author: DAVID S. NELSON, District Judge.

text:
    Frederick BOROWIEC, Leo W. Dube, Arthur M. Dupre, Alfred J. Duval, Theodore Rogalski, Raymond Serewicz, and Alexander Sledzieski, Plaintiffs, v. LOCAL NO. 1570 OF the INTERNATIONAL BROTHERHOOD OF BOILERMAKERS, IRON SHIP BUILDERS, BLACKSMITHS, FORGERS AND HELPERS OF AMERICA, et al., Defendants.
    Civ. A. No. 80-334-N.
    United States District Court, D. Massachusetts.
    Jan. 16, 1986.

      Robert L. Nowak, Chicopee, Mass., for plaintiffs.
    Warren H. Pyle, Angoff, Goldman, Manning, Pyle & Wanger, Boston, Mass., for defendants.
   ORDER

DAVID S. NELSON, District Judge.

This is an action by several members of Local 1570 of the International Brotherhood of Boilermakers, Ironship Builders, Blacksmiths, Forgers and Helpers (Local 1570 and the International) who were employed by the Moore Company (Company) and assigned to the Company’s plant 2 which closed in 1979. Plaintiffs have brought this action against Local 1570, its president, Kevin Szczygiel, the International, and its International representative, Benjamin Miller. Plaintiffs allege that Local 1570 breached its duty of fair representation by failing to seek the merger or dovetailing of the seniority lists of the closed plant with the remaining plants.

Plaintiffs originally filed this action in the Superior Court of Hampden County on January 30, 1980. Upon removing this action to federal court, the defendants moved to dismiss the complaint pursuant to Fed.R. Civ.P. 12(b)(7) for failure to join the Company as a party to this action. This court denied the defendants’ motion on March 22, 1982. . ,

Defendants have moved for summary judgment pursuant to Fed.R.Civ.P. 56(a). The plaintiffs have opposed this motion and have filed a cross motion for summary judgment.

The following material facts are not in dispute. Local 1570 is the collective bargaining representative of the employees of the Company at its five plants in Western Massachusetts. The collective bargaining agreement effective from August 23, 1976 to August 23, 1979 provided for plant-wide seniority for the purposes of lay-offs and recalls and Company-wide seniority for the purpose of benefits. The collective bargaining agreement provided in pertinent part:

ARTICLE XIV

SENIORITY

In the event of an increase or decrease in the working force, seniority shall be based upon

(1) Continuous service and '
(2) ability to perform the work and shall be upon a plant-wide basis within the bargaining unit.

ARTICLE XV

BIDDING-SHIFT PREFERENCE-

LAYOFFS — CUTBACKS

It is agreed that in laying off employees, length of service shall be the deciding factor, provided that the employee can satisfactorily do the job that remains open ... layoffs or recalls are on a plant-wide seniority basis.
Employees on layoff will be given preference, in line with seniority, on recall to openings in other plants within the bargaining unit. An employee recalled to another plant will be considered a new employee in that plant for purposes of Union plant seniority, but will retain Company seniority.

Under the seniority system for lay-offs and recalls established by the above provision, a laid-off employee who accepted work in another plant would retain seniority in the original plant until he was offered recall to that plant. Under these circumstances the employee would begin work in the new plant without seniority. In the event of voluntary transfer to another plant, the employee would lose seniority in his original plant and begin work in the new plant without seniority. (Szczygiel Affidavit ¶ 2; Plaintiffs’ Memorandum in Support of Motion at 3).

In late 1978, the Company decided that it would close plant 2. (Szczygiel Affidavit ¶ 6). On January 10, 1979 the Local 1570 and the Company entered into an agreement concerning seniority rules governing all cutbacks and recalls occurring in plants 1 and 2. That agreement provided in pertinent part:

1. The Plant # 1 seniority list as a group will be considered most senior.

2. Plant #2 seniority list will remain intact and be considered for all Plant # 1 recalls after the Plant # 1 seniority list. In the event of cutbacks or layoffs the Plant # 2 seniority list will be used before Plant # 1 list is affected.

This agreement was effective for the duration of the collective bargaining agreement and expired on August 23, 1979.

On December 3, 1979, a regular membership meeting of Local 1570 was held. Benjamin Miller told the members that the collective bargaining agreement “clearly” provided for endtailing in the event of a plant closing. This procedure would place the employees at the bottom of the seniority list at the plant to which they were transferred. No provision in the collective bargaining agreement specifically refers to “plant closings.”

Defendants state that on February 14, 1979 the Recording Secretary of Local 1570 notified the membership that the negotiating committee (Committee) was accepting proposals for a contract to replace the existing collective bargaining agreement. On or about February 14, 1979, Alfred Duval submitted a proposed contract clause. (Szczygiel Affidavit ¶ 9; Complaint ¶ 23). The proposal provided:

Whenever a layoff occurs the employee laid off may replace the least junior of the employees with less plant seniority than the laid off employee in any classification or department for which he is qualified in the same plant; if the laid off employee is unable to replace within the same plant, he may then replace the least junior of the employees with less Company seniority than the laid off employee in any classification or department for which he is qualified in any other plant.

The usual practice of Local 1570 was for the Committee to submit all such proposals directly to the Company for consideration during the contract renegotiation sessions. (Szczygiel Affidavit ¶ 10). Local president Szczygiel recognized the proposal’s controversial nature and requested that five members from plant 1 petition for a special meeting of Local 1570 to vote on Duval’s proposal. (Szczygiel Affidavit ¶[ 10; Plaintiff’s Memorandum in Support of Motion at 9). On February 26, 1979 Szczygiel received such a request for a special meeting and a meeting was scheduled pursuant to the Local’s by-laws.

On March 4, 1979 at the regular membership meeting of the Local, Szczygiel announced that a special meeting would be held on March 11, 1979 and that a vote would be held on Duval’s proposal at that time. (Szczygiel Affidavit 1111; Complaint 1125). Defendants posted notices of the special meeting on the designated union bulletin boards at each plant. The notice provided that “a SECRET BALLOT vote will be taken on a proposal submitted to the negotiating committee combining all Local 1570 members in all plants to One SENIORITY LIST.” (Emphasis original). A secret ballot vote was held on March 11, 1979. The majority of those present at the meeting voted against the proposed clause by a vote of 126 to 41. (Complaint ¶ 25; Szczygiel Affidavit ¶ 13).

On March 26, 1979, the Committee submitted a proposal concerning seniority in the event of the permanent closing of plant

2. The proposal provided:

In the event of the permanent closing of plant # 2, the plant # 2 seniority list in its entirety will be established behind the plant # 1 seniority list in its exact same order as it was in plant # 2.

At a meeting held on April 17, 1979 the Company submitted a proposal to the Cómmittee providing for a merged seniority list. The proposal was rejected by the Committee. (Szczygiel Affidavit ¶ 15). On May 11, 1979 the Company submitted another proposal which would have provided for a partial merging of the seniority lists in the event of a plant closing. This proposal was also rejected by the Committee.

The Committee and the Company reached agreement on the following language for the collective bargaining agreement for 1979-1982:

In the event of an individual plant closing, the seniority of the employee in the closed plant who is transferred to another plant will be placed at the bottom of the new plant in the same order that existed in the closed plant.

In the fall of 1979 the plaintiffs retained Attorney Robert Nowak to assist them with their dispute. On October 9, 1979 Nowak wrote to Szczygiel requesting that the Local re-open the contract negotiations to change the agreement to include a merged seniority list. On October 31, 1979 Szczygiel wrote to Nowak stating that he and Miller had reviewed all the aspects of the plaintiffs’ complaint and would “abide by the wishes of the majority of the Local.” On November 13, 1979 Nowak wrote Harold J. Buoy, the International President, requesting that he re-open negotations to merge the seniority lists and to allow the members to have access to certain information. The plaintiffs wrote a similar letter to Buoy on November 15, 1979. On January 11, 1980, after an investigation, the International wrote to Mr. Nowak stating that the International agreed with the action taken by the Local and that therefore it “cannot take any other action in this matter.”

A. Applicability of DelCostello v. International Brotherhood of Teamsters

On July 1, 1983 this court requested briefing on the applicability of DelCostello v. International Brotherhood of Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983), to the instant proceedings. DelCostello held that the six-month limitations period of the National Labor Relations Act, § 10(b), as amended, 29 U.S. C.A. § 160(b), applied to an employee’s suit against his union for breach of its duty of fair representation. Id., 103 S.Ct. at 2293-94. The defendants would apply DelCostello retroactively. As a result, they contend that the plaintiffs’ cause of action accrued more than six months before suit was filed on January 30, 1980. Having carefully considered the parties’ submissions, I find that DelCostello can and should be applied retroactively. Plaintiffs’ claims, however, should not be dismissed.

The general rule in federal courts is that judicial decisions are to be applied retroactively. Graves v. Smith’s Transfer Corp., 736 F.2d 819, 821 (1st Cir.1984). The First Circuit has analyzed DelCostello in detail and has found that it must be applied retroactively. See Scaglione v. Communications Workers of America, 759 F.2d 201 (1st Cir.1985), affd 586 F.Supp. 1018 (D.Mass.1984).

To determine whether the Del-Costello statute of limitations has run in this case, the court must first determine when plaintiffs’ cause of action accrued. A cause of action for a breach of the duty of fair representation arises when the plaintiff “had notice of alleged union wrongdoing.” McNutt v. Aireo Industrial Gases Division, 687 F.2d 539, 543 (1st Cir.1981). Wrongdoing constituting a breach of duty is defined as arbitrary, discriminatory or bad faith conduct. Vaca v. Sipes, 386 U.S. 171, 190, 87 S.Ct. 903, 916, 17 L.Ed.2d 842 (1967). Subsequent interpretations have established that proof of mere negligence or errors of judgment on the part of the union is insufficient. Cook v. Pan American World Airways, Inc., 771 F.2d 635 (2d Cir.1985).

