author: RICHARD C. FREEMAN, District Judge.

text:
    Homer G. RAY, Jr. v. LEHMAN BROTHERS KUHN LOEB, INCORPORATED.
    No. C82-206A.
    United States District Court, N.D. Georgia, Atlanta Division.
    Oct. 4, 1984.

      Jay Stuart Youngblood, Atlanta, Ga., for plaintiff.
    Paul W. Stivers, Rogers & Hardin, Atlanta, Ga., for defendant.
   ORDER

RICHARD C. FREEMAN, District Judge.

This action is now before the court on the parties’ cross motions for summary judgment on counts five, six, and seven of the plaintiff’s Second Amended Complaint, Rule 56, Fed.R.Civ.P., and on motions to strike by both the plaintiff and defendant.

I. Procedural Motions

Before addressing the summary motions the court will dispose of the two pending motions to strike. Defendant moves to strike the letter sent by the plaintiff’s attorney to the court dated April 23, 1984. The letter requested that a conference be held to resolve a discovery dispute between the parties. Defendant argues that this letter should be stricken because it is an attempt by plaintiff’s counsel to secure some action by the court without going through the formality of filing a motion. Plaintiff’s counsel argues that because he had not been able to resolve this dispute with defendant’s counsel and the court indicated that it would not accept any further' discovery motions, writing a letter to the court was the only way to obtain guidance in how to resolve this dispute. The court will grant the defendant’s motion to strike the letter of April 23, 1984. See Rule 7(b), Fed.R.Civ.P.

Plaintiff has filed a motion to strike the defendant’s renewed motion for summary judgment which was filed on May 25, 1984. Plaintiff argues that the defendant’s request for an extension of time to allow it to file the motion as of May 25 should also be denied. The court will grant the defendant’s motion for an extension of time and will deny the plaintiff’s motion to strike. The court finds that the plaintiff was not prejudiced by the filing of the defendant’s motion one day after the May 24 deadline. Plaintiff was timely served with the motion on May 24 even though the motion was not filed with the court until the next day. The court notes, however, that by this ruling it does not mean to condone the defendant’s conduct. The parties are advised that in the future all extensions of time must be sought before the expiration of the established deadline.

II. Cross Motions for Summary Judgment

In the Second Amended Complaint, filed on August 18, 1983, the plaintiff alleges manipulation of the market for the stock of Weatherford International, Inc., in violation of § 9(a)(2) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78i(a)(2);' violation of the Georgia Securities Act of 1973, common law fraud, and violation of fiduciary duties; and violation of § 10b of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5. The essence of these allegations is that the defendant Lehman Brothers Kuhn Loeb, Inc. (Lehman Brothers), by and through its employee Stuart Travis, manipulated the price of Weather-ford International, Inc. (Weatherford) stock during the period of July 15, 1980, through December 23, 1980. Plaintiff argues that the defendant’s alleged violation of § 9(a)(2) is a deceptive practice within the meaning of the Georgia Securities Act of 1973 and § 10b of the Securities Exchange Act of 1934. Plaintiff also asserts that the violation of § 9(a)(2) constitutes common law fraud and a violation of fiduciary duties under Georgia law.

Plaintiff Homer G. Ray, Jr. is a former customer of Lehman Brothers and Travis is the Lehman Brothers’ account executive who handled Ray’s account. Weatherford is a company in the oil services industry whose shares are traded on the American Stock Exchange. Weatherford had approximately 5.4 million shares outstanding during 1980.

A. Facts

The following is a summary of what the parties agree are the undisputed facts in this case. From November 1978, through at least October 1981, the research department of Lehman Brothers recommended the purchase of Weatherford stock. Beginning in July 1980, Travis recommended Weatherford stock to a number of his customers and executed various purchases and sales of the stock for his customers’ accounts. Between July 15 and September 29, 1980, Travis purchased approximately 155.000 shares of Weatherford for his customers. These purchases accounted for approximately 19% of the total purchases of Weatherford shares during this period. The daily trading volume in the stock during this time was about 14,600 shares.

On September 29,1980, Travis purchased 4.000 shares of Weatherford for his personal account at $39.00 per share. On September 30, 1980, Travis bought 13,500 shares for his customers. These purchases accounted for 51% of the purchases in Weatherford stock that day. The stock closed at $42.00 per share, up three points on the day. The next day, October 1, 1980, Travis sold the 4,000 shares of Weatherford in his personal account for $42.00 per share.

During October 2 and 3, 1980, Travis bought 6,400 shares of Weatherford for his personal account at prices ranging from $42.00 to $42.75 per share. Between October 4 and November 12, Travis purchased approximately 198,000 shares of Weather-ford for his customers. These purchases accounted for about 38% of the total purchases in the stock. The average daily volume in the stock during this period was approximately 19,500 shares. Travis’ purchases for his customers averaged about 7,350 shares per day during this time. The price of Weatherford stock rose from $42.00 to $54.25 per share between October 4 and November 12, 1980.

On November 6, 1980, Travis sold 2,800 shares of Weatherford from his personal account at prices ranging from $49,625 to $50.00 per share. Travis bought 2,200 shares for his customers in the same day. He sold the remaining 3,600 shares of Weatherford in his personal account on November 12 at a price of $53.75 per share. On the same day he purchased approximately 10,300 shares for his customers.

After November 12, Travis’ purchases for his customers were in lesser amounts. On December 23, the stock closed at $51.00 per share. From December 24, 1980 to January 7, 1981, Travis’ purchases for his customers accounted for less than 2% of the total shares traded in the stock. During this time the price of Weatherford stock fell to $42,625 per share.

Travis bought shares of Weatherford stock for Ray’s account on August 4 and 25, 1980; September 3 and 17, 1980; and October 17, 20, 21, and 29, 1980. These shares were sold on November 13, 14, 18, and 20, 1980. Ray realized a profit on these trades.

On November 25, 1980, Ray bought additional shares of Weatherford stock. More purchases were made in March and May 1981. In May 1981, the shares of Weather-ford purchased on November 25, 1980, were split 3 for 2. These shares were sold at a loss in September 1981. Plaintiff seeks reimbursement for this loss on the theory that he purchased the shares on November 25, 1980, in a market that had been manipulated by Travis. The shares purchased in March and May 1981, were sold later the same year. These transactions are not included within the plaintiff’s claim of market manipulation.

B. Manipulation in Violation of § 9(a)(2)

The allegations of manipulation are asserted in counts five, six and seven of the Second Amended Complaint. Plaintiff’s claims in these counts are premised upon a finding that the defendant engaged in mar- . ket manipulation in violation of § 9(a)(2) of the Securities and Exchange Act of 1934.

Section 9(a)(2) provides:

(a) It shall be unlawful for any person, directly or indirectly, by use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities exchange, or for any member of a national securities exchange (2) to effect, alone or with one or more other persons, a series of transactions in any security registered on a national securities exchange creating actual or apparent active trading in such security or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.

15 U.S.C. § 78i(a).

Section 9(e) of the 1934 Act, 15 U.S.C. § 78i(e), creates an express private remedy for violations of section 9(a) and an implied private cause of action has been recognized under section 10(b) and Rule 10b-5, see Ernst & Ernst v. Hochfelder, 425 U.S. 185, 196, 96 S.Ct. 1375, 1382, 47 L.Ed.2d 668 (1976).

To show a violation of section 9(a)(2) in a private suit under section 9(e), a plaintiff must plead and prove that

(1) a series of transactions in a security creating actual or apparent trading in that security or raising or depressing the price of that security, (2) carried out with scienter (3) for the purpose of inducing the security’s sale or purchase by others, (4) was relied on by the plaintiff, (5) and affected the plaintiff’s purchase or selling price.

Chemetron Corp. v. Business Funds, 682 F.2d 1149, 1164 (5th Cir.1982), vacated on other grounds, 460 U.S. 1007, 103 S.Ct. 1245, 75 L.Ed.2d 476 (1983), on remand, 718 F.2d 725 (5th Cir.), rehearing granted, 718 F.2d 730 (5th Cir.1983).

In support of his motion for summary judgment on the manipulation claim, the plaintiff argues that Travis effected a series of transactions in Weatherford, a security registered on a national exchange, and that this series created actual active trading in the security. Plaintiff asserts that the “purpose” element can be inferred from the circumstances of Travis’ conduct. See In the matter of Halsey Stuart & Co., Inc., 30 S.E.C. 106, 123-24 (1949).

Plaintiff relies on a portion of S.E.C. Release No. 34-3056, October 27, 1941, 11 F.R. 10967 (17 C.F.R. § 241.3056), for his contention that Travis acted with the intent and purpose of manipulating the market in Weatherford stock. The release states, in part:

On the one hand, let us suppose that a broker, believing a stock to be under-priced, enters into a buying program which, in view of the condition of the market, he knows will have the result of raising the price. From time to time he disposes of part of his purchases, ... to customers attracted either by the rising price or the increased activity, at the levels which his buying has thus created
[T]he broker will have effected a series of purchases creating active trading and raising the price of the security, and it will be difficult to avoid the inference that his transactions were affected for the illegal purpose of inducing others to buy.
The fact that the broker may have believed bona fide that the stock at higher levels would still be a good buy for his customers is immaterial.
... the relevance of the sales is not that they are an indispensible element of the offense, but that they are of great evidentiary weight in determining the purpose with which the buying was undertaken.

Plaintiff maintains that the undisputed facts show that the defendant, by recommending the purchase of Weatherford stock felt it was underpriced; that Travis bought the stock for his own account and then purchased shares for his customers between September 29 and November 12, 1980; that Travis sold his own shares at the same time he was buying shares for his customers. Plaintiff stresses the fact that there was no lapse between the time Travis sold his own shares of Weatherford and the time he bought shares for his customers.

Plaintiff argues that because purchases executed by Travis accounted for 38% of the volume in Weatherford trading between September 29 and November 12, 1980, Travis knew that such extensive purchases would be bound to cause changes in the market price of the stock. Plaintiff points out that both the plaintiff’s and defendant’s expert witnesses stated that a one hundred share order could alter the price of a stock. See Seman Deposition Vol. II, at 316, Frankhauser Deposition, at 14.

