author: PRADO, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. ONE 1979 LINCOLN CONTINENTAL TOWN COUPE, TEXAS LICENSE NO. 565 CEW, VIN: 9Y81S691677, Defendant.
    Civ. A. No. DR-84-CA-27.
    United States District Court, W.D. Texas, Del Rio Division.
    Oct. 17, 1984.

      Raymond A. Nowak, Asst. U.S. Atty., San Antonio, Tex., for plaintiff.
    Victor Roberto Garcia, Pendergrass & Garcia, Del Rio, Tex., for defendant.
   MEMORANDUM OPINION

PRADO, District Judge.

This is a forfeiture action filed by the United States, in rem, against a vehicle used to commit a violation of 8 U.S.C. § 1324(a) to facilitate the unlawful transportation of illegal aliens into this country from Mexico.

During the evening of March 7, 1984, Border Patrol agents were alerted by sensor activity along the Mexico-United States border at a location particularly known for alien smuggling activities. Agents observed the Respondent vehicle and other vehicles leaving the areas. The vehicles were stopped, and Respondent 1979 Lincoln Continental was found to contain five (5) illegal aliens from Mexico. Respondent vehicle was driven by William J. “Billy” Rodriguez of San Marcos, Texas, age 22, the son of claimant Pedro Rodriguez, the registered owner of Respondent vehicle. Among the other persons arrested at the same time was David Carlos “Butch” Rodriguez — another son of claimant Pedro Rodriguez. In addition to claimant’s car, both David Rodriguez’ and William Rodriguez' cars were seized. Thus two persons arrested and three vehicles seized on the night of March 7, 1984 were connected in one way or another with claimant Pedro Rodriguez. In all, ten illegal aliens were being smuggled into this country at a charge of $500 each.

Proeedurally, the United States’ Verified Complaint for Forfeiture was filed on May 14, 1984; an Order for Warrant of Arrest of Property and for Notice was filed on May 18, 1984, as amended by Amended Order filed June 8, 1984; and an Answer was duly filed by Pedro Rodriguez on or about June 29, 1984.

This matter came on for hearing before the Court on August 20, 1984, upon the United States’ Verified Complaint of Forfeiture. Claimant Pedro Rodriguez challenges the propriety of this proceeding by claiming an “innocent owner” exception to the strict liability standard applied to judicial forfeitures.

The “innocent owner” defense to seizure and forfeiture of conveyances used to transport an alien in violation of 8 U.S.C. § 1324(a) was eliminated by Congress in a 1981 amendment to § 1324(b). See Immigration and Nationality Act Amendments of 1981, Pub.L. No. 97-116, § 12, 95 Stat. 1617 (Dec. 29, 1981). Section 1324(b) now requires the government to show it had probable cause to believe that the Respondent vehicle was being used illegally to transport aliens. Once probable cause is demonstrated, the burden of proof shifts to the owner or claimant to show that the vehicle itself is “not guilty” — that is, that the wrong vehicle was seized, or that the vehicle was being used for a legal rather than an illegal purpose. See H.R.Rep. No. 97-264, reprinted in 1981 U.S.CODE CONG. & ADMIN.NEWS 2577, 2597. In this case the claimant acknowledges that the vehicle in question is the guilty vehicle.

Claimant argues that the legislature intended to eliminate the “innocent owner” defense only as it applied to seizure, not to forfeiture. As claimant interprets the legislative history of the 1981 amendment, Congress intended to provide an owner/claimant with every opportunity to present his or her case against forfeiture. In support of. this contention, plaintiff notes the legislative mandate that INS promulgate regulations for the purpose of determining whether seized property is subject to forfeiture.

INS regulations require the agency to attempt with due diligence to ascertain the ownership of any conveyance seized pursuant to the Immigration and Nationality Act to determine whether the conveyance is subject to forfeiture. 8 C.F.R. § 274.5(a). The INS regulations do contain two “innocent owner” exceptions to forfeiture. The first phrase of subjection 274.5(b)(3) states that a conveyance is not subject to forfeiture if the owner establishes he or she was not privy to the illegal use to which the vehicle was put. If the owner can credibly show the agency that he or she was completely unaware that the vehicle would be used to illegally transport aliens, then INS shall not proceed with forfeiture. The second portion of sub-section 274.5(b)(3) precludes forfeiture in situations where the owner did not consent, and took all reasonable steps to prevent the illegal use of the conveyance. In other words, an owner who verbally denies a request to borrow his vehicle while he tosses the borrower the keys would not be considered an innocent owner. Such an owner must convince the agency that under the particular circumstances of the case, he took all reasonable steps to prevent the illegal use.

Claimant argues that he has a right at forfeiture proceedings to enforce INS regulations, that such enforcement would show that he was without knowledge or reason to believe the car would be used to illegally transport aliens, and that such a showing compels INS to refrain from seeking forfeiture. I cannot agree with claimant that the Court can or should insure claimant has every opportunity to present his case. The legislative history of the 1981 amendment is clear that Congress intended the INS to provide claimants with an adequate opportunity to show that a conveyance should not be subjected to forfeiture. See H.R.Rep. 97-264, reprinted in 1981 U.S.CODE CONG. & ADMIN. NEWS 2577, 2597.

It is at the INS investigatory stage that claimant may properly invoke the “innocent owner” defense by filing a timely petition for remission or mitigation with the agency. Cf. Clow v. Nelson, 579 F.Supp. 981, 983-985 (W.D.N.Y.1984). The agency’s determination of claimant’s petition falls within the discretionary function of INS and is final. See Administrative Procedure Act §§ 1-10, 5 U.S.C. §§ 701-704 (1976). As a general rule, a district court is without jurisdiction to review an administrative agency denial of a petition for remission or mitigation. See, e.g., Clow v. Nelson, 579 F.Supp. 981, 983 (W.D.N.Y. 1984); One 1977 Volvo 242 DL v. United States, 650 F.2d 660, 662 (5th Cir.1981); United States v. One 1970 Buick Riviera, 463 F.2d 1168, 1170 (5th Cir.1971), cert. denied, 409 U.S. 980, 93 S.Ct. 314, 34 L.Ed.2d 244 (1972). Judicial review may be exercised only in what is referred to as the Edwards exception [U.S. v. Edwards, 368 F.2d 722 (4th Cir.1966)], where petitioner claims the administrative agency has refused to exercise its discretion. See 1977 Volvo 242 DL v. United States, 650 F.2d 660, 662 (5th Cir.1981) (invocation of Edwards exception requires either very specific allegations of refusal to consider petition or Edwards-type concessions by government).

Claimant’s pleadings in this action do not bring the case within the Edwards exception to permit the Court to review the INS determination to proceed with forfeiture. Claimant does not allege that he was denied an adequate opportunity to present his “innocent owner” defense to the INS. Nor does he claim the INS refused to consider his petition for remission or mitigation. Claimant argued at the forfeiture hearing that INS is not consistent in its determination of who is an innocent owner. But -this allegation merely infers, without any clear showing, that INS may abuse its discretion from time to time, and it does not present a reviewable issue. See United States v. One 1970 Buick Riviera, 463 F.2d 1168,1170 (5th Cir.1971), cert. denied, 409 U.S. 980, 93 S.Ct. 314, 34 L.Ed.2d 244 (1972).

Based upon the foregoing analysis and the evidence presented at a hearing before the Court on August 20, 1984, the Court now enters the following Findings of Fact and Conclusions of Law in accordance with Rule 52 of the Federal Rules of Civil Procedure.

FINDINGS OF FACT

1. On March 7, 1984, Respondent 1979 Lincoln Continental Town Coupe, Texas License No. 565 CEW, VIN 9Y82S691677 was being operated in or around Eagle Pass, Texas by William J. Rodriguez. The registered owner of Respondent vehicle is claimant Pedro Rodriguez. William J. Rodriguez is the son of Pedro Rodriguez.

2. On March 7, 1984, William J. Rodriguez was acting in concert with others, including his brother, David Carlos Rodriguez, to smuggle approximately ten (10) illegal Mexican aliens into this country at a charge of $500.00 each. Three (3) vehicles — of which Respondent vehicle is one— were involved in the smuggling attempt.

3. On the above date, William Rodriguez drove Respondent vehicle to a prearranged location along the Rio Grande River where five (5) illegal Mexican aliens got into Respondent vehicle and proceeded to exit the area. The location involved was known to U.S. Border Patrol agents to be one particularly utilized for alien-smuggling activities.

4. At the above date and time, agents with the U.S. Border Patrol were alerted to the above smuggling activities by sensor activity. Visual observation, including observation of Respondent vehicle, confirmed the smuggling activities described above. The three vehicles used in the smuggling operation — including Respondent vehicle— were subsequently stopped and seized. As noted, at the time of seizure, five (5) illegal Mexican aliens were found to be in Respondent vehicle being operated by William J. Rodriguez. Ever since its seizure, Respondent vehicle has been in storage in Del Rio, Texas.

5. There is no evidence that Claimant Pedro Rodriguez knew that Respondent vehicle was being used by his son William on March 7, 1984 to transport illegal aliens.

6. Subsequent to the time of seizure, Claimant Pedro Rodriguez, the registered owner of Respondent vehicle, was given actual notice of seizure of said vehicle. A $250.00 cost and claim bond was filed with the Border Patrol on or about April 12, 1984, by Claimant Rodriguez. The United States filed its Verified Complaint for Forfeiture against Respondent vehicle on May 14, 1984, to which, an Answer was duly filed by Claimant Pedro Rodriguez, on or about June 29, 1984.

7. Any of the foregoing Findings of Fact which may be deemed to constitute conclusions of law shall be so considered.

CONCLUSIONS OF LAW

1. This Court has jurisdiction over the subject matter and over the res to this action under the provisions of 8 U.S.C. § 1324(b) and 28 U.S.C. § 1345 and § 1355.

2. On March 7, 1984, Respondent 1979 Lincoln Continental Town Coupe was seized in or around Eagle Pass, Texas, within the Del Rio Division of the Western District of Texas, by duly authorized agents of the Immigration and Naturalization Service, U.S. Border Patrol.

3. On March 7, 1984, Respondent vehicle was intended for use and was used to facilitate the unlawful transportation of illegal aliens, in violation of 8 U.S.C. § 1324(a).

4. The United States, through its agents, had probable cause to believe that Respondent vehicle was intended for use and was used to facilitate the unlawful transportation of illegal aliens as aforesaid.

5. It is no defense to the forfeiture of Respondent vehicle that Claimant Pedro Rodriguez did not know that his son, William, would use Respondent vehicle in the unlawful manner stated. United States v. One 1975 Ford Pickup Truck, 558 F.2d 755 (5th Cir.1977); U.S. v. One 1969 Plymouth Fury, 476 F.2d 960 (5th Cir.1973); U.S. v. One 1970 Buick Riviera, 463 F.2d 1168 (5th Cir.1972).