On the question of when plaintiffs had knowledge of the alleged wrongdoing, the parties agree that plaintiffs and their counsel sent communications on October 9, November 13, and November 15, 1979 to Local officials and the International in an attempt to resolve this dispute concerning the merger of the seniority lists. In the November 15, 1979 letter to the International president, noted above, the plaintiffs appealed to him to “straighten” this “mess” out within Local 1570. The new collective bargaining agreement became effective on August 23, 1979. This suit was filed on January 30, 1980.

The defendants contend that the March 11, 1979 vote was enough to put the plaintiffs on notice of Local 1570’s failure to represent them fairly, such that their cause of action would have accrued on that date. This court disagrees. Viewing the facts most favorably for the plaintiffs, it is possible to infer that they did not have the necessary knowledge of a breach until sometime after the March 11, 1979 meeting. Plaintiffs’ correspondence with union officials, subsequent investigations conducted by the Local and International, and the Company’s own merger proposals after this date belief any suggestion that the March 11, 1979 vote was somehow irrevocable. See Schoen v. Lodge 3Jf, Intern. Ass’n of Machinists, 590 F.Supp. 193, 196 (E.D.Wis.1984). In order to come within the six-month limitations period, plaintiffs would have had to remain hopeful regarding their proposal to merge the seniority lists until July 30, 1979. Whether they did have an expectation involves an inquiry into the state of mind of the plaintiffs such that summary judgment is inappropriate on that issue. Hahn v. Sargent, 523 F.2d 461, 468 (1st Cir.1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976). Given the material dispute of fact between the parties as to when plaintiffs became aware that the Local would not dovetail the seniority lists or should have become aware of the Local’s breach of duty to represent, the parties’ motions for summary judgment with respect to this issue must be denied.

A second reason prevents this court from determining as a matter of law that the plaintiffs commenced this action within the six-month period. One of the aspects of the defendants’ alleged breach of its duty of representation was its failure to process the plaintiffs’ appeals after the March 11, 1979 meeting. This part of the alleged breach necessarily took place after the March 11, 1979 vote and less than six months before suit against the defendants was filed.

Finally, the defendants argue that this action is barred by Clayton v. United Automobile Workers, 451 U.S. 679, 101 S.Ct. 2088, 68 L.Ed.2d 538 (1981). In Clayton, the Supreme Court held that exhaustion of internal union remedies is a prerequisite to an action for failure to represent where the “internal union appeals procedure can result in either complete relief to an aggrieved employee or reactivation of his grievance.” Id. at 692, 101 S.Ct. at 2097. The defendants contend that after March 11, 1979, the union appeals procedure would not have afforded the plaintiffs complete relief, so that their cause of action could have accrued as of March 11, more than six months before this suit was filed. This court disagrees. The defendants do not dispute the Company’s willingness to merge the seniority lists after the March 11, 1979 vote. Thus, plaintiffs’ appeals to the union during this period, if successful, would have provided the complete relief requested.

In sum, the court finds that plaintiffs’ claims are not time-barred under DelCostello.

B. Motions for Summary Judgment

The duty of fair representation has been described as the union’s obligation, as the chosen representative of the employees, to make an honest effort to serve the interests of all employees without hostility to any. Ford Motor Co. v. Huffman, 345 U.S. 330, 337, 73 S.Ct. 681, 685, 97 L.Ed. 1048 (1952); Steele v. Louisville & Nashville R.R., 323 U.S. 192, 198, 202-04, 65 S.Ct. 226, 232-33, 89 L.Ed. 173 (1944). This includes a duty in collective bargaining with the employer to represent minority union members “without hostile discrimination, fairly, impartially, and in good faith.” Steele, 323 U.S. at 204, 65 S.Ct. at 233. Moreover, the union is required to consider the requests of these members and give them “notice of and opportunity for hearing upon its proposed action.” Id.

With this in mind, the court is aware that a wide range of reasonableness must be allowed a statutory bargaining representative in serving the unit it represents, subject always to complete good faith and honesty of purpose in the exercise of its discretion. Huffman, 345 U.S. at 338, 73 S.Ct. at 686. Moreover, as long as the union acts in good faith “courts cannot intercede on behalf of employees who may be prejudiced by rationally founded decisions which operate to their particular advantage.” Cook v. Pan American World Airways, 771 F.2d at 645 (quoting Capobianco v. Brink’s Inc., 543 F.Supp. 971, 975 (E.D.N.Y.1982), affd mem., 722 F.2d 727 (2d Cir.1983).

Plaintiffs assert that the defendants intentionally withheld information concerning the closing of plant 2 to the detriment of the employees. Plaintiffs also assert that Article XV of the collective bargaining agreement had always been interpreted by the employees as applying only to work fluctuations and temporary shutdowns. Plaintiffs contend that the negotiating committee had little interest in protecting plant 2 employees and that Szczygiel was open about his favoritism for plant 1 employees. Plaintiffs further contend that the Committee failed to weigh and consider the merits of Duval’s proposal. In fact, the Local leadership admits that it never debated or formally discussed the merits of the proposal. (Szczygiel Int. # 19). Finally, they assert that Szczygiel was aware of the result of a possible referendum vote and departed from the usual practice by submitting the proposal to a binding vote.

The defendants dispute the plaintiffs’ version of these facts. They suggest that Szczygiel personally favored the proposal, but accepted the endtail scheme as the mandate of the union. Moreover, the defendants argue that the plant 2 closing was widely discussed and denies any withholding of important information by Local officials. Defendants also contend that it had been the longstanding practice of the Local to endtail employees transferred to another plant following layoff or otherwise. Finally, defendants assert that the choice to endtail employees was reasonable.

The questions of bias and bad faith are ones of degree. In the instant case, the allegations are sufficient concerning the bias and bad faith of the defendants; if proven, the alleged behavior would be a violation of the requirements of 29 U.S.C. § 141 et seq. The pleadings are insufficient, however, to warrant summary judgment on the basis of bias. See Goodman v. Laborers’ Int'I. Union of North America, 742 F.2d 780, 783-85 (3d Cir.1984) (reversing decision of the district court where there existed a genuine issue of material fact as to the bias of the local union’s trial board, precluding summary judgment).

Nor can this court as a matter of law conclude that the adoption of the endtail schemes was arbitrary as the plaintiffs suggest. This court notes that the dovetailing standard is generally accepted as an equitable and feasible solution to the problem of a merger or absorption, see Humphrey v. Moore, 375 U.S. 335, 347 n. 10, 84 S.Ct. 363, 371 n. 16, 11 L.Ed.2d 370 (1964), but this by no means is the only scheme available. See, e.g., Zapp v. United Transp. Union, 727 F.2d 617, 620 (7th Cir.1984). A material issue of fact exists as to whether the defendants were fair, provided the plant 2 employees an opportunity to be heard, and prevented a debate on the proposal.

Defendants’ reliance on Price v. Inti. Bro. of Teamsters, 457 F.2d 605 (3d Cir. 1972), is misplaced. In Price the court upheld a union’s decision to dovetail seniority lists, where there had been no showing of dishonest capricious actions beyond the union’s authority under the collective bargaining agreement. There, however, the record was sufficient to show that the various committees that considered the problem gave “full and protracted consideration to the arguments of both sides.” Id. at 611. No such showing has been made in the instant case. Moreover, that court noted that dovetailing seemed to be the most rational solution to the problem presented by the transfer of men from one terminal to another. This is the same argument advanced by the plaintiffs.

In light of the foregoing, the parties’ motions for summary judgment on Count I is accordingly DENIED.

The parties next seek summary judgment on Counts II and III. In Count II plaintiffs contend that they were deprived of their right to vote and participate in the meeting in violation of 29 U.S.C. § 411(a)(1). The plaintiffs argue that the method of notice was unreasonable and in violation of the Local’s By-Laws. The parties agree that the defendants posted notices. Instead, plaintiffs argue that the defendants should have sent postcards to all the members to notify them of the special meeting. Plaintiffs have also argued that the defendants had a duty to inform each member of the merits of the Duval proposal.

In a related claim in Count III the plaintiffs contend that they were deprived of their right to free speech and participation in violation of 29 U.S.C. § 411(a)(2). In support of this contention plaintiffs state that the defendants deceived the membership, prevented debate, and provided insufficient information concerning the proposal to the employees before the March 11, 1979 vote. Furthermore, they claim there was little discussion of the proposal before the voté. The defendants have a rather different view, of these facts. They contend that the proposal was widely discussed, that the ballot was clearly explained to the members before the vote, and that the notice concerning the special meeting and the vote was adequate.

The role of the court is not to interpret the union’s constitution. Vestal v. Hoffa, 451 F.2d 706, 709 (6th Cir.1971), cert. denied, 406 U.S. 934, 92 S.Ct. 1768, 32 L.Ed.2d 135 (1972). This court, however, may intervene where there is a showing that union members have been deprived of rights guaranteed by the Act. Millinery Workers v. United Hatters, 495 F.Supp. 60, 62 (D.Mo.1980). The right to vote in union elections is a right to a meaningful vote. See Pawlak v. Greenawalt, 464 F.Supp. 1265 (D.Pa.1979). Here, there exists an issue of material fact as to whether the union members were able to cast meaningful or informed votes based on the information given them, precluding summary judgment. See Adkins v. General Motors Corp., 573 F.Supp. 1188 (D.Ohio 1983).

Finally, in Counts IV, V, VI and VII plaintiffs allege Benjamin Miller, individually and in his official capacity as an International representative, acted in concert to deprive the plaintiffs of fair representation of their interests and protection of their seniority rights. In support of their motion for summary judgment with respect to this claim plaintiffs contend that Miller was a contract signatory, participated in the Local’s regular meetings concerning seniority, engaged in conduct which helped defeat the Duval proposal, and falsely asserted to the Company following the vote that the issue-of the merged seniority list had been foreclosed by the binding referendum.

