author: CANNELLA, District Judge.

text:
    George BERNSTEIN, acting for and on Behalf of the COMMISSIONER OF BANKING AND INSURANCE OF The STATE OF VERMONT as Receiver for the purpose of rehabilitation of Ambassador Insurance Company and James P. Corcoran, Superintendent of Insurance of the State of New York as Rehabilitator of Horizon Insurance Company, Plaintiffs, v. CENTAUR INSURANCE COMPANY, Defendant.
    No. 83 Civ. 7989 (JMC).
    United States District Court, S.D. New York.
    Nov. 28, 1984.

      Kroll, Pomerantz & Cameron, New York City (Elliott M. Kroll, New York City, of counsel), for plaintiff George Bernstein.
    Stroock & Stroock & Lavan, New York City (Thomas Farber, New York City, of counsel), for plaintiff James P. Corcoran.
    Cabell, Kennedy & French, New York City (T. Richard Kennedy, New York City, of counsel), for defendant.
   MEMORANDUM AND ORDER

CANNELLA, District Judge.

Defendant’s motion to dismiss the seventh cause of action is granted. Fed.R. Civ.P. 12(b)(6).

Defendant’s motion to stay this action pending arbitration is granted in part and denied in part pending submission of supplemental affidavits. 9 U.S.C. § 3.

BACKGROUND

This diversity action was brought by Ambassador Insurance Company [“Ambassador”] and Horizon Insurance Company [“Horizon”]. On November 10, 1983, the Superior Court of the state of Vermont declared Ambassador insolvent and appointed the Commissioner of Banking and Insurance of Vermont as rehabilitator. On December 7, 1983, the Supreme Court of the State of New York declared Horizon insolvent and appointed the Superintendent of Insurance of New York as rehabilitator. On January 31, 1984, the current plaintiffs, acting on behalf of the rehabilitators of Ambassador and Horizon, were substituted as plaintiffs.

Ambassador alleges seven causes of action based upon certain reinsurance agreements between defendant Centaur Insurance Co. [“Centaur”] as reinsurer and plaintiffs as reinsured. Horizon joins in only the sixth and seventh claims. The first six claims allege nonpayment of amounts due under the agreements and seek damages, an accounting and a declaration of rights. The seventh cause of action alleges that defendant’s actions were “willful, deliberate, without reasonable or probable cause and in bad faith,” for which plaintiffs demand ten million dollars in damages.

Defendant has moved to dismiss plaintiffs’ seventh cause of action on the grounds that it fails to state an independent cause of action and is in fact merely a request for punitive damages, which are not available in a contract action absent willful or malicious fraud.

Defendant also moves to stay the action pending arbitration. It is undisputed that all the reinsurance agreements at issue contain a clause providing: “Any difference of opinion between the Reinsurer and the Company with respect to the interpretation of this certificate or the performance of the obligations under the certificate shall be submitted to arbitration.”

DISCUSSION

1. Motion to Dismiss

Defendant’s motion to dismiss is granted. There is no independent cause of action for punitive damages in New York. See Weir Metro Ambu-Service v. Turner, 57 N.Y.2d 911, 456 N.Y.S.2d 757, 442 N.E.2d 1268 (1982); Bradshaw v. Silversmith, 122 Misc.2d 544, 546, 472 N.Y.S.2d 237, 239 (N.Y.App.Term 1983). Moreover, even if the Court were to construe the complaint liberally and interpret the seventh cause of action as a demand for punitive damages, the demand would fail. Punitive damages are not permitted in a breach of contract action in New York absent “fraud ‘aimed at the public generally’, evincing a ‘high degree of moral turpitude’, and demonstrating ‘such wanton dishonesty as to imply a criminal indifference to civil obligations.’ ” Durham Indus, v. North River Ins. Co., 673 F.2d 37, 41 (2d Cir.1982) (quoting Walker v. Sheldon, 10 N.Y.2d 401, 405, 223 N.Y.S.2d 488, 491, 179 N.E.2d 497, 500 (1961)), cert. denied, 459 U.S. 827, 103 S.Ct. 61, 74 L.Ed.2d 64 (1983). See also Brink’s Inc. v. City of New York, 717 F.2d 700, 704 (2d Cir.1983) (punitive damages unavailable under New York law even for deliberate breach of good faith); Kaufman v. Chase Manhattan Bank, 581 F.Supp. 350, 357 (S.D.N.Y.1984) (no punitive damages permitted when investment fraud not aimed at investing public; no moral turpitude or wanton dishonesty); Garrity v. Lyle Stuart, Inc., 40 N.Y.2d 354, 358, 386 N.Y.S.2d 831, 833, 353 N.E.2d 793, 795 (1976) (punitive damages in contract action available only upon showing of public wrong); Borkowski v. Borkowski, 39 N.Y.2d 982, 982, 387 N.Y.S.2d 233, 233, 355 N.E.2d 287, 287 (1976) (punitive damages may be awarded in case of gross and wanton fraud even absent allegations of public wrong).

Plaintiffs have not alleged any fraud and can suggest no greater public wrong than their own inability to pay the claims of their insured as a result of defendant’s breach. This is not the kind of wrong to the public that requires exemplary damages. See Walker v. Sheldon, 10 N.Y.2d at 404, 223 N.Y.S.2d at 490, 179 N.E.2d at 499 (primary purpose of exemplary damages is to encourage victims to bring suit when they might have been hesitant to appear in a criminal trial against the wrongdoer).

2. Motion for Stay

Defendant’s motion to stay pending arbitration is founded upon section 3 of the Federal Arbitration Act [“Arbitration Act”]. Plaintiffs do not dispute the existence of the arbitration clause or its validity. They oppose the stay on three grounds: (1) New York law precludes arbitration of suits involving insurance companies under rehabilitation; (2) the validity and existence of the reinsurance certificates is an issue for the court; and (3) there exists no arbitrable dispute because defendant has not contested its liability under the certificates.

The first of these arguments is put forward by Horizon and involves only that company. Horizon does not deny that ordinarily the Arbitration Act would preempt state law governing arbitrability of matters in interstate commerce. Id. §§ 1, 3; see Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984) (state cannot create exception to the Arbitration Act). Nor does it dispute that insurance is business in interstate commerce. See United States v. South-Eastern Ass’n, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944). Plaintiff’s argument is founded upon section 2(b) of the McCarran-Ferguson Act, 15 U.S.C. § 1012(b), which provides:

No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, ... unless such Act specifically relates to the business of insurance____

Id.

The McCarran-Ferguson Act exempts from federal law only those state regulations that specifically regulate the “business of insurance”, see Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 99 S.Ct. 1067, 59 L.Ed.2d 261 (1979), and only to the extent that a federal statute would “invalidate, impair or supersede” state laws. 15 U.S.C. § 1012(b); see Miller v. National Fidelity Life Ins. Co. 588 F.2d 185, 187 (5th Cir.1979); Hamilton Life Ins. Co. v. Republic Nat’l Life Ins. Co., 408 F.2d 606, 611 (2d Cir.1969). Moreover, despite defendant’s argument to the contrary, the McCarran-Ferguson Act by its own terms exempts state law from the supremacy of federal law only when the federal law does not specifically address the insurance business. 15 U.S.C. § 1012(b); see Hanover Ins. Co. v. Commissioner, 598 F.2d 1211, 1218 (1st Cir.) cert. denied, 444 U.S. 915, 100 S.Ct. 229, 62 L.Ed.2d 169 (1979).

The Arbitration Act does not specifically address the insurance business. See 9 U.S.C. § 3. The Court assumes, therefore, without deciding, that Congress did not intend the Arbitration Act to be excluded from the scope of the McCarran-Ferguson Act. Thus, if New York has a law that specifically prohibits arbitration in disputes involving the insurance business, arbitration may be precluded in this case.

Plaintiff does not suggest any individual section of the New York Insurance Law that specifically precludes arbitration. Instead, it is argued that New York case law has construed article XVI of the Insurance Law as prohibiting arbitration of claims brought by or against a rehabilitator of an insurance company.

The leading case, In re Knickerbocker Agency, Inc. v. Holz, 4 N.Y.2d 245, 173 N.Y.S.2d 602, 149 N.E.2d 885 (1958), held that, although there is no express statutory provision granting exclusive jurisdiction to the New York Supreme Court in claims brought by a liquidator, the “overall scheme and plan of article XVI” requires such a result. Id. at 252, 173 N.Y.S.2d at 608, 149 N.E.2d at 891. The court further reasoned that this implied grant of exclusive jurisdiction in the Supreme Court further implies a prohibition against arbitration of those claims. Id. The reason for this prohibition, the Court suggested, is that the interests of “creditors, policyholders, stockholders and the public” might be threatened by the fact that “[arbitrators do not have the benefit of judicial instruction on the law; they need not give reasons for their results; the record of their proceedings is not as complete as it is in a court trial; and judicial review of an award is more limited than judicial review of a trial.” Id. at 253, 173 N.Y.S.2d at 609, 149 N.E.2d at 892. See also In re All City Ins. Co., 66 A.D.2d 531, 413 N.Y.S.2d 929 (1st Dep’t 1979) (applying Knickerbocker to rehabilitation proceedings).

One federal district court has found that an identical state law in Oklahoma precludes federal jurisdiction once liquidation proceedings have begun. See Professional Constr. Consultants Inc. v. Grimes, 552 F.Supp. 539, 541-43 (W.D.Okla.1982). That Court relied upon the Supreme Court decision in United States v. Bank of New York & Trust, 296 U.S. 463, 56 S.Ct. 343, 80 L.Ed. 331 (1963), which held that where the subject matter of a federal suit is a res in the control of a state court, the federal court should decline jurisdiction in favor of state court proceedings that can more completely and equitably resolve the issues as to all parties. Id. at 477-80, 56 S.Ct. at 347-48. The Grimes court reasoned that the assets of an insurance company in liquidation proceedings constituted such a res and therefore declined jurisdiction. 552 F.Supp. at 541-43.

In Grimes, the plaintiff was seeking damages from defendant insurance companies to be paid from assets then under liquidation proceedings. Id. By contrast, in Hamilton Life Ins. Co. v. Republic Nat’l Life Ins. Co., 408 F.2d 606 (2d Cir.1969), the Second Circuit rejected the claim that New York law precluded arbitration, after noting without discussion that plaintiff insurance company was under supervision of the New York State Insurance Department due to financial difficulty. But see Skandia Am. Reins. Corp. v. Schenck, 441 F.Supp. 715, 723 & n. 11 (S.D.N.Y.1977) (dicta) (noting without discussion that “[o]nce a New York insurer is placed in liquidation, it may not be compelled to arbitrate,” but retaining jurisdiction, also without discussion).

