text:
    Prince E. GILLIARD, on behalf of himself and all persons similarly situated, namely, Edith Goodman, Mary Persaud, Marian Benjamin, Ruth Jaisarie, Jacqueline Willoughby, Berlena H. Robinson, Barbara Levy, Sadie Phillips, Easthlyn Regis, Germaine Quiroz and Eula McCall, Plaintiffs, v. NEW YORK PUBLIC LIBRARY SYSTEM, Otillia Pearson, Priscilla Southern, Samuel Memberg, Irene Percelli, Antonio Medina, Edwin Holgrem, David Bauer, Robert Goldstein, Defendants.
    No. 84 Civ. 1038 (RWS).
    United States District Court, S.D. New York.
    Nov. 6, 1984.

      Paulette M. Owens, New York City, for plaintiffs.
    Proskauer, Rose, Goetz & Mendelsohn, New York City, for defendants;' Allan H. Weitzman, New York City, of counsel.
   OPINION

SWEET, District Judge.

Defendants New York Public Library System, Otillia Pearson, Priscilla Southern, Samuel Memberg, Irene Percoli, Antonio Medina, Edwin Holgrem, David Bauer, and Robert Goldstein (collectively, “the Library”) have moved for an order pursuant to Rule 12(b)(6) dismissing plaintiff Prince Gilliard’s (“Gilliard”) claims under Title VII and 42 U.S.C. §§ 1981, 1983 and 1985 and his pendent state claims of negligence and intentional infliction of emotional distress, and for an order pursuant to Rule 56(b) granting summary judgment in favor of the Library as to Gilliard’s contractual claims. For the reasons stated below, the Library’s motion for dismissal will be granted in part and denied in part, and the motion for summary judgment will be granted.

Facts

The allegations raised by Gilliard in this case stem from the Library’s dissolution of its Computer Input Division (“C.I.D.”) and the subsequent demotion or dismissal of C.I.D. employees. Gilliard, a black male employed by the division, was informed on June 23, 1980 that C.I.D. would be dissolved effective June 30, 1981 and that all C.I.D. employees would be terminated at that time unless they found other library jobs. C.I.D. employees were also informed that neither the Library nor Local 1930, the union representing the C.I.D. division (“the Union”), would be responsible for finding them employment and that they would be given no preferential treatment when applying for other library jobs. The Union subsequently filed a grievance against the Library on November 26, 1980, alleging that the dissolution of the unit breached the Union’s collective bargaining agreement (“the agreement”) with the Library. In accordance with the agreement, a binding arbitration hearing was held in June, 1981 during which the grievance' was withdrawn and a settlement reached in which the C.I.D. employees were promised preferential treatment in obtaining new Library jobs. The arbitrator maintained jurisdiction over any settlement issues until October 1, 1981.

On May 26, 1981, Gilliard and other C.I.D. employees were informed that they would be terminated on June 30, 1981 unless they accepted lower paying positions. On June 30, 1981 the C.I.D. division of the Library was dissolved. Having been refused employment with the Library’s newly created computer unit, Gilliard assumed a lower position in another division of the Library with a consequent reduction in salary. Shortly before April 20, 1981, the only white employee of C.I.D. was offered and accepted a lateral transfer. On March 24, 1982 Gilliard filed a complaint with the EEOC alleging that his demotion was a result of racially based discrimination. Gilliard subsequently commenced this action on behalf of himself and all other similarly situated minority employees of C.I.D. on February 14, 1984. He charges the Library with the intentional infliction of emotional distress, negligence, interference with economic relations, breach of contract, and interference with Gilliard’s contractual relationship. In addition, it is assumed by Gilliard’s references to Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq., and 42 U.S.C. §§ 1981, 1983 and 1985 in the “jurisdiction” section of his complaint that he also asserts causes of action pursuant to those statutes based on both the dissolution of C.I.D. and his subsequent demotion and on the Library’s alleged pattern and practice of discrimination against Gilliard and other minority employees. Such federal claims, however, are not properly stated and numbered.

Asserting that all Gilliard’s federal claims are time-barred, the Library has now moved for an order pursuant to Rule 12(b)(6) dismissing Gilliard’s claims under Title VII and 42 U.S.C. §§ 1981, 1983 and 1985 and the state law claims of negligence and intentional infliction of emotional distress and for an order pursuant to Rule 56(b) granting summary judgment in favor of the. Library as to Gilliard’s contractual claims.

The primary issue presented by the motions is whether Gilliard’s federal causes of action are barred by the applicable statutes of limitations, a decision which may also determine the status of the pendent state claims. United Mine Workers of America v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966). The resolution of this issue rests first on a determination of the applicable statutes, and more importantly, on a détermination of the date on which the specific causes of action accrued.

The Federal Statutory Claims

Preliminarily, we note that Gilliard’s § 1983 claims must be dismissed because the Library’s employment decisions do not satisfy the “state action” requirements of section 1983. A prerequisite for any relief under § 1983 is a showing that the defendant has acted under color of state law. Graseck v. Mauceri, 582 F.2d 203 (2d Cir.), cert. denied, 439 U.S. 1129, 99 S.Ct. 1048, 59 L.Ed.2d 91 (1979). The test of whether or not a private group’s actions constitute state action is whether there is “a sufficiently close nexus between the state and the challenged action of the entity so that the action of the latter may be fairly treated as that of the state itself.” Jackson v. Metropolitan Edison Co., 419 U.S. 345, 351, 95 S.Ct. 449, 453, 42 L.Ed.2d 477 (1974). In order to claim that a private employers decision should be treated as state action a plaintiff must prove that the state “has exercised coercive power or has provided such significant encouragement, either overt or covert, that the choice must be in law deemed that of the State.” Blum v. Yaretsky, 457 U.S. 991, 1004, 102 S.Ct. 2777, 2786, 73 L.Ed.2d 534 (1982). The two major factors that courts rely upon in making this decision are the extent to which the private group performs a function that “has been traditionally the exclusive prerogative of the state.” Rendell-Baker v. Kohn, 457 U.S. 830, 842, 102 S.Ct. 2764, 2772, 73 L.Ed.2d 418, and the degree to which it receives state funding. Id.

Gilliard’s only attempt to meet this required showing of “state action” is his bare allegation in the complaint that “[u]pon information and belief defendant New York Public Library (“NYPL”) is a quasi-governmental entity supported by funds from the City and State of New York” (Complaint, ¶ 3). His papers on this motion provide no further support for this allegation. In New York Public Library v. PERB, 45 A.D.2d 271, 274, 357 N.Y.S.2d 522, 525 (1st Dep’t 1974), aff'd, 37 N.Y.2d 752, 374 N.Y.S.2d 625, 337 N.E.2d 136 (1975), the court held that the Library was not a government or public employer within the meaning of the Taylor Act, Civil Service Law § 201. After carefully reviewing both the historical background and the manner of operation of the Library, the court noted:

[N]ot only is the Library a separate and distinct body from the City, but by contract it (the Library) retains general control over the direction and management of its own affairs. And more specifically, by contract and in practice, the hire, discharge and promotion of the employees, as well as the supervision of their daily and overall duties are vested in the Library____ There is no proof in the record- that the City interferes in these matters or has the power to do so.

Id. at 528. Cf. La Marca v. Brooklyn Public Library, 256 A.D. 954, 10 N.Y.S.2d 129 (2d Dep’t 1939); Brooklyn Public Library v. Craig, 201 A.D. 722, 194 N.Y.S. 715 (1922). Gilliard’s bare assertion that the Library is a “quasi-governmental entity” is not enough to overcome a judicial determination of the Library’s independence from the State. Gilliard’s assertion that the Library is supported by government funds also fails to meet the requirement of a showing of state action. As the Supreme Court has noted, the mere receipt of public funds by an entity “does not make [that entities’] discharge decisions acts of the State.” Rendell-Baker v. Kohn, supra, 457 U.S. at 840, 102 S.Ct. at 2771. While state funding may be a.factor in determining if a private group’s action were taken under color of state law, state funding alone does not transform employment decisions into “state action” for purposes of § 1983. Id.

In addition, Gilliard’s § 1985 claims of conspiracy must be dismissed for failure to state a cause of action. Section 1985 requires a conspiracy between “two or more persons,” a requirement that is not met where a conspiracy alleged “is essentially a single act by a single corporation acting exclusively through its own directors, officers and employees, each acting within the scope of his employment.” Herrmann v. Moore, 576 F.2d 453, 457 (2d Cir.), cert. denied, 439 U.S. 1003, 99 S.Ct. 613, 58 L.Ed.2d 679 (1978); see Girard v. 94th St. & 5th Ave. Corp., 530 F.2d 66, 70 (2d Cir.), cert. denied, 425 U.S. 974, 96 S.Ct. 2173, 48 L.Ed.2d 798 (1976). In this case, Gilliard has charged that “two or more of the defendants” (Complaint at 2), all of whom are employees of the Library (Complaint, ¶ 54), conspired to deprive him of his rights. Because he has failed to allege that these employees acted other than in the normal course of their duties or were “motivated by an independent personal stake in achieving the corporation’s objective,” Girard v. 94th St. & Fifth Ave. Corp., supra, 530 F.2d at 72, Gilliard’s claim of conspiracy among the defendants fails to meet the requirements of § 1985.

Gilliard’s complaint also alleges the existence of a conspiracy within § 1985 between the Library and the Union (Complaint, ¶¶ 68, 79). As this Circuit has repeatedly held, however, when conspiracy is alleged “complaints containing only vague or conclusory allegations will not survive a motion to dismiss.” Legal Aid Society v. Association of Legal Aid Attorneys, 554 F.Supp. 758, 766 (S.D.N.Y.1982); see Angola v. Civiletti, 666 F.2d 1, 4 (2d Cir.1971); Ostrer v. Aronwald, 567 F.2d 551, 553 (2d Cir.1977). Gilliard has failed to plead with particularity the conspiracy alleged between the Library and the Union. His conclusory allegations are insufficient to meet “the somewhat stringent pleading requirements of this Circuit” when conspiracy is alleged. 423 South Salina St. v. City of Syracuse, 566 F.Supp. 484, 493 (N.D.N.Y.1983); see also Legal Aid Society v. Association of Legal Aid Attorneys, supra, 554 F.Supp. at 766.

Because Gilliard’s complaint offers little guidance, we must also delineate the precise federal causes of action brought pursuant to Title VII and § 1981. Gilliard plainly claims that the Library’s decision to dissolve C.I.D. and to terminate his employment with the unit was discriminatory. The complaint also appears to allege another cause of action arising out of the Library’s treatment of Gilliard relative to non-minority employees after it notified him of its decision as to C.I.D. Finally, Gilliard alleges that the Library has engaged in a general pattern and practice of discrimination in areas including pay structure, training, benefits and promotions. Each of these causes of action must be dealt with separately for statute of limitations purposes.

