author: HAIGHT, District Judge:

text:
    JAB INDUSTRIES, INC., Plaintiff, v. SILEX S.P.A. and Tito Bentivogli, Defendants.
    No. 84 Civ. 2639-CSH.
    United States District Court, S.D. New York.
    Feb. 4, 1985.

      Bloch, Graff, Danzig, Jelline & Mandel, New York City, for plaintiff; Howard Graff, Elaine Menlow, Sheryl L. Krongold, New York City, of counsel.
    Bigham, Englar, Jones & Houston, New York City, for defendants; Joseph A. Kilbourn, Peter Broeman, New York City, of counsel.
   MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

This case is before the Court on cross-motions to compel or stay arbitration, and for related relief.

I.

Plaintiff Jab Industries, Inc. (“Jab”), a New York corporation, is an importer and distributor of household items. Defendant Silex S.P.A. (“Silex”), an Italian corporation, manufactures portable oil-filled electric heaters. Defendant Tito Bentivogli is president of Silex.

On May 16, 1981 Jab and Silex entered into a written agreement by which Silex appointed Jab to be the exclusive distributor of its heaters in the United States and Canada. The agreement calls for Jab to purchase Silex’s heaters for its own account, 112, paying for them through irrevocable letters of credit payable 90 days from the date of presentation of shipping documents. If 5.

Paragraph 18 provides for arbitration. It reads:

“In the event of any dispute arising hereunder or in connection herewith, the same shall be submitted to binding arbitration in the City of New York, New York before three (3) arbitrators in accordance with the rules of the American Arbitration Association. Each party hereto consents to the jurisdiction of such Association and agrees to be bound by the award of such tribunal. Nothing in this Paragraph, however, shall limit the ability of any party to this Agreement from seeking from a court of competent jurisdiction, any provisional remedy, including but not limited to injunction, receivership or attachment in the event of a dispute arising hereunder or in connection herewith.”

Thereafter Jab and Silex entered into three supplemental agreements. The first is dated February 22, 1982. It is captioned “Supplemental Agreement.” Its preface recites that it “supplements the Distributorship Agreement dated May 16, 1981” between Silex and Jab. Paragraph 1 of this supplemental agreement recited Jab’s delivery to Silex, and Silex’s receipt, of three checks in payment of three designated invoices, as well as the delivery by Jab to Silex of “accepted drafts” payable “at 90 days from the due date” of three additional specified invoices.

Paragraph 2 of the supplemental agreement of February 22, 1982 provides as follows:

“The Distributor will accept drafts in a form substantally [sic] the same as that annexed hereto as Exhibit ‘A’ for amounts of each invoice which remains unpaid, the drafts to be payable at 90 days from the due date of each invoice and to be mailed by registered mail, return receipt requested, to the Company before the due date of each invoice. At the request of the Distributor the due date of each draft referred to in this paragraph or in paragraph 1 above, shall be extended for additional 30 day periods up to a maximum of 90 days.”

The form of draft attached as Exhibit “A” to this agreement is printed in Italian. It contains a handwritten notation incorporating by reference the supplemental agreement of February 22, 1982 between Silex and Jab.

The second supplemental agreement is dated August 12, 1982. Its preamble recites that the agreement “supplements the distributorship agreement” between Silex and Jab. The agreement sets forth details of further purchases and shipments. In respect of payment, this supplemental agreement provides:

“2. Delivery and payment of the above-mentioned units will be effected as follows:
“a. The first 25,000 units will be shipped against receipt of irrevocable Letters of Credit payable 90 days from the date of shipment according to the shipping documents. Shipping documents to be those documents that indicate the day the boat has left the port of Europe to be called hereafter Bill of Lading. The Letters of Credit must include the following statements “Irrevocable Letter of Credit to be confirmed by advising Italian Bank (name of bank) with draft drawn on (name of Italian bank).
“b. The following 15,000 units will be shipped immediately after the first 25,-000 units are shipped and will be paid against drafts accepted by the Distributor payable 90 days from the date of the Bill of Lading. The drafts will be accepted and delivered to the Company or to one designated by the Company upon receipt of the invoice which will be made the day before the goods leave the Company’s premises.”

A third supplemental agreement, so captioned, was entered into on October 28, 1982. Its preamble recites that it is “supplemental to and is an integral part of the distributorship agreement (the “Distributorship Agreement”) dated May 16, 1981” between Silex and Jab. Further commercial details are given. Certain units covered by this supplemental agreement were to be paid for by letters of credit. This agreement then provides at 113(e):

“(e) Notwithstanding the provisions of subparagraphs (c) and (d) above, after Silex has shipped 15,000 units covered by containers 55 through 73, and after Silex has received letters of credit in acceptable form in payment therefor, Silex will ship four containers containing an aggregate of approximately 3,520 units on open account, the title documents of which will be released to Jab against acceptance and delivery by Jab to Silex of drafts payable at 90 days from the date of shipment of the units from Italian port, such drafts to be in the same form as used in the past.”

The drafts submitted pursuant to the second and third of these three supplemental agreements were not required to include notations incorporating the agreements by reference.

It is not at all clear from the motion papers which party took the initiative in amending the methods of payment under the distribution agreement. What is clear is that, increasingly over time, “notes” or “drafts” (the parties use the terms interchangeably) replaced letters of credit against shipping documents as the method of payment. It does not matter which party suggested the change, because whichever it was, the other party acquiesced.

When the draft procedure of payment was followed, Silex’s procedure was to invoice Jab and send with the invoice a draft which had not yet been signed by Silex as the drawer. Jab accepted the draft by signing it and returning it to Silex. Silex then signed the draft as drawer and presented it to an Italian bank.

Disputes arose under the distribution agreement. I need not detail them here. It is sufficient to say that at present, some 20,000 heaters purchased by Jab from Silex are presently languishing in warehouses in New Jersey. Jab says that most of them suffer from defective manufacture. Silex says that if the heaters are defective, the condition resulted from damage during ocean shipment, with the risk falling on Jab since the shipments were F.O.B. These significant disputes as to quality and merchantability are reflected on the payment side of the distributorship agreement. Jab has refused to accept certain drafts forwarded by Silex, and, although accepting others, has refused payment on them.

The situation is further complicated by the fact that Silex negotiated or assigned a number of accepted drafts to Italian banks. The best present estimate is that fourteen drafts totalling $370,700.15 are in the possession of Italian banks. Silex holds original drafts totalling $827,264.48. Jab refuses to pay any of them. Predictably, the banks take the position that they are not concerned with the disputes between Jab and Silex. The banks look to Jab to pay the drafts, or notes, which they hold. One bank has commenced an action on its drafts against Jab in this court. Banca di Credito Agrario di Ferrara v. Jab Industries Inc., 84 Civ. 8996 (MP). That ease is presently pending before Judge Pollock.

Jab’s counsel takes the position that the Banca di Crédito case should be transferred to my docket as related to the captioned action. Counsel for the bank resists that suggestion. I address the issue infra.

On March 30, 1984 Silex sent Jab a written notice of termination of the distributorship agreement, in the event that Jab did not satisfy its perceived debt of $1,178,396 to Silex on or before May 8, 1984. On April 13, 1984 Jab commenced the captioned action against Silex, alleging antitrust and Lanham Act violations. The case first came before the Court on Jab’s motion for preliminary injunctive relief in respect of unfair competition involving Jab’s trade dress. The Court granted Jab injunctive relief. Oral opinion of May 4, 1984. It is not necessary, within the context of the present motions, to dwell further upon those events.

On June 1, 1984 Silex filed with the American Arbitration Association a demand for arbitration of the disputes between Silex and Jab arising under the distribution agreement. The demand for arbitration states as follows:

“NATURE OF DISPUTE: Pursuant to a Distributorship Agreement and Supplemental Agreements thereof, Jab Industries, Inc. purchased heaters from claimant Silex, S.p.A. for which Jab has not paid.
“Payment was to be by drafts drawn on Jab by Silex. In some cases Jab accepted drafts but later refused to honor them. In other cases Jab has refused to accept the drafts. In a few instances Jab gave checks in exchange for some of the drafts but then stopped payment on the checks.
“Jab agreed on March 1, 1984 to pay the amount in dispute by March 20, 1984. On April 13,1984, still not having paid its debt to Silex, Jab commenced an action in federal court against Silex and its Sole Director, Tito Bentivogli, for infringement, unfair competition and related matters, all pertaining to the Distributorship Agreement. A copy of the complaint filed by Jab is attached hereto as Exhibit B.
“CLAIM OR RELIEF SOUGHT: (amount, if any) Payment of $1,178,396 in satisfaction of the mentioned debt and dismissal of the claims alleged in the above-mentioned lawsuit.”

