessary. Id. ¶ 20.

Since the plaintiffs discharge, two new collection representatives have been employed by PEPCO, one is a black male and the other a white female. Whitehead Affidavit ¶ 3. In July 1983, there were 33 blacks and 16 whites in PEPCO’s Customer Credit Department. In July 1984, there were 33 blacks and 17 whites in the same department. Moreover, in July 1983, there were 25 males in that department, of which 17 were black and 9 white, and in July 1984, there were 27 females in the department, of which 17 were black and 10 were white. Id. ¶ 4.

At the time the plaintiff was present at the fact finding conference held by the Equal Employment Opportunity Commission, she denied that she had been drinking at the time of the accident which resulted in her injuries. Id. ¶ 5. During the nine years the plaintiff was employed by PEP-CO, she received at least fourteen formal disciplinary actions for various kinds of conduct involving dishonesty, rudeness and excessive absenteeism. Id. ¶ 6.

The plaintiff’s problems did not end with the termination of her job. She was tried and convicted of negligent homicide with an automobile and on March 8, 1985, she was sentenced to serve not less than 18 months nor more than five years on that charge. Statement ¶ 19 and Motion Exhibit 1 (Transcript of Sentencing Hearing before Judge Joseph M. Hannon, Associate Judge, Superior Court of the District of Columbia). Evidence presented at her trial established that the plaintiff caused the accident and that she had a blood alcohol content of .259 upon admission of the hospital. Id. ¶ 20. Throughout the trial, and the arbitration proceeding, the plaintiff . denied that she was drunk at the time of the accident. Id. Her blood alcohol level of .259 was five times the quantity of alcohol as would be prima facie case that the plaintiff was driving under the influence of intoxicating liquor. D.C. Code Ann. § 40-717.1 (Supp. 1984).

The judge in the criminal case noted that the plaintiff approached a controlled intersection and that at an “outrageously excessive speed” she “thundered into the intersection at speeds in excess of forty to forty-five miles per hour to bring about the death of Mr. Leroy Beasley”. The court noted that “that’s the grossest type of wanton and reckless behavior”. Transcript at 5.

The plaintiff has filed an opposition to the motion and has incorporated her statement of disputed facts in the opposition. Her statement is discussed below. See Part III, infra.

II

First, it should be noted that in determining whether the defendant is entitled to summary judgment, the Court considers only the issue of plaintiff’s failure to produce the medical report, or in lieu thereof, a waiver allowing the defendant to obtain the report. The Court concludes that the other two grounds cited for termination before the arbitrator, namely, the alleged threat made to her supervisor, and her alleged attempt to interfere with disconnection of customer service, presents factual issues which would, if they were the only matters before the Court, prevent the granting of summary judgment. See Fed. R.Civ.P. 56.

It seems clear that the plaintiff would be able to establish a prima facie case if this matter went to trial. She was employed by PEPCO for nine years and obviously had the ability to perform her work. She was terminated from her employment in 1983, and she is a female and black. Thus, the question raised by the motion is whether she was terminated for reasons other than her sex and race, or whether she was accorded different treatment because of her race or sex, and if PEPCO contends she was terminated for valid reasons, whether that argument is merely a pretext for her discharge. Necessarily then, the Court must first determine whether the facts of this case presented valid grounds for her termination in the first instance.

It is conceded by plaintiff that she was involved in an automobile accident on May 1, 1983. Additionally, she was tried in a criminal proceeding and the jury found that she was at fault, that she was intoxicated, and that her negligence led to the death of another person. The injury she suffered and for which she claimed sick leave and medical benefits resulted from the above accident.

When it was brought to the attention of PEPCO that the plaintiff may have been intoxicated at the time of the accident, and that her own conduct may have lead to her injuries, the company requested the medical report containing her level of intoxication at the time she arrived at the emergency room. The basis for that request was Agreement § 13.09 which provides:

No employees shall receive any sickness allowance when the following conditions exist:
(c) When the disability is caused or results from an intentionally self-inflicted injury or other general acts of misconduct (emphasis the Court’s).

PEPCO had good cause to believe that the plaintiff’s injuries were caused by her own acts of misconduct, that is, that the plaintiff was driving while drunk or intoxicated. Since the Agreement provides that where an injury or disability results from “acts of misconduct” the defendant is not required to pay benefits, it follows that the company was entitled to make a further inquiry of the plaintiff. Therefore, the defendant was within its rights to require the plaintiff to produce the medical report. There is no suggestion that that information was somehow privileged.

