author: JAMES R. MILLER, Jr., District Judge.

text:
    Manuel E. NUNES and Dr. Leroy D. Kane v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC. and Philip C. Poston and Nancy M. Beckwith.
    Civ. A. No. M-84-3118.
    United States District Court, D. Maryland.
    April 2, 1985.

      Charles Bagley, IV and Council, Baradel, Kosmerl & Nolan, P.A., Annapolis, Md., for plaintiffs.
    David F. Albright, G. Randall Whittenberger and Semmes, Bowen and Semmes, Baltimore, Md., for defendants.
   MEMORANDUM AND ORDER

JAMES R. MILLER, Jr., District Judge.

Plaintiffs sue defendants in this civil action alleging various causes of action arising out of defendants’ handling of plaintiffs’ securities accounts (Paper No. 1). Plaintiffs allege violations of § 17(a) of the Securities Act of 1933, as amended, 15 U.S.C. § 77q(a); and §§ 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. §§ 78j(b) and 78t, and Rule 10b-5 promulgated thereunder, 17 CFR 240.10b-5; violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq.; violations of the Maryland Securities Act, Md. Corp. and Assn. Code Ann. § 11-703; and common law claims of fraud, breach of fiduciary duty, negligence, and breach of contract.

Defendants have filed a motion pursuant to Rules 12 and 56 (Paper No. 3). Plaintiffs have filed an opposition (Paper No. 5), to which defendants have filed a reply (Paper No. 6). In addition, defendants have filed a supplemental memorandum (Paper No. 7), to which plaintiffs have filed an opposing memorandum (Paper No. 8). After reviewing the memoranda submitted by the parties, the court concludes that no hearing is necessary to decide the motion. Local Rule 6(E).

I. Background

Manuel E. Nunes alleges that in 1981 he opened a cash management account with Merrill Lynch, Pierce, Fenner & Smith (Merrill Lynch) (Paper No. 1, ([ 13). He alleges that he became concerned with the poor condition of his account in June 1982, and turned to defendant Philip C. Poston, then an employee of Merrill Lynch, who in turn sent Nunes to defendant Nancy M. Beckwith, also a Merrill Lynch employee (id., ¶¶ 14-15). Nunes alleges that Poston and Beckwith represented that they would look after his account and make sure that he did not make any unwise trades (id., ¶15). Nevertheless, Nunes alleges, he continued to be faced with recurring maintenance margin calls which required him either to deposit additional funds or to transact additional securities option trades to prevent his account from being closed (id., ¶ 16). Nunes, allegedly relying on Poston’s advice, continued to authorize Poston to sell options on securities in order to generate cash to meet margin calls (id.). Nunes further alleges that at no time did Poston ever discourage Nunes from making a particular trade (id.).

Nunes alleges that during this time period the defendants induced transactions in securities and securities options in his account which were excessive and which generated $51,724.00 in commission expense and incurred $17,371.00 in margin expense for Nunes (id., ¶ 17). Nunes alleges that the defendants, without authority, assumed de facto control over his account and engaged in excessive and unwarranted trading in and churning of his account for the purpose of generating commissions and fees for themselves, in total disregard of the needs and objectives of Nunes (id., 1119).

Kane alleges that he opened up a cash account with Merrill Lynch on or about September 25, 1982, which remained open until June 1983 (id., ¶ 56). Kane alleges that, due to his close relationship with Nunes, he executed a power of attorney to Nunes under which Nunes had authority to make transactions in Kane’s account (id., K 57), and that Kane’s account was therefore subjected to the same problems as Nunes’ (id.).

Kane further alleges that sometime between October 30, 1982 and November 26, 1982, his account was changed from a cash account to a margin account without his prior knowledge or permission, and that in January 1983, it was changed to a cash management account, at which time he began receiving increased requests for monies from Poston to meet maintenance costs (id., ¶¶ 58, 59). Kane alleges that during the time when he had. an account with Merrill Lynch, defendants, having assumed de facto control over his account, induced excessive transactions which generated $8,222.00 in commission expense and incurred $1,439.00 in margin expense (id., ¶ 62). Kane alleges that, as a result of defendants’ actions, he has suffered a diminution in the value of his total investment account of approximately $16,000.00 (id., ¶ 66).

Nunes seeks compensatory damages of $69,000.00, consisting of commissions paid, margin expense, and other fees, while Kane requests compensatory damages of $16,000.00, consisting of the diminution in total value of his investment account. Both plaintiffs also request prejudgment interest, punitive damages of $1,000,000.00 each, and treble damages for all damages awarded to them under their RICO claims, pursuant to 18 U.S.C. § 1964(c).

II. Punitive Damages

A. Section 28(a) of the Securities Exchange Act

Defendants assert that neither federal nor state law permits recovery of punitive damages on the facts alleged in the complaint. First, defendants claim that § 28(a) of the Securities Exchange Act, 15 U.S.C. § 78bb(a), limits the damages available in this case, on both the federal and the pendent claims, to the actual damages suffered by the plaintiffs.

Punitive damages are not recoverable on the federal securities claims. See, e.g., Carras v. Burns, 516 F.2d 251, 259 (4th Cir.1975); Baumel' v. Rosen, 412 F.2d 571, 576 (4th Cir.1969).

The issue of the availability of punitive damages on pendent claims attached to federal securities claims was raised in this district in Goodman v. Poland, 395 F.Supp. 660 (D.Md.1975), where Judge Northrop stated:

“Thus, the general rule today appears to be that while punitive damages are not recoverable in an action solely under Rule 10b-5, see deHaas v. Empire Petroleum Co., 435 F.2d 1223, 1229-32 (10th Cir.1970), Baumel v. Rosen, supra, 412 F.2d at 576 {dictum,) Green v. Wolf Corp., 406 F.2d 291, 302-03 (2nd Cir. 1968), cert, denied, 395 U.S. 977, 89 S.Ct. 2131, 23 L.Ed.2d 766 (1969), they may be awarded, if allowable under state law, when a state law violation is joined with the Rule 10b-5 claim. Flaks v. Koegel, 504 F.2d 702, 706-07 (2nd Cir.1974); Coffee v. Permian Corp., 474 F.2d 1040, 1044 45 (5th Cir.), cert, denied, 412 U.S. 920, 93 S.Ct. 2736, 37 L.Ed.2d 146 (1973); Young v. Taylor, 466 F.2d 1329, 1337-38 (10th Cir.1972); Burkhart v. Alison Realty Trust, supra, 363 F.Supp. [1286] at 1290-92 [N.D.Ill.(1973) ]; In re Caesars Palace Securities Litigation, 360 F.Supp. 366, 393-94 (S.D.N.Y.1973); Gann v. Bernzomatic Corp., 262 F.Supp. 301, 304 (S.D.N.Y.1966).”

395 F.Supp. at 686. Defendants assert, however, that the holding in Goodman should be reassessed, stating:

“The problems with Goodman are that (1) it fails to follow the spirit of the Fourth Circuit decisions, Carras and Baumel, which .limit a plaintiffs recovery to actual damages in securities cases, (2) it fails to follow the explicit language of § 28(a), and (3) its rationale, based on ‘the general rule today,’ in 1975 could not possibly have forseen the great impact the many yet to be written Supreme Court cases would have on the course of statutory construction of the securities laws.”

(Paper No. 6 at 4-5).

Judge Northrop in Goodman did acknowledge the decisions in both Carras and Baumel, but apparently determined, correctly in this court’s view, that neither of those cases was controlling on the issue. In Baumel, although the plaintiff had also pleaded common law fraud and deceit, the Fourth Circuit panel did not address that claim because no decision was made on it below. 412 F.2d at 572. Similarly, in Carras, the court intentionally left this issue open, stating that it was unnecessary for the court to decide it since the jury in that case had found that the defendants lacked the intent to defraud necessary to support a claim for punitive damages under the applicable state law. 516 F.2d at 260.

There is no merit to defendants’ claim that the holding in Goodman fails to follow the explicit language of § 28(a). Defendants have cited no authority supporting its assertion that the explicit language of § 28(a) prohibits recovery of punitive damages under pendent claims, and this court is aware of none. Courts have generally found that the statute and its legislative history are capable of alternate interpretations. See, e.g., deHaas v. Empire Petroleum Co., 435 F.2d 1223, 1230 (10th Cir. 1970); Gilbert v. Bagley, 492 F.Supp. 714, 742-43 (M.D.N.C.1980). This court is in agreement.

While § 28(a) states that “no person permitted to maintain a suit for damages under the provisions of this chapter shall recover, through satisfaction of judgment in one or more actions, a total amount in excess of his actual damages on account of the act complained of,” it also provides that its rights and remedies are “in addition to any and all other remedies that may exist at law or in equity____” This section is capable of being interpreted as defendants request, i.e., that anyone permitted to maintain an action under the Securities Exchange Act is limited to recovery of actual damages on either securities or pendent claims. It is more likely, however, that Congress intended, in reserving common law remedies, to reserve the common law measure of damages as well and to limit recovery to actual damages only with regard to claims under the securities laws. In Goodman, Judge Northrop found this latter position to be the general rule, and subsequent decisions have agreed. See, e.g., Miley v. Oppenheimer & Co., 637 F.2d 318, 329-31 (5th Cir.1981); Nye v. Blyth Eastman Dillon & Co., 588 F.2d 1189, 1200 (8th Cir.1978); Faller Group, Inc. v. Jaffe, 564 F.Supp. 1177, 1185-86 (S.D.N.Y. 1983); Kirkland v. E.F. Hutton and Co., 564 F.Supp. 427, 446 (E.D.Mich.1983); Emmons v. Merrill Lynch, Pierce, Fenner & Smith, 532 F.Supp. 480, 485 (S.D.Ohio 1982); Darling & Co. v. Klouman, 87 F.R.D. 756, 759 (N.D.Ill.1980); Stowell v. Ted S. Finkel Inv. Services, Inc., 489 F.Supp. 1209, 1215-16 (S.D.Fla.1980); Hall v. Security Planning Services, Inc., 462 F.Supp. 1058, 1064-65 (D.Ariz.1978); Holmes v. Bateson, 434 F.Supp. 1365, 1389 (D.R.I.1977).

