author: COBB, District Judge.

text:
    W.A. RYMAN and Cynthia M. Jones v. OFFICE AND PROFESSIONAL EMPLOYEES INTERNATIONAL UNION LOCAL NO. 66 and Texaco Inc.
    Civ. A. No. B-83-787-CA.
    United States District Court, E.D. Texas, Beaumont Division.
    Dec. 13, 1985.

      Elizabeth K. Julian, Dallas, Tex., for plaintiffs. .
    M. Diane Dwight, Port Arthur, Tex., Archangela M. DeSilva, James D. Garrison, Houston, Tex., for defendants.
   OPINION

COBB, District Judge.

The issue presently before this court is whether the defendants, Office and Professional Employees International Union Local No. 66 and Texaco Inc., are entitled as a matter of law to summary judgment against the plaintiffs’ claims of age discrimination and breach of the duty of fair representation. Also at issue is whether the plaintiffs’ claims of retaliation under the Age Discrimination in Employment Act, 29 U.S.C. §§ 621-632 (1982), should be dismissed and whether the plaintiff’s demand for a jury trial should be stricken.

I.

Prior to January 1, 1981, the plaintiffs in this case, W.A. Ryman A. age 55, and Cynthia M. Jones, age 49, were employed by defendant Texaco Inc. (hereinafter “Defendant Texaco”) at its Port Arthur Package Division. Although they were represented for the purposes of collective bargaining by Defendant Office and Professional Employees International Union Local No. 66 (hereinafter “Defendant Union”), they were members of a different bargaining unit than that at defendant Texaco’s Port Arthur plant. In late 1980, defendant Texaco decided to close the Port Arthur Package Division and entered into negotiations with defendant Union at both the Port Arthur Package Division and the Port Arthur Plant in order to merge the two bargaining units and avoid a layoff of Port Arthur Package Division employees, including plaintiffs. These negotiations resulted in a Merger Agreement dated March 24, 1982, which provided, inter alia, that employees transferred from the Port Arthur Package Division to the Port Arthur Plant would begin accumulating seniority in the Port Arthur Plant bargaining unit retroactive to January 1, 1981. Plaintiffs were transferred to the Port Arthur Plant pursuant to the provisions of this Agreement.

After the merger of the two bargaining units, the terms and conditions of employment for former Package Division employees, including plaintiffs, were governed by the provisions of the collective bargaining agreement then in effect at Port Arthur Plant. This collective bargaining agreement incorporated in its terms a seniority system which had been negotiated by defendants, more particularly described in Section II of this Opinion. The two types of seniority described in the labor agreement are described as Plant-Clerical seniority and Company-Clerical seniority. According to the terms of the Agreement, plaintiffs only began to accrue Company-Clerical and Plant-Clerical seniority in the Port Arthur Plant bargaining unit of defendant Union on January 1, 1981.

The Port Arthur Plant collective bargaining agreement between defendants expired on January 7, 1982. During negotiations for a new collective bargaining agreement, defendant Texaco proposed changes to the seniority provisions. Among the proposed changes was a recommendation to eliminate certain classifications within the two groups of employees (Groups A and B) which the 1981 Collective Bargaining Agreement provided for. Because of the elimination of these classifications and their consolidation into those which remained, defendant Texaco proposed changes to the promotion and layoff provisions of the seniority system. Aside from these changes, the seniority system of the collective bargaining agreement remained essentially the same, with the method by which an employee in the bargaining unit accrued Plant-Clerical seniority and Company-Clerical seniority remaining the same. These proposals were negotiated by defendants and were adopted in the new collective bargaining agreement that was executed on August 20, 1982.

Subsequent to the execution of this new collective bargaining agreement, and pursuant to the provisions of that agreement, over a two-year period defendant Texaco laid off a total of twenty-six employees, only three of whom were within the protected age group, pursuant to the provisions of that agreement. Plaintiff Ryman was laid off under the terms of the collective bargaining agreement on September 30, 1983; plaintiff Jones was laid off under the terms of the collective bargaining agreement on November 30, 1984. Since those layoffs, no employees have been hired by defendant Texaco in the Port Arthur plant bargaining unit represented by defendant Union, although one employee was recalled in accordance with the terms .of the seniority system.

Even though the collective bargaining agreement contained a provision for filing a grievance, neither plaintiff in this case exercised his or her right to do so. Both plaintiffs, though, did file charges of discrimination against both defendants with the Equal Employment Opportunity Commission (hereinafter “EEOC”), alleging that they had been laid off because of their age. The EEOC however, found no probable cause to believe that these charges were true and issued to each plaintiff a Right to Sue letter.

Plaintiffs subsequently brought this suit against both defendants under 28 U.S.C. §§ 1331 and 1337. In their First Amended Complaint, which was filed with this court on January 12, 1984, plaintiffs alleged that defendants had negotiated a change in the seniority provisions of the collective bargaining agreement in 1981, with an intent to discriminate against them because of their age and that this change had caused their layoff and replacement by persons much younger than themselves. Plaintiffs further alleged in their First Amended Complaint that defendant Union had breached its duty of fair representation by negotiating in bad faith on behalf of plaintiffs and by failing to inform them of the change in the labor agreement prior to the ratification vote in 1982. On March 29, 1984, and April 24, 1984, defendants Union and Texaco, respectively, timely answered this complaint.

Thereafter, on April 9, 1985, defendant Texaco filed and served a Motion for Summary Judgment, which was subsequently joined in by defendant Union. In response to this Motion, plaintiffs filed and served a Memorandum in Opposition on June 5, 1985. While defendant Texaco’s Motion for Summary Judgment was pending, plaintiffs also filed and served a Motion for Amended and Supplemental Complaint on June 24, 1985, seeking to amend their complaint. This court announced to the parties at a July 3, 1985, hearing on defendant Texaco’s Motion for Summary Judgment that it would allow the plaintiffs to amend their complaint. At that hearing, all of the parties informed this court that the instant case was to be tried to the judge without a jury. Despite this statement to the court, however, plaintiffs . filed a jury demand nine days later. Defendant Texaco, in turn, filed a Motion to Dismiss plaintiff’s retaliation claims and to strike plaintiffs’ jury demand on July 22, 1985. Defendant Union subsequently filed a Motion to Dismiss on September 3, 1985.

In response to defendant Texaco’s Motion to Dismiss, plaintiff Jones filed another charge of discrimination with the EEOC. This charge, which was filed on July 26, 1985, alleged, inter alia, that defendant Texaco’s failure to recall plaintiff Jones was in retaliation for her having filed her previous charge. Because of the recency of this second charge, the EEOC has not yet had an opportunity to investigate or conciliate that charge. Also in response to defendant Texaco’s Motion to Dismiss, plaintiffs filed on July 29, 1985, a motion for jury trial under Fed.R.Civ.P. 39(b).

For the reasons set forth below, this court grants the defendants’ Motion for Summary Judgment as to the claims of age discrimination and breach of the duty of fair representation. With regard to plaintiff Jones’ claims of retaliation, the court dismisses those claims without prejudice so that the matter may be pursued further on an administrative level.

II.

Summary Judgment is to be rendered “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R. Civ.P. 56(c). Plaintiffs contend in this case that there is a factual issue as to the meaning of the 1981 Merger Agreement. Specifically, they allege that under this Agreement, they “retained” all of the Company-Clerical seniority and “lost” only the Plant-Clerical seniority that they had acquired while working at the Port Arthur Package Division. Despite the plaintiffs’ contention, however, there is no genuine issue of material fact in the instant case.

