author: DORSEY, District Judge.

text:
    Robert SILIGATO, Plaintiff v. William WELCH and Richard Welch, Defendants and Third-Party Plaintiffs v. ALLSTATE INSURANCE COMPANY, Third-Party Defendant
    No. Civil N-82-421 (PCD).
    United States District Court, D. Connecticut.
    May 3, 1985.

      Howard Jacobs, Karen F. Tross, Jacobs, Grudberg & Belt, New Haven, Conn., for plaintiff.
    Joseph Chiarelli, Hamden, Conn., for defendants and third-party plaintiffs.
    James O’Connor Shea, Branford, Conn., for third-party defendant.
   RULING ON MOTION FOR SUMMARY JUDGMENT

DORSEY, District Judge.

Background

Originating in a state court negligence action brought by Robert Siligato (Siligato), against William Welch and Richard Welch (Welches), this third-party action was removed to this courtj pursuant to 28 U.S.C. § 1441, by third-party defendant Allstate Insurance Company (Allstate), invoking diversity jurisdiction. • The Welches seek a declaratory judgment that Allstate’s refusal to defend and indemnify them in the state court action breached Allstate’s duties under a policy of liability insurance. Allstate has moved for summary judgment, Rule 56, Fed.R.Civ.P., on the ground that the complaint fails to allege facts covered by the policy of insurance. For the reasons set forth below, the motion is denied as to William Welch but granted as to Richard Welch.

Facts

On September 21, 1980, William Welch, while operating a vehicle owned by his brother, Richard Welch, with Richard’s permission, was involved in an accident in which Robert Siligato was injured.

Primary liability insurance of $300,000 was provided for Richard’s vehicle, and William as the permissive operator, by Metropolitan Property & Liability Insurance Company (Metropolitan).

At the time of the accident, William Welch resided, as he had for forty-two years, with his mother, Mary Alice Welch, in Hamden, Connecticut. Allstate provided liability coverage, in the amount of $100,-000, in relation to Mary Alice’s vehicle including all residents of her household driving with the permission of the owner (Exhibit A) either her vehicle (the insured vehicle) or other “non-owned” vehicles “not furnished for the regular use of a person insured.” It is not disputed but that any coverage provided by Allstate would be secondary to Metropolitan’s coverage.

Siligato’s original complaint describes Richard’s car as a family car then being used by William within the scope of his general authority. Claiming that Richard was a resident of his mother’s household, Allstate has refused to defend or indemnify on grounds that the complaint does not allege facts within the policy’s “non-owned” automobile coverage.

The Welches argue that though he visited his mother frequently and occasionally spent the night in her home, Richard actually lived in Cheshire, Connecticut, Richard’s vehicle, to which only he had keys, was rarely used by others, and he disliked others using his car and did not always permit William to use it.

On February 27, 1984, Siligato filed an amended complaint in which the Welch vehicle was described as driven by William within his general authority. In July of 1982, the primary insurer (Metropolitan) and the Welches, without participation by Allstate, agreed with Siligato that he was to be paid certain amounts. On August 9, 1982, Siligato released Metropolitan from any further liability and agreed not to satisfy any future settlement or judgment out of the personal assets of the Welches. Sili-gato reserved the right to collect any judgment or settlement from Allstate.

Claims

William Welch claims coverage by Allstate as a relative of Mary Alice, resident in her home and operating a “non-owned” vehicle with the permission of its owner.

Richard cannot claim coverage by .Allstate as he does not claim to be a resident in Mary Alice’s house and if he were his car would not be a non-owned vehicle.

Allstate claims that William is not covered by its policy:

(1) Because Richard was a resident in Mary Alice’s house and thus was an insured under her policy, from which it follows that his car, being owned by an insured, was not a covered “non-owned” vehicle.

(2) Because if Richard were not a resident of Mary Alice’s house, his vehicle was nonetheless regularly furnished to William for his use so as to preclude its being a covered “non-owned” vehicle.

Discussion:

Summary judgment cannot be granted if there is a “genuine issue as to any material fact.” Rule 56(c), Fed.R.Civ.P. See Schwabenbauer v. Board of Educ., 667 F.2d 305, 313 (2d Cir.1981). “The burden is on the moving party ‘to demonstrate the absence of any material factual issue genuinely in dispute.’ ” American Int’l Group v. London American Int’l Corp., 664 F.2d 348, 351 (2d Cir.1981), quoting Heyman v. Commerce & Indust. Ins., 524 F.2d 1317, 1319-20 (2d Cir.1975). Moreover, there may be no dispute as to any inferences which might be drawn from the record creative of an issue of material fact. Phoenix Savings & Loan v. Aetna Cas. & Sur., 381 F.2d 245, 249 (4th Cir.1967). In determining whether or not there is a genuine factual issue, the court must “resolve all ambiguities and draw all reasonable inferences against the moving party.” Schwabenbauer, 667 F.2d at 313; see also United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) (per curiam); Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980).

Duty to Defend

Allstate has two basic obligations to an insured: (1) to defend; and (2) to indemnify. If the complaint in Siligato’s action sets forth facts appearing to bring the injury within Allstate’s coverage, Missionaries of the Company of Mary v. Aetna Cas. & Sur., 155 Conn. 104, 110, 230 A.2d 21 (1967), then it is obligated at least to defend William Welch. Smedley Co. v. Employers Mut. Liab. Ins., 143 Conn. 510, 123 A.2d 755 (1956).

The original complaint alleged that Richard Welch’s automobile was a family car and it was then being operated by William within his general authority to do so. As a substituted complaint has . been filed, Allstate’s duty to defend is determined by the allegations therein and thus it is not necessary to decide whether Allstate was obligated to defend under the original allegations. The substitute complaint supersedes and controls an insurer’s obligations. Sussman v. American Sur., 345 F.2d 679 (5th Cir.1965); Salvatierra v. National Indem., 133 Ariz. 16, 648 P.2d 131 (Ariz.App.1982).

The substituted complaint of July 30, 1984, merely alleges Richard’s ownership of the vehicle and its operation by William, Richard’s brother, within William’s general authority. Under these allegations, William, as a resident of the house of Allstate’s insured, was driving a car owned by other than the insured or a resident of the insured’s premises, and with the permission of the owner. William would then be a resident operating a “non-owned” vehicle, and not within an exclusion. Thus, Allstate on those allegations would be obliged to defend William. Missionaries of Mary, 155 Conn. 104, 230 A.2d 21. Of course, Allstate’s obligations would not arise on the basis of the amended complaint (disregarding any prior obligation, if any) until'it was notified of the amended complaint. Sussman at 680; Salvatierra 648 P.2d at 134. While an inference of more than isolated use by William might be drawn from the allegation of his general authority, that is no basis to infer any particular amount of use and certainly no basis to infer, necessarily that the vehicle was furnished to William for his regular use.

As Richard’s residence presents an issue of fact, as does the regularity with which his car was furnished to William, Allstate is not entitled to summary judgment. The excess carrier’s duty to defend is secondary to the duty of the primary insurer, but it is no less real a duty. See Allstate Ins. v. Riverside Ins., 509 F.Supp. 43 (E.D.Mich.1981). Due to the distinction between coverage and liability, an insurer’s duty to defend the insured is independent of and broader than its duty to indemnify. Smedley Co., 143 Conn. at 516, 123 A.2d 755; Missionaries of Mary, 155 Conn. at 110, 230 A.2d 21. Metropolitan’s settlement with Siligato may have discharged its duty to indemnify, and its concomitant duty to settle, but it did not terminate its duty to defend its insured to the conclusion of the claims which are within the coverage. Allstate Ins. v. Riverside Ins. at 48. The settlement may have escalated the immediacy and the degree of Allstate’s participation in its insured’s defense. In any default of the primary carrier’s defense of their two insurers’ joint insured, Allstate may be obliged to assume up to the total defense of the insured subject to its right to be indemnified by the primary insurer for its expenses incurred by the excess insurer in discharging the primary insurer’s duty to defend. Id.

Duty to Indemnify

Allstate claims that the settlement agreement fully satisfied the injured party’s'damages, since he settled for less than the $300,000 primary policy limit and excused the insured of any personal liability. Contrary to Allstate’s claim, Siligato has not released his claim against the Welches. An agreement not to satisfy a judgment out of their personal asserts is no bar to his recovery of a judgment for his damages, with a set off for the amounts he has or has agreed to receive. An injured claimant who obtains a judgment may satisfy it against the defendants property, i.e. personally, or by subrogating his claim against the defendants’ insurer. Conn.Gen.Stat. § 38-175. The waiver of the right to satisfaction personally from a defendant is not a waiver of the right under the statute against the insurer.

An insurer remains liable for damages within its coverage until its insured’s legal liability is discharged. An excess insurer, such as Allstate, remains similarly liable, except that its duty to indemnify is invocable only after the primary coverage, here $300,000, is exhausted. Siligato’s reservation of his rights against the excess insurer precludes Allstate from claiming the benefit of a settlement agreement to which it was not a party and which did not and was not intended to terminate its obligation. See Deblon v. Beaton, 103 N.J.Super. 345, 247 A.2d 172 (1968); Allstate Ins. v. Riverside Ins.

Allstate’s indemnity liability would only arise if and to the extent that Siligato’s damages are determined to be more than $300,000, Pecker v. Aetna Cas. & Sur., 171 Conn. 443, 453, 370 A.2d 1006 (1976); see also, Deblon, 247 A.2d at 175; Allstate Ins. v. Riverside Ins. at 46, and William is found to be Allstate’s insured. Allstate’s liability cannot be increased by the fact, if true, that the present value of Metropolitan’s settlement agreement did not equal its $300,000 coverage.

