author: EDWARD WEINFELD, District Judge.

text:
    MODERN AMUSEMENTS, INC., Plaintiff, v. MARRIOTT CORPORATION and The County of Westchester, Defendants.
    No. 84 Civ. 3479 (EW).
    United States District Court, S.D. New York.
    Jan. 2, 1985.
    Katz, Kleinbaum, Farber & Karson, White Plains, N.Y., for plaintiff; Eugene I. Farber, White Plains, N.Y., of counsel.
    Scheffler, Karlinsky & Stein, New York City, for defendant Marriott Corp.; Robert P. Stein, New York City, of counsel.
    County of Westchester, White Plains, N.Y., for defendant Westchester County; Henry J. Logan, Gregory F. Meehan, White Plains, N.Y., of counsel.
   OPINION

EDWARD WEINFELD, District Judge.

This is in effect a three-way litigation. Plaintiff, Modern Amusements, Inc. (“Modern”), commenced this action against the defendants, The County of Westchester (“County”), and Marriott Corporation (“Marriott”), to recover a balance of $30,-000 claimed to be due under a written lease agreement entered into for the use of an amusement ride called “Himalaya” at Rye Playland Amusement Park (“Playland”), Rye, New York, owned by the County. The lease was for each of the three year operating seasons, 1982, 1983, and 1984, at a rental of $55,000 per season (“the Lease”). It was executed by Marriott “as Managing Agent for the County of Westchester” and contained an express representation by Marriott that it “is authorized to enter into this Lease on behalf of the County of Westchester as the County’s managing agent for the operation of Rye Playland.”

Modern asserts separate claims against the County and Marriott. It seeks to hold the County liable as principal under the Lease. Alternatively, in the event it is determined that Marriott did not have the legal authority to enter into the Lease on behalf of the County, plaintiff seeks to hold Marriott liable for the unpaid rental for breach of its representation that it did have such authority.

The County resists plaintiff’s claim against it upon the ground that the Lease was void ab initio for noncompliance with applicable statutory requirements for mu- ■ nicipal contracts, and in the event it is held liable to Modern, the County cross-claims against Marriott for the amount it is cast in liability to Modern. Marriott denies liability to Modern upon the ground that it was acting for a disclosed principal — the County, and in the event this defense is rejected and it is found liable to plaintiff, it asserts a cross-claim for indemnification against the County.

Marriott and the County each move to dismiss Modern’s respective claim against it pursuant to Rule 12(b)(6), Fed.R.Civ.P. for failure to state a claim, or alternatively, for summary judgment pursuant to Rule 56. Each makes the same motions against each other’s cross-claim. Modern in turn moves for summary judgment against each defendant and to dismiss their defenses. Each litigant has filed a statement as required by Local Rule 3(g). In view of the submission of affidavits in support of and in opposition to the respective motions, the parties, upon argument of these motions, acknowledged they are ripe for disposition under the summary judgment rule.

I

THE FACTUAL BACKGROUND

On or about January 1, 1981, the County and Marriott entered into an “Interim Management and Consulting Agreement (the “Management Agreement”) whereby Marriott was to manage and operate Playland for a term of two years ending December 31, 1982. The parties contemplated a long-term arrangement but this was never consummated.

On April 23, 1982 the Lease between Modern as lessor and the County as lessee was executed by Marriott, as already noted, as the “Managing Agent” for the County. Prior thereto, on or about March 17, 1982, Michael B. Lichtenstein, house counsel for Marriott, conferred with Richard Pitassy (“Pitassy”), the Chief Deputy Attorney of the County and discussed the proposed Lease and the fact that the term thereof was for three operating seasons, 1. e., 1982, 1983, and 1984, which would extend beyond December 31, 1982, the termination date of the Management Agreement. Pitassy gave his approval and authorized Marriott to execute the Lease. Thereafter a fully executed copy of the Lease was sent to and retained by Pitassy on behalf of the County.

Although the Management Agreement by its terms was effective as of January 1, 1981, it was not formally executed until April 28, 1981. Previously, the County had advised Marriott that contracts had to be entered into promptly so that the concessionaires would have the necessary lead time to prepare their concessions for the scheduled opening of Playland on May 9, 1981. Thus, by telex on April 9,1981, prior to the formal execution of the Management Agreement on April 28, 1981, the County authorized Marriott “to enter into concession agreements with concessionaires for the 1981 Playland season” and pursuant to such authorization Marriott executed a substantial number of such agreements as “Managing Agent for the County of Westchester.”

In June 1982, a group of concessionaires commenced an action in the Supreme Court of the State of New York, Westchester County, against Marriott and the County (“the Fragola” action) to enjoin them from removing the concessionaires and their equipment from Playland. The action centered about a dispute as to the terms of the concessions for the 1982 season. When the concessionaires applied for a preliminary injunction, Brian J. Powers, an Assistant Westchester County Attorney, submitted an affirmation in opposition to the motion and annexed thereto two exhibits, one, a copy of one of the 1981 concessionaire agreements with the County which had been executed by Marriott as “Managing Agent for the County of Westchester” and the other, a proposed agreement for the 1982 season to be executed by Marriott in the same manner. Also submitted in opposition to the motion for a preliminary injunction in the Fragola action was an affidavit of a Marriott Vice President and General Manager of Playland who swore that pursuant to the Management Agreement, Marriott was “empowered to enter into contractual agreements on behalf of the County of Westchester ...” Since Marriott and the County as defendants joined forces in opposition to the Fragola motion for injunctive relief, there can be no issue that the County’s attorneys were fully aware of that statement.

At the end of 1982, as previously noted, the Management Agreement between Marriott and the County terminated. Thereafter the County took over the operation of Playland as of January 1, 1983. On March 17, 1983 the County and Modern entered into a modification agreement of the Lease under which the Himalaya ride was delivered by Modern on May 4,1983 rather than on April 1, 1983 and $5,000 was deducted from the first monthly rent installment due on June 1, 1983. The modification agreement provides: “[a]ll other terms and conditions of the Lease agreement shall remain the same.” The County paid and Modern accepted the Lease payments for the use of the Himalaya for the 1983 season. Modern also received payments due for the year 1982 and all payments were made with the knowledge and consent of the County. On December 9, 1983, the County informed Modern that it would not lease the Himalaya during the 1984 season citing “the questionable validity of the April 23, 1982 Lease with the Marriott Corporation,” as well as other reasons.

II

DISCUSSION

In reliance upon the foregoing undisputed factual array, Marriott contends that: (1) it was authorized to enter into the Lease; (2) even if it did not have express authority, it had implied authority; (3) that the County by the various acts of its officials affirmed, ratified, and recognized Marriott’s authority to enter into the Lease, accepted its benefits and by reason thereof, the County is equitably estopped from challenging its validity.

The County responds that the Management Agreement did not expressly authorize Marriott to enter into a lease with Modern. Marriott first points to a provision of the Management Agreement which authorizes it to “[sjolicit proposals and negotiate leases, concessions, and other agreements” for Playland. However, authority to “solicit” and “negotiate” leases does not constitute a grant of authority to commit the County and to execute on its behalf a three season lease which extends beyond the expiration date of the Management Agreement.

Marriott makes a further argument based upon another clause of the Management Agreement which provides that “Marriott shall perform all the duties normally associated with sound management and provide all services as are customary and usual to such an operation [Playland], including, but not limited to,” as noted-above, “soliciting” and “negotiating” leases. Thus, Marriott urges that in the performance of its duties “normally associated with sound management,” County officials engaged in a course of conduct which if it did not establish “express” authority, substantiates its claim of implied authority to enter into the Lease.

Neither this, nor Marriott’s initial attempt to glean actual authority from the terms of the contract, however, meet the County’s principal contention upon this motion that the acts or omissions of individual County employees cannot serve to create implied authority to enter into the Lease, since it was void ab initio for want of compliance with Westchester County law. In sum, the County contends that the acts, statements and conduct of its attorneys and other officials relative to the Lease cannot grant to Marriott authority absent compliance with the requirements of the statute.

To sustain its position, the County relies principally upon Section 161.11 of the Westchester County Charter which provides that, with exceptions not here applicable, all contracts entered into by the County require the approval of the Board of Acquisition and Contract. This section does not authorize agreements to be executed by or on behalf of the County by a managing or operating agent designated pursuant to an agreement such as that at issue in this action. Moreover, Marriott does not dispute that the County’s Board of Acquisition and Contract did not authorize Marriott to enter into the Lease with Modern on behalf of the County. The fact that it did authorize the underlying agreement between Marriott and the County for management services cannot extend to authorization of the Lease.

Thus, Marriott’s essential claim to relief rests upon a contention that various acts of County officials constituted acceptance, approval and ratification of the Lease and that the County’s receipt of its benefits estop it from asserting its invalidity. Were this a litigation among private entities the Court would have no hesitancy in holding that the conduct and course of action of the County’s attorneys and officials bars the County from asserting the invalidity of the contract. The factors which enter into such a determination differ from those which come into play when a political entity, or municipality, or other governmental agency is involved and whose powers to enter into contracts are restricted and defined by statute. The statutory restrictions upon the powers of officials to commit municipalities or other political entities to contractual obligations are intended to protect the public against wasteful, exorbitant and even corrupt action and other evils and excesses in municipal government. Under such circumstances, private interests must yield to the greater community interests.

