author: LYNNE, Senior District Judge.

text:
    INTERGRAPH CORPORATION, Plaintiff, v. STOTTLER, STAGG & ASSOCIATES, INC., et al., Defendants.
    Civ. A. CV84-L-5437-NE.
    United States District Court, N.D. Alabama, Northeastern Division.
    Oct. 16, 1984.

      H. Harold Stephens, Lanier, Shaver & Herring, Huntsville, Ala., for plaintiff.
    Jack E. Held, Sirote, Permutt, Friend, Friedman, Held & Apolinsky, Birmingham, Ala., for defendants.
   MEMORANDUM

LYNNE, Senior District Judge.

Before the Court is the motion of the defendants to dismiss this action for lack of personal jurisdiction, or, in the alternative, to transfer this action to the United States District Court for the Middle District of Florida. Because the Court is convinced that this action should be transferred pursuant to 28 U.S.C. § 1404(a), there is no need to reach the jurisdictional issue.

This action arose from the sale of certain computer equipment by the plaintiff, an Alabama corporation, to the defendants (hereinafter collectively referred to as “Stottler, Stagg”), all of which are Florida corporations located in Cape Canaveral, Florida. This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332(a) (diversity of citizenship).

The relevant facts revealed by the pleadings and affidavits are these. In the summer of 1982, Wade Herod, director of operations for Stottler, Stagg, saw an advertisement about Intergraph Corporation (“Inter-graph”) and its computers in a national magazine. He called Intergraph’s Huntsville headquarters and expressed an interest in purchasing an Intergraph computer. Shortly thereafter, Mr. Chet Barr, a Florida resident and local Intergraph sales representative, contacted Mr. Herod and arranged for a meeting at Stottler, Stagg’s Cape Canaveral offices. Similar meetings followed, culminating in a formal sales presentation by Intergraph’s Florida sales representatives to Stottler, Stagg officials in Cape Canaveral. Following this sales presentation, Intergraph’s Florida sales personnel made several more visits to Stottler, Stagg’s offices to negotiate and finalize a sale agreement. Ultimately an agreement was reached, and on December 29, 1982, a purchase order prepared and signed by the president of Stottler, Stagg was mailed to Intergraph in Huntsville. Subsequently, Intergraph delivered a good portion of the equipment ordered and installed and tested it at Stottler, Stagg’s Cape Canaveral facility. The contract also provided for some on-site training of Stottler, Stagg personnel in the operation of the equipment, to be conducted by Intergraph personnel in Florida. Intergraph was also to service and maintain the equipment following its delivery and installation.

Intergraph correctly points out, however, that not all aspects of this transaction occurred in Florida. For instance, prior to the execution of the sale contract, at least three employees of Stottler, Stagg came to Intergraph’s Huntsville offices — albeit at Intergraph’s request — to attend a demonstration of the computer equipment. After the contract was executed, and again at the insistence of Intergraph, various Stottler, Stagg employees came to the Huntsville facility for some of their training in the operation of the equipment. Finally, Inter-graph points out that some (but not all) of the computer equipment sold was manufactured and developed by Intergraph in Alabama.

Following delivery, installation, and on-site testing of a good portion of the equipment by Intergraph employees at Stottler, Stagg’s offices, the Florida buyer began complaining about the equipment and its performance. On several occasions Inter-graph maintenance and service personnel in Florida attempted to correct or investigate the problems complained of. Ultimately, Stottler, Stagg refused to pay for the equipment as agreed. Intergraph then filed this suit for breach of contract. Shortly thereafter, Stottler, Stagg brought suit against Intergraph for misrepresentation of the equipment’s capacities and breach of contract in the delivery of defective equipment. Stottler, Stagg’s suit is currently pending in the United States District Court for the Middle District of Florida.

It is against this background that the Court must consider Stottler, Stagg’s motion to transfer the suit filed by Inter-graph. Title 28, U.S.C. § 1404(a) provides the controlling criteria:

For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.

It is clear that this action “might have been brought” in the Middle District of Florida. It is clear that Stottler, Stagg would have been amenable to suit there, and venue would, of course, be proper there since all the defendants concededly reside in that district. 28 U.S.C. §§ 1391(a), 1391(c).

The propriety of transfer, then, boils down to this: would a transfer best serve the convenience of the parties and the witnesses and the interests of justice? In deciding this question, the plaintiff’s choice of forum must be given considerable weight. Howell v. Tanner, 650 F.2d 610, 616 (5th Cir.1981). However, if the plaintiff’s choice is clearly outweighed by considerations of convenience, cost, judicial economy, and expedition of the discovery and trial processes, a district court has discretion to disregard the plaintiff’s choice of forum and transfer the action to a forum that better promotes these interests. Id. The weighing of relative inconveniences and the determination of the forum in which judicial resources can most efficiently be utilized is a matter committed to the discretion of the trial court. Norwood v. Kirkpatrick, 349 U.S. 29, 75 S.Ct. 544, 99 L.Ed. 789 (1966). See also Howell v. Tanner, 650 F.2d at 616.

In the present case, there can be little doubt that the Middle District of Florida would be a much more convenient forum for the expeditious resolution of this controversy. To begin with, Intergraph appears to be far more capable of litigating outside its home state than is Stottler, Stagg. Intergraph admittedly sells and services computers in many states, including Florida. Although it is headquartered in Alabama, it has sales and service personnel in Florida and obviously conducts a fair amount of business there. By contrast, the defendant appears to be far more localized, and conducts no business in Alabama aside from its purchase of the equipment that is the focal point of this litigation. Stottler, Stagg would suffer substantial inconvenience if forced to defend this suit in Alabama. In light of its significant presence in Florida, Intergraph would suffer little or no inconvenience if forced to prosecute this suit in Florida. Thus, when the relative convenience of the parties is put into the balance, the scales tip decidedly in favor of transferring this action to the Middle District of Florida.

When the convenience of material witnesses and the availability of evidence are considered, the result is the same. The testimony of Intergraph’s Florida sales and service representatives, who not only conducted many of the sales presentations and negotiating sessions in Florida, but also installed the equipment at Stottler, Stagg’s Cape Canaveral location and tested and serviced it there, will surely play a significant role in the resolution of this controversy. These Florida-based employees clearly have material testimony to provide concerning the existence and nature of the system’s alleged defects; the steps, if any, taken to correct those defects; the method of installation of the equipment; the representations made by Florida sales personnel regarding the system’s capabilities; and so on. Similarly, all of the Stottler, Stagg employees who have material testimony to offer in this matter reside in Florida. While a few of Intergraph’s Alabama employees may also have material testimony to provide concerning the nature of the contract and the capabilities of the system, it is apparent that the predominant convenience of the witnesses favors transfer of this action to Florida.

Another significant factor warranting transfer to Florida is the fact that the equipment itself is located in the State of Florida. It cannot be doubted that the deficiencies in the performance and capacity of the equipment sold by Intergraph will ultimately be raised by Stottler, Stagg in the defense of this suit. As the defendants point out, the proof of Stottler, Stagg’s case will very likely involve a demonstration of the equipment’s unsuitability through a jury view of the equipment. The need for a jury view in a particular forum has been held to be a material factor warranting transfer in other cases. See, e.g., Koehring Co. v. Hyde Construction Co., 324 F.2d 295 (5th Cir.1963). See also Early & Daniel Co. v. Wedgefield, 164 F.Supp. 414 (M.D.N.C.1958) (action would be more appropriately and conveniently settled if transferred to a forum closer to site where defective goods located).

There is another very important factor favoring transfer. The defendants contend that they are not amenable to suit in Alabama, and that it would be inconsistent with notions of “fair play and substantial justice” to force them to defend this suit in Alabama. Cf. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). This raises a “subtle and difficult problem” of personal jurisdiction, Burger King Corp. v. MacShara, 724 F.2d 1505, 1508 (11th Cir.1984). The question of whether a state may exercise specific jurisdiction over a nonresident based on the mere fact of his contractual dealings with a resident plaintiff is one that has “deeply divided the federal and state courts.” Lakeside Bridge & Steel Co. v. Mountain State Construction Co., 445 U.S. 907, 909, 100 S.Ct. 1087, 1088, 63 L.Ed.2d 325 (1980) (White, J., dissenting from denial of certiorari). Indeed, the Supreme Court recently acknowledged the ongoing controversy as to whether mere purchases by a nonresident from a forum seller could ever be a sufficient basis, standing alone, for the exercise of personal jurisdiction — even with regard to litigation arising out of the purchases. See Helicopteros Nacionales de Colombia v. Hall, — U.S.-, 104 S.Ct. 1868, 80 L.Ed.2d 404, 413 n. 12 (1984). The Supreme Court’s treatment of the issue in Helicópteros is ample evidence that the jurisdictional question presented in the case sub judice is an open and troubling one.

