author: VANARTSDALEN, Judge.

text:
    Paul J. BOGOSIAN, et al., Class Representatives v. GULF OIL CORPORATION, et al.
    Civ. A. Nos. 71-1137, 71-2543.
    United States District Court, E.D. Pennsylvania.
    April 1, 1985.
   MEMORANDUM OPINION AND ORDER

VANARTSDALEN, Judge.

Counsel Fees and Costs Award

By separate memorandum and order, I approved the settlement agreements entered into between counsel for the class plaintiffs and the thirteen remaining defendant oil companies. Counsel for the plaintiffs filed a motion for the allowance and award of counsel fees and costs. The motion requests counsel fees (including attorneys, law clerks and paralegals) totaling $6,734,600.50, plus costs expended of $349,-475.73, and $20,000.00 apiece to the named class representatives, Louis J. Parisi and Paul J. Bogosian, for consultative and other specialized services rendered to the class.

The total fund created for the damage class plaintiffs by the thirteen settling defendants is $25,000,000.00. In addition, certain equitable relief was obtained for the existing lessee-dealers who composed the plaintiff injunctive class, many of whom are class members of the damage class. Proper notice was provided to plaintiffs of both classes as to the proposed settlements and the application for counsel fees and costs. The notice provided for filing of objections and set a date for hearing the motions. Some objections were received as to the extent and nature of the equitable relief and as to the breadth of the releases to be granted to the defendants. There was no objection filed or stated at the hearing as to the amount of the proposed attorneys’ fees or the distribution of the fees. Nevertheless, it is clearly the duty of the trial judge to determine the amount of fees and costs to be allowed out of the settlement fund.

In this circuit, fee awards in class actions are controlled by the guidelines set forth in Lindy Brothers Builders, Inc. v. American Radiator and Standard Sanitary Corp., 487 F.2d 161 (3d Cir.1973) (Lindy I) and 540 F.2d 102 (3d Cir.1976) (Lindy II), and their progeny. Further guidance has been recently provided by In Re Fine Paper Antitrust Litigation, 751 F.2d 562 (3d Cir.1984). Fortunately, in this case, unlike several of the reported cases on counsel fees, there is a single unified fee petition presented by all counsel, and there is no dispute among counsel as to how the fees are to be divided among them. The petition is amply documented by affidavits, time records and other supporting material.

The first step in the analysis is “a determination of how many hours were spent, by which attorneys, and in what manner.” In Re Fine Paper, 751 F.2d at 583. These essential facts are fully documented in the petition and annexed papers. Time records were maintained on a current basis. Berger & Montague, P.C., the principal law firm involved, kept accurate computerized data processing records of time spent and services rendered. The other firms involved submitted detailed affidavits attesting to the maintenance of contemporaneous time records. There is nothing in any of the submissions to suggest that the records are inaccurate or that the time expended was excessive or duplicative. In that respect it may be noted that since the entry of Class Action Order No. 68 on February 8, 1983, all of the attorneys were placed under rigid time constraints to bring the case to trial, and plaintiffs’ attorneys, as well as defense counsel, were constantly hard pressed to accomplish the many absolutely essential pretrial preparations within the established time limits. They did not have the luxury of unlimited time within which to perform needless or redundant tasks. Determining after-the-fact and from hindsight whether the work done by attorneys in preparing a case for trial was excessive or wasteful is always difficult and largely subjective. This case was of such complexity that if there were enough lawyers available, an almost infinite amount of time could have been productively utilized in preparing for trial. The total hours claimed for the period covered by this fee petition appear to be entirely reasonable.

The next step is to “determine the value of each attorney’s services to the class.” Id. at 583. This is determined as to each attorney individually. Such a determination involves consideration of an attorney’s usual billing rate for like or similar services rendered to a paying client. This is an essential ingredient in determining the “lodestar” figure that then may be adjusted up or down based on separate considerations. The affidavits of counsel set forth both the present and the historical billing rates for the various attorneys, law clerks and paralegals.

In determining the “lodestar” fee in this case, I will apply the historical billing rates. Although counsel in their brief submit respectable authority that has utilized current rates (apparently to compensate for delayed payment), such an approach seems inconsistent with the theme of Lindy Brothers and its progeny. The “reasonable hourly rate” would appear to be that which the attorney would have charged at the time the services were rendered, not that which in today’s market might be appropriate. Compensation for the delay in payment is a factor that must, under Lindy Brothers, be considered as one of the contingencies influencing the adjustment to the lodestar. In Re Fine Paper, 751 F.2d at 583.

The fee application is for work done from February 22, 1981 to November 30, 1984. In 1981, Sun Oil Company and Getty Oil Company settled, and out of that settlement fund, plaintiffs’ counsel were awarded fees of $2,110,006.50 and costs of $79,-926.64 for services to February 22, 1981. The interim award was calculated solely on the basis of the “lodestar” calculation without any upward adjustment, but without prejudice to seeking an upward adjustment upon final termination of the litigation. Counsel are not seeking any upward adjustment for the fees allowed for work prior to February 22, 1981. The prior fee award did utilize the then current billing rates for work extending over approximately ten years. The decision by plaintiffs’ counsel not to seek any additional compensation for work done during the period prior to February 22, 1981, is both appropriate and commendable.

The lodestar will be calculated by multiplying the number of hours expended by each attorney, law clerk and paralegal by the historical billing rate of each such person. The total number of hours expended, as detailed in .the petition and annexed documents, is 32,757.75 hours for attorneys, 1,992.25 hours for law clerks, and 13,468.25 hours for paralegals. The law firm of Berger & Montague, P.C., which was plaintiffs’ lead counsel throughout this litigation, accounts for 28,143.5 hours of lawyers’ time and all of the claimed law clerk and paralegal time. The other attorneys seeking claims are Norman P. Zarwin (156.3 hours), Richard E, Bennett (420 hours), James J. Binns (249.55 hours), and Harold Brown (3,788.4 hours).

Utilizing the historical billing rates and allowing all of the time claimed by each attorney, the lodestar figure for the attorneys involved is as follows:

In addition, Berger & Montague, P.C., seek to have the law clerks’ and paralegals’ time and charges added to the lodestar. Services rendered by law clerks and paralegals may properly be included in the attorneys’ fee award. Whether those services are considered as costs or fees is of little practical significance provided the amount is that which would normally be billed a paying client and no upward adjustment is made to such calculation in determining a proper fee award. Again counsel have cited respectable authority that included paralegal services in calculating the lodestar before applying a percentage upward adjustment. This I now consider to be an incorrect method of calculation. In prior cases, I too may have included paralegals’ time and utilized current rather than historical billing rates before applying' an upward adjustment. The historical as opposed to current rates will be utilized as follows:

Thus, there is a lodestar for attorneys’ time and services of $3,772,526.25 and for paralegals and law clerks, $549,533.75. The lodestar may be adjusted upward based on the contingent likelihood of success in the litigation and the overall quality of the work performed. Significantly, the only attorneys who are seeking any upward adjustment of the fees are the law firm of Berger & Montague, P.C., and James Binns. They seek a multiplier of 1.5 times the lodestar figure. As to Berger & Montague, P.C., I consider this a modest and fair request.

Little need be said as to the multiplier request by Berger & Montague, P.C. The uncertainty of receiving any compensation was somewhat softened by the Sun Oil Company and Getty Oil Company settlements in 1981, for which all counsel received a substantial interim award of fees. Beyond that point in time, there were extreme risks that there would be no additional fund out of which to seek fees at the end of the litigation. Among the most substantial hurdles to successful litigation, as I repeatedly expressed in various pretrial determinations, was proof on a class-wide basis of damages in any amount.