Plaintiff maintains that section 9(a)(2) was designed to prevent the situation that occurred in this case. “Section 9(a)(2) was aimed at preventing an individual from dominating the market in a stock for the purpose of conducting a one-sided market at an artificial level for its benefit and to the detriment of the investing public.” Crane Company v. Westinghouse Air Brake Company, 419 F.2d 787, 794 (2d Cir.1969). Travis had a pecuniary interest in the price of Weatherford stock and profited from his personal holdings in the stock. Defendant Lehman Brothers had an investment banking relationship with Weatherford and at least one officer of Lehman Brothers was on the Board of Directors of Weatherford. Plaintiff contends that these facts prove that the purpose of Lehman Brothers, by and through its employee Travis, was to recommend and induce the purchase of Weatherford Stock, thus establishing all the elements necessary to prove a violation of section 9(a)(2).

Defendant argues that summary judgment should be granted in its favor because there is no evidence to support the plaintiff’s claim of market manipulation in Weatherford stock. Defendant asserts that all the evidence, including that of both the parties’ expert witnesses, shows that the plaintiff’s purchase of Weatherford stock were made in a normally functionally, efficient auction market. There is no evidence, the defendant maintains, that Travis’ customers bought Weatherford stock at a false price or that Travis’ trading affected the price of the stock.

Defendant argues that the plaintiff cannot prove that the purchases he complains of, on November 25, December 9, and 23, 1980, were made “at a price which was affected by such [manipulation] act or transaction.” Section 9(e), 15 U.S.C. § 78i(e). Defendant asserts that there is no evidence that the defendant’s conduct affected the price of Weatherford stock on or after November 25, 1980. See Shull v. Dain, Kalman & Quail, Inc., 561 F.2d 152, 159 (8th Cir.1977), cert. denied, 434 U.S. 1086, 98 S.Ct. 1281, 55 L.Ed.2d 792 (1978). Defendant contends that the term “affected price” in the section 9(e) does not mean the normal minor effect that any legitimate trading may have on the market price, but rather it means that the plaintiff must “either have entered a false market or paid a false price to enter a genuine market.” See Rosenberg v. Hano, 121 F.2d 818, 821 (3d Cir.1941). Defendant asserts that the plaintiff’s own expert testified that there was no reason to believe that any of Travis’ customers entered false market or paid a false price when they purchased Weatherford stock. See Seaman Deposition, Vol. II, at 272-87. Defendant argues that the plaintiff has failed to produce any evidence that any transactions which were recommended by Travis ever caused an artificial change in the price of Weatherford or created a false price for the stock.

Defendant also maintains that the plaintiff has failed to present evidence from which to infer that Travis acted with the purpose of manipulating the market in Weatherford stock, and thus has failed to prove an element necessary to state a cause of action under section 9(a)(2). There is no violation of this section, the defendant contends, unless the purpose of the transaction at issue was to stimulate an artificial demand for shares with a consequent rise in price from which the trader can profit. Defendant asserts that the “purpose” requirement must be interpreted in light of the objective of section 9(a)(2) which is to eliminate devices “used to persuade the public that activity in a security is a reflection of genuine demand instead of a mirage.” Stock Exchange Practices, Report of the Commission on Banking and Currency, S.Rep. No. 1455, 73d Cong.2d Sess. 54 (1934). Defendant maintains that a person’s knowledge that acquiring or disposing of a large holding in a security will affect the market price does not make his action in doing so unlawful. See H.R.Rep. No. 1383, 73d Cong., 2d Sess. 20 (1934); Crane, 419 F.2d at 794.

Defendant argues that there is no evidence that Travis purchased shares of Weatherford for his own account or recommended the stock to his customer with the purpose of profiting from an artificial price rise rather than a price determined by the normally operating market. Defendant points out that Travis’ recommendations of the stock were consistent with the recommendations which had been made by the defendant’s research department since 1978. Defendant argues that Weather-ford’s price movement during the period of the alleged manipulation paralleled that of comparable stocks in the industry, as did its subsequent decline in price in 1981.

Defendant maintains that Travis’ trading in Weatherford for his own account could have had no effect on the price the plaintiff paid for Weatherford on or after November 25, 1980, and thus could not constitute market manipulation of the stock. Travis’ trades for his personal account occurred in September and October, two months after the plaintiff asserts that the manipulation began. Although the plaintiff alleges that the manipulation continued through December 23, 1980, the defendant argues that because Travis personally held no position in Weatherford after November 12, 1980, he could not have profited from the plaintiff’s purchases on November 25, December 9 and 23, 1980.

The court may grant a motion for summary judgment only if the record demonstrates beyond doubt that there is no genuine issue as to any material fact and that' the movant is entitled to judgment as a matter of law. Rule 56(c), Fed.R.Civ.P.; Bingham, Ltd. v. United States, 724 F.2d 921, 924 (11th Cir.1984). The court is satisfied that no questions of material fact exist in this action. Viewing the evidence and all factual inferences in the light most favorable to the plaintiff, the court finds that the defendant is entitled to summary judgment on the plaintiffs market manipulation claims.

For the plaintiff to succeed on the market manipulation claims the court would have to find that Travis’ trading activity in Weatherford, including his activity after November 12, 1980, when his trades accounted for approximately 2% of the total trading volume in the stock, constituted “a series of transactions in [a] security ... creating actual or apparent active trading in [the] security, or raising or depressing the price of [the] security, for the purpose of inducing the purchase or sale of such security by others.” See section 9(a)(2). The court finds that the evidence presented fails to support these contentions.

The court finds that because Travis had no holdings in Weatherford after November 12, 1980, and his trading in the stock for his customers was greatly reduced after this date, there is no evidence that would support a finding that Travis created an artificial rise in price of the stock or a false market in the stock as of November 25, 1980. Nor is there evidence to support the plaintiff’s contention that Travis intended to profit from the alleged artificial price paid by the plaintiff for the stock. Travis had sold all his Weatherford stock as of November 12, and thus could not profit from any purchase by Ray of the stock on November 25 or later.

Section 9(a)(2) does not condemn extensive buying of a security or buying which raises the price of a security such as Travis may have engaged in from September through early November. A specific purpose to manipulate a security is required to establish a violation of the section. See Crane, 419 F.2d at 794 (2d Cir. 1969).

Plaintiff has failed to produce any evidence which would support a finding that Travis had a specific purpose to manipulate the market in Weatherford stock. “The central purpose of section 9(a) is not to prohibit market transactions which may raise or lower the price of securities, but to keep an open and free market where the natural forces of supply and demand determine a security's price.” Trane Co. v. O’Connor Securities, 561 F.Supp. 301, 304 (S.D.N.Y.1983). It is undisputed that Travis held no Weatherford stock for his own account after November 12 and that his purchases for his customer were in lesser amounts after that date. There is no evidence, therefore which would support a finding that Travis’ activities interfered with the natural forces of supply and demand in determining the price of or market for Weatherford stock on or after November 25, 1980. Defendant’s expert testified that there are none of the hallmarks of manipulative activity, (e.g. wash sales, painting.the tape through a series of transactions for a syndicate account, inducing specialists’ support for the stock) in the transactions in this case nor any evidence that the market for the stock was not functioning normally. See Frankhauser Deposition, at 20-27, 93; Frankhauser Affidavit at U 8, 9. Plaintiff’s expert witness also testified that the “primary periods” that he found “suggestive of Stuart Travis having definite impact [on Weatherford trading] would be the October 13th to 15th period and the October 20th to 23rd period.” Se-man Deposition, Vol. II, at 184. Plaintiff’s expert also testified, however, that he would not say that the trading activity in Weatherford by Travis during September and October was responsible for price of Weatherford stock on or after November 25, 1980. Id. at 231. He further testified that he could not attribute the rise or decline in the price of Weatherford to any single factor or to any group of factors, but that the substantial drop in price by Weatherford that began at the end of November 1980, was the result of market factors generally in the oil and oil service companies. Id. at 231-32, 284.

The court finds that the plaintiff has failed to produce evidence to meet the requirements of section 9(a)(2). Ray has not shown that Travis acted to create actual or apparent trading in Weatherford, raise or depress the price of the stock for the purpose of inducing purchases or sales of the stock by others, or that the price Ray paid for Weatherford stock purchased in late November and December 1980 was affected by Travis’ activities. Plaintiff has also failed to show that Travis acted with the motive arid willfulness required to make out a claim under section 9(e). The court will grant summary judgment for the defendant on the market manipulation claims.

Accordingly, the defendant’s motion for summary judgment on counts five, six, and seven of the second amended complaint is GRANTED. Defendant’s motion to strike is GRANTED. Plaintiff’s motion to strike is DENIED.


source: Caselaw Access Project

author: GASCH, District Judge.

license: Public Domain

text:
    Ahmed GHANEM, Diana Ghanem, Plaintiffs, v. Edwin J. KAY, D.P.M., Defendant.
    Civ. A. No. 84-1439.
    United States District Court, District of Columbia.
    Oct. 26, 1984.
    Joseph H. Koonz, Jr., Carolyn McKenney, Roger C. Johnson, and Mark J. Brice, Washington, D.C., for plaintiffs.
    Gary W. Brown, Washington, D.C., for defendant.
   MEMORANDUM-ORDER

GASCH, District Judge.

I. BACKGROUND

This is a malpractice action brought by plaintiff Ahmed Ghanem, a District of Columbia resident, against a podiatrist who treated him for callouses on his left foot, Dr. Edwin J. Kay (a Maryland resident). Mr. Ghanem’s complaint alleges that he consulted Dr. Kay in May, 1982 and was told that non-invasive surgery would be necessary. According to the complaint, Dr. Kay performed invasive surgery on both of plaintiff’s feet without his consent causing “a severe infection in plaintiff’s left foot, joint damage in plaintiff’s right foot, and surgical fractures to the fifth metatarsal heads of both of plaintiff’s feet.” Plaintiff asserts that Dr. Kay’s actions constitute performance of surgery without informed consent, negligent performance of surgery, and negligent management of infection and is seeking $500,000. Mr. Ghanem’s wife, Diana Ghanem, is seeking an additional $100,000 for loss of consortium.

Dr. Kay has filed a motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). He maintains that since his office is in Maryland and plaintiff was treated in Maryland, the District of Columbia long-arm statute is not satisfied.

II. DISCUSSION

The facts controlling this motion are not disputed. As mentioned above, Dr. Kay’s office is in Maryland and plaintiff received all treatment there. Dr. Kay is licensed to practice podiatry both in Maryland and the District of Columbia. According to his affidavit, however, he has not practiced in the District since 1947. He has advertised and listed his phone number in the District of Columbia Yellow Pages. A medical report submitted by Dr. Kay indicates that Mr. Ghanem was referred to Dr. Kay by a friend and did not consult Dr. Kay as a result of any solicitation efforts directed at District residents.

