author: J. THOMAS GREENE, District Judge.

text:
    Knowlton H. BROWN, dba Knowlton H. Brown Construction Company, Plaintiff, v. WASHOE HOUSING AUTHORITY and United States of America, Defendants.
    Civ. No. C85-647G.
    United States District Court, D. Utah, C.D.
    Dec. 23, 1985.

      Jack Fairclough, Salt Lake City, Utah, for plaintiff.
    LeRoy S. Axland, Scott F. Young, Kathleen B. Barrett, Salt Lake City, Utah, for defendants.
   MEMORANDUM DECISION AND ORDER

J. THOMAS GREENE, District Judge.

This matter came on regularly for hearing on October 30, 1985, on defendant Washoe Housing Authority’s Motion to Quash or in the Alternative Change of Venue and on the United States of America’s Motion to Dismiss. LeRoy S. Axland and Scott F. Young appeared on behalf of defendant Washoe Housing Authority, Kathleen B. Barrett appeared on behalf of defendant United States of America and Jack Fairclough appeared on behalf of plaintiff Knowlton H. Brown Construction Company. The issues were thoroughly briefed by the plaintiff and defendants and the parties presented extensive oral argument, after which the Court took the matter under advisement.

FACTUAL BACKGROUND

This case arises out of a contract for the construction of low-cost housing on the Washoe Indian Tribe’s land in the State of Nevada. The Washoe Tribe of the States of Nevada and California (“Washoe Tribe”) is a federally chartered corporation created by the Indian Reorganization Act of 1934, Ch. 576, 48 Stat. 984 (codified as amended at 25 U.S.C. § 461, et seq.). Defendant Washoe Housing Authority (hereinafter “Washoe”) is a non-profit agency and a political subdivision of the Washoe Tribe created by the Tribal Council to provide low income housing on Washoe Tribal lands. Invitations to bid were developed by Washoe and placed for publication in trade journals in the Western United States during the months of April-July 1979. One such trade journal, Intermountain Contractor, is published in Salt Lake City and is subscribed to by many major contractors in Utah for the purpose of learning about current construction projects and invitations to bid. The Intermountain Contractor published eleven weekly notices which furnished pertinent information on the projects, including solicitation of plans and specifications. Defendant Washoe provided the bid information together with plans and specifications to the Intermountain Contractor, for the obvious purpose of seeking and encouraging bids or contract offers from intermountain construction companies, including those in Utah. Plaintiff Brown subscribed to the Intermountain Contractor in order to keep advised of potential construction projects and bid opportunities, and reviewed the publication at its Brigham City, Utah office. A Brown Construction Company employee read the notice of the Projects and requested of Washoe the pertinent bid forms, plans and specifications, which were sent to plaintiffs Utah office. Brown then submitted its bid on the Projects to Washoe. The July 20, 1979 issue of the Intermountain Contractor gave notice that Brown was the low bidder for the Projects and it was awarded the contract. Based upon that award, defendant Washoe mailed an approved HUD contract to plaintiff Brown’s Utah office for signature, which Knowlton H. Brown signed in Utah and then returned by mail to Washoe. Thereafter, Washoe sent to Brown at its Utah office a copy of the contract signed by both parties and a Notice to Proceed on the contract. Brown contends, and Washoe does not dispute, that prior to and after the award there was communication on several occasions between Washoe and Brown by telephone and through the mails. Brown received all payments in Utah and executed payment bonds required by HUD and Washoe in Utah with a Utah bonding company. Brown completed the contract with inspection and acceptance by Washoe and HUD in May 1980.

PRESENT ACTION

On May 23, 1985, Brown filed a complaint against Washoe and HUD on claims arising out of the contract for the construction of the Projects on Washoe Tribal lands in Nevada. In the first cause of action it is alleged that during the course of construction plaintiff notified Washoe and HUD that breaches of the contract and improper contract administration by Washoe had caused the plaintiff to incur additional costs, work delay and other damages in the amount of $104,830.59, plus interest. In the second cause of action plaintiff seeks to enjoin Washoe from doing anything with the funds it has received from HUD for the Projects which might preclude plaintiff from collecting a judgment. In the third cause of action plaintiff alleges tortious conduct on the part of HUD in exercising its control over the projects and in the handling of plaintiff’s claims, as well as breaches of contract and warranty against HUD, for which plaintiff seeks judgment against the United States in the amount of $104,830.59, plus interest.

I. Personal Jurisdiction

The first issue is whether Washoe’s contacts with the State of Utah as outlined above are sufficient to subject it to personal jurisdiction in this forum. That issue involves an analysis of state statutory law and federal constitutional principles. In diversity actions, as here, the federal court must look to the law of the forum state to determine the issue of personal jurisdiction over the parties. See Yarbrough v. Elmer Bunker & Assoc., 669 F.2d 614 (10th Cir. 1982); Luckett v. Bethlehem Steel Corp., 618 F.2d 1373 (10th Cir.1980); Segil v. Gloria Marshall Management Co., 568 F.Supp. 915 (D.Utah 1983). Once it is determined that the state law subjects a party to the personal jurisdiction of the forum, the court must determine whether the party’s contacts with the state are sufficient to satisfy the due process requirements of the United States Constitution.

A. Utah Long Arm Statute

The Utah Long Arm statute provides in pertinent part:

Any person, notwithstanding section 16-10-102, whether or not a citizen or a resident of this state, who in person or through an agent does any of the following enumerated acts, submits himself, and if an individual, his personal representative, to the jurisdiction of the courts of this state as to any claim arising from:
1 (1) the transaction of any business within this state;
(Emphasis added)

Utah Code Ann. § 78-27-24(1), (3) (Supp. 1983) .

1. In General —Early on, the Utah Court took a fairly restrictive view of the potential reach of the Long Arm Statute over out of state parties. See, e.g., Union Ski Co. v. Union Plastics Corp., 548 P.2d 1257 (Utah 1976); Hill v. Zale Corp., 25 Utah 2d 357, 482 P.2d 332 (1971). Those cases, and others relied upon extensively by Washoe in support of its Motion to Quash, exemplify the Utah Supreme Court’s early hesitance to discard then traditional notions of personal jurisdiction. See Strachan, In Personam Jurisdiction in Utah, 1977 Utah Law Review 235; Mallory Engineering v. Ted R. Brown & Assoc., 618 P.2d 1004, 1006, cert. denied sub nom., Valad Electric Heating Corp. v. Ted R. Brown & Assoc., 449 U.S. 1029, 101 S.Ct. 602, 66 L.Ed.2d 492 (1980). However, more recent pronouncements from that court have followed the national trend in jurisdictional jurisprudence of giving credence to express legislative intent. For example, in Brown v. Carnes Corp., 611 P.2d 378 (Utah 1980), the Utah Supreme Court stated:

In determining whether the claims of the plaintiff arise from the activities of the defendant and thus become cognizable in accordance with 78-27-24, reference to the Legislature’s intent in enacting the Utah Long Arm Statute is illuminating. In declaring the purpose of the act the Legislature explained in 78-27-22:
It is declared, as a matter of legislative determination, that the public interest demands the State provide its citizens with an effective means of redress against nonresident persons who through certain significant minimal contacts with this State, incur obligations to citizens entitled to the State’s protection____
The provisions of this act, to ensure maximum protection to citizens of this state, should be applied so as to assert jurisdiction over nonresident defendants to the fullest extent permitted by the due process clause of Fourteenth Amendment to the United States Constitution.

The legislative mandate is clear. The yrotection afforded by the courts of this state must be ayylied to the fullest extent allowed by due yrocess of law. (Emphasis added)

Id. at 380. Under the aforesaid enunciated policy, a court would find no difficulty in finding the requisite personal jurisdiction under several of the enumerated provisions of the Long Arm Statute. For example, an auto accident involving a non-citizen in this forum could easily fall under the tort category; a company that sends its products into the state but whose product fails or causes injury might be subject to jurisdiction under the breach of warranty category; a non-citizen father might be haled into this forum in a paternity action under the recently enacted sexual intercourse category; a party who contracts to supply goods into the state but breaches that contract might also satisfy the statutory requirements.

2. Transaction of Business —“Transaction of business within this state” is defined in Section 78-27-23(2) of the Utah Code as “[the] activities of a nonresident person, his agents, or representatives in this state which affect persons or businesses within the State of Utah.” The legislative mandate is very broad, and the Utah Supreme Court has given liberal construction to the definition and to the Utah Long Arm Statute in general. See Synergetics v. Marathon Ranching Co., 701 P.2d 1106, 1110 (Utah 1985) for the Court’s most recent discussion of the breadth to be given the Utah Long Arm Statute. Under a liberal construction of the Utah Long Arm Statute, this Court finds that Washoe’s conduct falls within the statute’s meaning and intent. Washoe supplied information to a trade journal that is located in Utah and that services Utah contractors. Washoe supplied plaintiff with bid information, sent plaintiff a HUD-approved contract for plaintiff’s signature and sent plaintiff a copy of the executed contract. Other mail and wire correspondence occurred to and from Washoe, in and out of the State of Utah. Although modern modes of communication obviated the need for Washoe actually to enter this State to transact business, the transaction of business no less occurred despite the absence of Washoe’s physical presence. It is clearly the case that Washoe directed its business activities to residents of this state and that those activities affected persons or businesses within this state sufficient to satisfy the statute.

