author: MaeMAHON, District Judge.

text:
    Eugene McMAHON and Julia McMahon, individually and as Trustees of The David J. Hodder & Son, Inc. Employee Pension Plan; The David J. Hodder & Son, Inc. Profit Sharing Plan; The Laurie Funeral Home, Inc. Employee Pension Plan; The Laurie Funeral Home Profit Sharing Plan, Plaintiffs, v. SHEARSON/AMERICAN EXPRESS, INC. and Mary Ann McNulty, Defendants.
    84 Civ. 3331 (LFM).
    United States District Court, S.D. New York.
    Sept. 25, 1985.

      Cohn & Blau by Frederick H. Cohn, New York City, for plaintiffs.
    Theodore A. Kresbach and Harry D. Frisch, Shearson Lehman Brothers, Inc., New York City, for defendants.
   OPINION

MaeMAHON, District Judge.

Defendants move, pursuant to 9 U.S.C. § 3 (1970), for an order staying this action pending arbitration, or, in the alternative, pursuant to Rules 12(b)(6), 12(f) and 9(b), Fed.R.Civ.P., for an order dismissing plaintiffs’ amended complaint for failure to state a claim upon which relief can be granted.

FACTS

This is an action brought by plaintiffs, Eugene and Julia A. McMahon, individually and as trustees of the David J. Hodder & Son, Inc. Employee Pension Plan; the David J. Hodder & Son, Inc. Profit Sharing Plan; the Laurie Funeral Home, Inc. Employee Pension Plan; and the Laurie Funeral Home, Inc. Profit Sharing Plan (“the trusts”), against Shearson/American Express, Inc. (“Shearson”), a brokerage firm, and Mary Ann McNulty (“McNulty”), a registered representative who was responsible for plaintiffs’ accounts at Shearson.

On June 15, 1982, in connection with the opening of her joint account at Shearson, Julia McMahon entered into a customer’s agreement which contained the following arbitration provision:

“Unless unenforceable due to federal or state law, any controversy arising out of or relating to my accounts, to transactions with you for me or to this agreement or the breach thereof, shall be settled by arbitration in accordance with the rules, then in effect, of the National Association of Securities Dealers, Inc. or the Boards of Directors of the New York Stock Exchange, Inc. and/or the American Stock Exchange, Inc. as I may elect. * * * Judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction thereof (emphasis added)."

On October 26, 1984, plaintiffs filed an amended complaint, alleging, in essence, that McNulty, with the knowledge and consent of Shearson, (1) engaged in “churning” or the fraudulent and wilful practice of trading extensively solely to maximize commissions, (2) intentionally and recklessly violated Section 10(b) of the Securities Exchange Act of 1934 (“the 1934 Act”) and Rule 10b-5 promulgated thereunder, by making false statements and omitting material facts from the advice given plaintiffs, and (3) violated the Racketeer Influenced and Corrupt Organization Act of 1974 (“RICO”).

Defendants move for an order compelling plaintiffs to arbitrate their state law claims, as well as their claims under Section 10(b) of the 1934 Act and RICO. Alternatively, defendants move to dismiss the amended complaint on the following grounds: (1) failure to comply with the pleading requirements of Rule 9(b), Fed.R. Civ.P.; (2) lack of subject matter and pendent jurisdiction; (3) absence of an implied private cause of action for alleged violation of the rules of the New York Stock Exchange, Inc. and the National Association of Securities Dealers, Inc.; (4) failure to state a claim under RICO; and (5) unavailability of punitive damages.

DISCUSSION

The United States Arbitration Act, “reversing centuries of judicial hostility to arbitration agreements, was designed to allow parties to avoid ‘the costliness and delays of litigation,’ and to place arbitration agreements ‘upon the same footing as other contracts____”’ Accordingly, the Act provides:

“A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy arising out of such contract or transactions ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”

The customer’s agreement, entered into between Shearson and McMahon, contains McMahon’s agreement to arbitrate “any controversy arising out of or relating to” her securities at Shearson or to any “transactions” with Shearson for her. Defendants have therefore petitioned this court for an order compelling arbitration of this action.

To prevail on a motion to compel arbitration, a party needs only to establish (1) the existence of an agreement to arbitrate, (2) arbitrable claims, and (3) no waiver of the right to arbitrate. Plaintiffs contend that the arbitration provision in the customer’s agreement is not enforceable because (1) the customer’s agreement is a contract of adhesion, (2) fraud is not an arbitrable issue, and (3) defendants have waived their right to arbitrate.

We find that plaintiffs’ arguments are wholly unconvincing. First, it is well settled that one who signs a contract, in the absence of fraud or misconduct by another contracting party, is conclusively presumed to know its contents and to assent to them. Julia McMahon signed the customer’s agreement and has not demonstrated that it was entered into under fraud or duress. Arbitration clauses are routinely upheld by the courts, and, given plaintiffs’ sizeable investment, there is nothing to indicate that they were without bargaining power. Moreover, in Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 402-04, 87 S.Ct. 1801, 1805-06, 18 L.Ed.2d 1270 (1967), the Supreme Court held that “a broad arbitration clause will be held to encompass arbitration of the claim that the contract itself was induced by fraud.” Therefore, even if we were to assume that the customer’s agreement was fraudulently induced, the breadth of the arbitration provision would mandate that the issue of fraud in the inducement also be referred to arbitration.

Second, plaintiffs argue that their allegations of common law fraud are not arbitrable because the arbitration provision does not contemplate an action in tort. This argument is without merit. The substance of plaintiffs’ amended complaint, that defendants excessively “churned” their securities accounts and fraudulently represented the status of the accounts, is clearly within the scope of the arbitration clause as it arose from and relates to plaintiffs’ accounts at Shearson. Moreover, in Dean Witter Reynolds Inc. v. Byrd, — U.S. -, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985), the Supreme Court recently held that a district court is required to compel arbitration of state law fraud claims where the parties entered into an arbitration agreement similar to the one presented here.

Finally, plaintiffs contend that defendants waived their right to arbitrate this action when they commenced a state court action against plaintiffs. We find that, since the prior state court proceeding involves issues only tangentially related to those at stake here, that proceeding has no bearing on this action and certainly no effect on plaintiffs’ agreement to arbitrate. We therefore conclude that the federal Arbitration Act mandates that we compel arbitration of all arbitrable claims arising out of plaintiffs’ accounts or related transactions at Shearson.

The remaining question for us is which of plaintiffs’ claims are “arbitrable.” The state law fraud claims are clearly arbitrable under the Supreme Court’s decision in Byrd. The RICO claim is not arbitrable because of the important federal policies inherent in the enforcement of RICO by the federal courts. Claims based on violations of the federal securities laws have been considered to be non-arbitrable based on the doctrine enunciated in Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953). The validity of the Wilko doctrine, as applied to cases involving transactions outside the protection of the Securities Act of 1933 (“the 1933 Act”), however, is clearly suspect. The arbitrability of plaintiffs’ Section 10(b) claims under the 1934 Act, therefore, merits some discussion.

In Wilko, the Supreme Court held that an agreement to arbitrate claims that arise under Section 12(2) of the 1933 Act was not enforceable. The Court relied on three interconnected statutory provisions: (1) Section 14 of the 1933 Act which voids any “stipulation ... binding any person acquiring any security to waive compliance with any provision” of the 1933 Act; (2) Section 12(2) which creates “a special right to recover for misrepresentation which differs substantially from the common law action;” and (3) Section 22 which allows suits in any state or federal court of competent jurisdiction and provides for nationwide service. The Court concluded that an agreement to arbitrate was a stipulation waiving the right to seek a judicial remedy and therefore was void.

Several lower federal courts have assumed that Wilko applies to 1934 Act claims and have grouped claims under Section 12(2) of the 1933 Act, as well as claims under Section 10(b) of the 1934 Act, under the umbrella of non-arbitrable claims.

The Supreme Court, however, first expressed reservations about the propriety of applying Wilko to claims arising under the 1934 Act in Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974). These reservations were recently reiterated in Byrd, supra, where the Court again “questioned the applicability of Wilko to a claim arising under Section 10(b) of the 1934 Act or under Rule 10b-5 because the provisions of the 1933 and 1934 Acts differ and because, unlike Section 12(2) of the 1933 Act, Section 10(b) of the 1934 Act does not give rise to a private cause of action.” The Byrd court declined to resolve the applicability of Wilko to Section 10(b) claims because the question was not properly before the Court. Justice White, however, in his concurring opinion, stated that “Wilko’s reasoning cannot be mechanically transplanted to the 1934 Act” and cast substantial doubt on the contrary holdings of lower federal courts. He emphasized the salient distinctions between Sections 12(2) and 10(b):

“While § 29 of that Act, 15 U.S.C. § 78cc(a), is equivalent to § 14 of the 1933 Act, counterparts of the other two provisions are imperfect or absent altogether. Jurisdiction under the 1934 Act is narrower, being restricted to the federal courts. 15 U.S.C. § 78aa. More important, the cause of action under § 10(b) and Rule 10b-5, involved here, is implied rather than express. See Herman & MacLean v. Huddleston, 459 U.S. 375, 380, and nn. 9-10, 103 S.Ct. 683, 686-87, and nn. 9-10, 74 L.Ed.2d 548 (1983). The phrase ‘waive compliance with any provision of this chapter,’ 15 U.S.C. § 78cc(a) (emphasis added), is thus literally inapplicable. Moreover, Wilko’s solicitude for the federal cause of action— the ‘special right’ established by Congress, 346 U.S., at 431, 74 S.Ct., at 184— is not necessarily appropriate where the cause of action is judicially implied and not so different from the common law action.”

The only time the Supreme Court was faced with the issue of whether Wilko applied to Section 10(b) claims, albeit in the context of an international contract, the Court held that the claims were subject to the parties’ agreement to arbitrate. The Court noted that “a colorable argument could be made that even the semantic reasoning of the Wilko opinion does not control the case before us,” as “[tjhere is no statutory counterpart of § 12(2) in the [1934 Act], and neither § 10(b) ... nor Rule 10b-5 speaks of a private remedy____” Similarly, we entertain grave doubts about the legal correctness of overriding the parties’ express agreement concerning arbitration of all controversies in the name of protecting federal jurisdiction over implied rights of action.

Based on Justice White’s concurring opinion in Byrd, the reservations by the Supreme Court in Scherk v. Alberto-Culver Co., supra, and the strong national policy favoring the enforcement of arbitration agreements articulated in Moses H. Cone Memorial Hospital v. Mercury Const. Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), several district courts have held that the Wilko doctrine does not extend to Section 10(b) claims.