In the instant case, unlike Grimes, plaintiff, not defendant, is the holder of the res under supervision by the state department of insurance, and independent federal diversity jurisdiction is present. See Grimes, 552 F.Supp. at 542 (plaintiffs “have scarcely presented the Court with any basis for jurisdiction”). Moreover, unlike Knickerbocker, defendant in this case is a nonresident. See Knickerbocker, 4 N.Y.2d at 254, 173 N.Y.S.2d at 610, 149 N.E.2d at 893. Neither of the parties has claimed that this case is under the exclusive jurisdiction of the New York State Supreme Court, nor that this Court should exercise its discretion to decline jurisdiction in favor of state court proceedings.

In summary, no state law explicitly precludes arbitration of insurance cases and the case law inferring such a rule does so with reference to cases brought within the jurisdiction of the state Supreme Court. Because this case is not within the exclusive jurisdiction of the state Supreme Court and is not one brought under article XVI of the New York Insurance Law, it is not governed by Knickerbocker. It may be that New York’s policy against arbitrating this kind of suit weighs against enforcement of the arbitration clause, but the McCarran-Ferguson Act exempts state practices from preemption only if a state’s law would be invalidated, impaired, or superseded. See 15 U.S.C. § 1012(b). It does not stretch the exception to include state policies for which no specific law is enacted. See Miller v. National Fidelity Life Ins. Co., 588 F.2d 185, 187 (5th Cir.1979) (state regulations of insurance business generally do not trigger McCarran-Ferguson Act where no specific state law would be impaired, invalidated or superseded).

Plaintiffs next argue that the validity and existence of a contract is a threshold issue that must be decided by the Court. It is true that the existence of an agreement to arbitrate is an issue for the Court. See 9 U.S.C. § 4; Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403, 84 S.Ct. 1801, 1805, 18 L.Ed.2d 1270 (1967); Sun Int’l Ltd. v. Terrabo Petroleum Co., 747 F.2d 108, 110 (2d Cir.1984). However, it is also true that the arbitration clause is separable from the contract so that if there is no dispute as to the existence and scope of the arbitration clause, the arbitrators will be permitted to decide whether the contract generally is invalidated by, for example, fraud in the inducement. See Prima Paint, 388 U.S. at 403-04, 87 S.Ct. at 1805-06; S.A. Mineracao da Trinidade-Samitri v. Utah Int’l, Inc., 745 F.2d 190, 194 (2d Cir.1984).

The dispute as to the validity and existence of certain of the reinsurance contracts at issue in this case is so unclear that the Court is unable to make a determination as to arbitrability. Two areas of dispute seem to be present: Defendant argues (1) that the agreements numbered CF-719 and CF-720 are invalid and unenforceable and (2) that agreements numbered CF-757 and CF-758 extended from October 1, 1981 through October 1, 1982 rather than October 1, 1981 through October , 1, 1983 as claimed by the plaintiff.

Defendant has made no explanation of its grounds for doubting the validity of CF-719 and CF-720 and, in bringing this motion, is in fact relying upon the arbitration clauses in those two certificates. Thus it is impossible to determine whether the dispute goes to the existence of a contract containing an arbitration clause, which would be a question for the Court, or some question of fraud or interpretation that must be turned over to an arbitrator. Similarly, it is unclear whether the plaintiffs contend that the CF-757 and CF-758 certificates incorrectly state the term of those agreements or that there exists an additional pair of certificates covering the 1982-1983 period. The former argument would probably require the Court to issue a stay pending arbitration, see Ottley v. Sheepshead Nursing Home, 688 F.2d 883, 886 (2d Cir.1982), while the latter would present a threshold question for the Court.

Because of the lack of clarity in these disputes, the Court denies defendant’s motion for a stay pending arbitration insofar as it concerns certificates CF-719-20 and 757-58 and directs the parties to submit supplementary affidavits clarifying this issue within fifteen days of the date of this Memorandum and Order.

Plaintiffs’ final argument, that no arbitrable dispute exists, is frivolous. There is no allegation that the disputes between the parties fall outside the arbitration agreements. Instead, Bernstein tries to argue that there is no dispute at all. In fact, defendant disputes the amounts owed under the agreements and the validity and term of some of the agreements. Clearly, there is a dispute to be submitted to arbitration.

CONCLUSION

In accordance with the foregoing, the defendant’s motion to dismiss the seventh cause of action is granted. Fed.R.Civ.P. 12(b)(6).

Defendant’s motion to stay the action pending arbitration is granted in part and denied in part pending submission of supplemental affidavits within fifteen days. 9 U.S.C. § 3.

SO ORDERED.

      . Complaint, 83 Civ. 7989 (JMC) (filed Nov. 2, 1983).

      . Affidavit of John V. Henry at 2, 83 Civ. 7989 (JMC) (filed Apr. 4, 1984) [hereinafter "Henry Affidavit”].

      . Stipulation and Order of Substitution, 83 Civ. 7989 (JMC) (S.D.N.Y. Feb. 16, 1984).

      . Henry Affidavit, Exh. H.

      . If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordanee with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
      9 U.S.C. § 3.

      . The Second Circuit has found that the lack of an explicit reference to insurance in a federal law does not automatically place it within the McCarran-Ferguson Act. See Spirt v. Teachers Ins. & Annuity Ass’n, 691 F.2d 1054, 1063-67 (2d Cir.1982) (Congress never intended to remove insurance business from the scope of federal civil rights laws), vacated on other grounds, — U.S. -, 103 S.Ct. 3566, 77 L.Ed.2d 1406 (1983), reinstated as modified on other grounds, 735 F.2d 23 (2d Cir.1984). Because the Court finds that in this case no state law was impaired, invalidated or superseded, it does not reach the broader question of whether the Arbitration Act would have to be disregarded in favor of an appropriate state law. See Hamilton Life Ins. Co. v. Republic Natl Life Ins. Co., 408 F.2d 606, 611 (2d Cir.1969) (same result).

      . One district court case seems to contradict the holding of Hamilton. See Skandia Am. Reins. Corp. v. Schenck, 441 F.Supp. 715, 723 & n. 11 (S.D.N.Y.1977). Skandia involved an inter-pleader action in which plaintiff stakeholders sought clarification of their obligations with respect to two parties, each of whom claimed the right to funds originally owed to a New York insurance company then under liquidation. Id. at 718. One of the defendants was the Superintendent of Insurance of the State of New York, appearing as liquidator of the New York insurance company. Id. Thus, as in Hamilton, the res under dispute was in the hands of companies not under liquidation and which would have been defendants in a non-interpleader action. Nonetheless, the Court stated, with no discussion and no reference to Hamilton, that “[o]nce a New York insurer is placed in liquidation, it may not be compelled to arbitrate." Id. at 723 n. 11. Again without discussion, the Court in Skandia, unlike the Grimes court retained jurisdiction despite its reliance upon Knickerbocker, which based its ruling against arbitration on the fact that the Supreme Court of New York had been granted exclusive jurisdiction. The brevity of the Skandia treatment of this hazy issue suggests that the parties did not request a stay pending arbitration.

      . Henry Affidavit, Exhs. F & G.


source: Caselaw Access Project

license: Public Domain

text:
    EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff, v. VELSICOL CHEMICAL CORPORATION, Defendant.
    Civ. No. 82-2124-W.
    United States District Court, W.D. Tennessee, W.D.
    Nov. 28, 1984.

      George C. Bradley, Acting Supervisory Trial Atty., R. Faye Austin, Sr. Trial Atty., E.E.O.C., Memphis, Tenn., for E.E.O.C.
    Stephen Biller, Memphis, Tenn., for Velsicol Chemical.
   ORDER

WELLFORD, Circuit Judge, Sitting by Designation.

I.

This action was filed by plaintiff, Equal Employment Opportunity Commission (EEOC), on February 18, 1982, charging defendant, Velsicol Chemical Corp., with violating Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e-2000e-17. On March 15,1982, defendant filed a motion to dismiss and/or in the alternative for a more definite statement and/or in the alternative to strike part of the pleadings and/or in the alternative for judgment on the pleadings. This Court heard oral arguments on July 30, 1982, and on August 11, 1982, denied defendant's motion, reserving for later determination the issue of whether plaintiff properly assumed jurisdiction over the charges underlying this action.

In January 1983, plaintiff moved this Court to enter default judgment, defendant never having answered the complaint. This motion was referred to a magistrate, who on March 7, 1983, entered his recommendation denying the motion. Exceptions were duly filed by plaintiff on March 17, 1983. After carefully considering both the issue reserved for later determination in this Court’s order of August 11, 1982, and the motion for default judgment, this Court adopts the recommendation of the magistrate denying the motion. Further, this Court is of the opinion that plaintiff properly assumed jurisdiction over this action, and therefore defendant’s March 15, 1982 motion is denied in toto. Defendant will accordingly answer the complaint within twenty (20) days of the filing date of this order.

II.

Section 706(e) of Title VII provides in part:

In the case of an alleged unlawful employment practice occurring in a State, ... which has a State or local law prohibiting the unlawful employment practice alleged and establishing or authorizing a State or local authority to grant or seek relief from such practice ... no charge may be filed ... by the person aggrieved before the expiration of sixty days after proceedings have been commenced under the State or local law, unless such sixty-day period have been earlier terminated,

42 U.S.C. § 2000e-5(c).

In the present case, plaintiff concededly asserted jurisdiction over the charges filed with it prior to the expiration of the prescribed 60 day period, even though Tennessee is a deferral state within the meaning of section 706(c). Plaintiff asserts that it was justified in doing so, due to a “works-haring agreement” entered into with the state agency (i.e. the Tennessee Commission for Human Development).

It cannot be disputed that the charges initiated by Mr. Bobo were timely filed with both the EEOC and the state agency. See Mohasco Corp. v. Silver, 447 U.S. 807, 100 S.Ct. 2486, 65 L.Ed.2d 532 (1980) (filing with EEOC satisfies state agency filing requirement when forwarded by EEOC to state agency). The only question is whether plaintiff should have waited sixty days following the filing with the state agency before beginning its proceedings. Because plaintiff admittedly did not wait the required sixty days, it could only initiate its proceedings if the state had “terminated” the proceedings commenced before it. Because of the relevant language contained in the worksharing agreement, this Court concludes that the state agency initially waived its jurisdiction over the charges made by Mr. Bobo, and thereby “terminated” its proceedings for purposes of section 706(c). Plaintiff therefore properly initiated its own proceedings.

