source: Caselaw Access Project

author: IRVING BEN COOPER, District Judge.

license: Public Domain

text:
    Peter R. ACKERMANN, Dieter Schultze-Zeu, Dietger Feder, Detlef P. Eulitz and Karl-Heinz Lingner, Plaintiffs, v. Ira LEVINE, Defendant.
    No. 82 Civ. 0791 (IBC).
    United States District Court, S.D. New York.
    May 20, 1985.

      Walter, Consten & Schurtman, P.C., New York City, for plaintiffs; William M. Barron, Eric Stenshoel, New York City, of counsel.
    Ralph S. Naden, New. York City, for defendant.
   IRVING BEN COOPER, District Judge.

Plaintiffs, citizens of the Federal Republic of Germany and partners in the law firm of Ackermann & Schultze-Zeu, a partnership organized under the laws of the Federal Republic of Germany with its principal place of business in Berlin, West Germany, bring this action to enforce a judgment entered on December 12, 1980 by the Regional Court of West Berlin in favor of plaintiffs and against defendant, a resident of the City and State of New York, in the amount of Deutsche Marks (“DM”) 190,-708.49 plus interest at the rate of four percent per annum and costs. The case was tried to the Court on May 7-9, 1984; we reserved decision at the conclusion of the trial. FACTS

In 1979 defendant was a general partner in Hudson View Associates, a partnership engaged in developing for sale a piece of real estate located in Edgewater, New Jersey called “Edgewater Towers.” (Ex. 1, K 2) The sales price of the “entire project was 20 million. [Mr. Levine] was only interested in selling [his] property [for 6 million].” (Tr. 333) At the time defendant was looking for buyers, a friend of his introduced him to a West German businessman named Gottlieb Bauer-Sehlichtegroll (“Bauer”). (Tr. 305) Bauer informed defendant that he knew “many, many people in Germany that would be interested in financing the project [and] in particular, he named a gentleman by the name of Mr. Peter Kuth.” (Tr. 306) In pursuit of the opportunity, defendant furnished Mr. Bauer (at a meeting during the spring of 1979 in the Regency Hotel in Manhattan) with financial documents and written specifications of Edgewater Towers (Ex. 1, ([ 5); they agreed that Mr. Bauer would receive a commission of $600,000 if he effectuated a sale. (Tr. 334) Also present at the meeting was a friend of Mr. Bauer’s, Walter Pfaeffle, a West German journalist living in New York who spoke both German and English and who Mr. Bauer referred to as his “financial consultant,” a status not supported by the proof. (Tr. 463) At the conclusion of the meeting, Mr. Bauer agreed to keep in touch with defendant after he returned to West Germany; the two were to communicate through Mr. Pfaeffle (he possessed a Telex machine). (Tr. 306; 308) It was defendant’s understanding that Mr. Pfaeffle would share in the commission. (Tr. 334)

Although Mr. Bauer was not called to testify at trial, there was considerable testimony by other witnesses, including plaintiff, defendant and Mr. Pfaeffle, about Mr. Bauer’s role. Our review of all the proof and our considered estimate thereof convinces us that Mr. Bauer was a devious opportunist who told a different story to each interested party (i.e., he led them on) in order to ensure that, as he told Mr. Pfaeffle, “we will all benefit if the deal goes through.” (Tr. 475) Consequently, as we shall develop below, the approach of each of those interested in the sale of the property was not comprehended by the others. Each carried in his head a different plan; all the plans were to a very large extent constructed and conveyed by Mr. Bauer.

Approximately at the beginning of May 1979, Mr. Bauer called defendant and stated he had spoken with Mr. Kuth, who defendant believed to be the principal owner of the “Titan Group” investment company in West Berlin; that Mr. Kuth was very interested in the project and urged defendant to go to West Germany to discuss it. (Tr. 310) Mr. Bauer was confirmed to some extent by a telephone call from a Mr. Langsfeld (further identification not revealed) in West Berlin to defendant who said, “Yes, we are very much interested in doing the project ... and we wish you would come as quickly as you can possibly get here to discuss it.” (Tr. 311)

Defendant decided to travel to West Germany to meet Mr. Kuth. Before leaving, however, he visited Frederic Coudert, Esq., (a New York attorney to whom he is related) to obtain the names of Berlin attorneys in case a contract was worked out there. Mr. Coudert furnished defendant with the names of three law firms, one of which was plaintiffs’ firm. (Tr. 312-14; Ex. 1,Ufl 8, 9)

Defendant went to West Germany in late May or early June. Mr. Bauer met him at the airport and transported him to a hotel. He told defendant a meeting would be set up with Mr. Kuth. However, when Mr. Bauer returned to the hotel later that afternoon, he informed defendant that Mr. Kuth would not be available to see him, apparently because Mr. Kuth was then hospitalized. (Tr. 315-16)

Defendant was obviously distressed by this development. Mr. Bauer suggested they talk with plaintiff Peter Ackermann who he claimed was his attorney and friend, and “hopefully maybe we can have someone be helpful to you while you are here.” (Tr. 317) Defendant mentioned the coincidence that Mr. Ackermann’s firm had been one of those given to him by Mr. Coudert in New York.

Unbeknownst to defendant, Mr. Bauer had already discussed the Edgewater Towers project with Mr. Ackermann. Specifically, Mr. Ackermann testified:

[About one week before the meeting between myself and Messrs. Levine and Bauer], Mr. Bauer said to me that he had made the acquaintance, passing through New York, of a gentleman who was the general partner in a building project, and that he, Bauer, had said to Mr. Levine that why don’t he come to Germany and try to market this project under German tax shelter law. And Mr. Bauer said to me, “Would you be interested in handling the legal and tax ramifications of such a fairly sizable project?”, to which I responded, “Yes.”
Mr. Bauer then gave me a stack of documents which appeared to be telexes ... detailing that particular project as well as a stack of papers that mainly referred to the conditions upon which the HUD mortgage was to be paid out to the future investor. And he explained to me that I would have to make myself acquainted with the other papers that there were, of which he understood nothing but trusted that I would read those in order to prepare for the meeting that was forthcoming with the defendant himself.

(Tr. 52-53)

During the trial Messrs. Ackermann and Levine gave entirely different descriptions of the substance of their meeting with Mr. Bauer in West Germany. Our observation of the witnesses and our careful study of the record convinces us that the two versions emanate from the two almost opposite perspectives that each man brought to the meeting. And so it was throughout the trial with respect to other vital factual occurrences. Mr. Levine’s only goal was to sell his property; he preferred selling it to a German purchaser since he had learned through Mr. Bauer that he could get a substantially higher price in Germany than in the United States. (Tr. 353) He travelled to Germany with the expectation that a contract with Mr. Kuth’s investment company would ensue (through the aid of Mr. Bauer who was acting as his real estate broker).

Mr. Levine’s expectations were quickly diminished while he was still in Germany; before he returned (the next morning) (Tr. 329) to New York, he decided he had nothing to lose by following Mr. Bauer’s suggestion of a meeting with Mr. Ackermann (who had been recommended to defendant by Mr. Coudert).

Mr. Ackermann, on the other hand, entertained high hopes of the outcome of the meeting. At that time, it was becoming profitable for Germans to invest in United States property; he testified, “It was the beginning of a certain investment priority, to invest in the United States.” (Tr. 58) Therefore, it was clearly in the interest of an attorney to develop a favorable tax shelter scheme, particularly for a multi-million dollar investment. Mr. Bauer, who knew the interests in the venture of both Messrs. Ackermann and Levine, told Mr. Ackermann before all the parties met “that he had been asked by, Mr. Levine to find an attorney who could structure the deal ... in such a manner that the bank would accept it____ [T]his was not a building to be looked at and sold at a given price. This was an investment scheme to be developed. The building itself played only part of that total picture. We needed an attorney to structure an investment scheme for $21 million and not a broker to sell a piece of real estate.” (Tr. 60) In short, Mr. Ackermann approached the meeting with Messrs. Levine and Bauer believing Mr. Levine wanted him to create a legal tax shelter plan. Only Mr. Bauer knew the differing state of mind of each party during their encounter.

In this light, the two different synopses given by Messrs. Ackermann and Levine of the meeting between them and attended by Mr. Bauer is comprehended. According to defendant, Mr. Bauer outlined defendant’s project in very general terms and discussed the unavailability of Mr. Kuth; the meeting lasted for no more than twenty minutes. (Tr. 320-21) In contrast, Mr. Ackermann testified that:

Mr. Levine indicated that he was interested in selling this in West Germany under a tax shelter scheme that would allow the West German investors to write off, in an accelerated manner, the investments they would share in ... that particular project ...
He asked me whether I would see a possibility of structuring the sale of this property to be built under the German tax law to the effect that taxation writeoffs would be available to the German investor. And I told him that although I was skeptical about the financial, about the economic merits of that project, not knowing enough of it, I was not outspoken on that, and I told him that legally and from the tax point of view that would be a feasible avenue to entertain____
Mr. Levine said that he had directly contacted a bank who handles for their client real estate deals that offer tax advantages. This bank was the Grunt und Renten, which is a mortgage bank in West Berlin____ [T]his bank had shown a considerable interest in getting involved with [the Edgewater Towers] project____
[T]he bank needed more detail [regarding] whether or not there was a legal opinion, evidence, to the fact that the bank could, with a good conscience, sell that to their clients, to make it work at the end of the taxing time many years later.
And I replied that inasmuch as this is one of the fields in which our law firm operates, we would study that proposition____ I was to go to the bank as soon as I would receive from them an invitation to see them ... and explain to them the legal and taxwise ramifications of this structure that I was to develop.

(Tr. 40-42) Mr. Ackermann recollected that the meeting lasted one to one and a half hours. (Tr. 42)

We find, as we have already stated, that the trial testimony of plaintiff and defendant was clouded by reason of the differing information imparted to each by Mr. Bauer and accordingly their respective state of mind upon attending the meeting. For example, the Edgewater Towers project was covered at the meeting in more detail than Mr. Levine recollects and less detail than elaborated upon by Mr. Ackermann. We are convinced by a preponderance of the credible evidence that the parties discussed, in general terms only, tax shelter schemes — a plan that benefited both Mr. Ackermann, who wanted to develop this approach, and Mr. Levine, who stood to gain financially from a German purchaser. However, we are neither persuaded that the two agreed at that time that Mr. Ackermann would discuss these plans with the Grunt und Renten Bank nor that Mr. Levine had previously talked with representatives of that bank.

