author: ORRICK, District Judge.

text:
    COMPUTER PLACE, INC., a California corporation, Plaintiff, v. HEWLETT-PACKARD COMPANY, a Corporation; and Computerland, Inc., a Corporation, Defendants.
    No. C-82-4176 WHO.
    United States District Court, N.D. California.
    Oct. 22, 1984.

      Shayle P. Fox, Fox & Grove, Chartered, Chicago, Ill., for plaintiff.
    J. Thomas Rosch, Robert L. Ebe, McCutchen, Doyle, Brown & Enerson, San Francisco, Cal., for Hewlett-Packard.
    Timothy E. Carr, San Francisco, Cal., Michael J. Walter, Hayward, Cal., for Com-puterland.
   MEMORANDUM AND ORDER

ORRICK, District Judge.

Plaintiff, Computer Place, Inc. (“CPI”), has sold personal computers, calculators, and computer accessories by mail order and through a retail store in Carmel, California, since 1979. Defendant Hewlett-Packard (“HP”) manufactures, sells, and distributes to dealers a wide range of computers, computer accessories, calculators, supplies, and parts for those machines. Defendant Com-puterland, Inc. (“CL”) is a franchisor whose franchisees operate retail stores that sell those items to the public.

On June 3, 1982, HP announced a change in marketing strategy that significantly impacted its mail-order retailers. HP stated to all dealers that it had developed a program that emphasized face-to-face selling and local dealer support, as opposed to mail-order selling. The new program contained incentives to stimulate local dealer retailing. It also included a provision denying mail-order sellers the new personal computer models it developed. CPI alleges various federal antitrust and state law violations based on this change in distribution policy and the contract negotiations HP and CL were conducting at the same time.

Specifically, CPI alleges that defendants and various unidentified parties conspired to engage in acts that unreasonably restrained trade in violation of § 1 of the Sherman Act, 15 U.S.C. § 1, and conspired or attempted to monopolize the “business and scientific computer” market in violation of § 2 of the Sherman Act, 15 U.S.C. § 2. HP is also alleged to have violated § 2(a) of the Clayton Act, 15 U.S.C. § 13(a), by agreeing to sell products to CL at a lower price than it sold products to CPI. In addition, CPI alleges pendent state law claims, including breach of an oral promise by HP under a theory of promissory or equitable estoppel, tortious interference by HP with CPI’s business relationship with its clients, and tortious interference by CL with CPI’s contractual relationship with HP.

Defendants have moved for summary judgment on all claims. For the reasons herein stated, the motion is granted.

I. Sherman Act §§ 1 and 2

The Court will deal with the Sherman Act claims, the Robinson-Patman- Act claims, and the pendent state claims in that order, but first it is appropriate to comment briefly on the application of the drastic method of summary judgment to the facts as they have been presented to the Court by numerous exhibits, depositions, affidavits, declarations, and the like, and interpreted by voluminous briefs and mem-oranda as well as by excellent oral argument. It is but a truism to note that the roads to and from appellate courts are strewn with the wreck of complex antitrust cases. Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). But this does not mean that Poller and its progeny has read Federal Rule of Civil Procedure 56 out of the law and in particular cases where, under appropriate circumstances, it is proper to apply summary judgment. This is such a case where the pleadings and evidence present no genuine material issue of fact. The evidence must be viewed in a light most favorable to the party opposing summary judgment. But this party must also produce “significant probative evidence tending to support the complaint” that is relevant to the disputed factual issues and truly material to the litigation. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968). “A lawfully displaced competitor cannot construct a justi-ciable controversy from artful pleading alone.” General Business Systems v. North American Philips Corp., 699 F.2d 965, 971 (9th Cir.1983).

A. Sherman Act § 1: Conspiracy.

Section One of the Sherman Act proscribes concerted conduct rather than independent action. Monsanto v. Spray-Rite Service Corp., — U.S. -, 104 S.Ct. 1464, 1469, 79 L.Ed.2d 775 (1984). The plaintiff must allege “sufficient facts to raise a reasonable inference of an illegal combination or conspiracy.” Filco v. Amana Refrigeration, Inc., 709 F.2d 1257, 1261 (9th Cir.1983), cert. dismissed, — U.S. -, 104 S.Ct. 385, 78 L.Ed.2d 331 (1984). CPI has alleged a price-fixing scheme by defendants. It may not infer an agreement from highly ambiguous evidence to support this allegation. Rather, it must produce evidence that tends to exclude the possibility of independent action by the manufacturer and distributor. Monsanto, supra, 104 S.Ct. at 1471.

The relative burdens to be carried on a summary judgment motion are stated in ALW, Inc. v. United Air Lines, Inc., 510 F.2d 52, 55 (9th Cir.1975):

“Once the allegations of conspiracy made in the complaint are rebutted by probative evidence supporting an alternative interpretation of a defendant’s conduct, if the plaintiff then fails to come forward with specific factual support of its allegations of conspiracy, summary judgment for the defendant becomes proper.”

1. Evidence of Independent Action.

CPI alleges that HP, CL, and their co-conspirators engaged in a price-fixing scheme which included eliminating CPI as a mail order-seller because it offered price discounts to purchasers of HP products. Complaint at ¶ 13. HP allegedly initiated this conduct in response to complaints from CL and other co-conspirators. Complaint at ¶ 14.

To rebut these allegations, HP asserts its actions were unilateral, and taken to further a general marketing strategy initiated in November 1981. The strategy deempha-sized mail order distribution in favor of local dealers who could provide full service support for unsophisticated buyers of a new generation of personal computers.

In support of this assertion, HP submits evidence and testimony. The new HP-125 personal computer, introduced in the fall of 1981, was designed for neophyte users, such as businessmen and professionals; whereas the HP-85, sold by CPI and other mail-order dealers had been targeted for engineers and scientists. Stihler Depo. at 153-155; Rogers Decl. at 1110. By November 12, 1981, HP’s Marketing Council had developed “Distribution Objectives” that sought to emphasize dealers, such as computer stores and major retail chains, who would sell and support the full product line. Ebe Decl., Exhs. 12 & 13.

HP’s competitors were also changing their distribution strategies. A November 2, 1981, letter from Apple Computer, Inc. to CPI states that Apple would no longer supply mail-order dealers because such sellers do not educate or support the consumer. Ebe Decl., Exh. 14. On November 4, 1981, CPI agreed to a modification of its Apple Dealer Sales Agreement prohibiting CPI from making mail order or telephone sales of Apple products because “customers purchasing [Apple products] can be properly served only if they have the benefit of pre- and post-sale education, orientation and support.” Id. The modification emphasized that each customer’s needs must be properly assessed and the features, operation and application of Apple products must be demonstrated and fully explained because of their “technical nature.” Id. David Stihler, President of CPI, also acknowledged that Osborne and Sony discouraged mail order sales of personal computers. Stihler Depo. at 752, 768. In February and March of 1982, independent market data confirmed that mail-order computer sales would not be viable in the future. Ebe Decl. Exhs. 21 and 22.

HP asserts it was concerned about “free-riding” by mail order dealers on the sales efforts of local dealers. Mail order dealers used advertising allowances to finance national campaigns designed to attract customers who had been “presold” by a local dealer, and who would buy through mail-order dealers to get a lower price. Rogers Decl. at ¶¶ 17-21. Volume discounts offered by HP exacerbated this problem. Local dealers rarely were able to purchase in the quantity required to qualify for these discounts; whereas mail-order dealers invariably could. These programs made HP promotion very unattractive to local dealers, precisely the type of distributors HP wanted to attract. Both the rate at which HP was acquiring new dealers and its sales were down in the face of an overall market upswing. Rogers Decl. at ¶ 24.

In the Fall of 1981, HP began a thorough evaluation of its marketing strategy. The results of a November 1981 dealer survey were presented to the Marketing Council in December 1981. These results confirmed local dealer dissatisfaction with HP’s mail-order favoritism and prompted the Council to gather additional data. In March 1982, after confirming market trends and the adverse effect of policies favoring mail-order dealers, the Council appointed a Task Force to evaluate solutions. In May 1982 the Task Force recommended a “Five Point Program.” This proposal advocated elimination of advertising allowances and volume discounts, both of which favored mail-order dealers. HP also decided to exercise its contractual right and distribute new computer models only through dealers who would provide face-to-face end user support. Dealers were notified of these changes in distribution strategy in the June 3, 1982, letter.

This evidence is sufficient to rebut the allegations of conspiracy in the complaint. It supports the conclusion that the decision to curtail mail-order distribution was part of a unilaterally imposed system of nonprice restrictions. CPI must provide specific factual support for its allegations.

2. Evidence of Concerted Action.

CPI contends that HP did not act independently but in response to complaints from local dealers or demands by CL. It dismisses the Five Point Program as a sham and a major reversal of prior policy.

Last year, the Ninth Circuit addressed the combination requirement in dealer termination actions brought under the Sherman Act. “Something more than complaints and termination must be shown to overcome a motion for summary judgment * * * the additional showing can be made by either evidence of direct coercion or of a causal nexus between complaints and termination.” Filco, supra, 709 F.2d at 1263. CPI has not alleged direct coercion. The relevant factors in determining the causal link are: (1) the volume and intensity of complaints; (2) the time gap between receipt of complaints and termination; and (3) whether the manufacturer had a valid, independent reason for terminating the discounting dealer. Id. at 1264. This test has been reinforced by the recent holding of the Supreme Court that there must be “evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors were acting independently.” Monsanto, supra, 104 S.Ct. at 1471.

CPI contends that HP dealers complained about mail-order discounting. The deposition testimony of Stanley Podares, HP’s Eastern Regional Sales Manager, is offered as evidence of these complaints. Mr. Podares did not assume his responsibilities until November 1, 1981, the same month that the Marketing Council adopted its “Distribution Objectives.” Ebe Deck, Exh. 12. The simultaneous timing weakens the causal link CPI must establish. Furthermore, the testimony demonstrates that dealers complained about “free riding” rather than about price discounting.

