author: GERRY, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Robert C. CIAMPITTI, Albrecht and Heun Corporation, Bruce N. Ciampitti and Pacific Four Corporation, Defendants.
    Civ. A. No. 83-4004.
    United States District Court, D. New Jersey.
    Nov. 28, 1984.
    Samuel P. Moulthrop, Asst. U.S. Atty., Jodi Lee Alper, Sp. Asst. U.S. Atty., Newark, N.J., for plaintiff.
    Alfred A. Porro, Jr., Lyndhurst, N.J., for defendants Robert C. Ciampitti, Bruce N. Ciampitti and Pacific Four Corp.
   GERRY, District Judge.

1. INTRODUCTION

This matter is before the court on the Government’s request for a permanent injunction restraining the defendants from engaging in fill activities at the Diamond Beach site in Cape May County, New Jersey. Also at issue is the question of whether the defendants will be required to remove the fill already placed by them on the site, and whether they will be required to restore the site to its condition prior to the inception of fill activities. Finally, the court must decide whether the imposition of civil penalties against defendants is appropriate.

The Government has proceeded under the Federal Water Pollution Control Act (Clean Water Act), the Rivers and Harbors Act, and the Refuse Act. On October 24, 1983, this court issued a temporary restraining order barring any further fill activities by defendants until the matter could be heard. A hearing on the issuance of a preliminary injunction was held November 9, 15 and 17, 1983.

By opinion dated April 2, 1984, the court issued a preliminary injunction preventing any further fill activities. U.S. v. Ciampitti, 583 F.Supp. 483. In that opinion, the court held that the Government had succeeded on the merits of its case under the Clean Water Act, the proofs having established that the site in question constituted wetlands, and that the defendants had discharged fill material without obtaining the required permit. All the requirements for issuance of a preliminary injunction were met. See In re Arthur Treacher’s Franchise Litigation, 689 F.2d 1137, 1143 (3d Cir.1982). The defendants were invited to present “RELEVANT” evidence at a permanent injunction hearing to controvert the prior evidence on which basis we ruled that the Government had succeeded on the merits.

As to the Rivers and Harbors Act and the Refuse Act, this court held that the evidence was inconclusive as to whether any portion of the site fell below the mean high water mark and, therefore, within the jurisdiction of the Army Corps of Engineers such that a permit was necessary before fill activities could occur. The preliminary injunction, therefore, was not issued on the basis of these two Acts. However, it was clear from the evidence that the Government had the broadest jurisdiction over the site under the Clean Water Act. 583 F.Supp. at 497. That is to say, much larger areas of the site were wetlands than were arguably below the mean high water mark, and those areas arguably below the mean high water mark were in any event encompassed by the wetlands areas. Thus, success under the Rivers and Harbors Act and the Refuse Act was not crucial to the Government’s application for a preliminary injunction.

A hearing on the issuance of a permanent injunction was held on May 21, June 6 and July 5, 1984.

The following shall constitute the court’s findings of fact and conclusions of law.

2. FINDINGS OF FACT

A. The court adopts its previous findings and conclusions and incorporates them herein, with the following supplementations.

B. Clean Water Act

There has been no additional evidence submitted which alters the court’s finding of jurisdiction under the Clean Water Act. That is, the court continues to hold that the site in question, as described in Government Exhibits RR-5 and 100-102, contains wetlands.

C. Rivers and Harbors Act/Refuse Act

The Rivers and Harbors Act, 33 U.S.C. § 403, and the Refuse Act, 33 U.S.C. § 407, extend federal jurisdiction over and, to a certain extent, beyond, the “navigable waters of the United States.” The term “navigable waters,” for the purposes of these statutes, means those waters of the United States that are subject to the ebb and flow of the tide shoreward to the mean high water mark. 33 C.F.R. § 322.2. Testimony was introduced at both the preliminary and permanent injunction hearings regarding the presence of territory on the site below the mean high water mark.

Of the 26.72 acres of land within the Diamond Beach site that are federal wetlands (see Government Exhibit 101, Government Exhibit 43), the Government claims that 1.45 acres, all within the area designated as wetlands, are below the mean high water line. (These 1.45 acres are colored in blue on Government Exhibit 101.)

Indisputably, some of these 1.45 acres are below the mean high water line. The defendants’ witness, Gerald Speitel, conceded that some man-made ditches within the disputed area are below mean high water. Beyond these ditches, however, the evidence is less conclusive.

In order to establish the mean high water line for the Diamond Beach site, the Government’s expert, Richard Rauch, had to extrapolate from tidal bench marks above and below the site, since no data was available regarding the site itself. Mr. Rauch obtained data from two tidal bench marks: Bench Mark 5838 E1977, located north of the Diamond Beach site in the vicinity of Sunset Lake, and Bench Mark 5901J, located south of the Diamond Beach site. These two bench marks were chosen because of their proximity to the site.

By using surveying methods, elevations were established for the two bench marks, and then the elevations of the tidal bench marks were related to elevations established at control points on the Diamond Beach site. Mr. Rauch determined the mean high water line on the site to approximate an elevation of 2.94 feet. However, in depicting the mean high water line on Exhibit 101, Mr. Rauch used an elevation of 3.0 feet.

Once the elevation for the site was established, the contours of the area below that elevation (3.0 feet) were made using the process of photogrammetry. This process involves the use of aerial photographs viewed through a stereoscope.

Although there was considerable testimony regarding the accuracy of the elevation established (2.94 feet) and the accuracy of the contours on the map of the site (Government Exhibit 101), this court is still not convinced that, apart from the man-made ditches, any of the land in question lies below the mean high water line. The problem, in the court’s view, is with the methodology used to produce the data in question. The affidavit of defendants’ expert, James P. Weidener, introduced as Defendants’ Exhibit 46, concludes that the depiction. of areas below the mean high water line is “flawed and subject to error.” Mr. Weidener made, among others, the following criticisms of the Government’s evidence. First, he stated, the tide bench marks used were not sufficiently close to the Diamond Beach site and, “more importantly,” were in different bodies of water from the Diamond Beach site. Mr. Weidener stated that bench marks should have been established in Jarvis Sound, on which the property lies, because the elevations of mean high water from other bodies of water may not accurately reflect those at Jarvis Sound. Second, Mr. Weidener stated that the tidal datum epoch used in arriving at the mean high water lines for the sites north and south of the property was not the most current epoch for which data was available. The use of slightly stale data, the court infers, could have affected the accuracy of the Government’s evidence. Third, Mr. Weidener stated that the use of photogrammetry in order to establish contour boundaries is inappropriate because of problems with accuracy. Finally, the court notes that the Government used a figure of 3.0 feet as the elevation for the mean high water line and made its maps in accordance with this elevation. The actual elevation the Government calculated was 2.94 feet. Although the difference is not great, the use of the 3.0 figure may nevertheless result in a finding that a larger area is below mean high water than is actually the case.

The court, based on the above criticisms of the Government’s methodology, is unable to find that the Government has carried its burden with respect to the areas asserted to be below mean high water, except for the man-made ditches, about which there is no controversy. Somewhat less than 1.45 acres, therefore, is below the mean high water line, although, based on the Government’s exhibits, the court is not in a position to state the precise location or area of these pieces of territory.

3. CONCLUSIONS OF LAW

A. Clean Water Act—Injunctive Relief

Having reaffirmed our finding of Corps jurisdiction under the Clean Water Act, and finding no reason to disturb our conclusions regarding the other requirements for injunctive relief, the court will permanently enjoin the discharge of fill material into the wetlands, as designated in Government Exhibits 101 and 43.

The court must briefly address the arguments raised by the defendants in opposition to this conclusion.

First, the defendants contend that, based on a recent case out of the Sixth Circuit, the court should reconsider its conclusion that the property in question contains wetlands.

In US. v. Riverside Bayview Homes, 729 F.2d 391 (6th Cir.1984), the Sixth Circuit was faced with a case where, between the issuance and appeal of a permanent injunction, the Corps promulgated a new regulation changing the definition of “wetlands.” The case was remanded for further proceedings in light of the new definition. 615 F.2d 1363 (6th Cir.1980). On the second appeal, the issue was whether the district court on remand had properly interpreted the new definition to include the property of the defendants.

The former definition of wetlands was as follows:

those areas that are (1) periodically inundated and that (2) are normally characterized by the prevalence of vegetation that requires saturated soil conditions for growth and reproduction.