[I]t is better that an individual should occasionally suffer from the mistakes of public officers or agents, than to adopt a rule which, through improper combinations or collusion, might be turned to the detriment and injury of the public.

As this Court noted recently in a case involving the City of New York:

The statutory requirement that [a designated commission] must approve all contracts ... is not a mere technicality, but rather a fundamental statutory restriction. The power to approve or disapprove a municipal contract entails the power to dispose of public assets. Restrictions as to which city officials may invoke that power are not a mere formality, but are fundamental to “responsible municipal government.” Without such restrictions any city official, no matter his position, could dispose of public assets. Public accountability requires that restrictions on the persons authorized to enter into municipal contracts be rigidly enforced. The rule, of long standing, is stringent and rigorously exacting since it is designed to protect the public fisc and the public interest.

Whether a moral obligation on the part of the County exists by reason of the acts and conduct of its officials is not the issue. The issue is whether upon the undisputed facts a legal obligation exists in favor of Modern that can be enforced against the County.

The Court is persuaded that the County is beyond the reach of liability under the Lease and cannot be held liable thereon under any theory advanced by Marriott. New York courts have rigidly enforced statutory restrictions governing the authority of officials to commit municipalities to contractual obligations. Thus, over one hundred years ago, the New York State Court of Appeals, in Peterson v. Mayor of New York, while recognizing that a corporation can be bound by implied contracts to be deduced from the acts and conduct of its officers, nonetheless held:

no sort of ratification can make good an act without the scope of the corporate authority. So where the charter or a statute binding upon the corporation, has committed a class of acts to particular officers or agents, other than the general governing body, or where it has prescribed certain formalities as conditions to the performance of any description of corporate business, the proper functionaries must act, and the designated forms must be observed, and generally no act of recognition can supply a defect in these respects.

Accordingly, the fact that officials at the County Attorneys’ office approved or acquiesced in the continuation of the Lease, or that the Commissioner for Parks and Recreation entered into a modification of the Lease with Modern does not overcome the statutory restriction so as to cast the County in liability. Marriott has provided no evidence upon this motion to indicate that any of these officials were authorized initially to approve the contract under the applicable Westchester statute.

Similarly, the fact that the County may have received benefits under contract does not estop the County from challenging its validity nor does it create an implied contract to pay for the benefits received. Thus, as if in direct answer to Marriott’s various contentions here advanced, Chief Judge Lehman writing for a unanimous Court of Appeals, emphasized the continued rigid enforcement of legislative restraints upon officials with respect to contracts as follows:

Mere acceptance of benefits by the city under a contract made without authority does not estop a municipal corporation from challenging the validity of the contract and from denying liability for mate- . rials furnished or services rendered under a contract not made or ratified by a board or officer acting under authority conferred by law and in the manner prescribed by law. Where the Legislature provides that valid contracts may be made only by specified officers or boards and in specified manner, no implied contract to pay for benefits furnished by a person under an agreement which is invalid because it fails to comply with statutory restrictions and inhibitions can create an obligation or liability of the city. In similar case this court has given emphatic warning that equitable powers of the courts may not be invoked to sanction disregard of statutory safeguards and restrictions.

Accordingly, the Court holds that the contract entered into by Marriott with Modern is void insofar as Marriott purported to act as authorized agent for the County. Marriott in making the representation that it had authority to execute the Lease on behalf of the County did so at its own risk. It was charged with knowledge of the public law that applied to contracts of the nature here at issue. Moreover, in this instance, it can be charged with actual knowledge since the Management Agreement to which it was a signatory was approved by both the Westchester County Board of Legislators and the Board of Acquisition and Contract.

The County is entitled to judgment dismissing Modern’s claim against it and dismissing Marriott’s cross-claim against it. Modern is entitled to judgment against Marriott in the sum of $30,000, damages sustained by reason of breach of its representation that it was an authorized agent of the County to enter into the Lease.

The Lease contains a provision that in the event any action is brought in relation to the Lease the prevailing party, shall, in addition to all other sums to which it may be entitled, recover from the unsuccessful party its reasonable attorneys’ fees. Marriott argues it is not liable for the fees because it executed the Lease as agent for the County, a disclosed principal — a claim rejected above. Under the circumstances, its denial of liability for the payment of fees, specifically provided for under the Lease, is without substance. It is liable to Modern for all damages sustained by reason of breach of its representation. Had the County been held as principal it would have been obligated under the Lease to pay the fees as stipulated under the Lease.

Modern has submitted an affidavit by its attorney setting forth the details of services rendered by him and an associate in the prosecution of this action and evaluates the fair and reasonable value thereof at $7,695 representing 39V2 hours for services rendered by the principal attorney at the rate of $150 per hour and 14% hours for services rendered by his associate at the rate of $100 per hour. Reimbursement is also claimed for expenses in the sum of $295.

Marriott challenges the amount so requested as grossly excessive and much beyond the fair and reasonable value of services necessarily required in asserting and advancing Modern’s claims. This contention is based upon Marriott’s position that the various claims and issues involved necessitated that Marriott expend far greater effort than that required by plaintiff since Marriott was not only resisting Modern’s claim against it but seeking indemnification from the County and based upon its own legal charges, it contends that Modern’s request is excessive.

The Court, applying its own experience, is of the view that fair and reasonable compensation for the fair and reasonable value of the services necessarily required in prosecuting Modern’s claims is the sum of $6,000, plus disbursements in the sum of $295.

Judgment may be entered accordingly.

So ordered.

      . Plaintiff alleges that in an attempt to mitigate damages it leased to a third party the Himalaya for the 1984 season and received a rental of $25,000 thereby reducing the amount due under the lease agreement to $30,000.

      . Also discussed with Pitassy was another proposed lease with Continental Park Attractions, Inc.

      . Local Rule 3(g) Statement of Modern at Par. 5.

      . Westchester County Charter sec. 161.11 (Gen'l Code Publisher’s Corp.1979); see also id. sec. 104.11(5)(c) ("Leases of the property of others for County purposes for terms not exceeding five (5) years may be made by and with the approval of the Board of Acquisition and Contracts without action by the Board of Legislators”); Westchester County Administrative Code sec. 249.131 (Gen’l Publisher’s Corp.1979) ("the Commissioner shall have the right and authority, subject to the approval of the Board of Acquisition and Contract ... to grant to any person ... concessions in ... any .park or parks under his jurisdiction”).
      The County additionally urges the invalidity of the contract for failure to comply with an appropriation provision. In view of the Court’s holding, it is unnecessary to reach this issue.

      . See, e.g., Rothschild v. Title Guarantee & Trust Co., 204 N.Y. 458, 464, 97 N.E. 879, 881 (1912);
        Bisbing v. Sterling Precision Corp., 34 A.D.2d 427, 312 N.Y.S.2d 305, 309-10 (3d Dep’t 1970).

      . Potts v. City of Utica, 86 F.2d 616, 619 (2d Cir.1936) (quoting Whiteside v. United States, 93 U.S. (3 Otto) 247, 257, 23 L.Ed. 882 (1876)).

      . Genesco Entertainment, Inc. v. Koch, 593 F.Supp. 743, 749 (S.D.N.Y.1984).

      . 17 N.Y. 449, 454 (1858).

      . Cf. Potts v. City of Utica, 86 F.2d 616, 619 (2d Cir.1936).

      . Seif v. City of Long Beach, 286 N.Y. 382, 387, 36 N.E.2d 630 (1941); see Lutzken v. City of Rochester, 7 A.D.2d 498, 501, 184 N.Y.S.2d 483, 487 (4th Dep’t 1959).

      . See Potts v. City of Utica, 86 F.2d 616, 619 (2d Cir.1936); Genesco Entertainment, Inc. v. Koch, 593 F.Supp. 743, 749 & nn. 23-25 (S.D.N.Y. 1984).

      . See Wittenberg v. Robinov, 9 N.Y.2d 261, 173 N.E.2d 868, 213 N.Y.S.2d 430 (1961); 3 N.Y. Jur.2d secs. 282, 289 at 111 (1980).

      . See Boe v. Colello, 447 F.Supp. 607, 610 (S.D. N.Y.1978); Blank v. Talley Indus., Inc., 390 F.Supp. 1, 4 (S.D.N.Y.1975).


source: Caselaw Access Project

author: CALDWELL, District Judge.

license: Public Domain

text:
    Richard A. SCARNATI, D.O., Plaintiff, v. Leonard WASHINGTON, Jr.; Janardan P. Sinha, M.D.; Murray Feldberg, M.D.; Saul C. Holtzman, M.D.; Harry Walters; and United States of America, Defendants.
    Civ. A. No. 84-0078.
    United States District Court, M.D. Pennsylvania.
    Jan. 3, 1985.
    Mark P. Widoff, Widoff, Reager, Selkowitz & Adler, P.C., Camp Hill, Pa., for plaintiff.

      Sally A. Lied, Asst. U.S. Atty., Harrisburg, Pa., for the U.S.
   MEMORANDUM

CALDWELL, District Judge.

