author: STEGER, District Judge.

text:
    Michael DUNN, Regional Director of the Sixteenth Region of the National Labor Relations Board, for and on Behalf of the NATIONAL LABOR RELATIONS BOARD v. PILGRIM INDUSTRIES, INC.
    No. L-85-194-CA.
    United States District Court, E.D. Texas, Lufkin Division.
    Dec. 27, 1985.

      Wayne Rustin, Glyn Cook, Fort Worth, Tex., for plaintiff.
    Yona Rosen, Dallas, Tex., for the Union.
    Allen D. Schoolfield, P.C., Dallas, Tex., for defendant.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW

STEGER, District Judge.

This cause came to be heard upon the verified petition of Michael Dunn, Regional Director of Region Sixteen of the National Labor Relations Board (hereinafter the Board), for a temporary injunction pursuant to Section 10(j) of the National Labor Relations Act, as amended, (hereinafter the Act), pending the final disposition of the matters involved herein pending before the Board, and upon the issuance of an order to show cause why injunctive relief should not be granted as prayed for in said petition. Respondent has filed an answer to said petition. All parties agreed to stipulate the entire content of the record in Board Case No., 16-CA-12241 which was heard before Administrative Law Judge, Richard J. Linton on October 22, 1985. Instead of presenting witnesses, all parties were afforded full opportunity to be heard in oral argument on the issues, evidence and the law at a hearing on October 30, 1985. Having reviewed the testimony presented and having duly considered all exhibits and arguments before it, the Court hereby enters these its Findings of Fact and Conclusions of Law in conformity with Fed.R.Civ.P. 52(a).

Any finding of fact which constitutes a conclusion of law shall be deemed a conclusion of law. Any conclusion of law which constitutes a finding of fact shall be deemed a finding of fact.

Findings of Fact

1. Petitioner is Regional Director of Region Sixteen of the Board, an agency of the United States, and filed the petition for and on behalf of the Board.

2. Respondent, Pilgrim Industries, Inc., is now and has been at all times material herein, a corporation duly organized under and existing by virtue of the laws of the State of Texas and is engaged in the processing, packaging and sale of chicken broilers in Lufkin, Texas, the only facility involved in this proceeding. Respondent operates five poultry processing plants in Texas, with its principal office and place of business located in Pittsburg, Texas.

3. At all times material herein, the following persons occupied the positions set forth opposite their respective names, and have been and are now agents of Respondent within the meaning of Section 2(13) and are supervisors within the meaning of Section 2(11) of the Act:

Lonnie Bo Pilgrim......Chief Executive Officer

Eiray Woods...........Plant Manager

4. Respondent is now, and has been at all times material herein an employer engaged in commerce within the meaning of Section 2(6) and (7) of the Act.

5. Pluss-Tex Poultry Company, (hereinafter Pluss-Tex) was formerly engaged in the processing, packaging and sale of chicken broilers in Lufkin, Texas.

6. The United Food and Commercial Workers, Local 540, AFU-CIO, CLC, (hereinafter the Union), is a labor organization within the meaning of Section 2(5) of the Act and exists for the purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment and conditions of work.

7. The Union was elected by a majority vote of Pluss-Tex employees and certified by the Board as the exclusive bargaining agent for the production workers on April 15, 1955.

8. There have been a series of three year contracts between the Union and Pluss-Tex since April 15, 1955. The latest contract was effective from May 31, 1982 to June 3, 1985.

9. Respondent was aware of the contractual relationship between the Union and Pluss-Tex prior to June 3, 1985.

10. On May 29,1985, Respondent rejected the contract between Pluss-Tex and the Union. See G.C. Exhibit 7.

11. Commencing on May 29, 1985, and continuing to date, the Union has requested and is requesting Respondent to bargain collectively with respect to rates of pay, wages, hours of employment and other terms and conditions of employment as the exclusive collective bargaining representative of all employees in the bargaining unit.

12. On or about June 3, 1985, Respondent acquired the Pluss-Tex plant in Lufkin, Texas, and assumed operations of the plant at the same location, producing the same product, utilizing the same production methods and employing the same employees.

13. On June 3, 1985, Respondent instituted a pension plan and a 154a per hour pay increase in all of its plants, including the Lufkin operation.

14. The pension plan and pay increase were unilateral acts of Respondent without negotiation, consultation or approval of the Union.

15. On June 26, 1985, Respondent unequivocally advised the Union that it would not bargain with the Union until a majority status was established in an appropriate bargaining unit.

• 16. On August 4, 1985, Respondent instituted a second work shift at the Lufkin plant. Additional employees were added to cover the second shift. These additions approximately doubled the number of employees at the Lufkin location.

17. The institution of a second work shift was a unilateral change on the part of Respondent without negotiation, consultation, or approval of the Union.

18. On August 30, 1985, the General Counsel of the Board, on behalf of the Board, by petitioner, issued a Complaint and Notice of Hearing in Case No. 16-CA-12241, pursuant to Section 10(b) of the Act, alleging, inter alia, that Pilgrim Industries, Inc., herein called Respondent, has engaged in and is engaging in unfair labor practices within the meaning of Sections 8(a)(1) and (5) of the Act. Thereafter, Petitioner filed the instant action seeking a temporary injunction pursuant to 10(j) of the Act.

19. The Board has reasonable cause to believe that Respondent has failed and refused, and is failing and refusing to bargain collectively and in good faith with the representative of its employees and Respondent thereby has engaged in and is engaging in unfair labor practices affecting commerce within the meaning of Section 8(a)(1) and (5) and Sections 2(6) and (7) of the Act.

CONCLUSIONS OF LAW

1. This Court has jurisdiction over the parties and subject matter of the proceeding pursuant to § 10(j) of the National Labor Relations Act (the Act), 29 U.S.C. § 160Q).

2. Respondent is an employer engaged in commerce within the meaning of Section 2(6) and 2(7) of the Act.

3. Lonnie Bo Pilgrim, Chief Executive Officer, and Elray Woods, Plant Manager, are agents of Respondent within the meaning of Section 2(13) and are supervisors within the meaning of Section 2(11) of the Act.

4. A district court has authority to grant temporary injunctive relief against a party alleged to have committed an unfair labor practice if the court finds:

a. the Board has reasonable cause to believe that an unfair labor practice has occurred; and

b. injunctive relief to be “just and proper.” See Boire v. International Brotherhood of Teamsters, 479 F.2d 778 (5th Cir. 1973); Boire v. Pilot Freight Carriers, Inc., 515 F.2d 1185 (5th Cir.1975), cert. denied, 426 U.S. 934, 96 S.Ct. 2646, 49 L.Ed.2d 385 (1976).

Reasonable cause

5. The Board has reasonable cause to believe that Respondent has violated Sections 8(a)(1) and 8(a)(5) of the Act.

Section 8(a)(1) provides that an employer commits an unfair labor practice when it interferes with, restrains or coerces employees in the exercise of the right to bargain collectively. Section 8(a)(5) proscribes employer refusal to bargain. The Board satisfies their minimal proof requirements of reasonable cause if the legal theories upon which they proceed are not insubstantial or frivolous. Boire, 479 F.2d at 792.

This Court should find that reasonable cause exists if the facts of this case support the Board’s legal theories of employer violations. See Kobell v. Surburban Lines, Inc., 731 F.2d 1076 (3rd Cir.1984) (adopting Fifth Circuit “reasonable cause” test). Respondent has stipulated before the AU that it produces the same product with the same equipment and by the same processes as did Pluss-Tex, its predecessor. (Tr. 25-27). There is a substantial identity of employees between Pluss-Tex and Respondent. (Tr. 25). Many of Respondent’s customers were also customers of Pluss-Tex. (Tr. 107-108).

Petitioner contends that the above facts are relevant to a finding that Respondent is a “successor employer” and as such has a duty to negotiate with the Union that had been recognized by Pluss-Tex as the exclusive bargaining agent for its member employees. See N.L.R.B. v. Burns International Security Services, 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972); N.L.R.B. v. Auto Ventshade, Inc., 276 F.2d 303 (5th Cir.1960).

Respondent contests whether it is a “successor employer,” but argues that even if it is, there is no duty to bargain because the Union no longer enjoys a majority status in the bargaining unit. (Tr. 19). Respondent does not dispute that it has refused to recognize or bargain with the Union. (Tr. 101). Further, Respondent stipulates that it has instituted pay increases, a pension plan and a second work shift without negotiation with the Union representative. (Tr. 30-31).

In Boire, the Fifth Circuit gave guidance to district courts faced with § 10(j) petitions. First, the district court should not attempt to dispose of the legal issues in the underlying unfair labor practice action. The court’s analysis should proceed only as far as necessary to determine whether the Board’s theories are either insubstantial or frivolous. Boire, 479 F.2d at 792. In the instant case, both Petitioner and Respondent have briefed, argued, and presented evidence on issues that, if reached, would take this Court beyond its limited role. The Court is of the opinion that Congress gave the N.L.R.B. broad investigatory and adjudicatory powers to aid in the resolution of labor disputes and implementation of a national labor policy. Accordingly, this Court defers to their resources and expertise the resolution of the following issues: (1) Respondent’s duty to bargain, if any, as a “successor employer” under Burns, supra, (2) if such duty exists, whether Respondent has sufficient objective evidence to support a good faith doubt of the continuing majority status of the Union, N.L.R.B. v. Gulfmont Hotel Co., 362 F.2d 588 (5th Cir.1964) (Board decides questions on good faith doubt of majority), and (3) the composition of the bargaining unit. Boire, 515 F.2d at 1192.

The Court is of the opinion that in light of the admissions and stipulations of Respondent and the relevant statutory language found in Sections 8(a)(1) and 8(a)(5) that Petitioner has maintained their minimal burden of proof of reasonable cause. The Board will, in due course, resolve whether such unfair labor practices have in fact occurred. Suffice it to say that for the purposes of this § 10(j) proceeding the facts in evidence support a finding that the theories upon which the Board relies are not insubstantial or frivolous. Petitioner has reasonable cause to believe that violations of the Act have occurred at Respondent’s plant.

Just and proper

6. There is insufficient evidence to persuade this Court that a mandatory decree forcing Respondent to recognize and negotiate with the Union is equitably necessary to assure that a final order of the Board will not be meaningless or so devoid of force that the remedial purposes of the Act will be frustrated.

The Board and Union maintain that injunctive relief is proper for essentially four reasons. First, the Union will “inevitably” suffer loss of support, attrition of membership or loss of majority during the pendency of Board proceedings. Second, the Board argues that the harm suffered by decrease in Union membership cannot be remedied by a Board order and is, therefore, irreparable. Third, the Board contends that bargaining unit employees will be denied the potential benefits of collective bargaining. Finally the Union contends that it is inequitable to allow Respondent to benefit by saving the costs of collective bargaining and erosion of Union strength while it refuses to bargain.

The Court finds fault with Petitioners’ arguments in two respects. First, their conclusion that inevitable irreparable ham will result from the refusal to bargain assumes the truth of their premise that Respondent has an obligation to bargain. This is the issue now before the Board. Second there is little, if any, evidence of specific facts to support these general conclusions and speculations.