33 C.F.R. § 209.120(d)(2)(i)(h) (1976). This definition was changed, according to the Corps, to eliminate several problems. The reference to “periodic inundation” was deleted because the Corps concluded that the Clean Water Act, § 404 (33 U.S.C. § 1344), was intended to regulate discharges into the aquatic system as it exists, not as it may have existed over a record period. 729 F.2d at 395. Furthermore, “normally” was replaced by the phrase “under normal circumstances do support.” This change was adopted, in part, to make clearer that excluded from Corps jurisdiction are those areas that are not aquatic but experience an abnormal presence of aquatic vegetation. Id. at 396, and also to make clearer that man-made obstructions to the flow of water, such as tidal gates (as are present here) would not exempt a site from Corps jurisdiction. Id. Thus, the new, and present, definition of wetlands is as follows:

those areas that are inundated or saturated by surface or ground water at a frequency and duration sufficient to support, and under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions.

33 C.F.R. § 323.2(c) (1983).

In construing this newer definition, the Riverside court stated as follows:

The new regulation makes clear that it is the present occurrence of inundation or flooding sufficient to support wetlands vegetation, not the mere presence of such vegetation from some other cause, that determines whether a particular area is wetland____ Neither inundation nor aquatic vegetation would be sufficient, standing alone, to bring a piece of land within the definition. Both must be present, and the latter must be caused by the former.
Were this not so, then areas which inexplicably support some species of aquatic vegetation, but which are not normally inundated, would fall within the wetlands definition. Such a perverse result could not have been what the Corps contemplated .... Indeed, as noted earlier, the Corps expressly adverted to the situation of “areas that are not aquatic but experience an abnormal presence of aquatic vegetation” and emphasized that such lands were not intended to be covered by the regulations.

729 F.2d at 396 (emphasis added).

In holding that the lands in that case were not wetlands, the Riverside court noted that the lands, although arguably “periodically inundated” (in accordance with the previous wetlands definition), were not presently inundated. The presence of the vegetation was “abnormal,” and attributable not to the few present instances of flooding, but to the type of soil on the property. Id. at 397.

This court has some reservations about the Sixth Circuit’s construction of the regulation at issue, although it has no problem with that construction as applied to the facts of that case. We find, however, that the facts of the instant case clearly support Corps jurisdiction, even under the Riverside test. In our previous opinion, we found as follows:

The soil in the federally designated wetlands at the site is saturated throughout, in most cases directly to the surface.
During normal high tide conditions, surface water covers a majority of the site____
Vegetation on the site which indicates a wetlands environment includes: marsh hay, salt marsh cordgrass, high tide bush, salt marsh fleabone, black grass, and sea myrtle. These plants are commonly found in New Jersey salt marshes and are adapted to an area subject to tidal flow.

583 F.Supp. at 489. We further concluded: The Government has proven ... that the site ... has an abundance of ... plants requiring a saturated environment to survive____

Id. at 492 (emphasis added). This court believes that its findings indicate the presence of areas inundated by surface or ground water, the presence in those areas of a prevalence of vegetation typically adapted for life in saturated soil, and that such findings support the conclusion that the latter circumstance is caused by the former.

In considering “causation” under this regulation, this court does not believe the Sixth Circuit announced a test whereby it becomes necessary to rule out any and every possible cause for the existence of aquatic vegetation other than frequently saturated soil. This would be an impossible test, it would seem. Rather, this court believes the Sixth Circuit was speaking of causation in a somewhat looser sense, whereby by the presence of frequently saturated soil would ordinarily be taken as the “cause” of the vegetation, absent some peculiar circumstance indicating another cause.

In this case, the court has found the presence of both saturated soil and aquatic vegetation; and absent any evidence to indicate that, under the circumstances, the presence of the vegetation is, in some sense abnormal, the court concludes that the soil saturation “causes” the growth of the vegetation. This is not the “perverse” case to which the Sixth Circuit alludes wherein, even absent the regular presence of soil saturation, aquatic plants are nevertheless abundantly present. In such a case it obviously becomes necessary to look for the explanation of the growth in other factors beside the presence of surface or ground water. Here, there is no need to look any further.

Accordingly, our finding of Corps jurisdiction is not disturbed by the Riverside decision.

The court further notes that the fact that we cannot quite conclude that much of the land is below mean high water does not indicate, as defendants argue, that it is not saturated by surface or ground water.

The defendants’ second challenge to the issuance of a permanent injunction is one previously raised and disposed of, but which we will reiterate. This is the “taking” issue.

The defendants state that the assertion of Corps jurisdiction over the property, combined with the injunction against further discharges onto the property, amounts to a taking for which compensation must be paid.

The first problem with this argument is that neither of the defendants who have answered the complaint (that is, neither Robert Ciampitti nor Albrecht and Heun) is, on the record, a property owner. These defendants, therefore, lack standing to even raise the issue. We only address the issue further because counsel for Robert Ciampitti entered an appearance for Bruce Nicholas Ciampitti and Pacific Four Corporation. Bruce Nicholas Ciampitti, at least, owns some of the property and has standing to raise the issue (although, to do so, he should have filed an answer and counterclaim). Whether a taking claim may even properly be brought in this court, however, is doubtful. If the taking claim exceeds $10,000, jurisdiction is exclusive in the Court of Claims under the Tucker Act, 28 U.S.C. § 1491. American Dredging Co. v. Dutchyshyn, 480 F.Supp. 957 (E.D.Pa. 1979), aff’d 614 F.2d 769 (3rd Cir.); Bayou des Families Development Corp. v. U.S. Corps of Engineers, 541 F.Supp. 1025 (E.D.La.l982).

Furthermore, as this court stated in its previous opinion, the issue is, in any event, premature until a permit is applied for and denied. The defendants argue that, if applied for, a permit will most certainly be denied. However, any informal predictions by Corps personnel can hardly take the place of a formal denial following a formal submission in compliance with the application requirements of 33 C.F.R. § 325. The fact remains that no permit application has yet been processed, and the taking issue is premature. See Avoyelles Sportsmen’s League v. Marsh, 715 F.2d 897, 927 (5th Cir.1983); U.S. v. Byrd, 609 F.2d 1204 (7th Cir.1979).

The defendants have introduced letters (Defendants’ Exhibit 32) which purport to demonstrate that the Corps has been unwilling to meet with them to discuss a possible permit application. It may well be that the Corps at this juncture will not talk to Mr. Ciampitti. See 33 C.F.R. § 326.-3(c)(4) and footnote 2 (where Clean Water Act violation is of a nature that complaint is recommended to be filed by U.S. Attorney, after-the-fact permit application should not be accepted until the enforcement action is resolved). This fact still does not convert the Corps assertion of jurisdiction into a taking but further highlights the prematurity of the claim.

Finally, of course, we note that the mere assertion of jurisdiction and the injunction against filling may or may not ultimately, on the merits, amount to a taking. See, e.g., Deltona Corp. v. U.S., 657 F.2d 1184, 228 Ct.Cl. 476 (1981); Andrus v. Allard, 444 U.S. 51, 100 S.Ct. 318, 62 L.Ed.2d 210 (1979).

In sum, then, the taking argument has no bearing on our conclusion in favor of an injunction. (Of course, the mere fact that property is “taken” only requires that compensation be paid; nothing prevents the Government from taking the property by preventing development.)

To repeat, then: the defendants are hereby permanently enjoined from engaging in fill activities on those portions of the site designated as wetlands.

C. Rivers and Harbors Act/Refuse Act—Injunctive Relief

Above, we found that the man-made ditches on the Diamond Beach site were below the mean high water line. Even though man-made, these ditches are nonetheless subject to Corps jurisdiction. See 33 C.F.R. § 329.8(a)(1) (determination of navigability not limited to natural or original condition of waterbody; a canal or other artificial water body that is subject to ebb and flow of the tide is a navigable water); see also 33 C.F.R. § 329.13(b). Therefore, as to these ditches, a permanent injunction against fill activities is warranted under either 33 U.S.C. § 403 or § 407. However, at this juncture, such an injunction is unnecessary, since the permanent injunction against filling the wetlands already encompasses any activities in these ditches. Moreover, the court at this time lacks a clear survey or metes and bounds description of the ditches such as would make it possible to appropriately fashion an injunctive order. Accordingly, no injunction specifically directed to the man-made ditches will issue at this time.

The Government has apprised the court of case law indicating that jurisdiction under these Acts may extend even beyond the mean high water line, where activities shoreward of the line may have an impact on navigable waters below the line. See U.S. v. Sexton Cove Estates, Inc., 526 F.2d 1293, 1297-99 (5th Cir.1976); U.S. v. Moretti, 526 F.2d 1306, 1310 (5th Cir.1976); U.S. v. American Cyanamid Co., 480 F.2d 1132, 1135 (2d Cir.1973); U.S. v. Esso Standard Oil Co., 375 F.2d 621, 623 (3d Cir. 1967).

