author: VANARTSDALEN, District Judge.

text:
    MERICAN, INC., Merican Curtis, Inc., and Merican Curtis, Ltd. v. CATERPILLAR TRACTOR CO.
    Civ. A. No. 80-3723.
    United States District Court, E.D. Pennsylvania.
    Sept. 28, 1984.

      Alan Schnoll, Philadelphia, Pa., Robert C. Levy, Berryl A. Speert, Allan P. Hillman, Frank, Bernstein, Conaway & Goldman, Baltimore, Md., for plaintiffs.
    Edward W. Mullinix, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., John DeQ. Briggs, III, David C. Murchison, P.C., Washington, D.C., for defendant.
   MEMORANDUM OPINION AND ORDER

VANARTSDALEN, District Judge.

Plaintiffs filed the present action nearly four years ago, alleging that defendant Caterpillar Tractor Co. (Caterpillar) violated § 1 of the Sherman Act, 15 U.S.C. § 1, by altering its system for collecting a service fee from its authorized dealers in order to exclude plaintiffs and other independent marketers from competing in the overseas sale and servicing of Caterpillar electrical generator sets. Plaintiffs originally sought monetary damages under § 4 of the Clayton Act, 15 U.S.C. § 15, and injunctive relief under § 16 of the Clayton Act, 15 U.S.C. § 26. In March of 1982, Caterpillar moved to dismiss plaintiffs’ claims for monetary damages, because plaintiffs were indirect purchasers and thus barred by the rule of Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). This court denied Caterpillar’s motion, but certified the Illinois Brick issue to the court of appeals pursuant to 28 U.S.C. § 1292(b), and the court of appeals granted review. The court of appeals then reversed this court’s order, holding that the rule of Illinois Brick bars plaintiffs from seeking damages under § 4 of the Clayton Act. Merican, Inc. v. Caterpillar Tractor Co., 713 F.2d 958 (3rd Cir.1983), cert. denied, — U.S. -, 104 S.Ct. 1278, 79 L.Ed.2d 682 (1984).

In the aftermath of the court of appeals’ decision, the parties have moved in opposite directions. Plaintiffs have filed a motion for leave to amend their complaint to replace the rejected § 4 claim with a claim for damages under the common law of civil conspiracy. Caterpillar, on the other hand, filed a motion for summary judgment as to plaintiffs’ remaining claim for injunctive relief. For the reasons that follow, plaintiffs’ motion will be denied, and Caterpillar’s motion will be granted.

Most of the relevant facts are set forth at length in the court of appeals’ opinion. Briefly, Caterpillar distributes its electrical generator sets through a network of authorized dealers. Under the terms of the distribution agreement between Caterpillar and its dealers, Caterpillar offers the dealers a 5% discount off the list price of its electrical generator sets in exchange for the dealer’s obligation to service Caterpillar’s products in the dealer’s assigned service territory. If a dealer sells a Caterpillar generator set that receives its “initial substantial use” in another dealer’s service territory, the selling dealer is required to return the 5% to Caterpillar. Caterpillar then distributes the 5% to the servicing dealer, provided that the servicing dealer submits an appropriate claim. This payment is known as an interterritorial service fee.

Prior to 1978, Caterpillar had a practice of returning the fee to the selling dealer if no servicing dealer presented a claim. Many selling dealers simply transferred the service fee directly to the servicing dealer, and retained the service fee if they knew that no claim would be made. A dealer selling to an independent marketer that resold the generator set and provided its own servicing could be assured that no-claim for the service fee would be made. Consequently, that selling dealer could pass on some ol- all of the 5% as a price reduction to the buyer.

In July, 1978, Caterpillar began to insist that its dealers comply with the distribution agreement and return the service fee as soon as it became known that the generator set would receive its initial substantial use outside of the seller’s service territory. Caterpillar would then hold the fee for a year, and return it to the selling dealer if no claim was made. In February 1980, Caterpillar implemented a policy whereby it no longer returned the service fee to the selling dealer, but instead kept all unclaimed fees as miscellaneous income. The practical result of this modified system was to prevent selling dealers from passing on all or part of the service fee as a price reduction to marketers who intended to resell and service the generator sets outside of the selling dealers’ service territory.

Plaintiffs are general trading companies that at one time bought Caterpillar electrical generator sets from an authorized Caterpillar dealer in the United States, Ohio Machine Company (OMCO), and sold those sets abroad, primarily in Saudi Arabia. Plaintiffs’ principal customer for Caterpillar generator sets in Saudi Arabia was Rabiah and Nasser Co. (Raneo), which in turn sold the sets to various Saudi buyers. Plaintiffs also performed necessary delivery, installation, inspection and warranty service for users of Caterpillar generator sets in Saudi Arabia. Plaintiffs sold and serviced the Caterpillar sets in competition with certain authorized Caterpillar dealers, particularly Zahid Heavy Tractor Co. Ltd. (Zahid) of Saudi Arabia. Plaintiffs assert that Caterpillar’s modification of its system for collecting the 5% service fee imposed a penalty on all sales to plaintiffs and other independent marketers, and that this penalty was designed specifically to eliminate such marketers as a source of competition to Zahid and other authorized Caterpillar dealers. In the fall of 1981, about a year and a half after Caterpillar modified this service fee system, plaintiffs ceased marketing Caterpillar electrical generator sets, and transferred their generator set business to OMCO.

Caterpillar’s Motion for Summary Judgment.

Caterpillar contends that plaintiffs’ claim for injunctive relief is moot because plaintiffs have been out of the business of marketing Caterpillar electrical generator sets for nearly three years. Plaintiffs acknowledge that they no longer market Caterpillar sets, but assert that they were driven out of the market by Caterpillar’s service fee penalty and that removal of the penalty would permit them to reenter the market and compete as they once did. Caterpillar responds that certain changes in Saudi Arabian law subsequent to the cessation and sale of plaintiffs’ generator set business now preclude plaintiffs from returning to this principal former market. These changes are embodied in Royal Decree No. M/32 dated 10/8/1400 H. (June 23, 1980) (Royal Decree M/32), and Ministry of Commerce Order No. 1897 dated 24/5/1401 H. (March 30, 1981) (Ministerial Decision 1897). Plaintiffs dispute Caterpillar’s interpretation of these changes, and contend that these changes do not prevent plaintiffs from returning to their former business if Caterpillar’s service fee penalty is enjoined. Plaintiffs’ claim for injunctive relief thus turns in the first instance on the interpretation of Royal Decree M/32 and Ministerial Decision 1897.

Federal Rule of Civil Procedure 44.1 governs the procedure for determining an issue of foreign law. Rule 44.1 states:

A party who intends to raise an issue concerning the law of a foreign country shall give notice in his pleadings or other reasonable written notice. The court, in determining foreign law, may consider any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence. The court’s determination shall be treated as a ruling on a question of law.

Fed.R.Civ.P. 44.1. Defendants provided the requisite notice of their intent to raise an issue concerning Royal Decree M/32 and Ministerial Decision 1897 in a pleading entitled “Notice of Matter Concerning Foreign Law.” Both sides then submitted translations of the relevant Saudi Regulations, affidavits from experts on Saudi law, and other materials in support of their respective positions.

The parties rely primarily on the expert affidavits in advancing their suggested interpretations of Royal Decree M/32 and Ministerial Decision 1897. All of the affiants profess a familiarity with the interpretation and application of Royal Decree M/32 and Ministerial Decision 1897. Not surprisingly, the experts disagree as to the scope of those laws. Because this court’s determination is treated as a ruling on a question of law, however, this disagreement on the part of the experts would not foreclose the granting of a motion for summary judgment. Alosio v. Iranian Shipping Lines, S.A., 426 F.Supp. 687, 689 (S.D.N.Y.1976), affd, 573 F.2d 1287 (2nd Cir.1977).

Royal Decree M/32 essentially is the Saudi equivalent of enabling legislation, and it enables the Saudi Ministry of Commerce to promulgate revisions to the Saudi Commercial Agencies Regulations. Saba Affidavit, ¶ 4. One such revision is Ministerial Decision 1897, which provides “Implementation Rules” for the Commercial Agencies Regulations. These Implementation Rules became effective on May 17, 1981. Saba Affidavit, 11 6; First Al-Hejailan Affidavit, ¶ 7. Decision 1897 states in pertinent part:

“Commercial Agencies” under the Commercial Agencies Regulations and its amendments mean any person who enters into a contract with a producer or his representative, in his country to carry on business whether as an agent or distributor in any type of agency or distribution for a profit, a commission or facilities of whatever nature, including agencies for sea, air and land transportation and any agencies for which an order is issued by the Minister of Commerce.
No person other than a Saudi, whether natural or juridical, may be a commercial agent in the Saudi Arabia Kingdom. However, Saudi companies must have fully Saudi capitalization and their boards of directors and officers and those who have the right to sign on their behalf must be Saudis.

Implementation Rules for Commercial Agencies Regulations, Ministry of Commerce Order No. 1897 of 25/5/1401 H. (March 30, 1982), articles 1 & 2.

Mr. Saba states that Decision 1897 imposes certain specific requirements on parties who wish to act as a distributor or agent in Saudi Arabia for a foreign manufacturer. First, those parties must register with the Saudi Ministry of Commerce as a foreign manufacturer’s agent or distributor. Second, those parties must be Saudi nationals or one hundred percent Saudi entities. Third, those parties must have entered into a distributorship agreement or other agency agreement directly with the foreign manufacturer or the manufacturer’s duly authorized representative, and such agreement must be registered with the Ministry of Commerce. Saba Affidavit, 11117, 9, 10. In addition, Decision 1897 requires that the Saudi agent or distributor maintain service facilities and an adequate supply of spare parts, and also that he respect the terms and conditions of the warranties provided by the foreign manufacturer. Saba Affidavit, 1111.

