text:
    GIBBS-BROWER INTERNATIONAL, Plaintiff, v. KIRCHHEIMER BROTHERS CO. and Joe DeJure, Defendants.
    No. 84 C 5174.
    United States District Court, N.D. Illinois, E.D.
    May 10, 1985.

      Irwin I. Zatz, Chicago, Ill., for plaintiff.
    Herbert H. Victor, Chicago, Ill., and Barry R. Fertel, New York City, for defendants.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Gibbs-Brower International (“GibbsBrower”) initially sued Kirchheimer Brothers Co. (“Kirchheimer”) and sole Kerchheimer stockholder Joe DeJure (“DeJure”), seeking to recover a commission and finder’s fee as the result of DeJure’s sale of all the outstanding shares of Kirchheimer stock to Canover Industries, Inc. (“Can-over”). Kirchheimer and DeJure then filed counterclaims against Gibbs-Brower alleging defamation. DeJure has now moved under Fed.R.Civ.P. (“Rule”) 56 for summary judgment on Gibbs-Brower’s claim for a reasonable finder’s fee based on Canover’s purchase of the Kirchheimer stock. Gibbs-Brower asks summary judgment against both defendants on their counterclaims. For the reasons stated in this memorandum opinion and order:

1. DeJure’s motion is granted.
2. DeJure’s counterclaims are dismissed with prejudice by agreement.
3. Gibbs-Brower’s motion is granted in part and denied in part as to Kirchheimer’s counterclaims.

Facts

. In December 1983 Kirchheimer, a manufacturer of bags, cartons and other forms of packaging, decided to close its manufacturing facility in Schiller Park, Illinois and to sell the machinery and equipment thus removed from service. In late December Gibbs-Brower, a corporation engaged in the business of buying and selling industrial and manufacturing machinery, proposed to handle the sale of the Schiller Park machinery for Kirchheimer. Following a number of meetings between DeJure (acting for Kirchheimer) and Gibbs-Brower representative James Crosset, the corporations entered into a January 27, 1984 Exclusive Sales Agreement (the “Agreement”).

Under the Agreement Gibbs-Brower was to advertise and promote the Kirchheimer machinery worldwide, such efforts to include “all means deemed necessary and appropriate by Gibbs-Brower International” (Complaint Ex. A). In addition GibbsBrower was to negotiate any sale it procured and then forward all payments it received to Kirchheimer. Kirchheimer, in turn, gave Gibbs-Brower the exclusive right to sell the machinery for a three-month period beginning the date of the Agreement and ending April 27, 1984. As is customary in such exclusive brokerage arrangements, Kirchheimer agreed to pay a commission to Gibbs-Brower for any equipment sale made during the term of the Agreement, whether initiated by GibbsBrower or by Kirchheimer personnel.

During January Gibbs-Brower sold two pieces of the Kirchheimer equipment, forwarding the proceeds (less Gibbs-Brower’s commission) to Kirchheimer. Late in the same month Canover approached Kirchheimer about the remaining machinery after having been told of its availability by Gibbs-Brower. Canover official Al Eisenberg (“Eisenberg”) visited Schiller Park to inspect the Kirchheimer equipment. Over the course of several additional visits Can-over became interested in buying Kirchheimer’s entire business operation rather than just the machinery. Negotiations between Canover and Kirchheimer continued, without the participation of Gibbs-Brower, until on March 8 Canover agreed to purchase all outstanding shares of Kirchheimer stock (Kirchheimer told Gibbs-Brower of its agreement with Canover on the same date).

During the course of the Kirchheimer-Canover negotiations, Gibbs-Brower was at work preparing a marketing brochure describing the Kirchheimer machinery. On March 7 the marketing brochure was mailed to prospective purchasers worldwide. Its cover described the machinery in general terms, making reference to its good condition and low price, and also bore the following statement in block letters:

KIRCHHEIMER BROTHERS HAS CLOSED ITS ULTRA-MODERN CHICAGO PLANT! AND ... ALL MACHINERY MUST BE SOLD.

Kirchheimer became aware of the brochure March 9. DeJure immediately telephoned Gibbs-Brower to complain that the quoted statement gave the clear impression Kirchheimer was going out of the paper business altogether. On the same day Gibbs-Brower sent telegrams to the recipients of its brochure, correcting any misimpression created by the cover statement and saying the Kirchheimer machinery was no longer on the market (DeJure Aff. Ex. A):

We wish to correct the statements made in our previous letter to you. Kirchheimer Brothers Corporation is continuing its business and operations and merely intended to sell certain machinery and equipment.
The Company has withdrawn such machinery and equipment for sale, as it will be continuing its manufacturing and operations as conducted in the past.

Gibbs-Brower’s Claims Against DeJure

Gibbs-Brower wants to charge Kirchheimer commission, calculated under the Agreement, on the sale of the machinery to Canover (as subsumed within the stock transaction). Gibbs-Brower’s claim against DeJure, by contrast, sounds in quantum meruit and seeks to recover a reasonable finder’s fee on the entire sale price of Kirchheimer stock to Canover. In that respect Gibbs-Brower asserts its tendering of Canover as a purchaser for the Kirchheimer machinery was also the procuring cause of DeJure’s ultimate sale of the Kirchheimer stock to Canover. According to GibbsBrower Mem. 6:

DeJure could reasonably have been expected to know — that if he sold more than just the machinery — he would be expected to pay for all of the benefits he received. Gibbs-Brower made known to DeJure that it expected to be compensated for all of its services.

In pressing for summary judgment on that claim DeJure argues:

1. New York law, which does not recognize claims in quantum meruit, applies to the Agreement.
2. DeJure did not reasonably believe Gibbs-Brower expected a fee on the stock sale.
3. Gibbs-Brower’s claim with respect to the stock sale is an attempt to expand its business advantage beyond the express terms of the Agreement.

Those contentions — a mixed bag at best— will be considered in turn.

DeJure’s first contention is altogether without merit. It says New York law applies because Gibbs-Brower is a New York corporation and because the Agreement was prepared on Gibbs-Brower stationery. Not surprisingly, DeJure cites no authority for that novel idea.

Klaxon Corp. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941) calls for the use of Illinois choice-of-law rules to determine the applicable substantive law. Research has uncovered no Illinois case addressing — let alone deciding — what conflict rule applies in quantum meruit or unjust enrichment cases. But as the Restatement (Second) of Conflict of Laws 2d § 221 (1971) suggests, unjust enrichment cases fall somewhere between contract and tort. Illinois’ well-established rule in tort cases, first announced in Ingersoll v. Klein, 46 Ill.2d 42, 48, 262 N.E.2d 593, 596 (1970), requires the court to look to the law of the state having the “most significant contacts” with the challenged conduct. In contract cases Illinois has traditionally looked primarily to the law of the place of performance. More recently, however, there has been some evidence of movement toward a “center of gravity” approach similar to the Ingersoll tort-case doctrine. See Overseas Development DISC Corp. v. Sangamo Construction Co., 686 F.2d 498, 510-11 n. 43 (7th Cir.1982); WICO Corp. v. Willis Industries, 567 F.Supp. 352, 355 n. 4 (N.D.Ill.1983).

In light of the clear Ingersoll tort-ease rule and the like trend in contract cases, this Court concludes (as did Overseas Development, 686 F.2d at 511) Illinois would apply the “most significant relationship” concept to quantum meruit claims too. That approach would plainly point to the substantive law of Illinois:

1. Gibbs-Brower sent a representative to Illinois on several occasions to propose and then negotiate the Agreement.
2. All negotiations between Kirchheimer and Canover took place in Illinois.
3. Kirchheimer, the sale of whose stock underlies the claim, is an Illinois-based corporation.

Indeed the only arguable link to New York is Gibbs-Brower’s incorporation there — and even that contact is minimal, given the location of Gibbs-Brower’s general offices and principal place of business in Danbury, Connecticut (Gibbs-Brower Vice President William Schwartz (“Schwartz”) Feb. 27, 1985 Aff. ¶ 2).

In short the events giving rise to GibbsBrower’s unjust enrichment claim are centered in Illinois. Illinois’ substantive law of quantum meruit must apply.

DeJure’s second argument reflects a principle well-established in Illinois law (Plastics & Equipment Sales Co. v. DeSoto, Inc., 91 Ill.App.3d 1011,1017, 91 Ill.Dec. 487, 493, 415 N.E.2d 492, 498 (1st Dist.1980) (emphasis added)):

A quantum meruit recovery requires a showing that a defendant has voluntarily accepted a benefit which would be inequitable for him to retain without payment since the law implies a promise to pay reasonable compensation when valuable services are knowingly accepted.

It follows such equitable relief is not available where “the plaintiff did not contemplate a fee at the time the services were rendered, or the defendant could not have reasonably believed that plaintiff expected a fee” (id.).

DeJure’s affidavit avows his dealings with Gibbs-Brower before the parties entered into the Agreement focused exclusively on the machinery and equipment, with no discussion of the possibility of selling Kirchheimer as a going concern. Gibbs-Brower’s own marketing brochure dealt only with the machinery and plainly anticipated its piecemeal sale. Consequently when a Canover official came to inspect the machinery DeJure had no inkling he might be interested in Kirchheimer as a going business (DeJure Aff. ¶ 9). There is no room for any inference that either Gibbs-Brower nor Kirchheimer contemplated the sale of Kirchheimer as a business, nor has Gibbs-Brower provided any evidence it engages in brokering businesses as well as the buying and selling of machinery. It is scarcely surprising that DeJure Mar. 25, 1985 Aff. ¶ 6 states:

During all meetings and telephone calls between myself and officers and salesmen of Gibbs-Brower, no mention was made about my possible charge or fee to me personally for any contingency that may occur.