The worksharing agreement provides in Part III. B. that the state agency may elect to waive jurisdiction over any charge, and will thereafter “so inform the EEOC as soon as possible, but not later than ten (10) days from the date that the charge will have been received by the [state agency], so that the EEOC may exercise jurisdiction within the 60 day deferral period, ____” (Emphasis added). Part III. C. goes on to state:

The EEOC will initially process the following categories of charges:
1. All deferred and waived charges provided in III B. above. * # * * * #
8. Any charge alleging retaliation for activities protected by Section 704(a) of Title VII, except charges alleging retaliation for filing a charge with the TCHD.
9. All charges initially received by EEOC’s Memphis District Office and the Nashville Area Office.

Here, two charges were filed initially with plaintiff. Also, one charge was for retaliatory conduct. Thus, both charges are governed by paragraph 9 of Part III. C., set out above, and one of the two charges is also governed by paragraph 8. The state agency, construing Parts III. B. and C. together, therefore waived jurisdiction over these charges and effectively “terminated” its proceedings for purposes of section 706(c). Such an interpretation of the worksharing agreement is consistent with the Supreme Court’s holding in Love v. Pullman Co., 404 U.S. 522, 92 S.Ct. 616, 30 L.Ed.2d 679 (1972). It is accordingly held that the EEOC properly exercised jurisdiction over these charges.

III.

Due to the fact that this Court reserved ruling on the issue discussed above, which if decided in defendant’s favor would have resulted in a dismissal of the action, it is concluded that entry of default judgment would be inappropriate. Plaintiff’s motion is therefore DENIED, and defendant is instructed to file its answer within twenty (20) days.

IV.

It is so ORDERED.


text:
    Sergio VIVOLI, etc., Plaintiff, v. VIVOLI'S, etc., et al., Defendants.
    No. CV-84-4432.
    United States District Court, C.D. California.
    Nov. 30, 1984.

      Mark A. Borenstein, Tuttle & Taylor, Los Angeles, Cal., for plaintiff.
    Flehr, Hohbach, Test, Albritton & Herbert, Richard E. Backus, San Francisco, Cal., Cislo, O’Reilly & Thomas, Donald M. Cislo, Santa Monica, Cal., for defendants.
   MEMORANDUM OPINION AND ORDER TRANSFERRING ACTION TO THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

CONSUELO BLAND MARSHALL, District Judge.

I. FACTS

Plaintiff is a general partner in Gelateria Vivoli, an Italian “gelato” (ice cream) business located in Florence, Italy. Gelateria Vivoli does no business in the United States, does not sell gelato here, has no retail outlets here, and does no advertising here. Plaintiff Sergio Vivoli resides here; however, this action is not brought on his behalf as an individual, but rather on behalf of the Italian partnership. At some time in the future, the Italian partnership may set up a store in the Central District of California.

Defendants are a California corporation, Vivoli’s; Vivoli’s of Italy, a California partnership; and the three individuals who are partners in Vivoli’s of Italy. The corporation and partnership are headquartered in the Berkeley area, which is where the three partners reside. Defendants have one retail outlet — it is located in Berkeley. Over 60% of defendants’ sales are in the Berkeley area; 30% of defendants’ gelato sales are in the Los Angeles area. All of defendants’ employees work in Berkeley. Defendant does not employ or retain any salespeople in Southern California.

Jurisdiction is founded on diversity, violation of the Lanham Act, and unfair competition.

II. ANALYSIS

Plaintiff urges that since defendants have more than a minimal amount of sales in this district, venue is proper in an unfair competition case. While plaintiff may produce witnesses showing that defendant engaged in acts of unfair competition in the Central District, plaintiff ignores the fact that any competitive effect would be felt NOT in the Central District, but in Italy, where plaintiff partnership has its sole business location.

Plaintiff partnership is located in Italy, not in California. Plaintiff would have the Court confuse the residence of Sergio Vivoli, the individual, with that of Gelateria Vivoli, the partnership on whose behalf this action is brought. While Sergio Vivoli may reside in the Central District, Gelateria Vivoli is located in Florence. Any weight normally given to plaintiff’s choice of venue, and the attendant costs and convenience of the parties, is obviated when the true plaintiff has no contact with any particular district.

While plaintiff alleges that some acts of unfair competition and trademark infringement occurred in the Central District, it seems clear that the majority of those acts must have occurred in the Northern District, where all defendants and all of defendants’ employees are located, and where defendants have all of their manufacturing facilities. It is far less convenient for defendants to defend an action in this district, than it is for plaintiff to prosecute this action in the Northern District.

No substantial contact exists between this district and the parties or the transactions at issue. For the above reasons, this action should be transferred to the Northern District of California. Leroy v. Great Western United Corp., 443 U.S. 173, 99 S.Ct. 2710, 61 L.Ed.2d 464 (1979); Polaroid Corp. v. Casselman, 213 F.Supp. 379 (S.D.N.Y.1962).

III. CONCLUSION

The motion for change of venue shall be, and hereby is, GRANTED, and this action shall be transferred to the United States District Court for the Northern District of California.

IT IS SO ORDERED.


author: JAMES LAWRENCE KING, Chief Judge.

text:
    The ECONOMIC DEVELOPMENT CORPORATION OF DADE COUNTY, INC., a Florida not for profit corporation, Plaintiff, v. Merrett R. STIERHEIM, as County Manager of Metropolitan Dade County, and Metropolitan Dade County, a political subdivision of the State of Florida, Defendants.
    No. 84-2210-Civ-KING.
    United States District Court, S.D. Florida, Miami Division.
    Nov. 30, 1984.
    Jaime Claudio Bovell, Coral Gables, Fla., for plaintiff.
    Robert A. Cuevas, Jr., Cynthia Johnson, Miami, Fla., for defendants.
   ORDER GRANTING DEFENDANT STIERHEIM’S MOTION TO DISMISS PLAINTIFF’S COMPLAINT PURSUANT TO FRCP 12(b)(1)

JAMES LAWRENCE KING, Chief Judge.

THIS CAUSE comes before the Court upon the Defendant Stierheim’s Motion for Summary Judgment or to Dismiss the Plaintiffs Complaint for, inter alia, lack of this Court's subject matter jurisdiction, and upon the Plaintiff’s Cross Motion for Summary Judgment.

The Plaintiff is seeking to invoke this Court’s jurisdiction pursuant to 28 U.S.C. § 1843(a)(3) and 42 U.S.C. § 1983. Section § 1343 provides in pertinent part:

(a) The district courts shall have original ■ jurisdiction of any civil action authorized by law to be commenced by any person:
(3) To redress the deprivation, under color of any State law, statute, ordinance, regulation, custom or usage, of any right, privilege or immunity secured by the Constitution of the United States or by any Act of Congress providing for equal rights of citizens or of all persons within the jurisdiction of the United States.

The aforementioned statute conferring jurisdiction upon this Court is in turn closely related to § 1983, which provides in pertinent part that:

[Any] person who, under color of any statute, ordinance, regulation, custom, or usage, of any State ... subjects, or causes to be subjected, any citizen of the United States ... to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.

In Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961), after extensively reviewing the legislative history of § 1983, the United States Supreme Court held that:

[i]t is abundantly clear that one reason the legislation was passed was to afford a federal right in federal courts because, by reason of prejudice, passion, neglect, intolerance or otherwise, state laws might not be enforced and the claims of citizens to the enjoyment of rights, privileges and immunities guaranteed by the Fourteenth Amendment might be denied by the state agencies. Id., at 180, 81 S.Ct. at 480. See also Parratt v. Taylor, 451 U.S. 527, 534-35, 101 S.Ct. 1908, 1912-13, 68 L.Ed.2d 420 (1981).

At the onset, this Court notes that the Plaintiff has not alleged that the state laws might not be enforced because of prejudice, passion, neglect, intolerance or otherwise. Consequently, the Court fails to see why the state forum would not provide the Plaintiff adequate redress within the legislative intent of § 1983 and the due process clause of the Fourteenth Amendment. However, before reaching the merits of Plaintiff's Complaint, and before addressing whether a post-deprivation hearing in state court would comport with the Fourteenth Amendment, a brief discussion of the relationship as between the parties and their respective arguments is in order.

As County Manager for Metropolitan Dade County (“County”), Defendant Stierheim’s duties required him to carry out the policies of the Board of County Commissioners (“Board”). One of the policies of the Board was to assist minority businesses in special impact areas within the County. In furtherance of this policy, the County, using federally provided Community Development Block Grant funds, entered into several contracts with the Plaintiff to perform certain community development functions. As part of its obligations, the Plaintiff was to administer a revolving loan fund from which, among other things, it made loans to minority businesses. The present controversy centers around one of the above mentioned contracts between the County and the Plaintiff.

The Plaintiff is well aware that in order to invoke this Court’s subject matter jurisdiction under § 1983, it must allege that it was deprived of life, liberty or property, by someone acting under color of law, without due process of law as guaranteed under the Fourteenth Amendment. See Parratt, 451 U.S. at 535, 101 S.Ct. at 1912. However, in analyzing the above-styled cause, the Court notes that the alleged deprivation is procedural in nature, not substantive. See, e.g., Travis & Adams, The Supreme Court’s Shell Game: the Confusion of Jurisdiction and Substantive Rights in Section 1983 Litigation, 24 B.C.L.Rev. 635 (1983) (criticizing Parratt’s mixing of procedure and substance); and Wells & Eaton, Substantive Due Process and the Scope of Constitutional Torts, 18 Ga.L.Rev. 201 (1984).

Plaintiff alleges that Defendant Stierheim, while acting as the County’s Manager, terminated the above mentioned contract in violation of its Fourteenth Amendment rights to due process. In other words, its property interest has been deprived since the contract was terminated without an opportunity to be heard prior to termination and, furthermore, Defendant Stierheim’s defamatory statements, in reporting to the news media the underlying reasons for said termination, have injured its reputation and good will and therefore its liberty interest as well. However, before deciding whether or not the Plaintiff, in fact, has a legitimate claim of entitlement to the contract between itself and the County, which might establish a constitutionally protected property interest, see, e.g., Board of Regents v. Roth, 408 U.S. 564, 567, 92 S.Ct. 2701, 2704, 33 L.Ed.2d 548 (1972); Bishop v. Wood, 426 U.S. 341, 96 S.Ct. 2074, 48 L.Ed.2d 684 (1976) or to an attendant liberty interest in reputation, Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976), the Court must first decide, as suggested earlier, whether the Plaintiff has properly alleged the deprivation of the due process prong of the Fourteenth Amendment/§ 1983 claim. See, e.g., Fundiller v. City of Cooper City, 578 F.Supp. 303 (S.D.Fla.1984). However, before addressing this issue, further discussion is in order.

