text:
    WALTER E. HELLER & COMPANY, Plaintiff, v. JAMES GODBE COMPANY, James R. Godbe and James R. Godbe, Jr., Defendants.
    No. 84 C 5209.
    United States District Court, N.D. Illinois, E.D.
    Nov. 8, 1984.

      Nathan H. Dardick, Jill B. Berkeley, Ellen J. Barron, Dardick & Denlow, Chicago, 111., for plaintiff.
    Karen R. Goodman, Carmel, Baker & Marcus, Chicago, 111., for defendants.
   MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiff Walter E. Heller & Company (“Heller”) brings this breach of contract action against defendants James R. Godbe Company, James R. Godbe and James R. Godbe, Jr. (collectively “the Godbes”) to recover money allegedly due under certain equipment leases and related guaranties. Presently before the Court are two motions: the Godbes’ motion to transfer venue of this action to the Northern District of Texas and Heller’s motion to enjoin proceedings in a second suit filed by the Godbes against Heller in Texas. For the reasons set forth below, the motion to transfer venue is granted, and the motion to enjoin the Texas action is denied.

A.

Heller initially argues that the Godbes have waived any objections to venue in Illinois because of certain provisions contained in the equipment leases and guaranty agreements. Each equipment lease includes the following section:

(22) CHOICE OF LAW; SERVICE OF PROCESS. This Lease shall be binding and effective only when signed by an officer of Lessor at its home office in Chicago, Illinois, and, except for local filing requirements, shall be governed by Illinois law and shall be deemed to have been made in Chicago, Illinois. Lessee does hereby submit to the jurisdiction of any courts (federal, state or local) having a situs within the State of Illinois with respect to any dispute, claim or suit arising out of or relating to this Lease or Lessee’s obligations hereunder____

Similarly, each written guaranty contains the following language:

This Guaranty shall be governed as to validity, interpretation, effect and in all other respects by the laws and decisions of the State of Illinois. The undersigned do hereby submit to the jurisdiction of any court (federal, state or local) having situs within the State of Illinois____

Heller contends that by agreeing to these choice of law and consent to jurisdiction clauses, the Godbes contracted to litigate all disputes arising out of the lease and guaranty agreements only in Illinois and are now precluded from moving for transfer of venue under 28 U.S.C. § 1404(a).

We disagree. It is true that the Godbes have consented contractually to the jurisdiction of the courts within Illinois. Implicit in this consent is consent to venue as well as to personal jurisdiction. Coface v. Optique du Monde, Ltd., 521 F.Supp. 500, 506 (S.D.N.Y.1980). Thus, the Godbes may not claim now that venue in Illinois is improper and move for dismissal or transfer under 28 U.S.C. § 1406(a). However, the Godbes make no such assertion. They concede that this Court has jurisdiction over them in this suit and, by moving for a transfer of venue under § 1404(a) rather than § 1406(a), that venue is proper in this district.

Notwithstanding the foregoing, the Godbes argue that they may still move for transfer to another district because the consent to jurisdiction provisions fail to establish Illinois as the exclusive forum for litigation between the parties. This argument is persuasive. A plain reading of the contractual provisions reveals that Illinois is merely established as a permissible forum with jurisdiction over the Godbes. Compare M/S Bremen v. Zapata OffShore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) (contract provided that “[a]ny dispute arising must be treated before the London Court of Justice”); Full-Sight Contact Lens Corp. v. Soft Lenses, Inc., 466 F.Supp. 71 (S.D.N.Y.1978) (parties expressly agreed that “any suit brought by Distributor shall be brought in either San Diego or Los Angeles County”). Numerous other courts have taken care to distinguish choice of law and consent to jurisdiction provisions like the ones in this ease from agreements placing venue exclusively in a single forum. E.g., Plum Tree, Inc. v. Stockment, 488 F.2d 754, 758 n. 7 (3d Cir. 1973); Credit Alliance Corp. v. Crook, 567 F.Supp. 1462, 1465 (S.D.N.Y.1983); G.H. Miller & Co. v. Hanes, 566 F.Supp. 305, 307 (N.D.Ill.1983); Wilmot H. Simonson Co. v. Green Textile Associates, Inc., 554 F.Supp. 1229, 1234 (N.D.Ill.1983); Coface v. Optique du Monde, Ltd., 521 F.Supp. 500, 506 (S.D.N.Y.1980). Consequently, the contractual provisions in this case do not bar the Godbes from moving for a transfer of venue under 28 U.S.C. § 1404(a).

B.

In order to meet the requirements of § 1404(a), the Godbes must establish: (1) that venue is proper in the transferor district; (2) that the transferee court is in a district where the action may have been brought originally; and (3) that the transfer is for the convenience of the parties and witnesses, in the interest of justice. The first two requirements are clearly satisfied in this case. Venue is proper in the Northern District of Illinois, the transferor district, since it is where Heller is deemed to reside. 28 U.S.C. § 1391(a) and (c). Venue is also proper in the Northern District of Texas, the transferee district, where all the defendants reside. 28 U.S.C. § 1391(a). We therefore turn to a consideration of the equitable factors involved in a transfer of venue.

Generally, a plaintiffs choice of forum is to be given considerable weight in determining whether to transfer. However, where the chosen forum lacks any significant connection with the underlying claim, it is of reduced importance and becomes just one of the many factors which the court may consider. G.H. Miller & Co., 566 F.Supp. at 307; see also Norwood v. Kirkpatrick, 349 U.S. 29, 75 S.Ct. 544, 99 L.Ed. 789 (1955). Heller does not really dispute the Godbes’ assertion that, although an officer of Heller gave final approval to the contracts in Illinois, all the relevant representations, negotiations and transactions involving the Godbes and Heller’s agents in Texas, occurred in and around Dallas, Texas. Thus, Heller’s choice of forum is of lesser importance in this case.

The facts presented by Heller and the Godbes indicate that the convenience of the parties is neutral in this case. Either side will be inconvenienced if this action is brought in the other parties’ resident district, and the financial strengths of the parties, if not equal, are not disparate enough to tip the balance in the Godbes’ favor.

However, the remaining factors — the convenience of the witnesses and the interest of justice — warrant a transfer of venue to Texas. Heller states that its principal witnesses are two employees who work in Illinois in collection matters arising from Heller’s leasing operations and who will be inconvenienced by litigation in Texas. Godbe argues that these witnesses are hardly necessary, as they can only testify about such matters as the execution of the contracts, the Godbe’ failure to continue payments under the leases and the amounts and number of payments already made and allegedly due. The Godbes do not dispute these matters and thus argue that the parties could easily stipulate to this information.

On the other hand, the Godbes’ witnesses include various persons present at or otherwise involved in the equipment lease negotiations in Texas. They will be asked to testify about the transactions and any representations made to the Godbes, in support of the Godbes’ affirmative defenses. However, these witnesses are neither residents of Illinois nor parties to this action. They therefore are not amenable to process within Illinois, and their attendance at trial before this Court could not be compelled. Moreover, because the Godbes’ witnesses are representatives or agents of Heller, they may well be reluctant to testify voluntarily. See, e.g., Hotel Constructors, Inc. v. Seagrave Corp., 543 F.Supp. 1048, 1051-52 (N.D.Ill.1982); Commercial Solvents Corp. v. Liberty Mutual Insurance Co., 371 F.Supp. 247, 250 (S.D.N.Y.1974). The credibility of these witnesses will be important to the Godbes’ efforts to establish their affirmative defenses, so the use of depositions would not be an adequate substitute for live testimony. Id.; see also Hess v. Gray, 85 F.R.D. 15, 25 (N.D.Ill. 1979). Thus, the unavailability of these material non-party witnesses weighs heavily in favor of transfer.

As stated above, most or all of the relevant events took place in Texas. Although the parties’ contracts provide that Illinois law will govern this action, the Texas federal court certainly has sufficient access to Illinois legal materials and is as able as this Court to apply Illinois law. To be sure, no intricate questions of Illinois law appear to be involved in this case. See Coface, 521 F.Supp. at 511.

In conclusion, we find that the Godbes have demonstrated the superiority of the Texas forum, and their motion to transfer pursuant to § 1404(a) is granted. Accordingly, there is no need for this Court to interfere with the other suit already pending in Texas, and Heller’s motion to enjoin proceedings in that action is denied. It is so ordered.

      . Jurisdiction is based on diversity of citizenship, 28 U.S.C. § 1332(a)(1), and venue is asserted under 28 U.S.C. § 1391.

        . We note additionally that even when a forum selection clause places venue exclusively within a particular state, courts have held that such a clause is "but one of many factors to be considered by the Court” in deciding a motion to transfer venue under § 1404(a). G.H. Miller & Co., 566 F.Supp. at 307; see abo Plum Tree, 488 F.2d at 757—58; Full-Sight, 466 F.Supp. at 74. As the Third Circuit observed, Congress clearly stated in § 1404(a) the factors which it intended to decide a motion for transfer. Only one of these factors — the convenience of the parties — is within the power of the parties themselves to affect by private agreement. Plum Tree, 488 F.2d at 758. Thus, even a clear forum selection clause (which is not present in this case) does not preclude a court from weighing all the factors relevant to a transfer of venue.

