author: LARKINS, Senior District Judge:

text:
    MID-ATLANTIC DIESEL, INC., Plaintiff, v. Lloyd H. FULCHER and Grayden L. Fulcher, in personam, and the U.S. Oil Screw Miss Marsha, Her Engines, Tackle, Apparel, etc., in rem, Defendants.
    No. 84-61-Civ-4-A.
    United States District Court, E.D. North Carolina, New Bern Division.
    March 13, 1985.

      Stevenson L. Weeks, Wheatly, Wheatly & Nobles, P.A., Beaufort, N.C., for plaintiff.
    Richard F. Gordon, Morehead City, N.C., for defendants.
   ORDER

LARKINS, Senior District Judge:

This court having heard the above named action, in admiralty, during its regular term of court, conducted from February 4-7, 1985, now makes the following findings. Plaintiff filed suit invoking this court’s admiralty and maritime jurisdiction against the vessel MISS MARSHA, in rem, and its owners Lloyd H. Fulcher and Gray-den L. Fulcher, in personam. Pursuant to a warrant of arrest said vessel was seized, and the defendants by posting a cash bond of twelve thousand dollars ($12,000.00) effected its release.

Plaintiff claims that defendants owe the corporation $10,342.77 for materials and labor furnished the vessel in connection with its being outfitted for fishing, clam kicking, and shrimping.

Plaintiff contends that it entered into the following contracts with the defendants: first, that the plaintiff corporation would rebuild and convert to marine use a used diesel engine for which work the defendants agreed to pay for the price of parts plus the cost of labor at the rate of twenty dollars ($20.00) per hour; and second, that the plaintiff corporation would install fuel tanks and a keel cooler, construct and install a mast, boom, outriggers, and chain plates, install a winch and fabricate its power train, and finally, obtain and install a wash down pump, for which work the defendants would pay the price of parts and materials furnished plus labor charges at the rate of twenty-two dollars and fifty cents ($22.50) per hour.

The defendants contend that a contract was formed in which the plaintiff agreed to overhaul the diesel engine and install a keel cooler, a fuel system, a steering system, an exhaust system and engine instrumentation for the fixed sum of eight thousand dollars ($8,000.00). Defendants contend that they later agreed to pay an additional seven hundred dollars ($700.00). This work, allegedly, was to be performed by June 1, 1983, but the engine was not installed and running until November, 1983. Further, defendants contend that the plaintiff agreed to construct and install a mast, booms, and chainplates and to install a winch and wash down pump for an amount not to exceed twenty-five hundred dollars ($2,500.00) for parts. No specific labor charge was determined other than the plaintiff assured defendants that it would not be much. This work was to be completed in time for the claim kicking season of 1983-84. Because this work was not completed by June of 1984, the defendants removed the vessel from plaintiff’s possession.

Both parties agree that defendants have satisfied $10,821.22 of their indebtedness. However, plaintiff contends that an outstanding balance of $10,342.77 is owed while the defendants concede that only $1,167.02 is owed.

Defendants have filed two counterclaims: first, a one thousand dollar ($1,000.00) claim for damage to the vessel which occurred while it was moored during the time which plaintiff was to install the rigging and winch; and second, a claim for damages stemming from loss of use.

At trial, both parties insisted that a contract was formed but disagreed as to its contents (variable versus fixed costs). From .the evidence, it is clear that no contract was formed, for there was not a meeting of the minds as to the necessary and essential terms. Accordingly, any recovery by the plaintiff must stem from the equitable principles of quantum meruit, which allows one to recover the reasonable value of his services and materials furnished when an express contract fails.

The plaintiff corporation presented evidence which supports a gross recovery from defendants of $16,957.00. This sum represents the reasonable value of all parts, materials, labor, and services which plaintiff provided the defendants and the vessel MISS MARSHA. Upon payment of the outstanding balance owed, plaintiff is directed to surrender possession of the winch, wash down pump, and rigging to the defendants. Upon releasing these items, plaintiff is relieved of all obligations to defendants, including installation.

Defendants are entitled to recover the sum of two hundred dollars ($200.00) from the plaintiff for damage to the vessel. The evidence discloses that the plaintiff corporation failed to exercise an ordinary level of care in protecting the vessel from damage while being moored for the corporation’s commercial benefit.

. No recovery for loss of use is justified by the evidence adduced at trial. Although evidence discloses that the plaintiff was aware of the intended use of the vessel, any recovery is barred since any award of damages would be based on speculation. Defendants’ business of clamming, fishing, and shrimping with the MISS MARSHA is a new one. Whether or not a new venture will be commercially successful is something that this court is unable to determine with certainty. The problem of predicting future profits is magnified, in this case, by the inherent risks in the business itself— successfully harvesting the fruits of the sound during a favorable market. For these reasons, damages for loss of use are denied.

Finally, both sides are to pay their own costs of this action, including attorney fees. Prejudgment interest is also denied.

Accordingly, for the foregoing reasons, it is hereby ORDERED that defendants pay the plaintiff corporation the sum of $5,935.78 ($16,957.00-($10,821.22 + $200.00)).

SO ORDERED.


source: Caselaw Access Project

author: FEIKENS, Chief Judge.

license: Public Domain

text:
    ESTATE OF Jacquelyn SCOTT, by David F. SCOTT, Personal Representative, Plaintiff, v. Richard deLEON, Michael Minerath, William Thayer, and Walter Scott, Defendants, and Walter V. SCOTT, Third-Party Plaintiff, and Cross-Plaintiff and Defendant, v. Ann Marie PIZZUTI, Staff Pharmacist; David F. Scott; Harold T. Shapiro, President, University of Michigan; Gary Calhoun, Assistant Director of University of Michigan Hospital; and Michael Ryan, Assistant Director of Pharmacy, Jointly and Severally, Third-Party Defendants, and Richard deLeon, Director of Pharmacy; Michael Minerath, Associate Director of Pharmacy, and William Thayer, Assistant Director of Pharmacy, Jointly and Severally, Cross-Defendants and Defendants.
    Civ. No. 82-60399.
    United States District Court, E.D. Michigan, S.D., Ann Arbor Unit.
    March 13, 1985.

      Donald E. Shelton, Allen J. Philbrick, Ann Arbor, Mich., for David F. Scott.
    Robert M. Vercruysse, Gregory V. Murray, Butzel, Long, Gust, Klein & Van Zile, Detroit, Mich., for Richard deLeon, Michael Minerath, William Thayer, Ann Marie Pizzuti, Harold T. Shapiro, Gary Calhoun, and Michael Ryan.
    Raymond F. Clevenger, Ann Arbor, Mich., Elmer L. Roller, Detroit, Mich., Roger F. Wardle, Cynthia Cooper Adkison, Farmington Hills, Mich., Paul Van Oostenburg, Grand Rapids, Mich., for Walter V. Scott.
   OPINION

FEIKENS, Chief Judge.

This is a civil rights action filed by the personal representative of Jacquelyn Scott’s estate (“plaintiff”), alleging that Mrs. Scott’s death resulted from the sexual harassment of defendant Walter Scott. In addition to plaintiff’s claims against Walter Scott, plaintiff has sued three of Walter Scott’s supervisors, alleging that their knowing and reckless disregard of his harassment of the deceased denied her equal protection of the law and is actionable under 42 U.S.C. § 1983. I now consider the supervisory defendants’ argument that they are protected against this claim by their qualified immunity, see Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982), and are entitled to summary judgment. I conclude that the motion for summary judgment should be denied.

I. FACTS

A motion for summary judgment can be granted only when a court “finds from the whole record before it that there are no material facts which are in dispute. It may not make findings of disputed facts on a motion for summary judgment.” Watkins v. Northwestern Ohio Tractor Pullers Association, 630 F.2d 1155, 1158 (6th Cir. 1980). The burden is on the moving party to show “conclusively that there exists no genuine issue as to a material fact and the evidence together with all inferences to be drawn therefrom must be considered in the light most favorable to the party opposing the motion. The movant’s papers are to be closely scrutinized while those of the opponent are to be viewed indulgently.” 630 F.2d at 1158.

With these standards in mind, I will briefly recite the facts that might be inferred from the record before me when it is viewed most favorably for plaintiff. In doing so, I emphasize that my discussion does not constitute actual, or even tentative, factual findings by the Court. It is only intended to elucidate the facts that might be inferred from the record so that I can determine whether on these facts defendants are entitled to immunity as a matter of law.

From 1977 until her death, Jacquelyn Scott was employed as a-pharmacy assistant at the Mott Hospital pharmacy, which is part of the University of Michigan Hospitals. There is evidence in the record supporting the conclusion that Mrs. Scott was sexually harassed by her supervisor, Walter Scott, from late 1978 until approximately September, 1981 (when Walter Scott went on sick leave). This harassment included sending her numerous letters and notes at work, attempting to rearrange her working hours, and threatening her not to transfer out of the pharmacy, in an effort to coerce her into having a. sexual relationship with him.

In August, 1979, while Walter Scott was on vacation, Jacquelyn Scott complained to defendant Thayer of this harassment. Thayer was Assistant Director of Pharmacies at University of Michigan Hospitals and was the immediate supervisor of Walter Scott. There is evidence indicating that Thayer met with Walter Scott and told him that as long as his behavior did not interfere with his work, Thayer would not pursue the matter. Deposition of Walter Scott, p. 80. A later meeting between Jacquelyn Scott, Walter Scott, and Thayer was cancelled after Jacquelyn Scott did not show up and Walter Scott told Thayer that she had changed her mind. Thayer claims that Jacquelyn Scott told him in September, 1979, that the harassment had stopped.

Although the harassment apparently did stop for some time, it began again in early 1980, There is evidence suggesting that this was common knowledge at the pharmacy and it might be inferred that Thayer must have been aware of it. Nevertheless, plaintiff alleges that Thayer made no further investigation nor took any other action, and further that he made no notation of the harassment in Walter Scott’s personnel file. When Thayer was replaced by defendant Minerath in September, 1980, Thayer did not inform him of the problem.