Defendant Stierheim, on the other hand, argues that the Plaintiff has not been deprived of its due process rights under the Fourteenth Amendment since an adequate post-deprivation remedy lies in state court. Furthermore, he argues that the contract was terminated for cause and then only after the County’s Internal Auditing Department (“IAD”) had done a number of extensive audits of Plaintiff’s books and records. The audits disclosed that the Plaintiff had improperly used funds which were earmarked for the revolving loan fund, as well as co-mingling of revolving loan fund monies into unrelated accounts, in clear violation of the contract. After receiving this information from IAD, and pursuant to the contract (¶ A of § 12, Part IV) and IAD’s recommendation, on September 6, 1984, Defendant Stierheim notified the Plaintiff, by letter, that he was terminating the contract for the above mentioned reasons. It is also argued by Defendant Stierheim, that the contract was terminated to protect the liability of the County and to insure that the public funds, for which the County was responsible, were adequately protected.

In Parratt, even assuming the Plaintiff had satisfied the three prerequisites of a valid Fourteenth Amendment due process/§ 1983 claim, e.g., that the Defendant was acting under color of state law, that he infringed a protected property and/or liberty interest (“property”), and that the injuries Plaintiff complains of amounted to a deprivation, the United States Supreme Court has held that “[sjtanding alone, however, these three elements do not establish a violation of the Fourteenth Amendment. Nothing in that Amendment protects against all deprivation of life, liberty, or property by the State. The Fourteenth Amendment protects only against deprivation ‘without due process of law.’ ” 451 U.S. at 537, 101 S.Ct. at 1914, citing Baker v. McCollan, 443 U.S. 137, 145, 99 S.Ct. 2689, 2695, 61 L.Ed.2d 433 (1979). Accordingly, the Court went on to explain that the proper inquiry was “whether [the Plaintiff] suffered a deprivation of [property] without due process of law.” Specifically, the Court must decide “whether the [contract and/or] tort remedies which the State of [Florida] provides as a means of redress for [property] deprivation satisfy the requirements of procedural due process.” Id. In other words, would Florida law provide adequate redress in a post-deprivation hearing in state court? The answer is clearly, yes. However, in answering this dispositive query in the affirmative, the Court notes that even where the “state remedies may not provide the [Plaintiff] with all the relief which may have been available if [it] could have proceeded under § 1983, that does not mean that the state remedies are not adequate to satisfy the requirements of due process.” Parratt, 451 U.S. at 544, 101 S.Ct. at 1917.

Accordingly, the Court finds that Florida’s judicial system does provide the Plaintiff with adequate post-deprivation redress within the letter and spirit of the due process clause of the Fourteenth Amendment and, consequently, the Plaintiff has not properly alleged the due process prong of the Fourteenth Amendments 1983 claim. See Gilmere v. City of Atlanta, Go., 737 F.2d 894 (11th Cir.1984). The Court, therefore being fully advised in the premises, herein does

ORDER and ADJUDGE that the Defendant’s Motion to Dismiss be, and it is, GRANTED due to Plaintiff’s failure to allege this Court’s subject matter jurisdiction. Furthermore, the Court finds that since both Defendants’ stand in relatively the same position, it is

ORDERED and ADJUDGED that the Plaintiff’s Complaint be, and it is, DISMISSED as to both Defendants’. Also, the Court is aware that the Defendants' have subpoenaed thirteen (13) of Plaintiff’s clients for deposition on the 4th and 5th of December, 1984, and, as a result, the Plaintiff’s have moved for a Protective Order in an attempt to prevent these depositions from being taken. However, in light of this Court’s decision today, it is

ORDERED and ADJUDGED that the above mentioned subpoenaes be, and they are, QUASHED and, therefore, Plaintiff's clients are relieved from complying with same.

DONE and ORDERED in chambers at the United States Courthouse, Miami, Dade County, Florida this 30th day of November, 1984.


author: NESBITT, District Judge.

text:
    NATIONAL ASSOCIATION OF BROADCAST EMPLOYEES AND TECHNICIANS, AFL-CIO, Plaintiff, v. SUNBEAM TELEVISION CORPORATION (WCKT-TV; WSVN-TV), Defendant.
    No. 84-1464-CIV-NESBITT.
    United States District Court, S.D. Florida, S.D.
    Dec. 2, 1984.

      Lipsitz, Green, Fahringer, Roll, Schuller & James, Howard S. Susskind, Miami, Fla., for plaintiff.
    Joseph A. Caldwell, John D. Gronda, Miami, Fla., for defendant.
   ORDER ON SUMMARY JUDGMENT

NESBITT, District Judge.

THIS CAUSE involves a suit by Plaintiff, National Association of Broadcast Employees and Technicians, AFL-CIO, (the “Association”), to enforce an arbitration award entered pursuant to the collective bargaining agreement in force between the Plaintiff and the Defendant, Sunbeam Television Corporation (“Sunbeam”). The Defendant has filed a Motion to Dismiss and, in the Alternative, Motion for Summary Judgment. The Plaintiff has responded to these Motions and has also filed a Motion for Summary Judgment.

FINDINGS OF FACT

The material facts in this case are not in dispute, as there is agreement between a majority of the allegations made by Plaintiff in its Complaint, and by the Defendant in the Affidavit of its Vice-President and General Manager, Robert W. Leider, which was filed with the Court in support of Defendant’s Motion for Summary Judgment.

There is currently a collective bargaining agreement in force between the Plaintiff and Defendant, pursuant to which the parties agreed to arbitrate a dispute regarding what union personnel were required to be on board the Defendant’s helicopter when remote microwave transmissions were being made from it. The dispute arose when the Defendant made such a transmission on November 13, 1982 without any union personnel aboard. On July 11, 1983, the arbitrator, John Caraway, entered his award (the 1983 “award”) ruling that under the terms of the collective bargaining agreement, the Defendant was required to have on board the helicopter both a production assistant and a technician, while making any remote microwave transmissions within a fifty (50) mile radius of the Defendant’s main studios. (See arbitration award dated July 11, 1983, attached to Plaintiff’s complaint as Exhibit B.)

It is also undisputed that on December 1, 1983, the Defendant made a remote microwave transmission from the helicopter while it was within the fifty (50) mile radius and that there was neither a production assistant nor a technician on the helicopter, as required under the 1983 Award.

The Plaintiff brought this action seeking declaratory and injunctive relief, as well as attorneys' fees and costs incurred in this action.

CONCLUSIONS OF LAW

The Court has jurisdiction over the subject matter of this action pursuant to Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185(a), and under 28 U.S.C. § 1331. The Plaintiff is a labor organization certified as a collective bargaining representative within the meaning of 29 U.S.C. §§ 152(5), 152(7), 185(a). The Defendant is an employer within the meaning of 29 U.S.C. §§ 152(2), 185(a), and maintains its principal place of business in Miami, Florida.

This case turns on the interpretation of and effect to be given the 1983 Award. After the initial transmission on November 13, 1982, the plaintiff brought to arbitration its claim that the collective bargaining agreement mandated the use of certain union personnel whenever a remote microwave broadcast was made from Defendant’s helicopter.

Upon review of the arguments made by the Union and the station as well as the language of the collective bargaining agreement, and after consideration of the nature of the remote microwave transmissions and the job functions of the various union members, the arbitrator made the following award:

The Union grievance is sustained. The Company violated the Agreement by making a microwave transmission on November 13, 1982 aboard the helicopter without there being a technician and production assistant aboard the helicopter. The Company shall cease and desist from making remote microwave transmissions originating from the station’s helicopter unless a production assistant and technician are aboard this aircraft.

(See, 1983 Award, pp. 12-13.)

Initially, the Court notes that there is no dispute as to the fact that Arbitrator Caraway was acting within the scope of his authority in issuing the 1983 Award. As well, there is no claim that the 1983 Award did not draw its essence from the terms of the collective bargaining agreement between the parties. As such, the Court has the power to enforce the 1983 Award. United Steelworkers of America v. American Manufacturing Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960); United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960); and United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960).

The Defendant has argued that the 1983 Award did not cover the remote microwave broadcast which was made on December 1, 1983. The Defendant has proposed that the parties return to arbitration to determine if the December 1, 1983 broadcast was actually a violation of the collective bargaining agreement. In support of this position, the Defendant has pointed to the fact that it did not “intend” to make any remote broadcasts when the helicopter was dispatched on December 1, 1983. The Defendant also claims that there was a pressing public interest in transmitting the story, distinguishing this transmission from the one at issue in the 1983 Award. Pointing to these alleged material differences, the Defendant urges the Court to determine that the December 1, 1983 transmission was not covered by the 1983 Award.

In response to the Defendant’s arguments, it is the Plaintiff’s position that the December 1, 1983 transmission was exactly the type of conduct prohibited by the 1983 Award. Plaintiff argues that requiring further arbitration on a clear violation of the 1983 Award would gut the arbitration process, as it would strip the 1983 Award of any prospective effect.

The Court is aware that its function is not to interpret obviously ambiguous arbitration awards, American Federation of State, County and Municipal Employees, Local Lodge No. 1803 v. Walker County Medical Center, 715 F.2d 1517 (11th Cir.1983), nor is it to determine the preclusive effects of past arbitration awards, which by their terms are limited to the specific labor grievance resolved. New Orleans Steamship Association v. General Longshore Workers, 626 F.2d 455 (5th Cir.1980). However, the Court also recognizes that it does have the power and duty to enforce an arbitration award by means of injunctive or other relief where the actions being challenged are those which the earlier arbitration award specifically prohibited. United Steelworkers of America v. American Manufacturing Co., supra; United Steelworkers of America v. Warrior & Gulf Navigation Co., supra; United Steelworkers of America v. Enterprise Wheel & Car Corp., supra.

The pivotal question is whether the December 1, 1983 transmission was within the conduct prohibited by the 1983 Award. To make this determination, the Court must examine whether there is “material factual identity” between the conduct prohibited by the 1983 Award and the conduct in issue in this case, specifically, the December 1, 1983 transmission.

The “material factual identity” standard was adopted in Oil, Chemical, and Atomic Workers International Union, Local 4~ 16000 v. Ethyl Corporation, 644 F.2d 1044 (5th Cir.1981). In the Ethyl case, the former Fifth Circuit held that:

‘Material factual identity’ exists when there is no difference between the current facts and those giving rise to the prior arbitration award which, when analyzed in light of the mandates of the collective bargaining agreement, would justify an arbitrator’s reaching a different conclusion in each of the two cases.