      . The individual Godbes assert that they have insufficient financial resources to litigate in Illinois. However, the corporate defendant is a multi-million dollar business. We see no great difference in the abilities of Heller and the Godbes to bear the financial burden of litigating this action in a distant forum.


source: Caselaw Access Project

author: EDELSTEIN, District Judge:

license: Public Domain

text:
    CORPORATE PRINTING COMPANY, INC., Plaintiff, v. NEW YORK TYPOGRAPHICAL UNION NO. 6 and Walter L. Eisenberg, Defendants.
    No. 84 Civ. 5178 (DNE).
    United States District Court, S.D. New York.
    Nov. 16, 1984.

      Kaye, Scholer, Fieman, Hays & Handler, New York City, William C. Zifchak and Michael Starr, New York City, of counsel, for plaintiff.
    Robinson, Silverman, Pearce, Aronsohn & Berman, New York City, James F. Gill, Andrew Irving and Michael F. O’Toole, New York City, of counsel, for defendant New York Typographical Union No. 6.
   OPINION AND ORDER

EDELSTEIN, District Judge:

This action was removed from the Supreme Court of the State of New York pursuant to 28 U.S.C. § 1441(a). Jurisdiction is conferred on this court by 29 U.S.C. § 185.

Plaintiff Corporate Printing Company, Inc. (“Corporate Printing”) brought this action to stay an arbitration commenced by defendant New York Typographical Union No. 6 (“Union”) before defendant Walter L. Eisenberg (“Eisenberg”). A second arbitration was commenced by Corporate Printing after this suit was filed. The Union filed a motion for summary judgment on the original claim relating to the first arbitration and a motion for a preliminary injunction to stay the second arbitration. These motions were conditionally denied and a trial was commenced. The trial was terminated when it became apparent that no material issues of fact existed. It was determined at that time that the disputes regarding both arbitrations could be decided in the context of a single motion for summary judgment. The initial motions are deemed consolidated into the single motion for summary judgment considered herein. The parties have not submitted additional papers and none are needed. The facts are adequately presented in the submissions for the two original motions and the trial.

FACTUAL BACKGROUND

Corporate Printing was a member of an employers’ association known as the Printer’s League Section-Printing Industries of Metropolitan New York (the “League”). In 1975, the League, on behalf of its members, and the Union entered into a collective bargaining agreement (“1975 Agreement”). In February 1977 Corporate Printing expressly withdrew its collective bargaining authorization from the League. Corporate Printing later withdrew from the League. The withdrawal was before an agreement was entered into between the League and the Union which modified the 1975 agreement. Corporate Printing did not adopt this agreement and is the only company still operating under the original 1975 Agreement.

The 1975 Agreement provides for the appointment of a “Designated Arbitrator” to resolve disputes arising under the agreement. The 1975 Agreement also prescribes the procedure for the selection and removal of the Designated Arbitrator. Article 13 provides in relevant part:

The Designated Arbitrator (and any successor to a Designated Arbitrator) shall be selected by mutual agreement of the League and the Union; failing such mutual agreement, the selection shall be made in accordance with the Voluntary-Labor Arbitration Rules of the American Arbitration Association except that no administrative appointment may be made pursuant to such rules. Either party, on 60 days notice to the other party, has the right to seek the selection of another Designated Arbitrator.

Defendant Eisenberg was the Designated Arbitrator under the 1975 Agreement.

The Union sought arbitration before Eisenberg of a dispute with Corporate Printing. The dispute related to contributions by Corporate Printing to the Benefit and Productivity Fund (“BAP Fund”) which was established to provide for payments to employees displaced because of automation of the printing industry. Corporate Printing refused to submit to arbitration before Eisenberg and sought to dismiss Eisenberg as the Designated Arbitrator. This suit was brought by Corporate Printing to stay the BAP Fund arbitration.

Following the commencement of this action, Corporate Printing notified the Union that Corporate Printing was invoking an arbitration pursuant to League Option A of the 1975 Agreement. League Option A provides that an arbitration may be sought by the League to challenge the cost of living increase provisions of the 1975 Agreement. The Union counterclaimed to stay the League Option A arbitration.

DISCUSSION

A. Initial Arbitration

Corporate Printing seeks to stay the initial arbitration relating to the BAP Fund on three theories. First, Corporate Printing claims that the Designated Arbitrator, Eisenberg, has been dismissed pursuant to the procedure provided for in the 1975 Agreement. Second, Corporate Printing claims that Eisenberg will not be able to render an impartial determination. Finally, Corporate Printing claims that the Union has not complied with the express conditions precedent to arbitration as provided for in the 1975 Agreement.

1. Dismissal of the Designated Arbitrator

а. Plain Meaning of the Agreement

The effectiveness of the dismissal of Eisenberg as Designated Arbitrator rests on Corporate Printing’s power to exercise the procedure for dismissal set forth in the 1975 Agreement. Corporate Printing presents various theories to support their exercise of this power. First, they claim that the term “party” in the paragraph of Article 13 relating to the dismissal of the Designated Arbitrator includes “each employer, not a League member, which is bound to [the] agreement.” This definition would include Corporate Printing. This definition of the term “party” is found in the preamble to Article 14 which is set forth below.

The application of this definition of the term “party” to Article 13 is rejected. The term “party” in Article 13 clearly refers to the League and the Union and not to the employers. Further, in order to interpret all of the provisions of the agreement consistently, the term “party” in Article 13 must apply to the League and the Union. A provision in Article 14 that relates to the dismissal of the Designated Arbitrator states that “either the League or the Union, upon sixty (60) days advance written notice to the other and to the Designated Arbitrator, shall have the right to seek the selection of another Designated Arbitrator .... ” Therefore, the plain meaning of the 1975 Agreement does not grant the right to dismiss the Designated Arbitrator to employers such as Corporate Printing. This power is expressly granted to the League.

b. Can Corporate Printing Stand in the Shoes of the League?

Corporate Printing’s second contention is that the League was the agent of employers such as Corporate Printing for purposes of the 1975 Agreement and that by withdrawing from the League and thereby terminating the agency, Corporate Printing may now exercise those powers granted to the League, as agent, in the 1975 Agreement. Corporate Printing relies on a number of cases involving the withdrawal of an employer from an employers’ association and whether the employer is bound to a subsequent agreement between the association and the union. In this case, there is an agreement entered into between the League and the Union prior to the withdrawal from the League. The cases relied on by Corporate Printing are therefore inapposite to the present dispute.

Companies that withdraw from associations are generally bound by agreements entered into by the association prior to the withdrawal, see Chicago Magnesium Castings Co. v. N.L.R.B., 612 F.2d 1028, 1035 (7th Cir.1980), absent language that limits the applicability of the agreement to association members, see Western-Pacific Contractor’s Material Co., 243 N.L.R.B. 1078 (1979). There is no such language in the 1975 Agreement. Thus, Corporate Printing is bound to the terms of the 1975 Agreement.

The question is therefore whether the League’s power to dismiss under the 1975 Agreement was in its capacity as agent for the employers and as such can be exercised by the employers once the agency is terminated. The 1975 Agreement provides: “This Contract and Scale of Prices is made and entered into by and between the Printers League Section, Printing Industries of Metropolitan New York, Inc. ... as the authorized representative of the firms, corporations and individuals listed herewith ____” The League was thus designated as the employers’ agent for purposes of negotiating the contract and binding its members to the contract that it entered into with the Union. The power to dismiss the Designated Arbitrator does not fall within this grant of authority to negotiate and bind the employers; the League’s power to dismiss and select the Designated Arbitrator arises out of the express terms of the contract. The employers remain bound to these express contractual terms whether or not they remain in the League once the 1975 Agreement was entered into.

To accept Corporate Printing’s contention would permit an employer to alter the provisions of a contract simply by withdrawing from an association. This result, if desired by the parties, may be drafted into the agreement, see Western-Pacific Contractor’s Materials Co., 243 N.L.R.B. 1078 (1979) (terms of agreement expressly applied only to association), but without such express language, this result cannot be considered to have been the intent of the parties to the agreement and cannot be permitted. The power to dismiss the Designated Arbitrator is not related to the League’s capacity as the employer’s agent for collective bargaining and may not be invoked by an employer that terminates the unrelated agency.

c. Estoppel

Corporate Printing apparently has dealt directly with the Union since February 1983. Corporate Printing asserts that by this conduct, the Union has acquised to Corporate Printing’s status as the subrogee of the League under the 1975 Agreement. As subrogee, Corporate Printing would thus be able to exercise any power granted to the League in the 1975 Agreement. The Union does not dispute the fact that the Union has dealt directly with Corporate Printing, but the Union notes that the treatment of Corporate Printing was no different than that of other non-League employers who were bound by the terms of either the original 1975 Agreement or under the agreement as it existed after 1982. Corporate Printing has not established that the direct dealings between the Union and Corporate Printing was different from the dealings that the Union had with others bound by the agreement. Corporate Printing has also failed to demonstrate how the fact that it has dealt with the Union directly in other circumstances affects the duties under the clauses of the 1975 Agreement that are the focus of this action.

