author: LONGOBARDI, District Judge.

text:
    Richard CARTER, Plaintiff, v. THREE UNKNOWN POLICE OFFICERS OF the WILMINGTON POLICE DEPARTMENT, et al., Defendants.
    Civ. A. No. 81-228 LON.
    United States District Court, D. Delaware.
    Oct. 4, 1985.

      Richard Carter, pro se plaintiff.
    Roger A. Akin, of Sawyer & Akin, Wilmington, Del., for defendants Three Unknown Police Officers and City of Wilmington.
   OPINION

LONGOBARDI, District Judge.

Plaintiff Richard Carter brought this action under 42 U.S.C. § 1983 seeking declaratory and injunctive relief and monetary damages. The Defendants are the City of Wilmington, Delaware and three members of the Wilmington Police Department as well as an officer of the Delaware County, Pennsylvania, Investigation Division. Judge Latchum previously granted summary judgment for Defendants on Plaintiff’s claims for declaratory and injunctive relief. Docket Item (“D.I.”) 47. Currently before the Court are cross-motions for summary judgment filed by Carter and the Wilmington Defendants on Carter’s claim for monetary damages.

BACKGROUND

The police activities which led to Plaintiff’s complaint were related to the investigation into the murder of Clarence Humphrey Womack. On February 17, 1981, Chester, Pennsylvania police found Wom-ack’s body in a van parked on a street in Chester. On February 18, 1981, Carter entered Levy's Pawn Shop in Wilmington, Delaware and attempted to sell forty-one gold rings. The manager suspected that the rings might have been stolen and he called the Wilmington police. Officers Martin P. Hageman and George J. Crowley, two of the Defendants in this action, responded to the manager’s call. They informed Carter that they had come because the owner suspected the rings were stolen and they began to question Carter about his identity and reasons for being in Wilmington. Carter told the officers that he was from Pennsylvania and that he had come to Wilmington to sell the rings because the price of gold was higher in Wilmington. The officers then asked Carter where he obtained the rings and he answered that he purchased some of them from customers at a fast food restaurant at which he was employed.

Officers Hageman and Crowley were not satisfied with Carter’s answers and they informed him that he would be detained pursuant to 11 Del. C. § 1902. Section 1902 permits a police officer to “stop any person ... who he has reasonable ground to suspect is committing, has committed or is about to commit a crime____” If the person fails to identify himself or explain his actions to the satisfaction of the police officer, he may be further detained for up to two hours.

Carter was taken to Wilmington police headquarters where he was told his Miranda rights and informed that he was suspected of attempting to sell stolen goods. Carter had given Hageman and Crowley two pieces of identification, one of which was a bank card which showed an address in Chester. Detective James Kelly of the Wilmington Police Department, the third Wilmington Defendant in this action, called the Chester Police Department and was informed that Carter was wanted by the Chester police in connection with a homicide investigation. In response to Kelly’s phone call, Detective Daniel Iacona of the Chester Police Department and Detective Randolph Martin of Delaware County, Pennsylvania came to Wilmington police headquarters with Womack’s widow and her brother. Mrs. Womack recognized the rings which Carter had attempted to sell as having been the property of her husband. Carter then told police that he had purchased the rings from Womack. He was arrested by the Wilmington police for possession of stolen property.

At the time of his arrest, Carter was staying at the Radisson Hotel in Wilmington. Carter told police that he had to check out of the hotel by one o’clock. He was then taken by Kelly and Martin to the Radisson to check out and pick up his belongings. Carter was again told his Miranda rights and informed that any additional evidence found in the room would be used against him. The parties disagree about whether Carter consented to the search of his hotel room. The Defendants claim that Carter told them he had nothing to hide and that they were free to search his hotel room. D.I. 134, p. 12. Carter says that he told the officers he had nothing to hide but he denies consenting to the search. Deposition of Richard Carter, D.I. 125, pp. 44-45.

Kelly and Martin then searched Carter’s hotel room. They found a hypodermic syringe, possession of which is a violation of 16 Del.C. § 4757, and two small vials containing a light amber liquid. Here again, the parties differ as to what transpired. Kelly claims that he suspected that the vials contained drugs and that a field test of the vials indicated they contained methamphetamine, the possession of which is criminal under Delaware law. Formal laboratory tests later revealed that the vials did not contain any controlled substance. D.I. 134-A, p. A-45.

Carter’s version of the events is somewhat different. He contends that after the hypodermic syringe was found the officers offered to throw it away if Carter agreed to go back to Chester voluntarily. Carter Deposition, D.I. 125, p. 46. When he refused, Carter asserts that the officers fraudulently claimed that the vials contained a controlled substance when they knew that the vials contained musk oil. Carter maintains that the Defendants brought the drug charges in bad faith to coerce him into going back to Chester.

Carter was charged by the Delaware authorities with possession of methamphetamine, possession of a hypodermic syringe and receipt of stolen property and he was held for twelve days at the Delaware Correctional Center before being released on bail. Carter was indicted on the hypodermic syringe and stolen property charges. D.I. 134-A, p. A-44. The methamphetamine charges were dropped when the laboratory tests revealed that the vials seized from Carter did not contain a controlled substance.

Subsequently, Carter was arrested in Pennsylvania and charged with the murder of Clarence Womack. The Delaware authorities entered a nolle prosequi on the Delaware charges because of Carter’s arrest on far more serious charges in Pennsylvania. D.I. 134-A, p. A-46.

Following a preliminary hearing, Carter was held for trial in Pennsylvania on charges of murder, robbery, theft by receipt of stolen property and related charges. D.I. 134-A, p. A-12. Prior to trial, Carter moved to suppress all evidence arising out of his Delaware detention and arrest. The motion was denied by Judge Levy of the Pennsylvania Court of Common Pleas. Commw. v. Carter, No. 5904-81 (Ct. of C.P. of Delaware County, April 15, 1982).

At a jury trial, Carter was acquitted of murder and robbery but convicted of receipt of stolen property and was sentenced to jail. He then moved for reconsideration of his sentence claiming, inter alia, that the court erred in not suppressing the evidence obtained from his Delaware detention and arrest. Judge Levy denied the motion for reconsideration. Commw. v. Carter, No. 5904-81 (Ct. of C.P. of Delaware County, March 18, 1983).

In his opinion Judge Levy considered the validity of Carter’s arrest under both Delaware law and the United States Constitution. Judge Levy found that the officers had reasonable grounds to suspect that Carter was involved in criminal activity based on the statement by the pawn shop owner that the rings may have been stolen, the officers’ observations that the rings were all new, Carter’s inability to explain possession of so many rings and the conflict between Carter’s statement that he lived in Philadelphia and the Chester address on his identification card. Judge Levy concluded that Carter’s initial detention satisfied the requirements of 11 Del. C. § 1902 and was, therefore, valid under Delaware law.

Judge Levy then discussed Carter’s contention that even if his initial detention was valid under section 1902, section 1902 was unconstitutional. He noted that the Supreme Court’s decision in Dunaway v. New York, 442 U.S. 200, 99 S.Ct. 2248, 60 L.Ed.2d 824 (1979), raised serious doubt about the constitutionality of statutes such as section 1902 which authorize detention based on suspicion not amounting to probable cause. However, Judge Levy found it unnecessary to rule on the constitutionality of section 1902 since he held that the police had probable cause to arrest Carter based on the factors enumerated above. Therefore, even if the initial detention of Carter is viewed as a full arrest, there was no constitutional violation. On appeal, the Pennsylvania Superior Court affirmed. Commonwealth v. Carter, Pa.Super., 479 A.2d 1095 (1984). The Pennsylvania Supreme Court denied Carter’s petition for review.

In this action under 42 U.S.C. § 1983, Plaintiff claims that the Wilmington Defendants violated his constitutional rights by illegally detaining and arresting him, illegally searching his hotel room, fabricating a charge of illegal possession of a controlled substance and falsely imprisoning him for twelve days at the Delaware Correctional Center. The Court will consider the motions for summary judgment with regard to each of these claims asserted against the three Wilmington police officers. The Court will then consider separately the liability of the City of Wilmington for these alleged constitutional violations.

DETENTION, ARREST AND IMPRISONMENT OF CARTER BY DELAWARE AUTHORITIES

Plaintiff attacks the legality of his detention and arrest by the Defendants on two grounds. First, he asserts that the Delaware statute which authorized his initial detention, 11 Del.C. § 1902, is unconstitutionally vague and also violates his fourth amendment rights. Second, he contends that the detention actually constituted an illegal arrest because it was without a warrant and was not supported by probable cause.

Defendants have moved for summary judgment responding that Plaintiff may not argue that his detention and arrest were unsupported by probable cause since that issue has already been litigated and decided against him by a Pennsylvania court. Defendants cite Allen v. McCurry, 449 U.S. 90, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980), in support of their position that this Court must give preclusive effect to the State court decision that probable cause did exist to arrest Carter.

In Allen, plaintiff (McCurry), after being convicted of heroin and assault offenses in State court, brought a damages suit under 42 U.S.C. § 1983 against the police officers who had arrested him. McCurry asserted that the officers had conducted an illegal search and seizure in conjunction with his arrest. The Supreme Court held that collateral estoppel does apply in section 1983 cases and that a prior State court decision that the search and seizure was valid would bar McCurry from reasserting the issue in federal court. See, Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 104 S.Ct. 892, 897, 79 L.Ed.2d 56 (1984). The explicit basis for issue preclusion is the Constitution’s Full Faith and Credit Clause as implemented by the Federal Full Faith and Credit Statute.

