source: Caselaw Access Project

author: VANARTSDALEN, District Judge.

license: Public Domain

text:
    COMPRO-FRINK COMPANY v. VALK MANUFACTURING COMPANY.
    Civ. A. No. 80-2748.
    United States District Court, E.D. Pennsylvania.
    Nov. 1, 1982.

      Eugene Chovanes, Jackson & Chovanes, Edward L. Jackson, Bala Cynwyd, Pa., for plaintiff.
    Stuart E. Beck, Trachtman, Jacobs & Beck, Philadelphia, Pa., for defendant.
   MEMORANDUM AND ORDER

VANARTSDALEN, District Judge.

Plaintiff and defendant are both manufacturers of heavy duty highway snow plowing equipment. Plaintiffs complaint charged defendant with patent infringement of two patents held by plaintiff involving the mechanical design and operation of snowplows. The complaint sought an injunction, an accounting, and monetary damages. Defendant filed an answer denying infringement and asserting the invalidity and unenforceability of the patents. Defendant also filed a counterclaim seeking declaration of invalidity and damages for misuse of the patent by wrongfully accusing defendant of infringements of the patents.

After extensive discovery, a full trial, nonjury, was held on the merits. By opinion and order dated June 15, 1982, I ruled that both patents were valid and enforceable, but that the snowplows manufactured by defendant did not infringe either patent. Consequently, final judgment was entered in favor of defendant on plaintiffs claim for damages and injunctive relief, and in favor of plaintiff on defendant’s counterclaim for declaratory relief. Thus neither party was a prevailing party as to the respective claim asserted by each party, but both were prevailing parties to the extent each was defending against the claim of the other. However, to the extent that the judgment decrees that the patents are valid and enforceable, arguably, at least, on the whole litigation, plaintiff, as holder of the patents is the prevailing party-

Subsequent to entry of the judgment, plaintiff filed a motion to amend the judgment. By stipulation of counsel that motion was withdrawn and no appeal from the entry of the final judgment has been taken.

Defendant has filed a bill of costs for a substantial sum. Costs have not been taxed by the Clerk of Court. Plaintiff filed a motion seeking a court order that neither party be awarded costs. Defendant opposes the motion, contending it is the prevailing party.

Federal Rule of Civil Procedure 54(d) provides, inter alia, that “costs shall be allowed as of course to the prevailing party unless the court otherwise directs.” This Circuit has held that the court has discretion in awarding costs. Copperweld Steel Co. v. Demag-Mannesmann-Bohler, 624 F.2d 7 (3d Cir.1980). Costs may be denied a prevailing party, which is largely a matter of discretion. Delaney v. Capone, 642 F.2d 57 (3d Cir.), cert. denied, 454 U.S. 828, 102 S.Ct. 120, 70 L.Ed.2d 103 (1981). When a district court determines that a prevailing party is not entitled to costs, an explanation should be entered on the record, because an articulation of the basis for the order is necessary for purposes of appellate review. Delaney, supra at 58; ADM Corp. v. Speedmaster Packaging Corp., 525 F.2d 662, 664-65 (3d Cir. 1975).

In ADM Corp., supra, also a patent infringement case, the court opined that denying costs to a prevailing party is in the nature of a penalty, as where the prevailing party has unduly extended or complicated resolution of the issues.

The problem in the present case, as previously noted, is in determining realistically who is the prevailing party. It would be impossible, from a practical point of view, to allow costs to each respective party only as to the defense against the other’s claim, because those costs, in most instances, are inseparable from the affirmative claim asserted by such party. Quite frequently, witnesses who appeared and testified presented testimony relevant to several issues in the case. The issue of infringement was related to interpretation of the scope of the patent claims, which in turn was related to patent validity. There has been no practical suggestion by the parties of any reasonable allocation on the basis of costs attributable to a successful defense as opposed to costs attributable to an unsuccessful claim.

As previously noted, arguably plaintiff was the prevailing party on the overall litigation. Plaintiff, however, seeks no costs. Defendant contends that at least as to the issue of infringement, it was the prevailing party and should be awarded costs. Because there is no way that costs could be fairly allocated on the basis of prevailing issues, rather than as to prevailing parties, neither party should be entitled to costs. It is clear that both parties gained something by the action, while at the same time being unsuccessful in establishing any wrongdoing on the part of the other. Defendant may continue to manufacture the accused snowplows; plaintiff has a judicial declaration of patent validity; neither was able to establish that the other was liable in damages.

In this case, regardless of who is the prevailing party, if either, to deny costs to both parties does not, as a practical matter impose a penalty on either party. Rule 54(d) speaks in terms of a “prevailing party.” In the context of this case, in practical effect, there was no prevailing party and no losing party. The litigation resulted in a tie. Neither is entitled to costs.


author: VINING, District Judge.

text:
    The COCA-COLA COMPANY, Plaintiff, v. The PROCTER & GAMBLE COMPANY, and Coca-Cola Bottling Mideast, Inc., Defendants.
    Civ. A. No. C82-2864A.
    United States District Court, N.D. Georgia, Atlanta Division.
    Jan. 7, 1983.
    On Motion to Amend and to Transfer Feb. 25, 1983.

      Frank C. Jones, King & Spalding, and David M. Rapp, Atlanta, Ga., for plaintiff.
    John J. Dalton, Troutman, Sanders, Lockerman & Ashmore, Kent E. Mast and James Gilbert, Hansell, Post, Brandon & Dorsey, Atlanta, Ga., for defendants.
   ORDER

VINING, District Judge.

This action for declaratory and injunctive relief was filed in the Superior Court of Fulton County on December 14, 1982. On that same date Judge Clarence Cooper signed a temporary restraining order, which basically restrained the defendants from taking any further steps to complete the acquisition of Coca-Cola Bottling Mideast, Inc., by the Procter & Gamble Company and further restrained Coca-Cola Bottling Mideast from disclosing any information pertaining to Coca-Cola bottling operations to Procter & Gamble. The case was removed to federal court on December 16, 1982. The complaint basically alleges that the proposed acquisition of Mideast by Procter & Gamble would result in a breach of the franchise agreement between Coca-Cola and Mideast, would violate implied contractual obligations of confidentiality, and would result in a breach of the fiduciary relationship of trust between Coca-Cola and Mideast; Coca-Cola further alleges that Procter & Gamble’s conduct in seeking to acquire Mideast constitutes a tortious interference with contract and also constitutes unfair competition.

Pending before the court are the defendants’ motions to dismiss for lack of personal jurisdiction and insufficiency of process or, in the alternative, to transfer because of improper venue. They have also moved to transfer or dismiss because of the failure to join indispensable parties.

I. FACTUAL BACKGROUND

On November 1, 1921, Mideast, through a predecessor corporation, entered into an agreement with Coca-Cola to bottle Coca-Cola in a defined area in Kentucky and Indiana. This “bottler’s contract” is perpetual, grants to Mideast an exclusive territory, and obligates Coca-Cola to supply Mideast’s total requirements of Coca-Cola bottle syrup at a price controlled by a formula in the contract, as amended. Paragraph 10 of that contract provides, “[N]either this contract nor any part of the territory herein described shall be assigned, transferred or conveyed, in whole or in part, without the written consent of ... The Coca-Cola Company.”

On November 14, 1982, Procter & Gamble announced that it had agreed to purchase the stock of Mideast. Coca-Cola’s consent to the transfer of that stock was neither sought nor obtained. Procter & Gamble acknowledged in its announcement that the purpose of the proposed purchase was to learn about the bottling and distribution of soft drinks by Mideast, thereby enabling Procter & Gamble to bottle and distribute its own brand of soft drinks more effectively.

