author: SWEET, District Judge.

text:
    ASHLEY MEADOWS FARM, INC., Plaintiff, v. AMERICAN HORSE SHOWS ASSOCIATION, INC., Defendant.
    No. 82 Civ. 5691 (RWS).
    United States District Court, S.D. New York.
    Sept. 30, 1985.
    Butler, Fitzgerald & Potter, P.C., New York City (James M. Davis and James H. Neale, New York City, of counsel), for plaintiff.
    LeBoeuf, Lamb, Leiby & MacRae and Tenzer, Greenblatt, Fallon & Kaplan, New York City (H. Richard Wachtel, Molly S. Boast, Richard G. Reid and Thomas More Griffin, New York City, of counsel), for defendant.
   SWEET, District Judge.

Defendant American Horse Shows Association, Inc. (the “Association”) has made its third motion to dismiss this antitrust action brought by Ashley Meadows Farm, Inc. (the “Farm”), this time for summary judgment under Fed.R.Civ.P. 56. Upon the findings and conclusions set forth below, the motion will be granted on the grounds that the Farm lacks standing.

The Parties

The Association was organized under the laws of New York in 1917 and has become the national equestrian federation of the United States. Its membership is comprised of approximately 2,000 recognized horse shows and more than 40,000 individual members. The Association does not operate horse shows. From time to time the Association prints its Constitution and Rules which govern recognized horse show competitions.

The Farm is a corporation organized in 1979 which has owned and operated a number of horse shows recognized by the Association every year since 1980. The Farm, whose president and operator is Dolores A. Swann (“Mrs. Swann”), has operated its shows at a facility in Berwyn, Pennsylvania.

Prior Proceedings

According to the Association, “this litigation has wandered without clear direction for nearly three years.” This perigrination is worth recording, representing as it does a classic example of the difficulties presented in achieving an efficient disposition of litigation. Energetic and ingenious counsel, both present and past, have overlooked no opportunity to employ their skills, and the disposition of the action has been delayed by discovery disputes and motion practice despite the resolution by the court of each issue raised by the parties. Positions of the parties have shifted and the issues sensitive to each of the parties have been thoroughly explored. The process has been exhaustive, presumably expensive and has been guided, as it must be, by the litigative strategies of the parties, including the Association’s instant motion for summary judgment on the eve of trial after all discovery has been completed.

The initial complaint was filed on August 27, 1982, alleging prima facie tort committed by the Association and its secretary, Ira Finkelstein, against the Farm and its president Mrs. Swann. The complaint arose out of the Farm’s claim regarding the alleged denial of certain procedural rights in connection with the Association’s imposition of a $500 fine for the Farm’s failure to provide ambulance service at one of its horse shows. Although the suit was scheduled for a pretrial conference on November 30, 1982, the court was advised a settlement had been reached and the action was dismissed on December 2, 1982, only to be reopened later at the request of the litigants.

In February, 1983, the Farm filed an amended complaint alleging the antitrust violations which have remained at issue to the present. In response, the Association and Ira Finklestein moved to dismiss the complaint for failure to state a claim upon which relief may be granted. By opinion of September 29, 1983, the motion was granted as to Finklestein and denied as to the Association. At the end of 1983, the Association requested and was granted a substitution of counsel. Shortly thereafter, the Farm requested an entry of judgment for failure to answer timely the amended complaint. The entry of default was eventually set aside upon the motion brought by the Association’s new counsel.

On January 31, 1984, the parties requested additional time in order to complete motions and discovery and to pursue settlement. The request was granted and a deadline of June 11, 1984 was ordered, not to be extended except by motion. By May discovery disputes had arisen requiring a court conference for resolution. A trial date of July 2 was set. On June 19, 1984 the Association moved for summary judgment. After an adjournment by consent the motion was eventually granted as to Mrs. Swann and denied as to the Farm by the opinion dated September 20, 1984. In denying summary judgment seeking dismissal of the Farm’s complaint for lack of standing, the opinion stated:

Given the availability to [the Farm] of its own financial statements and its asserted intention to introduce evidence of the profitability of horse shows of the category and scale which [the Farm] had desired to sponsor, the rigorous showing necessary to grant a summary judgment motion has not been satisfied.

