author: HOLDERMAN, District Judge:

text:
    BYER MUSEUM OF the ARTS, Stephen Byer & Associates, Stephen B. Byer, and Barbara L. Byer, Plaintiffs, v. The NORTH RIVER INSURANCE COMPANY, Defendant.
    No. 85 C 6055.
    United States District Court, N.D. Illinois, E.D.
    Nov. 22, 1985.

      Nicholas D. Chabraja, Linda Listrom, Daniel R. Warren, Jenner & Block, Chicago, 111., for plaintiffs.
    James T. Crotty, Scott W. Hoyne, James S. Stickles, Jr., Timothy J. Nalepka, Crotty & Hoyne, Chicago, 111., for defendant.
   MEMORANDUM OPINION AND ORDER

HOLDERMAN, District Judge:

This case is before the Court on defendant’s motion to dismiss, or in the alternative, stay this action in light of a nearly identical state action pending between the parties in the Circuit Court of Cook County.

BACKGROUND

This case concerns an insurance policy issued by The North River Insurance Company (“defendant”) to the Byer Museum of the Arts and Stephen Byer & Associates (“plaintiffs”) insuring a building and its contents. The insured building is located in Evanston, Illinois and is occupied by plaintiffs: the Byer Museum and Stephen Byer & Associates.

On December 31, 1984, approximately three months after the insurance policy was issued, a fire occurred at the building causing extensive damage. In March and April of 1985 the plaintiffs submitted their claims to the defendant for the damage caused by the December fire. The defendant asserted that the claims were grossly inflated and, therefore, sought to have the policy declared null and void due to the plaintiffs’ fraud. Plaintiffs asserted that the claim was proper and objected to the delay in payment.

Their differences defined, the parties began some elaborate strategic posturing within the state and federal judicial systems. On May 31, 1985, defendant filed suit in federal court seeking a declaratory judgment annulling its liability under the policy. Five days later, defendant voluntarily dismissed the federal action pursuant to Fed.R.Civ.P. Rule 41(a)(1)(i), and on the same day refiled the complaint for declaratory judgment in the Circuit Court of Cook County, Illinois under docket number 85 CH 5589 (“state action”). Nearly one month later, plaintiffs decided to file their own action in federal court based on the very same insurance policy and involving the same factual questions and parties. The plaintiffs’ present federal action seeks the full amount claimed under the policy, attorneys’ fees, statutory penalties under Ill.Rev.Stat. ch. 73 § 767, compensatory damages and punitive damages. Federal jurisdiction was based on diversity of citizenship under 28 U.S.C. § 1332.

DISCUSSION

Having lost the race to the courthouse, the plaintiffs would like to start another race; a race to judgment between this Court and the Illinois state court. To prevent such a race to judgment and to conserve scarce legal and judicial resources, the defendant has moved to dismiss or stay the federal action based on alternative grounds, namely: § 2-619(a)(3) of the Illinois Code of Civil Procedure; and the Colorado River doctrine which allows federal courts to dismiss or stay federal actions in deference to concurrent state proceedings. For the following reasons defendant’s motion to dismiss is granted.

Because jurisdiction in the present litigation is premised on diversity of citizenship, Illinois state law is applicable under the well established principles of Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Guarantee Trust Co. of N.Y. v. New York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945); and Byrd v. Blue Ridge Elec. Coop., Inc., 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958). Directly in issue is whether the Erie doctrine requires the application of an Illinois statutory provision which allows the dismissal of a cause of action involving the same cause and same parties as another pending action.

Section 2-619(a)(3), Ill.Rev.Stat. ch. 110, provides:

Defendant may, within the time for pleading, file a motion for dismissal of the action or for other appropriate relief upon any of the following grounds.
sjc * $ Of # #
(3) That there is another action pending between the same parties for the same cause.

The Illinois Supreme Court has interpreted “same cause” to mean that “actions are ‘for the same cause,’ when relief is requested on substantially the same set of facts.” Skolnick v. Martin, 32 Ill.2d 55, 203 N.E.2d 428 (1964), cert. denied, 381 U.S. 926, 85 S.Ct. 1562, 14 L.Ed.2d 684 (1965).

Though it is clear that the state and federal actions fall within the parameters of § 2-619(a)(3), plaintiffs contend that this statutory provision is merely a procedural device for use by the Illinois state courts and has no applicability to federal courts exercising diversity jurisdiction. This argument is contrary to the overwhelming weight of judicial decisions determining the applicability of § 2-619(a)(3) to federal courts sitting in diversity. Simenc v. Holiday Inns, Inc., No. 83 C 5618, slip op. (N.D.Ill. Feb. 10, 1984) (Judge Moran); Brite Industries v. Anderson, No. 81 C 5593, slip op. (N.D.Ill. March 25, 1982) (Judge Kocoras); Holmes v. Chicago Transit Authority, 505 F.Supp. 877 (N.D.Ill. 1981) (Judge Leighton); Carpets Interna tional v. Quill Corp., No. 81 C 3489, slip op. (N.D.Ill. Nov. 2, 1981) (Judge Decker); Repp v. F.E.L. Publications, Ltd., No. 80 C 3335, slip op. (N.D.Ill. Oct. 8, 1980) (Judge Leighton); Holston v. The Rockford Surgical Service, No. 80 C 173, slip op. (N.D.Ill. Sept. 22, 1980) (Judge Shadur); General Investment Funds Real Estate Holding Company v. Exchange National Bank of Chicago, No. 79 C 1286, slip op. (N.D.Ill. April 14, 1980) (Judge Aspen); Kaiser v. Raymond Bolzan, Inc., No. 77 C 4122, slip op. (N.D.Ill. Dec. 4, 1978) (Judge Kirkland); Klondike Helicopters, Ltd. v. Fairchild Hiller Corp., 334 F.Supp. 890 (N.D.Ill.1971) (Judge McGarr); Seaboard Finance Company v. Davis, 276 F.Supp. 507 (N.D.Ill.1967) (Judge Will). See also Simmons v. Pulmosan Safety Equip Corp., 471 F.Supp. 999 (S.D.Ala.1979) (applying Alabama’s version of § 2-619(a)(3) to federal courts).

Judge Will’s opinion in Seaboard, supra, 276 F.Supp. 507, is considered the definitive work regarding the relationship between § 2-619(a)(3) and federal courts exercising diversity jurisdiction. Seaboard carefully analyzed the history and development of the Erie doctrine and concluded that Erie and its progeny require a federal court to consider several factors in determining whether state law applies. The factors are:

(1) whether the variance between the state and local rule is such that it will affect the outcome of the litigation; (2) whether the variance is of a nature that it would encourage forum shopping; and (3) whether there is some countervailing federal consideration which would justify the variance. Where a substantial variance exists, the court must balance the first two factors against the third. Only if the countervailing considerations outweigh the possibilities of divergent administration of the laws and forum shopping, should the federal rule be applied.

276 F.Supp. at 515. Weighing these factors, the court held that § 2-619(a)(3) must be applied by federal courts exercising diversity jurisdiction.

The Seventh Circuit has implicitly approved Seaboard’s analysis. In Commonwealth Edison v. Gulf Oil Corp., 541 F.2d 1263, 1271-72 (7th Cir.1976) the Court distinguished Seaboard's § 2-619(a)(3) analysis on the basis that Seaboard was premised on diversity jurisdiction whereas jurisdiction in Commonwealth Edison was based on a federal question under the Federal Arbitration Act, thereby relieving the district court of the obligation to consider state law.

The Seventh Circuit has had only one other occasion to consider the application of § 2-619(a)(3) to federal courts. In Bio-Analytical Services, Inc. v. Edgewater Hospital, 565 F.2d 450, 450 n. 6 (7th Cir.), cert. denied, 439 U.S. 820, 99 S.Ct. 84, 58 L.Ed.2d 111 (1978) the court determined that the defendant had waived any right to raise a § 2-619(a)(3) motion to dismiss because of its failure to raise the motion in the district court and, therefore, held it was unnecessary to express any views as to the applicability of § 2-619(a)(3).

Despite the apparent authority of § 2-619(a)(3) to dismiss this case, plaintiffs argue that § 2-619(a)(3) cannot be applied because the provision conflicts with the “virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.” Colorado River Water Conservation District v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 1246, 47 L.Ed.2d 483 (1976). The Court disagrees with plaintiffs' contention. The two provisions are not in conflict, but are rather complementary avenues for dismissal. The Colorado River doctrine, in fact, provides the evaluative framework that should be used in conjunction with Judge Will’s Seaboard analysis in determining whether dismissal is proper under § 2-619(a)(3).

Colorado-River represents an affirmation and expansion of the traditional federal court abstention doctrine. In Colora do River the Supreme Court recognized that federal courts could dismiss federal actions in deference to parallel state proceedings when the two courts were exercising concurrent jurisdiction, even though none of the traditional abstention categories were satisfied. Dismissals under this new doctrine are premised on “considerations of [w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.” Id., at 817, 96 S.Ct. at 1246. Courts have been instructed to consider a variety of factors in determining when such federal deference should be exercised. The relevant considerations include: the federal interest in proceeding with the litigation; whether state or federal law provides the rule of decision on the merits; the avoidance of piecemeal litigation; the vexatious or reactive nature of either the state or federal action; the inconvenience of the federal forum; and the order in which jurisdiction was obtained by the concurrent forums. Id., at 818-19, 96 S.Ct. at 1246-47; Moses v. Cone Memorial Hospital v. Mercury Const., 460 U.S. 1, 103 S.Ct. 927, 938 n. 20, 941-42, 74 L.Ed.2d 765 (1983); Micro Software Computer Systems v. Ontel Corp., 686 F.2d 531, 537 (7th Cir.1982). It is important to note that these factors encompass Judge Will’s considerations in Seaboard, supra, when he made the initial determination that § 2-619(a)(3) applied to the federal courts. This Court believes that all of these factors have applicability to a § 2-619(a)(3) determination. Each of these factors will be considered seriatum.

1. FEDERAL INTEREST IN THE LITIGATION.

Plaintiffs’ complaint does not present an important federal interest. This action’s presence in federal court hinges only on the diverse citizenship of the parties. Although federal courts have been admonished not to treat diversity litigants as second-class litigants, neither should the federal courts allow litigants to waste precious judicial resources and subvert the fundamental principles of federal jurisdiction.

