author: MacLAUGHLIN, District Judge.

text:
    SURGIDEV CORPORATION, a California corporation, Plaintiff, v. EYE TECHNOLOGY, INC., a Delaware corporation, and Robert J. Fitzsimmons, Frederick G. Kalfon, James A. Greiling and Debra J. McCoy, Individuals, Defendants.
    Civ. No. 4-85-1376.
    United States District Court, D. Minnesota, Fourth Division.
    Jan. 6, 1986.

      Hugh D. Jaeger, Minneapolis, Minn., and Wayne Willenberg and David M. Simon (Spensley, Horn, Jubas & Lubitz, of counsel), Los Angeles, Cal., for plaintiff.
    Lawrence C. Brown, Duane W. Krohnke, James L. Volling, and James C. Wine, Faegre & Benson, Minneapolis, Minn., for defendants.
   MacLAUGHLIN, District Judge.

This matter is before the Court on plaintiff’s motion to dismiss counterclaims brought by the defendants. Plaintiff’s motion will be granted in part and denied in part.

FACTS

Plaintiff Surgidev Corporation (Surgidev) is a California corporation with its principal place of business in Goleta, California and is engaged in the manufacture of artificial lenses. Defendant Eye Technology, Inc. (ETI) is a Delaware corporation headquartered in St. Paul, Minnesota. Defendants Robert J. Fitzsimmons, Frederick G. Kalfon, James A. Greiling and Debra J. McCoy are former Surgidev officers and employees now associated with ETI.

This is an action brought by Surgidev charging defendants with unfair competition, misappropriation of trade secrets, breach of contract, breach of fiduciary duty, conversion, and tortious interference with contractual relations and prospective economic advantage. Surgidev is a leading manufacturer of intraocular lenses — artificial lenses implanted in the eyes of cataract patients. In February, 1985, defendant Robert Fitzsimmons resigned his position as executive vice president of marketing and sales at Surgidev to form ETI, of which he is the president, chief executive officer, and treasurer as well as a member of the board of directors. Fitzsimmons was joined at ETI by several other Surgidev executives, including Frederick Kalfon, formerly Surgidev director of marketing; James Greiling, formerly Surgidev’s north central regional sales manager; Debra McCoy, formerly Surgidev manager of manpower development; William Fagan, formerly Surgidev northeastern regional sales manager; and Myron Lippman, formerly president of Surgidev. All now hold key positions at ETI.

ETI is currently in the formative stages of corporate life, having been incorporated June 24, 1985. On August 29, 1985, ETI filed with the Securities Exchange Commission a registration statement for a public offering of 2.1 million shares of ETI common stock, intended to provide $6.3 million in operating capital. When completed, the public offering is expected to provide ETI with capital sufficient to establish manufacturing and administrative facilities. The prospectus filed with the SEC by ETI indicates that the corporation plans to engage in the business of manufacturing for sale intraocular artificial lenses.

The crux of Surgidev’s complaint is that the individual defendants took valuable trade secrets and marketing information when they left Surgidev’s employ to form ETI, and that in so doing each of the individual defendants contravened non-disclosure agreements which they entered into while employed at Surgidev. The trade secrets allegedly misappropriated by the individual defendants relate to technical expertise as well as confidential marketing and sales data. Surgidev seeks compensatory and punitive damages and an injunction restraining defendants from soliciting Surgidev’s customers or current employees, using Surgidev’s trade secrets, or competing with Surgidev in the manufacture and sale of intraocular lenses.

Defendants have counterclaimed, alleging: '

First counterclaim: Tortious Interference with ETI’s public offering.
Second counterclaim: Abuse of process and malicious prosecution.
Third counterclaim: Defamation.

Plaintiff now brings this motion to dismiss each of defendants’ counterclaims.

DISCUSSION

A. Tortious Interference

Defendants’ first counterclaim alleges that plaintiff has tortiously interfered with the ETI public offering by filing this lawsuit. Elements of the tortious interference cause of action are set forth in the Restatement (Second) of Torts § 766B (1977) (adopted by the Eighth Circuit in Missouri v. National Organization for Women, Inc., 620 F.2d 1301, 1316 (8th Cir.1980)):

One who intentionally and improperly interferes with another’s prospective contractual relation (except a contract to marry) is subject to liability to the other for the pecuniary harm resulting from loss of the benefits of the relation, whether the interference consists of
(a) inducing or otherwise causing a third person not to enter into or continue the prospective relation or
(b) preventing the other from acquiring or continuing the prospective relation.

Restatement § 766B. Factors to be considered in determining whether the interference is improper are catalogued in the Restatement (Second) of Torts § 767 (1977) (cited with approval in Missouri v. NOW, 620 F.2d at 1316):

In determining whether an actor’s conduct in intentionally interfering with a contract or a prospective contractual relation of another is improper or not, consideration is given to the following factors:
(a) the nature of the actor’s conduct,
(b) the actor’s motive,
(c) the interests of the other with which the actor’s conduct interferes,
(d) the interests sought to be advanced by the actor,
(e) the social interests in protecting the freedom of action of the actor and the contractual interests of the other,
(f) the proximity or remoteness or remoteness of the actor’s conduct to the interference and
(g) the relations between the parties. Restatement § 767.

Plaintiff bases its motion to dismiss defendants’ tortious interference counterclaim on its first amendment right to petition government. As recognized by the United States Supreme Court in the landmark cases of Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961) and United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965), the first amendment right to petition government protects the right to bring suit in state and federal courts. Accordingly, the act of filing suit is generally privileged from tort or antitrust liability. See Otter Tail Power Co. v. United States, 410 U.S. 366, 380, 93 S.Ct. 1022, 1031, 35 L.Ed.2d 359 (1973). The courts have recognized only one exception to the Noerr-Pennington doctrine of privilege — resort to the courts which is a mere “sham” intended to disguise tortious or anti-competitive activity is not privileged. See Noerr, 365 U.S. at 140, 81 S.Ct. at 531. The “sham exception” to the Noerr-Pennington doctrine was authoritatively confirmed by the Supreme Court in California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 511-16, 92 S.Ct. 609, 612-14, 30 L.Ed.2d 642 (1972), and was thoroughly explored in a recent decision of the United States Court of Appeals for the Eighth Circuit, Razorback Ready Mix Concrete Co., Inc. v. Weaver, 761 F.2d 484 (8th Cir.1985). In Razorback Ready Mix the Eighth Circuit stated:

It is only where a defendant’s resort to the courts is accompanied or characterized by illegal and reprehensible practices such as perjury, fraud, conspiracy with or bribery of government decision makers, or misrepresentation, or is so clearly baseless as to amount to an abuse of process, that the Noerr-Pennington cloak of immunity provides no protection.

Razorback, 761 F.2d at 487, quoting Chest Hill Co. v. Guttman, 1981-2 Trade Cas. (CCH) ¶ 64,417, 75,054 (S.D.Ohio May 29, 1981). Thus, the filing of suit will fit within the “sham exception,” and will give rise to tort liability, only if “clearly baseless,” or if accompanied by perjury, fraud, conspiracy, bribery, misrepresentation, or other “illegal and reprehensible practices.”

An analysis of plaintiff’s claims reveals that they are neither clearly baseless nor characterized by “illegal and reprehensible practices.” As such, plaintiff’s claims are protected by the Noerr-Pennington privilege from tort liability. Plaintiff’s first cause of action alleges that the individual defendants breached non-disclosure agreements entered into while employed at Surgidev. The non-disclosure agreements signed by each of the individual defendants prohibits just the type of conduct allegedly engaged in by the individual defendants here — misappropriation of trade secrets, hiring of Surgidev employees, and engaging in direct competition with Surgidev in the intraocular lens (IOL) industry. Whether the individual defendants have in fact contravened the terms of the non-disclosure covenants will of course await determination in trial on the merits, nevertheless, given the facial validity of plaintiffs breach of contract counts, it cannot be said that the initiation of this lawsuit was a “mere sham.”

The remaining counts of plaintiffs complaint are also facially valid. Given the high corporate rank of the individual defendants while employed at Surgidev, it certainly does not strain the imagination to believe that the individual defendants may have misappropriated trade secrets, converted Surgidev documents, and otherwise engaged in unfair competition, as alleged by the plaintiff. Plaintiff has also raised a colorable claim of tortious interference— plaintiff has alleged that defendants have or will cause Surgidev clients and customers to discontinue present and prospective contractual relationships.

In sum, plaintiffs lawsuit is far from a “sham” lawsuit. The “sham exception” is a “narrow one,” Razorback Ready Mix, 761 F.2d at 487. As recognized by the Eighth Circuit in First American Title Co. of South Dakota v. South Dakota Land Title Association, 714 F.2d 1439, 1447 (8th Cir.1983):

“[t]he right of access to the courts is indeed but one aspect of the right of petition”; accordingly, groups do not [expose themselves to liability] by “us[ing] the channels and procedures of state and federal agencies and courts to advocate their causes and points of view respecting resolution of their business and economic interests vis-a-vis their competitors.”

Id. at 1447, quoting California Motor Transport, 404 U.S. at 510-11, 92 S.Ct. at 611-12. The mere fact that plaintiffs lawsuit threatens to harm defendants as competitors of plaintiff is not a sufficient ground on which to deny plaintiff access to the courts.

Further, it is extremely doubtful that the initiation of a single lawsuit can fit within the “sham exception.” In California Motor Transport the United States Supreme Court applied the “sham exception” to litigation which constituted a “pattern” of baseless, repetitive claims. California Motor Transport, 404 U.S. at 513, 92 S.Ct. at 613. Several courts have construed the “pattern” language of that case to mean that a single lawsuit will not fit within the “sham exception.” See Central Bank of Clayton v. Clayton Bank, 424 F.Supp. 163 (E.D.Mo.1976); Mountain Grove Cemetery Association v. Norwalk Vault Co., 428 F.Supp. 951 (D.Conn.1977). In a concurring opinion filed in the case of Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623, 97 S.Ct. 2881, 53 L.Ed.2d 1009 (1977), Justices Blackmun and Burger stated that one lawsuit is not sufficient to fall within the sham exception and that there must be a pattern of baseless, repetitive claims. Vendo, 433 U.S. at 646, 97 S.Ct. at 2895. The plurality opinion announced by Justice Rehnquist and joined by Justices Stewart and Powell dealt with the issue in an inconclusive fashion. The Eighth Circuit in Razorback Ready Mix apparently rejected a strict reading of the “pattern” language of California Motor Transport, stating that a single lawsuit does not give rise to liability “absent allegations that the lawsuit involves serious misconduct similar to the ... abuses described in California Motor.” Razorback Ready Mix, 761 F.2d at 487. In First National Bank of Omaha v. Marquette National Bank of Minneapolis, 482 F.Supp. 514 (D.Minn.1979), following a thorough discussion, it was stated “the court finds that the institution of a single lawsuit without any allegations that the lawsuit involves unethical misconduct similar to the abuses described in California Transport is not sufficient to bring the defendants’ actions within the ‘sham exception’ to the Noerr-Pennington doctrine.” First National Bank of Omaha, 482 F.Supp. at 521. Here there has been no allegation that plaintiff’s act of filing suit constitutes “serious misconduct” of the type described in California Motor Transport. As such, plaintiff’s institution of this single lawsuit is not sufficient to bring plaintiff’s actions within the “sham exception.” Accordingly, defendants’ first counterclaim will be dismissed.

