author: MUNSON, Chief Judge.

text:
    UNITED STATES of America v. Clifford E. BROWNE and Helen L. Browne, Defendants.
    No. 83-CR-72.
    United States District Court, N.D. New York.
    Dec. 3, 1985.

      Frederick J. Scullin, Jr., U.S. Atty. (Craig A. Benedict, Asst. U.S. Atty., Syracuse, N.Y., of counsel), for U.S.
    Baker & Baker (William Baker, North Syracuse, N.Y., of counsel), for defendant Clifford Browne.
    Edward F. Gerber, Christine Cassalia, Syracuse, N.Y., for defendant Helen Browne.
   MEMORANDUM — DECISION AND ORDER

MUNSON, Chief Judge.

Before the court is the Government’s motion to compel defendant Helen Browne to execute a release to allow the Government to obtain records from foreign banks of accounts allegedly under her control. Clifford and Helen Browne were indicted for failing to disclose the existence of foreign bank accounts. The Government states that it has attempted to obtain records of these accounts without defendants’ assistance but has been unsuccessful in obtaining any bank records from Switzerland and partially unsuccessful in its efforts to obtain documents from Canada.

Defendant asserts in oppostion to the Government’s motion that a court order compelling her to sign the “consent” form authorizing the release of bank records to the Government would violate her constitutional rights under the fourth, fifth, sixth and thirteenth amendments.

Bank records per se are not constitutionally protected from disclosure to the Government. United States v. Miller, 425 U.S. 435, 96 S.Ct. 1619, 48 L.Ed.2d 71 (1976); California Bankers Ass’n v. Shultz, 416 U.S. 21, 52-55, 94 S.Ct. 1494, 1512-14, 39 L.Ed.2d 812 (1974). An individual has no fourth amendment privacy rights in one’s own bank records, Miller, 425 U.S. at 442-43, 96 S.Ct. at 1623-24, nor do United States citizens acquire these rights under foreign bank secrecy laws as a shield from criminal investigations by the United States Government. United States v. Payner, 447 U.S. 727, 732 n. 4, 100 S.Ct. 2439, 2444 n. 4, 65 L.Ed.2d 468 (1980); United States v. Ghidoni, 732 F.2d 814, 817 n. 5 (11th Cir.), cert. denied, — U.S. -, 105 S.Ct. 328, 83 L.Ed.2d 264 (1984). While there is no fourth amendment violation in the Government’s obtaining records of bank accounts held by the Brownes, defendant’s release authorizing the disclosure of defendants’ bank accounts may have communicative aspects of its own which the fifth amendment would prohibit, see United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 1242, 79 L.Ed.2d 552 (1984); Fisher v. United States, 425 U.S. 391, 410, 96 S.Ct. 1569, 1580, 48 L.Ed.2d 39 (1976); United States v. Davis, 767 F.2d 1025, 1040 (2d Cir.1985). The fifth amendment would be violated if the defendant were “compelled to make a testimonial communication that is incriminating." Fisher, 425 U.S. at 408, 96 S.Ct. at 1579, quoted in Ghidoni, 732 F.2d at 816 (emphasis added). All three factors must be present in the “consent” form which the Government has requested the defendant to sign in order to find that defendant’s fifth amendment rights would be violated by this court’s ordering her to sign the form. See Ghidoni, 732 F.2d at 816-17 (court decides consent form was not testimonial in nature therefore obviating the necessity of court’s determining element of incrimination).

Obviously, if the court orders the defendant to sign the “consent” form after she has refused to do so voluntarily, the element of compulsion is met. See Ghidoni, 732 F.2d at 816.

The consent form would be deemed testimonial if the defendant, by signing the form, was thereby attesting to the bank records’ existence, authenticity, or defendant’s control over the records. See, Doe, 104 S.Ct. at 1242 (quoting Fisher, 425 U.S. at 410, 96 S.Ct. at 1580). The consent form presented by the Government is broadly worded and does not state that any accounts in the name of defendant exist. Therefore, if the banks produce records of accounts held in the name of defendant, the Government has not relied upon the “truth-telling” of the defendant’s signed release to demonstrate the existence of these records. See Fisher, 425 U.S. at 411, 96 S.Ct. at 1581, cited in Ghidoni, 732 F.2d at 818. Cf. In re Grand Jury Investigation, Doe, 599 F.Supp. 746, 748 & n. 5 (S.D.Tex. 1984) (court denies Government’s request for order directing person appearing before grand jury to sign consent form similarly authorizing release of foreign bank account records; court determines that because of content of proposed consent form, individual’s signing consent form would amount to attestation of existence of the bank accounts). The release presented by the Government in this case does not contain an admission or any other statement that defendant exercises control over any of the accounts for which the Government will request the bank records. As in Ghidoni the release permits the banks to make their own determination of whether defendant exercises control over any accounts in the particular bank. Id.

The last element of the testimonial factor is whether the release amounts to defendant’s attesting to the authenticity of any bank records to be produced. As in Fisher and Ghidoni, only the banks can authenticate their own records; this situation is unlike those cases in which the individuals are required to produce records which they have maintained themselves. See Doe, 104 S.Ct. at 1242, 1246-47; United States v. Fox, 721 F.2d 32, 36-38 (2d Cir.1983). Because the release is not testimonial defendant may not properly invoke the fifth amendment to refuse to sign the consent form presented by the Government.

Whether defendant’s signing the release is incriminating is a more troubling question. It could be said that the release is incriminating in that “it furnishes a link in the chain leading to the procurement of documents that the government intends to use to secure [defendants’] conviction” at trial. Ghidoni, 732 F.2d 819, 821 (Clark, J., dissenting). Stated differently, the release allowing the banks to produce bank records of defendant’s accounts may compel defendant to “add to the ‘sum total of the Government’s information.’ ” Fox, 721 F.2d at 38. However, there is no support for defendant’s argument that a waiver of rights under foreign bank secrecy laws constitutes the incrimination element of the fifth amendment’s protection. While a waiver by Mrs. Browne of her rights will lead to the production of records which the Government intends to use to obtain her conviction, this is not self incrimination. A determination of incrimination is confined to whether the communication compelled to be made by the individual is itself incriminating or testimonial. See Davis, 767 F.2d at 1039; Doe, 104 S.Ct. at 1242 (act of production of one’s own documents which may be used against one in criminal prosecution may have testimonial aspects and an incriminating effect). Here the consent would merely operate to “remove an obstacle” to the production of foreign bank records which obstacle is created by foreign law. United States v. Quigg, Crim. No. 80-41-1, slip op. at 5 (D.Vt. Jan. 5, 1981). Since defendant does not acquire any rights under foreign bank secrecy laws which are cognizable in United States courts, Payner, 447 U.S. at 732 n. 4, 100 S.Ct. at 2444 n. 4, defendant may not invoke the fifth amendment to refuse to waive these “rights” by signing the proposed consent form. This court concludes that there is nothing in the release itself which incriminates defendant; therefore, requiring defendant to sign the proposed consent form does not violate defendants’ fifth amendment rights.

Defendant argues that the Government’s motion should be denied because a request for all of defendant’s bank records sweeps too broadly where the defendant was not indicted for tax fraud but only failure to report the existence of foreign bank accounts in excess of $1,000. Accordingly, defendant argues that the Government should be limited to seeking only the information which would directly prove defendant’s violation of this criminal law: that the Government should be limited to asking the banks from which it seeks records whether defendant had control over any accounts in excess of $1,000 in any one calendar year. Because defendant’s bank records are not constitutionally privileged there is no basis for this court’s limiting the Government’s request for defendant’s records. Whether all of the bank records or information contained therein is admissible to prove the crimes charged is a separate question which must abide the Government’s attempt to introduce these records into evidence at trial. See e.g., United States v. Figueroa, 618 F.2d 934, 939 (2d Cir.1980).

The Government’s request for an order directing Mrs. Browne to sign the release presents no sixth amendment impediments at this time. The Confrontation Clause of the sixth amendment may prevent the admission into evidence of bank records at trial if the records do not “bear sufficient indicia of reliability to assure an adequate basis for evaluating the truth of the [records].” Davis, 767 F.2d at 1032. Until the records are produced, the authenticity of the records maintained by the banks cannot be challenged.

In conclusion, the Government is entitled to an order of the court directing the defendant to sign the broadly-worded consent form authorizing the release of records of her foreign bank accounts if they exist. No fourth amendment right protects against disclosure of foreign bank accounts held by United States citizens. The release presented by the Government is neither testimonial nor incriminating and therefore defendant is not entitled to refuse to sign the form on fifth amendment grounds. No sixth amendment right is yet implicated where the defendant may still have the opportunity to challenge the authenticity of the records.

It is hereby ordered that Helen Browne execute the release in the form presented by the Government with' this motion authorizing The Bank of Nova Scotia, The Bank of Montreal, and the Foreign Commerce Bank of Zurich (Switzerland) to produce their records of accounts maintained by the defendant in this action.

IT IS SO ORDERED.

APPENDIX

AUTHORIZATION FOR RELEASE OF BANK RECORDS

I, HELEN L. BROWNE, of the State of New York in the United States of America, do hereby authorize and direct any bank or trust company at which I have or have had a bank account of any kind, or at which a corporation has or has had a bank account of any kind upon which I am or have been authorized to draw, specifically including, but not limited to, The Bank of Nova Scotia, The Bank of Montreal, and The Foreign Commerce Bank of Zurich (Switzerland) and its officers, employees and agents, to disclose all information and deliver copies of all documents of every nature in your possession and control which relate to the said bank accounts with a notorized certificate attesting to their authenticity to any attorney of the United States Department of Justice, for use in the case of the United States of America v. Helen L. Browne, 83-CR-72, now pending in the United States District Court for the Northern District of New York, and this shall be irrevocable authority for so doing. This release is intended to apply to any and all bank confidentiality laws, and shall be construed as consent with respect thereto as the same shall apply to any of the bank accounts for which I may be or have been a relevant principal, signatory or beneficiary.

HELEN L. BROWNE

Sworn to before me this_day of October, 1985.

Notary Public

      . The government moved to compel both defendants to sign the releases. Clifford Browne has since died. Mr. Browne has made arguments in opposition to the government’s motion which were not made by Mrs. Browne. Because both defendants were similarly situated with respect to this motion, the arguments made by each will be deemed to have been made by both. Therefore the arguments advanced by Mr. Browne will be treated as having been made by Mrs. Browne in ruling on the government’s motion.
      The release to be signed by Mrs. Browne would permit the government to obtain bank records of only those accounts over which Mrs. Browne had control either jointly or individually. It could not operate to release records of accounts over which the deceased Mr. Browne had exclusive control. A copy of the release which the government seeks to compel Mrs. Browne to sign appears as an appendix to this decision. The release sought from Mr. Browne is identical.