It is axiomatic that an employee’s seniority rights, if any, are derived from the applicable labor agreement. Trailmobile Co. v. Whirls, 331 U.S. 40, 53 n. 21, 67 S.Ct. 982, 988 n. 21, 91 L.Ed.2d 1328 (1947), Aeronautical Indus. Dish Lodge 727 v. Campbell, 337 U.S. 521, 526, 69 S.Ct. 1287, 1289, 93 L.Ed. 1513 (1949). In this case, the plaintiffs’ seniority rights in the Port Arthur Plant office group in 1981, if any, had to be derived from the labor agreement between defendants that was in effect at Port Arthur Plant at that time. Under that agreement, an employee had two types of seniority, Plant-Clerical seniority and Company-Clerical seniority. Plant-Clerical seniority was defined as seniority spent in a particular group within the bargaining unit. According to the 1981 labor agreement, there were two groups in the bargaining unit, namely Group A and Group B. Group A consisted of two classifications, Senior Clerk and Clerk, and Group B consisted of six other classifications, Senior Stenographer, Senior Machine Operator, Stenographer, Steno Clerk, Machine Operator, and Messenger. Under the 1981 labor agreement, an employee thus accumulated separate Plant-Clerical seniority in Group A and in Group B. Art. IV, ¶ B(2) of the labor agreement.

Company-Clerical seniority, in contrast, was defined under the 1981 labor agreement as “all continuous employment in the future in any of the established classifications shown on the promotion charge.” Art. IV, ¶ B(1)(b) of the labor agreement. An examination of the bargaining history at the Port Arthur Plant shows that despite the apparent meaning of the term, Company-Clerical seniority has historically meant seniority within the bargaining unit. That seniority is thus dependent upon the amount of time that an employee spends within the relevant bargaining unit and is totally unrelated to an employee’s years of service with the company. An employee, for example, could have twenty years of service with the company and yet have no seniority if he or she was only recently transferred to a bargaining unit where seniority is defined by a labor agreement. That is essentially what occurred in the matter at hand.

As of January 1, 1981, both plaintiffs were employed at the Port Arthur Package Division, and neither had accrued Plant-Clerical or Company-Clerical seniority at the Port Arthur Plant. On March 24,1981, the Merger Memorandum of Agreement was signed. Thereafter, on April 6, 1981, plaintiff Jones was transferred to the Port Arthur Plant as a Steno pursuant to the terms of the Merger Agreement and the labor agreement. Had there been no Merger Agreement, plaintiff Jones would have had both Company-Clerical and Group B Plant-Clerical seniority dating only from April 6, 1981, plus any time previously spent in a classification in the Port Arthur Plant bargaining unit. On June 1, 1981, plaintiff Ryman was transferred to the Port Arthur Plant as a Clerk pursuant to the terms of the Merger Agreement and the labor agreement. Had there been no Merger Agreement, plaintiff Ryman would have had both Company-Clerical and Group A Plant-Clerical seniority dating only from June 1, 1981, plus any time previously spent in a classification in the Port Arthur Plant bargaining unit.

However, the Merger Agreement altered, in some respects, the terms of the Port Arthur Plant labor agreement. Specifically, the Merger Agreement provided that former Port Arthur Package Division employees, such as plaintiffs, would accumulate “Port Arthur Plant seniority” as of January 1,1981, regardless of the date that they were actually transferred to the Port Arthur Plant bargaining unit after the merger. Because the Merger Agreement failed to define the term “Port Arthur Plant seniority,” the appropriate definition of that term must be that which is found in the labor agreement then in effect at the Port Arthur Plant. In other words, “Port Arthur Plant seniority,” as that term is used in the Merger Agreement, refers to both Plant-Clerical and Company-Clerical seniority. Thus, under the terms of the Merger Agreement, plaintiffs began to accumulate both Plant-Clerical and Company-Clerical seniority in the Port Arthur Plant bargaining unit only from January 1,1981. There is nothing in the Merger Agreement to indicate that the Company-Clerical seniority of Plaintiffs, or any of the Port Arthur Package Division employees, was to include any time that they spent at the Port Arthur Package Division.

Plaintiffs, though, point to several seniority lists which were published after the signing of the Merger Agreement that show the plaintiffs’ Company-Clerical seniority as including time spent by them in the Port Arthur Package Division. Plaintiffs maintain that these seniority lists demonstrate that the parties to the Merger Agreement had intended to allow former Package Division employees to carry over the Company-Clerical seniority that they had accumulated while in the Package Division bargaining unit. The plaintiffs’ reliance on these seniority lists, however, is misplaced. Seniority lists are merely a tool by which an employer and a union can keep track of an employee’s seniority. These lists are not part of the labor agreement, they are not binding on the parties, and they cannot, by themselves, confer seniority upon employees. Moreover, in the event of a conflict between a seniority list and a labor agreement, the language of the labor agreement must control. Thus, this court must adhere to the seniority provisions as they are set out in both the 1981 labor agreement and the Merger Agreement and disregard any portion of those seniority lists which are inconsistent with the terms of those Agreements.

Plaintiffs further point out that, under the 1981 labor agreement, the transfer of clerical employees to or from the Port Arthur Plant had to be “in conformance with the present policy and practice of the Company.” Paragraph W of the labor agreement. As Mr. D.C. Landry, the Manager of Employee Relations at defendant Texaco’s Port Arthur Plant, testified in his June 14, 1985, deposition, however, the company’s policy at that time was to not give an employee credit for seniority purposes for time spent outside of the bargaining unit unless the parties to the labor agreement negotiated and entered into a separate agreement for the crediting of such seniority. Landry Dep. at 35-43. In the matter at hand, the only separate agreement that was entered into by the parties to the labor agreement pertaining to seniority was the Merger Agreement, and as noted above, that Agreement did not give employees credit for time spent outside of the Port Arthur Plant bargaining unit. Rather, it simply provided that former Package Division employees were to begin accruing seniority in the Port Arthur Plant bargaining unit as of January 1, 1981. Plaintiffs’ contention that they were entitled to credit for the time that they had spent in the Port Arthur Package Division is therefore contrary to both the express language of the Merger Agreement and the policy of the company at that time.

In short, no genuine issue as to any material fact has been raised in this case. Contrary to the plaintiffs’ contentions, both the labor agreement and the Merger Agreement are clear as to how the plaintiffs’ Company-Clerical seniority in the Port Arthur Plant bargaining unit was to be calculated. Under those agreements, plaintiffs were to begin accruing Company-Clerical seniority in that bargaining unit only as of January 1, 1981, and were not to be given credit for any time that they had spent at the Port Arthur Package Division.

III.

Having determined that there is no genuine issue as to any material fact in this case, this court must now determine whether the defendants are entitled as a matter of law to summary judgment against plaintiffs’ claims of age discrimination and breach of the duty of fair representation. Addressing the age discrimination claims first, plaintiffs contend that the defendants negotiated the 1982 changes in the seniority system in order to discriminate against them on the basis of their age. To establish a prima facie case of age discrimination, the United States Court of Appeals for the Fifth Circuit has held, “the plaintiff-employee must show that (1) he was a member of the protected group, (2) he was discharged, (3) he was replaced with a person outside the protected group, and (4) he was qualified to do the job.” Price v. Maryland Casualty Co., 561 F.2d 609, 612 (5th Cir.1977). Accord, Carolan v. Central Freight Lines, Inc., 489 F.Supp. 941, 943 (E.D.Tex.1980). Because of the specific facts surrounding a claim of age discrimination where there has been a reduction in the employer’s workforce, the Fifth Circuit modified the test set out in Price in its decision in Williams v. General Motors Corp., 656 F.2d 120 (5th Cir.1981), cert. denied, 455 U.S. 943, 102 S.Ct. 1439, 71 L.Ed.2d 655 (1983). In Williams, the court observed:

[A] plaintiff in this job reduction case could have established a prima facie case by: (1) satisfying the “standing requirements under the statute,” ... i.e., showing that he is within the protected age group and that he has been adversely affected — discharged or demoted — by defendant’s employment decision; (2) showing that he was qualified to assume another position at the time of discharge or demotion; and (3) producing evidence, circumstantial or direct, from which a fact-finder might reasonably conclude that the employer intended to discriminate in reaching the decision at issue.

Id. at 129 (citations and footnotes omitted).