The burden of establishing the basis for the exercise of jurisdiction is on the plaintiffs. See, e.g., Hutton v. Piepgras, 451 F.Supp. 205, 207 (S.D.N.Y.1978). The first requirement for the Court to have personal jurisdiction over Dr. Kay in this action is that the District of Columbia long-arm statute be satisfied. See D.C.Code 13-423 (1981). Plaintiffs argue that Dr. Kay’s actions constituted “transacting any business” within the meaning of section 13-423(a)(1) and therefore that the statute is satisfied. As plaintiffs correctly point out, recent decisions by the District of Columbia Court of Appeals establish that section 13-423(a)(1) “covers any transaction of business in the District of Columbia that can be reached jurisdictionally without offending the due process clause.” Mouzavires v. Baxter, 434 A.2d 988, 993 (D.C.1981), cert. denied, 455 U.S. 1006, 102 S.Ct. 1643, 71 L.Ed.2d 875 (1982). Thus, rather than engaging in separate inquiries as to whether statutory and constitutional requirements are satisfied by virtue of Dr. Kay’s being licensed and advertising in the District, the two inquiries merge into one question: whether the defendant’s activities are such that jurisdiction would violate the due process clause. See, e.g., World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 290, 100 S.Ct. 559, 563, 62 L.Ed.2d 490 (1980); Museum v. F. Eberstadt & Co., 440 F.Supp. 30, 31 (D.D.C.1977) (“[o]ur inquiry need not be bifurcated [where] the constitutional and statutory provisions are coextensive ____”). Thus, the sole issue is whether defendant’s activities constitute the minimum contacts that must exist between a nonresident defendant and the forum state for maintenance of the suit to “not offend traditional notions of fair play and substantial justice.” International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945).

Application of the International Shoe test has centered on consideration of whether “defendant’s conduct and connection with the forum state are such that he should reasonably anticipate being hauled into court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at 297, 100 S.Ct. at 567. A defendant is deemed to be in this position where there is “some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state____” Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958) (emphasis supplied).

As counsel for defendant has noted, there is a great deal of authority supporting the conclusion that solicitation alone is not sufficient to constitute purposeful availment. See, e.g., Frene v. Louisville Cement Co., 134 F.2d 511, 515 (D.C.Cir. 1943); Landell v. Northern Pac. Ry. Co., 98 F.Supp. 479, 482 (D.D.C.1951). Thus the motion before the Court turns largely on whether the fact that Dr. Kay is licensed in the District of Columbia is sufficient to constitute the purposeful availment discussed in Hanson v. Denckla even though he has not practiced in the District of Columbia in thirty-seven years.

There is little case law addressing the issue. Although there are numerous cases where courts dismissing actions against nonresident physicians have noted as one possible factor that defendants were not licensed in the jurisdiction in question, this is not dispositive of whether dismissal is appropriate if the defendant is licensed in the jurisdiction. In resolving this question, the Court finds the reasoning contained in a recent Pennsylvania decision addressing virtually identical facts to be persuasive. In Lebkuecher v. Loquasto, 255 Pa.Super. 608, 389 A.2d 143, 145 (1978), the Court held that “it is the actual practice of a profession ... and not the possession of the right to practice that brings a person within the jurisdiction of a ... court.” A nonresident physician who arranges to be licensed in the District would not by this act alone reasonably anticipate being required to defend a suit brought in the District of Columbia. Of course, where a nonresident physician is not only licensed in a jurisdiction but carries on significant activities within that jurisdiction, the due process requirement of minimum contacts between a defendant and a forum state is satisfied.

III. CONCLUSION

Because plaintiffs have failed to meet their burden of demonstrating that jurisdiction over the defendant would be proper, this action is dismissed pursuant to Federal Rule of Civil Procedure 12(b)(2).

SO ORDERED.

      . Plaintiffs have offered nothing to contradict this representation and have not disputed its accuracy.

      . Dr. Kay initially swore in an affidavit attached to his motion to dismiss that he did not advertise in the Yellow Pages. However, after plaintiffs attached copies of Kay’s ads to their opposition, Dr. Kay conceded that, in fact, he did advertise in this fashion.

      . Section 13-423(a)(l) provides that: “A District of Columbia court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person’s ... transacting any business in the District of Columbia.”

      . See, e.g., Cook v. G.D. Searle & Co., 475 F.Supp. 1166 (S.D.Iowa 1979); McGee v. Riekhof, 442 F.Supp. 1276 (D.Mont.1978).

      . The Lebkuecher decision involved a physician with offices in New Jersey who was licensed to practice in both Pennsylvania and New Jersey and was listed in Pennsylvania telephone directories. As in the instant case, there was no indication that the physician aggressively sought patients in the forum state or that the plaintiff had sought the defendant’s services in response to defendant’s listing in the forum state's phone book.

      . Although it might be argued that the holding of Lebkuecher is not applicable to the instant case because the District of Columbia long-arm statute has been given such a broad interpretation, this Court holds that on the facts of the instant case (i.e., where the physician has not aggressively sought patients in the forum and the plaintiff did not consult defendant as a result of forum activities by the defendant), possession of a license (and a listing in the forum jurisdiction’s phone book) without practicing in the forum is not sufficient to meet the due process requirements that limit jurisdiction under all long-arm statutes.


author: McCURN, District Judge.

text:
    ONONDAGA LANDFILL SYSTEMS, INC., Joseph R. Tripoli and Mary E. Tripoli, Plaintiffs, v. Henry G. WILLIAMS, Individually, and as Commissioner of the New York State Department of Environmental Conservation, and Richard J. Brickwedde, Individually, and as Regional Attorney for the New York State Department of Environmental Conservation, Defendants.
    No. 84-CV-1637.
    United States District Court, N.D. New York.
    Jan. 29, 1985.

      Obold Burstein & McGowan (Alan S. Burstein, Robert Á. Barrer, Syracuse, N.Y., of counsel), for plaintiffs.
    Robert Abrams, Atty. Gen., Environmental Protection Bureau of State of New York (Douglas L. Ward, Asst. Atty. Gen., Albany, N.Y., of counsel), for defendants.
   MEMORANDUM-DECISION AND ORDER

McCURN, District Judge.

Presently before the court is defendants’ motion to dismiss the complaint and plaintiffs’ motion for summary judgment. For the reasons discussed below, the court grants dismissal and denies summary judgment.

BACKGROUND

Plaintiffs Onondaga Landfill Systems, Inc. (OLSI), Joseph R. Tripoli, and Mary E. Tripoli are the owners and operators of a sanitary landfill in Onondaga, New York. They purchased the landfill from a previous owner and began operations in 1977. In December, 1978, the New York State Department of Environmental Conservation (DEC) held a public hearing on OLSI’s permit applications to operate and expand the landfill. The Administrative Law Judge found that OLSI’s operations did not satisfy the requirements of 6 N.Y.C.R.R. § 360.8 and expressed particular concern that the landfill posed a threat to the groundwater. By order dated August 31, 1979, the Commissioner of the DEC denied OLSI’s permit applications and ordered the landfill closed. The Commissioner found that the landfill site was “fundamentally unsuited” for a sanitary landfill and the operation was not “reasonably capable of ... full compliance with 6 N.Y.C.R.R. Part 360.” On May 27,1981, the Appellate Division of the New York State Supreme Court, Fourth Department, affirmed the Commissioner’s decision. Onondaga Landfill Systems, Inc. v. Flacke, 81 A.D.2d 1024, 440 N.Y.S.2d 135 (4th Dep’t 1981). The New York Court of Appeals subsequently denied OLSI permission to appeal.

In July, 1981, the DEC brought an action in New York State Supreme Court to enforce the Commissioner’s August, 1979, order. On July 26, 1982, Supreme Court Judge John Balio ordered the plaintiffs’ landfill closed on or before October 31, 1985. Until that time, plaintiffs are permitted to operate the facility. The State court has retained jurisdiction over the landfill and has appointed a receiver to oversee the landfill’s operation and closure.

Judge Balio’s order provides in pertinent part:

OEDEEED, that the receiver shall have the authority and responsibility to supervise defendant’s compliance with 6 NYCEE Part 360 for interim landfill operations and shall have the further authority subject to approval of the Court, to employ an engineer to render expert assistance on environmental issues and advise the receiver on policy matters, particularly with respect to the development, submission, and implementation of a closure plan; and it is further
OEDEEED, that the defendant OLSI and its President, JOSEPH TEIPOLI, shall continue to own, possess, and operate subject landfill, provided however, that said defendant, its officers and employ- ■ ees shall abide by all supervisory directives of the receiver concerning operation in compliance with 6 NYCEE Part 360 and such other powers and directives hereinafter set forth; and it is further OEDEEED, that the Commissioner and his employees, aside from routine field inspections, shall communicate directly with the receiver and/or his designee, concerning compliance with environmental regulations; and it is further ... OEDEEED, that the receiver shall report not less infrequently than monthly to the Court on the general status of landfill operations, closure plan preparation, closure, and receivership activities; ____

In July, 1984, the DEC began inspecting plaintiffs’ landfill on a “twice daily” basis pursuant to New York Environmental Conservation Law (ECL) § 3-0301(2)(g) and 6 N.Y.C.E.E. § 360.1(j). Plaintiffs claim that the DEC’s inspections constituted permanent monitoring resulting in a violation of their constitutional rights. According to plaintiffs, the DEC’s inspector arrived daily in the morning, left for lunch, and returned in the afternoon. Prior to July, 1984, the DEC inspected the landfill for approximately one hour, once or twice a month. Plaintiffs contend that this is the normal rate of inspection at other area landfills.

On November 5, 1984, plaintiff Joseph Tripoli ordered the DEC’s inspector to leave the landfill and not return. The DEC applied to the New York State Supreme Court for a search warrant but later withdrew its application. The parties subsequently stipulated to once-a-week inspections.

Plaintiffs filed their federal complaint against the DEC’s Commissioner and Regional Attorney on November 26, 1984. The complaint alleges that ECL § 3-0301(2)(g) and 6 N.Y.C.R.R. § 360.1(j) are unconstitutional on their face and as applied. Plaintiffs seek a declaratory judgment and damages.

On January 3, 1985, the state defendants and the Town of Onondaga, plaintiff-intervenors in the state action, applied to New York State Supreme Court Judge Balio for an order to show cause enjoining plaintiffs from interfering with the DEC’s inspections of the landfill and awarding civil penalties against plaintiffs for violating 6 N.Y. C.R.R. § 360.1(j). The order is returnable in the State Supreme Court on February 1, 1985. As a result, the validity of the statute and regulation at issue in the present action is now also pending before the state court.