      . Clifford Browne’s argument that a court order compelling him to execute the release sought by the Government would constitute a violation of the thirteenth amendment’s protection against involuntary servitude is summarily rejected. There is no foundation for such an argument. A court has the power to order a person to take some action which the court determines they are legally obligated to take without treading on such a person’s rights under the thirteenth amendment.

      . Defendant seeks to interject into her fourth amendment argument a balancing by the court of the interest of foreign governments in upholding their banking secrecy laws against the interest of the United States in enforcing its criminal laws. See United States v. Davis, 767 F.2d 1025, 1033-36 (2d Cir.1985). However, such an inquiry is not necessary at this stage of the proceedings before a formal request or subpoena is issued to the banks along with the signed releases. Additionally, this argument is more appropriately raised by the foreign banks which are subject to the secrecy laws, id. at 1033; it is not an appropriate basis for defendant's refusing to sign the release form. Again, defendants do not enjoy the protections of foreign banking secrecy laws in a criminal proceeding in a United States court.


source: Caselaw Access Project

author: BROOKS, District Judge.

license: Public Domain

text:
    Ruth Carolyn ATKINS, Plaintiff, v. TONY LAMA COMPANY, INC., Teresa Lama Bean, Angelina Lama Faulkner, Tony Lama, Jr., Joseph H. Lama, Jr., Max R. Prestridge, Jr., Jack Rich, J. David Stanford, E. Eugene Burkett, Woodrow W. Bean, Jr., Carmen Lama Caruso, Bruce Faulkner, Defendants.
    No. EV 84-214-C.
    United States District Court, S.D. Indiana, Evansville Division.
    Dec. 3, 1985.

      Theodore Lockyear, Evansville, Ind., for plaintiff.
    David Jones, Bowers, Harrison, Kent & Miller, Alan Shovers, Kahn, Dees, Donovan & Kahn, Evansville, Ind., W. Donald McSweeney, James Clark, Schiff, Hardin & Waite, Chicago, 111., John L. Carroll, Johnson Carroll & Griffith, Evansville, Ind., for defendants.
   MEMORANDUM ORDER

BROOKS, District Judge.

This matter comes before the Court upon the motions of the defendants to dismiss plaintiff’s complaint. Each of the parties have fully briefed the issues presented by the motions and the Court now deems the motions ripe for ruling.

Plaintiff commenced this class action in three (3) counts on August 8, 1984 seeking compensatory and punitive damages as well as the rescission of the sale and purchase of some four hundred forty two thousand eight hundred ninety seven (442,897) shares of stock of the corporate defendant which occurred in 1984. Count I of the complaint, after reciting various facts with respect to the sale and purchase of the stock, alleges that the individual defendants negligently breached their fiduciary duty to the corporation’s shareholders thereby causing a diminution in the value of the shareholders’ stock. Count II, which incorporates by reference the allegations of Count I, is premised upon the theory that the purchase price paid for the four hundred forty two thousand eight hundred ninety seven (442,897) shares was in excess of the market value of said shares, thereby constituting a premium, and requests the Court to find that the transaction was in fact a declaration by the corporate defendant of a dividend to which plaintiff and the members of the class are entitled. Count III is plead as a stockholder’s derivative action brought pursuant to Rule 23.1, Federal Rules of Civil Procedure, contending that the board of directors of the corporation have caused, authorized, or acquiesed in the waste of corporate assets which conduct has benefited, either directly or indirectly, the individual board members. On February 1, 1985 plaintiff amended her complaint to add an additional count alleging that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10(b)(5) promulgated thereunder. The jurisdictional basis for plaintiff’s complaint is founded upon the Security Act of 1933, as amended, 15 U.S.C. § 77a et seq., and the Securities Exchange Acts of 1934, as amended, 15 U.S.C. § 78a et seq. and Title 28 United States Code, Sections 1331 and 1332.

The plaintiff in this action, Ruth Carolyn Atkins (hereinafter “Atkins”), is an Indiana resident and the owner of some three hundred (300) shares of common stock of the corporate defendant Tony Lama Company, Inc. (hereinafter “Tony Lama”) a Texas corporation with its principal place of business in Texas. The individual defendants are also residents of Texas. Teresa Lama Bean, Woodrow W. Bean, Jr., Angelina Lama Faulkner, Bruce Faulkner and Carmen Lama Caruso (hereinafter collectively the “Sellers”) were stockholders of Tony Lama who sold their shares to the corporation in 1984 which transaction gave rise to this suit. Defendants Tony Lama, Jr., Joseph H. Lama, Jr., Louis R. Lama, Max R. Prestidge, Jr., Jack Rich, J. David Stanford and E. Eugene Burkett, as well as Teresa Lama Bean and Angelina Lama Faulkner, comprised the board of directors of Tony Lama at the time of the events complained of, and in some cases also held positions as executive officers within the corporation. These later defendants will hereinafter be collectively referred to as the “Board of Directors”.

Each of the defendants (i.e. Tony Lama, the Sellers, and the Board of Directors) filed, prior to the amendment of plaintiffs complaint, motions to dismiss the complaint. After plaintiffs amendment adding Count IV, each of the parties filed supplemental briefs with respect to the pending motions to dismiss. Essentially, it is defendants’ position that with respect to Counts I and II plaintiff lacks standing to maintain this action on her own behalf or as a class action because such counts may only be brought by or on the behalf of Tony Lama, the corporate defendant. Additionally, it is contended that there is no cognizable claim at law for a constructive dividend and that the acts of which plaintiff complains do not give rise to a violation of the federal securities laws. With respect to Counts III and IV, defendants argue that both fail to allege the statutory prerequisites excusing plaintiff’s failure to make a demand on the Board of Directors and that the alleged omissions and misstatements set forth in Count IV do not give rise to an actionable claim. The Court finds that the majority of the defendants’ arguments are well taken.

Counts I and II of Atkins’ complaint, while seeking different forms of relief, are both premised upon the theory that the members of the Board of Directors have breached their fiduciary duties and committed corporate waste and that, as a result, the financial condition of Tony Lama has been impaired and there has been a diminution in the value of Tony Lama’s stock. As plead, such allegations, despite being characterized as wrongs against plaintiff and plaintiff class members, allege wrongs primarily against the corporation itself which affects the whole body of the corporation’s stock or property and not just plaintiff’s individual interest. Accordingly, the proper manner in which to assert such claims is via a shareholder’s derivative action, since Atkins may not proceed individually even though she may have been injured by a diminution of the value of her shares. Cowin v. Bresler, 741 F.2d 410 (D.C.Cir.1984); Lewis v. S.L. & E., Inc., 629 F.2d 764, 768 n. 10 (7th Cir.1980); Press v. Marvalan Industries, 468 F.Supp. 1072, 1078 (S.D.N.Y.1979). As the Court noted in Cowin supra:

When an injury to corporate stock falls equally upon all stockholders, then an individual stockholder may not recover for the injury to his stock alone, but must seek recovery derivatively in behalf of the corporation. Id. at 414

It follows, that Atkins not having standing to maintain the action in her own behalf may not maintain Counts I and II as a class action since a predicate to her right to represent a class is her eligibility to sue in her own right. Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727, 734 (3rd Cir. 1970).

Therefore, while the Court has no quarrel with the view that the allegations of Counts I and II may be sufficient to allege valid state causes of action for breach of fiduciary duties or corporate mismanagement that is not the decisive issue. The inquiry goes to plaintiff’s standing to maintain such claim in her own behalf or as a class representative. Based upon the above authorities, the Court finds that plaintiff lacks standing either in her own behalf or as a class representative to maintain Counts I and II, and those counts therefore should be dismissed.

Count III of plaintiff’s complaint is brought derivatively on behalf of the corporate defendant, Tony Lama. The allegations underlying this count are the same as those upon which Counts I and II are based. Thus, Count III presents nothing more than a derivative claim seeking damages for the same corporate misconduct which is alleged in Counts I and II. Defendants have moved to dismiss this Count (as well as Count IV) on the basis that the complaint fails to allege sufficient facts to excuse plaintiff’s failure to make a demand on the Board of Directors.

Rule 23.1 Federal Rules of Civil Procedure requires that in a derivative action the complaint must “allege with particularity the efforts, if any, made by the plaintiff to obtain the action he desires from the directors or comparable authority and, if necessary, from the shareholders or members, and the reasons for his failure to obtain the action or for not making the effort.” Generally, the determination of the sufficiency of the allegations regarding demand or the futility of making a demand rests within the discretion of the court. Kaster v. Modification Systems, Inc., 731 F.2d 1014 (2nd Cir.1984); Lewis v. Graves 701 F.2d 245 (2nd Cir.1983).

In the case sub judice plaintiff has indicated that no demand has been made upon the Board of Directors for the reason that such demand would be futile. In support of the contention that demand would be futile plaintiff points to several different factors which excuse demand:

(1) That the Board of Directors have caused, acquiesed in, authorized or approved the waste of assets and have directly or indirectly benefited from the wrongful conduct alleged.
(2) That the Board of Directors embarked upon a plan and scheme to favor members of the Lama family to protect their own pecuniary interests and to safeguard their interests and relationships as Board of Directors and not for any valid business purpose of the Company.
(3) That the Board of Directors are fully knowledgeable about the waste and diversion of the Company’s assets that has already occurred through their wrongful acts and transactions complained of herein, and said defendants will not voluntarily refrain from continuing their plan and scheme.
(4) That to permit this action to be prosecuted by the Board of Directors would place its directors in hostile hands and prevent its prosecution.
(5) That the Board of Directors cannot in good faith excuse any independent business judgment to determine whether to approve a resolution authorizing the filing of a suit against themselves and the defendant sellers.

The core then of plaintiff’s contentions that demand should be excused is based upon the proposition that the board members are so self interested or otherwise tainted that no demand upon the Board of Directors could be expected to prod them to correct the alleged wrongs. However, upon examination the Court is not of the opinion that plaintiff’s allegations are sufficiently particularized so as to enable the Court to find the demand requirement excused.

It has been repeatedly held that absent specific allegations of self dealings or bias on the part of a majority of the board, mere director approval or acquiescence in the alleged misdeeds is insufficient to render demand futile. Lewis v. Graves, supra; Lewis v. Curtis, 671 F.2d 779 (3rd Cir.) cert. denied, 459 U.S. 880, 103 S.Ct. 176, 74 L.Ed.2d 144 (1982). Grossman v. Johnson, 674 F.2d 115 (1st Cir.1982) cert. denied, 459 U.S. 838, 103 S.Ct. 85, 74 L.Ed.2d 80 (1982). Nor is the fact that plaintiff has named all of Tony Lama’s then serving directors as defendants sufficient to excuse demand. Lewis v. Graves, supra; Heit v. Baird, 567 F.2d 1157 (1st Cir.1977); Brooks v. American Export Industries, Inc., 68 F.R.D. 506 (S.D.N.Y. 1975). Thus, the Court must determine whether the other allegations supporting futility of demand establish a sufficient degree of “involvement” so as to point to bias or self interest on the part of the directors.