To establish a prima facie case of age discrimination in this case, plaintiffs thus need to satisfy each prong of the three-prong test set out in Williams. While plaintiffs are able to satisfy the first prong of this test, they are unable to satisfy the remaining two prongs of that test. Specifically, neither plaintiff has been able to prove that he or she is qualified to assume another position within the bargaining unit. In fact, plaintiff Ryman admitted in a deposition that he could not perform either the Stenographer or Machine Operator duties. Deposition of W.A. Ryman at 29. Plaintiff Jones testified at her deposition that she had only performed the duties of Stenographer and Machine Operator and had never held the position of Clerk or Senior Clerk. Deposition of Cynthia M. Jones at 5-8, 16. Additionally, even if plaintiffs had possessed the qualification to fill some of the positions which remained after the reduction in force, defendant Texaco could not have placed plaintiffs in those positions without violating the provisions of the collective bargaining agreement between it and defendant Union.

Both the plaintiffs have likewise failed to come forward with any “additional direct, circumstantial, or statistical evidence that age was a factor in [their] termination,” as required under the third prong of the Williams test. See, LaGrant v. Gulf and Western Mfg. Co., 748 F.2d 1087, 1091 (6th Cir.1984). See also, Williams v. General Motors Corp., 656 F.2d at 129. To establish their prima facie case, plaintiffs needed to present evidence which would “lead the factfinder reasonably to conclude either (1) that defendants] consciously refused to consider retaining or relocating a plaintiff because of his [or her] age, or (2) defendants] regarded age as a negative factor in such consideration.” Id. at 130. Plaintiffs failed to present any evidence which would lead this court to believe that the defendants have consciously acted to discriminate against the plaintiffs because of their age. In fact, the evidence shows the converse to be true. Of the twenty-six employees who have been laid off since the 1982 collective bargaining agreement went into effect, only three were members of the protected age group. The seniority system therefore has had a greater impact on younger, rather than older, employees. More importantly, the changes in the seniority provisions which occurred as a result of the 1982 negotiations had absolutely no effect on the plaintiffs’ susceptibility to layoff. Because their Plant-Clerical and Company-Clerical seniority were equal, both plaintiffs would have been laid off regardless of the change in the seniority provisions.

Plaintiffs, in short, have failed their burden to prove a prima facie case of age discrimination. Neither has presented any evidence to show that they were qualified to assume another position with defendant Texaco or that the change in the collective bargaining agreement was negotiated with an intent to discriminate against them on the basis of their age.

IY.

In addition to the age discrimination claims discussed above, plaintiffs also alleged that defendant Union had breached its duty of fair representation by negotiating in bad faith on behalf of plaintiffs and by failing to inform them of the change in the labor agreement prior to the ratification vote in 1982. The United States Supreme Court recognized in Vaca v. Sipes, 386 U.S. 171, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967) that a union violates its duty of fair representation only when its “conduct toward a member of the collective bargaining unit is arbitrary, discriminatory, or in bad faith.” Id. at 190, 87 S.Ct. at 916. Thus, absent a showing on the part of the plaintiffs that defendant Union acted in bad faith or in an arbitrary or discriminatory manner during the 1982 labor negotiations, defendant Union cannot be deemed to have violated its duty of fair representation.

The evidence before this court revealed that, while defendant Union may have acted in a negligent manner, it did not act in bad faith nor were its actions arbitrary or discriminatory. During the 1982 labor negotiations, defendant Texaco proposed several changes in the collective bargaining agreement which were primarily aimed at consolidating crafts and eliminating certain job classifications in order to permit employees to assume a wider variety of responsibilities in their job assignments. Included among these proposed changes was a change in the manner by which employees were to be reduced from Group A to Group B. Although this latter change was included in the attachments to defendant Texaco’s proposal, it was never formally discussed between the parties. The parties instead concentrated on certain other changes which had been regarded by the Union membership as being controversial. These other changes were openly presented to and discussed with the Union membership. Through inadvertence, however, defendant Union overlooked the change regarding reductions and thus failed to formally present that change to its membership.

Plaintiffs have failed to submit any evidence in this case which would suggest that defendant Union’s failure to present this change was the result of any collusion between defendants or the result of an intentional desire on the part of defendant Union to withhold the extent of the changes from its membership. The fact that defendant Union made the Memorandum of Agreement, which contained the contract changes, available to anyone, including plaintiffs, for inspection at its Union hall prior to the ratification vote demonstrates that defendant Union was not intentionally attempting to conceal the change in the reduction procedures from its membership. Thus, at most, the evidence shows that defendant Union was negligent in its responsibilities to plaintiffs as their collective bargaining agent. The mere showing of negligence, poor judgment or ineptitude on the part of the Union, however, is insufficient in itself to establish a breach of the duty of fair representation. See, e.g., Brown v. Trans World Airlines, Inc., 746 F.2d 1354 (8th Cir.1984); Curtis v. United Transportation Union, 700 F.2d 457 (8th Cir.1983). In light of plaintiffs’ failure to show that defendant Union acted in bad faith or in an arbitrary or discriminatory manner, defendant Union is entitled to summary judgment against plaintiffs’ claims for breach of the duty of fair representation. This court accordingly grants defendants’ Motion for Summary Judgment as to those claims.

V.

The court now turns to the issue of whether the plaintiffs’ claims of retaliation should be dismissed. In their Second Amended and Supplemental Complaint, plaintiffs allege that defendant Texaco retaliated against them by failing to transfer them during the period of the layoffs. Plaintiff Jones, in addition, alleges that she has been harassed, that she has not been recalled to fill an alleged vacancy, and that seniority was improperly calculated in retaliation for her having filed this suit against the defendants. Plaintiffs also allege that defendant Union assisted defendant Texaco in its efforts to retaliate against them.

Under the Age Discrimination in Employment Act (ADEA), “[n]o civil action may be commenced by an individual ... until 60 days after a charge alleging unlawful discrimination has been filed with the [Equal Employment Opportunity] commission.” 29 U.S.C. § 626(d)* (1982). The filing of such a charge is a jurisdictional prerequisite to suit under the ADEA. Borumka v. Rocky Mountain Hosp. & Medical Serv., 599 F.Supp. 857, 859 (D.Colo.1984).

While both plaintiffs did file initial charges with the EEOC in 1983, those charges did not encompass the retaliation claims alleged in the amendments to plaintiffs’ complaint. Under the Fifth Circuit’s reasoning in Gupta v. East Texas State Univ., 654 F.2d 411 (5th Cir.1981), this court has jurisdiction to hear plaintiffs’ retaliation claims only if they “[grow] out of an administrative charge that is properly before the court.” Id. at 414. To avoid the requirements of 29 U.S.C. § 626(d), the plaintiffs’ retaliation claims must be “reasonably related to the allegations in [their] EEOC chargefs]”. Borumka v. Rocky Mountain Hosp. & Medical Serv., 599 F.Supp. at 859.

Looking at the specific facts of this case, plaintiffs alleged in their initial EEOC charges that they had been laid off because of their age. In the Second Amended and Supplemental Complaint, plaintiffs allege, in contract, that they had been retaliated against by defendant Texaco’s failure to transfer them during the period of layoffs. Because transfers made at the discretion of defendant Texaco bear no relation to a layoff conducted pursuant to the provisions of the seniority system, the two claims cannot be deemed to be “reasonably related.” Thus, plaintiffs’ allegations regarding Texaco’s failure to transfer them do not “grow out of” their claim of an alleged discriminatory layoff under the terms of a labor agreement.

Similarly, the allegation of harassment and improper calculation of seniority that plaintiff Jones raises in her Second Amended and Supplemental Complaint do not “grow out of” her initial EEOC charge, in which she alleged that she had been placed on a layoff list because of her age. The alleged harassment occurred long before her layoff, and her failure to raise it prior to June 24,1985, means she has waived her right to pursue such claims now. The alleged miscalculation of seniority also occurred long before June 24, 1985, and, in fact, should have been included in the allegations of Plaintiff Jones’ initial EEOC charge.

This court cannot properly entertain a claim under the Age Discrimination in Employment Act unless that Act’s jurisdictional prerequisites have been met. Because of plaintiffs’ failure to file charges with the EEOC which encompasses the retaliation claims discussed above, this court lacks subject matter jurisdiction over those claims. Accordingly, those retaliation claims are hereby dismissed.