Caterpillar concludes from Mr. Saba’s affidavit that Decision 1897 bars plaintiffs from marketing Caterpillar generator sets in Saudi Arabia because plaintiffs are not authorized Caterpillar dealers, and, consequently, are not able to enter into an authorized distributorship or agency agreement with their Saudi purchasers. In addition, Caterpillar notes that plaintiff left the Caterpillar electrical generator set business by selling the business to OMCO, an authorized Caterpillar dealer, approximately four months after Decision 1897 took effect. Caterpillar thus raises an inference that plaintiffs left the market in Saudi Arabia in direct response to the change in Saudi law, and not as a result of Caterpillar’s service fee change.

Plaintiffs dispute the conclusions Caterpillar draws from the Saba affidavit. Plaintiffs contend that all commercial relationships between foreign suppliers and Saudi purchasers need not take the form of a formal distributorship or agency relationship. Rather, plaintiffs suggest that Decision 1897 merely sets guidelines for distributor or agency relationships if the Saudi purchaser desires such a relationship. According to plaintiffs’ position, these guidelines do not prevent Saudi purchasers who do not wish to enter into a formal distributorship or agency relationship from purchasing foreign goods from an independent middleman or reseller. Plaintiffs support this interpretation with the affidavit of Mr. Al-Hejailan. Mr. Al-Hejailan states:

9. Neither the Commercial Agency Regulations nor the Implementation Rules require that a Saudi person register as the commercial agent or distributor of a foreign manufacturer as a prerequisite to engaging in the importation and sale in Saudi Arabia of such foreign manufacturer’s goods.
10. The Commercial Agency Regulations and Implementation Rules do not require that a Saudi importer buy his stock either directly from a foreign manufacturer or the manufacturer’s representative, and a Saudi importer is free to purchase the foreign manufacturer’s products from third parties without any relationship to the manufacturer.
11. The Commercial Agency Regulations and the Implementation Rules do not require that a Saudi person register as a commercial agent or distributor of a foreign manufacturer to purchase, import and sell such manufacturer’s products, and such activity is not contrary to Saudi law even if the foreign manufacturer has a registered commercial agent or distributor in Saudi Arabia.

First Al-Hejailan Affidavit, 11119-11.

Plaintiffs conclude from Mr. Al-Hejailan’s affidavit that if Caterpillar’s service fee penalty is eliminated, plaintiffs will not be barred by Decision 1897 from returning to their previous business of marketing Caterpillar electrical generator sets as a reseller in Saudi Arabia. Plaintiffs bolster this conclusion with the affidavit of Wash-burn S. Oberwager, the president of Merican, Inc. and Merican Curtis, Inc. Mr. Oberwager states that despite Decision 1897, plaintiffs have continued to market various other types of foreign manufactured goods, including heavy equipment, in Saudi Arabia, in the same manner that they marketed Caterpillar generator sets prior to 1981. Mr. Oberwager concludes from his practical perspective that the change in Caterpillar’s service fee system, and not the change in Saudi law, caused plaintiffs to cease marketing Caterpillar generator sets. Oberwager Affidavit, ¶[¶ 2-8. Caterpillar responds with the affidavit of Mr. Helmy. Mr. Helmy states that the statements contained in the Al-Hejailan affidavit are incomplete and inconsistent with the policy position of the Saudi Ministry of Commerce. Mr. Helmy declares that some members of the Saudi legal community have been of the opinion that a Saudi purchaser may import goods from a foreign supplier without having to register the importation agreement, but only when such importation takes place on an ad hoc or intermittent basis. When the relationship between the foreign supplier and the Saudi importer begins to take on a more continuous nature, and thus more closely resembles the distribution of a foreign manufacturer’s product, Decision 1897 requires the Saudi importer to obtain an acceptable distribution or agency agreement directly with the foreign manufacturer or the manufacturer’s authorized representative, and register the agreement with the Saudi Ministry of Commerce. Helmy Affidavit, 1111 4-10.

In addition, the Helmy affidavit contains a letter that the Saudi Ministry of Commerce has prepared in blank for routine distribution in response to inquiries concerning the scope of Decision 1897. The letter states in pertinent part:

First: This Ministry, or naturally, any other entity has no right to enforce any provision of the Commercial Agencies Regulations, as amended, and its implementing regulations against any foreign person (entity) not residing in the Kingdom nor has business transactions to be performed within its territory.
Second: If, however, there is a business transaction, whatever its contractual characterization may be (agency-distributorship-importation) and the Kingdom was the place of performance of the contract, there are certain conditions stated hereunder that have to be met (in the agency contract).
1. The relationship should be direct without any intermediary between the foreign producer and/or who represents him in his country on one hand — and the Saudi agent, distributor or importer on the other.

Helmy Affidavit, attachment (emphasis added). Caterpillar contends that this letter represents the policy position of the Ministry of Commerce and reveals an intention to apply the requirements of Decision 1897 broadly to all business transactions between a foreign entity and a Saudi purchaser. Such a broad application would require the registration of agreements even for ad hoc or intermittent sales to' Saudi Arabia.

Plaintiffs then submitted a second affidavit from Mr. Al-Hejailan. The second AlHejailan affidavit disputes the legal basis for Mr. Helmy’s position, and declares that the Ministry of Commerce letter attached to Mr. Helmy’s affidavit does not constitute official correspondence because it is undated and bears no Ministry of Commerce reference number. Second Al Hejailan Affidavit, ¶[¶ 5-6. Mr. Al-Hejailan also states his opinion that the Saudi Commercial Agencies Regulations “should not be used by foreign manufacturers or local businessmen to reduce competition and injure the Saudi Arabian consumer.” Id. at 118.

As the foregoing discussion illustrates, the parties’ submissions basically amount to a partisan “battle of experts” over the scope of Decision 1897. Neither party has submitted a clearly authoritative Saudi pronouncement on the scope of the rule. Rather, in keeping with their respective interest in the litigation, plaintiffs offer a narrow, formalistic interpretation of Decision 1897, while Caterpillar advances a broad, functional approach to the rule. Under plaintiffs’ interpretation, the requirements of Decision 1897 apply only to commercial arrangements that already characterize themselves as distributorship or agency agreements. Under Caterpillar’s approach, the requirements of Decision 1897 govern any commercial arrangement that results in the importation or distribution of foreign-manufactured goods in Saudi Arabia, without regard to the formal characterization of such arrangements, and the requirements dictate that such arrangements take the form of a distributorship or agency agreement directly between the foreign producer and the Saudi purchaser.

It is my opinion that Saudi Arabia would subscribe to the interpretation that Caterpillar advances. First, Caterpillar’s interpretation is consistent with the position stated in the Ministry of Commerce letter attached to the Helmy affidavit. Although this letter apparently is not official, it nonetheless is probative in revealing the Ministry of Commerce’s interpretation of the scope and application of Decision 1897. The letter states on its face that whenever a business transaction takes place with a foreign entity, regardless of the characterization of the contractual relationship, and the place of performance of the contract is Saudi Arabia, the contractual relationship should be directly between the Saudi purchaser and the foreign manufacturer or the manufacturer’s authorized distributor. The language of the letter expressly excludes business transactions that involve an intermediate party.

Second, Caterpillar’s interpretation is consistent with that of a recent commentary on Decision 1897. See Cartwright, The New Saudi Commercial Agencies Regulaslion, 16 Int’l Law. 443 (1982). The Cartwright article is not necessarily more authoritative than the expert affidavits submitted to the court, but it nonetheless is important as an English language interpretation of Decision 1897 that is not in any way colored by the adversarial context of the present litigation. Mr. Cartwright states:

Royal Decree M/32 and the Implementing Regulations, like the commercial agencies laws of several other countries in the Middle East, including Egypt, Jordan and Qatar, seem to require that Saudi commercial agency arrangements be concluded by the Saudi agent directly with the foreign producer, or a representative of the producer located in the producer’s own country. This provision undoubtedly represents an effort to prohibit (by making non-registrable) agreements between Saudi agents and regional agents or distributors or other “middlemen,” whose role, in the view of the Saudi government, makes the goods or services the subject of the agency unduly expensive locally, by the factor of the middleman’s markup or commission.

Id. at 445. Mr. Cartwright thus interprets Decision 1897 to prohibit the type of reselling arrangement that formed the basis of plaintiffs’ Caterpillar generator set business.

Third, Caterpillar’s interpretation is consistent with the identifiable policies underlying Decision 1897. From the face of the regulation, as well as the Helmy affidavit, it is apparent that the regulation requiring Saudi purchasers to deal directly with the foreign manufacturers or the manufacturer’s authorized representatives is designed to insure a sufficient flow of spare parts, service, and warranty protection to the ultimate Saudi consumers. Decision 1897, article 3; Helmy Affidavit, U 9. The Cartwright article suggests that the regulation also is designed to avoid the price markup associated with a middleman’s commission. These policies would be frustrated entirely if Saudi distributors were able to contract freely with independent resellers and not register their importation agreements with the Ministry of Commerce. Decision 1897 inherently manifests a judgment on the part of the Saudi government that direct distribution relationships, monitored through the registration of the distribution agreements, serve the needs of the Saudi consumer for spare parts, service and warranty protection better than an open market that includes unauthorized resellers and middlemen. Notwithstanding plaintiffs’ apparently good record of providing such parts, service, and warranties during their history as resellers of Caterpillar generator sets, Decision 1897 now excludes plaintiffs, as resellers, from the registered marketplace.

Finally, the statements of Mr. Oberwager that plaintiffs market and resell other types of foreign manufactured goods in Saudi Arabia is not persuasive support for plaintiffs’ narrow construction of Decision 1897. Plaintiffs’ present activities may simply reflect their short term success at eluding the Ministry of Commerce’s registration and enforcement efforts. This conduct would not justify permitting plaintiffs to expand their unauthorized activity by distributing Caterpillar generator sets as well.

