author: COHN, District Judge.

text:
    David BOWLING, a Minor, by Phyllis C. NADVORNIK, his Next Friend, Theresa N. Bowling, Phyllis C. Nadvornik, and Robert C. Nadvornik, Plaintiffs v. CITY OF WESTLAND, Chief of Police William L. Rechlin, Sergeant Hugh Carpenter, Sergeant Robbin Crosby, Officer Tommy Dean Vaughan and Officer Dale Moore, Jointly and Severally, Defendants.
    Civ. No. 82-72801.
    United States District Court, E.D. Michigan, S.D.
    Jan. 17, 1985.

      Marvin Skupski, Dearborn, Mich., for plaintiffs.
    Owen Cummings, Livonia, Mich., for defendants.
   AMENDED MEMORANDUM AND ORDER ON PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

COHN, District Judge.

This is a police misconduct case. The parties and the claims are described in the order of July 13, 1984. The underlying facts are essentially uncontested and are described on pages 3 and 4 of the joint pretrial statement approved April 3, 1984. Plaintiffs now move for partial summary judgment on their claim that the search of their home and the subsequent seizure of their property on July 81, 1982 was done under an invalid search warrant. Plaintiffs specifically say that 1) there was no affidavit supporting the search warrant and 2) assuming that the search warrant was itself an affidavit, it did not show probable cause. Plaintiffs further say that defendants’ seizure of their property was not made in good faith.

In response, defendants argue that plaintiffs’ claim as to the absence of an affidavit and lack of probable cause are precluded because they are beyond the scope of the joint pretrial statement. Defendants also argue that the warrant does show probable cause and that the seizure was made in good faith.

Plaintiffs, for the reasons which follow, are correct with regard to the invalidity of the search warrant.

I.

Fed.R.Civ.P. 16(e) provides that the pretrial order (read joint pretrial statement) “shall control the subsequent course of the action unless modified by a subsequent order”. Defendants argue that in moving for summary judgment on the grounds that there was no affidavit and that the warrant was issued without probable cause, plaintiffs make claims beyond the scope of the joint pretrial statement. In the joint pretrial statement, plaintiffs state that their claim arises from the “individually named defendants improperly executing an invalid search warrant”. Under the heading “Legal Issues” the statement goes on to list

“a. May William Meade by regarded as a reliable informant;
b. Was the search warrant used to search Plaintiffs’ home invalid because it was an unconstitutional general warrant.”

Although the precise issues raised here are not stated in the same words in the joint pretrial statement, certainly the lack of an affidavit and issuance of the warrant without probable cause are claims which go to the validity of the search warrant, an issue that was raised in the statement. The cases cited by defendants do not support their argument that the court should not consider these issues. These cases involve situations where a party is raising entire claims not mentioned in the pretrial order after verdicts had already been rendered. See, e.g., McKinney v. Galvin, 701 F.2d 584 (6th Cir.1983); Union Planters National Bank v. Commercial Credit, 651 F.2d 1174 (6th Cir.1981).

“Courts have held that the (pretrial) order should be construed liberally so that it covers any of the possible legal or factual theories that might be embraced by its language”. 6 Wright & Miller, Federal Practice and Procedure, § 1527. Considering that the claims raised by the motion are generally stated in the joint pretrial statement, there is no reason to adopt defendants’ rather technical reading.

II.

As to plaintiffs’ claim that the search warrant was invalid because it was not supported by an affidavit, defendants say that since the search warrant contained the signatures of both the issuing judge and the affiant, William Andrew Meade, the affidavit was contained within the warrant and there was no need for Meade to sign a separate statement under oath.

The Fourth Amendment provides in part:

“No warrants shall issue; but upon probable cause, supported by oath or affirmation.”

See Mich.Stats.Ann. § 28.1259(1) [M.C.L.A. § 780.651]. In determining whether there is probable cause to issue a search warrant, the magistrate can consider only the information contained in the affidavit made before him. Mich.Stats.Ann. § 28.1259(3) [M.C.L.A. § 780.653]; Aguilar v. Texas, 378 U.S. 108, 112, 84 S.Ct. 1509, 1512, 12 L.Ed.2d 723 (1964); People v. Coleman, 100 Mich.App. 587, 300 N.W.2d 329 (1980). The purposes of the affidavit requirement have been described as a

“guarantee that the finding of probable cause will be based only on material allegations which are true ... to ensure that the magistrate may judge for himself the persuasiveness of the precise facts relied on to show probable cause, and ... to provide a record upon which the reviewing court may properly determine the sufficiency of the facts presented to the magistrate to establish probable cause and whether these facts were given under oath.”

Ringel, Searches & Seizures, Arrests and Confessions, §§ 5.4-5.4(a).

The Court has found no cases directly on point, i.e., where the warrant is also claimed to serve as the affidavit. However, in view of the purposes underlying the requirement of the affidavit to satisfy minimum institutional requirements, it does not appear necessary to require a separate document, so long as the facts giving rise to probable cause are set out somewhere. In addition, the search warrant itself, in lieu of stating the grounds for probable cause, may instead incorporate by reference or have attached a copy of the affidavit. See Massachusetts v. Sheppard, — U.S. —, —, 104 S.Ct. 3424, 3428, 82 L.Ed.2d 737 (1984); Mich. Stats .Ann. § 28.1259(4) [M.C.L.A. § 780.-654]; Ringel, supra, at § 5.4(c) (“[t]he fact that the information relied on to establish probable cause is not in the form of an affidavit will not always defeat the warrant, as long as the information is sworn to under the oath or affirmation requirement”). Affidavits, normally drafted in haste by non-lawyers, are not held to rigid technical requirements “once exalted under common law pleadings”. United States v. Ventresca, 380 U.S. 102, 108, 85 S.Ct. 741, 746, 13 L.Ed.2d 684 (1965); Illinois v. Gates, 462 U.S. 213, 103 S.Ct. 2317, 2330, 76 L.Ed.2d 527 (1983). Therefore, the issue is not whether the search warrant was supported by a piece of paper marked “affidavit” but rather, whether the facts presented in the search warrant are sufficient to establish probable cause.

III.

Defendants argue that the affidavit contained in the warrant “overwhelmingly supports” a finding of probable cause. A careful reading of the search warrant suggests otherwise. The search warrant opens by stating:

“on this day William Andrew Meade, affiant, having subscribed and sworn to an affidavit for a Search Warrant, and I having under oath examined affiant, am satisfied that probable cause exists;”

The search warrant then commands the police to search a one story brick ranch house to seize:

“one Panasonic stereo component set with two brown walnut speakers
one GE cassette player, black and chrome 10" X 12" X 4"
one Panasonic 8 track AM/FM radio
one unknown brand watch, silver band, red digital face
one white AM/FM radio (clock radio-alarm)
one white hair dryer
Any other property believed to be stolen.”

This list is followed by the paragraph constituting the affidavit claimed by defendant to support the finding of probable cause. This portion reads:

The following facts having been sworn to by affiant in support of the issuance of this Warrant: On 7-29-81, a breaking and entering at 1170 Henry Ruff, where the above listed items were taken along with a Gruen Women’s quartz digital watch with the initials of the Complt. (S.N.) engraved on same. On 7-30-81, Affiant was at 1171 Sharon (address listed in warrant) and observed several of the listed items along with the listed watch which he purchased for the purpose of returning to the Complt. to identify. Found inside of the purchased watch were the Complts. initials. Same was turned over to the Westland Police Dept, and entered in as evidence.

The search warrant concludes with the signature of William Andrew Meade and the words

. “Issued under my hand this 30th day of July 1981”

followed by the signature of the magistrate. Only by implication can it be said that Meade was actually sworn by the magistrate.

Probable cause has been defined as

“the facts and circumstances within their (the officer’s) knowledge and of which they had reasonably trustworthy information (are) sufficient in themselves to warrant a man of reasonable caution in the belief that an offense has been or is being committed.”

United States v. Townsend, 394 F.Supp. 736 (E.D.Mich.1975) (quoting Brinegar v. United States, 338 U.S. 160, 69 S.Ct. 1302, 93 L.Ed. 1879 (1948)). In addition, “the reasons that caused the officer to conclude that probable cause was present must be made known to the Magistrate”. Ringel, supra, at § 4.1(c). This is essential so that the magistrate will serve as more than merely “a rubber stamp for the police”. United States v. Ventresca, supra 380 U.S. at 109, 85 S.Ct. at 746 (1965). Although affidavits in support of a search warrant should be tested in a common sense and realistic fashion, id. at 108, 85 S.Ct. at 745,

[sufficient information must be presented to the magistrate to allow that official to determine probable cause; his action cannot be a mere ratification of the bare conclusions of others. In order to ensure that such an abdication of the Magistrate’s duty does not occur, courts must continue to conscientiously review the sufficiency of affidavits on which warrants are issued.

Illinois v. Gates, supra 103 S.Ct. at 2332 (1983).

Viewed in the most realistic manner possible, the sworn statement, assuming it was sworn, on the basis of which this search warrant was issued could not have provided probable cause. It is certainly not clear how Meade could have sworn to the breaking and entering at 1170 Henry Ruff. It is also not clear from Meade’s statement how he knew at the time that he was in plaintiff’s home, that the watch and other “listed items” which he claims to have seen were the items allegedly stolen and not items previously belonging to plaintiff. Finally, it is not clear why Meade purchased this watch for identification and what previous relationship he had with the complainant “S.N.” and with plaintiffs. The only facts the “affidavit” attests to is that Meade purchased a watch from plaintiffs and, drawing a permissible inference from the facts stated, that this watch had been stolen the day before. Although Meade claims to have seen the other “listed items” this fact is not specific enough, and the surrounding “facts and circumstances” are not clear enough, to support a finding of probable cause.

