author: DORSEY, District Judge.

text:
    William H. STEPNEY, Jr. v. Raymond LOPES, et al.
    Civ. No. H-84-306(PCD).
    United States District Court, D. Connecticut.
    March 29, 1984.
    See also, D.C., 592 F.Supp. 1538.

      James A. Wade, Sally S. King, Robinson, Robinson & Cole, Hartford, Conn., for plaintiff.
    Carl Schuman, Anne Dránginis, Walling-ford, Conn., for defendants.
   RULING ON MOTION FOR STAY ON EXECUTION OF SENTENCE

DORSEY, District Judge.

In this action William H. Stepney, Jr. (petitioner) seeks relief in the form of a Writ of Habeas Corpus from the sentence of the Superior Court for the State of Connecticut. 28 U.S.C. §§ 2241, et seq. Preliminarily petitioner moves for a stay of the execution of his sentence pending the outcome of his petition. 28 U.S.C. § 2251. For the reasons set forth herein, the motion for a stay of execution of sentence is denied.

Facts

Petitioner was accused by the State of Connecticut of causing the death of Barbara McKitis on May 9,1979. He was tried in the Superior Court, to a jury, and convicted of murder, specifically of the violation of Conn.Gen.Stat. § 53a-54a. He was sentenced to incarceration for 22 years to life. He appealed his conviction but was denied. State v. Stepney, 191 Conn. 233, 235-36, 464 A.2d 758 (1983). He petitioned the United States Supreme Court for a petition of certiorari but was denied. — U.S.-, 104 S.Ct. 1455, 79 L.Ed.2d 772 (1984). Pending his petition for certiorari, the Connecticut Supreme Court stayed the execution of his sentence. He remains at liberty, on bond, as he has been since his conviction. He has not exhausted his appeal rights as there is still time for a petition for a rehearing of the petition for certiorari to the Supreme Court.

The grounds of his petition are:

A. That a trial court ruling permitting evidence as to the circumstances and petitioner’s demeanor when, pre-arrest, he terminated an interview by a police officer, violated petitioner’s rights under the fifth amendment.

B. That the trial court’s jury instructions on the credibility of petitioner and his wife violated the petitioner’s right of equal protection under the fourteenth amendment.

C. That cumulatively, A and B above constituted a violation of petitioner's right to due process.

Petitioner is 67, to be 68 within the month. He speaks without the aid of his voice box, removed due to cancer many years ago. He has had at least one heart attack and is on a medication regimen. He has,had a mild stroke with slight residual effect on the right side of his face and a partial loss of sight in the right eye. He has high blood pressure.

Claim

This stay is sought on the basis of plaintiff’s health and the substance of his claim. No claim is made that incarceration would have an immediate, adverse effect on his health. No claim is made that the administrators of the Connecticut Correction System cannot or will not provide petitioner with the care his physical condition requires or may necessitate. Nor is any claim made that the substance of petitioner’s legal claim presents any unique issues reflective of any grossly wrongful denial of his rights, but involves a claim of impropriety, on a constitutional basis, in evidentiary rulings by the trial judge.

It is to be noted that this case by agreement of the parties, is to be determined on the record of the trial in Superior Court, the transcript of which is readily available. Thus, as will be provided in this memorandum, issues can be joined and this case can be decided in a relatively short time. Discussion

Though petitioner remains at large, his status constitutes sufficient custody to permit a habeas corpus. Hensley v. Municipal Court, 411 U.S. 345, 93 S.Ct. 1571, 36 L.Ed.2d 294 (1973). A stay, as sought by petitioner, is equivalent to the admission to bail and is within the authority of the court. In re Shuttlesworth, 369 U.S. 35, 82 S.Ct. 551, 7 L.Ed.2d 548 (1962). Indeed this court has granted such motions. United States ex rel. Smith v. DiBella, 314 F.Supp. 446, 448 (D.Conn.1970); Moynahan v. Manson, 419 F.Supp. 1139, 1141 n. 2 (D.Conn.1976), aff'd, 559 F.2d 1204 (2d Cir.), cert. denied, 434 U.S. 939, 98 S.Ct. 430, 54 L.Ed.2d 299 (1977).

Whether to grant the motion requires consideration of the effect of denial as opposed to the grant. A denial would subject the petitioner to execution of the sentence, i.e. incarceration. It would not bar his release if his petition is ultimately granted as merited. It does subject him to the sentence of the Superior Court which, under principles of comity, is entitled to considerable weight. Petitioner has passed the point of presumption of his innocence. That was stricken by the verdict of the jury. His case was reviewed as to the legality of his sentence on motion to the trial court, on appeal to the Connecticut Supreme Court, and, to a limited degree, on petition for certiorari. Petitioner therefore is not due the consideration of one merely accused or even one convicted but who has not exhausted his appeal rights. Ostrer v. United States, 584 F.2d 594 (2d Cir.1978). Any meritorious writ of habeas corpus constitutes an adjudication of the illegality of the petitioner’s custodial status, presumably from its inception, and thus any successful petitioner will have been found to have. been wrongfully in custody from its inception and until released on the grant of the writ. The flip side of the coin is, however, that a stay relieves a petitioner from a sentence and custody which, if the writ is not ultimately granted, would have been deemed to have been lawful from the outset. Under such circumstances, one who ultimately is found to have been lawfully subject to custody will have walked free when he should have been incarcerated. Granting stays of sentences in these habeas corpus proceedings would create the danger that every prisoner would be invited to flood the state or federal courts, successively and repeatedly ad infinitum.

Apart from this impact of a grant on the system, a grant would further constitute an affront to the state criminal prosecution system in that a grant would deny the state the right to bring to conclusion its criminal prosecutions and the judgments of its courts after a conviction has been lawfully obtained. The federal court should tread lightly before such a disruption is visited on the state.

The decision of the court must, then, balance the justness of a grant and its effect on the administration and enforcement of the state criminal law as opposed to a denial with its attendant impact on the petitioner. There, are several factors which have been articulated as proper for consideration in thus deciding:

1. Are substantial claims set forth in the petition?

2. Is there a demonstrated likelihood the petition will prevail?

3. . Are there extraordinary circumstances attending the petitioner’s situation which would require the grant in order to make the writ of habeas corpus effective, presumably if granted?

In short, is this case distinguishable from other habeas corpus cases? Iuteri v. Nardoza, 662 F.2d 159 (2d Cir.1981); Aronson v. May, 85 S.Ct. 3, 13 L.Ed.2d 6 (1964); Glynn v. Donnelly, 470 F.2d 95 (1st Cir.1972); Eaton v. Holbrook, 671 F.2d 670 (1st Cir.1982); Monroe v. State Ct. of Fulton Cty., 560 F.Supp. 542 (N.D.Ga.1983); Pfaff v. Wells, 648 F.2d 689 (10th Cir.1981); Bates v. Estelle, 483 F.Supp. 224 (S.D.Tex.1980).

With, respect to item 1, the claims are not, on their face, without substance but they are not extraordinary in their legal weight nor in their merit on the face of the record. With respect to item 2, there is no clear suggestion that such a major deprivation of petitioner’s constitutional rights occurred in the course of his trial as to create any strong likelihood that a writ will issue. As to item 3, there are significant human considerations based on petitioner’s health but there are offsetting factors of considerable weight, i.e. the fact of petitioner’s conviction of a major crime and his having had the full opportunity to exhaust his appeal rights in prior proceedings. Evaluation of petitioner’s motion is circular, as there is a countering consideration for any ground on which a decision might be laid. Thus the court finds no extraordinary factor which dictates the circle be broken in favor of the granting of the motion. Of considerable importance to the court is the fact that the sentence will not be exhausted or even substantially served between now and when this court’s decision on the merits, as the schedule set forth below will bring about an early decision on the merits. Accordingly, the motion to' stay the execution of sentence is denied.

Defendants will file their answer on or before April 20, 1984.

Petitioner will file the trial court transcript, any other documentation intended to constitute the record with respect to this case, his motion for a decision on the merits and his memorandum in support of his motion, on or before April 27, 1984. Defendants will file their response to any motion within two weeks of its receipt, or not later than May 11, 1984. Petitioner may reply within one week of receipt of defendants’ memorandum, but no later than May 18, 1984.

SO ORDERED. .

      . The United States Supreme Court denial of certiorari does not constitute a review of all issues and the petition for habeas corpus does provide another avenue for appeal resulting from the federal system where the federal courts function, in part, in parallel to the state courts.

      . The court cannot conceive that the well of imagination behind the flow of petitions from penal institutions is likely to dry but is more likely to swell particularly with the incentive such as would be provided if this argument is adopted.


source: Caselaw Access Project

author: CHARLES R. RICHEY, District Judge.

license: Public Domain

text:
    Ruth MOYER, et al., Plaintiffs, v. 1330 NINETEENTH STREET CORP., et al., Defendants.
    C.A. No. 83-2528.
    United States District Court, District of Columbia.
    May 14, 1984.

      John R. Dugan and David H. Shapiro, Washington, D.C., for plaintiffs.
    Russell H. Gardner, Jeanne M. Phelan, Baltimore, Md., Frederick B. Abramson, Bernard J. Carl, and Christopher Hassell, Washington, D.C., for defendants.
   ORDER

CHARLES R. RICHEY, District Judge.

This case involves claims brought pursuant to 42 U.S.C. §§ 1981 and 1985, and a pendent defamation claim. The gravamen of the complaint by the six plaintiffs is that they were denied a contract to operate a coat-check room in a nightspot known as “Numbers” because some of them are black.

Plaintiffs are represented by two attorneys, David H. Shapiro and John R. Dugan, who are not members of the same law firm. In preparing the case, Mr. Shapiro interviewed the former manager of Numbers, Nestor Fernandez. Mr. Fernandez made statements highly prejudicial to the defendants. The statements were reduced to an “affidavit” on July 7, 1983, in Mr. Shapiro’s law office. Subsequently, Mr. Fernandez, who is now a defendant in the case, recanted, via a deposition, virtually all of the allegations contained in the affidavit. In essence, Fernandez now asserts that the statements he made to Mr. Shapiro were totally false and motivated by a desire to get revenge because of his firing as the manager of Numbers. In the deposition, Mr. Fernandez also asserted, in essence, that Mr. Shapiro had put words in his mouth and that he did not know the meaning of some of the language found in the “affidavit.” Serious questions have also been raised as to whether the “affidavit” was properly notarized by Mr. Shapiro’s office manager.