Although there exists precedent in this circuit holding that Section 10(b) claims are not arbitrable, there is doubt that these decisions retain viability in light of the Supreme Court’s ruling in Byrd. In Allegaert v. Perot, 548 F.2d 432 (2d Cir.1977), the trustees of a bankrupt securities brokerage firm sued four individuals, several corporate members of the New York Stock Exchange and the Exchange itself, alleging violations of the Bankruptcy Act, the 1934 Act and various state corporate laws. In deciding whether to compel arbitration of the alleged violations of the anti-fraud provisions of the securities laws, the court examined “the public interest in the dispute, the degree to which the nature of the evidence made the judicial forum preferable to arbitration, and the extent to which the agreement was a product of free choice.” Pointing out that the case was “a claim of wholesale fraud” brought on behalf of hundreds of creditors, the court determined that the claim was imbued with strong public interest and protective public policy considerations which were inappropriate for enforcement by arbitration.

We are not presented here with claims involving fraud, nor industry-wide practices which may tend to ensnare an unsuspecting public. Plaintiffs’ claim is simply that a single securities representative “churned” their accounts and made certain misrepresentations concerning the status of those accounts. Such a dispute over the management of an account neither raises broad issues of policy nor involves widespread industry practices and, .therefore, touches none of the concerns at stake in Allegaert which mandate a judicial forum.

We note the. distinction between the 1933 Act and the 1934 Act, as well as the strong national policy favoring arbitration, and thereby accept Byrd’s invitation to compel the parties’ compliance with their express contractual obligations concerning arbitration. We consequently hold that the Wilko doctrine should not be extended to plaintiffs’ Section 10(b) claims. We do not find that all Section 10(b) claims, no matter what their factual underpinnings, are arbitrable, but only that this particular claim relating to the management of a securities account is appropriate for resolution by arbitration. The non-arbitrable RICO claim shall be stayed pending arbitration of the common law and securities fraud claims. This stay is appropriate where the arbitrable claims “permeate” the case, and the validity of the RICO claim is uncertain at this early stage of the litigation.

Accordingly, defendants’ motions are granted to the extent that this court orders arbitration of all of plaintiffs’ claims, except their claim brought under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c) (1982), the litigation of which is temporarily stayed pending arbitration. This action is "placed on the suspense docket pending the outcome of arbitration.

So ordered.

      . Customer’s Agreement ¶ 13.

      . 15 U.S.C. § 78j(b) (1981).

      . 18 U.S.C. § 1962(c) (1982).

      . 9 U.S.C. §§ 1 et seq. (1970).

      . Scherk v. Alberto-Culver Co., 417 U.S. 506, 510-511, 94 S.Ct. 2449, 2452-53, 41 L.Ed.2d 270 (1974), citing H.R.Rep. No. 96, 68th Cong., 1st Sess., 1, 2 (1924).

      . 9 U.S.C. § 3 (1970).

      . Bigge Crane & Rigging Co. v. Docutel Corp., 371 F.Supp. 240 (E.D.N.Y.1973).

      . Fustok v. Conticommodity Services, Inc., 577 F.Supp. 852, 856 (S.D.N.Y.1984).

      . 9 U.S.C. § 3 (1970).

      . Dean Witter Reynolds Inc. v. Byrd, — U.S. -, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985).

      . See S.A Mineracao da Trindade-Samitri v. Utah Int'l, 576 F.Supp. 566, 574-76 (S.D.N.Y.1983).

      . 15 U.S.C. § 77/(2) (1981).

      . Wilko v. Swan, 346 U.S. 427, 431, 434-35, 74 S.Ct. 182, 184, 186, 98 L.Ed. 168 (1953); 15 U.S.C. §§ 77n, 77/(2), 77v (1981). See also Dean Witter Reynolds Inc. v. Byrd, supra (White, J., concurring).

      . Wilko v. Swan, supra, 346 U.S. at 434-35, 74 S.Ct. at 186.

      . See, e.g,, DeLancie v. Birr, Willson & Co., 648 F.2d 1255, 1258-59 (9th Cir.1981); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Moore, 590 F.2d 823, 827-29 (10th Cir.1978); Allegaert v. Perot, 548 F.2d 432 (2d Cir.1977).

      . Dean Witter Reynolds Inc. v. Byrd, supra, — U.S. - at -, 105 S.Ct. at 1240 n. 1.

      . Dean Witter Reynolds Inc. v. Byrd, supra (White, J., concurring), — U.S. -, 105 S.Ct. at 1243.

      . Id., — U.S. at -, 105 S.Ct. at 1244.

      . Scherk v. Alberto-Culver Co., supra.

      . Id., 417 U.S. at 513, 94 S.Ct. at 2454.

      . See Raiford v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 83-685A, — F.Supp. - (N.D.Ga. May 16, 1985); Gregory v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 84-1647 (M.D.Fla. March 9, 1985); Greenstein v. First Biscayne Corp., No. 82-0584 (S.D.Fla. May 16, 1985); Mann v. Foster & Marshall, No. C84925D (W.D.Wash. May 24, 1985).

      . See, e.g., Allegaert v. Perot, supra.

      . 11 U.S.C. §§ 701 et seq. (1979).

      . Allegaert v. Petot, supra, 548 F.2d at 436.

      . Id., 548 F.2d at 436-38.

      . See Greater Continental Corp. v. Schechter, 422 F.2d 1100, 1103 (2d Cir.1970).

      . Finn v. Davis, 610 F.Supp. 1079 (S.D.Fla.1985); Wells v. Oppenheimer & Co., 106 F.R.D. 258 (S.D.N.Y.1985).

      . Finn v. Davis, supra.

      . See S.A. Mineracao da Trindade-Samitri v. Utah Int'l, supra, 566 F.Supp. at 576.


source: Caselaw Access Project

author: ENSLEN, District Judge.

license: Public Domain

text:
    David L. BRADFORD, Plaintiff, v. GENERAL TELEPHONE COMPANY OF MICHIGAN, a Michigan corporation, I.B.E.W., Local 1106, Jeanette Riley, Sue Schmidtendorf, Karen Jones, John E. Russell, and J.J. Birchmeier, individually and in their official capacities.
    No. K 83-383.
    United States District Court, W.D. Michigan, S.D.
    Sept. 26, 1985.

      Kenneth Kobayashi, Kalamazoo, Mich., for plaintiff.
    Michael McCasey, Grand Rapids, Mich., for Gen. Telephone Co., Riley, Schmidtendorf, Jones, Russell & Birchmeier.
    Roger McClow, Southfield, Mich., for IBEW.
   OPINION

ENSLEN, District Judge.

This case is a hybrid § 301/unfair representation action that also encompasses claims of sex-based discrimination under Title VII and various state law claims. Plaintiff was an employee of Defendant General Telephone Company of Michigan (“Defendant Company”) from 1969 until his discharge on August 23, 1982, for alleged sexual harassment and physical abuse of some of the Company’s female employees. Upon his discharge, Plaintiff filed a grievance through his local union, I.B.E.W. Local 1106 (“Defendant Local”), alleging that Defendant Company had failed to satisfy the “just cause” standard for dismissal contained in the collective bargaining agreement (“CBA”) it had with Defendant Local. The Company denied Plaintiff’s grievance in December of 1982. Defendant Local then filed a timely demand for arbitration on January 7, 1983. Defendant’s Motion for Summary Judgment, Exhibit J.

On or about January 24,1983, Defendant Local received a notice from Plaintiff stating that he did not wish to proceed with the arbitration. Defendant Local subsequently, on or about January 26, 1983, notified Defendant Company that it was withdrawing Plaintiff’s grievance from arbitration. Defendant Company then closed its file on the case and rejected Plaintiff and Defendant Local’s requests to reopen the arbitration proceedings. Plaintiff alleges Defendant Local’s withdrawal of his grievance breached an agreement between Plaintiff, Plaintiff’s attorney, and Defendant Local that the Local would not withdraw from arbitration absent permission from Plaintiff's attorney. Plaintiff filed suit in this Court on August 2, 1983, raising a hybrid § 301/unfair representation claim against the company and the local, see 29 U.S.C. § 185(a) (1982), a Title VII claim of sex-based discrimination against the company, 42 U.S.C. § 2000e-2 (1982), and a variety of state law claims against the company and five of its employees. On June 22, 1984, the Court dismissed Plaintiff’s unfair representation claim against Defendant Local as being barred by the statute of limitations. Judgment Order of June 22, 1984.

Two motions currently are pending before the Court: (1) Defendants’ Motion to Dismiss, and (2) Defendant Company’s Motion for Summary Judgment on Plaintiff’s Title VII claim. I will first consider Defendant Company’s Motion for Summary Judgment, and then will discuss the issues Defendants raise in their motion to dismiss.

Defendant Company’s Motion for Summary Judgment

Plaintiff alleges in Count II of his complaint that his discharge:

[W]as also the result of the arbitrary, capricious, discriminatory, calculated, willful, wanton, malicious and/or wrongful efforts of Defendant Company to remove a male employee in violation of Title VII of the Civil Rights Act of 1964; that in support of this allegation Plaintiff cites instances where many other female employees would bump into other female employees or male employees and no such investigation or discharge occurred to them.

Complaint, ¶ 51. On February 12, 1985, Defendant Company filed a Motion for Summary Judgment on Plaintiff’s Title VII claim. It argued that Plaintiff has failed to establish a prima facie case of sexual discrimination or to introduce any evidence that the Company discharged him “for a sexually discriminatory motive.” Plaintiff did not respond to Defendant Company’s motion.

The standard in this Circuit for granting summary judgment is well known. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Watkins v. Northwestern Ohio Tractor Pullers Association, 630 F.2d 1155, 1158 (6th Cir.1980); Province v. Cleveland Press Publishing Co., 605 F.Supp. 945, 955-56 (N.D.Ohio 1985); See Federal Rules of Civil Procedure (“FRCP”) 56(c). I therefor will mention only two aspects of the standard that are of particular importance to this case. First, although Plaintiff has failed to respond to Defendant Company’s motion as required by Rule 56(e), FRCP 56(e), at his peril, Shavmoch v. Clark Oil and Refining Corp., 726 F.2d 291, 293 (6th Cir.1984); Curtis v. International Brotherhood of Teamsters, 716 F.2d 360, 361 (6th Cir.1983), the Court still must search the entire record to determine whether there are any “genuine issue[s] as to any material fact[s]” requiring trial. Smith v. Hudson, 600 F.2d 60, 64-65 (6th Cir.), cert. dismissed, 444 U.S. 986, 100 S.Ct. 495, 62 L.Ed.2d 415 (1979); United States v. Crooksville Coal Co., 560 F.Supp. 141, 142 (S.D.Ohio 1982); FRCP 56(c) (judgment shall be rendered only “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that” the moving party satisfies the standard). Second, the Sixth Circuit has cautioned that summary judgment “must be used only with extreme caution for it operates to deny a litigant his day in court”. Smith, 600 F.2d at 63; see also Bender v. Southland Corp., 749 F.2d 1205, 1210 (6th Cir.1984) (“the party seeking summary judgment must conclusively show that there exists no genuine issue of material fact and that the movant is entitled to judgment as a matter of law”) (emphasis in original). It also has noted that grants of summary judgment generally are inappropriate in discrimination cases because “questions of intent or motive [that] are particularly ill-suited for [such] disposition” often are involved. Leonard v. City of Frankfort Electric and Water Plant Board, 752 F.2d 189, 194 (6th Cir.1985) (section 1981 claim); see also Jones v. Western Geophysical Co., 669 F.2d 280, 283 (5th Cir.1982) (summary disposition is not favored in Title VII cases).

