text:
    Richard A. WEINBERG, Maciej Kopacz, Jaewook Kim, as Partners of Weinberg, Kopacz & Kim; E. Ronn Heiner, Alan Pierrot, Donald Huene, Barbara Noyes, as Partners of Heiner & Peirrot; Raymond Schwartz, Richard Wheatley, Sathaporn Vathayanon, as Partners of Schwartz, Wheatley & Vathayanon, Plaintiffs, v. LEAR FAN CORPORATION, (a Nevada Corporation); Lear Avia Corporation (a Delaware Corporation); Lear Fan Ltd. (an English Limited Company); Lear Fan Corporation (US) (a Delaware Corporation); Oppenheimer & Co., Inc. (a Delaware Corporation); Zoysia Corporation, N.V. (a Netherlands Antilles Corporation); Fan Holdings, Inc. (a Delaware Corporation); Samuel H. Auld; William W. Surbey; Moya Olsen Lear; and Bob Burch, Defendants.
    No. 84 Civ. 1689 (EW).
    United States District Court, S.D. New York.
    Feb. 5, 1986.

      Wolf Popper Ross Wolf & Jones, New York City, Sharon Green, Inc., San Francisco, Cal., for plaintiffs; Robert A. Skirnick, Patricia I. Avery, New York City, Sharon Green, San Franciscp, Cal., of counsel.
    Schulte Roth & Zabel, New York City, for defendant Oppenheimer & Co., Inc.; David M. Brodsky, E. Scott Gilbert, Debra L. Mellinkoff, of counsel.
    Davis Polk & Wardwell, New York City, for defendants Lear Fan Corp., LearAvia Corp., Zoysia Corp., N.V., Fan Holdings, Inc., Samuel H. Auld, Bob Burch, Moya Olsen Lear, and William W. Surbey; Scott Muller, Robert Kasdin, of counsel.
    Davis Graham & Stubbs, Denver, Colo., for Dari G. Hobson, Chapter 11 Trustee for Lear Fan Ltd. and Lear Fan Corp. (US); Glen E. Keller, Jr., C. Randel Lewis, of counsel.
   OPINION

EDWARD WEINFELD, District Judge.

This is a motion, upon notice to all members of the proposed class, for approval of a settlement pursuant to Fed.R.Civ.P. 23(e) and for the allowance of attorneys’ fees to plaintiffs’ counsel.

Plaintiffs, nine medical doctors and one Ph.D, commenced this action in October 1983 in the United States District Court for the Eastern District of California on behalf of themselves and a class of approximately 200 purchasers of limited partnership interests in the Lear Fan Research Limited Partnership (“LFRLP” or “the Partnership”). The Partnership was formed in 1980 to finance research and development for a proposed lightweight business aircraft, the Lear Fan 2100. In March 1984, the action was transferred to this Court, where plaintiffs filed an amended complaint.

The defendants, Lear Fan Corp. (a Nevada corporation), Lear Fan Ltd. (an English Limited Company), Lear Fan Corp. (US) (a Delaware corporation), LearAvia Corp. (a Delaware corporation) (collectively referred to as “the Lear Fan defendants”), Oppenheimer & Co., Inc. (a Delaware corporation), Zoysia Corp., N.V. (a Netherlands Antilles corporation), Fan Holdings, Inc. (a Delaware corporation), Samuel H. Auld, Moya Olsen Lear, William W. Surbey, and Bob Burch, moved to dismiss several of the claims alleged in the amended complaint and opposed class certification. In March 1985, this Court dismissed four counts of the amended complaint and granted plaintiffs’ motion for leave to file a second amended complaint. After the Court’s dispositions of the parties’ motions rendered plaintiffs’ motion for class certification moot, the parties agreed that plaintiff would have until January 15, 1986 to move for class certification under the second amended complaint.

The litigation arose from the sale in 1980 of limited partnership interests in the Partnership to provide $30 million for research and development of the Lear Fan 2100. Having spent $16.5 million between 1978 and 1980 for research and development and in need of additional funds to complete the project, LearAvia Corp. retained Oppenheimer & Co., Inc. to raise money from private investors. The Lear defendants and Oppenheimer sold partnership units of $150,000 each through a Preliminary Private Placement Memorandum dated April 25, 1980. Prospective investors were required to complete a subscription agreement in which they represented, among other things, that they were able to bear the economic risks of the investment.

LearAvia assigned the rights to all the technology developed with respect to the Lear Fan 2100 to the Partnership; the latter granted Lear Fan Ltd. an option to acquire an exclusive license to all of the Partnership’s technology for the purpose of manufacturing and selling the aircraft. In return, Lear Fan Ltd. agreed to pay the Partnership royalties for each Lear Fan 2100 sold during the 25-year period following shipment of the first plane sold, with no monetary cap on total royalty payments.

By the summer of 1982, no aircraft had been developed or sold and additional funds were needed. The Partnership’s general partners, Lear Fan Corp. (Nevada) and Lear Fan Corp. (US), entered into a reorganization agreement whereby certain undisclosed investors agreed to contribute $60 million to the project through a shell corporation, Zoysia Corp., N.V. (“Zoysia”). Under the reorganization, Lear Fan Ltd. exercised its option to acquire the exclusive license to the Lear Fan 2100 technology. Lear Fan Ltd. was then acquired by the entity created for the purpose of implementing the refinancing agreements, Fan Holdings, Inc. Zoysia owned 85% of the stock of Fan Holdings, Inc. The Partnership acquired 6% of the stock, the Partnership’s royalty rights were restructured according to a formula based on the number of aircraft sold, and royalties were capped at $71,250,000.

Plaintiffs’ second amended complaint alleges violations of section 10(b) of the Securities Exchange Act of 1934 and various common law claims with respect to the 1980 private placement and the 1982 reorganization. In particular, counts one and six allege that the Lear defendants, Oppenheimer, and the individual defendants (except Burch) committed common law fraud and violated section 10(b) by making material misstatements and omissions in connection with the 1980 offering of Partnership interests. Counts two, three and four allege that all of the defendants violated section 10(b), breached the Partnership agreement and breached fiduciary duties owed to the Partnership and the limited partners during the 1982 reorganization. Finally, count five alleges that Zoysia, Fan Holdings, Inc. and Burch tortiously interfered with the royalty agreement between the Partnership and Lear Fan Ltd.

A relevant postscript to the commencement of this litigation is that during 1985 all four of the Lear defendants filed petitions under Chapter 11 of the Bankruptcy Code: LearAvia and Lear Fan Corp. filed in the District of Colorado and Lear Fan Ltd. and Lear Fan Corp. (US) filed in the District of Nevada. To date, although $200 million has been expended on the Project, no aircraft have been produced or sold and research and development has been suspended.

THE SETTLEMENT

The parties to the action, the Trustee and Receiver for Lear Fan Ltd., and the Department of Economic Development of Her Majesty’s Government of the United Kingdom of Great Britain and Northern Ireland (the “DED”) engaged in extensive negotiations to reach a settlement intended to resolve the parties’ disputes and continue the project. Under the proposed settlement, a new corporation will be formed — Lear Fan Technology, Inc. — to which the parties and the DED will assign their rights to the Lear Fan 2100, its technology and its profits and royalties, in exchange for stock in the newly formed corporation and the right to appoint its directors. The following table illustrates the share of Lear Fan Technology each party will receive in exchange for its right to the royalties, profits and technology of the project:

Party Percentage of LFT Stock Received Number of Directors Amount Contributed to Lear Fan Project

LFRLP 47.00% 3 $30 million

LEAR FAN LTD. (for its creditors) 20.00% 1 $40 million (approx.)

ZOYSIA 14.25% 1 $60 million

DED 14.25% 1 $70 million

LEAR AVIA 4.50% 1 $16.5 million

Lear Fan Technology will own 92.8% of the stock of Fan Holdings, Inc. (the owner of all of Lear Fan Ltd.’s stock) and the Partnership will retain its 6% share of Fan Holdings, Inc. All parties and the DED will execute a mutual release with respect to all claims arising out of the sale of the partnership units and the 1982 refinancing.

Pursuant to the stipulation of settlement, the parties have agreed that counts one and six of the second amended complaint will be dismissed without prejudice, the action otherwise certified as a class action for settlement purposes pursuant to Rule 23(b)(1), and counts two through five dismissed with prejudice. After notice was sent by first-class mail to each of the purchasers of limited partnership interests, a hearing on the proposed settlement was held on January 28, 1986.

EVALUATION OF THE SETTLEMENT

When presented with a proposed settlement of a class action suit, the Court’s function is to evaluate the probabilities of success upon a trial and to compare the benefits thereof with the terms of the parties’ settlement, not to reopen the negotiations with the litigants or to substitute its business judgment for that of the parties. Where, as here, the parties have negotiated a settlement before the class has been certified, the Court should “scrutinize the fairness of the settlement agreement with even more than the usual care.”

We turn first to the likelihood of success on the merits. If the settlement is not approved and the case proceeds to trial, plaintiffs will have the burden of proof with respect to each of their claims. Without attempting to forecast a definitive resolution upon a trial of the merits, the likelihood that plaintiffs will fail to sustain their burden is substantial.

The limited partners on whose behalf this action is brought, by their own admission, are a group of fairly sophisticated investors, including doctors, lawyers, educators and businessmen. The Prospectus through which the limited partnership units were sold made very clear that it was a risky investment and that the limited partners could lose their entire investment. In fact, the first sentence of the first paragraph of the introduction to the Prospectus cautioned: “Investment in the Limited Partnership Interests involves a high degree of risk.” Moreover, the Prospectus made clear that “[t]here can be no assurance that Limited will manufacture and sell airplanes or that royalties to the partnership with respect thereto will ever be paid.” The Prospectus disclosed the risks associated with the production of an aircraft still in the developmental stage, the need for FAA approval of the airplane, and emphasized that the project might be unable to obtain the funding necessary to complete development of the aircraft.