Jacquelyn Scott complained of the harassment to Minerath in September, 1981, while Walter Scott was again on vacation, and requested a transfer. There is some evidence suggesting that Minerath may have waited one month before acting on this complaint, and that he then contacted the personnel department. He informed Jacquelyn Scott that she would have to meet with the personnel department and provide documentary evidence of her claim. There is also evidence suggesting that his conduct was contrary to University policy requiring supervisors to “[[Investigate [an] allegation of harassment and if misconduct has occurred, take immediate disciplinary action up to and including discharge. Failure to do so is also misconduct subject to disciplinary action.” Plaintiffs Exhibit 7 (University of Michigan Standard Practice Guide).

• Plaintiff alleges that in November, 1981, Jacquelyn Scott complained to defendant deLeon, the Pharmacy Director for the University of Michigan Hospitals, and requested a transfer. deLeon contacted Minerath who told him that nothing could be done unless someone filed a formal complaint with the personnel department. Plaintiff alleges that deLeon did not transfer Jacquelyn Scott and took no further action. On November 26, 1981, Jacquelyn Scott died, apparently as a result of a drug overdose.

In reciting these facts, I reiterate that this version is simply what might be inferred from the record when considered in the light most favorable to plaintiff. While defendants vigorously dispute this account, I must, for purposes of this motion, assume it to be true and determine whether the alleged conduct is actionable under 42 U.S.C. § 1983.

II. DISCUSSION

In Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982), the Supreme Court held that “government officials performing discretionary functions generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” 457 U.S. at 818, 102 S.Ct. at 2738. In articulating a test that focuses on “the objective reasonableness of an official’s conduct, as measured by reference to clearly established law,” the Court sought to “avoid excessive disruption of government and permit the resolution of many insubstantial claims on summary judgment.” 457 U.S. at 818, 102 S.Ct. at 2739. In considering whether the supervisory defendants are immune in this action, I have heeded the Court’s frequent admonitions that “insubstantial claims should not proceed to trial,” Harlow, 457 U.S. at 815-16, 102 S.Ct. at 2737, 73 L.Ed. 396, see also Butz v. Economou, 438 U.S. 478, 507-08, 98 S.Ct. 2894, 2911-12, 57 L.Ed.2d 895 (1976), and have reviewed the record and applicable law with great care.

Summary judgment is warranted in this case unless it was clearly established as of late 1979 that the supervisory defendants’ conduct was actionable in a section 1983 action based on the equal protection clause. That defendants’ conduct may have clearly violated Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e-2000e-17 (1982) (“Title VII”), does not strip them of immunity in a suit such as this, which is based on the equal protection clause and not Title VII.

By 1979, it was clearly established that the equal protection clause prohibited intentional gender discrimination unless it was substantially related to a legitimate government objective. See Craig v. Boren, 429 U.S. 190, 197, 97 S.Ct. 451, 456, 50 L.Ed.2d 397 (1976). It was equally clear that a single invidiously discriminatory governmental act “would not necessarily be immunized by the absence of such discrimination in the making of other comparable decisions.” Village of Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S. 252, 266, 97 S.Ct. 555, 564 n. 14, 50 L.Ed.2d 450 (1977). See also Adickes v. S.H. Kress & Co., 398 U.S. 144, 152, 90 S.Ct. 1598, 1605, 26 L.Ed.2d 142 (1970).

I have little difficulty concluding from these principles, that it was clearly established that sexual harassment could violate the rights protected by the equal protection clause. Although no case had considered this issue, common sense as well as relevant Title VII case law indicated that harassment was the sort of invidious gender discrimination that the equal protection clause forbade: that is, intentional discrimination against a woman because of her sex by a person acting under color of law. Plaintiff alleges that it was the very essence of Jacquelyn Scott’s womanhood that motivated Walter Scott. As Walter Scott acknowledges, he “was attracted to her as a woman, on a personal basis. Her femaleness’ was a matter of attraction.” Brief in Support of Third Party Plaintiff, Cross-Plaintiff and Defendant, Walter Scott’s Motion for Summary Judgment, p. 16 (emphasis added). Further Title VII case law indicated that sexual harassment could be motivated by the victim’s gender. As the United States Court of Appeals for the District of Columbia Circuit explained in Barnes v. Costle, 561 F.2d 983, 990 (D.C.Cir.1977):

But for [plaintiff’s] womanhood, from aught that appears, her participation in sexual activity would never have been solicited.... [S]he was invited only because she was a woman subordinate to the inviter in the hierarchy of agency personnel. Put another way, she became the target of her superior’s sexual desires because she was a woman, and was asked to bow to his demands as the price for holding her job. The circumstance imparting high visibility to the role of gender in the affair is that no male employee was susceptible to such an approach by [plaintiff’s] supervisor.

The same analysis pertains to the allegations in this case. For these reasons, I conclude that it was clearly established by 1979 that the alleged gender discrimination violated the equal protection clause.

The more difficult question before me is whether defendants’ alleged conduct had a sufficient nexus to the harassment to make it clearly actionable under 42 U.S.C. § 1983. Section 1983 provides that “[e]very person who, under color of [law] subjects, or causes to be subjected any ... person within the jurisdiction [of the United States] to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law [or] suit in equity....” 42 U.S.C. § 1988 (1982). Plaintiff argues that defendants are liable under § 1983 because they knowingly acquiesced in, or deliberately disregarded, Walter Scott’s sexual harassment.

I agree with plaintiff that the record before me creates a genuine issue as to whether defendants knowingly acquiesced in, or deliberately disregarded, Walter Scott’s alleged sexual harassment. Each defendant is alleged to have been aware of the harassment and to have failed to take prompt and reasonable steps to protect the rights of Jacquelyn Scott. Whether their conduct was so inadequate under the circumstances that it constituted acquiescence in, or deliberate disregard of, the alleged harassment can only be determined properly after the evidence is fully presented at trial.

While there is a genuine factual issue as to whether defendants’ conduct can be characterized as “knowing acquiescence” or “deliberate disregard,” I must determine whether it was clearly established that such behavior was actionable under section 1983. The Supreme Court had not addressed this issue at the time of the alleged acts. In Rizzo v. Goode, 423 U.S. 362, 96 S.Ct. 598, 46 L.Ed.2d 561 (1976), the Court did reject the suggestion that officials were liable under section 1983 for their failure to act in the face of a statistical showing of unconstitutional behavior by police officers even without a showing of direct responsibility for the actions of those officers. 423 U.S. at 375-76, 96 S.Ct. at 606-07. The Court, however, did not consider whether a supervisor might be liable for inadequately responding to a specific complaint of unconstitutional behavior by a subordinate.

Nor was definitive guidance provided by case law in the Sixth Circuit. In Hays v. Jefferson County, 668 F.2d 869, 874 (6th Cir.), cert. denied, 459 U.S. 833, 103 S.Ct. 75, 74 L.Ed.2d 73 (1982), the United States Court of Appeals for the Sixth Circuit indicated that “[knowing acquiescence] in the unconstitutional conduct of the offending officers” was actionable under section 1983, but this decision postdated the conduct in this case. The most pertinent decision during the relevant time span is Coffy v. Multi-County Narcotics Bureau, 600 F.2d 570 (6th Cir.1979). Although there is language in that opinion suggesting that section 1983 liability must be predicated on a supervisor’s participation in, or encouragement or direction of illegal acts, Coffy left open the possibility that knowing acquiescence by a supervisor might be actionable:

Neither have Coffy and Bower made out a case for nonfeasance on the part of Laird. While Laird was the Director of the Bureau, nothing in this record indicated that Laird was put on notice of an alleged scheme to put Coffy and Bower out of business that he should have prevented.

600 F.2d at 580.

Finding Supreme Court and Sixth Circuit jurisprudence inconclusive, I turn to case law in other Circuits to determine whether the law was clearly established. A review of the case law reveals that by 1979 at least thirteen cases had indicated that a supervisor’s knowing acquiescence in, or deliberate indifference to, a subordinate’s constitutional violation was actionable under section 1983. Moreover, defendants have not brought to my attention a single case directly addressing this issue that reached a contrary holding and was still good law in 1979.

In light of this overwhelming consensus in the case law, I conclude that it was clearly established that a supervisor who knowingly acquiesced in a subordinate’s constitutional violations could be sued under section 1983. I reject defendants’ implicit suggestion that a reasonable supervisor, confronted with a complaint of a ’ subordinate’s clearly unconstitutional conduct, could conclude that he could acquiesce in this conduct without any personal liability.

III. CONCLUSION

Without deciding the merits of plaintiff’s allegations, I conclude that there is a genuine factual issue as to whether the supervisory defendants violated clearly established law. Accordingly, defendants’ motion for summary judgment based on their qualified immunity is DENIED.

      . In reviewing the extensive record before me, I have given no credence to statements that would be inadmissible hearsay evidence at trial.

      . Although deLeon claims that Jacquelyn Scott withdrew the transfer request, there is evidence in the record that clearly creates a genuine issue as to this fact.

      . See also Hall v. Medical College, 742 F.2d 299, 307-10 (6th Cir.1984), cert. denied, 105 S.Ct. 796 (1985); People of Three Mile Island v. Nuclear Regulatory Commissioners, 747 F.2d 139, 143-45 (3d Cir.1984). See generally Note, Harlow v. Fitzgerald: The Lower Courts Implement the New Standard for Qualified Immunity Under Section 1983, 132 U.PA.L.REV. 901 (1984).

      . In moving for summary judgment on this ground, defendants originally focused on Title VII cases in their discussion of whether their conduct violated clearly established law. The Court requested rebriefing on whether immunity was only lost if it was clearly established that defendants' conduct was actionable in a § 1983 claim based on the equal protection clause and, if so, whether it was clearly established that supervisors could be held liable in such an action. After rebriefing, the matter was discussed at length in oral argument before the Court.

      . I have used late 1979 as the benchmark date because this is the earliest date on which any of these defendants is alleged to have acted in an actionable manner. While their subsequent conduct might also justify use of a later date, my decision that the relevant law was clearly established by late 1979 renders this possibility moot.

      . In Davis v. Scherer, — U.S. —, 104 S.Ct. 3012, 82 L.Ed.2d 139 (1984), the Court indicated that government officials do not “lose their immunity by violating the clear command of a statute or regulation — of federal or of state law — unless that statute or regulation provides the basis for the cause of action sued upon.” 104 S.Ct. at 3020 n. 12.