With these standards in mind, I have carefully searched the record in this case and find that there exist genuine issues as to material facts regarding Plaintiff’s claim of discriminatory treatment, particularly with regard to Defendant’s alleged legitimate, non-discriminatory rationale for Plaintiff’s discharge. A grant of summary judgment therefore would be inappropriate at this time. Smith, 600 F.2d at 63-66. Defendant Company’s motion will be denied.

Defendant’s Motion to Dismiss

Defendants have raised eight grounds for dismissing some or all of Plaintiff’s claims: (1) that Plaintiff’s claims for Defendants’ alleged breach of the CBA are barred by the statute of limitations; (2) that Plaintiff’s Title VII claim is barred by his failure to have received a right to sue notice from the Equal Employment Opportunity Commission (“EEOC”) prior to filing suit; (3) that the Court should decline to exercise pendent jurisdiction over Plaintiff’s state law claims; (4) that the Court should dismiss Plaintiff’s pendent state claims and breach of contract claims as being subsumed within his Title VII claim; (5) that the Court should dismiss the individual Defendants not named in Plaintiff’s complaint before the Michigan Civil Rights Commission and the EEOC; (6) that Plaintiff’s claims are barred by the doctrine of “Election of Remedies”; (7) that Plaintiff cannot claim damages under Title VII; and (8) that Plaintiff has failed to state a claim upon which relief can be granted under the Michigan Handicappers’ Civil Rights Act. The Court will discuss these grounds in order.

Statute of Limitations

I have already ruled on the statute of limitations issue with respect to Plaintiff’s Union Local. In that ruling I held that the applicable six-month statute of limitations, DelCostello v. International Brotherhood of Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983), bars Plaintiff’s claim against the Local for breach of its duty of fair representation. Judgment Order of June 22, 1984 (granting Defendant Local’s motion to dismiss); see also Judgment Order of September 19, 1985 (denying Plaintiffs motion for reconsideration). I now find that the statute of limitations likewise bars Plaintiffs claim against Defendant Company for breach of the CBA. As was the case with Defendant Local, the key issue regarding Defendant Company’s statute of limitations defense is when Plaintiff’s cause of action against the Company accrued and the time for him to bring suit began to run. The statute of limitations for both branches of Plaintiff’s hybrid § 301/unfair representation suit— his claim against the Company for breach of the CBA in violation of § 301 and his claim against the Local for breach of its duty of fair representation — is six-months. DelCostello, 462 U.S. at 155, 103 S.Ct. at 2285.

The starting point for analysis of this issue is to understand the relationship between an employee’s suit against his employer for breach of the CBA and his suit against his union for breach of its duty of fair representation. As the Supreme Court stated in DelCostello, “ ‘the two claims are inextricably interdependent. To prevail against either the company or the Union, ... [employee-plaintiffs] must not only show that their discharge was contrary to the contract but must also carry the burden of demonstrating breach of duty by the Union.’ ” Id. at 164-65, 103 S.Ct. at 2290 (quoting United Parcel Service, Inc. v. Mitchell, 451 U.S. 56, 66-67, 101 S.Ct. 1559, 1565-66, 67 L.Ed.2d 732 (1981) (Stewart, J., concurring in judgment)). In situations where the grievance and arbitration procedures of the CBA are the exclusive remedy for an employee aggrieved by his employer’s breach of the CBA, as apparently is the case here, proof that the employee’s union breached its duty of fair representation is a prerequisite to the employee’s suit under § 301 to enforce the terms of the CBA. Vaca v. Sipes, 386 U.S. 171, 186-87, 87 S.Ct. 903, 914-15, 17 L.Ed.2d 842 (1967).

Courts accordingly generally have found that the statute of limitations on an employee-plaintiff’s cause of action against his employer for breach of the CBA begins to run at the same time as the statute of limitations on his predicate cause of action for unfair representation against his union. See Bell v. Michigan Sport Service, Inc., 117 L.R.R.M. 2616, 2618 (BNA) (E.D.Mich.1984); DelCostello v. International Brotherhood of Teamsters, 116 L.R.R.M. 2754, 2758-59 (BNA) (D.Md.1984); Edie v. Brundage Co., 546 F.Supp. 837 (W.D.Mich.1982). That is, when the employee-plaintiff “discovers, or in the exercise of reasonable diligence should have discovered, the acts constituting the [union’s] alleged violation” of its duty, Shapiro v. Cook United, Inc., 762 F.2d 49, 51 (6th Cir.1985); or when the employee-plaintiff “is barred from proceeding to the next step in the grievance procedure.” Edie, 546 F.Supp. at 839 n. 5. As the Court discussed in its Opinions of June 22, 1984 and September 19, 1985 (on Plaintiff’s motion for reconsideration), the accrual date in this case for Plaintiff’s cause of action against Defendant Local, and thus against Defendant Company as well, was January 26, 1983. Since Plaintiff filed his complaint in this Court more than six months after that date, on August 2, 1983, his claims against Defendant Company for breach of the CBA — all of Counts IY, V, and IX of the complaint, and that part of Count I which alleges a breach of the Company’s duty to conduct a fair and reasonable investigation into the circumstances surrounding Plaintiff’s discharge — must be dismissed.

Right to Sue Notice

In support of their second ground for dismissal, Defendants argue that receipt of a “right to sue” letter from the EEOC is a jurisdictional prerequisite to bringing suit in federal court, and that the Court thus should dismiss this case since Plaintiff did not receive such a notice before filing suit. Plaintiff argues in response that receipt of a right to sue letter is not an absolute requirement for filing a complaint, and that the Court has jurisdiction over his claim because he has exhausted his administrative remedies, as required by 42 U.S.C. § 2000(e)-5(f)(l), by filing a charge with the appropriate state agency (the Michigan Civil Rights Commission) and the EEOC within the allowable time period, and then waiting 180 days before filing suit in this Court. Plaintiff further argues that after he filed his complaint he did request the EEOC to issue a right to sue notice. The Court also notes that Plaintiff did receive a right to sue letter from the EEOC on January 18,1984, subsequent to which he filed a separate Title VII action against Defendant Company, Bradford v. General Telephone Co., No. K84-170, that has been consolidated with the present action. ORDER of August 1, 1984.

The Court finds that it must deny this part of Defendants’ motion because Plaintiff has demonstrated sufficient compliance with Title VII’s administrative prerequisites for it to exercise jurisdiction over his claim. Section 5(f)(1) of Title VII provides that once a party has filed a timely charge with the EEOC:

If [such] charge ... is dismissed by the Commission, or if within one hundred and eighty days from the filing of such charge ..., the Commission has not filed a civil action under this section ..., or the Commission has not entered into a conciliation agreement to which the person aggrieved is a party, the Commission ... shall so notify the person aggrieved and within ninety days after the giving of such notice a civil action may be brought against the respondent named in the charge ... by the person claiming to be aggrieved____

42 U.S.C. § 2000e-5(f)(l) (1982). Plaintiff filed a timely charge against Defendant Company with the Michigan Civil Rights Commission and the EEOC on December 6, 1982. He then waited 180 days before filing suit against Defendant Company.

Defendants correctly argue that Plaintiff should have received the right to sue notice mentioned in Section 5(f)(1) before filing suit. Receipt of a right to sue notice — or letter — is not a jurisdictional requirement, however, “but rather a statutory requirement designed to give the administrative process an opportunity to proceed before a lawsuit is filed.” Gooding v. Warner-Lambert Co., 744 F.2d 354, 358 (3rd Cir.1984). Receipt of a right to sue notice, like full compliance with Title VIPs administrative time requirements, see Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 102 S.Ct. 1127, 71 L.Ed.2d 234 (1982), is not an absolute prerequisite to filing suit in federal court. In Zipes the Supreme Court held that filing of a timely charge of discrimination with the EEOC “is not a jurisdictional prerequisite to suit in federal court, but a requirement that, like a statute of limitations, is subject to waiver, estoppel, and equitable tolling.” Id. at 393, 102 S.Ct. at 1132. The Court noted that the Act’s structure and legislative history indicate that its administrative exhaustion requirements and other prerequisites to filing suit should be liberally construed to honor the Act’s remedial purposes. Id. at 393-98, 102 S.Ct. at 1132-33; see Leake v. University of Cincinnati, 605 F.2d 255, 259 (6th Cir.1979) (equitable principles should apply to Title VIPs time limitations). The Court’s opinion, moreover, although not addressed to the notice of right to sue requirement, implicitly rejected the “jurisdictional requirement” analysis employed in the cases upon which Defendants rely. See Gibson v. Kroger Co., 506 F.2d 647, 650 (7th Cir.1974), cert. denied, 421 U.S. 914, 95 S.Ct. 1571, 43 L.Ed.2d 779 (1975); Stebbins v. Continental Insurance Co., 442 F.2d 843, 845-46 (D.C.Cir.1971).

Several courts have made this rejection explicit with regard to the right to sue notice requirement and have held that receipt of such a notice is not a jurisdictional prerequisite to suit. Gooding, 744 F.2d at 358; Perdue v. Roy Stone Transfer Corp., 690 F.2d 1091, 1093 (4th Cir.1982); Pinkard v. Pullman-Standard, 678 F.2d 1211, 1215 (5th Cir.1982) (Kravitch, J., concurring), cert. denied, 459 U.S. 1105, 103 S.Ct. 729, 74 L.Ed.2d 954 (1983). I agree with the Fourth Circuit that “it is entitlement to a ‘right to sue’ notice, rather than its actual issuance or receipt, which is a prerequisite to the jurisdiction of the federal courts.” Perdue, 690 F.2d at 1093. Since Plaintiff was entitled to receive a right to sue notice at the time he filed this suit, having exhausted his administrative remedies, the Court has jurisdiction over his Title VII claim against Defendant Company. Plaintiffs receipt of a right to sue notice subsequent to his filing of this complaint, on January 18, 1984, sufficed, moreover, to cure whatever impediment to the Court’s exercise of its jurisdiction may have existed. See Gooding, 744 F.2d at 358; Pinkard, 678 F.2d at 1215; Williams v. Washington Metropolitan Area Transit Authority, 721 F.2d 1412, 1418 n. 12 (D.C.Cir.1983); Watson v. Fuller Brush Co., 570 F.Supp. 1299, 1302 & n. 5 (W.D.Mich.1983). Defendants’ motion to dismiss Plaintiff’s Title VII claim must be denied.