Finally, defendants assert that Judge Northrop, in stating the general rule in Goodman, could not have foreseen the impact that subsequent Supreme Court cases would have, in support of which defendants cite Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 100 S.Ct. 242, 62 L.Ed.2d 146 (1979); Touche Ross & Co. v. Redington, 442 U.S. 560, 99 S.Ct. 2479, 61 L.Ed.2d 82 (1978); Piper v. Chris-Craft Industries, 430 U.S. 1, 97 S.Ct. 926, 51 L.Ed.2d 124 (1977); Santa Fe Industries v. Green, 430 U.S. 462, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977); and Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976). These cases, however, do not address the issue in the present case, and no inconsistency exists between their holdings and the holding in Goodman. Section 28(a) expressly reserves common law remedies, and it would require a strained interpretation to find that it does not also preserve the common law measure of damages for pendent claims. Furthermore, despite these cases, the general rule, as noted above, has not changed, and courts ordinarily permit punitive damages to be recovered on pendent claims filed with federal securities claims. Accordingly, there is no merit to defendants’ argument that § 28(a) requires this court to find that punitive damages are not recoverable on the pendent claims involved in this case.

In their supplemental memorandum, defendants state two additional reasons why they feel that plaintiffs’ punitive damage claim should be dismissed. First, defendants contend that plaintiffs’ state common law claims for punitive damages are preempted by federal securities laws. This argument is without merit. This court has already concluded that the claim for punitive damages does not conflict with the provisions of § 28(a), in light of § 28(a)’s express reservation of other available rights and remedies.

Defendants also contend that plaintiffs’ state claim for punitive damages is an unconstitutional burden on interstate commerce. Defendants first base this assertion on their claim that such an award directly burdens interstate commerce because it directly conflicts with § 28(a). As this court has found that such a conflict does not exist, this argument is without merit.

Defendants also assert that an award of punitive damages under state law indirectly burdens interstate commerce, because the states’ legitimate interest in protecting their citizens against fraudulent securities practices is outweighed by the burden imposed on Congress’ power and interest in protecting the free flow of securities transactions through the channels of interstate commerce. The burden, if any, imposed on interstate commerce by Maryland’s common law fraud remedy is minimal, however, and the state has a legitimate interest in protecting its citizens from fraud. Accordingly, the court finds that the statute is constitutional under the decision in Edgar v. Mite Corp., 457 U.S. 624, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982), and the rule announced in Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970), that:

“Where the statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.”

397 U.S. at 142, 90 S.Ct. at 847.

B. Punitive Damages under Maryland Law

Defendants also assert that plaintiffs have failed to allege adequately their claim for punitive damages under Maryland law, because they have not pleaded actual malice.

Punitive damages, while not recoverable in a pure breach of contract action, may be recovered for a tort committed in connection with a breach of contract. H & R Block, Inc. v. Testerman, 275 Md. 36, 44, 338 A.2d 48 (1975). Where recovery of punitive damages is based on a tort arising out of a contractual relationship, however, the plaintiff must prove actual malice. General Motors Corp. v. Piskor, 281 Md. 627, 634, 381 A.2d 16 (1977); Henderson v. Maryland National Bank, 278 Md. 514, 519, 366 A.2d 1 (1976); H & R Block, Inc. v. Testerman, 275 Md. at 44-46, 338 A.2d 48. Actual malice has been defined as “the performance of an act without legal justification or excuse, but with an evil or rancorous motive influenced by hate, the purpose being to deliberately and willfully injure the plaintiff.” H & R Block, Inc. v. Testerman, 275 Md. at 43, 338 A.2d 48. When a defendant’s object is merely to benefit itself, although the plaintiff might coincidentally be injured, there are no grounds to support an award of punitive damages. H & R Block, Inc. v. Tester-man, 275 Md. at 48, 338 A.2d 48; St. Paul at Chase v. Mfrs. Life Insurance Co., 262 Md. 192, 238, 278 A.2d 12 (1971); Knickerbocker Co. v. Gardiner Co., 107 Md. 556, 569-70, 69 A. 405 (1908).

Defendants assert that none of the facts pleaded in the complaint describe acts of actual malice and that, therefore, the defendants should be granted summary judgment on the claim for punitive damages. Plaintiffs, however, contend that since evil motive may be proven by circumstantial evidence, Henderson v. Maryland National Bank, 278 Md. at 520, 366 A.2d 1, the motion should be denied. In Goodman v. Poland, 395 F.Supp. 660, Judge Northrop found that the plaintiffs there had alleged sufficient facts to withstand a motion to dismiss and stated that “at the present stage of the proceedings it would be inappropriate to comment as to whether plaintiffs can make a sufficient showing to justify an award of punitive damages under the facts of this case.” 395 F.Supp. at 687.

As this court is treating the motions as a motion to dismiss, the “complaint should not be dismissed unless ‘it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.’ ” McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. 232, 246,100 S.Ct. 502, 511, 62 L.Ed.2d 441 (1980) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957)); Chertkof v. Mayor & City Council of Baltimore, 497 F.Supp. 1252, 1258 (D.Md.1980).

The complaint alleges, inter alia, that defendants engaged in improper conduct by engaging in options transactions which were not suitable for plaintiffs’ investment objectives and by engaging in excessive and unauthorized trading (Paper No. 1, j[ 7). It further alleges that such actions were engaged in willfully (id., jfjf 27, 72). If plaintiffs are able to prove that defendants, in pursuing the alleged courses of action, were attempting deliberately and willfully to injure the plaintiffs, then actual malice would exist and plaintiffs could be entitled to punitive damages. At this stage of the proceedings, the court cannot say that plaintiffs can prove no set of facts which would entitle them to relief. Therefore, the motion must be denied.

III. Private Right of Action under Private Exchange Rules

Defendants assert that Counts VI, VII, XI, XVI, and XVII should be dismissed to the extent that they are based on alleged violations of the Rules of the New York Stock Exchange, Inc., the National Association of Securities Dealers, Inc., the American Stock Exchange, Inc., and the Chicago Board Options Exchange, Inc.

The general rule in this circuit is that there is no private right of action for a violations of such rules. See, e.g., Carras v. Bums, 516 F.2d 251, 260 (4th Cir.1975); Chapman v. Merrill Lynch, Pierce, Fenner & Smith, Inc., Fed.Séc.L.Rep. (CCH) ¶ 99, 419 (D.Md.1983); Rizika v. Merrill Lynch, Pierce, Fenner & Smith, Fed.Sec. L.Rep. (CCH) ¶ 97, 934 (D.Md.1981); Kaufman v. Merrill Lynch, Pierce, Fenner & Smith, 464 F.Supp. 528 (D.Md.1978); Parsons v. Homblower & Weeks-Hemphill, Noyes, 447 F.Supp. 482 (M.D.N.C.1977), offd per curiam, 571 F.2d 203 (4th Cir. 1978).

Plaintiffs do not contest defendants’ assertion that no private right of action exists under those rules, but assert that references to the rules were made to show the existence of a standard of care and duty owed by defendants to plaintiffs. Defendants respond that the legal standards of care for violations of specific statutes or common law are based on the enactments of Congress and the Maryland legislature, or the common law decisions of the Maryland courts, not by rules drafted by private businessmen to govern their private stock exchanges.

Because it is clear that no private right of action exists under such rules, the motion to dismiss will be granted to the extent such a cause of action is alleged. As the counts in question appear adequately to allege otherwise proper causes of action for negligence and securities fraud, the underlying claims will not be dismissed. With respect to defendants’ assertion that the applicable standard of care is not governed by the rules, this is an evidentiary issue not properly resolved on a motion to dismiss. Therefore, the court need not decide that issue at this time.

IV. Private Right of Action under § 17(a) of the Securities Act of 1933

Defendants next assert that Counts I, II, XI and XX of the complaint should be dismissed to the extent that they are based on a private right of action under § 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a).

In Newman v. Prior, 518 F.2d 97, 99 (4th Cir.1975), the Fourth Circuit clearly held:

“Although there is authority to the contrary, this circuit is committed to the rule that § 17(a) supports a private damage claim for the fraudulent sale of a security. Johns Hopkins University v. Hutton, 488 F.2d 912 (4th Cir.1973); cf. J.I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964). See generally 6 Loss, Securities Regulation 3913 (1969).”

Defendants assert that the current validity of this holding is questionable. First, defendants point to dicta in SEC v. American Realty Trust, 586 F.2d 1001, 1006 (4th Cir. 1978), where the Fourth Circuit stated, in a case where the SEC brought an action for injunctive relief:

“The question is not now before us in this suit by the Commission, but to hold that § 17(a)(2) creates a private right of action would probably require some substantial disregard of the whole legislative scheme.”

