author: TELESCA, District Judge.

text:
    FRIENDS OF THE EARTH, and Atlantic States Legal Foundation, Inc., Plaintiffs, v. FACET ENTERPRISES, INC., Defendant.
    No. CIV-84-357T.
    United States District Court, W.D. New York.
    Dec. 28, 1984.

      Bruce J. Terris, Lee Ann Meyer, Terris & Sunderland, Washington, D.C., Richard J. Lippes, Allen, Lippes & Shonn, Buffalo, N.Y., for plaintiffs.
    Theodore L. Garrett, Covington & Bur-ling, Washington, D.C., Ragna Henrichs, Nixon, Hargrave, Devans & Doyle, Roehester, N.Y., for defendant,
   DECISION and ORDER

TELESCA, District Judge.

This is a citizen’s suit to enforce the anti-pollution standards of the Federal Clean Water Act, 33 U.S.C. Section 1251, et seq. Plaintiffs are environmental organizations, and defendant operates an automotive parts manufacturing plant in Elmira Heights, New York. Jurisdiction of this Court is alleged pursuant to Section 505 of the Clean Water Act, 33 U.S.C. Section 1365. Pending before me are plaintiffs’ motion for partial summary judgment as to liability, and defendant’s motion for summary judgment as to standing, the applicable statute of limitations, and failure to state a claim under Clean Water Act Section 505. As set forth below, I determine that the applicable statute of limitations is five (5) years under 28 U.S.C. Section 2462, and deny the remaining motions for summary judgment.

FACTS

In operating its Elmira facility, defendant Facet Enterprises discharges treated waste into Mays Creek, a tributary of New-town Creek, which is in turn a tributary of the Chemung River. A permit authorizing the discharge of limited amounts of pollutants was issued to the defendant initially by the Environmental Protection Agency (a National Pollutant Discharge Elimination System, or NPDES, permit) and subsequently by the New York State Department of Environmental Conservation, or DEC (a State Pollutant Discharge Elimination System, or SPDES, permit). Plaintiffs allege over 100 violations of these permits between 1977 and 1982, based upon Discharge Monitoring Reports (DMR’s) filed by defendant with DEC. Plaintiffs also allege some eleven (11) violations of the SPDES permit since that time, all of which defendant alleges not to have been prohibited by the terms of the SPDES permit and the applicable regulations.

In June, 1984, defendant moved to dismiss plaintiffs’ complaint for failure to state a claim, primarily upon the theory that the Clean Water Act does not grant citizen plaintiffs a right to sue for civil penalties imposed soley as a result of past violations. This motion has been converted to a summary judgment motion, and some discovery has taken place on this and other issues. Defendant has added two (2) more counts to its summary judgment motion, dealing with standing and the applicable statute of limitations. Defendant claims that plaintiffs lack standing because they have no interest adversely affected by defendant’s discharges, and because plaintiffs have suffered no injury traceable to defendant’s discharges. Further, defendant argues that the applicable statute of limitations is either the five (5) year statute of limitations under 28 U.S.C. Section 2462, or alternatively the three (3) year statute of limitations under New York CPLR Section 214.

Plaintiffs’ motion for partial summary judgment is based upon the DMR’s filed by defendant which provide evidence of violations. Plaintiffs claim that the DMR’s conclusively establish defendant’s liability for the violations.

DISCUSSION

I. Standing

Plaintiffs have provided several affidavits (many of which are as yet unsigned) from members attesting to their aesthetic and recreational use of the Chemung River. Plaintiffs claim that this establishes an interest adversely affected by discharges from defendant’s plant, satisfying the first prong of the two-prong test of standing under Data Processing Service v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970). Plaintiffs claim that the second prong of the test, (that there be injury to plaintiffs traceable to the defendant’s violations), has been satisfied insofar as plaintiffs are required to do so under the holding in United States v. SCRAP, 412 U.S. 669, 93 S.Ct. 2405, 37 L.Ed.2d 254 (1973), by a showing that plaintiffs’ members use the area affected by defendant’s discharges recreationally and aesthetically.

The test for standing in a case such as this one was recently articulated by the Second Circuit in Sierra Club v. S.C.M. Corporation, 747 F.2d 99 (1984):

The constitutional limits on standing are grounded in the requirement of Article III that the federal courts adjudicate only actual cases or controversies, and such limitations require that the would-be plaintiff show injury in fact, i.e., “that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant.” Prudential concerns may further limit the class of those permitted to sue, as where “the judiciary seeks to avoid deciding questions of broad social import where no individual rights would be vindicated,” and thus requires that the plaintiff’s injury be “peculiar to himself or to a distinct group of which he is a part, rather than one ‘shared in substantially equal measure by all or a large class of citizens.’ ” Finally, Congress may grant a right to sue to those who meet the constitutional limitations on standing but who might otherwise be barred by prudential limitations. Congress may not, however, “abrogate the Art. Ill minima: A plaintiff must always have suffered ‘a distinct and palpable injury to himself,’ ... that is likely to be redressed if the requested relief is granted.”

At 103 (citations omitted).

After analyzing the legislative history of Clean Water Act Section 505, the Second Circuit did not state categorically that Congress intended by Section 505 to abrogate any prudential limitations on standing. Rather, the court held only that “[Section] 505(g)’s definition of ‘citizen’ as a ‘person or persons having an interest which is or may be adversely affected,’ means those who can claim injury in fact within the meaning of [Sierra Club v. Morton, 405 U.S. 727, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972) ].” At 105. The implication of this holding for an environmental group is that for the group to have standing it must show individualized injury in fact to its members. Id. at 107.

I find that plaintiffs herein have met this test. The signed affidavits from their members demonstrate that the members derive recreational and aesthetic benefits from the area affected by defendant’s discharges. Under the holding in United, States v. SCRAP, supra, no greater showing is required in order to establish standing. I caution plaintiffs, however, that proof of standing is not ultimate proof of either violations by defendant or injury to plaintiffs.

II. Past vs. Present Violations

Defendant argues that Clean Water Act Section 505(a)(1) requires that it be currently “in violation” of the Act before plaintiffs can maintain this action. Although the bulk of the violations alleged by the plaintiffs occurred prior to 1982, plaintiffs have alleged some eleven (11) “current” violations. Defendant has submitted affidavits arguing that, for various reasons, the eleven (11) incidents did not constitute violations of the SPDES permit or the applicable regulations. Plaintiffs have responded with arguments (by persons who do not appear to possess the scientific qualifications of defendant’s senior plant engineer) that the defendant’s “justifications” for the incidents are more apparent than real.

Consequently, defendant argues that, despite discovery, plaintiffs have failed to set forth, by affidavits or otherwise, specific facts showing that there is a genuine issue for trial. Rather, plaintiffs in their memoranda have disputed the interpretations of the alleged post-1982 violations given by defendant’s senior plant engineer. For purposes of this motion, the evidence must be viewed in the light most favorable to the opposing party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). A party may rely upon documentary evidence in the record in opposing a summary judgment motion. 6 Pt. 2 Moore’s Federal Practice Para. 56.23 (1982). Plaintiffs have relied upon the proof of violations contained in defendant’s DMRs. While I do not believe the DMRs supply conclusive proof of defendant’s liability, see Part IV, supra, I believe they enable plaintiffs to survive defendant’s motion for summary judgment as to the issue of whether current violations exist. However, I caution plaintiffs that they will be expected to produce competent expert testimony at trial if they are to meet their burden to prove that these eleven (11) incidents actually constitute violations.

III. Statute of Limitations

Defendants argue that the five (5) year statute of limitations under 28 U.S.C. Section 2462 is the applicable statute of limitations, and thus that any violations alleged to have occurred more than five (5) years prior to the filing of plaintiffs’ notice of their intent to sue are time-barred. Alternatively, defendant claims that the three (3) year statute of limitations of New York C.P.L.R. Section 214 applies.

Plaintiffs respond that there is no statute of limitations governing EPA’s enforcement of the Clean Water Act, and that there should be no limitation on the rights of citizens to act as “private attorneys general” in bringing citizen suits under Section 505. Alternatively, plaintiffs’ claim that if a statute of limitations does apply, it is the five (5) year statute of limitations under 28 U.S.C. Section 2462, rather than a period of time provided under a state statute of limitations.

The language of 28 U.S.C. Section 2462, is clear and provides that:

Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five (5) years from the date when the claim first accrued if, within the same period, the offender of the property is found within the United States in order that proper service may be made thereon.

Plaintiffs have conceded that they cannot recover damages under Section 505, but can only require defendant to pay penalties for past violations and/or be enjoined against future violations. Accordingly, because this is an action for federal statutory civil penalties, I hold that the five (5) year statute of limitations of 28 U.S.C. Section 2462 applies.

IV. DMR’s as Proof of Liability

Plaintiffs also argue that the DMRs filed by defendant constitute conclusive proof that defendant has committed the violations reported in the DMRs, entitling plaintiffs to partial summary judgment as to defendant’s liability for the violations. Plaintiffs rely primarily on four recent District Court cases from New Jersey for support, Student Public Interest Research Group of New Jersey v. Monsanto Co., 14 ELR 20228 (D.N.J.1983); Student Public Interest Research Group of New Jersey v. Fritzsche, Dodge & Olcott, 579 F.Supp. 1528 (D.N.J.1984); Student Public Interest Research Group of New Jersey v. Tenneco Polymers, Inc., 602 F.Supp. 1394 (D.N.J.1984); and, Student Public Interest Research Group of New Jersey v. Anchor Thread Co., Civ. No. 84-0320 (D.N.J. Oct. 1, 1984). As defendant points out, however, in those cases the defendants either offered no evidence contradicting their own DMRs or argued unconvincingly that the DMRs could not be relied upon due to inaccuracies or measuring error. In the present case, defendant has offered a multitude of justifications for the alleged violations, along with convincing arguments why many of the alleged violations should not actually constitute violations (e.g., typographical mistakes in the DMRs). I will not exclude defendant’s evidence, and I decline to grant plaintiffs’ motion for partial summary judgment.

I would draw the parties attention before trial to the provisions of Fed.R.Civ.P. 16(c)(3) and Section VI.B.l of the 1984 Guidelines for Practice and Procedure Before this Court. In this case (which plaintiffs allege to involve over 150 violations by defendant) I would expect the parties to stipulate to the facts on as many of the alleged violations as possible.

ALL OF THE ABOVE IS SO ORDERED.