A summary of comments made by dealers in response to the November 1981 survey is also cited as evidence of complaints. When examined in context, it is again clear that local dealers were concerned about mail-order sellers benefiting from the support services of retailers. Moreover, these statements were made in response to a survey initiated by HP. The Supreme Court has recently placed its imprimatur on the development of new marketing strategies.

“A manufacturer and its distributors have legitimate reasons to exchange information about the prices and the reception of their products in the market. Moreover, it is precisely in cases in which the manufacturer attempts to further a particular marketing strategy by means of agreements on often costly nonprice restrictions that it will have the most interest in the distributors’ resale prices. The manufacturer often will want to ensure that its distributors earn sufficient profit to pay for programs such as hiring and training additional salesmen or demonstrating the technical features of the product, and will want to see that “free-riders” do not interfere * * *.
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[C]omplaints about price-cutters ‘are natural — and from the manufacturer’s perspective, unavoidable — reactions by distributors to activities of their rivals.’ Such complaints, particularly where the manufacturer has imposed a costly set of nonprice restrictions, ‘arise in the normal course of business and do not indicate illegal concerted action.’ Moreover, distributors are an important source of information for manufacturers. In order to assure an efficient distribution system, manufacturers and distributors constantly must coordinate their activities to assure that their product will reach the consumer persuasively and efficiently. To bar a manufacturer from acting solely because the information upon which it acts originated as a price complaint would create an irrational dislocation in the market.”

Monsanto, supra, 104 S.Ct. at 1470. In light of this admonition, it would be anomo-lous to base a finding of concerted action on a marketing survey of local dealers initiated by a manufacturer.

CPI also attempts to develop its theory that the CL/HP contract signed on March 11,1982, was conditioned on the elimination of mail-order sellers. Three pieces of evidence are offered to prove this combination: (1) notes from a February 2, 1982, meeting between HP and CL representatives; (2) a conference call wherein the CL franchisees expressed concern about the mail-order dealers; and (3) the concurrent timing of the CL/HP contract and elimination of the mail-order dealers.

Robert W. Rogers, World-Wide Marketing Manager for the Personal Computation Group, represented HP at the February 2 meeting. His handwritten notes report statements made by Michael A. McConnell, President of the CL International Division. Mr. McConnell was reportedly “concern[ed]” that “custo[mers] are presold — [the] target for mail-order discount channels.” Unikel Deck, Exh. 8. His own notes of that meeting contain the cryptic phrase “Discounter/m/o.” Unikel Deck, Exh. 9. These two notations are the only evidence CPI has produced that mail order sellers were even discussed at the meeting. Rogers’ notes support the conclusion that CL was concerned its franchisees would presell HP customers who would then become a target for mail-order sellers. This is consistent with the testimony of all who attended the meeting. There is no evidence that CL expressed concern about the price at which mail-order dealers sold HP products. Concern about the “free riding” problem is a legitimate dealer complaint. Monsanto, supra, 104 S.Ct. at 1470.

On February 2, 1982, after meeting with HP, CL held a routine conference call with its franchisees. CPI again cites handwritten notes taken by CL representatives during the call. These references support the conclusion that CL franchisees expressed concern to their franchisor about mail-order sellers and discounting. There is no evidence, however, that these concerns were communicated to HP, the manufacturer. To infer a conspiracy from these isolated and ambiguous memoranda would be contrary to the recent holdings of both the Supreme Court and the Ninth Circuit. Monsanto, supra; Filco, supra, 709 F.2d at 1264.

Nor does the fact that HP changed its marketing policy three months after entering a contract with CL prove they had the requisite “conscious commitment to a common scheme designed to achieve an unlawful objective.” Monsanto, supra, 104 S.Ct. at 1471.

CPI contends that the Five Point Program recommended in June 1982 by the Task Force of HP’s Marketing Council was mere camouflage. It bases this conclusion, in part, on a March 26, 1982, memorandum from Mr. Rogers that proposed many of the same strategies. This memorandum documented strategies discussed during a meeting between Rogers and John J. Regan, National Sales Manager for the HP Personal Computation Group, on March 2, 1982. The only evidence CPI has produced to connect CL to the development of the Five Point Program is that Rogers and Regan met nine days before the CL/HP contract was signed on March 11, 1982. Speculation based on coincidence is insufficient to raise a material issue of fact.

More generally, CPI argues that HP was feeling “pressure” from its dealers and from CL. It finds evidence of this pressure in the “major reversal” of HP’s discount policy. The Stocking Incentive Policy (“SIP”) was introduced in September 1981. It provided a 28 percent base discount and a 30 percent discount for three units or more. In January 1982, the base rate was increased to 30 percent, the rate for four to nine units was increased to 33 percent and the rate for ten or more units was increased to 33 percent. Unikel Deck, Exh. 15. The Five Point Program replaced this scale with a flat 33 percent rate-for all dealers. This hardly constitutes a “major reversal” of the relatively new discount policy. Rather, it provides further evidence of HP’s intention to ameliorate any discrimination against local dealers inherent in its distribution programs. The development of the Five Point Program is well documented and has been thoroughly reviewed above. The “pressure” HP reacted to was the response of its dealers to the November survey, many of whom were concerned about HP policies which allowed mail order sellers to “free ride” on local dealers.

Finally, CPI contends that HP knew eliminating mail-order selling was not in its own best economic interest. It relies on two staff memoranda which refer to possible short-term losses from a rebaté program that HP did not adopt. The undisputed record shows that HP personal computer sales, through local dealers, in the latter half of 1981, were 40 percent higher than they were during the same period in the prior year.

HP has demonstrated that, beginning in 1981, it acted independently to develop a marketing strategy for its new line of personal computers. The new computers were designed to be used by inexperienced customers and required support services of a local dealer. The marketing program HP had developed when it . sold calculators and products designed for sophisticated customers disadvantaged local dealers and was inadequate. HP’s major competitors, such as Apple and IBM, had chosen to sell their new personal computers by local dealers rather than by mail order.

CPI has failed to produce “evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors acted independently.” Monsanto, supra, 104 S.Ct. at 1471. Viewed in a light most favorable to CPI, the evidence shows that HP and the local dealers were concerned about mail-order sellers. The concern demonstrated, however, was that mail-order sellers were taking advantage of and discouraging local dealers. The evidence also shows that the industry considered local dealer support essential to compete in the new personal computer market.

The record does not support a finding of illegal combination or conspiracy.

B. Sherman Act § 2: Monopolization.

CPI alleges violation of § 2 of the Sherman Act under two theories: defendants either conspired or attempted to monopolize the business and scientific computer market in the national market. Complaint at 1T1T19, 20.

As discussed above, CPI has failed to provide specific facts to support the allegations of conspiracy contained in the complaint. Thus, it cannot sustain a claim for violation of § 2 of the Sherman Act under a conspiracy to monopolize theory.

Attempted monopolization has three elements: (1) a specific intent to control prices or destroy competition in the relevant market; (2) predatory or anticompetitive conduct directed to accomplishing this unlawful purpose; and (3) a dangerous probability of success. Cascade Cabinet Co. v. Western Cabinet & Millwork, Inc., 710 F.2d 1366, 1373 (9th Cir.1983). CPI contends it has offered sufficient proof of anticompetitive conduct for the Court to infer the existence of the other two elements. Specific intent to monopolize and a dangerous probability of success may be inferred from certain types of conduct. However, the plaintiff must produce evidence of “ ‘conduct amounting to a substantial claim of restraint of trade or conduct clearly threatening to competition or clearly exclusionary.’ * * * [E]ven if the challenged practice could satisfy the conduct element of attempted monopolization, it cannot supply an inference of the other two elements.” Id. at 1374, quoting William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 668 F.2d 1014, 1030 (9th Cir.1981) (footnote omitted), cert. denied, 459 U.S. 825, 103 S.Ct. 57, 74 L.Ed.2d 61 (1982).

The relationship between HP as a manufacturer and CPI as its distributor is vertical. Vertical restraints are ordinarily subject to rule of reason analysis. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 51 n. 18, 97 S.Ct. 2549, 2558 n. 18, 53 L.Ed.2d 568 (1977). CPI argues that a stricter standard of review is appropriate because the alleged conduct constitutes a per se violation. It attempts to characterize HP’s conduct as price fixing, group boycott and resale price maintenance. The evidence does not support an allegation under any of these theories.

The Third Circuit has recognized that termination of a distributor by a manufacturer in response to complaints from other dealers about the terminated distributor’s prices may amount to a per se violation of the Sherman Act. Cernuto, Inc. v. United Cabinet Corp., 595 F.2d 164 (3d Cir.1979). The Ninth Circuit noted this reasoning but rejected its application in the absence of an allegation that the complaining dealer was “seeking to eliminate price competition.” JBL Enterprises, Inc. v. Jhirmack Enterprises, Inc., 698 F.2d 1011, 1015 (9th Cir.1983), cert. denied, — U.S. -, 104 S.Ct. 106, 78 L.Ed.2d 109 (1983). As discussed above, CPI has failed to rebut evidence showing that the new distribution strategy, emphasizing local rather than mail-order dealers, was initiated by HP in response to market conditions rather than to dealer complaints. Comments made to an HP sales representative or in response to a questionnaire sent by HP are the only evidence of dealer “complaints”. This conduct was explicitly sanctioned in Monsanto and cannot be the basis of a per se violation.

A concerted refusal to deal with a particular dealer, commonly referred to as a “group boycott,” also triggers per se analysis. See e.g., Fashion Originators’ Guild of America, Inc. v. FTC, 312 U.S. 457, 61 S.Ct. 703, 85 L.Ed. 949 (1941). The Court is urged to apply this doctrine to the instant case. However, CPI has failed to produce any viable evidence that HP and CL or its franchisees acted in concert. The cryptic notes of meetings and a phone conference do not demonstrate agreement, much less an agreement to boycott CPI or other mail-order sellers. Moreover, the per se rule is generally not applied when the alleged refusal to deal is vertical rather than horizontal. Fine v. Barry and Enright Productions, 731 F.2d 1394, 1398-1399 (9th Cir.1984); Cascade Cabinet, supra at 1371.