6. The United States is entitled to entry of judgment of forfeiture against Respondent 1979 Lincoln Continental Town Coupe, with costs to be awarded to the United States as provided by law.

7. Any of the foregoing conclusions of law that may be construed to constitute Findings of Fact shall be so considered. Let judgment enter in favor of Petitioner United States in accordance with Rule 58.


source: Caselaw Access Project

author: BOWEN, District Judge.

license: Public Domain

text:
    Angela F. DOXIE and all other persons similarly situated, Plaintiffs, v. FORD MOTOR CREDIT COMPANY, Defendant.
    Civ. A. No. CV184-36.
    United States District Court, S.D. Georgia, Augusta Division.
    Oct. 18, 1984.

      John B. Long, Augusta, Ga., for plaintiffs.
    John H, Fleming, Sutherland, Asbill & Brennan, Atlanta, Ga., for defendant.

      . Plaintiff styled her complaint as a class action and filed a "motion for order determining action maintainable as class action” with her complaint. Defendant opposed the motion for class certification. The Court has deferred ruling upon the motion pending resolution of the motion to dismiss. Because of the holding of the Court on the motion to dismiss, the Court need not reach the class action question. For a discussion of the issue of class certification in RICO cases, see Wilcox Development Co. v. First Interstate Bank, 97 F.R.D. 440 (D.Or.1983).

   MEMORANDUM OPINION AND ORDER

BOWEN, District Judge.

This case is another in the rapidly multiplying number of cases involving “private civil RICO” — the private right of action found in the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 (1982). Before the Court is defendant’s motion to dismiss and motion to dismiss the amended complaint.

For purposes of ruling upon the motions to dismiss, the Court accepts plaintiff’s allegations as true. See, e.g., Guerrero v. Katzen, 571 F.Supp. 714, 716 (D.D.C.1983). The plaintiff, Angela F. Doxie, purchased a used 1979 Ford LTD automobile on November 4, 1981, from Bob Beard Ford, a Ford dealership. In addition to an initial down payment, Doxie agreed to pay $160.99 per month. In connection with the purchase and financing of the automobile, Doxie signed a retail installment contract on forms that the defendant, Ford Motor Credit Company (Ford Credit) had provided to the automobile dealer. The dealer assigned the contract to Ford Credit.

The contract, a copy of which is attached to the complaint, requires insurance coverage for the automobile that Doxie purchased:

The Buyer will insure the Buyer and the Creditor against loss or damage to the Vehicle. The type and amount must be acceptable to the Creditor. The Creditor may buy the insurance if the Buyer does not, but the Creditor does not have to do so. If the Creditor buys the insurance, the Creditor may insure only the Creditor or both the Creditor and the Buyer. In either case, the Buyer must pay back to the Creditor what the Creditor pays for the insurance plus interest at the highest rate allowed by law. If the Creditor insures only the Creditor, the Buyer will not have insurance.

Subsequent to entering the contract, Doxie maintained insurance on the LTD, protecting the interests of herself and Ford Credit against loss, damage, or destruction to the automobile. Sometime during June of 1982, however, Doxie’s insurance policy lapsed.

Consequently, Ford Credit purchased a policy, a copy of which is also attached to the complaint, to provide insurance coverage for the automobile. As stated in the insurance agreement, it provided “limited insurance protection to the Debtor, as well as to the insured Creditor.” As also stated in the agreement, the insurance provided for Doxie only “limited physical damage coverage” not to exceed the least of either the cost of repair or replacement of the automobile less the deductible; or, the unpaid balance Doxie owed to Ford Credit less the amounts of unearned finance charges, unearned insurance premiums, and the deductible; or, “the actual cash value” of the automobile “immediately pri- or to the peril occurrence.”

Plaintiff alleges that Ford Credit purchased the insurance pursuant to an agreement with American Security Insurance Company or American Security Insurance Group. The agreement allegedly provided that Ford Credit would make commissions on profits from the sale of such insurance. American Security retained only a small percentage of the insurance premium, and Ford Credit “received the balance less losses assessed against the aggregate remaining premiums collected from” Doxie and others like her. (Complaint, para. 8).

Under the “scheme” between Ford Credit and American Security, “it was to the economic advantage of Ford Credit to charge as high a premium as possible.” (Complaint, para. 9). The total cost of the insurance with finance charges was $913.63. After purchasing the insurance, Ford Credit notified Doxie through the United States mail that her monthly payments were being increased by $35.13 per month, for á total monthly payment of $196.12. In October of 1983, Doxie purchased her own replacement property insurance policy; the property damage premium for twelve months was only $136.00. When Ford Credit canceled the policy it had purchased, it computed the rebate of the unearned premium by the Rule of 78’s rather than the pro rata method of Ga.Code Ann. § 33-24-44(c).

Thus, Ford Credit charged Doxie over $716.00 of premium and interest for sixteen months coverage. After Doxie had again provided her own insurance, Ford Credit informed her that her monthly payment for the remainder of the contract would be $183.00.

According to Ford Credit’s figures, Doxie has paid $386.43 toward the cost charged her for the insurance that Ford Credit purchased. Ford Credit contends that Doxie owes an additional $330.43.

The heart of plaintiff’s attempt to allege a civil racketeering claim is in paragraphs 17 through 19 of the complaint:

17. By attempting to collect commissions and profits from the sale of this insurance by the use of the mail, Defendant, in connection with the named Plaintiff and in connection with all other persons similarly situated, has sent false and fraudulent statements through the mail, has engaged in a scheme to obtain money by means of false or fraudulent pretenses and representations, and has violated the provisions of 18 U.S.C. § 1341.
18. By sending such false and fraudulent statements through the mail and by attempting to collect from the named Plaintiff and all those individuals similarly situated, Defendant has engaged in a racketeering activity relating to mail fraud as defined in 18 U.S.C. § 1961.
19. Defendant, Ford Motor Credit Company, has engaged in a pattern of racketeering activity of the type alleged in this Complaint in that Defendant, Ford Motor Credit Company, has similarly forced property damage insurance upon other customers, has used the mails to collect the costs of such insurance and has made a profit from the sale of such insurance in violation of the provisions of [Ga.Code Ann.] §§ 10-6-24, 10-6-25 and 10-6-31 [(1982)].

In paragraph 20 of the complaint, plaintiff seeks “judgment against Defendant, Ford Motor Credit Company, in an amount equal to three times the amount of profit made by Defendant, Ford Motor Credit Company, from the sale of said policies of insurance, as authorized by 18 U.S.C. § 1964(c), all costs of this action, together with reasonable attorney’s fees.”

Defendant moves to dismiss based in part upon an argument that the complaint’s allegations of fraud are incomplete under Fed.R.Civ.P. 9(b) and the RICO statute. I agree. See, e.g., Friedlander v. Nims, 571 F.Supp. 1188, 1194 (N.D.Ga. 1983). If a plaintiff files a civil suit under RICO and, as in this ease, relies upon mail fraud as the alleged racketeering activity, the complaint must be pleaded with particularity. Barker v. Underwriters at Lloyd’s, London, 564 F.Supp. 352, 356 (E.D.Mich. 1983). See also Serig v. South Cook County Service Corp., 581 F.Supp. 575 (N.D.Ill.1984); County of Cook v. Midcon Corp., 574 F.Supp. 902, 920-922 (N.D.Ill.1983); Seville Industrial Machinery Corp., v. Southmost Machinery Corp., 567 F.Supp. 1146, 1156 (D.N.J.1983); King v. Lasher, 572 F.Supp. 1377, 1383 (S.D.N.Y. 1983); Eaby v. Richmond, 561 F.Supp. 131 (E.D.Pa.1983). In order to allege mail fraud, Doxie must state such matters as the time, place, and contents of the purported false representations. Additionally, she must “specify in what respect each of the statements were false and misleading, and the factual basis for believing that the defendant acted with an intent to defraud.” Serig, 581 F.Supp. at 580.

Plaintiff in this case is subject not only to the specificity requirements of Fed.R. Civ.P. 9(b), but also to the special pleading requirements of the RICO statute. Even courts that have broadly construed the standing requirement of 18 U.S.C. § 1964(e) have insisted upon strict adherence to the technical requirements for a civil RICO claim because the statute is a relatively specific one. Ralston v. Capper, 569 F.Supp. 1575, 1581 (E.D.Mich.1983). “In face of the difficulties courts have had in interpreting the provisions of RICO, and also in face of the treble damage liability which defendants are subject to, it is imperative that the court and the defendants be placed on clear notice as to what is being alleged, and what the substance of the claim is, in order to facilitate a decision on the merits of the case.” Id. At least one court in this circuit has previously ruled that RICO claims must be pled with particularity. Taylor v. Bear, Stearns & Co., 572 F.Supp. 667, 682-683 (N.D.Ga.1983). See also Bache, Halsey, Stuart, Shields, Inc. v. Tracy Collins Bank & Trust Co., 558 F.Supp. 1042, 1045-47 (D.Utah 1983). Whereas the complaint does not meet the especial pleading requirements of RICO and Fed.R.Civ.P. 9(b), the complaint, as to the federal RICO claim, must be dismissed.

Defendant also argues that the complaint should be dismissed because it fails to state a claim upon which relief can be granted under the RICO statute, in that plaintiff has failed to allege the injury needed to bring a RICO civil action under 18 U.S.C. § 1964(c). Again, I agree with defendant’s argument. This Court holds in accord with a growing weight of authority that requires plaintiffs in civil RICO cases to “allege injury caused by an activity which RICO was designed to deter, which whatever it may be, is different from that caused simply by such predicate acts as are alleged here.” Sedima, S.P.R.L. v. Imrex Co., Inc., No. 741 F.2d 482, 494 (2d Cir. 1984). In other words, “a civil RICO complaint must allege ‘a distinct RICO injury,’ ... [an] injury caused by a RICO violation, not just one caused by some of the essential elements of a RICO violation.” Bankers Trust Co. v. Rhoades, 741 F.2d 511, 516 (2d Cir. July 26, 1984). Compare Morosani v. First National Bank of Atlanta, 581 F.Supp. 945 (N.D.Ga.1984); Friedlander, 571 F.Supp. at 1194; and Wilkinson v. Paine, Webber, Jackson & Curtis, Inc., 585 F.Supp. 23, 28-29 (N.D.Ga.1983).

The Eleventh Circuit decision in the case of Morosani v. First National Bank of Atlanta, 703 F.2d 1220 (11th Cir.1983) is not to the contrary. The Morosani decision stands only for the proposition that “the relevant nature of ‘criminality’ [of the RICO predicate offenses] is not strictly limited by what has traditionally been prosecuted.” Friedlander, 571 F.Supp. at 1194 n. 3. See also Divco Construction & Realty Corp. v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 575 F.Supp. 712, 714 (S.D.Fla.1983).

