author: TERENCE T. EVANS, District Judge.

text:
    Lennon WILLIFORD, Petitioner, v. Warren YOUNG, Superintendent, Waupun Correctional Institution and Bronson C. La Follette, Attorney General of the State of Wisconsin, Respondents.
    Civ. A. No. 84-C-1241.
    United States District Court, E.D. Wisconsin.
    March 22, 1985.
    Michael Yovovich, Asst. State Public Defender, Madison, Wis., for petitioner.
    Thomas J. Balistreri, Asst. Atty. Gen., Madison, Wis., for respondents.
   DECISION and ORDER

TERENCE T. EVANS, District Judge.

On November 25, 1978, during the early morning hours, Lennon Williford walked into the Racine Police Department and said “I made a mistake ... I shot my wife.” Three days later, Williford was charged with first degree murder. In May of 1979, he was tried before a jury and convicted of the charge. Williford appealed and, on September 9, 1980, the Wisconsin Court of Appeals reversed his conviction on one of his claims of error, that the trial court had failed to submit a manslaughter-heat-of-passion option to the jury as a lesser included offense. The State appealed to the Wisconsin Supreme Court and the Supreme Court reversed the Court of Appeals’ decision. State v. Williford, 103 Wis.2d 98, 307 N.W.2d 277 (1981).

In November of 1981, Williford filed a collateral attack on his conviction pursuant to § 974.06, Wis.Stats., alleging that the intoxication instruction given in his case impermissibly shifted to him the burden of persuasion on the element of intent. The trial court denied the request for relief and the Wisconsin Court of Appeals, on January 7, 1983, affirmed. The Wisconsin Supreme Court denied review on February 15, 1983. On September 27, 1984, almost six years after he entered the Racine Police Station to admit the shooting, Williford petitioned this court for a writ of habeas corpus.

At the time of the fatal shooting, Lennon Williford and Annabelle Williford were separated; she had filed for a divorce. Like the marriage, the separation was stormy; the couple fought over other women, other men, and money. Annabelle had gone out on the evening of November 24, 1978, and returned home at approximately 1:00 a.m. November 25. In her home were Williford’s daughter Wanda and Wanda’s son, Annabelle’s daughter Dana Fraline, and twin boys who were the children of Annabelle and Williford. Wanda was sleeping on a couch in the living room; the other children were upstairs.

Williford came to the door and Annabelle invited him in. Wanda awoke when he came in and was awake briefly while he was there, but was asleep when the shooting took place. She awoke to the sounds of screaming and gunshots. Dana Fraline awoke and ran downstairs. Wanda saw what had happened and ran to Williford and began hitting him. She asked him why he had shot Annabelle. He did not respond. He left the home, and soon thereafter arrived at the Racine Police Station.

The issues Williford raises in his petition for habeas corpus are (1) that the failure to instruct the jury on the lesser included offense of manslaughter (heat of passion) denied him due process of law; (2) that he was denied the effective assistance of counsel; and (3) that the modified intoxication instruction given at his trial shifted the burden of persuasion on the issue of intent to the defense.

That the trial judge did not instruct the jury on manslaughter, Williford contends, deprived him of due process of law. The propriety of giving a lesser included offense instruction is an issue of obvious importance in any criminal case. It is, however, a matter which is not easily discussed in specific constitutional terms.

In Beck v. Alabama, 447 U.S. 625, 100 S.Ct. 2382, 65 L.Ed.2d 392 (1980), the court held that, in a capital case, if the unavailability of a lesser included offense instruction enhances the risk of an unwarranted conviction, the State is constitutionally prohibited from withdrawing from the jury the option of the lesser included offense. In Nichols v. Gagnon, 710 F.2d 1267, 1271 (7th Cir.1983), the Seventh Circuit declined to extend the rule to non-capital cases:

Although the Court may someday decide to extend the rule of Beck to non-capital cases, we are not inclined to anticipate its doing so.

The Court of Appeals perceived a tension between the important goal of preventing innocent persons from being convicted and the fact that Beck does not deal with a “specific constitutional right,” and involves a question more appropriately handled on direct review:

The innocent are not a despised and vulnerable minority who need the protection of the federal courts.

The standard of review on this issue in a habeas proceeding remains the standard articulated in Peery v. Sielaff, 615 F.2d 402 (7th Cir.1979). It is that:

... The failure to instruct on a lesser included offense, even if incorrect under state law, does not warrant setting aside a state conviction unless “failure to give the instruction could be said to have amounted to a fundamental miscarriage of justice.” Nichols at 1269.

Here the Wisconsin Supreme Court has determined that the failure to give the instruction is not error as a matter of state law. Presumably, the Wisconsin Supreme Court has the last word on the state law issue. The issue before me is whether the failure to instruct on manslaughter in this case amounted to a fundamental miscarriage of justice. It did not. There is virtually no evidence in the record to support a heat of passion instruction.

The decision of the state judge not to give the manslaughter instruction was made with extreme care. During the conference on jury instructions counsel and the court had somewhat differing memories of what the testimony of Williford showed. The court had the testimony read back so that it was “fresh in [their] minds.” Tr. 388, 390. Williford’s own testimony— and he was the only observer — does not justify the instruction. Somewhat secondarily, Wanda testified that when she was briefly awake in the living room with her father and Annabelle, everything was calm, which was why she went back to sleep. She slept until the gunshots awakened her. On that record, it cannot be said that failure to give a manslaughter instruction resulted in a miscarriage of justice. In leaving this issue, however, it is interesting to note that Williford was not left without anything to argue about to the jury. The trial judge did instruct on the LIO of second degree murder. If the jury did not see fit here to move down one peg to second degree, it is doubtful they would have, even if given the option, slid down two to manslaughter. The jury obviously believed that the four shots that Williford pumped into his estranged wife added up to murder one, a conclusion, based on this record, that appears to be inescapable.

Williford next argues in his petition for habeas corpus that he was denied the effective assistance of counsel. The standard to be used in reviewing a sixth amendment ineffective assistance of counsel claim has been recently considered in Strickland v. Washington, — U.S. -, 104 S.Ct. 2052, 2064, 80 L.Ed.2d 674 (1984):

A convicted defendant’s claim that counsel’s assistance was so defective as to require reversal of a conviction or death sentence has two components. First, the defendant must show that counsel’s performance was deficient. This requires showing that counsel made errors so serious that counsel was not functioning as the “counsel” guaranteed the defendant by the sixth amendment. Second, the defendant must show that the deficient performance prejudiced the defense. This requires showing that counsel’s errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable. Unless a defendant makes both showings, it cannot be said that the conviction or death sentence resulted from a breakdown in the adversary process that renders the result unreliable.

Williford claims first that counsel was ineffective because he failed to investigate and find an important witness, Patricia Bell. The witness had been interviewed by the Public Defender’s Office, but was not contacted by trial counsel.

Specifically regarding the duty to make investigation, the court in Strickland stated 104 S.Ct. at 2066:

Strategic choices made after less than complete investigation are reasonable precisely to the extent that reasonable professional judgments support the limitations on investigation. In other words, counsel has a duty to make reasonable investigations or to make a reasonable decision that makes particular investigations unnecessary. In any ineffectiveness case, a particular decision not to investigate must be directly assessed for reasonableness in all the circumstances, applying a heavy measure of deference to counsel’s judgments.

Here counsel .presented witnesses who testified to the relationship between Williford and his wife. Bell’s testimony would have gone to this issue and would not have added significant' additional information. Her testimony could not have maligned the victim’s character more thoroughly than did the testimony of Attorney Vincent Vassallo, whose statements regarding Annabelle’s abuse of the children nearly caused a mistrial. In addition, there was testimony in the record from more than one source that- Annabelle brought her young boyfriend to a hearing in the office of the Family Court Commissioner regarding her request for “more money” from Williford. There was also testimony that Annabelle carried a gun. The only additional information Bell would have given was to state that Annabelle was very irritable following a hysterectomy performed six years prior to her murder. If it was incompetent for the attorney not to have found Bell — and I do not think that it was — it certainly cannot be said to have been so serious as to have deprived Williford of a fair trial.

Another way in which counsel was said to have been ineffective was in his failure to object to the introduction of two misdemeanor convictions which occurred at least twenty years previously. Respondent concedes that it was error to admit the convictions; presumably then counsel should have objected to their use.

In this context, it is especially important to keep in mind the strength of the State’s case against Williford, not the least part of which is his immediate confession to the Racine Police Department. In that context, to argue that two misdemeanor convictions prejudiced the jury into finding Williford guilty is absurd.

Finally, it is argued that counsel was incompetent because of his failure to object to six instances in which the prosecutor violated Doyle v. Ohio, 426 U.S. 610, 96 S.Ct. 2240, 49 L.Ed.2d 91 (1976), by referring to Williford’s request to consult with an attorney.