Second, defendants assert that Newman was decided prior to the Supreme Court’s issuance of a number of cases setting out strict rules of statutory construction to be applied before finding an implied private right of action, citing Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976); Piper v. Chris-Craft Industries, 430 U.S. 1, 97 S.Ct. 926, 51 L.Ed.2d 124 (1977); Santa Fe Industries v. Green, 430 U.S. 462, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977); Touche Ross v. Redington, 442 U.S. 560, 99 S.Ct. 2479, 61 L.Ed.2d 82 (1979); Transamerica Mortgage Advisors v. Lems, 444 U.S. 11, 100 S.Ct. 242, 62 L.Ed.2d 146 (1979); Universities Research Ass’n v. Coutu, 450 U.S. 754, 101 S.Ct. 1451, 67 L.Ed.2d 662 (1981); and California v. Sierra Club, 451 U.S. 287, 101 S.Ct. 1775, 68 L.Ed.2d 101 (1981).

The Supreme Court has not yet ruled on whether § 17(a) of the 1933 Act creates a private right of action. The courts which have considered the issue, however, are split. Compare Stephenson v. Calpine Conifers II, Ltd., 652 F.2d 808, 815 (9th Cir.1981) (finding an implied private right of action); Lincoln National Bank v. Herber, 604 F.2d 1038, 1040 n. 2 (7th Cir.1979) (same); Kirshner v. United States, 603 F.2d 234, 241 (2nd Cir.1978), cert, denied sub nom., Goldberg v. Kirshner, 444 U.S. 995, 100 S.Ct. 531, 62 L.Ed.2d 426 (1979) (same), with Landry v. All American Assurance Co., 688 F.2d 381 (5th Cir.1982) (finding no implied private right of action); Shull v. Dain, Kalman & Quail, Inc., 561 F.2d 152, 159 (8th Cir.1977), cert, denied, 434 U.S. 1086, 98 S.Ct. 1281, 55 L.Ed.2d 792 (1978) (same); Citizens State Bank v. Coninental Assurance Co., 598 F.Supp. 1111, 1115 (W.D.Wisc.1984) (same); Xaphes v. Merrill Lynch, Pierce, Fenner & Smith, 597 F.Supp. 213, 217 (D.Maine 1984) (same); Bruns v. Ledbetter, 583 F.Supp. 1050 (S.D. Cal.1984) (same); Kimmel v. Peterson, 565 F.Supp. 476, 482-88 (E.D.Pa.1983) (same). Still other courts have stated that “it is not a terribly important question,” because § 17(a) is so similar to Rule 10b-5, under which a private right of action is well established. Peoria Union Stock Yards Co. v. Penn Mutual Life Insurance Co., 698 F.2d 320, 323 (7th Cir.1983); Banowitz v. State Exchange Bank, 600 F.Supp. 1466 (N.D.Ill.1985).

There does appear to be a trend to deny a private right of action among recent cases which have examined the issue in light of the test for implying a private right of action set forth in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 and its progeny. Nevertheless, this court is bound to follow the Fourth Circuit on this issue, as have other courts in this circuit. See, e.g., Rocco v. Dusseau, No. N-82-2848 (oral opinion issued Jan. 23, 1984); Kaufman v. Merrill Lynch, Pierce, Fenner & Smith, 464 F.Supp. 528, 537 (D.Md.1978); Reid v. Madison, 438 F.Supp. 332, 333 (E.D.Va.1977). Despite the dicta in SEC v. American Realty Trust, 586 F.2d at 1006, to the contrary, the holding in Newman that a private right of action exists under § 17(a) remains the law in this circuit. Accordingly, the motion to dismiss the claims based on § 17(a) must be denied.

V. RICO Counts

In Counts IX, X, XIX, and XX of the Complaint, plaintiffs allege causes of action under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq. Defendants assert that plaintiffs have failed to state a claim, particularly that plaintiffs have failed to plead the predicate acts constituting racketeering activity and that plaintiffs have failed to describe an enterprise separate and apart from Merrill Lynch.

The civil remedies available under RICO are provided by 18 U.S.C. § 1964(c), which states that:

“(c) Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee.”

Section 1962(c) provides:

“(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.”

The definitions for the material terms contained in § 1962 are provided in § 1961 as follows:

“As used in this chapter—
(1) ‘racketeering activity’ means ... (B) any act which is indictable under any of the following provisions of title 18, United States Code: ... section 1341 (relating to mail fraud), section 1343 (relating to wire fraud), ... or (D) any offense involving ... fraud in the sale of securities ...;
(3) ‘person’ includes any individual or entity capable of holding a legal or beneficial interest in property;
(4) ‘enterprise’ includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity;
(5) ‘pattern of racketeering activity’ requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (ex-eluding any period of imprisonment) after the commission of a prior act of racketeering activity;____”

The predicate offenses alleged by plaintiffs in this case include mail fraud, wire fraud, and federal securities fraud. Plaintiffs’ complaint alleges that between October 1982 and June 1983, the defendants committed at least two of the predicate acts stated above. Under § 1961(5), a pattern of racketeering activity has been sufficiently established for purposes of a motion to dismiss if the plaintiff has alleged that defendants are guilty of two acts of racketeering activity. See Battlefield Builders, Inc. v. Swango, 743 F.2d 1060, 1063 (4th Cir.1984). As plaintiffs have alleged such acts, they have sufficiently alleged a pattern of racketeering activity and the predicate acts constituting racketeering activity.

Defendants contend, however, that plaintiffs have failed to describe an “enterprise” separate and apart from Merrill Lynch. Plaintiffs assert that they have sufficiently alleged that the defendants, Poston, Beck-with, and Merrill Lynch, have formed an “enterprise” by associating to offer and sell securities to plaintiffs.

An “enterprise” under § 1961(4) must be an entity separate and apart from the pattern of racketeering activity in which it engages, and must be an entity whose members are “associated together for a common purpose of engaging in a course of conduct.” United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 2528, 69 L.Ed.2d 246 (1981). See also United States v. Griffin, 660 F.2d 996, 999 (4th Cir.1981), cert, denied, 454 U.S. 1156, 102 S.Ct. 1029, 71 L.Ed.2d 313 (1982). An enterprise must have a “common or shared purpose,” it must “function as a continuing unit,” and it must have ah “ ‘ascertainable structure’ distinct from that inherent in the conduct of a pattern of racketeering activity.” United States v. Bledsoe, 674 F.2d 647, 665 (8th Cir.1982). Furthermore, the enterprise must “refer to a being different from, not the same as or part of, the person whose behavior the act was designed to prohibit, and, failing that, punish.” United States v. Computer Sciences Corp., 689 F.2d 1181, 1190 (4th Cir.1982).

An enterprise, however, may include an association of individuals and corporations. See United States v. Aimone, 715 F.2d 822, 828 (3rd Cir.1983), cert, denied, — U.S. —, 104 S.Ct. 3585, 82 L.Ed.2d 883 (1984); United States v. Thevis, 665 F.2d 616 (5th Cir.), cert, denied sub nom., Evans v. United States, 456 U.S. 1008, 102 S.Ct. 2300, 73 L.Ed.2d 1303 (1982).

Defendants assert that plaintiffs have not alleged an enterprise separate and distinct from Merrill Lynch. While plaintiffs concede that Merrill Lynch itself cannot be an “enterprise,” they allege that there was an association in fact between Merrill Lynch and either Beckwith (count IX), Poston (counts XIX and XX), or both Beckwith and Poston (count X). The court is of the opinion that plaintiffs’ allegation that these defendants associated to offer and sell securities properly alleges an “enterprise” under RICO. See Austin v. Merrill Lynch, Pierce, Fenner & Smith, 570 F.Supp. 667, 669 (W.D.Mich.1983). Therefore, this motion must be denied.

VI. Adequacy of Fraud Allegations Under Rule 9(b)

Defendants contend that Counts I-IV and XI-XIV, in which plaintiffs allege fraud under the federal securities laws, Maryland securities laws, and common law, should be dismissed for failure to plead fraud with adequate particularity.

Allegations of fraud must comply with the pleading requirements set forth in Rule 9(b), Fed.R.Civ.P., which states:

“In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other conditions of mind of a person may be averred generally.”

Rule 9(b) must be read in conjunction with the requirement of Rule 8(a), Fed.R.Civ.P., that the complaint consist of “a short and plain statement of the claim” for relief. Windsor Associates, Inc. v. Greenfeld, 564 F.Supp. 273, 280 (D.Md.1983). Furthermore, “ ‘the most basic consideration in making a judgment as to the sufficiency of a pleading is the determination of how much detail is necessary to give adequate notice to an adverse party and enable him to prepare an adverse pleading.’ ” Windsor Associates, Inc. v. Greenfeld, 564 F.Supp. at 280 (quoting C. Wright and A. Miller, Federal Practice and Procedure, § 1297, p. 415 (1969)).

In the present case, the complaint explains the course of the relationship between plaintiffs and the party defendants and gives dates of relevant contacts. In addition, plaintiffs provide a monthly breakdown of the number of transactions involved, the commissions allegedly made by defendants on the transactions, the average equity of plaintiffs, the commission/equity ratio for the month, and the margin costs.