B. Malicious Prosecution — Abuse of Process

Defendants second counterclaim alleges that plaintiff’s act of filing this lawsuit constitutes malicious prosecution and abuse of process.

In order to state a claim for malicious prosecution, three elements must be satisfied: (1) the suit must be brought without probable cause and with no reasonable ground on which to base a belief that the plaintiff would ultimately prevail on the merits; (2) the suit must be instituted and prosecuted with malicious intent; and (3) the suit must ultimately terminate in favor of the defendant. First National Bank of Omaha v. Marquette National Bank of Minneapolis, 482 F.Supp. 514, 522-23 (D.Minn.1979) (emphasis added). Plaintiff contends, and defendants concede, that the third element of the malicious prosecution tort has not been and cannot be proved, in that this lawsuit has not terminated in favor of the defendants. Accordingly, defendants’ malicious prosecution counterclaim will be dismissed.

The essential elements of an abuse of process action are the existence of an ulterior purpose and an act of using the process to accomplish a result not within the scope of the proceeding in which it was issued. First National Bank of Omaha, 482 F.Supp. at 524. “The gist of the action is the misuse or misapplication of the process, after it has once been issued, for an end other than that which it was designed to accomplish.” Kittler & Hedelson v. Sheehan Properties, Inc., 295 Minn. 232, 239, 203 N.W.2d 835, 840 (1973), quoting Hoppe v. Klapperich, 224 Minn. 224, 231, 28 N.W.2d 780, 786 (1947); Prosser, Law of Torts § 121.

The difficulty with defendants’ abuse of process counterclaim is that there has been no allegation that plaintiff has used the Court’s processes to achieve an improper purpose. Defendants’ second counterclaim alleges in conclusory fashion that plaintiff commenced this action “with the intent of interfering with, and disrupting, the public offering of ETI’s securities.” Counterclaim 11151 (emphasis added). The initiation of a lawsuit to restrain defendants from forming a competing corporation and thereby contravening non-compete agreements to which they were parties is not an improper use of the Court’s process — it is, in the words of the Prosser treatise, “nothing more than carrypng] out the process to its authorized conclusion, even though with bad intentions.” Prosser § 121 at 857. The gravamen of the abuse of process tort is the use of process to “obtain a collateral advantage, not properly involved in the proceeding itself, such as the surrender of property or the payment of money, by the use of the process as a threat or a club.” Prosser § 121 at 857. Here defendants have failed to allege that plaintiff has used the Court’s process to obtain a “collateral advantage” —one outside the scope of the proceedings. The purpose which defendants claim to be improper — disruption of the ETI public offering — is collateral only in the sense that an award of the injunctive relief sought by plaintiff would hamper the ETI sale of common stock. This collateral advantage is not the result of plaintiffs improper purpose, but rather of plaintiffs diligent pursuit of its legal rights and remedies. Defendants’ counterclaim merely alleges in conclusory fashion that this litigation has caused and will cause harm to the defendants without alleging any special harm other than that which normally flows from any litigation. See Barrett v. Baylor, 457 F.2d 119, 123 (7th Cir.1972). Absent allegations that plaintiff has willfully made use of process to accomplish a result not within the scope of the proceeding in which it was issued, an abuse of process claim has simply not been established. Bigelow v. Galway, 281 N.W.2d 835 (Minn. 1978); Rosvall v. Provost, 279 Minn. 119, 155 N.W.2d 900 (1968). Accordingly, defendants’ abuse of process counterclaim will be dismissed.

C. Defamation/Trade Libel

Defendants’ third counterclaim alleges that Surgidev has falsely stated to ophthalmologists, Surgidev employees, and others in the IOL industry, that defendants have stolen trade secrets and breached their nondisclosure agreements, and that Surgidev knew these statements were false when made. Defendants contend that Surgidev made the comments with a malicious intent to injure defendants’ reputation in the IOL industry and to interfere with customers and potential customers of ETI.

Plaintiff bases its motion to dismiss defendants’ third counterclaim on the ground that defendants have failed to plead special damages. Generally, in a defamation case based on slander, injury to reputation is not presumed. Thus, ordinary slander is not actionable absent pleading and proof of special damages. See Restatement (Second) of Torts § 558(d) (an element of the tort of defamation is “either actionability of the statement irrespective of special harm or the existence of special harm caused by the publication”). To this general rule there is one well-recognized exception: a spoken defamation which adversely reflects on an individual’s abilities in his business, trade, or profession is slander per se, actionable without proof of special damages. Restatement § 570; Advanced Training Systems, Inc. v. Caswell Equipment Co., Inc., 352 N.W.2d 1 (Minn.1984); Hoesl v. United States, 451 F.Supp. 1170 (N.D.Cal.1978).

Whether defendants must be required to plead special damages in this case turns on whether their third counterclaim is more properly characterized as a claim of slander per se or one of “trade libel.” Generally, trade libel is defined as a statement disparaging the quality of another’s “land, chattels or intangible things.” Restatement of Torts § 626. It is well-accepted that recovery may not be had for trade libel (or “product disparagement” as it is known under Minnesota law) absent proof of “special damages in the form of pecuniary loss directly attributable to the defendant’s false statements.” Advanced Training Systems, Inc. v. Caswell Equipment Co., Inc., 352 N.W.2d 1, 7 (Minn.1984). Thus, if defendants’ third counterclaim alleges disparagement by plaintiff of defendants’ products or property, then it is a trade libel claim and special damages must be pled. On the other hand, if the counterclaim is properly one for defamation, and if the alleged defamatory statements reflect adversely on the defendants’ abilities in their collective trade or business, special damages need not be pled.

An analysis of defendants’ third counterclaim reveals that it raises allegations of slanderous defamation adversely reflecting on defendants’ business and professional abilities, and not disparagement of defendants’ products or property. Accordingly, the Court finds that the counterclaim is for slander per se and that special damages need not be pled. Defendants’ allegations relate to statements concerning business ability — primarily in the nature of statements that defendants are not trustworthy or credible because of the fact that they misappropriated plaintiff’s trade secrets and breached a contractual agreement with plaintiff. Nothing whatsoever has been alleged regarding the “quality” of defendants’ products or property. Indeed, it would be difficult for plaintiff to impugn the quality of defendants’ products, inasmuch as none have yet been produced. The Court finds that defendants’ have alleged defamation relating to business ability, not product disparagement.

An analysis of the differing interests served by the two torts supports a finding that defendants’ third counterclaim sounds in defamation and not trade libel. A defamatory statement is defined by the restatement as one that:

tends so to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him.

Restatement § 559. Because business reputation is accorded great significance by the law, any statement adversely affecting business reputation is per se actionable. In contrast, reputation of the quality of property is not accorded such overweaning significance. Accordingly, proof of special damages is required to support the cost and inconvenience of a lawsuit.

Here plaintiff has allegedly impugned the business reputation of defendants. As such, special damages need not be pled. Nor is an order of the Court requiring defendants to amend their third counterclaim pursuant to Rule 12(e) of the Federal Rule of Civil Procedure necessary, in light of the fact that proof of special damages is not required in a slander per se case. Plaintiff’s motion to dismiss defendants’ third counterclaim or in the alternative to require defendants to amend their third counterclaim to provide a more definite statement will be denied.

Based on the foregoing, IT IS ORDERED:

1. plaintiff’s motion to dismiss defendants’ first counterclaim is granted;

2. plaintiff’s, motion to dismiss defendants’ second counterclaim is granted;

3. plaintiff’s motion to dismiss defendants’ third counterclaim is denied.

      . The non-disclosure agreements signed by the individual defendants provide that:
      5.2 No Hiring of Other Employees. While employed by SURGIDEV and for five (5) years after that employment ends, EMPLOYEE agrees not to employ or attempt to employ, in competition with SURGIDEV, any of SURGIDEV’s other employees who work in any area in which EMPLOYEE has been significantly engaged on behalf of SURGIDEV.
      5.3 No Use of Confidential Information and Trade Secrets. While employed by SURGIDEV and for ten (10) years after that employment ends, EMPLOYEE agrees not to enter into any employment competitive with SURGIDEV in which the complete fulfillment of the duties of the competitive employment would inherently require EMPLOYEE to reveal or use any of the Confidential Information and Trade Secrets of SURGIDEV learned or obtained by EMPLOYEE while employed by SURGIDEV.
      5.4 No Solicitation of Customers. While employed by SURGIDEV and for five (5) years after that employment ends, EMPLOYEE agrees not to divert or attempt to divert (by solicitation or by any other means) the cus

        tomers of SURGIDEV existing at the time EMPLOYEE’S employment ends.
      Plaintiff’s Complaint Exhibit A (emphasis added).

      . Footnote 6 of the plurality opinion seems to state that a federal court may not conclude from the conduct of a single lawsuit that the litigation is baseless. The plurality opinion concerns itself primarily with the powers of the federal courts under the Anti-Injunction Act, 28 U.S.C. § 2283, however, not with the complainant’s tort or antitrust liability. Justices Stevens, Brennan, White, and Marshall, in dissent, took the position that a single lawsuit could give rise to legal liability. Vendo, 433 U.S. at 662, 97 S.Ct. at 2903.

      . The Court further finds that a stay of defendant’s malicious prosecution counterclaim pending outcome of plaintiffs claims would serve no useful purpose.