In this federal action, the state defendants have moved for dismissal. Plaintiffs have cross moved for partial summary judgment on the facial constitutionality of both ECL § 3-0301(2)(g) and 6 N.Y.C.R.R. § 360.1(j). For convenience, the court will hereafter refer to both the statute and regulation in question as “the statute”, but will mean both.

ABSTENTION

The state defendants argue that this court should dismiss plaintiffs’ federal action on grounds of abstention. Recent United States Supreme Court and Second Circuit decisions reveal that abstention is not favored and is the exception rather than the rule. See e.g. Hawaii Housing Authority v. Midkiff, 467 U.S. 229, 104 S.Ct. 2321, 81 L.Ed.2d 186 (1984); Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976); Giardina v. Fontana, 733 F.2d 1047 (1984). In Colorado River Water Conservation District the Supreme Court stated:

Abstention from the exercise of federal jurisdiction is the exception, not the rule. ‘The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the state court would clearly serve an important countervailing interest.’ County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89, 79 S.Ct. 1060, 1063, 3 L.Ed.2d 1163, 1166 (1959). ‘[I]t was never a doctrine of equity that a federal court should exercise its judicial discretion to dismiss a suit merely because a State court could entertain it’. Alabama Pub. Serv. Comm’n. v. Southern R. Co., 341 U.S. 341, 361, 71 S.Ct. 762, 774, 95 L.Ed. 1002, 1015 (1951(Frankfurter, J., concurring in result).

Colorado River Water Conservation District, 424 U.S. at 813-14, 96 S.Ct. at 1244.

The Supreme Court has identified three categories of cases where abstention is appropriate:

Roughly, the three categories of abstention are: (1) avoiding a federal constitutional issue by seeking a state determination of state law; (2) deferring to state resolution of difficult state law questions that involve important public policy or where federal review would be disruptive of state regulation or administration; and (3) declining to restrain state criminal proceedings, collection of state taxes and the like. See Colorado River Water Conservation District v. United States, 424 U.S. at 814-16, 96 S.Ct. at 1244-45.

Giardina, 733 F.2d at 1052 n. 1. Federal courts in the Eastern District of New York and the District of Maryland have noted that:

[T]he various abstention doctrines are more distinct in theory than in actual practice. They overlap and mix together to form the basis for abstention in particular cases. This is especially true in cases challenging in federal court state attempts to implement local land use policy.

Northeast Mines, Inc. v. Town of Smithtown, 584 F.Supp. 112, 113 (E.D.N.Y.1984), quoting Kent Island Joint Venture v. Smith, 452 F.Supp. 455, 461 (D.Md.1978). In the court’s opinion this action is the exceptional case where abstention is appropriate. In fact, all three categories of abstention are applicable.

PULLMAN ABSTENTION

The first category of abstention was established in Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941). The Supreme Court has explained that:

[F]ederal courts should abstain from decision when difficult and unsettled questions of state law must be resolved before a substantial federal constitutional question can be decided. By abstaining in such cases, federal courts will avoid both unnecessary adjudication of federal questions and ‘needless friction with state policies____’

Hawaii Housing Authority, 467 U.S. at -, 104 S.Ct. at 2327, interpreting Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 500, 61 S.Ct. 643, 645, 85 L.Ed. 971 (1941). Pullman abstention is appropriate where: (1) a state statute is unclear or an issue of state law is uncertain, (2) resolution of the federal issue depends upon the interpretation to be given to the state law, and (3) the state law is susceptible to an interpretation that would avoid or modify the federal constitutional issue. Winters v. Lavine, 574 F.2d 46, 69 (2d Cir.1978); Northeast Mines, Inc., 584 F.Supp. at 115.

The Supreme Court has cautioned that Pullman abstention “is limited to uncertain questions of state law”. Hawaii Housing Authority, 467 U.S. -, 104 S.Ct. at 2327. Accordingly, abstention was improper in Hawaii Housing Authority because the challenged state statute was unambiguous on its face and did not present an uncertain question of state law.

The statute being challenged in the present case is not clear on its face and has never been interpreted by the state courts. In fact, the only case that the court has been able to find which has considered the statute in question is People v. Hedges, 112 Misc.2d 632, 447 N.Y.S.2d 1007 (Dist.Ct. Suffolk Co.1982). In Hedges the Suffolk County District Court granted the defendant’s motion to suppress evidence in a criminal action. The evidence was seized in a warrantless search pursuant to various provisions of the ECL including section 3-0301(2)(g). The court held that the evidence was tainted because the provisions authorizing the search were unconstitutional. Plaintiffs concede that the precedential value of Hedges is unclear, and Hedges has never been reviewed by the higher state courts. Moreover, the statute in the present action, unlike the statute in Hawaii Housing Authority, is limited by other environmental regulations. See 6 N.Y.C.R.R. § 360.1(b) (sites subject to inspection are “solid waste management facilities”); 6 N.Y.C.R.R. § 360.8 (site management and closure specifications to be reviewed). Even if the language of the statute in question appears overly broad, the state courts may interpret the statute narrowly to avoid constitutional difficulties. See Huffman v. Pursue, Ltd., 420 U.S. 592, 612, 95 S.Ct. 1200, 1212, 43 L.Ed.2d 482 reh. denied, 421 U.S. 971, 95 S.Ct. 1969, 44 L.Ed.2d 463 (1975); United States ex rel. Terraciano v. Montanye, 493 F.2d 682, 685 (2d Cir.), cert. denied sub nom Terraciano v. Smith, 419 U.S. 875, 95 S.Ct. 137, 42 L.Ed.2d 114 (1974). Accordingly, the court finds that the statute in question is not flagrantly unconstitutional on its . face. Resolution of the plaintiffs’ federal claims will therefore depend on the interpretation given the statute. Policy dictates that the state should be allowed the first opportunity to interpret its own law.

BURFORD ABSTENTION

Moreover, the statute in the present action is part of a complex and pervasive state regulatory system involving an area of traditional and important state concern. This consideration goes to the second category where abstention is appropriate known as Burford abstention. See Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943). “The ‘Buford’ abstention doctrine ‘permits a federal court, in the exercise of its discretion, to relinquish jurisdiction where necessary to avoid needless conflict with the administration by a state of its own affairs’.” Northeast Mines, Inc., 584 F.Supp. at 114, quoting Surowitz v. New York City Employees’ Retirement System, 376 F.Supp. 369, 376 (S.D.N.Y.1974).

In Louisiana Power and Light Company v. City of Thibodaux, 360 U.S. 25, 79 S.Ct. 1070, 3 L.Ed.2d 1058 (1959), the district court applied Burford abstention where the scope of a previously uninterpreted state law concerning a traditional area of state interest, eminent domain, was challenged. The Supreme Court held that the district court properly stayed the proceedings pending the institution of a declaratory action and subsequent decision by the highest state court. The court stated:

[Wjhere the issue touched upon the relationship of City to State, City of Chicago v. Fielderest Dairies, Inc., 316 U.S. 168, 62 S.Ct. 986, 86 L.Ed. 1355, or involved the scope of a previously uninterpreted state statute which, if applicable, was of questionable constitutionality, Leiter Minerals, Inc. v. United States, 352 U.S. 220, 229, 77 S.Ct. 287, 292, 1 L.Ed.2d 267, we have required District Courts, and not merely sanctioned an exercise of their discretionary power, to stay their proceedings pending the submission of the state law question to state determination.

Id. at 28, 79 S.Ct. at 1072.

Explaining Burford abstention in Colorado River Water Conservation District, the Supreme Court also stated:

Abstention is also appropriate where there have been presented difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar. Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25, 79 S.Ct. 1070, 3 L.Ed.2d 1058 (1959), for example, involved such a question. In particular, the concern there was with the scope of the eminent domain power of municipalities under state law. See also Kaiser Steel Corp. v. W.S. Ranch Co., 391 U.S. 593, 88 S.Ct. 1753, 20 L.Ed.2d 835 (1968); Hawks v. Hamill, 288 U.S. 52, 53 S.Ct. 240, 77 L.Ed. 610 (1933). In some cases, however, the state question itself need not be determinative of state policy. It is enough that exercise of federal review of the question in a case and in similar cases would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.

Colorado River Water Conservation District, 424 U.S. at 814-15, 96 S.Ct. at 1244-45.

The present case involves the constitutionality of an uninterpreted state statute which is part of the state’s extensive regulatory scheme to monitor and control landfill operations, garbage and hazardous waste disposal, and pollution in general. This is an area of strong public interest which has traditionally been left to the states. Moreover, the state in its sovereign capacity is involved here as a party, and the state court’s decision overseeing the closure of plaintiffs’ landfill is implicated. The concern for friction between the federal courts and the state is particularly strong under these circumstances. Considerations of federalism and comity dictate that this court abstain to avoid interfering in the state’s complex environmental regulatory system.

YOUNGER ABSTENTION

The third type of abstention has grown out of Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). The Younger doctrine, which prohibits the federal courts from enjoining a pending state criminal action or issuing a declaratory judgment that will interfere with the state action, has been extended to civil cases in Huffman v. Pursue, Ltd., 420 U.S. 592, 95 S.Ct. 1200, 43 L.Ed.2d 482, reh. denied, 421 U.S. 971, 95 S.Ct. 1969, 44 L.Ed.2d 463 (1975); Trainor v. Hernandez, 431 U.S. 434, 97 S.Ct. 1911, 52 L.Ed.2d 486 (1977); and their progeny. In Huffman the lessee of a theater, which had been ordered closed under a state nuisance statute because obscene films had been shown at the theater, brought an action for declaratory and injunctive relief challenging the statute. The Supreme Court held that the district court should not have entertained an action to enjoin the state court judgment prior to exhaustion of state appellate remedies unless early intervention was justified because the state proceeding was conducted with an intent to harass or in bad faith or the challenged statute was flagrantly and patently unconstitutional. In Trainor the state initiated proceedings in state court to regain fraudulently obtained welfare benefits and attached the defendants’ credit union account. The defendants commenced a federal action challenging the attachment statute’s constitutionality. The Supreme Court held that considerations of equity, comity, and federalism under the Younger doctrine required the federal court to dismiss the federal action. More recently, the Supreme Court held that a federal court should have abstained from interfering with the state’s ongoing disciplinary proceedings against an attorney. Middlesex County Ethics Committee v. Garden State Bar Ass’n, 457 U.S. 423, 102 S.Ct. 2515, 73 L.Ed.2d 116 (1982).