Pendent Jurisdiction

As their third ground for dismissal, Defendants argue that the Court should refuse to exercise its pendent jurisdiction over Plaintiff’s state law claims against General Telephone and the five individual Defendants. Defendants correctly recognize that federal courts have the constitutional authority to exercise pendent jurisdiction over state law claims that arise out of a “common nucleus of operative facts” with the federal claims that provide a basis for federal jurisdiction. United Mine Workers v. Gibbs, 383 U.S. 715, 725-26, 86 S.Ct. 1130, 1138-39, 16 L.Ed.2d 218 (1966); see Williams v. Bennett, 689 F.2d 1370, 1379-80 (11th Cir.1982) (pendent party jurisdiction). Exercise of that authority, however, is subject to the Court’s discretion. Gibbs, 383 U.S. at 726, 86 S.Ct. at 1139. Defendants argue that in this case considerations of comity and federalism, and the differing remedies and procedures available under Plaintiff’s federal and state law claims, militate against the Court’s exercise of its pendent jurisdiction. Motion to Dismiss at 10-12; Motion for Summary Judgment at 18-19. Plaintiff responds, however, that considerations of “judicial economy, the avoidance of duplicative pleadings, and convenience of the parties” favors the Court’s exercise of its pendent jurisdiction. Plaintiff’s Response to Defendants’ Motions to Dismiss at 13.

It is important in addressing Defendants’ motion to recognize that this case involves two separate aspects of the pendent jurisdiction question. With respect to Defendant Company, Plaintiff has an independent basis for federal jurisdiction and simply seeks to join state law claims against the company that arise out of a “common nucleus of operative facts” with his federal claims. With respect to the five individual Defendants, however, Plaintiff has no independent basis for federal jurisdiction and seeks to have the Court exercise jurisdiction over those Defendants solely on the basis that the state law claims he has against them and the federal claims he has against Defendant Company arise out of a “common nucleus of operative facts.” Gibbs, 383 U.S. at 725, 86 S.Ct. at 1138. I consequently shall deal separately with the Court’s exercise of pendent jurisdiction over each category of Defendants.

Plaintiff raised two federal claims against Defendant Company in his complaint: (1) a claim under § 301 of the LMRA for breach of the collective bargaining agreement, 29 U.S.C. § 185(a) (1982); and (2) a claim under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e (1982), for discrimination on the basis of his sex. I have already decided in this opinion that the statute of limitations bars Plaintiff’s section 301 claim. Since the federal basis for Plaintiff’s state law claims that relate primarily to Defendant Company’s performance of its contractual obligations (Counts I & IV of the Complaint) is gone, it would seem appropriate to dismiss such state law claims as well. See Gibbs, 383 U.S. at 726, 86 S.Ct. at 1139 (“if the federal claims are dismissed before trial ... the state claims should be dismissed as well”). Given that Plaintiffs sole remaining federal claim is under Title VII, moreover, it is proper to recognize that several courts have refused, based on the remedial and procedural complications that consideration of state law claims entail, to exercise pendent jurisdiction over state law claims in Title VII cases. Bouchet v. National Urban League, Inc., 730 F.2d 799, 805-06 (D.C.Cir.1984); Haroldson v. Hospitality Systems, Inc., 596 F.Supp. 1460, 1460-61 (D.Colo.1984); Frye v. Pioneer Logging Machinery, Inc., 555 F.Supp. 730, 731-36 (D.S.C.1983); Lazic v. University of Pennsylvania, 513 F.Supp. 761, 770 (E.D.Pa.1981); Jong-Yul Lim v. International Institute of Metropolitan Detroit, Inc., 510 F.Supp. 722, 724-26 (E.D.Mich.1981).

It appears, however, that some of the factual issues Plaintiff may seek to prove at trial relating to his Title VII claim, primarily those concerning the validity of Defendant Company’s reasons for his discharge, may also arise with regard to some of his state law claims. It would be unfair to Plaintiff, moreover, given that his case has been before the Court for over two years now, to force him to refile all his state law claims against Defendant Company in state court. Upon careful consideration, therefore, of the pleadings, depositions, and other papers that both parties have filed, I find that the interests of justice and considerations of judicial economy and of fairness and convenience to the litigants would best be served if I exercise pendent jurisdiction over Plaintiff’s state law claims against Defendant Company that are related to his Title VII claim. See Van Atta v. Kal-Aero, Inc., 555 F.Supp. 912, 916-17 (W.D.Mich.1983); cf. Frye, 555 F.Supp. at 735-36 (noting Title VII cases in which courts have exercised pendent jurisdiction). I accordingly will deny Defendants’ Motion to Dismiss for lack of pendent jurisdiction over Plaintiff’s state law claims against Defendant Company, with the exception of Counts I and IV of the Complaint which — to the extent they have not already been dismissed — will be dismissed without prejudice. Plaintiff may pursue those claims in state court.

The second aspect of the pendent jurisdiction issue is the propriety of the Court’s exercise of its pendent jurisdiction over the five individual Defendants against whom Plaintiff has no federal claims. Plaintiff’s basis for requesting the Court to exercise jurisdiction over these “pendent parties” is tenuous. The Supreme Court has noted that “there is a ... serious obstacle to the exercise of pendent jurisdiction” if “the ... party ... is not otherwise subject to federal jurisdiction.” Aldinger v. Howard, 427 U.S. 1, 18, 96 S.Ct. 2413, 2422, 49 L.Ed.2d 276 (1976). In these pendent party cases, a court must determine both whether Article III authorizes it to exercise jurisdiction in the case before it and, if so, whether Congress has “expressly or by implication negated” the existence of pendent party jurisdiction under the particular statute in question. Id. It is not necessary in this case, however, for me to determine whether I have the constitutional and statutory authority to hear Plaintiff’s state law claims against the individual Defendants because even assuming I have such authority, the considerations discussed above in connection with Plaintiff’s state law claims against Defendant Company lead me to decline to exercise pendent jurisdiction over the individual Defendants. Plaintiff bases his claims against these Defendants solely on state law and consideration of them would not advance the interests underlying Title VII. See Jong-Yul Lim, 510 F.Supp. at 725-26. I also find that exercise of pendent jurisdiction over Plaintiffs claims against these Defendants would create a predominance of state law issues in this case that would not serve the interests of judicial economy. See Frye, 555 F.Supp. at 735-36. I therefore will dismiss without prejudice Counts VII, X, XI, XII, and XIII of Plaintiffs Complaint.

Defendants’ Other Grounds for Dismissal

Defendants remaining grounds for dismissal do not require much discussion. As their fourth ground, Defendants argue that the Court should dismiss Plaintiffs state law claims as being “subsumed” within his Title VII claim. Although there are some factual similarities between Plaintiffs remaining state law claims and his Title VII claim against Defendant Company, I find that there are sufficient legal and factual differences to permit separate consideration. See Stewart v. Thomas, 538 F.Supp. 891, 895-97 (D.D.C.1982). Defendants fifth ground for dismissal is moot since I have decided to dismiss Plaintiffs claims against the individual Defendants. Defendants sixth ground for dismissal— the “election of remedies” argument — is meritless. Alexander v. Gardner-Denver Co., 415 U.S. 36, 49-51, 94 S.Ct. 1011, 1020-21, 39 L.Ed.2d 147 (1974); Vaca, 386 U.S. 171, 87 S.Ct. 903. I will grant Defendants seventh ground for dismissal and order that Plaintiffs request for damages (compensatory, exemplary, and punitive) under Title VII be stricken from the Complaint. Harrington v. Vandalia-Butler Board of Education, 585 F.2d 192, 194-97 (6th Cir.1978), cert. denied, 441 U.S. 932, 99 S.Ct. 2053, 60 L.Ed.2d 660 (1979); Moll v. Parkside Livonia Credit Union, 525 F.Supp. 786, 791-93 (E.D.Mich.1981). Defendants eighth ground is moot since I have decided to dismiss Plaintiffs claims under the Handicappers’ Civil Rights Act.

      . The Court subsequently denied Plaintiff's motion to reconsider that dismissal. Judgment Order of September 19, 1985. It also has denied Plaintiffs motion to compel arbitration of his grievance. Memorandum Opinion and Order of September 19, 1985.

      . I note that although Defendant Company labeled its pleading a Motion for Summary Judgment, it stated in the body of the motion that it was moving pursuant to "Federal Rules of Civil Procedure 12(b), (1)(6), (H)(3).” Defendant, however, submitted in support of its motion materials that are outside the pleadings, and I have considered materials outside the pleadings that are favorable to Plaintiff. I therefore will consider Defendant’s motion as a motion for summary judgment under P.ule 56 of the Federal Rules of Civil Procedure. See FRCP 12(b).

      . I should note that the legal basis for Counts I, IV, and V of Plaintiffs Complaint is unclear. To the extent, however, these Counts raise claims under Section 301 of the LMRA for breach of the CBA, I have already dismissed them as being barred by the statute of limitations.

      . Considering the Court’s ruling on its pendent jurisdiction over Plaintiffs state claims in conjunction with its ruling on Defendant Company’s statute of limitations defense, Plaintiff can pursue the following claims against General Telephone in this Court: (1) his Title VII claim (Count II); (2) his claim under the Elliott Larsen Civil Rights Act (Count III); and (3) the tort law claims contained in Counts VI and XIV.

      . I will note that some courts have held, applying the Aldinger standard, that they are not authorized to exercise either pendent or pendent party jurisdiction in Title VII cases. E.g., Haroldson, 596 F.Supp. at 1461; Kiss v. Tamarac Utilities, Inc., 463 F.Supp. 951, 953-54 (S.D.Fla.1978).


author: CARRIGAN, District Judge.

text:
    Albert P. BRUNO, Plaintiff, v. WESTERN ELECTRIC COMPANY, Defendant.
    Civ. A. No. 82-C-1333.
    United States District Court, D. Colorado.
    Sept. 26, 1985.

      Alexander Halpern, Boulder, Colo., for plaintiff.
    Lee Dale, Denver, Colo., for defendant.
   MEMORANDUM OPINION AND ORDER

CARRIGAN, District Judge.