      . The only court process of which plaintiff has made use to this point has been the issuance of a complaint. There has been no allegation that plaintiff has misused discovery or other court process. Several courts have declared that the mere issuance of a complaint, standing alone, is an insufficient ground on which to base an abuse of process counterclaim. See Behrendt v. Rassmussen, 234 Minn. 97, 47 N.W.2d 779 (1951); Blue Goose Growers, Inc. v. Yuma Groves, Inc., 641 F.2d 695 (9th Cir.1981); Rosemont Enterprises, Inc. v. Random House, Inc., 261 F.Supp. 691 (S.D.N.Y.1966); Alberto-Culver Co. v. Andrea Dumon, Inc., 295 F.Supp. 1155 (N.D.Ill,1969); Merritt-Chapman & Scott Corp. v. Elgin Coal, Inc., 358 F.Supp. 17 (E.D.Tenn. 1972); Selas Corp. of America v. Wilshire Oil Co. of Texas, 344 F.Supp. 357 (E.D.Pa.1972).

      . Defendants’ third counterclaim alleges that:
      The Surgidev statements referred to in paragraph 157 hereof have damaged defendants in that these statements have prejudiced ETI in the conduct of its business and have deterred their parties from dealing with ETI. The amount of defendants’ damages are not known at this time.
      Counterclaim ¶ 159.

      . In the Prosser hornbook the following approach to the issue was suggested:
      It is not always easy to distinguish between personal defamation of the plaintiff and disparagement of his property or business. If the statement made charges the plaintiff with personal misconduct, or imputes to him reprehensible characteristics, it is regarded as libel or slander; and since any such charge concerning his conduct of his business will affect him in that business, the slander is actionable without proof of damage. On the other hand, if the aspersions reflect only upon the quality of what he has to sell, or the character of his business as such, it is merely disparagement, and proof of damage is essential to the cause of action.
      Prosser on Torts § 128 at 917-18 (footnotes omitted).


source: Caselaw Access Project

author: SWEET, District Judge.

license: Public Domain

text:
    Michael DONOVAN, William Ford, James Kazel and Judy Keogh, Plaintiffs, v. FEDERAL BUREAU OF INVESTIGATION, Defendant.
    No. 82 Civ. 4766 (RWS).
    United States District Court, S.D. New York.
    Jan. 6, 1986.
    Paul, Weiss, Rifkind, Wharton & Garrison (Robert S. Smith, Maurice A. Leiter, New York City, of counsel) for plaintiffs.
    Rudolph W. Giuliani, U.S. Atty., S.D.N.Y. (Gerald T. Ford, Asst. U.S. Atty., New York City, of counsel) for defendant.
   OPINION

SWEET, District Judge.

Presently before the court as a result of a submission on September 20, 1985 is the motion of plaintiffs Michael Donovan, William Ford, James Kazel and Judy Keogh (the “Plaintiffs”) for summary judgment and the cross-motion of defendant Federal Bureau of Investigation (“FBI”) for similar relief. At issue is the adequacy of the FBI’s 70-page affidavit sworn to April 30, 1985, drafted to meet the indexing requirements set out in Vaughn v. Rosen, 484 F.2d 820 (D.C.Cir.1973), cert. denied, 415 U.S. 977, 94 S.Ct. 1564, 39 L.Ed.2d 873 (1974) (hereinafter “Vaughn affidavit”), with respect to the agency’s documents relating to its investigation of the murder of Jean Donovan and three nuns in El Salvador on December 2, 1980. The Plaintiffs seek summary judgment to require an additional Vaughn affidavit. The FBI opposes the motion and also seeks summary judgment dismissing the complaint on the grounds that the withheld documents, or portions of documents, are authorized by the exemptions cited. The Plaintiffs’ motion, although well-founded, is denied, and the documents at issue will be withheld or produced as set forth below as a consequence of the court’s in camera review.

This Freedom of Information Act (“FOIA”) request relates to our government’s concern and activity with respect to the murder of four American churchwomen in El Salvador in 1980. Files were maintained by the FBI which included material also maintained by the Department of State (“State”), the Department of Justice (“Justice”), the Central Intelligence Agency (“CIA”), the U.S. Customs Service (“Customs”), and the U.S. Marshal’s Service (“Marshals”). The request has already been the subject of extensive litigation chronicled below. In addition, events have overtaken the request in some regards, because a distinguished former member of this court, the Honorable Harold R. Tyler, Jr., conducted an investigation and rendered a report to the Secretary of State, The Churchwomen Murders: A Report to the Secretary of State and on May 25,1984 five former Salvadoran guardsmen were convicted of the murdfer. Notwithstanding these and other events, a glance at the daily headlines and a reflection upon the anguish of the Plaintiffs establish that issues here presented possess great sensitivity and significance. In view of these special circumstances, the time has come to resolve these issues with a final disposition although in another case and at another time it would be appropriate to require an additional Vaughn index.

Prior Proceedings

The Plaintiffs served their first FOIA request on the FBI on March 11, 1982, and served a follow-up request on January 4, 1983. The FBI initially asserted that all documents in its ten volume, 2912 page file were exempt from disclosure under FOIA exemption 7(A) which protects investigatory records compiled for law enforcement purposes, the release of which would “interfere with enforcement proceedings.”

On February 8,1984, this court, reconsidering its prior order of August 12, 1983 granting the Plaintiffs’ partial summary judgment, held that exemption 7(A) protected all but 162 of the documents in the FBI’s file. Nonetheless, this court held that the assertion of a blanket exemption for the entire file was inappropriate and that a Vaughn affidavit should have been prepared. Donovan v. FBI, 579 F.Supp. 1111, 1125-26 (S.D.N.Y.1983). Both sides appealed this court’s ruling to the Court of Appeals.

While appeals were pending, five Salvadoran National Guardsmen were convicted in El Salvador of the churchwomen’s murders. Shortly thereafter, the FBI informed the Court of Appeals and the Plaintiffs that it would no longer assert exemption 7(A) with respect to the churchwomen’s file, and would re-process the ten volume file, asserting at that time any other FOIA exemptions it deemed applicable. The FBI completed its processing of documents on December 6, 1984.

The release of the ten volumes to the Plaintiffs was completed on December 6, 1984. By letter dated February 8,1985 the Plaintiffs requested defendant to prepare a Vaughn affidavit for all 34 documents that were withheld in their entirety, some 72 FBI documents that were withheld in part, 58 State Department documents that were withheld in part, and another 37 documents only if they related to the churchwomen’s murder. Accordingly, on May 6, 1985, the FBI produced the Seventh Declaration of D.F. Martell, sworn to April 30, the Declaration of Sherry L. Davis, sworn to the same day, the 186-page Declaration of John Eaves, and the 12-page Declaration of Louis J. Dube, sworn to May 1, 1985. On July 31, 1985, the Plaintiffs filed the instant motion for an order requiring defendant to provide an additional Vaughn affidavit, limiting their application to 23 documents.

All documents were numbered sequentially at the time of the initial motions, and the following are now at issue in connection with this motion:

6 11 17A 41 70 83 83A 84 85 86 88 92 92A 108 222 225 227 308 321 470A 643 644 A & B

The FBI’s treatment of 644 A & B as two documents will be adopted for the sake of convenience as demonstrated below.

The Vaughn Affidavit

The Vaughn affidavits are collated in the Martell affidavit which has four sections: I: Summary of Administrative and Judicial Proceedings, Paragraphs 6-15; II: Following Trial and Convictions Blanket (b)(7)(A) Exemption No Longer Was Applicable and the Churchwomen File Was Reprocessed, Paragraphs 16-18; III: Explanation of Format Utilized for the Justification of Deleted Material, Paragraphs 19-24; and IV: Justification Categories: Exemptions Asserted: Rationale Descriptions of Deleted Materials — (b)(1), (b)(3), (b)(5), (b)(6), (b)(7)(A), (b)(7)(C), (b)(7)(D), (b)(7)(E) and (b)(7)(F), Paragraphs 25-107. The documents were attached in deleted form as Exhibit B to the Martell Declaration and were submitted in camera in their original form.

The FBI Vaughn affidavit thus provides the following information: a listing of the numerical designation of the documents derived from the initial analysis of the file, a list of the exemptions relied upon as cited in the act, a rationale or explanation of each of the cited exemptions and finally copies of the documents at issue with the cited section relied upon added at the deleted portion. The Plaintiffs refer to these designations as “coded symbols.” In some of the rationale sections (IV referred to above), certain of the numerically designated documents are referred to, but the affidavit as such does not contain a master listing describing the document at issue, a citation of the exemption relied upon and an explanation of the applicability of the exemption. The explanation of the applicability of the exemption is given in general terms, although in a number of instances the numerical designation of the document is given while in the explanations of other exemptions no particular documents are referred to. Of course, an examination of the document reveals the designation of the exemption relied upon but not the explanation.

Both the Plaintiffs and the FBI cite the test for determining the adequacy of a Vaughn index that is set forth in Founding Church of Scientology v. Bell, 603 F.2d 945, 949 (D.C.Cir.1979). The elements quoted are:

(1) The index should be contained in one document;
(2) The index must adequately describe each deletion; and
(3) The index must state the exemption claimed for each deletion and explain why the exemption is applicable to that deletion.

These necessary elements have been widely accepted by the circuit courts and by the courts of this district. Osborn v. I.R.S., 754 F.2d 195, 196 (6th Cir.1985); Davis v. CIA, 711 F.2d 858, 851 (8th Cir.1983); Chilivis v. Securities and Exchange Commission, 673 F.2d 1205, 1208 n. 9 (11th Cir. 1982); Holy Spirit Assn. v. U.S. Dept. of State, 526 F.Supp. 1022, 1025 (S.D.N.Y.1981).

The Plaintiff’s launch two attacks on the adequacy of the Martell affidavit. The first is one of form, claiming that the affidavit fails to put the required elements in one place. The second attack claims that the explanations given are conclusory and not related with sufficient specificity to a particular document.

The court in Powell v. United States Department of Justice, 584 F.Supp. 1508 (N.D.Cal.1984) found an FBI affidavit strikingly similar to the one at issue here inadequate. It described that affidavit as follows:

In fact, the FBI has presented no index at all. Instead, it has placed code symbols next to each deletion in the documents. These symbols correspond to a table which describes a category of information into which the deletion falls, and the affidavits of the Special Agents then supply generalized discussions of why a particular category of information is exempt. It appears that these discussions are broad enough to apply to any FOIA request, and they are in no way tied to the content of the specific deletions.

Id. at 1513-14.

Similarly, in Thorstad v. CIA, 494 F.Supp. 500 (S.D.N.Y.1979), the Court found Vaughn affidavits insufficient where they failed to describe adequately the reason why the withheld information properly falls within the exemption. As the court noted with respect to one affidavit at issue:

In a rather extreme example of the shortcomings of defendant’s affidavits, the Conley affidavit devotes five pages to describing how the enclosure was classified and how its disclosure could affect national security, but without the slightest attempt to describe sufficiently the information contained in the document.