The stock of Mideast is held in trust by the Liberty National Bank & Trust Company of Louisville, Kentucky, pursuant to a trust established by W.B. Terry, Sr., approximately seven years ago. The current income beneficiaries of the trust are the four sons of Mr. Terry, who, together with their father, are the only directors of Mideast.

Although the complaint in this action sought to enjoin the effectuation of the stock purchase agreement whereby Procter & Gamble would acquire the stock of Mideast, Coca-Cola in its brief in opposition to the defendants’ motions to dismiss or transfer states that the agreement between Procter & Gamble, Liberty National Bank, and Mr. Terry (as guarantor) “is not at issue in the present case, and [Coca-Cola] seeks no declaration with respect to the stock purchase agreement.” That brief further states, “It is the contract between Mideast and the [Coca-Cola] Company — the Bottler’s Contract — which is at issue and with respect to which a declaratory judgment is sought.”

Because the defendants’ motions address substantially the same issues, this order will treat the issues, not the motions, seriatim.

II. PERSONAL JURISDICTION

In a diversity case, a federal court may exercise personal jurisdiction over a non-resident defendant to the extent permitted by the Long Arm Statute of the forum. Goldkist, Inc. v. Baskin-Robbins Ice Cream Company, 623 F.2d 375 (5th Cir.1980). The Georgia Long Arm Statute, Off.Code of Ga.Ann. § 9-10-91, which has been held to be co-extensive with the Due Process Clause of the Fourteenth Amendment, Shellenberger v. Tanner, 138 Ga. App. 399, 227 S.E.2d 266 (1976), provides that a court in Georgia may exercise personal jurisdiction over any non-resident if that person:

(1) Transacts any business within this state;
(2) Commits a tortious act or omission within this state, except as to a cause of action for defamation of character arising from the act;
(3) Commits a tortious injury in this state caused by an act or omission outside the state if the tort-feasor regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in the state; or
(4) Owns, uses, or possesses any real property situated within this state.

Since subsection (1) applies only to matters in contract, not to those sounding in tort, Lutz v. Chrysler Corp., 691 F.2d 996 (11th Cir.1982), and since there is no contractual relationship between Coca-Cola and Procter & Gamble, there can be no assertion of personal jurisdiction over Procter & Gamble by virtue of this subsection. However, allegations of tortious interference with contract and of unfair competition are sufficient to invoke long arm jurisdiction under subsection (3) provided, however, that Procter & Gamble has sufficient minimum contacts with the state of Georgia to satisfy the Due Process Clause of the Fourteenth Amendment. See International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

The depositions taken thus far show that Procter & Gamble conducts its manufacturing, distributing, and selling business through subsidiaries. Of these subsidiaries, at least four actively conduct business in the state of Georgia: The Procter & Gamble Manufacturing Company, The Procter & Gamble Distributing Company, The Procter & Gamble Paper Products Company, and The Buckeye Cellulose Corporation. During the fiscal year ending June 30, 1982, Procter & Gamble, through its subsidiaries, derived revenues from sales to consumers in Georgia in excess of $190,000,000.

The court notes that there is an extremely close relationship between Procter & Gamble and its subsidiaries. There are five directors on the boards of each of the four named subsidiaries, and three of these directors sit on all four boards; four of the directors of Procter & Gamble Distributing also sit on the board of Procter & Gamble Paper Products. Additionally, serving on the board of Procter & Gamble are three of the directors of Procter & Gamble Distributing, four of the directors of Procter & Gamble Manufacturing, four of the directors of Procter & Gamble Paper Products, and three of the directors of Buckeye Cellulose. The president of Procter & Gamble is also the president of Procter & Gamble Distributing, Procter & Gamble Manufacturing, and Procter & Gamble Paper Products; all four subsidiaries and the parent corporation have the same secretary and treasurer. Every director of the four named subsidiaries serves as an officer of Procter & Gamble.

Procter & Gamble provides centralized functions for its subsidiaries in a wide range of areas, including legal, patent, research and development, advertising, and sales, although the subsidiaries are normally billed for any work done for them. Procter & Gamble and its wholly-owned subsidiaries also prepare a consolidated annual tax return.

Procter & Gamble has stipulated it spends a substantial sum of money for advertising on national television networks and that this advertising finds its way into Georgia.

Thousands of phone calls are made each month between Procter & Gamble and its subsidiaries and other locations in Georgia. During the single month of November 1982 Procter & Gamble made over 2800 such telephone calls to persons within the state of Georgia.

In 1925 the United States Supreme Court held that a corporation in one state did not subject itself to personal jurisdiction in another state simply because it conducted business in that state through a subsidiary corporation. Cannon Manufacturing Co. v. Cudahy Packing Co., 267 U.S. 333, 45 S.Ct. 250, 69 L.Ed. 634 (1925). However, the holding of this case was substantially refined in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and more recently the Court recognized that “[t]he limits imposed on state jurisdiction by the Due Process Clause, in its role as guarantor against inconvenient litigation has been substantially relaxed over the years.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 292, 100 S.Ct. 559, 563, 62 L.Ed.2d 490 (1980). See also Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1952). This court concludes that the harsh strictures of Cannon Manufacturing are no longer applicable.

This court holds that neither the Due Process Clause nor traditional notions of fair play and substantial justice preclude the exercise of personal jurisdiction over a parent corporation if the parent’s control over the subsidiaries’ activities is so complete that the subsidiary is, in fact, merely a division or department of the parent. See Katz Agency, Inc. v. Evening News Association, 514 F.Supp. 423 (S.D.N.Y. 1981). This court has previously held that where a corporation advertises its product in the media within Georgia and, through subsidiaries or distributorships, places its product “in channels of international commerce knowing full well that normal product migration through the distributive chain will inevitably bring a significant number of its [products] to the retail market in Georgia,” such corporation was subject to the long arm jurisdiction of Georgia. Thornton v. Toyota Motor Sales USA Inc., 397 F.Supp. 476, 482 (N.D.Ga.1975).

This court finds that the pervasive and tight control exercised by Procter & Gamble over its subsidiaries (accomplished primarily through interlocking directorates, commonalilty of officers, and necessity of parent review and approval of subsidiary actions) renders these subsidiaries functionally equivalent to departments or divisions of the parent corporation. This close, symbiotic relationship between Procter & Gamble and its subsidiaries is recognized by Procter & Gamble as shown by the following statement in its 1982 annual report:

The Company’s operations are characterized by interrelated raw materials and manufacturing facilities and centralized research and administrative staff functions, making any separate profit determination by product category dependent upon necessarily arbitrary assumptions as to allocations of common costs. Different assumptions or physical or organizational arrangements would produce different results.

Various tests, formulas, and factors have been used by the courts in determining whether they should exercise jurisdiction over non-residents, but the quintessential consideration is whether subjecting the non-resident to jurisdiction would be reasonable and fair. See World-Wide Volkswagen and International Shoe. A review of the business operations of Procter & Gamble and its subsidiaries together with a consideration of Procter & Gamble’s contacts with Georgia through its subsidiaries convinces this court that it would be neither unreasonable nor unfair for the court to exercise personal jurisdiction over Procter & Gamble.

For the foregoing reasons, this court holds that the Georgia Long Arm Statute gives it personal jurisdiction over Procter & Gamble.

Mideast is a party to a perpetual bottler’s contract with The Coca-Cola Company, which is headquartered in Atlanta; that contract is partly performed in Georgia. Mideast is also a party to a number of’ other contracts with Coca-Cola which are partly performed here, including contracts for the sale of other soft drink syrups. Personnel from Mideast have made at least 107 different trips into Georgia related to the bottling business just since 1978. Approximately 40 of these trips were for the purpose of training seminars at Coca-Cola’s training center in Atlanta. The seminars covered a wide range of technical, financial, and marketing subjects, which can be quite valuable to a local bottling operation.