In the face of such a subtle and complex question of constitutional law, the considerations warranting transfer become all the more compelling. Judicial economy would hardly be furthered by retaining the action in this district when doing so would require a decision on a close question of constitutional law, a decision which would surely require a substantial investment of judicial resources by this Court and would almost certainly generate one or more appeals. Whether those appeals came before or after a judgment on the merits, this litigation would undoubtedly be prolonged and the costs for both the parties and the judicial system would be substantially increased. The existence of other factors warranting transfer of this action to Florida, where the district court would clearly have jurisdiction to render a judgment on the merits, counsels strongly against stepping into the muddy waters of this jurisdictional morass.

Particularly since plaintiff maintains a substantial presence in Florida in the form of sales and service representatives, and since those representatives have been most intimately involved in the transactions which are at issue in this case, and since the center of gravity of this controversy is clearly in Florida rather than Alabama, this Court is convinced that it should exercise its discretion to transfer this case pursuant to 28 U.S.C. § 1404(a).

      . There has been no contention that Stottler, Stagg has those contacts with the forum of a "continuous and systematic” nature required to justify a court’s assertion of “general” jurisdiction over a defendant in litigation unrelated to forum contacts. See Helicopteros Nacionales de Colombia v. Hall, — U.S.-, 104 S.Ct. 1868, 80 L.Ed.2d 404, 411, n. 8 (1984) (discussion of “general” versus "specific” jurisdiction). Thus, the issue here is one of specific jurisdiction — are the contacts of the defendant with the forum in connection with the transaction in issue sufficient to give the Court in personam jurisdiction over the company for purposes of this particular litigation? Cf. Pepsi-Cola Bottling Co. of Ft. Lauderdale-Palm Beach, Inc. v. Buffalo Rock Co., Inc., et al., 593 F.Supp. 1559, 1562 (N.D.Ala. 1984).

      . Although this Court recently found jurisdiction available over a nonresident who purchased goods from the forum seller in the Buffalo Rock case, supra, n. 1, that case involved a transaction more intimately connected to Alabama than the one involved here. Questions of personal jurisdiction inherently require a thorough analysis of the totality of the circumstances, and each case must be decided on its own facts. Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 499 (5th Cir.1974). Because there is ample reason to transfer this case to Florida, the Court need not decide whether its decision in Buffalo Rock should be extended to uphold jurisdiction on the particular facts of this case.


source: Caselaw Access Project

author: CURTIN, Chief Judge.

license: Public Domain

text:
    UNITED STATES of America, Plaintiff, v. STATE OF NEW YORK, New York State Department of Health and Niagara County Health Department, Defendants.
    No. CIV-83-514C.
    United States District Court, W.D. New York.
    Sept. 7, 1984.

      Salvatore R. Martoche, U.S. Atty., Buffalo, N.Y. (Sonia C. Jaipaul, Asst. U.S. Atty., Buffalo, N.Y., of counsel), for plaintiff.
    Robert Abrams, Atty. Gen. of the State of N.Y., Buffalo, N.Y. (Douglas S. Cream, Asst. N.Y. State Atty. Gen., Buffalo, N.Y., of counsel), for defendants State of New York and New York State Department of Health.
    Glenn S. Hackett, Niagara County Atty., Lockport, N.Y. (J. Michael Fitzgerald, Asst. Niagara County Atty., Lockport, N.Y., of counsel), for Defendant Niagara County Health Department.
   CURTIN, Chief Judge.

The United States [the government] has filed this claim for indemnification under the Swine Flu Act, 42 U.S.C. § 247b(k)(7). The government has named both New York State and Niagara County as defendants for their responsibility as participants in the Swine Flu innocuiation program. Defendants have moved to dismiss the action.

The facts are as follows. On November 19, 1976, Janet Vincek was innoculated under the national Swine Flu Immunization Program administered through the Niagara County Health Department. She suffered severe left ulnar nerve palsy, sensory and motor, with marked muscle wasting. On November 14, 1978, she filed a claim against the government for $2 million. On or about October 3, 1979, the government sent a letter of inquiry to Niagara County to verify the legitimacy of Ms. Vincek’s claim. The Health Department apparently responded with a general acknowledgement. Information about those letters came to this court’s attention at the time of oral argument on the present motions.

On July 16, 1981, the government paid Janet Vincek $150,000.00 in settlement of her claim. On May 16, 1983, the government filed the instant action.

Defendant State of New York now moves to dismiss on two grounds: 1) the suit is barred by eleventh amendment immunity; and 2) the suit is time-barred under both CPLR § 214 and Court of Claims Act § 10(3) pertaining to Court of Claims actions. Niagara County also moves to dismiss, but argues only that the action is time-barred under CPLR § 214.

The State has now conceded “that by virtue of its participation in the Swine Flu Immunization Program it may have waived its sovereign immunity pursuant to 42 U.S.C. § 247b(k)(7).” (Item 12, Letter Brief at p. 1.) This position is correct, which leaves only the statute of limitations issue.

The Swine Flu statute does not provide an applicable statute of limitations; hence, all parties agree that this court must apply the most appropriate state statute of limitations. Before addressing this hotly contested issue, this court must define the nature of the instant action, which will in turn help determine the correct statute of limitations.

The government admits that an element of proof in this case will be the negligence of the County in the administration of the flu shot. However, the action is premised upon the federal statutory right of indemnification. The plaintiff in this case is not the injured party; rather, the government is merely suing for monies paid to the injured party. No right to sue under this federal statute exists unless and until money is paid by the government. Hence, the cause of action does not accrue until payment. The government filed this action within two years of the date that payment was made. Because the action primarily depends upon a right of indemnification, CPLR § 213 applies, and the action is timely.

With the encouragement of this court, the parties have addressed the need for a notice of claim pursuant to Gen.Mun.Law § 50-e. Defendants argue that section 50-e applies in this case and the absence of notice to the county precludes suit. Section 50-e applies “[i]n any case founded upon tort” as identified in Gen.Mun.Law § 50 — i, as follows:

No action ... shall be ... maintained against a ... county ... for personal injury, wrongful death or damage to real or personal property alleged to have been sustained by reason of the negligence or wrongful act of such ... unless, (a) a notice of claim shall have been made and served upon the ... county____

This provision has been held to apply in a suit for indemnification based upon a statutory duty to operate a county transit system. Coleman v. Westchester Street Transportation Co., Inc., 57 N.Y.2d 734, 454 N.Y.S.2d 978, 440 N.E.2d 1324 (1982). Coleman differs, however, in very important ways from the instant case. In Coleman, the statutory duty belonged to the County. The plaintiff was the injured party, and the indemnification was between the county and the transit authority.

In the instant case, the plaintiff is not the injured party. Rather, the plaintiff is claiming rights under a statutory duty to indemnify. This indemnification is between plaintiff and defendant — not between defendant and its agents or employees. See Accredited Demolition Const. Corp. v. City of Yonkers, 37 A.D.2d 708, 324 N.Y.S.2d 377, 379 (2d Dept.1971).

More important is the fact that section 50 — i was created as a condition precedent to suits which would otherwise have been barred by municipal immunity. The right of action in the instant case was created by federal statute, and the state or county exposed itself to liability as a result of their participation under the statute.

Finally, the County Health Department did have informed notice of possible indemnification liability when it received the letter of inquiry from the government in 1979. This fact is not dispositive, but it does demonstrate that at least the spirit of section 50 — i has been served.

In sum, this court finds that since plaintiffs action depends upon a federal statutory right of indemnification, the cause of action did not accrue until payment. Hence, the action is timely.

The State defendant further argues that the Court of Claims limitations period should apply. Court of Claims Act § 10(3). It does not. Actions against the State are normally brought in the Court of Claims; hence, the procedures of that court would apply. Since this claim is properly in federal district court, the Court of Claims provision does not apply.

For all these reasons, defendants’ motions to dismiss are in all respects denied. The parties are instructed to meet with the court on October 11, 1984, at 9 a.m.

So ordered.


author: SOFAER, District Judge:

text:
    Nathaniel DAVIS, Frederick D. Purdy, Ray E. Davis, Plaintiffs, v. Constantin COSTA-GAVRAS; Universal City Studios, Inc.; MCA, Inc.; and the Hearst Corporation, Defendants.
    No. 83 Civ. 2539 (ADS).
    United States District Court, S.D. New York.
    Oct. 16, 1984.