Indeed, Mr. Levine testified, and we believe it credible, that at the meeting with Mr. Ackermann, an appointment was scheduled for defendant to go with Mr. Bauer and an accountant to the parent bank of Grunt und Renten called Grundkreditbank. (Tr. 321, 325) The conversation at the bank meeting, held immediately after the encounter at plaintiffs’ office, was all in German; Mr. Bauer told Mr. Levine “that they were discussing the possible investment in [the] project in Edgewater, New Jersey” (Tr. 326) and that they spoke about the purchase price, number of units, size of land involved and financing — all in very general terms. (Tr. 327) Mr. Bauer further told Mr. Levine that “his impression of the meeting was a very favorable one and he thought the bank was very much interested in doing the project.” (Tr. 328) Mr. Bauer agreed to keep in touch with Mr. Levine and apprise him of developments pertaining to the bank’s involvement. (Tr. 329) In short, at the end of his business trip in West Germany, though disappointed that he had not been able to meet with Mr. Kuth, Mr. Levine believed that the Grundkreditbank might purchase the property.

Upon Mr. Levine’s return to New York the next day, he received (several days later) a telephone call or telex (he did not remember which) from Mr. Bauer confirming that the bank was “very much interested in the project [but] they needed some time ... to go through their proper procedures.” (Tr. 330) Mr. Levine informed him that he “was not interested in waiting, that I had many interested parties in this country who wished to buy my property.” (Tr. 330) Mr. Bauer responded that the appropriate bank committee would meet within seven to ten days, a period of time to which Mr. Levine agreed on condition that he receive from them a letter setting forth their serious consideration of the project. (Tr. 331) Mr. Bauer suggested that “because of Mr. Ackermann’s relationship with the bank, we should utilize Mr. Ackermann to go into the bank and discuss the project.” (Tr. 332) Mr. Levine testified that he objected, stating, “ ‘I don’t understand at this point why we are involving Peter Ackermann in this situation____ You are acting as a broker to sell my property.’ ” According to defendant, Mr. Bauer responded by stating, “ ‘We need Mr. Ackermann to go into the bank, because of his association with the bank, and he has agreed with us to share in our commission equally.’ ” (Tr. 334) Evidently, Mr. Levine agreed with Mr. Bauer’s reasoning, for on June 8, 1979 defendant mailed a letter to Mr. Ackermann (Ex. A) which stated:

Ackerman & Schuetze ‘Zeu Kampftrasse 13 1 Berlin 12
Attn: Peter Ackerman Dear Peter:
I am very pleased to address this letter to you regarding our real estate project in Edgewater, New Jersey.
I wish to authorize your firm to negotiate this matter in the behalf of Hudson View Associates and I am looking forward to a successful completion of these negotiations.
Sincerely,
Ira Levine, General Partner HUDSON VIEW ASSOCIATES

Mr. Ackermann had a different interpretation of the authorization letter. Mr. Bauer had told him that he had “been asked by Mr. Levine to find an attorney who could structure the deal ... in such a manner that the bank would accept it.” (Tr. 60) Mr. Ackermann understood that when Mr. Levine returned to the United States, he would send him a complete power of attorney on Mr. Levine’s letterhead (Tr. 67); Mr. Ackermann “intended to or expected to render several legal opinions upon which the banks would rely.” (Tr. 508) Thus, as he saw it, the authorization letter sent by defendant gave Mr. Ackermann a power of attorney, not the power to negotiate as a broker in behalf of Mr. Levine. Indeed, plaintiff’s expert witness, Mrs. Margrit Beckmann von Ruckteschell, testified that a German attorney is prohibited by statute from selling real estate. (Tr. 171) Since we are convinced by Mr. Ackermann’s demeanor on the witness stand that he is a moral, upright “officer of the Court” who would not engage in the illegal practice of selling real estate, we do not hesitate to conclude that he believed he had been authorized to act as Mr. Levine’s attorney.

In any event, Mr. Ackermann negotiated with the Grundkreditbank, but the objective was not achieved. As Mr. Ackermann informed Mr. Levine by telex dated June 14,1979, “[The president and two directors] have qualified your offer as ‘very interesting’ but too large to handle on their own.” (Ex. N) Mr. Ackermann told defendant that another bank in Frankfurt might be interested in running Mr. Levine’s project as a joint venture with the Grundkreditbank and asked defendant if he would be interested in having Mr. Ackermann negotiate in his behalf. Defendant responded by stating, “ ‘That’s up to you.’ ” (Tr. 440)

On June 21, 1979, Mr. Ackermann traveled to Frankfurt and met with a person named Graf Ysenburg at the Deutschen Genossenschrafts-Hypothekenbank (“DG Bank”). (Tr. 96) The DG Bank considered Mr. Ackermann’s proposal but decided not to “entertain this particular project.” (Tr. 97)

By letter dated July 18, 1979, plaintiffs sent defendant a letter requesting an advance payment of $10,000 for legal fees. (Ex. 1, H15) Defendant contacted Mr. Pfaeffle and said, “ T am not paying Mr. Ackermann a penny. My understanding is that Mr. Ackermann is sharing in the commission with you and Bauer, and I don’t understand this letter at all.’ Walter’s response to me was, ‘Forget it.’ ” (Tr. 347) Defendant did not respond in any way to Mr. Ackermann’s letter of July 18th. (Tr. 348; Ex. 1, % 15)

On August 8 or 9, 1979, defendant again flew to West Berlin, but this time he finally met with Peter Kuth and the Titan Investment Group. Messrs. Levine and Kuth signed a letter of intent evidencing the company’s interest in purchasing the property. (Ex. 16) Defendant did not call Mr. Ackermann while on this trip to West Germany. (Tr. 380-81)

Subsequently, on October 22, 1979, plaintiffs sent a letter terminating the alleged attorney/client agreement (Ex. 17) coupled with an itemized bill for DM 190,827.77 for legal services rendered. (Ex. 1, 1[ 16) Again, defendant did not respond.

Plaintiffs’ legal fees were computed in accordance with the German fee statute called Bundesrechtsanwaltsgebuehrenordnung or BRAGO. Pursuant to the statute, each legal step taken in an action is worth a fee unit; a fee unit, in turn, is convertible to a price. Thus, for instance, initial discussion with a client is worth one fee unit; a client’s authorization for the attorney to do further work is worth a second unit, and a ruling by a judge that attorneys must gather evidence makes the third and last fee unit due and payable. (Tr. 23) When in-court proceedings are at issue, attorneys will charge the value of a full fee unit. However, when the case involves out of court proceedings, a lawyer, at his or her discretion, may reduce the fee unit to as low as 50 percent of its full value. In most instances of out of court proceedings, German attorneys charge 75 percent of a fee unit. (Tr. 24) The amount each fee unit is worth depends upon the total value of a ease; the greater the value of the matter, the greater the value of each fee unit. (Tr. 23, 27) For example, at the time of trial, in a commercial transaction upon which a litigant sues claiming up to DM 200, an attorney may charge DM 30 per fee unit. (Ex. 9) Thus, if the matter reaches litigation, accumulating all three fee units, the attorney may charge a maximum total of DM 90. However, if the case is relatively uncomplicated and involves few in-court proceedings throughout its “life,” the attorney, in his discretion, may charge as low as 50 percent of the value of each fee unit, i.e., DM 45. In contrast, if the value of a case is DM 1 million, the lawyer may charge up to DM 5,730 for each fee unit. (Ex. 9) In sum, the price charged defendant was high because the value of his realty sale was high.

It is undisputed that the parties never discussed fees prior to the litigation between them (Ex. 1, 11) and that plaintiffs did not inform defendant of the operation of BRAGO. (Ex. 1, fl 18)

When defendant failed to respond to Mr. Ackermann’s bills, plaintiffs sued defendant in the Regional Court of Berlin (Landgericht Berlin), West Germany. (Ex. 1, H 19) On January 11, 1980, the Regional Court sent the summons and complaint (in both English and German) to the Consulate General of the Federal Republic of Germany in New York together with a request that service be made upon defendant Levine and the partnership at the New Jersey business address. (Ex. 1, 1f 20) The Consulate did so serve the summons and complaint by registered mail, and received return receipts postmarked March 13,1980 as proof of delivery. However, Mr. Levine takes the unalterable position that he never received these documents. (Ex. 1, 1J 21)

Six months later, on September 11, 1980, the Regional Court again sent the summons and complaint with exhibits to the Consulate with a request that they be served on defendant at his home address, 910 Fifth Avenue, Apt. 6A, New York, New York. (Ex. 1,fl 22) These documents were served by registered mail upon Mr. Ortiz, an employee at defendant’s residential building, who gave them to defendant; the return receipt bears the postmark October 14, 1980. (Ex. 1, 1fH 23, 24)

Defendant did not defend the suit. On December 12, 1980, the Regional Court entered judgment in favor of plaintiffs against defendant in the sum of DM 190,-708.49 plus 4 percent annual interest from October 4, 1980 plus costs. (Ex. 1, j[ 25) By order dated January 29, 1981, costs were fixed at the rate of DM 8,590.34 plus 4 percent annual interest. (Ex. 1, H 26) Defendant received notice of both the Regional Court’s judgment and order in sufficient time to appeal but did not do so. (Ex. 1,1127)

Plaintiffs bring this action to enforce the German judgment and order.

THE LAW

It is a well-established rule that a judgment obtained in a foreign country is conclusive as to its merits unless the foreign court had no jurisdiction over the defendant, thus failing to satisfy constitutional due process, or the judgment was fraudulently obtained or offensive to the public policy of the state where enforcement is sought. Fairchild, Arabatzis & Smith, Inc., v. Prometco Produce & Metals Co., Ltd., 470 F.Supp. 610, 615 (S.D.N.Y.1979); Johnston v. Compagnie Generate Transatlantique, 242 N.Y. 381, 152 N.E. 121 (1926).

We are fully aware that our ultimate judgment herein is predicated solely upon, and limited to, our final estimate addressed to, and exclusively based upon, these three factors. Nevertheless we believe it might prove supportive of our final decision to observe that the total trial record before us is replete with facts relating to the underlying transactions between the parties — particularly the detailed sworn testimony of the two principal witnesses, Messrs. Ackermann and Levine. From that source, in our opinion as trier of the facts, the conclusion is irresistible that at best there existed between the litigants a misunderstanding as to the essential elements of the alleged contract between them — in other words, a meeting of minds between them did not take place.

We now proceed to examine each of these factors to determine the enforceability of plaintiffs’ West German judgment and order.

I. Jurisdiction

A judgment is not valid if the connections between the defendant and the state where judgment was rendered were too insufficient to require defense of the action as a matter of fairness, Milliken v. Meyer, 311 U.S. 457, 463-64, 61 S.Ct. 339, 342-43, 85 L.Ed. 278 (1940), or if the defendant did not have reasonable notice of the action, Mullane v. Central Hanover Trust Co., 339 U.S. 306, 309, 313-14, 70 S.Ct. 652, 654, 656-57, 94 L.Ed. 865 (1950). See Kulko v. California Superior Court, 436 U.S. 84, 91, 98 S.Ct. 1690, 1696, 56 L.Ed.2d 132 (1978).