A primary insurer is permitted, and should be encouraged, to settle a claim in discharge of its duties without being impeded or prejudicing the excess insurer, which is left in the same position after a settlement by the primary insurer as before. Deblon 247 A.2d at 176; Allstate Ins. v. Riverside Ins. at 46. “As insurance is intended as indemnification for loss, amounts received by an insured in satisfaction, or partial satisfaction of his loss will be applied in full or partial discharge of his insurer’s liability.” Pecker 171 Conn. at 452, 370 A.2d 1006; see also, 46 C.J.S., Insurance, § 1206. Though Allstate may dispute any duty to indemnify, its failure to defend in the face of allegations obliging it to do so may cost it the right to contest its duty to indemnify. Missionaries of Mary, 155 Conn. at 114, 230 A.2d 21.

As noted above, documents submitted by the Welches and Allstate show differing definitions of what constitutes “non-owned” automobile in Allstate’s liability policy. It is for the trier of fact to decide the question of whether (1) Richard was a resident of his mother’s household; or (2) whether the car was furnished or provided on a regular basis. Young v. American Fidelity Ins., 2 Conn.App. 282, 289, 479 A.2d 244 (1984); Hollander v. Nationwide Mut. Ins., 60 A.D.2d 380, 401 N.Y.S.2d 336, 338, appeal denied, 44 N.Y.2d 646, 406 N.Y.S.2d 1026, 378 N.E.2d 127 (1978). As exceptions to Allstate’s coverage, the burden of proving facts on which its policy exclusions would apply is on Allstate. Young 2 Conn.App. at 286, 479 A.2d 244.

As issues of fact exist and because Allstate’s duty to defend and to indemnify, as discussed above, cannot as a matter of law be precluded, Allstate’s motion is denied.

SO ORDERED.

      . The parties have each submitted what they claim to be copies of the relevant Allstate liability policy. However, these exhibits differ in their definitions of "non-owned automobile.” The policy submitted by the Welches defines "non-owned automobile" as: "A non-owned auto used by you or a resident relative with the permission of the owner. This auto must not be available or furnished for the regular use of a person insured." Welch Exhibit at 6. The policy submitted by Allstate defines "non-owned automobile" as: "An automobile, ... not owned by, or furnished or available for the regular use of, the named insured or any resident of his household other than a temporary substitute automobile, provided the use thereof is with the permission of the owner.” Exhibit A at 2.

      . The two policies use different language to define resident, but with the same meaning. "Resident ... means ... bodily presence in [the named insured’s] household [with] an intention to continue to dwell therein ....” Exhibit H at 2.

      . As the Welches' memorandum does not argue Richard’s claim to coverage, the motion as to him is granted.


source: Caselaw Access Project

author: FULLAM, District Judge.

license: Public Domain

text:
    AMERICANS UNITED FOR SEPARATION OF CHURCH AND STATE, et al. v. Ronald W. REAGAN, et al.
    Civ. A. No. 84-4476.
    United States District Court, E.D. Pennsylvania.
    May 7, 1985.

      Lee Boothby, Berrien Springs, Mich., Earl W. Trent, Jr., Valley Forge, Pa., for plaintiffs.
    Alexander Ewing, Jr., U.S. Atty., Philadelphia, Pa., for defendants.
   MEMORANDUM AND ORDER

FULLAM, District Judge.

On January 10, 1984, the United States Department of State issued the following formal announcement:

“The United States of America and the Holy See, in the desire to further promote the existing mutual friendly relations, have decided by common agreement to establish diplomatic relations between them at the level of embassy on the part of the United States of America, and Nunciature on the part of the Holy See, as of today, January 10, 1984.”

President Regan announced that he would nominate the Honorable William A. Wilson, who had been serving as his personal representative to the Vatican, as United States Ambassador to the Vatican; Mr. Wilson’s nomination was confirmed by the Senate on March 7, 1984.

Plaintiffs, a group of 20 religious organizations and 12 of the officials of these organizations, together with some 71 individual members of the clery of various denominations, have brought this lawsuit challenging the adoption and implementation of these arrangements, on a variety of constitutional grounds. The defendants have filed a Motion to Dismiss.

Plaintiffs assert four categories of claims, which may be summarized as follows:

1. By confirming the appointment of Ambassador Wilson and by providing funds to support his activities, Congress has violated the First Amendment because the arrangement (a) establishes a formal official relationship with a church, (b) amounts to a preference of one church over all other churches, (c) provides special benefits to one church to the detriment of all others, (d) produces excessive entanglement of the government in church affairs and vice-versa, and (e) creates religious divisiveness.
2. The President has exceeded his Article II powers, since the Holy See is a church, not a state; moreover, the President’s actions contravene the First Amendment, for the reasons mentioned above.
3. The arrangement violates the Equal Protection Clause of the Fifth Amendment.
4. The defendants have violated the Constitution in various specific ways, including (a) supporting the Catholic Church, to the detriment of all others, (b) spending tax dollars for the benefit of the Catholic Church and its prelates, (c) supporting the Catholic Church in its efforts to counteract and nullify the influence of foreign missionaries allied with other churches, and (d) cooperating with the Catholic Church in investigating other United States religious organizations.

The defendants disagree with plaintiffs’ constitutional arguments, but assert, preliminarily, that plaintiffs lack standing to bring this lawsuit, and that the court lacks subject-matter jurisdiction over these “political questions”.

I. BACKGROUND

At the time of the American Revolution, and during the first several decades of our nation’s history, what we now think of as the Vatican or the Holy See included the Papal States, an area of some 16,000 square miles with a population in excess of 3 million, whose temporal as well as spiritual ruler was the Pope. Amicable commercial relationships between the Papal States and this country were established shortly after the end of the Revolutionary War. A United States consul was appointed in 1797; he and his successors apparently derived their financial support from consular fees.

In 1847, at the request of President Polk, Congress authorized the opening of formal diplomatic relations with the Papal States, and provided funding for a chargé d’af-faires. The first such official was appointed, with the advice and consent of the Senate, in 1848.

In 1867, while Congress was considering the diplomatic and consular appropriation bill, questions were raised concerning whether the Vatican permitted Protestant church services to be conducted at the American Embassy in Rome; whereupon, Congress duly enacted a provision to the effect that “no money hereby or otherwise appropriated shall be paid for the support of an American legation at Rome, from and after the 30th day of June, 1867.” Attempts to restore funding proved unsuccessful.

In 1870, the Italian government annexed the Papal States, and the status of the Vatican/Holy See/Roman Catholic Church as a territorial entity remained a matter of dispute and uncertainty until February 11, 1929, when the Lateran Treaty between the Holy See and the Italian government became effective. This treaty created the “State of the City of the Vatican”, and, in return, the Holy See renounced its claims to the territory previously encompassed in the Papal States. Vatican City includes about 108 acres (approximately one-sixth of a square mile) of territory, with a permanent population of approximately 1,000. It is the world headquarters of the Roman Catholic Church.

Beginning in 1939, presidents of the United States have exchanged personal representatives with the Vatican. In 1961, President Truman sought to appoint an ambassador to the Holy See, but the proposal generated controversy, and was withdrawn in 1952. In 1970, President Nixon appointed Henry Cabot Lodge as his personal representative. As in the ease of his predecessors, Mr. Lodge’s appointment did not require senatorial approval or congressional funding. Every president since then has appointed a personal representative to the Vatican. Mr. Wilson, whose appointment as ambassador is challenged in the present litigation, was serving as President Reagan’s personal representative from 1981 until his appointment as ambassador.

In order to clear the way for the exchange of ambassadors, Congress had enacted P.L. No. 98-164, § 134, 97 Stat. 1029, on November 22, 1983, repealing the restriction against appropriations contained in the 1867 Act discussed previously.

Concomitantly with Ambassador Wilson’s appointment, the Vatican sent a representative of equivalent rank (a Pro-Nuncio) to this country.

II. STANDING

The Constitution imposes limitations upon the judicial branch, as well as the other two branches.- A court may exercise judicial power only at the instance of a litigant who has suffered, or is threatened with, legal injury. Such a litigant is said to have “standing” to seek judicial intervention. While judicial pronouncements on the subject of standing have not always been clear and consistent, recent decisions of the Supreme Court have removed much of the uncertainty surrounding the development of standing doctrine, and provide clear answers to the questions of standing involved in the present case.

In combination, the decisions in Valley Forge Christian College v. Americans United for Separation of Church and State, 454 U.S. 464, 102 S.Ct. 752, 70 L.Ed.2d 700 (1981), Flast v. Cohen, 392 U.S. 83, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968), Schlesinger v. Reservist Committee to Stop the War, 418 U.S. 208, 94 S.Ct. 2925, 41 L.Ed.2d 706 (1974), and U.S. v. Richardson, 418 U.S. 166, 94 S.Ct. 2940, 41 L.Ed.2d 678 (1974) establish the following principles: (1) a taxpayer, as such, may have standing only to challenge actions by Congress in the exercise of its taxing and spending power under Article I, § 8 of the Constitution; (2) a litigant has no standing to complain about actual or threatened violations of the Constitution, by any branch of the government, unless such violation directly injures that litigant, as distinguished from the public at large; and (3) there is no relaxation of standing requirements merely because violations of the First Amendment are alleged. In short, a citizen does not have standing to litigate alleged violations of the Establishment Clause merely because of an interest in achieving a just society in which church-state separationist values are preserved. It was that precise- issue which divided the Court in Valley Forge Christian College, supra; needless to say, this court is obliged to follow the majority opinion in that case.