The explicit disclosures by defendants of the multitude of risks associated with the venture make it far from certain that plaintiffs would be able to establish that the defendants intentionally misled the investors or that plaintiffs reasonably relied on any representations about the project’s future, two elements of their section 10(b) and common law fraud claims. Defendants could argue that the various projections in the Prospectus challenged by plaintiffs are not actionable since the defendants had a reasonable basis to make such statements in view of the facts known at the time they were made. In addition, the detail with which the Prospectus described potential conflicts of interest and other matters casts substantial doubt on the viability of plaintiffs’ claim that there were material omissions with respect to these matters. Plaintiff’s claims regarding the 1980 sale of limited partnership interests is further weakened by the fact that each investor was required to represent in writing that he or she had read the Prospectus, knew the venture was speculative and was willing and able to bear the risk of the loss of the entire investment.

With respect to plaintiffs’ claims regarding the 1982 refinancing, plaintiffs’ major hurdle to recovery is that plaintiffs are seeking recoupment of the amount of royalties they would have received if the royalties provision had not been renegotiated. Since no aircraft have been sold, no royalties have been paid in any amount. The Lear Fan 2100 has not received FAA certification and research and development has been suspended. As a result, plaintiffs’ claim that they were damaged by the royalty reduction in 1982 appears conjectural and is extremely unlikely to prevail. Moreover, since the ability of plaintiffs to receive any royalty payments was tied directly to the project’s success, the decision of the general partners to reduce plaintiffs’ royalty share in exchange for $90 million of additional funding probably would be considered a direct benefit to the limited partners and a decision entitled to protection under the business judgment rule.

Even if plaintiffs prevailed on any or all of their claims, the likelihood of recovering substantial damages from the defendants is complicated by the bankruptcy of all four Lear defendants and by the insolvency of both Zoysia and Fan Holdings, Inc. In addition, the limited partners already have received most, if not all, of their expected tax benefits from their investment in the project. Under the decision of our Court of Appeals in Salcer, Panfeld, Edelman v. Envicon Equities Corp., damages in federal securities suits must be offset by the tax benefits received by the investor, thereby significantly reducing the amount of provable damages plaintiffs could recover upon a trial.

If the settlement is not approved, the protracted and costly litigation will continue. Defendants have indicated that they will not only move to dismiss the complaint but will also oppose class certification. Discovery, which already consists of numerous depositions and inspection of thousands of pages of documents, would no doubt continue until the moment of trial. The complexity of the 1982 refinancing transaction, the fact that six years have passed since the 1980 private placement, and the likelihood of appeals should the plaintiffs prevail all increase the uncertainty surrounding plaintiffs' ability to obtain a result more favorable than this settlement.

The proposed settlement is the product of extensive and thorough arms-length negotiations conducted in good faith by experienced counsel over a period of seven months. They included not only the parties but also counsel for the DED. The settlement offers the plaintiffs the prospect of sharing the profits from a viable new corporation. Each party and the DED has rights to different portions of the technology which alone are essentially worthless. If combined through this settlement, a potentially valuable entity can be created. With all of the claims to the Lear Fan 2100 technology resolved, Lear Fan Technology, Inc. will have an opportunity to attract new financing to complete the aircraft. If the settlement is not approved, the parties and the DED will lose their $200 million expenditure.

The limited partners, who contributed only $30 million of the $200 million expended to date, will receive 47% of the stock of the new corporation and the right to appoint three of its directors. While Lear Fan Technology, Inc. may not achieve the degree of success hoped for by the parties, the Court is of the view that the possibility of substantial profits from the sale of the aircraft or sale of the new corporation far outweigh the marginal likelihood that plaintiffs would prevail at trial, succeed in recovering damages, or that any assets would be available to satisfy all or any part of a recovery.

Bearing in mind its responsibility independently to evaluate the proposed settlement, the Court notes that the Bankruptcy Courts for the Districts of Nevada and Colorado have approved the settlement with respect to the four Lear defendants and that no limited partners have filed any objections to the proposed settlement.

After a careful weighing of all of the competing considerations, the Court approves the proposed settlement.

ATTORNEYS’ FEES

Applying the factors enumerated in City of Detroit v. Grinnell Corp., and upon consideration of the affidavits of plaintiffs’ counsel detailing the information as to the services they rendered, the Court is of the view that the amount and apportionment of fees and disbursements agreed upon by the parties is fair and reasonable and, accordingly, is approved.

Judgment may be entered accordingly.

So ordered.

      . LearAvia is the parent corporation of both Lear Fan Ltd. and Lear Fan Corp. Lear Fan Corp. and Lear Fan Corp. (US), a subsidiary of Lear Fan Ltd., were the general partners of the Partnership.

      . 15 U.S.C. § 78j.

      .Lear Fan Ltd. originally filed for liquidation under Chapter 7. After the Trustee and a Receiver for the company’s United Kingdom assets were appointed, the Trustee converted the bankruptcy to one under Chapter 11.

      .Of the $200 million, $30 million was contributed by the Partnership, $60 million by Zoysia, $70 million by the Department of Economic Development of Her Majesty’s Government of the United Kingdom of Great Britain and Northern Ireland, $16.5 million by LearAvia, and the balance by others, including creditors of Lear Fan Ltd.

      . See Kuck v. Berkey Photo, Inc., 87 F.R.D. 75, 78 (S.D.N.Y.1980); Contreras v. Tweedy, Browne & Knapp, 76 F.R.D. 39, 43 (S.D.N.Y.1977); Blank v. Talley Indus., Inc., 64 F.R.D. 125, 129 (S.D.N.Y.1974); Levin v. Mississippi River Corp., 59 F.R.D. 353, 361-62 (S.D.N.Y.), aff’d, 486 F.2d 1398 (2d Cir.), cert. denied, 414 U.S. 1112, 94 S.Ct. 843, 38 L.Ed.2d 739 (1973).

      . Weinberger v. Kendrick, 698 F.2d 61, 73 (2d Cir.1982), cert. denied, 464 U.S. 818, 104 S.Ct. 77, 78 L.Ed.2d 89 (1983).

      . See TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976); Freschi v. Grand Coal Venture, 767 F.2d 1041 (2d Cir.1985); Ainger v. Michigan General Corp., 476 F.Supp. 1209 (S.D.N.Y.1979), aff’d, 632 F.2d 1025 (2d Cir.1980).

      . Cf. Zissu v. Bear Stearns & Co., 627 F.Supp. 687 (S.D.N.Y.1986).

      . 744 F.2d 935 (2d Cir.1984).

      . 495 F.2d 448 (2d Cir.1974).


source: Caselaw Access Project

author: ROBERT D. POTTER, Chief Judge.

license: Public Domain

text:
    Garlon R. PHILLIPS, Plaintiff, v. S. GUMPERT COMPANY, INC., Defendant.
    No. C-C-85-575-P.
    United States District Court, W.D. North Carolina, Charlotte Division.
    Feb. 5, 1986.
    William L. Rikard, Jr., H. Carey Strickland, III, Parker, Poe, Thompson, Bernstein, Gage & Preston, Charlotte, N.C., for plaintiff.
    Lawrence Hewitt, Berry, Hogewood, Edwards & Freeman, Charlotte, N.C., for defendant.
   ORDER

ROBERT D. POTTER, Chief Judge.

THIS MATTER was heard before the undersigned on January 31, 1986 at Charlotte, North Carolina on the Defendant’s Motion to transfer this action pursuant to 28 U.S.C. § 1404(a). The Defendant was represented by Lawrence W. Hewitt, Attorney at Law. The Plaintiff was represented by H. Carey Strickland, III and William L. Rikard, Jr., Attorneys at law.

The Plaintiff, Garlón R. Phillips, is a resident of Louisiana and a former employee of the Defendant in North Carolina. The Defendant, S. Gumpert Co., Inc., is a New York corporation with its principal place of business in Jersey City, New Jersey. It has been doing business continuously in this District at all times relevant to this lawsuit.

During the first half of 1984, two officers of the Defendant approached the Plaintiff in Louisiana about working in North Carolina as a sales representative for the Defendant. The Plaintiff alleges that he entered an employment contract with the Defendant through a series of correspondence. According to the Plaintiff, the contract provided that the Defendant would employ the Plaintiff as a sales representative for a fixed term of two years at an annual salary of $65,000.00; pay him $10,000.00 annually in expenses; assign him the territory of North Carolina, South Carolina, and Virginia; and pay the cost of his move from Louisiana to Charlotte, North Carolina.

Nineteen weeks after the Plaintiff moved to Charlotte and assumed his position as the Defendant’s sales representative, the Defendant allegedly reduced the Plaintiff’s salary by a substantial amount. After the Plaintiff protested, the Defendant allegedly terminated his employment.

Upon receiving notification of the reduction in his salary, the Plaintiff consulted counsel in Charlotte about the matter. He continued to consult with and to assert his rights through his Charlotte counsel in attempts to resolve the dispute without litigation. After his termination and after it had become evident that his dispute with the Defendant could not be resolved without litigation, the Plaintiff returned to Louisiana.

Since he had already spent considerable time and effort conferring with the North Carolina attorneys he had engaged when the dispute first arose, the Plaintiff decided that this District would be the most convenient forum for his lawsuit. In addition, a number of the witnesses he plans to call live in or near this District, making this forum more convenient for them and enabling the Plaintiff to compel the attendance of some of those who may be unwilling to appear. Those witnesses include customers on whom the Plaintiff called while employed by the Defendant and the sales representative the Plaintiff was hired to replace but who remained in his position when the Defendant unilaterally changed, its plans.

The Defendant disagrees with the Plaintiff’s assessment of the convenience of this forum, and seeks pursuant to 28 U.S.C. § 1404(a) to have the case transferred to a district closer to its principal place of business in New Jersey, i.e., the Southern District of New York. The Defendant contends that it would be no less convenient for the Plaintiff to conduct his litigation in New York since he is no longer a North Carolina resident, and that it would be much more convenient for the Defendant to litigate in New York. The Defendant points out that its cost of litigation would be reduced if the case were transferred to New York, as it would no longer require the services of North Carolina counsel in addition to its regular general New York counsel. The Defendant further states that none of its witnesses reside in North Carolina, but rather within close proximity to the courthouse for the Southern District of New York. It maintains that there would be easier access to documentary evidence if the case were litigated in the Southern District of New York, since the documents relevant to this action are located in the Defendant’s corporate office in Jersey City, New Jersey. Finally, the Defendant claims that a transfer would be appropriate because the Western District of North Carolina has no interest in this lawsuit at this point in time.

