author: WARREN, District Judge.

text:
    MILLER BREWING COMPANY, Plaintiff, v. Robert LANDAU, Charles A. Lockwood, Gerald Marsden, and Eisner & Lubin, a partnership, Defendants.
    No. 85-C-0258.
    United States District Court, E.D. Wisconsin.
    Aug. 19, 1985.

      Laurence C. Hammond, Milwaukee, Wis., and Irvin B. Nathan, Washington, D.C., for plaintiff.
    Barry I. Fredericks, New York City, and Janice Rhodes, Milwaukee, Wis., for Landau.
    Jon P. Christiansen, Milwaukee, Wis., for Lockwood.
    Edward A. Hannan, Milwaukee, Wis., for Marsden and Eisner & Lubin.
   DECISION AND ORDER

WARREN, District Judge.

This case arises out of events which began in 1981 when the plaintiff, Miller Brewing Company (hereafter “Miller”) hired defendant Robert Landau, President and sole shareholder of Robert Landau Associates, Inc. (“RLA”), a New York City marketing and promotional agency, to assist Miller in its marketing efforts. Miller contends that Landau and defendant Charles A. Lockwood, Executive Vice-President of RLA, made several trips to Milwaukee from 1981 to 1984 for the purpose of negotiating and executing promotional services contracts. Due to RLA’s bankruptcy, it allegedly failed to perform as agreed under certain of these contracts.

According to the affidavit of Thomas B. Shropshire, Senior Vice-President, Treasurer and Assistant to the President of Miller Brewing Company, Miller began negotiating with RLA, represented by Landau and Lockwood, in November of 1983 for promotional services contracts to be performed in 1984. These contracts were executed in Milwaukee and were governed by Wisconsin law. According to Shropshire’s affidavit, a check for $2 million was presented to Landau and Lockwood in Milwaukee pursuant to these contracts.

In the spring of 1984, Miller became concerned about the financial condition of RLA. In order to satisfy Miller’s concerns, RLA had the New York accounting firm of Eisner & Lubin, defendant herein, send a letter to Miller stating, in essence, that RLA was financially sound (a copy of that letter is attached hereto). The letter was signed by Gerald Marsden, a partner in Eisner & Lubin and a defendant in this action. Following receipt of this letter, Miller paid RLA an additional $1.3 million pursuant to one of the promotional services contracts.

On September 14, 1984, RLA filed proceedings in bankruptcy court under Chapter 11 and ceased performing its duties on behalf of Miller. On February 21, 1985, Miller filed the present action against Landau, Lockwood, Marsden and Eisner & Lu-bin in which Miller sets forth four separate claims. In Count I, Miller claims that the defendants engaged in a pattern of racketeering by which Miller was defrauded out of approximately $2 million. This claim is brought under the provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, et seq. Count II is a claim brought under the Wisconsin Organized Crime Control Act, Wis. Stat. §§ 946.80-946.87, and is based on allegations similar to those made in Count I. Count III is a common law fraud and civil conspiracy claim against all defendants, while Count IV is a negligence claim against defendant Eisner & Lubin.

All of the defendants have moved to dismiss the complaint for improper venue. In the alternative, the defendants request that the action be transferred to the District Court for the Southern District of New York.

As grounds for their motion, defendants Marsden and Eisner & Lubin claim (1) that they are not found, do not reside, and have no agents in this district; (2) that they have not transacted affairs in this district; (3) that the plaintiff’s claim did not arise in this district; (4) that the operative facts alleged in the complaint occurred in New-York; (5) that they reside in New York; and (6) that all of the witnesses, records and documents necessary for their defense are in New York.

Defendant Landau’s motion is based on similar contentions, with one notable additional argument. Landau states that any affairs he conducted in Wisconsin were on behalf of RLA and not himself. It is Landau’s further contention that any affairs he conducted in Wisconsin on behalf of RLA are irrelevant with respect to venue considerations.

Although he was twice granted additional time to answer or otherwise respond to the complaint, defendant Lockwood’s motion to dismiss or to transfer venue merely consists of two pages in which he states that he will rely upon the briefs of his co-defendants as well as his own affidavit to support his motion. In that affidavit, Lockwood reiterates the position taken by Landau that his activities in Wisconsin were not undertaken on behalf of himself. Lockwood also states that his personal records and business records from RLA are now in Florida, where he lives, and that it would be inconvenient for him to transfer those records to either Milwaukee or New York.

In response, the plaintiff contends that the appropriate venue is the Eastern District of Wisconsin for the following reasons:

(1) Defendants Robert Landau and Charles Lockwood came to Miller’s offices in Milwaukee on at least 30 separate occasions since 1981. Many of these visits were in furtherance of the defendants’ scheme to defraud Miller. Shropshire Aff. II7.
(2) In the course of defendants’ scheme to defraud Miller, Landau and Lockwood and other representatives of Robert Landau Associates, Inc. made hundreds of telephone calls to officials of Miller in Milwaukee. Shropshire Aff. 117. See also Wolf Aff. If 4 and Exhibits 2, 3, 4, 5 and 6.
(3) The 1984 Service Agreements, signed by defendant Landau, which served as the vehicle for defendants’ fraud, were executed in Milwaukee and provided that Wisconsin law would govern any dispute. Shropshire Aff. If 6.
(4) Contrary to a false affidavit filed by Robert Landau in support of his venue motion, Robert Landau flew to Milwaukee to receive personally Miller’s check for $2 million issued in reliance upon defendants’ fraudulent misrepresentations. Shropshire Aff. 11 6.
(5) The May 25, 1984 Eisner & Lubin “comfort letter” prepared by Gerald Marsden falsely attesting to the financial viability of the racketeering enterprise, RLA, was sent by defendants to, and considered by Miller, in Milwaukee. Complaint ¶ 31; Shropshire Aff. UK 9, 10.
(6) All of the remaining payments which Miller was defrauded into making were sent by Miller from Milwaukee. Shropshire Aff. ¶ 11.
(7) The damaging effects of the defendants’ fraud were suffered by Miller in Milwaukee. Complaint ¶ 43; Shropshire Aff. ¶ 13.

Based on these contacts between the defendants and Miller in Milwaukee, and because the acts alleged to have been done by the defendants caused an economic harm to Miller in Milwaukee, Miller contends that its claim arose in the Eastern District of Wisconsin. Accordingly, Miller states that venue lies in the Eastern District of Wisconsin under 28 U.S.C. § 1391(b). In addition, the plaintiff has asserted that venue may lie in this district under the provisions of RICO, 18 U.S.C. § 1965(a), in that defendants Landau and Lockwood transacted their affairs in this district.

For the reasons set forth below, the Court believes that venue is appropriate in this district primarily because the plaintiff’s claim arose here. Thus, the Court will deny the motions to dismiss and will also deny the alternative requests to transfer this case to the Southern District of New York.

I. VENUE UNDER RICO, 18 U.S.C. § 1965

Although the plaintiff’s argument in favor of maintaining this action in this district is based mainly upon its contention that its claim “arose here” within the meaning of 28 U.S.C. § 1391(b), the Court will first consider plaintiff’s alternative or, perhaps, supplementary argument that venue may lie in this district under the liberal provisions of the RICO venue statute, 18 U.S.C. § 1965(a) and (b). Subsections (a) and (b) of U1965 provide that

(a) Any civil action or proceeding under this chapter [18 USCS §§ 1961 et seq.] against any person may be instituted in the district court of the United States for any district in which such person resides, is found, has an agent, or transacts his affairs.
(b) In any action under section 1964 of this chapter [18 USCS §§ 1964] in any district court of the United States in which it is shown that the ends of justice require that other parties residing in any other district be brought before the court, the court may cause such parties to be summoned, and process for that purpose may be served in any judicial district of the United States by the marshal thereof.

The plaintiff claims, and the Court agrees, that defendants Landau and Lockwood both transacted their affairs in this district, and that venue is appropriate in this district as to them under § 1965(a). A person has transacted his affairs within a particular district when he has regularly conducted business of a substantial and continuous character within that district. Hodgdon v. Needham-Skyles Oil Company, 556 F.Supp. 75, 78 (D.D.C.1982); King v. Vesco, 342 F.Supp. 120, 122 (N.D.Cal. 1972). Both Lockwood and Landau made several trips to Milwaukee to meet with Miller personnel for the purpose of negotiating and executing the promotional services contracts entered into between Miller and RLA. According to the Shropshire affidavit, Miller’s records reflect that Landau met with Miller personnel in Milwaukee at least fourteen (14) times between 1981 and 1984. During that same period, Lockwood met with Miller personnel in Milwaukee on at least twenty-nine (29) separate occasions. In addition, Landau and Lockwood flew to Milwaukee in November, 1983, to receive a check from Miller in the amount of $2 million. Clearly, defendants Landau and Lockwood conducted business of a substantial and continuous nature in this district, and therefore transacted their affairs here as is meant in 111965(a).

Both of these defendants claim, however, that any business they transacted in this district was done on behalf of RLA, not themselves. They further claim that, in determining whether one has transacted his affairs in a certain district, only the personal affairs of the defendant are to be considered as opposed to any affairs he may have transacted on behalf of his employer. As authority for their argument, the defendants cite Bulk Oil (USA), Inc. v. Sun Oil Trading Company, 584 F.Supp. 36, 39 (S.D.N.Y.1983).

The Court in Bulk Oil focused upon the language “transacts his affairs” in § 1965(a) and decided that it pertained to the personal affairs of the defendant employees and not the affairs conducted by them on behalf of their employer, Sun Oil Trading Company. 584 F.Supp. at 39. While that court’s interpretation of the language in § 1965(a) may be viewed as a eollary to the doctrine that employees ordinarily should be shielded from liability for acts done on behalf of their employers, this Court believes that there is ample reason for refusing to extend the holding in Bulk Oil to the circumstances present in this case.