It is this arbitration which, on these cross-motions, Jab seeks to stay and Silex seeks to compel. The motions are governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-4.

II.

“Since adoption of the United States Arbitration Act, American jurisprudence has favored the arbitrability of disputes whenever parties contractually provide for arbitration.” Prudential Lines, Inc. v. Exxon Corp., 704 F.2d 59, 63 (2d Cir.1983), citing Scherk v. Alberto-Culver Co., 417 U.S. 506, 510-11, 94 S.Ct. 2449, 2452-53, 41 L.Ed.2d 270 (1974).

In the case at bar, ¶ 18 of the distributorship agreement provides for the arbitration of “any dispute arising hereunder or in connection herewith____” I regard this clause as broad in scope. Even if it should be regarded as “narrow,” cf. Prudential Lines, Inc., supra, at 64 n. 5, disputes involving the quality of the heaters furnished by Silex and Jab’s obligation to pay for them clearly fall within the arbitration clause.

That being so, and given the public policy favoring arbitration as expressed in the statute, Jab bears a heavy burden of persuasion in avoiding the arbitration demanded by Silex.

Jab argues that Silex’s only enforceable claim arises under the notes (or drafts), and not under the distributorship agreement. Because the notes do not contain arbitration clauses, Jab contends that it is under no obligation to arbitrate with Silex. References are made to the Uniform Commercial Code and New York state decisions interpreting its provisions in respect of the nature, functioning and effect of notes or drafts as instruments of payment.

I find no substance to Jab’s argument. I readily accept Jab’s preliminary proposition: that the obligation of a party to a commercial transaction to arbitrate disputes is contractual in nature, so that it cannot be compelled to arbitrate in the absence of an agreement to do so. In the case at bar, however, the distributorship agreement, which underlies the present disputes, contains an arbitration clause. What I cannot accept is Jab’s contention that after-occurring events displaced the arbitration agreement with different contracts.

In considering the impact of the drafts upon the distributorship agreement and its arbitration clause, I look first to the three supplemental agreements. It is these agreements which introduced drafts or notes as an alternative to payment by letter of credit. The adjective “supplemental” is significant. The distributorship agreement was not being revoked or displaced, it was being supplemented in certain limited ways. Except to the extent of those limited changes set forth in the supplemental agreements, the original distributorship agreement (including its arbitration clause) remained in full force and effect.

Surely there was no express revocation of the arbitration clause. Jab’s argument has to be that the arbitration clause in the distributorship agreement was impliedly revoked by the substitution of drafts as a means of payment for letters of credit. In view of the public policy favoring arbitration, as well as applying basic contract principles, I decline to find such an implication.

It is clear that if the distributorship agreement had originally provided for payment by time drafts, Jab could not avoid arbitration on the theory that whereas the agreement provided for arbitration, the drafts did not. Judge Lasker so held in Dale Metals Corp. v. Kiwa Chemical Industry Co., 442 F.Supp. 78, 81 n. 1 (S.D.N. Y.1977):

“In support of their motion to remand, plaintiffs advance the unusual contention that the time drafts by which payment for the Kiwalite was made supersede the confirmations of sale. The latter contain arbitration clauses. The former do not. Since removal was based on the existence of the arbitration agreement, 9 U.S.C. § 205, the alleged disappearance of the agreement is said to compel remand. Plaintiffs offer no authority for the proposition that an instrument of payment supersedes the underlying agreement that gives rise to the obligation to pay. If this were true, every ordinary check issued to pay for, say, a bargained-for sale of goods would dissolve the underlying contract.”

It makes no difference that, in the case at bar, the contract originally provided for payment by letters of credit, with payment by time drafts being introduced by a series of supplemental agreements. The essence of Judge Lasker’s opinion — with which I fully agree — is that procedures for payment cannot be viewed in isolation, so as to eliminate by implication a clearly expressed agreement to arbitrate contained in the underlying agreement which the drafts are intended to implement. At the very least, the circumstances would require a clearly expressed intent to revoke the arbitration clause. None appears here.

The arbitration case upon which Jab places primary reliance (as opposed to cases arising generally out of the UCC) is Matter of ITT Avis, Inc. v. Tuttle, 27 N.Y.2d 571, 313 N.Y.S.2d 394, 261 N.E.2d 395 (1970). The case is inapposite. In Tuttle, two separate contracts existed: an employment agreement, and a stock option agreement. An employee sought arbitration of a claim arising under the separate stock option agreement. The memorandum of the 4-3 majority reads:

“The arbitration clause contained in the employment contract provided: ‘Any controversy concerning a question of fact arising under this agreement shall be determined by arbitration in accordance with the rules then in effect of the AMERICAN ARBITRATION ASSOCIATION.’ (Emphasis added.)
“While it is true that the employment contract makes mention of the stock option plan, there is absolutely no indication in the employment agreement that the parties ever contemplated arbitrating the disputes which might arise under the separate stock option agreement. Accordingly, in the absence of an arbitration clause in the option agreement itself, or some clear statement incorporating the arbitration clause contained in the employment contract, it is simply impossible to read these separate agreements as one to find the requisite intention to arbitrate the dispute which has arisen under the option agreement (Matter of Lehman v. Ostrovsky, 264 N.Y. 130, 190 N.E. 208). To hold otherwise, would, in our opinion, lead the parties into arbitration ‘unwittingly through subtlety’ (Matter of Riverdale Fabrics Corp. [Tillinghast-Stiles Co.], 306 N.Y. 288, 291, 118 N.E.2d 104, 106).”
313 N.Y.S.2d at 394-95, 261 N.E.2d 395.

This case is not in the least instructive in the case at bar, where the parties’ rights and obligations turn upon a single, underlying commercial contract, implemented by alternating methods of payment.

There is Second Circuit authority for the proposition that “[i]f a dispute arises under a collateral agreement, arbitration of that dispute cannot be compelled merely based upon the existence of an arbitration clause in the main agreement.” Prudential Lines, Inc., supra, at 64, citing Rochdale Village, Inc. v. Public Services Employees Union, Local No. 80, 605 F.2d 1290, 1296-97 (2d Cir.1979). However, the crucial distinction lies “between a dispute arising under a collateral agreement and one which arises under the main agreement but requires determination of a sub-issue.” Ibid. A “sub-issue,” under Second Circuit authority, is one which is “inextricably tied up with the merits of the underlying dispute,” McAllister Bros. v. A & S Transportation Co., 621 F.2d 519, 523 (2d Cir.1980). In the case at bar, there is no basis for arguing that the drafts by which the underlying indebtedness was to be paid constitute “collateral agreements.” On the contrary, Silex’s right :to collect on those drafts, as well as Jab’s right to reject or dishonor them, is “inextricably tied up with the merits of the underlying dispute.” Consequently the disputes are arbitrable under the Second Circuit cases cited.

The very fact that, in a significant number of instances, Jab has either refused to accept the drafts or dishonored those previously accepted, casts into bold relief the insubstantiality of Jab’s effort to avoid arbitration. I am advised by counsel for Silex, and have no reason to doubt, that Jab refused to accept drafts in a total amount of $402,568.30. Silex main brief at 12. In addition, it is common ground that Jab has dishonored drafts which it previously accepted. This comprises the second element of the indebtedness Silex now asserts against Jab in arbitration. The third element arises out of checks which Jab gave in exchange for some of the drafts, thereafter stopping payment on the checks. See Silex’s demand for arbitration, quoted at p. 975, supra. While Jab professes to rely upon the Uniform Commercial Code, the most pertinent provision is section 3-802(1), whose provisions, set out in the margin, demonstrate that the giving of the sort of instrument involved in this case suspends the underlying indebtedness only pro tanto until the instrument is honored and paid. “If the instrument is dishonored action may be maintained on either the instrument or the obligation,” § 3-802(l)(b); Silex pursues the former course in arbitration, and in these circumstances, Jab is hardly in a position to complain of it.

II.

Alternatively, Jab argues that Silex has by its conduct waived the arbitration clause.