This case involves an alleged broker churning case, in which “a broker, exercising control over the volume and frequency of trading, abuses his customer’s confidence for personal gain by initiating transactions that are excessive in view of the character of the account.” Carras v. Burns, 516 F.2d 251, 258 (4th Cir.1975). Churning cases involve numerous transactions which take place over an extended period of time and generally involve disproportionate trading, frequent in and out transactions, and large brokerage commissions. Consequently, in a churning case “it serves no useful purpose to require the plaintiffs to list with particularity every transactions relevant to their claim.” Baselski v. Paine, Webber, Jackson & Curtis, Inc., 514 F.Supp. 535, 541 (N.D.I11.1981).

In light of these considerations, the court finds that the complaint in the'present case alleges sufficiently specific facts to put defendants on notice of what plaintiffs allege they did, and that, therefore, the complaint meets the pleading requirements of Rule 9(b). The motion to dismiss plaintiffs’ fraud claims on this basis is denied.

Accordingly, it is this 2nd of April, 1985, by the United States District Court for the District of Maryland, ORDERED:

1) That the defendants’ Motion Pursuant to Rule 12 and Rule 56 be, and the same is hereby, GRANTED in part and DENIED in part, as set forth in this Memorandum and Order.

2) That the Clerk mail a copy of this Memorandum and Order to counsel for the parties.

      . Although defendants have entitled this part of their motion as one for summary judgment, a reading of the motion shows that it asserts that plaintiffs have failed to state a claim with respect to the claim for punitive damages. Furthermore, neither party has submitted matters outside the pleadings for consideration by the court. The court shall therefore treat it as a motion to dismiss.

      . Section 28(a) states in relevant part:
      “(a) The rights and remedies provided by this chapter shall be in addition to any and all other rights and remedies that may exist at law or in equity; but no person permitted to maintain a suit for damages under the provisions of this chapter shall recover, through satisfaction of judgment in one or more actions, a total amount in excess of his actual damages on account of the act complained of.”

      . As plaintiffs’ damage claim is located at the end of their 20 count complaint, it could be construed as requesting punitive damages under any or all of its counts, including the federal securities claims. In their opposition to defendants' motion, however, plaintiffs indicate that they seek punitive damages only under their pendent state claim.

      . In several cases, the Court has expressly recognized that this is an open question. See Herman & MacLean v. Huddleston, 459 U.S. 375, 378 n. 2, 103 S.Ct. 683, 685 n. 2, 74 L.Ed.2d 548 (1983); Aaron v. SBC, 446 U.S. 680, 689, 100 S.Ct. 1945, 1951, 64 L.Ed.2d 611 (1980); Teamsters v. Daniel, 439 U.S. 551, 557 n. 9, 99 S.Ct. 790, 795 n. 9, 58 L.Ed.2d 808 (1979); Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 733-34 n. 6, 95 S.Ct. 1917, 1924 n. 6, 44 L.Ed.2d 539 (1975).

      . Although not specifically raised by the parties, the court recognizes that the holding in Sedima, S.P.R.L. v. Imrex Co., 741 F.2d 482 (2nd Cir. 1984), cert, granted, — U.S. —, 105 S.Ct. 901, 83 L.Ed.2d 917 (1985), to the effect that the defendants in a civil RICO action must have been previously convicted of a RICO predicate offense, would act to bar this cause of action if followed by this court. After careful consideration of the applicable case law, and in light of the Fourth Circuit's recent decision in Battlefield Builders, Inc. v. Swango, 743 F.2d 1060 (4th Cir.1984), this court finds that it cannot follow Sedima for the reasons set forth by Judge Northrop in Wang Laboratories, Inc. v. Burts, Civil No. N-84-1977 (D.Md. Jan. 28, 1985), and by Magistrate Smalkin in Heffron Co. v. Seafarers Maryland Bldg. Corp., — F.R.D. —, Civil No. HAR-83-3274 (Feb. 27, 1985).


source: Caselaw Access Project

author: ROBERT L. CARTER, District Judge.

license: Public Domain

text:
    UNITED STATES of America, v. Coltrane CHIMURENGA, a/k/a “Randolph Simms,” a/k/a “Rashid Penderglass,” a/k/a “Lionel Jean-Baptiste,” a/k/a “The Tall One,” a/k/a “Carl,” Viola Plummer, a/k/a “June,” Roger Wareham, a/k/a “Frank Rogers,” a/k/a “Kameel Teen,” a/k/a “Frankie,” a/k/a “Baldy,” Robert Taylor, a/k/a “R.T.,” a/k/a “Pizon,” a/k/a “Chic,” a/k/a “Coach T.” a/k/a “The Ballplayer,” Omowale Clay, a/k/a “William Clay,” a/k/a “T.” a/k/a “Milton Clyde Hilliard,” a/k/a “H. Hilliard,” Ruth Carter, a/k/a “Latifa Carter,” a/k/a “Anna Carter,” a/k/a “Janice,” Colette Pean, a/k/a “Carmen Oliveras,” a/k/a “Paulette Jackson,” a/k/a “Nia,” Yvette Kelley, a/k/a “Willie Y. Kelley,” a/k/a “Joy Bailey,” a/k/a “Cheryl,” and Jose Rios, a/k/a “Pepe,” a/k/a “Brava,” Defendants.
    No. S 84 Cr. 818 (RLC).
    United States District Court, S.D. New York.
    April 8, 1985.

      Rudolph W. Giuliani, U.S. Atty. for the S.D.N.Y., New York City for the U.S.; Kenneth Roth, Loma G. Schofield, Asst. U.S. Attys., New York City, of counsel.
    Lennox Hinds, Stevens, Hinds & White, New York City, for Coltrane Chimurenga.
    Michelle S. Jacobs, New York City, for Viola Plummer.
    William'Mdgulescu, Levinson Mogulescu & Kaplan, New York City, for Roger Ware-ham.
    Barry C. Scheck, New York City, for Robert Taylor.
    Steven Bernstein, New York City, for Omowale Clay.
    Lee A. Ginsberg, Freeman, Nooter & Ginsberg, New York City, for Ruth Carter.
    James Silver, New York City, for Colette Pean.
    Judith Holmes, Flood, Holmes & Tipograph, New York City, for Yvette Kelley.
    Michael Hurwitz, Handelman, Hurwitz & Stampur, New York City, for Jose Rios.
   OPINION

ROBERT L. CARTER, District Judge.

As a part of the surveillance of the defendants, the government, with the permission of its occupants, used a private residence in the vicinity of 80 Midwood Street, Brooklyn, from, which they took a number of photographs and kept a written log of defendants and others entering and leaving the 80 Midwood Street address. The government alleges that two of the defendants, Roger Wareham and Omowale Clay, usually resided at 80 Midwood. A large cache of weapons was found on these premises during authorized searches by the government.

Pursuant to the familiar scenario the government would normally turn over to defendants both the photographs and the logs pursuant to Rule 16, F.R.Cr.P. What makes this case different is that government agents promised the occupants of the residence which they used to make their observations, logs and photographs that neither the residence nor its occupants would ever be publicly identified. Unfortunately, however, the government has discovered, apparently after its commitment had been made, that if it turns over the photographs to defendants, the location of the residence the agents used and the identity of its occupants would be revealed. In order to abide by its commitment of anonymity, the government seeks a protective order to withhold the photographs from the defense.

The government has manifested willingness to turn over the logs, with appropriate redaction of any reference to the confidential residence, to defendants and to verify that the logs accurately reflect the photographs; has indicated that it will not use the photographs or logs at trial, and will forego its right to introduce evidence that contradicts defendants’ evidentiary showing through observations in its possession from the confidential private residence. The government is also willing to have the photographs available for in camera inspection by the court. Thus the government argues that if defendants question the accuracy of the logs, the court would be able to view the photographs to determine whether the entry or entries accurately reflect the photographs.

The government argues that they are not required under Brady v. Maryland, 878 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963) and its progeny, “routinely to deliver [the prosecution’s] entire file to defense counsel.” United States v. Agurs, 427 U.S. 97, 111, 96 S.Ct. 2392, 2401, 49 L.Ed.2d 342 (1976). The photographs, the government argues, “would have no relevance at trial because the government would continue to forego testimony about what they reflect.” (Gov’t.Mem. at 4). Thus, the argument goes, no harm will be visited on defendants since the government’s Brady obligation is not to supply a defendant with every item the government holds that might conceivably be of assistance, “but to assure that the defendant will not be denied access to exculpatory evidence only known to the Government”, United States v. LeRoy, 687 F.2d 610, 619 (2d Cir.1982), cert, denied, 459 U.S. 1174, 103 S.Ct. 823, 74 L.Ed.2d 1019 (1983), citing United States v. Ruggiero, 472 F.2d 599, 604 (2d Cir.), cert, denied, 412 U.S. 939, 93 S.Ct. 2772, 37 L.Ed.2d 398 (1973).

Defendants, not surprisingly, argue that they have a right to the photographs “in order to identify and locate those persons who were at 80 Midwood Street, on certain dates, to attend specific community and political meetings.” (Def. Mem. at 2). They contend that these photographs constitute Brady material which must be supplied to them. They argue that surveillance logs reveal continuous misidentification by government agents.

Discussion

This seems to be a case of first impression in this circuit. However, we start with the proposition that defendants are entitled to all information and materials necessary to their defense. United States v. Nobles, 422 U.S. 225, 231, 95 S.Ct. 2160, 2166, 45 L.Ed.2d 141 (1975). Under the broad rubric of Rule 16, F.R.Cr.P., the photographs, as well as the written logs and any other documents concerning the agents’ observations (except possibly some comments in internal memoranda, but even these on redaction might be given defendants as of right) are required to be disclosed to defendants.

