author: ALLEN SHARP, Chief Judge.

text:
    Mary VOORS, Kevin Saylor & Wanda Saylor, Plaintiffs, v. NATIONAL WOMEN’S HEALTH ORGANIZATION, INC.; Fort Wayne Women’s Health Organization, Inc.; Y & S Management Corporation; Medical Management of Fort Wayne, Inc.; Mary E. Collins; Susan Hill; Joan E. Uebelhoer, Defendants.
    No. F 83-354.
    United States District Court, N.D. Indiana, Fort Wayne Division.
    June 17, 1985.

      Edward L. Murphy, Jr., Fort Wayne, Ind., for plaintiffs.

      Allan M. Pollack, Glass & Howard, P.C., New York City, and Arnold H. Duemling, Fort Wayne, Ind., for defendants.
   MEMORANDUM and ORDER

ALLEN SHARP, Chief Judge.

I.

This action was originally brought in the Allen Superior Court in the State of Indiana and was subsequently removed to this court by the defendants, National Women’s Health Organization, Inc. [NWHO], Fort Wayne Women’s Health Organization, Inc. [FWWHO], Y & S Management Corp. [Y & S], Medical Management of Fort Wayne, Inc. [MMFW], Mary E. Collins, Susan Hill, and Joan Uebelhoer on October 27, 1983 pursuant to 28 U.S.C. § 1441 [a] and [b]. Thereafter, on November 4, 1983, the defendants filed with this court an amended petition for removal alleging as an additional ground for removal 28 U.S.C. § 1441[c]. Plaintiffs, Mary Voors, Kevin Saylor and Wanda Saylor, filed a motion to remand this case to the Allen Superior Court on November 22, 1983. For the reasons set forth below, the motion to remand of plaintiffs is granted.

Plaintiffs’ complaint contains six counts. In counts I and II, plaintiff, Kevin Saylor, seeks damages against defendants, NWHO, FWWHO, Y & S, MMFW, Mary E. Collins and Susan Hill for injury and impairment to his name and reputation, humiliation and mental anguish, loss of love, affection and care of his wife and attorney fees resulting from abuse of process and malicious prosecution. Similarly, plaintiff, Wanda Saylor, seeks damages against the same defendants for injury and impairment to her name and reputation, humiliation and mental anguish, loss of love, affection, and care of her husband and attorney fees resulting from abuse of process and malicious prosecution in counts III and IV. In counts V and VI, plaintiff, Mary Voors, seeks damages against defendants, NWHO, FWWHO, Y & S, MMFW, Mary E. Collins, Susan Hill and Joan E. Uebelhoer for injury and impairment of her good name and reputation, humiliation and mental anguish, attorney fees and medical expenses resulting from abuse of process and malicious prosecution on the part of the defendants. In general, each count in the complaint depends upon the defendants’ acts of initiating, causing to be initiated, procuring, or voluntarily participating in the action filed in the United States District Court for the Northern District of Indiana, Fort Wayne Division, Cause No. F 79-9.

II.

The right of removal from a state court to a federal court exists only in certain enumerated classes of actions, and in order to exercise the right to removal, it is essential that the case be shown to be one within one of those classes. Chesapeake & Ohio Railway Co. v. Cockrell, 232 U.S. 146, 151, 34 S.Ct. 278, 279, 58 L.Ed. 544 [1914]; Strange v. Arkansas Oklahoma Gas Corp., 534 F.Supp. 138, 139 [W.D.Ark.1981], The burden of proving subject matter jurisdiction rests upon the parties seeking removal. Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 37, 66 L.Ed. 144 [1921]; Jones v. General Tire & Rubber Co., 541 F.2d 660, 664 [7th Cir.1976]. The right of removal is a congressionally imposed infringement on a state court’s power to determine controversies, and, therefore, the removal statutes must be strictly construed. Shamrock Oil & Gas Co. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 872-73, 85 L.Ed. 1214 [1941]. Moreover, courts should resolve any doubt regarding jurisdiction in favor of state court jurisdiction. Jones v. General Tire & Rubber Co., 541 F.2d at 664.

Defendants have purported to remove this case to this court under the provisions of 28 U.S.C. § 1441[a], [b] and [c] which provide as follows:

[a] Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.
[b] Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.
[c] Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction.

A.

In paragraph 4 of the defendants’ amended petition for removal, defendants allege that this court has subject matter jurisdiction of this action on the ground that the plaintiffs’ complaint presents a federal question. Specifically, defendants contend that each of counts I, III and IV contains two paragraphs concerning abridgment of First and Sixth Amendment rights. They point out that plaintiffs claim in their complaint that legal action was initiated by the defendants to prevent the plaintiffs from exercising their rights to free speech and assembly guaranteed by the First and Sixth Amendment to the Constitution. In addition, plaintiffs’ complaint also claims that the actions of defendants were part of a continuing course of conduct in an attempt to harass and prevent the plaintiffs from exercising their rights to free speech and assembly guaranteed by the First and Sixth Amendments.

In the leading case on this issue, Gully v. First National Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 [1936], the Supreme Court of the United States stated the following test to be applied in determining whether a federal question is presented by the complaint:

To bring a case within the statute, a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff’s cause of action. The right or immunity must be such that it will be supported if the Constitution or laws of the United States are given one construction or effect, and defeated if they receive another. A genuine and present controversy, not merely a possible or conjectural one, must exist with reference thereto, and the controversy must be disclosed upon the face of the complaint, unaided by the answer or by the petition for removal. [Citations omitted.] Id. at 112-13, 57 S.Ct. at 97-98.

See also Oglesby v. RCA Corporation, 752 F.2d 272, 275 [7th Cir.1985],

The plaintiffs’ suit does not involve an action against the defendant for the abridgement of their constitutional rights of free speech and assembly, but rather for abuse of process and malicious prosecution. While it is true that plaintiffs’ complaint contains allegations of constitutional violations, those allegations state the defendants’ wrongful purpose in initiating the underlying action against the plaintiffs. In order to state a claim for relief for abuse of process under Indiana law, the plaintiff must allege, that by filing the underlying suit, the defendants caused a “misuse or misapplication of process, for an end other than that for which it was designed or intended.” Display Fixtures Co. v. R.L. Hatcher, Inc., Ind.App. 438 N.E.2d 26, 31 [1982]. Thus, if the rights of free speech and assembly are issues at all in this case, their infringment is a proximate result of defendants’ tortions acts.

The “wrong” complained of in this case is defendants’ acts of initiating or causing the initiation of a law suit for a purpose other than that for which it was intended. The fact that defendants may assert, as a matter of defense, that preventing the plaintiffs from exercising their right of free speech and assembly was a valid purpose for filing the lawsuit, is not material to the question under what law the suit is brought. As the Supreme Court stated in Gully, supra.:

Not every question of federal law emerging in a suit is proof that a federal law is the basis of the suit____
The most one can say is that a question of federal law is lurking in the background, just as farther in the background there lurks a question of constitutional law, the question of state power in our federal form of government. A dispute so doubtful and conjectural, so far removed from plain necessity, is unavailing to extinguish the jurisdiction of the states. 299 U.S. at 115, 117, 57 S.Ct. at 98, 100.

The plaintiffs’ cause of action in this case for abuse of process is based upon, and originates in, the law of Indiana.

Further, defendants also attempt to transform this action into a federal question by alleging that since the court process alleged to have been abused in this case is the federal court process, whether there has been an abuse of federal court process is a federal question. Defendants cite Nationwide Charters and Conventions, Inc. v. Garber, 254 F.Supp. 85 [D.Mass.1966] [citing Rury v. Gandy, 12 F.2d 620 [E.D.Wash.1926]; Eighmy v. Poucher, 83 Fed. 855 [C.C.N.D.N.Y.1898]; Hurst v. Cobb, 61 Fed. 1 [C.C.N.D.Tex.1894] in support of their position.

The Supreme Court of the United States has observed generally that “Congress has not ... left to federal courts the creation of a federal common law for abuse of process.” Eastern Industries, Inc. v. Joseph Ciccone & Sons, 532 F.Supp. 726, 728 [E.D.Pa.1982], citing Wheeldin v. Wheeler, 373 U.S. 647, 652, 83 S.Ct. 1441, 1445, 10 L.Ed.2d 605 [1963]. This position undermines defendants’ argument that this action presents a federal question because federal court process was involved. A careful review of the cases cited by defendants in support of their argument indicates that the cases all involve abuse of process or malicious prosecution suits that arose from original actions filed in the federal courts raising federal questions. In Nationwide Charters and Conventions, Inc. v. Garber, supra, the plaintiff brought an action in State Court for abuse of process, slander and breach of contract. The underlying action giving rise to the plaintiff’s claim for abuse of process was instituted pursuant to the Federal Aviation Act, 49 U.S.C. § 1487. 254 F.Supp. at 86. In Rury v. Gandy, 12 F.2d 620 [E.D.Wash.1926], the plaintiff filed suit for malicious prosecution based upon allegations that false accusations made to the United States Attorney and false testimony given to the grand jury caused the institution of a federal criminal prosecution. Eighmy v. Poucher, supra, involved a malicious prosecution claim filed against federal officials based upon a wrongful criminal prosecution in federal court. In each case, the construction of federal laws as they related to the underlying action were issues that would be involved in the suits for malicious prosecution and abuse of process.