Explaining the policy behind Younger abstention, the Supreme Court has stated:

Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), and its progeny espouse a strong federal policy against federal court interference with pending state judicial proceedings absent extraordinary circumstances. The policies underlying Younger abstention have been frequently reiterated by this Court. The notion of “comity” includes “a proper respect for state functions, a recognition of the fact that the entire country is made up of a Union of separate state governments, and a continuance of the belief that the National Government will fare best if the States and their institutions are left free to perform their separate functions in their separate ways.” Id., at 44, 91 S.Ct., at 750. Minimal respect for the state processes, of course, precludes any presumption that the state courts will not safeguard federal constitutional rights.

Middlesex County Ethics Committee, 457 U.S. at 432, 102 S.Ct. at 2521. The Supreme Court further stated that “(t)he policies underlying Younger are fully applicable to noncriminal judicial proceedings when important state interests are involved.” Id. See also Huffman, 420 U.S. at 604, 95 S.Ct. at 1208.

. Construing Trainor and Huffman narrowly, the court should dismiss the federal action where (1) a prior state action is pending, (2) the state as sovereign is a party to the state action, (3) the state action involves important state policy, and (4) the state action is quasi-criminal in nature or involves abatement of a nuisance.

All of these elements are present here. In the state action Judge Balio has retained jurisdiction over the closure of plaintiffs’ landfill. Plaintiffs could have raised their constitutional claims before Judge Balio at any time, and he will undoubtedly consider them on the return date of defendants’ order to show cause. The state court’s closure order also specifically provides for monitoring the landfill under the challenged statute. A declaratory judgment that the statute is unconstitutional would significantly impact the state court’s order. As noted above, the state as sovereign commenced the state action, and the state’s regulatory scheme is being challenged. Indeed, an adverse ruling from this court would disrupt the state’s entire regulation of solid waste disposal. Moreover, plaintiffs were, and still are, operating their landfill without the proper permits, and they have been found in violation of numerous regulations. The state has chosen not to pursue criminal action which is available under the statute in question. Instead, the state has brought a civil closure action in state court. Judge Balio’s closure order also provides close monitoring and control of the landfill operation to prevent further violations and danger to the public. The state action is thus quasi-criminal in nature and involves the abatement of a nuisance. Because the court finds no evidence that the state action was brought to harass or in bad faith and the challenged statute is not flagrantly unconstitutional, Younger abstention is appropriate in the present action.

WISE JUDICIAL ADMINISTRATION

Finally, the Supreme Court has recognized that in a few, exceptional cases “considerations of ‘(w)ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation’ ” also permit the federal court to decline jurisdiction in favor of concurrent state proceedings. Colorado River Water Conservation District, 424 U.S. at 817-18, 96 S.Ct. at 1246; Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 936, 74 L.Ed.2d 765 (1983). See also Giardina, 733 F.2d at 1052-53; Northeast Mines, Inc., 584 F.Supp. at 115-16. The circumstances permitting dismissal for wise judicial administration are “considerably more limited than the circumstances appropriate for abstention”. Colorado River Water Conservation District, 424 U.S. at 818, 96 S.Ct. at 1246. The Supreme Court has refused to prescribe a rigid rule in this area. Id. at 818-19, 96 S.Ct. at 1246-47. Instead, the Court has suggested several relevant factors to be considered. These include:

(1) assumption by either court of jurisdiction over a res or property, (2) convenience to the parties of one forum over the other, (3) avoidance of piecemeal litigation, (4) the order in which jurisdiction was obtained by the concurrent forums and (5) whether federal or state law provides the rule of decision on the merits.

Giardina, 733 F.2d at 1053, discussing Moses H. Cone Memorial Hospital, 460 U.S. 19-26, 103 S.Ct. at 939-42. See also Colorado River Water Conservation District, 424 U.S. at 818, 96 S.Ct. at 1246. These factors are not determinative. “The weight to be given to any one factor may vary greatly from case to case, depending on the particular setting of the case.” Moses H. Cone Memorial Hospital, 460 U.S. 16, 103 S.Ct. at 937.

Applying the above factors to the present case also indicates that the state court should decide plaintiffs’ claims. Although plaintiffs are challenging the present statute’s constitutionality, to decide plaintiffs’ equal protection claim the court must evaluate how the state applied the statute in monitoring plaintiffs’ landfill. The state court has retained jurisdiction over the operation and closure of the landfill, the res, since 1982. More importantly, the state action was not only commenced first, but it has also been pending in state Supreme Court for two and one half years. In fact, if the state administrative proceedings are also considered, the regulation of plaintiffs’ landfill has been pending before the state since 1978, more than six years. Since 1982 State Supreme Court Judge Balio has developed considerable expertise in this complicated litigation which the federal court lacks. Because of its expertise, the state court is uniquely able to decide plaintiffs’ present claims. Under these circumstances, plaintiffs should not waste limited judicial resources and inconvenience defendants by forcing them to litigate in two forums. The third factor also weighs against a federal forum. As noted above, even though federal constitutional law obviously applies to plaintiffs’ present claims, the statute’s constitutionality will depend on how the state, in the first instance, interprets its law. Therefore, the interests of wise judicial administration, as well as the constitutional and federal/state concerns of abstention, require the court to decline jurisdiction in the present case.

The court recognizes its responsibility to decide the cases before it and does not decline jurisdiction over plaintiffs’ claims lightly. The court does so only after carefully weighing the concerns of equity, comity, federalism, and wise judicial administration against plaintiffs’ interests and the knowledge that the state court can fully and fairly litigate plaintiffs’ federal claims. For the reasons discussed, the court finds that the present action is the exceptional case where abstention is proper. Because Younger abstention is most appropriate and elements of Burford abstention are present, the court feels constrained to dismiss the present action rather than staying proceedings pending state litigation.

Accordingly, it is hereby

(1) Defendants’ motion to dismiss the complaint is granted.

(2) Plaintiffs’ motion for partial summary judgment is denied as moot.

SO ORDERED.

      . N.Y.Envtl.Conserv. Law § 3-0301(2)(g) provides:
      2. To further assist in carrying out the policy of this state as provided in section 1-0101 of the chapter the department, by and through the commissioner, shall be authorized to:
      g. Enter and inspect any property or premises for the purpose of investigating either actual or suspected sources of pollution or contamination or for the purpose of ascertaining compliance or noncompliance with any law, rule or regulation which may be promulgated pursuant to this chapter. Any information relating to secret processes or methods of manufacture shall be kept confidential.

      . 6 N.Y.C.R.R. 360.1(j) provides:
      Enforcement. Any person who violates any of the provisions of this Part or of any permit issued pursuant hereto, or any order issued by the department’s commissioner, shall be liable for the civil, administrative, and criminal penalties given in article 71, title 27 of the ECL. Such a person shall also be subject to any penalties, sanctions or orders resulting from any other applicable provision of article 71 of the ECL. The commissioner or his/her representative is authorized to enter and inspect any property or premises for the purpose of ascertaining compliance or noncompliance with this Part.

      . Because the court finds that abstention is proper, the court need not consider defendants' other grounds for dismissal.


author: FREEDMAN, District Judge.

text:
    John SCARPA, Plaintiff, v. William MURPHY, John De Varennes, Marcia Bettega (Town of Lee Selectmen), Edward Finnegan (Chief of Lee Police), William Tierney, Christopher Holmes (Lee Police Officers), and Town of Lee, Massachusetts, Defendants.
    Civ. A. No. 82-0115-F.
    United States District Court, D. Massachusetts.
    Jan. 30, 1985.

      Robert Christo, West Springfield, Mass., for plaintiffs.
    J. Norman O’Connor, David B. Mongue, Donovan & O’Connor, Adams, Mass., for defendants.
   MEMORANDUM

FREEDMAN, District Judge.

Introduction

This case presents the difficult question of when a town and its supervisory officials can be held liable under 42 U.S.C. § 1983 for an alleged negligent failure to train and supervise their underlings.

Plaintiff’s three-count complaint is simple and concise. Plaintiff alleges that on or about September 12, 1981, defendants Tierney and Holmes, police officers of the Town of Lee, Massachusetts, used excessive force while arresting plaintiff and denied him medical treatment, thereby causing plaintiff permanent hearing loss. Plaintiff further alleges that defendant Finnegan, Chief of the Lee police, negligently failed to train and supervise those police officers reporting to him, and that this negligence was a proximate cause of plaintiff’s injuries. In addition, plaintiff charges defendants Murphy, DeVarennes and Bettega, Town of Lee Selectmen, with negligence in training and supervising Chief Finnegan. Plaintiff maintains that this negligence also proximately caused his injuries. Although plaintiff names the Town of Lee in the complaint’s caption, plaintiff makes no specific allegations against the Town itself.

Defendants Town, Chief and Selectmen have moved to dismiss the complaint for failure to state a claim upon which relief may be granted. Fed.R.Civ.P. 12(b)(6). Having carefully considered the arguments of all the parties and having exhaustively reviewed the controlling and relevant precedent, the Court has concluded that defendants’ motion must be granted.

A motion to dismiss for failure to state a claim should not be granted unless it appears from the complaint that plaintiff can prove no set of facts entitling him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). With this standard in mind, the Court examines. the liability of each defendant.

Town of Lee

It is axiomatic that a municipality cannot be held liable under § 1983 unless the unlawful conduct involved occurred as a result of a policy or custom of the municipality. Monell v. Department of Social Services of the City of New York, 436 U.S. 658, 690, 98 S.Ct. 2018, 2035, 56 L.Ed.2d 611 (1978). Furthermore, since “the touchstone of the § 1983 action against a government body is an allegation that official policy is responsible for a deprivation of rights protected by the Constitution,” id. (emphasis added), a plaintiff must plead policy in his § 1983 complaint. Here, plaintiff has made no allegations against the Town of Lee, much less pleaded that some policy or custom of the Town of Lee caused the deprivation of plaintiffs constitutional rights. Accordingly, plaintiff’s complaint against the Town of Lee must be dismissed.

However, in view of the federal courts’ liberal policy of allowing amendments to the pleadings, Fed.R.Civ.P. 15(a), the Court deems it useful to indicate what the characteristics of an actionable custom or policy of a negligent failure to train are.