      . Accord. Personnel Administrator v. Feeney, 442 U.S. 256, 99 S.Ct. 2282, 60 L.Ed.2d 870 (1979); Davis v. Passman, 442 U.S. 228, 99 S.Ct. 2264, 60 L.Ed.2d 846 (1979); Califano v. Webster, 430 U.S. 313, 97 S.Ct. 1192, 51 L.Ed.2d 360 (1977); Frontiero v. Richardson, 411 U.S. 677, 93 S.Ct. 1764, 36 L.Ed.2d 583 (1973); Reed v. Reed, 404 U.S. 71, 92 S.Ct. 1, 30 L.Ed.2d 225 (1971).

      . Similarly, in Tomkins v. Public Service Electric & Gas Co., 568 F.2d 1044 (3d Cir.1977), the Third Circuit had little trouble disposing of the suggestion that harassment was not sex-based discrimination, reasoning that "the essence of [plaintiffs] claim is that her status as a female was the motivating factor in the supervisor’s conditioning her continued employment on compliance with his sexual demands.” 568 F.2d at 1047.
      In pointing to Title VII cases, I am well aware of the differences between Title VII actions and § 1983 equal protection actions that were recognized by 1979. In particular, the latter actions required class-based animus while an adverse impact on the class was sufficient in a Title VII action. Hence, the fact that sexual harassment was clearly recognized as "gender based” discrimination under Title VII would not, standing alone, indicate that it was clearly cognizable in a § 1983 equal protection action. The cases I have focused on are those which consider whether sexual harassment might be motivated by the victim’s gender. Although some early District Court cases implied that the answer was no, this view was clearly discredited by 1979. See A. LARSON, 1 EMPLOYMENT DISCRIMINATION § 41.62 (1984).

      . In Estelle v. Gamble, 429 U.S. 97, 97 S.Ct. 285, 50 L.Ed.2d 251 (1976), the Court held that state officials violated the Eighth Amendment if they acted with deliberate indifference to serious medical needs of prisoners, and this was actionable under § 1983. In Estelle, however, the indifference itself constituted a constitutional violation and hence obviously fell within the scope of § 1983. The question before me is somewhat different: whether acquiescence in, or indifference to, another’s constitutional violation is actionable under § 1983.

      . See Triplett v. Azordegan, 570 F.2d 819, 823 (8th Cir.1978) (“A defendant will not be held liable under ... § 1983 unless he was personally involved ... or he either has or is charged with having actual knowledge that his subordinates are causing deprivations of constitutional rights”); Sims v. Adams, 537 F.2d 829, 832 (5th Cir.1976) ("We have also indicated ... that a complaint alleging that a police supervisor has notice of past culpable conduct of his subordinates and has failed to prevent a recurrence of such misconduct states a § 1983 claim”); Kite v. Kelley, 546 F.2d 334, 337 (10th Cir.1976) (“The ‘affirmative link’ requirement of Rizzo means to us that before a superior may be held for acts of an inferior, the superior, expressly or otherwise, must have participated or acquiesced in the constitutional deprivations of which complaint is made”); Doores v. McNamara, 476 F.Supp. 987, 992 (W.D.Mo.1979) (“[I]mposition of liability on supervisory personnel ... may also be premised on their directing the action to be taken, or acquiescing with knowledge in its commission”); Donaldson v. Hovanec, 473 F.Supp. 602, 608 (E.D.Pa.1979) ("An official who knows of an incident and fails to take steps to prevent a recurrence can be found to be liable under § 1983”); Lee v. Downs, 470 F.Supp. 188, 191 (E.D.Va.1979) ("Actions of a subordinate can be imposed on higher officials only when the superior had knowledge or acquiesced in the allegedly unconstitutional acts”), aff’d, 641 F.2d 1117 (4th Cir.1981); Leite v. City of Providence, 463 F.Supp. 585, 590 (D.R.I.1978) (A supervisory official can be found liable under § 1983 when he "failed to act or acted inadequately when he had actual or imputed knowledge of a past pattern of police misconduct or knowledge of well-known, isolated incidents of police misconduct”); Craig v. Carson, 449 F.Supp. 385, 396 (M.D.FIa.1978) ("[W]here, despite a defendant’s knowledge of the unconstitutional conduct of his subordinates, he fails to restrain, acquiesces in, or ratifies it, and it deprives a person of his constitutional rights, the defendant will be vicariously liable”), Duckett v. Ward, 458 F.Supp. 624, 627 (S.D.N.Y.1978) (‘‘[W]here a prison official is ‘aware’ of the unconstitutional activities of those subject to his authority, the ultimate responsibility for permitting these actions is squarely his”); Perry v. Elrod, 436 F.Supp. 299, 303 (N.D.Ill.1977) ("Thus, if a supervisory official is deliberately or recklessly indifferent to constitutional violations by his subordinates, or others under his control, his indifference is actionable”); Delaney v. Dias, 415 F.Supp. 1351, 1354 (D.Mass.1976) (For a public official to be liable under § 1983 on a theory of personal misfeasance, "there must be an allegation of, at least, some participation or acquiescence — express or otherwise — in the constitutional deprivations complained of’); Smith v. Wickline, 396 F.Supp. 555, 563 (W.D.Okl.1975) ("[R]esponsibility may be imposed if the official knew of past culpable conduct on the part of a subordinate and failed to take appropriate steps to prevent a recurrence”); Potts v. Wright, 357 F.Supp. 215, 218 (E.D.Pa.1973) ([Defendant is not liable under § 1983 unless he "was personally involved in causing the deprivation of a constitutional right or he either has or is charged with having actual knowledge that his subordinates are causing deprivations of constitutional rights, and he is negligent in failing to take action to prevent the deprivations”).

      . The cases cited by defendants did not involve knowing acquiescence by supervisors. See Defendant's Supplemental Brief in Support of Motion for Summary Judgment, pp. 5-6. Insofar as Lodermeier v. City of Sioux Falls, 458 F.Supp. 1202, 1205-06 (D.S.D.1978), rejects liability based on knowing acquiescence, it is inconsistent with the controlling Eighth Circuit decision in Triplett v. Azordegan, 570 F.2d 819, 823 (8th Cir.1978).


author: CAFFREY, Chief Judge.

text:
    George R. CADMAN, et al, Plaintiffs, v. Richard M. BOND, et al., Defendants.
    Civ. A. No. 84-3122-C.
    United States District Court, D. Massachusetts.
    March 13, 1985.
    T. David Houghton, Hyannis, Mass., for plaintiffs.
    Harvey Weiner, Peabody & Arnold, Boston, Mass., for defendants.
   MEMORANDUM

CAFFREY, Chief Judge.

This is a civil diversity action in which plaintiffs George R. and Bobbie Jo Cadman make allegations for breach of contract, breach of fiduciary duty and fraud against defendants Richard M. and Carol B. Bond. The transaction in question involved the sale of a 46 foot Cal 2-46 ketch-rigged sailboat (“ketch”) to the defendants, the consideration for which included a “purchase-money mortgage” on the ketch and a beneficial interest in a 40 foot custom cutter (“cutter”) owned by the defendants. Although the complaint alleges that the plaintiffs are residents of Massachusetts and the defendants are residents of Florida, all parties were physically present in Florida when the contract was entered into. Both yachts were and remain in Florida waters.

On October 11, 1984 plaintiffs moved for a preliminary injunction prohibiting the defendants from removing, conveying, encumbering, or causing to be encumbered either yacht without the plaintiffs’ prior consent. Subsequently, the defendants filed their motion to dismiss for lack of in personam jurisdiction. Fed.R.Civ.P. 12(b)(2).

The motion for preliminary injunction was heard on January 16, 1985, at which time it became apparent that there was a substantial question regarding the Court’s jurisdiction over the defendants. Conse-. quently, the matter was taken under advisement to allow the parties to file memoranda of law on the defendants’ motion to dismiss. Both motions are presently before the Court.

The plaintiffs base their request for injunctive relief on two premises: (1) that the security interest in the ketch is unperfected and unperfectible because it is not in proper form, and (2) the contract establishes a trust under which the defendants hold the cutter as trustees for the plaintiffs and with certain fiduciary responsibilities. The plaintiffs argue that injunctive relief is necessary because the defendants have no other assets and the plaintiffs will be unable to satisfy a judgment if the yachts are removed, conveyed, or encumbered, thereby suffering irreparable harm.

Before addressing the merits of plaintiffs’ claim for preliminary relief, it is necessary to resolve the jurisdictional issue. The Massachusetts long-arm statute, M.G.L. c. 223A § 3, defines the jurisdiction of this Court over a nonresident in a diversity action. Hahn v. Vermont Law School, 698 F.2d 48, 49 (1st Cir.1983). The relevant portion of the statute provides:

A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action in law or equity arising from the person’s
(a) transacting any business in this commonwealth;
(b) contracting to supply services or things in this commonwealth;
(c) causing tortious injury by an act or omission in this commonwealth;
(d) causing tortious injury in this commonwealth by an act dr omission outside this commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this commonwealth;
* * * * * *

To assist the Court in its determination of the issue, both parties have submitted affidavits. Defendant Richard Bond’s affidavit states that the contract was signed in Florida, that defendants were residents, of Florida, and that the plaintiffs were also residents of Florida at the time but subsequently moved to Massachusetts. The plaintiffs’ affidavits do not contradict this, but merely recite a series of “transactions” between the Cadmans in Massachusetts and the Bonds in Florida. These “transactions” consist of a series of letters and telephone conversations relating to the performance of, and modifications to, the contract. I note that all of the Bond’s requests for modification of the contract, which originated in Florida and were received in Massachusetts, were denied. There were two purported modifications by the plaintiffs, but these were proposed in Massachusetts and received in Florida. Other “transactions” consist of interest payments received by the plaintiffs in Massachusetts and a phone call to Mr. Cadman in which Mr. Bond threatened to sue. The plaintiffs argue that these “transactions” constitute “transacting business within the commonwealth” within the contemplation of c. 223A § 3(a), and satisfy the constitutional requirement of “minimum contacts.” See International Shoe Co. v. State of Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945).