First, defendant Landau was the president and sole shareholder of RLA; it would certainly be pointless if not impossible to distinguish his own affairs from those he undertook on behalf of the business he owned and controlled. The same reasoning can be applied as well to Lockwood, the executive vice-president of RLA. Both defendants enjoyed positions within the business they operated such that the affairs of the business were, in reality, their own affairs. Any distinction made between their affairs and those of RLA would be superficial and misleading.

A second reason for rejecting the defendants’ argument is that RLA appears to have been a grossly undercapitalized venture which has now gone bankrupt. Were the Court to extend the holding in Bulk Oil to this case, it would set a bad precedent of allowing corporate officers who transacted affairs on behalf of a shell corporation to avoid application of the venue provisions of § 1965(a) to themselves. This problem as it relates to personal jurisdiction issues was discussed by the court in Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 903 (2nd Cir.1981):

In evaluating the fairness of subjecting an individual to personal jurisdiction for acts done in his role as a corporate employee, it is appropriate to focus not only on the fealty of the employee to the corporation in the performance of those acts, but also on the nature of the corporation and the individual’s relationship to it. If the corporation is a mere shell for its owner, the employee-owner’s actions may be viewed as having been taken simply in his own interest. In such circumstances it will not advance notions of fairness to allow the owner of the corporation to invoke the protections of the fiduciary shield. As Judge Weinstein observed, obiter, in Bulova Watch Co. v. K. Hatton & Co., supra [508 F.Supp. 1322 (E.D.N.Y.1981) ],
As the term “fiduciary shield” suggests, this is an equitable doctrine. It should be followed not [ ] mechanically but with a sound exercise of discretion. If, for example, the [corporation] lacked sufficient assets to respond or if it were a shell utilized by an individual defendant for his own benefit, the balance of fairness might be tipped and jurisdiction over the individual might lie.
508 F.Supp. at 1348.
In deciding whether the corporation is a real or a shell entity, the appropriate standard should not be the very stringent test, normally applied in other contexts, for piercing the corporate veil. That test requires a showing not only that the corporation is a shell, but that it was used to commit a fraud. Walkovszky v. Carlton, 18 N.Y.2d 414, 276 N.Y. S.2d 585, 223 N.E.2d 6 (1966). When both of these showings are made the corporate entity is disregarded, and the individuals behind the corporate shell are held responsible for its liabilities. The fiduciary shield doctrine, however, is not concerned with liability. It is concerned with jurisdiction, and specifically with the fairness of asserting jurisdiction over a person who is acting solely in the interests of another. In determining whether a corporation for which an owner-employee acts is really “another,” it is sufficient to inquire whether the corporation is a real or shell entity. If the corporation is merely a shell, it is equitable, even if the shell may not have been used to perpetrate a fraud, to subject its owner personally to the court’s jurisdiction to defend the acts he has done on behalf of his shell.

The Court has quoted the Miller decision at length because the analysis therein applies very well to the issue at hand, and because the approach taken by the Second Circuit is far more cogent and insightful than that undertaken by the court in Bulk Oil. Defendants Landau and Lockwood are attempting to veil the affairs they conducted in this district behind the cloak of the undercapitalized corporation they operated. To follow the ruling in Bulk Oil in this case would frustrate the purpose of § 1965(a) and render futile the plaintiff’s attempt to maintain this action in this district where defendants Landau and Lockwood conducted numerous transactions which redounded to their own benefit.

While it is clear to the Court that venue may be maintained in this district as to Landau and Lockwood by virtue of § 1965(a), defendants Marsden and Eisner & Lubin did not have extensive contact with this district and cannot be said to have transacted their affairs here. The complaint alleges no other connections between Marsden, Eisner & Lubin and this district other than telephone calls placed to Miller personnel and a single letter sent on May 25, 1984 from Marsden to Miller. These contacts are not sufficient to establish venue under § 1965(a). Follett College Stores Corp. v. Fernandez, 587 F.Supp. 1051, 1054 (N.D.Ill.1984).

Although § 1965(a) cannot be used to assert that venue lies in this district as to Marsden and Eisner & Lubin, § 1965(b) is available to include them in an action brought in this district if “the ends of justice” so require. While the standards for determining whether an “ends of justice” finding should be made have not been well defined, at least one factor that should be considered is whether an alternative forum exists where venue would be proper as to all defendants. Soltex Polymer Cory, v. Fortex Industries, Inc., 590 F.Supp. 1453, 1459 (E.D.N.Y.1984); Farmers Bank of State of Delaware v. Bell Mortgage Corp., 452 F.Supp. 1278, 1282 n. 8 (D.Del. 1978).

Since all of the defendants have transacted their affairs in the Southern District of New York, venue would be proper as to all of them in that district under § 1965(a). While this fact militates against making an “ends of justice” finding under § 1965(b), the Court opines that it should not be the sole consideration, especially where transferring the case would result in extraordinary delay or some other extreme prejudice against the plaintiff’s interests.

This action is already several months old, and substantive discovery has been stayed throughout most of that time pending the completion of briefing and a decision on the venue question. The Court believes that, were this action to be transferred to the Southern District of New York, an additional delay of several months, at least, would ensue. Since the defendants are all well represented by Milwaukee counsel and appear to be capable of defending this action in this district, the resulting harm to the plaintiff from transferring this case to New York would far outweigh the difficulties imposed upon the defendants by keeping it here. Therefore, were § 1965(b) the only means of maintaining the action in this district, the Court would find that the ends of justice require the presence of Marsden and Eisner & Lubin as defendants in this case.

It is neither the plaintiffs theory nor the Court’s belief that venue lies in this district solely or primarily because of § 1965, however. The venue provisions of § 1965 are not exclusive; rather, they are supplemental to those found in 28 U.S.C. § 1391. Section 1391(b) provides that

(b) A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside, or in which the claim arose, except as otherwise provided by law.

Since the Court’s jurisdiction is not founded solely on diversity of citizenship, and because the defendants obviously do not reside in this district, a determination based on § 1391(b) that venue is proper in this district requires a finding that the plaintiff’s “claim arose” here.

II. VENUE UNDER § 1391(b): THE PLAINTIFF’S CLAIM AROSE IN THIS DISTRICT

The plaintiff asserts that its claim arose in this district because the economic harm allegedly caused by the defendants’ acts was incurred by Miller in Milwaukee, where its corporate headquarters are located. In response, the defendants state that the Court should apply the “weight of the contacts” test to determine the locus of the claim. Under the latter approach, venue will lie “in any district in which a substantial part of the acts, events, or omissions occurred that give rise to the claim for relief.” Commercial Lighting Products v. United States District Court, 537 F.2d 1078, 1080 (9th Cir.1976).

The plaintiff’s “economic effect” argument was rejected by the United States Supreme Court in Leroy v. Great Western United Corp., 443 U.S. 173, 99 S.Ct. 2710, 61 L.Ed.2d 464 (1979). In Leroy, the plaintiffs argued that a claim arose in Dallas because that is where the statute at issue would have had its impact on the plaintiffs. The Court stated that,

“... such a reading of § 1391(b) is inconsistent with the underlying purpose of the provision, for it would leave the venue decision entirely in the hands of plaintiffs, rather than making it ‘primarily a matter of convenience of litigants and witnesses.’ ”

443 U.S. at 186-87, 99 S.Ct. at 2718, quoting Denver & R.G.W.R. Co. v. Railroad Trainmen, 387 U.S. 556, 560, 87 S.Ct. 1746, 1748, 18 L.Ed.2d 954 (1967); see also Medical Emergency Service Associates v. Duylis, 558 F.Supp. 1312, 1315 (N.D.Ill.1983). Stating that “Congress did not intend to provide for venue at the residence of the plaintiff or to give that party an unfettered choice among a host of different districts,” the Court concluded that:

“the broadest interpretation of the language of § 1391(b) is that in the unusual case in which it is not clear that the claim arose in only one specific district, a plaintiff may choose between those two (or conceivably even more) districts that with approximately equal plausibility—in terms of the availability of witnesses, the accessibility of other relevant evidence, and the convenience of the defendant (but not of the plaintiff)—may be assigned as the locus of the claim.”

443 U.S. at 185, 99 S.Ct. at 2717.

In this case, the plaintiff’s claims did not arise solely within the confines of one specific district. Events that are the subject of the plaintiff’s claims transpired in both this district and the Southern District of New York.

Under the test proposed by the defendants, though, the Court believes that venue is proper in this district because a substantial number of the acts which constitute the basis of plaintiffs claims did occur in Milwaukee. Defendants Landau and Lockwood made numerous trips to Milwaukee, negotiated contracts between RLA and Miller here, and received millions of dollars in payments pursuant to those contracts in this district. The critical letter sent by Marsden and Eisner & Lubin was also received by Miller in this district, although it was conceived and written in New York.

The defendants may be correct in asserting that whatever fraudulent acts they committed were devised in New York, but the success of their ventures depended upon the existence of the contracts negotiated in Milwaukee. The alleged scheme to defraud Miller also came to fruition in Milwaukee when Landau and Lockwood received a check for $2 million at the Milwaukee airport. Thus, the Court finds that the “weight of the contacts” favors the present forum over the Southern District of New York.

The criteria which the Supreme Court stated should be considered in situations where a claim arose in more than one district also weigh in favor of the present forum. Since Miller’s corporate offices are located in Milwaukee, much of the evidence pertaining to the contracts at issue, as well as the witnesses involved in the contract transactions are located here. The attendance of any witnesses from elsewhere in the country may be compelled under the provisions of § 1965(d). The only factor weighing clearly in favor of transferring this case to the Southern District of New York is the convenience of the defendants. However, even that forum would be inconvenient for defendant Lockwood, who is now a resident of Florida.