With respect to plaintiff Jones’ remaining allegations, she did file a charge of discrimination with the EEOC on July 26, 1985, in which she alleges that defendant Texaco failed to recall her to an alleged job vacancy in retaliation for her having filed her initial charge in 1983. Because the EEOC has not yet had the opportunity to investigate or conciliate this July 26, 1985, charge, plaintiff Jones’ attempt to pursue this claim in this suit is premature. 29 U.S.C. § 626(d) (1982). Accordingly, this court dismisses that claim without prejudice so that the matter may be pursued further on the administrative level.

VI.

For the reasons stated above, defendants’ Motion for Summary Judgment is granted as to plaintiffs' claims of age discrimination and breach of the duty of fair representation and plaintiff Jones’ retaliation claims is dismissed without prejudice.

      . Pursuant to the provisions of the March 24, 1981, Agreement, both plaintiffs brought with them on January 1, 1981, seniority previously accrued in the Port Arthur Plant bargaining unit.

      . Plaintiffs do not dispute the calculation of their Plant-Clerical seniority. The only arguable issue of fact raised by plaintiffs pertains to the calculation of their Company-Clerical seniority in the Port Arthur Plant bargaining unit represented by defendant Union.

      . In 1959, Article IV of the Port Arthur Labor Agreement defined "unit seniority” as "all continuous employment in the future in any of the established clerical classifications." In 1964, Article VI of the Port Arthur Plant Labor Agreement defined “Company-Clerical seniority" as "all clerical employment heretofore previously credited and set forth as ‘unit seniority’ in the seniority records.” In both 1981 and the present labor agreements, the term "Company-Clerical seniority” has been defined in the same manner.

      . This interpretation of the Merger Agreement is consistent with the deposition testimony of Robert E. Collins, who drafted that Agreement and who negotiated the merger with the Port Arthur Package Division. The bargaining history as reflected in the Port Arthur Package Division Minutes also supports this interpretation. Plaintiff Ryman’s affidavit, which presents a different interpretation of the Merger Agreement, does not. raise a material fact issue, because the interpretation raised in that affidavit is based on inadmissible hearsay and is contrary to the express language of the Merger Agreement and the labor agreement.

      . Plaintiffs’ reliance upon information concerning the transfer of two other former Package Division employees — Francis and Sams — as evidence of a Company policy at Port Arthur Plant permitting the crediting of seniority for time worked outside Port Arthur Plant is misplaced. These transfers occurred prior to the execution of the Merger Agreement which governed Plaintiffs’ seniority. Additionally, the Company and the Union agreed separately to the manner in which the seniority of Francis and Sams would be credited.

      . As was noted earlier in this Opinion, plaintiffs began to accumulate both Plant-Clerical and Company-Clerical seniority in the Port Arthur Plant bargaining unit on January 1, 1981. Because plaintiff Ryman was always employed in a Group A position at the Port Arthur Plant, his Plant-Clerical and his Company-Clerical seniority were equal. The same is true for plaintiff Jones, because she had always worked in a Group B position at the Port Arthur Plant. Because their Plant-Clerical and their Company-Clerical seniority were equal, it made no difference to plaintiffs whether reductions were based on Plant-Clerical or Company-Clerical seniority.

      . Because defendant Texaco played no part in the Union’s alleged breach of its duty of fair representation, it could not be held liable for that breach. See, Vaca v. Sipes, 386 U.S. 171, 197 n. 18, 87 S.Ct. 903, 920 n. 18, 17 L.Ed.2d 842 (1967), and thus, the plaintiffs did not name it as a party to that action.


source: Caselaw Access Project

author: SWEET, District Judge.

license: Public Domain

text:
    Patricia VINCENT and David Vincent, Plaintiffs, v. DAVIS-GRABOWSKI, INC., Defendant.
    No. 85 Civ. 3447 (RWS).
    United States District Court, S.D. New York.
    Dec. 17, 1985.
    Kevin Concagh, P.C., New York City, for plaintiffs; by Steven M. Loren, of counsel.
    Helfenstein & Matza, P.C., New York City, for defendant; by Hugh J. Helfenstein, Charles J. Hefter, of counsel.
   OPINION

SWEET, District Judge.

This is a diversity action sounding in products liability and tort. Defendant Davis-Grabowski, Inc. (“Davis”), has moved for an order to dismiss this suit pursuant to Fed.R.Civ.P. 12(b)(2) on the ground that this court lacks personal jurisdiction and alternatively for a transfer to the Southern District of Florida pursuant to 28 U.S.C. § 1404. For the reasons set forth below, both motions are denied.

Plaintiffs, Patricia and David Vincent (the “Vincents”) are domiciliaries of New Jersey. Davis is a Florida corporation. In May, 1984, while residing in New Canaan, Connecticut, Patricia Vincent purchased a device marketed as the “Funride” by Davis. Mrs. Vincent claims that, due to the defective design or negligent manufacture of the Funride device, she sustained serious physical injury in May, 1984.

I. Personal Jurisdiction

As explained in Hoffritz For Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985), certain statements about the law of personal jurisdiction recur so frequently that they have become benchmarks. One such is that a plaintiff bears the burden of demonstrating the existence of federal jurisdiction by a preponderance of the evidence. Beacon Enterprises, Inc. v. Menzies, 715 F.2d 757 (2d Cir.1983). Another is that a plaintiff may defeat a motion to dismiss for lack of personal jurisdiction by making a prima facie showing of facts that support jurisdiction. Marine Midland Bank v. Miller, 664 F.2d 899 (2d Cir.1981). Unless the court grants a hearing to consider the merits of the jurisdictional allegations, doubts about the sufficiency of the pleadings shall be resolved in favor of the plaintiff. Id. at 904.

New York C.P.L.R. § 301 provides for the exercise of jurisdiction over a foreign defendant whose presence in the state is based on a continuous and systematic cause of “doing business” in the state. Thus, a cause of action brought against a foreign corporation need not arise out of a transaction in New York as long as it conducts business in the state “not occasionally or casually, but with a fair measure of permanence and continuity.” Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915 (1917); accord Laufer v. Ostrow, 55 N.Y.2d 305, 449 N.Y.S.2d 456, 434 N.E.2d 692 (1982); Frummer v. Hilton Hotels International, Inc., 19 N.Y.2d 533, 281 N.Y.S.2d 41, 43, 227 N.E.2d 851, 853 (1967). The determination of whether a foreign defendant comes within the ambit of section 301 requires a factual inquiry into the circumstances that allegedly support jurisdiction. I. Oliver Engebretson, Inc. v. Aruba Palm Beach Hotel & Casino, 587 F.Supp. 844, 850 (S.D.N.Y.1984).

The following facts relevant to the issue of personal jurisdiction are presented by the affidavits submitted with this motion. Davis, a corporation organized under the laws of Florida with its principal office and place of business in Miami, holds the patent on a toy called “Funride.” Davis apparently subcontracts the manufacture of the Funride, and serves as distributor or sales corporation. Davis is not certified to do business in New York, nor has it designated New York’s Secretary of State as its agent for service of process. Davis has no assets in the city or state of New York, pays no income or sales taxes to the city or state, and maintains no bank account with the state. Davis presently leases a 1,000 square foot showroom at 200 Fifth Avenue in New York City, and the New York telephone directory reveals a telephone listing under its name at this address. Principals of the corporation attend an annual Toyfair in New York at which time they visit the showroom and oversee the efforts of the local sales representative. New York sales of $175,000 to $350,000 account for approximately 5-10% of Davis’ annual gross sales.

Davis’ chairman of the board Stephen Snyder (“Snyder”) states in conclusory fashion that its New York showroom is “unmanned” and that all New York “[sjales are effected by an independent sales representative.” Davis has not submitted an affidavit from this representative setting forth the nature of his relationship with Davis and with the companies. Mrs. Vincent’s affidavit does not provide any additional information because she is unaware of the representative’s identify.

