author: KRAM, District Judge.

text:
    UNITED STATES of America, v. Libertad CRUZ, a/k/a “Libby,” a/k/a “Levy,” Defendant.
    S 83 Cr. 657 (SWK).
    United States District Court, S.D. New York.
    Feb. 21, 1985.

      Rudolph W. Giuliani, U.S. Atty. for the Southern District of New York, by Neil S. Cartusciello, Asst. U.S., Atty., New York City, for the U.S.
    Francis M. DeCaro, New York City, for defendant.
   MEMORANDUM OPINION AND ORDER

KRAM, District Judge.

The above-captioned action is before this Court upon defendant’s motion for a new trial, pursuant to Rule 33 of the Federal Rules of Criminal Procedure. For the reasons stated below, the motion is denied.

-BACKGROUND-

Defendant Libertad Cruz was named in a six-count superseding indictment charging him with the following: 1) conspiracy to distribute, and to possess with intent to distribute, heroin and cocaine; 2) engaging in a continuing criminal enterprise; 3) three counts of distributing heroin; and 4) carrying a firearm during the commission of a felony.

The Government’s proof at trial consisted primarily of the testimony of one key witness, Wilfredo Rodriguez. Rodriguez, on three occasions during 1982, had sold quantities of heroin to an undercover agent of the Drug Enforcement Agency (“DEA”). Rodriguez was arrested after the third sale, and pled guilty to one count of distributing heroin. After his conviction and sentencing, Rodriguez decided to cooperate with the Government.

At trial, Rodriguez testified that he had obtained the heroin that he sold to the DEA agent from Cruz, and that he had turned over most of the money received from those sales to Cruz. Rodriguez further testified about a heroin and cocaine business run by Cruz out of an apartment in one of his buildings in the Bronx. Rodriguez described this business in great detail.

According to Rodriguez, each morning (Monday through Saturday) from about May through August 25, 1982, Cruz brought large quantities of high purity heroin and cocaine to Apartment 2E at 54 Featherbed Lane in the Bronx. There Rodriguez, along with Jose Marquez and Abraham Reyes (the fugitive defendants), cut and packaged the drugs in small glassine envelopes or “dime bags”, approximately 800 each of heroin and cocaine. The envelopes were stamped with brand names— “Goya” for the heroin, and “Two-Way” for the cocaine. The envelopes were then divided between Rodriguez and Reyes, who delivered them to two selling points on the street: Rodriguez delivered his half to a man named Jose at 143rd Street and Willis Avenue; Reyes delivered his half to a man at 179th Street and Anthony Avenue. Each afternoon, Rodriguez and Reyes would collect the money from the selling points and bring it back to Marquez. Marquez would give the money to Cruz.

Rodriguez further testified that Cruz carried a pistol when he delivered the drugs to apartment 2E. Rodriguez identified a gun seized at Cruz’s apartment at the time of his arrest as the pistol he had carried when he delivered drugs to apartment 2E.

In addition to this five-man operation, Rodriguez testified that Cruz was a supplier of heroin to at least one other person, one Carlos Rivera-Gonzalez. Rodriguez indicated that Gonzalez purchased approximately seven to eight ounces of uncut heroin every seven to ten days.

The Government introduced further evidence of Cruz’s drug dealings. Several pages of handwritten records were seized from one of Cruz’s apartments. DEA agents, based on their experience as narcotics agents, testified that these records reflected drug transactions. This opinion was based in part, on the price shown in the records (then, the going rate for heroin in quantity on the street) and the distinction of quantities as “brown” or “white” (two types of heroin). The agents testimony was highly credible. On the other hand, Anna Rodriguez’s testimony that these documents were records of purchases of different grades of heating oil was not credible. It appears from these records that Cruz was distributing heroin to at least three other individuals — Richie, Pedro, and Skippy.

As further evidence of Cruz’s drug dealing, the Government presented the testimony of Raj Tuli. Tuli, a citizen of India, had been arrested on July 5, 1983, at Kennedy Airport attempting to import approximately 1.75 kilograms of heroin. He pled guilty to possession of heroin, and agreed to cooperate with the Government. Tuli was incarcerated at the Metropolitan Correction Center (“MCC”) awaiting sentence. Tuli testified that he met one Jose Mojica in late July, 1983, and discussed with him a plan to import heroin from India. Mojica was arrested on October 21, 1983, on unrelated drug charges. Tuli testified that after Mojica was arrested, he introduced him to Cruz, who was also incarcerated at the MCC, and stated that Cruz was “like a father” to him. Tuli further testified that those three (Cruz, Mojica, and Tuli) had several conversations in the MCC during which plans were made to import heroin from India. Tuli was cross-examined extensively about his conviction for possession of heroin and his cooperation agreement. , Tuli was also cross-examined at length about the alleged conversations and plans to which Cruz was a party. Tuli admitted that the plans never got off the ground, but he maintained that they had been made, and that Cruz had been a party to them.

Cruz testified on his own behalf. He admitted that Mojica is one of his friends, and that Mojica had introduced him to Tuli at the MCC. Cruz further testified that Mojica calls him “Viejo,” or old man, which he loosely translated as “father,” and that Mojica might have referred to him as “like a father” when introducing him to Tuli. Cruz denied, however, having any conversations with Tuli and Mojica regarding the importation of heroin; rather, he testified, they only talked “normally.” Cruz testified that Tuli had approached him, out of Mojica’s presence, to suggest a scheme to import heroin.

Neither party called Mojica to testify at the trial. After a lengthy jury trial, Cruz was convicted on all six counts. The Court scheduled Cruz’s sentencing for June 20, 1984.

On June 20th, the Government apprised the Court of new information it had acquired. The Court adjourned the sentencing to allow the Government to investigate this new information and to determine how to handle this potential problem.

This new information, as it unfolded, involved Mojica’s statements regarding the tripartite conversations allegedly conducted at the MCC. In late May or early June, 1984, Mojica decided to plead to his charges and to cooperate with the Government. (Affidavit of Neil S. Cartusciello, dated October 15, 1984 (“Cartusciello Aff.”), ¶ 10.) During debriefing, Mojica acknowledged that Cruz was “like a father to him,” and that he had introduced Cruz to Tuli using that expression. (Id., ¶ 11a.) Mojica also admitted that he had met with Tuli prior to his arrest to discuss a plan to import heroin from India. (Id.) Mojica, however, denied having conversations after his arrest to plan such importation, with or without Cruz, and disclaimed any knowledge of such conversations between Cruz apd Tuli. (Id.) Mojica also acknowledged that he was aware of Cruz’ narcotics dealings with the fugitive defendants Marquez. and Reyes. (Id., ¶ 11b.) Mojica further stated that Cruz made incriminating statements to him while they were both in the MCC. In particular, Cruz remarked that the Government was coming down hard on him now for dealing on a relatively small basis by comparison to the light way they treated him when he was dealing on a larger scale years ago (Id., ¶ 11c.), and that he suspected Marquez and Reyes had given information against him (Id.). Apparently, Mojica has since recanted some of these statements. (Id., ¶ 12).

At the time of sentencing on July 6, 1984, defense counsel argued that Tuli had lied on the stand and moved to dismiss Count Two (the Continuing Criminal Enterprise count), or in the alternative for a new trial and for some form of discovery of Mojica’s statements. The Court directed counsel to file such motions formally, which was done, and sentenced Cruz on the charges against him. That motion is now before the Court.

-DISCUSSION-

Defendant’s motion, pursuant to Rule 33 of the Federal Rules of Criminal Procedure, for a new trial is based on the grounds of newly discovered evidence. The alleged newly discovered evidence, presumably, is Mojica’s potential testimony on Cruz’s behalf, and, derivatively, its weight in demonstrating the perjurious nature of Tuli’s testimony.

It has long been the law in this Circuit that “motions for new trials are not favored and should be granted only with great caution.” United States v. Costello, 255 F.2d 876, 879 (2d Cir.), cert. denied, 357 U.S. 937, 78 S.Ct. 1385, 2 L.Ed.2d 1551 (1958). The long-standing test applied to such motions based on newly discovered evidence is clear. . A new trial based on newly discovered evidence will be granted only if the following criteria are met: (1) the evidence must, indeed, be newly discovered, i.e., discovered after trial; (2) the evidence must be such that it could not, with due diligence, have been discovered prior to or during trial; (3) the evidence must be material to the issue of guilt, and not merely for the purpose of impeaching other testimony; (4) the evidence must not be cumulative; and (5) the evidence must be such that it would probably lead to acquittal. See, e.g., United States v. Alessi, 638 F.2d 466, 479 (2d Cir.1980); United States v. Stofsky, 527 F.2d 237, 243 (2d Cir.1975), cert. denied, 429 U.S. 819, 97 S.Ct. 65, 50 L.Ed.2d 80 (1976); United States v. Slutsky, 514 F.2d 1222, 1225 (2d Cir.1975); Costello, 255 F.2d, at 879; see also, Berry v. State, 10 Ga. 511, 527 (1851).

That test is applicable unless the failure of the defendant to discover the evidence sooner was due in some part to prosecutorial misconduct. See United States v. Agurs, 427 U.S. 97, 96 S.Ct. 2392, 49 L.Ed.2d 342 (1976); see also Stofsky, 527 F.2d at 243-44. In such a ease, a less demanding standard is applied. Id. Defendant, in this case, appears to be making vague assertions about such misconduct. The defendant asks, “why didn’t the Government put Jose Mojica on the stand? He was in their control.” This vague allegation is insufficient to warrant any inquiry into the propriety of the prosecutor’s conduct. See United States v. Gilbert, 668 F.2d 94, 97 (2d Cir.1981), cert. denied, 456 U.S. 946, 102 S.Ct. 2014, 72 L.Ed.2d 469 (1982). The short answer to defendant’s allegation is that Mojica was not in the Government’s control. The fact that he was incarcerated at the MCC does not place him under the Government’s control. Mojica was facing his own criminal charges and retained his array of constitutional rights including the right not to give self-ineriminating testimony. The Government was under no obligation to call a witness who would refuse to testify because of his Fifth Amendment privilege. Moreover, the evidence shows that the Government exercised proper diligence in investigating the exact evidence at issue. The Government attempted to obtain Mojica’s cooperation prior to Cruz’s trial, but Mojica refused. (Cartuseiello Aff., ¶ 10.) Furthermore, upon obtaining Mojica’s cooperation and learning of his proffered testimony, the Government advised the Court at its earliest opportunity. Certainly, the conduct of the prosecutor in this action has not been improper.