Defendants rely on United States v. Townsend, supra, to support the argument that Meade’s affidavit was sufficient to show probable cause. Defendants’ reliance is misplaced. There the court stated that an informant’s personal observation of weapons and the sale of weapons was not, in itself, sufficient to establish probable cause for the issuance of a search warrant authorizing seizure of “stolen weapons”. The court concluded, however, that probable cause was established because of “the personal involvement of the informant with the stolen items, the repeated sales, the number of weapons and the damaging nature of the admission by the informant”. 394 F.Supp. at 742. Unlike the affiant in Townsend, Meade made no statement as to his personal involvement with prior stolen items. He described no course of prior transactions that could establish probable cause to believe that the other items claimed to have been seen by him were stolen.

Defendants also say in their brief in opposition that “prior to his purchase, Mr. Meade had been informed by a third-party that Plaintiff, David Bowling, had broken into the Aben home and had stolen various items”. Since this bit of information is not contained in the search warrant, it certainly cannot be considered in determining whether probable cause existed for issuance of the warrant. Mich.Stats.Ann. § 28.1259(3) [M.C.L.A. § 780.653]; People v. Coleman, supra; see Illinois v. Gates, supra 103 S.Ct. at 2332. Even if these facts had been contained in Meade’s sworn statement, since it was given to the affiant by an unnamed source of unknown reliability it could be given very little weight, if any, by the magistrate in his determination of probable cause. There is just no basis for determining the informant’s veracity, reliability or basis of knowledge. See Illinois v. Gates, supra at 2327-28 (1983) (Although these elements are not to be “rigidly exacted in every case”, they are “all highly relevant in determining the value of [the informant’s report]”); Aguilar v. Texas, 378 U.S. 108, 84 S.Ct. 1509, 12 L.Ed.2d 723 (1964); Spinelli v. United States, 393 U.S. 410, 89 S.Ct. 584, 21 L.Ed.2d 637 (1969).

IV.

Plaintiffs also claim that the search warrant is invalid because it does not particularly state the things to be seized. The Fourth Amendment requires that “no warrants shall issue ... without particularly describing the place to be searched and the person or things to be seized.” Plaintiffs claim that the catchall phrase “and any other property believed to be stolen”, turns the search warrant into an impermissible general warrant. “As to what is to be taken, nothing should be left to the discretion of the officer executing the warrant”. Marron v. United States, 275 U.S. 192, 196, 48 S.Ct. 74, 76, 72 L.Ed. 231 (1927).

In Townsend, supra, the court held that a concluding, catch-all phrase is a deficiency which “standing alone, is insufficient to infect the warrant fatally.” However, “[i]t may generally be said that less specificity will suffice when the police or government investigators have made the most through presentation possible to the magistrate concerning the particular crime under investigation”. Ringel, supra, at § 5.6.

It is significant that in Townsend, although the court found that there might have been probable cause for the issuance of the warrant, and that the lack of specificity in the warrant was not fatal, the court ultimately concluded that the fruits of the search warrant had to be suppressed. The court stated that in view of the multiple problems inherent in the warrant, including the catch-all language and the problems regarding probable cause, the court could not in good conscience uphold the warrant. Likewise, in view of the fact that there was an insufficient showing made as to the probability that plaintiffs were in possession of stolen items and the catch-all phrase as well as the more technical problems surrounding the “affidavit”, this Court concludes that the search and seizure involved here was in violation of the Fourth Amendment rights of plaintiffs.

As to the validity of the search and seizure, plaintiffs’ motion for summary judgment is GRANTED.

V.

Plaintiff also argues that in executing the search warrant, defendants Carpenter, Crosby and Vaughan did not act in good faith. It is uncontested that none of the items seized actually corresponded with the items listed on the face of the search warrant. However, defendants say that the items were seized in the reasonable belief that they were authorized by the search warrant.

A police officer has a complete defense to liability under § 1983 if he reasonably believed in good faith that his actions were constitutional. Pierson v. Ray, 386 U.S. 547, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967). The good faith inquiry used to determine the existence of this immunity is limited to “the objective reasonableness of an official’s conduct”. Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 2739, 73 L.Ed.2d 396 (1982); c.f. United States v. Leon, — U.S. —, —, 104 S.Ct. 3405, 3419, 82 L.Ed.2d 677 (1984) (objective test used to establish good faith exception to the exclusionary rule). Specifically, the question presented is “whether a reasonably well-trained officer would have known that the search was illegal despite the magistrate’s authorization”. Leon, supra, at — n. 23, 104 S.Ct. at 3421 n. 23.

Harlow eliminated the subjective component of § 1983 qualified immunity to facilitate the granting of summary judgment motions on insubstantial claims. The court noted that the issue of an official’s subjective good faith has been considered a jury issue and that use of an objective test, “by reference to clearly established law, should avoid excessive disruption of government and permit the resolution of many insubstantial claims on summary judgment.” Harlow, supra, 457 U.S. at 818, 102 S.Ct. at 2739.

However, this Court is unwilling on the record before it to decide that as a matter of law the search warrant was so deficient, and the circumstances surrounding its issuance “ ‘so lacking in indicia of probable cause as to render official belief in its existence entirely unreasonable’ ”. Leon, supra, — U.S. at —, 104 S.Ct. at 3422 (quoting Brown v. Illinois, 422 U.S. 590, 610-11, 95 S.Ct. 2254, 2265-66, 45 L.Ed.2d 416 (1975) (Powell, J., concurring in part)). This is especially so since the conclusion that the search was invalid was based, not on any single blatant deficiency, but on a number of deficiencies any one of which, standing alone, may not have been sufficient to invalidate the search. The objective reasonableness of the reliance by defendant on the warrant and execution of the search presents a genuine issue of material fact which should not be disposed of on a motion for summary judgment. See Smith v. Hudson, 600 F.2d 60 (6th Cir. 1979).

On the issue of good faith, the motion for summary judgment is DENIED.

SO ORDERED.

APPENDIX A

      . The order reads in part:
      This is a police misconduct case. Plaintiffs are David Bowling (son), Theresa N. Bowling (daughter), Phyllis C. Nadvornik (mother) and Robert C. Nadvornik (stepfather). Defendants are City of Westland police officers, Hugh Carpenter (Carpenter), Robbin Crosby (Crosby), Tommy Dean Vaughan (Vaughan), the City of Westland and the Chief of Police, William L. Rechlin (Rechlin). The case involves a search and seizure at the home of plaintiffs and the arrest and juvenile prosecution of the son. The claims are asserted under 42 U.S.C. § 1983 and state law.
      1. Illegal search and seizure (§ 1983)
      2. False arrest (state law)
      3. Malicious prosecution and abuse of process (state law)
      The claims by plaintiffs against the City of Westland and Rechlin are for failure to train and supervise police officers (§ 1983).
      The claim for malicious prosecution and abuse of process is of doubtful validity since the record does not reflect involvement by Carpenter, Crosby or Vaughan and indicates that the juvenile proceedings were concluded on the merits.

      . Pages 3 and 4 read in part:

        B. Uncontested Facts:

      1. Geraldine Aben of 1170 Henry Ruff, City of Westland, Michigan, complained to the West-land Police around 6:30, P.M., on July 31, 1981 of a breaking and entering.
      2. Mrs. Aben reported stolen (1) Gruen watch with the initials "S.N.” scratched on the back; (2) a Panasonic component stereo with two round speakers; (3) a GE casette player; (4) a Panasonic 8-track player AM-FM radio; (5) a watch with a silver band and a red digital face; (6) an AM-FM clock radio; and (7) an off-white blow dryer.
      3. Defendants Vaughan and Moore interviewed a Mr. William Meade. Mr. Meade told them that George Smith told him that David Bowling was responsible for the breaking and entering.
      4. Mr. Meade also stated to the officers that he purchased a watch with the initials "S.N." on the back from David Bowling for ten dollars ($10.00) at approximately 6:00, P.M., that evening. The watch is identified as having been taken in the B & E.
      Defendants have moved to dismiss or in the alternative for summary judgment. Several hearings have been held. This order resolves the motion.
      The claims for negligence, invasion of privacy and intentional infliction of emotional distresses are DISMISSED. These claims are simply not described in the record with sufficient particularity.
      The claims against Carpenter, Crosby and Vaughan are as follows:
      Son Daughter Mother Stepfather
      XXX X
      X X
      5. Mr. Meade also stated that he saw the items Mrs. Aben reported as stolen in David Bowling’s residence that evening at around 6:00, P.M.
      6. Defendants Crosby and Carpenter were called and prepared an application for search warrant and a search warrant based on the statements of Mr. Meade.
      7. The search warrant authorized the search for those items listed in paragraph 2 above and ”... any other property believed to be stolen.”
      8. Application for search warrant was submitted to Judge Callanan of City of Westland District Court and the search warrant as prepared by Officers Crosby and Carpenter was issued by Judge Callanan.
      9. Defendants Vaughan and Moore placed David Bowling's residence under observation from approximately 7:30, P.M., until 10:00, P.M., that evening when Defendants Crosby and Carpenter arrived with the search warrant.
      10. At approximately 10:00, P.M., the officers entered David Bowling's residence in execution of the warrant. The residence is also home for the other Plaintiffs. At the time Defendants entered the residence pursuant to the search warrant the only persons present in the residence were Plaintiff Theresa Bowling and Richard Witkowski.
      11. As a result of the search Defendants seized (1) one Panasonic casette player; (2) one Audiotronics casette player; and (3) one Remington electric chain saw.
      12. David Bowling upon his arrest was taken to the City of Westland Police Station and then the same evening taken to the Wayne County Juvenile Home.

