author: McLAUGHLIN, District Judge.

text:
    Stephanie LEDINGHAM, as mother and natural guardian of Philip David Ledingham, an infant, Plaintiff, v. PARKE-DAVIS DIVISION OF WARNER-LAMBERT COMPANY, Parke, Davis & Company, Warner-Lambert Company, Defendants.
    No. 84 CV 2821.
    United States District Court, E.D. New York.
    Feb. 20, 1986.

      Julien & Schlesinger, P.C., New York City (Alfred S. Julian, Edward J. Sanocki, Jr., William D. Fireman, of counsel), for plaintiff.
    Heidell, Pittoni & Moran, P.C., New York City (Walter R. Marklein, of counsel), for defendants.
   MEMORANDUM AND ORDER

McLAUGHLIN, District Judge.

The infant plaintiff is alleged to have suffered serious birth defects as the result of his mother’s ingestion of the drug DILANTIN during pregnancy. Defendants move to dismiss this diversity action on the ground of forum non conveniens. For the reasons stated below, the motion is granted.

Facts

Plaintiff’s mother, Stephanie Ledingham, is a citizen and resident of Canada. She alleges that she ingested the drug DILANTIN during and prior to her pregnancy in 1969-1970. Her son, Philip David, was born with serious birth defects, including a cleft palate, an inner-ear malformity, and a congenital heart defect.

In a complaint sounding in negligence, breach of warranty and strict liability, plaintiff seeks both compensatory and punitive damages.

Defendant Warner-Lambert Company (“Warner-Lambert”) is a Delaware corporation with its principal place of business in New Jersey. Defendant Parke, Davis & Company (“Parke, Davis”), a wholly-owned subsidiary of Warner-Lambert, is a Michigan corporation with its principal place of business in New Jersey. Defendant ParkeDavis Division of Warner-Lambert Company is an operating division of Warner-Lambert having no separate and distinct corporate identity.

DILANTIN is an anti-convulsant drug, first marketed, sold and distributed in the United States by Parke, Davis in 1938. Defendants claim, however, that the DILANTIN ingested by Mrs. Ledingham was manufactured, packaged, advertised, promoted and marketed by Parke Davis Canada, Inc., a separate and independent corporation organized under the laws of Canada. Moreover, the drug was prescribed to plaintiff by Canadian physicians, dispensed at Canadian pharmacies and ingested in Canada. Finally, the manifestation and treatment of the infant’s injuries occurred there. Defendants argue, accordingly, that this Court should dismiss the complaint since Canada provides a more convenient forum for the litigation.

Plaintiff argues, however, that the allegedly tortious conduct complained of arises neither from the manufacture nor the administration of the drug, but from defendants’ decision to place the drug in the stream of commerce with knowledge that the accompanying warnings were inadequate. Thus, since the original development and testing of the drugs and, perhaps, the alleged withholding of adequate warnings, occurred in this country, plaintiff argues that defendants’ forum non conveniens motion should be denied.

Discussion

The doctrine of forum non conveniens allows a court, in its discretion, to “resist imposition upon its jurisdiction” even though jurisdiction and venue are technically proper, if it appears that the convenience of the parties and the ends of justice warrant dismissal. Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 507, 67 S.Ct. 839, 842, 91 L.Ed. 1055 (1947). See Koster v. Lumbermens Mut. Cas. Co., 330 U.S. 518, 527, 67 S.Ct. 828, 833, 91 L.Ed. 1067 (1947). The Supreme Court has described the appropriate inquiry.

Initially, the Court must determine whether there is, in fact, an alternative forum. Piper Aircraft v. Reyno, 454 U.S. 235, 254 n. 22, 102 S.Ct. 252, 265 n. 22, 70 L.Ed.2d 419 (1981). Once the existence of an alternative forum is established, the court must balance the public and private interests at stake in assessing the relative convenience of the forum chosen by plaintiff as compared to the available alternative forum. Gulf Oil v. Gilbert, supra, 330 U.S. at 507-08, 67 S.Ct. at 842-43. Although traditionally there is a presumption in favor of the plaintiff’s choice of forum, defendants’ burden of showing inconvenience to rebut the presumption is less stringent where, as here, the plaintiff is a foreign citizen. See Piper Aircraft v. Reyno, supra, 454 U.S. at 255-56, 102 S.Ct. at 265-66.

A. Availability of an Alternative Forum

Defendants maintain that the courts of Ontario, Canada provide a suitable alternative forum for this case. Indeed, defendants have offered to consent to suit by plaintiff in the courts of Canada as a condition for dismissal.

Defendants, moreover, have provided the Court with an affidavit from Alan J. Lenczner, a barrister in Ontario, who opines that plaintiff could bring her claim in a Canadian court on theories of (a) negligence, (b) failure to warn of an inherent danger in the use of a product, and (c) breach of an implied warranty of merchantability. See Lenczner Affidavit at ¶ 15. Barrister Lenczner informs the Court, however, that the Canadian courts (a) do not recognize a claim of strict products liability, (b) do not permit the representation of clients on a contingency fee basis, and (c) impose a $180,000 upper limit on the recovery of non-pecuniary general damages. Id. at ¶16 — ¶ 20.

Faced with similar considerations, the Supreme Court held that the possibility that the law of the alternative forum will be less favorable to the plaintiff, while a factor, is not sufficient, alone, to bar dismissal on the ground of forum non conveniens. See Piper Aircraft v. Reyno, supra, 454 U.S. at 247, 102 S.Ct. at 261. The Court went on to state that:

[I]f the remedy provided by the alternative forum is so clearly inadequate or unsatisfactory that it is no remedy at all, the unfavorable change in law may be given substantial weight; the district court may conclude that dismissal would not be in the interests of justice.

Id. at 254, 102 S.Ct. at 265. See Dowling v. Richardson-Merrell, Inc., 727 F.2d 608, 613 (6th Cir.1984).

Thus, although plaintiff’s potential damage award may be smaller in Canada, and although litigation there might be more expensive and more difficult, the Court finds that there is no danger that plaintiff will be deprived of a remedy or treated unfairly there. See Dowling v. Richardson-Merrell, Inc., supra, 727 F.2d at 615. Having concluded that the courts of Canada provide an adequate alternative forum for this litigation, I turn to the Gulf Oil v. Gilbert balancing test.

B. The Balancing of the Public and Private Interests at Stake

The Supreme Court in Gulf Oil v. Gilbert laid out the factors that a court must consider in balancing the public and private interests at stake in a forum non conveniens determination. That test was summarized as follows in Piper Aircraft v. Reyno:

The factors pertaining to the private interests of the litigants included the “relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view would be appropriate to the action; and all other practical problems that make trial of a case easy, expeditious and inexpensive.” The public factors bearing on the question included the administrative difficulties flowing from court congestion; the “local interest in having localized controversies decided at home”; the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action; the avoidance of unnecessary problems in conflict of laws, or in the application of foreign law; and the unfairness of burdening citizens in an unrelated forum with jury duty.

454 U.S. at 241 n. 6, 102 S.Ct. at 258 n. 6 (citations omitted).

1. The Private Interests

Defendants contend that the bulk of the evidence relevant to this case is located in Canada since that is where the drug was manufactured, marketed, prescribed, and ingested, and since that is where the mother and her son reside. Plaintiff responds, on the other hand, that the records and witnesses pertaining to the testing and development of the drug and the defendants’ failure to warn of its hazardous side effects are located in the United. States.

Although, admittedly, the proof with respect to the issue of liability may be located in both countries, I conclude that access to evidence will be facilitated, and the convenience of witnesses and parties furthered, if this case is tried in Canada.

Significantly, those records and witnesses located in the United States are, for the most part, within defendants’ exclusive control, and thus, can be inexpensively and easily produced. Indeed, this Court will condition the dismissal upon the defendants’ agreement to provide the records relevant to plaintiff’s claims. See Piper Aircraft v. Reyno, supra, 454 U.S. at 257-58 n. 25, 102 S.Ct. at 266-67 n. 25.

Clearly, however, the vast majority of evidence relating to the causation and damages elements of plaintiff’s claims is located in Canada. Cf. Harrison v. Wyeth Laboratories, 510 F.Supp. 1, 8 (E.D.Pa.1980), aff'd, 676 F.2d 685 (3d Cir.1982); Jones v. Searle Laboratories, 93 Ill.2d 366, 67 Ill.Dec. 118, 121-22, 444 N.E.2d 157, 160-61 (1983). Indeed, defendants have identified numerous physicians, pharmacists, hospitals, and therapists involved in either the prescription or administration of the drug or the treatment of the child’s condition. If these witnesses are unwilling to testify before this Court, there is no compulsory process that can issue from this Court to secure their attendance. Jones v. Searle Laboratories, supra, 67 Ill.Dec. at 122, 444 N.E.2d at 161. Although defendants could depose the witnesses in Canada, depositions are an inadequate substitute for live testimony. Gulf Oil v. Gilbert, supra, 330 U.S. at 511, 67 S.Ct. at 844.