Nor does the evidence support an allegation of a per se violation under a resale price maintenance theory. Termination or the threat of termination may be unlawful if it coerces a dealer to adhere to a fixed price. Knutson v. Daily Review, Inc., 548 F.2d 795, 804-805 (9th Cir.1976) cert. denied, 433 U.S. 910, 97 S.Ct. 2977, 53 L.Ed.2d 1094 (1977). Although CPI alleges that it was terminated because it offered HP products at discount prices, the evidence it relies on to show coercion directly contradicts this conclusion. John J. Regan, National Sales Manager of the HP Personal Computation Group, explained the new program in a July 26, 1982, letter to Olympic Sales Co., Inc.: “The most important point I want to clarify is this: All of our dealers continue to be free to determine their own retail selling prices and to show those prices in their advertising.” Plf.Exh. 203 at A01791-A01792.

Having failed to provide sufficient evidence of conduct constituting a per se violation of § 1, CPI must establish a substantial restraint under the Rule of Reason in order to infer the specific intent required to proceed with its claim of attempted monopolization. An unreasonable restraint under the Sherman Act has two elements: (1) intent to harm or unreasonably restrain competition; and (2) actual injury to competition. Fine, supra, 731 F.2d at 1399; Cascade Cabinet, supra, 710 F.2d at 1373.

“[IJnjury to the antitrust plaintiff alone is not sufficient to prove injury to competition.” Robert’s Waikiki U-Drive Inc. v. Budget Rent-A-Car Systems, Inc., 732 F.2d 1403, 1408 (9th Cir.1984). To allege such injury, a plaintiff must begin by defining the relevant market. Kaplan v. Burroughs Corp., 611 F.2d 286, 291 (9th Cir.1979), cert. denied, 447 U.S. 924, 100 S.Ct. 3016, 65 L.Ed.2d 1116 (1980).

' A “relevant market” is defined by “the product involved, the geographical limits within which it functions and the appropriate time frame.” General Business Systems, supra, 699 F.2d at 972. The only disputed element in this case is the product involved. HP defines the relevant market as the entire personal computer market. CPI contends that the relevant market is the technical/professional sub-market.

The standards for defining product markets and submarkets were set forth in Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 1523-24, 8 L.Ed.2d 510 (1961):

The outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it. However, within this broad market, well-defined submarkets may exist which, in themselves, constitute product markets for antitrust purposes. United States v. E.I. du Pont de Nemours & Co., 353 U.S. 586, 593-595 [77 S.Ct. 872, 877-878, 1 L.Ed.2d 1057]. The boundaries of such a submarket may be determined by examining such practical indicia as industry or public recognition of the submarket as a separate economic entity, the product’s peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors.

CPI’s definition of the technical/prof es-sional submarket is primarily based on a study of the personal computer industry conducted by Data Quest, an industry research organization. A June 1981 Data Quest report defines a personal computer as a “computer with a list price of between $200 and $5000 that is used by the individual for personal applications.” The report lists five different applications or uses for the personal computer: business, technical/professional, education, hobby, and home. HP sold 39 percent of the personal computers identified by Data Quest as the “technical/professional segment.” This segment is defined as “use' of personal computer for computer assisted problem-solving, or engineering design by individuals.” Plf.Exh. 117.

It is clear from its definitions that the Data Quest report analyzes the market for one product — personal computers. The market is broken down into groups designated by customer application. CPI relies on this evidence to establish a technical/professional submarket but it has failed to produce evidence of the practical indicia required by Brown. For example, it has offered no evidence that the technical/professional products have peculiar characteristics or are produced at unique facilities. Although the market is segmented by application, no evidence has been offered that, customers in the various categories are distinct. The only evidence about price is the testimony of CPI’s President David Stihler that professional/engineering customers had no interest in comparatively inexpensive computers and that customers in the various markets were relatively insensitive to price changes. This vague and conclusory testimony is insufficient to establish a well-defined submarket on summary judgment. Casey v. Diet Center, 590 F.Supp. 1561 (N.D.Cal.1984). There is nothing to rebut the evidence offered by HP that personal computers are reasonably interchangeable.

In the absence of competent evidence of a technical/professional submarket, the Court must consider the entire personal computer market to be the relevant product market. During 1982, HP had a 3.6 percent share of that market, measured in terms of units sold, and a 5.8 percent share, measured in terms of dollars earned. Neither of these shares gives HP sufficient power to influence competition in the personal computer market as a matter of law.

II. Robinson-Patman Act § 2(a): Price Discrimination.

Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(a), prohibits illegal price discrimination. Klamath-Lake Pharmaceutical Association v. Klamath Medical Service Bureau, 701 F.2d 1276 (9th Cir.1983), cert. denied, — U.S. -, 104 S.Ct. 88, 78 L.Ed.2d 96 (1984). It is undisputed that HP agreed to sell products to CL at 40 percent below list price while it sold to CPI at 35 percent below list. However, to establish a Robinson-Patman violation, CPI must prove that this discrimination had an adverse effect on competition. William Inglis, supra, 668 F.2d at 1040. CPI has failed to produce evidence of competitive injury.

CL functions as a wholesaler. It purchases computer products and accessories from a manufacturer and resells those products to its franchisees. CL franchisees sell the products at retail. HP agreed to sell its products to CL at 40 percent below list price. The CL franchise contract allows franchisees to buy HP products at 40 percent below list but obligates them to pay an additional 8 percent of their gross sales as a royalty fee and .5 percent toward a national advertising fund. The undisputed evidence shows that CL franchisees effectively paid between 31.5 percent and 33 percent off list price for HP products while CPI bought HP products for 35 percent off list price.

CPI urges the Court to compare the 40 percent discount given to CL with the 35 percent discount it received. It is the CL franchisees, however, who were competitors of CPI. Had CL merely passed along the 40 percent discount and not charged its franchisees the 8 percent royalty, there would be evidence of competitive injury. Perkins v. Standard Oil Co. of California, 395 U.S. 642, 648, 89 S.Ct. 1871, 1874, 23 L.Ed.2d 599 (1969). This record, however, will only support one conclusion. The price advantage was not passed along; there was no competitive injury.

III. State Claims.

CPI alleges three pendent state claims: promissory or equitable estoppel, tortious interference with business relations, and tortious interference with contractual relations.

1. Estoppel.

In count IV, CPI claims that HP is es-topped by prior promises to deny CPI new models of HP personal computers. However, the written Dealer Agreement, signed by CPI’s President David Stihler in November 1981, expressly allowed HP to market products without making them available to the dealer. CPI contends that this contract was not a fully integrated contract. It argues that the mail order arrangement with HP was based on a prior consistent oral agreement. This argument falls of its own weight.

The Dealer Agreement has an express integration clause. Antecedent understandings and parol evidence are not admissible to alter the terms of an unambiguous integrated contract. Golden Gate Acceptance Corp. v. General Motors Corp., 597 F.2d 676, 680 (9th Cir.1979); Cal.Com.Code § 2202; Cal.Code Civ.Pro. § 1856(a).

2. Tortious Interference with Business Relations.

CPI pleads this cause of action by incorporating paragraphs from the antitrust and estoppel counts. Thus, it is clearly based on the same conduct. The refusal of HP to supply CPI with its new computers allegedly interfered with relations between CPI and its customers. As discussed above, HP exercised its express right under the written Dealer Agreement when it decided to distribute the new models only to local dealers. The exercise of a contractual right cannot be the basis for a claim of tortious interference. Lawless v. Brotherhood of Painters, Decorators & Paperhangers of America, 143 Cal.App.2d 474, 478, 300 P.2d 159 (1956).

3. Tortious Interference with Contractual Relations.

In Count VI, CPI claims that CL “intentionally and maliciously induced HP to breach and terminate its contractual and ongoing business relationship with CPI.” Complaint at ¶ 40. There has been no attempt to brief this issue. It is obviously based on the conduct alleged in the Sherman Act counts. CPI has failed to produce competent evidence that CL induced HP to take any action which affected CPI.

Accordingly, IT IS HEREBY ORDERED that summary judgment is granted on all claims.

      . The Monsanto court reaffirmed earlier: "A manufacturer of course has the right to deal or refuse to deal with whomever it likes, as long as it does so independently.” Monsanto v. Spray-Rite Service Corp., — U.S. -, 104 S.Ct. 1464, 1469, 79 L.Ed.2d 775, citing United States v. Colgate & Co., 250 U.S. 300, 307, 39 S.Ct. 465, 468, 63 L.Ed. 992 (1919).

      . CPI received discounts on all its personal computer purchases in the first quarter of 1982. Ninety-five per cent of the promotional fund it received from HP was used to finance national advertising; only five per cent was used for local advertising.

      . In some instances, the profit margin of local dealers was as low as 3.8 percent before deducting support costs and other overhead expenses.

      . Paragraph 4(b) of the Dealer Terms and Conditions of Sale Section of the Dealer Agreement provides in relevant part:
      "Dealer understands and agrees that HP may market other products, including products in competition with the computing or accessory products listed on the enclosed Product Exhibits or in addition to the computing or accessory products listed on the enclosed Exhibits without making such computing or accessory products available to Dealer.”
      Ebe Deck, Exh. 2.

      . The "complaints" were described in the following testimony:
      "Q. At that time, did you have any discussions with any HP dealer who complained to you that he had demonstrated an HP personal computer and then that computer was sold by a mail order dealer or other HP dealer at a lower price?
      Mr. Ebe: Counsel, I have to object. We discussed yesterday you used the word ‘complaint.’ There's no testimony about any complaints, and that’s a problematic word for the legal reasons.
      Mr. Unikel: Q. Had you had any conversations with any HP dealer who expressed to you any dissatisfaction about having demonstrated an HP computer, personal computer to a customer and then that customer purchased a personal computer from a mail order seller or other HP dealer that discounted that product?
      A. There were conversations relative to making the demonstration and losing the sale to mail order companies.”
      Podares Depo., p. 89, 11. 4-21, attached to Unikel Decl.