Plaintiffs have tried valiantly to identify particularized injury-in-fact in this case, but the effort has failed. Specifically, they claim: (1) that they are being denied equal access to the Executive Branch of government, in that the unique, continuing relationships resulting from the ambassadorial appointment will not be available to the plaintiffs or their organizations. (2) The spiritual and moral teachings of the Catholic faith, plaintiffs assert, will be thrust into the public limelight and the political arena in a manner not available to other religions. (3) The Catholic Church will be better able to compete in the religious market-place, with corresponding loss of membership and revenue for other religious denominations, because of the actual or symbolic preference Mr. Wilson’s appointment connotes. (4) The Papal Nuncio and other Vatican representatives are clergymen; they are being granted diplomatic privileges and immunities not available to the clery of other faiths. (5) Plaintiffs’ religious beliefs and religious institutions are stigmatized because the formalization of diplomatic relations with the Vatican makes it appear that the Catholic Church is more important than other denominations. (6) The establishment of diplomatic relations with the Vatican will have an impact on government policies, and plaintiffs and members of their congregations will be subjected to subtle, indirect pressures to conform to such government policies, even though such policies may be contrary to their spiritual and moral beliefs and practices. And (7) the Catholic plaintiffs’ (there are several) “free-exercise” rights are being invaded, in view of the potential for governmental intrusion into the internal affairs of the Catholic Church.

These alleged injuries, in my view, amount to nothing more than a statement of some of the reasons why the separation of church and state is a good idea. These plaintiffs do not differ, in any significant respect, from the vast majority of Americans who support the principles of the First Amendment. But this, under the teaching of Valley Forge Christian College, supra, does not entitle them to litigate the alleged First Amendment violation. Persons who hold strong views on the subject of school prayer, for example, are not entitled to call upon the courts for relief unless they or their own children attend the schools in question and are directly affected by the practice. Doremus v. Board of Education of Borough of Hawthorne, 342 U.S. 429, 72 S.Ct. 394, 96 L.Ed. 475 (1952).

Plaintiffs do not allege that the actions now challenged have caused a decline in the membership or revenues of any of the plaintiffs’ denominations or organizations, and any such assertion would be patently frivolous. Neither is there any allegation that the Catholic Church has been interfered with by our government, or that any of the plaintiffs or their organizations have been required to pursue objectionable policies or goals. All that is alleged is that plaintiffs believe that the challenged actions may create a climate in which these dire consequences will be more likely to occur. But that, quite obviously, does not amount to particularized injury-in-fact, under the authorities cited above.

I conclude that this action must be dismissed because plaintiffs lack standing to pursue it.

III. POLITICAL QUESTION

In no area of governmental activity is judicial intervention less likely to be permissible than in the President’s conduct of foreign policy.

“The very nature of executive decisions as to foreign policy is political, not judicial. Such decisions are wholly confided by our Constitution to the political departments of the government, Executive and Legislative. They are delicate, complex, and involve large elements of prophecy. They are and should be undertaken only by those directly responsible to the people whose welfare they advance or imperil. They are decisions of a kind for which the judiciary has neither aptitude, facilities or responsibility and which has long been held to belong in the domain of political power not subject to judicial intrusion or inquiry.” Chicago and Southern Airlines v. Waterman Steamship Co., 333 U.S. 103, 111, 68 S.Ct. 431, 436, 92 L.Ed. 568 (1948).

Every one of plaintiffs’ contentions in this litigation is based upon the premise that “the Vatican” or the “Holy See”, with which the exchange of ambassadors has occurred, is essentially a church rather than a state, or, at least, that it is a church-state whose churchly attributes far outweigh its secular attributes. The record provides considerable support for the proposition that the Vatican/Holy See views itself in that light. But this does not mean, of course, that the government of the United States is obliged to regard the Vatican/Holy See as primarily a church rather than a state. Whatever the correct analysis, the authority to conduct it rests with the Executive Branch, not this court.

“What government is to be regarded here as representative of a foreign sovereign state is a political rather than a judicial question, and is to be determined by the political department of the government.” Guaranty Trust Co. v. U.S., 304 U.S. 126, 137, 58 S.Ct. 785, 791, 82 L.Ed. 1224 (1938).

Moreover,

“The authority of the political department is not limited, however, to the determination of the government to be recognized. The President is also empowered to determine the policy to govern the question of recognition. Objections to the President’s determination of the government ‘as well as to the underlying policy’ must be addressed to the political department.” U.S. v. Pink, 315 U.S. 203, 207, 62 S.Ct. 552, 86 L.Ed. 796 (1942).

It is unnecessary to decide whether the Constitution would be violated were the President to establish formal diplomatic relations with a church qua church, and I express no view on that subject. It is enough, for present purposes, to express my firm conclusion that this court is not empowered to pass judgment on the accuracy of the President’s characterization of the nature of the entity with which diplomatic relations are established.

IV. THE AMENDED COMPLAINT

Plaintiffs filed their Complaint in this action on September 19, 1984. The defendants responded with a Motion to Dismiss, and plaintiffs were granted an extension of time for filing their response to the motion.

Although the original Complaint included class-action allegations, plaintiffs’ counsel perceived that there had been inadequate compliance with this Court’s Local Rules pertaining to class actions. Accordingly, on December 20, 1984, plaintiffs filed a motion for leave to amend their Complaint, so as to bring it into compliance with the local rule; at the same time, plaintiffs requested an extension of time for obtaining formal certification of the class action, until after the court had ruled on the pending motion to dismiss. Both applications were granted.

Plaintiffs’ memorandum in opposition to the Motion to Dismiss (119 pages, plus numerous exhibits) was filed January 14, 1985. Reply memoranda, supplemental memoranda, etc., were filed thereafter, and oral argument was scheduled for March 15, 1985, at 9:30 a.m. Late in the afternoon of March 14, 1985, plaintiffs filed their “First Amended Complaint”. In addition to the purely formal amendments the plaintiffs had originally proposed, this document makes numerous substantive changes in plaintiffs’ allegations and claims. It is clear that plaintiffs had the right to file an amended complaint, without obtaining leave of court, since the defendants had moved to dismiss, rather than responding on the merits. On the other hand, after they obtained permission to file a specific amendment to the Complaint, and permitted their adversaries to proceed on the assumption that that was the only change contemplated, plaintiffs’ eleventh-hour amendment falls outside the bounds of acceptable advocacy.

Although, as a result of the substantive changes in plaintiffs’ pleadings, the briefs of all parties are slightly off-target in some respects, I have concluded that the First Amended Complaint does nothing to overcome the plaintiffs’ lack of standing or the non-justiciability of the controversy. Since the Amended Complaint presumably reflects everything the plaintiffs can muster in response to the Motion to Dismiss, no useful purpose would be served in permitting further amendments.

V. CONCLUSION

Plaintiffs’ Complaint and plaintiffs’ First Amended Complaint will be dismissed, with prejudice, on the grounds that (1) plaintiffs lack standing, and (2) the controversy is not justiciable.


author: MATSCH, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. TELECTRONICS PROPRIETARY, LTD. and Telectronics Limited, Defendants and Counterclaim-Plaintiffs, v. UNITED STATES of America and Zimmer U.S.A., Inc., Counterclaim-Defendants.
    Civ. A. No. 80-M-981.
    United States District Court, D. Colorado.
    June 8, 1983.
    Vito J. DiPietro, Thomas J. Scott, Jr., Commercial Litigation Branch, Civ. Div., Dept, of Justice, Washington, D.C., Janis E. Chapman, Asst. U.S. Atty., Denver, Colo., for plaintiff.
    James D. Hinga, Baker & Hostetler, Denver, Colo., for co-plaintiff Zimmer U.S.A., Inc.
    Bruce Klaas, Klaas & Law, Denver, Colo., William C. Nealon, Vice President and Gen. Counsel, Suffield, Conn., Michael I. Rackman, Gottlieb, Rackman & Reisman, P.C., New York City, for defendants and counterclaim-plaintiffs.
   MEMORANDUM OPINION AND ORDER ON PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT

MATSCH, District Judge.

This is a patent infringement action for injunctive relief and damages brought pursuant to 35 U.S.C. §§ 283, 284 and 285. Jurisdiction is found in 28 U.S.C. §§ 1338 and 1345. The defendants have asserted patent misuse as an affirmative defense and counterclaim.

The matter now before this court is the plaintiffs motion for partial summary judgment dismissing that counterclaim and affirmative defense. There are no genuine issues of material fact relevant to the question of whether patent misuse can prevent enforcement of the patent in this action.

The subject patent is for an electronic bone growth stimulation device developed at the University of Pennsylvania under a “patent rights” contract with the Office of Naval Research (“ONR”). The patent, issued to the United States on October 22, 1974, was subsequently licensed to counterclaim-defendant Zimmer U.S.A., Inc. on an exclusive basis. The defendants, in the counterclaim and affirmative defense at issue, challenge the propriety of this exclusive license grant. Specifically, it is contended that Zimmer U.S.A., Inc., in its exclusive license application,. made material misrepresentations concerning product commercialization which, under the ONR licensing regulations, require revocation or cancellation of the exclusive license award. The ONR’s refusal to revoke and pursuit of this infringement action are alleged to constitute such “patent misuse” as to prevent enforcement of the patent.

The equitable doctrine of patent misuse was developed in a series of cases involving “tying” arrangements. In those cases, the Supreme Court held that an owner of a patent could not condition a license upon a requirement that the licensee use unpatented materials or devices. Carbice Corp. v. American Patents Dvp. Corp., 283 U.S. 27, 51 S.Ct. 334, 75 L.Ed. 819 (1931); Morton Salt Co. v. Suppiger Co., 314 U.S. 488, 62 S.Ct. 402, 86 L.Ed. 363 (1942); B.B. Chemical Co. v. Ellis, 314 U.S. 495, 62 S.Ct. 406, 86 L.Ed. 367 (1942); Mercoid Corp. v. Mid-Continent Invest. Co., 320 U.S. 661, 64 S.Ct. 268, 88 L.Ed. 376 (1944). The subsequent extension of the “misuse” doctrine, premised on the equitable maxim of “unclean hands,” has precluded enforcement in a variety of patentee sale and licensing practices. See generally Dellers’ Walker on Patents §§ 646-670 (2d ed. 1973). Although the exact parameters of the doctrine remain indistinct, the policy remains equitable: preventing a patentee from extending the economic effect beyond the legal monopoly involved in the grant of the patent. Dawson Chemical v. Rohm & Haas Co., 448 U.S. 176, 100 S.Ct. 2601, 65 L.Ed.2d 696 (1980); Zenith Radio Corp. v. Hazeltine Research, 395 U.S. 100, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969); Riker Lab., Inc. v. Gist-Brocades N.V., 636 F.2d 772 (D.C.Cir.1980); Panther Pumps & Equipment Co., Inc. v. Hydrocraft, Inc., 468 F.2d 225 (7th Cir.1972), cert. denied, 411 U.S. 965, 93 S.Ct. 2143, 36 L.Ed.2d 685 (1973).

