author: FEIKENS, Chief Judge.

text:
    Peter KARMANOS, Jr., Peter Karmanos, III, and Compuware Hockey Club, Plaintiffs, v. Deane BAKER, Paul W. Brown, Neil D. Nielsen, Sarah Goddard Power, Thomas A. Roach, Veronica Latta Smith, Nellie M. Varner, James L. Waters, individually and as members of the University of Michigan Board of Regents, Harold T. Shapiro, individually and as President of the University of Michigan, Don Canham, individually and as Athletic Director of the University of Michigan, the National Collegiate Athletic Association, and John Doe and Richard Roe, jointly and severally, Defendants.
    No. 85-CV-60089-AA.
    United States District Court, E.D. Michigan, S.D.
    Sept. 13, 1985.
    As Amended Sept. 23, 1985.

      Erwin B. Ellman, Levin, Levin, Garvett & Dill, Southfield, Mich., for plaintiffs.
    Peter A. Davis, David & Fajen, Ann Arbor, Mich., for defendants Baker, Brown, Nielsen, Power, Roach, Smith, Varner, Waters, U-M Bd. of Regents, Shapiro and Canham.
    Edmond F. Devine, Miller, Canfield, Paddock & Stone, Ann Arbor, Mich., for defendant Nat. Collegiate Athletic Ass’n; Swanson, Midgley, Gangwere, Clarke & Kitchin, Kansas City, Mo., of counsel.
   OPINION

FEIKENS, Chief Judge.

This case involves the issues of the claimed federal constitutional rights of Peter Karmanos III and his father, Peter Karmanos Jr., and whether, if these rights exist, they were violated by defendants National Collegiate Athletic Association (“NCAA”), the Regents of the University of Michigan, Harold Shapiro, President of University of Michigan, and Don Canham, Athletic Director of University of Michigan, (“University defendants”), when Karmanos III was determined ineligible to play intercollegiate hockey. Additionally, Karmanos Jr. and his company, Compuware Hockey Club (“Compuware”) claim antitrust and interference with contract damages based upon alleged communications between NCAA and the Detroit Red Wings professional hockey team.

Jurisdiction is based upon 28 U.S.C. §§ 1331, 1343, and 2201.

I. BACKGROUND

The matters before me are defendants’ Motions to Dismiss or, in the alternative, for Summary Judgment. In analyzing whether I should grant the Motions to Dismiss, I must view the alleged facts in a light most favorable to plaintiffs, but any statement of the alleged facts should not be interpreted as findings by me.

Peter Karmanos III, a resident of Michigan, went to Quebec, Canada to complete his last two years of high school. While in Quebec, Karmanos III joined the Canadian Major Junior A hockey league. He played with Club de Hockey Les Voisin de Laval and Club de Hockey de Verdun. The clubs are professional hockey teams in that some or all players are paid for playing. Karma-nos III, however, added a rider to his contract which stated that he would not be compensated. Karmanos Jr. paid all costs and expenses of his son’s maintenance and support.

While playing hockey in Canada during 1984, Karmanos III was recruited by John Giordano and Mark Miller, hockey coaches for the University of Michigan. The coaches represented to Karmanos III that the University of Michigan would protect his right to try out for the University’s intercollegiate hockey team and, if necessary, would vigorously challenge any NCAA rule which cast doubt on his eligibility.

Plaintiff enrolled at the University of Michigan and began his college education in August, 1984. On September 10, 1984, Karmanos III submitted a statement of his hockey experience and reasons he should not be deemed a professional hockey player to Dr. Gikas, University of Michigan Representative for Intercollegiate Athletics. Exhibit C — 1, NCAA’s Motion to Dismiss. In late September, Karmanos III participated in practice sessions, in which practice participants are rated by University of Michigan hockey coaches.

Based upon Karmanos Ill’s statement and the NCAA Constitution, Article III, Section I, Karmanos III was considered a professional hockey player:

An individual may participate singly or as a member of a team against professional athletes; but if the individual participates or has ever participated on a team known to the individual or which reasonably should have been known to the individual to be a professional team in that sport, that individual no longer shall be eligible for intercollegiate athletics in that sport.
A professional team shall be any organized team which is a member of a recognized professional sports organization, which is directly supported or sponsored by a professional team or professional sports organization, which is a member of a playing league that is directly supported or sponsored by a professional team or professional sports organization or on which there is an athlete receiving directly or indirectly payment of any kind from a professional team or professional sports organization for the athlete’s participation.

NCAA Constitution, Article III, Section 1.

Dr. Gikas initiated a hearing proceeding with the Eligibility Committee of the NCAA. See Exhibit B, NCAA’s Motion to Dismiss. The basis of the proceeding was that even though Karmanos III was by definition a professional hockey player because he played on a professional team, he was not compensated for doing so.

A telephone conference call hearing regarding Karmanos Ill’s eligibility was arranged, and Karmanos III was notified of the hearing one or two days in advance. Karmanos III attended the hearing on October 4, 1984, and the NCAA Eligibility Committee voted to deny the University’s appeal for Karmanos Ill’s eligibility.

The University informed Karmanos III that it would not pursue restoration of his eligibility through state or federal court litigation. Karmanos III was given the option, however, of presenting his case to the NCAA Council’s Subcommittee on Eligibility Appeals in person or through a telephone conference hearing. A proposed in-person hearing date of mid-April, 1985, was set, but Karmanos III filed this lawsuit on February 27, 1985, and abandoned his NCAA eligibility appeal.

Karmanos Jr. and Compuware also sue for antitrust and interference with contractual relations damages. These claims arise from a letter sent by the NCAA to the General Manager of the Detroit Red Wings professional hockey team. The letter stated that “an ice hockey team which includes on its roster an individual who is receiving payments for his participation on that team from a professional sports organization would be considered a professional team under NCAA legislation.” Plaintiffs’ Exhibit D. If the Compuware team was considered professional, all of the players on the team could lose their amateur status. The letter was prompted by a question whether one of the participants in the Compuware summer hockey program was being paid by the Red Wings to participate.

Karmanos Jr. and Compuware allege that the Compuware team was damaged by the NCAA’s letter because players who wished to retain their amateur status were reluctant to participate in the Compuware hockey program.

II. DISCUSSION

Plaintiffs have sued the University of Michigan Board of Regents as an official board and as individuals. In their official capacities the Board of Regents are an agency of the state, see Ewing v. Board of Regents of University of Michigan, 552 F.Supp. 881 (E.D.Mich.1982), rev’d on other grounds, 742 F.2d 913 (6th Cir.1984); Marwil v. Board of Regents, Civil Action No. 79-7331 (E.D.Mich., July 3, 1980), and as such, they are immune from suit. Alabama v. Pugh, 438 U.S. 781, 782, 98 S.Ct. 3057, 3057, 57 L.Ed.2d 1114 (1978). Plaintiffs have not alleged that the State of Michigan has consented to suit, and I hold that they have not. Therefore, I dismiss the University of Michigan Board of Regents in their official capacities. In any event the Board, qua Board, is not a necessary party to grant the relief sought.

The remaining University defendants argue that the Karmanos Ill’s claims against them are moot because Karmanos III was not ranked high enough during his practice sessions to gain a position on the University team. Karmanos III, however, remains a student at University of Michigan and may attempt to play on the hockey team again. If I held his claims moot, defendants’ allegedly wrongful acts would evade review because these acts could recur during Karmanos Ill’s remaining years at the University. Thus, I hold that Karmanos Ill’s claims are not moot.

Count I of plaintiffs’ Complaint claims that defendants deprived Karmanos Jr. of his right to direct the upbringing and education of his child. By not allowing Karmanos III to play NCAA intercollegiate hockey, Karmanos Jr. argues that defendants have deprived him of this right without procedural and substantive due process of law. I hold, however, that Karmanos Jr. was not deprived of his right to direct the upbringing of his child. He chose to send his child, Karmanos III, to Canada to expose him to a different culture as well as to develop his hockey skills. Defendants did not prevent this opportunity; it occurred. Even if defendants’ classification of Karmanos III as a professional could be viewed as an interference of Karmanos Jr.’s upbringing of his son, I hold as a matter of law that it is not a constitutional violation. The right to direct the upbringing and education of one’s child does not extend so far as to give a father a right to direct his child to play hockey on a professional team without the child losing amateur status.

The Supreme Court has long recognized the constitutional stature of parental rights to the upbringing of their children. Meyer v. Nebraska, 262 U.S. 390, 43 S.Ct. 625, 67 L.Ed. 1042 (1923); Pierce v. Society of Sisters, 268 U.S. 510, 45 S.Ct. 571, 69 L.Ed. 1070 (1925). The Supreme Court and the United States Court of Appeals for the Sixth Circuit have recognized, however, that these parental rights are not absolute. See Prince v. Massachusetts, 321 U.S. 158, 166, 64 S.Ct. 438, 442, 88 L.Ed. 645 (1944); Sims v. Waln, 536 F.2d 686, 689 (6th Cir. 1976). It is clear to this Court that parental rights do not extend to the point for which Karmanos Jr. argues.

Many of plaintiffs’ arguments as to Count I contain a central logical flaw. If I were to hold that defendants are precluded from considering Karmanos III ineligible because such an act violates Karmanos Jr.’s right to direct the upbringing of his child, then logically I should do so even if Karmanos III were compensated for participating in the Canadian hockey league. The sole determining factor then becomes whether the father directed his son to participate. I refuse to adopt such an approach to this claim. Accordingly, I dismiss Karmanos Jr.’s parental rights claim in Count I. I also dismiss Karmanos Jr.’s parental rights claim in Count VII for the reasons stated supra.