      Robert Kasanof and Bart M. Schwartz, New York City, for plaintiffs; Robert Kasanof, Bart M. Schwartz, Howard E. Heiss, New York City, of counsel.
    Williams & Connolly, Washington, D.C., for defendants Universal City Studios, Inc., MCA, Inc., and Constantin Costa-Gavras; Irving Younger, David E. Kendall, Steven A. Steinbach, Washington, D.C., of counsel.
    Baker & Hostetler, Washington, D.C., for defendant Hearst Corp.; Bruce W. Sanford, Washington, D.C., of counsel.
   OPINION AND ORDER

SOFAER, District Judge:

Plaintiffs filed this libel action in January 1983 in the Eastern District of Virginia. The suit was subsequently transferred to the Southern District of New York. Davis v. Costa-Gavras, No. 83-0019-A (E.D.Va. March 25, 1983). Jurisdiction is based on diversity of citizenship, 28 U.S.C. § 1332. Plaintiffs are two State Department officials, Nathaniel Davis and Frederick D. Purdy, and a naval officer, Captain Ray E. Davis, who were stationed in Santiago, Chile in September 1973 during the military coup which deposed the government of Salvador Allende Gossens. While stationed in Chile, Plaintiff Nathaniel Davis served as United States Ambassador, Frederick D. Purdy as United States Consul to the Santiago Consulate, and Captain Ray E. Davis as Commander of the United States Military Group and Chief of the United States Navy Mission to Chile.

Charles Horman was a United States citizen killed in the aftermath of the September 1973 coup. The circumstances surrounding the disappearance and death of Horman attracted the attention of che author Tom Hauser, who researched and wrote what purports to be a nonfiction account of Horman’s death, entitled The Execution of Charles Horman: An American Sacrifice {“Execution”). Harcourt Brace Jovanovich, Inc., (“HBJ”) published Hauser’s work in hardcover in 1978. The book, republished in paperback by The Hearst Corporation (“Hearst”), was the basis for the motion picture “Missing,” directed by Constantin Costa-Gavras and released by Universal City Studio’s, Inc., (“Universal”) a wholly owned subsidiary of MCA, Inc. (“MCA”).

Plaintiffs named as defendants the author Hauser, publishers HBJ and Hearst, and filmmakers Costa-Gavras, Universal, and MCA; they claim that defendants, through publication of the books and release of the film, “falsely accused [them] of ordering or approving the order for the murder of Charles Horman.” In an opinion and order dated February 7, 1984, motions for summary judgment by the defendants Hauser and HBJ were granted. Davis v. Costa-Gavras, 580 F.Supp. 1082 (S.D.N.Y. 1984).

Defendant Costa-Gavras now renews his motion to dismiss for lack of personal jurisdiction and also moves, together with Universal and MCA, for judgment on the pleadings on the ground that the movie “Missing” is not susceptible of a defamatory interpretation. Defendant Hearst moves for summary judgment on the ground that it is not liable either for the republication of the hardcover book Execution, or for any defamatory statements contained in the motion picture “Missing.” For the reasons set forth below, defendant Costa-Gavras’ motion to dismiss for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2) is denied, and defendant Hearst’s motion for summary judgment pursuant to Rule 56 is granted. The motions of defendants Costa-Gavras, Universal, and MCA to dismiss under Rule 12(c) will be assessed in a separate opinion and order.

I. Personal Jurisdiction

Costa-Gavras argues that this court may not exercise jurisdiction over him consistent with either New York state’s long-arm statute, NYCPLR § 302 (McKinney 1972), or the requirements of due process, see International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945); Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). Plaintiffs claim that the jurisdictional issue was finally decided by Judge Cacheris when he transferred the case to this District, that Costa-Gavras waived his power to object to jurisdiction here by moving to transfer this case to the Southern District of New York, and that jurisdiction in any event exists under NYCPLR § 302(a)(1) and (a)(2).

Judge Cacheris entertained neither briefing nor argument as to the propriety of jurisdiction in New York, and never explicitly determined that the Southern District of New York would have personal jurisdiction over Costa-Gavras. The general rule that a disappointed litigant should not be given an opportunity to litigate a matter that has been fully considered by a court of coordinate jurisdiction, see Hayman Cash Register Co. v. Sarokin, 669 F.2d 162 (3rd Cir.1982), is therefore inapplicable. See Hoffman v. Blaski, 363 U.S. 335, 340 n. 9, 80 S.Ct. 1084, 1088 n. 9, 4 L.Ed.2d 1254 (1960) (“order did not purport to determine the jurisdiction of the transferee court and therefore did not preclude [transferee court] of power to determine [its] own jurisdiction. ..”); see also C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3827, at 175 (1976) (transferee court has power to reexamine for itself whether it is a court in which suit could have been brought). Plaintiffs’ further argument that Costa-Gavras waived jurisdiction by moving to transfer need not be decided, for in personam jurisdiction clearly exists.

Costa-Gavras, a citizen and resident of France, coauthored the screenplay for the movie “Missing,” and directed the film. From August 1980 when he began working on the screenplay, until December 1980 when the screenplay was in final form, Costa-Gavras was in New York City on approximately seven or eight occasions. Costa-Gavras Affidavit at 2. During this period and at his request, see Costa-Gavras Depo. Tr. at 9, he met with Thomas Hauser, author of the book Execution, and asked Hauser questions “probably concerning the story and the characters and the information. Id. at 20. Costa-Gavras also met with Donald Stewart, coauthor of the screenplay, see id. at 8, and consulted with the family of Charles Horman. Costa-Gavras Affidavit at 2-3. In late 1981 and early 1982, Costa-Gavras returned to New York on at least three separate occasions. In September 1981, he was in New York to attend the screening of “Missing” for the family of Charles Horman, and in October 1981 he attended another New York screening of the film for executives of Universal. Costa-Gavras Affidavit at 3. In addition to these private screenings, Costa-Gavras also attended, in or about January 1982, the formal premiere of the film in New York. Costa-Gavras Depo. Tr. at 26-27. In December 1981 he traveled to New York and remained here for several days to engage in various publicity-related activities in connection with the release of the film, including consultations with publicity representatives regarding the material to be used in the advertising campaign for “Missing,” and meetings with media representatives. Costa-Gavras Affidavit at 3. In addition to these extensive New York activities related to “Missing,” Costa-Gavras also visited New York City approximately 20-25 times in the past 10 years “either in connection with motion picture productions or to visit friends,” and he maintains a bank account here. Id. at 3-4.

NYCPLR § 302(a)(1) creates a two-step test for personal jurisdiction, requiring not only that the defendant “transact business” in the state, but also that the cause of action “arise” from the in-state transactions. See Xedit Corp. v. Harvel Industries Corp., Fidelipac, 456 F.Supp. 725, 728 (S.D.N.Y.1978); Longines-Wittnauer, 15 N.Y.2d 443, 452, 209 N.E.2d 68, 72, 261 N.Y.S.2d 8, 14, cert. denied, 382 U.S. 905, 86 S.Ct. 241, 15 L.Ed.2d 158 (1965); Rene Boas & Assoc. v. Vernier, 22 A.D.2d 561, 257 N.Y.S.2d 487 (1965). Defendant’s numerous in-state activities, including business meetings with various persons connected with the writing, production, and release of the motion picture “Missing,” constitute “transacting business" within the meaning of the statute’s threshhold requirement. Cf. Xedit, 456 F.Supp. at 728 (single meeting at trade show constitutes “transacting business” for purposes of § 302(a)(1)); Potter’s Photographic Applications Co. v. Ealing Corp., 292 F.Supp. 92, 101-02 (E.D.N.Y. 1968) (defendant was “transacting business within state” for jurisdictional purposes where preliminary contract negotiations were conducted in New York on at least three occasions).

Defendant’s New York State activities were also purposeful and sufficiently proximate to the allegedly unlawful acts that the cause of action here may fairly be said to arise out of those activities. By coming to New York on approximately ten separate occasions to engage in meetings with Hauser, the Horman family, publicity and media representatives, and coauthor Stewart, Costa-Gavras “ ‘purposely’ availed himself ‘of the privilege of conducting activities’ within New York and thereby ‘invok[ed] the benefits and protections of its laws' [in connection with the motion picture “Missing”]” Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 18, 256 N.E.2d 506, 508-09, 308 N.Y.S.2d 337, 341 (1970) (quoting Denckla, 357 U.S. at 253, 78 S.Ct. at 1239). The cause of action “arises” from defendant’s New York activities inasmuch as these activities substantially contributed to the writing of the screenplay and to its production, promotion, and release, and thereby necessarily furthered the alleged libel.