Moreover, even assuming that the medical witnesses are willing to testify, the costs of producing them in New York would be substantial. Cf. Jones v. Searle Laboratories, supra, 67 Ill.Dec. at 122, 444 N.E.2d at 161. In comparison, those witnesses located in this country are, for the most part, employees of the defendants, and thus, may be produced at little expense.

Finally, defendants have advised the Court of their intention to implead plaintiff’s treating and prescribing physicians. However, there is nothing in the record to suggest that any of these Canadian physicians is subject to the jurisdiction of a New York court. Thus, in all likelihood, if the case is tried in New York, the defendants will be forced to undergo the burdensome procedure of commencing separate actions for indemnity or contribution in Canada. This factor weighs in favor of dismissal. See Piper Aircraft v. Reyno, 454 U.S. at 259, 102 S.Ct. at 267.

Thus, as long as plaintiff’s access to the design and testing records is assured, as it will be by the conditions placed on dismissal, the private interests of the parties will be well served by trial in Canada, as all other evidence relating to the action is located there.

2. The Public Interests

Analysis of the public interests prong of the Gilbert test leaves little doubt that this case would be better tried in Canada. Clearly, the local interest in deciding this case is minimal.

Plaintiff argues that this Court has an interest in preventing wrongs from occurring as the result of unsafe prescription drugs that are developed, and for which warnings are formulated within this country. Cf. Lake v. Richardson-Merrell, Inc., 538 F.Supp. 262, 275 (N.D.Ohio 1982). Clearly, however, when a regulated industry, such as the pharmaceutical industry, is involved in an action, the country where the injury occurs has a particularly strong interest in the litigation. Dowling v. Richardson-Merrell, supra, 727 F.2d at 616. Indeed, several courts faced with similar claims have decided that the more convenient forum lies in the country where the drugs were manufactured, marketed, prescribed and ingested. See, e.g., id.; Purser v. American Home Products Corp., 80 Civ. No. 710 (S.D.N.Y. Jan. 30, 1981) (Cannella, J.); Harrison v. Wyeth Laboratories, supra, 510 F.Supp. at 4, 8; Bewers v. American Home Products Corp., 99 A.D.2d 949, 472 N.Y.S.2d 637, 639 (1st Dep’t 1984).

As one court noted:

Questions as to the safety of drugs marketed in a foreign country are properly the concern of that country; the courts of the United States are ill-equipped to set a standard of products safety for drugs sold in other countries. The issues raised here concern the knowledge, if any, of an allegedly unreasonable risk, and the sufficiency of the warning of that risk to users of the product. Both the [Canadian] and the American governments have established requirements as to the standards of safety for drugs and the adequacy of any warnings to be given in connection with its use. Each government must weigh the merits of permitting the drug’s use and the necessity of requiring a warning____ The United States should not impose its own view of the safety, warning, and duty of care required of drugs sold in the United States upon a foreign country when those same drugs are sold in that country.

Harrison v. Wyeth Laboratories, 510 F.Supp. at 4.

Moreover, it would be manifestly unfair to the defendants, who claim to have complied with Canadian regulations, if this Court were to set a higher standard of care than is required by the Canadian government. Id. at 5. Accordingly, I find that Canada’s interest in having this localized controversy decided at home is strong.

Significantly, an analysis of the law that would apply also points to Canada as the appropriate forum. A federal court sitting in a diversity case must apply the choice of law rules of the forum state. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). Under New York law, the Court must apply “the law of the jurisdiction which, because of its relationship or contact with the occurence or the parties, has the greatest concern with the specific issue raised in the litigation.” Loebig v. Larucci, 572 F.2d 81, 84 (2d Cir.1978) (quoting Babcock v. Jackson, 12 N.Y.2d 473, 481, 240 N.Y.S.2d 743, 749, 191 N.E.2d 279, 283 (1963)).

Plaintiff argues that the design and marketing decisions were made in New Jersey, and thus, that New Jersey law should govern the action. Even assuming that these decisions were made by defendants in New Jersey, however, it is clear that Canadian law must apply, since the application of New Jersey law “would displace the regulatory scheme that the [Canadian] government has decided is in the best interests of its citizens.” Purser v. American Home Products, supra, slip op. at 8. Cf. Bewers v. American Home Products, supra, 472 N.Y.S.2d at 639. This Court’s unfamiliarity with Canadian law supports dismissal of the action on the basis of fomm non conveniens. See Piper Aircraft v. Reyno, supra, 454 U.S. at 260, 102 S.Ct. at 268.

Finally, although administrative difficulties, such as calendar congestion and juror allocation, are, perhaps, the least significant factors in the calculus, they nonetheless merit consideration. See Gulf Oil v. Gilbert, supra, 330 U.S. at 508-09, 67 S.Ct. at 8. Clearly, the public has an interest in avoiding further congestion of the court’s calendar when there exists a more convenient forum for the action. See Fraizer v. St. Jude Medical, Inc., 609 F.Supp. 1129, 1132 (D.Minn.1985). In this case, the Court finds no justification for the imposition of jury duty upon residents of a community having no connection with the litigation.

Conclusion

Defendants’ motion to dismiss the complaint is granted, subject to the following conditions:

1. that defendants consent to suit and acceptance of process in any suit plaintiff files in Canada on the claims that are the subject of the instant suit;
2. that the appropriate forum in Canada accepts jurisdiction to hear the case;
3. that defendants agree to waive any statute of limitations defense acquired after the action was filed in this Court;
4. that defendants agree to make available, at their own expense, any doeuments, records or witnesses within their control that are needed for the fair adjudication of the plaintiff’s claims in Canada;
5. that the defendants advise the Court and the plaintiff of their consent to these conditions within thirty days of the date of this Order.

Defendants’ request for attorney fees is denied.

SO ORDERED.

      . Both sides have also moved for summary judgment on other grounds. In light of my disposition of the action, however, I need not decide the motion.

      . Plaintiff argues that the defendants have not specified which of these witnesses will be needed for the trial. However, defendants need not detail all the witnesses likely to be called in order to establish inconvenience. Rather, they need only provide enough information to enable the Court to balance the parties' interests. Piper Aircraft v. Reyno, supra, 454 U.S. at 258-59, 102 S.Ct. at 267-68. Clearly, defendants have met their burden.

      . Plaintiff also argues that defendants should be collaterally estopped from relitigating issues relating to defendants’ failure to adequately test the drug and warn of its dangerous side effects, since those issues were resolved against the defendants in a prior action in this district. See Alboher v. Parke-Davis Division of Warner-Lambert Company, Civ. No. 80-0046 (E.D.N.Y.1984) (Nickerson, J.). However, that case was decided under New York law. In light" of my ruling that this case is governed by Canadian law, it is clear that the two cases do not involve identical issues, and thus, that the Alboher judgment cannot be given preclusive effect in this action. Cf. Feniello v. University of Pennsylvania Hospital, 558 F.Supp. 1365, 1367 (D.N.J.1983).

      . If the Canadian courts do not accept jurisdiction, this Court will entertain plaintiffs request to transfer the case to the United States District Court in New Jersey.


source: Caselaw Access Project

author: DEVINE, Chief Judge.

license: Public Domain

text:
    Gina Marie CATALFO; Alfred T. Catalfo; Carole Joanne Catalfo; Alfred Catalfo, Jr. v. Jack JENSEN; Jon Crispin; Brad Edmondson; Ithaca Times.
    Civ. Nos. 85-588-D to 85-591-D.
    United States District Court, D. New Hampshire.
    Feb. 21, 1986.
    Thomas E. Flynn, Jr., Gerald Tauge, Portsmouth, N.H., for plaintiff.
    Dirk Galbraith, Ithaca, N.Y., for Jensen.
    James A. Salk, Trumansburg, N.Y., Byron J. Siegal, Portsmouth, N.H., for Crispin.
    Peter J. Walsh, Ithaca, N.Y., for Edmondson.
    William L. Chapman, Concord, N.H., Richard B. Thaler, Ithaca, N.Y., for Ithaca Times.
    Steven Eric Feld, Portsmouth, N.H., for Jensen and Edmondson.
   ORDER

DEVINE, Chief Judge.

In this action, plaintiff Alfred Catalfo, Jr., and his three children, plaintiffs Gina Marie, Alfred T., and Carole Joanne, have individually brought suit against defendants Jack Jensen, Jon Crispin, Brad Edmondson, and Ithaca Times seeking damages for an allegedly defamato: y article printed in the Ithaca Times and Portsmouth Magazine in March 1984. Plaintiffs originally brought these individual suits in Strafford County Superior Court. Pursuant to 28 U.S.C. § 1441, however, these actions were properly removed to this court, with jurisdiction being based upon 28 U.S.C. § 1332, the citizenship of the parties being diverse and the amount in controversy exceeding $10,000 exclusive of interest and costs. Presently before the Court is defendant Crispin’s motion for summary judgment, Rule 56, Fed.R.Civ.P., in each of the individual defamation cases and plaintiffs’ objections thereto.