644 F.2d at 1055.

In the case at bar, there are no real differences between the facts giving rise to the 1983 Award and to this suit. In both cases, the Defendant made a remote microwave transmission from the station’s helicopter within a fifty (50) mile radius of the main station. In both the necessary production assistant and technician were not aboard the helicopter. A review of both the 1983 Award and the collective bargaining agreement indicates that the Defendant’s intent is irrelevant and immaterial in making a determination as to whether or not the agreement requires the Defendant to use the technician and production assistant on board the helicopter. This requirement arises from the language of the collective bargaining agreement, and it is not subject to any “good faith” compliance exceptions.

As well, there is no merit to the Defendant’s contention that the presence of a compelling public “need to know” about the story caused a material factual difference between the transmissions made on November 13, 1982 and the one made on December 1, 1983. Neither the collective bargaining agreement nor the 1983 Award provide for any such exception, even though both were entered into or rendered in the setting of the public broadcast media. Accordingly, the Court finds that no such exception exists. Therefore, whether or not there was a pressing “need to know” about the December 1, 1983 transmission is completely irrelevant to the Court’s decision in this matter.

The Court finds that the Defendant, by its remote microwave transmission made on December 1,1983, has violated the collective bargaining agreement between the parties as supplemented by the 1983 Award. Accordingly, the Plaintiff is entitled to the issuance of a permanent injunction directing the Defendant to comply with the 1983 Award by ceasing and desisting from making any remote microwave transmissions originating from the station’s helicopter unless a production assistant and technician are aboard this aircraft.

Based upon the Court’s finding that the Defendant violated the 1983 Award and thereby the collective bargaining agreement, the Plaintiff is entitled to the grant of a declaratory judgment.

The last issue for resolution is whether the Plaintiff is entitled to an award of attorneys’ fees. There is no statutory provision for such an award under the Labor Management Relations Act, and therefore, they can be awarded only where the Plaintiff has made a showing of exceptional circumstances, such as that the Defendant acted in bad faith or without any justification in refusing to comply with the 1983 Award. Amalgamated Meat Cutters and Butcher Workmen of North America AFL-CIO, Local Union 540 v. Great Western Food Company, 712 F.2d 122 (5th Cir.1983); United Electrical, Radio and Machine Workers of America, Local 1139 v. Litton Microwave Cooking Products, Litton Systems, Inc., 704 F.2d 393 (8th Cir.1983).

The Court finds no such exceptional circumstances in this case. There is no evidence of bad faith on the part of the Defendant. This is apparent from the fact that the Defendant was willing to submit this matter to arbitration, waiving any claims that this action might have been time-barred had the Court found that this case should have been brought initially to a new arbitration proceeding. A review of the authorities cited by the Defendant indicates that there was a “colorable legal argument” to be made that this matter should have been resubmitted to arbitration. Thus, the refusal to comply with the 1983 Award was not without justification.

Accordingly, the Court finds that it would be inappropriate to award the Plaintiff attorneys’ fees incurred in the prosecution of this action.

CONCLUSIONS

1. The Motion to Dismiss and, in the Alternative, Motion for Summary Judgment filed by the Defendant be and the same is hereby DENIED.

2. The Motion for Summary Judgment filed by the Plaintiff be and the same is hereby GRANTED. The Court declares that by its conduct, the Defendant has violated the collective bargaining agreement between the parties as a result of its failure to comply with the arbitrator’s award of July 11, 1983. The Defendant is by this Order Permanently Enjoined from further violations of the July 11, 1983 arbitration award. In the future, the Defendant shall comply with this award, and shall not make remote microwave transmissions from the station’s helicopter within a fifty (50) mile radius of the Defendant’s station unless there are on board the helicopter the production assistant and technician as required by the July 11, 1983 arbitration award.

3. The Motion for Award of Attorneys’ Fees be and the same is hereby DENIED. The Court has found that the Defendant did not act either in bad faith or without justification in making its claim that this issue should be returned for further arbitration. Accordingly, the Plaintiff will not be awarded attorneys’ fees for the prosecution of this action.

      . In addition, the Plaintiff has stipulated to take as true the factual allegations in the Affidavits.

      . This decision was handed down prior to September 30, 1981, and as such, is binding precedent in the Eleventh Circuit pursuant to Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir.1981) (en banc).


author: CANNELLA, District Judge:

text:
    SUNRAY ENTERPRISES, INC., Plaintiff, v. DAVID C. BOUZA AND ASSOCIATES, INC., David C. Bouza and Sunbelt Footwear, Inc., and Several Unknown John Does, and Jane Does, Defendants.
    No. 83 Civ. 8408 (JMC).
    United States District Court, S.D. New York.
    Dec. 14, 1984.

      Bernard Kenny, New York City, for plaintiff.
    Warshaw Burstein Cohen Schlesinger & Kuh, New York City (Richard Kuh, New York City, of counsel), for defendants.
   MEMORANDUM AND ORDER

CANNELLA, District Judge:

Defendants’ motion to transfer this action to the Eastern District of Louisiana is granted. 28 U.S.C. §§ 1391(b), 1406(a) [“Sections 1391(b), 1406(a)” ].

FACTS

Plaintiff, Sunray Enterprises, Inc. [“Sun-ray”] is a New York corporation that imports athletic footwear manufactured to its specifications in South Korea. On January 1, 1980, plaintiff entered into a contract with defendants David C. Bouza and his company, David C. Bouza Associates, Inc. [“Associates”], pursuant to which Bouza agreed to act as Sunray’s exclusive representative and promote the sale of its products in the United States. Bouza is a resident of Louisiana. Associates is incorporated and had its principal place of business in Louisiana. Bouza operated out of Louisiana but solicited orders from national chains and retail stores located primarily in the southern United States. Under the contract, Sunray was obligated to obtain letters of credit on Bouza’s orders. Sun-ray’s failure to obtain these letters of credit gave Bouza the right to obtain them himself and to terminate the contract.

On November 7, 1983, defendants notified plaintiff that due to Sunray’s failure to obtain certain letters of credit, defendants considered the contract to have been terminated. Bouza then opened his own letters of credit and, as President of Sunbelt Footwear, Inc. [“Sunbelt”] (also incorporated in and operating out of Louisiana), Bouza continued to import footwear from Korea.

On November 17, 1983, Sunray commenced this action against Bouza and Associates by means of an order to show cause seeking a temporary restraining order and preliminary injunction. Plaintiff alleged acts constituting a breach of contract and breach of fiduciary duty. Plaintiff claimed that Bouza had established a competing business — Sunbelt—while under contract to Sunray and in doing so had improperly solicited plaintiff’s employees, customers and business opportunities for his own company, by means of Sunray’s confidential customer lists and other trade secrets. Most of the acts alleged in the complaint appear to have taken place in South Korea or Louisiana. Jurisdiction is based upon diversity of citizenship. 28 U.S.C. § 1332.

After a hearing before Judge Leonard B. Sand, on November 25, 1983 and November 28, 1983, a partial preliminary injunction was granted. See Order, 83 Civ. 8408 (JMC) (S.D.N.Y. Dec. 2, 1984). Plaintiff then amended its complaint on January 10, 1984, to add a new defendant, Sunbelt, and several new causes of action, including a claim for trademark infringement under 15 U.S.C. § 1125 and a claim for damages under the Racketeer Influenced and Corrupt Organizations Act [“RICO” ], 18 U.S.C. § 1962(c), 1964(c). Plaintiff also added claims for tortious interference with contract and for violation of state laws governing unfair competition and dilution of trademark. Jurisdiction over these last two state law violations is based upon diversity and pendent jurisdiction.

DISCUSSION

Defendants move to dismiss or transfer this action to the Eastern District of Louisiana pursuant to Sections 1391(b), (c), and 1406(a). Defendants argue that venue was properly placed in this district under the original complaint because jurisdiction was then based solely upon diversity and thus venue was governed by 28 U.S.C. § 1391(a) [“Section 1391(a)”], which permits a case to be brought in the district in which the plaintiff resides. Because federal claims have been added to the amended complaint, however, venue is now governed by Section 1391(b), which requires that a case not based solely upon diversity jurisdiction be brought in the district where all defendants reside or in which the claim arose. 28 U.S.C. § 1391(b). Defendants claim that none of the defendants reside in New York and that none of the claims arose in New York.

There is no allegation that Bouza, the individual defendant, resides in New York. Thus, “all” defendants, as requested under Section 1391(b), obviously do not reside in New York and venue can only be properly laid in New York if the “claim” arose here. The Court must look to federal law to determine where the claims arose. See Cochrane v. Iowa Beef Processors, Inc., 596 F.2d 254, 260-62 (8th Cir.1979), cert. denied, 442 U.S. 921, 99 S.Ct. 2848, 61 L.Ed.2d 290 (1979); Honda Assocs. v. Nozawa Trading, Inc., 374 F.Supp. 886, 890-92 (S.D.N.Y.1974). Moreover, the venue statutes are designed primarily to protect defendants from litigating in forums that are inconvenient with regard to the availability of witnesses and other evidence. See LeRoy v. Great Western United Corp., 443 U.S. 173, 185-87, 99 S.Ct. 2710, 2717-18, 61 L.Ed.2d 464 (1979); Honda Assocs., 374 F.Supp. at 889. Thus, to determine where a claim arose courts look to the weight of the contacts between the acts of the defendants and the forum state, with an eye to determining “the availability of witnesses, the accessibility of other relevant evidence, and the convenience of the defendant (but not of the plaintiff).” LeRoy, 443 U.S. at 185, 99 S.Ct. at 2717. (emphasis in original).

The only acts of defendants alleged to have taken place in New York that have any relation to plaintiff’s trademark claim are two visits by Bouza as President of Sunbelt to trade shows in New York City. It is suggested that orders for goods bearing the offending mark might have been displayed or sold at this fair.

District court decisions in this circuit have repeatedly required some significant contacts between the infringing activity and the forum state beyond mere impact or occasional solicitation. See Georgia Boot Division of U.S. Indus, v. Georgia Footware Corp., 579 F.Supp. 1037, 1038 (S.D.N.Y.1983); Seabrook Foods, Inc. v. Seabrook Bros. & Sons, Inc., 495 F.Supp. 792, 793-94 (S.D.N.Y.1980); Transamerica Corp. v. Transfer Planning, Inc., 419 F.Supp. 1261, 1263 (S.D.N.Y.1976); Honda Assocs., 374 F.Supp. at 891. These opinions have emphasized that the purpose of the “where claim arose” language in Section 1391(b) was to close the “gap” created by actions in which defendants did not all reside in one state, but was “clearly not to permit suit in every district in which defendant sells its products.” Seabrook Foods, 495 F.Supp. at 794.