Because Congress did not establish a statute of limitations applicable to actions brought under 42 U.S.C. § 1981, the most analogous state statute of limitations is binding. Board of Regents v. Tomanio, 446 U.S. 478, 100 S.Ct. 1790, 64 L.Ed.2d 440 (1980); Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 95 S.Ct. 1716, 44 L.Ed.2d 295 (1975). The applicable statute of limitations for federal civil rights claims brought in New York is N.Y.C.P.L.R. § 214(2), which provides for a three year period. Pauk v. Board of Trustees of City University of New York, 654 F.2d 856 (2d Cir.1981), cert. denied, 455 U.S. 1000, 102 S.Ct. 1631, 71 L.Ed.2d 866 (1982); Hudson v. IBM, 620 F.2d 351, 352 n. 2 (2d Cir.), cert. denied, 449 U.S. 1066, 101 S.Ct. 794, 66 L.Ed.2d 611 (1980); Montagna v. O’Hagan, 402 F.Supp. 178, 180 (E.D.N.Y.1975). The appropriate statute of limitations for Title VII claims brought in New York is governed. by 42 U.S.C. § 2000e-5(e) which holds that a plaintiff must file with the EEOC within 300 days of the discriminatory act. Timely filing is a prerequisite for bringing suit in federal court, although the requirement may be excused on equitable grounds. Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 102 S.Ct. 1127, 71 L.Ed.2d 234 (1982).

The Dissolution of C.I.D.

If the date on which the cause of action relating to the dissolution of C.I.D. and the termination of Gilliard’s job with the unit accrued is considered to be June 23, 1980, the day on which he received notification of C.I.D.’s future dissolution, both the 42 U.S.C. § 1981 claim and the Title VII claim are time barred. The EEOC claim was filed more than 300 days later, on March 24, 1982, and the § 1981 claim was brought more than three years later. Gilliard argues, however, that the cause of action did not accrue until, at the earliest, June 30, 1981, the day on which he was actually demoted, that because he has asserted a continuing violation, the limitation period has not yet begun to run, and that therefore the claims are timely.

The actual event giving rise to this claim was the termination of Gilliard’s employment with C.I.D. on June 30, 1981. Numerous cases have held, however, that the statutory limitation period begins to run when an employee is notified of the employer’s decision to terminate the employee, not when the actual termination occurs. Chardon v. Fernandez, 454 U.S. 6, 102 S.Ct. 28, 70 L.Ed.2d 6 (1981); Delaware State College v. Ricks, 449 U.S. 250, 101 S.Ct. 498, 66 L.Ed.2d 431 (1980); Pauk v. Board of Trustees of City University of New York, supra, 654 F.2d 856; Vuksta v. Bethlehem Steel Corp., 540 F.Supp. 1276, 1279 (E.D.Pa.1982). The notification itself is sufficient to inform the employee that his rights have been violated. As the Supreme Court noted in Chardon, “respondents were notified, when they received their letters, that a final decision had been made to terminate their appointments. The fact that they were afforded reasonable notice cannot extend the period within which the suit must be filed.” Chardon v. Fernandez, supra, 454 U.S. at 8, 102 S.Ct. at 29. Gilliard’s attempt to distinguish his demotion from Ricks and Chardon is not convincing; even if the decision to terminate his employment with C.I.D. was not effective until the actual date of the demotion, the demotion itself was a mere result of the earlier decision and not a separate discriminatory act.

Gilliard argues, however, that the notification letter was in itself “facially neutral” and that the discriminatory basis of the dissolution and his termination only became apparent during the following year. While the Library’s subsequent action may have revealed the discriminatory purpose or effect of its decision to terminate Gilliard’s job with C.I.D., the actual violation, alleged to be the elimination of the position, was complete as of the date of notification. At that time Gilliard was informed that he would be terminated unless he found another Library job, that no effort would be made by the Library to secure him another job, and that he would be given no priority in obtaining positions. The crux of Gilliard’s termination complaint is that the Library followed through on its initial decision. For accrual purposes, the carrying out of the decision made and communicated on June 23, 1980 is not in itself a separate violation, and the date of notification remains the relevant date for determining the accrual of Gilliard’s cause of action for the termination of his former position. Delaware State College v. Ricks, supra.

In addition, the facts do not support Gilliard’s argument that this claim of position elimination involves an ongoing violation, thereby exempting him from the strict time limitations of Title VII and the Civil Rights Act under the doctrine of continuing discrimination. When a cause of action is based not on a discrete act of discrimination but rather on an ongoing violation, the doctrine of continuing discrimination operates to remove the limiting time requirements in order to “provide a remedy for past actions which operate to discriminate against the plaintiff at the present time.” Olson v. Rembrandt Printing Co., 511 F.2d 1228, 1234 (8th Cir.1975). As the Supreme Court has noted, however, merely alleging a present effect of past discrimination is not sufficient to establish an ongoing violation. Delaware State College v. Ricks, supra, 449 U.S. at 258, 101 S.Ct. at 504; United Airlines, Inc. v. Evans, 431 U.S. 553, 97 S.Ct. 1885, 52 L.Ed.2d 571 (1977). The primary question is if there is a present violation of terminated positions, not just a present effect of the past termination. Goldman v. Sears, Roebuck & Co., 607 F.2d 1014, 1017 (1st Cir.), cert. denied, 445 U.S. 929, 100 S.Ct. 1317, 63 L.Ed.2d 762 (1979). In this case, Gilliard alleges that his salary remains at a lower level than before and that his career plans have been impaired by the Library’s decision to dissolve C.I.D. These claims do not represent anything other than mere effects of the prior violation. See United States v. Smith, 649 F.2d 305 (5th Cir.1981), cert. denied, 460 U.S. 1068, 103 S.Ct. 1521, 75 L.Ed.2d 945 (1983).

Furthermore, Gilliard may not transform his claim as to C.I.D.’s dissolution and the termination of his job with the unit into an ongoing violation simply by simultaneously alleging a persistent and ongoing pattern of discrimination by the Library. While these claims may in themselves state a cause of action, and certainly represent evidence that may support his claim of discrimination, they do not in themselves support a finding that the dissolution of C.I.D. and the subsequent termination of Gilliard’s employment with the unit consisted of an ongoing violation. In Malarkey v. Texaco, Inc., 559 F.Supp. 117 (S.D.N.Y.1982), aff'd 704 F.2d 674 (2d Cir.1983), the plaintiff’s complaint alleged a long term pattern of sex discrimination in addition to specific allegations of discriminatory demotions. The Court held that the earlier of the demotions was barred by the statute of limitations despite plaintiff’s claims that it was part of a persistent pattern of discrimination: “Completed acts such as termination through discharge or resignation, a job transfer, or discontinuance of a particular job assignment, are not acts of a ‘continuing nature.’ ” Id. at 121 (quoting Corbin v. Pan American World Airways, 432 F.Supp. 939, 944 (N.D.Cal.1977)). A plaintiff may not simply characterize a discrete act of discrimination as ongoing in order to circumvent stringent time limits. Ricks, supra, 449 U.S. at 258, 101 S.Ct. at 504; Corbin v. Pan American World Airways, supra, 432 F.Supp. at 944.

Finally, nothing in this case suggests that equity requires excusing Gilliard’s untimely filing with the EEOC. Although the Supreme Court ruled in Zipes v. Trans World Airlines, Inc., supra, 455 U.S. 385, 102 S.Ct. 1127, 71 L.Ed.2d 234 that the timely filing of an EEOC charge is not a jurisdictional prerequisite to bringing a Title VII suit in federal court but rather a requirement subject to waiver, estoppel or tolling when equity requires, Gilliard has given no evidence that equitable considerations weigh in favor of excusing his untimely filing. Gilliard does not allege that the Library wrongfully concealed facts from him, Reeb v. Economic Opportunity Atlanta, Inc., 516 F.2d 924, 928 (5th Cir.1975) or otherwise engaged in behavior that would merit extending the applicable time limits. See Hart v. J.T. Baker Chemical Corp., 598 F.2d 829, 932 (3d Cir.1979). Gilliard was aware right from the day notice was first given concerning the elimination of the unit that the Library had no intention of helping him find alternative employment on the same level. In any event, later attempts to mitigate the effects of a discriminatory act will not be held to estop defendant from asserting the statute of limitations, absent evidence of a deliberate design by the employer or of actions that the employer should unmistakably have understood would cause the employee to delay filing his charge. Price v. Litton Business Systems, Inc., 694 F.2d 963, 965 (4th Cir.1982). Gilliard’s federal statutory claims as to the discriminatory basis of C.I.D.’s dissolution and the termination of his employment with the unit, therefore, must be dismissed as untimely.

Post-Notification Action

Gilliard’s complaint also suggests the existence of a separate cause of action under Title VII and § 1981 based on the Library’s actions after its decision to dissolve C.I.D. In the complaint he alleges that he and the other members of the division were notified on May 26, 1981 that they would be terminated on June 30, 1981 “if they did not accept lower paying positions.” (Complaint, ¶ 26). He also alleges that in April of 1981 the only white employee of C.I.D. was given a lateral transfer and that white employees in other reorganized units were maintained at their prior grade and salary levels. (Complaint, ¶ 36).

The Library apparently views these allegations, as an aspect of Gilliard’s complaint about the dissolution of C.I.D. and his subsequent demotion. Read in a light most favorable to the plaintiff, however, these allegations are in themselves sufficient to state an independent cause of action. Gilliard’s initial complaint pertains to the termination of C.I.D. The claim of demotion, on the other hand, relates to the Library’s discriminatory treatment of him once the decision to dissolve C.I.D. had been made. Even if this cause of action was not denominated as such in his complaint, Gilliard’s allegations of racial discrimination are sufficient to state a claim under Title VII and § 1981.

The date on which this cause of action accrued was May 26, 1981, when Gilliard and other C.I.D. employees were informed that they would have to take lower level jobs. Chardon v. Fernandez, supra, 454 U.S. 6, 102 S.Ct. 28, 70 L.Ed.2d 6; Pauk v. Board of Trustees of City University of New York, supra, 654 F.2d 856. The EEOC claim, however, was filed more than 300 days after the cause of action accrued. As noted above, nothing in this case suggests that equity requires excusing his untimely filing of the EEOC charge. See, e.g., Hart v. J.T. Baker Chemical Corp., supra, 598 F.2d at 932. Accordingly, Gilliard’s claim under Title VII as to the Library’s discriminatory actions after it decided to dissolve C.I.D. is dismissed. Because the § 1981 claim was filed within three years of this date, however, it is timely.

Pattern of Discrimination

Gilliard also alleges in his complaint that the Library has engaged in.a long term pattern and practice of racial discrimination against its black employees. Specifically, he states that the Library assigns black persons to racially-segregated areas, denies them access to jobs offering opportunity for advancement, fails to promote or transfer black employees, denies them access to training and to notice of new jobs, pays blacks at a lower rate and denies them salary increases, gives blacks poor job performance evaluations, provides blacks with inferior fringe benefits, and terminates a disproportionate number of black employees. These allegations are sufficient to state a cause of action under Title VII and § 1981. In addition, because this claim by its very nature alleges a continuing violation, there is no relevant date on which the cause of action accrued, Olson v. Rembrandt Printing Co., supra, 511 F.2d at 1234, and the claim is not barred by the statute of limitations.