The New York Court of Appeals’ decision in Laufer, supra, 449 N.Y.S.2d at 458-59, 434 N.E.2d at 694-95, provides a recent standard to determine whether Davis’ presence is sufficient to confer jurisdiction. The Laufer court rejected a foreign corporation’s insistence that as a matter of law it could not be subjected to New York’s process because its business was merely solicitation. Laufer rejected this by holding that a “foreign corporate sales agency of New York accounts” is amenable to New York jurisdiction provided that its solicitation and servicing of New York accounts through sales representatives employed by the company and present in New York are conducted on a systematic and continuous basis. Id., 449 N.Y.S.2d at 459, 434 N.E.2d at 695.

The Laufer court distinguished previous decisions in which it had ruled that a foreign supplier of goods or services that obtains orders in New York through mere solicitation by a local independent sales agency has no business presence in New York regardless of the volume of its subsequent orders. In these earlier cases, the Court of Appeals found that mere solicitation of orders and advertisement of the foreign corporation's product was not sufficient to support jurisdiction. See Delagi v. Volkswagenwerk AG, 29 N.Y.2d 426, 328 N.Y.S.2d 653, 278 N.E.2d 895 (1972) (sales independently negotiated and contracted by local franchise); Miller v. Surf Properties, 4 N.Y.2d 475, 176 N.Y.S.2d 318, 151 N.E.2d 874 (1958) (independent agency using telephone listing in defendant’s name, solicited customers and transmitted reservation requests to defendant for confirmation). The Court of Appeals’ decisions demonstrate that something more than just solicitation is required but that the use of an independent agent does not defeat jurisdiction so long as the local representative is an agent who confirms transactions and effectuates sales in New York. See Delagi, supra, 328 N.Y.S.2d at 657, 278 N.E.2d at 899. See also Gelfand v. Tanner Motor Tours, Ltd., 385 F.2d 116 (2d Cir.1967); Bulova Watch Co., Inc. v. K. Hattori & Co., Inc., 508 F.Supp. 1322, 1333 (E.D.N.Y.1981).

Vincent also cites Frummer, supra, 281 N.Y.S.2d at 43-45, 227 N.E.2d at 853-55, where the Court of Appeals found jurisdiction to lie over a foreign corporation that conducted its business in New York through a surrogate. The activities of the local affiliate included making reservations and providing advertising for the foreign defendant. The Court of Appeals determined the “significant and pivotal” factor to be that the foreign defendant’s New York stand-in “does all the business which Hilton (U.K.) could do were it here by its own officials.” Id., 281 N.Y.S.2d at 44, 227 N.E.2d at 854.

In another related decision, Bryant v. Finnish National Airline, 15 N.Y.2d 426, 260 N.Y.S.2d 625, 208 N.E.2d 439 (1965) a foreign corporate defendant was sued in New York on an unrelated cause of action. The Bryant court held that the totality of the airline’s activity in New York indicated its intent to carry on business with a “considerable measure of continuity, and from a permanent locale.” 260 N.Y.S.2d at 628, 208 N.E.2d at 442. The facts justifying a finding of jurisdiction in Bryant were leased office space, the employment of seven employees, a telephone listing, transmission of airline reservations and confirmations, performance of advertising, information and publicity functions, and maintenance of a bank account from which to pay employees and cover operating expenses. Id., 260 N.Y.S.2d at 626, 208 N.E.2d at 440.

While the occasional visits by Davis’ officers to New York and the shipment of products to New York would in themselves be insufficient to support the conclusion that Davis is doing business here, see Lichtenstein v. Jewelart, Inc., 95 F.R.D. 511, 514 (E.D.N.Y.1982), Davis also has leased showroom space, maintained a telephone listing and used a local representative to sell its wares within this state. These local sales efforts have resulted in a large volume of sales within this state. Significantly, Davis admits that its local representative effects sales within the state. Therefore the transaction of sales within the state rather than mere solicitation places the agency relationship within the scope of the Gelfand decision and distinguishes this case from Miller, supra. Sales in the state under these circumstances constitute doing business on a systematic and continuous basis. Therefore, Davis is properly within the jurisdiction of this court, and the motion to dismiss is denied, with leave granted, of course, to renew upon a further factual submission.

II. Change of Venue

Davis’ alternative motion for dismissal. on the basis of forum non conveniens must be evaluated in accordance with the standards for transfer of venue pursuant to 28 U.S.C. §§ 1404(a), 1406(a). Section 1404(a) permits a district court to transfer any civil action to any other district or division where it might have been brought for the convenience of parties and witnesses and in the interest of justice.

The plaintiffs’ choice of forum must be given substantial weight unless the balance of convenience and the interest of justice weighs heavily in favor of the defendant. Factors Etc. v. Pro Arts, Inc., 579 F.2d 215 (2d Cir.1978), cert. denied, 440 U.S. 908, 99 S.Ct. 1215, 59 L.Ed.2d 455 (1979). Accordingly, the burden is on the defendant to establish that there should be a change of venue. City of New York v. General Motors Corp., 357 F.Supp. 327, 328 (S.D.N.Y.1973), see Ross v. American Airlines, Inc., 83 Civ. 3718 (S.D.N.Y. Oct. 18, 1983) (requiring a “clear-cut showing”); 15 C. Wright, A. Miller and E. Cooper, Federal Practice and Procedure 244 (1976). The relevant factors are: convenience to the parties and witnesses; the relative ease of access to sources of proof; the availability of process to compel the presence of unwilling witnesses; the practical problems indicating that the case can be tried more expeditiously and inexpensively, and the interests of justice. Seven Star Shoe Co., Inc. v. Strictly Goodies, Inc., 83 Civ. 2904 (S.D.N.Y. March 21, 1984). See Van Dusen v. Barrack, 376 U.S. 612, 616, 84 S.Ct. 805, 809, 11 L.Ed.2d 945 (1964); Schneider v. Sears, 265 F.Supp. 257, 263 (S.D.N.Y.1967).

An evaluation of the parties and their prospective witnesses does not provide a clear-cut showing that this case would better be tried in Florida. The Vincents have demonstrated that their proposed witnesses, including themselves, and each of the medical personnel who have treated Mrs. Vincent, are within the subpoena power of the court. On the other hand, Davis has asserted that the transfer of this action to Florida is in the interests of justice since Davis subcontracted manufacture of the Funride to Florida companies beyond the reach of this court. While third-party joinder is an important consideration, Vassallo v. Niedermeyer, 495 F.Supp. 757, 760 (S.D.N.Y.1980), it does not overcome the Vincents’ strong interest in litigating near their residence. The locus of the accident and current residence of the_ plaintiff outweigh the interest of the defendant in transfer of a products liability action to the district of its home office.

For the foregoing reasons, Davis' motions are denied.

IT IS SO ORDERED.


author: MURRAY M. SCHWARTZ, Chief Judge.

text:
    Frederick Lee ALEXANDER, Petitioner, v. INTERNAL REVENUE SERVICE, Respondent.
    Civ. A. No. 85-336 MMS.
    United States District Court, D. Delaware.
    Dec. 18, 1985.

      Frederick Lee Alexander, pro se.
    Richard G. Andrews, Asst. U.S. Atty,, Dept, of Justice, Wilmington, Del., for respondent.
   MURRAY M. SCHWARTZ, Chief Judge.

Petitioner Frederick Lee Alexander seeks to enjoin the Internal Revenue Service (IRS) from enforcing its levy against him or his business, the Galaxie Inn. On June 10, 1985, this Court denied Alexander’s motion for a temporary restraining order and indicated that a hearing on his petition for a preliminary injunction would not be scheduled unless he requested it.

On August 20, 1985, respondent IRS filed a motion to dismiss and an opening brief in support thereof. On September 13, 1985, the Court ordered that petitioner’s answering brief be filed by October 3,1985, and respondent’s reply brief be filed by October 16, 1985.

Petitioner has not filed his answering brief or requested an extension of time to do so. The Court will therefore decide the motion to dismiss on the record before it. For the reasons outlined below, respondent’s motion to dismiss will be granted.

Factual Background

Alexander purchased the Galaxie Inn on January 24, 1985 and is the operator and sol? shareholder of the business. The agreement of sale states that Alexander would assume the outstanding obligations of the business, “excluding any payroll debts, wages, or withholding taxes due.” Galaxie Inn had an outstanding tax liability for unpaid federal employment taxes in the amount of $20,321.16 for the years 1983 and 1984.