Thus, an injunction under these Acts to prohibit fill activities in close proximity to the ditches may be warranted, as fill placed on the banks of, or near, the ditches may erode into the ditches. However, for the reasons given above with respect to the ditches themselves, no injunction specifically directed to fill near the ditches will issue at this time. The injunction we issue with respect to the entire wetlands is sufficient to address the concerns of the Government under all the Acts under which suit was brought.

D. Restoration Plan

The Government seeks an order requiring the defendants to remove all fill placed within the wetlands area and to return the site to its natural state by planting wetlands vegetation and restoring waterways.

There can be no doubt that this court has the power under the Clean Water Act to order the restoration proposed by the Government. See U.S. v. Robinson, 570 F.Supp. 1157 (M.D.Fla.1983); U.S. v. Outboard Marine Corp., 549 F.Supp. 1036, 1043 (N.D.Ill.1982); U.S. v. Weisman, 489 F.Supp. 1331 (M.D.Fla.1980); O’Leary v. Moyer’s Landfill, 523 F.Supp. 642 (E.D.Pa. 1981).

The defendants argue, however, that the Government has failed to justify, either procedurally or substantively, its proposed plan. The defendants rely on U.S. v. Sexton Cove Estates, Inc., 526 F.2d 1293, 1301 (5th Cir.1976) and Weisman, supra. The Weisman court, expanding on the language in Sexton Cove Estates, stated:

[T]here are two prerequisites to be satisfied before any consideration of the restoration plan itself: (1) the court must have jurisdiction over the portion of the property or activity to be directly affected by the restoration plan, and (2) the court must conduct a hearing in which the merits, demerits, and alternatives to the restoration plan are fully developed.

489 F.Supp. at 1342-43. Here, based on the above findings of fact and conclusions of law, there can be no doubt that this court has jurisdiction over the affected portion of the site. As to the hearing requirement, there is nothing in the case law to suggest that the hearing on the restoration plan be a hearing separate and apart from, or subsequent to, the hearing on the merits (the hearing to determine whether the Act was violated). In the Weisman case itself, no separate hearing took place. 489 F.Supp. at 1343. Therefore, this court finds nothing procedurally inappropriate about ordering restoration on the present record.

The Weisman court elaborated as well on the criteria to be applied in evaluating a proposed restoration plan.

The selected plan must: (1) confer maximum environmental benefits, (2) be achievable as a practical matter, and (3) bear an equitable relationship to the degree and kind of wrong it is intended to remedy.

489 F.Supp. at 1343. The Government’s proposed plan is actually merely a set of guidelines. The Government would have the defendants submit a more detailed plan, subject to approval or modification by the Corps of Engineers. Nevertheless, there is enough in these guidelines to permit this court to evaluate the plan’s appropriateness.

These guidelines require: that all fill be removed and that the defendants identify the location where such removed fill will be taken; that the area be replanted with plant species found adjacent to the areas of fill removal; and that waterways be restored. Further, the Government would have the defendants submit an implementation schedule, prepare a post-restoration monitoring program, and have the defendants engage an outside consultant to actually prepare and implement the program.

In opposition to the Government’s proposal, the defendants apparently take the position that there should be no restoration; that is, that the site should be left as it is. The defendants’ position is based on rather vague allegations that restoration would have an adverse impact on the environment insofar as it would destabilize partially completed sewer and utility systems in the area and result in an economic loss to both public and private investors in these utility and sewer lines. The court has scrutinized the record in this case and finds little evidence to support these allegations, other than the evidence that the defendants themselves will suffer economic loss.

In evaluating whether a proposed restoration plan will confer maximum environmental benefits, it is necessary to consider the environmental importance of the wetlands on the site as well as the harm caused by the defendants’ activities. Congress and the Corps of Engineers, through its regulatory authority, have taken the position that wetlands serve important environmental functions:

Some wetlands are vital areas that constitute a productive and valuable public resource, the unnecessary alteration or destruction of which should be discouraged as contrary to the public interest____
Wetlands considered to perform functions important to the public interest include: ... wetlands which serve significant biological functions, including food chain production, general habit, and nesting, spawning, rearing and resting sites for aquatic or land species; ... wetlands which are significant in shielding other areas from wave action, erosion, or storm damage; ... wetlands which serve as valuable storage areas for storm and flood waters ... and wetlands which serve significant and necessary water purification functions.

33 C.F.R. § 320.4(b). In the court’s findings of fact in connection with the issuance of a preliminary injunction, we found that the wetlands on the Diamond Beach site perform all the vital functions enumerated above. 583 F.Supp. at 490. We further found that the ability of these wetlands to perform these vital functions was hindered by the defendants’ activities. Id. It stands to reason that the return of the wetlands area to its undeveloped state would confer maximum environmental benefits. At best, the defendants’ protestations to the contrary are speculative, and the only remedy they offer is that of doing nothing, which is unacceptable. Cf. Weisman, supra, at 1347.

In evaluating the practicality of a proposed restoration, we must consider its feasibility and cost-effectiveness. Id. at 1348. There is nothing in the record to suggest either that the fill could not be removed or that vegetation could not be replanted. Of course, whether the replanted vegetation will survive is uncertain. In other circumstances, however, this has not barred a proposed replanting. See Weisman, supra, at 1347 (restoration of forest ordered, although full recovery would take from 10 to 30 years). In considering cost-effectiveness, we realize that we lack some information that might be useful: the financial resources of the defendants and an estimate of the cost of the restoration plan. Cf. U.S. v. Robinson, supra, at 1164-65. But here, the indefiniteness of the Government’s proposal is actually a virtue. The defendants, so long as they are faithful to the goals of the plan, will have considerable independence and will be able to do what they feel is desirable to minimize the cost of restoration. Therefore, the court is not overly troubled by certain lacunae in the record, especially given the equitable considerations applicable here. See infra.

Finally, turning to the equities of this case, we find that the defendants, with one exception, are not in a strong position to argue equity. As this court has found previously, as early as 1980 the defendants were aware of wetlands regulations and the possibility that Diamond Beach was within the jurisdiction of the Corps. In September 1983, the defendants acted in defiance of a “cease and desist” order of the Corps. 583 F.Supp. at 486, 487. Even after this court issued its preliminary injunction in April 1984, the defendants did not cease their fill activities, and Robert Ciampitti was cited for contempt in September, 1984. Even -after that, fill activities continued on the site. Thus the equities do not weigh in the defendants’ favor.

However, this court believes that the defendant Albrecht and Heun is in a better position to make an equitable argument. The record indicates that this defendant was merely a construction company which acted at the instance of the other defendants, and that its role was more or less passive. Moreover, this defendant does not appear to have a continuing interest in the site. Accordingly, Albrecht and Heun shall be excluded from this court’s restoration order.

In sum, then, the court adopts the restoration plan proposed by the Government. We shall retain jurisdiction to resolve any disputes which may arise in either the preparation or implementation of the plan.

Finally, we must address the timing of the plan. We believe that restoration should occur as soon as possible. However, it seems both wasteful and unfair to the defendants to order restoration to proceed while there exists the possibility that the development of the Diamond Beach may be approved by the Corps. Therefore, the court will stay the implementation of the restoration plan on the following conditions:

A. The defendants shall, within 45 days of the accompanying order, apply for a permit to engage in fill activities at the site.
B. If the defendants have not applied for a permit within 45 days of the order, then implementation of the plan shall proceed as scheduled in the order. Furthermore, if the defendants’ permit application is returned for failure to meet the requirements of 33 C.F.R. § 325.1, then implementation shall proceed as scheduled in the order.
C. If defendants submit a proper application within 45 days of the accompanying order, then implementation of the restoration plan will be stayed pending a decision by the Corps on the application.

Of course, if the Corps grants the permit, the injunction and restoration order will be vacated or modified as is appropriate. The stay conditions provided above only apply to the implementation phase of the restoration plan. The defendants will be required to prepare a plan within 60 days of the accompanying order.

E. Civil Penalties

The Government seeks the imposition of civil penalties against Robert Ciampitti only. Holding only this defendant liable is appropriate, given the statement of his attorney that he is the party responsible for the activities on the site and all the evidence consistent with this conclusion. This defendant clearly violated sections 301(a) and 404 of the Clean Water Act, 33 U.S.C. §§ 1311(a) and 1344, on at least 15 separate days (including those violations occurring after the court’s order of April, 1984). Section 309(d) of the Act, 33 U.S.C. § 1319(d), authorizes imposition of a penalty of up to $10,000 for each day on which a violation occurs. The Government urges that the flagraney of Ciampitti’s conduct warrants a substantial penalty.

The court does not entirely disagree. However, the question of penalties will be held in abeyance pending the preparation and implementation (if necessary) of the restoration plan. We believe this course is appropriate because it is more important that the site be restored than that the defendant Robert Ciampitti be punished. To the extent that Robert Ciampitti is not a person of unlimited resources, the court prefers that his resources be initially spent on clean-up of the site. Cf. O’Leary, supra. Furthermore, defendant Robert Ciampitti’s good faith in preparing and implementing a restoration plan is a relevant factor in assessing the size or necessity of civil penalties.