Defendant also seems to argue that the fact that Tub’s testimony was perjurious (or so defendant alleges) is conclusive of his right to a new trial. Many cases do apply a less stringent test in addressing motions for a new trial in case involving perjured testimony. See, e.g., Larrison v. United States, 24 F.2d 82, 87 (7th Cir.1928); see also Stofsky, 527 F.2d at 245 n. 9 (listing cases); United States v. Polisi, 416 F.2d 573, 577 (2d Cir.1969). The law in this Circuit, however, is to the contrary: absent prosecutorial misconduct, motions for a new trial based on newly discovered evidence that perjurious testimony was received at trial are governed by the traditional Berry test. See Stofsky, 527 F.2d at 245-46; see also United States v. Rosner, 516 F.2d 269, 279 (2d Cir.1975), cert. denied, 427 U.S. 911, 96 S.Ct. 3198, 49 L.Ed.2d 1203 (1976); United States v. Marquez, 363 F.Supp. 802, 806 (S.D.N.Y.1973) (Weinfeld, J.), aff'd on opinion below, 490 F.2d 1383 (2d Cir.), cert. denied, 419 U.S. 826, 95 S.Ct. 44, 42 L.Ed.2d 50 (1974).

The burden of proving that the five requirements of the Berry test are met is on the defendant. See United States v. Fassoulis, 203 F.Supp. 114, 117 (S.D.N.Y.1962) (J. Weinfeld). So tested, this motion must be denied.

1. Newly discovered evidence.

Cruz claims in his motion papers, apparently, that two items of newly discovered evidence warrant a new trial. First, that Mojica would testify that he did not engage in conversations with Tub and Cruz at the MCC devising a scheme to import heroin from India, thus corroborating Cruz’s testimony in this regard. Second, that, based on this, Tub’s testimony was perjured. Essentially, this is only one item of newly discovered evidence — Mojica’s potential testimony — with its derivative impact on the credibility of Tuli’s testimony.

As to this one item, Mojica’s proffered testimony, Cruz has shown that it was discovered after trial. Since it was the Government that discovered this evidence, in the course of its efforts to obtain Mojica’s cooperation after Cruz’s trial, and that then related it to the defendant and the Court, Cruz has shown that he learned of it after trial.

2. Defendant’s diligence in obtaining this evidence.

By letter dated February 1, 1984, the Government advised defense counsel that it intended to prove that Jose Mojica was among the defendant’s co-conspirators and among those as to whom Cruz occupied a supervisory position. By letter dated March 8, 1984, the Government advised defense counsel that it intended to prove “that the defendant continued to engage in heroin dealings during the time he was incarcerated in the Metropolitan Correctional Center immediately following his arrest ... [through] the testimony of a witness who was a prisoner at the time the defendant was also a prisoner.” Thus, before trial began, defendant was aware of Mojica’s importance to the case.

Furthermore, discussions on the morning trial commenced make clear that the defendant was aware that the Government intended to prove that Mojica was part of the conspiracy continuing through the alleged negotiations in the MCC. (See Transcript of pretrial discussions on March 14, 1984, pp. 2, 10.) It is also clear that, at that time, the defendant was aware that the Government intended to prove this through the testimony of Raj Tuli. (See Transcript of Government’s opening statement, pp. 14-16.) Nonetheless, defendant apparently still made no effort to secure Mojica’s testimony.

Moreover, the Government delivered copies of Tuli’s prior statements, “3500 material,” to defense counsel on March 26, 1984, one week before Tuli actually testified. The defendant was aware, through this 3500 material, if not sooner, of the substance of Tuli’s testimony, and, in particular, that Tuli would testify to conversations with Mojica and Cruz regarding the importation of heroin. Still, the defendant did not try to secure Mojica’s testimony (or a continuance to attempt to secure his testimony).

Tuli testified on April 2, 1984. During that testimony, Tuli stated that he had met Cruz in the MCC while he was there awaiting sentence. Cruz had been introduced to him by Mojica. He further stated that the three of them had several discussions about devising a scheme to import quantities of heroin from India. Tuli was cross-examined extensively regarding these alleged conversations. Nonetheless, the defendant did not attempt to secure Mojica’s testimony nor did he seek a continuance for that purpose.

Finally, Cruz testified on April 7, 1984. Cruz admitted that Mojica is a friend of his, but denied ever having any business dealings with him, or any knowledge of Mojica’s “business” other than his knowledge that Mojica was a cab driver. Furthermore, Cruz admitted that Mojica had introduced him to Tuli in the MCC, but vehemently denied being party to any drug related discussions. The defense rested after Cruz testified, without calling Mojica.

Defendant offers no excuse for the failure to attempt to secure Mojica’s testimony before, or during, trial. Defendant claims, in his reply papers on this motion, that “[djefense counsel took it as good faith as to what the Government offered.” Putting aside the efficacy of defense strategy which accepts the substance of the Government’s ease on “good faith,” defendant cannot seriously argue that he did accept the Government’s evidence on good faith. Cruz testified and specifically refuted Tub’s testimony in this regard. Cruz stated that Tub “bed” regarding the alleged discussions.

It is plain that defendant did not exercise due diligence in attempting to discover this .evidence before or during trial. Cruz knew the substance of Tub’s testimony and the importance of Mojica’s testimony in refuting it. See, e.g., United States v. Roberts, 388 F.2d 646 (2d Cir.1968); United States v. Puco, 338 F.Supp. 1252, 1255 (S.D.N.Y.1972). There is no question about Mojica’s availability at the time of the trial. Cf. United States v. Beasley, 582 F.2d 337, 339 (5th Cir.1978) (“where a party fails to call a witness who was available during trial, the testimony of that witness cannot be considered newly discovered evidence”). More significantly, Cruz knew that Mojica had introduced him to Tub and knew whether or not Mojica was present for any conversations regarding drugs among the three of them. See United States v. Erb, 543 F.2d 438 (2d Cir.), cert. denied, 429 U.S. 981, 97 S.Ct. 493, 50 L.Ed.2d 590 (1976) (conflicting testimony regarding question of whether defendant was present at a particular meeting); Roberts, 388 F.2d 646.

In Roberts, a case very similar to this, the key Government witness at trial was an undercover narcotics agent. The agent testified that an informant introduced the defendant to him and was present while the defendant negotiated, and ultimately consummated, heroin sales to the agent. The defendant testified at trial, and admitted that the informant, who he previously knew, introduced him to the agent. He denied, however, that there was any conversation regarding, or any subsequent sale of, narcotics. The informant did not testify. Defendant’s post-conviction motion based on proffered newly discovered evidence that the informant would testify corroborating the defendant’s testimony and refuting the agent’s was denied because defendant had not exercised the requisite due diligence. Roberts is squarely on point with regard to Cruz’s showing of due diligence. See also Puco, 338 F.Supp. 1252 (post-conviction proffer of testimony of alibi witnesses that defendant with them; insufficient showing of due diligence for new trial); United States v. Rogers, 182 F.Supp. 786 (E.D.N.Y.1960) (post-conviction proffer of testimony of witness present with defendant at time of prior statements by Government witness; no due diligence).

Finally, Cruz’s decision not to attempt to call Mojica as a witness appears to have been a strategic decision. Defense counsel argued in summation that Mojica may have been involved with Tub in negotiating heroin importation (Tr. 1528) but that Cruz was not involved, and especially, that there was no corroborating evidence to support Tub’s testimony (Tr. 1534-35). Cf. United States v. Tramunti, 500 F.2d 1334, 1349-50 (2d Cir.), cert. denied, 419 U.S. 1079, 95 S.Ct. 667, 42 L.Ed.2d 673 (1974) (decision to call attention during summation to Government’s failure to introduce corroborative testimony precluded post-trial argument for new trial where counsel on notice of basic facts which could have revealed subsequently discovered, allegedly exculpatory, testimony).

3. Exculpatory nature of evidence.

Mojica’s statements to the Government, proffered now by the defendant as exculpatory, are ambiguous at best. Mojica apparently did say that no conversations regarding importation of heroin occurred at the MCC involving all three — Mojica, Cruz and Tub. To the extent that this is, indeed, exculpatory, it simply is not enough. Mojica’s statements, taken as a whole, are not exculpatory. Mojica’s statements corroborate, in part, Rodriguez’s testimony regarding the drug operation in Apartment 2E. Moreover, Mojica relayed incriminating statements that Cruz had made while in the MCC. See United States v. Murphy, 715 F.2d 39, 41 (2d Cir.1983) (new evidence actually strengthened prosecution case); see also Beasley, 582 F.2d at 340 (“Although ... [the statements of the new witness] do not confirm the testimony of other witnesses, jot by jot, in every detail, the portions of them that would favor [defendant] or conflict with testimony of witnesses actually called at the trial are isolated items in a mass of incriminating material.”)

Even insofar as Mojica’s statements corroborate Cruz’s testimony that no tripartite conversations occurred, they do not necessarily exculpate Cruz of dealing with Tuli in the MCC. Mojica disclaimed any knowledge of Cruz’s dealings with Tuli, and even suggested at one point that Cruz and Tuli may have been dealing behind his back. (Cartusciello Aff., ¶ 11a.) To this extent, Mojica’s statements merely impeach the testimony of Tuli and are not proper grounds for a new trial. See Alessi, 638 F.2d at 479; Rosner, 516 F.2d at 273-74; United States v. Passero, 290 F.2d 238, 245 (2d Cir.), cert. denied, 368 U.S. 819, 82 S.Ct. 36, 7 L.Ed.2d 25 (1961).

4. Cumulative.

Tuli was impeached at trial through his prior conviction. Defense counsel, in summation, referred to Tuli as an “informant who needs to help himself. He wants his jail sentence to be lightened.” Further, Tuli was cross-examined thoroughly regarding these alleged conversations. Finally, Cruz testified at trial and refuted Tub’s testimony. Mojica’s tendered statements are, thus, merely cumulative of testimony given at the trial and are not properly the grounds for a new trial. See Gilbert, 668 F.2d 94 (witness already impeached); Tramunti, 500 F.2d at 1349 (same; witness referred to during summation as a “bar with a criminal record”); Puco, 338 F.Supp. 1252 (alibi witnesses would be cumulative of defendant’s testimony).

5. Probability of acquittal.

Cruz claims, in relevant part, as follows:

Mojica’s testimony would certainly have lead [sic] to an acquittal and certainly would change this entire trial. The change [sic — presumably “charge”] would have to be different, Count 2 would have to be dismissed as a matter of law since Count 2 of the indictment states that the Defendant was engaged in a continuing criminal conspiracy [sic] which included Mojica and his girlfriend Daisy Rodriguez. They were part of the alleged five that the Defendant would be doing business with and directing.

Cruz’s arguments are to no avail. The evidence against him was overwhelming. The testimony of Rodriguez alone would have been enough for the jury to find Cruz guilty on all six counts. Defense counsel acknowledged this in summation when he said that “each one of these counts necessarily relies for its validity on the testimony of Wildredo Rodriguez.” (Tr. 1501.) Rodriguez testified regarding the three quantity sales of heroin. Rodriguez testified about the day to day drug operation. Rodriguez testified about the gun Cruz carried during his participation in the daily drug operation.

