author: ROBERT D. POTTER, Chief Judge.

text:
    ELECTRICITIES OF NORTH CAROLINA, INC., Plaintiff, v. The SOUTHEASTERN POWER ADMINISTRATION, et al., Defendants.
    No. C-C-85-384-P.
    United States District Court, W.D. North Carolina, Charlotte Division.
    Oct. 30, 1985.

      John R. Jolly, Ernie K. Murray, Spruill and Spruill, Rocky Mount, N.C., James N. Horwood, Marc R. Poirier, Patricia E. Stack, Donald Weightman, Spiegel & McDiarmid, Washington, D.C., for plaintiff.
    Robert H. Forry, Robert P. Edwards, Jr., Troutman, Sanders, Lockerman & Ash-more, Atlanta, Ga., Richard A. Yinroot, Robinson, Bradshaw & Hinson, Charlotte, N.C., John P. Scott, Jr., Balch and Bingham, Birmingham, Ala., Ben H. Stone, Eaton, Cottrell, Galloway, Lang & Stone, Gulfport, Miss., for The Southern Co., Georgia Power Co., Alabama Power Co., Gulf Power Co., Mississippi Power Co.
    Thomas J. Bolch, Raleigh, N.C., for Southeastern Power Resources Committee.
    Lawrence W. Hewitt, Berry, Hogewood, Edwards & Freeman, Charlotte, N.C., Reuben Goldberg, Channing D. Strother, Jr., Goldberg, Fieldman & Letham, Washington, D.C., for Alabama Cities.
    L. Clifford Adams, Jr., Heard, Leverett & Adams, Atlanta, Ga., Clifton A. Vince, Bernhardt K. Wruble, Nancy A. Wodka, Verner, Liipfert, Bernhard, McPherson & Hand, Washington, D.C., Dean Gibson, Berry, Hogewood, Edwards & Freeman, Charlotte, N.C., for Municipal Electric Authority of Ga.
    C. Max Vassanelli, Drake Cutini, Attys., Dept. of Justice, Civ. Div., Washington, D.C., Charles R. Brewer, U.S. Atty., Charlotte, N.C., for Federal defendants.
    Denver L. Rampey, Southeastern Power Admin., Elberton, Ga., for Southeastern Power Admin.
   ORDER

ROBERT D. POTTER, Chief Judge.

THIS MATTER is before the Court upon Defendants’ Motion to dismiss or, alternatively, for summary judgment.

INTRODUCTION

The Plaintiff alleges that the Federal Government Defendants have violated Section 5 of the Flood Control Act of 1944, 16 U.S.C. § 825s, by failing to give preference to its service area members in the sale and other allocation of hydroelectric energy; the procedural provisions of the Department of Energy Organization Act, 42 U.S.C. §§ 7191(b), (c), and (d) and the Administrative Procedure Act, 5 U.S.C. §§ 553(b), (c), and (d), by making specific determinations, sales, and allocations of power in certain contracts without first publishing the proposed rule or order; and the Southeastern Power Administration’s Final Georgia-Alabama Power Marketing Policy. The Plaintiff further claims the private Defendants have violated applicable state laws by their alleged intentional interference with prospective business relations.

The Defendants seek dismissal of the case for several reasons: no justiciable case or controversy; improper venue; no violations of the Flood Control Act of 1944, Southeastern Power Administration’s Final Power Marketing Policy for the Georgia-Alabama System, the relevant procedural requirements of the Department of Energy Organization Act and the Administrative Procedure Act; and preclusion of the action due to res judicata or collateral estoppel.

PARTIES

The many parties to this lawsuit, which were represented at the hearing of October 2, 1985, include:

(1) Plaintiff Electricities of North Carolina, Inc. (“Electricities”) is orga- ■ nized under the laws of the State of North Carolina and it represents the interests of several municipally owned electric systems in North Carolina, sixteen of which are located in the Western District of North Carolina.
(2) Governmental Defendant Southeastern Power Administration (“SEPA”) is the federal power marketing authority of the Department of Energy. SEPA is a marketing agency created for the purpose of disposing of excess hydroelectric power produced in the states of West Virginia, Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama, Mississippi, Tennessee, and Kentucky. SEPA does not produce any power, nor does it own or operate a transmission network. SEPA is governed by the Flood Control Act of 1944.
(3) Governmental Defendant Harry C. Giesinger is being sued in his capacity as Administrator of SEPA.
(4) Governmental Defendant Department of Energy (“Energy”) is the governmental branch of which SEPA is a part.
(5) Governmental Defendant John S. Herrington is being sued in his capacity as Secretary of Energy.
(6) Private Defendant The Southern Company (“Southern”) is a holding company with its principal place of business in Atlanta, Georgia. Southern owns the common stock of other private Defendants in this case:
(a) Georgia Power Company (“Georgia Power”);
(b) Alabama Power Company (“Alabama Power”);
(c) Gulf Power Company (“Gulf Power”); and
(d) Mississippi Power Company (“Mississippi Power”).
These private Defendants are electric utilities which operate in Alabama, Georgia, Florida, and Mississippi, respectively.
(7) Defendant Intervenor Municipal Electric Authority of Georgia (“MEAG”) is a public corporation in the business of providing electricity to political subdivisions of the State of Georgia. MEAG is composed of 47 participant companies which have established contractual relations with SEPA for the distribution of energy.
(8) Defendant Intervenor Alabama Cities represents certain cities in Alabama which, as preference customers, have interests in the established energy allocation of SEPA.
(9) Defendant Intervenor Southeastern Power Resources Committee (“SPRC”) represents several electric cooperative generation, distribution, and transmission systems throughout the states of Virginia, North Carolina, South Carolina, Georgia, Alabama, and Mississippi. The SPRC membership seeks to protect its interests in the established energy allocation of SEPA.

FACTS

A. SEPA

The Flood Control Act of 1944, 16 U.S.C. § 825s, requires that SEPA dispose of the power produced “in such manner as to encourage the most widespread use thereof at the lowest possible rates to consumers consistent with sound business principles.” The Act further requires that “preference” in the sale of power be given to public bodies and cooperatives, rather than private entities.

SEPA sells hydroelectric power from the United States Army Corps of Engineers reservoir projects in the Southeastern United States. This area is divided into four marketing systems, one of which is the Georgia-Alabama system, at issue in the case at bar. The Georgia-Alabama system covers all or portions of Georgia, Alabama, South Carolina, Mississippi, Florida, and North Carolina. This system is further subdivided into eastern and western divisions, which are divided by the Georgia-South Carolina border of the Savannah River. The contracts which the Plaintiff has challenged pertain to the western division which includes all of Georgia, most of Alabama, and portions of Mississippi, and Florida. Under SEPA’s present marketing policy, none of Plaintiff’s members is eligible to purchase power allocated to the western division.

SEPA does not own or control any transmission lines; so it depends on others to move the power of its facilities to its customers. SEPA supplies only a small part of the needs of its customers. The power that it sells from the Georgia-Alabama system is “peaking” power, that is, power to meet the peak demands of its customers. By purchasing its power, SEPA’s customers are relieved of the need to invest in generation facilities to meet energy demands during peak periods.

B. SEPA’S MARKETING POLICY

SEPA develops its marketing policies by informal rule making with notice and an opportunity to submit comments. In 1979, SEPA issued a notice of intent to formulate a power marketing policy for the Georgia-Alabama system. In response, Plaintiff proposed that once existing contracts expired, SEPA should allocate equal amounts of power to all interested preference entities, a suggestion which SEPA rejected.

SEPA subsequently published notice of its proposed marketing policy for the Georgia-Alabama system, and in January of 1980, held two public comment fora on the proposed policy.

On October 1, 1980, SEPA published a final marketing policy for the allocation of hydroelectric power in the Georgia-Alabama system. 45 Fed.Reg. 65143-44 (Oct. 1, 1980). The policy provided that SEPA’s pre-existing customers would continue to receive their existing allocations of power after their contracts expired. Sixteen of the Plaintiff member cities are scheduled to receive some of the eastern division power under this policy in the future. Contracts negotiated by SEPA with western division companies (private Defendants) do not alter the allocation of SEPA power to the eastern division under the 1980 Policy.