In Count VI there is a claim that defendants negligently performed the contract between the NCAA and its member institutions to protect amateur athletes and amateur athletics. Plaintiffs argue that they are beneficiaries of this contract and that they are entitled to relief based upon negligent performance. This theory is recognized in Michigan law. See Chamberlain v. Bissell, Inc., 547 F.Supp. 1067 (W.D. Mich.1982); Hart v. Ludwig, 347 Mich. 559, 79 N.W.2d 895 (1956).

The fact that no actionable breach of contract may have occurred does not preclude a finding that the performance of a contractual undertaking has been negligent and resulted in harm to the other contracting party or to a third person.

547 F.Supp. at 1067.

This negligent performance claim is pendent. Complete diversity does not exist between plaintiffs and defendants. I question whether I have the power to hear such a pendent claim against University of Michigan officials in light of the Supreme Court’s holding in Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984). In any event, it is within my discretion to entertain a pendent claim, and I decline to exercise my discretion. Accordingly, Count VI is dismissed without prejudice.

Since Karmanos Jr.’s and Compuware’s claims in Counts I, VI and VII are dismissed, plaintiffs have only their antitrust and interference with contract claims remaining. As mentioned earlier, the latter claims are based on a letter sent by the NCAA to the Detroit Red Wings and the alleged resulting harm to plaintiffs. The facts relating to these claims are separate from the Karmanos III claims. The Karmanos III claims arise from defendants’ ruling that Karmanos III is a professional hockey player who is ineligible to play amateur intercollegiate hockey. Karmanos Jr. joined in this action with his son because the constitutional claims based on Karma-nos Jr.’s “right to direct the upbringing of his son” asserted a right to relief based upon the same transactions or occurrences and sharing common factual or legal questions with Karmanos Ill’s claims. See Fed. R.Civ.P. 20(a). Mere assertion of joint claims and common legal issues, however, is not sufficient to preclude misjoinder. “In spite of the great liberality of Rule 20(a), the rule does not excuse any of the joined parties from the obligation to state a claim against defendant or defendants upon which relief may be granted.” C. Wright & A. Miller, 7 Federal Practice and Procedure § 1656 at 284-85 (1972).

I have held that Karmanos Jr.’s assertions of constitutional violations do not state a claim upon which relief may be granted; thus, Karmanos Jr. and Compuware fail to meet the joinder requirements of Rule 20(a). The remedy for misjoinder is provided in Rule 21, which states:

Misjoinder of parties is not ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or of its own initiative at any stage of the action and on such terms as are just. Any claim against a party may be severed and proceeded with separately.

Fed.R.Civ.P. 21 (emphasis added). Pursuant to Rule 21,1 retain jurisdiction over the primary action but drop Karmanos Jr. and Compuware as parties. Accordingly, Karmanos Jr.’s and Compuware’s antitrust and interference with contractual relations claims are dismissed without prejudice.

The remaining claims in this suit are the claims of Karmanos III (hereinafter “plaintiff”) in Counts II, III and IV.

In Count II plaintiff alleges that defendants deprived him of his property or liberty interests without due process of law, in violation of the Constitution. Count II is divided into ten subparts (11(a) — (j)), each listing an interest of which plaintiff claims he was deprived. I shall analyze each sub-part infra.

Count 11(a) claims that defendants deprived plaintiff of his “fundamental right to free public and secondary education and his fundamental right to equal educational opportunity at the college level.” Count 11(b) claims that defendants deprived plaintiff of his “fundamental right to acquire useful knowledge, to be free in the enjoyment of his faculties and to pursue such occupations and avocations as are most suitable and congenial to his personal development and enjoyment.” While I question whether these interests are fundamental or even whether they are property or liberty interests for due process analysis, I first address a primary flaw in plaintiffs claim. Plaintiff has failed to allege any acts of defendants which infringe these interests. Defendants have not refused to allow plaintiff to pursue his education at the University of Michigan; in fact, plaintiff is a matriculated undergraduate student at the University now in his sophomore year of studies. Defendants have not restrained plaintiff from pursuing a career of professional hockey; he remains free to re-enter a professional hockey contract at any time. The only restriction that defendants have imposed upon him is the opportunity to play intercollegiate hockey because of plaintiffs professional status.

The law is clear in this circuit that a person does not have a liberty interest subject to due process protection to participate in interscholastic athletics. See Hamilton v. Tennessee Secondary School Athletic Association, 552 F.2d 681 (6th Cir.1976); see also Mitchell v. Louisiana High School Association, 430 F.2d 1155 (5th Cir. 1970); Bailey v. Truby, 321 S.E.2d 302 (W.Va.1984).

For better or worse, the due process clause of the fourteenth amendment does not insulate a citizen from every injury at the hands of the state. “Only those rights, privileges and immunities that are secured by the Constitution of the United States or some Act of Congress are within the protection of the federal courts. Rights, privileges and immunities not derived from the federal Constitution or secured thereby are left exclusively to the protection of the states.” [Quoting from 1 W. Barron & A. Holtzoff, Federal Practice § 37 at 200 (Wright ed. (1960) ]. The privilege of participating in interscholastic athletics must be deemed to fall in the latter category and outside the protection of due process.

552 F.2d at 682 (quoting Mitchell v. Louisiana High School Athletic Association, 430 F.2d 1155, 1157-58 (5th Cir.1970)).

Plaintiff also has not demonstrated that he has a property interest in participating in NCAA intercollegiate hockey on the University of Michigan hockey team. Property interests for due process purposes are defined by an independent source such as state law, Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972), and plaintiff has not cited any authority for the proposition that he has such a property interest. Because of this and because plaintiff has not alleged any acts by defendants which deprive him of educational or vocational opportunities other than the opportunity to play intercollegiate hockey, I dismiss Counts 11(a) and (b) with prejudice.

Count 11(c) claims that defendants deprived plaintiff of his “right to travel throughout the United States and, subject to valid Congressional regulation, abroad, without condition or qualification retroactively imposed.” Plaintiff has not alleged any burden on his right to travel, and I cannot conceive how defendants’ alleged acts imposed anything more than a de minimus burden. Accordingly, I dismiss Count 11(c) with prejudice.

Count 11(d) claims that defendants deprived plaintiff of his “right to be free from ex post facto laws and regulations and bills of attainder.” This claim seems far-fetched. Plaintiff has not alleged that defendants have added or changed any rules since plaintiff signed his contract with the Major Junior A hockey league. It is undisputed that the rule which renders plaintiff a professional has been in effect since 1980, three years before plaintiff joined the Major Junior A league. I therefore dismiss Count 11(d) with prejudice.

Count 11(e) claims that defendants deprived plaintiff of his “right of free assembly and association, whether for political, social, recreational or educational interests.” This is a novel theory on which to challenge NCAA amateur eligibility rules. Apparently, plaintiff is claiming that defendants are penalizing him for his association with Canadian hockey players by not allowing plaintiff to play intercollegiate hockey at the University of Michigan.

It is clear that plaintiff has a liberty interest in his right to associate guaranteed by the first amendment of the Constitution, but I hold that defendants have not deprived plaintiff of this right. The mere fact that defendants consider plaintiff ineligible for participation in intercollegiate hockey cannot be' said to deprive plaintiff of his right of association. A due process claim requires a protected liberty or property interest as well as a denial or deprivation of that interest. Defendants’ alleged acts do not amount to a deprivation of the interest enunciated in Count 11(e). Plaintiff has been and is free to associate with whomever he chooses; defendants have not and do not regulate such association. The only deprivation that plaintiff faces is of his claimed “right” to contract and play hockey with a professional hockey team and retain his amateur status. I hold that plaintiff has no such constitutional right. The question whether plaintiff could have lost his amateur status for playing in an informal hockey game with friends, one or more who are professionals, might warrant a different result; that question, however, is not before me. The question before me is whether plaintiff, who signed a contract and played hockey with a professional team and had knowledge that such an act would jeopardize his amateur status, is being deprived of his constitutional first amendment freedom of association when classified as a professional. I hold that he is not and, accordingly, dismiss Count 11(e) with prejudice.

I add that if I had held that defendants’ acts deprived plaintiff of his right of association, it would follow that any hockey player on any team, whether he receives compensation or not, must be eligible to participate on the University of Michigan hockey team. Clearly, this is contrary to existing law, and I do not adopt such an approach here.

Count 11(f) claims that defendants deprived plaintiff of his “right to control, exercise and develop his own body.” Again, I cannot accept plaintiff’s argument that he was deprived of this right. He has been and remains free to exercise and develop his body in any way he chooses, except on the University of Michigan hockey team. I earlier held that participation on the team is not a protected liberty or property interest, and I refuse to allow plaintiff to seek relief against defendants based either on rights which he does not have or on alleged deprivations of rights which did not occur. Accordingly, I dismiss Count 11(f) with prejudice.

Count 11(g) claims that defendants deprived plaintiff of his “right to a full college education which the state has seen fit to provide.” Plaintiff has cited no authority to support the proposition that he has a liberty or property interest in a full college education and, in particular, in playing intercollegiate hockey. Accordingly, I dismiss Count 11(g) with prejudice.

Count 11(h) claims that defendants deprived plaintiff of his “right to fair and just treatment in the course of legislative and executive investigation and hearing, as assured by Article I, Section 17 of the Michigan Constitution of 1963.” I question whether the eligibility determinations of the NCAA and University defendants are covered by this language of the Michigan Constitution. I base my decision, however, on a different ground. Plaintiff has made no allegation that the hearing or investigation surrounding his eligibility was unfair. Plaintiff is blurring the distinction between an allegedly unfair athletic eligibility rule and an allegedly unfair legislative or executive hearing or investigation. Given plaintiff’s lack of allegation of the latter, I dismiss Count 11(h) with prejudice.