Even assuming arguendo that the Union’s treatment of Corporate Printing was different than that of other employers, the estoppel argument must fail. The requirements of establishing an estoppel have not been alleged. In order for the Union to be estopped from contesting Corporate Printing’s exercise of the right to dismiss the Designated Arbitrator, Corporate Printing must demonstrate that the Union has acquiesced to this precise conduct in the past. There has been no showing that Corporate Printing has exercised the power to dismiss the Designated Arbitrator in the past. Further, in order to establish an estoppel, the party against whom the estoppel is set must have acquiesced in such a manner that to allow the party to repudiate such conduct would be contrary to equity and good conscience. See Emeco Indust., Inc. v. United States, 485 F.2d 652, 657, 202 Ct.Cl. 1006 (1973); Redington v. Hartford Accident and Indemnity Co., 463 F.Supp. 83, 86 (S.D.N.Y. 1978) (“[T]he sin qua non of an estoppel is some inequitable or fraudulent conduct engaged in by the party sought to be es-topped which is reasonably relied upon by the other party to his detriment.”). No such showing has been made based on the undisputed facts regarding the course of conduct between the parties since February 1983. The estoppel argument, therefore, is rejected.

2. Bias of Arbitrator

Corporate Printing seeks to stay the initial arbitration based on the Designated Arbitrator’s alleged inability to render an impartial decision. This is based on what Corporate Printing calls “institutional partiality” resulting from Corporate Printing’s withdrawal from the League. The presentation of this issue is premature. The determination of arbitrator bias is best raised on a petition to vacate the arbitration award, Sunrise Undergarment Co. v. Undergarment & Negligee Workers’ Union, 419 F.Supp. 1282, 1286 (S.D.N.Y.1976); see Marc Rich & Co. v. Transmarine Seaways Corp. of Monrovia, 443 F.Supp. 386, 387 (S.D.N.Y.1978) (decision of disqualification left to arbitrator, decision subject to judicial review after award is made), pursuant to the power to vacate an award based on bias found in the United States Arbitration Act, 9 U.S.C. § 10. Therefore, the initial arbitration relating to the BAP Fund will not be stayed based on a claim of bias on the part of the Designated Arbitrator.

3. Failure to Comply with Procedures

Finally, Corporate Printing seeks to stay the initial arbitration based on a failure by the Union to comply with the procedures set forth in the 1975 Agreement as condition precedents to arbitration. The 1975 Agreement requires that disputes be submitted to the Joint Standing Committee as a first step in resolving disputes under the 1975 Agreement. Corporate Printing contends that the Union has not submitted the dispute to the Joint Standing Committee. Procedural disputes such as this, because they often develop in the context of the actual dispute sought to be arbitrated, are best left to the arbitrator. John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 556-57, 84 S.Ct. 909, 917-18, 11 L.Ed.2d 898 (1964); Bressette v. International Talc Co., 527 F.2d 211, 215 n. 6 (2d Cir.1975). The Designated Arbitrator, based on his familiarity with the 1975 Agreement, is best able to consider any objections based on procedural defects. Therefore, the BAP Fund arbitration will not be stayed by this court based on the alleged procedural defect.

B. League Option A Arbitration

The Union seeks to enjoin the arbitration sought by Corporate Printing pursuant to League Option A. Corporate Printing claims the right to seek League Option A arbitration, which by the terms of the 1975 Agreement is granted to the League, based on its ability to step into the shoes of the League. This is the same argument presented by Corporate Printing to support the dismissal of the Designated Arbitrator in the initial arbitration discussed above. The argument is rejected based on the reasoning above. Corporate Printing may not simply step into the shoes of the League with regard to rights expressly granted to the League in the 1975 Agreement. The League Option A arbitration is therefore stayed.

CONCLUSION

For the reasons stated herein, the BAP Fund arbitration will not be stayed nor will the Designated Arbitrator be dismissed. The League Option A arbitration is hereby stayed.

SO ORDERED.

      . Defendant Walter L. Eisenberg was not a party to the removal action because he is merely a nominal defendant in this proceeding.

      . Defendants were given leave to amend their answer to include a counterclaim based on this second arbitration.

      . The plaintiff claims that the 1982 Agreement did not simply modify the 1975 Agreement but that it is an entirely new agreement. This is irrelevant when determining Corporate Printing's obligations under the 1975 Agreement under which Corporate Printing is undeniably still bound.

      . The 1975 Agreement provides that a Joint Standing Committee shall be established to "expedite decisions" on questions of interpretation and enforcement of the 1975 Agreement. In the event that the Joint Standing Committee is unable to agree, the issue is to be submitted to the Designated Arbitrator.

      . League Option A provides:
      The League may elect to notify the Union that it is challenging the cost of living and wage increase provisions of the Contract. This option may be exercised in connection with amendments to be effective October 4, 1978, or on any succeeding annual October 4 anniversary date.
      Notice of the election of this option must be given in writing by the League to the Union on or before August 1 preceding the October 4 on which amendments sought would be effective. Should the Union invoke Union Option B and the League invoke League Option A, the arbitration procedures under League Option A will be followed with the Union also submitting those written statements called for in Union Option A.
      The arbitration panel shall consist of three impartial members, at least two of whom shall be economists, designated by agreement of the parties. If the parties fail to agree on the three impartial members by the appropriate August 3, the impartial members shall be designated by the American Arbitration Association in accordance with its Voluntary Labor Arbitration Rules, except that no administrative appointment may be made pursuant tó such Rules.
      In the event of refusal to serve, death, incapacity, or resignation of any member of the panel, a successor shall be appointed immediately to fill the vacancy in the manner provided above.
      In order to encourage frank and full discussion between the parties during negotiations, those conversations which occur and proposals which are made during such negotiations shall not be referred to in connection with the presentation of any issues to the panel, except as the parties agree otherwise.
      The League shall submit to the arbitration panel and to the Union in writing by the appropriate August 15 a detailed written justification for the amendments which it seeks.
      The justification must include support for the following contentions:
      (1) That a substantial economic or competitive change not foreseen by the parties at the time that they entered into this Contract has occurred.
      (2) That such substantial change has had a serious adverse effect on the business of the League’s members.
      The panel shall not order modifications in the wage or cost of living provisions of the Contract unless it concludes that the League has proved the above two contentions.
      On or before August 22, the Union may file with the panel and with the League a written reply to the League’s written justification. Following this, the panel will conduct hearings :and render a decision. The panel must in reaching its decision give due weight and consideration to productivity gains achieved by the employers in their composing rooms since the date of ratification of the Contract and Special Agreement as compared to productivity gains made in other departments of the industry during the same period.
      The panel shall not order modifications that extend in their effect past midnight October 3 following the October 4 on which the modifications sought are to be effective.
      The decision of the panel shall be final and binding on the League. The Union may elect either to accept the award or cancel the Contract. If the Union elects to cancel the Contract, conditions prevailing prior to midnight October 3 of the year in question shall be maintained until an agreement is reached or other action is authorized by New York Typographical Union No. 6 or the League.
      However, the employment or income guarantees as set forth in Article 1 of this Contract and Special Agreement shall survive cancellation of the Contract by the Union.

      . The Preamble of Article 14 states that:
      During the term of this Agreement there may arise differences of opinion between the parties (which term includes not only the League and the Union, but also each League member bound to this Agreement and each employer, not a League member, which is bound to this Agreement) with respect to issues (as that term is hereinafter defined), particularly, but not exclusively, by reason of the many substantial changes which have been made in pre-existing contractual provisions.

      . Corporate Printing argues that because it is the only employer bound under the original 1975 Agreement, and because the League has entered into an agreement that causes a conflict of interest between the League and Corporate Printing, Corporate Printing may stand in the shoes of the League regarding the League’s rights under the 1975 Agreement. Regardless of the League’s other contractual obligations, whether it is as an amendment or separate contract, the League is still named to exercise specific rights in the 1975 Agreement.
      If Corporate Printing is not satisfied with the League’s representation of Corporate Printing’s interests under the 1975 Agreement, then it should pursue possible remedies against the League rather than a suit against the Union.

      . Courts have displaced arbitrators for bias pri- or to the rendering of a decision by the arbitrator but these cases involved an arbitrator specifically named in the agreement. See, e.g., Christina Blouse Corp. v. I.L.G.W.U., 492 F.Supp. 508, 510-11 (S.D.N.Y.1980); Erving v. Virginia Squires Basketball Club, 349 F.Supp. 716, 719 (E.D.N.Y.), aff’d, 468 F.2d 1064 (2d Cir.1972). The courts displaced the arbitrator by reforming the agreement. These agreements are distinguishable from the agreement in this case. See Marc Rich & Co. v. Transmarine Seaways Corp. of Monrovia, 443 F.Supp. 386, 388 (S.D.N.Y.1978) (distinguishes Erving, supra, based on arbitrator being specifically named in contract).

      . Section 10(b) of the United States Arbitration Act provides that a basis to vacate an arbitrator's award is "where there was evident partiality ... in the arbitrator.” For a discussion of what constitutes "evident partiality” see Morelite Constr. Corp. v. New York City District Council Carpenters Benefit Funds, 748 F.2d 79 (2d Cir. 1984).


author: SCHATZ, District Judge.

text:
    Dana R. BOND, Plaintiff, v. UNION PACIFIC RAILROAD COMPANY, Defendant.
    No. CV. 84-0-36.
    United States District Court, D. Nebraska.
    Nov. 16, 1984.
    Thomas R. Wolff, Omaha, Neb., for plaintiff.
    Barbara Zandbergen, Omaha, Neb., for defendant.
   MEMORANDUM OPINION

SCHATZ, District Judge.