Plaintiff contends that the directors have directly or indirectly benefited from the alleged wrongful conduct, yet plaintiff fails to point to any facts demonstrating how the directors benefited either directly or indirectly from the complained of actions. Nowhere is it alleged that the directors received any benefits as a result of their decisions, pecuniary or otherwise. Simply saying that there was a benefit falls far short of particularized charges of bias or self-dealing, and leaves the Court in the untenable position of having to speculate as to what benefits the directors derived. This the Court is unwilling to do. If, as plaintiff subsequently charges, the benefit received was the preservation of the defendants’ position on the Board of Directors, such allegations, absent a logical or factual nexus between the challenged transaction and the asserted entrenchment, also must fail. Lewis v. Graves, supra.

The balance of plaintiff’s arguments in support of excusing demand are at best conclusory and speculative. There is no indication in the complaint that the Board of Directors cannot or would not make a good faith investigation of the wrongs of which plaintiff complains. The fact that the Board of Directors would be asked to sue itself is not determinative as to the question of futility of demand. Heit v. Baird, supra. Furthermore, speculative allegations as to the Board’s motivation without any factual basis is insufficient to justify the failure to make a demand. In Re Kauffman Mutual Fund Actions, 479 F.2d 257 (1st Cir.1973), cert. denied, 414 U.S. 857, 94 S.Ct. 161, 38 L.Ed.2d 107 (1973). To find otherwise would be to eviscerate the demand requirement altogether in nearly every case and allow disgruntled shareholders to easily avoid the clear requirements of the rule.

Atkins, in her responsive briefs to the motions, makes much ado about the fact that she has alleged that certain defendants “controlled” the Board of Directors. However, this allegation standing alone will not suffice. Numerous courts have found that a bare allegation that the board of a corporation is dominated or controlled by others insufficient to excuse demand. Grossman v. Johnson, supra, Greenspun v. Del E. Webb Corp., 634 F.2d 1204 (9th Cir.1980); Vernars v. Young, 539 F.2d 966 (3rd Cir.1976); In Re Kauffman, supra. In the present ease plaintiff has set forth no particularized allegations of domination or control of the Board of Directors, and in the Court’s opinion plaintiff cannot at this juncture support such allegation with fact, in light of the fact that the alleged “control” persons comprised a minority of the board at the time the transactions complained of were approved. Accordingly, because the Court finds that plaintiff has failed to sufficiently particularize reasons which would excuse demand, the Court agrees that Count III of the complaint should also be dismissed.

There are also alternative reasons why the Court believes Count III should be dismissed. The thrust of Atkins’ allegations of wrongdoing in Count III goes to the directors’ breach of their fiduciary duties or other corporate mismanagement. Such claims cannot give rise to an action based upon violation of the federal securities acts. Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977); Panter v. Marshall Field & Co., 646 F.2d 271 (7th Cir.1981), and are cognizable, if at all, only under the substantive state corporation law dealing with mismanagement, fraud and self dealing. Although it is not entirely clear from plaintiff’s response to the motions, it appears to be plaintiffs position that the allegations of Count III are sufficient to state a claim under Section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a) et seq. However, in the Court’s opinion plaintiff is mistaken.

Section 14 of the 1934 Act, 15 U.S.C. § 78n, is, like Section 10(b) upon which Count IV is based, one of the broad antifraud provisions of the Securities Acts designed to prohibit deception or misrepresentation in the securities field. The two provisions and the rules promulgated thereunder are fairly coextensive in their anti-fraud provision and differ materially only with respect to the “in connection with” language and the culpability required for violation of their provisions. Both provisions require plaintiff to allege fraud, deception, or the making of some material misrepresentation. See: J.I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964); Cowin v. Bresler, supra; Panter v. Marshall Field, supra; Ruckle v. Roto American Corp., 339 F.2d 24 (2nd Cir 1964). In Count III, plaintiff makes no claims of fraud, deception or misrepresentation of any kind. She instead simply alleges corporate misconduct in the purchase of its stock or that the purchase was improvident in some other respect. Such allegations are simply insufficient to invoke federal jurisdiction under the securities laws.

Finally, Count III of Atkins’ complaint, if sufficient to state a claim for corporate mismanagement or breach of fiduciary duty, will be governed by state law. Cowin v. Bresler, supra; Weiss v. Kay Jewelry Stores, Inc., 470 F.2d 1259 (D.C.Cir.1972). Because Tony Lama is incorporated in Texas, the substantive law of that State would govern this Court’s disposition of Atkins’ state law claims. Thus, even if plaintiff could remedy the deficiencies which exist with respect to plaintiff’s failure to excuse demand, this Court would be required to immerse itself in Texas law, a task which in the Court’ opinion is better left to the courts of that state. United Mine Workers of America v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). Therefore, for all of the foregoing reasons, the Court finds that Count III should be dismissed.

Count IV of plaintiff’s complaint, as noted earlier, is predicated upon alleged violations of Section 10(b) of the 1934 Act and Rule 10(b)(5) promulgated thereunder, and is brought as a derivative claim on behalf of Tony Lama. Defendants have moved to dismiss this claim also, on the basis of Atkins’ failure to adequately articulate reasons which would excuse demand upon the Board of Directors. In addition defendants contend that the alleged omissions or misrepresentations of which plaintiff complains are as a matter of law insufficient to support a claim arising under § 10(b) or Rule 10(b)(5). After having examined the allegations of Count IV, the Court is inclined to agree that the allegations of Count IV are deficient in several respects.

The allegations of Count IV of plaintiff’s complaint with respect to futility of demand are identical to the allegations contained in Count III. As the Court has already noted, plaintiff’s allegations regarding futility of demand fail to be sufficiently particularized so as to enable the Court to infer that the Board of Directors upon whom demand would be made lack the requisite disinterestedness to determine fairly whether the corporate claims should be pursued, or that the directors votes are dominated or controlled by others. Thus, on that basis alone, Count IV is subject to possible dismissal.

Furthermore, the Court has examined the various omissions and misrepresentations which plaintiff contends make the proxy statement defective, and the Court has concluded that much of what is alluded to in Atkins’ complaint are not actionable omissions or misrepresentations.

First, it is clear that the failure to reveal intent or motive, no matter how impure, is not a material fact which must be disclosed in a proxy statement. Morrissey v. County Towers Corp., 559 F.Supp. 1115 (E.D.Mo.), 717 F.2d 1227 (8th Cir. 1983); Panter v. Marshall Field, supra; Dixon v. Ladish Co., 597 F.Supp. 20 (E.D. Wis.1984). Thus, defendants’ failure to disclose the “real purpose” as in Morrissey or the “true reasons” as in Hecco Ventures v. Avalon Energy Corp., 606 F.Supp. 512 (S.D.N.Y.1985) does not give rise to a claim under the federal securities laws. Nor are defendants required to characterize the transaction in question in the same pejorative terms (i.e. “scheme”) as suggested by plaintiff. Selk v. St. Paul Ammonia Products, Inc., 597 F.2d 635 (8th Cir.1979); Goldberger v. Baker, 442 F.Supp. 659 (S.D. N.Y.1977).

Second, upon examination of the proxy statement, many of the alleged omissions of which plaintiff complains, are in fact, addressed in various portions of the proxy statement. For example, plaintiff alleges that the proxy statement fails to disclose that certain officers of the corporation would acquire an interest in the Employee Stock Ownership Plan (“ESOP”) and the nature and extent of that interest. Yet, the proxy statement does disclose both the fact and the extent of potential interests in the ESOP and shows the amount of company contributions for various employees including executive officers. Likewise, plaintiff alleges that various facts with respect to J. David Stanford’s status as both a director and legal counsel to the corporation were omitted as well as information regarding the participation of his law firm in the acquisition of the shares. However, the Court finds that most of the information which plaintiff contends was omitted is in fact contained in the proxy statement or readily discernable from a reading of the entire proxy statement. Therefore, the Court is not of the opinion that in view of the total mix of information available regarding any particular alleged omission, that the proxy statement is so deceptive so as to prevent the shareholders from seeing clearly the elements of the proposed transaction. TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976).

Finally, the Court notes that in 10(b)(5) actions there is a “reliance” requirement. That is, it must be shown that the “defrauded” party relied upon the alleged misrepresentations or omissions. Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975); Panter v. Marshall Field, supra. Here the only alleged omissions or misstatements were in Tony Lama’s own proxy statement. Furthermore, plaintiff relies upon the claim that all of the facts concerning the waste and diversion of the corporation’s assets were known to the Board of Directors. By definition then, it would appear that Tony Lama, on whose behalf Count IV is brought, and who acted through its allegedly culpable directors, could not have been deceived, and thus could not meet the “reliance” requirement of 10(b)(5). See, Zilker v. Klein, 510 F.Supp. 1070 n. 6 (N.D.Ill.1981).

Based upon the foregoing, it would appear that Count IV of Atkins’ complaint should also be dismissed, for failure to meet the demand requirement of Rule 23.1, for the reason that, as plead, the “reliance” requirement cannot be met, and for the reason that most, if not all, of the alleged omissions and/or misrepresentations either are not redressable under the securities laws, or are in fact, disclosed in the proxy statement, albeit not in the form plaintiff would have them in. The true thrust of Count IV, as pled, arises out of alleged acts of corporate mismanagement. In fact, that is the gravamen of plaintiff’s entire complaint. As such, under the Santa Fe rule, the claim is not cognizable under federal law.

However, the Court is mindful of the fact that when ruling upon a motion to dismiss the Court should not grant the motion unless, when read in the light most favorable to the plaintiff, the complaint fails to state any valid claim for relief. In the case sub judice Atkins, although not pleading it specifically, has suggested that she is also asserting a claim under § 14(a) of the 1934 Act, 15 U.S.C. § 78 n(a) and Rule 14 (a)(9). Since “reliance” is not a requirement under that rule, Cowin v. Bresler, supra, and since plaintiff has requested leave to amend her complaint, the Court is of the opinion that at this juncture, the interests of justice require this Court to allow plaintiff to amend Count IV of her complaint.