Despite whatever arguments can be made with respect to the convenience of one forum as opposed to another, however, it is an undeniable fact that a substantial number of the actions which form the basis of the plaintiff’s claims occurred within this district. Accordingly, the Court hereby finds that the plaintiff’s claims did arise in this district, and the venue is proper here under 28 U.S.C. § 1391(b).

For the reasons stated above, the Court hereby DENIES the motions of defendants Landau, Lockwood, Marsden, and Eisner & Lubin for dismissal or transfer of venue. Since the venue question is now resolved, the Court also lifts the stay of substantive discovery that has been in effect in this case.

      . The defendants also cite an unpublished decision, Ashland Oil, Inc. v. Arnett, 84 Civ. 1324 (N.D.Ill. August 20, 1984), as further support for their argument. Beyond the fact that unpublished decisions carry very little, if any, persuasive value, Ashland Oil merely cites Bulk Oil for the proposition at issue.


source: Caselaw Access Project

author: LOVELL, District Judge.

license: Public Domain

text:
    CONFEDERATED SALISH AND KOOTENAI TRIBES OF the FLATHEAD RESERVATION, MONTANA, Plaintiff, v. FLATHEAD IRRIGATION AND POWER PROJECT; August C. Mueller, Acting Project Engineer, Flathead Irrigation and Power Project; and United States of America, Defendants, and Joint Board of Control of the Flathead, Mission and Jocko Valley Irrigation Districts, Intervening Defendant.
    No. CV 85-150-M.
    United States District Court, D. Montana, Missoula Division.
    Aug. 20, 1985.

      Stanley T. Kaleczyc, R. Stephen Browning, and J. Daniel Hoven, Browning & Kaleczyc, P.C., F. Woodside Wright, Helena, Mont., for defendants.
    Mike Greely, Atty. Gen., Clay R. Smith, Asst. Atty. Gen., Helena, Mont., Deirdre Boggs, Hamilton, Mont., for Intervenor Joint Board of Control.
    James H. Goetz, and Brigitte M. Anderson, Goetz, Madden & Dunn, P.C., Bozeman, Mont., Daniel F. Decker, John B. Carter, and Patrick L. Smith, Confederated Salish & Kootenai Tribes, for Intervnor State of Mont.
    Robert Brooks, Asst. U.S. Atty., Vernon Peterson, Regional Sol., Portland, Or., and Ann Crichton, U.S. Dept. of Interior, Washington, D.C., for plaintiff.
   MEMORANDUM OPINION AND ORDER

LOVELL, District Judge.

This is an action for injunctive relief by Plaintiff, (hereinafter also “Tribes”), to enjoin Defendants (hereinafter also the “Project”) from endangering the Tribes’ fishing and appurtenant water rights allegedly guaranteed by the Hell Gate treaty of July 16, 1855.

The parties are: Plaintiff, the Confederated Salish and Kootenai Tribes of the Flathead Reservation, a duly recognized governing body organized pursuant to the Indian Reorganization Act of 1934, 25 U.S.C. § 476 et seq.; Defendant Flathead Irrigation and Power Project, an Indian irrigation project operated by the Bureau of Indian Affairs, United States Department of Interior; Defendant August C. Mueller, Acting Project Engineer for the Flathead Irrigation and Power Project; Defendant United States of America; and Intervening Defendant The Joint Board of Control for the Flathead, Mission and Jocko Valley Irrigation Districts (hereinafter also “JBC”), which represents approximately 2,600 farmer-irrigators, both Indian and non-Indian, who receive water from the Project. The State of Montana also seeks to be made a party-defendant herein; that motion will be addressed later in the opinion.

This opinion is written because of the vigorous denial of this Court’s jurisdiction, initially by the United States and the JBC, and later by the State of Montana.

FACTUAL AND PROCEDURAL BACKGROUND

The Flathead Reservation was established by the Treaty of Hell Gate, signed on July 16,1855, and approved by Congress in 1859. By the terms of the Treaty, the Tribes relinquished all right, title and interest in and to what is now most of Montana. The Treaty reserved approximately 1.2 million acres of land for “the exclusive use and benefit of said Confederated Tribes as an Indian reservation.” It also secured to the Tribes the exclusive right of taking fish in all streams running through or bordering the Reservation. By the Flathead Act of 1904, Congress provided for allotments of reservation land to individual Indians on the Flathead Reservation, and for opening the surplus, unallocated lands to non-Indians. The Reservation was formally opened for non-Indian settlement by Presidential Proclamation on May 22, 1909.

The Project was created by the Act of April 23, 1904, as amended by the Act of May 29, 1908. It is administered by the Bureau of Indian Affairs, United States Department of the Interior, and currently supplies water to irrigate some 127,079 acres of land, approximately 16,085 of which are held in trust by the United States for the Tribes and their members. The remaining acreage is held in fee, by both Indians and non-Indians. The Project maintains approximately 1,165 miles of canals and fourteen reservoirs for irrigation, accounting for 55 to 65 per cent of all surface waters occurring within the Reservation.

As a result of diminished precipitation and snowpack levels in 1985, combined with above-average summer temperatures, the Flathead Reservation has experienced unusually dry conditions, threatening to result in a severe drought before the close of the 1985 irrigation season. This action was commenced to prevent the dewatering, for irrigation, of streams and reservoirs which serve as natural habitat for tribal fisheries, consisting largely of native and wild naturally reproducing trout, as well as other species. The Tribes allege violation by the Project of treaty fishing rights and reserved water rights appurtenant thereto as well as breach of fiduciary duty and abuse of discretion in violation of the Administrative Procedure Act, 5 U.S.C. § 706(2) (1977). They further allege that immediate injunctive relief is necessary to prevent irreparable injury to the fisheries.

On August 1, 1985, Plaintiffs moved for a temporary restraining order which the Court heard in open court. Although it considered Plaintiffs motion an ex parte request, as provided by Rule 65(b) Fed.R. Civ.P., the Court made certain that other interested parties were requested to appear and be fully heard on the matter. During the hearing, the United States was joined as a party, and the court entertained a motion to intervene by the JBC, pursuant to Rule 24(a)(2) Fed.R. Civ.P. The JBC appeared on behalf of the 2,600 irrigators within the regulatory area of the Project who stand to incur substantial hardship were the Project enjoined from delivering water for irrigation. JBC adequately demonstrated that the interests of the irrigators would be significantly impaired by curtailing irrigation flows; since such interests were not represented by existing parties to the litigation, the Court ruled that intervention would be granted upon JBC’s filing of an answer, and JBC was allowed to present its arguments in opposition to the restraining order.

The evidence submitted to the Court during the hearing demonstrated the immediacy of the water crisis facing the Flathead Reservation. The exclusive fishing rights guaranteed to the Tribes were not the subject of opposition; rather, the dispute concerned the implied reservation of water to support a core population of fish on the Reservation. Additionally, the United States and JBC contested the Court’s jurisdiction to consider the matter at all. After a showing by the Tribes of a possibility of irreparable injury to tribal fisheries, and a likelihood of successfully proving that a right to a minimum quantity of water for preservation of the fisheries was impliedly reserved by the Treaty of Hell Gate, the Court entered an order temporarily restraining the Project from allowing diversions in excess of sufficient waters to maintain and preserve the native and wild trout fishery within the Reservation. A hearing for preliminary injunction was set for August 9, 1985, and was subsequently continued to August 12, 1985.

On August 12, 1985, the Court convened to hear the Tribes’ motion for preliminary injunction. At the commencement of the hearing, the State of Montana appeared for the first time and moved to intervene as a party-defendant in the action pursuant to Rule 24(a)(2), Ped.R.Civ.P. The state claims to have a unique interest in the subject matter of the action arising out of its comprehensive water rights adjudication plan, and has predicated its motion for intervention on the inadequate representation of its interest by existing parties. The motion was resisted by the Tribes but unopposed by all other parties. It was at this stage of the proceedings that the Tribes submitted to the Court a stipulation, being a written agreement between the Tribes and the Project, and signed by the United States, by the terms of which all differences between the original parties hereto are resolved and settled, to be effective from the date thereof until October 31, 1985. Thereafter the United States suggested to the Court that the matter had become moot, to which the Tribes agreed and suggested dismissal of the case without prejudice. The terms of the dismissal ultimately received the consent of both the JBC and the State of Montana.

JURISDICTION

Jurisdiction lies with this Court pursuant to 28 U.S.C. § 1362 (1966). The Tribes commenced this action alleging breach of treaty-guaranteed fishing rights which the United States has a duty to protect. As a general rule, federal courts have jurisdiction to hear and decide claims by an Indian tribe against the United States arising under federal law. Gila River Indian Community v. Henningson, Durham and Richardson, 626 F.2d 708, 711 (9th Cir.1980). The Supreme Court has construed the McCarran Amendment, 43 U.S.C. § 666 (1952), as providing an exception to federal jurisdiction where Indian water rights are at issue. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), reh. den., 426 U.S. 912, 96 S.Ct. 2239, 48 L.Ed.2d 839; Arizona v. San Carlos Apache Tribe, 463 U.S. 545, 103 S.Ct. 3201, 77 L.Ed.2d 837 (1983). The Colorado River and San Carlos cases dictate deferral of water rights adjudication to state courts in the interests of wise judicial administration. It is clear, however, that the Supreme Court’s statement that state courts have jurisdiction over Indian water rights “does not imply that state courts have exclusive jurisdiction over such rights.” United States v. Adair, 723 F.2d 1394 (9th Cir.1983) [emphasis in original].