The defendants dispute these facts. They claim Miller, and the International union, were not involved directly or indirectly concerning the seniority issue.

An international union may be held responsible for the wrongful acts of one of its locals where there is proof of actual participation in, or an actual authorization of, or ratification of such acts after knowledge thereof. See Carbon Fuel Co. v. United Mine Workers, 444 U.S. 212, 217 n. 6, 100 S.Ct. 410, 414 n. 6, 62 L.Ed.2d 394 (1979). There is a material dispute of fact as to the extent and nature of the International’s and Miller’s participation in the events leading to the March 11, 1979 vote and the negotiations that followed. The parties’ motions for summary judgment must therefore be DENIED.

SO ORDERED.

      . This system for consolidating seniority rosters has been used in a number of company mergers. It involves the compiling of a single roster with workers listed in the order of their date of hire. See Truck Drivers and Helpers, Local Union 568 v. N.L.R.B., 379 F.2d 137, 143 (D.C.Cir. 1967) for a detailed description and variations on this theme.

      . Article 8, section B, of the Union’s By-Laws states:
      Special meetings may be called by the President on written request of not less than five (5) members in good standing, of which due notice shall be given. Announcement of any special meeting shall briefly outline the cause for which it is called, and every effort shall be made to inform all members that the same, is to be held (emphasis added).


source: Caselaw Access Project

author: NORDBERG, District Judge.

license: Public Domain

text:
    The HAROLD M. PITMAN COMPANY, Plaintiff, v. TYPECRAFT SOFTWARE LTD., Thomas O’Connor, and Rangegrove Computing Ltd., Defendants.
    No. 84 C 3028.
    United States District Court, N.D. Illinois, E.D.
    Jan. 16, 1986.

      Donald W. Rupert, Kirkland & Ellis, Chicago, Ill., for plaintiff.
    Kevin M. Flynn, Coffield, Ungaretti, Harris & Slavin, Chicago, Ill., for defendants.
   MEMORANDUM OPINION AND ORDER

NORDBERG, District Judge.

This matter is before the court on the motion of defendants Typecraft Software, Ltd. (“Typecraft”) and Thomas O’Connor to dismiss this action pursuant to Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction. For the reasons stated below, the court grants defendants’ motion to dismiss.

I. Facts

Plaintiff Harold M. Pitman Company (“Pitman”) is an Illinois corporation with its principal place of business in New Jersey. Pitman distributes, sells and services equipment used in the printing industry.

Typecraft is a company incorporated under the laws of the United Kingdom. Located in London, Typecraft develops, manufactures and sells computer software and hardware for use in the printing industry. Mr. O’Connor is currently an officer, director and a ninety percent shareholder of Typecraft. Rangegrove Computed, Ltd. (“Rangegrove”) is the former corporate name for Typecraft, and both names describe the same entity.

This suit arises out of an exclusive distributorship agreement between Pitman and Typecraft Systems (Derby), Ltd. (“Systems”), a corporation not named as a defendant in this action. In July, 1982, Systems entered into an agreement with Pit-man, giving Pitman the exclusive right to distribute the Typecraft Phototypesetting System in the United States. In August, 1982, Systems entered into another agreement with Pitman, under which Systems agreed to pay that portion of the salary of Pitman’s employee, Mr. Ronald Johnson, that exceeded $3,000.00 per month. Mr. O’Connor negotiated this agreement with Pitman on behalf of Systems.

In October, 1982, Top Business Systems (Nottingham), Ltd. (“Top Business”) assumed the worldwide marketing and distribution rights for the Typecraft Phototypesetting System. Mr. O’Connor, then Sales Director for Top Business, wrote Pitman in October, 1982, confirming that Pitman’s distributorship agreement with Systems was effective between Pitman and Top Business. In October, 1983, Top Business sold the marketing and distribution rights to the Typecraft Phototypesetting System to Rangegrove. Mr. O’Connor signed the sales agreement both as a representative and a personal guarantor of Rangegrove.

On April 6, 1984, Pitman filed this action in federal court, alleging jurisdiction based on diversity of citizenship. In the complaint, Pitman alleges that when the defendants bought the phototypesetting system, they assumed the rights, obligations and liabilities of the distributorship agreement between Top Business and Pitman. Pitman contends that the defendants have breached both the exclusive distributorship agreement and the agreement regarding Mr. Johnson’s salary. Pitman also contends that defendants misrepresented material facts relating to the distributorship agreement, and that defendants misused Pitman’s confidential business information.

In April, 1984, Mr. O’Connor traveled from England to attend “Type-X 1984,” an annual three-day exhibition of companies in the printing industry. On April 6, 1984, the first day of the exhibition, Mr. O’Connor was served with the summons and complaint in this action, on behalf of himself and as an agent for Type-craft. Typecraft had a booth at the exhibition and was listed in the Directory of Exhibitors. During the show, Typecraft distributed a brochure describing one of its products. Also, Mr. O’Connor contacted several companies at the exhibition and explored possible distribution arrangements with them. Mr. O’Connor scheduled an appointment with one company to meet with Typecraft in London in order to evaluate Typecraft’s products. In addition, Mr. O’Connor negotiated with several major manufacturers of phototypesetting systems for incorporation of Typecraft products into their systems.

Defendants now move for dismissal based on lack of personal jurisdiction. Essentially, Mr. O’Connor and Typecraft assert that the court’s exercise of personal jurisdiction over them will not satisfy the due process clause of the fourteenth amendment unless Pitman can demonstrate that defendants have had “minimum contacts” with this jurisdiction, as required under International Shoe Corp. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) and Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977). Mr. O’Connor and Typecraft assert that their “transient presence” in Illinois is not sufficient to meet the International Shoe and Shaffer minimum contacts requirement.

Pitman, on the other hand, asserts that the court may properly exercise personal jurisdiction over the defendants, because the defendants were present in Illinois at the time service of process was made. According to Pitman, when defendants are personally served within the jurisdiction, personal jurisdiction is proper regardless of the existence of “minimum contacts” between the defendant, the litigation and the forum state. Alternatively, Pitman asserts that, assuming the minimum contacts rationale of International Shoe and Shaffer applies, the defendants’ contacts with Illinois are sufficient for jurisdictional purposes.

II. Motion to Dismiss for Lack of Personal Jurisdiction

A federal court has personal jurisdiction in a diversity case only if the forum state would have jurisdiction. Jacobs/Kahan & Co. v. Marsh, 740 F.2d 587, 589 (7th Cir.1984); Deluxe Ice Cream Company v. R.C.H. Tool Corp., 726 F.2d 1209, 1212 (7th Cir.1984); Fed.R.Civ.P. 4(e). The plaintiff bears the burden of proof on the jurisdictional issue. Grafon Corp. v. Hausermann, 602 F.2d 781 (7th Cir.1979). Plaintiff’s burden of proof is two-fold: it must establish the existence of jurisdiction under Illinois law, and it must show that exercise of jurisdiction over the defendant will not offend the due process clause of the fourteenth amendment.

A. Peronal Jurisdiction Under Illinois Law

In its complaint and its response to defendants’ motion to dismiss, Pitman does not specify which Illinois statutes or cases it relies upon for jurisdiction under Illinois law. From the facts of the case, the only jurisdictional bases Pitman may rely on are Ill.Rev.Stat. ch. 110, para. 2-203(a)(l), for personal jurisdiction over Mr. O’Connor, and Ill.Rev.Stat. ch. 110, para. 2-204, for personal jurisdiction over Typecraft.

Section 2 — 203(a)(1) provides that “service of a summons upon an individual defendant shall be made (1) by leaving a copy thereof with the defendant personally____” Illinois cases interpreting section 2-203(a)(l) do not appear to impose an additional requirement of minimum contacts between the defendant, the litigation and the forum, separate from the minimum contacts requirement of the due process clause of the fourteenth amendment. Service upon Mr. O’Connor, therefore, comports with the requirements of Illinois law for personal jurisdiction over Mr. O’Connor.

Section 2-204 provides that service upon a private corporation may be made “(1) by leaving a copy of the process with its registered agent or any officer or agent of said corporation found anywhere in the State____” The Illinois Supreme Court has held that Illinois courts may not assert jurisdiction over nonresident corporations not licensed in Illinois under section 2-204, unless such corporations “do business” in Illinois. Maunder v. De Havilland Aircraft of Canada, Ltd., 102 Ill.2d 342, 350, 80 ULDee. 765, 466 N.E.2d 217 (1984), cert. denied sub nom, De Havilland Aircraft of Canada, Ltd. v. Maunder, — U.S.-, 105 S.Ct. 511, 83 L.Ed.2d 401 (1984). The Illinois Supreme Court has also held that this “doing business” requirement is not equivalent to the minimum contacts requirement for due process, but it is a separate state law requirement within the outer limits of the due process standard. Cook Associates, Inc. v. Lexington United Corporation, 87 Ill.2d 190, 201, 57 Ill.Dec. 730, 429 N.E.2d 847 (1981).

Cook involved facts very similar to those in the present case. In Cook, the defendant corporation, Lexington, was a Delaware corporation not licensed to do business in Illinois. Lexington’s president was served with process while attending a housewares exhibition in Chicago. Lexington took orders at the exhibition, as it had at two other trade shows in Chicago in 1976 and 1977; however, on all three occasions, the orders amounted to less than $50,000.00, and Lexington accepted the offers later, at its St. Louis office. Lexington’s other contacts with Illinois were minimal. Lexington did not have an office or employee in Illinois. It did not have an Illinois telephone number, nor did it advertise in Illinois, except in connection with the Chicago trade exhibitions. Lexington sold its merchandise in Illinois, but through an independent manufacturer’s representative who sold the merchandise of other manufacturers and worked strictly on a commission basis.