Mojica and Daisy Rodriguez were mentioned as people the Government contends acted in concert with, and were supervised by, Cruz. They were not, however, two of only five possible subordinates. The Government in summation, listed at least nine for the jury, and emphasized the five participants in the daily drug operation at Apartment 2E described by Rodriguez— Rodriguez, Reyes, Marquez, Jose at 143rd Street and Willis Avenue and the man at Anthony Avenue. (Tr. 1478.) Rodriguez also listed a sixth Carlos Rivera-Gonzalez. The drug records seized from Cruz’s second apartment revealed perhaps three more individuals — Richie, Pedro, and Skippy. It is clear, therefore, that Cruz would not have been entitled to a directed verdict absent Tub’s Testimony.

Based on Rodriguez’s testimony and the corroborating evidence, the “jury could without difficulty have disbelieved [Tub] and nonetheless convicted” Cruz. Gilbert, 668 F.2d at 96; see also Rogers, 182 F.Supp. at 787. Moreover, many of Mojica’s statements serve only to strengthen the Government’s case against Cruz. Thus it can hardly be argued that Mojica’s comments introduce a probability of acquittal into these proceedings. See Murphy, 715 F.2d at 41-42.

This is especially so given the nature of the proffered testimony. Mojica’s statements are clearly self-protecting. At times he tries not to incriminate Cruz — although some of his statements are very incriminating — but, for the most part, he appears to be simply exculpating himself by extricating himself from any drug dealings with Tuli and/or Cruz. Mojica, therefore, is yet another witness with a motive to lie. Cf. Baca v. United States, 312 F.2d 510 (10th Cir.1962) (rejecting unsworn statement of defendant’s brother as “new evidence” because, inter alia, incredible), cert. denied, 373 U.S. 952, 83 S.Ct. 1682, 10 L.Ed.2d 706 (1963). Mojica’s inconsistent, ambiguous statements, which, perhaps, exculpate Cruz in only one regard, and incriminate Cruz in other respects, warrant neither a new trial nor a hearing. There simply is no probability of acquittal based on this newly-discovered evidence considering both its impact on the factual elements of the Government’s case and its impact on the credibility of Tuli’s testimony. See Stofsky, 527 F.2d at 246.

In sum, Cruz cannot be heard to argue now for a new trial based on Mojica’s statements. He knew Mojica’s identity well in advance of the lengthy trial held herein. He knew that Mojica was allegedly a co-conspirator and a subordinate in the continuing criminal enterprise. He knew the substance of Tuli’s testimony, and the fact (if so) that Mojica could rebut it. In other words, he knew the importance of Mojica’s testimony on his behalf. He also knew Mojica’s whereabouts. Yet he did not subpoena Mojica, nor did he seek to have the Government produce Mojica, nor did he ever seek an adjournment of the trial until Mojica’s testimony could be obtained. See United States v. Lanza, 329 F.2d 422, 423 (2d Cir.1964). Now he proffers statements by Mojica which, on the whole, strengthen the Government’s case and which raise no probability that Cruz would have been, or would be, acquitted. Accordingly, his motion for a new trial, or for an evidentiary hearing, must perforce be DENIED.

SO ORDERED.

      . Cruz’s motion papers are, to say the least, bareboned. The initial motion papers, quoted in their entirety, are as follows: "The defendant, by his attorney, FRANCIS DE CARO, now moves under Title 18 Rule 33 of the F.R.C.P. which was preserved, and respectfully requests that this Honorable Court vacate the Conviction and order a new trial. In support of said motion, the defendant will show the court the following: I A key witness for the Government, RAJ TULI, who testified as to certain conversation pertaining to the Defendant out of the presence of the Defendant and with another party (JOSE MOJICA) and allowed permissible under Rule 801(d)(2)(E) was perjurious. II These conversations have now been found to be perjurious as (JOSE MOJICA) denies such. Ill The U.S. Attorney has stated that his witness may have “lied." IV It is now respectfully requested that this Honorable Court grant said motion as there is no question as to the gross prejudice to the Defendant and tainted the presentation to the Jury. WHEREFORE, premises considered, it is respectfully requested that this Honorable Court grant said motion or in the alternative, grant a hearing as to JOSE MOJICA who is in the M.C.C. and in Government Control, [sic passim]” (Emphasis in original). Defendant's reply papers are not significantly more substantial.
      The Court has read these papers very liberally in order to give the defendant the benefit of any doubt in understanding the grounds for the motion and the legal support therefor.

      . See footnote p. 828, above.

      . Mojica's statements contradict those of Tuli. While they obviously, therefore, have bearing on the credibility of Tuli’s testimony (and on whether that testimony was perjured), they do not prove that Tuli’s testimony was perjured because they, too, are subject to impeachment and are of questionable credibility. Moreover, the “perjurious” nature of Tuli’s testimony, in itself, cannot be considered newly discovered. Cruz testified at the trial. His testimony contradicted Tuli's testimony regarding the alleged conversations. Indeed, Cruz specifically testified that Tuli “lied" about these discussions.

      . Since the evidence in this case, like that proffered in Murphy, is totally inadequate to warrant a new trial, the Court does not address whether the evidence is to be measured for its probability to result in an acquittal on retrial or for the probability that it would have resulted in an acquittal, if introduced, at the first trial. Compare Polisi, 416 F.2d at 577 (1969) (retrial), with Agurs, 427 U.S. 97, 96 S.Ct. 2392, 49 L.Ed.2d 342 (1976) (first trial); see also Murphy, 715 F.2d at 42 n. 7. To be sure, Cruz would prefer that the assessment be made prospectively, since Tuli would be unavailable to testify at the retrial — thus forcing the Government to read Tuli’s testimony to the jury rather than having the powerful, live testimony before them. I feel that the retrospective method is the preferable one because it allows for an analysis based on the course of an actual trial which I had the opportunity to observe. Nonetheless, I need not reach that question here because the new evidence tendered here is insufficient under either test.

      . The Court is shocked that defendant did not, at- any time before, during, or after trial, attempt to secure the sworn testimony of Mojica. The very least this Court would have expected on this Rule 33 motion was the affidavit of Mojica, submitted by Cruz, detailing Mojica’s proposed testimony. See Costello, 255 F.2d at 879 (requiring “[tjhat the affidavit of the witness himself should be produced, or its absence accounted for”) (quoting Berry, 10 Ga. 511, 527). The Court cannot help but question defense counsel's continued reliance upon the Government to do his work for him.


source: Caselaw Access Project

author: MUIR, District Judge.

license: Public Domain

text:
    Elmer H. DRUM and Linda L. Drum, Plaintiffs, v. UNITED STATES of America, Defendant.
    Civ. Nos. 83-0399, 83-0369.
    United States District Court, M.D. Pennsylvania.
    Feb. 21, 1985.
    W. David Marcello, Marcello & Lepley, Williamsport, Pa., for plaintiffs.
    Michael J. Salem, Trial Attorney-Tax Div., U.S. Dept, of Justice, Washington, D.C., Frederick E. Martin, Asst. U.S. Atty., Lewisburg, Pa., for the U.S.
   OPINION

MUIR, District Judge.

Introduction.

Section 7602(c)(1) of Title 26 of the United States Code provides that after a “Justice Department referral,” the Internal Revenue Service may not issue an administrative summons or begin an action to enforce an administrative summons. Summonses which the Drums now seek to quash were issued by the IRS and enforced by this Court before the IRS made a Justice Department referral. Since then, however, the IRS has referred the investigation of the Drums to the Justice Department with a recommendation for criminal prosecution of the Drums. This case presents the apparently novel question of whether the IRS may continue to execute a summons following a Justice Department referral when the summons was validly issued and enforced prior to a Justice Department referral.

Background.

In January and March 1983, the IRS served administrative summonses on the Northern Central Bank, the Muncy Bank & Trust Company, and Kidder, Peabody & Company in connection with an investigation of the tax liability of Elmer H. Drum and Linda L. Drum. In Civil Action No. 83-369, the Drums petitioned this Court to quash the summonses directed to the banks. In Civil Action No. 83-399, the Drums petitioned this Court to quash the summons directed to Kidder, Peabody & Company. The United States opposed the Drums’ petitions to quash the summonses and moved for summary enforcement of the summonses pursuant to 26 U.S.C. § 7604. In orders dated June 15 and July 14, 1983, this Court denied the Drums’ petitions to quash the summonses and granted the United States’s motions for summary enforcement. 570 F.Supp. 938. This Court’s orders were affirmed by the United States Court of Appeals for the Third Circuit in May, 1984. Drum v. United States, 735 F.2d 1348 (3d Cir.1984).

On August 31,1984, the IRS referred the investigation of the Drums to the Department of Justice with a recommendation that the Drums be prosecuted for criminal violations of the tax laws. The action of the IRS constituted a “Justice Department referral” as defined by 26 U.S.C. § 7602(c)(2)(A)(i).

On November 8, 1984, the Drums again filed motions to quash the summonses. The Drums argue that continued execution of the summonses following the Justice Department referral is prohibited by 26 U.S.C. § 7602(c)(1). Section 7602(c)(1) provides that:

No summons may be issued under this Title, and the Secretary may not begin any action ... to enforce any summons, with respect to any person, if a Justice Department referral is in effect with respect to such person.

Hearings on the Drums’ motions were held on December 19, 1984 and January 9, 1985. The Court learned at the first hearing that there was a dispute between the parties as to whether this matter was moot; the United States indicated that there was some doubt as to whether the IRS would continue to execute the summonses on or after the date of the hearing. The Court therefore continued the hearing to January 9, 1985 to allow the parties the opportunity to address the question of whether the Drums’s motions were moot.

At the January 9,1985 hearing, the United States represented that the IRS would not make any additional efforts to seek compliance with the summons directed to Kidder, Peabody & Company. Consequently, the Drums’ motion in Civil Action No. 83-399 is moot. However, the Government indicated that the IRS would continue to seek execution of the summonses directed to Northern Central Bank and the Muncy Bank & Trust Company. Because neither party has indicated to the Court since January 9, 1985 that the IRS will not continue to seek enforcement of the summonses at issue in Civil Action No. 83-0369, it appears that the dispute with respect to these summonses should be resolved by this Court.

Discussion.

The Drums raise two arguments in support of their motion to quash the summonses. First, they argue that the action of the IRS since the August 31, 1984 Justice Department referral constituted “[beginning an] action ... to enforce [a] summons,” under 26 U.S.C. § 7602(c)(1) and the action of the IRS is thus expressly forbidden by that statute. Second, the Drums contend that assuming the action of the IRS is not expressly forbidden by Section 7602(c)(1), it would be consistent with the intent of Congress in enacting the statute to construe the statute as prohibiting not only the beginning of an action to enforce the summons but continuation of enforcement of a summons as well following a Justice Department referral.

