author: SHADUR, District Judge.

text:
    Gregory AMOS, Plaintiff, v. Michael LANE, individually and as Director of the Illinois Department of Corrections, certain unknown members of the Illinois Prisoner Review Board, individually, The Illinois Prisoner Review Board, and the State of Illinois, Defendants.
    No. 85 C 1450.
    United States District Court, N.D. Illinois, E.D.
    Feb. 26, 1985.

      James A. McCarron, Peter F. Bender, Kevin P. Brown, Law Offices of James A. McCarron, Chicago, Ill., for plaintiff.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Gregory Amos (“Amos”) has filed this action under 42 U.S.C. §§ 1983, 1985 and 1988 and under pendent jurisdiction of state-law claims against several defendants: Illinois Department of Corrections Director Michael Lane, the unnamed members of the Illinois Prison Review Board and the State of Illinois itself. For the reasons stated in this memorandum opinion and order, this Court sua sponte enters judgment on the pleadings for defendants.

According to Amos’ Complaint, on November 22, 1983 he was assaulted (tied up, then cut and stabbed) and his fiancee was tied up and then sexually assaulted by Cleotha Watts (“Watts”). Watts had been released on parole two months earlier, cutting short his service of a long prison term for murder, rape and armed robbery. Amos complains that Watts’ release was not proper under Illinois statutes or Department of Corrections’ regulations (Complaint ¶¶ 14, 22) and that Watts’ background and recidivist record should have alerted defendants to the “clear and present danger” Watts presented “to the citizens of Illinois and specifically to those citizens living in Cook County” (Complaint ¶¶ 15H, 23).

As tragic as the events recited in the Complaint are, they may not be placed at defendants’ doorstep. Amos’ lawyer has simply not done his homework—or perhaps any research at all—before filing suit.

First, it is fundamental jurisprudence that the State is not subject to suit under the post-Civil War civil rights statutes invoked by Amos. That proposition is firmly established by a number of square holdings by the Supreme Court, most recently Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 906-08, 79 L.Ed.2d 67 (1984) (and see cases cited there).

Second, none of the branches of Section 1985 provides a safe harbor for Amos’ claims:

1. Section 1985(1) by its terms is limited to conspiracies to impede the performance of duty by officers of the United States.
2. Section 1985(2), though it does not require the class-based animus of Section 1985(3) (next discussed), is equally inapplicable on its face to the facts alleged by Amos. See Kush v. Rutledge, 460 U.S. 719, 724-27, 103 S.Ct. 1483, 1486-88, 75 L.Ed.2d 413 (1983).
3. At least since Griffin v. Breckenridge, 403 U.S. 88, 91 S.Ct. 1790, 29 L.Ed.2d 338 (1971) there has been no doubt Section 1985(3) extends only to class-based invidious discrimination. Indeed less than two years ago the Supreme Court reaffirmed that proposition in unmistakable terms. United Brotherhood of Carpenters and Joiners of America, Local 610, AFL-CIO v. Scott, 463 U.S. 825, 103 S.Ct. 3352, 77 L.Ed.2d 1049 (1983). No such discrimination is even hinted at here.

Third, Section 1988 is not in the case at all for jurisdictional purposes. Anyone who troubles to read it must recognize it does not create any substantive rights to a cause of action, but rather deals with the procedure to be followed in civil rights actions over which jurisdiction is conferred by other statutory provisions.

That leaves only Section 1983, whose familiar provisions (in the respect relevant here) grant relief for deprivations under color of state law of life, liberty or property without due process of law. Just five years ago the Supreme Court, in one of its relatively infrequent unanimous decisions, flatly rejected a Section 1983 cause of action in Martinez v. California, 444 U.S. 277, 100 S.Ct. 553, 62 L.Ed.2d 481 (1980), a case with such similar facts that the opinion might well have been written for this case (id. at 279-80, 100 S.Ct. at 556-57):

The complaint alleged that the parolee, one Thomas, was convicted of attempted rape in December 1969. He was first committed to a state mental hospital as a “Mentally Disordered Sex Offender not amenable to treatment” and thereafter sentenced to a term of imprisonment of 1 to 20 years, with a recommendation that he not be paroled. Nevertheless, five years later, appellees decided to parole Thomas to the care of his mother. They were fully informed about his history, his propensities, and the likelihood that he would commit another violent crime. Moreover, in making their release determination they failed to observe certain “requisite formalities.” Five months after his release Thomas tortured and killed appellants’ decedent. We assume, as the complaint alleges, that appellees knew, or should have known, that the release of Thomas created a clear and present danger that such an incident would occur. Their action is characterized not only as negligent, but also as reckless, willful, wanton and malicious. Appellants prayed for actual and punitive damages of $2 million.

If anything the Martinez factual situation was even more horrifying than that alleged by Amos. Nonetheless, as Justice Stevens said for the Court (444 U.S. at 284-85, 100 S.Ct. at 558-59, citations omitted):

We also conclude that it is not necessary for us to decide any question concerning the immunity of state parole officials as a matter of federal law because, as we recently held in Baker v. McCollan, 443 U.S. 137 [99 S.Ct. 2689, 61 L.Ed.2d 433], “[t]he first inquiry in any § 1983 suit ... is whether the plaintiff has been deprived of a right ‘secured by the Constitution and laws' ” of the United States. The answer to that inquiry disposes of this case.
Appellants contend that the decedent’s right to life is protected by the Fourteenth Amendment to the Constitution. But the Fourteenth Amendment protected her only from deprivation by the “state ... of life ... without due process of law.” Although the decision to release Thomas from prison was action by the State, the action of Thomas five months later cannot be fairly characterized as state action. Regardless of whether, as a matter of state tort law, the parole board could be said either to have had a “duty” to avoid harm to his victim or to have proximately caused her death, ... we hold that, taking these particular allegations as true, appellees did not “deprive” appellants’ decedent of life within the meaning of the Fourteenth Amendment.
Her life was taken by the parolee five months after his release. He was in no sense an agent of the parole board. ... Further, the parole board was not aware that appellants’ decedent, as distinguished from the public at large, faced any special danger. We need not and do not decide that a parole officer could never be deemed to “deprive” someone of life by action taken in connection with the release of a prisoner on parole. But we do hold that at least under the particular circumstances of this parole decision, appellants’ decedent’s death is too remote a consequence of the parole officers’ action to hold them responsible under the federal civil rights law. Although a § 1983 claim has been described as “a species of tort liability,” Imbler v. Pachtman, 424 US. 409, 417 [96 S.Ct. 984, 988, 47 L.Ed.2d 128] it is perfectly clear that not every injury in which a state official has played some part is actionable under that statute.

Accordingly, Amos not only has not stated but cannot state a cause of action against defendants under the Civil Rights Act. Judgment is entered on the pleadings for defendants, and this action is dismissed. Although a copy of this opinion is being mailed to the Illinois Attorney General’s office, Amos’ counsel is directed to send copies of this opinion forthwith to the same addresses he has used for service of process on defendants.

      . Each of those statutory provisions will be cited simply "Section—".

      . Consistently with the entire tenor of Amos’ Complaint, it simply cites to Section 1985, without any effort to distinguish among its subsections (even though they draw on quite different principles). That has imposed still another burden on this Court.

      . It is true that Watts committed his violent acts on Amos and his fiancee two months after his release, while the parolee in Martinez committed his killing five months after release. That however is a distinction without a difference under the Martinez analysis.

      . This added directive is aimed at avoiding needless trouble and expense to defendants, with the resulting potential of a Fed.R.Civ.P. 11 sanction against Amos’ counsel for having filed such an obviously groundless lawsuit (certainly the scope of federal jurisdiction in this area is not a subject as to which Amos himself is charged with knowledge).


source: Caselaw Access Project

author: RAMBO, District Judge.

license: Public Domain

text:
    In re THREE MILE ISLAND LITIGATION.
    Civ. A. Nos. 79-0710, 79-0763, 79-0785, 79-0791, 79-0906, 79-0912, 79-0994, 79-1018, 79-1106, 79-1242, 79-1569, 81-0412, 81-0747, 81-0748, 81-0854, 82-0380 and 84-0806 to 84-0808.
    United States District Court, M.D. Pennsylvania.
    Feb. 27, 1985.

      Arnold Levin, Howard J. Sedran, Levin & Fishbein, Philadelphia, Pa., Louis M. Tarasí, Jr., Tarasi, Tighe, Tierney & Johnson, P.C., Pittsburgh, Pa., John J. O’Brien, Jr., O’Brien & O’Brien Associates, Philadelphia, Pa., Raymond L. Hovis, Stock & Leader, William B. Anstine, Jr., Anstine & Anstine, York, Pa., Leslie B. Handler, Handler & Weiner, Harrisburg, Pa., Allan Kanner, Philadelphia, Pa., Lee C. Swartz, Hepford, Swartz, Menaker & Morgan, Harrisburg, Pa., Joseph D. Shein, Shein & Brookman, Philadelphia, Pa., Richard A. Jameson, Harrisburg, Pa., Bailey & Broder, New York City, Charles A. Buechel, Jr., Pannebaker & Associates, Middletown, Pa., for plaintiffs.
    John G. Harkins, Jr., A. H. Wilcox, Pepper, Hamilton & Sheetz, Philadelphia, Pa., for defendant.
   AMENDED MEMORANDUM

RAMBO, District Judge.

This case is before the court on defendants’ Motion for Partial Summary Judgment. Defendants ask the court to dismiss the claim for punitive damages in each of the captioned actions, alleging that as a matter of federal law, punitive damages are not recoverable under the Price-Anderson Act. Pub.L. 85-256, 71 Stat. 576 (1957).