The Massachusetts Supreme Judicial Court examined the application of § 3(a) in the case of Droukas v. Divers Training Academy Inc., 375 Mass. 149, 153, 376 N.E.2d 548 (1978). In that case, the nonresident defendant placed an advertisement in a publication distributed in Massachusetts, received á telephone call from Massachusetts in regard to the purchase of goods, sent correspondence into Massachusetts confirming the sale, and shipped merchandise into the state “collect.” The Supreme Judicial Court held that these contacts “were insufficient to afford jurisdiction under .§ 3(a) because the transaction was an isolated one, and with slight effect on the commerce of the commonwealth,” and “void of any purposeful intent on the part of the defendant to avail himself of the privilege of conducting activities within [Massachusetts].” Id. at 154, 376 N.E.2d 548.

Where, as in the present case, the defendants’ communications with the plaintiffs were transmitted into Massachusetts only because the plaintiffs chose to move here after signing the contract, the case for in personam jurisdiction is considerably weaker. Certainly, it cannot be said that the Bonds have purposefully availed themselves of the privilege of transacting business in the Commonwealth by merely forwarding interest payments to the plaintiffs here. As to the alleged trust obligations, it is clear as a matter of constitutional limitation that the mere presence of a trust beneficiary and settlor in the forum state does not provide jurisdiction over the trustee of an out-of-state trust. Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958).

The contract modifications proposed by the Bonds are similarly insufficient to provide a basis for jurisdiction. To begin with, none of the modifications proposed in Florida and received in Massachusetts ever became a part of the agreement. Therefore, it is impossible for the cause of action to have arisen out of these contacts as required by the statute. Mas Marques v. Digital Equipment Corp., 637 F.2d 24 (1st Cir.1980). Moreover, even if the modifications had been adopted in Massachusetts, this alone would not indicate that the Bonds were “transacting business” within the contemplation of the statute and to the extent required by constitutional concerns. Contract law technicalities such as the location of an acceptance are tempered by constitutional fairness concerns. Vencedor Manufacturing Co. v. Gougler Industries, Inc., 557 F.2d 886, 890 (1st Cir.1977). Once again, I note that the Bonds were forced to correspond with the Cadmans in Massachusetts regarding pre-existing contractual obligations because of the plaintiffs fortuitous move into the commonwealth. In consideration of this fact, it would be manifestly unfair to hale the Bonds into Court in Massachusetts.

I rule, therefore, that this Court lacks in personam jurisdiction over the defendants because their contacts with Massachusetts are insufficient to satisfy statutory and constitutional requirements. It follows that this action should be transferred to the United States District Court for the Middle District of Florida pursuant to 28 U.S.C. § 1404 as jointly moved for by both parties in their motion filed March 5, 1985.

Order accordingly.


author: FLANNERY, District Judge.

text:
    Fletcher McDANIEL, et al., Plaintiffs, v. ARMSTRONG WORLD INDUSTRIES, et al., Defendants.
    Civ. A. No. 83-3520.
    United States District Court, District of Columbia.
    March 14, 1985.

      Michael P. Chervenak, Rockville, Md., for Armstrong World Industries.
    Kevin J. McCarthy, Upper Marlboro, Md., for A.C. & S., Inc.
    H. Patrick Donohue, Rockville, Md., for Atlas Turner, Inc., & Bell Asbestos.
    David P. Durbin, Washington, D.C., for Celotex Corp.
    R.G. Guziak, Washington, D.C., for Nicolet, Inc.
    Hopewell H. Darneille, III, Richard H. Saltsman, Washington, D.C., for Turner & Newall, PLC.
    Brock R. Landry, Washington, D.C., for U.S. Gypsum Co.
    Edward J. Lopata, Washington, D.C., for W.R. Grace Company.
    Patrick James Attridge, Rockville, Md., for U.S. Mineral Products Co.
    Louis R. Moffa, Jr., Washington, D.C., for National Gypsum Co.
   MEMORANDUM OPINION

FLANNERY, District Judge.

This matter is before the court on the motions to dismiss filed by defendants Turner & Newall PLC (“T & N”) and Nicolet, Inc. (“Nicolet”), and the motion of defendants Atlas-Turner, Inc. (“Atlas”), and Bell Asbestos Mines, Ltd. (“Bell”) to dismiss or, in the alternative, for summary judgment. These motions allege that this court lacks personal jurisdiction over these defendants.

BACKGROUND

Plaintiff Fletcher McDaniel was employed from 1950 to 1982 as a plasterer’s helper. He alleges that he worked at various job sites in and around the District of Columbia where he was exposed to asbestos and asbestos-containing materials. As a direct result, plaintiff claims, he contracted a pulmonary disease. The defendants are manufacturers, suppliers and sellers of asbestos and asbestos-containing products with which plaintiff alleges he came into contact. Plaintiff further alleges that defendants were negligent and failed to warn him of known dangers. He also sues on the theories of strict liability and breach of warranties. Plaintiff asserts that he was diagnosed as having this pulmonary disease in 1983. The intricate corporate structure involved in this case and its changing nature over time are critical in determining whether this court can exercise personal jurisdiction over these defendants. Significantly, none of the defendants has taken issue with plaintiffs’ description of the corporate structure and distribution scheme involved in this case.

Turner & Newall was formed in 1920 through a merger of several United Kingdom manufacturers of asbestos-containing products, one of which was J.W. Roberts, Ltd. J.W. Roberts continued to function as a branch of T & N. In 1934, T & N acquired Atlas Asbestos Co., a Canadian corporation. In 1936, T & N completed the acquisition of Keasbey and Mattison Company (“K & M”), located in Ambler, Pennsylvania. Keasbey and Mattison owned Bell Mine in Thetford, Quebec. In 1937, T & N formed a wholly owned subsidiary, Bell Asbestos Mines, Ltd., for the purpose of acquiring Bell Mine.

By 1950, Keasbey and Mattison was manufacturing a wide range of asbestos-containing products. By that same year, T & N’s distribution chain was so firmly entrenched that' T & N informed its shareholders that Keasbey and Mattison distributors:

now embrace all the major trading areas of the nation, and serve to place the various Keasbey and Mattison products virtually at the doorsteps of retailers and ultimate users throughout the United States.

Turner & Newall brochure at 39 (quoted in Plaintiffs’ Brief in Opposition to Defendant Turner & Newall PLC’s Motion to Dismiss at 5).

In the 1930’s, J.W. Roberts, a company for which T & N does not deny responsibility, developed a product known as Sprayed Limpet Asbestos. The manufacturing process took place in England and the product was distributed through a series of exclusive license agreements. Initially, J.W. Roberts granted Keasbey and Mattison the right to distribute Limpet in the United States. In the late 1950’s, Keasbey and Mattison entered into a sublicensing agreement with National Asbestos Co. (“National”), one of the companies for which Mr. McDaniel worked, for the Sprayed Limpet Asbestos process. National’s territory under this agreement included the District of Columbia, and under this agreement, National regularly applied Sprayed Limpet Asbestos in buildings located in the District of Columbia.

In 1962, after selling Keasbey and Mattison, T & N, through J.W. Roberts, granted Armstrong Contracting and Supply Company an exclusive license for the Sprayed Limpet Asbestos process in the United States. Armstrong entered into a sublicense agreement with Krafft-Murphy to sell Limpet in an area that expressly included the District of Columbia. This sub-license agreement was subject to T & N’s approval. Krafft-Murphy employed the plaintiff, Mr. McDaniel. T & N shipped Limpet for use in the District of Columbia to ports in Maryland and New Jersey. The Limpet was trucked from the ports to a Krafft warehouse or delivered directly to District of Columbia construction sites.

In 1967, the license held by Armstrong was transferred to Atlas Asbestos Co., an internal division of T & N’s wholly owned subsidiary, Bell. In addition to being the licensee for the distribution of Limpet in the United States, Atlas manufactured Limpet. Most of the asbestos fiber used by Atlas in the manufacturing process was supplied by a subsidiary of T & N. The sublicense with Krafft-Murphy was also transferred from Armstrong to Atlas. Thereafter, Krafft-Murphy applied Limpet in buildings located in the District of Columbia throughout the period it served as sublicensee. Atlas frequently shipped Sprayed Limpet Asbestos ordered by Krafft-Murphy directly to District of Columbia jobsites by truck from Canada. On other occasions shipments were made to the Keasbey and Mattison warehouse in Virginia. In 1977 Atlas Asbestos Company became a separate corporate entity and changed its name to Atlas-Turner, Inc.

Defendants do not dispute the facts as set out above in any of their essentials. Defendant Turner & Newall contends that its lack of present contacts with the forum puts it out of the reach of the D.C. long-arm statute. Alternatively it argues that to find that this court can exercise personal jurisdiction over it would be a violation of due process. Defendants Atlas and Bell deny that this jurisdiction’s long-arm statute covers their activities, and argue, that if it does, they have no minimum contacts with the District of Columbia. Defendant Nicolet argues that jurisdiction cannot be found over it on the basis of the activities of Keasbey and Mattison.

DISCUSSION

In order for this court to find that it can exercise jurisdiction over these defendants it must make a two-pronged inquiry. First, the court must determine whether the D.C. long-arm statute permits the exercise of jurisdiction over these defendants. If so, then the court must inquire whether the exercise of jurisdiction over these defendants comports with constitutional due process requirements. Gatewood v. Fiat, S.p.A., 617 F.2d 820, 823 (D.C.Cir.1980).

The D.C. long-arm statute provides in pertinent part:

(a) A District of Columbia court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person’s—
(1) transacting any business in the District of Columbia;
(2) contracting to supply services in the District of Columbia;
(3) causing tortious injury in the District of Columbia by an act or omission in the District of Columbia;
(4) causing tortious injury in the District of Columbia by an act or omission outside the District of Columbia if he regularly does or solicits business, engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed, or services rendered, in the District of Columbia.
....
(b) When jurisdiction over a person is based solely' upon this section, only a claim for relief arising from acts enumerated in this section may be asserted against him.

D.C.Code Ann. § 13-423 (1981)

Plaintiffs seek to assert jurisdiction over these defendants relying primarily on sections (a)(1), the “transacting business” prong of the long-arm statute, and (a)(4), the “tort without, injury within,” prong of the long-arm statute. Plaintiffs rely principally on the “stream of commerce” theory of personal jurisdiction, under which it is held to be within this forum’s long-arm statute and within the bounds of due process for a court to exercise personal jurisdiction over a corporate defendant if that defendant willingly causes items to be marketed in the forum.