It should be noted, however, that as plead, Atkins complaint, in this Court’s opinion presents precisely the kind of claims the Supreme Court in Santa Fe felt should be decided under state corporate law. Therefore, in order to survive any subsequent motions, plaintiff is going to have to allege sufficient facts, consistent with the Court’s opinion, from which futility of demand may be inferred. Upon amendment, the Court will then reconsider whether plaintiff’s claims of domination or control are sufficient to excuse demand upon the Board of Directors. Furthermore, the Court would call to plaintiff’s attention the requirements of Federal Rules of Civil Procedure, Rule 9(b) which requires that in all averments of fraud the circumstances constituting fraud shall be stated with particularity, a requirement which is applicable to claims brought under § 10(b) or § 14(a). Decker v. Massey-Ferguson, Ltd., 681 F.2d 111 (2nd Cir.1982); Altman v. Knight, 431 F.Supp. 309 (S.D.N. Y.1977). Thus, plaintiff is going to have to plead with particularity what act or omissions she alleges were deceptive and misleading in the proxy statement and may not “boot strap” what are essentially claims of corporate mismanagement into federal securities violations.

The Court recognizes that defendants will undoubtably disagree with the Court’s disposition of their motions with respect to Count IV. However, the Court is aware that plaintiff has just recently obtained some requested discovery and is of the opinion that plaintiff should be given a reasonable opportunity to amend her complaint so as to allege a valid securities law claim, if in fact she may do so. Therefore, the defendants’ motion to dismiss Counts I, II and III of the complaint are hereby GRANTED by reason of the foregoing. Defendants’ motions with respect to Count IV of the complaint is DENIED at this time and plaintiff is given twenty (20) days from the date of this order in which to amend Count IV of her complaint to conform with the Court’s order herein.

      . Plaintiff’s class certification motion is currently pending before this Court.


author: SWEET, District Judge.

text:
    Jesus Roberto AYALA, Plaintiff, v. UNITED STATES of America, Defendant.
    No. 85 Civ. 3756 (RWS).
    United States District Court, S.D. New York.
    Dec. 4, 1985.

      Jesus R. Ayala, Bronx, N.Y., pro se.
    Rudolph W. Giuliani, U.S. Atty. S.D.N.Y. (Harriet L. Goldberg, Asst. U.S. Atty., New York City, of counsel), for U.S.
   SWEET, District Judge.

Defendant United States of America (the “government”) has moved for an order pursuant to Federal Rule of Civil Procedure 12(b)(1) dismissing the complaint of plaintiff Jesus Roberto Ayala (“Ayala”) for lack of subject matter jurisdiction and for failure to exhaust administrative remedies or, in the alternative, for an order granting summary judgment pursuant to Rule 56(b). Ayala, proceeding pro se, claims that certain actions taken by his Marine Corps superiors were racially motivated, resulting in his transfer from the Selected Marine Corps Reserves to the Individual Ready Reserves. For the reasons set forth below, the court grants the motion to dismiss for lack of subject matter jurisdiction and finds that Ayala has failed to exhaust the available administrative remedies.

Ayala, a gunnery sergeant in the United States Marine Corps Reserves, brings this action seeking retroactive pay and promotion, medical care, and pension benefits denied to him because of a transfer from the Selected Marine Corps Reserves to the Individual Ready Reserves in April, 1983. At the time of Ayala’s transfer to the Individual Ready Reserves, he had completed sixteen creditable years of service towards the necessary twenty-year minimum for retirement from the reserves. Ayala contends that his transfer was racially motivated because he is Hispanic, and he seeks damages totalling $17,000,000.00.

In April, 1983 Ayala sent a letter to the “Commanding General USMC” requesting an interview to discuss grievances and alleging discrimination within his reserve unit. An investigation was commenced pursuant to this complaint which culminated in a report on October 21, 1983, which concluded that Ayala’s transfer was not in violation of applicable regulations and that no discrimination was present in Ayala’s unit. Ayala also contacted his Congressman for assistance and received a letter adopting the conclusions of the military investigation.

Because Ayala is proceeding pro se, this court will be solicitious in determining whether his complaint states a colorable claim, Robles v. Coughlin, 725 F.2d 12 (2d Cir.1983) and will dismiss only if it is “beyond doubt that plaintiff can prove no set of facts in support of his claim that would entitle him to relief.” Haines v. Kerner, 404 U.S. 519, 520-21, 92 S.Ct. 594, 596, 30 L.Ed.2d 652 (1972). Towards this end, the jurisdictional question will be analyzed as if Ayala has claimed discriminatory reassignment against both the United States and the superior officers whom Ayala names in his moving papers.

Government as Defendant

The United States, as sovereign, is generally immune from suit unless it specifically consents to be sued and such consent is unequivocally expressed. United States v. Mitchell, 445 U.S. 535, 538, 100 S.Ct. 1349, 1351, 63 L.Ed.2d 607 (1980); Keene Corp. v. United States, 700 F.2d 836, 841 (2d Cir.1983). We are unable to exercise subject matter jurisdiction over Ayala’s damage claims against the United States because no such waiver of immunity exists for Ayala’s constitutional claims.

The Tucker Act, 28 U.S.C. § 1346(a)(2) and §' 1491(a)(2)(1982) might provide Ayala with jurisdiction for an action seeking back pay, as it provides a limited waiver of sovereign immunity for servicemen alleging wrongful discharge from the military. See, e.g., Sanders v. United States, 594 F.2d 804, 219 Ct.Cl. 285 (1979). The Act grants jurisdiction to the federal courts to hear money claims against the United States “founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in eases not sounding in tort.” 28 U.S.C. § 1491. Construed in its most favorable light, Ayala’s claim might be considered an action for back pay under the Reservists Pay Mandating Statute, 37 U.S.C. § 206 (1982), based on the allegedly wrongful transfer from Class II to Class III Reservist status. However, where the Tucker Act, 28 U.S.C. § 1346(a)(2), does confer concurrent jurisdiction upon the United States district courts and the claims court fpr such actions based on the Constitution or Acts of Congress for amounts not exceeding $10,000, claims in excess of that amount are within the exclusive jurisdiction of the Court of Claims. 28 U.S.C. § 1491. Here Ayala claims damages in excess of $17,000,000, far outstripping the maximum jurisdictional amount of this court under the Tucker Act. Thus, even if Ayala had properly pleaded a claim for military back pay, his damage claims would be dismissed for lack of jurisdiction, or transferred to the Claims Court if appropriate. Crawford v. Cushman, 531 F.2d 1114, 1126 n. 17 (2d Cir. 1976), citing Carter v. Seamans, 411 F.2d 767 (5th Cir.1969) (serviceman’s claim for back pay and correction of military records dismissed without prejudice to be pursued in Claims Court since the grant of relief in excess of Tucker Act limit would undermine jurisdiction of the Claims Court).

The Federal Tort Claims Act, 28 U.S.C. § 2671 et seq. similarly does not provide jurisdictional basis for Ayala’s claim. Although the Act is a general waiver of sovereign immunity for tort claims involving money damages against the United States, the Supreme Court through the Feres doctrine established an exception for injuries arising out of the course of activity incident to military service. Feres v. United States, 340 U.S. 135, 71 S.Ct. 153, 95 L.Ed. 152 (1950); Stencel Aero Engineering Corp. v. United States, 431 U.S. 666, 97 S.Ct. 2054, 52 L.Ed.2d 665 (1977); Chappell v. Wallace, 462 U.S. 296, 103 S.Ct. 2362, 76 L.Ed.2d 586 (1983) (applying the Feres doctrine to bar a Bivens-type action against superior officers of military personnel).

While the federal courts do have jurisdiction to review the Constitutionality of prescribed military procedures, Estep v. United States, 327 U.S. 114, 120, 66 S.Ct. 423, 426, 90 L.Ed. 567 (1946), Ayala charges a racially discriminatory motive for his change of reservist status, and not the facial unconstitutionality of a particular regulation. See, e.g., Brown v. Glines, 444 U.S. 348, 100 S.Ct. 594, 62 L.Ed.2d 540 (1980) (First Amendment attack on Air Force regulation authorizing base commander to regulate circulation of petitions); Parker v. Levy, 417 U.S. 733, 94 S.Ct. 2547, 41 L.Ed.2d 439 (1974) (void for vagueness attack on the Uniform Code of Military Justice); Frontiero v. Richardson, 411 U.S. 677, 93 S.Ct. 1764, 36 L.Ed.2d 583 (1973) (equal protection challenge to military benefit plans for service women).

Superior Officers as Defendants

Even if this court construes Ayala’s claim as a suit against his superior officers, federal court jurisdiction is barred by the Feres doctrine of intra-military immunity. The Supreme Court’s recent decision in Chappell v. Wallace, supra, 462 U.S. 296, 103 S.Ct. 2362, 76 L.Ed.2d 586 held that military personnel cannot maintain actions against superior officers for violations of their Constitutional rights in the course of military service. Extending the scope of the Feres doctrine to suits against specific officers, the Court indicated that a claim founded directly under the Constitution pursuant to Biviens v. Six Unknown Federal Narcotics Agents, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971) was barred by doctrines intra-military immunity. The Court reasoned “Civilian courts must, at the very least, hesitate long before entertaining a suit which asks the court to tamper with the established relationship between enlisted military personnel and their superior officers; that relationship is at the heart of the necessarily unique structure of the Military Establishment.” Chappell v. Wallace, supra, 462 U.S. at 300, 103 S.Ct. at 2365.

Administrative Remedies

Congress has enacted an intricate scheme of administrative remedies to handle the grievances of military personnel, and these are the appropriate forum for Ayala’s claims. The Uniform Code of Military Justice, 10 U.S.C. § 938 provides:

Any member of the armed forces who believes himself wronged by his commanding officer, and who, upon due application to that commanding officer, is refused redress, may complain to any superior commissioned officer, who shall forward the complaint to the officer exercising general court-martial jurisdiction over the officer against whom it is made. The officer exercising general court-martial jurisdiction shall examine into the complaint and take proper measures for redressing the wrong complained of; and he shall, as soon as possible, send to the Secretary concerning a true statement of that complaint, with the proceedings had thereon.

This statute has been held applicable to the grievances of Marine Corps Reservists, Schatten v. United States, 419 F.2d 187 (6th Cir.1969). While a discretionary denial of relief under 10 U.S.C. § 938 is not reviewable in district court, failure to respond to a serviceman’s invocation of these procedures or failure to properly follow the procedures set in the statute is reviewable. Smith v. Resor, 406 F.2d 141 (2d Cir.1969).

Furthermore, there is a civilian review board, which operates pursuant to 10 U.S.C. § 1552, whose function is to review applications for the presence of an error or injustice and make recommendations for corrective action. The Board for Correction of Naval Records (“BCNR”), composed of civilians appointed by the Secretary of the Navy, is empowered to “correct any military record ... When [the Secretary of the Navy acting through the Board] considers it necessary to correct an error or remove an injustice.” 10 U.S.C. § 1552(a), Chappell v. Wallace, supra, 462 U.S. at 303, 103 S.Ct. at 2367. The BCNR is empowered to grant monetary awards including back pay and can order retroactive promotions. 10 U.S.C. § 1552(c).