Background

The actions to which these motions are addressed were filed to recover for losses which are alleged to have occurred as a result of the accident at TMI on March 28, 1979. On January 27, 1984, plaintiff filed a Motion for a Rule 16 Conference to determine the applicability of Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984) to the pending lawsuits. Plaintiffs argued that the Supreme Court’s decision in Silkwood, properly read permits the recovery of punitive damages in these actions. During the conference held on February 23, 1984, a procedure was agreed upon to bring this threshold issue of the availability of punitive damages before the court for an early resolution. In an order issued that day, defendants were directed to file a motion and brief in support of their stated position that punitive damages are not available in the instant cases as a matter of law. Defendants then filed their motion for summary judgment. Briefing has been completed and the motion is ripe for consideration.

The Price-Anderson Act

The Price-Anderson Act was passed by Congress in 1957 as an amendment to the Atomic Energy Act of 1954. Act of Aug. 30, 1954, ch. 1073, 68 Stat. 919, as amended, 42 U.S.C. §§ 2011-2284 (1978 and Supp. 1984). The Act had the dual purpose of protecting the public by assuring a source of funds to compensate persons injured as a result of a nuclear accident and of encouraging private industry to enter into the development of nuclear power, 42 U.S.C.S. § 2012(i). See Duke Power Co. v. Carolina Env. Study Group, 438 U.S. 59, 98 S.Ct. 2620, 57 L.Ed.2d 595 (1977). The Act limited the aggregate liability for a single nuclear incident to $560 million: $500 million plus the amount of liability insurance available on the private market—$60 million in 1957. The nuclear industry was required to purchase the maximum amount of privately underwritten public liability insurance and if damages from a nuclear disaster exceeded that amount, the Federal government would indemnify the licensees as well as other “persons indemnified” in an amount not to exceed $500 million. Duke Power, 438 U.S. at 65, 98 S.Ct. at 2626.

The Act has been twice amended. The 1966 amendments extended the basic liability-limitation provisions for another ten years. A provision was added which required those indemnified under the Act to waive certain legal defenses in the event of an extraordinary nuclear occurrence. Congress was concerned that state tort law, as it relates to liability for nuclear incidents, was unsettled and that it was necessary to insure a common standard of responsibility, specifically strict liability, across all jurisdictional bounds. This was accomplished by the waiver of defenses, which Congress believed was less intrusive on state tort law than would be the enactment of a federal strict liability statute. See, Duke Power, 438 U.S. at 66, 98 S.Ct. at 2626.

The 1975 amendments extended the Act through 1987. A new provision required, in the event of a nuclear incident, each reactor owner to contribute a set amount toward the cost of compensating victims. 42 U.S.C. § 2210(b). The NRC subsequently set that amount to be $5 million. See 10 C.F.R. § 140.11(a)(4). While the liability ceiling of $560 million remained the same, the 1975 amendments effectively established a level of secondary liability. Congress further provided that “in the event of a nuclear accident involving damages in excess of [the] amount of aggregate liability, the Congress will thoroughly review the particular incident and will take whatever action is deemed necessary and appropriate to protect the public from the consequence of a disaster of such magnitude....”

Application of the Statute

The only Supreme Court case to construe the Price-Anderson Act was Duke Power Co. v. Carolina Env. Study Group, 438 U.S. 59, 98 S.Ct. 2620, 57 L.Ed.2d 595 (1977). In Duke Power, the Court sustained the constitutionality of the Act against challenges under both the Due Process and Equal Protection Clauses of the fifth amendment. While the Court has not had another opportunity to address Price-Anderson directly, it did include those amendments in its discussion of the Atomic Energy Act in the recent decision, Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984).

Silkwood was an action brought by the decedent’s father as administrator of her estate to recover for contamination injuries to Silkwood’s person and property. Those injuries were allegedly sustained in her work with defendant Kerr-McGee. Asserting diversity jurisdiction, the action was based on common law tort principles under Oklahoma law. The Supreme Court held that the safety rationale of the Atomic Energy Act does not preempt the availability of an award of punitive damages in an action brought under state tort law. Specifically, the Court said:

We do not suggest that there could never be an instance in which the federal law would preempt the recovery of damages based on state law. But insofar as damages for radiation injuries are concerned, preemption should not be judged on the basis that the federal government has so completely occupied the field of safety that state remedies are foreclosed but on whether there is an irreconcilable conflict between the federal and state standards or whether the imposition of a state standard in a damages action would frustrate the objectives of the federal law. We perceive no such conflict or frustration in the circumstances of this case. (Emphasis added)

104 S.Ct. at 626.

The Silkwood decision is important to the instant cases because in determining the availability of punitive damages under the Atomic Energy Act, the Court discussed the legislative history of the Price-Anderson amendments. The majority interpreted that history to permit the recovery of punitive damages: “[I]t is clear, that in enacting and amending the Price-Anderson Act, Congress assumed that the state law remedies, in whatever form they might take, were available to those injured by nuclear incidents.” 104 S.Ct. at 617.

Silkwood does not resolve the issue at bar, however, because Silkwood was not a Price-Anderson case. The Court acknowledged this at the very beginning of its analysis. 104 S.Ct. at 623. The Court merely used the Price-Anderson amendments to illustrate its discussion of the Atomic Energy Act. Thus, all that Silk-wood says about Price-Anderson is dicta. Defendants correctly set forth the appropriate weight to be given such dicta, as first articulated by Chief Justice Marshall:

It is a maxim, not to be disregarded, that general expressions, in every opinion, are to be taken in connection with the case in which those expressions are used. If they go beyond the case, they may be respected, but ought not to control the judgment in a subsequent suit, when the very point is presented for decision. The reason of this maxim is obvious. The question actually before the court is investigated with care, and considered in its full extent. Other principles which may serve to illustrate it, are considered in their relation to the case decided, but their possible bearing on all other cases is seldom completely investigated.

Cohens v. Virginia, 19 U.S. 264, 399-400, 5 L.Ed. 257 (6 Wheat. 120, 174) (1821).

While this court recognizes that the issue resolved by Silkwood must be distinguished from the issue presented today, this court must also be guided by the teachings of the Court of Appeals as it addressed itself to the significance of dicta:

We recognize that the prior Supreme Court cases on which we rely can be factually and doetrinally distinguished. But those cases are barometers which suggest how the Court would decide this case. Just as no barometer is a precise predictor of tomorrow’s weather, no pri- or case, which can be factually or doctrinally distinguished, is a perfect predictor of how the Court will decide a related but different case. Nevertheless, we cannot avoid our obligation to forecast or predict how the Court will decide troubling cases involving new factual situations.

Jaffee v. United States, 663 F.2d 1226, 1228 (3d Cir.1981).

While this court must render its own construction of the Act, it cannot ignore the clear import of the Supreme Court’s decision in Silkwood. The analysis here must heed that forecast.

The argument advanced by the defendants in Silkwood was grounded in the doctrine of preemption. Since Congress committed the regulations of nuclear safety to the federal government, it must have intended to preempt state punitive damage awards, because any such award would be tantamount to state penal sanctions for safety violations. The Supreme Court rejected that argument, and found that the Atomic Energy Act did not preempt state remedies. Defendants here attempt to distinguish Silkwood. They argue that because Kerr-McGee’s plutonium facility was not covered by the Price-Anderson Act in 1974 (the time of Karen Silkwood’s exposure), the question of preemption was the only federal issue presented. In the case at bar, the compatibility of federal and state safety regulation is not at issue. Rather, defendants argue that where recovery is sought under the system of compensation established by the Price-Anderson Act, the district court must select the appropriate rule of decision from among the array of available remedies. Further, it must do so in the way which will best effectuate the Congressional purpose in establishing such a system. Defendants further argue that since the express purpose of Price-Anderson is compensatory, the availability of punitive damages will not effectuate but rather, will disserve, the purpose of Congress. Defendants ask this court to look to the compensatory purpose of the act, and to fix a boundary among available state law remedies. That boundary, it is argued, should exclude punitive damages.

A careful examination of legislative history indeed reveals the intent of Congress to set up a system which would compensate victims of a nuclear accident. It also reveals an intent to interfere as little as possible with existing state tort law. Were it not for Silkwood, this court might accept defendants’ argument. However, the Supreme Court’s barometer cannot be ignored. This court is compelled to find that punitive damages are available under the Price-Anderson Act.

The starting point of the analysis was set out by the Silkwood majority:

Kerr-MeGee focuses on the differences between compensatory and punitive damages awards and asserts that, at most, Congress intended to allow the former. This argument, however, is misdirected because our inquiry is not whether Congress expressly allowed punitive damages awards. Punitive damages have long been a part of traditional state tort law. As we noted above, Congress assumed that traditional principles of state tort law would apply with full force unless they were expressly supplanted. Thus, it is Kerr-McGee’s burden to show that Congress intended to preclude such awards. See IBEW v. Foust, 442 U.S. 42, 53 [99 S.Ct. 2121, 2128, 60 L.Ed.2d 698] (1979) (Blackmun, J., concurring). Yet, the company is unable to point to anything in the legislative history or in the regulations that indicates that punitive damages were not to be allowed.

104 S.Ct. at 625.

The Supreme Court thus held that the defendant was required to show a Congressional intent to exclude punitive damages and that it failed to meet its burden. That decision makes defendants' task here all the more difficult. They have asked this court to construe amendments to the Act which the Supreme Court has held to permit punitive damages. Defendants must point this court to language in the amendments or in the surrounding legislative history which indicates an intent to effect a change, and remove the punitive damages held to be available to injured parties under Price-Anderson.

The legislative history does not come down clearly on either side of this issue. The system of indemnification set out in the Act is described as a compensatory one. That description does not suggest a purpose consistent with an award of punitive damages. However, Congress clearly intended to keep interference with state tort law to a minimum. As the Silkwood majority pointed out, punitive damages have long been a part of state tort law. Further, Congress never expressed any intent to disallow punitive damages. The Joint Committee Report on the original version of the Price-Anderson Act explained the relationship between the Act and existing state tort law as follows:

Since the rights of third parties who are injured are established by State law, there is no interference with the State law until there is a likelihood that the damages exceed the amount of financial responsibility required together with the amount of the indemnity. At that point the Federal interference is limited to the prohibition of making payments through the state courts and to prorating the proceeds available. S.Rep. No. 296, 85th Cong., 1st Sess. 9 (1957).