I will not labor the issue with lengthy recitations of the history of the RICO statute or with an academic attempt to state the elusive meaning of the term “racketeering injury.” The case books are already replete with such efforts. What this order should make clear, however, is that I have concluded that Congress did not intend to federalize every tort or breach of contract in business transactions involving the use of the mails. See Tarlow, RICO Revisited, 17 Ga.L.Rev. 291, 304 (1983).

In addition to the Federal RICO claim, plaintiff has raised several state claims based upon pendent and diversity jurisdiction. Plaintiff seeks civil remedies under the Georgia Racketeer Influenced and Corrupt Organizations Act. Ga.Code Ann. § 16-14-6 (1984). The Georgia General Assembly was specific in stating the limitations of the Georgia RICO Act: “The General Assembly declares that the intent of this chapter is to impose sanctions against [the] subversion of the economy by organized criminal elements .... This chapter shall be construed to further that intent.” Ga.Code Ann. § 16-14-2(b). Even accepting plaintiff’s allegations as true, I cannot find and conclude that Ford Credit is a member of the “organized criminal elements” at which the Georgia RICO Act is aimed.

In Count Two of plaintiffs amended complaint, plaintiff asserts that a “confidential relationship” existed between herself and Ford Credit and that Ford Credit breached its ensuing obligation to perform the contract in good faith. “Any relationship shall be deemed confidential, whether arising from nature, created by law, or resulting from contracts, where one party is so situated as to exercise a controlling influence over the will, conduct, and interest of another....” Ga.Code Ann. § 23-2-58 (1982). The contract between Ford Credit and plaintiff did not create a confidential relationship between them, nor was Ford Credit “so situated as to exercise a controlling influence over the will, conduct, and interest” of plaintiff. Id. “The mere fact that one reposes trust and confidence in another does not create a confidential relationship. ‘In the majority of business dealings, opposite parties have trust and confidence in each other’s integrity, but there is no confidential relationship by this alone.’ ” Lewis v. Alderman, 117 Ga.App. 855, 162 S.E.2d 440, 441 (1968), quoting, Dover v. Burns, 186 Ga. 19, 26, 196 S.E. 785, 789 (1938). Although factual situations are conceivable in which a person purchasing an automobile could have a confidential relationship, within the meaning of Ga.Code Ann. § 23-2-58, with the corporation financing the purchase, in the usual setting, such as in this case, the purchaser of an automobile has no confidential relationship with the financer of the purchase.

In Count Four of her amended complaint, plaintiff alleges that Ford Credit “wilfully and wrongfully converted money owed” to the plaintiff. No claim for conversion can properly be asserted against Ford Credit. “ ‘[I]f the owner expressly or impliedly assents to or ratifies the taking, use, or disposition of [her] property, [s]he cannot recover as for a conversion thereof; and this is true although defendant exceeded the power given him.’ ” Birkett L. Williams Co. v. Smith, 353 F.2d 60, 64 (5th Cir.1965).

In Count Five, plaintiff raises a claim for money had and received. An express contract governs the rights of the parties in this case, and an action based on an implied contract theory such as money had and received cannot be maintained. Wofac Corp. v. Hanson, 131 Ga.App. 725, 206 S.E.2d 614 (1974).

In conclusion, for the above stated reasons, the Court orders the complaint DISMISSED without prejudice. The Court will allow plaintiff twenty (20) days from the date of this order to amend her complaint, if she can, in accord with this order. If a second amended complaint is not filed within twenty (20) days of the date of this order, the Court will order the case DISMISSED with prejudice.

      . Compare Complaint, ¶ 15 ($716.35) with Complaint, ¶ 21 ($716.86).

      . When reading the RICO statute, one would do well to remember the words of a recent presidential candidate: "When you take the text out of context, the result is a pretext."


author: SAFFELS, District Judge.

text:
    FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. Kenneth P. SODEN, et al., Defendants. James L. EISENBRANDT, et al., Plaintiffs, v. FEDERAL DEPOSIT INSURANCE CORPORATION, et al., Defendants. Kenneth P. SODEN and William O. Isenhour, Jr., Plaintiffs, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant.
    Civ. A. Nos. 83-2354, 84-2080 and 84-2081.
    United States District Court, D. Kansas.
    Oct. 19, 1984.

      Brian E. Gardner, A. Bradley Bodamer, Morrison, Hecker, Curtis, Kuder & Parrish, Overland Park, Kan., Martin J. Purcell, John C. Cozad, Stanley A. Reigel, Morrison, Hecker, Curtis, Kuder & Parrish, Kansas City, Mo., for F.D.I.C.
    Thomas A. Hamill, Hamill, Neill & Dwyer, Mission, Kan., Richard T. Merker, Rudolf H. Beese, Wallace, Saunders, Austin, Brown & Enochs, Dennis M. Clyde, Gates & Clyde, Overland Park, Kan., for Soden, Eisenbrandt and Isenhour.
   MEMORANDUM AND ORDER

SAFFELS, District Judge.

These cases, all arising out of the failure of the Mission State Bank and Trust Company, are hereby consolidated by this court on the motion of the Federal Deposit Insuranee Corporation [hereinafter FDIC]. There are numerous motions pending. The court has determined that oral argument would not be of material assistance. Rule 15(d), Rules of Practice of the United States District Court for the District of Kansas.

I. FDIC As Defendant

The court will first consider the motions of the FDIC, in its corporate capacity, to dismiss' in Case Nos. 84-2080 and 84-2081. FDIC is the defendant in both cases.

In Eisenbrandt v. F.D.I.C., plaintiffs James L. Eisenbrandt and Louise Eisenbrandt have sued the FDIC, both in its capacity as receiver and in its corporate capacity, for treble damages, pursuant to 12 U.S.C. § 1971, et seq. In Kenneth P. Soden and William O. Isenhour v. F.D.I.C., the defendant FDIC is sued only in its corporate capacity. The FDIC, in its corporate capacity only, has moved to dismiss these actions.

In considering a motion to dismiss under Rule 12(b)(6), Federal Rules of Civil Procedure [hereinafter F.R.C.P.], the factual allegations of a complaint must be taken as true and all reasonable inferences must be indulged in favor of the plaintiff. Mitchell v. King, 537 F.2d 385 (10th Cir.1976); Dewell v. Lawson, 489 F.2d 877 (10th Cir. 1974). A complaint should not be dismissed unless it appears beyond a doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). In this ease, the court has considered the complaint of the Eisenbrandt plaintiffs and the amended complaint of the Soden plaintiffs, as well as the briefs of the plaintiffs in support of their claims. It appears to the court “beyond doubt” that plaintiffs can prove no set of facts entitling them to affirmative relief from the FDIC in its corporate capacity.

The facts, as viewed in the light most favorable to the plaintiffs, indicate that the FDIC prior to February of 1980 had identified the Mission State Bank and Trust Company as a problem bank. Plaintiffs allege that the FDIC became actively involved in the day-to-day operations of the bank, and exceeded the normal actions of a regulatory agency. Plaintiffs allege that the actions were taken by the FDIC in its corporate capacity with its own best interests in mind.

On Tuesday, February 26, 1980, a law partnership note, No. 9516, in the amount of Six Thousand Dollars ($6,000), plus accrued interest, was due to the bank. Plaintiff James L. Eisenbrandt and plaintiffs Soden and Isenhour were members of the law partnership. The law partnership requested from the bank that the note be renewed and that the partnership be granted an additional Ten Thousand Dollars ($10,000) for payroll and operating expenses.

At the same time, a certain note of the KJW Development Company, No. 3100, was past due in the amount of One Thousand One Hundred Fifty-Nine and 32/100 Dollars ($1,159.32), plus accrued interest. According to plaintiffs, the past due status of this note was merely a technicality, because of a remaining Two Hundred Thirty-Eight Thousand Four Hundred Eighty Dollars ($238,480) balance available for draw on a wrap-around mortgage of certain property in Corbin, Kentucky. Plaintiffs were involved in the KJW Development Company.

On Tuesday, February 26, 1980, or Wednesday, February 27, 1980, bank officials met with members of the law partnership to discuss the execution of certain guaranty agreements in favor of the bank. These guaranty agreements allegedly were requested by the FDIC in part to shore up the FDIC's exposure in the event of the bank’s insolvency. Following discussion, the partners determined that they would not sign the requested personal guaranties. They expressed this decision to the bank officials and further stated that the partnership would seek the necessary financing at another bank. Thereafter, the partners were advised by the bank that if the guaranty agreement was not signed, all loans of KJW Development, Tri-State Road Boring Company, the law partnership, the building partnership, and each of the individual partners would be immediately due and payable, essentially accelerating the due date on all unrelated indebtedness, totaling well in excess of One Million Dollars ($1,000,000).

Plaintiffs allege they will show that this action was taken at the direction of, and on behalf of, the FDIC in a manner clearly directed at using its economic power to force plaintiffs, as customers, to provide personal guaranties in order to obtain the product or service they desired, in direct violation of federal statute. The Soden plaintiffs also allege that the bank, together with the FDIC, conditioned the extension of credit upon the plaintiffs not obtaining credit from any competitor of the bank.

The Bank Holding Company Act, 12 U.S.C. § 1971, et seq., prohibits banks from entering into certain tying arrangements. The relevant statute, 12 U.S.C. § 1972, states, in pertinent part:

(1) A bank shall not in any manner extend credit, lease or sell property of any kind, or furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement—
******
(C) that the customer provide some additional credit, property, or service to such bank, other than those related to and usually provided in connection with a loan, discount, deposit, or trust service;
******
(E) that the customer shall not obtain some other credit, property, or service from a competitor of such bank, a bank holding company, of such bank, or any subsidiary of such bank holding company, other than a condition or requirement that such bank shall reasonably impose in a credit transaction to assure the soundness of the credit.

Defendant FDIC, in its corporate capacity, claims that plaintiffs’ complaints fail for four independent reasons. First, the bank tying statute, on its face, is not applicable to the FDIC. Second, the actions alleged to have been taken are no more than the regulatory actions the FDIC is empowered to take by its authorizing statute, 12 U.S.C. § 1811, et seq. Third, plaintiffs’ actions are barred by the Federal Tort Claims Act, 28 U.S.C. § 2679(a), which expressly bars suits such as this against federal agencies for the allegedly wrongful discretionary acts or omissions of their employees. Finally, the FDIC alleges that even if the bank were still in operation and these suits were brought only against the bank, the complaints would fail to state a claim for relief in that the actions alleged amount to no more than requiring additional security for an existing loan before making additional loans, and such actions are entirely consistent with ordinary and customary banking practices and reflect prudence rather than anti-competitive intent.