As to the quality of the work performed, although that would normally be reflected in the not immodest hourly rates of all attorneys, for which one would expect to obtain excellent quality work at all times, the results of the settlements speak for themselves. Despite the extreme uncertainties of trial, plaintiffs’ counsel were able to negotiate a cash settlement, of a not insubstantial sum, and, in addition, by way of equitable relief, substantial concessions by the defendants which, subject to various conditions, will afford the right, at least, to lessee-dealers to obtain gasoline supply product from major oil companies and suppliers other than from their respective lessors. The additional benefits obtained for the classes by way of equitable relief would, in and of itself, justify some upward adjustment of the lodestar figure.

The multiplier of 1.5 times the calculated lodestar figure of the attorneys’ time and services based on historical rates of the law firm of Berger & Montague, P.C., will be granted.

Mr. Binns, an eminently qualified trial attorney, was called into the fray by plaintiffs’ counsel sometime in 1984. He expended a total of 249.55 hours. His normal billing rate for 1984 was $250 per hour. Undoubtedly, his services were quite valuable. He appears to have been one of the important members of plaintiffs’ negotiating team that finally brought about the settlements. I note that the billing rates of at least twenty-seven attorneys who have assisted plaintiffs in this litigation are set forth in the application and accompanying documents. Mr. Binns’ hourly billing rate is higher than all but two of those attorneys; namely, David Berger, lead counsel throughout, whose rate is higher, and Harold Brown, whose rate is the same as Mr. Binns’.

Without in any way intending to minimize the value of the services rendered by Mr. Binns, I do not find that a multiplier to the hourly rate of $250 is warranted for him in this case. The delay factor, to the extent delay in payment is an appropriate consideration in deciding an upward adjustment, is minimal or nonexistent, because no work was done prior to 1984. Although the uncertainty or contingency factor was of course present, most of the pretrial proceedings and discovery had been completed and thus the contingent risks could be more adequately gauged. Where substantial hourly rates are charged, an upward adjustment should be awarded only in unusual circumstances where it is needed to obtain a fair fee for the services rendered.

There is also an application for an award of $20,000.00 apiece to Louis Parisi and Paul Bogosian, the two named class representatives in these cases. Both provided valuable consultative assistance to plaintiffs’ counsel. They, by reason of being the class representatives, were required to assist in preparing pretrial discovery; they were both subject to extensive oral depositions. Early in discovery, I had ruled that defendants could not depose class members, other than the class representatives, unless they were identified as trial witnesses. Each representative avers that he spent in excess of 500 hours’ time at counsels’ request toward various preparatory phases of this litigation. The propriety of allowing modest compensation to class representatives seems obvious, and I have done so in at least one previous case. Aamco Transmissions v. Tayloe, 82 F.R.D. 405 (E.D.Pa.1979). There has been no objection to this application. It will be granted.

The law firm of Berger & Montague, P.C.‘, will be awarded the lodestar for attorneys’ fees of $3,042,041.25, multiplied by 1.5, which equals $4,563,061.87, plus law clerks’ and paralegals’ charges of $549,-533.75, for a total fee of $5,112,595.62. In addition, costs expended of $325,097.44 will be awarded. Harold Brown will be awarded $596,822.50, plus costs expended of $23,-328.99. James Binns will be awarded $62,-387.50 and costs of $374.50. Zarwin, Baum, Resnick and Cohen, P.C., will be awarded $19,675.00. Richard Bennett will be awarded $51,600.00 and costs of $675.00.

The total fees awarded at this time are $5,843,080.62; costs are allowed totaling $349,475.93. The total settlement generating these fees is $25,000,000.00. The fee awards are approximately 23%% of the fund. This would appear to be an overall reasonable award considering all of the circumstances. If one takes into account the prior settlements, there was a total settlement fund generated of $36,000,000.00. Also calculating the amount of prior fees awarded, together with the present award of fees allowed, the total fees would be $7,953,087.12. This would calculate to approximately 22% of the total settlement fund — again an overall reasonable amount.

In the notice that was sent to the class members, it was stated the total awards for fees and costs “will not exceed 25% of the aggregate amount of all settlements in this matter, including interest accrued on the settlements obtained from all defendants.” As of the time of the hearing on the application for approval of the settlements and the award of fees, it was represented that there remained a fund of about $12,000,000 after deducting the interim award of fees and costs, which sum, together with the $25,000,000 from the present settlements, will create a principal fund of $37,000,000.00, which until final distribution will continue to collect interest.

There is considerable work still to be completed in distributing the shares to the proper class members. However, because of a proposed formula set forth in the notice to the damage class, to which there has been no objection, the work required to complete the attorneys’ services should be fairly routine and no doubt much of the work can be assigned to paralegals and other less expensive professional assistants. Of course, counsel will be entitled to petition for the allowance of additional fees and costs for services that are required in order to complete the duties owed to the classes, subject to the overall limitation self-imposed by counsel in the notice sent to the classes, as noted above.

SETTLEMENT ORDER NO. 7

It is ordered that counsel fees and costs in addition to the interim award heretofore entered, are awarded to be paid out of the settlement fund created by the settlements with the defendants as follows:

It is further ordered that there is awarded out of the settlement fund created by the settlements with the defendants the sum of $20,000 apiece to the class representatives, Louis Parisi and Paul J. Bogosian.

      . Other attorneys might have requested an upward adjustment had they anticipated that historical billing rates, rather than current rates, would be utilized. Nevertheless, I conclude that the historical rates provide an ample fee award in this case.

      . In Hensley v. Eckerhart, 461 U.S. 424, 435, 103 S.Ct. 1933, 1940, 76 L.Ed.2d 40 (1983), involving a fee award under 42 U.S.C. § 1988, the court stated:
      Where a plaintiff has obtained excellent results, his attorney should recover a fully cornpensatory fee. Normally this will encompass all hours reasonably expended’ on the litigation, and indeed in some cases of exceptional success an enhanced award may be justified.

      . The figures for Berger & Montague are compiled from six separate billing periods spanning February 23, 1981 to November 30, 1984. See Exhibit C, Affidavits in Support of Joint Petition of Plaintiffs’ Counsel Fees and Reimbursement of Cost Disbursements.

      . The figures for the Law Offices of Harold Brown include Mr. Brown and twelve attorneys in his firm.


source: Caselaw Access Project

author: DAN M. RUSSELL, Jr., District Judge.

license: Public Domain

text:
    Karl R. GORMAN, Plaintiff/Counter-Defendant, v. SOUTHEASTERN FIDELITY INSURANCE COMPANY, Defendant/Counter-Plaintiff/Third-Party Plaintiff, v. GENERAL MOTORS ACCEPTANCE CORPORATION, Third-Party Defendant.
    Civ. A. No. S84-0134(R).
    United States District Court, S.D. Mississippi, S.D.
    April 1, 1985.

      Donald C. Doman, Jr., Denton Persons, Doman & Bilbo, Biloxi, Miss., for plaintiff Gorman.
    Floyd G. Hewitt, Jr., Bryan, Nelson, Allen, Schroeder & Compton, Biloxi, Miss., for defendant Southeastern Fidelity.
    Robert Alan Byrd, Rushing & Guice, Biloxi, Miss., for defendant General Motors.
   MEMORANDUM OPINION

DAN M. RUSSELL, Jr., District Judge.

This motion is presently before the Court on the defendant’s motion for summary judgment to dismiss plaintiff’s complaint, or in the alternative, partial summary judgment on the issue of punitive damages. The plaintiff’s complaint alleges tortious breach of contract, breach of fiduciary duties, and fraud in the inducement resulting from a one car accident which occurred on June 4, 1983 at approximately 5:20 pm on Lamey Bridge Road in North Biloxi, Mississippi. Plaintiff’s original contractual claim for the cash value of the car has apparently been paid by the defendant and accepted by the lienholder of plaintiff’s automobile, General Motors Acceptance Corporation.