A. Connections Between Defendant and the Forum

Jurisdictional basis is satisfied if the forum where the action is brought has minimum contacts with the parties. As the Supreme Court stated in the landmark case of International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945): “[D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ” A defendant is present when he “purposefully avails [himjself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its law.” Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958); see Shaffer v. Heitner, 433 U.S. 186, 216, 97 S.Ct. 2569, 2586, 53 L.Ed.2d 683 (1977); International Shoe, supra, 326 U.S. at 319, 66 S.Ct. at 159; Longines-Wittnauer Watch Co. v. Barnes & Reinecke, Inc., 15 N.Y.2d 443, 451-52, 261 N.Y.S.2d 8, 13-14, 209 N.E.2d 68, 71-72 (1965).

Defendant claims that his sole contacts with Germany were: (1) his late May or early June 1979 visit to Germany on the invitation of Mr. Bauer for the purpose of meeting with Peter Kuth, a likely buyer for his investment company though defendant instead met with Mr. Ackermann; (2) his letter to Mr. Ackermann, written in New York and mailed to Germany, which authorized plaintiffs to negotiate for defendant; (3) a number of contacts between Mr. Levine in New York and Mr. Ackermann in Germany by way of telephone and telex; and (4) defendant’s second visit to Germany in which he had no contact at all with Mr. Ackermann. (Defendant’s Post-Trial Memorandum of Law at 62) In short, defendant argues that his total contacts with Germany concerning the events giving rise to this cause of action include one visit with Mr. Ackermann for less than one and a half hours and a number of telexes and telephone conversations. Defendant cites a host of cases holding that such contacts are not enough to confer personal jurisdiction. See, e.g., Sayles Biltmore Bleacheries, Inc. v. Soft-Fab Textile Processors, Inc., 440 F.Supp. 1010 (S.D.N.Y.1977); Concrete Detailing Services, Inc. v. Thomsson Steel Co., Inc., 411 F.Supp. 1021 (S.D.N.Y.1976); Siedler v. Jacobson, 86 Misc.2d 1010, 383 N.Y.S.2d 833 (Sup.Ct.N.Y.Co.1976).

Defendant’s summary of his contacts with Germany ignore the fact that defendant authorized Mr. Ackermann to conduct ongoing negotiations in that country in defendant’s behalf. In the letter dated June 8, 1979, defendant “authorize[d plaintiffs’] firm to negotiate [the real estate project in Edgewater, New Jersey] in the behalf of Hudson View Associates.” (Ex. A) Pursuant to this authorization, Mr. Ackermann, acting for defendant, personally dealt with personnel at the Grundkreditbank in Berlin and afterwards with employees at the DG Bank in Frankfurt. We conclude that defendant’s contacts with West Germany included the work done by Mr. Ackermann toward the end of selling defendant’s New Jersey real estate to a German investor.

In International Shoe, supra, 326 U.S. at 319, 66 S.Ct. at 159, the Supreme Court stated:

But to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations, and, so far as the obligations arise out of or are connected with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue.

We find that defendant, who was seeking to find a German purchaser believing that he could get a higher sales price in Germany than in the United States and consequently authorized Mr. Ackermann to conduct negotiations in his behalf in Germany, enjoyed the benefits and protections of German law. It would be manifestly unfair to allow defendant the privileges of conducting business in Germany and then hold that he is not amenable to suit there.

The cases cited by defendant which found a lack of personal jurisdiction are clearly distinguishable; in all of them, the contacts made through letters, telephone conversations and/or personal visits did not lead to further activity in the forum state. See Sayles, supra (letters sent by defendant to plaintiff in New York, the forum state; interstate telephone conversations; shipment to New York of “infinitesimal” amount of goods as samples; one visit by defendant to New York regarding a contract which did not give rise to the cause of action); Concrete Detailing Services, Inc., supra (defendant visited the forum once and negotiated a contract over the telephone); Seidler, supra (only contact with forum was purchase made there).

Accordingly, we find that the basis for jurisdiction in West Germany over defendant was in no way violative of constitutional due process.

B. Service of Process

Proper service of process is essential to a court’s exercise of jurisdiction because it ensures that the defendant has received notice of the action — a constitutional due process requirement. Milliken v. Meyer, supra; Federal Deposit Insurance Corp. v. Spartan Mining Co., Inc., 96 F.R.D. 677, 681 (S.D.W.Va.1983), affd sub nom. Federal Deposit Insurance Corp. v. Schaffer, 731 F.2d 1134 (4th Cir.1984). As the Supreme Court held in Mil-liken, supra, 311 U.S. at 463, 61 S.Ct. at 342, service is adequate if it “is reasonably calculated to give [the defendant] actual notice of the proceedings and an opportunity to be heard. If it is, the traditional notions of fair play and substantial notice ... implicit in due process are satisfied.”

Defendant contends that the service of the summons and complaint by registered mail to defendant at his home address, the return receipt of which was signed by Mr. Ortiz, an employee of the building where defendant resides, was improper both under the Hague Convention and German law.

1. The Hague Convention

The Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (“Hague Convention”), TIAS 6638, 20 U.S.T. 361, is an international treaty that has been ratified by approximately 20 countries including the United States and the Federal Republic of Germany. As a ratified treaty, the Convention is treated in the United States as “the supreme law of the land” for matters that fall within its ambit. See Aspinall’s Club Ltd. v. Aryeh, 86 A.D.2d 428, 450 N.Y.S.2d 199, 202 (2d Dep’t 1982).

Plaintiffs cite Articles 8 and 10 of the Hague Convention to support their contention that service of process was made in accordance with the treaty’s provisions. Article 8 provides:

Each contracting State shall be free to effect service of judicial documents upon persons abroad, without application of any compulsion, directly through its diplomatic or consular agents.
Any State may declare that it is opposed to such service within its territory....

Article 10 of the Convention states:

Provided the State of designation does not object, the present Convention shall not interfere with: (a) the freedom to send judicial documents, by postal channels, directly to persons abroad.

The United States has not opposed either of these provisions; therefore, they are binding.

We do not read Article 10 as broadly as do the plaintiffs. It is our opinion that this provision must be read in conjunction with Article 5 which specifically discusses service of process:

The Central Authority of the State [or the diplomatic or consular agents] shall itself serve the document or shall arrange to have it served by an appropriate agency, either—
(a) by a method prescribed by its internal law for the service of documents in domestic actions upon persons who are within its territory, or
(b) by a particular method requested by the applicant, unless such a method is incompatible with the law of the State addressed.
Subject to subparagraph (b) of the first paragraph of this article, the document may always be served by delivery to an addressee who accepts it voluntarily____

In view of Article 5, we interpret Article 10 to mean that the Convention will not interfere with the freedom to send judicial documents through postal channels only when such mailing accords with the rules governing proper methods of service under the treaty. Any other construction would leave open a strong probability that due process requisites would not be satisfied.

We now examine the adequate methods of service listed in Article 5 of the Convention. First, service may be made in a way sanctioned by the internal law in domestic actions. This has been held to include federal as well as state law. Aspinall’s Club, supra.

Mere mailing of a summons and complaint to a defendant, even if accompanied by a return receipt, is not sufficient to establish jurisdiction in the State of New York. To achieve valid service of process in New York, section 308 of the C.P.L.R. requires one of the following: (1) personal delivery; (2) delivery to a person of suitable age and discretion at the defendant’s place of business or residence plus mailing of the summons to the defendant’s address; (3) delivery of the summons to defendant’s agent for service; (4) where the above three methods cannot be accomplished, valid service mandates affixing the summons to the door of the place of business or residence and mailing the summons to the defendant at his residence; or (5) if even the last method is unsuccessful, the court may direct an alternative form of service.

It is clear that service of process in the instant case was not made pursuant to any of the alternatives listed in the C.P. L.R. § 308; accordingly, it did not satisfy the requirements of the law of New York State. Nor did the service satisfy the Federal Rules of Civil Procedure. Effective February 26, 1983, Fed.R.Civ.P. 4 was amended to allow, inter alia, more liberal forms of service of process, including merely mailing the summons and complaint by first class mail, postage prepaid to the person to be served together with two copies of a notice, an acknowledgement and a postage prepaid return envelope addressed to the sender. Fed.R.Civ.P. 4(c)(2)(C)(ii). However, this amended rule was not in existence at the time the summons and complaint were issued and served in the instant case; consequently, it has no effect. See United States v. Bluewater-Toltrec Irrigation District, 100 F.R.D. 687 (D.N.M.1983); Prather v. Raymond Construction Co., 570 F.Supp. 278, 280-81 (N.D.Ga.1983); Chronister v. Sam Tanksley Trucking, Inc., 569 F.Supp. 464, 469 (N.D.Ill.1983). Prior to its amendment, the rule on point, Fed.R.Civ.P. 4(d)(1), provided that service upon an adult, competent person could be made: (1) personally; (2) by leaving copies at his residence with a person of suitable age and discretion then residing therein; or (3) “by delivering a copy of the summons and of the complaint to an agent authorized by appointment or by law to receive service of process.” Without question, service of process was not accomplished in the instant case by either of the first two alternative means.

Regarding the third method of service, merely acting as a defendant’s agent was not enough; actual authorized appointment was necessary. Interpreting this provision, it has been held that not even service on defendants’ secretary at defendants’ place of business was effective when plaintiffs presented no evidence that defendants intended to appoint the secretary to receive service in their behalf. Lamont v. Haig, 539 F.Supp. 552 (D.C.S.D.1982). Indeed, our Court has found insufficient service under this section when the summons and complaint were served on defendant’s co-employee who was not authorized to act as defendant’s agent even when defendant actually received the documents. Richards v. New York State Department of Correctional Services, 572 F.Supp. 1168, 1173 (S.D.N.Y.1983).

Plaintiffs herein have introduced no proof whatever showing that Mr. Ortiz, the employee at defendant’s residential apartment building who accepted the notice, was an agent authorized to receive service of process for defendant. Accordingly, service of process did not conform to the mandates of the federal rule effective at the time delivery of these documents was made.

Service may nevertheless be proper under the Hague Convention when it is made by a particular method requested by the applicant, unless such a method is incompatible with the law of the State addressed. (Article 5 of the Hague Convention) The applicant in this case, the Presiding Judge of Civil Chamber 82 of the Regional Court of Berlin, did not request any specific method of service — only that the summons and complaint “Durch Einfaehe Ubergabe Zuzustellan.” Defendant and the official German translator interpret this expression to mean “by simple personal service” (Tr. 285; Ex. L), which was not accomplished. Plaintiffs translate these words to mean “delivery of possession” (Tr. 302), a means which, when done in the manner the instant papers were served, was clearly incompatible with the operative law in New York, and with due process requirements.

Since service of process was not effected in accordance with the Hague Convention, the governing law in the United States with respect to the question of proper service between nations, we cannot enforce the West German judgment and order. However, in order to present a complete record of findings of fact and conclusions of law, we proceed to examine the other issues presented in this case.