Plaintiffs believe that this circuit’s decision in Stabilisierungsfonds Fur Wein v. Kaiser-Stuhl, 647 F.2d 200 (D.C.Cir.1981), is dispositive of the case at bar. The defendants in Kaiser-Stuhl were Barossa, an Australian corporation that produced wine; Kaiser-Stuhl, its wholly owned Australian subsidiary; Victoire and Peartree, its two exclusive United States importers; and A & A Liquors, a District of Columbia liquor store. Id. at 202. The court found that the Australian defendants were subject to jurisdiction under section (a)(1) and alternatively under section (a)(4). Id. at 204, 206.

Initially, the court examined subsection (a)(1) and found that these foreign defendants were transacting business in the District of Columbia. It stated:

We are convinced that when the “transacting any business” language is read to extend to the limits of due process, it encompasses a case like the present one where a nonresident defendant ships goods to an intermediary with the expectation that the intermediary will distribute the goods in a region that includes the District of Columbia.

Id. at 205.

A. Defendants Turner & Newall PLC, Atlas and Bell

This court believes that except for the period of time that has elapsed between the last time the stream of commerce flowed into the District and the filing of this lawsuit, Kaiser-Stuhl would be dispositive of the current case. At no point have defendants Turner & Newall, Atlas, or Bell sought to distinguish their distribution scheme from that in Kaiser-Stuhl except to argue that both Krafft-Murphy and National were non-D.C. corporations which unilaterally brought T & N asbestos into the District after sales to them that did not take place in the District. The court rejects this argument that the acts of KrafftMurphy and National in bringing the asbestos into the District and applying it and presumably selling it here, were actions which served to break the flow of the stream of commerce. These companies were sublicensees approved by T & N and, as the record clearly demonstrates with respect to Krafft-Murphy, whose sublicense agreements expressly included the District of Columbia as a territory for the application of Sprayed Limpet Asbestos. The record further reveals that, as contemplated by these agreements, Sprayed Limpet Asbestos was applied in numerous buildings in the District of Columbia. Thus, the fact that the asbestos was ultimately applied in buildings here was not a fortuitous event, but was affirmatively welcomed by defendants. See Kaiser-Stuhl, supra, at 205.

Defendants claim that unlike Kaiser-Stuhl there is not a nexus between the transaction of business and the claim here sufficient to satisfy D.C.Code § 13-423(b) which requires that when jurisdiction over a person is based on § 13-423, which includes the transacting business prong, “only a claim for relief arising from acts enumerated in this section may be asserted.” Defendants’ argument is that an asbestos injury that arises from the placement of those products in the stream of commerce does not arise from the transaction of business. The court disagrees. This is not a case in which a plaintiff injured by product A, sues a defendant based on its transaction of business within a forum with regard to product B. It is indisputable that if Mr. McDaniel was injured by the defendants’ asbestos products, and if the defendants were transacting business within this jurisdiction with respect to those products, then the McDaniels’ claim arises from the defendants’ transaction of business in the District of Columbia.

At oral argument Turner & Newall claimed that the (a)(1) prong cannot apply to tortious injuries that arise from transacting business because to so apply it would render the prongs that do deal with tortious conduct redundant. This court finds nothing in District of Columbia law that suggests that the “arising from” language should be limited solely to contract actions as defendants suggest. ' Such a limitation would be especially odd in light of the fact that the highest court of the District of Columbia has already ruled that the transacting business prong is coextensive with the due process clause. Hummel v. Koehler, 458 A.2d 1187, 1190 (D.C.1983) (citing Mouzavires v. Baxter, 434 A.2d 988, 991, 992 (D.C.1981), cert. denied, 455 U.S. 1006, 102 S.Ct. 1643, 71 L.Ed.2d 875 (1982)). In fact recent cases of the District of Columbia Court of Appeals suggest that the “transacting any business” prong is met as long as there are minimum contacts with the forum. See Hummel, supra, at 1190; Smith v. Jenkins, 452 A.2d 333, 336 (D.C. 1982). Further, there may be cases in which, for example, tortious conduct outside the jurisdiction with an effect within could not be brought under (a)(1) because the claim does not arise out of the transacting of business here. In any event, there is no discernible principle which suggests that the various prongs of the long-arm statute were meant to be mutually exclusive. In Kaiser-Stuhl, for example, the court found alternative bases upon which the exercise of personal jurisdiction in that case could be justified. 647 F.2d at 204, 206. Finally, courts have (had no trouble in finding that torts can arise from the transaction of business. See Wimmer v. Koenigseder, 128 Ill.App.3d 157, 83 Ill.Dec. 368, 470 N.E.2d 326 (1984); Mohamed v. Michael, 279 Md. 653, 370 A.2d 551 (1977); State ex rel. Newport v. Wiesman, 627 S.W.2d 874 (Mo.1982) (en banc). Thus, there is no reason to restrict jurisdiction based on the transacting business prong only to contract actions.

Having determined that this action arises from the transaction of business of defendants Turner & Newall, Atlas, and Bell, the court next considers what effect, if any, the lack of contacts for over twelve years should have on the analysis of jurisdiction under (a)(1). The court finds that this factor does not remove this court’s power under the long-arm statute to exercise jurisdiction over these defendants. First, the plain language of section (a)(1) does not require that the transaction of business occur at the time the suit is filed. Rather, (a)(1) is satisfied if the claim arises from the transacting of business. As discussed above, the court has found that this claim does so arise, and thus the exercise of jurisdiction is within the plain meaning of the statute. The question remains, however, whether the exercise of jurisdiction in this case under (a)(1) comports with the requirements of due process. The court finds that it does.

In determining whether the exercise of personal jurisdiction in a particular case violates due process, the Supreme Court has provided broad guidance which centers the court’s inquiry on whether the assertion of jurisdiction comports with “traditional notions of fair play and substantial justice.” International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). The focus for application of this broad standard has been to consider whether there are “minimum contacts” between the defendant and the forum state. International Shoe, 326 U.S. at 316, 66 S.Ct. at 158, World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980). In a products liability situation the “defendant’s conduct and connection with the forum [must be] such that he should reasonably anticipate being haled into court there.” World-Wide Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567. In determining whether a particular exercise of jurisdiction is consistent with due process, the inquiry must focuá on “the relationship among the defendant, the forum, and the litigation.” Rush v. Savchuk, 444 U.S. 320, 327, 100 5. Ct. 571, 577, 62 L.Ed.2d 516 (1980) (quoting Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2580, 53 L.Ed.2d 683 (1977)). As the Supreme Court explained in World-Wide Volkswagen:

Implicit in this emphasis on reasonableness is the understanding that the burden on the defendant, while always a primary concern, will in an appropriate case be considered in light of other relevant factors, including the forum State’s interest in adjudicating the dispute ...; the plaintiff’s interest in obtaining convenient and effective relief ... at least when that interest is not adequately protected by the plaintiff’s power to choose the forum; the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social polices....

444 U.S. at 292, 100 S.Ct. at 564 (citations omitted). Even with these guiding concepts, however, it is still true that “the constitutional standard is easier to state than to apply.” World-Wide Volkswagen, 444 U.S. at 313, 100 S.Ct. at 568 (Marshall, J., dissenting).

The crux of defendants’ due process complaint is that it would violate due process to look to the time of the injury rather than to the time of the commencement of litigation in determining whether the defendants had minimum contacts with this forum. Defendants assert that they have had no contact with this forum for a substantial amount of time — some twelve or so years — and thus should not be haled into court here. This complaint, however, which seems reasonable at first blush, sounds more like an argument that should be addressed to the issue of how a statute of limitations should be applied. But the issue before the court is one of personal jurisdiction, and in such a case the basic question is whether the connection between the defendant, the forum and the litigation renders it fair to hale these defendants into court in this forum. The court believes the exercise of personal jurisdiction against defendants Turner & Newall, Atlas, and Bell does comport with due process.

Defendants, in effect, are arguing that in addition to considering the relationship among the litigation, the forum and the defendant, a court must take an additional step and be sure that there are continuing contacts with the forum at the time the suit is filed. This court does not read the Supreme Court’s decisions as requiring any such mechanical approach to the question of fairness. In fact, any such requirement was conspicuously absent in McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), where, in upholding the exercise of jurisdiction over the defendant insurance company, the Court declared: “It is sufficient for purposes of due process that the suit was based on a contract which had substantial connection with that State.” 355 U.S. at 223, 78 S.Ct. at 201 (emphasis added). The Court then added: “The contract was delivered in California, the premiums were mailed from there and the insured was a resident of that state when he died.” 355 U.S. at 223, 78 S.Ct. at 201 (emphasis added). Defendant Turner & Newall contends that the Supreme Court in its more recent personal jurisdiction cases such as WorldWide Volkswagen, supra, and Rush v. Savchuk, supra, has retreated somewhat from the expansive approach taken in McGee to the question of contacts. But none of the cases since McGee has added a requirement to the due process analysis that there be contacts at the time the suit is filed.

The cases upon which Turner & Newall rely to support the proposition that contacts must be measured at the time suit is filed are not helpful to this court. In none of those eases was the issue squarely before the court, and, in any event, the cases provide little or no analysis to support such a conclusion. See Connecticut Artcraft Corp. v. Smith, 574 F.Supp. 626, 630 (D.Conn.1983); Lachman v. Bank of Louisiana in New Orleans, 510 F.Supp. 753, 757 (N.D.Ohio 1981); In re Puerto Rico Air Disaster Litigation, 340 F.Supp. 492, 498 & n. 19 (D.P.R.1972); Henson v. Fred Harvey, Inc., 308 F.Supp. 218, 219 (E.D.Pa. 1970); Optico Corp. v. Standard Tool Co., 285 F.Supp. 46, 48 (E.D.Pa.1968); Proler Steel Corp. v. Luria Brothers & Co., 225 F.Supp. 412, 413 (S.D.Tex.1964). Rather, for reasons stated above, the court finds more persuasive cases that have taken a view contrary to that in cases relied on by Turner & Newall here. See Boeing Co. v. Spar Aerospace Products, Ltd., 380 F.Supp. 101, 106 (E.D.Pa.1974); Johnston v. Gilley, 50 N.C.App. 274, 273 S.E.2d 513, 516 (1981); Collins v. Mize, 447 S.W.2d 674, 675-6 (Tex.1969). To exercise personal jurisdiction over these defendants comports with the central reasoning of International Shoe:

[T]o the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations; and, so far as those obligations arise out of or are connected with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue.