C. PROCEDURAL BACKGROUND

Prior to this action, Plaintiff filed suit against SEPA, and others, challenging the marketing policy on several grounds. Summary judgment was entered against Plaintiff in Electricities of North Carolina, Inc., et al. v. The Southeastern Power Administration, et al, Civ. No. 82-888-CIV-5 (E.D.N.C. Oct. 16, 1984), aff'd, 774 F.2d 1262 (4th Cir.1985). Specifically, the Fourth Circuit upheld the district court’s ruling that the agency decisions challenged by Plaintiff’s involved agency expertise and were not subject to judicial review, but, even if they were subject to judicial review, they were rational decisions.

In this action the Plaintiff alleges in its Complaint that the governmental Defendants violated the Flood Control Act of 1944 by failing to give preference to Plaintiff’s members in the Georgia-Alabama system. The Complaint further alleges that the government Defendants have violated procedural requirements of the Department of Energy Organization Act and the Administrative Procedure Act by making specific determinations, sales and allocations of power without providing for adequate notice, opportunity to comment and publication of the final determination. Plaintiff further alleges that SEPA and its Administrator have violated its 1980 Policy by failing to provide preference customers an opportunity ahead of non-preference customers to provide exchange pumping energy as required by the Policy; by failing to keep Plaintiff members apprised of the status of negotiations with Southern; and by not allowing Plaintiff members to consult with and offer advice to SEPA, as required by the Policy. Plaintiff finally claims that private Defendants intentionally, maliciously and unjustifiably interfered with the prospective business relations between SEPA and some or all of Plaintiff’s members.

DISCUSSION

The Court is of the opinion that this suit should be dismissed because Plaintiff does not have the requisite standing to assert its claims. Essentially, Plaintiff’s claims can be broken down into four: (1) Defendants’ alleged failure to give Plaintiff members preference; (2) Defendants’ alleged failure to give preference customers the first opportunity to provide exchange pumping energy and failure to apprise Plaintiff members of SEPA’s contract-negotiation status; (3) private Defendants’ alleged intentional and malicious interference with Plaintiff’s prospective business relations; and (4) Defendants’ alleged failure to meet certain procedural requirements.

A. RELEVANT LAW

The federal judicial power is limited to cases and controversies only. U.S. Const. Art. III § 2. The cases and controversies requirement of Art. III involves the doctrine of standing, which has a prudential aspect demanding that the plaintiff show (1) an injury-in-fact, (2) that there is a causal connection between the challenged action and this injury-in-fact, Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U.S. 59, at 72-81, 98 S.Ct. 2620, at 2629-2634, 57 L.Ed.2d 595 (1977), and (3) that the injury is capable of redress, Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, at 472, 102 S.Ct. 752, at 758, 70 L.Ed.2d 700 (1982).

B. ANALYSIS

SEPA indicated in its 1980 Policy that the Georgia-Alabama system would consist of two divisions, the Savannah River being the dividing line. The eastern division of that system is the same as it was prior to the 1980 Policy, except for the inclusion of the service area of South Carolina Electric and Gas Company. That Policy has been upheld by the Fourth Circuit Court of Appeals as noted supra.

Pursuant to the Policy allocation of power to the western division, SEPA contracted with Southern to transmit western division electricity to preference customers. These contracts also provide that Southern member companies will purchase a decreasing amount of capacity until 1991 when they will not be purchasing any capacity at all.

Plaintiff contends that the temporary decreasing sales are improper because such action fails to give a preference to public bodies. Plaintiff argues that SEPA cannot create two divisions of energy allocation and sell some of its power to non-preference customers in the western division while excluding preference customers in the eastern division. Plaintiff claims that the 1980 Policy was formulated with the expectation that only preference customers would use the power allocated to the respective divisions. Plaintiff also argues that the Policy does not address SEPA’s disposition of potential excess power in a division; the power being sold to Southern is in excess of what western division preference customers want or could use.

The 1980 Georgia-Alabama Policy is not subject to review by this Court in light of the Fourth Circuit’s ruling on that issue on October 10, 1985. Although SEPA’s contracts for the decreasing sales of energy to the non-preference customers of Southern may be questioned, Plaintiff is without proper standing to do so. Even if those contracts were deemed invalid, the unreviewable Policy allocation of power to the western division remains the same and Plaintiff’s eastern division members would not stand to benefit anything. Furthermore, on Plaintiff’s appeal of the eastern district court’s denial of its motion for preliminary injunctive relief, the Fourth Circuit held Plaintiff has no right or entitlement to allocations of SEPA power. Electricities of North Carolina, Inc. v. Southeastern Power Administration, 758 F.2d 646 (4th Cir.1985); See also, Greenwood Utilities Commission v. Hodel, 764 F.2d 1459, 1465 (11th Cir.1985); City of Santa Clara v. Andrus, 572 F.2d 660 (9th Cir.), cert. denied, 439 U.S. 859, 99 S.Ct. 176, 58 L.Ed.2d 167 (1978); City of South Sioux City v. Western Area Power Administration, No. CV-L-107 (D.Neb. May 20, 1985).

It is also worth noting that SEPA’s contracts with Southern are necessary for the transmission of power since SEPA depends upon others for that; and, SEPA is gradually providing its western division preference customers with energy by making its contracts with Southern on a decreasing sales basis, until 1991 when only preference customers will receive energy in the western division. Plaintiff’s claim that the power being sold to Southern is excess power is without merit. SEPA’s sales of power to the preference customers are gradually increasing. Consequently, the rates that Southern will charge to transmit the power will gradually increase. Even if the western division contracts with Southern were invalidated, the power allocated to the western division would go unchanged; however, the costs of transmitting the SEPA power to the western division preference customers would increase drastically and suddenly, rather than gradually. Such a result is undesirable to both the western preference customers and SEPA.

Similarly, the challenged western division contracts, again, part of the 1980 Policy, have not caused Plaintiffs alleged injury, and thus no case or controversy is before this Court. This Court is of the opinion that Plaintiffs alleged injury is a result of SEPA’s decisions in the 1980 Policy regarding how much power to allocate to the eastern and western divisions of the Georgia-Alabama system. That decision is committed to agency discretion and is not subject to judicial review. Electricities of North Carolina, et al. v. Southern Power Administration, et al, supra.

The same analysis applies to Plaintiff’s claims that Defendants failed to provide preference customers with the first opportunity to provide exchange pumping energy and to apprise Plaintiff members of SEPA’s contract-negotiation status. The Plaintiff is again challenging actions of SEPA pertaining to the western division; thus, even if the action were held improper, Plaintiff’s members would realize no change in their energy access from SEPA because the 1980 Policy has predetermined that.

With respect to Plaintiff’s allegation of private Defendants’ intentional, malicious, and unjustifiable interference with Plaintiff’s prospective business relations, again, the same analysis applies. Plaintiff member cities are in the eastern division of the Georgia-Alabama system and have no prospective business relations concerning SEPA’s Policy allocation of energy to the western division. Therefore, the western division private Defendants cannot be said to have interfered with the prospective business relations of Plaintiff because Plaintiff has no prospective business relations in the western division according to the 1980 Policy.

Likewise, Plaintiff does not have standing to challenge the procedures used by SEPA in disposing of its energy in the western division. The Plaintiff argues that SEPA has failed to meet the procedural requirements imposed upon it. It is unnecessary to analyze whether SEPA complied with relevant informal rule-making procedures in dealing with its western division sales and allocations, because, even if such procedures were deemed improper, energy allocated under the 1980 Policy to the eastern and western divisions would remain unchanged.

CONCLUSION

As noted before, this Court is of the opinion that Plaintiff’s alleged injury more accurately rests in SEPA’s decisions in the 1980 Policy to allocate energy between the eastern and western divisions. That Policy involves the types of decisions committed to agency discretion and not subject to judicial review. Electricities of North Carolina et al. v. Southeastern Power Administration, et al., supra. Consequently, Plaintiff’s eastern division members’ claims of invalid action in the western division do not meet the requirements of standing of (1) injury-in-fact, (2) causal connection, and (3) injury capable of redress. Duke Power Co. v. Carolina Environmental Study Group, Inc., supra; and Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., supra.

The Court has also considered a letter received on October 23, 1985 submitted by Plaintiff. Plaintiff therein states that the recent Fourth Circuit decision of October 10, 1985 is not applicable to this case as to the issue of SEPA’s allocation as between preference and non-preference customers. The Court disagrees for the reasons stated above.