The Court has already ruled that the “affidavit” is admissible at trial as a party admission, Federal Rule of Evidence 801(d)(2), and that its probative value is not substantially outweighed by the danger of unfair prejudice. Federal Rule of Evidence 403. As a result of that ruling, it became apparent to the Court that there was a possibility that Mr. Shapiro might become a witness in this case. The Court’s concern with the ethical ramifications of such an event was immediately brought to the attention of all counsel. The Court “should sua sponte raise ethical problems involving danger to a just, speedy, and inexpensive remedy, even if the parties do not.” General Mill Supply Co. v. SCA Services, Inc., 697 F.2d 704, 711-12 (6th Cir.1982).

The Court requested briefing on the issue by the parties and conducted a hearing into the matter. By agreement of all counsel, the court will treat the memorandum of the defendants as a motion to disqualify Mr. Shapiro from serving as counsel for the plaintiffs. Counsel for the plaintiffs have stated that they do not intend to call Mr. Shapiro as a witness, apparently believing their clients’ interests can be served by cross-examination of Mr. Fernandez. However, defendants have stated that they will call Mr. Shapiro as an adverse witness at trial to-examine him concerning the “affidavit,” in light of the Fernandez deposition recanting the statements and accusing Mr. Shapiro of various matters adverse to his clients. Thus, there is no doubt that, if Mr. Shapiro is allowed to remain as counsel in this case, he will be acting in the dual roles of witness and attorney.

Attorneys appearing in this Court are governed by the Code of Professional Responsibility adopted by the District of Columbia Court of Appeals. Local Rule 4-3(IV)(b). Ethical Consideration 5-9 notes that “[t]he roles of an advocate and of a witness are inconsistent; the function of an advocate is to advance or argue the cause of another, while that of a witness is to state the facts objectively.” The relevant Disciplinary Rule (“DR”) is 5-102, “Withdrawal as Counsel When the Lawyer Becomes a Witness.” That DR provides:

(A) If, after undertaking employment in contemplated or pending litigation, a lawyer learns or it is obvious that he or a lawyer in his firm ought to be called as a witness on behalf of - his client, he shall withdraw from the conduct of the trial____
(B) If, after undertaking employment in contemplated or pending litigation, a lawyer learns or it is obvious that he or a lawyer in his firm may be called as a witness other than on behalf of his client, he may continue the representation until it is apparent that his testimony is or may be prejudicial to his client.

Counsel for the plaintiffs argue that § B should control here. They reason that Mr. Shapiro’s testimony will not be prejudicial to their clients since it will rebut the testimony of Mr. Fernandez. The Court is not convinced by that argument. If the jury believes Mr. Fernandez, it will obviously be left with the impression that Mr. Shapiro is less than truthful. Surely that will affect any credence given to Mr. Shapiro’s arguments on behalf of his clients. Conversely, if the jury believes Mr. Shapiro, that will cast an unfair and prejudicial shadow on the defendants. In addition, the Court concludes that the interests of the plaintiffs, the defendants, and justice require that the allegations of undue influence by Mr. Shapiro with regard to the critical Fernandez “affidavit” not be brushed aside. Thus, § A of the Disciplinary Rule is brought into play. Our Circuit Court recently addressed this issue in Groper v. Taff, 717 F.2d 1415 (D.C.Cir.1983):

We cannot say that the ... district judge abused his discretion in disqualifying [plaintiff’s attorney]. The judge could reasonably conclude, as he did, that [the attorney] ought to appear ... therefore that DR 5-102(A) required disqualification. [The attorney’s] continued representation in this case would implicate two principal ethical considerations which underlie the disciplinary rule: [Plaintiff’s] case would be presented through the testimony of an obviously interested witness who is subject to impeachment on that account, and [the attorney] would be put in the unseemly position of arguing his own credibility.

717 F.2d at 1418.

Mr. Shapiro’s clients’ views on this matter are certainly of concern to the Court, but they cannot be controlling. Disciplinary rules may not be waived by the clients since the rules “are also for the protection of the bar and the integrity of the court.” Supreme Beef Processors v. American Consumer Industries, 441 F.Supp. 1064, 1068 (N.D.Tex.1977) (footnote omitted).

The Court has carefully weighed the effects of Mr. Shapiro’s disqualification vis-a-vis the interests of the plaintiffs. Both Mr. Dugan and Mr. Shapiro have stated to the Court that Mr. Dugan is anxious, ready, willing, and able to carry on the representation of the plaintiffs by himself on the date now set. As recently as May 9th, in court, Messrs. Dugan and Shapiro repeatedly urged the Court to maintain the trial date of May 14th. Furthermore, Messrs. Shapiro and Dugan have stated that with minor exceptions, the parties have reached virtual agreement on all matters expected to arise at trial, including joint jury instructions. Finally, Mr. Dugan is an experienced lawyer and a former long-time Assistant United States Attorney who has appeared before this Court on many occasions in civil matters. Thus, the Court has no reason to question his competence or ability to try this case alone. Moreover, he has had the able assistance of Mr. Shapiro through the pre-trial of this case. While Mr. Shapiro’s assistance would no doubt be of value to Mr. Dugan, there is no reason to believe that the plaintiffs will not be more than adequately represented. The Court would willingly grant a continuance in this case in order for new co-counsel to be retained, but plaintiffs’ counsel and their clients are adamant that new counsel is unnecessary. Clearly, the Court’s ruling is subject to an interlocutory appeal, Groper v. Taff, supra, but plaintiffs are so anxious to proceed to trial that they will forego that right. Given the Court’s confidence in the ability of Mr. Dugan, this case, brought under Civil Rights statutes as well as common law defamation, will proceed to trial promptly. Mr. Shapiro has been informed of the Court’s decision and has asked if he may remain as co-counsel until the conclusion of the pre-trial of this ease. After careful consideration, the Court has concluded that he may do so until trial begins. The dangers inherent in having a lawyer potentially testify as a witness stem from the strong possibility that the lawyer’s credibility will be placed in issue or that the jury will be unduly influenced by the testimony. Such potential for prejudicial impact does not exist through and at a settlement or pre-trial conference where no testimony is being taken and no jury is present. In addition, DR 5-102(A) specifically provides that the attorney “shall withdraw from the conduct of the trial____”, and does not mention the pre-trial proceedings. Finally, counsel for the defendants' have limited their objections to Mr. Shapiro’s participation in the trial proceedings only.

For all of the foregoing reasons, it is, by the Court, this 14 day of May, 1984.

ORDERED, that defendants' motion to disqualify Mr. David H. Shapiro and his law firm from participation in the conduct of the trial of this matter be, and the same hereby is, granted; and it is

FURTHER ORDERED, that, effective immediately, the Clerk of the Court shall notify all counsel of the Court’s decision contained herein.


author: VON DER HEYDT, District Judge.

text:
    Thomas O’BRIEN and Gene Hardy, Plaintiffs, v. Nick KELLY, in personam; and the FISHING VESSEL TUXEDNI, her engines, hull, tackle, and apparel, in rem, Defendants. Laird B. PETERSON, Trustee of that certain Bankruptcy entitled In re Nick Melvin Kelly and Sharon Gayle Kelly, husband and wife, Debtor, Case No. 82-02298, in the United States Bankruptcy Court for the Western District of Washington, at Seattle, as Successor-In-Interest to Nick Melvin Kelly, Plaintiff, v. William H. OPEL, in his capacity as United States Marshal, and The United States Marshal Service, Defendants.
    No. F80-021 Civ.
    United States District Court, D. Alaska.
    May 16, 1984.

      Daniel E. Winfree, Perkins, Coie, Stone, Olsen & Williams, Anchorage, Alaska, H. Bixler Whiting, Fairbanks, Alaska, for plaintiffs.
    Michael Spaan, U.S. Atty., Anchorage, Alaska, Mark C. Choate, Fairbanks, Alaska, Kurt LeDoux, LeDoux & LeDoux, Kodiak, Alaska, for defendants.
   MEMORANDUM AND ORDER

VON DER HEYDT, District Judge.

THIS CAUSE comes before the court on the government’s motion to dismiss Peterson’s complaint. Originally, this cause, F80-021, was an action by plaintiffs O’Brien and Hardy against Kelly. In that original action judgment was entered against Kelly. Pursuant to that judgment O’Brien and Hardy had the U.S. Marshal levy and sell a certain lot belonging to Kelly. O’Brien and Hardy submitted the high bid at the execution sale through an agent and are now owners of that' lot.

Around the time of the execution sale Kelly filed for bankruptcy. Peterson is the trustee in bankruptcy for the Kellys’ bankruptcy estate and therefore Kelly’s successor in interest to the lot. In an attempt to redeem the lot Peterson tendered a check to the U.S. Marshal, who declined to redeem the property without a judicial order.

The trustee, Peterson, filed an action in mandamus in cause A83-514 seeking to compel the U.S. Marshal to redeem the lot in question. See 28 U.S.C. § 1361. The government moved to intervene in cause F80-021. After that motion was granted, the Marshal placed the tendered funds in the registry of the court so that their disposition could be decided in an interpleader action. The government also moved to dismiss Peterson’s mandamus action. To expedite resolution of this matter the court consolidated the two actions. The court now addresses the government’s motion to dismiss.

Plaintiff Peterson alleges that Fed.R.Civ.P. 69(a) requires this court to follow state procedures in executing judgments. Because the Alaska execution statute, Alaska Statutes ch. 9.35, allows redemption within one year of judicial confirmation, he argues the Marshal is required to follow those procedures and redeem the property upon proper application. See id. §§ 9.35.-210-250. The government and the purchasers at the sale, O’Brien and Hardy, argue that the Marshal’s sale was a judicial sale, not an execution sale and, because federal law does not allow for redemption after judicial sales, no right of redemption exists. See United States v. Heasley, 283 F.2d 422, 427 (8th Cir.1960).

The Ninth Circuit in Travelers Insurance Co. v. Lawrence, 509 F.2d 83 (9th Cir.1974), distinguished judicial sales from execution sales.

The distinction in this regard between judicial sales and the ordinary execution sales is well summarized in 47 Am.Jur.2d Judicial Sales § 3, p. 301 as follows:

Id. at 89.