On August 10, 1982, the plaintiff Albert P. Bruno (“Bruno”) brought an action against the defendant, Western Electric Company (“Western Electric”), alleging that Bruno had been subjected to age discrimination in violation of the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621 et seq. (1982). Bruno sought injunctive relief, reinstatement, expurgation of the record, damages for lost wages, damages for emotional pain and suffering, liquidated damages, punitive damages, and costs, including attorney’s fees.

The trial was bifurcated. During the course of the liability trial, I struck Bruno’s claims for punitive damages, front pay, and general damages for pain and suffering on the basis of the Tenth Circuit opinion in Perrell v. Financeamerica Corp., 726 F.2d 654 (10th Cir.1984) which was published at about the time of trial. On February 6, 1984, the jury returned a verdict in favor of Bruno. The jury found: (1) that Bruno had been denied a job transfer because of his age; (2) that he had been transferred because of his age to a position for which he was not qualified; (3) that he had been demoted or paid a lower salary because of his age; and (4) that he had been subjected to harassment and other adverse working conditions while on the job. Further, the jury cleared the defendant of charges that Bruno had been denied a promotion because of his age. On April 18, 1984, Bruno was awarded damages of $30,419.16 as well as an adjustment in his pension plan to reflect his lost wages.

Two disputes remain unresolved: (1) On April 30,1984, Bruno’s attorneys submitted a motion seeking $75,455.50 in attorney’s fees and an enhanced fee award to take into account the “contingent nature” of their fee arrangement with Bruno. (2) On June 27,1984, Bruno filed a motion seeking review of the Clerk’s taxing of Costs, challenging the Clerk’s decision to disallow $7,898.48 in claimed costs out of a total of $9,956.72 requested. Western Electric resists both motions. The parties have briefed the issues, and oral argument would not assist in resolving them.

I. Attorneys’ Fees.

The general rule is that absent a statute or enforceable contract, litigants must pay their own attorney’s fees. Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). In this case, the statutory scheme authorizes attorneys’ fees. Section 626(b) of the ADEA declares that “[t]he provisions of this chapter shall be enforced in accordance with the powers, remedies, and procedures provided in sections 211(b), 216 (except for subsection (a) thereof), and 217 of this title (the Fair Labor Standards Act), and subsection (c) of this section.” 29 U.S.C. § 626(b) (1982). Section 216(b) of the Fair Labor Standards Act of 1938 in turn states that “[t]he court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.” 29 U.S.C. § 216(b) (1982).

In Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), the United States Supreme Court elucidated standards for determining the proper amount of an award of attorney’s fees:

“Where a plaintiff has obtained excellent results, his attorney should recover a fully compensatory fee. Normally this will encompass all hours reasonably expended on the litigation, and indeed in some cases of exceptional success an enhanced award may be justified. In these circumstances the fee award should not be reduced simply because the plaintiff failed to prevail on every contention raised in the lawsuit. Litigants in good faith may raise alternative legal grounds for a desired outcome, and the court’s rejection of or failure to reach certain grounds is not sufficient reason for reducing a fee. The result is what matters.
If, on the other hand, a plaintiff has achieved only partial or limited success, the product of hours reasonably expended on the litigation as a whole times a reasonable hourly rate may be an excessive amount. This will be true even where the plaintiff’s claims were interrelated, nonfrivolous, and raised in good faith.
[Finally], [w]here the plaintiff has failed to prevail on a claim that is distinct in all respects from his successful claims, the hours spent on the unsuccessful claim should be excluded in considering the amount of a reasonable fee.” Id. at 435-36, 440, 103 S.Ct. at 1940-41, 1943. (Citation and footnote omitted).

Western Electric’s opposition to the Motion for Award of Attorneys’ Fees raises four principal issues: (1) whether Bruno achieved excellent results or merely limited success; (2) whether Bruno’s claims were distinct and separate from each other, or were related; (3) whether some of the hours billed were duplicative; and (4) whether Bruno’s attorneys are entitled to an enhanced award.

A. Degree of Success Achieved.

The first issue is whether the plaintiff achieved excellent results or only limited success. Western Electric argues that Bruno achieved only limited success because many of his damage claims were rejected as not recoverable under the ADEA: “After striking all the damages for physical and emotional pain and suffering and punitive damages, and all damages for a promotion and half the damages for the lateral transfer, the total recovery is proportionately minimal in terms of the hours and fees requested.” Defendant’s Memorandum of Law on Issue of Attorneys’ Fees at 3. Bruno responds that he achieved excellent results because he “prevailed on eleven of the twelve contested factual issues defined in the Pretrial Order, [and] in essence also prevailed on all the contested issues of law except those relating to the availability of compensatory damages for pain and suffering and punitive damages under the ADEA.” Plaintiff’s Brief Supporting Motion for Attorneys’ Fees at 3.

Western Electric’s argument that the award of attorneys’ fees should be reduced because Bruno did not recover all of the damages he sought must be rejected. In Hensley, the court repudiated any formalistic method which would automatically link a plaintiff’s overall success to the relief granted.

“Nor is it necessarily significant that a prevailing plaintiff did not receive all the relief requested. For example, a plaintiff who failed to recover damages but obtained injunctive relief, or vice versa, may recover a fee award based on all hours reasonably expended if the relief obtained justified that expenditure of attorney time.” Hensley, 461 U.S. at 436 n. 11, 103 S.Ct. at 1941 n. 11. (Emphasis added).

In Ramos v. Lamm, 713 F.2d 546 (10th Cir.1983), the Tenth Circuit emphasized that any approach that drew a strict correlation between a plaintiff’s monetary recovery and an assessment of his success on the merits would be flawed, since such an approach would ignore the fact that different issues would have varying degrees of importance:

“Some courts have reduced fees when the thrust of the suit was for monetary recovery and the recovery was small compared to the fees counsel would have received if compensated at a normal rate for hours reasonably expended. We reject this practice. The amount of monetary recovery is not as significant as the policy being vindicated____ It should not be expressed as a requirement that the fee award have a particular relationship to the amount of the monetary recovery.” Ramos, 713 F.2d at 557. (Emphasis added).

This is not to imply that the amount of damages awarded is irrelevant to a court’s determination of the extent of the plaintiff’s success. In fact, the award of damages may be of crucial importance in evaluating whether the relief obtained justified the expenditure of attorney time. In Nephew v. City of Aurora, 766 F.2d 1464 (10th Cir.1985), the court ordered the reduction of a $12,500 award of attorney’s fees because the award of damages to the plaintiff was a nominal award of only $2. The court’s decision was prompted by its conclusion that the nominal recovery reflected to some extent the relative merits of the litigation:

“[T]he approach set forth in Hensley ... [provides] incentives for meritorious civil rights litigation. It instructs a lawyer to critically evaluate the prospects for success in each potnetial ... claim, and it encourages the lawyer to proceed only with those claims that are indeed meritorious.” Id. at 1466, quoting Cooper v. Singer, 719 F.2d 1496, 1502 (10th Cir.1983). (Emphasis in original.)

The court’s decision manifests concern that an award of only nominal damages reflects a claim of questionable merit or minimal importance. Nephew, however, does not reject the position espoused in Ramos —that it is not necessary to have a “particular relationship” between an award of attorney’s fees and a plaintiff’s monetary recovery. In fact, Nephew expressly rejects such a reading. “We do not imply that an award of nominal damages necessarily means that a corresponding fee award must also be nominal.” Nephew, at 1467. Nephew simply refines the court’s position in Ramos to ensure that attorney’s fees will be awarded only when a claim is meritorious and substantial as well as successful. Claims that are trivial, and thus just short of frivolous, should not be encouraged by awarding substantial attorneys’ fees to attorneys who file them.

In the present case, I find and conclude that the award of attorney’s fees should not be reduced on the ground that Bruno’s success was limited. The single claim in this case was predicated on Bruno’s contention that Western deliberately and systematically discriminated against him because of his age. His success on that claim was virtually complete. The fact that one of the circumstances that Bruno believed would illustrate that design — denial of a job promotion — was found not to have been based on discrimination does not negate Bruno’s overall success. “[T]he fee award should not be reduced simply because the plaintiff failed to prevail on every contention raised in the lawsuit.” Hensley, 461 U.S. at 435, 103 S.Ct. at 1940.

Nor is Bruno’s overall success reduced by the fact that his plea for injunctive relief was mooted when he accepted a favorable early retirement settlement. When a legal position advances the interests of a client by obtaining a significant concession from the defendant, its technical success or failure is less significant than the result. Stanford Daily v. Zurcher, 64 F.R.D. 680 (N.D.Cal.1974), aff'd 550 F.2d 464 (9th Cir.1977), rev’d on other grounds, 436 U.S. 547, 98 S.Ct. 1970, 56 L.Ed.2d 525 (1978). “The result is what matters.” Hensley, 461 U.S. at 435, 103 S.Ct. at 1940. Finally, although Bruno did not prevail on the issues of punitive damages and damages for physical and emotional pain and suffering, his positions were based on substantive legal grounds raising unresolved legal issues. Therefore, the time spent on those issues was “reasonably expended in pursuit of the ultimate result achieved in the same manner that an attorney traditionally is compensated by a fee-paying client for all time reasonably expended on a matter.” Davis v. City of Los Angeles, 8 E.P.D. 5047, 5049 (C.D.Cal.1974) (Cited by Congress to illustrate a proper application of § 1988 in awarding attorney’s fees. See S.Rep. No. 94-1011, 94 Cong. 2 Sess. 6 (1976), U.S.Code Cong. & Admin.News 1976, pp. 5908, 5913.). The overall results achieved by Bruno, while not perfect, were sufficient to uphold an award of full attorney’s fees.

B. Treatment of Unsuccessful Claims.

Western Electric’s second objection to the amount of attorney’s fees requested by Bruno is based on the premise that at least two of Bruno’s unsuccessful claims— that he was denied a promotion because of discrimination and that he was entitled to damages for physical and emotional pain and suffering — were distinct from the successful claims. “Where the plaintiff has failed to prevail on a claim that is distinct in all respects from his successful claims, the hours spent on the unsuccessful claim should be excluded in considering the amount of a reasonable fee.” Hensley, 461 U.S. at 440, 103 S.Ct. at 1943. However, a lawsuit which involves “a common core of facts or [is] based on related legal theories ... cannot be viewed as a series of discrete claims.” Id. at 435, 103 S.Ct. at 1940.

The issue of whether Bruno was denied promotion on the basis of discrimination is not “distinct in all respects” from the other issues. It arises out of a common core of facts with those issues raised successfully by Bruno. In this court’s order of March 6, 1984, I noted that “the conduct complained of constituted a single, continuous, uninterrupted course of discriminatory activity from the outset to the time of trial.” Bruno v. Western Electric Co., No. 82-C-1333 (D.Colo. March 6, 1984) (Order denying defendant’s Motion for Directed Verdict or for Judgment Notwithstanding the Verdict or for New Trial). Bruno’s failure to receive a promotion was only one of a myriad of actions characterized by Bruno as discriminatory, all of which combined to form his claim for relief.