The IRS levied against Galaxie Inn’s bank account and its lottery account at the Delaware Trust Company (“bank”). The bank sent to the IRS a check for $10,822.72 in partial satisfaction of the levy, which amount equaled a $5,246.05 balance in the Galaxie Inn account plus a $5,576.67 balance in the Inn's separate lottery account.

Alexander requests the Court to enjoin the IRS from enforcing its levy against Alexander or the Galaxie Inn and to order the return of any monies released by the bank to the respondent. The IRS argues that Alexander’s claim must be dismissed because the Court lacks jurisdiction. It further asserts the claim is barred by the Anti-Injunction Act (26 U.S.C. § 7421); and finally, that the Galaxie Inn remains responsible for its tax obligations as a matter of law notwithstanding any provision in the agreement of sale.

Discussion

Alexander asserts jurisdiction under 26 U.S.C. § 7426. Section 7426 of the Internal Revenue Code permits persons other than taxpayers to maintain a wrongful levy action in the district court. The relevant subsection reads:

If a levy has been made on property or property has been sold pursuant to a levy, and [sic] any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States.

26 U.S.C. § 7426(a)(1) (1982) (emphasis added).

The statute plainly would not allow the Galaxie Inn to maintain this wrongful levy action. The IRS argues that jurisdiction is likewise lacking for Alexander’s claim. The Court agrees.

A corporation is an entity separate and distinct from its shareholders. 1 W. Fletcher Cyclopedia of the Law of Private Corporations § 25, at p. 304 (rev.perm.ed.1983). While Alexander owns Galaxie Inn and is obviously concerned with its losses, he does not have the type of “interest in or lien on” the bank accounts required by the statute. See Schroeder v. United States, 54 A.F.T.R.2d 5239 (D.Minn.1984) (plaintiff as president, director, and 60% shareholder has no “interest” in corporate accounts receivable levied on by IRS); Quinn v. IBS, 84-1 U.S.T.C. ¶9337 (E.D.La.1984) (trustees have no “interest in or lien on” ERISA fund). In addition, the bank accounts were not “wrongfully levied upon,” since the tax liabilities of Galaxie Inn were not affected by the agreement of sale between the previous owner and Alexander. Jurisdiction is lacking under 26 U.S.C. § 7426.

Moreover, Section 7421(a) of the Code states that, with the exception of actions under Section 7426(a)(1) and sections not relevant here, “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.” Alexander’s attempt to enjoin the IRS from enforcing its levy against Galaxie Inn and to secure the return of the levied fund falls squarely within the prohibition.

A judicial exception to this statutory ban applies where, assuming equity jurisdiction otherwise exists, “it is clear that under no circumstances could the Government ultimately prevail.” Enochs v. Williams Packing Co., 370 U.S. 1, 7, 82 S.Ct. 1125, 1129, 8 L.Ed.2d 292 (1962). Because this exception does not apply in the present case, the Court is without jurisdiction and the complaint must be dismissed. See id.

An Order will be entered dismissing the Complaint for want of jurisdiction.

      . The Delaware State Lottery Office has made an administrative claim for wrongful levy of the amounts in the lottery account of Galaxie Inn. Respondent’s Opening Brief at 4. This claim is separate and distinct from petitioner’s claim.

      . The State’s interest in the lottery account forms no part of this litigation.


author: LAFFITTE, District Judge.

text:
    Jorge Luis GONZÁLEZ, etc., Plaintiffs, v. BROWN GROUP, INC. and Brown Shoe Company, Defendants.
    Civ. No. 85-2130 HL.
    United States District Court, D. Puerto Rico.
    Dec. 27, 1985.
    Russell A. del Toro, Roberto Santana Aparicio, Hato Rey, P.R., for plaintiffs.
    McConnell, Valdés, Kelley, Sifre, Griggs & Ruiz Suria, San Juan, P.R., Maggie Correa-Avilés, for defendants.
   OPINION AND ORDER

LAFFITTE, District Judge.

Plaintiffs, Jorge L. González and his wife Lizette López-Cepero de González, brought this action against defendants, Brown Group, Inc. and Brown Shoe Co. (“Brown Shoe”), alleging that Brown Shoe terminated plaintiff Jorge González’ employment without “just cause” in violation of Puerto Rico Act 75, 10 L.P.R.A. § 278 et seq. (“Law 75”), and in a tortious breach of contract. Plaintiffs are citizens of the Commonwealth of Puerto Rico and defendant, Brown Shoe, is a foreign corporation with its' central office and principal place of business in St. Louis, Missouri. This Court has diversity jurisdiction of the controversy under 28 U.S.C. Sect. 1332.

Plaintiffs requested an injunction pendente lite under Section 3-A of Law 75, 10 L.P.R.A. 278b-1. A hearing was held on November 13 and 14, 1985, to determine whether an injunction should issue. At the conclusion of plaintiff’s case defendants presented a motion to dismiss under Fed.R.Civ.P. 41(b). The Court reserved judgment, and proceeded to hear all the evidence. Defendant reasserted its motion to dismiss at the close of its case. Defendants argue that plaintiff has failed to state a claim under Law 75 because he is not a “dealer” within the meaning of the act and, in the alternative, no violation was committed because his employment with Brown Shoe was terminated with “just cause.” Because we find that plaintiff, Jorge González, is not a “dealer” covered by Law 75, we dismiss his claim without considering whether there was “just cause” for termination.

I. FACTUAL BACKGROUND.

In November 1975, plaintiff Jorge González contracted with Brown Shoe to serve as its representative in Puerto Rico and the U.S. Virgin Islands. Plaintiff’s job was to promote the sale of the full line of Brown Shoes. When González started as defendants’ representative in 1975, Brown Shoe’s only client in Puerto Rico was González Padin — a large department store on the island. Though González Padin remained Brown Shoe’s largest client, plaintiff succeeded in soliciting orders from several other retail stores during his term of employment. Based on the figures submitted at the hearing on the rate of shoe sales in Puerto Rico during plaintiff’s ten year employment, it is undisputed that the market for Brown Shoe products increased as a result of plaintiff’s efforts.

At the beginning of plaintiff’s relationship with Brown Shoe he was provided a monthly draw of $1,000 on his sales commission. Plaintiff continued to receive a draw for one year when he chose to go on straight commission. The commission was set at 5% of the value of each shoe order and was paid upon shipment of the shoes to the client, regardless of whether payment for the order was made. Brown Shoe provided plaintiff with medical and dental insurance, life insurance, disability insurance, paid absence time, a pension plan, an employee stock purchase plan, tuition assistance and a matching education grant. The company did not, however, deduct from plaintiff’s pay checks federal or local taxes, social security, workmen’s compensation or unemployment compensation. Plaintiff was also provided with no paid vacation time. He took his vacation whenever he preferred, provided he notified the central Brown Shoe office in St. Louis.

As the exclusive representative of Brown Shoe in Puerto Rico, plaintiff was responsible for maintaining Brown Shoe’s relationship with old clients and for soliciting new clients. To carry out his work he rented office space. He paid for his own phone, mailings and travel to visit his clients, but had no other business expenses. He hired no employees, carried no inventory, rented no warehouse space, and did no advertising.

Brown Shoe supported plaintiff in his efforts to promote their shoes in Puerto Rico by providing him with a sample of each style shoe, company stationery, and advertising upon occasion. Brown Shoe orders could either be made through plaintiff, who would forward them to the central office for approval, or made to the Brown Shoe Co. directly.

Though it was left to plaintiffs discretion to determine which retail stores to solicit for business, final approval of all orders was reserved by the central office. On the face of each order form it stated:

“This order is subject to approval of the Brown Shoe Company, Div. of Brown Group, Inc., through a duly authorized representative in St. Louis and is taken subject to fires, accidents or other causes beyond our control. It is also understood that we will be allowed reasonable time after specified shipping date for completion of order. All terms, agreements, understandings, etc. must be expressed in writing, as no other will be recognized.”