The Drums’ first argument is unpersuasive. Beginning an action to enforce a summons involves the filing by the United States of a motion or petition seeking enforcement of a summons under 26 U.S.C. § 7604. The United States began the action to enforce the summonses in Civil Action No. 83-0369 when it requested summary enforcement of the summonses in its response to the Drums’s motion to quash. Moreover, in view of the fact that the summonses were enforced as of July 14, 1983, the action to enforce the summons clearly was begun before the August 31, 1984 Justice Department referral and is not expressly prohibited by § 7602(c)(1).

We next consider the- Drums’ argument that although § 7602(c)(1) does not by its terms prohibit execution of the summonses at issue in this case, it clearly was intended by Congress to prohibit such action. In Section 7602 Congress adopted a so-called “bright line” rule regarding issuance and enforcement of third party administrative summonses. See Moutevelis v. United States, 727 F.2d 313, 314-15 (3d Cir.1984); Pickel v. United States, 746 F.2d 176, 183 (3d Cir.1984). The “bright line” of section 7602 is the point at which the IRS makes a Justice Department referral as defined by § 7602(c)(2). Congress apparently chose to prohibit issuance or the beginning of any action for the enforcement of an administrative summons following a Justice Department referral because use of an administrative summons to compel a third party to produce documents in connection with the criminal investigation of the taxpayer would invade the function of the grand jury and would broaden the Justice Department’s right to discovery in criminal cases. See Moutevelis v. United States, 727 F.2d 313, 314-15 (3d Cir.1984). See also United States v. LaSalle National Bank, 437 U.S. 298, 320-21, 98 S.Ct. 2357, 2369, 57 L.Ed.2d 221 (1978) (Stewart, J., dissenting).

Although section 7602 defines the power of the IRS to issue or to seek enforcement of a summons before or after a Justice Department referral, it does not address the question of whether the IRS has the power to execute a previously issued summons following the referral. In Pickel v. United States, 746 F.2d 176, 183 (3d Cir.1984), the Court of Appeals stated in dictum that “the summons power” ends when the IRS makes a Justice Department referral. The statute itself does not address the “summons power” involved in this case, i.e., the power to execute a validly issued summons following a Justice Department referral. The apparent logic of Section 7602 as discussed in Pickel, Moutevelis and other cases indicates that Congress intended that the IRS have no power to execute a summons following a Justice Department referral. Even if a summons was valid when issued and was properly enforced because issuance and enforcement occurred before the referral, continued execution of the summons subsequent to the referral would involve interference with the power of the grand jury and broadening of the Justice Department’s right to discovery in criminal investigations. See Moutevelis, 727 F.2d at 314-15. See also U.S. v. LaSalle National Bank, 437 U.S. 298, 320-21, 98 S.Ct. 2357, 2369, 57 L.Ed.2d 221 (1978) (Stewart, J., dissenting).

The Government argues that a prohibition on IRS execution of a summons following a Justice Department referral is unnecessary because in the event that the IRS improperly uses a summons in connection with a Justice Department investigation of a criminal case, a remedy is available to the taxpayer in the form of a motion to suppress any improperly obtained evidence in any criminal prosecution that might be brought against the taxpayer. We find this argument unpersuasive. The availability of a suppression hearing to prevent the use of evidence improperly obtained by the IRS through use of an administrative summons would arguably eliminate the need for any limit on the IRS’s summons power, including the limit in § 7602(c)(1). Evidence obtained pursuant to an administrative summons issued before a Justice Department referral can be suppressed by the taxpayer just as well as evidence obtained after a Justice Department referral. Thus, the Government’s argument fails to take into account the reason for the “bright line” of section 7602 prohibiting issuance or enforcement of a summons after a Justice Department referral.

In light of the foregoing, it appears to the Court that Congress’s intent in enacting § 7602(c)(1) in its present form may well have been to prevent the IRS from using its summons power in any manner after a Justice Department referral. However, the language of Section 7602 is unambiguous. The statute prevents issuance of or commencement of an action to enforce a summons after a Justice Department referral but it does not prevent continued execution of a validly issued and enforced summons. The Drums’ seek to have the Court add language to the statute to cover their situation so that § 7602(c)(1) would read: “No summons may be issued under this title, and the Secretary may not begin any action ... to enforce or seek any compliance with any summons with respect to any person if a Justice Department referral is in effect with respect to such person.”

We think that there is a reasonable likelihood that congressional intent might be served if the Court were to read Section 7602(c)(1) as suggested by the Drums. Nevertheless, it is improper for this Court to re-write congressional legislation. It is conceivable that the Court of Appeals is willing to interpret the statute contrary to its plain meaning but I decline to do so. If Congress intended or now intends that the summonses relating to the Drums should be invalid in light of the Justice Department referral in this case, it is my view that the proper course in our form of government is for Congress to amend the statute.

An appropriate order will be entered.


author: GOETTEL, District Judge:

text:
    Wilbur KLEIN and Sheldon Hoffman, on behalf of themselves and all others similarly situated, Plaintiffs, v. COMPUTER DEVICES, INC., A.G. Becker Paribas Incorporated, Hoyt Ecker, Seaforth M. Lyle, Bruce Elmblad, Morton E. Goulder, David T. Riddiford, and Robert L. Warren, Jr., Defendants. Joseph DAVELLA, Plaintiff, v. A.G. BECKER PARIBAS INCORPORATED, et al., Defendants.
    Nos. 83 Civ. 6456 (GLG), 83 Civ. 8318 (GLG).
    United States District Court, S.D. New York.
    Feb. 21, 1985.

      Booth, Lipton & Lipton, New York City, for plaintiffs Klein and Hoffman; Philip H. Kalban, New York City, of counsel.
    Pomerantz, Levy, Haudek, Block & Grossman, New York City, Berman, Devalerio & Pease, Sumner Woodrow, Boston, Mass., for plaintiff Davella; Stephen P. Hoffman, Lawrence D. Paskowitz, New York City, of counsel.
    Brown, Wood, Ivey, Mitchell & Petty, New York City, for defendant A.G. Becker Paribas Inc.; Henry F. Minnerop, Judith Welcom, Stuart J.M. Breslow, New York City, of counsel, Louis Loss, New York City, of special counsel.
   OPINION

GOETTEL, District Judge:

On July 8, 1983, there was a public offering of one million shares of common stock of Computer Devices, Inc., at $11.25 per share. The value of these shares declined and Computer Devices, Inc., subsequently filed for bankruptcy. Purchasers of the stock filed complaints alleging violations of the securities laws by the officers and directors of Computer Devices, Inc., and by Becker Paribas Incorporated (“Becker”), the lead underwriter of the public offering. The defendants moved to dismiss the complaints on various grounds. The motions were granted in part and denied in part. See Klein v. Computer Devices, Inc., 591 F.Supp. 270 (S.D.N.Y.1984) (the “Opinion”).

Becker now moves for reargument of the Opinion with respect to the denial of Becker’s motion to dismiss the plaintiffs’ claims under section 12(2) of the Securities Act of 1933 (the “Securities Act”) for lack of privity between the plaintiffs and Becker. In the alternative, Becker moves for an order pursuant to 28 U.S.C. § 1292(b) certifying the Court’s order for interlocutory appeal.

Becker argues that the Court failed to consider the unique statutory status of an underwriter with respect to its liability under section 12(2). Becker argues that this section unambiguously requires privity between the buyer and the seller. Although it acknowledges that the courts have sidestepped the privity requirement by utilizing such theories as participation, aiding and abetting, and conspiracy, Becker contends that such theories are not applicable to an underwriter because of the statutory limitations that Congress articulated in sections 11 and 12.

Section 12(2) provides that

[a]ny person who ... offers or sells a security ... by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading, ... shall be liable to the person purchasing such security from him____

15 U.S.C. § 111 (1982).

Section 11 provides that

[i]n case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security ... may ... sue ... every underwriter with respect to such security.

15 U.S.C. § 77k(a) (1982). In 1934, Congress amended section 11, adopting section 11(e), to provide that

[i]n no event shall any underwriter (unless such underwriter shall have knowingly received from the issuer for acting as an underwriter some benefit, directly or indirectly, in which all other underwriters similarly situated did not share in proportion to their respective interests in the underwriting) be liable in any suit ... for damages in excess of the total price at which the securities underwritten by him and distributed to the public were offered to the public.

15 U.S.C. § 77k(e) (1982). See 78 Cong. Rec. 8709 (1934) (statement of Rep. Rayburn) (“There has been a question ever since the adoption of the Securities Act of 1933 with reference to the underwriter. We make it clear in these amendments that hereafter under no circumstances shall an underwriter be held responsible for any more of the issue than he himself personally underwrites.”).

Becker argues that section 12 must be read in conjunction with section 11. Such a reading, contends Becker, demonstrates Congress’ intent to limit the liability of an underwriter to what that underwriter underwrote and sold as illustrated by the privity requirement of section 12 and the specific damage limitations for underwriters in section 11. Thus, argues Becker, Congress precluded judicial imposition of unlimited liability on underwriters which the Court’s Opinion has expanded.

The plaintiffs agree that the two sections are to be read together. They argue, however, that Congress never intended to limit the liability of a managing underwriter, like Becker, as indicated by the parenthetical provision in section 11(e) which provides that an underwriter’s liability is not limited if the underwriter received preferential treatment from the issuer. They contend that lead underwriters now evade the effect of section 11(e) by receiving their management fee from members of the underwriting syndicate rather than from the issuer.

Taking into consideration everything that has been presented to it, the Court now clarifies its Opinion with respect to the liability of Becker under section 12(2).

As we held before, plaintiffs can sue not only their immediate sellers under section 12(2) but also those who substantially participated in the transaction. See Klein v. Computer Devices, Inc., supra, 591 F.Supp. 270 and authorities cited therein. Participation can include active participation in the transaction or aiding and abetting or conspiring with the seller. Id.