No such issues are presented in this case. The underlying action was removed to federal court based upon diversity of citizenship and did not involve the determination of any federal law. Thus, defendants’ attempt to bring this cause of action within the subject matter jurisdiction of this court on the grounds that a federal question is presented by plaintiffs’ complaint must fail.

B.

Defendants second major argument opposing plaintiff’s motion to remand is that Joan Uebelhoer was fraudulently joined in this cause for the purpose of destroying diversity of citizenship. The proper standard to be applied to determine whether a party has been fraudulently added is whether there exists no possible action against the resident defendant. Buchanan v. Delaware Valley News, 571 F.Supp. 868, 870 [E.D.Pa.1983]. A claim of fraudulent joinder must be asserted with clarity and be supported by clear and convincing evidence. American Brahmental v. American Simmental, 443 F.Supp. 163, 165 [W.D.Tex.1977]. See also 14 C. Wright, A. Miller and E. Cooper, Federal Practice and Procedure: Jurisdiction § 3723 at p. 611 [1976]. Unless the court can state with reasonable certainty that no possible liability exists against defendant, remand is required where the addition of the defendant defeats jurisdiction. Buchanan v. Delaware Valley News, 571 F.Supp. at 870. There need be only a possibility that a right to relief exists to avoid this conclusion, and a plaintiff’s ultimate failure to obtain a judgment is immaterial. 14 C. Wright, A. Miller & E. Cooper, supra, § 3723 at p. 617.

The defendants cite the Restatement [Second] of Torts, § 653 comment d [1977], for the proposition that “causing” the action to be filed requires greater involvement on Joan Uebelhoer’s part than supplying information to other defendants. However, the plaintiffs allege that Joan Uebelhoer caused the initiation of the suit against Mary Voors by supplying what she knew or should have known to be false information concerning Mary Voors. Thus, it appears that the issue of Joan. Uelbelhoer’s liability in this case involves questions of fact. Insofar as these factual questions exist, the defendants have failed to carry their burden that no reasonable ground for liability exists. Therefore, no subject matter jurisdiction is conferred upon this court on the basis of diversity of citizenship.

C.

Finally, defendants attempt to invoke jurisdiction of this court pursuant to 28 U.S.C. § 1441[c] by contending that separate and independent claims or causes of action are asserted by plaintiffs in their complaint.

The leading case construing § 1441[c] is American Fire & Casualty Co. v. Finn, 341 U.S. 6, 71 S.Ct. 534, 95 L.Ed. 702 [1951]. The plaintiff in Finn asserted alternative theories of liability for a fire loss against each of two non-resident corporations individually and against the corporations and a resident individual jointly and severally. The non-resident corporate defendants removed the action on the ground that the plaintiff had asserted claims or causes of action aginst them that were separate and independent from the claim or cause of action asserted against the resident defendant. The jury returned a verdict against the plaintiff and judgment was entered on the verdict. The plaintiff moved the court to vacate the judgment on the ground of improper removal. The court denied the motion and the ruling was affirmed by the Court of Appeals. The Supreme Court of the United States reversed the decision of the Court of Appeals and remanded the case to the district court with directions to vacate the judgment and remand the case to state court. Id. at 18-19, 71 S.Ct. at 542-543.

In making its determination, the Supreme Court reviewed the congressional purpose of the statute and found that a significant goal was to limit removal from state court. Id. at 9-10, 71 S.Ct. at 537-538. In construing the statute, the court stated:

Of course, ‘separate cause of action’ restricts removal more than ‘separable controversy.’ In a suit covering multiple parties or issues based on a single claim, there may be only one cause of action and yet be separable controversies. The addition of the word “independent’ gives emphasis to congressional intention to require more complete disassociation between the federally cognizable proceedings and those cognizable only in state courts before allowing removal. Id. at 12, 71 S.Ct. at 539. [Footnotes omitted.]

The Court then held that “where there is a single wrong to plaintiff, for which relief is sought, arising from an interlocked series of transactions, there is no separate and independent claim or cause of action under § 1441[c].” Id. at 14, 71 S.Ct. at 540.

Although the Finn case involved only one plaintiff and multiple defendants, the construction placed upon the statute in that case appears to this court to be the appropriate standard to apply to this case. Commentators have also adopted this position:

Even under most liberal of state joinder rules and statutes, parties are not properly joined unless there is a question of law or fact common to all of them and there is a claim asserted for or against them all arising out of the same transaction or occurrence or series of transactions or occurrences. It seems reasonable to conclude that claims involving common questions and stemming from the same transaction do not qualify as separate causes of action under the Supreme Court’s formulation. 14 C. Wright, A. Miller & E. Cooper, supra, § 3723 at P. 617.

Moreover, the language of 28 U.S.C. § 1441[c] is instructive. The two words “separate” and “independent” in § 1441[c] are used conjunctively and should be given significance in order to carry out the intent and purpose of congress to limit removal and simplify determination of removability. Her Majesty Industries, Inc. v. Liberty Mutual Insurance Company, 379 F.Supp. 658, 661 [D.S.C.1974], Therefore, a cause of action must be both “separate” from and “independent” of the main action to be removable under § 1441[c]. Chase v. North American Systems, Inc., 523 F.Supp. 378, 382 [W.D.Pa.]. The phrase “separate and independent” connotes an entirely distinct controversy; one that differs from and is not dependent upon the main cause of action. Id.

In this case plaintiffs allege that they were injured by one happening which occurred as a result of the combined activities of all the defendants. All plaintiffs seek damages for malicious prosecution and abuse of process arising from a single wrong, the wrongful initiation of the action in The United States District Court for the Northern District of Indiana, Fort Wayne Division, Cause No. F79-9 against them. For authority supporting this position, see Chappell v. SCA Services, Inc., 540 F.Supp. 1087 [C.D.Ill.1982]; Strange v. Arkansas-Oklahoma Gas Corp., supra; Lavan v. Petroleum Underwriters at Lloyds, 334 F.Supp. 1069 [S.D.N.Y.1971],

Although the court is cognizant of courts taking a less restrictive view of this removal provision, see, e.g., Stokes v. Merrill Lynch, 523 F.2d 433 [6th Cir.1975]; Northside Iron & Metal Co. v. Dobson & Johnson, Inc., 480 F.2d 798 [5th Cir.1973]; Jong v. General Motors Corporation, 359 F.Supp. 223 [N.D.Cal.1973]; Herrmann v. Braniff Airways, 308 F.Supp. 1094 [S.D.N.Y.1969], this court is of the opinion that its interpretation of 28 U.S.C. § 1441[c] best comports with the congressional purpose of the statute to limit removal. Therefore, the court finds that plaintiffs’ claims or causes of action are not separate and independent as required by 28 U.S.C. § 1441[c] so as to give this court subject matter jurisdiction.

Accordingly, it is the order of this court that the motion to remand of plaintiffs Mary Voors, Kevin Saylor and Wanda Saylor, be and is hereby, GRANTED. It is further ordered that this case be REMANDED to the Allen Superior Court pursuant to 28 U.S.C. § 1447[c]. SO ORDERED.

      . Defendants filed their memorandum in opposition to plaintiffs motion for remand on December 19, 1983. Plaintiffs filed a reply on January 10, 1984. Defendants filed supplemental memorandums in opposition to plaintiffs’ motion for remand on January 17, 1984 and May 16, 1984.

      . Plaintiffs have indicated that all references to the Sixth Amendment contained in their complaint were inadvertently included and that they will move to amend their complaint in order to delete such references after a ruling on this motion. Memorandum in Support of Plaintiffs' Motion for Remand, p. 7 n. 1.

      . If, however, the information is known by the giver to be false, an intelligent exercise of the officer's discretion becomes impossible, and a prosecution based upon it is procured by the person giving the false information.
      Restatement [Second] of Torts, § 653 comment g [1977].


source: Caselaw Access Project

author: CAFFREY, Chief Judge.

license: Public Domain

text:
    Rose GAVRILLES, Plaintiff, v. Daniel O’CONNOR, Manson Hall, and Frank Peros, Defendants.
    Civ. A. No. 83-0006-C.
    United States District Court, D. Massachusetts.
    June 17, 1985.
    Anne M. Vohl, Burlington, Mass., Betty A. Gittes, Shaevel, Shaevel & Gittes, Boston, Mass., for plaintiff.
    Loretta T. Attardo, Duane R. Batista, Nutter, McClennen & Fish, Boston, Mass., for defendants.
   MEMORANDUM

CAFFREY, Chief Judge.

This is a civil action brought pursuant to 42 U.S.C. § 1983 by Rose Gavrilles, a tenured teacher in the Watertown, Massachusetts School System. Defendants are Daniel O’Connor, Superintendent of Schools, Manson Hall, Headmaster of Watertown High School, and Frank Peros, Director of Art Education for the Watertown School System.

In her second amended complaint, plaintiff alleges that she exercised her First Amendment rights by filing and processing a grievance according to the procedure set forth in her union’s collective bargaining agreement, and that, in response to her actions, “defendants have systematically retaliated against [her] ... by bringing unwarranted proceedings against her by suspending her, and by various other ongoing hostile actions.” Defendants assert that, as government officials, their qualified immunity protects them from civil liability for any discretionary actions which they have taken regarding Ms. Gavrilles. The case is now before the Court on defendants’ motion for summary judgment, which raises the affirmative defense of qualified immunity.