Based on this evidence, the Illinois Supreme Court held that Lexington was not amenable to the jurisdiction of the court under either the Illinois long-arm statute or the doctrine of submitting to jurisdiction by virtue of “doing business” in Illinois. With regard to the “doing business” doctrine, the court stated:

The “doing business” approach, however, developed and was accepted as a means to obtain personal jurisdiction over foreign corporations. This court held that a foreign corporation doing business in Illinois was constructively present in this State and its assent to service upon an agent in Illinois could be implied under those circumstances. The corporation, therefore, could be served personally in Illinois in the same manner as a domestic corporation could be. If the foreign corporation was not doing business in Illinois, even personal service upon an officer of the company who was physically present in this State as a visitor, for example, did not confer jurisdiction over the nonresident____ The doing-business standard, of course, continues to be used in determining questions of jurisdiction over foreign corporations not licensed in Illinois----

Cook, 87 Ill.2d at 199-200, 57 Ill.Dec. 730, 429 N.E.2d 847 (citations omitted and emphasis added). The court then proceeded to examine Lexington’s activities according to the “doing business” test, as applied by Illinois courts.

The Illinois Supreme Court conceded the lack of an all-inclusive test for “doing business” in Illinois. However, the Court found that, in general, “doing business” means “conducting business in Illinois ‘of such a character and extent as to warrant the inference that the corporation has subjected itself to the jurisdiction and laws of the district in which it is served arid in which it is bound to appear when a proper agent has been served with process.’ ” Id. at 201, 57 Ill.Dec. 730, 429 N.E.2d 847 (quoting Pembleton ¶. Illinois Commercial Men’s Association, 289 Ill. 99,104,124 N.E.2d 355 (1919), appeal dismissed, 253 U.S. 499, 40 S.Ct. 483, 64 L.Ed. 1032 (1919)). The court concluded that “doing business” requires “activities greater than solicitation” and “a regularity of activities in Illinois that is absent in the case of Lexington.” Id. at 201, 202, 57 Ill.Dec. 730, 429 N.E.2d 847.

If Lexington’s contacts were insufficient to amount to “doing business,” Typecraft’s contacts most certainly do not amount to “doing business” under Illinois law. Lexington solicited orders at three different trade exhibitions in Chicago and sold merchandise in Illinois through an independent manufacturer’s representative. By contrast, Typecraft was served the first day that it ever appeared in Illinois for any purpose. Typecraft was served while attending the first day of a trade exhibition at which it merely contacted companies to explore possible distribution arrangements, scheduled a London appointment with one potential distributor, and negotiated with manufacturers of phototypesetting systems for possible incorporation of Type-craft products. Typecraft received no orders for its products. At the very most, Typecraft’s conduct at the “Type-X 1984” Exhibition only amounts to “mere solicitation.” Aside from the “Type-X 1984” Exhibition, Typecraft apparently has no contacts with Illinois. Pitman does not allege that Typecraft distributes its products in Illinois through an employee or an independent manufacturer’s representative. Also, Pitman does not allege that Typecraft has an office, an employee, or a telephone listing in Illinois, or any other contacts with that state.

On this evidence, the court finds that Pitman has failed to establish that Type-craft was doing business in Illinois at the time of service, as required for a proper exercise of personal jurisdiction over Type-craft under Illinois law. The court therefore grants Typecraft’s motion to dismiss for lack of personal jurisdiction. The only remaining issue is whether due process precludes the exercise of personal jurisdiction over Mr. O’Connor.

B. Personal Jurisdiction Under the Due Process Clause of the Fourteenth Amendment

Pitman contends that the due process minimum contacts doctrine of International Shoe and Shaffer does not apply in this case because Mr. O’Connor was personally served while present, albeit transiently, in Illinois. Alternatively, Pitman asserts that, if International Shoe and Shaffer do apply, Mr. O’Connor’s contacts with Illinois amount to the minimum contacts required under those decisions.

Pitman cites three district court cases in support of its contention that International Shoe and Shaffer do not apply when there is personal service within the jurisdiction. Opert v. Schmid, 535 F.Supp. 591 (S.D.N.Y.1982); Ruggierri v. General Well Service, Inc., 535 F.Supp. 525 (D.Colo. 1982); Aluminal Industries v. Newton Commercial Associates, 89 F.R.D. 326 (S.D.N.Y.1980). Neither the holding nor the reasoning in any of these cases control or persuade the court here.

In Opert, a New York resident brought suit in a New York federal court against an English corporation and its owner, based on alleged defamatory statements made and circulated in Europe. The owner of the corporation, Mr. Schmid, was personally served in New York while attending the U.S. Grand Prix. The court found that the corporation was not “doing business” in New York, and the claim against the corporation did not arise from the corporation’s transaction of business within the state. Therefore, the court could not exercise personal jurisdiction over the corporation.

As for Mr. Schmid, however, the court found that it could properly exercise personal jurisdiction. The court stated that personal service on a defendant while present, albeit transiently, in the jurisdiction establishes a court’s personal jurisdiction over such a defendant. As support for this contention, the court cited Aluminal, discussed supra, and Donald Manter Co., Inc. v. Davis, 543 F.2d 419 (1st Cir.1976), a pre-Shaffer case. The court summarily dismissed the reasoning of the Supreme Court in Shaffer and Worldwide Volkswagen Corp. v. Woodson, 444 U.S. 286,100 S.Ct. 559, 62 L.Ed.2d 490 (1980), as failing to provide direction on this question. The court, without any analysis, simply found these cases wholly inapplicable because they were not cases in which the defendant was personally served within the jurisdiction. In any event, the court went on to hold that even if personal service within the jurisdiction is not by itself sufficient to establish jurisdiction under due process standards, Mr. Schmid’s contacts with the jurisdiction were not “so minimal that due process considerations would intervene.” Opert, 535 F.Supp. at 594.

In Ruggieri, the court examined the various bases for personal jurisdiction. The court discussed personal service of a defendant within the jurisdiction; however, this discussion was mere dicta by the court. The facts and the holding of the Ruggieri court dealt only with jurisdiction under Colorado’s long-arm statute.

In Aluminal, nonresident defendant Dennis S. Tinsky was served with process while transiently in a New York airport. Mr. Tinsky was served on behalf of himself and co-defendant Newtown Commercial Associates (“Newtown”), a limited partnership of which Mr. Tinsky was the sole managing partner. Relying on Donald Manter, a gve-Shaffer decision, the court found personal jurisdiction over Mr. Tinsky and Newtown proper, based on service of process within the state. The Aluminal court, like the Opert court, summarily dismissed the defendants’ reliance on Shaffer, insisting that “Shaffer did not expand or modify existing in personam jurisdiction principles____” Aluminal, 89 F.R.D. at 329.

Aluminal fails to persuade the court, not only because of its lack of analysis, but also because the Third Circuit disapproved of the Aluminal and Donald Manter decisions in Nehemiah v. Athletics Congress of U.S.A., 765 F.2d 42 (3rd Cir.1985). Nehemiah held that due process considerations preclude effecting personal jurisdiction over an unincorporated association merely by service on an agent transiently present in the state. Id. at 46. In so holding, the court found Donald Manter “ambiguous” on this issue, and the court cited Aluminal as a lower court decision contradictory to its holding.

Thus, the three cases Pitman cited for support provide little guidance for the court here. In none of these cases did the court seriously analyze Shaffer and its effect on the transient jurisdiction doctrine. It is to Shaffer that this court now turns.

In Shaffer, the plaintiff, Mr. Heitner, brought a shareholder’s derivative suit in a Delaware state court against Greyhound Corporation, a Delaware corporation. Mr. Heitner also sued Greyhound’s wholly-owned subsidiary, and 28 present or former officers and directors of Greyhound and its subsidiary. Mr. Heitner alleged that the individual defendants had violated their duties to Greyhound by causing it and its subsidiary to engage in actions that resulted in a judgment against Greyhound for substantial damages in a private antitrust suit and a large fine in a criminal contempt action. The Delaware state court acquired quasi in rem jurisdiction of the case by sequestering the property of the defendants in Delaware, pursuant to a state sequestration statute. Defendants’ property consisted, for the most part, of Greyhound stock and options. Under the sequestration statute, the defendants had two options upon sequestration: (1) they could make a special appearance to contest jurisdiction only; or (2) they could enter a general appearance and defend on the merits, thereby subjecting themselves to in person-am liability.

The Supreme Court held that the Delaware sequestration statute violated the due process clause of the fourteenth amendment because it permitted the state courts to exercise quasi in rem jurisdiction despite the absence of sufficient contacts between the defendants, the litigation and the forum. In adopting the minimum contacts test for in rem and quasi in rem actions, the Supreme Court examined the evolution of the doctrinal foundations of jurisdiction from Pennoyer v. Neff, 5 Otto 714, 95 U.S. 714, 24 L.Ed. 565 (1878), to International Shoe.

The Court began with the two jurisdictional principles of Pennoyer: (1) that every state has exclusive jurisdiction over persons and property within its territory; and (2) that no state has direct jurisdiction over persons and property outside its jurisdiction. Shaffer, 433 U.S. at 197, 97 S.Ct. at 2576. The Court then outlined the development away from those principles, highlighting its opinion in International Shoe. In International Shoe, the Court held that “the relationship among the defendant, the forum, and the litigation, rather than the mutually exclusive sovereignty of the States on which the rules of Pennoyer rest, [is] the central concern of the inquiry into personal jurisdiction.” Shaffer, 433 U.S. at 204,- 97 S.Ct. at 2580 (footnote omitted).

In light of International Shoe, the Shaffer Court concluded that there had been a “collapse of the in personam wing of Pennoyer.” Id. The Court then weakened the in rem wing of Pennoyer, holding that the minimum contacts standard set forth in International Shoe governs actions in rem as well as in personam.