Even though the claim was filed in a timely fashion, however, the Title VII claim must be dismissed. The general rule is that Title VII claims can only be maintained in federal court if they are reasonably related to the allegations brought before the EEOC. Claims which are “not within the scope of the EEOC investigation which reasonably could be expected to grow out of the administrative charge are properly subject to dismissal for lack of subject jurisdiction.” Grant v. Morgan Guaranty Trust Co. of New York, 548 F.Supp. 1189, 1191 (S.D.N.Y.1982). In this case, Gilliard’s EEOC claim states that “I am non-white and have been denied equal terms, conditions and privileges of employment and demoted on or about July 1, 1981.” (Exhibit D of defendant’s motion). Even if Gilliard is given the benefit of a broad reading of the EEOC complaint, the allegations as to a general pattern of discrimination by the Library fall outside of the scope of the charge. Gilliard’s EEOC charge was limited to a claim of discriminatory discharge. Because the EEOC charge did not give the Library sufficient notice of Gilliard’s intention to raise allegations pertaining to discrimination in wages, benefits and training, Gilliard’s Title VII claim as to these allegations must be dismissed. Ferguson v. Mobil Oil Corp., 443 F.Supp. 1334, 1337-38 (S.D.N.Y.1978), aff'd without op, 607 F.2d 995 (2d Cir.1979); Hubbard v. Rubbermaid, Inc., 436 F.Supp. 1184, 1193 (D.Md.1977).

Contract Claims

Gilliard has characterized his remaining claims, including the breach of contract, interference with economic relations and interference with contractual relationship claims, as state causes of action which are pendent to his federal causes of action. The Library, on the other hand, contends that even though Gilliard’s complaint is pleaded solely in terms of state law as far as these claims are concerned, it alleges facts that state a claim under section 301(a) of the Labor-Management Relations Act, 29 U.S.C. § 185(a) (“Section 301(a)”) and that such claims are uniquely federal causes of action. The Library further argues that the distinction is significant because the § 301(a) claims are time-barred.

Because these claims all involve the collective bargaining agreement between the Library and the Union, they could have been brought pursuant to section 301(a), which provides a mechanism by which an employee may sue in federal court to enforce, as a matter of federal labor law, a collective bargaining agreement. Smith v. Evening News Ass’n, 371 U.S. 195, 200, 83 S.Ct. 267, 270, 9 L.Ed.2d 246 (1962). The general rule is that where the facts of a case support both a federal and a state law claim, “the party who brings the suit is master to decide what law he will rely upon.” The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25, 33 S.Ct. 410, 411, 57 L.Ed. 716 (1913). This rule is not applicable, however, if the state law relied upon has been preempted by federal law. North American Phillips Corp. v. Emery Air Freight Corp., 579 F.2d 229, 233-34 (2nd Cir.1978); Alameda Room, Inc. v. Pitta, 538 F.Supp. 1072 (S.D.N.Y.1982).

Because the substantive state contract law relied upon by Gilliard has been preempted by the federal labor law that governs actions under Section 301(a), Gilliard’s contract claims must be dealt with as federal claims. The Supreme Court has repeatedly held that substantive federal law applies to suits on collective bargaining agreements covered by § 301(a). Republic Steel v. Maddox, 379 U.S. 650, 655, 85 S.Ct. 614, 617, 13 L.Ed.2d 580 (1964); Local 174, Teamsters v. Lucas Flour, 369 U.S. 95, 103-04, 82 S.Ct. 571, 576-77, 7 L.Ed.2d 593 (1962); Textile Workers v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957). Because “the subject matter of § 301(a) is peculiarly one that calls for uniform law’,” Pennsylvania R Co. v. Public Service Comm’n., 250 U.S. 566, 569, 40 S.Ct. 36, 37, 64 L.Ed. 1142 (1919), the Court has concluded that “[t]he dimensions of [section 301(a)] require the conclusion that substantive principles of federal labor law must be paramount in the area covered by the statute.” Local 174, Teamsters v. Lucas Flour, supra, 369 U.S. at 103, 82 S.Ct. at 576. Gilliard’s decision to characterize these claims as state claims does not affect the applicability of federal law; as the Sixth Circuit has held:

[a]ll rights and claims arising from a collective bargaining agreement in an industry affecting interstate commerce arise under Federal Law. State law does not exist as an independent source of private rights to enforce collective bargaining contracts. While State courts may have concurrent jurisdiction, they are bound to apply Federal law____ The force of Federal preemption in this area of labor law cannot be avoided by failing to mention Section 301 in the Complaint.

Avco Corp. v. Aero Lodge No. 735, Int’l Ass’n of Machinists and Aerospace Workers, 376 F.2d 337, 339-40 (6th Cir.1967), aff'd, 390 U.S. 557, 88 S.Ct. 1235, 20 L.Ed.2d 126 (1968). See also Brown v. United Parcel Service, Inc., 560 F.Supp. 146 (1982); Alameda Room Inc. v. Pitta, supra, 538 F.Supp. at 1076-1077.

Because Gilliard’s contract claims arise solely under Federal law, the relevant statute of limitations for Section 301 claims must be applied. The Supreme Court has held that the timeliness of most Section 301 suits should be determined “by reference to the appropriate state statute of limitations.” United Auto Workers v. Hoosier, 383 U.S. 696, 704, 86 S.Ct. 1107, 1113, 16 L.Ed.2d 192 (1966). An examination of the complaint and the papers submitted in connection with this motion, however, reveals that Gilliard’s contract claims fall squarely within the parameters of Del Costello v. International Brotherhood of Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983). Del Costello involved a suit by employees against an employer and union following an arbitration procedure in which they alleged that the employer breached provisions- of a collective bargaining agreement and that the union breached its duty of fair representation. The Court differentiated between the claim before it and more straightforward suits under section 301 of the Labor Management Relations Act, 29 U.S.C. § 185, for breach of a collective bargaining agreement by an employer, see, e.g., Auto Workers v. Hoosier, 383 U.S. 696, 86 S.Ct. 1107, 16 L.Ed.2d 192 (1966), by noting both that the case involved an agreement to submit disputes to arbitration and that the employee was also objecting to the union’s activities during the grievance and arbitration procedure: “The suit is thus not a straightforward breach of contract suit under § 301, as was Hoosier, but a hybrid § 301/fair representation claim, amounting to ‘a direct challenge to the private settlement of disputes under [the collective-bargaining agreement]’ ” Id. at 2291; (citations omitted). In such a case, the Court ruled, the applicable limitations period is provided by section 10(b) of the National Labor Relations Act, as amended, 29 U.S.C. § 160(b), which establishes a six-month limitation period.

In the case at hand, Gilliard is suing only his employer and not the Union. As the Court in Del Costello noted, however, “[t]he employee may, if he chooses, sue one defendant and not the other; but the case he must prove is the same whether he sues one; the other, or both.” Id. at 2291. Gilliard’s relations with the Library are governed by a collective bargaining agreement that requires the employee to submit to arbitration and which holds that an arbitration award will be final and binding; all of his contract claims either relate to the grievance at issue in the settlement between the Union and the Library, or arise under the collective bargaining agreement. To succeed on his claims against the Library which relate to the grievance settled by the Union, Gilliard would have to show that the Union did not properly represent him in its dealings with the Library. Gilliard would have to make the’ same showing to succeed on any claims that he did not pursue through the procedures established in the collective bargaining agreement. Numerous cases have held that a plaintiff may not bring an action under section 301 until he has exhausted all administrative remedies. See, e.g., Republic Steel Corp. v. Maddox, supra, 379 U.S. 650, 85 S.Ct. 614, 13 L.Ed.2d 580; Dinger v. Anchor Motor Freight, Inc., 501 F.Supp. 64, 70-71 (S.D.N.Y.1980). An exception exists only when a plaintiff can show that pursuing those remedies would be useless because of inadequate representation by a union.

Thus, Gilliard’s contract claims necessarily involve both contractual claims against the Library and fair representation claims. The Court in Del Costello chose to deal with cases involving allegations of inadequate representation by unions in a different manner because such cases involve a breakdown in normal administrative procedures. In this ease, Gilliard is implicitly challenging the manner in which the Union and the Library resolve problems arising under the collective bargaining agreement. His decision not to sue the Union does not affect the status of these claims as hybrid section 301/fair representation claims within the meaning of Del Costello.

Even if the latest possible date on which these claims can be seen to have accrued is used — June 30, 1982, when Gilliard was demoted — this suit was filed more than six months after the commencement of the limitations period. Thus Gilliard’s contract claims are barred by the six-month statute of limitations imposed by Del Costello. Summary judgment is entered for the Library.

State Claims

Finally, the Library has moved to dismiss Gilliard’s state tort claims of intentional infliction of emotional distress and negligence for failure to state a cause of action. Gilliard’s cause of action for negligence is based on the Library’s alleged failure to establish adequate grievance policies and procedures as to employee suspension, termination and grievances, and its failure to hire, train and oversee competent supervisors. This court has found no case under New York law allowing a negligence claim in a fact situation such as this. In situations where a defendant’s employee caused physical injury to a third party and the defendant was negligent in selecting or controlling the employee, New York courts have recognized an employer’s duty to refrain from hiring employees whom the employer reasonably should have known to be dangerous and to exercise reasonable care in hiring and supervising employees. See Bushey & Sons, Inc. v. United States, 276 F.Supp. 518, 525 (E.D.N.Y.1967); Spica v. Connor, 56 Misc.2d 364, 288 N.Y.S.2d 719, 723 (Suffolk County 1968). These cases, however, are not relevant to an employment discrimination case where no physical injury is involved. No New York court has extended an employer’s duty to hire or supervise its employees to cases in which the alleged negligence is a failure to establish adequate grievance procedures or to prevent employees from acting in a discriminatory manner. But see Buddle v. Heublein, Inc., 81 Civ. 7671 (S.D.N.Y. Jan. 25, 1984).

Furthermore, both Gilliard’s negligence claim and his intentional infliction of emotional distress claim must be dismissed for failure to exhaust his grievance remedies. Even though these claims are characterized as causes of actions in tort, all the acts complained of constitute grievances under the collective bargaining agreement. Gilliard’s cause of action for the intentional infliction of mental distress is based entirely on the Library’s decisions to dissolve C.I.D. and to demote Gilliard. As noted above, his cause of action for negligence is based on the Library’s alleged failure to establish grievance procedures and to supervise its employees. In both cases, these claims could have been pursued through the Union as violations of the collective bargaining agreement.

If Gilliard had challenged the Library’s conduct as a violation of the agreement, however, his claim would have been barred for the same reasons that his contract claims were dismissed above. In a similar case, Dinger v. Anchor Motor Freight Inc., supra, 501 F.Supp. 64, the court refused to allow a plaintiff pleading intentional infliction of emotional distress for claims that arose under a contract to bypass the normal grievance procedures established by the agreement: “I do not see a reason ... why plaintiffs failure to exhaust his grievance remedies should not also bar a claim framed in tort, at least where as here, all the acts complained of constituted grievances under the agreement.” Id. at 71. As the court went on to explain,

It is foreseeable and understandable that any employee who allows unresolved grievances to accumulate can reach a point of suffering emotional distress from feeling that he has been repeatedly wronged ... This does not change a contract claim into a tort claim ____ Moreover to allow him to reach that point without submitting his grievances to dispute resolution machinery which the union and the employee have chosen as exclusive and to allow him to proceed in court on a tort theory would deprive both parties to the agreement of the benefit of their bargain. This could result in making employees less willing to bind themselves to exclusive grievance-arbitration machinery and could undermine the union’s position as collective bargaining representative.