        13. Plaintiff Phyllis Nadvornik upon learning of the events described above telephoned the Westland City Police and talked to Defendant Carpenter. Phyllis Nadvornik was informed that her son David Bowling would not be released to her from the police station.
      14. On August 7, 1981 after Mrs. Aben looked at the seized property and each item was checked against the reports of stolen property, the seized items were released to Plaintiff Phyllis Nadvornik.

      . A copy of the search warrant is attached as Appendix A.

      . Although Harlow, a suit filed against federal officials, did not involve immunity under § 1983, the court stated that "it would be ‘untenable to draw a distinction for purposes of immunity law between suits brought against state officials under § 1983 and suits brough directly under the constitution against federal officials.’ " Harlow, supra, at 818 n. 30, 102 S.Ct. at 2739 (quoting Butz v. Economou, 438 U.S. 478, 504, 98 S.Ct. 2894, 2910, 57 L.Ed.2d 895 (1978)); see Briggs v. Malley, 748 F.2d 715 at 718 (1st Cir. 1984).


source: Caselaw Access Project

author: MIHM, District Judge.

license: Public Domain

text:
    STATE of ILLINOIS, in its proprietary capacity and in its parens patriae capacity, Plaintiff, v. PANHANDLE EASTERN PIPELINE COMPANY, a Delaware Corporation, Defendant.
    No. 84-1048.
    United States District Court, C.D. Illinois, Peoria Division.
    Jan. 17, 1985.

      Hercules F. Bolos, Edward J. Burke, William C. Holmes, Sp. Asst. Attys. Gen., Chicago, 111., David M. Lynch, Peoria, 111., for plaintiff.
    Mark Howard, Peoria, 111., Juris Kins, Chicago, 111., Shirley McGregor Pearson, Panhandle Eastern Pipeline Co., Houston, Tex., for defendant.
   ORDER

MIHM, District Judge.

This Court conducted an evidentiary hearing November 5, 6, 7, 8, 13, 14, 15, 20 and 21 on Plaintiff’s motion under Fed.R. Civ.P. 65(a) for a preliminary injunction against Defendant Panhandle Eastern Pipe Line Company (“Panhandle”), pending final determination of this action,

(1) enjoining Panhandle from enforcing the existing Transportation Guidelines;
(2) enjoining Panhandle from promulgating or otherwise imposing discriminatory conditions upon the transportation of natural gas; and
(3) enjoining Panhandle from refusing to transport natural gas when capacity is available to do so, at just and reasonable rates, on a non-discriminatory basis, upon demand.

Plaintiff relies upon the counts in its second amended complaint alleging monopoly leveraging, denial of use of an essential facility, and tying as violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, as the basis for the preliminary injunction. The Court finds that it has jurisdiction over the subject matter and parties in this action under sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, Sections 4, 4C, and 16 of the Clayton Act, 15 U.S.C. §§ 15, 15c, 26, and 28 U.S.C. § 1337.

In Roland Machinery Company v. Dresser Industries, Inc., 749 F.2d 380 (7th Cir., 1984), the Seventh Circuit stated the principles which must be assessed by the district court in considering a motion for preliminary injunction:

(1) The plaintiff must show that it has “no adequate remedy at law” and that it will suffer “irreparable harm” if the preliminary injunction is not granted.
(2) The plaintiff must show that an award of damages at the end of the trial will be inadequate, i.e., “seriously deficient as a remedy for the harm suffered.”
(3) The plaintiff must show “some likelihood of succeeding on the merits.”
(4) The court must consider any irreparable harm that the defendant might suffer if the injunction is granted.
(5) The court must balance the harms between the parties. “The more likely the plaintiff is to win (in a trial on the merits), the less heavily need the balance of harms weigh in his favor; the less likely he is to win, the more need it weigh in his favor.”
(6) Where the court’s order will have consequences beyond the immediate parties, the “public interest” must be factored into the weighing process.

Roland, at 386-388.

LACK OF AN ADEQUATE REMEDY AT LAW AND IRREPARABLE HARM

Roland Machinery requires that Plaintiff show that it has no adequate remedy at law and that it will suffer irreparable harm if the preliminary injunction is not granted. The Plaintiff has shown that it will suffer direct money damages if the injunction is not granted. Money can always be repaid, however, and it appears that the Defendant is in a financial condition to meet any possible monetary judgment.

As to indirect monetary and non-monetary harm, Plaintiff has at least conceptually shown that no adequate remedy at law exists and that it and those it represents may suffer irreparable harm. If a residential consumer of natural gas must make a choice between heating her residence or purchasing food, for example, she suffers serious injury which cannot be adequately compensated by monetary damages at some unknown time in the'future. An award of damages to compensate for such injuries at the close of trial would be inadequate, i.e., “seriously deficient as. a remedy for the harm suffered.” Roland, at 386.

Plaintiff has also advanced the argument that if an injunction is granted, new job opportunities and new money would be brought into Central Illinois, This idea may be sound in principle, but it is not irreparable harm in the traditional sense. Plaintiff has not shown that if the injunction is not granted, jobs will be lost or money will leave Central Illinois in any greater proportion than at present.

LIKELIHOOD OF SUCCESS

One element which Plaintiff must prove for each of its claims is that the Defendant has market power, defined as “the power to control prices or exclude competition.” United States v. E.I. duPont de Nemours and Co., 351 U.S. 377, 391, 76 S.Ct. 994, 1005, 100 L.Ed. 1264 (1956). The Plaintiff has established a reasonable likelihood of proving that the Defendant has market power. The Defendant has a monopoly on the transportation of natural gas into Central Illinois.

However, there are substantial questions remaining which cast some doubt on Plaintiff’s assertions that the Defendant possesses market power, that the relevant geographic market is Central Illinois and that the relevant product market is limited to natural gas. The rates which Panhandle charges for transportation of gas, for example, are set on a system wide basis and are uniform throughout the Panhandle system. Second, industrial users may have the practical ability to make some conversion to the use of alternative fuels. Third, residential consumers have the potential for conservation and reduction of the amount of natural gas used. There is, however, some point at which it is not economically feasible nor physically possible to reduce the amount of natural gas consumed.

In opposing the Plaintiff’s position as to the relevant market and the existence of market power, Defendant asserts that there is a possibility of a new interconnection between Central Illinois Light Company (“CILCO”) and Northern Gas Pipeline Company of America. That interconnection, however, is speculative, and in any case, the Federal Energy Regulatory Commission (“FERC”) has limited use of that interconnection to emergency situations.

MCI Communications v. AT & T, 708 F.2d 1081, 1107 (7th Cir.1983), requires that in regulated industries, analysis of market power must include consideration of whether regulation precludes a regulated firm from controlling prices or excluding competition and thereby exercising market power. See also Southern Pacific Communications v. AT & T, 740 F.2d 980,1000-1002 (D.C.Cir.1984). Plaintiffs analysis of the market focuses too heavily on the extent of market power in the absence of regulation. There are substantial regulations restraining Panhandle and any analysis of its activities must be made within that regulatory context.

In the circumstances of a regulated utility entitled to recover its cost of services and provide its investors with a reasonable rate of return, something more than general intent is required to establish a Sherman Act violation. Plaintiffs showing of specific anti-competitive intent as to each of the allegedly anti-competitive acts attributed to Panhandle is necessary for each of its claims. MCI v. AT & T, 708 F.2d at 1108, City of Mishawaka v. American Electric Power Co., 616 F.2d 976, 985 (7th Cir.1980), cert. denied, 449 U.S. 1096, 101 S.Ct. 892, 66 L.Ed.2d 824 (1981).

The Plaintiff has presented substantial evidence through Panhandle’s internal memorandums and conversations that Panhandle acted with anti-competitive intent. To what extent an inference of anti-competitive intent is sound, however, in the context of an alleged free exchange of ideas within a corporation leading to formation of the corporation’s ultimate policy is still somewhat unclear. Panhandle’s corporate decisions appear to be a reflection of many anti-competitive views tempered by legal concerns of a possible anti-trust violation.

A factor substantially affecting Panhandle’s intent is its take or pay obligations. In the 1970’s, as a result of a shortage of natural gas, many natural gas companies entered into a variety of different types of contractual obligations to meet market conditions. Panhandle was under pressure to insure a flow of gas at whatever price was necessary. CILCO, the Illinois Commerce Commission and FERC supported many of the decisions which Panhandle made in that respect. The Defendant appears to have been somewhat less than cautious in protecting itself from changing economic conditions, however, and it appears to have responded more slowly than have some other companies to resolution of problems resulting from the contractual obligations incurred by it in the 1970’s.

Panhandle has reduced most of its take or pay obligations to ten percent of what could have been required. However, the remaining take or pay obligations, in the worst scenario, still exist as a sword poised next to Panhandle’s corporate throat. It is clear, then, that Panhandle’s take or pay obligations have had some effect on its intent in developing the Transportation Guidelines. To what extent that constitutes a legitimate showing of a lack of anti-competitive intent with reference to the corporation’s decisions is still unclear to the Court.