Rule 56(c), Fed.R.Civ.P., provides that summary judgment is appropriate when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” The party moving for summary judgment bears the burden of demonstrating that there is no disputed issue of fact which is both “genuine” and “material”. Finn v. Consolidated Rail Corp., 782 F.2d 13, 15 (1st Cir.1986) (citations omitted). A dispute of fact is material if it “affects the outcome of the litigation” and is genuine if manifested by “substantial” evidence “going beyond the allegations of the complaint”. Taylor v. Hercules, Inc., 780 F.2d 171, 174 (1st Cir.1986). Pignons S.A. de Mecanique v. Polaroid, 657 F.2d 482, 486 (1st Cir.1981). In addition, the record must be viewed in the light most favorable to the party opposing the motion, and all inferenees favorable to such party must be indulged. General Office Products Corp. v. A.M. Capen’s Sons, Inc., 780 F.2d 1077, 1078 (1st Cir.1986); Stepanischen v. Merchants Despatch Transportation Co., 722 F.2d 922, 928 (1st Cir.1983). For the following reasons, the Court finds and rules that defendant Crispin’s motion for summary judgment must be granted.

The record before the Court reveals the following facts. An article was published in both the Ithaca Times and the Portsmouth Magazine at about the time of New Hampshire’s 1984 first-in-the-nation presidential primary. The article, entitled “Cookies and Candipods”, satirically and often cynically reviewed the press coverage of the myriad presidential candidates campaigning in the Granite State at that time. The paragraphs of the article of concern to the Court describe a campaign visit by the Walter Mondale entourage to the home of plaintiffs herein. In the article, plaintiff Alfred Catalfo, Jr., is described as “a fat version of Dustin Hoffman’s ‘Ratso’ in Midnight Cowboy”, and the plaintiff Catalfo children are described as “the sleazy little Catalfos”. The article was written by “Jack Jensen, with Brad Edmondson and Jon Crispin”, and subtitled “3 brash young journalists cover the press covering the candidates covering New Hampshire”. A biographical box on the first page of the article notes that:

JACK JENSEN is a staff writer for the Ithaca Times, a free circulation news weekly in New York and JON CRISPIN is a free lance photographer whose work often appears in the Times. BRAD EDMONDSON, Times editor, assisted with the production of the article and photographs. The trio, all under 30, are all Cornell University graduates and admit that they subscribe to the ‘Hunter S. Thompson School of Journalism.’

The Court is cognizant of the fact that society has a persuasive and strong interest in preventing and redressing defamation or attacks upon people’s reputations. Rosenblatt v. Baer, 383 U.S. 75, 86 S.Ct. 669, 15 L.Ed.2d 597 (1966). And language is defamatory when it tends “to lower the plaintiff in the esteem of any substantial and respectable group, even though it may be quite a small minority.” Morrissette v. Cowette, 122 N.H. 731, 733, 449 A.2d 1221 (1982), quoting Thomson v. Cash, 119 N.H. 371, 373, 402 A.2d 651 (1979). Moreover, it is established that a defamation claim requires a plaintiff to plead and prove that the matter complained of is false and defamatory and published or communicated to a third person with malice or bad intent. W. Prosser, Law of Torts § 111-113 (4th ed. 1971); see, e.g., Duchesnaye v. Munro Enterprises, Inc., 125 N.H. 244, 253, 480 A.2d 123 (to be actionable, defamation need be published to only one person other than plaintiff). In addition, it is also established that every person who directly or indirectly publishes or assists in the publication of an actionable defamatory statement is liable for the resultant injury. German v. Killeen, 495 F.Supp. 822, 832 (E.D.Mich.1980); Noyes v. Thorpe, 73 N.H. 481, 482-83, 62 A. 787 (1901).

The basic issue before the Court as framed by the parties is whether defendant Crispin published either directly or indirectly the alleged defamatory statements contained in the subject article. Some insight into the issue is provided by several decisions involving a defamation suit brought against the Washington Post, its reporters, and its Chief Executive Officer. In Tavoulareas v. Piro, 93 F.R.D. 11 (D.D.C.1981), plaintiffs sued, among others, Katherine Graham, Chairman of the Board and Chief Executive Officer of the Washington Post Company, for an allegedly libelous article which had appeared in the Washington Post. Noting that “some responsible participation is clearly a prerequisite to any potential liability of Mrs. Graham”, id. at 15 (citations omitted), the court ruled that Mrs. Graham was entitled to summary judgment since the undisputed facts revealed that she was removed from the day-to-day operation of the newspaper; she did not have general responsibility for the operation of the paper; her personal views were not reflected in the challenged article; and she had not participated in any form in preparing or publishing the article. Id. Similarly, in Tavoulareas v. Piro, 759 F.2d 90 (D.C.Cir.1985), a judgment n.o.v. entered in favor of a reporter sued for his participation in the allegedly libelous Washington Post article was affirmed by the circuit court. The court noted that “[t]o be liable for defamation, defendant ... must have published or knowingly participated in publishing the defamation.” Id. at 136. The defendant reporter had not actually written or edited the article, nor had he exercised any control or influence over its publication. Moreover, the reporter did not know what the final article would contain. The reporter’s involvement with the article was limited to sparking the initial investigation of the story, supplying a source for the article, and furnishing some initial information for the article. Id.

In the instant case, defendant Crispin argues that he is entitled to judgment as a matter of law since the undisputed facts indicate that he was not a responsible participant in the publication of the article, and without such publication, there can be no liability. The Court agrees. Defendant Crispin has proffered, in addition to the article itself, three affidavits — one from each of three individual defendants. In these affidavits, it is sworn that defendant Crispin was a free-lance photographer at the time of the publication, not a staff photographer for the Ithaca Times; he did not assist or supervise in the writing of the article; he did not write or edit the article; and he was only responsible for the photographs accompanying the article. Plaintiffs have produced no evidence to rebut these affidavits.

Given defendant Crispin’s unrebutted documentation concerning his role, or lack of it, in preparing the allegedly libelous article, the Court is satisfied that he, as a free-lance photographer, did not publish, directly or indirectly, the challenged artiele. Contrary to plaintiffs assertion, there does not remain a genuine issue of fact pertaining to the extent of defendant Crispin’s involvement in the publication. The purpose of the summary judgment procedure is to pierce the pleadings so that the burden of trial will not be wasted on baseless claims. As noted by then Judge Cardozo, “[t]he very object of a motion for summary judgment is to separate what is formal or pretended in denial or averment from what is genuine and substantial, so that only the latter may subject a suitor to the burden of trial.” Richard v. Credit Suisse, 242 N.Y. 346, 350, 152 N.E. 110, 111 (1926).

In the instant case, defendant Crispin has effectively pierced the pleadings through his submitted affidavits. Plaintiffs’ defamation claim relied upon the fact that Crispin’s name appeared in the article byline. Crispin, through his affidavits, has conclusively shown that this fact is not susceptible to the interpretation which plaintiffs sought to afford to it. Thus, the burden shifted under Rule 56(e) to plaintiffs to produce some evidence of defendant Crispin’s responsible participation in the publication. It is a burden which plaintiffs herein have failed to carry. See, e.g., First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968) (Rule 56[e] placed upon plaintiff the burden of producing evidence after defendant showed that facts upon which plaintiff relied to support allegations were not susceptible to plaintiff’s interpretation). As recently noted by the United States Court of Appeals for the First Circuit in Finn v. Consolidated Rail Corp., supra, 782 F.2d at 16:

The opposing party cannot defeat summary judgment by mere allegations but must bring ‘sufficient evidence supporting the claimed factual dispute to require a jury or judge to resolve the parties differing versions of the truth at trial.’ Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904 [96 S.Ct. 1495, 47 L.Ed.2d 754] (1976) (quoting First National Bank of Arizona v. Cities Service Co., Inc., 391 U.S. 253, 289 [88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569] (1968)). The burden is on both parties to file necessary materials with the court to support their claims for and against summary judgment. Fed.R.Civ.P. 56(e) and Stepanischen v. Merchants Despatch Transportation Corp., 722 F.2d 922, 929-30 (1st Cir.1983).

Plaintiffs further argue that even if defendant Crispin did not publish the allegedly defamatory article, he ratified it by allowing the article to appear under his byline. The Court finds this “ratification” argument to be without merit. “Notions such as ‘ratification’ or ‘approval’ rest on the assumption that the party charged with liability had some authority over the tortious activity or was a responsible participant in its implementation.” Davis v. Costa-Gavras, 580 F.Supp. 1082, 1098 (S.D.N.Y.1984). Again, defendant Crispin’s documentation in support of the motion for summary judgment effectively refutes the allegation that he had any authority over the alleged tortious activity or that he was a responsible participant in its implementation. Plaintiffs have not submitted any documentation to the contrary and hence have failed to sustain their burden under Rule 56(e) with respect to the issue of ratification of the alleged libel.

In summary, the Court finds and rules that defendant Crispin is entitled to judgment as a matter of law since he, as the photographer covering the story, was not a responsible participant in the publication of the challenged Ithaca Times and Portsmouth Magazine article. The Court, in addition, rules that the four individual Catalfo cases will hereinafter be consolidated for purposes of trial and discovery under master docket number 85-588-D. See Rule 42(a), Fed.R.Civ.P. Any pleadings pertaining to two or more cases shall be captioned with this master docket number.