Since we find that defendant Washoe conducted activities in the State of Utah which affected persons or businesses within the State sufficient to satisfy the state statutory transaction of business requirement, we need not discuss whether the complaint sufficiently pleads the commission of a tort and injury, as an alternative ground for jurisdiction. We turn now to federal due process of law considerations.

B. Due Process Limitations

The next level of inquiry is whether Washoe has sufficient minimum contacts within the limits of the Fourteenth Amendment, to support the exercise of in person-am jurisdiction. The case of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) expressed a flexible standard which superceded the traditional, strictly territorial concept of personal jurisdiction set forth in Pennoyer v. Neff, 95 U.S. (5 Otto) 714, 24 L.Ed. 565 (1877). This standard requires that a defendant, if not present within the forum, have “certain minimum contacts with it such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice,’ ” before the defendant can be subjected to a judgment in personam. International Shoe, 326 U.S. at 316, 66 S.Ct. at 158. In examining the requirements for “fair play and substantial justice,” the Supreme Court has taken into account “the burden on the defendant,” “the forum state’s interest in adjudicating the dispute,” “the plaintiff’s interest in obtaining convenient and effective relief,” “the interstate judicial system’s interest in obtaining the most efficient resolution of controversies,” and the “shared interest of the several states in furthering fundamental substantive social policies.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980), quoted in Burger King Corp. v. Rudzewicz, — U.S. -, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985). The Supreme Court has stressed “fair warning” and foreseeability as important factors in evaluating “minimum contacts” and determining “fair play and substantial justice” in any given circumstance. Thus in Shaffer v. Heitner, 433 U.S. 186, 218, 97 S.Ct. 2569, 2587, 53 L.Ed.2d 683, the Court said that a party should have “fair warning that a particular activity may subject [it] to the jurisdiction of a foreign sovereign.” The fair warning requirement is satisfied where a defendant “purposefully direct[s]” its activities “at residents of a forum, ... and the litigation results from alleged injuries that ‘arise out of or relate to’ those activities....” Burger King Corp. v. Rudzewicz, 105 S.Ct. at 2182 (1985) [citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 104 S.Ct. 1473, 1478, 79 L.Ed.2d 790 (1984) and Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984)]. The Court has consistently held that the foreseeability of causing injury in a foreign state, in itself, is insufficient to satisfy due process requirements, stressing that “the foreseeability that is critical to due process analysis ... is that the defendant’s conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at 297, 100 S.Ct. at 567 (1980). The case of Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958) sheds insight into when a party might reasonably anticipate such litigation:

The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum state. The application of that rule will vary with the quality and nature of the defendant’s activity, but it is essential in each case that there be some act by which the defendant purposely avails itself of the privilege of conducting activities within the foreign state thus invoking the benefit and protections of its laws. (Emphasis added)

Id. at 253, 78 S.Ct. at 1239-40, cited in Burger King Corp., 105 S.Ct. at 2183.

It is clear that the due process clause does not mandate that a party physically enter the forum in order for there to be a valid exercise of personal jurisdiction. The Supreme Court addressed that question in Burger King Corporation:

Although territorial presence frequently will enhance a potential defendant’s affiliation with a state and reinforce that reasonable forseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a state in which business is conducted. So long as a commercial actor’s efforts are “purposefully directed” towards residents of another state, we have consistently rejected the notion that an absence of physical contact can defeat personal jurisdiction there. (105 S.Ct. at 2184.)

In the context of interstate contractual relations and obligations, on several occasions, the Court has “emphasized that parties who ‘reach out beyond one state and create continuing relationships and obligations with citizens of another state’ are subject to regulation and sanctions in the other state for the consequences of their activities.” Id. [quoting Travelers Health Ass’n. v. Virginia, 339 U.S. 643, 647, 70 S.Ct. 927, 929, 94 L.Ed. 1154 (1950) ]. The constitutional propriety of such an exercise of jurisdiction is based upon several grounds. First, a state has a “manifest interest” in giving its residents an “effective means of redress” for injuries inflicted by out-of-state parties. McGee v. International Life Insurance Co., 355 U.S. 220, 223, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957). Second, a party should expect to litigate in the forum where business is performed because “modern transportation and communications have made it much less burdensome for a party sued to defend himself in a state where he engages in economic activity.” Burger King Corp. v. Rudzewicz, 105 S.Ct. at 2183 [quoting McGee, 355 U.S. at 223, 78 S.Ct. at 201]. It usually will not be unfair to subject a party to the burdens of litigating in another forum for disputes relating to his activities there. The third ground is purposefulness. Where a party “purposefully derive[s] benefit” from its interstate activities, “it may well be unfair to allow them to escape having to account in other states for consequences that arise proximately from such activities; the Due Process Clause may not readily be wielded as a territorial shield to avoid interstate obligations that have been voluntarily assumed.” Id. [quoting Kulko v. California Superior Court, 436 U.S. 84, 96, 98 S.Ct. 1690, 1699, 56 L.Ed.2d 132 (1978) ].

Applying the aforesaid principles to the . facts herein, it is apparent that Washoe had fair warning that it could be liable for suit in this forum because it purposely directed activities at residents of this forum which amounted to the transaction of business here. This litigation resulted from alleged injuries which arose out of and relate to those activities. By supplying bid information to the trade journal, which is published in Utah and services Utah and other intermountain contractors, and by entering into a construction contract with a Utah contractor, Washoe reached out beyond the State of Nevada and created a continuing relationship and obligations with citizens of this State. By accepting the bid of a Utah contractor and maintaining mail and telephone correspondence with that contractor, Washoe performed purposeful acts here and it was foreseeable to Washoe that it could be haled into court in this forum in an action arising out of its interstate relationship with the plaintiff. In Fidelity and Casualty Co. v. Philadelphia Resins Corp., 766 F.2d 440 (10th Cir.1985) the defendant’s product made its way into Utah and allegedly caused injury there. The defendant had advertised its product in a trade publication with presumably national circulation. However, the product’s entry into the State of Utah had not been a result of the plaintiff’s seeing and acting upon the advertisement. Rather, the product came into the forum as a result of the actions of an unconnected third party and other fortuitous events over which the defendant had no control. The Tenth Circuit concluded that because the advertisement had not been seen and acted upon by plaintiff in Utah, there was no relationship or connection between the defendant’s conduct and the cause of action. The Court speculated, however, that had such been the case, there would have been a close enough relationship between the advertising that had reached Utah and the alleged injury to confer in personam jurisdiction over the defendant. Id. at 446-47. That circumstance exists herein. The trade journal to which Washoe supplied bid information was seen and acted upon in Utah, and it is that set of circumstances out of which this cause of action arises. Aside from Washoe’s other contacts with the State by means of wire and mail, a relationship between the advertisement and the cause of action exists.

We hold that Washoe’s actions constitute sufficient “minimum contacts” to satisfy due process and that it is fair and reasonable to require the defendant to appear and defend the action in this forum.

II. Venue

Defendant Washoe moves in the alternative that this Court change venue to the Federal District Court of Nevada. A change of venue is discretionary with the Court. Wm. A. Smith Contracting Co. v. Travelers Indemnity Co., 467 F.2d 662, 664 (10th Cir.1972). The moving party has the burden of establishing that the case should be transferred based upon the factors set forth in the venue statute:

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

28 U.S.C. § 1404(a). A change of venue pursuant to the statute is “to prevent the waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience.” National Surety Corp. v. Robert M. Barton Corp., 484 F.Supp. 222, 223-24 (W.D.Okl.1979). However, the policy of the courts is to give substantial deference to a plaintiff in selecting the forum. Therefore, the defendant’s burden is heavy, and unless the circumstances of the case weigh heavily in favor of the transfer, plaintiff’s choice should not be disturbed. Id. at 224.

The circumstances of this case do not weigh heavily in favor of a transfer. Based upon a review of the facts submitted, the Court is convinced that the burden to the defendant, in terms of time, energy and money, in litigating here is equal to or less than the burden the plaintiff would have if required to litigate in Nevada. Although the contract was performed mainly in Nevada, and most of defendant’s witnesses and records may be in Nevada, those facts are insufficient to persuade the Court. Most if not all of plaintiffs’ witnesses reside within this forum and all of plaintiffs’ records are here. Plaintiffs’ bonding company also is Utah based. The balancing of the relevant factors does not strongly favor the defendant, and the plaintiffs’ choice of forum should not be disturbed. We therefore deny Washoe’s Motion for Change of Venue.

III. HUD’s Motion to Dismiss

Defendant United States of America has moved for dismissal as to it for failure to state a claim and for lack of subject matter jurisdiction. The Complaint purports to state a claim against the United States in both tort and contract for HUD’s involvement in the contract and in plaintiff’s attempts to receive payment on its additional claims.