Against that cumulative showing, GibbsBrower offers only the statement (Schwartz Aff. ¶ 4):

Gibbs-Brower in all its dealings with Kirchheimer made known to DeJure that it expected to be compensated for all services it rendered.

That generalization does not meet GibbsBrower’s burden under Rule 56(e) to come forward with specific evidence to rebut De-Jure’s showing. All the evidence shows both parties contemplated the “services [to be] rendered” by Gibbs-Brower embraced only the sale of the Kirchheimer machinery. Gibbs-Brower surely has not raised a genuine factual question as to whether De-Jure could reasonably have believed GibbsBrower expected a fee on the sale of stock.

Even were there room to doubt that conclusion about the parties’ reasonable expectations (as there is not), DeJure would still be entitled to summary judgment on the strength of its third argument. Illinois cases generally bar a litigant’s resort to quantum meruit to gain for himself an advantage not contemplated by the parties to the transaction. That principle informs the preceding discussion of whether in the circumstances DeJure reasonably believed Gibbs-Brower expected a finder’s fee on the stock — and it also stands behind the general rule (Industrial Lift Truck Service Corp. v. Mitsubishi International Corp., 104 Ill.App.3d 357, 360, 60 Ill.Dec. 100, 103, 432 N.E.2d 999, 1002 (1st Dist. 1982)):

that no quasi-contractual claim can arise when a contract exists between the parties concerning the same subject matter on which the quasi-contractual claim rests.

In part that rule guards against the use of quantum meruit to distort a negotiated arrangement by broadening the scope of the contract. As Industrial Lift Truck, id. at 361, 60 Ill.Dec. at 104, 432 N.E.2d at 1002 put it:

If a quasi-contract action could be brought every time a party under contract performs a service not precisely covered by the contract, then the rule preventing quasi-contract actions when a contract exists would have little meaning. Parties to a contract often perform services not expressly demanded by the contract. They do so to enhance their position under the contract and not because they expect a different remuneration for those services from what they could receive under the contract.

This case really follows a fortiori from that proposition. After all Gibbs-Brower provided no service beyond that called for in the contract: It simply produced a prospective purchaser for the machinery (though, in fairness, it was willing to involve itself in the negotiations if needed). Even less justification exists, then, for it to share in the incidental and unexpected consequence of Canover’s later-developed interest in the Kirchheimer business as a whole: its distribution business, its interest in any real estate, its good will. Gibbs-Brower cannot, therefore, fairly lay claim to a windfall share of that wholly incidental benefit.

Two independent — and independently sufficient — reasons thus exist for a summary judgment rejecting Gibbs-Brower’s claim against DeJure for a finder’s fee on the sale of the Kirchheimer stock. That claim is out of the case.

Counterclaims Against Gibbs-Brower

Kirchheimer and DeJure have advanced three counterclaims against GibbsBrower, all stemming from the allegedly false and defamatory statement on the cover of the marketing brochure:

1. Counterclaim I purports to state a cause of action for defamation, alleging special damages in the amount of $228,-000.
2. Counterclaim II claims GibbsBrower’s distribution of the defamatory brochure constituted a breach of the Agreement.
3. Counterclaim III, sounding in negligence, alleges distribution of the defamatory brochure breached Gibbs-Brower’s duty to Kirchheimer to distribute a truthful brochure.

Because Gibbs-Brower Mem. 7-8 accurately pointed out DeJure (not named in the brochure at all) was not “the real party in interest” (Rule 17(a)) on those claims, Kirchheimer Mem. In.* has accepted dismissal of the claims as to DeJure. As for the Kirchheimer claim, Gibbs-Brower retorts by saying the statement was not defamatory at all.

Kirchheimer Mem. 5 acknowledges the marketing brochure statement was not libelous per se under the “reasonable innocent construction” rule of Chapski v. Copley Press, 92 Ill.2d 344, 351-52, 65 Ill. Dec. 884, 887-88, 442 N.E.2d 195, 198-99 (1982). Instead Kirchheimer claims the statement was libelous per quod (Audition Division, Ltd. v. Better Business Bureau of Metropolitan Chicago, Inc., 120 Ill.App.3d 254, 258, 75 Ill.Dec. 947, 951, 458 N.E.2d 115, 119 (1st Dist.1983)):

An action for libel per quod is established where a publication not libelous on its face is rendered defamatory by extrinsic facts or innuendo and special damages are proved.

That means Gibbs-Brower must prevail on the defamation counterclaim unless Kirchheimer can offer evidence to indicate (1) the brochure was rendered defamatory by extrinsic facts and (2) it suffered special damages.

In support of its summary judgment motion Gibbs-Brower offers Crosset’s account of his discussions with DeJure (Crosset Aff. ¶4):

On or about January 16, 1984 I met with Mr. DeJure at Chicago, Illinois. Mr. De-Jure said he is closing the production facility, selling all of the machinery and then continuing in business as a distributor.

DeJure, however, flatly denies that account (DeJure Aff. ¶ 3):

On or about December 15, 1983 negotiations commenced between myself and Gibbs-Brower International (“GBI”) concerning the sale of machinery owned by [Kirchheimer] on or about January 16, 1984. The representative of GBI, James Crosset met with me to discuss the sale of such equipment. Neither during that meeting, nor thereafter, did I ever say that the production facility would close.

Yet the brochure affirmatively stated in block letters that the Schiller Park facility “has closed.” On DeJure’s evidence, which the Crosset statement does not really contradict (and which this Court must credit on Gibbs-Brower’s Rule 56 motion), the brochure statement was false. And being false, the statement may well have been defamatory. According to DeJure Aff. ¶ 11, it was widely known in the industry Kirchheimer had only one manufacturing facility. Gibbs-Brower’s announcement of the facility’s closing, therefore, at least “intimated that [Kirchheimer] was going out of the paper business.” To that extent the brochure conveyed a false impression of Kirchheimer to the industry — a false impression that had the potential adversely to affect Kirchheimer’s business.

Kirchheimer’s only effort to “prove” special damages is in DeJure Aff. ¶ 13:

As a result of plaintiff’s deflamatory [sic] brochure which was produced as a result of GBI’s gross negligence, KBC lost a great deal of business. As noted in the amended answer, KBC has lost at least $247,000 in business. Specifically, KBC prior to the distribution of the brochure, did approximately $300,000 per year in business with Edison Brothers, but after the brochure was distributed, then Edison believed that KBC was going out of business, and the volume of KBC’s business with Edison Brothers dropped by over $200,000. In addition, we lost an account with Puritan Clothing which was approximately $20,000 as well as an account with Beloit for $7,000. Obviously, in this competitive industry when one of our competitors views a brochure purportedly produced by KBC that KBC “is closing its only facility,” that competitor would use such a brochure to divert KBC business to a competitor. That is what occurred in this case, and KBC suffered significant damages as a result.

But that simply ignores Rule 56(e)’s requirement that affidavits “shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.” Summary judgment is a substitute for trial, available when no material facts are in dispute. At trial DeJure could not testify about what someone else believed, nor could he indulge the generalized and conclusory statements that pervade the quoted language. No more can he do so by a Rule 56 affidavit.

Because Kirchheimer has thus not met its burden as to one element of its libel per quod claim, Gibbs-Brower’s motion as to that claim is granted. Only because GibbsBrower has obviously (though without any justifiable reason) mistaken its Rule 56(e) responsibility, this ruling is without prejudice to Kirchheimer’s expeditious renewal of its claim «/supported with a prima facie factual showing of special damages.

Kirchheimer’s second and third counterclaims, sounding in contract and negligence, are also founded upon the proposition that the brochure statement was false and defamatory. But where GibbsBrower goes awry is in urging that common element means all the claims must stand or fall together.

Kirchheimer’s breach of contract claim, simply stated, is that Gibbs-Brower distributed a false brochure and thus breached the Agreement. As Colgan v. Rae-Ann Electric Co., 91 Ill.App.3d 386, 390, 47 Ill.Dec. 227, 230, 414 N.E.2d 1343, 1346 (3d Dist.1980) teaches:

Engrafted on every written contract are the customs, practices and definitions which are commonly understood and accepted by the parties.

At this stage it is enough to conclude one such implied term could be the understanding that Gibbs-Brower would not publish false information about Kirchheimer in the course of procuring buyers for the machinery. In view of the genuine dispute as to whether the brochure was true or false, Gibbs-Brower may therefore have been in breach of its obligation under the Agreement. Its motion must be denied as to Kirchheimer’s second counterclaim.

Kirchheimer’s third counterclaim is really a restatement in tort of its second counterclaim, for it turns on the allegation Gibbs-Brower was negligent in distributing a false brochure and thereby breached its duty to use reasonable care in preparing and distributing the brochure. That duty, of course, arose from the actual and implied terms of the Agreement. Thus the third counterclaim survives just as the second has.

Conclusion

There is no genuine issue of material fact, and DeJure is entitled to a judgment as a matter of law, on Gibbs-Brower’s claim against DeJure for a finder’s fee on the sale of the Kirchheimer stock. That claim is dismissed with prejudice.

By agreement of the parties, DeJure’s counterclaims against Gibbs-Brower are also dismissed with prejudice. As for Kirchheimer’s counterclaims against GibbsBrower:

1. There is no genuine issue of material fact, and Gibbs-Brower is entitled to a judgment as a matter of law, on Kirchheimer’s defamation claim (subject to the possibility of its renewal discussed earlier in this opinion).
2. Gibbs-Brower’s motion for summary judgment is denied as to Kirchheimer’s contract and negligence claims.