      . Parenthetically, I find it difficult to accept the logic of defendant’s argument that plaintiffs’ action for civil penalties is not maintainable if based solely upon past violations. As plaintiff has pointed out, it is difficult for a plaintiff to verify that a violation is occurring at the very time that plaintiff is filing notice of intent to sue. Surely if a plaintiff can bring a citizen suit seeking civil penalties (a proposition with which defendant does not seem to quarrel), a plaintiff could base a citizen suit upon violations (particularly intermittent ones) which had occurred in the very recent past, as this would provide some indication of ongoing conduct by a defendant. This being so, I am not prepared to draw a line which Congress has not drawn, defining the point at which violations are deemed sufficiently "recent” to form the basis for a citizen suit. To my mind, that line has been drawn already at five (5) years, in 28 U.S.C. Section 2462, as set forth below.
      Nevertheless, if a defendant could show that violations had not occurred immediately prior to (and subsequent to) the institution of a civil suit, this would certainly be a relevant factor in the fixing of any civil penalty.

      . Defendant argues in a footnote that, if this Court does not apply the federal statute of limitations, it should borrow the applicable state three-year statute of limitations in New York CPLR Section 214 (McKinney 1983). Because I am ruling that the five-year federal statute of limitations applies, I do not address defendant’s argument, nor plaintiffs’ strenuous response to it.


source: Caselaw Access Project

license: Public Domain

text:
    UNITED STATES of America v. Richard FISHER.
    No. Crim. 84-00477.
    United States District Court, E.D. Pennsylvania.
    Jan. 11, 1985.

      Nicholas Harbist, Asst. U.S. Atty., Philadelphia, Pa., for plaintiff.
    Thomas A. Bergstrom, Philadelphia, Pa., for defendant.
   MEMORANDUM and ORDER

JOSEPH S. LORD, III, Senior District Judge.

On December 4, 1984, the Grand Jury returned an indictment charging the defendant with conspiracy to distribute heroin, and with substantive counts charging distribution of heroin. On December 18, 1984, following an evidentiary hearing on the Government’s motion for detention under the Bail Reform Act of 1984, P.L.98-473, the Magistrate entered a detention order. The defendant has now applied to me for an order admitting him to bail. I held an evidentiary hearing on January 10, 1985.

Section 3142(e) requires that I determine whether or not there is probable cause to believe that the person committed an offense for which a maximum term of imprisonment of ten years or more is prescribed in the Controlled Substances Act (21 U.S.C. § 801 et seq.). The Government’s evidence on this point consisted entirely of the hearsay statements as to declarations of informants, testimony which was admissible only because of the express terms of the Bail Reform Act, subsection (f). However, it has long been the law that probable cause may be established by hearsay evidence providing there is also evidence of the reliability of the informer. This requirement was satisfied here by the law enforcement officers’ testimony that previous tips by the informers had resulted in both arrests and convictions. I have no reason to disbelieve the officers, and therefore there was sufficient evidence to satisfy the requirements of hearsay-based probable cause. There was also testimony that there was a tape of a conversation concerning a sale of narcotics in November, 1982. The tape was made sometime in late 1982. Curiously, there was no direct evidence by any surveillance agent or anyone else of actual first hand observation of a sale. Nevertheless, I find that the evidence presented by the Government, although scanty, is sufficient to establish probable cause of a commission of a crime.

This finding raises a rebutable presumption that “no condition or combination of conditions will reasonably assure the appearance of the person as required and the safety of the community ...” The Bail Reform Act, § 3142(e). The Act further provides that “[t]he facts the judicial officer uses to support a finding pursuant to subsection (e) that no condition or combination of conditions will reasonably assure the safety of ... the community shall be supported by clear and convincing evidence.” I find that the Government has not fulfilled this requirement of the Act.

It must be remembered that we are dealing with the deprivation of the liberty of a citizen of the United States who is presumed to be innocent. In my judgment the clear and convincing evidence requirement rightly places a heavy burden upon the Government before this radical interference with freedom is imposed.

The Government here again offered only hearsay testimony. That testimony consisted of the testimony of police officers repeating what an informer had told them, and in some cases what another police officer had told the witness the informer had told him. The opportunities for distortion and imprecision are obvious. There was also testimony concerning a taped conversation vaguely placed between September and November of 1984 which allegedly recorded a sale by the defendant. The witness who testified to this had never listened to the tape and did not know what the substance was, how much was sold, where it was sold, or any of the circumstances surrounding the sale. Indeed, the substance of the taped conversation came to the testifying witness third-hand through Agent Cunningham, who allegedly was present at the sale, but who did not testify and who repeated his recollection of the taped conversation to the witness who appeared in court. It is common experience of mankind that repetition of conversations, no matter how good the intentions of the narrator may be, is subject to twists of wishful thinking, of interpretation or substitution of words or differences in phraseology, — in short, the conveyance of a completely erroneous version of what the actual conversation was. Although the Government had in its possession both the 1982 and 1984 tapes, and the transcript of the 1982 tape, it did not offer me an opportunity to hear the tapes in camera nor did it furnish me with a transcript of the 1982 tape. The very fact that the Government chose to rely on triple hearsay with its inherent human frailties of recollection, instead of furnishing me the exact language, casts suspicion upon the accuracy of the witnesses’ testimony. The failure of the Government to offer me proof positive of what the tapes said causes me to believe that the actual conversations might have been harmful to the Government’s case and also to be suspicious of the probative value of the hearsay testimony of the witnesses.

Finally, the conduct for which the defendant has been indicted occurred in 1982. Inspite of the fact that the Government now vigorously contends that Fisher will be a menace to the community, the Government nevertheless let him roam at large, allegedly reaping his profits and poisoning the neighborhood of 20th and York Streets, Philadelphia, with a flood of destructive narcotics. There may be some explanation for this inaction, but aside from the unsworn statement of counsel, none was offered. All of the foregoing glaring deficiencies in the Government’s proof seem to indicate that the Government treats deprivation of liberty as an automatic sequella of an indictment and that the deprivation of an individual’s liberty is not a very serious thing. I disagree with the Government and I find that its evidence falls far short of the clear and convincing standard rightly demanded by the Act.

I will therefore enter an order admitting the defendant to bail in the amount of One Hundred Thousand Dollars ($100,000.00) with ten percent (10%) in cash deposit accompanied by conditions (B), (D), (F), (G), (H), and (I) as set forth in the Bail Reform Act, Section 3142(c)(2). The restrictions called for by Subsection (D) shall be that the defendant shall not leave the jurisdiction and that he will not appear at or frequent the area of 20th and York Streets in Philadelphia, and that he will associate with no known sellers or users of narcotics. The terms of Subsection (F) are self-explanatory and the defendant shall report in person daily to the Pretrial Services Agency of this court.

The conditions of Subsection (G) is that the defendant shall be at 2307 N. Woodstock Street, Philadelphia, from 8 o’clock each evening until 8 o’clock of the morning of the following day. Furthermore, he shall be subject to telephone calls at random times during that period, and his failure to be there shall be a violation of this condition. Subsection (I) is self-explanatory. Under the Bail Reform Act, subsection (N), I impose the further condition that any failure to conform to the previous conditions of bail shall result in revocation of bail and forfeiture of the deposit.


author: LAFFITTE, District Judge.

text:
    Cruz DIAZ, et al., Plaintiffs, Maria L. Hernandez, et al., Plaintiffs Intervenors, v. BECTON DICKINSON & CO., S.A., et al., Defendants.
    Civ. No. 78-2327 HL.
    United States District Court, D. Puerto Rico.
    Jan. 21, 1985.

      Ernersto Maldonado Perez, Maldonado & Ortiz, San Juan, P.R., for plaintiffs.
    Ernesto Rodriguez Suris, Miranda Cardenas, Otero, De Corral & Rodriguez, Old San Juan, P.R., Brian P. Mullen, New York City, for defendants.
    Paul E. Summit, Orans, Elsen & Lupert, New York City, for Fairleigh S. Dickinson, Jr.
   OPINION AND ORDER

LAFFITTE, District Judge.

This matter is before us on motions for summary judgment filed by defendants, requesting dismissal of the complaint on the grounds that this Court lacks in personam jurisdiction over them.

Plaintiffs allege in their amended complaint filed on May 28, 1980, that they have suffered physical and mental damages due to mercury intoxication resulting from the negligence of all defendants in the operation of a thermometer manufacturing plant at Juncos, Puerto Rico. Defendants Becton Dickinson & Co. of New Jersey (BD) is the parent company of Becton Dickinson & Co., S.A. (BDSA), a Panamanian corporation doing business in Puerto Rico, as well as of all subsidiaries organized under the trade name Beeton-Dickinson. Codefendants Farleigh S. Dickinson, Jr., Henry F. Becton, and Wesley J. Howe were, during specific time intervals, members of the Board of Directors of Becton Dickinson, Becton Dickinson, S.A., and Becton Dickinson Puerto Rico, Inc. (BDPR). Also, codefendants Wesley J. Howe and Marvin A. Asnes, Henry Supplee, Robert G. Butler, and Benedict Harter acted as officers of BDPR, which employed the plaintiffs herein. The Hartford Insurance Company allegedly insures all defendants.

On October 2, 1979, and May 19, 1980, respectively, codefendants Howe, Harter, Asnes, Supplee, Butler, BD, and BDSA moved to dismiss the previous complaint. In view of the amended complaint filed on May 28, 1980, the above mentioned defendants filed, on June 3, 1980, a motion to dismiss for lack of personal jurisdiction adopting by reference their previous motions. On December 29, 1980, plaintiffs filed a second amended complaint adding as defendants Insurance Company of North America and Aetna Casualty & Surety Company. By order entered on March 9, 1982, the complaint was dismissed as to these two last defendants.

On January 12, 1982, BDSA moved for summary judgment. On October 21, 1982, plaintiffs filed a lengthy opposition to defendants’ motion to dismiss for want of in personam jurisdiction or summary judgment. Defendants replied on December 14, 1982, that the complaint as to BD should be dismissed since plaintiffs have not been able to prove that there is jurisdiction as to defendant BD. Finally, on January 31, 1983, the remaining individual defendants, Asnes, Harter, Howe, Becton Dickinson, and Supplee replied to plaintiffs’ brief of October 21, 1982.

In a diversity case, as in the present action, the federal district court’s personal jurisdiction over a non-resident defendant is governed by the forum’s long-arm statute. Therefore, a federal court has jurisdiction over a non-resident defendant only to the extent permitted by the long-arm statute of the forum. Quasha v. Shale Development Corp., 667 F.2d 483, 484-85 (5th Cir.1982). Puerto Rico’s long-arm statute provides two possible independent basis for jurisdiction in this case:

(a) Where the person to be served is not within Puerto Rico, the General Court of Justice of Puerto Rico shall have personal jurisdiction over said non-resident as if he were a resident of the Commonwealth of Puerto Rico, if the action or claim arises as a result of the following:

(1) Such person or his agent carries out business transactions within Puerto Rico;
(2) Executes by himself or through his agent, tortious act within Puerto Rico. Puerto Rico Laws Ann., Title 32 App. II, R.4.7.