2. Violation of Service of Process Laws in West Germany

Much of the trial testimony was devoted to the issue of whether service of process violated the law of West Germany; if the summons and complaint were not served in accordance with the law of that country, the judgment and order would not be enforceable. Defendant contends that plaintiffs’ mailing of the summons and complaint, rather than personally handing them to defendant or someone in defendant’s household, violated the German Civil Procedure Code called Zivilprocessordnung, or ZPO.

Defendant’s expert witness on German law, Mrs. Margrit Beckmann von Ruckteschell, testified that in order to effectuate personal service, the ZPO requires that a summons and complaint be personally handed over from the process server to the defendant (§ 180 of the ZPO); if the defendant is not present, the papers may be served on a member of the defendant’s household (§ 181 of the ZPO). If that cannot be accomplished, the process server may effectuate service at defendant’s business address (§ 183 of the ZPO). “But in all three cases ... it has to be handed over.” (Tr. 184) Section 193 of the Code further provides that “services can also be effected by mail.” (Tr. 190) However, Mrs. von Ruckteschell interpreted this provision in accordance with the commentary given by one of three authoritative sources of German procedural law, Thomas Putzo. (Tr. 191) It was the witness’ understanding from this source that, although not expressly provided for in the ZPO, service by mail is only permissible in Germany and West Berlin. (Tr. 192)

Putzo’s interpretation was in discord with that provided in the “ZRHO,” regulations to execute service abroad prepared by either the German Ministry of Justice or the German Foreign Service Administration including the Consulate. (Tr. 272-73) The ZRHO provides that personal handing over of a summons abroad may be substituted by mail. (Tr. 273) Furthermore, section 187 of the ZPO, entitled “Cure of Defects in Service,” provides in substance that “if the summons and complaint reach[] the party to whom [they] were directed, without proof of formally correct service or in noneompliance with service of process rules, the service can be considered valid as of the time the document reaches the party.” Mrs. von Ruckteschell agreed that according to that provision, since defendant actually received the summons and complaint, any service defects were cured under the German civil code system. (Tr. 275)

Mrs. von Ruckteschell, however, insisted that service was improper because it was not in accordance with the Regional Court’s directive to the Consulate: “Dureh Einfache Ubergabe Zuzustellan.” She testified that “Ubergabe” meant “[s]ervice by simple handing over or personal service” (Tr. 285); indeed, the translation of the German order by the German Court’s official translator also stated that the Regional Court “request[s] that [the Consulate] serve these papers upon [Mr. Levine] ... by simple personal service.” (Ex. L; Tr. 289) In contrast, counsel for defendant adduced a German-English dictionary published in Munich in 1980 which defined the word “Ubergabe” to mean “delivery of possession, surrender,” (Tr. 302) and made no mention of “personal” delivery. Moreover, in the direct testimony of Mr. Ackermann upon his recall to the witness stand, the 1977 volume of Putzo’s commentary was introduced. This version was more recent than the 1975 version from which Mrs. von Ruckteschell read (Tr. 523), and according to Mr. Aekermann, stated that “Ubergabe” is done “most ordinarily by mail.” (Tr. 517) This language was not contained in the 1975 edition. Although we recognize that Mr. Aekermann is a party to the litigation and not an expert on German law or German/English translation, we had the opportunity to judge his ability, capacity and veracity, and we believe plaintiff properly translated the term as used in the 1977 edition of Putzo’s commentary.

In sum, we are not persuaded by a fair preponderance of the credible evidence that service with which we are here concerned violated West German law. However, as we have already discussed at length, service of process in this case did violate the Hague Convention, the supreme law of our land, as well as constitutional due process requisites. Since the Regional Court therefore lacked jurisdiction over defendant, we are compelled to find that we cannot enforce the German judgment and order.

II. Fraud

If a judgment rendered in a court in a foreign country is fraudulently obtained, American courts cannot enforce it. See Fairchild, Arabatzis & Smith v. Prometco, 470 F.Supp. 610, 615 (S.D.N.Y.1979). However, it is well settled that the fraud “must relate to matters other than issues that could have been litigated and must be a fraud on the court.” Id. (quoting Overmyer v. Eliot Realty, 83 Misc.2d 694, 371 N.Y.S.2d 246, 258 (Sup.Ct. Westchester Co. 1975)). See Chisholm v. House, 160 F.2d 632, 643 (10th Cir.1947).

Defendant’s factual arguments on the issue of fraud as well as the majority of cases he cites in support deal with alleged fraud in the underlying transaction rather than fraud on the court. Defendant attempts to bridge this gap by arguing that acts of alleged fraud (i.e., the imposition of large fees under BRAGO; the failure to disclose in full the relationship between Messrs. Bauer, Pfaeffle and Aekermann; and the failure to disclose Mr. Ackermann’s affiliation with the New York law firm Lans, Feinberg & Cohen, Esqs.) (Defendant’s Post-Trial Memorandum of Law at 49-50) were contained in the papers submitted to the Regional Court (id. at 58), constituting a fraud on the court.

Defendant’s argument is completely unpersuasive. Fraud must be proven by clear and convincing evidence, see Clarkson Co., Ltd. v. Shaheen, 544 F.2d 624, 631 (2d Cir.1976), a burden we find defendant has entirely failed to assume in light of our conclusion that neither plaintiffs nor defendant acted dishonestly; we find that nothing in the opinion of the Regional Court of Berlin suggests that plaintiffs materially misrepresented the facts as plaintiffs perceived them to be. Consequently, we are compelled to conclude that enforcement of the German court’s judgment may not be precluded on this ground.

III. Public Policy

Finally, we address the question of whether New York public policy requires that the German judgment must not be enforced. Public policy is offended if the judgment is “repugnant to fundamental notions of what is decent and just in the State where enforcement is sought.” Tahan v. Hodgson, 662 F.2d 862, 864 (D.C.Cir.1981) (quoting Restatement (Second) Conflict of Laws § 117, comment c (1971)). Put another way, the foreign judgment should not be enforced if it “tends clearly to injure the public health, the public morals, the public confidence in the purity of the administration of the law, or to undermine that sense of security for individual rights, whether of personal liberty or of private property, which any citizen ought to feel, is against public policy.” Somportex Ltd. v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 443 (3d Cir.1971), cert. denied, 405 U.S. 1017, 92 S.Ct. 1294, 31 L.Ed.2d 479 (1972) (quoting Goodyear v. Brown, 55 Pa. 514, 26 A. 665, 666 (1893)). See Loucks v. Standard Oil Co., 224 N.Y. 99, 110 (1918) (Cardozo, J.) (vested rights may be withheld when “the cause of action in its nature offends our sense of justice or menaces the public welfare”).

Defendant argues that the enormous size of the fee charged by plaintiffs is a violation of New York public policy in view of plaintiffs’ total failure to discuss fees with defendant though Mr. Ackermann, who was associated with a New York law firm, was familiar with American legal practice which makes such disclosure imperative.

As a matter of public policy, retainer agreements between attorney and client are of particular concern to courts in the State of New York. In re Schanzer’s Estate, 7 A.D.2d 275,182 N.Y.S.2d 475, 479 (1st Dep’t 1959). Attorneys bear the burden of proving that a compensation arrangement is fair, reasonable and fully comprehended by the client. In re Howell, 215 N.Y. 466 (1915); Abrams, Kisseloff & Kissin v. 160 Bleecker Street Assocs., 67 A.D.2d 629, 412 N.Y.S.2d 19, 21 (1st Dep’t 1979); In re Schanzer’s Estate, supra, 7 A.D.2d 275,182 N.Y.S.2d at 479. See Howard v. Murray, 43 N.Y.2d 417, 422, 372 N.E.2d 568, 570, 401 N.Y.S.2d 781, 783 (1977); Frost v. Bachman, 283 N.Y. 744, 745, 28 N.E.2d 969 (1940); Whitehead v. Kennedy, 69 N.Y. 462, 466 (1877).

In the instant case it is undisputed that the attorney, Mr. Ackermann, never mentioned the subject of attorneys fees with defendant, who he believed to be a client of his law firm (Ex. 1, j[ 11 at 3); in fact, Mr. Ackermann never even discussed with defendant the nature and scope of their relationship. Nonetheless, plaintiffs sent defendant a bill for legal services rendered and disbursements that amounted to almost $100,000.00. It must be borne in mind that Mr. Levine not only believed that Mr. Ackermann was acting in the capacity of a broker, but defendant was also totally ignorant of the existence of and high costs incorporated in the German legal fee statute. Plaintiffs attempt to justify this failure to disclose vital information to defendant by insisting that:

It doesn’t occur to us in Germany when we do legal work. It’s different than it is here. You are an officer of the court, as it has been called here, and the client comes in, it’s like in a doctor’s office, he asks what kind of service he wants, and he is being protected by the law. The attorney, like the barrister in England, they don’t talk about the financial arrangements. That is taken care of by the law. And you do your service. And when the case is closed you pass it on to bookkeeping and they draft the bill because they know the legal statute on bills much better than the attorney does, the clerks. And they submit the bill, they send it out, it gets paid, and you never see it again.
And more specifically in this case, I have a gentleman from the United States. It couldn’t possibly have occurred to me, as he was referred to us by the law firm of Coudert Brothers for whom we have done work and been charging and receiving moneys according to the BRAGO. And he had a venture of class, of substance, of some difficulty, of very likely long duration. And he was showing me that [if] we could handle this very complex and very difficult and, of course, very large job, we would earn a large fee.

(Tr. 510-11)

We read Mr. Ackermann’s statement to say that in West Germany it is the responsibility of the client to know of the attorney/client legal fee statute when he or she goes to a lawyer; further, that the more the client’s appearance and legal project suggest indicia of “class” and “substance,” the greater is his or her responsibility to be familiar with BRAGO. We find this practice “repugnant to fundamental notions of what is decent and just in the State where enforcement is sought,” Tahan, supra, at 864, and violative of the requirement under New York law that the attorney, not the client, must ensure the fairness, reasonableness and full comprehension by the client of their compensation agreement. Further, if we were to hold otherwise the public’s “sense of security for individual rights” would be severely undermined. See Somportex Ltd., supra, at 443. Accordingly, we find an additional ground for not enforcing the West German judgment and order is that they violate the public policy of the State where plaintiffs are seeking to have them enforced.

CONCLUSION

On the basis of the facts and the law applicable thereto as recited herein, we are constrained to, and do, find unenforceable the judgment and order issued by the Regional Court of Berlin on December 12, 1980 and January 29, 1981 which held in favor of plaintiffs and against defendant.

SO ORDERED.

      . Plaintiffs’ and Defendant’s post-trial memoranda were filed with the Clerk of the Court on July 2, 1984; plaintiffs' reply brief was filed on July 13, 1984.