Illegal Tying Claim

A threshold requirement in establishing a tying claim is that the tying item and tied item are separate products. This question focuses on the character of the demand for the two items and the existence of two separate product markets. Jefferson Parish Hospital District No. 2 v. Hyde, — U.S. —, 104 S.Ct. 1551, 1562-4, 80 L.Ed.2d 2 (1984). In this case, the existence of separate products has been established. Tlje tying item is the pipeline transmission and the tied item is natural gas. These products are perceived as separate. If they are not so perceived by everyone, they are at least perceived in that manner by those in direct contact with the process of purchasing natural gas. The Defendant’s expert testified that this situation was a temporary aberation of the market based on the gas shortage in the 1970’s followed by the surplus of gas in the 1980’s. It may be that the products are separate on only a somewhat temporary basis, but it is the present tense which controls this litigation.

Second, in establishing a tying claim, the Plaintiff must prove that the Defendant has economic power in the tying product market. This has been shown subject to the previously stated provisios.

The Plaintiff must also show that the seller has conditioned purchase of the tying item on the buyer’s purchase of the tied item from the seller or that the conduct of the seller has in some other way granted the seller a competitive advantage. See Jefferson Parish, supra, Northern Pacific Ry. Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958), International Salt Co. v. United States, 332 U.S. 392, 68 S.Ct. 12, 92 L.Ed. 20 (1949). The Plaintiff has established that both of these elements are present here, although the second is stronger. The chilling effect ,.on the purchase of gas through Panhandle’s transmission services, however, may not be as serious as the Plaintiff claims. There is not a great deal in the record showing the practical effects that the Transportation Guidelines have on the purchase of gas. There is, however, no question that the Guidelines give Panhandle a competitive advantage.

Finally, a tying arrangement does not constitute a per se violation of the Sherman Act unless there are anti-competitive consequences. Plaintiff must show that forcing occurs and that it forecloses a substantial volume of commerce. Jefferson Parish, 104 S.Ct. at 1560. The record in the case at bar is weak on this point.

Leveraging Claim

The State alleges that Panhandle uses its monopoly power over the transportation of gas into Central Illinois to gain an unwarranted competitive advantage over sales of gas. An activity may be illegal if it merely distorts though does not destroy competition in the gas sales market. See Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 275 (2nd Cir.1979), cert. denied 444 U.S. 1093, 100 S.Ct. 1061, 62 L.Ed.2d 783 (1980), Sargent Welch Scientific Co. v. Ventron Corp., 567 F.2d 701, 711-13 (7th Cir.1977), cert. denied 439 U.S. 822, 99 S.Ct. 87, 58 L.Ed.2d 113 (1978).

The Plaintiff has established with a reasonable likelihood of success that Panhandle possesses monopoly power, with the qualifications previously stated regarding market power. It has also established with a reasonable likelihood of success that Panhandle has exploited its power to gain a competitive advantage in the natural gas market. The Transportation Guidelines create for the Defendant the best of two worlds. The Guidelines give Panhandle the opportunity to always be the provider of natural gas and, if it is not the provider, Panhandle is able to ship the gas and charge for that shipment.

Essential Facility Claim

With respect to the Plaintiff’s essential facility claim, section 2 of the Sherman Act is violated where (1) a monopolist controls an essential facility (2) which competitors cannot reasonably duplicate (3) and denies use of that facility to competitors (4) despite feasibility. MCI v. AT &T, 708 F.2d at 1132. In this case, the pipeline is an essential facility; i.e., “an indispensable facility which cannot easily be duplicated.” City of Chanute v. Kansas Gas & Elec. Co., 564 F.Supp. 1416, 1422 (D.Kan. 1983). The parties have stipulated that the pipeline cannot reasonably be duplicated. Panhandle has control of that pipeline for the purposes of the allegations in the State’s complaint. Regulation of the use of the pipeline is, in many respects, reserved to FERC; but here, the blanket certificate creates a situation allowing for the transportation of natural gas subject to the conditions which Panhandle has imposed. Thus, the regulatory controls of FERC are not effective within the context of the allegations raised in this lawsuit.

With regard to the element of denial of use of a facility to competitors, the Court previously ruled that the Plaintiff need not be a “competitor” of the Defendant in order to pursue this claim. The Court ruled that the Plaintiff, representing the state agencies and the residential customers of CILCO, had standing to pursue its claim. Order of July 10, 1984.

The Defendant has not “denied” use of its facility in a traditional sense. However, a question exists if the Guidelines create an unreasonable interference with use of the facilities. Plaintiff advances significant argument to support this conclusion but its evidence is inconclusive.

With respect to denial of use to the state agencies, a provision in the Guidelines requiring that the volume requested to be transported be at least 100,000 Mcf per year is applicable. The record does not establish that this minimum limit is unreasonable. Panhandle also has the right of first refusal, i.e., the contract price which a user obtains from an off-system supplier is subject to bid out to Panhandle’s on-systems suppliers for a possible matching of the price and volume. In the abstract, this requirement surely has a chilling effect on the purchase of natural gas from off-system suppliers. The bid out procedure would certainly lengthen the time required to obtain a supply of natural gas. However, there is little evidence in the record as to the practical negative effect of the bid-out procedure.

The Defendant argues that the possibility that an end user may subsequently solicit a lower bid from off-system suppliers after its bid has been met by an on-systems supplier alleviates any chilling effect on competition. The Court finds this argument to be disingenuous where there is no mention of this possible “auction” procedure within the Guidelines themselves. The Guidelines also contain a provision that contracts for transportation for off-system suppliers are terminable every six months to allow rebidding to on-system suppliers. Again, it appears that such a provision would have a chilling effect. It may be fair, for example, to infer from the record that off-system suppliers may not wish to enter into long-term contracts with fixed price and supply requirements. However, there is a paucity of evidence to support this conclusion.

With respect to denial of use of the essential facility to residential consumers, it appears that CILCO has always conditioned the transport of off-system gas on the retention of its G2 status. Significant evidence also exists, however, that retention of the G2 status is immaterial since Panhandle’s corporate policy almost certainly would not have allowed the transport anyway.

Finally, with regard to the final element of an essential facility claim, transportation of non-Panhandle gas is feasible.

Conclusion

With regard to the likelihood of success on the merits, the Plaintiff has established some elements of each of its claims. As to each claim, however, there is at least one element which is questionable.

BALANCE OF HARDSHIPS

Roland mandates that the Court consider any irreparable harm that the Defendant might suffer if an injunction is granted. The Court must balance the harms between the parties with an eye to the likelihood of the Plaintiff’s success in a trial on the merits. Where the Court’s order will have consequences beyond the immediate parties, as in this case, the “public interest” must also be factored into the balancing process. Roland, 749 F.2d at 387-388.

The Court is concerned with the claimed effect on the Plaintiff if an injunction is not granted. The state agencies will arguably have to pay a greater amount of poney for their energy costs resulting in a greater loss of tax dollars. Residential users will conceivably suffer from economic loss, personal discomfort and hardship, and the loss of new money and jobs in the Central Illinois area. The Court is also concerned with possible irreparable harm which the Defendant may suffer if an injunction is granted. The effect of the corporation’s take or pay obligations, for example, arguably could lead to higher gas costs and serious if not catastrophic damage to the company.

The Plaintiff believes that the public’s interest is served by the grant of a preliminary injunction. However, damage to the Defendant corporation and higher gas costs could have a serious negative impact on the interests of the public. CONCLUSION

The Court must be extremely careful when it is asked to impose an injunction which, in the opinion of the Court, is substantially mandatory in nature. As in City of Chanute v. Kansas Gas & Electric Co., 564 F.Supp. 1416, 1420 (D.Kan. 1983), whichever way the Court chooses to rule in this case will affect the status quo. By granting the relief sought here, however, the Court would be imposing, in effect, a mandatory contract carriage on the Defendant. Whether that is the same as imposing a common carrier status is substantially in dispute. It is, however, a factor weighing against the grant of a preliminary injunction.

There is a question as to the ultimate likelihood of success on the merits with respect to each claim. This case is set for trial on the merits in April of 1985. In this scenario, the Court is unwilling to impose mandatory relief which may cause substantial harm to the Defendant. Thus, Plaintiff’s motion for a preliminary injunction is denied. In so ruling, the Court expresses no opinion on the probable merits of the Plaintiff’s claim after a full trial on the merits.


author: EARL E. O’CONNOR, Chief Judge.

text:
    CELLARMASTER WINES OF MISSOURI, INC., Plaintiff, v. Thomas J. KENNEDY, Director, Alcoholic Beverage Control Div., Kansas Department of Revenue, Defendant.
    Civ. A. No. 84-4113.
    United States District Court, D. Kansas.
    Jan. 22, 1985.

      Michael W. Merriam, of Colmery, McClure, Letourneau, Entz & Merriam, Topeka, Kan., for plaintiff.
    Richard Hodson, Asst. Atty. Gen., Topeka, Kan., for defendant.
   MEMORANDUM AND ORDER

EARL E. O’CONNOR, Chief Judge.

This matter comes before the court on the motion of plaintiff Cellarmaster Wines of Missouri, Inc., (Cellarmaster) for a preliminary injunction. Cellarmaster and defendant Thomas J. Kennedy, Director of the Kansas Department of Revenue’s Alcoholic Beverage Control Division, (the Director) have submitted a “Stipulation of Facts” to accompany the motion. For the reasons set out below, we will deny the injunction.

I. Facts.

The following nine paragraphs constitute the Stipulation of Facts submitted by the parties. (We note that the ninth Stipulation of Fact is immaterial to our decision in this matter.)