I. Introduction

Before the court is the motion of defendants for summary judgment in the above-captioned matter. The motion now applies only to the United States, the sole remaining defendant pursuant to a stipulation of the parties which was approved on December 13, 1984, and provided that all other defendants be voluntarily dismissed from this case pursuant to Federal Rule of Civil Procedure 41(a)(l)(ii).

The summary judgment motion is opposed by plaintiff, and the parties have agreed to a set of facts that constitutes the evidence in this case. The parties acknowledge that we have before us all relevant materials needed to decide the summary judgment motion. For the reasons discussed hereinafter we have concluded that defendant’s motion should be granted.

II. Background

The plaintiff, Dr. Richard A. Scarnati, initiated this action under 28 U.S.C. §§ 1331 and 1346, contending that he was denied due process in the proceedings that led to his termination as a staff psychiatrist with the Veterans Administration. At the times relevant to the present complaint (September 26, 1982, to October 7, 1983), plaintiff was considered a probationary physician and was subject to the provisions of 38 U.S.C. § 4106. Section 4106(b) of the statute specifies that the probationary period is two years in duration and that the records of probationary physicians are subject to periodic board review. Moreover, if the board concludes that the doctor is “not fully qualified and satisfactory he shall be separated from the service.” Id.

After his appointment to the VA Medical Center in Lebanon, Pennsylvania, plaintiff, a doctor of osteopathy and a psychiatrist, began working in a satellite outpatient clinic in Harrisburg. By January of 1983, complaints from patients and other individuals were being received by VA officials about plaintiff’s ability to establish affirmative relationships with patients and about his treatment methods, particularly his refusal to prescribe medications that some patients had been using with apparent success over long periods of time.

The abrupt changes made by plaintiff in the medications received by his patients stemmed from his view that the use of certain drugs was dangerous except on a short term basis. Following discussions with his superiors about the complaints, plaintiff received a special proficiency report that gave him an unsatisfactory rating. He was also notified that a three-member Professional Standards Board (PSB) would be convened to determine whether plaintiff would have his employment continued or terminated.

At the initial PSB meeting on July 12, 1983, no deliberations occurred nor was testimony heard or exhibits received. On July 19, however, twelve written exhibits were submitted and testimony was received from the plaintiff and from three of his supervisors. Plaintiff addressed the two issues the PSB was considering: the propriety of his medication procedures and his relationship with patients. At plaintiff’s request another session of the PSB was held on August 4, 1983, so that he could further present his case.

On that date, at the conclusion of the proceedings, the PSB recommended plaintiff’s termination and concluded that Dr. Scarnati’s clinical competence was unsatisfactory “due to his inability to establish and maintain productive doctor-patient relationships and his failure to follow the instructions of his supervisors.” Upon further review by a central office board of the VA, the recommendation of the PSB was approved and Dr. Scarnati was notified that he would be terminated at the close of business on October 13, 1983.

On January 18,1984, the complaint in the present action was filed alleging that plaintiff’s discharge violated his fifth amendment due process rights as well as applicable VA regulations. The principal relief sought was reinstatement with back pay pending a hearing pursuant to constitutional requirements and VA regulations.

III. The “Liberty Interest” Issue

Disposition of the current motion turns on the common issue characterizing similar cases where due process violations are alleged, i.e. whether a “property” or “liberty” interest in employment is involved. As numerous cases have held, absent such an interest, plaintiff cannot assert a due process claim under the constitution. See, e.g., Orloff v. Cleland, 708 F.2d 372 (9th Cir. 1983). The United States Supreme Court, in the landmark case of Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972), concluded that an individual does not have a property interest in a governmental benefit, including employment, unless he has entitlement to the benefit. In the present case, it is undisputed that plaintiff was a probationary physician and therefore had no property interest in continued employment as a VA staff psychiatrist. Thus his due process claim is dependent upon whether his problems with the VA infringed a constitutionally protected liberty interest.

Formulating a precise definition of what constitutes a liberty interest is difficult. In Stretten v. Wadsworth Veterans Hospital, 537 F.2d 361 (9th Cir.1976), the court stated,

The “liberty interest” is the interest an individual has in being free to move about, live, and practice his profession without the burden of an unjustified label of infamy. Board of Regents v. Roth, 408 U.S. at 572, 92 S.Ct. at 2706, 33 L.Ed.2d at 557. In the context of Roth-type cases, a charge which infringes one’s liberty can be characterized as an accusation or label given the individual by his employer which belittles his worth and dignity as an individual and, as a consequence is likely to have severe repercussions outside of professional life. Liberty is not infringed by a label of incompetence, the repercussions of which primarily affect professional life, and which may well force the individual down one or more notches in the professional hierarchy. The distinction is not perfect; our utility affects our dignity and worth whether viewed from within or without. However, implicit in such a distinction is the notion that the constitutional need for procedural protection is not strong when the charge (e.g., incompetence) involves a matter which is peculiarly within the scope of employer-employee relations and when the likely results of even a false charge are reduced economic returns and diminished prestige, but not permanent exclusion from, or protracted interruption of, gainful employment within the trade or profession. Employers, including the Veterans’ Administration, have a strong interest in conserving resources and dealing expeditiously with incompetent employees.

Id. at 366.

Stretten, a case heavily relied upon by defendant, bears discussion. The plaintiff, a physician who was employed as a resident in pathology at a VA hospital, was terminated prior to completing his first year of residency essentially for unsatisfactory performance of his duties. The appellate court in Stretten concluded that the district court had erred in finding that a liberty interest was infringed by the doctor’s dismissal and found instead that the record below did not support a contention that such an interest had “in any way been infringed.” Id. Moreover, the court observed,

All the charges which surround his termination center around his inability to perform satisfactorily as a pathology resident, including an unwillingness or inability to deal with his coworkers in a proféssional manner. These are not the kind of charges which are likely to preclude Dr. Stretten from practicing medicine, and in fact there is evidence in the record that the charges may not have precluded him from staying in his specialty of pathology, [footnote omitted]. Thus we find no infringement of liberty and hence no deprivation of due process on that account, [footnote omitted].

Id.

In the present case, plaintiff has argued that his situation is distinguishable from that of the physician in Stretten because he can show that the charges against him have interfered with his employment and will continue to hinder his finding work as a physician. The stipulations of fact filed in this matter, however, belie plaintiffs contentions. The stipulations indicate that all VA installations receive a list of “some former employees of the VA whose employment is terminated” (emphasis supplied). The central office of the VA must be contacted before such individuals may be hired. Dr. Scarnati has provided a lengthy list of prospective employers to whom he made application from October 13, 1983, through September 26, 1984. Whether or not plaintiff’s name has been circulated to VA installations is unclear but at any rate it appears that plaintiff has not applied for employment at such facilities. Under the circumstances, we cannot conclude that plaintiff is precluded from all future positions with the VA.

In addition, although the stipulations indicate that other federal agencies may receive copies of plaintiff’s personnel file if they so request, the record is unclear on whether any federal agency has made such a request. It is undisputed, however, that of the 124 prospective employers on plaintiff’s list only one contacted the VA concerning his employment history. Thus, although plaintiff may feel compelled to consent to disclosure of his VA personnel folder to possible employers who request the information, such requests to date have been minimal. By his own admission, Dr. Scarnati has voluntarily disclosed the circumstances of his discharge not only to potential employers but also to the general public, largely through the news media.

Plaintiff’s efforts to publicize his discharge are significant in the context of the form of action he has brought. In Orloff, supra, the United States Court of Appeals for the Ninth Circuit reversed the lower court’s grant of summary judgment for defendants because of deficiencies in the record, among which were “whether the VA publicized the reasons for Orloff’s discharge.” 708 F.2d at 378. As the court noted,

[W]hen the government dismisses an individual for reasons that might seriously damage his standing in the community, he may be entitled to notice and a hearing. Board of Regents v. Roth, 408 U.S. at 573 n. 12, 92 S.Ct. at 2707 n. 12. The accusations, however, must be publicized. See Bollow v. Federal Reserve Bank, 650 F.2d 1093, 1101 (9th Cir.1981), cert. denied, 455 U.S. 948, 102 S.Ct. 1449, 71 L.Ed.2d 662 (1982). Moreover, the accuracy of the charges must be contested. Vanelli v. Reynolds School District No. 7, 667 F.2d 773, 777 (9th Cir.1982).

Id. The court in Bollow, supra, citing among other case, Bishop v. Wood, 426 U.S. 341, 348, 96 S.Ct. 2074, 2079, 48 L.Ed.2d 684 (1976), found that “[ujnpublicized accusations do not infringe constitutional liberty interests because, by definition, they cannot harm ‘good name, reputation, honor, or integrity.’ ” 650 F.2d at 1101.

No evidence exists in the present case that the publicity generated about plaintiff’s dismissal originated with the VA. Thus, the charges against plaintiff would not have been publicized, with the possible exception of information circulated to VA installations, but for Dr. Scarnati’s efforts to focus media attention on his problems with the VA. Under the circumstances we must conclude that all publicity that could negatively influence plaintiff’s status in the job market was generated by plaintiff. The focus of the relevant cases, such as Bollow, supra, and Orloff, supra, is on whether adverse publicity originated with the employer. The VA in the present matter played no role in providing information to the media regarding Dr. Scarnati’s discharge.