A defendant carries a particularly heavy burden when it moves pursuant to § 1404(a) to transfer an action from a district where venue is proper. As this Court has noted previously,

it is “black letter law”, that “ ‘a plaintiff’s choice of a proper forum is a paramount consideration in any determination of a transfer request, and that choice ... should not be lightly disturbed.’ ”

Western Steer — Mom ‘N’ Pops, Inc. v. FMT Investments, Inc., 578 F.Supp. 260, 265 (W.D.N.C.1984) (quoting Scott Paper Co. v. Scott’s Liquid Gold, Inc., 374 F.Supp. 184, 191 (D.Del.1974) (quoting Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir.1970), cert. denied, 401 U.S. 910, 91 S.Ct. 871, 27 L.Ed.2d 808 (1971)). The Defendant must make a clear showing that the balance of factors bearing on the convenience of witnesses, the convenience of parties, and the interests of justice weighs strongly in its favor. Morehead v. Barksdale, 263 F.2d 117 (4th Cir.1959). If a transfer would merely shift the inconvenience from the Defendant to the Plaintiff, or if the equities lean but slightly in favor of the Defendant after all factors are considered, the Court should not disturb the Plaintiff’s choice of forum. See Milliken & Company v. Federal Trade Commission, 565 F.Supp. 511, 517 (D.S.C.1983); Grey v. Continental Marketing Associates, Inc., 315 F.Supp. 826, 831 (N.D.Ga.1970).

The Defendant has failed to show that the balance of convenience for the parties and witnesses or the balance of equities weighs heavily in its favor. In addition, the interests of justice dictate that the case be litigated in this District. While the Southern District of New York would be a proper forum because the Defendant does business there, it has little, if any, interest in this case in that none of the contract negotiations or performance of the contract occurred there. In contrast, the Plaintiff was obligated to perform his job as sales representative from his home base in Charlotte, North Carolina, and the contract was allegedly breached while he was working for the Defendant in this District. Since the cause of action arose here, the Western District of North Carolina has a much more substantial interest in this litigation than does the Southern District of New York. Further, as the Plaintiff noted at the hearing, the case probably would not reach trial for another two years in the Southern District of New York due to the heavy caseload there. The Western District of North Carolina is not currently suffering from as heavy a caseload, and, therefore, this action undoubtedly would be scheduled for trial long before it would be set for trial in the Southern District of New York.

Since the Defendant has not met its burden of establishing that there should be a change of forum, its Motion to transfer pursuant to 28 U.S.C. § 1404(a) should be DENIED.

IT IS SO ORDERED this 4th day of February, 1986.

      . The Defendant's counsel informed the Court at the hearing that the Defendant had decided to abandon its Motion to dismiss for improper venue pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure.

      . 28 U.S.C. § 1404(a) provides:
      For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.

      . The Defendant’s counsel admitted at the hearing, however, that the "relevant documents" consisted of a few letters, which would not be burdensome to transport.


author: MATSCH, District Judge.

text:
    Jerry Wayne WATTS, et al., Petitioners, v. John T. HADDEN, Warden, et al., Respondents.
    Civ. A. No. 78-M-495.
    United States District Court, D. Colorado.
    Feb. 5, 1986.

      Daniel J. Sears, Vicki Mandell-King, Asst. Federal Public Defender, Denver, Colo., for petitioners.
    Douglas Curless, Asst. U.S. Atty., Denver, Colo., Claire Cripe, General Counsel, U.S. Bureau of Prisons, Washington, D.C. Rockne Chickinell, U.S. Parole Com’n, Chevy Chase, Md., John Shaw, Western Regional Counsel, U.S. Bureau of Prisons, Burlingame, Cal., for respondents.
   MEMORANDUM OPINION AND ORDER

MATSCH, District Judge.

This class action on behalf of persons who have been committed for treatment under the Youth Corrections Act (“YCA”), 18 U.S.C. §§ 5005 et seq., is again before this court pursuant to its continuing jurisdiction to implement the mandate issued in Watts v. Hadden, 651 F.2d 1354 (10th Cir.1981). The present dispute concerns the manner in which the Parole Commission determines the conditional release date of a YCA inmate, and the respective roles of the Parole Commission and the Bureau of Prisons. While the YCA was repealed on October 21, 1984 in 98 Stat. 2027, and while this court did, on November 4, 1985, authorize the Bureau of Prisons to implement an amended plan to use FCI, Englewood, a designated YCA facility, to house some non-YCA offenders, the repeal is of no effect on the present issues because persons committed under the Act must be treated according to the requirements of the statute.

The court of appeals made it clear in Watts, supra, that the Parole Commission was failing to follow the requirements of the YCA because the Commission had mistakenly believed that the enactment of the 1976 Parole Commission Act had impliedly repealed certain provisions of the YCA. More particularly, the court concluded that the inmates’ response to treatment must be considered with the criteria contained in 18 U.S.C. § 4206(a).

The respondents received further instructions on the law from the Tenth Circuit Court of Appeals in Benedict v. Rodgers, 748 F.2d 543 (10th Cir.1984), which concerned two habeas corpus petitions out of this court. In that opinion, as modified by an order entered on January 14, 1985, the appellate court affirmed this court’s finding and conclusion that by the use of a presumptive release date, with an alternate date, contingent upon satisfactory program completion, the Parole Commission was failing to give adequate consideration to the individual’s response to treatment. The circuit court used the following language:

We believe that such prospective “consideration” of rehabilitation as a factor in parole determinations does not satisfy the requirements of the YCA as analyzed in Watts. A proposed formulaic reduction of sentence for completion of a program plan does not approximate an evaluation of an individual offender’s response to treatment as mandated by Watts. Nor does it amount to consideration of rehabilitation as a determinative factor in parole decisions as Watts explicitly requires.
We are concerned that without more inherent flexibility, such a rigid, prospectively-applied formula converts an indeterminate sentence into a determinate one, thereby divesting the trial court of its sentencing function, a result expressly proscribed by the Supreme Court in Dorszynski, 418 U.S. [424] at 440, 94 S.Ct. at [3042] 3051 [41 L.Ed.2d 855 (1974)]. See Watts, 651 F.2d at 1376. In addition, the knowledge that the Parole Commission will re-evaluate the extent of rehabilitation and response to treatment following completion of the program plan will provide a much stronger incentive for the offender to do well.

Id. at 546-47.

The habeas corpus petitions considered in Benedict were filed after the Parole Commission had refused to change the alternate release dates in consideration of the Warden’s report of program completion and recommendation for an earlier release date. The evidentiary hearings which have since been held in this class action, and the briefs which have been filed, make it clear that the response to the Benedict decision by the Bureau of Prisons was an abdication of authority and a shifting of full responsibility to the Parole Commission to determine release dates. While the previous practice had been for the Warden (as the Director’s delegate) to certify program completion and recommend a release date, the new approach is simply to certify program completion and make no recommendation. The stated justification for this position is that the Bureau of Prisons is not in the rehabilitation business, and has no “expertise” to make any such determinations. That is a facile evasion of a difficult decision. The question is not “expertise” but responsibility.

The purposes and structure of the YCA have been examined and articulated repeatedly by the courts. In Dorszynski v. United States, 418 U.S. 424, 94 S.Ct. 3042, 41 L.Ed.2d 855 (1974), the Supreme Court considered the overall plan for the YCA in great detail, and emphasized that:

An important element of the program was that once a person was committed for treatment under the Act, the execution of sentence was to fit the person, not the crime for which he was convicted.

Id. at 434, 94 S.Ct. at 3048.

There is a joint responsibility for both the Bureau of Prisons and the Parole Commission to act together to determine the appropriate treatment required for an individual inmate, and to determine the time when he has responded to that treatment sufficiently to warrant release after consideration of the other two criteria in section 4206(a). Under section 5014, the Bureau of Prisons must make an initial classification study within thirty days of commitment, and report the findings from that study with recommendations for treatment to the Parole Commission. A parole interview must be conducted as soon as practicable after commitment. It seems apparent that the Act contemplates participation by the Parole Commission in the treatment program design for each inmate. There would be no other purpose for the statutory requirements that it receive the classification report with recommendations and that it conduct an early parole interview.

Under section 5016, the Director must cause periodic examinations and re-examinations to be made on all YCA inmates with reports to the Parole Commission as to each offender. Under section 5017(a), the Parole Commission may make the conditional release decision at any time; but, that subsection also contains the following language:

When, in the judgment of the Director, a committed youth offender should be released conditionally under supervision he shall so report and recommend to the Commission.

Since the Benedict decision, the Bureau of Prisons has read that language to mean that it need report only on matters “within its knowledge and expertise: the offenders completion of the individualized treatment plan at the institution, along with any comments on particularly good or poor adjustment on his part.” Bureau of Prisons’ Response at page 2. That view contradicts the explicit language of the statute which requires the Director to report when a “committed youth offender should be released conditionally under supervision." The Director does not have the option of refusing to make a judgment as to when an offender should be released conditionally because the Bureau of Prisons has a philosophical disagreement with a policy of rehabilitative treatment, or because it is difficult to predict human behavior, or because the staff does not include persons with adequate knowledge or training. The plain language of the statute compels the Bureau of Prisons to make a recommendation for a release date. While the Director may choose the particular means and manner for making the judgment, he cannot avoid the responsibility for recommending a release date to the Parole Commission.

For its part, the Parole Commission continues to contend that regardless of program participation, the offense severity is a primary factor, and that emphasis on offense severity is necessary to reduce disparity which erodes confidence in the criminal justice system. The YCA expressly contemplates disparity in the length of confinement of inmates convicted of the same or similar offenses. That is precisely why the Act was adopted as an alternative to the sentence which would otherwise be required by law. Again, it is necessary to emphasize that which the Supreme Court said thirteen years ago in Dorszynski. The execution of the sentence must fit the person, not the crime for which he was convicted. What has been shown here, yet again, is the same resistance to recognize and respond to the requirements of the law that these respondents have demonstrated throughout the years in which this litigation has been in this court. It seems incredible that the respondents still sing the refrain that they cannot determine when “rehabilitation” has been achievéd. In this regard, it should again be noted that nowhere in the YCA is the word “rehabilitation” used. The statute speaks to “treatment” which is defined in section 5006(f) as:

(f) “treatment” means corrective and preventive guidance and training designed to protect the public by correcting the anti-social tendencies of youth offenders.