See also, H.Rep. 435, 85th Cong., 1st Sess. 9 (1957); S.Rep. No. 1605, 89th Cong., 2d Sess. 5 (1966), U.S.Code Cong. & Admin. News 1966, p. 3201.

The 1966 Amendments to the Act arose in the context of concerns about the adequacy of state law remedies in the event of a nuclear accident. See, e.g., S.Rep. No. 649, supra at 13. In describing the waiver of defenses which would be required of operators in the event of an extraordinary nuclear occurrence, the Joint Committee stated

By requiring potential defendants to agree to waive defenses the defendants’ rights are restricted; concomitantly, to this extent, the rights of plaintiffs are enlarged. Just as the rights of persons who are injured are established by State law, the rights of defendants against whom liability is asserted are fixed by State law. What this subsection does is to authorize the [NRC] to require that defendants covered by financial protection and indemnity give up some of the rights they might otherwise assert. S.Rep. 1605, 89th Cong., 2d Sess. 25 (1966), U.S.Code Cong. & Admin.News 1966, p. 3226. (Emphasis added)

Similarly,

Absent ... a determination [that the incident is an “extraordinary nuclear occurrence”], a claimant would have exactly the same rights that he has today under existing law—including, perhaps, benefit of a rule of strict liability if applicable State law so provides.” Id., at 11. (Emphasis added)

Thus, once again, the legislative history demonstrates that Congress used state law as a point of reference and did so without excluding any of its potential remedies. By defining available remedies by reference to state tort law, Congress showed no intent to exclude punitive damages.

The purpose of Price-Anderson was to protect the public while providing incentives for private industry to develop nuclear power through a system which caps liability with a specific dollar amount and provides for indemnification for some of those losses. Congress was content to permit state law to determine the types of damages available within that framework. The availability of punitive damage does not conflict with those expressed Congressional purposes. The incentives given to the industry are accomplished by the statutory cap on liability and the system of indemnification. Punitive damages would not expand the amount of operator exposure but only vary the form which damages awards might take within that maximum dollar amount.

The argument that punitive damage awards would deplete the funds available to provide actual compensation to victims is without merit. The Congressional Committee addressed this problem in its discussion of the role of the courts in the event of an accident causing damages in excess of the liability amount. The Committee noted that

The district court is authorized to issue orders declaring the liability limited and staying the payment of claims and the execution of court judgments. By this procedure the right of the State courts to establish the liability of the persons involved in the normal way is maintained, but the payment of those liabilities can be stayed. This will permit a payment to all persons who suffered damage on a prorated basis and will not permit full payment to the first claimants with no payment to the last claimants. (Emphasis added)

S. Report 296, 85th Cong., 1st Sess. at 823-24.

When it amended the Act in 1975, Congress again addressed the means by which available funds might be allocated. The Committee recommended that the district court be allowed to formulate a plan establishing priorities between classes of claims and claimants. That recommendation was accepted by Congress. See 42 U.S.C. § 2210(o). While this scheme does not include a place for punitive damages, given the compensatory purposes of the Act, these awards presumably would be paid only after compensation had been made for actual losses. The failure to mention punitive damages specifically, standing alone, is not enough to permit an inference by this court that Congress intended to preclude punitive damages.

There is one final consideration which this court must address. It is possible that within this system of federal indemnification, punitive damages, if awarded by a jury, may be paid out of the Federal Treasury. It is clear that the United States, its agencies and instrumentalities may not be held liable for punitive damages without the express consent of Congress. Missouri Pac. R.R. v. Ault, 256 U.S. 554, 563-64, 41 S.Ct. 593, 597, 65 L.Ed. 1087 (1921); Sentner v. Amtrak, 540 F.Supp. 557 (D.N.J.1982). Under the circumstances presented here, although punitive damages would not be assessed against the United States directly, it might become necessary to pay such awards out of the United States Treasury. This court is unable to find any intent on the part of Congress to hold the United States liable for payment of punitive damage awards. Therefore, to the extent that punitive damages assessed under the Price-Anderson Act would be paid from federal monies, such damages must be disallowed. This is' perhaps not the most efficient way to administer the federal program; however, courts are not

empowered to rewrite legislation in accord with their own conceptions of prudent public policy [citations omitted]. Only when a literal construction of a statute yields results so manifestly unreasonable that they could not fairly be attributed to congressional design will an exception to statutory language be judicially implied.

United States v. Rutherford, 442 U.S. 544, 555, 99 S.Ct. 2470, 2477, 61 L.Ed.2d 68 (1979).

An appropriate order will be entered.

ORDER

IT IS HEREBY ORDERED THAT defendants’ Motion for Partial Summary Judgment is denied.

       This memorandum amends the memorandum of February 12, 1985 and corrects a number of typographical errors and errors of form. No substantive changes have been made. The memorandum is issued in an amended form for reasons of expediency.

      . Defined, 42 U.S.C. § 2014(t).

      . As originally enacted, the Act was applicable only to licenses issued between August 30, 1954 and August 1, 1967. § 4, 71 Stat. 576, as amended 42 U.S.C. § 2210(c).

      . The defenses of negligence, contributory negligence, charitable or governmental immunity and assumption of risk are waived in the event of an extraordinary nuclear occurrence. Also waived, to a limited degree, are defenses based on certain short state statutes of limitation. 80 Stat. 891, 42 U.S.C. § 2210(n)(l).

      . This court must also consider the recent Third Circuit decision in Stibitz, et al v. General Public Utilities Corp., et al., 746 F.2d 993 (1984). That decision might well be read to further reflect a policy of non-interference with state adjudication of traditional state remedies.

      . The Joint Committee wishes to assure that in such a case, where the immediate recovery by claimants may be less than the full amount of their losses, the distribution of funds will be made in such a manner as to compensate first for the most severe and the most readily computable losses. Thus claims for actual losses to property, for actual and reasonable medical expenses, for loss of wages, and other such losses may merit higher priority than such claims as those for alleged pain and suffering, emotional harm, and loss of consortium. Likewise, losses otherwise compensated for, while not precluded from recovery (under the collateral source rule) in most jurisdictions, should be accorded lower priority than uncompensated losses. The Joint Committee also believes that as a matter of equity, in cases where less than full compensation will be made through the amounts immediately available from insurance and Government indemnity, losses to offsite property of the licensee of the responsible facility should be accorded lower priority than losses to third parties. The court is authorized to establish such additional priorities as are deemed desirable and equitable to further the principles described above.
      S.Rep. No. 94-454, 1975 U.S.Code Cong. & Ad. News 2251, 2264.

      . As noted in defendants' brief, at the present time the full limit of liability is funded through the initial and secondary layers of insurance. Therefore, no federal funds are implicated. However, at the time of the TMI accident, $85,-000,000.00 of the "financial protection" was accorded by the Federal Treasury.


author:
MAGNUSON, District Judge.
      RENNER, District Judge,

text:
    In the Matter of the Petition of Ellis OLKON for Readmission to Practice.
    Misc. No. 4-80-7.
    United States District Court, D. Minnesota, Fourth Division.
    March 27, 1985.

      Theodore J. Collins, St. Paul, Minn., Nancy K. Olkon, Minneapolis, Minn., for petitioner.

      Jon M. Hopeman, Asst. U.S. Atty., Minneapolis, Minn., for U.S.
    Before RENNER and MAGNUSON, District Judges.
   MEMORANDUM AND ORDER

MAGNUSON, District Judge.

Before the court is the application of Ellis Olkon for readmission to the federal bar pursuant to District of Minnesota Rule of Practice l.G. A hearing on the matter was held on December 12, 1984 before Judges Robert G. Renner and Paul A. Magnuson, and the matter was taken under advisement. Theodore J. Collins, Esq. and Nancy K. Olkon, Esq. appeared for Petitioner. Jon M. Hopeman, Esq. appeared for the United States.

FACTS

On September 20, 1979, the Hennepin County District Court convicted Petitioner Ellis Olkon of two counts of the felony attempted theft by swindle. Olkon had attempted to defraud two insurance companies by presenting the personal injury claims of a client whom Olkon knew was not injured. State v. Olkon, 299 N.W.2d 89 (Minn.1980), cert. denied, 449 U.S. 1132, 101 S.Ct. 954, 67 L.Ed.2d 119 (1981). Judge Amdahl, then of the Hennepin County District Court, sentenced Olkon to five years probation and fined him ten thousand dollars. As a result of his felony conviction, Petitioner was temporarily suspended from the Minnesota state bar on March 30, 1980 for the duration of his criminal probation, or for two years, whichever was longer. In re Petition for Disciplinary Action Against Ellis Olkon, 324 N.W.2d 192 (Minn.1982). A divided court of five to three held that Olkon would be automatically reinstated upon completing the terms of his suspension. Id. at 196 (Justice Amdahl did not participate in the decision). As noted by the dissent, the automatic reinstatement precluded a review of Olkon’s fitness to practice once his suspension had expired. Id. at 197 (Todd, J., dissenting).

On May 12, 1980, Olkon was indefinitely suspended from practice in federal court pursuant to District of Minnesota Rule of Practice 1.F(a). In re Suspension of Ellis Olkon, Misc. 4-80-7 (D.Minn. May 12, 1980). Rule l.F(a), governing disbarment and discipline, provides: “Any member of this court who has been suspended or disbarred from the bar of the State of Minnesota or who has been convicted of any criminal offense in any United States District Court shall ... be suspended from practice before this court.” Unlike the state suspension Order, the federal Order declined to set a specific suspension period. It also declined to waive the investigation and hearing process.