Although Petitioners need not prove their case in this Court by a preponderance of the evidence or make a showing of irreparable harm, their case would be bolstered by some evidence that actions of the Respondent have caused, or are likely to cause, some objective discernable harm or prejudice to Union membership or support. The specific facts that underlie their general conclusions that harm is inevitable would assist a court of equity in fashioning relief proper under the particular circumstances.

A court of equity maintains equitable powers to mold each decree to the necessities of the case. Boire, 515 F.2d at 1193. Although the equitable relief obtainable through 10(j) proceedings may not be governed solely by the rules of equity applicable to civil litigation, the Court in its discretion may rely in part on general equitable principles. Id.; Cf. Canal Authority of the State of Florida v. Callaway, 489 F.2d 567 (5th Cir.1974) (requirements for a preliminary injunction); Mississippi Power & Light v. U.S. Gas Pipe Line, 760 F.2d 618 (5th Cir.1985) (same). As such, courts have been able to fashion 10(j) relief for a number of reasons. See, e.g. Sheeran v. American Commercial Lines, Inc., 683 F.2d 970 (6th Cir.1982) (circumstances of the case warrant judicial action in the public interest); Boire, 515 F.2d at 1193 (preservation of the status quo is at least one consideration); Lebus v. Manning, Maxwell & Moore, Inc., 218 F.Supp. 702 (W.D. La.1963) (stabilization of labor relations).

The Court is of the opinion that there is no evidence that Union membership has decreased or suffered due to actions of Respondent or that recruiting new Union members has been hampered by Respondent’s activities. Additionally, the Fifth Circuit has stated that in cases of successor employers, the Board is to look to the time of succession to determine if the Union represents a majority of the employees. N.L.R.B. v. Auto Ventshade, 276 F.2d at 307.

There is no evidence to suggest that any harm done cannot be remedied by a Board order. Once the Board determines by a preponderance of the evidence that an employer is engaging in unfair labor practices the Board may issue a cease and desist order to the employer as well as take “such affirmative action ... as will effectuate the policies of the Act.” 29 U.S.C. § 160(c). The scope of the relief to be granted by the Board is largely a question of administrative discretion. N.L.R.B. v. Truitt Mfg. Co., 351 U.S. 149, 76 S.Ct. 753, 100 L.Ed. 1027 (1956). The argument that the Board cannot restore loss of membership is merely an extension of the argument above, and assumes facts not in evidence; that there has been or will be a decline in membership due to the recent changes.

Third, the Union argues that, absent injunctive relief, employees will be denied a legal right to bargain collectively. As in Boire, regardless of how this Court rules on the mandatory bargaining issue, one party stands to be hurt in the sense of injury to a legal right. Either an employer will be forced to bargain with a Union with which it is not required to bargain or employees will be temporarily denied their contractual right to bargain collectively.

Given this choice, the Court chooses to follow the reasoning in Boire and await the pronouncement of the Board. There is scant evidence in the record that failure to issue a de facto bargaining order will injure the Union to the point where it cannot recover. To the contrary, the evidence suggests that the Union has been in operation for thii’ty years at the Lufkin plant. (Tr. 38). The Union maintains that it has in the past, and currently, represents a majority of the production employees. It is reasonable to infer that a base of support built over the span of three decades will not be seriously jeopardized by the temporary continuation of the non-bargaining status. Boire, 515 F.2d at 1194.

The Court also finds support in its conclusion by the absence of substantial evidence on the points listed below. Although none standing alone is decisive, the sum of their absences persuades the Court that mandatory injunctive relief is not equitably necessary in this case. First, the record does not reflect employee dissatisfaction with the current status. The record is devoid of any suggestion that employees have considered strikes, work slow downs, violence or any other expression of dissatisfaction. Second, there is no evidence that Respondent is using this interim period to obtain a strategic numerical advantage over the employees. Respondent has neither discharged, locked out, nor overtly encouraged employee rejection of the Union. Third, there is no evidence that Respondent has favored or supported a competitor union. Fourth, there is no evidence that Respondent has exerted economic or social pressures on employees to discourage Union membership or encourage defection from the ranks of the Union.

Although Respondent has admitted initiating unilateral changes in the Lufkin plant, all parties agree that the employees have benefitted. Respondent has not selectively implemented policies which benefit only non-Union employees or Union defectors. Second, neither the employees, Union nor the N.L.R.B. wish to rescind any of the unilateral changes made by Respondent.

The Court recognizes that the Union has been caught upon the horns of a dilemma. While the Union might justifiably argue that the pay raise and pension plan instituted by Respondent are attempts to lure Union employees away from the rank and file, the Union cannot object to these changes (other than on procedural grounds) because to do so would cast it in an unfavorable light in the eyes of its members. Since all have agreed that the changes were beneficial to employees, the Union is now in the position of objecting; not to the fact that its members were benefitted, but that the benefits were not conferred with its concurrence. The Court does not view that the change in employee benefits was an attempt by Respondent to exert economic pressure upon employees in an effort to undermine Union strength. Respondent has testified that he operates five processing plants. (Tr. 85). Respondent also testified that all plants were operated under a single policy which was determined by Pilgrim, the Chief Executive Officer (Tr. 97). Respondent contends the benefits were increased across the board and not just at the Lufkin plant. It is not reasonable to infer from these circumstances that implementation of changes in employee benefit plans was meant to undermine Union support at the Lufkin facility.

Viewed from a larger perspective, there has been no showing of a significant financial loss inflicted upon either the employees or the Union. There is no evidence that the public will suffer with loss of a valuable public service if the Court does not intervene with the issuance of mandatory bargaining order.

Although there is no evidence that Respondent had unfairly capitalized on the current state of relations between itself and the Union, the Court is aware that the possibility of abuse exists. The Court is, therefore, of the opinion that, pursuant to § 10(j) of the Act, the following prohibitory order is just and proper and will best preserve the legal and factual issues pending final action by the Board.

It is, therefore, ORDERED, ADJUDGED and DECREED that pending the final disposition of the matters involved before the National Labor Relations Board, Respondent, its officers, representatives, agents, servants, employees, attorneys and all persons acting in concert or participation with them be, and hereby are enjoined and restrained from committing any act or implementing any policy at the Lufkin plant with the intent or effect of eroding employee support of or membership in the Union and from attempting to dissipate Union strength in any unlawful manner in the future. It is further

ORDERED, ADJUDGED and DECREED that there be no recission of the pay increase, pension plan or second work shift instituted at the Lufkin plant. Further, the Court declines to use the mandatory injunction as a de facto bargaining order based upon the evidence before it. Therefore, no such order will issue. This temporary relief will cease to be of force and effect upon issuance of a final order by the Board.

SO ORDERED.

      . The parties have stipulated that the evidentiary record adduced at the hearing before the AU would suffice for the evidentiary record in this 10(j) proceeding and therefore no witnesses were called or evidence admitted here. The bulk of the record compiled before the ALJ was directed to the issues of union majority, good faith doubt of continuing majority and composition of the bargaining unit. This is entirely proper because, as noted above, those are precisely the issues with which the Board must deal. While using that record in this case has the obvious benefit of conserving time and resources, it is not without flaw. The disadvantage here is that the issues for determination by the Board and those for determination in this Court are not completely coextensive. Specifically, the Board is not concerned with the equitable necessity of a temporary injunction, and as a result the evidentiary record concerning that issue is sparse.


source: Caselaw Access Project

author: MURRAY M. SCHWARTZ, Chief Judge.

license: Public Domain

text:
    ELF AQUITAINE, INC., a Delaware corporation, Plaintiff, v. PLACID OIL COMPANY, a Delaware corporation, Defendant. ELF AQUITAINE, INC., a Delaware corporation, Plaintiff, v. SUN PRODUCTION COMPANY, a Delaware corporation, Defendant. ELF AQUITAINE, INC., a Delaware corporation, Plaintiff, v. PLACID REFINING COMPANY, a Delaware corporation, Defendant. ELF AQUITAINE, INC., a Delaware corporation, Plaintiff, v. MURPHY OIL USA, INC., a Delaware corporation, Defendant.
    Civ. A. Nos. 85-182 MMS to 85-185 MMS.
    United States District Court, D. Delaware.
    Dec. 27, 1985.

      Stephen E. Herrmann, of Richards, Lay-ton & Finger, Wilmington, Del. (John P. Mathis, Randolph Q. McManus, and Christopher J. Braun, of Baker & Botts, Washington, D.C., of counsel), for plaintiffs.
    John H. Small, and Norman L. Pernick, of Prickett, Jones, Elliott, Kristol & Schnee, Wilmington, Del. (Allen Weed, and Mark M. Petzinger, of Shank, Irwin & Conant, Dallas, Tex., of counsel), for defendants Placid Oil Co. and Placid Refining Co.
    William O. LaMotte, III, of Morris, Nichols, Arsht & Tunnell, Wilmington, Del. (James Bailer, and Barbara I. Berschler, of Bailer & Hammett, P.C., Washington, D.C., of counsel), for defendant Sun Production Co.
    Lawrence C. Ashby, of Ashby, McKelvie & Geddes, Wilmington, Del., (David A. Holzworth, M. Bradford Moody, and C. Fairly Spillman, of Akin, Gump, Strauss, Hauer & Feld, Washington, D.C., of counsel), for defendant Murphy Oil USA, Inc.
   OPINION

MURRAY M. SCHWARTZ, Chief Judge.

Plaintiff Elf Aquitaine, Inc. (“Elf”) brought separate suits in this Court against four purchasers of its crude oil, alleging that they failed to pay the full amounts due under the agreements of sale. Presently before the Court are motions filed by defendants to dismiss the complaints for lack of subject-matter jurisdiction and for failure to state a claim upon which relief can be granted under the Delaware statute of limitations. For the reasons expressed below, the Court will dismiss the complaint in each case for lack of subject-matter jurisdiction.

Facts

Elf and each of the defendants are Delaware corporations. Elf entered into agreements with defendants for the sale of crude oil produced from Elf’s interests in various oil fields. Complaint at 116. The agreements specified that the price for each barrel of oil delivered would be a benchmark market price, based on Elf’s “posted price per barrel (42 U.S. standard gallons) for like grade, gravity and quality of oil produced in the same field or area to which applicable and in effect on the day of the date of delivery.” Id. at 11 8.

During the relevant period the price for oil was subject to the Department of Energy (“DOE”) Mandatory Petroleum Allocation and Price Regulations, 10 C.F.R. Part 212 (revoked). These regulations were promulgated pursuant to the Emergency Petroleum Allocation Act of 1973, 87 Stat. 628, 15 U.S.C. § 751 et seq. (1982). In general, the regulations, which set ceiling prices at which producers could sell their oil, precluded Elf from charging the market price called for in its agreements.