It is true in principle that a party may through his conduct waive his right to arbitration. In practice, the question turns upon the circumstances of each case, subject to the overarching federal policy favoring arbitration, which requires that “waiver is not to be lightly inferred." Lubrizol International, S.A. v. M/V Stolt Argobay, 562 F.Supp. 565, 572 (S.D.N.Y.1982), and cases there cited.

There is no substance to the claim that Silex waived its right to arbitrate disputes under the distributorship agreement. Much of the analysis under Point I, supra, applies here. I will only add to that discussion a consideration of Jab’s claim that waiver should be based upon the prejudice to Jab arising out of Silex’s negotiation of some of the drafts into the hands of third-party banks.

The short answer is that Jab is in no position to complain of those events. Whether Jab initiated the substitution of drafts for letters of credit or readily acquiesced in that manner of.payment, the negotiation by Silex of at least a portion of the notes was easily foreseeable, if not in the circumstances highly likely. It is true that the third-party banks are not bound by the arbitration clause, and can accordingly pursue Jab independently. But that is not a sufficient reason to deprive Silex of the benefit of its contracted-for arbitration clause, particularly since the drafts themselves could readily have been claused to revoke the arbitration clause in respect of shipments covered by them.

I decline to hold, in the circumstances of this case, that Silex waived arbitration.

III.

Jab has included an antitrust claim against Silex in its complaint in this Court. It is that Silex’s negotiation of the notes, the filing of an arbitration claim, and refusal to refund to Jab the “tremendous sum” allegedly due Jab for defective heaters “are simply part and parcel of the conspiracy to eliminate the plaintiff from the Heater business." Main brief at 18. On the basis of that claim, Jab argues that the arbitration should be stayed in order to preserve this Court’s exclusive jurisdiction over that nonarbitrable federal claim.

The rule in this Circuit is that the existence of an antitrust issue, which must be decided by the Court and is nonarbitrable, does not necessarily require that arbitration of arbitrable issues be stayed pending its court resolution. To justify a stay of arbitration, it must appear that the antitrust issues “permeate the entire case,” have “a reasonable chance of success,” and “may conclude the entire matter____” N. V. Maatschappij voor Industriele Waarden v. A.O. Smith Corp., 532 F.2d 874, 876 (2d Cir.1976) and cases cited. Ordinarily this requires “a showing prima facie of an agreement in restraint of trade.” Ring v. Spina, 148 F.2d 647, 654 (2d Cir.1945). Arbitration pending a decision by the court on the antitrust claim will not be ordered “where the validity of the antitrust claims was not so clear,” or where it is not that clear that the antitrust decision will conclude the entire case, as where the agreement in suit contains a severability clause. N.V. Maatschappij, supra, at 876-77, and cases there cited.

In the case at bar, while I intimate no view on the merits of Jab’s antitrust claim, it can hardly be said that at the pleading stage it rises to the level of a prima facie showing of an antitrust violation. Furthermore, assuming the viability of the antitrust claim, the contract at bar contains a severability clause. Nor does the antitrust issue “permeate the entire case.” Whether or not Silex’s heaters were in fact defective is a commercial question, uncomplicated by antitrust considerations. I could conclude otherwise only if I accepted at face value Jab’s contention of massive defects. But that is a contention, not proof; Silex denies it; the issue is arbitrable; and the arbitrators will resolve it.

The assertion of this particular antitrust claim in this particular case does not entitle Jab to a stay of arbitration. On the contrary: I will stay the litigation here pending arbitration, with its likely narrowing of the issues. Cf. Fox v. Merrill, Lynch Co., Inc., 453 F.Supp. 561 (S.D.N.Y.1978).

IV.

Finally, Jab fashions a claim for “equitable relief,” as follows: a stay of the arbitration unless defendants are able to produce all of the notes; or alternatively, that the arbitration be stayed until defendants post a bond to ensure Jab’s right of contribution against defendants in case Jab is held liable to the third-party banks, but prevails in the arbitration. Those were the demands accompanying Jab’s original motion. In a subsequently filed memorandum, Jab asks that arbitration proceedings be stayed pending extensive document discovery and depositions.

I reject these applications. Silex may well be unable to produce the notes which it negotiated to third-party banks. Consequently a stay of arbitration pending their production would effectively deprive Silex of a right to arbitrate which is enforceable in the circumstances of this case. Nor will I require defendants to post a bond. Nothing in the Arbitration Act provides for such a requirement; indeed, there is no provision in the statute for a stay at all, although in appropriate circumstances such an order is within the discretionary power of the district court. See generally, Tai Ping Insurance Co. Ltd. v. M/V Warschau, 731 F.2d 1141, 1144 (5th Cir.1984). Generally, with the exception of maritime cases, provisional remedies such as attachments or compulsory bonds are not available in arbitration. Cooper v. Ateliers de la Motobecane, 57 N.Y.2d 408, 456 N.Y.S.2d 728, 442 N.E.2d 1239 (1982). I will not require security at this late date, where the negotiation by Silex of the drafts was readily foreseeable, and Jab could have taken steps to protect itself, had it wished, when drafts were first suggested as an alternative to payment under the contract by letters of credit.

Silex has offered to consent to an order requiring that if Silex succeeds in its arbitration against Jab, $370,700.15 of the amount recovered be used to satisfy drafts held by the third-party banks or, alternatively, deposited with the Court, provided that the arbitration includes that portion of the debt represented by the drafts held by the banks. This procedure is suggested as a means of ensuring Jab against possible double liability. Affidavit of Peter Broeman, Esq., verified January 9,1985, at 1131. That is the most consideration to which Jab is entitled in the circumstances. The order adjudicating these motions will contain that requirement.

As for discovery, the rules of the AAA, by which the parties agreed to be bound, contain limited discovery procedures. I will adhere to the usual rule that broad form discovery under the Federal Rules of Civil Procedure is not available to parties who have agreed to arbitrate their disputes.

V.

The last issue is whether the Banca di Crédito case presently pending before Judge Pollack should be transferred to me as a “related case.”

Rule 15 of the Rules for the Division of Business Among District Judges of this Court defines “related cases” as follows:

“Cases are related if they present common questions of law and fact, or arise from the same source or substantially similar transactions, happenings, events or relationships, or if for any other reason they would entail substantial duplication of labor if assigned to different judges.”

In view of the resolution of the present motions, litigation in this case will be stayed and arbitration will go forward between Jab and Silex. The plaintiff bank in Banca di Crédito is not bound by the Jab/Silex arbitration clause. Nevertheless, an argument can be made for staying the bank’s action against Jab pending the arbitration. In certain circumstances “a stay is appropriate even though it affects parties who are not bound to arbitrate.” Dale Metals Corp., supra, at 81, citing Lawson Fabrics, Inc. v. Akzona, Incorporated, 355 F.Supp. 1146, 1151 (S.D.N.Y.), aff'd., 486 F.2d 1394 (2d Cir.1973).

Whether or not such a stay should issue lies within the sound discretion of the trial judge. At the very least, Judge Pollack’s judicial discretion is as perceptive as mine. I therefore see no need to treat the cases as related, although I will consult Judge Pollack on the point.

CONCLUSION

For the foregoing reasons, these motions are resolved as follows:

1. Plaintiff’s motion to stay arbitration and for related relief is denied.

2. Defendants’ cross-motion to compel arbitration is granted. This litigation is stayed pending arbitration.

3. In the event that defendants prevail in the arbitration in respect of shipments covered by drafts negotiated to third-party banks, payment of that portion of the arbitration award will be made by Jab not to defendants, but to defendants’ counsel, who are hereby directed to pay such amount forthwith into the Registry of this Court, there to await the Court’s further order. In further implementation of this paragraph, counsel for the parties are directed to submit a copy of this order to the arbitrators, and to request the arbitrators to issue an itemized award.

4. This Court will retain jurisdiction over plaintiff’s antitrust claim, and over such further proceedings as may arise under the Federal Arbitration Act or this order.

The Clerk of the Court is directed to place this case on the Suspense Docket of the Court.

It is SO ORDERED.