The Allen court also provided a test against which questions of issue preclusion are to be judged by federal courts: “Congress has specifically required all federal courts to give preclusive effect to state court judgments whenever the courts of the State from which the judgments emerged would do so. . . .” Allen, 449 U.S. at 96, 101 S.Ct. at 415 (emphasis added). See, Migra, 104 S.Ct. at 897. [“Allen therefore made clear that issues actually litigated in a state court proceeding are entitled to the same preclusive effect in a subsequent federal § 1983 suit as they enjoy in the courts of the State where the judgment was rendered.”]

Allen does control this case. As a result, this Court must give preclusive effect to the Pennsylvania court probable cause determination if it is found that the decision would have such effect under Pennsylvania law.

The Pennsylvania Supreme Court has established that four conditions must be met in order to properly preclude relitigation of an issue in a subsequent action (collateral estoppel) under State law:

1) the issue decided in the prior adjudication was identical with the one presented in the later action, 2) there was a final judgment on the merits, 3) the party against whom the plea is asserted was a party or in privity with a party to the prior adjudication, and 4) the party against whom it is asserted has had a full and fair opportunity to litigate the issue in question in a prior action.

Safeguard Mutual Insurance Company v. Williams, 463 Pa. 567, 345 A.2d 664, 668 (1975).

It appears evident that all four Williams’ conditions are satisfied in the present case. First, the material issue in the prior adjudication and the present one are identical. In the prior adjudication, Pennsylvania Court of Common Pleas Judge Levy held that probable cause did exist to permit Carter’s detention and arrest. Commw. v. Carter, No. 5904-81 at 7 (Ct. of C.P. of Delaware County, March 18, 1983). In the present case, Carter bases his section 1983 claim on his allegation that the Defendants lacked probable cause to arrest him. Plaintiff’s Complaint, D.I. 2, p. 2. Second, there was a final judgment on the merits. In the initial criminal matter, the probable cause issue was decided in the denial of Carter’s motion to suppress evidence based on his allegation of an illegal arrest. “[T]hat the parties were fully heard, that the court supported its decision with a reasoned opinion, that the decision was subject to appeal or was in fact reviewed on appeal, are factors supporting the conclusion that the decision is final for the purposes of preclusion.” Restatement (Second) of Judgments, § 13, Comment g (1982); see, United States ex rel Di Giangiemo v. Regan, 528 F.2d 1262 (2d Cir. 1975), cert. denied, 426 U.S. 950, 96 S.Ct. 3172, 49 L.Ed.2d 1187 (1976) [where the court found an Order on a suppression motion to be a “final judgment” for purposes of issue preclusion. Id. at 1265]. Third, the party against whom issue preclusion is sought is identical in both eases, that is, Carter. Fourth, Plaintiff did have a full and fair opportunity to litigate the issue of probable cause in the Pennsylvania courts. The issue was dealt with at three different levels of judicial scrutiny during the criminal proceeding in Pennsylvania. It was adversely decided against the Plaintiff at the pretrial motion to suppress, Commw. v. Carter, No. 5904-81 at 7-10 (Ct. of C.P. of Delaware County, April 15, 1982), at the post-trial objections, Commw. v. Carter, No. 5904-81 at 6 (Ct. of C.P. of Delaware County, March 18, 1983), and on appeal Commonwealth v. Carter, 479 A.2d 1095.

Allen did recognize, however, an exception to the issue preclusion based on state court rulings. In England v. Medical Examiners, 375 U.S. 411, 84 S.Ct. 461, 11 L.Ed.2d 440 (1964), a group of chiropractors brought an action in federal court challenging the constitutionality of the Louisiana Medical Practice Act. Since there was some question as to whether the Act actually applied to chiropractors, the federal court abstained to allow the state courts an opportunity to interpret it. In the proceeding before the state court, the chiropractors argued that the statute was unconstitutional and that the statute did not apply to them. They explicitly reserved the right to return to federal court if the state courts decided against them on the constitutional issue.

The Louisiana state courts held that the Act applied to chiropractors and that, as so applied, it did not violate the United States Constitution. The chiropractors then attempted to return to federal court but the district court dismissed the action on the grounds that the state courts had already ruled on the constitutional claim. The Supreme Court reversed holding that the district court should have considered the chiropractors’ constitutional claim.

Allen interpreted England as applying only to a situation in which the plaintiff had originally sought a hearing in a federal court but had been unable to obtain a hearing because that court had decided to abstain. In such circumstances, “a plaintiff who properly reserved the federal issue by informing the state courts of his intention to return to federal court, if necessary, was not precluded from litigating the federal question in federal court.” Allen, 449 U.S. at 101, n. 17, 101 S.Ct. at 418, n. 17.

In response to this Court’s inquiry as to whether the England exception was applicable, Carter submitted the transcript of the suppression hearing before Judge Levy. That transcript contains no mention of the federal court proceeding in Delaware nor is there any indication that Plaintiff informed Judge Levy that he reserved the right to return to federal court if necessary. Thus, the England exception is inapplicable here.

Even if Plaintiff had reserved the right to return to federal court, this case is distinguishable from England. In this case, Judge Latchum abstained for a time to allow the Delaware courts to conclude their proceedings. This Court never abstained because of the Pennsylvania criminal proceedings which proceeded to their conclusion independently of this action. Also, in this case, the Court did not abstain in order to allow a state court to rule on an issue of state law but stayed the case to avoid disrupting the Delaware criminal proceeding. In contrast, in England, the district court abstained to allow the Louisiana state courts to resolve issues of state law. In such a case, “[a]bstention may serve only to postpone, rather than to abdicate jurisdiction.” Allen, 449 U.S. at 101, n. 17, 101 S.Ct. at 418, n. 17. Here, however, there is no reason not to give the state court ruling collateral estoppel effect.

Carter’s next argument to avoid the preclusive effect of the Pennsylvania court decision is that the Pennsylvania court lacked jurisdiction to rule on the constitutionality of a Delaware statute. Even if there were any merit to this contention, it would not help Carter because Judge Levy did not, in fact, rule on the constitutionality of section 1902. Instead, he ruled that the police had probable cause to make a full arrest and thus had no need to rely on the “reasonable suspicion” standard of section 1902.

Finally, Carter contends that Judge Levy’s ruling on probable cause was erroneous. Such a contention misconstrues the nature of the federal system. This Court does not have the authority to review the correctness of state court rulings on constitutional law. The Supreme Court has repeatedly reaffirmed that state court judges are as capable and as qualified as federal judges to decide constitutional issues. Allen, 449 U.S. at 105, 101 S.Ct. at 420; Stone v. Powell, 428 U.S. 465, 493-94, n. 35, 96 S.Ct. 3037, 3052, n. 35, 49 L.Ed.2d 1067 (1976). Further, under the principle of collateral estoppel, even an incorrect determination of probable cause would be binding on this court. United States ex rel. Hickey v. Jeffes, 571 F.2d 762 (3d Cir. 1978). Defendants’ motion for summary judgment on Carter’s claims arising out of his detention and arrest will, therefore, be granted.

Carter’s claim that his twelve day detention in prison in Delaware was unconstitutional is based on his claim that his arrest was unconstitutional. Since the Court has concluded that Carter is collaterally es-topped from challenging the validity of his arrest, he is also precluded from seeking damages for his subsequent imprisonment. Defendants’ motion for summary judgment will also be granted with respect to Carter’s claims arising out of his imprisonment in Delaware.

SEARCH OF CARTER’S HOTEL ROOM

Carter contends that the Defendants violated the fourth amendment when they searched his hotel room at the Radisson. Defendants have moved for summary judgment on the grounds that Carter consented to a search of his room and that, even if he did not consent, a warrantless search could be justified as an inventory search.

Defendants’ contention that Carter consented to the search is contradicted by Carter who denies ever giving his consent. These opposing contentions create a disputed issue of fact which cannot be resolved on a summary judgment motion.

In support of their contention that a war-rantless search of Carter’s hotel room was justified, Defendants cite United States v. Lipscomb, 435 F.2d 795 (5th Cir.1970). In Lipscomb, the police took into custody two individuals, Robert Lipscomb and Charlene Deering, who were sharing a hotel room. At Deering’s request, the police took the couple’s personal belongings from the hotel room to the police station for safekeeping. There, the police inventoried the personal effects. The Fifth Circuit held that evidence discovered in the course of this inventory was admissible against Lipscomb. The court found that the police were not attempting to obtain additional evidence against the couple but were simply following standard police procedure for the safekeeping of their possessions. The Court also found that there was no evidence that the inventory was a pretext for a search for incriminating evidence. Accordingly, the warrantless search was upheld as reasonable.

In this case, however, Defendants have not established that the search was solely for inventory purposes. In particular, Detective Kelly’s testimony on this point at the suppression hearing before Judge Levy is ambiguous at best. Transcript, p. 59. Since there remain disputed factual issues, the motion for summary judgment on this claim must be denied.

METHAMPHETAMINE CHARGES LODGED AGAINST CARTER

Carter contends that the officers fabricated the drug charges against him in an attempt to coerce him to go back to Chester voluntarily. Carter has moved for summary judgment based on the undisputed fact that the vial seized from his room did not contain methamphetamine or any other controlled substance.

Defendants contend that they conducted a field test on the vial which indicated that it contained methamphetamine. They then brought the drug charges against Carter in the good faith and reasonable belief that they had found a controlled substance in his room. When more precise laboratory testing determined that no controlled substance was present, the charges were dropped. Under this version of events, there could be no violation of Carter’s constitutional rights. Since disputed factual issues remain, Carter’s motion for summary judgment on this claim must be denied.