      . That motion does not address Gibbs-Brower’s commission claim against Kirchheimer, described later in this opinion.

      . Rule 56 principles impose on the party moving for summary judgment the burden of establishing the lack of a genuine issue of material fact. Korf v. Ball State University, 726 F.2d 1222, 1226 (7th Cir.1984). For that purpose the court must, in viewing the evidence, draw all reasonable inferences in the light most favorable to the nonmovant. Hermes v. Hein, 742 F.2d 350, 353 (7th Cir.1984). In a situation like this, where each litigant has filed a Rule 56 motion, the court may be called on to take a double perspective on certain facts (those as to which an inference might reasonably be drawn either way). This section states matters in conformity with the principles just outlined. To the extent the parties seek to controvert the facts as so stated, the later text discussion deals with their contentions.

      . Gibbs-Brower appraised the Kirchheimer machinery and set an asking price that included its commission.

      . Also as frequently occurs in such transactions, sales to any of four designated purchasers (prospects who antedated Gibbs-Brower's involvement in the matter) were specifically excluded from the payment of commissions under the Agreement.

      . In fact a meeting was held in April 1984 among Gibbs-Brower and counsel for Canover and DeJure to discuss Gibbs-Brower’s rights in light of the sale of Kirchheimer as a business. Their discussion focused only on any commission payable on the machinery, with nothing said about a fee based on the sale of stock (Victor Aff. ¶ 6).

      . Gibbs-Brower’s responsive memorandum consistently refers to allegations in its Complaint— but Rule 56(e) bars consideration of those allegations in opposition to the current motion.

      . That renders unnecessary any ruling on whether the publication could meet the standard for corporate defamation on its face (Garber-Pierre Food Products, Inc. v. Crooks, 78 Ill.App.3d 356, 360, 33 Ill.Dec. 878, 881, 397 N.E.2d 211, 214 (1st Dist.1979)):
      [T]he alleged defamation must assail the corporation’s financial position or business methods, or accuse it of fraud or mismanagement.
      See also Audition Division, 120 Ill.App.3d at 256, 75 Ill.Dec. at 954, 458 N.E.2d at 118. Examination of the brochure against that standard demonstrates the soundness of Kirchheimer's concession.

      . This is not of course a finding of falsity. It rather reflects a genuine dispute as to truth or falsity (clearly a material fact). Whether De-Jure’s version is consistent with Kirchheimer’s acknowledged decision to sell all its machinery is for the factfinder to decide later.


source: Caselaw Access Project

author: BARRINGTON D. PARKER, District Judge:

license: Public Domain

text:
    Robert BARNES, et al., Plaintiffs, v. DISTRICT OF COLUMBIA, et al., Defendants.
    Civ. A. No. 84-2415.
    United States District Court, District of Columbia.
    May 15, 1985.

      Emilia DiSanto, John C. Morrison, Kiefer & Morrison, Washington, D.C., for plaintiffs.
    Metcalfe C. King, Asst. Corp. Counsel, Washington, D.C., for defendants.
   MEMORANDUM OPINION

BARRINGTON D. PARKER, District Judge:

INTRODUCTION

This matter comes before the Court on the parties’ cross-motions for summary judgment. The plaintiffs are employees of the District of Columbia General Hospital (“D.C. General”) who receive annuities from the federal government by virtue of their status as retired military personnel. They have filed suit challenging the District of Columbia’s (“District” or “D.C.”) application of section 1103(b) of the District of Columbia Government Comprehensive Merit Personnel Act of 1978, D.C.Code § l-612.3(b). As originally enacted, this statute was designed to preclude dual compensation by reducing the salaries of federal and District of Columbia annuitants employed by the District. The statute provided that the total compensation received by a reemployed annuitant could not exceed the amount of the salary he was entitled to receive under the District of Columbia salary schedule. In effect, these individuals would forfeit the portion of their salaries which was equal to their pensions. These restrictions applied equally to individuals receiving annuities under federal or District civilian retirement systems, and those receiving annuities pursuant to the military retirement system. These restrictions were not, however, implemented by the District until 1984, when the plaintiffs and other District employees were notified of the District’s intention to enforce the statute prospectively. Shortly thereafter, the City Council of the District of Columbia amended the statute to provide that the first $51,000 in salary received by retired military personnel was exempt from the statute. This amendment became effective on March 13, 1985, after the required 30-day congressional review period. This temporary legislation will remain in force until September of 1985.

The plaintiffs challenge the statute both as originally enacted and as amended. They argue that it violates the Supremacy Clause and the Contract Clause of the United States Constitution, and is inconsistent with various provisions of local law, including the District of Columbia Self-Government and Governmental Reorganization Act, D.C.Code § 1-201 et seq., D.C.Code § 1-612.1(a)(2), and certain regulations contained in the D.C. Personnel Manual. Finally, they assert that' the District of Columbia should be equitably estopped from enforcing or implementing section 1-612.3. Only the claims under the United States Constitution are within this Court’s federal jurisdiction; the remainder are properly characterized as pendent claims.

The defendants are the District of Columbia, Mayor Marion Barry, and Edward Conway, the Director of the Personnel and Manpower Division at D.C. General. The individual defendants are sued only in their official capacities. The Court determines that the plaintiffs’ constitutional claims are without merit, and dismisses these claims with prejudice. Moreover, the Court declines to exercise jurisdiction over the plaintiffs’ pendent local claims. To do so would be an abuse of discretion. The reasons for this determination are set forth below.

FACTUAL BACKGROUND

The material facts in this case are straightforward and undisputed. The plaintiffs are retired military personnel who receive nondisability retirement pay. There are three basic types of military retirement: nondisability retirement, reserve retirement, and disability retirement. Non-disabled retired officers are often referred to as retired regular officers. See Puglisi v. United States, 564 F.2d 403, 405, 215 Ct.Cl. 86 (1977), cert. denied, 435 U.S. 968, 98 S.Ct. 1606, 56 L.Ed.2d 59 (1978).

Each of the plaintiffs was hired by D.C. General after the enactment of D.C.Code § 1-612.3 in 1979. They responded to a published position vacancy announcement which established a salary range and stated that the District of Columbia was an equal opportunity employer who would consider “all qualified candidates” without regard to a number of factors including “source of income.” Plaintiffs’ Motion for Summary Judgment (“Plaintiffs’ Motion”), Appendix A, filed Sept. 14, 1984. The plaintiffs were not specifically informed about the statute until June of 1984, when they were notified that “the reduction in your pay by the amount of the annuity you receive will commence on the first day of the first pay period in September 1984 (September 2, 1984).” Id., Appendix B. Similar announcements were sent to all federal and District annuitants employed by the District. In effect, this announcement meant that the salaries of these individuals would be reduced dollar-for-dollar by the amount of their pensions.

The plaintiffs received a short reprieve from this action — until October 14, 1984— so that the Council of the District of Columbia could consider emergency legislation designed to soften the effect of this pay reduction scheme as applied to retired military personnel. On October 25, 1984, the Council enacted temporary legislation, D.C.Law 5-140, which provided that retired military personnel whose combined salary and annuity did not exceed $51,000 were exempt from the pay reduction statute. This amendment did not extend to civilian annuitants. Military personnel whose combined salary and pension exceeded $51,000 were still covered by the statute, and their salaries were reduced by the amount of the excess.

The law was transmitted to Congress for the required 30-day review period. Since the 30-day period expired without congressional action, D.C.Law 5-140 became effective on March 13, 1985. The law will expire in September of 1985.

The plaintiffs have informed the Court that only four of the original plaintiffs are still subject to the pay reduction statute in light of the 1984 amendment. The salaries of the other plaintiffs were presumably paid without reduction. The Court now turns to the constitutional claims raised by the remaining plaintiffs. The constitutionality of the law both as enacted and as amended is discussed. In the Court’s view, the relevant issues do not differ materially under either version of the statute, and the case is now ripe for decision.

LEGAL ANALYSIS

Supremacy Clause

The Supremacy Clause of the United States Constitution provides that “the Constitution and the laws of the United States ... shall be the supreme law of the land.” Art. 6, cl. 2. Thus, a state law may violate the Supremacy Clause in one of two ways: it may conflict with the Constitution or with the provisions of a federal statute enacted by Congress. In this case, the plaintiffs assert that the D.C. law conflicts with the federal statutes governing the disposition of military retirement pay.

In determining whether a state statute conflicts with a federal statute and is therefore invalid under the Supremacy Clause, the Court’s

function is to determine whether a challenged state statute ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’

Perez v. Campbell, 402 U.S. 637, 649, 91 S.Ct. 1704, 1711, 29 L.Ed.2d 233 (1971) (citing Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941)). The Supremacy Clause comes into play “whether Congress’ command is explicitly stated in the statute’s language or implicitly contained in its structure and purpose,” Conference of State Bank Supervisors v. Conover, 710 F.2d 878, 882 (D.C.Cir.1983) (quoting Fidelity Federal Savings & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982).