The government cites two cases from the District of Columbia Circuit to support its right to withhold these photographs. United States v. Harley, 682 F.2d 1018 (D.C.Cir.1982); United States v. Green, 670 F.2d 1148, 1157 (D.C.Cir.1981).

I do not see what comfort the government believes either Harley or Green provides to support its contention that the photographs can be withheld.

In Harley agents watched a narcotics transaction and one of the agents filmed the transaction with a camera equipped with a zoom lens. The video tape of the transaction was introduced at trial. Defense counsel sought to require the agent to reveal the location from which the surveillance was taken. The court barred this inquiry. On appeal it was held at 1020 that “surveillance location privilege, like the informer’s privilege, applies at trials, and that it, too, is to be applied through a balancing test controlled by ‘the fundamental requirements of fairness.’ ” (citation omitted). This case has no application to the instant situation. In Harley, the defendant was obviously given the film taken from the location. While right to the film of the narcotics transaction in which the defendant was involved was recognized, he had no independent right to the identity of the location itself. His Rule 16, F.R.Cr.P. right was to the film. Here the government seeks to bar access to the photographs because they will inadvertently reveal the location from which they were taken and the identity of the occupants of the residence in question. While the government has a right to withhold the location of the residence used and may shield the occupants of the residence from disclosure, it cannot deny defendants access to the photographs.

There is indeed a paramount public interest, which courts must protect, in the free flow of information to law enforcement officials. United States v. Tucker, 380 F.2d 206, 213 (2d Cir.1967). Moreover, there is at least a qualified privilege afforded to those who provide information to law enforcement officers to have their identities shielded from public scrutiny and particularly from the defendants whose criminal conduct they are assisting the government in deciphering. In the instant case, the government’s assurances of confidentiality to the occupants of the private residence should be protected under ordinary circumstances, see United, States v. Harley, supra, but “when identification of the surveillance location ‘is relevant and helpful to the defense of an accused ... the privilege must give way’ ”, United States v. Green, supra, 670 F.2d at 1157 n. 14, citing Roviaro v. United States, 353 U.S. 53, 60-61, 77 S.Ct. 623, 627-628, 1 L.Ed.2d 639 (1957). The government cannot withhold these photographs from defendants. The latter are not interested per se in knowing the person or persons who occupied the building from which the agents took the photographs. Nor are they interested per se in the location of the building itself. Their interest is in obtaining the photographs. That the photographs inadvertently provide information the government promised to withhold is unfortunate. On any scale or yardstick applicable under our criminal justice system, the defendants’ rights in this case must prevail.

United States v. Green, supra, cited by the government is clearly not in point. It involved appeal of the trial court’s recognition of a qualified privilege not to disclose its surveillance location at a suppression hearing. A police officer testified that he had made various observations from a hidden observation post. The defendant sought to identify the post and the government’s objection was sustained. The court, however, made clear, as note 14 supra, clearly shows, that its rulings did not apply to a trial, but only embraced pretrial proceedings.

While defendants argue that the photographs constitute Brady material and the government argues that Brady does not require disclosure, I do not have to determine whether this is putative Brady material. It is clearly relevant to the defense, and, in the court’s judgment, defendants are entitled to it as of right under Rule 16, F.R.Cr.P.

The photographs record defendants and others coming and going from an address where two of them lived. The photographs are evidentiary and putatively relevant. The photographs are not otherwise available, and failure to obtain the photographs could delay and impede defendants’ preparation for trial. Cf. United States v. Iozia, 13 F.R.D. 335 (S.D.N.Y.1952) (Weinfeld, J.).

Moreover, the documents may be Brady material. Defendants contend that the documents are exculpatory and will help support their defense that the comings and goings in the Midwood address were political gatherings. The government wants to turn over the photographs to the court for in camera inspection. I do not believe that the court is in a position at this time to dispute defendants’ contention of their need and expected use of the photographs for defense purposes. At this stage, defendants must be given the benefit of the doubt.

While in the ordinary case the court should seek a formula to enable the government to keep its commitment, it cannot do so when the only formula available violates defendants’ right to be afforded a fair opportunity to prepare for trial. Balancing the government’s commitment against defendants’ right, the latter must prevail.

The government is ordered to turn over the photographs to defendants without delay.

IT IS SO ORDERED.


text:
    UNITED STATES of America, v. Coltrane CHIMURENGA, a/k/a “Randolph Simms,” a/k/a “Rashid Penderglass,” a/k/a “Lionel Jean-Baptiste,” a/k/a “The Tall One,” a/k/a “Carl,” Viola Plummer, a/k/a “June,” Roger Wareham, a/k/a “Frank Rogers,” a/k/a “Kameel Teen,” a/k/a “Frankie,” a/k/a “Baldy,” Robert Taylor, a/k/a “R.T.,” a/k/a “Pizon,” a/k/a “Chic,” a/k/a “Coach T.” a/k/a “The Ballplayer,” Omowale Clay, a/k/a “William Clay,” a/k/a “T.,” a/k/a “Milton Clyde Hilliard,” a/k/a “H. Hilliard,” Ruth Carter, a/k/a “Latifa Carter,” a/k/a “Anna Carter,” a/k/a “Janice,” Colette Pean, a/k/a “Carmen Oliveras,” a/k/a “Paulette Jackson,” a/k/a “Nia,” Yvette Kelley, a/k/a “Willie Y. Kelley,” a/k/a “Joy Bailey,” a/k/a “Cheryl,” and Jose Rios, a/k/a “Pepe,” a/k/a “Brava,” Defendants.
    No. S 84 Cr. 818 (RLC).
    United States District Court, S.D. New York.
    April 22, 1985.
    See also, 609 F.Supp. 1066.

      Rudolph W. Giuliani, U.S. Atty. for the S.D.N.Y., New York City, for the U.S.; Kenneth Roth, Loma G. Schofield, Asst. U.S. Attys., New York City, of counsel.
    Lennox Hinds, Stevens, Hinds & White, New York City, for Coltrane Chimurenga.
    Michelle S. Jacobs, New York City, for Viola Plummer.
    William Mogulescu, Levinson Mogulescu & Kaplan, New York City, for Roger Ware-ham.
    Barry C. Scheck, New York City, for Robert Taylor.
    Steven Bernstein, New York City, for Omowale Clay.
    Lee A. Ginsberg, Freeman, Nooter & Ginsberg, New York City, for Ruth Carter.
    James Silver, New York City, for Colette Pean.
    Judith Holmes, Flood, Holmes & Tipograph, New York City, for Yvette Kelley.
    Michael Hurwitz, Handelman, Hurwitz & Stampur, New York City, for Jose Rios.
   ROBERT L. CARTER, District Judge.

Defendants challenge the constitutional validity of the electronic surveillance of Apartment 21F, 1700 Bedford Avenue and of 80 Midwood Avenue, Brooklyn, authorized in this case by order of Judge McLaughlin pursuant to 18 U.S.C. § 2518. The order, initially issued on August 16, 1984, authorized the interception of electronic communications at the two locations and the installation and monitoring of hidden microphones at the Bedford Avenue address. The order was extended on August 24, 1984, September 14, 1984, and October 12, 1984.

The defendants contend that the affidavits supporting the original application, particularly that of FBI Special Agent David Mitchell, contained misstatements and misrepresentations. It is argued that the order authorizing two prior electronic surveillance authorizations, one state and one federal, on which probable cause for the instant application was partially predicated, were themselves defective. It is contended that what the government has proffered through Mitchell as evidence, of probable cause is “prosecution by innuendo, and guilt by association; the association being the implied relationship of certain targeted ‘black’ political groups.” (Affidavit of James Silver, par. 17). Reliance on the testimony of Peter Middleton as the basis for probable cause is castigated by defendants. Defendants claim that during the Brinks trial Middleton admitted to lying “on ‘15 or 20’ occasions” to the FBI. Id., par. 21. The government, it is contended, deliberately failed to inform the judge that the subjects of the wiretap were political community workers and that the true purpose of the electronic surveillance was to monitor the activities of a known political group and further to identify the group’s membership.

The standard for a finding of probable cause to order electronic surveillance is the same as that for issuance of a search warrant. United States v. Fury, 554 F.2d 522, 530 (2d Cir.1977). An affidavit supporting an order for electronic surveillance has a presumption of validity. Frank v. Delaware, 438 U.S. 154, 172, 98 S.Ct. 2674, 2685, 57 L.Ed.2d 667 (1978). We have been admonished by the United States Supreme Court that “[i]n dealing with probable cause ... we deal with probabilities. These are not technical; they are the factual and practical considerations of everyday life in which reasonable and prudent men, not legal technicians, act.” Illinois v. Gates, 462 U.S. 218, 231, 103 S.Ct. 2317, 2328, 76 L.Ed.2d 527 (1983) quoting from Brinegar v. United States, 338 U.S. 160, 175, 69 S.Ct. 1302, 1310, 93 L.Ed. 1879 (1949). “[P]robable cause is a fluid concept — turning on the assessment of probabilities in particular factual contexts — not readily or even usefully, reduced to a neat set of legal rules.” Id., 462 U.S. at 232,103 S.Ct. at 2329. The affidavit is sufficient to support a finding of probable cause if its factual allegations enable the magistrate or judge issuing the order “to make the judgment that the charges are not capricious and are sufficiently supported to justify bringing into play the further steps of the criminal process.” Jaben v. United States, 381 U.S. 214, 224-25, 85 S.Ct. 1365, 1370-71, 14 L.Ed.2d 345 (1965). “[Ojnly the probability, and not a prima facie showing, of criminal activity” is needed to meet the probable cause yardstick. Spinelli v. United States, 393 U.S. 410, 419, 89 S.Ct. 584, 590, 21 L.Ed.2d 637 (1969).