Because one of the defenses here was intoxication, respondent maintains that the questions regarding Williford’s invocation of his right to counsel were to show that he was acting rationally and soberly immediately after the shooting. Counsel’s failure to object to this testimony could be based on a reasonable belief that such a use of the evidence was permissible.

More importantly, however, it is extremely difficult to imagine how such questions prejudiced the defendant who had, just pri- or to asking to consult with his lawyer, confessed the shooting. Surely any citizen who shot another person for whatever reason under whatever extenuating circumstances would want to see a lawyer. It is when a suspect denies committing the act and the prosecutor refers to his desire to see a lawyer that impermissible inferences can creep into a trial. In short, if counsel, should have objected to this material, and if his failure to object under these circumstances can be said to have made his representation ineffective, petitioner has nevertheless failed to carry his burden in showing that he was prejudiced in any manner by these references.

Williford’s final contention is that the jury instruction on intoxication impermissibly shifted to him the burden of persuasion on an essential element of the crime of first degree murder — intent. The instruction included the following language:

The defense of intoxication is an issue in this case.
The Criminal Code of Wisconsin provides that an intoxicated condition is a defense if such condition negatives the existence of a state of mind essential to the crime.
Ordinarily, intoxication will not relieve a person from responsibility for his criminal acts. However, where a certain state of mind or intent is an essential element of the crime, an accused is not guilty if, at the time of the commission of the alleged criminal act, he was so intoxicated that he was unable to form the essential intent or have the essential mental state.
The “intoxicated or drugged condition” to which the statute refers is not the condition of alcohol-induced incandescence or being well-lit that lowers the threshold of inhibitions or stirs the impulse to criminal adventures. It is that degree of complete drunkenness which makes a person incapable of forming an act or commit a crime. To be relieved from responsibility for criminal acts it is not enough for a defendant to establish that he was under the influence of intoxicating beverages. He must establish that degree of intoxication that means he was utterly incapable of forming the intent requisite to the commission of the crime charged.
In this case, defendant is charged with the crime of 1st degree murder of which one of the essential elements is intent to kill. The defendant claims that, at the time of the alleged offense, his condition from the use of intoxicating liquor was such that he did not form such intent.
If the defendant, because of his condition, was incapable of forming and, therefore, did not form the intent to kill, then you must not find him guilty of 1st degree murder as charged in the information.
If you have any reasonable doubt as to whether or not he was so intoxicated, you must give the defendant the benefit of that doubt and find him not guilty of 1st degree murder.

The jury instructions also, however, included specific statements regarding the presumption of innocence and the fact that the State has the burden of proof beyond a reasonable doubt:

The law presumes every person charged with the commission of an offense to be innocent. This presumption attends the defendant throughout the trial and prevails at its close unless overcome by evidence which satisfies the jury of his guilt beyond a reasonable doubt. The defendant is not required to prove his innocence.
The burden of proving the defendant guilty of every element of the crime charged (or submitted for your consideration) is upon the State. Before you can return a verdict of guilty, the State must prove to your satisfaction beyond a reasonable doubt that the defendant is guilty.
If you can reconcile the evidence upon any reasonable hypothesis consistent with the defendant’s' innocence, you should do so and find him not guilty.

The issue as argued by the petitioner is first whether the intoxication instruction is more like the one found unconstitutional in State v. Schulz, 102 Wis.2d 423, 307 N.W.2d 151 (1981), or the one found constitutionally permissible in Barrera v. State, 109 Wis.2d 324, 325 N.W.2d 722 (1982). Without going through a line-by-line comparison, I find that the instruction here is similar to that in Barrera. Presumably, then, the instruction is acceptable under Wisconsin law. Presumably, also, that is why the Wisconsin court did not overturn Williford’s conviction on this issue.

The issue in federal court is whether this instruction offends the United States Constitution. I find that it does not. Read in the context of all of the instructions, no reasonable juror could have concluded that Williford had the burden of persuasion on an essential element of the crime.

IT IS THEREFORE ORDERED that the petition of Lennon Williford for the issuance of a writ of habeas corpus is DENIED.


source: Caselaw Access Project

author: WEXLER, District Judge.

license: Public Domain

text:
    MERCY HOSPITAL ASSOCIATION, Plaintiff, v. Frank MICCIO, Local One Amalgamated Lithographers of America, an Unincorporated Association of Edward Hansen, President, Defendants.
    No. CV 84-3806.
    United States District Court, E.D. New York.
    March 22, 1985.

      Mullooly, Jeffrey, Rooney & Flynn, Glen Head, N.Y., for plaintiff.
    Robinson, Silverman, Pearce, Aronsohn & Berman, New York City, for defendants.
   MEMORANDUM AND ORDER

WEXLER, District Judge.

Plaintiff Mercy Hospital Association commenced this action against defendants for payment of approximately nine months of in-patient medical care and services provided to defendant Frank Miccio. Although plaintiff names Mr. Miccio’s union and its president as co-defendants liable for payment of the $197,346.83 allegedly owing, in fact the proper defendant is not Local One of the Amalgamated Lithographers of America (the Union) but its Sickness and Accident Fund (the Union Fund).

Plaintiff filed the action in New York Supreme Court for the County of Nassau and served the Union. The Union Fund then filed a timely petition for removal in this Court. 28 U.S.C. §§ 1441, 1446(a)-(b). Plaintiff now moves for remand of the action to state court.

Certain threshold issues must be noted and addressed. Plaintiff did not initially file this action under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1144. The Union Fund, however, contends in their answer that the cause of action arises under ERISA and the plaintiff now agrees. Both sides have next agreed that plaintiffs suit is under 29 U.S.C. § 1132(a)(1)(B) and that therefore under § 1132(e)(1) the state and federal courts have concurrent original jurisdiction. Subsection 1132(a)(1)(B) allows civil suits by beneficiaries or participants to recover benefits due from an ERISA fund. The parties, therefore, agree that this particular benefit fund is governed by ERISA and that Mercy Hospital, as the one to whom benefits are owing, has standing to sue under § 1132(a)(1)(B). The Court, however, does not have before it necessary facts for determination of these points. While not deciding the issues, for the purposes of this motion the Court will assume the parties are correct that ERISA applies and Mercy Hospital is the proper plaintiff under § 1132(a)(1)(B).

Plaintiff contests removal of this action on the ground that the Court has discretionary power in removal cases and the proper exercise of that power would dictate remand to state court. Plaintiff has perhaps misapprehended the law. The Court does not treat a removal petition in a civil action as a motion or application to be denied or granted, 28 U.S.C. § 1446(a)-(b). Rather, filing the petition has the effect of removing the action to district court, subject to remand or dismissal. Grounds for remand or dismissal include lack of subject matter jurisdiction. in the federal district court, 28 U.S.C. § 1447(c), or a statutory prohibition of removal, e.g., 28 U.S.C. § 1441(b), 1445.

Indeed, the right to removal is a statutory grant to be strictly construed. American Fire & Casualty Co. v. Finn, 341 U.S. 6, 71 S.Ct. 534, 95 L.Ed. 702 (1951). The defendant seeking removal must base the petition on a specific removal provision and specific grant of original jurisdiction in the district court. In this instance, the Union Fund premises removal on federal question jurisdiction, that is the ERISA claim, and the removal provision of 28 U.S.C. § 1441(a) and (b).

Plaintiff, however, argues that the matter should be remanded. In particular plaintiff relies on the language “any civil action ... may be removed by the defendant,” 28 U.S.C. § 1441(a) (emphasis added). Plaintiff contends that this wording vests the Court with discretion as to whether an action with concurrent state and federal jurisdiction will be removed to federal court. This is not the correct interpretation. The permissive wording means that a defendant can choose to remove the action to district court or can choose to proceed in the state forum chosen by plaintiff.

In support of this assertion of discretionary power in the Court and its contention that the case should be remanded, Mercy Hospital further relies on Lederman v. Pacific Mutual Life Insurance Co. for the proposition that in cases of concurrent jurisdiction under 29 U.S.C. § 1132(a)(1)(B) and (e)(1), the defendant should not be allowed to vitiate plaintiffs choice of forum by removing to federal court. 494 F.Supp. 1020, 1023 (C.D.Cal.1980). This defies the logic and purpose of the removal statutes. With due respect to the Lederman Court, its construction is incorrect. The federal removal statutes explicitly contemplate concurrent jurisdiction in all cases eligible for removal. 28 U.S.C. §§ 1441-1450. Moreover, original jurisdiction in state court is a prerequisite for the federal court to acquire derivative jurisdiction by removal. Venner v. Michigan Central Rail Road, 271 U.S. 127, 46 S.Ct. 444, 70 L.Ed. 868 (1926). That 29 U.S.C. § 1132(e)(1) excepts actions under Subsection 1132(a)(1)(B) from exclusive federal jurisdiction cannot reasonably be construed to mean that it bestows on plaintiff irrevocable choice of forum. To make removal discretionary with the district court and base exercise of that discretion on a principle of deference to initial filing destroys the purpose and effect of the removal provisions. The removal statutes by their very purpose and nature take away plaintiffs power to choose the forum in limited cases.