IT IS, THEREFORE, ORDERED that Defendants’ Motions to dismiss are hereby GRANTED.

      . There are numerous other motions outstanding in this case which are unnecessary to consider due to the effect of this Order.

      . The Plaintiffs member cities are eligible to purchase SEPA power only in the eastern division of the Georgia-Alabama system.

      . The subdivision of the Georgia-Alabama system into eastern and western divisions also re-suited from SEPA’s 1980 marketing policy.


source: Caselaw Access Project

author: NANGLE, Chief Judge.

license: Public Domain

text:
    CAMPUS SPORTSWEAR COMPANY, Plaintiff, v. UNITED STATES of America, Defendant.
    No. 85-1255C(1).
    United States District Court, E.D. Missouri, E.D.
    Oct. 30, 1985.
    James K. Pendleton, St. Louis, Mo., for plaintiff.
    Wesley D. Wedemeyer, Asst. U.S. Atty., St. Louis, Mo., for defendant.
   MEMORANDUM

NANGLE, Chief Judge.

Defendant moves to dismiss plaintiffs complaint for lack of subject matter jurisdiction. Plaintiff imported merchandise, described by plaintiff as boys’ swimsuits, into the United States. Pursuant to 19 U.S.C. § 1623 (1982), plaintiff filed a bond obligating plaintiff to comply with all customs regulations. The Customs Service disagreed with plaintiff’s description and categorized the merchandise as shorts under the Tariff Schedules. Consequently, the Customs Service demanded redelivery of the clothing and, when plaintiff failed to comply, assessed a penalty of over $34,-000.00 against plaintiff. Plaintiff paid the assessment. In this action, plaintiff alleges improper classification and sues to recover the assessment.

If jurisdiction is challenged, the party seeking to invoke federal jurisdiction has the burden of establishing that jurisdiction exists. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936); see also, Mountaire Feeds, Inc. v. Agro Impex, S.A., 677 F.2d 651, 653 (8th Cir.1982). In this case, plaintiff bears that burden.

Plaintiff alleges jurisdiction under 28 U.S.C. § 1355 (1982). As defendant argues, since 28 U.S.C. § 1582(2) (1982) grants the Court of International Trade exclusive jurisdiction of any civil action which arises out of an import transaction and which is commenced by the United States to recover upon a bond relating to the importation of merchandise required by the laws of the United States, this Court lacks jurisdiction. The Government asserts that if plaintiff had protested the claim and not paid the assessment, the Government could have sought to collect the money in the Court of International Trade under the exclusive jurisdiction granted by 28 U.S.C. § 1582(2). The plaintiff, the Government contends, should not be allowed to circumvent this jurisdictional scheme by paying the assessment and suing in district court. This Court agrees with the result advocated by the Government but disagrees with its analysis.

One of the primary objectives of the Customs Court Act of 1980, Pub.L. No. 96-417, 94 Stat. 1727 (codified in scattered sections of 19, 28 U.S.C.) (hereinafter cited as the Act), was to resolve conflicts and confusion arising from the division of jurisdiction between the Customs Court and the United States District Courts. Recent Developments, International Trade: United States Court of International Trade—Customs Courts Act of 1980, 22 Harv.Int’l. L.J. 480 (1981). The Act renamed the Customs Court the Court of International Trade, 28 U.S.C. § 251 (1982), and provided the new court with exclusive jurisdiction over any civil action against the United States arising out of the federal statutes governing import transactions. 28 U.S.C. § 1581 (1982). Specifically, the Act grants the Court of International Trade exclusive jurisdiction over disputes which deal with the classification of imported merchandise. 28 U.S.C. § 1581(a). See generally, Re, Litigation Before the United States Court of International Trade, 26 N.Y.L.Sch.L. Rev. 437, 444 (1981). In addition, the Court of International Trade is given exclusive jurisdiction to fashion equitable relief in appropriate circumstances. 28 U.S.C. § 1581®.

Here, plaintiff disputes the classification of imported clothing. Thus, under § 1581(a) or § 1581(i) the Court of International Trade has exclusive jurisdiction over this action. See, Lowa, Ltd. v. United States, 561 F.Supp. 441, 447 (C.I.T.1983) (Re, J.); Wear Me Apparel Corp. v. United States, 511 F.Supp. 814 (C.I.T.1981). Accordingly, plaintiffs complaint is dismissed without prejudice for lack of subject matter jurisdiction.

      . 28 U.S.C. § 1355 provides:
      "The district courts shall have original jurisdiction, exclusive of the courts of the States, of any action or proceeding for the recovery or enforcement of any fine, penalty, or forfeiture, pecuniary or otherwise, incurred under any Act of Congress, except matters within the jurisdiction of the Court of International Trade under section 1582 of this title.”

      . Modern authority holds the view that § 1355 extends only to suits by a public officer to recover a sum of money that will be paid into the public treasury. See, 13B C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3578 (1984). The Customs Court Act amended § 1355 and excluded from it matters within the jurisdiction of the Court of International Trade under § 1582, which, of course, pertains to suits brought by the United States. This new scheme provides jurisdiction for all cases brought by the United States to recover penalties —§ 1582 for customs matters, § 1355 for all other matters. The symmetry of this scheme reinforces the view that §-1355 does not grant jurisdiction to private litigants for recovery of money. However, since this Court finds exclusive jurisdiction over this action lies with the Court of International Trade, this Court need not determine the reach of 28 U.S.C. § 1355.


author: DORSEY, District Judge.

text:
    Edward BURNS v. PRESTON TRUCKING COMPANY, INC.
    Civ. No. H-84-1298 (PCD).
    United States District Court, D. Connecticut.
    Oct. 31, 1985.
    As Amended Feb. 24, 1986.

      David E. Kamins, Hartford, Conn., for plaintiff.
    Peter A. Janus and Gregory J. Garner, Siegel, O’Connor & Kainen, Hartford, Conn., for defendant.
   RULING ON MOTION TO DISMISS

DORSEY, District Judge.

Facts

For the purposes of deciding this motion, the allegations in the complaint are taken as true. Cooper v. Pale, 378 U.S. 546, 84 S.Ct. 1733, 12 L.Ed.2d 1030 (1964); Fine v. City of New York, 529 F.2d 70, 75 (2d Cir.1975). Plaintiff, Edward Burns (“Burns”), alleges that, while employed at Yellow Freight Systems in East Hartford, Connecticut, representatives of defendant, Preston Trucking Company, Inc. (“Preston”), actively recruited him to take a similar position with Preston. He relied on Preston’s representations concerning promotion and pension possibilities and future employment in taking a position with Preston on or about July 9, 1979. He performed well until he was terminated on or about May 22, 1984. Immediately prior to his termination, defendant demanded that he admit to defendant’s employees unspecified errors which he would correct. When plaintiff refused, he was fired. Preston assigned as a cause for terminating plaintiff his inability to follow instructions, his style of management which was incompatible with defendant’s management style, and his failure to follow instructions communicated to him in a counseling session conducted on May 17, 1984. These reasons were included in plaintiff’s permanent personnel record.

Plaintiff claims unjust termination, breach of a covenant to report accurately as to his termination, and that defendant defamed him in response to inquiries by prospective employers of plaintiff. Jurisdiction is based on diversity of citizenship. 28 U.S.C. § 1332. The claims raised are governed by the substantive law of Connecticut, Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), including the state’s choice of law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Applying the substantive law of the state in which allegedly tortious acts occurred, and the substantive law of the state in which the contract had its operative effect, Connecticut law controls. Whitfield v. Empire Mut. Ins. Co., 167 Conn. 499, 506, 356 A.2d 139 (1975); Leone v. Burns Internat’l Security Serv., Inc., Civil No. B-84-19(PCD) (D.Conn. Jan. 2, 1985) (Ruling on Motion to Dismiss). Defendant has moved to dismiss Counts One, Two and Four under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted.

