author: POLOZOLA, District Judge.

text:
    Tomie G. TYLER v. BONAPARTE’S FRIED CHICKEN, INC., Omni Capital Worldwide, Ltd. and Richard A. Friedberg.
    Civ. A. No. 85-111-B.
    United States District Court, M.D. Louisiana.
    April 8, 1985.

      Timothy C. Ellender, Houma, La., W. Arthur Abercrombie, Jr., Taylor, Porter, Brooks & Phillips, Baton Rouge, La., for plaintiffs.
    Robert A. Kutcher, Bronfin, Heller, Steinberg & Berins, New Orleans, La., for defendants.
   POLOZOLA, District Judge.

This matter is before the Court on the motion of the plaintiff, Tomie G. Tyler, to remand this action to the Nineteenth Judicial District Court for the Parish of East Baton Rouge, State of Louisiana. No oral argument is required on this motion.

On February 21, 1980, Tyler filed suit in the Thirty-Second Judicial District Court for the Parish of Terrebonne, State of Louisiana, against the following defendants: (a) Bonaparte’s Fried Chicken, a corporation organized under Louisiana law with its principal place of business in Louisiana; (b) Omni Capital Worldwide, Ltd., a corporation organized under New York law with its principal place of business in New York; and (c) Richard Friedberg, a citizen of the state of Connecticut. The action sought damages against Bonaparte’s Fried Chicken, Inc. resulting from an alleged breach of a lease agreement between Bonaparte’s Fried Chicken, Inc. and the plaintiff. In addition, the plaintiff sought to enforce suretyship contracts whereby Omni Capital Worldwide, Ltd. and Friedberg allegedly agreed to guarantee payment of the first ten (10) years rent due under the alleged lease. Pursuant to a motion to change venue, the suit was subsequently transferred to the Nineteenth Judicial District Court, for the Parish of East Baton Rouge. On May 15, 1981, Bonaparte’s Fried Chicken, Inc., the Louisiana corporation against whom this suit was initially filed, merged with Bonaparte’s Fried Chicken, Inc., a corporation organized under the laws of Delaware with its principal place of business in New York. On January 10,1985, the plaintiff filed an amended petition alleging that the defendants Friedberg and Omni are bound in solido with Bonaparte’s due to their disregard for the corporateness of Bonaparte’s. In addition, the amended petition prayed for an increase in attorney’s fees from $50,000.00 to $100,000.00. On February 5, 1985, all defendants joined in a petition for removal pursuant to 28 U.S.C. § 1446(b) claiming diversity of citizenship as the basis for subject matter jurisdiction. See 28 U.S.C. § 1332.

The plaintiff has based the present motion to remand on the contention that diversity jurisdiction is determined at the time the original complaint is filed and that if such jurisdiction did not exist at that time, it cannot be later acquired by a change of domicile by one of the parties. The defendants contend, in opposition to the motion to remand, that the change of Bonaparte’s citizenship after the commencement of the action allowed the defendants to remove the case after an amended petition had been filed. The defendants cite several cases which stand for the proposition that a case, originally removable but not removed from state court, may have its right to remove “revived” by the filing of an amended petition that “so change[s] the character of the litigation as to make it a substantially new suit begun that day.” Fletcher v. Hamlet, 116 U.S. 408, 410, 6 S.Ct. 426, 426, 29 L.Ed. 679 (1886). See also O’Bryan v. Chandler, 496 F.2d 403 (10th Cir.1974), cert. denied 419 U.S. 986, 95 S.Ct. 245, 42 L.Ed.2d 194 (1974); Henderson v. Mid-West Refining Company, 43 F.2d 23 (10th Cir.1930); Dow Coming Corporation v. Schpak, 65 F.R.D. 72 (N.D.I11. 1974); and Garden Homes, Inc. v. Mason, 143 F.Supp. 144 (D.Mass.1956). The rationale of this rule is that “willingness to remain in a state court to litigate a particular claim should not be interpreted as a willingness to remain in a state court to adjudicate a different claim.” 14 Wright & Miller, Federal Practice and Procedure, § 3732 p. 728 (1976). See also Henderson v. Mid-West Refining Company, 43 F.2d at 25, and Garden Homes v. Mason, 143 F.Supp. at 145.

The argument asserted above by the defendants is not applicable to the present set of facts. The proposition upon which the defendants are relying presupposes that there was a right to remove that was lost by not exercising it within a prescribed period of time. Presumably, the defendants consider that Bonaparte’s change of citizenship through the merger constitutes the event that made the state action removable and that although such right was not exercised within thirty days of the event, the amended petition filed on January 10,1985 “revived” that right. The change of Bonaparte’s citizenship subsequent to the filing of the petition had no effect on the creation of diversity jurisdiction and, therefore, did not make the action removable. Diversity jurisdiction is a matter that is determined at the commencement of a suit. Mullen v. Torrance, 9 Wheat 537, 22 U.S. 537, 6 L.Ed. 154 (1824). It should be noted that “[a] corollary of the general rule that diversity is determined as of commencement is that if diversity of citizenship did not exist when the action was commenced, it cannot be created by a later change of domicile by one of the parties____” Wright & Miller, supra, § 3608 at p. 458. In American Foundation, Inc. v. Mountain Lake Corp., 454 F.2d 200 (5th Cir.1972), the plaintiff was a Delaware corporation with its principal place of business in Florida and the defendant was a Florida corporation with its principal place of business in Florida at the commencement of the suit. The district court held that there was no diversity jurisdiction and the Fifth Circuit Court of Appeals affirmed the lower court’s decision. The appellate court held that the facts supported the district court’s finding that the principal place of business of the plaintiff was Florida at the commencement of the suit and there was no necessity to determine if or when such principal place of business had ceased being in Florida. In Gresham Park Community Organization v. Howell, 652 F.2d 1227 (5th Cir.1981), the Fifth Circuit discussed the holding of American Foundation, Inc. v. Mountain Lake Corp. and stated that:

The rule [elucidated in American Foundation ] appears to be based on the same concern for certainty that lies behind the companion rule that a change of citizenship occurring after the filing of the complaint will not divest the federal court of jurisdiction. (Citations omitted.) Certainty is also served by not allowing an event, whether a change in citizenship or the issuance of a state court order, occurring during the pendency of the suit to create jurisdiction; the parties and judge would encounter uncertainty in determining the existence of jurisdiction when crucial facts could change. Thus federal jurisdiction must be determined under the facts as of the date of the filing of the complaint.

(Emphasis added.) Gresham Park Community Organization v. Howell, 652 F.2d at 1236 n. 25. Therefore, the Court finds that this action was removed “improvidently and without jurisdiction.” Because of this finding, the Court sees no necessity in determining whether the amended petition filed on January 10, 1985, “so change[d] the character of the litigation as to make it a substantially new suit begun that day” (Fletcher v. Hamlet, 116 U.S. at 410, 6 S.Ct. at 426) so as to “revive” the right to remove that was lost by the failure of the defendants to timely remove the suit in accordance with 28 U.S.C. § 1446(b). In accordance with 28 U.S.C. § 1447(c), the Court hereby remands this case to the Nineteenth Judicial District Court for the Parish of East Baton Rouge, State of Louisiana.

Therefore:

IT IS ORDERED that the motion of the plaintiff, Tomie G. Tyler, to remand this cause to the Nineteenth Judicial District Court, for the Parish of East Baton Rouge, State of Louisiana be, and it is hereby GRANTED.

Judgment shall be entered accordingly.

      . 28 U.S.C. 1446(b) provides that:
      If the case stated by the initial pleading is not removable, a petition for removal may be filed within thirty days after receipt by the defendant, through service or otherwise, a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.

      . 8 Del.Code Ann. Tit. 8 § 259 has been interpreted to mean that after a foreign corporation has merged into a Delaware corporation, the surviving corporation is a citizen of Delaware for the purposes of diversity jurisdiction. See Hoefferle Truck Sales v. Divco-Wayne, 523 F.2d 543 (7th Cir.1975); Webster Dictionary Co. v. William Collins Plus World Pub. Co., Inc., 436 F.Supp. 927 (W.D.N.Y.1977) and Akwelt Corp. v. Eiger, 141 F.Supp. 19 (S.D.N.Y.1956).

      . See Fletcher v. Hamlet, 116 U.S. 408, 6 S.Ct. 426,.29 L.Ed. 679 (1886); O'Bryan v. Chandler, 496 F.2d 403 (10th Cir.1974), cert. denied 419 U.S. 986, 95 S.Ct. 245, 42 L.Ed.2d 194 (1974); Henderson v. Mid-West Refining Company, 43 F.2d 23 (10th Cir.1930); Dow Corning Corporation v. Schpak, 65 F.R.D. 72 (N.D.Ill.1974); and Garden Homes v. Mason, 143 F.Supp. 144 (D.Mass.1956).

      . 28 U.S.C. § 1447(c) provides that “[i]f at any time before final judgment it appears that the case was removed improvidently and without jurisdiction, the district court shall remand the case, and may order the payment of just costs.


source: Caselaw Access Project

author: LOUIS H. POLLAK, District Judge.

license: Public Domain

text:
    Anthony GONCALVES and Clara Goncalves v. EAGLE-PICHER INDUSTRIES, INC.
    Civ. A. No. 83-999.
    United States District Court, E.D. Pennsylvania.
    April 15, 1985.

      Martin Greitzer, Greitzer & Locks, Philadelphia, Pa., for plaintiffs.
    James V. Bielunas, Thompson & Pennell, Philadelphia, Pa., for defendant.
   MEMORANDUM

LOUIS H. POLLAK, District Judge.

Plaintiffs Anthony and Clara Goncalves seek compensatory and punitive damages for injuries allegedly caused by asbestos products which defendant Eagle-Picher Industries manufactured. According to the Amended Complaint, Anthony Goncalves worked as a pipefitter and chemical operator for GAF Corporation in Linden, New Jersey, from 1963 to 1971; Mr. Goncalves also worked as a pipefitter and insulator for the American Cyanimid Corporation in Linden from 1972 to 1981. Amended Complaint U 8. Plaintiffs allege that, during this eighteen-year period, Mr. Goncalves “continually worked with, used and was ... exposed to the defendant’s asbestos products.” Id. That exposure has allegedly caused plaintiff to contract asbestosis.