In reviewing the sufficiency of the basis for Judge McLaughlin’s order, the court is required to make a totality of the circumstances analysis. Illinois v. Gates, supra, 462 U.S. at 233, 103 S.Ct. at 2329.

After-the-fact scrutiny by courts of the sufficiency of an affidavit should not take the form of de novo review. A magistrate’s “determination of probable cause should be paid great deference by reviewing courts[,]” Spinelli v. United States 393 U.S. at 419, 89 S.Ct. at 590, and “courts should not invalidate warranty] by interpreting affidavit[s] in a hypertechnical, rather than a commonsense, manner.” United States v. Ventresca, 380 U.S. 102, 109, 85 S.Ct. 741,- 746, 13 L.Ed.2d 684 (1965).

With the standard outlined and the limitations of our examination defined, we now turn to the affidavit of Special FBI Agent David Mitchell which provided the probable cause foundation on which Judge McLaughlin rested his order. Mitchell states that he had learned a great deal about the Brinks operations from government informers. Defendants dismiss one of the informers, Peter Middleton, as an admitted liar and the testimony of government informer Tyrone Rison for the reason that the information supplied by Rison to the government led to the prosecution of thirty-five people but only two were convicted. (Hinds Affidavit, par. 17). The validity of a law enforcement officer's conviction that criminal activity is under way is not measured by the beyond a reasonable doubt standard which is required for a jury finding of guilt. Indeed, that two of the thirty-five persons were convicted gives considerable credence to Rison’s information.

Middleton advised Mitchell that in May, 1981, Mutulu Skakur, the head of the original Brinks military unit, discussed with defendant Chimurenga the need to form a “people’s militia in New York City.” Chimurenga was given responsibility for training on strategy and weapons, and following Sekou Odinga’s incarceration, Chimurenga, according to Middleton, became the day-today military leader. Moreover, in an intercepted telephone conversation on March 8, 1982, Skakur was overheard speaking of “a militia that Chimurenga started.” (Mitchell Affidavit, p. 42). During the same conversation Skakur said that while he was preparing to leave New York, he was helping to select people to continue the New York operation. Id. at 43. A gun traced to Chimurenga purchased some years earlier was found in a New Jersey location which the government believes was a safe house for Brinks conspirators. Chimurenga was seen with principals in the Brinks case. He is believed to have visited Odinga at the MCC using a false name. Observations of Chimurenga’s activities indicated considerable interest in armored trucks and helicopters.

Rison had testified that extensive armored truck surveillance preceded planned robberies. Id. at 56. Chimurenga was observed in his car on February 27, 1984, watching two Brinks armored trucks servicing a Manufacturers Hanover Trust Co. (MHT) bank at Clinton and Pierrepont Streets, Brooklyn, id. at 56; and later was seen watching one armored truck service another MHT bank at Ashland Place, and then return to the first observation point, id. at 57; later, he was seen watching an armored truck servicing an A & P supermarket at East 64th Street and Second Avenue in Manhattan. Id. at 58.

That same day he was seen at the Pan Am Heliport at East 60th Street and F.D.R. Drive and later on went to the Heliport at 34th Street where he inquired about helicopter flight rates and schedules. Later on he and defendant Viola Plummer drove to the Brooklyn House of Detention where Odinga was incarcerated, and Chimurenga was seen directing Plummer’s attention to the top of the building. Id. at 59. On March 4, Howard Bonds, an unindicted co-conspirator, took a helicopter cruise from 34th Street Heliport. During the flight he spoke to the pilot about taking lessons, inquired about various cockpit buttons, about the range of the helicopter and the feasibility of its use in a rescue operation. Id. at 60. On March 23, defendant Roger Wareham came to the 34th Street Heliport and checked several pamphlets and a flyer, used a pay phone and left. Id. On March 27, Wareham was seen outside the Brooklyn House of Detention where he appeared to be pacing off distances and counting windows. Id.

On February 6, 1984, defendant Yvette Kelley filled out a rental application for an apartment at 37 Lynwood Place in New Haven, Connecticut. The name given on the application, Joy Bailey, was false. The applicant indicated employment at the New York City Housing Preservation Department (“HPD”) and that Viola Plummer was her immediate supervisor, giving Plummer’s correct business telephone number. Kelley was employed in Newark, New Jersey. Kelley's New York telephone number was listed as that of her former landlord, and the application shows that Carmen Oliveras (now known to be Colette Pean) would be sharing the apartment. Id. at 67.

Kelley lives with defendant Ruth Carter and Pean at 1700 Bedford Avenue. Known visitors to that apartment include Chimurenga, Plummer, Bonds and William Clay. She visited Odinga many times at the MCC, Brooklyn House of Detention and Rikers Island. Id. at 14. Kelley accompanied a woman to the Brooklyn House of Detention after Bonds’ March, 1984 arrest and posted $1,500 bond for his release. Id. at 141. One of the figures (Dixon) in the Brinks case arrested for creating a disturbance had in his possession an address book with the name Yvette (adjacent to the number where Kelley worked). Id. at 141.

Middleton identified Howard Bonds, id. at 46, Roger Wareham and Robert Taylor, id. at 47, as members of the military unit.

Ruth Carter has visited 80 Midwood when Chimurenga, William Clay, Wareham and Plummer were known to be present. There are records of numerous calls between the Carter/Kelley phone and the Wareham/Clay residence phone and the Plummer and Clay HPD phone. Id. at 144. On several occasions before the April 16, 1981 killing of one and the critical wounding of another police officer for which James Dixon York was convicted of attempted murder, he was seen on the 21st floor where the Carter/Kelley apartment is located in the building on Bedford Avenue. After this incident, a number of calls from Carter to Michael Dennis Hill were intercepted in which she urgently requested a meeting with him. She refused to give Hill her telephone number or work address over the phone, although she was trying to meet him. Id. at 148. Hill was observed entering the 1700 Bedford Avenue apartment complex on July 2, 1981. Hill was seen circling the block at 1700 Bedford a number of times, then placing a call from a pay phone and then meeting with an unidentified black woman who entered the 1700 Bed-ford apartment after the meeting. Id. at 149. Between March and June, 1981, there were three calls from Carter’s phone to Hill’s house on Long Island, and on August 5, 1981, Hill called Carter’s residence from a pay phone on Long Island. Id. Carter’s phone showed 5 calls to South Carolina between May and August, 1981. Id. at 150. During this same period, a call from Hill’s phone to South Carolina was intercepted, and shortly thereafter York was arrested fleeing from the building Hill had called. On August 18, 1981, the day after York was arrested, Carter called Hill and asked whether the price tag had been removed from all those dresses. When arrested York had a 9mm automatic handgun from which the serial number had been removed. Id. The message was interpreted as asking whether serial numbers had been removed.

Both Chimurenga and Wareham used false identification — the former in February, 1984, when he visited Odinga at MCC by presenting a false HPD identification with his own picture identifying him as Lionel Jean Baptiste. Id. at 72. In September, 1983, Wareham applied for a passport in the name of Frank Rogers, giving a bogus New Jersey birth certificate, and he gave Plummer’s telephone number at HPD as his office telephone. Id. at 70-72. The parties were observed constantly using maneuvers as if to disguise their actual destination.

The defendants argue that the instant surveillance order is defective because it is based on two prior defective wiretap orders. The challenged wiretaps occurred during the investigative attempt by the New York City Police Department to locate James Dixon York and Anthony Nicholas LaBorde who had been indicted for killing a New York City police officer and critically wounding his partner on April 16, 1981. Wiretaps were placed on the telephones of Michael Dennis Hill in Mastic, Long Island and Ruth Carter at 1700 Bedford Avenue. The latter was identified as “Wendy”, last name unknown. These two wiretaps are only mentioned in passing in Mitchell’s affidavit, and then only as background.

Applying the principles enunciated at the outset, the motion to suppress the fruits of the electronic surveillance authorized in this case must be denied. Under the commonsense standard which must be applied, the Mitchell affidavit provided Judge McLaughlin with a “substantial basis for ... concluding]” that electronic surveillance would uncover evidence of wrongdoing. Jones v. United States, 362 U.S. 257, 271, 80 S.Ct. 725, 736, 4 L.Ed.2d 697 (1960). That provides a sufficient basis to satisfy 4th and 14th Amendment strictures. Id. While if one looks at each of the incidents set forth above in isolation, each might appear innocent, the sum total of these events — the false identification, the surveillance of the armored trucks, the visits to the heliports, the inquiries about the helicopter, the rental of the apartment in New Haven while Odinga was incarcerated in New York City and the failure to pay rent on the apartment once he had been moved, surreptitious visits, that is, under an alias, of Chimurenga to Odinga, his and Ware-ham’s interest in the Brooklyn House of Detention while Odinga was incarcerated, Mitchell’s information linking Chimurenga to Brinks participants, verified by observation and through a gun found in a Brinks safehouse which was traced to him, the use of Plummer’s and Clay’s HPD office to support false applications for rental of the apartment in Connecticut and for Ware-ham’s false passport, the devious maneuvers defendants used in going from one place to the next, taken together add up to probabilities of illegal activity. The Mitchell affidavit is sufficient, therefore, to validate Judge McLaughlin’s order. Illinois v. Gates, supra, 462 U.S. at 231, 103 S.Ct. at 2328.