The Tertiary Incentive Program (“TIP”) was an exception to the general price control scheme. See 10 C.F.R. § 212.78 (1980) (revoked). TIP was established to encourage producers to undertake more expensive enhanced recovery projects, which otherwise would be uneconomical under price controls. See 44 Fed.Reg. 51148 (Aug. 30, 1979). The TIP regulations authorized a qualified producer to sell crude oil, otherwise subject to price controls, at the market price in order to recoup up to 75 percent of the allowed expenses it had incurred and paid in connection with the establishment or expansion of a “qualified tertiary enhanced recovery project.” 10 C.F.R. § 212.78(a)-(c) (1980) (revoked). The producer was required to certify to the purchaser that the oil qualified under TIP. Id. § 212.131(a)(4). Crude oil originally sold under price controls could be recertified as tertiary incentive crude oil within two months after its production and sale. Id. § 212.131(a)(6).

On January 28, 1981, the President issued Executive Order 12287, immediately exempting petroleum products from price and allocation controls adopted pursuant to the Emergency Petroleum Allocation Act. See Executive Order No. 12,287, 46 Fed. Reg. 9909 (Jan. 30, 1981). Crude oil sold during December 1980 and January 1981 could be certified or recertified retroactively as tertiary incentive crude oil in accordance with 19 C.F.R. 212.131 during the two-month period following the month in which the oil was sold if the oil would have otherwise qualified prior to the Executive Order. DOE Ruling 1981-1, 46 Fed.Reg. 12945, 12947 (question no. 5) (Feb. 19, 1981). See Union Oil Co. v. DOE, 688 F.2d 797 (TECA 1982), cert. denied, 459 U.S. 1202, 103 S.Ct. 1186, 75 L.Ed.2d 433 (1983) (upholding ruling).

The crude oil at issue in these cases was originally sold in December 1980 and January 1981 as controlled oil, and later recertified as tertiary incentive crude oil. Elf invoiced the additional amounts to each of the defendants, but they have refused to make payment. In each of the instant suits, Elf seeks to recover the amount allegedly due it as tertiary incentive revenue: the difference between the contract amounts and the controlled price amounts.

Subject-Matter Jurisdiction

The parties in these actions are all Delaware corporations. Hence, diversity is lacking and subject-matter jurisdiction must be by means of federal-question jurisdiction. In its complaint, Elf alleges three statutory bases for federal subject-matter jurisdiction: 28 U.S.C. § 1331; Section 211(a) of the Economic Stabilization Act of 1970; and 12 U.S.C. § 1904 (note). Elf contends these provisions confer jurisdiction “because the rights and obligations of the Plaintiff and Defendant under their agreements with respect to the sale of crude oil were subject to the regulations of the Department of Energy under the Mandatory Petroleum Allocation and Price Regulations, promulgated pursuant to the Emergency Petroleum Allocation Act of 1973, 15 U.S.C. § 751(b).” Complaint at U.

1. 28 U.S.C. § 1331

Under 28 U.S.C. § 1331, federal-question jurisdiction extends to “all civil actions arising under the Constitution, laws, or treaties of the United States.” The complaint makes no reference to the Constitution or treaties; at issue here is whether this is an action “arising under” federal law.

As the Supreme Court recently discussed, the “arising under” phrase has resisted precise definition since the first version of Section 1331 was enacted in 1875. See Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 8-9 103 S.Ct. 2841, 2845-46, 77 L.Ed.2d 420 (1983); see also Trent Realty Associates v. First Federal Savings & Loan Ass’n, 657 F.2d 29, 32 (3d Cir.1981); 13B C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3562 (1984). It is clear, however, that Section 1331 federal jurisdiction will not arise if the claim does not satisfy the “well-pleaded complaint” rule. See Franchise Tax Board, 463 U.S. at 9-12, 103 S.Ct. at 2846-48; Trent Realty, 657 F.2d at 33.

Well-Pleaded Complaint Rule

Under the well-pleaded complaint rule, whether a case arises under the laws of the United States for the purposes of Section 1331 “must be determined from what necessarily appears in the plaintiff’s statement of his own claim ... unaided by anything alleged in anticipation of avoidance of defenses which it is thought the defendant may interpose.” Franchise Tax Board, 463 U.S. at 10, 103 S.Ct. at 2846 (quoting Taylor v. Anderson, 234 U.S. 74, 75-76, 34 S.Ct. 724, 725, 58 L.Ed. 1218 (1914)). The complaint must establish “either that federal law creates the cause of action or that the plaintiff’s right to relief reasonably depends on resolution of a substantial question of federal law.” Id. at 27-28, 103 S.Ct. at 2856. Absent that, jurisdiction is not conferred by Section 1331 “even if the defense is anticipated in the plaintiff’s complaint, and even if both parties admit that the defense is the only question truly at issue in the case.” Id. at 14, 103 S.Ct. at 2849; see Louisville and Nashville R.R. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 43, 53 L.Ed. 126 (1908) (jurisdiction lacking over breach of contract action in which Constitution allegedly invalidated anticipated federal defense); see also Pan American Petroleum Corp. v. Superior Court, 366 U.S. 656, 81 S.Ct. 1303, 6 L.Ed.2d 584 (1961) (state-court jurisdiction existed for contract overcharge actions although provisions of Natural Gas Act would certainly be examined by way of defense).

In this case, Elf acknowledges that federal law does not create its breach of contract cause of action. It claims that federal subject-matter jurisdiction exists under the “substantial question” alternative outlined in Franchise Tax Board. Elf argues that, absent its compliance with the TIP regulations, it could not demand a contract price in excess of the price ceilings. Thus, its rights to the contract price are “inextricably tied to Elf’s participation in, and compliance with, the DOE’s Tertiary Incentive Program.” Brief in Opposition at 14.

Plaintiff’s argument is unavailing. Reference to federal regulations is not needed to state this breach of contract claim. Only if the price control regulations are cited by the purchasers as a defense to Elf’s contract claim for the market price will Elf need to show that the oil was exempt under TIP. Compliance with the TIP regulations is not an essential element of its affirmative case. See Phillips Petroleum Co. v. Texaco Inc., 415 U.S. 125, 94 S.Ct. 1002, 39 L.Ed.2d 209 (1974) (per curiam) (no § 1331 jurisdiction where effect of federal energy statutes only to overcome a potential defense to state-law quantum meruit action); Lindy v. Lynn, 501 F.2d 1367, 1369 (3d Cir.1974) (federal regulation of contract does not mean that all aspects of its performance are to be governed by federal law rather than state contract law); Westland Oil Development Corp. v. Summit Transportation Co., 481 F.Supp. 15 (S.D.Tex.1979) (no § 1331 jurisdiction simply because industry regulated, or because breach of contract by defendant allegedly subjected plaintiff to liability under federal law), aff'd, 614 F.2d 768 (TECA 1980) (per curiam). Cf. Mountain Fuel Supply Co. v. Johnson, 586 F.2d 1375 (10th Cir.1978), cert. denied, 441 U.S. 952, 99 S.Ct. 2182, 60 L.Ed.2d 1058 (1979) (plaintiff raised federal question by claiming-that federal regulations entitled it to more than the contract price).

Plaintiff artfully characterizes the relief it seeks as “tertiary incentive revenue due,” suggesting that its right to the extra amount was conferred and determined by federal law. In fact, Elf’s claim is for the exact amount specified in its agreements: the market price. While Elf’s right to recover the market price under its contracts may well ultimately depend upon its compliance with the relevant DOE regulations, it does not necessarily depend upon compliance.

The situation in this case is much like that in Franchise Tax Board. In that case, California law created a set of conditions, without reference to federal law, under which a tax levy could be enforced. The state sued in state court for damages related to defendant’s failure to honor levies and a declaration that the Employee Retirement Income Security Act of 1974 (ERISA) did not preempt its right to tax the defendant plan. In unanimously holding that federal jurisdiction was lacking for the damages claim, the Court noted that federal law would become “relevant only by way of a defense to an obligation created entirely by state law, and then only if [the state] has made out a valid claim for relief under state law.” 463 U.S. at 13, 103 S.Ct. at 2848. The well-pleaded complaint rule squarely applied. See id. Cf. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) (jurisdiction exists for claim that state laws are preempted by ERISA).

As in Franchise Tax Board, in this case Delaware common law created an action for breach of contract without reference to federal law. Federal price control and tertiary incentive program regulations will become relevant only in the context of a defense and only if Elf has made out a valid state-law contract claim.

Following Franchise Tax Board, the Third Circuit Court of Appeals recently found federal subject-matter jurisdiction lacking in Stibitz v. General Public Utilities Corp., 746 F.2d 993 (3d Cir.1984), cert. denied, — U.S. -, 105 S.Ct. 1187, 84 L.Ed.2d 334 (1985). Plaintiffs in Stibitz brought a tort and contract class action against various defendants alleging harm from increased utility rates imposed after the accident at the Three Mile Island nuclear power facility. The parties all argued affirmatively that federal subject-matter jurisdiction existed because the litigation would necessarily implicate the Price-Anderson Act by requiring the court to determine its scope and construe its terms. They argued in particular that the case could turn on the meaning of statutory terms such as “public liability” and “nuclear incident,” and noted the great federal interest in the proper application and construction of the Act.

Judge Seitz, sitting with Retired Justice Stewart and Judge Adams, invoked the well-pleaded complaint rule to deny jurisdiction. The court noted that a claim does not arise under a federal law unless the right or immunity created by the law is “an element, and an essential one, of the plaintiffs cause of action.” Id. at 996 (quoting Franchise Tax Board, 463 U.S. at 11, 103 S.Ct. at 2847, quoting Gully v. First National Bank, 299 U.S. 109, 112, 57 S.Ct. 96, 97, 81 L.Ed. 70 (1936)). In. Stibitz, the Court held that none of the Price-Anderson elements was essential to plaintiffs case under state tort and contract law, and so jurisdiction was not established. The same reasoning applies to the present case.

Finally, the Court notes its own decision in Northwest Central Pipeline Corp. v. Mesa Petroleum Co., 576 F.Supp. 1495 (D.Del.1983). In that case, federal jurisdiction did not exist for any of the three declaratory judgment and injunctive claims made by plaintiffs in a contract dispute. In language fully applicable to the present case, this Court held that the suit “does not arise under federal law even though the [state court] will probably be compelled to interpret federal law in rendering its decision.” Id. at 1500. More specifically with regard to the first two claims, this Court held that “[although the application of the [Natural Gas Act] and [Natural Gas Policy Act] to this contract probably will arise in defense to plaintiffs state law contract claims, that eventuality does’ not convert those contract claims into federal claims.”

Pragmatic Considerations

Plaintiff contends that the Court must take into account “pragmatic considerations,” which assertedly weigh in plaintiffs favor, if doubt exists as to federal-question jurisdiction. See C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure (1984) § 3562 at 47 and cases cited. Specifically, Elf cites the effect on the federal caseload, the extent to which such cases will actually turn on federal law, and the statutory requirement that challenges to an agency rule or regulation must be heard in federal court.