The Contract Claim

In this action, the only express contract in existence was between the plaintiff and Washoe. Although HUD, through its supervision of the use of federal funds by the housing authority, approved the contract, its involvement does not manifest an agreement between HUD and the plaintiff. A representative of HUD signed the contract indicating HUD’s approval, but the contract named neither HUD nor the United States as a party therein. The approval itself did not create a contract, express or implied. See Housing Corporation of America v. United States, 468 F.2d 922, 924-25, 199 Ct.Cl. 705 (1972).

Plaintiff asserts that an implied contract or warranty arose by HUD’s alleged assurances that the matter would be resolved in a timely manner and by HUD’s involvement in approving the contract and the funding. This Court finds that as a matter of law the facts as alleged do not rise to the level of an express or implied-in-fact contract between plaintiff and HUD. No actual agreement was manifested by words or action of both parties and there has not been a sufficient showing of consideration or that the government benefited from the alleged transaction. Those elements must be present before the United States is bound to an implied-in-fact contract. See, e.g., Barnett v. United States, 397 F.Supp. 631, 638 (D.S.C.1975). The Court therefore dismisses the breach of contract claim alleged against the United States.

The Tort Claim

Plaintiff also alleges that the United States was “reckless, careless, negligent, willful and arbitrary” in failing to approve closing documents and failing to approve or disapprove plaintiff’s claims for additional relief despite HUD’s alleged promises that the matter would be timely resolved. The Court has serious doubts as to whether this claim is sufficiently pleaded to satisfy the requirements of the Federal Tort Claims Act. Assuming, however, that plaintiff does have a claim under the Federal Tort Claims Act an essential prerequisite to bringing such a claim in federal district court has not been followed, i.e., before filing suit, a plaintiff must file an administrative claim with the appropriate agency pursuant to 28 U.S.C. § 2675. See Three-M Enterprises, Inc. v. United States, 548 F.2d 293, 294-95 (10th Cir.1977). Plaintiff has failed to comply with the jurisdictional requirements of the Federal Tort Claims Act and therefore this Court dismisses the tort claim for lack of subject matter jurisdiction.

For the reasons set forth above, the Court denies defendant Washoe Housing Authority’s Motion to Quash and to Change Venue and grants defendant United States of America’s Motion to Dismiss.

IT IS SO ORDERED.

      . The invitations to bid were published on April 20, April 27, May 4, May 11, May 18, May 25, June 8, June 15, June 22, June 29, and July 6, 1979. The notices stated:
      SINGLE HOUSING UNITS B/O 2: p.m. May 15 Gardnerville Est. Cost: $2-1/2 million
      Bid Opg. at Tribal Admin. Bldg. 4 miles south of Gardnerville.
      Owner: Washoe Housing Authority, c/o Archt.
      Archt: Lescher & Mahoney, 1755 East Plum Lane Airport Plaza #107, Reno NV 89502, (702) 322-5111 56 single housing units and a community bldg, to be built at three sites: Dresslerville site inclus. 11 3-bedroom units and 9 4-bedroom units and a community bldg. The Alpine site incls. 10 3-bedroom units and 13 4-bedroom units. The Carson site incls. 5 3-bedroom units and 8 4-bedroom units.
      (0515Q)
      Plans and specs, fr. archt. $50 dep.
      Plans and specs, in plan room #83.

      . Plaintiff asserts that it attempted for five years to obtain from Washoe or HUD payment or at least a final decision on the validity of its claims. Plaintiff asserts that both Washoe and HUD told it on several occasions that at least some of its claims were valid. No payments have been made and no final decision has been rendered.

      . This statement does not necessarily mean that the statute and due process considerations are coterminous; the legislature does not intend to confer jurisdiction in all cases that the constitution permits. Rather, the legislature intends to extend jurisdiction over specific categories of cases, and in those categories, to the fullest extent permitted by due process. Granted, many courts have taken a "one-step” approach to this type of jurisdictional question, simply bypassing the statute and looking only at due process considerations. "This is probably not faithful to the legislative intent, and it undoubtedly is not what the Illinois Supreme Court had in mind when it first declared that the Statute [after which Utah's was fashioned] was intended to reach the outer limits of due process” R.C. Casad, Jurisdiction in Civil Actions ¶ 4.01[l][b]m, at 405 (1983). Therefore, under the enumerated acts set forth in the Utah long arm statute, personal jurisdiction is extended to the limits of due process.

      . McGee v. International Life Insurance Co. is a relatively early Supreme Court case on personal jurisdiction that involved a defendant with slight contacts with the state but whose contacts directly related to plaintiff's claims. The plaintiff, a California resident, was the beneficiary of a life insurance policy. After the insured died, plaintiff sued the Texas-based insurance company that had assumed the obligations of an insurance contract originally entered into by the deceased and another insurance company. The defendant had no agents nor offices in California and had done no business there other than its transactions with the insured. It simply had mailed a reinsurance certificate to the insured in California and had received premiums by mail from California. Finding the exercise of personal jurisdiction to be valid, the Court stated:
      Looking back over this long history of litigation a trend is clearly discernible toward expanding the permissible scope of state jurisdiction over foreign corporations and other nonresidents. In part this is attributable to the fundamental transformation of our national economy over the years. Today many commercial transactions touch two or more states and may involve partners separated by a full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time modern transportation and communication have made it much less burdensome for a party sued to defend himself in a state where he engages in economic activity.
      355 U.S. at 222-23, 78 S.Ct. at 201.

      . In an almost identical fact situation, this court earlier reached the same result. In Brown v. Provident Federal Savings & Loan Association, No. C80-388A (Jan. 13, 1981), plaintiff Brown (also the plaintiff herein) brought an action on a contract it had entered pursuant to a bid submitted to an out-of-state party. The plaintiff became aware of the invitation to bid through its subscription to the Intermountain Contractor, the same trade journal involved here. Many of the same arguments were raised in that action but the Court concluded that the defendant’s conduct was within the scope of the Utah Long-Arm statute, that the defendant had sufficient minimum contacts with the state and that subjecting it to the jurisdiction of this forum would not offend notions of fair play and substantial justice.

      . No contract implied-in-law is enforceable against the United States. See United States v. Algoma Lumber Co., 305 U.S. 415, 59 S.Ct. 267, 83 L.Ed. 260 (1939); Barnett v. United States, 397 F.Supp. 631, 632 (D.S.C.1975).


source: Caselaw Access Project

author: FARNAN, District Judge.

license: Public Domain

text:
    John J. DEVINE, Jr., Plaintiff, v. XEROX CORPORATION, Defendant.
    Civ. A. No. 84-154-JJF.
    United States District Court, D. Delaware.
    Dec. 23, 1985.

      Melvyn I. Monzack, of Walsh & Monzack, Wilmington, Del., for plaintiff.
    Thomas Stephen Neuberger, Wilmington, Del., for defendant.
   OPINION

FARNAN, District Judge.

Plaintiff, John J. Devine, Jr., brought this action against Xerox Corporation (hereinafter “Xerox”) seeking severance pay in the amount of $21,684.00, plus interest, as well as punitive damages and attorney’s fees. Plaintiff states four theories under which he is allegedly entitled to relief: (1) Violation of Section 1132(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.; (2) Violation of Section 1109 of the Delaware Wage Payment and Collection Act, 19 Del. C. § 1101 et seq.; (3) Breach of an express or implied agreement to pay severance pay; and (4) Breach of a covenant of good faith and fair dealing. Currently before the Court is Xerox’s Motion for Summary Judgment, claiming: (1) That plaintiff was not “constructively discharged”, but rather resigned voluntarily, and is thus not entitled to the severance pay he claims; (2) That Plaintiff has failed to state a claim under Counts III and IV because Delaware adheres to the “employment-at-will” rule; and (3) That Counts II, III and IV of the Amended Complaint are preempted by ERISA.

I. BACKGROUND.

Plaintiff Devine was employed by Xerox as a salesman from 1966 until 1983. Plaintiff’s Dep. 4, Docket Item (“D.I.”) 29. His position for the last several years prior to his discharge was that of an account representative, with responsibility for Xerox’s sales at several major accounts in the Wilmington area. Plaintiff’s Dep. 5-6, D.I. 29. Until 1982, plaintiff’s performance was satisfactory, and he received numerous company awards in recognition of his sales achievements. Plaintiff’s Dep. 10, D.I. 29. However, in 1982 and early 1983, plaintiff did not meet the sales target assigned him. Plaintiff’s Dep. 11-13, D.I. 29.

As a result of this poor performance, Xerox initiated disciplinary action against plaintiff in March 1983. Plaintiff’s Appendix, Section D, D.I. 28A. On March 1, 1983, plaintiff was placed on “formal counseling” status, the first step in employee discipline, under which specific performance requirements were established with which plaintiff had to comply in order to avoid more serious action. Plaintiffs Appendix Section D, D.I. 28A; Amended Complaint Ex. B-l, D.I. 12. After determining that the performance requirements set for plaintiff had not been met, Xerox elevated plaintiff to “formal warning” status on May 4, 1983. Plaintiffs Appendix Section F, D.I. 28A. On July 25, 1983, plaintiff submitted his resignation, effective August 15, 1983. Plaintiffs Appendix Section C, D.I. 28A.