The plaintiffs argue that section 1-612.3 conflicts “with the established congressionally mandated scheme governing voluntary nondisability retirement programs of the Armed Services.” Plaintiffs’ Motion at 8. This “congressionally mandated scheme,” in the plaintiffs’ view, arises in part from the federal statutes providing for nondisability retirement pay for retired military officers. See, e.g., 10 U.S.C. §§ 3911, 3929. These statutes cannot, however, be construed to preempt all local statutes which may affect military pensions. Congress itself has provided that retired pay is taxable as ordinary income, McCarty, 453 U.S. at 214 n. 7, 101 S.Ct. at 2731 n. 7 (construing 26 U.S.C. § 61(a)(ll); 26 C.F.R. § 1.61-11), and state governments are necessarily free to legislate in similar areas.

As additional evidence of congressional intent, the plaintiffs point to the congressional dual compensation scheme which reduces the pay of reemployed federal annuitants by the amount of their annuities. 5 U.S.C. § 8344. The federal statute is strikingly similar to the District’s statute, with the exception that retired military personnel are excluded from its reach. Annuitants are former employees, 5 U.S.C. § 8311, and the term “employee” includes civil service employees. See id. § 2105. Members of the uniformed services are not considered civil service employees. Id. § 2101; American Federation of Government Employees v. Hoffman, 543 F.2d 930, 941 (D.C.Cir.1976), cert. denied, 430 U.S. 965, 97 S.Ct. 1645, 52 L.Ed.2d 356 (1977).

The plaintiffs argue that section 1-612.3, as originally enacted, violates the Supremacy Clause because it does not provide the same privileges to retired military personnel as does the federal scheme under section 8344. They maintain that even as amended the D.C. statute frustrates congressional intent because it does not go as far as the congressional scheme in protecting the total compensation of reemployed retired military personnel. In the Court’s view, the plaintiffs misconceive the role of the Supremacy Clause in serving as a check on local legislation. Local legislation is not preempted by federal law unless it conflicts with a “clear and manifest purpose of Congress.” Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947). Here, the plaintiffs have cited no statutory language or legislative history which suggests that Congress intended that local governments be precluded from reducing the salaries of retired federal employees who receive military pensions. Section 8344 at most shows Congress’ intent to protect the federal government salaries of reemployed military personnel; it does not mandate that local governments may not consider these pensions as a factor in setting salaries for their employees.

Nor is there any indication that these federal benefits may not be indirectly reduced by local legislation directed at the salaries of local government employees, unlike the salary reduction scheme in the case primarily relied on by the plaintiffs, Raskin v. Moran, 684 F.2d 472 (7th Cir.1982). In Raskin, the Court invalidated a Wisconsin statute which reduced the salaries of state reserve judges by an amount equal to their federal social security benefits. The Court relied on section 203(f)(3) of the Social Security Act, 42 U.S.C. § 403(f)(3), which mandated that “income earned after the recipient’s 70th birthday [would] not be used to reduce benefits.” Id. at 474. The Court noted that while the Wisconsin law actually reduced the judges’ salaries, it also indirectly reduced the benefits which federal law mandated they receive. Id. at 477. The Court held that

[w]e believe that a state statute which is applied to ‘cancel out’ the receipt of a protected federal benefit ... clearly . stands as an obstacle to frustrate the quite apparent underlying goals of the federal statute.

Id. at 480. No such clear goal of protecting federal benefits is articulated in section 8344, which merely sets forth a federal formula for determining the total compensation certain federal employees may receive from the government.

Nor does the holding in McCarty, supra govern the disposition of this case. There, the Supreme Court held that state community property laws may not divest retired regular officers of their pensions. This holding was premised on the direct conflict between federal statutes which allowed retired military personnel to determine exactly how their retirement pay should be allocated to their survivors, see id., 453 U.S. at 224-26, 101 S.Ct. at 2737 (construing Retired Serviceman’s Family Protection Plan, 10 U.S.C. §§ 1431-1446; 10 U.S.C. § 2771), and California law, which treated all property acquired during marriage as the property of both spouses. Id. at 216, 101 S.Ct. at 2732. No such direct conflict is apparent in this case.

In short, the Supremacy Clause does not prevent the District of Columbia City Council from determining the degree to which retired military or civilian personnel employed by the District shall have their salaries reduced by the receipt of federal or District pensions. Absent a conflict with some other provisions of federal or local law, the District of Columbia is free to fashion its compensation system as it chooses. It may elect to treat retired military and civilian personnel equally, as it did in the original version of § 1-612.3, or it may determine that military personnel are entitled to special privileges, as provided in the recent amendment. § l-612.3(c).

This conclusion is buttressed by two additional factors which were not briefed by the parties. First, this Court has serious doubts about the extent to which the Supremacy Clause could nullify a District of Columbia law enacted pursuant to the District of Columbia Self-Government and Governmental Reorganization Act, Pub.L. No. 93-198, 87 Stat. 774, D.C.Code §§ 1-201 et seq., subject to the 30-day review period provided by § l-233(c)(l). Although that Act extends a “measure of home rule” to the District, see Don’t Tear It Down, Inc. v. Pennsylvania Avenue Development Corp., 642 F.2d 527, 530 n. 33 (D.C.Cir.1980), the City Council’s legislative authority is still significantly limited by the powers retained by Congress. For instance, Congress possesses

a substantial role in the legislative process through the ‘layover provision’ permitting congressional veto or amendment of Council legislation.

American Federation of Government Employees v. Barry, 459 A.2d 1045, 1050 (D.C.Ct.App.1983). In this case, the current version of D.C.Code § 1-612.3 was subject to a 30-day period of congressional review. D.C.Code § l-233(c)(l). It is difficult to reconcile this control exercised by Congress and its implicit approval of the legislation with the concept that a law subject to the 30-day review period violates the Supremacy Clause. While the preemption doctrine may affect District of Columbia regulations which were never reviewed by Congress, see Firemen’s Ins. Co. v. Washington, 483 F.2d 1323, 1325, 1328-31 (1973), it would seemingly have a lesser effect on enactments which have been implicitly approved by Congress.

Second, Congress has enacted legislation which substantially reduces the retirement pay of retired regular officers of the uniformed services who hold civilian positions with the federal government. Dual Compensation Act of 1964, 5 U.S.C. § 5532. As interpreted in Puglisi v. United States, 564 F.2d at 405 n. 1., the Act provides that “a retired regular officer may receive full civilian pay but his retirement pay shall be reduced to an annual rate equal to the first $2,000 of retirement pay plus one-half of any remainder.” These provisions do not apply to retired reserve officers, and the exceptions listed in subsections (c) and (d) are not relevant to the present proceeding. Since Congress has itself legislated to reduce the retirement pay of military officers who return to civilian employment with the federal government, it is difficult to discern any congressional intent to preserve intact the government salaries and pensions of reemployed military personnel. The fact that the District of Columbia scheme may reduce the total compensation of some military personnel to a greater extent than the comparable federal scheme does not demonstrate a conflict between the two schemes. Accordingly, the Court concludes that D.C.Code § 1-612.3 survives the plaintiffs’ Supremacy Clause challenge.

Contract Clause

Next, the plaintiffs argue that section 1-612.3 violates the Contract Clause, Art. 1 § 10, cl. 1, which provides that “no state shall ... pass any ... law impairing the obligation of contracts.” According to the plaintiffs, the source of this impairment is twofold: first, their contracts with the federal government for retirement pay are impaired because the dual compensation provision “destroys their career expectation of receiving retirement pay upon fulfilling their active duty service commitments.” Plaintiffs’ Motion at 14. Second, their contracts with D.C. General are impaired because their compensation was reduced several months after they received notice of D.C.’s intention to enforce section 1-612.3 prospectively.

Neither of these arguments is convincing because the plaintiffs have not satisfied the threshold element that the “state law has, in fact, operated as a substantial impairment of a contractual relationship.” Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411, 103 S.Ct. 697, 704, 74 L.Ed.2d 569 (1983) (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244, 98 S.Ct. 2716, 2722, 57 L.Ed.2d 727 (1978)). Here, the plaintiffs have proffered no evidence that their “contracts” with the federal government or D.C. have been impaired. Assuming arguendo that military retirees have contracts with the federal government for pension benefits, a proposition which is extremely doubtful, section 1-612.3 does not impair those contracts because it does not reduce retirees’ pensions. Instead, section 1-612.3 operates to reduce the compensation plaintiffs and other retirees will receive from the District of Columbia government.

Nor have the plaintiffs pointed to any impairment of their contracts with D.C. General. As an initial matter, the Court notes that the plaintiffs have neither submitted copies of their contracts with' D.C. General nor suggested that the terms of those contracts guaranteed compensation at a given rate now and in the future. The only evidence submitted which is relevant to this inquiry are copies of D.C. General’s published vacancy announcements, which set forth a range of compensation for each position. They further provide that D.C. General is “an equal opportunity employer — all qualified candidates will receive consideration without regard” to a number of factors, including “source of income.” Appendix A. A description of the factors D.C. General utilizes in its initial hiring decisions and the salary ranges for various positions does not justify an inference that the plaintiffs were guaranteed any particular salary in the future. This inference is particularly unpersuasive because section 1-612.3 was on the books when the plaintiffs were hired. The District chose not to enforce the law until several years after the plaintiffs were hired, and gave the plaintiffs sufficient notice of its decision to enforce the law prospectively. That decision raises no constitutional issue under the Contract Clause.