First of all, the Court has no doubt that the well-pleaded complaint rule precludes subject-matter jurisdiction under Section 1331 in this case. Even if this were a “close case,” however, the Court questions whether “pragmatic considerations” should be used to tip the balance for federal jurisdiction. See Winsor v. United Airlines, Inc., 159 F.Supp. 856, 860 (D.Del.1958) (court should decline jurisdiction of removed case where jurisdiction is questionable). Considering the effect of granting jurisdiction on the federal caseload, for example, seems patently inappropriate to an inquiry as to the Court’s authority to hear a case. Likewise, considering whether as a practical matter the case will turn on federal law undermines the longstanding doctrine of the well-pleaded complaint rule.

Finally, Elf asks the Court to include as a significant pragmatic consideration the specific statutory requirement that any challenge to the validity of an agency regulation, raised by either complaint or defense, must be heard by a federal court. See Emergency Petroleum Allocation Act of 1973, 15 U.S.C. § 754(a) (1982), incorporating Economic Stabilization Act of 1970 (“ESA”), § 211(a), 12 U.S.C.A. § 1904 (note) (1980). Elf suggests that defendants may well challenge some aspect of the TIP regulations and notes that, if they do, the case must be heard by a federal court. Thus, the argument suggests, jurisdiction should be conferred in the first place.

This argument fails on two levels. First, plaintiff again anticipates a defense, in contravention of the well-pleaded complaint rule. Second, plaintiffs argument is contradicted by the very statute it cites. Section 211(a) explicitly states:

[Njothing in this subsection ... affects the power of any court of competent jurisdiction to consider, hear, and determine any issue by way of defense (other than a defense based on the constitutionality of this title or the validity of action taken by an agency under this title) raised in any proceeding before such court. If in any such proceeding an issue by way of defense is raised based on the constitutionality of this title or the validity of agency action under this title, the case shall be subject to removal by either party____ (emphasis added).

The statute therefore contemplates that contract actions such as the present one would be brought in state court. Only if and when the constitutionality of the stat- ■ ute or the validity of agency action is challenged can either party remove. The ability of the plaintiff to remove underscores the intent that plaintiffs first bring suit in state court. Thus, rather than weighing in favor of finding federal jurisdiction in this case, Section 211(a) further compels granting defendants’ motion to dismiss.

Strict application of the well-pleaded complaint rule might appear to be an overly mechanical approach that sacrifices substance for form. It is beyond doubt, however, that the rule must be applied even though its proper application “may produce awkward results.” Franchise Tax Board, 463 U.S. at 4, 103 S.Ct. at 2843-44. In Franchise Tax Board, the Supreme Court denied federal jurisdiction although the substantive issue was described as “an important one, which affects thousands of federally regulated trusts and all non-federal tax collection systems, and [which] must eventually receive a definitive, uniform resolution.” Id. In Stibitz, the Court of Appeals for the Third Circuit found no jurisdiction in a case that necessarily involved determining the scope and meaning of the Price-Anderson Act, and despite the strong federal interest in nuclear energy policy. 746 F.2d 993. This Court cannot do otherwise in the present case, where the federal interest is less by reason of the federal program no longer being in existence.

Because this case falls squarely within the bounds of the well-pleaded complaint rule, jurisdiction cannot be found under 28 U.S.C. § 1331.

2. Other Grounds for Jurisdiction

In its complaint, Elf also alleged jurisdiction pursuant to Section 211(a) of the Economic Stabilization Act of 1970 and 12 U.S.C. § 1904 (note) as a whole. These grounds, as well as those urged by defendant Murphy, are without merit.

Section 211(a) of the Economic Stabilization Act (“ESA”) states that federal district courts “shall have exclusive original jurisdiction of cases or controversies arising under this title, or under regulations or orders issued thereunder----” 12 U.S.C. § 1904 (note) (Supp. Y 1980). This provision confers jurisdiction for review of federal administrative decisions or actions taken under the Act, not for disputes that are purely private. See Lo-Vaca Gathering Co. v. Railroad Commission, 565 F.2d 144, 147 (TECA 1977), cert. denied, 434 U.S. 1067, 98 S.Ct. 1245, 55 L.Ed.2d 768 (1978); Air Products & Chemicals, Inc. v. United Gas Pipe Line Co., 503 F.2d 1060, 1063 (TECA 1974). Moreover, for the reasons discussed earlier, Elf’s breach of contract action cannot be said to “arise under” the DOE regulations.

Defendant Murphy cites cases dealing with the scope of TECA’s appellate jurisdiction under Section 211(b)(2) to support its argument that this Court has subject-matter jurisdiction under Section 211(a). The Court of Appeals for the Second Circuit has noted, however, that the scope of the “arising under” language of Section 211(b)(2) is

broader than that of Section 211(a). See Coastal States Marketing, Inc. v. New England Petroleum Corp., 604 F.2d 179, 186 (2d Cir.1979). Section 211(a) explicitly states that it does not affect the power of a state court to determine any ESA issue (except the validity or constitutionality of the Act or regulation) injected into a state court case by way of defense. Id. at 183. Federal appellate review of such cases is limited to the Supreme Court. Id. The federalism and comity concerns that arise in the context of state-court versus federal-court jurisdiction, however, are not present when the issue is whether TECA or the courts of appeals have jurisdiction. Id. at 183, 186. Moreover, considerations that are valid in defining a federal trial court’s jurisdiction do not necessarily apply in determining the appellate jurisdiction of a federal court. Id. at 186.

In addition, the cases cited by Murphy involve situations in which the federal issue arose either directly as part of plaintiff’s case or as a counterclaim, both of which are absent in the matter sub judice. In Sohio Petroleum, the parties had agreed to the sale of oil at the seller’s “posted well price.” 573 F.2d at 1261. After inadvertently billing the purchaser at the controlled price, seller attempted to recover the difference between that price and the uncontrolled market price, to which it claimed to be entitled under the “stripper well” exemption. Id. at 1261-62. The purchaser counterclaimed for a refund of payments made at the uncontrolled price. The trial court entered judgment for the seller and dismissed the counterclaim. Id. at 1262. On appeal, TECA sua sponte raised the issue of its jurisdiction. TECA first noted that “plaintiffs complaint was clearly an action on a contract with jurisdiction allegedly based solely on diversity of the parties.” Id. The purchaser’s counterclaim, however, “put in issue the applicability of the EPAA ... [and] clearly involved an interpretation of [the applicable] regulations____” Id. In light of the counterclaim and the extensive findings of fact arising out of the district court’s interpretation of the price control exemption, TECA jurisdiction existed. Id. at 1262-63.

In Citronelle-Mobile, the seller of crude oil sued the purchaser for the amount due under their contract. 591 F.2d at 713. The purchaser asserted the defense that the EPAA regulations imposed a ceiling price lower than the contract price, and successfully counterclaimed for amounts it earlier had paid in excess of the controlled price. Id. at 713-14. The seller challenged TECA’s jurisdiction to hear its appeal, characterizing the case as a simple breach of contract dispute. 591 F.2d at 715. The TECA court held that it did have jurisdiction, however, because “[the purchaser’s] counterclaim clearly arises under the EPAA and is so closely related to [the seller’s] complaint that the resolution of the litigation in its entirety requires application and interpretation of EPAA____” Id. at 716. See also MGPC, Inc. v. Canadian Hidrogas Resources, Ltd., 725 F.2d 1376, 1378 (TECA), cert. denied, 464 U.S. 961, 104 S.Ct. 394, 78 L.Ed.2d 337 (1983) (suit for contract price of “highest permissible by federal or other regulations”; possible diversity action); Mobil Oil Corp. v. DOE, 728 F.2d 1477 (TECA 1983), cert. denied, — U.S. -, 104 S.Ct. 3545, 82 L.Ed.2d 849 (1984) (overcharge complaint under § 210(b)). As already discussed, plaintiff’s complaint is not dependent upon any federal statute or regulation and no counterclaims have been asserted by defendants.

Murphy also asserts that subject-matter jurisdiction exists under Section 210(a) of the ESA. Section 210(a) created a private cause of action for any person “suffering legal wrong because of any act or practice arising out of this title, or any order or regulation issued pursuant thereto.” It enables a plaintiff to sue someone who has injured him through a violation of the Act or its regulations. McCulloch, 577 F.2d at 717; Lo-Vaca, 565 F.2d at 146-47; Air Products, 503 F.2d at 1060. In the present case, however, the plaintiff does not allege that defendants have violated any regulation. Cf. Air Products, 503 F.2d at 1060 (action for overcharges); Boehm, 496 F.Supp. at 1061-64 (same). Moreover, Elf has expressly disclaimed Section 210(a) as a jurisdictional basis.

Finally, there is no support for a finding of jurisdiction under 12 U.S.C. § 1904 (note) as a whole, a ground asserted by Elf in its complaint but argued by neither Elf nor Murphy in their briefs.

Conclusion

For the foregoing reasons, the complaints by plaintiff Elf Aquitaine, Inc. against each of the defendants will be dismissed for lack of subject-matter jurisdiction. As a consequence, defendants’ arguments with regard to the statute of limitations will not be considered.

      . Elf filed separate suits against Placid Oil Co. (C.A. No. 85-182-MMS); Sun Production Co. (C.A. No. 85-183-MMS); Placid Refining Co. (C.A. No. 85-184-MMS); and Murphy Oil USA, Inc. (C.A. No. 85-185-MMS).
      A motion to dismiss was filed by Sun Exploration and Production Co., the successor in interest to Sun Production Co., and jointly by Placid Oil Co. and Placid Refining Co. on both of the grounds stated in the text. Defendant Murphy Oil USA, Inc. ("Murphy") filed a brief in aid of the Court’s jurisdiction and moved to dismiss on the statute of limitations ground alone.
      A suit similar to those before this Court was filed by Placid Corporation against Murphy in Texas state court. On Murphy’s motion, the case was removed to federal district court. C.A. No. 3-85-0801 (N.D.Tex.). Plaintiff has moved to remand the action to state court and defendant Murphy has moved to transfer the case to this Court and to dismiss for lack of jurisdiction.

      . Elf’s complaints against each of the defendants are virtually identical, except for the identification of different oil fields and dates of agreement and sale. This opinion will cite to the complaint and briefs in Civil Action No. 85-182 unless otherwise indicated. The complaint in that action is identical in all relevant aspects to the complaints in the other actions.

        For the purposes of these motions to dismiss, the facts alleged by plaintiff Elf will be taken as correct.

      . For a more detailed description of crude oil allocation and price regulations, see Union Oil, 688 F.2d at 800-04; Exxon Corp. v. DOE, 601 F.Supp. 1395, 1398-1401 (D.Del.1985).

      . Elf is alleging damages of $481,044.49 against Placid Oil Co.; $207,244.37 against Sun Production Co.; $56,318.89 against Placid Refining Co.; and $343,137.12 against Murphy Oil USA, Inc. Elf also seeks interest on these amounts plus costs and attorneys’ fees.

      . The Emergency Petroleum Allocation Act of 1973 incorporated sections of the Economic Stabilization Act of 1970, 12 U.S.C. § 1904 (note) (Supp. V 1970), dealing with administration and enforcement. See 15 U.S.C. § 754(a)(1).