Furthermore, just as Gilliard’s reliance on substantive state contract law was misplaced because of the preemption doctrine, his reliance on state tort law must fail because the tort law has been preempted by section 301 of the Labor-Management Relations Act. See Avco Corp. v. Aero Lodge No. 735, Int’l Ass’n of Machinists and Aerospace Workers, supra, 376 F.2d at 339-40 (“All rights and claims arising from a collective bargaining agreement in an industry affecting interstate commerce arise under Federal law.”) In Ramsey v. Signal Delivery Serv., Inc., 631 F.2d 1210, 1212-13 (5th Cir.1980), the Fifth Circuit upheld the dismissal of a plaintiff’s pendent state tort claims for emotional distress on the ground that the common law had been preempted by section 301. The court noted that “[t]he alleged discriminatory treatment accorded plaintiff is precisely the type of conduct the federal labor laws intended to prohibit...”. Id. at 1213. Gilliard may not avoid the consequences of his untimely filing of his section 301 claims by characterizing them as actions in tort.

Conclusion

For the reasons stated above, the Library’s motion to dismiss is granted as to Gilliard’s §§ 1983 and 1985 claims, his claims relating to the termination of his job with C.I.D., his Title VII claims, and his state tort claims. The Library’s motion for summary judgment is granted as to Gilliard’s contract claims; and the Library’s motion to dismiss is denied as to Gilliard’s sections 1981 claims relating to his demotion and to an ongoing pattern and practice of discrimination by the Library.

Discovery will be completed by February 13, 1985 and the pretrial order filed on February 20, 1985.

IT IS SO ORDERED.


source: Caselaw Access Project

author: CACHERIS, District Judge.

license: Public Domain

text:
    Christopher F. WEIGHT, et al., Plaintiffs, v. KAWASAKI HEAVY INDUSTRIES, LTD., et al., Defendants.
    Civ. A. No. 84-0925-A.
    United States District Court, E.D. Virginia, Alexandria Division.
    Nov. 7, 1984.

      Yvonne F. Weight, Bernard S. Cohen, Alexandria, Va., for plaintiffs.
    George.F. Cronin, Jr.,-Fairfax, Va., Michael Esher Yaggy, Carl F. Ameringer, Niles, Barton & Wilmer, Baltimore, Md., for defendants Kawasaki Motors Corp.
    Joseph A. Shull, Arlington, Va., James K. Archibald, Lawrence H. Norton, Venable, Baetjer and Howard, Baltimore, Md., for defendant Kawasaki Heavy Industries, Ltd.
   MEMORANDUM OPINION

CACHERIS, District Judge.

This matter is before this court on the plaintiffs’ motion for remand and defendant Kawasaki Heavy Industries, Ltd.’s (“KHI”) motion to dismiss for insufficiency of service of process. For reasons set forth below, the court denies plaintiffs’ motion for remand and rules that KHI was properly served with process.

I

Background

On August 2, 1984, plaintiff, Christopher F. Weight filed his motion for judgment in the Circuit Court for the City of Alexandria. The plaintiff alleges negligence and breach of warranty for injuries sustained in a motorcycle accident. The motorcycle was manufactured by defendant KHI and distributed by defendant Kawasaki Motors Corp., U.S.A. (“KMC”).

Pursuant to Virginia Code § 8.01-329 (Repl. Vol. 1984), both defendants were served by the Secretary pf the Commonwealth. Service was made on KMC on August 15, 1984, and KHI received suit papers on August 20, 1984. On September 10, 1984, both defendants filéd a verified petition for removal.

II

It is well established that “the burden of establishing removal jurisdiction rests upon the party seeking to invoke it.” Thompson v. Gillen, 491 F.Supp. 24, 27 n. 4 (E.D.Va.1980). In examining whether jurisdiction exists, the entire record brought forward on removal should be examined. Thompson, 491 F.Supp. at 27 n. 4.

Plaintiffs argue that the petition for removal is defective as to KHI because the petition does not allege where KHI’s principal office and business is located as is required under 28 U.S.C. § 1332(a)(1).

Under § 1332(a)(3), a federal district court has original jurisdiction in cases between “citizens of different States and in which the citizens or subjects of a foreign state are additional. parties.” 28 U.S.C. § 1332(a)(3). Here, the removal petition and the record brought forward with it show (1) plaintiff is a citizen of Virginia, (2) defendant KMC is a citizen of Delaware and California, and (3) KHI, as an additional party, is a citizen of a foreign state (Japan).

An alien corporation is considered a citizen of the foreign state in which it was incorporated. Barrow S.S. Co. v. Kane, 170 U.S. 100, 18 S.Ct. 526, 42 L.Ed. 964 (1898); 13 Wright, Miller and Cooper, Federal Practice and Procedure § 3628 (1975). Thus, KHI is a citizen of Japan.

Since removal jurisdiction is based on 28 U.S.C. § 1332(a)(3), plaintiffs’ argument that the removal petition is deficient because of a failure to allege KHI’s principal place of business is meritless. The principal place of business of an alien corporation is irrelevant in determining diversity jurisdiction. See Roby v. General Tire & Rubber Co., 500 F.Supp. 480 (D.Md.1980); Eisenberg v. Commercial Union Assurance Co., 189 F.Supp. 500 (D.N.Y.1960); 13 Wright, Miller and Cooper, Federal Practice and Procedure § 3628 (1975).

Therefore, the court concludes that KHI has properly removed its case.

Ill

Plaintiffs argue that defendants have failed to remove in a timely fashion. Plaintiffs contend that the time for removal commences from the date of service on the Secretary of the Commonwealth. However, 28 U.S.C. § 1446(b) makes the date of “receipt” the applicable point in time for the beginning of the thirty day time period for removal. It is well settled that the time for seeking removal commences only when the defendant or an agent in fact receives the process. Wright, Miller and Cooper summarize the current state of the law when they state:

“Accordingly, it is now settled law that the time for seeking removal begins to run only when the defendant or an agent in fact receives the process. Technicalities of state law as to completion of service of process are ignored, just as state law generally is disregarded when removal is considered. This approach is both practical and desirable and perfectly consistent with the purposes and language of the federal removal statute.

14 Wright, Miller and Cooper, Federal Practice and Procedure § 3732, p. 723 [footnotes omitted]. See also, Mahony v. Witt Ice and Gas Company, 131 F.Supp. 564 (W.D.Mo.1955); Benson v. Bradley, 223 F.Supp. 669 (D.Minn.1963); Tyler v. Prudential Insurance Co. of America, 524 F.Supp. 1211 (W.D.Pa.1981).

The case law clearly establishes the rule that the thirty-day removal period of § 1446(b) does not begin to run until a defendant actually receives the summons and complaint. In the case at bar, KMC received suit papers on August 15, 1984. KHI received suit papers on August 20, 1984. The verified petition for removal was filed September 10, 1984. Both defendants exercised their right to remove well within the thirty:day period. Therefore, the plaintiffs’ motion for remand is denied.

IV

KHI argues that service was ineffective because it failed to conform to the requirements of the Hague Convention of the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters (20 U.S.T. 361, T.I.A.S. 6638) (the “Convention”). KHI argues that plaintiffs’service of process on KHI in Japan by registered mail, pursuant to Virginia Code Section 8.01-329, ignores the treaty requirement that service be made on. the Japanese “Central Authority” pursuant to Article 5 of the Convention. Secondly, KHI maintains that plaintiffs’ service of process failed to include, a Japanese translation in compliance with the Convention.

Article 10 of the Convention states:

Provided the State of destination does not object, the present Convention shall not interfere with—
(a) the freedom to send judicial documents, by postal channels, directly to persons abroad,
(b) the freedom of judicial officers, officials or other competent persons of the State of origin to effect service of judicial documents directly through the judicial officers, officials, or other competent persons of the State of destination;
(c) the freedom of any person interested in a judicial proceeding to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination.

KHI concedes that Japan has not objected to Article 10(a), while it specifically objected to Articles 10(b) and (c) of the Convention. Indeed, because the Convention has the status of a self-executing treaty, and thus, it constitutes the Supreme law of the land under Article VI of the United States Constitution, Article 10(a) takes precedence over state law. Vorhees v. Fischer & Krecke, 697 F.2d 574 (4th Cir.1983).

According to the Practical Handbook on the Operation of the Hague Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (1983) (“Handbook”), “Japan has not declared that it objects to service through postal channels.” Handbook, at 112. Accordingly, under Article 10(a), service on KHI, a Japanese corporation, was effective by the direct mail procedure pursuant to Virginia Code Section 8.01-329. See e.g., Shoei Kako Co. v. Superior Court, 33 Cal.App.3d 808, 109 Cal.Rptr. 402 (1973) (service by registered mail on a Japanese defendant valid under Article 10(a) of the Convention).

On the issue of a Japanese translation, this court finds KHI’s position to be without merit. A Japanese translation is required only when service of process is. transmitted through the “Central Authority” pursuant to Article 5 of the Convention. See Article 5 of the Convention. However, Article 10(a) of the Convention contains no such requirement for direct postal service. See generally Shoei Kako Co. v. Superior Court, 33 Cal.App.3d 808, 109 Cal.Rptr. 402 (1973).

V

For the above reasons, the court denies plaintiffs’ motion for remand and defendant KHI’s motion to dismiss for lack of proper service. The parties may undertake discovery on the question of KHFs contacts with Virginia to determine whether this court has jurisdiction.

An appropriate order shall issue.

      . The Handbook’s publisher; the Hague Conference on Private International Law, specifically noted that the Handbook was a product of "close co-operation” between the signatory States and its organization. Handbook, at V.


author: GENE CARTER, District Judge.

text:
    N.A. BURKITT, INC., Plaintiff, v. J.I. CASE CO., Defendant.
    Civil No. 83-0094-P.
    United States District Court, D. Maine.
    Nov. 8, 1984.

      John B. Graustein, Drummond, Wood-sum, Plimpton & MacMahon, Portland, Me., for plaintiff.
    David M. Hirshon, Thompson, Willard & McNaboe, Portland, Me., for defendant.
   MEMORANDUM AND ORDER DENYING DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT

GENE CARTER, District Judge.

I.