Pendent Claims

Lastly, the Court turns to the non-federal claims asserted in Counts 3 through 6 of the complaint. These claims include two claims arising under the D.C.Code: the District of Columbia Self-Government and Governmental Reorganization Act, D.C. Code § 1-201 et seq. and D.C.Code § 1-612.1(a)(2), which allegedly guarantees equal pay for equal work, claims under various unenumerated provisions of the D.C. Personnel Manual, and claims that the District of Columbia is equitably estopped from enforcing the dual compensation provision. Although the plaintiffs allege the existence of diversity jurisdiction under 28 U.S.C. § 1332 in their complaint, the District of Columbia government is not a citizen within the meaning of section 1332, District of Columbia v. L.B. Smith, Inc. of Virginia, 474 F.Supp. 894, 896-97 (D.D.C.1979), and therefore is not within the reach of the diversity statute. See also Adden v. Middlebrooks, 688 F.2d 1147, 1150 (7th Cir.1982); Lenoir v. Porters Creek Watershed District, 586 F.2d 1081, 1089 n. 9 (6th Cir.1978). Even if a state were a citizen for purposes of diversity jurisdiction, it would presumably be a citizen of itself. See L.B. Smith, Inc., 474 F.Supp. at 896. Since one of the four remaining plaintiffs is a resident of the District of Columbia, complete diversity does not exist and the Court would in any event lack an independent basis for subject matter jurisdiction over the plaintiffs’ local claims. Thus, pendent jurisdiction provides the only possible basis for this Court’s determination of the local law claims.

In this case, the plaintiffs’ claims “derive from a common nucleus of operative fact,” United Mine Workers of America v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966), which gives this Court the power to decide the local law claims. The Court, however, declines to exercise its discretion to decide these claims. Moreover, it would more than likely be an abuse of discretion to reach out to decide these issues. The plaintiffs’ claims under the D.C.Code and the personnel manual involve unexplored questions of state law which are best left to the local courts. In this situation, “a federal District Court opinion is no substitute for an authoritative decision by the courts of the District of Columbia.” Doe v. Board on Professional Responsibility of the District of Columbia Court of Appeals, 717 F.2d 1424,1428 (1983) (per curiam) (quoting Financial General Bankshares, Inc. v. Metzger, 680 F.2d 768, 778 (D.C.Cir.1982)). Since these local claims must necessarily be dismissed, judicial economy would not be served by retaining the remaining local claim premised on equitable estoppel.

CONCLUSION

The plaintiffs’ constitutional claims are dismissed for failure to state a claim upon which relief may be granted, and the pendent local law claims are dismissed without prejudice to refiling in the appropriate local forum.

      . Subsequent legislative developments have meant that § 1-612.3(c) is the portion of the statute which is now applicable to the plaintiffs. The Court will refer to both versions of the statute as the dual compensation provision, and will generally cite to § 1-612.3, where appropriate.

      . Although the plaintiffs' complaint asserts the existence of diversity jurisdiction under 28 U.S.C. § 1332, the discussion supra at 15 establishes that diversity jurisdiction does not lie.

      . Although the plaintiffs have never clearly stated whether they are retired regular officers or retired reserve officers, the Court assumes that they are retired regular officers because they cite cases which discuss this type of military retiree. See, e.g., McCarty v. McCarty, 453 U.S. 210, 213, 101 S.Ct. 2728, 2731, 69 L.Ed.2d 589 (1981). In any event, the disposition of the plaintiffs' claims is the same regardless of the exact nature of their retired status.

      . As originally enacted, § 1.612-3(b) provided that
      The pay of an individual receiving an annuity under any federal or District government civilian retirement system, or any retirement system of the uniformed services of the United States, selected for employment in the District government on or after the effective date of this chapter, shall be reduced by the amount of annuity allocable to the period of employment as a reemployed annuitant.
      As amended, § 1-612.3 now differentiates between civilian (§ 1-612.3(b)) and military (§ l-612.3(c)) retirees. See discussion supra at 5.

      . The relevant terms of the amendment provide that:
      The pay of an individual receiving an annuity under any retirement system of the uniformed services of the United States selected for employment in the District government on or after the effective date of this title shall be reduced by only that amount of the individual’s salary which when added to his or her annuity exceeds the basic pay then in effect for step one of a Grade 15 of the District Service Schedule 1.
      D.C.Code l-612.3(c). The parties agree that a Grade 15 employee receives a salary of approximately $51,000.

      . The McCarty decision was superseded by congressional passage of the Uniformed Service Former Spouse Protection Act, 10 U.S.C. § 1408. That statute directs that
      [t]reatment of retired pay ... generally would be dependent on the divorce and property laws applied by the courts of the jurisdiction in which a divorce or other related decree is issued.
      S.Rep. No. 502, 97th Cong., 2d Sess., reprinted in U.S.Code Cong. & Ad.News, 1555, 1596, 1598.

      . Although some dicta in Don’t Tear It Down, 642 F.2d at 534 n. 65 suggests that “the preemption doctrine effects District of Columbia legislation no less than state enactments," that decision did not address the effect of direct congressional review, which applies to legislation which would otherwise become effective immediately.

      . The Court notes that a very similar equitable estoppel claim, as well as claims based on the Supremacy and Contract Clauses, were decided adversely to a different group of plaintiffs who also challenged the legality of D.C.Code § 1-612.3(b). Barnes v. District of Columbia, No. 84-4853 (D.C.Super.Ct. order dated Aug. 21, 1984), appeal docketed, No. 84-1193 (D.C.Ct.App. Aug. 30, 1984). Since the Superior Court judge did not set forth his reasons for granting summary judgment to the District of Columbia, this Court has not relied on this precedent to support its decision.


author: GIERBOLINI, District Judge.

text:
    Antonio Rafael de la COVA y GONZALEZ ABREU, Plaintiff, v. The UNITED STATES of America, et al., Defendants.
    Civ. No. 85-0725 GG.
    United States District Court, D. Puerto Rico.
    May 16, 1985.

      Blas C. Herrero, Jr., Hato Rey, P.R., for plaintiff.
    Daniel F. Lopez Romo, U.S. Atty., Hato Rey, P.R., for defendants.
   OPINION AND ORDER

GIERBOLINI, District Judge.

Petitioner, Antonio Rafael de la Cova y González Abreu, filed the present habeas corpus petition pursuant to 28 U.S.C. § 2241(c)(2) and (3), alleging that he has been incarcerated without due process of law and in violation of his right of free speech and press as guaranteed by the First Amendment of the Constitution. Petitioner also asserts that the Warden of the State Penitentiary, acting under color of state law, has violated his constitutional right to due process of law as guaranteed by the Fourteenth Amendment. Specifically, as to the Warden, a cause of action is asserted pursuant to 42 U.S.C. § 1983.

The magistrate to whom this matter was referred rendered a report on April 3, 1985, recommending that the present petition be dismissed due to petitioner’s failure to exhaust available administrative remedies. Petitioner has filed an opposition to the magistrate’s report requesting, inter alia, that petitioner be placed under bail or supervision as provided by 18 U.S.C. § 4214(a)(l)(A)(ii), and that the conditions imposed by the Parole Commission be declared an unconstitutional abridgement of petitioner’s First Amendment rights. Petitioner has also requested a de novo hearing before this court.

A brief summary of the facts is necessary. Petitioner was convicted for conspiracy, civil rights violations, and for using explosive devices and destroying property. He was sentenced to fifteen years confinement by the United States District Court for the Southern District of Florida. Sentence was imposed on September 22, 1976 and on May 5,1981, petitioner was released on parole. His release was subject to two conditions:

1. You shall not work/associate with any political group that could conceivably endanger your adjustment to supervision.
2. You shall not write any article in any local newspaper which might heighten awareness of political issues or situations for or against any given political government.

On March 26,1985, petitioner was arrested for violating the second condition of parole. He is presently incarcerated without bail at the Rio Piedras State Penitentiary, San Juan, Puerto Rico.

In Morrissey v. Brewer, 408 U.S. 471, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1972), the Supreme Court held that a parolee is constitutionally entitled to certain minimum due process protections before his parole may be revoked. Since the revocation of parole is not part of the criminal prosecution, the full panoply of rights accorded a defendant in such a proceeding does not apply to parole revocations. Due process only requires that an informal hearing be held which assures that the finding of parole violation be based on verified facts and that the exercise of discretion be informed by an accurate knowledge of the parolee’s behavior. Morrissey, supra, at 480-484, 92 S.Ct. at 2599-2602. The parolee does not have a constitutional right to release or bail before a revocation hearing. Galante v. Warden, 573 F.2d 707, 708 (2d Cir.1977).

Specifically, the Parole Commission and Reorganization Act, 18 U.S.C. at §§ 4213-15, contains provisions concerning parole revocation. Also, the United States Parole Commission has issued regulations governing revocation proceedings. See 28 C.F.R. § 2.44, et seq.

If a parolee is alleged to have committed a violation of his parole, the Commission under Section 4213 may either summon the parolee to a Section 4214 revocation hearing or issue a warrant and retake the parolee. See 28 C.F.R. § 2.44. If a parolee is retaken on a warrant issued by the Commission, he shall remain in custody until final action is taken regarding revocation of his release. See 28 C.F.R. 2.49(d). . Section 4214(a)(1)(A) provides that a parolee is entitled to a preliminary hearing, at or reasonably near the place of the alleged parole violation or arrest, without unnecessary delay to determine if there is probable cause to believe that he has violated a condition of his parole. If probable cause is found to exist the Commission may restore the parolee to parole supervision subject to certain conditions delineated in Section 4214(a)(l)(A)(i-iv). However, if parole is revoked under Section 4214, the parolee may seek reconsideration before the regional commissioner and if the decision is adverse, it may be appealed to the National Appeals Board. See Section 4215.