Defendant Eagle-Picher has moved for partial summary judgment on three of plaintiffs’ claims against it:. (1) the conspiracy claim contained in count IV of the Complaint, (2) the fraud claim, also contained in count IV, and (3) the claim for punitive damages. Plaintiffs do not oppose the motion insofar as it regards the claims for conspiracy and fraud. Accordingly, Eagle-Picher’s motion will be granted as unopposed with respect to those claims.

The punitive damages portion of EaglePicher’s motion is contested. Eagle-Picher has submitted the affidavit of Robert L. Bockstahler, the former President and General Manager of Eagle-Picher’s Chemical and Fibers Division. In addition, both sides have submitted copies of various letters and memoranda written by or to Eagle-Picher personnel with regard to asbestos. Finally, plaintiffs have submitted partial copies of several articles, found in Eagle-Picher’s Research Library, having to do with asbestos-related health hazards.

The parties differ, of course, in the conclusions they draw from this factual record. In addition, they differ somewhat with regard to the applicable legal standard. I shall discuss both the legal standard and its application to this record, but before reaching either issue, I must determine whether, under the applicable law, punitive damages are available in products liability actions.

I. Availability of Punitive Damages

It is undisputed that a Pennsylvania court would hold that the substantive law of New Jersey governs this action. New Jersey is the state of plaintiffs’ residence and the state in which Anthony Goncalves suffered both his exposure to asbestos and the resulting injuries. Amended Complaint Uj[ la, 8. Accordingly, it is the state which, under Pennsylvania choice of law rules, has the greatest interest in the outcome of this litigation. Kelly v. Johns-Manville Corp., 590 F.Supp. 1089, 1094-95 (E.D.Pa.1984).

There is some disagreement as to whether punitive damages are available in a New Jersey products liability action. Compare Gold v. Johns-Manville Sales Corp., 553 F.Supp. 482 (D.N.J.1982) (Ackerman, J.) (punitive damages unavailable in strict liability actions); Wolf v. Procter & Gamble Co., 555 F.Supp. 613, 618 & n. 1 (D.N.J.1982) (Fisher, C.J.) (same) with Gogol v. Johns-Manville Sales Corp., 595 F.Supp. 971, 975-76 (D.N.J.1984) (Gerry, J.) (punitive damages available in strict liability actions); Cinnaminson Township Board of Education v. U.S. Gypsum Co., 552 F.Supp. 855, 863 (D.N.J.1982) (Thompson, J.) (same). A recent decision of the Appellate Division of the New Jersey Superior Court, Fischer v. Johns-Manville Corp., 193 N.J.Super. 113, 472 A.2d 577, 581-87 (App.Div.) (same), certification granted, 97 N.J. 598, 483 A.2d 137 (1984). Holding that punitive damages can be had in a products liability case, is now pending before the New Jersey Supreme Court. My role is to predict what that court will rule. McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 661-63 (3d Cir.), cert. denied, 449 U.S. 976, 101 S.Ct. 387, 66 L.Ed.2d 237 (1980). See also Novosel v. Nationwide Ins. Co., 721 F.2d 894, 897 (3d Cir.1983); Becker v. Interstate Properties, 569 F.2d 1203, 1205-06 & nn. 5-8 (3d Cir.1977), cert. denied, 436 U.S. 906, 98 S.Ct. 2237, 56 L.Ed.2d 404 (1978).

In Gold v. Johns-Manville Sales Corp., 553 F.Supp. 482 (D.N.J.1982), Judge Ackerman predicted that New Jersey would not allow punitive damages in actions based purely on strict liability, because (1) punitive awards would artificially raise the price consumers pay for the affected goods, and (2) such awards are “concerned with [defendants’] normative behavior,” and would therefore confuse a jury charged according to strict liability principles. 553 F.Supp. at 484-85. Judge Fisher adopted this reasoning in Wolf v. Procter & Gamble Co., supra, 553 F.Supp. at 618 & n. 1. Both Gold and Wolf preserve plaintiffs’ right to present punitive damages claims in cases in which negligence as well as strict liability is alleged. Gold, supra, 552 F.Supp. at 485; Wolf, supra, 553 F.Supp. at 618. Under both decisions, however, punitive damages are unavailable in cases based solely on strict liability.

Plaintiffs in this case press both negligence and strict liability claims. Accordingly, even under Gold and Wolf, punitive damages are legally available on plaintiffs’ negligence claims, given sufficient proof of egregious conduct.

Gold and Wolf would not permit plaintiffs to assert punitive damages claims on their strict liability counts. However, two cases decided since Gold and Wolf have concluded that New Jersey law permits punitive awards even where liability is based solely on section 402A of the Second Restatement of Torts. In Fischer v. Johns-Manville Corp., supra, the case now under review in the New Jersey Supreme Court, the Appellate Division of the New Jersey Superior Court expressly considered the arguments advanced in Gold, and concluded that Gold misapprehended applicable New Jersey precedent. 472 A.2d at 583-84. The court went on to decide that punitive damages serve the same policy goals in products liability actions as in other kinds of tort cases:

With respect to the public policy considerations implicated in allowing punitive damages in products liability cases, we concur with the judicial consensus that if punitive damages are awarded only in egregious situations, the public interest, on balance, is better served by allowing such an award than by precluding it. As we have noted, the underlying purpose of punitive damages is both to punish the offender and to deter him and others from engaging in similar conduct. Both punishment and deterrence are appropriate responses to a supplier of defective goods who has knowledge of the high degree of risk of grave harm to which they will subject the public but who nevertheless makes the cynical, conscious business decision to place and keep them on the market. Were punitive damages to be withheld, those entrepreneurs who act with flagrant disregard of the public safety would be able to write off the public’s injury as a cost of doing business by the payment of compensatory damages, for which there is typically insurance coverage. One court has described this practice as the ‘coldblooded calculation’ that it is more profitable to pay claims than to cure the defect____ Thus, it is only the threat of punitive damages which can ultimately induce these entrepreneurs and others to act with a reasonable modicum of responsibility.

Id. at 584 (citations omitted). Fischer was decided in January 1984. Nine months later, in Gogol v. Johns-Manville Sales Corp., supra, Judge Gerry decided that, in light of Fischer, Judge Ackerman’s ruling in Gold incorrectly predicted how the New Jersey Supreme Court would rule on the issue. 595 F.Supp. at 975-76.

Like Judge Gerry, I find Fischer persuasive. As the Fischer court noted, the weight of authority in other jurisdictions is strongly in favor of allowing punitive awards in strict liability actions. Id. 472 A.2d at 582-83 (citing cases); Annot, 13 A.L.R.4th 52 (1982). A recent instance is the Third Circuit’s articulation of Virgin Islands law in Acosta v. Honda Motor Co., 717 F.2d 828 (3d Cir.1983), which took issue with Judge Ackerman’s conclusion in Gold, supra, that, as a general matter, products liability defendants would be able to “pass on” punitive damage awards to consumers. See id. at 835-36. I conclude that the New Jersey Supreme Court will determine that punitive damages are available in 402A cases according to the same standard applied in negligence cases. See also Neal v. Carey Canadian Mines, 548 F.Supp. 357, 375-78 (E.D.Pa.1982) (applying Pennsylvania law).

II. The Legal Standard for Punitive Damages Under New Jersey Law

The leading New Jersey case on the standard for awarding punitive damages is Berg v. Reaction Motors Division, 37 N.J. 396, 181 A.2d 487 (1962). In Berg, a government contractor caused structural damage to a number of houses in the course of testing rocket engines. (The damage to the houses was apparently caused by sound waves.) Plaintiff homeowners sued the contractor; at trial, plaintiffs were awarded a total of $25,605 in compensatory damages and $75,000 in punitive damages. 181 A.2d at 491-92. The New Jersey Supreme Court unanimously reversed the punitive award. The court noted that punitive damages are awarded to punish a defendant for “willful and wanton” conduct. By way of defining what is meant by “willful and wanton,” the court stated: “Our cases indicate that the requirement may be satisfied upon a showing that there has been a deliberate act or omission with knowledge of a high degree of probability of harm and reckless indifference to consequences.” Id. at 496 (citations omitted). The conduct of the contractor in Berg did not satisfy this standard, because the Contractor took steps to deal with the sound problems occasioned by its testing of rocket engines. Id. at 496-97.

The Berg standard — “knowledge of a high degree of probability of harm” coupled with “reckless indifference to consequences” — has been consistently cited and applied by New Jersey courts in'the twenty-three years since Berg was decided. See, e.g., Nappe v. Anschelewitz, Barr, Ansell & Bonello, 97 N.J. 37, 477 A.2d 1224,1230 (1984); DiGiovanni v. Pessel, 55 N.J. 188, 260 A.2d 510, 512 (1970); Fischer v. Johns-Manville Corp., 193 N.J.Super. 113, 472 A.2d 577, 581 (App.Div.1984); Stern v. Abramson, 150 N.J.Super. 571, 376 A.2d 221, 223 (Law Div.1977). In Fischer, supra, the New Jersey Superior Court applied this standard to a strict liability action against assorted sellers of asbestos products. After holding that punitive damages were compatible with strict liability, see 472 A.2d at 582-86, Fischer proceeded to affirm punitive awards against JohnsManville Corporation and Bell Asbestos Mines. Id. at 587-88. The court found ample justification for a finding that “both defendants, during the period of plaintiffs exposure, acted knowingly and deliberately in subjecting him as an asbestos worker to serious health hazards with utter disregard of his safety and well-being.” Id. at 587.

Plaintiffs argue that these eases require only a showing of reckless indifference to the potential hazards of one’s conduct in order to sustain a punitive award. The clear language of Berg says otherwise: “knowledge of a high degree of probability of harm and reckless indifference to consequences” are necessary to establish “willful and wanton” conduct. Berg, supra, 181 A.2d at 496 (emphasis added). Neither gross negligence nor recklessness suffices; rather, actual knowledge of the relevant risks must be shown. Thus, in Fischer, the court focused on evidence that the defendants were fully aware of the risk of asbestos-related disease as early as the 1930’s, long before warnings were placed on their products. Fischer, supra, 472 A.2d at 587-88. Conversely, the Berg court noted that the defendant in that case received favorable results from its testing of sound levels, suggesting that the defendant was unaware of the “high probability” that its actions would injure buildings in the area. Berg, supra, 181 A.2d at 496-97. The analysis in both opinions shows that proof of defendant’s knowledge is a prerequisite to a punitive award.