The State of Montana’s intervention is in essence exclusively for the purpose of asserting the lack of this Court’s jurisdiction over the matter. The State, joined by JBC, contends that the Tribes’ claims are barred by res judicata and collateral estoppel as a result of the San Carlos decision and the subsequent Ninth Circuit remand order in Northern Cheyenne Tribe v. Adsit, 721 F.2d 1187 (9th Cir.1983). It is JBC’s and the State’s position that any decision by this Court limiting the diversion of water for irrigation would be an adjudication of water rights, including the existence, relative priority, and quantity of Tribal in-stream flow rights.

Res judicata is raised as a defense by the State and by the JBC on the grounds that the Tribes were a party to the Adsit litigation and are estopped from raising the identical claim of reserved rights addressed in Adsit. In 1979, the United States filed seven actions in the Montana federal district courts, seeking a federal forum to generally adjudicate water rights in drain-ages involving federally reserved water rights. One such action was United States v. Abell, 484 F.Supp. 31 (Mont.1979), brought on behalf of the Confederated Salish and Kootenai Tribes to obtain adjudication of water rights within the Flathead River Basin. Although the Tribes did not participate in Abell at the district court level, they intervened in the subsequent Ninth Circuit appeal. Under the authority of the Colorado River case, Judges Hatfield and Battin of the District of Montana had consolidated Abell and the six other pending actions and dismissed all seven suits in deference to the State of Montana’s water adjudication proceedings. On appeal, the Ninth Circuit reversed and remanded for further proceedings. Northern Cheyenne Tribe v. Adsit, 668 F.2d 1080 (9th Cir.1982). The United States Supreme Court granted Montana’s petition for certiorari and consolidated the case with San Carlos Apache Tribe v. Arizona, 668 F.2d 1093 (9th Cir.1982). The Supreme Court reversed the Ninth Circuit, concluding that the District Courts correctly dismissed in deference to the state proceedings. Arizona v. San Carlos Apache Tribe, Supra, 463 U.S. at 570, 103 S.Ct. at 3215. On remand, the Ninth Circuit entered a stay of the federal actions until the conclusion of state proceedings, and declined to rule on questions of state jurisdiction or adequacy of state proceedings. Northern Cheyenne Tribe v. Adsit, 721 F.2d at 1188-1189.

The State of Montana and the JBC claim that jurisdiction of this Court is barred by Adsit and considerations of wise judicial administration spelled out in San Carlos. They allege that any decision by this Court would necessarily require a determination of the issues presented in Abell and deferred to state court.

The Tribes respond to these arguments by countering that the Montana Supreme Court has not ruled on the adequacy of the state system to adjudicate federally reserved water rights, although the question is pending. State of Montana v. Water Court of the State of Montana, — Mont. —, 691 P.2d 833 (1984). The Tribes further allege that the Montana water court system is presently in disarray, due to a pending action between the Montana Department of Fish, Wildlife and Parks and the State Water Court, involving instream flow rights. Moreover the Tribes assert that even if Montana has proper adjudicatory jurisdiction, there is no adequate state forum for purposes of the emergency relief sought herein.

ISSUES OF LAW

The gravamen of this controversy is twofold: first, whether the Winters doctrine extends to implication of a water right sufficient for preservation of native and naturally reproducing fish; and second, if the Tribes do have a reserved water right for fishery preservation, whether such right is entitled to priority over the rights of both Indian and non-Indian water users.

The doctrine of reserved water rights has been a part of federal law since the 1908 case of Winters v. United States, 207 U.S. 564, 28 S.Ct. 207, 52 L.Ed. 340 (1908). Recently, the Supreme Court expressed its most succinct and lucid statement of the governing principles of reserved water rights:

This Court has long held that when the federal government withdraws its land from the public domain and reserves it for a federal purpose, the Government, by implication, reserves appurtenant water then unappropriated to the extent needed to accomplish the purpose of the reservation. In so doing the United States acquires a reserved right in unappropriated water which vests on the date of the reservation and is superior to the rights of future appropriators. Reservation of water rights is empowered by the Commerce Clause, Art. I., § 8, which permits federal regulation of navigable streams, and the Property Clause, Art. IV., § 3, which permits federal regulation of federal lands. The doctrine applies to Indian reservations and other federal enclaves, encompassing water rights in navigable and nonnavigable streams.
******
In determining whether there is a federally reserved water right implicit in a federal reservation of public land the issue is whether the government intended to reserve unappropriated and thus available water. Intent is inferred if the previously unappropriated waters are necessary to accomplish the purpose for which the reservation was created.

Cappaert v. United States, 426 U.S. 128, 138, 96 S.Ct. 2062, 2069, 48 L.Ed.2d 523, 534, (1976). See also, United States v. New Mexico, 438 U.S. 696, 98 S.Ct. 3012, 57 L.Ed.2d 1052 (1978).

Cappaert has special significance to this action, insofar as the Supreme Court allowed the United States to protect water from diversion for preservation of a peculiar race of desert fish, the survival of which was found to be a purpose for which the reservation, a National Park, was created.

The Ninth Circuit Court of Appeals has applied the Cappaert guidelines in the context of Indian water rights. United States v. Adair, supra., 723 F.2d 1394. Indeed, Adair is educational for the resolution of issues presented by the Tribes in this matter. The Ninth Circuit recognized that the right to water for hunting and fishing purposes is a right to prevent other appropriators from depleting the streams’ waters below a protected level in any area where the non-consumptive right applies. Adair, supra., 723 F.2d at 1411. The court found that the rulings of Cappaert and New Mexico, supra., do not require the identification of a single purpose which the parties to the treaty intended the reservation to serve and further that both agrarian objectives and hunting and fishing qualified as primary purposes of the Klamath Treaty. A similar conclusion was reached in Col-ville Confederated Tribes v. Walton, 647 F.2d 42 (9th Cir.1981) [Walton II.], in which the court found preservation of the tribe’s access to fishing grounds one purpose for the creation of the Colville Reservation.

In view of the stipulation between the original parties, it is not necessary now for the Court to determine the extent of its jurisdiction to ultimately resolve this matter. The Court will not attempt to qualify or quantify the full extent of the Tribes’ relative water rights. At this time it is the holding of the Court only that given the existence of a federal issue of reserved water rights, together with the exigency of the circumstances, jurisdiction was properly invoked on an emergency basis, and that the temporary restraining order was properly issued to protect the tribal fisheries from irreparable injury. Kittitas Reclamation District v. Sunnyside Valley Irrigation District, 763 F.2d 1032 (9th Cir. 1985); Colville Confederated Tribes v. Walton, 752 F.2d 397 (9th Cir.1985). The Court further holds that under San Carlos, the proper forum for general adjudication of water rights on the Flathead Indian Reservation lies in the state courts of Montana.

The Court recognizes and appreciates the excellent briefing and presentation of the issues in the case by counsel for all parties, on short notice, and under emergency conditions.

IT IS HEREBY ORDERED:

1. Plaintiffs’ motion for preliminary injunction is DENIED.

2. The motion of the State of Montana to intervene as a party-defendant pursuant to Rule 24(a)(2), Fed.R.Civ.P., is GRANTED.

3. Plaintiff’s Complaint is DISMISSED in its entirety as to all parties, without prejudice to the Plaintiff to refile, for the reason that the subject matter of the action has become moot due to the stipulation between the original parties, and agreement to the terms of dismissal by all other parties to the action. The terms of the stipulation are not incorporated into this order, nor will the Court retain continuing jurisdiction to enforce any of the provisions of the stipulation.

APPENDIX

TEMPORARY RESTRAINING ORDER

“Motions for temporary restraining order and preliminary injunction have been made by the Plaintiff, Confederated Salish and Kootenai Tribes of the Flathead Reservation, Montana, pursuant to Rule 65 F.R. Civ.P. This Court has considered those motions together with the affidavits filed in support thereof and has considered the complaint and brief. From the affidavits it clearly appears that specific facts demonstrate that immediate and irreparable injury is being suffered by the Applicant, and that such injury will possibly continue to result to the Applicant before the Defendants, Flathead Irrigation and Power Project and its acting Project Engineer, can be heard in opposition and that therefore a temporary restraining order is immediately necessary and that an expedited hearing on the motion for preliminary injunction must be set.

“The injury which is being suffered by the Applicant results from the severe drought conditions that are being experienced in Western Montana. Streams and reservoirs of the Flathead Indian Reservation are rapidly becoming dewatered. As a consequence, there is an immediate injurious effect on the wild, naturally reproducing fish in these streams and reservoirs and to the interests of the Plaintiffs in such fish as allegedly protected by the Plaintiffs’ Treaty with the United States of July 16, 1855. In addition, there is a strong potential for significant mortality to occur to the wild trout populations on the Flathead Reservation if conditions do not improve. Due to the manner in which the Flathead Irrigation and Power Project is being administered, its reservoirs will possibly become exhausted during the present irrigation season with significant adverse impact on the ability of these reservoirs to provide a fishery. The Court concludes that Applicant has adequately demonstrated probable success on the merits as to its treaty rights.

“This order is of limited duration and scope. The Court does not purport to adjudicate the specific water rights of any of the interested parties, nor does it intend to assert itself in the water rights adjudication process being conducted by the State of Montana. The Court specifically abstains from doing so.

“THEREFORE IT IS ORDERED that the Defendants Flathead Irrigation and Power Project and its acting Project Engineer, August Mueller, and all their agents and all those acting in concert with them, be, and hereby are, temporarily restrained from diverting waters from any of the streams or reservoirs on the Flathead Reservation, Montana, listed below, unless they shall first ensure that there are sufficient waters left in said streams and reservoirs to maintain and preserve the native and wild trout fishery therein.