      . The section provides:
      “(1) Unless otherwise agreed where an instrument is taken for an underlying obligation
      "(a) the obligation is pro tanto discharged if a bank is drawer, maker or acceptor of the instrument and there is no recourse on the instrument against the underlying obligor; and
      "(b) in any other case the obligation is suspended pro tanto until the instrument is due or if it is payable on demand until its presentment. If the instrument is dishonored action may be maintained on either the instrument or the obligation; discharge of the underlying obligor on the instrument also discharges him on the obligation."

      . That is the amount Silex calculates to represent the total of negotiated drafts in the hands of banks. Counsel for defendants have submitted detailed affidavits in support of that calculation. No reason is suggested why I should distrust it.


source: Caselaw Access Project

author: EDWARD WEINFELD, District Judge.

license: Public Domain

text:
    Richard E. SKOLDBERG, Administrator ad prosequendum of the Estate of William John Skoldberg a/k/a William John Skolberg and William J. Skoldberg, and Richard E. Skoldberg, Barbara Skoldberg, Richard Eric Skoldberg and John William Skoldberg, individually, Plaintiffs, v. Anthony VILLANI, The Estate of Robert Villani, Deceased, Buchanan Marine, Inc., and the Motor Vessel, Jane S, her engines, boilers, etc., and the Motor Vessel, Yellow Rose, her engines, boilers, etc., Donzi Marine, Inc., Ocean Beach Marina, Inc., and Flagship Marine Engine Co., Inc., Defendants. In the Matter of the Complaint of Anthony VILLANI, as Owner of the vessel Yellow Rose for Exoneration from or Limitation of Liability. Anthony VILLANI, Third-Party Plaintiff, v. DONZI MARINE, INC., Ocean Beach Marina, Inc. and Flagship Marine Engine Co., Inc., Third-Party Defendants.
    Nos. 83 Civ. 7787, 83 Civ. 9168 and 84 Civ. 4402.
    United States District Court, S.D. New York.
    Feb. 4, 1985.
    Bruce S. Koppel, Scarsdale, N.Y., for claimants Skoldberg.
    Newman & Schlau, P.C., New York City, for petitioner Anthony Villani.
    Vincent, Berg, Russo, Marcigliano & Zawacki, New York City, for Buchanan Marine, Inc.
    Boal, Doti & Larsen, New York City, for Estate of Robert Villani.
    Sutera, Siracuse & Sutera, P.C., New York City, for third-party defendant Ocean Beach Marina, Inc.
    Baumann & Rickenwald, Oceanside, N.Y., for third-party defendant Flagship Marine Engine Co., Inc.

      Wilson, Elser, Moskowitz, Edelman & Dicker, New York City, for Donzi Marine, Inc.
    John F. McHugh, Healy & McCaffrey, New York City, for Anthony Villani.
   OPINION

EDWARD WEINFELD, District Judge.

Plaintiff concedes that this action arises under the Court’s general maritime jurisdiction. See Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 373, 98 S.Ct. 2396, 2402, 57 L.Ed.2d 274 (1978) (28 U.S.C. § 1332 requires complete diversity); see also Executive Jet Aviation, Inc. v. City of Cleveland, 409 U.S. 249, 268, 93 S.Ct. 493, 504, 34 L.Ed.2d 454 (1972) (scope of maritime jurisdiction); Kelly v. United States, 531 F.2d 1144, 1146-47 (2d Cir.1976) (same); Kayfetz v. Walker, 404 F.Supp. 75 (D.Conn.1975) (same). In the absence of any basis of jurisdiction other than 28 U.S.C. § 1333, plaintiff is not entitled to a jury trial as a matter of right; on the contrary, the “time-sanctioned” rule is that general maritime claims be tried to the Court. See Fitzgerald v. United States Lines Co., 374 U.S. 16, 20-21, 83 S.Ct. 1646, 1650, 10 L.Ed.2d 720 (1963); Romero v. International Terminal Operating Co., 358 U.S. 354, 369, 79 S.Ct. 468, 478, 3 L.Ed.2d 368 (1959); Powell v. Offshore Navigation, Inc., 644 F.2d 1063, 1068 (5th Cir.), cert. denied, 454 U.S. 972, 102 S.Ct. 521, 70 L.Ed.2d 391 (1981); Mahramas v. American Export Isbrandtsen Lines, Inc., 475 F.2d 165, 172-73 (2d Cir.1973); Matter of Berkley Curtis Bay Co., 569 F.Supp. 1491, 1493 (S.D.N.Y.1983); Red Star Towing & Transportation Co. v. “Ming Giant, 552 F.Supp. 367, 371 (S.D.N.Y.1982); Camrex (Holdings) Ltd. v. Camrex Reliance Paint Co., 90 F.R.D. 313, 317 (E.D. N.Y.1981). Indeed, plaintiff does not claim a right to a jury trial. Rather, the issue is whether the Court should exercise its discretion and empanel an advisory jury pursuant to Fed.R.Civ.P. 39(c). The function of an advisory jury is solely to enlighten the conscience of the Court. An advisory verdict has no binding effect upon the Court; indeed, whether the Court accepts or rejects an advisory verdict, the Court is required by Fed.R.Civ.P. 52(a) to make its own findings of fact and conclusions of law, which alone form the basis of appeal. See Mallory v. Citizens Utilities Co., 342 F.2d 796, 797 (2d Cir.1965); (American) Lumbermens Mutual Casualty Co. v. Timms & Howard, Inc., 108 F.2d 497, 500 (2d Cir.1939). Thus, at bottom, the question is whether there are special factors in this action which suggest that a jury composed of members of the community would provide the Court valuable guidance in making its own findings and conclusions. Plaintiff contends that the calculation of damages, which here may involve loss of society and pain and suffering as well as pecuniary loss, see Sea-Land Services, Inc. v. Gaudet, 414 U.S. 573, 583-92, 94 S.Ct. 806, 814-18, 39 L.Ed.2d 9 (1974), is particularly within the competence of a jury. Although some elements of damages may involve a more subjective evaluation than others, plaintiff’s argument for an advisory jury is not persuasive. Whatever value the views of a jury may have is diminished by the fact that the Court must still come to its own judgment in accordance with Fed. R.Civ.P. 52(a). Moreover, the elements of pecuniary loss, a major portion of any damage award, have been set forth in detail elsewhere by this Court and can be readily calculated according to familiar and well developed formulae. See Petition of Marina Mercante Nicaraguense, S.A., 248 F.Supp. 15, 25-36 (S.D.N.Y.1965), mod., 364 F.2d 118 (2d Cir. 1966), cert. denied, 385 U.S. 1005, 87 S.Ct. 710, 17 L.Ed.2d 803 (1967). The role the subjective judgment of the fact-finder would play in determining a possible damage award simply does not justify the additional time and expense involved in presenting this case to a jury, whose verdict in any event would only be advisory. Accordingly, plaintiff’s motion for a jury trial, as joined by defendant Estate of Villani, is denied.

So ordered.


author: HARDY, District Judge.

text:
    Gloria C. BRADSHAW, et ux., Plaintiffs, v. John H. VAN HOUTEN II, et al., Defendants. Jacqueline D. PEABODY, Plaintiff, v. John H. VAN HOUTEN II, et al., Defendants. Gordon L. BARTON, Plaintiff, v. John H. VAN HOUTEN II, et al., Defendants.
    Nos. Civ 83-1096 PHX VAC to CIV 83-1098 PHX VAC.
    United States District Court, D. Arizona.
    Feb. 5, 1985.
    David D. Dodge, Phoenix, Ariz., for plaintiffs.
    Evans, Kitchel & Jenckes, P.C., Phoenix, Ariz., for Merrill Lynch.
    Sacks, Tierney & Kasen, Phoenix, Ariz., for Mehren.
    Campana & Horne, Phoenix, Ariz., for Van Houten & Continental Arizona Consultants.
   AMENDED MEMORANDUM OPINION AND ORDER

HARDY, District Judge.

Plaintiff’s amended complaint in CIV 83-1098 PHX VAC alleges various federal securities law violations and pendent state claims. The defendant Merrill Lynch, Pierce, Fenner and Smith, Inc. has moved for summary judgment. The motion will be granted.

FACTS

Barton, the plaintiff, inherited a substantial amount of IBM stock. On the recommendation of his lawyer, he went to the defendant Mehren, a vice president of Merrill Lynch. In the course of several discussions, Mehren persuaded Barton to permit him to manage Barton’s investment. Barton delivered the IBM stock certificates to Mehren and an investment account was opened with Merrill Lynch. A cash management account was also opened, from which Barton could withdraw funds by drawing drafts on the account.