Accordingly, I find that, under New Jersey law, an award of punitive damages must be predicated on the twin findings of knowledge of the relevant risk of harm and reckless disregard for the consequences of incurring that risk. I turn now to the application of that standard to the record in this case.

III. Evaluation of the Evidence

In support of its motion, defendant has submitted the affidavit of Robert L. Bockstahler, former President and General Manager of defendant’s Chemical and Fibers Division. Mr. Bockstahler states that prior to 1964 (the year in which Eagle-Picher began placing warnings on its asbestos products), “the Company never received a warning from any of its medical or safety officers relating to potential hazards of asbestos-containing insulation products.” Mr. Bockstahler further states that (1) Eagle-Picher “was not involved in any studies or experiments relating to the possible hazards of asbestos,” (2) it did not receive such studies until after it ceased manufacturing asbestos products, and (3) no asbestos-related workers’ compensation claims were filed against it until 1981, some ten years after it had ceased manufacturing asbestos products.

Mr. Bockstahler’s affidavit, if uncontradicted, would suffice to carry defendant’s burden under Rule 56(c). Plaintiffs are therefore required to come forward with affidavits or other exhibits showing that a genuine issue of material fact exists with regard to the question whether defendant (1) had knowledge of a high probability of harm arising out of its asbestos production, and (2), given such knowledge, acted with reckless indifference to the consequences of its actions. Fed.R.Civ.P. 56(e).

By way of meeting that burden, plaintiffs have introduced the following items:

(1) a memorandum written in 1942 by H.W. Aber, then a salesman for EaglePicher, in which Aber mentions a “very informative article discussing the health risks related to asbestos”;

(2) a memorandum written in 1962 by J.P. Harrington, an Eagle-Picher employee, regarding the increased incidence of workers’ compensation claims against asbestos-producing companies;

(3) portions of the deposition of Herman L. Huelster, another Eagle-Picher employee, regarding the implementation of warnings on Eagle-Picher products after 1964;

(4) two interoffice memoranda by W.F. McCarthy regarding the type size to be used for the warnings;

(5) a 1965 letter from Paul Losse, another Eagle-Picher employee, to Sun Shipbuilding, an Eagle-Picher customer, in which Losse downplays the risks associated with asbestos products;

(6) a 1965 letter from Robert Alexander of Sun Shipbuilding asking Eagle-Picher for information regarding various product hazards;

(7) a 1968 letter from P.K. Maitra of Eagle-Picher to Shell Oil stating that Eagle-Picher products are not toxic; and

(8) portions of three medical publications found in Eagle-Picher’s Research Library which discuss in general terms some of the health risks posed by asbestos exposure.

Plaintiffs argue that these items are sufficient to support a punitive damages verdict. Defendant contends that they provide no evidence whatever of the requisite knowledge of asbestos-related health risks. I do not face this question unaided. Both parties have offered, in support of their respective positions, a number of recent decisions in which other judges ruled on similar motions by Eagle-Picher. Two of these decisions bear directly on this case, because they apply New Jersey law and because they appear to consider much the same evidence as is before me in this case.

In Konrad v. H.W. Porter Co., No. L28838-80, Slip Op. (N.J.Super.Ct. Law Div., Middlesex County April 27, 1984), the court analyzed the Aber memorandum and the medical article to which it refers. As the court recognized, the chief subject of the Aber memorandum was not asbestos, but mineral wool. The memorandum relates Aber’s discussion with a Mr. Wardlow of the Texas State Board of Health Laboratories regarding allegations by employers of Humble Oil & Refining Company (an Eagle-Picher customer) that mineral wool products were unsafe. In the fourth paragraph of the memorandum, Aber mentions that there is an article in Occupation and Health regarding asbestos. The memorandum then states, “If you think mineral wool’s dangerous, you should read this,” and explains how copies of the article might be obtained. The court in Konrad, after examining the article in question, concluded that the article discussed the risks of exposure to raw asbestos rather than finished products, and that the article’s authors predicted that low levels of dust concentration would prove safe. Slip op. at 8-9, 13. Finding that the article was insufficient to support a punitive damages verdict, the court dismissed the punitive damages claim against Eagle-Picher. Id. at 13.

In Herber v. Johns-Manville Corp., Civil Action No. 80-2081, Bench Op. (D.N.J. Nov. 8, 1984), Judge Barry reached a different conclusion. Judge Barry found, based on four of the eight items which plaintiffs have submitted in this case, that a jury could determine that the Berg-Fischer requirements for punitive awards were met. Bench op. at 7-9.

The Konrad and Herber decisions are not necessarily in conflict. Judge Barry considered a number of items not mentioned in Konrad\ one might reasonably infer that the cumulative effect of this additional evidence tipped the scales in plaintiff’s favor in Herber. Because my own evaluation of the evidence differs somewhat from Judge Barry’s, however, I proceed to consider the record before me afresh.

Plaintiffs’ evidence can conveniently be broken down chronologically. Three items — the Aber memorandum, the Harrington memorandum, and the medical publications found in Eagle-Picher’s research library — bear on what defendant knew about asbestos-related health risks prior to 1964, the year in which defendant began using warnings on its asbestos products. The rest of plaintiffs’ submissions concern defendant’s knowledge after 1964.

The chronological divide is an important one for purposes of assessing the viability of plaintiffs’ punitive damages claim. Defendant is liable for punitive damages based on its pre-1964 conduct if, given its knowledge of the relevant health risks, its silence as to those risks constituted reckless indifference to the possible ill effects of its products on Mr. Goncalves and others like him. Once defendant began, using warnings, the inquiry changes substantially: the question becomes whether the warnings were so inadequate as to constitute reckless indifference given defendant’s knowledge. As a practical matter, it is easier to satisfy Berg’s reckless indifference prong by defendant’s silence than by the use of an insufficient warning. Because of this difficulty, evidence of defendant’s knowledge after warnings are used ordinarily goes to the adequacy of the warnings and not to punitive damages. Gill v. Pacor, Inc., 24 Pa. D. & C.3d 659, 679 (Pa.Ct. Common Pleas, Phila. County 1982) (Takiff, J.) (applying Pennsylvania law). With this common-sense distinction in mind, I turn to the evidence of EaglePicher’s pre-1964 knowledge of the risk of asbestos-related disease.

Neither the Aber memorandum nor the Harrington memorandum suffices to create a fact issue regarding defendant’s knowledge. The Aber memorandum does not itself convey any information about asbestos, and there is no evidence that anyone besides Aber read the article to which he refers. Moreover, that article, as Konrad suggests, is at most a heavily qualified statement of the risks of asbestos. Defendant may well have been negligent to overlook such data, but no reasonable jury could find that it was recklessly indifferent within the meaning of Berg and Fischer. The Harrington memorandum is even less helpful to plaintiffs. That document, written in 1962, reviews the incidence of asbestos-related workers’ compensation claims. Harrington states that eighteen such claims have been filed nationwide, and calls this frequency a “fad.” None of the claims to which Harrington refers were filed against Eagle-Picher. The memorandum suggests not knowledge, but ignorance: Harrington concludes by noting that a producer association “is now compiling information on this problem,” and calls for the development of more data on the subject. In short, the Harrington memorandum may be evidence of Eagle-Picher’s negligence; it does not create a fact issue with regard to the company’s knowledge.

The other item of pre-1964 evidence is more substantial. Plaintiffs have introduced portions of three medical publications found in Eagle-Picher’s Research Library. Each of the publications was stamped received by the research library; the dates ranged from 1930 to 1953. The one-page excerpt of “The Chemistry of Industrial Toxicology” states, inter alia, that “[a]sbestos ... causes a fibrotic lung condition known as asbestosis, which resembles silicosis in many respects and can be almost as serious.” The excerpted portions of “Industrial Dust” discuss the pathology of asbestosis; there is no discussion of causes or acceptable and unacceptable exposure levels. The third publication, entitled “Occupational Medicine and Industrial Hygiene,” is excerpted at greater length, and contains some discussion of exposure levels. The important passage for our purposes reads:

One point of practical significance may be indicated by these observations; namely, that very finely ground asbestos is not dangerous. This conclusion has support in clinical observation, for it has long been known that at the Thetford Mills there was no clinical asbestosis even though in former years the atmosphere was very dusty and the dust was extremely fine. The fact that fabrication of fibres of the same mineral in American plants could produce disease was one of the puzzling features of this disease. But those experiments offer a plausible explanation. The fine dust in the mills is composed of serpentine and extremely short chrysotile fibres; that in the spinning and weaving mills contains many more long fibres.

R. Johnstone, Occupational Medicine and Industrial Hygiene 369, 372 (1948) (excerpted in Exhibit C to Plaintiffs’ Supplemental Brief in Opposition to Motion for Partial Summary Judgment).

The quoted passage, together with the rest of the excerpted materials, suggests (1) that exposure to certain types of asbestos fibers is dangerous, and (2) that exposure to “very finely ground asbestos” is not. Unfortunately, there is nothing in the record before me concerning the nature of Anthony Goncalves’ exposure to asbestos. Given the posture in which I consider the issue — a motion for partial summary judgment by the defendant — I must assume that Mr. Goncalves’ exposure was of the sort which the Johnstone book defines as dangerous.

The record is incomplete in another critical respect. There is nothing before me concerning the role defendant’s research library played in its operations, or the manner in which information such as this flowed from the library to the concerned divisions of the company. Accordingly, I must assume, for purposes of deciding the instant motion, that the information contained in the articles is fully chargeable to responsible Eagle-Picher officials.

Given my assumptions concerning the nature of plaintiff’s exposure and the scope of defendant’s knowledge of materials in its research library, I must conclude that there is an issue of material fact with regard to defendant’s knowledge of asbestos-related risks prior to 1964. Taking the most favorable view (for plaintiff) of the evidence before me, a jury could conclude that defendant had knowledge of the relevant risks. And if such knowledge were found, a jury could also reasonably find that the failure to warn users such as Mr. Goncalves exhibited reckless indifference to the potential consequences of their exposure to asbestos.