GOOD FAITH IMMUNITY

Defendants contend that even if some of their activities violated the constitution, they are entitled to the qualified good faith immunity applied to state officials who must exercise discretion in the performance of their duties. In Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 2738, 73 L.Ed.2d 396 (1982), the Court held that such officials are immune from suit provided that their actions satisfy a test of “objective reasonableness.” The test is whether their conduct violates “clearly established statutory or constitutional rights of which a reasonable person would have known.” Id.

Carter’s allegations that the officers invented the methamphetamine charge in an effort to force him to go back to Chester would clearly negate the good-faith immunity defense. A more difficult question arises with respect to the search of Carter’s hotel room. Even if the officers strayed beyond the boundaries of an inventory search, they may be entitled to a good-faith immunity defense if they did not violate a clearly established constitutional right. Unfortunately, the record does not indicate what procedures the Wilmington Police Department follows when goods must be secured nor does it show whether the officers, in fact, prepared an inventory of the goods. Defendants’ motion for summary judgment on this ground must be denied but may be renewed after development of a more ample record.

LIABILITY OF THE CITY OF WILMINGTON

Carter has named the City of Wilmington as a Defendant in this action, apparently based on the activities of its employees, the Defendant police officers. It is well established that an employer cannot be held liable under section 1983 based on a theory of respondeat superior. Monell v. Department of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978). In order to maintain this action against the City, Carter must present evidence that the allegedly unconstitutional activities of the police officers were pursuant to a “policy statement, ordinance, regulation or decision officially adopted and promulgated by [the City’s] officers.” Id. at 690, 98 S.Ct. at 2036.

The City has moved for summary judgment on the ground that Carter has not presented any evidence that the officers’ activities were connected in any way with official policy. Carter has not responded to this contention nor is there any evidence in the record that would support a cause of action against the City. The City of Wilmington’s motion for summary judgment is, therefore, granted with respect to all claims.

CONCLUSION

Plaintiff’s motion for summary judgment is denied. The motion for summary judgment by the City of Wilmington is granted with respect to all claims. The motion for summary judgment by the Defendant Police Officers is granted with respect to Plaintiff’s claims arising out of his detention, arrest and imprisonment and denied with respect to Plaintiff’s claims arising out of the search of his hotel room and the methamphetamine charges filed against him.

      . The officers testified that Carter told them he was from Philadelphia. D.I. 134, p. 10. Carter claims he told the officers that he was from Chester. D.I. 136, p. 9.

      . Detective Iacona was originally named as a Defendant in this action but later settled with Carter and was dismissed from the case.

      . Officer Martin was served as a Defendant in this action but has not responded in any way.

      . This Court adopts the formulations of collateral estoppel and res judicata as set forth by the Supreme Court in Migra v. Warren City School Dist. Bd. of Educ., 104 S.Ct. 892, 894 n. 1 (1983). Collateral estoppel is issue preclusion and "refers to the effect of a judgment in foreclosing relitigation of a matter that has been litigated." Id.; Restatement (Second) of Judgments § 27 (1982). Res judicata, as the term has recently been applied by the Court, is "virtually synonymous with ‘claim preclusion.’ ’’ Id. Therefore, res judicata refers "to the preclusive effect of a judgment in foreclosing relitigation of matters that should have been raised in an earlier suit." Id.

      . “Full Faith and Credit shall be given in each State to the public Acts, Records, and Judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.” U.S. Const., Art. IV, § 1.

      . "Such Acts, records and judicial proceedings or copies thereof, so authenticated, shall have the same full faith and credit in every court within the United States and its Territories and Possessions as they have by law or usage in the courts of such State, Territory or Possession from which they are taken.” 28 U.S.C. § 1738 [excerpt of pertinent part].


source: Caselaw Access Project

author: BUA, District Judge.

license: Public Domain

text:
    Joseph ONESTI, Anna Onesti, and J. Onesti & Sons, Inc., an Illinois corporation, Plaintiffs, v. Thomson McKinnon securities, INC., Richard M. Harris and Touche Ross & Co., Defendants.
    No. 85 C 4375.
    United States District Court, N.D. Illinois, E.D.
    Oct. 7, 1985.

      Edward A. Berman, Jerome J. Roberts, Kathleen C. White, Berman, Roberts & Kelly, Chicago, 111., for plaintiffs.
    James E. Beckley, Richard S. Schultz, James E. Beckley & Associates, Chicago, 111., for defendants Thomson McKinnon and Richard M. Harris.
    Francis J. Higgins, John W. Rotunno, Thomas L. Fink, Bell, Boyd & Lloyd, Chicago, 111., for defendant Touche Ross.
   MEMORANDUM ORDER

BUA, District Judge.

Before the Court is defendants’ motion to dismiss plaintiffs’ complaint for compensatory damages. Plaintiffs allege numerous theories of recovery, including violations of the Racketeer Influenced and Corrupt Organization Act (“RICO”), 18 U.S.C. § 1962(c); the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (the 1934 Act); the Securities Act of 1933 (the 1933 Act), 15 U.S.C. § 77q(a); and the Illinois Consumer Fraud and Deceptive Practices Act, I2IV2 Ill.Rev.Stat. § 262 (1985). Plaintiffs also allege common law fraud and breach of fiduciary duty.

This Court’s jurisdiction is based on 28 U.S.C. § 1331, 18 U.S.C. § 1964, 15 U.S.C. § 77v, 15 U.S.C. § 78aa, and on principles of pendent jurisdiction. For the reasons stated herein, the Court denies defendants’ motion to dismiss in part. The Court, however, grants defendant Touche Ross’ motion to dismiss Count VI, grants TMS’ motion to dismiss TMS from Count I, and grants defendants TMS and Harris’ motion to dismiss Count IV.

FACTS

The following facts are alleged in plaintiffs’ complaint. For purposes of this order they are considered to be true.

Plaintiffs desired to invest in low-risk investments. On July 13, 1982, plaintiffs entered into an investment contract with defendant Thomson McKinnon Securities, Inc. (“TMS”), allowing TMS to invest plaintiffs’ money pursuant to TMS’ recommendations. TMS and co-defendant Harris, a TMS employee, recommended that plaintiffs invest substantial sums in stocks and a limited partnership. Plaintiffs acquiesced in defendants’ investment recommendations and allowed defendants to purchase stock and to make other investments for plaintiffs’ account beginning in July 1982.

During the course of managing plaintiffs’ accounts, TMS and Harris charged excessive commission fees. In addition, they materially misrepresented stock investments as suitable to plaintiffs’ inves-tive goals and objectives when they were not. TMS and Harris also recommended investments without adequately investigating the tax consequences to plaintiffs. Along these lines, defendant Touche Ross wrongfully conveyed tax information that induced plaintiffs to accept TMS and Harris’ investment recommendations. Plaintiffs apparently sustained losses and this litigation ensued.

Count I of the complaint alleges a § 1962(c) RICO violation. Counts II and III set forth securities fraud violations of § 10(b) of the 1934 Act and § 17(a) of the 1933 Act. Count IV alleges common law fraud, while Counts V and VI allege breach of fiduciary duty. Count VII pleads an action under the Illinois Consumer Fraud and Deceptive Business Practices Act.

DISCUSSION

I. Touche Ross’ Motion to Dismiss for Lack of Subject Matter Jurisdiction

Touche Ross is named only in the breach of fiduciary duty allegations in Count VI. Since Count VI lacks an independent basis for original federal jurisdiction, Touche Ross is joined as a pendent party defendant. Touche Ross therefore moves to dismiss plaintiffs’ complaint for lack of subject matter jurisdiction.

A pendent party defendant is not a party to a jurisdictionally sufficient main claim, but is only a party to a related state law claim. The Supreme Court has never expressly acknowledged the legitimacy of pendent party jurisdiction. Knudsen v. D.C.B., Inc., 592 F.Supp. 1232, 1235 (N.D.Ill.1984). In the Seventh Circuit, such jurisdiction has been generally met with disfavor. Thomas v. Shelton, 740 F.2d 478, 487 (7th Cir.1984). However, pendent party jurisdiction is not dead. A few opinions have approved pendent party jurisdiction, see Moore v. The Marketplace Restaurant, Inc., 754 F.2d 1336, 1353 (7th Cir.1985) (separate opinion by Posner, J.), suggesting that the exercise of such jurisdiction is within the trial court’s sound discretion. Musikiwamba v. ESSI, Inc., 760 F.2d 740, 754 (7th Cir.1985).

Courts allowing pendent party jurisdiction require the federal and state claims to arise from a common nucleus of operative facts such that a plaintiff would ordinarily be expected to try his claims in one judicial proceeding. Moore v. Marketplace Restaurant, Inc., 754 F.2d 1336, 1353 (7th Cir.1985). Moreover, the valid pendent claim must be based on the same facts as the main claim for the two claims to be considered part of a single case. Bernstein v. Lind-Waldock & Co., 738 F.2d 179, 187 (7th Cir.1984).

Plaintiffs’ claims against TMS and Harris and claim against Touche Ross are related, but the claims do not arise from a common nucleus of operative fact and cannot be considered part of the same case. TMS and Harris had a contractual relationship with plaintiffs, whereas Touche Ross did not. In addition, TMS and Harris repeatedly misrepresented the liquidity and suitability of numerous investments to plaintiffs’ known investment objectives. Touche Ross’ misrepresentation was limited to tax advice regarding a single investment given without knowledge of plaintiffs’ investment goals. Plaintiffs’ pendent party claim against Touche Ross should not be joined with plaintiffs’ other federal claims since pendent party jurisdiction is construed conservatively in recognition of the inroads it makes into the autonomy of state sovereignty. Accordingly, Touche Ross’ motion to dismiss is granted.