Thereafter, Mehren proceeded to sell portions of the IBM stock and to invest some of the proceeds in other securities. These investments were handled in the normal course of Merrill Lynch’s business. Proceeds from the sales of securities were deposited in the cash management account. When securities were purchased for Barton, the cash management account was credited. Commissions were charged to Barton, records of the transactions were kept by Merrill Lynch and confirmation notices were given to Barton by Merrill Lynch.

Mehren introduced Barton to Van Houten, a certified public accountant, who was not an employee or officer in Merrill Lynch. Mehren told Barton that Van Houten had some excellent limited partnership investments which would be good tax shelters. Barton dealt directly with Van Houten in purchasing interests in two limited partnerships, Continental Meadows and Continental Eastpoint. Mehren also persuaded Barton to purchase an interest in a third limited partnership, Cheshire Land Trust. In each transaction, Barton paid for his interest by drawing a draft on his cash management account. These three investments are the alleged fraudulent transactions which are the basis of this action. They were not handled in the normal course of Merrill Lynch’s business. Mehren testified that he deliberately did not inform any one at Merrill Lynch of these transactions because he was afraid that they would disapprove of them. Barton was aware that he was dealing with Mehren and not with Merrill Lynch.

DISCUSSION

1. Sham Issue

In his deposition Barton testified that he knew that he was not purchasing Cheshire Land Trust from Merrill Lynch but rather from Mehren:

Q Isn’t it fair to say, Mr. Barton, that you understood when you purchased the Cheshire Land Trust that you were purchasing them from Mr. Mehren?
A Instead of Merrill, Lynch?
Q Yes, sir.
A Yes.

In opposing the motion for summary judgment Barton filed an affidavit averring that he purchased the investment “because of my faith in Mr. Mehren because of his position at Merrill Lynch” and because “they were the same as far as I was concerned because I always thought Mr. Mehren acted in behalf of Merrill Lynch.” It is the law in the Ninth Circuit that a party who has given a deposition under oath cannot raise an issue of fact simply by submitting an affidavit contradicting his own prior testimony. Lopez v. General Motors Corp., 697 F.2d 1328, 1333 (9th Cir.1983); Radobenko v. Automated Equipment Corp., 520 F.2d 540, 544 (9th Cir.1975).

2. Controlling Person Liability

Both the Securities Act of 1933 and the Securities and Exchange Act of 1934 have “controlling persons” provisions. Merrill Lynch is indisputably a controlling person. Section 15 of the 1933 Act, 15 U.S.C. § 77o, imposes liability upon a controlling person “unless the controlling person had no knowledge of or reasonable ground to believe in the existence of the facts by reason of which the liability of the controlled person is alleged to exist.” Here, Mehren deliberately concealed from Merrill Lynch the fact that he had referred Barton to Van Houten and the fact that he himself had sold an interest in the Cheshire Land Trust to Barton. There is nothing to suggest that Merrill Lynch had any reasonable ground to believe in the existence of these transactions.

Section 20(a) of the 1934 Act, 15 U.S.C. § 78t(a), provides that a controlling person shall be liable for violations of the Act by a controlled person “unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action.”

In Christoffel v. E. F. Hutton and Co., Inc., 588 F.2d 665 (9th Cir.1978), the Ninth Circuit observed:

Although the concept of “control” used in Section 20(a) is broad, it is not unlimited. The term was not used by Congress as it is defined within the context of common law agency. Congress declined to define the term because “it would be difficult if not impossible to enumerate or to anticipate the many ways in which actual control may be exerted____” (H.R.Rep. 1383, 73d Cong., 2d Sess. 26 (1934).) Congress intended the term “control” to encompass relationships with broader variety and scope than those traditionally associated with master and servant, principal and agent. At the same time, Congress also intended a more restrictive meaning than that embraced by agency principles by also requiring some kind of participation by the controlling person in the activities of the controlled person which are claimed to be violative of the securities laws.

Id. at 668.

At first blush, the Ninth Circuit decisions on controlling person liability seem to be contradictory. In Hecht v. Harris, Upham & Co., 430 F.2d 1202 (9th Cir.1970), the court upheld the district court’s ruling that failure of the controlling person to maintain and diligently enforce a proper system of interna] supervision and control constitutes participation in the misconduct. Id. at 1210. In Christoffel, the court ruled that E. F. Hutton and Co. could not be a controlling person within the meaning of Section 20(a) because it was not a participant in the activities which were claimed to violate the securities laws. 588 F.2d at 669. In Kersh v. General Council of the Assemblies of God, 535 F.Supp. 494 (N.D. Cal.1982) the district court ruled that “allegations of reckless non-feasance are sufficient to state a claim of control person liability under Section 20(a) where allegations of a duty of care have been made.” Id. at 498. The court rejected an argument that Christoffel overruled Hecht by implication because there was no allegation in Christoffel of a duty to supervise. Id. In a recent decision the Ninth Circuit stated:

This court has indicated that there can be no liability if the controlling person “was not a participant in ... activities which are claimed to violate the securities laws.” [citing Christoffel ] ... “There must be some showing of actual participation ... before the consequences of control may be imposed.” Herm v. Stafford, 663 F.2d 669, 684 (6th Cir.1981).

Burgess v. Premier Corp., 727 F.2d 826 at 832 (9th Cir.1984).

The apparent conflict in the foregoing rulings disappears when it is recognized that the duty owed by a defendant to a plaintiff in an action under the 1934 Act is gauged by a “flexible duty” standard. This standard was first enunciated in White v. Abrams, 495 F.2d 724 (9th Cir. 1974). The court held that in determining a defendant’s duty, consideration should be given to, among other things, “the relationship of the defendant to the plaintiff, the defendant’s access to the information as compared to the plaintiff’s access, the benefit that the defendant derives from the relationship, the defendant’s awareness of whether the plaintiff was relying upon their relationship in making his investment decisions and the defendant’s activity in initiating the securities transaction in question.” Id. at 735-36 (footnotes omitted).

The Court pointed out:

By adopting such a duty analysis, we avoid the confusion that arises from classifying the defendants as primary and secondary, or from classifying the transactions as direct and indirect. This flexible approach, as compared to the compartmentalized approach, does away with the necessity of creating a separate pigeonhole for each defendant whose involvement in the transaction in question may not fit nicely into one of the previously defined classes.

Id. at 734.

It has been argued that in Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976), the Supreme Court dealt a death blow to White v. Abrams. See Spectrum Financial Companies v. Marconsult, Inc., 608 F.2d 377, 383 (9th Cir.1979) (Ferguson, D.J., concurring specially). The Ninth Circuit noted in Zweig v. Hearst Corp., 594 F.2d 1261 (9th Cir.1979), however, that while Ernst & Ernst partially overruled White v. Abrams, “its approach to the duty question is otherwise the law of this circuit.” Id. at 1268 n. 13. See also Spectrum Financial Companies, 608 F.2d at 381.

Hecht was a churning case. Between 1957 and 1965 the Hecht account was among the most actively traded in Harris, Upham’s San Francisco office and was among the most lucrative in terms of commissions and interest. Contrary to recognized good standards of practice in the brokerage business and to Harris, Upham’s own policies, the resident partner in the office where Hecht’s accounts were maintained made no inquiry to determine the propriety of investments made in behalf of Hecht and did nothing to supervise the activities of its account broker. See Hecht v. Harris, Upham & Co., 283 F.Supp. 417, 438-39 (N.D.Cal.1968). The Ninth Circuit affirmed the district court’s finding that, because of this failure, Harris, Upham could not be said to have acted in good faith and had indirectly inducted the churning. See Hecht, 430 F.2d at 1210.

In Christoffel, the account executive had been appointed by the Superior Court in Arizona as the guardian of his customer. The brokerage firm gave its permission, subject to the express stipulations that the executive would supply the firm with court authorizations for all transactions conducted by him through the brokerage firm as guardian for the estate, that he would receive no commission or other compensation from the brokerage firm of such security transactions and that he would supply the firm with yearly court-approved accountings of his transactions as guardian. In the course of the guardianship, the account executive embezzled guardianship funds. The court concluded that in doing so, he was not acting as a controlled person and that the brokerage firm could not therefore be a controlling person. See Christoffel, 588 F.2d at 668-69.