A. Xerox’s Severance Pay Guidelines.

Xerox’s internal policy guidelines set forth the conditions under which employees are entitled to severance pay upon departure from the company. These guidelines provide that employees are entitled to severance pay whenever termination of employment is initiated by Xerox, for reasons other than flagrant offenses as defined in Xerox’s personnel manual. Amended Complaint, Ex. D, D.I. 12. Xerox does not provide severance pay if an employee voluntarily resigns. However, severance pay is provided when the employee resigns at the request of the company. This is termed “permitted resignation”, and is considered to be an involuntary separation. Amended Complaint, Ex. D, D.I. 12.

Severance pay is computed based upon length of service with the company. Employees who have served 15 years or more, such as plaintiff, are entitled to six months’ severance pay if otherwise eligible. Amended Complaint, Ex. D, D.I. 12. The guidelines also require several levels of management approval, depending upon length of service, before involuntary separation or permitted resignation can be allowed. In plaintiff’s case, involuntary termination would require approval of the President or Chairman of Xerox, while a permitted resignation would require approval of the Corporate Vice President for Personnel. Amended Complaint, Ex. D, D.I. 12.

B. Xerox’s Alleged Plan to Force Plaintiffs Departure.

Plaintiff alleges that, beginning in 1982, Xerox initiated a course of action deliberately intended to bring about plaintiff’s termination. He alleges that Xerox decreased the number of accounts as well as the size of the territory to which he was assigned, while it increased the dollar volume sales that plaintiff was expected to meet. Devine Dep., D.I. 29, at 10, 13-16, 41-45. This action effectively precluded plaintiff from meeting his sales quotas for the year 1982, as well as the beginning of 1983. Devine Dep., D.I. 29, at 102-105. Plaintiff’s sales were further reduced in 1983 by the decision of one of his largest accounts to defer all of its purchasing decisions until 1984, a fact which was known to plaintiff’s supervisors when they began disciplinary action against him. Riley Dep., D.I. 26, at 32, 86-88; Berman Dep., D.I. 32, at 55-60. The declining sales that plaintiff experienced caused a reduction in his salary. Devine Dep., D.I. 29, at 40. Also, plaintiff alleges that his fellow employees at Xerox were aware that he had been placed on disciplinary status, and that he was thus subjected to embarrassment, humiliation, and intense pressure to meet unrealistic sales goals. Devine Dep., at 106-112.

Plaintiff alleges that the actions taken against him were part of a standard Xerox policy of forcing the most senior sales personnel out of their positions. He alleges that, during his years of service with Xerox, he had witnessed numerous senior sales personnel being demoted or forced out of their positions because their previous job assignments had been taken from them. Devine Dep., D.I. 29, at 14-17. He alleges that, at the time he was placed on disciplinary status, he was the last employee over forty years of age in the Wilmington sales unit. Devine Dep., D.I. 29, at 15. Xerox allegedly maintains this policy of forcing out senior sales personnel because younger sales personnel, with their lower base salaries, are more profitable employees. Devine Dep., D.I. 29, at 28. Plaintiff also alleges that no employee who had ever been placed on “formal warning” status had ever been able to remain with Xerox. Berman Dep., D.I. 32, at 32. He alleges that the above situation placed him under intense pressure, and led him to believe that he would be forced to leave Xerox as well. Ás a result, plaintiff submitted his “forced letter of resignation”. Amended Complaint, Ex. C, D.I. 12; Devine Dep., D.I. 29, at 17.

C. Plaintiffs Claim for Severance Pay.

Plaintiff claims that his resignation was submitted based upon the understanding that he would be granted permitted resignation status and receive severance pay. Devine Dep., D.I. 29, at 17-19. He alleges that Xerox administrative personnel John Riley, Robert Berman, and Carolyn Reed all assured him that he would in fact be granted permitted resignation status. Devine Dep., D.I. 29, at 116. However, according to Carolyn Reed, a personnel coordinator with Xerox, approval by higher levels of Xerox management is required before a request for permitted resignation status is granted and severance pay awarded. Reed Dep., D.I. 31, at 7; Amended Complaint, Ex. D, D.I. 12. Reed, Berman, and Riley all claim that they attempted to obtain approval for permitted resignation status for plaintiff, and that an exit interview was arranged for plaintiff with Xerox management in Arlington, Virginia. Berman Dep., D.I. 32, at 38-40; Riley Dep., D.I. 26, at 74-80; Reed Dep., D.I. 31, at 4-8. On the advice of counsel, plaintiff did not attend the exit interview. Devine Dep., D.I. 29, at 86-90. Because of his refusal to meet with senior management, Xerox informed plaintiff by letter, on October 5, 1983, that his request for permitted resignation was denied. Amended Complaint, Ex. F, D.I. 12. Plaintiff claims that he was never informed that a grant of permitted resignation status or severance pay was dependent upon his attending such a meeting. Devine Dep., D.I. 29, at 89.

II. DISCUSSION.

Summary judgment, under Rule 56(c), is appropriate only where there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Federal Laboratories, Inc. v. Barringer Research Ltd., 696 F.2d 271, 274 (3rd Cir.1982). In considering a Motion for Summary Judgment, the evidence must be viewed in a light most favorable to the party opposing the motion, with all reasonable inferences drawn in that party’s favor. Small v. Seldows Stationery, 617 F.2d 992, 994 (3rd Cir.1980).

Defendant’s Motion for Summary Judgment raises three issues: (1) whether Xerox’s severance pay plan is an “employee welfare benefit plan” within the meaning of 29 U.S.C. § 1002(1), and thus' governed by ERISA; (2) if the severance pay plan is governed by ERISA, whether plaintiff’s state law claims are preempted by ERISA; and (3) viewing the evidence most favorably towards plaintiff, whether plaintiff is not entitled to severance pay under any legal theory.

A. Severance Pay.

ERISA was enacted to protect the interests of employees and their beneficiaries in employee benefit plans. See Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 361-62, 100 S.Ct. 1723, 1726, 64 L.Ed.2d 354 (1980). The statute protects both “employee pension benefit plans”, which provide for income deferral or retirement income, 29 U.S.C. § 1002(3), as well as “employee welfare benefit plans”, which provide benefits for contingencies such as illness, accident, disability, death, or unemployment. 29 U.S.C. § 1002(1). The statute also sets uniform standards for reporting, disclosure, and fiduciary responsibility for both pension and welfare plans. 29 U.S.C. §§ 1021-1031, 1101-1114. ERISA grants participants and beneficiaries of pension plans and welfare benefit plans the right to sue in federal court for benefits due under the plans. 29 U.S.C. § 1132(a)(1)(B).

In Count I of the Amended Complaint, plaintiff argues that defendant’s severance pay plan is an “employee welfare benefit plan” within the meaning of 29 U.S.C. § 1002(1). That section defines “employee welfare benefit plan” to include:

Any plan, fund, or. program ... established or maintained by an employer ... to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise (a) ... benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits ... or (b) any benefit described in Section 186(c) of this Title (other than pensions on retirement or death and insurance to provide such pensions). 29 U.S.C. § 1002(1).

.Section 186(c), included by reference within Section 1002(1), in relevant part describes as benefits “pooled vacation, holiday, severance or similar benefits, or defraying costs of apprenticeship or other training programs.” 29 U.S.C. § 186(c)(6). Department of Labor regulations promulgated under ERISA state that the effect of ERISA’s reference to Section 186(c) “is to include within the definition of ‘welfare plan’ those plans which provide holiday and severance benefits, and benefits which are similar ...” 29 C.F.R. § 2510.3-l(a)(3). Thus, Xerox’s severance pay plan is clearly an employee welfare benefit plan to which ERISA applies. See Petrella v. NL Industries, Inc., 529 F.Supp. 1357, 1361-62 (D.N.J.1982); Blau v. Del Monte Corp., 748 F.2d 1348, 1352 (9th Cir.1985); Donovan v. Dillingham, 688 F.2d 1367, 1371 n. 4 (11th Cir.1982); Pinto v. Zenith Radio Corp., 480 F.Supp. 361 (N.D.Ill.1979) aff'd, 618 F.2d 110 (7th Cir.1980).

B. Preemytion of State Claims by ER-ISA.

In its Motion for Summary Judgment, Xerox argues that Counts II, III and IV of the Amended Complaint are preempted by ERISA because they are based on state law. 29 U.S.C. § 1144(a); Shaw v. Delta Airlines, 463 U.S. 85, 103 S.Ct. 2890, 2899-2901, 77 L.Ed.2d 490 (1983). At oral argument, plaintiff conceded that, if Xerox’s severance pay plan was covered by ERISA, plaintiff’s state-based claims would be preempted. Therefore, having found that Xerox’s severance pay plan is in fact covered by ERISA, the Court need not examine the preemption question at this time.