This matter is before the Court upon defendant Union Pacific Railroad’s motion to dismiss the amended complaint (Filing No. 14). After review of the pleadings and of the briefs filed in support of and in opposition to defendant’s motion to dismiss, and having considered the arguments of counsel raised at the hearing in this matter, the Court concludes that defendant’s motion to dismiss is well taken and should be granted.

As alleged in the amended complaint, the facts are these. On October 20, 1982, the Interstate Commerce Commission issued an order approving the merger application of defendant with Missouri Pacific and Western Pacific Railroad Companies. As relevant herein, the order of the Commission specifically set forth a requirement that any employee whose job was eliminated or consolidated by reason of the merger was to be protected by conditions known in the industry as “New York Dock.”

As of September 7, 1983, plaintiff had been an employee of the defendant for approximately thirteen years, serving in his final capacity as an assistant controller-accounting operations. On that date, plaintiff was informed by C. Barry Schaefer, Executive Vice President-Law and Finance, that plaintiff’s job was being terminated as a result of consolidation within the accounting department brought about by the merger. Plaintiff was further informed that he would receive benefits and salary for a period of eight months.

Plaintiff's amended complaint alleges two causes of action. First, plaintiff alleges that the New York Dock conditions, imposed by the ICC in connection with defendant’s merger, entitle plaintiff to payment of salaries and benefits for a period of six years following his termination. Therefore, plaintiff seeks a declaratory judgment directing his entitlement to such salary and benefits. Plaintiff’s second cause of action is based upon the theory of breach of implied contract of employment. Specifically, plaintiff alleges that at the time and place of his hiring, defendant impliedly contracted that as long as plaintiff maintained relative efficiency in his job performance, he would retain his job until retirement. In addition, plaintiff alleges that defendant represented to the ICC its plan to institute a procedure whereby any displaced person would be given an opportunity to transfer to another position. Therefore, plaintiff argues that defendant breached its implied promise and its represented procedure in terminating plaintiff.

In regard to its motion to dismiss, defendant makes several arguments. First, defendant alleges that the employment protections of the New York Dock conditions do not apply to the executive position held by plaintiff. Second, and in the alternative, defendant argues that even if the conditions do apply to plaintiff, then such require arbitration of this dispute, and the Court is without subject matter jurisdiction. Accepting the allegations of plaintiff’s complaint as true for purposes of resolving the present motion, the Court must assume that plaintiff’s employment position, although ranked sixty-third out of approximately 22,750 employment positions, was a position to which the protections of the New York Dock conditions extend.

In reviewing a proposed railroad merger, the Interstate Commerce Commission is directed by 49 U.S.C. § 11347 to require the involved companies to provide for the interests of employees adversely affected by the merger. In meeting this directive with regard to the Union Pacific, Missouri Pacific, and Western Pacific merger, the Commission imposed the New York Dock conditions, so named because they are derived from the Commission’s decision in New York Dock Railway Control-Brooklyn Eastern District Terminal, 360 ICC 60 (1979), aff’d, 609 F.2d 83 (2d Cir.1979). Under these conditions, protected employees who are displaced or dismissed as the result of a merger or consolidation of railroads continue to receive compensation for a period of six years. However, in Article I, Section 11, the conditions also state as follows:

11. In the event the railroad and its employees or their authorized representatives cannot settle any dispute or controversy with respect to the interpretation, application or enforcement of any provision of this appendix ... within 20 days after the dispute arises, it may be referred by either party to an arbitration committee. (Emphasis added).

Although plaintiff herein held a non-union, salaried position, Article IV of the conditions similarly provides for arbitration of disputes concerning this type of position:

Employees of the railroad who are not represented by a labor organization shall be afforded substantially the same levels of protection as are afforded to members of labor organizations under these terms and conditions.
In the event any dispute or controversy arises between the railroad and an employee not represented by a labor organization with respect to the interpretation, application or enforcement of any provision hereof which cannot be settled by the parties within 30 days after the dispute arises, either party may refer the dispute to arbitration. (Emphasis added).

Defendant argues that, even if the New York Dock conditions apply to plaintiff, the “may” clause mandates arbitration as the proper forum for resolving disputes. Plaintiff, however, argues that the “may” clause provides alternatives of either arbitration or redress to court.

Although use of the word “may” ordinarily connotes discretion, the ICC’s own use of the word in the context of the phrase “may be referred by either party to an arbitration committee” and the holdings of courts which have analyzed this phrase and phrases closely analogous, require an opposite conclusion. In 1944, the Commission first used the “may” phrase in Section 8 of what became known as the “Oklahoma” conditions. See, Oklahoma Railway Company Trustees Abandonment of Operation, 257 I.C.C. 177, 200 (1944). Commenting on that phrase, the ICC has stated:

In our opinion, fairness and equity require adoption * * * of the condition * * with respect to arbitration, which will make mandatory the submission to binding arbitration of disputes not settled by agreement between the carrier and the employee.
Southern Railway Company-Control-Central of Georgia Railway Company, 317 I.C.C. 557, 566 (1962) modified, 317 I.C.C. 729 (1963).

In addition, recent court decisions interpreting the New York Dock conditions support the position that arbitration of disputes is mandatory. In Walsh v. United States, 723 F.2d 570 (7th Cir.1983), the Seventh Circuit, after analyzing the Commission’s own assessment of the meaning of the “may” phrase in its Southern Railway decision, concluded that the ICC intended the phrase to connote mandatory arbitration. In addition, the Court was persuaded by a United States Supreme Court interpretation requiring arbitration under a similar phrase of the Railway Labor Act. 723 F.2d at 574, citing Brotherhood of Railroad Trainmen v. Chicago River & Indiana Railroad Co., 353 U.S. 30, 34, 77 S.Ct. 635, 637, 1 L.Ed.2d 622 (1957). As a result, the Seventh Circuit concluded that the phrase “may be referred by either party to an arbitration committee” within Article I of the New York Dock conditions, imposes mandatory arbitration of disputes.

Although the Eighth Circuit Court of Appeals has not addressed this particular phrase of the New York Dock conditions, at least one United States District Court within this Circuit reads the phrase to mandate arbitration. In Swartz v. Norfolk and Western Railway Co., 589 F.Supp. 743 (E.D.Mo.1984), the Court noted that the Eighth Circuit has interpreted analogous clauses in collective bargaining agreements to require arbitration. See Sorensen v. Chicago and North Western Transportation Co., 627 F.2d 136 (8th Cir.1980), aff'g, 476 F.Supp. 1125 (D.Neb.1979). Furthermore, the district court found no compelling reason to doubt that the Eighth Circuit would not follow the Seventh Circuit’s Walsh decision. Accordingly, the Court held that arbitration of disputes is mandatory under the New York Dock conditions.

This Court is similarly persuaded by the well-reasoned approach taken in the Walsh and Swartz decisions. Plaintiff herein claims that his position was eliminated as a direct result of the merger of defendant and two other railroads. Since, under New York Dock, arbitration of plaintiff’s employment dispute is mandatory, and plaintiff has not pursued arbitration, this Court finds that, as a matter of law, it has no subject matter jurisdiction over plaintiffs first cause of action. Furthermore, since plaintiff's second cause of action is premised on breach of implied contract and arises under state law, the Court declines to assume jurisdiction over this pendent claim. See, Koke v. Stifel, Nicolaus & Co., Inc., 620 F.2d 1340, 1346 (8th Cir.1980). Accordingly, a separate order in accordance with this memorandum opinion will be entered this date granting defendant’s motion to dismiss the amended complaint.


author: ASPEN, District Judge:

text:
    Slobodan SRECKOVIC, Plaintiff, v. INTERNATIONAL HARVESTER COMPANY, Defendant.
    No. 84 C 6269.
    United States District Court, N.D. Illinois, E.D.
    Nov. 19, 1984.
    Bogdan Martinovich, Ray & Glick, Libertyville, 111., for plaintiff.
    David J. Parsons, Matkov, Griffin, Parsons, Salzman & Madoff, Chicago, 111., for defendant.
   MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Slobodan Sreckovic (“Sreckovic”) has sued defendant International Harvester Company (“Harvester”) for alleged violations of the Employee Retirement Income Security Act of 1974. 29 U.S.C. § 1001, et seq. (“ERISA”). Harvester has moved to dismiss or for summary judgment, arguing that Sreckovic has not exhausted various contractual remedies. For the reasons stated below, we deny Harvester’s motion.

The dispute centers about Harvester’s termination of Sreckovic’s disability benefits. The parties seem to agree about the following basic facts. A Harvester employee for about eight and one half years, Sreckovic suffered a work-related injury on October 23, 1981. He received benefits for 52 weeks, and on December 20, 1982 was awarded monthly “Long Term Disability Benefits” of $860.00, retroactive to October 23, 1982. Harvester informed him that he could receive these benefits until May 8, 1990 so long as he remained “totally disabled.” However, believing that his condition had improved, Harvester terminated Sreckovic’s benefits as of July 31, 1983. The Union’s Local Benefits Representative, Gerald L. Schlabach (“Schlabach”), filed a grievance on behalf of Sreckovic. Harvester and Schlabach agreed to obtain a third doctor’s opinion on Sreekovic’s condition. A Dr. Menelo Avila examined Sreckovic on April 5, 1984. Based on its interpretation of Dr. Avila’s report, Harvester declined to reinstate Sreckovic’s benefits. This lawsuit followed.