Discussion

In passing on the motion, this court must construe the allegations of the complaint in a light most, favorable to the pleader. See Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Scheer v. Chubb & Sons, Inc., Civil No. N-82-397(EBB) (D.Conn. Dec. 14, 1982), 9 CLT No. 17, p. 13 (Apr. 25, 1983); Doyle v. St. Paul Fire & Marine Ins. Co., 583 F.Supp. 554 (D.Conn.1984). The complaint should not be dismissed unless it appears beyond doubt that plaintiff can prove no set of facts which would entitle him to relief. Williams v. Vincent, 508 F.2d 541 (2d Cir. 1974). “The issue is not whether Plaintiff will ultimately prevail, but whether he is entitled to offer evidence in support of his claims.” Scheuer, 416 U.S. at 236; Halpern v. City of New Haven, 489 F.Supp. 841, 842-43 (D.Conn.1980). The court should not consider matters outside the pleadings but examines the complaint in isolation to determine whether it states a claim. Bowman v. Grolsche Bierbrouwerij B.V., 474 F.Supp. 725, 728 (D.Conn.1979).

Although plaintiff, in his memorandum, claims that Count One merely alleges a breach of an implied agreement that he would not be fired without just cause, Count One alleges breach of an implied or express agreement requiring just cause and alsó intentional torts of unjust termination and intentional infliction of emotional distress. Count Two claims a breach of an implied covenant to report accurately on any firing of plaintiff to prospective employers. Count Four alleges a tortious wrongful discharge in violation of public policy. Each of the claims will be considered separately.

Count One

Plaintiff first claims a breach of an implied or express agreement that plaintiff would be terminated only for just cause. An employee hired for an indefinite term is dischargeable at the will of his employer, with or without cause. Fisher v. Jackson, 142 Conn. 734, 118 A.2d 316 (1955); Somers v. Cooley Chevrolet, 146 Conn. 627, 153 A.2d 426 (1959); Cook v. Alexander & Alexander, 40 Conn.Sup. 246, 488 A.2d 1295 (1985), 11 CLT No. 30, p. 12 (July 29, 1985). Plaintiff claims that “the circumstances surrounding or involved with the plaintiffs hiring by the defendant and their policy with respect to treatment of employees and job security created an implied or express agreement between the plaintiff and the defendant that in consideration for the plaintiffs loyal and continued good service to the defendant, the defendant would not fire the plaintiff without justifiable cause.” Complaint at 3. The question, therefore, is whether Connecticut recognizes such an express or implied agreement in the context of an employment-at-will.

Although employment contracts are not exempted from the general requirement of good faith in contractual relationships, that requirement will not turn an employment contract terminable at will into one requiring just cause for termination. Magnan v. Anaconda Indus., Inc., 193 Conn. 558, 569, 479 A.2d 781 (1984). However, Magnan left open the question of whether such contractual terms would be found in the circumstances of particular employment relationships, including an employee relations manual. Id. at 564, 479 A.2d 781. In Bilbao v. Wyatt, Inc., No. 207324 (Super.Ct. June 6, 1983), 9 CLT No. 45, p. 14 (Nov. 7, 1983), the Connecticut Superior Court held that representations made in an employee handbook could be infused into the employment contract. “While an employer need not establish personnel policies and practices, where an employer chooses to establish such policies and practices and makes them .known to its employees, it commits itself to discharge employees in compliance with those procedures.” Id. at 15. “ [I]n appropriate circumstances the law of our state permits a fact finder to find from all the evidence, including an employer’s personnel policies and procedures manual, that a contract of employment existed which limited the employer’s right to discharge an otherwise at will employee.” Finley v. Aetna Life & Cas., 5 Conn.App. 394, 406 (1985). If the employer’s manual constituted an offer communicated by dissemination to the employee, acceptance and continuation of employment may constitute acceptance of the offer. By accepting and remaining on the job, although free to leave, the employee may have supplied the necessary consideration. Id. at 410.

The language in Finley, at 406, implies that other circumstances may permit a finding of a restriction on the right to discharge an otherwise at will employee. Lincoln v. Sterling Drug, Inc., Civil No. H-85-109(MJB) (D.Conn. Sept. 10, 1985) (Ruling on Motion to Dismiss). This complaint, construed most favorably to plaintiff, presents a colorable claim of an express or implied agreement requiring just cause for termination. Plaintiff is entitled to an opportunity to prove the claim. The motion to dismiss is denied as to the claim of an express or implied contract which requires just cause before plaintiff may be terminated.

The tort claim of wrongful termination in the first count is essentially the same as stated in Count Four, which, however, is expressly based on a claim of a violation of public policy. A narrow limitation was imposed on the otherwise unlimited employer discretion by recognition of a limited tort of wrongful discharge in Connecticut. Sheets v. Teddy’s Frosted Foods, Inc., 179 Conn. 471, 427 A.2d 385 (1980). There, an employee allegedly fired for reporting violations of the Connecticut Uniform Food, Drug and Cosmetic Act was entitled to challenge his discharge. The court “carved out the narrow exception to the general rule that contracts for indefinite term of employment are terminable at will.” Glassover v. Audiotron Co., Inc., No. CV 83-0067383-S (Super.Ct. Jan. 26, 1984), 10 CLT No. 20, p. 17 (May 14, 1984). “A cause of action exists in certain limited and narrow factual settings for employees who have had their employment terminated in retaliation for their insistence that their employers commit no acts in contravention of statutory law or clear mandate of public policy.” Santanella v. SNET Co., No. 265398 (Super.Ct. Jan. 17, 1984), 10 CLT No. 20, p. 11 (May 14, 1984). In Magnan, the Connecticut Supreme Court refused to enlarge the circumstances under which an at will employee may successfully challenge his dismissal beyond the situation where the discharge violates an important public policy, whether the claim is framed in contract or in tort. Clearly, Connecticut has sought to preclude employer action which would vitiate execution of a public policy.

No violation of a statute nor of a clear mandate of public policy is alleged in Count One as the basis for plaintiff’s allegedly wrongful discharge. As the mere allegation of a discharge, wrongful for want of just cause, is not a ground for a cause of action in Connecticut, this aspect of Count One is dismissed.

The final claim in Count One of intentional infliction of emotional distress, resulting from defendant’s termination of plaintiff, is dismissed. Plaintiff has failed to allege all of the elements of the tort of intentional infliction of emotional distress. Specifically missing are allegations of (1) an extreme and outrageous conduct which (2) intentionally or recklessly causes (3) severe emotional distress to another. Hiers v. Cohen, 31 Conn.Sup. 305, 307, 329 A.2d 609 (1973). This claim is, therefore, dismissed.

Count Two

Count Two alleges a prospective breach of an implied covenant of good faith which would require defendant to report accurately on the firing of plaintiff. Both parties cite Magnan in defense of their positions. While Magnan applied the general contract element of implied good faith to employment contracts, such an abstract concept was not held to unduly restrict an employer’s discretion in managing his/her work force. “A breach of such an implied covenant cannot be predicated simply upon the absence of good cause for a discharge.” Magnan 479 A.2d at 788.

Plaintiff urges recognition of an implied covenant of fair dealing after his termination without authority other than Mag-nan. Such a right is clearly beyond the province of the limited cause of action created in Magnan. More than the lack of good cause must be alleged to state a claim. Plaintiff would add to the contract, by implication, a term to take effect after the contract was concluded. “While a federal court must be sensitive to the doctrinal trends of the jurisdiction whose law it applies, it is beyond the authority of a federal court in such circumstances to create entirely new causes of action.” Wolk v. Saks Fifth Ave., Inc., 728 F.2d 221, 223 (3rd Cir.1984). Thus, this count must also be dismissed as it has no basis in Connecticut law. Plaintiff may have other means of redress if defendant actually reports falsely, for example. Such a factual situation is not alleged here.

Count Four

Although plaintiff alleges a violation of public policy in Count Four, there is no allegation of a violation of a particular statute nor of a clear mandate of a specific public policy as required in Sheets and subsequent cases. Thus, Count Four is dismissed.

Conclusion

The allegations in the second and third parts of Count One, Count Two and Count Four do not demonstrate any set of facts on which plaintiff could recover under such claims. The claim in the first part of Count One, the alleged breach of an express or implied agreement to terminate only for just cause, is sufficient under Connecticut law. Thus, the motion to dismiss as that claim in Count One is denied. As to all other claims in Count One and Counts Two and Four, the motion to dismiss is granted.

SO ORDERED.


author: TODD, District Judge.

text:
    Virgil ADAMS, et al., Plaintiffs, v. REPUBLIC STEEL CORPORATION and Republic Builders Products, Inc., Defendants.
    No. 82-1106.
    United States District Court, W.D. Tennessee, E.D.
    Oct. 31, 1985.