The Defendant manufactures construction equipment and sells it through dealers in Maine, including Plaintiff. By letter dated January 21, 1983, Defendant notified Plaintiff that because the Plaintiff had achieved inadequate sales volume, the Defendant was terminating the dealership agreement effective on April 23, 1983, or 90 days after Plaintiff’s receipt of the letter, whichever was later. Plaintiff brought suit alleging that (1) Defendant had violated Maine’s Regulations of Business Practices Between Motor Vehicle Manufacturers, Distributors and Dealers, 10 M.R.S.A. §§ 1171, et seq. (Supp.1983) (the “1981 Act”); (2) Defendant had violated the 1975 version of the same act, 10 M.R.S.A. §§ 1171, et seq. (1964) partially repealed by 1981 Maine Laws ch. 331, §§ 4-6 & ch. 470, §§ A 23-25 (the “1975 Act”); and (3) Defendant had breached its agreement with Plaintiff. The dealership agreement had been entered into during 1979 and amended in 1980, while the 1975 Act was in force. The termination letter was sent after the effective date of the 1981 Act.

Defendant moved for partial summary judgment on the notice issues, contending that it had complied with the notice provisions of the 1975 Act and no more was necessary. The 1975 Act required that manufacturers provide a written notice of cancellation, setting forth the specific ground therefor, at least sixty days before the effective date of cancellation. 10 M.R.S.A. § 1174(3)(C) (prior to amendment). Plaintiff asserts that Defendant was required to comply with the 1981 Act, which repealed § 1174(3)(C), and enacted new notice provisions including one that a manufacturer cancelling because of a dealer’s inadequate sales or service performance provide the dealer with a six-month opportunity to cure the performance. Id. § 1174(3)(P)(2). Plaintiff also contends that Defendant has not complied with the notice provisions of the 1975 Act. Defendant counters that the 1981 amendments were not intended to apply to dealership agreements already in effect and that to apply them to agreements like the instant one would impair the obligation of contract, in violation of both the United States and Maine Constitutions.

On April 6, 1984, United States Magistrate D. Brock Hornby recommended that Defendant’s motion be granted. He found that (1) Defendant had complied with the 1975 notice requirements; (2) the 1981 Amendments were intended to apply to dealership agreements already in effect at the time of their enactment; (3) the 1981 imposition of a six-month right-to-cure violated the Maine Constitution, article 1, section 11.

Plaintiff objected to the Magistrate’s finding that application of the 1981 amendments to the instant franchise would violate the Maine Constitution and that the notice given by Defendant meets the requirements of the 1975 Act. Due to the importance of the constitutional issue, this Court ordered that supplemental briefs be filed and scheduled oral argument. Having carefully considered the record, including the recommended decision of the Magistrate and the written and oral presentations of counsel, the Court has determined that Maine law is consonant with federal law on impairment of contracts and that under the most recent pronouncement of federal law, Energy Reserves Group, Inc. v. Kansas Power and Light Co., 459 U.S. 400, 103 S.Ct. 697, 74 L.Ed.2d 569 (1983), application of the 1981 amendments violated neither the Maine nor the United States Constitution.

II.

In analyzing the 1981 amendments, the Magistrate found that the legislature intended them to apply to dealership agreements already in effect. The Court adopts this sound conclusion. As the Magistrate states, the 1981 Act’s repeal of the 1975 Act would leave a gap in coverage of preexisting dealerships if the 1981 Act does not apply to them. Moreover, to find that the legislature intended dealership agreements to be covered only by the law in effect when they were executed would create grave problems of enforcement.

The Magistrate’s subsequent determination that application of the 1981 amendments to the instant dealership agreement violated the Maine Constitution relied on Portland Savings Bank v. Landry, 372 A.2d 573 (Me.1977), a case in which a statute reducing the redemption period of mortgages was found unconstitutional. In Landry the Law Court quoted both the Maine Law Court and United States Supreme Court and set forth the test for determining whether legislation impairs contractual obligations:

“The obligation of contract, in the constitutional sense, is the means provided by law by which it can be enforced, — by which the parties can be obliged to perform it. Whatever legislation lessens the efficacy of the means impairs the obligation. If it tends to postpone or retard the enforcement of the contract, the obligation of the latter is to that extent weakened.”
Accord, Canal National Bank v. School Administrative District, 160 Me. 309 [203 A.2d 734] (1964). Thus, where a statute lessens the value of a contract to the parties, the constitutional prohibition has been violated. See Bank of Minden v. Clement, 256 U.S. 126, 128 [41 S.Ct. 408, 408, 65 L.Ed. 857] (1921); Barton v. Conley, 119 Me. 581 [112 A. 670] (1921), aff'd 260 U.S. 677 [43 S.Ct. 238, 67 L.Ed. 456] (1923).

Id. (quoting Phinney v. Phinney, 81 Me. 450, 421, 17 A. 405 (1899), which quoted Louisiana v. New Orleans, 12 Otto 203, 206-07, 102 U.S. 203, 206-07, 26 L.Ed. 132 (1880)). Finding that Landry was Maine’s latest pronouncement on the meaning of the contract clause, the Magistrate applied its test to find that the six-month right-to-cure “ ‘lessens the efficacy of the means’ by which the manufacturer can enforce the contract and thereby ‘lessens the value’ of the contract to the manufacturer.’ ” Magistrate’s Recommended Decision at 8.

Since the Law Court’s decision in Landry, however, the United States Supreme Court has clarified the standard for determining violations of the Contract Clause of the United States Constitution in three major cases: United States Trust Co. v. New Jersey, 431 U.S. 1, 97 S.Ct. 1505, 52 L.Ed.2d 92 (1977); Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 98 S.Ct. 2716, 57 L.Ed.2d 727 (1978); and most recently in Energy Reserves Group, Inc. v. Kansas Power and Light Co., 459 U.S. 400, 103 S.Ct. 697, 74 L.Ed.2d 569. In Energy Reserves the Court elucidated a three-pronged balancing test which contrasts sharply with the rights/remedies distinction set forth iii Landry. In footnote 4 of his opinion, the Magistrate stated that in light of his finding based on the Maine Constitution “it is unnecessary to address the federal constitutional issue which, as the Defendant admitted at oral argument, is a much closer issue.” Implicit, therefore, in the Magistrate’s recommendation is a finding tha,t the federal law on impairment of contract is diverging from that of Maine.

In determining what the law of the forum state is, the federal judge is to use all the data available to him and decide what the judges of the highest state court would decide. See C. Wright, Law of Federal Courts 372 (1983). In most instances a relevant holding by the highest state court is the best evidence of how that Court would decide a given issue of state law. See, for example, Industrial Consultants, Inc. v. H.S. Equities, Inc., 646 F.2d 746 (2d Cir.1981). That is not the ease, however, if there are strongly persuasive reasons for the federal court’s belief that the state’s highest court would no longer adhere to its own decision. C. Wright, A. Miller and E. Cooper, 19 Federal Practice and Procedure § 4507 at 92. The First Circuit has pointed out that a federal court may anticipate a change in state law: “Of course, it is not necessary that a case be explicitly overruled in order to lose its persuasive force as an indication of what the law is.” Mason v. American Emery Wheel Works, 241 F.2d 906, 909 (1st Cir.1957). In Mason the Court abolished Mississippi’s privity requirement in tort actions, relying on the facts that the requirement was out of date and that the new trend had been mentioned in an opinion by the Mississippi Supreme Court: “We have no doubt that [when the issue is squarely presented], the Supreme Court of Mississippi will declare itself in agreement with the more enlightened and generally accepted doctrine.” Id. at 910.

Plaintiff urges the Court to anticipate that the Maine Court will employ the Energy Reserves balancing test in the future when confronting contract clause claims based both on the federal and state constitutions.. This is, in the view of this Court, a sound prediction.

The language of both clauses is identical, and the Law Court has made no distinction between the two in analyzing cases alleging a contract clause violation. See, e.g., Bowman v. Maine State Employees Appeals Board, 408 A.2d 688 (Me.1979); Landry, 372 A.2d 573; In re Searsport Water Co., 118 Me. 382, 108 A. 452 (1919). In fact, in Landry, the case relied upon by the Magistrate for his construction of the Maine contract clause, neither the Court nor the plaintiff articulated under which constitution the challenge to the new redemption law was brought. At the beginning of its analysis the Court recited language of the federal clause and then stated: “In its Declaration of Rights, the Constitution of Maine, art. I, § 11, contains a similar provision.”

Perusal of Maine contract clause cases shows that the Law Court used federal and state cases interchangeably in its analysis of those issues. See, e.g., Bowman v. Maine State Employees Appeals Board, 408 A.2d 688; Landry, 372 A.2d 573; Canal National Bank v. School Administrative District, No. 3, 160 Me. 309, 203 A.2d 734 (1964). In fact, the test for impairment of contract obligations set forth in Landry was originally taken from a United States Supreme Court case. Landry, 372 A.2d at 576.

Given the similarity of the federal and state contract clauses and the Law Court’s proclivity for following the federal court’s construction of the contract clause in cases brought in Maine, it is likely that the Court will, in due course, change its approach to reflect the clarification of federal law set forth in Energy Reserves. Although the rights/remedies distinction had been the basis for determining contract impairment under the federal constitution for many years, a balancing approach had evolved in a long series of cases beginning with Home Building & Loan Association v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413 (1934). In Blaisdell the Supreme Court acknowledged that in certain instances the contract clause prohibition must be accommodated to the inherent police power of the state. Home Building & Loan Association v. Blaisdell, 290 U.S. at 434, 54 S.Ct. at 238. The Blaisdell court set forth five factors bearing on its analysis, including whether the law impairing the conduct was an emergency measure and limited to the duration of the emergency. The Landry court acknowledged Blaisdell but found it inapposite since no emergency similar to the Great Depression existed in Maine in 1977. The Law Court in Landry also referred to and applied the Supreme Court’s developing balancing test as articulated in City of El Paso v. Simmons, 379 U.S. 497, 85 S.Ct. 577, 13 L.Ed.2d 446 (1965). The Court in City of El Paso had found constitutional a Texas law limiting reinstatement rights of interest-defaulting purchasers of land from the state when the previous statute had allowed perpetual redemption rights. The Court based its decision on the grounds that (1) the state had a vital interest in the orderly administration of its school lands program; (2) the old statute had had effects unintended by the legislature at the time it was enacted; and (3) the limitation did not affect anything that had served as consideration for the buyer’s undertaking. Id. In considering City of El Paso, the Maine Court did not go through a detailed balancing analysis but did find that there was no important state interest advanced by the statute challenged in Landry. Landry, 372 A.2d at 577.

It appears then that Maine’s highest court is attuned to and tends to follow changes in the federal law of contract impairment. This conclusion is bolstered by a concurring opinion joined by two Maine justices in the recent case of Atlantic Oceanic Kampgrounds, Inc. v. Camden National Bank, 473 A.2d 884, 887 (Me.1984) (Glassman and Roberts, J.J. concurring). In that case the majority had declined to address the constitutionality under the contract clause of the retroactive application of 14 M.R.S.A. § 6204-A, a statute providing for rebate to the mortgagee by the mortgagor of any surplus funds from a mortgáge foreclosure sale. The concurring justices, however, thought it necessary to reach the constitutional issue. In their opinion, Justices Glassman and Roberts cited Landry as representative of traditional Maine contract clause jurisprudence: “Traditionally, we have, consistent with United States Supreme Court doctrine, drawn a distinction between statutes which affect contract rights and those which affect remedies.” Atlantic Oceanic Kampgrounds v. Camden National Bank, 473 A.2d at 889. Noting that the United States Supreme Court in Energy Reserves had enunciated a change in the traditional standard for evaluation of impairment of contractual obligations, the justices applied the Energy Reserves analysis to the issue before them. Id. at 890.