The parties do not agree about the facts material to the pending motion. First, they disagree about the source of Sreckovic’s benefits. Harvester asserts that Sreckovic received benefits under the “Long Term Disability Benefit” program (“Disability Plan”), not the so-called “Non-Contributory Retirement Plan” (“Pension Plan”) under which Sreckovic makes its claim. Harvester reasons that because Sreckovic never applied for benefits under the specific plan named in his complaint, “no benefits are due him under the terms of his plan.” 29 U.S.C. § 1132(a)(1)(B). Second, the parties disagree about whether Sreckovic exhausted the contractual remedies of the relevant collective bargaining agreement between Harvester and his Union. We take up each issue in turn.

The Source of the Benefits

We agree with Harvester that Sreckovic did not receive benefits under the Pension Plan, and that he erroneously named that Plan in his complaint. However, we do not find that error fatal to the complaint. While Sreckovic cannot bring an action based on the Pension Plan because of his failure to apply for benefits under that Plan, see, e.g., Kross v. Western Elec. Co., Inc., 701 F.2d 1238, 1244-5 (7th Cir.1983) (ERISA generally requires exhaustion of Plan remedies), it is clear that his naming of that Plan, rather than the Disability Plan, is a simple factual error. Harvester does not really dispute that Sreckovic wants to restore the benefits he previously received, which, as Harvester admits, were paid out under the Disability Plan. Rather than dismiss the case because of this error of nomenclature, we will grant Sreckovic leave to amend his complaint to allege the proper plan.

Exhaustion of Remedies

Regardless of whether Sreckovic received benefits under the Pension Plan or Disability Plan, Harvester’s termination of his benefits comes within the ambit of ERI-SA. Under 29 U.S.C. § 1132(a)(1)(B) Sreckovic may sue “to recover benefits due to him under the terms of his plan.” Both the Retirement Plan and the Disability Plan are “plans” covered by ERISA. 29 U.S.C. § 1002(1), (2), (3); see Roe v. General American Life Ins. Co., 712 F.2d 450, 452 (10th Cir.1983) (company’s disability benefit plan falls under ERISA).

Harvester argues that Sreckovic failed to exhaust the contractual remedies mandated by the Collective Bargaining Agreement. Although ERISA does not expressly demand exhaustion of remedies, the Seventh Circuit has held that exhaustion of remedies should be imposed in most circumstances. See Kross v. Western Electric Co., Inc., 701 F.2d 1238, 1244-5 (7th Cir. 1983); Challenger v. Local Union No. 1 of Intern. Bridge, 619 F.2d 645, 649 (7th Cir. 1980). Sreckovic does not argue that the exhaustion doctrine does not apply to him; nor does he claim that we should apply one of the exceptions to the exhaustion doctrine. See, e.g., Macon v. Youngstown Sheet and Tube Co., 698 F.2d 858, 860 (7th Cir.1983). Rather, he claims that he has in fact exhausted his contractual remedies.

We are thus presented with a factual dispute about whether the step Sreckovic has taken — seeing Dr. Avila — exhausted his remedies under the relevant Collective Bargaining Agreement. The affidavit of Mr. Schlabach, the Local’s benefits representative, asserts that the grievance and the ensuing physical examination exhausted Sreckovic’s contractual remedies. Harvester counters that Sreckovic never requested an arbitration hearing, implying that he was bound to do so. Incredibly, while the parties skirmished over whether Sreckovic exhausted his contractual remedies, neither party cited any provision of the Collective Bargaining Agreement and neither attached copies of the relevant provisions. Moreover, although ERISA requires that Harvester create an internal review procedure for its Disability Plan, see 29 U.S.C. § 1133, Harvester has not stated whether it has such a procedure or whether Sreckovic complied with it. Faced with this informational vacuum, the Court obtained a copy of the Collective Bargaining Agreement from Harvester’s attorneys. Our scan of the Agreement given to us reveals that Sreckovic has apparently exhausted his private remedies.

We begin by looking at the “Health Security Program Agreement” (“The Health Security Plan”), which under Part I, ch. Ill, provided the Long Term Disability Benefits Sreckovic received. Section 2, ¶ 9 of the Plan states that the usual arbitration procedures of the Main Labor Contract do not apply to disputes under the Health Security Plan:

It is understood that no grievance procedure of any collective bargaining agreement between the parties hereto shall apply to this Agreement or any insurance contract in connection therewith and that any claim for an insured benefit will be presented for settlement only to the insurer.

Turning to Paragraph 13 of the Health Security Plan, we discover that:

If a question of whether an employe is totally disabled for Long Term Disability purposes, or totally and permanently disabled for Life Insurance purposes is involved, the procedure for determining such dispute under the Non-Contributory Retirement Plan Agreement shall be utilized to determine such question and the Arbitrator shall be bound by the determination made under that procedure in making his decision.

Thus, to learn whether Sreckovic had to arbitrate, we must turn to the Pension Plan. Section 2(d)(8) of that Plan provides:

(8) Since the question whether an employe is totally and permanently disabled is not made subject to arbitration, nor to determination by the Board, no arbitrator or the Board shall undertake to make a determination regarding the same. Such question shall be determined in the manner hereinafter set forth.

It seems clear, then, that Sreckovic was not required to arbitrate the question whether he remained totally disabled. The next paragraph of the Retirement Plan, Section 2(d)(8)(i) tells us that Sreckovic apparently did exactly what was required of him, that is, see an impartial physician:

(i) Should disagreement arise as to whether an employe is totally and permanently disabled and should the disagreement not be resolved on the basis of the examination of the physician appointed by the Company, the Board shall appoint a physician or a clinic to examine the employe and render a decisive medical opinion concerning the totality and permanence of disability involved. Such physician shall be a member of the Medical Society nearest the employe’s place of employment. The fees and expenses of such physician or clinic shall be borne equally by the Company and the Union. Should it be the judgment of such physician or clinic that at the time of making his examination it was too early to determine definitely whether the disability is total and permanent, the decision shall be postponed until the physician or clinic considers that sufficient time has elapsed to make such definite determination.

We cannot at this point say that the fact that the opinion of Dr. Avila was to be “decisive” precludes this lawsuit. Sreckovic states in his brief that Harvester arbitrarily terminated his benefits contrary to the opinion of Dr. Avila and the rest of the medical evidence. We thus think he has stated a claim under ERISA. 29 U.S.C. § 1132(a)(1)(B) (beneficiary may sue “to recover benefits due to him under the terms of his plan”).

For the reasons stated above, we deny Harvester’s motion for summary judgment on the exhaustion issue.

Conclusion

Harvester’s motion for summary judgment is denied provided Sreckovic amends his complaint as directed herein. Sreckovic is given leave to amend his complaint on or before December 10, 1984. Harvester is to respond on or before December 31, 1984. Should Sreckovic fail to amend as directed, Harvester’s motion for summary judgment will be granted. The parties are to commence completing discovery forthwith. Status is reset for January 4,1985, at 10:00 a.m., at which time the parties are to report if there is any remaining discovery. The parties are also to. meet prior to the January 4, 1985 status conference for a preliminary settlement conference.

Harvester’s accompanying motion for attorney’s fees and costs under Fed.R.Civ.P. 11 is also denied. It is so ordered.

      . Because the parties have attached affidavits and other documents to their memoranda, we will treat Harvester’s motion as one for summary judgment under Fed.R.Civ.P. 56. See Fed.R. Civ.P. 12(b).

      . Harvester submits an affidavit of Dana Hansen, its Pension Plans manager, who states that Sreckovic never applied under the Pension Plan. Sreckovic refers us to a booklet he received from Harvester concerning that Plan, and argues that under the terms of the booklet, he was receiving benefits under that Plan. That is plainly not the case, since the booklet states that the Pension Plan requires ten or more years of “credited service," and Sreckovic admits in his complaint that he was employed for only eight and one-half years. Schlabach’s affidavit that Sreckovic received his benefits under the Retirement Plan does not create a genuine issue of material fact, since no foundation was laid as to how Schlabach is competent to testify from personal knowledge as to the source of the benefits. We therefore conclude that no genuine issue of material fact exists as to the source of the benefits; but in light of our discussion below, this finding does not prejudice Sreckovic.

      . This situation is similar to where evidence adduced at trial does not conform to the pleadings. See Fed.R.Civ.P. 15(b). When a variance occurs at trial, the modern Rules do not strap a party to the literal words of his or her pleading. This is consistent with the general policy of the Rules, as expressed in Rule 1, to dispense with traditional pleading booby traps and instead "secure the just, speedy and inexpensive determination of every action.” Similarly, where, as here, affidavits reveal a simple factual variance between the pleading and the proof, we see nothing to gain from dismissal, in light of Harvester’s admission that the Disability Plan is the correct one, and in light of the lack of prejudice to Harvester from allowing Sreckovic to amend. We note that this result does not prejudice Harvester, especially because it apparently had an unwitting role in causing Sreckovic’s confusion: when he asked Harvester to send him all information concerning available benefits, he received a booklet about the Pension Plan, but not the Disability Plan.

      . 29 U.S.C. § 1133 provides:
      In accordance with regulations of the Secretary [of Labor], every employee benefit plan shall—
      (2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.