Furthermore, defendant’s extensive, purposeful contacts with the state of New York are such that the maintenance of this suit can in no sense be said to offend “our traditional conception of fair play and substantial justice,” International Shoe, 326 U.S. at 320, 66 S.Ct. at 160, and the exercise of jurisdiction here over Costa-Gavras will further both plaintiffs’ “interest in obtaining convenient and effective relief, see Kulko v. Superior Court, 436 U.S. 84, 92 [98 S.Ct. 1690, 1696, 56 L.Ed.2d 132] (1978), ... [and] the interstate judicial system’s interest in obtaining the most efficient resolution of controversies.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980). Finally, New York State’s interest in adjudicating this dispute is significant; as an important center for the film industry, New York has an interest in ensuring that the risks and liabilities flowing from filmmaking activities substantially undertaken in New York be uniform.

II. Republication

Plaintiffs assert that Hearst is liable for republishing in paperback form allegedly defamatory material contained in Execution, and that Hearst shares responsibility with defendants Costa-Gavras, Universal and MCA for defamatory statements allegedly contained in the motion picture “Missing.” Hearst, claiming that no material issues of fact are in dispute, moves for summary judgment on the grounds that: 1) its republication of the 1982 paperback edition is not actionable defamation as a matter of law; and 2) it bears no legal responsibility for any defamatory material allegedly contained in the motion picture “Missing.”

A. The Paperback “Missing".

Execution was first published in hardcover in 1978 by HBJ. In March 1979, a division of Hearst, Avon Books (“Avon”), acquired a license from HBJ to publish paperback editions of Execution. Pursuant to this agreement, Avon republished the book under the same title in 1980. In July 1981, upon learning from Hauser that a film based upon Execution would be released in January 1982 and that it would be entitled “Missing,” Avon obtained from MCA a license to use the advertising logo and artwork of the motion picture “Missing” in paperback editions of the book. In early 1982, Avon released a paperback edition of Execution under the title Missing. In Davis v. Costa-Gavras, 580 F.Supp. at 1093, plaintiffs’ claims based on the 1980 edition were dismissed for failure to comply with the New York state statute of limitations. Plaintiffs press their claim with respect to the 1982 edition.

In publishing the 1982 edition, Avon made no changes in the text of the 1978 hardcover edition; indeed, the texts of the three editions are identical inasmuch as Avon used the photographic negatives that had originally been prepared by HBJ for the hardcover edition when it published both paperback editions. Avon’s editorial role in the publication of the 1982 edition was limited to changing the book’s title and redesigning the cover to display the advertising logo and artwork of the film “Missing.”

Prior to publication, Avon made no independent inquiry into the accuracy of Hauser’s account of events surrounding the death of Charles Horman. Instead, Avon relied on the reputation of HBJ, on HBJ’s assurances that the book had been thoroughly reviewed for libel prior to its original publication, and on HBJ’s express warranty in the paperback licensing agreement that Execution “contains no libelous or unlawful matter.” Vought Affidavit at 9. Avon also relied on the absence — over a period spanning almost four years from the initial release of Execution in hardcover— of any litigation or other indication that the veracity of the book had been challenged.

New York courts that have addressed the question of a publisher’s liability for republication of allegedly defamatory material have consistently held that, absent some reason to believe that the material to be published is false, a republisher need not conduct its own independent accuracy check, but may instead rely on the research and reputation of the original publisher. Yiamouyiannis v. Consumers Union, 619 F.2d 932 (2d Cir.), cert. denied, 449 U.S. 839, 101 S.Ct. 117, 66 L.Ed.2d 46 (1980); Karaduman v. Newsday, Inc., 51 N.Y.2d 531, 416 N.E.2d 557, 435 N.Y.S.2d 556 (1980); Rinaldi v. Holt, Rinehart & Winston, Inc., 42 N.Y.2d 369, 366 N.E.2d 1299, 397 N.Y.S.2d 943, cert. denied, 434 U.S. 969, 98 S.Ct. 514, 54 L.Ed.2d 456 (1977). Plaintiffs have not challenged HBJ’s reputation in the publishing industry, and HBJ explicitly assured Avon regarding the accuracy of Execution.

Furthermore, Hearst may be held answerable in libel only if it acted with “actual malice” in connection with the 1982 republication. As United States Ambassador, United States Consul, and Commander of the United States Military Group in Chile respectively, plaintiffs Nathaniel Davis, Frederick D. Purdy, and Ray E. Davis are public officials within the meaning of New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964); see also Rosenblatt v. Baer, 383 U.S. 75, 85, 86 S.Ct. 669, 675, 15 L.Ed.2d 597 (1966) (plurality opinion) (“ ‘public official’ designation applies at the very least to those among the hierarchy of government employees who have, or appear to the public to have, substantial responsibility for or control over the conduct of government affairs”). These public officials cannot recover for a defamatory statement absent “clear and convincing” proof that “the statement was made with ‘actual malice’— that is, with knowledge that it was false or with reckless disregard of whether it was false or not.” 376 U.S. at 279-80, 84 S.Ct. at 725-26.

Plaintiffs contend, however, that a triable issue of fact exists as to whether Hearst acted with actual malice in publishing the 1982 edition. Avon received a copy of a letter from Judd Kessler and Nathaniel Davis addressed to Universal, MCA, HBJ, and Hauser on January 25, 1982, days before plaintiffs claim the 1982 edition was published. Plaintiffs argue that this letter constituted notice to the defendant of the false and defamatory material contained in Execution.

Hearst claims Avon received the letter after republication; but even assuming receipt of the letter prior to publication, plaintiffs have failed genuinely to place in issue their claim that defendant republished the 1982 edition with the requisite “subjective awareness of probable falsity or actual intent to publish falsely.” Yiamouyiannis, 619 F.2d at 940. Kessler and Davis focus in the letter almost exclusively on material to be included in the movie “Missing.” They also repeatedly distinguish the book from the movie, noting that “a motion picture is obviously a far different medium from a book” and that “the motion picture will portray as truth a series of conjectures, ‘theories,’ innuendos and outright falsifications (appearing only as supposedly neutral ‘questions’ in the Hauser book) to the effect that Charles Horman was killed by or with the complicity of United States diplomatic, military and intelligence personnel.” The only portion of the letter that complains directly of material in the book is the closing paragraph, and even there Kessler and Davis’ concern appears to stem not from the book’s contents, but from its release in conjunction with the motion picture:

If we are mistaken and the motion picture in any way suggests [plaintiffs’ complicity in the death of Charles Horman], ... you may be assured that appropriate action will be taken. This applies with equal force to any republication — for example, in paperback — of the Hauser book in connection with the release of the motion picture.

Hearst Exhibit G.

The mere threat of litigation is insufficient to put a defendant on notice of “probable falsity.” Cf. Rinaldi v. Viking Penguin, Inc., 52 N.Y.2d 422, 420 N.E.2d 377, 438 N.Y.S.2d 496 (1981) (finding a triable issue of malice where plaintiff “had supplied to defendant a detailed and objectively verifiable analysis” of the book’s “specific inaccuracies,” and defendant publisher had “itself concluded that at least some part of the material to which plaintiff had objected indeed was inaccurate,” and had informed plaintiff that it would correct the inaccuracies, but then failed to implement the decision). As the court in Edwards v. National Audubon Society, Inc., 556 F.2d 113, 121 (2d Cir.), cert. denied, 434 U.S. 1002, 98 S.Ct. 647, 54 L.Ed.2d 498 (1977), observed: “Surely liability under the ‘clear and convincing proof’ standard of New York Times v. Sullivan cannot be predicated on mere denials, however vehement; such denials are so commonplace in the world of polemical charge and counter-charge that, in themselves, they hardly alert the conscientious [publisher] to the likelihood of error.” Plaintiffs’ unsubstantiated threat was insufficient genuinely to place in issue plaintiff’s claim that Hearst published the 1982 edition of Execution with either knowledge of its probable falsity or actual intent to publish falsely.