Likewise, the issue of whether Bruno could recover punitive damages turned on the same “common core of facts” as the issue of whether Bruno could recover lost wages or liquidated damages. Under the standard adopted in Hensley, neither the promotion issue nor the issue of punitive damages can be viewed separately from those issues raised successfully by Bruno. Consequently, Bruno’s failure to prevail on those issues should not affect the recovery of attorney’s fees for time spent on them.

Finally, Western Electric objects to the awarding of attorney’s fees for two unsuccessful motions to compel. When assessing attorney’s fees, however, it “is not legally relevant that the plaintiffs’ counsel expended a certain limited amount of time pursuing certain issues of fact and law ... upon which plaintiff ultimately did not prevail.” Davis, 8 E.P.D. at 5049. The issue is whether the time spent on the unsuccessful motions was “reasonably expended in pursuit of the ultimate result____” Id. These motions meet that standard. Therefore, Western’s contention that attorney’s fees are not recoverable for the two unsuccessful motions to compel is without merit.

C. Duplicative Services and Training New Attorney.

Western has also requested that this court reduce the award of attorney’s fees by $1,729.25 on the ground that 25.3 hours reflect duplicative effort and new lawyer training that would not ordinarily be charged to the client. The hours in dispute are 19.5 hours where both attorneys for Bruno attended various depositions, and 5.8 hours where both attorneys attended pretrial conferences. Bruno has responded that it was necessary and reasonable for both attorneys to appear at depositions, hearings and the trial because the division of responsibilities between them was such that neither individual alone would have been adequately prepared to conduct the proceeding independently.

Fees generally cannot be recovered for duplicative services. Ramos, 713 F.2d at 554. In particular, “the presence of more than one lawyer at depositions and hearings must be justified to the court.” Id. at 554, n. 4. Today it has become all too common for two, or even more, attorneys to appear at a hearing, deposition or other proceeding where one lawyer traditionally appeared. Indeed there are hearings where firms send not one lawyer, but a “flight” of them, consisting of a senior partner, one or more juniors or associates, and several paralegals. Whether this is legal “featherbedding” or merely an effort to give young people more courtroom experience, there can be no justification for charging the excessive time to an opponent who lost the case. While there was no such apparent featherbedding in this case, Bruno’s attorneys have not adequately justified the presence of both attorneys at the various depositions and conferences in dispute. Bruno’s assertion that neither individual alone would have been adequately prepared to conduct the proceeding independently is belied by his attorneys’ own description of the division of labor between them. Further, the defendant's undisputed averment that one of the plaintiff’s attorneys was recently graduated from law school and admitted to the bar gives credence to the supposition that the presence of the junior attorney was “for the purpose of being trained.” Ramos, 713 F.2d at 554 n. 4. Such hours would not normally be billed to one’s client, and therefore are not properly billed to one’s adversary. Hensley, 461 U.S. at 434, 103 S.Ct. at 1939.

E. Enhanced Fee Award.

Finally, Western Electric objects to Bruno’s attorneys’ request for an enhanced fee award. Bruno’s attorneys have asserted that an enhanced fee award is appropriate to take into account the contingent nature of the fee arrangement.

In Hensley, the Supreme Court noted that “in some cases of exceptional success, an enhanced award may be justified.” Hensley, 461 U.S. at 435, 103 S.Ct. at 1940. In a concurring opinion in Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984), Justice Brennan argued that “the risk of not recovering any attorney’s fees is a proper basis on which a district court may award an upward adjustment to an otherwise compensatory fee.” Id. at 1550. The majority, however, expressly declined to consider whether “the risk of not being the prevailing party ... and therefore not being entitled to an award of attorney’s fees from one’s adversary, may ever justify an upward fee adjustment.” Id. at 1550 n. 17. In my view the contingent fee system well serves the public and judicial administration. It provides for many worthy causes access to the justice system that otherwise would be deprived solely because the would-be plaintiff cannot afford a lawyer. Thus the contingent fee advances our ideal of equal justice under law. Moreover, the contingent fee discourages lawyers from accepting bad cases they are likely to lose and thus not be paid for. In addition, such fee arrange-' ments tend to minimize unneeded discovery motions and time wasting practices which can be profitable for a lawyer whose hourly charge “meter” is running.

Regardless of whether an enhanced fee award is ever appropriate to reflect the contingency of the fee because of the risk of not winning, I conclude that it is not appropriate in this case. Although Bruno’s attorneys contend that this case was “essentially contingent,” the facts do not support their position. Bruno’s arrangement with his attorneys simply was not contingent on the success or failure of the suit. His attorneys had arranged to “bill him monthly for fees at the prevailing rate of the attorneys involved and costs as incurred.” (Defendant’s Memorandum of Law on Issue of Attorneys’ Fee, Exhibit A.)

II. Taxing of Costs.

The second dispute that remains unresolved concerns $7,898.48 in costs disallowed by the Clerk of this court. The Clerk denied: (1) all recovery by Bruno for expert witness fees, totalling $5,870.00; and (2) all of Bruno’s deposition expenses except those related to the Burris and Stein depositions, amounting to $2,028.48.

A. Expert Witness Fees.

Under 28 U.S.C. § 1920 (1982), the general costs statute, expert witness fees are not recoverable as costs. Ramos v. Lamm, 713 F.2d 546 (10th Cir.1983); Cleverock Energy Corp. v. Trepel, 609 F.2d 1358 (10th Cir.1979). Consequently, the clerk was correct in refusing to tax the expert witness fees as costs under § 1920. However, this does not mean that expert witness fees are never recoverable. In actions under Title VII, 42 U.S.C. 2000e et seq. (1982), expert witness fees may be reimbursed as part of “attorney’s fees” under 42 U.S.C. § 1988. Ramos, 713 F.2d at 559. The issue in this case is whether such costs are recoverable as part of “attorney’s fees” in actions under the ADEA.

The parallels between Title VII and the ADEA are numerous. The acts share similar aims — the elimination of arbitrary discrimination in the work place — and their substantive prohibitions are virtually identical. Oscar Mayer & Co. v. Evans, 441 U.S. 750, 755, 99 S.Ct 2066, 2071, 60 L.Ed.2d 609 (1979); Lorillard v. Pons, 434 U.S. 575, 584, 98 S.Ct. 866, 872, 55 L.Ed.2d 40 (1978). “In fact, the prohibitions of the ADEA were derived in haec verba from Title VII.” Id. at 584, 98 S.Ct. at 872. Further, the evidentiary guidelines used in Title VII actions to allocate the burdens of proof have also been applied to ADEA eases. Sutton v. Atlantic Richfield Co., 646 F.2d 407, 411 (9th Cir.1981). Overall, the ADEA’s coverage and most of its operative provisions are substantially identical to those of Title . VII. 3 A. Larson & L. Larson, Employment Discrimination, § 98.00 (1984).

The general symmetry which exists between Title VII and the ADEA is further reflected in the language of their respective attorney’s fees statutes. The ADEA’s fee recovery statute provides for a prevailing party to be awarded “reasonable attorney’s fees ... and costs of the action.” 29 U.S.C. § 216(b) (1982). Section 1988 grants the prevailing party “a reasonable attorney’s fee as part of the costs.” Considering the similarities between the ADEA and Title VII, both generally and in regard to their recovery statutes, it is logical to apply the same definition of “attorney’s fees” to cases arising under either the ADEA or Title VII. Heiar v. Crawford County, Wis., 746 F.2d 1190, 1203 (7th Cir.1984); See Russell v. Curtin Matkeson Scientific, 27 F.E.P. 1336 (S.D.Tex.1984). Furthermore, it would be anomalous to apply a § 1988 standard when determining the proper recovery of attorney’s fees in an ADEA action, see Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), and then to reject its definition when deciding what is included in the term “attorney’s fees.”

I conclude that the reasoning that includes expert witness fees as part of “attorney’s fees” in Title VII cases also applies to actions arising under the ADEA. Therefore, expert witness fees are recoverable as “attorney’s fees” in this action if they are “reasonably necessary” to the plaintiff’s case. See Ramos, 713 F.2d at 559, 10 C. Wright and A. Miller, Federal Practice & Procedure § 2678 (1973).

The standard of what is “reasonably necessary” to a case must be applied with some flexibility. The purpose of such a standard is not to discourage thoroughness in trial preparation under the guise of economic efficiency, but to prevent the squandering of an adversary’s resources. An expert witness is “reasonably necessary” to the case if, at the time he or she is retained, the testimony constitutes a vital and integral part of the preparation of the case. See Russell v. Curtin Matheson Scientific, 27 F.E.P. 1336 (S.D.Tex.1981) (Witnesses were vital to the case even though the case was settled prior to trial.)

“Although it is ordinarily the rule that no fee may be allowed for witnesses who do not testify at trial, this presumption may be overcome if it is shown that their testimony was rendered unnecessary by the occurrence of some extrinsic circumstance.” Wehr v. Burroughs Corp., 477 F.Supp. 1012, 1022 (E.D.Pa.1979), modified on appeal, 619 F.2d 276 (3rd Cir.1980); 10 C. Wright & A. Miller, Federal Practice & Procedure § 2678 (1973). In the present case, Bruno has overcome that presumption as to all three of his experts. Dr. Cayton was retained specifically to rebut Western Electric’s witness, Dr. Stanfield, and did not testify only because Western Electric made a strategic decision not to use Dr. Stanfield. Dr. Singell would have testified but for a stipulation on the eve of trial that rendered his testimony irrelevant. See Wehr, 477 F.Supp. at 1022. Finally, Dr. Prentice did not testify only because the issue upon which he was to testify was mooted by the decision in Perrell v. Financeamerica Corp., 726 F.2d 654 (10th Cir.1984), handed down during the course of trial. It is apparent, then, that the testimony of these experts was rendered unnecessary only by the occurrence of extrinsic events. Their fees should be allowed.

B. Deposition Costs.

Expenses for copies of depositions which are reasonably necessary to the prosecution of a case are recoverable under 28 U.S.C. § 1920 (1982). Ramos v. Lamm, 713 F.2d 546, 560 (10th Cir.1983). The necessity of a deposition should not be analyzed in a moment of crystal clarity induced by hindsight. Deposition costs should be allowed if the depositions “were reasonably necessary when taken, even if not later used at trial.” O’Donnell v. Georgia Osteopathic Hospital, 99 F.R.D. 578, 581 (N.D.Ga.1983); Health-Chem Corp. v. Hyman, 523 F.Supp. 27, 33 (S.D.N.Y.1981); Alonso v. Union Oil of California, 71 F.R.D. 523, 525 (S.D.N.Y.1976). In this day of increasing awareness of lawyer malpractice exposure, it is unfair to require that a deposition be taken to meet a standard of reasonable care in preparation, and then, after the trial, to characterize it as “unnecessary” because the conditions which made it necessary before no longer exist.