Nor have defendants made a sufficient showing to warrant an evidentiary hearing. Such a hearing would be justified only ón a substantial showing that Mitchell’s affidavit is deliberately false or in reckless disregard of the truth, and when the matters allegedly false and in reckless disregard of the truth are put to one side, there is insufficient content in the affidavit to support a finding of probable cause. Franks v. Delaware, 438 U.S. 154, 172, 98 S.Ct. 2674, 2685, 57 L.Ed.2d 667 (1978). That standard has not been met.

Defendants have also moved for an order compelling the government to provide grand jury records and, in the event of defect, an order dismissing the indictment in this case. The materials requested relate to grand jury due process, alleged misinstruction, and the inspection of grand jury minutes.

There is a presumption of regularity in grand jury proceedings, United States v. Gordon, 493 F.Supp. 814, 816-817 (N.D.N. Y.1980), affd, 655 F.2d 478 (2d Cir.1981), and such presumption can be overcome only by a showing of particularized need or similar compelling necessity. United States v. Abrams, 539 F.Supp. 378 (S.D.N. Y.1982) (Stewart, J.).

No such showing has been made by defendants with respect to the grand jury proceedings at issue here. First, the need is not sufficiently particularized since “the sweep of these interrogatories is so broad that it suggests what is sought is a general investigation of both the prosecution and the grand jurors and their functionings____” United States v. Wilson, 565 F.Supp. 1416, 1437 (S.D.N.Y.1983) (Weinfeld, J.). Second, defendants’ motion is based entirely on unsupported surmise and thus does not provide the factual basis necessary to warrant the extraordinary relief of disclosure of grand jury proceedings. Id. at 1436; United States v. Olin Corp., 465 F.Supp. 1120, 1134-1135 (W.D. N.Y.1979).

IT IS SO ORDERED.


author: LEGGE, District Judge.

text:
    BUILDING SERVICE EMPLOYEES PENSION TRUST, Plaintiff, v. HORSEMEN’S QUARTER HORSE RACING ASSOCIATION, Quarter Horse Racing, Inc., a California corporation, dba Horsemen’s Quarter Horse Racing Association, Hollywood Park, Inc., a Delaware corporation dba Hollywood Turf Club, Los Alamitos Race Course, a California corporation, Los Angeles County Fair Association, Los Angeles Turf Club, Oak Tree Racing Association, Southern California Racing Association, a California corporation, Windcorp, a Delaware corporation dba Western Harness Racing, Defendants.
    No. C-81-0569-CAL.
    United States District Court, N.D. California.
    April 8, 1985.

      Elizabeth G. Leavy, Carroll, Burdick & McDonough, San Francisco, Cal., for plaintiff.
    Stephen P. Pepe, O’Melveny & Myers, Los Angeles, Cal., Edward W. Rosston, Jonathan C. Dickey, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., for defendants.
   OPINION AND ORDER FOR SUMMARY JUDGMENT

LEGGE, District Judge.

This case is before the court on cross motions for summary judgment by all parties. The case has been pending for four years, and the parties now agree that discovery is complete, that there are no genuine issues of material fact, and that the issues are ones of law which should be resolved by summary judgment.

The court has reviewed all of the moving and opposing papers and the record, and now orders that summary judgment be entered for plaintiff and against defendants.

I.

Plaintiff Building Service Employees Pension Trust (“Trust”) is an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (“ERISA”) 29 U.S.C. §§ 1001-1461. Defendants are operators of racetracks.

In 1976, defendants entered into collective bargaining agreements with the Service Employees International Union (“SEIU”) Locals 193, 280, and 399. Those collective bargaining agreements incorporated a Pension Plan and Trust Indenture by reference. Under those agreements, defendants were obligated to make contributions to the Trust on behalf of employees who were members of the three SEIU locals.

In 1979, the collective bargaining agreements expired. Members of all three locals went on strike, but Teamsters union members and other non-SEIU union members crossed the picket lines. During the third week of the strike, most of the SEIU Local 193 members signed cards authorizing Teamsters Local 495 to represent them. Subsequently, defendants recognized Teamsters Local 495 as the bargaining agent for those employees. SEIU Locals 280 and 399 then settled their strike, and new collective bargaining agreements were negotiated for their members and for those employees then represented by Teamsters Local 495.

The Pension and Trust Indenture were incorporated into the new agreements of SEIU Locals 280 and 399. Since the plan and indenture applied to unions affiliated with SEIU only, it was not incorporated into the agreement between defendants and Teamsters Local 495. Thus, defendants no longer made contributions to the Trust on behalf of former SEIU Local 193 members.

Shortly thereafter, the Trust received numerous requests for early retirement benefits from the Trust by former SEIU Local 193 members. Under the Pension Plan, a participating employee is entitled to request early retirement so that he may begin receiving monthly pension benefits before age sixty-five; § 8.01. Although bénefits are usually paid to fully-retired employees only, the plan recognizes that in certain situations it could be beneficial to all parties to have a retired employee return to work on a temporary basis. The Pension Plan therefore expressly authorizes the reemployment of a retired employee who is receiving pension benefits from the Trust; § 12.02. However, restrictions are placed on the right of a retired employee to return to work. Two such provisions of the Pension Plan are relevant here. First, the fact that a retired employee has returned to work is to be called to the attention of the Trust administrators immediately; § 12.02(b). Second, if a retired employee works for a participating employer for more than five hundred hours per year, he forfeits a certain percentage of pension benefits; § 12.02(c).

Because of the number of requests for early retirement benefits by former SEIU Local 193 members, the Trust administrators apparently suspected that many early retirement applicants were working for defendants as members of Teamsters Local 495. In order to enforce Pension Plan §§ 12.02(b) and 12.02(c), the Trust requested that defendants provide the employment records of all former SEIU Local 193 members who had taken early retirement, but who had returned to work for defendants as members of Teamsters Local 495.

The Trust’s request for information was based upon Trust Indenture § 5.12. That section provides in part that “[t]he Pension Plan Trustees may require of any Employer ... any reasonable information, data and documents relevant and suitable for the purposes of the administration of the Trust and Pension Plan.”

The defendants declined to provide the information.

II.

The Trust commenced this action in 1981. Pursuant to 29 U.S.C. § 1059(a)(1), the Trust seeks to compel defendants to produce the disputed employment records. It is important to note that this action seeks only the production of records and information. It does not seek to cancel or forfeit any pension benefits, although the Trust might attempt such actions after receiving the information which it seeks here. Defendants filed various counterclaims.

In 1983, the parties filed cross-motions for summary judgment with respect to the second amended complaint and the defendants’ counterclaims. In 1984, Judge Robert P. Aguilar granted the Trust’s motion for summary judgment on the defendants’ counterclaims, and denied defendants’ motion for summary judgment. Following Judge Aguilar’s order, discovery was completed. The parties now cross move for summary judgment on the complaint and contend that no genuine issues of material fact remain.

III.

A.

In cases involving collective bargaining agreements and trust agreements, standard rules of contract interpretation are not necessarily applicable. Harm v. Bay Area Pipe Trades Pension Plan Trust Fund, 701 F.2d 1301, 1304 (9th Cir. 1983). Instead, a court must usually confine its analysis to the written terms of such agreements. See Kemmis v. McGoldrick, 706 F.2d 993, 996 (9th Cir.1983). Since construction of collective bargaining agreements and trust agreements generally involve questions of law, Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc., 698 F.2d 802, 805 (6th Cir.1983), cert, granted, — U.S. —, 104 S.Ct. 3531, 82 L.Ed.2d 837 (1984), summary judgment is often appropriate.

B.

The right of the Trust to obtain information is defined in section 5.12 of the Trust Indenture. That section in part authorizes the Trustees to “require of any Employer ... any reasonable information, data and documents relevant and suitable for the purposes of the administration of the Trust and Pension Plan.”

Defendants are “Employers” within the meaning of the Pension Plan and Trust Indenture. And the stated objective of the trust in seeking the information is to determine whether certain trust beneficiaries are entitled to their claimed early retirement benefits under section 12.02 of the plan.

The actions of the Trust are therefore prima facie for a valid purpose “of the administration of the Trust and Pension Plan,” and are consistent with the purposes and policies of ERISA.

C.

Defendants oppose the Trusts’ request for information on several grounds.

Defendants’ underlying argument is that this action is really harassment by SEIU and the Trust with respect to the former members of its Local 193 who are now members of the Teamsters Union, and is part of the labor discord which began in 1979. Certain statements about that background are contained in the record. But the court must nevertheless enforce the rights and duties between the parties, even if this action is simply one battle in a larger war.

The court therefore now considers the specific arguments of defendants in opposition to the Trust’s attempt to enforce its rights and defendants’ duties.

1.

Defendants argue that they are not obliged to provide the information because the collective bargaining agreement with SEIU Local 193 expired in 1979. The Trust replies that the duty to provide the information survives the expiration of the collective bargaining agreement, because the information pertains to employees who were covered by the collective bargaining agreement before its expiration, and on whose behalf defendants made contributions into the Trust.