The instant case is just such a case. As an action based on a federal question it comes squarely under 28 U.S.C. § 1441(a)-(b). The requisite original jurisdiction in both the state and federal courts is present, and the procedural requirements apparently were followed. Plaintiffs contention that there is a third requirement of district court discretion calls for a gloss on the statute that is not supported by the law and runs counter to the principle of strict interpretation of the removal statutes. Indeed, it runs counter to the language of the statute. Section 1441(a) begins, “Except as otherwise expressly provided by Act of Congress, any. civil action brought in a State Court ... may be removed____” There is no express contradiction of this permission to remove in 29 U.S.C. § 1132(a)(1)(B) or (e)(1), hence no basis to bar removal here. E.g., McConnell v. Marine Engineers Beneficial Association, 526 F.Supp. 770 (N.D.Cal.1981). Moreover, if there were an express prohibition of removal of § 1132(a)(1)(B) actions filed in state court, it would not be a basis for an exercise of discretion of the sort propounded by plaintiff. See 28 U.S.C. § 1445(a) (nonremovable actions arising under federal law). Rather, in a straightforward question of removal of an action arising under federal law, the Court does not exercise discretion, but strictly interprets and applies the provisions governing removal.

The Court concludes that Mercy Hospital has presented no ground for remand of this action to state court. 28 U.S.C. § 1447(c). Accordingly, plaintiffs motion to remand is denied.

SO ORDERED.


text:
    Vincent R. DeSIMONE, Plaintiff, v. BOARD OF EDUCATION, SOUTH HUNTINGTON UNION FREE SCHOOL DISTRICT, and Marie Connelly, Defendants.
    No. CV 83-5296.
    United States District Court, E.D. New York.
    March 22, 1985.

      Block & Hamburger by Frederick Block, Smithtown, N.Y., for plaintiff.
    Jaspan, Ginsberg, Ehrlich, Reich & Levine by Lawrence Reich, Garden City, N.Y., for defendant Bd. of Educ.
    Paul Derkash, Plainview, N.Y., for defendant Connelly.
   MEMORANDUM AND ORDER

WEXLER, District Judge.

This is an action under 42 U.S.C. § 1983.

I. FACTS

On May 11, 1983 defendant Board of Education abolished plaintiffs position of High School Dean, effective June 30, 1983. At the same time, the Board established a new position of High School Administrative Assistant. On May 12, 1983 the Superintendent of Schools for the district informed plaintiff of the abolition of his position, and also informed plaintiff that he would not be offered new employment for the term starting September 1983.

It is undisputed that plaintiff held tenure pursuant to N.Y. Education Law § 3012(2). Defendant contends that the discharge was proper pursuant to Education Law § 2510(2) and (3), which provides that whenever a board of education abolishes a position the services of the teacher having the least seniority in the system within the tenure of the position abolished shall be discontinued, and that such teacher shall be placed upon a preferred eligible list of candidates for appointment to vacancies in a similar position. Plaintiff contends that the new position of High School Administrative Assistant is essentially equivalent to plaintiffs old position of High School Dean. Under Education Law § 2510(1) if the board of education abolishes one position and creates a similar position, the person holding the old position must be appointed to the new position. Plaintiff contends that defendant has deprived plaintiff of property without due process, in violation of the Due Process Clause of the Fourteenth Amendment.

Defendant has moved to dismiss pursuant to Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981), on the ground that the state provides adequate post-deprivation remedies for the alleged deprivation of property. Plaintiff has moved for partial summary judgment, requesting this Court to find that plaintiff has been deprived of property without due process.

II. THE PARRATT ISSUE

The first issue is whether this case should be dismissed pursuant to Parratt.

In Parratt, the Court held that the loss of a prisoner’s property caused by the negligent failure of prison officials to follow normal procedures for the receipt of mail packages, although constituting a deprivation of property under color of state law, did not constitute a deprivation “without due process”, given the fact that (1) the loss resulted from a random unauthorized act, so that the state could not provide any pre-deprivation process, and (2) the state did provide adequate post-deprivation remedies. In Hudson v. Palmer, — U.S. -, 104 S.Ct. 3194, 82 L.Ed.2d 393 (1984), the Court- applied the same reasoning to intentional deprivations of property resulting from random unauthorized acts by prison guards. In Logan v. Zimmerman Brush Co., 455 U.S. 422, 102 S.Ct. 1148, 71 L.Ed.2d 265 (1982), the Court explained that the Parratt doctrine applies only in situations where the state could not practically have provided pre-deprivation process, as for example when the alleged deprivation results from random unauthorized acts by low level personnel.

In the instant case, state law under Education Law § 2510 clearly gave plaintiff a substantive property right that in the event his position was abolished and replaced by an essentially equivalent position he would be allowed to occupy such new equivalent position. Plaintiff alleges that the new position created by defendant was essentially equivalent to plaintiff’s old position.

If and insofar as plaintiffs contention that the positions are equivalent turns upon questions of fact, the procedural component of the Due Process Clause of the Fourteenth Amendment requires that defendant provide plaintiff with notice and a hearing before finally determining that the positions are not equivalent. Assuming for the sake of argument that the equivalency of the positions turns at least in part upon questions of fact and that such a hearing is therefore required, we hold that such hearing, or at least a preliminary hearing, should have been provided before plaintiff was discharged. Here, unlike in Parratt and Hudson, we deal not with random unauthorized acts by low level personnel which higher authorities could not have prevented by means of pre-deprivation process, but rather with an act by a Board of Education. If any hearing was required, we see no reason why the board could not have provided plaintiff with (at the very least) some kind of preliminary hearing before the discharge took place. We do not necessarily mean to imply that a full-scale trial type hearing was required prior to the discharge; perhaps it would have been sufficient to hold an abbreviated non-evidentiary hearing prior to the discharge, to be followed by a more elaborate evidentiary hearing after the discharge. See Arnett v. Kennedy, 416 U.S. 134, 94 S.Ct. 1633, 40 L.Ed.2d 15 (1974).

Of course, the equivalency of the positions does not necessarily turn upon issues of fact which could reasonably be disputed. It may well be that the positions were so clearly similar or so clearly dissimilar that at the time of the Board’s action it could be said as a matter of law that the discharge was or was not proper under Education Law § 2510. If, at the time of the discharge, undisputed facts could establish as a matter of law that the positions were not “similar” within the meaning of the substantive law of Education Law § 2510(1), then a hearing would have served no purpose, and the Board did not violate the Due Process Clause by discharging plaintiff. On the other hand, if at the time of the discharge undisputed facts could establish as a matter of law that the positions were “similar” within the meaning of the substantive law of Education Law § 2510(1), then the Board’s action in discharging plaintiff was substantively (as distinct from procedurally) defective. If the Board’s action was substantively defective, then no amount of hearings on factual issues could have remedied the defect (it should be noted, however, that if state authorities determined through formal proceedings that the positions were dissimilar as a matter of substantive law, such a determination might conceivably bar the instant action, not because such a determination would remedy a substantive defect in the Board’s action, but rather because such determination could conceivably have res judicata effect and so preclude the possibility of this Court finding the existence of a substantive defect in the first place). Since such substantive defect would have resulted from the action of the Board of Education rather than the random unauthorized action of low level personnel, the existence of post-deprivation state law remedies would not bar the instant action under Parratt.

For the above reasons we hold that this action should not be dismissed pursuant to Parratt.