B. The Motion Picture “Missing”.

Plaintiffs also claim that Hearst is liable for the subsequent republication of material contained in Execution in the motion picture “Missing”. Under New York law, liability for a subsequent republication must be based on real authority to influence the final product, not upon evidence of acquiescence or peripheral involvement in the republication process. See Davis v. Costa-Gavras, 580 F.Supp. at 1096; Karaduman, 51 N.Y.2d 531, 416 N.E.2d at 560-61, 435 N.Y.S.2d at 559-60. The record is devoid of evidence that Hearst was even peripherally involved in the production of the motion picture “Missing”. Hearst’s only connection to the film was a contract entered into between Avon and MCA, under which MCA licensed Avon to use the advertising logo and artwork of the motion picture in paperback editions of the book, and also agreed to include a reference to the paperback book in advertising the film. Hearst took steps to capitalize on the “movie tie-in,” but this limited activity fails to demonstrate the requisite authority or control over the final product. See Davis, 580 F.Supp. at 1097-98.

Hauser’s contract with the filmmaker, Universal, reveals that Universal was not required to obtain Avon’s imput or even to consult with the publisher on the project. Under the agreement, Universal possessed the “exclusive, absolute, and unlimited right to use ... its uncontrolled discretion” to “adapt, use, dramatize, arrange, change, vary, [or] modify ...” Hauser’s work. See letter from Universal Pictures to Thomas Hauser (April 10, 1981); Hauser Exhibit 2. Avon possessed no authority, control, or even influence over the planning, writing, production or distribution of the film. Plaintiffs, moreover, have had the opportunity to depose Avon’s employees regarding the relationship between Avon and the motion picture “Missing” and also to review the documents in Avon’s possession relating to the motion picture. Despite this discovery, they have been unable to produce any evidence of Avon’s involvement in the film. Summary judgment in Hearst’s favor is therefore appropriate.

Defendant Costa-Gavras’ motion to dismiss is denied and defendant Hearst’s motion for summary judgment is granted.

SO ORDERED.


author: MacMAHON, Senior District Judge.

text:
    THOMAS NELSON, INC., Plaintiff, v. CHERISH BOOKS LTD. and Stanley Reisner, an individual, Defendants.
    No. 84 Civ. 5474 (LFM).
    United States District Court, S.D. New York.
    Oct. 17, 1984.

      Brooks Haidt Haffner & Delahunty by Charles G. Mueller, New York City, for plaintiff.
    Jonathan S. Gaynin, New York City, for defendants.
   OPINION

MacMAHON, Senior District Judge.

This is an action for injunctive relief and damages brought by Thomas Nelson, Inc., a Tennessee corporation engaged in the publication of romance novels, against Cherish Books Ltd., a New York corporation engaged in the same business. The parties stipulated that trial on the merits be advanced and consolidated with the hearing on the application for a preliminary injunction. Fed.R.Civ.P. 65(a)(2). Accordingly, the action was tried to the court, without a jury, on September 18 and 19, 1984.

Plaintiff seeks to enjoin defendants permanently from using the term CHERISH ROMANCES and a heart-shaped design, or any other designation similar to plaintiff’s trademark, in connection with the publication of paperback romance novel series. Plaintiff also seeks to require defendants to deliver up for destruction all material in the control of defendants containing the words CHERISH ROMANCES. Finally, plaintiff seeks compensatory and punitive damages.

Defendants generally deny the significant allegations of the complaint and counterclaim under common law trademark and unfair competition, Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1982), and Section 368-d of the New York General Business Law (McKinney 1984). Defendants seek dismissal of plaintiff’s action, as well as a permanent injunction prohibiting plaintiff, inter alia, from using the term CHERISH ROMANCE, compensatory and punitive damages, recall of all of plaintiff’s books for destruction, a corrective advertisement, and attorney’s fees.

After carefully considering the documents, hearing and observing the witnesses, and considering the arguments of counsel, we find the following facts established by the evidence:

In April 1983, defendant Cherish Books decided to publish a series of romance novels which had been previously published under the imprint Richard Gallen. By early September 1983, Cherish had conceived the mark CHERISH ROMANCE and, using the CHERISH mark, had commenced soliciting orders for the novels. In response, by December 1983, K-Mart Corporation had ordered 150,000 volumes with the CHERISH mark. The first printing of the novels using the mark was on March 20, 1984, and on April 9, 1984 Cherish filed an application for registration of its mark with the United States Patent and Trademark Office. By the end of July 1984, over 240,000 novels had been distributed to every major city in the United States. They were sold to the public by major retail stores and bookstores and were also distributed by national and international distributors. Cherish has expended over $150,000 in connection with the publication and marketing of its books using the mark CHERISH ROMANCE.

In September 1983, plaintiff Nelson, a leading Bible publisher in Tennessee, was considering the publication of a series of Christian romance novels under the mark CHERISH ROMANCES. On October 20, 1983, Nelson initiated a search to determine the availability of the trademark CHERISH for books. Finding no conflicting marks, Nelson announced, in its November 1983 company newsletter, the adoption of a line of novels under the CHERISH mark. Prepublication sales of the books commenced in April 1984, and on July 2, 1984 Nelson proceeded to distribute the first novel of its series. To date, over 60,000 copies have been sold.

Since all of the issues depend on the merits of defendants’ counterclaim for trademark infringement, we first consider the counterclaim.

INFRINGEMENT

It is clear from the foregoing facts that defendant Cherish, not plaintiff Nelson, is the owner of the trademark CHERISH ROMANCE because of its first use of the mark in commerce. Generally, first use for trademark purposes is the date on which the mark is used in connection with established business to identify the product. Stern Electronics, Inc. v. Kaufman, 523 F.Supp. 635 (E.D.N.Y.1981), aff'd, 669 F.2d 852 (2d Cir.1982). Cherish’s first publication and distribution in commerce occurred on March 20, 1984, while Nelson’s first publication was not until July 2, 1984. Thus, Cherish’s first use predates Nelson’s first use by three and one-half months. Accordingly, we find that Cherish is the owner of the trademark CHERISH ROMANCE.

In order to establish an action for trademark infringement, Cherish must demonstrate that Nelson’s use of the mark is likely to cause confusion or to deceive purchasers as to the source or origin of the novels. Lanham Act § 32, 15 U.S.C. § 1114. In determining the existence of a likelihood of confusion, a number of factors must be considered. Among tnese are: the strength of the CHERISH mark; the degree of similarity between the two marks; the proximity of the products; actual confusion; and the degree of care likely to be exercised by consumers. Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492 (2d Cir.), cert. denied, 368 U.S. 820, 82 S.Ct. 36, 7 L.Ed.2d 25 (1961).

Applying these factors, we find that defendant Cherish has demonstrated the requisite likelihood of confusion. The marks in question, CHERISH ROMANCE and CHERISH ROMANCES, are in effect identical. Both are being used to promote, distribute, and sell lines of romance novels to consumers in the United States. Thus, they compete head-to-head displaying virtually the same mark on the same product to the same consumers. Defendant Cherish’s books have extensive market penetration both in total number of volumes and in geographical distribution. Such penetration has created in the minds of consumers an identification of the mark with Cherish as the source of the novel. Given the market proximity shown here, Nelson’s mark is so similar that it will be likely, indeed it is certain, to lead to confusion among consumers as to the source of the novels. See Playboy Enterprises, Inc. v. Chuckleberry Pub., Inc., 511 F.Supp. 486 (S.D.N.Y.1981), aff'd, 687 F.2d 563 (2d Cir.1982). If Nelson is permitted to continue with its publication, it will get a free ride from Cherish’s sales, marketing efforts, and good will — all to the detriment of Cherish. See, e.g., Harlequin Enterprises Ltd. v. Gulf & Western Corp., 503 F.Supp. 647 (S.D.N.Y.1980), aff'd, 644 F.2d 946 (2d Cir.1981).

Under common law trademark infringement and the Lanham Act, 15 U.S.C. § 1117, Cherish is not required to prove actual damages or loss of sales to support its claim for injunctive relief. See, e.g., Coca-Cola Co. v. Tropicana Products, Inc., 690 F.2d 312 (2d Cir.1982); Monsanto Chem. Co, v. Perfect Fit Products Mfg. Co., 349 F.2d 389 (2d Cir.1965), cert. denied, 383 U.S. 942, 86 S.Ct. 1198, 16 L.Ed.2d 206 (1966). It is sufficient that Cherish has demonstrated that sales of its novels will probably be harmed if Nelson continues to publish its novels under the CHERISH ROMANCES mark.

In view of the likelihood of confusion and the irreparable injury to defendant should plaintiff Nelson continue to use the CHERISH mark, we grant defendants’ prayer for a permanent injunction.