II. Motion to Dismiss Counts I Through V and Count VIIfor Failure to Plead Fraud with Particularity

Defendants Harris and TMS move to dismiss Counts I through V and Count VII of plaintiffs’ complaint for failure to plead fraud with particularity as required by Rule 9(b). Fed.R.Civ.P. 9(b). Rule 9(b) provides that “in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Generally, a complaint is considered sufficient when it sets forth the time, place, particular contents of the false representation, the identity of the party making the misrepresentation, and the consequences of the misrepresentation. Bennett v. Berg, 685 F.2d 1053, 1062 (8th Cir. 1982); Baselski v. Paine, Webber, Jackson & Curtis, 514 F.Supp. 535, 540 (N.D.Ill. 1981).

The specificity requirements of Rule 9(b) have been imposed to ensure that defendants have been apprised of the claimed fraud in a manner sufficient to permit adequate responsive pleadings. Felton v. Walston, 508 F.2d 577, 581 (2d Cir.1974). Nevertheless, Rule 9(b)’s more stringent requirements must be read in conjunction with Rule 8, which requires a short and plain statement of the claim. Tornera v. Galt, 511 F.2d 504, 508 (7th Cir.1975). The sufficiency of a pleading under these rules varies with the complexity of the transaction. When the transactions are numerous and take place over an extended period of time, less specificity is required. Baselski v. Paine, Webber, Jackson & Curtis, 514 F.Supp. 535, 540 (N.D.Ill.1981).

Defendants argue that the complaint is insufficient for a variety of reasons. First, they assert Counts I through III fail to allege the specific time and place where the representations were made. Second, they argue Counts II and III do not specify the content of the misrepresentation. Third, defendants maintain all counts fail to list the specific dollar amount of plaintiffs’ investment. Finally, defendants allege Count V fails to include any facts establishing a fiduciary relationship.

Counts I through V and Count VII sufficiently comport with the requirements of Rule 9(b). Plaintiffs cannot be expected to specify the exact time and particular place of each factual omission and misrepresentation. The complaint adequately specifies the transactions and the approximate time frame, the contents of the alleged misrepresentations and the essence of omitted information, and the identities of those involved. In addition, there is little purpose in requiring plaintiffs to expand the complaint by including the specific dollar amount of plaintiffs’ investments. Finally, a close review of paragraphs 5 through 23 of the complaint reveals that a fiduciary relationship is alleged since defendant Harris was plaintiffs’ stock broker and TMS contracted with plaintiffs as their investment brokerage house.

The complaint sets forth the time, place, and contents of the alleged false representations, as well as the names of the individuals who made them, and the damage caused by the misrepresentations and omissions. The averments describe the essential aspects of defendants’ allegedly fraudulent activity. For these reasons, defendants’ motion to dismiss Counts I through V and Count VII for failure to plead with particularity is denied.

III. Motion to Dismiss Counts I Through VII for Failure to State a Claim

The guidelines used in considering a motion to dismiss a complaint for failure to stae a claim are well defined. On a motion to dismiss, a complaint must be construed in the light most favorable to the plaintiff, the allegations thereof being taken as true. Mathers Fund, Inc. v. Colwell, 564 F.2d 780, 783 (7th Cir.1977). A complaint should not be dismissed unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim that would entitle him to the requested relief. Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079,1081, 31 L.Ed.2d 263 (1972); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957).

a. RICO

TMS and Harris argue that plaintiffs’ § 1962 RICO claims in Count I should be dismissed for several reasons. First, TMS asserts that the § 1962(c) claim against it should be dismissed because the complaint alleges TMS is both the “enterprise” and the “person” conducting the racketeering activity. Second, Harris maintains that the § 1962(c) claim against him must be dismissed since the complaint fails to specifically identify Harris. Last, TMS and Harris assert that the § 1962(d) claim against them must be dismissed if the § 1962(c) claims are dismissed.

To properly allege a § 1962(c) violation, a plaintiff must allege that the defendant was employed by an enterprise engaged in interstate commerce, and that the defendant conducted the enterprise’s affairs through a pattern of racketeering activity. Haroco v. American National Bank and Trust Company of Chicago, 747 F.2d 384, 387 (7th Cir.1984). The “enterprise” and the “person” conducting the racketeering activity must be distinct entities. Id. at 402. Because plaintiffs allege TMS is both the enterprise and the person conducting the racketeering activity, these allegations are defective. Accordingly, plaintiffs’ § 1962(c) against TMS must be dismissed.

Harris argues that the § 1962(c) claim against him should be dismissed because the complaint fails to specifically identify Harris. The Court rejects Harris’ argument. Construing the complaint in the light most favorable to the plaintiff, the Court easily finds that plaintiffs’ reference to “defendants” in Count I sufficiently identifies Harris.

Finally, defendants maintain plaintiffs’ § 1962(d) RICO claim must be dismissed if the § 1962(c) claims are dismissed. The Court rejects this argument for two reasons. First, the § 1962(c) claim against Harris has not been dismissed. Second, the conspiracy to commit a RICO violation is a distinct violation from the performance of the actual racketeering activity. A conspiracy claim stands on its own merit and does not fail because another claim is dismissed.

Accordingly, only TMS’ motion to dismiss it from the § 1962(c) claim is granted,

b. § 17(a) of the Securities Act

Defendants argue that Count III should be dismissed because a private right of action does not exist under § 17(a) of the 1933 Act. Whether § 17(a) can be enforced by private damage suits is an open question in this circuit. Teamsters Local 282 Pension Trust Fund v. Angelos, 762 F.2d 522, 530 (7th Cir.1985). The Second and Ninth Circuits, however, have found such a right of action does exist. See Stephenson v. Calpine Conifers II, Ltd., 652 F.2d 808 (9th Cir.1981); Kirshner v. United States, 603 F.2d 234 (2nd Cir.1978).

This Court finds the Second and Ninth Circuits’ opinions persuasive in light of the minimal differences between § 17(a) of the 1933 Act and § 10(b) of the 1934 Act and the undisputed existence of a private right of action under § 10(b). Moreover, the Seventh Circuit’s dicta in Teamsters Local 282 Pension Trust Fund v. Angelos, 762 F.2d 522, 531 (7th Cir.1985), and Peoria Union Stock Yards Co. v. Penn Mutual Life Insurance Company, 698 F.2d 320, 323-24 (7th Cir.1983), lead this Court to believe that the Seventh Circuit would follow this Court if it addressed this issue. For these reasons, defendants’ motion to dismiss Count III is denied.

c. Failure to Allege Scienter

Defendants argue that Counts II through IV must be dismissed because plaintiffs fail to allege “scienter” in each of the counts. Count II alleges a violation of § 10(b) of the Securities Exchange Act; Count III alleges a violation of § 17(a)(2) of the Securities Act, and Count IV alleges common law fraud. Whether a scienter allegation is required differs with each count.

In Count II, plaintiffs’ § 10(b) claim is required to allege scienter: an intent to deceive, manipulate, or defraud plaintiffs. The Court finds that scienter is alleged.

Defendants’ argument need not be addressed since they admit that the complaint alleges scienter (memo in support MTD brief at 10).

In Count III, however, plaintiffs’ § 17(a)(2) claim is not required to allege scienter. Aaron v. Securities Exchange Commission, 446 U.S. 680, 100 S.Ct. 1945, 64 L.Ed.2d 611 (1979). In Aaron, the Supreme Court distinguished between § 17(a)(1) and § 17(a)(2). The Court held that § 17(a)(2) does not have a scienter requirement whereas § 17(a)(1) does. Id. at 697, 100 S.Ct. at 1956. In this Court, plaintiffs allege a § 17(a)(2) violation and therefore were not required to allege scienter.

In Count IV, plaintiffs’ fraud claim is required to allege that defendants knew or believed the representations to be false. Soules v. General Motors Corporation, 79 I11.2d 282, 284, 37 Ill.Dec. 597, 599, 402 N.E.2d 599, 601 (1980). Plaintiffs’ conclusory statement that “the aforesaid conduct of each of the defendants constitutes common law fraud” inadequately alleges defendants knew or believed the representations to be false.

Accordingly, defendants’ motion to dismiss Count II for failure to allege scienter is granted. Defendants’ motion to dismiss Counts III and IV are denied.

d. Common Law Fraud

TMS and Harris argue that the fraud claims in Count V must be dismissed since they are predicated on defendants’ failure to accurately predict future events. Defendants’ argument might have been persuasive if plaintiffs based their claims merely on inaccurate predictions. Plaintiffs’ complaint, however, actually alleges defendants fraudulently represented the liquidity of certain tax shelter investments and recommended purchasing investments without investigating the tax consequences of those purchases upon plaintiffs. Plaintiffs’ claim states a cause of action because they allege fraud claims based upon misrepresentation of current investment opportunities.

e. Illinois Consumer Fraud and Deceptive Practices Act

Count VII is said to be defective because the Illinois Consumer Fraud and Deceptive Practices Act (ICFDPA), Ill.Rev. Stat. ch. 121V2, § 262, et seq. (1985), does not apply to securities fraud claims because securities are not considered merchandise under the ICFDPA.