The court need not reach all of the issues posed by plaintiffs’ claims. The court finds as a matter of law that plaintiffs have failed to state a claim for which relief can be granted under the Bank Holding Company Act. The relevant provision, 12 U.S.C. § 1972(1) states that a “bank” shall not in any manner extend credit on the basis of certain prohibited conditions. The question before the court is whether 12 U.S.C. § 1972(1) subjects the FDIC in its corporate capacity to treble damage liability for violation of its provisions. Plaintiffs contend that the FDIC may be held liable in that the FDIC had the right to make loans and accept deposits of public monies, and therefore the FDIC may be considered a “bank” under the Act. See 12 U.S.C. § 1841(c). Plaintiffs offer as an exhibit the FDIC’s admission in a related case, which states as follows:

[FDIC] ... may make loans under certain specific conditions. [FDIC] is also authorized by virtue of 12 U.S.C. 1823(b), by the Congress of the United States, to accept deposits of public moneys (sic) except by receipts from customs, in the event that it is designated a depository by the Secretary of the Treasury. While it has not been so designated by the Secretary of the Treasury, [FDIC] ... claims that the language of 12 U.S.C. 1823(b) is sufficient authorization to bring it within the definition of a supervised financial organization found in K.S. A.1982 Supp. 16a-l-301(37).

FDIC v. Thompson, No. 114797 (D. Johnson Co., Ks., 1983). (Amended answer to request for admissions.)

Under 12 U.S.C. § 1841(e), a “bank” is an institution which “(1) accepts deposits that the depositor has a legal right to withdraw on demand, and (2) engages in the business of making commercial loans.” The court finds that FDIC does not fall within this definition of a bank in that it does not accept deposits payable upon demand; in other words, the FDIC does not offer checking accounts. While the FDIC admittedly has authority under 12 U.S.C. § 1823(b) to accept deposits of public monies when so designated by the Secretary of Treasury, such deposits are not sufficient to make the FDIC a bank under the Bank Holding Company Act. The legislative history of that Act indicates that the statute excludes institutions which do not accept checking accounts.

... the bill redefines “bank” as an institution that accepts deposits payable on demand (checking accounts), the commonly accepted test of whether an institution is a commercial bank so as to exclude institutions like industrial banks and non-deposit trust companies.

1966 U.S.Code Cong. & Adm.News, 2391.

By definition, therefore, the FDIC, in its corporate capacity, is not an institution subject to liability under the Bank Holding Company Act. The court finds that the FDIC is not a bank subject to regulation under the Act, but rather is a regulatory agency of the federal government with regulatory powers under the Act. 12 U.S.C. § 1972(2)(F)(vi). In its corporate capacity, the FDIC cannot be held liable under 12 U.S.C. § 1972 as alleged by plaintiffs herein.

II. Counterclaims Against FDIC

The court shall now consider the counterclaims raised by defendants James L. Eisenbrandt and Louise Eisenbrandt, and Kenneth P. Soden and William 0. Isenhour, Jr., in Case No. 83-2354 brought by the FDIC against these parties. In their counterclaims herein, the Eisenbrandts, Soden and Isenhour assert against the FDIC various claims under the Bank Holding Company Act, 12 U.S.C. § 1971, et seq., which prohibits banks from entering into certain tying arrangements. These are the same claims as asserted by the Eisenbrandts, Soden and Isenhour in Cases No. 84-2080 and 84-2081 above. The court therefore finds that the counterclaims stated in Case No. 83-2354 by the Eisenbrandts, Soden and Isenhour do not state a claim upon which relief can be granted. Further, in that the FDIC is suing solely in its corporate capacity in Case No. 83-2354, the counterclaims of these defendants are dismissed in their entirety.

Also before the court is the motion of plaintiff FDIC to dismiss the counterclaim of defendants Lawrence C. and Jeanne K. Gates in Case No. 83-2354. The Gates defendants have filed a counterclaim against the FDIC generally alleging that the FDIC failed to comply with certain provisions of the Kansas Consumer Credit Code [hereinafter KCCC], K.S.A. 16a-1-101, et seq. Defendants allege the FDIC has never obtained a license from the State of Kansas to make or take assignments of supervised loans in Kansas. K.S.A. 16a-2-301. Defendants allege that the FDIC’s failure to obtain such a license voids the promissory notes herein and entitles the defendants to a statutory penalty. These same arguments were previously dealt with by order of this court in FDIC v. Gates, 594 F.Supp. 36 (D.Kan.1984), reconsideration denied (D.Kan. 4/17/84). There, this court held that K.S.A. 16a~2-301, the licensing provision of the KCCC, does not require the licensing of the FDIC before it undertakes a collection of loans which it purchases in its corporate capacity. The court hereby adopts the reasons set forth in FDIC v. Gates and holds that the defendants have not stated a counterclaim under the KCCC.

Also before the court is the motion of the FDIC in Case No. 83-2354, to dismiss the counterclaim of defendant Soden & Isenhour, a general partnership (hereinafter referred to as the law firm). The law firm seeks judgment voiding two promissory notes, for Fifteen Thousand Two Hundred Eleven and 16/100 Dollars ($15,211.16), plus interest, for civil penalties and reasonable attorneys’ fees. The law firm’s arguments are based on two theories. First, the firm contends that the FDIC has failed to comply with certain provisions of the KCCC. K.S.A. 16a-l-101, et seq. This argument has been dealt with in FDIC v. Gates, supra; therefore, the counterclaim of Soden & Isenhour under the KCCC must be dismissed. Second, the firm alleges that there was an agreement between the law firm and Theodore Meyer, President of Mission State Bank and Trust Company, that the indebtedness on the two notes [for Sixty-Eight Thousand Dollars ($68,000) and Six Thousand Dollars ($6,000)] would be paid from the contingent fees of the firm and its predecessors and from fees for services rendered by it and its predecessors to Gary L. Frazier and various corporations with which Gary L. Frazier was connected. The law firm alleges that Meyer requested the firm to represent Frazier, and Meyer guaranteed the payment of Fifty-Five Thousand’ Six Hundred Ninety-Five and 61/100 Dollars ($55,695.61). The law firm alleges that this money and guaranty has never been collected by it or its predecessors and that the Mission State Bank and Trust Company failed to pay. The law firm alleges that Meyer at all times pertinent hereto controlled the funds of Frazier and his corporations, and that the FDIC acknowledged and acquiesced in the agreement that said indebtedness would be paid from the contingent fees.

The FDIC contends that D’Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), and 12 U.S.C. § 1823(e) protect the FDIC from secret side agreements which are not reflected in the records of a failed bank. The relevant statute, 12 U.S.C. § 1823(e), states:

No agreement which tends to diminish or defeat the right, title or interest of the Corporation in any asset acquired by it under this section, either as security for a loan or by purchase, shall be valid against the Corporation unless such agreement (1) shall be in writing, (2) shall have been executed by the bank and the person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the bank, (3) shall have been approved by the board of directors of the bank or its loan committee, which approval shall be reflected in the minutes of said board or committee, and (4) shall have been, continuously, from the time of its execution, an official record of the bank.

It is clear that the alleged side agreement entered into between the bank and the law firm did not comply with § 1823(e) in that no allegation has been made that such agreement was in writing or was approved by the board of directors or the bank or was in any aspect reflected in an official record of the bank. While the law firm alleges that the FDIC was aware of the agreement, the court finds that such knowledge by the FDIC is irrelevant. In FDIC v. de Jesus Velez, 678 F.2d 371, 375 (1st Cir.1982), the court stated:

Section 1823(e) is explicit in its requirements for the validity of collateral agreements. Knowledge by the FDIC and some sort of constructive knowledge of the bank directors are not relevant. The agreements do not meet the § 1823(e) requirements, and therefore the agreements are invalid.

The court finds that for the same reasons the collateral agreement here between the bank and the law firm is not relevant and the provisions of § 1823(e) have not been complied with. Therefore, the counterclaim of the law firm against the FDIC must be dismissed.

III. Cross-claims

Defendants Kenneth P. Soden, William 0. Isenhour, Jr., and Soden & Isenhour, a general partnership, have moved to dismiss or strike the cross-claims of defendants James L. Eisenbrandt and Louise Eisenbrandt. The Eisenbrandt defendants served their answer and counterclaim to plaintiffs complaint by mail on May 29, 1984. Thereafter, on July 19, 1984, the Eisenbrandt defendants served, without leave of court, a cross-claim on defendants Soden, Isenhour and the law partnership (hereinafter referred to as the Soden defendants). The Soden defendants claim that the cross-claim filed by the Eisenbrandts is an improper pleading in that it was not served with the answer and that it was untimely in that it was not filed within twenty (20) days after the service of summons and complaint. Rule 12(a), Federal Rules of Civil Procedure.

Rule 7(a), F.R.C.P., states:

There shall be a complaint and an answer; a reply to a counterclaim denominated as such; an answer to a cross-claim, if the answer contains a cross-claim; a third-party complaint, if a person who was not an original party is summoned under the provisions of Rule 14; and the third-party answer, if a third-party complaint is served. No other pleading shall be allowed, except that the court may order a reply to an answer or a third-party answer. (Emphasis supplied.)

Consistent with the above language, a cross-claim must be properly contained in the answer. The Eisenbrandt defendants’ answer did not contain a cross-claim, and leave of court was not obtained from the court to amend the answer. Rule 15, F.R.C.P., allows amendment by leave of the court, and commands that leave shall be freely given when justice so requires. The Eisenbrandt defendants have requested leave to amend their answer to include a cross-claim in the event the court rules that the above cross-claim is not proper. The court finds that the Eisenbrandt defendants should be granted fifteen (15) days from the date of this order to amend their answer to include a cross-claim.

IV. Interpleader

Defendant Soden & Isenhour, a general partnership, has moved for an order dismissing or setting aside the interpleader filed herein by Gates & Clyde, Chartered. The interpleader paid Two Thousand Eight Hundred Thirty-One and 20/100 Dollars ($2,831.20) into the court and was discharged from any liability to any conflicting claimants with regard to these funds. Defendant Soden & Isenhour filed its motions to dismiss and/or to set aside the interpleader’s payment of funds into the court on July 26 and July 31, 1984. No responsive brief has been filed by any of the parties. It appears from the briefs of the interpleader and defendant Soden & Isenhour that these funds were legal fees due and owing to Soden & Isenhour, a general partnership, for which FDIC has apparently made some sort of claim outside the records of this court. The court, without addressing the merits of which party is ultimately entitled these funds, finds, consistent with the motion of defendant Soden & Isenhour, that the holding of these funds by the court is improper. The court therefore finds that the interpleader should be set aside and the sums held by the registry of the court pursuant to the court’s earlier order should be released to Soden & Isenhour, a general partnership, pending trial on the merits.

IT IS BY THE COURT THEREFORE ORDERED that Case Nos. 83-2354, 84-2080 and 84-2081 are hereby consolidated.

IT IS FURTHER ORDERED that the motions of defendant FDIC to dismiss the claims of the plaintiffs in Case Nos. 84-2080 and 84-2081 are hereby granted as to the FDIC in its corporate capacity. The FDIC remains in Case No. 84-2080 in its capacity as receiver.

IT IS FURTHER ORDERED that the motion of plaintiff FDIC in Case No. 83-2354 to dismiss the counterclaims of James L. Eisenbrandt, Louise Eisenbrandt, Kenneth P. Soden and William 0. Isenhour, Jr. is hereby granted.