Although syrup is shipped to Mideast from an Ohio syrup plant, Mideast purchases all of its syrup requirements from Coca-Cola in Atlanta, where all invoices and bookkeeping are administered.

Telephone calls take place on a regular and continuous basis between Mideast and Coca-Cola in Atlanta, and at least 800 such telephone calls have been made in late 1981.

In early 1980, the bottler’s contract between Mideast and Coca-Cola was amended to provide for flexible pricing of the Coca-Cola bottle syrup which is provided by Coca-Cola to its bottlers. Meetings and discussions regarding the amendment took place in Atlanta, and personnel from Mideast attended this Atlanta meeting.

This court finds that Mideast has transacted business in the state of Georgia, the mere negotiation of a contract being sufficient to invoke long arm jurisdiction under Off.Code of Ga.Ann. § 9-10-91(1). Shea/Rustin, Inc. v. Home Fashion Guild, Ltd., 185 Ga.App. 88, 217 S.E.2d 405 (1975). Mideast’s activities as outlined above show that Mideast’s contacts with the state of Georgia are not mere isolated, casual incidents but are significant and continuous with a fair measure of permanence and continuity. These contacts are sufficient under Georgia’s Long Arm Statute for this court to have personal jurisdiction over Mideast, and the exercise of such jurisdiction does not run counter to the requirements of the due process clause.

III. SERVICE AND SUFFICIENCY OF PROCESS

The defendants’ contentions that service was improper and insufficient are based primarily upon their contention that the court lacks personal jurisdiction over the defendants. Since the court has determined that it can properly exercise personal jurisdiction over the defendants, the court finds no merit in the defendants’ arguments that service of process was improper or insufficient.

IV. TRANSFER

The defendants have moved to transfer this action to either Kentucky or Ohio pursuant to 28 U.S.C. § 1404(a) which provides, “For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.”

The court recognizes that many potential witnesses reside in either Kentucky or Ohio; however, the court further recognizes that many potential witnesses reside in Georgia. The documents in this case, although numerous, are not so voluminous that they cannot be furnished to counsel or to court in this district.

Although this action could have been brought in another forum, the plaintiff has chosen to litigate in this district. This is a consideration entitled to great weight, especially since the plaintiff resides in this district. There has been no showing that key witnesses would be greatly inconvenienced by requiring their presence in this district, nor has there been a showing that these witnesses’ testimony could not be presented to this court through depositions if they would be greatly inconvenienced by having to appear here. Additionally, there are apparently no actions in other districts of a similar nature. This court finds that the defendants simply have not met their burden under Grey v. Continental Marketing Associates, Inc., 315 F.Supp. 826 (N.D. Ga.1970), of showing that this case should be transferred to another district.

For the foregoing reasons, the motion to transfer is denied.

V. INDISPENSABLE PARTIES

The court is concerned about the different approaches taken by Coca-Cola in its brief (focusing on the bottler’s contract) and in its complaint (focusing on the stock purchase agreement). The court hereby reserves a ruling on the question of whether Liberty National Bank and W.B. Terry, Sr., are indispensable parties until the court is able to confer with all counsel and hear oral argument as to what position Coca-Cola is taking relative to the bottler’s contract and the stock purchase agreement. The temporary restraining order as previously entered and as orally modified at the meeting with counsel on December 17, 1982, is extended until the court is able to hear oral argument with respect to the question of indispensable parties.

VI. SUMMARY

The defendants’ motions to dismiss for lack of subject matter jurisdiction are denied. The defendants’ motions to transfer are denied. A ruling on the defendants’ motions to transfer or dismiss for failure to join indispensable parties is reserved. The temporary restraining order, as orally modified, is hereby extended until the court hears argument on the indispensable parties issue.

ON MOTION TO AMEND AND TO TRANSFER

This action for declaratory judgment and injunctive relief was filed in the Superior Court of Fulton County, Georgia, on December 14, 1982, and was removed to this court on December 16. On January 7, 1983, this court denied the defendants’ motions to dismiss for lack of personal jurisdiction and at the same time denied the defendants’ motions to transfer pursuant to 28 U.S.C. § 1404(a). In that order the court expressed its concern about the different approaches taken by Coca-Cola in its briefs and its complaint and reserved ruling on the question of whether Liberty National Bank and W.B. Terry, Sr., were indispensable parties. The parties have now more fully briefed that issue and Coca-Cola has moved to amend its complaint so as to put the nature of case and the relief sought in clearer focus.

Coca-Cola’s motion to amend its complaint is unopposed, and that motion is hereby GRANTED.

The factual background of this case was set out in the court's order of January 7, and only a brief synopsis is necessary at this time in order to gain a proper prospective of the issues confronting the court. Pursuant to a bottler’s contract entered into between Mideast (and its predecessors) and Coca-Cola in 1921, Coca-Cola has granted to Mideast certain perpetual and exclusive rights as a bottler to purchase Coca-Cola syrup and to manufacture and distribute Coca-Cola. All the stock of Mideast was owned by W.B. Terry, Sr., until he transferred that stock to a trust which had been established by him in 1974; the current trustee of that trust is Liberty National Bank and Trust Company of Louisville, Kentucky. In November 1982, Procter & Gamble announced that it had reached an agreement whereby it would acquire all of the stock of Mideast from Liberty National as trustee.

In its original complaint Coca-Cola focused upon the harm that it would allegedly suffer if the stock purchase agreement between Procter & Gamble and Liberty National was effectuated and Procter & Gamble acquired Mideast. Paragraph 21 of the original complaint succinctly sets out Coca-Cola’s concerns:

P & G’s acquisition of Mideast and its Coca-Cola bottling operation in order to permit P & G to enhance its own competitive products, and to benefit bottlers in competition with The Coca-Cola Company and its bottlers, would constitute an actual breach of the contractual and fiduciary obligations of Mideast to The Coca-Cola Company and an unfair, improper and unlawful effort on the part of P & G to appropriate the trade secrets and confidential business information of its competitor. Unless enjoined and restrained by this Court, P & G’s acquisition of Mideast would cause great and irreparable harm to The Coca-Cola Company for which it has no adequate remedy at law.

However, in its amended complaint, Coca-Cola does not seek a permanent injunction against Procter & Gamble’s acquisition of Mideast but seeks a declaration that such acquisition would constitute a material breach of the express and implied obligations of Mideast to Coca-Cola “authorizing The Coca-Cola Company to immediately terminate the Bottler’s Contract and other express and implied contractual relationships running between The Coca-Cola Company and Mideast” and further declare that Mideast’s conduct in allowing, facilitating, and permitting the proposed acquisition of Mideast “would, under the facts of this case, authorize The Coca-Cola Company to immediately terminate the Bottler’s Contract and other express and implied contractual relationships running between The Coca-Cola Company and Mideast.” In its amended complaint, Coca-Cola asks that Procter & Gamble be temporarily restrained and preliminarily enjoined from completing the acquisition of Mideast and from obtaining and disseminating information relating to Coca-Cola’s bottling operations and that Mideast be temporarily restrained and preliminarily enjoined from furnishing to Procter & Gamble any information pertaining to Coca-Cola bottling operations and from taking any steps to facilitate the acquisition of Mideast by Procter & Gamble “pending a decision on the declaratory judgment herein sought.”