Regulations promulgated under the statute offer a broad range of procedural safeguards, including the right to counsel, and a hearing where witnesses and evidence may be presented if the BCNR determines that a hearing is required. 32 C.F.R. §§ 723.2, 723.4, 723.5. The Board’s denial of an applicant’s claim must be explained fully, 32 C.F.R. § 723.3(e)(5), and an official record of the proceedings must be certified and returned. 32 C.F.R. § 723.6(c).

Unlike the remedy afforded under 10 U.S.C. § 938, the proceedings of the BCNR are subject to judicial review and can be overturned if they are arbitrary, capricious, or not based on substantial evidence. Chappell v. Wallace, supra, 462 U.S. at 303, 103 S.Ct. at 2367, citing Grieg v. United States, 640 F.2d 1261, 226 Ct.Cl. 258 (1981), cert. denied, 455 U.S. 907, 102 S.Ct. 1251, 71 L.Ed.2d 444 (1982); Sanders v. United States, 594 F.2d 804, 219 Ct.Cl. 285 (1979).

A serviceman is generally required to exhaust administrative remedies offered by the military before bringing a claim against his superiors in civilian courts. Diliberti v. Brown, 583 F.2d 950 (7th Cir. 1978) (vacating lower court injunction against the Secretary of Defense and dismissing complaint for failure to exhaust administrative remedies); Seepe v. Department of the Navy, 518 F.2d 760 (6th Cir. 1975) (enlisted Marine Reservist must exhaust BCNR remedies before suit on breach of enlistment contract); Nelson v. Miller, 373 F.2d 474, 480 (3d Cir.1967) (exhaustion of remedies required where Board for Correction of military records might obviate the need for judicial review).

While failure to exhaust administrative remedies is not always a judicial bar, particularly when the claimant bases his grievance on a Constitutional claim, Martinez v. Brown, 449 F.Supp. 207 (N.D.Ca. 1978), such cases typically involve attempts to enjoin dishonorable discharges or Constitutional challenges to the regulation under which the discharge was made. Schwartz v. Covington, 341 F.2d 537 (9th Cir.1965); Downen v. Warner, 481 F.2d 642 (9th Cir. 1973). The mere presence of a Constitutional claim does not warrant an exception to this requirement that Ayala exhaust his administrative remedies, Diliberti v. Brown, supra, 583 F.2d at 952, and the BCNR is empowered to redress claims of Constitutional violations as well as the more routine inquiries into intra-military conflicts. Bard v. Seamans, 507 F.2d 765 (10th Cir.1974).

Ayala’s claim for damages do not excuse him from first exhausting his administrative remedies. As the Second Circuit stated in Plano v. Baker, “A boilerplate claim for damages will not automatically render the administrative remedy inadequate. Where the relief claimed is the only factor that militates against the application of the exhaustion requirement, the complaint should be carefully scrutinized to insure that the claim for relief was not asserted for the sole purpose of avoiding the exhaustion rule.” 504 F.2d 595, 599 (2d Cir. •1974). Here the Board is competent to award back pay and any benefits due, and Ayala’s damage claim of $17,000,000 should not form the basis of an exception to the exhaustion requirement.

For the foregoing reasons, Ayala’s claims are dismissed pursuant to Federal rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and for failure to exhaust administrative remedies.

IT IS SO ORDERED.


author: LATCHUM, Senior District Judge.

text:
    TRANSPORTES AEREOS DE ANGOLA, Plaintiff, v. JET TRADERS INVESTMENT CORPORATION d/b/a Commercial Air Transport Sales, and Nigel Winfield, Defendants. JET TRADERS INVESTMENT CORPORATION, Plaintiff, v. TEKAIR, LTD. and Ronair, Inc., Defendants.
    Civ. A. Nos. 81-120-JLL, 79-363-JLL.
    United States District Court, D. Delaware.
    Dec. 6, 1985.
    F. Alton Tybout of Tybout, Redfearn, Casarino & Pell, Wilmington, Del., Michael B. Standard and Emily M. Bass of Rabinowitz, Boudin, Standard, Krinsky and Lieberman, New York City, of counsel, for plaintiff Transportes Aereos de Angola.
    Allen M. Terrell, Jr. of Richards, Layton & Finger, Wilmington, Del., and Thomas E. Engel, Robert P. Knapp III and James G. McCarney of Engel & Mulholland, New York City, of counsel, for defendants Ronair, Inc. and Tekair, Ltd.
    Laurence I. Levinson, Wilmington, Del., for defendant Nigel Winfield.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW

LATCHUM, Senior District Judge.

Defendants Tekair, Ltd. (“Tekair”) and Ronair, Inc. (“Ronair”) have filed a motion for a default judgment and an award of costs and attorneys’ fees pursuant to this Court’s opinion and order of February 4, 1985 (Docket Item [“D.I.”] 325, 326), and Fed.R.Civ.P. 37, 54, and 55. The Court in its order and opinion granted the motions of Tekair and Ronair for dismissal of the claims against them by Jet Traders and Winfield and for a default on their claims against Jet Traders. The Court also awarded Ronair and Tekair costs and attorneys’ fees'for their motion, continued the attachment bond posted by Jet Traders pending entry of a default judgment for damages after a hearing to assess damages, and granted Tekair and Ronair leave to apply for recovery out of the attachment bond other costs they may have incurred. After considering the affidavits submitted in conjunction with their motion, and the other undisputed facts of this case, the Court enters the following findings of fact and conclusions of law as required by Rule 52(a), Fed.R.Civ.P.

FINDINGS OF FACT

1. Transportes Aereos de Angola (“TAAG”) is a juridical entity of the Ministry of Transport of the Peoples Republic of Angola. TAAG is organized under the laws of Angola with its principal place of business in Luanda, Angola.

2. Plaintiff Jet Traders Investment Corporation (“Jet Traders”) is a Florida corporation with its principal place of business in Florida.

3. Plaintiff Nigel Winfield is a citizen of Broward County, Florida.

4. Tekair is a Swiss corporation with its principal place of business in Switzerland.

5. Ronair is a Delaware corporation with its principal place of business in the State of New' York.

6. Jet Traders filed its action on July 27, 1979 (“C.A. 79-363”), seeking specific performance from the defendant Tekair for an agreement to sell a Boeing 707-320F (“Aircraft”) or to recover money damages in the alternative.

7. On March 24, 1981, TAAG filed a complaint (“C.A. 81-120”) against Ronair and Jet Traders seeking recovery from the defendants of the $6,550,000 it paid to Jet Traders for the Aircraft. On October 14, 1982, TAAG amended its complaint to include as defendants Ronair, Jet Traders, and Nigel Winfield, personally, as controlling Jet Traders.

8. Jet Traders and Winfield filed cross-claims against Ronair for compensatory, consequential, and punitive damages arising out of the Tekair-Jet Traders contract for the sale of the Aircraft.

9. The Court consolidated C.A. 81-120 and C.A. 79-363 on November 1, 1983 (D.I. 119), and by order granted TAAG’s motion voluntarily to dismiss with prejudice its claims against Ronair. (D.I. 169.)

10. On September 25, 1984, Tekair and Ronair filed a motion for dismissal for failure to prosecute (“September 25 Motion”) pursuant to Fed.R.Civ.P. 41(b) of the claims by Jet Traders against Tekair and Ronair, for default on their counterclaims against Jet Traders in C.A. 79-363 pursuant to Fed.R.Civ.P. 55(a), as well as for costs, disbursements, and attorneys’ fees incurred as a result of the motion. Ronair also filed a motion, dated November 20, 1984, on November 23, 1984, pursuant to Fed.R.Civ.P. 37 for dismissal of the cross-claim for indemnification by Winfield against Ronair for an award of expenses for Winfield’s failure to admit and failure to obey a Court order (“November 20 Motion”).

11. The Court granted both of these motions and motions by TAAG on February 4, 1985, including a civil contempt against Nigel Winfield and an award to TAAG of $102,681.72 in interim attorneys’ fees. The orders were made in view of the “contumacious conduct” of Jet Traders and Winfield. Transportes Aereos de Angola v. Ronair, Inc., 104 F.R.D. 482, 499-509 (D.Del.1985).

12. Ronair has expended $49,482.55 in attorneys’ fees and expenses in preparing and filing the motions of Tekair and Ronair against Jet Traders and Winfield for dismissal and default (D.I. 232-233a, 273) pursuant to the Court’s February 4,1985 order (D.I. 326) and Rule 37, Fed.R.Civ.P. (D.I. 376, ¶ 2.)

13. Tekair alleges attachment damages arising from the default judgment on their counterclaims against Jet Traders to consist of $18,242.30 in attorneys’ fees and disbursements incurred in vacating the attachment. Ronair alleges attachment damages to consist of $45,376.82 in lost rental value and certain incidental expenses.

14. Tekair and Ronair allege additional damages to the extent of the prejudgment interest which has accrued on their attachment damages. The prejudgment interest on Tekair’s damages is $6,468.27, and on Ronair’s damages, $16,641.49 through September 30, 1985. (D.I. 376, 1117.) Additional prejudgment interest has accrued after that date to the date of this judgment, December 6, 1985, at a rate of $3.00 per day to Tekair and $7.46 per day to Ronair.

15. The total damages Tekair and Ronair claim to have incurred are therefore the following (D.I. 376, 1117):

Tekair Ronair

Attachment Damages $18,242.30 $ 45,376.82

Prejudgment Interest through 9/30/85 $ 6,468.27 $ 16,641.49

Prejudgment Interest, 10/1/85-12/6/85 $ 201.00 $ 499.82

(total of 67 days) ($3.00/day) ($7.46/day)

Attorneys’ Fees and Expenses of September 25 and

November 20 Motions N/A $ 49,482.55

TOTAL $24,911.57 $112,000.68

16. Preparation of the September 25 and November 20 Motions consumed a considerable amount of time. The September 25 Motion for a default and a dismissal against Jet Traders required a review and analysis of the entire five-year history of the litigation. (D.I. 376 at 11 5.) In Ronair’s November 20 Motion to dismiss Win-field’s cross-claim, counsel was also required to review all the evidence, depositions, and documents to show that the cross-claim was without substance. (Id.)

CONCLUSIONS OF LAW

1. Jurisdiction exists on the basis of diversity pursuant to 28 U.S.C. § 1332.

2. The default entered by the Court against Jet Traders on February 4, 1985, conclusively establishes Jet Traders’ liability.