The foregoing constitutes the court’s findings of fact and conclusions of law pursuant to F.R.Civ.P. 52(a).

      . The presence of typically wetlands vegetation slightly beyond the boundaries designated in Government Exhibit 101 probably merely indicates that the Government’s designation is conservative.


source: Caselaw Access Project

author: PARSONS, District Judge.

license: Public Domain

text:
    INFORMATION RESOURCES, INC., Plaintiff, v. A.C. NIELSEN COMPANY, Defendant.
    No. 84 C 6704.
    United States District Court, N.D. Illinois, E.D.
    Nov. 28, 1984.

      Thomas W. Johnston, Steven C. Page, Michael L. lie, Champ W. Davis, Jr., Chad-well & Kayser, Chicago, Ill., for plaintiff.
    Thomas F. Ryan, Christian L. Campbell, Chaim T. Kiffel, Sidley & Austin, Chicago, Ill., James W. Carter, Jr., A.C. Nielsen Co., Northbrook, Ill., for defendant.
   MEMORANDUM OPINION AND ORDER

PARSONS, District Judge.

Marketing research service is the furnishing of usable statistical information to the manufacturers of various goods about the movement of consumer goods through the retailers to the consumer. The raw data from which this information is processed is obtained by counting. Counting here involves the use of sampling traditional to the concept of survey research. Counting can be done at several points along the path taken by the goods from the manufacturer to the consumer; at the manufacturer’s shipping dock, at the entrance and exit docks of the distributors or ware-housemen, at the entrance doors and in the store rooms of the retailer, at the place of the shelving or deshelving of the goods in the store of the retailer, at the check-out counter of the retailer, and indeed, at the shelving or deshelving of the goods in the consumer’s house.

The statistics that can be developed from the raw data, and the uses to which they can be put, vary in meaning, in reliability and in usefulness to the producer, both in his production planning and his advertising planning, according to the point or combination of points at which the raw data is gathered, the frequency with which it is gathered, and the selectivity of the sampling used in the system.

The defendant in this case, one of the old and experienced firms in the field of sampling survey research has devoted one of its departments to the selling of marketing research services to consumer goods manufacturers (principally manufacturers in the food industry) for over thirty years. With a wide spectrum sampling base, its research statistics were relatively predictable nationally. It concentrated on using raw material gathered from storage room and shelf counts in the retailer’s stores. It did not use the manufacturer or warehouse-men’s storage racks or docks for raw data, and it did not use data gathered from the consumer. For purposes of counting it used human beings; its own employees going into the stores, counting from their shelves and store rooms, equipped with pencils and pads. Its product delivered to its manufacturing customer has been a substantial bi-monthly publication and interim advisories called the Nielsen Food Index.

Recently, an innovation called scanning developed in the grocery store business, and particularly in the chain supermarkets for helping to speed along the long lines at the checkout counters, and for improving accuracy in cash register totalling. Now there has developed among manufacturers universal product codes which they place on packaged products at the time their products are packaged. Then at the checkout counter these codes are picked up by an electric reading lamp when the package of goods are scraped across a glass screen. The process is called scanning.

Scanning has revolutionized the whole field of retail-exit counting and is particularly adaptable to the field of marketing research of consumer goods. Now scanners not only can make computer read-outs for the store itself but the information can be transferred to the computers of businesses engaged in marketing research of consumer goods.

The plaintiff in this case was founded seven years ago for the express purpose of selling a research service to manufacturers, using the process of scanning. It has several research products, the most important of which are BehaviorScan and the Marketing Fact Book. Its founder and Chief Executive Officer described his businéss in these words:

“IRI began selling BehaviorScan its first product, in 1979. BehaviorScan is a test marketing service. IRI has installed scanning equipment which is able to read the Universal Product Codes (UPC) on packaged grocery products at the checkout facilities in supermarkets representing approximately 90% of the total supermarket sales volume in each of eight markets. IRI also has assembled consumer panels consisting of approximately 2,500 households in each market. By using this scanning equipment and IRI’s computerized data collection system, IRI gathers household-by-household data on the purchasing behavior of its consumer panels, as well as data on the total sales of all UPC coded packaged goods made by the participating supermarkets. These data are used to analyze consumer response to new products, advertising, pricing strategies and other marketing techniques employed by manufacturers and distributors of packaged consumer goods.
“Each of IRI’s eight markets has cable television. IRI is able to direct alternate television advertising to its consumer panel households. Together with IRI’s scanning data collection capability, this permits the measurement of direct consumer response to television advertising. IRI also administers, supervises and performs product test marketing and various other merchandising activities on behalf of its clients in each of the eight markets.
“IRI developed and in 1981 began selling its second major product, the Marketing Fact Book (MFB). The MFB constitutes a separate and distinct application of IRI’s scanning data base. Whereas BehaviorScan is essentially a test marketing service, the MFB tracks weekly sales results together with reports on ad features, store displays, shelf price reductions, coupons and other “causal” marketing information. These data enable packaged goods manufacturers to measure the effect of price changes and promotions on sales. The MFB data base also contains demographic data which permit manufacturers to determine the types of customers who are buying their products.
“The MFB is issued in hard copy quarterly and annually, but its real value lies in the fact the the MFB data base is directly accessible by computer. IRI’s clients can therefore use the vast MFB data base to perform frequent and timely analyses of product sales performance and measure the effect of price changes and promotions on sales.”

There are several other market research service companies which have been coming into this business during the last few years, using one type or another data base in an effort to produce a distinctive service product, but none of them including the plaintiff here has developed anything near the size of the defendant. One of them appeared by witness to testify on behalf of the plaintiff in this first case testing the products of marketing research in the scanner computer age. Several years ago, even Nielsen began experimenting with the use of scanner data in place of manual audit procedures, and set up two programs; one called Local Markets and one called National Markets.

What ignited this case, which, incidentally began with a Petition for a Temporary Restraining Order that enlarged to a Petition for a Preliminary Injunction, was the announcement in June of 1984 by Nielsen of its intention to dive full force into the use of scanners and scanner data while retaining as long as necessary its now antiquated system of manual audit, providing as the system developed more custom tailored research information for the manufacturer, standardizing research information output on a two week or semi-monthly basis instead of a bi-monthly basis, and providing in due course of time feed back information directly to the retailer. The defendant calls the program which was scheduled to get underway on November 1, 1984, an Enhanced Nielsen Food Index, and outlines what it calls a Transition Period of two to four years, beginning on November 1st.

Because of the imminence of this so called Transition Period, plaintiff has asked this court to issue a preliminary injunction forthwith, basing its claim on the “tying concept” of the Anti-Trust Laws. Plaintiff says that defendant is tying its new product to the old product over which it has exercised extensive economic power for many years and that this action is in Restraint of Competition, conduct proscribed by Section I of the Sherman Act. The language plaintiff seeks in the injunction describes distinctly the nature of this case:

“... that Nielsen, its officers, agents, servants, employees and persons acting under its direction and authority or in concert with it are hereby enjoined and restrained from selling Nielsen Food Index (NFI) audit data, information generated from such data and/or consulting services relating thereto ... on condition that purchasers also buy from Nielsen scanner data, information generated from scanner data and/or consulting services relating thereto. Nothing herein shall prevent Nielsen from selling scanner data separate and apart from audit data.”

The key to this case is the answer in each instance to the question “when in this new and still developing industry is a product a new one or merely an improvement of an older one?” This question must first be answered because of the defendant’s Motion to Dismiss based on the ground that the plaintiff lacks standing to sue; i.e., that the plaintiff is not in competition with the defendant. Defendant urges that plaintiff’s product deals with consumer behavior whereas defendant’s product deals exclusively with the movement of grocery items across the facilities of the retailer store. As has been stated before, the products we are dealing with are not the raw data nor the method of collecting it. The products are refined residuum of such raw data, refined by computer and programmed analysis, with reasoned explanations and projections made available periodically to the manufacturers of the food items we all of us eventually purchase in the stores.

It appears from the evidence that some part of plaintiff’s distributed product includes information that is unique because plaintiff is in a position to translate for its customers facts about the purchasing and consuming practices and habits of consumers and their behavior patterns that can be processed or inferred from sales data supplied by consumers who agree to serve as “guinea pigs” for the plaintiff. At the same time, plaintiff is engaged in gathering and processing data from the stores themselves.