This change of focus from the stock purchase agreement in the original complaint to the bottler’s contract in the amended complaint is undoubtedly the result of Coca-Cola’s recognition that in a suit to permanently enjoin the sale of Mideast stock to Procter & Gamble, the stockholder would be an indispensable party. Rule 19(a)(2)(i), Federal Rules of Civil Procedure, specifically provides that a person shall be joined as a party in the action if he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may as a practical matter impair or impede his ability to protect that interest. There can be little doubt that in an action seeking to enjoin the effectuation of a stock purchase agreement the parties to that agreement would not be able to protect their interests in that agreement unless they were parties to the action. In its amended complaint, Coca-Cola seeks to avoid the dictates of Rule 19 by having the court declare its rights with respect to the bottler’s agreement (to which only it and Mideast are parties) instead of seeking to enjoin the effectuation of the stock purchase agreement.

In paragraph 22 of its amended complaint, Coca-Cola states that it “refuses to consent to the acquisition of Mideast by P & G under the circumstances here present.” Ordinarily such refusal would be of no importance, since Coca-Cola is not a stockholder nor does it have a contractual relationship with the sole stockholder of Mideast so as to give it any rights to object to a stock transfer. However, Coca-Cola relies upon paragraph 10 of the bottler’s contract, which provides, “It is further agreed that neither this contract nor any part of the territory herein described shall be assigned, transferred or conveyed, in whole or in part, without the written consent of the party of the first part [i.e. Mideast and its predecessors in interest] and The Coca-Cola Company.” Coca-Cola seeks to invoke the anti-transfer provisions of this paragraph by alleging in amended paragraph 22 of its complaint that Mideast’s conduct “in allowing, permitting and facilitating P & G’s efforts to acquire the interest of Mideast in the Bottler’s Contract” constitutes a breach of that contract. The problem with this argument is that Mideast is not transferring or assigning any rights under the contract; rather, it is Mideast itself which is being transferred from one stockholder to another.

Simply stated, the central issue in Coca-Cola’s amended complaint is whether a nonassignability clause in a contract to which a corporation, but not its sole stockholder, is a party may be used to halt a sale of the stock in that company. If this court should hold that such a non-assignment clause was sufficient to prevent a transfer of the stock, the stockholder’s rights would unquestionably be affected.

In making a determination of indispensability under Rule 19, Federal Rules of Civil Procedure, the court is guided by the general principle that pragmatic concerns, especially the effect on the parties and on the litigation, control any decision on joinder. Smith v. State Farm Fire & Casualty Co., 633 F.2d 401 (5th Cir.1980). Consideration of joinder or dismissal of the action involves a two-fold analysis. First, the court must determine if the party in question is one who can and should be joined under the standards set forth in Rule 19(a). If joinder is not possible under Rule 19(a), the court must then look to Rule 19(b) and, applying the enumerated factors, decide whether “in equity and good conscience” the action should proceed. If the court concludes that the action should not go forward without the party in question’s presence, the absentee is then regarded as indispensable, and the action must be dismissed. Haas v. Jefferson National Bank of Miami Beach, 442 F.2d 394 (5th Cir.1971).

As stated earlier, a declaration by this court that the non-assignment clause in the bottler’s agreement was sufficient to prevent a transfer of the company’s stock would unquestionably affect the rights of the stockholder. It is for this reason that the stockholder must be made a party to this action since his absence would “as a practical matter impair or impede his ability to protect that interest.” Rule 19(a)(2)(i).

Since this court lacks, personal jurisdiction over both Liberty National and W.B. Terry, the court must proceed to the next step of the two-part analysis and determine “whether in equity and good conscience” this action should proceed without these two parties. Coca-Cola has argued that Liberty National is not an indispensable party by virtue of its position as a trustee. This position is based upon the fact that the stock purchase agreement contains a non-recourse provision in favor of the bank, which excludes any personal liability on the part of the trustee and also because it is a mere custodian of the stock and does not, in fact, exercise any of the rights of a shareholder but leaves the running of Mideast to its management. This argument ignores, the fact that the stockholder of Mideast is an indispensable party to this action, and at this point in the proceedings, neither the de jure owner of the stock {i.e., Liberty National as trustee) or the allegedly de facto owner (i.e., W.B. Terry) is a party to this action. In stating the foregoing, this court expresses no opinion whatsoever on the issue of whether the bank is a mere custodian or is full owner of the stock in both law and fact but merely recognizes the arguments put forth by Coca-Cola as to the status of the bank. The status of these persons is a question that must await resolution once they are made parties to this action.

Coca-Cola further asserts that in the January 5, 1983, amendment to the stock purchase agreement, Procter & Gamble and Mideast agreed not to assert the “condition” of the pendency of this lawsuit or the entry of an injunction in this lawsuit as a condition that would allow termination of the stock purchase agreement. Coca-Cola further argues that that amendment allows each party to “walk away” from the anticipated sale, with each party to bear its own expenses, if they are unable to consummate the sale because of court action in this lawsuit. Coca-Cola thus argues that this court should find that neither Procter & Gamble nor W.B. Terry (who guaranteed performance by Liberty National under the purchase agreement) will be harmed by the outcome of this litigation, whatever it might be. This argument is unpersuasive, since a stockholder would suffer “harm” if a court forbids him to sell his stock even if he is insulated from a suit for breach of contract.

Based upon the foregoing, the court concludes that Liberty National Bank is a necessary party to this action and further concludes that because of W.B. Terry’s status as a guarantor of the stock purchase agreement and because of Coca-Cola’s allegations with regard to his status as the person who exercises actual control over Mideast stock, his presence is also necessary for a full and just adjudication. Applying the factors set out in Rule 19(b), this court finds that a judgment rendered in the absence of these parties would be prejudicial to them, that the prejudice suffered by them could not be lessened by protective provisions in the judgment, and that Coca-Cola will still have an adequate remedy even if the case could not proceed in this forum.

Since this court lacks personal jurisdiction over both Liberty National Bank and W.B. Terry and since the court has determined that they are indispensable parties, this action should be dismissed. However, this court believes that the better action is to transfer this matter to a forum which can exercise personal jurisdiction over the indispensable parties and where the case can proceed to a conclusion on the merits. Liberty National Bank is located and maintains its only offices in Kentucky, and W.B. Terry is a resident and citizen of Kentucky. Consequently, the United States District Courts in Kentucky could exercise personal jurisdiction over these parties. Since Mideast is incorporated in Kentucky with its principal place of business located in Lexington, Kentucky, this action could have originally been brought in the United States District Court for the Eastern District of Kentucky. Consequently, this court hereby TRANSFERS this matter to the United States District Court for the Eastern District of Kentucky.

In sum, this court holds that Liberty National Bank and W.B. Terry are indispensable parties and that this action cannot proceed in this forum, since this court lacks personal jurisdiction over these parties. Consequently, the court transfers this action to the United States District Court for the Eastern District of Kentucky.


author: McNAMARA, District Judge.

text:
    Philip C. WILD, Jr., et al. v. LYKES BROTHERS STEAMSHIP CORP.
    Civ. A. No. 78-1679.
    United States District Court, E.D. Louisiana.
    June 2, 1983.
    Harold J. Lamy, New Orleans, La., for plaintiffs.
    John A. Bolles, New Orleans, La., for defendant.
   ORDER

McNAMARA, District Judge.

This matter came on for trial on a former day and was taken under advisement. Now, after hearing the evidence and considering the argument and memoranda of the parties, the Court rules as follows.

The issue in this case is whether the presence of an observation platform, which is itself not dangerous, but which is designed in such a way to facilitate its conversion into an unsafe ladder, constitutes ship negligence under Section 905B of the Longshoremen and Harbor Workers’ Act. The issue arises in the following context.