In Burgess, five doctors brought an action against a corporation and its directors for securities fraud arising from the sale of tax shelter investments in cattle herds. Three of the directors had also been officers of the corporation. The other two, Shrock and Darby, had not. A judgment was obtained against all five defendants. On appeal, the judgment was affirmed as to the corporation and three of the directors but was reversed as to Darby and Shrock. It was held that they were not controlling persons because they had not participated in the day to day operations of the corporation and had no contact with any of the doctors. See Burgess, at 832-33.

While the Ninth Circuit did not expressly apply the flexible duty standard in Hecht, Christoffel or Burgess, the existence of the standard explains why inaction was sufficient to impose Section 20(a) liability in Hecht but not in Christoffel or Burgess.

Applying a flexible duty standard in this case, it is clear that Merrill Lynch cannot be held liable as a controlling person. In two of the three transactions which are the basis of this action, Barton dealt directly with Van Houten. In the third he knew that Mehren was not acting for Merrill Lynch but for himself. Merrill Lynch was not even aware of the transactions and derived no benefit from them. Barton may have been relying upon Mehren’s relationship with Merrill Lynch in making his investment decision but Merrill Lynch could not have been aware of that reliance since the transactions were concealed by Mehren. Finally, of course, Merrill Lynch had nothing to do with initiating the transactions.

3. Rescission

In responding to Merrill Lynch’s motion for summary judgment, Barton argued that he was entitled to rescind all contracts entered into with Merrill Lynch pursuant to the provisions of Section 29(b) of the 1934 Act, 15 U.S.C. § 78cc(b). However, the amended complaint alleges only that the three transactions discussed above were in violation of the securities laws. There is no allegation that any transaction Mehren handled on behalf of Barton through Merrill Lynch was fraudulent.

4. Additional Discovery

Barton has requested that Merrill Lynch’s motion for summary judgment be held in abeyance pending additional discovery relating to Merrill Lynch’s employee supervision policies. If the transactions in question had been handled in the normal course of Merrill Lynch business, the request would be well taken, but they were not.

IT IS ORDERED granting Merrill Lynch’s motion for summary judgment.


author: WEINSTEIN, Chief Judge:

text:
    James HARRIS, Petitioner, v. Robert KUHLMAN, Warden, Woodbourne Correctional Facility, and Robert Abrams, Attorney General of the State of New York, Respondents.
    No. CV-84-2657 (JBW).
    United States District Court, E.D. New York.
    Feb. 5, 1985.

      Julius M. Wasserstein, Lasher & Wasserstein, New York City, for petitioner.
    John Santucci, Dist. Atty., County of Queens, Kew Gardens, N.Y., for respondents; Robert Alexander, and Brian Bressman, Kew Gardens, N.Y., of counsel.
   MEMORANDUM and ORDER

WEINSTEIN, Chief Judge:

Petitioner seeks a writ of habeas corpus. 28 U.S.C. § 2254. Several difficult problems are presented. First, whether petitioner, having made repeated efforts (through his family and by letters) to contact his attorney during this time and to obtain relief from the Clerk of the Appellate Division, can be said to have exhausted available state remedies. Second, whether the failure of petitioner’s court-appointed counsel to perfect his appeal to the Appellate Division within 7V2 years is attributable to the state. Finally, whether petitioner’s due process rights were violated when he was imprisoned for more than half of his sentence and was unable to perfect his appeal in the state courts during that time. For the reasons indicated below, each of these questions is answered in the affirmative and the writ is granted.

I. PROCEDURAL HISTORY

Petitioner is presently incarcerated in the Woodbourne Correctional Facility of the New York State Department of Correctional Services. He was committed to this institution on May 23, 1977, having been convicted on each of two counts of robbery in the first degree and of criminal possession of a weapon in the second degree. For the robbery he was sentenced to 10-20 years; for the gun charge he was sentenced to 8% to 7 years. All terms were to run concurrently, but consecutive to any time petitioner owed for having violated a prior parole.

On May 23,1977, petitioner filed a Notice of Appeal. The Appellate Division of the Supreme Court of the State of New York, Second Department assigned William Hellerstein of the Legal Aid Society as counsel. N.Y. County Law Art. 18-B, § 722 et seq. (McKinney’s 1972 & Supp.1984). Petitioner received notice of this assignment on January 24, 1978 and was informed by the Clerk to direct any further inquiries to counsel.

On February 16, 1978, petitioner, having consulted with fellow inmates, petitioned the Supreme Court of New York to set aside his conviction on the basis of newly-discovered evidence and the ineffective assistance of counsel at trial. N.Y.Crim. Proc.L. § 440.10 (McKinney’s 1972). The Supreme Court conducted a hearing on July 16, 1978. It denied his motion on October 16, 1978 and denied leave to appeal.

When the Legal Aid Society learned that one basis for the direct appeal was ineffectiveness of counsel at trial, it sought to be replaced as petitioner’s counsel because the Society had defended him at trial. The court relieved the Legal Aid attorney on December 15, 1978 and assigned New Counsel. New Counsel was a former Assistant District Attorney in Queens County knowledgeable in state criminal law.

On June 19, 1984, seven full years after filing his original notice of appeal, petitioner requested that this court issue a writ of habeas corpus. A hearing was held on November 16 and 17, 1984.

II. FACTS

Upon his appointment, New Counsel received a letter from the Appellate Division, as well as a memorandum specifying his obligations to his client and to the court. The instructions reminded counsel that, because he would be appealing a judgment entered after the taking of testimony, counsel had 120 days from the date a certified transcript was filed with the court to bring his appeal on for argument. Any request for an extension of time was to be submitted in writing prior to the expiration of 120 days. At about the same time, New Counsel received a copy of the trial transcript, the minutes of the arraignment and sentencing, and a copy of the Legal Aid Society’s motion to be relieved. He did not receive a transcript of the hearing on the 440 motion until 1980. (Apparently he did nothing to expedite preparation of that transcript.) Nor did he ever submit a request in writing for an extension of time in which to perfect the appeal.

When New Counsel was assigned petitioner’s appeal, it represented the sixth appeal assigned to him by the court within an eight-month period. Those officials in charge of the 18-B Panel of the court provided this workload despite the fact that when New Counsel had applied for appointment to the Panel, he noted his lack of experience or training with appeals prior to that time. Following his assignment, New Counsel notified petitioner of his appointment. A hiatus of six years occurred during which he made no effort to perfect the appeal.

At the hearing before this court New Counsel explained that during this time he suffered from a period of depression caused by the death of close members of his family, including his mother, the severe illness of his father, his wife’s miscarriage and subsequent pregnancies, as well as the difficulties of starting a law firm. Nevertheless, he was able during that same time to perfect an appeal before the Court of Appeals for the Second Circuit which has strict time controls. It is clear from the hearing that the Second Circuit appeal was given prompt attention by counsel because he knew that the federal Court of Appeals would not tolerate delay. In contrast, the Appellate Division, Second Department did not then monitor delays in appeals.

During this six-year period, New Counsel received no guidance or indication from the Appellate Division that the delay in perfecting his appeal was inordinate. The Chief Clerk of the Appellate Division, Second Department, testified that prior to 1983, there was no mechanism to monitor such delays and the court relied on attorneys to perfect appeals. On March 21, 1983, the Appellate Division, Second Department, promulgated a dismissal calendar, comparable to the system already in place in the Second Circuit, designed to rid the court of those cases not brought for hearing “within six months of the filing of the record or papers on which the appeal is to be heard.” Ap.Div.R. 670.-24 (eff. Mar. 23, 1983). The rule, however, was not retroactive and has not been applied to the backlog of appeals filed prior to 1983.

The testimony of Mr. William Heller-stein, the Attorney in Charge of the Criminal Appeals Bureau of the Legal Aid Society, made clear the effectiveness of a dismissal calendar. He testified that prior to the implementation of a dismissal calendar in the Second Department, appeals were perfected more expeditiously in the First Department, which had a dismissal calendar, than in the Second Department, which did not. Tr. at 66. Only the internal controls of the Legal Aid Society enabled it to maintain some balance. He also stated that the pressure of the dismissal calendar even on Legal Aid to perfect appeals was substantial. Id.