As stated earlier, petitioner was retaken on March 26, 1985. A preliminary hearing was scheduled for April 17,1985 at which attorneys for petitioner as well as two United States Probation officers were present. Due to certain misunderstandings, the hearing was continued to April 25, 1985. Although 18 U.S.C. § 4214(c) requires the Commission to conduct a final revocation hearing within ninety days of petitioner’s retaking (i.e., within ninety days of March 26, 1985), this period of time has not yet elapsed and petitioner must first exhaust his administrative remedies before habeas corpus relief may be sought in this court. Guida v. Nelson, 603 F.2d 261 (2d Cir.1979); United States ex rel. Sanders v. Arnold, 535 F.2d 848, 851 (3rd Cir.1976); Willis v. Ciccone, 506 F.2d 1011, 1015 (8th Cir.1974).

Furthermore, the appropriate remedy for the failure to conduct a hearing under Section 4214 would be a writ of mandamus to compel the Commissioner’s compliance and not a writ of habeas corpus to compel release on parole. Sutherland v. McCall, 709 F.2d 730 (D.C.Cir.1983). Absent prejudice or bad faith on the part of the Commission, immediate release from custody is not available for violation of Section 4214. See Carlton v. Keohane, 691 F.2d 992-993 (11th Cir.1982); Lambert v. Warden, U.S. Penitentiary, 591 F.2d 4, 7-8 (5th Cir.1979); Smith v. United States, 577 F.2d 1025, 1028-29 (5th Cir.1978).

These findings are clearly supported by the legislative history of the Parole Commission and Reorganization Act as reflected by the comments made by the chairman of the House and Senate Subcommittees concerning the consequences of the Commission’s failure to act within the ninety day period:

... If a legal remedy is necessary in the absence of good faith effort on the part of the Commission, the remedy available to the prisoner or the parolee is to compel the decision, not release from custody. 122 Cong.Rec. S 2572, 2573 (daily ed. March 2, 1976) (remarks of Sen. Bur-dick).
... If the Commission fails to act in accordance with these deadlines, the ... parolee would not be automatically released ... but he could compel the Commission to make their decision promptly____ If for some reason they were unable to meet a time deadline, the ... parolee could solicit the assistance of the court under ... section 28 U.S.C. 1361.... 122 Cong.Rec. H 1499, 1500 (daily ed. March 3, 1976) (remarks of Rep. Kastenmeir).

It is evident that Congress intended to provide the Parole Commission with great latitude in making decisions concerning revocation. 18 U.S.C. § 4218(d) states that:

Actions of the Commission pursuant to paragraphs (1), (2) and (3) of Section 4203(b) shall be considered actions committed to agency discretion for purposes of section 701(a)(2) of Title 5, United States Code.
Section 4203(b)(3) provides in part:
The Commission ... shall have the power to
sfc * # *
(3) modify or revoke an order paroling any eligible prisoner.

5 U.S.C. § 701(a)(2), which deals with judicial review under the Administrative Procedure Act (APA), states that “This chapter applies ... except to the extent that... (2) agency action is committed to agency discretion by law.” The end result of Section 4218(d) is to insulate all Commission decisions relating to parole revocation from judicial review under the APA.

However, this exclusion does not necessarily mean that habeas corpus relief could never be obtained; it only indicates such relief will be accorded under extremely limited circumstances. Luther v. Molina, 627 F.2d 71, 75-76 (7th Cir.1980). Although the writ of habeas corpus provides the means to secure release from illegal detention, Preiser v. Rodriguez, 411 U.S. 475, 484, 93 S.Ct. 1827, 1833, 36 L.Ed.2d 439 (1973), imprisonment of parolees pending revocation is committed to the Parole Commission’s discretion and, as such, is generally regarded as legal. Luther, supra, at 76.

Furthermore, 28 U.S.C. § 2241(c)(3) expressly limits the grounds on which the writ may issue to release a federal prisoner. The writ of habeas corpus may not issue unless the prisoner is “in custody in violation of the Constitution or laws or treaties of the United States.” In the present case, petitioner attacks the validity of his confinement due to certain conditions imposed by the Parole Commission which are violative of his First Amendment rights. We find no merit to petitioner’s contentions.

Congress has vested in the Commission the sole power to grant or deny parole. Timpani v. Sizer, 732 F.2d 1043, 1047 2d Cir.1984). The Parole Commission has wide discretion to determine under what conditions an inmate is to be paroled. Taylor v. Wood, 458 F.2d 15 (9th Cir.1972); O’Callahan v. Attorney General, 338 F.2d 989 (1st Cir.1964), cert. denied, 381 U.S. 926, 85 S.Ct. 1563, 14 L.Ed.2d 685 (1965). The essence of parole is release from incarceration before the completion of sentence, on the condition that the prisoner abide by certain rules during the remainder of the sentence. To accomplish the purpose of parole, the parolees are subjected to specified conditions which substantially restrict their activities beyond the ordinary restrictions imposed by law on an individual citizen. Morrissey, supra, 408 U.S. at 478, 92 S.Ct. at 2598. This is so because a parolee enjoys only a conditional liberty properly dependent on observance of special parole restrictions. Typically, parolees may be forbidden to use liquor or to have associations or correspondence with certain categories of undesirable persons. Also, they may be required to obtain permission from their parole officers before changing employment or residence, marrying, acquiring or operating a motor vehicle or traveling. Additionally, parolees must report regularly to the parole officer to whom they are assigned. See Morrissey, supra, at 478, 92 S.Ct. at 2598. The conditions imposed serve the purpose of integrating the individual into society and places the parole officer in the position of guiding the parolee in his rehabilitation.

Since the petitioner in this case accepted parole subject to legally specified conditions, he is not now entitled to challenge the legality of his parole and thereby evade the consequences of the conditions he implicitly accepted. One who accepts release from confinement on parole does so subject to authorized conditions for release and for retaking for violation of the terms and conditions of release. See O’Callahan, supra, at 990.

Finally, petitioner has also requested that this court hold a de novo preliminary hearing and order the petitioner released on parole. However, as a statutory court, we lack authority to conduct such proceeding and to issue the order requested. Congress, in the proper discharge of its legislative functions, vested in the Parole Board and not in the courts the power and discretion to grant or deny parole. Of course, we have the authority to review a decision by the Board, where the issue has been properly brought before the court in an habeas corpus proceeding, which demonstrates an abuse of discretion on the part of the Board, resulting in an abridgement of petitioner’s constitutional rights. Clay v. Henderson, 524 F.2d 921, 924 (5th Cir.1975), cert. denied, 425 U.S. 995, 96 S.Ct. 2210, 48 L.Ed.2d 820 (1976). The only remedy which we can provide is to order the Board to correct the abuses or wrongful conduct within a fixed period of time, after which, in the case of noncompliance, a writ of habeas corpus could be issued to order the prisoner discharged from custody. However, only under very extreme circumstances, would release, outright or on bail, be necessary or appropriate to fully effectuate the habeas remedy. To proceed as requested by petitioner under the circumstances present here, would constitute a usurpation of the authority Congress has delegated to the Commission.

Wherefore, in view of the foregoing, the Magistrate’s Report and Recommendation is affirmed and petitioner’s request for a writ of habeas corpus is hereby denied.

The clerk shall enter judgment dismissing the present action.

SO ORDERED.

      . 28 U.S.C. § 2241 reads in part as follows:
      (c) The writ of habeas corpus shall not extend to a prisoner unless—
      ******
      (2) He is in custody for an act done or omitted in pursuance of an Act of Congress, or an order, process, judgment or decree of a court or judge of the United States; or
      (3) He is in custody in violation of the Constitution or laws or treaties of the United States; or ...

        , Originally, only the first condition was imposed. The second condition was added on in 1983.

      . Petitioner also seeks a determination that he is entitled to immediate release from imprisonment under 42 U.S.C. § 1983. Inasmuch as this remedy is subsumed in his petition for habeas corpus, we need not entertain this claim.


author: HORACE T. WARD, District Judge.

text:
    Royce JONES, Plaintiff, v. PREMIER INDUSTRIAL CORPORATION, Defendant.
    Civ. A. No. C83-2419A.
    United States District Court, N.D. Georgia, Atlanta Division.
    May 21, 1985.
    Spencer Gandy, Atlanta, Ga., for plaintiff.
    William King, Atlanta, Ga., for defendant.
   ORDER OF COURT

HORACE T. WARD, District Judge.

Plaintiff instituted this action alleging age discrimination in violation of 29 U.S.C. § 621 et seq., the Age Discrimination in Employment Act (hereinafter referred to as “ADEA”). The defendant filed a motion to dismiss on the ground that the plaintiff did not file his charge of discrimination within 180 days after his termination from employment, which timely filing is a prerequisite to the filing of a civil suit against an employer under the ADEA. In his brief in opposition to defendant’s motion to dismiss, the plaintiff concedes that he did not file his charge of discrimination within 180 days after his termination but contends that his charge was filed well within 180 days of his gaining knowledge of facts to support the charge, and that, therefore, he is entitled to equitable tolling of the time period for filing.

After agreeing that there is a factual issue as to whether the plaintiff’s failure to timely file a charge of age discrimination was the result of such facts and circumstances as would equitably toll the running of the 180-day period, the parties jointly proposed to limit discovery to the preliminary issue so that the matter could be treated by the court as a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.

The undisputed material facts can be summarized as follows: On February 2, 1982, plaintiff, then a 53-year-old sales manager, was terminated without notice after seventeen (17) years of employment with the defendant, a distributor of electronic components and industrial maintenance products. On that same day, plaintiff was advised in a meeting with two of his supervisors that he was being discharged because “sales were off” and “some changes were being made.”