The traditional purpose of diversity jurisdiction, protecting out-of-state litigants from prejudicial treatment, is not present in this case. As citizens of Illinois, the plaintiffs (state court defendants) are undeserving of the protections afforded by diversity jurisdiction. The Circuit Court of Cook County is quite capable of acting impartially towards each of the federal plaintiffs. Moreover, the Court believes that the plaintiffs have circumvented Congress’ express desire to keep litigants, such as the plaintiffs, out of federal court. Congress, in enacting the removal provision, 28 U.S.C. § 1441(b), specifically provided that actions cannot be removed from state to federal court if the state defendants are citizens of the state in which the state litigation is brought. That is exactly the position plaintiffs are in.

Because plaintiffs have been foreclosed by Congress from removing this action and because the traditional justification for diversity jurisdiction is not present, the Court holds that there is no substantial federal interest served by proceeding with this case.

2. APPLICATION OF FEDERAL VERSUS STATE LAW.

The Supreme Court in its most recent opinion interpreting the Colorado River doctrine held that the presence of exclusively state-law issues may counsel in favor of deferring a federal action to a parallel state proceeding. Moses v. Cone, supra, 103 S.Ct. at 942. In this dispute both the state and federal litigants seek to determine the validity of a single insurance policy; a determination which requires the application of state-law principles. Neither party has asserted that any federal laws are in issue. Because this Court is compelled to apply Illinois substantiave law in its determination on the merits of this ease, the Court must consider this factor as weighing in favor of dismissal.

3. AVOIDANCE OF PIECEMEAL LITIGATION.

The ongoing state action between the parties will determine the validity of the insurance policy. Plaintiffs’ federal action seeks a de novo determination of validity and, assuming the plaintiffs prevail, a finding that the failure to pay was vexatious and unreasonable, thereby entitling plaintiffs to an Illinois statutory penalty (Ill.Rev.Stat. ch. 73 § 767) and common law compensatory and punitive damages.

Plaintiffs’ “counterclaim” for damages cannot justify this court in duplicating the trial process that is already underway in the state action. To do so “would be a grand waste of efforts by both courts and parties in litigating the same issues regarding the same [insurance policy] in two forums.” Microsoftware, supra, 686 F.2d at 538. There is no indication that the Circuit Court of Cook County is incapable of thoroughly and fairly litigating all the issues presented in both the original state court action and plaintiffs’ later filed federal action.

To have this Court make a separate determination as to the validity of the insurance policy will only result in an undesirable race to judgment. As the Seventh Circuit has held:

Since the first court to decide the dispute will bind the other, the maintenance of an extra action will have a perceptible effect upon proceedings in the original action if the parties there attempt to accelerate or stall the proceedings in order to influence which court finishes first. The result would be quite similar to forum shopping, and is just as unseemly.

Microsoftware, 686 F.2d at 538. Moreover, if this Court were to stay the federal litigation pending the state court’s validity determination and then exercise federal jurisdiction to decide plaintiffs’ damages claim we would be promoting, not avoiding, piecemeal litigation.

4. VEXATIOUS OR REACTIVE LITIGATION.

Plaintiffs’ federal complaint is nothing more than a tactical maneuver responding to the jurisdictional machinations of the defendant. As plaintiffs themselves point out, the only reason the federal court is of interest is the fact that some of the federal judges in the Northern District of Illinois have allowed recovery for both the statutory penalty under Ill.Rev.Stat. ch. 73 § 767 and common law remedies for vexatious and unreasonable failure to pay insurance claims. The First District of Illinois, in which the Circuit Court of Cook County sits, has held that recovery under Ill.Rev. Stat. ch. 73 § 767 precludes recovery for common law punitive damages.

We condone neither of the parties conduct; however we will not allow the plaintiffs to wield the federal forum as its pawn in their strategic maneuvering with the defendant. Plaintiffs’ rights can be defined and protected in the state court action. There is no reason for this Court to reward plaintiffs with an additional opportunity to litigate the same issues that are being determined in the state action. The presence of a parallel federal action can only impede a speedy and fair determination in the state court proceeding.

5. INCONVENIENCE OF THE FEDERAL FORUM.

Less than five blocks separate the respective courthouses of the Circuit Court of Cook County and the Federal District Court in Chicago, so it cannot be said that either forum is more or less convenient than the other. This is the only factor that does not counsel in favor of dismissal.

6. ORDER OF FILING.

Although the Seventh Circuit has held that the order of the filing has little significance by itself, it is nevertheless a factor the Supreme Court has instructed courts to consider. It may well be that this factor is analogous to the forum non conveniens principle of giving considerable weight to the original plaintiff’s choice of forum. Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055 (1947). Whatever the importance of this factor, and we assume it is minimal, it nonetheless weighs in favor of dismissing the federal action.

CONCLUSION

Given the plethora of district court opinions applying § 2-619(a)(3) to diversity actions and given the ambiguous, but apparently supportive position of the Seventh Circuit, this Court finds Seaboard’s analysis compelling and believes § 2-619(a)(3) must be applied to this action. Moreover, in applying the later developed Colorado River factors to our § 2-619(a)(3) dismissal determination, we conclude that dismissal is appropriate. Judicial interests in conserving scarce resources and insuring the proper exercise of federal jurisdiction will be served best by allowing the Circuit Court of Cook County to decide this state issue unimpeded by the presence of a parallel federal proceeding.

For the reasons set forth herein, defendant’s motion to dismiss is GRANTED.

      . Ill.Rev.Stat. ch. 73 § 767 provides:
      In any action by or against a company wherein there is in issue the liability of a company on a policy or policies of insurance or the amount of the loss payable thereunder, or for an unreasonable delay in settling a claim, and it appears to the court that such action or delay is vexatious and unreasonable, the court may allow as part of the taxable costs in the action reasonable attorney fees, other costs, plus an amount not to exceed any one of the following amounts:
      (a) 25% of the amount which the court or jury finds such party is entitled to recover against the company, exclusive of all costs;
      (b) $5,000;
      (c) the excess of the amount which the court or jury finds such party is entitled to recover, exclusive of costs, over the amount, if any, which the company offered to pay in settlement of the claim prior to the action.
      (2) Where there are several policies insuring the same insured against the same loss whether issued by the same or by different companies, the court may fix the amount of the allowance so that the total attorney fees on account of one loss shall not be increased by reason of the fact that the insured brings separate suits on such policies.

      . The Illinois Code of Civil Procedure was revised in 1982, providing for a new classification system. Section 2-619(a)(3) is the successor provision to former section 48(1)(c). The relevant language of the two provisions is unchanged.

      . The three traditional abstention categories are:
      (1) where ‘"cases present a federal constitutional issue which might be mooted or presented in a different posture by a state court determination of pertinent state law’
      (2) "where there have been presented difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar”; and
      (3) "where, absent bad faith, harassment, or a patently invalid state statute, federal jurisdiction has been invoked for the purpose of restraining state criminal proceedings.”

        Colorado River, 424 U.S. at 814-17, 96 S.Ct. at 1244-45.

      . Evans Transportation Co. v. Scullin Steel Corp., 693 F.2d 715, 717 (7th Cir.1982).

      . The fact that the state court has lesser remedies available than what might have been available in the federal forum is not a reason for denying dismissal under § 2-619(a)(3). In Cummings v. Iron Hustler Corp., 118 Ill.App.3d 327, 73 Ill.Dec. 829, 454 N.E.2d 1078 (3rd Dist. 1983) the appellate court approved the dismissal of plaintiffs circuit court retaliatory discharge action because he had already instituted a complaint of a civil rights violation with the Illinois Human Rights Commission. This was true even though the plaintiff could seek punitive damages in the state court retaliatory discharge action, but could not receive punitive damages from the Human Rights Commission. The court holding that:
      This distinction, without more, does not mandate a reversal on grounds that the "causes” are different or that the trial court abused its discretion in ordering dismissal. We do not find that the purpose of section [2-619(a)(3) ] of avoiding duplicative litigation is outweighed by the public policy furthered by allowing the extraordinary remedy of punitive damages, in addition to compensatory relief, in retaliatory discharge awards.

        118 Ill.App.3d at 333, 73 Ill.Dec. at 833, 454 N.E.2d at 1082. (Citations omitted.)

      . Evans Transportation Co. v. Scullin Steel Co., 693 F.2d 715, 718 (7th Cir.1982).


source: Caselaw Access Project

author: EDWARD WEINFELD, District Judge.

license: Public Domain

text:
    Philip RASTELLI, Petitioner, v. WARDEN, METROPOLITAN CORRECTIONAL CENTER, NEW YORK, NEW YORK; United States Department of Justice, Bureau of Prisons; and United States Parole Commission, Respondents.
    No. 85 Civ. 0613 (EW).
    United States District Court, S.D. New York.
    Nov. 23, 1985.

      Stanley A. Teitler, New York City, for petitioner; Amy Adelson, of counsel.
    Rudolph W. Giuliani, U.S. Atty., S.D. N.Y., New York City, for respondents; William E. Simon, Jr., of counsel.
   OPINION

EDWARD WEINFELD, District Judge.

Petitioner, Philip Rastelli, seeks a writ of habeas corpus, claiming that he was denied his constitutional right to due process of law in the revocation of his parole. This is petitioner’s second request for a writ; the procedural posture of the case makes necessary a review of the background of the previous application, which was disposed of by Judge Sofaer, in an extensive opinion familiarity with which is assumed.

Background

Petitioner was convicted in 1976 of conspiracy to violate and violations of the Hobbs Act, and of criminal restraint of trade under the Sherman Act. On August 27, 1976, petitioner was sentenced to ten years’ imprisonment, to run consecutively to a state criminal sentence of four years. On June 15, 1977, he was released from state confinement, and began serving his federal sentence. On April 21, 1988, Rastelli was mandatorily released from confinement, having served his sentence less the statutory good time allowance. Under the mandatory release, Rastelli was “deemed as if released on parole until the expiration of the maximum term or terms for which he was sentenced less one hundred and eighty days,” and thus was subject to parole supervision through December 16, 1986.

After Rastelli’s release he was the subject of surveillance by federal and state law-enforcement authorities. On August 16, 1984, Rastelli was arrested pursuant to a warrant issued at the request of his parole officer, Victor Zaccheo.