SO ORDERED.

      . Plaintiffs are citizens of New Hampshire, residing in Dover, New Hampshire, while defendants Jensen, Crispin, and Edmondson are citizens of New York, and defendant Ithaca Times is a New York corporation with a principal place of business in Ithaca, New York.

      . Rule 56(e) provides in pertinent part:
      When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.

      . While the Court is aware that the question of a defendant’s responsibility for publication is generally a factual one, Skeoch v. Ottley, 377 F.2d 804, 808 (3d Cir.1967), resolution of the question is permissible at the summary judgment level where the undisputed facts reveal the absence of any involvement therein by the defendant. See Tavoulareas v. Piro, supra, 93 F.R.D. at 15.


author: SWEET, District Judge.

text:
    CCS COMMUNICATION CONTROL, INC., Plaintiff, v. LAW ENFORCEMENT ASSOCIATES, INC., Defendant. CCS COMMUNICATION CONTROL OF ILLINOIS, INC., Plaintiff, v. LAW ENFORCEMENT ASSOCIATES, INC., Defendant. COMMUNICATION CONTROL SYSTEMS, LTD. OF CALIFORNIA, Plaintiff, v. LAW ENFORCEMENT ASSOCIATES, INC., Defendants. CCS COMMUNICATION CONTROL SYSTEM, INC., Plaintiff, v. LAW ENFORCEMENT ASSOCIATES, INC., Defendant.
    Nos. 84 Civ. 1274 (RWS), 85 Civ. 6672 (RWS), 85 Civ. 7298 (RWS) and 85 Civ. 8492 (RWS).
    United States District Court, S.D. New York.
    Feb. 21, 1986.

      Harold Wm. Suckenick, New York City, for plaintiff.
    Walter B. Udell, Philadelphia, Pa., Anthony J. Casella, Gerald E. Hespos, New York City, for defendants.
   OPINION

SWEET, District Judge.

Plaintiff CCS Communication Control, Inc. (“CCS”) and defendant Law Enforcement Associates, Inc. (“LEA”) have cross-moved for summary judgment pursuant to Rule 56, Fed.R.Civ.P. on the grounds that there are no genuine issues of material fact disputed by the parties, and that each is entitled to judgment as a matter of law. Because there are no disputed facts which require a trial on the merits, and because CCS has failed to establish the validity of its claim of trademark infringement under the Lanham Trademark Act, 15 U.S.C. § 1051 et seq. (hereinafter “Lanham Act”), LEA’s motion for summary judgment is granted.

Prior Proceedings

CCS commenced this action in the Southern District of New York on February 23, 1984 claiming that LEA had engaged in trademark infringement, copyright infringement and unfair competition with respect to its marketing and advertising of an executive telephone system manufactured by CCS. CCS then withdrew its claims of trademark and copyright infringement with prejudice, leaving only the claim of unfair competition described in Counts II and IV of CCS’ complaint. Subsequent. to this filing, CCS commenced three substantially identical actions against corporations wholly owned or controlled by LEA in California, Illinois, and Texas which were transferred to the Southern District of New York. By order of November 16, 1985, this court consolidated these actions and pleadings.

At the second status conference in this action on November 22, 1985, this court enjoined CCS from filing any further actions against LEA based on the same charges, and gave LEA until December 6, 1985 to file a motion for summary judgment. On December 6, 1985 LEA filed its motion for summary judgment, and on December 17, 1985 CCS gave notice and filed its cross-motion.

Facts

The following facts are undisputed by the parties. In early 1983, LEA received one of CCS’ products as a trade-in, an executive telephone with voice-mask and scrambler, labeled Model No. CC-800 (hereinafter the “CC-800”) which LEA photographed and placed in its 1983-84 catalog which was compiled by Carl Lande, the former president of LEA. The CC-800 appeared at page 10 of the LEA 1983-84 catalog [Exhibit E] in a photograph too small to reveal any markings of the manufacturer. An examination of a different photograph of the CC-800 reveals that all of CCS’ markings, including its name, are still affixed to the product. Larger photographs of other merchandise on page 11 of the catalog display the product manufacturer’s name.

In September, 1983, Spencer Lawrence (“Lawrence”), current vice-president and chief executive officer of LEA, received a telephone call from Jim Barker of Playboy Magazine, who informed him that the magazine wanted to do a follow-up story on executive security devices which it had published the previous year. Lawrence agreed to lend Barker any products he wished to use for the article and instructed his vice president for U.S. Sales, Philip Rosen (“Rosen”), to ship any items which Playboy requested. According to Rosen, whose affidavit is uneontroverted, Barker selected eight items from the LEA catalog to be shipped without consulting LEA about the items, one of which was the CC-800. Of the eight items shipped to Playboy, only two were selected for the article — the CC-800 and a cigar humidor bug detector— both of which were photographed by Playboy and returned to LEA. According to the Lawrence affidavit, neither he nor Rosen saw the text of the article before it was published.

The article appeared in the March, 1984 issue of the magazine and was entitled “The Executive James Bond,” and the CC-800 Executive Communications Security System briefcase appeared on a page with four other security devices. The caption beside the photograph of the CC-800 stated that it was “from LEA,” and the two photographs above had captions ending in “by Wilson Jones Company” and “by Research Electronics.” Because of the small size of the photograph and the fact that the briefcase lid was hinged over the components, the CCS identification markers were not visible on the item.

According to Rosen, the CC-800 generated approximately twelve telephone inquiries, six of which occurred prior to the publication of the Playboy article. Rosen asserts that he never stated that LEA manufactured the Executive Communication System but rather advised inquirers that the component parts of the communication system could be purchased at a much lower cost using equivalent or superior components. Rosen indicated that CCS’ price for its CC-800 was $7,800.00, whereas the components integrated into one case by LEA would have sold for approximately $3,500.00.

LEA never sold its single CC-800 and the photograph has been marked “discontinued” in LEA’s catalog. LEA never sold a comparable assembled unit of its own component parts. The Lawrence affidavit attests that LEA’s sales of component parts of an executive communication system for the twelve month period prior to and after publication of the article were substantially as follows:

Before After
Article Article
Telephone Scrambler, Model 3100 115 86
Anti-Spy Telephone, Model 4400 30 24
Voice Mask, Model 3600-001 4 5

The remaining two components of the system, the tape recorder and line control switch, are sold in volume and cannot be correlated to the purchase of executive communications systems.

Discussion

The remaining elements of CCS’ claim are contained in Counts II and IV of the complaint, which allege unfair competition by LEA in violation of section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). Paragraphs 5, 10 and 11 of the complaint allege that LEA falsely described or represented the CC-800 as its own products in its catalog, that LEA caused this misrepresentation to be circulated in the media through the Playboy article, and that LEA copied and sold a unit similar to the CC-800. In addition to these claims, CCS argues in its memorandum of law that LEA used the photograph of the CC-800 in the Playboy article to sell its own competing product, also in contravention of Section 43(a).

Section 43 of the Lanham Act created a federal statutory tort of false representation of goods in commerce. It provides in relevant part:

(a) Any person who shall affix, apply, or annex, or use in connection with any goods or services, or any container or containers for goods, a false designation of origin, or any false description or representation, including words or symbols tending falsely to describe or represent the same, and shall cause such goods or services to enter into commerce, and any person who shall with knowledge of the falsity of such designation of origin or description or representation cause or procure the same to be transported or used in commerce or deliver the same to any carrier to be transported or used, shall be liable to a civil action by any person doing business in the locality falsely indicated as that of the origin or in the region in which said locality is situated, or by any person who believes that he is or is likely to be damaged by the use of any such false description or representation.

15 U.S.C. § 1125(a).

CCS claims that both the magazine article and the picture of the CC-800 in LEA’s catalog establish a “false designation of origin” within the meaning of section 43(a). However, a close examination of CCS’ claims shows that LEA has not “palmed-off” its goods as those of CCS, and has not used the picture of the CC-800 in its catalog to sell its own version of the product.

“Palming-off” — where a trader sells his product as that of another — is a classic violation of the Lanham Trademark Act and is actionable per se. Fur Information and Fashion Council, Inc. v. E.F. Timme & Son, Inc., 364 F.Supp. 16 (S.D.N.Y.1973), aff'd, 501 F.2d 1048 (2d Cir.1974); Pic Design Corp. v. Sterling Precision Corp., 231 F.Supp. 106, 113 (S.D.N.Y.1964). The focus of the prohibition is to prevent a manufacturer from deliberately using a competitor’s trademark or packaging design to divert business to the sales of his own product. Sutton Cosmetics (P.R.), Inc. v. Lander Co., 455 F.2d 285, 288 (2d Cir.1972). Thus the words of section 43(a) prohibit a competing manufacturer from attempting to identify another producers’ goods as his own, for example by affixing the distinctive markings of that product on his own.