The minor contacts alleged by plaintiff with respect to this claim are insufficient to create proper venue, particularly considering that Louisiana is the place of residence of both Sunbelt and Bouza, as well as the apparent situs of most of the infringing acts. The state claims concerning unfair competition and trademark dilution arise out of essentially identical facts and thus are equally inappropriate in this forum. See e.g., Seabrook Foods, 495 F.Supp. at 793-94 (state claims considered in conjunction with federal claim).

Venue under RICO may be established under the special RICO venue provision, see 18 U.S.C. § 1965(a) [“Section 1965(a)” ], or the general federal venue provisions. See Farmer’s Bank of State of Del. v. Bell Mortgage Corp., 452 F.Supp. 1278, 1280-82 (D.Del.1978) (where no venue lies under Section 1965(a), look to general test). Under Section 1965(a), venue is proper in any district in which a defendant is found, has an agent or transacts its affairs. There is no allegation that any of the defendants is “found”, has an agent or transacts any business in New York, other than the attendance at an occasional trade fair, which is clearly insufficient. See, e.g., Van Schaick v. Church of Scientology of Cal., Inc., 535 F.Supp. 1125, 1133 (D.Mass.1982) (Section 1965(a) required that corporate defendant be present by officers and agents carrying on business of corporation). Moreover, plaintiff has given no indication that any acts relevant to the RICO claim took place in New York. Thus Section 1391(b) also does not provide a basis for venue in this district on the RICO claim.

The Court need not analyze whether the tort and breach of contract claims arose in New York. If plaintiff wished to split them from the federal claims (thereby risking collateral estoppel and res judicata problems), it could, theoretically, bring them in this district based solely on diversity jurisdiction and thus have a proper venue under Section 1391(a). Because they arise out of essentially the same set of operative facts and thus involve a similar set of witnesses, however, the Court directs that they be transferred to the Eastern District of Louisiana, a proper venue for all the claims by virtue of the fact that all the defendants reside in that district. See 28 U.S.C. § 1391(a), (b). Cf. Cochrane v. Iowa Beef Processors, Inc., 596 F.2d at 260-62 (claims based upon essentially same facts considered together).

CONCLUSION

In accordance with the foregoing, defendants’ motion to transfer this action to the Eastern District of Louisiana is granted. 28 U.S.C. §§ 1391(b), 1406(a). Defendants are directed to submit an order directing the clerk to transfer the action to the Eastern District of Louisiana within five days of the date of this Memorandum and Order.

SO ORDERED.

      . Plaintiff attempts to show that defendants are somehow guilty of laches or have waived their right to raise a venue objection by not doing so earlier in the action. However, because venue was properly in this district under the original complaint, defendants could not possibly raise the claim any sooner than in this initial and appropriate response to the amended complaint. Therefore, plaintiffs waiver theory is meritless.

      . Defendants seem to be correct in arguing that the corporate defendants are also not "residents” of this district. See 28 U.S.C. § 1391(c) (for corporation, residence equals “doing business"). There seem no facts to suggest that either corporation was doing business in New York at the time the complaint was served. Because the individual defendant is clearly not a resident of this state, the Court need not address this issue.

      . The Court notes that even had this been the proper venue, plaintiffs RICO claim would have to be dismissed because plaintiff has alleged no predicate acts that have resulted in a criminal conviction. See Sedima, S.P.R.L. v. Imrex Co., 741 F.2d 482 (2d Cir.1984).


author: WEIGEL, Senior District Judge.

text:
    Raymond J. DONOVAN, Secretary of the United States Department of Labor, Plaintiff, v. Joseph P. MAZZOLA, et al., Defendants.
    No. C 79-134 SAW.
    United States District Court, N.D. California.
    Dec. 26, 1984.

      Francis X. Lilly, Robert N. Eccles, Norman P. Goldberg, Sherwin Kaplan, Thomas L. Holzman, U.S. Dept, of Labor, Office of the Sol. of Labor, Plan Benefits Sec. Div., Washington, D.C., Daniel Teehan, Regional Sol., Sandra K. Rogers, U.S. Dept, of Labor, Office of the Sol., San Francisco, Cal., for plaintiff.
    Joseph L. Alioto, Alioto & Alioto, Albert Brundage, San Francisco, Cal., for defendants.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW

WEIGEL, Senior District Judge.

This matter was duly heard on December 13, 1984, pursuant to the Temporary Restraining Order and Order to Show Cause issued by the Court on December 4, 1984. Having carefully considered the pleadings, declarations, memoranda, argument of counsel and the entire record, the Court makes the following findings of fact and conclusions of law:

1. On November 17, 1981, the Court found that defendants, current and former trustees of defendant U.A. Local 38 Pension Trust Fund (Pension Fund), including union-appointed trustees Joseph P. Mazzola, Lawrence J. Mazzola, Fred Castro, V.J. Kazarian, Raymond Springer, Robert J. Costello and William Jennings, breached their fiduciary obligations with respect to the Pension Fund in violation of ERISA, 29 U.S.C. §§ 1104(a)(1)(A), (B), (C) and § 1106(b)(2).

2. On July 6, 1982, the Court ordered said defendant trustees to make restitution to the Pension Fund for losses due to their breaches of fiduciary obligations and to post a cash or corporate surety bond to insure the Pension Fund against other such losses.

3. After defendant trustees failed to comply with said order, each was held in contempt of Court and fined. See 716 F.2d 1226.

4. The contempt fines for the union-appointed trustees were paid by Local 38 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe-fitting Industry of the United States and Canada (Local 38).

5. On May 29, 1984, the Court ordered defendant trustees to make restitution in the amount of $126,910.61 to the Pension Fund. Said amount had been expended by the Pension Fund to pay for legal services in defense of defendant trustees’ misconduct. The Court expressly found “that the conduct of the individual defendants which was the subject of this action was detrimental to and in no way furthered the legitimate interests of the plan’s participants and beneficiaries nor was it in the interest of any sponsoring union or management association or the membership thereof.”

6. The Court further found that “any reimbursement of the judgment of restitution [of legal fees] by any labor organization subject to the Labor-Management Reporting & Disclosure Act of 1959, whether or not authorized by the general membership, would violate the provisions of § 501 of that Act.” Defendant trustees were permenently enjoined from receiving any reimbursement, either direct or indirect, of the judgment of restitution of legal fees from any labor organization subject to the Labor-Management Reporting and Disclosure Act of 1959.

7. By letter dated November 19, 1984, signed by defendant Joseph P. Mazzola, the membership of Local 38 was informed that at a regular membership meeting to be held on December 5, 1984, the membership would be asked to approve a recommendation of the Executive Board of Local 38 “that the union pay the amount of such restitution liabilities levied by the Court on the Labor Trustees, excluding legal fees.”

8. At a hearing held on December 4, 1984, the Court temporarily restrained defendant individual trustees “from receiving any reimbursement, either direct or indirect, of any expense incurred by them in connection with this lawsuit, including repayment to them of any amounts paid by them as restitution for their fiduciary breaches as specifically described in this Court’s findings of November 17, 1981 and Judgment of July 6, 1982, from any labor organization subject to the Labor-Management Reporting and Disclosure Act of 1959.”

9. At a meeting held on December 5, 1984, the membership of Local 38 approved a resolution that but for the December 4, 1984, temporary restraining order said union would be authorized by those attending the meeting to “pay the restitution liabilities for the Labor Trustees”.

10. The conduct of the individual defendants which the Court has previously found to violate ERISA, 29 U.S.C. §§ 1104(a)(1)(A), (B) and (C) and § 1106(b)(2), was detrimental to and in no way furthered the legitimate interests of the Pension Fund’s participants and beneficiaries nor was it in the interest of any sponsoring labor organization or management association or the membership thereof.

11. Because said conduct did not benefit any sponsoring labor organization, any reimbursement to defendant trustees for the judgment of restitution by any labor organization subject to the Labor-Management Reporting and Disclosure Act of 1959, whether or not such reimbursement were authorized by the general membership of such organization, would violate the provisions of § 501(a) of that Act. See Morrissey v. Segal, 526 F.2d 121, 126-27 (2d Cir.1975); Kerr v. Shanks, 466 F.2d 1271, 1277 (9th Cir.1972). The Court therefore exercises its equitable power to prevent defendants from violating federal law in the course of satisfying the Court’s judgment of restitution.' See United States v. Coca-Cola Bottling Co., 575 F.2d 222, 278 (9th Cir.), cert. denied, 439 U.S. 959, 99 S.Ct. 362, 58 L.Ed.2d 351 (1978); see also Federal Trade Comm’n v. Ruberoid, 343 U.S. 470, 473, 72 S.Ct. 800, 803, 96 L.Ed. 1081 (1952).

12. Because no union officer or union body can authorize an illegal expenditure, see United States v. Boyle, 482 F.2d 755, 764 (D.C.Cir.), cert. denied, 414 U.S. 1076, 94 S.Ct. 593, 38 L.Ed.2d 483 (1973), the Court need not and does not rule on the completeness or fairness of defendant trustees’ disclosures to union members. Nor need the Court rule on any of the other factual issues defendants have sought to raise.

13. The parties stipulated that pursuant to Fed.R.Civ.P. 65(a)(2), the Court should consolidate the hearing for preliminary injunction with the trial of the matter on the merits. Therefore, the Court issues a permanent injunction.

PERMANENT INJUNCTION

In accordance with the Findings of Fact and Conclusions of Law filed on December 26, 1984, IT IS HEREBY ORDERED that:

(1) Defendants Joseph P. Mazzola, Robert E. Buckley, Robert J. Costello, William Spencer, William Jennings, D.E. Dehnert, V.J. Kazarian, Keith Hansen, Lawrence J. Mazzola, H.J. Riboni, Raymond Springer, Stewart Smith, Fred Castro and James Emmons are permanently enjoined from receiving any reimbursement, either direct or indirect, of any expense incurred by them in connection with this lawsuit, including any amounts paid by them as restitution for their breaches of fiduciary obligations as specifically described in the Court’s findings of November 17, 1981 and Judgment of July 6, 1982, from any labor organization subject to the Labor-Management Reporting and Disclosure Act of 1959 and/or from any fund subject to the Employee Retirement Income Security Act of 1974.

(2) Said defendants shall provide a copy of this Permanent Injunction and a copy of the underlying Findings of Fact and Conclusions of Law to each member and officer of Local 38 of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada attending any meeting of said union held for the purpose of considering, directly or indirectly, the restitution referred to in this order.