Id. at 503.

Presumably the form adopted by the FBI is the product of its experience and the exigencies of the demands placed upon the agency. However, the connective tissue between the document, the deletion or its description, the exemption and the explanation is missing, and in a number of instances the explanation is of such generality as to constitute in effect merely a repetition of the exemption rather than an explanation. Such an affidavit fails to fulfill the agency’s responsibility under FOIA, a responsibility which must be carried out if the statute is to have its desired effect. Only after a careful review by the agency and the disclosure through a Vaughn affidavit can the adversarial procedure properly proceed and judicial de novo review properly be conducted with deference toward the agency’s expertise. Indeed, the affidavit submitted by the FBI here seems motivated by the improper purposes which initially compelled the Vaughn court to require a more reasoned discussion of the withheld documents. As to the Vaughn opinion suggested:

[SJince the burden of determining the justifiability of a government claim of exemption currently falls on the court system there is an innate impetus that encourages agencies automatically to claim the broadest possible grounds for exemption for the greatest amount of information. Let the court decide. And the tactical ploy is, to the extent that the number of facts in dispute are increased, the efficiency of the court system involved in that dispute resolution will be decreased.

It may well be that in instances of foreign government information for which an exemption is claimed pursuant to classification or national security information under Executive Order 12356, any explanation would compromise the exemption. If that is the explanation for the absence of an explanation, it should be so stated. However, it should be possible to state some explanation relating to the applicability of an exemption of a particular document in a fashion that would not compromise its security. Indeed, what follows hopefully will constitute just such an exercise.

The In-Camera Review

At the outset of its memorandum in chief the government stated:

In any event, defendant is willing to provide the documents to the court for an in camera inspection which eliminates any possible need for another Vaughn affidavit.

(Memorandum of Law in Opposition at 2). The Plaintiffs responded:

Thus, the FBI should not be freed from its obligation to prepare a sufficient affidavit for the documents at issue in this motion — and it should not ask the court to prove the FBI’s case by an in camera review.

(Memorandum in Further Support at 3).

Of course, the Plaintiffs properly concede, citing Ray v. Turner, 587 F.2d 1187, 1194-95 (D.C.Cir.1978), that the court may exercise its discretion to conduct a review. In fact the government has submitted the 23 documents unexpurgated, all of which have been made available to the Plaintiffs in edited form. The Plaintiffs urge the court to refrain from a review on two grounds, first, that it is the agency’s burden which should not be shifted to the courts by sweeping generalized claims of exemption, Mead Data Central v. U.S. Department of Air Force, 566 F.2d 242, 260 (D.C.Cir.1977) and second, that the public interest, which is demonstrated here, should be served by a public justification. It is also for the latter reason that the Plaintiffs place little weight on the off-the-record oral Vaughn discussions which have concededly taken place since the filing of the motion.

Despite the inadequacy of the FBI’s proffered Vaughn affidavit described above, the circumstances of this motion call for the exercise of discretion to conduct the in camera review. Twenty-three documents remain at issue out of an initial ten-volume file of approximately 2912 pages. The FBI file has become the repository of all the government documents on the subject, including those originating in other agencies. As a consequence, exemptions are claimed not only on behalf of the FBI but also on behalf of the other agencies involved. The file has already been reviewed by the court in connection with the now mooted (b)(7)(A) law enforcement exemption.

In addition, it should be noted that this action was initiated as a consequence of the denial of a request which the Plaintiffs made of the FBI on March 11, 1982 and was filed in this court on July 21, 1982. It has already been the subject of several opinions and one appeal. The interests of justice and finality require a disposition which can then be made the subject of appellate review, if necessary, to resolve the availability of the information at issue.

It may well be that the court initially erred by acceding to the government’s request to consider the (b)(7)(A) exemption in isolation without requiring all exemptions to be set forth with respect to each document at that time. On the other hand, the issues have now been reduced to the following twenty-three documents. Administration of FOIA requests and litigation arising under it remains vexatious as this action demonstrates when viewed in its totality.

While the first ground urged by the Plaintiffs, the undesirability of shifting the burden of a proper review from the agency to the courts has a strong appeal, particularly to a court, the course of this litigation makes it necessary for the court to assume the burden of an in camera review. As to the public interest, as always, it is hoped that it will be properly served by the explanations which follow.

Document 6

The exemptions claimed for the related matter are (b)(l)/3, information properly classified under Executive Order 12356, and (b)(5)/5, the National Security Council exemption. The excised portion contains items of an agenda which describes itemp that do not relate to the request and involve United States policy issues properly classified under (b)(l)/3.

Document 11

The exemptions claimed are (b)(7)(C)/l, information concerning third party informants, and (b)(7)(D)/2(a) name and identity of source provided under an assurance of confidentiality. The excised portion contains identification and location of an informant properly withheld.

Document 17-A

The exemptions claimed are (b)(7)(C)/1 and (b)(7)(D)/2(a), described above, and (b)(7)(D)/2(b), information identifying the source of the information. The redactions include descriptive information about an informant and the process by which the informant’s information was acquired. The information is properly exempt in view of the informant’s request for confidentiality which is not altered by an ambiguous consent to the use of the informant’s name if necessary. The inconsistent redaction by the FBI of introductory verbs does not rise to a level requiring further disclosure.

Document 41

The first exemption claimed is (b)(7)(D)/3, and the summary analysis in Martell’s declaration states that the redacted material is information provided by a Salvadoran official. However, the statutory exemption applies only to confidential sources and is therefore inapplicable to the redacted sentence.

The second exemption claimed is (b)(5)/2, FBI opinions as to the progress of the Salvadoran investigation. The redacted material is an expression of the prior deliberative opinion of an FBI officer and therefore properly exempt.

Document 70 .

The exemptions claimed are (b)(1)/1(a)(3), Department of State information obtained from foreign governments which is classified pursuant to Executive Order 12356. The foreign government exemption is properly claimed as to the redacted material except for the two sentences at the bottom of page one which continue on to page two of the document. These sentences do not include information obtained from foreign governments and must be disclosed except for the names of foreign participants described in the document.

Document 83

The exemption claimed is b(l)/1(a)(5), Department of State information regarding foreign relations and activities of the United States classified under Executive Order 12356. The subjective expressions and opinions of both Salvadoran and of United States officials, here redacted, are properly within the exemption claimed by the FBI. Document 83-A

The exemption claimed and its proper exercise is identical to that which applied to Document 83.

Document 84

The exemption claimed is (b)(l)/(l)(a)(9), a confidential source exempt by virtue of classification under Executive Order 12356. The first redacted sentence describes the source and is properly exempt. The second and third sentences offer information which does not tend to identify the source and are therefore not exempt. The final two sentences are properly exempt as information which tends to identify the source.

Document 85

The exemption claimed is the same as that claimed for Document 84. The first redacted paragraph tends to identify the source and is properly exempt. The next redacted paragraph does not identify the source and is not properly exempt except for the last sentence which tends to identify the source. The following two paragraphs tend to identify the source by the nature of the acquisition of the knowledge and information set forth and are properly exempt. The final paragraph stating the motivation and belief of the source tend to identify the source and is properly exempt. Document 86

The exemption claimed is the same as set forth with respect to Document 84 and the redacted material consists of seven paragraphs, the first six of which contain both information which tends to identify the source and is properly withheld. The seventh paragraph beginning with the word “Comment” does not tend to identify the source. It is independent of the source and, therefore, not properly exempt other than as relating to the identification of United States personnel.

Document 88

The exemption claimed is (b)(l)/l(a)(5), the foreign relations and activities of the United States. The material redacted by the Department of State as confidential analysis and recommendation for action is properly exempt under Executive Order 12356.

Document 92

The exemptions claimed are (b)(1)/ 1(a)(3) and (5). The redacted material is a government official analysis relating foreign relations activities of the United States and therefore properly exempt.

Document 92A

The exemption claimed is (b)(1)/1(a)(9), a confidential source, and the first redacted material tends to identify the source and is properly redacted. The later redactions are based on the foreign government and relations exemption, (b)(l)/l(a)(3) and /5, and recount a discussion between government officials which is properly exempt.

Document 108

The exemption claimed is (b)(1)/1(a)(5) and the redacted material refers to foreign relations activities of the United States and is properly exempt.

Document 222

The exemptions claimed are (b)(7)(C)/l, (b)(7)(C)/2(b), (b)(7)(D)/1(a), (b), and (b)(7)(D)/7, the confidentiality and unwarranted invasion of personal privacy exemptions. There is nothing in the document to establish any implied confidentiality for the sources involved or that the information would constitute an unwarranted invasion of privacy and it is not properly exempt except for the sources’ addresses, telephone numbers, current places of employment and physical characteristics as to which disclosure would be unfairly intrusive. Moreover, there is no basis, from the face of the document, to justify the redaction of only one source’s name.

Document 225

The exemptions claimed are (b)(7)(C)/7 and (D)/9. The (b)(7)(C)/7 exemption is properly requested by the U.S. Marshal’s Service. Since the rest of the redacted information tends to identify a confidential source, it is properly exempt. The confidentiality needed to protect the source may properly be implied from the information describing the source’s activity and status which indicate the possibility of reprisal.

Document 227

This document is subject to the same ruling as Document 222 to which it is substantially similar.

Document 308

The exemptions claimed are (b)(7)(C)/1 and (b)(7)(D)/2(a), name and identify of confidential source. The redacted information tends to identify a source and is properly exempt.

Document 321

The exemptions claimed are (b)(7)(C)/7 and (b)(7)(D)/9. The redacted material is a portion of that same information held properly redacted in Document 225.

Document 470A

Exemptions claimed are (b)(7)(C)/2, (b)(7)(D)/2(a) and (b). The redacted information tends to identify the source and is properly exempt, except as to the information on the last line on page two which does not have that quality and was improperly redacted.

Document 643

The exemptions claimed are (b)(6), (b)(7)(C)/8 and (b)(7)(F). The redaction of the identity of the government official on page 2 is proper. The exemption claimed for pages 3, 4 and 5, is (b)(7)(C) and (b)(7)(D)/1(a) and the information redacted tends to identify the source and is properly exempt and the (b)(7)(A)/1(1) exemption was properly exercised on page 5 and 6 for the redacted material since it is outside the scope of the inquiry.