For these reasons, defendants’ motion for partial summary judgment will be denied insofar as it seeks dismissal of plaintiffs’ punitive damages claim. I need not consider the effect of the evidence regarding post-1964 knowledge.

      . In briefing and arguing Eagle-Picher’s motion, plaintiffs have treated the motion as solely directed to the punitive damages claim.

      . Argument was heard in Fischer on November 5, 1984. As of the date this Memorandum was filed, the Supreme Court had not rendered its decision.

      . For a more explicitly economic approach along the same lines, see Cooter, Economic Analysis of Punitive Damages, 56 So.Cal.L.Rev. 79 (1982).

      . Defendant has submitted a number of other recent decisions — all unpublished — in which courts granted motions similar to the one now before me but which, for various reasons, I find unhelpful. In Jarusewicz v. Johns-Manville Products Corp., No. L-3220-80 (N.J.Super.Ct. Law Div., Middlesex County Jan. 5, 1983), the court issued an Order unaccompanied by an opinion. Eagle-Picher has attached its own brief and letter memorandum in Jarusewicz to the court’s order; however, none of the opposing submissions in that case is attached. It is therefore impossible to tell what the court in Jarusewicz considered in making its ruling.
      Similarly, in Thomas v. Johns-Manville Sales Corp., No. 82-0793 (D.D.C. Oct. 21, 1983), the court adopted the report of the federal magistrate on the punitive damages issue, in which the magistrate stated that the Thomas plaintiffs failed to offer a single piece of evidence to support their punitive damages claim. Plaintiffs in this case have introduced a number of items to support their claim. See infra at 11-12.
      There was some significant discussion of the punitive damages issue in Moore v. Johns-Man-ville Corp., No. 942 (Pa.Ct. Common Pleas, Philadelphia County June 4, 1981), in which Judge Takiff, ruling from the bench, granted EaglePicher’s motion to dismiss the punitive damages claims against it. Plaintiffs argument in Moore, however, rested primarily on Eagle-Picher’s ignorance of the medical literature on asbestosis. Plaintiffs in this case rely not on Eagle-Picher’s ignorance but on its knowledge.
      Finally, in Oliver v. Johns-Manville, Nos. L-32410-80, L-013445-83 (N.J.Super.Ct. Law Div., Middlesex County Nov. 30, 1984), Judge Keefe expressly relied on his earlier decision in Konrad v. H.W. Porter, which I discuss in the text. Tr. at 35-36. There is no discussion in Oliver of any of the exhibits before me on Eagle-Picher’s motion.

      . Judge Keefe also considered portions of the Huelster deposition which are not before me in this case.

      . Items four, six, seven, and eight in the list, supra at 11-12, do not appear in the list of items Judge Barry considered in making her decision. Herber, supra, Bench op. at 8-9.

      . Plaintiffs deny that defendant used warnings on its packages after 1964, but offer no evidence to support their contention. The Bockstahler affidavit is therefore uncontradicted on this issue.


author: SPELLMAN, District Judge.

text:
    Irwin FREUND, Plaintiff, v. Gary R. GERSON and Neity Gerson as Trustees of Gary R. Gerson, C.P.A., P.A. Pension Trust, and Gary R. Gerson, C.P.A., P.A. Pension Trust, Defendants.
    No. 81-411-CIV-EPS.
    United States District Court, S.D. Florida, Miami Division.
    April 18, 1985.
    Ronald Gilbert, Miami, Fla., for plaintiff.
    James Kenny, Miami, Fla., for defendants.
   MEMORANDUM OPINION AND FINDINGS OF FACT AND CONCLUSIONS OF LAW

SPELLMAN, District Judge.

This action is brought under the Employee Retirement Income Security Act (“ERI-SA”), 29 U.S.C. §§ 1001-1381 (1975). Jurisdiction is predicated upon 29 U.S.C. § 1132. The Plaintiff, Irwin Freund, seeks “to recover benefits [allegedly] due to him ... under his [Pension] plan.” 29 U.S.C. § 1132(a)(1)(B). A non-jury trial was held on March 14, 1985 and on March 26, 1985 this Court heard the final arguments. The opinion which follows constitutes this Court’s findings of fact and conclusions of law.

I

Plaintiff was born on November 13,1948. From September 12, 1972 until April 28, 1978 Plaintiff was employed as a staff accountant by Gary R. Gerson, C.P.A., P.A. (now Gerson, Preston & Company, P.A.) in Broward County, Florida. Plaintiff was 29 years old when he left Gerson, Preston & Company, P.A.

The Defendants, Gary R. Gerson and Neity Gerson, are Trustees of the Defendant Gary R. Gerson, C.P.A., P.A. Penson Trust. Plaintiff was a beneficiary under the Pension Trust and on April 28, 1978 had a vested interest of $4,448.00, representing 30% of $14,827.00 in employer contributions. Plaintiff did not make any additional, voluntary contributions to the Pension Plan.

Lawrence Fisher, another accountant with Gerson, Preston & Company, P.A. also voluntarily terminated his employment on or about April 28,1978. Beginning in May, 1978, Plaintiff and Fisher, without the written consent of Gerson, Preston & Company, P.A., engaged in an accounting practice in Dade County, Florida under the firm name of Freund & Fisher. Freund & Fisher is in direct competition with Gerson, Preston & Company, P.A. and performs accounting services for, among others, clients for whom Gerson, Preston & Company, P.A. had been performing accounting services while Plaintiff was employed there.

The terms of the Pension Plan include Article XIX, which provides:

Notwithstanding any provisions contained herein to the contrary, in the event a Participant or a terminated Participant, without the written consent of the Employer, directly or indirectly, for himself, or on behalf of or as an employee of any other person, firm, association, or corporation, engages in or is employed by a business competitive with that of the Employer within eighteen (18) months after the termination of his employment with the Employer, the Participant’s or terminated Participant’s vested interest and benefits accumulated pursuant to the terms of the Plan shall be forfeited. However, the provisions of this Article shall not be applicable ... to voluntary contributions made by a Participant. This Article shall be applicable only until a Participant has completed ten (10) years of service with the Employer.

Plaintiff’s Exhibit 2, at page 57.

Although Plaintiff was not aware of this provision until after he left Gerson, Preston & Company, P.A., Plaintiff did receive a Summary Plan Description during his employment with Gerson, Preston & Company, P.A. The Summary Plan Description, however, under the section describing “CIRCUMSTANCES WHICH MAY RESULT IN DISQUALIFICATION, INELIGIBILITY, OR DENIAL, LOSS, FORFEITURE, OR SUSPENSION OF ANY BENEFITS,” erroneously advised that “[t]here are no circumstances which may cause a forfeiture of your vested benefits.” Plaintiff’s Exhibit 1, at page 5. Thus, because of this error in the Summary Plan Description, and because Plaintiff had no knowledge of the Non-Competition Agreement contained in Article XIX, Plaintiff contends that “Article XIX is void and the Plaintiff is entitled to his pension.” First Amended Complaint, paragraph 11, at page 3. This Court disagrees.

II

In order to insure that the participants and beneficiaries have full knowledge of all necessary information, ERISA requires that they be furnished with a Summary Plan Description. 29 U.S.C. § 1022(a)(1). This summary plan must contain certain information, including “circumstances which may result in disqualification, ineligibility, or denial or loss of benefits.” 29 U.S.C. § 1022(b). As previously stated, Plaintiff’s position is, in essence, that because of the error in the Summary Plan, Defendant is estopped to deny benefits on this basis.

Although ERISA specifically allows private actions for benefits, injunctions and other appropriate relief, including attorneys’ fees, 29 U.S.C. § 1132, this Court is of the opinion that a private action cannot lie for merely a “technical” breach of § 1022(b). Instead, this Court finds, and case law suggests, that in order to recover damages for the breach, Plaintiff must show some significant reliance upon, or possible prejudice flowing from the faulty Summary Plan description. See Govoni v. Bricklayers, Masons & Plasterers, 732 F.2d 250, 252 (1st Cir.1984) (citing cases). This Court, however, can find no such reliance or prejudice here.

Gary Gerson testified that Irwin Freund was a very valuable employee. Thus, in 1978, when Plaintiff gave notice that he was terminating his employment with Gerson, Preston & Company, P.A., and engaging in competitive practice with Lawrence Fisher, both Gary Gerson and Richard Preston attempted to change Plaintiff’s mind. In 1978, Plaintiff was earning approximately $35,000.00 per year from Gerson, Preston & Company, P.A. Plaintiff was offered a generous salary increase in return for his promise to stay. Over $50,000.00 per year was the offer. Plaintiff was also told that he would probably be made a partner in the firm within one year. Additionally, Plaintiff, who resided in Dade County but commuted to Broward County to work, was offered the opportunity of managing a new satellite office Gerson, Preston & Company, P.A. promised to open nearer to Plaintiff’s home.

During these negotiations, the Gary R. Gerson, C.P.A., P.A. Pension Trust was also mentioned. Plaintiff, for the first time, was informed of the forfeiture provision contained in Article XIX and that because of this provision, he could lose his $4,448.00 in accrued benefits. Nonetheless, in light of the threat of Article XIX and despite the generous promises made by Gerson, Preston & Company, P.A., Plaintiff still chose to leave. Gary Gerson testified that “it was obvious that Irwin Freund had already made up his mind at that time.”

This Court agrees with Mr. Gerson’s assessment. In fact, this Court believes that Plaintiff had his mind “made up” for some time. Plaintiff schemingly engineered his exodus from Gerson, Preston & Company, P.A.; he took with him not only a co-worker, Lawrence Fisher but many of the firm’s clients and contacts. And in that the $15,-000.00 a year salary increase, the possibility of partnership in the firm, and the other generous promises could not dissuade Plaintiff from opening up Freund & Fisher, this Court finds as a matter of law that knowledge of the forfeiture provision would have likewise made no difference.

Plaintiff did not rely on the faulty description in the Summary Plan in terminating his employment. Plaintiff terminated his employment with Gerson, Preston & Company, P.A. because of his high hopes for Freund & Fisher. Had he known of the forfeiture provision, this Court cannot believe that he would have acted any differently. If the lost promises made by Ger-son, Preston & Company, P.A. did not make Plaintiff stay, the $4,448.00 in lost benefits certainly would not. Thus, in this case, knowledge of the forfeiture provision is irrelevant and for this reason Plaintiff should not be able to recover claiming he was unaware of the provision. Quite simply, Plaintiff has not demonstrated how he was prejudiced by the misinformation.