There are no “classic” acts of patent misuse alleged in this case, e.g. (1) requiring the purchase of unpatented goods for use with patented apparatus or processes, (2) prohibiting production or sale of competing goods, or (3) conditioning the granting of a license under one patent upon the acceptance of another and different license. Chisum, Patents § 19.04[3], at p. 19-103 (1982). Misuse of a patent, however, may be inferred from the totality of a licensor’s conduct and business practices. Duplan Corp. v. Deering Milliken, Inc., 444 F.Supp. 648 (D.S.C.1979), rev’d in part on other grounds, 594 F.2d 979 (4th Cir.1979), cert. denied, 444 U.S. 1015, 100 S.Ct. 666, 62 L.Ed.2d 645 (1980); Transitron Electronic Corp. v. Hughes Aircraft Co., 487 F.Supp. 885 (D.Mass.1980), aff'd, 649 F.2d 871 (1st Cir.1981). Thus, some inquiry into the nature of the ONR licensing conduct is required.

In general, a patentee has the untrammeled right to suppress his patent; to exact royalties as high as he can negotiate with the leverage of his monopoly and to select the licensees who will be authorized to practice the patent on an exclusive or nonexclusive basis. See e.g. United States v. Westinghouse Elec. Corp., 648 F.2d 642 (9th Cir.1981); SCM Corp. v. Xerox Corp., 645 F.2d 1195 (2d Cir.1981), cert. denied, 455 U.S. 1016, 102 S.Ct. 1708, 72 L.Ed.2d 132 (1982); LaSalle Street Press v. McCormick & Henderson, Inc., 445 F.2d 84 (7th Cir.1971). See also Bement v. National Harrow, 186 U.S. 70, 22 .S.Ct. 747, 46 L.Ed. 1058 (1902). Indeed, the unilateral right to license, exclusively or otherwise, or to refuse to license at all, reflects the essence of the statutory patent monopoly. Zenith Radio Corp. v. Hazeltine Research, supra, 395 U.S. at 135, 89 S.Ct. at 1582; United States v. Westinghouse Elec. Corp., supra, at 647. It therefore follows that a patentee’s decision to license his patent on an exclusive basis, or to refuse to revoke a license procured fraudulently or for anti-competitive motives, may not, without more, be a defense to the patentee’s infringement action. Such unilateral licensing conduct does no more than employ means “normally and reasonably adapted” to maintain the monopoly under the law. See United States v. General Electric, 272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362 (1926); Hensley Equipment Co. v. ESCO Corp., 383 F.2d 252 (5th Cir.1967).

In the instant action, we are presented with the licensing activities of a government patentee. Thus, extensive regulations addressing, inter alia, the terms, conditions and restrictions on federal licensing grants are implicated. Of immediate consequence are those regulations pertaining to the licensing of government inventions in the custody of the Department of Navy. 32 C.F.R. § 746.1 et seq. Detailed inquiry into the enumerated licensing standards is not necessary to a resolution of the present issue: Can a failure to comply with articulated licensing standards prevent the government from enforcing the patent? The answer is no.

It is true that the regulations express an unequivocal preference for nonexclusive license awards. See 32 C.F.R. §§ 746.2; 746.7. In addition, discretionary revocation authority, premised on material misrepresentations in the license application, is expressly provided. 32 C.F.R. § 746.11(e). However, neither the existence of this regulatory licensing scheme, nor agency actions in contravention of it, implicate the policies supporting the misuse doctrine. Procedural licensing irregularities do not, of themselves, “exploit” or “extend” the scope of the underlying patent monopoly. No enhanced economic effect, or dilution of the market for competing products or processes, results from the government’s action in issuing the exclusive license or from the failure to seek revocation of it. There is no showing that the patentee is using the strength of the patent grant to wield power in the public domain. Thus, the counterclaim and affirmative defense do not, as a matter of law, preclude the plaintiff from proceeding with this action. The claims made against the exclusive licensee for anticompetitive conduct are not involved in this motion for summary judgment.

Upon the foregoing, it is

ORDERED, that a summary judgment in favor of the plaintiff and against the defendants on the second affirmative defense and second counterclaim, ordered filed on November 4, 1982 and they are, accordingly, dismissed as to the plaintiff.


author: SHERMAN G. FINESILVER, Chief Judge:

text:
    K-N ENERGY, INC., Plaintiff, v. GULF INTERSTATE COMPANY, The Appalachian Company, Mark J. Millard, Raja W. Sidawi, Energy Enterprise Overseas, N.V., Westpool Investment Trust, P.L.C. and Shearson/American Express, Inc., Defendants.
    Civ. A. No. 82-F-1881.
    United States District Court, D. Colorado.
    June 30, 1983.

      David Ebel, Davis, Graham & Stubbs, Denver, Colo., Allan Horwich, Shiff, Hardin & Waite, Chicago, Ill., for plaintiff.
    John S. Pfeiffer, Gorsuch, Kirgis, Campbell, Walker & Grover, Denver, Colo., Anthony F. Phillips, Michael Young, Willkie Farr & Gallagher, New York City, for defendants.
   MEMORANDUM OPINION AND ORDER

SHERMAN G. FINESILVER, Chief Judge:

THIS MATTER is before the Court on a complaint for preliminary and permanent injunctive relief, filed by the plaintiff on February 4, 1983. The complaint alleges violations of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a et seq., the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968, and common law fiduciary duties. The violations alleged are all in connection with the purchase of common stock of the plaintiff, K-N Energy, Inc., by the various defendants.

Jurisdiction of the Court is invoked under 15 U.S.C. § 78aa; 15 U.S.C. § 79y; 18 U.S.C. § 1964 and 28 U.S.C. § 1332. Venue is proper as the Court has determined that some of the acts and transactions complained of by the plaintiff took place within the District of Colorado.

On February 24, 1983, the plaintiff filed a Motion for Preliminary Injunction requesting the Court to enjoin the defendants from (a) voting any shares of K-N stock owned by them, in connection with the then upcoming K-N annual meeting of shareholders; (b) soliciting any proxy or consent with respect to K-N stock; (c) exercising or attempting to exercise any influence or control over the business or management of K-N; (d) acquiring any shares of K-N; and (e) continuing their ongoing violations of the Security Exchange Act of 1934 and of the Public Utilities Holding Company Act of 1935. It was agreed by the parties that the hearing on the Motion for Preliminary Injunction as well as a hearing on defendants’ Motion to Dismiss or for Summary Judgment, filed on February 22, 1983, would be consolidated with the trial on the merits of plaintiffs complaint pursuant to Rule 65(a)(2) of the Federal Rules of Civil Procedure.

On March 23, 1983, the trial to the Court commenced. Each side was given an opportunity to summarize their view of the case and to offer exhibits into evidence. This done, the parties then agreed that the matter could be submitted to the Court for a determination based on the briefs of the parties and the exhibits and depositions offered and admitted into evidence. The Court thereafter took the matter under advisement.

We have reviewed the record in this case, the briefs submitted by the parties and the exhibits and deposition excerpts admitted into evidence. After careful consideration, it is our view that defendants’ Motion to Dismiss or for Summary Judgment should be DENIED. Further we have determined that the evidence supports, in part, the plaintiff’s complaint and that the injunctive relief sought by the plaintiff should be GRANTED in part and DENIED in part.

I,

The factual background surrounding this case is not in real dispute. The plaintiff is a Kansas corporation with its principal place of business in Lakewood, State of Colorado. While K-N Energy, Incorporated (K-N) is a diversified energy corporation, a substantial amount of its business is in the retail and wholesale supply and delivery of natural gas to industrial, agricultural, commercial and residential customers in Colorado and surrounding states. At all times relevant to this action, the common stock of K-N has been registered with the Securities and Exchange Commission pursuant to section 12(b) of the Security Exchange Act of 1934 (“1934 Act”), 15 U.S.C. § 781 (b). K-N is also a gas utility company as that term is defined in the Public Utility Holding Company act of 1935 (“1935 Act”), 15 U.S.C. § 79b(a)(4), and is a public utility company as the 1935 Act defines that term, 15 U.S.C. § 79b(a)(5). The plaintiff has substantial holdings in natural gas producing properties in the Rocky Mountain region and in the midwest.

Mr. Thomas Creigh is Chairman of the Board of K-N. Mr. Robert Wilson is the President of K-N. Milton Williams is a former director of K-N.

The defendant, Gulf Interstate Company, is a Delaware corporation with its principal place of business in Houston, Texas. Gulf Interstate Corporation (“Gulf”) is involved in various phases of energy development and supply. Gulf also invests in other energy-related concerns. Dr. C.T. Wells (“Wells”) is the President of Gulf.

The defendant, The Appalachian Company (“TAC”), is a Delaware corporation, with its principal place of business in Worthington, Ohio. Mr. Sy Orlofsky (“Or-lofsky”) is the President of TAC. Wells is a director of TAC. Gulf holds a substantial block of TAC common stock.

