author: COHILL, Chief Judge.

text:
    Donald L. HESS, Plaintiff, v. ALLSTATE INSURANCE COMPANY, Defendant.
    Civ. A. No. 83-1322.
    United States District Court, W.D. Pennsylvania.
    July 31, 1985.

      William P. Chapas, Pittsburgh, Pa., for plaintiff.
    David White, Dickie, McCamey & Chilcote, Pittsburgh, Pa., and William T. Barker, Chicago, 111., for defendant.
   OPINION

COHILL, Chief Judge.

Presently before us is Defendant’s Motion for Partial Summary Judgment. This action was originally filed in the Court of Common Pleas of Allegheny County and removed to the Court pursuant to 28 U.S.C. § 1441. We have jurisdiction based on diversity of citizenship, 28 U.S.C. § 1332. The amount in controversy exceeds $10,-000.

Introduction

Plaintiff in this case claims that a “coordination of benefits” provision in an automobile no-fault insurance policy, which he purchased from Defendant, should not be given effect. The coordination of benefits provision provided that, in return for a reduction in Plaintiff’s insurance premium, Plaintiff’s health insurance would be the primary source of benefits in case of an accident, with Plaintiff’s automobile insurance covering any additional costs. Plaintiff claims that he is entitled to payment from Defendant of the full value of his medical claims, in spite of the coordination of benefits provision, because Defendant’s agent allegedly fraudulently induced him into making the election, and misrepresented or omitted relevant information in selling him the policy.

Plaintiff alleges causes of action based on breach of contract, common law fraud, and violation of the Pennsylvania Unfair Trade Practices Act, 40 Pa.Stat.Ann. 1171 et seq. (Purdon Supp.1984)

Allstate has moved for partial summary judgment as to Plaintiff’s claims for additional medical benefits. While Plaintiff’s original complaint also stated a claim for additional work loss benefits, based on a “stacking” theory, counsel for Plaintiff conceded at oral argument that this claim is no longer valid in light of the decision of the Pennsylvania Supreme Court in Antonovich v. Allstate Insurance Co. — Pa. —, 488 A.2d 571 (1985).

The parties have filed pretrial statements as well as a stipulation of facts. Because we find that there are no material facts in dispute, and because we find Defendant is entitled to judgment as a matter of law, we will grant' Defendant’s motion and enter judgment for Defendant in this case. FACTS

Plaintiff, Donald Hess, resided in Ohio from 1967 to 1969, where he was employed as an insurance agent for Allstate. Stip. II5. He held an automobile insurance policy issued by Allstate while he lived in Ohio. Subsequently, Hess moved to Pennsylvania and left the employ of Allstate. Id. The Ohio policy was transferred to Pennsylvania and remained in effect through July 18, 1975. On that date, Plaintiff’s policy was amended to include no-fault coverage, pursuant to the Pennsylvania No-Fault Motor Vehicle Insurance Act, 40 Pa.Stat.Ann. § 1009.101 et seq. (Purdon Supp.1984), repealed, Act of February 12, 1984, P.L. 26, No. 84-11 as amended by Act of February 12, 198k, P.L. 53, No. 84-12, 1984 Pa.Legis. Serv. 91 (“No-Fault Act”). That policy, as amended, remained in effect until it was cancelled on August 21, 1978.

From September 1, 1978 until September 1, 1980, Plaintiff held an assigned-risk automobile insurance policy issued by Allstate. The policy covered two cars, and was referred to Allstate by the Pennsylvania Automobile Insurance Plan. Id. 116.

On or about July 31, 1980, Allstate sent Plaintiff renewal materials for the policy expiring September 1, 1980, and a letter (the “Takeout Letter”) offering to insure Plaintiff as a regular (non-assigned risk) policyholder at Allstate’s regular rates. Id. II7. The Takeout Letter stated, in part,

DO YOU WISH TO ACCEPT OUR OFFER OF COVERAGE? IF SO, BRING THIS LETTER TO AN ALLSTATE AGENT. THE AGENT WILL BE HAPPY TO EXPLAIN, IN DETAIL, THE COVERAGES, AND BENEFITS AVAILABLE UNDER A POLICY ISSUED BY ALLSTATE INDEMNITY COMPANY. AN AGENT CAN ALSO INITIATE THE ISSUANCE OF A POLICY AT YOUR REQUEST.

Id. See also Stip. Ex. B.

On August 29, 1980, Plaintiff took the Takeout Letter to an Allstate office. Id. ¶ 8. Plaintiff spoke with Janet Haggerty, an Allstate agent, who took Plaintiffs application for a policy of voluntary private passenger insurance. Plaintiff signed the application. Id. Pursuant to the application, Allstate issued Plaintiff a policy which contained a coordination of benefits endorsement. Id.

Section 203 of the No-Fault Act provides, in part,

(b) The owner or operator of a motor vehicle may elect to provide for security in whole or in part for the payment of basic loss benefits through a program, group, contract or other arrangement that would pay to or on behalf of the victim or members of his family residing with him or the survivor of a deceased victim, allowable expense, loss of income, work loss, replacement services loss and survivors loss.
In all such instances, each contract of insurance issued by an insurer shall be construed to contain a provision that all basic loss benefits provided therein shall be in excess of any valid and collectible benefits otherwise provided through such program, group, contract or other arrangement as designated at the election of the owner or operator which shall be primary.
(c) An insurer providing basic loss benefits and tort liability in accordance with the provisions of subsection (b) above shall reduce the cost of such contract of insurance to reflect the anticipated reduction in basic loss benefits payable by the insurer by reason of the election of the owner or operator to provide substitute security.

40 Pa.Stat.Ann. § 1009.203(b), (c).

In order to implement the provisions of section 203 of the No-Fault Act, Allstate developed an endorsement which provides, in part,

Coordination of Benefits In consideration of a reduction in premium and subject to the coverages and limits shown in the declarations, it is agreed that:
1. IF MEDICAL EXPENSES benefits are identified as excess under Coverage VA on the declaration, Allstate shall not be liable to the extent that any elements of loss covered under Personal Injury Protection MEDICAL EXPENSES benefits are paid, payable or required to be provided to or on behalf of the NAMED INSURED or any RELATIVE under the provisions of any valid and collectible
(a) individual, blanket or group accident disability, or hospitalization insurance,
(b) medical or surgical reimbursement plan,
(c) workmen’s compensation law, or similar disability law, or any state or federal government laws, or
(d) automobile or premises insurance affording MEDICAL EXPENSES benefits.

See Stip. Ex. A, Endorsement.

At all times since July 18, 1975, it has been Allstate’s policy to include the endorsement in all policies of Pennsylvania No-Fault insurance issued to vehicle owners or operators who made the election authorized by section 203(b) of the No-Fault Act, and not to include the endorsement in such policies issued to persons not making that election. Id. 14.

Neither Plaintiff nor Defendant’s agent who sold Plaintiff the policy has any current recollection of what, if anything, was said on August 29, 1980 regarding the meaning, significance, and effect of a coordination of benefits election or the resulting inclusion of the endorsement in the Policy purchased. Id. 11 8.

Pursuant to Plaintiff’s application and binder, Allstate issued the policy sued on in this action. Plaintiff received a premium reduction as a result of the coordination of benefits election and the resulting inclusion of the endorsement in the policy. Id.

The policy, including the endorsement, was renewed in March and September 1981. Id. On December 15, 1981, while the policy was in effect, Plaintiff was injured in an automobile accident. Id. ¶ 1. As a result of the accident, Plaintiff incurred and continues to incur substantial medical and rehabilitation expenses which qualify as “allowable expenses” under the No-Fault Act. Id. H 9. At the time of the accident Plaintiff was also covered by a Blue Cross/Blue Shield plan maintained through his employer, which also provided for payment of these expenses. See Stip. Ex. D.

As of the date of the Stipulation entered into by the parties, Blue Cross/Blue Shield had paid benefits in the total amount of $61,807.38, of which $15,364.00 was paid in 1982 under the major medical portion of the Blue Cross/Blue Shield coverage. Id. ¶ 14. The parties further agree that all “allowable expense” incurred by Plaintiff as a result of the accident has been paid by either Allstate or Blue Cross/Blue Shield. Accordingly, the parties agree that if the endorsement is valid and effective, Allstate is not liable for any additional benefits on account of “allowable expense” incurred to date. Id. ¶ 16.

Plaintiffs Claims

Plaintiff claims that Allstate failed to explain to him, either orally or in writing, the effect of the coordination of benefits endorsement, and that his election to include it in the policy was invalid and ineffective. Id. ¶ 2, 10. Plaintiff also claims that Defendant’s agent fraudulently induced Plaintiff to purchase the policy with the coordination of benefits provision. Plaintiff’s Pretrial Statement, at 1.

Specifically, Plaintiff contends that Allstate was obliged to inform him, prior to the making of any coordination of benefits election, of (a) the availability of a double recovery of medical payments arising from both Allstate and Plaintiff’s Blue Cross/Blue Shield plan if no coordination of benefits election was made; and (b) the possibility that medical expense benefits paid under Plaintiff’s Blue Cross/Blue Shield plan as a result of an automobile accident might exhaust or reduce the limits of coverage under that plan and so leave Plaintiff and his family without medical insurance or with less medical insurance applicable to illnesses and injuries unrelated to the use or operation of a motor, vehicle. Id. If 11.

Defendant’s Motion for Summary Judgment

Defendant argues that all of Plaintiff’s claims are based on the allegation that he was misinformed or inadequately informed by Allstate as to the meaning and effect of the endorsement prior to and at the time he elected it, with the result he was unable to make an informed decision as to the election. Defendant’s Motion for Summary Judgment, at 2. Allstate asserts that there is no evidence in the record, apart from Plaintiff’s allegations, of 1) any affirmative misrepresentations regarding the coordination of benefits election; or 2) any failure by Allstate to disclose the relevant facts. Id. at 4. Further, Allstate argues that there is no evidence that Plaintiff was not fully informed as to the effect of the election on double coverage or Plaintiff’s other medical benefits, or that he relied on Allstate to advise him either when making the election or when renewing the policy. Id.