The First Revocation Proceeding

The Parole Commission charged Rastelli with two violations at his first parole revocation proceeding: (1) that he associated with individuals with criminal records, and (2) that he associated with individuals engaged in criminal activity. The first alleged that Rastelli had knowingly associated with seven persons with criminal records on ten occasions. The second alleged that Rastelli had associated with individuals, both named and unnamed, on February 16 and 17, 1984, who after leaving Rastelli’s place of employment were seen counting policy slips in a candy store located in the same neighborhood. After a formal hearing, at which Rastelli was represented by counsel, the hearing examiners found that Rastelli had violated his parole in that he had on ten occasions associated with persons having criminal records; they made no findings as to the second charge. The examiners recommended that Rastelli’s mandatory release be revoked and that he be imprisoned until the expiration of his term, with credit for the time on mandatory release.

The recommendations of the examiners were sustained by the Regional Commissioner and the National Commissioners, acting as an “original jurisdiction” review panel. Although the National Commissioners expressly found that “[r]eparole guidelines indicate a range of 0-9 months to be served before re-release,” the Commissioners decided to exceed the guidelines, and upheld the recommendation that Rastelli be reimprisoned for the remainder of his term.

During the pendency of his administrative appeal to the full Parole Commission, Rastelli filed a petition for writ of habeas corpus in this district. The petition was heard by Judge Sofaer who, on June 9, 1985, entered an order granting the writ. Judge Sofaer affirmed only one of the five charges on which Rastelli had been convicted. This charge alleged that on April 28, 1984, Rastelli met with James Napoli, Sr., at the Hi-Way Lounge, a Brooklyn restaurant. Rastelli, who had been incarcerated at the Lewisburg Correctional Institution at the same time as Napoli, admitted both the meeting with Napoli and his knowledge of Napoli’s criminal record. On this ground, Judge Sofaer found that Rastelli had committed only a single administrative violation of his' parole, to wit, the meeting with Napoli; however, he further held that the Parole Commission had acted arbitrarily and capriciously, and had abused its discretion in deciding to exceed its own guidelines of nine months upon recommitment and to incarcerate Rastelli for the remainder of his original sentence, a period in excess of two years.

With respect to the other charges upheld by the Parole Commission, Judge Sofaer found that the Commission had not sustained the burden of proving that Rastelli associated with individuals having criminal records. Judge Sofaer found as to three of the associations charged that Rastelli’s alleged associates did not in fact have criminal records. In addition, with respect to one Gabriel Infanti, with whom Rastelli was alleged to have met briefly on one occasion, Judge Sofaer found that the contact was “incidental” or “fleeting,” and therefore not an association within the meaning of the regulation establishing the violation.

Having held that Rastelli, who had been confined for nearly ten months at the time of the order, was not subject to incarceration for more than nine months, Judge Sofaer granted the writ, but stayed its issuance “for thirty days, during which time the Commission must commence a new parole revocation proceeding, or seek to justify his continued detention on some legally sufficient basis.”

The Second Revocation Proceeding

On June 28, 1985, within the thirty-day period specified in Judge Sofaer’s order, the Commission, by a Notice of Action, commenced a new parole revocation proceeding. The Commission specified seven charges of violation against Rastelli. The first concerned the same April 28, 1984, meeting with James Napoli, Sr., which had been considered at the November 1984 hearing and affirmed by Judge Sofaer. This time, the Parole Commission broadened the charge by alleging that Rastelli had violated his parole by associating with a person engaged in criminal activity, in violation of 28 C.F.R. § 2.40(a)(6). In all other respects, the factual foundation of the charge was identical to that previously sustained. The second and third charges concerned association with persons engaged in criminal activity, and recharged associations with Salvatore Vitale and Gabriel Infanti. Rastelli had been charged at the earlier hearing with violating his parole by meeting with the two at a diner in Queens on June 5, 1984, and also by meeting again with Salvatore Vitale on June 12, 1984. These same meetings were alleged in the new charges as associations with persons engaged in criminal activity, rather than, as under the first petition, associations with persons having criminal records.

The Parole Commission also advanced four new charges at the second hearing. These alleged that “in or about May 1984, you sent a list of persons to be made members of a criminal organization to Anthony Salerno and Matthew Ianniello,” and that “in or about May 1984, you had a conversation with Anthony Corallo.” Each of these factual allegations charged two separate and distinct violations of parole: first, that Rastelli had associated with Salerno, Ianniello, and Corallo, who were engaged in criminal activity; and second, that Rastelli had associated with Salerno, Ianniello, and Corallo, who had criminal records.

The Hearing of July 2, 1985

Rastelli was given a hearing on these new charges at his place of confinement, the New York Metropolitan Correctional Center, on July 2,1985, before Parole Commission Hearing Examiners Krueger and Santella. Two witnesses testified in support of the charges: Patrick Marshall, an FBI Special Agent in New York and the FBI’s coordinator of Bonanno organized crime family investigations, and Victor Zaccheo, who had been Rastelli’s Probation Officer during the period of Rastelli’s release.

Agent Marshall presented background information upon which he expressed his belief that Rastelli was the boss of the Bonanno family of the Cosa Nostra organization in New York, which consisted of five families each headed by a boss; in this connection he identified numerous documents, including testimony from previous criminal trials in which Rastelli was not a defendant, and documents based upon Congressional investigations of organized crime conducted in 1964 and 1983 in which Rastelli’s alleged criminal activities were portrayed. Marshall also testified, based upon reports by and conversations with other FBI agents, as to surveillances of Rastelli following his release in which he, Marshall, had not participated.

With respect to two of the first three charges, concerning association with Infanti and Vitale, Agent Marshall testified from reports compiled by other agents, who did not testify at the hearing but who had actually conducted the surveillances. He testified that the reports indicated that Rastelli had been seen meeting at the Fresh Ponds Diner with both Vitale and Infant!. On cross examination, he acknowledged that he had no. information showing that any illegal acts had been committed by Infanti, Vitale, or petitioner at or around the time of the meetings alleged.

Agent Marshall also testified about a tape recording upon which the Commission relied to sustain the charges of sending a list of persons to be made members of the Bonanno family and of association with Salerno, Ianniello, and Corallo. The original tape recording was not played at the hearing, despite a request by counsel; the government provided a purported transcript of the taped conversation, to whose admission into evidence counsel objected. According to the typewritten transcript, the participants were Anthony Salerno, Matthew Ianniello, and James Ida, all claimed by the government to be connected with the Genovese family of the Cosa Nostra. Agent Marshall testified that he had listened to the tape recording, and had identified only the voice of Anthony Salerno. The other voices he could not identify, but he testified that other agents had told him that they were the voices of Ianniello and Ida. It is undisputed that Rastelli was not a participant in the recorded conversation. Nonetheless, Agent Marshall testified to his understanding of the conversation purportedly set out in the, transcript, which in his opinion indicated that Rastelli had sent to Salerno for Salerno’s approval a list of people to be made members of the Bonanno family of the Cosa Nostra, and he further opined that the transcript of the tape showed that Rastelli had, in or about May 1984, associated with Anthony Corallo.

The sole direct testimony offered to support the first charge against Rastelli, that of associating with James Napoli, Sr., who was alleged to be engaging in criminal activity, came from Victor Zaccheo. Zaccheo testified that on April 28,1984, he and another Probation Officer observed Rastelli meeting with Napoli, a meeting which Rastelli had admitted at the first proceeding. On cross-examination, Zaccheo stated that he had “no idea” of what criminal activity, if any, Napoli had been engaged in at that time.

In sum, the only direct evidence against Rastelli at the second proceeding consisted of his admission that he had met with Napoli, supported by the observations of Zaccheo. The other evidence was the hearsay testimony by Marshall as to the meetings between Rastelli and Vitale and Infanti at the Fresh Ponds Diner, the typewritten transcript of the tape recording, not played at the hearing, and Marshall’s interpretation of the conversation set forth in the transcript, based upon what the Hearing Examiner called his “specialized knowledge.” This testimony was supplemented by the documents as to which Marshall testified, of which he had no personal knowledge, and which purported to show that Rastelli had been involved with the Bonanno family of the Cosa Nostra since at least 1964. Upon this hearsay material, the Hearing Examiners upheld all seven charges against Rastelli, upon a finding that “it is more likely than not and the evidence sustains that you were associating with persons involved in criminal activity ... and having a criminal record.” The examiners recommended that Rastelli’s parole be revoked, that he be reimprisoned for the remainder of his original sentence, and that his case be accorded “original jurisdiction” treatment by the Regional Commissioner, which involved de novo review of the hearing examiners’ findings by the Regional Commissioner and a panel of his colleagues, members of the National Parole Commission. On August 15, 1985, the National Commissioners affirmed the findings of the hearing examiners that Rastelli was in association with (1) persons engaged in criminal activity, and (2) persons with criminal records, and further found that such violations amounted to “new criminal conduct ... because [he] fostered an organization involved in professional criminal activity.” The findings were referenced to the transcript of the taped conversation which allegedly took place among Anthony Salerno, Matthew Ianniello, and James Ida, along with “stipulated source documents.” Rastelli took a further administrative appeal to the full National Parole Commission, and during the pendency of that appeal moved for enforcement of Judge Sofaer’s June 9 order.

Review of the Parole Commission’s Action

Under Judge Sofaer’s order the writ was to issue unless within thirty days from the entry of his order the Commission began “a new parole revocation proceeding, or [sought] to justify his continued detention on some legally sufficient basis.” This the Parole Commission did, in that within thirty days of June 9 it brought new charges of parole violation against Rastelli, already referred to, and afforded him a hearing on those charges.

Petitioner contends that the proceeding conducted with respect to the new charges did not comport with the requirements of due process, in that there was an absence of reliable evidentiary support for the revocation of parole and that he was denied the right to a fundamentally fair hearing. The Court therefore treats Rastelli’s motion as a renewed petition for a writ of habeas corpus, and reviews the Commission’s determination on that basis. Since, on October 31, 1985, the full National Parole Commission affirmed the prior decision of the National Commissioners, Rastelli has exhausted his administrative remedies, and the matter is ripe for review here.