While CCS has not raised a claim that LEA attempted to sell its own products by “disguising” them as those of CCS, CCS claims can be construed as “reverse palming-off”; that LEA removed CCS’ markings from the product and replaced them with its own, reselling them to customers. Pic Design Corporation v. Sterling Precision Corp., supra, 231 F.Supp. at 113. The undisputed facts establish, however, that this claim cannot be substantiated. First, LEA has submitted photographs of the single CC-800 unit in its possession to demonstrate that LEA never removed any of CCS’ markings or identifications on the unit. It has also demonstrated that the absence of CCS’ name from the picture in the 1983-84 catalog was caused by the need to reduce the photograph and by the small size of the CCS lettering on the unit. In larger photographs of other catalog items, and on items with larger lettering, the manufacturers’ name is visible.

Nor has CCS demonstrated that LEA replaced CCS’ designations with its own. LEA was entitled to possess and sell the CC-800 in its catalog and in no way indicated that LEA was the manufacturer of the product. Indeed, the courts of this district have held that the receipt of an item, manufactured by another producer, the removal of its identifying letters and its resale is not a violation of the Lanham Trademark Act because it “makes actionable the application of ‘a false designation of origin,’ not the removal of a true designation.” Id. at 115 (emphasis in original).

While CCS claims that LEA applied its name to the CC-800 by causing it to appear without CCS’ logo in the magazine article over the caption “from LEA,” CCS has not produced any evidence which links LEA to the production of the article. LEA’s affidavit evidence shows that the company’s sole involvement with the article was its initial cooperation in sending Playboy the items which it selected from the 1983-84 catalog. Playboy took its own photographs of the items and returned them to LEA. Furthermore, the caption “from LEA,” when juxtaposed against items on the same page labeled “by company X” indicate that “from LEA” represents “available from LEA,” whereas “by company X” designates “manufactured by company X.”

CCS also contends that LEA used the photograph of the CC-800 to advertise its own products, a tactic also prohibited by the Lanham Act. While the use of a picture of another manufacturers product to advertise your own is a clear violation, L’Aiglon Apparel, Inc. v. Lana Lobell, Inc., 214 F.2d 649 (3d Cir.1954); American Optical Company v. Rayex Corporation, 266 F.Supp. 342 (S.D.N.Y.1966), aff'd, 394 F.2d 155 (2d Cir.1968), the events surrounding the advertisement of the CC-800 do not establish such a violation.

The essence of any claim of such an advertising “bait and switch” is that the manufacturer attempts to capitalize on the appearance of the competitors product in order to aid its own sales effort. The cases cited by CCS which granted injunctions on such claims support this understanding of the nature of the claim. For example, in National Dynamics Corp. v. John Surrey Ltd., 238 F.Supp. 422 (S.D.N.Y.1963), the defendant used a picture of plaintiffs defroster gun and its trademark “Quickee” in its catalog, although it intended to fill all orders resulting from that picture with a product of lesser quality manufactured in Japan. Similarly, in Ideal Toy Corporation v. FAB-LU, Ltd., 261 F.Supp. 238 (S.D.N.Y.1966), a doll manufacturer had deliberately and purposefully had copies of his competitors’ successful dolls manufactured in Hong Kong, sending the dolls of his competitor to serve as models for the copies. The defendant authorized photographs of the plaintiff’s dolls to be made and placed in trade publications to sell his copies, and the court found that the defendant had used the photograph of his competitors doll to sell his own.

Finally, in Matsushita Electric Corp. of America v. Solar Sound Systems, Inc., 381 F.Supp. 64 (S.D.N.Y.1974) the seller of portable radios had removed the plaintiff's name from a competing radio, had affixed its own name to the product and had photographed the misbranded article in order to solicit orders for its own product.

In all three cases the defendants exploited the recognized brand name and image of the plaintiffs’ product by associating its own trade name with the competing product, by taking the photograph of that product and by filling all requests for the product with its own similar version of the article. These are not the factual circumstances here LEA did not affix any of its own markings to the CC-800 but merely placed the unit in its 1983-84 catalog. CCS has not demonstrated that LEA intended anything more than to sell its single expensive unit to an inquiring customer. Furthermore, there is no evidence that LEA had a competing unit which it intended to sell, and it is undisputed that neither the single CC-800 nor a model constructed from LEA’s components was ever sold by LEA. The Rosen affidavit indicates that he advised inquiries that LEA could produce a unit similar to the CC-800 at a cheaper price, but that he never assembled such a unit, and the sales figures for these components declined after the appearance of the article in Playboy. LEA’s disparagement of the CC-800 demonstrates that it was not intending to confuse customers into believing that the CC-800 was its own item, and there is no evidence to indicate that LEA ever intended to produce an executive communication security set. Disparagement of a competitor’s goods is not actionable under the Lanham Act. As the court stated in Fur Information & Fashion Council, Inc. v. E.F. Timme & Son, Inc., supra, 364 F.Supp. at 21 (emphasis in original):

This is not, however, a false representation or description as to defendants goods. The evil sought to be remedied was not the unjustified disparagement of the competitors’ goods, but deceit or palming-off with respect to the advertisers own goods.

In short, CCS has not demonstrated that LEA attempted to use the catalog advertisement or the magazine article to sell its own competing product, or to sell anything other than the single CC-800 unit in its possession.

For the aforementioned reasons, LEA is entitled to summary judgment, and there is no need for this court to rule upon LEA’s asserted “unclean hands” defense or to rule on the question of damages. This case is therefore dismissed.

IT IS SO ORDERED.


text:
    SHOKAI FAR EAST LTD., Plaintiff, v. ENERGY CONSERVATION SYSTEMS, INC., Defendant.
    No. 84 Civ. 0663 (RWS).
    United States District Court, S.D. New York.
    Feb. 21, 1986.
    Parker, Chapin, Flattau & Klimpl, New York City, for plaintiff; Barry J. Brett, Babette T. Rubin, of counsel.
    Baden, Kramer, Huffman & Brodsky, P.C., New York City, for defendant; Douglas J. Kramer, of counsel.
   OPINION

SWEET, District Judge.

Plaintiff Shokai Far East Ltd. (“Shokai”), brought this action to recover the unpaid portion of the agreed price of certain goods ordered by defendant Energy Conservation Systems, Inc. (“ECS”), as well as certain incidental damages and relief pursuant to Rule 11, Fed.R.Civ.P. Upon all the proceedings heretofore had herein, including a bench trial held from November 14 to 19, 1985, and the following findings of fact and conclusions of law, judgment will be entered for Shokai in the amount of $103,-832.26 plus incidental damages and interest as set forth below.

Prior Proceedings

This action was commenced in the Supreme Court of the State of New York and removed to this court by ECS. The answer submitted by ECS set forth the events upon which ECS intended to rely to substantiate its claim of defectiveness of certain of the goods purchased from Shokai, namely, certain events occurring in September, 1983. The dates were reaffirmed by defendant’s deposition testimony. On the eve of the scheduled trial, counsel to Shokai received a letter dated August 26, 1985 from ECS counsel admitting that certain of the statements in ECS’ answer were untrue and withdrawing prior deposition testimony. If these allegations in the affirmative defenses of the answer had not been made and then withdrawn at the eve of trial, Shokai might have secured judgment on the pleadings or summary judgment.

Parties

Shokai is a corporation incorporated under the laws of the State of New York with its principal place of business in Hartsdale, New York. It is in the business of importing into the United States electronic component parts manufactured in the Orient. It does not manufacture or store goods. The products it sells are manufactured or delivered by vendors at the request of Shokai after Shokai has received an order from its customer. The products are then shipped directly to the customer of Shokai in the manner designated by the customer.

ECS is a corporation incorporated under the laws of the State of Virginia with its principal place of business in Arlington, Virginia. It is in the business of manufacturing lighting fixtures and related products, including power reducers which are inserted into a fluorescent lighting system to reduce the amount of light emitted and consequently reduce energy costs. The power reducers manufactured by ECS incorporate a component known as a capacitor, the function of which is to reduce the current passing through the fluorescent fixture and thus decrease the light output. ECS used various rated metalized polyester capacitors (collectively “capacitors”) in the models of power reducers manufactured by ECS. The rating of a capacitor is designated by microfarad value, voltage and permissible variations from tolerance, for example, a 2.5 MFD 10% is a 2.5 microfarad capacitor, 250 volts with a permissible variation from tolerance of 10%.

The Transaction at Issue

Prior to March of 1983, ECS had no manufacturing facilities. During that time, it merely distributed power reducers manufactured by a company called Energy Savings Devices (“ESD”) in St. Paul, Minnesota, which had used Shokai as a source of capacitors. No complaints were received by Shokai with respect to capacitors used in the power reducers manufactured by ESD. When ECS began production of power reducers at its own facilities in Virginia after March, 1983, ECS submitted orders for capacitors to Shokai. ECS did not provide specifications or information relating to the use to which the capacitors would be put or the conditions in which they would be used. ECS manufactured almost five times the number of power reducers made previously by ESD and ran such tests as it deemed necessary on all capacitors it received. ECS had a supply of power reducers in its possession before delivery to any customers. In the early part of 1983 ECS expected to sell about 400,000 power reducers and forecast a need for an equivalent number of capacitors. Ultimately it sold only about 80,000 and by August of 1983 had begun to reassess its requirements for capacitors.