326 U.S. at 319, 66 S.Ct. at 160. Although the obligations that defendants incurred as a result of their transacting business within the District of Columbia are just now being called due, the timing of this suit does not alter the fact that the claim being brought here is intimately connected with this forum since this is where the alleged injury took place, and the injury allegedly arose out of the defendants’ transaction of business here as that term has been applied in Kaiser-Stuhl. Further, the District of Columbia clearly has an interest in providing a forum for its citizens when injuries manifest themselves after a corporate defendant has ceased activities which relate to the District of Columbia. This is not a case in which a plaintiff brings a claim based on a recently suffered injury and comes to the forum claiming personal jurisdiction based on ancient contacts that do not relate to the injury; rather, here the injury was allegedly occurring simultaneously, for the most part, with the contacts on which plaintiffs seek to invoke the personal jurisdiction of this court. Thus, considering the relationship among the defendant, the forum and the litigation, this court concludes that it comports with “traditional notions of fair play and substantial justice” to hale a defendant into court in the place where it transacted business at the time the injury complained of was taking place and where the injury arose from the defendants’ transaction of business.

B. Defendant Nicolet

The court reaches a different conclusion with respect to defendant Nicolet. Plaintiffs have not argued here that Nicolet also participated in the distribution scheme that brought the products into this jurisdiction. Nor have they argued that Nicolet’s own contacts with the District of Columbia bring this defendant within the reach of the D.C. long-arm statute. Rather, plaintiffs have stated the legal conclusion that defendant Nicolet is the successor in interest to Keasbey & Mattison, a company over which the court could have asserted jurisdiction under the theory outlined earlier in this Memorandum Opinion. While in considering a motion to dismiss for lack of personal jurisdiction, the court may be required to resolve factual issues in favor of the party asserting jurisdiction, the plaintiffs have cited no case, and indeed there would be no case, that says the court must resolve legal issues in its favor. With respect to defendant Nicolet the plaintiffs have simply not met their burden of establishing a prima facie case of jurisdiction.

The crux of their jurisdictional claim against Nicolet is that it acquired the Industrial Products Division of Keasbey and Mattison, the division which manufactured Sprayed Limpet Asbestos, and therefore, as successors in interest, the court can use the contacts of K & M to exercise jurisdiction over Nicolet. In papers submitted to this court supported by affidavits, defendant Nicolet has declared “... that sprayed limpet asbestos was not part of the product line of the K & M Industrial Products Division when purchased by Nicolet, and that Nicolet has never, in fact, distributed a sprayed limpet asbestos product or any similar type sprayed asbestos product.” Response of Defendant, Nicolet, Inc. to Plaintiffs’ Recent Notice of Filing in Support of Plaintiffs’ Opposition to Pending Motions to Dismiss at 3 (filed June 4,1984). At oral argument, plaintiffs did not suggest that it would contest this fact but rather pointed to the fact that Nicolet distributed asbestos-containing products using the Keasbey and Mattison logo. Transcript of Oral Argument, June 5, 1984 at 42. Significantly, the plaintiffs here have not attempted to assert jurisdiction over Nicolet based on exposure to any of Nicolet’s products after the acquisition of assets of K & M, but rather rely solely on the activities of K & M with regard to Sprayed Limpet Asbestos.

This court need not here decide whether it is ever possible to use the successor in interest theory as a tool to assert personal jurisdiction because plaintiffs have not here adduced enough facts to bring within due process bounds the assertion of personal jurisdiction over defendant Nicolet. The court will grant Nicolet’s motion to dismiss for lack of personal jurisdiction.

An appropriate Order accompanies this Memorandum Opinion.

ORDER

This matter is before the court on the motions to dismiss of defendants Turner & Newall PLC, and Nicolet, Inc., and the motion of defendants Atlas-Turner, Inc. and Bell Asbestos Mines, Ltd. to dismiss or, in the alternative, for summary judgment. For the reasons stated in the accompanying Memorandum Opinion, it is, by the court, this 13th day of March, 1985

ORDERED that the motion to dismiss of defendant Turner & Newall PLC is hereby denied; and it is further

ORDERED that the motion to dismiss of defendant Nicolet, Inc. is hereby granted; and it is further

ORDERED that the motion to dismiss of defendant Atlas-Turner, Inc. is hereby denied; and it is further

ORDERED that the motion to dismiss of defendant Bell Asbestos Mines, Ltd. is hereby denied; and it is further

ORDERED that because defendant has not demonstrated to this court that it can decide the issue of liability as a matter of law, the motion of defendant Atlas-Turner, Inc. for summary judgment is hereby denied; and it is further

ORDERED that because defendant has not demonstrated to this court that it can decide the issue of liability as a matter of law, the motion of Bell Asbestos Mines, Ltd. for summary judgment is hereby denied.

      . There are cases in this jurisdiction that suggest that because the transacting business prong is coextensive with due process, a court can proceed directly to the constitutional issue. See Hummel v. Koehler, 458 A.2d 1187, 1190 (D.C. 1983); Smith v. Jenkins, 452 A.2d 333, 336 (D.C. 1982). Because the matter is not entirely free from doubt, however, the court will analyze the case using the two-step approach while noting that the result would be the same had it considered only the constitutional issue.

      . To support the connection of these license agreements with the District of Columbia plaintiffs have supplied the affidavit of Richard W. Boyle, Secretary-Treasurer of the Krafft-Murphy Company. In his affidavit he explains that the National Asbestos Company ("National”) was formed in the 1950’s by the stockholders of Krafft-Murphy and that National shared office space and wharehouse space with Krafft-Murphy. He declares that while the sublicense with Keasbey and Mattison was in effect National “regularly applied Sprayed Limpet Asbestos in buildings located in the District of Columbia.” Boyle Affidavit at %%7¶ 4-6. In the early 1960's the activities of National were absorbed in one company called Krafft-Murphy. The Boyle affidavit declares that while the sublicense agreement with Armstrong was in effect Krafft-Murphy regularly applied Sprayed Limpet Asbestos in buildings in the District of Columbia. Id. ¶ 13. After the Armstrong license was assigned to Atlas, the Boyle affidavit declares that Krafft-Murphy continued to apply Limpet in the District of Columbia, and that this asbestos was ordered from Atlas in Canada. Id. ¶ 19. It appears reasonable to characterize Krafft-Murphy and National’s transactions in the District of Columbia as sales when they contracted to apply Limpet here. Counsel for plaintiffs have so characterized the activities of Krafft-Murphy and National. See Plaintiffs’ Reply to Defendant Turner & Newall PLC’s Supplemental Memorandum in Support of Motion to Dismiss at 6. ("uncontested factual record in this case ... establishes that.T & N’s approved distributor, Krafft-Murphy, sold T & N’s Limpet in the District of Columbia for a period spanning three decades”). The Boyle affidavit does not use the precise word "sale,” but the court finds that the activities he describes are sufficient to come within the transacting business prong as analyzed in Kaiser-Stuhl.

      . Courts in other jurisdictions which have similar “arising from” language in their long-arm statutes have used various verbal formulas which support a view that the claim here arises from the defendants’ transaction of business here. Illinois courts, for example, require that the claim “lie in the wake” of the defendant’s commercial activities. Jacobs/Kahan & Company v. Marsh, 740 F.2d 587, 591 (7th Cir.1984) (applying Illinois law); Wimmer v. Koenigseder, 128 Ill.App.3d 157, 83 Ill.Dec. 368, 470 N.E.2d 326, 329 (1984). There can be little doubt that Mr. McDaniel’s injuries if found to have been caused by the exposure to defendants' products lie in the wake of the defendants' decision to market asbestos products in the District of Columbia.

      . The stream of commerce theory may narrow the range of cases in which resort by a plaintiff to the (a)(4) prong will be necessary in order to support personal jurisdiction, but that reality in no way affects a determination whether (a)(1) should apply in a given case.

      . "Decisions applying Virginia and Maryland law are persuasive authority in the District of Columbia since Congress modeled the District’s long-arm statute on the statutes of those neighboring states." Kaiser-Stuhl, supra, at 205 n. 13.

      . Absent the problem of timing presented here, this court would have no difficulty concluding that the exercise of jurisdiction over these defendants comports with due process. The point was conceded in Kaiser-Stuhl, 647 F.2d at 203, and other courts faced with similar distribution schemes have found the exercise of personal jurisdiction to be within the scope of due process requirements. See, e.g., Bean Dredging Corp. v. Dredge Technology Corp., 744 F.2d 1081 (5th Cir.1984); Nelson by Carson v. Park Industries, Inc., 717 F.2d 1120 (7th Cir.1983), cert. denied, — U.S. — 104 S.Ct. 1277-78, 79 L.Ed.2d 682 (1984).

      . See also Restatement (Second) of Conflict of Laws § 48 (1971) ("A state has power to exercise judicial jurisdiction over a foreign corporation which has done business in the state, but has ceased to do business there at the time when the action is brought, with respect to causes of action arising from the business done in the state").


author: EDWARD WEINFELD, District Judge.

text:
    AAACON AUTO TRANSPORT, INC., Plaintiff, v. Harold Dean BARNES and Barnes Used Cars, Inc., Defendant.
    No. 84 Civ. 5310(EW).
    United States District Court, S.D. New York.
    March 14, 1985.
    Zola & Zola, New York City (Ralph J. Zola, New York City, of counsel), for plaintiff.
    Baskin & Steingut, P.C., New York City (Lawrence A. Mandelker, Mark J. Morgenstern, New York City, of counsel), for defendant.
   OPINION

EDWARD WEINFELD, District Judge.

In its amended complaint, the plaintiff, Aaacon Auto Transport, Inc. (“Aaacon”), asserts eight causes of action against the defendants, Harold Dean Barnes and Barnes Used Cars (collectively “Barnes”). The first three causes of action involve an agreement whereby Barnes, who is based in the Washington, D.C. area, allegedly transported over 600 automobiles for Aaacon between the latter’s facilities in New York City, where it is located, and its terminals in Florida. Barnes began transporting automobiles in February 1983 and continued to do so during the year and into 1984. In essence, Aaacon claims that on numerous occasions Barnes failed to deliver the automobiles in the condition in which he received them. The fourth through seventh causes of action involve Barnes’s sale to Aaacon of an allegedly defective tractor and trailer, and the eighth cause of action is based upon an alleged slanderous statement by Barnes that Aaacon owes defendants $50,000. The action is before the Court on cross-motions relating to arbitration of Aaacon’s claims arising from the transportation agreement and on Barnes’s motion to dismiss the remaining five causes of action for lack of in personam jurisdiction.