C. Plaintiffs Entitlement to Severance Pay.

Xerox argues that, under the undisputed material facts, plaintiff is not entitled to severance pay under its guidelines as a matter of law, because his termination was neither initiated by Xerox, nor was he granted permitted resignation status. Xerox argues that plaintiff has not shown sufficient facts to support a finding that he was “constructively discharged”, nor has he shown facts to support a finding that his resignation was conditioned upon his receiving permitted resignation status.

The doctrine of constructive discharge has been applied in actions for severance benefits under Section 1132(a)(1)(B) of ERISA. See Donnelly v. Aetna Life Insurance Co., 465 F.Supp. 696, 698 (E.D.Pa.1979). See also Lojek v. Thomas, 716 F.2d 675, 680-81 (9th Cir.1983). The applicable standard in the Third Circuit for determining whether a constructive discharge has occurred is whether “the employer knowingly permitted conditions of [employment] so intolerable that a reasonable person subject to them would resign.” Goss v. Exxon Office Systems Co., 747 F.2d 885, 888 (3rd Cir.1984). This standard requires the employer’s deliberate creation of intolerable conditions, rather than a specific intent to get rid of the employee. See Goss, 747 F.2d at 887-88; Ferguson ¶. E.I. duPont de Nemours & Co., Inc., 560 F.Supp. 1172, 1202-03 (D.Del.1983); EEOC v. Hay Associates, 545 F.Supp. 1064, 1085 (E.D.Pa.1982).

From the record before the Court as outlined supra, it is clear that numerous issues of material fact remain. Plaintiff has alleged that Xerox follows a consistent practice of forcing the most senior sales personnel to leave their positions. He has identified several former members of the Sales Department whom he alleges were subjected by Xerox to similar pressures, and who were forced to leave their positions. He has outlined a course of action taken by Xerox, beginning in 1982, whereby his territories and accounts were systematically reduced, at the same time that his sales quotas were substantially increased. He has also alleged that, on at least one occasion, he was deliberately “humiliated” by one of his supervisors in front of one of his most important clients. Xerox has denied all of these factual allegations. Clearly, a fact-finder believing these facts and drawing all reasonable inferences could find that Xerox had deliberately made plaintiff's working conditions so intolerable that a reasonable person would have been forced to resign. Thus, since there are numerous issues of material fact, summary judgment would be inappropriate.

III. CONCLUSION.

In summary, Xerox’s severance pay plan is an “employee welfare benefit plan” within the definition of 29 U.S.C. § 1002(1), and is thus covered by the protections of ERISA. Since plaintiff concedes that his state-based claims are preempted if the plan is governed by ERISA, partial summary judgment shall be granted for defendant on Counts II, III and IY of plaintiff’s Amended Complaint. However, summary judgment on Count I of the Amended Complaint, alleging violations of ERISA, shall be denied.

      . Xerox applied a four step policy of progressive discipline to employees whose performance was deemed unacceptable. The first step, “counseling", involved a review of the employee’s job requirements with his supervisor, and the establishment of specific performance goals which the employee should meet. At the second step, "oral warning”, the employee is advised that a written warning, or possible termination, could result if his problem is not resolved. At the third step, "formal warning”, a written warning is issued to the employee defining the problem and the required corrective steps, and emphasizing again the seriousness of the problem and the possibility of probation and termination. At the fourth stage, “probation”, the employee is advised that termination may result if improvements in performance are not achieved within a specific time frame. Xerox Policy Memo, "Performance Improvement”, Amended Complaint Ex. B-l, D.I. 12.

      . After his departure from Xerox, plaintiff filed charges with the EEOC alleging age discrimination. See Devine Dep., D.I. 29, at 28.

      . Although the Third Circuit has applied this standard primarily in labor relations and employment discrimination litigation, the Court finds the same standard to be appropriate in actions under ERISA. See Donnelly, 465 F.Supp. at 698. See also Lojek, 716 F.2d at 680-81.


author: SWEET, District Judge.

text:
    Q-CO INDUSTRIES, INC., Plaintiff, v. Sidney HOFFMAN, Dilip Som and Computer Prompting Corp., Defendants.
    No. 85 Civ. 4653 (RWS).
    United States District Court, S.D. New York.
    Dec. 24, 1985.

      Abberley Kooiman Marcellino & Clay, New York City (Barry Magidoff, of counsel), for plaintiff.
    Stanley K. Shapiro, New York City, for defendants.
   OPINION

SWEET, District Judge.

The plaintiff Q-Co Industries, Inc. (“Q-Co”) has moved for a preliminary injunction under Fed.R.Civ.P. 65, seeking to bar defendants Sidney Hoffman (“Hoffman”), Dilip Som (“Som”) and Computer Prompting Corp. (“CPC”) from selling their CPC-1000 program which is alleged to infringe Q-Co’s copyrighted VPS-500 program. The defendants have cross-moved to enjoin Q-Co from interfering with the development of the CPC-1000 program and from representing itself to the sole owner of the VPS-500 program. Both programs are software designed to permit use of personal computers as prompters for television and theatre presentations. Teleprompters or prompters are machines which scroll large characters on a television screen to permit a speaker to read a prepared text by looking directly ahead at the screen, thereby avoiding the appearance of reading. On the facts and conclusions set forth below, the injunctive relief requested by Q-Co on its motion and by defendants on their cross-motion will be denied at this time.

This fact-rich case has presented difficult issues for resolution, particularly since the intellectual property at issue is computer programming, a form not readily comprehended by the uninitiated. The challenge to counsel to make comprehensible for the court the esotérica of bytes and modules is daunting. The absence of direct authority dealing with these issues is matched by the ease of access by the parties to the property involved and by the consequent difficult of resolving not only what happened but the effect of these events on the rights of the parties.

Prior Proceedings

This action was filed on June 14, 1985 and Q-Co promptly sought a temporary restraint. The defendants agreed not to merchandise the CPC-1000 program alleged by Q-Co to have derived from Q-Co’s VPS-500 program. Discovery was initiated, and despite disputes over the confidentiality of materials, no present discovery demands are outstanding.

A hearing was held on September 9 and 10, 1985 after which the defendants terminated their voluntary restraint and a motion for temporary restraint was denied. The hearing was resumed on October 10 and completed on the 11th. Final submissions were made on October 24, 1985.

The Facts

Q-Co is a New York corporation with its principal place of business in New York City. Hoffman is a New York resident and Som a resident of the District of Columbia. CPC is a New York corporation organized early in 1985.

Q-Co registered its VPS-500 software program with the Registrar of Copyrights and received a Certificate of Registration Class Tx., No. 1-568-702 on May 29, 1985. This dispute has resulted from the work Hoffman and Som did to devise the VPS-500 program which permitted the user of the program to employ an Atari 800-XL (“Atari”) computer as a prompter, and their subsequent development of the CPC program which seeks to permit a user to employ an IBM PC computer for the same purpose.

Q-Co has been in the business of providing prompting equipment and services to various clients in the business, entertainment and governmental communities for over twenty-nine years. There are a number of companies other than Q-Co currently marketing prompting software packages designed for use on the Atari computer. No company has as yet been able to design a commercially viable program capable of ¡performing prompting on the IBM PC. ‘The principle advantages of an IBM PC-based program are the great public recognition and acceptance of the IBM computer and the much larger memory available on the IBM.

However, because of differences between the hardware of the Atari computer and that of the IBM PC, the Atari is simpler and better suited to the development of a prompting program. Three basic functions are required for the development of a computerized prompter:

1) the generation of large characters on a screen;
2) the scrolling the characters up and down at smooth and variable speeds; and
3) word processing and editing capabilities.

While the Atari has a graphics chip built into its hardware which permits the generation of large characters and scrolling through a relatively simple sequence of program commands, the IBM PC has no such hardware. Instead, a lengthy and complicated software program must be developed to enable the IBM to generate large characters and scroll text. This difference has been the principal hurdle blocking the development of a prompting program for the IBM-PC.

Q-Co hired Hoffman as a prompter technician in mid-1976 on a part-time basis. In late 1983, Q-Co learned that Hoffman had recently been awarded an advanced degree in the field of computer science and in January, 1984, hired him on a full-time basis to develop a software program to utilize the Atari 800-XL as a prompter. Shortly thereafter, at the suggestion of Hoffman, Q-Co also employed Som, a close personal friend of Hoffman, to work on a hand control device to be a part of the computerized prompter and to assist Hoffman in the development of the program. No employment contracts, confidentiality agreements or agreements not to compete were entered into. Hoffman was an employee at will and Som a consultant. Som is a physicist with a masters degree from the University of Calcutta, and a Ph.D. from the City University of New York, who is presently a post-doctoral research assistant at George Washington University where he is developing research programs.