      . Defendants could choose to defend on grounds unrelated to the regulations. For example, Murphy's answer sets forth affirmative defenses based, inter alia, on the statute of limitations, laches, unclean hands, failure to join a necessary party, and waiver. See Dkt. 6 at 7.

      . The Price-Anderson Act, among other things, provides for a system of indemnification and limited liability, under certain circumstances, in the event of a nuclear "incident.” See 42 U.S.C. at § 2210. The Act also requires defendants to waive certain defenses they might otherwise enjoy under state law. See id.; Stibitz, 746 F.2d at 995.

      . Plaintiff attempts to distinguish Northwest Central and other cases by insisting that the application and effect of the federal regulations are “essential ingredients” in its claims. See, e.g., Brief in Opposition at 20. Again, this is not so. Elf can make its contract claim without reference to those regulations or to the price controls. Only if the defendants cite the controls will plaintiff’s compliance with the regulations granting an exemption become an essential ingredient to its case.

      . This reading of the statute is supported by the legislative history. The House bill had given the federal courts exclusive jurisdiction over "litigation stemming from regulations and orders” issued under the ESA. See H.R.Rep. No. 714, 92d Cong., 1st Sess. 8 (1971). The Senate, on the other hand, made it "explicit” that state courts could hear any defense other than those challenging the constitutionality of the Act or the validity of regulations issued under it: "If the defense is simply one concerning the applicability of a regulation to a party such case would stay in the State court, the issue of applicability could be decided in that court, and appeals would proceed through the procedure established for that court."' S.Rep. No. 507, 92d Cong., 1st Sess. 10 (1971), U.S.Code Cong. & Admin.News 1971, pp. 2283, 2292. The Senate provision was ultimately adopted. H.R.Rep. No. 753, 92d Cong., 1st Sess. 20-21 (1971).

      . Defendant Murphy’s motion for dismissal, which relies wholly on statute of limitations grounds, was predicated on a vigorous argument in favor of this Court’s subject-matter jurisdiction. Nevertheless, parties cannot confer or consent to subject-matter jurisdiction where it does not exist. Insurance Corp. of Ireland, Ltd. v. Compagnie Des Bauxites De Guinea, 456 U.S. 694, 701-02, 102 S.Ct. 2099, 2103-04, 72 L.Ed.2d 492 (1982); Stibitz, 746 F.2d at 995-96. Jurisdiction under Section 1331 must therefore be denied in each of the four suits.

      . These grounds were not argued by Elf after being challenged in briefs by defendants Placid Oil Co., Placid Refining Co., and Sun Production Co. Defendant Murphy, however, did take up and elaborate upon these grounds as part of its argument that Elf’s suit against it should be dismissed on the basis of the Delaware statute of limitations and not lack of subject-matter jurisdiction. The Court granted defendants Placid Oil Co. and Placid Refining Co. leave to file a supplemental brief addressing the arguments raised by defendant Murphy in support of the existence of subject-matter jurisdiction.

      . Judge Poliak has noted an apparent discrepancy in TECA cases regarding the relationship between sections 210 and 211 of the ESA. See Boehm v. Gulf Oil Co., 496 F.Supp. 1060, 1064 n. 5 (E.D.Pa.1980) (comparing Lo-Vaca and Griffin v. United States, 537 F.2d 1130 (TECA 1976)). In Griffin, the court stated that Section 211 is the statute’s jurisdictional grant while Section 210 establishes specific causes of action. Air Products, Lo-Vaca, and other cases, however, distinguished between actions for legal or equitable relief against private parties pursuant to Section 210, and actions for equitable relief against the government pursuant to Section 211. TECA later explained that Griffin "departed from this view of the statutory scheme ... [only] to reconcile the Act with the demands of the Fifth Amendment.” McCulloch Gas Processing Corp. v. Canadian Hydrogas Resources, Ltd., 577 F.2d 712, 718 (TECA), cert. denied, 439 U.S. 831, 99 S.Ct. 109, 58 L.Ed.2d 126 (1978) (citing Air Products and other cases). See also Dempsey v. Rhodes Oil Co., 620 F.2d 274, 278 (TECA 1980) (§ 210(a) confers jurisdiction; citing Manning v. Notre Dame du Lac, 484 F.2d 501, 503-04 (TECA 1973); Lo-Vaca, 565 F.2d at 146); Wilmington Education Ass'n v. Board of Public Education, 389 F.Supp. 621, 625 n. 7 (D.Del.1975) (jurisdiction if it exists, is also conferred by [§ 210(a) ]).

      . Murphy also cited Sohio Petroleum v. Caribou Four Corners, Inc., 573 F.2d 1259, 1262-63 (TECA 1978), and Citronelle-Mobile Gathering Inc., v. Gulf Oil Corp., 591 F.2d 711 (TECA), cert. denied, 444 U.S. 879, 100 S.Ct. 168, 62 L.Ed.2d 109 (1979), for the proposition that "TECA has consistently read the ‘arising under’ language of § 211 more broadly than the identical language of the federal question jurisdiction statute.” Both of these cases, however, deal with TECA’s jurisdiction under Section 211(b)(2): “[TECA] shall have exclusive jurisdiction of all appeals from the district courts of the United States in cases and controversies arising under this title or under regulations or orders issued thereunder.” Thus neither of these cases is applicable to the determination of jurisdiction under Section 211(a) in this case.

      . See C.A. No. 85-185-MMS, Dkt. 12 at 12-16 (Plaintiff’s Brief in Opposition to Motion of Murphy Oil USA, Inc. for Dismissal).


author: SHADUR, District Judge.

text:
    Wayne M. MILLER, et al., Plaintiffs, v. AFFILIATED FINANCIAL CORPORATION, et al., Defendants.
    No. 84 C 20108.
    United States District Court, N.D. Illinois, W.D.
    Dec. 27, 1985.
    Norman Lindstedt, Holmstrom & Green, P.C., Rockford, 111., for plaintiffs.
    Richard Lee, Epton, Mullin & Druth, Chicago, 111., Mark T. Dunn, Dunn, Goebel, Ulbrich, Morel & Hundman, Bloomington, 111., Marshall McMahon, Burke, Griffin, Chomicz & Weinke, P.C., Chicago, 111., for defendants.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Wayne Miller and his mother Eunice (collectively “Millers”) have filed a multi-count Amended Complaint against Affiliated Financial Corporation and Stephen, Jack and JoAnne Smith (collectively “Affiliated-Smiths”), asserting a laundry list of fraud-based claims together with two claims alleging a lesser degree of culpability. In turn Affiliated-Smiths filed a Third Party Complaint against their former lawyers, Reno, Zahm, Folgate, Lindberg & Powell (“Reno Zahm”), seeking both indemnification (Third Party Complaint Count I) and contribution (Third Party Complaint Count II). Reno Zahm responded with:

1. a motion to dismiss indemnification Count I in its entirety;
2. a motion to dismiss contribution Count II as to Affiliated-Smiths’ claims grounded in (a) the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968, and (b) Illinois common-law fraud; and
3. a Fourth Party Complaint against Metropolitan Life Insurance Company (“Metropolitan”), seeking contribution if Reno Zahm are held liable to Affiliated-Smiths for contribution.

Metropolitan has in turn moved to dismiss the Fourth Party Complaint to the same extent just referred to in paragraph numbered 2.

Third Party Complaint Count I: Indemnification

Affiliated-Smiths have not even responded to Reno Zahm’s motion to dismiss Third Party Complaint Count I. Whether or not that represents an acknowledgement of the motion’s soundness, there is no question Reno Zahm are right. This Court’s November 29, 1985 memorandum opinion and order in Central Illinois Savings & Loan Association v. DuPage County Bank of Glendale Heights, 622 F.Supp. 1493 (N.D. Ill.1985), has discussed the identical controlling issues at length, and its reasoning need not be repeated here.

Accordingly Affiliated-Smiths are not entitled to indemnification from Reno Zahm on any valid theory. Third Party Complaint Count I is dismissed.

Third Party Complaint Count II and Fourth Party Complaint: Contribution

To the extent contribution is sought (by either Affiliated-Smiths or Reno Zahm) to share liability under RICO, Central Illinois, slip op. at 10-15 points the way toward rejection of such relief. This Court there found indemnification inappropriate by analogy to contribution doctrines: It relied for that purpose on the decisions in Northwest Airlines, Inc. v. Transport Workers Union of America, AFL-CIO, 451 U.S. 77, 86-99, 101 S.Ct. 1571, 1577-84, 67 L.Ed.2d 750 (1981) and Texas Industries, Inc. v. Radcliffe Materials, Inc., 451 U.S. 630, 638-47, 101 S.Ct. 2061, 2065-70, 68 L.Ed.2d 500 (1981), each of which refused to imply a cause of action for contribution toward a federally-created statutory liability. Northwest Airlines and Texas Industries provide persuasive precedent (rather than merely analytical analogies) for rejection of a contribution claim as to RICO liability. Accordingly contribution as to Amended Complaint Counts II and III (each sounding in RICO) is denied.

But that reasoning does not extend to contribution as to liability for Illinois common-law fraud under Amended Complaint Count V. As to that claim, both Reno Zahm and Metropolitan urge the regime that predated the Illinois Contribution Among Joint Tortfeasors Act (the “Act,” Ill.Rev.Stat. ch. 70, ¶1¶ 301-305) — that is, a pre-Act judge-made doctrine barring any contribution toward liability for intentional torts — remains law under the Act. They are wrong.

True enough, the Act was stimulated by the Illinois Supreme Court’s partial disavowal of the common-law prohibition of contribution among joint tortfeasors in Skinner v. Reed-Prentice Division Package Machinery Co., 70 Ill.2d 1, 15 Ill.Dec. 829, 374 N.E.2d 437 (1970). When the Illinois General Assembly acted, however, it did not limit itself to a legislative abolition of the same doctrine as to negligent torts. Instead it spoke in unequivocal terms in Act § 302(a) (emphasis added):

Except as otherwise provided in this Act, where 2 or more persons are subject to liability in tort arising out of the same injury to persons or property, or the same wrongful death, there is a right of contribution among them, even though judgment has not been entered against any or all of them.

Nothing in the Act or its legislative history suggests a limitation of “liability in tort” to unintentional torts, so as to exclude contribution in (say) fraud cases. Indeed, at least one judicial dictum contemporary with the Act’s adoption suggests the opposite (Erickson v. Gilden, 76 Ill.App.3d 218, 220 n. 1, 31 Ill.Dec. 758, 760 n. 1, 394 N.E.2d 1076, 1078 n. 1 (2d Dist.1979) (emphasis added)):

We note that Senate Bill 308 entitled “AN ACT in relation to contribution among joint tort feasors,” has been passed by the General Assembly and was approved by the Governor September 14, 1979. It provides generally for a right of contribution between joint tortfeasors without limitation as to the type of action in which it may arise____

It is part of a lawyer’s stock in trade to gloss over (or avoid entirely) the plain meaning of language. To that end Reno Zahm and Metropolitan point to judicial statements to the effect the Act was meant to “codify” Skinner. See, e.g., Doyle v. Rhodes, 101 Ill.2d 1, 8, 77 Ill.Dec. 759, 762, 461 N.E.2d 382, 385 (1984). From such language Reno Zahm and Metropolitan argue the Act — despite its unfettered literal breadth — must be limited in scope to the type of tort involved in Skinner itself: the unintentional variety.