Decision 1897 requires at least that a continuous distribution of a foreign manufacturer’s goods take the form of a formal, registered distribution or agency relationship between the Saudi purchaser and the foreign manufacturer or the manufacturer’s authorized representative. In the years 1980 and 1981 plaintiffs marketed over 500 Caterpillar generator sets to Raneo in Saudi Arabia. This continuous distribution of Caterpillar sets would fall within the confines of Decision 1897 if plaintiffs returned to such activity today. Because plaintiffs are not authorized representatives of Caterpillar, they are presently barred by Decision 1897 from returning to their former business as resellers of Caterpillar generator sets. Caterpillar’s change in its fee service system, therefore, even if it unlawfully penalized plaintiffs in the past, does not support present injunctive relief, because plaintiffs can no longer compete with Caterpillar in their principal former market, Saudi Arabia. “Past exposure to illegal conduct does not in itself show a present case or controversy regarding injunctive relief ... if unaccompanied by any continuing, present adverse effects.” O’Shea v. Littleton, 414 U.S. 488, 495-96, 94 S.Ct. 669, 675-76, 38 L.Ed.2d 674 (1974). Because of Decision 1897, there are no continuing, present adverse effects to plaintiffs resulting from Caterpillar’s change in their service fee system. Consequently, plaintiffs’ claim for injunctive relief no longer presents a live case or controversy. Plaintiffs’ claim for injunctive relief, therefore, will be dismissed.

Plaintiffs’ Motion for Leave to Amend.

Plaintiffs seek leave of this court to file a second amended complaint. The proposed amendment basically retains the factual allegations of plaintiffs’ previous complaints, but includes an additional claim for damages under the state common law of civil conspiracy. Caterpillar objects to the proposed amendment as an untimely and prejudicial attempt to revive plaintiffs’ dismissed antitrust damage claim.

Rule 15(a) of the Federal Rules of Civil Procedure provides this court with the discretion to grant or deny leave to amend a pleading. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330, 91 S.Ct. 795, 802, 28 L.Ed.2d 77 (1971). The rule, however, advises that “leave shall be freely given when justice so requires,” Fed. R. Civ.P. 15(a), and, in general, courts liberally permit parties to amend their pleadings. See Boileau v. Bethlehem Steel Corp., 730 F.2d 929, 938 (3rd Cir.1984). Despite this general liberality, the Supreme Court has enumerated specific factors that may justify the denial of leave to amend. See Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230, 9 L.Ed.2d 222 (1962). These factors include “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party, [and] futility of amendment.” Foman, 371 U.S. at 182, 83 S.Ct. at 230.

There is no question that plaintiffs substantially delayed the filing of the proposed amendment. The common-law conspiracy claim that plaintiffs seek to assert was available to them at the time they filed their original complaint, because the conspiracy claim admittedly is based upon the same factual allegations that underlie plaintiffs’ federal antitrust claims. Nevertheless, plaintiffs did not move for leave to amend their complaint to include the common-law conspiracy claim until December of 1983. That date is over three years after plaintiffs filed their original complaint, almost two and a half years after they filed their first amended complaint, over a year and a half after Caterpillar moved to dismiss the federal antitrust damage claim, and over four months after the court of appeals handed down the opinion holding that plaintiffs’ antitrust damage claim is barred by the doctrine of Illinois Brick.

The mere existence of delay, however, is an insufficient basis for denying a proposed amendment. Cornell & Co. v. Occupational Safety & Health Review Commission, 573 F.2d 820, 823 (3rd Cir. 1978). Rather, the moving party’s delay must be coupled with an additional consideration, such as prejudice to the opposing party, before a court may deny leave to amend. Boileau, 730 F.2d at 939; Johnson v. Trueblood, 629 F.2d 287, 294 (3rd Cir.1980). Indeed, prejudice to the non-moving party is considered the “touchstone” for the denial of leave to amend. Cornell, 573 F.2d at 283. As a practical matter, the longer the moving party delays in seeking leave to amend, the more likely it is that the nonmoving party has suffered prejudice in some way. See Advocat v. Nexus Industries, Inc., 497 F.Supp. 328, 331 (D.Del.1980).

Allowing plaintiffs to amend their complaint to include a claim for common-law conspiracy would result in substantial prejudice to Caterpillar, the nonmoving party. The court of appeals has defined prejudice under Rule 15 to mean “undue difficulty in prosecuting a lawsuit as a result of a change in tactics or theories on the part of the other party.” Deakyne v. Commissioners of Lewes, 416 F.2d 290, 300 (3rd Cir.1969). Caterpillar already has expended a significant amount of time and resources defending this case as an antitrust matter. Should this case go forward with plaintiffs’ proposed amendment, Caterpillar will be forced to expend additional time and resources in litigation.

To begin with, Caterpillar would be required to defend this action under an entirely new and different theory of liability. The court of appeals’ opinion on the Illinois Brick issue forecloses plaintiffs from pursuing their claim for damages under the federal antitrust laws. In the foregoing section of this opinion, I have held that plaintiffs’ claim for injunctive relief under the federal antitrust laws does not present a justiciable case or controversy. Indeed, plaintiffs’ claim for injunctive relief has not been live since plaintiffs sold their Caterpillar electrical generator set business in 1981. If plaintiffs are permitted to amend their complaint, this action, which is almost four years old, will be transformed completely into a state common-law conspiracy action. The amendment would require Caterpillar to engage in additional, and possibly duplicative, discovery, and would necessitate a lengthy and complicated trial. See Kuhn v. Philadelphia Electric Co., 85 F.R.D. 86 (E.D.Pa.1979) (potential for lengthier and more complicated trial sufficient reason to deny leave to amend). Such a fundamental change in the nature of this litigation, particularly after plaintiffs’ original claim for damages has been rejected, frustrates even the liberal rules of notice pleading and is unduly prejudicial to Caterpillar. Zinser v. Continental Grain Co., 660 F.2d 754, 762 (10th Cir.1981) (plaintiff denied leave to amend complaint to assert claims of fraud, deceit and civil conspiracy after court had ruled that Illinois Brick bars plaintiff’s antitrust claims).

In addition, Caterpillar would be exposed to the danger of duplicative recovery and the uncertainties associated with the complex apportionment of damages. The court of appeals already has addressed these concerns in the factual context of this ease, and has held that they justify barring a claim for damages under the federal antitrust laws. Merican, 713 F.2d at 968-69. Permitting plaintiffs to reassert a damage claim by employing a theory of civil conspiracy would reopen the door to duplicative recovery and complicated proof of damages and undermine the sound policies articulated and applied by the court of appeals. The prejudice to Caterpillar would be manifest.

The court of appeals held that the district court “erred by refusing to grant Caterpillar’s motion to dismiss Appellees’ [plaintiffs’] claims for damages.” Merican, 713 F.2d at 960. Despite this clear mandate, plaintiffs’ seek to avoid dismissal of their claim for damages by asserting, upon the same factual allegations, a cause of action for common-law civil conspiracy, rather than the previously asserted antitrust violations. The court of appeals in Boileau, 730 F.2d at 939 stated that “it is within the discretion of a trial judge to prevent the abusive use of amendment to delay or prolong litigation.” Clearly, the only reason for the delay in seeking to amend was because plaintiffs were relying solely on their antitrust claim, and when that claim was finally ordered to be dismissed and certiorari denied by the Supreme Court, plaintiffs made a last-ditch effort to resuscitate their claims by asserting, on the same facts, an entirely new and distinct cause of action.

From the submitted briefs, it is quite apparent that over the intervening years, many documents that would be relevant have become unavailable. Many documents that were at one time maintained by plaintiffs’ Saudi facility can no longer be located. Witnesses who were at one time employed by plaintiffs are no longer in their employ, and, thus, it may be impossible for defendants to secure their testimony. See Caterpillar Tractor Co.’s Memorandum in Opposition to Plaintiffs’ Motion for Leave to File a Second Amended Complaint at 15-20.

The motion for leave to file a second amended complaint will be denied. Considering all of the circumstances of this case, to grant such a motion at this time, although within the discretion of the district court, might well constitute an abuse of discretion. In any event, in the exercise of discretion, I will deny the motion to amend the complaint.

      . On February 27, 1984, following the Supreme Court’s denial of certiorari, the judgment order of the court of appeals, dated July 26, 1983, was filed with the Clerk of this court. That judgment order reversed the prior order of this court, and remanded the case for further proceedings consistent with the court of appeals' opinion. Accordingly, plaintiffs' claims for monetary damages under § 4 of the Clayton Act will be dismissed.

      . Caterpillar provided affidavits from Joseph Saba and M. Taher Helmy. Mr. Saba is a member of the bar of the District of Columbia who presently resides in Riyadh, Saudi Arabia. Saba Affidavit, ¶¶ 1-2. Although Mr. Saba is not licensed to practice in Saudi Arabia, he acts as a managing partner for a law firm in Riyadh, and serves on the editorial board of a publication that analyzes the laws and regulations of various Middle Eastern Nations. Id. Under Rule 44.1, an expert need not be admitted to practice in the country whose law is at issue. Murphy v. Bankers Commercial Corp., 111 F.Supp. 608, 611 (S.D.N.Y.), aff'd, 203 F.2d 645 (2nd Cir.1953). Mr. Helmy is a member of the bars of Illinois, Saudi Arabia, and Egypt, and he practices general international law in Riyadh. Helmy Affidavit, ¶ 1.
      Plaintiffs submitted two affidavits from Salah Al-Hejailan. Mr. Al-Hejailan is a member of the Saudi Arabian bar, and he maintains a private practice in Riyadh. First Al-Hejailan Affidavit, ¶ 1 (filed June 14, 1984).