Between April 15, 1983 and July 12, 1983, ECS placed the following written orders with Shokai for capacitors.

Date of Order Purchase Order No. Type of Capacitor Quantity
April 15, 1983 2.5 MFD 10% 250 VAC 100,000
(No. 4153) 5 MFD 10% 250 VAC 100,000
2.5 MFD 10% 320 VAC 100,000
4 MFD 10% 320 VAC 100,000
June 27, 1983 2.5 MFD 10% 250 VAC 80,000
(No. 6273) 5 MFD 10% 250 VAC 30.000
4 MFD 10% 320 VAC 10.000
July 12, 1983 2.5 MFD 10% 250 VAC 50.000
(No. 7123) 5 MFD 10% 250 VAC 50.000

Shokai followed its customary pattern, notifying its Tawainese manufacturers and arranged for delivery to ECS as follows:

Date of Order (Purchase Order No.) Date of Delivery Quantity Delivered
April 15, 1983 June 10, 1983 20.000 2.5 MFD 10% 250 VAC
(No. 4153) 20.000 5 MFD 10% 250 VAC
(On or about June 27, 1983, ECS requested Shokai to decrease the number of capacitors ordered under purchase order No. 4153, to which reduction Shokai agreed, resulting in the quantities received by ECS being less than the 400,000 capacitors
June 27, 1983 10.000 of each of the four (4) types ordered
August 9, 1983 10.000 of each of the four (4) types ordered
August 11, 1983 20.000 2.5 MFD 10% 250 VAC
Sept. 15, 1983 10.000 of each of the four (4) types ordered
July 12, 1983 Sept. 7, 1983 17.500 2.5 MFD 10% 250 VAC
(No. 7123) 16.500 5 MFD 10% 250 VAC
Oct. 4, 1983 32.500 2.5 MFD 10% 250 VAC
33.500 5 MFD 10% 250 VAC

Shokai sent invoices to ECS at the time of each delivery reflecting the agreed upon purchase price and requesting payment net ten days and requiring any claims to be made within five days. ECS made payments to Shokai as set forth below:

Amount Invoiced Date of Delivery by Shokai Amount of Payment Date Payment Sent by Energy
1. P/O No. 4153
June 10, 1983 $28,992.22 $20,000.00 June 23, 1983
8,992.22 July 1, 1983
June 27, 1983 $30,450.00 $20,000.00 July 15, 1983
10.450.00 July 25, 1983
August 9, 1983 $30,450.00 $15,000.00 August 25, 1983
15.450.00 September 14, 1983
August 11, 1983 $13,720.50 $13,720.50 August 19, 1983
Sept. 15, 1983 $30,450.00 $10,000.00 November 1, 1983
10.450.00 November 14, 1983
BALANCE OWED $10,000.00
Amount Invoiced Amount of Date Payment
Date of Delivery by Shokai Payment Sent by Energy
2. P/0 No. 7123
Sept. 7, 1983 $24,534.92 $10,150.00 October 4, 1983
October 4, 1983 $47,280.94 11,797.50 October 25, 1983 -0- _
BALANCE OWED $49,866.36

As reflected above, ECS ordered 100,000 of the 10% 250 VAC capacitors from Shokai on or about July 12, 1983 under purchase order No. 7123, which order, at the request of ECS, was to be shipped by air freight. Shokai caused the goods to be delivered to ECS in two shipments, 34,000 pieces on or about September 7, 1983 and 66,000 pieces on or about October 4, 1983, each shipped by air. By statement No. 9414 dated August 30, 1983, Shokai invoiced ECS $24,-534.92 for the first shipment of the goods sold and by statement No. 5809 dated October 3, 1983 Shokai invoiced ECS $47,278.94 for the second shipment. ECS made two payments in the aggregate amount of $21,-947.50 to Shokai for the goods delivered to ECS by Shokai in accordance with purchase order No. 7123, and received and accepted the capacitors. No competent proof was adduced to establish that purchase order No. 7123 was either cancelled or modified. ECS made late payments for goods previously received and by the beginning of October, 1983, Shokai had claims in excess of $100,000 for goods sold and delivered to ECS.

When the first shipment of goods ordered by ECS under purchase order No. 6273 with an agreed price of $39,175 arrived in the United States in the middle of October, 1983, Shokai determined to exercise its rights under Section 2-705 of the Uniform Commercial Code, as enacted in New York State, and diverted these goods to its offices. By telephone call, by letter dated October 27, 1983 and by invoice No. 5869 dated October 24, 1983, Shokai advised ECS of this diversion and the concern of Shokai over the delinquency in payment, both in time and amount.

ECS continued to make payments to Shokai in October and November for goods delivered in August and September, and in fact, as late as November 15,1983, requested additional merchandise and promised further payments in $10,000 installments “as funds become available and as soon as possible.” By late November of 1983, the time when the second shipment of goods ordered by ECS under purchase order No. 6273 arrived in the United States, the ECS unpaid balance totalled $138,622.26. Shokai again diverted the goods under purchase order No. 6273, and informed ECS of the stopping of delivery by telephone call and by invoice No. 9563 dated November 28, 1983.

The Failure of the Power Reducers

ECS had never experienced a failure of any of its power reducers prior to the failure in late October, 1983, though over 180,-000 of these power reducers were made with capacitors purchased from Shokai. As recently as July and August, 1983, Charles E. Smith and Co., had installed in a large development in Arlington, Virginia, 80,000 power reducers that used Shokai capacitors, none of which failed. In late October, 1983, ECS learned of the first failure of its energy savings device. Additional failures occurred in early November at installations in public schools in Washington County, Maryland. The power reducers that failed utilized Shokai’s capacitors which were delivered to ECS on or after August 9, 1983.

After ECS began experiencing these failures, on November 14, 1983, it stopped its fabrication of power reducers using the Shokai capacitors. At that time it had 165,-700 Shokai capacitors in inventory. On November 30, a telephone call was made by Shokai to ECS seeking payment. It was returned by the president of ECS who notified Shokai of the failures, following this notification by letter of December 6 which Shokai responded on December 7 noting the absence of prior complaints and requesting samples of the capacitors involved.

In February, 1984, ECS ordered from Quantum Thayer, a domestic supplier, over 100,000 capacitors rated identically to those supplied by Shokai. Power reducers using Quantum Thayer capacitors have never failed even though they have been installed in over 150 buildings of all sizes, descriptions and ages.

ECS had no knowledge of the ballasts, power sources, energy level or other field conditions to which its products would be subjected, and these variables could have different effects on its products and components used therein. The physical examination of ECS’ power reducers demonstrated that a corona effect was present in some applications. This corona effect resulted in a melt-down of the components of the capacitors. Scientific principles establish that corona cannot exist without a minimum voltage of 280 volts, which voltage can be produced by use of a power reducer with certain combinations of ballasts and other conditions. The capacitor sold by Shokai was not stated, designed or intended for use under such conditions, and ECS never asked Shokai for a capacitor with those specifications. The preponderance of the evidence, factual and expert, fails to establish that a defect in the capacitor caused the failure of the power reducer.

ECS cannot identify the lot (as that term is defined in Section 2-105 of the Uniform Commercial Code, as enacted in New York State) of capacitors, about which it was complaining since all capacitors, upon delivery and after random sample testing, were stored with all others in inventory. Consequently, there is no evidence to show that any particular batch of capacitors was defective. ECS had no consistent testing process for the components of its power reducers. The capacitors which ECS elected to purchase from Quantum Thayer to use in 1984 possessed different specifications and cost twice as much as the Shokai capacitors.

Shokai placed one ad in the New York Times, seeking to resell the goods ordered by ECS under purchase order No. 6273 which were not delivered to ECS. It resold the entire number of 5 MFD 10% 250 VAC capacitors (that is, 30,000) and 23,000 of the 80,000 total number of 2.5 MFD 10% 250 VAC capacitors for $34,790. The remaining undelivered capacitors have not been added to the Shokai catalog of advertised products available for sale.

Conclusions

The court has jurisdiction over this action and the parties. The facts described above establish that ECS accepted the goods delivered to ECS in accordance with section 2-606 of the Uniform Commercial Code. N.Y.U.C.C. § 2-606. A buyer has a reasonable time to inspect goods upon their receipt and to notify seller of his rejection if the goods are found to be nonconforming. N.Y.U.C.C. § 2-602(1). The determination of a reasonable time period depends on the particular circumstances of each case. See Sherkate Sahami Khass Rapol v. Henry R. Jahn & Son, 701 F.2d 1049, 1051 (2d Cir.1983). ECS’ notice of rejection, at the earliest November 30, was not timely in view of the several months which passed since Shokai began shipping the capacitors. Furthermore, ECS’ use of the capacitors after testing them constitutes acceptance under the U.C.C. See V. Zappata & Co., Inc. v. Pyramid Co., 81 A.D.2d 983, 439 N.Y.S.2d 765, 767 (N.Y.App.Div.1981); In re Barney Schogel, Inc., 12 B.R. 697 (Bankr.S.D.N.Y.1981). ECS failed to establish that the capacitors were non-conforming.