The Congress recognized that no one can foretell future conduct of any individual when it required that the initial release must be a “conditional release,” subject to close supervision. Obviously, the best measure of the ability of a person to function in free society is to put him back there under close supervision and adequate control.

While this court has consistently sought to avoid intrusion into the discretionary authority of the respondents in performing their respective duties under the Act and has, accordingly, directed the submission of plans for compliance with the Act as it has been interpreted in this circuit, it now becomes clear that more specific direction is required to avoid prolonging this litigation beyond the time when the last YCA inmate will be in the system. Moreover, the giving of some specific direction seems necessary to avoid the continuing proliferation of habeas corpus petitions by inmates in this district. Those who are serving the YCA commitments should be given more adequate guidance with respect to the goals and objectives of their individual institutionalization and the requirements which they must meet to obtain conditional release. Toward that end, the Bureau of Prisons and Parole Commission should agree upon the treatment program plan for each inmate. Since most of the inmates now in this class are well beyond the initial classification stage, some mechanism should be developed for the Parole Commission to review their program plans and indicate approval or disapproval at the earliest possible time.

A second requirement is that the Director through his delegate, the Warden, or some other staff position, shall develop a system for periodic reporting on the inmate’s progress in treatment, with written reports and interim evaluations to go to the Parole Commission no less frequently than at six-month intervals. Additionally, the Director shall, through the Warden or other delegate, cause a section 5017(a) recommendation for conditional release to be made to the Parole Commission, with a report of findings and a sufficient statement of reasons to give the Parole Commission an understanding of the individual inmate’s status and the basis for the Director’s judgment.

To make these periodic reports and release recommendations meaningful, the Parole Commission will be required to conduct conditional release interviews with each inmate within ninety days of the receipt of the interim reports and within sixty days of receipt of the release recommendation. Those interviews must be attended by the inmate’s unit leader, or some other person from the institution having direct knowledge of the inmate’s participation in programs and conduct within the institution, who can respond to questions from the hearing examiners and the inmate.

It should be made clear to all inmates that they may not rely on any previous presumptive release date determinations or alternative release date determinations. Counsel for the plaintiff class has asserted that all of the class members should be given new opportunities for hearings without the threat of losing the existing alternate release dates. That would be inconsistent with and violate the provisions of section 5018, giving the Parole Commission the express authority to revoke or modify any of its orders respecting a committed youth offender, excepting an order of unconditional discharge. It also would be inconsistent with this court’s criticism of the previous conduct of the Parole Commission in using guidelines to transform indeterminate sentencing to determinate sentences.

While the Parole Commission may continue to use the guidelines for purposes of evaluating the section 4206(a) criteria, it must not continue the policy of refusing to release any inmate earlier than would be dictated by the “very good” category plus the maximum reduction for superior program achievement provided at 28 C.F.R. § 2.60. There can be no strict requirement for any minimum time to be served under a YCA sentence.

These are the directions to be followed. The details for implementing them are matters which must be determined by the respondents. In directing further action, this court is, of course, aware that the YCA inmate population is declining. In that regard, there is the flexibility provided in section 5015(b) giving the Director the authority to transfer committed youth offenders from one agency or institution to another agency or institution, and the additional authority granted in section 5013 to contract with any appropriate public or private agency for the training of committed youth offenders. It may well be that with the declining population the use of contract facilities will become more appropriate for the particular treatment needs of individuals under the YCA, and that for appropriate and articulated reasons, an inmate may be placed with a contract agency even though there would then be no segregation from adults. These are matters which are not now before this court in this case. They are mentioned only to remind the respondents that there are alternatives which can be considered in performing the difficult task of treating YCA inmates under the changed circumstances resulting from repeal of the Act.

Upon the foregoing, it is

ORDERED that on or before March 31, 1986, the respondents Bureau of Prisons and Parole Commission shall file a joint plan for the implementation of the directions given herein.


author: GENE CARTER, District Judge.

text:
    UNITED FISH CO., Plaintiff, v. Donald E. BARNES, et al., Defendants.
    Civ. No. 85-0248 P.
    United States District Court, D. Maine.
    Feb. 5, 1986.
    Patrick J. Scully, John M.R. Paterson, Bernstein, Shur, Sawyer & Nelson, Portland, Me., for plaintiff.
    Richard E. Poulos, Law Offices of Richard E. Poulos, Portland, Me., for defendants.
   MEMORANDUM OF DECISION AND ORDER ON MOTION FOR DISMISSAL

GENE CARTER, District Judge.

This case comes before this Court on the amended motion of Defendants Donald E. Barnes, Bernard J. O’Neill, and North Star Corporation for dismissal. Defendants contend that the Plaintiff, United Fish Co., has failed to state a claim in the federal law count (Count IV) of the Amended Complaint, and that if Count IV consequently is dismissed, the remaining state law claims in Counts I, II and III should be dismissed for lack of subject matter jurisdiction.

Plaintiff alleges in Count I that Defendants Barnes, O’Neill and North Star wrongfully converted funds of the Plaintiff for the use of the Defendants. Count II sets forth a claim against Barnes for breach of fiduciary obligations of care, honesty and loyalty. Count III sets forth a claim against Barnes for diversion of corporate opportunities. In Count IV, Plaintiff alleges that Barnes, O’Neill and North Star violated the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, et seq. It is Count IV of the Complaint, the RICO claim, that Defendants claim is deficient and contend should be dismissed.

In sum, Plaintiff alleges that O’Neill and Barnes undertook to conduct fraudulent transactions on behalf of United Fish with various customers on the eastern seaboard. Specifically, Plaintiff alleges that Barnes and O’Neill entered into agreements to sell fish to various purchasers, that the purchase money for the fish was paid into bank accounts in Philadelphia created by O’Neill and Barnes in námes such as United Fish of Philadelphia, Inc. and North Star Corporation, and that Defendants then informed Plaintiff that such purchase money had not actually been paid by the customer and that the accounts should be written off as bad debt losses. In addition, Plaintiff alleges that Barnes wrote checks on United Fish bank accounts to himself which were not for services rendered, and that these checks were wrongfully converted to the use of all Defendants. Plaintiff also alleges that such transactions were conducted utilizing the telephone and the mail, and that such actions constituted a “pattern of racketeering activities” within the meaning of 18 U.S.C. § 1961(5), and in violation of 18 U.S.C. § 1962(c) and (d).

Defendants raise two basic arguments in support of their contention that the RICO claims of Plaintiff should be dismissed. First, Defendants maintain that Plaintiff has failed to allege a RICO violation with sufficient particularity, as required by Fed. R.Civ.P. 9(b). Second, Defendants argue that the Amended Complaint fails to allege a “pattern of racketeering activities” as required by the RICO statute, 18 U.S.C. §§ 1961(5) and 1962.

Turning to Defendants’ first contention, the requirements of Rule 9(b) apply to allegations of fraud such as set forth in Count IV of the Plaintiff’s Amended Complaint. Rule 9(b) states:

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

Defendants contend that Plaintiff’s Amended Complaint failed to apprise Defendants of the basis of the claim, and that it did not specify properly the time, place and content of allegedly fraudulent actions.

The First Circuit has enunciated an approach to the particularity requirement of Rule 9(b) that appears to require a more detailed allegation of fraud in the complaint than would be required by some other courts. See, e.g., Seville Industrial Machinery Corp. v. Southmost Machinery Corp., 742 F.2d 786 (3d Cir.1984). Thus, in McGinty v. Beranger Volkswagen, Inc., 633 F.2d 226, 228 (1st Cir.1980), in which a plaintiff sued several sellers and distributors of a car for a fraudulently adjusted odometer, the Court stated:

The clear weight of authority is that Rule 9 requires specification of the time, place and content of an alleged false representation, but not the circumstances or evidence from which fraudulent intent could be inferred. (Citations omitted.) This interpretation of Rule 9 comports with its language, harmonizes the rule with Rule 8, which requires that documents in pleadings be concise and direct, and at the same time fulfills a major purpose of Rule 9: to give adequate notice of the plaintiff’s claim of fraud or mistake. (Citations omitted.)

See also Hayduk v. Lanna, 775 F.2d 441, 444 (1st Cir.1985).

While the First Circuit emphasizes the need for specificity in averments of fraud, Plaintiff’s Amended Complaint satisfies such requirements. Plaintiff alleges the approximate time at which Barnes and O’Neill each began dealing with customers on behalf of United Fish Co., and the time during which the allegedly fraudulent transactions took place. Amended Complaint, If 23(c) and (d). Plaintiff sets forth the names of eight customers with whom Barnes and O’Neill allegedly engaged in fraudulent transactions. Amended Complaint, 1123(d). Plaintiff also describes the manner of carrying out such allegedly fraudulent activities, such as the use of false invoices or bills, the failure to forward customer payments to United Fish Co., the urging that United Fish Co. write off such transactions as uncollectible bad debts, and the creation of bank accounts in Philadelphia by the Defendants for the depositing of fraudulently-induced payments from customers. Amended Complaint, II 23(d), (e) and (f). Plaintiff also alleges a time period during which Barnes improperly wrote checks on United Fish Co. accounts to himself and to accounts controlled by himself and the other Defendants. Amended Complaint, ¶ 23(g). Additionally, Plaintiff specifically names Kenneth Peterson as a customer who was instructed by Barnes to make payment directly to him for a transaction with United Fish Co. and not to disclose such payment to Plaintiff. Amended Complaint, 1123(h).

While Defendants contend that the Plaintiff’s Amended Complaint does not comply with the requirements of Rule 9(b), a plaintiff is not required to allege “evidentiary details” in his fraud claim. Caliber Partners, Ltd. v. Affeld, 583 F.Supp. 1308, 1311 (N.D.Ill.1984). Moreover, Rule 9(b) should be read in light of the requirements of other rules such as Rule 8. As C. Wright and A. Miller state:

[I]t is inappropriate to focus exclusively on the fact that Rule 9(b) requires particularity in pleading fraud. This is too narrow an approach and fails to take account of the general simplicity and flexibility contemplated by the rules.