As Pitman points out, neither International Shoe nor Shaffer specifically involved the question of whether personal service within the jurisdiction suffices for in personam jurisdiction over individuals. However, in Shaffer, the Court clearly expressed its preference for “assessing assertions of jurisdiction by a single standard.” Shaffer, 433 U.S. at 209, 97 S.Ct. at 2582. The Court concluded, unequivocally, “that all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny.” Shaffer, 433 U.S. at 212, 97 S.Ct. at 2584.

We now hold that, under Shaffer, mere service of process upon a defendant transiently present in the jurisdiction does not vest a state with personal jurisdiction over the defendant. Personal service within the jurisdiction is not the litmus test for proper in personam jurisdiction. Rather, the test is whether the defendant has had minimum contacts with the forum “such that maintenance of the suit does not offend traditional notions of fair play and substantial justice.” International Shoe, 326 U.S. at 317, 66 S.Ct. at 158.

In reaching this conclusion, the court is not without support. Several commentators have questioned the vitality of the transient jurisdiction doctrine after Shaffer. See 4 Wright and Miller, supra, § 1064, Pocket Part at 40 (1985); Bernstine, Shaffer v. Heitner: A Death Warrant for the Transient Rule of In Personam Jurisdiction, 25 Vill.L.Rev. 38 (1979). See also Nehemiah, 765 F.2d at 46-47, and articles cited therein.

Also, in a case involving facts almost identical to those in the instant case, Amusement Equipment, Inc. v. Mordelt, 595 F.Supp. 125 (E.D.La.1984), the court held that, under Shaffer, personal service upon defendants is not sufficient to justify the assertion of personal jurisdiction over such defendants. Mordelt, 595 F.Supp. at 128 n. 3. In Mordelt, the plaintiff brought a breach of contract action in a Louisiana federal district court against a West German corporation and Carl Mordelt, the corporation’s general manager and a resident of West Germany. On November 11,1983, Mr. Mordelt was served with process, on behalf of himself and his employer, while attending a trade show in New Orleans. The plaintiff asserted that the court could properly exercise personal jurisdiction over the defendants because they had been personally served within the jurisdiction, and, alternatively, they “transacted business” in the jurisdiction from which the cause of action arose.

The court concluded that the due process clause and, thus, the minimum contacts requirement, limit the state’s jurisdictional reach under both long-arm and transient jurisdiction. Mordelt, 595 F.Supp. at 128. According to the court, “[i]nsofar as the transient jurisdiction doctrine runs afoul of the minimum contacts test for personal jurisdiction framed by International Shoe, the doctrine, and its obsolete theoretical underpinnings, must give way.” Id. at 128 n. 3.

Nehemiah, 765 F.2d 42, also supports this court’s holding. As noted above, Nehemiah held that a court could not obtain jurisdiction over an unincorporated association merely by service upon an agent transiently present within the state. The Nehemiah court, relying on Shaffer and the similarity between corporations and unincorporated associations, extended the application of the International Shoe minimum contacts requirement to unincorporated associations. Id. at 47. The court questioned whether Shaffer dictates a further extension to individuals served with process within the forum, but did not so hold, as that set of facts was not before the court. Id. at 46-47.

In addition to commentaries and case law, public policy supports the court’s decision that the minimum contacts requirement applies to transient jurisdiction eases. Under Shaffer, a court may not sequester a defendant’s property and assert in rem or quasi in rem jurisdiction unless there are minimum contacts between the defendant, the litigation and the forum. Were the court to hold that minimum contacts need not be present for an exercise of in person-am jurisdiction over a defendant present in the jurisdiction when served, the court would thereby accord less protection to an individual defendant than to his or her property within the state. Surely the Shaffer Court did not intend such an illogical and unfair result. See Nehemiah, 765 F.2d at 47. Moreover, transient jurisdiction may constitute an unwarranted and undesirable burden on commerce.

Having found that the minimum contacts requirement must be satisfied even where a defendant is personally served within the jurisdiction, the court now examines whether such minimum contacts exist between Mr. O’Connor, this action and Illinois. The Mordelt decision provides some guidance on this question. In Mordelt, the court stated that, in order for an exercise of personal jurisdiction over a nonresident defendant to comport with due process requirements, the defendant must have some minimum contacts with the state resulting from an affirmative act or acts on its part. Id. at 129. Also, it must not be unfair or unreasonable to require the defendant to defend the suit in the forum. Id. The court labelled these two requirements as the “affirmative act” and the “fairness” prongs of the constitutional due process test.

The Mordelt court examined the three affirmative acts which arguably connected the defendants to the forum, Louisiana. The court found that none of these affirmative acts, one of which was Mr. Mordelt’s attendance at the New Orleans trade show, was related to the cause of action. The court also found that requiring defendants to defend the suit in Louisiana would be unfair and unreasonable because (1) neither party was a Louisiana corporation, and, although the plaintiff corporation was licensed to do business in Louisiana, it apparently brought suit in Louisiana simply because it was able to personally serve the defendant there; (2) Louisiana had no special interest in providing a forum for the suit because none of its residents were involved; and (3) the “basic equities” of the case did not favor a Louisiana forum as the parties negotiated and executed the contract which was the basis for plaintiff’s breach of contract claim in Florida and West Germany, and defendants did not “reach out” to plaintiff in Louisiana. Mordelt, 595 F.Supp. at 131.

In the present case, the only affirmative act which arguably connects Mr. O’Connor with Illinois is his attendance at the “Type-X 1984” trade exhibition. Mr. O’Connor’s attendance at that exhibition had nothing to do with the contracts and actions which provide the basis for Pit-man’s complaint. Also, requiring Mr. O’Connor to defend this suit in Illinois would be unfair and unreasonable. As for the convenience of the parties, although Pitman is an Illinois corporation, its principal place of business is Secaucus, New Jersey, and Mr. O’Connor is a resident of the United Kingdom. Pitman never asserts that Mr. O’Connor contacted Pitman, or negotiated or executed any agreement with Pitman, in Illinois. Similar to the plaintiff in Mordelt, Pitman appears to have filed this suit in Illinois simply because it was able to personally serve Mr. O’Connor in Illinois. The court therefore finds that Mr. O’Connor’s transient presence at the “Type-X 1984” exhibition fails to amount to the minimum contacts required under the due process clause. Likewise, even if Typecraft was somehow found to be doing business in Illinois for purposes of service, due process would preclude the exercise of personal jurisdiction over Typecraft as well.

Conclusion

For the reasons stated above, the court therefore grants the motion of Typecraft and Mr. O’Connor to dismiss this action for lack of personal jurisdiction.

      . The court referred this motion to a Magistrate for a Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). Defendants Typecraft and Mr. O’Connor filed objections to the Magistrate’s Report and Recommendation. Under 28 U.S.C. § 636(b)(1)(B) and Fed.R.Civ.P. 72(b), this court must make a de novo determination of those portions of the Report and Recommendation to which the objections are made, and this court has the discretion to accept, reject or modify, in whole or in part, the Magistrate's Report and Recommendation. For the reasons set forth in this memorandum, the court does not adopt the Report and Recommendation of the Magistrate in this case.

      . Pitman does not assert, in its complaint or memorandum, that any of the following events occurred in Illinois: (1) the negotiation, execution and alleged breach of the agreements; (2) the misrepresentation of material facts relating to the distributorship agreement; and (3) the misuse of Pitman’s confidential business information.

      . Affidavit of Jack A. Maltby, National Marketing Manager of Pitman, and Exhibit “A” to the Maltby Affidavit, attached to Plaintiff's Memorandum in Opposition to Defendants’ Motion to Dismiss ("Plaintiff’s Memorandum”). The court may rely on affidavits when determining the propriety of a dismissal for lack of jurisdiction. O'Hare International Bank v. Hampton, 437 F.2d 1173, 1176 (7th Cir.1971).

      . Exhibit "F” to the Maltby Affidavit, attached to Plaintiff's Memorandum. In its memorandum, Pitman asserts that Typecraft distributed brochures for many of its products. Plaintiff’s Memorandum, p. 6. Pitman submits these brochures as Exhibits "B”-"F” to the Maltby Affidavit, attached to its memorandum. In their Reply to Pitman's Memorandum in Opposition to Defendants’ Motion to Dismiss (“Defendants' Reply”), defendants contend, and the court now finds, that Exhibits “B,” “C” and "E” describe products offered by Typecraft (UK) Limited, a British corporation separate and distinct from Typecraft Software, Ltd., the defendant in this suit. Defendants' Reply, p. 3. In addition, the court notes that Exhibits "C” and “E” are identical.

      . The court draws these facts from Exhibit “3” to the Plaintiffs Memorandum. Exhibit "3” is a confidential report Mr. O'Connor prepared for the British Overseas Trade Board, the governmental agency which funded Mr. O'Connor’s trip to the "Type-X 1984” Exhibition. Pitman filed the report under seal, pursuant to the court’s September 18, 1984 protective order.

      . The Illinois long-arm statute, Ill.Rev.Stat. ch. 110, para. 2-209, does not apply because Pit-man’s claims do not arise out of any business transacted, or tort committed, in Illinois. See supra n. 2.

      . In Opert, the owner was in New York merely to attend the U.S. Grand Prix, and yet, the Opert court found the owner’s contacts with New York to be sufficient to satisfy due process. The court noted that Schmid’s attendance was connected with his financial interest, and his company's participation, in Formula One racing. Without reliance on any authority, the court held Schmid’s minimal contacts, because they were "purposeful,” sufficient to satisfy due process.

      . The Aluminal court also cited, for support, 4 Wright & Miller, Federal Practice and Procedure: Civil § 1064 at 209 (1969). That section provides in part:
      As a result of the Pennoyer [v. Neff, 5 Otto 714, 95 U.S. 714, 24 L.Ed. 565 (1877) ] decision, it became clear that even if defendant’s presence within the state is transitory, perhaps only long enough to allow him to be served with process, it is sufficient to endow the court with jurisdiction.