It is possible to state a cause of action under § 1983 for the negligent deprivation of constitutional rights. Parratt v. Taylor, 451 U.S. 527, 534-35, 101 S.Ct. 1908, 1912, 68 L.Ed.2d 420 (1981); Fernandez v. Chardon, 681 F.2d 42, 55 (1st Cir. 1982), aff'd, 462 U.S. 650, 103 S.Ct. 2611, 77 L.Ed.2d 74 (1983). Thus, the negligent omissions of upper-level municipal officials may create an actionable official policy. Turpin v. Mailet, 619 F.2d 196, 200 (2d Cir.), cert. denied, 449 U.S. 1016, 101 S.Ct. 577, 66 L.Ed.2d 475 (1980). However, in order for a municipality — or anyone, for that matter — to be liable under § 1983, there must also be a causal connection between the conduct complained of and the plaintiff’s constitutional deprivation. Paratt v. Taylor, 451 U.S. at 535, 101 S.Ct. at 1912; Rizzo v. Goode, 423 U.S. 362, 370-71, 96 S.Ct. 598, 603-04, 46 L.Ed.2d 561 (1976).

Analysis of this causality requirement often leads to a discussion of what standard of conduct the defendant is to be held to. See Fernandez v. Chardon, 681 F.2d at 55-56. Although technically a municipality could be held liable for a simple negligent failure to train that resulted in the deprivation of a plaintiff’s constitutional rights, the lower federal courts have generally permitted liability only where the municipality’s failure to train reached the level of “gross negligence” or “deliberate indifference” to the plaintiff’s constitutional rights. Tuttle v. City of Oklahoma City, 728 F.2d 456, 460 (10th Cir.1984); Avery v. County of Burke, 660 F.2d 111, 114 (4th Cir.1981); Turpin v. Mailet, 619 F.2d at 201; Owens v. Haas, 601 F.2d 1242, 1246 (2d Cir.), cert. denied, 444 U.S. 980, 100 S.Ct. 483, 62 L.Ed.2d 407 (1979); Leite v. City of Providence, 463 F.Supp. 585, 590-91 (D.R.I.1978). This Court now formally adopts that standard. Furthermore, the Court shall require that plaintiff allege gross negligence in order to withstand a defendant municipality’s 12(b)(6) motion. Id. at 591.

In the case at bar, plaintiff has alleged only a single incident of police brutality. There is disagreement among the lower federal courts as to whether it is possible to infer a custom or policy from one unconstitutional occurrence. Compare Avery v. County of Burke, 660 F.2d at 114 (“single incident ... normally insufficient to establish supervisory inaction upon which § 1983 liability may be based”) and Landrigan v. City of Warwick, 628 F.2d 736, 747 (1st Cir.1980) (municipality’s failure to investigate isolated charge of perjury insufficient to establish its liability) and Thompson v. Sanborn, 568 F.Supp. 385, 393 (D.N.H. 1983) (“policy simply cannot be inferred from a single incident of illegality”) with Tuttle v. City of Oklahoma City, 728 F.2d at 461 (single incident rule inapplicable where act so plainly and grossly negligent that it shows lack of training) and Turpin v. Mailet, 619 F.2d at 202 (one can infer policy if single incident egregious enough) and Owens v. Haas, 601 F.2d at 1247 (circumstances of single beating suggest grossly negligent failure to train).

The Court has concluded that the determination of whether a single incident of alleged unconstitutional conduct actually implies the existence of a municipal policy depends on the facts of the case: if the one occurrence is sufficiently brutal and outrageous, one can reasonably infer that the municipality’s failure to train was grossly negligent or deliberately indifferent to the constitutional rights of citizens. Here, plaintiff’s complaint is not at all specific about the details of defendants’ alleged use of excessive force. It is therefore impossible to tell whether plaintiff’s claim against the City would fail also because of application of the single incident rule.

To reiterate, plaintiff’s complaint against the Town of Lee must be dismissed for failure to state a claim because plaintiff has failed to allege any policy of the Town of Lee leading to the alleged deprivation of his constitutional rights.

Chief of Police and Board of Selectmen

It is not clear from plaintiff’s complaint whether plaintiff is suing Chief Finnegan and the members of the Board of Selectmen in their official capacities, their individual capacities, or both. This distinction is important and the Court will assume for purposes of analysis that plaintiff has sued these defendants in both capacities.

Official Capacity

A suit against a person in his official capacity is usually “only another way of pleading an action against an entity of which an officer is an agent____” Monell v. Department of Social Services, 436 U.S. at 690 n. 55, 98 S.Ct. at 2035 n. 55; Wolf-Lillie v. Sonquist, 699 F.2d 864, 870 (7th Cir.1983). The logical fall-out from this concept is significant. • For example, it has been held that since municipalities are not entitled to a qualified immunity defense, Owen v. City of Independence, 445 U.S. 622, 657, 100 S.Ct. 1398, 1418, 63 L.Ed.2d 673 (1980), then neither are individuals sued in their official capacities, Brandon v. Holt, — U.S. -, -, 105 S.Ct. 873, 879, 83 L.Ed.2d 878 (1985); McKay v. Hammoch, 730 F.2d 1367, 1374 (10th Cir.1984), even though those persons would be entitled to assert a good faith defense if they were sued in their individual capacities, see Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982). Furthermore, if a plaintiff recovers judgment against a person in his official capacity, it is the entity for which he is agent that is liable. Brandon v. Holt, — U.S. at -, 105 S.Ct. at 878.

If an official capacity suit is really only a suit against the municipality and if it is the municipality that must pay if plaintiff obtains judgment, then it makes sense to say that a person sued in his official capacity can be found liable only if the municipality could also be liable. Wolf-Lillie v. Sonquist, 699 F.2d at 870. That means plaintiff must allege and prove a policy that deprived him of his constitutional rights and, in the case of an alleged policy failure to train, that that failure was grossly negligent or amounted to deliberate indifference to citizens’ constitutional rights. See, supra pp. 34-35.

Here, Chief Finnegan and the members of the Board of Selectmen are agents of the Town of Lee. However, plaintiff has alleged no policy of the Town of Lee that caused him to be subjected to excessive force at the hands of the Town’s police officers. Nor has plaintiff alleged that the failure to train rose to the level of gross negligence or deliberate indifference. Plaintiff’s complaint against Chief Finnegan and the members of the Board of Selectmen in their official capacities must therefore be dismissed for failure to state a claim.

Individual Capacity

Section 1983 imposes liability on anyone who “subjects, or causes to be subjected” any person to a deprivation of federal constitutional or statutory rights. 42 U.S.C. § 1983. One of the key points in any § 1983 suit is therefore whether there is a sufficient causal connection between the act complained of and the constitutional deprivation. See, e.g., Paratt v. Taylor, 451 U.S. at 535, 101 S.Ct. at 1912; Rizzo v. Goode, 423 U.S. at 370-71, 96 S.Ct. at 603-04; Wolf-Lillie v. Sonquist, 699 F.2d at 869; Dunn v. State of Tennessee, 697 F.2d 121, 128 (6th Cir.1982), cert. denied, 460 U.S. 1086, 103 S.Ct. 1778, 76 L.Ed.2d 349 (1983); Fernandez v. Chardon, 681 F.2d at 55; Bowen v. Watkins, 669 F.2d 979, 988 (5th Cir.1982); Black v. Stephens, 662 F.2d 181, 189 (3d Cir.1981), cert. denied, 455 U.S. 1008, 102 S.Ct. 1646, 71 L.Ed.2d 876 (1982); McClelland v. Facteau, 610 F.2d 693, 695 (10th Cir.1979); Leite v. City of Providence, 463 F.Supp. at 590.

The question is: what is a sufficient causal connection? This is really another way of asking what standard of conduct courts are going to require of supervisory officials as individuals. In other words, how negligent do supervisory officials have to be before the law will say their conduct “caused” a plaintiffs constitutional deprivation?

It appears that a “[m]ere failure to supervise is not a basis for liability under § 1983____” Fernandez v. Chardon, 681 F.2d at 56. Something more is required. The First Circuit has given some guidance on this question, but cf. Gero v. Henault, 740 F.2d 78, 85-86 (1st Cir.1984), cert. denied, — U.S. -, 105 S.Ct. 965, 83 L.Ed.2d 970 (1985), and appears prepared to hold supervisory personnel liable where they can be deemed to have been on notice of pervasive constitutional violations or if their failure to supervise “is so severe as to amount to gross negligence or deliberate indifference to constitutional violations____” Fernandez v. Chardon, 681 F.2d at 56; Layne v. Vinzant, 657 F.2d 468, 471 (1st Cir.1981). This view is in accord with the opinions of other federal courts. See Bowen v. Watkins, 669 F.2d at 988 (liability if failure to supervise amounts to gross negligence or deliberate indifference); McClelland v. Facteau, 610 F.2d at 697 (liability if supervisor “knew or should have known” of the unconstitutional conduct, but failed to act to prevent future harm); Sims v. Adams, 537 F.2d 829, 831-32 (5th Cir.1976) (liability for failure to control a police officer’s known propensity for use of excessive force).

It is clear from plaintiff's complaint that he is relying on a mere negligent failure to supervise on the parts of Chief Finnegan and the Board of Selectmen members. The Chief allegedly negligently failed to supervise the defendant police officers and the Board of Selectmen allegedly negligently failed to supervise the Chief. Such allegations cannot survive defendants’ motion to dismiss because defendants cannot, and as a matter of law, be liable for a mere negligent failure to supervise. Plaintiff’s complaint against the Chief and the Board of Selectmen in their individual capacities must be dismissed for failure to state a claim upon which relief may be granted.

Summary

Because plaintiff has failed to allege a policy of the Town of Lee leading to the alleged deprivation of his constitutional rights, the Court must grant defendants’ motion to dismiss plaintiff’s complaint against the Town of Lee and against the Chief of Police and the Board of Selectmen in their official capacities. Similarly, plaintiff’s failure to allege the required causal connection between defendants’ conduct as individuals and plaintiff’s constitutional deprivation mandates that plaintiff’s suit against defendants Chief of Police and Board of Selectmen members in their individual capacities also be dismissed.

An appropriate Order shall issue.


author: VAN SICKLE, District Judge.

text:
    Keith D. WINTER, Plaintiff, v. The UNITED STATES of America; Tenneco Oil Company; Virginia S. Najjar; Paulette Williamson; the Unknown Heirs, Devisees, Legatees, and Creditors of David P. Winter, a/k/a David Winter, Deceased; the Unknown Heirs, Devisees, Legatees and Creditors of Ulyssa K. Winter, Deceased; and All Other Persons Unknown Claiming any Estate or Interest in or Lien or Encumbrance Upon the Property Described in the Complaint, Defendants.
    Civ. No. A4-82-76.
    United States District Court, D. North Dakota, Northwestern Division.
    Feb. 28, 1985.
    James D. Geyer, Mackoff, Kellogg, Kirby & Kloster, P.C., Dickinson, N.D., for plaintiff.
    Jerome C. Kettleson, Asst. U.S. Atty., Bismarck, N.D., for the U.S.
    Gary Wolberg, Fleck, Mather, Strutz and Mayer, Ltd., Bismarck, N.D., for Tenneco Oil Co.
   MEMORANDUM AND ORDER

VAN SICKLE, District Judge.