      Allan Kanner, Philadelphia, Pa., Gayden Drew, IV, and T. Robert Hill of Hill, Boren & Strickland, P.C., Jackson, Tenn., and Newton B. Schwartz, Houston, Tex., for plaintiffs.
    Thomas R. Prewitt, Sr., and Fred M. Ridolphi, Jr., of Armstrong, Allen. Bra-den, Goodman, McBride & Prewitt, Memphis, Tenn., for defendants.
   MEMORANDUM OPINION AND ORDER

TODD, District Judge.

Defendants have filed a motion to dismiss on the grounds that this court lacks subject matter jurisdiction to hear this cause of action. For the reasons set forth herein, this motion is granted in part and denied in part.

The original complaint in this case was filed on April 27, 1982, by thirty named plaintiffs on behalf of themselves and others similarly situated. In their complaint, plaintiffs alleged that the defendants owned and operated a steel door manufacturing plant in McKenzie, Tennessee, and that toxic chemicals were emitted by defendants in the operation of the plant. These emissions were further alleged to have exposed the plaintiffs to highly toxic chemicals and to have resulted in serious environmental and health problems. The complaint, seeking damages, injunctive relief, and attorneys fees, was based upon violation of The Tennessee Air Quality Act, Tenn.Code Ann. § 68-25-101 et seq. (1983); violations of the following federal statutes: The Clean Air Act, 42 U.S.C. § 7401 et seq., The Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., and The Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq.; and the following theories of common law liability: negligence, nuisance, trespass, strict liability, assault and battery, and intentional infliction of emotional distress.

The complaint alleged that this court has jurisdiction to hear this matter on the basis of diversity of citizenship of the parties, alleging that defendants are foreign corporations and that all plaintiffs are Tennessee citizens. In their answer, defendants corrected the name of one defendant to Republic Builders Products Corporation (Republic Builders) and admitted the citizenship of the parties. Defendants later moved to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure on the grounds that Republic Builders had its principal place of business in Tennessee and was thus a citizen of Tennessee under 28 U.S.C. § 1332(c). As such, defendants argued that complete diversity of citizenship would no longer exist and that this court lacked jurisdiction.

In response to that motion, plaintiffs moved to amend their complaint to reflect the places of incorporation and principal places of business of the two defendants. Plaintiffs denied that defendant Republic Builders’ principal place of business was in Tennessee and alleged that Republic Builders’ principal place of business was actually that of defendant Republic Steel Corporation (Republic Steel). Plaintiffs also alleged in response to the defendants’ motion to dismiss that this court has subject matter jurisdiction under 28 U.S.C. § 1331 due to the alleged violations of federal statutes. Finally, plaintiffs submitted a motion to file an amended complaint, in which they alleged that this court has jurisdiction on principles of diversity, federal question, and pendent jurisdiction. In their responses to the proposed amendments, defendants again asserted that no diversity existed and also contended that the alleged violations of the federal statues were not sufficient to confer federal question jurisdiction.

I. DIVERSITY OF CITIZENSHIP AS A BASIS FOR JURISDICTION

Under 28 U.S.C. § 1332(a)(1), district courts have subject matter jurisdiction in civil actions seeking damages in excess of $10,000 when the opposing parties are citizens of different states. The diversity required is that of complete diversity, that is, each defendant must be a citizen of a different state from each plaintiff. Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 373, 98 S.Ct. 2396, 2402, 57 L.Ed.2d 274 (1978). For the purposes of determining diversity of citizenship, a corporation is considered a citizen of both the state in which it was incorporated and the state where it has its principal place of business. 28 U.S.C. § 1332(c).

Both Republic Steel and Republic Builders were incorporated in New Jersey. As noted above, plaintiffs’ complaint alleged that both defendants have their principal place of business in Ohio. Defendants conceded that Republic Steel’s principal place of business was in Ohio but asserted that Republic Builders’ principal place of business was in Tennessee. To support this assertion, defendant Republic Builders offered excerpts of a deposition of Mr. Lowell Marshall, the president of Republic Builders. Mr. Marshall testified that Republic Builders is a New Jersey corporation entirely separate from defendant Republic Steel and that its principal place of business was its manufacturing plant in McKenzie, Tennessee. To rebut this assertion, plaintiffs also relied upon Mr. Marshall’s deposition, in which he stated that Republic Builders had offices in Atlanta, Houston, and Los Angeles, as well as its Tennessee offices located in Dyersburg, McKenzie, and Jackson. Plaintiff also noted that Mr. Marshall testified that Republic Builders is a wholly owned subsidiary of Republic Steel, that Republic Builders conducts business in all fifty states and several foreign countries, and that four of the seven board members of Republic Builders are employed by Republic Steel, including Republic Steel’s chairman, vice-chairman, and vice-president. Based upon these facts, plaintiffs contend that Republic Steel exercises an undue degree of control over Republic Builders and that this court should pierce Republic Builders’ corporate veil to find that its principal place of business is the same as that of its parent corporation.

Determination of a corporation’s principal place of business involves a question of fact and consideration of such factors as “the character of the corporation, its purposes, the kind of business in which it is engaged, and the situs of the operations.” C. Wright, The Law of Federal Courts § 27, at 152 (4th ed. 1983). Although it may be somewhat unrealistic to label any one place as the “principal place of business” of a corporation that transacts business in many states, application of 28 U.S.C. § 1332(c) requires such a label. In order to make this determination, various tests have been developed by the courts, including the “home office” and “nerve center” tests. Wright, supra. These tests have been incorporated into a “total activity” test, which examines both production or sales activities and managerial or policy making activities of a corporation. See, e.g., Vareka Inv., N.V. v. American Inv. Properties, Inc., 724 F.2d 907, 910 (11th Cir.) cert. denied, — U.S. -, 105 S.Ct. 107, 83 L.Ed.2d 51 (1984); Toms v. Country Quality Meats, Inc., 610 F.2d 313, 315 (5th Cir.1980).

The only evidence offered by both sides on the issue of Republic Builders’ citizenship are the deposition and affidavits of Mr. Marshall. Mr. Marshall’s uncontroverted testimony discloses that all manufacturing by Republic Builders occurs in Tennessee and that the offices in other states are only sales offices. According to Mr. Marshall, Republic Builders central office is located at the manufacturing plant in McKenzie, Tennessee, and even though Republic Builders is wholly owned by Republic Steel, all policy decisions of Republic Builders are made by Mr. Marshall as its president. In light of this evidence, this court finds that Republic Builders’ principal place of business was in Tennessee.

This finding does not end the analysis if, as plaintiffs urge, the corporate existence of Republic Builders is a mere fiction. In such cases, the court may pierce the corporate veil to find that the subsidiary’s principal place of business is actually that of the parent corporation. See e.g., Fritz v. American Home Shield Corp., 751 F.2d 1152, 1153 (11th Cir.1985); de Walker v. Pueblo Int’l., Inc., 569 F.2d 1169, 1172-73 (1st Cir.1978); Amarillo Oil Co. v. Mapco, Inc., 99 F.R.D. 602, 603 (N.D.Tex.1983). These cases indicate, however, that “creation of diversity jurisdiction is one of the least compelling reasons for disregarding” the separate corporate existence of a subsidiary. Amarillo Oil, supra, at 604. The fact that a corporation is a wholly owned subsidiary of another does not alone justify such disregard for separate corporate existence. Velandra v. Regie Nationale des Usines Renault, 336 F.2d 292, 296 (6th Cir.1964). Piercing of the corporate veil in order to find diversity jurisdiction should be limited to cases in which the “corporate separation is fictitious, or ... the parent has held the subsidiary out as its agent, or, ... the parent has exercised an undue degree of control over the subsidiary.” Id.