A further order set November 28, 1984 as the deadline for completion of discovery and by December 9 a pretrial order had been submitted and modified. The Association responded by seeking to stay completion of discovery until February 2, 1985. The court was then advised that the action was settled, and later that it was not. On February 4, 1985, the Farm moved for summary judgment. The hearing on the Farm’s motion was adjourned on consent and by opinion of May 10, 1985 it was denied. A deadline of July 16 was set for the completion of discovery and the submission of a pretrial order. The instant motion was filed on July 3, 1985 and heard by consent of the parties on July 26. Rather than wandering without direction, this action has been detoured by last minute diversions as set forth above, of which the instant motion is simply the latest and the most successful.

The Issues

The question of standing and the degree of injury necessary to confer it has already been considered by the court once before, prior to the completion of discovery and submission of a pretrial order clarifying the proof anticipated by both the Association and the Farm. Under the peculiar and particular circumstances here presented and described below, it is now apparent that the Farm will not present any evidence of monetary damages to it. The question of its standing to obtain injunctive relief is thus presented.

The Availability of Summary Judgment and the Undisputed Facts

Summary judgment at the hands of a trial judge is a difficult determination to make and equally difficult to support on appeal. The authorities are oft cited. On the one hand, a court considering a motion for summary judgment must resolve all doubts and draw all reasonable inferences in favor of the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) (per curiam); United States v. One Tintoretto Painting Entitled “The Holy Family with Saint Catherine and Honored Donor,” 691 F.2d 603, 606 (2d Cir. 1982). Moreover, this Circuit has long had a policy in favor of allowing the development of a full factual record through trial of the issues presented, a policy which is limited by the grant of summary judgment. See Jaroslawicz v. Seedman, 528 F.2d 727, 731 (2d Cir.1975).

On the other hand, a plaintiffs’ failure to allege substantial facts and its mere reliance on a general denial of the accuracy of the opponent’s affidavits is insufficient to controvert a motion for summary judgment. Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir.1983); see WIXT Television, Inc. v. Meredith Corp., 506 F.Supp. 1003 (N.D.N.Y.1980). In such circumstances the use of summary judgment is desirable to avoid imposing and incurring “fruitless expenses of litigation.” Merit Motors, Inc. v. Chrysler Corp., 569 F.2d 666, 673 (D.C.Cir.1977). The court’s prior opinions and its decision here have attempted to strike the delicate balance required by these principles.

Except as noted here, none of the facts previously found have been altered by the showing on this motion. The 212-page pretrial order reflecting the issues, the projected proof, and the stipulated facts has been considered in conjunction herewith and should be considered as an unattached appendix to this opinion. The pretrial order and the evidence submitted on this motion demonstrate the unique character of the facts now undisputed.

The initial prima facie tort claim was replaced by allegations of Sherman Act violations resulting from the Association’s “Mileage Rule” which limits the time and place of holding various categories of recognized horse shows. According to the Association, it is a governing board of equestrian sport under the legislation set up to organize the United States Olympic Committee. Once the United States Equestrian Team designates certain of the Association’s shows as those upon which its selections are based, the Association’s rules actually govern the competition. The Association maintains that its limitations on the holding of horse shows are necessary to further the sport of equestrian competition. It has already been held that a rule of reason analysis is applicable despite the per se violation resulting from these limitations on competition. Opinion of May 10, 1985.

Every year since 1980, the Farm has staged a number of horse shows recognized by the Association. The Farm expends funds to conduct its horse shows, and earns revenues on each show, primarily from the entry fees paid by exhibitors, who often travel across state lines to compete at Ashley Meadows Farm. Some of the Farm’s shows have made a profit while others have not and the dates and ratings assigned to each of the Farm’s horse shows by the Association are claimed to be a factor in this outcome.

The “Mileage Rule” establishes minimum distances between horse shows recognized by the Association and grants priority to established recognized shows over other shows or new shows seeking recognition for the first time. As a result, the Farm has been excluded from competing in the horse show market on a variety of allegedly desirable dates. Recognized horse shows that the Farm has been permitted to stage have allegedly been less successful economically than other horse shows recognized by the Association.

It had been assumed on the basis of prior representations that some evidence of injury would be offered by the Farm in addition to evidence of the financial success of the shows which have benefitted by the Association’s mileage restrictions. However, the Farm has not substantiated its allegations relating to economic injury. Responding to an interrogatory requesting that it state the amount of revenues allegedly lost as a result of having certain of its show date applications denied, the Farm made the following statement:

As defendant is aware, plaintiff seeks leave of court to dismiss its damage claims in this action without prejudice. Accordingly, the provision of answers concerning the dollar amount of plaintiff’s damages would be unduly burdensome, since the dollar amount of its damages will not lead to the discovery of admissible evidence concerning plaintiff’s claims for injunctive relief.