The statutory provision relevant to the issue of standing is section 16 of the Clayton Act, 15 U.S.C. § 26. To establish standing under section 16, the plaintiff must show a “threatened loss or damage by a violation of the antitrust laws.” Unless the products are competitive or potentially competitive, there can be no threatened loss or damage. In this relatively new and rapidly expanding industry, the concept of the product must not be drawn too narrowly. Simply because one company might measure only eight markets and another might measure hundreds of markets does not mean that the two companies do not compete now or will not compete in the future as the smaller company grows. Similarly, just because one company uses its raw data to provide a certain type of marketing information, say consumer behavior information, and another company uses its raw data to provide a different type of marketing information, say market share information, does not mean that those companies would not be potential competitors as their products grow and change with advances in technology. The concept of the product here must be painted with a broad brush. Both IRI and A.C. Nielsen provide information to manufacturers on product movement. The details of market share, market size, consumer profiles, etc. are merely small components of an overall picture given to a manufacturer to assess how its product is being received in the market place. To draw the line based on these details seems to be asking too much. Therefore, I find that on the issue of standing there is potential competition. Even at this time there is some actual competitive overlap in the area of pricing and promotional analysis, even though the analysis in those areas is reached by different procedures. As the products and data gathering techniques advance technologically there will continue to be potential competition in other areas as well. For these reasons, the case cannot be dismissed for lack of standing to sue.

I turn now to the plaintiff’s request for a preliminary injunction. When a district court is asked to issue a preliminary injunction it should consider four factors: (1) whether the plaintiff will have an adequate remedy at law or will be irreparably harmed if the injunction does not issue; (2) whether the threatened injury to the plaintiff outweighs the threatened harm the injunction may inflict on the defendant; (3) whether the plaintiff has a reasonable likelihood of success on the merits; and (4) whether the issuance of the injunction will serve the public interest. Libertarian Party ¶. Packard, 741 F.2d 981, 984 (7th Cir.1984).

The first factor boils down to whether damages can be ascertained in monetary terms. I am unconvinced by plaintiff’s assertion that damages would be unreasonably difficult to calculate. If necessary IRI can survey any customer which leaves them and see if they went to A.C. Nielsen for marketing research analysis. Alternatively, IRI could poll every new customer or even each existing customer of Nielsen and see if these customers would have used the services of IRI were it not for the enhancement in Nielsen’s product. In short, damages are ascertainable.

The second factor also favors Nielsen. If a preliminary injunction were to issue at this time, it would cause Nielsen’s $25 million in improvements to be held in abeyance. Customers would have to be apprised of the injunction and contracts would have to be halted or rewritten. If on the other hand, an injunction were not issued and this were later found to have been erroneous, the harm to IRI could be calculated in damages and any long-term contracts between Nielsen and its customers could be halted at that time. Thus, the injury to the defendant, if an injunction were to issue, would outweigh the injury to the plaintiff if such an injunction were not issued.

The third factor is the critical factor in this case. The plaintiff must prove a reasonable likelihood of success on the merits. In order to prove this likelihood of success, the plaintiff must show the court that there is a reasonable probability that the elements of a tying violation would be established at a trial on the merits. The elements of a tying violation which the plaintiff must show are: (1) two separate products or services; (2) substantial market power in the tying product; (3) use of Nielsen’s market power in the tying product to coerce sales of the tied product and; (4) foreclosure of sales by competitors in the tied product market. Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 104 S.Ct. 1551, 1556-56, 80 L.Ed.2d 2 (1984).

The basis on which all four factors must rest is whether there are two separate products, for without a “tying” and a “tied” product the last three factors are meaningless. It is this single factor on which plaintiffs have not shown a convincing case at this time. A.C. Nielsen provides its customers with marketing information. The data gathering method it has used for years has involved manual audits. Now, to take advantage of advanced technology, it is using scanners to gather the same data. This advance in technology will allow the data to be gathered more quickly and more economically. Admittedly, because of the increase in speed with which Nielsen is able to receive the data, other types of marketing analysis will be possible. The product must be viewed broadly, as stated earlier. It cannot be broken down into each miniscule type of analysis but rather must be looked at as an overall service. This broad view of the product which allows the plaintiff to have standing works against the plaintiff on the question of whether there are two separate products. This new technique of data gathering is a product improvement. The data generated by scanners and the data generated by manual audits may be used separately and in conjunction with each other during this time of transition.

“The practice has been to classify a product as a single product if there are obvious economies of joint provision, as in the left-shoe-right-shoe example.” Jack Walters & Sons v. Morton Building Inc., 737 F.2d 698, 703 (7th Cir.1984).

Here, there are obvious economies of joint provision during this time.

“Very few products today are produced like a statue that is made by pouring molten bronze into a cast—the ultimate single product. But to hold therefore that every composite product is a tie-in, subject to the hostile scrutiny to which antitrust law still subjects tie-ins, would place industry under a vast antitrust cloud and has been rejected.” Id.

A different approach to the question of separate products was taken in the Jefferson Parish case where the Supreme Court held that products are separate for tie-in purposes if there are separate markets for each product. 104 S.Ct. at 1562-63. Here, Nielsen has been losing NFI customers apparently because of the outmoded method of data gathering which results in a greater delay from the time of data gathering to the time of the release of the marketing information. It is to keep up with the customer demands for the use of the new technology that Nielsen is attempting to improve its product in this way. Customer demand, whether overt or implied by loss of customers to a scanner-based service such as SAMI, shows that it is the same market demanding the improved service.

“The answer to the question whether petitioners have utilized a tying arrangement must be based on whether there is a possibility that the economic effect of the arrangement is that condemned by the rule against tying—that petitioners have foreclosed competition on the merits in a product market distinct from the market for the tying item.” Jefferson Parish v. Hyde, 466 U.S. 2, 104 S.Ct. 1551, 1563, 80 L.Ed.2d 2 (1984).

Here, the markets are not clearly distinct. Realistically, the product must not be reduced to its smallest elements merely to create separate markets.

In sum, the plaintiff has not yet shown a convincing case that there is a reasonable likelihood of success on the merits because it has not been able to show that the enhanced NFI is a product or service separate from the NFI as it had existed through the use of manual audits only.

I turn now to the final factor to be considered in the issuance of a preliminary injunction: whether the issuance of such an injunction will serve the public interest. IRI is currently the leader in scanning-generated market research information. IRI is expanding into the area of markets in larger cities. The presence of the defendant already in these areas tends to increase competition and that is consistent with the purposes of the antitrust laws. For these reasons and because it appears unlikely that a tying case can be made out at this time, I find that the issuance of a preliminary injunction would not serve the public interest.

The plaintiff’s request for a preliminary injunction is denied at this time. The parties may choose to request the court to certify this case before proceeding with further discovery and preparation for trial.


author: EDWARD WEINFELD, District Judge.

text:
    AMERICAN HOME PRODUCTS CORPORATION, Plaintiff, v. KEY PHARMACEUTICALS, INC., Defendant.
    No. 84 Civ. 4167 (EW).
    United States District Court, S.D. New York.
    Dec. 4, 1984.
    Donovan, Leisure, Newton & Irvine, New York City, for plaintiff; Louis C. Lustenberger, Jr., Howard R. Reiss, Joseph L. Ciasen, III, New York City, of counsel.
    Paul, Weiss, Rif kind, Wharton & Garrison, New York City, for defendant; Arthur L. Liman, Steven E. Landers, Bruce Birenboim’ New York City’ of counsel.
    Arky, Freed, Stearns, Watson, Greer, Weaver & Harris, P.A., Miami, Fla., for defendant; Bruce W. Greer, Peter W. Homer, Miami, Fla., of counsel.
   OPINION

EDWARD WEINFELD, District Judge.

The defendant, Key Pharmeceuticals, Inc. (“Key”), moves pursuant to 28 U.S.C. § 1404(a) to transfer this diversity action to the Southern District of Florida. Because this action centers about events that occurred in the proposed transferee district, where nearly all of the witnesses having firsthand knowledge of those events reside, defendant’s motion is granted.

American Home Products Corporation (“American Home”), a Delaware corporation with its principal place of business in New York City, and Key, a Florida corporation, entered into agreements whereby Key was to develop two transdermal drug products for use in treating certain heart ailments. American Home was to provide Key with funds “for Key’s costs directly attributable to development” of the trans-dermal products.

American Home commenced this action against Key upon allegations that as required under the contracts it advanced one-half the funds ($885,000.) upon the execution of the contracts; that it terminated the contracts because Key failed to meet the developmental goals specified therein; that Key has not spent all the funds advanced to it; and that American Home is entitled to the return cf. the unexpended funds. The defendant denies that it has not spent all the funds and disputes that it is required under the contracts to return any alleged unexpended sums.