In determining whether a parent corporation has exercised such undue control over a subsidiary, Tennessee courts use the “instrumentality rule.” Continental Bankers Life Ins. Co. v. Bank of Alamo, 578 S.W.2d 625, 632 (Tenn.1979). Under this test, a subsidiary corporation will be found to be the instrumentality of its parent if (1) the parent exercises complete dominion over the finances, policy, and business practices of its subsidiary; (2) this parental dominion is used to commit some fraud of wrong; and (3) is the proximate cause of the alleged injury. Id. Plaintiffs have not alleged sufficient facts in this case to show complete dominion of Republic Builders, thereby warranting disregard for its corporate existence. As noted above, mere ownership of Republic Builders by Republic Steel is not sufficient evidence of control over the day to day operations of Republic Builders. Velandra, supra. See also Latham v. Technar, Inc., 390 F.Supp. 1031, 1037 (E.D.Tenn.1974); Garrett v. Southern Ry. Co., 173 F.Supp. 915, 916 (E.D.Tenn.1959), aff'd, 278 F.2d 424 (6th Cir.), cert. denied, 364 U.S. 833, 81 S.Ct. 49, 5 L.Ed.2d 59 (1960). Plaintiffs have made no allegations that the two corporations failed to follow the formalities of separate corporate existence, that the funds of the corporations were commingled, or that the corporate existence of Republic Builders was a subterfuge. In light of Mr. Marshall’s testimony that he makes all policy decisions of Republic Builders as its president, membership of four Republic Steel employees on the seven member board of Republic Builders is not dispositive of the issue of control. Even though the presence of Republic Steel’s employees on the board of directors of Republic Builders undoubtedly affects Mr. Marshall’s decisions in the management of Republic Builders, no evidence has been introduced to indicate that such influence amounts to an undue degree of control over the decisions of Mr. Marshall.

This court recognizes that corporate separation in the parent-subsidiary setting may at times be “merely formal;” however, the separate existence must be recognized unless the facts indicate that it is “pure fiction.” Cannon Manufacturing Co. v. Cudahy Packing Co., 267 U.S. 333, 337, 45 S.Ct. 250, 251, 69 L.Ed. 634 (1925) (Brandeis, J.). Accordingly, this court finds that plaintiffs have not alleged sufficient facts to warrant disregard for Republic Builders’ corporate existence. Because Republic Builders’ principal place of business has been determined to be in Tennessee, complete diversity of citizenship between the parties does not exist and this court does not have subject matter jurisdiction of this cause under 28 U.S.C. § 1332(a).

II. FEDERAL QUESTION JURISDICTION

In their complaint, plaintiffs also alleged violation of three federal statutes but did not allege that these alleged violations gave this court subject matter jurisdiction pursuant to 28 U.S.C. § 1331. In their proposed amendments to the complaint, however, plaintiffs specifically alleged the existence of federal question jurisdiction.

On this motion to dismiss under Rule 12(b)(1), defendants make a facial attack on the complaint’s allegation of subject matter jurisdiction. In such a motion, all allegations of jurisdiction in the complaint are presumed to be true. Eaton v. Dorchester Dev., Inc., 692 F.2d 727, 731 (11th Cir.1982); Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir.), cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981). Plaintiffs’ proposed amendment to the complaint, if accepted as true, would be sufficient for this court to find subject matter jurisdiction pursuant to the alleged violations of the federal statutes. The probability of plaintiffs’ success on the merits of their claim has no bearing on the existence of subject matter jurisdiction. Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946). Accordingly, a complaint that appears to state a cause of action under a federal statute should be dismissed only when the claim is clearly “immaterial” or is “wholly insubstantial and frivolous.” Id. at 682-83, 66 S.Ct. at 776-77; Local Div. 1285, Amalgamated Transit Union v. Jackson Transit Auth., 650 F.2d 1379, 1381-82 (6th Cir.1981), cert. denied, 457 U.S. 15, 102 S.Ct. 2202, 72 L.Ed.2d 639 (1982).

In order to ascertain if plaintiffs’ claims are immaterial or insubstantial, the federal statutes in question must be examined to determine if plaintiffs have causes of action under those statutes. A private right of action to enforce air pollution prevention under 42 U.S.C. § 7401 et seq. is provided for in 42 U.S.C. § 7604. This right of action is limited, however, to actions to restrain violations of emission standards or to force the Environmental Protection Agency to perform certain non-discretionary duties required by the Clean Air Act. 42 U.S.C. § 7604(a). Although attorney’s fees and court costs may be recovered in such an action under 42 U.S.C. § 7604(d), compensatory damages are not available. Gardeski v. Colonial Sand & Stone Co., Inc., 501 F.Supp. 1159, 1160 n. 1 (S.D.N.Y.1980). Accordingly, actions seeking compensatory damages under the Clean Air Act do not state a claim for which federal question jurisdiction exists.

The statute giving a private right of action under the Toxic Substances Control Act (TSCA), 15 U.S.C. § 2619, is worded similarly to that in the Clean Air Act. In fact, the legislative history of the TSCA expressly states that the provision creating a private right of action was “modeled after similar provisions in the Safe Drinking Water Act, Consumer Product Safety Act, Clean Air Act, Federal Water Pollution Control Act, and Noise Control Act.” S.Rep. No. 698, 94th Cong., 2d Sess., reprinted in 1976 U.S.Code Cong. & Ad. News 4491, 4499. According to the Senate’s Commerce Committee Report, the purpose of the TSCA was “to prevent unreasonable risks of injury to health or the environment associated with ... chemical substances.” Id. at 4491 (emphasis supplied).

No cases have been found expressly stating that compensatory damages are not available under 15 U.S.C. § 2619. Construing a similarly worded statute providing for private actions under the Federal Water Pollution Control Act (FWPCA), the Supreme Court held that private remedies not expressly provided for in that act would not be implied. Middlesex Cty. Sewerage Auth. v. Sea Clammers, 453 U.S. 1, 18, 101 S.Ct. 2615, 2625, 69 L.Ed.2d 435 (1981). Due to the similarity expressed in the legislative history of the TSCA between it and the FWPCA, this court finds the Sea Clammers case controlling. In light of that case and the legislative history of the TSCA, this court holds that this private action for compensatory damages under the TSCA fails to state a cause of action under a federal statute so as to give this court federal question jurisdiction.

Finally, plaintiffs alleged that defendants violated the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. § 9601. Private rights of action under CERCLA are provided for in 42 U.S.C. § 9607(a)(4) and have not been found to be as limited as those under the Clean Air Act and the Toxic Substances Control Act. Under section 9607(a)(4)(B), a party may recover “response costs,” which have been stated to include such costs as medical testing and loss of use of wells for drinking water. Jones v. Inmont Corp., 584 F.Supp. 1425, 1429 (S.D.Ohio 1984). These costs must be part of a “clean up” or response to a hazardous waste problem, however, and a private right of action for damages only is not available under the Act. City of Philadel phia v. Stepan Chemical Co., 544 F.Supp. 1135, 1146 (E.D.Pa.1982).

Although plaintiffs have not specifically alleged that they have incurred response costs recoverably under CERCLA, this court finds that they have alleged sufficient facts to warrant a finding that a claim has been stated “arising under” CERCLA. To the extent that plaintiffs may have suffered actual injury that may be remedied by an award of response costs, it cannot be said that their claim is immaterial or wholly insubstantial. Accordingly, this court finds that subject matter jurisdiction exists under 28 U.S.C. § 1331 and defendants’ motion to dismiss the CERCLA claim under Rule 12(b)(1) is denied.

III. PENDENT JURISDICTION

Having found that sufficient facts were alleged in the complaint to give this court subject matter jurisdiction over the alleged violations of a federal statute, it must now be determined if pendent jurisdiction should be exercised over the state tort claims also presented. Although there may not be independent grounds for the exercise of jurisdiction over a party’s claim, the doctrine of pendent jurisdiction gives the court discretion in the interests of “judicial economy, convenience and fairness to, the litigants” to try all of a plaintiff’s claims in one proceeding. United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966). In order for a court to exercise pendent jurisdiction over a state claim, the federal claim must be substantial and the federal and state claims “must derive from a common nucleus of operative fact” and be so related that a party would normally be expected to try them all in one judicial proceeding. Id. at 725, 86 S.Ct. at 1138. Once a finding is made that jurisdiction may be exercised, the statute creating the federal claim must be examined to determine if it expressly or implicitly negates the exercise of pendent jurisdiction over the state claim. Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 373, 98 S.Ct. 2396, 2402, 57 L.Ed.2d 274 (1978). Finally, it should be noted that the exercise of pendent jurisdiction is one of discretion. As such, “if it appears that the state issues substantially predominate, whether in terms of proof, of the scope of the issues raised, or of the comprehensiveness of the remedy sought, the state claims may be dismissed without prejudice and left for resolution to state tribunals.” Gibbs, supra, 383 U.S., at 726-27, 86 S.Ct. at 1139-40.