Count II(i) claims that defendants deprived plaintiff of his “right to be free from damage and injury as a consequence of monopolies and restraints of trade prohibited by the laws of the United States and the State of Michigan.” I find this claim to be far-fetched. See discussion of Count 11(d), supra. The antitrust laws of the United States and Michigan, in this case, do not give plaintiff a property or liberty interest subject to due process protection. Plaintiff’s attempt to bootstrap an antitrust claim into a constitutional claim is inappropriate. Accordingly, I dismiss Count II(i) with prejudice.

Count II(j) claims that defendants deprived plaintiff of his “property rights in the contractual commitments made by the University to him as a student enrolled at the University.” Plaintiff, however, does not indicate the basis of such contractual commitments. There are no allegations that the University of Michigan contracted to allow plaintiff to play hockey notwithstanding his professional status. The only circumstance in plaintiff’s allegations that could arguably create such a commitment is the representations made by the University of Michigan hockey coaches while plaintiff was in Canada. These mere representations, however, do not rise to a property or liberty interest which require due process protection. See Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972); Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972); Shamie v. City of Pontiac, 620 F.2d 118 (6th Cir.1980).

The Supreme Court has held that representations which create only a mere expectancy are not protected by procedural due process. See Perry, 408 U.S. at 603, 92 S.Ct. at 2700. In Shamie, the United States Court of Appeals for the Sixth Circuit interpreted Perry. Shamie and the City of Pontiac’s attorney agreed that if the city denied his liquor license application, it would provide reasons for the denial. The representation was made to this Court during a preliminary hearing of Shamie’s 42 U.S.C. § 1983 suit against the City, and I embodied the representation in a court order. Shamie’s application was denied without reason six months later.

I held that the City had deprived Shamie of a property interest in the agreement without due process when it breached the agreement. On appeal, however, the Sixth Circuit held that “the City’s promise to tell him why his application might be rejected does not automatically confer on him a ‘property interest’ protected by constitutional due process.” 620 F.2d at 121. The Court distinguished Shamie from cases in which benefits that have been conferred are taken away, i.e., a welfare recipient’s loss of benefits, parolees threatened with revocation of parole or probation, wage earners against whom an order of attachment is sought, or a driver who faces revocation of his driver’s license.

In this case plaintiff never received the benefit which he alleges is being taken away. Any alleged representation made by the coaches of University of Michigan created only an expectation of a benefit which did not, in and of itself, endow plaintiff with due process protection. Accordingly, I dismiss Count II(j) with prejudice.

Thus, Count II is dismissed in its entirety.

Count III claims that defendants “summarily relegated [plaintiff] to second class citizenship at the University without reasonable notice, or opportunity to defend himself through counsel,” and that such acts deprived plaintiff of procedural due process. Count III further claims that “at no time was [plaintiff] advised that he was to be deprived of educational opportunities at the University by reason of prior recreational and educational activities undertaken by him on his own time, in another country, and at the exclusive cost to his family.” Based upon the undisputed facts, however, plaintiff was or should have been aware of the possibility of losing his amateur status before he signed the contract with the Major Junior A league. According to plaintiffs Complaint, paragraph 19, the NCAA made a determination that the Canadian Major Junior A hockey league was a professional hockey league in 1980 — three years before plaintiff entered into a player’s contract with the league. It is also uncontested that the NCAA rules stated that an individual who participates on a professional team no longer shall be eligible for intercollegiate athletics in that sport. See Complaint, para. 17. I have difficulty with plaintiff’s claim that he was not advised that his participation on a professional hockey team would jeopardize his eligibility to play intercollegiate hockey.

On June 26, 1980, over three years prior to the date plaintiff entered the contract with the Major Junior A league, defendant NCAA sent a memorandum to Directors of Athletics of member institutions sponsoring the sport of ice hockey. The memorandum stated that it appeared that Major Junior A ice hockey teams in both United States and Canada would be deemed professional teams within NCAA rules because such teams have professional players assigned to them or have athletes who are receiving payments from professional sports organizations. See Exhibit I, NCAA’s Motion to Dismiss. This interpretation of NCAA’s rules was published in the NCAA News on July 15, 1980.

It is undisputed that plaintiff sought and received assistance of counsel in entering into the contract with the Major Junior A league. The top of the first page of the contract states:

IMPORTANT NOTICE TO PLAYER
[six-point type]
(1) Before signing the contract you should (A) consult a barrister, solicitor or lawyer of your choice as to the advisability of signing this contract and to obtain his explanation and opinion as to the obligations imposed upon you and the benefits to which you are entitled hereunder____

Page four of the contract contains a “Certificate of Independent Advice” which states that Charles J. Carson of the Michigan Bar conferred with plaintiff “as to the advisability of his signing this Standard Player’s Contract.” The certificate further stated that attorney Carson placed plaintiff’s “position and the consequences of his signing this Standard Player’s Contract fully and plainly before him and he declared that he fully understood the nature and effect of said Standard Player’s Contract____” At a minimum, plaintiff should have known that signing with a Major Junior A hockey league would jeopardize his opportunity to play amateur intercollegiate hockey under then existing NCAA rules.

Defendants cannot be expected to intervene and personally inform every player of his situation upon the execution of a contract and participation with a Major Junior A hockey team; accordingly, I hold that defendants did not owe such a duty to plaintiff.

Plaintiff also argues that he received only one to two days notice prior to the October 4, 1984, eligibility telephone conference hearing. Plaintiff claims such notice was insufficient for him to obtain assistance of counsel. Plaintiff never alleged, however, that he was entitled to assistance of counsel, nor has he cited any authority for the proposition that he was entitled to assistance of counsel at the October 4, 1984, hearing. Analogy to assistance of counsel requirements in welfare benefit termination cases, see Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), is inappropriate because plaintiff has not demonstrated that he has a liberty or property interest of which he is being deprived. Even if plaintiff had demonstrated that denial of the opportunity to play hockey was a deprivation tantamount to a suspension from school for disciplinary reasons, his argument would fail. The Supreme Court has held that there need be no delay between the “notice” and the hearing for such a suspension, nor must the school afford the student the opportunity to secure counsel. See Goss v. Lopez, 419 U.S. 565, 582-83, 95 S.Ct. 729, 740-41, 42 L.Ed.2d 725 (1975); see also Lee v. Western Reserve Psychiatric Habilitation Center, 747 F.2d 1062 (6th Cir.1984) (probationary employee at state facility not deprived of due process when given notice of charge one day before hearing).

Since plaintiff has not demonstrated that he was without adequate notice that his participation in the Major Junior A hockey league would jeopardize his eligibility to play intercollegiate hockey and has not demonstrated that he had a right to be assisted by counsel at his October 4, 1984, hearing, I dismiss Count III with prejudice.

Count IV claims that defendants collaborated, cooperated and conspired to deprive plaintiff and the class of individuals who play in the Canadian Major Junior A hockey league of their freedom of association and of equal protection of the law. Based upon reasons that I stated in dismissing Count 11(e), supra, i.e., that plaintiffs freedom of association was not deprived, I dismiss plaintiffs freedom of association claim in Count IV with prejudice.

Plaintiffs equal protection claim is based upon the treatment of players in the Major Junior A hockey league. Plaintiff has not argued that this group is a suspect class subject to strict scrutiny analysis. I hold that it is not a suspect class. Additionally, there is no fundamental interest at issue that would require strict scrutiny analysis because I have dismissed plaintiffs freedom of association deprivation claim. Thus, the applicable standard for plaintiffs equal protection claim is the rational basis test. See Harrah Independent School Dist. v. Martin, 440 U.S. 194, 199, 99 S.Ct. 1062, 1064, 59 L.Ed.2d 248 (1979); San Antonio Independent School Dist. v. Rodriguez, 411 U.S. 1, 40, 93 S.Ct. 1278, 1300, 36 L.Ed.2d 16 (1973).

Under the rational basis test defendants need only show that they had a basis “rationally related to the State’s objective” for treating plaintiff differently than others. See Harrah, 440 U.S. at 199, 99 S.Ct. at 1064; Massachusetts Board of Retirement v. Murgia, 427 U.S. 307, 315, 96 S.Ct. 2562, 2567, 49 L.Ed.2d 520 (1976). It is undisputed that defendant NCAA’s stated objective is to promote and protect amateur intercollegiate athletics. See Complaint, para. 50. I hold that this is a legitimate state interest, and in order to fulfill this purpose, the NCAA and its member institutions must prevent professional players from competing on amateur intercollegiate teams. The rules precluding players on professional teams from competing on intercollegiate amateur teams are rationally related to the objective of protecting amateur athletics. Accordingly, I dismiss plaintiff’s equal protection claim in Count IV with prejudice.

Finally, it should be said that even though plaintiff Karmanos III has not explicitly attacked the constitution and rule promulgated by the NCAA, several of his broadly worded allegations might implicitly be said to do that. Hence, this comment. If these allegations, when taken as a whole, constitute a constitutional attack on the facial validity of the constitution and rule, I find the attack unavailing.

First, plaintiff has no constitutionally protected right, privilege, or entitlement to participate in intercollegiate hockey. Cf. Walsh v. Louisiana High School Athletic Association, 616 F.2d 152, 159 (5th Cir. 1980), cert. denied, 449 U.S. 1124, 101 S.Ct. 939, 67 L.Ed.2d 109 (1981) (association rule prohibiting transfer students from competing interscholastically during the year following their transfer did not infringe a constitutionally protected right); Mitchell v. Louisiana High School Association, 430 F.2d 1155, 1157-78 (5th Cir.1970) (participation in interscholastic athletics is not a right, privilege, or immunity protected by the federal Constitution); Hamilton v. Tennessee Secondary School Athletic Association, 552 F.2d 681, 682 (6th Cir.1976) (citing Mitchell, supra for the point annotated). Second, the NCAA constitution and rule implicitly challenged by plaintiff is not so arbitrary or unreasonable as to deny plaintiff substantive due process or equal protection. The NCAA has a legitimate interest in restricting collegiate competition in amateur athletes. The constitution and rule challenged by plaintiff bears a reasonable relationship to this objective by prohibiting the participation of amateurs and professionals on the same team. This is all that due process or equal protection requires in a situation such as this. Cf. Kite v. Marshall, 661 F.2d 1027 (5th Cir.1981), cert. denied, 457 U.S. 1120, 102 S.Ct. 2934, 73 L.Ed.2d 1333 (1982); In Re U.S. ex rel. Missouri State High School Activities Association, 682 F.2d 147 (8th Cir.1982).