The defendant, Raja W. Sidawi (“Si-dawi”), is a citizen of Austria and Syria residing in London, England. Sidawi is the owner individually and in conjunction with defendant Energy Enterprises Overseas, N.V., of a large block of the common stock of Gulf and TAC. Sidawi is a director of Gulf and TAC. Defendant Energy Enterprises Overseas, N.Y. is wholly owned by Sidawi.

The defendant, Westpool Investment Trust P.L.C. (“Westpool”) is an investment holding company with its principal place of business in London, England. Westpool is involved in oil and gas exploration in the United States. Indirectly, Westpool holds a large number of shares of common stock of TAC. The Rayne family holds approximately 37% of the stock of Westpool. Mr. Robert Rayne is a director of TAC.

The defendant, Shearson/American Express, Inc., (“Shearson”), is a New York corporation with its principal place of business in New York City. Shearson is a large stock brokerage and investment banking firm. Shearson has provided Gulf with a substantial amount of investment and financial services since at least 1980. Mr. Mark Wellman (“Wellman”) is a Gulf director. Shearson has also provided financial advice to TAC.

The defendant, Mark J. Millard (“Millard”), is a resident of the State of New York. Millard is a Senior Managing Director of investment banking for and a director of Shearson. Millard is the Chairman of the Board and a director of Gulf and TAC.

Beginning in early 1979, the various defendants, other than Shearson, began purchasing K-N common stock. These purchases continued on and off through the fall of 1982. On October 15, 1982, Gulf and TAC made a joint purchase of 375,000 shares of K-N common stock. On October 25, 1982, the defendants, other than Shear-son, filed a Schedule 13D with the Securities and Exchange Commission. A copy of the Schedule 13D was also provided to K-N. A Schedule 13D must be filed with the Securities and Exchange Commission (“SEC”) and copies provided to the issuer whenever a “person”, as that term is defined by regulations promulgated by the SEC, acquires “beneficial ownership” of more than 5% of a class of equity security registered pursuant to Section 12 of the 1934 Act. See, Section 13(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m(d)(l). The defendants other than Shearson held approximately 8% of the common stock of K-N following the purchase by TAC and Gulf on October 15, 1982. The common stock of K-N is a class of equity security registered under Section 12 of the 1934 Act. Because of the definition of “person” under the statute, 15 U.S.C. § 78m(d)(3), the defendants, other than Shearson, filed a Schedule 13D with the SEC and sent copies to the issuer, K-N.

Certain information must be provided within the Schedule 13D including, inter alia, the names and background of the filing parties, the number of shares beneficially owned by the filing parties and the purpose for which the shares were acquired. The filing defendants responded to each of these queries.

During the time from early 1979 until October of 1982, other entities were purchasing K-N common stock. Alpha Capital Company, a California based investment company run by Mr. William Figara, began acquiring K-N common stock sometime in early 1979. Alpha Capital Company (“Alpha”) has at times owned a significant number of shares of Gulf common stock. Mr. Figara is an acquaintance of both Wells and Millard.

Energy International, N.V. is an offshore investment company. Sometime in 1979 it began to purchase K-N common stock. Shearson had a role in the organization of Energy International N.V. (“Energy International”). Shearson provided investment advice to Energy International. Mr. Millard is one the Advisory Committee of Energy International.

Shearson/American Express is the sole owner of Shearson Asset Management. Shearson Asset Management was formed to service discretionary and advisory accounts established by Shearson Asset Management customers. At various times accounts managed by Shearson Asset Management have contained K-N common stock.

On November 5, 1982, the plaintiff commenced this action by filing the initial complaint. The plaintiff later filed a First Amended Complaint (December 8, 1982) and thereafter a Second Amended and Supplemental Complaint (February 4, 1983). The plaintiff contends that the defendants violated and are continuing to violate Section 13(d) of the 1934 Act by filing an untimely, materially false and misleading Schedule 13D. Plaintiff alleges that additional members of the filing “group” existed that were not revealed in the Schedule 13D filed on October 25, 1982. Plaintiff asserts that when these additional members are considered, together with the K-N common stock they hold, the group held in excess of 5% of the outstanding K-N common stock well before the purchase that took place on October 15, 1982. Thus the filing that took place on October 25, 1982, was untimely and also false in that it failed to reveal the other group members and the numbers of shares of K-N common stock owned beneficially by the additional group members.

In addition, the plaintiff asserts that the Schedule 13D filed on October 25, 1982, is false and misleading in that it fails to disclose the true purpose for which the stock of K-N was acquired by the filing group. Item 4 of Schedule 13D requires the purpose of the acquisition to be revealed. The Schedule 13D filed on October 25, 1982, states that the stock is being held solely as an investment. Plaintiff contends that the defendants and the other group members intend to use the stock they have accumulated to take control of K-N and/or to acquire valuable gas producing properties from K-N. Alternatively, the plaintiff alleges that the group intends to use the stock they hold to obtain representation on the K-N board of directors. Item 4 of the Schedule 13D filed by the defendants, other than Shearson, indicates that certain alternatives were considered by the filing group including acquiring control of K-N, obtaining board representation or attempting to trade their K-N stock for certain assets of K-N. However, the Schedule 13D indicates that these alternatives do not represent the purpose of the filing group “as of this date”. See, Schedule 13D, October 15, 1982, at pg. 15. Plaintiff argues that the evidence shows that these statements do not represent the true purpose behind the acquisition of K-N common stock by the filing group and others.

Plaintiff also alleges that when the putative group members and their holdings of K-N common stock are accounted for, the Schedule 13D fails to disclose that the group may well be in violation of the 1935 Act. Under provisions of the 1935 Act persons holding in excess of 10% of the outstanding equity securities of a public utility company may be deemed to be a public utility holding company and be subject to certain restrictions under the 1935 Act. These restrictions could have an impact on the business activities and opportunities of K-N. The plaintiff asserts that this information was inadequately described in the Schedule 13D filed on October 25, 1982, both because it failed to reveal the true percentage of outstanding K-N common stock held by the group as a whole and because the impact of such holdings was not described.

The plaintiff also maintains that when the total number of shares of K-N common stock held by all group members is tallied together with the value the shares represent, the Schedule 13D is misleading in that it does not disclose that the defendants have failed to register their holdings in conformance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), 15 U.S.C. § 18a(a)-(b). The act requires persons holding in excess of $15 million of the voting securities of a company with assets of $10 million or more, to notify the Federal Trade Commission and the Antitrust Division of the Justice Department and wait a certain number of days before consummating the transaction that puts their holdings at or over the $15 million dollar threshold. Plaintiff asserts that the filing group, together with the additional members of the group (Shear-son/Shearson Asset Management, Alpha, Energy International) have held in excess of $15 million of voting securities of K-N for a period of time and have not notified the FTC or the Justice Department nor have they revealed these omissions in the Schedule 13D.

The plaintiff contends that as a result of these continuing violations of the federal securities laws in conjunction with the acquisition of K-N stock, the defendants have violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq. The RICO statute provides for civil damages to those harmed by the illegal activities covered by the Act. The Act extends to fraud in the sale of securities, 18 U.S.C. § 1961(1)(D). RICO has been applied in civil as well as criminal matters.

Finally, the plaintiff asserts that in using information provided by former K-N employees or persons retained by K-N to provide certain studies, the defendants have facilitated, aided and abetted the breach of fiduciary duties owed to the plaintiff. In early 1979, K-N retained Booz, Allen & Hamilton, a management consulting firm, to do a study of the K-N business operations. Mr. Gerald Thomas (“Thomas”) was the Booz, Allen employee in charge of the K-N study. He later left Booz, Allen and joined Gulf. It is K-N’s contention that during his work at K-N, Thomas acquired confidential information about K-N resource holdings which he later passed on to Gulf. In addition K-N asserts that Gulf received a report from CBW services detailing the oil and gas interests held by K-N. CBW Services is owned by a former K-N executive together with the son of a former K-N director. K-N believes that CBW Services passed on confidential information about K-N to Gulf. This information was acquired by the employees of CBW Services while associated with K-N in a confidential relationship.

This set of facts forms the basis for the present litigation.

II

Because Section 13(d) of the 1934 Act is the focal point in this action, a brief discussion of that section as well as the rules promulgated by the SEC to effectuate the requirements of the section is necessary to provide a framework within which to analyze the claims made by the plaintiff.

Section 13(d) of the 1934 Act, 15 U.S.C. § 78m(d)(l) requires

Any person who after acquiring ... the beneficial ownership of any equity security of a class which is registered pursuant to section 78 1 of this title, ... is ... the beneficial owner of more than 5 per centum of such class shall, within ten days after such acquisition, send to the issuer of the security, ... send to each exchange where the security is traded and file with the Commission, a statement containing such of the following information, and such additional information as the Commission may, by rules and regulations, prescribe as necessary or appropriate in the public interest or for the protection of investors '...

The section then goes on to require that the statement contain, inter alia, the general background of the beneficial owners [§ 78m(d)(l)(A) ], the number of shares held by each beneficial owner [§ 78m(d)(l)(D) ] and the purpose for which the stock in question was acquired [§ 78m(d)(l)(C) ]. The section also requires the filing parties to amend the statement at any time material changes occur in the facts in the statement, 15 U.S.C. § 78m(d)(2). The section also states that when two or more persons act together to acquire the securities the syndicate or group shall be considered a “person” for purposes of the filing requirements, 15 U.S.C. § 78m(d)(3).

The purpose behind Section 13(d) is to alert the marketplace and holders of the security in question to every large rapid aggregation or accumulation of that security, regardless of the technique employed, which might reflect a potential change in corporate control, GAF Corporation v. Milstein, 453 F.2d 709, 717 (2nd Cir., 1971). Without such information investors considering a sale or purchase of the security would not be able to adequately evaluate the relative worth of the security. As the Court of Appeals for the First Circuit has noted

Although such disclosure may greatly affect the internal distribution of corporate- power, Congress was careful to avoid tipping the balance of federal regulation in favor of either-management or those attempting a change in corporate control; the balance was struck in favor of allowing investors to be informed of potential changes in corporate control and permitting the market to value the shares accordingly.