C. Wright and A. Miller, Federal Practice and Procedure: Civil § 1298.

The Amended Complaint alleges the role of the Defendants, the method of the scheme, and the time frame of the process with particularity sufficient to comply with the requirements of Rule 9(b).

Defendants next contend that the Amended Complaint fails to allege a sufficient “pattern” of racketeering activity as required by the RICO statute.

The relevant statutory definition reads:
“pattern of racketeering activity” requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity.

18 U.S.C. § 1961(5).

Defendants maintain that merely alleging two acts of racketeering activity does not necessarily show the requisite pattern of activity, and that Plaintiff should be required to show that separate criminal episodes took place rather than multiple acts in furtherance of a single criminal scheme. Defendants rely on the remarks of Justice White in a footnote to his opinion in Sedima, S.P.R.L. v. Imrex Co., Inc., — U.S.-,-, n. 14, 105 S.Ct. 3275, 3285, n. 14, 87 L.Ed.2d 346, 358, n. 14 (1985).

The Sedima holding did not address the question whether a pattern of racketeering activity had been established, and so Justice White’s remarks on the issue constituted dicta. However, Justice White’s interpretation of this provision should not be lightly dismissed, particularly given the legislative history supporting his view. Footnote 14 of Sedima reads, in part:

As many commentators have pointed out, the definition of a “pattern of racketeering activity” differs from the other provisions in § 1961 in that it states that a pattern “requires at least two acts of racketeering activity,” § 1961(5) (emphasis added), not that it “means” two such acts. The implication is that while two acts are necessary, they may not be sufficient. Indeed, in common parlance two of anything do not generally form a “pattern.” The legislative history supports the view that two isolated acts of racketeering activity do not constitute a pattern. As the Senate Report explained: “The target of [RICO] is thus not sporadic activity. The infiltration of legitimate business normally requires more than one ‘racketeering activity’ and the threat of continuing activity to be effective. It is this factor of continuity plus relationship which combines to produce a pattern.” S.Rep. No. 91-617, p. 158 (1969) (emphasis added).

Nevertheless, the Defendants’ reliance on this language, for the proposition that multiple criminal schemes always must be alleged, is misplaced. Justice White, and the legislative history, assert that multiple criminal acts must be related and not “sporadic” in order to constitute a pattern under the statute; they do not contend that one comprehensive criminal scheme, involving several related unlawful actions, would be insufficient.

While courts have differed on the requirements for establishing a pattern of racketeering activity, interpretations subsequent to Sedima are instructive. In R.A.G.S. Couture, Inc. v. Hyatt, 774 F.2d 1350 (5th Cir.1985), a company sued two individuals under RICO for defrauding it through the use of false invoices. The Court found the complaint, which alleged two acts of mail fraud, sufficient to form a pattern of racketeering activity. “The Supreme Court in Sedima implied that two ‘isolated’ acts would not constitute a pattern. (Citations omitted.) In this case, however, the alleged acts of mail fraud are related.” Id. at 1355; see also Systems Research, Inc. v. Random, Inc., 614 F.Supp. 494 (N.D.Ill.1985).

Similarly, the acts alleged by United Fish Co. are not isolated instances of misconduct. The alleged use on several occasions of false invoices involving the named customers, the alleged direction that the debts be written off the Plaintiff’s books as bad debt losses, and the alleged creation of bank accounts by the Defendants for the purposes of receiving fraudulent payments for customers, all involving mail and telephone transactions, demonstrate continuity and relationship sufficient to allege a pattern of racketeering activity.

For the foregoing reasons, the motion of Defendants for dismissal due to the absence of subject matter jurisdiction is hereby DENIED.

So ORDERED.


author: CLARKSON S. FISHER, Chief Judge.

text:
    James COLEMAN, Petitioner, v. John J. RAFFERTY, etc., et al., Respondents.
    Civ. A. No. 85-4339.
    United States District Court, D. New Jersey.
    Feb. 5, 1986.
   CLARKSON S. FISHER, Chief Judge.

This is a motion to amend respondents’ answer to a petition for a writ of habeas corpus. The court has considered the matter on the papers submitted by the parties pursuant to Fed.R.Civ.P. 78.

Petitioner, James Coleman, incarcerated at Rahway State Prison, seeks a writ of habeas corpus pursuant to 28 U.S.C. § 2254. On February 2, 1985, the Superior Court of New Jersey, Law Division, Passaic County, entered a judgment of conviction against petitioner on six counts of armed robbery, as defined by N.J.S.A. 2C:12-1(b)(2). Coleman appealed his conviction to the appellate division which affirmed his conviction. On January 23, 1984, the New Jersey Supreme Court denied his petition for certification and dismissed his appeal pursuant to N.J.Ct.R. 2:12-9.

Coleman filed a petition for habeas corpus relief on November 5, 1984, alleging six violations of his due-process and equal-protection rights secured by the United States Constitution. An opinion was handed down on April 22, 1985, denying Coleman’s petition for a writ of habeas corpus. On July 2,1985, the court issued an amended opinion in this matter superceding in its entirety the original April 22 opinion.

Coleman filed another petition for a writ of habeas corpus on September 11,1985, to which respondents filed an answer based upon the April 22 opinion. Respondents’ attorney was new to the case and not aware of the superceding amended opinion until he received a copy of a letter from petitioner to the court stating that respondents had erroneously relied on the April 22 opinion. Respondents filed this motion for leave to amend the answer basing it upon the July 2 opinion and also adding a third affirmative defense.

Rule 11 promulgated under 28 U.S.C. § 2254 states that “[t]he Federal Rules of Civil Procedure, to the extent that they are not inconsistent with these rules, may be applied, when appropriate, to petitions filed under these rules.” It has been held that federal habeas corpus proceedings are civil and not criminal in nature. They are governed by the Federal Rules of Civil Procedure. Further, the writ of habeas corpus is not a proceeding in the original criminal prosecution, but an independent civil suit. United States ex rel. Gaugler v. Brierley, 477 F.2d 516, 523 (3d Cir.1973).

Rule 15(a) of the Federal Rules of Civil Procedure states that

[a] party may amend his pleading once as a matter of course at any time before a responsive pleading is served_ Otherwise a party may amend his pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.

It is entirely contrary to the spirit of the Federal Rules of Civil Procedure for decisions on the merits to be avoided on the basis of a mere technicality. The federal rules reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits. Foman v. Davis, 371 U.S. 178, 181-82, 83 S.Ct. 227, 229-30, 9 L.Ed.2d 222 (1962).

In the absence of any apparent or declared reason — such as undue delay, bad faith, or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, or futility of amendment — the leave sought, as the rules require, should be freely granted. . Foman v. Davis, 371 U.S. at 182, 83 S.Ct. at 230.

Leave to amend pleadings under rule 15(a) is within the discretion of the trial court, and courts have shown a strong liberality in allowing amendments. Boileau v. Bethlehem Steel Corp., 730 F.2d 929, 938 (3d Cir.1984). The liberal rules of amendment of complaints are premised on the express concern for the “just, speedy, and inexpensive determination of every action.” Fed.R.Civ.P. 1. While it is within the discretion of a trial judge to prevent the abusive use of amendment to delay or prolong litigation, it is quite a different matter for the discretionary denial of amendment to be used to preclude a plaintiff from the federal forum altogether. Particularly where the underlying claim involves the deprivation of fundamental constitutional rights, discretionary procedural measures should be cautiously employed when denying a litigant his day in court. Boileau v. Bethlehem Steel Corp., 730 F.2d at 939.

In this case, respondents’ attorney states that he inadvertently overlooked the July 2 opinion. When it was brought to his attention by petitioner’s letter of October 30, 1985, however, he filed a motion for leave to amend the answer to correct the mistake. It appears that to amend the answer would not cause any of the mischief mentioned above in Foman and, thus, there would be no miscarriage of justice.

For the foregoing reasons, respondents’ motion for leave to amend the answer is granted. No costs.


author: EDWARD WEINFELD, District Judge.

text:
    Steven SINGER and Dulce Reyes Singer, Plaintiffs, v. Emily Singer BELL and Michael Bell, Defendants.
    No. 83 Civ. 5765 (EW).
    United States District Court, S.D. New York.
    Feb. 6, 1986.

      Eagle & Fein, P.C., New York City (Patrick J. Carr, of counsel), for plaintiffs.
    Weil, Gotshal & Manges, New York City (R. Peyton Gibson and Robbie E.B. Nar-cisse, of counsel), for defendants.
   OPINION

EDWARD WEINFELD, District Judge.

Plaintiff originally brought an action under 42 U.S.C. §§ 1983, 1985, alleging violations of his civil rights arising from what he claimed was a conspiracy to trick him into New Jersey, where an arrest warrant had issued against him for failure to comply with child-support orders of the New Jersey state courts. The Court dismissed plaintiffs various claims. Defendant Emily Bell counterclaimed for enforcement in this Court of orders of the New Jersey courts determining arrearages in child-support payments, and for enforcement of her separation agreement with respect to tax deficiencies assessed against the couple on income tax returns filed jointly by them during the period of their marriage. Defendant Emily Bell now seeks summary judgment on her counterclaims, and also seeks costs and fees under Fed.R.Civ.P. 11 for the allegedly frivolous litigation which Singer instituted in this Court.

With respect to the counterclaim for unpaid child support, defendant Emily Bell has secured two judgments from Superior Court in the State of New Jersey, dated November 3, 1980, and June 25, 1981, determining arrearages in child support of $48,031 and $3,690, respectively. Plaintiff Steven Singer has willfully evaded the jurisdiction of the New Jersey courts, but there is no dispute that these orders were entered to enforce Singer’s child support obligations arising from a final judgment of divorce entered in the New Jersey Superior Court January 25, 1974, and whose jurisdiction over the parties is also not open to dispute. These orders are entitled to full faith and credit in New York, and judgment may be entered thereon in this Court.