The stipulations of fact further reveal that although Dr. Scarnati has not had fulltime work as a psychiatrist since his dismissal, he worked for two months in the summer of 1984 for the Harrisburg Institute of Psychiatry. A glowing letter from his supervisor at this Institute has been submitted for our consideration. Such a reference should facilitate plaintiffs finding future employment as a psychiatrist.

Unlike the plaintiff in Orloff, who was charged with assigning VA doctors to perform services for a private medical corporation and with working privately in other locations during hours when he was credited with being on duty at a VA installation, Dr. Scarnati was not charged with dishonesty or immorality or other actions rising to the “moral turpitude” standard discussed in Stretten, supra. Rather he was terminated because he could not establish productive relationships with his patients and did not follow directions from his supervisors, particularly with regard to abrupt medication changes for his patients.

We have carefully considered the case of Giordano v. Roudebush, 448 F.Supp. 899 (S.D.Iowa 1977) (hereinafter Giordano I) relied upon by Dr. Scarnati. In Giordano I a liberty interest was found to have been infringed when a probationary urologist was dismissed, A major concern of the Giordano I court was that Dr. Giordano was deprived of a hearing with “some measure of procedural protections.” Id. at 904. In the present case, we have concluded that a liberty interest was not infringed and that no due process hearing was required. Nevertheless, for the sake of clarification, we shall examine the due process issue and in doing so, distinguish the present matter from Giordano I.

IV. Due Process Considerations

Plaintiffs due process attack focuses on the exhibits considered by the PSB. First, Dr. Scarnati contends that he had never seen three of the twelve exhibits presented to the PSB on July 19, 1983, until he received copies of all the exhibits in October, 1983. The three exhibits in question addressed patient complaints about Dr. Scarnati with regard to abrupt medication changes and/or poor rapport with patients. Plaintiff has further contended that three other exhibits were incomplete because they were complaints about him to which one of his superiors responded. Plaintiff contends that the responses, which were not submitted for consideration by the PSB, approved plaintiffs actions and thus were erroneously and prejudicially omitted. The final contention regarding exhibits is that a memorandum dated December 17, 1982, to plaintiff from his direct supervisor was not submitted to the PSB. That document addressed the results of an audit of the records of fifteen out-patients, asked that Dr. Scarnati “note the deficiencies,” and concluded with “I know you have corrected most of these and I feel you are doing a fine job. Keep up the good work.”

Plaintiff, as a probationary employee, clearly was governed by the provisions of 38 U.S.C. § 4106 rather than 38 U.S.C. § 4110, which applies only to tenured employees. Two eases that have comprehensively discussed the differences between the process that is due employees pursuant to the aforementioned statutory provisions are Kenneth v. Schmoll, 482 F.2d 90 (10th Cir.1973) and Giordano v. Roudebush, 617 F.2d 511 (8th Cir.1980) (hereinafter Giordano II). In Kenneth, a case in which the appellate court reversed the district court’s order that a probationary VA nurse be reinstated pending a full evidentiary hearing, the court concluded,

[Tjhe VA views the probationary period as being an extension of the appointment process, which provides the final test of actual performance on the job and which is designed to protect the YA against the retention of individuals who are found in actual practice to be unsuited for permanent employment. In any event, there is most certainly no language in § 4106(b) which suggests to us that a probationary employee is entitled to a full-blown, trial-like hearing, with the right to counsel, right to confront adverse witnesses and cross-examine, before he be “separated from the service.” On the contrary, we believe the exact opposite is indicated.
In line with the provisions of § 4106(b), the regulations promulgated by the Administrator to effectuate this particular legislative intent sets up a review board known as the Professional Standards Board, which is authorized, among other things, to conduct a so-called summary review “when summary separation from the service may be justified.” Under these regulations, notice is required, which notice is to be “brief, but in sufficient detail so that the employee will clearly understand why his services are considered deficient and/or the nature of the incident involved,” with the subject of the hearing permitted to thereafter appear before the Professional Standards Board and make an oral or written statement in his own behalf, though not being permitted to confront and cross-examine witnesses or be represented by counsel.

Id. at 93-94. Although nurse Kenneth had alleged but not presented to the trial court a constitutional right to a full scale hearing, the appellate court “in the interest of bringing the matter to speedy conclusion” ordered that no hearing be held on “whether a preliminary injunction could be based on any constitutional ground.” Id. at 95.

In Giordano II, the court in discussing the same statutory provisions and their separate and distinct applicability to probationary and tenured medical employees, noted that plaintiff urologist upon rehearing had received a 2-1 retention vote by the PSB convened in his case. The heart of Giordano I, however, in contrast to the present case, was the court’s observation that plaintiff would have had no right to a constitutional due process hearing except to give him the opportunity to refute and/or explain the stigmatizing statements in his record. 448 F.Supp. at 899.

In the present case, plaintiff, unlike Dr. Giordano, appeared before the PSB twice and had ample notice of the charges being considered, as well as the opportunity to counter them. Insofar as the exhibits are concerned, we agree with defendant’s position that plaintiff was not entitled to copies of all materials reviewed by the PSB. Even assuming arguendo that Dr. Scarnati could demonstrate a right to these exhibits, any error in failing to provide them would appear harmless. The favorable memorandum of December 17, 1982, has no relevance to the proceedings initiated later on the specific problems before the PSB. The letters of March 7 and June 23, 1983, do not contain blanket approvals of Dr. Scarnati’s methods. Finally, the exhibits dated March 16, March 17, and July 6, 1983, either reiterate complaints of which plaintiff was aware through other sources or, in the case of the July memorandum, is somewhat vague so that any rebuttal would of necessity be equally general.

V. Conclusion

In conclusion, even were a liberty interest implicated in the present case, and we have determined it was not, plaintiff was accorded more than ample opportunity to answer and refute the charges against him. Based upon the discussion above the defendant’s motion for summary judgment will be granted in an accompanying order.

ORDER

AND NOW, this 3rd day of January, 1985, IT IS ORDERED THAT:

1. Defendant’s motion for summary judgment is granted.
2. The Clerk of Court shall close the file.

       But a label which would prevent an individual from practicing his chosen profession at all may have consequences so severe that liberty would be infringed. Such a formulation raises the possibility that in some cases due process rights will turn on a definition of the scope of a particular profession. In this case, both parties appear to have assumed that the relevant profession is "physicians.”

      . The first two were memoranda dated March 16 and March 17, 1983, and were written by the assistant chief of the psychiatry service, one of plaintiffs supervisors. The third, dated July 6, 1983, was from a VA team leader to the chief of the psychiatry service.

      . The exhibits consisted of letters dated January 28 and February 23, 1983, and a memorandum dated June 19, 1983. The February correspondence came from a woman with a personal care home for veterans and detailed medication changes and the results thereof for several of Dr. Scarnati’s patients.


author: GARRITY, District Judge.

text:
    ASSOCIATED GENERAL CONTRACTORS OF MASSACHUSETTS, INC., et al., Plaintiffs, v. BOSTON DISTRICT COUNCIL OF CARPENTERS et al., Defendants.
    Civ. A. No. 84-3603-G.
    United States District Court, D. Massachusetts.
    Jan. 3, 1985.
    John D. O’Reilly, III, Framingham, Mass., for plaintiffs.
    Michael A. Feinberg, Feinberg & Feld, Richard W. Coleman, Boston, Mass., for defendants.
   MEMORANDUM AND ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

GARRITY, District Judge.

This action is an attempt to enjoin the defendants Boston District Council of Carpenters and Local # 33 of the United Brotherhood of Carpenters (“Carpenters”) from taking their grievance against the Blount Brothers Corp. (“Blount”) to arbitration. Underlying the grievance was a jurisdictional dispute between the Carpenters and the Massachusetts District Laborers Council of the Laborers International Union (“Laborers”) concerning the erection of certain scaffolding at the Lafayette Place construction project.

Blount was the general contractor on the project and through its collective bargaining representative, Associated General Contractors, Inc. (“AGC”), Blount had entered into agreements with both the Carpenters and Laborers. Both agreements contained clauses which designated the job of erecting scaffolding as within the jurisdiction of the respective union. Both agreements also required Blount to subcontract “work covered by this agreement” only to companies which had also signed agreements with the respective unions.

In the course of the construction of Lafayette Place Blount subcontracted with the Anastasi Brothers Corp. (“Anastasi”) for masonry work. Included in that subcontract was work involving the erection of masonry scaffolding. Anastasi was a signatory to a contract with the Laborers, but not with the Carpenters. Anastasi proceeded to assign the scaffolding work to its employees represented by the Laborers. The Carpenters objected to the assignment and engaged in a work stoppage.

The jurisdictional dispute was eventually resolved before the National Labor Relations Board (the “Board”) pursuant to Section 10(k) of the National Labor Relations Act, 29 U.S.C. § 160(k). The Board found that Anastasi was the “employer” which was subjected to competing claims for the purposes of its decision. Laborers Local 223 (Anastasi Bros., Inc.), 272 NLRB No. 111, slip op. p. 6. In other words, as far as the Board was concerned, the dispute was only among Anastasi and the two unions. Blount, as the general contractor, was not directly involved.