Document 644A

The exemption claimed is (b)(7)(C)/2(a), (b)(7)(C)/l, (b)(7)(B)/1(a), (b)(7)(C)/2(d), (b)(7)(D)/1(a) and the redacted material tends to identify a possible source and is properly exempt.

Document 644B

The exemption claimed is (b)(7)(C)/l, (b)(7)(D)/1(a) and (b), and the redacted material tends to identify the source and is properly exempt.

Conclusion

The government will turn over the redacted portions where required under the rulings set forth. Compliance will be stayed twenty (20) days from the date hereof to permit an application for a further stay pending appeal. Following the required disclosure, this action and its companion case will be dismissed without costs,

IT IS SO ORDERED.

      . The exemptions will be referred to according to the classification used in the Martell affidavit. The classification refers both to the statutory exemptions, which precede the slash, and further subcategories which follow the slash.


text:
    Eustace MINETOS, Petitioner, v. Charles SCULLY, Superintendent, Green Haven Correctional Facility, as Agent for the State of New York and Robert Abrams, the Attorney General of the State of New York, Respondents.
    No. 84 Civ. 7791 (RWS).
    United States District Court, S.D. New York.
    Jan. 6, 1986.
    Eustace Minetos, Stormville, N.Y., pro se.

      Carl A. Vergari, Dist. Atty. of Westchester County (Richard E. Weill, Gerald D. Reilly, Asst. Dist. Attys., White Plains, N.Y., of counsel), for respondents.
   OPINION

SWEET, District Judge.

Eustace Minetos (“Minetos”) was convicted in the New York Supreme Court of Westchester County of robbery in the first degree N.Y.Penal Law, § 160.15, on September 23, 1981. He was sentenced to an indeterminate prison term with a minimum of ten years and a maximum of twenty years. He petitions for a writ of habeas corpus on the grounds that his conviction was based on the admission of identification evidence secured through pretrial identification procedures which were so suggestive as to create substantial likelihood of irreparable misidentification and that he was deprived of his constitutional right to compulsory process for obtaining witnesses in his favor. For the reasons set forth below, the motion is denied.

FACTS

The Robbery

At approximately 7:00 p.m. on February 14,1981, Bert Wolneck (“Wolneck”) started his regular evening shift as bartender at the Fife and Drum Restaurant in Mt. Kisco, New York. It was a busy evening at the bar, which usually remained open until 4:00 a.m. Minetos, known to Wolneck as “Steve,” entered the tavern at about 1:00 a.m. Wolneck was casually acquainted with Minetos. During the course of the evening they spoke briefly, exchanging pleasantries. Minetos left the tavern at about 4:15 a.m. At 4:30 a.m. the lights in the bar were turned up. The remaining patrons left, and Wolneck, alone in the tavern, began the chores of closing up.

At 5:10 a.m. an individual appeared in the tavern. He was holding a pistol in his hand and wore a woman’s stocking pulled over his head so that Wolneck was unable to see his face. The intruder was dressed in a blue jacket, tan slacks, brown shoes and was wearing gloves. He confronted Wolneck and said in a voice with a Southern accent that he wanted the receipts from the register. Wolneck retrieved the bagged receipts, which amounted to approximately $600 in cash and $700 in checks, and handed them to the robber, who then ordered him to the office of the tavern. Wolneck walked to the office of the tavern with the intruder behind him. At the office Wolneck was ordered to sit in a chair facing the wall. The room was well lit and Wolneck could see the robber’s reflection in a mirror. At that point the robber engaged Wolneck in a brief conversation, inquiring into the location of a safe and whether Wolneck owned the establishment. Wolneck later testified at trial that once they were at the office, the intruder’s Southern accent began to fade, and at that point Wolneck recognized the robber’s voice and formed an opinion that the intruder was “Steve.” After Wolneck responded that he was not aware of a safe on the premises and was not the owner, the intruder tied him to the chair, took the money and left. Wolneck was able to free himself from the chair in about thirty seconds. He then telephoned his boss and reported the robbery. The entire incident lasted about seven minutes. During that period Wolneck was able to observe the thief for about two or three minutes.

The Investigation

At approximately 5:20 a.m. Officers Richard Stoorza, William Marlbury and Ronald Buxton of the Mt. Kisco Police Department were called upon to investigate the robbery which had just taken place at the Fife and Drum Restaurant. At trial there were discrepancies in the testimony of the various witnesses as to which police officer actually interviewed Wolneck at the scene of the robbery, and whether or not Wolneck named “Steve” as the thief at that time. Stoorza and Marlbury admitted that they received their information not from the victim Wolneck but instead from Officer Buxton. Wolneck testified that he spoke to “at least three” police officers immediately after the incident, that he gave the description of the robber, including the name “Steve” to a “sergeant” whose name he did not know, but that it was not Patrolman Buxton. Patrolman Stoorza and Marlbury both testified that they did not speak to any witness at the scene. Patrolman Buxton later submitted a signed police incident report of an interview with Wolneck taken immediately after the incident. That report described the perpetrator as “a male, possibly white, speaking with a put-on Southern accent, approximately five-eight, about one hundred and fifty-five to one hundred and sixty pounds.” Police Officer Buxton did not testify at trial.

At approximately 6:30 a.m. a 1973 green Chrysler that Officer Stoorza had previously noticed at 5:15, the time of the robbery parked within 100 yards of the Fife and Drum Tavern was traced to 70 Barker Street, apartment 608 in the village of Mt. Kisco. The police were admitted to that residence by a female occupant. Minetos was present in the apartment as were other individuals. Minetos was wearing a sleeveless t-shirt, blue jeans and brown loafers. On a table and chair in the dining room were a blue jacket and a pair of beige colored pants. In response to police questioning, Minetos stated that he had been to the Fife and Drum that evening, that he had used the green Chrysler and that the jacket and slacks in the dining room belonged to him. Minetos then agreed to comply with the request of the police to accompany them to headquarters. Before leaving, Minetos, on his own initiative, changed out of the jeans he had been wearing when the police arrived and into the light-colored pants that had been in the dining room. He also put on a three-quarter length coat. As they were leaving an officer picked up the blue jacket that was in the dining room and brought it along to police headquarters.

No pistol or cash was ever retrieved in connection with the robbery.

The Show-Up Identification

After Minetos was brought to police headquarters in the early morning, a detective contacted Wolneck and asked him “to come down and make an identification.” Later at trial there was considerable controversy over whether or not Wolneck had recognized the robber to be Minetos who he knew as “Steve” at the time of the robbery identification, that is, whether he believed it was Minetos who had robbed him before seeing him at the police station.

Minetos was presented by the police to Wolneck in a show-up alone rather than in a multiple person lineup. Wolneck was brought to a back office of the police station to identify Minetos, who was dressed in the brown sweater, the slacks and brown shoes he had worn from 70 Barker Street. Wolneck did not make an immediate identification. Petitioner was then asked to put on the blue jacket which the police had brought along from 70 Barker Street. After Minetos donned the blue jacket approximately two minutes after the procedure started, Wolneck identified him as the individual who had committed the robbery earlier that morning.

The Trial

Wolneck testified at trial that before he got to the police station he was “fairly certain” that Minetos was the individual who had robbed the tavern, but that he had identified both the man and the clothes. He testified that at some point during the robbery he had determined the masked thief was “Steve” but that, at the show-up, the clothes that Minetos was wearing were a “re-inforcing factor” in his identification. He was the only eyewitness to the robbery. At trial the prosecution produced Patrolman Ronald Buxton’s report which indicated that he was the investigative officer to whom Wolneck had given his description of the assailant, but did not call him as a witness. On learning of the defenses’ effort to subpoena Buxton, the trial judge stated that “if he was subpoenaed properly and legally, I’ll issue a bench warrant to get him down here.” Counsel for the defense then requested an adjournment in order to procure his investigator who would testify that he had served a subpoena for Patrolman Buxton on the Desk Sergeant at the Mt. Kisco police headquarters, which was where Buxton usually worked, and that he had done so because Buxton had been absent on that day. In the alternative the defense offered to supply the court with an affidavit of service. The court ruled that it would not issue the bench warrant because Buxton had not been properly personally served with process, and that under the applicable law leaving the subpoena at the witnesses’ regular place of employment was only sufficient if he had been on duty, working, at the time. No request for a continuance to serve Buxton personally was made by the defense. The defense request for a missing witness charge was denied.

Procedural History

At a pretrial hearing held on September 14, 1981, Minetos’ motion to exclude identification evidence based on the allegedly suggestive identification procedure was denied. The case went to trial on September 18, 1981, during the course of which the jury heard testimony from Wolneck identifying Minetos as the person who had robbed him at the tavern. Testimony was also heard from Wolneck concerning the circumstances of the show-up identification.

On September 23, 1981, the jury found Minetos guilty of robbery in the first degree, N.Y.Penal Law Section 160.15, subdivision 4; guilty of criminal use of a firearm in the first degree, N.Y.Penal Law § 265.-09; guilty of grand larceny in the third degree, N.Y.Penal Law Section 155.30; guilty of unlawful imprisonment in the second degree, N.Y.Penal Law § 135.05, and guilty of criminal mischief in the fourth degree, N.Y.Penal Law Section 145.00. The trial judge sentenced Minetos on October 14, 1981 as a second felony offender to serve two indeterminate terms of imprisonment of not less than ten years and not more than twenty years, an indeterminate term of imprisonment of not less than two years and not more than four years, and two definite terms of imprisonment of one year, all to run concurrently. On direct appeal, the Appellate Division affirmed this judgment, People v. Minetos, 97 A.D.2d 801, 468 N.Y.S.2d 589 (1983), and leave to appeal was denied by the New York Court of Appeals, People v. Minetos, 61 N.Y.2d 676, 472 N.Y.S.2d 1037, 460 N.E.2d 240 (1983).

Compulsory Process

For his first point, Minetos argues that the failure of the trial court to grant a continuance to procure a witness expected to be called by the state deprived Minetos of the right to compulsory process.

The constitutional right of the accused to have compulsory process to obtain witnesses in his defense is well established. Washington v. Texas, 388 U.S. 14, 87 S.Ct. 1920, 18 L.Ed.2d 1019 (1967). However, not every denial of a motion for a continuance to obtain witnesses violates the accused’s right to compulsory process. See, e.g., McKinney v. Wainwright, 488 F.2d 28 (5th Cir.1979). The denial of a motion for continuance is entrusted to the sound discretion of the trial judge. United States v. Leach, 429 F.2d 956 (8th Cir.1970). A defendant is deemed to have waived his right to compulsory process where his counsel fails to move for such process. United States v. DiGregorio, 148 F.Supp. 526 (S.D. N.Y.1957); Eaton v. United States, 437 F.2d 362 (9th Cir.1971).