The circuit court found the following factors important in determining whether or not a sale is a judicial sale: (1) Was the writ issued by the clerk or was the sale made pursuant to judicial order; (2) Did the writ specify designated property; (3) Did a court order or state statute govern the mode and conditions of sale; (4) Was a levy or seizure required before the court obtained jurisdiction over the property and the sale could occur; and (5) Was the sale merely to satisfy a money judgment? See also Yazoo & Mississippi Valley R.R. v. City of Clarksdale, 257 U.S. 10, 19, 42 S.Ct. 27, 29, 66 L.Ed. 104 (1921); United States v. Branch Coal Corp., 390 F.2d 7, 9-10 (3d Cir.1968).

In this case all these factors indicate that the sale was an execution sale. The writ of execution was issued by the clerk and did not specify designated property. The sale was conducted following state statutory guidelines. See Memorandum in Support of Motion to Confirm Sale, October 1, 1982 (Docket # 106). Finally, levy was required before the property could be sold and the sale was to satisfy a money judgment unrelated to the property in issue. The fact that plaintiffs O’Brien and Hardy sought judicial confirmation as allowed by Alaska Statutes § 9.35.180 does hot turn what would otherwise be an execution sale into a judicial sale. Cf. Kasdon v. G.W. Zierden Landscaping Inc., 541 F.Supp. 991, 996 (D.Md.1982), aff'd, 707 F.2d 820 (4th Cir.1983). The court therefore finds that the sale in question was an execution sale.

The rule against allowing redemption only applies to judicial sales conducted pursuant to 28 U.S.C. §§ 2001 and 2002. See Heasley, 283 F.2d at 426-27. When there is an execution sale pursuant to Rule 69(a), that rule precludes the application of federal procedures for judicial sales. Branch Coal, 390 F.2d at 9; Weir v. United States, 339 F.2d 82, 86 (8th Cir.1964). Additionally, past federal courts presumed without addressing the issue that under Rule 69 or its predecessor statute redemption was available after a Marshal sold property in an execution sale. See Weir, 339 F.2d at 85; Hilliard v. Sisil, 192 F.2d 800, 802-04 (9th Cir.1951) (receiver redeemed property under circumstances similar to those present here).

Finally, allowing redemption will discourage collusive or undervalued bids at execution sales. So long as the judgment debt- or can redeem the property, he or she will be protected from having it sold at execution sales for less than fair market value. The court finds there is a strong public interest in encouraging high bids at execution sales.

The court finds that the Marshal has a clear and certain duty to redeem the property, assuming the requirements of the state redemption statute have been met. The duty of the Marshal to redeem is ministerial, not discretionary. Consequently, plaintiff Peterson’s complaint, presents a valid claim for mandamus and the government’s motion to dismiss must be denied. See, e.g., Smith v. Grimm, 534 F.2d 1346, 1352 (9th Cir.), cert. denied, 429 U.S. 980, 97 S.Ct. 493, 50 L.Ed.2d 589 (1976); Jarrett v. Resor, 426 F.2d 213, 216 (9th Cir.1970).

Finally, the court notes that in ruling on this motion to dismiss, it was required to rule on the merits of the mandamus claim and the interpleader action. Given this unusual procedural posture, the court finds it would be unfair to issue an order compelling the Marshal to redeem the lot in question without allowing parties to raise issues not decided by this opinion. Therefore, all parties shall have fifteen days from date of this order to show cause why this court should not compel the Marshal to redeem.

Accordingly, IT IS ORDERED:

(1) THAT the government’s motion to dismiss is denied;

(2) THAT all parties shall have fifteen days from date of this order to show cause why this court should not compel the U.S. Marshal to redeem the lot in question.

      . As an initial matter the court wishes to thank Mr. Winfree for his unusually clear, cogent and helpful brief.

      . In this case, plaintiffs’ bid of $110 was the high bid at the execution sale of a lot worth considerably more than that.


author: TERENCE T. EVANS, District Judge.

text:
    William DIXON, Jane Schennum and Robert Eisele, Plaintiffs, v. LADISH CO.; Armco, Inc.; Victor F. Braun; John H. Ladish; Robert S. Omelina; Gilbert F. Backes; Ralph Startz; Robert Daykin; Otto Widera; Orrin F. Brunner; Loren K. Olson; Victor F. Braun Foundation; Herman W. Ladish Family Foundation; C.C. Gladson; James V. Braun; Roger J. Myers; and Victor F. Braun, John H. Ladish and Roger J. Myers as Executors of the Estate of Sally Braun Myers, Defendants. Charles KADEMIAN, Plaintiff, v. LADISH COMPANY, et al., Defendants. Stan JANES, Plaintiff, v. LADISH COMPANY, et al., Defendants. Herb ENDE, Plaintiff, v. LADISH COMPANY, et al., Defendants. M.J. DEUTSCH, Plaintiff, v. LADISH COMPANY, et al., Defendants. J.M. BROWNING, Plaintiff, v. LADISH COMPANY, et al., Defendants.
    Civ. A. Nos. 81-C-1563, 82-C-722 to 82-C-726.
    United States District Court, E.D. Wisconsin.
    May 22, 1984.

      Herbert Beigel, Barnett & Beigel, Stephen M. Merrick, Fishman, Merrick, Perl-man & Nagelberg, Chicago, 111., for plaintiffs.
    Frank Daily, Quarles & Brady, Milwaukee, Wis., for defendant Ladish.
    Richard Ninneman, Whyte & Hirschboeck, S.C., Milwaukee, Wis., for defendant Armco.
   DECISION and ORDER

TERENCE T. EVANS, District Judge.

This securities action, arising out of the 1981 merger between the defendant companies, Ladish and Armco, is before me on the defendants’ motions to dismiss the complaint or, alternatively, for summary judgment. This decision pertains to separate actions which I consolidated for purposes of discovery and pretrial proceedings on November 8, 1982. The motions have been extensively briefed and supplemented with many affidavits and documents surrounding the merger. For this reason, I will treat the defendants’ motions as motions for summary judgment.

In addition to an amended complaint which was filed on December 30, 1981, the plaintiffs have moved to add another claim to their five-count complaint. On September 7, 1983, the plaintiffs moved, pursuant to Rule 15(a), F.R.C.P., to add a new count, Count VI, alleging a violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq. The defendants have requested that I first decide the motion to dismiss and then permit briefing and argument on the Rule 15 motion. I will do so.

Based on my review of the submissions of the parties in this case, I do not believe that the plaintiffs’ federal claims fall within the purview of the securities laws. Accordingly, I believe that it is proper to grant the defendants summary judgment on these claims. I have decided to keep under advisement the motions to dismiss the state law-related breach of fiduciary duty claims and will decide them upon the completion of briefing on the Rule 15 motion.

INTRODUCTION

The gist of the plaintiffs’ complaint is that they were shortchanged as a result of the merger. They received less than they might have for their stock because those who conducted the merger were concerned about tax advantages and corporate control, not maximizing the cash return. Further, the defendants covered up their motives by issuing deceptive financial information about Ladish and the stock, by manipulating the market for Ladish stock, and by excluding potential competitors from the merger arena. In the end, the plaintiffs complain, all shareholders were forced to sell their Ladish shares to Armco at a value far below what might have been obtained elsewhere in the market.

The following analysis begins and ends in federal law territory. Thus, what should be clear from the outset is the limited purpose of the federal securities laws. They were not created to recompense shareholders who claim merely.that they have received inadequate consideration for the shares which they have traded in a merger. See Goldberg v. Meridor, 567 F.2d 209 (2d Cir.1977), cert. den., 434 U.S. 1069, 98 S.Ct. 1249, 55 L.Ed.2d 771 (1978); Browning Debenture Holders Committee v. DASA Corp., 560 F.2d 1078 (2d Cir.1977). It is also fundamental that the securities laws do not penalize traders merely for failing or refusing to confess their “true” motives or characterize the fairness of the transaction. See Panter v. Marshall Field & Co., 646 F.2d 271, 291 (7th Cir.), cert. den., 454 U.S. 1092, 102 S.Ct. 658, 70 L.Ed.2d 631 (1981). Indeed, the securities laws do not address any injuries which can fairly be said to result from corporate mismanagement rather than transactional fraud. Those questions involve state law and deserve federal attention only as an ancillary matter. See Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977).

FACTS

The Background of the Merger

Because I am granting the defendants’ motion, I will accept as true the “facts” as presented by the plaintiffs. Those facts present the following picture. The plaintiffs each owned shares of Ladish stock which were converted to shares of Armco stock as a result of the merger. The defendants, in addition to Ladish and Armco, include former officers, directors, and shareholders of Ladish. The background of this case involves events which took place long before the 1981 merger ever came to fruition.

The plaintiffs describe the financial history of the Ladish Company as a conspiracy to maintain rigid control over the value of the company and to make it appear to be much lower than it actually was. Victor Braun was Chairman of the Ladish Board. Its chief officer was John Ladish. Their primary goal, in the plaintiffs’ view, was to block any free market activity in Ladish securities, “to keep the reported value and trading prices of the Ladish Co. stock as low as possible”. (Complaint, ¶ 31.) The underlying purposes in doing so were twofold: First, since much of the Ladish stock was held by charitable foundations which were run by Braun and Ladish, Braun and Ladish could maintain control of the company only if these foundations could avoid disposing of their stockholdings pursuant to IRS requirements for tax exempt foundations.- By keeping the price of the stock low, the charitable foundations were able to maintain substantial holdings of Ladish stock, and Braun and Ladish were able to maintain control of the company. Second, keeping the stock price low enabled Braun, who had reached the age of 85 and who owned a substantial amount of Ladish stock, to pass on an estate whose value for tax purposes was significantly less than “its true worth” (Complaint, ¶ 31d).

In pursuit of these goals, the plaintiffs allege that Braun intervened in and controlled transactions of the stock by arranging sales at preset prices and by regulating the number of buyers and sellers in the market. (Complaint, ¶ 33a.) Braun also allegedly took steps to discourage transactions at the corporate level by restricting access to the company’s financial information and by concealing or quashing bids for the company’s control.

All of this alleged control over the market for Ladish shares began to come to an end when certain Ladish vice-presidents sought out a merger partner for Ladish. They hoped to earn a rate of return better than what Braun made available, a deal which might reflect what they believed to be Ladish’s true worth. However, they were unable to escape the force of Braun’s control. For example, some officers approached Armco, who had long been a supplier and purchaser for Ladish, and who had allegedly coveted Ladish for years (Br. in Opposition at 15). However, Armco was concerned about offending Braun and losing Braun’s cooperation in securing control of Ladish at some later date. Thus, according to the plaintiffs, Armco refused to purchase any shares without Braun’s approval.