      . Each party has submitted a translation of Decision 1897. Plaintiffs’ translation is attached to the first affidavit of Mr. Al-Hejailan, and Caterpillar's translation was received from the Saudi Arabian Embassy in Washington, D.C. Although neither translation apparently is official, the parties do not dispute the wording of the regulation. For present purposes, I have chosen to use the wording contained in the translation supplied to Caterpillar by the Saudi Arabian Embassy.

      . Decision 1897 provides a one year grace period for agents and distributors that were in business at the time the decision became effective. Ministerial Decision 1897, article 22; Saba Affidavit, ¶ 12. Consequently, the regulations would not have applied to plaintiffs until May 17, 1982.

      . See generally Merryman, Foreign Law as a Problem, 19 Stan.J.Int’l L. 151, 157-59 (a numher of pressures tend to result in an expert on foreign law becoming a partisan advocate for the client whose counsel engages him),

      . By way of explanation, the sequence of events following the plaintiffs’ filing of their motion for leave to amend took place as follows: The parties stipulated to a deferral of Caterpillar’s response to plaintiffs’ motion and the filing of Caterpillar’s motion to dismiss plaintiffs’ claim for injunctive relief until after the Supreme Court issued its final order on plaintiffs’ petition for a writ of certiorari regarding the Illinois Brick issue. The Supreme Court denied certiorari on February 21, 1984. Caterpillar then filed its motion for summary judgment on March 9, 1984, and its response to plaintiffs' motion for leave to amend on March 23, 1984. Thereafter, the parties submitted an extensive series of briefs, reply briefs, affidavits and other materials on the Saudi law issue involved in Caterpillar’s motion for summary judgment. I allowed this briefing to continue up to a point because of my desire to receive and utilize relevant source materials on that issue of unfamiliar foreign law. My desire to address both motions together necessitated the delay in disposing of plaintiffs’ motion for leave to amend.


source: Caselaw Access Project

author: KRAM, District Judge.

license: Public Domain

text:
    Edmund JORDAN, Dolores Jordan, Steven Kane, Joyce Kane, Daniel B. Katz, Harvey Levine, Sheldon Murra, Marc Nagel, Felix E. Matusky and Robert Wasserman, Plaintiffs, v. MADISON LEASING COMPANY, Turnkey Equipment Leasing, Inc., Turnkey Sales and Leasing, Inc., Turnkey Software, Inc., Fred Lanzetta, Vincent J. Deschamps, Patricia Krever, Joseph M. Patane, J.R. Fredrick Corp., Dewall Leasing Corp., Todtman, Epstein, Young & Goldstein, P.C., Donald R. Young, Martin Todtman, Seymour M. Goldstein, Martin B. Epstein, Gary Goldberg & Company, Inc., and Gary Goldberg, Defendants. TODTMAN, EPSTEIN, YOUNG & GOLDSTEIN, P.C., Donald R. Young, Martin Todtman, Seymour M. Goldstein and Martin B. Epstein, Third-Party Plaintiffs, v. SCHLESINGER & SLAVET, P.C., Seidman & Seidman, Joseph Klausner and the Estate of Howard P. Schlesinger, Third-Party Defendants.
    Nos. 83 Civ. 2515 (SWK), 83 Civ. 3237 (SWK), 83 Civ. 3438 (SWK), 83 Civ. 5497 (SWK) and 83 Civ. 5833 (SWK).
    United States District Court, S.D. New York.
    Oct. 2, 1984.

      Siff & Newman, P.C. by Benjamin Vinar, New York City, for third-party plaintiffs Todtman, Epstein, Young & Goldstein, P.C., Martin Todtman, Donald R. Young, Seymour M. Goldstein, Martin B. Epstein and Robert D. Tolz.
    Solinger, Grosz & Goldwasser, P.C. by Bernard Persky, New York City, for third-party defendants Schlesinger & Slavet and the Estate of Howard P. Schlesinger.
    Cahill, Gordon & Reindel by Mathias E. Mone, New York City, for third party defendants Seidman & Seidman and Joseph Klausner.
   MEMORANDUM OPINION AND ORDER

KRAM, District Judge.

The above-captioned action is before this Court upon the motion of third-party defendants to dismiss the third-party actions against them pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure. For the reasons stated below the motions are hereby granted in part and denied in part.

The main action, as well as the third-party actions emanate from a complicated tax shelter scheme involving plaintiffs’ purchase and the subsequent lease back to end users of certain word processing equipment and software. The defendants include Turnkey Information Processing, Inc. and various entities associated with the sale of the tax shelters (Turnkey companies), various officers and directors of Turnkey, the law firm of Todtman, Epstein, Young & Goldstein and various partners of the law firm (third-party plaintiffs). The plaintiffs variously allege that some or all of the equipment and software purportedly sold to them in fact never existed or was materially different from the equipment described to them, that the value of such equipment and software that did exist was lower than originally represented to them, that such equipment and software was not actually leased to end users, and that, as a result, the tax benefits which they were led to believe they would realize never materialized. Plaintiffs allege violations of Section 10(b) of the Securities and Exchange Act of 1934, breach of fiduciary duties, fraud, recklessness, negligence and violation of the Federal anti-racketeering laws. Plaintiffs charge that defendants, third-party plaintiffs, misrepresented the nature and value of the equipment in the offering memoranda prepared by third-party plaintiffs, and that they should be held liable for failing to investigate and correct such misinformation.

Third-party defendants, Schlesinger & Slavet, P.C., the Estate of Howard P. Schlesinger, Seidman & Seidman and Joseph Klausner, are the accountants who audited the financial statements of the Turnkey companies for the fiscal years ending December 31, 1979 and 1980 and March 31, 1981 and 1982. Third-party plaintiffs have commenced their action seeking indemnification and contribution from third-party defendants “for misleading them by the clean opinions which they repeatedly gave to their clients’ financial statements year after year.” (Third-party plaintiffs’ Memorandum in Opposition to the Dismissal Motions, at 4).

Indemnity

The right to indemnification may arise out of an express agreement of indemnification, or it may be implied by law in favor of one who is held liable solely by imputation of law because of his relation to the actual wrongdoer. Rogers v. Dorchester Assoc., 32 N.Y.2d 553, 347 N.Y.S.2d 22, 300 N.E.2d 403 (1973); Margolin v. New York Life Ins. Co., 32 N.Y.2d 149, 344 N.Y.S.2d 336, 297 N.E.2d 80 (1973); Malette v. Loblaws, Inc., 61 A.D.2d 1054, 402 N.Y.S.2d 474, 477 (1978).

In this case third-party plaintiffs claim that, under the principle of primary versus secondary liability, they are entitled to full indemnity, implied by law, against a third person even if they are found guilty of negligence, as long as the nature of the third person’s wrong is more culpable. In support of this proposition, third-party plaintiffs rely upon Dole v. Dow Chemical Co., 30 N.Y.2d 143, 331 N.Y.S.2d 382, 282 N.E.2d 288 (1972). However, Dole and subsequent cases interpreting Dole make it clear that indemnity is allowed where the party seeking indemnity was not personally at fault and did not actually contribute to the injury, but was held liable to the plaintiff only vicariously. Tokio Marine and Fire Ins. Co. v. McDonnell Douglas Cory., 465 F.Supp. 790 (S.D.N.Y.1978), aff'd, 617 F.2d 936 (2d Cir.1980). Furthermore, Dole recast the terminology categorizing primary and secondary liability. The party who is primarily liable is the one who should pay ultimately for his actual fault. The one who must pay because of first instance liability to third parties, but who ought to be able to recover from one guilty of actual fault, is secondarily liable. Kelly v. Diesel Construction Division, 35 N.Y.2d 1, 7, 358 N.Y.S.2d 685, 690, 315 N.E.2d 751, 754 (1974).

In this case, third-party plaintiffs are not being held vicariously responsible solely by imputation of law because of their relation to the third-party defendants. Rather, the claims asserted against the third-party plaintiffs are based upon their own acts or omissions. Consequently, third-party plaintiffs are not entitled to indemnification. Instead, according to the principles enunciated in Dole, what third-party plaintiffs have stated, at most, is a basis for an apportionment of responsibility among the parties. Therefore, third-party plaintiffs’ claims for indemnification are DISMISSED.

Contribution

The third-party plaintiffs seek contribution on plaintiffs’ common law claims of negligence, gross negligence, recklessness, breach of fiduciary duty and fraud and under federal law for violation of Section 10(b) of the Securities and Exchange Act of 1934.

The New York law of contribution, codified in CPLR 1401, provides that

two or more persons who are subject to liability for damages for the same personal injury, injury to property or wrongful death, may claim contribution among them whether or not an action has been brought or a judgment has been rendered against the person from whom contribution is sought.

The legislative report of the Judicial Conference made it clear that CPLR 1401 expanded the right of contribution to include not only joint tort feasors, but also “concurrent,” “successive and independent,” “alternative” and “intentional” tort feasors. (Twelfth Annual Report of the Judicial Conference on CPLR to the Legislature, 1974 McKinney’s Session Laws, pp. 1805-1907).

An action over for contribution will not lie unless all of the essential elements of a cause of action against the proposed contributor can be made out. Lodino v. Health Ins. Plan of Greater New York, Inc., 93 Misc.2d 18, 401 N.Y.S.2d 950, 951 (1977).

In this case, third-party defendants can be held liable in negligence only to those parties with whom they are in privity. This rule was set forth in Ultramares Corp. v. Touche, 255 N.Y. 170, 189, 174 N.E. 441 (1931), and was recently reaffirmed in Dworman v. Lee, 56 N.Y.2d 816, 452 N.Y.S.2d 570, 438 N.E.2d 103 (1982), affg on opinion below, 83 A.D.2d 507, 441 N.Y.S.2d 90 (1st Dept.1981). Thus, although third-party defendants may have been aware that the audits which they prepared would be relied upon by third parties, in the absence of privity of contract the accountants cannot be held liable to third parties for negligence. Therefore, to the extent that third-party plaintiffs’ contribution claims are based on allegations of negligence by third-party defendants, they are insufficient to state a cause of action.