IT IS FURTHER ORDERED that the motion of the FDIC to dismiss the counterclaim of Soden & Isenhour, a general partnership, is hereby granted.

IT IS FURTHER ORDERED that the motion of defendants Kenneth P. Soden, William 0. Isenhour, Jr., and Soden & Isenhour, a general partnership, to dismiss or strike the cross-claims of defendants James L. Eisenbrandt and Louise Eisenbrandt is hereby granted. IT IS FURTHER ORDERED that defendants James L. Eisenbrandt and Louise Eisenbrandt are hereby granted leave to file, within fifteen (15) days from the date this order is filed, an amended answer including the cross-claims which have been heretofore struck by this order.

IT IS FURTHER ORDERED that the motions of defendant Soden & Isenhour, a general partnership, for an order dismissing or setting aside the interpleader filed herein by Gates & Clyde, Chartered, are hereby granted, and the .Clerk of this Court is hereby ordered to release to Soden & Isenhour, a general partnership, any sums heretofore deposited with this court in this case by order dated July 18, 1984.


author: ROBERT L. CARTER, District Judge.

text:
    AMERICAN HOME ASSURANCE COMPANY and Birmingham Fire Insurance Company of Pennsylvania, Plaintiffs, v. The INSURANCE CORPORATION OF IRELAND LIMITED, those certain Underwriters At Lloyds subscribing to reinsurance agreements evidenced by Cover Note Nos. BIB 1210/82 and LI 113, RTC Limited, and Bloodstock International (Bermuda) Ltd., Defendants. and The INSURANCE CORPORATION OF IRELAND LIMITED, Third-Party Plaintiff, v. RHULEN AGENCY, INC., Somerset Broking Limited, Leadenhall International Limited, Peter James Meredew and John Richard Crawford Harris, Third-Party Defendants. and RHULEN AGENCY, INC., Fourth-Party Plaintiff, v. PAUL NAPOLITAN, INC., Fourth-Party Defendant. FRONTIER INSURANCE COMPANY, Plaintiff, v. INSURANCE CORPORATION OF IRELAND, LTD; Equine And Livestock Insurance Company, Ltd.; Brian D. Sutton; Bloodstock International (Bermuda), Ltd.; Peter J. Meredew, John Harris, RTC Limited and Rhulen Agency, Inc., Defendants. The MONARCH INSURANCE COMPANY OF OHIO, Plaintiff,. v. The INSURANCE CORPORATION OF IRELAND, LTD., and Frelinghuysen Livestock Managers, Inc., Defendants. and The INSURANCE CORPORATION OF IRELAND, LIMITED, Third-Party Plaintiff, v. RTC LIMITED, Bloodstock International (Bermuda), Ltd., Leadenhall International Limited, Peter James Meredew, John Richard Crawford Harris and Somerset Broking Limited, Third-Party Defendants. PUBLIC SERVICE MUTUAL INSURANCE COMPANY, Plaintiff, v. The INSURANCE CORPORATION OF IRELAND, LTD., Defendant. and The INSURANCE CORPORATION OF IRELAND, LTD., Third-Party Plaintiff, v. Peter James MEREDEW, John Richard Crawford Harris, Rhulen Agency, Inc., Somerset Broking Limited, Leadenhall International Limited, RTC Limited, and Bloodstock International (Bermuda) Limited, Third-Party Defendants.
    Nos. 83-Civ. 9181 (RLC), 84 Civ. 769 (RLC), 84 Civ. 871 (RLC) and 84 Civ. 3797 (RLC).
    United States District Court, S.D. New York.
    Oct. 22, 1984.

      Kroll, Pomerantz & Cameron, New York City,, for plaintiffs American Home Assur. Co. and Birmingham Ins. Co. of Penna; Roy E. Pomerantz, Leigh R. Isaacs, New York City, of counsel.
    Hart & Hume, New York City, for Rhulen Agency, Inc.; Cecil Holland, Jr., Thomas Fenerty, New York City, of counsel.
    D’Amato & Lynch, New York City, for defendant and third-party plaintiff Ins. Corp. of Ireland, Ltd.; Robert E. Meshel, John P. Higgins, New York City, of counsel.
    Solin & Breindel, New York City, for defendant Certain Underwriters at Lloyds; Janice C. Berman, New York City, of counsel.
    Montclare & Guay, New York City, for defendant RTC Limited; Paul Montclare, New York City, of counsel.
    Hale, Russell & Gray, New York City, for defendant Bloodstock Intern, and third-party defendants John Richard Crawford Harris and Somerset Broking Limited; Selvyn Seidel, New York City, of counsel.
    Thaeher, Proffitt & Wood, New York City, for third-party defendant Peter James Meredew; Joan Hillenbrand, New York City, of counsel.
    Anderson, Laino & Urgenson, P.C., New York City, for third-party defendant Leadenhall Intern., Ltd.; A. Broadus Anderson, New York City, of counsel.
    Donovan, Maloof, Walsh & Kennedy, New York City, for fourth-party defendant Paul Napolitan, Inc.; Thomas P. Parry, New York City, of counsel.
    Raggio, Jaffe, Kayser & Hunting, New York City, for Frelinghuysen Livestock Managers; Leo Kayser, III, New York City, of counsel.
    Rein, Mound & Cotton, New York City, for The Monarch Ins. Co. of Ohio; Alan Rein, New York City, of counsel.
    Marvin L. Tepper, Monticello, N.Y., and Shea & Gould, New York City, for Frontier Ins. Co.; John G. Nicolich, New York City, of counsel.
   OPINION

ROBERT L. CARTER, District Judge.

This consolidated action involves American and foreign parties in an international reinsurance transaction. The plaintiffs are United States insurance companies, doing business in New York City, suing for reimbursement of claims paid to, inter alia, insureds in the United States.

Primary defendants include reinsurers: The Insurance Corporation of Ireland Limited (“ICI”), certain Underwriters at Lloyds (“Underwriters”), both doing business in New York City; agents RTC Limited (“RTC”) and Bloodstock International (Bermuda) Limited (“BIBL”), whose contacts with New York have not yet been ascertained but which transacted a Binding Agreement Authority (“binding agreement”) with reinsurers allowing them to transact cover notes between certain plaintiffs and reinsurers. There are, in addition, a number of other defendants in the separately filed actions, but they are not parties to the motions being decided in this opinion.

The complaint, in 83 Civ. 9181, is typical of the allegations in the companion cases. Plaintiffs allege breach of contract against all primary defendants, negligence, misrepresentation, and breach of warranty of authority against RTC and BIBL.

Defendant ICI has impleaded Rhulen Agency, Inc. (“Rhulen”); Somerset Broking Limited (“Somerset”); Leadenhall International Limited (“Leadenhall”); and Peter James Meredew (“Meredew”) and John Richard Crawford Harris (“Harris”) as individuals. The third party action alleges that third party defendants acted fraudulently as agents of American Home Assurance Co. (“AHA”) in consummating the disputed reinsurance agreement between AHA and reinsurers.

Rhulen, a New York corporation and AHA’s agent, has brought a fourth party action against Paul Napolitan, Inc. (“Napolitan”), another reinsurance broker and also a New York corporation. That action alleges Napolitan’s responsibility for any liability that attaches to Rhulen.

Motions were made by two of the primary defendants, RTC, a British corporation, and BIBL, a Bermuda corporation, to dismiss the action against them in part on grounds of forum non conveniens. In the alternative they seek to stay this action pending the outcome of litigation filed in the United Kingdom. Plaintiffs are not parties to the United Kingdom action.

Motions similar to the aforenamed defendants’ motions were made by third party defendants Leadenhall, a British corporation; Somerset, a Bermuda corporation; and Harris, an individual resident in either Bermuda or the United Kingdom.

Plaintiffs, AHA and Birmingham Fire Insurance Company of Pennsylvania, corporations organized and existing under the laws of New York and Pennsylvania, respectively, with both having their principal places of business in New York City, have moved to enjoin the parties from proceeding with the United Kingdom actions.

I

The central purpose of any forum non conveniens inquiry is to ensure that the situs of the trial is convenient. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 256, 102 S.Ct. 252, 266, 70 L.Ed.2d 419 (1981); Ayers v. Arabian American Oil Co., 571 F.Supp. 707, 708 (S.D.N.Y.1983) (Carter, J.). In making that determination, courts are to consider the private and public interest factors elucidated by the Supreme Court in the leading forum non conveniens ease, Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-15, 67 S.Ct. 839, 843-46, 91 L.Ed. 1055 (1947).

We begin the analysis with the important private interest of plaintiffs’ choice of forum. There is a strong presumption in favor of a citizen or resident plaintiffs choice of forum unless other private and public interest factors involved clearly point to trial in the alternate forum. Reyno, supra, 454 U.S. at 255, 102 S.Ct. at 265 (emphasis added). The complaint of an American citizen should not be dismissed on forum non conveniens grounds unless trial in a United States court would be unjust, oppressive, or vexatious and not merely inconvenient to the defendant. Koster v. Lumbermens Mutual Casualty Co., 330 U.S. 518, 524, 67 S.Ct. 828, 831, 91 L.Ed. 1067 (1947); Leasco Data Processing Equipment Corp. v. Maxwell, 468 F.2d 1326, 1344 (2d Cir.1972); Thompson v. Palmieri, 355 F.2d 64, 66 (2d Cir.1966); Ionescu v. E.F. Hutton & Co. (France) S.A., 465 F.Supp. 139, 145 (S.D.N.Y.1979) (Pollack, J.).

Here, plaintiffs are United States corporations, all doing business in New York, all have their principal place of business in the Southern District of New York, and AHA, Frontier Insurance Company, and Public Service Mutual Insurance Company are organized under the laws of this state. Movants do not allege any “unjust, oppressive, or vexatious” grounds for their claim of forum non conveniens. All primary parties are corporate entities involved in international reinsurance practice and all but RTC and BIBL are present in New York. Trial in New York would therefore be at least as convenient to the primary parties as trial in the United Kingdom. See Top Form Mills v. Sociedad Nationale Ind., Etc., 428 F.Supp. 1237 (S.D.N.Y.1977) (Gagliardi, J.); Odita v. Elder Dempster Lines, Ltd., 286 F.Supp. 547 (S.D.N.Y.1968) (Herlands, J.).

Other private interest factors named in Gilbert weigh in favor of retention of jurisdiction. All documentary evidence is now present in the United States and arrangements have been made to depose all foreign witnesses. Allegations by movants concerning greater access in Britain to documents, witnesses and evidence concerning London market practices, therefore, appear unfounded but, even if true, do not amount to the “extreme circumstances” and “material injustice” needed to overcome the strong private interest of plaintiffs’ choice of a domestic forum. Leasco Data Processing Equipment Corp. v. Maxwell, supra, 468 F.2d at 1344 quoting Burt v. Isthmus Development Co., 218 F.2d 353, 357 (5th Cir.1955), cert. denied, 349 U.S. 922, 75 S.Ct. 661, 99 L.Ed. 1254 (1955).