The Illinois Supreme Court has held that an action under the ICFDPA may only be brought by consumers who have purchased merchandise. Section 1(b) of the ICFDPA defines merchandise as including “any objects, wares, goods, commodities, intangibles ----” Defendants’ assertion that securities are not merchandise is unpersuasive in light of the Illinois Appellate Court’s decision in People ex rel. Scott v. Cardet International, Inc., 24 Ill.App.3d 740, 321 N.E.2d 386 (1974), defining securities as “intangible” goods. In Scott, the court defined “intangibles” as “property which has no intrinsic value but which is representative or evidence of value, such as certificates of stocks, bonds, promissory notes, and franchises.” Id. at 744, 321 N.E.2d at 390. Applying the facts before this Court, plaintiffs’ purchase of stocks is merchandise under the ICFDPA and therefore ICFDPA applies. Consequently, defendants’ motion to dismiss is denied.

CONCLUSION

Defendants’ motions to dismiss various counts of plaintiffs’ seven-count complaint is denied in part and granted in part. First, Touche Ross’ motion to dismiss Count VI for lack of subject matter jurisdiction over plaintiffs’ pendent party claim is granted. Second, TMS’ motion to dismiss plaintiffs’ § 1962(c) RICO claim in Count I is granted because the complaint alleged TMS was both the “enterprise” and the “person” conducting the racketeering activity. Third, TMS and Harris’ motion to dismiss Count IV is granted because the complaint failed to allege defendants Harris and TMS defrauded plaintiffs with knowledge or belief that their representations were false. The dismissal of Counts I and IV are without prejudice.

IT IS SO ORDERED.


author: HAROLD H. GREENE, District Judge.

text:
    Timothy C. SAWYER, Plaintiff, v. BP OIL, INC., Defendant.
    Civ. A. No. 85-2944.
    United States District Court, District of Columbia.
    Oct. 7, 1985.
    William R. Scanlin, Anderson, Quinn, Wyland, Yost & Scanlin, Washington, D.C., for plaintiff.
    Jeffrey A. Dunn, Gary M. Hnath, Vena-ble, Baetjer, Howard & Civiletti, Washington, D.C., for defendant.
   MEMORANDUM ORDER

HAROLD H. GREENE, District Judge.

Plaintiff Timothy Sawyer brought this action seeking injunctive and declaratory relief against the defendant, BP Oil, Inc., pursuant to the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. § 2801 et seq. The general issue before the Court is whether defendant BP Oil fully complied with the requirements of the PMPA when it failed to renew plaintiff’s franchise. More specifically, this case presents the question of whether a prior notice of termination is invalidated by a promise by a franchisor to allow a franchisee to continue to operate a service station while negotiations for sale of the lease are ongoing between them.

I

On May 3, 1982, plaintiff and defendant entered into a Dealer License Agreement, authorizing plaintiff to operate a gasoline service station at 1448 U Street as a franchised BP dealer. The Agreement provided that the franchise would expire on May 31, 1985.

On May 29, 1985, defendant notified plaintiff by certified mail of its decision not to renew the Agreement because the company had decided to close and sell its interest in the U Street gas station. The notice informed plaintiff that his franchise would terminate on August 31, 1985.

Approximately one month later, on July 1, 1985, BP Oil sent a letter to plaintiff offering to sell him its interest in the U Street property for $375,000. The letter gave plaintiff 60 days to accept the offer and execute a formal agreement. On August 21, 1985, almost six weeks later and a little over a week before the August 31 franchise expiration date, plaintiff responded to BP Oil’s offer with a $200,000 counteroffer which BP Oil promptly rejected by a letter dated August 28. The letter also notified plaintiff that the expiration of his franchise would become effective on August 31, 1985, pursuant to BP’s May 29 notice of intent not to renew, and that BP Oil intended to close the U Street gas station on September 20, 1985.

In the only disputed fact in this case, plaintiff claims that during the course of the negotiations for BP’s interest in the leasehold, the company agreed to extend the dealer licensing agreement indefinitely. Defendant denies that it agreed to any such extension, acknowledging, however, that it informed plaintiff’s attorney that it would not close the station until the conclusion of the negotiations in the event that they extended past August 31.

On September 18, 1985, two days before defendant was scheduled to close the U Street station, plaintiff filed this action, seeking a temporary restraining order and a preliminary injunction against such closure. Following an agreement by the parties to maintain the status quo pending a decision on the case, the Court agreed to disregard the request for a temporary restraining order and to decide the case as a motion for preliminary injunction.

II

As indicated, plaintiff brings this action pursuant to the Petroleum Marketing Practices Act, 15 U.S.C. § 2801 et seq. Section 2805(b)(2) of Title 15 provides that, in actions brought by franchisees alleging violations of the Act:

... the court shall grant a preliminary injunction if
(A) the franchisee shows
(i) the franchise of which he is a party has been terminated or the franchise relationship of which he is a party has not been renewed; and
(ii) there exists sufficiently serious questions going to the merits to make such questions a fair ground for litigation; and
(B) the court determines that, on balance, the hardships imposed upon the franchisor by the issuance of such preliminary injunctive relief will be less than the hardship which would be imposed upon such franchisee if such preliminary injunctive relief were not granted.

With this standard at hand, the Court turns to an examination of the substantive statutory provisions at issue here and an analysis of the plaintiffs claims in light of those provisions.

The PMPA was enacted to equalize to a degree the disparity in bargaining power between large petroleum companies and individual service station operators in the negotiation and maintenance of franchising agreements. See S.Rep. No. 95-731, 95th Cong., 2d Sess. 17-18, U.S.Code Cong. & Admin.News 1978, pp. 873, 875-877; 123 Cong.Rec. 10383, 10387 (1977). In striking a balance between the conflicting interests of franchisers and franchisees, Congress sought to protect franchisees from arbitrary and discriminatory termination of their franchises while allowing franchisors to effect legitimately terminations of franchises based upon changed conditions or a failure of the franchisee to carry out his contractual obligations. S.Rep. No. 95-731, 95th Cong., 2d Sess. 19.

To implement this balance, the PMPA places a number of restrictions on the ability of franchisors to terminate or fail to renew a franchise, imposing both substantive and procedural safeguards for the protection of franchisees. The franchisor may terminate a franchise only through strict compliance with the PMPA requirements. See Escobar v. Mobile Oil Corp., 678 F.2d 398, 400 (2d Cir.1982).

Thus, in order effectively to terminate its franchise with plaintiff in compliance with the PMPA, BP first had to terminate or to fail to renew the franchising agreement on one of the grounds enumerated in the statute. Next, BP had to notify plaintiff in a specified manner of its intent to terminate or to fail to renew the franchise at least 90 days before the date the termination or nonrenewal becomes effective. Finally, where, as here, the grounds for termination or nonrenewal was the franchisor’s intent to sell its interest in the franchise, it had to make a bona fide offer to sell its interest to plaintiff within the 90 day notice period.

The heart of the plaintiff’s claim is that BP Oil failed to comply with the notice requirement of the Act. BP did issue a 90 day notice of intent to terminate, as required by section 2804, in the letter BP sent to plaintiff on May 29, informing him of its intent to terminate his lease as of August 31. However, according to plaintiff, that notice was voided when the company allegedly promised to extend the franchise indefinitely during the course of the negotiations for the sale of the U Street property. Consequently, plaintiff argues, he is entitled to a second 90 day notice before BP may terminate his franchise.

Plaintiff does not claim that the notice BP issued was defective in any other way, and he does not dispute BP’s compliance with all of the Act’s other prerequisites, such as that there were proper grounds for the termination. See 15 U.S.C. § 2802. There is every indication the materials submitted to the Court, in fact, that defendant has complied in full with every requirement the Act imposes upon a franchisor to accomplish a proper termination. Thus, unless the plaintiff is able to establish that the negotiations between the parties for the sale of the leasehold and BP’s alleged agreement to extend the franchise did in fact void the May 29 notice, BP is clearly entitled to terminate the franchise and to close the service station. See Escobar v. Mobile Oil Corp., 678 F.2d 398, 400 (2d Cir.1982).

At the center of this legal issue is the factual question of whether any new agreement was ever made and, if it did, what kind of agreement was made. Plaintiff claims that during the course of the negotiations for the sale of the U Street lease, BP assured plaintiff’s representative in the negotiations, James Trimm, that BP would extend plaintiff’s franchise “indefinitely.” As support for this assertion, he provides only his own affidavit, although he was not present when BP representatives allegedly made this promise.

BP, Inc., denies ever agreeing to extend the franchise indefinitely, claiming that its intent has always been to leave the franchising business at the U Street site and to sell its interest in the property. Defendant does acknowledge that it promised plaintiff’s attorney, James Trimm, that BP would not close the station until the conclusion of the negotiations between plaintiff and defendant, in the event the negotiations continued past the August 31 closing date, and it offers the affidavits of the two BP officials who actually negotiated with plaintiff’s attorney in support of the more limited promise.

Even ignoring the technical evidentiary problems of plaintiff’s affidavit, the great weight of the evidence submitted to the Court clearly points to the conclusion that, while there was some agreement, it was only an agreement not to close the station pending negotiations. This conclusion is supported not only by the sworn statements of the two individuals directly involved in the negotiations, but also circumstantially, by defendant’s negotiations both with plaintiff and with other parties to sell the property. Given this purpose to sell, it is highly improbable that BP would have agreed to continue the franchise at all, much less indefinitely. On the other hand, given the proximity of the negotiations to the August 31 expiration date, it is probable that plaintiff and defendant made provision only as to what would happen to the U Street station should the negotiations continue past the termination date.