      . We received two volumes: the "Main Labor Contract” and a volume which contains various benefits plans, including the "Health Security Program," which contains the Long Term Disability Plan, and the “Non-Contributory Retirement Plan.” Although these Plans have expired, Harvester’s counsel asserts they are “operative.” We assume that the material terms of the current Collective Bargaining Agreement are unchanged.

      . There is an irony in Harvester's Rule 11 motion for attorney's fees and costs. In light of Harvester’s failure to cite specific provisions of the Plans concerning dispute resolution, and in light of provisions which seem to plainly contradict its argument that arbitration was required, it is arguably Harvester who might have offended Rule 11. However, because Harvester has not spoken to our reading of the Plans, we do not now saddle it with Sreckovic’s costs and fees from having to contest the motion to dismiss.


text:
    In re CENCO INCORPORATED SECURITIES LITIGATION. SEIDMAN & SEIDMAN, Plaintiff, v. CENCO INCORPORATED, Defendant.
    No. 75 C 2227, MDL Docket No. 291.
    United States District Court, N.D. Illinois, E.D.
    Nov. 26, 1984.

      Samuel Weisbard, McDermott, Will & Emery, Chié'ago, 111., for plaintiff.
    David E. Springer, Kirkland & Ellis, Chicago, 111., for defendant.
   MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Introduction

This suit is now a vestige of what was once a complex class action based on common law and federal securities fraud. Plaintiffs, security holders of Cenco, Inc. (“Cenco”) brought this class action against several defendants, alleging what the Seventh Circuit later termed “a massive fraud.” Most of the case has been resolved through various settlements between the plaintiff class and the individual defendants. Several of the various cross-claims between the defendants also have been settled or otherwise resolved. We are left now with the cross-claims between co-defendants Cenco and its former auditors, Seidman & Seidman (“Seidman”). Former District Judge John Powers Crowley tried these claims in 1980. On cross-appeals to the Seventh Circuit, the Court (1) affirmed Judge Crowley’s judgment, entered on jury verdicts, against Cenco on its cross-claims against Seidman, (2) affirmed Judge Crowley’s dismissal of Seidman’s claims against Cenco under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq. (“RICO”); and (3) remanded for possible retrial Seidman’s common law counts against Cenco. Presently before the Court are several motions, the most significant of which are Cenco’s motion to dismiss for lack of subject matter jurisdiction and motion for summary judgment. For the reasons stated below, we deny that part of Cenco’s summary judgment motion which deals with interpreting the past decisions of this Court and the Court of Appeals in this case. However, because that holding pares this down to a purely state law case, and because considerations of judicial economy and comity no longer warrant our continuing exercise of federal jurisdiction, we dismiss Seidman’s cross-claim without prejudice for lack of subject matter jurisdiction.

I. Cenco’s Summary Judgment Motion

The primary issue raised in Cenco’s motion is whether Seidman waived its rights to recover from Cenco the $3.5 million settlement Seidman paid to the plaintiff class. Stripped for the moment of its legal trappings, Cenco’s basic argument is that Seidman and Cenco’s settlements with the plaintiff class forbade Seidman from recovering the $3.5 million, and that Seidman admitted this several times in open court. In response, Seidman admits that it promised to waive any claim against Cenco for contribution or indemnity, but notes that its present claim is based upon a related yet distinct tort of fraud. Seidman adds that the Seventh Circuit already held in this case that Seidman may recover its settlement payments from Cenco, and that this holding binds us under the doctrine of “the law of the case.” To analyze these arguments, we must first summarize the nature of Seidman’s cross-claim, ascertain the meaning of the settlements reached in 1980 and assess the import of the Seventh Circuit’s holding.

A.

Seidman bases its cross-claim on a common law theory of fraud, which can be sketched as follows: Cenco engaged in a huge fraud against various third parties. It inflated the value of its inventories in order to bloat the value of its stock, obtain other companies cheaply and recover swollen insurance claims. Seidman, Cenco’s auditors during the time of the fraud, had been deceived by Cenco’s managers so that it could not pierce Cenco’s fraudulent scheme. The class named Seidman as a co-defendant when it filed its suit. Eventually Seidman settled with the class for $3.5 million. It claims this settlement as an element of damages resulting from Cenco’s fraud against it.

Having sketched Seidman’s theory of recovery, we turn next to the relevant language of Cenco and Seidman’s settlements with the class. Paragraph fourteen of Cenco’s agreement provided:

This Agreement affects the Certified Class’s claims against Cenco and the co-defendants only in the following respect: the amount that the Certified Class recovers from Cenco, directly or indirectly, shall be limited to the amount specified in Paragraph 6 of this Agreement; therefore, any amount that the Certified Class recovers (by judgment, settlement or otherwise) from any co-defendant, including any new co-defendant added by plaintiffs in the consolidated class actions, shall be reduced (or eliminated) by any amount that such co-defendant recovers or becomes entitled to recover (by judgment, settlement, or otherwise) from Cenco through operation of principles of indemnification or contribution.

The key element in this agreement is its so-called “judgment reduction provision”; This provision capped Cenco’s liability to the class by reason of its alleged fraud against the class. Any dollar that the class received from another defendant would be “taken away” for every dollar that defendant might recover from Cenco via indemnification or contribution.

Seidman’s agreement with the class complemented this “judgment reduction provision.” Paragraph 3(g) of that settlement says:

By its settlement agreement with Cenco, dated January 12, 1978 (the “January 12, 1978 Agreement), the Class agreed, inter alia, that it would reduce the judgment or settlement recovered by the Class against Seidman by any amount that Seidman became entitled to recover from Cenco through operation of principles of indemnification or contribution on that judgment or settlement. Accordingly, by this Agreement Seidman agrees that it will not collect or recover any amount for contribution or indemnification against Cenco which arises out of the amount paid in this settlement by Seidman to the class, and that any such amount which Seidman becomes entitled to recover from Cenco shall be discharged of record. However, in the event that Seidman is ever found liable for contribution or indemnification in connection with the consolidated class actions, Seidman reserves its right to assert both the fact that Seidman has paid $3,500,000 to the Class and that Cenco and all the Individual Settling Defendants should be included in any formula for contribution or indemnification, for the purpose of determining the appropriate formula or amount of contribution which should be paid by or credited to Seidman. Seidman agrees to fully indemnify the Class and hold it harmless for the Class’ obligations as to any claims by Seidman against Cenco, in the event and to the extent that it is ever determined that the Class is obligated to Cenco pursuant to the January 12, 1978 Agreement.

Thus, Seidman agreed that it would not try to recover from Cenco — via contribution or indemnity — any of the $3.5 million it paid to the class. Subsequently, Judge Crowley on May 11, 1980, issued an order confirming the relevant part of the above understandings:

The Court hereby rules that no such claims for contribution of indemnification by either Cenco or Seidman against the other arising out of the settlement with the Plaintiff Class are legally permissible, and all such claims are hereby denied and dismissed.

It is clear from these agreements, and the parties agree, that Seidman agreed not to seek contribution or indemnification from Cenco for the $3.5 million Seidman paid to the class. What the parties heatedly debate is whether Seidman promised more than that, that is, whether Seidman promised to waive every right it might have against Cenco for the $3.5 million. To answer this question, we turn next to the Court of Appeals’ decision.

At the trial on Seidman’s cross-claims, Judge Crowley directed a verdict against the fraud claim for lack of proof of injury. The Seventh Circuit vacated this dismissal. It noted that Seidman had failed to present evidence of injury at trial not because it lacked evidence, but because the trial had been bifurcated: “Since [Judge Crowley] had, the day after trial began, tentatively approved the settlement under which Seidman agreed to pay $3.5 million to the class, Seidman naturally thought it had no need to present any evidence or injury at trial, and it did not.” 686 F.2d at 457. The court went on to hold:

The district judge should have taken judicial notice of the settlement and held that Seidman’s obligation thereunder was evidence enough of injury to withstand a directed verdict of liability. Apparently he did not do so because he thought Seidman was just seeking indemnification from a codefendant, which this court has held is not allowed in a Rule 10b-5 case. Heizer Corp. v. Ross, supra, 601 F.2d [330] at 334-35 [(7th Cir.1979)]. But indemnity is a remedy of one wrongdoer against another; and Seidman’s claim is that it was a victim rather than a wrongdoer. It is true that it paid several millions to the class plaintiffs, but it never admitted wrongdoing or was adjudicated a wrongdoer. Therefore, if it can prove that Cenco defrauded it into issuing false audit reports which in turn exposed it to liability to the class plaintiffs, the amount it paid to settle with the class would be a permissible item of damages.

686 F.2d at 457-8. The parties hotly dispute the meaning of this holding and how it bears on Seidman’s right to recover the $3.5 million settlement payment. They dispute first whether the Seventh Circuit actually took judicial notice of the settlement, and if not, whether this Court may properly do so. They also dispute whether the Court’s holding that the settlement payment is recoverable is “the law of the case” such that we cannot now consider the language of the settlements or Seidman’s statements in court about them. We take up each issue in turn.

B.