At the end of January, 1984, Hoffman commenced work as a full-time employee of Q-Co, to create the computer prompter program for Q-Co which was later entitled the VPS-500. In creating the VPS-500, Hoffman and Som, utilized only Q-Co’s equipment and supplies, including textbooks, provided by Q-Co, albeit in almost all cases purchased by either Som or Hoffman and reimbursed by Q-Co. The equipment included the Atari computers used by both Som and Hoffman for carrying out all their programming efforts. A program devised by Compu-Prompt, a Q-Co competitor, for use in employing the Atari as a prompter was also provided by Q-Co to Hoffman.

Hoffman had “overall responsibility for the computer prompting project” under Alvin S. Eisenberg (“Eisenberg”), an executive vice-president of Q-Co, but Hoffman worked so closely with Som that “things were so, like, intertwined together” and it was not possible to separate their work. Hoffman reported to Q-Co's officers on how the overall project was progressing. Although Som ultimately became the principal programmer for the VPS-500 project, other Q-Co employees or officers were never informed of that fact. In any event, Som and Hoffman both worked very closely together, even though geographically separated in New York City and Washington, D.C. during the period February through July, conversing by telephone almost daily and speaking directly during Hoffman’s weekend trips to Som’s house once every three weeks when they would work for eight hours a day together. The program as it was developed was the joint product of both men. During this period Hoffman had one or more conversations with Q-Co officers and employees to the effect that it would be desirable to develop a prompting program for the IBM PC once the Atari program was completed.

In early August, 1984, Hoffman and Jerry Berg, a Q-Co employee (“Berg”), Hoffman’s immediate supervisor, travelled to a suburb of Detroit, Michigan to prepare the text for a prompting job Q-Co was to perform for Marritz Communications Co. (“Marritz”) which was acting on behalf of Ford Motor company (the “Ford Show”). While preparing such text, David Davis, an official of Marritz, advised Berg and Hoffman that many of Marritz’ customers, including Ford, had need of a computerized prompter to operate on an IBM PC and that he looked forward to an IBM PC program for the following year’s Ford show.

After several days in Detroit, Berg and Hoffman travelled to Las Vegas, Nevada to begin rehearsals for the Ford show. Because the VPS-500 was still in the developmental stages, it had insufficient memory for the job and as such required the use of two Atari’s being operated in tandem to provide sufficient memory. Berg concluded that he and Hoffman would require assistance in Las Vegas, and Som travelled to Las Vegas for that purpose. In Las Vegas there were again discussions in which Hoffman was involved about a computerized prompter for an IBM PC. In response to Berg, Som on several occasions stated it would be possible to develop an IBM PC computer prompter but that it was very difficult.

Upon returning from Las Vegas in late August, Hoffman, during a luncheon meeting in New York City with his friend of several years, Geoffrey Pope (“Pope”), told Pope that he was thinking about going into his own business with his friend Som and possibly to sell a program for a computerized prompter. In the same period, Hoffman suggested to Eisenberg and Berg that development of the VPS-500 would continue more quickly if he were to move to Washington, D.C. and work more closely with Som. Q-Co agreed and Hoffman moved to Washington, D.C. in early September for the months of September, October and November, 1984.

In the beginning of December, 1984, Hoffman returned to New York City and advised Q-Co that he was going to look for other employment and that he felt the VPS-500 would be completed by December 31, 1984, but that in the event there were any loose ends, he would ask Som to assist Q-Co. On Friday, December 28, 1984, Som and Hoffman demonstrated the latest version of the VPS-500 to Q-Co personnel in Q-Co’s New York office.

As of December 31, 1984, Hoffman left Q-Co’s employ, having been paid a salary of approximately $25,000 for the preceding eleven months, as well as two bonuses— one in October in the amount of $560 and one at the end of December in the amount of $1,000.

Q-Co was totally unaware of any alleged change in the proportionate responsibility for the VPS-500 as between Hoffman and Som and virtually all communications to Q-Co officers concerning the VPS-500 were made by Hoffman. Hoffman paid additional sums of his own money to Som, without advising Q-Co, including cash payments and checks totalling $1,000. Several checks bore the notation “programming fund” which Hoffman testified related to Som’s work on the VPS-500 and did not relate to any specific budget or other purpose.

Som testified that unbeknownst to both Q-Co and Hoffman, he had secured the services of one George Schwenk to do work on portions of the VPS-500 in 1984 paying him approximately $1,000 at the rate of $20.00 per hour.

During December, 1984, Som had collected books and programs that he felt would assist him in developing the IBM program, spending between 180 and 270 hours on the project. In mid-December Som called Martin Smith (“Smith”), a programmer who had developed the Banner program, which was a publicly available software program that produced scrolling and large characters. Som sent a letter dated December 18, 1984 to Smith along with an outline of the program in which he told Smith that the reason he chose the IBM PC was because of its expanded memory which could hold more text than the Atari for which he had already developed a program. At this time Som and Smith discussed the possibility of developing the IBM PC prompting program. Som sought Smith’s assistance in programming what was to become the CPC-1000 and Smith carried out “Som’s vision of the program” based upon numerous telephone discussions and correspondence with Som and exchanges of ideas and information. During this period Som was also completing his work on the VPS-500. While Som was in New York, Hoffman loaned Som $1,000 because Som claimed he was running out of money. Upon his return to Washington, D.C. in late December, Som sent Smith a payment in the amount of $2,150 and purchased a monitor and various supplies related to the CPC-1000 project totaling $777.85.

Som sent Smith an initial custom-made hand control device for the IBM PC program in late December or early January, and Smith sent a character generator or utility program to Som on January 2, 1985. Smith and Som agreed at the outset, in December, 1984, that Smith would create an editor as well as the scroll program. Smith was paid only for work previously completed, and the first payment was made by check dated January 1, 1985. Despite several inquiries by Smith to Som, all Som told Smith was that he was developing an educational program to assist in reading comprehension and that he was doing so for one particular client.

On January 9, 1985 Hoffman as sole incorporator acquired a New York Certificate of Incorporation for Computer Prompting Corp. which was issued on January 14, 1985. Both Som and Hoffman are vice presidents of CPC, and although the formalities are unclear, according to Som’s uncontradicted testimony, they are 50-50 owners of the corporation. Aware of the deadline for the National Association of Broadcasters (“NAB”) show in Las Vegas, at which broadcast industry products are exhibited, Hoffman on February 8, 1985 sent an application and check in the amount of $1,200 to reserve space at the show in April on behalf of CPC, although at that time no program was in fact in hand. By the end of February, 1985, Som had completed his work for Q-Co on the VPS-500 and was working with Smith on the CPC-1000. A brochure was prepared for the NAB Show announcing that “with the arrival of the CPC-1000 the future is now” and promoting the fact that the new program would operate on the IBM PC.

For the next two or three months Som worked on the average of three hours a day on the CPC-1000. A copyright application for the CPC-1000 was filed on April 11, 1985. It was conceded that the CPC-1000 is still in its “final developmental phase,” from which it has yet to emerge.

The CPC-100 program at the time of the NAB show consisted of two floppy discs with a capacity of 1,000 lines, the second disc containing fragments rather than a complete working program. It’s disclosure was, nonetheless, a shock to Q-Co and after initial discussions at which merger was suggested, on June 14 this action was commenced. According to Som, at the time of the hearing, no further work has been done on the program although presumably the completion of the program would be undertaken in the future. No orders have been received although interest has been expressed.

The defendants introduced evidence that Q-Co in the past had sought to enjoin competitors from unfair competition and had a British affiliate that also had done some work on an IBM prompter program during the period in question without obtaining an operational result.

The Programs

Both parties called individuals qualified as computer experts to testify about their examinations of the VPS-500 and the CPC-1 1000 programs. The differences between | the programs arise primarily from the | hardware deficiencies in the IBM-PC relevant to the screen display. The display | controller in the Atari hardware, specifieally the “ANTIC” chip and “CTIA” and the so-called “player missile graphics,” easily permit the display and scrolling of large characters and provide an “arrow” to indicate the position of the prompter on the screen. The lack of this hardware capability in the IBM-PC requires extra programming in the CPC-1000. The design decisions made by the programmer of the CPC-1000 reduced the time and effort needed to prepare the CPC-1000 program although it unnecessarily restricted the capabilities of the IBM PC, with regard to total memory capacity. The CPC-1000 program is not a copy or a paraphrase of the Atari-based VPS-500. The CPC-1000 program is written in different computer languages (Pascal and IBM Assembler) than the VPS-500 (Basic and Atari), and employs wholly distinct algorithms.

The CPC-1000 program is comprised of a total of four modules, which correspond directly to four of the twelve modules of the VPS-500 program. The four CPC-1000 modules are as follows: A Pascal language “Title” module that presents an initial screen including the title and credits of the program. A second Pascal language module “reads in” or loads the third and fourth modules from the disc into the computer’s internal memory, and then presents a main menu to the user. The main menu includes the terms “Create,” “Save,” “Load,” “Edit,” “Prompt,” “Print,” “Sub Menu,” and “Help.” The third module of the CPC-1000 is in Assembler language and provides the functions of text scrolling and editing. The fourth module generates the “large characters” for display on the computer screen.