Under Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982), “government officials performing discretionary functions, generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” Id. at 818,102 S.Ct. at 2738. The parties agree that as of 1982-1983, the period in which the incidents giving rise to the action occurred, there existed no federal case law explicitly stating that a public employee has a constitutional right to be free from retaliation for processing a personal grievance through her union. By 1980, however, the United States Supreme Court had made clear that First Amendment freedom of association protects the right of public employees to join together in a union, to advocate and seek redress for grievances through that collective entity, and to be free from retaliation for engaging in such activities. Smith v. Arkansas State Highway Employees, 441 U.S. 463, 464-65, 99 S.Ct. 1826, 1827-28, 60 L.Ed.2d 360 (1979) (per curiam); See also, United Mine Workers of America, District 12 v. Illinois State Bar Association, 389 U.S. 217, 222, 88 S.Ct. 353, 356, 19 L.Ed.2d 426 (1967); NAACP v. Button, 371 U.S. 415, 429-31, 83 S.Ct. 328, 335-37, 9 L.Ed.2d 405 (1963).

Defendants assert that, because they are not constitutionally required to consider grievances filed by plaintiff’s union, Smith, 441 U.S. at 465-66, 99 S.Ct. at 1828-29, they could not reasonably have known that retaliation against plaintiff for making use of her union’s grievance procedure is constitutionally prohibited. This contention has no merit. The fact that the Constitution does not obligate a public employer to recognize or bargain with an employees’ union cannot reasonably be interpreted as a grant of permission to retaliate against an employee who, through her union, successfully processes a grievance. The impermissibility of retaliating against an employee for engaging in union activities was clearly established by 1982. Insofar as the filing and processing of grievances is a legitimate union pursuit, I rule that defendants reasonably should have known that retaliation against plaintiff for participating in that activity is constitutionally prohibited. I further rule, therefore, that defendants’ motion for summary judgment should be denied.

Order accordingly.

      . Prior proceedings in this case are reported at 579 F.Supp. 301 and 599 F.Supp. 357 (D.Mass. 1984).


author: WILLIAM C. CONNER, District Judge.

text:
    RECORD CLUB OF AMERICA, INC., Plaintiff, v. UNITED ARTISTS RECORDS, INC., Defendant.
    No. 72 Civ. 5234 (WCC).
    United States District Court, S.D. New York.
    June 17, 1985.

      Nancy G. Grossman, New York City, for plaintiff.
    Phillips, Nizer, Benjamin, Krim & Ballon, New York City, for defendant; Janet P. Kane, Robert B. Weintraub, New York City, of counsel.
   OPINION AND ORDER

WILLIAM C. CONNER, District Judge.

This diversity action was commenced in 1973 by plaintiff Record Club of America, Inc. (“RCOA”), a Delaware corporation engaged in the business of manufacturing and distributing mail-order records and tapes, against United Artists Records, Inc. (“UAR”), a California corporation with which plaintiff had entered into a 1970 licensing agreement. Plaintiff asserted in its original complaint that UAR had breached the licensing agreement. Subsequently, however, plaintiff amended the complaint to allege a claim of antitrust violations against defendant, and another claim that UAR had tortiously induced two of its subsidiaries to breach related agreements with RCOA.

Before the Court today is defendant’s motion for partial summary judgment on the antitrust and tortious inducement claims. For the reasons below, the motion is granted in part and denied in part.

This action has a somewhat complicated procedural history which need not be set forth in detail here. The following summary of undisputed facts is helpful, however, for purposes of placing the instant dispute in context:

The controversy finds its roots in 1970, when plaintiff filed two actions against UAR and other record companies, alleging violations of the Sherman Act. In voluntary settlement of the claims against UAR, the parties entered into three contracts, all of which took effect on October 1, 1970. Under the first contract (“the license agreement”), UAR granted to RCOA a renewable three-year non-exclusive license to produce, advertise and sell by mail-order all records and tapes manufactured and distributed by UAR. RCOA agreed to make quarterly royalty payments on all albums and tapes it sold, and to make certain minimum payments. Under the other two agreements (“the side agreements”), RCOA agreed that during the term of the license agreement, it would purchase UAR’s catalogue of long-playing records from a wholly-owned record-manufacturing subsidiary of UAR called All-Disc Records, Inc. (“All-Disc”), and that it would purchase eight-track and cassette tapes from another wholly-owned subsidiary, Liberty/UA Tape Duplicating, Inc. (“Liberty Tape”).

On January 2, 1972, RCOA entered into an Agreement of Settlement and Release with UAR and its affiliates. Ex. 2 to Def. Mem. of July 16, 1984. This agreement recited that UAR had been named as a defendant in the two antitrust suits, and that in consideration of the parties’ execution of the 1970 licensing agreement, RCOA would dismiss its claims against UAR, and the parties would exchange mutual releases. The Agreement of Settlement and Release then provided that RCOA released and forever discharged UAR and its affiliates from all antitrust claims and similar causes of action arising out of any transaction or occurrence connected' with or in any manner related to the underlying lawsuit.

In late 1972, a dispute arose over how and when certain royalties were to be calculated and paid under the licensing agreement. Defendant filed an action against plaintiff in California, alleging that RCOA had failed to pay these royalties on time. RCOA then filed an action in this Court, seeking an order confirming that its obligation to pay the royalties in question had not yet arisen. These actions were consolidated before me.. Shortly thereafter, RCOA raised two additional claims: it asserted that UAR had tortiously induced its subsidiary All-Disc to breach the side agreement with RCOA, and that UAR had committed antitrust violations.

In December 1974, before these issues were resolved, plaintiff commenced Chapter 11 proceedings. At the request of a court-appointed receiver, this action was transferred to the Court’s suspense docket, where it remained until 1982, when RCOA emerged from bankruptcy and requested that the matter be restored to the active calendar. The Court granted that request and subsequently held a pretrial conference on March 16, 1983. At that conference, the Court reviewed the complaint and directed RCOA to replead its antitrust claim. A week later, RCOA filed an “Amended and Supplemental Complaint” asserting five grounds for relief.

In the amended complaint plaintiff seeks: (1) damages resulting from UAR’s anticipatory breach of the licensing agreement in 1972; (2) a declaratory judgment that plaintiff effectively renewed the contract for a two-year period commencing in 1973, and thereby obtained an option for a second renewal period under the agreement; (3) damages for UAR’s breaches of the agreement during the years 1973 through 1977; (4) damages for All Disc’s breach of the side agreement with RCOA, which allegedly was tortiously induced by UAR; and (5) treble damages for UAR’s unreasonable restraint of trade in violation of the Sherman Act.

On November 14, 1983, defendant moved for partial summary judgment on the fourth and fifth claims raised in the amended complaint. Thus, only the tortious inducement and antitrust causes of action are relevant to the Court’s considerations today. Arguments surrounding the antitrust allegations have consumed the vast majority of the parties’ voluminous submissions, and I therefore address these issues first.

The Antitrust Claim

The Sherman Act claim alleges that from October 1, 1970 through 1978, UAR and All-Disc combined and conspired with each other, with Liberty Tape, and with “other co-conspirators known and unknown,” to coerce RCOA to enter into the two side agreements with UAR’s subsidiaries, thus unreasonably restraining RCOA’s freedom to manufacture albums and tapes on more favorable economic terms, such as those enjoyed by RCOA’s competitors. According to plaintiff, this conduct violated § 1 of the Sherman Act, 15 U.S.C. § 1, et seq., insofar as it represented a conspiracy in restraint of trade.

Defendant’s initial position was that it was entitled to summary judgment on the antitrust claim on the ground that UAR and its wholly-owned subsidiaries constituted a single integrated enterprise, and therefore there were no independent entities capable of conspiring within the meaning of § 1 of the Sherman Act. In response, RCOA denied that UAR, All-Disc and Liberty Tape were sufficiently integrated to foreclose conspiracy liability under the Sherman Act. RCOA asserted, in addition, that even if UAR were found to be legally incapable of conspiring with its wholly-owned subsidiaries, summary judgment would still be inappropriate because: (1) the complaint also alleged that UAR had conspired with other parties; and (2) the allegations that UAR had required RCOA to purchase records and tapes from its subsidiaries instead of from competitors described an illegal tying arrangement, which also violated § 1 of the Sherman Act. According to RCOA, UAR used its ownership of performance rights, copyrights and trademarks to coerce RCOA into accepting the related manufacturing services of All-Disc and Liberty Tape. The tying theory involves no conspiracy, but rather, a contract in restraint of trade.

UAR replied that RCOA had failed to present sufficient competent evidence of a conspiracy with others to survive a summary judgment motion, and that RCOA could not prevail on its tying theory because UAR’s conduct was protected as a legitimate exploitation of its copyright privilege. UAR argued, finally, that RCOA entered into the side agreements voluntarily, and therefore could not establish the coercion element of a tying claim.