In the process of deciding to whom Anastasi should have assigned the scaffolding work the Board considered (1) the existence of collective bargaining agreements between the employer (Anastasi) and the unions, (2) the employer’s preferences and past practices, (3) area practice, and (4) economy and efficiency of operations. A majority of the Board found that each of these factors weighed in favor of Anastasi’s assignment of the work to the Laborers. Id. at pp. 9-12.

Prior to the commencement of the Board proceedings the Carpenters filed a grievance with Blount concerning its having subcontracted the masonry scaffolding work to Anastasi, claiming that the subcontract was a breach of Blount’s agreement with the Carpenters. Soon after the Board’s decision was issued the Carpenters took their grievance before an arbitrator, who found that, despite the Board decision, the Carpenters’ grievance was arbitrable and set the matter down for hearing on the merits. Blount and AGC then brought this action to restrain further arbitration.

The plaintiffs contend that the Carpenters’ grievance is in reality a jurisdictional dispute and as such constitutes an impermissible attempt to circumvent the Board’s decision. The Carpenters, on the other hand, argue that the dispute is purely contractual and is not preempted or controlled by the 10(k) determination. After examining the parties’ memoranda and a hearing on December 20, 1984, we find that the Carpenters’ position more accurately describes the nature of this dispute.

In arguing that the 10(k) determination preempts the arbitration, the plaintiffs contend that the Board implicitly decided the contract claim. Since the Board awarded the job of erection of masonry scaffolding to the Laborers such work is not “work covered by [the Carpenters’] agreement” according to the plaintiffs and is therefore not subject to that agreement’s restraint on subcontracting. However, the Board’s decision was much more narrow in scope. It held only that a particular employer, Anastasi, correctly awarded such work on a particular jobsite to the Laborers. The decision did not require Blount to subcontract the work to Anastasi; it did not prohibit Blount from subcontracting the work to employers who have an agreement with the Carpenters as well as the Laborers; nor did it hold that any subcontractor performing such work must assign it to the Laborers.

The plaintiffs do not dispute that Blount could have fulfilled their contractual obligations to both unions by subcontracting the scaffolding work to a subcontractor who had signed agreements with both unions just as Blount itself had done. Nor is it disputed that Blount could have retained the work for its own employees without breaching the agreements. Therefore, a decision by the arbitrator that the Carpenters’ agreement was breached by Blount would not cause Blount to be subjected to conflicting requirements.

For this reason the cases cited by plaintiffs, beginning with Carey v. Westing house Electric Corp., 1963, 375 U.S. 261, 84 S.Ct. 401, 11 L.Ed.2d 320, which held that an employer is not liable in damages when it makes a disputed job assignment in conformity with the Board’s determination are not on point. The rationale for immunizing an employer from contract liability in a jurisdictional dispute is to prevent the employer from being subjected to the “conflicting demands of two or more unions.” Associated General Contractors v. International Union of Operating Engineers, Local 701, 9 Cir.1976, 529 F.2d 1395, 1397 (“AGC v. Local 701 ”). Blount was not an employer making job assignments to one of two rival unions: as was recognized in the Board’s decision, the employer subject to conflicting demands in the present case was Anastasi. Since Anastasi is not even a party to the arbitration, an award favorable to the Carpenters would have no impact on Anastasi’s assignment of the work to the Laborers.

Also inapposite are the Board decisions cited by plaintiffs. They demonstrate only that the Board treats union demands of a general contractor to arbitrate in the midst of a strike over jurisdiction as unfair labor practices in some instances. The grievances in the Board decisions were apparently without merit and designed solely to bring more pressure to bear on the beleaguered employer. See, e.g., Carpenters Local 102 (Meiswinkel Interiors), 260 NLRB No. 120, 109 LRRM 1245 (1982); Ironworkers Local 350 (Perini Corp.), 271 NLRB No. 183, 177 LRRM 1115 (1984). In the one case in which there was an arguably valid contract claim, a federal district court sent the matter to arbitration. Carpenters Local 753 (Blount Bros.), 175 NLRB No. 81, 71 LRRM 1024, 1024 (1969). Here there is no ongoing jurisdictional dispute since the work has been definitively awarded to the Laborers and the Carpenters’ grievance appears to have merit.

Accordingly, we find that AGC v. Local 701, supra, should control the disposition of this matter and that the arbitration should be permitted to go forward. Contrary to the argument of the plaintiffs, AGC v. Local 701 is not limited merely to those situations in which a general contractor is signatory to only one relevant union agreement, but to any case in which the general contractor is not subjected to inconsistent demands by two or more union agreements. While the presence of a second union agreement may result in a jurisdictional dispute at the subcontractor level, the Carpenters may be entitled by virtue of the agreement with Blount to have entered that struggle on equal footing with the Laborers, at least to the extent of having a collective bargaining agreement with the employer.

Since the arbitration is one dealing only with the contract right of the Carpenters to have scaffolding work done by employers who have agreements with the Carpenters and will not grant the Carpenters the right to perform work at Lafayette Place or any other construction project, it has no jurisdictional component and therefore there is no reason to make the arbitration tripartite. The Laborers have no rights at stake in the contract dispute which they are entitled to protect.

For the above reasons, the plaintiffs’ constructive motion for summary judgment and the plaintiffs’ and Laborers’ motions to make the arbitration tripartite are denied. The Carpenters’ constructive motion for summary judgment is granted.

      . Although not designated as motions for summary judgment by the parties, the motion and opposition filed by. the parties are consistent with Fed.R.Civ.P. 56 and are dispositive of this case. Therefore the court will treat the plaintiffs’ motion and the Carpenters’ opposition as cross motions for summary judgment.

      . The presence of the Laborers’ agreement and their claim to the disputed work also makes problematic the propriety of money damages, should the Carpenters request it, since it appears quite possible that the Laborers would have been awarded the work even had the alleged breach never occurred. However, the plaintiffs did not request that the remedy be limited to a "cease and desist” order and therefore the court will not discuss the problem at great length. Furthermore, we note that the question of the appropriate remedy was stipulated by the parties to be an issue for the arbitrator.


author: GLASSER, District Judge:

text:
    Richard J. BOSIO, Plaintiff, v. NORBAY SECURITIES, INC. and Benjamin Taormina, Defendants.
    No. 84 Civ. 3914.
    United States District Court, E.D. New York.
    Jan. 8, 1985.

      Daniel J. Piliero II, Eileen Malloy-Wall, Tighe, Curhan & Piliero, Washington, D.C., for plaintiff.
    Ormsten & Evangelist, New York City, for defendants.
   MEMORANDUM AND ORDER

GLASSER, District Judge:

Plaintiff brings this action seeking compensatory and punitive damages under the Securities and Exchange Act of 1934, 15 U.S.C. § 78a et seq. (the “1934 Act”), and state law. Defendants have moved to dismiss the complaint or parts thereof for a variety of reasons. Plaintiff has also moved to amend the complaint. For the reasons set forth below, defendants’ motion to dismiss the first, second, third and fourth causes of action, as well as the demand for punitive damages, is granted. As to the fifth and sixth causes of action, defendants’ motion is denied. Plaintiff may amend his complaint in a manner consistent with this opinion.

Background

At all the time relevant to the complaint, plaintiff Bosio, a California resident, maintained an account with defendant Norbay Securities, Inc. (“Norbay”), a securities brokerage firm incorporated in New York and a member of the Boston Stock Exchange (“BSE”) and National Association of Securities Dealers (“NASD”). Defendant Taormina is a broker-dealer employed by Norbay who acted as plaintiff’s broker during the period in question.

In July 1982, in connection with a problem between plaintiff and Norbay which is not at issue here, plaintiff informed defendant Taormina and a Ms. Spinella, another broker, that neither they nor any other brokers at Norbay should enter into any transactions for his securities account without his express authorization. Later in 1982, plaintiff instructed Ms. Spinella, who was then with another firm, to sell 49,000 of his 223,000 shares of Western Consortium stock, send him the proceeds of that sale, and reissue to him a certificate for the remaining 174,000 shares. Because Spinella’s firm could not handle the transaction, plaintiff was referred back to Norbay.

At plaintiff's instruction, Taormina executed the sale of the Western Consortium stock. This dispute arises, however, from plaintiff’s allegation that the $43,947 in proceeds resulting from that sale were never turned over to him. Rather, the complaint alleges, these proceeds were put into “an account held with Norbay of a third party.” Plaintiff alleges that although Taormina initially represented that the proceeds would be transferred to plaintiff, Taormina has never done so despite numerous demands by plaintiff. Neither the identity of this third party nor the circumstances surrounding this alleged improper transaction have been revealed by either party to this Court.

In his complaint, plaintiff has alleged six causes of action as follows: (1) defendants violated § 10(b) and § 15(c)(1) of the 1934 Act and the rules promulgated thereunder; (2) Norbay is liable under § 20 of the 1934 Act for any damages caused to plaintiff by Taormina by violations of the Act; (3) defendants violated NASD and BSE rules requiring fair dealings with customers; (4) defendants committed common law fraud by intentionally making material misrepresentations or omissions on which plaintiff relied and thereby suffered injury; (5) defendants breached a fiduciary duty to plaintiff by failing to carry out plaintiff’s instructions to forward the proceeds to him and instead transferred them to a different account; and (6) defendants converted plaintiff’s proceeds.