Defendant has moved for summary judgment with respect to the other claims asserted in this action, arguing that they are based on the same facts as Plaintiff’s breach of contract claim. In addition, Allstate argues that the Pennsylvania Unfair Trade Practices Act is inapplicable to the business of insurance.

Standard

Rule 56, provides, in part, that summary judgment shall be entered “if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c).

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest on the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.

Fed.R.Civ.P. 56(e) (emphasis added). See Ness v. Marshall, 660 F.2d 517, 519 (3d Cir.1981).

We are, of course, aware that any doubts as to the existence of genuine issues of material fact are to be resolved against the moving parties. Continental Ins. Co. v. Bodie, 682 F.2d 436, 438 (3d Cir.1982); Hollinger v. Wagner Mining Equipment Co., 667 F.2d 402, 405 (3d Cir.1981). Further, the facts and inferences to be drawn from the facts must be viewed in the light most favorable to the party opposing the motion. Betz Laboratories, Inc. v. Hines, 647 F.2d 402, 404 (3d Cir.1981).

DISCUSSION

It is well established that the language of a contract clause which limits liability coverage must be clear and precise in order to prevent unfair surprise. Bishop v. Washington, 331 Pa.Super. 387, 480 A.2d 1088, 1095 (1984) (citing K & C, Inc. v. Westinghouse Electric Corp., 437 Pa. 303, 308-09, 263 A.2d 390, 393 (1970)). The goal in interpreting an insurance contract, like any contract, is to ascertain the intent of the parties as manifested by the language of the written instrument. Where a provision of a policy is ambiguous, the policy provision is to be construed in favor of the insured and against the insurer, the drafter of the agreement. Where, however, the language of the contract is clear and unambiguous, a court is required to give effect to that language. Votedian v. General Accident Fire & Life Assurance Corp., 330 Pa.Super. 13, 478 A.2d 1324, 1326 (1984) (quoting Standard Venetian Blind

Co. v. American Empire Insurance Co., 503 Pa. 300, 469 A.2d 563, 566 (1983)).

In Standard Venetian Blind the Supreme Court of Pennsylvania held that an insured may not avoid the effect of a clear and unambiguous exclusion clause in an insurance contract by showing that it was either unaware or did not understand the effect of the exclusion. 469 A.2d at 564, 566-67. Standard Venetian Blind thus overruled Hionis v. Northern Mutual Ins. Co., 230 Pa.Super. 511, 327 A.2d 363 (1974), which held that, in order to rely upon an exclusion in an insurance policy, the insurer must show that the insured was aware of and understood its effect. Id. at 517, 327 A.2d at 365. After Standard Venetian Blind, the relative knowledge and understanding of the insured is no longer relevant, provided that the exclusion is clear and conspicuous. See St. Paul Surplus Lines Ins. Co. v. 1401 Dixon’s Inc., 582 F.Supp. 865, 869 (E.D.Pa.1984). The Standard Venetian Blind decision has been given retroactive effect. Short v. Metropolitan Life Ins. Co., 339 Pa.Super. 124, 488 A.2d 341, 343-44 (1985). The only exception, where the Hionis line of cases remains potentially applicable, is where the limitation clause was ambiguous or unconscionable at the time it was made. Standard Venetian Blind, 469 A.2d at 567. See also Haegele v. Pennsylvania General Ins. Co., 330 Pa.Super. 481, 479 A.2d 1005, 1011 (1984).

In the case at bar, Defendant has submitted five affidavits in support of its summary judgment motion. It also relies on the depositions taken in the case.

The affidavit of Janet Haggerty, the Allstate agent who sold Plaintiff the policy in question, states that she took the insurance policy application from Plaintiff on or about August 29, 1980. Haggerty Aff., at 1. Ms. Haggerty states that she does not recall what she and Mr. Hess discussed, but that the policy application reflects that Plaintiff requested coordination of benefits with respect to the medical expense portion of the personal injury protection coverage (“PIP”) included in the policy. Id. See Stip., Ex. C. Ms. Haggerty stated that, prior to the repeal of the No-Fault Act, when selling a policy of insurance, she always inquired whether the prospective insured had medical insurance and, if so, explained the availability of coordination of benefits. Haggerty Aff. at 1. She explained that, if the insured took the regular coverage, Allstate would pay all expenses arising from automobile accidents. Id. She also explained that if a prospective insured chose to coordinate benefits, he would save 40% on his PIP premium and his other medical insurance would be primary, with Allstate providing secondary coverage. Id. at 1-2. Ms. Haggerty stated that this was her routine practice. Id. at 2.

In addition, Ms. Haggerty’s affidavit states that her routine initial explanation of the coordination of benefits option did not address 1) the impact of the option on the prospective insured’s other insurance coverage; 2) whether election of the option might reduce the available insurance under other insurance coverage relating to medical expenses; or 3) whether the insured might be able to obtain benefits under both an automobile policy and other medical insurance if he chose not to coordinate benefits. Id. Ms. Haggerty stated that she has never made any statement regarding the nature and effect of a coordination of benefits election in order to induce anyone to elect the provision unless she was confident the statement was true. She stated that at no time has she ever concealed or withheld any information which she thought a potential insured might wish to know about the nature and effect of a coordination of benefits election. Id.

Defendant also submitted the affidavits of the following Allstate employees: Margaret Spohrer, Communication’s Administrator; George Van Ryan, Product Administration Director; Barry Nicholas, Senior Project Manager, Systems Department; and Gary Laughern, an Actuary specializing in group medical insurance. The affidavits explain Allstate’s regular business practice with respect to the mailing of various informational brochures. The affidavits state that one packet of information, consisting of inserts X1640 and X1415-1, were inserted in all renewal offers sent to all “line 12” policyholders for the year commencing November 1, 1979. Van Ryan Aff. at 1-2 and Ex. 1-3; Nicholas Aff., at 2-3. “Line 12” policies were assigned risk policies such as the one held by Plaintiff in July and August, 1980. See Spohrer Aff. at 1-2. The information explained the coordination of benefits provision. See Van Ryan Aff., Ex. 2. The contents of the mailing packages was spot-checked by supervisory personnel to assure the correct documents were included. Spohrer Aff., at 2.

Mr. Hess stated at his deposition that, as a result of his accident, his memory is very poor. Hess Dep., at 4. He has no recollection of any of the events surrounding his purchase of insurance in August and September, 1980. Id. He does not recall receiving any correspondence in connection with his insurance. Id. at 6. Mr. Hess testified that he received a B.A. in business administration, and had worked as an insurance agent for several years. Id. at 6-7. Mr. Hess was shown a copy of the coordination of benefits provision at his deposition (Dep. Ex. 1) and the mailing packet communication sent to assigned-risk policyholders. (Dep. Ex. 2). When asked to read and state his understanding of Option A, covering Excess Medical Expense (Dep. Ex. 2), Mr. Hess stated:

A. I am reading that it would be that, “Your health insurance plan would pay first,” and it’s what your thing says here and, “Then, your auto insurance would take” — pick up on anything unpaid.
Q. And what does that convey to you regarding what your auto insurance would do about the expenses paid by your other plan?
A. There would be no duplication.

Hess Dep. at 10.

Plaintiff, in response to Defendant’s Motion, generally reasserts the allegations of the Complaint, with no references to the record. See Plaintiff’s Brief, at 1 (“defendant’s agent induced Mr. Hess into purchasing a ... policy of insurance”). Plaintiff refers to no statements which would remotely support an allegation of fraudulent inducement or misrepresentation. Thus, there is no issue of fact with respect to these issues.

We turn to Plaintiff’s theory that Defendant breached its duty of good faith, and thus, the contract, by failing to explain the effects of the coordination of benefits clause. First, Plaintiff has referred to nothing in the record which supports the allegation that the provision was not explained. In contrast to the affidavits submitted by Allstate, Plaintiff’s deposition reveals that he remembers nothing about the facts and circumstances surrounding his purchase of insurance. See generally, Dep. of Donald Hess.

The Court of Appeals for the Third Circuit has repeatedly held that “a party resisting a [Rule 56] motion cannot expect to rely merely upon bare assertions, conclusory allegations or suspicions.” Gans v. Mundy, 762 F.2d 338, 341 (3d Cir.1985) (citing Ness v. Marshall, 660 F.2d 517, 519 (3d Cir.1981)). Moreover, in Gans, the Court held that the burden upon a party opposing the motion is to show a genuine issue of fact exists in light of the appropriate burden of proof. Gans, at 343. Thus, in Gans, where it was plaintiff’s burden to establish, in a legal malpractice action, the standard of care with expert testimony in order to avoid an involuntary dismissal or a directed verdict, plaintiff was required to oppose [the defendant’s] factual averments with expert evidence demonstrating that the [defendant’s] conduct failed to meet the appropriate standard of care. Id. In another recent opinion, the Court emphasized “[i]n the vernacular, [a party] may not “lie doggo” in the summary judgment proceedings ...” Bencivenga v. Western Pennsylvania Teamsters and Employers Pension Fund, 763 F.2d 574 (3d Cir.1985), reh’g and reh’g en banc denied, (3d Cir. July 3, 1985).

The policy language of the limitation is clear on its face. Plaintiff understood the effect of the provision at his deposition, in spite of his impaired mental condition. See Donald Hess Dep. at 10.