The purpose of sections 1 and 2 of the Puerto Rico Rule 4 is to ascertain whether a non-resident defendant has sufficient contacts with the forum so as to justify subjecting him to this courts’ jurisdiction. Worldwide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). Therefore, we must scrutinize the jurisdictional facts in the instant case to determine whether defendants had the necessary contacts with Puerto Rico, to comport with due process requirements. Consequently, if defendants have purposely availed themselves of the privileges and protections of a state’s laws, and they ought reasonably to foresee that their activities may have possible consequences in that state that would force them to defend an action there, they will be amenable to in personam jurisdiction. Worldwide Volkswagen Corp., supra.

In A.H. Thomas Co. v. Superior Court, 98 PRR 864 (1970), the Supreme Court of Puerto Rico adopted a three-pronged test for determining whether in personam jurisdiction can be asserted over a non-resident defendant:

1. There must be an act done or consummated within the forum by the non-resident defendant. (Physical presence is not necessary; the act or transaction may be by mail.)

2. The cause of action must arise out of the defendant’s action within the forum state.

3. The activity linking defendant, forum, and cause of action must be substantial enough to meet the due process requirement of “fair play and substantial justice.” 98 PRR at 870.

The keystone of personal jurisdiction is that the cause of action against a non-resident must have resulted from the defendant’s activity in the state. Plaintiffs have the burden of proving those facts necessary to sustain jurisdiction. See, McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 56 S.Ct. 780, 80 L.Ed. 1135 (1936); Escude Cruz v. Ortho Pharmaceutical Corp., 619 F.2d 902 (1st Cir.1980). At this state plaintiffs must make out a prima facie showing of facts upon which jurisdiction is predicated in this Court.

Rule 4.7 of the Puerto Rico long-arm statute provides no basis for jurisdiction over defendants Henry Supplee and Benedict Harter, who were corporate officers of both BD and BDSA. Each worked and resided outside the Commonwealth of. Puerto Rico. According to the record, their relationship with the forum resulted from the fact that they were officers of a Puerto Rico corporation. This alone is insufficient to establish jurisdiction over defendants. There must be an independent basis for asserting jurisdiction over corporate officer defendants besides the fact that there is jurisdiction over the corporation. See, Escude Cruz v. Ortho, supra, at 906.

In this case, Mr. Harter began working at BD in 1960 as Comptroller. Subsequently he became Vice-president of Finance and Treasurer, and later was Senior Vice-president for Administration. He was also Treasurer of the subsidiary companies. When the Juncos thermometer plant began operating in 1958, Mr. Harter travelled to Puerto Rico between five and ten times for banking and taxes purposes. There is no evidence in the record that reveals that these trips or any other dealings in Puerto Rico were causally related to the plaintiffs’ injury.

As to Mr. Supplee, he was Assistant Secretary and also Vice-president for BD. Mr. Supplee was also Secretary of all the subsidiary companies and was General Counsel for BD. Mr. Supplee never travelled to Puerto Rico. In his affidavit and deposition he states that his functions in BD were purely ministerial. Nothing else in his testimony or affidavit suggests anything to the contrary.

Therefore, without such a causal nexus between the defendants’ activities in Puerto Rico and the plaintiffs’ claim, the defendants cannot be found to have “carried out business transactions within Puerto Rico” within the meaning of the long-arm statute. Rule 4.7(a)(1).

Plaintiffs have also failed to prove facts to establish jurisdiction over defendants Supplee and Harter under Rule 4.7(a)(2), the section of the long-arm statute concerning torts committed within the Commonwealth of Puerto Rico. In Escude Cruz v. Ortho, supra, the First Circuit held that officers of a Puerto Rican corporation were not subject to personal jurisdiction of Puerto Rico courts, absent showing that the officers had personal involvement with health or safety of employees, or that they undertook to maintain or inspect health and safety equipment. 619 F.2d at 907. In this case, plaintiffs have made no such showing. Affidavits filed by defendants state that they had no personal involvement with the health or safety of BDSA employees and that they did not undertake to maintain or inspect safety equipment, and that in case of any problems, those were handled by the local management. Here again the affidavits were not contradicted by the depositions of these defendants, and thus the affidavits must be taken as true. Mangual v. General Battery Corp., 710 F.2d 15, 19 (1st Cir.1983). Consequently, we must conclude that defendants Harter and Supplee did not have a personal involvement in plaintiffs’ injuries, and thus this Court lacks in personam jurisdiction over said defendants.

Nor have the plaintiffs proven sufficient facts to establish jurisdiction over defendants Dickinson, Becton, and Asnes. Defendant Farleigh S. Dickinson is a former Chairman of the Board of BD, where he was in charge of establishing standards for safety control. He served as a director of the BD subsidiaries until June, 1977, and only as an officer of the subsidiaries during the period of 1958 to September 30, 1963. However, the fact that Mr. Dickinson was never president or any other officer of any of the Puerto Rican subsidiaries after September 30, 1963, is indicative of Mr. Dickinson’s lack of operational involvement with the Juncos plant. Also, Mr. Dickinson stated in his deposition and affidavit that there are various BD subsidiaries throughout the world and that the task of investigating and implication safety conditions is a job that belongs to local management of each plant.

As to defendants Henry P. Becton and Marvin Asnes, the complaint does not contain allegations as to any specific duty on their part to provide for safety conditions of the employees. Mr. Becton was an officer of BDSA until February 26, 1964, holding the position of Treasurer. He was a director of the subsidiaries until February, 1979, and he was not an officer of any other subsidiary.

As to Mr. Asnes, he testified at his deposition that at that time (1980) he was President of Becton Dickinson & Co. Previously he had also been President of the Laboratory, Service & Education Division. In December, 1972, he became sole Executive Vice-president of BD. He travelled to Puerto Rico once on vacation in 1965-66, and again in 1973 or 1974, for a division presidents’ meeting in Dorado, Puerto Rico. (Deposition, p. 25.) When a suit was filed in 1975 in relation to the mercury intoxication, he referred the matter to the Law Department. He disavowed any knowledge of any grievance related to mercury intoxication prior to that time.

He concluded his testimony by stating that no action was taken by BDSA, BD Thermometer, or their boards of directors in connection with the complaint filed in 1975. He also stated that he was not aware of the contents of a 1974 Commonwealth of Puerto Rico legislative report relating to mercury intoxication at the plant.

Plaintiffs have failed to indicate facts sufficient for this Court to assume jurisdiction over these defendants. Chlebda v. H.E. Fortna & Bro., Inc., 609 F.2d 1022 (1st Cir.1979). These individual defendants’ relationship to the forum resulted from the fact that they were officers or directors of corporations doing business in Puerto Rico. As mentioned before, this alone is insufficient to establish jurisdiction over said defendants. Escude Cruz v. Ortho, supra; Mangual v. General Battery Corp., supra.

Even though an officer of a corporation may be liable for torts in which he personally participated whether or not he was acting within the scope of his authority, plaintiffs also have failed to establish sufficient facts that safety conditions at the Juncos plant were of concern to these individual defendants.

However, the situation is different as to defendant Wesley Jackson Howe, and requires the analysis by this Court.

Wesley Jackson Howe is Chairman and Chief Executive officer of BD and has been since 1974. Since 1964 he has also been an officer of the subsidiaries which owned and operated the Juncos plant and since February, 1973, a director of these companies. Howe also made trips to Puerto Rico and controlled decisions affecting the Juncos plant.

For purposes of Rule 4.7(a)(2) the record shows an issue of fact as to Howe’s possible involvement in decisions that might have caused plaintiffs’ injuries. Howe’s affidavit stated basically that he had no personal involvement with the plant, that he had no direct operational responsibilities, that his functions were administrative. In his deposition, Howe admitted that he did learn of a mercury vapor problem at the Juncos plant in 1966. Plaintiffs’ exhibits shows that he received report about high mercury units at BDSA and written reports as to this problems at the Juncos plant. Because Howe was in charge of the general management of BDSA, together with the fact that he had knowledge of the mercury intoxication and was involved in the improvement of the Juncos plant facilities, suggests Howe’s possible personal involvement with plaintiffs’ injuries either because of his acts or failure to act. Consequently, plaintiffs have presented a prima facie tort in this case as defendant Howe. At this time we are not expressing any opinion as to Howe’s liability. We only find that plaintiffs presented facts of Howe’s tortious conduct in Puerto Rico to sustain jurisdiction under Rule 4.7(a)(1).

We conté now to the question whether the Court has jurisdiction over BD. BD cannot be subject to this Court’s jurisdiction because BD is the sole stockholder of the subsidiaries, plaintiffs’ employer. Escude Cruz v. Ortho, supra, at 905. As to this issue, the case of Mangual, supra, 710 F.2d at 20-21, is controlling. From the evidence submitted in the case, it appears that individual defendants had dual roles as officers and directors of BD and the Puerto Rican subsidiaries. This fact alone does not establish that BD controlled BDSA.

We are of the opinion, however, that jurisdiction may be sustained over BD under Rule 4.7(a)(2). As already stated, plaintiffs have established facts of Howe’s possible personal involvement in plaintiffs’ injuries to support jurisdiction over him under Rule 4.7(a)(2). Since Howe was an officer of BD and was acting in that capacity on behalf of BD in Puerto Rico, tortious acts may be the basis of jurisdiction over BD. See, Mangual, supra, at 21.

As to codefendant Hartford Insurance Company, the motion to dismiss will be denied, since Hartford may be responsible for the damages suffered by plaintiffs if its insureds are held liable, however, only subject to the provisions of the Direct Action Statute, 26 LPRA 2001 et seq.; Ruiz Rodriguez v. Litton Industries Leasing Corp., 428 F.Supp. 1232 (D.P.R.1977), aff’d., 574 F.2d 44 (1st Cir.1978).

The motion to intervene by Maria L. Hernández at this late date is DENIED. The case is dismissed voluntarily as to co-defendant Robert G. Butler, in accordance with Rule 41(a)(1) of the Federal Rules of Civil Procedure.

The motion to dismiss for want of in personam jurisdiction is hereby DENIED as to codefendants Wesley J. Howe, Becton Dickinson & Co., and Hartford Insurance Co.; and GRANTED as to Marvin Asnes, Henry Supplee, Benedict Harter, Farleigh S. Dickinson, and Henry P. Becton.