On March 6, 1984, Olkon was readmitted to the Minnesota bar. In re Petition for Disciplinary Action Against Ellis Olkon, 345 N.W.2d 247 (Minn.1984). Justice Yetka for the court, deemed that compliance with Rule 18 of the Minnesota Rules on Lawyers Professional Responsibility was inapplicable. Id. Rule 18 requires an investigation and report by the Director of the Lawyer’s Professional Responsibility Board into a petitioner’s suitability to practice law before readmission. The rule also gives the court discretion to conduct a hearing on the petition for reinstatement. Minnesota Rule on Lawyer Professional Responsibility 18(b), (d).

On March 8, 1984, Olkon filed a petition for readmission to the federal bar. Pursuant to District of Minnesota Rule l.G(a), governing reinstatement of disbarred and suspended attorneys, the United States Attorney’s Office conducted an independent investigation of Olkon’s character and fitness for readmission and submitted the U.S. Attorney’s Report of Investigation (Report). The Report recommended denial of Olkon’s petition for reinstatement. This recommendation was based on evidence of unethical conduct by Olkon which was unassociated with his prior conviction. The evidence consisted of affidavits, F.B.I. reports, transcripts of phone and body taps, Grand Jury transcripts, and personal interviews. The Report alleged a number of ethical violations: that Olkon knowingly advised his clients on how to avoid arrests for prostitution; that he knowingly referred women clients who could not pay his fee to another client who conducted a prostitution business; that he used information obtained from clients who were prostitutes with intent to extort government officials, including judges; that he bribed judges; that he used police and court documents to further his client’s prostitution business; that he encouraged illegal campaign contributions; that he practiced law after suspension; and that he improperly importuned a witness and interfered with a juror.

In rebuttal, Olkon submitted the Petitioner’s Response to U.S. Attorney’s Report of Investigation (Petitioner’s Response). Proceeding on the assumption that the United States Attorney had secured attorney client waivers from Olkon’s former clients, Olkon addressed each allegation in the Report. The Court is satisfied that Olkon successfully rebutted a number of the allegations, for example: that he used information obtained from his clients who were prostitutes to extort government officials, including judges; that he bribed judges; that he used police and court documents to further his client’s prostitution business; that he encouraged illegal campaign contributions; and that he importuned a witness and interfered with a juror.

A hearing was held on December 12, 1984 before Judges Robert G. Renner and Paul A. Magnuson to consider Olkon’s petition. Olkon took the stand and testified that he was of good moral character and that he had committed no crimes. Olkon did not present any other witnesses on his behalf. The Petitioner refused the Court’s offer of a continuance permitting him to present witnesses to rebut the allegations in the Report. Although Olkon has succeeded in rebutting some of the allegations of unethical conduct, we find that he is insufficiently rehabilitated to be readmitted to the federal bar.

STANDARD FOR REINSTATEMENT

In a reinstatement proceeding, the applicant bears the burden of establishing “by clear and satisfactory evidence ... that [he] has undergone such a moral change as to now render him a fit person to enjoy the public confidence and trust once forfeited.” Peterson v. Sheran, 474 F.Supp. 1215 (D.Minn.1979) (citing In re Smith, 220 Minn. 197, 200, 19 N.W.2d 324, 326 (1945)), aff’d in part, vacated in part on other grounds, 635 F.2d 1335 (8th Cir.1980). The petitioner bears this heavy burden because it is essential that members of the bar be trustworthy and of good moral character.

It is a fair characterization of the lawyer’s responsibility in our society that he stands ‘as a shield’ ... in defense of right and to ward off wrong. From a profession charged with such responsibility there must be exacted those qualities of truth speaking, of a high sense of honor, of granite discretion, of the strictest observance of fiduciary responsibility, that have, throughout the centuries, been compendiously described as ‘moral character.’

Schware v. Board of Bar Examiners, 353 U.S. 232, 247, 77 S.Ct. 752, 760, 1 L.Ed.2d 796 (1957) (Frankfurter, J., concurring). Once an attorney engages in conduct indicating insensitivity to ethical demands, the bond between bench, bar, and public is severed and must be reconciled by the attorney before readmission is granted. “There is no vested right in an individual to practice law. Rather there is a right in the Court to protect itself, and hence society, as an instrument of justice.” In re Isserman, 345 U.S. 286, 289, 73 S.Ct. 676, 677, 97 L.Ed. 1013 (1953), judgment set aside on other grounds, 348 U.S. 1, 75 S.Ct. 6, 99 L.Ed. 3 (1954); see also Ex parte Wall, 17 Otto 265, 107 U.S. 265, 27 L.Ed. 552 (1882).

Consequently, Petitioner must bear the difficult burden of persuading this court to grant readmission by demonstrating that he is adequately rehabilitated. See In re Braverman, 549 F.2d 913, 919 (4th Cir.1976). An adequate showing of rehabilitation and fitness to practice requires a demonstration of strict adherence to the ethical rules. The reinstatement must be warranted by stronger proof of good moral character and trustworthiness than that required in an original admission to the bar. See Peterson, 474 F.Supp. at 1224. In order to transcend the attorney’s former unethical actions, an attorney seeking readmission “has the duty to be truthful in proceedings seeking reinstatement.... [F]ailure to be truthful would support a conclusion that the applicant has not been sufficiently rehabilitated to deserve reinstatement as a member of the bar.” Braverman, 549 F.2d at 916. Due to the vital social interests at stake, any doubts as to a petitioner’s fitness to practice in federal court should be resolved in favor of the public and court. See Isserman, 345 U.S. at 289, 73 S.Ct. at 677; In re G.L.S., 586 F.Supp. 375, 379 (D.Md.), aff’d, 745 F.2d 856 (4th Cir.1984).

ANALYSIS

Under District of Minnesota Rule l.G(a), when an attorney applies for readmission, the “United States Attorney shall investigate the facts alleged in the petition for reinstatement and shall present to the court, in affidavit form or otherwise, any facts in support of or against the granting of said petition.” The Report on Ellis Olkon alleged, inter alia, that Petitioner knowingly advised his clients on how to avoid arrests for prostitution; that he knowingly referred his women clients who could not pay his legal fee to another client who conducted a prostitution out-call service; and that he practiced law after his suspension.

Many of the allegations in the Report were based on the testimony of one Daniel Bahler, Olkon’s client who managed and owned a prostitution business. Bahler was arrested in 1982 and at that time he began to cooperate actively with the F.B.I. As discussed at length in Petitioner’s Response, and as implicitly conceded in the Report, Bahler’s credibility is far from exemplary. Petitioner’s Response at 8; Report at 18-19. We do not base our factual findings on Bahler’s testimony alone. Many of Bahler’s statements are corroborated by documents and other testimony. In addition, Olkon’s own statements in his written response lend support to some of the allegations.

Bahler claimed that Olkon knew from the beginning that his massage service, the “Bunny Hutch,” was a front for a prostitution business. This allegation is corroborated by a secretly recorded conversation between Olkon and Deborah Johnson, a former employee of Bahler’s who had been arrested for prostitution. Report Exhibit G at 021. The conversation occurred on February 27, 1980 in Olkon’s office, while Johnson was wearing a consensual monitoring device provided by the Minneapolis police. Report at 28. During this initial client conference, Johnson informed Olkon that she had worked for Bahler and then got a “straight job.” She informed Olkon that Bahler later contacted her and asked her to come back to work for him. Olkon commented, “You don’t want to go back, you said it was horseshit.... Other girls who worked for him always complained because he wanted to turn tricks with them and stuff like that.” Clearly, Olkon was aware of the Bunny Hutch’s true business purpose.

Although Olkon denies any knowledge of the illegal activity, Petitioner’s Response at 15-16, his knowledge of the Bunny Hutch’s actual nature can be implied through comments in his own written response. In attempting to rebut the Report’s allegations for extortion, Olkon related an instance where the Minneapolis Star published several articles about well-known public figures who were customers of prostitutes. Olkon’s written response states: “At the request of the Star reporter, Petitioner extended the Star’s invitation to Mr. Bahler to come forward with information about such persons who were customers of his service if he wished to do so.” Petitioner’s Response at 17. Similarly, in rebutting the Report’s allegation that Petitioner used police and court .documents to further Bahler’s prostitution business, Olkon implicated himself by stating: “In defending employees who worked at the Bunny Hutch who were arrested for prostitution, Petitioner frequently held Sharich hearings and as a part of such hearings secured the necessary statistical information for the Court.” Petitioner’s Response at 23.

Olkon’s denial of his knowledge of the true nature of Bahler’s business demonstrates a reluctance to be truthful in this proceeding. As acknowledged by the Fifth Circuit in In re Braverman, “failure to be truthful would support a conclusion that the applicant has not been sufficiently rehabilitated to deserve reinstatement.” 549 F.2d at 916.

Olkon performed the legal paperwork to incorporate the Bunny Hutch. Report at 21. In addition, Bahler claimed that Olkon gave him advice on how his prostitution business could avoid detection by the police. Id. at 20. Allegations of assisting a client in conducting criminal activities are corroborated by two other former clients— Judith Ruth Johnson and Craig Felty. Judith Johnson, who worked for another prostitution out-call service represented by Olkon, informed the F.B.I. that Olkon had personally advised her how to engage in prostitution without being arrested. Id. at 39. Craig Felty, who was formerly an assistant to Bahler, started his own out-call prostitution service, called the “Bunny Patch,” in July of 1980. Felty informed the F.B.I. that Olkon knew of the true nature of the business and helped him establish and incorporate the business. Felty also alleged that Olkon agreed in advance to handle all prostitution cases arising from arrests of Bunny Patch employees. Id. at 29.

Evidence that Olkon regularly contracted to handle client’s prospective prostitution arrests is contained in a recorded telephone conversation which occurred between Olkon and Bahler on July 11, 1980. Report Exhibit H. In discussing an employee of Bahler’s who was charged with prostitution, Olkon commented: “The only question I have is should I get the money from the girl or are you paying it or....” Bahler responded: “No, uh, yeah, its taken care of the usual way. ” Id. at 1051 (emphasis added). Olkon later stated: “Okay, but, bill her but you’ll pay her and then she brings it here, is that it?” Bahler responded: “Right. Right.” Id. at 1052.