Ill

The forfeiture provision is valid, see 29 U.S.C. § 1053(a)(2)(A); Hepple v. Dybdahl, 622 F.2d 962 (8th Cir.1980), and because it controls over the conflicting provision in the Summary Plan Description, this Court concludes that Plaintiff’s benefits forfeited to the Defendant Gary R. Gerson, C.P.A., P.A. Pension Trust when Plaintiff, without written consent, opened a competing firm. Thus, even though the Summary Plan is technically in error and violates 29 U.S.C. § 1022(b), see Pompano v. Michael Schiavone & Sons, Inc., 680 F.2d 911 (2nd Cir.1982) (cited by Plaintiff in closing arguments), and even though Plaintiff was unaware of the forfeiture provision in the Pension Trust before he decided to leave Gerson, Preston & Company, P.A., this Court is of the opinion that Plaintiff has no cause of action. Because Plaintiff has not demonstrated that knowledge of the forfeiture provision would have altered his course of action, his lack of knowledge should not preclude the application of Article XIX. Plaintiff was not damaged by the error in the Summary Plan. Therefore Plaintiff can not recover his pension benefits.

Defendants shall, within ten (10) days from the date of these .Findings of Fact and Conclusions of Law, submit to this Court a Final Judgment in accordance with this same.

      . There is a conflict in the testimony in this case. Plaintiff testified that he had on many occasions asked for a copy of the Plan but was never given a copy. Gary Gerson testified that it was company practice to provide a copy of the Plan to anyone who requested a copy. This Court chooses to credit Gary Gerson’s explanation and finds that Plaintiff did not ask for a copy of the Plan. Had Plaintiff requested a copy, one would have been provided.

      . 29 U.S.C. § 1022 provides in relevant part: (a)(1) A summary plan description of any employee benefit plan shall be furnished to participants and beneficiaries as provided in section 1024(b) of this title. The summary plan description shall include the information described in subsection (b) of this section, shall be written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan____
      ******
      (b) The plan description and summary plan description shall contain the following information: ... circumstances which may result in disqualification, ineligibility, or denial or loss of benefits; ...

      . See also Anthony v. Ryder Truck Lines, Inc., 611 F.2d 944, 947 (3rd Cir.1979) (no recovery "[a]bsent proof of an estoppel”); Zittrouer v. Uarco Incorporated Group Benefit Plan, 582 F.Supp. 1471, 1475 (N.D.Ga.1984) (Plaintiff must show (1) an intentional deception through concealment or inaction, or gross negligence amounting to constructive fraud; (2) justifiable reliance; and (3) damages).

      . The Summary Plan notes that "[i]f any information included in this summary plan description is in conflict with the trust agreement, the provisions of the trust agreement are controlling.” Plaintiff's Exhibit 1, at page 6.
      There is thus no question that the trust agreement controls. The cases are legion that an outline describing a pension plan may not be effective in overriding the terms of the Plan where the summary expressly states that it is only a brief description of the Plan and the terms of the Plan are governed entirely by the Plan. See Matter of The Eli Witt Co., 20 B.R. 778, 781 (Bankr.M.D.Fla.1982).


author: KEVIN THOMAS DUFFY, District Judge:

text:
    525 FULTON STREET HOLDING CORP., Plaintiff, v. MISSION NATIONAL INSURANCE COMPANY, Defendant.
    No. 83 Civ. 8229 (KTD).
    United States District Court, S.D. New York.
    April 26, 1985.

      Gerard I. Castelli, Tuckahoe, N.Y., for plaintiff.
    White, Fleischner & Fino, New York City, for defendant; Eric B. Schoenfeld, New York City, of counsel.
   KEVIN THOMAS DUFFY, District Judge:

From April 11, 1981 through September 23, 1982 — a span of seventeen months— Victor, Steven, and Charles Chera filed for nine insurance losses on which they collected nearly two million dollars. At least three of these claims stemmed from water damage caused by allegedly faulty plumbing at various premises they owned. The present case arises from the tenth insurance claim filed by the Cheras in recent months, and at least the fourth resulting from allegedly faulty plumbing.

525 Fulton Street Holding Corporation, the plaintiff, is owned by Victor, Steven, and Charles Chera. This case arose from an insurance contract dispute revolving around an alleged loss — caused by flooding — at plaintiffs premises, 525 Fulton Street, Brooklyn, New York on March 6, 1983 for which plaintiff seeks more than $600,000 in insurance proceeds. The insurer, Mission Insurance Company, began its routine inquiry into the case of this flood by sending an independent investigator to the premises. His report shed serious doubt on the validity of the insured’s claim and concluded that the loss may not have been caused by an accident. A follow-up investigation concluded that the fracture of the water valve stem in question was caused by deliberate impacting blows.

In light of these reports, Mission continued its investigation and sought, thru interrogatories, to acquire information about the plaintiff’s affiliates, specifically, any prior insurance losses they had claimed. This line of inquiry was understandable and justified; Mission wanted to ascertain whether the Chera brothers had a pattern of filing false insurance claims on other premises they owned. This historical information was clearly relevant to the most recent claim, particularly in light of the initial reports filed by two independent investigators which pointed to the possibility of foul play.

Over two years have elapsed since the claim was recorded, and the Cheras have still not supplied Mission with the requested information. This non-cooperation by the Cheras has continued despite a ruling by Magistrate Michael Dolinger on April 9, 1984 that this information was relevant to Mission’s investigation, and that “plaintiff’s resistance to answering the interrogatory is fundamentally misconceived.” Following this ruling, on May 24, 1984, the Cheras submitted a supplementary answer to the relevant interrogatory which listed the affiliates, their insurance carriers and dates of policies, and the loss history of these corporations. Four out of the eight prior losses listed by the plaintiff in this supplementary answer contain incorrect policy numbers. In addition to this, Mission has allegedly discovered another loss that was not mentioned by the Cheras in their supplementary answer.

The insurance policy governing this dispute contains a “cooperation clause” which provides that the insured, “as often as may be reasonably required, shall ... submit to examination under oath.” In Hudson Tire Mart, Inc. v. Aetna Cas. & Sur. Co., 518 F.2d 671, 674 (2d Cir.1975), the court observed that the purpose of the cooperation clause “is to enable the insurer to obtain all knowledge and facts concerning the cause of the ... loss ... to protect itself from fraudulent and false claims.” Id. at 674. Although the New York Court of Appeals has held that “a breach which will defeat a recovery cannot be based upon technical or unimportant omissions or defects in the performance by either party,” Porter v. Traders’ Ins. Co., 164 N.Y. 504, 509, 58 N.E. 641, 642-43 (1900), a “willful and fraudulent withholding of information” will defeat recovery. Happy Hank Auction Co. v. American Eage Fire Insurance Co., 1 N.Y.2d 534, 539, 154 N.Y.S.2d 870, 873, 136 N.E.2d 842, 845 (1956).

Mission has waited for over two years for this information relating to the Cheras’ prior claims. Plaintiff’s delay is inexcusable. Furthermore, in response to Magistrate Dolinger’s ruling issued over one year ago ordering disclosure of this information, the Cheras provided Mission with false and misleading data. Since then, they have made no effort to correct this misinformation.

The plaintiff does not contest that the information it provided in response to Magistrate Dolinger’s ruling was incorrect and misleading; rather, plaintiff contends that this court should not grant summary judgment on Mission’s motion because, in contrast with prior cases where summary judgment was granted, the Cheras have “not been warned several times that their failure to furnish the information and documents might void their rights under the policy.” I conclude, however, that it is not necessary in all cases for insureds to be warned several times that a failure to comply with the terms of their contract will void the policy. In light of their recent experiences, the Cheras are most probably well versed in insurance law. Furthermore, the Cheras may not claim they were not on notice that this information was relevant or that failure to provide it constituted a breach of the contract. Magistrate Dolinger’s ruling informed them of this over one year ago. Finally, the Cheras false responses in their supplemental answers following the Magistrate’s order cannot be classified as “technical or unimportant omissions or defects.” Porter, 164 N.Y. at 509, 58 N.E. 641. Rather, the answers constituted a “willful and fraudulent withholding of information.” Happy Hank Auction Co., 1 N.Y.2d at 539, 154 N.Y.S.2d 870, 136 N.E.2d 842.

Accordingly, defendant’s motion is granted and plaintiff’s complaint is dismissed.

SO ORDERED.


author: MOTLEY, Chief Judge.

text:
    UNITED STATES of America, v. Juan Jose QUINNONES, a/k/a “Papo”, et al., Defendants.
    No. 85 Cr. 625.
    United States District Court, S.D. New York.
    April 30, 1985.
    Rudolph W. Giuliani, U.S. Atty. by Stephen F. Markstein, New York City, for the U.S.

      Lawrence Farkash, New York City, for defendant Maria Torres.
   MEMORANDUM OPINION AND ORDER

MOTLEY, Chief Judge.

Defendant Maria Torres is charged with conspiring to violate the federal narcotics law, 21 U.S.C. sections 812, 841(a)(1), 841(b)(1)(A) as before amendment on October 12, 1984, and 21 U.S.C. section 812, 841(a)(1), 841(b)(1)(A)® & (ii), and 841(b)(1)(B), as amended on October 12, 1984. She is one of nineteen codefendants alleged to have conspired to distribute Schedule I and Schedule II narcotic controlled substances, to wit, heroin and cocaine. On March 7,1985, following defendant’s arrest, a detention hearing was held in Camden, New Jersey before the Honorable Jerome B. Simandle, United States Magistrate for the District of New Jersey. Magistrate Simandle ordered that the defendant be detained but did not issue a written detention order required under the recently enacted Bail Reform Act, 18 U.S.C. section 3142®. Although the transcript of the hearing indicates that he originally intended to issue such an order, the Assistant United States Attorney in Camden handed Magistrate Simandle a removal order at the end of the hearing and apparently confused him as to the need for a detention order.

On April 9, 1985, a hearing to review the Magistrate’s determination to detain defendant was held before this court. At that time it was learned for the first time that no written order of detention had been issued. Accordingly, a hearing was held the next day at which time this court determined those conditions which would insure that defendant would not flee and would not pose a danger to the community. A written release order, dated April 10, 1985, then was issued and defendant Torres was released. The determination of this court to release defendant Maria Torres was based on the following reasons.