Plaintiffs general awareness of the economic conditions of the company and the industry as a whole negated any thought on his part that his termination was prompted by anything other than the stated economic reasons. Other individuals, including three (3) management employees, thought plaintiffs termination was unfair, given plaintiffs performance and promotion record at Premier Industrial, and assisted in efforts to have him rehired. Although plaintiffs immediate supervisor privately recommended that plaintiff seek legal advice, no one thought at that time that age was a factor.

Efforts to secure plaintiffs rehire continued for approximately a year following his termination, until plaintiff learned he would not be further considered for reemployment by the defendant. In the interim, plaintiff was replaced by two younger employees, one of whom was outside the class of persons protected by the ADEA. Both individuals were hired by the defendant on or about November 1, 1982.

In April of 1983, plaintiff learned that other employees within the protected age group had been terminated by defendant. In June of 1983, plaintiff learned of another such termination and that individual confirmed the information plaintiff learned in April. Shortly thereafter, plaintiff sought legal advice, and the instant charge was filed on July 8, 1983.

Section 7(d)(1) of the ADEA, 29 U.S.C. § 626(d)(1), limits the period in which an aggrieved employee may initiate an action against his employer. It provides, in part:

No civil action may be commenced by an individual under this section until 60 days after a charge alleging unlawful discrimination has been filed with the [Equal Employment Opportunity] Commission. Such a charge shall be filed
(1) within 180 days after the alleged unlawful practice occurred.

It is now established, and the parties concede, that this 180-day charge-filing requirement is not a jurisdictional prerequisite that deprives a court of subject matter jurisdiction, but a condition precedent more in the nature of a statute of limitations. See McClinton v. Alabama By-Products Corporation, 743 F.2d 1483, 1485 (11th Cir.1984), citing Coke v. General Adjustment Bureau, 640 F.2d 584, 595 (5th Cir.1981) (en banc). The same equitable considerations familiar to statutes of limitation have been relied upon by courts to forestall the strict inflexible application of the ADEA’s filing requirement: the 180-day period does not begin to run until facts that would support a charge of discrimination “were apparent or should have been apparent to a person with a reasonably prudent regard for his rights similarly situated to the plaintiff.” Reeb v. Economic Opportunity Atlanta, Inc., 516 F.2d 924, 931 (5th Cir.1975); see Smith v. McClammy, 740 F.2d 925 (11th Cir.1984).

Plaintiff concedes that he did not file his charge of discrimination within 180 days after his termination but contends that his charge was filed well within 180 days of his gaining knowledge of facts that would support the charge, and that he is entitled to equitable tolling of the statutory time period allowed for filing. He argues that it was not until other persons within the protected age group were terminated that plaintiff first suspected age to be a factor in his termination and that his charge, filed within 180 days after he gained knowledge of the alleged pattern, is timely.

Defendant has presented no evidence contradicting the facts set forth above, but instead contends that these facts are insufficient as a matter of law to entitle plaintiff to equitable tolling of the filing period. Defendant’s position is that the filing period should be tolled no longer than that point in time when facts which would support a prima facie case of age discrimination were apparent to the plaintiff. In this vein, defendant argues that the filing period should have commenced running no later than mid-December 1982, when the elements of a prima facie case were arguably apparent, and thus the filing of plaintiff’s charge on July 8, 1983 operates as a bar to the present litigation.

The basic flaw in defendant’s theory lies in the assumption that facts which would support a prima facie ease of age discrimination should have been apparent to the plaintiff by mid-December 1982, when he learned that he had been replaced by two persons, one of whom was outside the protected age group. The defendant has cited no case law to support the proposition that knowledge of an employer’s decision to hire two persons, one of whom falls within the protected age group, will suffice to support a charge of discrimination, and this court declines to so conclude. To the contrary, a showing that an employee has been replaced by another member of the protected class is more in the nature of rebuttal to a prima facie case of age discrimination. See Moore v. Sears, Roebuck and Co., 464 F.Supp. 357 (D.C.Ga.1979).

After a careful review of the facts set forth in the record and the applicable statute and case law, the court is persuaded that the facts supporting a charge of age discrimination did not become apparent until the spring of 1983, when plaintiff learned of defendant’s alleged pattern of replacing older employees with persons outside the protected age group. Therefore, the 180-day period did not begin to run until that time, and plaintiff timely filed his notice of intent to file suit on July 8, 1983.

For the foregoing reasons, it is hereby ORDERED that the defendant’s motion for summary judgment is DENIED.

      . Plaintiff states in his affidavit that defendant's employment policy and practice was to restore benefits associated with past service to former employees who are rehired within one year following termination.


text:
    ALGEMENE BANK NEDERLAND, M.V.-ATLANTA AGENCY, Plaintiff, v. W.R. MATTOX, Defendant.
    Civ. A. C85-31A.
    United States District Court, N.D. Georgia, Atlanta Division.
    May 23, 1985.
    Judith S. Willingham, Atlanta, Ga., for plaintiff.

      Howell Hollis, III, Atlanta, Ga., for defendant.
   ORDER OF COURT

HORACE T. WARD, District Judge.

This is a diversity action in which the plaintiff seeks collection of a certain promissory note for which the defendant executed a guarantee in favor of the plaintiff bank. The matter is currently before the court on the defendant’s motion to dismiss the complaint for lack of personal jurisdiction over the defendant, pursuant to Fed.R.Civ.P. 12(b)(2).

The bank’s assertion of personal jurisdiction over the defendant is predicated solely upon the Georgia long arm statute, O.C. G.A. § 9-10-91. Under that statute, a Georgia court may exercise personal jurisdiction over a nonresident defendant if said nonresident, in person or through an agent, transacts business in the state. O.C.G.A. § 9-10-91(1). Georgia courts have construed this section as embodying three requisites: 1) the nonresident must have purposefully done some act or consummated some transaction in the state; 2) the plaintiff must have a cause of action which arises from or is connected with such act or transaction; and 3) the exercise of jurisdiction by the courts of the state must not offend traditional notions of fair play and substantial justice. Shellenberger v. Tanner, 138 Ga.App. 399, 404-405, 227 S.E.2d 266, 273 (1976). The tripartite requirement of Shellenberger is cumulative; establishment of the first requisite is required before the next one comes into play, and so on. Georgia Railroad Bank & Trust Company v. Barton, 169 Ga.App. 821, 823, 315 S.E.2d 17, 19 (1984).

The defendant contends that no factual basis exists to establish the “purposeful activity” which would constitute transacting business in Georgia. This court agrees.

It is undisputed that the defendant, at all relevant times, has been a resident of North Carolina and that he has had virtually no contact with the State of Georgia. While it is also undisputed that the defendant executed the purported guaranty which is the subject matter of this action, as shown by the uncontradicted affidavit of Eunice H. Mattox, said guaranty was neither solicited nor executed in Georgia.

This is not a case in which any of the contract negotiations are alleged to have occurred within the confines of Georgia. Compare Delta Equities, Inc. v. Larwin Mortgage Investors, 133 Ga.App. 382, 211 S.E.2d 9 (1974). Nor is this a case where the nonresident defendant is alleged to have had other financial dealings with the plaintiff. Compare Barton, 169 Ga.App. 821, 315 S.E.2d 17. Although the purported guaranty contains a choice-of-law provision calling for the application of Georgia law, which the Georgia Supreme Court has recognized as invoking the protection of the law of Georgia and therefore a contact to be considered in determining the applicability of Georgia’s long-arm statute, Davis Metals, Inc. v. Allen, 230 Ga. 623, 625, 198 S.E.2d 285, 287 (1973), it is clear that the Georgia courts consider the “totality of the circumstances.” Brooks Shoe Manufacturing, Inc. v. Byrd, 144 Ga.App. 431, 433, 241 S.E.2d 299, 301 (1977).

Given the totality of the circumstances in this case, this court has no doubt that the Georgia courts would hold, consistent with the due process clause of the Fourteenth Amendment, that the defendant has not transacted business in this state within the meaning of § 9-10-91. Accordingly, the court concludes that there is no basis for its exercise of personal jurisdiction over the nonresident defendant. Defendant’s motion to dismiss, pursuant to Fed.R.Civ.P. 12(b)(2) is GRANTED, and this action is hereby DISMISSED.


author: SHADUR, District Judge.

text:
    Edward F. KRULL, Plaintiff, v. CELOTEX CORPORATION, et al., Defendants.
    No. 83 C 9835.
    United States District Court, N.D. Illinois, E.D.
    May 31, 1985.

      Terrence M. Johnson, Chicago, Ill., for plaintiff.
    Michael P. Connelly, Connelly, Ruberry & Mustes, Chicago, Ill., for defendants.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Edward F. Krull (“Krull”) initially filed this action seeking both compensatory and punitive damages from The Celotex Corporation (“Celotex”) and others as a result of his having contracted pleural mesothelioma after exposure to insulating materials containing asbestos. On the eve of trial Celotex moved for partial summary judgment on the issue of its liability for punitive damages. For the reasons stated in this memorandum opinion and order, this Court has denied the motion.

Facts

All facts material to Celotex’s motion are both uncomplicated and undisputed. Phillip Carey Corporation (“Carey”) was for many years active in the manufacture of the type of asbestos products to which Krull was allegedly exposed. In April 1970 Carey merged with Briggs Manufacturing Co. to form the Panacon Corporation (“Panacon”), a Michigan corporation. Panacon continued Carey’s asbestos manufacturing and mining operations. In June 1972 Panacon was in turn merged into Celotex, a Delaware corporation.