As discussed above, for the purposes of finding subject matter jurisdiction, plaintiffs have arguably presented a substantial federal claim to recover response costs under CERCLA. Furthermore, both the state and federal claims appear to have arisen out of a common nucleus of operative fact, owing their existence to Republic Builders’ operation of a steel door manufacturing plant in McKenzie, Tennessee, and the alleged emissions of toxic chemicals during that operation. Whether these claims are so related that a plaintiff would normally be expected to try them in one judicial proceeding is not as clear. It is clear, however, that the state claims for damages predominate over any claim presented under CERCLA. Furthermore, because private actions for damages other than response costs are not available under CERCLA, Stepan Chemical, supra, it appears that pendent jurisdiction over a state claim for tort damages is implicitly negated by CERCLA. Kroger, supra.

Further support for such a holding can be found in an unreported case from the Eastern District of Missouri, Wehner v. Syntex Corp., 622 F.Supp. 302 (E.D.Mo. 1983). The plaintiffs in Wehner had filed an action against several chemical companies, alleging that the companies were responsible for the improper disposal of dioxin-containing oil. Plaintiffs alleged that they were entitled to response costs under CERCLA and also sough't damages and injunctive relief based upon various state law claims. As in this case, the plaintiffs initially alleged diversity jurisdiction, but complete diversity was found not to exist. The Wehner court was then urged by the plaintiffs to exercise pendent jurisdiction over the state claims.

After reviewing the provisions of CERCLA, the court turned to the issue of pendent jurisdiction and stated:

The liability under 42 U.S.C. § 9607 for response costs, however, is limited and far different from the type of liability plaintiffs seek to impose upon defendants under their state law claims. The plaintiffs’ complaint asserts nine different Missouri state law cases [sic] of action and involves many complex questions of state law. The legal and factual questions on these state law causes of action clearly substantially predominate the limited issues raised under the CERCLA claim.

Slip op. at 4. The court then declined to exercise pendent jurisdiction and dismissed the state claims without prejudice. Although plaintiffs attempted to distinguish the Wehner case by noting that it also involved a large number of pending state actions not before that court, this court finds that the situation in Wehner is not distinguishable from the present case. Both cases alleged violations of CERCLA and sought to assert numerous state common law claims on the basis of pendent jurisdiction. As noted above, this court, like the Wehner court, finds that the state law claims predominate over the relatively limited CERCLA claim. Accordingly, this court declines to exercise pendent jurisdiction over the state tort claims presented.

In conclusion, the following findings are made:

(1) Republic Builders’ principal place is in Tennessee. As such, complete diversity among the parties does not exist and this court does not have jurisdiction under 28 U.S.C. § 1332(a).

(2) The, plaintiffs have not presented claims for relief under either The Clean Air Act, 42 U.S.C. § 7401 et seq., or The Toxic Substances Control Act, 15 U.S.C. § 2601 et seq. A claim for response costs under The Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., is arguably presented. This court has jurisdiction under 28 U.S.C. § 1331 to try that claim and defendants’ motion to dismiss is denied insofar as it relates to the CERCLA claim.

(3) The state tort claims predominate over the federal claim presented under CERCLA. As such, this court declines to exercise its discretion to try the state claims under the doctrine of pendent jurisdiction. Plaintiffs’ state tort claims are therefore dismissed without prejudice so that they may be pursued in state tribunals.

IT IS SO ORDERED.

      . 33 U.S.C. § 1365.

      . As noted by Senator Albert Gore, Jr., while he was a member of the House Interstate and Foreign Commerce Committee considering CERCLA, "A clear, uniform federal law defining a victim’s cause of action [for damages arising from release of hazardous wastes] is sorely needed but [this] bill does not provide one.” A. Gore, Jr., Additional Views for "Superfund” Report, reprinted in 1980 U.S.Code Cong. & Ad. News 6139, 6141.


author: BUA, District Judge.

text:
    Gary RATNER, Dalia Ratner and All My Muffins, Inc., Plaintiffs, v. Steven HECHT and Alma Hecht, Defendants.
    No. 84 C 10466.
    United States District Court, N.D. of Illinois, E.D.
    Oct. 31, 1985.

      Myron M. Cherry, Peter Flynn, Cherry & Flynn, Chicago, Ill., for plaintiffs.

      Michael R. Turoff, Kurt J. Heinz, Arnstein, Gluck, Lehr, Barron & Milligan, Chicago, Ill., for defendants.
   ORDER

BUA, District Judge.

Before the Court are defendants’ motions, pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(2), to dismiss this case for lack of subject matter jurisdiction and for lack of personal jurisdiction, or in the alternative, to transfer this case, pursuant to 28 U.S.C. § 1404(a), to the United States District Court for the Central District of California. For the reasons stated herein, defendants’ motions to dismiss are denied, and the motion to transfer is granted.

I. FACTS

This is an action for a declaratory judgment regarding the existence of a contract for services, and the value of services rendered. The action was brought by Gary and Dalia Ratner, Illinois residents, and All My Muffins, Inc. (AMM), a Delaware corporation, whose principal place of business is disputed. The defendants are Steven and Alma Hecht, California residents.

Plaintiffs’ claim arises out of the defendants’ contested ownership interest in AMM. The plaintiffs incorporated AMM in July 1983 for the purpose of selling muffins and other bakery goods through retail stores. Dalia Ratner is AMM’s sole shareholder, President, and a director. Gary Ratner is AMM’s Chairman. The Ratners initially contemplated that AMM would establish three retail stores — in California, Illinois, and New York. When the Ratners decided in 1984 to open AMM’s first store, in Los Angeles, California, they enlisted the services of defendants Steven and Alma Hecht. The Hechts performed various services for AMM, both before and after the store opening in August 1984. The Hechts have asserted that, pursuant to an oral agreement, they are entitled to an ownership interest in AMM as compensation for their services.

The plaintiffs seek a declaration that no enforceable contract for the transfer of AMM stock exists between themselves and the defendants, and a declaration of the value of the services performed by defendant Steven Hecht. The defendants seek to dismiss this action for lack of subject matter and personal jurisdiction, or alternatively, to transfer the case to the United States District Court for the Central District of California.

II. DISCUSSION

A. Subject Matter Jurisdiction

Plaintiffs assert the jurisdiction of this Court based on diversity of citizenship. 28 U.S.C. § 1332. Defendants contend that AMM is a citizen of California, and therefore jurisdiction fails for lack of complete diversity. This Court finds that AMM is not a citizen of California. Thus, the parties to this controversy are completely diverse and subject matter jurisdiction is proper.

28 U.S.C. § 1332(c) provides that a corporation, for purposes of diversity jurisdiction, is a citizen of “any State by which it has been incorporated and of the State where it has its principal place of business.” Since AMM is incorporated under the laws of Delaware, whether diversity of citizenship exists depends upon whether AMM has its principal place of business in California or in Illinois.

Plaintiffs contend that the appropriate test of AMM’s principal place of business is the “nerve center” test. The nerve center test considers the following factors: the place where corporate decisions are made, where the corporation is funded, where its general counsel, directors, officers and shareholders are located, where the primary bank account exists, and the place of its principal office and corporate headquarters. In contrast, the defendants urge that a different test be used — the “place of operations” test. Defendants point to the site of AMM’s only retail store, and emphasize the following factors: the location of AMM’s tangible assets, the distribution of its employees and payroll, the allocation of gross income, and the situs of production and other physical activities.

In assessing the place of a corporation’s principal place of business, no single factor or test is determinative. Although some courts have analyzed a corporation’s principal place of business by reference to a “nerve center” or “place of operations” test, these tests are not necessarily conclusive. The tests merely characterize a location which, in certain circumstances, the balance of corporate activity has favored. The tests do not limit the inquiry to certain factors or activities to the exclusion of others. The determination of a corporation’s principal place of business requires consideration of the corporation’s entire scope of activity on a case-by-case basis.