After reviewing the submitted deposition excerpts, affidavits, and the pleadings, the Court has found the following relevant facts to be undisputed:

1. That on or about June 3, 1982, the plaintiff purchased from Southeastern, by application through the Buntyn and Veazey Insurance Agency of Gulfport, Mississippi, the automobile policy that is the subject of this lawsuit covering the plaintiffs 1981 Pontiac Grand Prix.

2. That said application indicated the plaintiffs address as Route 12, Box 68, Lot 128, Gulfport, Mississippi.

3. That a policy was issued and sent by Southeastern to the address set out in the plaintiffs application and was received by him at that address.

4. That the policy period for the subject contract of insurance was June 3, 1982 through June 3, 1983.

5. That the said policy providing, among others, collision coverage was not a continuing agreement but a one year contract requiring a new application for each succeeding policy period. Further, the contract specifically provided that no renewal shall be effective prior to the actual receipt by the company of the renewal premium at the company’s office.

24. Renewal of Coverage
All coverages afforded hereby shall expire at the expiration of the term of this policy or at the expiration of any renewal term thereof. In the event the insured and the Company agree to renew this policy, such renewal may be effected by means of a renewal certificate to be attached to this policy, or at the option of the Company by issuance of a new policy, but no renewal term shall become effective prior to the actual receipt of the premium in payment for the same and acceptance thereof by the company at the Company’s office. (Emphasis added)

6. That around the month of March, 1983, the plaintiff moved from Route 12, Box 68, Lot 128, Gulfport, Mississippi to Route Three, Box 235, Saucier, Mississippi, but did not notify the defendant or Buntyn and Veazey Insurance Agency.

7. That the plaintiff never came in to make arrangements for the renewal of his policy and the original policy expired on June 3, 1983 at 12:01 am.

8. That on June 4, 1983 at approximately 5:20 pm, the insured while driving the said 1981 Pontiac Grand Prix was involved in a one car accident, resulting in the said vehicle colliding with some trees.

9. That the plaintiff reported the accident to the Buntyn and Veazey Insurance Agency on the following Monday who passed this information along to the company.

10. That the claim was denied by the company on the grounds that no coverage was in existence under the subject policy because it had expired at 12:01 am on June 3, 1983.

11. That the plaintiff then retained counsel who made demand on the defendant for payment under the policy relying on their interpretation of § 83-11-5 and § 83-11-7 of the Mississippi Code of 1972, as requiring among others, notice to an insured that his policy is about to expire unless renewed; that the company is willing to renew the policy; and, unless such notice is given, the policy automatically renews.

12. That the defendant’s employees reviewed § 83-11-5 and § 83-11-7 and called Mississippi counsel concerning said statutes and notice. That, ■ after consulting with said attorney, Southeastern reaffirmed its denial based on the expired policy and its interpretation of said sections as not requiring such notice.

13. That after further correspondence between the parties, Southeastern paid GMAC, as loss payee and lienholder on said vehicle and obtained an indemnifying release.

14. That despite this payment, on February 13, 1984, the plaintiff filed suit against the defendant alleging that it had wrongfully denied the claim and, in so doing, was guilty of bad faith.

In order for punitive damages to be awarded for tortious breach of contract, the insurer’s refusal to pay a claim must be attended by intentional wrong, insult, abuse, or gross negligence as to consist of an independent tort. Standard Life Ins. Co. of Indiana v. Veal, 354 So.2d 239, 247 (Miss.1978). Such damages should be allowed only within narrow limits since they are assessed as an example and warning to others. Id. Punitive damages are not permitted when an insurance company has a legitimate or arguable reason for failing to pay a claim. Merchants Nat. Bank v. Southeastern Fire Ins. Co., 751 F.2d 771 (5th Cir.1985); Reserve Life Ins. Co. v. McGee, 444 So.2d 803 (Miss.1983); Consolidated American Life Ins. Co. v. Toche, 410 So.2d 1303 (Miss.1982).

The Court must determine whether the uncontroverted facts in this case support a claim for punitive damages under Count I of plaintiff’s complaint.

The defendant contends that Mississippi case law has not definitively addressed the issue whether Miss.Code Ann. § 83-11-5 and § 83-11-7 (1972) requires an automobile insurance carrier to notify its insured that his policy is about to expire and that it is willing to renew the existing or expiring policy. In light of this unsettled principal of law and defendant’s reliance upon the advice of retained counsel, the defendant argues that its denial of the plaintiff’s claim was not in the face of an established obligation. Therefore, its actions were based upon a legitimate and arguable reason barring the imposition of punitive damages.

This Court need not embark at this time upon an Erie bound journey to actually determine if notice was required, but only need decide whether, as' a matter of law, an arguable reason existed for the defendant’s denial of the plaintiff’s claim.

Miss.Code Ann. § 83-11-5 concerning notice of cancellation and Miss.Code Ann. § 83-11-7 pertaining to nonrenewal read as follows:

§ 83-11-5. Notice of cancellation.
No notice of cancellation of a policy to which section 88-11-3 applies shall be effective unless mailed or delivered by the insurer to the named insured at least twenty (20) days prior to the effective date of cancellation; provided, however, that where cancellation is for nonpayment of premium at least ten (10) days’ notice of cancellation accompanied by the reason therefor shall be given. Unless the reason accompanies or is included in the notice of cancellation, the notice of cancellation shall state or be accompanied by a statement that upon written request of the named insured, mailed or delivered to the insurer not less than fifteen (15) days prior to the effective date of cancellation, the insurer will specify the reason for such cancellation.
This section shall not apply to nonrenewal.
§ 83-11-7. Nonrenewal.
No insurer shall fail to renew a policy unless it shall mail or deliver to the named insured, at the address shown in the policy, at least thirty (30) days’ advance notice of its intention not to renew. This section shall not apply:
(a) if the insurer has manifested its willingness to renew, subject to certain specified conditions which are not met by the insured; nor
(b) if the insured has manifested its unwillingness to renew; nor
(c) in case of nonpayment of premium; nor
(d) in case of failure to make timely payment of dues to, or to maintain membership in good standing with, a designated association, corporation, or other organization where the original issue of such policy or renewal was dependent upon such membership; provided that notwithstanding the failure of an insurer to comply with this section, the policy shall terminate on the effective date of any other insurance policy with respect to any automobile designated in both policies.
Renewal of a policy shall not constitute a waiver or estoppel with respect to grounds for cancellation which existed before the effective date of such renewal, and if a policy shall be cancelled as authorized by this article prior to such policy’s renewal, such cancellation shall terminate any right of renewal conferred by this article. (Emphasis added)

Although Section 83-11-7 explicitly requires notice to the insured when the insurer intends not to renew a policy, it does not specifically state if notice is required before coverage terminates when an insurer is willing to renew an existing policy but has not heard from the insured as the anniversary date approaches. There has been no reported case law which has confronted this issue. The one reported decision which refers to Miss.Code Ann. § 83-11-7 (1972) concerns only whether the insured had provided sufficient notice of its intention not to renew an existing policy. See Henderson v. United States Fid. & Guar. Co., 620 F.2d 530 (5th Cir.1980).