Accountants may be held responsible to third persons for their fraudulent acts or omissions. Generally, a necessary element of actionable fraud is knowledge of the falsity of the representations on the part of the person making such misrepresentations. However, negligence, if gross, or blindness, although not equivalent to fraud, is sufficient to sustain an inference of fraud. Ultramares v. Touche, supra at 186, 189, 190, 174 N.E. 441; State Street Trust Co. v. Ernst, 278 N.Y. 104, 112, 15 N.E.2d 416 (1938). “A refusal to see the obvious, a failure to investigate the doubtful, if sufficiently gross, may furnish evidence leading to an inference of fraud so as to impose liability for losses suffered by those who rely on the balance sheet.” Id. Thus, although there may be lacking deliberate fraud on the part of third-party defendants, they may be liable to third persons where they had reason to know that the audits would be relied upon by those third persons, if it can be established that they were grossly negligent or reckless in their preparation of the audits. “[I]f less than this is proved, if there has been neither reckless misstatement nor insincere profession of an opinion, but only honest blunder, the ensuing liability for negligence is one that is bounded by the contract.” Ultramares v. Touche, supra at 189, 174 N.E. 441.

In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.

Therefore, the third-party plaintiffs have sufficiently pleaded a cause of action for contribution based on the claims of gross negligence and recklessness. For this reason, third-party defendants’ motions to dismiss are DENIED as to these causes of action.

Seidman & Seidman asserts that it cannot be held liable in contribution since it issued its opinion upon the financial statements after all of the plaintiffs’ purchases had taken place. However, the third-party complaints may not be dismissed unless it can be shown beyond doubt that the third-party plaintiffs can prove no set of facts in support of their claims which would entitle them to relief. It is not at all clear, based upon these pleadings, that none of the plaintiffs made their investment decisions after Seidman & Seidman issued its opinion. For this reason Seidman & Seidman’s request that these claims against it be dismissed is DENIED.

Pleading Fraud Under Rule 9(b)

Third-party defendants argue that third-party plaintiffs’ allegations of fraud have not been pled with particularity as required by Fed.R.Civ.P. 9(b).

Third-party plaintiffs have set forth the particular accounting and audit procedures and principles which the auditors allegedly violated. Thus, although these allegations are not as specific as might be desired, third-party defendants have certainly been given fair notice of what the third-party plaintiffs’ claim is and the grounds upon which it rests. The averments clearly go beyond the conclusory allegations forbidden by Rule 9(b). For this reason, third-party defendants’ motion to dismiss for failure to comply with Rule 9(b) is DENIED.

Violation of Section 10(b)

The right to contribution for claims under Section 10(b) is governed by federal law. Altman v. Liberty Equities Corp., 54 F.R.D. 620, 625 (S.D.N.Y.1972). It is well-established that contribution is a remedy available in cases involving violations of the federal securities law, but it is limited solely to recovery among joint tort feasors. Stratton Group Ltd. v. Sprayregen, 466 F.Supp. 1180 (S.D.N.Y.1979). A finding that parties are joint tort feasors is based on common liability to the injured party and not necessarily upon the same tort. Thus, if it is determined that the third-party defendants are liable to the plaintiffs based on a theory of fraud, then third-party defendants would be joint tort feasors against whom a right to contribution would exist.

Therefore, since third-party plaintiffs may be entitled to contribution on the claims under Section 10(b), the third-party defendants’ motions to dismiss the third-party complaint for failure to state a claim are DENIED as to this cause of action.

-CONCLUSION-

Third-party defendants’ motions to dismiss the third-party complaint are DENIED as to the claims for contribution based on gross negligence, recklessness, breach of duty, fraud and violation of the federal securities law under Section 10(b). The motions are GRANTED as to the third-party plaintiffs’ claims for indemnity and contribution based on a claim of negligence. In light of the fact that third-party plaintiffs’ claims for contribution have been dismissed only in part, Schlesinger & Slavet’s request that the non-contribution claim against it be dismissed is accordingly DENIED. Third-party defendants’ motions to dismiss the third-party complaint for failure to comply with Fed.R.Civ.P. 9(b) is DENIED.

SO ORDERED.

      . Rule 9(b) provides:

      . Cases have required plaintiffs to set forth the manner in which each document is alleged to have been fraudulent and to identify in what respects each particular statement was false or misleading. Nonetheless, in this case a sufficient nexus exists between the financial statements alleged to be false and the manner they are allegedly false to defeat a motion to dismiss.


author: CAHILL, District Judge.

text:
    William CAPERS, Plaintiff, v. Jerry BURKE, Sgt. Bill Pierce, Tom Jackson, Thomas Murphy, Ed Kyle, Tom McDermott, Dan Hoffarth, Ron Bilyk, and Jim Nowotny, Defendants.
    No. 83-0561C(4).
    United States District Court, E.D. Missouri, E.D.
    Oct. 4, 1984.

      Curtis Calloway, St. Louis, Mo., for plaintiff.
    Eugene K. Buckley, Michael M. Flavin, Brown, James & Rabbitt, St. Louis, Mo., for defendants.
   MEMORANDUM AND ORDER

CAHILL, District Judge.

This matter is before the Court on defendants Pierce, Jackson, Murphy, Kyle, Bilyk, and Nowotny’s (the defendants’) motion for summary judgment; and defendant Burke’s separate motion for summary judgment. The Court will heretofore treat defendant Burke’s motion as a motion to dismiss.

William Capers, a federal prisoner in Ashland, Kentucky, commenced this action pursuant to 42 U.S.C. §§ 1983, 1985, 1986, and 1988, seeking damages for alleged constitutional misconduct on the part of the defendants. After careful consideration of all the evidence presented, this Court grants the defendants’ motion for summary judgment and dismisses plaintiff’s cause of action against defendant Burke.

Plaintiff sues defendant Burke in his capacity as chief of the Normandy County Police Department. Burke, however, has no supervisory authority over the other named defendants in that they are police officers for the County of St. Louis. The plaintiff has failed to present this Court with any evidence indicating that Burke participated in or directed the activity of the police officers. Thus, plaintiff’s claim against defendant Burke must be dismissed. See Tara Enterprises, Inc. v. Humble, 622 F.2d 400, 401 (8th Cir.1980) (cause of action dismissed against police chief who no longer had any official authority).

As to the other named defendants, plaintiff’s cause of action must also be dismissed. In bringing the present cause of action, plaintiff attempts to relitigate the same issues that were previously decided adversely to him. See United States v. Capers, 685 F.2d 249 (8th Cir.1982). Thus the doctrine of collateral estoppel precludes the plaintiff from maintaining his present cause of action. See Allen v. McCurry, 449 U.S. 90, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980); Engleman v. Harvey, 518 F.Supp. 655 (E.D.Mo.1981).

Plaintiff further alleges that the defendants engaged in a conspiracy directed at the plaintiff. The plaintiff asserts that the conspiracy issue was not ruled on by the trial court. The defendants correctly point out the fact that the conspiracy claim adds nothing to the substantive counts. See Hostrop v. Bd. of Jr. College Dist. No. 515, 523 F.2d 569, 576-77 (7th Cir.1975), cert. denied, 425 U.S. 963, 96 S.Ct. 1748, 48 L.Ed.2d 208 (1976).

Finally, plaintiff alleges that he was denied effective assistance of counsel. The plaintiff makes a bare allegation and fails to provide the Court with any evidence that would indicate he received ineffective counsel. Plaintiff carries a heavy burden when alleging he received ineffective assistance of counsel. See United States v. Bentley, 706 F.2d 1498, 1511 (8th Cir.1983); Hindman v. Wyrick, 702 F.2d 148, 152 (8th Cir.1983). It is the opinion of this Court that plaintiff has failed to meet his burden. In light of the above-mentioned reasons, this Court grants the defendants’ motion for summary judgment, and dismisses plaintiff’s cause of action against defendant Burke. Accordingly,

IT IS HEREBY ORDERED that the defendants Pierce, Jackson, Murphy, Kyle, Bilyk, and Nowotny’s motion for summary judgment is GRANTED.

IT IS FURTHER ORDERED that plaintiff’s cause of action against defendant Burke is DISMÍISSED.


author: DEBEVOISE, District Judge.

text:
    Nancy KATHENES, Plaintiff, v. QUICK CHEK FOOD STORES; Joyce Beverages of New Jersey, Inc.; Owens-Illinois Company and the Seven-Up Company, Defendants.
    Civ. A. No. 83-4668.
    United States District Court, D. New Jersey.
    Oct. 9, 1984.

      W. Stephen Leary, Morristown, N.J., for defendant Joyce Beverages.
    McCarter & English by Andrew T. Berry, Newark, N.J., for defendant Owens-Illinois.
   OPINION

DEBEVOISE, District Judge.

Nancy Kathenes was injured when the cap of a soda bottle flew off and struck her in the eye. She instituted a personal injury products liability suit in state court against defendants, Quick Chek Food Stores, the retailer, Joyce Beverages, the bottler, and Owens-Illinois, the manufacturer of the allegedly defective bottlecap. Following extensive settlement negotiations, an “Order of Judgment” was filed by the state court judge on November 16th, 1983, entering judgment against Joyce and dismissing plaintiff’s claims against Quick Chek and Owens. After entry of judgment, the only claims remaining in the case were Joyce’s claims for contribution and indemnification from Owens. Owens removed the case to federal court on December 6, 1983.

Owens now moves for summary judgment. Owens admits for purposes of this motion that the blank closure (the bottle cap) involved in this case was shipped by Owens to Joyce. It is undisputed that Owens sent an order acknowledgement form with each order to Joyce. See Dreffer Aff. at paragraph 3. This order form provided at paragraph 8 that the contract between the parties would be governed by Ohio law. The order form also provided at paragraph 4 that:

Seller shall not be liable for any breach of this contract, or of any duty or obligation arising out of or relating hereto, in any amount in excess of the contract price of the articles with respect to which such breach occurs, and shall not be liable in any event for loss of contents or for special or consequential damages.