Defendant has cited a number of eases in an attempt to support its contention that Parratt is applicable here. We believe that none of these cases are on point, as in every case cited either the alleged deprivation arose from random unauthorized acts, or for some other reason it was impractical to supply any pre-deprivation process. In Engblom v. Carey, 677 F.2d 957 (2d Cir.1982), striking prison guards were evicted from staff housing buildings to make room for National Guardsmen who were to staff the prison. That case involved an emergency situation in which the state could not have supplied pre-eviction process. In Giglio v. Dunn, 732 F.2d 1133 (2d Cir.1984), cert. denied, — U.S. -, 105 S.Ct. 328, 83 L.Ed.2d 265, a tenured high school principal contended that he had been coerced to resign by superiors who informed him that his position would be abolished unless he resigned. In that case, unlike the instant case, plaintiffs loss of his job did not result from a formal official action by a Board of Education, but rather was alleged to have resulted from the informal unofficial and unauthorized threats by individual superiors of the plaintiff. Consequently, no hearing could have been provided prior to the alleged coercion. Had the Board of Education itself coerced the plaintiff in that case to resign, we believe that the Court would not have applied Parratt. If a Board of Education coerces a tenured teacher to resign on the basis of a belief that the teacher has engaged in misconduct or other beliefs concerning legally relevant issues of fact open to question, and there is no emergency situation justifying the immediate pre-hearing removal of the teacher, the Board’s failure to supply a pre-termination hearing would appear to violate the requirements of procedural due process. If a Board of Education coerces a tenured teacher to resign on the basis of beliefs which, even if factually correct, as a matter of law do not justify the teacher’s termination, then the Board’s action would appear to violate the substantive component of the Due Process Clause of the Fourteenth Amendment.

Defendant has argued that state law does not require a hearing prior to a discharge pursuant to Education Law § 2510. Even assuming that this is true, it does not follow that the instant discharge without a hearing was constitutional. Where, as here, state law has created a substantive property interest, the Due Process Clause of the Fourteenth Amendment sets certain requirements regarding the minimum amount of process that must be employed in making factual determinations relevant to the destruction of such interest, requirements not necessarily derived from the law creating the underlying substantive interest. Vitek v. Jones, 445 U.S. 480, 490-491, 100 S.Ct. 1254, 1262-1263, 63 L.Ed.2d 552 (1980) (rejecting suggestions to the contrary contained in the plurality opinion in Arnett v. Kennedy, 416 U.S. 134, 94 S.Ct. 1633, 40 L.Ed.2d 15 (1974)); see also Santosky v. Kramer, 455 U.S. 745, 775 n. 3, 102 S.Ct. 1388, 1406 n. 3, 71 L.Ed.2d 599 (Rehnquist, J., dissenting) (1982). Further, the notion that state law never requires a hearing before a discharge under Education Law § 2510 is open to question. In Mitchell v. Board of Education of Great Neck Public Schools, 40 N.Y.2d 904, 389 N.Y.S.2d 354, 355, 357 N.E.2d 1008, 1009 (1976), it was held that no hearing is required when a teacher’s position is abolished. That case is not on point. Here, there may be a factual dispute over whether plaintiff's position was in fact “abolished”. For the same reason, Beers v. Nyquist, 72 Misc.2d 210, 338 N.Y.S.2d 745 (Sup.Ct.1972) is not on point.

III. ISSUES LEFT UNRESOLVED

From the papers submitted to the Court so far, it is impossible for the Court to determine whether (1) resolution of plaintiff’s allegation that his old position and the newly created position were essentially equivalent turns upon disputed issues of fact; or (2) it can be said as a matter of law that the positions were similar; or (3) it can be said as a matter of law that the positions were dissimilar. We will allow the parties to submit further papers on these issues.

Plaintiff can prove that he has been deprived of property without due process if he demonstrates either (1) that at the time of the plaintiff’s discharge there existed genuine factual issues bearing upon the similarity or dissimilarity of the positions; or (2) that at the time of plaintiff’s discharge it could be said as a matter of law that the positions were similar within the meaning of Education Law § 2510(1). Defendant can prove that there was no deprivation of property without due process if it can show that at the time of the discharge it could be said as a matter of law that the positions were not similar within the meaning of Education Law § 2510(1).

If it is shown that plaintiff was not deprived of property without due process, then the case will be dismissed.

On the other hand, if it is shown that plaintiff was deprived of property without due process, then the question of remedy will arise. If the discharge was unconstitutional because it could be said at the time of discharge that the positions were similar as a matter of law, then reinstatement with back pay would appear to be appropriate remedies. If the discharge was unconstitutional because at the time of discharge there existed disputed issues of fact concerning the similarity or dissimilarity of the positions, then it will be necessary to determine whether the positions are in fact similar or dissimilar. This determination might require a trial, or might be made on the basis of affidavits showing that certain questions of fact which could have been genuinely disputed at the time of the discharge have now been cleared up and cannot now be genuinely disputed. If the positions are in fact similar, then here again reinstatement with back pay would appear appropriate. If the positions are in fact dissimilar, then we must assume that plaintiff would eventually have been discharged in any event even if a hearing had been provided, and plaintiff will consequently be entitled to only nominal damages.

IY. POSSIBILITY OF ABSTENTION

In Railroad Comm’n of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941), the Court held that a federal district court should abstain from ruling upon federal constitutional issues which might be rendered moot or placed in a different posture by state court determination of pertinent state law. In England v. Louisiana State Bd. of Med. Exam., 375 U.S. 411, 84 S.Ct. 461, 11 L.Ed.2d 440 (1964), the Court held that when a federal district court applies Pullman abstention, the plaintiff may bring a state court action, inform the state court that he intends to reserve final determination of federal legal issues and facts relevant to such issues for the federal court, and return to federal district court at the conclusion of the state proceedings.

In the instant case, it is impossible to determine at this point whether resolution by state courts of open state law issues could render plaintiffs constitutional claims moot or present them in a different posture. We will therefore allow the parties to submit further papers on this question. If the facts concerning the similarity of the positions were clear at the time of discharge but the state law concerning the definition of “similar” is ambiguous, this would appear an appropriate case for Pullman abstention. If the facts were unclear at the time of the discharge and the state law is still unclear, Pullman abstention would probably serve little purpose. This is so because the issues of fact and issues of state law may be heavily intertwined. Since the plaintiff can reserve factual issues for determination by this Court, and since issues of fact and issues of state law may be intertwined, it would be difficult for a state court to make a definitive determination of state law. Finally, if the state law is not ambiguous, Pullman abstention would of course not apply.

In Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), the Court held that “abstention is also appropriate where there have been presented difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar.” Colorado River Water Conser. Dist. v. U.S., 424 U.S. 800, 814, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976) (summarizing Burford holding). The Burford doctrine applies even in cases involving issues of federal law as well as state law. Levy v. Lewis, 635 F.2d 960, 964 (2d Cir.1980). We will allow the parties to submit papers on whether Burford abstention is appropriate in the instant case.

V. CONCLUSION

Defendants’ motion to dismiss pursuant to the Parratt doctrine is denied.

SO ORDERED.


text:
    James NAUM, Petitioner, v. John BROWN, Warden of Oklahoma State Penitentiary, Michael Turpin, Attorney General of the State of Oklahoma, Respondents.
    No. CV 84-3066.
    United States District Court, E.D. New York.
    March 22, 1985.
    James Naum, petitioner, pro se.
    Michael Turpin, Oklahoma Atty. Gen., Oklahoma City, Okl., for respondents.
   MEMORANDUM AND ORDER

WEXLER, District Judge.

James Naum petitions this Court for a writ of habeas corpus pursuant to 28 U.S.C. § 2254. He was convicted on July 18, 1979 in Tulsa County District Court in Tulsa, Oklahoma of first degree manslaughter for strangling his wife Maria to death in January 1978 in Tulsa, Oklahoma. Mr. Naum was sentenced to twenty years in prison and has been serving that time in the Oklahoma prison system since.

Petitioner has filed six earlier actions in this Court, premised on his many years as a Queens, New York resident before he traveled to Oklahoma. The Court surmises that this is the reason he has filed his habeas corpus petition here. One of the earlier actions was dismissed, the others were transferred to federal district courts in Oklahoma.

The United States District Courts are courts of limited jurisdiction, Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371, 376, 60 S.Ct. 317, 319, 84 L.Ed. 329, reh’g denied, 309 U.S. 695, 60 S.Ct. 581, 84 L.Ed. 1035 (1940). They have only that existence and subject matter jurisdiction that Congress specifically grants under Article III Section 2 of the U.S. Constitution. The question of subject matter jurisdiction is so fundamental that the Court is compelled to raise it of its own accord, even when it is not otherwise suggested by the parties to the action. Mansfield, Coldwater & Lake Michigan Rwy. v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 511, 28 L.Ed. 462 (1882).

Among the grants of subject matter jurisdiction bestowed by Congress on the district courts is the power to hear and grant petitions for habeas corpus from persons in state custody pursuant to state court judgments. 28 U.S.C. § 2254(a). Nevertheless, without suspending the writ, Congress has limited district court jurisdiction under 28 U.S.C. § 2241. This section provides in relevant part:

(a) Writs of habeas corpus may be granted by the Supreme Court, any justice thereof, the district courts and any circuit judge within their respective jurisdictions. The order of a circuit judge shall be entered in the records of the district court of the district wherein the restraint complained of is had.
(b) The Supreme Court, any justice thereof, and any circuit judge may decline to entertain any application for a writ of habeas corpus and may transfer the application for hearing and determination to the district court having jurisdiction to entertain it.
* * * * 5k *
(d) Where an application for a writ of habeas corpus is made by a person in custody under the judgment and sentence of a State court of a State which contains two or more Federal judicial districts, the application may be filed in the district court for the district wherein such person is in custody or in the district court for the district within which the State court was held which convicted and sentenced him and each of such district courts shall have concurrent jurisdiction to entertain the application. The district court for the district wherein such an application is filed in the exercise of its discretion and in furtherance of justice may transfer the application to the other district court for hearing and determination.