The Clerk shall enter judgment accordingly.

IT IS SO ORDERED.

      . On October 21, 1982, plaintiffs moved for voluntary dismissal against Butler.

      . On December 6, 1979, Judge Torruella had denied the motion to dismiss as to the individual defendants.

      . On September 24, 1980, Judge Pérez-Giménez dismissed the amended complaint (later reinstated) as to Becton Dickinson and Co., and denied the motion to dismiss as to BDSA, which had before that date admitted it was doing business in Puerto Rico.


author: SIFTON, District Judge.

text:
    Thomas PEZZOLA, Plaintiff, v. UNITED STATES of America, Defendant.
    No. CV-83-3239.
    United States District Court, E.D. New York.
    Jan. 24, 1985.

      Zimmerman & Zimmerman, by Thomas Doyle, New York City, for plaintiff.
    U.S. Dept, of Justice, Torts Branch, Civ. Div., by Paul M. Wasserman, New York City, for defendant.
   MEMORANDUM AND ORDER

SIFTON, District Judge.

This is an action for personal injuries allegedly sustained while working on board a United States vessel in August 1981. Jurisdiction is based on the Public Vessels Act, 46 U.S.C. §§ 781-790, and the Suits in Admiralty Act, 46 U.S.C. §§ 741-752. This matter is before the Court on defendant’s motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) and (h)(3) of the Federal Rules of Civil Procedure.

The facts, as alleged in the complaint and plaintiff’s affidavits submitted on this motion, are that on August 18, 1981, plaintiff was working as a welder doing maintenance work on the United States Naval Ship Paweatuck. The work was being done at the Jackson Marine Pier, and plaintiff was employed by the Jackson Marine Co. In the course of work, plaintiff fell and was injured, sustaining a tear of the posterior horn of the medial meniscus of the left knee. He continues to suffer from that injury as well as from traumatic neurosis and depression said to have been caused by the fall. As a result, he alleges that he is no longer able to perform his duties as a welder.

The action was commenced by the filing of a complaint on July 26, 1983. On that date a summons was issued by the Clerk of the Court. The summons and complaint were served on the United States Attorney’s office in this courthouse. On September 26, 1983, the defendant served its answer. The answer contains no reference to defective service of process and pleads no affirmative defenses based on lack of personal or subject matter jurisdiction.

On October 25, 1983, a status conference was held attended by attorneys for both sides, and no jurisdictional objections were made by the United States. Discovery proceeded during which defendant served interrogatories, deposed plaintiff, and conducted a medical examination. On June 4, defendant made a proposal to settle the case for $3,000 in the form of an offer of judgment, which was apparently not accepted. On September 24, 1984, a final pretrial conference was held, and the case was marked ready for trial.

Defendant now moves for dismissal for lack of subject matter jurisdiction on the ground that the Attorney General of the United States was never served by mail or otherwise with a copy of the summons and complaint as required by the Suits in Admiralty Act, 46 U.S.C. § 742.

Plaintiff does not dispute defendant’s contention that he has failed to comply with the requirements of § 742. Plaintiff argues initially that defendant’s claim of lack of personal jurisdiction or insufficient service of process is, under Rule 12(h)(1) of the Federal Rules of Civil Procedure, waived because not timely made. Alternatively, plaintiff argues that the government is estopped from relying on plaintiff’s essentially procedural default by its conduct in defending this case without either timely advising the plaintiff that service was improper or moving to dismiss. For the reasons that follow, the motion to dismiss is granted.

In suits brought against the United States under the Public Vessels Act, 46 U.S.C. §§ 781-790, which incorporates by reference the Suits in Admiralty Act, 46 U.S.C. §§ 741-752, the procedural requirements for obtaining jurisdiction over the United States are set forth in 46 U.S.C. § 742, which requires the libelant forthwith to serve a copy of his libel on the United States Attorney and to mail a copy thereof by registered mail to the Attorney General of the United States. The statute is harsh and much criticized. As stated in Amelia v. United States, 732 F.2d 711 (9th Cir.1984), “[ljawyers unfamiliar with the ways of admiralty or careless on their watch will encounter this statute as a hidden reef that can be a jurisdictional bar to an otherwise meritorious suit.” 732 F.2d at 712.

The leading case in this Circuit is Battaglia v. United States, 303 F.2d 683 (2d Cir.), cert. dismissed, 371 U.S. 907, 83 S.Ct. 210, 9 L.Ed.2d 168 (1962). In Battaglia, the court affirmed the district court’s dismissal of the action for lack of subject matter jurisdiction because the libelant “had failed to effect service of process on the United States in that he failed to serve a copy of the libel on the Attorney General of the United States and file an affidavit as required by 46 U.S.C. §§ 742 and 782.” That action was filed on June 8, 1961, and service was made on the United States Attorney for the Southern District of New York. The plaintiff, however, did not mail a copy to the Attorney General or file an affidavit of service. On October 25, 1961 the government moved to dismiss claiming defective service. The next day libelant attempted to cure the defect by mailing a copy to the Attorney General and filing the affidavit. The court, recognizing the harshness of § 742, nonetheless affirmed, finding that the failure to mail a copy of the libel deprived the court of jurisdiction. In so finding, the court stated:

“Libelant’s argument that notice to the United States Attorney should be adequate notice to the United States is not realistic. His conception of a United States Attorney ‘in his office snowbound’ eventually using his ‘horse and buggy’ to carry notice of the libel to the Attorney General may be somewhat altered by a more modern communication system but it ignores the function of the Attorney General’s Office. The Attorney General is responsible for handling the nationwide litigation against the Government. For convenience of litigants, actual personal service may be made in the appropriate district, thus avoiding the necessity of traveling from North Dakota (for example) to Washington, or engaging local Washington counsel to make service. It is, nevertheless, equally important, if not more important, for the Attorney General to receive almost simultaneous notice. In final analysis, the ultimate final responsibility for the handling of cases, both as to pleading and trial tactics as well as possible settlement, is vested in the Attorney General. The local United States Attorneys are his deputies who possess such authority as he chooses to bestow upon them.”

303 F.2d at 685-86.

The court moreover rejected plaintiff’s argument that the government’s four-month delay in moving to dismiss constituted a waiver, stating “the [United States] Attorney had no power to waive conditions or limitations imposed by statute in respect of suits against the United States.” 303 F.2d at 686.

Judge Friendly, in a concurrence, disagreed with the court’s interpretation of § 742 but conceded the weight of authority was that all procedures in § 742 were jurisdictional in nature. He stated:

“Hence, if, as the opinion assumes, every failure by a libelant to comply with a procedural step outlined in the Suits in Admiralty Act, 41 Stat. 525 (1920), is ‘jurisdictional,’ but only if so, its Draconian conclusion inexorably follows.
“I cannot believe Congress meant anything of the kind; I should have supposed that, once Congress gave the basic consent to sue the United States, as it did in the first sentence of § 2 of the Suits in Admiralty Act, 42 U.S.C.A. § 742, it was content to have the courts decide the effect of various procedural lapses in the same manner as ‘if such vessel were privately owned or operated.’ The Act was ‘a comprehensive waiver by the United States’ whereby ‘the government, in entering the shipping world as a participant, simply assumes a normal role in the antecedent pattern.’ Gilmore and Black Admiralty (1957), pp. 773-774.”

303 F.2d at 686.

Battaglia has not received much comment within this Circuit, and, while criticized, it continues to be followed. Kenyon v. United States, 676 F.2d 1229 (9th Cir.1981), held that, where the libelants mailed a copy of the libel to the Attorney General 60 days after institution of the suit and 55 days after the effective two-year statute of limitations had expired, the action had to be dismissed for lack of jurisdiction. Citing Battaglia, the court stated: “The congressional command of § 742 is a condition precedent to the congressional waiver of the Government’s sovereign immunity.” 676 F.2d at 1231.

Much as Judge Friendly did, Judge Boochever, in Kenyon, concurred based upon the weight of precedent but stated that he “would hold that the service provision of section 742 does not constitute an integral part of the substantive waiver of sovereign immunity, but it is a mere procedural provision.” In reaching that conclusion, Judge Boochever argued that he would find that Rule 4 of the Federal Rules of Civil Procedure, which governs service on the United States, was intended to supplant all conflicting service provisions. He stated:

“I would conclude that the service of process provision in Section 742 is procedural and has been supplemented by the provisions of Rule 4 specifying the method of service on the United States of America. Under that rule, service was timely accomplished in this case. I can see no logical reason why there should be a different method of service in this one instance in which the United States is a defendant. I further am impressed by the fact that Section 742 specifies even the manner of mailing ‘by registered mail to the Attorney General of the United States.’ Certainly that provision is not to be considered as jurisdictional and would be superseded by the Federal Rule provision that states that a copy of the summons and complaint may be sent by ‘registered or certified mail to the Attorney General of the United States.’ Fed.R.Civ.P. 4(d)(4).”

Kenyon, supra, 676 F.2d at 1232.

Most recently in Amella v. United States, 732 F.2d 711 (9th Cir.1984), the Ninth Circuit, citing Battaglia, reaffirmed the principle that “failure to comply with the forthwith service demand of § 742 is a jurisdictional defect which denies a court subject matter jurisdiction in the controversy.” Id. at 712. In that action the United States Attorney’s Office advised appellant’s counsel to dismiss voluntarily and re-file the action so that it could serve the Attorney General by registered mail. However, the libelant chose to ignore that advice and instead opted to mail the complaint 63 days after the action was filed.

In the course of its opinion, the court commented on the proposition that Rule 4 intended to supplant § 742 by stating it is a “dubious assumption that the Federal Rules of Civil Procedure can amend an act of Congress.” Id. at 713. Nor, the court stated, could the parties cure the defect by simply re-serving the original complaint, since to allow that would make § 742 a nullity. In granting the motion to dismiss, the court renewed the attack on § 742, stating:

“It is a sad case. After the obdurate refusal of counsel to follow the sensible and generous advice of the United States Attorney’s office, the appellants forfeited substantial claims. The loss of meritorious causes is inherent in any workable system of legal procedure. One of the ‘problems which a legal system must face is a combination of a due regard for claims of substantial justice with a system of procedure rigid enough to be workable,’ 2 Holdsworth, A History of English Law 196 (1909); but § 742 appears to strike the balance too far in favor of formalism, to the detriment of justice. The United States at oral argument acknowledged the rule is harsh and often inequitable. If Congress were to take the statute off the books, we should feel no remorse; but until Congress awakes to action, we are bound by the statutory requirement.”

Id. at 714.