In undertaking this review, this Court is mindful that the Parole Commission “is vested with the broadest discretion consistent with due process to act upon reliable evidence in revoking parole,” and also that the Court’s power to review is extremely limited:

The appropriate standard for review of the commission’s decisions is whether there has been an abuse of discretion. This means that a court may not substitute its own judgment for that of the commission, but may consider only whether there is a rational basis for the commission’s decision.

For the reasons set out below, the Court holds that the Hearing Examiners and the Parole Commission had no rational basis for their findings as to the charges against Rastelli, and finds that they violated his right to due process of law required by the United States Constitution.

As the Court’s summary indicates, the record of the hearing afforded Rastelli on July 2, 1985, reveals a veritable catalogue of serious error. The Court holds that the evidence presented at the hearing, far from proving each of the charges by a preponderance of the evidence, did not provide a rational basis for sustaining any of the charges brought against Rastelli.

With respect to the first three charges, of association with Napoli, Vitale, and Infanti, each of whom was alleged to be engaged in criminal activity, it suffices to note that no evidence whatever was introduced, either by testimony or through documents, of any criminal activity engaged in by these three individuals at any time on or about the dates of the alleged associations. Agent Marshall did testify that each of the three was known by the government to be a member of an organized crime family; at oral argument before this Court on the present motion, the government took the position that membership in a criminal organization, without more, is criminal activity within the meaning of the Parole Commission’s regulations. While the Commission’s interpretations of its own regulations are entitled to deference unless clearly unreasonable, the Commission has offered no justification for its view that a finding of criminal activity may be predicated upon a mere showing of membership in an organization believed by enforcement authorities to be engaged in a criminal enterprise. The record in this ease provides no rational basis for the Commission’s findings on charges 1(a), 1(b), and 1(c), and accordingly they may not stand.

The remaining charges upon which it was sought to revoke Rastelli’s parole concerned alleged associations with Anthony Salerno, Matthew Ianniello, and Anthony Corallo. Despite surveillance by federal and state enforcement authorities during Rastelli’s parole release, the only evidence offered in support of each of these charges was the transcript of the taped conversation which allegedly took place among Salerno, Ianniello, and James Ida concerning a list of prospective organized crime members allegedly sent by Rastelli. This Court, during the argument of instant application, listened to the original tape recording together with counsel representing the petitioner and the Commission and, as then noted, found that with the exception of half a dozen words scattered throughout the five-minute conversation, the tape is utterly unintelligible, and consists of “blurred sounds and voices.” This procedure was not followed at the revocation hearing before the examiners on July 2, at which the original tape was not played. Rastelli’s counsel objected at the hearing to the admission of the transcript of the recording, and placed in issue the sufficiency of the voice identification which purportedly authenticated the tape. Under these circumstances, the refusal of the Hearing Examiner to play the tape at the hearing, and to permit exploration of the issues of authenticity and audibility, was an abuse of discretion and was substantially prejudicial to petitioner’s right to attack the evidence as untrustworthy and unreliable.

Even if, however, the admission of the tape and the transcript had been proper, reliance on the tape as the sole evidence in support of four of the seven charges was egregious error. The government does not contend that Rastelli participated in the conversation recorded, and thus everything contained on the tape was hearsay as to him. Agent Marshall, the only -witness who testified to the authenticity of the tape, could identify only one of the recorded voices. The other voices were unknown to him, but he testified as to what he was told by other agents as to who the other alleged participants were. Moreover, no corroboration of any kind was offered to support the allegation of the existence of a list of candidates for admission to a criminal organization, or that such a list had been sent by Rastelli. With respect to the charges concerning association with Coral-lo, the evidence was even less reliable, consisting as it did of a hearsay statement recounting a conversation between two parties who were not participants in the taped conversation. The only support for the charge that Rastelli associated with Corallo was the alleged statement, on an inaudible tape, by someone identified as Anthony Salerno that someone named Tony Ducks, said to be Corallo, not present, had had a conversation, at a time and place not specified, with someone named Rusty, identified as Rastelli, who was also not a participant. This was hearsay run riot.

While the Supreme Court has acknowledged that the admission of hearsay evidence in parole revocation hearings is not per se a due process violation, the admission of “unsubstantiated or unreliable hearsay as substantive evidence at revocation hearings ... would certainly eviscerate the safeguards” the Court has created. Although parole revocation hearings are concededly intended to be informal proceedings in which “the full panoply of rights due a defendant” in a criminal prosecution do not apply, the admission of entirely unsubstantiated double and triple hearsay as the sole foundation for a finding of parole violations crosses the line which separates informality from irrationality.

The National Parole Commission, on final administrative appeal from the Commission’s determination, compounded the error by relying in large measure upon the transcript, which purported to reflect the contents of what this Court has found to be an utterly unintelligible recording, for its finding that Rastelli “fostered an organization involved in criminal activity.” In making this finding, the Commission stated it was “based on information discussed with you at the hearing which included the conversation between [sic] Anthony Salerno, Matthew Ianniello and James Ida on May 22, 1984.” Thus, the National Parole Commission relied not only on an unintelligible tape recording, but on double and triple hearsay in reaching its conclusion. The tape recording, even if audible and intelligible, would not have provided a rational basis for Rastelli’s conviction on charges 1(d), 1(e), 2(a), and 2(b).

As an independent matter, apart from the lack of a rational evidentiary basis for the Hearing Examiners’ findings, the Court is persuaded that Rastelli was denied his right to the objective judgment of “a neutral and detached’ hearing” officer which the Supreme Court has said is one of the “minimum requirements of due process” in the context of parole revocation. This aspect of the case has had the Court’s most concerned consideration. A hearing officer functions in a quasi-judicial capacity, making factual determinations in his recommendation to the Commission for final action. Here, a word by word and intensive study of the entire record, which included listening to the inaudible tape, leaves the Court with the settled and firm conviction that the Hearing Examiners did not conduct the hearing with the required objectivity, but to the contrary displayed a result-oriented attitude favorable to the charges. In this connection, three examples taken from the hearing record will suffice. In the first instance, Examiner Krueger interrupted cross-examination of Agent Marshall by Rastelli’s counsel, directed to establishing when the Parole Commission first became aware of the charges it had brought against Rastelli, to declare:

MR. KRUEGER: Mr. Teitler, I would venture to guess — as you know, Mr. Rastelli was mandatorily released from his ten-year sentence — I would venture to guess that if the Commission had had it in its power to prohibit him from being released from custody in 1983, the Commission would have done so.

When, having elicited from Agent Marshall the information that he did not know what illegal activity James Napoli had engaged in which formed the basis for charge 1(a), Rastelli’s counsel moved for dismissal of that charge, the following colloquy took place:

MR. TEITLER: Your Honor, based on the agent’s testimony, I submit that the charge 1(a) be dismissed.
MR. KRUEGER: We’ll offer other testimony on that. We’ll offer other testimony. There’s only one witness here.
MR. TEITLER: You said we’ll offer. Are you offering testimony?
MR. KRUEGER: No, not me. There will be other testimony.

Similarly, when Rastelli’s counsel questioned whether the Commission was seeking to introduce evidence connected with indictments presently pending against Rastelli, Examiner Krueger interjected “We intend not to. We intend not to bring those indictments on the record.”

These statements indicate much more than a colloquial use of the editorial “we.” Indeed, the interchanges offer in brief what the hearing transcript as a whole makes clear, that the presiding Hearing Examiner, Mr. Krueger, forfeited his objectivity and became an advocate for one of the contending parties. Recognizing that “[t]he officer directly involved in making recommendations cannot always have compíete objectivity in evaluating them,” the Supreme Court has said that separation of the investigative and prosecutorial functions from the fact-finding function is a basic requisite of due process in the revocation of parole. When an individual’s liberty is at stake, the requirement of an independent fact-finder, capable of evaluating all the evidence, and only the evidence, in coming to a determination is a fundamental element of our concept of fairness, part of “the very essence of a scheme of ordered liberty.” Where, as here, the neutrality and detachment of the fact-finder have been abandoned, the rudiments of due process are lacking. It goes without saying, and yet on consideration of the record in this case may bear repetition, that petitioner’s background has not the slightest bearing on his right to a fair hearing. As Mr. Justice Frankfurther once observed, “It is a fair summary of history to say that the safeguards of liberty have frequently been forged in controversies involving not very nice people.”

For the foregoing reasons, the Court finds that petitioner was deprived of due process of law in the revocation of his parole. The writ will issue directing petitioner’s release. The writ will be stayed for seventy-two hours to enable the respondents, in the event of an appeal, to apply for a further stay from the Court of Appeals.

So ordered.

      . See Rastelli v. Warden, Metropolitan Correctional Center, 610 F.Supp. 961 (S.D.N.Y.1985). Upon Judge Sofaer’s resignation as a United States District Judge, the matter was assigned to this Court.

      . 18 U.S.C. § 1951.

      . 15 U.S.C. § 1.

      . See 18 U.S.C. § 4161 (good time allowance is ten days per month for sentences of ten years or more); 18 U.S.C. § 4163 (mandatory release at "expiration of [the] term of sentence less the time deducted for good conduct”).

      . 18 U.S.C. § 4164.

        . Such knowing association is a violation of 28 C.F.R. § 2.40(a)(10).

      . This conduct was alleged to be a violation of 28 C.F.R. § 2.40(a)(6), which provides in pertinent part: "The parolee shall not violate any law, nor shall he associate with persons engaged in criminal activity.”

      . Under 28 C.F.R. § 2.17(a), the Regional Commissioner "may designate certain cases for decision by a quorum of Commissioners ... as original jurisdiction cases. In such instances, he shall forward the case with his vote, and any additional comments he may deem germane, to the National Commissioners for decision.” Original jurisdiction appeals are subject to review by the full National Parole Commission, composed of the National and Regional Commissioners, pursuant to 28 C.F.R. § 2.27.

      . Notice of Action, 1/16/85, Exhibit K to Affidavit of Henry Sadowski, 5/16/85, at 2.

      . The regulations promulgated by the Commission specifically provide that "[w]here the circumstances warrant, decisions outside of the guidelines (either above or below) may be rendered.” 28 C.F.R. § 2.20(c).

      . Rastelli v. Warden, Metropolitan Correc. Center, 610 F.Supp. 961 (S.D.N.Y.1985). Respondents have appealed in part from the decision of Judge Sofaer; that appeal is presently pending.

      . 610 F.Supp. at 978-79.

      . See 610 F.Supp. at 974-78.