Defendants also seek compensatory and punitive damages, recall of all of plaintiff’s books for destruction, a corrective advertisement, and attorney’s fees. Compensatory damages are not appropriate for specific damages were not proven at trial, and plaintiff’s sales have not been profitable to date. Any damages would be merely speculative in the absence of a showing of loss of sales or actual confusion. Punitive damages are also inappropriate for defendants have failed to demonstrate any fraud, bad faith, or malice on the part of plaintiff. There is no evidence that plaintiff knowingly and deliberately copied defendant Cherish’s mark or that plaintiff had the slightest hint of defendant’s use of the mark prior to plaintiff’s adoption of its similar mark.

After balancing the burdens and expense of a recall and destruction of all of plaintiff’s publications bearing the mark CHERISH ROMANCE against the probable benefits, we deny defendants’ request for a recall and destruction. See, e.g., Ideal Industries, Inc. v. Gardner Bender, Inc., 612 F.2d 1018 (7th Cir.1980). However, in view of plaintiff’s misleading advertisement in the August 31, 1984 issue of Publisher’s Weekly, we order that plaintiff pay for a corrective advertisement in the next available issue of Publisher’s Weekly.

Finally, we deny defendants’ request for attorney’s fees. Pursuant to the Lanham Act, 15 U.S.C. § 1117, attorney’s fees may be awarded in “exceptional” cases. This case is not an exceptional one. Plaintiff has demonstrated that it was acting upon the advice of counsel in bringing this action for trademark infringement. Absent adequate evidence of bad faith, malice, or fraud, attorney’s fees are not appropriate under the statute. Blue Bell, Inc. v. Jaymar-Ruby, Inc., 497 F.2d 433 (2d Cir.1974).

The foregoing opinion constitutes this court’s findings of fact and conclusions of law, pursuant to Fed.R.Civ.P. 52.

Accordingly, the Clerk of the court is directed to enter judgment dismissing plaintiff’s action with costs and granting defendants’ counterclaim. The parties are directed to settle a form of judgment within ten (10) days granting a permanent injunction against plaintiff with costs and a corrective advertisement, and denying other relief consistent with this opinion.


author: KRAM, District Judge.

text:
    SHEEPSHEAD NURSING HOME, Viola Ellner, and Ann Salerno, individually, as President and Vice-President of the Residents Council of Sheepshead Nursing Home and as representatives of all the patients at Sheepshead Nursing Home, Plaintiffs, v. Margaret M. HECKLER, as Secretary of the United States Department of Health and Human Services; Cesar Perales, as Commissioner of the Department of Social Services of the State of New York; David Axelrod, M.D., as Commissioner of the Department of Health of the State of New York; and George Vernez, as Acting Commissioner/Administrator of the New York City Human Resources Administration, Defendants.
    No. 84 Civ. 6649 (SWK).
    United States District Court, S.D. New York.
    Oct. 17, 1984.

      Marvin Neiman, Meissner, Tisch & Klein-berg, New York City, for plaintiffs; Moshe Z. Mirsky and George S. Meissner, New York City, of counsel.
    Rudolph W. Giuliani, U.S. Atty., S.D. N.Y., New York City, for defendant; Michael D. Patrick, New York City, of counsel.
    Robert Abrams, Atty. Gen. of the State of N.Y., New York City, for defendant NYSAG; Evelyn Tenenbaum, New York City, of counsel.
    Frederick A.O. Schwarz, Jr., Corp. Counsel, Law Dept., New York City, for defendant; Paul Marks, New York City, of counsel.
   MEMORANDUM OPINION AND ORDER

KRAM, District Judge.

This is an action for a preliminary injunction. The action was originally brought by three plaintiffs: Sheepshead Nursing Home, Viola Ellner, and Ann Salerno. The latter two plaintiffs are currently patients in Sheepshead Nursing Home (hereinafter referred to as “Sheepshead”). The plaintiffs seek to enjoin the four named defendants from terminating Sheepshead’s provider agreement and from terminating, as of October 17, 1984, medicare and medicaid payments to Sheepshead for the care and treatment of patients eligible for participation in these two programs.

Procedural History

The plaintiffs originally sought a temporary restraining order (hereinafter referred to as “TRO”) in Part I from Judge Stewart on September 17, 1984. Judge Stewart denied the application for a TRO and scheduled a hearing for the preliminary injunction for October 2. At the request of all of the parties the hearing was postponed twice, and commenced on October 4. The hearing continued on October 9 and 10.

Counsel for plaintiffs informed the Court for the first time late in the afternoon of October 9 that they would be unable to proceed with the hearing on October 11 and 12 because of the religious holiday of Succoth. Counsel further informed the Court by letter late in the afternoon of October 15 that plaintiffs would conclude the presentation of their case with the submission of one affidavit. At this time plaintiffs also reinstated their application for a TRO, which is hereby denied.

On October 15 two of the plaintiffs, Viola Ellner and Ann Salerno, submitted notices of dismissal as to the actions brought by them. As there are currently summary judgment motions pending before the Court any dismissal must be based on the consent of all parties or Fed.R.Civ.P. 41(a)(2). I have decided to order the dismissal of the actions brought by Salerno and Ellner. Pursuant to Fed.R.Civ.P. 41(a)(2) these actions are hereby dismissed without prejudice. That leaves Sheepshead as the sole plaintiff in this action.

Sheepshead Nursing Home

Sheepshead is a 200-bed skilled nursing facility. Based upon three days of hearings and the voluminous affidavits submitted by the parties, it is undisputed that Sheepshead has a long history of providing inadequate and unacceptable care and treatment to its resident-patients.

As far back as March 23, 1983 Sheepshead was surveyed by the New York State Department of Health (hereinafter referred to as “DOH”). At this time Sheepshead was found to have excessive deficiencies in the level of care it was providing to its patients. Sheepshead was clearly advised of this on April 27, 1983, and to this day, has not contested the accuracy of the findings of the DOH survey team. Sheepshead was resurveyed on June 13, 1983. Of the twelve conditions (out of a total of eighteen conditions which must be met under federal law) previously found to be out of compliance, five remained out of compliance as of June 13, 1983. In view of this, Sheepshead was advised on June 15 and 30,1983 that a ban on medicare admissions was being imposed on this facility. This had the effect of barring Sheepshead from accepting any new patients whose medical bills were paid for by Medicare or Medicaid.

On June 28, 1983, Sheepshead was provided with a meeting, which involved its representatives and representatives from the United States Department of Health and Human Services (hereinafter referred to as “HHS”), the Health Care Financing Administration (hereinafter referred to as “HCFA”), and New York State officials. Sheepshead’s inability to comply with required conditions and to provide adequate care were discussed at this meeting.

In view of its poor record, Sheepshead was advised as early as June 30, 1983 that, not only would the ban on medicare admissions take effect, but also the termination of its provider agreement would be considered by the Secretary of Health and Human Services (hereinafter referred to as “the Secretary”) if Sheepshead’s level of compliance with federal requirements did not improve.

The ban on admissions lasted until December 29, 1983, and was lifted as of that day. Between July 15 and December 15, 1983 Sheepshead was resurveyed twice. On March 30, 1984 Sheepshead was issued a provider agreement by the Secretary. The duration of this agreement, however, was only for six months and covered the period from January 1 until June 30, 1984. Normally provider agreements issued by the Secretary are for a period of one year. Because of Sheepshead’s dismal record, it was issued this agreement for a shorter period of time, and was also clearly advised that it would be carefully monitored during the period of the agreement.

Sheepshead was resurveyed yet another time on March 15 and 16, 1984. Once again Sheepshead was found to be providing deficient care. Sheepshead did not contest the validity of these findings, and merely submitted a Plan of Correction, as it had done on several prior occasions.

On June 25, 26 and 27, 1984 a team of HCFA surveyors conducted another survey of Sheepshead. In addition, at the end of this survey, the representatives of Sheepshead were provided with an exit conference. At this conference the surveyors once again clearly outlined several areas of deficient care and treatment which Sheepshead was providing to its patients.

The Secretary, by a letter dated August 15, 1984, formally notified Sheepshead that its Medicare provider agreement was being terminated. The termination of the agreement was to take effect on September 17, and Medicare and Medicaid payments to the facility would end as of October 17, 1984. The Secretary took this action because, as a result of the June survey, Sheepshead was once again found to be out of compliance with twelve of eighteen conditions required by federal law. Facilities must meet these conditions to be eligible for Medicare reimbursement. In addition to the Secretary’s letter of August 15, Sheepshead also received a twenty-five page list of specific and detailed deficiencies in the care and treatment it provided to its patients.

Sheepshead made no response until September 12. On this date, for the first time in eighteen months (since the March 23, 1983 survey), Sheepshead requested a hearing to contest the findings of the surveyors as to the existence of numerous deficiencies in the care Sheepshead was providing.