In May of 1977, pursuant to contract, the DOCTOR LYKES, owned by Defendant, Lykes Brothers Steamship Corporation (Lykes), underwent extensive repairs by Dixie Welding and Metal Works, Inc. (Dixie). The DOCTOR LYKES is an oceangoing vessel which can load and discharge barges with containerized cargo by use of a vessel elevator deck.

Repairs began on May 20, 1977, and were completed about July 1, 1977. On a typical day in excess of 200 Dixie employees were working per shift. These included various crafts such as pipe fitters, machinists, boiler makers and laborers. Plaintiff was one of 20 to 40 boiler makers on board per shift. The evidence reflects that for all practical purposes, the entire vessel was turned over to Dixie for repairs. The only Lykes employees on board were the captain and a port engineer. Their responsibility was limited to seeing that the overall repairs were completed in accordance with plans and specifications.

Plaintiff first reported to this job on May 23, 1977. A Dixie foreman assigned Plaintiffs duties. His initial duties (for IV2 days) consisted of miscellaneous repair work on the aft end of the vessel and in the vessel’s pump room. While performing these initial duties in the pump room, Plaintiff had need for a ladder and was told by his foreman that some ladders were being brought to the vessel from Dixie’s shop which was only a short distance away. In the interim, he borrowed a ladder from Lykes and had no problems. Plaintiff’s next duties required him to descend to an elevator deck, which at the time of Plaintiff’s accident was in its stowed position approximately 5 to 6 feet below the main deck. The elevator deck, was, when operating, used to lift and lower barges containing cargo. To descend from the main deck to the elevator, Plaintiff utilized a “ladder” which had been placed in position by someone else whose identity is unknown. This “ladder”, which Plaintiff utilized to descend to the elevator deck, was in reality a configuration of pipes which formed the perimeter safety guard of a small observation platform located on the main deck. This observation platform would enable one to have an unobstructed view of the elevator deck during loading and unloading operations. (See Photographs P1-P15). This device was designed in such a manner that its vertical stanchions could be unbolted from the main deck of the vessel and the entire mechanism rotated between 90 and 180 degrees. In this position, the mechanism became a “ladder” its vertical stanchions having been converted to a handrail and its horizontal sections having been converted to “ladder” rungs. This device also contained an additional two steps to the “ladder” which rested on the elevator deck below. These bottom two steps of the converted “ladder” appear to serve no purpose when the device is being used for its primary purpose as a perimeter protection for the observation platform. For this reason, I find that the mechanism in question was purposefully designed to be used in two ways. Its primary use was as a perimeter guard for the observation platform, and its secondary use was as a ladder from the main deck to the elevator platform if the elevator was positioned either in its stowed position or at any level approximating the stowed position.

I further find that when the device is converted to a ladder, it is defective and unreasonably dangerous for several reasons; its handrails do not extend the full length of the ladder, its rungs are not non-skid but instead smooth, round pipe and it is unsturdy.

While descending this “ladder” Plaintiff was injured when he slipped and fell. The cause of him slipping and falling was grease on the ladder rungs, and on his shoes, movement of the ladder and the absence of a handrail at the lower end of the ladder.

Prior to Plaintiff’s injury, he had used the “ladder” a few times each day for several days and observed its unsafe condition. Prior to the accident, he had remarked to himself “who the hell put this here” but complained to no one else. After the accident, he told a co-worker that he had “slipped on that greasy mickey mouse ladder”.

I find that Plaintiff has not proved whether or not at the time control of the vessel was relinquished to Dixie for repairs, on or about May 20, 1977, the mechanism in question was in the converted position for use as an unsafe “ladder” or whether at that time it was in its primary position for use as a perimeter guard for the observation platform. There is simply no evidence as to who placed the mechanism in its converted ladder position and insufficient evidence as to when this conversion took place, though it did take place before Plaintiff began work on the vessel on May 23, 1977.

Dixie’s foreman testified that had he been advised of the unsafe “ladder”, he would have replaced it with a gangway owned by Dixie and located in Dixie’s warehouse one block away. Indeed, after Plaintiff’s accident, a Dixie gangway was installed in place of the unsafe ladder.

Unlike Pluyer v. Mitsui OSK Lines, Ltd., 664 F.2d 1243 (5th Cir.1982), Plaintiff has not proven Defendants in the case at bar took any affirmative action in furnishing the ladder in question. In fact, Plaintiff has not proved by a preponderance of the evidence that any Lykes employees were aware that the mechanism was being utilized as a ladder at the time of Plaintiff’s accident.

Had Plaintiff proved that the mechanism in question was in its position as a defective ladder at the outset of the Dixie operation or that the Lykes employees knew or were chargeable with knowledge of the fact that someone, the identity of whom is unknown, converted the mechanism to an unsafe “ladder” during the operation and further knew that Dixie was exercising improvident judgment in using the defective ladder, the elements of Scindia Steam Nav Co. v. De Los Santos, 451 U.S. 156, 101 S.Ct. 1614, 68 L.Ed.2d 1, would be met and the vessel owner (Lykes) might have a duty to intervene. In this case, none of these elements have been proven. The record simply doesn’t reflect who converted the mechanism to an unsafe ladder, when it was done or whether or not any Lykes personnel were aware that the mechanism was being used in that manner.

Though there was some testimony by Plaintiff’s co-employees that the elevator deck in question could only be moved by Lykes personnel, that is, Dixie personnel were not permitted to lower or raise the elevator deck, I don’t find that that limitation equates to the elevator deck area remaining under the control of Lykes. In fact, much of the work that Dixie was performing was in the area of the elevator deck and indeed the duties of Plaintiff himself involved that work area. Furthermore, to the extent that Lykes retention of the operation of lowering or raising the elevator deck bears on the issue of the control of that work area, it should be noted that Plaintiff has not proven that the elevator deck in question was raised or lowered during the repair operation and it may have been in its stowed position since the beginning of work by Dixie. Thus, unlike Walker v. The Blacksea SS Co., 637 F.2d 287 (5th Cir.1981), the work area in the case at bar was controlled by Dixie.

In summary, the duties owed by Lykes to Plaintiff in this case:

“The first is a duty to exercise ordinary care to have the vessel and its equipment in such a condition that a reasonably cautious expert stevedore can carry on its operations with reasonable safety. The second is a duty to inform the stevedore of any hazardous conditions aboard the vessel as regards its equipment, that are either known to the vessel owner or should have been known to it in the exercise of ordinary care, that are likely to be encountered by the stevedore in the exercise of its cargo operations and that are unknown to it and would not otherwise be self-evident or expected by it if it displays an acceptable level of competence while doing its work.” Stass v. American Commercial Lines, Inc., 683 F.2d 120, 121 (5th Cir.1982)

were not breached by Lykes.

Accordingly, Plaintiff’s suit must be and it is DISMISSED at his costs.

The above Order will serve in lieu of Findings of Fact and Conclusions of Law.


author: BLOCH, District Judge.

text:
    William J. FEINAUGLE, Plaintiff, v. The PITTSBURGH AND LAKE ERIE RAILROAD CO., a corporation, Defendant.
    Civ. A. No. 82-1743.
    United States District Court, W.D. Pennsylvania.
    June 13, 1983.
    Thomas W. White, Pittsburgh, Pa., Charles A. Collins, Minneapolis, Minn., for plaintiff.
    Mark T. Wade, Pittsburgh, Pa., for defendant.
   MEMORANDUM OPINION

BLOCH, District Judge.

Plaintiff, William J. Feinaugle, brings this action against defendant, The Pittsburgh and Lake Erie Railroad Company, alleging that defendant’s supervisor unreasonably harassed and intimidated him as a means of requiring him to appear as a witness in a co-worker’s Federal Employees Liability Act (hereinafter referred to as “FELA”) lawsuit. Plaintiff asserts that he was harassed to the point of a heart attack and that defendant’s condoning of the supervisor’s conduct served to render plaintiff’s work place unsafe in violation of the FELA, 45 U.S.C. § 51, et seq.