Under Pennsylvania law, the insurer would only have to prove that the insured received a copy of the policy containing the clear and unambiguous exclusionary language in order to prevail. See Tonkovic v. State Farm Mutual Automobile Ins. Co., 337 Pa.Super. 123, 486 A.2d 512, 514 (1984). Cases after Standard Venetian Blind have uniformly held that mere allegations of failure of the insurer to explain a clearly-worded limitation are legally insufficient. See, e.g. Antanovich v. Allstate Ins. Co., — Pa. —, 488 A.2d 571, 575 (1985); Haegele v. Pennsylvania General Ins. Co., 330 Pa.Super. 481, 479 A.2d 1005, 1010 (1984); Votedian v. General Accident Fire & Life Assurance Corp., 330 Pa.Super. 13, 478 A.2d 1324, 1328 (1984) (policy provision for set-off of sums previously paid by persons legally responsible for damages given effect; policy language clear and unambiguous). See also Blumenschein v. Security Connecticut Life Ins. Co., 586 F.Supp. 857, 859 (W.D.Pa.1984) (McCune, J.) (court rules prior to trial that plaintiff could not offer evidence that suicide clause of life insurance policy not explained to the decedent at the time he purchased the policy) aff'd, 755 F.2d 916 (3d Cir.1985); St. Paul Surplus Lines Ins. Co. v. 1401 Dixon’s Inc., 582 F.Supp. 865, 868-69 (E.D.Pa.1984) (knowledge and understanding of exclusion not material issue of fact sufficient to defeat motion for summary judgment).

Finally, we reject Plaintiff’s argument that Allstate was under a fiduciary duty to explain purely hypothetical effects on Plaintiff's other medical insurance policies. Where the limitation is clearly worded and unambiguous, the language of the policy controls. See Standard Venetian Blind, supra.

In Lazovick v. Sun Life Ins. Co., 586 F.Supp. 918 (E.D.Pa.1984), an insured purchased a life insurance policy with a standard suicide clause (the “1979 policy”). When the policy lapsed for nonpayment, the insured bought another policy (the “1980 policy”). The insured committed suicide in 1981. In asserting that the two-year suicide clause of the 1980 policy did not govern, and that the 1979 policy controlled, the insured argued that because the insurer, at the time of the purchase of the 1980 policy, failed to explain a conversion option in the 1979 policy, an implied or constructive conversion was effected because of an alleged breach of fiduciary duty. Id. at 922-24. The Court held that, where the conversion provision was conspicuously displayed and unambiguous, the insurance agent was under no fiduciary duty to explain the conversion provision. Id. at 924-25. In addition, the Court held that there was nothing in the summary judgment record which raised a genuine issue of fact as to whether the agent acted as the insured’s agent in the transaction, or in any other confidential relationship with the insured. Id. at 924. Rather, the Court held that the uncontested facts showed that the agent was acting on behalf of the insurance company, selling insurance in an arm’s length transaction. Id. We believe this reasoning applies with equal force here.

In this action, Plaintiff has never denied making the coordination of benefits election. See Stip. 111,10. Moreover, Plaintiff himself had been an insurance agent in the past. Id. 11 5. Hess received a premium reduction as a result of the coordination of benefits provision, Id. 11 8, and renewed the policy twice. Id. There is no allegation that Allstate has not paid benefits due Plaintiff under the policy. Id. 1116. Under the present law, Plaintiff cannot avoid the clear language of the limitation by showing he did understand the limitation or that it was not explained to him. We find Plaintiff’s other arguments without merit.

Finally, we feel compelled to state our feeling that even before Standard Venetian Blind, we would have viewed this as a factually tenuous case. Counsel, by their signature, pursuant to Fed.R.Civ.P. 11, represent that the facts alleged in a complaint are true to the best of their belief at the time of filing. In this case, however unfortunate, Plaintiff had no memory of any facts underlying the claims in this action. With no memory of those facts, we find it difficult to discern the factual basis of the Complaint. CONCLUSION

Because we find that there are no material issues of fact in dispute, and that Defendant is entitled to judgment as a matter of law, we will grant Defendant’s Motion for Partial Summary Judgment as to Plaintiff’s claim for Medical Expenses.

On the basis of the decision in Antanovich v. Allstate Ins. Co., — Pa. —, 488 A.2d 571 (1985), we will enter judgment for Defendant on the Plaintiff’s claim as to stacking of work loss benefits.

Because we find no facts to support a claim based on the Pennsylvania Unfair Practices Act, we will enter judgment for Defendant.


source: Caselaw Access Project

author: GESELL, District Judge.

license: Public Domain

text:
    SIERRA CLUB, et al., Plaintiffs, v. John BLOCK, et al., Defendants.
    Civ. A. No. 85-2226.
    United States District Court, District of Columbia.
    July 31, 1985.

      Douglas L. Honnold, Denver, Colo., Eric P. Jorgensen, Washington, D.C., for plaintiffs.
    Rebecca Donnellan, Dept, of Justice, Washington, D.C., for defendants.
   MEMORANDUM

GESELL, District Judge.

This case challenges the propriety of a government program that involves extensive cutting of trees in four southern wilderness areas. It is presently before the Court on the plaintiffs motion for a preliminary injunction based on alleged violations of the National Environmental Policy Act (NEPA), 42 U.S.C. § 4332, and the Endangered Species Act, 16 U.S.C. §§ 1531-1543. After reviewing extensive affidavits and briefs submitted by the parties and hearing oral argument, the Court finds as follows.

Background

This case places the Court in the middle of an environmental dilemma. The Southern Pine Beetle is killing thousands of acres of pine trees in the southeastern United States. Beetle infestations start with a “spot” (approximately 50 trees or more) of yellowing, dying pine trees that rapidly grows as the beetles reproduce and attack more trees. In order to control the spots the government is cutting the infested trees and creating “buffer” areas by cutting uninfested pine trees around the spots. Thousands of acres of pine trees have already been cut in an effort to control the beetles’ progress and some of the buffer zones extend for miles. The cut trees are sometimes removed or treated with chemicals, but they are often left in the forest untreated. The cutting program is currently being used in the national forests and the national wilderness areas and similar control methods are being followed on private timberlands, at the urging of state and federal authorities. The government maintains that without this cutting program, the southern pine beetle infestations may destroy commercial and environmental value of the pine forests.

The plaintiffs complain that the cutting is destroying national wilderness areas. The government’s control efforts bring in motorized equipment and leave behind fallen timber, stumps and large areas of cleared woodlands, destroying the pristine environment of wilderness forests that have been set aside to be protected from gross human intrusion as a matter of national policy. See Wilderness Act, 16 U.S.C. § 1131(c). Moreover, they argue, there is no scientific proof that the cutting is effective in stopping the beetle. Plaintiffs maintain that it is better to risk loosing the trees to a natural pest like the beetle than to have planned destruction of wilderness areas proceed without full appraisal of its environmental consequences.

In the middle of this controversy is the red-cockaded woodpecker, an endangered species. The woodpecker lives in living pine trees and depends on the pine forests for its habitat. The government maintains that the cutting program is necessary, in part, because it protects the red-cockaded woodpecker from the direct threat posed by beetles killing the pine trees housing woodpecker colonies and from the indirect threat posed by the potential long-range loss of the pine forests. Thus, the government’s program has two principle objectives: to prevent spreading beetle infestations from destroying the commercial value of pine forests adjacent to the wilderness areas and, where red-cockaded woodpecker colonies are known to exist, save the colonies and their habitat. The plaintiffs argue that the government’s cutting of pine trees around woodpecker colonies harms their habitat and has not been shown to have any beneficial effect on the colonies.

Plaintiffs seek to preliminarily enjoin the cutting program in four wilderness areas: Black Creek and Leaf Wilderness area in DeSoto National Forest, Mississippi; Caney Creek Wilderness area in Ouchita National Forest, Arkansas; and Kisatchie Hills Wilderness area in Kistchie Hills National Forest, Louisiana. In initiating these cutting programs, the government has made some effort to comply with NEPA and the Endangered Species Act. Since 1982, three environmental assessment statements (EAS) have been issued, each covering the control program in one of the three national national forests, including the wilderness areas within those forests. All three assessments concluded that the southern pine beetle control program will not result in any significant impact on the environment so no environmental impact statement (EIS) was required in order to comply with NEPA. Prior to these assessments, a programatic EIS on the southern pine beetle control program was completed in 1974. A new programatic EIS is now in progress and is scheduled to appear in draft form in October, 1985. In addition, the Forest Service has engaged in consultations with the Fish and Wildlife Service, pursuant to its obligations under the Endangered Species Act. See 50 C.F.R. § 402.04. These consultations have resulted in special guidelines for conducting the cutting in the vicinity of red-cockaded woodpecker colonies. If these guidelines are followed, the Fish and Wildlife Service believes that the cutting program is “not likely to jeopardize the continued existence of the red-cockaded woodpecker.”

Discussion

1. The National Environmental Policy Act.

In determining whether the Forest Service’s decision not to prepare an EIS is likely to be upheld, the Court is guided by the Council on Environmental Quality’s (CEQ) guidelines on NEPA compliance, 40 C.F.R. §§ 1501-08, and an inquiry into (1) whether the agency took a “hard look” at the environmental problems; (2) whether the agency identified the relevant areas of environmental concern; (3) whether the agency has made a convincing case that the problems it has identified pose an insignificant impact; and (4) whether the agency has convincingly established that changes in the project reduced any significant impact to a minimum. Sierra Club v. United States Department of Transportation, 753 F.2d 120, 127 (D.C.Cir.1985); Cabinet Mountains Wilderness v. Peterson, 685 F.2d 678, 682 (D.C.Cir.1982); Maryland National Capital Park & Planning Commission v. U.S. Postal Service, 487 F.2d 1029, 1040 (D.C.Cir.1973). In short, the Court must determine whether “the agency has supplied convincing reasons why potential impacts are truly insignificant.” 487 F.2d at 1040.