      . Throughout this opinion, the letters "Ex.” followed by a number in parentheses indicate a particular exhibit. The same applies to a “Tr.” which refers to a specific page in the trial transcript.

      . The property was eventually sold to a company called American Landmark Corporation which was affiliated with Olympia & York. (Tr. 304)

      . Actually, the attorney can charge more than the value of a full fee unit, but only with the written authorization of the client. (Tr. 30)


author: WILLIAM T. HART, District Judge.

text:
    ELECTRONIC RELAYS (INDIA) PVT. LTD., Plaintiff, v. Joseph E. PASCENTE, et al., Defendants. GANJAM MOKSHAGUNDAM DEVICES PVT. LTD., Plaintiff, v. Joseph E. PASCENTE, et al., Defendants.
    Nos. 84 C 6128, 84 C 6129.
    United States District Court, N.D. Illinois, E.D.
    May 21, 1985.
    On Reconsideration June 11, 1985.
    John B. Huck, James R. O’Dell, Chapman & Cutler, Chicago, Ill., for plaintiff.

      Richard C. Clark, Michael R. Grimm, Clausen, Miller, Gorman, Caffrey & Witous, Michael D. Falls, Falls & Samis, Chicago, 111., for defendants.
   MEMORANDUM OPINION AND ORDER

WILLIAM T. HART, District Judge.

Defendant Joseph E. Pascente has filed these motions to dismiss against these two consolidated cases. For convenience, the cases, which are numbered 84 C 6128 and 84 C 6129, will be referred to as “6128” and “6129”, respectively. Jurisdiction over both eases exists under both 28 U.S.C. §§ 1331 and 1332.

Count 2 of 6128 and count 3 of 6129 allege violations of RICO, 18 U.S.C. § 1961 et seq. The two counts are indistinguishable for purposes of deciding this motion. Pascente’s first argument is that the various mail and wire communications alleged in those counts as predicate acts show on their face that they cannot be used to make out a RICO claim. Apparently copies of each of the communications exist, and although no such copies are attached to the complaint Pascente has attached them to his motion, citing several cases in which courts in other circuits have considered material referenced by but not included in the complaint in deciding a motion to dismiss. See, e.g., Interstate Natural Gas Co. v. Southern California Gas Co., 209 F.2d 380, 384 (9th Cir.1953). In this circuit, however, the rule is that “consideration of a motion to dismiss is limited to the pleadings.” Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir.1984), cert. denied, — U.S.-, 105 S.Ct. 1758, 84 L.Ed.2d 821 (1985). Even if the rule were otherwise it is obvious that the communications reveal very little on their face, thus requiring the parties to make unsupported assertions concerning the facts surrounding the communications. Perhaps the legal effect of those communications could be resolved by summary judgment motion, but this court refuses to bypass summary judgment procedures by addressing the issues on this motion to dismiss.

Pascente’s next argument is that the RICO counts fail to adequately plead a pattern of racketeering activity because there is no “factual statement similar to a bill of particulars” setting forth the predicate acts. Bache Halsey Stuart Shields, Inc. v. Tracy Collins Bank and Trust Co., 558 F.Supp. 1042, 1046 (D.Utah 1983). As plaintiffs point out, however, (and as Pascente seems to concede by the silence of his reply brief) our appellate court has refused to require such specificity in the pleadings. Haroco, Inc. v. American National Bank and Trust Co., 747 F.2d 384, 404 (7th Cir. 1984), cert. granted, — U.S.-, 105 S.Ct. 902, 83 L.Ed.2d 917 (1985).

Pascente’s final argument is that the RICO counts are barred by the statute of limitations. Where, as with RICO, “Congress has not established a time limitation for a federal cause of action, the settled practice has been to adopt a local time limitation as federal law if it is not inconsistent with federal law or policy to do so.” Wilson v. Garcia, — U.S.-, 105 S.Ct. 1938, 1942, 85 L.Ed.2d 254 (1985). See also Vallone v. Local Union 705, 755 F.2d 520, 521 (7th Cir.1984).

Wilson, which dealt with a statute (42 U.S.C. § 1983) very similar to RICO for purposes of this issue, sets forth the steps to follow in deciding what statute of limitations should govern a federal cause of action that contains no limitation period. See 105 S.Ct. 1943. First, the court must determine whether one limitations period should apply to all RICO actions or whether different periods should apply depending on the particular facts of the case. Second, the court must characterize the RICO action before it (or RICO actions generally, depending on the answer to the first question), or to put it another way, the court must analogize RICO to a state cause of action. Third, the court must determine what state limitations period applies to the kind of action the court has found RICO to be. Finally, the court must determine whether that period is inconsistent with the policies of RICO, and if so what limitations period better serves those policies. (On that last point see also DelCostello v. International Brotherhood of Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983)).

In Wilson, the Court determined that actions under 42 U.S.C. § 1983 should be given one characterization so that at least in a given state all § 1983 actions would be governed by one limitations period. 105 S.Ct. at 1947. Otherwise, the Court noted, choosing a statute of limitations would become a source of “uncertainty, and unproductive and ever increasing litigation” that would reduce the effectiveness of § 1983 by dissipating scarce resources over “useless litigation on collateral matters” (id.) and work injustice on both sides (id. at n. 34). See also Beard v. Robinson, 563 F.2d 331, 337 (7th Cir.1977), cert. denied, 438 U.S. 907, 98 S.Ct. 3125, 57 L.Ed.2d 1149 (1978) (voicing similar concerns). These concerns are just as strong in a civil RICO case. As with § 1983, RICO actions can be brought on a great variety of facts, so that in many cases the lawyers will be able to argue that 2 or more limitations periods apply. Also as with § 1983, different limitations periods could be applied to actions with different facts in the same state, and sometimes even in the same case. Therefore, this court concludes that one characterization must be adopted for all RICO actions in this state.

Choosing the proper characterization for civil RICO claims is a matter of federal law. 105 S.Ct. at 1944 and n.19. That characterization is “derived from the elements of the cause of action, and Congress’ purpose in providing it.” Id. at 1943. Characterizations of RICO by courts searching for a statute of limitations vary. The first court to consider this issue apparently analogized RICO to the antitrust laws and therefore applied the 1-year period applicable to antitrust claims in Louisiana. Ingram Corp. v. J. Ray McDermott & Co., 495 F.Supp. 1321, 1324 n.4 (E.D.La.1980). Another court suggested that the 5-year period for the forum state’s own version of RICO should govern, Delta Coal Program v. Libman, 554 F.Supp. 684, 690 n. 2 (N.D.Ga.1982), aff’d on other grounds, 743 F.2d 852 (11th Cir.1984). The other courts that have applied one limitations period to all RICO actions have applied some sort of catch-all statute. See Durante Bros. & Sons, Inc. v. Flushing Nat. Bank, 755 F.2d 239, 248-49 (2d Cir.1985) (finding that RICO has no state-law analog, court applies New York’s 3-year limit on actions to enforce a liability created by statute); Compton v. Ide, 732 F.2d 1429, 1433 (9th Cir.1984) (California’s 3-year period for actions based on statute); Victoria Oil Co. v. Lancaster Corp., 587 F.Supp. 429, 431-32 (D.Col.1984) (Colorado’s 3-year period for all actions not otherwise provided for); Seawell v. Miller Brewing Co., 576 F.Supp. 424, 427 (M.D.N.C.1983) (North Carolina’s 3-year period for claims based on either a federal or state statute). The remaining decisions have characterized a RICO action according to the particular facts pleaded as predicate acts. Steven Operating, Inc. v. Home State Savings, 105 F.R.D. 7,11 (S.D.Ohio 1984) (Ohio’s 4-year period for common-law fraud); Burns v. Erserk, 591 F.Supp. 837, 843-44 (D.Minn.1984) (3-year period for securities fraud); Clute v. Davenport Co., 584 F.Supp. 1562, 1577 (D.Conn.1984) (Connecticut’s 2-year period for securities actions); D Torio v. Adonizio, 554 F.Supp. 222, 232 (M.D.Pa.1982) (Pennsylvania’s 6-year period for common-law fraud); State Farm Fire and Casualty Co. v. Estate of Caton, 540 F.Supp. 673, 684-85 (N.D.Ind.1982) (Indiana’s 6-year period for common-law fraud); Gilbert v. Bagley, Fed.Sec.L.Rep. (CCH) par. 99,483 (N.D.N.C. Sept. 17, 1982) (North Carolina’s 2-year period for securities fraud); Willcutts v. Jefferson Trust and Savings Bank of Peona, No. 74-329 (C.D.Ill. April 21, 1982) (Illinois’s 5-year period for common-law fraud).

In Wilson, the Court determined that at the time § 1983 was passed Congress’s concern was with “the campaign of violence and deception in the South, fomented by the Ku Klux Klan, which was denying decent citizens their civil and political rights.” Id. 105 S.Ct. at 1947. Recognizing that § 1983 was applicable to a broad range of harms, the Court nonetheless concluded that because § 1983 was designed to protect personal rights, Congress would have considered the closest analogy to be a personal injury action. Id. at 1948.

In analyzing RICO, “the legislative history forcefully supports the view that the major purpose of [RICO] is to address the infiltration of legitimate business by organized crime.” United States v. Turkette, 452 U.S. 576, 591, 101 S.Ct. 2524, 2532, 69 L.Ed.2d 246 (1981). The main mechanism for achieving that end was to be the criminal provisions of RICO. Indeed, the civil provisions of RICO went virtually undiscussed and seemingly unnoticed by Congress. Sedima, S.P.R.L. v. Imrex Co., 741 F.2d 482, 488-92 (2d Cir.1984), cert. granted, — U.S.-, 105 S.Ct. 901, 83 L.Ed.2d 917 (1985). The only comment revealing Congress’s intent in adding the civil provisions to RICO was made by Congressman Poff, who stated that

at the suggestion of the gentleman from Arizona (Mr. Steiger) and also the American Bar Association and others, the committee has provided that private persons injured by reason of a violation of the title may recover treble damages in Federal courts — another example of the antitrust remedy being adapted for use against organized criminality.

116 Cong.Ree. 35295 (1970). That comment suggests that Congress viewed the treble damages provision as civil RICO’s most distinctive feature. That suggestion is certainly consistent' with the nature of RICO. In most, if not all, RICO cases there exist state-law remedies for the same conduct that forms the basis of the RICO count. RICO’s attractiveness, what sets it apart from the other available legal theories, is not the wrong but the remedy. Thus, to the extent Congress had any intent in adding the civil provisions to RICO, Congress intended the treble damages provision to provide the incentive necessary to cause private citizens to assist the government in eradicating organized crime. Therefore, this court concludes that for purposes of choosing the proper statute of limitations RICO should be characterized as a treble damages action.