The record reveals that the defense counsel did not properly request an adjournment at trial to secure the attendance of Patrolman Buxton. Minetos therefore cannot be heard to claim that the trial court’s failure to grant a continuance to procure Patrolman Buxton deprived petitioner of the right to compulsory process. Defense counsel did request an adjournment in order to call his investigator to testify that a subpoena for Buxton was served, thereby supporting his request for the missing witness charge. The pertinent part of the record reads as follows:

Mr. Naderio [Defense Counsel]: [Y]our Honor, my application at this point is in the alternative, either for an adjournment to have Mr. O’Connor [the defense investigator who attempted to serve process on Buxton] come in and testify, or for the court to accept this affidavit of service and to give me the missing witness charge.

Since defense counsel did not request an adjournment to secure the presence of Buxton after he failed to appear, but only requested a continuance to secure the appearance of the defense investigator, petitioner cannot now claim that he was denied compulsory process of a witness he never requested the trial court to produce. Minetos does not raise the issue of whether it was a denial of due process to refuse to give the missing witness charge on the basis of the affidavit, and so we do not address it here.

Reliability of Witness Identification

For his second point, Minetos claims that the one man show-up was unnecessarily suggestive so as to taint Wolneck’s identification and that there was no independent basis for a reliable identification.

Due process of law required in state criminal proceedings under the Fourteenth Amendment to the United States Constitution, mandates that eyewitness identification evidence is not reliable and must be suppressed “if suggestive identification procedures have led to a very substantial likelihood of irreparable misidentification.” Kirby v. Illinois, 406 U.S. 682, 691, 92 S.Ct. 1877, 1883, 32 L.Ed.2d 411 (1972).

The admission of testimony concerning a suggestive and unnecessary identification procedures does not violate due process so long as the identification possesses sufficient aspects of reliability. Manson v. Brathwaite, 432 U.S. 98, 97 S.Ct. 2243, 53 L.Ed.2d 140. However, even an impermissibly suggestive pretrial identification procedure does not render an identification inadmissible in court if, considering the totality of the circumstances, there is sufficient evidence of reliability apart from the tainted identification. If so, the identification is admissible independent of the suggestive nature of the pretrial identification. Manson v. Brathwaite, 432 U.S. 98, 97 S.Ct. 2243, 53 L.Ed.2d 140 (1977); Neil v. Biggers, 409 U.S. 188, 93 S.Ct. 375, 34 L.Ed.2d 401 (1972).

Hence, the due process requirements governing the admissibility of identification evidence involves a two party inquiry. First, the pretrial identification must be scrutinized to determine whether it was unnecessarily suggestive of Minetos guilt to Wolneck. If the pretrial procedure is found to have been conducted improperly, no in-court identification of the defendant by such witness may be received in evidence “without first determining that [the in-court identification] was not tainted by the illegal line-up but [was] of the independent origin.” Gilbert v. State of California, 388 U.S. 263, 288, 87 S.Ct. 1951, 1961, 18 L.Ed.2d 1178 (1967).

Five factors to be considered as independent indicia of the reliability of a witness’ identification are: 1) the opportunity of the witness to view the suspect at the time of the crime; 2) the witnesses’ degree of attention; 3) the accuracy of the witnesses’ prior description of the criminal; 4) the level of certainty demonstrated at the confrontation; and 5) the time elapsed between the crime and the confrontation. Manson v. Brathwaite, supra, 432 U.S. at 114, 97 S.Ct. at 2253. Another factor affecting the reliability of an identification is the prior familiarity the witness has with the accused. See People v. Gissendanner, 48 N.Y.2d 543, 552, 423 N.Y.S.2d 893, 399 N.E.2d 924; People v. Tas, 51 N.Y.2d 915, 434 N.Y.S.2d 978, 415 N.E.2d 967. Prior acquaintance may rule out the need for the due process test. See Sobel, Eyewitness Identification, (2d ed. 1984).

Although it has been pointed out that one-on-one show-ups are suggestive, Stovall v. Denno, 388 U.S. 293 at 302, 87 S.Ct. 1967 at 1972, 18 L.Ed.2d 1199 (1967), under the totality of the circumstances in this case, the procedure was not so unnecessarily suggestive as to amount to a denial of due process. An examination of the record shows that reliability was present in this case.

The facts that Wolneck knew Minetos previously, that they had been acquainted for a year prior to the robbery, and that Wolneck had spoken to Minetos earlier in the evening, are factors which all contribute to the overall reliability of Wolneck’s identification of Minetos. As part of the totality of the circumstances this prior acquaintance bolsters the reliability of Wolneck’s identification of petitioner.

Considering the five factors as set forth in Manson and Biggers, supra, it appears that Wolneck had several minutes to view his assailant at close range in a well-lit room, including at least one minute when they were face to face. Even though the intruder was masked, Wolneck could still observe his physical build, bearing and way of moving. In Holland v. Perini, 512 F.2d 99 (6th Cir.1975). Even though the initial identification involved a one-on-one show-up where the witness observed the armed robber for forty-five seconds at a distance of eight feet at the scene of the crime and less than one day intervened between the crime and pretrial confrontation, it was found that the one-on-one confrontation was not impermissibly suggestive. These aspects of Holland are similar to the case at bar, where in addition the robber’s voice, which lost its disguising southern accent as the robbery progressed, was also an observation supporting reliable subsequent identification.

The fact that Wolneck complied with the assailant’s directions and answered his questions indicates that Wolneck’s attention was focused on the intruder. Victims of crime, unlike casual observers, have a special incentive to closely observe and retain an image of the perpetrator. Neil v. Biggers, 409 U.S. at 200, 93 S.Ct. at 382, citing United States ex rel. Phipps v. Follette, 428 F.2d 912, 915 (2d Cir.1970). Wolneck testified that although he was upset at the time, the situation made him more alert. It thus appears that Wolrieck’s level of attention at the time of the incident contributed to the degree of reliability.

Shortly after the robbery, Wolneck described the assailant to police as “a male, thirty to thirty-five years of age, one hundred seventy to one hundred eighty pounds, wearing a blue jacket, a pair of light-colored pants and brown shoes, and with a 'put-on' southern accent.” This description was sufficiently detailed and accurate to support Wolneek’s identification of petitioner independent of the show-up. At the police station, after being given a standard introduction to make a careful identification, Wolneck readily identified Minetos. The procedure took place only several hours after the initial incident. Both of these factors comport with the indicia of reliability as set forth in Manson and Biggers.

Under these circumstances, we conclude that the identification of Minetos was reliable and that the show-up procedure did not create a substantial likelihood of irreparable misidentification. Even if the one-on-one show-up may have contained aspects of suggestiveness, considering the five factors enunciated in Manson and Biggers, and the fact that Wolneck and Minetos were previously acquainted, the in-court identification was independently reliable and so was admissible at trial.

For the foregoing reasons, Minetos’ petition for a writ of habeas corpus is denied.

IT IS SO ORDERED.


text:
    Henry R. SILVERMAN; Peter F. Edelman; Adrian B. Werner; HRS/Dallas Parc, Inc.; PFE/Dallas Parc, Inc.; and ABW/Dallas Parc, Inc., Plaintiffs, v. WORSHAM BROTHERS CO., INC. and Earl S. Worsham, Defendants.
    No. 84 Civ. 5063 (RWS).
    United States District Court, S.D. New York.
    Jan. 6, 1986.

      Law Offices of Russel H. Beatie, Jr. (Russel H. Beatie, Jr., Eric R. Finkelman, New York City, of counsel), for plaintiffs.
    Rogers & Hardin, P.C. (John J. Almond, Atlanta, Ga., of counsel), for defendants.
   OPINION

SWEET, District Judge.

This diversity action was brought by plaintiffs Henry R. Silverman (“Silver-man”), Peter F. Edelman (“Edelman”), Adrian B. Werner (“Werner”), HRS/Dallas Parc, Inc., PFE/Dallas Parc, Inc., and ABW/Dallas Parc, Inc. (the “general partners”) against Worsham Brothers Co., Inc. and Earl S. Worsham (“Worsham”), their former partners, seeking recoveries of moneys spent in the unsuccessful real estate transaction, the development of the River Parc Hotel in Miami, Florida. River Parc was initially contemplated to be a European-style luxury hotel. After jurisdictional motions, a bench trial was held on September 11 and 12 and the matter finally submitted on October 25, 1985 by able, experienced and helpful counsel. Based on the following findings and conclusions of law, judgment will be entered against Worsham in the amount of $102,385.04, with interest.

The parties to this action are sophisticated and generally successful real estate developers. Notwithstanding, under the pressure of events to be described, at the eleventh hour they sought to resolve certain of their differences with respect to the development of the hotel and created a document partly handwritten which gave rise to this lawsuit. The facts though complicated by the nature of the transaction are in general not in dispute.

Silverman resides in the City and State of New York and is the sole stockholder of HRS/Dallas Parc. Werner resides in Stamford, Connecticut and is the sole stockholder of ABW/Dallas Parc, and was project manager of the River Parc Hotel. Edelman is an individual who resides in the City and State of New York and is the sole stockholder of PFE/Dallas Parc. HRS/Dallas Parc, ABW/Dallas Parc, PFE/Dallas Parc are subchapter S corporations, duly organized and existing under the laws of the state of Florida, formed by the respective plaintiffs as stockholders for the purpose of acting as general partners of Dallas Parc Associates, Ltd. (“Dallas Park Associates”), the limited partnership formed to develop the River Parc Hotel.

HRS/Dallas Parc held 10% of Dallas Parc Associates, ABW/Dallas Park held 35% and PFE/Dallas Parc held 35% of the general and Class B limited partners’ interest in Dallas Parc Associates.

In the late seventies, the parties became known to each other as participants in the development of the Miami Center project, part of which involved the construction of the Miami Hyatt Regency for which Werner was the project manager. Werner had prior experience in this role, Silverman and Edelman were also real estate developers, a field which Worsham also entered after operating successful contracting businesses in Tennessee. In 1981, the parties became aware of the availability for purchase of the Bauder Fashion College, a site in downtown Miami. All agreed it would be suitable for the development of a luxury hotel. It is not necessary to determine the initiator of the project for by the summer of 1981 an oral agreement was reached to proceed. The site was placed under contract by use of a loan collateralized by a $500,000 certificate of deposit pledged by Worsham.