There can be no question that the plaintiff has not complied with the requirement of 46 U.S.C. § 742, made applicable by § 782, that he must “forthwith” mail a copy of the complaint by registered mail to the Attorney General of tpe United States. It has been over one year since the complaint was filed, and no summons has been mailed or affidavit of mailing filed. Additionally, the statute of limitations, which is a two-year statute, expired in August 1983, and thus no argument could be made that the forthwith requirement allows at least until the statute of limitations expires. It is elementary that “the United States as sovereign is immune from suit save as it consents to be sued and the terms of its consent to be sued in any court define that court’s jurisdiction to entertain the suit.” United States v. Mitchell, 445 U.S. 535, 538, 100 S.Ct. 1349, 1351, 63 L.Ed.2d 607 (1980). In the context of § 742, it has been most recently held that, “[wjhere, as here, a waiver of sovereign immunity is implicated, a failure to comply with statutory provisions concerning service and notice must be regarded as jurisdictional.” Allen v. United States, No. 84-5717 (S.D.N.Y. Oct. 31, 1984). Thus, by the terms of § 742, defendant’s motion for dismissal for lack of subject matter jurisdiction must be granted.

Plaintiff argues that pursuant to Rules 12(b) and (h)(1), defendant has waived its right to contest the jurisdiction under § 742 by not raising it in his answer or by earlier motion. In order for this Court to adopt that argument, it would have to find the requirement of forthwith mailing to be procedural rather than jurisdictional. If the requirement is jurisdictional then the defense is not waived since Rule 12(h)(3) allows a party or the Court to raise lack of subject matter jurisdiction at any point.

Justice Friendly’s argument in Battaglia was that the mailing requirement should be regarded as procedural. However, as Judge Friendly recognized, principles of stare decisis compel a finding that the mailing requirement is jurisdictional. Plaintiff asks this Court not to follow the Battaglia rule, but rather to adopt Judge Friendly’s reasoning that Congress could not have meant that, in a situation such as this, dismissal for lack of subject matter jurisdiction should be granted. As already stated, this Court is confined to the Battaglia rule, unless the Court of Appeals itself reverses Battaglia.

Plaintiff makes the argument that the acts of the government constitute waiver of the requirements of § 742. However, what was said in United States v. United States Fidelity & Guaranty Co., 309 U.S. 506, 60 S.Ct. 653, 84 L.Ed. 894 (1940), is dispositive here:

“It is a corollary to immunity from suit on the part of the United States ... that this immunity cannot be waived by officials. If the contrary were true, it would subject the Government to suits in any court in the discretion of its responsible officers. This is not permissible.”

309 U.S. at 513, 60 S.Ct. at 657. See also American-Foreign Steamship Corp. v. United States, 291 F.2d 598, 607 (2d Cir.1961); United States v. Hennen, 300 F.Supp. 256, 259 n. 5 (D.Nev.1968).

Plaintiff’s collateral estoppel argument must also be rejected if only because the government’s misleading conduct, if such it was, is not responsible for plaintiff’s current plight. As already noted, plaintiff’s complaint was filed on the evening of the expiration of the statute of limitations. By no stretch of the imagination can the government be taxed with failing to act promptly enough to bring to the attention of plaintiff his failure to serve the Attorney General properly in time to avoid the bar that now exists preventing him from curing the defect in service. While the government certainly wasted much time and effort on its part and on the part of its adversary over the course of this litigation, that waste of time and effort made the plaintiff’s situation no worse than it already was. Accordingly, even assuming some misconduct on the part of government counsel in allowing this suit to proceed as far as it has, that misconduct did not prejudice plaintiff’s case, which was essentially past remedy jurisdictionally when the initial service was defectively made.

For the reasons set forth above, defendant’s motion to dismiss must be granted.

The Clerk is directed to enter judgment dismissing the complaint and to mail a copy of the within to all parties.

SO ORDERED.


author: ALSOP, Chief Judge.

text:
    Vicki Lynn DRAKE and Mark Drake, husband and wife; Marcella Hills and Harvey Hills, husband and wife, Plaintiffs, v. LOCHINVAR WATER HEATER, INC., a Michigan corporation, formerly known as Wagoner Corporation; and Honeywell, Inc., a Delaware corporation, Defendants. HONEYWELL, INC., Third-Party Plaintiff, v. WAGONER WATER HEATER CO., INC., Third-Party Defendant.
    No. 3-83 Civ 663.
    United States District Court, D. Minnesota, Third Division.
    March 21, 1985.
    On Motion To Amend April 26, 1985.

      Stanley E. Karon & Associates, P.A. by Stanley E. Karon, St. Paul, Minn., for plaintiffs.
    Faegre & Benson by George W. Flynn, Scott P. Drawe and Scott Johnson, Minneapolis, Minn., for defendant and third-party plaintiff Honeywell, Inc.
   MEMORANDUM ORDER

ALSOP, Chief Judge.

This matter comes before the court upon defendant Honeywell, Inc.’s (Honeywell) motion to dismiss count 5 of the complaint for failure to state a claim upon which relief can be granted pursuant to Fed.R. Civ.P. 12(b)(6). In count 5, plaintiffs allege that Honeywell failed to properly, timely and accurately advise the Consumer Product Safety Commission (Commission) that the Honeywell V5130 gas control valve was defective and unreasonably dangerous in violation of the Consumer Product Safety Act (CPSA) § 15(b), 15 U.S.C. § 2064(b).

Plaintiffs bring count 5 pursuant to § 23(a) of the CPSA, which authorizes a private cause of action under the following circumstances:

Any person who shall sustain injury by reason of any knowing (including willful) violation of a consumer product safety rule, or any other rule or order issued by the Commission may sue any person who knowingly (including willfully) violated any such rule or order____

15 U.S.C. § 2072(a) (emphasis added).

Title 15 U.S.C. § 2064(a), which Honeywell allegedly violated, provides that every manufacturer who obtains information that its consumer product “contains a defect which could create a substantial product hazard” must inform the Commission of that information. To interpret and implement this statutory provision, the Commission promulgated reporting requirement rules. See 16 C.F.R. §§ 115.01-.22 (1984). The issue before this court is whether a manufacturer’s violation of the reporting requirement rules, 16 C.F.R. pt. 1115, creates a private cause of action under 15 U.S.C. § 2072(a).

Honeywell’s first argument is that the CPSA does not create a private cause of action for alleged violations of the statute itself. Rather, the CPSA creates a private cause of action only for violations of rules or orders promulgated by the Commission pursuant to the statute. See 15 U.S.C. § 2072(a). Plaintiffs, however, in count 5 of the complaint, do not allege that Honeywell violated Commission rules or orders. Instead, plaintiffs allege a violation of the statute itself. Thus, argues Honeywell, count 5 fails to state a claim upon which relief can be granted and should therefore be dismissed.

The court agrees with Honeywell that count 5 is technically deficient in stating a valid legal claim. Nevertheless, given that amendments to pleadings are to be granted liberally under Fed.R.Civ.P. 15(a), the court will permit plaintiffs to amend their complaint to specify the rule or order that Honeywell allegedly violated. Plaintiffs’ amended complaint shall be filed within 30 days of the date of this order.

Honeywell’s next, and more persuasive, argument is that the CPSA does not create a private cause of action for violations of the reporting requirement rules, 16 C.F.R. pt. 1115. Honeywell contends that § 2072(a) authorizes a private cause of action only for knowing violations of the two kinds of consumer product safety rules, the seven other kinds of substantive rules the Commission is authorized by statute to promulgate, and an order promulgated under 15 U.S.C. § 2064. Thus, Honeywell argues that “other rules” as used in § 2072 refers only to substantive rules which the Commission is specifically authorized to promulgate under the CPSA. The regulations promulgated in 16 C.F.R. pt. 1115, according to Honeywell, are merely interpretive rules, whose violation does not give rise to a private cause of action under § 2072(a). To support this analysis, Honeywell points to the regulations themselves, which state that the purpose of part 1115 is to set forth the Commission’s “interpretation of the reporting requirements imposed on manufacturers, ... distributors, and retailers by Section 15(b) of the [CPSA, 15 U.S.C. § 2064(b) ].” 16 C-.F.R. § 1115.1 (emphasis added). Honeywell also directs the court to the preface of the current regulations, in which the Commission acknowledges that it “considered the difference between promulgating the rule as substantive or interpretive ... and has decided to promulgate the rule as interpretive.” Substantial Product Hazard Reports, 43 Fed.Reg. 34988, 34990 (Aug. 7, 1978).

As noted above, Honeywell’s argument is both creative and persuasive, especially in light of basic principles of federal administrative law regarding the effect of substantive versus interpretive rules. Nevertheless, Honeywell is fighting an uphill battle, in that Honeywell’s analysis fails to account for the plain meaning of the statutory language, the statute’s legislative history, or rather, the lack thereof, and the overwhelming weight of contrary judicial authority.

In construing the meaning of § 2072(a), this court will “begin with the familiar canon of statutory construction that the starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive.” Consumer Product Safety Commission v. G.T.E. Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980) (construing the CPSA), quoted in Young v. Robertskaw Controls Co., 560 F.Supp. 288, 292 (N.D.N.Y.1983) and Butcher v. Robertshaw Controls Co., 550 F.Supp. 692, 698-99 (D.Md.1981). The language of § 2072(a) is plain and straightforward — a private cause of action is available to any person injured because of a knowing violation of a consumer product safety rule, “or any other rule or order issued by the Commission.” Although the term “consumer product safety rule” is defined in the CPSA, see 15 U.S.C. § 2052(a)(2), the term “other rule” is not defined. Other courts have turned to the Administrative Procedure Act (APA) for a definition of “rule.” See Young v. Robertshaw Controls Co., supra, 560 F.Supp. at 292-93 n. 8; Swenson v. Emerson Electric Co., 356 N.W.2d 313, 317 (Minn.App.1984). Under the APA, “ ‘rule’ means the whole or a part of an agency-statement of general or particular applicability and future effect designed to complement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency----” 5 U.S.C. § 551(4) (emphasis added).

Honeywell contends the term “other rule” in § 2072(a) refers to substantive rules, which Honeywell defines as seven specific kinds of rules the Commission is authorized to promulgate under various sections of the CPSA. See supra note 2. This view is overly restrictive and “flies in the face” of the unambiguous language of the statute. Young v. Robertshaw Controls Co., supra, 560 F.Supp. at 292. Honeywell’s list of seven substantive rules is contrived. The CPSA does not define substantive rules, nor does it differentiate between substantive and interpretive rules. Further, the CPSA does not prohibit the Commission from issuing other rules not described in the statute. Moreover, there is no indication whatsoever in the language of § 2072(a) to limit “other rules” to the species of rules defined by Honeywell. In addition, there is no statutory language revealing an intent to exclude interpretive rules from the scope of § 2072(a).