In late 1980, Ladish Vice-President Charles Kademian turned the attention of these maverick officers to ACF Industries, a Ladish customer which had expressed interest in pursuing a merger. Braun, however, attempted to dissuade ACF. He misrepresented the terms of ACF’s proposal to the Ladish Board, he informed the ACF Chairman that any purchase of Ladish stock would be considered an unfriendly act, and he attempted to dissuade the mavericks from seeking offers for their stock.

However, ACF was undeterred. On June 13, 1981, it agreed to purchase stock from a group of vice-presidents. It acquired approximately 5% of outstanding Ladish stock at a cost of up to $2,000 per share — nearly 20 times the price which Braun had “predetermined” for sales of Ladish stock.

Through these purchases, ACF obtained a portion of shares sufficient under Wisconsin law to- demand access to Ladish financial records. It was at this point, according to the plaintiffs, that Braun gave up hopes of controlling the company and began to pursue merger negotiations with Armco “regardless of the cost to Ladish shareholders” (Br. in Opposition at 17).

And so, according to the plaintiffs, a race to settle the merger ensued. It was in Braun’s interests to declare a quick merger with Armco, the plaintiffs believe, in order to short-circuit a complete unraveling of the details of his prior stock manipulations and still maintain control over Ladish. It was in Armco’s interests to settle the merger as quickly as possible in order to preempt a bidding war with ACF.

Within a week after ACF’s 5% purchase, Braun contacted Armco representatives. He met with them several times immediately after. At these meetings, Braun negotiated with Armco on the basis of studies prepared for him by the Ladish treasurer. These studies indicated that the company’s true per share value was much higher than the $2,000 offer which ACF had proposed as its purchase price. Among the valuations which Braun defended were $3,468 per share, $3,738 per share, and $4,074 per share. Braun once calculated that when the company’s “good will” was factored into valuations, the true worth of Ladish was $700 million — in excess of $6,000 per share. However, the deal settled much closer to the ACF offer. Armco proposed to exchange 60 Armco shares for 1 Ladish share, a value to Ladish shareholders of $2,100 per share. Armco’s Chairman William Verity admitted at his deposition that the $2,000 mark was the “hurdle” Armco had to surpass.

Next the merging companies swiftly turned their attention to locking up their deal. According to the plaintiffs, this was necessary in order to head off a bidding war prompted by ACF. The Braun family, John Ladish and the two foundations together controlled nearly a majority of the outstanding shares of Ladish stock. Purchase agreements were executed with these and other shareholders on July 2, 1981. They consisted of conditional promises by Armco to purchase Ladish shares. Armco would buy the Ladish shares owned by those who signed the agreements if the merger failed to go through, but only on the condition that none of the contracted group commit itself to “vote any of the shares in favor of any merger or in favor of any sale of all or substantially all of the assets of the company with or to any company other than Armco” (Br. in Opposition, App.Ex. 11). Thus, regardless of the wishes of other directors or shareholders, Armco would have control of Ladish through this fait accompli.

Nevertheless, ACF continued to fight for control of the company. On July 15, 1981, ACF wrote the Ladish Board proposing a merger at $2,500 per Ladish share. At later points in time, ACF offered $3,000 and ultimately $3,200 per Ladish share. Armco made no effort to improve its offer in response, other than to increase the exchange ratio from 60 to 66 shares per Ladish share in order to account for the amount of value Armco stock lost while the deal was pending.

The Ladish Board approved the merger agreement on July 19, 1981. Ladish and Armco jointly issued a Proxy Statement on September 16, 1981, in anticipation of a shareholders meeting to be held on October 9, 1981. According to the plaintiffs, the defendants “carefully wove a tale of deception” into the Proxy. The plaintiffs claim that the Proxy Statement omits or misrepresents facts about Ladish finances, the corresponding value of its stock, Braun’s manipulation of the stock, and the background of the merger negotiations.

On October 5, 1981, shortly before the shareholders convened to vote on the merger, the first of these consolidated eases was filed in the District Court for the Northern District of Illinois. District Judge John F. Grady permitted the shareholder meeting to proceed but enjoined the defendants from consummating the merger itself. This temporary restraining order was certified for interlocutory appeal, and an appeal was heard on October 15, 1981. The Court of Appeals vacated Judge Grady’s order, ruling that the plaintiffs had made an inadequate showing of irreparable injury. The court also commented that: '

In regard to likelihood of success on the merits ... a recent decision in Panter v. Marshall-Field & Co., 646 F.2d 271, (7th Cir.1981), places very substantial obstacles in the way of plaintiffs’ claims under the federal securities law which are based, as the claims in the instant case appear to be in this procedural context, on breaches of state law fiduciary duties and the failure to disclose such breaches under the securities laws.

Dixon v. Ladish Co., 672 F.2d 920 (7th Cir., 1981 at 5).

The shareholders met to vote on October 9. The merger was approved overwhelmingly. Approximately 92% of the shares were voted in favor of the merger. The only negative votes were cast by ACF, the plaintiffs Dixon and Schennum, the Steinbrecher family (approximately 1%) and shareholder Sutton (less than .1%).

An amended complaint was filed on December 30, 1981. The amended complaint, which is quite lengthy, alleges five counts against the defendants. Count 1 contains claims alleging violations of §§ 10(b) and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j, 78n(e); and rules promulgated by the Securities and Exchange Commission. Count 2 alleges violations of §§ 11, 12(2), and 17(a) of the Securities Act of 1933, 15 U.S.C. §§ 77k, 77l, and 77q. Both Counts 1 and 2 are directed at all of the defendants. Count 3, which is directed at all of the defendants except for Armco, alleges a conspiracy to violate § 10(b) of the Exchange Act. Count 4, directed against all defendants, alleges a cause of action arising under Wisconsin state law for tortious interference with reasonable business expectancy. Count 5, which is directed against all the defendants with the exception of Armco, alleges a breach of fiduciary duty.

The specific conduct on which the plaintiffs base their claims may be synopsized under two headings: Facts relating to statements made in or omitted from the Proxy Statement; and facts relating to conduct outside of the Proxy which preceded and allegedly predetermined the merger.

Facts Relating to the Proxy Statement

The plaintiffs charge that the Proxy is rife with misrepresentations and omissions of fact which were critically important to shareholders weighing the merger proposal. Among the arguably actionable flaws they cite are:

(1). The plaintiffs insist that the financial health of the company was misrepresented by the Proxy. Fourteen pages of financial information was presented in a form which was certified by an independent accounting firm to conform with generally accepted accounting principles. Nevertheless, the plaintiffs contend that if certain information was accounted for and presented in a different fashion, Ladish would have appeared to be worth much more than the Proxy reported. For instance, had the Ladish inventory been calculated on a Last-In, First-Out (LIFO) basis, rather than a First-In, First-Out (FIFO) basis, reported earnings would have been higher. The Proxy does report this fact in a footnote. However, the plaintiffs insist that “no mention was made as to the practical impact” of this recalculation. The plaintiffs appear to demand that the Proxy should have done more than just note the effect of the recalculation on the inventory figure; it should have also presented reworked balance sheets illustrating the overall effect of the different methods on total earnings. Had it done so, it might have been more plainly stated that Ladish’s pretax earnings would have appeared to be $60 million rather than the reported $21.3 million.

The same argument is made with respect to several other elements of the financial reports. The Proxy is attacked for understating total earnings by understating the rate of return on pension investments. The income Ladish earned by investing employee pension benefit funds was calculated on the basis of a 5% return on income rather than a higher rate. The plaintiffs argue that a higher rate was available to Ladish investors. The Proxy is allegedly misleading because it omitted information about the “practical effect” on earnings wrought by this fact.

Similarly, the Proxy understated overall worth because it understated the value of certain Ladish plant and equipment. These assets were valued at their cost to Ladish despite having market values far in excess of cost. Finally, overall earnings were misrepresented because Ladish accountants used certain accelerated depreciation and amortization techniques which gave the appearance of expensing rather than capitalizing certain purchases.

(2) . The Proxy omitted the results of internal valuation studies which confirmed Ladish’s “true worth”. The plaintiffs point out that Ladish negotiators themselves valued the company much higher than it was actually purchased for. It was fraudulent, the plaintiffs explain, for the Proxy to refer to two of the internal valuations prepared for Ladish negotiators (arriving at $3,468 and $3,738 figures) without revealing a third internal valuation which put the company’s per share value at $4,074. Furthermore, the Proxy failed to describe the information and accounting methods underlying these valuations.

(3) . The Proxy misrepresented the background of the merger proposals. Among details which the Proxy omits were the medieval details of Braun's earlier control over the market for Ladish shares and his attempts to quash bids for control of the company. It also omitted to state that it was Braun and not Armco who initiated merger discussions between Ladish and Armco. Nor does the Proxy reveal that Braun’s offer came on the heels of the June 13 sale of 5% of Ladish stock to ACF — not 10 days later, as represented in the Proxy. Thus, the plaintiffs contend, the Proxy falsely implied that ACF was the unruly interloper who would have upset the lucrative Armco deal, rather than some other way around.

(4) . The Proxy gave short shrift to a comparison between the features of an ACF merger and an Armco merger. The plaintiffs contend that it was deceptive to state that ACF was less compatible than Armco with Ladish without describing ACF’s business. ' One line of ACF’s business involved the oil area, which the plaintiffs claim was “a major and growing part of Ladish’s business”. The Proxy did not present the detailed financial information about ACF that it gave about Armco.

Fraudulent Practices Outside the Proxy

Other conduct which generated the merger amounted, according to the plaintiffs, to unlawful manipulation. The conduct itself as well as the defendants’ failure to report it in the Proxy, are alleged to violate the securities laws.

The conduct on which the plaintiffs base these claims consists mainly of Braun’s attempts to marshal control over the market for Ladish shares and the company itself. The plaintiffs assail Braun for blocking the development of a free market for Ladish stock. They allege that Braun maintained lists of prospective buyers and sellers of Ladish stock and arranged sales between them at preset prices. Furthermore, Braun enforced “handshake” agreements among Ladish officers to sell their stock back to Ladish. On top of all this, Braun restricted the flow of information concerning the value of Ladish stock, giving shareholders access only to bare summaries of selected financial records. The information which did trickle out was skewed, the plaintiffs charge, by the same accounting tactics described above.