Worsham Bros, is a Tennessee corporation with its principal place of business in Atlanta, Georgia. Worsham Bros, was a Class B limited partner in Dallas Parc Associates, holding 35% of the general and Class B limited partners’ interest in Dallas Parc Associates. Worsham resides in Atlanta, Georgia and is a chairman of Worsham Bros. A separate Limitation Agreement among the general and Class B limited partners was entered dated August 16, 1982 (“Limitation Agreement”). Worsham personally guaranteed the obligations of Worsham Bros, under the Limitation Agreement.

In 1981, Worsham became aware that the Bauder Fashion College, a building in downtown Miami, was available for purchase and concluded it would be appropriate to develop this building into a luxury deluxe hotel in Miami and conferred with Silverman, Edelman, and Werner with whom he had a relationship arising out of the development of the Miami Hyatt. All the parties were influenced by the prosperity then enjoyed by Miami as a banking and financial center for many wealthy foreign businessmen.

The day after Labor Day, 1981, Worsham was able to obtain a $500,000 loan from the Southeast First National Bank in Miami, secured by the pledge by Worsham Bros, of a $500,000 certificate of deposit owned by Worsham Bros. It was agreed that each of the partners would be responsible for one-quarter of the loan (or $125,-000), and would put up his share of the collateral. The other three partners — Werner, Silverman and Edelman — did not put up any money for their shares, however, and the bank eventually foreclosed upon Worsham Bros.’ $500,000 certificate of deposit to satisfy the loan.

The parties continued to be unable to reach an agreement either with respect to their aliquot shares or even to sign a partnership agreement as to the property. To protect its investment, Worsham Bros, had to put additional monies into the property until, all told, it had invested about $850,-000 in it. Eventually, through the brokerage efforts of Edelman, a financial broker, outside investors were attracted to the hotel project and construction financing was obtained from a troika of banks — the Florida National Bank, the Dime Savings Bank of New York, and the Buffalo Savings Bank (which later merged with the Goldome Bank for Savings). This financing, lined up in the summer of 1982, enabled the parties to go forward with the hotel renovation project.

The parties formed a limited partnership by the name of Dallas Parc Associates, Ltd. Silverman, Werner, and Edelman determined to make Worsham Bros, merely a limited partner in the partnership and not a general partner, purportedly because, they said, one of the construction lenders did not want Worsham Bros, as a general partner. They never identified to Worsham or Worsham Bros, the identity of the person who had allegedly insisted that Worsham Bros, not be a general partner.

The various related transactions — the formation of the limited partnership, the closing of the construction loan, the funding of the contributions by the investors or Class “A” Limited Partners, the execution of the construction agreement, and the other subsidiary agreements — were closed more or less simultaneously on August 16, 1982. As a consequence, Worsham’s collateral and expenses were repaid and the parties’ various interests were governed by the agreements thus reached.

Silverman, Edelman, and Werner formed corporations to be the general partners of Dallas Parc Associates, Ltd. Worsham Bros, was the Class “B” Limited Partner, and the partnership, as originally formed, had twelve Class “A” Limited Partners. The General Partners each contributed a total of $100 in cash to the partnership and agreed to cause the land and the building, formerly owned by the oral partnership of Silverman, Edelman, Warner and Worsham, to be conveyed to Dallas Parc Associates. The Class “A” Limited Partners agreed to contribute a total of $1.65 million to the partnership over time on the following basis: They agreed to contribute $150,-000 at closing; $900,000 on January 15, 1983; $450,000 on the later of “Renovation Completion” or January 15, 1984; and the last $150,000 on January 15, 1985, but in no event before the payment of the $450,000 contribution that was due on the later of Renovation Completion or January 15, 1984.

The Limited Partnership Agreement defined “Renovation Completion” as follows:

2.31 “Renovation Completion” shall mean the date on which all four of the following conditions have first been satisfied: (i) issuance of a temporary or permanent certificate of occupancy for the entire building, (ii) commencement of hotel operations, (iii) establishment of a working capital account and initial reserve account of $250,000 and $500,000, respectively, and (iv) funding of the Permanent Loan.

The original project budget called for completion and renovation of the hotel for a total price of $19,150,000 of which $3.9 million was earmarked for construction costs; $2.94 million for the furnishings, fixtures, and equipment (or “FF & E”); $8 million for the acquisition of the land and building; $216,000 for brokerage fees in connection with the acquisition of the land and building; $386,500 for financing fees, including the origination fee for the construction loan and for the permanent loan (as to which Dime and Goldome had issued a permanent loan commitment); $1,475,000 for construction loan interest; $375,000 for professional fees (architectural, legal, accounting, etc.); $375,000 for pre-opening hotel expenses, promotion, and advertising; $200,000 for “reimbursables and overhead”; $750,000 for hotel start-up working capital; and $481,000 for contingency reserve for other fees and expenses.

The sources of the funds under the original budget were as follows: The Florida National, Dime Savings, and Goldome construction loan in the amount of $15 million; $2.5 million in installment financing for the purchase and installation of FF & E (for which the FF & E supplier would be taking back a chattel mortgage on the furnishings, fixtures and equipment); and $1.65 million in Class “A” limited Partner capital contributions.

The construction agreement with the general contractor, Nico Construction, called for a target date of April 1, 1983 for substantial completion of the renovation. Werner’s company, Adrian Werner & Associates, Inc., was to be the project manager responsible for managing the renovation development.

The parties’ main security against liabilities was the prospect of the permanent loan which, in connection with the August 16, 1982 closing, the Dime Savings Bank and the Goldome Bank committed to provide to the limited partnership upon completion of the renovation in accordance with the construction contract documents. The permanent loan, which was to be in the amount of the original construction loan, was not to be personally guaranteed by any one. Since the only project financing that was intended to be guaranteed was the construction loan (which loan would be repaid from the proceeds of the permanent loan), the closing of the permanent loan would have eliminated any personal exposure of the individuals on any loan guarantees. The originally-planned $2.5 million FF & E chattel mortgage financing was not to be personally guaranteed.

Demolition on the Bauder building commenced in September of 1982, and lasted approximately four and a half months. Construction began in February of 1983, and was substantially completed by September of 1983. While construction was underway, the project met its first major hurdle. The Italian company, which was providing the marble and furniture for the hotel, and which was to provide the $2.5 million loan for furniture, fixtures, and equipment at an extremely favorable rate, reneged on its commitment. The plaintiffs were compelled to explore alternative sources of funding to replace this FF & E loan and in August of 1983 Silverman, Edelman and Werner were forced to obtain a $2.5 million increase and an extension of the construction loan from the banks to replace the FF & E loan and they were required to give their personal guarantees for this loan.

Although the banks had committed to provide the permanent loan, the completion of the project in accordance with the loan documents, lien-free, was a precondition to the funding of the permanent loan. The hotel received its temporary certificate of occupancy in September, 1983 and commenced operations. By October 31, 1983, the partnership expended all monies allotted under the development budget for the payment of construction loan interest. With completion of the hotel several months away, it followed that the funding of the permanent loan, which was conditioned upon completion of the hotel, was several months away.

The delayed completion, in combination with the opening of the hotel, created serious problems for the partnership. Operating within a development budget that did not budget for construction loan interest payments beyond October, the partnership faced construction loan interest obligations beyond the development budget and, beginning in September, 1983, hotel operating losses.

At the same time, the hotel market in Miami began a disasterous turn for the worse. As a result of a decline in oil prices, rioting and civil unrest in Miami, the Miami hotel market fell off drastically. Hotel occupancy fell off about 25% in Miami in general, and the River Parc Hotel, planned as a luxury hotel to accommodate the many wealthy Latin American and other visitors who had been coming to the city in great numbers, was particularly hard hit since it required a 70% occupancy rate in order to break even. The actual occupancy was averaging at around 20%.

The demand notes with which the three plaintiff corporations were financed were called, and the proceeds were used to meet the operating expenses of the hotel in the amount of $473,000. Silverman, Werner and Worsham personally guaranteed a line of credit which was obtained at Florida National Bank. Approximately $400,000 was drawn on this line of credit to meet liabilities of the River Parc Hotel.

In his memorandum of December 12, 1983, Werner reported:

Of the $19,500,000 [the total development budget], a total of $18,892,985 has been drawn to date. This includes interest earned and the proceeds of selling scraps off the job. Of this amount, $18,-286,655 has been disbursed in accordance with the print-out, leaving $606,330 theoretically undisbursed but reported on the printout. Of this amount, $517,000 has been diverted to pay operating losses, leaving $88,622 cash on hand and a liability of $606,330 to vendors for which the funds have been drawn from the bank but not disbursed to these vendors.

In the same memorandum, Werner reported that the California Federal permanent loan commitment was to be received that week (the week of December 12, 1983), which would produce some $300,000 in excess funds — that is, excess of the $17.5 million in financing provided by Dime Savings and Goldome and that the project was to be completed within the development budget. However, a number of FF & E items, including the swimming pool deck, the employee cafeteria, the maintenance shop, the health club, and the walkway to the Knight Convention Center, had not been constructed and eventually were abandoned.

By the time California Federal negotiations fell through, the partnership had a $600,000 arrearage on construction loan interest payments. Dime Savings and Goldome apparently expressed willingness to close the permanent loan if Dallas Parc Associates paid up the $600,000 arrearage in order to bring the debt service current. Dallas Parc Associates did not pay the arrearage on the construction loan and did not remove the liens on the property, and, hence, the permanent loan never closed.

Beginning in January, 1984, Silverman, Edelman and Werner began advancing their own monies directly to the partnership to cover operating deficits or losses of the River Parc Hotel. Silverman reported by letter of January 26, 1984, that he, Edelman and Werner “have advanced $300,000 to [Dallas Parc Associates] to pay operating expenses for the past several weeks in order to keep the River Parc’s doors open.” By the end of March, 1984, they had made a total of $473,000 in advanees to the partnership for operating expenses of the hotel.

The plaintiffs also advanced $109,890.24 for “Taxes — payroll related” which they themselves categorize as payments towards “operating deficits.” They also made payment of a settlement described as “FSB — Legal—Garber, Goodman Settlement” in the amount of $17,000. All told, plaintiffs claim to have advanced $599,-890.24 towards hotel operating deficits.

The plaintiffs requested that defendants Worsham and Worsham Bros, pay their share of all liabilities and operating expenses as required under the Limitation Agreement which demand was refused. The River Parc Hotel was foreclosed upon in April of 1984.