Ill

On this basis, the Court finds that the parties agreed merely not to close the station pending negotiations. What needs to be resolved next is the issue as to whether such an agreement invalidates the otherwise effective notice of termination BP issued on May 29. The PMPA clearly grants franchisees the right to a 90 day notice period, subject to a franchisor’s right to a shorter period under certain circumstances. 15 U.S.C. § 2804(a); Pugh v. Mobile Oil Corp., 533 F.Supp. 169, 175-65 (S.D. Tex.1982). In giving the franchise a 90 day notice period, the PMPA grants to the franchisee time to preserve the franchise or to wind up his affairs. See California Petroleum District v. Chevron U.S.A., Inc., 589 F.Supp. 282, 285 (E.D.N.Y.1984). The Act is silent, however, on the question whether a valid notice can subsequently become invalidated by circumstances such as those presented by this case.

Plaintiff supports his claim that BP’s pri- or notice is invalid by citing Ferriola v. Gulf Oil Corp., 496 F.Supp. 158 (E.D.Pa. 1980). In that case, the court held that, where a franchisor and franchisee enter into negotiations for renewal of a franchise after the franchise has expired and then reach an impasse in negotiations, the franchisee is entitled to a 90 day notice before the franchise may be terminated. But Fer-riola is no help to plaintiff here simply because the franchisor in that case had never given the franchisee any valid notice of intent to terminate. In fact, the franchisor there clearly intended to continue the franchise but was unable to reach an agreement on the conditions of renewal with the franchisee. Consequently, the franchisee had not yet had the benefit of a 90 day period to wind up his affairs or to try and preserve the franchise through some other method. Here, plaintiff had the benefit of a valid 90 day notice period and knew all along that BP intended to sell the station.

Not only does there not appear to be any other precedential support for the proposition that a deferral of a closing date pending negotiations invalidates prior valid notice, but the statute, in fact, clearly contemplates in section 2802(b)(3)(D)(iii)(I) that negotiations such as those which took place here — i.e., negotiations for the sale of the property — will occur during the 90 day notice period and that they do not invalidate the notice. The Act nowhere provides or implies that such negotiations or an agreement to suspend closure pending negotiations would in any way invalidate the notice period. Indeed, an invalidation consequence would defeat the very purpose of the bona fide offer provision because it would discourage franchisors from negotiating actively to sell their interests or, at the least, it would discourage negotiations beyond the 90 day period. This type of disincentive would, of course, interfere with the ability of franchisees to buy franchises.

It is relevant also that, while the broader purpose of the Act is to protect franchisees from arbitrary and discriminatory termination, BP’s actions in this case have not been of such character. Plaintiff does not challenge defendant’s reasons for terminating the franchise or the bona fide quality of its offer to sell the station for $325,000. In addition, while the Court recognizes the disadvantaged position a small service station operator such as plaintiff vis-a-vis a large corporation such as BP Oil, the PMPA is designed to rectify that disadvantage and restore a fairer balance between the two parties. But under the balance struck by the Act, the franchisor has a right not to renew a franchise if it complies with the requirements of the Act in so doing. See Roberts v. Amoco Oil Co., 740 F.2d 602, 606 (8th Cir.1984); Bellmore v. Mobile Oil Corp., 524 F.Supp. 850 (D.Conn. 1981).

It follows from what has been said that even under the relaxed standard for issuing injunctive relief pursuant to section 2805(b)(2) of the PMPA, the Court must deny plaintiffs motion.

IV

Plaintiff has not shown the existence of a sufficiently serious question going to the merits so as to provide a fair ground for litigation. Furthermore, although it is undisputed that the plaintiffs franchise has not been renewed, thereby satisfying the first requirement for relief, it is not even clear that plaintiff could prevail on the third requirement, balance of hardships, even if the Court did find a sufficient question on the merits. Plaintiffs successful purchase of the Rhode Island Avenue station establishes that his operation of the U Street station is not his sole livelihood. See Cantrell v. Exxon Co., U.S.A., 574 F.Supp. 313 (M.D.Tex. 1983). In the meantime, the defendant would bear the daily operating loss of the station during an additional 90 day notice period, and more importantly, would be hampered in its current effort to sell the leasehold interest to a third party. If plaintiff had been able to establish, or even to adduce credible evidence, that he had some hopeful prospect of negotiating the sale with BP during any additional notice period, the result might conceivably be different. In the absence of such evidence, any additional notice period creates no more than pointless delay and unnecessary expense to the defendant.

For the reasons stated above, it is this 7th day of October, 1985

ORDERED that plaintiffs request for a preliminary injunction be and it is hereby denied; and it is further

ORDERED that this action be and it is hereby dismissed.

      . BP Oil is holding the U Street property on a long term lease. See Mui Affidavit, p. 2 and Exhibit 2.

      . The letter explained that BP’s decision was based upon its location in a high-crime district and its proximity to Maryland with its lower gasoline taxes. See Morris Affidavit, Exhibit B.

      . The notice of intent not to renew was sent pursuant to a provision of the PMPA, 15 U.S.C. § 2804(a), which requires a franchiser to give franchisees at least 90 days notice before terminating a franchising agreement, along with a statement of reasons for the termination.

      . BP’s offer was in compliance with section 28-02(b)(3)(D)(iii)(I) of the PMPA, infra note 9. This provision requires all franchisors electing not to renew franchise agreements because they intend to sell their interest in the franchise to make a bona fide offer to sell the property first to the franchisee.

      . The expiration of the 60 days, which would have occurred on or around August 30, roughly coincided with the effective date for the termination of the franchise on August 31.

      . Plaintiff also operates another one of defendant’s stations, located on New Hampshire Avenue, N.W. When defendant notified plaintiff of its intent to sell the U Street station, and terminate his franchise, it likewise notified him of its intent to sell the New Hampshire Avenue station and terminate his franchise there as well. BP also offered to sell its interest in the New Hampshire station to plaintiff at the beginning of July. Plaintiff and defendant reached an agreement on a purchase price in mid-August, and plaintiff will presumably continue to operate the BP New Hampshire Avenue station.

      . For example, the Act limits both the grounds on which a termination or nonrenewal may be accomplished, and it establishes a strict notice requirement which must be complied with before a franchisor can effect a termination. See 15 U.S.C. § 2802 et seq.

      . As a further protection for the franchisee, the PMPA places the burden of proving compliance with the statute on the franchisor. 15 U.S.C. § 2805(c); see Lasko v. Consumers Petroleum of Connecticut, Inc., 547 F.Supp. 211, 221-22 (D.Conn.1981).

      . Section 2802(b)(3)(D)(iii)(I) provides;
      (3) For purposes of this subsection, the following are grounds for nonrenewal of a franchise relationship:
      * * * * it it

      (D) In the case of any franchise entered into prior to June 19, 1978 (the unexpired term of which, on such date, is 3 years or longer) and, in the case of any franchise entered into or renewed on or after such date (the term of which was 3 years or longer, or with respect to which the franchisee was offered a term of 3 years or longer), a determination made by the franchisor in good faith and in the normal course of business, if—
      (i) such determination is — •
      (I) to convert the leased marketing premises to a use other than the sale or distribution of motor fuel, ...

      . The Act also requires the notice to contain a statement of reasons for the nonrenewal and that it be given in a specified manner. See section 2804(a)-(c). BP apparently complied with the notice provision in all these respects.

      . BP’s stated reason for termination to close and sell the station because of its location, see supra note 2, appears on its face to be a permissible ground for nonrenewal pursuant to 15 U.S.C. § 2802(b)(3)(D). See supra note 9.

      . Defendant has moved to strike this portion of plaintiffs affidavit as inadmissible hearsay. If the Court completely disregarded the affidavit on this ground, it would have to dismiss the lawsuit without further consideration. Because of the Court’s resolution of the factual dispute about the agreement, it will not rule on the defendant’s motion and will assume for present purposes that the affidavit is admissible.

      . See supra note 12.

      . BP claims that it is currently involved in negotiations for the sale of its leasehold interest with third parties, including but not limited to McDonald's Corporation. Mui Affidavit, at 6.

      . Although not relevant to this case, 15 U.S.C. § 2804(b)(1) does provide an exception to the 90 day notice requirement for "circumstances in which it would not be reasonable for the franchisor to furnish notification" 90 days in advance.

      . See note 4, supra.

      . The legislative history of the Act establishes that Congress did not intend to provide the maximum protection possible to franchisees without regard to the legitimate interests of franchisors. In the committee report, the Senate Committee members wrote:
      Legislation in this subject area requires recognition of the legitimate needs of a franchisor to be able to terminate a franchise or not renew a franchise relationship based upon certain actions of the franchisee, including certain failures to comply with contractual obligations or upon certain changes in circumstances. Particularly important is that legislation dealing with this subject recognize the importance of providing adequate flexibility so that franchisors may initiate changes in their marketing activities to respond to changing market conditions and consumer preferences.
      S.Rep. No. 95-731, 95th Cong., 2d Sess., at 19; see also, 123 Cong.Rec. 10383, 95th Cong., 2d Sess.

      . See page 4, supra.

      . See supra note 6.


author: BECHTLE, District Judge.

text:
    COMMONWEALTH OF PENNSYLVANIA and Ronald Williams, et al. v. LOCAL 542, INTERNATIONAL UNION OF OPERATING ENGINEERS, et al.
    Civ. A. No. 71-2698.
    United States District Court, E.D. Pennsylvania.
    Oct. 9, 1985.