For relief, plaintiff seeks compensatory damages in the amount of the proceeds, pre- and post-judgment interest, and an estimated $15,000 in attorneys’ fees. On the fiduciary duty claim plaintiff seeks punitive treble damages under California law, and on the fraud claim, plaintiff seeks the same damages based on common law. Discussion

Because defendants have moved to dismiss the complaint or parts thereof for a variety of reasons, I will address defendants’ motion as it pertains to each cause of action.

Causes of Action Under The 1934 Act

In his first cause of action, plaintiff alleges that in connection with their sale of the Western Consortium stock, defendants

willfully and fraudulently through the means and instrumentalities of interstate commerce (1) employed a device, scheme or artifice to defraud Bosio; and/or (2) made misrepresentations and/or omissions of material fact to Bosio; and/or (3) engaged in acts, practices, or a course of business which operated to defraud all [sic] and/or deceive Bosio

in violation of § 10(b) of the 1934 Act, 15 U.S.C. § 78j(b), and § 15(c)(1) of the Act, 15 U.S.C. § 78o (c)(1).

Section 10(b) of the 1934 Act makes it unlawful for anyone to use a device “in connection with the purchase or sale of any security.” Section 15(c)(1) prohibits a broker or dealer from using the mails or other means of interstate commerce “to effect any transaction in, or to induce or attempt to induce the purchase or sale of, any security____” Although not specified in the complaint, plaintiff’s motion papers aver that the alleged securities violations stem from Taormina’s representation that he would complete the Western Consortium transaction in accordance with plaintiffs instructions, and that Taormina thus induced plaintiff to allow defendants to handle the transaction. Plaintiff alleges that defendants’ fraudulent act was the “improper distribution of proceeds in connection with the sale of Western Consortium, Inc. stock.” Plaintiff’s Memorandum at 10, 13.

Defendants move to dismiss this cause of action for failure to allege fraud with particularity as required by Rule 9(b) and for failure to allege the essential elements of the statutory violations alleged. Because I find that plaintiff fails to state a claim under § 10(b) and § 15(c)(1), I need not address any other alleged bases for dismissal.

Plaintiff relies on Opper v. Hancock Securities Corp., 250 F.Supp. 668 (S.D.N.Y.), aff'd, 367 F.2d 157 (2d Cir.1966) to support his allegation that a failure to follow a customer’s order is actionable under the Act. In that case, the plaintiff had requested that the defendant, a broker-dealer, sell 3,000 of plaintiff's shares of stock at the best price obtainable. The defendant assured plaintiff that it would sell the shares but did not do so, allegedly because it had not yet obtained a market for the shares. At the same time, however, defendant sold over 6,000 of its own shares of the same stock.

The Opper trial court found that plaintiff had stated a cause of action under § 10(b) and § 15(c)(1). The court held:

It has been settled for a long time that when Congress struck in this legislation at the particularized problems of “manipulative, deceptive, or otherwise fraudulent” practices in the securities markets, it meant to reach frauds that “may take on more subtle and involved forms than those in which dishonesty manifests itself in cruder and less specialized activities.” ... We are concerned in this case with a garden variety instance of deception, nondisclosure, and self-preferment by a broker purporting to act as a selling agent.

250 F.Supp. at 673 (citations omitted). Affirming the district court, the Second Circuit itself differentiated Opper from the instant case. The court stated that a broker’s failure to carry out a sale order while disposing of its similar stock constituted a breach of contract and securities law violation. 367 F.2d at 158 (citing Barnett v. United States, 319 F.2d 340, 344, 345 (8th Cir.1963)). Opper therefore does not provide support for plaintiff’s position.

I find, however, that other authorities warrant the dismissal of plaintiff’s claims under § 10(b) and § 15(c)(1). It is well established in this circuit that the “in connection with” the purchase/sale of securities requirement of 10(b) requires using a device “of a sort that would cause reasonable investors to rely thereon, and [therefore] cause them to purchase or sell a corporation’s securities.” SEC v. Texas Gulf Sulfur, 401 F.2d 833, 860 (2d Cir. 1968) (en banc), cert. denied, 394 U.S. 976, 89 S.Ct. 1454, 22 L.Ed.2d 756 (1969) (emphasis added). This principle has been reiterated in numerous district and circuit court cases in this circuit. The “fraud practiced must have been prior to or contemporaneous with the sale of securities,” Freschi v. Grand Coal Venture, 551 F.Supp. 1220, 1227 (S.D.N.Y.1982) (citing Kogan v. National Bank of North America, 402 F.Supp. 359, 361 (E.D.N.Y.1975)) (emphasis added). As stated in plaintiff’s motion papers and at oral argument, plaintiff alleges that defendants acted in violation of the 1934 Act because Taormina fraudulently promised to “follow plaintiff’s instructions” regarding the sale of the Western Consortium stock and falsely represented that he would forward the proceeds of the sale to plaintiff. This sort of misrepresentation, if it was a misrepresentation at all, goes not to any inducement by the defendants regarding the investment purpose of the sale, but to the arrangements concerning the mechanics of the sale. As such, plaintiff’s claims under § 10(b) and § 15(c)(1) must fail.

Further support for this conclusion is found in Smith v. Chicago Corp., 566 F.Supp. 66 (N.D.Ill.1983). Plaintiff’s causes of action under § 10(b) and Illinois law were based on claims that defendant’s employee failed to make certain purchases for plaintiffs’ accounts although instructed to do so, and also fraudulently withdrew funds from plaintiffs’ accounts. Two issues were therefore before the court: whether plaintiffs had standing under § 10(b) and whether a plaintiff can state a claim under that section “when purchases he orders are not made and money is misappropriated from his securities account.” Id. at 68. Although not precisely identical, the second issue is similar to that presented in the instant case.

Relying on Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975) and Sante Fe Industries, Inc. v. Green, 430 U.S. 462, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977), the Smith court found that plaintiffs lacked standing because although they requested that defendant’s employee purchase stock on their behalves, they never actually became “purchasers” within the meaning of § 10(b). In dictum that is helpful to the instant analysis, however, the court went on to state that plaintiffs had also failed to state a claim under § 10(b). Quoting Sante Fe, the court reiterated the principle that “a cause of action under the antifraud provisions of the Securities Exchange Act should not be implied where it is ‘unnecessary to ensure the fulfillment of Congress’ purposes’ in adopting the Act,” that purpose being “full and fair disclosure in securities transactions.” 566 F.Supp. at 69, 70 (citing Sante Fe, supra, 430 U.S. at 477, 478, 97 S.Ct. at 1303). The Smith court determined:

Thus, a 10b-5 action should not be implied where the wrongs sought to be addressed in an action “do not fall within § 10(b)’s fundamental purpose of requiring full and fair disclosure to participants in securities transactions of the information that would be useful to them in deciding whether to buy or sell securities.”

566 F.Supp. at 70 (citing O’Brien v. Continental Illinois National Bank & Trust Co., 593 F.2d 54, 62-63 (7th Cir.1979)). Asking itself what decisions defendant’s employee’s alleged misrepresentations may have influenced, the court found that “[the] information withheld from plaintiffs was material to their decision not to terminate their account with the defendant, but it did not relate to the decisions to make purchase requests.” 566 F.Supp. at 70. Similarly, the alleged misrepresentation here cannot be said to have been the type of fraud against which § 10(b) was intended to protect. See Chemical Bank v. Arthur Andersen & Co., 726 F.2d 930 (2d Cir. 1984).(1)

The plaintiff here complains essentially of defendants’ failure to transmit to him the proceeds of the sale of stock. Assuming that defendants’ were at fault in doing so, the words of Smith are again appropriate:

Plaintiffs’ claim here is essentially one for conversion. The only connection with federal securities laws is that the funds were converted from a securities investment account. However, the allegedly converted funds were not used to purchase securities and none of the acts complained of by plaintiffs involved the actual sale or purchase of securities. In light of the principles enunciated by the Court in Sante Fe and Blue Chip Stamps, this court is unwilling to imply a cause of action under Section 10(b) in this case, where the underlying claim is, in essence, one of state law and where no actual securities transactions are involved.

566 F.Supp. at 70.

For the reasons set forth above, I find that plaintiff has failed to state a claim under both § 10(b) and § 15(c)(1), which has the same essential requirements as the former section. See supra at 4. If all brokerage customers were permitted to maintain § 10(b) and § 15(c)(1) claims by alleging that the defendant misrepresented its intention to follow the customer’s instructions and to turn over the proceeds of a sale to the customer, the courts would be flooded with innumerable conversion claims that were not intended to be covered by the 1934 Act. Such “bootstrapping” of a conversion claim should not be permitted. See Shemtob v. Shearson, Hammill & Co., 448 F.2d 442, 444 (2d Cir.1971) (plaintiff could not bootstrap claim that defendant failed to sell stock promptly and later liquidated margin account in breach of alleged agreement into § 10(b) by conclusorily alleging defendant’s actions were fraudulent).