DISCUSSION

18 U.S.C. section 3142® provides in relevant part:

CONTENTS OF DETENTION ORDER. —In a detention order issued pursuant to the provisions of subsection (e), the judicial officer shall—
(1) include written findings of fact and a written statement of the reasons for the detention;
(2) direct that the person be committed to the custody of the Attorney General for confinement in a corrections facility separate, to the extent practicable, from persons awaiting or serving sentences or being held in custody pending appeal;
(3) direct that the person be afforded reasonable opportunity for private consultation with his counsel; and
(4) direct that, on order of a court of the United States or on request of an attorney for the Government, the person in charge of the corrections facility in which the person is confined deliver the person to a United States marshal for the purpose of an appearance in connection with a court proceeding.

See also Hse.Rpt. No. 98-1030, Appropriations Committee, Continuing Appropriations, 1985 — Comprehensive Crime Control Act of 1984, September 17, 1984, p. 28, U.S.Code Cong. & Admin.News 1984, p. 3182.

It is a fundamental principle of statutory interpretation that if the statutory language is clear and unambiguous, the court is not permitted to adopt an interpretation different from that directed by the language. See, e.g., Rubin v. United States, 449 U.S. 424, 430, 101 S.Ct. 698, 701, 66 L.Ed.2d 633 (1981); United States v. Holroyd, 732 F.2d 1122, 1125 (2d Cir. 1984). As the Supreme Court has noted: [w]here the language is plain and admits no more than one meaning, the duty of interpretation does not arise, and the rules which are to aid doubtful meanings need no discussion.” Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 194, 61 L.Ed. 442 (1916). The provision of the Bail Reform Act in issue is unambiguous in its terms and the procedural safeguards incorporated into the Act must be strictly applied. United States v. Payden, 759 F.2d 202, 204-05 (2d Cir.1985). Accordingly, pursuant to the express language of the statute, a written detention order containing the information enumerated above must be issued whenever a defendant, after a detention hearing, is ordered to be detained prior to trial and deprived of his or her liberty during the period of time in which the presumption of innocence is extremely important.

Because the statutory requirements were not complied with in this instance, this court was compelled to order the release of defendant Torres on a combination of conditions which would ensure her appearance at court hearings and protect the safety of other persons and the community. This result was necessitated because the procedural requirements of the Bail Reform Act cannot be applied imprecisely. Id., at 205. Whenever a defendant is ordered detained prior to trial and thus deprived of his liberty interest, the Bail Act mandates that a written detention order, containing certain specified information be issued.

SO ORDERED.


text:
    Fred M. BROWN, Plaintiff, v. E.F. HUTTON & CO., INC., Defendant.
    No. 80-1400-CIV-SPELLMAN.
    United States District Court, S.D. Florida, Miami Division.
    April 30, 1985.

      Lewis N. Brown, Miami, Fla., for plaintiff.
    Gill S. Freeman, Miami, Fla., for defendant.
   MEMORANDUM OPINION AND ORDER COMPELLING ARBITRATION ON COUNTS II, III, IV AND V OF PLAINTIFF’S AMENDED COMPLAINT

SPELLMAN, District Judge.

THIS CAUSE came before the Court on the Defendant’s Motion and Application for Order Compelling Arbitration and Staying Arbitration Pending Litigation of Plaintiff’s Securities Claims. For the following reasons the Court finds that Counts II, III, IV, and V of Plaintiff’s Second Amended Complaint should be submitted to arbitration forthwith.

I.

When Plaintiff, Fred M. Brown, opened a brokerage account with the Defendant, E.F. Hutton, he signed a customer agreement providing that he would arbitrate any controversy arising out of or related to his account with E.F. Hutton. There is no question that the customer agreement evidences a transaction involving commerce and therefore comes within the ambit of the Federal Arbitration Act, 9 U.S.C. § 2 (1976).

Plaintiff filed a five count complaint against the Defendant in connection with his account alleging one federal securities claim (Count I) and multiple Florida statutory and common law claims (Counts II through IV). In accordance with the customer agreement and the Federal Arbitration Act, Hutton moved this Court for an Order compelling arbitration on the state law claims. Because Hutton assumed that under Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953) the federal claim for violation of Section 10(b) of the Securities Exchange Act of 1934 was not subject to the arbitration provision of the contract and could only be resolved in a federal forum, it did not move to compel arbitration on that count.

Plaintiff opposes arbitration of the state claims. His primary argument is that the Defendant has waived arbitration because it did not request arbitration until after the Plaintiff filed a Second Amended Complaint, nearly four years after the initiation of this lawsuit. A review of the procedural history of this case, however, demonstrates that Defendant’s demand for arbitration was not untimely. Moreover, evén if Defendant should have moved to enforce the arbitration provision of the contract earlier, a default or a waiver has not occurred because the Plaintiff cannot point to any prejudice by the delay.

II.

The Plaintiff filed his original complaint against Hutton in June of 1980. Plaintiff alleged that Hutton through its agent Philip Pauze, recommended to Plaintiff that he sell short 1,000 shares of Resorts International stock. Plaintiff claimed that the financial damage caused therefrom was directly attributable to the Defendant. The original complaint did not allege, nor seek recovery for any transactions other than the Resorts International trade.

On June 24, 1983, an hour before the Plaintiff’s scheduled deposition, Plaintiff agreed to a settlement. Thereafter, Plaintiff claimed that he did not understand the import of his agreement to settle and sought to set aside his agreement. This Court declined to enforce the settlement agreement and permitted Plaintiff to file a Second Amended Complaint.

This new complaint has significantly broadened the focus of the litigation in that Plaintiff now alleges that damage occurred with respect to the entire course of dealings between the parties — not simply one transaction. Whereas the original complaint alleged that the damages suffered by the Plaintiff totalled some $50,000 as a result of one “unsuitable” transaction, the Second Amended Complaint alleges that mismanagement of the entire account resulted in damages of $150,000.

An amended complaint under the Federal Rules supercedes the original complaint. See Fritz v. Standard Security Life Ins. Co. of New York, 676 F.2d 1356, 1358 (11th Cir.1982); Wright & Miller, Federal Practice and Procedure, § 1476, at 389-90. And when a plaintiff files an amended complaint which changes the theory or scope of the case, the Defendant is allowed to plead anew as though it were the original complaint filed by the Plaintiff. See Joseph Bancroft & Sons Co. v. M. Lowenstein & Sons Co., 50 F.R.D. 415 (D.Del.1970) (defendant permitted to file new counterclaim in response to amended complaint); Archie and Allan Spiers, Inc. v. United States, 296 F.2d 757, 766 (Ct.Cl. 1961) (“when the plaintiff amended, changing its theory, it was well within defendant’s rights to file a new or amended answer changing its defense”).

This Court finds that under the circumstances present here, the Defendant is entitled to a “fresh start” in answering Plaintiff’s amended complaint. Indeed, it would be inequitable to entertain the Plaintiff’s Second Amended Complaint without permitting the defendant to completely plead anew. If the Plaintiff had not been able to have his claims relate back to the date of the original pleading, the claims would have been time-barred. Accordingly, the Defendant should also be permitted, notwithstanding passage of time, to respond as if the second amended complaint were the original complaint and to invoke its contract right to arbitrate the state claims. As the Bancroft court noted:

Since the amended pleader chooses to redo his original work, and receives the benefit of this nunc pro tunc treatment, he can hardly be heard to complain that claims filed against him are improper because they should have been asserted in response to his original pleading.

50 F.R.D. at 419.

Because the Second Amended Complaint here greatly expands the factual allegations the Plaintiff has made against the Defendant, this case is readily distinguishable from Weight Watchers of Quebec, Ltd v. Weight Watchers International, Inc., 398 F.Supp. 1057 (E.D.N.Y.1975) cited by the Plaintiffs. In Weight Watchers, the defendant, franchisor, moved for arbitration of a dispute with its franchisee after the franchisee filed an amended complaint. The defendant’s motion for summary judgment on the merits had been denied prior to the filing of the amended complaint. The court found that under the circumstances, the defendant had waived arbitration and that the filing of an amended complaint did not materially alter the situation. But unlike the Second Amended Complaint in this case, the amended complaint filed by the plaintiff in Weight Watchers did not add any new allegations — the amended complaint only “restate[d], in ... a clearer and more orderly fashion, the claims arising out of the matters already pleaded and dealt with in the summary judgment motion.” Id. at 1060.

But even if the Defendant should have made his demand earlier, delay alone does not constitute a default or a waiver of a valid arbitration clause. Since there is a strong federal policy favoring arbitration, “any party arguing waiver of arbitration bears a heavy burden of proof.” Belke v. Merrill Lynch, Pierce, Fenner & Smith, 693 F.2d 1023, 1025 (11th Cir.1982) (and cases cited therein). A party opposing arbitration must also demonstrate that he had been prejudiced by the delay. See Gavlick Construction Co. v. H.F. Campbell Co., 526 F.2d 777, 783 (3rd Cir.1975); Carcich v. Rederi A/B Nordie, 389 F.2d 692, 696 (2nd Cir.1968). This Plaintiff has failed to do.

The pretrial discovery conducted in this case cannot have prejudiced the Plaintiff in that the discovery does not appear to have been extensive. The record indicates that since the institution of this litigation there has only been one deposition taken and it was noticed by the Plaintiff. While the Defendant propounded interrogatories and has served a production request, the discovery has been limited to the issues of the Resorts International trade. There has been no discovery of the alleged wrongdoings set forth in the second amended complaint with the exception of the aforesaid trade.

In Mitsui & Co. Inc. v. C & H Refinery, Inc., 492 F.Supp. 115 (N.D.Cal.1980) the district court upheld one party’s right to arbitrate claims notwithstanding discovery initiated by both parties. The court opined: “If the discovery record is sparse, an objecting party must show specifically how its case has been impaired. Absent such a showing, the strong policy favoring arbitration controls.” Id. at 120. Since the Plaintiff here has not made a specific showing of prejudice, the Defendant is entitled to invoke its contract right.

III.