“The streams and reservoirs included herein are:

“Jocko River; Mission Creek; Post Creek; Little Bitteroot River; Upper Crow Creek; Lower Crow Creek; Mission Reservoir; Upper Jocko Reservoir; Lower Jocko Reservoir; Crow Reservoir;

“IT IS FURTHER ORDERED that the application for a preliminary injunction prayed for in the complaint be and the same is hereby set for hearing before the undersigned in Helena, Montana, at the Federal Courthouse, on the 9th day of August, 1985 at 9:00 o’clock a.m.; and that a copy of this Order be served immediately with the summons and complaint upon each of the Defendants and due return made according to law.

“This Court has considered the security provisions of Rule 65(c) F.R.Civ.P., and upon due consideration and it appearing that bond is unnecessary Orders that no security be required as a condition to the temporary restraining order. This temporary restraining order is issued this 1st day of August at 4:30 o’clock p.m. and shall be filed forthwith in the Clerk’s Office and entered of record.

      . 12 Stat. 975.

      . Article II, Hell Gate Treaty, 12 Stat. 975

      . 33 Stat. 302

      . 36 Stat. 2494

      . 33 Stat. 302

      . 35 Stat. 444

      . Plaintiff requested the Court to determine specific numerical stream flow and reservoir levels, which the Court emphatically declined to do. The text of the temporary restraining order is reprinted as an appendix to this opinion.

      . 28 U.S.C. § 1362 provides as follows: "The district courts shall have original jurisdiction of all civil actions, brought by any Indian Tribe or band with a governing body duly recognized by the Secretary of the Interior, wherein the matter in controversy arises under the Constitution, laws, or treaties of the United States.”

      . The Tribes, supported by language in Adair, 723 F.2d at 1414, also claim that their reserved rights to water on the Flathead Reservation are aboriginal, with a priority date of time immemorial. This assertion is sharply contested by the JBC, which claims that the Tribes’ water rights have a priority date of July 16, 1855, the date of the treaty.


text:
    CONFEDERATED SALISH & KOOTENAI TRIBES OF the FLATHEAD RESERVATION, MONTANA, et al, Plaintiffs, v. STATE OF MONTANA, et al, Defendants.
    No. CV 81-149-M.
    United States District Court, D. Montana, Missoula Division.
    Sept. 9, 1985.
    James Goetz, Goetz, Madden & Dunn, Bozeman, Mont., Daniel F. Decker, John B. Carter, Tribal Attorneys, Pablo, Mont., for plaintiffs.
    Helen S. Maclay, Missoula, Mont., Deirdre Boggs, Hamilton, Mont., Chris D. Tweeten, Atty. Gen., Helena, Mont., for defendants.
   OPINION AND ORDER

LOVELL, District Judge.

Plaintiffs, the Confederated Salish and Kootenai Tribes and certain of their members (hereinafter also “Tribes”) instituted this action in 1981, seeking to enjoin the application or enforcement of the Montana Water Use Act of 1973 [§§ 85-2-101 through 85-2-704 and §§ 3-7-101 through 3-7-502, M.C.A. (1983)] on the Flathead Indian Reservation and to any and all waters arising upon, flowing through or under, bordering, or otherwise occurring on the Reservation. The Tribes further seek a declaration that the state’s Water Use Act is unlawful and unconstitutional as applied to the Tribes and their members and to all waters arising on the Reservation.

On July 12, 1982, Plaintiff filed a motion for summary judgment. By order of the Hon. Russell E. Smith, dated August 3, 1983, the proceedings were stayed pursuant to stipulation of the parties, who had entered into negotiations. The order required the parties to file a status report every four months, and provided that any party at any time may request the Court to move the case forward, at which time the Court will set a time within which the State of Montana and other defendants shall respond to the Tribes’ motion.

The State of Montana has requested this Court to terminate the stay and to set a briefing schedule on the Tribes’ motion for summary judgment. The Tribes in turn have withdrawn their motion and seek to have the stay continued. The Tribes further request that the Court take no action in this matter until the Supreme Court of Montana enters a decision in State of Montana ex rel. Mike Greely, Attorney General, Water Court of the State of Montana and the Judges of that Court, Petitioners, v. United States, individually and as trustee for each of the hereinafter named Indian Tribes, et al., Respondents, 691 P.2d 833 (“State of Montana v. United States ”).

There are two issues pending before the Supreme Court of Montana in State of Montana v. United States. The first is whether the Disclaimer Clause contained in Article I of the Montana Constitution prohibits state adjudication of Indian water rights. The second issue is whether the adjudication procedures set forth in the Montana Water Use Act are adequate to adjudicate Indian Water Rights. State of Montana v. United States thus represents the latest development in the continuing dispute over the proper forum for adjudication of Indian and federal reserved water rights.

The history of the dispute in Montana dates back to 1979, when Judges Hatfield and Battin of this District dismissed seven consolidated actions brought by the United States for the purpose of adjudicating the water rights of certain Indian tribes as well as Indian and non-Indian individuals in and to certain streams. Northern Cheyenne Tribe v. Tongue River Water Users Association, 484 F.Supp. 31 (D.Mont.1979). The Court cited United States v. Colorado River Water Conservation District, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), for the factors instrumental in its decision to dismiss the action in deference to state proceedings:

in water rights litigation, the interdependency of the various rights; the availability of comprehensive state systems for adjudication of water rights; the stage of the proceedings in the federal court, beyond the filing of the complaint and the motion to dismiss; the extensive involvement of state water rights; and the apparent design of the McCarran Amendment to avoid piecemeal or burdensome litigation.

Northern Cheyenne Tribe, supra; 484 F.Supp. at 35. The Court then examined Montana’s Senate Bill 76 and its provisions for water rights adjudication (now codified in Part Two, Chapter Two, Title 85, M.C. A.), finding that they “reflect both the policy and the essential mechanism for adjudication of state water rights. Adjudication by adversary proceeding initiated by one claimant against all others in his drainage has been forsaken in favor of blanket adjudication of all claims, including federal and federal trust claims.” Id., at 35-36 [emphasis in original].

On appeal, the Ninth Circuit Court of Appeals reversed, holding in part that the McCarran Amendment did not grant jurisdiction in a state which “expressly disclaims jurisdiction over Indian lands within its constitution and enabling act.” Northern Cheyenne Tribe v. Adsit, 668 F.2d 1080, 1084 (9th Cir.1982).

The case was ultimately appealed to the United States Supreme Court, which held that the District Court properly dismissed the actions in deference to the state adjudicatory process. Arizona v. San Carlos Apache Tribe, 463 U.S. 545, 103 S.Ct. 3201, 77 L.Ed.2d 837 (1983). In a footnote, the Court stated that “resort to the federal forum should remain available if warranted by a significant change in circumstances, such as, for example, a decision by a state court that it does not have jurisdiction over some or all of these claims after all.” Id., 103 S.Ct. at 3215, note 20.

On remand, the Court of Appeals for the Ninth Circuit stated that it believed dismissal to be unwise. “A stay of the federal actions would be preferable to a dismissal here so the federal forum would most readily be available if warranted by a ‘significant change of circumstances’____” Northern Cheyenne Tribe v. Adsit, 721 F.2d 1187, 1188 (9th Cir.1983). The district courts were instructed to stay the actions until “state court proceedings have been concluded.” Id., at 1189.

The directives of the Ninth Circuit Court of Appeals in Adsit suggest that this Court should further stay the present proceedings. The Court recognizes that this case is not identical to the actions originally dismissed by District Judges Hatfield and Battin, since it does not expressly request a general adjudication of water rights on the Flathead Indian Reservation. On the other hand, were this Court presently to rule in the Tribes’ favor, it would effectively thwart the efforts of the Montana Water Rights Compact Commission and the entire state adjudicatory process. Should the Supreme Court of Montana rule that the state proceedings are inadequate for adjudication of federally reserved water rights, then it may be appropriate for this action to proceed, but not before.

Recently, this Court decided the case of Confederated Salish and Kootenai Tribes of the Flathead Reservation v. Flathead Irrigation and Power Project, et al., 616 F.Supp. 1292, wherein the Court held that adjudication of water rights, including federally-reserved water rights, is a proper function of the courts of the State of Montana to which this Court would defer. The Court nonetheless issued a Temporary Restraining Order under the emergency circumstances therein claimed, to maintain the status quo while the Tribes’ alleged aboriginal fishing rights guaranteed by treaty were under consideration. The parties introduced evidence purporting to show the present disarray of Montana’s water adjudication system, and specifically a petition filed in the Supreme Court of Montana by the Department of Fish, Wildlife and Parks. This and other evidence indicates that the water adjudication process is in the midst of controversy but nonetheless gradually being stabilized and put in order. Under these circumstances, where the Supreme Court of Montana will soon decide these critical issues of disclaimer and adequacy of state proceedings, it would only exacerbate the existing problems should this Court meddle in the water adjudication arena.

It is thus clear that the parties’ present remedy is to press action at the state level, not to insist on a federal forum which must remain unavailable in the presence of these unresolved matters of state law.

THEREFORE, IT IS HEREBY ORDERED that all proceedings in this action are stayed until state court proceedings have been concluded or until the further order of this Court.

IT IS FURTHER ORDERED that the parties are to file a status report in this matter once each month, the first such report to be filed on or before September 30, 1985, with additional reports filed prior to the last day of each succeeding month until further order of this Court.


author: MENTZ, District Judge.

text:
    John WILSON v. J. RAY McDERMOTT & COMPANY, INC., et al.
    Civ. A. No. 83-5632 “I” (5).
    United States District Court, E.D. Louisiana.
    Aug. 20, 1985.