Celotex had not been involved in the mining or manufacture of asbestos products before the Panacon merger. After the merger Celotex both (1) placed warning labels on all asbestos-containing products and (2) restricted its asbestos products sales primarily to products used in manufacturing processes rather than the insulating products to which Krull was exposed.

Celotex’s Status As a Successor Corporation

Celotex Motion for Summary Judgment ¶ 3 argues Krull’s claim for punitive damages is “solely predicated upon the alleged misconduct of Phillip Carey Corporation.” Celotex urges the unfairness of saddling it with such punitive damages because it (id. ¶4):

never participated in or ratified any of the allegedly wrongful acts committed by either the Phillip Carey Corporation or the Panacon Corporation.

Celotex’s emphasis on its own conduct is misplaced. That error reflects the fundamental flaw in Celotex’s analysis: its failure to distinguish between the liability of a successor corporation by merger from the very different situation that has generated most “successor corporation” litigation in the products liability field.

Celotex argues as if it had simply bought Carey’s (or Panacon’s) business assets without an express assumption of liabilities. Rules of law dealing with that common kind of acquisition have, in recent years, been in a state of flux. Several jurisdictions have made the policy determination that an asset purchaser may nonetheless be saddled with liability for the predecessor manufacturer’s torts. See, e.g., In re Related Asbestos Cases, 566 F.Supp. 818, 821-22 (N.D.Cal.1983). But the general rule in such cases remains that, subject to certain exceptions, the asset-acquiring company is not liable for the debts and liabilities of the seller. Manh Hung Nguyen v. Johnson Machine & Press Corp., 104 Ill.App.3d 1141, 1143, 60 Ill.Dec. 866, 868, 433 N.E.2d 1104, 1106 (1st Dist.1982).

But the Celotex-Panacon transaction was a merger, not merely a purchase of assets. And the universal rule applicable to mergers or consolidations is that, by operation of law, the successor corporation assumes all debts and liabilities of the predecessor corporation precisely as if it had incurred those liabilities itself. Hanlon v. Johns-Manville Sales Corp., 599 F.Supp. 376, 378 (N.D.Iowa 1984) (applying Iowa law); Moe v. Transamerica Title Insurance Co., 21 Cal.App.3d 289, 304-05, 98 Cal.Rptr. 547, 556-57 (1971); Nguyen, 104 Ill.App.3d at 1143, 60 Ill.Dec. at 868, 433 N.E.2d at 1106.

That rule is inherent in the concept of a merger, under which the surviving corporation stands in the shoes of the disappearing corporation in every respect. And that concept is uniformly codified in every merger statute, including the Delaware General Corporation Law under which the Celotex-Panacon merger was accomplished. Del.Code Ann. tit. 8, § 259(a) specifically provides:

When any merger or consolidation shall have become effective under this chapter, for all purposes of the laws of this State the separate existence of all the constituent corporations, or of all such constituent corporations except the one into which the other or others of such constituent corporations have been merged, as the case may be, shall cease and the constituent corporations shall become a new corporation, or be merged into one of such corporations, as the case may be, possessing all the rights, privileges, powers and franchises as well of a public as of a private nature, and being subject to all the restrictions, disabilities and duties of each of such corporations so merged or consolidated ... and all debts, liabilities and duties of the respective constituent corporations shall thenceforth attach to said surviving or resulting corporation, and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it.

Indeed, Section 11 of the Celotex-Panacon merger agreement has been reported in Hanlon, 599 F.Supp. at 378 as expressly tracking the language of the statute:

[A]ll debts, liabilities and duties of Panacon shall upon the effective date of the merger attach to Celotex and may be enforced against it to the same extent as if such debt, liabilities and duties had been incurred or contracted by Celotex.

And of course “liabilities” and “duties” extend to contingent liabilities such as tort claims.

Celotex’s presentation to this Court never acknowledged the existence of the quoted statute or adverted to Celotex’s unconditional obligation under the merger agreement to shoulder all of Panacon’s liabilities. Instead, Celotex Mem. 12 has misleadingly argued:

Other jurisdictions, which have litigated the issue of a successor corporation’s liability for punitive damages, have consistently held successor corporations not to be liable on the sole basis of their relationship to the predecessor corporation.

In support of that contention Celotex cites three cases that never even discuss the merger issue:

1. Drayton v. Jiffee Chemical Corp., 395 F.Supp. 1081,1097-98, modified and aff'd, 591 F.2d 352 (6th Cir.1978) (no indication whether acquisition involved a purchase of assets or a merger);
2. Chapin v. Celotex, No. 579-0272(N) (S.D.Miss. Jan. 30, 1984) (analyzing the Celotex-Panacon merger as if it were a mere purchase of assets); and
3. In re Related Asbestos Cases, 566 F.Supp. 818 (N.D.Cal.1983).

Contrary to Celotex’s representation, numerous decisions in other jurisdictions have held Celotex liable in asbestos cases for punitive damages occasioned by the conduct of its merged-out predecessors. See Hanlon, 599 F.Supp. at 378-79; Sheppard v. A.C. and S. Co., 484 A.2d 521, 524-26 (Del.Super.Ct.1984) and cases there cited. As n. 3 reflects, Delaware (where Sheppard was decided) is the controlling jurisdiction for these purposes. And that renders especially disturbing Celotex’s failure to have apprised this Court of those adverse decisions (particularly Sheppard ).

Corporations are largely the molders of their own destinies in acquisition transactions: They may buy assets without assuming liabilities, they may buy stock and preserve the acquired company as a subsidiary (insulating the parent from subsidiary liabilities), they may engage in upstream or downstream mergers, they may consolidate — there is no need to ring all the changes with which a knowledgeable corporate practitioner is familiar. In the products liability area some imaginative courts have begun to circumscribe the conventional corporate law effects of some of those acquisition methods, looking through the transactions to impose “successor” liability (the “de facto merger” notion is such a device). But if an acquiring corporation — for its own business (and perhaps tax) purposes — chooses a formal de jure merger, with its familiar consequences of the total assumption of predecessor liabilities, the corporation will not be heard to extract itself from its wholly voluntary and deliberately undertaken actions.

Conclusion

Under the terms of the merger agreement and the Delaware General Corporation Law, Celotex unconditionally assumed all debts and liabilities of Panacon. Celotex has presented this Court with no authority for treating punitive damages differently from any other liability. Celotex’s motion for summary judgment as to punitive damages is therefore denied.

      . Krull had worked as an insulator for some 25 years, with the disease having manifested itself after his retirement. He died of mesothelioma earlier this year, and before the commencement of trial earlier this month his three children (co-executors of his estate) were substituted as plaintiffs.

        . This Court summarized its reasons for denial in an oral bench ruling promptly after the motion was filed. Because the issue is a recurring one in the thousands of asbestos-related-disease cases pending throughout the country against Celotex (and others), it seemed appropriate to expand the ruling into this written opinion.

      . Perhaps more accurately, where two corporations organized in different jurisdictions merge, the corporate laws of both jurisdictions must be satisfied to consummate the merger. However the law of the place of incorporation of the survivor defines the extent to which that corporation takes the position of the disappearing corporation cum onere (though if the law applicable to the surviving corporation purported to extinguish liabilities that the law applicable to the disappearing corporation would have preserved, the creditors involved might have an impairment-of-contracts constitutional claim). If there were any question on that score, it is mooted by the fact the Michigan corporate law (where Panacon was organized) contains a provision with different language from, but identical impact to, that of the Delaware statute quoted in the text. Michigan Comp. Laws § 450.59.

      . This Court has no way of knowing whether the District Judge in Chapin was the victim of the same kind of misleading presentation as that tendered here. If not — if the true issue was perceived but not found persuasive in Chapin —this Court simply disagrees with the result reached there.

      . Celotex argues Illinois law controls its liability for punitive damages. But Illinois law actually governs only Panacon's or Carey’s liability for punitive damages. Except for the moot possibility dealt with in n. 3, Delaware law plainly governs the only issue relevant here: which of Panacon’s liabilities became Celotex’s obligations by virtue of the merger agreement. As to such questions Illinois courts (and hence this Court in a diversity action) would look not to Illinois substantive law, but to the law of the place of incorporation. And if it were relevant (as it is not), Illinois’ own substantive corporate law (both statutory and case law) follows Delaware in requiring the surviving corporation to assume all liabilities of the corporation extinguished in the merger. Ill.Rev.Stat. ch. 32, § 157.69(e); Manh Hung Nguyen, 104 Ill.App.3d at 1143, 60 Ill.Dec. at 868, 433 N.E.2d at 1106.

      . That omission raises concerns about Celotex’s compliance with its duty of candor to the court set out in Ethical Consideration 7-23 of the ABA Model Code of Professional Responsibility:
      Where a lawyer knows of legal authority in the controlling jurisdiction directly adverse to the position of his client, he should inform the tribunal of its existence unless his adversary has done so; but having made such disclosure, he may challenge its soundness in whole or in part.
      More recently that duty has been built directly into Rule 3.3(a)(3) of the new ABA Model Rules of Professional Conduct. And this is not simply the nondisclosure of a case arguably on point— it is a case squarely on point in which the same litigant was the loser.

      . Because the parties settled this case after this ruling and after trial had begun (or more accurately after the jury had been chosen), this opinion need not address such other issues as the propriety (or constitutionality) of punitive damage awards in mass tort litigation. See, e.g., Sullivan, Multiple Punitive Awards in Huge Cases Pose Risks, National Law Journal, June 3, 1985, at 15 col. 1.