The other possible analogies offered by plaintiffs are not persuasive. Plaintiffs argue that their case is most like a common law fraud action, citing Eisenberg v. Gagnon, 564 F.Supp. 1347, 1354 (E.D.Penn. 1983). However, this court has already decided that only one limitations period should be used for all RICO actions, and it is obvious that the common law fraud analogy falls far short of capturing the multitude of factual bases on which RICO can be based.

Plaintiffs seem to suggest that the 5-year period for criminal RICO, 18 U.S.C. § 3282, should apply to civil RICO also. One commentator has also suggested that solution, Note, Civil RICO: Searching for the Appropriate Statute of Limitations in Actions Under Section 1964(c), 14 Loy. U.Chi.L.J. 765, 793-94 (1983), but the only court to consider a criminal statute of limitations has rejected that approach. D'Iorio v. Adonizio, 554 F.Supp. 222, 232 (M.D.Pa.1982). This court agrees with D Torio. Though civil and criminal RICO are alike in obvious and significant ways, the considerations that go into striking the balance between repose and enforcement are (also obviously) different for criminal and civil actions. For example, criminal prosecutions for violations of the antitrust and securities laws are governed by the 5-year period of 18 U.S.C. § 3282, United States v. Portsmouth Paving Co., 694 F.2d 312, 324 (4th Cir.1982) (antitrust); United States v. Jensen, 608 F.2d. 1349, 1355 (10th Cir.1979) (securities), but civil actions under those laws have 4 and 3 year periods, respectively. 15 U.S.C. § 15(b) (4 years for civil antitrust); Suslick v. Rothschild Securities Corp., 741 F.2d 1000, 1004 (7th Cir.1984) (3-year period for securities in Illinois). Moreover, the Wilson analysis sanctions adoption of a federal limitations period only when the state analogy conflicts with federal policy. Since this court finds no such conflict (as discussed below) there is no reason to turn to federal law.

Plaintiffs also suggest RICO should be analogized to a common law action for tortious interference with economic relations, citing NSC International Corp. v. Ryan, 531 F.Supp. 362, 363 (N.D.Ill.1981). In Ryan Judge Marshall had to decide whether civil RICO is an action at law, in which case a plaintiff would have a right to a jury trial, or an action in equity, in which case no such right would exist. Given the context, it is very unlikely that Judge Marshall even considered a treble damages action as a possible analogy, so the case is distinguishable on that ground. Moreover, this court believes that while an action for tortious interference with economic relations is a good analogy, an action for treble damages is even better. As already noted, RICO is much more than a remedy for injured persons — it provides considerable incentive for private citizens to act as private attorneys general and a large and very tangible deterrent for those who might be thinking of violating its provisions. Congress, as the scant legislative history suggests, would surely have considered the treble damages feature if it had picked a limitations period itself, so it would be a mistake not to include that most distinctive feature in the characterization.

For the same reason, this court rejects the 5-year period that applies to actions “to recover damages for an injury done to property, real or personal.” Ill.Rev.Stat. ch. 110, § 13-205. While RICO is only available to those who suffer injury to business or property, 18 U.S.C. § 1964(c), and in that sense is analogous to a property damage action, that characterization also ignores the treble damages feature of RICO and hence fails to capture the essence of a civil RICO claim.

Having characterized RICO as an action for treble damages, the next step is to determine what limitations period applies to such an action. In Illinois that period is the 2-year period of Ill.Rev.Stat. eh. 110 § 13-202. Hoskins Coal & Dock Corp. v. Truax Traer Coal Co., 191 F.2d 912, 913 (7th Cir.1951), cert. denied, 342 U.S. 947, 72 S.Ct. 555, 96 L.Ed. 704 (1951); see also People v. Climatemp, Inc., 101 Ill.App.3d 1077, 57 Ill.Dec. 416, 428 N.E.2d 1096 (1st Dist.1981) (holding that treble damages actions are penal in nature).

Finally, this court must consider whether a 2-year limit conflicts with the federal policy underlying RICO. Plaintiffs argue that the only reason Illinois courts would apply the 2-year limit is because they see treble damages as penal, and that conflicts with Congress’s statement that RICO “shall be liberally construed to effectuate its remedial purposes.” Section 904 of Title IX, Pub.L. 91-452, 84 Stat. 947. See Steven Operating, Inc. v. Home State Savings, 105 F.R.D. 7, 11 (S.D.Ohio 1984); D Torio v. Adonizio, 554 F.Supp. 222, 232 (M.D.Pa.1983); State Farm Fire and Casualty Co. v. Estate of Caton, 540 F.Supp. 673, 684-85 (N.D.Ind.1982). However, there is not necessarily a conflict here. Certainly a statute can have a remedial purpose yet contain specific provisions that are punitive in nature. And while Congress’s use of the word “remedial” applies equally to the criminal provisions that hardly shows Congress thought a sentence imposed for a violation of those provisions would not be punitive. Moreover, this court has not characterized RICO as penal, but as a treble damages action. Of course this court has looked to state case law to see what limitations period applies since Illinois has no statute of limitations that explicitly applies to treble damages actions. As it happens, Illinois courts view treble damages as penal and that is why they apply the 2-year period of § 13-202. But the question here is not whether the state’s reasons for choosing 2 years are consistent with Congress’s intent; it is whether the 2-year period itself is consistent with that intent. (Usually, of course, a federal court does not know the reasons why a particular time period was chosen, and no court has ever suggested state legislative history should be consulted to see if those reasons are ones Congress would approve.) Knowing the state’s reasons for choosing the time period may justify extra care in determining whether that period conflicts with federal policy, but it does not answer that question.

Two years is indeed shorter than the 5 years that would apply to plaintiffs’ proposed analogies. However, to paraphrase the Supreme Court, it does not follow that because five years is long enough, 2 years is too short. Del Costello v. International Brotherhood of Teamsters, 462 U.S. 151, 166, 103 S.Ct. 2281, 2291, 76 L.Ed.2d 476 (1983) (“it does not follow that because six years is too long, 90 days is long enough”). This court sees no conflict between a 2-year statute of limitations and the policies underlying RICO. No one suggests here that RICO plaintiffs are like the employee plaintiffs in Del Costello in needing extra time to bring suit because of a lack of sophistication. 462 U.S. at 165-66, 103 S.Ct. at 2291. Nor is it suggested that extra time is needed because Congress requires any special prerequisites to bringing suit, as in Occidental Life Ins. Co. v. EEOC, 432 U.S. 355, 367-69, 97 S.Ct. 2447, 2454-56, 53 L.Ed.2d 402 (1977) (holding that state statutes of limitation do not govern an EEOC enforcement action). Finally, it is worth noting the period approved in Wilson was 3 years and the Court knew that its affirmance of personal injury as the proper characterization of § 1983 would result in statutes of limitation as short as 2 years. 105 S.Ct. at 1941 and n.10 (noting that after adopting the approach affirmed in Wilson the 10th Circuit had chosen a 2-year period for actions brought in Kansas). Clearly the Court did not consider those periods too short even though § 1983, like RICO, is interpreted very broadly and has important remedial purposes. Id. at 1945 (noting that § 1983 is accorded “a sweep as broad as its language,” quoting United States v. Price, 383 U.S. 787, 801, 86 S.Ct. 1152, 1160, 16 L.Ed.2d 267 (1966)).

A violation of RICO involves a very serious injury; a kind of injury that cannot go unnoticed by the victim, at least not for long. Two years is certainly long enough to realize one has been injured by a RICO violation and to bring suit. And the normal rules on accrual and tolling should ensure that no diligent RICO plaintiff will find his claim time-barred. See Compton v. Ide, 732 F.2d 1429, 1433 (9th Cir.1984) (limitations period for RICO claim begins to run “when the plaintiff knows or has reason to know of the injury which is the basis for his action”); Suslick v. Rothschild Securities Corp., 741 F.2d 1000, 1004 (7th Cir.1984) (“equitable tolling doctrine is read into every federal statute of limitations including state statutes adopted by federal law,” citing Sperry v. Barggren, 523 F.2d 708, 710 (7th Cir.1975)); Clute v. Davenport Co., 584 F.Supp. 1562, 1577 (D.Conn.1984) (applying accrual and tolling doctrines to RICO). Therefore, this court concludes that 2 years is the applicable statute of limitations for civil RICO. In doing so, this court joins Judge Koeoras, who has also chosen the 2-year period of § 13-202 as the correct period. See Traylor v. Central States, South East and Southwest Areas Pension Fund, Nos. 83 C 2206 and 83 C 6283, slip op. at 5-6 (N.D.Ill. Nov. 6, 1984) (citing his earlier oral ruling in Caldarone v. Brown, No. 80 C 6251 (N.D.Ill. Sept. 30, 1983)).

Since plaintiffs’ actions were brought over 2 years after they accrued, and plaintiff does not argue that the statute of limitations was tolled, the RICO counts must be dismissed as time-barred.

State Claims

Paseente has also moved to dismiss count 1 of 6129, which alleges that Pascente intentionally interfered with a contract between plaintiff and defendant ERI-Energy, Inc., of which Pascente was president, managing officer and (indirectly through another company) principal shareholder. Pascente’s principal argument is that as an officer of ERI-Energy his actions benefit from the rule that “corporate officers who, ‘in accordance with their business judgment and discretion,’ interfere with their corporations’s contractual relations lack the requisite ‘malice’ and therefore are not liable in tort.” Swager v. Couri, 77 Ill.2d 173, 184, 32 Ill.Dec. 540, 546, 395 N.E.2d 921, 927 (1979), quoting Loewenthal Securities Co. v. White Paving Co., 351 Ill. 285, 300, 184 N.E. 310 (1932). Apparently that rule does apply here, but that privilege is not absolute. Here, a reasonable inference can be drawn from plaintiff’s allegations that Pascente neither acted in the best interest of his corporation when he did the acts complained of nor acted with justification, which would establish the required malice. George A. Fuller Co. v. Chicago College of Osteopathic Medicine, 719 F.2d 1326, 1333 (7th Cir.1983). Therefore, the complaint states a cause of action.

Pascente also argues that plaintiff’s contract with his corporation was assigned to another corporation before the date that plaintiff alleges as the date of breach. That agreement is attached to the motion to dismiss, so again is matter outside the pleadings. Moreover, there is a dispute (which is partly factual) as to whether the assignment was really intended to assign the entire contract or just portions thereof, so the issue cannot be resolved on a motion to dismiss. Therefore, the motion to dismiss count 1 in 6129 is denied.

Conclusion

IT IS THEREFORE ORDERED that defendant Joseph Pascente’s motions to dismiss count 2 in 84 C 6128 and count 3 in 84 C 6129 are granted and those counts are dismissed. Pascente’s motion to dismiss count 1 of 84 C 6129 is denied. Pascente is given 7 days from the date of this order to respond to all outstanding written discovery. This case is set for status hearing and discovery will close on July 17, 1985 at 9:15 a.m.