After the matter was fully submitted, the Court advised the parties by letter dated June 28, 1984 that only days earlier, the United States Supreme Court had held in Copperweld Corp. et al. v. Independence Tube Corp., — U.S.-, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984), that a parent corporation and its wholly-owned subsidiary were legally incapable of conspiring in violation of § 1 of the Sherman Act. In this letter, the Court expressed its view that Copperweld disposed of the claim that UAR conspired with All-Disc and Liberty Tape; the Court also invited the parties to submit any additional arguments they deemed appropriate in light of the Supreme Court’s decision in Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984), which discussed illegal tying arrangements. This invitation was enthusiastically accepted and a new barrage of briefs and letters soon followed.

During this subsequent round of arguments on the tying claim, two important propositions surfaced quite suddenly. First, RCOA came to the startling realization that the UAR sound recordings in issue were not copyrighted at all. UAR reluctantly conceded this issue, dropping its “legitimate exploitation” argument. Second, UAR raised for the first time its claim that RCOA’s antitrust cause of action was barred by the 1972 Agreement of Settlement and Release. Because I agree with defendant that the antitrust claim is barred, I need not reach the questions of whether the side agreements constituted illegal tying arrangements, and whether there is competent evidence of a conspiracy between UAR and other independent record companies.

As indicated above, the Agreement of Settlement and Release was executed in 1972, in settlement of RCOA’s two 1970 lawsuits against UAR. The document incorporated by reference the licensing agreement entered into in 1970, and stated that in consideration of execution of that licensing agreement, RCOA had agreed to dismiss UAR from the pending lawsuits and execute a release. The release provision of the 1972 Agreement of Settlement and Release is set forth in pertinent part below:

Record Club does ... release and forever discharge the [UAR] Defendants, ... and each of their affiliated companies, ... from all claims, actions, causes of action, suits, ... contracts, controversies, agreements, promises, representations, restitutions, damages and demands by Record Club for, upon, or by reason of any fact, act, matter, transaction, cause or thing whatsoever connected with, referred to in, or in any manner asserted or involved with, the claim against the [UAR] Defendants in the Subject Lawsuits or any related matter under the antitrust or similar laws, by Record Club, from the beginning of the world to the date hereof____

Ex. 2 to Def. Additional Mem. of July 16, 1984 at ¶ 2. (emphasis added).

It is difficult to imagine a release provision with broader language than this, and yet RCOA argues now that its antitrust claim is not barred. RCOA notes that the two original antitrust suits brought against UAR were based on the fact that UAR had previously had exclusive licensing contracts with a competitor of RCOA’s and that the language immediately preceding the release provision in the Agreement of Settlement and Release indicates that the parties had “agreed to exchange mutual releases with respect to the subject matter of the Subject Lawsuits.” RCOA argues that the release provision itself “goes on to limit the release to the subject matter of those ‘exclusive dealing’ antitrust lawsuits,” and that since the claim of an illegal tying arrangement was not part of the exclusive dealing claim raised in the original lawsuits, it is not covered by the release.

The above-quoted provision could not, under any reasonable construction, be interpreted as limiting the release to the issues raised in the underlying lawsuits. Indeed, the release specifically and unambiguously covers any claim arising out of any matter “connected with” or “related” to those lawsuits. The allegation that UAR coerced RCOA into an illegal tying arrangement is obviously a “claim” within the meaning of the release; it is based upon agreements executed in settlement of the underlying lawsuits and is therefore “related” to those lawsuits; it is brought under antitrust laws; and, needless to say, it arose during the period from the beginning of the world to the date the settlement agreement was executed. It is therefore apparent to me, on the basis of the clear language of the release, that RCOA’s interpretation of the release is fanciful at best.

Of course, a settlement agreement containing a release provision may be unenforceable, just like any other contract, if it was secured through duress or coercion. Citibank, N.A. v. Real Coffee Trading Co., 566 F.Supp. 1158 (S.D.N.Y.1983). RCOA has not asserted duress here, however, and I would not sustain such a challenge to the operation of the release had it attempted to do so.

RCOA has claimed duress/economic coercion as an element of its illegal tying claim, and the record contains a 1970 letter from UAR to RCOA indicating that operation of the licensing agreement and the two side agreements was subject to execution of the release. On this basis, plaintiff could perhaps have argued that since the license was illegally conditioned on the side agreements, and all three agreements were conditioned on execution of the release, the release was coerced. However, even if I ignore the fact that the release was signed more than a year after the contracts became effective, and even if RCOA could persuade me that UAR coerced it into releasing UAR from liability for claims raised in the original antitrust suit, it would strain credulity to suggest that RCOA had no practical alternative but to execute a release with such extraordinarily broad language. Plaintiffs alternative was to tailor a narrower release; had it done so, the present claims might not be barred.

I can only presume that the Agreement of Settlement and Release was drafted and executed by competent attorneys who were well aware of the meaning of the contractual language. In hindsight, counsel for plaintiff might well wish these words had been more carefully chosen; nonetheless, this contract will not be voided upon a showing that it was improvidently entered. Accordingly, I conclude that the release operates to bar plaintiff from prosecuting this antitrust claim against defendant.

The Tortious Inducement Claim

RCOA asserts a fourth cause of action for tortious inducement of breach of contract. In stating this claim, plaintiff alleges that in mid-1972, UAR accused RCOA of having breached the 1970 licensing agreement, that UAR notified RCOA of its contention that the licensing agreement was terminated, and that UAR threatened to direct its subsidiary, All-Disc, to cease supplying RCOA with records under the side agreement unless RCOA agreed to execute a new contract. RCOA further alleges that it did not breach the licensing agreement with UAR, that nonetheless All-Disc failed to fill plaintiffs orders during the period from 1973 to 1977, that this refusal constituted a breach of the side agreement between RCOA and All-Disc, that this breach was “tortiously and wilfully induced by UAR” and that RCOA suffered damages as a result of this breach.

Defendant has moved for summary judgment on the ground that “a parent corporation cannot tortiously induce the breach of — and, indeed, is privileged to interfere in — the contractual relationships of a wholly-owned subsidiary.” Def.Mem. in Support of Motion for Partial Summary Judgment at 25. In support of this position, UAR relies chiefly on Felsen v. Sol Cafe Mfg. Corp., 24 N.Y.2d 682, 301 N.Y.S.2d 610, 249 N.E.2d 459 (1969), which it characterizes as “dispositive.” In my view, neither Felsen nor the other authorities cited by defendant establish this unconditional proposition.

Under New York law, one who has a financial interest in the business of another is privileged to interfere with a contract between the other and a third party if his purpose is to protect his own interests and if he does not employ improper means. Felsen, supra, 301 N.Y.S.2d at 612, 249 N.E.2d 459. A parent corporation that is motivated by malice toward a plaintiff, or that uses fraudulent or illegal means, is not immune from liability. Id.; see also Coniff v. Dodd, Mead & Co., 593 F.Supp. 266, 269 (S.D.N.Y.1984).

There are documents in the record tending to suggest that All-Disc’s failure to supply RCOA reflected UAR’s belief that RCOA was in default of its contractual obligations, and that UAR might never receive payments due. Defendant has not explained the significance of these documents, however, and I simply cannot conclude that there is no dispute as to whether UAR’s conduct was fraudulent or malicious. Resolution of this issue may well turn on the subjective intent of individuals at UAR, and the Court of Appeals for the Second Circuit has repeatedly cautioned district judges not to grant summary judgment where intent is an element of the claim. Accordingly, the motion is denied.

SO ORDERED.

      . Prior to February’25, 1971, UAR was called "Liberty/UA, Inc."

      . The parties agree that the second part of this claim for relief was mooted by my oral ruling at an April 22, 1983 conference.

      . Plaintiff subsequently conceded that Copper-weld. disposed of this question. See PI. Additional Mem. at 7.

      . Defendant’s delay in raising this defense is inexplicable. In September of 1983, an answer to the Amended and Supplemental Complaint was filed by Capitol Records, Inc., the successor in interest through corporate merger to UAR. The answer asserted, as a seventh affirmative defense, that RCOA’s execution of the 1972 release barred the antitrust claim against defendant.

      . The Agreement of Settlement and Release expressly incorporates only the licensing agreement between RCOA and UAR; the side agreements are not specifically mentioned. Nonetheless, it is beyond question that execution of the side agreements was integrally related to execution of the licensing agreement, that the three contracts were entered into simultaneously, and that all three contracts were therefore “related" to the underlying antitrust lawsuits. See PI. 3(g) Stmt, at ¶ 33; Def. 3(g) Stmt, at ¶ 33.

      . I note, in passing, the skepticism with which I view the merits of plaintiff's illegal tying claim. As the Supreme Court has clearly stated, an essential characteristic of an invalid tying arrangement is the seller's ability to force the buyer into the purchase of a tied product he might have preferred to purchase elsewhere. Notwithstanding the need for plaintiff to show coercion, it has conceded at ¶ 33 of its Local Rule 3(g) statement that RCOA entered into the agreements with UAR, All-Disc and Liberty Tape "in voluntary settlement of its claims against UAR in the 1970 litigation."
      Moreover, although I need not and do not decide the merits of the tying claim, I am impressed with the reasoning of Judge Friendly in Martina Theatre Corp. v. Schine Chain Theatres, Inc., 278 F.2d 798 (2d Cir.1960), a case cited by defendant in support of its argument that there was no coercion because plaintiff's clear alternative to entering into the side agreements was to proceed to trial. The court said in Martina Theatre Corp.:

      We ... cannot accept plaintiff's second suggested ground, of duress. For the financial hardship alleged to have forced plaintiff to accept the settlement flowed from the same alleged unlawful practices that were the subject of the plaintiff’s claim. A court was ready to determine this. Every settlement reflects the parties’ balancing of the strength of their positions against the expenditure of time, money, and effort required to establish them. Threats by a defendant of deliberate delays and obstructions in the suit might present a different case____ However, it would seriously and needlessly impair the utility of settlement to allow a plaintiff to attack a settlement merely because the financial injury alleged in its initial cause of action may have been serious.