        Id. After the Shaffer decision, however, Wright & Miller amended § 1064, so that it now provides:
      The Supreme Court's decision in Shaffer v. Heitner adopting the minimum contacts test for in rem and quasi in rem jurisdiction casts considerable doubt on the continued vitality of transient jurisdiction.
      4 Wright & Miller, supra, § 1064, Pocket Part at 40 (1985) (footnotes omitted).

      . Neither Pitman nor the defendants state where the agreements at issue in this case were negotiated or executed, or where the alleged misrepresentation and misuse of confidential information occurred. The court notes that it is likely that some of these actions may have taken place in New Jersey, the state in which Pitman’s principal place of business is located. If so, Pitman would be able to assert, and a federal court in New Jersy could properly exercise, jurisdiction over defendants under New Jersey’s long-arm statute.


author: GLASSER, District Judge:

text:
    BANK OF BOSTON INTERNATIONAL OF MIAMI, Plaintiff, v. Roberto ARGUELLO TEFEL and Matilde Osorio de Arguello, Defendants.
    No. 84 Civ. 1023.
    United States District Court, E.D. New York.
    Jan. 17, 1986.

      Kelley Drye & Warren, New York City, for plaintiff.
    Buckley, Kremer, O’Reilly, Pieper, Ho-ban & Marsh, Mineóla, N.Y., for defendants.
   MEMORANDUM AND ORDER

GLASSER, District Judge:

Plaintiff Bank of Boston International of Miami (“BBIM”) brought this action against defendants Roberto Arguello Tefel and Matilde Osorio de Arguello to collect on a promissory note allegedly made by Roberto Arguello and a loan agreement executed by both defendants. Defendants have moved for an order dismissing the action on the ground that it is time-barred, or through the operation of the doctrine of forum non conveniens. For the reasons set forth below, defendants’ motion will be denied.

I. Statute of Limitations

There is no significant dispute as to the ■ facts underlying this portion of defendants’ motion. BBIM alleges that defendants defaulted on their obligations “by failing to make the full principal payment that was due on January 15, 1979 and have defaulted on all payments due” since that date. Amended Complaint at 1123. The complaint in this action was filed on March 9, 1984, more than five years later. The only task, therefore, is to determine what statute of limitations applies to this action.

The first step in this determination is to observe that subject matter jurisdiction in this case is based on diversity of citizenship. As such, this court must apply the statute of limitations that would be applied by the state in which it sits. Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945). Next, it should be noted that “under New York law the statute of limitations is considered procedural ... and New York will apply its own statute of limitations even though the injury which gave rise to the action occurs in another state.” Stafford v. International Harvester Co., 668 F.2d 142, 147 (2d Cir.1981), citing Martin v. Julius Dierck Equipment Co., 43 N.Y.2d 583, 588, 403 N.Y.S.2d 185, 187, 374 N.E.2d 97, 99 (1978). Because of this aspect of New York law, the court need not, at this time, determine what law will ultimately govern the merits of this action. Thus, defendants’ argument that a grouping of contacts test would lead to the choice of Nicaraguan law is simply irrelevant to the issue at hand. By the same token, it is unnecessary to consider plaintiff's contention that a choice of law provision in the promissory note that refers to Massachusetts law will govern. See Sears, Roebuck & Co. v. Eneo Associates, Inc., 43 N.Y.2d 389, 397, 401 N.Y.S.2d 767, 772, 372 N.E.2d 555, 559 (1977) (“The contract provision that the agreement was to be governed by Michigan law operated only to import the substantive law of Michigan.”).

There is no question that with regard to New York’s six-year statute of limitations for contract actions, N.Y.C.P.L.R. § 213 (McKinney’s 1972 & Supp.1984-1985), this action is timely. However, because of New York’s “borrowing statute,” N.Y.C.P.L.R. § 202 (McKinney’s 1972), our inquiry does not end there. That statute provides:

An action based upon a cause of action accruing without the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of the state the time limited by the laws of the state shall apply.

Because it is agreed that this action did not accrue in New York, and because neither BBIM nor Bank of Boston Trust Company (Bahamas), Ltd., in whose favor the action originally accrued, see note 1 supra, is not a resident of New York, see United States Fidelity & Guaranty Co. v. E.W. Smith Co., 46 N.Y.2d 498, 414 N.Y.S.2d 672, 387 N.E.2d 604 (1979), it must be decided whether this action is barred by the “state where the cause of action accrued.”

In determining where a cause of action accrues for the purpose of the borrowing statute, it has been said that “[t]he New York Court of Appeals has furnished little guidance.” In re Agent Orange Product Liability Litigation, 597 F.Supp. 740, 801 (E.D.N.Y.1984). Nevertheless, decisions of lower New York courts and of our own Court of Appeals provide some assistance. Preliminarily, it must be noted that defendants’ attempt to invoke modern choice of law doctrine, by incorporating that doctrine into the borrowing statute, is once again unavailing:

Although some lower courts — apparently motivated by the conviction that the “grouping of contacts” approach consistently provides far more rational results than the old “place of injury” rule — have hypothesized that New York’s highest court would apply the “modern” conflict of laws analysis to the borrowing statute, the Second Circuit Court of Appeals has consistently held that it would not.

Lang v. Paine, Webber, Jackson & Curtis, Inc., 582 F.Supp. 1421, 1425 (S.D.N.Y. 1984). See also In re Agent Orange, supra, 597 F.Supp. at 802 (“In the absence of state case law directly on point, the Second Circuit, estimating what New York’s highest court would rule, has embraced the traditional doctrine that the place of injury determines where a cause of action accrues.”); Maiden v.- Biehl, 582 F.Supp. 1209, 1212 (S.D.N.Y.1984) (“The Second Circuit has made it clear that choice of law principles based on grouping of contacts do not apply to borrowing statute analysis.”).

With regard to the more specific inquiry as to how the borrowing statute applies to a breach of contract claim, both parties cite Tandoc v. Luckenbach S.S. Co., 5 A.D.2d 857, 171 N.Y.S.2d 381 (1st Dep’t 1958), as authority. Tandoc teaches that “[a] cause of action arises when and where the breach occurs, even though the place of contracting be elsewhere.” 5 A.D.2d at 858, 171 N.Y.S.2d at 382. In light of Tandoc, defendants argue that “the breach or nonperformance occurred in Nicaragua when the stock held as security depreciated in value and defendants were unable to make payments by reason of currency restrictions.” Defendants’ Brief at 9-10. Plaintiff rebuts defendants’ argument as follows:

[Defendants] argue that the causes of action accrued in Nicaragua because various events occurred in Nicaragua, e.g., civil insurrection, the enactment of currency restrictions and the expropriation of their property, which they claim explain their refusal to repay the loan. While these events may have constituted acts of default which would have given BBIM the right (but not the obligation) to accelerate the amounts due under the Promissory Note and Loan Agreement, they are simply not the breaches upon which this action is based.

Plaintiff's Brief at 11. Instead, plaintiff argues that the relevant breaches were the defendants’ failure to make payments on the loan in January 1979 and thereafter. Because under the terms of the promissory note all payments were to be made at the head office of the First National Bank of Boston, in Boston, Massachusetts, plaintiff argues that Massachusetts is the state where the cause of action accrued.

Bearing in mind the general principle that a cause of action accrues at the place of injury, the Court finds plaintiff’s argument to be the more convincing one. Although it is obvious that events which took place in Nicaragua were causally related to the breach of contract that is at issue, it is also clear that the injury alleged to be suffered by the plaintiff was felt when payments were not made at the contractually agreed upon location. Moreover, plaintiff’s argument is supported by uncontradicted, if somewhat ancient, authority that for the purposes of the borrowing statute, a cause of action for nonpayment of a promissory note accrues in the state where the note was payable. Farmers’ Trust Co. v. Bradshaw, 137 Misc. 203, 242 N.Y.S. 598 (N.Y.City CL1930).

Both parties agree that this action is timely under the relevant Massachusetts statute of limitations. Mass.Stat. Ann. Ch. 260, §§ 1, 2. Defendants, however, make two further arguments in favor of applying Nicaraguan law to this action. First, they attempt to rely on the Second Circuit’s holding in Stafford, supra, that “a cause of action cannot accrue for purposes of New York’s borrowing statute in a state which could not exercise jurisdiction over the cause of action.” 668 F.2d at 153. Assuming that defendants’ visits to Massachusetts in connection with the transactions at issue did not subject them to jurisdiction in that state, defendants’ reliance on Stafford is nevertheless unavailing. The rule in Stafford was formulated to shield plaintiffs from possible illogical applications of the borrowing statute:

Insofar as the purpose of the borrowing statute is ... to prevent a plaintiff from forum shopping, it makes no sense at all to apply the shorter limitation of a state where the defendant could not have been sued.

Id. at 152. As such, it would be anomalous to allow that rule to be used as a sword by defendants. But even if defendants were allowed to invoke the rule, they would not benefit from it. Defendants argue that the Stafford, rule should be used to determine where the cause of action accrued: if defendants are not subject to jurisdiction in Massachusetts, the Court must then conclude that the cause of action accrued in Nicaragua, where defendants are subject to jurisdiction. The logic of this argument does not comport with the analysis in Stafford. In Stafford, the court first applied the “place of injury” rule to determine that the cause of action accrued in Pennsylvania. It next decided that because one of the defendants in that action was not amenable to process in Pennsylvania, the Pennsylvania statute of limitations should not be allowed to bar a claim against that defendant. Contrary to defendants’ argument, however, this latter conclusion did not compel the court to decide that its conclusion concerning the place of accrual was therefore mistaken. Rather, with respect to a second defendant which was amenable to process in Pennsylvania, the court reiterated its finding that the cause of action had accrued there and, finding no reason not to apply the borrowing statute, barred the plaintiff’s claim.