In this action the plaintiff, Keith D. Winter, seeks to quiet title to 50% of the oil, gas, and other minerals (excluding coal) under 320 acres of land in McKenzie County, North Dakota. Keith Winter is the successor in interést to David Winter.

The case is presented on stipulated facts and evidence The action arises under Title 28 U.S.C. § 2409a.

In resolution of this case, the chronology is important and the facts are organized accordingly.

1914 The United States issued its patent Covering Twp. 149 N, Range 103 W, Section 14, NE'A

1920 The United States issued its patent Covering Twp. 149 N, Range 103 W, Section 17, N'ANW'A, W'ANE'A

1940 Both parcels were conveyed to McKenzie County by tax deed, (lost for non-payment of taxes).

1945 McKenzie County conveyed to David Winter Twp. 149 N, Range 103 W, Section 17, N'ANW'A, WVaNE'A

The County Deed also contained the language:

Subject to the provisions of Chapter 36, laws of North Dakota 1941, reserving to the County fifty percent of all oil, gas, or minerals that may be found underlying the land.

Feb. 8 1947 David Winter received a judgment quieting title against McKenzie County and prior owners as to the lands in Section 17. This judgment established in Winter a fee simple title as against McKenzie County.

Feb. 21 1947 McKenzie County conveyed to David Winter Twp. 149 N, Range 103 W, Section 14, NE'A

The County Deed contained this language:

Subject to the provisions of Chapter 136, Laws of North Dakota 1941, reserving to the County fifty percent of all oil and gas, or minerals that may be found underlying the land.

1948 In preparation for a land exchange with Winter, the United States made an appraisal of the mineral interests in the land, and put them at zero value. (Docket No. 40, Exhibits 10 and 11.)

1949 In the course of a land exchange between the United States and David Winter, under a National Grazing Lands Program, David Winter gave:

Warranty Deed:

Date: September 18, 1949

From: David and Ulyssa Winter

To: United States of America

Description:

McKenzie County, North Dakota

Township 149 N, Range 103 W,

Section 14, NE'A

Section 17, N'ANW'A, W'ANE'A

Reservations and Exceptions:

Except fifty percent of all oil, gas, or minerals that may be found underlying said lands, reserved by McKenzie County, North Dakota, in its deed to David Winter dated December 5, 1945, recorded in Book 50 of Deeds at page 448 of the records of McKenzie County as to the above described lands in said Section 17, and by its deed to David Winter dated February 5, 1947, recorded in Book 53 of Deeds at page 409 in said County records as to the above described lands in section 14.

1951 In a series of cases the Supreme Court of North Dakota held that since the dominant statutes required that upon sale of lands taken for non-payment of taxes, the County must convey “all right, title and interest of the County therein.” A prior statute requiring a reservation of 50% of the minerals in the County was void. The holdings clearly voided the reservations in the County deeds of 1945 and 1947.

The leading cases were:

Kopplin v. Burleigh County, 77 N.D. 942, 47 N.W.2d 137 (1951)

Kershaw v. Burleigh County, 11 N.D. 932, 47 N.W.2d 132 (1951)

State v. California Co., 79 N.D. 430, 56 N.W.2d 762 (1953)

April 28 1977 Counsel for Tenneco Oil Company, lessee of 50% of the oil and gas under:

Township 149, Range 103 W,

Section 17, W'ANE'A, EVaNW'A

demanded that the United States lease the remaining minerals to it.

June 27 1977 The United States first claimed more than 50% of the minerals under the land acquired by the Winter deeds (Docket No. 39, Exhibit 7).

Jan. 1982 Keith D. Winter, personal representative of the estate of David Winter, received the following:

Quit Claim Deed:

Date: January 5, 1982

From: County of McKenzie, North Dakota

To: Keith D. Winter, personal representative of the Estate of David Winter

Description:

All its right, title, interest, claim or demand in and to all oil, gas, and other minerals in and under the following tracts ....

Township 149 N, Range 103 W,

Section 14, NE'A

Section 17, N'ANW'A, NVzNE'A

The deed then recites further that it is given to convey those interests previously reserved to McKenzie County in its deeds covering the above lands.

“Said mineral reservations having been declared void by the North Dakota Supreme Court subsequent to said Deeds.”

June 1982 Winter began this action to clear title to his claimed 50% of the minerals.

The basic issue is as to the effect of the reservation in the deed given from David and Ulyssa Winter to the United States of America in 1949.

Before that basic issue can be reached, we must consider whether the statute of limitations found at 28 U.S.C. § 2409a(f) defeats this action. The statute provides:

Any civil action under this section shall be barred unless it is commenced within 12 years of the date upon which it accrued. Such action shall be deemed to have accrued on the date the plaintiff or his predecessor in interest knew or should have known of the claim of the United States.

Briefly, the United States relies upon United States v. McKenzie County, North Dakota, 187 F.Supp. 470 (D.N.D.1960), which was a case decided on a substantially like, but not identical deed, and involving substantially like, but not identical facts. United States v. McKenzie County was affirmed by the Eighth Circuit in 1961 in Murray v. United States, 291 F.2d 161, and the United States claims that the date of that decision is the date upon which David Winter knew or should have known of the claim of the United States. If so, since this action was not commenced until June 1982, it is time barred. But this Court cannot accede to the proposition that a layman has constructive notice of a rule of law evolved out of a judicial decision based on a specific set of facts, and between other litigants. This Court has found no case where the doctrine of constructive notice, i.e., “knew or should have known” (a test based on reasonableness (Amoco Production Co. v. United States, 619 F.2d 1383 (10th Cir.1960)), was held as a matter of law to impute knowledge of a rule of law discernable from a judicial decision in an unrelated case, to a layman. In every case this Court has reviewed there has been something more, some evidence that the layman received a signal, or was in some manner required to keep himself alerted. The closest thing to the claim of the government that a decision in an unrelated case triggers an obligation to learn more, was the ease of McCann v. Coughlin, 698 F.2d 112 (2nd Cir.1983). This was a civil rights case involving a claim of abuse of an inmate’s right to be heard at a disciplinary hearing. In that case the court said:

Officials are not required to predict future developments ... in the law (citing cases) and “State officials, however, may be charged with constructive knowledge of the established law at that time” citing Wood v. Strickland, 420 U.S. 308 at 322, 95 S.Ct. 992 at 1001, 43 L.Ed.2d 214.

In Strickland administrators were held to the standard of:

... should have known of settled, indisputable law applicable to the daily supervision of children.

I find from these cases that the correct rule is that a layman whose work requires that he continuously apply a given field or area of the law is required to keep informed of established law in that area of law. Therefore, since the Winters’ had no reason to concern themselves on a daily basis with the scope of an interest conveyed by a county in a tax deed sale, this Court cannot say they “should have known” of the North Dakota Supreme Court decision in Kopplin, supra, and related eases.

So I conclude that this action is not time barred under Title 28 U.S.C. § 2409a(f).

Turning back to the basic issue of the effect of the reservation or exception in the deeds from Winter to the United States: On its facts, this case parallels United States v. McKenzie County, North Dakota, 187 F.Supp. 470 (D.N.D.1960), Murray v. United States, 291 F.2d 161, in at least these elements:

1. In both cases the landowner acquired the land from McKenzie County by County Deed before the line of eases beginning with Kopplin, supra, wás decided.
2. The two County Deeds in Winter (this case), and one County Deed in McKenzie County, as to the mineral reservations, are identical as to form (see Abstracts, Docket No. 39, Exhibits 1 and 2); and see McKenzie County, supra, at 472.
3. The two deeds from the landowner to the United States, as to mineral reservation references, are substantially the same except for the use of the phrase “reserved by McKenzie County” in the Winter deeds, ahd the phrase “received by McKenzie County” in the McKenzie County deed. The formats of the deeds are identical in that in both cases the relevant language appears in that portion of the deed which recites “subject to the following reservations and exceptions” (Docket No. 39, Exhibit 3, McKenzie County, supra, at 472).
4. In both cases the landowners traded the land to the United States pursuant to the grasslands program of the Bankhead-Jones Farm Tenant Act, Title 7 U.S.C. § 1010, et seq.

Plaintiff argues that Judge Register, at the time of his writing of McKenzie County, supra, deplored the fact that there was no North Dakota decision on the point (McKenzie County, supra, at 478), and that this vacuum was filled by the decision in Stetson v. Nelson, 118 N.W.2d 685 (N.D. 1962). In Stetson, supra, Kistler attempted to convey by warranty deed to Iverson “excepting and reserving to L.G. Marcus, one of the parties of the first part,” %th of the minerals. Marcus was not a party of the first part. He was a stranger to the instrument. Held: The reservation to the stranger was void, and the excepted and reserved interest remained in the grantor.

But Stetson, supra, is not determinative of our problem because in Stetson the language of the reservation reflected a clear commitment to transfer an interest to Marcus. In that situation the sensible thing to do is to say that the defective transfer failed to transfer anything. Then if Marcus had a valid claim, he could assert it against the committor, instead of against a stranger to the commitment. But in McKenzie County and Winter, whatever the transferor intended, he did not intend to grant the 50% of minerals to McKenzie County.

From the history of events, these things stand out:

1. As to the land in Section 17, Winter quieted title against McKenzie County. Thus anticipating the North Dakota Supreme Court holding in Kopplin, supra, post, and thus demonstrating a consciousness of the importance of the mineral interests.
2. As to all the land traded by Winter, the United States made no claim of the 50% mineral interest until it was jarred into activity by the efforts of Tenneco to get a lease.
3. Neither counsel suggests, and the abstracts as extended, do not show that Winter, at any time after the land trade, exercised a claim of ownership as to the 50% mineral interest until Tenneco made its claim, and although the minerals lay in an active area for oil and gas development, i.e., about ten miles south of Charbonneau, North Dakota.
4. As to the language of the deed under the section on reservations and exceptions, the precise language is “except 50% of all oil ..., reserved by McKenzie County ... in its deed ... recorded____”

Thus the same problem arises as in the case of McKenzie County, supra. That is, did Winter recite this exception to limit his warranty, or to retain the interest?