Of course the Illinois Supreme Court was well aware the common-law no-contribution rule first arose in the intentional-tort context (Skinner, 70 Ill.2d at 7-8, 15 Ill.Dec. at 831-32, 374 N.E.2d at 439-40), and the Skinner majority conceded a principal objection to the abolition of the rule was a disinclination to “use the courts for relief of wrongdoers” (id. at 12, 15 Ill.Dec. at 834, 374 N.E.2d at 442, quoting Reese v. Chicago, Burlington & Quincy Railroad Co., 55 Ill.2d 356, 363-64, 303 N.E.2d 382, 386 (1973)). But having said all that, Skinner went on to state unequivocally (70 Ill.2d at 13, 15 Ill.Dec. at 834, 374 N.E.2d at 442):

We are of the opinion that there is no valid reason for the continued existence of the no-contribution rule and many compelling arguments against it.

Reno Zahm and Metropolitan cite then-Chief-Justice Ward’s Skinner dissent in an attempt to show Skinner did not alter the no-contribution rule as applied to intentional torts (id. at 19, 15 Ill.Dec. at 837, 374 N.E.2d at 445):

Finally, the majority’s review of Merryweather v. Nixan (1799), 101 Eng.Rep. 1337, 8 Term R. 186, and of some of this court’s decisions suggests that the rule against contribution between joint tortfeasors where the tort was one of intentional misconduct or of concerted action has not been disturbed, but the opinion does not make an explicit pronouncement to this effect. Torts of this character do not come within the rationale of the doctrine of contribution, and the rule denying contribution in that situation should be preserved. I would state clearly that it is being retained.

That statement — spoken after all in dissent — only underscores the fact Skinner did not expressly limit its holding in the way Reno Zahm and Metropolitan urge.

In view of the Act’s open-ended language (“liability in tort”), Skinner’s asserted “codification” in the Act does not suggest the Act bars contribution among joint perpetrators of an intentional tort. After having given itself ample opportunity to limit its holding to negligence and strict liability torts, Skinner simply abolished Illinois’ no-contribution rule. More significantly, the General Assembly (which obviously was aware of the Skinner dissent) saw no reason to adopt more limited language. Absent a limiting ruling by the Illinois courts, it would be impermissible judicial legislation for this Court to distort the statute’s unequivocal directive.

This Court therefore concludes the Act— both in terms and as an asserted “codification” of Skinner —applies to intentional torts. Reno Zahm’s and Metropolitan’s motions to dismiss the portions of the Third and Fourth Party Complaints seeking contribution as to liability for common-law fraud are denied.

Effect on Millers’ Proposed Second Amended Complaint

Just before this opinion was written, this Court ruled orally on December 23 that Millers could not file a Second Amended Complaint adding Reno Zahm and Metropolitan to the parties it was suing directly. That ruling took into account the present posture of this case. Among other factors, this Court found Reno Zahm and Metropolitan would be materially prejudiced by the need to expand their discovery significantly if their involvement were materially broadened from potential third-party and fourth-party liability to first-party defendant status.

Accordingly Millers have been left to pursue their newly-filed direct action against Reno Zahm and Metropolitan in the Western Division of this District Court. From the rulings in this opinion, it should be obvious that certain direct liability issues affecting Reno Zahm and Metropolitan — those relating to Millers’ claims against Affiliated-Smiths as to which a right to contribution does exist — will be determined in this action. To that extent, the decision here will no doubt be conclusive among the parties in that new lawsuit via issue preclusion (collateral estoppel) or claim preclusion (res judicata) or both. As this Court said in its oral ruling, that should serve the interests of judicial and litigants’ economy, without prejudicing Reno Zahm and Metropolitan as the Second Amended Complaint would have.

Conclusion

Third Party Complaint Count I is dismissed. Third Party Complaint Count II is dismissed only as to any claimed contribution with respect to the RICO claims under Amended Complaint Counts II and III. Reno Zahm’s Fourth Party Complaint is dismissed to the same extent.

      . Affiliated-Smiths’ counsel have now withdrawn, leaving the clients to go it alone. Counsel were in the case, however, until well after the time of Reno Zahm’s motion.

      . Discovery has already been closed except for the limited purposes of the Third Party Complaint and Fourth Party Complaint, discovery as to those matters is scheduled to close by January 10, 1986, and the case has been set for trial in February 1986.

      . Surely Reno Zahm and Metropolitan will not be able to argue in that new action that Millers have split their cause of action, given the fact that this Court’s rejection of the Second Amended Complaint was at the instance of Reno Zahm and Metropolitan themselves.


author: VOORHEES, District Judge.

text:
    Wayne C. REMBOLD, Plaintiff, v. GIBRALTAR SAVINGS AND LOAN ASSOCIATION, a federally chartered savings and loan association; and Queen City, Inc., a Washington corporation, Defendants, Counterclaimants and Cross-Claimants, v. WESTSIDE FEDERAL SAVINGS AND LOAN ASSOCIATION, a federally chartered savings and loan association, Additional Counterclaim and Cross-Claim Defendants, v. REMBOLD CORPORATION, an Oregon corporation, Third-Party Defendant.
    No. C84-1644V.
    United States District Court, W.D. Washington.
    Dec. 27, 1985.
    Louis D. Peterson, Hillis, Phillips, Cairn-cross, Clark & Martin, Seattle, Wash., for Rembold Corp., an Oregon corp.
    David Lieberworth, Logerwell, Farley & Schoonmaker, Seattle, Wash., for Gibraltar Sav. and Queen City.

      John D. Alkire, Perkins Coie, Seattle, Wash., for Westside Federal Sav.
   ORDER

VOORHEES, District Judge.

Having considered the motion of cross-claim defendant, the Federal Savings and Loan Insurance Corporation (“FSLIC”), to dismiss, the motion of cross-claim plaintiff Gibraltar Savings and Loan Association (“Gibraltar”) to defer the decision date on the motion to dismiss, and the motion of Gibraltar to disqualify Perkins Coie and to bar transfer of confidences, together with the memoranda and affidavits submitted by counsel, the Court now finds and rules as follows:

1. In the fall of 1982, Queen City Savings and Loan Association (“Queen City”) lent $2,000,000.00 to Wayne Rembold. Westside Federal Savings and Loan allegedly entered into a standby commitment to back the loan. In late 1983 Rembold was in default on his loan.

2. On July 24,1984, FSLIC was appointed as receiver for Queen City, which was in financial difficulties. Thereafter, on that same day, Gibraltar purchased most of the assets and assumed most of the liabilities of Queen City. Among its assets was the Rembold loan. In September, 1984, Rem-bold filed this action against Gibraltar, seeking a judicial declaration of the rights and obligations of the parties to the Queen City-Rembold loan. Gibraltar answered and counterclaimed against Rembold. It also filed several cross-claims against Westside Federal based on the standby commitment.

3. FSLIC has moved to dismiss the cross-claims, contending that Congress has committed the determination of the validity, priority and satisfaction of these claims in the first instance to the FSLIC. The FSLIC contends that Gibraltar must present its claims to the receiver and the Federal Home Loan Bank Board before obtaining any judicial consideration of its claims.

4. The FSLIC relies on two provisions in its enabling statute and on a recent Fifth Circuit opinion. 12 U.S.C. 1464(d)(6)(C) provides:

Except as otherwise provided in this subsection, no court may ..., except at the instance of the [Federal Home Loan Bank] Board, restrain or affect the exercise of powers or functions of a conservator or receiver.

12 U.S.C. 1729(d) then provides:

In connection with the liquidation of insured institutions, the [FSLIC] shall have power to carry on the business of and to collect all obligations to the insured institutions, to settle, compromise, or release claims in favor of or against the insured institutions, and to do all other things that may be necessary in connection therewith, subject only to the regulation of the Federal Home Loan Bank Board____

The FSLIC contends that these provisions require that the validity of Gibraltar’s claims be first decided by the receiver. Thereafter, if Gibraltar feels aggrieved by the receiver’s determination, it can seek administrative review before the Federal Home Loan Bank Board and in the courts pursuant to the Administrative Procedure Act.

5. The Court is persuaded by the reasoning by the Fifth Circuit in North Mississippi Savings and Loan Association v. Hudspeth, 756 F.2d 1096 (5th Cir.1985), that the contentions of the FSLIC are correct.

6. Gibraltar argues that the Hudspeth decision was wrongly decided and that this Court should not follow that decision. Gibraltar contends that 12 U.S.C. 1730(k)(l), which grants original jurisdiction to the federal district courts of any civil action in which the FSLIC is a party, overrides the other statutory provisions. The interpretation argued by Gibraltar, however, would create an irreconcilable conflict between 12 U.S.C. 1730(k)(l) and the two statutory sections cited above. The Court finds that these statutory provisions should be so read that each retains some meaning. Section 1730(k)(l) provides jurisdiction for the FSLIC to proceed in federal court when it is acting as plaintiff or when it is being sued in some capacity other than as receiver. Claims against the FSLIC as a receiver should, however, be first resolved through the administrative process.

7. Gibraltar also contends that the legislative history does not support the position taken by the Fifth Circuit. The Court disagrees and finds that the result reached in Hudspeth should be adopted because it gives deference to the complex regulatory scheme adopted by Congress for liquidating troubled savings and loan institutions. It was the intent of Congress to provide for quick relief, and it is not for this Court to frustrate the administrative process contemplated by Congress.

8. Lastly, Gibraltar argues that the position taken by the FSLIC constitutes an unconstitutional delegation of Article III powers to an administrative body. Gibraltar is not precluded access to the federal courts, however. It is simply required to exhaust its administrative remedies before seeking judicial review of the administrative determination under the Administrative Procedure Act. Hudspeth, 756 F.2d at 1103.

9. Gibraltar has urged the Court to defer a decision in this matter to permit it to conduct discovery regarding the motion to dismiss. This would include interrogatories on the rules for adjudicating claims before the FSLIC and on the order of priority the FSLIC intends to place on the claims before it. The Court finds that the motion to dismiss has raised strictly legal issues and that no discovery was necessary in order for Gibraltar to respond to it. Any concerns Gibraltar has about the legality of the administrative process before the FSLIC will be adequately protected by Gibraltar’s right to judicial review of any FSLIC determination.

10. Because the FSLIC motion to dismiss must be granted, the Court will not consider the motion of Gibraltar to disqualify the law firm of Perkins Coie and to bar the transfer of confidences and secrets by the FSLIC.

Accordingly, the motion of the FSLIC to dismiss the cross-claims of Gibraltar is GRANTED. The motion of Gibraltar to defer decision on the motion to dismiss is DENIED.