There is no dispute that, as section 1404(a) requires, the action “might have been brought” in the Southern District of Florida, where Key maintains its principal place of business. Whether a transfer to that district is appropriate depends upon the balance of the familiar factors to be considered on a section 1404(a) motion. The prime and basic issue in the case is the costs necessarily incurred by Key in its efforts to develop the transdermal products. These efforts were carried on at Key’s manufacturing and research facility and executive offices in Florida, where all its officers and employees engaged in the project reside (with the exception of two persons, one of whom has since moved to California and the other to Pennsylvania). All progress reports and records of costs were made and are maintained there. Thus, a substantial case has been made for transfer.

Plaintiff, however, seeks to avert such a disposition upon a claim that from time to time as the project proceeded its officials reviewed progress reports prepared by Key and conferred with Key’s personnel by telephone and at meetings in New York City and Florida. But the substance of these communications does not bear directly upon the basic issue of costs actually and necessarily incurred by Key in its developmental activities, all of which took place in Florida. American Home executives can testify only to what Key officials advised them about developmental progress and the costs related thereto; they are without firsthand knowledge on these vital matters.

So, too, the fact that American Home officials who participated in the negotiations leading to the contracts are located in New York City is of no special significance on this motion. As both sides acknowledged at oral argument, the contracts make no express provision for unspent funds. Nevertheless, even assuming the trial court would accept testimony as to whether the contracts require Key to return unspent funds, ordinarily an issue of law, neither side can claim that its personnel have a monopoly on relevant firsthand knowledge since both sides participated in the negotiations. More importantly, resolution of this issue is likely to require the testimony of only a few individuals, those who actually conducted the negotiations, and their testimony is likely to be brief and narrow in scope in comparison to that relating to the issue of work performed and costs incurred by Key pursuant to the contracts.

The convenience of witnesses, the most significant factor to be considered, strongly favors transfer of the action to the Southern District of Florida. Accordingly, the defendant’s motion is granted.

So ordered.

      . See 28 U.S.C. § 1391(a), (c).

      . See Schneider v. Sears, 265 F.Supp. 257, 263 (S.D.N.Y.1967).

      . Under New York law, it is generally the responsibility of the Court to interpret written instruments. See Hartford Acc. & Indent. Co. v. Wesolowski, 33 N.Y.2d 169, 171-72, 305 N.E.2d 907, 909, 350 N.Y.S.2d 895, 898 (1973); Cale Dev. Co. v. Conciliation & Apps. Bd., 94 A.D.2d 229, 234, 463 N.Y.S.2d 814, 817 (1st Dep’t 1983), aff’d, 61 N.Y.2d 976, 463 N.E.2d 619, 475 N.Y. S.2d 278 (1984) (mem.). However, the parol evidence rule would permit the parties to offer extrinsic evidence of their intentions regarding an aspect of their agreement as to which their writing is silent or ambiguous. See Sobering Corp. v. Home Ins. Co., 712 F.2d 4, 9 (2d Cir. 1983); Musifilm, B.V. v. Spector, 568 F.Supp. 578, 582 n. 4 (S.D.N.Y.1983); 67 Wall St. Co. v. Franklin Nat’l Bank, 37 N.Y.2d 245, 248-49, 333 N.E.2d 184, 186-87, 371 N.Y.S.2d 915, 918 (1975); Silverman v. Riker-Maxson Corp., 91 A.D.2d 524, 525, 456 N.Y.S.2d 775, 776 (1st Dep’t 1982) (mem.).

      . See Saminsky v. Occidental Petroleum Corp., 373 F.Supp. 257, 259 (S.D.N.Y.1974).


author: MOYE, Chief Judge.

text:
    A.C. AUKERMAN CO., Plaintiff, v. JASPER CONSTRUCTION COMPANY, Defendant.
    No. C84-1208A.
    United States District Court, N.D. Georgia, Atlanta Division.
    Feb. 22, 1985.
    William H. Needle, Atlanta, Ga., for plaintiff.
    Lee C. Davis, Atlanta, Ga., for defendant.
   ORDER OF COURT

MOYE, Chief Judge.

The above-styled action is again before this Court on the defendant’s motion for summary judgment. A review of the procedural background of this case is necessary to resolve the present motion.

FACTS

The plaintiff is in the business of building interstate highway median barrier wall by a process called slip forming. These barriers are designed so that a vehicle striking the wall will stay under control. The height of the contoured surface of the wall above the highway is an important factor in designing a safe barrier wall. Plaintiff’s Supp. Brief at 2. If a barrier wall is the same height on each side, it is known as a “symmetrical wall.” If the contours on opposite sides of the wall are at different heights, the wall is called “asymmetrical.” Id. Until 1971, it was not possible to slip form asymmetrical barrier wall. Id. at 3.

In 1971, a friend of the plaintiffs developed a method to slip form asymmetrical barrier wall. Subsequently, both the method of slip forming asymmetrical barrier wall (patent # 133) and the invention itself (patent # 633) were patented by the plaintiff. Id. at 4.

In the fall of 1972, the plaintiff discovered that Miller Formless Co. was manufacturing and selling a slip form capable of erecting asymmetrical barrier wall. After several years of unsuccessful negotiations with Miller Formless, the plaintiff filed an infringement action in federal court in Illinois. The Illinois court granted Miller Formless’ motion for summary judgment on the grounds of laches and estoppel, and that decision was affirmed by the Seventh Circuit Court of Appeals in A.C. Aukerman Co. v. Miller Formless Co., Inc., 693 F.2d 697 (7th Cir.1982).

On November 9, 1984, this Court held that the Illinois judgment was a “judgment on the merits” for res judicata purposes. In addition, this Court found that under res judicata, and under the Kessler doctrine first articulated in Kessler v. Eldred, 206 U.S. 285, 27 S.Ct. 611, 51 L.Ed. 1065 (1907), the defendant in this case, a company that had purchased from Miller Formless a slip form capable of making asymmetrical barrier wall, was protected by the Illinois judgment. The Court deferred the defendant’s motion for summary judgment, however, because the plaintiff alleged that, upon further discovery, it could show that this lawsuit involves a different cause of action than the Illinois lawsuit. It is this issue that is presently before the Court.

Discussion

The plaintiff advances four arguments in support of its contention that this lawsuit is different than the Illinois suit, and is therefore not barred by res judicata or the Kessler doctrine. The plaintiff first states that this lawsuit is based on infringing use whereas the Illinois suit was based on infringing manufacture. Second, the plaintiff stresses that the defendant in this action has independently decided to infringe the plaintiff’s patent and is therefore not entitled to the protection of the Illinois lawsuit. Third, the plaintiff contends that the defendant is using a different type of slip form than that used by Miller Formless. Finally, the plaintiff argues that the defendant is not protected by the Illinois judgment because it has incorporated the patented slip form into a “larger system.” As will be discussed below, this Court finds that none of these arguments has any merit.

I. Use v. Manufacture

The plaintiff’s first argument is that the previous Illinois judgment does not protect the defendant in this case because that judgment was based on manufacturing the allegedly infringing device whereas this lawsuit concerns the use of that device. This argument has no merit for two reasons. First, contrary to the plaintiff’s assertions, the previous lawsuit did concern the allegedly infringing use of the plaintiff’s patented slip form. The Court in Aukerman, supra, stated the following:

Appellant [Aukerman] cannot escape so easily because this suit essentially concerns the first patent which covers the method of plaintiffs invention____ In the license negotiations between the parties ... plaintiff viewed the invention as both apparatus and method and defendant’s alleged intrusion as a single intrusion.

Aukerman, supra, at 700 n. 4. Thus, it is clear that infringing use was a part of the Illinois lawsuit.

The plaintiff’s independent use argument also fails in light of the Supreme Court’s decision in Kessler v. Eldred, 206 U.S. 285, 27 S.Ct. 611, 51 L.Ed. 1065 (1907), as interpreted by subsequent case law, which held that the customers of a manufacturer who had previously prevailed in a patent infringement lawsuit were protected by that lawsuit if they bought the completed accused device from the manufacturer. Id. at 286-87, 27 S.Ct. at 611-12. Molinaro v. American Tel. & Tel. Co., 460 F.Supp. 673 (E.D.Pa.1978), aff’d without published opinion, 620 F.2d 288 (3d Cir. 1980). Therefore, since the defendant in this case purchased the completed slip form from the manufacturer which had previously prevailed in the Illinois lawsuit, the defendant is fully protected by that lawsuit.

II. Independent Use

The plaintiff argues that this lawsuit is different than the Illinois lawsuit because the defendant in this case has independently decided to use the accused device in an infringing manner. The plaintiff discusses at length the fact that the slip form in question can be used either in an infringing or non-infringing manner depending on whether it is used to make asymmetrical or symmetrical barrier wall. According to the plaintiff, because the defendant has decided to use the slip form to make asymmetrical barrier wall, it has independently decided to infringe the plaintiff’s patent and is not protected by the Illinois judgment.