The material facts on Owens’ motion are not in dispute.

In order to prevail on a motion for summary judgment, the moving party must prove that “there is no genuine issue as to any material fact and that [the movant] is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56. A motion for summary judgment may only be granted if there are no remaining issues of material fact which, if believed by the trier of fact, would jsutify a finding for the party opposing that judgment. Bryson v. Brand Insulation, Inc., 621 F.2d 556, 559 (3d Cir.1980). All evidence submitted must be viewed in a light favorable to the party opposing the motion. Wahl v. Bexnord, 624 F.2d 1169, 1181 (3d Cir.1980). However, the opposing party may not rest upon the mere allegations or denials of his pleadings, but his response must set forth specific facts showing a genuine issue for trial. DeLong Corp. v. Raymond International, Inc., 622 F.2d 1135, 1139 (3d Cir.1980).

At the outset, it will have to be determined whether New Jersey or Ohio law applies in this case. A federal district court of New Jersey sitting in diversity must apply New Jersey’s choice of law rules. Klaxon v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1940); see e.g., Doyle v. Northrop Corp., 455 F.Supp. 1318, 1326 (D.N.J.1978). New Jersey has adopted the Uniform Commercial Code (UCC) which allows the parties to contractually agree as to which forum’s laws will govern their respective rights and duties. N.J.Stat.Ann. 12A:1-105(1). The only restriction upon this power is that the forum chosen must bear a “reasonable relationship” to the transaction involved. See UCC Comment 1 to Section 1-105 citing Seeman v. Philadelphia Warehouse Co., 274 U.S. 408, 47 S.Ct. 626, 71 L.Ed. 1123 (1927). The New Jersey study Comment to Section 1-105 indicates that the “reasonable relationship” requirements of Seeman “would give courts leeway to utilize the ‘public policy’ considerations set out in the Shot-well case.” Shotwell v. Dairymen’s League Co-op Association, Inc., 22 N.J. Misc. 171 (Dist.Ct.1944) is a pre-UCC case which held that the parties’ choice of law would be enforced as long as public policy would not be violated. Id. 22 N.J.Misc. at 174, 37 A.2d 420. The New Jersey Study Comment to Section 1-105, thus, incorporated the holding of Shotwell into the “reasonable relationship” test of N.J.Stat.Ann. 12A:1-105.

The parties ... may state that the law of another jurisdiction shall apply to some or all aspects of the contract, and the expressed intention will be given effect by the Courts so long as it does not violate a strong public policy of this state or try to avoid the law of the state for some unconscionable purpose.

Id. (emphasis added).

Thus, it is necessary to decide in the present case whether the application of Ohio law pursuant to paragraph 8 of Owens’ order form would violate any public policy of New Jersey.

Joyce asserts that New Jersey has a strong public policy in favor of applying its own law in products liability cases. See e.g., Monsanto v. Alden Leeds, 130 N.J.Super. 245, 326 A.2d 90 (Law Div.1974). Joyce notes that by virtue of the settlement it has become liable to the ultimate consumer, Kathenes. Joyce concludes that the strong public policy in New Jersey of holding manufacturers of component parts strictly liable, cf. Michalko v. Cooke Color and Chemical Corp., 91 N.J. 386, 451 A.2d 179 (1982), dictates that New Jersey law be applied to this case. Joyce’s argument totally misses the mark. It is true that New Jersey courts have enunciated a strong public policy to apply New Jersey law in the area of products liability. See e.g., Monsanto, 130 N.J.Super. at 245, 326 A.2d 90. However, that is not the issue in this case. Rather, the precise issue is whether there is a strong public policy in New Jersey which would prohibit merchants from assigning risks in a commercial transaction. I conclude that there is not.

After the court in Monsanto noted New Jersey’s policy reasons for applying New Jersey law to products claims, it nevertheless applied Missouri law in interpreting the contract which disclaimed all warranties and limited the buyer’s remedies. “Since the contract specifies the law to govern its interpretation, and public policy does not dictate otherwise, the contract will be interpreted under Missouri law.” Id. 130 N.J.Super. at 252, 326 A.2d 90. The instant suit is not a case where the seller has limited the remedies of the ultimate consumer. If it were such a case there might be strong policy reasons against applying any law other than New Jersey. However, this is merely a case which involves the allocation of risk between merchants. I find the reasoning of Judge Harding in Pepsi-Cola Metropolitan Bottling Co., Inc., v. Owens-Illinois Inc., to be an accurate statement on the law in New Jersey.

Between merchants dealing with each other, limiting a commercial loss on its face is not an unconscionable practice. Here the consumer recovered a personal injury claim against Pepsi. This suit seeks to pass off that recovery to Owens. It seems to the Court that two companies, in the roles of the buyer and seller, that the seller may properly say to the buyer: “Look, I’m going to sell you a certain parts item that you need. In the course of your manufacture, you take it and do with it what you want. I’m not dealing at first hand with the consumer. You are. I don’t want to be bound by the consequential aspects of your sale. You can insure yourself, or take whatever steps are necessary to protect yourself against a consumer’s claim. But I don’t want to be bothered with that. I’m selling you bottle caps. Here they are. I’m going to limit my exposure or your remedy against me, to simply recovering, even if I give you a defective one, the cost of the item, itself.” It seems to me that’s something perfectly proper one corporation can say to another.

Slip op. at 15. (Law Div. Middlesex County, November 27, 1978) (attached as an exhibit to Owens’ brief). Therefore, I conclude that there is no public policy in New Jersey which would prohibit this Court from applying Ohio law in this case.

The threshold issue with respect to the limitation of Joyce’s remedies is whether or not the terms and conditions of the order form became part of the contract between Owens and Joyce. I conclude that these terms did become a part of the contract. Although I reach this decision based upon an examination of Ohio law, I note that my decision would be the same under New Jersey law.

Ohio Rev.Code Ann. 1302.10 provides as follows:

(A) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
(B) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
(a) the offer expressly limits acceptance to the terms of the offer;
(b) they materially alter it; or
(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

In the present case, the initial contract between the parties was oral. Joyce placed the orders by phone. Schien Cert, at paragraph 3. However, each shipment from Owens to Joyce was accompanied by an order form with Owens’ terms and conditions of the contract. Dreffer Aff. at paragraph 3. Since both parties to the contract were merchants, Owens’ terms and conditions became part of the contract unless they fall within one of the three categories set forth in Ohio Rev.Code Ann. 1302.10(B). Since the offer did not expressly limit acceptance to the terms of the offer and no notification of objection to the terms was ever received by Owens, the terms become part of the contract unless they materially altered the contract.

Joyce asserts that Owens’ limitation of remedies excluding incidental and consequential damages is unreasonable and a material alteration. Official Comment 5 to 2-207 indicates that a clause limiting a remedy in a reasonable manner is not a material alteration. The comment cross-references Section 2-719 on the modification and limitation of remedies. Thus, Owens’ term limiting Joyce’s remedies would be a part of the contract as long as it is reasonable under Section 2-719.

Section 2-719 of the UCC provides:

(1) Subject to the provisions of subsections (2) and (3) of this section and of the preceding section on liquidation and limitation of damages,
(a) the agreement may provide for remedies in addition to or in substitution for those provided in this chapter and may limit or alter the measure of damages recoverable under this chapter, as by limiting the buyer’s remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts; and
(b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.
(2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this Act.
(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.

Obviously, the draftsmen of the Code contemplated terms and conditions similar to those in the case at bar. Subsection 1(a) explicitly notes that remedies may be limited such as “by limiting the buyer’s remedies to return of the goods and payment of price or to repair and replacement of nonconforming goods or parts____” That is precisely what paragraph 4 of the order form indicates.

Seller shall not be liable for any breach of this contract, or of any duty or obligations arising out of or relating hereto, in any amount in excess of the contract price of the articles with respect to which such breach occurs, and shall not be liable in any event for loss of contents or for special or consequential damages.

Joyce contends that the remedy fails its essential purpose and that 719(2) of the UCC applies in the instant case. Joyce argues that the official comment to 2-719 provides that a clause “purporting to modify or limit the remedial provisions of this Article in an unconscionable manner is subject to deletion and in that event the remedies made available by this Article are applicable as if the stricken clause had never existed.” UCC Comment 1. Thus, Joyce concludes that Owens’ terms and conditions are unconscionable and should be stricken.

Joyce’s position is untenable. There is no indication that the remedy provided in Owens’ terms and conditions fails its essential purpose. Owens indicated that it would not be liable for any breach beyond the contract price. Joyce has not presented any facts from which I can conclude that this provision has not fulfilled its purpose. To the contrary, the purpose of the provision was to shift the unpredictable risk for consequential damages to Joyce. See Post-Tape Association v. Eastman Kodak Co., 450 F.Supp. 407 (E.D.Pa.1978) (holding that the nature of products’ defects is the very reason for adopting such a limitation. Id. at 411). That is exactly what it accomplished.

Finally, Joyce argues that the terms may not be enforced because the limitation is unconscionable. Joyce argues, first, that the limitation is prima facie unconscionable under Section 2-719(3) because it limits consequential damages for injury to the person in the case of consumer goods, and, second, that it is unconscionable in that it is oppressive and unreasonable. Joyce’s first argument, that the terms limit damages for personal injury in the case of consumer goods, is erroneous. The closures which Owens sold to Joyce were not consumer goods. Consumer goods are defined in the UCC as goods “used or bought for use primarily for personal, family or household purposes.” Sections 9-109(1) and 2-103(3). What Joyce purchased was not to be used for personal, family or household purposes. The fact that the closures were ultimately converted into bottles which became consumer goods does not alter the fact that between Joyce and Owens the closures were merely inventory for business use.