In a settlement agreement with the Banks, the plaintiffs paid the Banks $400,-000 plus approximately $80,000 in taxes, in exchange for an agreement that the Banks would not seek a default judgment against the plaintiffs in the event that the proceeds from the foreclosure were insufficient to satisfy the amount of the partnership’s liability to the Banks which plaintiffs had personally guaranteed.

At a foreclosure sale in April, 1984 to which the public was invited to attend and submit bids, the hotel was sold to the construction lender for an amount equal to the outstanding principal and interest on the loan, and the costs and expenses of the Banks. This amount was less than $20,-000,000 and less than the value of the River Parc Hotel property.

On February 25, 1984, Worsham and Worsham Bros, concluded a settlement with Werner and his company, Adrian Werner & Associates, Inc., whereby Werner received $440,000 (out of the proceeds of a sale of an ownership interest in the Miami Hyatt Hotel) and, in connection with that settlement, Werner and his company gave general releases to Worsham and Worsham Bros. In those releases, Werner released Worsham and Worsham Bros:

From all, and all manner of action and actions, causes and causes of action, suits, debts ... contracts, controversies, agreements, ... claims and demands whatsoever, in law or in equity, which said first party [Werner] ever had, now has, or ... hereafter can, shall, or may have ... for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of these presents.

The monies from this settlement went into an escrow fund established under an escrow agreement of the same date, February 25, 1984. Under that escrow agreement, those funds were to be used in large part to fund certain indemnities running from Werner and in favor of Silverman in relation to the River Parc Hotel. On June 6, 1984, this lawsuit was initiated. Conclusion

Federal jurisdiction over this action is founded upon diversity of citizenship pursuant to 28 U.S.C.A. § 1332(a)(1). A federal court in a diversity suit must apply the choice of law rules of the forum state court. Day Zimmerman, Inc. v. Challoner, 423 U.S. 3, 96 S.Ct. 167, 46 L.Ed.2d 3 (1975); Klaxon Co. v. Stentor Electro Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Hence, in this case, New York’s conflict of law rules control.

Under New York law, the law of the state having the most significant relationship to the matter in controversy governs contract disputes in the absence of an effective choice by the parties. Duplan Corp. v. W.B. Davis Hosiery Mills, 442 F.Supp. 86, 88 (S.D.N.Y.1977); Teledyne Industries, Inc. v. Eon Corporation, 373 F.Supp. 191, 200 (S.D.N.Y.1974); Auten v. Auten, 308 N.Y. 155, 124 N.E.2d 99 (1954). As the agreements were executed in Florida and the hotel was renovated and to be operated in Florida, and as three of the plaintiffs are corporations duly organized and existing under the laws of Florida, Florida is the state having the most significant relationship to the matter in controversy. Thus, the contract is governed by Florida law.

Under Florida law, “[t]he general principle adopted by civilized nations is, that the nature, validity and interpretation of contracts are to be governed by the lex loci of the country where the contracts are made or are to be performed; but the remedies are to be governed by the lex fori.” Goodman v. Olsen, 305 So.2d 753, 757 (Fla.1975); Wingold v. Horowitz, 292 So.2d 585, 586 (Fla.1975). Thus the validity and interpretation of the August 16, 1982 agreement and indemnification letter, for breach of which the plaintiffs seek relief, are governed by Florida law, and the remedies for breach are governed by the law of New York.

Paragraph 3 of the Limitation Agreement specifies three types of “liabilities,” including all obligations set forth in the Partnership Agreement, “all liabilities for which Edelman, Silverman and Werner could be personally liable in connection with this transaction except operating expenses ...” and $200,000 in operating expenses. Paragraph 5 defines the limits of this liability, “$125,000 for Worsham for the liabilities and his proportionate share of the $200,000 operating deficit requirement without regard to the above limitation.”

The questions thus presented are: (1) did Silverman, Edelman and Werner incur liabilities in connection with the project; (2) were payments made for operating deficits to trigger Worsham’s obligation to provide $40,000; (3) did the plaintiffs breach any agreements to Worsham thus voiding any obligation on his part, or giving rise to a liability to Worsham, and (4) what are the damages, if any.

As to liabilities paid by the plaintiffs, the facts found above establish liabilities which the plaintiffs “could be personally liable in connection with this transaction,” apart from their obligations set forth in the closing documents. These include the bank loan, interest, and the settlement of the banks’ claims in excess of $900,000. Worsham’s liability for his limited amount is triggered unless defeated by plaintiffs’ breach or recalculated by virtue of the Worsham release. As determined below, “operating deficits” have a precise, post renovation measuring, and to exclude these sums as operating expenses does not exclude the amounts paid as liabilities.

The only serious breach of contract by Werner urged by Worsham relates to the use of construction loan funds for what would be generally categorized as operating expenses after the hotel opened and before the renovation date was achieved. Worsham points to no provision of the agreement between the parties that was violated and no agreement to which Dallas Parc Associates was party which was violated. Indeed, the proposed budget allocations were altered, but there is no claim that such a shift constituted conversion. Indeed, there was unrebutted testimony that such use of construction funds was a common industry practice.

The remaining acts described as breaches are best categorized as the effects of an inability to perform resulting primarily from the economic conditions but in any event giving rise to no defense to Worsham. Indeed, it was in contemplation of just such events that caused the preparation of the Limitation Agreement.

Worsham’s interpretation of the Limitation Agreement would restrict its coverage only to operating expenses and thus vitiate the parties’ expressed intention that each would pay a share, limited to $125,000, of the liabilities. The Limitation Agreement included by its terms both categories of payments. In this regard, one principal expressed concern specifically related to the guarantees of the individual plaintiffs of the construction loan.

Worsham relies on certain principles of Florida law with respect to the duties surrounding indemnification and contribution. The cases cited by Worsham are distinguishable either because they are applying principles of implied indemnity law, see Parfait v. Jahncke Service, Inc., 484 F.2d 296, 304 (5th Cir.1973) or else are construing indemnity contracts having different provisions, such as a right to notice of claims or settlements. See Wright v. Fidelity & Casualty Co. of New York, 139 So.2d 913 (Fla.App.1962). However, the indemnification claim in this case must be evaluated according to the terms of the Sharing Agreement between the parties which requires no notice to the indemnitor. In the absence of a specific notice provision, Florida law does not require that the indemnitor be notified to come in and defend against a claim as a condition precedent to recovery. Crystal River Enterprises, Inc. v. NASI, Inc., 399 So.2d 77 (Fla.App.1981).

Since the Sharing Agreement provides for indemnification of “all liabilities for which Edelman, Silverman and Werner could be personally liable,” it encompasses payments of claims based on potential as well as actual liability. The Limitation Agreement is by its terms a modification of the previously formed “oral partnership agreement” and represents simply one aspect of the relationship between the parties, the sharing of any losses, in addition to the other closing agreements. Therefore, it would be inappropriate to interpret the term “liability” in an overly technical fashion as urged by Worsham. Instead, the “plain meaning” of that word as used in the Limited Agreement and adopted herein is appropriate under Florida law. See Cueto v. Allmand Boats, Inc., 334 So.2d 30, 32 (Fla.1976). Only if the payments made by the plaintiffs were mere “volunteers” could Worsham escape his indemnification obligation and that has not been demonstrated. Plaintiffs’ payment of $400,000 to the Banks was not voluntary since it was made to avoid the possible liability of foreclosure deficit. Although the sales price actually satisfied the full obligation, that factor is only one element which a Florida court would evaluate in determining whether to dismiss a deficiency judgment. See Spencer v. American Advisory Corp., 338 So.2d 62, 63 (Fla.App.1976).

Even if the indemnity agreement was broadly construed as creating a duty of good faith on the part of the contracting parties, there is no demonstration that the plaintiffs violated any such duty. All the funds spent and categorized as liabilities were unquestionably spent in an effort to maintain the viability of the hotel, a purpose to which the Limitation Agreement specifically addressed itself, and were required of the plaintiffs, practically, for that purpose.

With respect to Werner’s claim, there is no meaningful ground offered by Werner to invalidate the general release given on February 25, 1984. While it may be that Worsham drove a hard bargain and that Werner was entitled to more arising out of his interest in the Hyatt Regency project, nonetheless, all claims against Worsham were released. A delay of two years in the resolution of Werner’s claim against Worsham does not qualify as duress and no authority is cited by Werner for the proposition. The plaintiffs concede in their post-trial memorandum (page 19) that, if the release is effective, Worsham’s $125,000 limited liability is reduced to $102,385.04 by the reduction of Werner’s share.

As to plaintiffs’ claim regarding Worsham’s alleged share of the operating expenses, such claim will be denied since it would allow a recovery not contemplated by the Limitation Agreement. Plaintiffs seek contribution for payment described as being for “operating deficits.”

Under the Limitation Agreement, the parties expressly excluded from the definition of “Liabilities” any payments or obligations for operating deficits. The parties’ sharing obligation with respect to any operating deficits is spelled out at the end of paragraph 3 of the Limitation Agreement. Under this provision, the parties must bear “their proportionate share of the $200,000 of operating deficits which is required under the Partnership Agreement.”

This provision by its terms refers back to Section 29 of the Partnership Agreement, which defines the obligations of the partners for any operating deficits or operating expense liabilities. Under Section 29 of the Partnership Agreement, no party has any obligation to fund any operating deficits until “Renovation Completion”:

29.1 If, at any time subsequent to Renovation Completion but prior to December 31, 1985, there is negative Cash Flow (i.e., there are cash deficits from the operation of the Project after application of all available sums from the reserve accounts described in Article 6 and the proceeds of any loans permitted under Article 12), then the General Partner shall promptly notify all Partners of this fact (the “Deficit Notice”) ... Within ten (10) days after the Deficit Notice is given, each General Partner shall contribute his pro rata share of the deficits to the Partnership (the “Deficit Loans”) in proportion to his interest as set forth in Section 12.4 ... In no event shall the General Partners be required to make Deficit Loans in excess of the aggregate sum of $200,000.

Renovation Completion is defined in Section 2.31 of the Partnership Agreement to be a date following the satisfaction of four conditions, including issuance of a certificate of occupancy, commencement of operations, establishment of capital accounts, and the funding of the permanent loan. Thus, Renovation Completion could not be achieved until the funding of the Permanent Loan. In this case, the Permanent Loan never funded. Hence, Renovation Completion was never achieved and no obligation or liability arose on the part of the partners to fund any operating deficits as that term is defined by the Limitation Agreement.

Judgment will be entered in favor of Silverman and Edelman in the amount of $102,385.04, with interest. Submit judgment on notice.

IT IS SO ORDERED.