As a result of all these actions, the market price of Ladish stock was kept at “predetermined” figures — $40-$50 per share prior to 1975, and $100-$125 per share after 1975. The plaintiffs allege that these prices had neither economic justification nor reflected supply or demand factors.

At the entity level, Braun undertook various actions to discourage corporate suitors. One step which he took was to conceal offers made by companies interested in purchasing Ladish. Braun allegedly concealed expressions of interest not only from Armco and ACF, but also from Gulf & Western, United Technologies, and Aerojet.

The final element of alleged manipulative conduct consists of the “lock-up” agreements executed after the merger deal had been struck. The plaintiffs insist that the, purchase agreements, which gave Armco control over Ladish no matter how the rest of the shareholders decided to vote, predetermined the outcome of the merger battle and constituted an unlawful fait accompli.

DISCUSSION

The motion before me turns on whether the plaintiffs were prevented from making an intelligent investment decision when faced with the prospect of merger between Ladish and Armco. Having studied this question from the vantage points offered by the securities laws, I conclude that they were not.

The Purpose of the Securities Laws: Full Disclosure

Undisputed stands the goal which the securities statutes were intended to meet and to which the courts limit their purview: full disclosure in securities transactions. In Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977), the Supreme Court wrote that “The Court repeatedly has described the ‘fundamental purpose’ of the [1934] Act as implementing a ‘philosophy of full disclosure’; once full and fair disclosure has occurred the fairness of the terms of the transaction is at most a tangential concern of the statute.” Id. at 477-478, 97 S.Ct. at 1302-03. The 1933 Act embraces the very same motivating and limiting philosophy. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 195, 96 S.Ct. 1375, 1382, 47 L.Ed.2d 668 (1976). In deploying this “philosophy of full disclosure”, it has been explained that

... the federal purpose is served if the [Proxy] statement fully and fairly sets out such relevant and material facts as would enable a reasonably prudent stockholder to make an intelligent decision as to whether to grant the requested Proxy or as to how he should vote on the questions mentioned in the Proxy statement.

Golub v. PPD Corp., 576 F.2d 759, 764 (8th Cir.1978). Thus, federal intervention is warranted only where the conduct alleged can be fairly viewed as misleading. Unless the defendants perpetrate some manipulation or deception which prevents shareholders from seeing clearly the elements of the proposed transaction, no federal interest is implicated. Santa Fe 430 U.S. at 473-474, 97 S.Ct. at 1300-01; Bucher v. Shumway, [1979-1980 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 97,142 at 96,299 (S.D.N.Y.1979), aff'd, 622 F.2d 572 (2d Cir.), cert. den., 449 U.S. 841, 101 S.Ct. 120, 66 L.Ed.2d 48 (1980). Given the similarity of the purpose and operative language of the 1933 Securities Act, the same can be said for it.

Furthermore, in establishing federal supervision over the securities markets, Congress stopped short of authorizing federal scrutiny into matters of corporate management and fiduciary duty. Thus, the Court of Appeals for this Circuit has cautioned that if “the central thrust of a claim or series of claims arises from acts of corporate mismanagement, the claims are not cognizable under federal law. To hold otherwise would be to eviscerate the obvious purpose of the Santa Fe decision, and to permit evasion of that decision by artful legal draftsmanship.” Panter at 289 quoting Hundahl v. United Benefit Life Insurance Co., 465 F.Supp. 1349, 1365-66 (N.D.Tex.1979). This means that a failure to disclose facts which would alert investors to nothing other than a breach of fiduciary duty is insufficient to invoke the federal remedy. The Court of Appeals for the Second Circuit underscored how substantial the nondisclosure must be when it cautioned that

We are also not inclined to subject every tender offer to a knit-picking judicial, scrutiny which will in the long run injure shareholders by preventing them from taking advantage of favorable offers. The disclosure required by the Act is not a right of confession or an exercise in common law pleading. What is required is the disclosure of material objective factual matters.

Data Probe Acquisition Corp. v. DataTab, Inc., 722 F.2d 1, 4 (2d Cir.1983).

In this case, the plaintiffs’ federal claims fall short of satisfying the purpose of the securities acts. What appears to be a rather bitter bout between opposing managerial camps cannot perdure in federal court on the basis of the nondisclosures, misrepresentations and manipulations which the plaintiffs describe. Indeed, intervening on the basis of what transpired in this case would set a precedent for federalizing every merger.

The plaintiffs’ claims fail for several reasons. Some of the facts which they claim were not disclosed were. Some of the non-disclosures are not redressable under the securities laws in the first place. The rest of the non-disclosures involved facts which were not material to the reasonably prudent stockholders’ decision. Most of the practices which they attack as manipulative were immaterial; those practices which did play a positive role in the merger — namely, the lock-up agreements — cannot fairly be called “manipulative” within the meaning of the securities acts. At bottom, the “central thrust” of the plaintiffs’ complaint is better left to a state court to be adjudicated under principles of state corporation law: That the plaintiffs were in the end rooked out of a larger amount of cash by a majority group of shareholders, officers and directors who engineered and ratified a stock swap which was intentionally tax-free rather than cash-plenty implicates principles of fiduciary duty, not securities fraud.

Each instance of securities fraud which the plaintiffs allege is analyzed below:

Self-Dealing

The defendants’ failure to describe, in terms as dramatic as those chosen by the plaintiffs, Braun and Ladish’s interests in protecting the charitable foundations which they managed and in their control over the company does not state a claim under the securities laws. As was stated at the outset, the failure to reveal intent itself, no matter how impure, does not subject those who engineered the merger to securities fraud liability. See Panter at 289, 291. Like the claim in Panter, this allegation constitutes no more than a failure to reveal a breach of fiduciary duty.

The Ladish Board members did disclose the material facts underlying their own interests. The Proxy identifies the foundations'which owned and voted Ladish stock (the Herman W. Ladish Family Foundation, Inc., which owned approximately 15% of Ladish and the Victor F. Braun Foundation, Inc., which owned approximately 3% of Ladish, and their directors, Victor Braun, John Ladish, Elwin Zarwell, and James V. Braun). Under “Reasons for the Merger”, the Proxy identifies as the number one reason for approving the merger the fact that the merger afforded Ladish shareholders, “many of whom are long-term holders of low-basis Ladish Common Shares, the. opportunity through a ‘tax-free’ exchange to participate in the ownership of an enterprise which is larger and more diversified and has greater resources than Ladish”. See Proxy, Armco-Ladish Br. in Support, Ex. B at 3, 6-8, 13-14 (hereinafter “Proxy at_”). Furthermore, the Proxy identifies the directors and officers of Ladish and demonstrates, by detailing how much of the company stock they controlled, the extent of their interest and voting power to perpetuate their offices. Id. at 6-8, 27. Cf. Rodman v. Grant Foundation, 608 F.2d 64, 73 (2d Cir.1979).

Deceptive Accounting Methods

The Proxy is attacked as deceptive because it omitted to -state that the accounting methods employed by Ladish bookkeepers (generally accepted accounting principles, according to independent accountants who reviewed the statements) understated Ladish’s “true worth”. In the first place, at least a portion of this information is made available in footnotes to the financials in the Proxy. See, e.g., Proxy at 48 (FIFO/LIFO comparison).

Furthermore, the failure to rework the balance sheets using different accounting methods is not a duty which the securities laws impose. Faced with very similar facts, the Hundahl court also declined to require that this kind of data be provided:

... The claim is that there was not enough information given by Mutual to make the facts disclosed meaningful and, hence, not deceptive. But the omissions are not facts. They are, instead, non-disclosures of purpose and motive; for example, not disclosing that the true worth of the company stock was depressed by the accounting methods used.

Id. at 1364. Hundahl held “not cognizable under federal law” claims that Mutual failed to state that United’s “very conservative” book value conversions understated United’s worth and earnings and that Mutual failed to disclose that United's assets had appreciated to an amount substantially in excess of their book value. Id. at 1364-1365.

Internal Valuation Studies

The Proxy reveals that Ladish negotiators to some degree believed that the company was worth more than shareholders actually realized in the exchange. It plainly states that two internal valuation studies were conducted, but only for use during merger negotiations. The studies put the value of the firm at $3,738 and $3,468 per share. The Proxy states that these figures were derived from “a list of items such as net worth of Ladish, market value of Oremet stock, the LIFO reserve, etc., which when added together produced ‘adjusted book values’.” Proxy at 13. The plaintiffs charge that the Proxy is deceptive because it fails-to reveal a third study, which placed the value even higher, and because it failed to supply all the details underlying the stated conclusions.

Ladish’s failure to reveal the details of valuation studies prepared for merger negotiations and not for public dissemination is not unlawful. The Panter court cautioned against the disclosure of tentative information which does not necessarily reflect reliable values:

However, projections, estimates, and other information must be reasonably certain before management may release them to the public. Thus, in the recent case of Vaughn v. Teledyne, Inc., 628 F.2d 1214, 1221 (9th Cir.1980), the Ninth Circuit rejected the claim that defendants had a duty to disclose internal projections during the course of a tender offer for its own shares. The court held “[i]t is just good general business practice to make such projections for internal corporate use. There is no evidence, however, that the estimates were made with such reasonable certainty even to allow them to be disclosed to the public.”

Id. at 292. As was discussed in Panter, the fact that these valuations varied greatly from valuations endorsed by independent accountants compels the inference that they were highly tentative and of little value outside the negotiations. Id. Other courts have declined to require that these kind of studies be published. “Ordinarily ... the courts discourage presentations of future earnings, appraised asset Valuations and other hypothetical data in Proxy materials.” Kohn v. American Metal Climax, Inc., 458 F.2d 255, 265 (3d Cir.1972), cert. den., 409 U.S. 874, 93 S.Ct. 120, 34 L.Ed.2d 126 (1972). “Full factual disclosure need not be embellished with speculative financial predictions.” Rodman at 72.