      . 610 F.Supp. at 980.

      . See Notice of Action, 6/28/85, Exhibit 2 to Affidavit of Henry Sadowski, 10/9/85, at 1.

      . Id. at 1-2.

      . Transcript of Hearing, 7/2/85, at 21-37. The Court notes that the hearing was recorded on tape rather than stenographically transcribed, and the parties have submitted two different versions of the transcript. For the purposes of this opinion, the Court refers to the government’s transcript, cited hereinafter as ‘‘Tr.’’

      . Tr. at 30-35.

      . Tr. at 100-04.

      . Rastelli’s counsel, Stanley Teitler, objected to the introduction of the transcript:
      MR. TEITLER: Mr. Krueger, the evidence is not the transcript, the evidence is the tape. Could we ask that the tape be played and have the agent identify who’s talking on the tape?
      Tr. at 40. The tape was not played during the direct examination of Agent Marshall. Upon renewal of the request on cross-examination, the following colloquy took place between Mr. Krueger, the Hearing Examiner, and Mr. Teitler, counsel for Rastelli.
      MR. KRUEGER: Oh, well go ahead, cross examine.
      MR. TEITLER: Tape recorder?
      MR. KRUEGER: No, we're not playing the tape. Cross-examine him on the transcript.

      Tr. at 50 (emphasis added). As Rastelli’s counsel pointed out in summation, “[t]hat tape is not even in evidence; only a transcript is." Tr. at 150.
      It is now asserted that, following the hearing, one of the hearing examiners, Mr. Krueger, listened to the tape “and is satisfied that the transcript is a reasonable portrayal the [sic] conversation as it took place between Salerno, Ianniello and Ida." Revocation Summary, Exhibit 6 to Affidavit of Henry Sadowski, 10/9/85, at 4.

      . Tr. at 38-39.

      . Tr. at 38-44. The section of the conversation upon which the government relies most heavily contains, according to the transcript, the following interchange:
      IANNIELLO: Rusty sent this here, wanted to know if it’s okay to make these groups. He gave me a list.
      SALERNO: (UI) He’s got nothing to do with (UI).
      IANNIELLO: He’s got something ... can’t you ... he don’t like that (UI).
      SALERNO: I don’t even know what to do with this guy.
      IANNIELLO: Ah, listen
      SALERNO: I (UI) don't recognize these guys. He’s too tired and then he want to have a meeting. But, I didn’t want to meet, Paul didn’t want to meet. Tony Ducks [Corallo] didn’t want to meet and Tony Ducks told Rusty he said listen, he said take care of your family and then we’ll talk about the Commission. He wants to be on the Commission ... but too much young guys. They got a crew of 80 guys (PH) like that. How could we meet ... I don’t know the guys number one, number two, I don’t know.
      Government’s Memorandum of Law in Opposition, at 23.

      . Tr. at 130.

      . Tr. at 41.

      . Tr. at 156.

      . Notice of Action, 8/15/85, Exhibit 7 to Affidavit of Henry Sadowski, 10/9/85, at 2.

      . Rastelli, 610 F.Supp. at 980.

      . The Court notes that Judge Sofaer’s opinion of June 9 held that under 18 U.S.C. § 4203(c)(4) any appeal to the full National Parole Commission in original jurisdiction cases must be decided within thirty days. Under this holding, from which respondents have taken an appeal, Rastelli had exhausted his remedies before the filing of the present motion. Because, in any event, the decision of the National Commission is now final, the Court does not reach the issue of the time limit for decision of parole revocation appeals in original jurisdiction cases.

      . United States ex rel. Sperling v. Fitzpatrick, 426 F.2d 1161, 1163 (2d Cir.1970).

      . Bialkin v. Baer, 719 F.2d 590, 593 (2d Cir.1983) (citations omitted).

      . See Transcript of Argument, 10/15/85, at 63.

      . See Timpani v. Sizer, 732 F.2d 1043, 1047 (2d Cir.1984); Lieberman v. Gunnell, 726 F.2d 75, 77 (2d Cir.1984).

      . Hearing Transcript, 10/22/85, at 6.

      . See supra note 20.

      . Cf. United States v. Chiarizio, 525 F.2d 289, 293 (2d Cir.1975); United States v. Bryant, 480 F.2d 785, 790 (2d Cir.1973).

      . Gagnon v. Scarpelli, 411 U.S. 778, 781-82 & n. 5, 93 S.Ct. 1756, 1759-60 & n. 5, 36 L.Ed.2d 656 (1973); Morrissey v. Brewer, 408 U.S. 471, 489, 92 S.Ct. 2593, 2604, 33 L.Ed.2d 484 (1972).

      . Egerstaffer v. Israel, 726 F.2d 1231, 1235 (7th Cir.1984); see also Taylor v. United States Parole Comm’n, 734 F.2d 1152, 1155-56 (6th Cir.1984).

      . Morrissey v. Brewer, 408 U.S. 471, 480, 92 S.Ct. 2593, 2600, 33 L.Ed.2d 484 (1972).

      . Notice of Action, 10/31/85, at 1.

      . Id.

      . Morrissey v. Brewer, 408 U.S. 471, 489, 92 S.Ct. 2593, 2604, 33 L.Ed.2d 484 (1972).

      . Tr. at 58.

      . Tr. at 65.

      . Tr. at 46.

      . Examiner Krueger, rather than counsel for the Commission, conducted the questioning of the witnesses who testified in support of the charges. In doing so, the Examiner not only made extensive use of leading questions, but also occasionally elicited testimony concerning documents with which the witness testified he was not familiar:
      MR. KRUEGER: I show you a partial index to hearings before the permanent subcommittee on investigations, and ask you to review them. Are you familiar with that?
      MR. MARSHALL: No sir, I am not.
      MR. KRUEGER: Would you review it and indicate to me what it represents?
      MR. TEITLER: Objection, Your Honor. The witness has testified that he’s not familiar with it.
      MR. KRUEGER: He has it in his hand, (UI)
      Tr. at 28. On cross-examination, Marshall acknowledged that he had first seen the document at issue on the day of the hearing. Tr. at 55; cf. Notice of Action, 8/15/85, Exhibit 7 to Affidavit of Henry Sadowski, 10/9/85, at 2 (decision of National Commissioners based in part upon "stipulated source documents”).

      . Morrissey v. Brewer, 408 U.S. 471, 486, 92 S.Ct. 2593, 2602, 33 L.Ed.2d 484 (1972).

      . Palko v. Connecticut, 302 U.S. 319, 325, 58 S.Ct. 149, 152, 82 L.Ed. 288 (1937).

      . United States v. Rabinowitz, 339 U.S. 56, 69, 70 S.Ct. 430, 436, 94 L.Ed. 653 (1950) (Frankfurter, J., dissenting).


author: SHADUR, District Judge.

text:
    J.L. GRISWOLD and Patricia Griswold, Plaintiffs, v. E.F. HUTTON & CO., INC., Arthur Lassila and Robert Stieren, Defendants.
    No. 85C4948.
    United States District Court, N.D. Illinois, E.D.
    Nov. 25, 1985.

      Joel J. Bellows, Nicholas P. lavarone, Bellows & Bellows, Chicago, 111., for plaintiffs.
    John J. Enright, Robert P. Bramnik, Andrew B. David, Marjorie E. McCollom, Arvey, Hodes, Costello & Burman, Chicago, 111., for defendants E.F. Hutton and Arthur Lassila.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

J.L. Griswold and his wife Patricia (“Griswolds”) sue E.F. Hutton & Co., Inc. (“Hutton”) and two Hutton account executives, Arthur Lassila (“Lassila”) and Robert Stieren (“Stieren”), for civil damages based on the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968, the Commodity Exchange Act (“CEA”), 7 U.S.C. §§ 1-26 and violations of fiduciary duty under state law. Hutton and Lassila have moved under Fed.R.Civ.P. (“Rule”) 12(b)(6) to dismiss the Amended Complaint (the “Complaint”) in its entirety as to them. For the reasons stated in this memorandum opinion and order, their motion is denied.

Facts

In November 1983 Lassila, a former classmate of J.L. Griswold, learned Gris-wolds had sold their business and had a large sum of money available for investment (¶ 14). During November and December 1983 Lassila had several conversations with J.L. Griswold in which he “extolled” the advantages of Hutton’s Managed Commodity Account Program (“MCAP”) as an investment vehicle (¶ 15). Griswolds were convinced by Lassila’s presentation of MCAP and decided to invest in it. On December 7, 1983 Griswolds opened several accounts with Hutton, depositing some $775,000 for use in trading commodities (¶ 25). On January 26, 1984 Griswolds invested a further $250,000 (¶ 26).

Lassila described MCAP to Griswolds as a program for trading commodity futures by drawing on the abilities of several Commodity Trading Advisers (“Advisers”) at once. MCAP provided Hutton’s customers with a number of Advisers, each of whom would separately trade an account established in the customer’s name by Hutton. Thus MCAP was supposed to be a means of diversifying the risk associated with commodities trading (¶ 15).

Lassila ultimately introduced J.L. Gris-wold to six Advisers. Five of those — Cresta Commodity Management, Inc. (“Cresta”), Orion, Inc. (“Orion”), A.O. Management Corp. (“A.O.”), Institute for Computer Studies of Commodities (“ICSC”) and Colorado Commodities Management Corp. (“Colorado”) — were “outside” Advisers participating in Hutton’s program. Stieren, a Springfield, Illinois Hutton account executive, was the sixth. All were recommended to Griswolds by Lassila, who promised he would oversee the activities of the Advisers on a daily basis to insure adherence to a trading plan and to control risks (¶[ 22-23, 25).

Griswolds signed a client agreement (the “Client Agreement”) with Hutton that included authorization for Stieren to trade on their behalf (Ex. A-l). Griswolds also signed individual authorization agreements with Cresta, Orion, A.O., ICSC and Colorado, each authorizing the individual Adviser to trade a designated dollar amount on account with Hutton (Exs. A-2 to A-7).