In this case, I find and conclude that all of the depositions at issue were reasonably necessary to the case except those of Messrs. Bennett and Willman. These deponents did not testify at trial, their depositions were not introduced or read at trial, and there is no indication that they were ever intended for use at trial. Therefore, those two depositions were not reasonably necessary for the prosecution of this case. I find and conclude that all of the other depositions at issue were reasonably necessary for the prosecution of the case.

The form of the affidavits accompanying the plaintiffs motion is not sufficiently detailed to allow me to determine what portion of the total deposition costs sought is attributable to the depositions of Bennett and Willman. Therefore, counsel are ordered to meet and confer to determine an appropriate amount to be subtracted from the requested sum of $2,028.48. If counsel are unable to agree, they shall submit appropriate motions with accompanying affidavits and a request for expedited hearing.

Accordingly, it is ordered that:

1. Plaintiffs motion to recover attorney’s fees is granted in the amount of $73,726.25.

2. Plaintiff’s motion to recover expert witness fees is granted in the amount of $5,870.00.

3. Plaintiff’s motion to recover deposition costs is granted in an amount to be agreed upon by the parties or absent such an agreement, in an amount to be determined by the court.

      . The action to recover attorney’s fees in Hensley was brought under 42 U.S.C. § 1988 (1982). However, the reasoning in Hensley is "generally applicable in all cases in which Congress has authorized an award of fees to a ‘prevailing party’" Hensley, 461 U.S. at 433 n. 7, 103 S.Ct. at 1939 n. 7. See Heiar v. Crawford County, 746 F.2d 1190 (7th Cir.1984). (In assessing attorney’s fees in an ADEA action, the court should be guided by the Hensley standards.)


author: OWEN, District Judge.

text:
    UNILEVER ACQUISITION CORP., Plaintiff, v. RICHARDSON-VICKS, INC., et al., Defendants.
    No. 85 Civ. 7239 (RO).
    United States District Court, S.D. New York.
    Sept. 27, 1985.

      Cravath, Swaine & Moore, New York City, for plaintiff; David Boies, Max Shulman, Stephen D. Poss, New York City, of counsel.
    Skadden, Arps, Slate, Meagher & Flom, New York City, for defendants; Vaughn C. Williams, James C. Freund, Edward P. Welch, Margaret Enloe, New York City, of counsel.
   OPINION AND ORDER

OWEN, District Judge.

Richardson-Vicks Inc., the makers of Vicks Vaporub and other well known products, is resisting a takeover attempt by the Unilever Acquisition Corp., a newly-formed subsidiary of Unilever United States, Inc., owners of, among others, Lever Bros., a household products company, and Thomas J. Lipton, Inc., the tea and soup manufacturer. Richardson-Vicks is a publicly-held Delaware corporation, with some one-third or more of its stock controlled or held by various Richardsons.

After earlier feelers in the summer of 1985, Unilever in early September sent a letter to the board of directors of Richardson-Vicks proposing to acquire all the shares of Richardson-Vicks at $54 per share. This offer was refused. On September 16, Unilever, which owns 100,000 shares of Richardson-Vicks stock, brought this suit alleging both Williams Act, 15 U.S.C. § 78n(e), et seq., and state and common law violations, and almost simultaneously publicly announced a tender offer for all outstanding shares of RichardsonVicks common stock, at a cash price of $56 per share if the Richardson-Vicks board of directors approved the offer and $48 if it did not.

Thereafter on September 17, the Richardson-Vicks board of directors voted and announced the issuance of a “Series A $4.00 Participating Cumulative Convertible Preferred Stock” to be distributed as a stock dividend to common stockholders of record as of September 27, 1985. Under the proposal, one share of the new preferred stock is to issue for each 5 shares of common. Among other benefits, each preferred share will entitle the holder to cast 25 votes on all issues on which the common can vote. However, if the preferred share is transferred, the new holder may exercise only 5 of those 25 votes for the first 36 months the stock is held. Thus, if the stock dividend is made as planned, the result will be that while each common stockholder will have the same voting power as theretofore, that stockholder will be unable to transfer those voting rights, since two-thirds will be unexercisable for 36 months following the transfer. This, it appears, would make it impossible for Unilever to acquire Richardson-Vicks at this time, for without the consent of the Richardson group, even were Unilever to succeed in purchasing all non-Richardson shares, the effect would be to increase the Richardson group’s command of the total exercisable vote from about one-third to an absolute majority for the following 36 months.

Unilever, believing this new stock dividend to be an illegal interference both with its rights as a stockholder and with its attempt to acquire the company in violation of its rights under Delaware law, moved for an order temporarily restraining said dividend. I granted this relief in an oral opinion on September 19. The same issue is now before me now on Unilever’s motion for a preliminary injunction enjoining the issuance of the stock dividend pending trial.

As hardly needs restating, in this Circuit, before a preliminary injunction will issue, a plaintiff must show, first, irreparable harm and, second, either likelihood of success on the merits or both sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief. Dallas Cowboy Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200 (2d Cir.1979).

Certain principles are " basic. Thus, a board of directors, having in good faith and after reasonable deliberation determined that a tender offer is not in the company’s best interest, may resist the offer by any legal means available. Crouse-Hinds Co. v. Intemorth, Inc., 518 F.Supp. 390, 408 (N.D.N.Y.1980), reversed on other grounds, 634 F.2d 690 (2d Cir.1980). However, the business judgment rule does not protect actions taken in bad faith or in self-interest such as resisting a take-over solely to entrench the directors’ control. Crouse-Hinds, 634 F.2d at 702. Further, under Delaware law, action of the board which is calculated to alter the structure of the corporation and results in a fundamental transfer of power from one corporate constituency to another, is not shielded by the business judgment rule. Moran v. Household International, Inc., 490 A.2d 1059, 1076 (Del.Ch.1985), appeal pending (Del.Sup.Ct.1985).

While noting that the Richardson-Vicks directors determined to issue the proposed stock dividend after consultation with the highly respected firm of Kidder, Peabody, I do not need to reach the issue of the board’s good faith, concluding that the only issue I need reach at this time is the permissibility of the step that the RichardsonVicks board has taken.

Under Delaware statute, each share of common stock is entitled to one vote, unless the corporate certificate of incorporation provides otherwise. Del.Gen. Corp.Law § 212. Furthermore, to change the certificate of incorporation in matters affecting shareholder rights, the board must ordinarily submit the proposed amendments to the shareholders at an annual or special meeting. Del.Gen. Corp.Law § 242. However, the board is also empowered to authorize by resolution, without shareholder approval, the issuance of new stock not authorized in the certificate of incorporation if it is explicitly authorized to do so by the provisions of the certificate of incorporation and it files a certificate meeting certain requirements with the Secretary of State. Del.Gen. Corp.Law § 151(g). One unreported decision of the Delaware Chancery court has relied on this provision in refusing to enjoin issuance without stockholder authorization of a “piggyback preferred stock” which would have the effect of increasing from 75% to 80% the majority necessary to consúmate certain mergers. See National Education Corporation v. Bell & Howell Co., et al., #7278 (Del.Ch.Ct.1983). While defendant has filed a certificate pursuant to this section, plaintiff maintains that the board acted beyond its authority in so doing, since while the Richardson-Vicks certificate of incorporation authorizes the board to issue preferred stock with the terms to be set by the board, it does so only with the restriction that all shares of any series of preferred stock have identical voting rights.

In addition, the Delaware statute explicitly provides that “no restriction [on transfer of shares] shall be binding with respect to securities issued prior to the adoption of the restriction unless the holders of the securities are parties to an agreement or voted in favor of the restriction.” Del.Gen. Corp.Law § 202(b).

The proposed dividend both restricts transferability of Richardson-Vicks common stock and affects its voting rights, since after the issuance of the dividend, a common stockholder will be unable to transfer two-thirds of his voting power. In addition, it undoubtedly will discriminate hereafter among different holders of shares of the same issue of preferred stock, since some will, while others will not be able to vote the full number, depending on the circumstances of acquisition.

Defendant points out that discrimination among stockholders, when authorized by the stockholders or under extreme circumstances, is not in itself a violation of Delaware law and has been upheld by the Delaware courts, although under significantly different circumstances. See Providence & Worchester Co. v. Baker, 378 A.2d 121 (Del.Sup.1977) (where authorized for over one hundred years by corporate charter, large stockholders may be restricted to fewer votes per share than small stockholders); Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del.Sup.Ct.1985) (in fending off well known “green-mailer,” corporation permitted to make exchange offer to all shareholders other than the greenmailer). However, these cases are not applicable where the discrimination strips the shareholder of the ability to transfer voting rights without prior warning, compensation or shareholder authorization, creating two classes within one series of shares — those that have been recently acquired, with reduced votes, and those that have not, with full votes — and it does this in the face of a provision of the corporation’s certificate of incorporation explicitly providing that “[a]ll shares of any one series of preferred stock shall be identical with each other in all respects.” Art. 4, § B-III. Under Delaware law, a change in corporate structure of this magnitude, reducing the transferability of a shareholder’s ability to vote and the value of his or her asset to this degree, requires stockholder approval which has not been obtained. Del.Gen.Corp.Law § 202(b); Schnell v. Chris Craft Ind., Inc., 285 A.2d 437 (Del.Sup.Ct.1971).

In conclusion, I find that plaintiff has established irreparable injury in that the impermissible issuance of the preferred stock dividend will severely limit if not eliminate its ability, as a shareholder intending to acquire additional shares, to control and/or influence the management and future course of Richardson-Vicks. See Asarco v. MRH Holmes A Court, #1123 (D.N.J.1985). Further, plaintiff has shown likelihood of success on the merits. Accordingly, the preliminary injunction restraining the issuance of the preferred stock dividend is granted. The foregoing constitutes the Court’s findings of fact and' conclusions of law and is so ordered. ,>A formal order may be submitted on notice.


author: BRITT, Chief Judge:

text:
    Terry L. HAITH, Plaintiff, v. James G. MARTIN, in his capacity as the Governor of the State of North Carolina; Lacy H. Thornburg, in his capacity as the Attorney General of the State of North Carolina; Thad Eure, in his capacity as Secretary of State of North Carolina; the State Board of Elections of North Carolina; Robert N. Hunter, in his official capacity as Chairman of the State Board of Elections; Ruth Semashko, Robert F. Browning, William A. Marsh, Jr. and Margaret King, in their official capacities as members of the State Board of Elections, Defendants.
    No. 84-1319-CIV-5.
    United States District Court, E.D. North Carolina, Raleigh Division.
    Sept. 27, 1985.