The Clerk of this Court is instructed to send uncertified copies of this order to all counsel of record.


author: IRVING BEN COOPER, District Judge.

text:
    Gerald A. KEARNEY, individually and as attorney for the Estate of Scott Joplin, and Mary L. Wormley, individually and as sole legatee of the Scott Joplin Estate (Deceased), Plaintiffs, v. TODD L. SMITH, P.A. and individually, Naomi Behar Smith, P.A. and individually, Karen Coolman Amlong, P.A. and individually, William R. Amlong, Glendale Federal, a banking corporation, formerly known as First Federal of Broward, organized and existing under the laws of the State of Florida, and Richard A. Barnett, P.A. and individually, Defendants.
    No. 85 Civ. 1005 (IBC).
    United States District Court, S.D. New York.
    Dec. 28, 1985.

      Gerald A. Kearney, Fort Lauderdale, Fla., for plaintiffs.
    Newman, Schlau, Fitch & Burns, P.C., New York City (Carole A. Burns, of counsel), for defendant Todd L. Smith, P.A.
    Wilson, Elser, Moskowitz, Edelman & Dicker, New York City (Richard K. Traub, Stephen M. Marcellino, of counsel), for defendants Todd L. Smith and Naomi Behar Smith.
    Geoffrey E. Chanin, New York City, for defendants Karen Coolman Amlong and William R. Amlong.
   OPINION

IRVING BEN COOPER, District Judge.

Plaintiffs instituted this action for damages with the filing of a complaint on February 6, 1985 alleging libel and slander against an exceedingly large number of defendants. By order dated July 11, 1985 we dismissed the complaint against defendants Seymour H. Chanin, Geoffrey E. Chanin, Lothair H. Szerlip and Unibay Co., Inc. for lack of subject matter jurisdiction. Several of the remaining defendants now move for similar dismissal on a variety of grounds. In addition to considering these requests, we proceed to examine sua sponte the appropriateness of the claims against those defendants who have as yet failed to make any motions.

Background

Two separate sets of occurrences form the backdrop to this action. The first series concerned a judgment for $15,000 in favor of Unibay Co., Inc. (“Unibay”) and against plaintiff Kearney obtained on September 22, 1980 and entered on January 6, 1981 in Special Term Part I of the Supreme Court of the State of New York, Kings County.

In 1977 Unibay owned a commercial building in Brooklyn, New York, which it rented out to Rappa Trucking Company whose chief operating officer was Frank Rappa, brother-in-law of plaintiff Kearney. That year the tenant fell in arrears for rent, and various legal actions ensued, resulting in an agreement reached and recorded in open session of the same Supreme Court on November 30, 1977 that plaintiff and Rappa would sell a jointly owned piece of land (located in New Jersey) and pay $15,000 of the proceeds to Unibay. Subsequently, Lothair Szerlip, Esq., who at that time was counsel for Unibay, was informed by the New Jersey tax authorities that complete ownership of that piece of land had become vested in plaintiff alone and that he had sold it for $40,000. Despite this, nothing was paid to Unibay in contravention of the agreement that had been reached. Consequently, Unibay, with Geoffrey E. Chanin, Esq. as its counsel, brought a motion for summary judgment to recover its $15,000; the motion was granted by Judge Thomas R. Jones on September 22, 1980. Although the order (entered of record on January 6, 1981) was promptly served on plaintiff, no money was paid to Unibay.

At approximately the same time these events were unfolding, Mr. Kearney became embroiled in the second set of occurrences giving rise to this litigation before us. As an attorney, Mr. Kearney represented plaintiff Mary L. Wormley in the final settlement of a claim. Plaintiff Wormley, the oldest surviving relative of singer Scott Joplin, had been awarded $105,000 in New York Supreme Court in the settlement of a dispute arising out of the use of one of Joplin’s songs. An account was set up at defendant Glendale Federal Bank in Florida (“Glendale Federal”) in the name of “Gerald A. Kearny in trust for Mary L. Wormley.”

Some time later (date unspecified) Mr. Kearney left New York and took up residence in Florida. Unibay, still trying to satisfy the judgment it obtained in Brooklyn, retained Florida counsel, defendant Karen Coolman Amlong, P.A. An investigation of Mr. Kearney’s finances revealed a large amount of money on deposit at Glendale Federal. Mr. Kearney, however, claimed that this was not his money, that it belonged to Mrs. Wormley. Unibay sued Mr. Kearney in state court in Broward County, Florida, listing Glendale Federal as the garnishee. Mr. Kearney initially retained defendant Richard A. Barnett, Esq. to represent him during these garnishment proceedings; later Mr. Barnett withdrew from the case. Mrs. Wormley was represented by defendant Naomi Behar Smith, Esq.

The court in Florida found that the disputed funds were indeed now owned by Mr. Kearney, not Mrs. Wormley, and accordingly awarded a judgment of $21,973.04 in favor of defendant Unibay on January 24, 1984. Glendale Federal complied with the court ordered garnishment.

After so much strange and unusual behavior on the part of Mr. Kearney — exemplified by his persistent evasion of his monetary obligation to Unibay and by the finding of the Florida court that the monies in the account “in trust for” Mrs. Wormley now belonged to Mr. Kearney — several of the defendants became suspicious of his motives. In open court during the garnishment proceedings, defendant Karen Cool-man Amlong, Esq. expressed her doubts about plaintiff Kearney’s claims. Moreover, defendants Chanin and Naomi Behar Smith independently wrote letters to the Kings County (New York) Bar Association Disciplinary Committee urging an investigation of Mr. Kearney. The instant complaint, grounded on libel and slander, followed with Mr. Kearney claiming that each of the defendants injured his good name.

We feel compelled to note the mysterious uncertainty that has cloaked a whole series of underlying events in this action which found its way into our Court. On August 22, 1985 we received a letter from Carole A. Burns, Esq., attorney for Todd L. Smith, P.A., complaining of the deposition schedule of witnesses that had been set by Mr. Kearney:

... Mr. Kearney is giving notice of ten depositions, primarily of non-party witnesses, which he has scheduled between September 9, 1985 and October 1, 1985. Five ... are scheduled in New York; three in Fort Lauderdale, Florida; one in Washington, D.C.; and one in Aquora, California. The three Fort Lauderdale depositions are not scheduled for the same or consecutive days____ [W]e will be in ... California, on September 30th, and the very next day will be required ... in Fort Lauderdale.

After reviewing her letter in the context of the whole case, we responded to Ms. Burns by letter dated August 23, 1985 noting: “Subject to further study the Judge is of the opinion that vital issues involving privileged and non-privileged matter should be first resolved before the unusually large number of depositions at this early stage of the case and already noticed goes forward____ [^Accordingly, Judge Cooper directs that each and every deposition be held in abeyance until counsel are directed to proceed therewith.” Copies of the letter were sent to all parties.

On November 13, 1985 we received a telephone call from the Clerk’s Office of our Court inquiring whether we had any knowledge of the whereabouts of the official docket sheet in this case. We learn that Mr. Kearney had submitted to the Judgment Clerk a proposed default judgment against defendant Glendale Federal; that the clerk spent approximately one hour reviewing the proposed judgment with Mr. Kearney. At that time, the clerk had the docket sheet. Subsequently, however, it was reported missing. After a thorough search, neither the clerk’s office nor Mr. Kearney have been able to find it; Mr. Kearney sent us his most recent copy listing the latest entry as July 21, 1985. Since there is no sure way of knowing whether additional documents were thereafter filed, the Judgment Clerk has refused to give his stamp of approval to the proposed default judgment submitted by Mr. Kearney.

We now proceed to examine the outstanding motions and plaintiffs’ complaint in general.

I. Motion to Dismiss by the Amlongs

Defendants Karen Coolman Amlong, Karen Coolman Amlong, P.A., and William R. Amlong move to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b) on the grounds of lack of subject matter jurisdiction, personal jurisdiction, improper service and failure to state a claim upon which relief can be granted. We begin by examining into personal jurisdiction.

Karen Coolman Amlong, an attorney licensed to practice law in the State of Florida, is the sole shareholder and director of Karen Coolman Amlong, P.A., which is a constituent of Holmes & Amlong, Esqs., the Fort Lauderdale, Florida law firm retained by Unibay to enforce the New York judgment in favor of Unibay. Defendant William R. Amlong is a law clerk with the firm.

In order for a court to be able to exercise personal jurisdiction over a defendant not present within the territory of the forum, that defendant must have certain “minimum contacts” with the state in which the court sits “such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” International Shoe Co. v. State of Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). What constitutes contact sufficient to warrant the exercise of jurisdiction is not the mere foreseeability that the situation giving rise to the lawsuit occurred in a manner where a defendant has some tenuous link to a foreign state. Rather, “it is that the defendant’s conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there.” World Wide Volkswagon v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

In the instant case, there is no allegation that the Amlongs had any connection with New York. They were approached in Florida to enforce a sister state judgment there; which sister state rendered that judgment was irrelevant; what mattered was that there was a judgment to be enforced using proceeds located in the State of Florida. Neither of the Amlongs transacted business in New York or sought to take advantage of New York laws, or obtained any privileges, benefits or protections from the State of New York; nor did the cause of action against the Amlongs arise out of an act committed in New York. See Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). In short, the Amlongs did not have enough minimum contacts in the State of New York that could, consistent with the high standards of fair play and substantial justice, subject them to jurisdiction in this forum.

We go further. Each state has its own long-arm statute to constitutionally restrict the class of people over which its courts can exercise jurisdiction. The question of jurisdiction over non-resident defendants in an action pending in federal court is to be determined by the long-arm statute of the forum state. Cargill, Inc. v. Sabine Trading & Shipping Co., Inc., 756 F.2d 224, 228 (2d Cir.1985); Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir.1984).

New York’s long-arm statute, C.P.L.R. § 302(a), further narrows the scope of nonresidents who may be sued in New York courts, particularly in cases alleging libel and slander:

... a court may exercise personal jurisdiction over any non domiciliary ... who in person or through an agent:
3. commits a tortious act without the state causing injury to persons or property within the state, except as to a cause of action for defamation of character arising from the act____

(Emphasis added) Furthermore, there is no allegation in the instant complaint that would support the exercise of jurisdiction in New York over the Amlongs pursuant to any other subsection of New York C.P.L.R. § 302.

Accordingly, we find that plaintiffs are precluded from exercising personal jurisdiction over Karen Coolman Amlong, Karen Coolman Amlong, P.A., and William R. Am-long in New York and dismiss the actiop as to these defendants.

We note that even had we not found a lack of in personam jurisdiction we would be compelled to dismiss the complaint against the Amlongs on the ground of failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). Plaintiffs’ claim for libel and slander against the Amlongs is based on two statements made in open court during the garnishment proceedings of Mr. Kearney’s bank account. The first was:

After checking the land records, corporate records, registration and other records, thought what might be found to be assets, it was determined that there were no assets sufficient to satisfy the judgment in the state of Florida. We filed a motion for a Writ of Garnishment and the Writ was issued.