This section is held to be a restriction on the jurisdiction of the district court, not a venue provision. United States ex rel. Rudick v. Laird, 412 F.2d 16 (2d Cir.1969). In other words, it limits the power of the Court to hear and grant the writ. Unlike venue, it is not a matter within the Court’s discretion and it cannot be waived. Without jurisdiction over the action, any decision or ruling by the Court is a nullity.

Clearly, jurisdiction in this action is absent. The petitioner-prisoner is not within this Court’s territorial jurisdiction, nor are his custodians. The crime, trial, and sentencing all took place in Oklahoma. Under § 2241(a) and (d) this Court is powerless to hear and grant the habeas corpus petition.

When the Court lacks subject matter jurisdiction dismissal is proper. Rule 12(h), Fed.R.Civ.P. Nevertheless, where the petitioner is a prisoner and a pauper, outright dismissal would work delay and injustice. The Court is particularly persuaded by Judge Neaher’s reasoning on this issue in United States ex rel. Ayala v. Tubman, 366 F.Supp. 1268 (E.D.N.Y.1973), that transfer to the Northern District of Oklahoma, where Mr. Naum was convicted and ■ sentenced, is the better course of action and within the Court’s power. Accordingly, the petition is transferred to that district court pursuant to 28 U.S.C. § 1406(a).

In closing the Court would like to address a few words of explanation, albeit dicta, to the petitioner. This is the seventh cause of action Mr. Naum has filed in this Court. Six of them, to Mr. Naum’s apparent frustration, have been transferred to Oklahoma district court, and one dismissed outright. In five of the transfers the Court was not acting in its discretion; it had no choice. Federal district court jurisdiction can be a difficult concept to grasp. Briefly, this Court is not a court of general jurisdiction. It cannot act except where Congress specifically gives it subject matter jurisdiction. Where such jurisdiction does not exist it cannot be bestowed by the parties’ consent or waiver. In addition, even where the Court has subject matter jurisdiction, it must also have personal jurisdiction. A plaintiff consents to personal jurisdiction when he files an action in this Court. But without personal jurisdiction over the defendants, any judgment or ruling is without force or effect and the defendants cannot be compelled to act as the Court orders. Contrary to Mr. Naum’s understanding, the Court does not have wide powers to do as it wishes, but must tread the pathways laid out by the Constitution and laws. The Court hopes that Mr. Naum will not pursue future exercises in futility by filing actions in a court powerless to give him redress or relief.

The Clerk of the Court is hereby ordered to transfer this action to U.S. District Court for the Northern District of Oklahoma, pursuant to 28 U.S.C. § 1406(a).

SO ORDERED.

      . Naum v. Heckler, CV 83-2580; Naum v. Free and Accepted Masons, et al., CV 84-2651; Naum v. Douglas, et al, CV 84-2778; Naum v. Mitchell, CV 84-2779 (dismissed September 12, 1984); Naum v. Sanders, CV 84-2780; and Naum v. Brown, CV 84-2921.


author: GLASSER, District Judge:

text:
    Alice Bender KLAUSNER, Plaintiff, v. Gaspare P. FERRO, Alfred DiPasqua, H.J. Bottling Co., Inc. and Cantrel & Cochrane, Inc., Defendants.
    No. 81 Civ. 2692.
    United States District Court, E.D. New York.
    March 22, 1985.

      Irving Bizar, Bizar & D’Alessandro, New York City, for plaintiff.
    Burton I. Manis, Suozzi, English & Cianciulli, P.C., Mineóla, N.Y., for defendants.
   MEMORANDUM AND ORDER

GLASSER, District Judge:

Plaintiff Alice Bender Klausner brings this action alleging violations of § 10(b) of the Securities Exchange Act of 1934 (“the 1934 Act”), 15 U.S.C. § 78j(b), and the rules promulgated thereunder, in connection with the exchange of her shares of stock in H.J. Bottling Co., Inc. (“HJ”) for shares of International Telephone and Telegraph Corp. (“ITT”) in August 1976. Plaintiff also alleges pendent state law claims against defendants.

Defendants Gaspare P. Ferro and Alfred DiPasqua have moved for summary judgment dismissing plaintiff’s federal claim under the 1934 Act. After a thorough examination of the record, and for the reasons set forth below, I find that defendants’ motion for summary judgment should be granted. Because plaintiff’s federal claim is insufficient, her pendent state claims must fail as well. United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). Facts

A great many of the facts underlying this action are undisputed by the parties. Defendant HJ was a closely-held New York corporation, organized on September 5, 1968, which maintained its principal place of business in New Jersey. From the date of HJ’s incorporation until August 1976, defendant Ferro was the President and defendant DiPasqua was the Vice President of HJ. Both men were also directors of the company. In 1968, Ferro owned 1005 issued and outstanding shares of HJ stock, and DiPasqua owned 525 shares. After HJ shares were issued to third parties in November 1968, the individual defendants owned approximately 70% of the company’s issued and outstanding stock. In 1972, Ferro and DiPasqua each purchased 172 shares from HJ stockholders who had expressed a desire to sell those shares. Following those purchases, the individual defendants owned a total of approximately 88% of HJ’s issued and outstanding stock.

Meyer Bender, HJ’s insurance broker and the father of plaintiff, had purchased ten (10) shares of HJ for his son, Stephen Bender, plaintiff’s brother, in 1968. In or about June or July 1973, Meyer Bender and Seymour Graubard, acting as trustees for plaintiff, purchased six (6) shares of HJ stock at a price of $3900, which transaction was arranged by Ferro, DiPasqua and HJ’s then attorney, Anthony V. Curto, Jr. The six shares were issued to plaintiff’s trust on July 2, 1973, represented by Certificate No. 55.

Additional transactions in HJ stock are relevant to this action. First, in August 1975, a letter signed by Ferro was sent to all HJ shareholders, offering to purchase any outstanding HJ shares for the price of $750 per share. Affidavit of Gaspare P. Ferro (“Ferro Aff.”), Exh. 19. Informing the shareholders that dividends were not expected to be declared, the letter stated in pertinent part:

From time to time you have been offered the opportunity to sell your interest in the company, and again we feel[,] due to the years that have gone by, compelled to offer you an opportunity to dispose of your interest at this time. Therefore, this is an offer to purchase your stock at the price of $750.00 per share.

The expiration date of this offer was September 12, 1975. As a result of this offer, HJ redeemed 66 shares of its outstanding stock, in addition to some 64 shares which the company had redeemed prior to August 1975. Although plaintiff’s trustee did not tender any of the trust’s shares for redemption, Meyer Bender informed Ferro, in a series of brief notes, that he would be interested in purchasing additional shares at $750 per share if they became available. Ferro Aff., Exhs. 20-24.

In addition to the above transaction, HJ’s pre-1976 contacts with ITT are relevant to a discussion of this motion. ITT first approached HJ as a potential acquisition in early 1973, prior to the purchase of shares by plaintiff’s trustee. In March 1973, ITT concluded that it did not want to acquire HJ. See Ferro Aff., Exh. 3. In early 1976, ITT renewed its interest in HJ. Id., Exhs. 4-6. As a result of negotiations between ITT and Ferro and DiPasqua, those parties reached a tentative agreement to exchange all of the issued and outstanding shares of HJ stock for 235,000 shares of ITT stock. A letter of intent was executed on June 24, 1976. Ferro Aff., Exh. 7. At a shareholders’ meeting held on July 6, 1976, all of HJ’s shareholders gave their authorization for Ferro and DiPasqua to complete negotiations with ITT. As a result, an exchange of shares between HJ and ITT took place on August 13, 1976, pursuant to an Agreement and Plan of Reorganization (the “Agreement”), executed by ITT and all of the shareholders of HJ. At that time, plaintiff’s trust exchanged her six shares of HJ stock for 657 shares of ITT Series K Preferred Stock, having a value of approximately $32,850 — or roughly 800% over plaintiff’s original investment.