PEPCO did not act arbitrarily or unreasonably in requesting the information. Plaintiff was requested to furnish the information or a release therefore on July 13, 1983. The reason for the request was explained to her. Although she has contended that she was advised by her doctor and her lawyer not to furnish that information, nothing in the record supports that contention. Mr. Wolverton explained to the plaintiff that the information was necessary and he “asked her not to turn what might be a loss of sick pay into a cause for discharge by continuing to engage in insubordination by failing to provide the data” PEPCO required. Wolverton Affidavit ¶ 11. Plaintiff was also requested by written memoranda to provide the information. She refused to do so. Under all of the above facts, PEPCO had the right to terminate her employment.

The Court concludes that absent a showing by plaintiff that the reasons given by PEPCO were only a pretext for terminating her, the defendant is entitled to summary judgment. See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973).

III

PEPCO has provided an affidavit that demonstrates that the gender and race makeup of the Customer Credit Department did not change substantially after her termination. See Whitehead Affidavit (Motion Exhibit 3). Prior to her discharge, the Customer Credit Department consisted of 33 blacks and 16 whites, while after her discharge it consisted of 33 blacks and 17 whites. The same consistency, before and after, is found in the number of females employed in that department. Prior to her discharge there were 25 females in the department including 16 blacks and 9 whites, while after there were 27 females in the department, including 17 blacks and 16 whites. Whitehead Affidavit II4. Moreover, since the plaintiff’s discharge, two new employees have been hired, one a black male and one a white female. Id. 113. The above figures appear to contradict any claim of either race or sex discrimination. But, those figures alone are not dispositive of the motion.

A review of the plaintiff’s opposition to the motion reveals that she does not raise any factual issues in this case. In defending against the motion for summary judgment, the plaintiff may not rest upon the allegations or denials in her pleadings, “but [her] response [to the motion] by affidavit or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial”. Fed.R.Civ.P. 56(e) (emphasis the Court’s). In addition, the affidavit “shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein”. Id.

The plaintiffs affidavit does not measure up to the above requirements. She states that for at least two years the managers in her section attempted to discharge her because of her race and sex and that the disciplinary actions reported by Mr. Whitehead were pretexts for the actual reasons asserted as grounds for her discharge. Plaintiff Affidavit Ill. Plaintiffs statement is no more than an allegation. It does not set forth “specific facts”, and nothing in the affidavit demonstrates that she has personal knowledge of the facts or that such “facts” would be admissible in evidence.

Plaintiff states that she has never threatened any person, including her supervisors, and that “what I have said has been taken totally out of context”. Id. f 2. Her own statement is not clear and recognizes that it may be that her statements were taken out of context. The Court need not address this allegation, however, since as it has already observed, it has not considered the alleged threats as grounds for termination.

In the third paragraph of her affidavit, the plaintiff disputes that the action taken against her is the same as action taken against other persons, but this is no more than an allégation and without more does not raise a factual issue. Again, the plaintiff does not set forth specific facts and there is no basis to determine whether she has personal knowledge of those alleged facts and whether such allegations would be admissible in evidence. She also asserts that PEPCO should know “a Caucasian male received benefits under the contract for alleged misconduct similar to that for which [she] was discriminated”, but again, the statement does not comply with the requirements of Rule 56(e) and does not set forth specific facts, as for example, giving the name of the employee or the nature of the termination.

Finally, plaintiff states that she supplied medical certificates, but again she does not set forth the nature of the certificates supplied and when those certificates were supplied.

The Court concludes that the plaintiffs affidavit fails to meet the requirements of Rule 56(e), and indeed, her affidavit is an illustration of the reasons for the requirement for specificity contained in the rule. All the plaintiff has done is to make additional allegations, but as Rule 56(e) clearly provides, such allegations are not enough and do not raise a factual issue.

IV.

After giving careful consideration to the motion, the opposition thereto, the arguments of counsel and the record in this case, the Court concludes that there are no genuine issues of material fact and that defendant is entitled to judgment as a matter of law. It is clear that the defendant had just cause for requesting the medical report in question and it is also clear that when the plaintiff failed to furnish that reports or a release therefore, the defendant had the right to first suspend her and then terminate her. Nothing in the record supports the plaintiffs allegation that she was terminated because of either her race or her sex. Nothing in the record supports an allegation that the reasons given for her termination were a pretext for the real reasons.

Defendant also argues that since the plaintiff is now to be incarcerated, the relief she has requested may not be granted. For example, the plaintiff has requested reinstatement. The Court need not address that issue since the Court finds that, in any event, the plaintiff is not entitled to any relief in this case.

Defendant’s motion for summary judgment will be granted and this case will be dismissed with prejudice.

Separate order has issued.

      . The statements were made on or about May 2, 1983, and would be admissible, not for the truth of the statements, but because, based upon those statements, the defendant requested the plaintiff to furnish any medical reports concerning the level of her intoxication at the time she was brought to the emergency room. See Fed.R. Evid. 801. (“Hearsay is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted”, (emphasis supplied by the Court)). Moreover, such evidence would not prejudice the plaintiff since the finder of fact would be entitled to hear the circumstances relating to the accident and the record of plaintiffs subsequent criminal trial and conviction on the charge of negligent homicide. Thus, there would be no basis to exclude the statements under Fed.R.Evid. 403.