Honeywell is unable to find any support for its theory in the legislative history of the CPSA. An examination of that history reveals little; however, there is no indication of any congressional intent contrary to the plain language of the statute. See H.R.Conf.Rep. No. 1593, 92d Cong., 2d Sess., reprinted in 1972 U.S.Code Cong. & Ad.News 4573, 4596; S.Rep. No. 835, 92d Cong., 2d Sess., reprinted in 1972 U.S. Code Cong. & Ad.News 4573.

The CPSA is remedial legislation which must be liberally construed to effectuate its purpose. United States v. One Hazardous Product Consisting of a Refuse Bin, 487 F.Supp. 581, 588 (D.N.J.1980); United States v. Anaconda Co., 445 F.Supp. 486, 494 (D.D.C.1977). Honeywell’s interpretation limits the remedial purposes of the CPSA.

A number of other courts have addressed this same issue. Three United States district courts and the Minnesota Court of Appeals have held that a violation of the reporting requirement rules promulgated at 16 C.F.R. pt. 1115 creates a private cause of action under § 2072(a). Payne v. A. O. Smith Corp., 578 F.Supp. 733 (S.D.Ohio 1983); Young v. Robertshaw Controls Co., supra, 560 F.Supp. 288; Butcher v. Robertshaw Controls Co., supra, 550 F.Supp. 692; Swenson v. Emerson Electric Co., supra, 356 N.W.2d 313. All of these cases dealt with water heater control devices — the same product involved in the instant action. Honeywell argues that these cases are “clearly wrong.” The Butcher court, according to Honeywell, erroneously assumed that rules contained in part 1115 constituted substantive rules. More accurately, though, the Butcher court spoke only of rules generally without differentiating substantive from interpretive rules. The Young court, and later the Payne and Swenson courts, however, specifically held that § 2072(a) applies to violations of interpretive rules. Payne v. A.O. Smith Corp., supra, 578 F.Supp. at 738; Young v. Robertshaw Controls Co., supra, 560 F.Supp. at 292-93 n. 8; Swenson v. Emerson Electric Co., supra, 356 N.W.2d at 317. Honeywell argues that these decisions are incorrect insofar as they ignore the distinction in federal administrative law between substantive and interpretive rules. There is no indication that this argument was not presented to those courts. Furthermore, Honeywell’s analysis ignores the plain meaning of the language of the statute which was relied upon in the other actions.

Defendants cite one contrary United States district court decision. In Morns v. Coleco Industries, 587 F.Supp. 8 (E.D.Va.1984), a swimming pool case, the court held that no private claim exists for a failure to disclose under § 2064. The Morris court explained that the disclosure requirement of § 2064 “is not a requirement based upon a rule or order of the Commission. It is a requirement predicated upon the statute itself.” Id. at 9. It appears that the analysis of the Morris court turned on the fact that plaintiffs alleged a violation of the CPSA itself, rather than a rule. Thus, Morris is both distinguishable from the instant action and consistent with the other cases recognizing a private cause of action. Based upon the plain language of § 2072(a), the lack of any contrary legislative intent, and the prior judicial determinations of the issue in other jurisdictions, this court holds that Honeywell’s alleged violation of the reporting requirement rules, 16 C.F.R. pt. 1115, creates a private cause of action under 15 U.S.C. § 2072(a).

Honeywell also contends that plaintiff’s CPSA cause of action should be dismissed because of causation problems. The court agrees with Honeywell that plaintiffs will have a difficult time proving that any failure to report was the proximate cause of plaintiffs’ injury. Nevertheless, the court views the causation question as one that must be resolved on a full record. Thus, the court will not dismiss the CPSA claim on this basis.

Honeywell finally contends that plaintiffs cannot claim punitive damages under the CPSA. Section 2072(a) expressly limits damages recoverable thereunder to “damages sustained.” Honeywell maintains that the clear meaning of “damages sustained” is damages actually suffered, or in other words, compensatory damages. An examination of the legislative history of the CPSA reveals that Congress did not intend treble or punitive damages to be awarded under § 2072 as a matter of federal law. See Butcher v. Robertshaw Controls Co., Civ. No. B-81-72, slip op. at 4-6 (D.Md. Nov. 3, 1982); Wahba v. H & N Prescription Center, Inc., 539 F.Supp. 352, 355-56 (E.D.N.Y.1982).

Nevertheless, “the measure of recovery under the [CPSA] is a function of state rather than federal law.” Young v. Robertshaw Controls Co., supra, 560 F.Supp. at 294, quoting Wahba v. H & N Prescription Center, Inc., supra, 539 F.Supp. at 354. The parties have not briefed this state law issue, including the related choice of law issue. Thus, the question of whether state law permits a claim of punitive damages under the CPSA is not properly before the court at this time. Accordingly, Honeywell’s contention that plaintiffs fail to state a claim for punitive damages under the CPSA will be denied. Honeywell may, however, renew its motion to dismiss the CPSA punitive damages claim at a later date.

Based upon the foregoing,

IT IS ORDERED That Honeywell’s motion to dismiss count 5 for failure to state a claim be and the same hereby is in all things denied.

IT IS FURTHER ORDERED That plaintiffs shall file an amended complaint within thirty (30) days of the date of this order which shall specify a CPSA rule or order that Honeywell allegedly violated.

ON MOTION TO AMEND

This matter comes before the court upon defendant Honeywell, Inc.’s (Honeywell) motion to amend this court’s interlocutory order dated March 21, 1985 to include the prescribed statement of 28 U.S.C. § 1292(b). The order Honeywell seeks to amend denied Honeywell’s motion to dismiss Count V of plaintiffs’ complaint for failure to state a claim. Plaintiffs oppose the motion to amend. The matter was submitted without oral hearing upon written statements of counsel. Fed.R.Civ.P. 78.

Discretionary appeal from an interlocutory order of the district court is permitted if the district judge certifies in writing that he or she is “of the opinion” that the order (1) “involves a controlling question of law,” (2) “as to which there is substantial ground for difference of opinion,” and (3) “that an immediate appeal from the order may materially advance the ultimate termination of the litigation.” 28 U.S.C. § 1292(b); 16 C. Wright, A. Miller, E. Cooper & E. Gressman, Federal Practice and Procedure § 3930, at 155-56 (1977). An order may be amended to include the prescribed statement of § 1292(b) at any time. Fed.R.App.P. 5(a).

The court has reviewed its order dated March 21, 1985 and concludes that the criteria for § 1292(b) certification are met. In Count V of their complaint, plaintiffs allege that Honeywell violated the reporting requirements of the Consumer Product Safety Act (CPSA) § 15(b), 15 U.S.C. § 2064(b). This court’s order, denying Honeywell’s motion to dismiss Count V, involves a controlling question of law because, if erroneous, it would constitute reversible error on final appeal. Further, the issue is purely a question of law. As reflected in this court’s order dated March 21, 1985, plaintiffs’ claim under the CPSA presents a question of law which has not been addressed by the circuit courts and as to which there is substantial ground for difference of opinion. The various trial courts which have faced the same issue are divided. See Memorandum Order, Mar. 21, 1985, at 7-8. In addition, this court is of the opinion that an immediate appeal on this issue may materially advance the ultimate termination of the litigation. A trial on the merits of the CPSA claim would require separate proof and would raise many difficult evidentiary issues. Further, a contrary ruling on appeal after trial would ¿reate the potential need for a second trial. Thus, appellate review at this time would limit the issues that remain to be tried.

Accordingly,

IT IS ORDERED That defendant and third-party plaintiff Honeywell’s motion to amend this court’s order dated March 21, 1985 be and the same hereby is granted.

IT IS FURTHER ORDERED That this court’s order dated March 21, 1985, denying Honeywell’s motion to dismiss Count V of plaintiffs’ complaint, be and the same hereby is amended to include the following:

The court is of the opinion that the denial of Honeywell’s motion to dismiss plaintiffs’ fifth claim for relief (CPSA) involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from this portion of the order may materially advance the ultimate termination of the litigation.

      . See 15 U.S.C. §§ 2056(b), 2057.

      . See 15 U.S.C. §§ 2058(g)(2) (rules prohibiting stockpiling), 2062(a) (rules regarding new consumer products) (repealed 1981), 2063(a)(2), (b), (c) (rules prescribing reasonable testing programs), 2065(b) (rules regarding record keeping), 2066(g) (rules related to imported consumer products), 2075(c) (rules exempting state and local governments from requirement that parallel nonfederal regulations mirror consumer product safety standards), 2076(e) (rules requiring manufacturers of consumer products to provide the Commission with performance and technical data).

      . In their brief, plaintiffs cite two Minnesota district court actions for the same proposition. See Jendro v. Honeywell, Inc., No. 730315 (Hennepin County District Court); Martens v. A.O. Smith and White Rodgers Division of Emerson Electric (Dakota County District Court).

      . Honeywell also cites a Wisconsin circuit court action, Hedrick v. F.R. Kirk Co., No. 581-363 (Milwaukee County Circuit Court), for the same proposition.


author: GASCH, District Judge.

text:
    Peter C. LOVENHEIM, Plaintiff, v. IROQUOIS BRANDS, LTD., Defendant.
    Civ. A. No. 85-0734.
    United States District Court, District of Columbia.
    March 28, 1985.

      Jonathan Eisenberg, Washington, D.C., for plaintiff.
    Hadrian R. Katz, Washington, D.C., for defendant.
   MEMORANDUM

GASCH, District Judge.

I. BACKGROUND

This matter is now before the Court on plaintiff’s motion for preliminary injunction.

Plaintiff Peter C. Lovenheim, owner of two hundred shares of common stock in Iroquois Brands, Ltd. (hereinafter “Iroquois/Delaware”), seeks to bar Iroquois/Delaware from excluding from the proxy materials being sent to all shareholders in preparation for an upcoming shareholder meeting information concerning a proposed resolution he intends to offer at the meeting. Mr. Lovenheim’s proposed resolution relates to the procedure used to force-feed geese for production of paté de foie gras in France, a type of paté imported by Iroquois/Delaware. Specifically, his resolution calls upon the Directors of Iroquois/Delaware to:

form a committee to study the methods by which its French supplier produces paté de foie gras, and report to the shareholders its findings and opinions, based on expert consultation, on whether this production method causes undue distress, pain or suffering to the animals involved and, if so, whether further distribution of this product should be discontinued until a more humane production method is developed.

Attachment to Affidavit of Peter C. Lovenheim.