Cenco has moved the Court for a hearing under Fed.R.Evid. 201(e) on the propriety of our taking judicial notice of the settlement. It argues that judicial notice is improper because of the waiver it believes Seidman made, of which the Court of Appeals was ignorant. Seidman replies that the Court of Appeals took judicial notice of the settlement, and that Cenco failed to request a Rule 201(e) hearing from that Court; thus, concludes Seidman, Cenco’s request for a hearing now is not “timely” under the Rule. See Reiner v. Washington Plate Glass Co., Inc., 711 F.2d 414, 416 n. 5 (D.C.Cir.1983) (when appellate court judicially noticed a fact, a timely request for a hearing on propriety should be addressed to the appellate court in a petition for rehearing). We believe that the Seventh Circuit did not take judicial notice of the settlement, but . rather instructed us to do so. We think the Court meant as follows: “The district court erred in not taking judicial notice. Thus, the directed verdict must be vacated; Accordingly, we remand with instructions to take judicial notice on retrial.” This phrasing is more consistent with the Seventh Circuit’s language than is Seidman’s reading. The Court nowhere said it was taking judicial notice. Instead, it said the district court “should have” done so, and then vacated the dismissal and remanded. It should also be noted that the Court reached its judicial notice holding sua sponte: while Seidman argued that the settlement was evidence of injury, neither side presented arguments about judicial notice. In light of the above considerations, we think it best to construe the ambiguity in the holding in a way that allows Cenco to argue the issue. Thus, in accordance with the opinion above, we take judicial notice of the settlement, recognizing that Seidman’s obligation under it is evidence of tortious injury. But we also allow Cenco’s motion for a hearing under Fed.R.Evid. 201(e) for a hearing on the propriety of doing so.

We find no need, however, to hold a separate hearing on judicial notice. In briefing its summary judgment motion, Cenco argued at length that Seidman had waived its rights to recover the settlement payment. It thereby also argued implicitly that we should not take judicial notice. Our consideration below of its summary judgment motion amounts to a hearing on propriety. Thus, in denying Cenco’s motion for summary judgment below, we also hold that taking judicial notice of the settlement as evidence of injury is proper.

C.

Citing the above-quoted language from the settlement agreements and reproducing transcripts of extensive pretrial colloquies with Judge Crowley, Cenco argues that Seidman waived all of its rights to recover the $3.5 million from Cenco. We disagree. The settlement agreements, as well as the colloquies before Judge Crowley, unequivocally show that Seidman waived only its rights to recover its settlement via contribution or indemnity. It did not waive any rights to recover the settlement as a damage arising from a separate tort of fraud perpetrated upon it by Cenco.

The written settlement agreements are clear on the point. They are couched in terms of “contribution” and “indemnity,” and we need dwell on them no further. While the colloquies are not quite as clear, we do not agree with Cenco that the statements of Seidman’s counsel reinforce Cenco’s interpretation of the settlements. Cenco arrives at its interpretation by focusing only on selected portions of counsel’s statements. Taken as a whole, counsel’s statements were consistent with the written settlement agreements: Seidman agreed only to waive claims of contribution or indemnity. We need not clutter these pages with lengthy reproductions of the colloquies. We have examined them carefully and believe that Seidman did not orally waive its right to recover the settlement payment from Cenco on a separate fraud theory.

D.

We turn next to Cenco’s remaining argument to avoid exposure for Seidman’s settlement payments. It argues that there is no genuine issue of material fact that Cenco proximately caused Seidman to settle with the class. Thus, it claims, it is entitled to partial summary judgment under Fed.R.Civ.P. 56 with respect to that element of damage. We disagree.

To address Cenco's argument, we must again return to the language of the Seventh Circuit’s holding that the settlement payments are recoverable: “[I]f [Seidman] can prove that Cenco defrauded it into issuing false audit reports which in turn exposed it to liability to the class plaintiffs, the amount it paid to settle with the class would be a permissible item of damages.” 686 F.2d at 458. Seidman argues that the Seventh Circuit held that it can recover the settlement payments as damages, that this holding is the law of the case, and that Cenco is thus barred from raising its proximate cause arguments. Cenco reasons that the Seventh Circuit’s holding hinges on two contingencies which must be satisfied before Seidman may recover the settlement payments. First, Seidman must establish tortious acts, that is, “prove that Cenco defrauded it into issuing false audit reports.” Second, Seidman must show causation, that is, prove that the fraud “in turn exposed” Seidman to liability to the class.

As Seidman argues, we undoubtedly must follow the holding of the Seventh Circuit and its enunciations of law. See, e.g., Hayes v. Thompson, 637 F.2d 483, 487 (7th Cir.1980). However, “[w]hile an appellate decision establishes the Taw of the case’ for all subsequent stages of the litigation ... the trial court is restrained only with respect to those issues which have been considered and resolved by the appellate court.” Holcomb v. United States, 622 F.2d 937, 940 (7th Cir.1980); see also Quern v. Jordan, 440 U.S. 332, 347 n. 18, 99 S.Ct. 1139, 1148, 59 L.Ed.2d 358 (1979). We agree with Cenco that the law of the case doctrine does not relieve Seidman from having to prove the tortious act and causation elements mentioned above. The language of the holding above is clear that Seidman had not yet established those elements. However, if Seidman does prove the two elements, its right to recover the settlement payments follows, and that is “the law of the case.”

As for the first contingency — proof of the fraud — Cenco does not argue that the facts comprising the alleged fraud are not genuinely at issue. Thus, Cenco is not entitled to summary judgment on that score. See, e.g., Korf v. Ball State University, 726 F.2d 1222, 1226 (7th Cir.1984) (movant bears burden of showing no genuine issue of material fact exists).

Moving to the second contingency, Cenco argues that Seidman’s voluntary decisión to settle with the class, not Cenco’s alleged fraud against it, proximately caused its injury. This argument misinterprets the meaning of proximate cause in this context. Obviously, Seidman’s decision to settle was a factual cause of its damages, and its possible individual liability to the class probably in part motivated it to do so. The Court of Appeals’ holding is clear that the mere fact that the settlement was voluntary does not itself preclude Seidman from recovering the payment. The real proximate cause issue is not whether Seidman voluntarily settled, but whether Cenco’s fraud was a cause of Seidman’s potential liability to the class. If so, Seidman’s settlement payment follows from that exposure and can be recoverable both under the opinion of the Court of Appeals above and Illinois law. See, e.g., Sorenson v. Fio Rito, 90 Ill.App.3d 368, 371-76, 45 Ill.Dec. 714, 718-20, 413 N.E.2d 47, 51-53 (1980). See also Seaboard Surety Co. v. Permacrete Construction Corp., 221 F.2d 366 (3d Cir.1955). Once again, Cenco in its motion does not sustain its burden of showing that there is no factual issue concerning whether the fraud caused Seidman’s exposure. Accordingly, it is not entitled to summary judgment on the basis of proximate cause.

II. The Motion to Dismiss

The remaining issues in Cenco’s motion for summary judgment, indeed the rest of the Cenco-Seidman dispute, involve questions of state law. Recognizing this on appeal, the Seventh Circuit in a lengthy dictum considered sua sponte whether this Court has subject matter jurisdiction to hear Seidman’s state law cross-claim against Cenco. 686 F.2d at 458-59. Although leaving it for us to decide in the sound exercise of our discretion, the Seventh Circuit’s opinion suggested that we may not wish to exercise pendent or ancillary jurisdiction over Seidman’s cross-claim. Seidman’s cross-claim was pendent to its federal RICO cross-claim against Cenco, which Judge Crowley dismissed, and ancillary to the federal claims of the plaintiffs against them in the original class action, which are now settled. The Seventh Circuit had this to say about the remaining pendent and ancillary claims:

The rule in pendent jurisdiction is that if the federal claim to which the state-law claim is pendent is dismissed before trial, the court will decline jurisdiction over the state-law claim and remit the claimant to the state courts. United Mine Workers of America v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966). The RICO claim, the only federal claim to which Seidman’s common law counts could be pendent, was not dismissed before trial, so the rule just stated is not strictly applicable. On the other hand, since Seidman is seeking a new trial on those counts, the dismissal of the RICO claim which we affirm today is a dismissal of the main count before trial of the common law counts, more precisely before retrial of them. The position is the same if jurisdiction to decide Seidman’s common law claim is based on the concept of ancillary rather than of pendent jurisdiction. Since the claims to which Seidman’s claim are ancillary, namely the claims of the plaintiffs in the original class action, have all been finally disposed of there will be no federal question remaining in the case when Seidman’s common law counts are retried; and pendent and ancillary jurisdiction are treated the same so far as the rules governing retention of the nonfederal claim after dismissal or other final disposition of the federal claim are concerned. See Federman [v. Empire Fire & Marine Ins. Co., 597 F.2d 798 (2d Cir.1979) ] supra.

Id. The Court went on to note:

Since there must be a new trial from scratch in this case, since the litigation has now narrowed down to a dispute between two citizens of the same state over the application of state law to their dispute, since Seidman’s claim against Cenco involves novel and difficult issues of state law, and finally since the judge who presided over the first trial has resigned from the bench, it may well be that the second trial should be in a state court. The district court will have to decide this on remand, balancing the considerations we have just listed against any judicial economies from retaining the matter in federal court, where it began.

Id. In sum, while we have the power to exercise ancillary jurisdiction over Seidman’s cross-claim, we must now decide whether to exercise that power, taking guidance from the considerations listed by the Court above.