The plaintiff cites only two cases to support this novel argument and neither case supports the plaintiff’s position. In Rubber Tire Wheel Co. v. Goodyear Tire & Rubber Co., 232 U.S. 413, 34 S.Ct. 403, 58 L.Ed. 663 (1914), a person purchased one component from a manufacturer who had previously prevailed in a patent suit and combined that one component with two other components, purchased from third parties, to manufacture an allegedly infringing device. The Supreme Court held that the original manufacturer could not enjoin a suit by the patentee against the customer. Id. at 416, 34 S.Ct. at 404. The Court, however, specifically distinguished the facts of Rubber Tire Wheel from other cases - where the alleged infringer had bought the entire device from the manufacturer. The Court stated the following:

We may lay on one side the question as to the rights of one purchasing from the [manufacturer] the completed article. Doherty [the alleged infringer] did not purchase it; he made it himself, assembling its various elements for that purpose and effecting the [patented] combination.

Id. Furthermore, the Court went on to say that a customer who bought the completed product from a manufacturer who had previously prevailed was entitled to “unmolested” use of the product under the Supreme Court’s decision in Kessler v. Eldred, 206 U.S. 285, 27 S.Ct. 611, 51 L.Ed. 1065 (1907). Rubber Tire Wheel at 418, 34 S.Ct. at 405. Thus, the Rubber Tire Wheel decision actually supports the defendant’s position, not the plaintiff’s.

The other case relied on by the plaintiff, Aralac, Inc. v. Hat Corporation of America, 166 F.2d 286 (3d Cir.1948), is equally inapposite. In Aralac, the plaintiff was a manufacturer of the raw material casein. The Court simply held that the manufacturer had no right to restrain patent suits against customers who were combining casein with other products in violation of a patented process.- ' Id. at 293. This holding, however, provides no support for the plaintiff’s position that the defendant in the present action is not protected by the Illinois judgment because it is possible to use the slip form at issue in a noninfringing manner.

The defendant in this case purchased from Miller Formless a completed product that had previously been the subject of a patent suit against Miller Formless. Under res judicata and the Kessler doctrine, the defendant is protected by this judgment. The fact that the defendant is capable of using the device in a noninfringing manner is simply irrelevant to the applicability of the previous lawsuit to the present case. Therefore, the defendant is protected by the previous judgment against the plaintiff despite the fact that the defendant could use the slip form in a noninfringing manner.

III. A Different Slip Form

The plaintiff argues that the defendant is not protected by the Illinois judgment because the slip form being used by the defendant in this case is different than the slip form that was the subject of the Illinois litigation. The plaintiff cites Young Engineers v. U.S. International Trade Commission, 721 F.2d 1305 (Fed.Cir.1983), to support its position. The Young court stated the following about the res judicata effect of a prior noninfringement decision on a later lawsuit:

With respect to patent litigation, we are unpersuaded that an ‘infringement claim,’ for purposes of claim preclusion, embraces more than the specific devices before the court in the first suit ____
As the proponent of the defense of claim preclusion, the burden was on [the defendant] to establish the defense by showing that the devices here were the same as those in the 1969 suit. [The defendant] made no attempt to do so, resting its case on the legal theory that any charge of infringement based on the patent is barred, a clearly untenable position.

Id. at 1316 (emphasis added). Relying on the Young decision, the plaintiff claims that there is an issue of fact relating to the similarity between the slip forms used in the two lawsuits and therefore the defendant’s motion for summary judgment should be denied.

The flaw in the plaintiff’s argument is that, unlike the previous judgment in Young, the previous Illinois judgment was not based upon a finding of noninfringement as to a particular slip form. Rather, the Court found that the plaintiff was precluded from alleging patent infringement because of its excessive delay in bringing suit. See A.C. Aukerman Co. v. Miller Formless Co., Inc., 693 F.2d 697, 702 (7th Cir.1982). Thus, the important question in this lawsuit is whether the plaintiff is claiming infringement of the same patents, as opposed to devices, as it did in the Illinois lawsuit. If so, the Illinois judgment would bar the present action.

The Illinois lawsuit covered any device made by Miller Formless that Aukerman asserted came within the scope of the two patents (Nos. 133 & 633) at issue in the present lawsuit. See Jasper’s Exhibit E. In fact, the plaintiff does not dispute that the same two patents are involved in both lawsuits. Therefore, because the Illinois court held that the plaintiff was estopped from litigating those patents against Miller Formless, the Kessler doctrine and the doctrine of res judicata preclude the plaintiff from litigating these same patents against the defendant in this case. Therefore, the defendant is entitled to summary judgment even if the plaintiff had raised a factual question concerning the similarity of the devices at issue in both lawsuits.

IV. The Glare Screen

The plaintiff’s final argument is that the defendant has lost the protection of the Illinois judgment because it is using the slip form involved in that suit to make barrier wall on top of which a “glare screen” is placed. Because this kind of wall, with a “glare screen” on it, was not a part of the Illinois litigation, the plaintiff contends that defendant has lost the protection of that litigation. The only case relied upon by the plaintiff to support this novel argument is the Rubber Tire case, discussed in Part II of this order. That case, however, only concerned a manufacturer who combined various noninfringing devices to build one infringing device. See discussion in Part II, supra. The Rubber Tire case simply has no applicability to the present case where the defendant purchased a completed device from a manufacturer who had previously prevailed in a patent infringement lawsuit concerning that device.

This Court finds that the subsequent addition or modification of the barrier wall formed by the accused slip form is simply irrelevant to the issues in this case. The defendant used the Illinois slip form to make barrier wall. It is therefore entitled to the protection of the Illinois judgment which precluded the plaintiff from litigating the right of Miller Formless to sell this slip form. Therefore, the plaintiff’s final argument is meritless and the defendant is entitled to summary judgment.

In sum, this Court had previously found that the Illinois judgment was a judgment on the merits and that there was privity between the defendant in this case and the defendant in that case. See November 7 order at 3-5. And, this Court previously found that the Kessler doctrine precluded the plaintiff from suing the customers of the defendant in the Illinois lawsuit for infringement of the same patents involved in that lawsuit. Id. 6-8. The only issue left open by this Court’s previous order was whether the present cause of action was the same cause of action as the one before the Illinois court. The defendant has proven to this Court that there are no material issues of fact as to this issue and that the two lawsuits are based on the same cause of action. Therefore, under res judicata and the Kessler doctrine, the defendant is entitled to the full protection of Miller Formless’ judgment against the plaintiff. Accordingly, the defendant’s motion for summary judgment is GRANTED. This order resolves all of the issues in this case.

      . The defendant’s Fed.R.Civ.P. 12 (b)(6) motion has been converted into a summary judgment motion because the defendant has relied on matters outside the pleadings.

      . The defendant has the ultimate burden of persuasion on this issue. This Court found, however, that the defendant presented significant evidence that the patents involved in both suits were the same. Therefore, the plaintiff must demonstrate that a material issue of facts exists as to the similarity of the two lawsuits.

      . The Court will not repeat its discussion of the general applicability of these doctrines to this case. This discussion can be found in this Court's order of November 9, 1984.

      . The policies underlying the Kessler doctrine would be undermined by allowing Aukerman to harass customers of Miller Formless who relied on the judgment of Miller Formless against Aukerman as to both patents at issue in the case.


author: HALL AN AN, District Judge.

text:
    Gary Calvin LILLY, Plaintiff, v. CITY OF BECKLEY, WEST VIRGINIA, et al., Defendants.
    Civ. A. No. 80-5188.
    United States District Court, S.D. West Virginia.
    March 1, 1985.

      Kevin B. Burgess, Hamilton & Mooney, Oak Hill, W.Va., for plaintiff.
    James A. Swart and N. Robert Grillo, Higgins & Gorman, Beckley, W.Va., for defendants.
   ORDER

HALL AN AN, District Judge.

On the 21st day of August, 1984, came the parties, in person and by their counsel, for the purpose of a trial to the Court of the issues joined in this action in which Plaintiff alleges he was the victim of “reverse discrimination.”

After hearing the testimony adduced at said bench trial and reviewing the documentary evidence submitted by the respective parties, the Court makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

1. Plaintiff Gary Calvin Lilly is a white male, a resident of the State of West Virginia, and a citizen of the United States.

2. Plaintiff holds an Associate Degree in Business Administration from Beckley College; an Associate Degree in Criminal Justice from West Virginia State College, and a Bachelor’s Degree in Criminal Justice from West Virginia State College.

3. Defendant City of Beckley is a municipality and political subdivision of the State of West Virginia with the ultimate responsibility for the employment, supervision and control of the City’s police department.

4. Defendant City of Beckley Police Civil Service Commission is charged by the law of the State of West Virginia and municipal ordinance with certain duties, including testing of applicants for positions on the City police force and certification of qualified applicants to the Mayor for appointment.