1. That plaintiff, Cellarmaster, is a Missouri corporation licensed to do business at 6942-6942 ½ North Oak Traffic Way, Gladstone, Missouri, and is engaged in the business of intrastate and interstate commerce as a retailer of alcoholic liquor, principally wine, from its licensed premises, as above.
2. Defendant Kennedy, acting in his capacity as the Director of Alcoholic Beverage Control Division of the Kansas Department of Revenue (hereinafter “Director”), is charged with the duty of regulating the distribution and sale of intoxicating liquor within the State of Kansas and in accordance with the laws of the State of Kansas, including the Kansas Liquor Control Act, K.S.A. 41-101 et seq.
3. Cellarmaster is a licensed retailer of alcoholic liquor in the State of Missouri — Division of Liquor Control. Cellar-master is a wholly owned subsidiary of Cellarmaster Wines, Inc., a Florida corporation, which is a wholly owned subsidiary of Aura Promotions Ltd., a Delaware corporation.
4. The State of Missouri has authorized the sale of distilled spirits, wine and beer through private enterprise pursuant to the Twenty-First Amendment to the United States Constitution. Cellarmaster is licensed by the State of Missouri to sell distilled spirits, wine and beer from its retail outlets in the State of Missouri.
5. Cellarmaster has and does sell wine to Kansas residents from its licensed premise in Gladstone, Missouri.
6. On or about August 3,1983, Cellar-master, through its counsel, Mr. Morton Siegel, was notified by Mr. Richard Hod-son, Assistant Attorney General, on behalf of the Director, that the activities of Cellarmaster were considered to be illegal under the laws of the State of Kansas. Such notification was based upon the assertion that Cellarmaster was selling alcoholic liquor in Kansas without a license and in violation of K.S.A. 41-104, K.S.A. 41-301, K.S.A. 41-308 and K.S.A. 41-901; that Cellarmaster was selling untaxed liquor in violation of K.S.A. 41-501 and K.S.A. 41-901 and that Cellar-master was transporting liquor into the State of Kansas in violation of K.S.A. 41-724.
7. By letter dated September 23, 1983, the Director requested from Cellar-master restitution of gallonage and enforcement taxes, including penalty and interest, on estimated sales in Kansas for the previous twelve months. In exchange for this payment, the Director agreed not to pursue other legal remedies against Cellarmaster for any prior illegal acts in Kansas. Payment was made on or around September 29, 1983.
8. Cellarmaster has, and does, and stands prepared to, voluntarily collect and remit the gallonage tax collectible pursuant to K.S.A. 41-501.
9. Sometime in March, 1978, a gift consisting of 15 cases of wine was delivered to the City of Wichita, Kansas, from Orleans, France. Special legislation was passed to allow the city to pay the gallon-age tax upon that wine, which action the legislature felt was necessary to allow the city to possess this wine.

II. Statutory Framework.

Before summarizing the respective positions of the parties, it seems wise to lay out the statutory framework at issue here. The Kansas Liquor Control Act, K.S.A. 41-101 et seq., contains the following general prohibition:

No person shall manufacture, bottle, blend, sell, barter, transport, deliver, furnish or possess any alcoholic liquor for beverage purposes, except as specifically provided in this act.

K.S.A. 41-104. The only exception relevant to this case provides that nothing contained in this act shall prevent:

(1) The possession and transportation of alcoholic liquor for the personal use of the possessor, his or her family and guests except that the provisions of K.S.A. 41-1103 relating to transportation and the provisions of K.S.A. 41-407 shall be applicable to all persons.

K.S.A. 41-104(1).

Of the two provisions referred to in this exception, K.S.A. 41-1103 was merely transitional and is no longer relevant. The other provision, K.S.A. 41-407, provides that

(a) It shall be unlawful for any person to:
(1) Evade, or attempt to evade, the payment of tax or duty on any alcoholic liquor, in any manner whatever....
(2) Have in his or her possession any cask or package of alcoholic liquor, without having thereon each mark and stamp required therefor by law.

K.S.A. 41-407(a)(1), (2).

Under K.S.A. 41-501, the State of Kansas imposes a tax “upon the manufacturing, using, selling, storing or purchasing [of] alcoholic liquors in this state....” K.S.A. 41-501(b)(l). Subparagraph (b)(2) of the same section provides, in full, that:

(2) The tax imposed by this section shall be paid only once and shall be paid by the person in this state or federal area who first manufactures, uses, sells, stores, purchases or receives the alcoholic liquors. The tax shall be collected and paid to the director as provided in this act. If the alcoholic liquor is manufactured and sold in this state or a federal area, the tax shall be paid by the manufacturer or farm winery producing it. If the alcoholic liquor is imported into this state by a distributor for the purpose of sale at wholesale in this state or a federal area, the tax shall be paid by the distributor.

Finally, K.S.A. 41-502 provides that “[payment of the tax provided for in K.S.A. 41-501 and amendments thereto shall be evidenced by tax stamps or crowns to be affixed to each original package of alcoholic liquor, except wine and brandy, for use in this state.” (Emphasis added.)

III. Positions of the Parties.

An explanation of the dispute now existing between these two parties requires resort to sources other than the Stipulation of Facts. In its complaint, for example, Cellarmaster alleges that K.S.A. 41-104(1) permits Kansas residents to purchase wine from Cellarmaster in Missouri and transport that wine into Kansas — so long as (1) the possession and transportation of that wine is for the personal use of the purchaser, his or her family, and guests, and (2) the purchaser complies with the provisions of K.S.A. 41-407. Since wine is exempt from the tax stamp requirement, see K.S.A. 41-502, the mandate of K.S.A. 41-407(a)(2) is automatically satisfied. That leaves only K.S.A. 41-407(a)(1), concerning the evasion of, or attempt to evade, payment of tax on the wine.

The Director contends that the latter requirement simply cannot be met by Kansas residents who choose to purchase wine from nonresident sellers. It is the Director’s position that an individual Kansas resident may not pay the applicable taxes directly to the State of Kansas. Relying on K.S.A. 41-501(b)(2), the Director asserts that the only parties eligible to pay such tax are Kansas manufacturers and Kansas distributors of wine.

Cellarmaster seeks to circumvent the Director’s interpretation of K.S.A. 41-501(b)(2) by voluntarily collecting the Kansas tax from Kansas wine purchasers at its Missouri store. Cellarmaster would then remit these tax monies directly to the State of Kansas. In its view, the Kansas purchaser would thus not be evading or attempting to evade payment of tax on wine later found to be in his or her possession within the State of Kansas. If Cellarmaster’s view were adopted by the Director, Kansas residents who chose to purchase wine from Cellarmaster at its Missouri store could presumably transport that wine into the State of Kansas without fear of prosecution. Cellarmaster concludes that such a change in the Director’s interpretation of these statutes would increase its sales of wine to Kansas residents.

Although the parties would presumably agree that the above paragraphs correctly set out their respective positions in this matter, they do not agree on the legal issue presented to the court. According to Cellarmaster’s brief, the issue is as follows:

May the Kansas Director of Alcoholic Beverage Control prevent a nonresident retailer of wine products [from] voluntarily collecting and remitting to the Director applicable Kansas gallonage taxes on wine sold to Kansas residents?

Plaintiff’s Brief at 1. Cellarmaster would answer this question in the negative. It asserts that the Director’s current interpretation of this Act is beyond his statutory authority, and thus deprives Cellarmaster of its liberty or property without due process of law. (Cellarmaster makes no claim, however, that the Act itself is unconstitutional.)

The Director focuses on quite a different issue. In his view, the Kansas statutes outlined in part II of this Memorandum have no direct effect on Cellarmaster. Subject only to regulation by the Missouri Division of Liquor Control, Cellarmaster is always free to collect from its Kansas customers an amount equal to the Kansas gallonage tax, and even to voluntarily remit that money to the State of Kansas. The dispute is over what effect such collection and voluntary remission of those funds should have on Kansas residents. While Cellarmaster would have its activities insulate those Kansas residents from prosecution under K.S.A. 41-407, the Director would ascribe no such effect to Cellarmaster’s activities. In the Director’s view, Cellarmaster would merely be acting as a conduit for the payment of gallonage taxes directly from Kansas consumers to the State of Kansas. The Director would thus state the issue as follows:

May a Kansas resident who purchases wine from a nonresident seller pay the applicable gallonage taxes directly to the State of Kansas?

Relying both on statutory construction and on existing ease law, the Director would answer this question in the negative.

We believe that the Director’s proposed question more appropriately frames the legal issue than does Cellarmaster’s. For the reasons set out in part V of this Memorandum, we also agree with the Director’s conclusion. Before we deal with the merits of the issue, however, part IV of this Memorandum will address the Director’s contention that Cellarmaster is without standing to mount this challenge.

IV. Standing.

As the Supreme Court has indicated, “Generalizations about standing to sue are largely worthless as such.” Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 151, 90 S.Ct. 827, 829, 25 L.Ed.2d 184 (1970) (Douglas, J.). With that caveat in mind, we attempt to summarize the Court’s current standing doctrine.

Any standing inquiry must begin with article III of the Constitution. Article Ill’s “case or controversy” requirement is designed so that parties seeking to invoke the court’s jurisdiction have “such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions.” Larson v. Valente, 456 U.S. 228, 238-39, 102 S.Ct. 1673, 1680, 72 L.Ed.2d 33 (1982). The Larson Court continued:

This requirement of a “personal stake” must consist of “a ‘distinct and palpable injury ... ’ to the plaintiff,” Duke Power Co. v. Carolina Environmental Study Group, 438 U.S. 59,] 72 [98 S.Ct. 2620, 2630, 57 L.Ed.2d 595 (1978)], quoting Warth v. Seldin, 422 U.S. 490, 501 [95 S.Ct. 2197, 45 L.Ed.2d 343] (1975), and “a ‘fairly traceable’ causal connection between the claimed injury and the challenged conduct,” Duke Power Co., supra [438 U.S.], at 72 [98 S.Ct. at 2630], quoting Arlington Heights v. Metropolitan Housing Dev. Corp., 429 U.S. 252, 261 [97 S.Ct. 555, 561, 50 L.Ed.2d 450] (1977).