ECS is required to pay at the contract rate for the goods delivered and accepted under N.Y.U.C.C. §§ 2-607(1), 2-709(l)(a) and, therefore, Shokai is entitled to an award of unpaid balance in delivery orders 4153 and 7123 as follows: On purchase order No. 4153 and accepted by ECS, $10,000 remains unpaid; on purchase order No. 7123, $49,866.36 remains unpaid. Shokai is entitled to interest thereon at an annual rate of ten percent (10%), see N.Y.C.P.L.R. § 5001, as follows: from September 16, 1983 on $10,000, from September 9, 1983 on $2,587.42, from October 13, 1983 on $47,278.94.

Shokai has resold a portion of the goods identified to purchase order No. 6273 which were withheld, having a value of $34,790. Shokai continues to hold the balance of the goods identified to the purchase order No. 6273 which were withheld. Under Section 2-709(l)(b) of the Uniform Commercial Code as enacted in New York State, Shokai is entitled to recover the price of goods identified purchase order No. 6273 in the amount of $78,755.90 with interest at an annual rate of 10% from November 3, 1983 on $39,580.90 and from December 8, 1983 on $39,175, less a credit to ECS in the amount of $34,790 for goods resold, having appropriately stopped delivery of the goods under purchase order No. 6273 pursuant to Section 2-705 of the Uniform Commercial Code, as enacted in New York State. In accordance with N.Y.U.C.C. § 2-709(2), the capacitors identified by No. 6273 which were not resold must be made available to ECS upon payment of the judgment.

In addition, Shokai has incurred the following charges:

(a) Warehouse charges to date for goods, the delivery of which was stopped by reason of the delinquency of payments by ECS $782.32
(b) Trucking charges for portions of the goods stored in the warehouse to offices of Shokai for resale $222.00
(c) Advertising expenses incurred in connection with resale of goods. $162.80
(d) Trucking costs of first shipment of goods under purchase order No. 6273 to offices of Shokai $405.90

Under Sections 2-709 and 2-710 of the Uniform Commercial Code, as enacted in New York State, Shokai is entitled to an award for the incidental expenses set forth above and continuing until the stored goods are removed, together with interest at an annual rate of 10% on each such charge from the date on which the same was paid.

The counterclaims pleaded by ECS are dismissed as not having been established by a preponderance of the evidence as found above. Rule 11 of the Fed.R.Civ.P. permits the imposition by the court of an appropriate sanction if a pleading is signed in violation of the mandate set forth therein. See Eastway Construction Corp. v. City of New York, 762 F.2d 243 (2d Cir.1985). Reasonable counsel fees for two days of trial in the amount of $2,400 will be imposed against ECS because of its assertion of defenses which were without basis in fact and were withdrawn just before the trial began. Without these unfounded allegations the need for trial would have been obviated.

Submit judgment on notice.

IT IS SO ORDERED.


author: GONZALEZ, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. CERTAIN REAL PROPERTY LOCATED AT 4880 S.E. DIXIE HIGHWAY, etc., Defendants.
    No. 85-8353-CIV-GONZALEZ.
    United States District Court, S.D. Florida. Fort Lauderdale Division.
    Feb. 21, 1986.

      Alan Mishael, Asst. U.S. Atty., Miami, Fla., for plaintiff.
    Ronald B. Ravikoff and John J. Evans of Zuckerman, Spaeder, Taylor & Evans, Coral Gables, Fla., for defendants.
   ORDER AWARDING FEES

GONZALEZ, District Judge.

THIS CAUSE has come before the court upon the motion of the claimants, Joseph P. Spina, Atlantic Coast Investments, Inc., Charlie’s Riverboat, Inc., Charlie’s Locker, Inc., Steven Spina, and Donna Sanders, for an order imposing attorneys’ fees and costs.

FACTS

The factual setting of this case has been reported in United States v. Certain Real Estate Property, 612 F.Supp. 1492, 1493-94 (D.C.Fla.1985). This case concerns a civil forfeiture action brought by the government against certain real estate in Port Salerno, Florida. On June 28, 1985, this court dismissed the government’s complaint upon a finding that “the Constitution forbids the Attorney General from seizing real property pursuant to 21 U.S.C. § 881(b) and the Supplemental Rules for Certain Admiralty and Maritime Claims absent exigent circumstances, without prior judicial review.” Id. at 1498.

The dismissal resulted from the government’s failure “to follow this procedure in seizing the claimants’ property.” Id. The government was given ten (10) days to submit an amended complaint. Id. Rather than amend its complaint, the government filed a notice of appeal with the Eleventh Circuit on July 5, 1985. On July 24, 1985, the appeal was dismissed, upon the granting of the government’s motion to dismiss.

BASIS FOR AWARDING FEES

Claimants as prevailing parties have made application for fees under two sections of the Equal Access to Justice Act (“EAJA”). 28 U.S.C. § 2412. Claimants seek an award of fees pursuant to § 2412(d) and, alternatively, pursuant to § 2412(b) of EAJA. A prevailing party under EAJA is one who has “ ‘received substantially the relief requested or has been successful on the central issue.’ ” Martin v. Heckler, 773 F.2d 1145, 1149 (11th Cir.1985), quoting Watkins v. Mobile Housing Board, 632 F.2d 565, 567 (5th Cir. Unit B 1980).

28 U.S.C. § 2412(d)

Section 2412(d) of EAJA, provides that an award of fees is mandatory under this section: “Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses. ...” 28 U.S.C. § 2412(d)(l)(A)(em-phasis added). The court is required to award fees under § 2412(d) unless “the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.” Id.

Substantial justification “shall be determined on the basis of the record.” Act of Aug. 5, 1985, Pub.L. No. 99-80, 1985 U.S. Code Cong. & Ad.News (99 Stat.) 183 (to be codified at 28 U.S.C. § 2412(d)(1)(B)). Recent changes in EAJA have altered subsection (d)(1)(B) of § 2412 to broaden its coverage to include the action or inaction of the agency upon which the civil action is based. Id. See also Charter Management, Inc., v. N.L.R.B., 768 F.2d 1299, 1301, (11th Cir.1985).

The government, not the claimant, bears the burden of demonstrating substantial justification for its conduct. Ashburn v. United States, 740 F.2d 843, 850 (11th Cir.1984). The government must demonstrate “ ‘that its case had a reasonable basis both in law and fact.’ ” Id., quoting H.R.Rep. No. 1418 at 10, U.S.Code Cong. & Ad.News 1980, at 4989; S.Rep. No. 253 at 6.

The government failed to present even one fact in its complaint to buttress its seizure of the claimants’ property or the forfeiture proceedings. Certain Real Estate, 612 F.Supp. at 1494. The complaint sought forfeiture on the basis of the filing attorneys’ “beliefs ‘based upon reports and information ...’” that the subject res had been purchased with the proceeds gained from transactions in narcotics. Id.

Even assuming that the government was in possession of such facts at the time of the filing of the complaint, there has been no attempt made by the government to reveal these facts, other than an offer to explain “in camera. ” Government’s Memorandum in Opposition at 4. Acceptance by the court of such an offer on the terms stated by the government would open the door to just the type of post hoc in camera communications that are offensive to the constitutional guarantee of due process. See Brusco v. Kusper, 435 F.2d 1046, 1057 (7th Cir.1971).

The government seeks to meet its burden under § 2412(d) by arguing that it had no advance warning of this court’s holding that the complaint was defective because-of the unconstitutional manner in which the claimants’ property was seized. Government’s Memorandum in Opposition at 6. The government seeks to justify its position by citing the same series of cases it cited to avoid dismissal of its complaint. All of the cases cited relate to automobiles, boats or money — none relate to real estate. This reasoning is unconvincing, for the reasons stated in this court’s order dismissing the government’s complaint. Certain Real Estate, 612 F.Supp. at 1496.

The analogy to other forms of property, where the exigent circumstance of easy mobility or fungibility frequently occurs, is inapposite to seizure of land. See Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972) and Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 94 S.Ct. 2080, 40 L.Ed.2d 452 (1974). As this court has earlier observed, when dealing with land there is “far less likelihood that the property will disappear.” Certain Real Estate, 612 F.Supp. at 1496.

The government’s ouster of the owners of the subject property and the actual physical seizure of the resort is similarily unjustified. The seizure of the property could have been effectuated through less destructive and intrusive means than actual physical occupation by federal agents. The owners could have been allowed to continue to operate the resort. United States v. One Parcel of Real Property, 767 F.2d 1495 (11th Cir.1985). This court commented on just how disruptive the government’s behavior was, in its earlier order dismissing the complaint:

[T]he United States Marshal Service seized the subject properties and ejected the owners and operators of the Resort, the boat company and the restaurant, along with the guests vacationing there. Among the guests forced to leave were persons participating in the Martin County Teachers Retreat. As the guests left the premises, government agents stopped and searched their vehicles to make certain that the visitors did not abscond with Resort property.
Despite the government’s retention of a former Resort employee to manage the seized properties, by all indications business there has been severely damaged.