In addressing issues of first impression and interpreting ambiguous contracts, the Mississippi Supreme Court has refused to award punitive damages even though it ultimately decided against the defendant insurance company. In Gulf Guaranty Life Insurance Co. v. Kelley, 389 So.2d 920 (Miss.1981), the defendant insurance company cancelled plaintiff’s insurance policy within ninety days of issuance as allowed by the policy. However, the cancellation occurred after the plaintiff suffered a heart attack. The Mississippi Supreme Court held that for public policy reasons the defendant was estopped from cancel-ling the policy after the onset of an illness. Although the Court allowed actual damages, it denied punitive damages reasoning that an arguable reason for failing to pay the claim existed since it was the first time the Court had addressed such a cancellation provision of a master policy. See also Consolidated American Life Insurance Company v. Toche, 410 So.2d 1303 (Miss. 1982).

In Michael v. National Security Fire and Casualty Company, 458 F.Supp. 128 (N.D.Miss.1978), Chief Judge Keady was faced with the interpretation of an ambiguous fire insurance policy. Although the Court interpreted the policy against the defendant insurance company, it granted defendant’s motion for summary judgment barring punitive damages stating:

Since this is a case of first impression in Mississippi, and no cases directly in point have been cited to the court or revealed by our research, National Security’s reason for denial of plaintiff’s claim can fairly be characterized as “legitimate” or arguable”, and, therefore, an award of punitive damages is inappropriate.

Id. at pp. 131-132. See also Black v. Fidelity and Guaranty Insurance Underwriters, 582 F.2d 984, 991 n. 14 (5th Cir. 1978). (“We note that had the only question been whether the policy had been effectively cancelled on the day preceding the accident, the defendant clearly would have had an arguable reason for denying the claim, given the ambiguity of Miss.Code Ann. § 83-11-5.”)

Furthermore, the Fifth Circuit has stated that “good faith reliance upon advice of counsel may prevent imposition of punitive damages.” Henderson v. United States Fid. & Guar. Co., 695 F.2d 109, 113 (5th Cir.1983); Stanton Brooks v. Astra Pharmaceutical Products Inc., 718 F.2d 553, 580 (3rd Cir.1983). After being approached by plaintiff’s counsel who propounded his opinion that notice was due and payment was being wrongfully denied, the defendant retained Mr. Frank Montague, Jr., a licensed attorney, for advice. As evidenced by his affidavit, Mr. Montague researched Sections 83-11-5 and 83-11-7 and expressed his opinion that no notice was required by Mississippi law. The defendant continued to deny payment based upon the advice received.

The lack of specific statutory language and judicial interpretation concerning the notice requirement in approaching policy expiration situations clearly provides the defendant a legitimate basis to rely on its own statutory interpretation and policy provisions. Therefore, it is the opinion of this Court that the defendant denied payment as a result of what was no more than a legal dispute arising from insufficient legal authority governing the issue of notice. Such as factual setting enables this Court to determine that there was no element of aggression, insult, malice or gross negligence which would evince a ruthless disregard for the rights of Karl Gorman by Southeastern.

Defendant had an arguable reason for denying the plaintiffs claim since as of the time of the dispute, and this opinion for that matter, the issue of whether notice is required as matter of law under the facts sub judice has never been determined. Therefore, a claim for punitive damages is held to be inappropriate. Such a holding also precludes any claim for punitive damages under Counts II and III of the plaintiffs complaint as well as any claim for extracontractual damages and emotional distress since the same elements of willful and intentional wrong, malice, or gross negligence would have to exist. Green v. Amerada Hess Corp., 707 F.2d 201, 208 (5th Cir.1983); Horton v. Hartford Life Ins. Co., 570 F.Supp. 1120, 1124 (N.D.Miss. 1983); T.G. Blackwell Chevrolet Co. v. Eshee, 261 So.2d 481, 485 (Miss.1972).

The Court is also of the opinion that summary judgment should be granted as to Count II and Count III of the plaintiffs complaint alleging breach of fiduciary duty and fraud in the inducement respectively, on additional grounds.

Under Mississippi law, there is no fiduciary relationship or duty between an insurance company and its insured in a first party insurance contract. George Norris, Jr. v. First Federated Life Insurance Company, Civil Action No. S820090(N) (S.D.Miss. Order of August 12, 1982); Equitable Life Assurance Society v. Weil, 103 Miss. 186, 60 So. 133 (1912). The relationship which does exist is one that is contractual in nature, that of a debtor-creditor type. Weil, supra; 2 Couch on Insurance 2d, § 23:11. Only when a third party relationship exists between the insurance company and the insured does the insurance company acquire “control” of the litigation which gives rise to a fiduciary relationship. See Craft v. Economy Fire and Casualty Company, 572 F.2d 565, 567 (7th Cir.1978); Baxter v. Royal Indemnity Company, 285 So.2d 652 (Fla.1973); and Walsh v. Campbell, 130 Ga.App. 194, 202 S.E.2d 657 (1973) (reasoning that one who claims under a first party policy necessarily takes a position antagonistic to the insurer and must expect to deal with it at arm’s length). Since a first party insurance contract existed between the plaintiff and defendant, this Court refuses to impose a fiduciary relationship upon the parties.

Count III of the plaintiff’s complaint alleges fraud in the inducement. For a claim of fraud to be established, the plaintiff must prove, by clear and convincing evidence, the following elements:

(1) a representation,

(2) its falsity,

(3) its materiality,

(4) the speaker’s knowledge of its falsity or ignorance of its truth,

(5) his intent that it should be acted on by the hearer and in the manner reasonably contemplated,

(6) the hearer’s ignorance of its falsity,

(7) his reliance on its truth,

(8) his right to rely thereon, and

(9) his consequent and proximate injury. Franklin v. Lovitt Equipment Co., Inc., 420 So.2d 1370, 1373 (Miss.1982); Parker v. Howarth, 340 So.2d 434 (Miss.1976).

The plaintiff makes only a general allegation of fraud contrary to what is required by Fed.R.Civ.P. 9(b) which states: “In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Such a fact pleading requirement is well established in common law and Mississippi practice. McMahon v. McMahon, 247 Miss. 822, 157 So.2d 494 (1963). Plaintiff’s complaint simply alleges that the defendant made promises with the intent to defraud the plaintiff, that the defendant did not intend to perform these promises, and that upon reliance of these promises the plaintiff suffered an injury. Nowhere is it stated what was the actual nature or falsity of the representations made in light of the facts of this case. The claim for coverage did not arise from an accident within the stated policy duration dates. Rather, the destruction of plaintiffs car occurred after the anniversary date of the insurance policy. It is the opinion of this Court that a representation concerning post anniversary date coverage would have had to have been made to the plaintiff in order to substantiate a claim for fraud of fraudulent inducement. The record being void of any allegation or evidence to this effect entitles the defendant to summary judgment as to Count III of the plaintiffs complaint.

Summary judgment having been granted in favor of the defendant as to Counts II and III of the plaintiffs complaint, and partial summary judgment having been granted as to punitive damages under Count I of the plaintiffs complaint, requires this Court to ponder whether any issue of actual contractual damages suffered by the plaintiff remains to be tried. Plaintiff vaguely alleges under Count I that he “has suffered damages under the terms the insurance policy in an amount to be determined at the time of trial, together with interest thereon at the legal rate.” The Court is unable to ascertain from the pleadings whether the plaintiff is referring to remaining, actual contractual damages or his claim for punitive/extra-contractual damages. Therefore, it is the opinion of this Court that the plaintiffs cause of action should be dismissed unless the plaintiff can amend his complaint prior to the pretrial conference to show a claim for pending, actual contractual damages exceeding the sum of ten thousand dollars. 28 U.S.C. § 1332 (1976).

An Order in accordance with this Opinion shall be provided as set forth in the Local Rules.

      . See findings of fact No. 5.


author: WEINER, District Judge.

text:
    CAMARO HEADQUARTERS INC. v. Phill Lee BANKS, Cindy Banks and National Camaro, Inc.
    No. 84-2640.
    United States District Court, E.D. Pennsylvania.
    April 10, 1985.
    Arthur Jacobs, Philadelphia, Pa., for plaintiff.
    Stanley H. Cohen, Philadelphia, Pa., for defendant.
   MEMORANDUM OPINION AND ORDER

WEINER, District Judge.