It is against this factual background that Sheepshead claims to have been denied its rights to procedural due process guaranteed by the Fifth and Fourteenth Amendments. The essence of its claim is that it is entitled to a full evidentiary hearing before the provider agreement can be terminated. Jurisdiction

Initially, the Court must confront the issue of whether it has subject-matter jurisdiction over this action. Plaintiff has alleged several alternative bases of jurisdiction. Sheepshead is mistaken, however, in attempting to rely on 28 U.S.C. § 1331 as a basis of jurisdiction over the federal defendant (the Secretary of HHS).

Title 42 of the Social Security Act establishes Health Insurance for the Aged and Disabled (hereinafter referred to as “the Medicare program”), 42 U.S.C. § 1395 et seq. The Medicare program, through 42 U.S.C. § 1395Ü, incorporates by reference 42 U.S.C. § 405(h). 42 U.S.C. § 405(h) has been interpreted to preclude 28 U.S.C. § 1331 from serving as a basis of subject-matter jurisdiction to review decisions of the Secretary of HHS. Weinberger v. Salfi, 422 U.S. 749, 757-760, 95 S.Ct. 2457, 2462-64, 45 L.Ed.2d 522 (1975). See also Mathews v. Eldridge, 424 U.S. 319, 326-327, 96 S.Ct. 893, 898-99, 47 L.Ed.2d 18 (1976); South Windsor Convalescent Home, Inc. v. Mathews, 541 F.2d 910, 912 (2d Cir.1976).

The Medicare program, in 42 U.S.C. § 1395ff(c), provides for judicial review of the Secretary’s decisions pursuant to 42 U.S.C. § 405(g). This latter section requires exhaustion of administrative remedies and the rendering of a “final decision” by the Secretary as prerequisites to judicial review. Mathews v. Eldridge, 424 U.S. 319, 328-329, 96 S.Ct. 893, 899-900, 47 L.Ed.2d 18 (1976). However, in Mathews the Supreme Court concluded that where a plaintiff challenges a decision of the Secretary based on constitutional claims which are collateral to the substantive claim, the requirement of administrative exhaustion can be dispensed with. Id. at 329-332, 96 S.Ct. at 900-901. Only a final decision of the Secretary is necessary in these circumstances for a court to exercise subject-matter jurisdiction over plaintiff’s claims pursuant to 42 U.S.C. § 405(g). Id.

As to the jurisdictional issue I conclude that the Court may exercise subject-matter jurisdiction over plaintiff’s claims against the Secretary of HHS pursuant to 42 U.S.C. § 405(g). Mathews, 424 U.S. 319, 329-332, 96 S.Ct. 893, 900-01, 47 L.Ed.2d 18. I reach this conclusion because the claims plaintiff raises as to the federal defendant are procedural due process claims which are entirely collateral to the issue of whether Sheepshead is in compliance with federal requirements as to the level of care it provides.

The remaining defendants are Perales, Axelrod and Vernez, officials of New York State and New York City respectively. I find that I have jurisdiction over plaintiffs claims as to these defendants pursuant to 28 U.S.C. § 1331 and principles of pendent jurisdiction. 42 U.S.C. § 405(h) precludes jurisdiction under 28 U.S.C. § 1331 only as to the Secretary of HHS, and does not apply to decisions of state and local officials.

Plaintiffs Claims Against the State and City Officials

Several of the plaintiffs claims against the two state officials and the sole claim as to the city official are based on New York State law. These defendants, in their motions to dismiss correctly note that the Supreme Court’s recent decision in Pennhurst State School & Hospital v. Halderman, — U.S. -, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984), bars federal courts from issuing injunctive relief against state officials based on state law. Id. at 911, 917. It is clear that the relief sought against the state and city defendants here would operate against the State of New York itself. This includes the relief sought against defendant Vernez. Id. at 920-921, 920 n. 34. Thus, the motion to dismiss these claims as to Perales, Axelrod and Vernez is granted as to all claims against them based upon state law. The application for a preliminary injunction as to these claims is accordingly denied, and these claims are hereby dismissed. As this is the sole claim against Vernez, he is hereby dismissed from this action.

Plaintiffs Federal Claims

Only Sheepshead’s federal law claims against defendants Heckler, Perales and Axelrod remain for the Court to consider. Sheepshead asserts that it is entitled to a full evidentiary hearing and a resurvey before its provider agreement for the Medicare program and its eligibility to receive medicaid payments are terminated. The bases of Sheepshead’s position are the Fifth and Fourteenth Amendments to the United States Constitution and 42 U.S.C. §§ 1395cc(f), 1396i(c), and 1396a(i). Sheepshead seeks a preliminary injunction to enjoin the remaining three defendants from terminating medicare and medicaid payments until such time as a hearing and a resurvey are conducted.

The remaining defendants (Heckler, Perales and Axelrod) have moved to dismiss all of Sheepshead’s claims. As the Court has considered the voluminous affidavits submitted by the parties it treats these motions as summary judgment motions pursuant to Fed.R.Civ.P. 12(b).

In order to obtain a preliminary injunction in this Circuit a plaintiff must meet the following standard

Preliminary injunctive relief in this Circuit calls for a showing of “(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) 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.”

Jack Kahn Music Co. v. Baldwin Piano & Organ Co., 604 F.2d 755, 758 (2d Cir.1979.)

Based upon three days of testimony at the hearing, and upon the voluminous affidavits submitted by the parties, the Court concludes that Sheepshead has failed to meet the foregoing standard. Its application for a preliminary injunction is, therefore, denied for the following reasons.

Sheepshead contends that it will suffer irreparable harm if the injunction is not granted. This is so because it will be forced to go out of business if payments are terminated, according to Sheepshead. Sheepshead also asserts that it has a protectible property interest in receiving medicare and medicaid payments. It asserts that only a pre-termination hearing can adequately protect this property interest.

While Sheepshead has a somewhat meritorious claim as to irreparable harm (as it may very well be forced out of business if payments are terminated), this is only one part of the burden which it must meet. Sheepshead must also show either likelihood of success on the merits or a fair ground for litigation and a balance of hardships tipping decidedly in its favor. Sheepshead has failed utterly to meet either one of these alternatives.

With respect to the procedural due process claims and their relation to the balance of hardships the Second Circuit has directly addressed the situation presented by the instant case. In Case v. Weinberger, 523 F.2d 602 (2d Cir.1975), the Court stated:

The procedural requirements of due process must reflect a balance between the government’s interest and the nature of the individual interest being affected by governmental action.

Id. at 606.

As the Second Circuit found in Case that the governmental interest in protecting the patients in the facility was significant, so I, on facts far more compelling in the instant case (given Sheepshead’s long history of providing excessively deficient care), reach the same conclusion. Id. at 606. The record in the instant case contains an overwhelming abundance of undisputed evidence regarding the inadequate and unacceptable level of care provided by Sheepshead over the past eighteen months.

I also find that the procedural due process accorded to Sheepshead thus far is more than sufficient to satisfy the Constitutional requirements, given the factual background of this case. This is so even though “a mistaken decision might unnecessarily close” Sheepshead. Id. at 607.

The record clearly illustrates that Sheepshead over the past eighteen months has had ample opportunity to contest the defendants’ findings of deficient care. Sheepshead was surveyed and resurveyed numerous times. Sheepshead has been provided with meetings and an exit conference. It could have contested any of the findings regarding the quality of care in the facility at any time during the last one and a half years. Yet, it has never availed itself of the opportunity to challenge the defendants’ findings. I also note that unlike the situation present in Case, 523 F.2d 602, there is no question here that Sheepshead will receive a full post-termination evidentiary hearing. The defendants do not dispute this.

Consistent with Case, I find that the balance of hardships does not tip decidedly in favor of Sheepshead. Indeed, given the government’s significant interest here, and the procedural due process which Sheepshead has received thus far, the balance of hardships tips decidedly in favor of the defendants. Sheepshead has therefore failed to satisfy this prong of the standard. Case v. Weinberger, 523 F.2d 602. See also Jewish Memorial Hospital v. Heckler, No. 83 Civ. 4969, slip op. (S.D.N.Y. August 8, 1983) (for a transcript of this opinion see exhibit D which is annexed to Heckler’s Memorandum of Law in support of motion to dismiss); Kings Terrace Nursing Home v. Schweicker [Schweiker], No. 82 Civ. 6470, slip op. (S.D.N.Y. October 25, 1982); Schwartzberg v. Califano, 453 F.Supp. 1042 (S.D.N.Y.1978).