The environmental assessments on the southern pine beetle control program do not appear to meet this standard. None of the environmental statements adequately address the impact of cutting wilderness areas. The 1974 EIS is addressed to cutting programs in forests that are to be harvested for commercial use and does not even attempt to address wilderness values. The more recent EASs only contain a cursory and prefunctory discussion of the wilderness problem. Moreover, under CEQ’s definitions, any action “with effects that may be major” in light of its context and intensity requires a EIS. 40 C.F.R. §§ 1508.18, 1508.25. One could not rationally conclude that cutting thousands of acres of pine trees in a wilderness forest will not have any effects that may be major. See Wyoming Outdoor Coordinating Council v. Butz, 484 F.2d 1244, 1249-50 (10th Cir.1973).

Indeed, the government does not even defend the finding of “no significant impact” in this litigation. Instead the government argues that the assessment statements indicate the 1974 EIS need not be supplemented and that there is an emergency situation which justifies going forward without awaiting the completion of a complete EIS. However, these arguments appear to be post hoc rationalizations since the EASs do not offer any of these reasons as a basis for the conclusion that no EIS was necessary. Moreover, it appears that a new EIS is necessary to supplement the previous statement. The 1974 EIS evaluated a different set of control programs under significantly different circumstances. See 40 C.F.R. § 1502.9(c)(l)(ii). The first of these EASs was issued in 1982 and no emergency has prevented the government from preparing an EIS for three years.

The EASs also appear to have other significant defects. None of them discuss the efficacy of the cutting program, which is particularly important consideration in evaluating the extensive cutting in wilderness areas. If the cutting has a limited or no effect on the number of pine trees lost to beetle infestations, wilderness area policy might be better served by no control. Obvious alternatives to spot cutting suggested in the plaintiffs’ submissions, such as cutting buffers between the wilderness areas and other forests to save commercial timber, have not been examined. Consequently, the Court concludes that the plaintiffs have shown a likelihood of previaling on the merits of this claim.

2. The Endangered Species Act

The government argues that the court lacks jurisdiction over the plaintiffs’ endangered species act claim relating to the effects of the cutting program on the red-cockaded woodpecker because they have failed to comply with the 60-day notice period provided in the statute. 16 U.S.C. § 1540(g)(2)(A). The Sierra Club sent notice of its objections on June 7, 1985. On July 2 the Fish and Wildlife Service replied, indicating its firm belief that the program was in full compliance with the Endangered Species Act and on July 5 the Forest Service sent a reply to the same effect. Plaintiffs filed this suit on July 12. The agencies involved are not reconsidering their position and the government has not alleged or shown any prejudice due to the timing of the notice. Under these circumstances the Court finds that the plaintiffs are in substantial compliance with the notice requirement and justice would not be served by declining jurisdiction to allow the few remaining days to run. Cf. Sierra Club v. Froehlke, 534 F.2d 1289, 1303 (8th Cir.1976).

On the merits, the Court finds that the plaintiff has failed to show a likelihood of proving a “take” of an endangered species to justify preliminary relief under the Act-16 U.S.C. § 1532(19). The information presented to the Court indicates that any threat to the red-cockaded woodpecker’s habitat from the cutting occurs primarily, if not exclusively in the breeding season which ended in mid-July. The plaintiffs were only able to offer one siting of an abandoned colony and there is no indication that the government’s cutting program was responsible for the woodpeckers abandoning this colony. The Forest Service’s consultations with the Fish and Wildlife Service reflect careful consideration of the effect on the woodpeckers and devote special attention to avoiding interference with the woodpeckers’ breeding and foraging. Plaintiffs have been unable to show that the Fish and Wildlife Service’s limitations on cutting near colony sites are inadequate to protect the woodpecker colonies from injury or death. See 50 C.F.R. § 17.3 (defining “harass” and “harm” in the definition of “take”).

3. The Availability of Equitable Relief

Having determined that plaintiffs have shown a likelihood of prevailing on their NEPA claim and have failed to show a likelihood of success on the Endangered Species Act claim, the Court must weigh three additional factors to determine whether a preliminary injunction is available. The Court must examine whether plaintiffs have shown that an injunction is necessary to prevent irreparable injury, whether an injunction will substantially harm other interested parties and whether an injunction is in the public interest. National Association of Farmworkers v. Marshall, 628 F.2d 604, 613 (D.C.Cir.1980); Virginia Petroleum Jobbers Association v. FPC, 259 F.2d 921, 925 (D.C.Cir.1958).

With respect to those areas where the government plans to cut in wilderness areas in order to protect private or public forests, the Court finds that enjoining the cutting program until the government demonstrates that it has complied with NEPA will prevent irreparable harm, will not impose substantial harm on others, and will be in the public interest. The cutting imposes a scar on the wilderness areas that may take 70 years or more to heal. A full consideration of the environmental impacts of this cutting is precisely what NEPA mandates, in the belief that a federal program should not go forward until full consideration is given to these impacts. The government has failed to show that a substantial harm will result if the cutting is enjoined, particularly in light of the fact that no cutting is anticipated in three of the four wilderness areas and preparation of a new EIS is already underway.

Where the government plans to cut solely to protect red-cockaded woodpecker colonies, it is more difficult to determine where the public interest lies. This case poses an environmental Catch 22: concern for preservation of pristine wilderness conflicts with concern for the red-cockaded woodpecker whose habitat may be threatened unless the government cuts down infested wilderness trees. The woodpecker lives in large colonies established only in live pine trees. Thus heavy infestations of the beetle around colony trees may endanger it by destroying its home. At least one colony has reportedly been destroyed by southern pine beetles. Costa Affd. ¶ 4. Two colonies appear to have been saved by the control program. Id. ¶ 7. However, cutting is most effective against the beetle in the hot summer months when it may be most harmful to the woodpecker because this is the woodpecker's breeding season. The woodpecker feeds on southern pine beetles and other insects in standing trees. If too large an area is cut, or too many live infested trees are cut in the clearing process, the forage of the woodpecker will be significantly diminished. Nevertheless, the Fish and Wildlife Service maintains that cutting of infestations, if properly conducted, may benefit the woodpecker.

The plaintiffs urge that even this limited removal of infested areas by spot cutting immediately around a colony be enjoined because it has not been “scientifically” shown that the cutting is effective. Notwithstanding the absence of any discussion of efficacy in the EASs, at this stage the Court is inclined to presume that the cutting must have some effect in retarding the beetles’ immediate attack on a colony. Common sense would seem to suggest this and the government’s submissions contain several ancedotal reports as well as a scientific study that indicates that cutting is effective, at least for short-term control of spot infestations.

In addition, the extensive cutting challenged by the complaint has not been directed at infestations around colony trees. The cutting to protect colonies has been and, by all indications, will continue to be very limited. No colonies have been identified in three of the wilderness areas and there are only about 15-20 in the fourth. The record suggests that there are only a handful of colonies in this area that may be threatened by a heavy infestation that could lead to spot cutting. Costa Affd. 11 6.

Finally, whenever cutting of an infestation around a colony occurs the process is controlled by guidelines developed by the Fish and Wildlife Service as part of its extensive program developed to protect the red-cockaded woodpecker. These guidelines include restrictions on the amount of area that may be cut and the use of chemical treatments. See Cooke Affd., Ex. D, Wildlife Habitat Management Handbook, § 420.39b (1985).

As the government points out the beetle is voracious and will not obey a court injunction. Consequently, concern for the public’s interest in preserving the red-cockaded woodpecker suggests that cutting should be allowed to go forward for this limited purpose. While many scientific questions remain unanswered and more information will be developed when a full NEPA study is made, prevention of cutting to remove infestations of pine beetles immediately around colony trees of the redcockaded woodpecker in conformity with Fish and Wildlife Service guidelines is unnecessary to assure preservation of the wilderness areas and favors this endangered species. The potential harm to the Fish and Wildlife Service’s efforts to ensure the survival of the woodpecker and the public interest in protecting this endangered species indicates that limited spot cutting to save active woodpecker colonies should not be enjoined.

Conclusion

Accordingly, a preliminary injunction will be entered on plaintiff’s NEPA claim to enjoin cutting in wilderness areas but will be limited in recognition of the special public concerns in protecting the red-cockaded woodpecker. Plaintiffs’ request for a preliminary injunction under the Endangered Species Act will be denied since they have failed to show a likelihood of success on the merits and have not shown that equitable considerations justify enjoining cutting to save woodpecker colonies. An appropriate preliminary injunction conforming to this memorandum is attached.

ORDER

It appearing that for the reasons set forth in the accompanying Memorandum the motion for preliminary injunction filed herewith should be granted in part, it is

ORDERED that the defendants, their agents, representatives and others acting on their behalf are enjoined until further order of this Court from cutting any trees pursuant to the southern pine beetle control program in the four wilderness areas known as Black Creek Wilderness area, Leaf Wilderness area, Caney Creek Wilderness area and Kisatchie Hills Wilderness area, provided that the prohibition of this preliminary injunction does not apply to cutting to control beetle infestations in or near active red-cockaded woodpecker colony sites if said cutting is

(a) undertaken for the sole purpose of preventing harm to the red-cockaded woodpeckers, and
(b) conducted in strict accordance with the guidelines presently established by the Fish and Wildlife Service’s Wildlife Habitat Management Manual, and
(c) preceded by due written notice to the Fish and Wildlife Service.

Plaintiffs’ motion for a preliminary injunction under the National Environmental Policy Act is in all other respects denied. Plaintiffs’ motion for a preliminary injunction under the Endangered Species Act is denied. It is further,

ORDERED that if defendants complete a programatic or site-specific Environmental Impact Statement covering the impact of the southern pine beetle program in any or all of the four wilderness areas named above, plaintiffs shall within thirty (30) days show cause, if any, why this preliminary injunction should not be modified or vacated, and it is further

ORDERED that, pursuant to Fed.R. Civ.P. 65(c), the plaintiffs shall post security of twenty dollars ($20.00) cash or bond.