On January 28, 1984 Lassila sent a handwritten note (Ex. E) to J.L. Griswold:

Dear Jim:
I wish to acknowledge the managed commodity account established in our Springfield office being managed by Bob Stieren. The account was funded in December, 1983 with $150,000 and an additional $250,000 on January 26, 1984. My understanding through your discussion with Bob is that the $150,000 is a general trading account with a maximum approximate stop-loss of $75,000. Further the $250,000 sized account is for the special situation which Bob perceives to be unfolding in the relatively near term. The stop-loss on this part of the account is an additional $75,000.
The nature of Stieren’s trading since the account’s inception has involved large positions and heavy trading resulting in heavy commission generation approximating 50 to 100% of original account equity per month. While the nature of markets could change from trading markets to trending markets and therefore reducing transaction activity, it can not be anticipated when this might occur. It is acknowledged that commissions in this account are running well above the usual commissions in managed commodity accounts. In view of this I will make an effort to obtain a large discount for this account retroactive to early December. Cordially,
Arthur Lassila
Acknowledgement of Letter and Stop-loss.
/s/ J. Griswold
Jim Griswold
Jan. 28, 1984

J.L. Griswold signed the acknowledgment.

On February 21, 1984 J.L. Griswold met Lassila at Hutton’s Peoria, Illinois office to obtain the discount mentioned in Lassila’s January 28 letter. Lassila tendered Hutton’s check (Ex. G) for $59,134 made out to “James Griswold & Patricia R. Griswold JTWROS.” Lassila said that was the amount due Griswolds after the commissions were discounted, and he also tendered a one-page single-spaced typed document (the “Release,” Ex. F), which he said Hutton needed signed to show the discount on Stieren’s commissions was final. In relevant part the Release reads:

RECEIPT AND GENERAL RELEASE AND ASSIGNMENT OF CLAIM

1. For and in consideration of the sum of Fifty Nine Thousand One Hundred Thirty Four [ ] dollars ($59,134), receipt of which is hereby acknowledged, _and_(“GRISWOLDS”) hereby release, discharge and acquit E.F. Hutton & Compnay [sic] Inc. (“HUTTON”) and its representatives, including, without limitation, its agents, employees, servants, directors, officers, attorneys, assigns and successors, and each of them, with the exception of Mr. Robert D. Stieren of and from any and all claims, demands, sums of money, actions, rights, causes of action, obligations and liabilities of any kind or nature whatsoever which the GRISWOLDS may have had or claim to have had, or now have or claim to have, hereafter may have or assert to have, including, without limitation, those which arise out of or are in any manner whatsoever, directly or indirectly, connected with or related to a certain account number F73-99919 standing in the GRISWOLDS name at Hutton’s branch office in Springfield, Illinois and any act, omission, transaction, dealing conduct or negotiation of any kind whatsoever between the GRISWOLDS and Hutton or between anyone acting or purporting to act on their respective behalves.
******
3. The GRISWOLDS warrant, represent and agree that in executing this release, and in accepting the consideration described herein, they do so with full knowledge of any and all rights which they may have with respect to the controversies herein compromised and that they have received independent legal advice from their attorney with regard to the facts relating to said controversies and with respect to the rights and asserted rights arising out of said facts. In this regard, the GRISWOLDS understand, acknowledge and agree that such payment is not an admission of liability on the part of Hutton, but to the contrary, represents a compromise of claims asserted against Hutton, which are expressly contested, disputed and denied.
******
5. This release shall inure to the benefit of Hutton and shall be binding upon the GRISWOLDS, their assigns, representatives and successors. The GRIS-WOLDS acknowledge that they have read this receipt, general release and assignment of claim, and that they fully know, understand and appreciate its contents and that they execute the same and make the settlement provided for herein voluntarily and of their own free will. In witness whereof, the undersigned have executed this receipt and general release as of the date hereinafter appearing.

When J.L. Griswold signed the Release he believed, based on Lassila’s statements, he was agreeing only not to seek further discounts on Stieren’s trades (¶ 34).

Stieren’s last trade on Griswold’s account was on February 15, 1984. During the two-month-plus trading period, Stieren generated $196,893 in total commissions on the $400,000 entrusted to him (¶ 29 and Ex. B).

Although Stieren’s account had been funded in full for $400,000, the accounts of the other Advisers were not. Lassila told Griswolds it was Hutton’s practice to fund such accounts with “fifty-cent dollars,” so the Advisers believed there was twice as much money available for trading as was actually the case. Lassila told Griswolds that procedure would work to their benefit (¶ 24). Each individual agreement with an Adviser (other than Stieren) indicates account funding at twice the amount actually deposited by Griswolds with Hutton.

Griswolds’ investment in MCAP was a disaster. By May 4, 1984 they had sustained losses of $542,232 in trading, while incurring $298,827 in commissions to Hutton and $19,708 in fees to the outside Advisers (¶ 31). In total about 84% of some $1,025,000 Griswolds invested in Hutton’s MCAP had evanesced.

Griswolds’ Complaint asserts (with considerable redundancy) various forms of fraud and misrepresentation as predicates for their RICO, CEA and state-law claims:

1. churning of accounts by Stieren;
2. intentional failure by Hutton and Lassila to supervise and curtail Stieren’s trading;
3. misrepresentation of the profit and risk potential of MCAP;
4. failure to coordinate the Advisers’ trading to achieve the promised coherent plan;
5. concealment of reasons for trading losses;
6. misrepresentation of the amount of funds available to the outside Advisers with the intent to generate increased trading and higher commissions;
7. rendition of statements in a form (by individual Adviser’s account) designed to disguise the total volume of trading and commissions;
8. misrepresentation of the contents and legal impact of the Release; and
9. breach of the common-law fiduciary duty to account for secret profits obtained through improper use of Gris-wolds’ funds on deposit.

Two grounds for Rule 12(b)(6) dismissal have been asserted on the current motion:

1. This action is barred as a matter of law by the Release.
2. Even if the Release is not a bar, the Complaint (including its attached Exhibits) does not state a claim under any of the legal theories advanced.

Release

Griswolds initially argue the Release cannot be considered on a Rule 12(b)(6) motion because it is an affirmative defense required by Rule 8(c) to be made by way of a responsive pleading. That argument is simply incorrect, and Griswolds' attorney should know better.

Of course “release” is included in Rule 8(c)’s list of affirmative defenses and must be pleaded to be considered at all, National Compressor Corp. v. Carrow, 417 F.2d 97, 102 (8th Cir.1969). But it is black-letter law that on a Rule 12(b)(6) motion a court may take into account “the allegations in the complaint ... and exhibits attached to the complaint____” 5 Wright & Miller, Federal Practice & Procedure: Civil § 1357, at 593 (1969) (emphasis added); see also 2A Moore’s Federal Practice ¶ 12.07[2.-5], at 12-68 (2d ed. 1985 revision) (“material which is submitted as part of the complaint ... may be considered by the court”). See also Goodman v. Board of Trustees of Community College District 524, 498 F.Supp. 1329, 1337 (N.D.Ill.1980). Griswolds themselves brought the Release into this litigation by attaching it as Complaint Exhibit F. Hence this Court may unquestionably consider it. Quiller v. Barclays American/Credit, Inc., 727 F.2d 1067, 1069 (11th Cir.1984), aff'd and reinstated en banc, 764 F.2d 1400 (11th Cir.1985).

Next the parties argue the choice-of-law question. Defendants’ contentions in that area are varied, while Griswolds’ contention is simple.

Hutton and Lassila urge the Release must be interpreted according to New York law because all Griswolds’ claims arise from their customer relationship with Hutton — a relationship governed by the Client Agreement (Ex. A-1), which reads in part:

This agreement and its enforcement shall be governed by the laws of the state of New York____

Though the RICO and CEA claims concern federally created rights, Hutton and Lassila also assert a federal court should look to state law (again New York law, in their view) to interpret a contract releasing federal claims. Finally they say the Release is a valid bar to this action even if Illinois law were applied.

To all this Griswolds retort that no choice-of-law language appears in the Release itself, which was signed and dated in Illinois. Griswolds therefore say the Release must be interpreted under Illinois law, especially because (in their view) it concerned solely the discounts on Stieren’s trading, all of which took place in Illinois.

Were this Court limited to a choice between Illinois and New York law, it would incline toward the former. Clearly the Release is not the same as (nor does it refer to) the Client Agreement. So it is not, in the words of the latter document, “this agreement.” And only by a tortured leap of logic could the Release be considered an effort to “enforce” the Client Agreement — especially when Hutton expressly denied any liability in the Release. Thus the New York choice-of-law provision is by its terms inapplicable to the Release. Because the Release was executed by the parties in Illinois and released claims relating to transactions more closely related to Illinois than New York, the Release’s “most significant contacts” are with Illinois. See Dr. Franklin Perkins School v. Freeman, 741 F.2d 1503, 1515 n. 19 (7th Cir.1984); Sears, Sucsy & Co. v. Insurance Co. of North America, 392 F.Supp. 398, 403 (N.D.Ill.1974).

But both sides have ignored controlling precedent holding federal law must apply here. That is so because the litigants do not stand in the same position as those in Three Rivers Motors or Oberweis (see n. 10). Both those actions sought to construe and enforce the release of federally-created claims. By contrast, Griswolds challenge their Release as void on fraudulent misrepresentation grounds. They specifically allege Lassila misrepresented to J.L. Gris-wold the contents and legal impact of the Release. See Seredinski v. Clifton Precision Products Co., 776 F.2d 56, 59-60 (3d Cir.1985) (discussing distinction between actions to enforce and actions to void settlements of federal claims).

No doubt the broad language of the Release (“any and all claims, demands, sums of money, actions, rights, causes of action, obligations and liabilities of any kind or nature whatsoever ... including, without limitation, those which arise out of [the Stieren account]”) could be found sufficient (more of this later) to release Hutton and Lassila from RICO and CEA claims of which Griswolds were aware or that they “could have discovered upon reasonable inquiry.” Oberweis, 568 F.Supp. at 1101. Compare, e.g., Green v. Valve Corp. of America, 428 F.2d 342, 345 (7th Cir.1970) (typical broad general-release language) with Oglesby v. Coca-Cola Bottling Co. of Chicago/Wisconsin, 620 F.Supp. 1336 at 1341-42 (N.D.Ill.1985) (construing release language narrowly). But even if the language of the Release sufficed as a general release under Illinois or New York law, the validity of a release of federally created rights is a question of federal law. Dice v. Akron, Canton & Youngstown Railroad Co., 342 U.S. 359, 361-62, 72 S.Ct. 312, 314-15, 96 L.Ed. 398 (1952). See also Locafrance U.S. Corp. v. Intermodal Systems Leasing, Inc., 558 F.2d 1113, 1115 (2d Cir.1977) (citing Dice):

It is well established that federal law governs all questions relating to the validity of and defenses to purported releases of federal statutory causes of action.