Although the concurring opinion is not a definitive pronouncement of Maine’s highest court, it shows that at least these two concurring members of the court perceive Maine law as parallel to federal law on contract clause issues and that those two are willing to follow the Supreme Court’s latest teaching on the subject. Since the perceptions of at least two justices coincide with those of this Court on the direction Maine law is likely to. take, this Court, too, will apply the Energy Reserves balancing test to the case at hand.

III.

The threshold inquiry is “ ‘whether the state law has, in fact, operated as a substantial impairment of a contractual relationship.’ ” Energy Reserves, 459 U.S. at 411, 103 S.Ct. at 704-705, 74 L.Ed.2d at 580 (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. at 244, 98 S.Ct. at 2722). If a substantial impairment is found, the Court must inquire whether the state has a significant and legitimate public purpose behind the regulation. Energy Reserves, 459 U.S. at 412, 103 S.Ct. at 705, 74 L.Ed.2d at 581. If a legitimate public purpose is found, the final inquiry is “whether the adjustment of the rights and responsibilities of the contracting parties [is based] upon reasonable conditions and [is] of a character appropriate to the public purpose justifyiñg [the legislation’s] adoption.” Id. (quoting United States Trust Co. v. New Jersey, 431 U.S. at 22, 97 S.Ct. at 1517-1518).

A.

In determining whether the state law has caused a substantial impairment of Defendant’s contractual rights, a major factor to be considered is whether the industry in which the parties are operating is heavily regulated. In Energy Reserves the Court found significant the fact that Kansas had extensively and intrusively regulated gas prices, even though it had not specifically regulated natural gas prices. Since the contracts were structured against the background of regulated gas prices, a statute that undercut the escalator clauses in the contracts did not constitute a substantial impairment. Id. 459 U.S. at 415, 103 S.Ct. at 707, 74 L.Ed.2d at 583.

In Maine an extensive system of regulation of business practices between motor vehicle manufacturers, distributors, and dealers was enacted by the legislature in 1975. 10 M.R.S.A. §§ 1171-86. The legislation, which predates the contract between the parties in this case, ordered almost every aspect of the relationship between dealers and manufacturers, including termination. Id. § 1174(3)(C). Thus, in Maine not only was there a general background of regulation against which the new termination provision should be judged, termination itself had actually been regulated. Just as in Energy Reserves, therefore, “regulation existed and was foreseeable as the type of law that would alter contract obligations.” Energy Reserves, 459 U.S. at 416, 103 S.Ct. at 708, 74 L.Ed.2d at 584. Defendant argues that this is not the case, because nowhere in the instant contract is there any acknowledgment, as there was in the Energy Reserves contract, that the agreement was subject to relevant present and future state law. As the Court stated in Energy Reserves, that provision demonstrates what Energy Reserves’ reasonable expectations were.

In the instant case the parties’ reasonable expectations upon entering into their contract were that certain aspects of their ability to terminate their relationship would not be subject to their absolute control because they would be regulated for fairness. As Justice Holmes stated long ago, “[O]ne whose rights, such as they are, are subject to state restriction, cannot remove them from the power of the State by making a contract about them.” Hudson Water Co. v. McCarter, 209 U.S. 349, 357, 28 S.Ct. 529, 531, 52 L.Ed. 828 (1908). Thus, although the contract between the parties permitted termination “for any reason” on appropriate notice, the statute in effect at the time of their agreement-made clear that the manufacturer could only terminate for “due cause.” The 1981 amendments to the statute merely changed the standard for termination from due cause to good cause and delayed enforcement of termination for failure of sales or service by interjecting a six-month cure period. Since Defendant had entered a field in which fairness of termination was one of many business practices regulated, his reasonable expectations were not impaired by the heightened standard of that regulation. His substantive ability to terminate the dealership under the contract was not significantly restricted; rather, the procedure was circumscribed.

B.

Even if the 1981 amendment were found to cause a significant impairment of Defendant’s contractual interests, the Court has no doubt that the 1981 amendments to Maine’s laws regulating business practices between motor vehicle manufacturers and dealers are a valid exercise of Maine’s police power. The State of Maine has delineated in the challenged section a significant and' legitimate interest in regulating business practices within the state to eliminate the “unfair methods of competition and unfair and deceptive practices.” 10 M.R.S.A. § 1174. By so doing it can foster a salubrious and more stable business climate for all businesses with Maine, thus aiding the state economy. Also important is the secondary benefit that inures to Maine consumers by the prevention of arbitrary or hasty terminations of local dealerships.

C.

In assessing the reasonableness and necessity of a particular legislative measure, “courts properly defer to legislative judgment” unless the state itself is a contracting party. United States Trust Co. v. New Jersey, 431 U.S. at 22-23, 97 S.Ct. at 1517-1518. Here the Court can properly defer for the regulatory measure is narrowly drawn. When the manufacturer’s concern is with a failure of performance, the regulation affords an opportunity for the dealer, when notified of the problem, to correct it, which presumably is to the advantage of both parties. The right-to-cure is limited, however, to six months so the possible losses to the manufacturer are circumscribed if cure is not possible.

The 1981 amendments to Maine’s dealership laws do not work a substantial impairment of Defendant’s contractual rights under Energy Reserves. Even if they did, however, the state has a legitimate and significant purpose underlying this exercise of its police power, and it has achieved this purpose with a statute that is narrowly drawn to achieve that purpose.

Accordingly, it is ORDERED that the recommended decision of the Magistrate be, and is hereby, DISAPPROVED. Defendant’s Motion for Partial Summary Judgment on the Notice Issues is hereby DENIED.

So ORDERED.

      . The Court agrees with the Magistrate’s finding that Defendant's termination of Plaintiff's dealership was both specific enough and early enough to comply with the 60-day notice requirement of the 1975 Act. This point is no longer an issue, however, given the Court’s disposition of the constitutional issue regarding the 1981 Act.

      . Article 1, Section 10 of the United States Constitution provides: “No State shall ... pass any ... law impairing the Obligation of Contracts.” Article I, Section 11 of the Maine Declaration of Rights provides that "[t]he Legislature shall pass no ... law impairing the obligation of contracts____”


author: FILIPPINE, District Judge.

text:
    Steven LOVE, Plaintiff, v. Dr. Lee Roy BLACK and Dick Moore, Defendants.
    No. 84-1829C(2).
    United States District Court, E.D. Missouri, E.D.
    Nov. 8, 1984.

      Steven Love, pro se.
    Deborah Neff, Asst. Atty. Gen., Jefferson City, Mo., for defendants.
   MEMORANDUM

FILIPPINE, District Judge.

This matter is before the Court on plaintiff’s motion for appointment of counsel and defendant’s motion to dismiss. Plaintiff is proceeding in forma pauperis and is pro se.

Plaintiff brings this action under 42 U.S.C. § 1983 challenging the discontinuation of a release program whereby the Governor of the State of Missouri would, upon the recommendation of the Department of Corrections, commute sentences of prisoners who had served Viz or Viz of their sentence. The new program, “administrative parole,” allows the release of prisoners upon serving V12 of their sentence subject to supervision by the Department of Corrections.

Under 28 U.S.C. § 1915 an action is frivolous and may be dismissed pursuant to § 1915(d) if it fails to state a claim upon which relief can be granted under Martin-Trigona v. Stewart, 691 F.2d 856, 858 (8th Cir.1982); Matz v. Kelsch, 638 F.2d 48, 49 n. 2 (8th Cir.1981). A pro se civil rights complaint is held to less stringent standards than those required of complaints drafted by an attorney, Hughes v. Rowe, 449 U.S. 5, 9, 101 S.Ct. 173, 175, 66 L.Ed.2d 163 (1980) (per curiam); McNally v. Pulitzer Publishing Company, 532 F.2d 69, 73 n. 3 (8th Cir.1976), cert. denied 429 U.S. 855, 97 S.Ct. 150, 50 L.Ed.2d 131 (1976), and can be dismissed for failure to state a claim only if it appears beyond doubt that the plaintiff could prove no set of facts supporting a claim for relief. Estelle v. Gamble, 429 U.S. 97, 106, 97 S.Ct. 285, 292, 50 L.Ed.2d 251 (1976); Guy v. Swift and Company, 612 F.2d 383 (8th Cir.1980) (per curiam).

Plaintiff is a convicted inmate at the Missouri Eastern Correctional Center in Pacific, Missouri. He brings this suit under 42 U.S.C. § 1983 alleging violations of his constitutional rights due to a change in policies concerning merit time release. Prior to 1979 Missouri had two basic merit time provisions. Mo.Rev.Stat. § 216.355 (repealed by L.1977, p. 658, § 1, eff. Jan. 1, 1979) provided for the unconditional release of any prisoner “who shall serve three-fourths of the time for which he was sentenced in an orderly and peaceable manner____” The second category of merit time was set forth in Administrative Rules and Regulations. Under this system a prisoner who had served Viz or Viz of his sentence may have his sentence commuted by the governor upon the recommendation of correction officials. This second category of merit time was based on the governor’s power to commute sentences under Article 4, Section 7, of the Missouri Constitution of 1945 and was a “matter of grace resting purely within the discretion of the governor.” Parrish v. Wyrick, 589 S.W.2d 74, 78 (Mo.Ct.App.1979) and cases cited therein.

Effective January 1, 1979, Mo.Rev.Stat. § 216.355 was repealed and the only merit time system available to persons whose crimes- were committed after that date was the Viz or 7/i2 program. This program was discontinued on December 15, 1982, when the administrative parole program became effective. Memorandum of David Blackwell (12/15/82). The administrative parole program provides, under certain circumstances, that a prisoner who has served V12 of his sentence will be placed on administrative parole.

This change in the merit time release program is the basis for plaintiff’s claim. Plaintiff contends that because his release date was set at the Viz date, the change in programs constitutes a violation of his constitutional rights.

In their motion to dismiss the defendants first argue, citing Preiser v. Rodriguez, 411 U.S. 475, 487-88, 93 S.Ct. 1827, 1835, 36 L.Ed.2d 439 (1975), that this issue falls within the scope of habeas corpus and is therefore premature as plaintiff has failed to exhaust state administrative remedies as required by 28 U.S.C. § 2254. The court in Preiser, 411 U.S. at 487-88, 93 S.Ct. at 1835, held that where a prisoner challenges the fact or duration of his confinement his sole federal remedy is a writ of habeas corpus. The Court, however, carefully limited its holding to those cases where the prisoner seeks equitable relief only.

If a state prisoner is seeking damages, he is attacking something other than the fact or length of his confinement, and he is seeking something other than immediate or more speedy release — the traditional purpose of habeas corpus. In the case of a damages claim, habeas corpus is not an appropriate or available federal remedy. Accordingly,' as petitioners themselves concede, a damages action by a state prisoner could be brought under the Civil Rights Act in federal court without any requirement of prior exhaustion of state remedies.