      . Plaintiffs also maintain that the cutting program violates the Wilderness Act, but this claim is not before the Court in this motion for a preliminary injunction.

      . The government argues that laches precludes equitable relief for the plaintiffs because they were aware of the government's plans during the spring and have prejudiced the government by waiting until the "prime” cutting season to bring suit. This argument is without merit. The government admits that no cutting is currently being conducted and only one of the four wilderness areas anticipates renewed cutting in the foreseeable future. Moreover, the government cannot claim any surprise from this suit since Sierra Club filed a similar suit challenging the southern beetle control program in wilderness areas in Texas. Sierra Club v. Block, 614 F.Supp. 134 (E.D.Tx.1985).


author: BUA, District Judge.

text:
    SYSTEMS RESEARCH, INC. and Systems Control, Inc., Plaintiffs, v. RANDOM, INC. and Orvin Nordness, Jr., a/k/a Skip Nordness, Defendants.
    No. 85 C 2507.
    United States District Court, N.D. Illinois, E.D.
    Aug. 1, 1985.

      Mario F. Cirignani, Thomas R. Cirignani & Associates, Chicago, Ill., for plaintiffs.
    David A. McGuire, Stone, McGuire & Benjamin, Chicago, Ill., for defendants.
   MEMORANDUM ORDER

BUA, District Judge.

Before the Court is defendants’ motion to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Jurisdiction is invoked pursuant to 18 U.S.C. § 1964(a) and the doctrine of pendent jurisdiction. For the reasons stated below, defendant’s motion to dismiss is denied.

FACTS

Plaintiffs, Systems Research (“Research”) and Systems Control (“Control”) are both licensed employment agencies engaged in the business of securing employment for persons seeking employment and for employers seeking employees. Since January 1, 1981, Control has been counseling and advising solely on behalf of employers. Both agencies employ placement counselors who interview, advise applicants and employers, and arrange contacts between employers and employees. The plaintiffs are cooperative corporations and are not competitors.

Defendant, Random, Inc. (“Random”) is an executive recruiting agency engaged in the business of securing employees for employers. Random has been a direct competitor of both plaintiffs since September 20, 1980. Defendant Nordness was an employee of plaintiff Control from June 15, 1979 to September 19, 1980. Defendant Nordness is currently the president of Random and its only shareholder, thereby controlling and dominating its corporate activities.

From April 18, 1977 to February 15, 1985, Mark Johnson was an employment counselor for both plaintiffs. As an employment counselor, Johnson was paid a percentage of the applicant's gross salary when a job position was filled. By virtue of his position, Mark Johnson stood in a fiduciary relationship with both plaintiffs, owing them the duties of loyalty and fidelity.

Johnson became acquainted with defendant Nordness on about June 15, 1979. Nordness allegedly began to devise and participate in a scheme to defraud plaintiffs as early as April 1982, with the help of Johnson. According to the complaint, this scheme consisted of the payment of money or promises of such payment to Mark Johnson for making available to Nordness the names of applicants without plaintiffs’ consent. The complaint further alleges that once these names were made available to Nordness, he would contact the applicant and arrange an interview with the respective hiring company. Upon a successful placement, Nordness would collect a percentage of the applicant’s gross salary.

In their complaint, plaintiffs allege that the names of applicants contacted by the defendants, the placement fee charged by defendants, and the scheme to defraud was furthered by use of the mails and the telephone, in violation of 18 U.S.C. §§ 1341 and § 1343. Plaintiffs further allege that these violations constitute participation in an enterprise which affected interstate commerce, thus violating 18 U.S.C. § 1961(4), the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Plaintiffs allege an aggregate loss of $37,800 and allege that defendants used this income, derived from a pattern of racketeering activity, in violation of 18 U.S.C. § 1962(a). Several pendent state claims arising under the common law of Illinois are also alleged.

Defendants contend, initially, that plaintiffs fail to plead a “pattern of racketeering activity” as required by 18 U.S.C. § 1961 and, alternately, that the complaint fails to plead the acts of mail and wire fraud with sufficient particularity under Fed.R.Civ.P. 9(b).

DISCUSSION

A. Count I — Failure to Allege a Racketeering Enterprise Injury

In defendants’ brief in support of their motion to dismiss, defendants contend that Count I of the complaint fails to allege a racketeering enterprise injury in accordance with 18 U.S.C. § 1964(c) which provides that “any person injured in his business or property by reason of a violation of § 1962 of this chapter may sue therefor in any appropriate United States District Court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee.” 18 U.S.C. § 1964(c).

While this motion was being briefed by the parties, the existing case law surrounding what kind of injury is required to satisfy “by reason of a violation of § 1962” was unclear. The Second Circuit, in Sedima, S.P.R.L. v. Imrex Company, Inc., 741 F.2d 482 (2d Cir.1984), rev’d, — U.S.-, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), held that a plaintiff, in order to allege a “racketeering injury,” must show injury “different in kind from that occurring as a result of the predicate acts themselves____” Id. at 496. Under this definition, the injury must have been caused by “an activity which RICO was designed to deter.” Id. The Seventh Circuit, however, in Haroco v. American National Bank, 747 F.2d 384 (7th Cir.1984), aff'd, — U.S.-, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985), chose to follow the less demanding “pattern resulting from the predicate acts” standard. Obviously the two are not consistent and defendants implore this Court to either follow the Second Circuit or stay its determination until the Supreme Court has decided the issue. As the Supreme Court has timely made its determination in favor of the Seventh Circuit interpretation, this is no longer an issue.

In Sedima, S.P.R.L. v. Imrex Co., Inc., — U.S. -, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), the Supreme Court reversed the Second Circuit’s holding in Sedima, stating that racketeering activity is to be construed as “no more and no less than commission of a predicate act” and that if the defendant “engages in a pattern of racketeering activity forbidden by these provisions, and the racketeering activities injure the plaintiff in his business or property, the plaintiff has a claim under § 1964(c).” Id. at-, 105 S.Ct. at 3286. The Court held that “a violation of § 1962(c).. .requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Id. at-, 105 S.Ct. at 3286 (footnote omitted).

Applying this standard to the instant case, it is clear that the plaintiffs have alleged a sufficient pattern of racketeering activity to satisfy the Seventh Circuit, and now the Supreme Court, standard. In order to “conduct or participate,” a defendant must be “enabled to commit predicate offenses solely by virtue of his position in the enterprise or involvement in or control over the affairs of the enterprise.” United States v. Scotto, 641 F.2d 47 (2d Cir.1980). Plaintiffs allege in paragraph 13 of the complaint that defendant is the president and single shareholder of Random and that he controls all its activities. The second requirement, that of conducting an “enterprise,” is defined by the statute as “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). Plaintiffs satisfy this requirement by alleging, in paragraph 9 of the complaint, that the defendant is a corporation under Illinois law. Finally, a pattern of racketeering activity must be alleged. The Court in Sedima held that the predicate acts alleged must be sufficiently related to constitute a pattern and that the acts be of the kind RICO was designed to deter or, more precisely, those listed in the statute. Sedima, supra, — U.S. at-, 105 S.Ct. at 3286. In paragraphs 24 and 25 of the complaint, plaintiffs allege that on two or more occasions defendants used the mails and the wires in conducting the enterprise involved. Since mail and wire fraud are listed under § 1962 as prohibited activities, and are alleged to be related to the scheme to divert applicants from the plaintiffs, this element is satisfied.

B. Count I — Sufficiency of the Allegations — Particularity and Rule 9(b)

Defendants alternately contend that the complaint fails to satisfy the particularity requirement for pleading fraud under Rule 9(b), of the Federal Rules of Civil Procedure. Defendants argue that plaintiffs’ complaint is insufficient because it does not identify each of the mailings and telephone conversations used in furtherance of the fraud. In order to determine the adequacy of the pleadings in this respect, the Court must consider both Rule 9(b) and the statutes governing mail fraud (18 U.S.C. § 1341) and wire fraud (18 U.S.C. § 1343).

Rule 9(b) governs the pleading of a violation involving fraud and reads as follows:

In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other conditions of mind of a person may be averred generally.

It is important, however, to note that since the motion before the court is one of dismissal for failure to state a claim, the allegations must be taken as true and the facts must be viewed in a light most favorable to the plaintiff. Powe v. City of Chicago, 664 F.2d 639, 642 (7th Cir.1981).

The court in Tomera v. Galt, 511 F.2d 504 (7th Cir.1975), explained the purpose of Rule 9(b):

Rule 9 must be read together with Rules 8(a)(2), 8(e)(1), and 8(f), Federal Rules Civil Procedure. Rule 8 requires that a plaintiff gives through his pleadings notice to defendant of the nature of his claims. It urges the plaintiff to make known his claims simply and concisely in short, plain statements. With these principles in mind, the purpose of Rule 9 becomes clear. Rule 9 lists the actions in which slightly more is needed for notice. In a fraud action, a plaintiff need also state ‘with particularity’ the circumstances constituting the fraud.

Id. at 508 (citations omitted).

In Tornera, which involved a securities fraud violation, the court also stated that “... a violation of 10b-5 is selling securities either by omitting to discuss material facts or by making false statements. Tom-era’s first amended complaint relates such a scheme.” Id. at 508.

The “scheme” pleaded in Tornera consisted of:

... On September 26, 1969, Alfred Rodriguez, then president of Astir, S.A. and Technical Director of Candamena, sold her several notes and 80 shares of unregistered stock in the mining companies he promoted. She further alleges defendant informed her that these three companies held valid mine leases in Mexico, were carrying on silver mining operations and processing the ore, and planned to use the funds she invested to further develop the mine property and facilities. In fact, none of the vital information was true.