The four corresponding modules in the VPS-500 program are similar in structure and organization, including a few textual similarities. The memory provided in the CPC-1000 is only about twice that of the VPS-500, although the IBM-PC is capable of providing ten times the internal memory of the Atari.

In terms of overall organization of the two programs, Dr. Friedberg, Q-Co’s expert, stated that the basic fact that there are four modules in the VPS-500 which correspond closely to the four modules of the CPC-1000 is itself most surprising, except in the context of a conversion of the VPS-500 program to the CPC-1000. Extensive differences between the two programs should arise by virtue of the gross differences in the hardware. Specifically, the reason for having a separate “Title” module in the VPS-500 was the much smaller internal memory in the Atari. This rationale was not expected to be present in a program independently created for the IBM-PC, which has no such internal memory limitations. There is no need to have a separate “Title” module merely to put in the first screen in the CPC-1000, especially when the second module of the CPC-1000 already provides much of the same infor-i mation. Since the CPC-1000 uses the identical organization of a separate title mo-,I dule, this supports Dr. Friedberg’s inter-J pretation that the CPC-1000 was a convert sion of the VPS-500. I

There is also a similarity in the terminology used in the respective menu lists in the second module of each of the two programs. The first five functions of the CPC-1000 and VPS-500 menus include substantially the same terminology, although in different sequences: “Create,” “Edit,” “Save,” “Load,” “Prompt.” The VPS-500 also including the word “Text” after each term.

The organization of the CPC-1000 program is also similar to that of the VPS-500 program, with respect to providing for the load, edit and scrolling, or “prompting” functions. In both programs, the “load” function is provided by the second module, in a high level language (BASIC for the VPS-500 and Pascal for the CPC-1000), while the scrolling and editing functions (with one exception) are provided by the third module (in assembly language).

Finally, the fourth module of the CPC-1000, which generates the large characters to be scrolled, is comparable to the fourth module in the VPS-500. The characters for the CPC-1000 are defined and generated in the same way as in the VPS-500. The VPS-500 program operates the Atari in its “text” mode, while the CPC-1000 operates the IBM-PC in its “graphics” mode. The same approach of generating the characters point-by-point was followed in both programs.

Hoffman, and more particularly Som, were completely familiar with the VPS-500 program using the Atari; indeed they had created the program. It is reasonable to infer from the facts already found that in the fall of 1984 Som and Hoffman concluded that an effort would be made to develop the software to program an IBM PC to provide a prompting function. Som, an independent consultant for Q-Co, started this endeavor late in 1984 while still working for Q-Co.

There is no direct evidence that Som, employed the VPS material and indeed direct) copying was impossible1 since the Atari programming was in Basic and IBM in Pascal. What Som did employ was the j structure/ and concept of the VPS-500 program. In one or two minor instances, some language of the VPS-500 crept into the CPC-1000 program. At the same time, a different program, different because of language and hardware, had to be devised. From the similarity of the modules, their structure and function and the obvious availability to Som of the VPS-500 program, it is rational to infer that it was used by Som, although not by Smith, in developing the CPC-1000 program.

Conclusions

Q-Co seeks relief on the basis of copyright infringement and misappropriation of trade secrets. As to copyright, the applicable statute, Title 17 U.S.C. 501(a) (Copyright Act of 1976) provides:

Anyone who violates any of the exclusive rights of the copyright owner as provided by Section 106 ... is an infringer of the copyright.

Section 106 of the Act provides:

The owner of a copyright under this title has the exclusive rights to do and to authorize any of the following: (1) to reproduce the copyrighted work in copies ...; (2) to prepare derivative works based upon the copyrighted work____

However, copyright protection extends only to forms of expression and not ideas, 17 U.S.C. Section 102(b); Milgrim, on Trade Secrets, Section 2.09 at 2-179 (1984). As the Court of Appeals stated in Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir.1960) (L. Hand, J.): “There can be no copyright in the ‘ideas’ disclosed but only in their ‘expression.’ ”

Thus, in Affiliated Hospital Products, Inc. v. Merdel Game Mfg. Co., 513 F.2d 1183 (2d Cir.1975), the court held that the copyright of a game book was not infringed where the defendant did not copy the copyrighted work verbatim, but rather made a good-faith attempt to improve upon and clarify the presentation of the rules, j The evidence establishes that the modules/ in different languages were similar in thei sense of “ideas”'rather than “expressions”/ and as such have not been copied in the) infringement sense. ¡

The extent of similarity between the two programs is more significant when considering the CPC-1000 as a derivative work.N.e., “a work based upon one or more pre-existing works, such as a translation, ‘ ... or any other form in which a work may be re-cast, transformed or adopted” (17 U.S.C. 101). This definition includes a “modification which, as a whole, represent an original work of authorship____” Thus, the mere fact that the CPC-1000 is in many respects dissimilar from the VPS-500 would not avoid infringement if similarity'' is shown within the CPC-1000 for a sub-: stantial element of the VPS-500 program, including, structure an.d arrangement.* Meredith Corporation v. Harper & Row Publishers, Inc., 378 F.Supp. 686 (S.D.N.Y.); aff'd, 500 F.2d 1221 (2d Cir.1974), after trial, 413 F.Supp. 385, 386 (S.D.N.Y.1975). “No plagiarist can excuse the wrong by showing how much of his work he did not pirate,” and is different from plaintiff's. Sheldon v. Metro Goldwyn Pictures Corp., 81 F.2d 49, 55 (2d Cir.1936). Similarly, the fact that the CPC-1000 may itself constitute a copyrightable creation in no way excuses the infringement, because the “tests for eligibility for copyright and avoidance of infringement are not the same. Puddu v. Buonamici Stationery, Inc., 450 F.2d 401, 402 (2d Cir.1971).

No decision of our Court of Appeals has been cited involving a computer program under the Copyright Act. However, courts have considered the relevance of similarities of structure and organization of computer programs in determining copying. It jhas been stated that the programming in jspurce_c.qde of a detailed English-language '^tatementuof a problem solution would result in duplication of expression and copyright infringement. Synercom Technology, Inc. v. University Computing Co., 462 F.Supp. 1003 (N.D.Texas 1978). In the present case, the defendants had available the plaintiffs source code, which potentially offers a far “simpler route of copying.” SAS Institute, Inc. v. S & H Computer Systems, Inc., 605 F.Supp. 816, 225 U.S.P.Q. 916, at 923 (M.D.Tenn.1985).

Basing its decision upon the Second Circuit’s opinion in Merdel Game Mfg. Co., supra, where the defendant prepared an outline of a textbook and then distributed the outlines “to other personnel, and they wrote original text based on the outline,” the court in SAS Institute found duplications of expression and copyright infringement where the defendant claimed that each individual programmer was “provided a specific statement of the task to be performed by a program module, and was given information as to the_way in which that module of code would interface with the remainder” of the program, without being told of the source of the material. This is similar to what occurred between the defendant Som and Smith. Som admitted to Smith that he originally “wrote this program on Atari 800XL in BASIC and partly in Assembler ... the reason for writing it on IBM is that I can have more text.” Further, here, as in SAS, Som placed himself at “the hub of the wheel,” controlling the information given to his assisting programmer and writing the source code for the modules linking the programs together.

Notwithstanding these facts, there is no testimony establishing any1, unique^ expression based on the existence of the VPS-500 modules, since the same modules would be an inherent part, of any prompting program. See Synecom Technology, Inc., supra, 462 F.Supp. at 1013. Their order and organization can be more closely analogized to the concept of wheelsJor.. the . car yhther than the .intricacies of a particular suspension system. Moreover, in contrast to the factual finding in SAS Institute, supra, that the defendant had “slavishly copied” plaintiff’s work, such copying is inlpossible' here, given the differences between the'- hardware"*for the Atari and IBM computers. Here, it was thésjága)) which was used rather than its expression. Therefore, copyright infringement has not been established.

Trade Secrets

All of the parties to the action agree that the VPS-500 is an independent original creation, made by defendants Hoffman and Som during the period of their employment by Q-Co. New York courts have adopted the general definition of a trade secret set forth in Restatement of Torts § 757, comment b (1939), as follows:

A trade secret may consist of any formula, pattern, device, or compilation or information which is used in one’s business and which gives him an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device ... The subject matter of a trade secret must be secret. Matters of public knowledge or of general knowledge in an industry cannot be appropriated by one as his secret ...
Substantially, a trade secret is known only in the particular business in which it is used. It is not requisite that only the proprietor of the business know it. He may, without losing his protection, communicate it to employees involved in its use. He may likewise communicate to others pledged to secrecy. Others may also know of it independently, as, for example, when they have discovered the process or formula by independent invention and are keeping it secret.

See, e.g., Minnesota Mining & Manufacturing Co. v. Technical Tape Corp., 23 Misc.2d 671, 192 N.Y.S.2d 102, 112-13 (Sup.Ct.Westchester Co.1959), aff'd, 15 A.D.2d 960, 226 N.Y.S.2d 1021 (2d Dept.1962); KLM Royal Dutch Airlines, N.V. v. DeWit, 98 Misc.2d 946, 415 N.Y.S.2d 190, 191 (Sup.Ct.N.Y.Co.), modified, 70 App.Div.2d 867, 418 N.Y.S.2d 63 (1st Dept.1979).