Plaintiff, Camaro Headquarters, Inc., brought this copyright infringement action pursuant to 17 U.S.C. § 501, against defendants, Phill Lee Banks, Cindy Banks, and the company under which the Banks trade, National Camaro. Plaintiff alleged that the copyright it owns, No. TX 1-069-368, for its sales catalog has been infringed upon, in that the sales catalog distributed by the defendants is substantially similar to the plaintiffs protected work.

On July 3, 1984, in accordance with a stipulation entered into between the parties, a motion of the plaintiff for a preliminary injunction was granted enjoining the defendants from publishing, selling, marketing or otherwise distributing or disposing of any copies of any of their catalogs that fully or substantially resembled or incorporated the designs, arrangements and language of the plaintiffs protected work. Subsequently, on February 1, 1985, it was ordered that trial be held in this matter on February 20, 1985. On February 6, 1985, defendants’ counsel filed with this court a motion for leave to withdraw his appearance, which motion was later granted. The trial date previously set was continued to March 8, 1985, to afford the defendants a sufficient interval to retain new counsel. The defendants were advised of this new trial date by a certified letter sent to them by the plaintiff’s counsel.

The defendants failed to appear at the trial. Plaintiff’s counsel was present with his witnesses. The court instructed plaintiff’s counsel to submit the testimony of the witnesses in affidavit form, and to send copies to the defendants so they could object to any of the testimony. On March 12, 1985, plaintiff filed the affidavits of its witnesses with the Court, and sent copies of the affidavits to the defendants by first class mail, postage paid. The affidavits were those of Harry Woodrow and Cynthia Woodrow, the principal stockholders of the plaintiff corporation.

For the plaintiff to prevail, it must establish a prima, facie case of infringement. The test for establishing an infringement has been stated by the Court of Appeals for the Third Circuit as follows:

To establish a copyright infringement, the holder must first prove that the defendant has copied the protected work and, second, that there is a substantial similarity between the two works. The criterion for the latter requirement is whether an ordinary lay observer would detect a substantial similarity between the works. Ideal Toy Corporation v. Fab-Lu Ltd., 360 F.2d 1021 (2d Cir.1966). Phrased in an alternative fashion, it must be shown that copying went so far as to constitute improper appropriation, the test being the response of the ordinary lay person. Arnstein v. Porter, 154 F.2d 464 (2d Cir.1946). See also Nimmer on Copyright § 143.53 (1973 ed.).

Universal Athletic Sales Co. v. Salkeld, 511 F.2d 904, 907 (3d Cir.1975).

As to the element of “copying”, it has been held that the appearance of common errors in the works of the plaintiff and defendant are especially probative. Adventures in Good Eating v. Best Places to Eat, 131 F.2d 809, 811 (7th Cir.1942); College Entrance Book Co. v. Amsco Book Co., 119 F.2d 874, 875 (2d Cir.1941); Rexnord, Inc. v. Modern Handling Systems, Inc., 379 F.Supp. 1190, 1194 (D.Del.1974).

In her affidavit, Cynthia Woodrow states that she personally typed the plaintiff’s catalog and made several typographical errors. These same misspellings appear in the defendants’ catalog. We note, for example, that on page 16 of the plaintiff’s catalog, listing colors of 1968 “deluxe reproduction seat skins” the word “turquoise” is spelled incorrectly twice. On the corresponding page of defendants’ catalog, the word is also misspelled twice.

Indeed, in examining the two catalogs submitted as exhibits it is apparent that they are identical save for their cover pages and prices quoted. The schematic drawings of the automotive parts cataloged, their labeling and numbering are identical in all relevant aspects. We, therefore, find that there is substantial similarity between the works. We, therefore, find that the plaintiff has met its burden of establishing a willful infringement by the defendants.

As to the question of damages, plaintiff requests that we award statutory damages of $50,000.00. Under 17 U.S.C. § 504(c)(1), the court may award a sum of not less than $250.00 nor more than $10,-000.00 upon a showing of infringement. However, where the plaintiff sustains the burden of proving, and the court finds, that the infringement was committed willfully, the court may, in its discretion, increase the award of statutory damages to a sum of not more than $50,000.00. While we do find the infringement was willful, we decline to award the maximum statutory damages allowable. We find that the sum of $20,000.00, twice the $10,000.00 award sanctioned by § 504(c)(1), is, given the facts of the case, an equitable award to the plaintiff.


author: KANE, District Judge.

text:
    John KUHNS, Plaintiff, v. CITY OF COMMERCE CITY, COLORADO, et al., Defendants.
    Civ. A. No. 84-K-1317.
    United States District Court, D. Colorado.
    April 22, 1985.

      Gary L. Polidori, Lakewood, Colo., Joseph E. Scuro, Jr., San Antonio, Tex., for plaintiff.
    Richard D. Greengard, Robert Simon, Denver, Colo., for defendants.
   MEMORANDUM OPINION AND ORDER

KANE, District Judge.

Plaintiff was discharged as an employee of the Commerce City, Colorado police department on September 15, 1983. He instituted this action claiming that the city’s actions denied him due process protections insured by the Fourteenth Amendment of the United States Constitution. Trial is scheduled for May 6, 1985. Pending are the plaintiff’s and defendants’ cross motions for summary judgment.

Summary judgment is a drastic remedy. The Tenth Circuit has cautioned that any relief pursuant to Rule 56, Fed.R.Civ.P., should be applied with care. Jones v. Nelson, 484 F.2d 1165, 1168 (10th Cir.1973). The burden is on the moving party to show the absence of a genuine issue of material fact. Pleadings and factual inferences tending to show issues of material fact must be viewed in the light most favorable to the party opposing summary judgment. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157-59, 90 S.Ct. 1598, 1608-09, 26 L.Ed.2d 142 (1970); Rea v. Wichita Mortgage Corp., 747 F.2d 567, 573 (10th Cir.1984). However, a party opposing summary judgment may not rest on allegations contained in pleadings to rebut the movant’s factual proof in support of the motion for summary judgment. The party opposing the motion must respond with specific facts demonstrating genuine issues requiring resolution at trial. Id. Unless the moving party can demonstrate his entitlement beyond a reasonable doubt, summary judgment must be denied. Norton v. Liddel, 620 F.2d 1375, 1381 (10th Cir.1980).

The uncontroverted facts are as follows. Plaintiff was discharged because he engaged in on duty social liaisons in violation of city personnel rules. On August 29, 1983 he met with one of his superiors, Lieutenant Kurls, to discuss his activities. On September 6, 1983, plaintiff also met with defendant Neal Wikstrom, chief of police, also concerning his inappropriate behavior. By letter dated September 14, 1983, plaintiff was informed by defendant Bramble, the city manager, that he was being discharged effective September 15. The letter also advised plaintiff of his right to appeal Bramble’s decision to the Commerce City Career Service Commission. Appeal was taken and the commission conducted a hearing on October 18, 1983. On October 28, 1983 the commission issued its opinion upholding the dismissal. Although plaintiff could appeal the commission’s decision to state courts, he has not done so.

Plaintiff’s motion for summary judgment argues solely that the Fourteenth Amendment requires that he be provided the opportunity for a hearing before discharge and that he need not pursue all available state remedies as a requisite to bringing this suit. Defendants’ motion argues that: 1) plaintiff had no property interest protected by the Fourteenth Amendment; 2) the procedural due process afforded plaintiff was constitutionally sufficient; and 3) the actions taken in dismissing plaintiff were appropriate and neither arbitrary nor capricious.