Larson, 456 U.S. at 239, 102 S.Ct. at 1680.

Except where Congress has, by legislation, expanded standing to the full extent permitted by article III, federal courts must also consider various “prudential principles” which might require a denial of standing. Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99-100, 99 S.Ct. 1601, 1608, 60 L.Ed.2d 66 (1979). Three such prudential considerations have been noted by the Court with some frequency. First, a litigant normally must assert an injury that is peculiar to himself or to a distinct group of which he is a part, rather than one “shared in substantially equal measure by all or a large class of citizens.” Gladstone, 441 U.S. at 100, 99 S.Ct. at 1608 (quoting Warth v. Seldin, 422 U.S. 490, 499, 95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975)). Second, the interests of the plaintiff must be at least “arguably within the zone of interests to be protected or regulated” by the statutory framework within which his claim arises. Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 39 n. 19, 96 S.Ct. 1917, 1925 n. 19, 48 L.Ed.2d 450 (1976) (quoting Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 829, 25 L.Ed.2d 184 (1970)). And third, a plaintiff must assert his own legal interests, rather than those of third parties. Gladstone, 441 U.S. at 100, 99 S.Ct. at 1608.

Although, as just indicated, a plaintiff may not ordinarily assert the rights of third parties, the Court has recognized exceptions to this rule. For instance, a constitutional or statutory provision may grant an express or implied right to seek relief on the basis of the legal rights and interests of others. Warth v. Seldin, 422 U.S. at 501, 95 S.Ct. at 2206 and eases cited therein. Alternatively, a plaintiff with standing to challenge the lawfulness of a statute “is entitled to assert those concomitant rights of third parties that would be ‘diluted or adversely affected’ should [its] constitutional challenge fail and the statute[] remain in force.” Craig v. Boren, 429 U.S. 190, 195, 97 S.Ct. 451, 456, 50 L.Ed.2d 397 (1976) (quoting Griswold v. Connecticut, 381 U.S. 479, 481, 85 S.Ct. 1678, 1680, 14 L.Ed.2d 510 (1965)). This Craig exception was relied upon by the Tenth Circuit in Hejira Corporation v. MacFarlane, 660 F.2d 1356, 1360 (10th Cir.1981). In both Craig and Hejira, the courts took pains to point out that the plaintiff was allowed to assert the rights of third parties only after it had shown that it had standing to assert at least some claims on its own.

With these guidelines in mind, we turn to the standing question presented by this case. Under the facts as stipulated by the parties, Cellarmaster fails to meet even the article III standing requirements. If Cellarmaster has incurred any “distinct and palpable injury,” it has presumably been the reluctance of Kansas residents to purchase wine from nonresident sellers. Yet the parties have not stipulated that any such Kansas resident has been discouraged from purchasing Cellarmaster’s wine by the Director’s interpretation of this Act. Even accepting Cellarmaster’s allegation to that effect, however, we fail to see any causal connection between Cellarmaster’s interpretation of the Act and increased sales of wine to Kansas residents. On the one hand, it seems plausible that a Kansas resident no longer facing the threat of prosecution for evasion of Kansas gallon-age taxes would be more likely to purchase wine from Cellarmaster or other nonresident wine sellers. Counteracting this notion, however, is the fact that Cellarmaster’s interpretation of the Act would force such Kansas residents to pay not only the Missouri gallonage tax, but also the Kansas tax. Kansas residents would thus incur a lower tax burden by buying their wine in Kansas rather than in Missouri. Cellarmaster has offered no evidence whatsoever to indicate that the reduced threat of prosecution outweighs the effect of double taxation. Accordingly, Cellarmaster has failed to establish even the article III standing requirements.

Even assuming Cellarmaster had established the article III requirements, prudential considerations would require us to deny Cellarmaster standing to seek this injunction. Although Cellarmaster alleges that the Director’s interpretation of these statutes violates the U.S. Constitution, the existence of such a violation depends on the proper interpretation of the Kansas Liquor Control Act. We must thus determine whether Cellarmaster’s right to sell wine to Kansas residents at its Missouri stores is arguably within the zone of interests to be protected by the Kansas Liquor Control Act. See Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. at 153, 90 S.Ct. at 829.

We cannot believe that the Kansas legislature had any intention of aiding nonresident wine sellers when it enacted this Act. Not even Cellarmaster makes such a contention. Rather, it contends that the Act was designed to raise State revenues, and that its proposal would further that goal. Kansas would receive gallonage taxes on wine sold not only within Kansas, but also without. Even assuming Cellarmaster’s economic prediction is correct, however, we do not believe that its underlying argument is valid.

The Kansas Supreme Court has described the purposes of this Act as follows:

In its comprehensive scheme of regulating, licensing and taxing alcoholic liquor from the time of its manufacture or importation into the state until its ultimate sale by a licensed retailer for use and consumption, the manifest purpose of the legislature was to channelize the liquor traffic; to minimize the commonly attendant evils; also, to facilitate the collection of revenue. To this end the manufacture, sale, transportation, and possession are permitted only under carefully prescribed conditions, and subject to constant control by the state. All phases of the traffic are declared illegal unless definitely authorized by the act.

State v. Payne, 183 Kan. 396, 402, 327 P.2d 1071, 1077 (1958) (citations omitted). As its name implies, then, the Kansas Liquor Control Act is concerned first and foremost with the control of liquor in the State of Kansas.

The preliminary injunction sought by Cellarmaster would seriously impair this goal of control. As Cellarmaster’s counsel conceded at oral argument, the Director could not permit Cellarmaster to voluntarily collect and remit the Kansas gallonage tax without also granting that privilege to wine sellers in distant states. Although the Director might be able to ensure that Cellar-master actually does collect and remit the full amount of tax, he clearly lacks the resources to police wine sellers located at a great distance from the state. Since wine is exempt from the tax stamp requirement, see K.S.A. 41-502, the Director could not even police the actions of distant wine sellers by inspecting the wine containers once they arrived within the State of Kansas. Cellarmaster’s desired relief would thus undermine the central purpose of this Act.

Although the Payne court also suggested that one of the Act’s purposes was “to facilitate the collection of revenue,” 183 Kan. at 402, 327 P.2d at 1077, the reference does not support Cellarmaster’s argument. Later in the Payne opinion, the court noted:

As has been indicated, [K.S.A.] 41-407 is part of a comprehensive scheme for the control and regulation of the liquor traffic. The fact that it is also a revenue producing measure does not deprive it of its regulatory character. The statute is a legitimate method of effectuating the substantive policies of controlling the distribution, taxation, and sale of alcoholic liquor within the state.

183 Kan. at 405, 327 P.2d at 1079-80 (citations omitted; emphasis added). In other words, the Act is designed to discourage liquor consumption by imposing a tax thereon. The raising of revenue is merely incidental to that goal. Cellarmaster’s desire to increase the amount of wine sold to Kansas residents is thus not even arguably within the zone of interests to be protected by the Act. On the basis of this prudential consideration, we must deny Cellarmaster standing to seek this preliminary injunction.

The other relevant prudential consideration involves the ability of Cellarmaster to challenge the Director’s interpretation on the ground that it injures third parties. At oral argument, Cellarmaster expressly disclaimed any intention of relying on such third-party standing. Cellarmaster’s counsel did express his belief, however, that third-party standing would be available under the circumstances of this motion. We will therefore consider that question at this point.

Cellarmaster points to no statutory or constitutional provision which either expressly or impliedly authorizes such third-party standing. See Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45 L.Ed.2d 343 (1975). Nor is this case analogous to Craig v. Boren. As noted above, the latter case authorizes a plaintiff to rely on the rights of third parties only if the plaintiff has himself established standing to assert his own rights. We have already held that Cellarmaster failed to make such a showing.

In any event, an important factor relied upon by the Craig Court in granting third-party standing is absent here. In Craig, the legal prohibition created by the challenged statute was addressed directly to vendors such as the plaintiff in that case. Had the Craig plaintiff failed to heed the statutory command, she was subject to “sanctions and perhaps loss of license.” Craig, 429 U.S. at 194, 97 S.Ct. at 455. No such sanctions are possible here. The Director disclaims any ability to prevent Cellarmaster from selling wine to Kansas residents. Cellarmaster apparently adopts the same view when it states that “the Director has utterly no control whatsoever over plaintiff’s activities in the State of Missouri, and could not attempt to exert any jurisdiction over plaintiff in Missouri.” Plaintiff’s Brief at 16.

This latter factor was sufficient to convince the United States District Court for the Western District of Missouri that a similarly situated plaintiff had no standing to challenge this same Act. In Berbiglia, Inc. v. Cheney, 249 F.Supp. 258, 262 (W.D.Mo.1965), that court commented as follows:

First, we think that the plaintiff has no standing to raise the question of the constitutionality of the Kansas Act. As a Missouri corporation it has never been adversely, legally affected by the Act. It has never been arrested or prosecuted under the Act, nor has it ever been legally directed or controlled under its provisions.

For the same reason, we hold that Cellar-master has no standing to seek the preliminary injunction described in its motion.

We emphasize that this conclusion is limited to the issues actually raised by the instant motion. Cellarmaster notes that “[ojther aspects of Plaintiff’s Complaint relating to the conducting of wine tasting parties within the state of Kansas are not being addressed in Plaintiff’s Application for Preliminary Injunction.” Plaintiff’s Brief at 2. Conceivably, those wine tasting parties might have subjected Cellarmaster to actual prosecution under the Act. This would explain, for instance, the sequence of events set out in paragraphs 6 and 7 of the Stipulation of Facts. A determination of Cellarmaster’s standing to prosecute the claims contained in the rest of its complaint will be made at the proper time.