Id. at 508. The court reasoned that “...these averments describing the bare bones of the fraudulent scheme coupled with Tomera’s allegations that defendant used the mails and other instruments of transportation in interstate commerce state a sufficient rule 10b-5 claim.” Id. The court concluded that the plaintiff's complaint “notified defendants of the nature of her claims, a rule 10b-5 securities fraud, and it alleged the details, a brief sketch of how the fraudulent scheme operated, when and where it occurred, and the participants. This is enough. More information can be gathered through discovery.” Id. at 509. (citing Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). See also Haroco, Inc. v. American National Bank, 747 F.2d 384, 405 (7th Cir.1984), aff'd, — U.S. -, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985).

The Tornera and Haroco courts place emphasis on two areas regarding the issue of particularity. First, there must be adequate notice to the defendant of the charges against him to allow him to plead. Second, the pleadings must establish enough of a “bare bones” scheme to defraud to exceed conclusory allegations. There is a fine distinction between a faulty, conclusory pleading and one that is consistent with our system of pleading and its emphasis on notice rather than fact or issue pleading. The court can reason by analogy that the same two goals exist in a pleading of mail or wire fraud as those of a securities fraud, but it is also helpful to examine those statutes to determine whether all Rule 9(b) requirements have been met in regard to 18 U.S.C. §§ 1341 and 1343.

The mail fraud statute, 18 U.S.C. § 1341, consists of two essential elements: a scheme to defraud and use of the mails in furtherance of the scheme. United States v. George, 477 F.2d 508 (7th Cir.1973). The defendants’ brief recognizes that the wire fraud statute was patterned after the mail fraud statute and was meant to be similarly interpreted, so that the issue of particularity in regard to 18 U.S.C. § 1343 may be determined at once with that of § 1341. United States v. Computer Sciences Corp., 689 F.2d 1181, 1188 (4th Cir.1982).

With all these considerations in mind, not only the “notice” and “more than conclusory allegations” requirements, but the specifics called for by the statutes, the Court examines plaintiffs’ complaint, keeping in mind that in considering a Rule 12(b)(6) motion, “a complaint should not be dismissed unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim that would entitle him to the relief requested.” Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 1081, 31 L.Ed.2d 263 (1972); Conley v. Gibson, 355 U.S. 41, 45-46; 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957).

To show a “scheme to defraud,” plaintiffs allege paragraphs 23, 24, and 25 in the complaint, which serve as the culmination of a complete description of a scheme to deprive plaintiffs of their right to the unfettered services of an employee and the income from his efforts. Paragraph 23 names the individuals used by defendant, companies where those individuals were placed and the resulting placement fees. In paragraph 18 of the complaint, plaintiffs allege a date on which the scheme began, as well as a general description of what was involved, both the services of Mark Johnson and plaintiffs’ right to confidential information. This is sufficient to satisfy the first prong of the test.

Plaintiffs must also show that this scheme was furthered by the use of the mails and wire. Defendants rely on County of Cook v. Midcon Corp., 574 F.Supp. 902, 921 (N.D.Ill.1983), in support of the. inadequacy of plaintiffs’ complaint in this respect. In Midcon, the court noted that “... but for one instance, plaintiffs fail to describe the contents of these mailings, when they were made or how they relate to the alleged scheme to defraud.” Id. at 921. While defendants contend that paragraphs 23-25 are equally insufficient, this Court disagrees. Plaintiffs do describe, indirectly, the content of the mailings by specifying the business context in which they occurred. Paragraphs 5-13 describe the employment placement business and its practice of contacting both employers and employees in order to solicit business. In paragraph 14, plaintiffs further specify that Mark Johnson’s job, in part, consisted of soliciting applicants and employers and that Mark Johnson became involved with defendant as early as April 19, 1982. By paragraphs 24 and 25 there is little question as to the contents of both the letters and the telephone calls alleged; they were clearly solicitous in nature.

As for the dates of the mailings and calls, defendants contend that the exact dates of each must be alleged, relying on County of Cook, supra; Strauss v. United States, 347 F.2d 691 (7th Cir.1965), and United States v. Cobb, 397 F.2d 416 (7th Cir.1968). Strauss and Cobb were criminal indictments and therefore are not applicable to the Rule 9(b) issue in this case. In any event, plaintiffs here have alleged the subject matter, parties contacted, and an approximate date on which the scheme began. Such allegations are sufficient even under the more stringent standards in Cobb and Strauss.

Finally, the court in County of Cook, supra, 574, F.Supp. at 921, required that the mailings relate to the scheme to defraud. Once again, the Court points to the allegations describing business context of employment counseling and its logistics. By setting out the details of the business, plaintiffs have sufficiently alleged the necessary connection between using the mails and wires and the scheme.

This Court further relies on the holding in Haroco v. American National Bank, 747 F.2d 384 (7th Cir.1984), aff'd, — U.S. --, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985). The court held that while Fed.R. Civ.P. 9(b) applies to civil RICO actions involving fraud, the complaint “adequately specified the transactions, the content of the allegedly false representations, and the identities of those involved.” Id. at 405. Most importantly, the complaint “put defendants on fair notice of the time and place of the alleged false representations,” (Id. at 405) and later reasoned that “[t]here would have been little point in requiring plaintiffs to expand the complaint by also identifying each notice which included an interest rate.” Id. at 405 (emphasis added.)

In regard to this complaint, this Court finds that defendants will have little difficulty answering the allegations as they now stand. The complaint sets out a scheme to defraud, use of the mails and wires in furtherance of it, and sufficient facts to put defendants on notice of the charges. Additionally, the Court will exercise its discretion and accept jurisdiction over the pendent state law claims pursuant to the doctrine of pendent jurisdiction.

CONCLUSION

For all the above reasons, defendants’ motion to dismiss is denied.

IT IS SO ORDERED.

      . 18 U.S.C.A. § 1341 provides:
      Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimate or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or other authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Post Office Department, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing, shall be fined not more than $1,000 or imprisoned not more than five years, or both.

      . 18 U.S.C. § 1343 provides:

        Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined not more than $1,000 or imprisoned not more than five years, or both.


author: TELESCA, District Judge.

text:
    CHURCH OF SCIENTOLOGY INTERNATIONAL, a corporation; Religious Technology Center, a corporation; and Scientology Missions International, a corporation, Plaintiffs, v. The ELMIRA MISSION OF the CHURCH OF SCIENTOLOGY, a corporation, a/k/a Church of Scientology, Mission of Elmira, a/k/a Dianetics Center, a/k/a Scientology Elmira, a/k/a Center for Creative Learning; Harry Palmer, an individual; and Avra Honey-Smith, an individual, Defendants.
    No. CIV-85-412T.
    United States District Court, W.D. New York.
    Aug. 1, 1985.

      Harris, Beach, Wilcox, Rubin & Levey, Rochester, N.Y. (Kevin J. Arquit, Rochester, N.Y., of counsel), for plaintiffs.
    Weidman & Jordan, Rochester, N.Y. (Mark S. Nunn, Rochester, N.Y., of counsel), for defendants.
   TELESCA, District Judge.

For over a decade, defendant Harry Palmer has been the operator and President of the Elmira Mission of the Church of Scientology. The Elmira Mission operated for many years with the blessings of the highest church officials until 1984, when the Elmira Chapter ceased paying its regular tithes to the mother church in California, Scientology Missions International. Within a few months, Mr. Palmer was notified by the Religious Technology Center (which purports to be the owner and protector of the trademarks associated with the religion of Scientology) that he had violated the obligations of his license agreement. After the parties failed in attempts at private dispute resolution, including arbitration, the Church of Scientology International brought the matter to this Court.

According to the complaint, the Elmira Mission of the Church of Scientology is presently using the “Scientology” trade-name and marks without the authorization of the church organization, and is therefore infringing plaintiffs’ rights under the Federal Trademark Act of 1946. Consequently, plaintiffs now move this Court for a preliminary injunction to restrain defendants from further infringement during the pendency of this lawsuit. For the reasons set forth below, that request must be denied.

DISCUSSION

I.

“Perhaps the single most important prerequisite for the issuance of a preliminary injunction is a demonstration that if it is not granted the applicant is likely to suffer irreparable harm before a decision on the merits can be rendered.” Citibank, N.A. v. Citytrust, 756 F.2d 273, 275 (2d Cir.1985) {quoting 11 Wright and Miller, Federal Practice and Procedure, Section 2948, at 431 (1973)). Plaintiffs have made no serious attempt to explain with evidentiary detail how that requirement might be satisfied under the particular facts of this case. Rather, plaintiffs have placed their primary reliance on the argument that the elements of “irreparable harm” are established in a trademark action simply by a showing of the likelihood of plaintiff’s success on the merits. Plaintiffs apparently take the position that they must be entitled to a preliminary injunction if they succeed in demonstrating a likelihood of success on their trademark claim, since such a showing would entail, as a matter of law, a conclusive and irrebuttable presumption of possible irreparable injury. Although the defendants have never contested that position, I draw a contrary conclusion from my reading of the applicable case law.

When a plaintiff seeks a preliminary injunction for violations of trademark or copyright law, it is now well settled in this Circuit that “allegations of irreparable injury need not be very detailed”, because normally such injury can be presumed from infringement. Wainwright Securities, Inc. v. Wall Street Transcript Corporation, 558 F.2d 91, 94 (2d Cir.1977) (copyright), cert. denied, 434 U.S. 1014, 98 S.Ct. 730, 54 L.Ed.2d 759 (1978). Due to the unique role played by a trademark in commerce, and the difficulties in measuring the value of the goodwill that it represents, there is a virtually insurmountable presumption that irreparable harm is at least possible (if not likely) where infringement is not enjoined. Consequently, when a plaintiff establishes a likelihood of success in a trademark infringement action, by demonstrating that defendant’s use of a mark is likely to cause confusion or mistake, the courts in this Circuit will almost routinely find the possibility of irreparable harm and grant preliminary injunctive relief.