Although this jurisdiction has not adopted the ethical standards promulgated by the American Bar Association, we acknowledge their persuasive authority. “As the profession’s own expression of its ethical standards, [the ABA Model Code and Rules of Proféssional Responsibility] provide substantial guidance to federal courts in evaluating the conduct of attorneys appearing before them.” Brennan’s, Inc. v. Brennan’s Restaurants, Inc., 590 F.2d 168, 172 (5th Cir.1979); see also NCK Organization Ltd. v. Bregman, 542 F.2d 128, 129 (2nd Cir.1976); Greenebaum-Mountain Mortgage Co. v. Pioneer National Title Insurance Co., 421 F.Supp. 1348, 1351 (D.Colo.1976) Kramer, The Appearance of Impropriety Under Canon 9: A Study of the Federal Judicial Process Applied to Lawyers, 65 Minn.L.Rev. 243, 246 (1980-1981). An application of these well-recognized and highly-regarded norms is warranted pursuant to our general supervisory authority to regulate attorneys appearing before this court. See United States v. Springer, 460 F.2d 1344, 1354 (7th Cir.), cert. denied, 409 U.S. 873, 93 S.Ct. 205, 34 L.Ed.2d 125 (1972).

A lawyer must not counsel or assist a client in conduct that the lawyer knows to be illegal. ABA Code of Professional Responsibility DR 7-102(A)(7); ABA Model Rules of Professional Conduct 1.2(d).

A lawyer should never counsel his client on how to violate the law and avoid punishment therefor.... “There is a sharp distinction ... between advising what can lawfully be done and advising how unlawful acts can be done in a way to avoid conviction. Where a lawyer accepts a retainer from an organization, known to be unlawful, and agrees in advance to defend its members when from time to time they are accused of crime arising out of its unlawful activities, this is equally improper.”

ABA Code of Professional Responsibility EC7-5 & n. 15 (quoting ABA Opinion 281 (1952)). Olkon’s advice and legal services to Bahler, Felty, and Johnson violated these standards. Moreover, Olkon’s original suspension was premised on the same type of unethical behavior. Petitioner has presented no evidence to show rehabilitation from his past untrustworthy behavior.

Disciplinary Rule 7-102(A)(7) and Model Rule 1.2(d) also forbid a lawyer from counselling a client to engage in criminal conduct. Bahler claimed that Olkon often referred clients to him for employment when they could not afford to pay their legal fees. Bahler advised that most of Olkon’s referrals were professional prostitutes. Bahler’s allegations aré corroborated by Jodi Benson, a former client of Olkon’s who was a professional prostitute. Report at 34-35. Benson met with Olkon at Olkon’s office sometime in July of 1979 to pay part of her bill for legal services rendered earlier in the year. Benson claims that when Olkon learned that she was a self-employed prostitute, he told her that he could call Bahler and that Bahler would give her a job at the Bunny Hutch. Id. at 35. Olkon gave Benson Bahler’s phone number. She called Bahler as soon as she returned home and left her name and number. Benson’s call was promptly returned by Bahler, who asked her to come to his home for an interview.

Evidence of Olkon’s referral and Benson’s call is found in a telephone message book belonging to Bahler, which was obtained by the F.B.I. See Report Exhibit I. An entry dated July 17, 1979 reads, “Jodi Benson, ref. by Ellis 823-7426.” Id. at 954. Olkon claims that “ref.” could mean “reference by” rather than “referred by” and that perhaps Bahler called Olkon to ask for a character reference. Petitioner’s Response at 30. Nevertheless, since Aria Berg, the individual who took the telephone message, was employed as a receptionist at the Bunny Hutch, Report at 10, it is more than probable that she was recording an incoming, rather than an outgoing call.

Bahler’s allegations are partly corroborated by secretly recorded statements made by Olkon to Deborah Johnson in February of 1980. See Report Exhibit G at 931. After acknowledging implicitly that Johnson was a prostitute when she worked for Bahler, id. at 930, Olkon stated:

[I]f you want to go back to Dan’s [Bahler], that’s your business, I’m not telling you to do it or not because I'm obviously—of all my old clients in the out-call service, I think he’s the only one that’s still around after about six or seven years. Everybody else is gone and come.... So it doesn’t matter to me if you work for Bahler, the Body Shop, Dolphin, or Jonnston’s. I guess the only requirement I have is how I am going to get paid.

Id. at 931.

Judith Ruth Johnson also alleged that Olkon referred her to an out-call prostitution service run by his client David Hartman. Report at 38. Olkon’s referrals of prostitutes to the Bahler and Hartman out-call services constitutes a violation of DR 7-102(A)(7) and Model Rule 1.2(d). Encouraging these women to work as prostitutes to pay their legal fees involves counselling a client to engage in criminal conduct.

The Report cited many events that occurred after Olkon was suspended from practice. When Craig Felty contacted Olkon regarding the establishment of a new out-call service, Olkon informed Felty that Mark Lofstrom, another lawyer from the law firm, would give him all final legal advice. Nevertheless, Felty claimed he never dealt with any attorney in Olkon’s office other than Ellis Olkon. Report at 29. Lofstrom specifically recalled that he never met Felty, nor did he incorporate an organization for Felty called the Bunny Patch. Id. at 55. Similarly, Bahler said he was informed by Olkon that although Olkon would continue to do legal work for Bahler after his suspension, his associate, Mark Lofstrom, would have to take any cases to court.

Pursuant to a search warrant, the F.B.I. searched the Bahler residence and the Bunny Hutch on Friday, July 24, 1980. A phone tap, authorized by the Honorable Edward J. Devitt, had previously been placed on the Bunny Hutch line. Three conversations recorded on July 24, 1980 pertaining to the Bunny Hutch search and Ellis Olkon, were submitted by the United States Attorney’s Office. Another conversation, recorded on July 11, 1980, pertains to a prostitution case Olkon agreed to take at Bahler’s request. Report Exhibit H. Clearly, these conversations indicate, to some extent, Olkon’s contact with and representation of Bahler and the Bunny Hutch after his suspension.

Olkon argues that “these exhibits show no more than Petitioner asking routine questions any paralegal or secretary would ask and also specifically indicate that other attorney’s in the office would provide the legal services required.” Petitioner’s Response at 25. We agree with Petitioner’s interpretation of his statements. Nevertheless, it is important to note that he expressly denies participating in the July 24th phone calls and rendering any services on behalf of Bahler after April of 1980. Petitioner’s Response at 9-10. Petitioner claims that on July 24, 1980 he was at Harvard Law School attending a seminar. Olkon’s call to Bahler on July 11 was made on a Saturday. In the conversation, he explains that he will be leaving that Sunday for Harvard and will be gone for only six days. Report Exhibit H at 2, 3. Therefore, he would have returned from Harvard on Friday, July 17—a week before the raid on the Bunny Hutch. Olkon’s statements are inconsistent with the logical conclusion the Court draws from the facts.

Based on the Report, the Petitioner’s Response, the affidavits, transcripts, and the hearing on the Petitioner’s application for reinstatement, we conclude that Olkon has failed to establish by clear and convincing evidence that he has sufficiently rehabilitated himself to the level required of an attorney to practice in federal court. In making this decision, we realize that it may appear to be contrary to the ruling of the Minnesota Supreme Court. The Third and Fourth Circuits have noted the importance “of symmetry in the standards of qualification of coordinate courts in the same state.” In re Braverman, 549 F.2d 913, 914 (4th Cir.1976); In re Abrams, 521 F.2d 1094 (3d Cir.), cert. denied, 423 U.S. 1038, 96 S.Ct. 574, 46 L.Ed.2d 413 (1975). The Abrams court noted that disparate treatment would result in “confusion in the minds of the public, which justifiably may speculate why an attorney not qualified to practice in a federal court has sufficient moral character to practice in the state court.” 521 F.2d at 1106.

Although we acknowledge the importance of similar treatment in the state and federal courts, we must also recognize that federal district courts have an independent power to discipline attorneys who have been admitted to practice before the federal bench. In re Ruffalo, 390 U.S. 544, 547, 88 S.Ct. 1222, 1224, 20 L.Ed.2d 117 (1968); Theard v. United States, 354 U.S. 278, 77 S.Ct. 1274, 1 L.Ed.2d 1342 (1957); Selling v. Radford, 243 U.S. 46, 37 S.Ct. 377, 61 L.Ed. 585 (1917); In re G.L.S., 745 F.2d 856, 859-60 (4th Cir.1984); Abrams, 521 F.2d 1094; see U.S. Const. Art. III, § 1; 28 U.S.C. §§ 1654, 2071; Fed.R.Civ.P. 83. See generally Comment, Disbarment in the Federal Courts, 85 Yale L.J. 975 (1976). In addition, “although the public may perceive an anomaly to be created when concurrent courts disagree as to an applicant’s fitness to practice in their courts, the public is best served by an independent assessment of an applicant’s character in each court.” In re G.L.S., 586 F.Supp. 375, 379 n. 4 (D.Md.), aff’d, 745 F.2d 856 (4th Cir.1984); accord Comment, supra, at 982-83.

To strike a balance between the need for symmetry and the independent authority of this court to establish standards for its bar, we must give “proper deference” to the state court decisions. See Braverman, 549 F.2d at 921; Abrams, 521 F.2d at 1101; G.L.S., 586 F.Supp. 375. Yet complete deference cannot be granted without stripping the federal court of its power to govern its own bar. In G.L.S., the United States District Court for the District of Maryland listed a number of relevant factors to consider when determining whether a federal court should defer to a state court’s determination:

Proper deference, we believe, requires this Court to look closely at the state court decision granting or denying admittance to the state bar, to assess the reasons given for the decision, and to take into consideration whether the opinion was or was not unanimously rendered and, as well, to examine the mechanisms available to the Court, if any, by which an independent investigation as to the moral character of an applicant as might be conducted.