In addition to these previously determined arrearages, defendant seeks judgment for other unpaid child support pursuant to the terms of the New Jersey Superi- or Court’s order of November 3, 1980, which required plaintiff Steven Singer to make monthly child support payments of $280 for each of his two minor children. It has long been a settled principle that an order determining future payments of alimony or child support is entitled to full faith and credit; past due payments under that order are “a debt of record.” Where the jurisdiction issuing the order retains the power to modify the judgment, enforcement of the judgment as to yet undetermined amounts is not compelled by the Full Faith and Credit Clause; the New York courts will, however, give effect to such judgments as a matter of comity. Defendant Emily Bell is entitled to entry of judgment for past due child support payments as determined by the November 3, 1980 order.

Under the terms of the separation agreement between the parties, dated October 23, 1973, and fully incorporated in the final judgment of divorce, plaintiff Steven Singer obligated himself to pay the full amount of any deficiencies assessed against the joint federal income tax returns filed by the parties during the period of their marriage, “as well as all accounting and legal expenses that may be incurred in the event of any contest.” It is not disputed that a deficiency proceeding is currently pending, and Singer does not dispute • that he has failed to pay the legal expenses associated with Emily Bell’s defense in that proceeding. Defendant is entitled to specific performance of the obligations contained in the separation agreement with respect to the income tax deficiency proceedings.

Accordingly, defendant Emily Bell is entitled to judgment on her counterclaim as follows: $48,031.00 in arrearage determined by the New Jersey court in its order of November 3, 1980; plus $15,960.00 representing 57 months of payments of $280.00 per month for the support of Cherie Singer from July 1980 to April 1985; plus $18,760.00 representing 67 months of payments of $280.00 per month for the support of Gregg Singer from July 1980 to the date of this order. Plaintiff Steven Singer is entitled to set off against these amounts payments of $4,950.00 made between July of 1980 and November of 1981. Judgment may be entered for the sum of $77,801.00, and specific performance of the separation agreement as it applies to federal income tax deficiency proceedings.

Defendant Emily Bell also seeks an award of counsel fees as sanctions pursuant to Fed.R.Civ.P. 11. She contends that the original action brought by Steven Singer under 42 U.S.C. § 1983 was meritless, and that plaintiff and his counsel had no reasonable basis for the commencement of the litigation. Singer’s arrest pursuant to a properly issued arrest warrant was held to be unlawful by the New Jersey Superior Court judge who had issued the warrant, on the ground that the arrest had been effected by “dirty tricks.” This finding requires rejection of the claim that the instant action was frivolous or without merit. Whatever one may think of the plaintiff’s conduct, and whether or not one disagrees with the decision of the New Jersey Superior Court holding Singer’s arrest unlawful, that decision gave reasonable grounds for the commencement of plaintiff’s § 1983 action. The Court finds that a “reasonable attorney could have concluded that allegations supporting the claims might be established”; under these circumstances, the award of Rule 11 sanctions is not appropriate. Accordingly, defendant’s motion for attorney’s fees is denied.

So ordered.

      . See Singer v. Bell, 585 F.Supp. 300 (S.D.N.Y.1984); Singer v. Bell, 599 F.Supp. 350 (S.D.N.Y.1984); Singer v. Bell, 613 F.Supp. 198 (S.D.N.Y.1985).

      . Pearson v. Pearson, 108 A.D.2d 402, 489 N.Y.S.2d 332 (2d Dept.1985); Carbone v. Alverio, 89 A.D.2d 553, 452 N.Y.S.2d 121 (2d Dept.1982); Blackburn v. Blackburn, 113 Misc.2d 619, 449 N.Y.S.2d 827 (Sup.Ct.1982).

      . Barber v. Barber, 21 How. 582, 595, 62 U.S. 582, 595, 16 L.Ed 226 (1858).

      . See Sistare v. Sistare, 218 U.S. 1, 30 S.Ct. 682, 54 L.Ed. 905 (1910); Lynde v. Lynde, 181 U.S. 183, 187, 21 S.Ct. 555, 556, 45 L.Ed. 810 (1901); Nichols v. Nichols, 306 N.Y. 490, 498, 119 N.E.2d 351 (1954).

      . See Mittenthal v. Mittenthal, 99 Misc.2d 778, 417 N.Y.S.2d 175, 177 (Sup.Ct.1979) (entering judgments for past due child support under order of New Jersey court).

      . See Singer v. Singer, No. M-10581-72, slip op. at 3 (N.J.Super.Ct.Ch.Div. August 11, 1982).

        .Tedeschi v. Smith Barney, Harris Upham & Co., 579 F.Supp. 657, 661 (S.D.N.Y.1984), aff’d, 757 F.2d 465 (2d Cir.), cert. denied, — U.S. -, 106 S.Ct. 147, 88 L.Ed.2d 122 (1985); see Eastway Construction Corp. v. City of New York, 762 F.2d 243, 254 (2d Cir.1985).


author: NICKERSON, District Judge.

text:
    UNITED STATES of America, v. Craig Arthur LEITNER, Defendant.
    No. 85 Misc. 0486/86 CV 387.
    United States District Court, E.D. New York.
    Feb. 6, 1986.

      Raymond J. Dearie, U.S. Atty., Brooklyn, N.Y. (Reena Raggi, Asst. U.S. Atty., of counsel), for plaintiff.
    Litman, Kaufman, Asche & Lupkin, New York City (Jack Litman, of counsel), for defendant.
   MEMORANDUM

NICKERSON, District Judge.

The matter is here on the government’s appeal from the order of the Magistrate admitting defendant to bail on conditions.

The complaint sought a warrant for the provisional arrest of defendant pursuant to the Treaty of Extradition between the United States and Israel, and alleges, in substance, the following. Israel has charged defendant with attempted murder, arson, attempted arson and conspiracy to commit a felony, all extraditable offenses under the Treaty. On September 24, 1984, the Magistrate’s Court in Jerusalem issued a warrant for the arrest of defendant based on the following six acts of terrorism committed by him.

(1) On March 4, 1984, he and others planned and near the city of Ramallah carried out an armed attack on a bus carrying Arab workers from their village to their jobs. Defendant was active in planning the attack. He drove the participants to the site of the attack, and while an accomplice fired an M-16 rifle at the bus, wounding six Arab civilians, defendant waited to drive them away.

(2) Defendant and others planned and on the night of July 21-22,1983 carried out an attack on Arab vehicles in Hebron. They planned the attack in Jerusalem, where they bought kerosene. They then drove to Hebron, chose three parked vehicles belonging to an Arab resident, threw kerosene on them, and ignited them.

(3) Defendant and others planned and carried out another such attack on the night of July 31-August 1, 1983. They again drove to Hebron, where defendant and another threw kerosene on and set fire to a parked Arab bus.

(4) On the same night defendant and others planned and carried out an attack on the editorial offices of the Arabic language newspaper, “Al Fajr”, in Jerusalem. On their return to Jerusalem from Hebron, defendant and the others went to the newspaper’s offices, where defendant threw a “Molotov cocktail” through a window, setting the offices on fire.

(5) On the night of December 20-21, 1983, defendant and others chose three parked cars of Arabs in the Wadi Joz district of Jerusalem. Defendant threw kerosene on them, and another of the conspirators set them on fire.

(6) Defendant and others planned and carried out an arson attempt against an Arab house in the Shuafat area of Jerusalem on the night of December 22, 1983. They prepared two “Molotov cocktails” and, while the family in the house was asleep, defendant threw them toward a window. They missed the window and hit a wall of the adjacent house.

Israeli police arrested defendant and the others suspected of having committed these acts. Initially defendant cooperated with the police, gave statements, and agreed to testify for the prosecution at the trials of the others. He was then released on bail. The other four suspects were indicted. Three admitted their participation and were convicted and sentenced by the Jerusalem District Court. The fourth denied the charges. When the time came for defendant to testify he had fled to the United States. The District Court acquitted the fourth accused partly because defendant had failed to testify.

Defendant says he had received serious threats that if he testified against the remaining accused he would be killed, as would members of his immediate family. He apparently made no effort to seek the protection of the Israeli government. Nor did he repudiate his agreement with the Israeli prosecutors and go to trial in his own case. Instead he chose to flee.

He claims he is the respected and responsible son of parents who have lived for more than thirty years in Queens. He submits letters from the family rabbi, one of his professors at Pace Law School, and his law school roommate, all attesting to defendant’s sense of responsibility and their belief that he would not flee. His papers detail the various threats on his life.

The government has informed the court that the maximum sentences that an Israeli court could impose on defendant are twenty years for attempted murder, fifteen years for arson, ten years for attempted arson, and seven years for conspiracy to commit a felony, or a total of fifty two years. Defendant says that the court is highly unlikely to impose a sentence approaching the maximum since the three others who were convicted received sentences ranging from a year and a half to five years.

In extradition proceedings the presumption is against bail. Wright v. Henkel, 190 U.S. 40, 23 S.Ct. 781, 47 L.Ed. 948 (1903). Only if the court finds “special circumstances” will it grant bail. Id.; United States v. Messina, 566 F.Supp. 740, 742 (E.D.N.Y.1983), and cases cited. Defendant asserts that he has shown he is not a bail risk because of his otherwise “unblemished” background, his family, and his current legal education.

Learned Hand in In re Mitchell, 171 F. 289, 289 (S.D.N.Y.1909), interpreted the decision in Wright v. Henkel, supra, to mean that a district court could exercise its power to grant bail “only in the most pressing circumstances, and when the requirements of justice are absolutely peremptory.” Whether this remains the test is in dispute. See United States v. Messina, supra.

But in any event because of the nation’s concern for its relationship with other countries, the court must apply standards in an extradition case far more strict than those applied in a domestic criminal case. This country has an obvious stake in its ability to produce extradited persons. That interest is magnified where a defendant is charged with acts of terrorism, a matter of increasingly grave concern to this and every other civilized country. Therefore only circumstances special to the defendant will justify any risk of flight in this case.

Learned Hand found special circumstances where a defendant was accused in Canada of larceny and needed to be free to consult with counsel about a civil case then on trial on which “his whole fortune depends.” In re Mitchell, supra, 171 F. at 290. Similarly the Court of Appeals for this circuit approved the District Court’s grant of bail in a case where there was no suitable facility to hold the defendant, who was only sixteen when he allegedly committed armed robbery in Hong Kong. Hu Yau-Leung v. Soscia, 649 F.2d 914, 920 (2d Cir.), cert. denied, 454 U.S. 971, 102 S.Ct. 519, 70 L.Ed.2d 389 (1981).