Defendants also argue that in borrowing the Massachusetts statute of limitations, this Court should also borrow Massachusetts’ borrowing statute. That statute provides that “no action shall be brought by any person upon a cause of action which was barred by the laws of any state or country while he resided therein.” Mass.Stat.Ann. Ch. 260, § 9. Although neither party has cited any cases interpreting this provision, it seems clear that this statute would lead the Court to apply the law of Florida, the state of plaintiff’s residence. From Florida, the defendants contend, the Court would be referred by Florida’s borrowing statute to Nicaraguan law. Florida’s borrowing statute is as follows:

When the cause of action arose in another state or territory of the United States, or in a foreign country, and its laws forbid the maintenance of the action because of lapse of time, no action shall be maintained in this state.

Fla.Stat.Ann. § 95.10. Defendants argue that Florida would look to Nicaragua as the location where the cause of action arose. This argument must fail for the same reasons that it failed as a matter of New York law. Applying the Florida borrowing statute to an action on a promissory note which had been executed in California but was payable in Florida, a Florida court stated:

The maker had promised to pay in Florida. When he breached this promise, the plaintiff had a cause of action. The incident (failure to pay) which created the cause of action occurred in Florida; therefore, the cause of action arose in Florida.

Aviation Credit Corporation v. Batchelor, 190 So.2d 8, 11 (Fla.App.1966), writ dismissed, 198 So.2d 24 (Fla.1967). In addition, a Florida intermediate court has determined recently that although the Supreme Court of Florida has adopted modern conflict of laws principles in determining what substantive law should apply to an action, see Bishop v. Florida Specialty Paint Co., 389 So.2d 999 (Fla.1980), it would retain the rule of lex loci delicti in determining where a cause of action arose for the purposes of the borrowing statute. Pledger v. Burnup & Sims, Inc., 432 So.2d 1323, 1329-31 (Fla.App.1983), review denied, 446 So.2d 99 (Fla.1984). Because the place of the wrong in this case is Massachusetts, applying the Florida borrowing statute would yield the same result as reached above. Plaintiff’s actions against the defendants are timely.

II. Forum Non Conveniens

Defendants also move to dismiss this case on the ground that Nicaragua would be a more convenient forum in which to try this case. In assessing the defendants’ request, the Court is required to consider several factors, taking into account the private interest of the litigants, as well as the public interest. Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947). In weighing these factors, the Court is admonished that “unless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be disturbed.” Id. at 508, 67 S.Ct. at 843.

Having considered the arguments put forth by the defendants, I find that they have not met their burden of showing that plaintiff’s choice of forum should be disturbed. Disputing plaintiff’s contention that “virtually all of the conceivable witnesses are located in the United States,” Plaintiff’s Brief at 21, defendants give the names of four potential witnesses who reside, respectively, in Spain, Nicaragua, Puerto Rico and Venezuela. Defendants’ Reply Brief at 25-26. While it may be that litigation of this case in New York will involve certain costs and inconvenience, it has not been shown that litigation in Nicaragua would be “easy, expeditious and inexpensive.” Gulf Oil, 330 U.S. at 508, 67 S.Ct. at 843.

More importantly, the fact that defendants reside in New York “weighs heavily against dismissal.” Schertenleib v. Traum, 589 F.2d 1156, 1164 (2d Cir.1978). Dismissing this case would not serve the purpose of the doctrine of forum non conveniens as perceived by the Supreme Court in Gulf Oil:

It is often said that the plaintiff may not, by choice of an inconvenient forum, “vex,” “harass,” or “oppress” the defendant by inflicting upon him expense or trouble not necessary to his own right or to pursue his remedy.

330 U.S. at 508, 67 S.Ct. at 843. In view of defendants’ assertion that they fled Nicaragua in 1979 in fear for their personal safety, see October 26,1984 Affidavit of Roberto Arguello at 1|¶ 15-16, it can hardly be said that plaintiff’s decision to commence this lawsuit in New York rather than in Nicaragua was, in any way, vexatious, harassing or oppressive.

Conclusion

For the reasons stated above, defendants’ motion to dismiss is denied.

SO ORDERED.

      . By Memorandum and Order dated October 9, 1984, I granted the motion of Bank of Boston Trust Company (Bahamas), Ltd., which commenced this action, to substitute BBIM as party plaintiff.

      . In their reply brief, defendants rely heavily on an alternative holding in In re Tonkonogoff’s Estate, 177 Misc. 1015, 32 N.Y.S.2d 661 (Surrogate's Ct. 1941). Tonkonogoff applied the rule that "if by the law of the state which has created a right of action, it is made a condition of the right that it shall expire after a certain period of limitation has elapsed, no action begun after the period has elapsed can be maintained in any state.” 32 N.Y.S.2d at 667 (quoting Restatement of Conflict of Laws § 605). The Second Circuit has questioned whether this rule has continued vitality. Clarke v. Pennsylvania Railroad Co., 341 F.2d 430 (2d Cir.1965). Assuming that it has, the Court holds, nevertheless, that Tonkonogoff represents an improper application of this rule, which finds little or no support in the cases which preceded or followed it, and should not be applied here. Having surveyed New York cases applying this rule, it is clear that in New York, as in other courts, "[t]he almost invariable prerequisite is that the liability sought to be enforced must have been created by statute." Restatement (2d) of Conflict of Laws § 143, Comment c. Although defendants assert that this action would be barred by Nicaragua’s prescriptive period, and that, under Nicaraguan law, prescription extinguishes both the right and the remedy, they do not claim that this action was created by any Nicaraguan statute. Thus, defendants’ assertion that this action was “created” by Nicaraguan law begs the question to be answered with respect to New York's borrowing statute. See p. 316 infra. Insofar as that statute leads to the conclusion that this action accrued in Massachusetts, see p. 317 infra, the Court finds no logical basis for reaching the contrary conclusion that this action was "created” in Nicaragua in order to apply the rule urged by defendants.

      . Plaintiff conceded this point at oral argument.
      A leading commentator has stated:
      Generally, the borrowing is of the other state’s limitation period only, and not of the other state's borrowing statute also. The renvoi difficulties which the latter approach could produce would be intolerable.
      Leflar, American Conflicts Law (3d ed. 1977) at 256 (footnotes omitted); see also Restatement (2d) of Conflict of Laws § 8, Comment i. Nevertheless, at least two New York courts have chosen this "latter approach.” Ross v. Graham, 122 Misc. 574, 203 N.Y.S. 390 (Sup.Ct.1924); Holmes v. Hengen, 41 Misc. 521, 85 N.Y.S. 35 (Sup.Ct.1903), aff'd, 94 App.Div. 619, 88 N.Y.S. 1104 (1st Dep’t 1904). Cf. Antone v. General Motors Corp., 64 N.Y.2d 20, 31, 484 N.Y.S.2d 514, 519, 473 N.E.2d 742 (1984) (”[I]n ‘borrowing’ a Statute of Limitations of another State, a New York court will also ‘borrow’ the other State’s rules as to tolling.”).

      . Defendants also argue that this action is barred by Florida’s five year statute of limitations. Fla.Stat.Ann. §§ 95.11(2), (3). Plaintiff, however, correctly invokes the protection of Fla.Stat.Ann. § 95.051(l)(a) which tolls the running of time under the statute of limitations during the “[a]bsence from the state of the person to be sued.”

      . The Second Circuit has not decided "the intriguing question ... whether, in diversity cases ..., state law or federal law is the source of the rules governing the forum non conveniens doctrine.” Schertenleib v. Traum, 589 F.2d 1156, 1162 n. 13 (2d Cir.1978). Neither party has addressed this issue; both parties have relied on federal cases alone. “In light of the similarity of the federal and state forum non conveniens doctrines," Olympic Corporation v. Societe Generate, 462 F.2d 376, 379 (2d Cir.1972), this question may again be left to another day.


author: JOSEPH H. YOUNG, District Judge.

text:
    Katherine M. FURCRON, et al. v. UNITED STATES of America, et al.
    Civ. No. Y-85-4000.
    United States District Court, D. Maryland.
    Jan. 17, 1986.

      Deborah E. Jennings, Baltimore, Md., for plaintiffs.
    Alison Kohler, Baltimore, Md., Ashby G. Hilsman, New York City, Robert L. Gordon, Washington, D.C., Catherine C. Blake, U.S. Atty., and Larry D. Adams, Asst. U.S. Atty., Baltimore, Md., for defendants.
   MEMORANDUM

JOSEPH H. YOUNG, District Judge.

Plaintiffs Katherine and Samuel Furcron, American citizens who divide their time between Mexico and the United States, have filed this suit against the United States, the Federal Reserve Bank of New York (“FRB”), and Citibank, N.A. (“Citibank”). Plaintiffs allege that they timely tendered to the Internal Revenue Service a $10,000 cashier’s check drawn on a Mexican bank in satisfaction of their 1979 tax liability. They allege that the IRS eventually sent the check to FRB New York for collection, that FRB sent the check to Citibank, and that three years later, without any prior notice to them, the IRS sent the Furcrons a “Past Due Final Notice” advising them that their payment for 1979 taxes had not been received and that, with interest and penalties, the amount due was now $16,512.39. Unable to resolve the dispute informally, the Furcrons paid another $10,000 on June 12,1985 and filed a claim for a refund of the second payment. The IRS denied the refund on December 3, 1985.

In Count II of their complaint the Furcrons brought suit against the United States for a refund of taxes “erroneously or illegally assessed or collected” under 28 U.S.C. § 1346(a)(1) and 26 U.S.C. § 7422. In Count I the Furcrons asserted a claim against all three defendants for negligence, and in Count III they sought indemnity from FRB and Citibank. Defendants United States and the Federal Reserve Bank of New York have filed motions to dismiss. For the purposes of resolving these motions the Court must assume that the allegations in the complaint are true.