Id. at 378.

In a case such as this, where an independent federal hearing and investigation was conducted and where the federal court does not base its decision on the original state action or the state court’s subsequent proceeding, a federal court’s determination regarding reinstatement is rightfully independent from a state court’s interpretation. Cf. Abrams, 521 F.2d at 1101 (power of federal district court to discipline its attorneys may be limited to the extent the district court relies on the state’s legal or factual determination). The allegations raised in the Report and the evidence supporting them were not before the state when it conducted its disciplinary proceedings. Since additional facts have been brought to this Court’s attention, we believe a deviation from the usual practice of relying on state court disciplinary proceedings is warranted. Moreover, the state did not conduct an investigatory hearing prior to reinstating the Petitioner. The decision to proceed without a Rule 18 investigation and hearing was made by a divided court before this evidence had surfaced. We believe that the state may well have required such a proceeding had such allegations been raised.

In denying Petitioner’s application for readmission, we imply no disrespect to the Minnesota Supreme Court. As noted by the United States District Court for the District of Colorado in In re Mattox, 567 F.Supp. 415 (D.Colo.1983), courts of limited jurisdiction have a slightly different concern in maintaining discipline than a state bar authorizing the general practice of law:

While both courts have an abiding concern for the maintenance of the highest standards of ethics and professional responsibility on the part of those attorneys who comprise the bar, the Supreme Court of Colorado must concern itself as well with the rights of members of its bar to sustain a livelihood. The United States District Court, however, is a court of limited jurisdiction. Practice in this court constitutes only a part of the overall practice of law; most lawyers admitted to practice in the State of Colorado do not practice in the federal courts. The only reason for membership in the bar of this court is to engage in litigation before our District Judges, Bankruptcy Judges and United States Magistrates. Because of the demands of the federal practice, the volume of documents and case files confronting each judge and the vicissitudes and complexity of federal legislation, a high degree of trust and reliance must be reposed in the members of this bar. Other courts, of course, also rely heavily on the trustworthiness and honor of the bar. In this court, however, such reliance is indispensable to the very functioning of the court.

Mattox, 567 F.Supp. at 417.

ORDER

IT IS ORDERED that Petitioner’s application for readmission is denied without prejudice to Petitioner’s right to reapply for readmission after four years from this date and upon demonstrating that he is sufficiently rehabilitated to practice before the federal bench.

RENNER, District Judge,

concurring.

I join with Judge Magnuson and concur in the foregoing findings and order. I do this, however, solely because we, as a court, have not adopted a per se rule providing for disbarment of any attorney convicted of a felony for actions committed within the scope of his or her legal practice. Cf. In re Goldman, 124 Ariz. 105, 602 P.2d 486 (1979) (felony conviction is conclusive evidence of facts establishing lack of fitness to practice law); People v. McGonigle, 198 Colo. 315, 600 P.2d 61 (1979) (use of professional status to commit felony demands disbarment); N.Y.Jud.Law § 90, subd. 4 (McKinney 1983) (any attorney convicted of a felony is automatically disbarred).

Such felonious wrongdoing betrays the very oath admitting one to membership in the bar. As cited in the memorandum, there is no vested right to practice law. In re Isserman, 345 U.S. at 289, 73 S.Ct. at 677. The public has the right to expect impeccable standards of professional responsibility of all who would comprise the bar.

When an attorney betrays this trust, society at large is injured. The privilege to practice must yield to the public’s expectations of honesty and integrity.

      . At the request of the United States Attorney, the Report and the Petitioner’s Response were sealed until.the hearing. In re Petition of Ellis Olkon for Readmission to Practice, No. Misc. 4-80-7 (D.Minn. Dec. 7, 1984).

        . Olkon made no exception for his felony conviction. The court notes that this could well indicate that he is neither remorseful nor repentant and does not acknowledge his previous wrongdoing.


text:
    NEWMAN-GREEN, INC., et al., Plaintiffs, v. Alejandro ALFONZO-LARRAIN R., et al., Defendants.
    No. 82 C 7933.
    United States District Court, N.D. Illinois, E.D.
    Feb. 27, 1985.

      Michael Sher, Rowe Snider, Friedman & Koven, Chicago, III, for plaintiffs.
    Michael Connelly, Edward Ruberry, Connelly, Ruberry & Mustes, Chicago, Ill., for defendants.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Newman-Green, Inc. (“NGI”) has charged Newman-Green de Venezuela (“NGV”) and NGV shareholders Alejandro Alfonzo-Larrain R., Irene Larrain de Ca-plan, Rafael Tudela, Alberto Tudela and William Bettison (collectively “Guarantors”) with violations of various agreements involving NGV’s manufacture and sales in Venezuela of NGI’s patented aerosol valves. Guarantors now move under Fed.R.Civ.P. (“Rule”) 56 for summary judgment as to Count I of NGI’s Amended Complaint. For the reasons stated in this memorandum opinion and order, their motion is denied.

Facts

NGI, an Illinois corporation, has manufactured and sold patented aerosol valves for at least 30 years (NGI President Edward H. Green, Sr. Affidavit [“Green Aff.”] 111). During the early 1970’s NGI developed a business relationship with Guarantors out of a mutual desire to organize a Venezuelan company to manufacture and sell Newman-Green aerosol valves in Venezuela under an exclusive license from NGI. NGV was thus born. NGI owns 25% of NGV’s capital stock, and Guarantors own the rest either directly or indirectly.

Following negotiations in both Illinois and Venezuela (Pl.Mem. 4), on June 13, 1974 NGI and NGV entered into a License Agreement (Def.EX. A). Because of then-recently-enacted Venezuelan legislation, the parties recognized the License Agreement would not become enforceable unless and until it was approved by SIEX, an administrative arm of the Venezuelan government (see Pl.Ex. A). NGV and Guarantors did not want to delay commencement of operations until approval was obtained (in which respect the lack of any SIEX track record made the timetable uncertain), while NGI was unwilling to risk any sale of its machinery or any provision of know-how to NGV absent further contractual assurances (Green Aff. 114). That gap was bridged by NGV’s and Guarantors’ tendering of two additional letter agreements:

1. NGV’s Confidentiality Agreement (App. A) ensuring protection of NGI’s trade secrets; and
2. Guarantors’ Guaranty Agreement (App. B) ensuring payment of royalties to NGI.

Both agreements were executed July 11, 1974. NGV president Alberto Tudela had drafted the Confidentiality Agreement, while it appears NGI attorney Perry Carvellas (Def.R.Mem. 9) had drafted the Guaranty Agreement.

After the Confidentiality Agreement and Guaranty Agreement were signed, NGI began performance by:

1. selling NGV valve-assembly machinery and valve components; and
2. providing technical training and assistance to NGV, both at NGI’s Illinois plant and NGV’s Venezuelan plant.

NGV began manufacturing and selling aerosol valves July 1, 1975. Between 1975 and 1980 NGV’s sales revenue from the valves exceeded $7 million.

SIEX never approved the License Agreement. In December 1977 SIEX indicated it would do so with substantial modifications (Def.Ex. 4), but NGI found the changes unacceptable and they were never made.

Despite its large sales volume, NGV never made any royalty payments to NGI. NGV apparently created a reserve fund for that purpose (Def.Ex. 5), but largely because of the SIEX problem the parties never worked out a mutually acceptable and legal way to transfer the funds to NGI (Def.Exs. 5, 7, 8).

On January 25, 1979 NGI terminated and withdrew the still-unapproved License Agreement and also terminated its relationship with NGV. NGV continued to manufacture and sell the aerosol valves until May 1980. Because NGI never received royalty payments from NGV, NGI demanded royalty payments of approximately $350,000 from Guarantors pursuant to the Guaranty Agreement. Guarantors have refused, and NGI seeks enforcement of that obligation in Count I.

Guarantors’ summary judgment theory is that Venezuelan law controls the validity of the Guaranty Agreement and renders it unenforceable. NGI has not disputed the outcome under Venezuelan law, contending instead that Illinois law applies and renders the Guaranty Agreement enforceable.

Summary Judgment Considerations

Rule 56 requires this Court to view the underlying facts in the light most favorable to NGI. Hermes v. Hein, 742 F.2d 350, 353 (7th Cir.1984). As movants, Guarantors have the burden of showing there is no genuine issue of material fact. Egger v. Phillips, 710 F.2d 292, 296 (7th Cir.1983). It is an understatement to say they have failed to meet that burden.

Guarantors are entitled to summary judgment only if they establish one of two results as a matter of law:

1. Under applicable choice-of-law rules, Venezuelan law controls (and negates) enforceability of the Guaranty Agreement.
2. If instead Illinois law controls, it similarly renders the Guaranty Agreement unenforceable.

As this opinion will reflect, however, each of those propositions ultimately depends on the intention of the parties to the Guaranty Agreement.

Under applicable Illinois law the question of intent (except, of course, as intent may be manifested by an unambiguous contract) is an issue of fact. Graebe v. Graebe, 95 Ill.App.3d 1144, 1150, 51 Ill.Dec. 537, 542, 420 N.E.2d 1095, 1100 (5th Dist.1981). And on that score analysis demonstrates that precisely the opposite of what Guarantors must prove is true: Either (1) the choice of law and the type of guaranty expressed in the Guaranty Agreement both favor NGI’s position as a matter of law or (2) a fortiori there are genuine issues of material fact as to both those subjects.

Parties’ Choice of Law

In this diversity action Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496-98, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941) requires this Court to look to Illinois’ conflict-of-laws rules. One such rule permits parties to a contract to specify the law applicable to their agreement. Hofeld v. Nationwide Life Insurance Co., 59 Ill.2d 522, 529, 322 N.E.2d 454, 458 (1975). Only when parties fail to make a valid choice of law do courts apply the traditional conflict-of-laws rules or engage in the “most significant contacts” analysis of the Restatement (Second) of Conflict of Laws (“Restatement”) § 188 (1971).