Joyce’s second argument, that the limitation is unconscionable because it is oppressive, is also without merit. Section 2-302 of the UCC provides that a court may refuse to enforce an unconscionable portion of a contract.

The basic test is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the contract ... The principle is one of the prevention of oppression and unfair surprise and not of disturbance of allocation of risk because of superior bargaining power.

UCC Comment 1 to Section 2-302.

There has been no oppressive conduct by Owens in this case — the risk of consequential damages was assumed by Joyce when it accepted the product without any objection to the terms. Nor can Joyce claim unfair surprise. The order form accompanied every shipment, Dreffer Aff. at paragraph 3, and Joyce was aware of the risks it assumed.

The law of Ohio is clear in this area. In Cyclops Corp. v. Home Insurance Co., 389 F.Supp. 476 (W.D.Pa.1975), the Court, applying Ohio law, held that the terms of a contract limiting a seller’s liability and excluding consequential damages barred the buyer from recovering lost profits. In granting summary judgment, the Court noted:

While limitation of damages for’injuries to the person in the case of consumer goods is prima facie unconscionable, where the loss is commercial it is not. Therefore, it is necessary for the. plaintiff to come forth with evidence to show there is a fact issue as to unconseionability ...
Similarly, as to whether this limitation of damages causes the contract to fail of its essential purpose it appears to the Court that no particular evidence has been presented to establish a disputed issue of fact here. The bargain of the parties was that liability of the manufacturer was limited to the correction of the defect, no matter what the cause or legal basis of the liability. The responding party has produced no evidence to show that such a limitation causes the contract to fail of its essential purpose.

Id. at 482-83.

In sum, I conclude that the term of the agreement limiting Joyce’s remedies to the contract price and excluding consequential damages is a commercially reasonable term and is not unconscionable. As such, it does not represent a material alteration of the parties’ oral agreement, and is, therefore, a term of their contract.

The terms and condition of the Owens order form are enforceable under Ohio law. In D. O. V. Graphics, Inc., v. Eastman Kodak, 46 Ohio Misc. 37, 347 N.E.2d 561 (1976), the Ohio Court of Common Pleas held that a seller’s limitation of liability to replacement of the defective product was reasonable and enforceable. In D.O.V. Graphics the Court noted that the plaintiff had been purchasing defendant’s paper for five years, that in the year the defect occurred plaintiff had purchased the paper at least ten times, and that the stated limitation of liability had been known to plaintiff for a long time prior to appearance of the defect.

A contract can be formed in many ways and whatever way it is formed it still is a contract binding on the parties. While it is true here that there is no evidence that the limitation of the liability was “negotiated,” it is equally clear that plaintiff ordered defendant’s photographic paper knowing that a defendant had stated in its instructions for the use of the paper and on each package delivered to plaintiff that its liability was limited to replacing any defective paper. The contract, therefore, for the alleged defective paper consisted of plaintiff’s order for paper knowing that defendant was limiting his liability for any commercial damages flowing therefrom and its acceptance of the package of paper on which such limitation of liability was set forth. The contract then between the parties included the limitation of liability.

Id. 347 N.E.2d at 562-563.

A similar provision was upheld in Cyclops, supra. See also Avenell v. Westinghouse Electric Corp., 41 Ohio App.2d 150, 324 N.E.2d 583 (1974) (holding that clause limiting liability to contract price was enforceable. Id. 324 N.E.2d at 587).

There are no genuine issues of material fact and the law of Ohio clearly holds that limitations such as those in the present case are enforceable. Therefore, I order that summary judgment be granted in favor of defendant Owens-Illinois and against defendant-cross claimant-plaintiff, Joyce beverages.

      . Joyce has submitted the affidavit of Leon Schien in opposition to Owens’ motion. Schien asserts that to his knowledge Joyce does not have a signed copy of the order form. There is no dispute, however, that such a form was received with each order.

      . The same analysis of Section 2-207 of the UCC would be utilized since New Jersey's version of 2-207 is identical to that of Ohio. Compare N.J.Stat.Ann. 12A:2-207 with Ohio Rev.Code Ann. 1302.10.

      . If it is reasonable under 2-719, then it is not a material alteration under 2-207 and hence becomes a part of the contract.


author: LIMBAUGH, District Judge.

text:
    The LIBERTARIAN PARTY, a National Political Organization; the Libertarian Party of Missouri; and Chad G. Colopy, State Chairman of the Libertarian Party of Missouri, Plaintiffs, v. Christopher BOND, in his official capacity as the Governor of the State of Missouri; James Kirkpatrick, in his official capacity as the Secretary of State of the State of Missouri; and Henry Koch, in his official capacity as the Director of Elections for the State of Missouri, Defendants.
    No. 84-2186C(5).
    United States District Court, E.D. Missouri.
    Oct. 10, 1984.
    David Sasser, Fred R. Seipold, Boise, Idaho, Charles D. Sindel, Clayton, Mo., for plaintiffs.
    Michael L. Boicourt, Asst. Atty. Gen., Jefferson City, Mo., for defendants.
   MEMORANDUM

LIMBAUGH, District Judge.

On September 18, 1984 plaintiff first filed complaint in this Court requesting declaratory relief and preliminary and permanent injunctive relief. Plaintiff submitted petitions to the Missouri Secretary of State to have the Libertarian Party recognized as a party in order for its candidates to be placed on the ballot for the November 6, 1984 general election. The Secretary of State refused to recognize the Libertarian Party as a party as the petitions did not have sufficient signers as required by law. Section 115.315 R.S.Mo. Plaintiff urges the Court to declare Sections 115.315 through 115.317, R.S.Mo. unconstitutional because they discriminate against the voters of the various election districts of the State of Missouri by limiting the value or power of their vote. Plaintiff asks that the Court direct defendants to recognize the Libertarian Party as a Party and to allow plaintiffs’ candidates to be placed on the ballot for the general election to be held November 6, 1984. The Court is urged to enjoin defendants from printing the ballot until this controversy can be resolved.

After informal conference between counsel and the Court, it was agreed that defendants would waive service of process and file answer on October 1, 1984. At that time, the parties would stipulate as to undisputed facts and offer testimony on disputed issues. The entire case was then to be submitted on the merits because of time constraints.

Answer was filed by defendants on October 1, 1984, placing the case at issue. No testimony was heard as the parties filed stipulation as to all facts accompanied by exhibits. Briefs and arguments were presented and the matter was submitted to the Court on the merits on October 1, 1984.

The facts reveal that The Libertarian Party, founded in 1971, is a national organization of electors and politically inclined citizens who have joined together, at both the national and state levels, for the purposes of espousing political philosophy and providing an alternative choice in the sponsorship and election of public officials. The Party is currently officially organized in all fifty (50) states and the District of Columbia and is actively pursuing its objectives in all jurisdictions.

The Presidential and Vice Presidential candidates of the Libertarian Party were on the ballots of all fifty (50) states and the District of Columbia in the 1980 general election.

The Presidential and Vice Presidential candidates of The Libertarian Party have been certified for inclusion on the 1984 general election ballots in thirty-five (35) states and the District of Columbia as of October 1, 1984.

Over forty (40) members of the Libertarian Party currently hold elected offices.

The Libertarian Party of Missouri is the arm of the national organization known as the Libertarian Party and is designated to carry out the Libertarian Party’s objectives within the State of Missouri.

Chad G. Colopy is the authorized and recognized chairman of the Libertarian Party of Missouri and is a citizen, resident and registered voter in the State of Missouri.

At all relevant times Christopher Bond is the Governor, James Kirkpatrick is the Secretary and Henry Koch is the Director of Elections of the State of Missouri.

Section 115.315-317 R.S.Mo.1978 is the statutory method now provided in Missouri for a newly formed political party to gain access to the Presidential and Vice Presidential general election ballot in the State of Missouri.

There were 2,088,027 total votes cast in the last general gubernatorial election of 1980 in the State of Missouri.

Plaintiffs filed their petition to form a new political party pursuant to Section 115.315 R.S.Mo.1978 with the Office of the Secretary of State on August 6, 1984 and he and/or his agents, employees and representatives verified signatures as follows:

First District 4,214 signatures verified.
Second District 5,702 signatures verified.
Third District 4,348 signatures verified.
Fourth District 221 signatures verified.
Fifth District 4,686 signatures verified.
Ninth District 4,947 signatures verified.

The number of signatures required to equal 2% of the total vote cast in each of the six districts in which plaintiffs secured signatures for the 1980 general gubernatorial election in order to comply with the requirements of Section 115.315(4) R.S.Mo. 1978 is as follows:

First District 4,266
Second District 5,348
Third District 5,090
Fourth District 4,432
Fifth District 4,486
Ninth District 4,536

The parties joint exhibit 2, attached hereto, is a true and exact map of the Missouri Congressional Districts as they exist at all times relevant hereto.

Plaintiffs were officially notified by the Secretary of State of Missouri of the results of the certification of plaintiffs’ petition as aforesaid on September 7, 1984.

Defendant, James C. Kirkpatrick and defendant, Henry Koch, denied ballot access for plaintiffs’ presidential and vice presidential candidates and electors for the reason that plaintiffs’ failed to meet the requirements set forth in Section 115.315(4) R.S.Mo.1978 and specifically that plaintiffs had less than the needed signatures in the First, Third and Fourth Districts, pursuant to Section 115.315(4) R.S.Mo.1978 although they had more than the needed signatures in the Second, Fifth and Ninth Districts.

Plaintiffs secured 24,118 verified signatures throughout the State of Missouri which is in excess of 1% of the total vote cast in the 1980 general gubernatorial election in the State of Missouri, but which is less than 2% of the total vote cast in the 1980 gubernatorial election.

The last date that the 1984 general election ballot for the State of Missouri can feasibly be changed is 16 days before the general election of November 6, 1984 to wit: October 20, 1984.