ON RECONSIDERATION

Plaintiffs have asked this court to reconsider its holding in the order of 21 May 1985 that the statute of limitations for private RICO actions is the two-year period of Ill.Rev.Stat. ch. 110 § 13-202. Plaintiffs argue that the proper characterization of RICO is as an action created by statute and therefore the proper statute of limitations is the five-year period of Ill.Rev.Stat. ch. 110 § 13-205 which, though it is phrased in terms of “all civil actions not otherwise provided for” has been held to apply to rights of action created by statute. Blakeslee’s Storage Warehouses v. City of Chicago, 369 Ill. 480, 485, 17 N.E.2d 1 (1938); Montague v. George J. London Memorial Hospital, 78 Ill.App.3d 298, 304, 33 Ill.Dec. 565, 569, 396 N.E.2d 1289, 1293 (1st Dist. 1979).

Plaintiffs understandably do not argue that their characterization is a closer analogy than the treble damages characterization this court chose. Instead, plaintiffs argue that their characterization is superi- or because it results in one uniform period for all RICO actions while this court’s choice would apply only to actions seeking treble damages. Plaintiffs point out that 18 U.S.C. § 1964(a) gives district courts jurisdiction to order various sorts of equitable relief, such as divestiture, investment restrictions, dissolution, reorganization, and injunctive relief. Plaintiffs also claim that a suit could be brought under § 1964(c) seeking only single rather than treble damages. Since a suit seeking only equitable relief or single damages is obviously not a treble damages action, plaintiffs argue that this court’s choice of the two-year period fails to achieve the uniformity that this court interpreted Wilson v. Garcia, — U.S. -, 105 S.Ct. 1938, 1947, 85 L.Ed.2d 254 (1985), to require. An action brought solely under § 1964(a) would be wholly equitable in nature. Equitable actions are simply not subject to a statute of limitations. If an equitable action is regarded as exclusive of rather than concurrent with an action at law, then it is governed not by any statute of limitations but only by the doctrine of laches. Nemkov v. O’Hare Chicago Corp., 592 F.2d 351, 354 (7th Cir.1979); see also Cannon v. University of Health Sciences/The Chicago Medical School, 710 F.2d 351, 357-58 (7th Cir.1983). Of course the statute of limitations may provide a guide in deciding the question of laches, International Telephone & Telegraph Corp. v. General Telephone & Electronics Corp., 518 F.2d 913, 926-28 (9th Cir.1975), but the final decision is an equitable one left to the judge’s discretion. Gurgone v. City of Chicago, 587 F.Supp. 1347, 1352 (N.D.Ill.1984). If, on the other hand, an action under § 1964(a) is regarded as concurrent to an action for damages under § 1964(c) (and, given the wording of § 1964(c), that would apparently always be true for private litigants), then “equity will withhold its remedy if the legal right is barred by the local statute of limitations”, Russell v. Todd, 309 U.S. 280, 289, 60 S.Ct. 527, 532, 84 L.Ed. 754 (1940), and that is so even if a litigant forbears from requesting the legal relief. Nemkov, 592 F.2d at 355; see also Cannon, 700 F.2d at 359; Argus Inc. v. Eastman Kodak Co., 552 F.Supp. 589, 599 (S.D.N.Y.1982). Given these principles, the non-uniformity plaintiffs worry about cannot arise. Either § 1964(a) is not subject to any statute of limitations at all (so that uniformity is impossible), or it stands or falls with the legal action under § 1964(c) (so that uniformity has been achieved).

Plaintiffs’ claim that a single damages action could be brought under § 1964(c) and would not be subject to the two-year period applied to treble damages actions is simply not tenable. No rational person would ask for single damages when treble damages can be had, so plaintiffs’ scenario will simply not occur. Even if someone did bring a single damages RICO action, that would not change the fact that treble damages is the essence of private RICO. The characterization of a cause of action depends not on how a particular litigant actually uses it but on how Congress intended for it to operate. See Wilson, 105 S.Ct. at 1943 (choosing a statute of limitations is, in the final analysis, a question of statutory construction).

Plaintiffs’ argument also fails because the reasons given in Wilson for adopting a uniform limitations period — avoiding the uncertainty and wasteful litigation that results from trying to choose an analogy based on each case’s facts — do not apply here. The actions plaintiffs claim would not be governed by the two-year period of § 13-202 are easily identified and distinguished from treble damages actions simply by perusing the complaint. No litigation would be necessary to decide which limitations period to apply, so neither uncertainty nor waste could result. Therefore, there is no reason to strive for complete uniformity and the more analogous period of Ill.Rev.Stat. ch. 110 § 13-202 remains the best choice.

IT IS THEREFORE ORDERED that on reconsideration this court adheres to the view that plaintiffs’ RICO claims are time-barred.

      . So far, courts faced with predicate acts that allow two characterizations and hence simultaneous application of different limitations periods have avoided that result by choosing one characterization over the other. Compare Burns v. Erserk, 591 F.Supp. 837, 843-44 (D.Minn.1984), where the 3-year period for securities fraud was applied rather than the 6-year period for common law fraud because most of the allegations had to do with securities fraud and only one paragraph alleged mail fraud, with Eisenberg v. Gagnon, 564 F.Supp. 1347, 1354 (E.D.Penn.1983), where the 6-year period for common-law fraud was applied rather than the 3-year period for securities fraud since the mail and wire fraud allegations were sufficient to sustain the RICO count and because the court thought that was more in line with Congress’s statement that RICO is to be "liberally construed to effectuate its remedial purposes.”

      . At least two judges in this district have held that private litigants may not sue under § 1964(a). DeMent v. Abbott Capital Corp., 589 F.Supp. 1378, 1384 (N.D.Ill.1984) (Judge Marshall); Kaushal v. State Bank of India, 556 F.Supp. 576 (N.D.Ill.1983) (Judge Shadur).

      . Perhaps plaintiffs are thinking that a single damages action would be brought by one who had missed the two-year limit but that is not so — a litigant who misses the time limitation has a time-barred RICO claim, not a single damages RICO claim.


author: HIRAM H. WARD, Chief Judge.

text:
    COBURN OPTICAL INDUSTRIES, INC., Plaintiff, v. CILCO, INC., Defendant.
    No. C-84-734-D.
    United States District Court, M.D. North Carolina, Durham Division.
    May 22, 1985.

      Daniel W. Fouts and Larry I. Moore of Adams, Kleemeier, Hagan, Hannah & Fouts, Greensboro, N.C., and Herbert Cohen & George C. Myers, Jr. of Wigman & Cohen, P.C., Arlington, va., for plaintiff.
    McNeill Smith of Smith, Moore, Smith, Schell and Hunter, Greensboro, N.C., for defendant.
   MEMORANDUM OPINION AND ORDER

HIRAM H. WARD, Chief Judge.

This matter comes before the Court on plaintiff’s Motion and Brief for Attorney’s Fees (March 11, 1985) and defendant’s Combined Opposition to Plaintiff’s Motion for Attorney’s Fees and Cross Motion for Attorney’s Fees and Costs (April 1, 1985). Both parties seek the imposition of attorney’s fees and costs against their opponent pursuant to Rule 11 of the Federal Rules of Civil Procedure and 28 U.S.C. § 1927. The Court will grant the plaintiff’s motion in part and deny it in part and deny the defendant’s motion. The Court on its own motion will award attorney’s fees and costs to the plaintiff incurred in defending defendant’s cross motion for attorney’s fees.

This civil action for patent infringement was commenced by a Complaint filed on August 6, 1984. Plaintiff alleged venue in this Court under 28 U.S.C. § 1400(b). The plaintiff, based on its information, believed that (1) defendant has a regular and established place of business in this district and (2) defendant has committed acts of infringement in this district, notably Sanford, North Carolina, by “making, having made, selling and using” the patented intraocular lens at issue in this case.

Defendant filed a motion to dismiss or transfer on September 26, 1984. In this motion and its supporting affidavits, defendant admitted that it has a regular and established place of business in this district. Defendant also admitted to making intraocular lenses, particularly known as the Freeman lens, which are similar to the lenses covered by the patent in issue. However, the defendant expressly and strenuously denied ever making or using Freeman lenses in its manufacturing facility in this district. Defendant claimed that these lenses were made elsewhere and no activity concerning them was conducted in Sanford.

Faced with the defendant’s motion and supporting affidavits, the plaintiff was left in a difficult position; if it did nothing its complaint would likely be dismissed or the case transferred. The plaintiff opted to further investigate facts, previously presented to the Court as accurate, by deposing corporate personnel of the defendant. This rather lengthy investigation revealed that a number of Freeman lenses were manufactured, to various points of completion, in this district. After this revelation the defendant changed the tenor of their motion and suddenly recognized that there was activity concerning the Freeman lenses in this district. See Defendant’s Reply to Plaintiff’s Opposition to Defendant’s Motion to Dismiss or Transfer for Improper Venue (Jan. 8, 1985). However, at no time did the defendant abandon its initial position and allegations except impliedly by altering its argument. In its reply brief defendant erected a novel legal argument stating that the “making” in this district was not really a “making.” The defendant also requested that the Court allow oral argument on their initial motion.

On February 22, 1985, the Court heard oral argument on defendant’s motion. At the outset the Court expected to hear argument concerning the lack of patent venue. To the surprise of the Court and opposing counsel, the position that patent venue was improper had all but disappeared. Defendant’s lead counsel basically conceded that venue existed. The primary focus of defendant’s oral argument was that the case should be transferred under 28 U.S.C. § 1404. Defendant had practically hidden this argument in its motion to dismiss or transfer and its reply. The scintilla of attention to the § 1404 argument was a brief line in a reply brief and perhaps an inference that could be drawn from the title of defendant’s original motion. The Court, on February 26, 1985, denied the defendant’s motion.

After this order the plaintiff filed a motion for attorney’s fees and costs. Plaintiff claims that the defendant and its attorneys failed to make a reasonable inquiry of the facts prior to filing its motion to transfer or dismiss for improper venuej failed to promptly apprise the Court and the plaintiff of facts relevant to the venue question once they became known to the defendant and its attorneys, and continued to press their motion to dismiss for improper venue after discovering facts which rendered defendant’s position untenable. The defendant denies these allegations and to exemplify aggressive lawyering has filed their own motion seeking attorney’s fees and costs, contending that plaintiff’s motion for fees is frivolous.