V. The Merits of Cellarmaster’s Claim.

Even if Cellarmaster did have standing to challenge the Director’s interpretation of this Act, its challenge would fail. Not only is the Director’s interpretation of the Act perfectly reasonable, it is fully supported by the applicable case law. K.S.A. 41-501(b)(2) clearly defines who may pay the Kansas gallonage tax. It is to be paid “only once” and “by the person in this state or federal area who first manufactures, uses, sells, stores, purchases or receives the alcoholic liquors.” Moreover, the tax “shall be collected and paid to the Director as provided in this act.” Id. (emphasis added). The section then goes on to list only two possible payers of this tax, Kansas manufacturers and Kansas distributors. Nonresident sellers such as Cellarmaster are not mentioned, nor are Kansas consumers.

These limited options are fully consistent with the purposes of the Act. As noted above, the Kansas Supreme Court has held that “all phases of the [liquor] traffic are declared illegal unless definitely authorized by the act.” Payne, 183 Kan. at 402, 327 P.2d at 1077. More to the point, the Payne court held that “[n]o method is provided by the act by which a consumer or possessor of alcoholic liquor for his personal use can pay the gallonage tax.” 183 Kan. at 398, 327 P.2d at 1075. See also Berbiglia, supra, 249 F.Supp. at 263 (“There is no provision in the Act for payment of tax by the consumers.”). Cellarmaster is thus barred from paying the Kansas gallonage tax either in its own right (as a nonresident wine seller) or on behalf of its Kansas customers (as Kansas consumers).

Cellarmaster seeks to distinguish both Payne and Berbiglia on the ground that they were decided when wine was still subject to the tax stamp requirement. We do not accept such a distinction. Rather, we agree with the Director that the tax stamp serves a mere evidentiary function. Where required, the presence of this stamp confirms that the gallonage tax has been paid. The exemption of wine from this requirement has admittedly made it more difficult for the Director to determine whether the required gallonage tax has been paid, but it has not relieved the appropriate parties of their duty to pay this tax. Nor has it altered the identity of those appropriate parties. Cellarmaster may thus derive no support for its position from the enactment of this stamp tax exemption.

VI. Preliminary Injunction Standards.

To obtain a preliminary injunction, of course, Cellarmaster need not establish an absolute right to permanent injunctive relief. In Otero Savings & Loan Ass’n v. Federal Reserve Bank of Kansas City, Missouri, 665 F.2d 275, 278 (10th Cir.1981), the Tenth Circuit set out the following requirements for obtaining a preliminary injunction:

The moving party must establish: (1) substantial likelihood that the movant will eventually prevail on the merits; (2) a showing that the movant will suffer irreparable injury unless the injunction issues; (3) proof that the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) a showing that the injunction, if issued, would not be adverse to the public interest.
* * * * * *
The Tenth Circuit has adopted the Second Circuit’s liberal definition of the “probability of success” requirement. When the other three requirements for a preliminary injunction are satisfied, “it will ordinarily be enough that the plaintiff has raised questions going to the merits so serious, substantial, difficult and doubtful, as to make them a fair ground for litigation and thus for more deliberate investigation.” Continental Oil Co. v. Frontier Refining Co., 338 F.2d 780, 782 (10th Cir.1964) (citing Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d Cir.1953)).

In connection with this motion, we need not examine the last three elements set out above. It is clear to the court that Cellar-master has failed to meet even the more liberal definition of the “probability of success” requirement. The statutory and case law are so clear that we see no “questions going to the merits so serious, substantial, difficult and doubtful, as to make them a fair ground for litigation and thus for more deliberate investigation.” Thus, even if Cellarmaster could establish the other three requirements for a preliminary injunction, we would be forced to deny its motion.

IT IS THEREFORE ORDERED that the motion of plaintiff Cellarmaster Wines of Missouri, Inc., for a preliminary injunction be and hereby is denied.


author: MOTLEY, Chief Judge.

text:
    SHIPPING CORPORATION OF INDIA, LTD., Plaintiff, v. The AMERICAN BUREAU OF SHIPPING, Defendant.
    No. 84 Civ. 1920 (CBM).
    United States District Court, S.D. New York.
    Jan. 22, 1985.

      Healy & Baillie by John P. McMahon, New York City, for plaintiff.
    Kirlin, Campbell & Keating by William J. O’Brien, Thomas R. Daniels, New York City, for defendant.
   OPINION

MOTLEY, Chief Judge.

Plaintiff, The Shipping Corporation of India, Ltd. (hereinafter “SCI”), an Indian corporation with its offices in India, brings this action to recover money damages in the amount of $88,965,086.00, from defendant, American Bureau of Shipping (hereinafter “ABS”) a non-profit corporation formed under a “Special Act” of the State of New York in 1862. SCI alleges that the claimed damages were suffered as a result of the fault, neglect, errors, and omissions of ABS in connection with ABS’ “classification” services.

The action is presently before the court on ABS’s motion to dismiss on the ground of forum non conveniens.

FACTS

ABS is a “classification society” which formulates and publishes rules and standards by which it rates the fitness of vessels for their intended service. ABS’ primary duty is to certify the soundness and seaworthiness of merchant vessels. Classification by a recognized classification society is a prerequisite to registration of merchant vessels and to procurement of insurance upon them and their operations.

The classification process proceeds as follows:

The Classification Process consists of a) the development of Rules, Guides, standards and other criteria for the design and construction of marine vessels and structure, for materials, equipment and machinery, b) the review of design and survey during and after construction to verify compliance with such Rules, Guides, standards or other criteria and c) the assignment and registration of class when such compliance has been verified.

Rule 1.1 of ABS’ “Rules for Building and Classing Steel Vessels” (1980 edition).

SCI owns and operates ocean-going cargo vessels which operate in international commerce, including ports of the United States. Among the merchant vessels SCI owns are the four “Ore-Bulk-Oil” (hereinafter “OBO”), vessels classified by ABS, at issue here.

All four vessels were constructed in Yugoslavia by Brodogradiliste Tvornica Diesel Mortora (hereinafter “Shipyard”). Hulls 254 and 261 were originally ordered by a Swiss corporation but sold to SCI before completion or classification. Hulls 270 and 271 were built directly for SCI.

SCI applied to ABS for classification of the four vessels, using ABS’ standard printed form which bears New York, New York as ABS’ address. Drawings were submitted to ABS’ Genoa office for review and analysis. Smaller scale plans were reviewed at ABS’ offices in England and Germany. ABS surveyors from the Genoa office inspected the four vessels prior to their classification as OBO vessels.

Problems developed after SCI put the four vessels into service as OBO vessels which required remedial measures to be undertaken by ABS. SCI made the final decision on all remedial measures only after conferring and negotiating with ABS’ New York office and overseas staff, and the Shipyard.

The crux of SCI’s complaint is that the vessels were not suited for use or service as OBO vessels because they were incapable of withstanding the normal stress incident to their operation in that capacity. Specifically, SCI alleges fault, neglect, errors, omissions, and breaches of or by ABS, or those for whom it is responsible, in performance of its obligations with respect to:

A. ABS’ formulation of its Rules and standards applicable to ABS’ design review and approval, construction surveys and classification of OBO type vessels;
B. ABS’ application of its Rules and standards to the design review and approval, construction surveys and classification of SCI’s OBO’s;
C. ABS’ neglect or default in specifying and approving corrosion control procedures; and
D. ABS’ services, inspections, structural analyses, investigations and recommendations performed and made during construction and after delivery of SCI’s OBO’s.

ABS brings this motion to dismiss on the ground of forum non conveniens. ABS supports this motion by claiming that none of the significant acts involved in this dispute took place in this jurisdiction and that the proper forum for trial of this matter is in Yugoslavia. ABS further supports its motion by asserting that SCI has an outstanding arbitration proceeding pending in England against the Shipyard. SCI opposes the motion, asserting that New York is not only ABS’ principle place of business, but also where ABS promulgates and interprets its rules and standards.

DISCUSSION

Dismissal of an action on the grounds of forum non conveniens is available only if there exists an “adequate alternative forum that possesses jurisdiction over the entire action and over all the named defendants.” Gibbons v. Udaras na Gaeltachta, 549 F.Supp. 1094, 1120 (S.D.N.Y.1982) [citing Pain v. United Technologies Corp., 637 F.2d 775, 784 (D.C. Cir.1980), cert, denied, 454 U.S. 1128, 102 S.Ct. 980, 71 L.Ed.2d 116 (1981) ].

The decision whether to dismiss an action on the ground of forum non conveniens is committed to the sound discretion of the district court. Piper Aircraft Company v. Reyno, 454 U.S. 235, 257, 102 S.Ct. 252, 266, 70 L.Ed.2d 419 (1981). In exercising that discretion, the court is to weigh certain enumerated factors involving both the private interest of the litigants and the public interest. Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055 (1947); Piper Aircraft Corp., supra, 454 U.S. 235, 102 S.Ct. 252, 70 L.Ed.2d 419.