      Harold I. Goodman, Philadelphia, Pa., for Raymond Williams, et al.
    Edward D. Foy, Jr., Richboro, Pa., for Local Union 542.
    Thomas J. McGoldrick, King of Prussia, Pa., for JATC.
   MEMORANDUM

BECHTLE, District Judge.

Following a hearing held on July 30, 1985, this court ordered that the “Judgment and Decree” originally issued by this court on November 7, 1979, as revised on August 12, 1983 (Post Decree Order # 73), which was to expire on August 31, 1985, be extended for two years. After a review of the Special Master’s Report, and the exhibits and arguments propounded by the parties, the court finds it necessary to make certain modifications to the Judgment and Decree.

I. FACTS

The facts of this prolonged litigation have previously been articulated by this court. See Commonwealth of Pennsylvania v. Local 542, 569 F.Supp. 582, 583-86 (E.D.Pa.1983). A brief summary of the facts, however, is in order.

This action was instituted on November 8, 1971, by 12 black men and the Commonwealth of Pennsylvania. It challenged a pattern and practice of racial discrimination against minorities, as a class, by Local 542, International Union of Operating Engineers (“Local 542” or the “Union”), the Joint Apprenticeship Training and Safety Committee (“JATC”), and the contractors and contractor associations that entered into collective bargaining agreements with Local 542.

On January 2, 1979, the court issued its decision that minorities, as a class, had been victims of intentional racial discrimination by Local 542 and the JATC by the denial to minorities of equal treatment in entry to the Union and to minority members of the Union in obtaining referrals to jobs, in violation of Title VII, 42 U.S.C. § 2000e et seq. and 42 U.S.C. § 1981. Commonwealth of Pennsylvania v. Local Union 542, 469 F.Supp. 329 (E.D.Pa.1978) (liability opinion), aff'd as to Local 542, 648 F.2d 922 (3d Cir.1981). The court also held that the contractor associations and contractors were liable under 42 U.S.C. § 1981 because of their contractual relationship to the Union hiring hall. Id. The court’s finding of vicarious liability on the part of the contractor associations and contractors was reversed by the United States Supreme Court. General Building Contractors Association, Inc. v. Pennsylvania, 458 U.S. 375, 102 S.Ct. 3141, 73 L.Ed.2d 835 (1982).

On November 7, 1979, the court issued an injunction, called a “Judgment and Decree” (the “Decree”), which prohibited any further discrimination by Local 542 and the JATC. That injunction also set specific minority goals, spread over five years, to bring about racial integration in the operating engineers trade and equal employment opportunities for those minorities who are or wish to become members or affiliates of Local 542 and the JATC. Commonwealth of Pennsylvania v. Local Union 542, 502 F.Supp. 7 (E.D.Pa.1979). The hour and wage percentage goals for the five-year duration of the Decree were as follows:

1st 2nd 3rd 4th 5th year year year year year
District 1 12 14 % 16 % 18 % 18 %
District 2 1.1% 1.8% 1.3% 1.3% 1.3%
District 3 .5 .7 % .7% .7% .7%
District 4 2 % 2.6% 2.8% 2.8% 2.8%
District 5 8 7o 10 % 12 % 12.4% 12.4%

Following a series of hearings in March, April and May 1985, before the Special Master, a report was submitted to the court by the Master concerning Local 542’s compliance with the Decree during years 4 and 5, and making recommendations concerning extending the Decree. Having thoroughly reviewed the Master’s report and having had a hearing and heard argument from all parties on July 30, 1985, the court finds that the Masters’ findings are not clearly erroneous. That is to say, the court concludes that the Master heard and considered all of the evidence and arguments offered by the parties and made thoughtful, reasonable and proper findings of fact. The Master was totally justified in accepting the facts and figures in the plaintiff’s testimony and exhibits as being accurate and as a basis for recommendations to the court. The court accordingly accepts essentially what the Master states in his report, including the history of the case, recall features, statistical presentations, etc., and hereby adopts the following findings and conclusions:

II. FINDINGS AND CONCLUSIONS

1. There has been a serious shortfall in wages and hours for minorities required by the Decree in District 1 and District 5 for years four and five, to wit:

District 1 District 5
4th 5th* 4th 5th*
year year year year
Applicable Goal 18.0% 18,0 % 12.4% 12.4 %
Under Decree
Actual Minority % 12.1% 13.43% 8.0% 10.10%
* September 1984 — May 1985

This represents a total wage shortfall for the two districts in years four and five combined of approximately $4,101,727.00.

2. The wages and hours goals for years four and five could have been met.

3. In Post Decree Order # 78 the court ordered an increase in referrals of minorities to jobs in order to rectify an apparent inability to achieve the necessary hours and wages for minorities. Thereafter, minority referrals in District 1 were to be at the rate of 40 percent of all referrals to achieve the wages and hours goal for year five, that goal being 18 percent. Since the issuance of Post Decree Order # 78, however, the actual referrals to minorities has actually decreased to 26.5 percent in year 5 from 27.47 percent in year 4. There were, in fact, enough minority operators on the out-of-work list at the Union’s hiring hall available so that 40 percent of all referrals could have been to minorities. Had 40 percent of all referrals gone to minorities, there was at least a chance that the 18 percent of hours and wages could have been met.

4. The court finds that the employer recall provision found in the collective bargaining agreement has had, and will continue to have, a material adverse impact on the Union’s ability to meet the referral goals, and therefore the wages and hours goals of the Decree. In District 1, for example, in the period from July 30, 1984, through July 26, 1985, there was a total of only 27.06 percent minority referrals (i.e., dispatches and recalls) — well below the court mandated 40 percent. Employer recalls made up 53 percent of all referrals, the remaining 47 percent being hiring hall dispatches. Of all employer recalls, only 13.3 percent were to minorities. Consequently, the percentage of minority hiring hall dispatches (42.5%) was so adversely affected by the percentage of minority employer recalls (13.3%) that the sum total minority referrals was only 27.06 percent. In other words, without the employer recall feature, the Union would have met the court mandated 40 percent minority referrals for District 1. Clearly, the recall provision in the collective bargaining agreement is a major obstacle to the Union’s ability to meet the goals of the Decree, thereby encroaching into the minorities opportunity for hours worked to an unacceptable degree.

The power of this court to alter provisions in the collective bargaining agreement which effect the ability of the Union to comply with the Judgment and Decree was specifically upheld by the Supreme Court in this very case in General Building Contractors Association, Inc. v. Pennsylvania, 458 U.S. 375, 102 S.Ct. 3141, 73 L.Ed.2d 835 (1982). Justice Rehnquist clearly defined the district court’s remedial powers:

To the extent that the remedy properly imposed upon the Union and the JATC requires any adjustment in the collective bargaining contract between [the employers] and the Union, it is entirely appropriate for the District Court to fashion its injunctive remedy to so provide, and to have that remedy run against ... the Union and the JATC.

458 U.S. at 400,102 S.Ct. at 3155 (emphasis added).

In reference to the referral system in this very case, the Third Circuit recently stated:

Here, where the referral system itself was the mechanism for intentional discrimination, there is no bona fide seniority system, and therefore there are no legitimate expectations based on the referral system. Where a seniority system has been maintained with discriminatory intent, those individuals who gain seniority within the system are direct, intentional beneficiaries of the illegal discrimination; their “expectations are therefore illegitimate, and do not warrant protection.”

Commonwealth of Pennsylvania v. Local Union 542, 770 F.2d 1068, slip op. at 12-13 (3d Cir.1985) (emphasis added).

In light of this court’s finding that the employer recall provision of the collective bargaining agreement is an obstacle, from all vantage points, to compliance with the Judgment and Decree, and because the reasons given for the need of a ninety-day recall period are obscure and in any event substantially outweighed by the interference it poses to the court’s Decree, the ninety (90) day recall rule could be removed entirely, but for the time being will be reduced to thirty (30) days. Hereafter, an employer may only recall an employee laid off within the preceeding thirty (30) calendar days, notwithstanding any provision in any collective bargaining agreement to the contrary. The court anticipates that this will increase the percentage of total minority referrals. After a satisfactory period of time, the court will re-evaluate the affect the thirty (30) day employer recall rule is having on the Union’s ability to meet the goals of the Decree and, if necessary, make further adjustments to this provision of the collective bargaining agreement.

5. The union was given five years in which to prove to this court that it could operate the hiring hall in a non-discriminatory, fair and equitable manner. The court finds that the union has failed in this regard and to the contrary, has continued to use the hiring hall as a tool of discrimination, albeit at a reduced level, but discrimination nevertheless. For this reason, the court will appoint a full-time Hiring Hall Monitor, directly responsible to the Court, who will be given full authority to operate and oversee all features of the hiring hall. In accordance with Fed.R.Civ.P. 53, the compensation to be allowed to the Hiring Hall Monitor shall be fixed by the court and shall be paid by Local 542.

6. Paragraph 19(a) of the Judgment and Decree (as revised) provides:

Defendant Local 542 shall develop and present to the Court for approval valid, job-related criteria for admission to the union for each method of entry through which membership can be attained, including affiliation via the Registrant Program. Validation shall be, to the extent feasible, in accordance with the “Uniform Guidelines on Employee Selection Procedures” as promulgated by the Equal Employment Opportunity Commission on August 25, 1978, 43 Fed.Reg. No. 166, at 38290 et seq. The Plaintiffs shall have the opportunity to present their position on the legality and validity of any of these proposed criteria.

Paragraph 34 of the Judgment and Decree (as revised) provides, in pertinent part:

The Defendants shall develop, adopt and implement non-discriminatory and job-related standards for the positions of master and assistant master mechanics. Once developed, these standards shall be submitted to the Court for approval, with prior submission to Plaintiffs for their comments, or objections, if any.