I have not addressed the issue whether defendant NCAA is a state actor, and because of the manner in which I have decided this case, I do not address that issue.

For the reasons stated in this Opinion, defendant NCAA’s Motion to Dismiss and defendants’ Shapiro, Canham, and the Regents’ Motion to Dismiss are hereby GRANTED. In addition, Karmanos Jr. and Compuware are dismissed as stated.

An appropriate order may be presented.

      . Karmanos III argues that he has a right to receive such guidance from his father. I shall treat this claim as included in Counts 11(a) and (b).

      . Karmanos Jr. and Compuware also do not meet the requirements for indispensable or necessary parties under Fed.R.Civ.P. 19.

      . Because I have determined that defendants have not deprived plaintiff of a property or liberty interest, I do not rule on whether plaintiffs letter stating his hockey experience and reasons he should not be deemed professional constitutes a predeprivation "opportunity to explain.” See Goss v. Lopez, 419 U.S. at 582, 95 S.Ct. at 740.


source: Caselaw Access Project

author: GERALD J. WEBER, District Judge.

license: Public Domain

text:
    CHAMBERS DEVELOPMENT COMPANY, INC., Plaintiff, v. MUNICIPALITY OF MONROEVILLE; Anthony Lagorga; Marshall W. Bond; Daniel Aston; and Frank J. Brunner, Jr., trading and doing business as Valley Sanitation, Defendants.
    Civ. A. No. 84-414.
    United States District Court, W.D. Pennsylvania.
    Sept. 13, 1985.

      John H. Bingler, Jr., Pittsburgh, Pa., for plaintiff.
    David M. Neuhart, Pittsburgh, Pa., for defendant Brunner.
    Frank E. Yourick, Jr., Pittsburgh, Pa., for defendant Municipality of Monroeville.
   OPINION ON MOTIONS TO DISMISS

GERALD J. WEBER, District Judge.

This is an action alleging antitrust, RICO (Racketeer Influenced and Corrupt Organizations Act), and civil rights violations, as well as pendant state law claims of interference with contractual and business relations, civil conspiracy, and business libel. Plaintiff is engaged in the business of garbage collection and disposal and operates a landfill in Monroeville, PA. The action was brought against the Municipality of Monroeville, a councilman, a manager, and a fire official of the Municipality, and one of plaintiff’s competitors in the garbage collection and disposal business (hereinafter referred to as Valley). All defendants have filed motions to dismiss the complaint as well as alternate motions for more definite statements. All oral depositions and subpoenas for production of documents have been stayed in this case pending the determination of these motions. The parties have supplied the court with briefs in support of their respective positions. We now address all motions to dismiss, accepting the facts for purposes of these motions in the light most favorable to the plaintiff.

I. ANTITRUST CLAIMS—

Counts I and II

Plaintiff alleges that defendants entered into contracts, combinations, and conspiracies in restraint of trade in violation of § 1 of the Sherman Act, as well as § 2 monopolization, attempts to monopolize and conspiracy to monopolize.

A. “STATE ACTION” EXEMPTION

The Municipality and its officials claim a “state action” exemption from antitrust laws as set out in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). The Parker doctrine rests on principles of federalism and is principally applied to states. The doctrine also applies to those actions of municipalities that are taken pursuant to a clearly expressed state policy. Municipal defendants indicate that the challenged activities in this case are expressly permitted under the Pennsylvania Solid Waste Management Act, 35 P.S. § 6018.202 as follows:

“(a) Each municipality shall be responsible for the collection, transportation, processing and disposal of municipal waste ...
(b) In carrying out its responsibilities, any such municipality may adopt ordinances, regulations and standards for the storage and collection of municipal wastes which shall be not less stringent than, and not in violation of, the rules, regulations, standards, and procedures of the department
(c) Municipalities may contract with any person or other municipality to carry out their responsibilities for the collection, transportation, processing and disposal of municipal wastes, provided that the ultimate disposal is known to be at a site permitted to accept such waste ...”

The Municipal activities challenged by plaintiff consist of the following:

(a) failure by the Municipality to take action approving and sponsoring a Methane Recovery Project within the specified time periods with the result that plaintiff did not obtain a Methane Recovery grant;

(b) adoption of Monroeville Ordinance 1254 disallowing expansion of plaintiffs landfill and imposing regulations, vehicle licensing and landfill inspection procedures;

(c) enforcement of the Vehicle Code;

(d) failure to waive paragraph 13 of plaintiffs Conditional Use Permit No. 73-21 (The permit allowed plaintiff to excavate, fill, and grade at the landfill. Paragraph 13 prohibited blasting. Limited blasting was necessary for plaintiff to meet Department of Environmental Resources (DER) requirements that plaintiff control leachate and develop a methane barrier.);

(e) adoption of Monroeville Ordinance 1379 prohibiting all activity on plaintiffs landfill from 6 p.m. to 6 a.m. Monday through Saturday, and all day Sunday and holidays;

(f) adoption of Ordinance 1376, as a supplement to Vehicle Code 3709, prohibiting persons operating motor vehicles from allowing mud, garbage, and other contents which have fallen from the vehicle to remain on any street, etc.;

(g) advertising for bids for disposal of garbage and wastes, specifying that bidders must have a DER permit, and accepting defendant Valley’s bid which falsely and fraudulently represented that Valley had a DER permit, No. 100280;

(h) continuing to dispose of its garbage and wastes at Valley’s landfill without contract on an “open market purchase” basis after a Common Pleas Court injunction prohibited the Municipality from awarding the contract on the basis of Valley’s bid which did not meet the bid specifications.

Plaintiff argues that although the Municipality has authority to operate in a given area, state law does not mandate that the Municipality act in a clearly anticompetitive manner or set up “a sham bidding procedure which resulted in a group boycott.” Plaintiff therefore disputes the applicability of the “state action” exemption.

We do not agree with plaintiff’s characterization of the facts, nor do we agree that a state “mandate” is necessary. See Town of Hallie, — U.S. at-, 105 S.Ct. at 1718. The state has specifically authorized municipalities to provide for garbage and waste disposal and has delegated the express authority to take action that foreseeably will result in anticompetitive effects. The Municipality’s activities were all directed toward the provision or regulation of authorized services. The fact that the regulatory activities taken were later found to be preempted or ineffective does not, in our opinion, subject the Municipality to antitrust liability. Plaintiff has in the past effectively used state court remedies to challenge improper municipal actions found to be in conflict with the state’s extensive regulatory pattern over waste collection and disposal. For these reasons we will dismiss plaintiff’s antitrust claims (Count I and Count II) as to the Municipality and its officials, acting in their official capacity.

B. NOERR PENNINGTON DOCTRINE

Fairly read, the complaint recites actions taken by LaGorga as an individual, in addition to those taken in his official capacity as a councilman of the Municipality. LaGorga lives on Thomas Street in Monroe-ville which is the public road leading to the entrance to plaintiff’s landfill. Plaintiff and other garbage collectors travel over this road to bring waste materials to the landfill. The landfill is said to be the reason that LaGorga became involved in politics in the first place, and he has publicly stated his specific intention to shut it down, as well as his opinion that Monroeville should not have the landfill. Plaintiff alleges inter alia that LaGorga, “motivated in part by malice and ill will toward plaintiff and by personal self interest,” enlisted the aid of others in a conspiracy, the ultimate purpose of which was to force the closing of plaintiff’s landfill and the destruction of plaintiff as a going concern.

The factual basis for these allegations includes LaGorga’s seeking public support of adverse municipal action, persuading other officials to deny plaintiff’s requests or to take adverse actions or to cause delays which would have adverse effects, persuading other officials to strictly enforce the Solid Waste Management Act, the Vehicle Code, or DER regulations, making false and fraudulent representations to Wilmerding officials to persuade them to pass an ordinance with adverse effects on plaintiff, and making unfounded and false allegations about the effects of blasting at plaintiff’s landfill during a public hearing to persuade other officials to take adverse action.

Defendants argue that these facts describe political or lobbying activities which are protected from antitrust attack under the Noerr-Pennington doctrine. Defendants argue that LaGorga’s efforts to influence public policy do not violate the antitrust laws even though they are intended to adversely effect competition. Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961); United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965).

We agree. LaGorga is not alleged to have been acting on behalf of a competitor. Rather he is acting on what appears to be personal motives or local interest in an attempt to shut down a landfill near his home. His official actions in regulating or providing for waste disposal are exempt from antitrust liability under Parker. His actions as an individual in attempting to persuade other officials to take a particular course of action are exempt under the Noerr-Pennington Doctrine.

C. VALLEY

The only remaining defendant is Brunner trading and doing business as Valley Sanitation (Valley). Brunner is alleged to have conspired to monopolize and entered a conspiracy in restraint of trade. Factually, he is said to have submitted a bid to the Municipality to provide waste disposal services, which bid falsely and fraudulently represented that Valley had a DER permit. However since Municipal actions in awarding the contract for waste disposal services are not subject to antitrust scrutiny, we do not see how submitting a bid however fraudulent, for such an award or otherwise providing disposal services could create antitrust liability. We do not believe that the facts as given provide a basis for antitrust claims against this defendant.

For all of the above-stated reasons, we will dismiss the antitrust claims as to all defendants.