Even if we decide that British law applies to the contested substantive issues regarding the disputed cover notes, such application of foreign law is not alone sufficient to warrant dismissal when a balancing of all relevant factors shows that the plaintiffs’ chosen forum is appropriate. Reyno, supra, 454 U.S. at 260, n. 29, 102 S.Ct. at 268, n. 29 (1981); Manu International S.A. v. Avon Products, Inc., 641 F.2d 62, 67 (2d Cir.1981); Gibbons v. Udaras na Gaeltachta, 549 F.Supp. 1094, 1123 (S.D.N.Y.1982) (Ward, J.); Odita v. Elder Dempster Lines, Ltd., supra, 286 F.Supp. at 551.

The possibility that primary defendant ICI will not be able to implead third party defendants Leadenhall, Somerset, Meredew, and Harris due to lack of personal jurisdiction might, in a different fact situation, lead to dismissal of the complaint against ICI on forum non conveniens grounds. The inability to implead other parties directly involved in the controversy is a factor which weighs against retention of jurisdiction. Fitzgerald v. Texaco, Inc., 521 F.2d 448, 453 (2d Cir.1975), cert. denied, 423 U.S. 1052, 96 S.Ct. 781, 46 L.Ed.2d 641 (1976); accord, Bailey v. Dolphin International, Inc., 697 F.2d 1268, 1279 (5th Cir.1983); Pain v. United Technologies Corp., 637 F.2d 775, 790 (D.C.Cir. 1980) (term “direct involvement” emphasized), cert. denied, 454 U.S. 1128, 102 S.Ct. 980, 71 L.Ed.2d 116 (1981); Dahl v. United Technologies Corp., 632 F.2d 1027, 1031 (3rd Cir.1980).

In a Second Circuit case where, as here, a foreign defendant and third party defendant moved to dismiss on grounds of forum non conveniens, the district court allowed the secondary action between the defendant French bank and third party defendant French buyer to be dismissed and brought separately in France, while retaining jurisdiction over the primary action between the American seller and French bank. Olympic Corp. v. Societe Generale, 462 F.2d 376 (2d Cir.1972), affg in part and rev’g in part, 333 F.Supp. 121 (S.D.N.Y.1971) (Bonsai, J.). The circuit court in reversing this court’s dismissal of the primary action found that “although the benefits of impleader might be taken into account in a close case in deciding whether or not to dismiss for forum non conveniens, they are not so important as to counteract the overwhelming evidence that [plaintiff] should be permitted to sue in the United States....” Olympic Corp. v. Societe Generale, supra, 462 F.2d at 379.

Although the Olympic solution of dismissing the third party action while retaining jurisdiction over the primary litigation may be applicable here, if we ultimately decide that this court lacks personal jurisdiction over certain third parties, the complexity of the present action makes such severance undesirable. Unlike Olympic, one third party defendant here, Rhulen, is a New York corporation and Rhulen has impleaded Napolitan, also a New York corporation, in a fourth party action. In addition, while defendants’ liability under the cover notes may be adjudicated without the presence- of third party agents, the nexus of factual relations is such that a more efficient use of judicial resources is possible if all parties are brought before the court in one action. Conservation of judicial resources is a factor to be considered in forum non conveniens cases. Calvalo Growers of California v. Belgium, 632 F.2d 963, 968 (2d Cir.1980); Pain v. United Technologies Corp., supra, 637 F.2d at 790-791; Disaster at Riyadh Airport, Saudi Arabia, on August 19, 1980, 540 F.Supp. 1141, 1143, n. 1 (D.D.C.1980); Mattes v. National Hellenic American Line, S.A., 427 F.Supp. 619, 629 (S.D.N.Y. 1977) (Lasker, J.).

Public interest factors also favor keeping the present case in its present configuration. First and foremost, national and local public policy favors providing a forum in which United States citizens may seek to redress an alleged wrong. Fiacco v. United Technologies Corp., 524 F.Supp. 858, 861 (S.D.N.Y.1981) (Broderick, J.). The reinsurance cover notes implicate not only the interests of the primary plaintiffs, but the interests of United States insureds as well.

Further, all parties in the consolidated action are before this court while neither plaintiffs, underwriters, Rhulen, Equine and Livestock Insurance Company, Ltd., and Brian D. Sutton (all defendants in the action brought by Frontier Insurance Company), nor Frelinghausen Livestock Managers, Inc. (defendant in the action brought by Monarch Insurance Company), are parties to the United Kingdom action. Thus, in the further interest of conservation of judicial resources, this forum seems best situated to adjudicate the entire controversy.

For the above stated reasons, all motions to dismiss on grounds of forum non conveniens are denied. Similar rationale mandates denial of the motions to stay this action pending the outcome of litigation in the United Kingdom.

II

As to plaintiffs’ motion to enjoin the parties from pursuing pending litigation in the United Kingdom, there is sufficient reason to grant the motion. Courts have the power to enjoin litigants from pursuing simultaneous contests in a foreign forum. Laker Airways v. Sabena Belgian World Airlines, 731 F.2d 909, 927-928 (D.C.Cir.1984); Seattle Totems Hockey Club, Inc. v. National Hockey League, 652 F.2d 852, 856 (9th Cir.1981), cert. denied, 457 U.S. 1105, 102 S.Ct. 2902, 73 L.Ed.2d 1313 (1982); Harvey Aluminum v. American Cyanamid Co., 203 F.2d 105,108 (2d Cir.1953); Garpeg, Limited v. United States, 583 F.Supp. 789, 798 (S.D.N.Y.1984) (Sweet, J.); Cargill, Inc. v. Hartford Accident and Indemnity Co., 531 F.Supp. 710 (D.Minn.1982).

In such a situation, this court has adopted a two part test to determine whether parties may be thus enjoined. Parties must be the same in both matters, and resolution of the first action must be dispositive of the action to be enjoined. Garpeg, Limited v. United States, supra, 583 F.Supp. at 798 citing Cargill, Inc. v. Hartford Accident and Indemnity Co., supra, 531 F.Supp. at 715. The present facts satisfy that yardstick. All parties to the United Kingdom action are currently before this court (while the converse is not true) and a resolution of this action will be dispositive of the United Kingdom action.

When these threshold requirements are met, five factors are suggested in determining whether the foreign action should be enjoined: (1) frustration of a policy in the enjoining forum; (2) the foreign action would be vexatious; (3) a threat to the issuing court’s in rem or quasi in rem jurisdiction; (4) the proceedings in the other forum prejudice other equitable considerations; or (5) adjudication of the same issue in separate actions would result in delay, inconvenience, expense, inconsistency, or a race to judgment. Garpeg, supra, 583 F.Supp. at 798 citing Cargill, supra, 531 F.Supp. at 715. Since all of the problems noted in the fifth factor are likely to occur and engender considerable vexation and injustice, we see due cause to enjoin the United Kingdom actions.

IT IS SO ORDERED.

      . A cover note is "[a] record of insurance arrangements pending the issuance of a formal reinsurance contract____” Strain, Reinsurance 646 (1980).

      . It is a matter of dispute whether third party defendants Meredew and Harris were acting for RTC and BIBL, respectively, in this transaction or as individuals. Meredew was an RTC-employed insurance broker throughout the period in question and was also a shareholder in and director of Leadenhall. Harris was and is a director of BIBL and was and is president and a director of Somerset.

      . Third party defendant Peter James Meredew ("Meredew”), an individual resident of Bermuda or the United Kingdom, has filed motions similar to the above-named motions but, for some reason, has omitted a claim of forum non conveniens. The outcome today renders such a deficiency moot in any event.

      . The question of whether New York or federal law applies in forum non conveniens cases has never been decided since the congruity of New York and federal law has made it unnecessary to decide the matter. Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 509, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947); Schertenleib v. Traum, 589 F.2d 1156, 1162, n. 13 (2d Cir.1978); Olympic Corp. v. Societe Generale, 462 F.2d 376, 378 (2d Cir. 1972); Ionescu v. E.F. Hutton & Co. (France) S.A., 465 F.Supp. 139, 145 n. 2 (S.D.N.Y.1979) (Pollack, J.); see Piper Aircraft Co. v. Reyno, 454 U.S. 235, 248, n. 13, 102 S.Ct. 252, 262, n. 13, 70 L.Ed.2d 419.

      . Though not dispositive, courts give such third party direct involvement considerable weight. Tort actions have been dismissed where a third party might bear responsibility for an accident and a full factual hearing required the presence of all parties. As noted, however, the citizenship of the plaintiff weighs heavily in the balance. See Reyno, supra, 454 U.S. 235, 102 S.Ct. 252, 70 L.Ed.2d 419 (foreign plaintiffs); Pain, supra, 637 F.2d 775 (one plaintiff, inter alia, American); Fitzgerald, supra, 521 F.2d 448 (foreign plaintiff); Whyham v. Piper Aircraft Corp., 96 F.R.D. 557 (M.D.Pa.1982) (foreign plaintiff); In re Disaster at Riyadh Airport, Saudi Arabia, on August 19, 1980, 540 F.Supp. 1141 (D.D.C. 1980) (foreign plaintiff); but see Fiacco v. United Technologies Corp., 524 F.Supp. 858 (S.D.N.Y. 1981) (Broderick, J.) (jurisdiction retained where one of plaintiffs was a citizen of New York, defendant's principal place of business was in the United States, site of all records of design and manufacture of instrumentality was located in the United States, and motion was motivated by defendant's calculated decision that Norway was a more advantageous forum for assessment of damages).

      . Motions to dismiss for lack of personal jurisdiction and for summary judgment are not decided, pending completion of discovery, but, for purposes of the forum non conveniens decision only, personal jurisdiction is assumed.


text:
    JET INDUSTRIES, INC., Plaintiff, v. The UNITED STATES of America, Defendant.
    Civ. A. No. SA-83-CA-2416.
    United States District Court, W.D. Texas, San Antonio Division.
    Oct. 24, 1984.

      Alexander S. Tradd, II, Austin, Tex., for plaintiff.
    Robert Michael Duffey, Asst. U.S. Atty., San Antonio, Tex., Ira Gould, Holleb & Coff, Ltd., Chicago, 111., for defendant.
   ORDER

PRADO, District Judge.

The matter before the Court is the government’s motion to dismiss and plaintiff’s resistance thereto. The Court is of the opinion that the recent Fifth Circuit decision in Flammia v. United States, 739 F.2d 202 (5th Cir.1984), compels this Court to dismiss the instant action for want of subject matter jurisdiction and for failure to state a claim upon which relief can be granted pursuant to Federal Rules of Civil Procedure 12(b)(1) and (6).