3. Tekair and Ronair can establish the amount of damages without an evidentiary hearing because each has presented to the Court “definite figures contained in the documentary evidence or in detailed affidavits” which are an adequate substitute for live testimony, Dundee Cement Co. v. Howard Pipe & Concrete Products, Inc., 722 F.2d 1319, 1323 (7th Cir.1983). The Court may also award such damages when the motion for default judgment specifies the amount requested and the defendant does not question that amount which is the case here. United States v. DeFrantz, 708 F.2d 310, 312-313 (7th Cir. 1983); Southern General Insurance Co. v. O’Keefe, 275 F.Supp. 107, 109 (D.Md.1967).

4. On the basis of the documentary evidence and affidavit submitted (Knapp Affidavit, D.I. 376), the Court finds the amount of damages requested by Tekair and Ronair to be reasonable.

5. Ronair is entitled to an award of $49,482.55, jointly and severally, against Jet Traders and Winfield for attorneys’ fees and expenses accumulated as a result of the September 25 and November 20 Motions of Tekair and Ronair. (D.I. 232-233a, 273.) This award is entered pursuant to this Court’s order of February 4, 1985 and Fed.R.Civ.P. 37(b)-37(d).

6. Tekair is entitled to attorneys’ fees and disbursements, as attachment damages, due to expenses incurred in vacating the attachment, which Jet Traders wrongfully sought to impose on Tekair, although Ronair, not Tekair, had an attachable interest in the Aircraft. Del.Super.Civ.R. 4(b)(2); Walsh v. Hotel Corp. of America, 231 A.2d 458, 462 (Del.1967).

7. Tekair is entitled to a default judgment for $18,242.30 and $6,468.27 in prejudgment interest, and Ronair is entitled to a default judgment for $45,376.82 and $16,-641.49 in prejudgment interest on their counterclaims, through September 30, 1985, against Jet Traders pursuant to Fed. R.Civ.P. 55(b)(2). The interest accrued on these damages since that date to December 6, 1985, the date of this judgment for the parties, respectively, is $201.00 and $499.82. The total award therefore is $24,-911.57 for Tekair and $112,000.68 for Ronair.

8. Tekair is authorized to recover $16,-200.00 as the prorated amount in partial satisfaction of the aforesaid judgment from the surety, St. Paul Fire & Marine Insurance Company, under the $90,000.00 attachment bond posted by Jet Traders. (C.A. 79-363, D.I. 61.) Ronair is authorized to recover $73,800.00 as the prorated amount in partial satisfaction of the judgment from this surety under Jet Traders’ attachment bond.

9. Tekair and Ronair are entitled to final judgment in this action of multiple claims, C.A. 79-363 and C.A. 81-120, as there is “no just reason for delay” pursuant to Fed.R.Civ.P. 54(b).

      . For reference purposes in this consolidated action, all docket items will refer to C.A. 81-120 unless otherwise stated.

      . For purposes of its motion, Ronair waives its claim for lost interest based upon the assumption that the Aircraft would have been promptly sold but for the attachment of the plane on July 27, 1979, and that Ronair therefore would no longer have to pay mortgage payments. (D.I. 376, ¶[ 10.) Instead, Ronair is claiming $44,000 for lost rental value and reserves the right to recover interest should the Court deny its rental value claim. (Id.)

      . D.I. 376, ¶ 4.

      . The prorated amounts were calculated as follows:
      $ 24,911.57 (Tekair's Judgment) $112,000.68 (Ronair's Judgment) $136,912.25 (Total Judgment) = -18 $136,912.25 (Total Judgment) = -82
      $ 90,000.00 (Bond) $90,000.00 (Bond)
      _X .18 (Tekair’s % of Total) x .82 (Ronair’s % of Total)
      $ 16,200.00 (Tekair's Prorated $73,800.00 (Ronair's Prorated
      Amount) Amount)


author: JOYCE HENS GREEN, District Judge.

text:
    AMERICAN INSURANCE ASSOCIATION and Alliance of American Insurers, Plaintiffs, v. H. Joe SELBY, Office of the Comptroller of the Currency, and United States of America, Defendants, Citibank, N.A., Defendant-Intervenor.
    Civ. A. No. 85-1489.
    United States District Court, District of Columbia.
    Dec. 6, 1985.

      Timothy C. Russell, Martin E. Lybeeker, Alan G. Priest, Drinker, Biddle & Reath, Washington, D.C., for plaintiffs.
    Sandra M. Schraibman, Hermes Fernandez, U.S. Dept, of Justice, Washington, D.C., for defendants.
    Arnold M. Lerman, Michael S. Heifer, Kerry W. Kireher, Wilmer, Cutler & Pickering, Washington, D.C., for defendant-intervenor.
   MEMORANDUM OPINION AND ORDER

JOYCE HENS GREEN, District Judge.

Plaintiffs American Insurance Association (AIA) and Alliance of American Insurers (AAI or Alliance), national trade associations representing companies engaged in property and casualty insurance, brought suit against the Office of the Comptroller of the Currency, the Acting Comptroller, and the United States (“Comptroller”), challenging a decision by the Comptroller allowing Citibank, N.A. (“Citibank”) to offer municipal bond insurance through an operating subsidiary. Defendants and defendant-intervenor Citibank (collectively referred to hereinafter as “defendants”) filed motions to dismiss for lack of standing. On September 17, 1985, the Court stayed further consideration of plaintiffs’ motion for summary judgment pending a determination of their standing to maintain the suit. For the reasons set forth below, the Court concludes that plaintiff AIA possesses the requisite “stake in the outcome of the controversy” to establish standing, that defendants’ motions to dismiss should therefore be denied, and that the stay issued on September 17 should be lifted.

I. Background

In a ruling issued May 2,1985, the Comptroller approved Citibank’s proposal to establish an operating subsidiary to issue standby credits for municipal bonds in the form of municipal bond insurance. That subsidiary opened for business on July 1, 1985. Plaintiffs filed suit in this Court for declaratory and injunctive relief on May 9, claiming that the Comptroller’s approval was arbitrary and capricious, and would result in violations of the Bank Holding Company Act, 12 U.S.C. §§ 1841 et seq., the National Bank Act, 12 U.S.C. § 24, and the McFadden Act, 12 U.S.C. §§ 36 and 81.

Plaintiff AIA consists of 174 member companies. Affidavit of William L. Martin at ¶ 2, Appended to Plaintiff’s Memorandum of Points and Authorities in Opposition to Defendants’ Motions to Dismiss (“Plaintiffs’ Opposition”). Of these, three members — the Travelers Indemnity Company, the Aetna Casualty and Surety Company, and Aetna Insurance Company — participate in a consortium called the Municipal Bond Insurance Association, which underwrites and sells municipal bond insurance. A fourth member, the United States Fidelity and Guaranty Company, engages directly in the municipal bond insurance business, independent of any group or consortium. Id. at 118. Defendants maintain that with only four out of a total of 174 members engaged in municipal bond insurance, plaintiff AIA lacks any meaningful relationship to the municipal bond insurance market, and that the interests it seeks to protect or advance in this lawsuit are not germane to its purposes. They insist, therefore, that plaintiff lacks standing to bring this action.

II. Discussion

It is well settled that “an association may have standing solely as the representative of its members.” Warth v. Seldin, 422 U.S. 490, 511, 95 S.Ct. 2197, 2211, 45 L.Ed.2d 343 (1975). To establish such “associational” or “representational” standing, the association must demonstrate that:

(a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.

Hunt v. Washington State Apple Advertising Comm., 432 U.S. 333, 343, 97 S.Ct.

2434, 2441, 53 L.Ed.2d 383 (1977); Committee for Auto Responsibility v. Solomon, 603 F.2d 992, 998 n. 13 (D.C.Cir.1979), cert. denied, 445 U.S. 915, 100 S.Ct. 1274, 63 L.Ed.2d 599 (1980). A plaintiff need not suffer a substantial injury in order to demonstrate standing; an identifiable trifle will suffice. United States v. Students Challenging Regulatory Action Procedure, 412 U.S. 669, 689 n. 14, 93 S.Ct. 2405, 2417 n. 14, 37 L.Ed.2d 254 (1973); Public Citizen v. Lockheed Aircraft Corp., 565 F.2d 708, 714 (D.C.Cir.1977). The injury, however, must be concrete, palpable and immediate, not conjectural or hypothetical. City of Los Angeles v. Lyons, U.S. 95, 101-02, 103 S.Ct. 1660, 1665, 75 L.Ed.2d 675 (1983). In the present case, four of plaintiff AIA’s members are engaged in the municipal bond insurance business, and thus, as a result of the Comptroller’s May 2 ruling, will suffer a competitive injury that would clearly confer standing upon them had they brought suit in their own right. Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 152, 90 S.Ct. 827, 829, 25 L.Ed.2d 184 (1970). Plaintiff AIA therefore appears to have satisfied the first prong of the associational standing inquiry. Plaintiff AAI, on the other hand, stands on a different footing. Like AIA, the Alliance has as its general goal the advancement of the interests of property and casualty insurers. Affidavit of Fred W. Beck at 11 5, Appended to Plaintiffs’ Opposition. None of its 175 member companies, however, actually engage in the municipal bond insurance business, and thus none of its members have suffered any injury in fact. Plaintiff AAI, therefore, cannot clear the first hurdle necessary to demonstrate representational standing.

15] Defendants do not seriously dispute plaintiff AIA’s showing of injury in fact, but rather “respectfully suggest that so few of plaintiff AIA’s members are involved in the municipal bond insurance market that AIA cannot establish standing on that basis.” Memorandum of Points and Authorities in Reply to Plaintiffs’ Opposition to Defendants’ Motion to Dismiss (“Defendants’ Reply”) at 6. Defendants, however, can cite no case in which a federal court has denied standing to an association simply because too few of the association’s constituent members have suffered injury in fact. Indeed, in Warth v. Seldin, the Supreme Court suggested that an association could establish standing by “alleg[ing] that its members, or any one of them, are suffering immediate or threatened injury____” 422 U.S. at 511, 95 S.Ct.

at 2211 (emphasis supplied). Defendants rely on American Ins. Ass’n v. Fox, No. 85 CV 2823 (Wis.Cir.Ct. June 5, 1985), in which a Wisconsin court ruled that AIA lacked standing to challenge the state’s approval of Citibank’s acquisition of a Wisconsin municipal bond insurance company because less than 2% of its members sell municipal bond insurance. At 270. That decision, of course, was based on the state’s law of standing, and is in no way binding on this Court. More importantly, however, the Fox court’s approach to standing is fraught with potential pitfalls. How, for example, are courts to decide what percentage of an association’s members must have standing before the association itself has standing? Defendants suggest that a threat of harm to four out of 174 association members is insufficient. Would a threat to ten members suffice, or twenty? What standards are to guide courts as they attempt to distinguish between fractional shares of association memberships? And if courts are to consider the percentage of members affected, perhaps they should also consider the relative influence and importance of the affected members. It would be perfectly consistent with defendants’ theory of standing to find that an injury to four of the AIA’s largest and most influential members confers standing on the association, but that a similar injury to four minor insurance companies does not. This Court declines to take the first step down such a slippery slope, especially in view of the Supreme Court’s suggestion that injury to a single member is an adequate basis upon which to rest a finding of standing.