II. RICO CLAIMS — Counts III and IV

The Supreme Court recently held that neither prior criminal convictions for predicate acts that constitute a “racketeering activity,” nor proof of a distinct “racketeering injury,” are prerequisite to maintaining a private RICO action. See Sedima, S.P. R. L. v. Imrex Co., Inc., — U.S.-, 105 S. Ct. 3275, 87 L.Ed.2d 346 (1985); Ameri can National Bank & Trust Co. of Chicago v. Haroco, Inc., — U.S.-, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985). In so holding, the Court signaled that RICO should be broadly interpreted. Furthermore, the Third Circuit has taken a very flexible approach in defining the particularity necessary under F.R.Civ.P. 9(b) to state a RICO claim based on mail or wire fraud. Seville Industrial Machinery Corp. v. Southmost Machinery Corp., et al, 742 F.2d 786 (3d Cir.1984). Noting the liberal “notice” pleading requirement of the modern federal rules, the Appellate Court indicated that “date, place or time” allegations were sufficient but not necessary to satisfy the rules, and held that plaintiffs were free to use alternate means of injecting precision and some measure of substantiation into their allegations of fraud.

We believe that plaintiff has met the pleading requirements of Seville in so far as it has pled that municipal officials have conducted the affairs of the Municipality (an enterprise) through a pattern of racketeering activity including mail and wire fraud (predicate acts). Complaint at pp. 28, 29. However, we see no factual basis to support plaintiff’s RICO claims against Brunner, since he clearly did not conduct Municipal affairs and there is no allegation that he was employed by or associated with the Municipality. We note that the language of 18 U.S.C. § 1962(c) is broader than the allegations of the complaint, and we cannot say that plaintiff would be unable to state facts which would support § 1962(c), (d) claims against Brunner with more specific pleading. Moreover if Brunner is not being charged with RICO violations, plaintiff does not appear to have shown a factual basis for its allegations of a pattern of racketeering activity, as. this would require some substantiation of the occurrence of two predicate acts by municipal officials within a ten year period.

Plaintiff will therefore be required to amend its RICO counts to provide specifically which defendants are being charged with RICO violations, and to clarify the predicate acts on which it relies to establish a pattern of racketeering activity.

III. THE CIVIL RIGHTS CLAIM — Count V

Count V of Plaintiff’s Complaint charges all defendants with violations of 42 U.S.C. § 1983. The Count itself is bare of any separate specific allegations of civil rights violations but it incorporates the general narrative allegations of paragraphs 1-39 of the Complaint. These are the allegations made in support of the anti-trust and the RICO counts of the complaint as well as the pendant claims. The Civil Rights Count merely recites that defendants have acted under color of state statutes, ordinances, regulations, customs, and usages to deprive plaintiff of equal protection and due process as well as property rights, freedom of enterprise, and freedom from the abuse of process.

This is a pretty broad statement of constitutional rights, more akin to the ringing prose of the Declaration of Independence than a specific constitutional construction. We are at loss as to how defendants can properly frame an answer. We would have to speculate ourselves as to which allegations of fact in the general narrative part of the complaint were meant to support the civil rights allegations. Therefore, when judicial mandate requires civil rights allegations to be pleaded with particularity, we will interpret that to mean that the civil rights count in the complaint itself be so pleaded. While there is case authority to the effect that a disappointed bidder on a public contract may assert a civil rights cause of action, this alone is not enough. The complaint must assert the specific circumstances under which plaintiff was denied due process or equal protection, and what personal or property right has been invaded. Therefore, we will dismiss the civil rights count (Count V) without prejudice to the filing of an amendment to that count.

IV. PENDANT STATE CLAIMS— Counts VI, VII, and VIII

With respect to Counts VI and VII the pendant causes of action, we will deny the Motion to Dismiss with respect to these until we have a firmly established federal cause of action on the federal jurisdiction counts.

It is our understanding that Count VIII, the business defamation count, has been withdrawn and the Motion directed to that count is moot.

An appropriate order will be entered.

      . The U.S. Supreme Court recently decided that active state supervision was not a prerequisite for a municipality to claim the state action exemption where anticompetitive activities are authorized but not compelled by the state. Town of Hallie, et al. v. City of Eau Claire, — U.S.-, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985).

        . The cases cited by the plaintiff are distinguishable in that they involve official governmental participation with a private party in a scheme to restrain trade where no "state action" exemption existed. See Duke & Company, Inc. v. Foerster, 521 F.2d 1277, 1281 (3d Cir.1975).

      . Plaintiff argues in its brief that the Complaint alleges: a) two separate enterprises, one legitimate and the other illegitimate, consisting of (1) the Municipality and (2) an association in fact of all defendants, including the Municipality, and others; b) Brunner is associated with an enterprise consisting of an association in fact of all defendants and others; and c) the overt acts of Brunner, his participation in the conduct of the affairs of the enterprise are set forth in paragraph 27 of the Complaint. If this was plaintiffs intention, we believe it could be pleaded with more specificity and clarity, giving all defendants notice of the claims against them.


author: THOMAS F. HOGAN, District Judge.

text:
    SHURBERG BROADCASTING OF HARTFORD, INC., Plaintiff, v. FEDERAL COMMUNICATIONS COMMISSION, Defendant.
    Civ. A. No. 84-3406.
    United States District Court, District of Columbia.
    Sept. 13, 1985.

      Harry F. Cole, Mark A. Kirsch, Bechtel & Cole, Washington, D.C., for plaintiff.
    Patricia J. Kenney, Asst. U.S. Atty., Washington, D.C., and Sue Ann Preskill, Office of General Counsel, F.C.C., Washington, D.C., for defendant.
   MEMORANDUM OPINION

THOMAS F. HOGAN, District Judge.

The plaintiff, Shurberg Broadcasting of Hartford, Inc. (“Shurberg”), filed this action under the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552, and the Government in the Sunshine Act (“Sunshine Act”), 5 U.S.C. § 552b, seeking access to certain documents generated by the defendant, the Federal Communications Commission (“FCC’Vthe “Commission”) as well as the videotape of a closed Commission meeting conducted on September 26, 1984. This case is presently before the Court on defendant’s motion to dismiss, or in the alternative for summary judgment, with respect to the FOIA claim. The plaintiff opposes the motion, asserting its need to conduct discovery prior to any disposition of its FOIA claim. Also before the Court are the parties’ cross-motions for summary judgment with respect to the Sunshine Act claim. Upon consideration of the motions, and the respective memoranda filed in support of and in opposition thereto, as well as the relevant portions of the record, this Court concludes that summary judgment must be granted for the defendant with respect to the Sunshine Act claim, but denied with respect to the FOIA claim, and the plaintiff permitted to conduct limited discovery on the FOIA claim.

Statement of Facts

The plaintiff’s claims in this action arise from matters that were pending before the FCC in September 1984 relating to the license of Station WHCT-TV, Channel 18, Hartford, Connecticut. At that time, Station WHCT-TV was licensed to Faith Center, Inc. (“Faith Center”). Faith Center’s operations, however, had been under investigation by the FCC since 1977, and in a November 1980 order the FCC designated Faith Center’s pending license renewal application for a hearing to determine whether it was qualified to remain a Commission license. See 47 U.S.C. § 309(e). However, the FCC’s “Statement of Policy on Minority Ownership of Broadcasting Facilities,” 68 F.C.C.2d 979 (1978), as revised, 92 F.C.C.2d 849 (1982), allows a licensee whose application has been , designated for a hearing to avoid that hearing by selling the station to a minority-owned entity at a price below fair market value. Pursuant to this “distress sale” policy, Faith Center filed an application in 1981 to sell to a minority-owned entity. That application was granted, subject to the conditions that the prospective purchaser be found fully qualified to be a licensee and that the sale become final within 90 days after such qualifications were confirmed. However, the sale was never consummated. In September, 1982 Faith Center filed a second request to utilize the distress sale process, which was granted by the FCC on September 30,1983, subject to the same conditions as the earlier approval. Again, however, the sale was not consummated.

Finally, on June 28, 1984 Faith Center filed a third distress sale request. However, on December 2, 1983, Shurberg Broadcasting, the plaintiff here, had filed an application for authority to construct and operate a television station on Channel 18 in Hartford which was mutually exclusive with Faith Center’s renewal application. Furthermore, on April 19, 1984 Shurberg had filed a “Petition for Extraordinary Relief” with the FCC, asserting that, in light of the failure of Faith center’s second distress sale attempt, its application should be consolidated with Faith Center’s renewal application, and the hearing promptly conducted. Upon the failure of the FCC to act, and upon learning that Faith Center was about to submit the third distress sale application, Shurberg filed a Petition for Writ of Mandamus with the United States Court of Appeals for the District of Columbia Circuit, requesting that the Court of Appeals order the FCC to act on the pending renewal application and Shurberg’s competing application. In re Shurberg Broadcasting of Hartford, Inc., No. 84-5363 (D.C.Cir.1984). On June 29, 1984 the Court of Appeals ordered that Shurberg’s petition would be held in abeyance until the earlier of October 1, 1984 or the disposition of certain cases then pending before the Court of Appeals. Id.

On September 19, 1984, pursuant to the public notice requirements of the Sunshine Act, 5 U.S.C. § 552b(d), (e), the Commission released a public notice stating that it intended to meet, in closed session, on September 26, 1984 in order to consider matters raised by Shurberg’s Petition for Extraordinary Relief and Faith Center’s third distress sale request. A subsequent request by Shurberg to open the meeting with respect to its petition was denied. In doing so, the FCC cited exemption 10 of the Sunshine Act, which permits closure of a meeting concerning “the agency's participation in a civil action or proceeding,” or the “conduct or disposition by the agency of a particular case of formal agency adjudication.” 5 U.S.C. § 552b(c)(10). In doing so, the FCC indicated that the meeting would relate to matters brought against the FCC by Shurberg in the Court of Appeals, and would concern the conduct and disposition of formal agency action concerning the licensing of Hartford Channel 18. After the September 26, 1984 meeting, the Chairman of the Commission, Mark S. Fowler, certified that the date, time, place and persons present for consideration of the matters were as stated on the certificate to close the meeting.