Post Decree Order # 81, issued on September 27, 1984, ordered:

It is also ordered that defendants complete and submit to plaintiffs and the court, within thirty (30) days of the date of this Order, the remaining validation project with respect to each of the methods of entry into the union as well as any additional work to be completed on the master and assistant master mechanic validation report.

Local 542, in blatent and confrontational contempt of these court mandates, has failed to do any of the validation work required of it. This court no longer believes the union is willing to make, or to even try to make any measurable effort to develop a satisfactory validation plan. Consequently, the court concludes that the Union has forfeited its opportunity to develop and submit validation material of its own, and by the accompanying Order, will appoint Dr. Felix Lopez to enter upon and complete a validation plan, subject to the approval of this court. Dr. Lopez’s fees will be paid by the Union.

7. It is evident that Local 542 has not met many of the goals of the Judgment and Decree. Therefore, the court will hold defendants in contempt for failing to satisfy court mandates respecting work levels for minorities, as well as its failure to do the validation work. The Union’s performance cannot be excused because the figures show improvement. The degree of improvement is patently and substantially out of proportion to the levels of compliance that could have been achieved with the resources and experience, and time allowed by the court to perform. The Union’s efforts have been mediocre, lackluster and, in the Court’s view, calculated to show the minimum of change at the least cost to the Union’s continuous program of wearisome and intentional racial discrimination.

In accordance with the above, an appropriate Modification Decree will be entered.

MODIFICATION DECREE

I. Duration and Effective Date

1. The Judgment and Decree (as revised) is extended, in all five (5) districts, for two (2) years, beginning on September I, 1985. The provisions of this Modification Decree are effective immediately. The Judgment and Decree as modified by this Modification Decree shall terminate on August 31, 1987, unless, prior to that date, good cause is shown for an extension of any provisions of the Decree or for their earlier termination.

II. Goals

2. It shall be the goal of this Decree that the number of hours worked by minorities equal the percentages of the total hours worked in each district and in each year as set out below:

Year 6 (Sept. 1, 1985 Year 7 (Sept. 1, 1986
to to
Aug. 31, 1986) Aug. 31, 1987)
District 1 18 % 18 %
District 2 i.3 y< 1.3%
District 3 .7% .7%
District 4 2.8% 2.8%
District 5 12.4% 12.4%

III. Referrals

3. Post Decree Order # 78 is to remain in effect for the duration of the Decree, to wit, 40 percent of all referrals are to go to minorities in District 1, and 17 percent of all referrals are to go to minorities in District 5.

IV. Recall Provision

4. In light of the court’s finding that the employer recall provision in the collective bargaining agreement has had, and will continue to have, a material adverse impact on the Union’s ability to meet the goals of the Decree, the ninety (90) day recall rule found in the collective bargaining agreement will be reduced to thirty (30) days. An employer may only recall an employee laid off within the preceding thirty (30) calendar days, notwithstanding any provision in the collective bargaining agreement to the contrary, unless specifically authorized by the Hiring Hall Monitor.

V. Hiring Hall Monitor

5. Pursuant to Rule 53 of the Federal Rules of Civil Procedure, the court shall designate a full-time Hiring Hall Monitor, to be paid at Local 542’s expense, with full authority to operate and oversee all features of the hiring halls in the five districts.

6. The Hiring Hall Monitor, in addition to his primary authority to oversee all five districts, shall be responsible for running the day to day operations of the hiring hall in District 1, the district with the greatest number of minorities. The Hiring Hall Monitor is authorized to appoint hiring hall leaders to run the day to day operations in the hiring halls in the remaining four districts, all of whom are directly responsible to the Hiring Hall Monitor.

7. The Hiring Hall Monitor will have the authority to approve of or disapprove of all referrals, including hiring hall dispatches and employer recalls. The Hiring Hall Monitor’s authority to approve a recall request by an employer which extends beyond the thirty (30) day recall period set by this Decree, shall be limited to “truly extraordinary circumstances.”

8. The parties are to convene together with the Hiring Hall Monitor to identify with particularity what the court envisions to be a very few “truly extraordinary circumstances” which would justify such an exception to the thirty (30) day rule. The Hiring Hall Monitor is to submit these guidelines in writing to the court within ninety (90) days of the date of this Modification Decree.

9. The Hiring Hall Monitor shall submit to the Master bi-monthly reports with copies to counsel for all parties, setting forth sufficient information regarding referrals, including a breakdown of minority hiring hall dispatches and employer recalls for the previous two month period.

10. A separate Post Decree Order will be entered appointing the Hiring Hall Monitor, summarizing his/her qualifications for this position, and setting forth the compensation he/she is to be paid.

VI. Validation

11. In light of the court’s finding defendants in contempt of paragraphs 19(a) and 34 of the Judgment and Decree (as revised) and Post Decree Order # 81, pursuant to Fed.R.Civ.P. 53, the court hereby appoints, at defendants’ expense, Felix Manual Lopez, Ph.D., to enter upon and complete a validation plan with respect to each of the methods of entry into the Union as well as developing non-discriminatory, job-related standards for the positions of master and assistant master mechanics.

12. Dr. Lopez is to submit to the court within 60 days of the date of this Modification Decree, a proposed plan to enter upon and complete the validation plan.

13. Once the validation plan is developed it shall be submitted to the court for approval, with prior submission to both plaintiffs and defendants for their comments, or objections, if any.

14. A separate Post Decree Order will be entered summarizing Dr. Lopez’s qualifications for this position, and setting forth the compensation he is to be paid.

VII. The Role of the Master

15. In light of the court’s appointment of a Hiring Hall Monitor to oversee the day to day operations of the hiring hall referral system, the Master is directed to shift his emphasis to the Training and Upgrading Program. Nonetheless, the Master retains all authority given to him under the Judgment and Decree (as revised). To the extent the authority and duties of the Master and Hiring Hall Monitor overlap or conflict, they are authorized to mutually resolve such conflicts. A written explanation of such resolutions are to be forwarded to the court, with a copy sent to counsel for all parties.

VIII. Training and Upgrading Program

16. The court has received the Master’s report on the Training and Upgrading Program (“Program”) and has taken the Master’s recommendations under advisement. The court will issue a separate Post Decree Order modifying the Program if it finds it necessary to do so. In the interim, the Program is to continue unmodified for the duration of the Decree.

IX. Effect of Modification Decree on Judgment and Decree

17. All provisions of the Judgment and Decree (as revised) not inconsistent with this Modification Decree shall remain in force.

      . United States District Judge A. Leon Higgin-botham was the judge assigned to the case until December 7, 1979 when it was transferred to United States District Judge Louis C. Bechtle by reason of the elevation of Judge Higginbotham to the United States Court of Appeals for the Third Circuit.

        . The court’s liability opinion was actually filed on November 30, 1978, but was impounded until January 2, 1979 in hopes of maximizing the chances for settlement.

      . The Judgment and Decree was actually filed on August 8, 1979. In the hope of fostering a settlement, the court impounded the Judgment and Decree and didn’t release it until November 7, 1979. See Commonwealth of Pennsylvania v. Local Union 542, 488 F.Supp. 988 (E.D.Pa.1980), where the court explains the impoundment and settlement process and elucidates the purpose and basis of the August 8, 1979 Judgment and Decree. The Judgment and Decree was revised on August 12, 1983 (Post Decree Order #73), which has become the operative document in this action. All references to the Judgment and Decree in this opinion shall be to the revised Decree found in Post Decree Order # 73.

      . On March 25, 1980 Judge Louis C. Bechtle appointed, pursuant to Fed.R.Civ.P. 53, Frank W. Jenkins, Esquire, as Special Master for the purpose and for the reasons set forth in the Court’s Order of appointment.

      . It is essential to an understanding of this opinion that the special terms "referral", "dispatch” and "recall” be defined as they have been used and will be used in the context of this case. “Referrals" are composed of "dispatches” and "recalls.”
      A "dispatch” (also referred to as "hiring hall dispatch” for clarity and emphasis) is an internal feature of the hiring hall in which Union members are “dispatched" to prospective employers based solely on the Union member's position on the out-of-work list. Hiring hall dispatches are under the exclusive control of the Union.
      A "recall” (also referred to as “employer recall” for clarity and emphasis), on the other hand, is a feature of the employer/employee relationship as found in the collective bargaining agreement. The employer recall provision allows the employer to recall (but it must be through the Union hiring hall) any Union employee laid off within the preceeding ninety (90) calendar days. Because, at least on the surface, employer recalls are initiated by the employer, employer recalls are under the control of the employer, not the Union.
      In Post Decree Order #80 the court defined referral, for purposes of this Decree, as including:
      [A]ll [hiring hall] dispatches by the union members which result in offers of employment from an employer-contractor, regardless of whether the minority union member accepts the offer of employment. "Referral" does not include an unsuccessful [dispatch] attempt by the union to contact a minority union member regarding a possible employment. A[n] [employer] recall by a contractor-employer shall be considered a “referral” for purposes of this Decree.

      . There is not a direct correlation between the percentage of minority referrals and the percentage of minority wages and hours. Forty percent minority referrals will not result in 40 percent minority wages and hours. This is because of the nature of the work assigned, i.e., different durations of employment, skill qualifications, etc. The court has found that in District 1, for example, 40 percent minority referrals is necessary to meet the ultimate goal of 18 percent minority hours and wages. There is a similar pattern in the other districts.