      . The summary states at ¶ 3A of Survey Observations:
      The HP-85 is being discounted so heavily that the net margin is not profitable to the majority of dealers. Dealers have lost all incentive to promote our products. The few good dealers we have are seriously debating dropping our line."
      Unikel Deck, Exh. 4, p. C02995.

      . In its brief, CPI argues that Al Oliverio, who "did most of the talking for HP” at the meeting, "understood” one of CL's requirements was elimination of mail-order sellers. Again, the deposition testimony relied on by CPI belies this interpretation.
      "Q. Did you receive any response from any of the Hewlett Packard personnel in connection with your statements about margins, that the problem had always been margins? Did anybody respond to that?
      A. To the best of my recollection, I believe that Al Olvierio let me know that he understood our concerns, or our needs. I considered that a very positive statement, but that’s as far as we went in that meeting.”
      McConnell Depo., p. 60, 1. 25 — p. 61, 1. 4, attached to Carr Deck
      "Q. Prior to Mr. Oliverio’s making that statement to you, that he understood what your requirements were, did you tell him that one of ComputerLand Corp.’s requirements was that HP take some action with regard to its mail order dealers?
      A. No.”

        Id. at p. 69, 11. 19-24.
      "Q. Do you recall, when Mr. Oliverio said to you, ‘I understand your requirements,’ at what point in the meeting that statement was made on February 2 of 1982?
      A. First of all, I’m not sure that that was a direct quote. My recollection is that it was early on in the meeting. I couldn’t be certain of that. And I know that either in the way he said it or the words he used, I felt he was referring to margin.”
      Q. And before he said it, did you say words to him to the effect that ‘Computerland Corp. would not do business with Hewlett Packard unless it took some action with regard to its HP dealers who sold by mail order’?
      A. No I would never have said that and did never say that. That wasn’t true.”

        Id. at p. 102, 1. 23—p. 103, 1. 8.

      . The only theory argued in opposition to defendants’ motion is attempted monopolization.

      . "[I]n general, conduct that will support a claim of attempted monopolization must be such that its anticipated benefits were dependent upon its tendency to discipline or eliminate competition and thereby enhance the firm’s long-term ability to reap the benefits of monopoly power.” William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 668 F.2d 1014, 1030 (9th Cir.1981), cert. denied, [459 U.S. 825], 103 S.Ct. 57 [74 L.Ed.2d 61] (1982).’’

      . Market definition is an essential element of a § 1 violation under the rule of reason. Such evidence is also required in an attempted monopolization claim where the plaintiff seeks to infer specific intent and a dangerous probability of success from anticompetitive conduct that does not constitute a per se violation. California Computer Products Inc. v. International Business Machines Corp., 613 F.2d 727, 737 n. 10 (9th Cir.1979). While technically complete proof of market power is not required where direct proof of these elements is offered, Greyhound Computer Corp. v. International Business Machines Corp., 559 F.2d 488, 504 (9th Cir.1977), cert. denied, 434 U.S. 1040, 98 S.Ct. 782, 54 L.Ed.2d 790 (1978), some evidence establishing the relevant market is essential to an evaluation of the specific intent to control prices and eliminate competition alleged by CPI. M.A.P. Oil Co. v. Texaco, Inc., 691 F.2d 1303 (9th Cir.1982).

      . CPI pleaded the relevant product market as' “business and scientific computer.” Complaint at ¶¶ 19 and 20. Defendants argue that redefinition of this market as "technical/professional" is improper and that plaintiff is bound to its pleading by Federal Rule of Civil Procedure 11. This rule requires a reasonable inquiry into the facts underlying allegations; it does not increase the requirements of Rule 8. The Court finds this pleading sufficient to notify the defendants of the claims now argued.

      .The summary of the November 1981 dealer survey, heavily relied on by CPI, supports the conclusion that one product, the HP-85, was broken down into several customer markets. Plf. Exh. 5, at C02301. CPI’s description of HP’s product line and method of distribution reinforces this conclusion.
      "The HP-85 is a microcomputer, commonly referred to as a ‘personal computer.' It is an integrated, self-contained unit in the sense that it had a built-in memory, a built-in printer and a built-in monitor (television screen). The HP-85 was sold to all who sought to purchase it (and who could pay for it); but it was bought primarily by engineers and scientists who had some prior experience with computers. When first introduced, the HP-85 carried an HP suggested list price of approximately $3,250.00."
      Appendix of Facts, p. 4, 11. 9-17.

      . The Appendix of Facts, quoted in note 12, supra, supports the conclusion that there was a unitary list price for the HP-85, regardless of customer application.

      . CPI has offered similar evidence from the HP dealer survey summary. 57.6 percent of.the dealers surveyed stated that price was not important to the technical/professional customer. Again, the summary only reflects responses to one product, the HP-85. Plf. Exh. 5 at C02301.

      . CPI originally alleged violations of the Robinson-Patman Act by discrimination in “credit allowances,” “advertising allowances," "preferential shipments” and "other discounts, allowances and opportunities.” Complaint at ¶ 24. Only the price discrimination claim is pressed in opposition to summary judgment.

      . See n. 4, supra.

      .Paragraph 12(d) provides in relevant part:
      "[T]his Agreement and the attached Exhibits contain the entire and only understanding between the parties relating to the subject matter hereof * * *. [N]o modification hereof shall be binding upon either party unless made in writing and signed by both parties.”
      Ebe Decl., Exh. 2.


source: Caselaw Access Project

author: ENSLEN, District Judge.

license: Public Domain

text:
    Elbert E. ROSS and Beatrice M. Ross, Plaintiffs, v. OMNIBUSCH, INC., a foreign corporation; R.E. Busch d/b/a Dr. R.E. Busch, Dr. R.E. Busch Research Institute and Chicago Grain & Financial Futures, a foreign corporation, formerly Chicago Grain Company, Defendants.
    No. K 84-72.
    United States District Court, W.D. Michigan, S.D.
    Nov. 9, 1984.

      Barry Crown, Lansing, Mich., John Dol-kert, Chicago, Ill., for plaintiffs.
    Thomas Luning, Chicago, Ill., Grant Gruel, Grand Rapids, Mich., for defendants.
   OPINION

ENSLEN, District Judge.

On October 22, 1984, the Court ruled from the Bench concerning several bases for dismissal or transfer raised by the Defendants in their Motion to Dismiss and their reply to Plaintiffs’ response. The Court reserved for written Opinion those grounds Defendants assert in their motion for dismissing Count 7 of Plaintiffs’ Complaint. This Opinion now addresses those grounds.

Count 7 alleges a violation of the Racketeering Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968. In their Motion to Dismiss, filed May 7, 1984, and their reply memorandum filed September 17, 1984, Defendants assert five bases for dismissing Count 7. These are, first, that Count 7 fails to allege fraud with the particularity required by Federal Rule of Civil Procedure (F.R.C.P.) 9(b); second, that Plaintiffs fail to allege an enterprise pursuant to 18 U.S.C. § 1962(c) and § 1961(4) which is separate from the Defendants and the pattern of racketeering; third, that Plaintiffs fail to assert the racketeering injury they argue is required by 18 U.S.C. § 1964(c); fourth, that no civil RICO action lies where there has been no criminal conviction of the, predicate acts that constitute the pattern of racketeering activities; and fifth, that no civil RICO action can survive without an allegation of organized crime’s involvement. The Court will address each of these seriatum.

Standard

In reviewing the instant motion, the Court’s inquiry at this point of the proceedings is limited to whether or not the challenged pleadings set forth allegations sufficient to make out the elements of a right to relief. In making this determination, all allegations in the pleadings are to be taken at “face value” and should be construed in a light most favorable to the pleader. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); California Motor Transport Company v. Trucking Unlimited, 404 U.S. 508, 515, 92 S.Ct. 609, 614, 30 L.Ed.2d 642 (1972). As stated by the Court of Appeals for the Sixth Circuit: “Well pleaded facts are taken as true, and the complaint is construed liberally in favor of the party opposing the motion.” Davis H. Elliot Co., Inc. v. Caribbean Utilities Company, 513 F.2d 1176, 1182 (CA6 1975). All reasonable inferences which might be drawn from the pleadings must be indulged. Fitzke v. Shappel, 486 F.2d 1072, 1076 n. 6 (CA6 1972). No Complaint should be dismissed for failure to state a claim unless it appears that Plaintiffs can prove no set of facts in support of their claim which would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957).

Fraud

The Court’s October 22, 1984, oral ruling is dispositive of Defendants’ argument that Plaintiffs fail to specifically plead fraud. Plaintiffs allege in Count 7 that Defendants violated RICO by using the mails two or more times in furtherance of their scheme to cheat and defraud them. Plaintiffs do not specify in Count 7 those facts which support their “scheme and defraud” allegation. However, in 111110 and 11, and in Counts 1 and 2, Plaintiffs set out the basic facts of their fraud allegations. In its oral Opinion, the Court held these to meet the requirements of F.R.C.P. 9(b) pursuant to Hagstrom v. Breutman, 572 F.Supp. 692, 697 (DC Ill 1983). These factual allegations, together with the entire rest of the Complaint, are incorporated into Count 7 by ¶ 41. Therefore, Count 7 meets the requirements of F.R.C.P. 9(b) and Defendants’ Motion to Dismiss on this ground is denied.

Enterprise

18 U.S.C. § 1962(c) provides:

It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.

18 U.S.C. § 1961 defines “enterprise”, among other terms contained in 18 U.S.C. § 1962(c):

“Enterprise” includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact, although not a legal entity. 18 U.S.C. § 1961(4).