The law is clear that if plaintiff had a property interest in his continued employment, he is entitled to a hearing before he is discharged. See Cleveland Bd. of Ed. v. Loudermill, — U.S. -, -, 105 S.Ct. 1487, 1492, 84 L.Ed.2d 494 (1985); Boddie v. Connecticut, 401 U.S. 371, 379, 91 S.Ct. 780, 786, 28 L.Ed.2d 113 (1971); Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 313, 70 S.Ct. 652, 656, 94 L.Ed. 865 (1950); Miller v. City of Mission, Kansas, 705 F.2d 368, 372 (10th Cir.1983). The procedures provided by the city cannot obviate the requirements of the Fourteenth Amendment. Cleveland Bd. of Ed., — U.S. at -, 105 S.Ct. at 1492-96. Thus, the procedures provided by the city do not comport with the constitutional requirements for protecting property interests.

Plaintiffs federal claim is dependent on his having a property interest in his continued employment. If no property interest exists, then the Fourteenth Amendment does not entitle him to a pre-termination hearing. Id. at -, 105 S.Ct. at 1490, Board of Regents of State Colleges v. Roth, 408 U.S. 564, 576-78, 92 S.Ct. 2701, 2708-10, 33 L.Ed.2d 548 (1972); Martin v. Unified School Dist No. 434, Osage County, Kansas, 728 F.2d 453, 455 (10th Cir. 1984); Williams v. West Jordan City, 714 F.2d 1017, 1019 (10th Cir.1983). Determination of plaintiffs property interests is a question of state law. As the Supreme Court recently stated:

Property interests are not created by the Constitution, “they are created and their dimensions are defined by existing rules and understandings that stem from an independent source such as state law.” Board of Regents v. Roth, supra, 408 U.S., at 577, 92 S.Ct. at 2709.

Cleveland Bd. of Ed., — U.S. at -, 105 S.Ct. at 1490. The question is essentially whether the plaintiff has a “legitimate, objective expectation of continued employment.” Martin v. Unified School Dist. No. 434, Osage City, 728 F.2d at 455. Under Colorado statutes and common law a police officer is generally considered an employee at will who has no property interest in continued employment. See Mitchell v. Town of Eaton, 176 Colo. 473, 491 P.2d 587 (1971); Johnson v. City Council for City of Glendale, 42 Colo.App. 188, 595 P.2d 701 (1979); Lontine v. VanCleave, 483 F.2d 966 (10th Cir.1973); Debono v. Vizas, 427 F.Supp. 905, 908 (D.Colo.1977) (Finesilver, J.). The case law in this and other jurisdictions generally provides that where the police officer can be fired without cause on the decision of the city manager alone there is no constitutionally protected property interest. See also Bishop v. Wood, 426 U.S. 341, 344-47, 96 S.Ct. 2074, 2077-79, 48 L.Ed.2d 684 (1976); Abeyta v. Town of Taos, 499 F.2d 323, 327 (10th Cir.1974).

In addition to statutes and general common law principals, a property interest in employment can be created by city ordinance or rules. See Bishop v. Wood, 426 U.S. at 344, 96 S.Ct. at 2077; City and County of Denver v. Industrial Comm’n of the State of Colorado, 666 P.2d 160, 162 (Colo.App.1983). In particular, plaintiff’s employment relationship was defined by the requirements of the Charter of the City of Commerce City as well as the Rules and Regulations Governing the Employees of the City of Commerce City. In Bishop v. Wood the Supreme Court held that under North Carolina law an employee who was dischargeable upon written notice of the effective date of discharge and the reasons for discharge, but had no right of judicial review, had no property interest in continued employment. See also Williams v. West Jordan City, 714 F.2d at 1020-21. The Tenth Circuit, however, held that under Oklahoma law an employee dischargable only for cause, who had the right to appeal his discharge to state courts, possessed a protected property interest. Poolaw v. City of Anadarko, Oklahoma, 660 F.2d 459, 463-64 (10th Cir.1981). Similarly, in the context of analyzing employment in the City and County of Denver, the Colorado Supreme Court held that employees who have vested interests in their job security, seniority rights, disability and sick benefits and pension rights “acquire vested property interests” in their jobs. City and County of Denver v. Dist. Court for the Second Judicial District in and for the City and County of Denver, 196 Colo. 134, 140, 582 P.2d 678 (1978). Pursuant to Rule XVI of the Commerce City Employee Rules, plaintiff was only dischargable by the city manager for cause. Plaintiff then had the right to appeal the manager’s decision to the City Career Service Commission and then to the state courts. Moreover, as a nonprobationary employee, plaintiff had vested interests in certain fringe benefits. Thus, I find, as a matter of Colorado law, that the provisions of the Commerce City Charter and Employee Rules provide plaintiff with a constitutionally protected property interest in his continued employment.

It is clear that plaintiff was entitled to a pre-discharge hearing. Plaintiff was, however, afforded a full hearing after he was terminated. With the exception of its timing, that hearing sufficiently insured protection of plaintiff’s rights to procedural due process. See Miller v. City of Mission Kansas, 705 F.2d at 375; Rosewitz v. Latting, 689 F.2d 175, 177-78 (10th Cir.1982). Before the hearing, through correspondence and meetings with his superiors, plaintiff was adequately appraised of the claims against him as well as the circumstance surrounding those claims. He was afforded clear notice of the alleged misconduct and reasonable time to marshall facts and evidence. The hearing was conducted before an impartial panel. Plaintiff was represented by counsel who had an opportunity to challenge the evidence and testimony presented by the city as well as present evidence and witnesses of his own. Plaintiff was also provided with the option of appealing the commission’s ruling to state courts.

I have reviewed the transcript of the proceedings before the Career Service Commission and its findings and conclusions. Plaintiff has presented no evidence challenging the merits of the commission’s findings. I find that the commission’s actions were reasonable and appropriate and were neither arbitrary nor capricious. Plaintiff was not deprived of substantive due process.

In conclusion, with the exception of plaintiff’s claim that his discharge hearing was untimely, he was afforded the full panoply of rights assured by the Fourteenth Amendment. The plaintiff’s- motion for summary judgment is, therefore, granted. Defendant’s motion for summary judgment is denied in part and granted in part. Because plaintiff’s complaint seeks only monetary relief the sole issue remaining for resolution at trial is the determination of the damages, if any, occasioned by defendant’s providing plaintiff with a hearing after his discharge instead of before.

      . In order to assert his Constitutional interests in this court, plaintiff need not exhaust all state remedies. See Patsy v. Florida Bd. of Regents of State of Florida, 457 U.S. 496, 102 S.Ct. 2557, 73 L.Ed.2d 172 (1982).


author: CARL B. RUBIN, Chief Judge.

text:
    The CENTRAL TRUST COMPANY, N.A., Plaintiff, v. ANEMOSTAT PRODUCTS DIVISION, et al., Defendants.
    No. C-1-83-1533.
    United States District Court, S.D. Ohio, W.D.
    May 3, 1985.

      Todd H. Bailey, Cincinnati, Ohio, for plaintiff.
    Joseph Jordan, Leonard Weakley, Jr., C.J. DeMichelis, Cincinnati, Ohio, for defendants.
   ORDER

CARL B. RUBIN, Chief Judge.

This matter is before the Court on two summary judgment motions filed by defendant Anemostat Products Division Dynamics Corporation of America (“Anemostat”). One seeks dismissal of the Complaint for plaintiff’s failure to submit the dispute .to arbitration as required by the terms of the parties’ contract. (Doc. No. 24). The second motion asks this Court to dismiss the suit because plaintiff lacks standing. (Doc. No. 18). For the reasons set forth below, both motions are DENIED.