In P. Daussa Corp. v. Sutton Cosmetics (P.R.) Inc., 462 F.2d 134, 136 (2d Cir.1972), the Court of Appeals announced that, “in trademark cases, confusing similarity between marks is sufficient injury to warrant the issuance of a preliminary injunction”. Reasoning that “an injunction will issue” when an infringing mark is likely to cause confusion, the Second Circuit held that the District Court Judge below had abused her discretion in denying a preliminary injunction on the ground that the plaintiff had failed to show the necessary “irreparable injury”. Id. Accord, Consumers Union of United States, Inc. v. General Signal Corp., 724 F.2d 1044, 1052 (2d Cir.1983) (“A preliminary injunction will issue where an advertisement creates a reasonable likelihood of confusion by consumers regarding the origin or sponsorship of the product”), cert. denied, — U.S.-, 105 S.Ct. 100, 83 L.Ed.2d 45 (1984); Coca-Cola Company v. Tropicana Products, Inc., 690 F.2d 312, 317 (2d Cir.1982) (Holding that statistical tests provided “sufficient evidence of a risk of irreparable harm because they demonstrate that a significant number of consumers would be likely to be misled”); Matter of Vuitton et Fils S.A., 606 F.2d 1, 4 (2d Cir.1979) (“In a trademark infringement case such as this, a substantial likelihood of confusion constitutes, in and of itself, irreparable injury sufficient to satisfy the requirements of Rule 65(b)(1)”); American Home Products Corporation v. Johnson Chemical Company, Inc., 589 F.2d 103, 106 (2d Cir.1978).

In reliance on these and similar pronouncements, many District Courts in this Circuit have held that the requisite showing of possible irreparable injury follows as a matter of course where there is a likelihood of consumer confusion. Tavaro S.A. v. Jolson, 591 F.Supp. 846, 853-54 (S.D.N.Y.1984); Camp Beverly Hills, Inc. v. Camp Central Park, Inc., 217 U.S.P.Q. 783, 785 (S.D.N.Y.1982); Cuisinarts, Inc. v. Robot-Coupe International Corp., 509 F.Supp. 1036, 1044-45 (S.D.N.Y.1981); Lacoste Alligator S.A. v. F. Saltstein, Inc., 216 U.S.P.Q. 985 (S.D.N.Y.1981).

In a pair of recent trademark decisions, however, the Second Circuit Court of Appeals has now made it clear that it will demand a slightly more discriminating analysis of the requirements for a preliminary injunction. See Citibank, N.A. v. Citytrust, 756 F.2d 273 (2d Cir.1985) and Bell & Howell: Mamiya Company v. Masel Supply Company Corp., 719 F.2d 42 (2d Cir.1983). In both cases, the District Courts below had found that the plaintiffs had satisfied their burden of demonstrating a likelihood of confusion. Consequently, in keeping with what had become the customary practice within this Circuit, both District Courts granted preliminary injunctions against continued infringement without any extended discussion or explicit findings with respect to irreparable harm. In both cases, however, the Court of Appeals vacated the preliminary injunction as an abuse of discretion, on the grounds that the District Court had failed to adequately consider whether there was a sufficient factual foundation for any presumption of possible irreparable harm. Without deciding whether the plaintiffs were likely to prevail on the question of trademark infringement, the Second Circuit decided in both cases that the type of “confusion” found by the District Court did not support an inference of possible irreparable injury.

Accordingly, although the inference of possible irreparable harm is nearly inexorable when a likelihood of confusion is established, that presumption may be rebutted. Citibank, supra, 756 F.2d at 276; Dow Jones and Company, Inc. v. Board of Trade of the City of Chicago, 546 F.Supp. 113, 117 (S.D.N.Y.1982) (copyright). As Chief Judge Henry J. Friendly observed, in defining the standard for preliminary injunctive relief against trademark infringement: “Where there is, then, such high probability of confusion, injury irreparable in the sense that it may not be fully compensable in damages almost inevitably follows.” Omega Importing Corp. v. Petri-Kine Camera Company, 451 F.2d 1190, 1195 (2d Cir.1971) (emphasis added). This conclusion is compelled by the fundamental principles of equity jurisprudence, since a rigid and irrebuttable presumption of irreparable harm would violate the well-established maxim that “equitable relief must, by its very nature, be tailored to the facts of a particular dispute”. Joseph Scott Company v. Scott Swimming Pools, Inc., 764 F.2d 62, 63 (2d Cir.1985). The Second Circuit has repeatedly observed that suits demanding injunctive relief against trademark infringement require a “comprehensive analysis of all the relevant facts and circumstances”, Vitarroz v. Borden, Inc., 644 F.2d 960, 968 (2d Cir.1981), since “each trademark infringement case presents its own unique set of facts”. Thompsom Medical Co., Inc. v. Pfizer, Inc., 753 F.2d 208, 214 (2d Cir.1985).

For the foregoing reasons, I hold that a plaintiff who demonstrates a likelihood of success in a trademark infringement action will “almost inevitably” be entitled to a presumption of possible irreparable injury adequate to sustain the granting of a preliminary injunction, but that inference must always remain open to rebuttal. Consequently; before granting a preliminary injunction against trademark infringement, a Federal Judge must first be satisfied that the reasoning traditionally underlying the ordinary presumption of “irreparable harm” is consistent with the unique facts and circumstances of the particular case. This duty exists even where, as here, the party opposing the injunction has made no serious attempt to explain why that ordinary presumption might be inapplicable. Accordingly, I now turn to the question of whether there is any realistic possibility that the infringing activities alleged in this case, if not enjoined during the pendency of this lawsuit, might cause harm which is “irreparable” in the sense that it cannot be fully compensated by legal remedies.

II.

To prevail on their claim for federal trademark infringement, plaintiffs will be required to prove that the defendants’ business activities are “likely to cause confusion, or to cause mistake, or to deceive”. 15 U.S.C. Section 1114(1). In trademark cases where the plaintiff appears likely to prevail on the merits, the courts of this Circuit will normally presume that such “confusion”, if not enjoined, will be likely to cause irreparable economic injury. Generally speaking, that possibility of irreparable harm may be created in two different ways: by the defendant’s exploitation of protected trademarks for its own advantage, or by the defendant’s corruption or dilution of the value of the goodwill and reputation associated with that trademark. Both of those possibilities must now be considered individually in the context of this particular factual situation.

A.

The most common economic injury of trademark infringement occurs when the infringer exploits the value of its competitor’s trademark in an effort “to divert business by misinforming the consumer”. Sutton Cosmetics v. Lander Company, 455 F.2d 285, 288 (2d Cir.1972). The result for the trademark owner may be a direct loss of sales, since many consumers are deceived or confused into associating the infringer’s product or service with the trademark. Although the injured trademark owner would be entitled to recover the profits on the infringing items, the lost profits may not be fully compensable in monetary damages, since it is “notoriously difficult” to prove the loss of sales due to infringement. Omega Importing Corp., supra, 451 F.2d at 1195. Consequently, the ordinary presumption of irreparable harm is valid where a competitor’s activities are likely to “mislead consumers and, as a consequence, cause them to shift their purchases from plaintiff’s product to defendant’s”. Coca-Cola Company, supra, 690 F.2d at 317. Accord, Wainwright Securities, supra, 558 F.2d at 94 (copyright).

In the present case, there appears to be no likelihood that defendants’ allegedly infringing activities would directly divert any business from the plaintiffs, since there is no evidence that the parties are in direct economic competition. The plaintiffs have never denied or contradicted the sworn deposition testimony of defendant Harry Palmer that the Elmira Mission of the Church of Scientology is the only Scientology mission in that city, and that “[tjhere is no other Scientology organization in Elmira to compete with”. (Palmer deposition at 38.) Mr. Palmer also testified, and plaintiffs’ counsel conceded at oral argument, that the Elmira Mission is the only Church of Scientology within a radius of almost 150 miles of that town.

All of the evidence presented to this Court indicates that the impact of the Elmira Mission’s activities is entirely confined to an area where the plaintiffs have had no competing business interests at all. These factors suggest that any diversion of plaintiffs’ sales by defendants’ competition will be minimal at best, easily calculated, and readily compensated by monetary damages. I therefore must conclude that there is no realistic possibility that the Elmira Mission might irreparably injure the Church of Scientology by directly reducing the demand for plaintiffs’ services.

This conclusion is compelled by the decision of the Second Circuit Court of Appeals in Sutton Cosmetics, supra, 455 F.2d at 286, in which the court upheld a preliminary injunction against apparent trademark infringement, “[w]ith the single modification of limiting the geographical scope of the injunction to the areas in which [the plaintiff] has sold”. The court reasoned that:

A preliminary injunction under Section 43(a) of the Lanham Act will issue only on a showing of a clear likelihood of success on the merits and irreparable injury, and [plaintiff] cannot be irreparably injured by [defendant’s] sales in markets in which [plaintiff] does not itself sell. Accordingly, we hold that the order must be modified to encompass only [those geographical] areas in which the district court finds that [plaintiff] was making sales at the time of the suit.

Id., at 288-289 (footnote and citation omitted). Applying that standard to the instant case, the Church of Scientology’s request for a preliminary injunction must be denied altogether.

B.

Even where the parties to a trademark action are not direct economic competitors, irreparable injury is often found where the infringer’s activities threaten to injure the economic value of the goodwill and reputation associated with the trademark. If consumers are confused into “mistaking] defendants’’inferior goods for those of plaintiffs”, the resulting loss of goodwill may not be easily translated into money damages. LaCoste Alligator, supra, 216 U.S.P.Q. at 989. Consequently, “if an infringer’s product is of poor quality, or simply not worth the price, a more lasting but not readily measurable injury may be inflicted on the plaintiff’s reputation in the market”. Omega Importing Corp., supra, 451 F.2d at 1195. Finally, infringers may also undermine the value of a trademark by diluting its distinctiveness, and the resulting confusion “may cause purchasers to refrain from buying either product and to turn to those of other competitors”. Id. Once again, however, the unusual and undisputed circumstances of this ease apparently rule out any possibility that the Elmira Mission might irreparably injure the Church of Scientology in any of these ways.