Each of the three agreements involving NGI, NGV and Guarantors contains a choice-of-law provision, and each prescribes Illinois law:

1. License Agreement § XXIII: “This agreement shall be construed under the laws of the State of Illinois, United States of America.”
2. Confidentiality Agreement: “This agreement is to be interpreted under the laws of the State of Illinois, U.S.A.”
3. Guaranty Agreement: “The agreement is to be interpreted in accordance with the laws of the State of Illinois.”

Obviously recognizing their task is one suited to Orwellian Doublethink—turning the natural meaning of language on its head, as in “Peace is War” and “Love is Hate”—Guarantors seek to convert the quoted provision of the Guaranty Agreement into a decision by the parties that Venezuelan law rather than Illinois law provides important rules of decision here. They contend the agreements chose Illinois law only for the purpose of interpreting the meaning of the agreements, but the parties chose Venezuelan law to govern enforceability of all the contracts.

That extraordinary notion is built on an obviously false premise. First Guarantors point to the NGV-NGI recognition in the Confidentiality Agreement that the License Agreement’s enforceability depended on Venezuelan law:

It is understood that because of recent enacted legislation the license agreement will not become enforceable until such time as the provisions of the agreement are approved by the Venezuelan government.

Of course that statement of understanding is not itself a choice-of-law agreement. Nevertheless Guarantors argue it indicates an understanding that all three actual choice-of-law provisions were meant to reserve questions of enforceability to Venezuelan law. Consistency demands, they say, reading all three choice-of-law clauses in the same manner.

Were that indeed so, it would merely reconfirm the validity of Emerson’s aphorism:

Foolish consistency is the hobgoblin of little minds.

But Guarantors’ contention is obviously flawed. To return to this Court’s earlier allusion, this is 1985 not 1984, and Guarantors’ indulging in Doublethink has convinced no one (excepting perhaps themselves).

Both the sequence of the agreements and the very language cited by Guarantors lead, to a conclusion wholly contrary to that urged by them. NGV and NGI first executed the License Agreement. Obviously they quickly realized (Green Aff. ¶ 4 and Carvellas Aff. ¶ 4 confirm this) the problems that would be posed by any attempted performance under an agreement that was prevented from going into effect by the newly-enacted legislation. Thus their prompt negotiation and execution of the Confidentiality and Guaranty Agreements—separate and distinct contracts from the earlier License Agreement—betoken a meaning for the quoted language precisely the opposite from that now suggested by Guarantors. Consistently with that common-sense analysis, NGI says the very reasons it insisted on execution of the Confidentiality and Guaranty Agreements were (1) its understanding the License Agreement was unenforceable in Venezuela (Green Aff. ¶ 4, Carvellas Aff. ¶ 4) and (2) its desire to bind Guarantors and NGV to undertakings that were enforceable.

Acutely aware the Guaranty Agreement would be (or was at least likely to be) unenforceable if it had to be sued on in Venezuela, NGI goes on to argue, the parties must have intended their choice of Illinois law to extend to enforceability. Were that not the casé, the result would be that the parties deliberately went through a meaningless charade: They negotiated, and then acted in reliance on, separate agreements knowing they could have no separate viability. That is of course absurd. It impermissibly ascribes no independent substantive effect at all to contracts that the contracting parties plainly treated as critical preconditions to their commencement of performance.

No language in the Guaranty Agreement expressly contrasts “interpretation” with “enforceability” or specifies that the latter is to look to a different source of law than the parties prescribed for the former. Of course parties are sometimes more precise than were the parties here in addressing (or appearing to address) choice of law as to enforceability. See, e.g., Bense v. Interstate Battery System of America, Inc., 688 F.2d 718, 722 (2d Cir.1982) (“This agreement is to be governed by and construed according to the laws of the State of Texas”); Mon-Shore Management, Inc. v. Family Media, Inc., 584 F.Supp. 186, 193 (S.D.N.Y.1984) (“[A]ll rights and obligations of the parties hereunder shall be governed as to validity, construction, and in all other respects by the law of New York”).

However the absence of a provision dividing up the choice of law into component parts gives Guarantors no real comfort. Even apart from the consideration identified in n. 6, courts have read choice-of-law clauses much like that in the Guaranty Agreement as extending to issues of enforceability. See, e.g., Boatland, Inc. v. Brunswick Corp., 558 F.2d 818, 821-22 (6th Cir.1977) (agreement to be “interpreted and construed according to” Wisconsin law); C.A. May Marine Supply Co. v. Brunswick Corp., 557 F.2d 1163, 1165 (5th Cir.1977) (per curiam) (same). Finally, Keller v. Brunswick Corp., 54 Ill.App.3d 271, 275, 11 Ill.Dec. 873, 875, 369 N.E.2d 327, 329 (4th Dist.1977) recognizes the possibility of a bifurcated choice but does not—as defendants contend—support the assertion the parties here chose one jurisdiction’s law for interpretation and another’s for enforceability. No Illinois case of which this Court is aware (and neither of the non-Illinois cases cited in Keller):

1. finds the parties made such a bifurcated choice or
2. applies the law of two different jurisdictions to the same contract.

Illinois courts treat the meaning of an unambiguous contract as a question of law for the court. National Tea Co. v. Commerce & Industry Insurance Co., 119 Ill.App.3d 195, 199-200, 74 Ill.Dec. 704, 708, 456 N.E.2d 206, 210 (1st Dist.1983). That principle could well mandate a definitive ruling in favor of NGI (not Guarantors) on Count I, for this Court would be hard pressed to find an ambiguity in the Guaranty Agreement. But prescinding that question, which need not be decided on the present motion, at the very worst an ambiguity might be found in the contract. And in that event NGI has established a genuine issue of fact as to whether the parties intended Illinois law to govern enforceability of the Guaranty Agreement. Resolution of that factual issue would ultimately require a weighing of the language used, the conduct of the parties and the broader context of the agreement. Graebe, 95 Ill. App.3d at 1150, 51 Ill.Dec. at 542, 420 N.E.2d at 1100.

To be sure, the choice-of-law inquiry does not end with a determination of the parties’ intent, for Illinois courts do not automatically give effect to contracting parties’ express choice of law. Most notably, Illinois cases have often said the chosen law must not violate a fundamental public policy of Illinois. Mell v. Goodbody & Co., 10 Ill.App.3d 809, 813, 295 N.E.2d 97, 100 (1st Dist.1973). That “public policy” doctrine, which was limited and sharply criticized in Champagnie v. W.E. O’Neil Construction Co., 77 Ill.App.3d 136, 139-43, 32 IllDec. 609, 611-14, 395 N.E.2d 990, 992-95 (1st Dist.1979), does not apply here in any event. By definition the application of Illinois law ensures, rather than imperiling, the fulfillment of Illinois public policy.

More precisely, the question is whether an Illinois court would defer to Venezuelan law on enforceability—in spite o/the parties’ choice of Illinois law—to protect a Venezuelan public policy. That possibility is expressed in Restatement § 187(2)(b), under which the parties’ choice of law will not be respected when:

application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

True enough, no Illinois court has ever adopted (or even discussed) that rule. However, it bears consideration in light of the Illinois courts’ adoption of the Restatement’s approach in other areas of law and their increasing reliance op the Restatement in the realm of contracts. Champagnie, 77 Ill.App.3d at 144-46, 32 Ill.Dec. at 615-16, 395 N.E.2d at 996-97; American Food Management, Inc. v. Henson, 105 Ill.App.3d 141, 147, 61 Ill.Dec. 122, 127, 434 N.E.2d 59, 64 (5th Dist.1982).

Even if such scrutiny led to a decision Restatement § 187 were to be applied here, Guarantors would fare no better. Let us assume arguendo the SIEX legislation was a Venezuelan law aimed at protecting that country’s nationals from overreaching by foreign investors. But Venezuela’s assumed interest in thus sheltering its nationals cannot be deemed “materially greater” than Illinois’ interest in protecting its citizens from the unjust enrichment of foreigners who obtain valuable property (by entering into contracts they do not intend to honor) and try to escape just liability for its payment. And the latter result is all the Guaranty Agreement seeks to avoid. Accordingly Restatement § 187(2)(b) would not invalidate the parties’ choice of Illinois law, even if Venezuelan law prevailed in the “most significant contracts” balancing of Restatement § 188.

Enforceability of the Guaranty Agreement under Illinois Law

That leaves for decision whether an Illinois court applying Illinois law would find the Guaranty Agreement enforceable. Guarantors assert a guarantor’s obligation must be co-extensive with that of the principal, citing State Bank of Blue Island v. Benzing, 383 Ill. 40, 54-55, 48 N.E.2d 333, 340 (1943); Mercantile Trust Co. of Illinois v. Kastor, 273 Ill. 332, 342-43, 112 N.E. 988, 992 (1916); and Dormeyer v. Haffa, 343 Ill.App. 177, 180-81, 98 N.E.2d 532, 534 (1st Dist.1951). If so, the unenforceability of the License Agreement against NGV would compel unenforceability of the Guaranty Agreement against Guarantors.

Once again Guarantors try to stretch case law beyond its proper bounds. All the cited cases involved only guaranties of performance that expressly incorporated the terms and conditions of the principal obligation. But guaranties of payment, such as that at issue here, are not logically limited in the same way.

After all, guaranty agreements are simply contracts. As such they may be subject to conditions established by the parties (State Bank of East Moline v. Cirivello, 74 Ill.2d 426, 431, 24 Ill.Dec. 839, 841, 386 N.E.2d 43, 45 (1978); Lawndale Steel Co. v. Appel, 98 Ill.App.3d 167, 170, 53 Ill.Dec. 288, 291, 423 N.E.2d 957, 960 (2d Dist.1981)), or they may be unconditional, independent undertakings (Beebe v. Kirkpatrick, 321 Ill. 612, 616, 152 N.E. 539, 540-41 (1926); Brown Plastering Co. v. Gottschalk, 261 Ill.App. 147, 152 (1st Dist.1931)). Brown for example held that when a guaranty is “founded upon a new and independent consideration” it becomes an independent contract whose enforceability is unaffected by the validity vel non of the principal obligation. Such is the case, at least under NGI’s version of the facts, with the guaranty at issue here.