The existence of an enterprise is one of the elements which a plaintiff must prove to establish a RICO violation. Bennett v. Berg, 685 F.2d 1053, 1060 (CA8 1982). U.S. v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 2528, 69 L.Ed.2d 246 (1981).

Defendants make two arguments concerning Plaintiffs’ asserted failure to sufficiently allege the enterprise element. In their first, Defendants rely principally on Bennett, supra, and assert that Plaintiffs must allege an enterprise distinct from the Defendants but have not done so. Defendants misstate the holding in Bennett, supra. The Court of Appeals did not hold that an enterprise cannot be a defendant, but rather that an enterprise must be alleged apart from the culpable “person” who “associated with” it for racketeering purposes. Bennett, supra at 1061. As the court in Van Schaick v. Church of Scientology, 535 F.Supp. 1125, 1136 (DC Mass 1982) stated, RICO

quite clearly envisions a relationship between a “person” and an “enterprise” as an element of the offense which 1962(c) proscribes for which 1964(c) would subject the “person” to treble damages.

Therefore, while the RICO enterprise may be a named defendant, one or more of the Defendants must be the “person” who acts upon the enterprise in such a way that the enterprise's affairs are conducted in the pattern of racketeering. Bennett, supra at 1061.

Here, Plaintiffs have asserted and incorporated into Count 7, allegations that Defendant R.E. Busch acted as the agent of both Defendant Omnibusch and Defendant Chicago Grain. In addition, Plaintiffs assert that Defendant Omnibusch acted as agent of Defendant Chicago Grain. Both Omnibusch and Chicago Grain, as corporations, fall within the definition of an enterprise. 18 U.S.C. § 1961(4). Both Omnibusch and R.E. Busch meet the definition of “person” since both are entities “capable of holding a legal or beneficial interest in property”. 18 U.S.C. § 1961(3). The agency relationships which are asserted to exist between these Defendants are sufficient to indicate that Defendant R.E. Busch and/or Defendant Omnibusch may be the persons who acted upon the enterprises of Defendant Omnibusch and/or Defendant Chicago Grain. Therefore, I am unable to find that Plaintiffs can prove no set of facts which would establish an enterprise distinct from a culpable person. Plaintiffs would be free at trial, of course, to develop facts which would establish other “persons” or “enterprises” as defined by RICO.

Defendants’ second argument concerning the enterprise element asserts that Plaintiffs have failed to allege an enterprise distinct from the pattern of racketeering activity. 18 U.S.C. § 1961(5) defines a pattern of racketeering activity as at least two acts of racketeering activity which occur within 10 years of each other. A pattern of racketeering is a distinct element of a RICO claim which must be proven, and is not synonomous with the enterprise which also must be proven. The Supreme Court in U.S. v. Turkette, supra, explained the relationship between these two elements:

[An enterprise] is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit. [A pattern of racketeering activity] is proved by evidence of the requisite number of acts of racketeering committed by the participants in the enterprise. While the proof used to establish the separate elements may in particular cases coalese, proof of one does not necessarily establish the other. The “enterprise” is not the “pattern of racketeering activity; it is an entity separate and apart from the pattern of activity in which it engages. The existence of an enterprise at all times remains a separate element which must be proved. U.S. v. Turkette, at 583, 101 S.Ct. at 2528.

Plaintiffs allege in ¶¶ 42 and 43 that Defendants employed the US Postal Service mail and communications by wire two or more times thereby violating 18 U.S.C. §§ 1341, 1343 and 1962(c). Plaintiffs thus adequately plead a pattern of racketeering activity. They make no attempt to equate this pattern as synonomous with the enterprises of Defendant Omnibusch and/or Defendant Chicago Grain. I find, therefore, that Plaintiffs have alleged an enterprise or enterprises sufficiently distinct from the pattern of racketeering activity which they assert. For these reasons, Defendants’ Motion to Dismiss on the ground that Plaintiffs failed to sufficiently allege an enterprise is denied.

RICO Injury

As their third basis for dismissal, Defendants maintain that Plaintiffs must allege an injury which results from a pattern of racketeering activity, not merely those injuries which result from the sepa rate acts composing the pattern. In RICO parlance, these separate acts are known as “predicate acts”, and an injury resulting from a pattern of racketeering activity as a “racketeering injury”.

In making this argument, Defendants are in respected company. Both Defendants and Plaintiffs have supplied the Court with copies of recently issued but still unpublished opinions on this issue, and the Court is grateful for the instruction which these cases provide. The recently issued Second Circuit Court of Appeals’ trilogy supports Defendants’ argument. Sedima v. Imrex, 741 F.2d 482 (CA2 1984); Bankers Trust v. Rhoades, 741 F.2d 511 (CA2 1984); Furman v. Cirito, 741 F.2d 524 (CA2 1984). However, Haroco v. American National Bank and Trust Company of Chicago, 747 F.2d 384 (CA7 1984), does not, and is strongly critical of the Second Circuit trilogy.

18 U.S.C. § 1964(c) requires that a RICO plaintiff be injured “by reason of a violation of § 1962.” District courts are split concerning whether this requires injury due to the predicate acts or something more, a “racketeering injury”. Haroco, supra, collects these cases at pages 387-388, footnotes 3 and 4. As the Haroco court notes, there does not seem to be a clear majority on one side or the other. In addition, the Circuit Courts of Appeals are also divided and the Haroco court also collects these cases at page 388, footnotes 5 and 6.

The Sixth Circuit Court of Appeals has not addressed this issue and no published opinions from the Western District of Michigan were cited by the parties or found by the Court. Therefore, this Court is free to chose that side of the issue which it finds most compelling and reasonable.

The Court has carefully read the cases cited and provided by both Plaintiffs and Defendants. Based on its thorough review of these authorities, the Court determines that Haroco, supra, and the dissenting opinions in Sedima, supra, and Bankers Trust, supra, and the views of the majority in Furman, supra, which re-luetantly followed the precedents of Sedi-ma, supra, and Bankers Trust, supra, state the rule which best affectuates the congressional policy behind the enactment of RICO. Therefore, this Court finds that Plaintiffs sufficiently allege injury pursuant to RICO when they allege injury as the result of the predicate acts that comprise the pattern of racketeering activity. Here, Plaintiffs have done so by alleging injury which resulted from violations of 18 U.S.C. §§ 1341, 1343 and 1962(c).

The court in Sedima, supra, in limiting RICO civil actions to those cases involving racketeering injury, noted that the purpose of RICO is to combat organized crime. Through an examination of RICO’s legislative history and language analogous to RICO’s “by reason of” phrase found in the Clayton Act, the Sedima court arrived at the conclusion that because RICO’s purpose is to combat organized crime, its available civil remedies should be limited to that activity which RICO was intended to deter. Thus, the Sedima court theorized that the injury due to such activity is different than that caused by simply predicate acts. At 496. The Court imposed the standing requirement that a plaintiff must allege and show a racketeéring injury. It felt such a standard requirement would best meet the purpose of the Act without fostering a further “explosion of civil RICO litigation”, at 486, or suits against “such respected and legitimate ‘enterprises’ as the American Express Company, E.F. Hutton and Company, Lloyds of London, Bear Stearns and Company, and Merrill Lynch,” at 487.

The Sedima court did not more specifically define racketeering injury than to state that it is “an injury different in kind from that occurring as a result of the predicate acts themselves, or not simply caused by the predicate acts, but also caused by activity which RICO was designed to deter.” At 496. The court in Bankers Trust, supra, was no more specific concerning the definition of the racketeering injury, and found none existed even in view of the defendants’ outrageous shifting of vast assets from one company to another to avoid a debt, litigation of numerous frivolous suits against plaintiffs in several forums, and bribery of a state court judge.

In determining that Haroco, supra, and the Second Circuit dissent state the best rule, the Court finds persuasive the Haroco court’s discussion of the Second Circuit trilogy, and the congressional intent and policy:

It is true that the legislative history includes relatively little material on RICO’s private civil remedy, see Sedima, S.P.R.L. v. Imrex Company, [741 F.2d 482 (1984)] at 492 (“clanging silence of the legislative history”), but it is also clear that Congress deliberately chose the very broad language of RICO’s provisions. Both the proponents and the opponents of RICO recognized the extraordinary breadth of its terms. The opponents argued that the breadth of the statute might chill civil liberties, and the proponents of RICO defended the broad terms on the grounds that narrower terms would provide loopholes through which the primary targets of RICO might escape. Indeed, the unifying threat of RICO’s legislative development was a desire to avoid creating loopholes for clever defendants and their lawyers. “In short, Congress chose to provide civil remedies for an enormous variety of conduct, balancing the need to redress a broad social ill against the virtues of tight, but possibly overly astringent, legislative draftsmanship.” Schacht [v. Brown], 711 F.2d [1343 (7th Cir.1983) ] at 1354-55. As we said more recently in response to a similar challenge:
But Congress deliberately cast the net of liability wide, being more concerned to avoid opening loopholes through which the minions of organized crime might crawl to freedom than to avoid making garden variety frauds actionable in federal treble damage proceedings — the price of eliminating all possible loopholes.
Sutliff, Inc. v. Donovan Cos, supra, 727 F.2d [648] at 654 [7th Cir.1984]. See Moss v. Morgan Stanley, Inc., supra, 719 F.2d [5] at 21 [2d Cir.1983] (it is not the judiciary’s role to reassess Congress’s balance of costs and benefits of RICO).
In addition, even if Congress had meant to leave the door open to narrower judicial interpretations of the statute, we said in Schacht that many of the provisions of RICO are so broad that “there is simply no legitimate principled criterion, for accomplishing that task. 711 F.2d at 1356. For example, since Congress itself rejected any attempts to employ the concept of “organized crime” in any colloquial sense in the language of RICO, the courts have thoroughly repudiated the contention that the civil provisions of RICO apply only to organized crime. See Schacht, supra, 711 F.2d at 1353-54; Alcorn County [v. U.S. Interstate Supplies, Inc.] supra, 731 F.2d [1160] at 1167 [5th Cir.1984]; Moss v. Morgan Stanley, Inc., supra, 719 F.2d at 21 & n. 17; Bennett v. Berg, supra, 685 F.2d [1053] at 1063 [8th Cir.1982]; Cenco, Inc. v. Seidman & Seidman, 686 F.2d 449, 457 (7th Cir), cert. den., 459 U.S. 880 [103 S.Ct. 177, 74 L.Ed.2d 145] (1982). And without reviving the discredited “organized crime” approach, the other deliberately broad terms of RICO, such as “person,” “enterprise,” “conduct,” and “participate,” offer few toeholds for courts seeking to narrow RICO’s application. Haroco, supra, at 390-391. (footnotes omitted)

The Haroco court additionally noted that “it appears Sedima has revived the discredited ‘organized crime nexis’ requirement without quite saying so”, at 394, and that “Sedima accurately describes Congress’ central purpose in passing RICO, but the application of RICO has never been limited to those purposes,” at 395.