Although information that is generally known cannot be a trade secret, Ferber v. Sterndent Corp., 51 N.Y.2d 782, 433 N.Y.S.2d 85, 412 N.E.2d 1311 (1980), absolute secrecy is not required. Fairchild Engine and Airplane Corp. v. Cox, 50 N.Y.S.2d 643 (Sup.Ct.1944). As noted by this Circuit:

[t]he rule is only that a “substantial element of secrecy must exist and this means so much that” except by use of improper means, there would be difficulty in acquiring the information.

A.H. Emery Co. v. Marcan Products Corp., 389 F.2d 11, 16 (2d Cir.), cert. denied, 393 U.S. 835, 89 S.Ct. 109, 21 L.Ed.2d 106 (1968).

It is a well settled principle “that a trade secret can exist in a combination of characteristics and components, each of which, by itself, is in the public domain, but the unified process and operation of which, in unique combination, affords a competitive advantage and is a protectable secret.” Imperial Chemical Indus. Ltd. v. National Distillers & Chem. Corp., 342 F.2d 737, 742 (2d Cir.1965). Computer software, or programs, are clearly protectible under the rubric of trade secrets, if the other elements are also proven. University Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 534, rehearing denied, 505 F.2d 1304 (5th Cir.1974). When an individual is expressly employed “to devote his time to the development of process and machinery and was to receive therefore a stated compensation,” the resulting development is the property “of him who engage the services and paid for them.” Standard Parts Co. v. Peck, 264 U.S. 52, 44 S.Ct. 239, 68 L.Ed. 566 (1924); Mechanical Plastics Corp. v. Thow, 197 U.S.P.Q. 651 (N.Y.Sup.Ct.Nassau County 1977).

Employees in the position of Som and Hoffman have been held to owe an implicit obligation of good faith and fair dealing to their employer. Kaufman v. International Business Machines Corp., 97 A.D.2d 925, 470 N.Y.S.2d 720, 723 (3d Dept. 1983), aff'd, 61 N.Y.2d 930, 474 N.Y.S.2d 721, 463 N.E.2d 37 (1984). To maintain confidentiality, it is not necessary that there have been an express contract between Q-Co and its employees Hoffman and Som, stating that information regarding the VPS-500 be kept secret. Arnold’s Ice Cream Co, supra, 330 F.Supp. at 1187; L.M. Rabinowitz & Co., Inc. v. Dasher, 82 N.Y.S.2d 431, 435 (Sup.Ct.N.Y.Co.1948); Speedry Chemical Products, Inc. v. Carter’s Ink Company, 306 F.2d 328, 332 (2d Cir.1962). Under New York law, an employee is “not free to exploit the same trade if the opportunity was facilitated by acts of preparation and disloyalty during his employment....” Aktiebolag v. ABA Optical Corp., 441 F.Supp. 747, 754 (E.D.N.Y.1977).

The source code of the VPS-500 program is not accessible to the public. The version of the VPS-500 program sold commercially was copy protected so that the purchasing public would not be able to convert the program on the floppy disc and would not be able to gain access to the source code. Only the object code is publically available; this the version of the program that is intended to be read by the computer and cannot be understood even by expert programmers.

In Telex Corp. v. IBM, 510 F.2d 894, 911, 928-30 (10th Cir.1975), cert. dismissed, 423 U.S. 802, 96 S.Ct. 8, 46 L.Ed.2d 244 (1975), the court upheld a finding that trade secret protection remained available even though IBM’s object code was in daily, open unrestricted use by employees since its more readily copyable source code was kept securely locked. Similarly, in Com-Share, Inc. v. Computer Complex, Inc., 338 F.Supp. 1229, 1234-35 (E.D.Mich.1971), aff'd, 458 F.2d 1341 (6th Cir.1972), the court was influenced by the fact that the plaintiff had inserted passwords into its system to prevent unauthorized access and had kept its magnetic tapes and symbolics locked when not in use. See also McGrody Protection of Computer Software—An Update and Practical Synthesis, 20 Hous. L.Rev. 1033, 1063 (“Secrecy will not be destroyed by the wide distribution of computer programs if they are distributed in object form only.”) The internal precautions taken by plaintiff to guard the VPS-500 source code listings have been adequate since the nature of the trade secret is not ascertainable by inspection of the program.

Som testified that in creating the CPC-1000, he had employed Smith to assist him. In so doing, he discussed the VPS-500 program (although without identifying it to Smith) and clearly described to Smith the “vision” of the CPC-1000 he had in his mind. Therefore, at least some of the trade secrets to be found in the VPS-500 program were communicated to outsiders. Moreover, one can infer from their close relationship that Hoffman and Som collaborated in this overall plan to develop a competing teleprompter program during this time period.

It is well recognized with respect to trade secrets that:

[misappropriation and misuse can rarely be proved by convincing direct evidence. In most cases plaintiffs must construct a web of perhaps ambiguous circumstantial evidence from which the trier of fact may draw inferences which convince him that it is more probable than not that what plaintiffs allege happened did in fact take place. Against this often delicate construction of circumstantial evidence there frequently must be balanced defendants and defendants’ witnesses who directly deny everything.

Greenberg v. Croydon Plastics Co. Inc., 378 F.Supp. 806, 814 (E.D.Pa.1974).

For the foregoing reasons, Q-Co. has met its burden on this motion for a preliminary injunction of establishing a likelihood of success on the merits regarding the existence of a trade secret, and its misappropriation by Hoffman and Som.

Irreparable Injury

The standard set in this circuit for obtaining preliminary injunction relief is a showing of “(a) irreparable harm and (b) either (1) likelihood of success on the merits, or (2) sufficiently serious questions going to the merits to make them fair grounds for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.” Jackson Dairy, Inc. v. H.P. Hood & Sons, 596 F.2d 70, 72 (2d Cir.1979).

While Q-Co meets either of the second set of tests set down in Jackson Dairy, Inc., supra, it fails on the first. So far the CPC-1000 program is inoperable, and may never succeed. No sales have been made by CPC or demonstrated to have been lost by Q-Co. It would appear that as yet no one has succeeded in developing an appropriate software package for an IBM PC to enable it to perform a scrolling function. The threat that CPC may do so in the future fails to establish present irreparable injury.

Similarly, the use of the Q-Co trade secrets has not to date caused irreparable damage incapable of calculation. Indeed, should CPC’s efforts ever be successful, it should be possible to determine the contribution made by the use of Q-Co’s trade secrets and assess an appropriate monetary-damage. To date, however, no such damage exists.

The Cross-Motion

No evidence has been introduced by CPC sufficient to establish an antitrust violation by Q-Co in terms of market-effect or any other element. Instead CPC relies solely on the argument that Q-Co’s present action is “baseless” and therefore should be seen as nothing more than an attempt to interfere with the business relationships of a competitor. See United States v. Otter Tail Power, 417 U.S. 901, 94 S.Ct. 2549, 41 L.Ed.2d 207 (1974); California Motor Transport co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972). The above conclusion that Q-Co has presented claims having a likelihood of success, however, vitiates the basis for CPC’s antitrust claim.

Som also claims part ownership in Q-Co’s VPS-500 program. In its copyright registration, Q-Co is designated as the author of the “work made for hire” entitled VPS-500 and the registration is prima facie evidence of Title 17 U.S.C. Sec. 410(c). Under the definition of “work made for hire” in the 1976 Copyright Act, 17 U.S.C. 101(1), “a work made for hire is a work prepared by an employee within the scope of his or her employment.” Both of the individuals employed by Q-Co to create the VPS-500, i.e., Hoffman and Som, were working within the scope of their employment when they jointly created the VPS-500 on behalf of Q-Co.

It is recognized that the Copyright Law of 1976, under which this case is to be determined, changed the prior law with respect to what can constitute “a work made for hire” (17 U.S.C. § 101), in requiring that, except in certain limited circumstances not relevant here, it only applies to “a work prepared by an employee within the scope of his or her employment____” Under the facts found here, regardless of what title Som chose to operate under with regard to his employment by Q-Co, he was an employee working with equipment and supplies owned by his employer Q-Co and was closely supervised by Q-Co’s regular employee, Hoffman. It is clear that Q-Co., the hiring “author” caused the work to be made and exercised the right to “direct and supervise the creation,” through its control over its full time employee, Hoffman. The VPS-500 was, therefore, a “work made for hire” for the hiring author, Q-Co. See 17 U.S.C. § 26; Samet & Wells, Inc. v. Shalom Toy Co., Inc., 429 F.Supp. 895 (E.D.N.Y.1977), aff'd mem., 578 F.2d 1369 (2d Cir.1978).

On these findings of facts and conclusions of law, both motions for preliminary injunctive relief will be denied.

IT IS SO ORDERED.