Defendant has filed a motion for permission to join, as third-party defendants, Dennis O. Waters and Ohio Valley Lodge 1161 of the International Association of Machinists and Aerospace Workers, the union that represented plaintiff in his employment. The basic thrust of defendant’s motion is that Dennis O. Waters, acting in his capacity as the President of the aforesaid union, told plaintiff that it would not be a good idea for him to appear as a witness in the co-worker’s FELA lawsuit; therefore, according to the defendant, the conduct of Waters, acting on behalf of the union, also served to harass the plaintiff. After a careful review of defendant’s motion, the Court hereby denies the same.

The pertinent provision for purposes of this motion is Fed.R.Civ.P. 14(a), which provides in pertinent part as follows:

(a) When Defendant May Bring in Third Party. At any time after commencement of the action a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to him for all or part of the plaintiff’s claim against him____ (Emphasis added).

The purpose of Rule 14(a) is to avoid “circuity of action” and to settle related matters in one litigation. Tiesler v. Martin Paint Stores, Inc., 76 F.R.D. 640, 642 (E.D. Pa.1977); Stiber v. United States, 60 F.R.D. 668, 670 (E.D.Pa.1973). However, joinder of third-party defendants under Rule 14 is not automatic; rather, the decision to permit joinder rests with the sound discretion of the trial court. Judd v. General Motors Corporation, 65 F.R.D. 612, 615 (M.D.Pa.1974); National Fire Insurance Co. of Hartford v. Daniel J. Keating Co., 35 F.R.D. 137, 140 (W.D.Pa.1964). In ruling on a motion to join third-party defendants, the Court is bound by the allegations in the pleadings. National Fire Insurance Co. of Hartford v. Daniel J. Keating Co., 35 F.R.D. at 139.

The Court acknowledges that a third-party defendant may be joined in an FELA action for purposes of contribution or indemnity to the original defendant (see Kennedy v. Pennsylvania Railroad Co., 282 F.2d 705 (3d Cir.1960)); however, it is not proper to bring in a person or entity as a third-party defendant simply because he is or may be liable to the plaintiff. Ross v. Erie Railroad Co., 18 F.R.D. 9, 11 (M.D. Pa.1955) (FELA action in which the original defendant attempted to place sole liability upon a third-party defendant and failed to allege that the third-party defendant is or may be liable to the original defendant). As this Court has previously noted, as originally promulgated in 1937, Rule 14 permitted the third-party plaintiff to join a person “who is or may be liable to him or to the plaintiff...,” but by amendment of 1946, the words “or to the plaintiff” were eliminated. Therefore, it is no longer possible to bring in a person simply because he is or may be liable to the plaintiff. National Fire Insurance Co. of Hartford v. Daniel J. Keating Co., 35 F.R.D. at 139. In essence, “[t]hird-party practice is permitted only where the defendant can show that if he is found liable to plaintiff, the third party will be liable to him.” Tiesler v. Martin Paint Stores, Inc., 76 F.R.D. at 643. The plaintiff has a right to choose the party against which he desires to institute his action, and the defendant cannot compel the plaintiff to also sue a third party, whom plaintiff does not wish to sue, by asserting in a third-party complaint direct liability between the third-party defendant and the plaintiff. Railey v. Southern Railway Co., 31 F.R.D. 519 (E.D.S.C.1963) (FELA action); Delano v. Ives, 40 F.Supp. 672, 673 (E.D.Pa.1941).

In this action, defendant’s motion for permission to join third-party defendants is actually two motions — an original motion and an amended motion which incorporates the original motion. In the original motion, defendant sets forth a brief procedural history and then proceeds to summarize a deposition of the plaintiff, upon which defendant concludes that plaintiff’s “injuries were in fact caused solely by the negligent and/or intentional acts of Dennis O. Waters, acting individually and within the scope of his duties as President of Ohio Valley Lodge 1161 of the International Association of Machinists and Aerospace Workers.” Motion for permission to join third-party defendants (docket entry No. 13). Moreover, defendant’s amended motion incorporates the original motion, further summarizes plaintiff’s deposition, and states as follows:

4. The deposition testimony reveals that, at the very least, Dennis Waters stands in the same position as Joseph Johns in that he made statements and veiled threats to plaintiff that made him nervous, fearful and overwrought. If defendant can be liable for such activity, so too, can Dennis Waters and the union local he represented.

Amended motion for permission to join third-party defendants (docket entry No. 19). Defendant’s motion and amended motion make no mention of any liability of the third-party to the original defendant; rather, the motions attempt to assert liability directly from a third-party defendant to the plaintiff, which, as discussed above, is an impermissible use of a motion to join third-party defendants. It is plaintiff’s right to institute this action, under the FELA, against the defendant, and it will be his burden to show that the defendant has committed the acts complained of and is liable. At the same time, however, the defendant cannot force the plaintiff to also sue Dennis Waters and the union through the filing of a third-party action. Moreover, even if defendant did assert that Waters and the union were liable to it for contribution and indemnity, the Court finds it hard to fathom how Waters and the union could be liable to the defendant for what has been alleged to be an intentional tort, that is, harassment. Accordingly, exercising its discretion under Rule 14(a), the Court denies defendant’s motion and amended motion for permission to join third-party defendants.

An appropriate Order will be issued.

      . The motion referred to is actually two motions, an original motion filed on January 13, 1983 (docket entry No. 13) and an amended motion filed on February 9, 1983 (docket entry No. 19).

      . As noted above, the Court is bound by these allegations in ruling on the motion.


author: CARL B. RUBIN, Chief Judge.

text:
    Robert L. McLAURIN, M.D., Plaintiff, v. Josef E. FISCHER, et al., Defendants.
    No. C-1-82-1032.
    United States District Court, S.D. Ohio, W.D.
    Oct. 26, 1983.

      Robert G. Stachler, Cincinnati, Ohio, for plaintiff.
    Robert Pitcairn, Jr., Cincinnati, Ohio, for defendants.
   ORDER DENYING MOTION FOR SUMMARY JUDGMENT OF DEFENDANT JOSEF E. FISCHER, M.D. (Doc. No. 14)

CARL B. RUBIN, Chief Judge.

This matter is before the Court on a Motion for Summary Judgment by defendant Dr. Josef E. Fischer. This lawsuit is brought pursuant to the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621 et seq. and 42 U.S.C. § 1983. Several pendent state claims are also involved.

Facts

The facts may be briefly summarized. On April 7, 1982, plaintiff was relieved of his duties as Director of the Division of Neurosurgery of the University of Cincinnati College of Medicine by defendant Dr. Fischer. He was not granted a hearing by the University prior to that action. Plaintiff was 60 years old at the time. He was ultimately replaced as Director by a man 46 years of age. Plaintiff did not lose his position as a member of the College of Medicine faculty, nor was his salary reduced. He asserts, however, that, subsequent to his removal as Director, other actions were taken by defendant which deprived him of income and severely limited his ability to function in his professional relationship with the University. Plaintiff’s federal claims against defendant involve discrimination on the basis of age in violation of the ADEA and deprivations of liberty and property interests without due process of law in violation of the Fourteenth Amendment and 42 U.S.C. § 1983. Defendant has moved for summary judgment on all claims.