        Id. at 802.

      . In order to show duress, the circumstances "must be such that the party asserting the defense had no practical alternative open to him.” Korn v. Franchard Corp., 388 F.Supp. 1326, 1333 (S.D.N.Y.1975).

      . I note that the complaint alleges illegal conduct extending past the date of the release. I do not believe this presents any problem under the release, however, because all of the harm alleged flows from and is related to the terms and conditions under which RCOA settled the original antitrust lawsuits. In other words, there may have been a continuing effect, but plaintiffs cause of action arose before the release was signed.

      . Technically speaking, plaintiffs amended complaint may be insufficient insofar as it fails specifically to allege either malice or improper means. See Felsen, supra (In action for tortious inducement to breach employment contract, plaintiff employee presented no proof of malice at trial and therefore failed to make out a prima facie case against defendant, the sole shareholder of employer). However, the clear thrust of plaintiffs claim, as gleaned from the affidavits and memoranda, is that UAR wrongly accused plaintiff of breaching the licensing agreement, and subsequently induced All-Disc to breach the side agreement, in order to deprive RCOA of any benefit gained from its settlement of the antitrust lawsuit. In light of my view that inadequate pleadings, affidavits and memoranda abound in this action, it seems to me that no useful purpose would be served by requiring plaintiff to file another amended complaint at this late date.


author: GONZALEZ, District Judge.

text:
    Selma BOYD, Plaintiff, v. MERRILL LYNCH, PIERCE, FENNER & SMITH and James B. Davis, Defendants.
    No. 84-6735-CIV-GONZALEZ.
    United States District Court, S.D. Florida, N.D.
    June 18, 1985.

      Russell L. Forkey, Ft. Lauderdale, Fla., for plaintiff.
    Patricia E. Cowart, Miami, Fla., for defendants.
   ORDER

GONZALEZ, District Judge.

THIS CAUSE has come before the court upon the defendants’ motion to dismiss or, in the alternative, to compel arbitration. Plaintiff’s three count complaint charges defendants with churning, fraud in the sale of securities and breach of their fiduciary duties. Plaintiff filed her original complaint on September 6, 1984 and subsequently amended that complaint on January 17, 1985.

Defendants’ motion to dismiss principally argues that plaintiff’s case is time-barred by the one or three year statute of limitations contained in section 13 of the Securities Act of 1933, 15 U.S.C. § 77m, and the two year limitations period contained in section 95.11(4)(e) of the Florida Investor Protection Act.

Section 13 of the Securities Act provides that an action brought under section 12(2) of the Act must be filed within one year after the discovery of the alleged fraud allegedly perpetrated on plaintiff, or within one year after said fraud should have been discovered by plaintiff through the exercise of due diligence. Under no circumstances, however, may a plaintiff raise a claim under section 12(2) if the subject sale occurred more than three years before initiation of the action.

Looking initially to the broadest construction of section 13, it is clear that any transaction of which plaintiff complains which occurred before September 6, 1981, is time barred. Indeed, plaintiff concedes as much in her Memorandum in Opposition to Defendants’ Motion to Dismiss at page 2 (filed Apr. 8,1985). Accordingly, the first thirteen transactions listed in plaintiff’s exhibit 4 appended to her amended complaint are hereby stricken.

The next level of inquiry is whether plaintiff alleges fraudulent activity which manifested itself in transactions occurring within the limitations period. A review of plaintiff’s complaint confirms that defendants arguably engaged in false or misleading statements or omissions thereby inducing plaintiff into executing multiple transactions within the time permitted by section 13. See Amended Complaint ¶¶ 9, 10, 12, 13 & 22. Admittedly, some of those misrepresentations occurred beyond the three year period, but they manifested themselves in transactions which occurred within that time.

As to those misstatements and subsequent transactions which occurred more than one year and less than three years before plaintiff filed this action, the question now is whether plaintiff alleges sufficient facts to show that defendants fraudulently concealed their wrongdoing and that plaintiff did not discover their activities though exercising due diligence. After reviewing count 1, the court is convinced — if only barely — that plaintiff has satisfied the due diligence (or “reasonable diligence”) requirements of section 12(2). The amended complaint states that plaintiff, as an unsophisticated investor, relied on defendants’ misrepresentations and did not discover the alleged fraudulent activity until she went to defendants’ office to withdraw a sum of money in April 1984. The court is mindful of plaintiff’s position that due diligence should be measured on a sliding scale, taking into account the sophistication of the investor and the complexity of the transactions, see, e.g., Sperry v. Barggren, 523 F.2d 708, 711 (7th Cir.1975); Amen v. Black, 234 F.2d 12, 25-26 (10th Cir.1956), and is inclined to follow that rule in. this case. Accordingly, based on the facts alleged in the amended complaint, the court finds that those transactions which occurred between September 6, 1981 and September 6, 1983 are not time-barred.

The remaining question with respect to plaintiffs claims in count 1 is whether those transactions occurring within a year’s time of the filing of this lawsuit are time-barred. The clear language of section 13 indicates that they are not.

Count 2 of plaintiff’s amended complaint alleges that defendants violated section 10(b) of the Securities Exchange Act of 1934. Defendants counter that plaintiff again fails to set forth sufficient facts to toll the relevant statute of limitations.

Federal courts borrow the relevant state statute of limitations when addressing the timeliness of actions under section 10(b) because the 1934 Act does not have its own statute of limitations. The relevant provision in this case is Fla.Stat. § 95.-ll(4)(e), which provides:

(4) WITHIN TWO YEARS
(e) An action founded upon a violation of any provision of part I of Chapter 517, with the period running from the time the facts giving rise to the cause of action were discovered or should have been discovered with the exercise of due diligence, but not more than 5 years from the date such violation occurred.

Although state law controls the limitations period, the date the statute begins to run and the circumstances that toll it are determined by federal common law. See Sargent v. Genesco, Inc., 492 F.2d 750 (5th Cir.1974); Azalea Meats v. Muscat, 386 F.2d 5 (5th Cir.1967).

The court has carefully considered the allegations of count 2 and finds that plaintiff also has alleged sufficient facts to toll the limitations period of Fla.Stat. § 95.11(4)(e). The court finds that plaintiff’s lack of both sophistication and opportunity to discover the facts is sufficient to objectively conclude that plaintiff’s action is timely. Certainly, the court would be more comfortable had the plaintiff alleged that defendants concealed their activities despite her numerous inquiries. See Baselski v. Paine, Webber, Jackson & Curtis, Inc., 514 F.Supp. 535 (N.D.Ill.1981). But an unsophisticated investor who considers her broker to be a fiduciary should not be expected to make as diligent or comprehensive an inquiry as a sophisticated investor who is the victim of a flagrant and widely publicized fraud. Azalea Meats, 386 F.2d at 9.

Defendants next argue that count 3 of plaintiff’s amended complaint should be dismissed for lack of an underlying federal claim. In light of the court’s ruling as to defendants’ arguments regarding counts 1 and 2, this additional position must be rejected.

Finally, defendants seek in the alternative that plaintiff’s complaint be submitted to arbitration. In light of the Supreme Court’s decision in Dean Witter Reynolds, Inc. v. Byrd, — U.S.-, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985), arbitration clearly is the preferred path. Indeed, federal law provides that written agreements to arbitrate controversies arising out of an existing contract “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Federal Arbitration Act, 9 U.S.C. § 2. In the aftermath of Byrd, parties hoping to avoid arbitration of securities claims are seeking refuge in the last clause of section 2. They contend, as has plaintiff in this case, that the contract containing the arbitration clause is invalid because of fraudulent inducement, unconscionability or lack of mutuality. E.g., Pierson v. Dean, Witter, Reynolds, Inc., 742 F.2d 334 (7th Cir.1984). Of course, there can be no arbitration if the arbitration clause was induced by fraud or the entire agreement is invalid. See Wick v. Atlantic Marine, Inc., 605 F.2d 166, 168 (5th Cir.1979). But plaintiff must do more than simply make conclusory statements attacking the validity of the arbitration clause. She must file affidavits and other evidence that support her claim. See Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 944, 74 L.Ed.2d 765 (1983); Pierson, 742 F.2d at 339 & n. 5. In this case, plaintiff has alleged that she is an unsophisticated investor, that the arbitration clause is merely a standardized form favoring defendants, and that plaintiff never agreed to be bound by the arbitration provision. Plaintiff basically attempts to argue out of existence all standardized customer contracts in the brokerage industry. The proliferation of these contracts, while not absolute proof of their legality, certainly is testimony to their workability and suggests that they are valid. The court is not inclined, however, to rule on plaintiffs arguments without first enabling defendants to file a response addressing the alleged deficiencies in the arbitration clause and the customer’s contract.