Rule 11 was amended in 1983 to expand significantly the responsibility imposed on attorneys when they sign pleadings or motions. See generally 5 C. Wright & A. Miller, Federal Practice and Procedure § 1333 (Supp.1985). Rule 11 provides that the signature on a motion or pleading constitutes a certificate that the signer has read the document and

that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

“Rule 11 in substance requires the signing lawyer or party to certify that on the basis of a reasonable factual prefiling inquiry he is informed and believes that the paper has a factual and legal basis and that it is not interposed for delay.” Schwarzer, Sanctions Under the New Federal Rule 11 — A Closer Look, 104 F.R.D. 181, 186 (1985) (emphasis added). The reasonable inquiry standard holds an attorney to a higher standard of knowing his case than original Rule 11 and provides for a greater range of circumstances to trigger its violation. See Advisory Committee Notes, 97 F.R.D. 165, 198 (1983); see also Golden Eagle Distributing Corp. v. Burroughs Corp., 103 F.R.D. 124 (N.D.Calif.1984) (Rule 11 violated when counsel made argument for extension of existing law disguised as one based on existing law). More teeth were put in Rule 11 by its 1983 amendment in order to further discourage “dilatory or abusive tactics” and “to streamline the litigation process by lessening the amount of frivolous matters brought before the federal courts.” Blair v. Shenandoah Women’s Center, Inc., 757 F.2d 1435 (4th Cir.1985).

[W]hat constitutes reasonable inquiry may depend on such factors as how much time for investigation was available for the signer; whether he had to rely on a client for information as to the facts underlying the pleading, motion, or other paper; whether the pleading, motion, or other paper was based on a plausible view of the law; or whether he depended on forwarding counsel or another member of the bar.

Advisory Committee Notes, 97 F.R.D. at 199. What constitutes a reasonable inquiry will vary with the nature of the litigation, and the amount and quality of the investigation. Wold v. Minerals Engineering Co., 575 F.Supp. 166, 167 (D.Colo.1983). The hardship caused by insufficient inquiry to the other side is also important. See Van Berkel v. Fox Farm and Road Machinery, 581 F.Supp. 1248, 1251 (D.Minn.1984). Whether counsel’s failure to conduct a reasonable inquiry of the facts was willful or inadvertent is not relevant. Weisman v. Rivlin, 598 F.Supp. 724, 726 (D.D.C.1984).

Defendant and its lead counsel’s investigation into the defendant’s manufacturing activity in this district falls short of being a reasonable inquiry. With four manufacturing facilities in the United States it would seem to strain reason to find that the defendant and its counsel did not know or could not have discovered on their own what had been done with reference to the lenses in this district. Certainly, accurately determining the facts pertinent to the patent venue issue may have taken some time. However, the defendant and its attorneys chose to make only a cursory investigation of these facts in the two months between the filing of plaintiff’s complaint and defendant’s motion to dismiss. Defendant instead chose to present affidavits and make representations to the Court that were inaccurate. Despite an attorney’s belief in the statements of his client, he needs facts on which to ground knowledge, information or belief. If all the attorney has is his client’s assurance that facts exist or do not exist, when a reasonable inquiry would reveal otherwise, he has not satisfied his obligation.

In this case the defendant erected a rather imposing legal argument based on a foundation of misrepresentations. Only the uncovering of the facts by the plaintiff’s diligence illuminated the frivolity of the defendant’s initial position. It is clear that an attorney must not omit facts critical to the application of the rule of law relied on by the Court. Here, the plaintiff was required to spend time preparing legal arguments defending its position and felt obligated to conduct further investigation in this matter because of the defendant’s allegations.

The Court feels that the imposition of attorney’s fees are in order against the defendant and its counsel. Beyond offering false representations and argument, they propounded them even after shown to be false; this clearly violates Rule 11. To persist in claims or defenses beyond a point where they can no longer be considered well grounded violates Rule 11. See Nemeroff v. Abelson, 620 F.2d 339, 350-51 (2d Cir.1980). Although out of state counsel did not sign the motion to dismiss or transfer it would appear that those attorneys prepared these documents and has been lead counsel for the defendant up to this point. It would subvert the purpose of Rule 11 to allow an attorney to hide behind another merely because a local district court rule requires the signature of local counsel. Rule 11 allows the imposition of sanctions against the party responsible for the paper.

The Court finds that local counsel must share liability for attorney’s fees and costs imposed on defendant and its lead counsel arising from the filing of defendant’s motion to dismiss. Local counsel’s signature is solely affixed to this motion. Local counsel seemed blindly to follow the commands of its out of state associates who in all probability prepared most, if not all, of the motion. What Rule 11 requires is that the lawyer who elects to sign a paper take responsibility for it, even if that responsibility is shared. Schwarzer, supra at 186. It is difficult for a lawyer to disclaim all responsibility for a paper bearing his name. See Golden Eagle Distributing Corp. v. Burroughs Corp., 103 F.R.D. 124 (N.D.Cal.1984). The Court expects local counsel who appear with attorneys not locally admitted to ensure that Local Rules and the Federal Rules of Civil Procedure are followed even when the pleading or motion is not prepared by them. In the instant case local counsel is no doubt far less culpable than out of state counsel and perhaps not at all responsible or liable for the faulty prefiling investigation, concerning the motion to dismiss. However, by local counsel propounding representations and argument in the motion to dismiss, even after shown to be false by the plaintiff’s investigation, local counsel’s responsibility and liability became akin to its out of state associate. The Court is unable at this time to determine the level of responsibility as between local and out of state counsel in this matter.

[ 7 ] N otwithstanding Rule 11 there exists an alternate ground to impose attorney’s fees and costs against the defendant’s counsel. That ground is 28 U.S.C. § 1927 which provides:

Any attorney ... who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.

The Court finds that defendant’s motion to dismiss or transfer was unreasonable, vexatious and caused the proceedings to multiply-

On its own motion the Court finds that the defendant and all of its attorneys should be required to pay attorney’s fees and costs incurred by the plaintiff to defend against defendant’s motion for attorney’s fees. Here, local counsel was as aware of the facts supporting this motion as its out of state colleague.

An attorney’s reasonable belief that a paper is “warranted by law” requires an objective analysis turning on the facts and circumstances of the case, not on the attorney’s state of mind. See SFM Corp. v. Sundstrand Corp., 102 F.R.D. 555 (E.D.Ill.1984). The Court finds that this motion is not warranted by existing law or a good faith interpretation derived from existing precedent and was brought to harass and delay. This motion for attorney’s fees was an attempt to best the other side by portraying as frivolous a valid motion of the plaintiff. Obviously, defendant was well within its rights to oppose the plaintiff’s motion for fees and costs but defendant’s motion for attorney’s fees is frivolous and imposed for the purpose of harassment and delay. This request for fees necessitated plaintiff to defend its position through more paper, again needlessly increasing the cost of this litigation. Again, local counsel as well as out of state counsel must pay its way under Rule 11 and 28 U.S.C. § 1927 for the attorney’s fees and costs incurred by the plaintiff in defending against defendant’s motion for fees and costs.

Attorneys are officers of the Court and their first duty is to the administration of justice. An attorney has a professional duty to dismiss a baseless motion or lawsuit, even over client’s objection, and to do so promptly on learning that the client’s position is without merit. A lawyer shall make reasonable efforts to expedite litigation consistent with the client’s interest. Attorneys’ attempts to prolong litigation often prove costly and unproductive.

The lawyer’s duty to place his client’s interests ahead of all others presupposes that the lawyer will live with the rules that govern the system. Unlike the polemicist haranguing the public from his soapbox in the park, the lawyer enjoys the privilege of a professional license that entitles him to entry into the justice system to represent his client and, in doing so, to pursue his profession and earn his living. He is subject to the correlative obligation to comply with the rules and to conduct himself in a manner consistent with the proper functioning of that system.

Schwarzer, supra at 184. If judges turn from Rule 11 and let it fall into disuse, the message will be clear to those inclined to abuse or misuse the litigation process. “Misconduct, once tolerated will breed more misconduct and those who might seek relief against abuse will instead resort to it in self-defense.” Id. at 205.

To minimize the need for ancillary proceedings and to concentrate emphasis on the material issues in this case, the Court urges counsel to seek to define areas of agreement (such as propriety of time spent, reasonableness of hourly rates, and relative degree of financial responsibility of each person or persons). The Court would direct counsel to Local Rule 210 for guidance in seeking an amenable resolution to these issues. However, if counsel is unable to resolve the amount to be reimbursed and the person or persons financially responsible, the Court will consider appropriate procedures to resolve the issue or issues. The Court would reiterate its desire to get this ease moving forward and avoid “satellite litigation;” this case is not a complex case and it has been delayed unnecessarily.

IT IS, THEREFORE, ORDERED that, plaintiff’s motion for attorney’s fees and costs be, and it is hereby GRANTED with respect to fees and costs incurred defending defendant’s motion to dismiss for improper venue. The Court on its own motion will impose attorney’s fees and costs on defendant and its counsel incurred with reference to plaintiff’s defense of defendant’s cross motion for attorney’s fees.

IT IS FURTHER ORDERED that defendant’s cross motion for fees and costs be, and the same hereby is DENIED.

      . 28 U.S.C. § 1400(b) provides:
      Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular place of business.
      In defining acts of infringement in 35 U.S.C. § 271, Congress has stated, "whoever without authority makes, uses or sells any patented invention, within the United States during the term of the patent, infringes the patent.” (emphasis added).

      . The defendant contended that in order to have a making, and therefore an act of infringement, under 35 U.S.C. § 271 the item must reach a point of total completion. Under this argument the quantity of work performed at a particular place has nothing to do with the question of whether the item was made there. This argument barely falls within Rule 11’s allowance for the creative pursuit of legal theories extending existing law. Were it not for the paucity of law defining the simple term "make” the Court would impose sanction on counsel for advancing this legal theory, especially after the de facto abandonment of this argument at oral argument.

      . Out of state counsel had associated themselves with local counsel pursuant to Local Rule 103.

      . Widespread concern over frivolous litigation and abusive practices of attorneys led to the amendment in 1983 of Rule 11. See, e.g., Roadway Express Inc. v. Piper, 447 U.S. 752, 757 n. 4, 100 S.Ct. 2455, 2459 n. 4, 65 L.Ed.2d 488, 495 n. 4 (1980).

      . Rule 11 requires that signing counsel have requisite "knowledge, information and belief.”

      . Out of state counsel’s name did appear on the motion and other papers.

      . Rule 11 makes it advisable for attorneys acting as local counsel to consider the extent to which they can perform the role of a passive conduit consistent with the responsibilities imposed by Rule 11. "Where control of litigation rest with other lawyers, ..., local counsel may be well advised to let one of those lawyers sign papers to be filed.” Schwarzer, supra at 186. The Court does recognize that local counsel must be able to rely to some extent on the representations of reputable out of state attorneys, especially when local counsel has no independent knowledge concerning the representations.

      . The Advisory Committee Notes to Rule 11 state that ”[t]he detection and punishment of a violation of the signing requirement, ..., is part of the court’s responsibility for securing the system’s effective operation.”

      . "[T]here is no position — no matter how absurd — of which an advocate cannot convince himself.” Wells v. Oppenheimer, 101 F.R.D. 358, 359 n. 3 (S.D.N.Y.1984).