Plaintiff had no authority to set prices or extend credit to Brown Shoe clients. Prices were fixed centrally at the central Brown Shoe office. The credit worthiness of a client or potential client was ultimately determined by the Brown Shoe credit office in St. Louis. Upon occasion Brown Shoe would extend credit to assist certain clients. Plaintiff had no inventory or warehouse and had no involvement with shoe deliveries. All orders were shipped by the central office directly to the client. Payment was made directly to the central St. Louis office.

In early 1983, at their meeting at the Chicago Shoe Show, Mr. Gephardt confronted plaintiff with problems in his work habits. By memo dated February 7, 1983, Mr. Gephardt summarized the issues discussed: Mr. González had failed to maintain sufficient communication with the central office through daily telephone calls or weekly “routers” stating his schedule, he did not visit his clients with sufficient frequency, and he was slow in submitting orders. Between 1983 and plaintiff’s termination in September, 1985, several discussions were had concerning Mr. González’ failure to improve his work habits. Memos were sent confirming these discussions. The issues raised were similar or identical to those raised in February, 1983 — failure to contact the central office, failure to write up marketing plans and slowness in submitting orders.

Tension between the parties peaked in September, 1985, when Mr. Gephardt discovered plaintiff had failed to submit two large orders; one from Shoe Warehouse and the other from González Padin. Brown Shoe was able to comply with the González Padin order by sending the shoes air freight. The Company covered the extra cost of sending the order by air rather than by sea. As for the Shoe Warehouse order, Mr. Gephardt testified that the late notice caused the Company to lose a major portion of the sale.

Upon discovery of González’ failure to submit these orders, Mr. Gephardt sent plaintiff a letter of termination. The reasons cited for his termination were his failure to improve his work habits criticized over the past two years and his failure to submit the Shoe Warehouse and González Padin orders.

II. LAW 75 — WHO IS A “DEALER”?

The issue raised by defendant’s motion to dismiss is whether plaintiff’s activities as a manufacturer’s representative for Brown Shoe make him a “dealer” as defined by Law 75 and bring him within the protection of the Act. Puerto Rico’s Law 75 protects a “dealer” from unilateral termination by a “principal” — the supplier of the products or services. The purpose of this Act was to remedy the abusive practices of suppliers who arbitrarily eliminated distributors after they had invested in the business to build a market for the supplier’s product or service. Warner Lambert v. Tribunal Superior, 1 P.R. Supreme Court Official Translation 527, 101 D.P.R. 378 (1973). The Statement of Motives of Act No. 75 reads:

The Commonwealth of Puerto Rico cannot remain indifferent to the growing number of cases in which domestic and foreign enterprises, without just cause, eliminate their dealers, concessionaries, or agents, or without fully eliminating them, such enterprises gradually reduce and impair the extent of their previously established relationships, as soon as these have created a favorable market and without taking into account their legitimate interests.

Yol. 18, Part 4, Diario de Sesiones 1724.

A “dealer” is defined by Law 75 as:

[a] person actually interested in a dealer’s contract because of his having effectively in his charge in Puerto Rico the distribution, agency, concession or representative of a given merchandise or service.

10 L.P.R.A. sect. 278(a). A “dealer’s contract” is defined as:

[the] relationship established between a dealer and a principal or grantor whereby and irrespectively of the manner in which the parties may call, characterize, or execute such relationship, the former actually and effectively takes charge of the distribution of a merchandise, or if the rendering of a service by concession or franchise, or the market of Puerto Rico.

10 L.P.R.A. sect. 278(b).

By limiting the definition of a “dealer” the Puerto Rico Legislature indicated that it did not intend to extend Law 75 protection to every middle person, between the manufacturer and the consumer, in contact with a product or service. Yet, based on the definition of “dealer,” combined with that of a “dealer’s contract,” it is difficult to discern where the line is drawn between protected and unprotected parties. The activities of a “dealer” defined by Law 75— distribution, agency, concession or representation — do not establish fixed legal relationships. As stated by the definition of a “dealer’s contract,” a principal and a dealer may enter into a contract protected by Law 75 no matter how they characterize or execute their relationship. Hence, for example, a party may be termed an “employee" by the principal but his activities of distribution, representation or concession make him a “dealer” as defined by Law 75. And, vice versa, a party labeled a “sales representative” may not come within the protection of Law 75, if his business activities and employment relationship do not comply with the definition of a “dealer.”

Since the legislative history of Law 75 explains only the purpose of the Act and is of no assistance to assess its coverage, see Franceschini, Inc. v. Riley Co., 591 F.Supp. 414, 416 (D.P.R.1984) (Cerezo, J.), the court must look to the Puerto Rico Supreme Court’s interpretation of the law and to the decisions of this court. Two decisions of the Puerto Rico Supreme Court, in particular, establish guidelines to determine which parties are protected: J. Soler Motors v. Kaiser Jeep Int’l. Corp., 8 P.R. Supreme Court Official Translation 138, 108 D.P.R. 134 (1978), and San Juan Mercantile v. Canadian Transport Co., Ltd., 8 P.R. Supreme Court Official Translation 218, 108 D.P.R. 134 (1978). J. Soler Motors characterized a dealer as an:

independent entrepreneur [whose relationship with the principal] is devoid of hierarchical subordination and [who] has made a substantial investment [in the business].

Id. at 145. San Juan Mercantile states that a Law 75 “dealer” is a party who:

endeavors to create a favorable market and to draw customers to the product or service by promoting and closing sales contracts.

Id. at 220-21.

Though the Puerto Rico Supreme Court has stressed that the creation or expansion of a market as the most important factor to determine whether a party is covered by Law 75, San Juan Mercantile, supra, at 221, it has identified a myriad of other factors which are also essential characteristics of a “dealer.” Id. These factors include publicity, market coordination, merchandise deliveries, collections, maintaining inventory, and promotion and closing of sales contracts. Id. at 221. See also, American Representatives, Inc. v. Gulf Export Co., Inc., Civ. No. 78-2136, (Decision March 31, 1981) (Pérez-Giménez, J.).

In Franceschini, Inc. v. Riley Co., supra, this court was presented with the question whether the creation of a market, albeit small, is enough to grant a business promoter the status of an Act 75 dealer, without evidence of the other factors characterizing a dealership. The court found that creation of a market alone was not enough to be a “dealer” within the meaning of the Act. It held that market creation must be balanced equally with the authority to close sales when determining whether a party is protected by Law 75. As the Court explained, if market creation were given unbalanced weight then individuals such as promoters, brokers, advertising agents and others removed from the distribution process could claim Law 75 protection, even though such expansive coverage was not the intent of the Puerto Rico Legislature.

We agree with Franceschini that a dealer cannot be defined by the activity of promoting merchandise and creating a market alone. However, we suggest that the second factor to be weighed equally with market creation is whether the party assumed a financial risk and took responsibility for the business. This factor is consistent with the characterization of a “dealer” in J. Soler Motors as an “independent entrepreneur,” who has “invested substantially” in the business.

Whether the party had authority to close sales contracts is just one consideration to assess whether a risk was assumed and responsibility for the business taken. Other considerations include those factors identified by the Puerto Rico Supreme Court in San Juan Mercantile and others identified by this court in prior Law 75 decisions: the extent of investment in real estate for office space, warehouse, equipment, advertising and labor; the extent of authority to negotiate prices, to extend credit and to control the distribution and delivery of the product. See, Franceschini, supra; Sudouest Import Sales Corp. v. Union Carbide Corp., 569 F.Supp. 1547 (D.P.R.1983) (Pieras, J.); Cruz Ramos v. Brother Intemat. Corp., 445 F.Supp. 983 (D.P.R.1978) (Torruella, J.).

In the case of a commissioned sales person both this Court and the local courts have held that there is no Law 75 coverage. Franceschini v. Riley Co., supra; Sudouest Import Sales Corp. v. Union Carbide Corp.; Cruz Ramos v. Brother International Corp., supra; Frank Munarriz v. Captain Sylvain Ledee, Inc., Superior Court Civ. 67-5799 (904) (Cumpiano, J.). In each of these cases no protection was extended because the plaintiff had assumed little or no financial risk and had taken no other business responsibilities associated with a Law 75 dealer.