In early 1981, plaintiff instituted this action, alleging that Ferro and DiPasqua failed to make certain disclosures prior to the HJ-ITT stock transfer which amounted to fraud upon her within the meaning of § 10(b) of the 1934 Act. In particular, plaintiff alleges that the individual defendants violated that statute and its rules by failing to disclose in connection with the ITT transaction:

(a) The true value of HJ;
(b) The financial results of HJ from which plaintiff could determine said true value;
(c) That the exchange ratio was determined by defendants’ arbitrary value attributed to HJ, which value had been impaired by defendants’ improper conduct;
(d) That defendants had acquired 344 additional shares of HJ’s stock by causing HJ first to borrow money in the amount of $250,000 and then, in turn, borrowing money from HJ;
(e) That defendants had borrowed the said $250,000 from HJ at no interest and then, upon discovery by HJ’s auditors, agreed to repay said loan at an interest rate far below that which HJ had to pay for the $250,000;
(f) That defendants had raised salaries, bonuses and expense accounts for themselves in ever-increasing amounts without approval from the stockholders;
(g) That HJ was to purchase any shares to be tendered pursuant to the offer and that it was unnecessary for HJ to do that since plaintiff was willing to purchase those shares;
(h) Defendants’ intention to, and subsequent increases of, their ownership interest in HJ in order to profit substantially from any future proposed acquisition;
(i) Defendants planned to receive employment and consulting agreements as part of HJ’s future acquisition;
(j) Other material and necessary facts.

Amended Complaint, HIT 22(a) — (j) (in substance). Plaintiff claims that had she or her father been informed of the facts allegedly not disclosed in the documents connected with the ITT transaction, she “would not have consented to the ITT transaction unless defendants either restructured the transaction to reduce their share of that transaction or otherwise repay substantial parts or all of their profits from their misconduct.” Opposing Affidavit of Alice Bender Klausner (“Klausner Aff.”). Plaintiff concludes: “Thus, I would have received substantially more from the ITT transaction than I did in fact receive.” Id.

Plaintiff amended her original complaint following my denial of the individual defendants’ motion to dismiss for failure to state a claim on May 12, 1983. In the amended complaint, plaintiff seeks as relief an accounting, the imposition of a constructive trust on defendants’ profits and $1 million in punitive damages.

Discussion

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment may be granted where “there is no genuine issue as to any material fact” and “the moving party is entitled to judgment as a matter of law.” Furthermore, “on a motion for summary judgment the court cannot try issues of fact; it can only determine whether there are issues to be tried.” Schering Corp. v. Home Insurance Co., 712 F.2d 4, 9 (2d Cir.1983) (quoting Heyman v. Commerce & Industry Insurance Co., 524 F.2d 1317, 132 (2d Cir.1975)).

In a Rule 56 motion, the party seeking summary judgment has the burden of establishing that no genuine issues of material fact exist. A dispute as to an immaterial fact, however, does not preclude the court from granting summary judgment. 10A C. Wright, A. Miller & Kane, Federal Practice & Procedure, § 2725 at 89 & n. 13 (“Wright & Miller”). A fact is material if it “tends to resolve any of the issues that have been properly raised by the parties.” Id. at 93.

Additional considerations are relevant to the resolution of a summary judgment motion when, as here, the action is to be tried before a judge and not a jury. A trial should be held “when a dispute over historical facts or inferences raises issues going to the weight or credibility of testimony, [and therefore] the party opposing the motion is entitled to confront and cross-examine witnesses ... and the judge must consider their credibility and demeanor in finding facts.” Schwarzer, Summary Judgment under the Federal Rulé: Defining Genuine Issues of Material Fact, 99 F.R.D. 465, 476 (“Schwarzer”). However, if the parties do not dispute the material facts of the case but differ only upon ultimate facts or conclusions, “it is not so clear that a trial serves as useful purpose.” Id. at 477. In any event, whether the case is to be tried by judge or jury, once the moving party has met its initial burden of disproving the existence of a genuine issue of material fact, it is incumbent upon the party opposing summary judgment to establish that a genuine factual dispute does exist. See Rule 56(c).

Section 10 of the 1934 Act, at issue here, provides in pertinent part:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—
(b) to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

An exchange of shares of stock is a securities transaction within the meaning of this section although it is not a “purchase” or “sale” in the usual commercial meaning of those words. See, e.g., Ingenito v. Bermec Corp., 376 F.Supp. 1154, 1180 (S.D.N.Y.1974).

Although § 10(b) must be read “flexibly, not technically and restrictively,” Superintendent of Ins. of State of New York v. Bakers Life & Cas. Co., 404 U.S. 6, 12, 92 S.Ct. 165, 169, 30 L.Ed.2d 128 (1971), the protection of this statute is limited to punishing schemes which are “in connection with” a securities transaction, in that the defendants must use a device “of a sort that would cause reasonable investors to rely thereon and [therefore] cause them to purchase or sell [or exchange] a corporation’s securities.” SEC v. Texas Gulf Sulfur Co., 401 F.2d 833, 860 (2d Cir.1968) (en banc), cert. denied, 394 U.S. 976, 89 S.Ct. 1454, 22 L.Ed.2d 756 (1969). Only purchasers or sellers (or transferors) of securities have standing to sue for alleged violations of the 1934 Act, Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975), because as recently stated by the Second Circuit:

The purpose of § 10(b) and Rule 10b-5 is to protect persons who are deceived in securities transactions — to make sure that buyers of securities get what they think they are getting and that sellers of securities are not tricked into parting with something for a price known to the buyer to be inadequate or for a consideration known to the buyer not to be what it purports to be.

Chemical Bank v. Arthur Andersen & Co., 726 F.2d 930, 943 (2d Cir.), cert. denied, — U.S. -, 105 S.Ct. 253, 83 L.Ed.2d 190 (1984). In order to prevail in a § 10(b) action, therefore, a plaintiff must establish several facts, namely, that (1) in connection with a securities transaction and (2) acting with scienter, the defendant(s) made (3) a material misrepresentation or nondisclosure upon which plaintiff (4) relied and thereby (5) suffered injury. See, e.g., Bloor v. Carro, Spanbock, Loudin, Rodman & Fass, 754 F.2d 57 (2d Cir.1985), at 61.

It is also well settled that breaches of fiduciary duty, such as the allegedly unlawful acts complained of by plaintiff here, do not alone give rise to liability under § 10(b). Rather, such alleged breaches only create liability if performed with “deception, misrepresentation or nondisclosure” in connection with a securities transaction. Sante Fe Industries, Inc. v. Green, 430 U.S. 462, 476, 97 S.Ct. 1292, 1302, 51 L.Ed.2d 480 (1977). Furthermore, any such alleged nondisclosure must have been “material.” Id. at 474 & n. 14, 97 S.Ct. at 1301 & n. 14.

The definition of “materiality” under the federal securities laws, in relation to a summary judgment motion, has been the subject of much judicial interpretation. In TSC Industries, Inc. v. Northway, 426 U.S. 438, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976), the United States Supreme Court defined that term as follows:

An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote. This standard is fully consistent with Mills’ general description of materiality as a requirement that “the defect have a significant propensity to affect the voting process.” It does not require proof of a substantial likelihood that disclosure of the omitted fact would have caused the reasonable investor to change his vote. What the standard does contemplate is a showing of a substantial likelihood that, under all the circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder. Put another way, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the “total mix” of information made available.

Id. at 449, 96 S.Ct. at 2132 (emphasis added), citing Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970). Despite the apparent subjectivity involved in determining whether a nondisclosure is “material,” it does not follow that

a court can never grant summary judgment on the issue of the materiality of alleged nondisclosures in a securities case because the question of materiality is one of mixed law and fact____ Although a determination of materiality “requires delicate assessment of the inferences a ‘reasonable shareholder’ would draw from a given set of facts and the significance of those inferences to him,” ... summary judgment should be granted when “reasonable minds cannot differ on the question of materiality.” ... To deny a defendant in a securities case alleging nondisclosure of material facts the benefit of summary judgment procedures would cause a wholly innocent person to incur enormous legal expenses in defending an unmeritorious and frivolous lawsuit at trial.

Staffin v. Greenberg, 509 F.Supp. 825, 834-35 (E.D.Pa.1981), aff'd, 672 F.2d 1196 (3d Cir.1982) (emphasis added) (citations omitted).

With the above considerations in mind, I now turn to the analysis of whether any of defendants’ alleged nondisclosures give rise to genuine issues of material fact that would defeat summary judgment.