General Aircraft Corp. v. Lampert, 556 F.2d 90, 94 (1st Cir., 1977).

Congress has itself stated that the purpose of Section 13(d) is to provide existing shareholders as well as potential investors with information about a change in ownership and control of the issuer to enable them to make informed investment decision, Jacobs v. Pabst Brewing Co., 549 F.Supp. 1050, 1057 (D.Del., 1982) citing S.Rep. No. 550, 90th Cong. 1st Sess. 7 (1967); H.R.Rep. No. 1711, 90th Cong. 2d Sess. 8, reprinted in [1968] U.S.Code Cong. & Ad.News 2811-2812.

Within Section 13(d) are two subsections of particular importance in the instant case. The statute defines a “person” to include two or more people who are acting together formally or informally to acquire, hold or dispose of the securities of the issuer, 15 U.S.C. § 78m(d)(3). Such a group is a “person” within the meaning of Section 13(d) of the 1934 Act. While the group members must agree to act together in order to fall within the purview of § 78m(d)(3), the agreement need not be formalized, Securities and Exchange Commission v. Savoy Industries, 587 F.2d 1149, 1163 (D.C.Cir., 1978); Corenco v. Schiavone & Sons, 488 F.2d 207 (2nd Cir., 1973).

The statute also dictates that within the Schedule 13D filed by an individual or group, the purpose behind their acquisition of the issuer’s securities must be revealed, 15 U.S.C. § 78m(d)(l)(C). Specifically, the statute, as amplified by the rules promulgated by the SEC, require the filing individual or group to reveal any intent to acquire control of the issuer. Further, the filing group must reveal any plan to acquire the assets of the issuer or any intent to change the make up of the board of directors or the management of the issuer, § 78m(d)(l)(C), Securities and Exchange Commission Regulation 13D, 17 C.F.R. § 240.13d-101, at 110.

Section 13(d) of the 1934 Act applies only to those “beneficial owners” of more than 5% of the issuer’s outstanding stock. The SEC has defined a “beneficial owner” as including those who have

(1) Voting power which includes the power to vote, or to direct the voting of, such security; and/or,
(2) Investment power which includes the power to dispose, or to direct the disposition of such security.

SEC Regulation 13D, 17 C.F.R. § 240.13d-3(a)(l)(2), (1982).

SEC Regulations indicate that the power to vote or to dispose of the security may be held directly or indirectly “through any contract, arrangement, understanding, relationship or otherwise.” SEC Regulation 13D, 17 C.F.R. § 240.13d-3(a), (1982). With this general framework in mind we turn to the substantive claims of the respective parties in this action.

III.

Initially, defendants contend that the plaintiff, as the issuer of the stock in question, lacks the requisite standing to bring a claim for violation of Section 13(d) of the 1934 Act. It is the position of the defendants that the statute does not imply a private cause of action for injunctive relief in favor of the issuing corporation. We cannot agree. The defendants have cited the Court to several opinions from other federal district courts which have determined that the issuer of a security may not bring an action under Section 13(d) of the 1934 Act, Holly Sugar Company v. Buschbaum, [1981-82 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 98,366 (D.Colo., 1981); Liberty Nat’l Ins. Co. v. Charter Co., [1982 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 98,797 (N.D.Ala., 1982); First Alabama Bancshares, Inc. v. Lowder, [1981 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 198,015 (N.D.Ala., 1981); American Bakeries Co. v. Pro-Met Trading Co., [1981 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 97,925 (N.D.Ill., 1981); Gateway Industries, Inc. v. Agency Rent-A-Car, Inc., 495 F.Supp. 92 (N.D.Ill., 1980); Sta-Rite Industries v. Nortek, Inc., 494 F.Supp. 358 (E.D.Wis., 1980).

We have reviewed these cases and, while each raises certain questions in regard to the standing of an issuer under Section 13(d) of the 1934 Act, we decline to follow them. The Court is more persuaded by the opinions of various circuit court opinions which have addressed the issue and determined that an issuer does have standing under Section 13(d), at least where injunc-tive relief is sought in an effort to correct a false or misleading Schedule 13D. Treadway Companies, Inc. v. Care Corp., 638 F.2d 357 (2d Cir., 1980); Dan River, Inc. v. Unitex Ltd., 624 F.2d 1216 (4th Cir., 1980), cert. denied, 449 U.S. 1101, 101 S.Ct. 896, 66 L.Ed.2d 827 (1981); Chromalloy American Corp. v. Sun Chemical Corp., 611 F.2d 240 (8th Cir., 1979). In other circuit court cases issuer standing under Section 13(d) has been acknowledged implicitly, Wellman v. Dickinson, 682 F.2d 355 (2d Cir., 1982); Corenco Corp. v. Schiavone & Sons, Inc., 488 F.2d 207 (2d Cir., 1973); Bath Industries v. Blot, 427 F.2d 97 (7th Cir., 1970). While issuers should not be permitted to use Section 13(d) as a weapon to discourage takeover bids or to prevent large accumulations of stock which would facilitate a takeover bid, we are of the view that, in many cases, the issuer is in the best position to review a Schedule 13D and to detect errors and/or omissions therein. Where the issuer has been permitted to bring an action under the section, it has been viewed as a step taken on behalf of existing shareholders and potential investors. In many instances the issuer will be in the best position to spot errors or omissions within a Schedule 13D and thereafter see to it that the Schedule is corrected. The purpose behind Section 13(d) would be substantially frustrated if corporate issuers were precluded from seeking injunc-tive relief where an error or omission is detected in a Schedule 13D. We find that the issuer in this case, K-N Energy, has standing to sue for injunctive relief under Section 13(d) of the 1934 Act.

IV.

Plaintiff alleges that the Schedule 13D filed by the defendants (other than Shear-son) on October 25, 1982, as amended on January 7, 1983, is false and misleading in that it fails to disclose all the members of the group and the total number of shares of K-N common stock held by the group. Associated with this allegation is the claim, made by the plaintiff, that the Schedule 13D filed on October 25, 1982, was untimely because the group including the additional members reached the five percent level at a time well before October 15, 1982; the date Gulf and TAC made the purchase of 375,000 shares of K-N common stock.

The contentions of K-N Energy hinge on a showing that additional entities holding K-N common stock should have been included as group members along with those who ultimately filed the Schedule 13D. The entities in question are: (1) Shearson-American Express/Shearson Asset Management; (2) Energy International, N.V. and (3) Alpha Capital Company. A brief background sketch of each of these entities has been given above. We now examine the connections and interrelationships between these putative group members and the members of the filing group as listed in the Schedule 13D filed on October 25, 1982.

A.

As discussed above, Shearson Asset Management is a wholly owned subsidiary of Shearson/American Express. Many of the officers and directors of Shear-son/American Express are also officers and/or directors of Shearson Asset Management. The two entities also share in investment research done by analysts with each separate entity.

Shearson Asset Management provides advice to and manages the accounts of customers who place money in either discretionary or advisory accounts with Shear-son Asset Management. Discretionary account holders authorize Shearson Asset Management portfolio managers to buy and sell securities held in the customer’s account without prior customer authorization. Hence, the name “discretionary” account. Advisory accounts are just that, advisory. The customer receives investment advice from the portfolio manager assigned to that account, but no trading may be done without the customer’s prior approval. As part of the service provided by Shearson Asset Management, a list of approved investments is regularly developed by the portfolio managers. This list is used as a guide to investments made in customer accounts. K-N Energy common stock has never been on the approved list. Some K-N Energy stock has been held in various client accounts at times relevant to this dispute. While the number of shares is the subject of some disagreement, the holdings in customer accounts (other than the advisory account of Energy International, N.V.) totaled something less than 15,000 shares at all times relevant to this case. Energy International holds approximately 140,000 shares of K-N stock in its advisory account with Shearson Asset Management. That amount may have been larger at times prior to the filing of the Schedule 13D in October of 1982. It is uncontroverted that Shearson Asset Management itself holds no K-N common stock for its own use and benefit.

By the definition of “beneficial owner” outlined earlier, it appears that Shear-son Asset Management might well be deemed to be the beneficial owner of the K-N common stock held in the discretionary accounts of its customers. A beneficial owner includes those who have the power to buy or sell the security in question, SEC Regulation 13D, 17 C.F.R. § 240.13d-3(a)(2), (1982). However, the plaintiff asserts that all K-N common stock held by Shearson Asset Management in any manner should have been included within the Schedule 13D because Shearson Asset Management and/or Shearson-American Express were and continue to be group members with control over all the K-N common stock held in customer accounts.

Plaintiff bases this assertion on the relationship between Shearson American Express and the filing group members. Shearson provides investment services and advice to TAC and Gulf. One of Shear-son’s most senior officers and directors is Mr. Millard, an acknowledged group member. Plaintiff maintains that there is enough evidence to show that Shearson had agreed to be a member of the group and acquire K-N stock. Plaintiff believes that the close ties between Shearson and Shear-son Asset Management justify a determination that Shearson is the beneficial owner of the shares of K-N common stock held in customer accounts by Shearson Asset Management. We have reviewed the evidence presented by the plaintiff and we have determined that it fails to prove that Shearson or Shearson Asset Management should be included as group members for purposes of Section 13(d) of the 1934 Act.