Accordingly, the plaintiff is instructed to file any additional affidavits or other proof (as distinct from further legal memoranda) in support of its position with regard to arbitration within ten days of entry of this order. Defendants will thereafter have twenty days to file a legal response along with evidentiary submissions of its own. At that point, the court will rule on the arbitrability of plaintiff’s claims. In making that ruling, the court will be guided by the instructive language of the Supreme Court in Mercury Construction: “The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay or a like defense to arbitrability.” 103 S.Ct. at 941-42 (footnote omitted although the parties are advised to review the cases cited therein). Of course, the court is also mindful that under Byrd and Wilko, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 plaintiff’s claim under section 12(2) of the 1933 Act is not susceptible to arbitration.

In conclusion, the defendants’ motion to dismiss plaintiff’s amended complaint is denied. The court reserves ruling on the defendants’ motion to compel arbitration pending the submission of documentary evidence by the parties in the manner specified above.


author: McLAUGHLIN, District Judge.

text:
    Arturo PARRA, Plaintiff, v. PRODUCTION MACHINE COMPANY, Production Machine Products, Wanskuck Company, Mossberg Industries and Mossberg-Hubbard Company, Defendants.
    No. 83 CV 4400.
    United States District Court, E.D. New York.
    June 18, 1985.

      Michael Weinberger, New York City, for plaintiff.
    Semel, Boeckmann & Skydel, New York City, for defendants; Wayne Paul Esposito, of counsel.
   MEMORANDUM AND ORDER

McLAUGHLIN, District Judge.

This is a diversity action in negligence and strict products liability. Plaintiff seeks to recover for hand injuries allegedly caused by a defective vertical sander manufactured by defendant Production Machine Company (“Production Machine”). The parties have cross-moved for summary judgment on the following issue: Is Moss-berg Industries (sued herein as Wanskuck Company, Mossberg Industries and Moss-berg-Hubbard Company) liable as a successor corporation for injuries caused by a defective product manufactured by defendant Production Machine?

Facts

The undisputed material facts are as follows. On December 4, 1980, plaintiff, a New York resident, was injured while working at his job at Virginia Plak, Ltd. in New York. This injury was caused by a vertical sander manufactured by defendant Production Machine Company, at the time of manufacture a Massachusetts corporation.

In or about May, 1960, all of the assets and certain liabilities of Production Machine were sold to .defendant Wanskuck Company, a Rhode Island corporation now known as defendant Mossberg Industries, Inc. No stock was transferred between Production Machine and Wanskuck, and no shareholders in Production Machine became shareholders of Wanskuck.

Pursuant to the sale agreement, Wanskuck purchased all the assets of Production Machine Company, both tangible and intangible. Thus, Wanskuck purchased the right to use the Production Machine Company name on its merchandise. Wanskuck also expressly assumed certain liabilities, although contingent tort liability was not among them. The agreement limited Wanskuck’s liability for Production Machine’s obligations to those expressly enumerated, and provided that “[Wanskuck] is not assuming ... any obligations or liabilities of [Production Machine] arising or incurred after the date [of the agreement], or any other liabilities ... except as particularly set forth above.”

In May, 1961, one year after the asset sale, Wanskuck discontinued the manufacture of Production Machine products in Massachusetts and began manufacture of those products in Rhode Island. Wanskuck continued to manufacture products previously made by Production Machine Company. Included among these was a vertical sander, which remained substantially the same as that manufactured by Production Machine, and which bore the name “Production Machine Company.”

For at least some time after the asset sale, Wanskuck used the name “Production Machine Co.,” on a sales brochure advertising a vertical sander, noting that this was a division of Wanskuck. Exhibit K to Plaintiff’s Statement of Uncontested Facts. Later, after Wanskuck became Mossberg Industries, a similar brochure said simply “Production Machine,” under which appeared the name Mossberg Industries, Inc. Exhibit A to Affidavit of Edward O. Bartlett. Additionally, Mossberg Industries to this day uses the name “Production Machine Company” on stationery, sales brochures and business cards.

Discussion

In New York, a corporation acquiring the assets of another is liable for the torts of its predecessor if “(1) it expressly or impliedly assumed the predecessor’s tort liability, (2) there was a consolidation or merger of seller and purchaser, (3) the purchasing corporation was a mere continuation of the selling corporation, or (4) the transaction is entered into fraudulently to escape such obligations.” Schumacher v. Richards Shear Co., 59 N.Y.2d 239, 244, 464 N.Y.S.2d 437, 440, 451 N.E.2d 195, 198 (1983). Plaintiff contends that liability for defects in Production Machine products attaches to Mossberg Industries under the “mere continuation” theory or the “de facto merger” theory.

1. Mere Continuation

The mere continuation exception “refers to corporate reorganization ... where only one corporation survives the transaction; the predecessor corporation must be extinguished.” Schumacher v. Richards Shear Co., supra, 59 N.Y.2d at 244, 464 N.Y.S.2d at 440, 451 N.E.2d at 198. A continuation “envisions a common identity of directors, stockholders and the existence of only one corporation at the completion of the transfer.” Ladjevardian v. Laidlaw-Coggeshall, Inc., 431 F.Supp. 834, 839 (S.D.N.Y.1977).

The undisputed facts establish that no stock was transferred between Production Machine and Wanskuck, and there is no identity of shareholders. Neither party, however, has adduced any evidence as to whether there is an identity of directors. More importantly, the evidence is inconclusive as to whether Production Machine Company still exists as a corporate entity. There are suggestions in the parties’ affidavits and exhibits that the corporation may exist, although plaintiff’s vain attempts to serve a summons and complaint upon Production Machine Company imply that it does not. Cf. Schumacher v. Richards Shear Co., supra, 59 N.Y.2d at 244, 464 N.Y.S.2d at 440, 451 N.E.2d at 198 (“Since [predecessor] survived the instant purchase agreement as a distinct, albeit meager, entity,” successor could not be considered a mere continuation.).

2. De Facto Merger

Plaintiff next suggests that defendant Mossberg Industries is liable for the torts of Production Machine Company because there was a de facto merger between the two corporations. A merger contemplates the absorption of one corporation by another, with the latter retaining the absorbed corporation’s name and corporate identity. Factors to be considered in assessing whether such a merger took place include continuity of management, personnel, assets and physical location, a continuity of shareholders, and a cessation by the selling corporation of ordinary operations, followed by liquidation and dissolution shortly thereafter. See Araserv, Inc. v. Bay State Harness Horse Racing and Breeding Assoc., 437 F.Supp. 1083, 1091 (D.Mass.1977); Ladjevardian v. Laidlaw-Coggeshall, Inc., supra, 431 F.Supp. at 838-39.

Once again, the evidence is insufficient to enable the Court to rule on this issue. Nobody has told the Court of the status of the Production Machine Company. Although defendant claims none of Production Machine’s “upper management” people came over to Wanskuck, there is no evidence of the corporate structure of either company. Because of this paucity of evidence with respect to material facts, the Court is unable to make an intelligent assessment of these factors.

Numerous issues of material fact exist with respect to both theories of liability, and thus the motions for summary judgment are denied.

SO ORDERED.

      . The parties suggest that the law of either New York or Massachusetts applies to this action. Plaintiff prefers New York, although neither party has briefed the issue; and they agree that whatever law applies, the result would be the same.

      . Plaintiff also suggests that liability exists under the "product line” theory. According to that theory, a successor corporation is liable if it continues to produce the predecessor’s product in the same plant. See Ray v. Alad Corp., 19 Cal.3d 22, 136 Cal.Rptr. 574, 560 P.2d 3 (1977). The New York Court of Appeals has considered and rejected this theory. Schumacher v. Richards Shear Co., 59 N.Y.2d 239, 245, 464 N.Y.S.2d 437, 440, 451 N.E.2d 195, 198 (1983). In light of that holding, this Court, sitting in diversity, cannot adopt such a theory of liability.


author: EDWARD WEINFELD, District Judge.

text:
    HONG KONG DEPOSIT AND GUARANTY COMPANY LIMITED, Michael J. Johnson and Eoghan M. McMillan, as Liquidators of Hong Kong Deposit and Guaranty Company Limited, Plaintiffs, v. Milton L. HIBDON and John M. Shaheen, Defendants. HONG KONG DEPOSIT AND GUARANTY COMPANY LIMITED, Michael J. Johnson and Eoghan M. McMillan, as Liquidators of Hong Kong Deposit and Guaranty Company Limited, Bil (Vila) Bank Limited, and Stanley Uren, as Liquidator of Bil (Vila) Bank Limited, Plaintiffs, v. Bradford A. SHAHEEN, Defendant.
    Nos. 83 Civ. 5895(EW), 83 Civ. 5896(EW).
    United States District Court, S.D. New York.
    June 19, 1985.

      See also 602 F.Supp. 1378.
    Cleary, Gottlieb, Steen & Hamilton, New York City, for plaintiffs; Evan A. Davis, Douglas B. Levene, New York City, Robert T. Greig, Mark P. Friedman, Hong Kong, of counsel.
    Thomas A. Andrews, P.C., New York City, for defendant Bradford A. Shaheen; Howard F. Husum, New York City, of counsel.
   EDWARD WEINFELD, District Judge.