I. Facts

The predicate for this action was a contract between Glenway Sheet Metal, Inc. (“Glenway”) and defendant Anemostat. The contract provided that Anemostat sell Glenway a quantity of variable air volume (“V.A.V.”) boxes for installation in the ventilation system of St. Francis-St. George Hospital by Glenway. The boxes failed to perform as required and Glenway incurred substantial expenses in correcting the problem.

Glenway owed plaintiff a large sum of money and in settlement of the debt assigned to plaintiff the proceeds of any claim it might have against defendant.

II. Arbitration

Almost 15 months after commencement of this suit and almost three months after a postponement of. the trial date, defendant moved for summary judgment dismissing the Complaint because of failure to arbitrate. Defendant’s position is that the contract between it and Glenway contained an arbitration. clause that acts as a condition precedent to recovery. Since plaintiff has not availed itself of that mandatory arbitration, the argument goes, plaintiff has failed to satisfy a condition of the contract and cannot therefore recover under it. Assuming for the purposes of this Motion only that the contract in question does include a mandatory arbitration clause, plaintiff’s position lacks merit because it ignores the governing law in the area.

The United States Arbitration Act states that a written provision in any contract “evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2 (1982). Through the Act, Congress created a body of federal substantive law establishing and regulating the duty to honor any contract to arbitrate. Moses H. Cone Memorial Hospital v. Mercury Construction Co., 460 U.S. 1, 25 n. 32, 103 S.Ct. 927, 942 n. 32, 74 L.Ed.2d 765 (1983). That body of federal substantive law provides litigants with only three options when litigating a contract containing a mandatory arbitration clause. They can move to stay the judicial proceeding pending arbitration, move to compel arbitration, or waive the right to arbitrate. 9 U.S.C. §§ 3, 4 (1982); American Locomotive Co. v. Chemical Research Corp., 171 F.2d 115 (6th Cir.), cert. denied, 336 U.S. 909, 69 S.Ct. 515, 93 L.Ed. 1074 (1949). By moving to have the Complaint dismissed, defendant here has requested an option not available to it. Its request must, therefore, be denied. Further its position in this case must be deemed a waiver of the right to arbitrate.

The right to arbitrate can be waived like any other contract right. 171 F.2d at 121. The filing of a responsive pleading would constitute such a waiver. Id. The filing of a complaint is notice to a defendant that the plaintiff is refusing to arbitrate. At that point, or within a reasonable time thereafter, defendant must decide whether to proceed to trial or invoke Sections 3 or 4 of the Arbitration Act. American Locomotive Co. v. Gyro Process Co., 185 F.2d 316 (6th Cir.1950). A substantial participation in litigation would result in prejudice to the opposing party. See United States v. S.T.C. Construction Co., 472 F.Supp. 1023 (E.D.Pa.1979).

This Court granted a § 3 Motion to Stay in Siam Feather & Forest Products Co. v. Midwest Feather Co., 503 F.Supp. 239 (S.D. Ohio 1980), aff'd., 663 F.2d 1073 (6th Cir.1981), where defendant made its motion within three weeks of the filing of the complaint. No responsive pleading had been made nor had any discovery been conducted. Here, by contrast, the case stands ready for trial. Discovery has been completed and the Final Pre-Trial Conference has been held. The case awaits only the advent of its trial date.

To treat defendant’s conduct as anything but a waiver of its right to arbitration would prejudice plaintiff by unduly delaying adjudication of its claim and exposing it to expenses and discovery not available in the arbitration proceedings. Further, a nonwaiver resolution of the motion would undermine Congress’s goal in enacting the Act of expediting the resolution of disputes. H.R.Rep. No. 96, 68th Cong., 1st Sess., 2 (1924). To dismiss the action or force the parties into arbitration now would further delay a case that has already been pending almost 19 months.

Defendant’s only answer to the above analysis is to argue that the arbitration clause is a mandatory condition precedent to the bringing of a lawsuit. The same mandatory arbitration language appeared in several other cases however, and it did not bar a finding of waiver. See e.g., Cornell & Co. v. Barber & Ross Co., 360 F.2d 512 (D.C.Cir.1966); American Locomotive Co. v. Chemical Research Corp., 171 F.2d 115 (6th Cir.1949); Weight Watchers of Quebec Ltd. v. Weight Watchers, Int’l., Inc., 398 F.Supp. 1057 (E.D.N.Y. 1975). Nor does this Court find it an impediment to waiver. Defendant’s Motion for Summary Judgment on arbitration grounds is therefore DENIED.

III. Standing

Defendant’s next Motion for Summary Judgment asserts that plaintiff lacks standing to bring the lawsuit. (Doc. No. 18). Standing refers to a constitutional requirement that judicial power extend only to cases and controversies. U.S. Const. art. III, § 2. Cases and controversies exist when, there is an actual injury redressable by the Court. Workers’ Compensation Program v. Perini North River Associations, 459 U.S. 297, 305, 103 S.Ct. 634, 641, 74 L.Ed.2d 465 (1983).

Clearly, such an injury is present here and plaintiff has an arguable claim for that injury by virtue of its settlement agreement with Glenway. Defendant argues, however, that the settlement agreement between Glenway and plaintiff did not give plaintiff any legal right to recover for the injury alleged.

The parties agree that plaintiff’s right to recover on Glenway’s claim against defendant for faulty V.A.Y. boxes derives from paragraph 7 of the Settlement and Release Agreement between plaintiff and Glenway. (Doc. No. 19, Ex. A). The provision states that “Glenway will, and hereby does, assign to Central Trust, the proceeds, if any, from its claim against Anemostat Products Division Dynamics Corporation of America. Glenway further agrees to execute any and all documents requested by Central Trust for the purpose of perfecting this Assignment.” Defendant argues that paragraph 7 entitles plaintiff to only the proceeds of the claim, not the right to collect on the claim. Apparently recognizing the problem with the provision, plaintiff and Jack J. McDonald executed a second Assignment on September 24, 1984, retroactive to December 31, 1982. The second Assignment states that McDonald, sole shareholder of Glenway Investments, Inc., formerly doing business as Glenway Sheet Metal, Inc., currently a dissolved corporation, gives plaintiff full rights to collect his claim against defendant. (Doc. No. 21, Ex. C).

This second Assignment would seem to resolve the motion in plaintiff’s favor because if defendant’s contention is correct, and the original Assignment did not give plaintiff the right to recover on the claim, the second Assignment certainly did. In defendant’s reply to plaintiff’s production of the second Assignment, the only fault it finds with the second Assignment is that it did not exist at the time the Complaint was filed. Defendant reasons that plaintiff did not, therefore, have standing at that time to bring the suit. Defendant cites in support of its contention Railroad Co. v. Hutchins, 37 Ohio St. 282 (1881).

Needless to say, the philosophy of pleading has come a long way since 1881. Under the Federal Rules of Civil Procedure, the purpose of pleading is to facilitate a proper decision on the merits, not to mire the case in technicalities. Foman v. Davis, 371 U.S. 178, 181-82, 83 S.Ct. 227, 229-30, 9 L.Ed.2d 222 (1961). Rule 15(d) speaks directly to the question at hand. It allows any party, upon leave of Court, to serve supplemental pleadings “setting forth transactions or occurrences or events which have happened since the date of the pleading sought to be supplemented.” Fed.R.Civ.P. 15(d). This Rule would control in a diversity case over any Ohio law to the contrary. Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965).

Such a supplement here, however, would be an unnecessary formality. The Complaint states that plaintiff is the assignee of - “certain claims” of Glenway against defendant. (Doc. No. 1, ¶ 4). The second Assignment necessitates no change in that statement, nor does Rule 8(a)’s requirement of a short and plain statement of the claim. To give defendant the relief it requests, on either Motion, would senselessly prolong this already lengthy and costly litigation. Therefore, defendant’s Motions for Summary Judgment are DENIED.