The Chief Clerk of the Appellate Division, Second Department, also testified that the first time he contacted New Counsel was on March 12, 1984, after receiving a letter from petitioner inquiring about the delay in his appeal. A deputy clerk wrote New Counsel and received a reply which stated that the appeal would be perfected by the end of April, 1984. It was not, and the Appellate Division, Second Department, attempted no further communication with New Counsel.

The Principal Appellate Office Assistant in charge of the 18-B Panel was called. She testified that the Panel did not followup to ascertain whether counsel had properly carried out their assignments. It should be noted that New Counsel testified that he had accepted additional assignments offered to him by the Panel even while he was guilty of gross delays in handling petitioner’s case.

Testimony was also taken from the Chief of the Appeals Bureau of the Queens County District Attorney’s Office. She stated that except for petitioner’s original application to proceed in forma pauperis, no attorney had been assigned to his direct appeal until 1984 when he filed a petition in federal district court. An attorney from the District Attorney’s Office had worked on petitioner’s 440 motion in 1979.

The Chief of the Appeals Bureau also testified that the District Attorney’s Office did not monitor all appeals and at no time would it make a motion to place a case such as petitioner’s, which was inactive for seven years, on the dismissal calendar. She admitted that her office did monitor the appeals of those who made bail during a stay of execution while awaiting appeal.

Petitioner testified to his own actions while waiting for his appeal to be perfected. He indicated that he had always relied on court-appointed counsel and he had been directed by the Appellate Division to make all inquiries regarding his appeal to his attorney. He had attempted to contact New Counsel through family members and had then written to him twice, once in 1981 and again in 1982. Finally, prior to seeking relief in federal court, he had sought the assistance of the Appellate Division by writing to it. He had not requested other counsel because fellow inmates advised him that would delay his appeal several more years.

Based on the advice of some “jailhouse lawyers,” petitioner commenced the instant proceeding on June 15, 1984. This court issued an order to show cause to respondent on June 20, 1984. The court appointed counsel from its Criminal Justice Act Panel of Attorneys, and inquired by telephone and telegram directed to New Counsel when the appeal would be perfected. New Counsel informed the court that he expected to submit his brief on August 1. In fact, it was not filed until August 22, 1984, six years and seven months after the case was assigned, and six years and three months after it was due.

The Queens District Attorney’s Office did not file its brief until after the evidentiary hearing on this petition. At the hearing, this Court suggested to the Clerk of the Appellate Division, Second Department, that it would be appropriate to expedite hearing of the appeal. The case has, we are informed, been submitted without oral argument. Based on the well-known effiIt is likely that a decision in this case will be handed down shortly by the Appellate Division. Nevertheless, in view of the extraordinary delay, this Memorandum and Order is being issued.

III. LAW

There is no constitutional right to an appeal. Abney v. United States, 431 U.S. 651, 656, 97 S.Ct. 2034, 2038, 52 L.Ed.2d 651 (1977). Having made the right of appeal available, however, the state is obligated by the United States Constitution to avoid impeding effective access to the appellate process. Rinaldi v. Yeager, 384 U.S. 305, 86 S.Ct. 1497, 16 L.Ed.2d 577 (1966); Douglas v. California, 372 U.S. 353, 83 S.Ct. 814, 9 L.Ed.2d 811 (1963); Griffin v. Illinois, 351 U.S. 12, 76 S.Ct. 585, 100 L.Ed. 891 (1956); [see also Evitts v. Lucey,_U.S__, 105 S.Ct. 830, 83 L.Ed.2d 821 (1985).]

While its protective power has been considerably eroded in recent years, the purpose of the Great Writ is still to test whether prisoners are detained in violation of their fundamental liberties. Townsend v. Sain, 372 U.S. 293, 311-12, 83 S.Ct. 745, 756-57, 9 L.Ed.2d 770 (1963). The writ should be granted where there is a fundamental violation of rights and “it appears that the applicant has exhausted the remedies available in the courts of the State,” or that “there is either an absence of available State corrective process” or such process is “ineffective to protect the rights of the prisoner.” 28 U.S.C. § 2254(b). Practical exhaustion and the lack of any effective state corrective process absent recourse to the federal courts exists.

A. Exhaustion of State Remedies

Federal courts may not consider a petition for habeas corpus unless petitioner has exhausted his state remedies. Rose v. Lundy, 455 U.S. 509, 515-19, 102 S.Ct. 1198, 1201-03, 71 L.Ed.2d 379 (1982). Respondent relies upon Ralls v. Manson, 503 F.2d 491 (2d Cir.1974) (per curiam), for the proposition that petitioner has not complied with the exhaustion requirement. Ralls involved a Connecticut prisoner serving a life sentence who filed a timely notice of appeal upon his conviction for murder. He had specifically requested a particular attorney to prosecute his appeal. Three and one-half years passed, during which various procedures were followed as required by the Connecticut Practice Book §§ 696 and 672 to perfect Ralls’ appeal. The appeal remained unheard. The district court granted Ralls’ petition for a writ of habeas corpus and ordered that he be released unless the State of Connecticut granted him a retrial within 60 days. Ralls, 375 F.Supp. 1271 (D.Conn.1974). The Second Circuit reversed, holding that Ralls had failed to exhaust state remedies. It found that an effective corrective process was available to Ralls in the Connecticut Practice Book. Ralls, 503 F.2d at 493; but cf. Roberson v. Connecticut, 501 F.2d 305 (2d Cir.1974) (waiving exhaustion requirement after undue delay in state appellate process).

Ralls is distinguishable from the present case on several grounds. First, petitioner in this case did not choose his counsel — the state made the choice from its Panel. Second, counsel in Ralls apparently made attempts to perfect his appeal and present the issues to the Connecticut Supreme Court. Here, counsel made no attempt to perfect the appeal until this Court made it clear that the delay was intolerable. Third, the Second Circuit found that Connecticut provided a procedure for relief; New York offered no similar mechanism until it provided a dismissal calendar in March, 1983. That calendar had no effect on petitioner’s case because his appeal had been filed before the implementation of the calendar. Fourth, Ralls raised all of his appealable state claims with the assistance of his counsel before the federal district court. Here, petitioner raises only the issue of the interminable wait for his appeal.

The instant case also differs from Cousart v. Hammock, 580 F.Supp. 259 (E.D.N.Y.), aff'd, 745 F.2d 776 (2d Cir.1984), in which petitioner managed to perfect a state court appeal, obtained a reversal and then challenged his retrial through a habeas proceeding in federal district court. Here, the State, through the inadequate appeals process in place at the time of petitioner’s conviction, effectively blocked petitioner’s ability to exhaust his state remedies. Under these circumstances, the exhaustion requirement does not preclude recourse to federal court. As recently noted in United States ex rel. Hankins v. Wicker, 582 F.Supp. 180, 182 (W.D.Pa.1984): “If an appropriate remedy does not exist or its utilization is frustrated in the state system, and the door to the federal court is closed by virtue of the exhaustion requirement, there exists no forum for the consideration of petitioner’s constitutional claims.” In Hankins, the court found a mere 33-month delay an adequate reason for its consideration of Hankins’ petition. More than 90 months have passed since petitioner was convicted in New York State court.

B. State Responsibility for Inadequacy of Petitioner’s Counsel

Respondent argues, however, that the inability to exhaust state remedies arose from counsel’s incompetence, not the state’s. This argument amounts to the contention that any violation of petitioner’s due process rights that may have occurred was not a result of state action.

There can be little question that ineffective assistance of counsel and failure of the state to correct the deficiency constitute state action. The Supreme Court implicitly addressed this issue in Anders v. State of California, 386 U.S. 738, 87 S.Ct. 1396, 18 L.Ed.2d 493 (1967), which held that a court-appointed attorney’s letter stating that an appeal lacked merit, and the state procedure it triggered, could be redressed through habeas corpus. In Cuyler v. Sullivan, 446 U.S. 335, 100 S.Ct. 1708, 64 L.Ed.2d 333 (1980), the Court explicitly concluded that alleged ineffectiveness of retained counsel amounted to sufficient state participation. Id. at 342-46; 100 S.Ct. at 1715-16. State involvement is even greater when counsel is appointed. See Pass-more v. Estelle, 607 F.2d 662, 663 (5th Cir.1979), cert. denied, 446 U.S. 937, 100 S.Ct. 2155, 64 L.Ed.2d 789 (1980); Cf. Cousart v. Hammock, 745 F.2d 776, 777 n. 1 (2d Cir.1984).