1. Valuation of HJ stock at the time of the HJ-ITT exchange (Amended Complaint, §§ 22(a)-(c)).

Plaintiff challenges the defendants’ alleged nondisclosures of the true value of the HJ stock, and of the financial results from which plaintiff could ascertain the true value. Plaintiff also alleges that the defendants failed to disclose that the exchange ratio was arbitrarily determined by defendants — which ratio was impaired by defendants’ allegedly improper conduct. In their statement of undisputed facts submitted pursuant to Local Rule 3(g), defendants state that on August 13, 1976, 235,000 shares of ITT stock were exchanged pro rata for 2144 issued and outstanding shares of HJ stock. The value of HJ, based upon a $53.75 per share value of ITT, is stated by defendants to be $12,600,-000. Defendants’ 3(g) Statement, II39. In her opposing 3(g) statement, plaintiff challenges the values set forth in paragraph 39 of defendants’ statement, urging that this value “was determined without any consideration of dividends declared by ITT and the value of employment contracts to Ferro and DiPasqua.” Plaintiff also states that “the date chosen by defendants of August 13, 1976 is not necessarily the proper date to be selected.”

As stated supra at 1193, once the moving party has met its initial burden of establishing that there is no genuine issue of material fact, the burden shifts to the party-opposing the motion to come forward with admissible evidence that demonstrates that there is a triable issue. Defendants rely on Staffin v. Greenberg, supra, for the proposition that even if correct, an allegation that defendants failed to state the true value of stock is insufficient to give rise to liability under the federal securities laws. 509 F.Supp. at 837. Plaintiff claims that the rule set out in Staffin is inapplicable here, because unlike the defendants in Staffin, the defendants here did not submit any facts or figures which have formed the basis for the valuations they suggest.

This allegation, however, does not defeat the principle stated in Staffin. In addition, the record reveals that prior to the conclusion of the HJ-ITT exchange, defendants furnished to plaintiff’s trustee several years’ worth of unaudited balance sheets for HJ. Ferro Aff., Exh. 10. Defendants also invited plaintiff’s trustee to review and discuss all of HJ’s files. Id. Also, the HJ-ITT exchange agreement, id., Exhs. 8 (unexecuted) and 11 (executed), refers to the consolidated balance sheets of HJ, see Agreement at sections 3.6 and 7, and includes in schedule A, part II, a valuation of HJ stock and other financial data. In view of the financial data provided, plaintiff cannot be said to have met her burden of controverting the propriety of the values established by defendants, HJ and ITT, much less the genuineness of any issue of fact that would preclude summary judgment on plaintiff’s value-related claims.

2. The individual defendants’ purchase of 3If shares of HJ stock and the corporate loan relating to that repurchase (Amended Complaint, ¶22(d), (e) and (h))

Plaintiff alleges that the defendants failed to disclose that they improperly purchased additional HJ shares, thereby increasing their potential profit in the event of an acquisition, and improperly caused HJ to loan them funds to make this purchase, while repaying the loan at an interest rate lower than that charged to the corporation.

It is abundantly clear that plaintiff would not have standing to challenge these allegedly improper acts in themselves, as they occurred in 1972, a year before her trust became a shareholder of HJ. Plaintiff asserts, however, that it is not defendants’ specific acts which she challenges, but defendants’ failure to disclose them in connection with the ITT transaction. It is stretching logic beyond reason, however, to claim that, if correct, these allegedly omitted facts “would have assumed actual significance in the deliberations of the reasonable stockholder,” who was deciding whether to approve the ITT transaction. The nondisclosure of the allegedly improper purchase of shares in 1972 could not conceivably be deemed material to the 1976 exchange of shares with ITT. TSC v. Northway, 426 U.S. at 449, 96 S.Ct. at 2132, supra. It is also stretching the “in connection with” requirement of § 10(b), as well as circumventing the standing requirements, to consider that these alleged non-disclosures were in any way related to the 1976 exchange of shares which transpired some four years after the defendants’ allegedly wrongful acts.

3. Defendants raised their salaries and enjoyed other benefits without shareholder approval (Amended Complaint, ¶ 22(f)).

Plaintiff alleges that defendants’ original contract with HJ stipulated a set salary, and that defendants raised their salaries, and granted themselves benefits such as bonuses, expense accounts and the use of company cars, without shareholder approval. Again, plaintiff has attempted to “bootstrap” into a § 10(b) nondisclosure claim what is essentially a claim “of a derivative nature which belongs to the corporation,” Bender v. Ferro, 86 A.D.2d 12, 13, 448 N.Y.S.2d 666 (1st Dep’t 1982) (citation omitted). While defendants’ alleged malfeasance may have provided the basis for an independent derivative claim for breach of fiduciary duty, it did not injure plaintiff directly nor did it relate in any way to plaintiffs decision at a later date to approve of the ITT transaction. Nondisclosure of the alleged misconduct could not then satisfy even the “broadest interpretation of the ‘in connection with’ ” requirement in that the deceptive practices did not even remotely “touch” the exchange of securities. See Bloor v. Carro, Spanbock, supra, 754 F.2d at 61 (citing Superintendent of Insurance v. Bankers Life & Casualty Co., 404 U.S. 6, 12-13, 92 S.Ct. 165, 168-169, 30 L.Ed.2d 128 (1971).

J. HJ’s redemption of its own shares was unnecessary because plaintiff was willing to purchase those shares (Amended Complaint, ¶ 22(g)).

Plaintiff here complains of defendants alleged improper nondisclosure regarding HJ’s 1975 redemption of 66 shares of stock at a price of $750 per share and the redemption of 64 shares prior thereto. In actuality, plaintiff admittedly complains here of her trust’s inability to purchase additional shares at that time. Plaintiff alleges that defendants “substantially benefited from this repurchase by HJ with no out-of-pocket costs to themselves,” Plaintiff’s 3(g) Statement at 11 C(12). However, this bald statement does not controvert the individual defendants’ contention that their sole individual purchases of HJ stock took place in 1968 and 1972. The HJ-ITT exchange agreement clearly indicates that at the time of the exchange of shares, there were 130 treasury shares of HJ. Ferro Aff., Exh. 11 (Exh. A, Section II). Defendants admit that they benefitted by HJ’s redemption of its own stock, but correctly urge that all of the HJ shareholders benefitted in proportion to the amount of HJ shares held by them. Plaintiff does not allege how defendants’ benefit from the redemption differs in proportion from that received by the other shareholders. It is also worth noting that the redemption took place some months before ITT renewed its interest in HJ. Thus, it cannot be said that any alleged nondisclosure regarding HJ’s redemption of 130 of its own shares would be material to a reasonable shareholder’s decision to agree to exchange his or her shares.

5. Defendants’ employment and consulting agreements with HJ (Amended Complaint, ¶ 22(i)).

Plaintiff’s allegation that defendants failed to disclose the existence of future employment and consulting agreements arising from the ITT transaction is the only alleged nondisclosure which is actually related to that transaction. The record itself, however, belies plaintiff’s argument. While the draft agreement, Ferro Aff., Exh. 8, indicates no names or figures under the “Employment Agreements” section (Agreement, Exh. A, Section VIII), the comparable section in the executed agreement, signed by plaintiff’s trustees and the other HJ shareholders, does indicate the existence of employment contracts with Ferro and DiPasqua. Thus, they were disclosed to the HJ shareholders.

Conclusion

As discussed above, I find that the alleged nondisclosures complained of by plaintiff are not actionable here for several reasons. For the most part, the alleged nondisclosures are so remote in time and unrelated in nature to the ITT transaction that they cannot be held to be “in connection with” that transaction within the meaning of § 10(b) of the 1934 Act.

In addition, plaintiff alleges that had she been aware of the alleged nondisclosures, she would have somehow restructured the ITT transaction or forced the defendants to repay allegedly wrongfully received profits. See supra at 1191-1192. Plaintiff has failed to establish by admissible evidence that defendants profitted unlawfully, and she has not established how she would or could have engineered a restructuring of the ITT transaction. That plaintiff would have “demanded” a restructuring or other modification is not to say that the transaction would have' been so altered. Plaintiff has not shown any reason why ITT would have acceded to plaintiff’s theoretical demands, or that plaintiff could have affected the ITT transaction in any manner, given the fact that plaintiff held only Va% of HJ’s issued and outstanding shares at the time of the transaction. Consequently, plaintiff has failed to show how defendants’ alleged nondisclosures caused her to receive a smaller share of the proceeds from the ITT transaction than she otherwise would have realized, or that she could have forced defendants to disgorge allegedly wrongful profits by blocking the ITT deal. Absent such a showing of causation, plaintiff’s § 10(b) claim for those injuries must fail. Bloor v. Carro, Spanbock, supra, 754 F.2d at 61.

For the reasons set forth above, I find that this is an appropriate case in which summary judgment should be granted in defendants’ favor on plaintiff’s § 10(b) claim. Because plaintiff’s state law claims are pendent to the insufficient federal claim, the complaint is hereby dismissed in its entirety. See United Mine Workers of America v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966).