      . PEPCO set forth three reasons for the discharge, including (1) plaintiffs refusal to provide medical records, (2) her threats to her supervisor and (3) her attempts to interfere with the discontinuation of customer service in a business in which she had a personal interest. Wolverton Affidavit Attachment E. The arbitrator felt that, insofar as the plaintiffs failure to furnish the requested information was concerned, PEPCO was within its right to discharge the plaintiff, thus the grievance was denied. The arbitrator did find that there was not just cause to discharge the plaintiff under the second and third claims.

      . William S. Whitehead, Jr., is the Manager, Customer Credit Department at PEPCO, and as such was the plaintiffs supervisor from Decernber 1978 to August 1983 when the plaintiff was discharged. Whitehead Affidavit ¶¶ 1 and 2.

      . At oral argument, plaintiffs counsel stated that the certificates referred to in plaintiff’s affidavit are not the subject medical reports.


author: WARRINER, District Judge.

text:
    MUSIC CITY MUSIC, et al. v. ALFA FOODS, LTD.
    Civ. A. No. 84-0881-R.
    United States District Court, E.D. Virginia, Richmond Division.
    June 11, 1985.

      Robert R. MacMillan, Breeden, Howard & MacMillan, Norfolk, Va., for plaintiffs.
   OPINION

WARRINER, District Judge.

Presently before the Court is plaintiff’s motion, accompanied by a brief and affidavit in support thereof, for a default judgment and a motion for attorney’s fees supported by a brief and affidavit.

On 5 December 1984 plaintiffs filed this action alleging three claims of copyright infringement under 17 U.S.C. § 101 et seq. Jurisdiction is based on 28 U.S.C. § 1338(a). Service was had upon the registered agent for defendant on 17 December 1984. Defendant did not plead or otherwise defend this action and upon motion of plaintiff, pursuant to Fed.R.Civ.P. 55(a), the Clerk of the Court on 8 April 1985 entered a default against defendant. Defendant’s registered agent received notice of the default by certified mail on 9 April 1985.

Defendant owns, controls, manages, operates, and maintains a place of business for public entertainment, accommodation, amusement and refreshment known as Best Western Virginia Inn, located at 5700 Chamberlayne Avenue, Richmond, Virginia. Complaint at 2. Plaintiffs’ complaint asserts that defendant “knowingly and intentionally violated plaintiff’s rights,” id. at 3, by, “despite numerous letters and visits by [plaintiffs’] representatives informing the defendant of its liability under the United States Copyright Law, ... continupng] to perform copyrighted music without permission during the hours that defendant’s establishment is open to the public for business and presenting musical entertainment.” Id. at 3-4.

Plaintiff Music City Music claims to be the copyright holder of “I’d Just Love to Lay You Down” written by Johnny McCray; plaintiff Milene Music, Inc., claims to be copyright holder of “Blue Eyes Crying in the Rain” written by Fred Rose; and plaintiff MCA, Inc. claims to be the copyright holder of “Orange Blossom Special” written by Ervin Thomas Rouse. Each plaintiff claims that defendant knowingly infringed upon these copyrights by publicly performing these works at Best Western Virginia Inn on 3 February 1984.

Pursuant to Fed.R.Civ.P. 8(d) the averments, not denied, contained in plaintiffs’ complaint are deemed to be admitted.

Because defendant has failed to plead or otherwise defend this action, a default judgment is appropriate and shall enter. Because the amount of damages alleged is not for a sum certain (see Wright, Miller & Kane Federal Practice and Procedure § 2683) the Court pursuant to Fed.R.Civ.P. 55(b)(2) will determine damages.

Plaintiffs have requested statutory damages and costs including reasonable attorneys’ fees. They have also prayed for a permanent injunction enjoining defendant from performing or aiding and abetting the performance on defendant’s premises of the compositions previously listed.

As to the permanent injunction, 17 U.S.C. § 502 provides in pertinent part: “any court having jurisdiction of a civil action arising under this title may ... grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright.”

In Gnossos Music v. Mitken, Inc., 211 U.S.P.Q. 841, 653 F.2d 117 (4th Cir.1981) defendant, an owner and operator of a nightclub, was found to have infringed upon plaintiff’s copyrights. The Fourth Circuit in discussing the copyright owner’s rights stated, “the infringed copyrights are thus entitled to an injunction, actual damages, and profits, or in the alternative, an injunction plus statutory damages.” Id. at 842, 653 F.2d 117 at 118. See also Boz Skaggs Music v. KND Corp., 491 F.Supp. 908, 914 (D.Conn.1980); N. Boorstyn, Copyright Law, § 10:19 (Lawyers Coop 1981 and 1984 Cum.Supp.) (“If after a trial on the merits, he succeeds in establishing copyright infringement, in addition to the recovery of monetary damages, plaintiff is entitled to a permanent injunction.”).