      Alan R. Sacks, New Orleans, La., for movant.
    Andre’ J. Mouledoux, Alan G. Brackett, Hebert, Mouledoux & Bland, New Orleans, La., for respondents.
   MENTZ, District Judge.

MEMORANDUM OPINION

On May 29, 1985, the Court denied J. Ray McDermott & Company, Inc.’s motion for summary judgment to compel J.R.F. Enterprises, Inc. and third-party defendant, Certain Underwriters at Lloyd’s, to indemnify, defend and hold harmless McDermott on the basis that the Louisiana Oilfield Anti-Indemnity Act, LSA-R.S. 9:2780, nullifies the indemnity provisions of the agreement entered into between J.R.F. Enterprises, Inc. and McDermott. Defendants, J.R.F. Enterprises, Commercial Union Assurance Company, and David A. Beaumont, filed a cross-motion for summary judgment nullifying in to to the indemnity provisions contained in the J. Ray McDermott and Company, Inc. Blanket Subcontractor’s Agreement. J.R.F. Enterprises, Commercial Union and Beaumont claim that the Louisiana Oilfield Indemnity Act of 1981, La.Rev. StatAnn. § 9:2780 (West Supp.1985), completely bars McDermott’s indemnity claim. After oral argument, the Court directed the parties to file any additional briefs they deemed necessary by June 3, 1985 at which time the motion filed by J.R.F. Enterprises, Beaumont and Commercial Union would be taken under submission. The Court has now considered the memoranda, pleadings, exhibits, and documents submitted in this matter, and based on the record and the law concludes that the motion filed by J.R.F. Enterprises, Beaumont and Commercial Union should be GRANTED IN PART. The Court has also reconsidered its ruling on McDermott’s motion and upon reflection, the Court has decided to modify its previous ruling and GRANT IN PART McDermott’s motion.

The plaintiff herein was a member of the welding crew employed by J.R.F. Enterprises to assist in the construction of a fixed platform for Exxon. The platform was being constructed on the outer continental shelf by McDermott, which hired J.R.F. Enterprises to provide a crew of structural welders to assist in the construction of the Exxon platform. On September 30, 1983, plaintiff was allegedly injured while involved in the construction of the platform off the coast of Louisiana. The Blanket Subcontractor’s Agreement entered into between McDermott and J.R.F. Enterprises contains reciprocal indemnity provisions, which are at issue, providing each contracting party shall defend and hold the other harmless from any claims or actions brought against the other by one of its employees, regardless of fault. In the agreement McDermott is designated as the “contractor” and J.R.F. Enterprises is designated as the “subcontractor”.

Pursuant to the first motion filed by McDermott, the Court found the indemnity agreement to be governed by Louisiana law not maritime law. See Home Insurance Co. v. Garber Industries, Inc., 588 F.Supp. 1218, 1220-21 (W.D.La.1984); Frazier v. Columbia Gas Development Corp., 596 F.Supp. 429, 430-31 (W.D.La.1984). Whether a particular contract is of the maritime genre is dependent on the nature and character of the contract, not the situs of performance or execution of the contract. Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 890, 6 L.Ed.2d 56, 60 (1961); Stiltner v. Exxon Corp., 593 F.Supp. 18, 19 (E.D.La.1983). A maritime contract is generally defined as one “relating to a ship in its use as [an agent of maritime enterprise], or to commerce or navigation on navigable waters, or to transportation by sea or to maritime employment”. 593 F.Supp. at 19; 1 Benedict on Admiralty, § 183 (7th Ed. 1981). See also General Engine & Machine Works, Inc. v. Slay, 222 F.Supp. 745, 747 (S.D.Ala.1963). Courts considering the question have almost uniformly held without detailed discussion that drilling and other oilfield-related contracts are to be construed by admiralty law i/’the contract affects operations aboard a vessel. Corbitt v. Diamond M. Drilling Co., 654 F.2d 329, 332 (5th Cir. 1981); Stiltner v. Exxon Corp., supra. The Stiltner court states that perhaps the lack of discussion is attributable to the fact that the contracts indigenous to the offshore oil industry do not even remotely resemble typical maritime contracts except for the fact that sometimes the services of a vessel are required to facilitate offshore drilling. 593 F.Supp. at 19 n. 1. Conversely, those same types of contracts affecting non-vessels are controlled by state law pursuant to the Outer Continental Shelf Lands Act (“OCSLA”). Dickerson v. Continental Oil Co., 449 F.2d 1209, 1221 (5th Cir. 1971), cert. denied, 405 U.S. 934, 92 S.Ct. 942, 30 L.Ed.2d 809 (1972); Stiltner v. Exxon Corp., supra.

The contract in question is not a maritime contract because the operations which were the subject matter of the master-service contract in no way related to the services of a vessel. Whether the contract was actually performed on a vessel is not decisive. Stiltner v. Exxon Corp., 593 F.Supp. at 20. While the contract no doubt contemplated the hiring of vessels and seamen to build the structure, the subject matter of this case has no direct relationship with these traditional subjects of maritime law. That the contract contemplated in part the use of instruments of admiralty is not sufficient to oust OCSLA-adopted state law in this case. Laredo Offshore Constructors, Inc. v. Hunt Oil Co., 754 F.2d 1223, 1231-32 (5th Cir.1985). The nature of the contract in question is not such that it could be said to be inherently maritime. See Stiltner v. Exxon Corp., 593 F.Supp. at 20.

Moreover, the Outer Continental Shelf Lands Act [“OCSLA”], 43 U.S.C. § 1333(a)(2)(A) (West Supp.1983), provides state law is applicable to resolve controversies arising on the outer continental shelf in the absence of conflicting federal law. Congress considered maritime law ill-adapted to deal with legal disputes arising from the exploration and development of underground resources on the outer continental shelf. This is the reason why Congress provided for the application of state law as surrogate federal law under the Outer Continental Shelf Lands Act. Laredo Offshore Constructors, Inc. v. Hunt Oil Co., supra. The concerns voiced by Congress over the inaptness of maritime law in the resource-developing context were general in nature and apply equally well to the technologically difficult task of platform construction and its inevitable attendant legal problems. 754 F.2d at 1283. Thus, federally adopted state law is not ousted by maritime law in this action. Accordingly, Louisiana law is applicable to “fill the gap” with regard to the propriety of contractual indemnity as to non-vessel owners’ activities on a fixed platform on the outer continental shelf. Rigby v. Tenneco Oil Co., 607 F.Supp. 1247, 1250 (E.D.La.1985); See Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 477, 101 S.Ct. 2870, 2874, 69 L.Ed.2d 784, 791 (1981). Contracts for the performance of services on or in the construction of fixed offshore platforms are controlled by Louisiana law. Rodrigue v. Aetna Casualty, 395 U.S. 352, 89 S.Ct. 1835, 23 L.Ed.2d 360 (1969); Note, 43 La.L.Rev. 189, 208. See also Laredo Offshore Constructors, Inc. v. Hunt Oil Co., supra. Moreover, the Court does not see any conflict between state law and general maritime law of indemnity. It is well settled that maritime law is not applicable to fixed platforms on the outer continental shelf. See Rodrigue v. Aetna Casualty, supra; Laredo Offshore Constructors, Inc. v. Hunt Oil Co., supra; Rigby v. Tenneco Oil Co., supra.

Thus, in determining the limits of contractual indemnity in this case, the Court finds it appropriate to apply the Louisiana Oilfield Anti-Indemnity Act, as it perceives no conflicting applicable federal law with regard to McDermott’s right to seek indemnity. Further, the recognition afforded indemnity agreements under general maritime law does not prevent the application of the Oilfield Anti-Indemnity Act to the blanket agreement at issue here. See Home Insurance Co. v. Garber Industries, Inc., supra; Frazier v. Columbia Gas Development Corp., supra. In addition, the execution of the “Blanket” contract prior to the effective date does not preclude its application, where as here, the contract did not specify “terminable performance of a specific job or activity”. See R.S. 9:2780(1); Home Insurance Co. v. Garber Industries, Inc., 588 F.Supp. at 1222; Rigby v. Tenneco Oil Co., 607 F.Supp. 1247, 1248 (E.D.La. 1985); Durant v. Chevron, U.S.A., Inc., 594 F.Supp. 527, 535-36 (E.D.La.1984); Tobin v. Gulf Oil Corp., 535 F.Supp. 116, 117 (E.D.La.1982). On May 29,1985, the Court found that McDermott was not entitled to any defense of indemnification from J.R.F. or its insurers since the agreement was null and void and against public policy per R.S. 9:2780. At this time, the Court has decided to reconsider its ruling denying McDermott any defense of indemnification from J.R.F. Enterprises or its insurers.

In that regard, the Court does not find that a denial of McDermott’s motion for summary judgment automatically requires the Court to grant the cross-motion of J.R.F. Enterprises, Beaumont and Commercial Union. The Court must determine what effect R.S. 9:2780 has on the contractual indemnity provisions. J.R.F. Enterprises, David Beaumont and Commercial Union assert that section 2780 nullifies the indemnity provisions in their entirety because the “Blanket” contract contains provisions which purport to provide for defense and indemnity against McDermott’s own negligence. These assertions are not fully supported by the statutory language, however. Subsection (B) of the Act plainly states that an oilfield indemnity agreement “is void and unenforceable to the extent that it purports to or does provide” for defense and indemnity against the negligence or other fault of the indemnitee. This language compels the conclusion that section 9:2780 nullifies an oilfield indemnity agreement only to the extent that the agreement purports to defend and indemnify a party against the consequences of its own negligence. Application of section 2780 leaves the indemnity agreement valid and enforceable in all other respects. Home Insurance Co. v. Garber Industries, Inc., 588 F.Supp. at 1222; Frazier v. Co lumbia Gas Development Corp., 596 F.Supp. at 431-32.