(Verified Complaint, ¶ 27, at 12)

It is well-settled in New York that statements made during a judicial proceeding are absolutely privileged, i.e., they do not provide a basis for a claim of libel and/or slander, as long as they are pertinent to the proceedings at hand. Martirano v. Frost, 25 N.Y.2d 505, 507, 307 N.Y.S.2d 425, 426-27, 255 N.E.2d 693 (1969). (“Since there can be no dispute or question that ‘[t]he privilege embraces anything that may possibly be pertinent’ ... it follows that a statement, made in open court in the course of a judicial proceeding, is absolutely privileged if, by any view or under any circumstances, it may be considered pertinent to the litigation ... ”) (citations omitted).

Since the above-quoted statement of Karen Coolman Amlong made in open court referred to the very matter at issue in the garnishment proceedings, we find that it was an absolutely privileged statement and thus not libelous or slanderous.

The second allegedly defamatory statement by the Amlongs was:

Now if in fact there is a Mrs. Wormley and I am not really sure whether there is or not...

(Plaintiff’s memorandum in opposition to motion to dismiss complaint by defendants Amlong, ¶ 6, at 3)

First, the question of Mary Wormley’s existence was of vital importance to the court’s inquiry regarding whether she or Mr. Kearney owned the funds deposited in Glendale Federal; this statement is thus absolutely privileged. See Martirano, supra. Moreover, the statement merely expresses an opinion, and as a matter of law, only a false statement of fact can support a claim for libel and slander. See Gertz v. Robert Welch, Inc., 418 U.S. 323, 339-40, 94 S.Ct. 2997, 3006-07, 41 L.Ed.2d 789 (1974); Mr. Chow of New York v. Ste Jour Azur S.A., 759 F.2d 219, 224 (2d Cir.1985); Yiamouyiannis v. Consumers Union of U.S., Inc., 619 F.2d 932, 941 (2d Cir.) cert. denied, 449 U.S. 839, 101 S.Ct. 117, 66 L.Ed.2d 46 (1980) (“false or even pernicious opinions are not actionable”); Hammerhead Enterprises, Inc. v. Brezenoff, 551 F.Supp. 1360 (S.D.N.Y.1982), aff'd, 707 F.2d 33 (2d Cir.) cert. denied, 464 U.S. 892, 104 S.Ct. 237, 78 L.Ed.2d 228 (1983).

In sum, plaintiffs’ allegations against the defendants Amlong fail to make out a claim upon which relief can be granted. Consequently, even if we did have jurisdiction over the Amlongs, we would be compelled nevertheless to dismiss the complaint against them.

II. Motion for Summary Judgment or to Dismiss by Defendant Todd L. Smith, P.A.

Defendant Todd L. Smith, P.A. moves for summary judgment pursuant to Fed.R. Civ.P. 56, or, alternatively, for dismissal of the action pursuant to Fed.R.Civ.P. 12(h)(3) on the ground that this Court lacks subject matter jurisdiction due to the absence of complete diversity between all plaintiffs and all defendants. Since by order dated July 11, 1985, we dismissed the complaint against all non-diverse defendants and retained jurisdiction over the diverse defendants, we find this request moot.

III. Dismissal Under Court’s Sua Sponte Jurisdiction

Having dismissed defendants Seymour and Geoffrey Chanin, Lothair Szerlip and Unibay by our July 11, 1985 order, and having granted the motion to dismiss herein by the three defendants Amlong, the only remaining defendants include: Todd L. Smith, Todd L. Smith, P.A., Naomi Behar Smith, Naomi Behar Smith, P.A., Richard A. Barnett, P.A., Richard A. Barnett and Glendale Federal.

Although Todd L. Smith, P.A. based his motions only on the ground of lack of subject matter jurisdiction which we have found moot, and although the other remaining defendants did not make similar motions for dismissal, our authority to consider this matter is not at an end. District courts have the ability to sua sponte dismiss a complaint for failure to state a claim upon which relief can be granted. See Diaz v. Stathis, 440 F.Supp. 634 (D.Mass. 1977), aff'd, 576 F.2d 9 (1st Cir.1978); 5 Wright & Miller, Federal Practice & Procedure § 1357, at 593.

We first consider count one of the complaint which alleges defamatory statements by Todd L. Smith, P.A. and Naomi Behar Smith who were hired to represent Mrs. Wormley in the garnishment proceedings against Glendale Federal. In paragraph 7 plaintiffs claim that on or about May 22, 1984 these defendants:

maliciously composed and caused to be published of and concerning plaintiffs Gerald A. Kearney and Mary L. Wormley a certain false, malicious, and defamatory letter to the New York Departmental Disciplinary Committee, First Judicial Department, on defendants’ own stationery and enclosed within defendants’ own envelope. Said envelope containing said letter was received by Claudio B. Bergamasco, opened by him, and the contents of said letter were read by him and numerous other people who saw the same.

Plaintiffs attach a copy of the letter; offer an example of the allegedly slanderous statements; accuse defendants of copying and secretly retaining Mr. Kearney’s personal documents in order to gain control of the Scott Joplin estate for their own monetary benefit; and allege monetary damage to Mr. Kearney’s good name and reputation.

First, we note that the allegation that these defendants had any intention with respect to the estate of Scott Joplin plays no role in a claim of libel and slander. Second, we note that the letter was signed only by Naomi Behar Smith, not by Todd L. Smith or his public association. Third and most significant, it is well-established in New York that complaints to Bar Association disciplinary committees are absolutely privileged; consequently, no claim for libel and slander on the basis of such a statement can stand. Wiener v. Weintraub, 22 N.Y.2d 330, 292 N.Y.S.2d 667, 239 N.E.2d 540 (1968); see also Doe v. Rosenberry, 255 F.2d 118 (2d Cir.1958). This is so even if it could be affirmatively proven that the statements made were false since, “[a] lawyer against whom an unwarranted complaint has been lodged will surely not suffer injury to his reputation among members of the Grievance committee since it is their function to determine whether or not the charges are supportable.” Wiener, supra, 292 N.Y.S.2d at 669, 239 N.E.2d at 541. We may assume if such a false and malicious complaint were lodged by an attorney (presumed not to be “unlearned in the law,” id.), he or she would be held to account in subsequent disciplinary proceedings. For the reason that plaintiffs have not advanced any statement capable of sustaining their claim for libel and slander against defendants Todd L. Smith, Todd L. Smith, P.A., Naomi Behar Smith, or Naomi Behar Smith, P.A., we conclude that the complaint fails to state a claim upon which relief can be granted against these defendants.

Count five of the complaint contains allegations against defendant Richard A. Barnett, Esq., a Florida attorney retained by plaintiff Kearney to represent plaintiffs in the Florida garnishment proceedings. Plaintiffs purportedly paid Mr. Barnett $2,250 in fees; he allegedly initiated proceedings on behalf of plaintiffs, then withdrew from their case as a result of a telephone conversation with Karen Coolman Amlong wherein he “listened extensively to defendant Amlong,” who supposedly made defamatory remarks about Mr. Kearney. (Verified Complaint ¶ 30)

Merely listening to a defamatory comment is not an element of a libel or slander claim; nor does withdrawing from legal representation constitute a defamatory action. Plaintiffs show no basis for their legal claim against Mr. Barnett. Accordingly, we dismiss the count alleging injuries caused by him.

Count 6 complains of actions taken by defendant Glendale Federal in the garnishment proceedings; paragraph 33 of the complaint alleges that the funds were “illegally attached.” However, the only action taken by the bank was that it complied with the order of the Florida court permitting the garnishment of funds in the account. We fail to see how compliance with a court order can constitute libel or slander or illegal behavior.

We note that, according to the copy of the docket sheet we now have, Glendale Federal submitted no papers in answer to plaintiffs complaint. Nevertheless, we cannot grant a default judgment in plaintiffs favor on a claim without any substantive merit. Put another way, plaintiffs’ claim against Glendale Federal fails to state a claim upon which relief can be granted.

In sum, this case presents one of the few fact patterns in which a court, in order to advance the ends of justice, is warranted in dismissing several counts of a complaint sua sponte.

IV. Sanctions

The four defendants who we dismissed by our order of July 11, 1985 for non-diversity of citizenship move pursuant to Fed.R. Civ.P. 11 for an order imposing sanctions upon plaintiffs in an amount equal to the expenses, costs, disbursements and reasonable attorneys’ fees incurred by these defendants.

Rule 11 provides in pertinent part:

... The signature of an attorney or party constitutes a certificate by him that he has read the pleading, motion, or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument ... that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation____ If a pleading, motion, or other paper is signed in violation of this rule, the court ... shall impose upon the person who signed it ... an appropriate sanction____

We note first that Mr. Kearney is an attorney licensed to practice in the State of New York; he alleged in his complaint that jurisdiction was based on diversity, and then listed these four defendants as having the same state citizenship as the plaintiffs. Second, viewing the action against these defendants in the context of the entire complaint which we have examined in detail, we would be hard pressed to conclude that this litigation was not intended to harrass or needlessly increase the cost of litigation. Consequently, we order that plaintiff Kearney reimburse Geoffrey E. Chanin, Seymour L. Chanin, Lothair Szerlip and Unibay for reasonable attorneys’ fees and other costs they incurred in being forced to litigate this meritless action.

No material has been submitted to enable us to determine the value herein of reasonable attorneys’ fees. Accordingly, we follow a practice our Court has successfully employed for a long time: We direct the parties to endeavor to agree on a rea-sonable and proper amount of attorneys’ fees, then to provide us with a proposed form of judgment including such amount agreed upon. If no agreement thereon is reached within 30 days from the filing date of this opinion, defendants are directed to serve and file their fee application. See Revlon, Inc. v. Carson Products Co., 602 F. Supp. 1071, 1107 (S.D.N.Y.1985).

V. Claims Made by Plaintiff Wormley

We are compelled to note that this action was brought by Mr. Kearney and by Mrs. Mary L. Wormley. However, the complaint is totally devoid of any factual allegations by Mrs. Wormley that would even intimate a cause of action in defamation. On the papers before us, we are convinced that her complaint fails to state a claim upon which relief can be granted. Fed.R. Civ.P. 12(b)(6). Accordingly, we order dismissed the complaint of Mrs. Wormley.

CONCLUSION

In accordance with the foregoing, we are constrained to, and do, dismiss the instant complaint in its entirety. In addition, we order that plaintiffs pay Geoffrey E. Chanin, Seymour L. Chanin, Lothair Szerlip and Unibay the reasonable attorneys’ fees and costs incurred in litigating this action.

      . State substantive law is applicable to these proceedings. See Erie v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). .

      . Having decided that there is no personal jurisdiction over the Amlongs and the complaint fails to state a claim against them for which relief may be granted, we do not go on to analyze whether there was subject matter jurisdiction or whether service was proper.

      . We note that we have received papers by plaintiffs in opposition to a motion to dismiss allegedly made by defendant Barnett. We have not received any such moving papers nor is such a motion entered on the copy of the official court docket sheet which this court maintains regarding this action.