This action, one of two consolidated actions, was instituted against the defendant Bradford A. Shaheen (“Shaheen”) for breach of written letter credit agreements and failure to pay when due two notes in the amounts of $1,244,737.45 and $614,-250.00, respectively, which sums were advanced by plaintiff banks to the defendant upon his execution and delivery of the notes, as required by the terms of the letter agreements. Following pretrial discovery, plaintiffs, Hong Kong Deposit & Guaranty Co. Ltd. (“HKDG”), Bil (Vila) Bank Ltd., and their respective liquidators, move pursuant to Rule 56, Fed.R.Civ.P., for summary judgment in their favor upon their claims and dismissal of defendant’s counterclaims for fraud and breach of an alleged oral commission contract.

BACKGROUND

HKDG is now a defunct deposit-taking company created under the laws of Hong Kong and formerly engaged in the business of wholesale banking. Shaheen and his father, John Shaheen, claim to have acted in conjunction with another Hong Kong deposit-taking company, Tetra Finance (HK) Ltd. (“Tetra”), in creating HKDG with the view toward attracting petro-dollar deposits from Arab oil interests. Shaheen claims that, prior to the formation of HKDG in January 1981, officers of Tetra agreed that he and his father would be paid commissions for generating deposits into the new bank and Tetra and for their efforts in bringing prominent Arabs onto the Boards of HKDG and Tetra. In addition, it is claimed that a $20 million loan would be advanced on behalf of Bradford Shaheen from Phillipine sources to constitute his capital contribution to HKDG.

By letters dated November 12, 1981 and December 2, 1981, Shaheen “instructed” the managing director of HKDG, Eduardo Yotoko (“Yotoko”), to withdraw sums of $1,200,000 and $600,000, respectively, from HKDG’s funds on deposit with Tetra and to advance those sums to him. Thereafter, on November 13 and December 4, Shaheen signed letter agreements with HKDG providing for short term loans, both ultimately due on January. 22, 1982. At the time of the execution of the letter credit agreements and the notes, Shaheen was the owner of fifty percent of the capital stock of HKDG, and its president, although he now claims it was only a nominal title and that Tetra management fully controlled HKDG.

DISCUSSION

Although the funds were advanced to Shaheen under his instructions and the written agreements and notes executed by him are unconditional and absolute, Shaheen, in opposing the motion for summary judgment, contends they do not state the “real” agreement of the parties — that it was different. He asserts that he had an understanding or oral agreement with Yotoko that the monies received by him were not a loan but were advances against either (1) sums due or to become due him pursuant to the oral commission arrangement entered into by his father with Tetra upon the formation of HKDG or (2) dividends to be declared or withdrawals of capital. Shaheen asserts, supported by an affidavit submitted by Yotoko, that because of liquidity problems, the advances were documented on the books of HKDG as a loan, i.e., an asset of HKDG. Finally, defendant contends that Yotoko fraudulently misrepresented to him that repayment of the loans would not be required.

The Commission Contract Claim

During the course of the litigation, Shaheen’s commission contract claim has taken a zigzag course to hurdle legal barriers to his denial of liability for payment of the notes. Originally Shaheen claimed that, prior to the formation of HKDG, he and his father “on the one hand, and HKDG and Tetra, on the other hand, [agreed] that [they] would be paid commission fees ... on all deposits made in HKDG and/or Tetra as of the date HKDG was established in 1981____” When plaintiffs’ counsel noted that any such agreement between Shaheen, a fifty percent shareholder and later a director, and HKDG would constitute a breach of fiduciary duty if not disclosed to the HKDG Board, Shaheen changed his claim, contending that under “the original understanding [his father] would be paid for the deposits which were made with HKDG and [he] would be paid on the deposits which were made into Tetra.” This “clarification” is a palpable attempt to avoid plaintiffs’ charge of a breach of fiduciary duty, for it is conceded that no commission arrangement was ever presented to, approved, or ratified by the Boards of HKDG or Tetra. However, in his attempt to avoid the charge, Shaheen has abandoned any claim against the plaintiffs herein upon the original pre-1981 commission contract. As defendant now characterizes that agreement, he was to receive commissions from Tetra, not HKDG. Tetra is not a party to this action. Accordingly, any affirmative defense or counterclaim based upon the pre-1981 agreement must fail.

Recognizing this failure, and repeatedly asserting that the commission contract claim has not been abandoned, Shaheen’s counsel now contends that “the advances made to [Bradford Shaheen] in late 1981 ($1.8 million) ... were advances against commissions due both [John Shaheen and Bradford Shaheen] on a consolidated basis.” However, Shaheen has not provided one scrap of written evidence to give the slightest support to this claim. Thus, entirely apart from the invalidity of any such agreement in the absence of Board approval, Shaheen’s claim runs squarely into the parol evidence rule. It is “[o]ne of the oldest and most settled principles of New York law” that a litigant may not offer proof of prior or contemporaneous oral statements “to alter or refute the clear meaning of unambiguous terms of written, integrated contracts.”

“Unless we have reached the point in commercial life where as in Alice in Wonderland, words do not mean what they say, [defendant’s] claim must fail.” Shaheen does not dispute that the written letter agreements are clear, unambiguous, complete, and unconditionally obligate him to repay the sums to HKDG. However, he claims that the parol evidence rule is inapplicable to his commission claim since it falls within the condition precedent exception to that rule. Here, Shaheen places substantial reliance upon the affidavit of Yotoko, who states, “[i]t was understood at the time of [the] advances [to Shaheen] that, after a final accounting when the ultimate commissions due to the Shaheens would be determined, the subject advances would be settled either as commissions or loans, depending upon the amount of commissions ultimately determined to be due.” Based upon this statement, Shaheen claims that the notes were only “conditionally” enforceable; that is, that their enforcement was conditioned upon a determination that the advances exceeded the commissions to which he and his father allegedly were entitled “at which point the notes would become enforceable to the extent' of any such excess.”

Shaheen’s own statement of his claim as well as the Yotoko affidavit make clear that the claimed oral understanding does not fall within the condition precedent exception to the parol evidence rule. Shaheen, in contending that the notes would be enforceable in the amount of any excess over and above commissions earned — an amount yet to be determined upon a final accounting at some unstated future date — , relies upon a condition subsequent, not a condition precedent. The lack of merit to this attempt to avoid payment of the notes is underscored by the fact that the loan agreements expressly enumerate three “conditions precedent,” of which an accounting for commissions allegedly due is not one.

Even assuming that the claimed condition were a true condition precedent to the formation of a binding contract, it would still fall outside the parol evidence rule. The New York courts have expressly rejected oral evidence of conditions precedent where it expressly contradicts the terms of a written agreement. Here, the contradiction is apparent: while, under the claimed oral understanding, the amount and the obligation to repay would be subject to change upon an accounting of commissions allegedly due, the written letter agreements and notes represent an absolute obligation to pay a sum certain.

The Dividend/Withdrawal of Capital Claim

In a further effort to avoid his “irrevocabl[e] and unconditional! ] promise to pay” the amounts specified in the notes, Shaheen contends that, when he made that unequivocal commitment, he was told by Yotoko that the loans would be converted into nonrepayable withdrawals of surplus capital over and beyond his investment in HKDG. Unlike the commission contract claim, this claim is based upon Shaheen's deposition testimony as to the alleged oral representation and is without support in the Yotoko affidavit.

In response to the objection that this claim too runs afoul of the parol evidence rule, Shaheen relies upon another exception thereto: fraud. Shaheen contends that when the funds were withdrawn, Yotoko knew that Tetra had failed to obtain the promised $20 million loan from Phillipine sources which was to represent his capital investment in HKDG. Accordingly, Shaheen claims that at the time of the advances, it was “fraudulently] misrepresentfed] to him ... that he was, in effect, withdrawing his own money in the form of surplus accrued interest and earnings on his $20 million investment in HKDG ... which he need not repay.”

Shaheen’s reliance upon an exception to the parol evidence rule is, again, without substance. Parol evidence will only be admitted to show fraud where it indicates “the intention of the parties that the entire contract was to be a nullity, not ... that only certain provisions of the agreement were not to be enforced”---- Here, Shaheen’s proffer of an oral misrepresentation, if proven, would only modify, reduce, or offset the repayment provision of the written agreements. It would not destroy the loan contracts. Shaheen does not claim that there were no loan contracts between the parties. Rather, he contends there were loan agreements, which he signed and pursuant to which he accepted funds, but which, according to Yotoko, were later to be converted into a withdrawal of surplus capital. Shaheen has renounced any claim for rescission of the agreements, seeking to retain the contracts’ benefits, but to defend upon the ground that the repayment provision was to be modified upon the occurrence of future events pursuant to an oral understanding. Accordingly, Shaheen’s reliance on the fraud exception to the parol evidence rule is as unavailing as his attempt to bring his commission contract claim within the condition precedent exception.

Both efforts to evade the force of the parol evidence rule must, in any event, fail for it is well established New York law that “when the outcome of the admission of parol evidence ... would be contrary to law and public policy, such proof [is] inadmissible and the written contract [is to] be enforced according to its terms.” Both the alleged commission understanding as well as the alleged promise to convert the advances into capital withdrawals violate New York policy as well as Hong Kong law. Both are predicated upon a secret agreement that the loans were not really loans and did not have to be repaid. However the alleged “understanding” is characterized — as one for the payment of commissions or as one for the withdrawal of surplus capital — the fact remains that, under either of Shaheen’s versions, the true nature of the transaction was concealed by the execution and delivery of the letter credit agreements and the notes under which the monies received by him were recorded on HKDG’s books as a loan payable by him.