In February 1983, the parties entered into a written contract setting forth the terms of the transportation agreement. Under that contract, “Barnes agree[d] to provide said transportation for a minimum of 600 automobiles between New York and Florida during the period from February 20, 1983 to June 30, 1983.” The contract contains an arbitration clause, which provides that “the parties consent to arbitration before the American Arbitration Association [“AAA”], pursuant to its rules, of any dispute that may arise between them.” Sometime after the expiration of the three month period specified in the contract, Aaacon presented Barnes with a proposed new contract setting forth a new period and minimum number of automobiles to be transported. Apparently, however, Barnes did not sign it because he believed the initial contract was still in effect and a new one unnecessary, and he continued to transport automobiles for Aaacon pursuant to the terms of the initial contract. Thereafter, disputes arose over various aspects of the transportation agreement and, in July 1984, Aaacon commenced this action. One month later, Barnes made a demand for arbitration of his own claims before the AAA in Washington, D.C., which, upon Aaacon’s request that the hearings be held in New York City, determined that Maryland is the appropriate locale. Barnes now moves pursuant to 9 U.S.C. § 3 to stay action on all claims arising from the transportation agreement pending arbitration in Maryland, and Aaacon cross-moves pursuant to 9 U.S.C. § 4 to compel arbitration of these claims in New York City instead of Maryland.

Both parties are prepared to arbitrate claims arising from the transportation agreement but disagree whether all such claims are arbitrable. Aaacon argues that the parties’ only written arbitration agreement terminated on June 30, 1983, when the three month period ended, and that claims arising from shipments Aaacon made after that date are not covered by any written agreement and therefore are not arbitrable. Barnes, in opposition, claims that the three month period was intended merely as a performance factor and not as a limitation on the parties’ contractual relationship, which was expressly made subject to termination by either party upon thirty days notice and was otherwise intended to be of continued duration unless so terminated. Thus, Barnes desires arbitration of all claims arising from shipments made by Aaacon, whereas Aaacon desires arbitration only of claims arising from shipments it made on or before June 30, 1983.

At issue here is not the existence but the duration of the parties’ written arbitration agreement. While the former issue is for Court determination, the latter issue should be resolved by the arbitrator, provided the arbitration clause is broad and arguably covers disputes concerning contract termination. As already noted, the parties agreed in writing to arbitrate “any dispute that may arise between them.” A broader arbitration clause is hard to imagine. Since this clause arguably covers the parties’ dispute over contract termination— that is, whether claims arising from shipments made after June 30, 1983 are arbitrable — that dispute is referable to arbitration. Accordingly, Barnes’s motion pursuant to 9 U.S.C. § 3 to stay the instant action is granted with respect to all claims arising from the transportation agreement pending determination of the termination issue by the arbitrator.

The parties also disagree about where arbitration proceedings should 'be held. Although the AAA has determined that they should be held in Maryland, Aaacon cross-moves pursuant to 9 U.S.C. § 4 to compel arbitration in New York City. The same reasons why the parties’ dispute over contract termination should be resolved by the arbitrator apply to this dispute about venue. In any case, Aaacon is not entitled under section four to an order compelling arbitration in New York City or anywhere else because Aaacon is not, as it must be to invoke section four, a “party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration.” Barnes has not failed, neglected, or refused to arbitrate. On the contrary, he has already made a demand for arbitration of his own claims before the AAA and now moves to stay this action so that all claims arising from the transportation agreement may be arbitrated together in Maryland, which the AAA has determined is the appropriate locale for the hearings. The arbitration clause states that proceedings thereunder are to be held before the AAA “pursuant to its rules.” There is no allegation that Barnes has breached this provision; indeed, on the contrary, he has invoked the arbitral procedure, as already noted. Accordingly, Aaacon is not a “party aggrieved” within the meaning of 9 U.S.C. § 4 and its cross-motion to compel arbitration in New York City is denied.

Barnes also moves pursuant to Fed. R.Civ.P. 12(b)(2) to dismiss the remaining five causes of action upon the ground that the Court lacks in personam jurisdiction. Four of these causes of action arise from Barnes’s sale of an allegedly defective tractor and trailer to Aaacon on April 23, 1984 and the fifth arises from a slanderous statement Barnes allegedly made about Aaacon. Barnes asserts, and Aaacon does not dispute, that the sale transaction was negotiated and executed in Maryland; there is no allegation by either party as to where the allegedly slanderous statement was made. Since Aaacon has failed to allege that these events occurred in New York State, New York’s long arm statute confers no personal jurisdiction over Barnes with respect to claims arising from the sale transaction unless that sale constituted a “tortious act without the state causing injury to person or property within the state,” and none at all with respect to the slander claim. As to the former, even assuming that Barnes’s sale of the tractor and trailer was fraudulent, as Aaacon claims, and therefore was a “tortious act without the state,” there is no allegation that Aaacon sustained “injury to person or property within the state.” With respect to commercial torts, the situs of injury is usually “the place where the critical events took place.” Here, the only allegation concerning the “critical events” is that the sale was negotiated and executed in Maryland. There is no indication whether Barnes’s allegedly fraudulent representations concerning the tractor and trailer were made to Aaacon in New York or whether Aaacon relied upon them in New York. Nor is there any allegation that Aaacon lost business in New York as a result of the alleged fraud. In short, Aaacon has failed to allege that it sustained injury in New York for any reason other than that it happens to be domiciled here and incurred a financial loss. Such a reason is no basis for in personam jurisdiction over a nonresident defendant under section 302(a)(3) of the long arm statute.

Aaacon asserts that the Court has in personam jurisdiction over Barnes pursuant to CPLR § 301. That section confers jurisdiction over a foreign defendant who is “ ‘engaged in such a continuous and systematic course of “doing business” [in New York] as to warrant a finding of its “presence” in this jurisdiction.’ ” Aaacon claims that Barnes was “doing business” in New York in that, pursuant to the transportation arrangement, the written portion of which was executed in the state, Barnes used his own trucking equipment and his own employees to load or unload over 500 automobiles in New York on a regular, continuing basis during the period at issue, entering the state on at least 100 occasions, for which he earned revenues in excess of $125,000. Aaacon further asserts that on those occasions when the shipments originated in Florida and terminated in New York, Barnes’s employees solicited return loads from other shippers in “the New York area” in order to avoid an empty “back haul.” Barnes counters that he conducts his business in Maryland and has not maintained an office, equipment, bank accounts, records, or garage facilities in New York, has no employees and rents no equipment in New York, and solicits no business in the state. According to Barnes, his sole business activity in New York was to deliver and pick up automobiles at Aaacon’s facility in New York for transport pursuant to his arrangement with Aaacon.

It is a close question whether frequent but temporary entry into New York solely to load and unload automobiles at another’s facilities for purposes of transporting them to and from points outside the state renders one “present” in New York, “ ‘not occasionally or casually, but with a fair measure of permanence and continuity’ ” so that it is reasonable and just that one be required to defend an unrelated action in New York. If Barnes’s employees also solicited business when they were in New York in order to avoid empty back hauls to Florida, then the argument for personal jurisdiction is stronger. However, on the pleadings and affidavits before the Court, there is no indication of how frequently Barnes’s employees came to New York, how long they stayed when they were here, or precisely what they did when they were here. Nor has Aaacon described in any detail the nature and extent of the solicitation activity in which Barnes’s employees allegedly engaged when in “the New York area.” This allegation is made on “information and belief” and is denied by Barnes. The issue here is whether Aaacon has discharged its burden of alleging a factual predicate for in personam jurisdiction. Although on this motion Aaacon is required to make only a prima facie case for personal jurisdiction, the lack of detail and conclusory nature of its allegations raise doubts about their sufficiency. Aaacon has had ample time for discovery — Barnes filed his motion more than four months after the date of the amended complaint — and might have supported its position with a stronger factual affidavit.

Whether or not Aaacon has sufficiently alleged facts that show Barnes was “doing business” in New York need not be decided. For in any case, Aaacon has failed to allege, as it must, that Barnes was “doing business” in New York at the time the action was commenced on July 26, 1984. According to the amended complaint, the parties’ written transportation agreement terminated prior to September 1983, whereupon Barnes rejected a proposed contract for the period up to February 28, 1984 but continued to do business with Aaacon on the same terms as those in the expired contract. How long the parties continued to do business in this manner is not stated in the amended complaint or in Aaacon’s affidavit and brief in opposition to the instant motion. Indeed, in its affidavit, Aaacon refers to the automobile shipments Barnes made as falling into two periods, the later of which ended on February 28, 1984. The only indication that Barnes’s loading and unloading activities in New York may have continued beyond that date is a reference by Barnes to money allegedly owed to him by Aaacon for services he rendered “pursuant to the Contract” in March, April, May, and June of 1984. Absent any allegation that Barnes maintained his contacts with New York on July 26, 1984, when this action was commenced, Aaacon has failed to discharge its burden on the jurisdictional issue. Accordingly, Barnes’s motion to dismiss the fourth through eighth causes of action is granted.

So ordered.

      . Barnes also moves pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss the eighth, or slander, cause of action for failure to state a claim upon which relief can be granted. Since Barnes’s motion to dismiss the fourth through eighth causes of action on jurisdictional grounds is granted, this additional ground for dismissal need not be addressed.

      . See Prudential Lines, Inc. v. Exxon Corp., 704 F.2d 59, 63-64 (2d Cir.1983); McAllister Bros., Inc. v. A & S Transp. Co., 621 F.2d 519, 522 (2d Cir.1980); Rochdale Village, Inc. v. Public Serv. Employees Union, Local No. 80, 605 F.2d 1290, 1294-95 (2d Cir.1979).

      . See Rochdale Village, 605 F.2d at 1195.