Mr. Lovenheim’s right to compel Iroquois/Delaware to insert information concerning his proposal in the proxy materials turns on the applicability of section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a) (“the Exchange Act”), and the shareholder proposal rule promulgated by the Securities and Exchange Commission (“SEC”), Rule 14a-8. That rule states in pertinent part:

If any security holder of an issuer notifies the issuer of his intention to present a proposal for action at a forthcoming meeting of the issuer’s security holders, the issuer shall set forth the proposal in its proxy statement and identify it in its form of proxy and provide means by which security holders [presenting a proposal may present in the proxy statement a statement of not more than 200 words in support of the proposal].

Iroquois/Delaware has refused to allow information concerning Mr. Lovenheim’s proposal to be included in proxy materials being sent in connection with the next annual shareholders meeting. In doing so, Iroquois/Delaware relies on an exception to the general requirement of Rule 14a-8, Rule 14a-8(c)(5). That exception provides that an issuer of securities “may omit a proposal and any statement in support thereof” from its proxy statement and form of proxy:

if the proposal relates to operations which account for less than 5 percent of the issuer’s total assets at the end of its most recent fiscal year, and for less than 5 percent of its net earnings and gross sales for its most recent fiscal year, and is not otherwise significantly related to the issuer’s business.

Rule 14a-8(c)(5), 17 C.F.R. § 240.14a-8(c)(5).

In addition to asserting that this exception applies, Iroquois/Delaware has raised two other challenges to the granting of a preliminary injunction: a) that the suit should be dismissed for lack of proper service of process; and b) that jurisdiction is not proper as to Iroquois/Delaware in this Court.

II. LIKELIHOOD OF PLAINTIFF PREVAILING ON MERITS

A. Service of Process

Iroquois/Delaware first asserts in opposition to plaintiff’s motion for preliminary injunction that plaintiff has failed to serve process upon Iroquois/Delaware.

It is undisputed that plaintiff made service by hand upon C.T. Corporation, the District of Columbia registered agent for a company named Iroquois Brands, Ltd., which is organized under the laws of the State of New York (hereinafter Iroquois/New York) and is distinct from Iroquois/Delaware. Service upon Iroquois/New York was defective as Iroquois/New York is not identified as a defendant.

A copy of the complaint was also mailed by regular mail to the headquarters of Iroquois/Delaware and to Iroquois/Delaware’s general counsel. Iroquois/Delaware asserts that this service was defective as it included only an unexecuted summons and was sent by regular mail instead of service by mail with signed receipt. See D.C.Code § 13-431.

Were these the only attempts at service, Iroquois/Delaware’s assertion of no proper service might have merit. However, plaintiff also attempted to serve the complaint together with an executed summons by sending them Federal Express to James P. McCaffrey, President of Iroquois/Delaware, and Joseph H. Sweeney, Senior Vice President of Iroquois. These materials were sent together with a notice of acknowledgment of receipt of summons and complaint. Iroquois/Delaware has not provided the Court with any basis for finding this latest attempt at service insufficient at this time.

B. Jurisdiction

Iroquois/Delaware’s second basis for opposing plaintiff’s motion for preliminary injunction is its assertion that it is not subject to the jurisdiction of this Court.

Both plaintiff and Iroquois/Delaware agree that section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, governs the jurisdictional issue. That section provides:

Any suit or action to enforce any liability or duty created by this chapter or rules and regulations thereunder, or to enjoin any violations of such chapter or rules and regulations, may be brought in any such district [wherein any act or transaction constituting the violation occurred] or in the district wherein the defendant is found or is an inhabitant or transacts business____

Id. According to an affidavit provided by the President of Iroquois/Delaware, the company maintains no offices or facilities in the District of Columbia, employs no persons here, owns no property here, and transacts no business here. Affidavit of James P. McCaffrey, ¶3.

Plaintiff, however, does not assert that defendant is found or transacts business in the District. Instead, plaintiff asserts that jurisdiction is proper in this District as the alleged violation of Rule 14a-8 plaintiff challenges, the mailing of the proxy statement without including a reference to Mr. Lovenheim’s proposal, occurred in this jurisdiction when past proxy statements excluding Mr. Lovenheim’s proposal were received by shareholders in the District of Columbia.

As plaintiff properly notes, jurisdiction and venue are proper under section 27 in any district where any violation of the Exchange Act has occurred. The case law construing this section establishes that the mailing of proxy statements that violate the Exchange Act into a district by interstate mail is sufficient to establish jurisdiction over the party mailing such materials. See, e.g., DeMoss v. First Artists Production Co., Ltd., 571 F.Supp. 409 (N.D.Ohio 1983), appeal dismissed without op., 734 F.2d 14 (6th Cir.1984); Abramson v. INA Capital Management Corp., 459 F.Supp. 917, 920-21 (E.D.N.Y.1978); Mayer v. Development Corp. of America, 396 F.Supp. 917, 928-30 (D.Del.1975); Oxford First Corp. v. PNC Liquidating Corp., 372 F.Supp. 191 (E.D.Pa.1974).

Iroquois/Delaware challenges the applicability of this authority, asserting that “there is no allegation that any violation of the Exchange Act ‘occurred’ in the District of Columbia.” Supplemental Memorandum of Defendant Iroquois Brands, Ltd. on Jurisdictional Issues at 4. Instead, Iroquois/Delaware asserts that plaintiff alleges only “that a violation may take place in the future.” Id. at 6. However this reasoning overlooks the fact that the complaint does allege a violation of the Exchange Act and shareholder proposal rule when Iroquois/Delaware refused to include plaintiff’s proposal in its proxy materials in 1984. See supra, note 7. Accordingly, the Court rejects Iroquois/Delaware’s jurisdictional challenge at this time.

C. Applicability of Rule 14a-8(c)(5) Exception

In light of the above discussion of the service and jurisdiction issues, the likelihood of plaintiff’s prevailing in this litigation turns primarily on the applicability to plaintiff’s proposal of the exception to the shareholder proposal rule contained in Rule 14a-8(c)(5).

Iroquois/Delaware’s reliance on the argument that this exception applies is based on the following information contained in the affidavit of its president: Iroquois/Delaware has annual revenues of $141 million with $6 million in annual profits and $78 million in assets. In contrast, its paté de foie gras sales were just $79,000 last year, representing a net loss on paté sales of $3,121. Iroquois/Delaware has only $34,-000 in assets related to paté. Thus none of the company’s net earnings and less than .05 percent of its assets are implicated by plaintiff’s proposal. McCaffrey Affidavit ¶ 6. These levels are obviously far below the five percent threshold set forth in the first portion of the exception claimed by Iroquois/Delaware.

Plaintiff does not contest that his proposed resolution relates to a matter of little economic significance to Iroquois/Delaware. Nevertheless he contends that the Rule 14a-8(c)(5) exception is not applicable as it cannot be said that his proposal “is not otherwise significantly related to the issuer’s business” as is required by the final portion of that exception. In other words, plaintiff’s argument that Rule 14a-8 does not permit omission of his proposal rests on the assertion that the rule and statute on which it is based do not permit omission merely because a proposal is not economically significant where a proposal has “ethical or social significance.”

Iroquois/Delaware challenges plaintiff’s view that ethical and social proposals cannot be excluded even if they do not meet the economic or five percent test. Instead, Iroquois/Delaware views the exception solely in economic terms as permitting omission of any proposals relating to a de minimis share of assets and profits. Iroquois/Delaware asserts that since corporations are economic entities, only an economic test is appropriate.

The Court would note that the applicability of the Rule 14a-8(c)(5) exception to Mr. Lovenheim’s proposal represents a close question given the lack of clarity in the exception itself. In effect, plaintiff relies on the word “otherwise,” suggesting that it indicates the drafters of the rule intended that other noneconomic tests of significance be used. Iroquois/Delaware relies on the fact that the rule examines other significance in relation to the issuer’s business. Because of the apparent ambiguity of the rule, the Court considers the history of the shareholder proposal rule in determining the proper interpretation of the most recent version of that rule.

Prior to 1983, paragraph 14a-8(c)(5) excluded proposals “not significantly related to the issuer’s business” but did not contain an objective economic significance test such as the five percent of sales, assets, and earnings specified in the first part of the current version. Although a series of SEC decisions through 1976 allowing issuers to exclude proposals challenging compliance with the Arab economic boycott of Israel allowed exclusion if the issuer did less than one percent of their business with Arab countries or Israel, the Commission stated later in 1976 that it did “not believe that subparagraph (c)(5) should be hinged solely on the economic relativity of a proposal.” Securities Exchange Act Release No. 12,999, 41 Fed. Reg. 52,994, 52,997 (1976). Thus the Commission required inclusion “in many situations in which the related business comprised less than one percent” of the company’s revenues, profits or assets “where the proposal has raised policy questions important enough to be considered ‘significantly related’ to the issuer’s business.”

As indicated above, the 1983 revision adopted the five percent test of economic significance in an effort to create a more objective standard. Nevertheless, in adopting this standard, the Commission stated that proposals will be includable notwithstanding their “failure to reach the specified economic thresholds if a significant relationship to the issuer’s business is demonstrated on the face of the resolution or supporting statement.” Securities Exchange Act Release No. 19,135, 47 Fed.Reg. 47,420, 47,428 (1982). Thus it seems clear based on the history of the rule that “the meaning of ‘significantly related’ is not limited to economic significance.” Comment, 1983 Amendments, supra note 10 at 183 (emphasis in original).

The only decision in this Circuit cited by the parties relating to the scope of section 14 and the shareholder proposal rule is Medical Committee for Human Rights v. SEC, 432 F.2d 659 (D.C.Cir.1970). That case concerned an effort by shareholders of Dow Chemical Company to advise other shareholders of their proposal directed at prohibiting Dow’s production of napalm. Dow had relied on the counterpart of the 14a-8(c)(5) exemption then in effect to exclude the proposal from proxy materials and the SEC accepted Dow’s position without elaborating on its basis for doing so. In remanding the matter back to the SEC for the Commission to provide the basis for its decision, id. at 682, the Court noted what it termed “substantial questions” as to whether an interpretation of the shareholder proposal rule “which permitted omission of [a] proposal as one motivated primarily by general political or social concerns would conflict with the congressional intent underlying section 14(a) of the [Exchange] Act.” 432 F.2d at 680 (emphasis in original).