Stock Price and Supply Manipulation

Braun’s alleged control over the market for Ladish stock — what plaintiffs have termed his “calculated market gamesmanship” — did not unlawfully determine the outcome of the merger. To successfully claim that Braun’s conduct — his predetermination of Ladish stock prices and supervision over individual sales — constitutes illegal “manipulation” of the market, the plaintiffs must identify some “misleading” effect it had on investors who were contemplating the merger. Santa Fe 430 U.S. at 476, 97 S.Ct. at 1302. As one court explained “manipulation”,

This term of art cannot be extended to cover every form of unfair dealing which appears to the lay person to be manipulative. The unifying element in a manipulative device as listed in Santa Fe is that they are “used to persuade the public that activity in a security is the reflection of genuine demand instead of a mirage.”

Billard v. Rockwell International Corp., 526 F.Supp. 218, 222 (S.D.N.Y.1981), aff'd 683 F.2d 51 (2d Cir.1982). Whether or not Braun was able to conjure a market mirage during some earlier period, it is plain that he did not have anyone transfixed during the pendency of the merger.

The plaintiffs paint a picture of controlled prices where the prices range from $50-125. Had the merger price fallen within this range, they might have had a claim. However, once ACF came on the scene, the market was blown wide open. ACF’s initial offer was 20 times or more what the present range would lead one to believe Ladish stock was worth. No longer was Ladish stock being traded within “the market vacuum” (Br. in Opposition at 61) Braun allegedly created. ACF’s purchase of 5% of the outstanding shares proved that no longer could Braun hold sway over individual sales of stock.

Nor can it be said that shareholders were misled from actively engaging in some bidding over the value of their stock. After all, Armco’s proposal narrowly topped the $2,000 bid ACF made for the vice-president’s stock. The Proxy also highlights the July 17, 1981, ACF offer of $2,500 per share for each outstanding Ladish common share (Proxy at 10), the August 3, 1981, ACF offer of $3,000 per share (Proxy at 12), and the August 26, 1981, ACF offer of $3,200 per share (Proxy at 13). Furthermore, the Proxy alluded to valuation studies which asserted an even higher per share value, which might have led shareholders to seek an even higher price for their holdings. In short, in the context of the merger, Braun’s alleged control over the market could no longer be found to be misleading.

Other Braun Machinations

I do not believe that the total mix of information available to a reasonable shareholder would have been materially affected by explicit reference in the Proxy to any or all of the facts that: Braun had withheld from the Ladish Board previous expressions of interest; Braun and Ladish held a monopoly on detailed financial information pertaining to the performance of the Ladish Company between 1975 and 1980 and did not make this information available in great detail in annual financial reports; or that an ACF offer served as a prelude and as the mark to beat, not merely as interference, to the ultimately successful Armco offer. Because a materiality determination involves a mix of law and facts, these allegations must be carefully weighed. See TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 450, 96 S.Ct. 2126, 2132, 48 L.Ed.2d 757 (1976). However, I do not believe that reasonable minds could differ on the question of materiality of the alleged omissions and misrepresentations under the circumstances of this case.

The legal test of materiality was defined by the Supreme Court in TSC Industries:

An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote____ Put another way, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the “total mix” of information made available.

Id. at 449, 96 S.Ct. at 2132. This test applies to each provision of the securities acts upon which the plaintiffs rely. See Greenapple v. Detroit Edison, 468 F.Supp. 702, 708 (S.D.N.Y.1979), aff'd., 618 F.2d 198 (2d Cir.1980) (§ 11, 1933 Act); Alton Box Board Co. v. Goldman, Sachs & Co., 560 F.2d 916, 919-920 (8th Cir.1977) (§ 12(2), 1933 Act); Spatz v. Borenstein, 513 F.Supp. 571, 580 (N.D.Ill.1981) (§ 17(a), 1933 Act); Berman v. Gerber Products, 454 F.Supp. 1310, 1321-23 (W.D.Mich.1978) (§ 10(b) and 14(e), 1934 Act).

How would the total mix of information have been improved by a fuller or fairer explanation of the details above? What would the reasonable shareholder have learned? He might have learned more about the alleged corporate mismanagement of Ladish Company, but that quarrel does not bootstrap this ease into federal court. He may have gained insight into Ladish’s worth at some earlier juncture; however, the Proxy already offered accurate and plenary financial information about the company’s current financial position, on which the merger proposal was based. Furthermore, the Proxy revealed that there was an interested party, namely ACF, who felt the company was worth even more.

The shareholder may have learned that the defendants were not giving ACF the full credit it deserved for shaking loose Braun’s control over the price one could fetch for a Ladish share; although this fact may have rallied underdog sympathies to ACF and turned emotions against Braun, there is no reason to believe that the sentiments would have played a significant role in the investment decision itself. No matter who opened the bidding — Braun, Arm-co, ACF — the bids themselves were all plainly stated to the ownership. The numbers were all there; an “up close and personal” on the players would not have significantly altered the score on which those weighing the merits of the various offers decided.

Therefore, I do not believe that these omitted facts change the investment decision itself. The plaintiffs may have desired a different outcome to the merger battle, or may have desired that the opportunity be exploited to express shareholder resentment over Braun’s control of the company; however, these are not purposes for which the securities laws were designed. None of the omitted facts directly underlying these desires were material to a prudent investment decision regarding the merger.

ACF Financial Information

I do not believe that the Proxy’s failure to give a more detailed report of ACF’s finances and a more detailed comparison between ACF and Armco materially affected the investment question posed to Ladish shareholders. ACF itself made this information available to each of the shareholders. It contacted them twice by letter and included a copy of ACF's Annual Report. See Ninneman Affidavit, Ex. E. Even had these steps not been taken, the information for which the plaintiffs clamor was publicly available (both ACF and Arm-co were publicly traded) to shareholders who would have considered it important. The parties cite no authority for their positions on this subject. However, it appears that no duty is imposed on the defendants to restate information which is publicized or widely known. See Smallwood v. Pearl Brewing Co., 489 F.2d 579, 606 (5th Cir.), cert. den., 419 U.S. 873, 95 S.Ct. 134, 42 L.Ed.2d 113 (1974); Alabama Farm Bureau Mutual Casualty Co. v. American Fidelity Life Ins. Co., 606 F.2d 602, 610 (5th Cir.1979), cert. den., 449 U.S. 820, 101 S.Ct. 77, 66 L.Ed.2d 22 (1980); Beissinger v. Rockwood Computer Corp., 529 F.Supp. 770, 781 (E.D.Pa.1981).

The Purchase Agreements

Nor do I believe that the Armco “lock-up” purchase agreements violate the federal securities laws. The Court of Appeals for the Second Circuit, in Data Probe, supra, recently declined to expand the concept of “manipulation” to include such lock-up practices:

Viewing the CRC option solely as a self-serving barrier created by Data Tab’s management to prevent its shareholders from choosing the Data Probe offer, the gravamen of the wrong alleged is a breach of fiduciary duty which we are not free to condemn under existing federal legislation.

Id. at 4, citing Santa Fe, supra. The key inquiry, the court had explained in a previous case, Buffalo Forge Co. v. Ogden Corp., 717 F.2d 757 (2d Cir.1983), was to determine whether, the conduct which was alleged to be “manipulative” works in some way to mislead the shareholders. If the pernicious effect of the practice derives from something other than its potential for misleading, then the claims fall outside the federal securities acts, somewhere, perhaps, within the realm of state corporation law. In this case the purchase agreements may have operated unfairly, but they did not mislead anyone; they were fully explained in the Proxy. Therefore, their operation does not constitute “manipulative” conduct within the purview of the securities acts.

The plaintiffs’ argument rests almost exclusively on the decision of the Court of Appeals for the Sixth Circuit in Mobil Corp. v. Marathon Oil Co., 669 F.2d 366 (6th Cir.1981). Mobil declared that it was manipulative and illegal for U.S. Steel to preempt the tender offer bid of Mobil Oil by striking an alternative agreement with Marathon which provided that if U.S. Steel’s bid for control of Marathon failed, it would be free to buy a portion of Marathon, a portion which just happened to constitute the core of the company’s assets. Therefore, even if Mobil had gained control of Marathon, it would lose control of what made the Marathon deal so enticing in the first place. The Mobil court declared this fait accompli violative of the Williams Act.

The Data Probe court expressly questioned the Mobil decision, which stretches the mission of the securities laws beyond “full disclosure” into a realm of general fair conduct. Since I find the Data Probe analysis more compelling, I agree that the “lock-up” agreements in this case do not violate the securities acts.

CONCLUSION

For all the foregoing reasons, I do not believe that the plaintiffs’ complaints state claims on which I can grant relief under the federal securities laws. In such a position, I do not believe that there would be pendent jurisdiction over the other claims which plaintiffs make and which arise under state law. Under the rationale of United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966), I am inclined to dismiss these claims as well.

However, in the interim between the filing of the federal securities claims and this decision, the plaintiffs have filed a motion to amend their complaint to allege claims arising under RICO. The defendants have requested that they be given a chance to brief that motion before receiving a decision on it. If the defendants are unsuccessful in defeating the motion to amend the complaint, there may be grounds for exercising pendent jurisdiction. Accordingly, I believe that it is appropriate to keep the motions to dismiss Counts IV and V of the complaint under advisement until I am able to resolve the motion to amend the complaint. I hope to resolve this issue quickly, and the schedule announced will serve to meet that purpose.

Therefore, the following ORDERS are issued:

1. Counts I, II, and III of the Amended Complaints are hereby DISMISSED.
2. The defendants shall respond to the plaintiffs’ motion to amend no later than two weeks from the date of this order.

      . Were it necessary, at a later point, to discuss the issue of reliance (I conclude below that it is not necessary to reach this issue; see n. 2, infra), several other facts would be worth recounting: Despite what has been asserted as a cleverly woven tale of deception, the plaintiffs have candidly stated in depositions that the Proxy did not deceive them. See, e.g., Dixon Dep. at 80-82, In fact, the plaintiffs voted against the merger. One of the plaintiffs testified that the most serious omission was the Proxy's failure to disclose the "true reasons” why Braun and other Ladish directors agreed to merge with Armco (Id. at 83).

      . The analysis which follows concentrates on the elemental issues (1) whether the defendants failed to disclose or represent differently any facts which federal law required; and (2) whether facts which -they omitted or misrepresented were material to the Ladish shareholders. Because of the determination I reach on these issues, other issues raised by the parties, including the tricky issue of reliance (See n. 1, supra), need not be analyzed.


author: FORRESTER, District Judge.

text:
    Charles Clifton COLLINS, Plaintiff, v. Vicki Lynn COLLINS, Defendant.
    Civ. A. No. C82-2460A.
    United States District Court, N.D. Georgia, Atlanta Division.
    June 29, 1984.