Id. Thus, where, as here, the plaintiff has filed suit for damages under 42 U.S.C. § 1983, application for a writ of habeas corpus is not the sole remedy for plaintiff.

Plaintiff argues that the change in merit time program constitutes a violation of a number of constitutional protections. The United States District Court for the Western District, of Missouri recently had the opportunity to review several of these challenges. In Tyler v. Black, No. 82-4383 CV-C-5 (W.D.Mo. Sept. 22, 1983), aff'd No. 83-2445 (8th Cir. July 9, 1984), the court adopted the recommendation of United States Magistrate Richard H. Ralston and granted summary judgment to defendants in a case arising out of essentially the same facts as give rise to the present action. There the court held that “plaintiffs have not demonstrated a violation of their due process, ex post facto or equal protection rights. Nor have they remotely shown a violation of their Eighth Amendment Rights.” Tyler, slip op. at 3. The court refers to the Magistrate’s review and recommendation in support of its conclusion. This Court finds the reasoning in Tyler persuasive. With respect to the Eighth Amendment claim, here, as in Tyler, plaintiff alleges no facts which demonstrate that his sentence is excessive or disproportionate to the crime committed, Solem v. Helm, 463 U.S. 277, 103 S.Ct. 3001, 77 L.Ed.2d 637 (1983), or that it entails any unnecessary infliction of pain. Rhodes v. Chapman, 452 U.S. 337, 101 S.Ct. 2392, 69 L.Ed.2d 59 (1981). Thus, there is clearly no Eighth Amendment violation.

Similarly, there is no violation of the equal protection clause as plaintiff fails to allege any “improper classification or discrimination among citizens,” Shortino v. Wheeler, 531 F.2d 938, 939 (8th Cir.1976), a necessary element of an equal protection claim.

The Western District’s conclusion on the due process issue is .also persuasive. Plaintiff argues that his expectancy of release on the %2 date rises to the level of a protected liberty interest. Missouri law is clear that commutation of sentence under the %2 or V12 program was purely within the discretion of the governor. Parish v. Wyrick, supra. In essence plaintiff had only the hope that his sentence would be commuted.

In terms of the Due Process Clause, a ... felon’s expectation that a lawfully imposed sentence will be commuted or that he will be pardoned is no more substantial than an inmate’s expectation, for example, that he will not be transferred to another prison; it is simply a unilateral hope. [Greenholtz v. Nebraska Penal Inmates, 452 U.S. 458, 101 S.Ct. 2460, 69 L.Ed.2d 158 (1979); Leis v. Flynt, 439 U.S. 438, 443-44, 99 S.Ct. 698, 58 L.Ed.2d 717 (1979).] A constitutional entitlement cannot “be created — as if by estoppel— merely because a wholly and expressly discretionary state privilege has been granted generously in the past.” Id., at 444, n. 5 [99 S.Ct. at 701, n. 5]. No matter how frequently a particular form of clemency has been granted, the statistical probabilities standing alone generate no constitutional protections; a contrary conclusion would trivialize the Constitution. The ground for a constitutional claim, if any, must be found in statutes or other rules defining the obligations of the authority charged with exercising clemency.

Connecticut Board of Pardons v. Dumschat, 452 U.S. 458, 465, 101 S.Ct. 2460, 2464, 69 L.Ed.2d 158 (1980) (footnote omitted). Accordingly, because the decision to commute a prisoner’s sentence is within the discretion of the governor, plaintiff’s expectation of a reduced sentence simply does not rise to a protected liberty interest.

Plaintiff also contends that the change violates the ex post facto clause. Again, this Court agrees with the Western District that there is no such violation. Plaintiff relies principally on the United States Supreme Court’s holding in Weaver v. Graham, 450 U.S. 24, 101 S.Ct. 960, 67 L.Ed.2d 17 (1981), that the repeal of gain time statute which operated to reduce the amount of gain time for good conduct deducted from a prisoner’s sentence was unconstitutional as an ex post facto law. Magistrate Ralston, in his review and recommendation filed in Tyler v. Black and adopted by the Western District, discussed the applicability of Weaver to Missouri’s change in merit time policies.

But Weaver is clearly distinguishable. Here, the Missouri legislature did not abrogate the opportunity of these plaintiffs to earn statutory good time. There is no contention on their part that they are unable to earn good time credits under.the statutory “three fourths” or “%2 ths” rate. Instead, plaintiffs complain that the executive action of the Governor in refusing to consider the commutation of their sentences violates the ex post facto clause.
Under Missouri law, “[t]he power of commutation is a matter of grace resting purely within the discretion of the governor.” Parrish v. Wyrick, supra at 78. It rests “solely within [his] discretion.” Id. Each release under the “Vi2ths” or %2ths” program depended upon his favorable exercise of that absolute discretionary power. And while that power may have been exercised on a regular and consistent basis through the years, under state law, a Missouri governor could not bind his successor to continue his “good time” programs; nor was he himself bound to continue them throughout the term of his own administration; nor was he bound to his commutation power in any individual case. Thus, unlike the inmate in Weaver, who could rely upon the fact that a statute in existence at the time of his offense afforded him the opportunity to earn good time credits, plaintiffs could not reasonably entertain such an expectation. They could not have relied upon the meaning of a legislative enactment in existence at the time of their crimes because no such statute existed. See Weaver v. Graham, supra [450 U.S.] at 27-29 [101 S.Ct. at 963-464], The primary purpose of the ex post facto clause is not served by its application in the present case; that is, the requirement that the legislature serve “fair warning” of the elements of, and punishment for, a criminal act. Weaver v. Graham, supra at [450 U.S.] 28-29 [101 S.Ct. at 963-964].
Moreover, the ex post facto clause is not implicated where, as here, executive action is solely involved. The clause is directed at arbitrary and vindictive legislative action- and it serves to “uphold the separation of powers by confining the legislature to penal decisions with prospective effect and the judiciary and executive to applications of existing penal law.” Weaver v. Graham, supra [450 U.S.] at 29, n. 10 [101 S.Ct. at 964, n. 10]. The ex post facto clause is not drawn into play simply because the chief executive of the State, or one of his agencies, deviates from a policy or practice which he . has consistently and regularly followed in the past; that policy or practice does not constitute a “law” within the meaning of the clause. Rifai v. United States Parole Commission, 586 F.2d 695, 697-98 (9th Cir.1978). Cf. Milhouse v. Levy, 548 F.2d 357 (D.C.Cir.1976).

(Footnote omitted.)

Plaintiff makes two constitutional arguments not addressed by the Court in Tyler v. Black. He argues that the change in policy violates separation of powers principles and the double jeopardy clause. With regard to the separation of powers issue plaintiff argues that since the governor has the sole power to grant pardons and to commute sentences, the Board of Probation and Parole may not itself revoke the 6/i2 or V12 program and thereby revoke commutation of sentences. This argument is clearly without merit. The Board has not revoked or attempted to revoke the governor’s constitutional power under the Missouri Constitution, Art. 4, § 7, to commute sentences. The governor is free to exercise his discretion in commuting sentences. The fact that the institution of the new merit time system may make commutations less frequent does not mean that the Board of Probation and Parole has usurped the governor’s power.

Plaintiff’s final argument against the constitutionality of the new system as applied to him is that the administrative parole system violates the double jeopardy clause of the United States Constitution because by withholding the merit time which plaintiff has already earned, the defendants cause him to serve that portion of his sentence a second time. Plaintiff’s argument is without substance. The merit time acquired under the old system was simply used as a criteria for making commutation of sentence recommendations to the governor. Parrish, supra, 589 S.W.2d at 78. As discussed above, the decision to commute a sentence is purely within the governor’s discretion. He is under no duty to commute a sentence when a recommendation is made. To argue that the new system violates the double jeopardy clause plaintiff must demonstrate that he is being punished a second time for the same crime. It makes no sense to argue that earning an amount of merit time is the same as having served that time. This would mean that every time the governor refused to commute a sentence under the old system, there was a violation of the double jeopardy clause. This is clearly not the case given the discretionary nature of the decision to commute sentences. Thus plaintiff’s final challenge to the administrative parole system is also without merit.

      . Defendants filed what is styled as defendants’ response to this Court's order to show cause why plaintiff should not proceed in forma pauperis in which they prayed for dismissal of plaintiff’s claim as frivolous. The Court will treat this as a motion to dismiss and will refer to it as same.


author: CURTIN, Chief Judge.

text:
    GUTHRIE AIRCRAFT, INC., Batavia Aviation, Inc., Plaintiffs, v. GENESEE COUNTY, NEW YORK, Prior Aviation Service, Inc., Defendants.
    No. CIV-79-142C.
    United States District Court, W.D. New York.
    Nov. 8, 1984.

      Harris, Beach, Wilcox, Rubin & Levey, Rochester, N.Y. (James M. Hartman, Rochester, N.Y., of counsel), for plaintiffs.
    Phillips, Lytle, Hitchcock, Blaine & Huber, Buffalo, N.Y. (Paul K. Stecker, Buffalo, N.Y., of counsel), for defendant Genesee County.
    Damon & Morey, Buffalo, N.Y. (F. James Kane, Jr., Buffalo, N.Y., of counsel), for defendant Prior Aviation Service, Inc.
   CURTIN, Chief Judge.

Defendant Genesee County filed a motion to disqualify plaintiffs’ counsel, Harris, Beach, Wilcox, Rubin and Levey, in August of 1984. Oral argument was heard on the motion on October 5, 1984. After reviewing submissions by all parties and considering the points made in argument, the defendant’s motion is granted.

Initially, it should be noted that motions to disqualify attorneys are generally disfavored. Board of Education of New York City v. Nyquist, 590 F.2d 1241 (2d Cir.1979). In this case, however, the motion must be granted.

At the time plaintiffs’ case was filed in February of 1979, they were represented by the firm of Dempsey and Dempsey. In February of 1984, the Dempsey firm moved to withdraw from the case, and on April 11, 1984, the Harris, Beach firm was ordered substituted for the Dempsey firm.

In early July of this year, it came to the attention of defendant Genesee County’s counsel, and eventually the court, that plaintiffs’ attorneys, Harris Beach, were simultaneously representing Genesee County in a case in a New York State court. That case, Innes v. Genesee County, et al., is a tort action in which the County is charged with negligent design and maintenance of a road (Item 86, Exhibit D-2). Harris, Beach entered the state action on behalf of Genesee County in June of 1983 (Item 91).

This sort of adverse representation of a current client has been held to be prima facie improper by the United States Court of Appeals for the Second Circuit. Cinema 5, Ltd. v. Cinerama, Inc., 528 F.2d 1384 (2d Cir.1976). An attorney must show that there will be no actual or apparent conflict in his loyalties or diminution of the vigor of his representation. Id. at 1387.

Putting it as mildly as we can, we think it would be questionable conduct for an attorney to participate in any lawsuit against his own client without the knowledge and consent of all concerned.

Id. at 1386.