The Court agrees that sections 11 and 12 should be read together when construing the liability of an underwriter, such as Becker, under section 12(2). For this reason, an underwriter who is alleged to have violated section 12(2) merely by performing the functions of a typical lead underwriter cannot be liable as a participator under section 12(2), unless the plaintiff bought its stock from that underwriter. It is possible, however, that an underwriter can be liable as a participator if the underwriter participates in the sales transaction to a greater degree. Moreover, an underwriter, whether the lead underwriter or just a member of the syndicate, who aids and abets or conspires in the preparation of a false prospectus to be used in selling securities to purchasers, can be liable under section 12(2). Cf. Akerman v. Oryx Communications, Inc., [Current] Fed.Sec.L.Rep. ¶ 91,680 (S.D.N.Y.1984) (The defendant-underwriters’ motion for summary judgment dismissing the complaint for lack of privity under section 12(2) was granted. The court found that the plaintiffs were unable to proffer any evidence that the underwriters of the issuance of stock aided, abetted, or conspired in transactions effected by the immediate sellers of stock.); Competitive Associates, Inc. v. International Health Sciences, Inc., [1975] Fed.Sec.L.Rep. ¶ 94,966 (S.D.N.Y.1975) (After a trial on the merits, the court found that a conspiracy existed and that its objective was to make the underwriting and public offering of the issuer a success beyond its normal expectations. The court further found that there was no evidence that the lead underwriter was a party to the conspiracy or should have known of it and that the underwriter was not liable under section 12(2).). This will require proof of some sort of scienter. See Lanza v. Drexel & Co., 479 F.2d 1277, 1298 (2d Cir.1973) (en banc) (“[S]ection [12(2)] requires privity or, in the absence of privity, scienter.”) (footnotes omitted); In re Caesars Palace Securities Litigation, 360 F.Supp. 366, 383 (S.D.N.Y.1973). See also L. Loss, Fundamentals of Securities Regulation 1184-1185 (1983). Requiring proof of scienter brings these theories of liability under section 12(2) close to liability under section 10(b) of the Securities Exchange Act of 1934 wherein the liability of an underwriter is not limited. See Frankel v. Wyllie & Thornhill, Inc., 537 F.Supp. 730, 744 (W.D.Va.1982).

Next the Court must decide whether the complaints adequately allege causes of action against Becker under the exceptions to the privity requirement as clarified above.

The Klein complaint alleges that Becker participated in the sales transactions and aided and abetted or conspired with the other defendants to make or cause the misstatements and omissions in the prospectus. This complaint fails to adequately state a section 12(2) claim against Becker under the various exceptions to the privity requirement.

The substantial participation exception is not met because the allegations relating to Becker’s participation in the sales transactions only allege the activities of the typical lead underwriter. The plaintiff alleges that

Becker actively promoted the sale of shares to plaintiffs and all other members of the class through: a) its orchestration of the entire transaction, b) its placement of advertisements, c) its negotiation of compensation on behalf of the other underwriters, d) its processing of purchase orders received from members of the public by all other underwriters, e) its participation in preparing the Prospectus, and f) its administrative services to all other participating underwriters.

Klein Complaint ¶ 20. These allegations merely expand upon the definition of a managing underwriter contained in the regulations of the Securities and Exchange Commission. That regulation defines a managing underwriter as

an underwriter ... who, by, contract or otherwise, deals with the registrant; organizes the selling effort; receives some benefit directly or indirectly in which all other underwriters similarly situated do not share in proportion to their respective interests in the underwriting; or represents any other underwriters in such matters as maintaining the records of the distribution, arranging the allotments of securities offered or arranging for appropriate stabilization activities, if any.

17 C.F.R. § 240.12b-2 (1984). Without more, Becker cannot be liable as a substantial participator.

The aiding and abetting and conspiracy exceptions are not met because the allegations are inexplicit and because scienter is not sufficiently set forth. The plaintiff alleges that “[e]ach of the defendants herein participated in or aided and abetted each other or conspired with some or all of the defendants to make the misstatements or cause the omissions set forth above.” Klein Complaint ¶ 25. The inadequacies of this allegation can be seen when compared with the section 10(b) claim in the same complaint:

Becker, through its participation in the preparation and review of the Prospectus, conspired with or aided and abetted Computer Devices in making the untrue statements and omissions of material facts alleged in paragraph 9 with knowledge of the misstatements and omissions or in reckless disregard for the truth of such statements and the existence of such omissions.

Klein Complaint ¶ 31. Although the complaint repeats and realleges prior allegations, the allegations in the adequately pled section 10(b) claim cannot cure the deficiencies of the section 12(2) claim. The section 10(b) claim is alleged after the section 12 claim and, therefore, is not read into the section 12(2) claim. Therefore, the section 12(2) claim in the Klein complaint must be dismissed.

The Davella complaint alleges that Becker substantially participated in the sales transactions by performing the duties of the lead underwriter and by aiding and participating in the preparation of the false prospectus. This complaint, too, fails to adequately state a section 12(2) claim against Becker.

This complaint merges the substantial participation exception and the aiding and abetting exception. While it is true that an aider and abettor is a participator in the transaction, such a theory is inadequate here because of the failure to allege scienter on the part of Becker. Therefore, the section 12(2) claim in the Davella complaint must also be dismissed.

In conclusion, Becker’s motion for reargument is granted. Upon reargument, the Court dismisses the section 12(2) claims in both complaints for the reasons stated above. The section 12(2) claim in the Klein complaint is dismissed with prejudice. The Klein plaintiffs had stipulated that the second amended complaint would be their final complaint. Moreover, the section 10(b) claim therein is substantially similar to their section 12(2) claim. The dismissal of the section 12(2) claim in the Davella complaint is with leave to replead. (There is no section 10(b) claim in this complaint.) The Davella plaintiff has twenty (20) days from the date of this decision to amend the complaint. Becker’s motion for certification is denied.

SO ORDERED.

      . There are two actions before this Court: Klein v. Computer Devices, Inc., No. 83 Civ. 6456 (S.D.N.Y. filed Aug. 31, 1983), and Davella v. A.G. Becker Paribas, Inc., No. 83 Civ. 8318 (S.D.N.Y. filed Nov. 15, 1983).
      Throughout this opinion, the Court refers to the second amended complaint in the Klein action as "the Klein complaint” and to the amended complaint in the Davella action as "the Davella complaint.”

      . Effective June 1, 1984, Becker changed its name from A.G. Becker Paribas Incorporated to Becker Paribas Incorporated.

      . The plaintiffs in the Klein action had also sued Computer Devices, Inc. They later moved to dismiss the action against Computer Devices, Inc., and the motion was granted without opposition.

      . The plaintiffs argue that this motion is untimely and should be stricken or denied. In response, Becker moves to extend its time to serve its motion for reargument. The Court grants this motion.
      Rule 3(j) of the Civil Rules of the Southern District of New York requires that a motion for reargument be served within ten days of the docketing of the underlying decision. The Court’s Opinion was filed on June 29, 1984. Becker’s motion for reargument was filed on July 10, 1984, one day late. The ten days between June 29, 1984, and July 9, 1984, included two weekends and the Fourth of July. Under the circumstances, the motion to extend is granted.

      . Becker states that the “Court appears to have held that a managing underwriter, solely by performing the duties typical of managing underwriters, may be held liable in damages for the proceeds of the entire public offering of securities sold to the public, regardless of the particular number of shares underwritten and sold by him." Defendant Becker's Memorandum of Law in Support of Its Motion for Reargument at 3. Becker further states that this holding “is of great importance to the entire investment banking community, as it threatens to vastly expand the financial exposure of a managing underwriter in a public offering.” Id.

      The Opinion may appear broader than it was meant to because the Court was considering the liability of various defendants (officers, directors, and underwriters) together under section 12(2). Therefore, although the Court did consider and evaluate everything presented to it earlier, we now clarify the Opinion with respect to the liability of underwriters.

      . Persons participating directly in a violation of [section 12] will not escape liability under the express language of the Act; similarly, those persons who are aware of and, to some lesser degree, participate in a violation of the securities laws and either enter into an agreement with or give assistance to the primary wrongdoers should not be permitted to escape the imposition of liability. As one commentator has pointed out, "[sjuch individuals will be subject to liability because they have acted knowingly or recklessly” to assist in such conduct or to be a part of a proscribed course of action.

        In re Caesars Palace Securities Litigation, 360 F.Supp. 366, 383 (S.D.N.Y.1973) (footnote omitted).

      . [T]here [is] a distinction under § 12 between the liability of the seller proper and the liability of other persons, in that the seller proper would have the burden under the statute of proving his innocence but that the plaintiff obviously would have the burden of proving that the other persons had participated in an unlawful sale, a burden that (at least under § 12(2) as distinguished from § 12(1)) would almost inevitably involve proof by the plaintiff of some sort of scienter on their part. L. Loss, Fundamentals of Securities Regulation 1184-85 (1983) (footnotes omitted).

      . Plaintiffs ... have actually alleged ... that the [defendants] aided and abetted the § 12(2) violations____ This theory of liability is an accepted one, the elements of which apparently are the same as those of aiding and abetting under Rule 10b-5. What is required is that “the aider and abettor be aware of the violation or act recklessly in that regard and give assistance to the primary wrongdoers. It is the participation with the knowledge that a fraud is being committed that leads to liability.” Stern v. American Bankshares Corp., 429 F.Supp. 818, 824 (E.D.Wis.1977). See also Pharo v. Smith, 621 F.2d 656 (5th Cir.1980); Securities & Exchange Commission v. Murphy, 626 F.2d 633 (9th Cir.1980); In re Itel Securities Litigation, 89 F.R.D. 104 (N.D.Cal.1981); Sandusky Land, Ltd. v. Uniplan Groups, Inc., 400 F.Supp. 440 (N.D.Ohio 1975); In re Caesars Palace Securities Litigation, 360 F.Supp. 366 (S.D.N.Y.1973).

        Frankel v. Wyllie & Thornhill, Inc., 537 F.Supp. 730, 744 (W.D.Va.1982).

      . In the Davella complaint, the plaintiff alleges that
      Defendant Becker played an active and substantial role in promoting the sale of Computer Devices common stock issued on the public offering to plaintiff and other members of the Class by: (i) acting as lead underwriter and as representative of the other underwriters in connection with the public offering; (ii) aiding and participating in the preparation of the Prospectus; (iii) negotiating underwriting agreements on behalf of the other underwriters; (iv) placing advertisements promoting the public offering; and (v) endorsing the public offering expressly and impliedly by permitting its name to be used in connection with the public offering.
      Defendant Becker by its actions provided substantial assistance to the underwriting group in the sales of shares of Computer Devices common stock issued on the public offering to plaintiff and other members of the Class.

        Davella Complaint ¶¶ 54, 55.

      . The Court notes that the section 11 claims of the plaintiffs still remain and that ultimately the plaintiffs would have had to make a choice between their section 11 and section 12 claims. See In re Itel Securities Litigation, 89 F.R.D. 104, 115 (N.D.Cal.1981); In re the Gap Stores Securities Litigation, 79 F.R.D. 283, 307 (N.D.Cal.1978); III L. Loss, Securities Regulation 1700 n. 46 (2d ed. 1960).
      As is usually done by a purchaser of securities allegedly defrauded by the selling prospectus, the plaintiffs alleged both section 11 and section 12(2) claims. Ultimately, however, a choice between the two must be made because the remedies of section 11 and section 12 are not cumulative. Id. "The purchaser of a registered security, whether from the issuer directly or from an underwriter or dealer, presumably cannot rescind the transaction under § 12(2) and at the same time retain his status as a security holder in order to sue for damages under § 11.” III L. Loss, supra, at 1700 n. 46.


author: GERRY, District Judge.

text:
    Walter R. JAMES and William J. Hontz, Plaintiffs, v. Wayne PRICE, Louis Berge, Willard Bernstein, Harvey Dubin, Albert Falciani, Kyle Sherlock and Joseph Archer, Defendants.
    Civ. A. Nos. 82-3184, 82-3831.
    United States District Court, D. New Jersey.
    Feb. 21, 1985.