When the state has assigned ineffective counsel resulting in an inordinate delay in perfecting a direct appeal and extended imprisonment for petitioner, it must assume responsibility. Cf. Cuyler, 446 U.S. at 343, 100 S.Ct. at 1715 (state participation in ineffective assistance of counsel may be an unconstitutional deprivation of liberty). The state has acknowledged its responsibility to persons such as petitioner by recognizing the obligation during trial to dismiss an incompetent defense attorney. People v. Medina 44 N.Y.2d 199, 207-08, 404 N.Y.S.2d 588, 592-93, 375 N.E.2d 768 (1978). Inauguration of a dismissal calendar fulfills that obligation for persons commencing appeals after 1983. Moreover, the 18-B Panel officials responsible for the assignment of counsel neglected to consider counsel’s ability and experience when it assigned him six appeals within eight months. The state in this case had the ability to protect petitioner’s rights, but it did not do so in the llh years he was in custody. The state cannot complain of lack of exhaustion when it itself was responsible for this failure. See Breazeale v. Bradley, 582 F.2d 5, 6 (5th Cir.1978) (delay of state remedy for over a year amounted to “a prolonged sleep, [which] in state remedies as in the rest of us, may safely be said to evince exhaustion”); see also Pool v. Wyrick, 703 F.2d 1064, 1066 (8th Cir. 1983); Wade v. Lockhart, 674 F.2d 721, 722 (8th Cir.1982); Sapienza v. Vincent, 534 F.2d 1007, 1010 (2d Cir.1976).

Petitioner’s request for habeas corpus relief is appropriate. Petitioner was at the mercy of the state and its procedures that provided for the appointment of his counsel. Not only did that system fail to work, but those who were responsible for the system and the court to which he had appealed had a mechanism available — the dismissal calendar — that would have revealed the ineffectiveness of petitioner’s counsel. The obligation to monitor its own officers and procedures is constitutionally imposed and a recognized obligation of New York State courts. See People v. Medina, supra, 44 N.Y.2d at 207, 404 N.Y.S.2d at 593, 375 N.E.2d 768 (incumbent upon the court to prevent adverse effects of counsel’s incompetence).

C. Right to Relief

A delay in adjudicating an appeal may constitute a denial of due process and equal protection. United States ex rel. Hankins v. Wicker, 582 F.Supp. 180, 183— 85 (W.D.Pa.1984). The Supreme Court in Barker v. Wingo, 407 U.S. 514, 92 S.Ct. 2182, 33 L.Ed.2d 101 (1972), sets forth the criteria to be utilized where delay is the basis of the claim for relief. Although a speedy trial case, the analysis is applicable to appeals. Doescher v. Estelle, 454 F.Supp. 943, 947 & n. 1 (N.D.Tex.1978).

First, has petitioner effectively waived his right by failing properly to assert it? 407 U.S. at 528, 92 S.Ct. at 2191. Respondent argues that petitioner in this case failed to assert his right to change counsel by petitioning the court. Petitioner was powerless to remedy this delay caused by state action. Respondent asserts that petitioner’s pro se petition and his previous change of counsel are evidence of his ability. In fact, replacement of The Legal Aid Society was initiated by the Society, not by petitioner. Petitioner was instructed at that time and earlier to direct all inquiries regarding his direct appeal to counsel and was not informed of his right to petition the court to change counsel. He was probably correctly advised by fellow prisoners that if he had requested a change of representation, he was inviting additional delay and frustration. See Barker v. Wingo, 407 U.S. 514, 529, 92 S.Ct. 2182, 2191 (burden on court and counsel to prevent undue delays); Gaines v. Manson, 194 Conn. 510, 481 A.2d 1084, 1093 (1984) (ordinarily it is counsel who is responsible for asserting petitioner’s rights).

Second, is the length of the delay excessive? 407 U.S. at 530-31, 92 S.Ct. at 2192. Where the delay between conviction and the hearing of an appeal exceeds 50 percent of a petitioner’s ten year minimum sentence, the court can assume that the delay is prejudicial. Cf. Shelton v. Heard, 696 F.2d 1127 (5th Cir.1983) (four years of six-year sentence served pending appeal). Petitioner is entitled to a “swift vindication” of his rights once the court has agreed to hear him. Cf. Galtieri v. Wainwright, 582 F.2d 348, 354 (5th Cir.1978) (exceptions to exhaustion doctrine illustrate tension between protecting constitutional rights and adhering to principles of comity).

Third, are there acceptable reasons for this delay? 407 U.S. at 531, 92 S.Ct. at 2192. Here, the core problem was an institutional defect. The state at all times had the means available to avoid excessive delay — the dismissal calendar with its imposition of “substantial pressure” on attorneys with pending appeals. This device was well known since it had been in use both in the Appellate Division, First Department, and in the Court of Appeals for the Second Circuit. It was ultimately adopted by the Second Department, but for no acceptable reason it was not made applicable to pending appeals. Without the dismissal calendar, petitioner found himself in the hands of an inexperienced appellate attorney who, despite having informed the 18-B Panel of this inexperience, received numerous appeals in a short period of time when due to his personal difficulties he was not capable of meeting even ordinary demands. The state’s failure to screen, administer, and monitor Panel attorneys, rather than forming a justifiable excuse for delay, infringed petitioner’s due process and equal protection rights. Cf. Gaines v. Manson, 194 Conn. 510, 481 A.2d at 1094 (delayed appeals resulting from overworked and understaffed Public Defender’s Office constituted violation of Fourteenth Amendment).

The final reason for the delay was quite clearly gross ineffectiveness of petitioner’s counsel. By any measure, counsel’s failure to perfect the appeal must be considered ineffective assistance. [Evitts v. Lucey,_U.S.-, 105 S.Ct. 830, 83 L.Ed.2d 821 (1985)]. See Strickland v. Washington, — U.S.-, 104 S.Ct. 2052, 2064, 80 L.Ed.2d 674 (1984) (“The benchmark for judging any claim of ineffectiveness must be whether counsel’s conduct so undermined the proper functioning of the adversarial process that the trial cannot be relied on as having produced a just result.”). New Counsel failed to provide “reasonably effective assistance” in prosecuting the appeal promptly. Strickland v. Washington, supra, 104 S.Ct. at 2064; Gulliver v. Dalsheim, 739 F.2d 104, 107 (2d Cir.1984). See also People v. Baldi, 54 N.Y.2d 137, 151-52, 444 N.Y.S.2d 893, 901, 429 N.E.2d 400 (1981).

Fourth, was there prejudice to petitioner? 407 U.S. at 532, 92 S.Ct. at 2193. Cf. Strickland, 104 S.Ct. at 2068 (appropriate test for prejudice is that “but for counsel’s unprofessional errors, the result of the proceeding would have been different.”). The Supreme Court has identified three interests that might be prejudiced: preventing unnecessary pretrial incarceration; minimizing anxiety and concern of the accused; and avoiding impairment to the accused’s defense. Barker v. Wingo, 407 U.S. 514, 532, 92 S.Ct. 2182, 2193, 33 L.Ed.2d 101 (1972).

While perusal of petitioner’s state claims suggests that there is very little chance of a reversal, petitioner has clearly suffered severe anxiety and concern as a result of the long delay. Petition of Williams, 378 Mass. 623, 626, 393 N.E.2d 353, 355 (1979). This is a form of unacceptable punishment. In addition, should petitioner receive a retrial, the newly-discovered evidence that forms the basis of his appeal may have grown stale after seven years. Compare Cousart v. Hammock, supra, 745 F.2d at 778.

It would be inappropriate to foreclose the state appellate courts from deciding the case now that petitioner’s counsel has filed a brief apparently raising the appropriate issues on appeal and the matter is sub judice in the state court. Cf. Barnes v. Jones, 665 F.2d 427 (2d Cir.1981), rev’d on other grounds, 463 U.S. 745, 103 S.Ct. 3308, 77 L.Ed.2d 987 (1983); Pressley v. Wainwright, 540 F.2d 818 (5th Cir.1976), cert. denied, 430 U.S. 987, 97 S.Ct. 1688, 52 L.Ed.2d 383 (1977). The petitioner is ordered released unless the Appellate Division has decided his appeal within sixty days from the date of this Order. This decision is stayed pending an appeal to the Court of Appeals for the Second Circuit.

SO ORDERED.