In Gulf Oil, supra, the Supreme Court articulated the private and public interest that a court must weigh in deciding whether a plaintiffs choice of forum should be rejected on grounds of forum non conveniens. The important considerations with respect to the private interests of the litigants include: relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining willing, witnesses; and all other practical problems that make trial of the case easy, expeditious, and inexpensive. Gulf Oil, 330 U.S. at 508, 67 S.Ct. at 843. The public interest factors that require examination include: administrative difficulties effected by court congestion; the desirability of having localized controversies decided at home; and the avoidance of unnecessary problems in conflicts of law and the application of foreign law itself. Id., at 508-9, 67 S.Ct. at 843. In addition, a court must evaluate the enforceability of a judgment rendered by it, “weigh relative advantages and obstacles to fair trial,” and determine whether the plaintiff has instituted suit in a particular forum with the intent to vex or harass the defendant. Id. at 508, 67 S.Ct. at 843.

The plaintiffs choice of forum should only be disturbed where the balance is strongly in favor of the defendant. Gulf Oil, 330 U.S. at 508, 67 S.Ct. at 843. In sum, the relevant inquiry is whether it would be so much easier and fairer to try the case in an alternate forum than in New York that the balance strongly favors dismissal. Manu International, S.A. v. Avon Products, Inc., 641 F.2d 62, 65 (2d Cir.1981).

The plaintiff contests defendant’s assertion that Yugoslavia is an adequate alternative forum possessing jurisdiction over the entire action and over the defendant. Only upon a determination that Yugoslavia satisfies the jurisdictional requirements may the court consider the previously mentioned factors of private and public interest.

Both parties have submitted affidavits of attorneys qualified to render an opinion on Yugoslav law. These affidavits address the following issues: 1) whether Yugoslav courts have or would take jurisdiction over the action; 2) whether under Yugoslav law there is a procedure similar to impleader under which ABS may file third-party complaint against parties who are alleged to be liable to it in indemnity or are liable for contribution to damages claimed by SCI; 3) whether Yugoslav courts have the power to require witnesses residing in Switzerland and/or Italy to appear for examination in Yugoslavia; 4) what law would Yugoslav courts apply in deciding this action; 5) if Italian law were to apply in this case, whether the Yugoslav courts are familiar with Italian law or would expert evidence of Italian law be required; and 6) whether a foreign defendant corporation must maintain a court registered representative office in Yugoslavia in order for Yugoslav courts to have jurisdiction over matters involving the defendant.

Neither of the legal experts were in agreement as to the Yugoslav courts’ jurisdiction to entertain this action against the defendant. Although both attorneys are highly qualified to render such opinions, this court is of the view that the Yugoslav courts have the power to exercise judicial jurisdiction over the instant action. Therefore, a forum non conveniens dismissal might be possible. However, a forum non conveniens dismissal is only appropriate if the factors of private and public interest strongly favors the defendant.

An examination of the private interest factors articulted in Gulf Oil begins with the relative ease of access to sources of proof. The inconvenience of New York as a forum is exhibited through three factors. These factors are: SCI’s employees and officers reside in India; ABS has documents and records in Yugoslavia and Western Europe; and ABS asserts that it may wish to implead Shipyard or some other foreign third-party defendant. Several factors point to the relative convenience of New York as a forum, including: ABS requires retention of a copy of all plans in New York; ABS’ Principal Surveyor in Genoa during the design approval stage of the building of the vessels, Mr. Borum, is now in New York; and according to the 1977 telex, many ABS New York employees were working on the project during its classification.

With respect to the availability of compulsory process for attendance of unwilling witnesses, most of the witnesses are likely to be employees of ABS and SCI. In addition, since disputed acts took place in many different jurisdictions the availability of compulsory process would be limited no matter where the case is heard.

The cost of obtaining willing witnesses would be expensive in New York, as it would be in any alternative forum since witnesses are scattered among India, Italy, New York, and Yugoslavia. The cost factor incident to obtaining witnesses is not as substantial when viewed in light of SCI’s claim that exceeds $88,000,000.

Practical problems that weigh in favor of dismissal include: the concentration of activity in Yugoslavia, Italy, and India; the limited nexus of activity to the United States; the lack of in personam jurisdiction over the Shipyard should ABS decide to implead them; and the real lack of convenience for SCI in litigating in New York. However, since the parties consistently dealt with each other in English all evidence would need to be translated if the case were tried in Italy or Yugoslavia. The burden of litigating a case in a foreign language has been held to mitigate against dismissal. Manu International, S.A., 641 F.2d at 66.

Moreover, ABS is a New York corporation with its principal place of business being New York City for over one hundred years. ABS formulates and published its classification rules here and subsequently interprets them here. The ultimate authority for ABS rests in New York. These factors are all important public interest concerns pointing towards retention of jurisdiction over the action.

More importantly, ABS’ standards and rules have been afforded statutory effect in the United States. In Re Marine Sulphur Transport Corp., 312 F.Supp. 1081, 1094 (S.D.N.Y.1970), aff’d in part, rev’d in part on other grounds, sub nom. In Re Marine Sulphur Queen, 460 F.2d 89 (2d Cir.), cert. denied, 409 U.S. 982, 93 S.Ct. 318, 34 L.Ed.2d 246 (1972). In addition, the structural analyses performed after delivery of the vessels were performed and directed from New York. Given these factors and the fact that ABS’ rules and standards are promulgated and interpreted here, New York may have the greatest local interest in the adjudication of the issues involved in the dispute.

With respect to conflicts of law considerations, since ABS’ rules and standards are afforded the effect of law in the United States in vessel design and construction matters this forum has a strong policy reason for applying its own law in evaluating ABS’ formulation and implementation of those standards and rules. Even though the construction of the vessels occurred in Yugoslavia and the design review occurred in Italy the issue at hand is whether ABS, acting through its authorized surveyors and investigators in those countries, conformed to its own rules when surveying the construction and evaluating the design. The rules themselves and their implementation are at issue, not the law of a foreign nation. Moreover, ABS’ remedial investigations were centered in and controlled from New York.

Even if foreign law were found to apply to this action, the need to apply foreign law is not itself sufficient reason to apply the doctrine of forum non conveniens. Manu International, S.A., 641 F.2d at 67. The courts of this country are capable of applying foreign law whenever necessary.

The fact that ABS may wish to implead the Shipyard or another third-party defendant must be considered. ABS, however, has neither made it clear that a third-party defendant would be impleaded in this action, nor offered proof that it would have a claim under whatever foreign law it regards applicable, that impleader procedures are available in any of the alternate forums, or that the alternate forums would have jurisdiction over third-party defendants other than those that reside in the forum.

The instant action is similar in one respect to Lynn v. Elizabeth Arden, Inc., 77 Civ. 2031 slip. op. (S.D.N.Y. 1971) (J. Motley), where the defendant alleged that it “might” implead the State of Arizona. Defendant’s motion to dismiss on the ground of forum non conveniens was denied as the court asserted, “[i]t is not clear that Arizona will be impleaded.” In addition, it has recently been held that the defendant's inability to implead third parties is not enough to justify denying the plaintiff its chosen forum. Alpa S.A. Agroindustrial Alemano v. ACLI International, Inc., 573 F.Supp. 1070 at 1077.

Finally, while a foreign plaintiff is entitled to less deference in its choice of forum than a citizen or resident of the United States, see, e.g., Piper Aircraft Company, supra, 454 U.S. at 256 n. 23, 102 S.Ct. at 266 n. 23, in Alegria v. Grand Bassa Tankers, Inc., 336 F. Supp. 401, 403 (S.D.N.Y.1971), the court stated that unless the defendant clearly establishes that it will be unfairly prejudiced, an admiralty action by non-residents should not be dismissed on the ground of forum non conveniens where the defendant maintains a principal place of business within the plaintiff’s chosen forum.

CONCLUSION

ABS’s motion to dismiss on the ground of forum non conveniens is denied. Given that New York is ABS’ principal place of business; the ABS’ rules are formulated and interpreted here, that ABS’ rules are afforded statutory effect in the United States, and that ABS and SCI communicated in English, both the private interests of the litigants and the public concerns involved warrant the retention of the action in the Southern District of New York.

SO ORDERED.

      . Counsel for defendant requested Dragos Jovovic to render an opinion regarding questions of Yugoslav law. In an affidavit dated July 16, 1984, Jovovic concluded that Yugoslav law provided the Yugoslav courts judicial jurisdiction over the action and over the defendant. He stated that Article 60 of the Code of Civil Procedure grants Yugoslav courts specific jurisdiction over foreign corporations as defendants if such defendant has a representative office in Yugoslavia. Article 60 provides as follows:
      In actions against an individual or legal person that has domicile outside of the country with respect to obligations undertaken or which must be performed in the SFRY, complaint may be filed with a Yugoslav court within whose territory is found the person’s permanent representative office in the SFRY or the domicile of the body entrusted with carrying out that person’s business.
      It is uncontested that ABS has a validly registered representative office in Yugoslavia.
      Article 492 of the CCP provides:
      In actions to determine the existence or nonexistence of a contract, the performance or breach of a contract, as well as in actions for damages arising out of failure to perform a contract, in addition to the court of general jurisdiction, also competent is the court in whose territory defendant is required to perform the contract by agreement of the parties.
      Mr. Iovovic opines that the entry into and performance of the Requests for Classification surveys with respect to each of the ships in Yugoslavis by ABS’s offices in Yugoslavia is sufficient to provide the Yugoslav courts jurisdiction pursuant to Article 492.
      Mr. Ivkovic, plaintiff’s expert, states in his affidavit that Yugoslavia courts would not have jurisdiction over this action and the defendant pursuant to Article 492. He believes that due to the "overwhelming contractual obligation of the defendant, the formulation of rules, approval of design, changes etc— Yugoslav court[s] would not accept jurisdiction" on the ground that inspection in the shipyard at Split, Yugoslavia would not be considered the basic obligation of the defendant but rather, merely one of the later phases of ABS’ obligations.