Plaintiff’s second argument against arbitration was based upon the Eleventh Circuit doctrine of “intertwining” — a doctrine that was recently rejected by the Supreme Court in Dean Witter, Reynolds v. Byrd, 470 U.S. -, 105 S.Ct. 1238, 84 L.Ed.2d 158 (March 4, 1985). In that case, the Supreme Court found that a District Court is required to compel arbitration under the Federal Arbitration Act “even where the result would be the possibly inefficient maintenance of separate proceedings in different forums.” According to the Court:

By its terms, the Act leaves no place for the exercise of discretion by the District Court, but instead mandates that District Courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.

The Court also made it clear that staying arbitration until after the federal claims have been litigated was inappropriate. Id. at -, 105 S.Ct. at 1241. Arbitrable claims should be submitted to arbitration without regard to the status of the claims to be litigated in court.

IV.

Plaintiff’s final argument against arbitration is that under Florida law the Florida Securities claims cannot be submitted to arbitration. The case relied upon for this proposition, Oppenheimer v. Young, 456 So.2d 1175 (Fla.1984) was recently vacated by the Supreme Court in light of Byrd, 53 U.S.L.W. 3686 (March 26, 1985). But regardless of the Florida court’s decision, it is plain that a federal court must apply the Federal Arbitration Act even when it pertains to state causes of action.

When Congress enacted the Federal Arbitration Act it “declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the partiews agreed to resolve by arbitration.” Southland Corp. v. Keating, 465 U.S. 1,-, 104 S.Ct. 852, 858, 79 L.Ed.2d 1 (1984). The “federal substantive law” created by the Act is applicable in both state and federal courts. Because the customer agreement here contains a valid arbitration clause and evidences á transaction involving commerce, the Federal Arbitration Act applies. The state law claims must be submitted to arbitration.

      . Count I alleges HUTTON’s violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240-10b-5. Counts II, III, IV and V allege fraudulent misrepresentation, violations of Section 517.211 and 517.301, Florida Statutes, and breach of fiduciary duty, respectively.


author: PHILIP PRATT, District Judge.

text:
    Thomas F. LITKA, Plaintiff, v. UNIVERSITY OF DETROIT DENTAL SCHOOL, Defendant.
    No. 82-70106.
    United States District Court, E.D. Michigan, S.D.
    May 2, 1985.

      Jack F. Pitonyak, Troy, Mich., for plaintiff.
    Frederick J. Ambrose, Bloomfield Hills, Mich., for defendant.
   MEMORANDUM OPINION AND ORDER DENYING DEFENDANT’S MOTION FOR RECONSIDERATION

PHILIP PRATT, District Judge.

Before the Court is defendant University of Detroit Dental School’s Motion for Rehearing the Court’s sua sponte order remanding this case to state court. For the reasons stated below this motion is denied.

Plaintiff commenced this action in Wayne County Circuit Court alleging various state and federal claims. Defendant properly removed the action to this Court based upon these federal claims. The graveman of plaintiff’s complaint is that defendant wrongfully prevented and deprived plaintiff a degree in dentistry. Counts I-IV and VII of his complaint are Michigan state law claims based upon an alleged breach of common law, statutory, and contractual obligations. Counts V and VI asserted claims based upon the due process and equal protection clauses of both the State and Federal Constitutions.

In March of 1984, plaintiff moved to remand this case to state court. The Court denied the motion because of the presence of the federal questions in the complaint. In October of 1984, this Court conducted a hearing on the defendant’s motion for summary judgment. At the hearing the Court ruled that plaintiff’s constitutional claims must be dismissed due to the absence of “state action.” Since only plaintiff’s state claims remained before the Court and since those claims presented unsettled questions of state law, the Court was constrained to remand the case to state court pursuant to United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), Rosado v. Wyman, 397 U.S. 397, 90 S.Ct. 1207, 25 L.Ed.2d 442 (1970), Financial General Bankshares, Inc. v. Metzger, 680 F.2d 768 (D.C.Cir. 1982); and J.P. v. DeSanti, 653 F.2d 1080, 1086 (6th Cir.1981). Defendant then filed this “Motion for Rehearing.”

Presumably, defendant brings this motion pursuant to Rule 17 k of the Local Rules of this district which governs motions for rehearing and reconsideration. Rule 17 k provides in pertinent part:

Generally, and without restricting the discretion of the Court, motions for rehearing or reconsideration which merely present the same issues ruled upon by the Court, either expressly or by reasonable implication, will not be granted. The movant must not only demonstrate a palpable defect by which the Court and parties have been misled but also show that a different disposition of the case must result from a correction thereof.

Defendant contends that the “palpable defect” of the Court’s order to remand is as follows:

In [remanding the case], the Court may have inadvertently overlooked Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 96 S.Ct. 584, 46 L.Ed.2d 542 ... (1976). There, the U.S. Supreme Court held that the only basis for a remand was the statutory criteria of 28 U.S.C. 1447(c), namely a case could not be remanded if it appears that the case was removed improvidently and without jurisdiction. The U.S. Supreme Court held the District Judge was not permitted to remand that case to the state courts based upon a consideration of a more speedy trial, as such a consideration was outside the scope of the remand statute [sic].

Defendant’s Brief at page 2. Presumably defendant contends that if removal is originally proper, district courts cannot remand a case no matter what later developments change the circumstances of the case. In essence defendant is arguing that under 28 U.S.C. § 1447(c) and the Thermtron Products court’s interpretation of that enactment, if removal was proper in the first instance than the district court cannot remand the case no matter what later developments occur. Defendant’s argument demonstrates a complete misunderstanding of the holding in Thermtron Products, the doctrine of pendent jurisdiction, and the almost two-hundred year history of federal court jurisdiction.

First, the Supreme Court did not rule in Thermtron Products that if removal was initially proper that the district court lacked authority to remand no matter the circumstances. In Thermtron Products, the case was removed to federal court based upon diversity of citizenship. Although acknowledging that the removal was proper, the district court remanded the case to state court, solely on the ground that his heavy docket would unjustly delay the plaintiffs from going to trial on the merits. The Supreme Court ruled that the court’s heavy docket was not a reason which warranted remand under § 1447(c). The Court held that the district courts can only remand cases if: (i) removal was improvident; or (ii) the court lacks jurisdiction. 423 U.S. at 343-44, 96 S.Ct. at 589-90. 13B C. Wright & A. Miller, Federal Practice & Procedure § 3739, at 336-37.

The defendant’s argument ignores this latter consideration, the proper jurisdiction of the court. Defendant’s understanding of Thermtron Products would mean that federal courts could not dismiss or remand cases even when developments in the proceeding left the Court without subject matter jurisdiction. Clearly this was not the intent of Congress in enacting § 1447 or the Supreme Court’s interpretation of that enactment. Various congressional statutes and rules as well as Supreme Court doctrines have authorized and even required federal courts to question and be certain of the subject matter jurisdiction throughout the pendency of the proceeding. See e.g., 28 U.S.C. §§ 1331 and 1332; Fed.R.Civ.Proc., Rule 12(b) & (h)(8); Sumner v. Mata, 449 U.S. 539, 101 S.Ct. 764, 66 L.Ed.2d 722 (1981); Sosna v. Iowa, 419 U.S. 393, 95 S.Ct. 553, 42 L.Ed.2d 532 (1975); American Fire & Casuality v. Finn, 341 U.S. 6, 71 S.Ct. 534, 95 L.Ed. 702 (1951); Mitchell v. Maurer, 293 U.S. 237, 55 S.Ct. 162, 79 L.Ed. 338 (1934); 13 C. Wright & A. Miller, Federal Practice & Procedure § 3522. There is no authority which interprets § 1447(c) or Thermtron Products to mean that if removal was initially proper that the court can no longer consider the propriety of its subject matter jurisdiction. Moreover, the constitutionality of such an interpretation is doubtful. See e.g., 13 C. Wright & A. Miller, Federal Practice & Procedure, § 3522.

Furthermore, the defendant’s argument misapplies the doctrine of pendent jurisdiction. Defendant’s contention would make pendent jurisdiction a matter of right and would bind the district court to hear state claims long after the federal claims had been dismissed. Clearly the doctrine of pendent jurisdiction has not been interpreted or applied in this fashion.

A federal court’s exercise of pendent jurisdiction is a matter of discretion. The scope of the Court’s discretion is limited by considerations of the jurisdiction authorized by Article III and the doctrine of comity. In United Mine Workers of America v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966), the Supreme Court both recognized the discretionary nature of this doctrine and addressed the scope of this discretion. The Court remarked as to the discretion of federal courts:

Pendent jurisdiction, in the sense of judicial power, exists whenever there is claim ‘arising under the Constitution, the Laws of the United States, and Treaties made or which shall be made, under their Authority ...,’ U.S. Const., Art. Ill, § 2, and the relationship between the claim and the state claim permits the conclusion that the entire action before the court comprises but one constitutional ‘case.’ The federal claim must have substance sufficient to confer subject matter jurisdiction on the court____ The state and federal claims must derive from a common nucleus of operative fact. But if, considered without regard to their federal or state character, plaintiff’s claims are such that he would ordinarily be expected to try them in one judicial proceeding, then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole.

Id. at 725, 86 S.Ct. at 1138 (emphasis in original). The discretionary nature of pendent jurisdiction has been uniformly recognized by the Circuit Courts, particularly the Sixth Circuit. E.g., Lee v. Western Reserve Psychiatric Habilitation Center, 747 F.2d 1062, 1069 (6th Cir.1984) (“A district court, in its discretion, can decline to hear pendent state claims when all federal claims have been dismissed prior to trial.”); J.P. v. DeSanti, 653 F.2d 1080, 1086 (6th Cir. 1981).

The Gibbs court went on to define the scope of this power:

The power need not be exercised in every case in which it is found to exist. It has consistently been recognized that pendent jurisdiction is a doctrine of discretion, not of plaintiff’s right. Its justification lies in consideration of judicial economy, convenience and fairness to litigants; if these are not present a federal court should hesitate to exercise jurisdiction over state claims____ Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law. Certainly, if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well.