Similarly, Sheepshead has also failed to show that it is likely to succeed on the merits of its claim that it is entitled to a pre-termination evidentiary hearing. Case v. Weinberger is directly contrary to Sheepshead’s contention with respect to medicaid payments. Medicaid payments are governed by 42 U.S.C. § 1396 et seq. (hereinafter referred to as “the Medicaid program”). Sheepshead asserts that an amendment to 42 U.S.C. §§ 1395cc(f) and 1396a(i), which occurred subsequent to the decision in Case v. Weinberger, enhances the likelihood of success on the merits.

Sheepshead attempts to rely on 42 U.S.C. §§ 1395cc(f) and 1396a(i) as a basis for its claim that it is entitled to a pre-termination hearing. However, Sheepshead cites no case which suggests that these sections require a pre-termination hearing. Moreover, at least one court has expressed serious doubt as to whether these sections create a right to a pre-termination hearing. American Healthcare Corp. v. Schweiker, 688 F.2d 1072, 1083-1087 (7th Cir.1982), cert. denied, 459 U.S. 1202, 103 S.Ct. 1187, 75 L.Ed.2d 432 (1983). The Seventh Circuit has stated that these two sections do not create a clear right to a pre-termination hearing. Id. See also Kings Terrace Nursing Home v. Schweicker [Schweiker], No. 82 Civ. 6470, slip op.; Schwartzberg v. Califano, 453 F.Supp. 1042.

Similarly, Sheepshead has failed to show that it is likely to succeed on a claim that the Medicare program, 42 U.S.C. § 1395 et seq., grants a right to a pre-termination hearing. The Medicare program, through 42 U.S.C. § 1395ff(c), incorporates 42 U.S.C. § 405(g). While 42 U.S.C. § 405(g) does provide for a hearing after a “final decision” by the Secretary, it does not require a pre-termination hearing.

As stated earlier, the Court concludes that Sheepshead has received adequate procedural due process thus far. Sheepshead has failed to show that it is likely to succeed on the merits of its claims that 42 U.S.C. § 1395 et seq., 42 U.S.C. § 1396 et seq., and the Fifth and Fourteenth Amendments to the United States Constitution require that it receive a pre-termination hearing. This being the case, Sheepshead has failed to meet the necessary standard to obtain a preliminary junction.

CONCLUSION

Sheepshead’s application for a preliminary injunction is hereby DENIED. Sheepshead’s application for a TRO is also DENIED. Defendant Vernez’s motion to dismiss all of the claims against him is hereby GRANTED. The motion to dismiss, made by defendants Perales and Axelrod, all of Sheepshead’s claims against them which are based upon state law is hereby GRANTED.

The action as to plaintiffs Viola Ellner and Ann Salerno is hereby dismissed as to all defendants. This is done at the request of Ellner and Salerno. Finally, the summary judgment motions as to Sheepshead’s federal claims, made by Heckler, Perales and Axelrod are not decided by this opinion. Decision on these motions is reserved by the Court at this time. These motions will be disposed of prior to a hearing for a permanent injunction.

SO ORDERED.


author: NORTHROP, Senior District Judge.

text:
    Victoria HALLER v. BUTLER SHOE CORPORATION, a Delaware Corporation.
    Civ. A. No. N 84-551.
    United States District Court, D. Maryland.
    Oct. 17, 1984.

      Nicholas V. Broccolino, Baltimore, Md., for plaintiff.
    Allen Poppleton, Baltimore, Md., and Kevin B. Getzendanner, Atlanta, Ga., for defendant.
   NORTHROP, Senior District Judge.

Currently pending in this Title YII case is defendant’s motion for summary judgment. The sole issue for determination is whether the plaintiff timely filed her employment discrimination charge with the E.E.O.C. After reviewing the memoranda submitted by counsel, the Court concludes that no hearing is necessary. Local Rule 6. For the reasons set forth hereinbelow, the defendant’s motion is denied.

On October 6, 1981, plaintiff was terminated from her employment with the defendant. For purposes of this motion, the reason for that termination is immaterial. On April 29, 1982, 205 days later, plaintiff filed a charge of discrimination with the E.E.O.C.

Under Title VII, the time period within which a complainant may lawfully file a charge of employment discrimination is set forth in section 706(e):

A charge under this Section shall be filed within one hundred and eighty days after the alleged unlawful employment practice occurred ... except that in a case of an unlawful employment practice with respect to which the person aggrieved has initially instituted proceedings with a State or local agency with authority to grant or seek relief from such practice ... such charge shall be filed by or on behalf of the person aggrieved within three hundred days after the alleged unlawful employment practice occurred ____

42 U.S.C. § 2000e-5(e) (1972) (emphasis added).

The defendant argues that in order to benefit from Title VII’s 300-day limitations period, a claimant must file a charge with Maryland’s state agency within the 180-day state limitation period, MD.ANN.CODE Art. 49B § 9(a). Under the defendant’s theory, plaintiff’s claim is time barred. See Doski v. M. Goldseker Co., 539 F.2d 1326 (4th Cir.1976) (a timely filed discrimination charge is a prerequisite to suit in the District Court).

In Soble v. University of Maryland, 572 F.Supp. 1509 (D.Md.1983), Judge Miller addressed and rejected the exact same argument raised by the defendant herein. In Soble, one of the issues was whether “plaintiff’s failure to file a charge with Maryland’s state agency within the 180-day state limitations period results in the plaintiff being denied the benefits of the extended federal filing period.” Id., at 1512. After a thorough analysis of the applicable law, the Court held:

[T]his court concludes that grievants in deferral states need not file a charge with a state agency within the state limitations period in order to obtain the benefit of the extended period of filing with the EEOC available in Title VII under 42 U.S.C. § 2000e-5(e).

Id., at 1514.

Defendant, aware that the Soble decision is directly contrary to its position, argues that Soble is inconsistent with other decisions of this District and that Soble was wrongly decided. The Court rejects these arguments. First, Soble was predicated on the decision rendered in Mohasco Corp. v. Silver, 447 U.S. 807, 100 S.Ct. 2486, 65 L.Ed.2d 532 (1980). The decisions reached by this District Court prior to that controlling Supreme Court decision are not persuasive on the issue raised herein. Thus Soble is more than just the most recent decision on this issue, it is the only decision that includes Mohasco in its analysis.

Second, the Court is not convinced that Soble was wrongly decided. In support of its position defendant relies upon Lowell v. Glidden-Durkee, Div. of SCM Corp., 529 F.Supp. 17 (N.D.Ill.1981), which indeed held that a timely filed charge under state law was a necessary condition for the application of the 300-day EEOC filing period. However, Lowell is not controlling; it is merely one of the post-Mohasco decisions that interprets Mohasco narrowly. Soble provides a better reading of Mohasco and is more in line with other decisions that have addressed the issue and rejected the restrictive approach urged by the defendant. See, e.g., Smith v. Oral Roberts Evangelistic Ass’n, Inc., 731 F.2d 684 (10th Cir.1984); Jones v. Aireo Carbide Chemical Co., 691 F.2d 1200 (6th Cir.1982); Owens v. Ramsey Corp., 656 F.2d 340 (8th Cir.1981); Wiltshire v. Standard Oil Co., 652 F.2d 837 (2d Cir.1981), cert. denied, 455 U.S. 1034, 102 S.Ct. 1737, 72 L.Ed.2d 153 (1982). Further support for the Soble decision can be found in the EEOC’s Code of Federal Regulations as revised in 1981 to conform to the Mohasco decision. 29 C.F.R. § 1601.13(a)(3) (1981).

After an independent review of the cases decided under Title VII, I conclude that the plaintiff’s discrimination charge, filed within 300 days from the date of discrimination, is timely filed under 42 U.S.C. § 2000e-5(e). Accordingly, defendant’s motion for summary judgment is denied. A separate Order confirming this ruling will be entered.

      . Plaintiff contends that the discrimination charge was filed on April 2, 1984, 178 days after the termination of employment. This contention is unsupported by the record or by affidavit, see FED.R.CIV.P. 56(e), and is contrary to the copy of the charge of discrimination filed as an exhibit to defendant’s motion for summary judgment. The Court finds that the discrimination charge was filed April 29, 1982. This finding does not, however, effect the decision rendered herein.

      . Lopez v. Sears, Roebuck & Co., 493 F.Supp. 801 (D.Md.1980); Mobley v. Acme Markets, Inc., 473 F.Supp. 851 (D.Md.1979).