As the Court in Rigby recently held, the application of the Oilfield Anti-Indemnity Act will serve to nullify only the obligation of the contractor, Tenneco, from its own negligence or other fault if the contractor is found to be solely or concurrently negligent or otherwise at fault in this matter. 607 F.Supp. at 1250. However, the act does not itself bar the contractor’s action for contractual indemnity against the subcontractor for the subcontractor’s fault. In the case at bar, the subcontractor, J.R.F. Enterprises, has not established a legal basis under state law or otherwise to void the obligation to indemnify the contractor, McDermott, for J.R.F. Enterprises’ own fault.

Thus, in the present case as the Court has already held, McDermott cannot enforce the agreement to indemnify and defend . McDermott against its own negligence. This part of J.R.F. Enterprises’, Beaumont and Commercial Union’s motion is GRANTED. Yet, J.R.F. Enterprises must indemnify and defend McDermott to the extent that the agreement covers claims that are not occasioned by the negligence or other fault of McDermott, or one of its employees, officers and agents. As a practical matter, this means only that McDermott will be entitled to its costs of defense for J.R.F. Enterprises if the trier of fact finds that McDermott was not negligent or otherwise at fault. Thus, the Court’s original ruling as to McDermott’s motion for summary judgment is hereby MODIFIED to reflect the partial granting of McDermott’s motion. Accordingly,

The Court entertains the defendants’ motion for summary judgment to nullify the indemnity provisions in the Blanket Subcontractor’s Agreement and GRANTS IN PART and DENIES IN PART, said motion in accordance with the reasoning stated above.

Further, this ruling shall modify the Court’s order denying McDermott’s motion for summary judgment for indemnification; in other words, McDermott’s motion for summary judgment is GRANTED IN PART and DENIED IN PART in accordance with the reasoning stated above.

Further, the hearing on McDermott’s motion for reconsideration set for Wednesday, August 21, 1985 at 10:00 a.m. is hereby CANCELLED.

      . McDermott filed a motion for reconsideration of the Court’s denial of its motion for summary judgment during the drafting of this opinion. This motion is set for hearing on August 21, 1985. In that regard, the Court has taken into consideration the arguments made by McDermott and the counterarguments made by J.R.F. Enterprises in the drafting of its opinion and finds it unnecessary to hear oral argument on McDermott's motion for reconsideration.

      . In Sullen v. Missouri Pacific Railroad Company, 750 F.2d 428, 433-34 (5th Cir.1985), the Court held
      “that unless the contract of indemnity specifically provides for costs of defense as a separate item of indemnification, the indemnitor has no obligation to defend if the petition alleges facts, which, if proven, would establish liability of the indemnitee but preclude coverage under the indemnity agreement.” [Emphasis added].

        See also Laird v. Shell Oil Company, 770 F.2d 508 (5th Cir.1985). The Blanket Subcontractor’s Agreement between J. Ray McDermott & Company, Inc. and J.R.F. Enterprises, Inc. specifically provides for costs of defense as a separate item. See Paragraph VIII, Subsection (I), which states in pertinent part:
      Subcontractor shall be obligated to bear the expense of the investigations and defenses of all claims or demands or causes of action against which McDermott is indemnified herein, and all lawsuits and administrative proceedings arising therefrom,____ [Emphasis added].
      Therefore, McDermott shall be entitled to its costs of defense only if it is one hundred percent (100%) exonerated by the trier of fact.


author: H. FRANKLIN WATERS, Chief Judge.

text:
    Wynona V. BELL and Zola L. Culwell, Plaintiffs, v. KANSAS CITY FIRE AND MARINE INSURANCE COMPANY and Bill Williamson, Defendants.
    Civ. No. 85-2004.
    United States District Court, W.D. Arkansas, Fort Smith Division.
    Aug. 20, 1985.

      Stephen G. Hough, Daily, West, Core, Coffman & Canfield, Fort Smith, Ark., for plaintiffs.
    E.C. Gilbreath, Jones, Gilbreath & Jones, Fort Smith, Ark., for defendants.
   MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

Plaintiffs initiated this action on January 3, 1985, against defendants, essentially alleging a claim based upon the tort of “third-party” insurance “bad faith.” Plaintiffs specifically allege that defendant, Kansas City Fire and Marine Insurance Company, and its agent, defendant Williamson, failed to acknowledge and act promptly with respect to plaintiffs’ claims, failed to promptly investigate the claims, failed to pay the claims without reasonable investigation, and failed to effectuate a prompt and equitable settlement of plaintiffs’ claims.

The underlying facts involve a vehicular collision in Poteau, Oklahoma, wherein defendants’ insured, Helen Loyd Pate, collided with the rear of the vehicle operated by plaintiffs. In each of two counts plaintiffs seek $25,000.00 in compensatory damages and $250,000.00 as punitive damages.

By letter dated April 3, 1985, this court denied defendants’ motion to dismiss, concluded that jurisdiction is present and that the law of the state of Arkansas governs the disposition of this cause. The court denied the motion based upon Rule 12(b)(6), primarily because of the reluctance of courts of appeal to affirm dismissals based upon that rule.

On July 1, 1985, defendants renewed their motion to dismiss and moved for summary judgment. The matter is now ripe for resolution.

It is well-settled that this court must follow the choice of law rules of the state of Arkansas. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Arkansas has adopted a flexible approach in recent years which requires attention to “choice-influencing” considerations in actions ex delicto. See Wallis v. Mrs. Smith’s Pie Co., 261 Ark. 622, 550 S.W.2d 453 (1977) (en banc). See also Wright v. Newman, 735 F.2d 1073 (8th Cir.1984). These “considerations” include (1) predictability of results, (2) maintenance of interstate and international order, (3) simplification of the judicial task, (4) advancement of the forum government’s interests, and (5) application of the better rule of law.

The court has recognized the choice of law issue presented in this action. The court had indicated in its letter of April 3, 1985, that it believed that the law of the state of Arkansas would govern the case. Upon reconsideration in the context of defendants’ renewed motion to dismiss and motion for summary judgment, the court concludes that Oklahoma law controls.

In actions ex contractu, under traditional choice of law rules, the law of the place of the “making” of the contract has been considered determinative. See State Mutual Fire Ins. Ass’n v. Brinkley Stave & Heading Co., 61 Ark. 1, 31 S.W. 157 (1895). More recently, however, Arkansas courts have approved the application of the “most significant relationship” test to choice of law questions in contract cases. See Standard Leasing Corp. v. Schmidt Aviation, 264 Ark. 851, 576 S.W.2d 181 (1979); Wright v. Newman, supra; Tiffany Industries v. Commercial Grain Bin Co., 714 F.2d 799 (8th Cir.1983); Williams v. State Farm Mutual Automobile Ins. Co., 737 F.2d 741 (8th Cir.1984); Snow v. Admiral Ins. Co., 612 F.Supp. 206, at 208 (W.D. Ark.1985).

As Professor Emeritus Robert Leflar notes in his treatise:

It is fair to say that the policies which underlie the standard choice-influencing considerations constitute, either tacitly or expressly, the basis for most contracts— choice-of-law decisions today, and that this is true regardless of which traditional explanations the opinions employ.

Leflar, American Conflicts Law § 150 at 311 (3rd ed. 1977).

Where there is no overriding consideration present, such as the preference for validation, stipulation of the parties, or countervailing strong public policy, the modern trend is to apply the law of the state with the most significant relationship to the transaction. See Snow, supra, at 209.

In this case that state is the state of Oklahoma. The policy provides that it is issued in accordance with the laws of the state of Oklahoma as “required by the Compulsory Insurance Law of Oklahoma.” Additionally, plaintiffs Bell and Culwell are citizens of Oklahoma, as is Helen Loyd Pate, the alleged insured. The accident occurred in Oklahoma. Oklahoma law and rules of the road would govern the liability, if any, of Helen Loyd Pate to the plaintiffs.

Although neither the proper choice of law applicable to the underlying accident nor the choice of law applicable to the underlying contract of insurance are necessarily dispositive of the choice of law decision with regard to the “bad faith” tort alleged, both militate in favor of the application of Oklahoma law. Only if Oklahoma law renders Helen Loyd Pate liable to the plaintiffs for damages sustained in the accident would the defendant, Kansas City Fire and Marine Insurance Company, be obligated to anyone on the contract of insurance. Further, only if Oklahoma law recognizes a duty on the part of Kansas City Fire and Marine Insurance Company, as insurer of Helen Loyd Pate, could there be any duty owed to any third parties. Any duty to fairly settle the claim, investigate it, or communicate with regard to it would necessarily have arisen .under Oklahoma law.

Because liability for the accident is governed by Oklahoma law and any liability on the contract would be governed by Oklahoma law, no duty to any third parties could conceivably have come into existence unless Oklahoma law recognizes the underlying liabilities. Put another way, if for some reason Oklahoma law recognized no liability on the part of Helen Loyd Pate for the underlying accident, then Kansas City Fire and Marine Insurance Company would have no liability as insurer. Similarly, if for some reason, Oklahoma law recognized no duty on the part of Kansas City Fire and Marine Insurance Company based on the contract, there is no duty owed to third persons which could theoretically be breached.

Even if an insurer owes any duty at all to third persons, this duty will not usually be implicated unless the insurer owes a duty of some sort to the insured. Had there not been a contract of insurance between Helen Loyd Pate and Kansas City Fire and Marine Insurance Company, obviously Kansas City Fire and Marine Insurance Company would owe no duty to the present plaintiffs.