For these reasons, Defendants’ Motion to Dismiss on this ground is denied.

Criminal Conviction of Predicate Acts

In Defendants’ fourth ground for dismissal, they argue that there can be no civil RICO violation where there is no criminal conviction for the predicate acts. The Sixth Circuit has dispositively ruled on this issue in USACO Coal v. Carbomin Energy, 689 F.2d 94 (1982). The court stated:

The defendants have not been subjected to any criminal proceedings under RICO for the acts complained of by the Plaintiffs. We are of the opinion that 18 USC § 1964(c) creates a private right of action for parties injured by conduct that violates 18 USC § 1962 without any requirement of a prior criminal conviction for that conduct. USACO Coal, supra, at 95, n. 1.
Accordingly, Defendants’ Motion to Dismiss on this basis is denied.

Link to Organized Crime

Defendants finally assert that where no allegation is made of organized crime’s involvement, no civil RICO action will lie. As stated by the court in Haroco, supra, this is a position which has been soundly rejected by a majority of the Courts which have considered it. At 391. Defendants’ Motion to Dismiss on this ground is denied.


author: BUA, District Judge.

text:
    Michael F. POWERS, Plaintiff, v. Elizabeth H. DOLE, Secretary of U.S. Department of Transportation, Defendant.
    No. 84 C 3790.
    United States District Court, N.D. Illinois, E.D.
    Nov. 20, 1984.
    Raymond J. Bylinski, Chicago, Ill., for plaintiff.
    Dan K. Webb, U.S. Atty. by Elizabeth Landes, Asst. U.S. Atty., Chicago, Ill., for defendant.
   MEMORANDUM AND ORDER

BUA, District Judge.

Before the Court are cross-motions for summary judgment in a reverse discrimination case. The plaintiff, Michael Powers, is an employee of the Federal Aviation Administration (FAA) of the United States Department of Transportation (DOT). The defendant, Elizabeth H. Dole, is the Secretary of the DOT. For the reasons stated herein, defendant’s motion is granted and plaintiff’s motion is denied.

I. FACTS

Michael Powers has been employed by the FAA continuously since August 30, 1981. During 1981, Powers participated in the FAA Academy’s training program for air traffic controllers. He was notified on December 14, 1981, that he had failed Phase IV of the training program. He was thereafter assigned to another position within the FAA at a lower rate of pay.

On December 30, 1981, Powers filed a formal grievance within the FAA alleging that he had failed the training program for air traffic controllers because his training class had received inadequate instruction. He requested that he be “recycled,” i.e., permitted to undergo air traffic controller training again.

On February 23, 1982, the FAA grievance examiner responsible for the initial review of Powers’ grievance, Elmer Loud-ermilk, recommended that Powers’ request for recycling be granted. Kenneth C. Patterson, the grievance official to whom the grievance examiner submitted his recommendation in accordance with the FAA’s grievance procedures, rejected the examiner’s recommendation and concluded that Powers’ grievance should be denied. In an affidavit submitted in support of defendant’s motion for summary judgment, Patterson stated that he found insufficient evidence to substantiate Powers’ claim of inadequate instruction. In addition, he stated that he did not base his decision on the fact that Powers is a white male.

Paul K. Bohr, Director of the Great Lakes Region of the FAA, subsequently reviewed Powers’ grievance pursuant to FAA grievance procedures and concluded that it should be denied. In his affidavit, Bohr stated that he found no merit in Powers’ claim that inadequate instruction was the cause of his training failure. In addition, he stated that he did not base his decision on the fact that Powers is a white male. In response to Powers’ letter of May 19,1982 challenging his decision, Bohr denied Powers’ request for reconsideration of his grievance in a letter dated June 23, 1982.

On May 18, 1982, the day before he wrote to Bohr requesting reconsideration of his grievance, Powers lodged an informal discrimination complaint with Henry T. Rogers, the Equal Employment Opportunity Counselor for the DOT in Chicago. On June 29, 1982, Powers timely filed a formal complaint of discrimination with the FAA. He cited as the basis for his discrimination complaint the “[ijmproper and unfair handling of an FAA Agency Grievance_” In addition, he alleged: “Minorities that show good reason to be recycled are given the opportunity. It appears, that in this case there is good reason, and I am being denied the right to be recycled because I am a white male, rather than part of a minority group.”

On April 6, 1984, the DOT issued its finding of no discrimination in Power?’ case. On May 1, 1984, Powers filed his complaint in this case, alleging that the defendant discriminated against him because of his “race (white) and sex (male) in that minorities and females who show cause to be recycled through the Federal Aviation Administration Academy are so recycled, although he having shown cause to be recycled was not.”

Supported by affidavits of defendant’s employees, FAA records reveal that eleven individuals who failed the FAA air traffic controller training program filed FAA grievances seeking recycling during 1980 through 1983. Only one of those eleven was recycled. The one individual who was recycled through the grievance procedure was a nonminority male.

In addition, individuals who feel they have been discriminated against in the course of their training for air traffic controllers’ positions may file discrimination complaints. According to regional FAA records, from 1980 through December 11, 1981, seven individuals who filed successful complaints of discrimination with the Great Lakes Region of the FAA were recycled through the training program. Of those seven, six were black females and one was a white female. During the same period, an additional 15 individuals filed unsuccessful complaints of discrimination seeking to be recycled. Among those 15 individuals were five females, of whom at least two were white females, and ten males, of whom at least six were white; the racial identification of two of the females and one of the males is not indicated by the records.

Powers does not allege that he was discriminated against in the course of his training or instruction for the position of air traffic controller. Rather, he alleges discrimination in the FAA’s rejection of his grievance claiming that he failed his training course because of poor instruction.

II. DISCUSSION

1. Plaintiff’s Motion and Local Rule 12(e)

Rule 12(e) of the General Rules of the United States District Court for the Northern District of Illinois provides:

With each motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure the moving party shall serve and file, in addition to the affidavits (if any) and other materials referred to in Rule 56(e) and a supporting memorandum of law, a statement of the material facts as to which the moving party contends there is no genuine issue ... including with that statement references to the affidavits, parts of the record and other supporting materials relied upon to support such statement. Failure to submit such a statement constitutes grounds for denial of the motion.

In the present case, the Court finds that the plaintiffs motion for summary judgment and supporting memorandum and his reply memorandum do not meet the requirement of Rule 12(e). The memoran-da outline the procedural history of plaintiffs administrative complaint and refers to evidence from the FAA records discussed above in statistical support of his reverse discrimination argument. They do not contain any affidavits from plaintiff or others in support of his reverse discrimination claim. It is clear that nothing contained in plaintiffs memoranda approaches the type of statement contemplated by Rule 12(e). In fact, plaintiff attempts in his reply memorandum to argue the specific facts contained in defendant’s response memorandum. Therefore, since plaintiff failed to submit a statement complying with Rule 12(e), his motion for summary judgment is denied in accordance with the Rule.

2. Defendant’s Motion for Summary Judgment

Defendant Secretary Dole argues that plaintiff Powers cannot prove that he received treatment which differed from that of others who were similarly situated or that, if different treatment existed, it was not based on his race and/or sex. Defendant concludes that Powers cannot make out a prima facie case in order to get him past a motion for summary judgment. Plaintiff counters with statistical evidence gleaned from FAA records. He offers no affidavit in support of his discrimination allegations.

To create a question of fact, an adverse party responding to a properly made and supported summary judgment motion must set forth specific facts showing that there is a genuine issue for trial. Rule 56(e), Fed.R.Civ.P.; Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir.1983). A party may not rest on mere allegations or denials of his pleadings; similarly, a bare contention that an issue of fact exists is insufficient to raise a factual issue. Id. Rule 56 of the Federal Rules of Civil Procedure clearly requires that an adverse party set forth specific facts showing a genuine issue for trial. Id.

As part of its motion for summary judgment, defendant submitted two affidavits and other exhibits, which contain FAA statistics, to support its two contentions: (1) that the decision not to recycle Powers was not based on the fact that he was a white male, and (2) that a group of others denied recycling contained white and minority males and females. Powers filed no affidavit in response and submits only statistical evidence in support of his claim. Even considering the plaintiffs affidavit submitted in his formal complaint filed with the DOT, the Court finds that the plaintiff presents only conclusory allegations derived from the statistical evidence based on FAA records. Powers submits no other evidence which suggests that the DOT denied his request to be recycled because he is a white male.

Applying the previously discussed principles of summary judgment, the Court concludes that Powers’ pleadings and previous affidavit are insufficient to create a question of fact concerning whether the DOT denied his recycling request on discriminatory grounds. They merely refer to an inference, drawn from FAA records, that more minority males and females and non-minority females are granted recycling requests than nonminority males. Plaintiff points to no specific facts from which reverse discrimination can be proven, i.e., articulated DOT quotas. In addition, defendant points out that, unlike plaintiff, many of the minority and nonminority females who were granted recycling had complained of inadequate training due to discrimination.