      Susan L. Moreinis, Yoorhees, N.J., for plaintiff, Walter R. James.
    Ronald William Munson, Bridgeton, N.J., for plaintiff, William J. Hontz.
    Irwin I. Kimmelman, Atty. Gen. of New Jersey by George W. Gregory, Deputy Atty. Gen., Trenton, N.J., for defendant, Wayne C. Price.
    Charles E. Woolson, Jr., Montano, Summers, Mullen, Manuel & Owens, Westmont, N.J., for defendant, Louis Berge.
    Horuvitz, Perlow, Morris & Baker, Bridgeton, N.J., for defendant Willard Bernstein.
    Martin, Crawshaw & Mayfield, Westmont, N.J., for defendant Harvey Dubin.
    Falciani, DiMuzio, Fletcher & Hoffman, Woodbury, N.J., for defendant Albert Falciani.
    Thomas E. Lenahan, Franchino, Lenahan & Cross, Somerville, N.J., for defendant Kyle Sherlock.
    Capehart & Scatchard, Moorestown, N.J., for defendant Joseph Archer.
   OPINION

GERRY, District Judge.

These two consolidated actions arise out of a 1981-1982 police investigation of a business venture known as “Dollar Savers Brochures.” Dollar Savers, a business owned and operated by plaintiff Walter James, was allegedly to provide low cost advertising for area businesses by producing ad booklets in conjunction with local South Jersey fast food franchises. Plaintiff William J. Hontz was a salesman for Dollar Savers. Beginning sometime in late fall of 1981, local and state police initiated investigations of the business practices of Dollar Savers in order to ascertain whether it was a legitimate enterprise or a “scam” as some complainants had suggested. State court indictments were subsequently returned against both James and Hontz. James was eventually convicted on one count of violating N.J.S.A. 2C:20-9, theft by failure to make required distribution of property received. He was found not guilty on one count of violating N.J.S.A. 2C:20-9, and two counts of violating N.J. S.A. 2C:20-4, theft by deception. Plaintiff Hontz asserts that he has never been convicted of any crime arising out of the Dollar Savers venture. Hontz has not made clear to the court, however, whether he was acquitted after a full trial or whether the charges against him were dropped.

Plaintiff James filed the original complaint in this matter while an inmate at the Salem County Jail. This original action was begun pro se. Subsequently, an amended complaint was filed by an attorney on behalf of James. This amended complaint contained an additional count on behalf of plaintiff William J. Hontz. There has been extensive motion practice directed at the amended complaint. The case was last before the court on October 19, 1984 on summary judgment motions brought by several defendants. These motions were granted in part and denied in part. The complaint then before the court was rather unclear, however, and so the court entered an order stating that all remaining claims would be dismissed if the plaintiffs did not amend their complaint again within 15 days to allege all elements essential to a § 1983 action. Both plaintiffs filed second amended complaints within the time period specified by the court.

This case is presently before the court on motions by defendants Wayne Price, a New Jersey State Police Detective, and Louis Berge, Detective Lieutenant of the Pennsville Police Department, for summary judgment on the second amended complaints filed by Walter James and William Hontz, respectively. Also before the court are motions brought by plaintiffs James and Hontz seeking reconsideration of this court’s October 1984 ruling according defendants Price and Berge qualified immunity from liability.

In order to evaluate the force of defendants’ arguments in support of their summary judgment motions, it is instructive to examine first the contents of the recently filed second amended complaints. Plaintiff James has submitted a complaint in four counts. Jurisdiction in this court is asserted under 42 U.S.C. § 1983 and 28 U.S.C. § 1343(3) and (4). It appears that no pendent state claims are alleged. In count I, plaintiff James alleges that defendant Price, under color of state law, maliciously prosecuted him in violation of his civil rights. Count II makes the same allegation against defendant Berge. Apparently these two counts proceed on the theory that the malicious prosecution of James constituted a deprivation of his liberty without due process and consequently is actionable under § 1983. Count III premises liability under § 1983 on a deprivation of property without due process. The plaintiff avers that the defendants tortiously interfered with his contractual and business relations, resulting in the loss of his property. Finally, count IY alleges a conspiracy to violate § 1983 on behalf of all the defendants, state officers and private individuals alike.

The second amended complaint filed on behalf of plaintiff William Hontz begins by incorporating by reference the allegations contained in the first four counts of co-plaintiff James’ complaint. However, Hontz’ complaint goes on to include a number of allegations not addressed in James’ complaint. For example, Hontz specifically states in count I that the action is brought in part to redress a violation of state law. Furthermore, Hontz contends that the defendants, either singularly or in concert, acted to deprive him of rights guaranteed under the First, Fourth, Fifth, Sixth, Eighth, Ninth, Thirteenth and Fourteenth Amendments of the United States Constitution.

With the preceding framework in mind it is now possible to turn to the applicability of the arguments advanced in support of and in opposition to the present motions. As discussed above, the first two counts of James’ complaint alleged that his malicious prosecution is actionable under § 1983 as a deprivation of liberty without due process. During the course of prior motion practice in this case, the court determined that, as to defendants Price and Berge, the doctrine of qualified immunity shielded them from § 1983 liability arising out of malicious prosecution. We observed that under the doctrine of Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982), a government official performing a discretionary function is shielded by qualified immunity unless his actions violated “clearly established statutory or constitutional rights of which a reasonable person would have known.” Id. at 818, 102 S.Ct. at 2738-39. Operating on the assumption that the right to be free from malicious prosecution was not a clearly established right, we found that the state officers in this case were entitled to rely on the qualified immunity defense. The plaintiffs have petitioned the court to reconsider this ruling. After further reflection, the court has now decided to overturn our prior determination in this case.

In our October 22, 1984 letter opinion at pages 5 and 6, we said: “As Voytko [Voytko v. Ramada Inn of Atlantic City, 445 F.Supp. 315 (D.N.J.1978) ] recognized, the district and circuit courts are sharply divided over the question of whether such a civil right even exists. Voytko at 323. In view of this, it cannot be said that the right is clearly established.” Upon consideration, the court believes that this conclusion was incorrect. Precisely what is meant by “clearly established” is an elusive question. The Supreme Court has expressly refused to indicate how much case authority is necessary before a right is clearly established. In footnote 32 of Harlow, the court said that it “need not define here the circumstances under which the ‘state of the law’ should be evaluated by reference to the opinions of this Court, of the Courts of Appeals, or of the local District Court.” Harlow, 457 U.S. at 818 n. 32, 102 S.Ct. at 2739 n. 32, citing Procunier v. Navarette, 434 U.S. 555, 565, 98 S.Ct. 855, 861, 55 L.Ed.2d 24 (1978). As recently as October 29, 1984, the Third Circuit acknowledged that lower courts are not informed about how much of a split of authority makes the law sufficiently unclear to mandate the granting of immunity. The People of Three Mile Island v. Nuclear Regulatory Commissioners, 747 F.2d 139 at 144 (3d Cir., 1984). In the absence of any such guidance, this court must nonetheless make its own determination of whether the right allegedly violated here was clearly established.

While the Voytko decision did refer to a conflict among the circuits about the existence of a constitutional right to be free from malicious prosecution, this conflict is not determinative of the immunity issue in the present case. First of all, Voytko went on to say that even though a conflict among the circuits may exist, the issue is settled in the Third Circuit. Voytko, 445 F.Supp. at 323. Voytko referred to Jennings v. Shuman, 567 F.2d 1213 (3d Cir.1977), and said that the rationale of that case indicates that a cause of action for malicious prosecution would also be cognizable under § 1983. Voytko, 445 F.Supp. at 324. Although the Jennings court did not squarely confront the issue (because the statute of limitations had run on the malicious prosecution claim), it assumed without questioning that malicious prosecution is a constitutional tort actionable under § 1983. See, e.g., Jennings, 567 F.2d at 1220. Secondly, even if Jennings is somewhat ambiguous about the existence of this constitutional right, Voytko itself explicitly found that a claim for malicious prosecution states an invasion of a substantial liberty interest actionable under § 1983. Voytko, 445 F.Supp. at 324. There is no indication that any other district courts within the District of New Jersey have disputed this unambiguous holding of the Voytko case.

Although the task of determining whether a right is “clearly established” would be greatly simplified by the presence of appellate court decisions squarely addressing the issue, the court believes that the combination of Jennings and Voytko forms a sufficient basis for saying that the right is clearly established within the District of New Jersey. Implicit in the Supreme Court’s comments in note 32 of Harlow is the suggestion that there are circumstances in which the state of the law would be evaluated by reference to the opinions of the local district court. Thus, it is arguable that even in the absence of Jennings the district court opinion in Voytko alone would be enough to support a finding that the right is clearly established. It would not be unreasonable to expect that state officers of the State of New Jersey would be on notice of published opinions of the United States District Court for the District of New Jersey. Furthermore, a standard acknowledging that an unrefuted district court case may clearly establish a right within that district is a very workable one. By contrast, a holding that one district court case is insufficient to establish a right would lead to endless confusion. The courts would then be faced with the task of drawing the line at some larger, though arbitrary, number of cases. Would two cases suffice? three? four? The defendants would never know whether their case would be the one that would tip the scale in favor of a finding that the right allegedly violated was clearly established. Similarly, if the courts were to say that several cases had to recognize the right before it was clearly established, then state officers, despite the existence of one unambiguous district court precedent acknowledging the right, would know that they had a “free bite at the apple”; that is, that they could violate that particular constitutional right without fear of losing their immunity. To permit such officials one or more liability-free violations of a constitutional right would be to undermine the effectiveness of § 1983 suits in deterring abuse of office and providing the injured party with an opportunity for recompense. See The People of Three Mile Island, at 143, 145.

In sum, the rationale of Jennings and the unambiguous and uncontradicted holding of Voytko form a sufficient basis for this court to find that, at least within the District of New Jersey, the right to be free from malicious prosecution is “clearly established.” Thus, under Harlow, defendants Price and Berge are not entitled to summary judgment on counts I and II of plaintiff James’ complaint on the basis of qualified immunity. Insofar as plaintiff Hontz has incorporated the same claims into his complaint by reference, the defendants’ motions for summary judgment on these claims must be denied as well.