Defendants next argue that even if plaintiff AIA has satisfied the first requirement of assoeiational standing, the interests of municipal bond insurers are simply not germane to AIA’s purposes. Defendants contend that AIA’s purpose is to represent the interests of property and casualty insurers, not municipal bond insurers; that the association has never before offered a single service to municipal bond insurers; and that, were it not for the purely fortuitous circumstance that four of AIA’s members happen to sell municipal bond insurance, plaintiff would have no connection whatever to that insurance market. AIA, on the other hand, maintains that “property and casualty insurance” is simply a generic phrase that is understood in industry parlance to encompass a wide variety of insurance specialties, including credit insurance, financial guaranty insurance and municipal bond insurance. Affidavit of William L. Martin at 113, Appended to Plaintiffs’ Opposition. Under Wisconsin law, for example, municipal bond insurance is defined as a form of “surety insurance,” which is in turn defined as a form of “property and casualty insurance.” See Wisconsin Administrative Code, Insurance, §§ 3.08(3)(e) and 6.75(2)(g). The interests of municipal bond insurers, therefore, are clearly embraced by AIA’s stated purpose of “promot[ing] the economic, legislative and public standing of its participating property and casualty insurers and the insurance industry.” Article Fourth, 112, AIA Certificate of Incorporation, attached as Exhibit 6 to Defendants’ Reply.

It is true, as defendants note, that an “association’s representative capacity will seldom, if ever, extend to all of its members’ interests.” Boyce v. Rizzo, 78 F.R.D. 698, 704 (E.D.Pa.1978). Defendants, however, advance an excessively restrictive view of germaneness in this case. An association’s litigation interests must be truly unrelated to its organizational objectives before a court will declare that those interests are not germane. Thus, for example, in Medical Ass’n of the State of Alabama v. Schweiker, 554 F.Supp. 955 (M.D.Ala.), aff'd, 714 F.2d 107 (11th Cir. 1983), the district court found that the Alabama Medical Association could not represent its members as taxpayers, since the injury the physician members had suffered as taxpayers was unrelated to the reasons they had joined together in a medical association. Id. at 965. Similarly, in Boyce v. Rizzo, the court offered the example of a local PTA, which, as an association, could not be expected “to represent the members in matters not relating to education.” 78 F.R.D. at 704. By contrast, plaintiff AIA seeks here to represent its members in matters relating to property and casualty insurance. The injury that four of its members have suffered clearly “has some reasonable connection with the reasons the members joined the organization and with the objectives of the organization.” Medical Ass’n of the State of Alabama, 554 F.Supp. at 965. Indeed, the interests of municipal bond insurers, as a sub-group of property and casualty insurers, are certainly comprehended by AIA’s broad goals of advancing the economic and legislative interests of property and casualty insurers generally.

At bottom, defendants’ position is that, since so few of AIA’s members are involved in the municipal bond insurance market, the interests of those members are simply not important enough to the AIA as a whole to be germane to the organization. This theory of germaneness suffers the same deficiencies as defendants’ numerical approach to determining standing. It would be presumptuous, to say the least, for this Court to inform plaintiff AIA that the interests of certain of its members, although falling squarely within the association’s stated goals, are simply not weighty enough to be germane. The Court declines to undertake a standardless inquiry into the relative importance of AIA’s varied interests, particularly in the absence of any authority requiring such a determination.

Having concluded that plaintiff AIA’s members would otherwise have standing to sue in their own right and that the interests plaintiff seeks to protect in this suit are germane to its purposes, the third requirement for representational standing presents no difficulty. Defendants do not suggest that the claim asserted by AIA or the relief requested require the participation of individual members in the lawsuit, and there is no reason to believe that such participation is necessary. The Court therefore concludes that plaintiff has satisfied the requisites of representational standing.

For all the foregoing reasons, the Court finds that plaintiff AIA has standing to maintain the action and that defendants’ motion to dismiss be and it hereby is denied. The stay of proceedings issued on September 17, 1985, is hereby lifted. Defendants will have until thirty (30) days from the date this Order is issued within which to file their oppositions to plaintiff’s motion for summary judgment; and plaintiff shall have an additional seven (7) days within which to reply to defendants’ oppositions.

The Court further finds that plaintiff AAI lacks standing to maintain this action. The Court, however, grants the Alliance leave to participate in this litigation as amicus curiae, provided it advises the Court of its intention to do so within seven days of the issuance of this Opinion and Order.

SO ORDERED.

      . As discussed below, property and casualty insurance is understood within the industry as a generic phrase encompassing, among other subcategories, municipal bond insurance. It may well be that some of AAI's members might in the future expand into this sub-market, or that the reasoning of the Comptroller’s decision could have ramifications that might affect AAI’s members in the future. These threats of harm, however, are not sufficiently immediate or palpable to sustain a finding of standing. SimilarIy, AAI’s claim that "it is reasonably probable” that it will have to expend funds to lobby Congress to correct the Comptroller’s allegedly improper ruling is an insufficient harm to warrant a finding that the Alliance itself has standing, independent of its members. Given the AAI’s interest in this litigation, however, the Court grants the Alliance leave to participate as amicus curiae, provided it advises the Court within seven days of the issuance of this Opinion and Order that it wishes to so participate.


author: CARL O. BUE, Jr., District Judge.

text:
    MTO MARITIME TRANSPORT OVERSEAS, INC. v. UMM AL JAWABY PETROLEUM COMPANY, N.V.
    C.A. No. H-84-1633.
    United States District Court, S.D. Texas, Houston Division.
    Dec. 9, 1985.

      James J. Sentner, Jr., Haight, Gardner, Poor & Havens, Houston, Tex., for plaintiff.
    R. Scott Hogarty, Fulbright & Jaworski, Houston, Tex., for defendant.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW

CARL O. BUE, Jr., District Judge.

Introduction

Plaintiff brought this action pursuant to the admiralty and maritime jurisdiction of this Court, which arises under Rule 9(h) of the Federal Rules of Civil Procedure, seeking damages for breach of a liner booking contract entered into between plaintiff and defendant.

On September 18, 1985, the case was tried to the Court without a jury. Having heard all of the testimony and having carefully reviewed documentary evidence, this Court hereby enters these Findings of Fact and Conclusions of Law, concluding that plaintiff is entitled to recover actual damages proximately resulting from defendant’s breach of an oral contract of affreightment.

Findings of Fact

1. At all times material hereto, plaintiff, M.T.O. Maritime Transport Overseas, Inc. (hereinafter referred to as “M.T.O.”), was a corporation duly organized and existing under the laws of the State of Texas with an office and place of business in Houston, Texas.

2. At all times material hereto, defendant, UMM A1 Jawaby Petroleum, N.Y. (hereinafter referred to as “Jawaby”), was a corporation duly organized and existing under the laws of the Netherlands with an office and place of business in Houston, Texas.

3. At all times material hereto, defendant, McLendon Forwarding Company (hereinafter referred to a “McLendon”), was a corporation organized and existing under the laws of the State of Texas with an office and place of business in Houston, Texas.

4. Defendant, McLendon, never entered an appearance in this action, and a decree of default was entered on September 17, 1984.

5. Defendant, Continental Emsco Company, was voluntarily dismissed by order dated January 22, 1985.

6. At all times material hereto, M.T.O. acted as the duly authorized agent for M.L.S. Maritime Logistics Service, S.A. (hereinafter referred to as “M.L.S.”), and entered into an oral contract of affreightment on the behalf of M.L.S. (Plaintiffs Exhibit 1; Testimony of John Miller).

7. At all times material hereto, McLendon was a freight forwarder duly licensed by the Federal Maritime Commission. (Testimony of Frank McLendon).

8. Defendant Jawaby engaged the services of McLendon to arrange for the ocean transport of two workover drilling rigs and related equipment from Houston, Texas to Libya. (Plaintiffs Exhibits 25, 26; Testimony of Frank McLendon and Shelly Eckeroth).

9. The selection of the ocean carrier was left to the complete discretion of McLendon, who served as the duly authorized agent of Jawaby. (Defendant’s Exhibit 11; deposition testimony of Mohamed Khalid; testimony of Frank McLendon).

10. McLendon entered into a booking contract with World Navigation, Inc., and North Africa Navigation, Ltd. (hereinafter referred to as “World Navigation”), and the first rig with related equipment was carried by World Navigation without incident. (Testimony of Frank McLendon and Shelly Eckeroth).

11. McLendon entered into a booking contract with World Navigation for the carriage of the second drilling rig and related equipment on, or about, December 3, 1983. (Defendant’s Exhibit 4; testimony of Frank McLendon).

12. When it came time for the second rig and related equipment to be transported, McLendon ascertained that World Navigation did not have an available vessel and therefore could not perform in accordance with the booking contract entered into on December 3, 1983. (Defendant’s Exhibit 9 with attached affidavit of Frank McLendon; testimony of Frank McLendon).

13. McLendon advised Jawaby concerning World Navigation’s inability to perform in accordance with the terms of the booking contract. (Testimony of Frank McLendon and Shelly Eckeroth).

14. Jawaby allowed McLendon complete discretion in the arrangements for substitute transportation of the second rig and related equipment. (Defendant’s Exhibit 11, deposition testimony of Mohamed Khalid; testimony of Frank McLendon).

15. Acting within the course and scope of his engagement as the freight forwarding agent of Jawaby, on, or about, December 28, 1983, McLendon entered into a booking contract for the carriage of the second rig and related equipment with M.T.O. (Defendant’s Exhibit 9 with attached affidavit of Frank McLendon; testimony of John Miller and Frank McLendon).

16. As is customary practice within the shipping industry, plaintiff’s representative, Bernard Gibson, left the liner booking note with McLendon after reaching an oral agreement. (Plaintiff’s Exhibit 1; testimony of John Miller and Frank McLendon).

17. Although the liner booking note was never executed by McLendon, the parties reached an oral agreement regarding all of the material terms of the contract and they intended to be bound by the terms of the oral agreement. (Testimony of Frank McLendon and John Miller).

18. As the agent of M.L.S., M.T.O. arranged for the carriage of the second rig and related equipment on the carrier M/V “THALASSINI KYRA.” (Plaintiff’s Exhibits 1, 4, 5; testimony of John Miller).

19. Although McLendon knew that the cargo was subject to a prior booking note with World Navigation, he advised M.T.O. that the prior contract had been breached and cancelled, and represented to M.T.O. that the drilling rig and related equipment would be available for transport on, or about, January 10, 1984. (Plaintiff’s Exhibit 13; testimony of John Miller and Frank McLendon).