      . Cf. Koreska v. Perry-Sherwood Corp., 253 F.Supp. 830, 832 (S.D.N.Y.1965) (Court cannot compel arbitration anywhere when parties have already submitted to arbitration in accordance with terms of contract), aff’d, 360 F.2d 212 (2d Cir.1966) (mem.); A/S Ganger Rolf v. Zeeland Transp., Ltd., 191 F.Supp. 359, 362-63 (S.D.N.Y. 1961) (since contract permitted petitioner to proceed with arbitration without respondent’s cooperation, petitioner was not “party aggrieved” and 9 U.S.C. § 4 did not apply).

      . N.Y.Civ.Prac.Law § 302(a)(3) (McKinneys 1972).

      . See American Eutectic Welding Alloys Sales Co. v. Dytron Alloys Corp., 439 F.2d 428, 433 (2d Cir.1971) (quoting Spectacular Promotions, Inc. v. Radio Station WING, 272 F.Supp. 734, 737 (E.D.N.Y.1967)); MIJE Assocs. v. Halliburton Servs., 552 F.Supp. 418, 420 (S.D.N.Y. 1982) (same); Data Communication, Inc. v. Dirmeyer, 514 F.Supp. 26, 30 (E.D.N.Y.1981) (same); Louis Marx & Co. v. Fuji Seiko Co., 453 F.Supp. 385, 388 n. 4 (S.D.N.Y.1978) (same).

      . See Hargrave v. Oki Nursery, Inc., 636 F.2d 897, 899-900 (2d Cir.1980); MIJE Assocs., 552 F.Supp. at 420 n. 5; Marine Midland Bank v. Keplinger & Assocs., Inc., 488 F.Supp. 699, 703 (S.D.N.Y.1980).

      . See Trafalgar Capital Corp. v. Oil Producers Equip. Corp., 555 F.Supp. 305, 312-13 (S.D.N.Y. 1983); Sales Arm, Inc. v. Automobile Club, 402 F.Supp. 763, 766 (S.D.N.Y.1975); Sybron Corp. v. Wetzel, 46 N.Y.2d 197, 206, 385 N.E.2d 1055, 1059, 413 N.Y.S.2d 127, 132 (1978).

      . See American Eutectic, 439 F.2d at 433-34; MIJE Assocs., 552 F.Supp. at 420; Fantis Foods, Inc. v. Standard Importing Co., 49 N.Y.2d 317, 326-27, 402 N.E.2d 122, 126, 425 N.Y.S.2d 783, 787 (1980).

      . N.Y.Civ.Prac.Law § 301 (McKinneys 1972).

      . McGowan v. Smith, 52 N.Y.2d 268, 272, 419 N.E.2d 321, 323, 437 N.Y.S.2d 643, 645 (1981) (quoting Simonson v. International Bank, 14 N.Y.2d 281, 285, 200 N.E.2d 427, 429, 251 N.Y.S.2d 433, 436 (1964)).

      . Laufer v. Ostrow, 55 N.Y.2d 305, 310, 434 N.E.2d 692, 694, 449 N.Y.S.2d 456, 458 (1982) (quoting Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 268, 115 N.E. 915, 917 (1917)).

      . See id. at 310, 434 N.E.2d at 694-95, 449 N.Y.S.2d at 459; compare Scanapico v. Richmond, Fredericksburg & Potomac R., 439 F.2d 17 (2d Cir.1970), aff’d on rehearing, 439 F.2d 25 (2d Cir.1970) (en banc) (nonresident railroad “doing business" in New York due to in-state freight solicitation by two employees, one a New York resident; in-state sale by connecting railroads of tickets for through-trains operated to and from New York over defendant's tracks; and daily presence of defendant’s freight cars in New York as part of interstate trains operated by others).

      . See Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir. 1984); Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981); Visual Sciences, Inc. v. Integrated Communications Inc., 660 F.2d 56, 58 (2d Cir.1981); Welsh v. Gibbs, 631 F.2d 436, 438 (6th Cir.1980), cert. denied, 450 U.S. 981, 101 S.Ct. 1517, 67 L.Ed.2d 816 (1981); Singer v. Bell, 599 F.Supp. 350, 353 (S.D.N.Y.1984).

      . See Arrow Trading Co. v. Sanyei Corp. (Hong Kong), Ltd., 576 F.Supp. 67, 69 (S.D.N.Y.1983); Puerto Rico Maritime Shipping Auth. v. Almogy, 510 F.Supp. 873, 878 (S.D.N.Y.1981); Top Form Mills, Inc. v. Sociedad Nationale Industria Applicazioni Viscosa, 428 F.Supp. 1237, 1246 n. 12 (S.D.N.Y.1977); Gaboury v. Central Vermont Ry., 250 N.Y. 233, 165 N.E. 275 (1929).


author: COHN, District Judge.

text:
    UNITED STATES of America, Counter-Plaintiff, v. NATIONAL ACCEPTANCE COMPANY OF AMERICA, Third-Party Defendant.
    Civ. No. 82-74822.
    United States District Court, E.D. Michigan, S.D.
    March 14, 1985.

      Ellen Carpenter, Trial Atty., Tax Division, U.S. Dep’t of Justice, Washington, D.C., for counter-plaintiff.
    Tom Radom, Southfield, Mich., Richard Rossman, Bloomfield Hills, Mich., for third-party defendant.
   MEMORANDUM AND ORDER

COHN, District Judge.

“The twentieth-century emphasis is on coming to a specific focus on a given statute on its full-dimensioned particularity of policy, rather than emphasizing material or values not immediately connected to that enactment. Courts now seem usually to strive to grasp the distinctive message of statutory words, taken in their own context, with reference to the documented process that produced that particular act, including legislative history deserving credibility, and policy guides supplied by the legislature’s successive development of the given policy area and related areas.”

J.W. Hurst, Dealing With Statutes 65 (1982).

I.

This is a tax collection case. The government, in its cross-complaint, alleges National Acceptance Company of America (NAC) is liable to it under § 3505(b) of the Internal Revenue Code (the Code), 26 U.S.C. § 3505(b), as a lender who supplied funds to Glass Screen Manufacturing, Inc. (Glass Screen) for the specific purpose of paying the wages of Glass Screen employees with actual notice or knowledge within the meaning of § 6323(i) of the Code that Glass Screen did not intend or would not be able to make timely payment of its employees’ withholding tax. NAC, having been given leave to amend its affirmative defenses, has moved for summary judgment on the grounds that it did not receive timely notice of the assessment of the defaulted withholding taxes against Glass Screen under § 6303(a) of the Code and therefore is not liable, citing United States v. Associates Commercial Corp., 721 F.2d 1094 (7th Cir.1983).

II.

I am not persuaded that § 3505(b) liability is dependent on receiving § 6303(a) notice. Section 3505(b) provides for personal liability in a sum equal to the taxes not paid with a limitation on such liability to an amount equal to twenty-five percent of the amount supplied. Section 6303(a) relates to notice to persons liable for unpaid taxes reflected in the assessment of such taxes. NAC under the circumstances alleged is not a person liable for the unpaid taxes. Moreover, there is nothing in the text of the Federal Tax Lien Act of 1966, Pub.L. No. 89-719, 80 Stat. 1125 or its legislative history to suggest that Congress intended to make lender’s liability conditioned on the giving of notice under § 6303(a).

It has long been established that no prior notice is required to impose common law debt liability on the part of one liable to the United States for taxes due. See Dallas Savings Bank v. United States, 19 Wall. 227, 239-240, 86 U.S. 227, 239-240, 22 L.Ed. 80 (1874) and United States v. Ayer, 12 F.2d 194, 200 (1st Cir.1926) and, more importantly, United States v. Nashville C. & St. L. Ry., 249 F. 678, 681-684 (6th Cir. 1918). In that case, the Sixth Circuit said:

“It is the general rule, applicable, not only to customs duties, but to internal revenue taxes, that a common-law action of debt lies in favor of the government whenever, by accident, mistake, or fraud, no duties or short duties have been paid; and thus that the government may recover a personal judgment for a tax, either in a sum certain or when readily reducible to certainty, whenever there exists a duty to pay, provided always another remedy has not been made exclusive.”

Id. at 681 (citations omitted). Indeed the Code expressly recognizes this right. See § 6501(a).

As explained by the government in its Brief in Opposition, either the Code requires notice as a condition precedent to suit or it does not require such notice. Questions of fairness, difficulty of collection, and the like are simply irrelevant except to the extent they may bear on Congressional intent. I am satisfied that the Seventh Circuit and the district courts which have followed its decision in Associates Commercial Corp., supra, were simply wrong.

III.

The Sixth Circuit, in Farmers-Peoples Bank v. United States, 477 F.2d 752, 756 (6th Cir.1973), in holding that a lender in a case under § 3505(b) was entitled to a jury trial and that an action of this kind is intended only to impose personal liability, described three essential elements to such an action:

First, the lender must have loaned money to the employer with the knowledge that the money was going to be specially used to meet payroll.

Second, the employer must have failed to pay payroll taxes for the applicable quarter and such taxes must still be due.

Third, the lender must have had actual notice or knowledge that the employer neither intended nor was able to pay its payroll taxes.

As I read § 3505(b) and its legislative history, to require more would defeat Congress’ intent in enacting it. NAC’s seventh amendment right to a jury trial is certainly all the protection it needs against any overbearing conduct on the part of the government.

The motion for summary judgment is DENIED.

SO ORDERED.

       This is an edited version of the Court's bench memorandum of February 25, 1985.

      . Section 3505(b) was added to the Code by Sect. 105(a) of the Federal Tax Lien Act of 1966. Section (b) of that Act amended the Miller Act, 40 U.S.C. 270a, by requiring performance bonds for public building contracts to provide coverage for unpaid withholding taxes reflected in a contractor’s tax return, and by requiring the United States to give notice to the surety of such unpaid taxes within 180 days of the filing of the return, and by imposing a 1 year statute of limitations following the date of the notice on the filing of suit.

      . See 1966 U.S.Code Cong, and Ad.News 3722 which sets out S.Rep. (Finance Committee) No. 1708, Oct. 11, 1966. In explaining the reason for imposing liability on lenders, the Senate Report states at 3743:
      "Third parties who specifically finance payrolls, although not paying employees directly, also are often in a position similar to that of employers. This appears to be true in those cases where they have actual notice or knowledge that the employers do not intend to or are unable to, pay the amount of withholding taxes due the Government. Therefore, in these cases also it would appear practical for these third parties to account for the withholding taxes to the Government.”