Defendant has shown no such special personal hardship. He chose flight when other alternatives were apparently open to him. He faces the possibility of a very heavy sentence. This court does not speculate as to what an Israeli court will do, what persuaded the Israeli court to impose on the other co-conspirators sentences of only up to five years, or what effect the very fact of defendant’s flight will have on his sentence if he is convicted.

Defendant does not contend in this court that there is no probable cause to believe he committed the terrorist acts. He has not challenged the government’s assertion that the offenses charged in Israel are extraditable.

In the light of the seriousness of the charges, defendant’s prior flight, the lack of a showing of special hardship to defendant, and the importance of maintaining the United States relations with Israel, particularly in a case that involves terrorism, this court reverses the Magistrate and directs that the defendant be held. So ordered.


author: GARRITY, District Judge.

text:
    TOWN OF NORWOOD, Board of Selectmen of the Town of Norwood, Plaintiffs, v. ADAMS-RUSSELL CO., INC., Defendant.
    Civ. A. No. 85-3632-G.
    United States District Court, D. Massachusetts.
    Feb. 6, 1986.
    Bruce A. Singal, Ferriter & Barna, Boston, Mass., for plaintiffs.
    James C. Heigham, Choate, Hall & Stewart, Boston, Mass., for defendant.
   MEMORANDUM AND ORDER ON PLAINTIFFS’ MOTION TO REMAND

GARRITY, District Judge.

This action was commenced in Superior Court for Norfolk County, Massachusetts, by plaintiffs, the Town of Norwood (“Nor-wood”) and the Board of Selectmen of the Town of Norwood (the “Board”). Plaintiffs sought preliminary injunctive and other relief from a cable television rate increase scheduled to take effect on September 1, 1985 by defendant Adams-Russell Co., Inc. (“Adams-Russell”), the cable television licensee in Norwood. Plaintiffs’ complaint stated claims for breach of the license agreement between the town and defendant and for violation of M.G.L. c. 93A, § 2. On August 30,1985, the Norfolk Superior Court denied plaintiffs’ request for a preliminary injunction and on September 1, 1985, the defendant’s rate increase became effective. On September 16, 1985, defendant filed its answer asserting federal preemption as a defense. Defendant filed a petition to remove the action to federal district court on the ground that plaintiffs’ action is subject to the original jurisdiction of the federal court pursuant to 28 U.S.C. § 1331. 28 U.S.C. § 1441(b). The petition was granted and the case now comes before the court on plaintiffs’ motion to remand the case to Superior Court for Norfolk County on the ground that the action was removed “improvidently and without jurisdiction.” 28 U.S.C. § 1447(c). A hearing was held on January 23, 1986. After reviewing the briefs and exhibits submitted by the parties, and considering the arguments made at the hearing, the court grants plaintiffs’ motion to remand the case to the Superior Court for Norfolk County.

28 U.S.C. § 1441(b) provides that “[a]ny civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties.” Defendant contends that this action falls within the original jurisdiction of the federal court because the “Expanded Cable Service” for which rates were increased is not “basic ‘must-carry’ service” and is thus subject to exclusive federal regulation under the Communications Act of 1934 as amended by the Cable Communications Policy Act of 1984 (47 U.S.C. 521 et seq.). 47 U.S.C. § 543(c) provides that for cable systems for which a franchise has been granted on or before December 29, 1984, the franchising authority may, for a two-year period ending on December 29, 1986, regulate the rates for basic cable service, including multiple tiers of basic service. Norwood maintains that the service at issue here is part of basic cable service and can be regulated locally until December 29, 1986. However, the court need not reach the question of whether defendant’s “Expanded Cable Service” is basic or non-basic service because, even assuming the applicability of federal preemption, the case is not founded on any claim or right arising under the Constitution, treaties or laws of the United States.

The emergence of the “well pleaded complaint” rule has limited significantly the number of cases that can be initiated in or removed to federal district court. That rule provides that the court’s original jurisdiction over a case “must be determined from what necessarily appears in the plaintiff’s statement of his own claim in the bill or declaration, unaided by anything alleged in anticipation of avoidance of defenses which it is thought the defendant may interpose.” Taylor v. Anderson, 234 U.S. 74, 75-76, 34 S.Ct. 724, 58 L.Ed. 1218 (1914). Thus, in deciding for removal purposes, whether a case presents a federal claim or right, “a court is to ask whether a plaintiff’s claim to relief rests upon a federal right, and the court is to look only to the plaintiff’s complaint to find the answer.” Hernandez-Agosto v. Romero-Barcelo, 1 Cir.1984, 748 F.2d 1, 2. Furthermore, even in cases in which neither the obligation created by state law nor the defendant’s factual failure to comply are in dispute, and both parties admit that the only question for decision is raised by a federal preemption defense, the well-pleaded complaint rule serves to defeat removal. Franchise Tax Board v. Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983).

Application of these principles to the instant action compels the conclusion that the case was removed improvidently and without jurisdiction and therefore must be remanded to Norfolk Superior Court. 28 U.S.C. § 1447(c). Plaintiffs’ complaint is in two counts. Count 1 alleges that defendant breached its contractual license agreement with Norwood by increasing the monthly rate for its “Expanded Cable Service” in violation of the agreement's two-year rate freeze provision. Count 2 alleges that the rate increase constitutes one or more unfair and/or deceptive acts or practices in violation of M.G.L. c. 93A, § 2. On its face, then, the complaint presents claims for relief based on state common and statutory law. Defendant argues that plaintiffs’ right to relief necessarily depends on resolution of the substantial federal question of whether federal preemption renders the agreement’s rate-freeze provision unenforceable. This court disagrees. A straightforward application of the well-pleaded complaint rule precludes original federal court jurisdiction. The rights under the license agreement which plaintiffs now seek to enforce are grounded in Massachusetts statutory law (see M.G.L. c. 93A, § 2; M.G.L. c. 166A, § 2-6) and the common law governing private contractual agreements. Federal law is not implicated as a necessary element of plaintiffs’ well-pleaded state claims.

Furthermore, this is not a case in which plaintiffs have attempted to defeat removal by failing to plead necessary federal questions. Federal law becomes relevant only by way of a defense to an obligation created entirely by state law. The well-pleaded complaint rule was framed to deal with precisely such a situation. A case may not be removed to federal court on the basis of a federal defense, including the defense of preemption, even if the defense is the only question truly at issue in the case. Franchise Tax Board, supra, at 14, 103 S.Ct. at 2849.

In reaching its decision, the court also relies on the absence of any federal cause of action available to plaintiffs to obtain the relief requested in the complaint. The unavailability of a federal remedy sharply undercuts defendant’s assertion that the federal issue is inextricably part of plaintiffs' cause of action. Of course, where state law claims are brought in an area that has been totally occupied by federal law, the issue of federal preemption is dispositive. For example, in Avco Corp. v. Aero Lodge No. 735, App. O.T. 1967, No. 445, pp. 2-9, an employer brought suit in state court against a union alleging simply that the union had violated the binding arbitration provision of its agreement with the employer. It was clear, however, that had the employer invoked it, there would have been a federal cause of action under § 301 of the Labor Management Relations Act, 29 U.S.C. § 185. The Supreme Court held that although the employer had pleaded an adequate claim for relief under state law, the preemptive force of § 301 was so powerful as to displace entirely any state cause of action for violation of contracts between an employer and a labor organization. § 301 had expressly supplied the plaintiff in Avco with a federal cause of action to replace its preempted state contract claim and thus plaintiff’s complaint, which came within the scope of the federal cause of action, necessarily arose under federal law. See, Franchise Tax Board, supra, at 23-24, 103 S.Ct. at 2853-54.

In the instant case, however, defendant has not pointed to, and the court has not found, any language in the Cable Communications Policy Act of 1984, 47 U.S.C. § 521 et seq., which either creates or expressly denies any cause of action in favor of municipalities to enforce cable television licensing agreements. For that reason, plaintiffs’ suit does not “arise under” that statute and therefore does not come within the original jurisdiction of the federal district courts. Accordingly, plaintiffs’ motion to remand the case to Superior Court for Norfolk County is granted.

      . The absence of original jurisdiction does not deprive defendant of a federal forum in which a preemption defense may be heard. If the state court rejects the claim of federal preemption, that decision is reviewable on appeal by the United States Supreme Court. Fidelity Federal Savings & Loan Ass'n v. De la Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982).


author: SHADUR, District Judge.

text:
    CRESCENT CORPORATION, Plaintiff, v. PROTOR & GAMBLE CORPORATION and Huber, Hunt & Nichols, Defendants.
    No. 85 C 8930.
    United States District Court, N.D. Illinois, E.D.
    Feb. 6, 1986.
    David L. Campbell, Campbell & Campbell, St. Louis, Mo., Joseph J. Banks, Jr., Carpentersville, Ill., for plaintiff.
    Hugh L. Moore, Lord, Bissell & Brook, Chicago, Ill., Alan H. Goldstein, Diane Hubbard Kennedy, Susan Brooke, Dutton & Overman, Indianapolis, Ind., for defendants.

      . This Court is compelled to follow the "Protor” misspelling of "Procter" as embodied in the original caption of this case. However, the text of this opinion will use the correct spelling, rather than either the typographical error in the caption or the equally incorrect "Proctor” (the erroneous version appearing' in the body of the Complaint).

   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Crescent Corporation (“Crescent”) has sued Procter & Gamble Company (“P&G”) and Huber, Hunt & Nichols, Inc. (“HH&N”) in a two-count Complaint arising out of Crescent’s engineering, design, manufacture and installation of the curtain-wall for P&G’s office building in Cincinnati, Ohio, on which HH&N assertedly acted as P&G’s agent:

1. Count I seeks quantum meruit recovery from P&G for over $2 million in extra materials and services going far beyond the original contract requirements.
2. Count II seeks damages (both compensatory and punitive) against both P&G and HH&N for fraud: It alleges false representations that a change order would be executed covering the extras, in reliance on which representations Crescent went ahead with the work.

Defendants removed the case from its original forum (the Circuit Court of Kane County, Illinois) to this District Court, then moved to dismiss or alternatively to transfer this action to the Southern District of Indiana, Indianapolis Division. For the reasons stated in this memorandum opinion and order, such transfer (rather than dismissal) is granted.