In his second cause of action, plaintiff alleges that defendant Norbay is liable under § 20 of the 1934 Act, 15 U.S.C. § 78t, for any violations of the Act committed by Taormina. That section imposes liability upon “[ejvery person who, directly or indirectly, controls any person liable under any provision of this chapter____” Because I have found that plaintiff’s purported § 10(b) and § 15(c)(1) claims against Taormina are insufficient, plaintiff cannot state any claim against Norbay under § 20.

For the above reasons, plaintiff’s first and second causes of action are dismissed.

Claims Under the NASD and BSE Rules

Defendants urge that the third cause of action, alleging violation of the NASD and BSE rules requiring fair dealing with customers, should be dismissed because a private right of action does not exist under these rules, or, alternatively, because this cause of action does not specify the rules allegedly violated or how such rules were allegedly violated. I find that dismissal of this claim is warranted for both of the reasons set forth by the defendants.

At the outset it is worth noting that plaintiff’s third cause of action does not state the specific rules which plaintiff alleges have been violated; rather, plaintiff suggests only that “Norbay and Taormina violated the NASD and Boston Stock Exchange rules of fair dealings with customers.” Certainly such an allegation is insufficient within the meaning of Fed.R.Civ.P. 8(a) and 9(b) to apprise the defendants and this Court of the nature of plaintiff’s claim. Plaintiff attempts to correct this insufficiency by stating in his memorandum in opposition to this motion at 15:

The NASD Rules contain only one rule covering “Fair Dealing with Customers.” NASD Manual, Rules of Fair Practice, Art. Ill, Sec. 2, ¶ 2152. As such, it is not “beyond the defendant’s ability to divine the nature of the charges” contained in Count III as suggested in their memorandum. A cursory examination of the NASD Rules would have indicated which rule Defendants have allegedly violated.®

While plaintiff’s contention may be true, it is appropriate for plaintiff to apprise the court and defendants of the identity of this rule in the complaint and not in its opposition papers. The defendant should not be required to “divine” the meaning of the plaintiff’s pleading. See Rule 8(a)(2).

Even if plaintiff’s third cause of action had stated the specific NASD and BSE rules upon which plaintiff relies, it is unlikely that plaintiff’s claim could survive a motion to dismiss. Plaintiff asserts that cases such as Rolf v. Blyth Eastman Dillon & Co., 424 F.Supp. 1021 (S.D.N.Y. 1977), aff'd, 570 F.2d 38 (2d Cir.), cert. denied, 439 U.S. 1039, 99 S.Ct. 642, 58 L.Ed.2d 698 (1978), and Vetter v. Shearson Hayden Stone, Inc., 481 F.Supp. 64 (S.D.N. Y.1979), permit a plaintiff to assert a private right of action under the NASD and BSE rules. These cases are, however, in-apposite. Although the district court in Rolf denied a motion to dismiss claims alleging violations of Rule 405 of the New York Stock Exchange (“NYSE”) and Art. Ill, § 2 of the NASD Rules, the circuit court affirmed on other grounds, expressly stating that it did not reach the question of “whether there is an implied cause of action under the NYSE rule or the NASD constitution.” 570 F.2d at 41. In Vetter, the court dismissed a complaint without prejudice for failure to allege fraud with particularity, again without reaching the question of whether a plaintiff could assert a private right of action based upon an alleged violation of NYSE Rule 408. 481 F.Supp. at 66.

While the Second Circuit has not yet ruled on whether a private right of action can be maintained for violation of stock exchange rules, Leist v. Simplot, 638 F.2d 283, 296 n. 11 (2d Cir.1980), aff’d sub. nom. Merrill Lynch Pierce Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 102 S.Ct. 1825, 72 L.Ed.2d 182 (1982), many recent authorities weigh against the implication of such a right. The right to assert a private right of action in general has been narrowed in recent years by the decisions of the Supreme Court in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), Touche Ross & Co. v. Redington, 442 U.S. 560, 99 S.Ct. 2479, 61 L.Ed.2d 82 (1979) and Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 100 S.Ct. 242, 62 L.Ed.2d 146 (1979). The effect of these decisions in the context of implied rights of action under NASD and stock exchange rules has been discussed at length in Colman v. D.H. Blair & Co., 521 F.Supp. 646, 648-55 (S.D.N.Y.1981) and ratified in several very recent cases, including Jaksich v. Thomson McKinnon Securities, Inc., 582 F.Supp. 485, 499-501 (S.D.N.Y.1984) and Klock v. Lehman Brothers Kuhn Loeb Inc., 584 F.Supp. 210, 216-18 (S.D.N.Y. 1984). Without reiterating the discussion of the Supreme Court cases so clearly set forth in Colman, suffice it to say that I find its logic to be fully applicable to the instant case. Noting the Transamerica and Touche Ross Courts’ requirement that congressional intent is the factor to be considered most heavily in determining whether a private right of action exists, the Col-man court set forth four factors suggesting that Congress did not intend to create private rights of action under stock exchange rules. The factors are as follows:

(1) the statutory bases for the NYSE and NASD Rules, see 15 U.S.C. §§ 78f(b)(5) and (6) and 78o-3(b)(6) and (7), do not confer any rights or proscribe any conduct by exchange or association members, ...
(2) there is apparently no mention of this subject in the legislative history; ...
(3) there are several express provisions in the Act creating private remedies under specified circumstances, suggesting that the failure to provide for private actions for violations of exchange or association rules was not an oversight, ... and
(4) the statutory scheme provides for self-regulation and enforcement by exchanges and associations, suggesting that Congress has selected this as the exclusive means of enforcement____

521 F.Supp. at 654 (citations omitted). See also cases cited in Klock, supra, 584 F.Supp. at 217 nn. 12 and 13. In addition to his failure to plead the specific rules which he alleges have been violated by the defendants, plaintiff cannot overcome the burden of the four-factor test imposed by Colman. In addition, plaintiff cannot demonstrate that “the rules allegedly violated impose “an explicit duty unknown to common law,” a factor which would weigh in favor of permitting a private right of action. See, e.g., Colonial Realty Corp. v. Bache & Co., 358 F.2d 178, 182-83 (2d Cir.), cert. denied, 385 U.S. 817, 87 S.Ct. 40, 17 L.Ed.2d 56 (1966). Several cases have, in fact, dismissed implied causes of action based on Article III, § 2 of the NASD Rules, one of the same violations plaintiff specifies in his motion papers here. See Colman, supra, 521 F.Supp. at 655 (Article III, § 2 “lacks the requisite precision in defining rights and obligations to satisfy the Colonial standard, and adds little or nothing to duties imposed by statute or by common law”). See also Klock, supra, 582 F.Supp. at 500 (quoting Colman).

For the reasons set forth above, plaintiff’s third cause of action is dismissed.

Common Law Fraud

Defendants’ move to dismiss the fourth cause of action for failure to allege fraud with particularity as required by Rule 9(b). It is well settled in this Circuit that a plaintiff alleging fraud must specify:

(1) Precisely what statements were made on what documents or oral representations or what omissions were made, and
(2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) the same,
(3) the content of such statements and the manner in which they misled the plaintiff, and
(4) what the defendants ‘obtained as a consequence of fraud.’

Todd v. Oppenheimer & Co., 78 F.R.D. 415, 420-421 (S.D.N.Y.1978). It is also true that when a plaintiff claims fraud on the part of multiple defendants, “each defendant named in the complaint is entitled to be apprised of the circumstances surrounding the fraudulent conduct with which he individually stands charged.” Jacobson v. Peat, Marwick, Mitchell & Co., 445 F.Supp. 518, 522 n. 7 (S.D.N.Y.1977) (citations omitted).

As noted supra at 4, plaintiff alleges that the fraudulent act here in issue is defendants’ “improper distribution of proceeds in connection with the sale of Western Consortium, Inc. Stock.” Plaintiff’s Memorandum at 13. See also Complaint 111139-42. Plaintiff essentially complains that defendants committed fraud because Taormina misrepresented that he would follow plaintiff’s instructions with regard to the Western Consortium stock he would forward the proceeds from the sale of the stock to plaintiff.

Plaintiff’s fraud claim must fail for several reasons. First, the complaint fails to allege certain facts required by Todd, supra, namely the time and place of the alleged misrepresentations by defendants, the manner in which plaintiff was misled, and what the defendants gained by allegedly defrauding plaintiff.

Second, plaintiff has not alleged any basis for its claim of fraud against Norbay. See Jacobson, supra. Plaintiff’s reliance on Marbury Management, Inc. v. Kohn, 629 F.2d 705 (2d Cir.), cert. denied sub nom., Wood Walker & Co. v. Marbury Management, Inc., 449 U.S. 1011, 101 S.Ct. 566, 66 L.Ed.2d 469 (1980), to support Nor-bay’s liability based on a respondeat superi- or theory is misplaced. While that case did state that § 20(a) of the 1934 Act did not supplant respondeat superior liability, Mar-bury discussed only respondeat superior liability for violations of the Act. Because I have concluded that plaintiff has not alleged any viable causes of action against plaintiffs for violations of the Act, Mar-bury cannot serve as a basis for fraud liability against Norbay.

For the reasons set forth above, plaintiff’s fourth cause of action must be dismissed.