There is a close distinction between the inference which the plaintiff seeks to draw from mere statistics and specific facts which could provide a basis for comparing his recycling request with those of others whose requests were granted. However, the Court is compelled to make this distinction in light of the strict requirements of Rule 56. Posey v. Skyline Corp., supra, at 106. Although it is true that a court should give to the party opposing a summary judgment motion the benefit of all reasonably drawn inferences, Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970), the mere possibility that a factual dispute may exist, without more, is an insufficient basis upon which to justify denial of a motion for summary judgment. Posey v. Skyline Corp., supra, at 106; see also Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980).

Powers’ previous affidavit and pleadings at best hint that a question of fact may exist in this case. However, Rule 56 demands that Powers show specific facts indicating that a genuine issue does exist for trial. Posey v. Skyline Corp., supra, at 106. This requirement has not been met. The Court has no obligation to hypothesize or speculate about the various implications of Powers’ factual presentation. Id. Unsupported by other evidence, Powers’ inference of reverse discrimination fails to go far enough to rebut the defendant’s unambiguous affidavits. Plaintiff Powers has failed to show that there exists a genuine issue of material fact and therefore summary judgment in favor of the defendant Secretary Dole is appropriate in this case.

III. CONCLUSION.

Plaintiff’s motion for summary judgment is denied for failure to comply with Rule 12(e) of the General Rules of the U.S. District Court for the Northern District of Illinois. Defendant’s motion for summary judgment is granted.

IT IS SO ORDERED.


author: ROSZKOWSKI, District Judge.

text:
    AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Trustee under Trust Agreement dated February 9, 1965, and known as Trust No. 21314, Morton J. Crane, Joseph L. Katz and Ralph R. Michelson, Plaintiffs, v. BOARD OF REGENTS FOR REGENCY UNIVERSITIES, a body corporate and politic, Defendant.
    No. 83 C 3559.
    United States District Court, N.D. Illinois, E.D.
    Nov. 20, 1984.
   ROSZKOWSKI, District Judge.

ORDER

Before the court is defendant’s motion to dismiss and/or for summary judgment. The court’s subject matter jurisdiction is asserted to rest upon 28 U.S.C. § 1331 (1982). For the reasons set forth herein, defendant’s motion to dismiss is denied and defendant’s motion for summary judgment is granted, in part, and denied, in part.

BACKGROUND

Plaintiffs are the owners of a private dormitory adjacent to the campus of Northern Illinois University (“University”). Plaintiffs bring this action pursuant to Sections 4 and 16 of the Clayton Act seeking damages and injunctive relief. Plaintiffs allege the implementation of certain University housing policies are in violation of Sections 1 and 2 of the Sherman Act.

Defendant, Board of Regents For Regency Universities, a body corporate and politic, is a public entity responsible for the ownership, operation and management of University-owned residence halls. The defendant is also responsible for the promulgation of policies and regulations regarding places of residence on and off campus where students may live.

At issue in the present case is the implementation of a certain parietal rule promulgated by the defendant. The subject rule requires that single, freshmen students under the age of 21 not residing with their parents must reside in one of the University residence halls so long as space remains available.

Plaintiffs do not challenge the defendant’s authority to make such parietal rules. (Plaintiffs’ Memo, p.23) Instead, plaintiffs merely challenge certain “temporary housing practices” followed by the defendant in implementing the subject rule.

The challenged temporary housing practices are alleged to include: (1) “the implementation of ‘temporary’ housing, whereby students are housed in non-dormitory rooms indefinitely,” and (2) the delaying of “advice to applicants as to whether or when they can be assured a permanent assignment, until so shortly before the commencement of the school year as to preclude plaintiffs from a realistic entry into the market.” (Plaintiffs Memo, p.2) As a result, plaintiffs contend the “[defendant has admittedly commenced and pursued a practice of violating its own ‘parietal’ policies by continuing to impose the requirement [that single, freshmen students under the age of 21 must reside in the University residence halls so long as space remains available] when space is not available.” (Plaintiffs’ Memo, p.24)

Defendant stresses that its so-called “temporary housing practices” merely present freshmen students with the option of residing in temporary housing until a permanent University residence hall assignment becomes available. The letter directed to incoming freshmen concerning temporary University housing merely provides, “[i]f you do NOT accept this assignment you are free to move off campus....” Defendant contends it offers this option to incoming freshmen because experience has shown “that each year there will inevitably be a number of students for whom University housing has been reserved that will either decide not to attend the University or leave early in the semester.” (Defendant’s Reply p.12) Thus, defendant contends it has adopted the challenged housing policy “[i]n order to account for this attrition factor and to provide University housing to all those who desire it_” (Id.)

Defendant has moved to dismiss and/or for summary judgment on three grounds: (1) that plaintiff’s claim is barred by lach-es; (2) that plaintiffs’ action for monetary damages is barred under the doctrine of sovereign immunity; and (3) that defendant’s actions are “state actions” exempt from federal antitrust laws.

I. Laches

Defendant initially argues that plaintiffs’ action is barred under the doctrine of laches. Laches bars an equitable action where a party’s unexcused or unreasonable delay has prejudiced his adversary. Boone v. Mechanical Specialties, 609 F.2d 956, 958 (9th Cir.1979). Defendant contends the plaintiffs knew or should have known of its parietal rule prior to commencing the construction of their private dormitory in 1965. In addition to the length of the delay, defendant contends it has been prejudiced by the loss, through resignation, retirement and death, of many of the individuals involved in formulating its housing policies since that time. Thus, defendant contends laches should bar plaintiffs’ action.

Defendant’s argument mischaracterizes the nature of the plaintiffs’ action. Plaintiffs are not challenging the parietal rule requiring that single, freshmen students under the age of 21 not residing with their parents reside in University residence halls so long as space remains available. Instead, plaintiffs are challenging the implementation of that parietal rule through defendant’s temporary housing practices. The latter practices were not commenced until the Fall of 1981. Thus, in view of the brief passage of time and the defendant’s failure to show any specific prejudice, defendant’s motion to dismiss on the basis of laches is denied.

II. Sovereign Immunity

Defendant next asserts that plaintiffs’ claim for monetary damages must be dismissed on the grounds of the Eleventh Amendment’s sovereign immunity doctrine. Quern v. Jordan, 440 U.S. 332, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979). The parties agree that the application of the sovereign immunity doctrine depends upon whether the defendant is considered to be an “arm of the state” or merely a “political subdivision of the state.” If the defendant is a mere “political subdivision” of the state, then its actions are not protected by the doctrine of sovereign immunity. Id. at 341 n.12, 99 S.Ct. at 1145 n. 12, 59 L.Ed.2d at 367 n. 12. In determining whether the defendant is an arm of the state, the single most important inquiry is whether or not any judgment against the defendant would be paid from public funds in the State treasury. Ranyard v. Board of Regents, 708 F.2d 1235, 1238 (7th Cir.1983).

In McGuire v. Board of Regents of Northern Illinois University, 71 Ill.App.3d 998, 28 Ill.Dec. 465, 390 N.E.2d 632 (4th Cir.1979), the Illinois Appellate Court was called upon to decide whether the Illinois Court of Claims has exclusive jurisdiction over breach of contract actions brought against the defendant Board .of Regents. The Illinois State Immunity Act provides, in relevant part, that “the State of Illinois shall not be made a defendant or party in any court.” ILL.REV.STAT. ch. 127, ¶ 801. A limited waiver of this immunity is provided for certain actions brought against the State in the Illinois Court of Claims. Specifically, the Court of Claims is granted exclusive jurisdiction to hear “[a]ll claims against the state founded upon any contract entered into with the State of Illinois." ILL.REV.STAT. ch. 37, 1439.8(b).

In determining whether or not the Court of Claims had exclusive jurisdiction over the breach of contract action against the defendant, the court applied a test strikingly similar to the test imposed for Eleventh Amendment sovereign immunity. The court recognized that “... if the relief sought could operate to control the action of the state or subject it to liability, the suit is deemed to be against the state.” (emphasis added) 390 N.E.2d at 634. Applying that test to the defendant, the court concluded, “[wjithout recitation of detail, examination of the statutory provisions creating the Regency Universities and granting their powers disclose that such provisions meet the criteria of an arm or agency of the state....” Id. Thus, the court held the Illinois Court of Claims has exclusive jurisdiction over any breach of contract action against the defendant. 390 N.E.2d at 635.

This court’s own independent review of the relevant Illinois statutes reveals a more than adequate basis exists for concurring with the Illinois Appellate Court’s express finding that the defendant is an arm or agency of the State. The nine individual members of the defendant Board of Regents are appointed by the Governor by and with the advice and consent of the State Senate. (ILL.REV.STAT. ch. 144, It 302) The statutory powers of the defendant are subject to the powers and duties of the Illinois Board of Higher Education. (ILL.REV.STAT. ch. 144, ¶ 309) Much of the “revenue” received by the defendant must “be paid into the state treasury without delay and ... covered into a special fund to be known as the Board of Regents Income Fund.” (ILL.REV.STAT. ch. 127, ¶ 142a4) Once in the Regents Income Fund, the funds are payable by General Assembly appropriations and are subject to audit by the Illinois Auditor General. Id. These revenues include “tuition, laboratory, library fees, and any interest that may be earned thereon...” as well as any excess “revenues” derived by Regency Universities from the operation of student or staff residence facilities, student and staff medical and health programs, Union Buildings, bookstores, farms and other auxiliary enterprises or activities. Id. Finally, the defendant’s title to all other property, real and personal, is “held for the People of the State of Illinois.” (ILL.REV. STAT. ch. 144, 11306, 307) As such, the property’s control and disposition is governed by the State Property Control Act. (ILL.REV.STAT. ch. 127, 11133bl-133bl3)

In view of this court’s own examination of the applicable Illinois statutes and the Illinois Appellate Court’s decision in McGuire, it is clear that the defendant is considered to be “an arm of the State” and not a mere “political subdivision.” Any monetary judgment against the defendant, therefore, would subject the State to liability. As a result, the Eleventh Amendment bars the plaintiffs’ claim for monetary damages against the defendant. Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974). Plaintiffs’ claim for injunctive relief, however, continues to be viable. Id. at 664-65, 94 S.Ct. at 1356-57.