The New York courts have consistently rejected such claims for sound policy reasons.

[W]hen [a party] execute[s] and deliver^] to the plaintiff bank an instrument in the form of a note, [that party is] chargeable with knowledge that, for the accommodation of the bank, [he] was aiding the bank to conceal the actual transaction. Public policy requires that a person who, for the accommodation of the bank executes an instrument which is in form a binding obligation, should be es-topped from thereafter asserting that simultaneously the parties agreed that the instrument should not be enforced.

Shaheen readily admits, and in fact relies upon, the arrangement whereby the alleged commission payments or withdrawals were booked as loans because of the Bank’s liquidity problems. Thus, even assuming the truth of his claim, Shaheen participated and effectively conspired with HKDG management to conceal the true nature of the agreement as a liability, instead of as an asset. To permit defendant Shaheen to rely upon the proffered oral testimony, whether of a commission contract or a dividend/withdrawal, would sanction an agreement between the President and fifty percent shareholder of a bank to drain assets out of the bank while making it appear that a loan receivable remained on the bank’s books. Such an agreement would not only constitute a fraud upon HKDG’s other fifty percent shareholder, but also a fraud upon the bank’s creditors and a violation of Hong Kong law with respect to the reporting and bookkeeping requirements of deposit-taking companies. Moreover, the alleged oral understandings constitute a flagrant abuse of fiduciary obligation by not only Shaheen and his father, but also by Eduardo Yotoko, the managing director of HKDG. According to their self-styled descriptions, these were persons of considerable experience in financial, banking, and world trade affairs. Shaheen’s attempts to vitiate the written letter of credit agreements and notes upon alleged oral “understandings” never presented to the Board of Directors of HKDG reflects recreant conduct and a betrayal of trust not only of HKDG depositors, but, too, of the other HKDG shareholder. What emerges from a careful and word by word reading of the voluminous papers submitted on this motion is a blatant attempt by the Shaheens acting in concert with Yotoko to defeat Bradford Shaheen’s “irrevocabl[e] and unconditional ] promise to pay” the amount of monies received by him.

When faced with a claimed oral understanding of this character, New York courts have not hesitated to preclude a litigant from seeking to vary the terms of a written contract, even upon claims of fraud. Accordingly, the court finds that Shaheen’s affirmative defenses to enforcement of the loan agreements and notes fail as a matter of law. Because Shaheen’s counterclaims are simply an attempt to enforce the same contentions advanced as affirmative defenses, they, too, are dismissed, and plaintiffs are entitled to judgment upon their claims.

Submit order.

      . Shaheen also phrases his claims in terms of estoppel. The Court’s disposition of the fraud and commission contract claims is equally applicable with respect to any “estoppel” claim.

      . Joint Pretrial Order ¶¶ 1, 1(a) at 8.

      . Affidavit of John M. Shaheen, Oct. 1, 1984, at ¶ 26.

      . Affidavit of Howard F. Husum, Esq., Feb. 4, 1985, at ¶ 3.

      . Meinrath v. Singer Co., 482 F.Supp. 457, 460 (S.D.N.Y.1979), aff’d without opinion, 697 F.2d 293 (2d Cir.1982).

      . Id. at 460; see id. at 460 n. 7 (citing cases); Jamestown Business College Ass’n v. Allen, 172 N.Y. 291, 64 N.E. 952 (1902); Thomas v. Scutt, 127 N.Y. 133, 27 N.E. 961 (1891).

      . Meinrath v. Singer Co., 482 F.Supp. 457, 460 (S.D.N.Y.1979), aff'd without opinion, 697 F.2d 293 (2d Cir.1982).

      . Under New York law, these agreements are integrated as a matter of law. Zugarek v. Walck, 54 A.D.2d 1074, 1075, 388 N.Y.S.2d 756, 757 (4th Dep't 1976); see Battery Steamship Corp. v. Refineria Panama, S.A, 513 F.2d 735, 738 & n. 3 (2d Cir.1975) (while under federal law and the law of most jurisdictions the question whether a written document is intended as a total integration of the terms of the parties' agreement is a question of fact, “under New York law a contract which appears complete on its face is an integrated agreement as a matter of law.”); Higgs v. De Maziroff, 263 N.Y. 473, 189 N.E. 555 (1934); Farm Stores, Inc. v. School Feeding Corp., 79 A.D.2d 504, 433 N.Y.S.2d 453 (1st Dep’t 1980); Piercy v. Citibank N.A., 101 Misc.2d 302, 303-04, 424 N.Y.S.2d 76, 77 (N.Y.Co.1978) ("We may not have recourse to the parol evidence to ascertain whether they do in fact include the entire agreement of the parties.” (quoting William H. Waters, Inc. v. March, 240 A.D. 120, 125, 269 N.Y.S. 420, 426 (1st Dep’t 1934)), aff’d, 48 N.Y.2d 900, 400 N.E.2d 1349, 424 N.Y.S.2d 897 (1979).

      . Defendant’s Memorandum in Opposition at 5.

      . Yotoko states in his affidavit that the final accounting contemplated by the parties was never formally completed, ”[d]ue to the problems experienced by HKDG and Tetra." Affidavit of Eduardo Yotoko, Aug. 2, 1983, at ¶ 6.

      . Under New York law, an "express absolute obligation to pay cannot be contradicted by parol evidence of a condition permitting subsequent termination.” Solomon v. Van De Maele, 21 A.D.2d 396, 399, 250 N.Y.S.2d 772, 774 (1st Dep’t 1964); see Higgs v. De Maziroff, 263 N.Y. 473, 189 N.E. 555 (1934); C & N Trading Co., Inc. v. Johnstown Fur Dressing Corp., 60 Misc.2d 1012, 304 N.Y.S.2d 405 (Ful.Co.1969).

      . See, e.g., Meadow Brook Nat’l Bank v. Bzura, 20 A.D.2d 287, 246 N.Y.S.2d 787 (1st Dep’t 1964); see Metropolitan Bank of Syracuse v. Brennan, 48 A.D.2d 254, 368 N.Y.S.2d 914 (4th Dep’t 1975).

      . Promissory Notes, Exhibits H, J, & L to Affidavit of Douglas B. Levene, Jan. 9, 1985.

      . Affidavit of Howard F. Husum, Esq., Jan. 29, 1985, at ¶ 15.

      . Bersani v. General Accident Fire & Life Assur. Corp., 36 N.Y.2d 457, 461, 330 N.E.2d 68, 71, 369 N.Y.S.2d 108, 112 (1975); see Meinrath v. Singer Co., 482 F.Supp. 457, 460 (S.D.N.Y.1979), aff’d without opinion, 697 F.2d 293 (2d Cir.1982).

      . Bersani v. General Accident Fire & Life Assur. Corp., 36 N.Y.2d 457, 461, 330 N.E.2d 68, 71, 369 N.Y.S.2d 108, 112 (1975); see also Bank of America Natl Trust & Savings v. Gillaizeau, 593 F.Supp. 239 (S.D.N.Y.1984); cases cited infra note 17.

      . Mount Vernon Trust Co. v. Bergoff, 272 N.Y. 192, 196, 5 N.E.2d 196, 197 (1936); see Fleck v. Bank of Suffolk Co., 67 A.D.2d 676, 412 N.Y.S.2d 177 (2d Dep’t 1979) (mem.); National Bank of Westchester v. Dogwood Constr. Corp., 47 A.D.2d 848, 365 N.Y.S.2d 554 (2d Dep’t 1975) ("The Bergoff rule is well-established in this State) (citing cases); see also D’Oench, Duhme & Co., Inc. v. FDIC, 315 U.S. 447, 459, 62 S.Ct. 676, 680, 86 L.Ed. 956 (1942); cf. Long Island Trust Co. v. International Institute for Packaging Educ., Ltd., 38 N.Y.2d 493, 344 N.E.2d 377, 381 N.Y.S.2d 445 (1976).

      . See Hong Kong Companies Ordinance §§ 121(1), 121(2), 121(4) (criminal penalties for failure of a director to take reasonable steps to secure compliance with requirements of keeping fair and true corporate records); Hong Kong Deposit-taking Companies Ordinance §§ 17(6), 17(7) (criminal penalties for false financial statements required to be submitted to Commissioner supervising deposit-taking companies).

      . See, e.g., First Nat’l Bank of Hamden v. Kaufman, 58 A.D.2d 668, 395 N.Y.S.2d 713 (3d Dep’t 1977); West End Federal Savings & Loan Assoc. of Albany v. DiBoise, 19 A.D.2d 476, 244 N.Y.S.2d 282 (3rd Dep’t 1963); see also cases cited supra note 17.

      . Shaheen does not by his fraud counterclaim seek rescission, or even actual damages, but in effect specific enforcement of the claimed fraudulent promise to convert the advances into dividends and/or surplus capital. Thus, Shaheen seeks by way of damages the $1.8 million he borrowed from HKDG, yet has failed to provide facts upon which to base a claim for actual injury. See Cayuga Harvester, Inc. v. Allis Chalmers Corp., 465 N.Y.S.2d 606, 618, 95 A.D.2d 5, 22-24 (4th Dep’t 1983).