On December 7, 1984, the Commission released a memorandum opinion and order denying Shurberg’s Petition for Extraordinary Relief and granting Faith Center’s third petition to accomplish a distress sale. In doing so, the FCC determined that Shurberg was not at that time entitled, as a matter of right, to have its application considered along with Faith Center’s renewal application, a position the FCC recognized as requiring the conclusion that Faith Center was absolutely precluded from pursuing its third distress sale request. Moreover, the FCC determined, as a policy matter, that the goal of possible minority ownership of the station at that time outweighed the public interest in having competing applications considered at that time. The FCC ruled, however, that if Faith Center’s third distress sale was not consummated, its renewal application would be promptly considered, allowing competing applications to be considered as well. Shurberg then filed an appeal of the FCC’s decision with the United States Court of Appeals for the District of Columbia Circuit, where it remains pending. Shurberg Broadcasting of Hartford, Inc. v. FCC, No. 84-1600 (D.C.Cir.).

On October 2, 1984 the plaintiff submitted its FOIA request to the FCC, requesting documents concerning Faith Center, and individuals and entities involved in the Faith Center proceedings before the FCC. On October 17, 1984 the FCC responded to plaintiff’s request, noting that it construed the request as seeking materials relating only to Faith Center’s last petition for distress sale, and indicating that seven documents responsive to plaintiff’s request had been located, as well as the videotape of the FCC’s September 26, 1984 meeting. The FCC’s October 17, 1984 response indexed and briefly described the items indicated. The videotape recording was withheld, however, pursuant to exemption 10 of the Sunshine Act, 5 U.S.C. § 552b(c)(10). Furthermore, all of the other documents were withheld pursuant to FOIA exemption (b)(5) which exempts inter-agency communication concerning internal decision-making, often referred to as the “deliberative process” exception to FOIA. Thereafter, on November 7, 1984, plaintiff filed this action for relief under FOIA and the Sunshine Act.

I. The Sunshine Act

The Sunshine Act requires that meetings of all multi-membered federal agencies be conducted in public except in very limited, narrowly defined circumstances. 5 U.S.C. § 552b(b) & (c). As succinctly-stated by Congress, the purpose of the Sunshine Act is to assure that the “government should conduct the public’s business in public.” S.Rep. No. 94-354, 94th Cong., 1st Sess. (1975); see also H.R.Rep. No. 880, 94th Cong., 2d Sess. 2-4 (1976), U.S.Code Cong. & Admin.News 1976, p. 2183. In seeking to close a meeting, the agency bears the burden of establishing that its meeting is subject to at least one of ten statutorily defined grounds for closure. 5 U.S.C. § 552b(c); Philadelphia Newspapers, Inc. v. NRC, 727 F.2d 1195, 1200 (D.C.Cir.1984); Common Cause v. NRC, 674 F.2d 921, 928 (D.C.Cir.1982). Furthermore, even if one or more exemptions may justify closure of a portion of a particular meeting, the agency must attempt to segregate the non-exempt from the exempt portions, and close only those portions of the meeting involving exempt topics, unless, “after making such efforts, an agency can persuade the court that segregation of exempt and non-exempt topics 'would make a coherent discussion impossible’____” Philadelphia Newspapers, 727 F.2d at 1201 (quoting Common Cause, 674 F.2d at 936 n. 46).

In closing the September 26, 1984 meeting the defendant invoked exemption 10 of the Sunshine Act indicating that the meeting would concern a case of pending adjudication before the Commission, as well as pending litigation instituted against the Commission by Shurberg in the Court of Appeals for the District of Columbia Circuit. (Defendant’s Motion to Dismiss or, in the Alternative, for Summary Judgment, Exhibit 4.) Exemption 10 provides that portions of a meeting may be closed to the public if they

specifically concern the agency’s issuance of a subpoena, or the agency’s participation in a civil action or proceeding, an action in a foreign court or international tribunal, or an arbitration, or the initiation, conduct, or disposition by the agency of a particular case of formal agency adjudication pursuant to the procedures in section 554 of this title or otherwise involving a determination on the record after opportunity for a hearing.

5 U.S.C. § 552b(c)(10) (emphasis added).

The record currently before this Court amply supports the conclusion that the September 26, 1984 meeting in fact involved discussion of Faith Center’s distress sale petition as well as Shurberg’s Petition for Extraordinary Relief, seeking initiation of the hearing on Faith Center’s license renewal application and Shurberg’s competing participation in that process. (Affidavit of Richard Shiben, filed January 18, 1985).

At the time of the September 26, 1984 meeting, the only matter pending before the Court of Appeals of this Circuit was Shurberg’s petition for a writ of mandamus, seeking to compel the Commission to take some action on Shurberg’s pending Petition for Extraordinary Relief. In re Shurberg, No. 84-5363 (D.C.Cir.) To the extent the September 26 meeting involves discussion of the Commission’s strategy for compliance with the October 1, 1984 date set by the Court of Appeals, the meeting would be subject to closure. S.Rep. No. 354, 95th Cong. 1st Sess. 26 (1975) (“Public disclosure of an agency’s legal strategy in a case before the agency or in the courts could make it impossible to litigate successfully the action.”) However, this exception would not serve in itself to justify closure of all discussion of the merits of plaintiff’s petition, but would at best require such consideration of the merits to be segregated from the Commission strategy discussions. Nevertheless, this Court finds that closure of the discussion of the merits of Faith Center’s distress sale petition as well as Shurberg’s petition for extraordinary relief, and hence closure of the entire September 26 meeting, was permissible under exemption 10 as matters concerning the conduct or initiation of formal agency adjudication.

The language of the Sunshine Act’s exemption 10 permitting closure of meetings that “specifically concern ... the initiation, conduct, or disposition ... of a particular case of formal agency adjudication” has not been the subject of significant judicial review. See Philadelphia Newspapers, 727 F.2d at 1200. The plaintiff maintains that, although any hearing on Faith Center’s application for renewal of its license would have been a formal on-the-record adjudicatory process, see 47 U.S.C. § 309(e), involving discovery and the presentation and cross-examination of witnesses before an administrative law judge pursuant to the procedures of the Administrative Procedure Act, 5 U.S.C. § 554-557, that hearing was never begun, but instead was avoided by the distress sale process, which is not part of the same formal adjudicatory process. The plaintiff points to the fact that the distress sale petition is presented to the full Commission, rather than an administrative law judge, and does not entail an adversarial process.

The Communications Act vests the FCC with broad discretion in structuring its own proceedings and resolving subordinate questions of procedure. See FCC v. Schreiber, 381 U.S. 279, 289, 85 S.Ct. 1459, 1467, 14 L.Ed.2d 383 (1965); FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 138, 60 S.Ct. 437, 439, 84 L.Ed. 656 (1940); City of Angels Broadcasting v. FCC, 745 F.2d 656, 664 (D.C.Cir.1984); MCI Telecommunications Corp. v. FCC, 712 F.2d 517, 533 (D.C.Cir.1983). The appeal of the FCC’s December 7, 1984 decision, presently pending before the Court of Appeals of this Circuit, raises numerous questions of first impression concerning the nature of the proceedings involving Faith Center’s distress sale petition and Shurberg’s Petition for Extraordinary Relief, including the applicability of the FCC’s prohibitions against ex parte contacts, see Shurberg Broadcasting of Hartford, Inc. v. FCC, No. 84-1600 (D.C.Cir.), Brief of Appellant, at 38-40, as well as the appropriate standard of review. See, id., Appellant’s Brief, at 9 n. 1. However, in considering plaintiff’s Sunshine Act claim, this Court need not determine whether the consideration of a distress sale petition and related procedural matters is per se a formal adjudicatory process as one which is conducted on-the-record and subject to review on that basis. This Circuit’s decision in Philadelphia Newspapers indicates that the particular meeting for which closure is sought need not itself be formally part of the adjudicatory process to satisfy exemption 10. In Philadelphia Newspapers the Court found that the Nuclear Regulatory Commission could properly close a portion of a Commission meeting intended to discuss the reopening of the nuclear power facility at Three Mile Island to the extent those discussions pertained to matters that were the subject of a formal on-the-record proceeding. 727 F.2d at 1199-1202. The Court held that such closure was proper despite the fact that, in terms of the formal adjudicatory process, the on-the-record proceeding was at that time subject to review by an intermediate Appeals Board before being brought before the Commission itself. Id. at 1199. Consequently, under Philadelphia Newspapers exemption 10 may be properly invoked as to meetings concerning issues which are the subject of, or subject to, formal agency adjudication outside of the formal adjudicatory process itself.

Therefore, even if consideration of Faith Center’s distress sale petition was outside of the actual hearing process for renewal applications, Faith Center’s third request to attempt a distress sale and Shurberg’s petition for extraordinary relief clearly concerned the initiation and conduct of that formal adjudicatory process, involving the Commission in determining whether the interests of the public in allowing competing applicants for the station should have at that point required denial of the distress sale petition and commencement of the renewal proceedings.

Accordingly, closure of the September 26 meeting was proper under exemption 10 of the Sunshine Act.

II. FOIA

As originally filed with this Court, the FOIA aspect of plaintiff’s complaint sought access to the first two items identified by the FCC’s October 17 response: (1) A cover memorandum and draft of an opinion regarding Faith Center, with multiple copies bearing different handwritten marginal notes of staff members from the Commissioners’ offices, Office of General Counsel, and the Mass Media Bureau; and (2) an intra-office memorandum from Zora Kramer, Assistant Director of Public Affairs for Minority Enterprises, to all Commissioners, dated September 24, 1984 regarding the then-pending Shurberg and Faith Center petitions.