      . Defendant HJ, no longer in existence, is a nominal defendant. Defendant Cantrel & Cochrane, Inc. (“C & C”) is a company that was related in interest to HJ and whose name appears on some of the HJ documents in this record.

      . It is not disputed that defendants borrowed funds from HJ, which funds HJ borrowed from its bank, in order to carry out payment to the HJ shareholders who sold their stock. The record indicates, however, that the loans were guaranteed by the personal guarantees of Ferro and DiPasqua and that all borrowed funds and interest were repaid by defendants. See Ferro Reply Aff. H B(o )-(y) and accompanying exhibits.
      It is also undisputed that defendants received increases in salaries and certain benefits from HJ, such as bonuses and the eventual use of a company car.

      . A draft of the Agreement, with incomplete schedules, was distributed to the HJ shareholders at the July 6, 1976 shareholders’ meeting, and is attached to the Ferro Aff. as Exh. 8. The completed executed Agreement is attached to that affidavit as Exh. 11. The letter of intent to HJ shareholders, Exh. 7, and the terms of the Agreement itself, indicate that ITT’s offer was for an exchange of its stock for all shares of HJ stock. See, e.g., Agreement, Section 1.1.

      . Although plaintiff alleges that defendants now improperly raise some of the same arguments rejected in the May 12, 1983 decision, I find that defendants’ arguments here differ significantly from those presented therein. Also, that decision was issued in relation to a motion to dismiss for failure to state a claim, made before the joinder of issue or discovery. The extensive materials yielded in discovery are now presented and available to the Court on the instant motion.

      . Plaintiffs brother, Stephen Bender, brought a similar action in state court complaining of many of the alleged breaches of fiduciary duty at issue here. See, e.g., Ferro Aff., Exhs. 25-32. The status of that action is described in the Ferro Aff., ¶¶ 48-59.

      . Effective October 26, 1983, prior to the filing and argument of this motion, Local Rule 9(g) was replaced by Rule 3(g), which is identical in substance to the earlier rule.


author: McMILLAN, District Judge.

text:
    SUN-DROP BOTTLING COMPANY, INCORPORATED, Plaintiff, and Royal Crown Bottling Company—Charlotte, N.C., Pee Dee Bottling Co., Inc. and Sun-Drop Bottling Company, Inc., Intervenor Plaintiffs, v. COCA-COLA BOTTLING CO. CONSOLIDATED, Defendant.
    No. C-C-84-513-M.
    United States District Court, W.D. North Carolina, Charlotte Division.
    March 22, 1985.

      John J. Barnhardt, III, and Ronald T. Lindsay, Bell, Seltzer, Park & Gibson, Charlotte, N.C., Charles D. Gray, III, Gastonia, N.C., Everett J. Bowman, Robinson, Bradshaw & Hinson, Charlotte, N.C., for plaintiff.
    Norvin K. Dickerson, III, Helms, Mulliss & Johnston, Charlotte, N.C., for defendant.
   ORDER DENYING PRELIMINARY INJUNCTION

McMILLAN, District Judge.

Plaintiff Sun-Drop Bottling Company, Incorporated (“Sun-Drop”) moved for a preliminary injunction against certain promotional and marketing practices of defendant Coca-Cola Bottling Co. Consolidated (“Coca-Cola”) which it claims violate federal and state anti-trust laws. The motion was heard on January 31, 1985.

In considering whether a preliminary injunction should issue, the court must consider and balance the following factors:

1. Plaintiff’s likelihood of success on the merits.

2. The probability that plaintiff will suffer irreparable harm if interim relief is denied.

3. The likelihood of harm to defendant if an injunction is issued.

4. The public interest.

The two most important factors to consider are the probability that plaintiff will suffer irreparable harm if an injunction does not issue and the likelihood of harm to defendant if an injunction does issue. If the balance of probable harm is likely to weigh more heavily on the plaintiff, the preliminary injunction should issue if “a grave and serious question is presented” on the merits. Blackwelder Furniture Co. v. Seilig Manufacturing Co., 550 F.2d 189, 196 (4th Cir.1977). If the balance of probable harm is likely to be equal, or weighs more heavily on the defendant, plaintiff must show a “likelihood of success on the merits” of his claims; even if “likelihood of success” on the merits is demonstrated, it is merely one “strong factor” to be weighed alongside the public interest and likely harm to defendant if an injunction issues. Wetzel v. Edwards, 635 F.2d 283, 291 (4th Cir.1980).

At the hearing, it appeared obvious to the court that certain of Coca-Cola’s 1984 “letters of agreement” with convenience stores revealed per se violations of the anti-trust laws in the form of vertical price-fixing. Those agreements, by which the convenience stores agreed to grant certain exclusive promotional rights to defendant’s products in exchange for cash or other incentives, uniformly contained the following language: “Our brands must be the exclusive soft drinks with a reduced retail.” Defendant asserts, however, and documents produced for the court show, that the admittedly illegal provision has been removed from 1985 promotional “agreements” between defendant and the convenience stores.

Plaintiff asserts that, despite the 1985 changes in the “agreements,” a preliminary injunction should be granted as to the price-fixing violations in order to prevent defendant’s return to its former illegal practice and to purge the effects of that practice. The court finds that, at this time, entry of such a preliminary injunction would be inappropriate. The illegal provisions have been removed from the 1985 agreements, and the court, for now at least, takes defendant at its word that they will not be reinstituted. The carry-over effects of the earlier illegal provisions on plaintiff’s current marketing and financial status have not been developed sufficiently to warrant issuance of a preliminary injunction on that basis.

The above finding does not foreclose entry of an injunction against such practices, either by later order should further violations be brought to the court’s attention, or as part of any final judgment to accompany whatever damages remedy may be found appropriate to compensate plaintiff for defendant’s violation of the anti-trust laws. Until further showing of continuing per se violations, however, the motion for preliminary injunction as to price-fixing will be denied.

Plaintiff also moves the court to enjoin various other practices by defendant which plaintiff alleges violate the anti-trust laws. Those practices include entering into agreements with merchants which reduce access to available space and advertising by competitors by (a) excluding competitors from in-store displays, maintenance of competitive cold drink dispensers and featured newspaper advertising, (b) forcing stores to carry a full line of defendant’s available products and (c) setting quotas for minimum cold inventory and shelf space to be allotted to defendant.

Analysis of plaintiff’s claims other than those of vertical price-fixing falls under the “rule of reason” test under which the restraints in question must be examined by “analyzing the facts peculiar to the. business, the history of the restraint, and the reasons why it was imposed.” National Society of Professional Engineers v. United States, 435 U.S. 679, 692, 98 S.Ct. 1355, 1365, 55 L.Ed.2d 637 (1978). The determination to be made is whether the practices in question promote competition or suppress competition. Id. at 691, 98 S.Ct. at 1365.

Although plaintiff has brought forward evidence of practices by defendant that appear to suppress competition, plaintiff has not made a sufficient showing of probability of suffering irreparable harm to outweigh the likelihood of harm to defendant and to warrant issuance of a preliminary injunction. At this time, the balance of hardship falls evenly between the parties.

Though plaintiff has shown monetary losses over the past year, it has not yet shown a connection between those losses and defendant’s practices sufficient to warrant the issuance of a preliminary injunction. Plaintiff itself alleges that its harm is due to the combined effects of the practices of Coca-Cola and Pepsi-Cola, not a defendant to this suit. Furthermore, Coca-Cola may face hardship if it alone is restrained from what may be fairly common industry practices not found (so far) to violate the anti-trust laws.

The balance of hardships is not in plaintiffs favor. Furthermore, plaintiff has not yet shown a probability of success on the merits. Defendant appears to have engaged in a course of conduct of entering into agreements with both convenience and grocery stores that has had both the intent and the effect of restraining competition by the plaintiff. However, while the necessity of the “rule of reason” inquiry does not preclude the issuance of a preliminary injunction in proper cases, the relevancy of proof of the factors of the particular market, the history of the restraint and the intent of the party imposing the alleged restraint makes it difficult to decide likelihood of success on liability until the facts are fully examined. Upon review of the record, the court finds that plaintiff has not, at this time, shown a likelihood of success on the merits of its non-vertical-price-fixing claims.

The public has an interest in preventing and punishing such violations of the anti-trust laws as restrictive market practices and price-fixing. However, this must be balanced against the public interest in non-interference with legitimate market activities. These factors are balanced at this time.

Therefore, while not modifying its initial impression that defendant has acted in an unlawful way that has resulted in competitive loss to plaintiff, the court will not, at this time, act to enjoin those practices preliminarily.

IT IS THEREFORE ORDERED:

1. Plaintiff’s motion for preliminary injunction is DENIED.

2. The court intends to try this case as soon as possible. All parties will take due notice.