      Allen Foster, Foster, Conner & Robson P.A., Greensboro, N.C., for plaintiff.
    James Wallace, Jr., Deputy Atty. Gen., N.C. Dept, of Justice, Raleigh, N.C., for defendants.
    Before PHILLIPS, Circuit Judge, BRITT, Chief Judge, and DUPREE, Senior District Judge.
   MEMORANDUM OPINION

BRITT, Chief Judge:

This action was instituted under the Voting Rights Act of 1965, 42 U.S.C. § 1973, (the Act) seeking to enjoin the election of superior court judges in North Carolina in accordance with acts of the General Assembly which have not been preeleared as required by section 5 of the Act. 42 U.S.C. § 1973c. As required by 28 U.S.C. § 2284 Chief Judge Winter designated a three-judge panel to hear and determine the controversy. The matter is now before the court on cross-motions for partial summary judgment, a hearing on said motions having been held in Wilmington, North Carolina, on 16 September 1985.

I

Plaintiff is a black citizen and registered voter of Guilford County. The named defendants are state officials of North Carolina, all sued in their official capacities.

II

The court has jurisdiction pursuant to 42 U.S.C. § 1973c and 28 U.S.C. § 2284.

III

The following facts are not in dispute:

1. On 1 November 1964 North Carolina had a total of thirty judicial districts, twenty-eight of which were served by one judge each, with the remaining two being served by two judges each. Judges within all districts were elected simultaneously for eight-year terms.

2. On 1 November 1964 candidates for the office of superior court judge in judicial districts having more than one judge were not required to announce for which vacancy he or she was filing nor did any district have staggered terms for judges within the district.

3. In 1965 the North Carolina General Assembly enacted Session Law Chapter 262 which amended N.C.Gen.Stat. § 163-147 (now N.C.Gen.Stat. § 163-106(d) (1982)) and established a system of numbered seat elections for the position of superior court judge in districts with two or more vacancies in any judicial district. 1965 N.C.Sess. Laws 262.

4. In 1967 the North Carolina General Assembly enacted Session Law Chapter 997 which provided for an additional resident judge in the 12th, 18th, 19th and 28th judicial districts to serve eight-year terms staggered from the positions already in existence in those districts. 1967 N.C.Sess. Laws 997.

5. In 1977 the North Carolina General Assembly enacted Session Laws Chapter 1119, which provided for an additional resident judge in the 3rd, 10th, 12th, 14th, 19th, and 20th judicial districts to serve eight-year terms staggered from the positions already in existence in those districts. 1977 N.C.Sess.Laws 1119.

6. In 1977 the North Carolina General Assembly enacted Session Laws Chapters 1130 and 1238 creating judicial districts 15A and 15B out of former district 15; creating judicial districts 19A and 19B out of former district 19; and, creating judicial districts 27A and 27B out of former district 27, thereby altering the districts from which candidates for the office of superior court judge in those districts were nominated. 1977 N.C.Sess.Laws 1130 and 1238.

7. In 1983 the North Carolina General Assembly enacted Session Laws 1109 which provided for additional judges in judicial districts 1, 9, 18 and 30. 1983 N.C.Sess.Laws 1109.

8. Forty of the one hundred counties in North Carolina are subject to section 5 of the Voting Rights Act of 1965, 42 U.S.C. § 1973c.

9. Elections of superior court judges in the forty counties which are covered by section 5 of the Voting Rights Act of 1965 are affected by the acts of the legislature above referred to.

IV

Defendants must submit “any voting qualification or prerequisite to voting, or standard, practice, or procedure ... different from that in force or effect on November 1, 1964,” to the Attorney General for preclearance or institute an action in the United States District Court for the District of Columbia for a declaratory judgment that any such qualification or prerequisite to voting, or standard, practice or procedure does not have the purpose and will not have the effect of denying or abridging the right to vote on account of race or color. 42 U.S.C. § 1973c. Defendants admit that Chapters 1119, 1130 and 1238 of the Session Laws of 1977 and Chapter 1109 of the Session Laws of 1983 have not been precleared. They contend, however, that Chapter 997 of the Session Laws of 1967 and Chapter 262 of the Session Laws of 1965 have been precleared because they were included in later enactments of the General Assembly which were submitted to, and approved by, the Attorney General. In addition, defendants contend that section 5 was not intended by Congress to apply to the election of judges and that their failure to preclear the subject enactments was the result of representations made to state officials by the office of the Attorney General. The contentions will be addressed separately.

A. Does section 5 apply to the election of judges?

Defendants base their contention that it does not apply to the election of judges on the case of Holshouser v. Scott, 335 F.Supp. 928 (M.D.N.C.1971), aff'd, 409 U.S. 807, 93 S.Ct. 43, 34 L.Ed.2d 68 (1972). In that case the practice of nominating candidates for superior court judgeships in North Carolina on a district-wide basis and electing them on a statewide basis was challenged as being violative of the due process clause of the 14th Amendment to the Constitution of the United States. The majority of a three-judge panel held that the practice was not constitutionally infirm stating that the one-man, one-vote rule did not apply to the state judiciary. Defendants’ reliance on Holshouser is misplaced as it in no way dealt with, or attempted to interpret, the Voting Rights Act of 1965. In fact, neither the majority nor the dissent mentioned the Voting Rights Act of 1965.

Defendants seek to draw on the distinction made in Holshouser between those in the legislative branch of government who represent their constituents in the making of laws and those in the judicial branch who do not represent a constituency but, rather, interpret the law. Discounting the interesting jurisprudential arguments arising from such an attempted distinction, see, Holshouser, 335 F.Supp. at 934 (Craven, J. dissenting), it is quite clear that no such distinction can be attributed to the Act. The Act provides:

No voting qualification or prerequisite to voting, or standard, practice, or procedure shall be imposed or applied by any State or political subdivision to deny or abridge the right of any citizen of the United States to vote on account of race or color ... 42 U.S.C. § 1973.

As can be seen the Act applies to all voting without any limitation as to who, or what, is the object of the vote. The cases presented to the courts have dealt with what constitutes a “standard, practice, or procedure.” Thus, in Dougherty County, Georgia, Board of Education v. White, the Supreme Court held that a newly enacted rule requiring employees seeking public office to take unpaid leaves of absence while campaigning was a “standard, practice, or procedure” requiring preelearance under section 5. 439 U.S. 32, 99 S.Ct. 368, 58 L.Ed.2d 269 (1978). The Court said that Congress meant “to reach any state enactment which altered the election law of a covered State in even a minor way.” 439 U.S. at 37, 99 S.Ct. at 371, quoting Allen v. State Board of Elections, 393 U.S. 544, 89 S.Ct. 817, 22 L.Ed.2d 1 (1969).

We hold that the fact that an election law deals with the election of members of the judiciary does not remove it from the ambit of section 5.

B. Were Chapters 997 of the Session Laws of 1967 and 262 of the Session Laws of 1965 precleared by inclusion in later enactments of the General Assembly?

Guidelines for submissions to the Attorney General for preclearance under section 5 have been set forth in 28 C.F.R. part 51. Section 51.25, entitled “Required Contents,” states:

Each submission should contain the following information or documents to enable the Attorney General to make the required determination pursuant to Section 5 with respect to the submitted change affecting voting: ... (b) if the change affecting voting is not readily apparent on the face of the document provided under paragraph (a) or is not embodied in a document, a clear statement of the change explaining the difference between the submitted change and the prior law or practice, or explanatory materials adequate to disclose to the Attorney General the difference between the prior and proposed situation with respect to voting.

28 C.F.R. § 51.25 (1984). Defendants do not challenge plaintiffs contention that they did not comply with these guidelines. Nor do they challenge plaintiffs contention that the transmittal letters in which the statutes were enclosed did not even mention Chapter 252, Session Laws of 1965 or Chapter 997, Session Laws of 1967.

The Supreme Court in McCain v. Lybrand rejected a contention similar to that advanced by defendants here. 465 U.S. 236, 104 S.Ct. 1037, 79 L.Ed.2d 271 (1984). In so doing the Court said: “When a jurisdiction adopts legislation that makes clearly defined changes in its election practices, sending that legislation to the Attorney General merely with a general request for preclearance pursuant to § 5 constitutes a submission of the changes made by the enactment and cannot be deemed a submission of changes made by previous legislation which themselves were independently subject to § 5 preclearance.” 104 S.Ct. at 1049.

On the facts presented we hold that Chapter 262, Session Laws of 1965 and Chapter 997, Session Laws of 1967 have not been precleared as required by section 5 of the Voting Rights Act of 1965.

C. Was the failure of defendants to obtain preclearance of the statutes in question the result of representations made to state officials by the office of the Attorney General?

Defendants submitted to the Attorney General for preclearance certain enactments of the 1967 session of the General Assembly of North Carolina. In a letter to the Executive Secretary of the North Carolina State Board of Elections dated 23 April 1971, Acting Assistant Attorney General David L. Norman stated: “... I must advise you that there were several statutes submitted, such as the changes in the North Carolina court system, which did not deal with voting practices or procedures and, thus, are not subject to Section 5 of the Voting Rights Act____”

Defendants contend that the Norman letter is “the cause of the State’s present dilemma” and that equitable principles should cause this court to sanction the failure to seek preclearance of legislation dealing with the election of judges. Thus, the state contends that even if this court holds, as we must, that section 5 does apply to elections of members of the judiciary our decree should be prospective only. The court disagrees. It does appear that great efforts were made by the Executive Secretary of the State Board of Elections to comply with the requirements of the Voting Rights Act of 1965. Nevertheless, the Act does not give this court the power to provide equitable relief to defendants, no matter how just their cause. See, 42 U.S.C. § 1973c.

By the very terms of the statute, covered changes in election laws may not be put into effect until they have either been precleared by the Attorney General or approved by the United States District Court for the District of Columbia. Indeed, they are not “effective as laws until and unless [they are] cleared pursuant to § 5.” McCain v. Lybrand, 465 U.S. -, 104 S.Ct. at 1044, quoting Connor v. Waller, 421 U.S. 656, 95 S.Ct. 2003, 44 L.Ed.2d 486 (1975).

Defendants have not challenged plaintiff’s contentions that each of the statutes in question deals with a “standard, practice, or procedure with respect to voting.” Since the statutes in question provide for designated seats in multi-member districts, staggered terms and changes in the boundaries or make-up of voting districts, we hold that they are subject to the section 5 preclearance requirements.

It follows that plaintiff is entitled to the injunctive relief sought. An order providing that relief will issue.