While the Fourth Circuit has not set any guidelines for determining when an injunction should issue, other than requiring the establishment of an infringement, some circuits have held that “a plaintiff is entitled to a permanent injunction in a copyright action when liability has been established and there is a threat of continuing violations.” Encyclopedia Britannica Educational Corp. v. Crooks, 542 F.Supp. 1156, 1187 (W.D.N.Y.1982) (quoting Universal Studios, Inc. v. Sony Corp. of America, 659 F.2d 963, 976 (9th Cir.1981)).

Plaintiffs have established, without dispute, that defendant infringed upon plaintiffs’ copyrights despite numerous letters and visits by the American Society of Composers, Authors, and Publishers (ASCAP) informing the defendant of its violation of the copyright laws. Plaintiffs also contend that defendant continues to perform copyrighted music without permission. Considering the past violations by defendant and the unrebutted assertion of plaintiffs in their complaint that an injunction is necessary to restrain the defendant from making further violations of the copyright laws, it appears that plaintiffs have established the right to a permanent injunction by establishing violations of the copyright laws and the threat of continuing violations.

Accordingly, a permanent injunction shall issue restraining defendant and its employees from publicly performing, or causing to be performed, or aiding and abetting the public performance of the compositions that are the subject matter of this suit unless defendant obtains the proper authorization.

17 U.S.C. § 504 deals with damages in a copyright infringement case. Section (a) provides, “Except as otherwise provided by this title, an infringer of a copyright is liable for either—(1) the copyright owner’s actual damages and any additional profits of the infringer, as provided by subsection (b); or (2) statutory damages, as provided as subsection (e).” Plaintiffs have opted for statutory damages. Section (c) provides in part:

(c) Statutory Damages. (1) Except as provided in clause (2) of this subsection, a copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, ... in a sum of not less than $250 or more than $10,000 as the court considers just. For the purposes of this subsection, all the parts of a compilation or derivative work constitute one work. (2) In a ease where the copyright owner sustains the burden of proving, and the court finds, that the infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more than $50,000....

Plaintiffs suggest that damages should be awarded in the amount of $1,500 per violation. Plaintiffs contend that an amount in excess of the statutory minimum should be awarded if defendant is to be deterred from violating the copyright laws in the future.

David Polosky by affidavit, plaintiffs’ Exhibit A, states that had defendant been licensed by the ASCAP, its fee as of October 1984 would have been $2,100, and urges the Court to assess damages at $1,500 per violation so that defendant will be put on notice that it costs less to obey the copyright laws than to violate them.

While I presume that the award of statutory damages is intended to compensate an injured plaintiff, see Boz Skaggs Music, 491 F.Supp. at 914-15, I must also presume that, in a case where a defendant’s infringement is found to be willful, the act contemplates that the award may, in the judge’s discretion, punish the wrongdoer.

It is clear that defendant’s actions were willful. Defendant was notified on numerous occasions both by letter and by visits from ASCAP representatives that it was violating the copyright laws. Because of this willful conduct I may, in my discretion, increase the award to a sum not exceeding $50,000.

Considering the willful nature of defendant’s act; savings reaped by defendant in not paying the $2,100 licensing fee; the need to deter defendant from choosing to violate the copyright laws in the future; the strong public interest in insuring the integrity of the copyright laws; and the damages awarded by another court in a case factually very similar, see Leigh v. Sakkaris, 215 U.S.P.Q. 113, 116 (N.D.Cal. 1982), the Court assesses statutory damages in the amount of $1500 per infringement.

Plaintiff has moved for costs and attorneys’ fees. 17 U.S.C. § 505 provides “in any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney’s fee to prevailing party as part of the cost.”

In determining whether or not to grant costs, including attorneys’ fees, I am guided by the holding in Leigh v. Sakkaris, 215 U.S.P.Q. 113, 116 (N.D.Cal.1982). The court in Leigh exercised its discretion in granting attorneys’ fees. That case was factually very similar to this case in that it dealt with a restaurant that gave public performances of copyrighted music without obtaining authority to do so. After considering Leigh, I am inclined to grant the motion for costs, including attorney’s fees. However, the affidavits supporting plaintiffs’ prayer for attorneys’ fees is not detailed and I cannot determine, from the affidavit nor from the brief in support of the motion, what a reasonable attorney fee would be in this case. Accordingly, plaintiffs are instructed to submit within ten days of the entry hereof a detailed brief and proofs as required by Local Rule 11(F) and (L). Failure to timely do so will constitute a waiver as to the attorney’s fees.

And it is so ORDERED.