Since the initiation of this action, however, the FCC has released to the plaintiff, in the course of the proceedings pending in the Court of Appeals, the Kramer memorandum identified as item two, as well as a second Kramer memorandum that was not identified by the FCC’s October 17 response. In addition, the FCC has now indicated that no copy of item number one bearing notes of the Mass Media Bureau in fact exists, but instead was mistakenly so indicated in the October 17 response. See Declaration of June O. Stewart, at 4-8; Declaration of John F. Kamp.

The defendant has now indicated that it is no longer pursuing any claim of access to any document specifically identified by the FCC’s October 17 response, but instead only its claim that the October 17 letter was itself not fully responsive to plaintiff’s FOIA request. Plaintiff therefore opposes defendant’s motion for summary judgment with respect to the FOIA claim, and requests that it be permitted to conduct discovery to determine whether there are any other documents responsive to plaintiff’s FOIA request whose existence has not been disclosed. In maintaining that discovery is necessary, the plaintiff asserts that the adequacy and competency of the search conducted by the FCC, as well as the FCC’s good faith in disclosing documents discovered during that search, are called into question by the fact that the FCC has released the first Kramer memorandum, which it originally refused to do, initially failed even to disclose the existence of the second Kramer memorandum, and listed a document as responsive to plaintiff’s FOIA request which did not even exist.

The defendant maintains that the errors alleged by the plaintiff are overstated, and are- insufficient to challenge its affidavits attesting to an adequate search and complete identification of all responsive documents. See Declaration of June O. Stewart; Affidavit of Lawrence S. Schaffner. Specifically, defendant maintains that no challenge to the adequacy or competency of the search, or the good faith of the agency in revealing the existence of responsive documents, can be based on the FCC’s identification but initial withholding of the first Kramer memorandum. Furthermore, defendant asserts that it has adequately explained that the mistake in naming the Mass Media Bureau as a division having seen and commented on the draft opinion and cover memorandum was the result of an abundance of caution in responding to plaintiff’s request under FOIA’s time constraints, rather than the result of any bad faith on the part of the FCC. See Declaration of June O. Stewart; Declaration of John F. Kamp. Likewise, the defendant asserts that the failure to initially identify the second Kramer memorandum was inadvertent, and due to the necessity for a quick response to plaintiff’s FOIA request, and could have been corrected earlier by the FCC itself if plaintiff had exercised its option to seek administrative review of the initial FOIA response.

Because the plaintiff has at this time abandoned any challenge to the exemptions claimed by the defendant for the documents identified in the October 17, 1984 response to its FOIA request, the only relevant issue is whether this Court should permit the plaintiff to conduct limited discovery concerning the adequacy of the search and the FCC’s good faith in revealing the existence of documents responsive to the request.

In Freedom of Information Act cases, as in all cases, summary judgment is appropriate only when “there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c); see also Exxon Corp. v. Federal Trade Commission, 663 F.2d 120, 126 (D.C.Cir.1980); Founding Church of Scientology of Washington, D.C. v. National Security Agency, 610 F.2d 824, 836 (D.C.Cir.1979). In FOIA cases, “the defending agency must prove that each document that falls within the class requested either has been produced, is unidentifiable, or is wholly exempt from the Act’s inspection requirements.” National Cable Television Ass’n v. FCC, 479 F.2d 183, 186 (D.C.Cir.1973). It is now well established in this Circuit, however, that the court may forego discovery and award summary judgment on the basis of affidavits which are relatively detailed, non-conelusory, and apparently submitted in good faith in the absence of any significant basis presented by the plaintiff for questioning their reliability. Goland v. CIA, 607 F.2d 339, 352-55 (D.C.Cir.1978). Moreover, such affidavits are to be considered “equally trustworthy when they aver that all documents have been produced as when they aver that identified documents are exempt.” Id. at 352.

However, as this Circuit has also recognized, “the competence of any records search is a matter dependent upon the circumstances of the case____” Founding Church of Scientology, 610 F.2d at 834. Therefore, especially mindful of the disadvantage faced by the plaintiff in attempting to test the claims raised by the agency in a FOIA action, where the plaintiff has pointed to some countervailing factor calling into question the completeness of the agency’s search or otherwise questioning the satisfactory nature of the agency’s response, an issue of material fact, precluding the denial of discovery and award of summary judgment, may be recognized. Id. at 833-38; Association of National Advertisers v. FTC, 1976-1 Trade Cases ¶ 60,835 (D.D.C.1976); see also Exxon Corp. v. Federal Trade Commission, 466 F.Supp. 1088, 1094 (D.D.C.1978), aff'd 663 F.2d 120 (D.C.Cir.1980). Thus, under Rule 56(f), the district court may defer ruling on a motion for summary judgment and permit discovery so that the non-moving party may obtain the information necessary to show an issue of fact in dispute.

Thus, in Association of National Advertisers then-Chief Judge Jones of this Court emphasized that, where satisfactory basis for questioning their reliability, discovery in FOIA cases should be denied to avoid unnecessary harassment of agency officials. 1976-1 Trade Cases 1160,835 at 68,-644. However, the court also recognized that if the plaintiff demonstrates “some substantial discrepancy between the defendant’s actions and words” with respect to the search for documents, discovery is justified. On that basis, Judge Jones held in National Association of Advertisers that the plaintiff had raised a substantial question as to the completeness of the agency’s search in seeking clarification of the agency’s release of additional documents some six months after its initial release of documents and claim of exemption as to all other discovered documents. The Court held that this course of events, without any explanation from the agency, created at least an inference that the agency failed to discover the second group of documents in its initial search, and that the initial search was therefore perhaps incomplete or inadequate. Accordingly, the court permitted plaintiff discovery, through interrogatories only, limited to the issue of the reason for the initial failure to release the second group of documents.

Similarly, in the instant case, this Court finds that the defendant’s failure to identify the existence of the second Kramer memorandum, and the absence of any sufficient explanation for that failure, raises a substantial issue of fact as to the adequacy of the initial search and the agency’s good faith in identifying documents revealed by that search. The defendant has not supplied any affidavits to this Court addressing this failure, but has merely indicated in its pleadings that any “minor errors” in completing the initial index of discovered documents was the result of the difficulty in complying with the request under FOIA’s time constraints. However, in light of the fact the plaintiff’s FOIA request specifically requested documents pertaining to Faith Center including “any communications in the possession of, or written by or at the direction or request of Elzora Kramer,” and the fact that defendant’s affidavit concerning the process of the search indicates that plaintiff’s request was forwarded directly to Zora Kramer of the Office of Public Affairs, Affidavit of June O. Stewart, this Court cannot simply accept that the failure to identify a document authored by Ms. Kramer was merely oversight at this juncture of the case. Rather, this Court finds that plaintiff should be permitted discovery to explore only the defendant's search and retreival procedures, and the defendant’s initial failure to identify second Kramer memorandum. However, the plaintiff is limited to the use of interrogatories in exploring these issues. See National Association of Advertisers, 1976-1 Trade Cases ¶ 60,835 at 68,644.

      . By failing to correct any inaccuracy of this construction of its request, the plaintiff has not exhausted its administrative remedies as to any claim that the FCC improperly construed the request too narrowly.


author: SHIRLEY WOHL KRAM, District Judge.

text:
    HANSON TRUST PLC, Plaintiff, v. SCM CORPORATION, Defendant.
    No. 85 Civ. 6667 (RLC).
    United States District Court, S.D. New York.
    Sept. 14, 1985.

      Weil, Gotshal & Manges by Dennis J. Block, Skadden, Arps, Slate, Meagher & Flom by Barry A. Garfinkel, New York City, for plaintiff.
    Wachtell, Lipton, Rosen & Katz by Bernard W. Nussbaum, Robert B. Mazur, Eric M. Roth, New York City, for defendant.
   MEMORANDUM OPINION AND ORDER

SHIRLEY WOHL KRAM, District Judge.

The above-captioned matter is before this Court, sitting as the Part One Judge. Defendant SCM Corporation (hereinafter referred to as “SCM”) has moved for a preliminary injunction. For the reasons which follow, the motion is GRANTED.

BACKGROUND

Hanson Trust PLC (hereinafter referred to as “Hanson”), the plaintiff, and SCM have been engaged in a hostile tender offer battle. On August 21, 1985, Hanson announced that it would commence a cash tender offer for any and all of the outstanding shares of SCM’s common stock. The offer would be for $60.00 per share.

On August 30, 1985, SCM and Merrill Lynch Capital Markets (hereinafter referred to as “Merrill Lynch”) of Merrill Lynch, Pierce, Fenner and Smith announced that they had reached an agreement for a leveraged buyout of SCM. Pursuant to that agreement, Merrill Lynch would make a cash tender offer for approximately 85.7% of SCM’s common stock at a price of $70.00 per share. At the back end of this transaction, the remaining SCM shares would be exchanged for subordinated debentures of the resulting corporation with a value of $70.00 per share. There were many other aspects to this agreement, but none are relevant to the instant application. In effect, SCM had found a “white knight” and the battle lines were drawn.

On September 5, 1985, Hanson increased its cash tender offer for any and all shares to $72.00 per share. Before 9:00 a.m. on September 11, 1985, a new merger agreement between SCM and Merrill Lynch was announced. This agreement provided for a leveraged buyout of SCM by Merrill Lynch and SCM management pursuant to a cash tender offer for approximately 80% of SCM’s common stock. Once again, the back end of the transaction is to involve exchange of stock for paper — notes valued at $74.00. Merrill Lynch’s tender offer is contingent upon its acquiring 66%% of SCM’s common stock. The agreement also granted to Merrill Lynch options to buy two very valuable divisions of SCM should a third party acquire 33V3% of SCM’s common stock.