It would be incongruous for this court to determine the liability of Helen Loyd Pate to the plaintiffs under Oklahoma law, and any contractual duty arising therefrom on the part of Kansas City Fire and Marine Insurance Company under Oklahoma law, and then apply the law of the state of Arkansas to determine the liability of Kansas City Fire and Marine Insurance Company to third parties who are citizens of Oklahoma merely because plaintiffs crossed the border into Arkansas to bring suit.

Although some of the alleged acts and omissions on the part of defendant Williamson occurred in Arkansas, the location of these acts and omissions is a “fortuitous fact.” Schmidt, supra. Thus, the court concludes that the law of the state of Oklahoma governs the duty owed by defendants to the plaintiffs.

The court believes that Allstate Insurance Co. v. Amick, 680 P.2d 362 (Okla. 1984), is dispositive. In Amick, plaintiffs brought a direct action against the liability insurance carrier for an automobile operated by the insured which was involved in an accident with the plaintiffs. The Oklahoma Supreme Court held that such an action is not recognized in Oklahoma:

This single duty of dealing fairly and in good faith with the insured arises from the contractual relationship. In the absence of a contractual or statutory relationship, there is no duty which may be breached.

Amick, supra, at 365.

Because Oklahoma law is controlling, and because Oklahoma does not recognize a third-party claim against an insurer based upon a breach of duty to act in “good faith,” the court concludes that defendants are entitled to judgment as a matter of law.

Although the court has concluded that the substantive law of the state of Oklahoma governs the disposition of this litigation, the court remains unconvinced that plaintiffs’ claims would be recognized in the state of Arkansas.

In Greer v. Mid-West Nat’l Fire & Casualty Ins. Co., 434 F.2d 215 (8th Cir.1970), the Eighth Circuit, applying Arkansas law, concluded that a third party may not maintain an action against a tortfeasor’s liability insurance carrier based on a theory of wrongful refusal to settle the claim. Because Arkansas had no direct-action statute which was applicable to the matter before the court, the Eighth Circuit in Greer declined to extend Arkansas law by judicial fiat:

It is not the function of a court to usurp the policymaking rights of the legislature. To nullify this statute (Ark.Stat. Ann. § 66-4001) should be the act of the legislature which passed it____ We will not disregard the expressed intention of the Arkansas legislature and in effect re-write this statute to reach the result plaintiff desires.

Greer, supra, at 217.

Currently, Aetna Casualty and Surety Company v. Broadway Arms Corp., 281 Ark. 128, 664 S.W.2d 463 (1983), is the leading Arkansas decision. Broadway Arms was a case involving the bad faith tort in an action brought by the insured against the insurer, i.e., a “first-party” claim of bad faith. The Arkansas Supreme Court said:

We have previously recognized that bad faith is an actionable tort in Arkansas. In discussing the tort of bad faith in Findley v. Time Ins. Co., 264 Ark. 647, 573 S.W.2d 908 (1978), we cited the earlier case of Members Mutual Ins. Co. v. Blissett, 254 Ark. 211, 492 S.W.2d 429 (1973), as authority for the premise that the tort of bad faith is an extension of the well established rule through which a liability insurance company can be held accountable in tort for failure to settle a claim within the policy limits. Although Blissett was decided on the question of negligence on the part of an insurer for failure to settle a third party claim within the policy limits of its insured, it did state that the action was a separate tort action.

Broadway Arms, supra, 664 S.W.2d at 465.

The court additionally held that neither the Arkansas Trade Practices Act, Ark. Stat.Ann. §§ 66-3001 et seq., nor Arkansas’ penalty-and-fees statute, Ark.Stat.Ann. § 66-3238, preempt the area upon which the tort of bad faith is founded.

In Atlas Carriers, Inc. v. Transport Ins. Co., 584 F.Supp. 50 (E.D.Ark.1983), Chief Judge Eisele, in a “first-party” bad faith case, reviewed Arkansas precedent in this area and concluded:

Although the (Arkansas Supreme) Court’s “adoption” of the tort of bad faith was in dictum, subsequent cases have also suggested that, given the proper factual situation, an action would lie in tort (citations omitted). Moreover, in Bandlow v. Mid-American Fire & Marine Ins. Co., No. LR-C-80-521 (E.D. Ark. Jan. 4, 1982) (mem. opin.), this Court acknowledged that although the bad faith tort would probably not be recognized by the Arkansas courts in the third-party insurance context, the Findley case had apparently recognized the tort in the first-party insurance context (emphasis added).

Atlas, supra, at 52 n. 3.

In Broadway Arms, supra, the Arkansas Supreme Court referred to a “third-party” tort: “Bad faith may give rise to either first or third party claims.” Broadway Arms, supra, 664 S.W.2d at 465.

In Employers Equitable Life Ins. Co. v. Williams, 282 Ark. 29, 665 S.W.2d 873 (1984), decided less than three weeks after Broadway Arms, the Arkansas Supreme Court again specifically referred to the “third-party” tort:

An insurance company may incur liability for the first-party tort of bad faith when it affirmatively engages in dishonest, malicious, or oppressive conduct in order to avoid a just obligation to its insured (citing Broadway Arms, supra). The third-party tort of bad faith is the negligent failure of an insurer to settle a third-party claim within the policy limits. See Members Mutual Ins. Co. v. Blissett, 254 Ark. 211, 492 S.W.2d 429 (1973); Findley v. Time Ins. Co., 264 Ark. 647, 573 S.W.2d 908 (1978); and M.B.M. Co. v. Counce, 268 Ark. 269, 596 S.W.2d 681 (1980).

Although these statements from Broadway Arms and Williams arguably support plaintiffs’ argument that Arkansas courts would recognize the third-party bad faith claim alleged in this case, it is clear that the Arkansas Supreme Court, in referring to the “third-party tort of bad faith” in the passages quoted, was referring to the type of “third-party claim” referred to in Blissett, i.e., the liability of an insurer in tort to its insured arising from the fraudulent, negligent, or bad faith refusal to investigate and settle a claim by a third party against the insured within the policy limits. This tort is based upon the conflict of interest between the insurer and the insured, as demonstrated by the following example postulated in Findley:

Suppose, for example, that the insurer has issued a $10,000 automobile liability policy. As the result of a traffic collision the insured is sued for $25,000. The plaintiff offers to settle for $10,000. If the insurance company refuses to settle for more than $8,000, it is risking only $2,000 of its own money against the possibility that its insured may be held liable for the full $25,000, a loss of $15,000 above the protection of the policy. That conflict of interest has led the courts to hold, as we did in Blissett and earlier cases, that the insurance company may be liable for fraud, bad faith, or negligence if it fails to investigate and settle a claim against its insured.

Findley, supra, 264 Ark. at 649, 573 S.W.2d 908.

Clearly, this type of “third-party” tort of “bad faith,” the type referred to in Broadway Arms and Williams, supra, is not presented in the instant ease. This court concurs with Chief Judge Eisele’s conclusion in Atlas that the bad faith tort of the type alleged in the instant case “would probably not be recognized by the Arkansas courts in the third party insurance context____” Atlas, supra, at 52 n. 3.

Accordingly, the court concludes that even if Arkansas law governs the instant action, which the court has found is not the case, no such cause of action as is pled by plaintiffs herein is or would be recognized by the Arkansas courts.

Finally, the court has serious doubts that plaintiffs have set forth sufficient facts to fall within the purview of the third-party “bad faith” tort, even if it were recognized in either Arkansas or Oklahoma. In the first-party context, such an action must be based on facts which indicate “affirmative misconduct by the insurance company, without a good faith defense, and ... the misconduct must be dishonest, malicious, or oppressive in an attempt to avoid its liability____” Broadway Arms, supra, 664 S.W.2d at 465. The court made clear that such a first-party claim “cannot be based on a good faith denial, offers to compromise a claim or for other honest errors of judgment by the insurer.” Negligence or bad judgment on the part of the insurer is not actionable. Broadway Arms, supra. “Actual malice,” “hatred, ill will or a spirit of revenge” is required. Broadway Arms, supra, 664 S.W.2d at 465.

Even if, as plaintiffs urge, the depositions indicate that the insurer was aware of the accident within a week of its occurrence (which was May 1, 1984), and if defendant Williamson did not contact the plaintiffs until August, 1984, and if further, defendant Williamson did not request any medical records until October 12, 1984, the court doubts that such action exemplifies actual malice, hatred, ill will, or a spirit of revenge.

It is not factually disputed that defendant Williamson set up $2,000 reserves for each claimant upon interviewing them, and it is agreed that all estimates of damage to the automobile were in the $400 range. Given the fact that there is no presumption of fault from the fact of a rear-end collision, at least in Arkansas, Schaeffer v. McGhee, 286 Ark. 113, 689 S.W.2d 537 (1985), the fact that plaintiff Culwell was unable to state whether there was a squeal of brakes prior to impact or whether plaintiffs’ vehicle was even moved by the impact, plaintiff Culwell described the damage as a “scratch” on the bumper, and the fact that neither party was issued a traffic citation, the court is highly doubtful that the conduct of defendants would be factually actionable even if the third-party tort was to be legally recognized in Oklahoma or Arkansas. However, because defendants are entitled to judgment as a matter of law on plaintiffs’ third-party bad faith insurance tort claims, the court need not decide whether plaintiffs have supported their opposition to defendants’ motion for summary judgment with sufficient factual documentation to preclude the award of summary judgment. The “facts,” when viewing them entirely as plaintiffs urge, simply do not give rise to a cause of action in their favor. The tort upon which they sue simply does not exist in Oklahoma nor in Arkansas at this time.

The court therefore concludes that defendants are entitled to summary judgment in accordance with Rule 56, Fed.R.Civ.P.

A separate judgment in accordance herewith will be concurrently entered.