The evidence outlining the contacts between Shearson and the various members of the group which filed the Schedule 13D merely establishes that a relationship existed between Shearson and TAC, Gulf, Si-dawi and Millard. However, as the plaintiff acknowledges, relationships alone are not enough to show an agreement to act in concert sufficient to indicate group membership, Securities and Exchange Commission v. Savoy Industries, 587 F.2d 1149, 1166 (D.C.Cir., 1978); Texasgulf, Inc. v. Canada Development Corp., 366 F.Supp. 374 (S.D.Tex., 1973). While an agreement to act in concert need not be in writing or in any other way formalized, there must be evidence that indicates an intention to act in concert over and above the prior and continuing relationships between the various parties, Wellman, supra; Corenco, supra. Although the plaintiff has outlined in great detail the ongoing relationship between Shearson on the one hand and the various group members on the other, on close examination there is no evidence beyond these relationships indicative of an agreement to act in concert vis a vis the purchase of K-N common stock.

Under different circumstances it might be possible to say that the shares of K-N common stock held by Shearson Asset Management are attributable to the group because Mr. Millard, an acknowledged group member has control over the disposition of those shares. In Wellman, supra, the district court found that an advisor to various clients with discretionary accounts held such control over the other advisors that it in fact retained beneficial ownership of the shares in dispute. Because that advisor was also involved in a bid to acquire a substantial block of the target corporation’s stock, the shares held in the discretionary accounts were attributed to the group the advisor was working with. The Court of Appeals for the Second Circuit upheld this determination, Wellman, supra, at 363-365. In Wellman, however, the Court had before it the testimony of the other directors of the discretionary accounts who stated that they would follow without question the advice of the advisor involved in the group effort. The advisor, Eberstadt M & D, was held to be the beneficial owner of the stock because it had the power to invest the shares held in various discretionary accounts and mutual funds.

In the case before us, such additional evidence is lacking. The plaintiff would have use find that every share of K-N common stock held in any way by Shearson Asset Management was attributable to Mr. Millard simply because of his involvement with the filing group and his position within the Shearson/American Express hierarchy. Balanced against this is the testimony of Mr. Raimondo, treasurer, corporate vice-president and director of Shearson Asset Management. His testimony, essentially unrefuted by the plaintiff, indicates how little control Mr. Millard has over the investment decisions of the portfolio managers servicing the discretionary and advisory accounts of Shearson Asset Management customers. Plaintiff has failed to prove to our satisfaction that Shearson or Shearson Asset Management are members of a group that agreed to act in concert in acquiring K-N common stock. Moreover, plaintiff has failed to show that the stock of K-N held indirectly by Shearson or Shearson Asset Management should be attributed to Mr. Millard as beneficial owner. Under these circumstances it is unnecessary to determine whether the shares held in advisory accounts could, under any circumstances, be “beneficially” owned either by Shearson or Mr. Millard. It is also unnecessary to determine whether Shear-son, absent beneficial ownership of any K-N common stock, could still be held to be a group member. This would still require evidence of an agreement between Shearson and the acknowledged group members to acquire or hold K-N common stock. There is no evidence of such an agreement beyond the ongoing relationships between the parties and we have determined that, in this case, such evidence alone is insufficient to find group membership on the part of Shearson.

B.

Plaintiff also argues that Energy International, N.V. should be deemed to be a group member and the shares of K-N common stock held by Energy International added to the total group holdings. Again, we cannot agree. Plaintiff’s position with regard to Energy International rests primarily on the role of Mr. Millard as an investment advisor to Energy International together with the fact that Shearson Asset Management is one of the three members of the Board of Management of Energy International. Having determined that Shearson Asset Management is not a group member its involvement with Energy International is of less importance. Mr. Millard provided advice to Energy International on investment matters. However, he was only one of twenty-seven such advisors on Energy International’s advisory committee. The affidavit of Mr. Richard Oliver Bernays, a director of one of the two investment managers of Energy International, indicates that Mr. Millard did not have the power to control the investment decisions for Energy International. At best the evidence in regard to Mr. Millard is inconclusive on the issue of Energy International’s membership in a group acquiring K-N common stock.

Plaintiff also points out that during the time from early 1979 until the fall of 1982 Energy International made purchases at points in time parallel to the purchases by other group members. The time periods mentioned, however, are not in terms of purchases made on the same day or even during the same week. Instead, plaintiff states that Energy International made purchases of K-N stock during the “Spring” of 1979 at the same time as other group members purchases shares of K-N common stock. Again in “July and August of 1980”, Energy International made purchases as did other group members. While evidence of parallel purchasing may evidence an agreement to act in concert, we are of the view that such parallel purchasing, to be persuasive, would have to involve relatively large amounts of stock purchased over a short period of time; something absent from the facts of this case. Indeed, it is interesting to note that the plaintiff mentions no purchases of K-N stock by Energy International after August of 1980. Presumably any parallel activity ceased after that time. Therefore, the plaintiff would have us refer back to purchases made over two years before this action was commenced as evidence of some agreement that continues to date.

Finally, the plaintiff calls the our attention to the fact that certain members of the filing group received information about the holdings of Energy International from Mr. Millard. However, this information traveled in one direction — from Mr. Millard to the other filing group members. At no time does it appear that Energy International inquired about the holdings of the others. Such information sharing may suggest that Mr. Millard hoped that Energy International would throw its support behind any actions taken by the others, but it provides no indication that Energy International agreed to do so. We have already stated that Mr. Millard did not have the power to acquire K-N common stock on behalf of Energy International nor did he have the authority to commit the K-N stock held by Energy International to any long term plan. Accordingly, the fact that Mr. Millard shared certain information with other members of the filing group provides little support for the argument that Energy International was also a group member. The plaintiff has failed to satisfy its burden of showing that Energy International agreed to act in concert with others to acquire K-N common stock.

C.

Plaintiff also contends that Alpha Capital Company was an additional member of the group whose identity and holdings in K-N common stock should have been included within the Schedule 13D filed on October 25, 1982. Plaintiffs claim is based in part on evidence of information sharing between Alpha, by way of its president, Mr. Figara, and Mr. Wells of Gulf and Mr. Millard. In addition, TAC, Gulf and Alpha shared the cost of a report done on K-N’s gas reserves. However, it must also be noted that Alpha was the holder of approximately 7% of Gulfs common stock at or about the time that the report was done and the information exchanged. Certainly, the evidence suggests that Alpha may have been involved in some plan regarding K-N. However, the evidence would also support a finding that the information was shared because each knew of the other’s investment in K-N as well as the fact that Alpha was a large shareholder of Gulf commons stock. The information provided Alpha and the information Alpha provided in return might simply have reflected this relationship unrelated to any group activity. That evidence alone is insufficient to support a determination that Alpha Capital was a member of a group acting in concert to acquire K-N common stock.

V.

Plaintiff maintains that the Schedule 13D filed on October 25, 1982, was false and misleading in that it failed to disclose the true purpose behind the acquisition of the K-N common stock by the filing group members. We are of the view that the evidence before us supports the plaintiffs contention.

As outlined above, 15 U.S.C. § 78m(d)(l)(C) requires the party filing a Schedule 13D to reveal the purpose for which the stock in question has been purchased. The regulations promulgated by the SEC go on to outline this requirement in greater detail, SEC Regulation 13D, 17 C.F.R. § 240.13d-101, (1982). As recent case law has made clear, the purpose behind the acquisition of the stock must be revealed even if there is no present plan to implement that purpose or if such a plan is less than definite, Dan River, Inc. v. Unitex Limited, 624 F.2d 1216 (4th Cir., 1980); Chromalloy American Corp. v. Sun Chemical Corp., 611 F.2d 240 (8th Cir., 1979); Kirsch Co. v. Bliss & Laughlin Industries, Inc., 495 F.Supp. 488 (W.D.Mich., 1980).

In the instant case, the Schedule 13D filed on October 25,1982, indicates that the stated purpose behind the acquisition of K-N stock by the filing group is investment only. Item 4 of the Schedule 13D also provides information on other courses of action that were considered in the past, but were not finally decided on or put into action. On the other hand, the plaintiff has presented evidence which indicates that the purpose (or purposes) behind the aequisition of the K-N common stock is something other than simply an investment.

A report dated August 11, 1980, indicates that Mr. Orlofsky, president of TAC, was at that time preparing for a proxy fight among K-N shareholders in an attempt to replace one or more of the K-N directors. The depositions of Mr. Millard and Mr. Orlofsky show that steps were initiated to acquire financing for a tender offer to K-N shareholders by members of the filing group. This effort continued as late as early September of 1982, less than two months before the Schedule 13D was filed. The depositions also reveal that the planned tender offer fell apart because the financing was unavailable and not because of any second thoughts as to the advisability of the tender offer.

Further, the evidence presented shows that ,Dr. Wells, the president of Gulf, contacted a former K-N director in an effort to determine how best to gain representation on the board of directors of K-N Energy. The precise date of this meeting is in dispute, but the undisputed fact is that such an effort was made by an agent of one of the filing group members. The defendants point out that Dr. Wells sought information on how best to convince the existing K-N management to willingly provide the group Dr. Wells represented with board representation; i.e., Dr. Wells wanted an “invitation” from the existing board members as well as management. While that may well have been the case, the fact remains that the filing group, shortly before or shortly after they reached the 5% plateau, took steps towards making a change in the representation on the board of directors of the issuer.

Finally, the documents turned over to the plaintiff pursuant to our Order entered on March 23, 1983, indicate that the filing group had a purpose or purposes beyond investment in acquiring a substantial block of K-N common stock. In a memorandum to Mr. Orlofsky from Mr. Millard, dated June 21, 1982, several alternatives in regard to K-N are discussed including gaining control, acquiring board representation and trading the stock held by the group for certain gas producing properties held by K-N Energy. Nowhere in that document is the possibility of holding K-N common stock solely as an investment discussed. In addition, certain draft Schedule 13D’s were turned over to the plaintiff following our March 23, 1983, Order. A draft dated October 15, 1982, the date of the purchase which put the group over the 5% level of ownership, states in Item 4 that the purpose of the group was to “seek some measure of influence on and ownership of Kansas-Nebraská”. That draft goes on to list the possible courses of action or plans to effectuate that purpose. None of the alternatives raised include holding the K-N common stock as simply an equity investment.