The next issue requiring consideration is plaintiff James’ claim in count III that he was deprived of property without due process when the defendants tortiously interfered with his contractual and business relations. According to the defendants, James cannot be allowed to proceed with his § 1983 action on this basis because the existence of an adequate state remedy precludes this court from finding that due process has been violated. The court’s previous letter opinion did not confront this question since it was unclear at that time whether the plaintiffs intended to pursue deprivation of property without due process as a separate § 1983 claim.

It is important to note that count III, unlike counts I and II, states a claim for deprivation of property without due process of law. In view of this, the court agrees with the defendants’ assertion that we must look to Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981) and Hudson v. Palmer, _ U.S. _, 104 S.Ct. 3194, 82 L.Ed.2d 393 (1984) for the appropriate legal guidelines. Parratt states the relevant rule because that case, like count III of the James complaint, involved “no other right, privilege or immunity secured by the Constitution or federal laws other than the Due Process Clause of the Fourteenth Amendment simpliciter.” Parratt, 451 U.S. at 536, 101 S.Ct. at 1913. As the court in Parratt emphasized, “[njothing in that Amendment protects against all deprivations of life, liberty or property by the State. The Fourteenth Amendment protects only against deprivations ‘without due process of law.’ ” Id. at 537, 101 S.Ct. at 1914. The question here — like the question in Parratt — is whether the tort remedies provided by the state as a means of redress for property deprivations satisfy the requirements of procedural due process. As outlined below, the court believes that the remedies available to plaintiff under New Jersey law are sufficient to satisfy due process.

The defendants have drawn the court’s attention to the New Jersey Tort Claims Act, N.J.S.A. 59:1-1 et seq. As the legislature itself indicated, the Act was intended to strike a balance between the unfairness and inequity resulting from strict application of the traditional sovereign immunity doctrine and the severe economic burden which total abrogation of that doctrine would impose upon liable public entities. See N.J.S.A. 59:1-2. Accordingly, the legislature provided that public entities and public officials shall be liable for their wrongdoing in certain, specified instances. Of particular relevance here, the Act provides that a public employee cannot avail himself of the limitations as to liability and damages “if it is established that- his conduct was outside the scope of his employment or constituted a crime, actual fraud, actual malice or willful misconduct.” N.J.S.A. 59:3-14.

The plaintiffs’ briefs in opposition to summary judgment do not allege that the remedies provided under the New Jersey Tort Claims Act are unavailable in the instant action. In fact, plaintiff James’ theory of liability under count III is cast in such a way as to trigger the applicability of N.J.S.A. 59:3-14. The plaintiff’s theory here is that the interference with plaintiff's business and the property loss allegedly experienced by him “were the result of the defendants’ malicious prosecution of plaintiff____” (James’ Second Amended Complaint at 4.) Thus, if plaintiff is able to prove the allegations underlying count III — that the defendants acted with actual malice — sovereign immunity does not bar recovery under New Jersey law. In light of the existence of this apparently adequate state remedy, the court believes that plaintiff cannot maintain a § 1983 action for deprivation of property without procedural due process. Consequently, the defendants’ motion for summary judgment on count III must be granted. Insofar as plaintiff Hontz has incorporated the identical claim in his amended complaint, summary judgment must be entered against him as well.

The final count of plaintiff James’ amended complaint — count IV — states that defendants Dubin and Sherlock entered into a conspiracy with defendants Price and Berge to deprive plaintiff of his constitutional rights. This allegation states a claim for conspiracy under § 1983. The ability to bring a conspiracy claim under § 1983 against private citizens acting in concert with public officials is well-recognized. Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Furthermore, a § 1983 conspiracy claim may be premised on a conspiracy to violate any constitutional right. In this respect, it differs from an action under § 1985(3), where plaintiff may recover only if his right to equal protection, privileges or immunities have been violated. Consequently, defendant Berge’s argument that plaintiffs’ conspiracy claim must fail because plaintiffs do not fall within a cognizable class is inapposite. Since this is the only argument advanced in support of defendant Berge’s motion for summary judgment on count III of James’ complaint, the motion is denied. Again, to the extent that plaintiff Hontz incorporates the conspiracy claim into his complaint, Berge’s motion for summary judgment must be denied on this claim as well.

The court notes that while plaintiff Hontz’ complaint repeats the allegations contained in counts I-IV of plaintiff James’ complaint, it also contains additional allegations. The complaint alleges violations of state law and asserts that this court has pendent jurisdiction over such claims. Furthermore, the complaint alleges a number of substantive constitutional violations. Since the defendants have sought summary judgment only as to the claims premised on conspiracy and on deprivations of property and liberty without due process, the court expresses no view on the viability of Hontz’ remaining claims.

The court also notes that pretrial discovery in this case has now been closed for several months. Accordingly, the court directs the parties that any additional pretrial motions should be filed no later than March 11, 1985 so as to be returnable on April 4, 1985. This will permit all remaining claims to proceed to trial promptly.

The attorney for plaintiff James shall submit an order consistent with this opinion.


text:
    John P. REINER, as Executor of the Estate of Paul Reiner, deceased, and Lincoln Orens, Plaintiffs, v. Edith DURAND, individually and as Executrix of the Estate of Marie Elbogen-Lockett, deceased, Defendant. John P. REINER, as Executor of the Estate of Paul Reiner, deceased and Lincoln Orens, Plaintiffs, v. Edith DURAND and Emmy Molles, individually and as Executrices of the Estate of Jan Hans Elbogen, deceased, Defendants.
    Nos. 83 Civ. 1017 (SWK), 83 Civ. 1018 (SWK).
    United States District Court, S.D. New York.
    Feb. 21, 1985.
    Tell, Cheser, Breitbart & Lefkowitz, New York City, for plaintiffs.

      Grais & Richards, New York City, Hill & Barlow, Boston, Mass., for defendants; David J. Grais, New York City, Ellen M. Semonoff, Boston, Mass., of counsel.
   MEMORANDUM OPINION AND ORDER

KRAM, District Judge.

The defendant, Edith Durand, has moved to dismiss the complaints in the two above-captioned actions. She asserts, pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure and C.P.L.R. § 302, that this Court does not have personal jurisdiction over her. This motion is DENIED.

Reiner v. Durand, 83 Civ. 1017, is a suit by John P. Reiner, as executor of the estate of Paul Reiner, and by Lincoln Orens against Edith Durand, individually and as executrix of the estate of her deceased mother, Marie Elbogen-Lockett. The related case of Reiner v. Durand, 83 Civ. 1018, is a suit by the same plaintiffs against Edith Durand and her sister Emmy Molles, both individually and as executrices of the estate of their deceased brother, Jan Hans Elbogen. Both suits arise from identical retainer agreements entered into by Edith Durand, Emmy Molles, and Jan Hans Elbogen and attorneys Paul Reiner and Lincoln Orens, in 1959. In these retainer agreements the attorneys agreed to represent the claims of Mrs. Durand, Mrs. Molles, Mr. Elbogen and their deceased mother, for the restitution of property expropriated by the Czechoslovakian government, before the U.S. Foreign Claims Settlement Commission. The attorneys were to be paid “ten per centum of the total amount paid pursuant to an award rendered in connection with” the restitution claims. These claims were successful, and in 1962 each claimant received an award of about 5% of his or her approved claim. A percentage payment was all that could be made at the time because only a small amount of money was available to meet the claims. Recently, additional funds, amounting to 71% of the unpaid approved claims, became available to meet the claims. The plaintiffs have brought suit to obtain 10% of the additional funds received by the defendants, based on the 1959 retainer agreements.

In 83 Civ. 1017, the contacts with New York that are at issue are those of Edith Durand. In 83 Civ. 1018, the contacts are those of Jan Hans Elbogen; if his contacts with New York are sufficient for jurisdiction, the court can exercise personal jurisdiction over Edith Durand as his executrix. C.P.L.R. § 302(a).

Section 302(a) provides as follows:

(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent:
1. transacts any business within the state or contracts anywhere to supply goods or services in the state ...

The first issue to be decided is whether Emmy Molles acted as an agent for her brother and sister within the meaning of CPLR § 302(a) when she initiated the discussions with Reiner and Orens that led to the signing of the retainer agreements by all three siblings. If Mrs. Molles can be considered their agent, the scope of the facts on which jurisdiction may be based is broadened, since in that event Mrs. Molles’ communications with the attorneys in New York may be treated as contacts with New York.

The meaning of the term “through an agent” as used in § 302(a) has not yet been definitively interpreted by the New York Court of Appeals. However, the Second Circuit has considered this issue in Mayes v. Leipziger, 674 F.2d 178 (2d Cir.1982). The Second Circuit noted that there is conflict among the cases as to how formal an agency relationship must be in order to subject the non-domiciliary principal to jurisdiction in New York. Two cases, Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506 (1970), and Glassman v. Hyder, 23 N.Y.2d 354, 296 N.Y.S.2d 783, 244 N.E.2d 259 (1968), “may suggest that § 302(a)(1) envisions application of the traditional common-law concept of agency.” Mayes, 674 F.2d at 180. However, “federal district courts sitting in New York and lower New York state courts have looked to the ‘realities’ of the situation and have construed § 302(a)(l)’s use of the word ‘agent’ to include any person who, with the consent of the non-domiciliary and under some measure of his control, acts in New York for the benefit of the non-domiciliary. See, e.g., PPS, Inc. v. Jewelry Sales Representatives, Inc., 392 F.Supp. 375, 380 (S.D.N.Y.1975); Arcata Graphics Corp. v. Murrays Jewelers & Distributors, Inc., 384 F.Supp. 469, 472 (W.D.N.Y.1974); East New York Savings Bank v. Republic Realty Mortgage Corp., 61 A.D.2d 1001, 1002, 402 N.Y.S.2d 639, 641 (2d Dep’t 1978); Legros v. Irving, 77 Misc.2d 497, 499, 354 N.Y.S.2d 47, 50 (Sup.Ct.N.Y.Co.1973).” Mayes, 674 F.2d at 181. The Second Circuit in Mayes v. Leipziger did not have to decide between these two interpretations of the agency provision of § 302(a), because it held that even under the more lenient definition the agency relationship on which jurisdiction was predicated did not exist. But the weight of recent authority supports using a more informal definition of agency in determining whether jurisdiction exists. See, e.g., Pasame Realty Corp. v. Ridge Village Partnership, 568 F.Supp. 483, 484 (S.D.N.Y., 1983). Accordingly, the question is whether Mrs. Molles, with the consent of Mrs. Durand and Mr. Elbogen and under some degree of their control, acted in New York for their benefit.