First of all, there is no possibility that the Elmira Mission might confuse or deceive anyone into a “mistaken” impression that the Church of Scientology International has authorized individual churches and missions to deliver Scientology services and materials on a local basis. On the contrary, plaintiffs concede that they have licensed 33 churches and over 80 missions of Scientology in the United States alone, and each uses the term “Church of Scientology” as a part of its name. (Affidavit of Warren McShane para. 5).

Furthermore, plaintiffs have never even alleged, much less offered any evidence, that the courses and services offered by the Elmira Mission are in any way inferior to, or even different from, those being provided by authorized missions and churches. Indeed, all of the available evidence points to a contrary conclusion. Plaintiffs concede that the Elmira Mission was an authorized mission of the Church of Scientology “for many years and until at least 1982”, at which time the Elmira Mission was granted by Scientology Missions International a written license to use the assorted trademarks owned by the Church. Plaintiffs further concede that the Elmira Mission was authorized and licensed to use the trademarks and service marks of the religion, including the name “Scientology”, “until relatively recently”. Yet, despite these admissions, the plaintiffs have never denied or drawn into serious question the testimony of Harry Palmer that the Elmira Mission has been providing the same Scientology training and courses for more than a decade. Plaintiffs have offered neither allegations nor evidence to dispute Palmer’s testimony that the Elmira Mission is still offering the same services it provided during the decade when it operated with the blessings and authorization of top Church officials. Indeed, when asked by this Court whether the defendants are presently teaching Scientology in accordance with the established tenets of the religion, plaintiffs’ counsel replied, “We do not know what they are teaching.” (Tr. oral arg. 11).

In fact, however, plaintiffs have a rather accurate idea of what the defendants are teaching at the Elmira Mission of the Church of Scientology. Along with this motion for a preliminary injunction, plaintiffs filed on the same day the affidavit of Celeste DeFiore, a student at Elmira College who visited the Elmira Mission on a number of occasions beginning in late 1984, months after the defendants had allegedly repudiated their license agreement. Her affidavit contains a detailed narration of what she was shown, sold, and taught at the Mission, and includes a number of exhibits of pamphlets and brochures that she was sold or given by the defendants. Those pamphlets purport to quote heavily from, and appear to promote the sale of, books and materials marketed by the Church of Scientology. In light of the considerable detail provided to the plaintiffs by this affidavit about the “Scientology” courses and services offered at the Elmira Mission, it is extremely significant that plaintiffs have never alleged that those courses or programs deviate in any way from the true teachings of the Church, or from the courses taught by the Elmira Mission during the 10 year period when it enjoyed the favor of the Mother Church.

For the foregoing reasons, I conclude that there is no realistic possibility that any consumer might be “confused” or “deceived” into believing that the form and the substance of the courses offered by the Elmira Mission have met the approval of the Church of Scientology. All of the available evidence shows that such an impression would not be mistaken, since the defendants’ practices, until very recently, enjoyed the authorization of the Church for many years. The only respect in which the Elmira Mission is now allegedly in breach of its license agreement, and the only reason offered by the plaintiffs for their sudden refusal to continue sponsoring that Mission, is the fact that the defendants have not paid their tithes to the plaintiffs since July, 1984. (Affidavit of Gerald Laws, para. 3.) Consequently, if the Elmira Mission is allowed to continue its allegedly infringing use of the “Scientology” name and trademarks during the pendency of this lawsuit, some consumers might be “deceived” or “confused” at most into believing- that the Mission has paid up all of its debts to the Church headquarters in California. That sort of “confusion” may well be actionable as a trademark violation, but it obviously poses absolutely no danger of irreparable harm to the goodwill and reputation enjoyed by the plaintiffs’ trademarks.

In this respect, the present case is quite similar to the factual pattern involved in Bell & Howell: Mamiya Company v. Masel Supply Company, 548 F.Supp. 1063 (E.D.N.Y.1982), reversed, 719 F.2d 42 (2d Cir.1983). The District Court in that case found a “substantial likelihood” that the public might be led to confuse an unauthorized importer of Japanese cameras with the American company which actually owned the legitimate and exclusive rights to distribute those cameras in this country. Id., 548 F.Supp. at 1079. Without reaching the merits or questioning that finding by the District Court, the Second Circuit Court of Appeals concluded that irreparable injury had not been demonstrated, since the plaintiff had not shown that the sale of the camera by an allegedly unauthorized distributor was “likely to cause any consumer to be misled about the product he or she purchases”. Id., 719 F.2d at 46 (emphasis added). In so doing, the Court of Appeals implicitly concluded (as I hold in this case) that a trademark violation does not pose any threat of irreparable injury merely because consumers are “confused” into believing that they are dealing with an authorized or licensed distributor.

In summary, although the facts alleged by the plaintiffs in this case may well satisfy the legal elements for a case of trademark infringement, the economic character of this case bears little resemblance to that of the traditional trademark infringement situation. From the perspective of potential economic consequences, the Elmira Mission’s alleged “infringement” is actually much closer to the case of a bookstore which orders and retails authentic “Scientology” books without paying the publisher for the books. Nothing could be further from irreparable injury.

CONCLUSION

For the reasons set forth above, I conclude that the version of the facts alleged by plaintiffs in this case, even if true, fails to create any possibility that plaintiffs might be irreparably injured if the Elmira Mission is not enjoined from its allegedly infringing use of the “Scientology” trademarks during the pendency of this lawsuit. For that reason, and for the reasons outlined in this Court’s oral decision at the argument of this motion on June 5, 1985, the plaintiffs’ motion for preliminary injunctive relief must be denied. It is therefore unnecessary for me at this time to reach the merits of plaintiffs’ trademark claims, or to decide any of the arguments advanced by the defendants in opposition to this motion.

ALL OF THE ABOVE IS SO ORDERED.

      . Plaintiffs also assert additional claims arising under New York State law, but have expressly based their application for a preliminary injunction solely on their claims for relief under Federal Trademark law.

      . Although the Second Circuit’s decisions in Bell & Howell and Citibank represent a fairly clear departure from prior case law in this Circuit, the issue apparently remains somewhat unsettled. In its most recent pronouncement on this subject, in a decision reached subsequent to oral argument in the instant case, the Second Circuit Court of Appeals stated that, "(i]n a trademark case, irreparable injury will be found” where the plaintiff demonstrates a likelihood of success on the issue of potential consumer confusion. Joseph Scott Company v. Scott Swimming Pools, Inc., 764 F.2d 62, 66 (2d Cir.1985). Accordingly, the Court of Appeals upheld the District Court’s finding of possible irreparable harm (and the issuance of a preliminary injunction) simply on the grounds that confusion seemed likely, without any further discussion as to how that confusion might lead to irreparable injury. Id., at 67.
      This aspect of the Scott decision is not easily reconciled with the other recent decisions by the Second Circuit on this same question, although it is consistent with the substantial body of prior case law. The resolution of this tension requires — and surely deserves — further clarification from the Court of Appeals for this Circuit.

      . In their opposition to this motion, defendants have placed primary reliance on their arguments as to plaintiffs’ likelihood of success on the merits.

        With respect to the possibility of irreparable harm, defendants' primary contention has been simply that plaintiffs have failed to meet their burden of proof, even though defendants have never disputed plaintiffs’ position that such a possibility can normally be inferred from the likelihood of success on the merits. Beyond that, defendants’ only argument as to irreparable injury has been their assertion, without the citation of any legal authority, that the Church of Scientology is too large to be injured economically, and too notorious to suffer any further damage to the commercial value of its good will and reputation.
      Fortunately for the defendants, my disposition of the issues raised in this opinion renders it unnecessary for me to rule on any of those arguments.

      . Mr. Palmer testified that the Elmira Mission is the only Scientology Center between Buffalo and New York City. According to data compiled and released by the Auto Club of Elmira, that city is a drive of 144 miles from Buffalo, and 240 miles from New York City. These facts are a proper matter for judicial notice. Federal Rules of Evidence 201.

      . It is noteworthy that, in this respect, the Sutton decision is also inconsistent with the plaintiffs’ argument (see Part I of this decision) that a showing of plaintiffs’ likelihood of success in a trademark action necessarily entails the possibility of irreparable harm and the propriety of preliminary injunctive relief.

      . I must therefore conclude, as the Court of Appeals did in Bell & Howell, supra, 719 F.2d at 46, that "there would appear to be ... no significant likelihood of damage to [the plaintiff’s] reputation" since thus far there has been no evidence that the courses and instruction offered by the Elmira Mission are inferior to those sold by the Church of Scientology.

      . Plaintiffs’ Memorandum dated May 2, 1985, at 4.

      . Affidavit of Warren McShane, para. 11.

      . Plaintiffs’ notice of motion and motion for preliminary injunction, dated May 2, 1985, para. 7.

      . Palmer deposition, at 25. In fact, far from questioning Palmer’s assertion that he has been offering the same courses for 12 years, plaintiffs have indicated a willingness to adopt that statement as an admission against defendants’ interest on the issue of infringement. See the affidavit of Kevin J. Arquit, sworn to May 29, 1985, at p. 4.

      . Of course, that aspect of this case (like the fact, discussed in part Il.A. of this decision, that the parties are not directly competing in the same areas) will not necessarily preclude the plaintiffs from ultimately prevailing on the merits of their federal trademark claims. Nevertheless, for the reasons stated in this opinion, those factors rule out any serious possibility that plaintiffs might be irreparably harmed by the denial of a preliminary injunction at this point.