We are- of the view that the explanation described in Item 4 of this draft Schedule 13D is more indicative of the group’s purpose than that described in the Schedule 13D that was ultimately filed by the group October 25, 1982. While each item of evidence discussed above may not, in itself, indicate a contrary purpose on the part of the filing group, the cumulative effect provides a clear indication that the K-N common stock was not being held simply as an investment. A person or group filing a Schedule 13D may not use “investment” as a catch-all purpose when the plans for implementing another purpose or purposes are indefinite or undeveloped. To do so would frustrate the intent behind Section 13(d) of the 1934 Act. While disclosures overstating the certainty of plans may be as misleading as the failure to adequately disclose the full scope of such plans, that is not a justification for indicating a purpose that in fact is not under consideration by the filing group. See, Chromalloy American Corp., supra, at 247. Section 13(d) of the 1934 Act requires the filing party to reveal any purpose tending towards obtaining control of the issuer, 15 U.S.C. § 78m(d)(1)(C). The SEC rules in turn define “control” to include

[T]he possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.

SEC Regulation 12B, 17 C.F.R. § 240.12b-2, (1982); made applicable to Section 13(d) of the 1934 Act by 17 C.F.R. § 240.12b-1, (1982).

This definition of control closely resembles what we believe was and is the overall purpose behind the acquisition of K-N common stock by the filing group members; the desire to influence the management and policies of K-N Energy. The Schedule 13D filed on October 25, 1982, as amended on January 7, 1983, is false and misleading in its failure to outline the true purpose behind the acquisition of the common stock of the plaintiff. Further, the Schedule 13D should have given some indication that steps were taken by various group members to gain influence over the affairs of K-N Energy at times shortly before the filing of the Schedule 13D. To say that certain courses of action have been considered in the past without indicating the steps taken or their relative proximity to the date the Schedule 13D was filed was also misleading.

VI.

Plaintiff has also alleged that the Schedule 13D filed on October 25, 1982, is false and misleading in that it fails to disclose violations of the Public Utilities Holding Company Act of 1935, 15 U.S.C. § 79a, et seq., and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a(a)-(b). Because we have determined that the group does not include additional members holding shares of K-N common stock, these claims are largely resolved. Each of these claims hinged on a determination that the group held more stock than that revealed in October 25, 1982, Schedule 13D. The evidence presented does not support such a contention.

However, the statement in the Schedule 13D which described the possible impact of the 1935 Act on K-N as a result of the group’s holdings is insufficient for another reason. The statute provides that the SEC may determine that a “person” is covered by the 1935 Act even if that person holds less than 10% of the voting securities of a public utility provided the Commission determines that the person

[D]irectly or indirectly (either alone or pursuant to an arrangement or understanding with one or more persons) exercise such a controlling influence over the management or policies of the public utility ... as to make it necessary in the public interest or for the protection of investors or consumers that such person be subject to the obligations, duties, and liabilities imposed by this chapter upon holding companies.

15 U.S.C. § 79b(a)(7)(B).

Because of the purpose behind the acquisition of K-N stock by the filing group, it is possible that the SEC, pursuant to this statutory section, might find the group to be a “holding company” within the meaning of the 1935 Act and subject to the obligations, duties and liabilities imposed by the 1935 Act. This possibility and the consequences of such a determination should have been revealed in the Schedule 13D filed by the group on October 25,1982.

VII.

Finally, the plaintiff alleges that the defendants have failed to reveal violations of common law fiduciary duties, as well as violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968. We find no evidence to support either of these claims.

The claim of violations of common law fiduciary duties is based entirely on the fact that various members of the filing group received information regarding K-N from former K-N employees. The plaintiff has done no more than allege that the information that was received was confidential and that those who passed the information were in a continuing fiduciary relationship with the plaintiff. However, there is simply no evidence to support these bare allegations.

Similarly, there is no evidence before us to support the claim that the defendants violated the RICO Act during the acquisition of the common stock of K-N. Specifically, the plaintiff has failed to show two related instances of fraudulent activity sufficient to suggest a pattern of racketeering activity. In addition, there is a question whether the RICO Act should be applied in cases where a remedy is provided by pre-existing federal securities laws. As one Court has noted

While RICO utilizes and sometimes expands upon offenses designated as racketeering activities, there is no evidence that it was meant to pre-empt or supplement the remedies already provided by those statutes which define a predicate RICO offense.

Harper v. New Japan Securities International, Inc., 545 F.Supp. 1002, 1007 (C.D.Cal., 1982)

RICO should not be applied in such a way as to encompass every possible fraudulent activity, Noland v. Gurley, Merrill Lynch Pierce Fenner & Smith, Inc. and E.F. Hutton & Company, 566 F.Supp. 210 (D.Colo.1983).

VIII.

The defendants contend that any equitable relief sought by the plaintiff should be denied because of plaintiffs “unclean hands”. The purpose of Section 13(d) of the 1934 Act is not to protect the existing management of the issuer, but to provide material information to the shareholders of the issuer as well as to potential investors and the market as a whole. The fact that management may have withheld information from the public does not negate the necessity that a Schedule 13D provide the information required by the statute.

To bar equitable relief on the grounds that management has also acted improperly would ignore the rights of the true party in interest and add to the information withheld from investors and shareholders. While existing management may have ulterior motives in seeking injunctive relief for alleged violations of Section 13(d), such relief will be granted only to protect shareholders and the investing public from irreparable harm that results when the Section is violated. The alleged “unclean hands” on the part of the plaintiff is not a bar to the injunctive relief sought in this case. We reject this contention of defendants.

CONCLUSION

We have determined that the Schedule 13D filed jointly by Gulf Interstate Company, The Applachian Company, Mark J. Millard, Raja W. Sidawi, Energy Enterprise Overseas, N.V. and Westpool Investment Trust, P.L.C., on October 25, 1982, as amended on January 7, 1983, is false and misleading. It is not in compliance with the requirements set forth in Section 13(d) of the 1934 Act. The Schedule 13D fails to provide a clear statement of the purpose(s) behind the acquisition of more than 5% of the outstanding common stock of the plaintiff, K-N Energy. Further, the Schedule 13D fails to provide sufficient information in regard to the impact of the filing group’s purpose on the applicability of the 1935 Act to the operations of K-N Energy.

We have also determined that the shareholders of K-N Energy as well as the investing public have suffered and will continue to suffer irreparable injury until a true and correct Schedule 13D is filed with the Securities and Exchange Commission and with the issuer, K-N Energy.

ORDER

The Court has determined that there are genuine issues of material fact presented by this case and, accordingly, defendants’ Motion for Summary Judgment is DENIED. Further, because we have found that an issuer has standing to sue under Section 13(d) of the 1934 Securities Exchange Act, the defendants’ Motion to Dismiss is also DENIED.

The plaintiff has failed to prove its claim as against the defendant, Shearson/Ameri-can Express. Accordingly, as to that defendant the Clerk of the Court is DIRECTED to enter Judgment in favor of Shear-son/American Express and against the plaintiff, K-N Energy, Inc.

Further, the Court finds that the remaining defendants, specifically Gulf Interstate Company, The Appalachian Company, Mark J. Millard, Raja W. Sidawi, Energy Enterprises Overseas, N.V., and Westpool Investment Trust, P.L.C., (the so-called “filing group”), have violated Section 13(d) of the 1934 Securities Exchange Act. The Schedule 13D filed by the group on October 25, 1982, was false and misleading in failing to divulge the true purpose behind the acquisition of the common stock of K-N Energy, Inc. Further the filing group failed to adequately describe the impact that the true purpose might have on the applicability of the Public Utility Holding Company Act of 1935 to the operations of K-N Energy, Inc. Accordingly, it is ORDERED that the members of the filing group, together with their agents, servants, employees and all other persons acting on their behalf, directly or indirectly, are PERMANENTLY ENJOINED from:

1. Acquiring or attempting to acquire any shares of K-N Energy, Inc.;
2. Soliciting any proxy, consent or authorization with respect to K-N Energy, Inc. stock; and
3. Making or attempting to make any tender, offer or request or invitation for tenders of any K-N Energy, Inc. stock.

This ORDER shall remain in effect until thirty (30) days after the date a true and correct Schedule 13D is filed with the Securities and Exchange Commission, as well as with the issuer, K-N Energy, Inc. To the extent described above the plaintiffs request for permanent injunctive relief is GRANTED. To the extent the plaintiff, K-N Energy, Inc., seeks injunctive relief beyond that described above, that request is DENIED.

The Clerk of the Court is DIRECTED to enter judgment in favor of the plaintiff and against the defendants, Gulf Interstate Company, The Appalachian Company, Mark J. Millard, Raja W. Sidawi, Energy Enterprises, N.V., and Westpool Investment Trust, P.L.C., on Count II of the plaintiffs Second Amended and Supplemental Complaint. On Counts I, III, IV and V, the Clerk of the Court is DIRECTED to enter judgment in favor of the defendants and against the plaintiff, K-N Energy, Inc.

The foregoing constitutes this Court’s Findings of Fact and Conclusions of Law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. Each party to bear their own costs.

      . These terms and concepts will be discussed later in the opinion.

      . Id.

      . Id.

      . In Holly Sugar Company, Judge Jim Carrigan of this Court determined that the issuer "probably” did not have standing under Section 13(d). However, the matter was not resolved with finality.

      . Similarly, we find no evidence to support a determination that the so-called "Annex B" individuals should be considered group members for purposes of Section 13(d) of the 1934 Act.