Breach of Fiduciary Duty

Defendant’s move to dismiss the fifth cause of action for failure to comply with Rule 9(b) and failure to state a claim. Defendants urge that plaintiff has failed to state a claim for breach of fiduciary duty due to the omission of details of the nature of plaintiff’s instructions to defendants, the basis of the fiduciary relationship and the identity of the third party to whose account plaintiff's proceeds were allegedly transferred. Defendants cite no authority to support this contention.

I must first note that Rule 9(b)’s particularity requirement applies only to allegations of fraud or mistake, and therefore cannot serve as a basis for dismissal of this cause of action. 5 C. Wright & A. Miller, Federal Practice and Procedure § 1297 at 405 (1969). As to defendants’ allegation that plaintiff has failed to state a claim for breach of fiduciary duty, I find that the complaint clearly details the instructions of plaintiff which were allegedly not followed by defendants. The identity of the third party to whom the proceeds were allegedly transferred is presumably unknown to any of the parties at this time and should surface during discovery. The nature of the fiduciary relationship between plaintiff and defendants is sufficiently alleged in the complaint, as a broker owes a fiduciary duty to its client. See Rolf, supra, 570 F.2d at 45; 1 A. Scott, The Law of Trusts § 12.10 at 134 (1967).

Thus, defendants’ motion to dismiss the plaintiff’s fifth cause of action must be denied.

Conversion

Defendants’ move to dismiss the sixth cause of action for failure to comply with Rule 9(b) and failure to allege an “act of conversion.” For the same reason discussed above, Rule 9(b) is also inapplicable to the conversion claim.

Defendants contend that this cause of action is also insufficient because plaintiff does not allege that defendants ever received the proceeds in issue or appropriated the proceeds to their own use, and does not allege any facts concerning the disposition of the proceeds by defendants. Considering that an act of conversion is an unauthorized exercise of the right of ownership and dominion over property of another to the exclusion of the owner’s rights, Meyer v. Price, 250 N.Y. 370, 165 N.E. 814 (1929), I find that paragraphs 21 through 27 of the complaint, and Exhibit E attached thereto, sufficiently allege an act of conversion by defendants. The proof of these allegations, of course, remains for trial.

Therefore, defendants’ motion to dismiss the sixth cause of action is denied.

Punitive Damages

Plaintiff seeks punitive damages on his fourth and fifth causes of action. Because the fourth cause of action has been dismissed, plaintiff’s demand for punitive damages on that claim must also be dismissed.

As to the punitive damages demanded on plaintiff’s fifth cause of action, a conflict of law issue is presented which is somewhat unusual in nature. None of the cases cited by the parties are helpful to its resolution.

A federal court sitting in a diversity case must apply the choice of law rules of the forum state. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). Because plaintiff’s federal claims must be dismissed and because this is a diversity case, the above principle is fully applicable here.

The most recent pronouncement by a New York court in the area of the choice of law applicable to a punitive damages claim against a broker is Knieriemen v. Bache Halsey Stuart Shields, 74 A.D.2d 290, 427 N.Y.S.2d 10 (1st Dep’t), appeal dismissed, 50 N.Y.2d 1021, 410 N.E.2d 745, 431 N.Y. S.2d 812, appeal dismissed, 51 N.Y.2d 970, 416 N.E.2d 1055, 435 N.Y.S.2d 720 (1980). There, plaintiff, a Louisiana resident, alleged causes of action based on breach of contract, negligence, fraud and churning against defendant, a New York Corporation. The Knieriemen court first determined that the contractual term requiring that New York law govern the contract did not require the same law to govern the tort claims. 427 N.Y.S.2d at 12-13. Thereafter, the court applied the choice of law factors set out in Matter of Crichton, 20 N.Y.2d 124, 133-34, 228 N.E.2d 799, 805, 281 N.Y.S.2d 811, 819 (1967), which require a court

‘to isolate the issue, next to identify the policies embraced in the laws in conflict, and finally to examine the contacts of the respective jurisdictions to ascertain which has a superior connection with the occurrence and thus would have a superi- or interest in having its policy or law applied.’

427 N.Y.S.2d at 13 (citing Dym v. Gordon, 16 N.Y.2d 120, 124, 209 N.E.2d 792, 794, 262 N.Y.S.2d 463, 466 (1965)).

The Knieriemen court determined that Louisiana law should apply to the punitive damages claim. In so doing, the court found that both New York and Louisiana had strong policies against awarding punitive damages. Whereas New York would award punitive damages “where the ‘wrong complained of is morally culpable, or is actuated by evil and reprehensible motives,’ ” 427 N.Y.S.2d at 13 (citing Walker v. Sheldon, 10 N.Y.2d 401, 404, 179 N.E.2d 497, 498, 223 N.Y.S.2d 488, 490 (1961)), Louisiana restricted the availability of punitive damages, based on a policy that “a plaintiff should recover only that which will fairly and reasonably compensate him.” 427 N.Y.S.2d at 13 (citation omitted). The court found that while Louisiana would have an interest in compensating the plaintiff, New York would be interested in “punishing the New York defendant for its misconduct and to provide a wholesome example,” id., the New York policies would not be furthered because the defendant was not found to possess evil or reprehensible motives and it was the defendants’ Louisiana agent that committed the act complained of.

In the instant case, the policies and law regarding the availability of punitive damages under New York law are those explained in Knieriemen. The specific California law which plaintiff seeks to apply here, § 3294 of the Civil Code, provides:

(a) In an action for the breach of an obligation not arising from contract, where the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.

The California courts have specifically held that a breach of fiduciary duty, if proven, may warrant the imposition of punitive damages based on a theory of implied fraud. See Nicholson v. Rose, 106 Cal. App.3d 457, 462, 165 Cal.Rptr. 156, 160 (Cal.Ct.App.1980); Devers v. Greenwood, 139 Cal.App.2d 345, 293 P.2d 834, 838 (Cal. Dist.Ct.App.1956). Thus it would appear more likely that the plaintiff here could obtain punitive damages under California law on his breach of fiduciary duty claim.

Both New York and California law, however, express a policy toward using punitive damages to punish the wrongdoing party. Unlike Knieriemen, where Louisiana punitive damages law was applied in part because the wrongdoing party was defendants’ Louisiana agent, both defendants here allegedly committed wrongful acts in New York. Also in Knieriemen, Louisiana punitive damages law expressed a policy to compensate the plaintiff. The California statute at issue here expresses no similar policy. In addition, the plaintiff’s account here was maintained in New York.

In view of the above considerations, I find that it is appropriate to apply New York punitive damages law to plaintiff’s breach of fiduciary duty claim. Under that law, the allegations in the complaint can hardly be construed to allege that defendants’ behavior was morally culpable or actuated by evil and reprehensible motives. For that reason, plaintiff’s claim for punitive damages on the breach of fiduciary duty claim must be dismissed.

Amendment of the Complaint

In addition to opposing defendants’ motion to dismiss, plaintiff has moved to amend the complaint to add causes of action based on breach of oral contract, breach of written contract, negligence and action on account. Because a responsive pleading has not yet been served by defendants, plaintiff may so amend his complaint without obtaining leave of court. Fed.R.Civ.P. 15(a).

Conclusion

For the reasons set forth above, defendants’ motion to dismiss the first, second, third and fourth causes of action, as well as the demand for punitive damages, is granted. As to the fifth and sixth causes of action, defendants’ motion is denied. Plaintiff may also amend his complaint in a manner consistent with this opinion within twenty (20) days of the date of this order.

SO ORDERED.

      . In Chemical Bank, the court stated:
      The purpose of § 10(b) and Rule 10b-5 is to protect persons who are deceived in securities transactions — to make sure that buyers of securities get what they think they are getting and that sellers of securities are not tricked into parting with something for a price known to be inadequate or for a consideration known to the buyer not to be what it purports to be.
      726 F.2d at 943.

      . Nowhere in its papers does plaintiff specify the BSE rule allegedly violated by defendants.

      . Plaintiff alleges, for example, that California law, specifically West’s Ann.Civ.Code § 3294, is applicable to the breach of fiduciary duty claim based on the cases of Freschi v. Grand Coal Venture, 551 F.Supp. 1220 (S.D.N.Y.1982) and Arneil v. Ramsey, 550 F.2d 774 (2d Cir.1977). While both of these cases do stand for the proposition that the law to be applied with respect to a cause of action for fraud in connection with a securities transaction is the law where the "economic impact is felt, normally the plaintiff’s residence,” this principle was held applicable to claims under § 10(b) of the 1934 Act. Freschi, supra, 551 F.2d at 1225; Arneil, supra, 550 F.2d at 779. Because I have found that plaintiff has failed to state any claims under the Act, Freschi and Arneil are not helpful to plaintiffs argument that California law should be applied because plaintiff resided there during all times relevant to this action. Cf. Klock v. Lehman Brothers Kuhn Loeb Inc., supra, 584 F.Supp. at 210 (Connecticut law applicable where Connecticut resident was allegedly injured due to defendants' fraudulent activities (citing Arneil v. Ramsey, supra, 550 F.2d at 780).
      Defendants’ authorities also fail to resolve the conflicts issue, as they do not address the precise question of what law should govern a demand for punitive damages in a breach of fiduciary duty claim.