(3) No person who has notice of this injunction shall fail to comply with its letter and spirit nor shall any person subvert its letter and spirit by any sham, indirection, or other artifice.


text:
    The MIAMI HERALD PUBLISHING COMPANY, a DIVISION OF KNIGHTRIDDER NEWSPAPERS, INC., a Florida corporation and Rick Hirsch, Plaintiffs, v. Maurice A. FERRE, individually and as Mayor of the City of Miami; the City of Miami, a Florida municipal corporation; Marie Petit; Nestor Toledo; and Alina Novaro, Defendants.
    No. 84-2918-Civ-King.
    United States District Court, S.D. Florida, Miami Division.
    Dec. 27, 1984.

      Arky, Freed, Stearns, Watson, Greer, Weaver & Harris, P.A., Paul & Burt, P.A., Richard J. Ovelmen, Miami, Fla., for plaintiffs.
    Fine Jacobson Schwartz Nash Block and England, John Copelan, Miami, Fla., for defendants.
   ORDER DENYING PETITION FOR REMAND

JAMES LAWRENCE KING, Chief Judge.

This cause arises before the Court upon the petition of defendants, MAYOR MAURICE A. FERRE and THE CITY OF MIAMI, to remove the above-styled action instituted in state court by the plaintiffs, THE MIAMI HERALD PUBLISHING COMPANY and its reporter RICK HIRSCH, and upon plaintiffs’ petition for remand.

On December 7, 1984 plaintiffs filed the above-styled action, numbered 84-45183, in the 11th Judicial Circuit Court, Dade County, Florida seeking declaratory, injunctive and other relief against the defendants for their destruction of records relating to the vote to terminate former City Manager Howard Gary. The state court heard and granted a motion for temporary injunction against the defendants immediately after the filing of the complaint. Two of the defendants, MAYOR MAURICE A. FERRE and THE CITY OF MIAMI, subsequently filed a petition for removal with this Court on December 13, 1984, based upon the presence of 42 U.S.C. § 1983 claims. Plaintiffs then filed their petition for remand on December 14, 1984 and this Court heard oral argument on the matter on December 20th.

Plaintiffs’ petition for remand of this action is predicated upon the following arguments which this Court will address separately below:

1. The petition for removal is facially defective because it is joined by only two, MAYOR MAURICE A. FERRE and THE CITY OF MIAMI, of the five defendants named in the state court action.

2. The right to remove under 28 U.S.C. § 1441 and § 1446 was waived by all the defendants in the state court action when, prior to the filing of the petition for removal, they entered substantive defenses to the state court action by filing and serving in state court an answer and affirmative defenses to the complaint.

1. Nonjoinder in Removal Petition

At the outset, this Court finds that plaintiffs’ procedural objections to the removal petition which were based upon the nonjoinder by three of the defendants have been cured by the timely filing on November 19, 1984 of written consents to the petition for removal by all three of the defendants in question, MARIE PETIT, NESTOR TOLEDO and ALINA NOVARO.

As regards the joinder requirement, the Court first notes that plaintiffs are correct in arguing that under the removal procedures specified in 28 U.S.C. § 1446(a) all defendants are required to join in the removal petition. Tri-Cities Newspapers, Inc. v. Tri-Cities P.P. & A. Local 349, 427 F.2d 325, 326-27 (5th Cir. 1970). Moreover, plaintiffs are also correct in their assertion that, while an exception to the joinder rule exists for purely nominal or formal parties, it is clear that none of the defendants herein meets the test for a nominal party as outlined by the Court in Tri-Cities, id. at 327, and, thus, all the named defendants in the instant action are required to join in the removal petition. However, what plaintiffs neglected to take account of in their petition for remand is that § 1446(b) provides that all defendants have thirty days after receipt of service within which to petition for removal. In addition, the Court further notes that it is well established that “the joinder requirement of section 1446 is satisfied where one defendant files a singular removal petition, if all defendants served on or before the filing of that petition thereafter timely file either their own removal petitions or their joinder in or consents to the original petition.” Albonetti v. GAF Corporation-Chemical Group, 520 F.Supp. 825, 828 (S.D.Tex.1981) (emphasis added). Accordingly, as the complaint in this action was filed and served on all defendants on December 7, 1984 the Court finds that the defendants have timely complied with the removal procedure of § 1446(b) by filing written consents to the petition for removal on December 19th.

As a final matter, the Court notes that plaintiffs at the oral argument on December 20th raised other objections dealing with technical defects in the removal procedure. Specifically, plaintiffs argue that the removal bond filed by defendants MAYOR MAURICE A. FERRE and THE CITY OF MIAMI is defective in that it runs to only one of the plaintiffs, THE MIAMI HERALD PUBLISHING COMPANY; it is not joined in by all of the defendants; and that cash, in lieu of a proper bond, was filed with the clerk of the court. However, here again, as in the case of the joinder requirement, the Court reminds plaintiffs that § 1446 provides for a thirty day limitation period within which to file a proper removal petition which includes the filing of a proper bond. See Proteus Foods & Industries, Inc. v. Nippon Reizo Kabushiki Kaisha, 279 F.Supp. 876, 878 (S.D.N.Y.1967). The Court is satisfied by defendants’ assurances made at the December 20th oral argument that all defects in the removal bond will be cured within the limitations period and, therefore, finds that remand of the action due to the defective removal bond is not warranted at this time.

2. Waiver of Removal Right

The Court is unpersuaded by plaintiffs’ argument that the defendants herein have waived their right to removal by filing an answer and affirmative defenses in state court. In this regard, the Court adopts the well-reasoned view stated by the Court in Bedell v. H.R.C. Ltd., 522 F.Supp. 732, 738 (E.D.Ky.1981) (quoting 1A Moore’s Federal Practice § 0.157(9) at 127), “that although waiver of the right of removal is possible, ‘the defendant’s intent (to waive) must be clear and unequivocal. Waiver will not occur by defensive action in the state court, short of proceeding to an adjudication on the merits.’ ” Moreover, the Court also concurs in the analysis of the Court in Haun v. Retail Credit Company, 420 F.Supp. 859, 864 (W.D.Pa.1976) where it notes that “the Federal Rules of Civil Procedure contemplate an answer in state court before removal to federal court. Rule 81(c) provides that in actions removed to federal court: repleading is not necessary unless the court so orders. In a removed action in which the defendant had not answered, he shall answer ... within 20 days.” Accordingly, the Court finds that the defendants in the instant action have not waived their right to remove by either defending at the preliminary injunction hearing or by filing an answer and affirmative defenses in state court prior to filing a timely petition for removal.

In conclusion the Court finds that the defendants have complied with removal procedure under § 1446 and, therefore, that the federal claims based upon 42 U.S.C. § 1983 in the above-styled action are properly removed to federal court. As this Court also finds that the remaining state claims are within its pendant jurisdiction, it will exercise its discretion to consider the entire action.

The Court, being fully advised, herein does:

ORDER and ADJUDGE that the plaintiffs’ petition for remand be, and it is, DENIED. Consistent with this Order, the defendants are hereby directed to cure all defects in the removal bond before the expiration of the limitations period on January 7, 1985.

DONE and ORDERED in chambers at the United States Courthouse, Miami, Dade County, Florida this 26th day of December, 1984.


author: FISH, District Judge.

text:
    Terry JAMES and Juha Kokko, Plaintiffs, v. Raymond H. MEINKE, Defendant.
    Civ. A. No. CA 3-83-0719-G.
    United States District Court, N.D. Texas, Dallas Division.
    Dec. 28, 1984.
    Coyt Randall Johnston, Johnston & Budner, Dallas, Tex., for plaintiffs.
    Hugh O. Mussina, Dallas, Tex., for defendant.
   MEMORANDUM ORDER

FISH, District Judge.

Having considered the motions for judgment submitted by both parties and the briefs thereto, the court is of the opinion that plaintiffs’ motion should be granted in part and denied in part and that defendant’s motion should be denied.

With respect to plaintiffs’ claims pursuant to Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, 15 U.S. C.A. § 78j(b) (West 1981) (“Section 10(b)”), the jury found in favor of the plaintiffs concerning each element necessary to establish a Section 10(b) violation. The defendant, however, contends that plaintiffs are not entitled to recover under this claim for the following reasons: (1) the jury found no damages in response to Special Interrogatory No. 19; and (2) notwithstanding the jury’s award of damages in response to Special Interrogatory No. 20, the plaintiffs are not entitled to this award because their guaranties do not constitute “securities” for purposes of Section 10(b).

The court will proceed to address only defendant’s second contention since its findings as to that issue will resolve the Section 10(b) problem. The term “security” as defined in 15 U.S.C.A. § 78c(a)(10) (West Supp.1984) includes “any note, stock, ... investment contract, ... or in general, any instrument commonly known as a ‘security’ ____”

A guaranty agreement constitutes a “security” only if it may be considered an “investment contract” or “an instrument commonly known as a security.” Crabtree Investments, Inc. v. Aztec Enterprises, Inc., 483 F.Supp. 211, 214 (M.D.La.1980). In order for an instrument to qualify as an “investment contract” or “an instrument commonly known as a security,” it must constitute “an investment in a common venture premised on a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.” United Housing Foundation, Inc. v. Forman, 421 U.S. 837, 852, 95 S.Ct. 2051, 2060, 44 L.Ed.2d 621 (1975); Westchester Corporation v. Peat, Marwick, Mitchell & Company, 626 F.2d 1212, 1215 (5th Cir.1980).

Applying this test to the case at bar, plaintiffs’ guaranties are clearly securities. Both James and Kokko testified, without dispute, that they executed the guaranty agreements in consideration for the promise that they would receive additional stock in Bratton Coach Works, Inc. (“Bratton”). Bratton is a corporate entity constituting a common venture “since the fortunes of the investors are ... ‘interwoven with and dependent upon the efforts and success’ ” of Meinke and others who sought out the plaintiffs’ investment. Westchester, 626 F.2d at 1215 (citations omitted).

Moreover, James and Kokko originally invested in Bratton and signed the guaranties in the expectation that as a result of these transactions they would receive profits of the corporation through its management and operation by Meinke and others. See id. at 1216. The plaintiffs did not merely execute a guaranty; they made an investment in a corporation giving their guaranty in exchange for the promise that they would receive stock in that corporation in return for their guaranty. Cf. Crabtree Investments, Inc., 483 F.Supp. at 215 (plaintiff made a loan, not an investment, in consideration for a fixed payment of $1,200 per month, which amount was independent of the corporation’s profits).

The court thus concludes that the guaranties involved here constitute “securities.” As a result, the plaintiffs have succeeded on their Section 10(b) claim and would be entitled to those damages found by the jury in response to Special Interrogatory No. 20.