Genesee County has not consented to this simultaneous, adverse representation and continues to demand the disqualification of Harris, Beach as attorney for plaintiffs in the Guthrie case. Moreover, both parties agree that a municipality may not consent to adverse representation, since the public interest is involved. New York State Bar Association Opinion Number 247 (1972).

Plaintiffs attempt to distinguish this case from Cinema 5 by noting that in that case, the two actions involved were of a similar nature (Item 92, footnote 3). Both actions there alleged antitrust violations in the motion picture industry. Plaintiffs point out that the instant case, Guthrie, involves antitrust claims, while the state court case, Innes, is a totally unrelated action in tort, involving claims of negligence against several defendants, including Genesee County. Plaintiffs also make a “Chinese wall” argument, noting that none of the Harris, Beach attorneys who are handling the Guthrie case in federal court are in any way involved in the Innes case. The Innes action is being handled by another of Harris, Beach’s approximately 70 attorneys.

Plaintiffs’ arguments fail. In Cinema 5, the court noted that a “substantial relationship” of issues test is inappropriate when a firm is representing clients with conflicting interests simultaneously. Id. at 1386. More recently, the Second Circuit en banc found that mere appearance of impropriety is insufficient, that the test should be whether there is a “threat of tainting the trial.” Armstrong v. McAlpin, 625 F.2d 433, 445 (2d Cir.1980), vacated and remanded on other grounds, 449 U.S. 1106, 101 S.Ct. 911, 66 L.Ed.2d 835 (1981). In that case, however, an attorney who was a member of a government agency proceeding against a defendant quit the agency. He then joined a firm which represented a plaintiff against the same defendant in a related case. As the Armstrong court made clear:

[T]his is not a case where a law firm, by use of a “Chinese wall,” is attempting to justify representation of conflicting interests at the same time.

Id. at 445 (emphasis added), citing Cinema 5, 528 F.2d 1384.

Nevertheless, plaintiffs urge the court to find that, because other facts and circumstances of the Guthrie and Innes cases are different, there is no conflict of interest in the Harris, Beach firm representing them against Genesee County in Guthrie while defending the County in Innes. If there is no conflict, then plaintiffs claim there is no need to obtain the County’s consent under Cinema 5.

The Harris, Beach attorney representing the County in Innes, Paul J. Yesawich III, states that he has thus far only prepared an answer, made certain discovery requests, and opposed a petition by plaintiff Innes to file a late notice of claim (Item 91). Denial of this petition was reversed by the Appellate Division, Fourth Department, in January of 1984. Innes v. Genesee County, et al., 99 A.D.2d 642, 472 N.Y.S.2d 223 (4th Dept.1984). Mr. Yesawich said that at this point, he has had only one communication with the County involving notice of tort claims and has received absolutely no confidential information.

However, as Mr. Yesawich notes, the claim against the County in Innes is that it negligently designed, constructed, and maintained a road. Since the time Mr. Yesawich made his affidavit, it has come to the court’s attention that he called Joseph Amedick to testify, on behalf of Genesee County, at an October 31 examination before trial in the Innes case. Joseph Amedick is the Genesee County Highway Superintendent. In the Guthrie case, plaintiffs have sought to adversely depose Mr. Amedick (Item 76) regarding the building of a snow fence near the airport. This snow fence is one of the key issues in plaintiffs’ claims against the County (Item 1).

This leaves the Harris, Beach firm defending the County and its Highway Department in state court and adversely deposing its Highway Superintendent in federal court. Not only does such a result appear improper, but it poses a risk of actual impropriety. There would also, in the future if not at the present, be the risk that the Harris, Beach firm would have access to confidential information which could hurt defendant Genesee County in the Guthrie case. A “Chinese wall” is insufficient in this case.

Plaintiffs have failed to overcome the heavy presumption, as put forth in Cinema 5, against simultaneously representing adverse parties, both of which are Harris, Beach’s clients in the traditional sense. (See also Glueck v. Jonathan Logan, Inc., 653 F.2d 746, 749 (2d Cir.1981). Defendant Genesee County’s motion to disqualify the plaintiffs’ counsel, Harris, Beach, is granted.

The court recognizes the burden this order places on plaintiffs. This will be the third counsel plaintiffs have had to procure in this .case. However, the Harris, Beach firm has been in the case only seven months. Hopefully, new counsel can be found soon and brought up to date on the case quickly.

Defendant Genesee County’s motion to disqualify plaintiffs’ counsel is granted. Plaintiffs are ordered to find new counsel by December 12, 1984. The court shall be notified of the name of counsel by that date so that a meeting may be held shortly thereafter to begin preparation for the resolution of this dispute.

So ordered.


author: BECHTLE, District Judge.

text:
    Blossom Myers DOUGLAS, Administratrix of the Estate of Yvette Myers, Deceased, and Blossom Myers Douglas, Individually and Sandra Hollie v. RYDER TRUCK LINES, INC., Now Known as Ryder/P-I-E Nationwide, Inc. and I.U. INTERNATIONAL v. AMERICAN DRUGGISTS INSURANCE COMPANY and Texas Tech University and Jaymie Rogers and John Gibbons and Thomas Gibbons t/a Gibbons Trucking.
    Civ. A. No. 84-2066.
    United States District Court, E.D. Pennsylvania.
    Nov. 8, 1984.
    Stephen A. Sheller, Philadelphia, Pa., for plaintiff.
    Edward L. McCandless, Jr., Philadelphia, Pa., for Ryder Truck Lines and I.U. International, Inc.
    Joseph T. Bodell, Jr., Philadelphia, Pa., for. American Druggists, Inc., John Gibbons and Thomas Gibbons.
    Michael P. McKenna, Philadelphia, Pa., for Texas Tech University.
    ' Richard S. March, Jay M. Levin, Philadelphia, Pa., for Jaymie Rogers.
   MEMORANDUM AND ORDER

BECHTLE, District Judge.

Presently before the court is plaintiffs’ motion to remand this case to the Pennsylvania Court of Common Pleas, Philadelphia County. For the reasons stated herein, the motion will be granted.

I. FACTS

This action arises from a collision between an automobile and a tractor-trailer which occurred in Pecos, Texas, on April 24, 1983. The decedent, Yvette Myers, and plaintiff, Sandra Hollie, were passengers in the automobile which collided with the tractor-trailer.

On February 6, 1984, plaintiffs commenced the action in Pennsylvania state court. Defendants removed the action to this court. In their petition for removal defendants claim that this court has original jurisdiction over the action pursuant to 28 U.S.C. § 1332(a)(1) since it is a civil action wherein the matter in controversy both exceeds the sum of $10,000.00 and is between citizens of different states.

Plaintiffs, who are all citizens of Pennsylvania, now seek to remand the case claiming that defendant I.U. International, Inc. (“I.U.”) has its principal place of business in Philadelphia, Pennsylvania, thus making I.U. a citizen of Pennsylvania under 28 U.S.C. § 1332(c) and preventing the complete diversity required under 28 U.S.C. § 1332(a)(1). See Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 373, 98 S.Ct. 2396, 2402, 57 L.Ed.2d 274 (1978).

II. DISCUSSION

Section 1441(a) of Title 28 of the United States Code permits any civil action brought in state court to be removed to the federal district court for the district embracing the place where the action is pending if the district court has original jurisdiction over the matter. A federal district court has original jurisdiction over all civil actions where the matter in controversy exceeds the sum or value of $10,000.00, exclusive of interest and cost, and is between citizens of different states. 28 U.S.C. § 1332(a)(1). When a corporation is involved in the action, the corporation is deemed a citizen of any state by which it has been incorporated and of the state where it has its principal place of business. See 28 U.S.C. § 1332(c).

In determining where a corporation’s principal place of business is located, this court is guided by the Third Circuit Court of Appeals’ decision in Kelly v. United States Steel Corporation, 284 F.2d 850 (3d Cir.1960). In Kelly, the court adopted an operational test for determining a corporation’s principal place of business, looking to the place where the corporation has its “headquarters of day-to-day corporate activity and management.” See United States Fidelity and Guaranty Co. v. DiMassa, 561 F.Supp. 348, 351 (E.D.Pa.1983), aff'd, 734 F.2d3 (3d Cir.1984).

I.U. is a holding company with approximately 200 wholly-owned subsidiaries located in the United States. In a holding company situation, the holding company conducts- very few day-to-day activities which affect itself. Rather, it makes and implements the broad policy decisions which affect the subsidiaries. In such cases, the principal place of business of the holding company would be the place where the broad policy decisions are implemented on a day-to-day basis.

In this case, I.U. does not make and implement the broad policy decisions which affect its subsidiaries. Rather, I.U., through its board of directors, only makes the broad policy decisions. The implementation of those decisions is left to I.U. Management Corporation (“Management Corporation”), an I.U. subsidiary located in Philadelphia, Pennsylvania. Thus, Philadelphia is where I.U. has its principal place of business since it is there that the broad policy decisions affecting I.U.’s subsidiaries are implemented on a day-to-day basis.

The fact that Management Corporation is a legal entity separate from I.U. does not preclude the location of Management Corporation from also being the location of 1. U.’s principal place of business. As Kelly instructs, in determining where the principal place of business is located, courts must look to the place where day-to-day corporate management is headquartered. Kelly, 284 F.2d at 854. In this case, while the broad policy decisions as to the activities of I.U.’s subsidiaries are made by I.U.’s board of directors, the day-to-day management of these activities is controlled by Management Corporation located in Philadelphia. Such a finding does not disregard Management Corporation’s separate corporate status but, rather, only recognizes that this separate entity is the instrumentality through which I.U.’s broad policy decisions are carried out. The location of the instrumentality, Philadelphia, Pennsylvania, is the location of the principal place of business of defendant I.U.

III. CONCLUSION

The principal place of business of defendant I.U. is Philadelphia, Pennsylvania, making I.U. a citizen of Pennsylvania under 28 U.S.C. § 1332(c). Since plaintiffs and defendant I.U. are citizens of Pennsylvania, complete diversity is lacking and removal from state court was improper. Accordingly, the case shall be remanded to state court.

      . In addition to being a holding company, I.U. has two operating divisions. These divisions, however, are an insignificant part of the corporate structure of I.U.

      . Among the services provided by Management Corporation to I.U. and I.U.’s subsidiaries in furtherance of the broad policy decisions made by I.U.’s board of directors are computer services, legal services, public relation services and accounting services.

      . The court notes that another court in this district has stated that I.U.’s principal place of business is in Philadelphia, Pennsylvania. Valenti v. International Mill Services, Inc., No. 84-1218 (E.D.Pa. September 28, 1984), slip op. at 2, n.1.

      . The court also rejects I.U.’s argument that under Salem Trust Company v. Manufacturers' Finance Company, 264 U.S. 182, 44 S.Ct. 266, 68 L.Ed. 628 (1924), its citizenship is irrelevant. The court finds that if plaintiffs’ allegations regarding the relationship between defendant I.U. and defendant Ryder/P-I-E Nationwide are true, plaintiffs may be permitted to recover against I.U. for the acts of its subsidiary Ryder/P-I-E Nationwide.