      Mary Ann B. Oakley, Oakley & Bonner, Atlanta, Ga., D. Lynn Russell, Ann J. Herrera, Decatur, Ga., for plaintiff.
    E. Penn Nicholson, David C. Newman, Dodd, Driver, Connell & Hughes, Atlanta, Ga., for defendant.
   ORDER

FORRESTER, District Judge.

This action is before the court on plaintiffs motion to substitute counsel, plaintiff’s motion for consolidation, and plaintiff’s motion for summary judgment. Plaintiff’s motion to substitute counsel is not in compliance with Local Rule 71.7 and is therefore DENIED without prejudice. Because the court has concluded, for reasons which will appear below, that this action should be dismissed for failure to state a claim, plaintiff’s motion for consolidation and defendant’s motion for summary judgment are MOOT.

I. FACTS.

This action began as a divorce proceeding in the Superior Court of Clayton County with all the bitterness which so often characterizes such proceedings. After a jury returned a verdict against him. but before a final judgment was entered, Mr. Collins filed a motion for reconsideration or in the alternative a motion for a new trial. While that motion was pending Judge Miller, the presiding judge was diagnosed as having terminal cancer. Nevertheless, a hearing was held on Mr. Collins’ motions in January 1982. On March 15, 1982, after learning that the judge had decided to rule in Mrs. Collins’ favor, Mr. Collins filed a motion to recuse on the grounds that there had been improper attempts to influence the judge through ex parte communications and that the judge was incompetent to continue in the case.

The motion to recuse was assigned -to Judge Ison. A hearing was held at which Mrs. Collins presented affidavits concerning the ability of Judge'Miller to continue hearing the ease. Evidence was also presented on the issue of whether Mrs. Collins had improperly attempted to influence Judge Miller. Mr. Collins had subpoenaed various witnesses to testify as to Judge Miller’s health, but Judge Ison had granted an unopposed motion to quash the subpoenas. Judge Ison, then denied the motion to recuse, finding that Judge Miller was fully competent to continue in the case and that the ex parte communications challenged by Mr. Collins were harmless and did not involve either Mrs. Collins or her attorney.

Immediately following the denial of the motion to recuse, Judge Miller entered his findings of fact, conclusions of law, and final order denying the motion for new trial and motion for reconsideration and awarding custody of the minor child to Mrs. Collins. Judge Miller died soon thereafter.

Subsequent to the entry of these judgments Mr. Collins sought a grant of an application for discretionary review from the Supreme Court of Georgia pursuant to Ga.Code Ann. § 6-701.1(a)(2) in order to review various orders issued by the trial court. Among the orders which Mr. Collins sought to appeal were the final custody order, as amended and re-entered, the order denying defendant’s motion for new trial and extraordinary motion for new trial, and the order denying defendant’s motion to recuse Judge Miller. On May 19, 1982 the Supreme Court denied the application for discretionary review. Subsequently, the remaining issues of child support, alimony and property division were tried before a jury which rendered a verdict which was reduced to a final judgment on June 16, 1982. Mr. Collins filed a separate application for appellate review of the final judgment and preceding orders, and the court’s award of attorney’s fees. On September 2, 1982 the Supreme Court denied the second application for appellate review.

Totally dissatisfied with the results obtained in the Georgia courts, Mr. Collins then filed the present action in this court seeking relief under 42 U.S.C. § 1983. Plaintiff’s complaint, as amended, asserted that the Georgia discretionary appeal statute, Ga.Code Ann. § 6-701.1(a)(2), violated the equal protection clause of the Constitution. Plaintiff asked this court to declare that statute unconstitutional and enjoin the Supreme Court of Georgia from enforcing it. In essence, he asked this court to order the Supreme Court of Georgia to hear his appeal. Plaintiff’s equal protection claim was dismissed by order dated June 30, 1983.

Plaintiff’s complaint also asserted that the defendants had acted under color of state law to deprive him of his property without due process. Plaintiff alleged that a conspiracy existed between Judge Miller and Mrs. Collins in order to thwart the recusal hearing to permit Judge Miller to remain on the bench, during the pendency of this action despite a clear inability to serve. Plaintiff alleged that three actions, either directly or indirectly, individually or in conjunction, acted to deprive him of due process. They are: “(a) The denial of the right to subpoena witnesses and present them at the hearing on the motion to recuse ... (b) the trial by an incompetent judge, and a trial of a judge acting without authority under Georgia law ...; and (c) the denial of the right granted by State law to have the motion to recuse transcribed by a court reporter for subsequent review by the appellate courts____” In the June 30, 1983 order the court dismissed that part of plaintiff’s due process claim which asserted that the denial of plaintiff’s right to have the hearing on the motion to recuse transcribed by a court reporter was a denial of due process. Therefore, plaintiff’s only remaining federal claims are that he was deprived of his constitutional rights by a conspiracy between Judge Miller and defendant Collins to thwart the recusal hearing, and that Judge Ison’s order quashing the subpoenas deprived him of due process.

II. DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

In her motion for summary judgment defendant argues that plaintiff’s remaining claims are barred by the doctrine of res judicata because they either were or should have been adjudicated in the Georgia courts. Plaintiff has responded to defendant’s motion by vigorously arguing that issues of fact remain concerning the competence of Judge Miller and whether the motion to recuse was improperly decided based on perjured affidavits and the absence of the witnesses whom plaintiff had subpoenaed. Neither side has raised or otherwise addressed the more fundamental issue of whether this court has jurisdiction in this case. Because this court must examine whether subject matter jurisdiction exists on its own motion if necessary, the court shall examine the question sua sponte.

Although plaintiffs complaint is couched as a suit brought under 42 U.S.C. § 1983 to enjoin violations of plaintiffs constitutional rights, when boiled down to its essential elements it is no more than a suit to set aside a judgment on the grounds that the judgment was obtained by fraud. Plaintiff asks this court to enjoin Mrs. Collins “from seeking any further attachments or process to enforce any of said judgments and that this Court further declare that said judgments are void and unenforceable as violative of the due process rights of this Plaintiff.” Plaintiff argues that Judge Miller was incompetent to render the judgments in the divorce case. Since Judge Miller’s competence was adjudicated by Judge Ison in denying the motion to recuse, Mr. Collins argues that the denial of the motion to recuse was improper and based upon perjured affidavits and an inadequate record. It follows therefore that the first hurdle the court must overcome is whether it has the power to review the denial of the motion to recuse. If this court has no such power, then the court cannot inquire into whether or not the recusal was proper or whether or not Judge Miller was competent to render a judgment.

The question then becomes: Can a federal district court enjoin enforcement of a state court judgment that has been obtained by fraud and which therefore deprives the plaintiff of property without due process of law? The starting point in the court’s analysis is Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923), in which the Court held that federal district courts have no jurisdiction to “entertain a proceeding to reverse or modify the judgment (of a state court) for (constitutional) errors____ To do so would be an exercise of appellate jurisdiction. The jurisdiction of the district courts is strictly original.” Id. at 416, 44 S.Ct. at 150. Rooker was relied upon by the Fifth Circuit in Warriner v. Fink, 307 F.2d 933 (5th Cir.1962), cert. denied, 372 U.S. 943, 83 S.Ct. 937, 9 L.Ed.2d 969 (1963). In that case the plaintiff argued that a foreclosure on her property had been obtained by fraud. She had appealed the foreclosure to the Supreme Court of Florida. However, evidence in the record supported plaintiff’s contention that defendant had made fraudulent representations to the Supreme Court of Florida which dismissed her appeal in reliance on such representations. Plaintiff then filed her action in the district court seeking to enjoin the defendants from enforcing the final decree of foreclosure and attacking that decree as void. Plaintiff argued that federal jurisdiction was based upon the first, fifth and fourteenth amendments of the Constitution, as well as on the due process and equal protection clauses. However, the court of appeals found that the district court had no jurisdiction to enjoin the enforcement of or to set aside or hold null and void the decree of foreclosure:

The plaintiff has appeared and argued the case very creditably in her own behalf and has impressed the Court with her sincerity. It is for that reason and to enable her the more easily to petition for review of our judgment in the Supreme Court of the United States, if she so desires, that we have set forth the facts alleged in the complaint in such detail. The plaintiff insists that through no fault of her own she is being deprived of valuable properties without any hearing on the merits of her defense to the bill of foreclosure and thus without due process of law. Her argument is that the purported final decree of foreclosure is an absolute nullity because of fraud practiced on the court, and that a federal district court can enjoin a party from enforcement of such a void judgment under such authorities as Simon vs. Southern Railway Company, (1915) 236 U.S. 115, 35 S.Ct. 255, 59 L.Ed. 492, and Johnson vs. First National Bank, (10 Cir.1955) 223 F.2d 31.
We are convinced, however, that when the plaintiff failed to seek review by the Supreme Court of the United States of the judgment of the Supreme Court of Florida of January 23, 1952 dismissing her appeal, she lost the only avenue of relief available to her in the federal courts. In the light of the anti-injunction statute, 28 USCA § 2283, and of a number of decisions of the Supreme Court and of this and other Circuits, in which the principles are fully discussed, we hold that the federal district court had no jurisdiction to enjoin the enforcement of, or to set aside, or hold null and void the decree of foreclosure entered by the Circuit Court of Monroe County, Florida. Warriner v. Fink, 307 F.2d 933, 936 (5th Cir.1962) (citing Toucey v. New York Life Insurance Co., 314 U.S. 118 [62 S.Ct. 139, 86 L.Ed. 100] (1941), Rooker v. Fidelity Trust Co., 263 U.S. 413 [44 S.Ct. 149, 68 L.Ed. 362] (1923), Chicago Life Ins. Co. v. Cherry, 244 U.S. 25 [37 S.Ct. 492, 61 L.Ed. 966] (1917), Hanna v. Home Insurance Co., 281 F.2d 298 (5th Cir.1960), and Manufacturers Record Publishing Co. v. Lauer, 268 F.2d 187 (5th Cir.1959)). See also Wright, Law of Federal Courts § 47 p. 205 (3rd Ed. 1976); 13 ALR 2d § 23, pp. 467 et seq.