Defendant next contends that plaintiffs are not entitled to recover on their claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S. C.A. § 1962(a) and (c) (West Supp.1984) for the following reasons: (1) since plaintiffs sustained no damages cognizable under Section 10(b), no fraudulent sale of stock exists to provide the predicate offenses required under RICO; and (2) a criminal conviction is a prerequisite to recovery in a civil RICO action.

The court’s previous discussion concerning plaintiffs’ entitlement to those damages found by the jury in response to Special Interrogatory No. 20 disposes of defendant’s first contention under the RICO count.

In the Fifth Circuit, a prior criminal conviction for either the predicate offenses supporting a RICO claim or for a RICO violation itself has not been necessary for recovery in a civil RICO action. See Alcorn County, Mississippi v. U.S. Interstate Supplies, Inc., 731 F.2d 1160, 1168-69 (5th Cir.1984); Owl Construction Company, Inc. v. Ronald, Adams Contractor, Inc., 727 F.2d 540, 542 (5th Cir.), cert. denied, — U.S. -, 105 S.Ct. 118, 83 L.Ed.2d 61 (1984). All that is required in this regard is evidence establishing that a defendant participated in the affairs of an enterprise through a pattern of racketeering activity, by committing at least two predicate offenses under 18 U.S.C. § 1961(1). Alcorn County, 731 F.2d at 1168-69.

Fraud in the sale of securities is one of the predicate offenses listed in Section 1961 and formed the basis for plaintiffs’ civil RICO claim herein. As stated above, the jury returned a verdict in plaintiffs’ favor on their Section 10(b) claims. Moreover, the court finds this result was warranted because plaintiffs presented substantial evidence establishing that Meinke committed securities fraud in violation of Section 10(b).

The court is cognizant of the Second Circuit’s recent decision in Sedima S.P.R.L. v. Imrex Co., 741 F.2d 482, 503 (2d Cir.1984) which held that a prior criminal conviction is a prerequisite to recovery in a private civil RICO action. However, the Fifth Circuit opinions cited above, which pre-date Sedima, fail to suggest any inclination on the part of the Fifth Circuit to follow the Second Circuit’s lead in the future. This court also has declined to hold that a prior criminal conviction is a prerequisite to a civil RICO action. Long v. Capitol Savings and Loan Association, et al., CA 3-84-1065-H (Nov. 6, 1984-Sanders, J.). Therefore, the court concludes that the plaintiffs have succeeded on their civil RICO claim as a result of which they are entitled to three-fold the damages found by the jury, as well as costs of court including reasonable attorneys’ fees. 18 U.S.C. § 1964(c) (West Supp.1984).

Since the plaintiffs have obtained favorable results on their RICO claims, the court presumes that the plaintiffs have elected their remedies under this statute. Accordingly, plaintiffs are entitled to three-fold the damages they sustained as found by the jury, together with costs of court including reasonable attorneys’ fees to be determined at a later date.

As a result of the plaintiffs’ success on both the Section 10(b) claim and the RICO claim, the court finds it unnecessary to determine whether the submission of plaintiffs’ claims under Section 12(2) of the Securities Act of 1933, 15 U.S.C.A. § 111(2) (West 1981) was proper. Assuming without deciding, however, that submission of the Section 12(2) claim was proper, the court is of the opinion, based upon the jury’s verdict, that the plaintiffs succeeded on that claim as well.

Conclusion

The court concludes that the plaintiffs have succeeded on all three claims presented to the jury for determination.


text:
    Mario ESTEVEZ-GONZALEZ, and Nubia Gonzalez, his wife, Plaintiffs, v. KRAFT, INC., and the Grand Union Company, Defendants.
    No. 84-2821-Civ-KING.
    United States District Court, S.D. Florida, Miami Division.
    Jan. 3, 1985.

      Neil G. Taylor, Miami, Fla., for plaintiffs.
    Dale F. Webner, Trenam, Simmons, Kemker, Scharf, Barkin, Frye & O’Neil, P.A., Miami, Fla., for defendants.
   ORDER REMANDING CAUSE

JAMES LAWRENCE KING, Chief Judge.

This cause arises before the Court upon the petition of the defendant, KRAFT, INC., to remove the action instituted by the plaintiffs, MARIO ESTEVEZ-GONZALEZ, and NUBIA GONZALEZ, in the Eleventh Judicial Circuit Court, Dade County, Florida, Case No. 84-39354, and upon the plaintiffs’ motion for remand.

Plaintiffs have objected to defendant’s proposed removal upon two grounds.

1. Waiver of Removal Right

First, plaintiffs allege that the Defendant, KRAFT, INC., has lost its right to remove because of substantial defensive action taken in state court. Although it is true, as the plaintiffs assert, that a waiver by one defendant will bind a second defendant, neither the actions of KRAFT, INC. nor the actions of GRAND UNION COMPANY constitute a waiver. As the Court in Bedell v. H.R.C. Ltd., 522 F.Supp. 732 (E.D.Ky.1981) held, a waiver of the right to remove is possible only where the defendant’s intent to waive is clear and unequivocal. The only actions taken in state court by the defendants in this case were the filing of a motion for extension of time, service upon the plaintiffs of interrogatories, and the filing of an answer. A motion for extension of time and the taking of discovery clearly do not evidence an unequivocal intent to waive removal and as such have been held not to result in the waiver of the right to remove. See Malave v. Sun Life Assurance Company of Canada, 392 F.Supp. 51 (D.Puerto Rico 1975) and Fuga v. Gulf Colorado and Santa Fe Railway Company, 206 F.Supp. 814 (D.Okl.1962). Similarly, the filing of an answer in state court has been held not to constitute a waiver of the right to remove. See Haun v. Retail Credit Company, 420 F.Supp. 859 (W.D.Pa.1976) and Kiddie Rides U.S.A., Inc. v. Elektro-Mobiltechnik GMBH, 579 F.Supp. 1476 (C.D.Ill.1984).

The Plaintiffs rely on Texas Wool and Mohair Marketing Association v. Standard Accident Insurance Co., 175 F.2d 835 (5th Cir.1949) for the proposition that the filing of an answer constitutes a waiver. A more careful reading of this case however, indicates that the answer at issue contained a cross-claim. While the filing of a permissive pleading seeking affirmitive relief, such as a cross-claim or permissive counterclaim, has been held to result in a waiver, the mere filing of a responsive pleading is generally held not to constitute a waiver. See Bedell v. H.R.C. Ltd., supra; Sood v. Advanced Computer Techniques Corp., 308 F.Supp. 239 (E.D.Va.1969); and Briggs v. Miami Window Corp., 158 F.Supp. 229 (M.D.Ga.1956). Accordingly, the Court finds that the defendants in the case at bar have not waived their right to remove.

2. Establishment of Diversity Jurisdiction

Second, plaintiffs assert that the defendant’s petition for removal fails to demonstrate the elements of diversity jurisdiction. Pursuant to 28 U.S.C. § 1332(a), diversity jurisdiction will exist if both defendants are of different citizenship from both plaintiffs, and if the matter in controversy exceeds the sum of $10,000, exclusive of interest and costs.

A petition for removal in a diversity case involving a corporate defendant must allege the corporation’s state of incorporation and its principal place of business because, a corporation is deemed to be a citizen of both states. The petition must disclose diversity between all defendants and all plaintiffs and must allege that such diversity was present at the outset of the suit as well as at the time of the removal petition. In the instant case, allegations of diverse citizenship have properly been made in the defendant’s motion for removal. These allegations are not in conflict with what is stated in the plaintiffs’ complaint, they have not been challenged in the plaintiffs’ motion for remand, and they do not appear to be misrepresented. Thus, the citizenship of the defendants provides no basis for remand.

The Court is also unpersuaded by plaintiffs’ argument that the defendant’s allegation of the required $10,000 jurisdictional amount is unsupported and thus provides a basis for remand. As a general rule, the amount stated in the complaint will determine the amount in controversy. However, where the complaint contains no specification of damages, as does the plaintiffs’ complaint in this action, the court will consider the allegations in the petition for removal. As in many personal injury actions filed in state court, the plaintiffs’ complaint alleges merely that damages have been incurred in excess of $5,000 which is the amount necessary for state circuit court jurisdiction. This Court has previously held in Baker v. Firestone Tire & Rubber Company, 537 F.Supp. 244 (S.D.Fla.1982) that if a reasonable reading of the complaint discloses that the sum in controversy does in fact exceed $10,000 the jurisdictional amount will be found to exist. The complaint in Baker merely alleged that the amount in controversy was in excess of $5,000. The Court found, however, that the plaintiffs’ allegations of permanent and serious injuries, pain, disfigurement, disability, loss of wages, loss of earning capacity, loss of capacity for the enjoyment of life and great expenses for future medical treatment, were sufficient to establish the jurisdictional amount. Likewise, in the case at hand, a reasonable reading of the plaintiffs’ complaint discloses that the amount in controversy does in fact exceed $10,000. The complaint alleges physical and mental pain, physical handicap, impairment of working ability, injuries permanent or continuing in nature, and medical expenses.

Although the issues raised in the plaintiffs’ motion do not provide proper grounds for remand, the defendant’s removal petition presents an additional defect which compels this Court to remand this action to state circuit court. 28 U.S.C. § 1446(a), which governs the procedure for removal has been interpreted to require each and every defendant who can meet the jurisdictional requirements of 28 U.S.C. § 1441 to join in a petition for removal in order for the petition to be valid. See Woods v. Firestone Tire & Rubber Company, 560 F.Supp. 588 (S.D.Fla.1983). In addition, 28 U.S.C. 1446(b) provides that all defendants have thirty days after receipt of service within which to petition for removal. This thirty day limitation also applies to a defendant who is required to join a petition for removal. The record presented to this court does not indicate the exact date of service upon the defendant, GRAND UNION COMPANY. However, an examination of discovery documents dated Nov. 16, 1984, filed by the defendant in state court, shows that that the thirty day period in regard to GRAND UNION COMPANY has expired. The defendant, GRAND UNION COMPANY, which the pleadings show meets the jurisdictional requirements, has failed to either file a removal petition of its own, or to join in or consent to the petition filed by the defendant, KRAFT, INC. Therefore, pursuant to 28 U.S.C. § 1447, the Court does:

ORDER and ADJUDGE that the plaintiffs’ petition for remand be, and it is, GRANTED with instructions to the Clerk of the Court to forward all original pleadings to the Clerk of Court for the Eleventh Judicial Circuit, in and for Dade County, Florida.

DONE and ORDERED in chambers at the United States Courthouse, Miami, Dade County, Florida this 2nd day of January, 1985.