Certain Real Estate, 612 F.Supp. at 1494 (footnotes omitted).

The government has failed to present any evidence that its behavior in seizing the claimants’ property was substantially justified. Neither has it been demonstrated or even alleged that any special circumstances existed to justify the government’s conduct. Accordingly, this court finds that it must award fees pursuant to 28 U.S.C. § 2412(d).

28 U.S.C. § 2412(b)

In addition to awarding fees under subsection (d) of section 2412 of EAJA, this court may under certain conditions, award fees under subsection (b) of section 2412. Subsection (b) authorizes awards against the United States “to the same extent that any other party would be liable under the common law or under the terms of any statute which specifically provides for such an award.” 28 U.S.C. § 2412(b). Subsection (b) allows the court discretion to award expenses and fees of attorneys to the prevailing party. Id. The claimants allege three provisions under which an award pursuant to § 2412(b) would be appropriate: Rule 11 of the Federal Rules of Civil Procedure, the “bad faith” exception, and 28 U.S.C. § 1927.

A federal district court may award attorney’s fees pursuant to Rule 11 of the Federal Rules of Civil Procedure. Rule 11 was amended in 1983, and has greatly broadened the power of the court to award fees. As amended Rule 11 provides:

The signature of an attorney or party constitutes a certificate by him that he has read the pleading, motion or other paper; that to the best of his knowledge, information and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

Rule 11 F.R.C.P.

The changes in Rule 11 are significant. Under the new form of the Rule, an attorney must “conduct a reasonable inquiry into the viability of a pleading before it is signed.” Eastway Const. Corp. v. City of New York, 762 F.2d 243, 253 (2d Cir.1985) (emphasis added). Once again, the government has responded that it can demonstrate in camera that government Strike Force attorneys (the filing attorneys) have met this standard and once again this gesture is unacceptable. In essence, all the government is willing to offer is a post hoc rationalization uttered in secret. Such behavior violates both the spirit and the letter of Rule 11.

Claimants urge the court to consider awarding fees under the common law “bad faith exception” to the American Rule that each litigant generally bears his own costs. Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). The court derives authority to make such awards from its inherent equity powers. Alyeska Pipeline, 421 U.S. at 258-59, 95 S.Ct. at 1622-23 and Kreager v. Solomon & Flanagan, P.A., 775 F.2d 1541, 1543 (11th Cir.1985).

The bad faith exception is not merely limited to suits filed in bad faith but includes “bad faith acts preceding and during litigation.” Kreager, 775 F.2d at 1543. The focus of the inquiry with bad faith is directed to the “ ‘conduct and motive of a party, rather than the validity of the case.’ ” Rothenburg v. Security Management Co., Inc., 736 F.2d 1470, 1472 (11th Cir.1984), quoting Green, From Here to Attorney’s Fees: Certainty, Efficiency and Fairness in the Journey to the Appellate Courts, 69 Cornell L.Rev. 207, 279-80 (1984).

The bad faith exception includes suits that are filed and conducted “ 'vexatiously, wantonly, or for oppressive reasons.’ ” Rothenburg, at 1471, quoting F.D. Rich Co. v. United States, 417 U.S. 116, 129, 94 S.Ct. 2157, 2165, 40 L.Ed.2d 703 (1974).

The conduct of the government can be characterized as ill-conceived and irresponsible, particularly in its occupation of the property, but there is no indication that the government brought or maintained this suit vexatiously or for oppressive reasons. Id. Accordingly, the bad faith exception, which requires a greater showing of objectionable behavior than under Rule 11, has not been met.

Finally, claimants press the court to award sanctions under § 2412(b), pursuant to 28 U.S.C. § 1927. Section 1927 provides:

Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.

28 U.S.C. § 1927 (Supp.1985).

The cases cited by the claimants to support an award of fees pursuant to § 1927, speak of fees being awarded under conditions not present here. These cases penalize attorneys for bringing claims unarguably groundless from a legal standpoint and for claims prosecuted far longer than occurred here. For example, the government’s claims were not bound by principles of res judicata as in United States v. Nesglo, 744 F.2d 887 (1st Cir.1984). An award pursuant to 28 U.S.C. § 1927 is, therefore, not proper.

CALCULATION OF FEES

The claimants urge this court to award fees both for the trial court period and for the appeal. The claimants cite several cases from other circuits to support this proposition. While the court in principle agrees with the claimants that it may have the authority to decide awards of fees for appellate proceedings, in absence of 11th Circuit guidance it would be inappropriate to award fees for the appeal. See United States v. 329.73 Acres, 704 F.2d 800, 811-12 (5th Cir.1983) (The court declined to settle on a hard and fast rule for fees on appeal, suggesting only that in some instances it would be appropriate for the trial court to determine if appellate fees are in order). Therefore, until and unless this court is so directed, the court finds that it must decline to award fees and costs incurred by the appeal of this case.

In determining the amount of fees appropriate under EAJA, this court must follow the guidelines set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.1974). In Johnson, the following factors were listed to aid courts in assessing the reasonableness of a requested fee:

1) the time and labor required;
2) the novelty and difficulty of the questions;
3) the skill requisite to perform the legal services properly;
4) the preclusion of other employment by the attorney due to acceptance of the case;
5) the customary fee;
6) whether the fee is fixed or contingent;
7) time limitations imposed by the client or the circumstances;
8) the amount involved and the results obtained;
9) the experience, reputation and ability of the attorneys;
10) the “undesirability” of the case;
11) the nature and length of the professional relationship with the client; and
12) awards in similar cases.

Id. at 717-19.

Applying the Johnson factors to the particular circumstances of this case, this court concludes that the claimants are entitled to attorneys’ fees in the amount of $17,100.00. This amount was calculated by multiplying sixty hours of work times $160.00 an hour for one partner’s time and by multiplying sixty hours of work times $125.00 an hour for one associate’s time, to arrive at the total amount of $17,100.00. This computation represents the “lodestar: the number of hours reasonably expended multiplied by a reasonable hourly rate.” Copeland v. Marshall, 641 F.2d 880, 891 (D.C.Cir.1980). This amount excludes work done on the appeal of this case.

This court notes that the award is in excess of the $75.00 per hour amount that the government argues is allowable for awards under EAJA. While it is true that Congress set a ceiling for fees under EAJA, the $75.00 per hour figure can be raised when special circumstances are found to be present. Florida Suncoast Villas, Inc. v. United States, 776 F.2d 974, 976 (11th Cir.1985). This court finds, in consideration of all of the factors listed in Johnson, but in particular the time constraints, the difficulty of the problem and the customary fee charged in this locality, that there exists ample justification for elevating the hourly rate.

Accordingly, the claimants are hereby awarded attorneys’ fees in the amount of $17,100.00, to be taxed against the United States.

Costs of the District Court proceedings are to be taxed separately and claimants may resubmit their request within ten (10) days of the filing of this order.

      . United States v. Eight Thousand Eight Hundred & Fifty Dollars, 461 U.S. 555, 103 S.Ct. 2005, 2011 n. 12, 76 L.Ed.2d 143 (1983); Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 94 S.Ct. 2080, 40 L.Ed.2d 452 (1974); and United States v. One 1978 Mercedes Benz, 711 F.2d 1297, 1300-03 (5th Cir.1983).

      . The government is correct in pointing out that this court observed in its written order of July 3, 1985, that "[t]he government was not without reason to suspect that the Resort and accompanying complex was purchased with money traceable to narcotic deals.” Certain Real Estate Property, 612 F.Supp. at 1494. This observation was, however, gleaned from statements of counsel made subsequent to the filing of the complaint, and after the claimants made their objections to the seizure of the Resort. The government omits a statement made by the court in the same order that "[t]he complaint fails to recite a single fact which might allow one to objectively conclude that the government had reason to believe that the Resort, the boat company or the restaurant had been purchased with the proceeds of drug transactions.” Id. Objective and not subjective good faith is now the standard to be applied under Rule 11. Eastway Construction Corp., 762 F.2d at 253.

      . There must be " ‘clear evidence’ that the claims are 'entirely without color and made for reasons or [sic] harassment or delay or for other improper purposes.’ ” Eastway Const. Corp., 762 F.2d at 253, quoting Browning Debenture Holders Comm. v. DASA Corp., 560 F.2d 1078, 1088 (2d Cir.1977).

      . The Eleventh Circuit has recently held that the factors outlined by the Fifth Circuit in Johnson, apply to cases arising under EAJA. Florida Suncoast Villas, Inc., 776 F.2d at 975. Fifth Circuit opinions issued prior to October 1, 1981, are binding on courts sitting in the Eleventh Circuit. Bonner v. City of Pritchard, 661 F.2d 1206 (11th Cir.1981) (en banc).