No court has addressed the issue of whether the duty to provide employment records for trust administration purposes survives the expiration of the collective bargaining agreement. However, courts have held that an arbitration clause in a collective bargaining agreement or trust agreement will be applied to pension benefit disputes which arise after the expiration of the particular agreement. Federated Metals Corp. v. United Steelworkers, 648 F.2d 856, 863 (3d Cir.), cert, denied, 454 U.S. 1031, 102 S.Ct. 567, 70 L.Ed.2d 474 (1981). See also Nolde Brothers, Inc. v. Bakery & Confectionery Workers, 430 U.S. 243, 97 S.Ct. 1067, 51 L.Ed.2d 300 (1977); International Union v. Defiance Industries, Inc., 251 F.Supp. 650 (N.D.Ohio 1966).

The policy underlying the survival of the arbitration procedures is the federal policy favoring arbitration as a method for resolving labor disputes. Federated Metals, 648 F.2d at 859. This court is of the opinion that the public policies which underlay Congress’ enactment of ERISA are equally valid bases for survival of the duty to provide relevant information to the Trust.

The disputed employment records in this case concern the rights of former SEIU Local 193 members to pension benefits. Since those rights arose under the collective bargaining agreement and under the terms of the Trust Indenture and Pension Plan, the reasoning of the arbitration cases should apply here. Defendants’ duty to provide information should not end upon the expiration of the collective bargaining agreement.

Defendants’ argument that the duty to provide information expired with the collective bargaining agreement is based upon Central States, Southeast and Southwest Areas Pension Fund v. CRST, Inc., 641 F.2d 616 (8th Cir.1981), overruled on other grounds, Robbins v. Prosser’s Moving and Storage Co., 700 F.2d 433 (8th Cir.1983) (en banc), and Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc., 698 F.2d 802 (6th Cir.1983), cert, granted, — U.S. —, 104 S.Ct. 3531, 82 L.Ed.2d 837 (1984). However, those cases are distinguishable. There the pension funds sought records of employees who were never covered by the collective bargaining agreements. The employers had made no contributions to the funds on behalf of those employees, and the pension funds did not pay benefits to those employees. In the present case, the former SEIU Local 193 members were covered by the collective bargaining agreement, defendants did make contributions on their behalf, and the former SEIU Local 193 members sought early retirement and are currently receiving pension benefits from the Trust.

Further, the language of the present collective bargaining agreements between defendants and SEIU Locals 280 and 399 obligate defendants to produce the information concerning the former Local 193 members. As stated the Trust’s claim to the employment records is based upon Trust Indenture § 5.12 which provides that the Trustees may request information “of any Employer.” Under the Trust Indenture, the term “Employer” includes employers of members of any SEIU Locals who make payments into the Trust pursuant to any collective bargaining agreements between such employers and SEIU. Trust Indenture § 2.01(c). Defendants are still parties to collective bargaining agreements with SEIU Locals 280 and 399, and defendants contribute to the Trust on behalf of the members of those locals. Defendants are thus “Employers” within section 2.01(c) and the Trust has the right to seek information from them under section 5.12. Therefore, the current collective bargaining agreements between defendants and other SEIU locals oblige defendants to produce the employment records, even though the collective bargaining agreement with SEIU Local 193 has expired.

This position is supported by Smith v. CMTA-IAM Pension Trust, 654 F.2d 650 (9th Cir.1981). That decision was based upon an interpretation of the term “participating employer” in a pension plan. The Ninth Circuit concluded that the definition included any employer which contributed to the trust, even though the employer did not contribute to the trust on behalf of the claimant but did so on behalf of the other employees who were members of the union. Id. at-656.

2.

Defendants argue that the Trust’s request for the employment records is not reasonable, because the objective which the Trust is pursuing is not a permissible one under the language of the Pension Plan and Trust Indenture. This argument is based upon defendants’ interpretation of the language of the instruments.

Defendants correctly note that under section 5.12, the Trust can seek information only for purposes of administration of the Trust and Pension Plan. The Trust’s stated purpose is to enforce section 12.02(c). But, defendants argue, section 12.02(c) only applies to persons who are “employees” as defined in the trust instruments. Defendants then point to the definition of “Employee” in Trust Indenture § 2.01(d) as a person “who performs work covered by any of the Collective Bargaining Agreements and for whom the Employer is obligated to make payments to the Trust____” Defendants then correctly note that they are not now required to make payments to the Trust for former SEIU Local 193 employees. Defendants’ construction of the language is a possible interpretation of the trust instruments.

However, that interpretation conflicts with other equally valid interpretations. One is that the status of an “Employee” is determined as of the time when contributions are made on behalf of that employee to the Trust. Another is that the word “Employee” is capitalized in the definition and in some of the text. But it is not capitalized in the language of section 12.-02(c), and hence the term as used there might have a broader meaning than the capitalized definition. Defendants’ interpretation also appears to conflict with the definition of “Employer” noted above; that is an “Employer” includes one who is now contributing to the Trust under collective bargaining agreements with other SEIU Locals. Finally, the court notes that the language of section 12.02(c) refers to an “employee ... for participating Employers.” The definition of “participating Employer” includes these defendants.

In view of these interrelated definitions and provisions, the court believes that they should be interpreted to give effect to the purposes of ERISA and the trust agreements as a whole. The purposes of both are to protect the pension benefits of those individuals who are entitled to them. The objective of the Trust’s power under section 5.12 is to enable the Trustees to have adequate information to perform their fiduciary duties in collecting, administering, and paying out benefits. That would include seeing if benefits are being paid to persons who are not entitled to them. In light of these purposes and objectives of ERISA and the trust instruments, the court believes that the Trust’s interpretation is the more reasonable and that defendants’ narrower interpretation should be rejected.

3.

Defendants argue that the Trust’s rights should not be enforced here because the Trust has . “selectively enforced” the reporting provisions of section 5.12. The argument is apparently that such selective enforcement demonstrates that the Trust’s requests for the disputed employment records are arbitrary and capricious.

Defendants rely upon one case in support of this argument. In Winpisinger v. Aurora Corp., 456 F.Supp. 559 (N.D.Ohio 1978), the court held that the provision of a pension plan authorizing the cancellation of employees’ past service credits could not be selectively enforced. Id. at 568 n. 7. But that case is not applicable here. The Trust is not attempting to cancel any pension benefits in this case. It is seeking in this action only to obtain information for the purpose of making pension decisions. Since the Trust is here inquiring into the eligibility of a large group of former union members to receive early retirement benefits, it is highly questionable whether the holding in Winpisinger would apply even to an attempt by the Trust to cutoff pension benefits of former SEIU Local 193 members. Certainly, that holding does not apply to the present action, where the only relief sought is the production of employment records.

4.

Defendants finally argue that the Trust’s eventual enforcement of section 12.02(c) would be improper under ERISA. As noted above, and in Judge Aguilar’s earlier opinion, the actual enforcement of section 12.02(c) is not an issue in this case. The Trust does not here seek to cancel pension benefits, but only seeks information on which it will at some time in the future make its decisions regarding pension benefits.

The enforcement of section 12.02(c) will become an issue only if at some time in the future, the Trust determines that certain pension benefits should be terminated. That would then become a dispute primarily between the Trust and certain of its beneficiaries. This court expresses no opinion on the law or on the possible outcome of such later proceedings.

IV.

Under 29 U.S.C. § 1132(g) this court may in its discretion allow reasonable attorneys’ fees and costs to either party. The factors for an award of attorneys’ fees have been defined by the Ninth Circuit in Hummell v. Rykoff & Co., 634 F.2d 446 (9th Cir.1980). Those factors include: the degree of culpability or bad faith of any party; the ability of the respective parties to satisfy an award of fees; whether an award of fees would deter others from acting in similar circumstances; whether the requesting parties sought to benefit all the beneficiaries or resolve a significant legal question regarding ERISA; and the relative merits of the parties’ positions. Id. at 453.

Applying those standards, the court awards to plaintiff its reasonable attorneys’ fees in defending defendants’ counterclaims, which were resolved against' defendants as a matter of law by Judge Aguilar. The opinion of Judge Aguilar does not directly discuss the issue of attorneys’ fees, but the reasoning stated there shows that the above factors were met.

The court exercises its discretion not to award attorneys’ fees to plaintiff for the prosecution of the main action. While this court does grant summary judgment to plaintiff, the language of the Pension. Plan and Trust Indenture which defined the parties’ rights and duties is convoluted and perhaps conflicting. Any degree of culpability in the somewhat dilatory prosecution of this action appears to be equally divided. And because of the peculiar nature of the underlying facts (that is, employees claiming pension benefits while going back to work for the same employers under the auspices of another union), the court does not feel that an award of fees would deter any acts contrary to the purposes of ERISA. Finally, it cannot yet be determined whether the Trust’s obtaining the information will ultimately benefit the participants and beneficiaries of the plan.

V.

IT IS ORDERED, ADJUDGED AND DECREED AS FOLLOWS:

1. Plaintiff’s motion for summary judgment is granted, and defendants’ motion for summary judgment is denied.

2. Summary judgment shall be entered for plaintiff and against defendants on plaintiff’s complaint.

3. Summary judgment shall be entered in favor of plaintiff and against defendants on defendants’ cross complaint, pursuant to the opinion of Judge Aguilar.

4. Plaintiff will submit to this court within ten (10) days, and simultaneously serve upon defendants, a proposed form of judgment which encompasses this decision and the decision of Judge Aguilar.

5. If the parties are not able to agree upon a reasonable attorneys’ fee for plaintiff as awarded in this opinion, plaintiff may notice a motion for the determination of such fees.

6. Costs of suit are awarded to plaintiff.