20. The rig and related equipment were never delivered to M.T.O., which positioned the vessel M/V “THALASSINI KYRA” in Houston ready to receive the cargo. (Testimony of John Miller and Frank McLendon).

21. Despite the efforts of M.T.O. and McLendon, World Navigation refused to deliver the drilling rig and related equipment to M.T.O. (Plaintiffs Exhibits 8, 9, 10, 13; testimony of Frank McLendon and John Miller).

22. McLendon accompanied M.T.O. and offerd testimony in support of M.T.O.’s unsuccessful attempt to secure release of the cargo by obtaining an injunction against World Navigation on January 6, 1984 in Cause No. C.A. H-84-58, which was filed in the United States District Court for the Southern District of Texas. (Defendant’s Exhibit 9; testimony of Frank McLendon and John Miller).

23. As a freight forwarder with many years of experience who had arranged for substitute carriers on many occasions under similar circumstances, McLendon did not anticipate difficulty in obtaining release of the cargo from World Navigation. (Testimony of Frank McLendon).

24. Both M.T.O. and McLendon believed that World Navigation’s refusal to release the cargo upon orders of the freight forwarder was a violation of the regulations established by the port authority. (Plaintiff's Exhibit 14; testimony of John Miller and Frank McLendon).

25. McLendon exerted good faith efforts on behalf of Jawaby. There is no evidence to support Jawaby’s allegations of fraud, collusion, or fraudulent procurement of contract. (Testimony of Frank McLendon and John Miller).

26. World Navigation was ultimately unable to perform in accordance with the terms of their booking contract, and delivery of the cargo was substantially delayed. (Testimony of Shelly Eckeroth and Frank McLendon).

27. Although the unexecuted memorandum of the agreement provides that M.T.O. would supply a vessel “on or about January 3, 1984,” it is clear from the subsequent conduct of the parties that January 10, 1984, was the agreed upon departure date. Furthermore, the time arrangements were satisfactory to McLendon. Indeed, the rig and related equipment were not shipped until considerable time had elapsed after M.T.O.’s vessel departed. (Plaintiff’s Exhibit 1, 10; testimony of John Miller, Frank McLendon, and Shelly Eckeroth).

28. By reason of Jawaby’s failure to deliver the cargo, the vessel, M/V “THALASSINI KYRA,” sailed with significant dead freight. (Plaintiff’s Exhibits 11, 20, 21, 22; testimony of John Miller).

29. Although the M/V “THALASSINI KYRA” was ready to sail on January 11, 1984, M.T.O. detained its vessel at the Port of Houston until January 12, 1984, incurring detention costs in the amount of $10,-006.67. (Plaintiff’s Exhibits 10, 17, 19, 20, 21; testimony of John Miller).

30. M.T.O. made unsuccessful efforts to mitigate the damages by attempting to locate substitute cargo. (Plaintiff’s Exhibits 16,17, 18, 19, 21, 22, 23; testimony of John Miller).

31. M.T.O. is the duly authorized agent of M.L.S. Within the ordinary course and scope of its agency, M.T.O. regularly collects freight charges on behalf of M.T.S., and was authorized to bring the present law suit. (Plaintiffs Exhibits 1, 11; testimony of John Miller).

Conclusions of Law

1. This Court has jurisdiction of this matter pursuant to Rule 9(h) of the Federal Rules of Civil Procedure.

2. It is a well established and time honored custom that oral contracts of affreightment are valid under maritime law. See, e.g., Union Fish Co. v. Erickson, 248 U.S. 308, 39 S.Ct. 112, 63 L.Ed. 261 (1919) (oral contracts of affreightment create rights under maritime law which cannot be directed by contrary state law); Hellenic Lines Ltd. v. Gulf Oil Corp., 340 F.2d 398 (2d Cir.1964) (enforcing collateral oral affreightment contract); Atlantic Banana Co. v. M/V “CALANCA”, 342 F.Supp. 447 (S.D.N.Y.1972) (upholding validity of oral contract of affreightment), and Orient Mid-East Lines v. Albert F. Bowen, Inc., 1972 A.M.C. 1509, 458 F.2d 572 (2d Cir. 1972).

3. The signing of a written contract of affreightment, also referred to as a “booking contract” or “booking note” is not necessarily an element of booking. “Booking” also has reference to an oral engagement of space. See P.D. Marchessini & Co. v. H.W. Robinson & Co., 287 F.Supp. 728 (S.D.N.Y.1967). Under maritime law, a binding contract is therefore created when a freight forwarder and a carrier reach an oral agreement on all material terms of a booking contract and intend to be bound by its terms. See Orient Mid-East Lines, supra.

4. Applying the law to the facts of this case, this Court concludes that it is uncontested that a valid, binding oral contract was entered into between McLendon and M.T.O. concerning all of the material terms of the contract, and that McLendon’s subsequent failure to execute the booking note is without legal effect. The written note was contemplated by the parties merely as a convenient memorial or written evidence of an obligation already ündertaken by the parties.

5. As Jawaby’s duly authorized freight forwarding agent, McLendon possessed actual and apparent authority to bind Jawaby by the terms of the oral contract entered into with M.T.O. See Lubbock Feed Lots, Inc. v. Iowa Beef Processors, Inc., 630 F.2d 250, reh’g denied, 634 F.2d 1355 (5th Cir.1980). See also Sun Oil Co. v. Behring Properties, Inc., 480 F.2d 310 (5th Cir.1973), cert. denied, 414 U.S. 1039, 94 S.Ct. 539, 38 L.Ed.2d 329 (1973).

6. The contract imposed no legal duty upon M.T.O. to obtain release of the cargo from World Navigation. To the contrary, plaintiff relied to its detriment upon the defendant’s representations that the cargo would be available for loading. Jawaby’s failure to deliver the cargo to M.T.O. is a breach of the contract of affreightment. See Rederi A/B Pulp v. Republic Chemical Corp., 1980 A.M.C. 1415 (2d Cir.1960).

7. By reason of defendant’s breach, M.T.O. is entitled to recover damages for dead freight in the sum of $88,-890.64, which amount is uncontested, together with interest and costs, and reasonable attorneys’ fees.

8. The terms of the oral contract entered into by M.T.O. and McLendon did not include fixed demurrage charges for delay prior to the anticipated loading of the rig and related equipment. Thus, M.T.O. may recover actual damages for detention proximately caused by defendant’s breach. See Sugar Products Co. v. Mobile & Gulf Nav. Co., 268 F. 815 (5th Cir.1920).

9. After weighing the conflicting testimony and evidence concerning the basis for the detention of the vessel, this Court determines that the plaintiff has failed to demonstrate persuasively that the detention of the vessel was reasonable and proximately caused by defendant AL JAWABY’s breach of contract and/or misrepresentations. Consequently, plaintiff is not entitled to recover damages for detention in the amount of $10,006.67.

10. After failing to obtain an injunction against World Navigation which would have compelled the release of the cargo, the parties had an additional five days within which to exert efforts to obtain the release of the cargo prior to the time plaintiff’s vessel was ready to sail. Even if McLendon represented that he was engaged in last minute efforts to obtain release of the cargo, which is disputed by the testimony of McLendon, given the intervening time period, the detention of the vessel for an additional thirty hours was unreasonable under the circumstances. Thus, the damages sustained by M.T.O. due to the detention of the vessel did not proximately flow from defendant’s breach of the oral contract of affreightment.

11. Unless contractual terms expressly provided that “time is of the essence,” the failure to timely perform is not an automatic breach of contract, and maritime law customarily affords a grace period when departure is expressed in terms of “on or about” a specified date. See Isbrandtsen Co., Inc. v. Lyncroft Grain Corp., 1957 A.M.C. 2112 (City Ct.N.Y. 1957). Thus, Jawaby’s contention that defendant’s performance under the contract is excused by M.T.O.’s failure to timely perform, is without legal merit.

12. This Court directed the parties to file Post-Trial Memoranda addressing Jawaby’s objections to M.T.O.’s status as the real party in interest. Defendant failed to assert by way of “specific negative averment,” including supporting particulars in the pleading, objections to M.T. O.’s status as the real party in interest as is required by Rule 9(a) of the Federal Rules of Civil Procedure. Furthermore, defendant failed to timely or properly raise a Rule 12(b)(6) defense. Even though plaintiff attached the unsigned booking note, which set forth M.T.O.’s agency relationship with M.L.S., to the original complaint, Jawaby did not challenge M.T.O.’s status until the eve of trial in the Joint Pretrial Order. Thus, there is substantial legal merit, in M.T.O.’s position, expressed in its Post-Trial Memoranda, that defendant has waived its right to object to plaintiff’s status as the real party in interest. See Myers v. Manchester Insurance & Indemnity Co., 572 F.2d 134 (5th Cir.1978), citing, Pace v. General Electric Co., 55 FRD 215, 16 Fed.R.Serv.2d 529 (W.D.Pa. 1972). Nevertheless, there is sufficient evidence of M.L.S.’s interest and capacity to sue present in the record. Consequently, in the interest of justice, and to avoid prejudice to either of the parties, M.T.O.’s Rule 15(b) motion should be granted to allow plaintiff to amend the pleadings by adding M.L.S. as a party plaintiff. See Dussouy v. Gulf Coast Investment Corp., 660 F.2d 594 (5th Cir.1981).

In the event that the foregoing Findings of Fact also constitute Conclusions of Law, they should be regarded as such. In the event that the Conclusions of Law also constitute Findings of Fact, they are adopted as such.

Conclusion

Accordingly, this Court concludes that the defendant, Jawaby, through the actions of its fully authorized freight forwarding agent, McLendon, who was acting within the actual and apparent scope of his agency, entered into a valid, binding oral contract of affreightment with M.T.O., which was acting as the duly authorized agent of M.L.S. In reliance upon the representations of defendant, M.T.O. positioned a vessel in the Port of Houston ready to receive the contracted freight. As a consequence of defendant’s failure to deliver the cargo for loading, plaintiff’s vessel sailed with significant dead freight because M.T.O. was unsuccessful in its efforts to obtain substitute cargo. As a proximate cause of defendant’s breach of the oral contract, plaintiff has sustained damages in the amount of $88,890.64, and is entitled to recover that amount, together with interest and costs, and reasonable attorneys’ fees from Jawaby. This Court further determines that plaintiff is not entitled to recover $10,006.67 in damages for detention of its vessel, said detention being unreasonable under the circumstances in the case. Although M.T.O. has presented sufficient facts and law to support the conclusion that defendant has waived the right to object to M.T.O.’s standing as a real party in interest, there being sufficient evidence in the record of M.L.S.’s interest and capacity to sue, in the interest of justice and without prejudice to either party, M.T.O.’s motion to add M.L.S. as a party plaintiff is hereby granted.