There are at least four North Dakota statutes which have some bearing on. this problem:

1. N.D.C.C. 47-09-11 provides that grants must be interpreted in like manner with contracts in general.
2. N.D.C.C. 9-07-03 provides that a contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting.
3. N.D.C.C. 9-07-12 provides that a contract may be explained by reference to the circumstances under which it was made and the matter to which it relates.
4. N.D.C.C. 9-07-14 provides that if the contract terms are ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed, at the time of making it, that the promisee understood.

So under the four statutes above recited, we must seek to find the intent of the parties at the time the Winter deed was executed; and since the precise meaning is uncertain, we must seek to learn the interpretation which Winter believed the United States understood.

The North Dakota Supreme Court has recognized that the rules of N.D.C.C. 9-07 (the contract must be interpreted to give effect to the intent of the parties) are applicable to real property conveyances. See Malloy v. Boettcher, 334 N.W.2d 8 (N.D. 1983), where the North Dakota Supreme Court relies upon “the rule that a deed must be construed to carry out a grantor’s intent if at all possible.”

A comparison of the conveyance to the United States in the McKenzie County and the Winter cases suggests that the same law office drew both instruments. The conveyance to the United States was made by Winter in 1949, that by Murray (the McKenzie County case) was in 1951. Both Winter and Murray had quieted title on at least some of the tax title land before conveying to the United States. In the McKenzie County case, Murray had sought to hold out some minerals but the United States, having appraised the minerals at zero value, refused to accept the title so limited. In the Winter case there is no history of an attempt to hold out minerals from the conveyance unless it is discoverable in the language of the deed. In both cases the United States had appraised the minerals under the land it was getting at zero value.

After a careful consideration of all of the “circumstances under which it was made and the matter to which it relates,” and the discernible “sense in which the promisor understood,” I conclude that the deed by Winter was intended by him to convey all of his interest of any nature in the land, and that the “exception” was intended as a limitation on the scope of his obligation undef the warranty contained in the last paragraph of the deed.

Winter also argues that regardless of the initial effect of the conveyance, the United States, having exercised no control over the 50% mineral interest until it was alerted to its claim by the lawyer for Tenneco, is now estopped to claim the interest under the doctrine of laches.

“The general principle is, that laches is not imputable to the government; ... not in the notion of extraordinary prerogatives, but upon a great public policy.” U.S. v. Kirkpatrick and others, 22 U.S. (Wheaton 9) 720, 735, 6 L.Ed. 199 (1824).

In Guaranty Trust Company v. United States, 304 U.S. 126, 58 S.Ct. 785, 82 L.Ed. 1224 (1938), Justice Stone said:

“The rule quod nullum tempus oecurrit regi — that the sovereign is exempt from the consequences of laches, and from the operation of statutes of limitations — appears to be a vestigial survival of the prerogative of the Crown, (cases cited) But whether or not that alone counts for its origin, the source of its continuing vitality where the royal privilege no longer exists is to be found in the public policy now underlying the rule even though it may in the beginning have had a different policy basis. Compare Maine, Ancient Law (10th Ed., 1930) 32 et seq. ‘The true reason is to be found in the great public policy of preserving the public rights, revenues and property from injury and loss, by the negligence of public officers. And though this is sometimes called a prerogative right, it is in fact nothing more than a reservation, or exception, and equally applicable to all governments.’ (cases cited).”

In United States v. California, 332 U.S. 19, 40, 67 S.Ct. 1658, 1669, 91 L.Ed. 1889 (1947), the Supreme Court held:

“The government (the United States) which holds its interests here as elsewhere in trust for all the people, is not to be deprived of those interests by the ordinary court rules designed particularly for private disputes over individually owned pieces of property; and officers who have no authority at all to dispose of Government property cannot by their conduct cause the Government to lose its valuable rights by their acquiescence, laches, or failure to act.”

So the doctrine of laches is of no help to the plaintiffs in this case.

From the facts and the law above recited:

IT IS ORDERED:
1. As to the claim of the Winters against the United States, for title to 100% of all oil, gas, gravel, coal, clay, uranium, and other minerals in and under:
Township 149 North, Range 103 West Section 14, NE1/)
Section 17, NANW1/», Wy2NEV4 is quieted in the United States of America, and the plaintiffs are forever debarred and enjoined from further asserting the same.
2. Except as to those claims, if any, of the remaining defendants which are derived from and under the United States of America, title to 100% of all oil, gas, gravel, coal, clay, uranium, and other minerals in and under the above described land, title is quieted in the United States of America, and those defendants are forever debarred and enjoined from further asserting the same.

Counsel for the United States of America shall prepare and serve copies of proposed judgment within ten days.


author: NORDBERG, District Judge.

text:
    Charles PETERSON and Alma Peterson, Plaintiffs, v. UNITED STATES STEEL CORPORATION and Mid-Continental Coke Company, Defendants.
    No. 84 C 7528.
    United States District Court, N.D. Illinois, E.D.
    March 19, 1985.
    Kevin J. Conway, Cooney & Stenn, Chicago, 111., for plaintiffs.
    George W. Gessler, Donna Kaner Socol, Gessler, Wexler, Flynn, Laswell & Fleischmann, Ltd., Chicago, 111., for defendant U.S. Steel.
    McKenna, Storer, Rowe, White & Far-rug, Chicago, 111., for defendants.
   MEMORANDUM OPINION AND ORDER

NORDBERG, District Judge.

This action, originally brought in the circuit court of Cook County, was removed to this court, with jurisdiction premised on diversity of citizenship. Plaintiffs Charles and Alma Peterson are residents of Indiana. Defendant United States Steel is a Delaware corporation with its principal place of business in Pennsylvania. Defendant Mid-Continental Coke Company is a Delaware corporation with its principal place of business in Ohio. Plaintiffs seek recovery for negligence due to personal injuries sustained by Mr. Peterson on premises owned by defendant United States Steel in Gary, Indiana, while he was working as a truck driver for defendant Mid-Continental Coke Company. Defendants now move to transfer this action to the United States District Court for the Northern District of Indiana, Hammond Division, pursuant to 28 U.S.C. § 1404(a). In accordance with the following opinion, the defendants’ motion to transfer is denied.

A district court may transfer any civil action to any other district or division where it might have been brought for the convenience of the parties and witnesses, and in the interests of justice. 28 U.S.C. § 1404(a). The initial determination in considering a motion to transfer is whether venue is proper in the transferee district. In the instant case, venue is clearly proper in both districts pursuant to 28 U.S.C. § 1391(a) and (c).

In addition to proper venue, a defendant moving to transfer an action has the burden of proving that the considerations embodied in § 1404(a) weigh heavily in favor of transfer. Bodine’s Inc. v. Sunny-O Inc., 494 F.Supp. 1279 (N.D.Ill.1980); Cunningham v. Cunningham, 477 F.Supp. 632 (N.D.Ill.1979). Accordingly, plaintiffs’ choice of forum should rarely be disturbed unless the balance is strongly in favor of defendant. Hess v. Gray, 85 F.R.D. 15, 24 (N.D.Ill.1979); Lemke v. St. Margaret Hospital, 552 F.Supp. 833, 839 (N.D.Ill.1982). Courts sometimes accord plaintiffs choice of venue less deference where plaintiff is not a . resident of the judicial district in which the action is brought, as is the case here. Nevertheless, the weight which the court accords plaintiff’s choice of forum should not be confused with defendant’s substantial burden of showing that litigation in the proposed transferee district would eliminate inconvenience and better serve the interest of justice. Applying the law to the facts of the present case, the court finds that defendants have not sustained their burden.

I. Convenience of the Parties and Witnesses

Defendant Mid-Continental is based in Willowbrook, Illinois, and defendant United States Steel has offices and personnel in Chicago, Illinois. Moreover, United States Steel’s Gary works plant, at which the events pertinent to this action are alleged to have occurred, is only a short distance from Chicago. Given the close proximity of the defendants to this court, it is difficult to find that they would be unduly inconvenienced by the action proceeding in this district.

With respect to the convenience of the witnesses, the court must consider not only the location of potential witnesses, but also the nature of their anticipated testimony and whether they can be compelled to testify. Coats Co., Inc. v. Vulcan Equipment Co., Inc., 459 F.Supp. 654 (N.D.Ill. 1978). The defendants’ argument regarding the inconvenience of bringing occurrence witnesses to Chicago from Gary, Indiana, is counterbalanced by plaintiffs’ showing that plaintiffs’ medical witnesses would, likewise, be inconvenienced by the trip from Chicago to Hammond, Indiana, if a transfer is granted. It is well-established that a change of venue is inappropriate when the effect is merely to shift the inconvenience from the defendant to the plaintiff. Oce-Industrials, Inc. v. Coleman, 487 F.Supp. 548, 553 (N.D.Ill.1980); Blumenthal v. Management Assistance, Inc., 480 F.Supp. 470 (N.D.Ill.1979). Moreover, defendants have not shown that this court’s lack of compulsory process over any potential witnesses would be detrimental to their case. Thus, on balance, the court finds an insufficient showing that the convenience of the parties and witnesses weigh heavily in favor of transfer.

II. Interest of Justice

The final consideration under § 1404(a) is whether a change of venue would serve the interests of justice. All factors which make the trial of a case easy, expeditious, and economical are to be considered. Gulf Oil v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947). In the instant case, no special circumstances, such as the existence of a related action in the transferee district with which this case may be consolidated, are present. Defendants argue that the controlling substantive law in this action is Indiana law and that therefore transfer to the Indiana District Court is warranted. In addressing this argument, the court first notes that federal district courts must often undertake the task of deciding foreign law. Further, familiarity with state law does not weigh heavily in consideration of a motion to transfer since a change of venue under § 1404(a) is to be “but a change of courtrooms.” Van Dusen v. Barrack, 376 U.S. 612, 639, 84 S.Ct. 805, 821, 11 L.Ed.2d 945 (1964).

In essence, the court finds no convincing basis upon which to hold that the interest of justice would be best served by transferring this case. As other courts have noted, § 1404(a) should not be invoked for transfer between courts separated by a short and easily traveled distance since the intent of the statute was to eliminate the real inconvenience which may accrue to parties and witnesses residing a substantial distance from the district where the action is brought. Jenkins v. Wilson Freight Forwarding Co., 104 F.Supp. 422, 425 (D.C.N.Y.1952); Lee v. Ohio Cas. Ins. Co., 445 F.Supp. 189, 192 (D.C.Del.1978).

For the foregoing reasons, defendants’ motion to transfer this action to the United States District Court for the Northern District of Indiana is denied.