The negligence claims against the United States must be dismissed. Title 28 U.S.C. § 2680(c) precludes the District Courts from hearing any suits for tort damages “arising in respect of the assessment or collection of any tax____” Cleveland Chair Co. v. United States, 526 F.2d 497 (6th Cir.1975); Broadway Open Air Theatre v. United States, 208 F.2d 257 (4th Cir.1953).

The United States argues that Count II of the complaint also fails to state a claim, because the plaintiffs have not alleged a valid basis for a tax refund. Title 26 U.S.C. § 6311(b)(1), entitled “Ultimate Liability,” provides:

If a check or money order so received [by the Secretary pursuant to § 6311(a)] is not duly paid, the person by whom such check or money order has been tendered shall remain liable- for the payment of the tax ... and for all legal penalties and additions, to the same extent as if such check or money order had not been tendered.

The Furcrons argue that the application of § 6311 to this case would be inequitable, and seek a refund on the ground that the United States was equitably estopped from collecting the second $10,000 from them before trying to collect from FRB and Citibank first.

At least eight Circuit Courts of Appeals have held that equitable estoppel is available against the government in very limited circumstances. See Hansen v. Harris, 619 F.2d 942, 959 (2d Cir.1980) (Newman, J., concurring) (collecting cases), rev’d per curiam, Schweiker v. Hansen, 450 U.S. 785, 101 S.Ct. 1468, 67 L.Ed.2d 685 (1981). In a series of three recent decisions, the Supreme Court refused to apply the estoppel doctrine against the government on the facts of the cases before it, stating: “it is well-settled that the Government may not be estopped on the same terms as any other litigant,” Heckler v. Community Health Services of Crawford County, Inc., 467 U.S. 51, 60, 104 S.Ct. 2218, 2224, 81 L.Ed.2d 42 (1984) (footnote omitted), but refused to adopt “a flat rule that estoppel may not in any circumstances run against the government.” Id. at 60, 104 S.Ct. at 2224. Two separate opinions by members of the court warned that the resolutions of those cases “[give] an impression of hospitality towards claims of estoppel against the government which our decided cases simply do not warrant,” Heckler v. Community Health Services, supra, 467 U.S. at 68, 104 S.Ct. at 2228 (Rehnquist, J., concurring in judgment), and “[provide] inadequate guidance to the lower courts____” Schweiker v. Hansen, supra, 450 U.S. at 792, 101 S.Ct. at 1473 (Marshall, J., dissenting).

With those warnings ringing in its ears, this Court feels constrained to follow the considerable precedent allowing estoppel claims against the government, at least until the Supreme Court clearly holds to the contrary. The Court notes that the Fourth Circuit appeared to apply principles •of equitable estoppel in the case of Tuck v. Finch, 430 F.2d 1075 (4th Cir.1970), but see Hansen v. Harris, supra, 619 F.2d at 954, n. 4. (Friendly, J., concurring), and did not suggest that estoppel was unavilable against the government in West Augusta Development Corp. v. Giuffrida, 717 F.2d 139, 140 (4th Cir.1983).

Allowing for the abstract possibility that estoppel may apply against the government is one thing; determining what principles to apply in evaluating specific government estoppel claims is another. The Court will review the last three Supreme Court decisions on the subject for guidance.

In Schweiker v. Hansen, supra, the plaintiff had become eligible for benefits as a divorced mother when certain Social Security amendments took effect on January 1, 1973. On June 12, 1974, the plaintiff met with a Social Security Field Representative to inquire about benefits. The representative told her she was ineligible. He also failed to advise her to file a written application, in violation of internal department procedures.

The statute and its implementing regulations allowed for retroactive benefits up to twelve months before the submission of a written application, and plaintiff sought retroactive benefits for the twelve-month period prior to her oral interview. The Second Circuit held that the government was estopped from asserting the defense that plaintiff had not filed a written application. Judge Friendly wrote a vigorous dissent, emphasizing the potential for numerous claims, fraudulent or legitimate, based on representations of similar misadvice by a government employee. Judge Friendly noted the potential costs of adjudicating those claims, and wrote that the Second Circuit’s opinion departed from a

solid and well-articulated body of doctrine that funds contributed by all citizens, with definite limitations upon their use, are not to be diverted to a person not within these limitations simply because the Federal Government has not been able to secure perfect performance from its hundreds of thousands of employees scattered throughout the continent.

Hansen v. Harris, supra, 619 F.2d at 954.

In a summary, per curiam reversal, the Supreme Court agreed with Judge Friendly’s dissent. Schweiker v. Hansen, supra, 450 U.S. at 788, 101 S.Ct. at 1470-71. The Court held that the oral misrepresentations to plaintiff did not rise to the “affirmative misconduct” necessary to estop the government from enforcing “the conditions defined by Congress for charging the public treasury.” 450 U.S. at 788, 101 S.Ct. at 1471, quoting Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 385, 68 S.Ct. 1, 3, 92 L.Ed. 10 (1947). In a footnote, the Court distinguished several lower court decisions that applied estoppel against the government on the ground that in those cases “estoppel did not threaten the public fisc as estoppel does here.” 450 U.S. at 788-89, n. 4, 101 S.Ct. at 1471, n. 4 (citations omitted).

In INS v. Miranda, 459 U.S. 14,103 S.Ct. 281, 74 L.Ed.2d 12 (1982) (per curiam), the plaintiff, a citizen of the Philippines, married an American citizen. His American wife filed a visa petition on plaintiff’s behalf. Plaintiff simultaneously filed an application requesting the INS to upgrade his status to permanent resident alien, which status was dependant on the availability of a visa. The INS did not process either application for 18 months. In the meantime, plaintiffs marriage broke up, and his wife withdrew the visa application on his behalf. The INS finally denied plaintiff’s request for an upgrade in status because he did not have a visa, and ordered him to show cause why he should not be deported.

The Ninth Circuit held that the 18-month delay was “affirmative misconduct” by the INS, and estopped the government from denying plaintiff’s request for an upgrade in status. Miranda v. INS, 673 F.2d 1105 (9th Cir.1982) (per curiam). The Supreme Court reversed, holding that the delay did not constitute “affirmative misconduct.” 459 U.S. at 18, 103 S.Ct. at 283. The estoppel issue had been raised for the first time on appeal, preventing full factual development of the reason for the delay, and the Court wrote “we cannot say in the absence of evidence to the contrary that the delay was unwarranted.” Id. The Court also held that a threat to the public fisc was not a precondition for overturning an estoppel claim against the government, and noted the “increasingly important interest, implicating matters of broad public concern,” in enforcing the immigration laws. 459 U.S. at 19, 101 S.Ct. at 284.

In Heckler ¶. Community Health Services of Crawford County, supra, a nonprofit health care provider had received a double disbursement of funds under Medicare and the Comprehensive Employment and Training Act (“CETA”). In filing claims for the double disbursement, the defendant had relied on the mistaken advice of a fiscal intermediary that had contracted with HHS to assume certain administrative responsibilities. Under applicable regulations the fiscal intermediary was required to consult HHS before advising the defendant.

The Third Circuit held that the mistaken advice of the fiscal intermediary, coupled with the intermediary’s failure to consult HHS, constituted “affirmative misconduct,” and estopped the government from recouping the double disbursements. The Supreme Court reversed without deciding whether the intermediary’s conduct constituted “affirmative misconduct.” The Court held that the defendant had not suffered a detrimental change of position because it had not been entitled to the money in the first place. 467 U.S. at 61-62, 104 S.Ct. at 2224-25. The Court also held that the defendant, an experienced health care organization, was not justified in relying on the intermediary’s bad advice because it had an independent duty to familiarize itself with the applicable regulations. Id. Thus, the Court concluded, defendant had not demonstrated “that the traditional elements of an estoppel [were] present.” Id.

From these cases, this Court draws several tentative principles. An estoppel claim against the government must make out the traditional elements of estoppel:

If one person makes a definite misrepresentation of fact to another person having reason to believe that the other will rely upon it and the other in reasonable reliance upon it does act ... the first person is not entitled ...
(b) to regain property or its value that the other acquired by the act, if the other in reliance upon the misrepresentation and before discovery of the truth has so changed his position that it would be unjust to deprive him of that which he thus acquired.

Heckler v. Community Health Services, supra, 467 U.S. at 59, 104 S.Ct. at 2223, quoting Restatement (Second) of Torts § 894(1) (1977) (footnote omitted). The government’s acts or misrepresentations inducing reliance must be “affirmative misconduct,” must be more than a mistake by an individual government employee. ■ And applying the estoppel must not threaten the public fisc or upset public policy if extended to like cases.

Under those principles, plaintiffs have alleged sufficient facts to survive a motion to dismiss. In order to prevail plaintiffs must demonstrate that the government’s failures to tender the check promptly for payment, to oversee on the collection efforts of FRB and Citibank, and to notify the plaintiffs that their check had been lost were the result of lax IRS practices, not the mistakes of an individual employee. In the alternative, plaintiffs must demonstrate that the decision to dun them a second time was the result of unjust IRS policies, not individual caprice. Such showings might constitute “affirmative misconduct.”

Plaintiffs must also demonstrate that they changed their position in reliance upon the government’s inaction. They must show that they might have been able to trace the check themselves, or pursue some remedy against the bank, had they been seasonably notified of the IRS’ collection difficulties. Plaintiffs must also demonstrate that they were irrevocably harmed by the government’s conduct. That showing will depend upon the resolution of plaintiff’s claims against the other defendants. They must also show that applying estoppel to cases such as theirs will not threaten the the public fisc or upset public policy.

Defendant Federal Reserve Bank of New York has filed a motion to dismiss, arguing that this Court does not have jurisdiction over it. Recognizing the serious jurisdictional difficulties with haling FRB into court in Maryland, the plaintiffs have moved this Court to transfer venue of their suit against FRB to the Southern District of New York. Plaintiffs’ motion for a change of venue will be granted, pursuant to 28 U.S.C. § 1406.