In its complaint, Jet Industries (Jet) alleges that while Frederix Peter DeVeau was a federal probationer and participant in the Federal Witness Protection Program, he defrauded Jet and stole $1,460,000 from the corporation. DeVeau has an extensive criminal history of mail fraud racketeering and securities fraud — well known to the government agencies who supervised him. Jet sued the United States under the Federal Torts Claims Act (FTCA) alleging that its negligence in supervising DeVeau’s activities and failure to warn Jet of a known risk of fraud caused the fraud to occur. Jet claims that the government owed Jet a duty to follow established policies and to ensure that this crime did not occur.

The United States grounds its motion to dismiss in the discretionary function and misrepresentation exceptions to the FTCA. The government points out that the activities of all of the governmental agencies participating in the selection, supervision, and regulation of DeVeau’s activities while in the Witness Protection Program fall within the category of discretionary functions for which there is no tort liability.

Although the United States has waived a portion of its sovereign immunity by creating a cause of action against it under the provisions of the FTCA, 28 U.S.C. § 1346(b) et seq., a major exception to liability is reserved for those claims which arise from acts or omissions of a governmental agency which is exercising a discretionary function. 28 U.S.C. § 2680. The Supreme Court has defined discretionary function as one in which there is room for a policy judgment. Dalehite v. United States, 346 U.S. 15, 36, 73 S.Ct. 956, 968, 97 L.Ed. 1427 (1953). The discretionary function is implicated whenever an official must act in an area that is devoid of fixed or readily ascertainable standards. See Barton v. United States, 346 U.S. 15, 36, 73 S.Ct. 956, 968, 97 L.Ed. 1427 (1953). The discretionary function is implicated whenever an official must act in an area that is devoid of fixed or readily ascertainable standards. See Barton v. United States, 609 F.2d 977, 979 (10th Cir.1979); Coastwise Packet Co. v. United States, 398 F.2d 77, 79 (1st Cir.), cert. denied, 393 U.S. 937, 89 S.Ct. 300, 21 L.Ed.2d 274 (1968).

Jet concedes that negligence occurring at the planning level would be unactionable, but invokes the Fifth Circuit’s Payton analysis to cloak agency actions at issue here in the actionable mantle of non-discretion— i.e., that those actions are more properly catalogued as operational, ministerial or clerical. See Payton v. United States, 679 F.2d 475, 480 (5th Gir.1982) (en banc). Plaintiff particularly focuses on the supervision of DeVeau by the Marshal’s Service as a ministerial and non-discretionary function.

The Supreme Court has recently sharpened our focus on whether a discretionary or non-discretionary function is implicated by agency actions. In United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig Airlines), — U.S. —, 104 S.Ct. 2755, 81 L.Ed.2d 660 (1984), we are directed to center our attention on the nature of the conduct rather than on the status of the actor to determine whether Congress intended to shield the government from tort liability in this case. See id. at-, 104 S.Ct. at 2765. Using this type of analysis two years prior to the Varig Airlines decision, the Eighth Circuit determined that both the selection and supervision of participants in the Federal Witness Protection Program constitute discretionary functions of the agencies involved. See Bergmann v. United States, 689 F.2d 789, 790-95 (8th Cir.1982). In view of the Flammia decision that the discretionary function exception “extends to specific individual applications as well as broad policies” this Court is persuaded that the Bergmann analysis of the Federal Witness Protection Program would be adopted in this circuit as well. See Flammia v. United States, 739 F.2d 202, 204 (5th Cir.1984); see also Smith v. United States, 375 F.2d 243, 246 (5th Cir.1967).

In the same vein, it is well settled that SEC regulatory and police activities are discretionary functions under the FTCA. See Varig Airlines — U.S. at —, 104 S.Ct. at 2762-63. Moreover, plaintiff’s claims that the SEC or any other agency deliberately or negligently misrepresented DeVeau’s status to Jet is barred by the misrepresentation exception to tort liability under the FTCA. See Boda v. United States, 698 F.2d 1174, 1176 (11th Cir.1983); Redmond v. United States, 518 F.2d 811, 814-15 (7th Cir.1975); 28 U.S.C. § 2680(h). Plaintiff’s argument that its misrepresentation claim is really a duty to warn claim is circuitous and throws the ball right back into discretionary function territory. In Bergmann, the Court reasoned that because the statute governing the program “contemplate[s] only the protection of the witnesses and their families — not protection of the public from the witness,” actions or inactions with regard to protection of the public are discretionary. See Bergmann v. United States, 689 F.2d at 797; see also Franz v. United States, 707 F.2d 582, 587 (D.C.Cir.1983); Leonhard v. United States, 633 F.2d 599, 623 (2d Cir. 1980). The Federal Witness Protection Act in its present form does not create a duty to warn.

Finally, Defendant argues for dismissal on the additional ground of failure to state a claim upon which relief can be granted. Under the FTCA, the United States has expressly limited its waiver of sovereign immunity to claims for negligence arising under “circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the alleged negligent act or omission occurred.” 28 U.S.C. §§ 1346(b), 2674; see Rise v. United, 630 F.2d 1068, 1072 (5th Cir.1980). Jet bases its claim for tort liability on the mistaken premise that DeVeau while a participant in the Federal Witness Protection Program was under the “control” of government agents, that such “control” as parole supervision affords gave rise to a duty to use reasonable care in preventing him from doing harm to others. The Supreme Court of Texas has found the existence of a duty of care only in situations where the “control” was custodial in nature. See Missouri, K & T. RY. Co. of Texas v. Wood, 95 Tex. 223, 66 S.W. 449 (1907) (employee kept in quarantine by railroad because of contagious infection); accord Flammia v. United States, 739 F.2d 202, 204 (5th Cir.1984); University of Louisville v. Hammock, 127 Ky. 564, 106 S.W. 219 (1907) (institutionalized mental patient). As the Eighth Circuit recognized in Bergmann v. United States, supra, however, the Witness Security Program involves the opposite of custodial control; the participant is released and relocated to live in society under an assumed identity, negating any assertion of control. 689 F.2d at 796. As the Government points out, Jet’s argument would write a new chapter in tort law by imposing enormous liability on the Government for failure to undertake the unworkable task of preventing, or warning potential victims of a crime whenever it has information suggesting that a crime might occur. It is not this Court’s place to legislate new tort law for Texas or for the United States. No claim for relief can be granted under these circumstances.

Finding neither jurisdiction over the subject matter nor a claim upon which relief can be granted,

IT IS, THEREFORE, ORDERED that this action be and the same hereby is DISMISSED.


author: HAROLD A. ACKERMAN, District Judge.

text:
    INNOVATION DATA PROCESSING, INC., etc., Plaintiff, v. INTERNATIONAL BUSINESS MACHINES CORPORATION, etc., Defendant.
    Civ. A. No. 83-1452.
    United States District Court, D. New Jersey.
    Oct. 25, 1984.

      Frederick L. Whitmer, Pitney, Hardin, Kipp & Szuch, Morristown, N.J., for plaintiff.
    Edward A. Zunz, Jr., Riker, Danzig, Scherer & Hyland, Morristown, N.J., Robert F. Mullen, Cravath, Swaine & Moore, New York City, for defendant.
   OPINION

HAROLD A. ACKERMAN, District Judge.

This is an antitrust action which was brought by the plaintiff Innovation Data Processing, Inc. against International Business Machines Corp. (IBM) seeking to enjoin IBM from marketing a new piece of computer software called Installation Productivity Option “J” (IPO-J).

As I pointed out in my previous decision, which was rendered on March 12, 1984, Innovation alleged that IPO“J” constituted a tie-in with an IBM software product known as Data Facilities Data Set Services (DFDSS). On the aforementioned date, I held that plaintiff had failed to demonstrate the existence of a per se unlawful tie-in arrangement, but found that the plaintiff was still entitled to proceed under its claim that defendant IBM’s practices violated the general standards of the Sherman and Clayton Acts. See Innovation Data Processing v. International Business Machines, 585 F.Supp. 1470 (D.C.N.J. 1984).

IBM now brings this motion for reconsideration of its motion for summary judgment upon the issue of whether Innovation may proceed under its alternative general standards claim. In the alternative IBM, has moved for certification of this issue to the Court of Appeals for the Third Circuit pursuant to 28 U.S.C. Section 1292(b).

Rule 12(1) of the Rules of the United States District Court for the District of New Jersey provides for reconsideration only when counsel has presented new factual matters or controlling decisions which the Court has overlooked. IBM contends that under this Court’s previous holding that IBM did not tie the DFDSS to the IPO“J” system, there is no anti-competitive conduct that remains to be tested under the “rule of reason” standard. In support of its motion, IBM cites a number of cases which support its contention that the failure to establish a tie-in must cause Innovation’s claims to fail under a rule of reason theory. Without the key element of a tie-in, the extent of any effect on competition and the reasonableness of any restraint of trade are irrelevant. See, Electroglas, Inc. v. Dynatex Corp., 497 F.Supp. 97, 106 (N.D.Cal.1980).

In a case decided by the United States Supreme Court only a few weeks after my previous decision, the Court dealt with the problem of tie-ins in connection with a contract that had been signed by a hospital in Louisiana with a group of anesthesiologists. I have read that decision and it is my determination that my denial of summary judgment as to plaintiff’s “general standards” claim should be reconsidered. See Jefferson Parish Hospital v. Hyde, — U.S. —, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984) which is to the best of my knowledge, the Court’s most recent pronouncement of the state of tying arrangements in antitrust law. I believe that the rationale employed by the Court requires that I reanalyze plaintiff’s alternative theory.

A threshold question which must be resolved is whether by March 12 opinion held only that no per se tie-in had been established as a matter of law, or whether it held there was simply no tie-in. A finding of no per se tie-in is a conclusion of law predicated upon a finding that three distinct elements exist. The three distinct elements that must be found are:

1. the conduct in question must be a tie-in;

2. the seller must have “sufficient economic power with respect to the tying product to appreciably restrain free competition in the market of the tied product,” and

3. a “not insubstantial” amount of interstate commerce must be affected.

See Northern Pacific Railway v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958), and Ungar v. Dunkin’ Donuts, 531 F.2d 1211, 1223-24 (3d Cir.1976), cert. denied 429 U.S. 823, 97 S.Ct. 74, 50 L.Ed.2d 84 (1977).

As Jefferson Hospital pointed out, “A per se rule focuses on the probability of anti-competitive consequences,” because “the character of the restraint produced by such an arrangement is considered a sufficient basis for presuming unreasonableness without the necessity of any analysis of the market context in which the arrangement may be found.” Jefferson Hospital, — U.S. at —, 104 S.Ct. at 1556. “Per se condemnation — condemnation without inquiry into actual market conditions — is only appropriate if the existence of forcing is probable.” Id. at —, 104 S.Ct. at 1560.

Where a per se claim fails, plaintiff does not necessarily fail altogether in his claim. He simply loses the benefit of the presumption of harm provided by the per se rule and must show the actual effect of the alleged anti-competitive practice on the market. See Fortner Enterprises v. U.S. Steel, (I), 394 U.S. 495, 500, 89 S.Ct. 1252, 1257, 22 L.Ed.2d 495 (1968); and Jefferson Hospital at —, 104 S.Ct. at 1568.