Judicial efficiency and economy, “the raison[s] d'etre of ancillary jurisdiction,” see Joiner v. Diamond M. Drilling Co., 677 F.2d 1035, 1042 (5th Cir.1982), stand foremost among the factors in our analysis. If retaining jurisdiction over Seidman’s cross-claim no longer promotes judicial economy, we should dismiss the claim. See U.M.W. v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966); Joiner, 677 F.2d at 1042. We must also be wary of deciding issues of state law now that the federal issues are resolved. “Gibbs teaches that federal courts must refrain from unnecessarily poaching on a sovereign state’s jurisprudential turf.” Joiner, 677 F.2d at 1042. Despite these concerns of economy and comity, we should nevertheless retain jurisdiction if a dismissal would unduly prejudice the parties:

For example, if the ... statute of limitations has run during the pendency of the state claim in federal court, a dismissal might deprive the parties of any forum. In such a case, a federal court would be justified in retaining jurisdiction over the ancillary state-law claims. Similarly, if litigation over the ancillary claim has proceeded apace and the parties have already prepared their case in reliance upon the availability of a federal forum, dismissal might not be required.

Joiner, 677 F.2d at 1043 (emphasis in original) (footnotes and citations omitted). With these additional considerations in mind, we turn to Cenco’s motion to dismiss.

Several facts point strongly to dismissal. First, a new trial will be necessary, and this Court did not preside over the first trial. Had we done so, judicial economy would clearly demand that we retain jurisdiction. But now any savings of judicial time would be marginal. Second, as Judge Posner observed, the new trial involves unresolved issues of state law. In the absence of related federal issues, we hesitate to decide these issues in the first instance. Finally, we must take note of the unpleasant possibility of a reversal on appeal. If we were to try this case and be reversed on appeal because the Seventh Circuit does not concur with our exercise of discretion to try the case, the parties would have to go through the enormous time and expense of a third trial, with possible appeals on the merits. See Joiner, supra; Rosario v. American Export-Isbrandsten Lines, Inc., 531 F.2d 1227, 1233 n. 17 (3d Cir.1976) (dicta). This last consideration obviously dovetails with the concerns of judicial economy noted above.

Seidman points to several countervailing considerations in arguing that a dismissal would be improvident. It suggests that depositions taken for the case in federal court may not be usable in a state court trial; that a trial in state court would be delayed longer than a trial in this Court; that the liberalized hearsay rule under the Federal Rules of Evidence which would permit extensive use of trial transcript testimony at trial is not available in state court; that Seidman may lose $75,000 in court costs, since dismissal of the instant case by this Court would demonstrate that Seidman was not the prevailing party in this litigation; and finally, that dismissal of this case would require a state court to construe judgments, orders and decisions of the federal courts. In effect, Seidman is arguing that a remand to state court would prejudice it within the meaning defined in Joiner.

These considerations are not as weighty as they might appear at first glance. Cenco has offered to stipulate that testimony from depositions and the trial transcript could be used in the state court to the same extent they could be used in federal court. Had Cenco not done this, the cost and delay of retaking depositions might have demanded our retention of jurisdiction. But the stipulation will minimize, if not eliminate, variances between state and federal procedure which might have prejudiced Seidman. As for the issue of delay, there is no guarantee that this case would be tried sooner in federal court; moreover, given the stated views of Judge Posner in the prior Seventh Circuit opinion, there is always the possibility of reversal on the jurisdictional issue, which would wipe out any savings from an earlier trial in federal court. Moving to another Seidman concern, we note that in light of our disposition, no federal judgments, orders or decisions linger for the state court to construe. We have, we hope, laid to rest the dispute over the meaning of the settlements and of the opinion of the Seventh Circuit.

Finally, as for the $75,000 in court costs, the Court of Appeals vacated Judge Crowley’s order awarding those costs to Seidman. In the Seventh Circuit’s view, neither party has yet “prevailed,” and so neither deserved costs. Moreover, the Court explicitly stated that Seidman would not be entitled to costs “if the court below should decide not to exercise jurisdiction over Seidman’s state law claims.” 686 F.2d at 459. Thus, the Court of Appeals implicitly recognized that the analysis of the jurisdictional issue should be separate from the costs issue. But even if costs should be considered in deciding the jurisdictional issue, Seidman is clearly not entitled to costs now, and its potential for recovering costs does not outweigh the economy and comity factors discussed above. In sum, then, those concerns of economy and comity compel us to grant Cenco’s motion to dismiss Seidman’s ancillary state law cross-claim for lack of subject matter jurisdiction.

III. Conclusion

To summarize our principal holdings above: (1) We take judicial notice that Seidman’s settlement payment is evidence of injury; (2) We allow Cenco’s motion for a hearing on whether taking judicial notice is proper, but hold that taking judicial notice is proper; (3) Seidman did not waive all rights to recover from Cenco its $3.5 million settlement payment to the class; (4) Cenco has not established that its alleged fraud did not proximately cause Seidman’s injury; (5) Thus, Cenco’s motion for summary judgment is denied; (6) Seidman’s state law cross-claim is dismissed for lack of subject matter jurisdiction. It is so ordered.

      . Cenco, Inc. v. Seidman & Seidman, 686 F.2d 449, 451 (7th Cir.1982).

      . On February 9, 1984, it was agreed that the remaining claims of the plaintiff class and Cenco against defendants Rose Packaging Co., David Marose and Russell Rabjohns would be held in abeyance and would be litigated only in the event it is established that these defendants become financially solvent. Thus, other than the possibility of revitalizing these actions, only the Seidman-Cenco cross-claims remain in this litigation.

      . In deciding Cenco’s motion for summary judgment, we have allowed Seidman’s motion to strike Cenco’s references to the SEC’s Accounting Series Release No. 196 ("ASR No. 196”). ASR No. 196 is analogous to a consent decree, issued by the SEC as a product of a settlement with Seidman in which Seidman did not admit or deny any of its statements. Judge Crowley previously sustained Seidman’s objection to its admission in evidence, ruling that it was a settlement within the meaning of Fed.R.Evid. 408, and, alternatively, that it did not fall within the hearsay exception of Fed.R.Evid. 803(8). We agree with Seidman that this ruling is the law of the case, but, in any event, we believe Judge Crowley was correct. Cenco has not persuaded us that it seeks admission of the settlement to prove facts other than those tending to show Seidman’s possible liability to it or to the class. Thus, Cenco has not shown that the ASR falls outside the scope of Rule 408. See, e.g., Central Soya Co. v. Epstein Fisheries, Inc., 676 F.2d 939, 944-45 (7th Cir.1982) (court may admit settlements to prove facts other than liability). Moreover, the underlying "facts” Cenco seeks to prove are not based on formal findings by the SEC following a hearing on the record. The ASR recites only unproven allegations developed by the SEC’s staff, plus some comments by the Commission. Accordingly, we grant Seidman’s motion to strike Cenco's references to ASR No. 196. It is so ordered.

      . The parties agree that this Court has subject matter jurisdiction to rule on that part of the summary judgment motion which involves interpreting the settlements approved by former District Judge John Powers Crowley earlier in this case. They are correct. This Court retains jurisdiction to construe its orders and judgments approving the settlement agreements in issue. Cf. Martina Theatre Corp. v. Schine Chain Theatres, Inc., 278 F.2d 798 (2d Cir.1960). Accordingly, we will return to the jurisdictional issue as it pertains to the rest of the case after disposing of the dispute over the settlements.

      . Rule 201(e) provides:
      A party is entitled upon timely request to an opportunity to be heard as to the propriety of taking judicial notice and the tenor of the matter noticed. In the absence of prior notification, the request may be made after judicial notice has been taken.

      . In light of this holding, we need not address the arguments of Seidman that the Seventh Circuit’s holding about the settlements constitutes "the law of the case."

      . Cenco’s additional argument that Seidman's claim for its settlement payment contravenes ‘‘federal policy" lacks merit. Cenco relies on Madigan, Inc. v. Goodman, 498 F.2d 233 (7th Cir.1974) and Heizer Corp. v. Ross, 601 F.2d 330 (7th Cir.1979), in so arguing, but those cases involved recovery under theories of indemnity. As' we have held above, and as the Court of Appeals noted, Seidman's claim is based on fraud, not contribution or indemnity, and thus is not controlled by Madigan or Heizer. Indeed, the Seventh Circuit explicitly distinguished Heizer in holding that Seidman could recover the settlement payments. 686 F.2d at 457-58.

      . State law governs not only the theory of recovery, but also the scope of recoverable damages. Cenco’s motion for summary judgment challenges Seidman’s right to recover third party litigation expenses, attorney’s fees, prejudgment interest and punitive damages, all of which will be determined under Illinois law. Because of our dismissal of the action, we do not reach those issues.

      . While Gibbs dealt with the standards for retaining jurisdiction over pendent state claims after the federal claims are resolved, the case applies as well to ancillary state claims. Cenco, 686 F.2d at 458; Joiner, 677 F.2d at 1042 n. 16.

      . This conclusion does not prejudice Seidman. It was concerned that if it lost in state court and Cenco petitioned for costs, Seidman would lose "credit” for the $75,000 previously awarded. However, Cenco has agreed to waive the first $75,000 in costs should it prevail in state court. Thus, prejudice to Seidman is neutralized.

      . Thus, the only matters in this litigation now remaining before this Court are the claims of the plaintiff class and Cenco against defendants Rose Packaging Co., Marose and Rabjohns. See footnote 2, supra. A status as to these remaining claims is set for November 1, 1985, at 10:00 a.m.