Warriner v. Fink has never been overruled and has been relied on as recently as 1981 in the decision of Reynolds v. Georgia, 640 F.2d 702 (5th Cir. Unit B), cert. denied, 454 U.S. 865, 102 S.Ct. 326, 70 L.Ed.2d 165 (1981). The rationale for the decisions in Rooker, Warriner, and Reynolds was the conclusion that the relief sought by plaintiff necessarily required the district court to undertake an appellate review of the state court proceedings. Such an appellate review was outside the jurisdiction of the district courts, which have only original jurisdiction. As the court stated in Reynolds:

At the outset, the Court recognizes that a State Court Judgment which violates settled legal principles may run afoul of the guarantees of the due process clause, especially if such a judgment has the effect of taking property from a citizen and giving it to the State..... However, the fact that an arbitrary judgment of a State Court may abridge the Constitution does not necessarily mean that such a judgment gives rise to a claim for violation of Constitutional and Civil Rights in Federal District Court. If to review such a judgment for constitutional violations of that character is essentially an exercise of appellate jurisdiction, a Federal District Court, whose jurisdiction is strictly original, has no power to entertain such a suit.
In this case, plaintiff asserts that she is not seeking appellate review of the State Court decision, but that she is stating a new and distinct claim based on the injury caused by the decision. This contention, however, is not borne out by the relevant authorities and, indeed, is refuted by the prayers of her own complaint.
In the case at bar, plaintiff asks this Court to “declare that ... the rulings of the Superior Court of McIntosh County, Georgia and the Supreme Court of Georgia ... have deprived her of her property in violation of the United States Constitution,” ... “[i]ssue a permanent injunction enjoining the defendants ... from implementing or taking advantage of the judgments of the Supreme Court of Georgia or the Superior Court of McIntosh County ...” ... and “[d]eclare null and void the judgments of the Supreme Court of Georgia and the Superior Court of McIntosh County____” Despite plaintiffs portrayal of her dissatisfaction with the Georgia courts’ decisions as a distinct injury, it is manifest from the prayers of her complaint that she seeks essentially an appellate review of those decisions. “It is the essential criterion of appellate jurisdiction, that it revises and corrects the proceedings in a cause____” Marbury v. Madison, 5 U.S. (1 Cranch) 137, 175, 2 L.Ed. 60 (1803). “[T]o reverse or modify [a] judgment ... would be an exercise of appellate jurisdiction.” Rooker, 263 U.S. at 416, 44 S.Ct. at 150. The addition of several new defendants in this action does not alter the prohibited character of relief she seeks, ... nor is it significant that she presents her claim under section 1983 as well as under the Constitution. Reynolds v. State of Georgia, 640 F.2d at 705-07 (emphasis added).

Warriner and Reynolds stand for the proposition that a federal district court lacks subject matter jurisdiction to set aside state court judgments where to do so would necessarily require an appellate-type review of the state court proceedings. However, Warriner and Reynolds were criticized and rejected by the court in Gresham Park Community Organization v. Howell, 652 F.2d 1227 (5th Cir. Unit B 1981). In Gresham Park the plaintiffs sought an order from the district court vacating and setting aside a state court judgment which enjoined plaintiffs from picketing in front of a liquor store. The court discussed and rejected the line of cases holding that the district court had no power to declare a state court judgment null and void. Relying on Fed.R.Civ.P. 8, under which complaints should be read liberally to do substantial justice, the court declared that “[w]here a party asks a federal court to declare a state court judgment null and void, we should consider this as praying for an injunction enjoining its enforcement.” After declaring that district courts had original jurisdiction under 28 U.S.C. § 1343 to issue injunctions restraining violations of civil rights, the court went on to rule that-the district court had properly abstained from issuing such an injunction under Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971).

Although the Gresham Park court criticized the Warriner and Reynolds decisions it did not overrule them. This court must therefore harmonize the Gresham Park case with the earlier cases if possible. One method of harmonizing the cases would be to examine the fact patterns to determine whether different facts necessitated different results. In certain types of cases the federal courts have been more willing to act than in others. As a broad rule it appears that where the state court judgment is constitutionally suspect on its face the federal court has been willing to hear an attack on the judgment under 42 U.S.C. § 1983. See Gresham Park Community Organization v. Howell, 652 F.2d 1227 (5th Cir. Unit B 1981) (state court had enjoined constitutionally protected picketing); Henry v. First National Bank of Clarksdale, 595 F.2d 291 (5th Cir.1979), cert. denied, 444 U.S. 1074, 100 S.Ct. 1020, 62 L.Ed.2d 756 (1980) (state court had issued broad injunction against a boycott organized to protest racial discrimination); and Machesky v. Bizzell, 414 F.2d 283 (5th Cir.1969) (state court had enjoined picketing and other speech in support of a political boycott). In cases such as these, where the state court judgment itself may violate protected constitutional rights, the federal court’s role as a guardian of civil rights is most readily apparent. The district court has both the authority and the duty to enjoin violations of constitutional rights under 28 U.S.C. § 1343. Concerns about comity and federalism, while not entirely absent in such cases, give way to the ultimate duty of the court to protect constitutional rights, especially where the state system has been unable or unwilling to protect those rights itself.

In other cases, however, the federal courts have been more reluctant to intervene in the state system. The rule in such cases might be stated as follows: Where the state court judgment is not constitutionally suspect on its face and where the state has provided appellate review sufficient to accord the federal plaintiffs the essentials of due process, the federal courts have been extremely reluctant to entertain a suit brought under 42 U.S.C. § 1983. The courts, however, have had some difficulty articulating a consistent rationale for such failure to intervene. In Warriner v. Fink, 307 F.2d 933 (5th Cir.1962) the court found that the district court lacked subject matter jurisdiction, partly because it believed the Anti-Injunction Act, 28 U.S.C. § 2283, prohibited injunctions against the enforcement of a state court judgment. In Reynolds v. Georgia, 640 F.2d 702 (5th Cir. Unit B 1981), the court of appeals agreed with the district court’s conclusion that the relief sought by the plaintiffs required an exercise of appellate jurisdiction and therefore exceeded the jurisdiction of the court. In Cheramie v. Tucker, 493 F.2d 586 (5th Cir.), cert. denied, 419 U.S. 868, 95 S.Ct. 126, 42 L.Ed.2d 107 (1974), a suit brought under 42 U.S.C. § 1983 against state appellate judges who had reversed an award of damages in a negligence case, the court did not address the jurisdictional issue but instead concluded that the issues which the trial court would have had to consider in order to grant the relief, requested had already been adjudicated by the state courts and were therefore barred by the doctrine of res judicata and collateral estoppel. As was pointed out in Gresham Park, a holding that re-litigation is barred by res judicata is a holding on the merits and is, therefore, an implicit finding that subject matter jurisdiction exists. 652 F.2d at 1235. By whatever name it is called, however, the principle remains the same. Federal courts are not in the business of hearing attacks on state court judgments where the judgment is not on its face violative of the Constitution and where the state has provided an opportunity for appellate review to satisfy the requirements of due process.

The state court judgment which plaintiff attacks in the present case does not on its face violate any constitutional rights of plaintiff. It is simply a garden variety conclusion to an everyday domestic dispute. Plaintiff claims that the judgment was obtained by fraud, but he has not made any showing that the Georgia appellate courts failed to accord him due process. The issues which he seeks to litigate in this court either were, or should have been, presented to the Georgia appellate courts.

After consideration of all the prior cases this court concludes that plaintiff’s case must be dismissed. Other decisions of this circuit and the Supreme Court have almost invariably come out this way, employing a number of different means of analysis. It seems to this court that no matter what the rationale, this outcome is dictated by considerations of finality and comity, and the court’s statutory obligation to give full faith and credit to judgments of state courts. 28 U.S.C. § 1738. To be sure, these factors would be forced to stand down if constitutional rights were truly at issue. The plaintiff here claims a deprivation of due process. He shows, however, that he had an opportunity for appellate review. He does not allege the abuse of discretion in the denial of his appeal, nor does he attack the neutrality of that tribunal. Accordingly, the court would find that plaintiff has failed to state a claim under 42 U.S.C. § 1983 because the existence of adequate review procedures under Georgia law has accorded plaintiff sufficient due process. See Parratt v. Taylor, supra.

III. CONCLUSION.

In sum, plaintiff’s motion to substitute counsel is DENIED for failure to comply with Local Rule 71.7. Defendant’s motion for summary judgment and plaintiff’s motion for consolidation are MOOT. The court hereby DISMISSES, on its own motion, plaintiff’s complaint for failure to state a claim for which relief can be granted.

      . No explanation appears in the record for why Mr. Collins failed to oppose the motion to quash.

      . Plaintiff s state law claims were also dismissed on June 30.

      . The fact that a court of competent jurisdiction has adjudicated the issue of whether Judge Miller should have been recused from further involvement in the divorce would preclude re-litigation of that issue in this court under the doctrine of res judicata. Plaintiff, however, argues that he never had a full and fair opportunity to litigate that issue because of the various alleged improprieties. Thus, the focus is on the process by which the motion to recuse was adjudicated.

      . Decisions of the former Fifth Circuit can be overruled by the Eleventh Circuit sitting en banc. Bonner v. City of Pritchard, 661 F.2d at 1210. The Gresham Park opinion was not an en banc opinion and therefore did not overrule the prior cases.

      . The existence of an opportunity for appellate review is important because it insures that even if there was fraud or some other irregularity sufficient to render the trial court's judgment violative of the due process clause, the trial court's judgment can be reversed or vacated by the state. “[T]he existence of an adequate state remedy to redress property damage inflicted by state officers avoids the conclusion that there has been any constitutional deprivation of property without due process of law within the meaning of the Fourteenth Amendment." Parratt v. Taylor, 451 U.S. 527, 542, 101 S.Ct. 1908, 1916, 68 L.Ed.2d 420 (1981) (quoting Bonner v. Coughlin, 517 F.2d 1311, 1319 (7th Cir.1975).

      . See Note 3, supra.

      . In order to determine whether or not an injunction should issue this court would necessarily have to resolve such questions as whether certain subpoenas should or should not have been quashed, whether certain affidavits were or were not false, and whether a trial judge was or was not competent under Georgia law. The court cannot see how such a determination could be anything other than an appellate re- . view of the state court proceedings. These are issues which were raised or should have been raised on direct appeal to the Georgia appellate courts and from there to the United States Supreme Court. For this court to consider such questions would necessarily involve an exercise of appellate review and would therefore exceed its jurisdiction.