There is substantial authority for the view federal law would require submission of the question of fraud to the jury even in the face of the Release’s inclusive language. Dice involved a railroad employee who sued for a job-related injury under the Federal Employers’ Liability Act (“FELA”), 45 U.S.C. §§ 51-60. He admitted signing a comprehensive and unequivocal release but claimed he had relied on the railroad’s “deliberately false statement” that the document was merely a receipt for back wages (342 U.S. at 360, 72 S.Ct. at 313). That was held by the Court to pose a question of fact for the jury, not one of law for the trial court (id. at 363, 72 S.Ct. at 315), because (id. at 362, 72 S.Ct. at 314-15):

We hold that the correct federal rule is ... a release of rights under [FELA] is void when the employee is induced to sign it by the deliberately false and material statements of the railroad’s authorized representatives made to deceive the employee as to the contents of the release.

Dice’s result was reached without recourse to such familiar arguments as duress, inequality of bargaining power, the employee’s lack of sophistication or the absence of arms’-length negotiations. Nor did the Court point to special equities that might distinguish FELA cases from actions under other federal statutes. Nonetheless some courts have suggested those factors ought to be considered in limiting Dice’s scope. For example Locafrance, 558 F.2d at 1114-15 held a release “signed in a commercial context by parties in a roughly equivalent bargaining position and with ready access to counsel” would be enforced if unambiguous on its face, though in personal injury cases, “where mistake, fraud, or overreaching against an individual is suspected,” courts may look behind the agreement.

Absent controlling authority in our Circuit (and the parties have identified none), it appears to be an open question whether Dice is to be given full force and effect outside the personal injury context. There is something to be said on each side of that proposition.

On the one hand, venerable authority supports the idea that failure to read a contract does not excuse performance. As Vargas v. Esquire, 166 F.2d 651, 654 (7th Cir.1948), cert. denied, 385 U.S. 813, 69 S.Ct. 29, 93 L.Ed. 368 (1948) (some citations omitted) put it:

And in the absence of fraud, which must be proved by clear and convincing evidence ..., a man in possession of all his faculties, who signs a contract, cannot relieve himself from the obligations of the contract by saying he did not read it when he signed it, or did not know or understand what it contained. Upton v. Tribilcock, 91 U.S. [(1 Otto)] 45, 50, 23 L.Ed. 203. To be sure, if his signature is secured by some fraudulent trick or device as to the context of the contract, which prevents him from reading the agreement, he may by proper action avoid the contract____ But the contract cannot be avoided by proof that one of the parties, if he was sound in mind and able to read, did not know the terms of the agreement. One must observe what he has reasonable opportunity for knowing; the law requires men, in their dealings with each other, to exercise proper vigilence [sic] and give their attention to those particulars which may be supposed to be within reach of their observation and judgment and not to close their eyes to the means of information which are accessible to them. A person is presumed to know those things which reasonable diligence on his part would bring to his attention.

That same concept was reflected in the portion of Upton cited in Vargas:

It will not do for a man to enter into a contract, and, when called upon to respond to its obligations, to say that he
did not read it when he signed it, or did not know what it contained. If this were permitted, contracts would not be worth the paper on which they are written.

On the other side of the coin, there is something disquieting about the notion an agreement is conclusively deemed free of fraud — as a matter of law — unless the instrument evidencing that agreement is ambiguous. Fraudulent misrepresentation, after all, is a classic example of a fact issue.

This case does not force a choice between those competing perspectives. It must be remembered one of the elements of fraudulent misrepresentation is that the representation shall have been reasonably relied upon. Classic Bowl, Inc. v. AMF Pinspotters, Inc., 403 F.2d 463, 466 (7th Cir.1968) (quoting Wilkinson v. Appleton, 28 Ill.2d 184, 187, 190 N.E.2d 727, 729-30 (1963) but reflecting the universal common-law rule). And one useful way of looking at the Upton-Vargas canon is that it reflects the conclusive unreasonableness of relying on a misstatement as to a crystal-clear document that is before the hearer’s eyes for examination.

From that viewpoint the Release and Lassila’s claimed misrepresentation as to its purpose leave room for a jury’s determination. Certainly the middle portion of Release ¶ 1, with its classic “any and all claims ...” language, were it the sole language in the release, could properly be characterized as unambiguous. But after all the “including, without limitation” clause — with its specific reference to the Stieren account alone — was being read by an unrepresented nonlawyer who was simultaneously being assured the document was linked only to the commission payment on that account. And that assurance could reasonably be viewed as buttressed by the fact that the middle portion of Release ¶ 1 (the broad general-language part) specifically excepted Stieren from the persons released.

That factual matrix renders the determination whether reliance on that assurance was reasonable (effectively a determination whether the Release as a totality could be perceived as ambiguous under all the circumstances) peculiarly appropriate for lay jurors who have not (unlike judges) read— and prepared — releases by the hundreds or thousands. There are many respects in which it is not a fiction (even an amiable one) for a judge to decide that no reasonable person could reach a particular conclusion, but in the context of a release document such as the one at issue in this case it is self-delusive to think a judge can wipe out the effect of decades of legal training and practice, restoring himself or herself to the pristine condition of having to read a release for the first (or second or third) time.

Consequently it is unnecessary to decide whether Dice, which left to a jury the question of the reasonableness of reliance on misrepresentations contradicted by the text of an FELA-claim release, should be extended to all federally created causes of action. This Court need hold only that given the language of the Release here and the environment in which it was signed, it is likewise for a jury to decide whether a misrepresentation was in fact made and whether J.L. Griswold reasonably relied on that representation in signing the Release. And this Court does so hold (at least as to federal claims, where the Dice concept is part of the web of authority for judicial decision). In sum, the Release is not a bar to Griswolds’ suit under RICO and CEA at this stage of the proceedings.

Griswolds’ state-law claims pose even less of a problem. It has already been said Illinois conforms to the universal rule: Reliance on a misrepresentation must be reasonable to constitute fraud invalidating a contract. Thus the just-completed analysis might perhaps apply (even absent a Dice-type Illinois precedent) in any event. But there is more, for the gravamen of Griswolds’ state-law claims is breach of fiduciary duty. Commodities brokers are related to their customers as agent and principal. Martin v. Heinold Commodities, Inc., 139 Ill.App.3d 1049, 94 Ill.Dec. 221, 487 N.E.2d 1098 (1985). Further, as Nairn v. J.A. Acosta & Co. (In re Rosenbaum Grain Corp.), 103 F.2d 656, 660 (7th Cir.1939) said: _

This relation, contemplating as it does the holding by the broker of the customer’s money and other property, is primarily fiduciary in nature.

Contracts between fiduciaries are “especially vulnerable to attack” when a fiduciary has misrepresented material facts. Wilkinson, 28 Ill.2d at 188, 190 N.E.2d at 730. Such contracts must be “open, fair and deliberately made” to be valid. Id. Griswolds allege Lassila both (1) concealed facts giving rise to claims against Hutton (e.g., lack of a coordinated trading plan, aggregate total trading and commissions and failure to supervise Advisers’ activity) and (2) misled J.L. Griswold as to the extent of the Release. Whether or not those actions by Lassila amounted to fraud under Illinois law via the earlier analysis in this opinion, at a minimum the allegations state a claim for breach of fiduciary duty. Martin, 139 Ill.App.3d at 1057, 94 Ill.Dec. at 226, 487 N.E.2d at 1103.

Failure To State a Claim

With the Release eliminated as a legal (though not necessarily a factual) bar to this action, this opinion can at last turn to the Hutton-Lassila challenges to the Complaint’s statement of substantive claims. Those challenges address both of Gris-wolds’ principal allegations of fraud:

1. churning;
2. various instances of material nondisclosure and deception.

1. Churning

Churning is a broker’s trading for the purpose of generating commission fees without regard to the client’s investment objectives. Hecht v. Harris, Upham & Co., 283 F.Supp. 417, 435 (N.D.Cal.1968), aff'd as modified, 430 F.2d 1202 (9th Cir.1970) stated the classic definition:

Churning cannot be and need not be, established by any one precise rule or formula. The essential question of fact for determination is whether the volume and frequency of transactions, considered in the light of the nature of the account and the situation, needs and objectives of the customer, have been so “excessive” as to indicate a purpose of the broker to derive profit for himself while disregarding the interests of the customer.

Churning is a fraudulent practice under Securities Exchange Act § 10(b), 15 U.S.C. § 78j(b) (Hecht, 283 F.Supp. at 433) as well as under the CEA, 7 U.S.C. § 6b (Johnson v. Arthur Espey, Shearson, Hammill & Co., 341 F.Supp. 764, 766 (S.D.N.Y.1972)). Though the principles governing proof of a churning claim are the same whether a securities or commodities fraud is alleged, it should be understood an amount of trading “excessive” in a securities account may not be “excessive” in a commodities account. That is so because (Booth v. Peavey Co. Commodity Services, 430 F.2d 132, 134 (8th Cir.1970)):

The commodity markets are highly volatile and are thus trading rather than investing vehicles.

And that is especially true where the customer, like Griswolds, is speculating rather than hedging (id. at 135).

Hutton and Lassila say Griswolds cannot meet the Hecht test because Stieren’s trading was not excessive in light of Griswolds’ “needs and objectives.” Their Mem. 12 argues J.L. Griswold’s “acknowledgement” of Lassila’s January 28, 1984 letter “confirm[ed] that the specified level of trading was consistent with plaintiffs’ objectives.”

In the initial pleading posture of this case, that is a weak reed at best. Quite to the contrary, a fair reading of Lassila’s letter and J.L. Griswold’s acknowledgement (especially with all reasonable inferences drawn in Griswolds’ favor, see n. 2) could just as well be that the commissions (and trading) were running too high and a discount was in order. Lassila’s letter is simply too opaque, and J.L. Griswold’s “acknowledgement” too curt, to constitute a satisfactory expression of Griswolds’ investment objectives. Compare, e.g., Costello v. Oppenheimer & Co., 711 F.2d 1361, 1363-64, 1368-69 (7th Cir.1983) (discussing evidence supporting jury finding customer’s “investment objectives were not unduly ambitious,” id. at 1368).