5. In January, 1974, Plaintiff was tested and then offered employment by Defendants as a police officer for the City of Beckley but he declined to accept employment at that time.

6. In January, 1976, Plaintiff met all of the necessary requirements for employment as a police officer by Defendants and he again made application for said position.

7. Prior to January, 1976, the Beckley Police Civil Service Commission utilized a hiring-testing procedure which involved a 27-page application, a four-part standard test prepared by Public Personnel Association of Chicago, Illinois, a psychological test, a polygraph examination, a background investigation and a physical examination prior to a final oral interview.

8. Immediately prior to the test administered in January, 1976, the testing procedures were revised. The application was reduced to one page, and the written examination which had previously consisted of objective multiple choice questions were altered to consist of a two-question essay examination.

9. The two questions applicants were required to answer were: “Explain fully the skills and abilities which I have developed which will enable me to serve as a member of the Beckley Police Department and how I am willing to use these toward the best interests of the Deaprtment and the Community (sic),” and, “How do I see myself five years from today as a member of the department (sic)?”

10. Plaintiff passed the written examination for employment but failed the interview portion of the application procedure.

11. There were no objective criterion whatsoever for grading performance on either of these elements of the examination.

12. Following completion of the written testing and interview process, the Defendant Commission certified a list of names to the Mayor who then appointed individuals for positions as police officers.

13. During the course of his interview with a member of the Commission, Plaintiff was essentially told that he would have a much better chance of obtaining employment had he been a member of a minority, and Defendants admit that said comments were true.

14. Prior to the administration of the examination in January, 1976, the Defendants were threatened with a loss of funding from various sources by the West Virginia Human Rights Commission because of the lack of minority recruitment and employment in various departments in the City of Beckley and particularly in the Police Department.

15. Defendants undertook to implement an affirmative action program to remedy the effects of past discrimination in the ranks of the Beckley Police Department and in other departments in the City of Beckley.

16. The evidence in this matter is sufficient to form the basis of a determination that minorities had in fact been discriminated against in hiring practices employed by the City of Beckley and the City Police Department.

17. The City of Beckley and the Beckley Police Civil Service Commission acted in accordance with the directives of the West Virginia Human Rights Commission and particularly Mr. James C. Karantonis with respect to their efforts to develop and implement an affirmative action program to remedy the past effects of discrimination in minority recruitment and hiring.

18. The Commission altered the testing procedure at Mr. Karantonis’ instance and apparently followed his directives in the entire matter of testing and certification of qualified applicants to the Mayor for employment.

19. The City of Beckley adopted an affirmative action plan in April, 1976.

20. Said plan provided in part: “The City of Beckley recognizes that preferential hiring on the basis of minority status or sex would be unlawful, even as a means of addressing underutilization of minorities, except as a numerical remedy ordered by the court.”

21. The Beckley Police Civil Service Commission was apparently acting in accordance with a voluntary, informal, affirmative action plan at the time the January, 1976, test was administered, although the particulars of said plan were not adduced at the trial of this matter.

22. Defendants concede that Plaintiff was not certified for employment primarily because he was not a member of a minority, and specifically because of his race and sex.

23. Defendants have proved no defense in this matter other than reliance on their “affirmative action” plan.

24. The affirmative action plan relied upon by Defendants failed to set forth any specific goals or timetables with respect to hiring of minority applicants.

25. Plaintiff properly exhausted his administrative remedies in a timely fashion.

CONCLUSIONS OF LAW

1. The Court has jurisdiction over the parties and the subject matter herein by virtue of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq., and venue is proper pursuant to 42 U.S.C. § 2000e-5(f)(3).

2. Defendant City of Beckley is an employer within the meaning of Title VII and is not immune to liability thereunder.

3. Defendant Beckley Police Civil Service Commission is not, in and of itself an employer within the meaning of Title VII, but by virtue of its relationship with respect to the matters at issue herein is an appropriate party to this action and is a necessary party for purposes of affording complete relief.

4. Title 42 U.S.C. §§ 2000e-2(a)(l) provides:

“(a) It shall be an unlawful employment practice for an employer—
(1) to fail or refuse to hire or discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; ...”

5. By virtue of the facts found by this Court as herein contained, Plaintiff proved a prima facie case of a violation of Title VII by the Defendants by showing that he was protected by the provisions of Title VII, was qualified for the position sought, that he was rejected, that Defendants sought other applicants for the positions available based upon considerations of race and sex which were not in accordance with a bona fide affirmative action plan. McDonald v. Santa Fe Tras. Co., 427 U.S. 273, 96 S.Ct. 2574, 49 L.Ed.2d 493 (1976); United Steelworkers of America v. Weber, 443 U.S. 193, 99 S.Ct. 2721, 61 L.Ed.2d 480 (1979); Bratton v. City of Detroit, 704 F.2d 878 (6th Cir.1983), cert. den., — U.S. —, 104 S.Ct. 703, 79 L.Ed.2d 168 (1984); reh. den. — U.S. —, 104 S.Ct. 1431, 79 L.Ed.2d 754 (1984); Detroit Police Officers’ Ass’n v. Young, 608 F.2d 671 (6th Cir.1979), cert. den., 452 U.S. 938, 101 S.Ct. 3079, 69 L.Ed.2d 951 (1981); Warsocki v. City of Omaha, 726 F.2d 1358 (8th Cir.1984). See also, McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973), and Setser v. Novack, 657 F.2d 962 (8th Cir.), cert. den., 454 U.S. 1064, 102 S.Ct. 615, 70 L.Ed.2d 601 (1981).

6. Defendants failed to meet their burden of proving that they acted in this matter in accordance with a valid affirmative action plan so as to insulate them from liability on the facts found herein.

7. Defendants failed to show that the purported affirmative action plan upon which they relied was substantially related to the objective of remedying past discrimination in that they failed to establish that its implementation resulted in or was designed to result in the hiring of a sufficient number of minority applicants so that the racial balance of the work force would approximate roughly the balance that would have been achieved absent the past discrimination; and they failed to show that the plan did not result in the hiring of unqualified applicants. Valentine v. Smith, 654 F.2d 503 (8th Cir.1981), cert. den., 454 U.S. 1124, 102 S.Ct. 972, 71 L.Ed.2d 111 (1981); Warsocki v. City of Omaha, 726 F.2d 1358 (8th Cir.1984).

8. Defendants failed to show any goals and timetables for the purported affirmative action plan whatsoever.

9. Defendants failed, therefore, to meet their burden of proving that the plan was reasonably related to its remedial purpose, Setser v. Novack Inv. Co., 657 F.2d 962, (8th Cir.), cert. den., 454 U.S. 1064, 102 S.Ct. 615, 70 L.Ed.2d 601 (1981), and that their actions did not unreasonably trammel the rights of non-minorities. United Steelworkers of America v. Weber, 443 U.S. 193, 99 S.Ct. 2721, 61 L.Ed.2d 480 (1979).

10. Plaintiff is entitled to affirmative relief pursuant to 42 U.S.C. § 2000e-5(g).

11. Plaintiff is entitled to an award of back pay in the amount of $36,973.09, the amount he would have earned had he not been unlawfully discriminated against, less the interim earnings from his principal occupation.

12. Defendants are not entitled to an offset for earnings from secondary employment inasmuch as Plaintiff proved to the Court’s satisfaction that said earnings could have been achieved had he been hired as a police officer.

13. Plaintiff is further entitled to affirmative relief in the form of an offer of employment by the Defendants in this matter.

14. Plaintiff is entitled to recover attorney’s fees and court costs incurred in prosecuting this action. 42 U.S.C. §§ 2000e-5(k).

Accordingly, it is hereby ORDERED that Defendant the City of Beckley shall pay to Plaintiff the sum of $36,973.09 within 90 days of the date of this Order to compensate him for back pay lost by reason of Defendants’ unlawful discrimination.

It is further ORDERED that Defendants shall offer Plaintiff the next available position as police officer on Defendant’s police force.

With respect to the issue of attorney’s fees and costs, Plaintiff’s counsel shall submit an itemized listing of Plaintiff’s claim together with appropriate documentation therewith no later than 30 days of the date of this Order. Said documentation shall include a memorandum of law specifying the appropriate factors in setting the fee award as expressed in Barber v. Kimbrell’s Inc., 577 F.2d 216 (4th Cir.1978).

Defendant shall file a response thereto if Defendants desire to contest the amount of said petition within 20 days following submission of the same to the Court.

A hearing on the amount of fees and costs to which Plaintiff is entitled shall be held at 1:00 o’clock p.m., on June 13, 1985, in the United States District Courthouse in Beckley, West Virginia. An appropriate Judgment Order in this action shall be entered herewith.