In order to defeat a motion to dismiss for lack of personal jurisdiction under Rule 12(b), the plaintiff needs only to make a prima facie showing of jurisdiction through its own affidavits and supporting materials. Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981). Consequently, it is appropriate to rely on the affidavit of William Reiner, submitted in opposition to the defendants’ motion to dismiss, in establishing the extent of Mrs. Molles’ contacts in New York with the plaintiffs. Mrs. Molles initially contacted the law firm in March 1959 by letter because she was interested in having the attorneys represent her family before the Foreign Claims Settlement Commission. (Reiner Affidavit, dated March 21, 1983, p. 3) Thereafter, on March 26, 1959, she came to the plaintiffs’ office and had a lengthy discussion with Paul and William Reiner regarding claims in her own behalf and on behalf of her sister and brother and her mother’s estate. Ibid. At that time she left documents with the attorneys regarding all these claims. Mrs. Molles had several other meetings with the attorneys at which all of her family members’ claims were discussed. One of these meetings occurred on May 7, 1959 (Reiner Aff., p. 4), and two meetings took place in October of 1959 (Reiner Aff., pp. 7-8). At these meetings Mrs. Molles provided the attorneys with information regarding the extensive property belonging to the Elbogen family in Czechoslovakia. At the March or May meeting, William Reiner explained to Mrs. Molles what the attorneys’ fee would be, and told her that individual retainer agreements should be signed by her, by her brother, and by her sister both individually and as executrix of their mother’s estate. Mrs. Molles agreed that this should be done and instructed Mr. Reiner to mail out the retainer agreements. (Reiner Aff., p. 4.) These were signed by Mrs. Durand in Boston and by Mr. Elbogen in Frankfurt, Germany and returned to the attorneys. (Ibid. pp. 4-5.) In addition to the oral information and documents that Mrs. Molles gave to the attorneys at these meetings, she sent them information in letters dated May 11, 1959 (Reiner Aff. p. 4), and December 21, 1959 (Reiner Aff. p. 8).

Based on these facts it can be concluded that Mrs. Molles’ various visits to and communications with the attorneys in New York were for the benefit of her brother and sister as well as herself. It was Mrs. Molles who took charge of arranging for the attorneys to represent the claims of the whole family before the commission, which led eventually to the award of money by the Commission to the members of the Elbogen family. The next question is whether Mrs. Molles did this with the consent of her brother and sister and under some control by them. Mrs. Durand’s consent to Mrs. Molles’ representation of her is shown by her letter of July 23, 1959 to the attorneys. (Attached to plaintiffs’ affidavit in opposition, dated March 21,1983, as exhibit 2). In this letter Mrs. Durand stated: “Since my sister was good enough to take on the work connected with these claims, I have not brought any files with me. I hope therefore that you are mailing her copies of all claims so that she can cheque [sic] them against her files.” In the same letter Mrs. Durand requested that the attorneys send copies of the final versions of the claims and of the-signed retainer agreements to Mrs. Molles, and gave Mrs. Molles’ current address for that purpose. These statements show that Mrs. Durand knew and approved of the steps Mrs. Molles had taken in dealing with the attorneys. Mr. Elbogen’s consent to her activities can be inferred from the fact that he signed the retainer agreement. It would be inappropriate to require a showing of “control” here, because the relationships involved are family relationships, not formal business relationships. If Mrs. Du-rand or Mr. Elbogen had objected to Mrs. Molles’ arrangements, they could have written to the attorneys themselves, or simply not signed the retainer agreements. Based on Mrs. Molles’ activities and the relationship between her and her brother and sister, she can be regarded as their agent for jurisdictional purposes.

The next issue is whether the contacts Mrs. Durand and Mr. Elbogen had with New York are sufficient for jurisdiction to be exercised. This inquiry does not focus narrowly on where the agreements were executed; instead, since Mrs. Molles can be considered as the agent of her brother and sister within the meaning of § 302(a), her activities in New York can be considered. Where the services were rendered is also relevant.

New York courts are divided over the question of whether the retainer of an attorney in New York by an out of state party is a transaction of business within the state so that jurisdiction can be exercised over the non-resident. Some courts have held that jurisdiction did not exist: Winick v. Jackson, 49 Misc.2d 1009, 268 N.Y.S.2d 768, (Sup.Ct., 1966); Law Research Service, Inc. v. Crook, 36 A.D.2d 912, 320 N.Y.S.2d 851 (1st Dep’t, 1971); Perlman v. Martin, 70 Misc.2d 169, 332 N.Y.S.2d 360 (Sup.Ct.1972); Amins v. Life Support Medical Equipment Co., 373 F.Supp. 654 (E.D.N.Y.1974). Others have found that jurisdiction existed: Elman v. Belson, 32 A.D.2d 422, 302 N.Y.S.2d 961 (2d Dep’t 1969); Mayer v. Goldhaber, 63 Misc.2d 605, 313 N.Y.S.2d 87 (Sup.Ct.1969); Polish v. Threshold Technology Inc., 72 Misc.2d 610, 340 N.Y.S.2d 354 (Sup.Ct. 1972); Jecies v. Matsuda, 503 F.Supp. 580 (S.D.N.Y.1980). The defendant naturally cites the former line of cases, and plaintiffs cite the latter. It is difficult to distill from these cases a rule distinguishing when the retainer of an attorney creates jurisdiction and when it does not, particularly since many of these opinions are not explicit as to the factual and legal bases for denying or granting jurisdiction. Since there is no clear rule on the issue, the issue can be decided under the fairness standard of International Shoe Co. v. State of Washington Office of Employment Compensation and Placement, 326 U.S. 310, 317, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). The negotiations leading up to the retainer of the attorneys were initiated by Mrs. Molles for the benefit of her brother and sister as well as herself. Her acts can therefore be imputed to them. As a result of the retainer agreements entered into by the parties, a substantial amount of legal work was done by the plaintiffs in New York, which eventually benefitted the Elbogen family by awards of money by the Foreign Claims Commission. Under the circumstances, it does not seem unfair to subject the defendant to the jurisdiction of this court. Jecies v. Matsuda, 503 F.Supp. 580 (S.D.N.Y.1980).

For the foregoing reasons, the motions to dismiss the complaints because of lack of personal jurisdiction over the defendant are hereby DENIED.

SO ORDERED.


author: LUONGO, Chief Judge.

text:
    William A. WALTERS v. Jean WOLFE, United States Parole Officer and United States Parole Commission.
    Civ. A. No. 84-1793.
    United States District Court, E.D. Pennsylvania.
    Feb. 21, 1985.
    William A. Walters, pro se.
    Rachel Shao, Asst. U.S. Atty., Philadelphia, Pa., for defendants.
   MEMORANDUM

LUONGO, Chief Judge.

This is a civil action filed by a former federal parolee who was arrested for violating the conditions of his parole. The remaining defendants are plaintiff’s parole supervisor and the United States Parole Commission. In a memorandum and order dated May 24, 1984, I construed plaintiff’s complaint as one for deprivation of constitutional rights under color of federal law. See Bivens v. Six Unknown Named Agents, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). Now before me is defendants’ motion to dismiss or for summary judgment. I will grant defendants’ motion for summary judgment.

The substance of plaintiff’s complaint relates to the alleged misconduct of defendant Wolfe during plaintiff’s nine-month period of release on parole, and particularly with respect to the events leading to his current incarceration. Although the relevance of plaintiff’s catalogue of allegations is not self-evident, I note that the complaint states that plaintiff was asked to resign from two jobs by his probation supervisors; that he was falsely accused of having “dirty urine;” that he was threatened with incarceration if he failed to report to the probation office despite what plaintiff interpreted as threats against him by someone who knew his reporting schedule; that defendant Wolfe inaccurately stated on an application for a warrant for plaintiffs arrest that he was arrested for offenses that were “just pending charges;” that defendant was so eager to have plaintiff reincarcerated that she neglected to recount that plaintiff had departed the Eastern District of Pennsylvania without permission, but that after plaintiff filed a motion to dismiss, defendant filed a revised, corrected warrant application; and, finally, that he has been reincarcerated without probable cause.

Defendants advance two basic arguments in response to the complaint. First, in response to my prior characterization of this case as a Bivens action, defendants argue that plaintiffs complaint can be read as a claim that he was deprived of his right to a probable cause hearing or that the underlying warrant application was negligently issued. So construed, defendants argue that an affidavit supporting their motion leaves no genuine issue of material fact relevant to plaintiffs claims. The Bivens action is further challenged on the ground that defendant Wolfe is entitled to quasi-judicial immunity.

Second, defendants argue that plaintiffs complaint can be construed as a petition for a writ of habeas corpus. So characterized, defendants contend that the petition should be dismissed for failure to exhaust administrative remedies.

Plaintiff has filed a response to defendants’ motion. In the response, plaintiff disputes the characterization of his claim as a habeas corpus petition, specifically stating that he does not wish to be released. Plaintiff’s response further states that the witnesses who testified for the government at the parole revocation hearing did so untruthfully.

In light of plaintiff’s disclaimer of intent to seek release, I cannot consider this a habeas corpus petition. References in plaintiff’s complaint to bringing the circumstances of his arrest before a court, therefore, must be considered as a request for an evidentiary hearing on his civil suit for damages.

As to plaintiff’s Bivens claim, defendants assert an absolute immunity because of defendant Wolfe’s status as a probation officer. Invoking the doctrine of quasi-judicial immunity, defendants cite Thompson v. Burke, 556 F.2d 231 (3d Cir.1977) and Hall v. Schaeffer, 556 F.Supp. 539 (E.D.Pa.), vacated and remanded on other grounds, 723 F.2d 897 (3d Cir.1983). I am unable to accept defendants’ claim for absolute immunity. Most of the conduct for which defendants are sought to be held liable cannot be considered so intimately related to the judicial process that a grant of absolute immunity is warranted. Compare Galvan v. Garmon, 710 F.2d 214 (5th Cir.1983) (per curiam), cert. denied, _ U.S. _, 104 S.Ct. 2150, 80 L.Ed.2d 536 (1984) (only qualified immunity protects probation officer who mistakenly causes arrest and incarceration of probationer) and Ray v. Pickett, 734 F.2d 370 (8th Cir.1984) (same) with Crosby-Bey v. Jansson, 586 F.Supp. 96 (D.D.C.1984) (absolute immunity attaches to preparation of presentence report). Nevertheless, I agree with defendants’ contention that plaintiff’s claim cannot survive the motion for summary judgment. An affidavit submitted in support of defendants’ motion makes clear that plaintiff has not been deprived of his right to a hearing to contest the charges against him — indeed plaintiff refused to participate in such a hearing. Moreover, the affidavit and exhibits thereto furnish ample probable cause for plaintiff’s arrest.

Because I conclude that the remainder of plaintiff’s factual allegations are not relevant to a claim upon which relief may be granted, I will grant defendants’ motion for summary judgment.