Jurisdiction

In an Order filed August 16, 1983, (Doc. No. 13), the Court dismissed plaintiffs’ ADEA claim against the University of Cincinatti for lack of jurisdiction, based on plaintiff’s failure to observe the 60-day waiting period of 29 U.S.C. § 626(d) before filing suit. See Wright v. Tennessee, 628 F.2d 949 (6th Cir.1980); Ewald v. Great Atlantic and Pacific Tea Co., Inc., 620 F.2d 1183 (6th Cir.), vacated and remanded, 449 U.S. 914, 101 S.Ct. 311, 66 L.Ed.2d 143 (1980). Plaintiff subsequently refiled his Complaint against the University in conformity with the statute, and that case has been consolidated with this one.

Defendant now argues that the ADEA claims against him should be similarly dismissed for failure to observe the 60-day hiatus of § 626(d). Although plaintiff’s failure to comply with the statute was identical with respect to both defendants, the Court will not require plaintiff once again to refile his lawsuit.

Unlike the University, this defendant did not raise the failure to comply with § 626(d) as a ground for dismissal until after the 60-day period had actually passed. Because the 60-day period had passed by the time the jurisdictional issue was raised by this defendant, and because the policies behind the 60-day requirement were not, as a practical matter, contravened, the Court holds that all jurisdictional requirements have effectively been met. See Stember v. Borough of Baldwin, 31 FEP cases 690 (W.D.Pa. March 15, 1983).

Summary Judgment

The summary judgment standard in this Circuit is a stringent one. Federal Rule of Civil Procedure 56(c) permits the Court to grant summary judgment only when there is no genuine issue of material fact and when the moving party is entitled to judgment as a matter of law. Sartor v. Arkansas Natural Gas Corp., 321 U.S. 620, 64 S.Ct. 724, 88 L.Ed. 967 (1944); Watkins v. Northwestern Ohio Tractor Pullers, 630 F.2d 1155, 1158 (6th Cir.1980). The Court may not make findings of disputed facts on a Motion for Summary Judgment. Watkins, supra. The movant has the burden of showing conclusively that there exists no genuine issue as to a material fact, and the evidence together with all inferences to be drawn therefrom must be considered in the light most favorable to the party opposing the motion. Id. The movant’s papers are to be closely scrutinized, while those of the opposing party are to be viewed indulgently. Id. The Court will consider this Motion in accordance with the foregoing considerations.

ADEA Claims

In essence, defendant’s argument with respect to plaintiff’s ADEA claim is that plaintiff has not produced evidence enough to establish even a prima facie case of age discrimination and that, in any case, defendant has come forward with legitimate, non-discriminatory justifications for plaintiff’s dismissal as Director which would overcome any such showing. The Court cannot agree.

The United States Court of Appeals for the Sixth Circuit has repeatedly noted that the methods of establishing a prima facie case of age discrimination may vary. See Blackwell v. Sun Electric Corp., 696 F.2d 1176, 1179 (6th Cir.1983); Laugesen v. Anaconda, 510 F.2d 307, 312-13 (6th Cir. 1975). Under any approach, the crucial question is whether age was a determining factor in the employer’s decision. Blackwell, supra, at 1180. This is essentially a question of fact.

As noted above, the Court may not make findings of disputed facts on a Motion for Summary Judgment and must construe all evidence in a light most favorable to plaintiff. Plaintiff has pointed to several instances in which defendant expressed an interest in attracting younger doctors to the College of Medicine faculty. In addition, although by no means controlling, it is undisputed that plaintiff was replaced by a younger man. Plaintiff also alleges that defendant considered several other candidates for the Director’s position, all of whom were below the age of the ADEA “protected age group.”

Construing the evidence in a light most favorable to plaintiff, the Court finds that disputed questions of fact exist regarding the role played by plaintiff’s age in defendant’s decision. Summary judgment is, therefore, inappropriate on plaintiff’s ADEA claim.

Due Process Claims Under § 1988

Plaintiff has also asserted a claim under 42 U.S.C. § 1983, alleging a denial of due process of law. Defendant contends that he is entitled to a qualified immunity from suit under § 1983 and that, in any case, plaintiff was deprived of no protected rights when he was removed as Director. These contentions will be considered in reverse order.

For due process concepts to apply, there must be both governmental action and the deprivation of a life, liberty or property interest warranting Constitutional protection. Banks v. Block, 700 F.2d 292, 295 (6th Cir.1983). For the purposes of this Motion, the Court will accept plaintiff’s contention that defendant was acting as an agent of the University, which the Court has held to be an arm of the state. The governmental action requirement is thus met.

Defendant argues that plaintiff was deprived of neither a liberty nor property interest which was Constitutionally cognizable. The Court agrees that no protected liberty interest is implicated. In removing plaintiff as Director, defendant made no charge against him that might seriously damage his standing and associations in the community, see Board of Regents v. Roth, 408 U.S. 564, 573, 92 S.Ct. 2701, 2707, 33 L.Ed.2d 548 (1972), nor did defendant impose on plaintiff a stigma or other disability that foreclosed his freedom to take advantage of other employment opportunities. Id. While it may be that plaintiff’s removal as Director injured his reputation in the academic community, such an injury does not trigger the protections provided by the Due Process Clause. Blair v. Board of Regents, 496 F.2d 322, 324 (6th Cir.1974). The Court holds that plaintiff was deprived of no Constitutionally protected liberty interest when he was removed as Director.

The Court is not able to so hold with regard to protected property interests. The Supreme Court has recognized that property interests may take many forms. Roth, supra, 408 U.S. at 576, 92 S.Ct. at 2708. However, to have a property interest in a benefit, a person must have more than a unilateral expectation of it. He must, rather, have a legitimate claim of entitlement to it. Id.

A person’s interest in a benefit is a property interest for due process purposes if there are rules or mutually explicit understandings that support his claim of entitlement to the benefit and that he may invoke at a hearing. Perry v. Sindermann, 408 U.S. 593, 601, 92 S.Ct. 2694, 2699, 33 L.Ed.2d 570 (1972). See also Roth, supra, 408 U.S. at 577, 92 S.Ct. at 2709. A teacher who, like plaintiff, has held a particular position for a number of years, might be able to show from the circumstances of his service, and from other relevant facts, that he had a legitimate claim of entitlement to that position. See Sindermann, supra, 408 U.S. at 602, 92 S.Ct. at 2700.

Plaintiff has alleged that he was made “permanent” Director of the Division of Neurosurgery in 1955. It is undisputed that he held the Directorship for 28 years. Plaintiff also asserts that no other division head “in the known history of the University” was ever dismissed or relieved against his will. Under these circumstances, in the context of this Motion, the Court holds that plaintiff “must be given an opportunity to prove the legitimacy of his claim of such entitlement in light of ‘the policies and practices of the institution.’ ” Sindermann, supra, at 603, 92 S.Ct. at 2700.

A further observation, is, however, warranted. Absent such proof of a legitimate claim of entitlement to the Director’s position, it appears that plaintiff was removable at the will of defendant without prior notice or hearing. In particular, the Court notes its agreement with defendant that Article 8 of the AAUP collective bargaining agreement did not apply to plaintiff. Based upon the Affidavits of Elizabeth Sato and Thomas Wagner, and the August 11, 1983, decision of the University Grievance Committee, the Court holds that Article 8 of the AAUP Agreement did not apply to the Director of the Division of Neurosurgery.

Defendant raises one final argument with respect to plaintiff’s § 1983 claim. He argues that he is entitled to a qualified immunity from suit under that statute.