Even were J.L. Griswold’s acknowledgement viewed as an approval of Stieren’s trading strategy, that would not bar a churning claim as a matter of law. Brokers bear some independent responsibility to see that trading on a customer’s behalf is not inappropriate to the customer’s “known financial condition.” Hecht, 283 F.Supp. at 432. Though an investor’s stated objectives “significantly illuminate” a claim of excessive trading and make it “easier to conclude” trading is not excessive if the goals are “aggressive or speculative,” the goals alone do not decide the issue. Costello, 711 F.2d at 1368.

As already stated, Stieren’s account trading generated commissions in just two months’ time that ate up almost exactly 50% of the original funding of $400,000. Griswolds’ claim of churning on that score survives Hutton and Lassila’s motion to dismiss.

2. Material Nondisclosure and Deceptions

Lastly Hutton and Lassila say everything Griswolds now allege as nondisclosure or deception was in fact disclosed in the various documents signed by Griswolds when setting up their accounts with Hutton and the Advisers. All those documents are attached to the Complaint and (for the reason already discussed) may be considered on this motion to dismiss.

In particular, Hutton and Lassila point to Client Agreement ¶ VIII(b) (Ex. A-1 at 3):

I understand that your corporation is no way responsible for any loss to me occasioned by the actions of the individual or organization named above [i.e., the Adviser] and that your corporation does not, by implication or otherwise, endorse the operating methods of such organization.

That language is not dispositive here for two reasons:

First, Griswolds allege Lassila promised he would oversee and coordinate the activities of the Advisers for purposes of risk control, and he failed to do so (¶ 23). That promise, if proved, would be a separate agreement, rendering inapplicable the Hutton-Lassila reliance on Amfac Mortgage Corp. v. Arizona Mall of Tempe, Inc., 583 F.2d 426, 430 (9th Cir.1978). Griswolds do not ask this Court to assume a state of facts contrary to the undertaking in the Client Agreement. Instead they allege additional facts.

Second and more importantly, Gris-wolds do not claim Hutton and Lassila liable for the “actions of the individual or organization” or for the “operating methods of such organization” — a kind of agency notion. They rather contend Hutton operated MCAP as a scheme to defraud. According to the Complaint, Griswolds’ losses are ascribable to' Hutton’s overall design of the plan, not to individual mistakes of the Advisers. Nothing in the Client Agreement is a disclaimer of that risk.

Hutton and Lassila direct one last salvo at Griswolds’ claim about the use of “fifty cent dollars” to generate excess trading activity and thus excess commissions. They rightly point out each of the individual contracts signed with the outside Advisers (Exs. A-2 to A-7) reflects an account size of twice the actual funds deposited with Hutton. It is also true the Cresta and ICSC contracts (but not the others) specify fees would be based in part on account size.

But again Hutton and Lassila fail to grasp the essence of Griswolds’ claim. Griswolds charge Lassila represented to them funding in “fifty-cent dollars” was customary and would be advantageous to Griswolds, all the while knowing that was false and the purpose of funding in “fifty-cent dollars” was to generate increased commissions. Griswolds do not seek to lay the excess trading at the Advisers’ doors (except in the case of Hutton’s own employee, Stieren, who did not trade in “fifty-cent dollars”). Rather they assert the representation that “fifty-eent-dollars” funding would be beneficial to their investment interests was a fraud. Disclosure to Griswolds of the method by which Advisers’ fees would be calculated does not bear on that issue.

In sum, the threshold attack on the misrepresentation claims fails as well. They too remain viable at the pleading stage.

Conclusion

Hutton’s and Lassila’s motion for their dismissal from the Complaint is denied. They are ordered to answer the Complaint on or before December 6, 1985.

      . This Court dismissed Stieren from the RICO count in an August 26, 1985 oral bench ruling.

      . For purposes of the current Rule 12(b)(6) motion, this opinion has accepted as true the Complaint’s well-pleaded factual allegations, drawing all reasonable factual inferences in favor of Griswolds. Wolfolk v. Rivera, 729 F.2d 1114, 1116 (7th Cir.1984). Of course no actual findings of fact are made or implied by the recital in the text.

      . Citations to the Complaint will simply take the form ‘¶ — ” and, in referring to documentary exhibits to the Complaint, “Ex. — .”

      . Griswolds signed two agreements with Cresta, one for general trading (Ex. A-2) and one for financial futures trading only (Ex. A-3).

      . In familiar securities usage, that of course stood for “joint tenants with right of survivor-ship.”

      . Griswolds do not identify Lassila’s explanation of the benefit.

      . This Court's August 5, 1985 oral bench ruling struck from the RICO count Griswolds’ allegation that Hutton had utilized Griswolds' funds as part of a massive checkkiting scheme. That same allegation had earlier been stricken from the original Complaint.

      . Griswolds Mem. 3 erroneously cites National Compressor as having been decided by our Court of Appeals (which, if true, would render the case binding on this Court and not merely persuasive). While that may well be the result of typographical error only, counsel must recognize the importance of accurate citation to avoid misleading the court. As National Compressor does not stand in any event for the proposition Griswolds seek to establish, the error is (according to one's perspective) either magnified or nullified.

      . Indeed, the case most strongly relied on in Griswolds’ memorandum, Butcher v. United Electric Coal Co., 174 F.2d 1003, 1006 (7th Cir.1949) explicitly says if an affirmative defense is “apparent on the face of the complaint,” it may be considered on a Rule 12(b)(6) motion. Butcher sustained the complaint before it because plaintiff did not plead a release. Instead, defendant raised a release for the first time in its Rule 12(b)(6) motion.

      . To that end they cite Three Rivers Motors Co. v. Ford Motor Co., 522 F.2d 885, 888-92 (3d Cir.1975) (applying state contract law in interpreting release of federal antitrust claim) and this Court’s decision in Oberweis Dairy, Inc. v. Associated Milk Producers, Inc., 568 F.Supp. 1096, 1098 n. 5 (N.D.Ill.1983) (same).

      . Had Hutton admitted liability for breach of the Client Agreement, it might be possible to characterize the Release as an effort to enforce rights granted to Griswolds in the Client Agreement. However, Hutton’s language in the Release expressly refutes such a characterization. For the same reason, Hutton’s and Lassila’s argument that the Release is "inseparably related" to the Client Agreement in the sense used by Southwest Forest Industries, Inc. v. Sharfstein, 482 F.2d 915, 919 (7th Cir.1972) fails on the facts.

      . Alternatively Griswolds claim they did not intend the Release as a general release of all claims, but rather as a release solely of claims related to Stieren’s trading. True enough, that is an interpretation question. But because it varies from the literal language of the Release, it too must rest on Lassila’s allegedly fraudulent statements as to the Release's scope.

      . Locafrance also rejected the notion a contractual choice-of-law provision should govern the question of the validity of a release of federal securities law claims.

      . Locafrance relied on New York cases to substantiate that distinction, even though the court went on to hold federal, not state, law was applicable to test the validity of releases of federal claims.

      . Hutton and Lassila cite the language in Richard’s Lumber & Supply Co. v. United States Gypsum Co., 545 F.2d 18, 20 (7th Cir.1976), cert. denied, 430 U.S. 915, 97 S.Ct. 1326, 51 L.Ed.2d 593 (1977), to the effect that general releases of federal antitrust claims are not against public policy unless procured by duress. It would strain that precedent impermissibly to hold a release procured by fraud would be enforceable where one procured by duress would not. In any event, Richard’s Lumber, id. at 20-21 emphasized specific facts showing plaintiff knew what it was undertaking when it released its claims.

      . True enough, J.L. Griswold is apparently a man of means who can afford to invest $1 million at a crack, nor does he plead special naivete. But those facts are appropriately part of the framework for a jury’s determination of the reasonableness of J.L. Griswold’s reliance.

      . Griswolds had no claim against Stieren except with respect to the specific account he was handling — the very account specified in the “including, without limitation" clause. Hence a rational reader (if unfamiliar with the language and structure of release documents) might arguably understand the entire Release to be limited in the way Lassila represented.

      . J.L. Griswold does not claim (nor could he, for the reasons stated in the Upton-Vargas line of cases) he did not read the Release — only that he relied on Lassila's characterization of its scope.

      . Hutton-Lassila Mem. 11 suggests Griswolds’ allegation they were promised a coordinated trading plan contradicts their argument Lassila misled them as to the extent of the Release. That is said to follow because Griswolds' belief that all accounts at Hutton "were being coordinated and jointly managed” would make it impossible for them also to believe they could release Hutton as to liability for Stieren’s account alone. That argument is no better than makeweight (if that). Lassila’s January 28, 1984 letter to J.L. Griswold does not even advert to the other accounts. It simply reflects how Stieren had gotten out of line and promises “an effort to obtain a large discount for this account.” When that was done and Lassila met with J.L. Griswold to deliver the check, it would appear wholly inconsistent with Lassila’s fiduciary obligations for him to tender to his cestui que trust another document with the undisclosed intention of obtaining a sweeping “all claims” release. And if Lassila then had no such intention, so that he himself did not understand the Release to cover all possible claims of all types, other problems would attend his present effort to urge a general release.

      . This case does not involve a so-called "discount broker” who engages to provide no expert advice (and therefore might argue for a lesser degree of fiduciary duty). Griswolds placed their money in Hutton’s hands and clearly relied on the Advisers to conduct trading.

      . Griswolds’ Complaint attaches only the Client Agreement as to Stieren’s account. Hutton and Lassila predicate their position on the signing of similar agreements in connection with each Adviser’s account.

      . According to the Complaint, only a relatively small portion of Griswolds’ trading expenses ($19,708) went in fees to Advisers, while the major portion ($298,827) went in sales commissions to Hutton for executing Advisers’ trades.

      . This Court’s August 26, 1985 oral bench ruling struck from the RICO count Griswolds’ prayer for an accounting of "secret profits” obtained on the use of their funds on deposit with Hutton. Under CFTC rules (17 C.F.R. § 1.29) any interest obtained on investment of customers’ funds while on deposit may be kept by a broker. Neither side, however, has addressed Griswolds’ prayer for an accounting of interest under their state-law theory.