In relevant part the Guaranty Agreement reads:

In consideration for the execution of the license agreement dated June 13, 1974 from Newman-Green, Inc., Addison, Illinois to Newman-Green de Venezuela, the undersigned personally, individually and/or collectively agree that they guarantee the payment to Newman-Green, Inc. of an amount of money up to the 5% royalty set forth in the license agreement and for the period of time specified in the license agreement.

Nowhere does the guaranty adopt all the terms and conditions of the License Agreement, nor does it expressly condition enforceability on the validity of the License Agreement. Indeed, just as with Guarantors’ argument dealt with earlier in this opinion, it would be absurd to imply such a condition—which would frustrate the entire purpose for which the guaranty was requested and given.

Finally, no significance is to be accorded the recital of “execution of the license agreement” as consideration for the Guaranty Agreement. Both NGI’s version of the facts and the parties’ conduct amply demonstrate additional and independent consideration to support the guaranty. According to the Green and Carvellas affidavits, NGI was unwilling to begin performance of the License Agreement without having received the additional assurances of the Guaranty and Confidentiality Agreements. NGI’s promise to provide NGV with machinery, information and training, despite the uncertainties surrounding the License Agreement, constituted independent consideration sufficient to render the guaranty an independent contract. Were there any doubt on that score, the fact of NGI’s having performed as it promised would erase that doubt.

Once more this Court could well make an ultimate finding in NGI’s favor on the issue of enforceability. For current purposes that is unnecessary. Suffice it to say NGI has raised a genuine issue of fact that precludes summary judgment.

Conclusion

At a minimum, NGI has raised genuine issues of material fact concerning the parties’ intentions as to their choice of law and the conditions of enforceability of the Guaranty Agreement. Guarantors are clearly not entitled to judgment as a matter of law. Summary judgment on Complaint Count I accordingly must be and is denied.

APPENDIX A

July 11, 1974

Mr. Edward H. Green,

President

Newman-Green, Inc.

57 Interstate Road

Addison, Illinois 60101

U.S.A.

Re: License Agreement Newman-Green, Inc. Addison/ Newman-Green de Venezuela

Dear Mr. Green:

This letter is to confirm the recent discussions during which it was expressed that Newman-Green, Inc., Addison, Illinois and Newman-Green de Venezuela are desirous of entering into a license agreement whereby Newman-Green de Venezuela will be licensed to manufacture and sell Newman-Green aerosol valves in Venezuela. Pursuant to the discussions a license agreement was signed on June 13, 1974. It is understood that because of recent enacted legislation in Venezuela the license agreement will not become enforceable until such time as the provisions of the agreement are approved by the Venezuelan Government.

In consideration of the covenants herein entered into between the parties, it is agreed that pending the approval of said license agreement that Newman-Green, Inc. will undertake to provide to Newman-Green de Venezuela aerosol valve assembly machinery embodying the proprietary, confidential and technical information and know-how of Newman-Green, Inc. It is further agreed that Newman-Green, Inc., will provide additional proprietary, confidential and technical information and know-how of Newman-Green, Inc. to a designated employee of Newman-Green de Venezuela. The additional information is to be such that it will be sufficient to allow start-up and operation of the valve assembly machinery provided to Newman-Green de Venezuela. The amount and sufficiency of the additional information is to be determined by Newman-Green, Inc. It is understood and agreed that all of the aforesaid information is provided in confidence and under the terms and conditions of the license agreement.

It is further agreed, in the event that for any reason the license agreement is not approved by the Venezuelan Government, that the confidentiality provisions and the termination and/or cancellation provisions of the license agreement are in full force and effect.

This agreement is to be interpreted under the laws of the State of Illinois, U.S.A.

Signed at Caracas, Venezuela.

NEWMAN-GREEN DE VENEZUELA

By: /s/ Alberto Tudela_

Alberto Tudela

President

APPENDIX B

July 11, 1974

Mr. Edward H. Green, President

Newman-Green, Inc.

57 Interstate Road

Addison, Illinois 60101

U.S.A.

Re: Newman-Green, Inc. and Newman-Green de Venezuela License Agreement

Dear Mr. Green:

In consideration for the execution of the license agreement dated June 13, 1974 from Newman-Green, Inc., Addison, Illinois to Newman-Green de Venezuela, the undersigned personally, individually and/or collectively agree that they guarantee the payment to Newman-Green, Inc. of an amount of money up to the 5% royalty set forth in the license agreement and for the period of time specified in the license agreement.

For the purposes of this agreement the undersigned agree by virtue of the license agreement between Newman-Green, Inc. and Newman-Green de Venezuela that-they are doing business in Addison, Illinois and designate as their individual and collective agent for service John E. Waghorne, Esq., Ace Avenue and Lake Street, Addison, Illinois 60101. The designation of agent is not revocable without the written consent of Newman-Green, Inc., Addison, Illinois.

The agreement is to be interpreted in accordance with the laws of the State of Illinois.

The effective date of this agreement is July 11, 1974.

Signed at Caracas, Venezuela.

/s/ Rafael Tudela_

Rafael Tudela

Apartado 59053

/s/ Alberto Tudela_

Alberto Tudela

Apartado 68658

/s/ A. Alfonzo-Larrain_

A. Alfonzo-Larrain

Apartado 1286

/s/ William Bettison_

William Bettison

Apartado 1286

/s/ Mrs. M. Caplan_

Mrs. M. Caplan

Apartado 1286

Rafael Tudela

Address:

Avda. Las Ciencias c/ Edison Edif. Edison, Piso 1 Los Chaguaramos Caracas.—

Alberto Tudela

Address:

Centro Plaza, Piso 7, Torre B Avda. Francisco de Miranda Los Palos Grandes Caracas.—

A. Alfonzo-Larrain R.

Address:

Edif. Aldemo, Piso 6 Avenida Venezuela, El Rosal Caracas.—

William L. Bettison

Address

Edif. Helados Club Calle Las Mercedes, Chacao Caracas.—

Irene Larrain de Caplan

Address:

Calle vuelta del Zorro Quinta Escondida Valle Arriba Caracas.—

      . Though the text refers to those individual defendants as “Guarantors,” citations to their memoranda and exhibits will take the more simplified form "Def.Mem.,” “Def.R.Mem.” and “Def.Ex."

      . Although the parties’ memoranda use the spelling "Guarantee Agreement,” the document itself bears no caption (it is in the form of a letter), and its body contains the word “guarantee” only once—used properly as a transitive verb. This opinion follows this Court’s customary usage of "guaranty” as a noun (or adjectival noun) and "guarantee" as a transitive verb. See the listing in Webster's Third New International Dictionary 1007 for “guarantee” as an alternate spelling of the noun (Webster's indicates the “ee” ending, when used for the noun, is probably a bastardization of the correct “y" ending, the alteration stemming from a false analogy to such words as "assignee” and "lessee”).

      . Guarantors first point to Venezuela Civil Code Article 1.805:
      A guaranty may not be undertaken except in order to guarantee a valid obligation.
      Their Mem. 19 then cites various commentaries on Venezuelan law to the effect that a guaranty cannot stand as a separate obligation and is thus invalid whenever, as here, the principal obligation is invalid.

      . Guarantors concede (as they must, given the clear choice-of-law contractual language quoted later in the text) Illinois law applies in interpreting the Guaranty Agreement.

      . In addition to the patent need for concern as to whether NGI could collect for goods and services delivered and royalties earned under the License Agreement, questions were plainly present as to the enforceability in a Venezuelan court of the License Agreement’s Illinois choice-of-law paragraph and, relatedly, as to whether an Illinois court could assert jurisdiction over NGV. It may be noted NGI requested and obtained terms in the Guaranty Agreement by which Guarantors specifically submitted to Illinois jurisdiction.

      . That cuts both ways—or neither way. Had the parties "clearly’’ intended Venezuelan law to control enforceability, as Guarantors urge, they could readily have inserted a clause to that effect. They did not.

      . Guarantors could not avoid the factual issue by invoking the rule that guaranty contracts are strictly construed in favor of guarantors. Telegraph Savings & Loan Ass'n v. Guaranty Bank & Trust Co., 67 Ill.App.3d 790, 794, 24 Ill.Dec. 330, 333-34, 385 N.E.2d 97, 100-01 (1st Dist.1978) (citation omitted) explains:

        But where the express terms of the contract are ambiguous, or there is a question regarding the intention of the parties, the rule of strict construction is not brought into play until the intention is determined from the declarations and conduct of the parties or from the surrounding circumstances.

      . There have been suggestions of a second limitation: that the contract must bear a "reasonable relationship" to the state whose law is chosen. But as this Court explained in Intamin, Inc. v. Figley-Wright Contractors, Inc., 595 F.Supp. 1350 (N.D.Ill.1984), the official comment to UCC § 1-105 seems to dispense with such a requirement, as does Restatement § 187 Comment (f).

      . See, e.g., Ingersoll v. Klein, 46 Ill.2d 42, 262 N.E.2d 593 (1970) (tort cases); Ford v. Newman, 64 Ill.App.3d 528, 21 Ill.Dec. 283, 381 N.E.2d 392 (4th Dist.1978) (trusts and wills).

      . This opinion does not of course decide Guarantors’ conduct fits that description. For purposes of the present motion, however, it must be assumed NGI can prevail on the merits.

      . Again Guarantors cannot avoid that factual uncertainty by invoking the rule that guaranty agreements are to be strictly construed in favor of the guarantor. See n. 7.