III. State Action

The single remaining issue before the court is whether the defendant is immunized from liability based upon the “state action” doctrine recognized in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). In Parker, the Supreme Court held that the Federal antitrust laws do not prohibit a state “as sovereign” from imposing certain anticompetitive restraints as an act of government. In subsequent decisions, the Court has struggled with the application of state action immunity to sovereign governmental entities such as state legislatures and supreme courts, non-sovereign governmental units such as state agencies and municipalities, and non-sovereign private organizations. See Hoover v. Ronwin, — U.S. -, 104 S.Ct. 1989, 80 L.Ed.2d 590 (1984) (application to the Arizona Supreme Court); Community Communications Co. v. City of Boulder, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982) (application to a home rule municipality); California Liquor Dealers v. Midcal Aluminum, 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980) (application to a private association authorized to administer a state price maintenance program); City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978) (application to municipalities); and Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975) (application to a “state agency.”).

In determining whether or not “state action” immunity is available to the defendant in the present case, the parties have focused their arguments upon the two-pronged test set forth by the Supreme Court in California Retail Liquor Dealers v. Midcal Aluminum, 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980). For “state action” immunity to apply, the court in Midcal held: (1) the challenged conduct must be one clearly articulated and affirmatively expressed as a state policy, and (2) it must be actively supervised by the state. In Midcal, the party accused of anticompet-itive conduct was a private association.

Subsequent lower court decisions, including a recent decision in this Circuit, have ignored the requirement of active supervision, however, when the party accused of anticompetitive conduct is a governmental agency or municipality. Town of Hallie v. City of Eau Claire, 700 F.2d 376, 383-85 (7th Cir.1983) cert. granted, — U.S. -, 104 S.Ct. 3508, 82 L.Ed.2d 818 (1984); see also Hybud Equipment Corp. v. City of Akron, Ohio, 742 F.2d 949, 957 (6th Cir.1984); Central Iowa Refuse Systems, Inc. v. Des Moines Metropolitan Solid Waste Agency, 715 F.2d 419, 425 (8th Cir.1983). In the view of this court, therefore, only the first prong of the Midcal test is applicable here.

In determining whether or not the challenged conduct was clearly articulated and affirmatively expressed as a state policy, courts have applied various tests. In Hybud Equipment Corp. v. City of Akron, Ohio, 742 F.2d 949 (6th Cir.1984), the Court concluded:

If the challenged restraints are reasonably related to an agency’s express powers and reasonably designed to promote the state aims within a designated field of regulation, they can be found to result from a ‘clearly and affirmatively expressed state policy’ to displace competition. Id. at 960-61.

Similarly, the Seventh Circuit recently held:

If the state authorizes certain conduct, we can infer that it condones the anti-competitive effect that is a reasonable or reasonably foreseeable consequence of engaging in the authorized activity. * * * ... [s]tate compulsion [to engage in anti-competitive activity] is not required.

Town of Hallie v. City of Eau Claire, 700 F.2d 376, 381 (7th Cir.1983) cert. granted, — U.S. -, 104 S.Ct. 3508, 82 L.Ed.2d 818 (1984).

In the present case, §§ 5.5 and 5.8 of the Board of Regents Revenue Bond Act, ILL. REV.STAT. ch. 144, If 355.5 and 355.8 (1982), grant the defendant the power:

To make and enforce and agree to make and enforce parietal rules that shall insure the use of any project to the maximum extent to which such project is capable of serving students, staff members and others using or being served by, or having the right to use or the right to be served by, or to operate, any project.
To covenant to perform any and all acts and to do any and all such things as may be necessary or convenient or desirable in order to secure its bonds, or as may in the judgment of the Board tend to make the bonds more marketable, notwithstanding that such acts or things may not be enumerated herein, it being the intention thereof to give the Board issuing bonds pursuant to this Act power to make all covenants, to perform all acts and to do all things not inconsistent with the constitution of the State of Illinois, (emphasis added)

If the. defendant’s parietal rule requiring single, freshmen students under the age of 21 not residing with their parents to reside in University residence halls so long as space remains available was the source of the plaintiffs’ complaint, the court would have little difficulty in resolving the present motion. The subject rule is reasonably designed to further Illinois’ express state policy of “... insurpng] the use of [University residence halls] to the maximum extent to which such [residence halls] [are] capable of serving students, staff members and others_” ILL.REV. STAT. ch. 144, ¶ 355.5 (1982). Moreover, the subject rule is a reasonably foreseeable consequence of the Board’s statutorily required efforts “... to secure its bonds ... [and] make the bonds more marketable. ...” ILL.REV.STAT. ch. 144, ¶355.8 (1982).

At issue in the present case, however, is the defendant’s implementation of the subject parietal rule. From the limited record before the court, it appears the defendant continues to assign incoming freshmen “temporary housing” after space is no longer available. Although incoming freshmen are informed that they are not required to accept their temporary assignments, some question remains concerning the nature and timing of the information provided to them. Plaintiffs allege the defendant delays advising applicants as to whether or when they can be assured of receiving a permanent assignment. As a result, incoming freshmen are allegedly housed in non-dormitory rooms on an indefinite basis and plaintiffs are precluded from a realistic entry into the market.

While a policy allowing incoming freshmen to voluntarily accept temporary housing assignments with the expectation that normal attrition will result in their receiving permanent assignments within a reasonable time would appear to be reasonably designed to further the same interests previously discussed, it is not clear that any intentional delay or misrepresentation aimed at inducing incoming freshmen to pay University residence hall room and board without any realistic expectation of receiving a permanent assignment would be reasonably related to the defendant’s express powers or reasonably designed to promote the State’s economic or educational aims. Absent evidence relating to the length of the alleged delays, the information given to students concerning the likely duration of their temporary housing assignments and the information given to students concerning the likelihood of their obtaining a permanent housing assignment, it is, therefore, difficult to determine whether the defendant’s implementation of its parietal rules is in furtherance of a clearly articulated and affirmatively expressed state policy. The parties have failed to specifically address any of these factual issues and the court is not prepared to rule based upon the present state of the record. Thus, defendant’s motion for summary judgment based upon the state action immunity doctrine is denied.

CONCLUSION

For all of the reasons set forth herein, defendant’s motion to dismiss based upon the doctrine of laches is denied and defendant’s motion for summary judgment based upon sovereign immunity and “state action” immunity is granted, in part, and denied, in part. Plaintiffs will be allowed to seek only injunctive relief.

Due to limited factual issues remaining and the unavailability of monetary damages, this court believes a pretrial conference may be helpful in voluntarily resolving the remaining issues in this case. Thus, the parties are ordered to appear for a pre-trial settlement conference on Thursday, December 20, 1984 at 11:00 a.m. in Chicago, Illinois. The parties are instructed to have some individual in attendance with authority to settle this matter.

      . Defendant did not address the issue of laches in its reply brief.

      . While the defendant allegedly followed similar practices in 1963-67, the plaintiffs’ dormitory was not in operation during the vast majority of that time. Once the dormitory was in existence, the defendant’s temporary housing practices apparently ceased relatively rapidly. Thus, no action was necessary at that time.

      . In addition, certain other unrelated state statutes evidence that the defendant is an arm of the State. The Illinois statute governing the Representation and Indemnification of State Employees, ILL.REV.STAT. ch. 127, ¶ 1301, defines the term “State” as including “the governing boards of the public institutions of higher education created by the State.” Id. Significantly, municipalities or other units of local government are not included in the Act's definition of state.

      . While one member of the court reached the same result in Ranyard v. Board of Regents, 708 F.2d 1235 (7th Cir.1983), the majority decided not to reach the issue. See concurring opinions Id. at 1240.

      . Even assuming the defendant would ordinarily be entitled to claim sovereign immunity, plaintiffs contend the defendant has waived that immunity here. Section 7 b of the Regency Universities Act provides the defendant has the power:
      to sue and be sued, provided that any suit against the Board based upon a claim sounding in tort must be filed in the Court of Claims.
      Plaintiffs contend that "the ‘sue and be sued’ clause was intended to be general in nature and that the only restriction to the Court of Claims applies to claims ‘sounding in tort' ”. Plaintiffs' proposed construction was expressly rejected in McGuire v. Board of Regents of Northern Illinois University, 71 Ill.App.3d 998, 28 Ill.Dec. 465, 390 N.E.2d 632 (4th Cir.1979). Thus, since this court does not construe the subject clause as a single restriction on a general waiver and since the "to sue and be sued” language, taken alone, has been held only to waive the state’s immunity from suit to the extent a suit is maintainable in the Illinois Court of Claims, McDonald v. State of Illinois, 557 F.2d 596, 600-01 (7th Cir.) cert. denied, 434 U.S. 966, 98 S.Ct. 508, 54 L.Ed.2d 453 (1977), plaintiffs’ claim of waiver must be denied.

      . Assuming the plaintiffs are able to prove that the defendant delays informing incoming freshmen of whether or when a permanent room assignment will become available and as a result incoming freshmen are indefinitely residing in non-dormitory rooms without any realistic expectation of receiving a permanent assignment, the plaintiffs will have proven facts taking the instant action outside the scope of the state immunity doctrine. Allowing additional students to indefinitely reside in non-dormitory rooms without any realistic expectation of receiving a permanent assignment is not reasonably designed "... to insure the use of [a residence hall] to the maximum extent to which [a residence hall] is capable of serving students, staff members and others_” (emphasis added) (ILL.REV.STAT. ch. 144, ¶ 355.5 (1982). Rather, the likely result of such a policy would be over-crowding and, as a consequence, a reduction in service.

      . While the letter directed to incoming freshmen makes some representations about the likelihood of any eventual delay in obtaining a permanent assignment, the veracity of those representations has not been tested. Moreover, plaintiffs may be able to prove the existence of certain oral statements contradicting the subject letter.