AMM was incorporated in July 1983, opened its California retail store in August 1984, and filed this action in December 1984. For the first 13 months of its existence, AMM’s principal and only place of business was in Illinois. In addition, AMM’s headquarters, its only office, its sole shareholder, officers, directors, and assets are located in Illinois. All tax returns and corporate filings originate in Illinois, and the plans for AMM’s multi-state bakery franchise were drawn up in Illinois. When in August 1984, AMM opened its first retail bakery store in California, AMM acquired a second place of business. In this location, AMM has its store lease, a small inventory, tangible equipment and fixtures, all of its employees, though few, and a small amount of cash in its operating bank accounts. The California store had operated for four months prior to the institution of this action. Considering the insubstantiality of the California operation, its short operative life, the amount of control and decision-making still exercised in Illinois, and the purpose of AMM which goes well beyond a single California store, the Court finds that AMM’s principal place of business is Illinois.

B. Inter-District Transfer

28 U.S.C. § 1404(a) governs change of venue and provides in pertinent part:

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

In order to meet the requirements of § 1404(a), the movant must establish “(1) that venue is proper in the transferor district; (2) that the transferor court has the power to transfer the case (that is, that the transferee court is in a district ‘where it might have been brought’); and (3) that the transfer is ‘for the convenience of the parties and witnesses in the interest of justice.’ ” Hotel Constructors, Inc. v. Seagrave Corp., 543 F.Supp. 1048, 1050 (N.D.Ill.1982). Requirements (1) and (2) are met in this case. Venue is proper in this, the transferor district, because this is the district in which all plaintiffs reside. See 28 U.S.C. § 1391(a). Moreover, this Court has the power to transfer the case. The United States District Court for the Central District of California has subject matter jurisdiction over the controversy based on diversity of citizenship. Venue is proper in that district because it is the district in which all defendants reside. See 28 U.S.C. § 1391(a).

The Court now turns to requirement (3). To support a motion to transfer, the movant must show a “clear balance of inconvenience” in this district over the transferee district. Id. See also SEC v. First National Finance Corp., 392 F.Supp. 239, 240 (N.D.Ill.1975). In determining whether the movant has met this burden, the Court must accord weight to the plaintiffs’ choice of forum, and consider the convenience of the parties, the convenience of the witnesses, and the interests of justice generally.

1. Plaintiffs’ Choice of Forum

Although under the common law doctrine of forum non conveniens plaintiff’s choice of forum was an overriding factor entitled to considerable weight, the significance of that choice has diminished since the enactment of § 1404(a). Norwood v. Kirkpatrick, 349 U.S. 29, 32, 75 S.Ct. 544, 546, 99 L.Ed. 789 (1955); Hotel Constructors, 543 F.Supp. at 1050. Additionally, plaintiffs choice of forum has reduced value where the forum lacks any significant contact with the underlying cause of action. Environmental Services, Inc. v. Bell Lumber and Pole Co., 607 F.Supp. 851, 853 (N.D.Ill.1984); Cunningham v. Cunningham, 477 F.Supp. 632, 634 (N.D.Ill.1979). In such a case, it becomes just one of many factors to be viewed by the Court when making its determination of convenience. General Signal Corp. v. Western Electric Co., 362 F.Supp. 878, 880 (N.D.Ill.1973).

In the instant case, the plaintiffs’ choice of an Illinois forum was based largely, if not exclusively, on the plaintiffs’ own convenience rather than on any significant connection of the forum to the cause of action. The action seeks to resolve the existence and breach of an alleged contract for services, and absent the finding of such a contract, the value of services actually performed. The parties dispute the location of the conduct which underlies the action. The defendants contend that the contract was created in California, must be performed in California, and was breached in California. The plaintiffs, on the other hand, contend that all activity relative to the contract centers in Illinois. Because it cannot determine where the alleged contract was in fact to be performed, the court cannot conclusively find that the underlying cause of action arose in, or bears any significant relationship to, the plaintiffs’ choice of forum. Illiana Producers Fund 79, Ltd., et al. v. Huron Resources, Inc., No. 85 C 2182 (N.D.Ill. May 13, 1985) slip op. at 4. Accordingly, plaintiffs’ choice of forum will be given equal consideration with the other factors which must be considered under § 1404.

2. Convenience of the Parties and Witnesses

Although § 1404(a) specifically prescribes consideration of the convenience of both parties and witnesses, in the instant case only the latter factor need be analyzed by the Court. The facts presented by this motion indicate that the parties will be equally inconvenienced, both physically and financially, if this action is brought in their adversaries’ resident district. The Court will therefore consider the convenience of the parties as a neutral factor.

In analyzing the convenience of the witnesses, the Court must consider not only the number of potential witnesses located in the transferor and transferee districts, but also the nature and quality of their testimony and whether they can be compelled to testify. Hotel Constructors, 543 F.Supp. at 1051. In this action, the principal witnesses will testify to the circumstances surrounding the alleged creation of a contract, and to the conduct of the parties consistent or inconsistent with the contract. Most of these witnesses will be California residents. Witnesses will also testify about the services performed by the defendant Steven Hecht. These witnesses will also be California residents. Because a majority of the prospective principal witnesses reside in California, the convenience of witnesses favors the California forum.

The propriety of a transfer to California is further strengthened by the Court’s interest in ensuring the live presence of material nonparty witnesses. It is well settled that the trier of fact should not be forced to rely on deposition evidence when the deponent’s live testimony can be procured. Coats Co., Inc. v. Vulcan Equipment Co., Inc., 459 F.Supp. 654, 657 (N.D.Ill.1978). Similarly, a litigant should not be forced to rely largely on deposition evidence when the deponent’s live testimony can be procured. Most of the material nonparty witnesses in the instant case are California residents. Furthermore, the defendants’ case rests almost entirely on the testimony of California witnesses. Unlike the transferee court, this Court has no subpoena power over these witnesses. A California forum would ensure the live testimony of material witnesses, and avoid prejudicing the defendants.

The plaintiffs forward the names of 12 witnesses who are material to the instant case and are not amenable to process in California. Two of these potential witnesses are plaintiffs’ family members, and four are plaintiffs’ past or present employees. The Court not only questions the materiality of the proposed testimony of these witnesses to the underlying cause of action, but notes that these witnesses are “not the type of witnesses ... likely to be reluctant to testify.” Cunningham v. Cunningham, 477 F.Supp. at 634. Regarding the plaintiffs’ other potential witnesses, two are New York residents, two are Washington, D.C. residents, and two are Montreal, Canada residents. Neither the California nor Illinois courts have subpoena power over these witnesses, and no facts before the Court suggest that they would be any more likely to testify in Illinois than in California. Overall, the live presence of a majority of nonparty witnesses, whose testimony is critical to this action, can be best ensured by trial in California.

C. Interests of Justice

The final factor to be considered under § 1404(a), the interests of justice, supports transfer of this case to the Central District of California. Under Illinois conflict of law principles, if a contract is to be wholly performed in one jurisdiction, and the place of making and the place of performance differ, the law of the place of performance governs the construction and obligations of the contract. P.S. & E. Inc. v. Selastomer Detroit, Inc., 470 F.2d 125, 127 (7th Cir.1972), citing Oakes v. Chicago Fire Brick Co., 388 Ill. 474, 58 N.E.2d 460 (1944). The instant contract, whatever its precise terms, contemplates the defendants’ performance of services in California and the plaintiffs’ tendering of compensation to the defendants in California. Regardless of the jurisdiction in which the contract was created, performance will likely occur wholly in California. Therefore, California law will apply. This fact encourages transfer not because California law is uncertain, novel or complex, but merely because issues of local law are best construed by courts most familiar with them. Color Technique, Inc. v. Don Wallace, Inc., 241 F.Supp. 952, 954 (N.D.Ill.1965).

III. PERSONAL JURISDICTION

The defendants ask that this action be dismissed, pursuant to Federal Rule of Civil Procedure 12(b)(2), for lack of personal jurisdiction. A finding of personal jurisdiction is not prerequisite to a grant of a § 1404(a) transfer. Brown v. Grimm, 483 F.Supp. 40 (N.D.Ill.1979). In light of the Court’s grant of a transfer, the Court will not consider the personal jurisdiction question.

IV. CONCLUSION

For the reasons stated above, defendants’ motion to dismiss this action is denied, and defendants’ motion to transfer this action to the United States District Court for the Central District of California is granted.

IT IS SO ORDERED.