383 U.S. at 726, 86 S.Ct. at 1139. Based upon this reasoning of the Gibbs court, federal courts have dismissed pendent state claims when the federal claims have been dismissed prior to trial because the state proceedings would not require a wasteful duplication of effort, and a state court will provide a more accurate, authoritative determination of the applicable law. E.g., Financial General Bankshares, Inc. v. Metzger, supra; J.P. v. DeSanti, supra; Wham-O-Mfg. Co. v. Paradise Manufacturing Co., 327 F.2d 748 (9th Cir.1964) (cited with approval in Gibbs). It was these considerations raised by the Gibbs court as well as the rulings in two Circuit Court cases, Financial General Bank-shares, Inc. v. Metzger, supra and J.P. v. DeSanti, supra, which guided this Court’s discretion to decline to exercise pendent jurisdiction.

In DeSanti, plaintiffs were a class of juveniles who had appeared in the past or may appear in the future before the Juvenile Court of Cuyahoga County, Ohio, on complaints of delinquency, unruliness, neglect, dependency and abuse. On both federal and state grounds plaintiffs challenged the juvenile court’s use of social histories both during adjudication and in post-adjudication procedures. The challenge concerning the post-adjudication use involved the interpretation and application of an Ohio statute. The district court exercised pendent jurisdiction over that claim and determined that the practice violated Ohio Rev. Code § 2151.14. The Court of Appeals reversed, holding that “the District Court abused his discretion by exercising jurisdiction to interpret” the Ohio statute. 653 F.2d at 1087.

The Court of Appeals recognized that under the Supreme Court’s holding in Gibbs that “federal courts have the power to hear” pendent state claims, but that this power was limited to considerations of judicial restraint and comity. Id. át 1086. The court held that the district court should not have passed upon the state law issue because Ohio had a substantial interest in the interpretation of its statute, that Ohio law was unclear as to the proper resolution of the issue, that the record was not sufficient to permit a well-considered determination, and that the state law grounds were not sufficiently raised by the parties. Id. at 1086-87.

The opinion in Financial General Bank-shares, Inc. v. Metzger, supra, is also instructive because of its close similarity to the case at bar. In Metzger, the complaint was filed in federal district court on March 18, 1978. The complaint alleged various violations of federal security laws as well as pendent local claims of breach of fiduciary and ethical obligations. Many motions were heard and extensive discovery occurred in the following two years after the filing of the complaint. In the summer of 1980, the parties settled a substantial number of the federal claims. On August 2, 1980, the district court entered summary judgment is favor of defendant on the remaining federal claims. The court retained jurisdiction over the pendent claims based upon considerations of judicial economy. The district court ruled that since extensive discovery on the pendent causes of action had taken place, the court was familiar with the relevant facts, and the parties were ready to proceed to trial, under the principles of judicial economy enunciated in Gibbs it should exercise jurisdiction over the pendent common law claims. The Court of Appeals disagreed and reversed the district court’s ruling.

The Circuit Court first held that the district court over-estimated the judicial economy to be gained by exercising such jurisdiction. The fact that discovery had been completed in the district court, the Circuit Court reasoned, would not mean it would have to be duplicated in the state court, since “the rules of discovery and evidence paralleled the federal rules. The Court further stated that the expenditure of additional judicial effort after dismissal of the federal claims:

also undermines the District Court’s determination that convenience and economy favored exercise of pendent jurisdiction over the state claims. The District Court denied Metzger’s motion to dismiss the common law claims on August 2, 1980. It then set a trial date, entered a pretrial order, and conducted a three-day trial from November 19 to 20, 1980 ... None of this expenditure of judicial resources contributed to resolution of any issue of federal law.

680 F.2d at 775 (emphasis supplied).

The Metzger court further ruled that the district court did not properly take into account the “unsettled and novel” nature of the pendent claims. The court stated:

[T]he importance of this factor was articulated in Gibbs, which emphasized that state courts would provide a “surer-footed reading of applicable law.” ... More recently, in two cases applying the Gibbs principles in somewhat different contexts, the Supreme Court has reaffirmed the importance of this factor in deciding whether to exercise pendent jurisdiction. In Moore v. County of Alameda, 411 U.S. 693, 93 S.Ct. 1785, 36 L.Ed.2d 596 ... (1973), the Court upheld the District Court’s dismissal of a state claim against a pendent party on the ground that dismissal was a proper exercise of discretion____ The Court wrote, ‘As is evident from this Court’s decision in Gibbs, ... the unsettled nature of state law was an entirely appropriate factor for the District Court to consider.’ ... Subsequently, in Hagans v. Lavine, 415 U.S. 528, 94 S.Ct. 1372, 39 L.Ed.2d 577 ... (1974), a case involving a pendent state claim, the Court explained.
[T]he rationale of Gibbs centers upon considerations of comity and the desirability of having a reliable and final determination of the state claims by state courts having more familiarity with the controlling principles and the authority to render a final judgment.
Although the degree of uncertainty in state law is one of several factors that should guide the district court’s discretion, it should be given considerable weight.

Id., 680 F.2d at 776. The Metzger court went on to hold that the district court had abused its discretion in retaining jurisdiction over the unsettled local claims.

This Court was constrained under these considerations to remand the remaining state claims to state court. First, this ease is not at a stage where judicial economy strongly weighs in favor of retention of the state claims. The federal claims have been dismissed long before trial. This is not a situation where the federal claims were before the court during or on the eve of trial. See e.g., Gray v. International Association of Heat & Frost Insulators & Asbestos Workers, 447 F.2d 1118 (6th Cir. 1971). Discovery has been completed in this case, but as the Metzger court recognized, the discovery the parties have performed will not be wasted and should be likewise useable in the state forum. For the Court to proceed with this matter any further would be inappropriate since “[n]one of this expenditure of judicial resources [will] contribute!] to [the] resolution of any issue of federal law.” 680 F.2d at 775.

Second and more importantly, the remaining claims are state actions based upon an alleged breach of Michigan “common law and/or statutory and/or contractual duties” which are grounded on an unsettled area of Michigan law. Only two Michigan decisions have touched upon this area of law, In re Johnston, 365 Mich. 509, 114 N.W.2d 255 (1962), a Michigan Supreme Court case of little consequence or guidance, and Maitland v. Wayne State University, 76 Mich.App. 631, 257 N.W.2d 195 (1977), an opinion difficult to comprehend and apply.

In Maitland, the plaintiff sought reinstatement as a student at Wayne State University Medical School. The opinion does not indicate on what grounds, be it federal or state, or what theory, in tort or contract, plaintiff’s claims were based. Apparently, the plaintiff was challenging the legitimacy of the school’s decision to drop him as a student based on certain academic criteria. The Maitland court looked to two federal court decisions, Green v. Bailey, 519 F.2d 5 (8th Cir.1975) and Connely v. University of Vermont, 244 F.Supp. 156 (D.C.Vt.1965), for guidance on the scope of judicial review of academic decisions made by public school faculty. Both of the federal decisions were applying a federal constitutional due process analysis. The Maitland decision, however, was clearly not based upon the federal due process clause. In Dietz v. American Dental Association, 479 F.Supp. 554 (E.D.Mich. 1979), this Court assumed that the Maitland court was basing its decision on Michigan common law. The court noted, however, its difficulty of applying Michigan law because of the lack of guidance. Id. at 558-59.

Michigan law and the Maitland decision presently are even more difficult to apply because of recent developments in the law. The Maitland court adopted the federal standard for judicial intervention in academic decisions that it perceived to exist in 1976. Since Maitland the Supreme Court in Board of Curators v. Horiwitz, 435 U.S. 78, 98 S.Ct. 948, 55 L.Ed.2d 124 (1978) and various circuit court opinions have given even greater deference to academic decisions of state university faculties. Whether Michigan courts would also adopt this more constrained approach is a question this Court would be required to determine with little guidance.

Furthermore, the Maitland court did not specify whether this claim sounds in tort or contract law. The plaintiff has sought both contractual and tort remedies. Whether the plaintiff can assert both of these claims or only one or the other is not clear under Michigan law. This question is of substantial importance since the defendant contends that the three-year tort statute of limitations has run and plaintiffs common law claims are barred.

Due to this uncertainty in Michigan law it would not be appropriate for this Court to exercise pendent jurisdiction and resolve these state law questions. United Mine Workers of America v. Gibbs, supra; Lee v. Western Reserve Psychiatric Habilitation Center, supra; Financial General Bankshares, Inc. v. Metzger, supra; J.P. v. DeSanti, supra. A “surer-footed reading” of state law is necessary. United Mine Workers of America v. Gibbs, supra, 383 U.S. at 726, 86 S.Ct. at 1139.

In sum, this Court correctly ruled that the exercise of pendent jurisdiction was not warranted due to considerations of judicial economy and principles of comity. Therefore, defendant’s Motion for Reconsideration is DENIED and this case is REMANDED to state court.

IT IS SO ORDERED.

      . Plaintiff’s claims in Counts V and VI were based upon the due process and equal protection clauses of the Federal and Michigan Constitutions. These provisions require that there must be "state action” in order to invoke their protection. E.g., Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d 477 (1974); Donahoo v. Household Finance Corp., 472 F.Supp. 353 (E.D.Mich.1979); Dow v. Michigan, 396 Mich. 192, 240 N.W.2d 450 (1976); McGruder v. Michigan Consolidated Gas Co., 113 Mich.App. 664, 318 N.W.2d 531 (1982). Plaintiff asserted that state action was present since the defendant receives funds and annual operating expenses from the State.
      The Court found this argument without merit because the defendant was a private institution which is not under direct government control. Since the school is statutorily given exclusive control over its educational affairs (Mich.Comp. Laws Ann. § 450.175), the mere act of receiving state funds is not enough governmental involvement to constitute state action. E.g., Spark v. Catholic University of America, 510 F.2d 1277, 1282 (D.C.Cir.1975). See e.g., Foster v. Ripley, 645 F.2d 1142 (D.C.Cir.1981); Payne v. Government of District of Columbia, 559 F.2d 809 (D.C.Cir.1977). Thus, the Court dismissed Counts V and VI of plaintiff’s complaint.

      . Title 28 U.S.C. § 1447(c) provides in part:
      If at any time before final judgment it appears that the case was removed improvidently and without jurisdiction, the district court shall remand the case, and may order the payment of just costs.

      . Plaintiffs Complaint, Count I. See also Counts II and VII.

      . Jurisdiction in Dietz was based upon diversity of citizenship.

      . E.g., Hines v. Rinker, 667 F.2d 699 (8th Cir.