IT IS SO ORDERED.

      . Paragraph 30 of Glenway’s purchase order form reads as follows:
      Any controversy or claim relating to this contract or a breach thereof shall be settled by arbitration in accordance with the rules of the American Arbitration Assn, (within the state of the corporation of the purchaser). Judgment upon the award rendered by the arbitration may be entered in any court having jurisdiction thereof.
      (Doc. No. 25, Ex. A).


author: LIMBAUGH, District Judge.

text:
    David Lee HOULIHAN, Plaintiff, v. John P. SCHMACKER and Smith, Moore and Company, Defendants. Dennis MEYER, Plaintiff, v. John P. SCHMACKER, Defendant.
    Nos. 83-159 C(5), 83-1356 C(5).
    United States District Court, E.D. Missouri, E.D.
    May 3, 1985.
    Stuart L. Oelbaum of Newburger and Yossmeyer, St. Louis, Mo.; for plaintiffs Houlihan and Meyer.
    Kevin F. O’Malley of Bryan, Cave, McPheeters and McRoberts, St. Louis, Mo., for defendant Smith-Moore.
    Thomas M. Newmark and Barry A. Short of Lewis and Rice, St. Louis, Mo., for defendant John P. Schmacker.
   MEMORANDUM AND ORDER

LIMBAUGH, District Judge.

This matter is before the Court on defendants’ joint motion to compel arbitration (Cause No. 83-0159) and defendant Schmacker’s motion to compel arbitration (Cause No. 83-1356). Plaintiffs Houlihan and Meyer have filed responsive pleading^).

The United States Supreme Court has recently addressed the issue of whether to compel arbitration of pendent state-law claims when the federal court will retain jurisdiction over non-arbitrable federal claims. Dean Witter Reynolds v. Byrd, — U.S. -, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). The Court unequivocably held that the Arbitration Act (9 U.S.C. §§ 1-14) requires the federal courts to compel arbitration of pendent arbitrable claims when one of the parties files a motion to compel. Id. Even if such action results in separate proceedings in separate forums at different times, the district court must still compel arbitration. Id.

The parties in the present suit entered into a valid and binding written contract to arbitrate any claims that might arise out of their securities transactions. This Court has no choice but to enforce the arbitration agreement with respect to the pendent state-law claim(s).

As to the federal claims, the Supreme Court has clearly held that agreements to arbitrate § 12(2) of the Securities Act of 1933 (15 U.S.C. § 77l(2)) claims are not enforceable. Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953). Although the Supreme Court has not specifically addressed the issue of applicability of Wilko to § 10b and Rule 10b-5 claims, it has questioned such applicability because the provisions of the 1933 and 1934 Acts differ, and unlike § 12(2) of the 1933 Act, § 10(b) and Rule 10b-5 do not expressly create a private cause of action. Dean Witter Reynolds, — U.S. - n. 1, 105 S.Ct. 1238, 1240 n. 1; Scherk v. Alberto Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974). The Eighth Circuit has remained silent on the issue of the arbitrability of the § 10(b) and rule 10b-5 claims.

The Court finds that the spirit and intent of the Arbitration Act, the arbitration agreement(s), and the Dean Witter Reynolds, Wilko and Scherk decisions is best carried out by compelling arbitration of the § 10(b) and Rule 10b-5 claims.

Furthermore, the Court finds that in the best interests of the parties and judicial efficiency, the litigation of the § 12(2) claims will be stayed until such time arbitration of the other claims is concluded or the parties inform the Court of some other disposition of this matter. Accordingly,

IT IS HEREBY ORDERED that defendants’ joint motion to compel arbitration and defendant Schmacker’s motion to compel arbitration be and are GRANTED.

IT IS FURTHER ORDERED that all other proceedings as regards Count III of the complaints (filed in Cause Nos. 83-159 and 83-1356) are stayed pending the outcome of the arbitration of plaintiffs’ claims contained in Counts I, II and IV of the complaints.


author: LEISURE, District Judge:

text:
    Adelino ABRANTES, Plaintiff, v. ST. GOTTHARD SCHIFFAHRTS, A.G. and Suisse Outremer Reederei, A.G., Defendants.
    No. 84 Civ. 8490 (PKL).
    United States District Court, S.D. New York.
    May 21, 1985.

      Zimmerman & Zimmerman (Thomas J. Doyle, of counsel), New York City, for plaintiff.
    Evans, Koelzer, Osborne & Kreizman (Thomas R. Denniston, of counsel), New York City, for defendants.
   ORDER

LEISURE, District Judge:

Plaintiff Adelino Abrantes, a citizen of New Jersey, brought this personal injury action in New York state court against St. Gotthard Schiffahrts, A.G., a West German corporation, and Suisse Outremer Reederei, A.G., a Swiss corporation. Neither is authorized to do business in New York. Defendants removed the action to this Court on November 26, 1984. Plaintiffs have moved to remand the case to Supreme Court, New York County or to continue adjudication in the Southern District of New York rather than in the District of New Jersey; defendants have cross-moved to dismiss the action for lack of personal jurisdiction or in the alternative to transfer venue to the District of New Jersey.

According to the Second Circuit,
It is basic that the burden of proving jurisdiction is upon the party who asserts it and that he must show by the complaint and supporting affidavits the essential requirements of the jurisdictional statute.

Lehigh Valley Indus., Inc. v. Birenbaum, 527 F.2d 87, 92 (2d Cir.1975) (citations omitted). Accord Mayer v. Josiah Wedgwood & Sons, Ltd., 601 F.Supp. 1523, 1528 (S.D. N.Y.1985).

The incident in question in this case occurred on defendants’ ship while it was docked at Port Newark, New Jersey. Thus, since the suit does not arise from an event within New York, jurisdiction over the defendants cannot be predicated on CPLR § 302. Plaintiff appears to rely on CPLR § 301 as the basis for jurisdiction over defendants. He alleges, however, no continuous substantial business carried on in New York by defendants, either by themselves or through agents, which would suffice to establish jurisdiction under § 301. See Laufer v. Ostrow, 55 N.Y.2d 305, 449 N.Y.S.2d 456, 434 N.E.2d 692 (1982); Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915 (1917). All he alleges (in his memorandum of law rather than in an affidavit) is that “defendants sent their ships regularly to the Port of New York, which includes subsidiary ports in the adjoining State of New Jersey.” (Pl. Mem. at 3). Defendants, on the other hand, have submitted allegations that their ships use only New Jersey ports and have never berthed in New York (Aguirre afft. ¶¶ 8, 9). Plaintiff has failed to make the necessary prima facie showing that defendants are subject to in personam jurisdiction in New York. See Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57-58 (2d Cir.1985).

If the state court in which the action was originally filed was without in personam jurisdiction, then the federal court to which the case is removed is without jurisdiction as well. See Arizona v. Manypenny, 451 U.S. 232, 242 n. 17, 101 S.Ct. 1657, 1665 n. 17, 68 L.Ed.2d 58 (1981) (“it is well settled that if the state court lacks jurisdiction over the subject matter or the parties, the federal court acquires none upon removal”) (emphasis added); Friedr. Zoellner (New York) Corp. v. Tex Metals Corp., 396 F.2d 300, 301 (2d Cir. 1968).

Defendants’ motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction is hereby granted.

SO ORDERED.

       Moreover, plaintiff has failed to show adequate service of process. He has not come forward with any showing at all that Ecuadorian Lines, Inc., on whom process was served, was an agent of defendants for purposes of receipt of service of process (which defendants deny).