Iroquois/Delaware attempts to distinguish Medical Committee for Human Rights as a case where a company sought to exclude a proposal that, unlike Mr. Lovenheim’s proposal, was economically significant merely because the motivation of the proponents was political. The argument is not without appeal given the fact that the Medical Committee Court was confronted with a regulation that contained no reference to economic significance. See supra note 13. Yet the Medical Committee decision contains language suggesting that the Court assumed napalm was not economically significant to Dow:

The management of Dow Chemical Company is repeatedly quoted in sources which include the company’s own publications as proclaiming that the decision to continue manufacturing and marketing napalm was made not because of business considerations, but in spite of them; that management in essence decided to pursue a course of activity which generated little profit for the shareholders ____

Id. at 681 (emphasis in original).

This Court need not consider, as the Medical Committee decision implied, whether a rule allowing exclusion of all proposals not meeting specified levels of economic significance violates the scope of section 14(a) of the Exchange Act. See 432 F.2d at 680. Whether or not the Securities and Exchange Commission could properly adopt such a rule, the Court cannot ignore the history of the rule which reveals no decision by the Commission to limit the determination to the economic criteria relied on by Iroquois/Delaware. The Court therefore holds that in light of the ethical and social significance of plaintiff’s proposal and the fact that it implicates significant levels of sales, plaintiff has shown a likelihood of prevailing on the merits with regard to the issue of whether his proposal is “otherwise significantly related” to Iroquois/Delaware’s business.

III. OTHER FACTORS BEARING ON INJUNCTIVE RELIEF

In addition to considering the likelihood of plaintiff’s prevailing on the merits, consideration of plaintiff’s motion for preliminary injunction requires a determination as to whether plaintiff will suffer irreparable injury without such relief, whether issuance of the requested relief will substantially harm other parties, and the public interest. Holiday Tours v. WMATA, 559 F.2d 841 (D.C.Cir.1977); Virginia Petroleum Jobbers Ass’n v. FPC, 259 F.2d 921, 925 (D.C.Cir.1958), cert. denied, 368 U.S. 940, 82 S.Ct. 377, 7 L.Ed.2d 339 (1961).

A. Irreparable Injury

In bringing this action, plaintiff sought to include his proposal in Iroquois/Delaware’s 1985 proxy statement. Counsel for Iroquois/Delaware represents that the proxy statement is to be mailed on or immediately after April 6, 1985. Thus plaintiff contends that absent preliminary relief, the relief sought in his action will be moot.

In response, Iroquois/Delaware asserts there is no possibility of irreparable injury as plaintiff has conceded his resolution is likely to fail and even if the resolution passes, it would only require appointment of a study committee. This argument misstates the significance of the shareholder proposal rule which is aimed at guaranteeing that shareholders have access to proxy statements whether or not their proposals are likely to pass and regardless of the immediate force of the resolution if enacted. Absent a preliminary injunction, plaintiff will suffer irreparable harm by losing the opportunity to communicate his concern with those shareholders not attending the upcoming shareholder meeting.

B. Injury to Iroquois/Delaware

Plaintiff asserts that requiring Iroquois/Delaware to include the Lovenheim proposal in its proxy statement would not cause undue harm to the company. Indeed, Iroquois/Delaware included the proposal in its 1983 proxy materials and has not claimed any resulting harm.

Iroquois/Delaware asserts that granting the injunction plaintiff seeks could have a distinctly adverse impact on the company. This contention is based on the affidavit of Iroquois/Delaware’s president which reports that investors tend to react negatively to the institution of litigation and to the issuance of injunctions against a company. McCaffrey Affidavit ¶ 9. The affidavit also raises the possibility that investors may conclude that Iroquois/Delaware is involved in the mistreatment of animals. Id. at TÍTT10-11. However, these contentions would appear to be largely speculative.

C. Public Interest

Plaintiff contends that the public interest represented in the Exchange Act is served by granting injunctive relief and allowing all shareholders to make an informed vote on the proposal. In contrast, Iroquois/Delaware submits that an injunction would be contrary to the “public interest in permitting businesses to function free from harassment, and in preventing proxy statements from becoming cluttered.” Given the “overriding” public interest embodied in section 14(a) and the shareholder proposal rule in assuring shareholders the right to control the important decisions which affect corporations, Medical Committee, 432 F.2d at'680-81, the Court finds that granting the preliminary injunction would be consistent with the public interest.

IV. CONCLUSION

For the reasons discussed above, the Court concludes that plaintiff’s motion for preliminary injunction should be granted.

ORDER

Upon consideration of plaintiff's application for a preliminary injunction, the opposition thereto, and the arguments of counsel in open Court, and, as discussed fully in the memorandum accompanying this order, it appearing that plaintiff has demonstrated a likelihood of success on the merits of his claim that the shareholder proposal he has submitted to the defendant may not be omitted from the defendant’s proxy statement under Rule 14a-8(c)(5), 17 C.F.R. § 240.14a-8(c)(5), and it further appearing that absent preliminary injunctive relief plaintiff will suffer irreparable harm, and it further appearing that the defendant will not be unduly harmed by the grant of a preliminary injunction and that the public interest will be served by the grant of such relief, it is by the Court this 27th day of March, 1985,

ORDERED that plaintiff’s application for a preliminary injunction be, and hereby is, granted; and that defendant Iroquois Brands, Ltd., a company organized under the laws of the State of Delaware, be, and hereby is, enjoined from omitting plaintiff’s shareholder proposal from its 1985 proxy statement; and it is further

ORDERED that plaintiff post bond of One Hundred Dollars ($100.00) as security for any costs awarded pursuant to Federal Rule of Civil Procedure 65(c). This requirement will be satisfied by the filing with the Clerk of the Court of a personal check from plaintiff or plaintiff's counsel.

      . As will be discussed infra, much of the controversy in this case centers on the need to distinguish between two different corporations named Iroquois Brands, Ltd. — one organized under the laws of the State of Delaware (Iroquois/Delaware) and one organized under the laws of the State of New York (Iroquois/New York).

      . Paté de foie gras is made from the liver of geese. According to Mr. Lovenheim’s affidavit, force-feeding is frequently used in order to expand the liver and thereby produce a larger quantity of paté. Mr. Lovenheim’s affidavit also contains a description of the force-feeding process:
      Force-feeding usually begins when the geese are four months old. On some farms where feeding is mechanized, the bird’s body and wings are placed in a metal brace and its neck is stretched. Through a funnel inserted 10-12 inches down the throat of the goose, a machine pumps up to 400 grams of corn-based mash into its stomach. An elastic band around the goose’s throat prevents regurgitation. When feeding is manual, a handler uses a funnel and stick to force the mash down.
      Affidavit of Peter C. Lovenheim at ¶ 7. Plaintiff contends that such force-feeding is a form of cruelty to animals. Id.

      Plaintiff has offered no evidence that force-feeding is used by Iroquois/Delaware’s supplier in producing the paté imported by Iroquois/Delaware. However his proposal calls upon the committee he seeks to create to investigate this question.

      . 17 C.F.R. § 240.14a-8.

      . Rule 14a-8 incorporates by reference Rule 14a-4(b), 17 C.F.R. § 240.14a-4(b), which requires issuers of securities to also include statements by proponents of shareholder proposals.

      . Because Iroquois/Delaware asserts that it has not been properly made a party to this litigation, it has not filed a formal motion to dismiss under Rule 12(b) of the Federal Rules of Civil Procedure but has instead filed a brief as amicus curiae.

      . Indeed, counsel for Iroquois/New York represents that the New York firm is not publicly traded, and therefore issues no proxy statements, and is not engaged in the paté business.

      . In addition to challenging Iroquois/Delaware’s decision to omit reference to plaintiff's proposal from the proxy materials being sent in connection with the upcoming 1985 shareholder meeting, the complaint alleges that Iroquois/Delaware violated section 14(a) of the Exchange Act and Rule 14a-8 by refusing to include plaintiff's proposal in the proxy materials mailed in April 1984 in connection with the company’s 1984 shareholder meeting. See Complaint ¶¶ 14, 18, 24.

      . The assertion that the proposal is significant in an ethical and social sense relies on plaintiffs argument that "the very availability of a market for products that may be obtained through the inhumane force-feeding of geese cannot help but contribute to the continuation of such treatment." Plaintiffs brief characterizes the humane treatment of animals as among the foundations of western culture and cites in support of this view the Seven Laws of Noah, an animal protection statute enacted by the Massachusetts Bay Colony in 1641, numerous federal statutes enacted since 1877, and animal protection laws existing in all fifty states and the District of Columbia. An additional indication of the significance of plaintiffs proposal is the support of such leading organizations in the field of animal care as the American Society for the Prevention of Cruelty to Animals and The Humane Society of the United States for measures aimed at discontinuing use of force-feeding. See Complaint ¶10.

      . See Comment, The 1983 Amendments to Shareholder Proposal Rule 14a-8: A Retreat from Corporate Democracy?, 59 Tulane L.Rev. 161, 183-84 (1984) (hereinafter "Comment, 1983 Amendments

      . 17 C.F.R. § 240.14a-8(c)(5) (1983).

      . Comment, 1983 Amendments, supra note 10 at 185 (emphasis supplied). For example, "[pjroposals requesting the cessation of further development, planning and construction of nuclear power plants and proposals requesting shareholders be informed as to all aspects of the company’s business in European communist countries have been included in this way.” Id. (footnotes omitted).

      . The Medical Committee decision was vacated as moot by the Supreme Court after the shareholder proposal at issue failed to get support from three percent of all shareholders, thereby triggering a separate basis for exclusion, Rule 14a-8(c)(4)(i), 17 C.F.R. § 240.14a-8(c)(4)(i). See SEC v. Medical Committee for Human Rights, 404 U.S. 403, 406, 92 S.Ct. 577, 579, 30 L.Ed.2d 560 (1972).

      . Rule 14a-8(c)(2), 17 C.F.R. § 240.14a-8(c)(2) (1970), permitted exclusion if a proposal was submitted “primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes.”

      . Medical Committee arose as a direct appeal of the Commission’s formal determination. In the instant case, the propriety of excluding the shareholder proposal has not gone before the full Commission although the staff of the SEC has advised Iroquois/Delaware that it will recommend that no enforcement action be taken if the company excludes plaintiff's proposal.

      . The Court defined the purpose of section 14(a) of assuring that shareholders exercise their right "to control the important decisions which affect them in their capacity as stockholders and owners of the corporation.” 432 F.2d at 680-81.

      . The result would, of course, be different if plaintiffs proposal was ethically significant in the abstract but had no meaningful relationship to the business of Iroquois/Delaware as Iroquois/Delaware was not engaged in the business of importing paté de foie gras.

      . The one exception is that shareholders may not require inclusion of a previously offered proposal which failed to obtain the votes necessary for resubmission under Rule 14a-8(c)(5). Iroquois/Delaware has not contended that this exception is applicable.