Defendants’ alternative prayer for relief does not advance a 28 U.S.C. § 1404(a) motion in conventional form — the statutory successor to the forum non conveniens doctrine, allowing transfer as a matter of balancing conveniences. Defendants’ focus is rather on the forum selection clause (the “Clause”) in Article 9 of the “Subcontract Agreement CF19A” (the “Subcontract”) between HH&N as “Contractor” and Crescent as “Subcontractor”:

Any suit brought for any breach of the Subcontract and any litigation arising under the Subcontract is here agreed to be maintained in any court of competent jurisdiction in the County and State shown as Contractor’s address, Article I., Recitals, CF19A.

HH&N’s address in the cited portion of the Subcontract was shown as 2450 South Tibbs Avenue, Indianapolis, Indiana 46241.

Most of the Complaint’s allegations characterize HH&N as P&G’s “agent” (see, e.g., Complaint ¶1¶ 4, 6, 7 and 8) and hence assert the Subcontract was entered into “for and on behalf of P&G” (Complaint ¶ 12). All this is of a piece with the allegation (Complaint 116) that the earlier contract between P&G and HH&N (though it may well have been a construction contract under which P&G was designated as owner and HH&N as contractor) was an “on-going association” the Complaint refers to as the “P&G Enterprise.” Consistently with those allegations, Crescent alleges the extras that form the gravamen of the Complaint were furnished “at the special instance and request of P&G and Huber [HH&N], acting in the furtherance of the affairs of the P&G Enterprise” (Complaint 1118), and the same paragraph alleges those extras “were agreed to, approved by and accepted by P&G and Huber in the furtherance of the affairs of the P&G Enterprise, and.. .now benefit P&G and Huber and the P&G Enterprise....”

Crescent’s Count I is labeled, and is alleged in part in the form of, a quantum meruit claim — a claim based on benefits conferred by Crescent on P&G. But it cannot be gainsaid the Count I claim really asserts a “breach of the Subcontract” within the meaning of the Clause. Indeed the claim, though not articulated in a conceptually precise manner, essentially says P&G was bound by the Subcontract because HH&N entered into it for P&G’s benefit. Complaint H 19 therefore calculates and alleges the amount due in terms of Crescent having fully performed all work under the Subcontract and thus being “entitled to the full payment of all sums remaining unpaid therefor.”

In much the same way, Count II does not charge fraud in the inducement of the Subcontract (the kind of claim that ordinarily precludes a defendant from bootstrapping itself by seeking to invoke a forum selection clause in the very contract that is under attack and that would be vitiated if the fraud-in-the-inducement claim were upheld). Instead Count II actually charges defendants with having violated their contractual obligation to sign change orders for authorized extras (see Subcontract Article VI and, presumably, Subcontract Terms and Conditions Article 18). Whether viewed in that manner or as the kind of fraud claim Crescent asserts, Count II plainly constitutes “litigation arising under the Subcontract” for purposes of the Clause.

At least in surface terms, then, the just-completed analysis brings the Clause potentially into play as to this entire litigátion. Before this opinion turns to whether that potentiality translates into actuality, or to the impact on this lawsuit if it does, a threshold question must first be considered: the enforceability vel non of the Clause. In that respect Crescent’s President John Wegman (“Wegman”) has stated by way of affidavit that HH&N and Crescent had arrived at an oral agreement for the curtainwall long before the Subcontract was entered into (or even drafted). As Wegman’s Affidavit puts it:

9. Subsequent to the reaching of the aforesaid oral agreement, but prior to the receipt of any draft of Exhibit A [the Subcontract], and prior to the receipt of any of the contents of Attachment III to Exhibit A hereto [which includes the Clause], and specifically Exhibit C hereto, Crescent expended in excess of $500,-000 on the design, engineering, fabrication, manufacture and providing of labor and materials to the Proctor & Gamble Project.
10. It was not until the basic contract terms concerning price and scope of work had been negotiated, the aforesaid oral agreement and understanding reached with respect thereto, and Crescent had already expended the aforesaid significant sums of money in the engineering, design, and construction of the Proctor & Gamble Project, that the written contract (Exhibit A hereto) and the attachments thereto (including Attachment III and Exhibit C hereto) was given to Crescent to sign.
11. None of the contents of Attachment III to the Contract (Exhibit A hereto), and specifically none of the contents of Exhibit C hereto was the subject of any negotiation or of any discussion between any representative of Crescent and any representative of HH&N prior to the completion of the construction of the Proctor & Gamble Project.
12. None of the contents of Attachment III to the Contract (Exhibit A hereto), and specifically the contents of Exhibit C hereto, were subject to any negotiation between the parties, but all of such terms were presented to Crescent by HH&N on a take it or leave it basis. But that version has proved to be no

more than a half-truth. It turns out the Subcontract (including the Clause) was part of the “Bid Package” that had been tendered to Crescent as the predicate for its initial formulation of a bid for the curtain-wall work (Randall Ket (“Ket”) Jan. 10, 1986 Aff. ¶ 2). Indeed the ultimate Subcontract specifically included all the terms and conditions of the Bid Package. Thus Crescent has been shown to have had full knowledge of the Clause before it ever became committed to the project and proceeded with its work, even though the Subcontract was not formally signed until March 1983. And as for its contract-of-adhesion type claim (Wegman Aff. 1112), Ket’s affidavit directly belies Wegman’s conclusory statement by offering facts. It establishes that Crescent successfully negotiated out part of the terms HH&N had proposed for the Subcontract (Ket Aff. 115), but that Crescent made no complaint at all about (nor did it even discuss) the Clause (Ket Aff. H114, 9). In that context, any significance to be gleaned from the absence of any negotiation or discussion concerning the Clause (Wegman Aff. ¶ 11) cuts against—rather than in favor of—Crescent.

Under these circumstances, Crescent’s challenge to the Clause’s enforceability must fail. See Snyder v. Smith, 736 F.2d 409, 419 (7th Cir.1984), citing and quoting from The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12, 15-19, 92 S.Ct. 1907, 1914, 1916-18, 32 L.Ed.2d 513 (1972); Clinton v. Janger, 583 F.Supp. 284, 288 (N.D.Ill.1984), also relying on the “landmark decision” in Bremen. What remains, then, is to analyze the effect of the Clause on this action.

First, P&G as well as HH&N clearly has the right to invoke the Clause. See the application of forum selection clauses to non-parties in such cases as Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 202-03 (3d Cir.), cert. denied, 464 U.S. 938, 104 S.Ct. 349, 78 L.Ed.2d 315 (1983); Dukane Fabrics International, Inc. v. M.V. “Hreljin,” 600 F.Supp. 202, 203 (S.D.N.Y.1985); Clinton, 583 F.Supp. at 290. Crescent is not entitled (1) to draw P&G into litigation on the theory HH&N was P&G’s agent in executing the Subcontract, and then (2) to disavow applicability of the Clause because P&G was not a formal contracting party.

Second, the applicability of the Clause is not impaired by Crescent’s statement of its claims in other than straight breach of contract terms. That proposition was scotched in Coastal Steel, 709 F.2d at 203 and cases there cited; see also Clinton, 583 F.Supp. at 287-88. This opinion’s earlier discussion has established the coverage of each of Crescent’s claims by the terms of the Clause, and Crescent’s claim to the contrary “ignores the reality that the [Subcontract] is the basic source of any duty to [Crescent]” (a quotation adapting Coastal Steel, 709 F.2d at 203 to this case).

Only one issue remains to be dealt with. Snyder, 736 F.2d at 419 referred to cases that “have considered forum selection clauses to be a type of venue provision,” but our Court of Appeals did not there find it necessary to decide whether such a clause constitutes “venue” within the meaning of Fed.R.Civ.P. 12. Some other courts confronted with the situation posed by the present motion have opted for dismissal, while still others have looked to 28 U.S.C. § 1406(a) and have transferred the action to the forum contracted for by the parties. This Court views the latter alternative as the more reasonable response. Accordingly this action is transferred to the United States District Court for the Southern District of Indiana, Indianapolis Division.

      . Except for the page of the Subcontract Terms and Conditions that includes the Clause (Article 9), this Court has been provided only the Index page to the Terms and Conditions, which lists Article 18 as "Changes."

      . It is significant that though Crescent filed an unbidden surreply February 3, complaining of certain statements in defendants’ Reply Memorandum, it has said nothing whatever to challenge defendants’ factual assertions described in this paragraph of the text. Because those assertions really explain the significance of, rather than creating a factual dispute as to, the partial story offered by Wegman, any rule that might oblige this Court to accept Crescent’s version of controverted facts does not come into play.

      . Crescent urges its desperate economic straits make it impossible for it to pursue its claim anywhere but in this District Court (Wegman Aff. ¶ 16-19). It is Crescent’s lawyer's "considered opinion" (David Campbell Aff. ¶ 8), and based on that advice Wegman believes (Weg-man Aff. ¶20), that Crescent cannot secure counsel in the Southern District of Indiana. That argument calls to mind the debate about the availability of legal representation in Merritt v. Faulkner, 697 F.2d 761 (7th Cir.1983). True enough, in the prisoner-representation context of that case this Court finds Judge Cudahy’s concurring opinion, id. at 768-69 far more persuasive than Judge Posner’s dissent, id. at 769-71. But Judge Posner’s marketplace approach to access to legal services, as expressed in that and other cases, has substantial force in the context of commercial litigation:
      1. Merritt, id. at 769: “I said [dissenting in McKeever v. Israel, 689 F.2d 1315, 1324-25 (7th Cir.1982)] that a [plaintiff] who has a good damages suit should be able to hire a competent lawyer and that by making the [plaintiff] go this route we subject the probable merit of his case to the test of the market.”
      2. McKeever, 689 F.2d at 1324: "Where damages are sought, the [plaintiff] should have no difficulty finding a lawyer willing to take his case on a contingent-fee basis, provided the case has some merit.”
      This Court is similarly unpersuaded that there is a demonstrated total unavailability of Indiana counsel, as suggested by Crescent. It declines the invitation of Crescent Mem. 10 to dismiss rather than transfer this action.