The standard guiding an inquiry into the purposes and effects of the practices involved in order to establish whether the standards of the Sherman Act have been violated, is known as the “rule of reason.” See U.S. Steel Corp. v. Fortner Enterprises, (II), 429 U.S. 610, 612, Footnote 1, 97 S.Ct. 861, 863, Footnote 1, 51 L.Ed.2d 80 (1977).

Crucial to whether a per se or “rule of reason” inquiry is made, however, is a preliminary showing of some practice or behavior by the defendant that could provide the basis for some anticompetitive effect. The practice alleged by the plaintiff here is that defendant tied the sale of one product to the sale of another. No other behavior is pleaded or can even be inferred from either the briefs or affidavits in this matter. Thus, before plaintiff may proceed on a per se analysis, or a “rule of reason” analysis, there must first be a finding that a tie-in is present. Thus, I now turn to my March 12 opinion to determine whether my finding that no per se illegal tie-in existed was predicated upon a finding that no tie-in existed in the first place.

In my analysis of the per se tie-in at issue, I proceeded under the three-prong analysis of Northern Pacific Railway described supra. (See also Innovation v. IBM, at 1475. The first element I examined was, of course, whether a tie-in existed. I found that, “IBM customers are for the purposes of the Sherman and Clayton Acts free to take either the DFDSS program or the IPO“J” by itself and that on this basis alone there is no illegal tying arrangement.” See Innovation v. IBM at 1475.

The opinion went on, however, to describe three uncontradicted facts that confirmed this conclusion. “First, any IBM customer is free to license the DFDSS program at any time by itself. Second, any IBM customer can order IPO“J” in a segmented version which does not include the DFDSS program. And, third, any IBM customer who orders the DFDSS program, whether by itself or together with either a segmented or integrated version of IPO“J”, is free to cancel the license for the program at any time, paying the license fee only for the period of usage.” Id.

On page 1476 I stated: “It is clear that IBM’s actual conduct here cannot constitute an unlawful tying arrangement.” At no point in my decision did I reach the issues raised by the second and third elements of a per se claim — the economic power of the defendant and the amount of interstate commerce affected.

Thus, my finding of no per se tying claim was predicated on the first element of the analysis — the existence of a tie-in itself. The Jefferson Hospital opinion in its analysis of the relevant markets to be considered in the economic effects analysis of a tie-in assumes that a finding of a tie-in has already been made before any inquiry into the adverse economic effects can proceed. For example, on page —, 104 S.Ct. at 1561 of that opinion the Court said: “any inquiry into the validity of a tying arrangement must focus on the market or markets in which the two products are sold ...” and Justice O’Connor’s concurrence stated: “the Court has never been willing to say of tying arrangements, as it has of price fixing, division of markets and other agreements subject to per se analysis, that they are always illegal, without proof of market power or anticompetitive effect.” Although, as plaintiff points out, Justice O’Connor states in footnote 2, page —, 104 S.Ct. at page 1570 n. 2, that “arrangements largely indistinguishable from tie-ins are generally analyzed under the rule of reason,” the assumption is that some practice has been found to exist that could allegedly be anticompetitive. As there has been no tie-in between IPO“J” and DFDSS, there is no practice to analyze even under a rule of reason.

The Jefferson Hospital rationale implicitly affirms the holding in Electroglas, supra, where the Court stated at page 106: “Plaintiffs correctly maintain that summary judgment against them on per se tying claims does not necessarily invalidate their tying claims under a rule of reason theory.... However, the failure to establish the existence of a tie-in must cause the tying claims to fail under either theory. Without this key element, the extent of any effect on competition and reasonableness of any restraint are irrelevant.”

In finding the basis for plaintiff’s claim under a rule of reason to be nonexistent, I am mindful of the Supreme Court’s cautioning that summary judgment procedures should be used sparingly in complex antitrust litigation. I mentioned this on March 12 citing then, and now, to Poller v. Columbia Broadcasting System, Incorporated, 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). There are, however, circumstances which authorize summary disposition as where plaintiff fails in an antitrust action to show sufficient facts to raise genuine issues for trial. See First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 1592, 20 L.Ed.2d 569 (1967), see also Electroglas, supra. For the aforementioned reasons, I accordingly grant defendant IBM’s motion for summary judgment and deny plaintiff Innovation’s claim under a “rule of reason” theory. Because of this finding there is no need to reach the § 1292 certification issue raised in defendant’s motion.


text:
    David G. SINKO, Plaintiff, v. ST. LOUIS MUSIC SUPPLY COMPANY, Defendant.
    Civ. A. No. SA-84-CA-551.
    United States District Court, W.D. Texas, San Antonio Division.
    Nov. 2, 1984.

      Edward Schroeder, San Antonio, Tex., for plaintiff.
    Ralph Kalish, St. Louis, Mo., J. Michael Ezzell, San Antonio, Tex., for defendant.
   ORDER

PRADO, District Judge.

The matter before the court is defendant’s resisted motion to quash return of service, to dismiss for lack of personal jurisdiction and, alternatively, to transfer, filed on May 1, 1984; and defendant’s motion to dismiss for failure to state a claim, filed on June 28, 1984.

In his complaint filed March 16, 1984, plaintiff alleges statutory and common law trademark and unfair competition violations in connection with defendant’s sale of mandolins. In lieu of an answer defendant filed the pending motion to dismiss on May 1, 1984.

The standard of ruling on motions advanced under Rule 12(b)(6) is well known. For purposes of this motion the well pleaded material allegations of the complaint are taken as admitted together with reasonable inferences that can be drawn in Plaintiff’s favor. Murray v. City of Milford, 380 F.2d 468 (2nd Cir.1967). A complaint should be dismissed if clearly without any merit, but should not be dismissed for insufficiency unless it appears to a certainty that Plaintiff is entitled to no relief under any state of facts which could be proved in support of the claim. Gillespie v. Civiletti, 629 F.2d 637 (9th Cir.1980).

Having considered the arguments of the parties the court denies the motions to quash and to dismiss. This controversy concerns defendant’s marketing and sale of mandolins bearing plaintiff’s registered trademark. Defendant is in the business of importing, manufacturing and selling musical instruments. In 1981 and 1982 defendant imported and sold mandolins from Japan which it in turn sold to retailers in the United States. In addition to defendant’s own trademark the imported mandolins had a decorative inlay which, it is alleged, duplicates plaintiff’s registered trademark. Defendant admits that one sale of the total 57 mandolins sold with the plaintiff’s mark was made to an Austin, Texas music company. Neither plaintiff nor defendant has presented any argument concerning the extent of defendant’s marketing and advertising of mandolins with the infringing mark within Texas or nationwide.

Nevertheless, based on the single Austin sale the court finds that it has personal jurisdiction over defendant. Contrary to defendant’s characterization, this suit arises out of and is directly related to its contact with the State of Texas. Where a claim arises out of or is related to a particular contact with the forum this court may exercise its specific jurisdiction over a defendant, without offending due process. Helicopterors Nacionales de Colombia, S.A. v. Hall, — U.S. — 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984); Worldwide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). Accordingly, defendant’s challenge based on the lack of personal jurisdiction is denied.

The court also denies defendant's motion to dismiss for failure to state a claim. In support of its motion, defendant contends that plaintiff lacks capacity to bring this suit because the last sale of allegedly infringing mandolins was made in December 1982 at a time when another individual was the trademark registrant. The original registration for this trademark by “Rolfe Gerhardt d/b/a Unicorn Mandolins” was filed September 20, 1978. The allegedly infringing mandolins were marketed and sold in 1981 and 1982. It was not until January 16, 1984 that this registration was assigned to Plaintiff. Nevertheless, defendant has cited no authority for the proposition that an assignee of a trademark is without standing to seek relief for infringement predating the assignment or for the other unfair trade allegations asserted. Furthermore, 15 U.S.C. § 1127 appears to put successors and assigns on equal footing with original registrants for purposes of federal trademark law. Defendant’s other argument concerning limitation of damages to which assignees are entitled acknowledges that assignees may sue for prior infringement. Whether assignment of the mark included an assignment of damages for infringement in 1981 and 1982 involves questions of fact which are not yet before the court. After discovery defendant may desire to reurge its motion as one seeking summary judgment presenting the court with documentation for its assertions and appropriate case authority. However at this time the court cannot conclude that Plaintiff is entitled to no relief under any state of facts which could be proved.

Finally, defendant has moved to transfer this action to the Eastern District of Missouri, Eastern Division, or Austin Division of this Court pursuant to 28 U.S.C. § 1404(a).

Initially it is noted that defendant failed to challenge the venue of this district court to hear this dispute. Rather defendant bases its request on 28 U.S.C. § 1404(a) which is applicable where venue is proper in the court where the suit was filed. If not timely raised, venue defects are waived. Federal Rule of Civil Procedure 12(h). Accordingly, any challenge as to the propriety of venue in this district cannot now be urged.

Turning to defendant’s motion to transfer, the court must consider the availability and convenience of witnesses and parties, location of counsel, location of books and records, costs of obtaining attendance of witnesses and other trial expenses, place of the alleged wrong, and plaintiff’s choice of forum. Although the decision regarding transfer is committed to the court’s sound discretion, the latter factor is the most influential and should rarely be disturbed unless the balance is strongly in favor of the defendant. Gulf Oil Co. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947).

The court finds that defendant has met its burden by showing that the convenience of parties, availability of witnesses, and costs of litigating this matter favor transfer to Missouri. Although plaintiff did not specifically address this issue, the court surmises that the only witnesses which reside in the Western District of Texas are the prior registrant, the Austin music company and plaintiff. All other potential witnesses are located outside Texas with the majority within the Eastern District of Missouri and presumably subject to compulsory process issued by that court. Expenses for securing attendance of these persons as well as shipping corporate records for trial in San Antonio would far exceed costs which plaintiff would be required to incur by appearing in Missouri'.

These factors alone although favoring transfer do not justify granting defendant’s motion. However, where the connection between plaintiff’s claims and this district, while sufficient to pass due process/personal jurisdiction analysis, is nevertheless “miniscule” or so insignificant as to have required dismissal or transfer if properly urged, 28 U.S.C. §§ 1391(b), 1406; Mida Manufacturing Co. v. Femic Inc., 539 F.Supp. 159, 163 (E.D.Pa.1982); U.S. Fidelity & Guaranty Co. v. Alexander, 463 F.Supp. 687, 692 (S.D.Ga.1979); Windsor Industries Inc. v. U.S. Diamond Imports, 549 F.Supp. 415 (S.D.N.Y.1982), transfer pursuant to Section 1404(a) is in order.

Accordingly, defendant’s motion to transfer this cause to the Eastern District of Missouri, Eastern Division, is GRANTED.

Also pending before the court is plaintiff’s resisted motion to compel filed October 18. Ruling on that motion will be reserved for consideration by the transferee court.