In response to the announcement of this “crown jewel” option and $74.00 per share offer, Hanson announced that it would terminate its tender offer. This announcement was publicly disseminated at 12:38 p.m. on September 11, 1985. Subsequent to this announcement, Hanson purchased approximately 25% of SCM’s common stock. These purchases all occurred between 3:00 p.m. and 4:34 p.m. in the afternoon of September 11, 1985. The shares were purchased in six privately negotiated transactions with sophisticated institutional investors and pursuant to a “cross” on the floor of the New York Stock Exchange. All of the purchases were pursuant to cash contracts at $73.50 per share. In a period of less than two hours during the afternoon of September 11, 1985, Hanson had purchased approximately 3.1 million shares of SCM’s common stock at a cost in excess of $200 million in cash. It was these block cash open market transactions which once again thrust the battle into the courtroom in the early evening of September 11, 1985.

PROCEDURAL HISTORY

At 8:42 p.m. on September 11,1985, after having heard argument from counsel for both sides of this battle, this Court entered a temporary restraining order. This temporary restraining order restrained Hanson and its agents from acquiring any additional SCM common stock for twenty-four hours. SCM argued that such an order was necessary because Hanson’s open market purchases constituted a de facto tender offer which was designed to avoid the strictures of the Williams Act. SCM argued that it and its shareholders would be irreparably harmed if Hanson were not restrained because Hanson would acquire at least an additional %lh% of SCM stock the next morning. This act would defeat the Merrill Lynch tender offer, would violate the Williams Act, and would deprive the court of any opportunity to consider the legality of Hanson’s conduct, according to SCM. The Court fully explained the basis for the entry of a TRO at the time it was entered.

On September 12, 1985, Hanson and SCM consented to extending the TRO until the conclusion of a hearing on September 13, 1985. Similarly, at the conclusion of a hearing on September 13, 1985, Hanson and SCM once again consented to an extension of the TRO until the Court could render its decision on the instant application for a preliminary injunction. The Court represented that it would render its decision by 4:00 p.m. on September 14, 1985, and accordingly, has done so.

DISCUSSION

In order to obtain a preliminary injunction in this Circuit a party 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).

The Court concludes that SCM has met its burden as to irreparable harm. As the Second Circuit has said, in the tender offer context,

preliminary injunctive relief is a particularly useful remedy for prevention of probable violations of the disclosure requirements of the Act____ (citation omitted) ... [Ojnce the tender offer has been consummated it becomes difficult, and sometimes virtually impossible, for a court to “unscramble the eggs.”

Sonesta Int’l Hotels Corp. v. Wellington Assocs., 483 F.2d 247, 250 (2d Cir.1973).

SCM argues that it has no adequate remedy at law should it be determined at some future time that Hanson’s open market purchases were made in violation of Section 14(d) of the Williams Act, 15 U.S.C. § 78n(d). The Court agrees that if Hanson is permitted to continue to purchase additional SCM common stock in the open market the Court could not, in reality, rescind the purchases at some future date after a full hearing on the merits. This is not a case where the Court could effectively “unscramble the eggs” and make SCM whole if it succeeds on its counterclaim.

More significantly, the Court finds that SCM shareholders will be irreparably harmed if Hanson is able to “block” the Merrill Lynch tender offer through purchases which the Court, at some future date, may determine violated the Williams Act. Only one legitimate tender offer is currently in existence. Should Hanson acquire in excess of 33V3% of the outstanding shares of SCM, that offer would be defeated. A majority of the shareholders will, in that event, have been deprived of the opportunity to participate upon full notice, with all the other attendant rights guaranteed by the Williams Act, without adequate recourse at law. There would be no adequate remedy at law to “revive" the defeated Merrill Lynch tender offer or to allow the shareholders participation in the Hanson acquisitions. The Court concludes, therefore, that without a preliminary injunction in place SCM and SCM shareholders would be irreparably harmed.

To obtain the preliminary injunction it seeks, SCM must also meet the second prong of the test. For the reasons which follow, the Court concludes that SCM has demonstrated a likelihood of success on the merits of its counterclaim that Hanson’s open market purchases, subsequent to its announcement that it had dropped its tender offer, were made in violation of Section 14(d) of the Williams Act.

The relevant underlying facts are not in dispute. On the morning of September 11, 1985, Merrill Lynch announced that it would increase its offer to $74.00 per share and that it had received a “crown-jewel” option to certain areas of SCM’s business. Subsequent to this, Hanson announced that it was dropping its tender offer. After this announcement, and within a period of less than two hours, Hanson purchased 3.1 million shares in privately negotiated and open market transactions. Hanson purchased all of these shares for a price of $73.50 per share. All of these shares were acquired pursuant to cash contracts; that is, on or before the next business day, immediately upon presentation of the stock certificates pursuant to the oral agreement, Hanson’s investment banker, Rothschild, Inc., would pay for the certificates in cash. Thus, Hanson effectively spent well in excess of $200 million in cash in a period of less than two hours to acquire approximately twenty-five percent of SCM’s common stock. This was done through six privately negotiated transactions and shares acquired pursuant to ancillary open market transactions.

The Williams Act does not define the term tender offer. The courts have used a variety of tests to determine when conduct is a tender offer. See Wellman v. Dickinson, 475 F.Supp. 783, 826 (S.D.N.Y.1979) (8 factor test), aff'd, 682 F.2d 355 (2d Cir. 1982), cert. denied, 460 U.S. 1069, 103 S.Ct. 1522, 75 L.Ed.2d 946 (1983); S-G Securities, Inc. v. Fuqua Inn. Co., 466 F.Supp. 1114 (D.Mass.1978) (2 factor test). Without deciding what test should ultimately be applied to determine whether Hanson’s conduct constitutes a “tender offer” within the meaning of the Williams Act, the Court concludes that SCM has demonstrated a likelihood of success on the merits of its contention that Hanson has engaged in a tender offer which violates Section 14(d) of the Williams Act.

Based upon the undisputed facts SCM has demonstrated a likelihood of success on the merits for its contention that Hanson’s purchases of stock, after its tender offer was dropped, was a deliberate attempt to do an “end run” around the requirements of the Williams Act. SCM contends that Hanson’s conduct was a de facto tender offer for which no compliance with Section 14(d) has been established or even argued. There are many factors which compel that conclusion. These include the following. The time between the announcement purporting to terminate the tender offer and the first transaction was very brief: a period of two to three hours at the most. Moreover, all of the purchases, totalling 3.1 million shares, were made in a period of less than two hours. The volume of the acquisitions amounted to approximately 25% of SCM’s common stock. All of these purchases were contracted for in cash. At least one offer was turned down because the “cash” term could not be met by the seller. These cash contracts were to be settled immediately upon presentation of the stock certificates to Rothschild, Inc. There were no differences in price for the various transactions. Rather, there was clearly a single firm price of $73.50. Indeed, offers to sell for in excess of that price were routinely rejected. No real negotiation was engaged in. The testimony revealed that at no point did Hanson suggest a price other than $73.50. In fact, in at least one instance Hanson advised a potential seller of the price at which it had already effected transactions. Finally, the firm price Hanson maintained was approximately one point above the prevailing market price.

The parties have seriously contested whether Hanson decided to engage in open market purchases before it dropped its tender offer or after. While there is some evidence to suggest that Hanson had considered open market purchases before it announced that the tender offer was dropped, the fact that Hanson may have decided to violate the Williams Act after it announced it was dropping its tender offer would not preclude the issuance of the instant injunction.

The Court concludes that based on the foregoing discussion of undisputed facts, SCM has demonstrated a likelihood of success at a trial on the merits of its counterclaim that Hanson’s conduct was a defacto tender offer in violation of Section 14(d) of the Williams Act. Accordingly, SCM has met the standard necessary to obtain a preliminary injunction.

CONCLUSION

SCM has met the necessary standard to obtain the preliminary injunction it seeks.

Accordingly, it is hereby

ORDERED that Hanson Trust PLC, HSCM Industries, Inc. and Hanson Holdings Netherlands B.V. and their officers, agents, servants, employees, and all persons in active concert or participation with them, are preliminarily enjoined from, directly or indirectly, acquiring or contracting to acquire any shares of SCM stock, and from exercising or attempting to exercise any of the voting rights inhering in the 3.1 million shares acquired by them pursuant to transactions commenced and/or consummated on September 11, 1985. This order shall remain in effect until a resolution of the claims raised herein by a full hearing on the merits or until further order of the Court.
SO ORDERED.

      . On September 12, 1985 the Court modified the terms of the TRO.

      . In granting the instant preliminary injunction, the Court relies primarily on "the likelihood of success on the merits” portion of the controlling standard. As for the alternative prong, the Court concludes that SCM has certainly raised a serious question going to the merits which is a fair ground for litigation. That question is whether Hanson’s conduct in acquiring 3.1 million shares of SCM’s common stock was a tender offer commenced in violation of Section 14(d) of the Williams Act.
      As for the balance of hardships, while this issue is a much closer one, the Court nonetheless concludes that the hardships tip decidedly in favor of SCM and SCM shareholders. This is so because without the injunctive relief which is requested SCM shareholders may well be permanently deprived of the right to participate in the Merrill Lynch tender offer. In balancing the hardships it is appropriate for the Court to consider the interest of the shareholders. Otis Elevator Co. v. United Technologies Corp., 405 F.Supp. 960, 973 (S.D.N.Y.1975). Likewise, because the Court feels it would not be possible to "unscramble the eggs” in the instant case, SCM would effectively lose the right to challenge the legality of Hanson’s conduct without an injunction in place.
      In view of the foregoing, the Court concludes that it would grant the instant preliminary injunction under this prong of the standard as well.