In Franceschini plaintiff was the exclusive representative in Puerto Rico for defendant’s “panalarm” products. Plaintiff’s activities included visiting clients to inform them of defendant’s products and advertising the product in a local trade publication. To assist in the promotion of the product,. plaintiff hired employees with a technical background and sent them to the United States for training about the product’s technical features. Plaintiff was paid a commission on each purchase order received and approved by defendant. All orders taken by plaintiff were subject to defendant’s approval. Defendant alone was authorized to set prices. Defendant did all the billing, shipping, delivery and servicing of the products. The evidence showed that defendant gave plaintiff the names of some clients to contact, but, others were solicited through plaintiff’s own efforts.

Although plaintiff expanded defendant’s market in Puerto Rico somewhat and invested in the business by hiring employees and advertising the product, the court held this was insufficient to bring' plaintiff under the protection of Law 75. Plaintiff did not have the authority to approve or reject orders — in other words, to close sales. It had no inventory or warehouse. It had no authority to fix prices or terms of sale. And, it did no billing and had no involvement in the delivery of the orders. Based on this evidence of the parties’ relationship, the court found plaintiff “assumed neither the risks nor the responsibilities that go with an Act 75 dealership.” Franceschini, supra, at 420.

In Frank Munarriz the Superior Court of Puerto Rico was presented with a similar situation. Plaintiff was the exclusive representative of defendant’s products in Puerto Rico. He rented his own office from which he carried out his work. Plaintiff solicited orders from contractors and submitted them to defendant for approval. Defendant was in charge of all shipment and delivery of the merchandise. Plaintiff was paid a 10% commission on all final sales. Evidence in the case showed that the major portion of defendant’s sales in Puerto Rico were due to plaintiff’s efforts. The Superior Court characterized plaintiff as a commissioned salesperson and held that he was not protected by Law 75.

We find that plaintiff González’ relationship to the Brown Shoe Co. is similar to that of a commissioned salesperson and that his activities as a Brown Shoe representative in Puerto Rico do not bring him within the protection of Law 75. Though plaintiff expanded the market for Brown Shoe, as is the job of a commissioned salesperson, this factor is outweighed by the fact that plaintiff assumed little financial risk or business responsibility. Plaintiff made no real investment in the business of distributing Brown Shoes. Brown Shoe assisted plaintiff in the promotion of their product by providing him with shoe samples, stationary and some advertising at their expense. Plaintiff’s only expenses were office rental, his phone bill and travel. He hired no employees, had no major equipment, had no inventory or warehouse.

Though plaintiff had the discretion to choose which retail shoe stores in the Puerto Rico market to solicit for business, he had no further responsibility for the business once orders were submitted to the central Brown Shoe office. Plaintiff had no authority to negotiate the price of shoes or other sales terms set by Brown Shoe. He had no authority to give final approval or rejection of the orders. All submitted orders were subject to a credit check and approval by the central office. Plaintiff had no involvement with shipment or delivery of the merchandise. Brown Shoe delivered the shoes directly to the client.

Because plaintiff González is not a dealer within the confines of Law 75, his first cause of action predicated thereunder fails to state a claim upon which relief can be granted and is hereby dismissed.

Plaintiff asserted a second cause of action for tortious breach of contract. None of the parties addressed this aspect of the case. All efforts were concentrated and focused on the Law 75 issue. Regarding the tortious breach of contract allegations, plaintiffs scant assertions are encompassed in two paragraphs containing conclusory allegations to the effect that defendant’s unilateral termination of the agreement was carried out in bad faith and was a tortious breach thereof; that said breach hindered plaintiff González in marketing defendant’s products in Puerto Rico. Even though plaintiff incorporated by reference the allegations set forth in the first cause of action, no description of the agreement appears in the complaint other than the allegation that defendants retained plaintiff González ten years ago to act as their independent factory sales representative for the territory of Puerto Rico and the Caribbean.

It is well settled that even if a party does not make a formal motion, the court on its own initiative may note the inadequacy of the complaint and dismiss it for failure to state a claim. Martin-Trigona v. Stewart, 691 F.2d 856 (8th Cir.1982); Dodd v. Spokane County, Washington, 393 F.2d 330 (9th Cir.1968). Hence, plaintiff’s second cause of action shall be likewise dismissed but with leave to amend.

WHEREFORE, plaintiff’s claim under Law 75 is hereby ordered DISMISSED, and there being no just reason for delay, the Clerk is directed to enter partial judgment dismissing plaintiff’s first cause of action with prejudice; and it is further

ORDERED, that plaintiff’s second cause of action is hereby DISMISSED without prejudice. Plaintiffs are granted twenty days to file an amended complaint as to the second cause of action.

IT IS SO ORDERED.

      . Section 3-A, 10 L.P.R.A. Sect. 278b-l provides: "In any litigation in which there is directly or indirectly involved the termination of a dealer’s contract or any act in prejudice of the relation established between the principal or grantor and the dealer, the Court may grant, during the time the litigation is pending solution, any provisional remedy or measure of an interdictory nature to do or to desist from doing, ordering any of the parties, or both, to continue, in all its terms, the relation established by the dealer’s contract, and/or to abstain from performing any act or any omission in prejudice thereof. In any case in which the provisional remedy herein provided is requested, the Court shall consider the interests of all parties concerned and the purposes of the public policy contained in this chapter."

      . Brown Shoe lines include: "Naturalizers,” "Life Stride" and "Buster Brown” among others. Plaintiff’s job differed from the job of Brown Shoe sales representative in the Continental United States who were allowed to represent only one line of shoes. This, however, appears to be the only major distinction between plaintiffs job and that of other sales representatives.

      . The retail stores added to the list of Brown Shoe clientele include: Novus, Pimpolin, Big & Beautiful, A. Barreto Shoe Store, Pequeñin, Emerald Corp., Shoe Warehouse, and Seedman’s. The evidence is controverted as to who made the initial contact and solicited orders from each of the new clients. It appears that certain retailers contacted Brown Shoe directly, while other clients González obtained through his efforts alone.

      . The evidence reflects and the Court finds that it was Brown Shoe’s policy to absorb the loss for an unpaid order. Plaintiff attempted to controvert this issue by testifying that on only one occasion he could remember was he held liable for an order out of hundreds of orders submitted. This testimony is insufficient to contradict the weight of evidence indicating the Brown Shoe policy.

      . Mr. Gephardt testified that an additional reason for terminating González was that he was representing “Sebago", another shoe line. This reason, however, was not stated in the letter of termination.

      . In their post-hearing brief plaintiffs suggested we certify this issue under Rule 53.1(c), 32 L.P.R.A. App. II, R. 53.1, to be decided by the Puerto Rico Supreme Court. We find that there is adequate precedent for this issue in the decisions of the Supreme Court of Puerto Rico and that the issue is not appropriate for certification. This Court has proper jurisdiction and authority to decide defendant’s motion.

      . Section 2, 10 L.P.R.A. sect. 278a states:
      "Notwithstanding the existence in a dealer’s contract of a clause reserving to the parties the unilateral right to terminate the existing relationship, no principal or grantor may directly or indirectly perform any act detrimental to the established relationship or refuse to renew said contract on its normal expiration, except for just cause.”

      . In J. Soler Motors v. Kaiser Jeep Int’l. Corp., 8 P.R. Supreme Court Official Translation 38, 108 D.P.R. 134 (1978), the Puerto Rico Supreme Court identified various stages in the transfer of goods from manufacturer to consumer. Whether the "middle” person at each of those stages is covered by Law 75 depends on. whether his activities and his relationship to the principal meet the characteristics of a "dealer” as defined by the Supreme Court of Puerto Rico.

      . See also, Cordova v. Simonpietri Insur. Agency, 12 P.R. Supreme Court Official Translation 1003, 112 D.P.R. 797 (1982), where the Court stressed that a dealer is characterized by his activities of creating a market and closing sales contract.