State officials performing discretionary functions are shielded from liability for civil damages under § 1983 “insofar as their conduct does not violate clearly established statutory or Constitutional rights of which a reasonable person would have known.” Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 2738, 73 L.Ed.2d 396 (1982). See also id. n. 30. Clearly, a reasonable person would know of the due process protection afforded property interests. However, it does not follow that a reasonable person would be able to identify all safeguarded property interests, particularly those on the periphery of Constitutional protection. The Court has held, supra, that plaintiff is entitled to prove that, under the policies and practices of the University, he had a legitimate claim of entitlement to, and therefore a property interest in, his position as Director. As Chairman of the Department of Surgery, defendant would also be aware of the policies and practices of the University. If, in accord with those policies and practices, plaintiff had a property interest in his position as Director, defendant should reasonably have known of that interest and of the due process guarantees attached thereto. In such a case, qualified immunity would be unavailable. See Harlow, supra. Because this immunity question turns on factual determinations, summary judgment is precluded. Accordingly, defendant’s Motion will be DENIED with respect to plaintiff’s due process claims, subject to the Court’s holdings that no Constitutionally protected liberty interest is involved here and that Article 8 of the AAUP Agreement does not apply to plaintiff.

Conclusion

Based on the opinion above, and subject to all holdings therein, the Court holds that the Motion for Summary Judgment of Defendant Josef E. Fischer, M.D., (Doc. No. 14), must be, and is hereby, DENIED.

IT IS SO ORDERED.

      . There are two defendants in this lawsuit, Dr. Fischer and the University of Cincinnati. Unless otherwise noted, the term "defendant," when used below, refers only to Dr. Fischer.

      . The Division of Neurosurgery is a division of the Department of Surgery, of which defendant is Chairman.

      . Defendant has recently filed a second Motion for Summary Judgment (Doc. No. 30), to which plaintiff has not had an opportunity to respond and which advances several new arguments. The Court expresses no opinion on the arguments presented in that Motion.

      . Plaintiff filed a charge with the Equal Employment Opportunity Commission on October 1, 1982. He filed suit three days later. The University filed its Motion on October 26, 1982. The Motion at issue was filed August 22, 1983.

      . The EEOC continued its investigation throughout the 60-day period, apparently without knowledge that a lawsuit had been filed. See Plaintiffs Motion for Reconsideration, (Doc. No. 17) at 5 n. 1. Furthermore, the lawsuit itself had not progressed, during that period, beyond the initial filing of pleadings and the briefing of the University’s Motion to Dismiss.

      . Section 1983 provides
      Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.

      . This statement is not to be construed as a holding. It is simply a reflection of the Court’s view of the record ss developed to this point.


author: GETZENDANNER, District Judge:

text:
    UNITED STATES of America, Plaintiff, v. AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Trustee under Trust No. 7501001 dated March 1, 1971, and EES Hickory Associates, Defendants.
    No. 83 C 2613
    United States District Court, N.D. Illinois, E.D.
    Oct. 27, 1983.
    Dan K. Webb, U.S. Atty. by Mary Anne Mason, Asst. U.S. Atty., John H. Mahoney, Assoc. Reg. Counsel, Dept, of HUD, Chicago, 111., for plaintiff.
    Sheldon Solow, Schwartz & Freeman, Steven P. Handler, Hannafan & Handler, Ltd., Chicago, 111., for defendants.
   MEMORANDUM OPINION AND ORDER

GETZENDANNER, District Judge:

In this action the United States sues to foreclose on a federally insured mortgage loan which the Secretary of Housing and Urban Development holds as assignee. Jurisdiction is based on 28 U.S.C. § 1345. Before the court is plaintiff’s motion for summary judgment. For the reasons given below, the court grants plaintiff's motion.

There is no serious dispute as to whether defendants are in default on the obligation secured by the mortgage. Plaintiff’s uncontroverted exhibits establish the elements of its claim. Exhibits A through I of the Complaint establish the obligation, the security agreements securing it, and the assignment to HUD. The Demitros affidavit, dated October 3, 1983, establishes defendants’ default in early 1981, entitling plaintiff to accelerate the note. The Demitros affidavit establishes that, apart from the acceleration, defendants’ delinquency as of August 31, 1983 was $1,104,443.10.

Defendants resist plaintiff’s motion for summary judgment on the basis of the affirmative defenses raised in their answer. These defenses assert that HUD has failed to pursue alternatives to foreclosure, that foreclosure would harm tenants of the property, and that HUD will not benefit from immediate foreclosure.

The court is guided by United States v. Winthrop Towers, 628 F.2d 1028 (7th Cir.1980). In that case the Court of Appeals held that under 42 U.S.C. § 1441a HUD’s decision to foreclose may be reviewed to determine whether it is consistent with national housing objectives. Id. at 1034-35 & n. 3. The standard for review comes from the Administrative Procedure Act, 5 U.S.C. § 706(2)(A), and judicial review “should be narrowly limited to the question whether HUD’s actions were ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’ ” Id. at 1036. “[0]n a scale of 1 to 9, where 1 represents the narrowest and most constrained discretion and 9 represents unlimited (or unreviewable) discretion, then HUD’s discretion in foreclosing a mortgage granted, for example, by a large commercial developer would be somewhere in the area of 7 or 8.” Id. Defendants have argued that Winthrop generally allows broader review than these passages would seem to suggest, but they have not argued that the 7 or 8 appropriate for a large commercial developer would be inappropriate in this case.

Defendants’ most substantial argument relates to the exploration of alternatives to foreclosure. In May 1982 defendants proposed a workout plan including major repairs to the property. (Donile Aff. ¶ 13) HUD rejected this plan two weeks later. (Donile Aff. ¶ 14.) HUD’s rejection letter, dated June 10, 1982 and signed by Vernon A. Washington, adequately explains that the proposed plan provided for unacceptably small payments against defendants’ delinquency, and that the delinquency would grow, under the plan, to an unacceptable size. Defendants observe that HUD made no counteroffer, but the court agrees with plaintiff that the proposed plan did not necessarily warrant a counteroffer. Defendants were free to make a second proposal. Although defendants did not propose a second workout plan, they did renew a proposal to convert their buildings to condominium ownership. (Donile Aff. ¶¶ 12, 23.) HUD plausibly could have concluded that condominium conversion would not advance national housing goals materially. Finally, some confusion over the timing of a rent increase, possibly attributable to misdirected mail, does not undermine HUD’s position.

The court holds that defendants have not raised a genuine issue of fact to support their argument that HUD acted arbitrarily or capriciously, or otherwise abused its discretion, by not exploring alternatives to foreclosure. HUD indicated its reasons for rejecting defendants’ workout proposal, and defendants could have made a second proposal responsive to HUD’s concerns. HUD was not obligated to formulate its own plan, at least on the facts presented in this case.

Defendants’ other affirmative defenses also must fail. Defendants argue that they are managing the complex well, but good management is not enough to make foreclosure inappropriate, if a sizable delinquency is accumulating. The same must be said about defendants’ demonstrated concern for their tenants’ well-being. Defendants’ argument that foreclosure would be harmful is supported only by defendants’ suggestions for returning to financial stability. (Donile Aff. ¶ 22.)

Although plaintiff is the movant, defendants are in the position of urging that HUD has abused its discretion. Having reviewed the parties’ supporting exhibits, the court concludes that defendants have raised no genuine issue as to any material fact. Foreclosure, when appropriate, is part of the statutory scheme, and HUD has not abused its discretion in deciding to foreclose. In Winthrop the Court of Appeals stated explicitly that a summary judgment motion frequently would be an appropriate mechanism for testing affirmative defenses such as those raised in this case. 628 F.2d at 1036. Plaintiff’s motion for summary-judgment is granted.

Plaintiff shall submit a draft judgment order. The court notes that there has been some confusion as to the proper name of the defendant trust beneficiary. (See, e.g., defendants’ memo p. 1 n. 1.) Along with its draft judgment order, plaintiff may present any motion necessary to correct this problem. The court expects that plaintiff and defendants will be able to agree on a solution.

It is so ordered.