In 1980, the Libertarian Party was able to comply with all Missouri statutory provisions relevant hereto, and the party candidates for President and Vice President appeared on the Missouri November 1980 general election ballot; however, the Libertarian Party candidates appearing on the 1980 general election ballot failed to receive sufficient votes statewide or in a single district or county of the state to become an established political party pursuant to the provisions of Section 115.317 R.S.Mo. 1978.

The Libertarian Party is not the only party to have successfully complied in previous general election years with the provisions of Section 115.317 R.S.Mo.1978 and other political parties have in the past, on two occasions, been able to have placed on the general election ballot of Missouri candidates for statewide office pursuant to the provisions of that statute or its predecessor.

Jurisdiction is invoked pursuant to 28 U.S.C. §§ 1331, 1343(3) and (4) and 2201 and 42 U.S.C. §§ 1983, 1985 and 1988 in that there is a deprivation of rights guaranteed to plaintiffs by the First, Fifth, Twelfth and Fourteenth Amendments to the United States Constitution. Plaintiffs also invoke pendant jurisdiction of this Court to decide claims arising under State law. Although defendants deny jurisdiction is vested in this Court in their answer, no basis for this assertion is set out in their brief. The Court will assume jurisdiction as asserted by plaintiffs.

The standard of review which courts have most frequently used in determining whether ballot access laws do or do not violate the First, Fifth or Fourteenth amendments to the constitution is the “least burdensome method” of achieving a “compelling state objective”. American Party of Texas v. White, 415 U.S. 767, 94 S.Ct. 1296, 39 L.Ed.2d 744 (1974); Anderson v. Celebrezze, 460 U.S. 780, 103 S.Ct. 1564, 1565, 75 L.Ed.2d 547 (1983). The apparent compelling state objective or interest asserted here is to enable a voter to have a candidate of his choice placed on the ballot so he can vote for that candidate. If this voting or ballot access right is to be classified as a compelling state interest, it must be decided whether Missouri statutes requiring minimum signatures from congressional districts as a prerequisite to having a candidate’s name placed on the general election ballot, is overburdensome.

Defendants suggest they need only prove the requirements of the challenged statutes have a rational basis “to a legitimate state interest” as the statutes are at most a de minimus burden on a new party seeking access to the ballot. This Court determines that when the right to vote is at issue, the compelling state interest test as articulated in American Party of Texas should be used as the standard of review. Applying that standard to the facts of this case, the requirements of the challenged Missouri statutes are, in fact, the least restrictive alternatives of furthering a compelling state interest when the spirit and intent of that test is also considered.

The spirit and intent of the standard of review in the constitutional construction of ballot access laws suggests that contemporaneous with the public interest objective of having a candidate’s name placed on the ballot so a voter may vote for that candidate, is the need to demonstrate a significant modicum of support for that candidate before placing a name on a ballot in order to avoid confusion, deception and frustration in the democratic process at the general election. This need is also an important state interest and must temper that part of the standard requiring the “least restrictive alternative.” Jenness v. Fortson, 403 U.S. 431, 91 S.Ct. 1970, 29 L.Ed.2d 554 (1971). Thus “... (A)s a practical matter, there must be a substantial regulation of elections if they are to be fair and honest and if some sort of order, rather than chaos, is to accompany the democratic process----” Storer v. Brown 415 U.S. 724, 94 S.Ct. 1274, 39 L.Ed.2d 714 (1974).

In Jenness, the Court upheld a Georgia law which provided that a nominee of a “political body” or an independent candidate may have his name on the ballot if he files a nominating petition signed by not less than 5% of those eligible to vote at the last election for the office the candidate is seeking. There was no geographical distribution requirement in the Georgia law so the 5% group could be composed of eligible voters wherever they might reside in Georgia.

The case of Udall v. Bowen, 419 F.Supp. 746 (S.D.Ind.1976), aff’d. mem. 425 U.S. 947, 96 S.Ct. 1720, 48 L.Ed.2d 191 (1976) construed favorably an Indiana statute which involved geographical distribution requirements. Indiana law requires a candidate who wishes his name placed on the Indiana presidential preferential primary ballot to submit to the Secretary of State by at least 50 days before the date of the primary election, petitions bearing the signatures of at least 500 registered Indiana voters from each of that state’s eleven congressional districts. Five hundred registered voters per district amounted to slightly less than two-tenths of 1% of the total voters registered to vote in each district.

Geographical requirements of the Federal Election Campaign Act of 1971 were also considered in Buckley v. Valeo, 424 U.S. 1, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976). The Election Campaign Act set up as a threshold eligibility requirement that the presidential candidate raise at least $5,000.00 in each of 20 states, counting only the first $250.00 from each person contributing to the candidate. The Court held this requirement to be constitutional on three grounds. One was that congress may require some preliminary showing of a significant modicum of support as an eligibility requirement for public funds. Another was that the states have important interests in limiting places on the ballot to those candidates who demonstrate substantial popular support. The final ground was that the (funding) requirement serves the important public interest against providing artificial incentives to splintered parties and unrestrained factionalism.

In order for a political party to be formed in Missouri after January 1, 1978, petitions declaring an intention to form the party must be filed with the Missouri Secretary of State no later than the first Monday in August, preceding the general election for which the petition is submitted. Section 115.315 and 115.329 R.S.Mo.

If the new party is to be formed for the entire state, the petition shall be signed by the number of registered voters in each of the several congressional districts which is equal to at least 1% of the total number of votes cast in the district for governor in the last gubernatorial election, or by the number of registered voters in each of one-half of the several congressional districts which is equal to at least 2% of the total number of votes cast in the district for governor at the last gubernatorial election. Section 115.315(4) R.S.Mo.

The filing of a valid petition shall constitute the political group a new party for the purpose of placing its name and the names of the candidates which appeared in the petition on the ballot at the next general election. If, at an election in which the new party’s candidates first appear, any of its candidates for a statewide office receives more than 2% of all votes cast for the office, the new party shall become an established political party for the state. Section 115.317 R.S.Mo.

Are these statutes overburdensome within the spirit and intent of the compelling state interest standard of review? It is the opinion of this Court that they are not.

State legislative bodies walk a delicate tightrope as they search for the middle ground between selecting a simplistic method for enabling prospective candidates to be named on a general election ballot and requiring the candidate to have significant support before placing his name on the ballot. Obviously, a simplistic approach would be to have less than meaningful requirements for ballot access. Yet, the achieving of the compelling state objective demands more. If there is no reasonable showing of a candidate’s statewide support, confusion, deception, frustration and indeed, chaos could result.

When the Missouri law became effective January 1, 1978, there were ten congressional districts. Today, there are nine. The population of each of these districts is virtually equal. Shayer v. Kirkpatrick, 541 F.Supp. 922, 935-944 (W.D.Mo.1982).

The one percent requirement is not over-burdensome. Even if it could be so construed every prospective party has an alternative of qualifying under the 2% requirement utilizing only one-half of the congressional districts. Jenness v. Fortson, Udall v. Bowen, Buckley v. Valeo, supra.

Plaintiff urges that Jenness is not applicable here as there were no geographical distribution requirements. It is correct that the required signatures could come from any place in the state of Georgia. The number of signatures required, however, was 5% of those eligible to vote at the last election for the office the candidate is seeking. Eligible voters constitute more than persons actually voting so 5% of this group is a substantial requirement, irrespective of the geographical location of the signers. In 1980, there were 2,088,027 total votes cast for Governor in Missouri. Five percent of this number is 104,401. Plaintiff gathered only 24,118 signatures in an attempt to qualify for the 1984 general election. Had the Georgia rule prevailed in Missouri, it would have been most burdensome for plaintiff to qualify. Assuming there were more eligible voters than actual voters, the required number to qualify would have been even greater. Yet, the court in Jenness determined the 5% rule met the compelling state interest standard of review.

Plaintiff also suggests the ruling in Udall v. Bowen, supra, is not controlling here. The State of Indiana, in Udall, required 500 signatures in each congressional district as a ballot qualification. As this was only one-fifth of one percent, plaintiff suggests Udall is not applicable as Missouri requires five times as many signatures as does Indiana. Yet, the principle remains that geographical signature prerequisites are not a constitutional bar in ballot qualification cases. Certainly, a one percent requirement from all congressional districts or in the alternative, a two percent requirement in one-half of the districts is not onerous.

In support of its position, plaintiff cites Blomquist v. Thomson, 739 F.2d 525 (10th Cir.1984) and Libertarian Party of Nebraska v. Beermann, 598 F.Supp. 57 (D.Neb.1984). The courts in each of these cases held certain state laws unconstitutional which required signatures from each county of a state. Obviously, county populations vary substantially and the one person-one vote concept would be violated with such a requirement. These requirements are distinguishable from the Missouri statutes.

In 1980, plaintiff met the Missouri requirements it now attacks in 1984. Enough signatures were obtained in the required congressional districts to enable plaintiff, the Libertarian Party of Missouri, to qualify as a party and to have its candidates placed on the ballot then. Its candidates were unable to garner 2% of all votes east for any office in the 1980 election and plaintiff was ineligible to qualify as an established political party. It must, therefore, conform to the same ballot requirement process now as it did in 1980. If Missouri law is constitutionally unsound, it is of no consequence that plaintiff has formerly conformed to state requirements. Yet, it is somewhat incongruous that plaintiff asserts in 1984 a constitutional violation as a last resort when it is now unable to comply on the eve of an election.

The Missouri statutes in question do in fact meet constitutional muster and conform to the spirit and intent of the standard of review prescribed in ballot access cases. Judgment shall be entered for the defendants on the merits of the complaint. As plaintiffs are unable to prevail on the merits, the motions for temporary and permanent injunction shall be denied.

The foregoing constitute findings of fact and conclusions of law as mandated by rule.

EXHIBIT 2

MISSOURI CONGRESSIONAL DISTRICTS