The Farm further stated in its responses that it was “unable” to quantify the amount of damage it had sustained, that it no longer intended to compare at trial any of its shows with other horse shows, and that it did not intend to call its own expert witness at trial.

The Association has pointed to a number of facts regarding the Farm which are said to explain the Farm’s inability to establish past or future financial injury. These facts are set forth below to demonstrate the unique situation presented by this particular antitrust plaintiff, whose claim is so interwoven with personal and financial relationship of its president Mrs. Swann and her husband Leonard A. Swann, Jr. (“Dr. Swann”).

The Farm is a Pennsylvania corporation qualified under Chapter “S” of the Internal Revenue Code. Its profits and losses are imputed to its sole shareholder, Dr. Swann, who, as owner of the corporation, was entitled to (and did) deduct the Farm’s operating losses from his personal income taxes. Dr. Swann is also the owner of the indoor arena in which horse shows conducted under the Farm’s name are run, although the indoor arena is not a necessary element to the holding of a horse show. The use of the arena and the land for horse shows is presently the subject of zoning litigation. The Farm has no lease from Dr. Swann for use of the arena and has paid no rent to him.

Neither the Farm nor Dr. Swann owns the land on which horse shows conducted under the Farm’s name are run. The land was purchased by Dr. Swann in 1978 and conveyed to a trustee by irrevocable deed of trust for the benefit of his daughter, Heather Swann. Pursuant to the Deed of Trust, the land on which shows are conducted may be developed at the trustee’s discretion, and the Farm has his express permission to conduct its shows on trust property which, in the trustee’s view, also includes the indoor arena. The Farm has not executed a lease with the trust. The trustee petitioned in January, 1985 to be relieved of his fiduciary responsibility.

The trustee on whose property the Farm shows are held has no permanent use and occupancy certificate for the indoor arena. Under the relevant zoning ordinance, a permanent use and occupancy certificate permitting the running of horse shows on the trustee’s property may be issued only if horse shows are deemed entirely incidental and subordinate to the property’s “farm use” zoning categorization. The trustee’s application for a permanent certificate permitting use of the indoor arena for horse shows was denied in 1980 by the Zoning Officer of Easttown Township where the property is located. Although five years of litigation ensued since then, and continues today, the only record decision on the propriety of conducting horse shows on the trustee’s land denied the trustee (and therefore the Farm) that right. Association-recognized horse shows may be staged at locations and facilities which their managements do not own, as the Farm has done in the past. The Farm has continued to obtain the Association’s recognition of its horse shows.

Mrs. Swann testified under oath before the Eastown Township Zoning Hearing Board in the proceeding in which the trustee’s zoning application was challenged because the Farm’s horse shows were “commercial” activities. In her testimony supporting the trustee, Mrs. Swann explained why the farm property had been acquired. As her daughter became more involved with horse showing, she explained, “I realized that the nature was such that I really needed our own place, so we could do it with less strain, less turmoil.” In addition, Mrs. Swann “thought it would be an excellent way of combining the children’s interests and mine, make it sort of a social activity at the same time for myself * * * [and] to concentrate my children’s main extracurricular activity in a convenient location, so I would not spend half my lifetime driving.”

Both Dr. Swann’s construction of the horse arena and the trustee’s purchase of the trust property were financed in part by loans from Swann Oil, Inc. (“Swann Oil”), a company owned by Dr. Swann. On May 25, 1984, Swann Oil invoked the protection of the United States Bankruptcy Code and filed a petition under Chapter 11. The trustee in bankruptcy thereby possesses claims arising from the Swann Oil loans. The status of those claims awaits final disposition of the Swann Oil bankruptcy proceeding, which continues to this day. Prior to the initiation of the bankruptcy proceeding, employees of Swann Oil had carried out many of the Farm’s administrative needs, including maintaining its books and records and mailing its literature to prospective exhibitors. Swann Oil no longer performs those functions.

Finally, Dr. and Mrs. Swann are presently engaged in divorce and child custody proceedings. Early in May 1984 they entered into an agreement which recited that Dr. Swann “as sole shareholder of [the Farm] is unwilling for [the Farm] to incur any further costs, expenses, attorney’s fees or other liabilities in any continued participation of [the Farm] in this action.” The agreement acknowledged that Mrs. Swann “has an interest in [the Farm] continuing to prosecute” this action and gave her the “exclusive right” to conduct the lawsuit, provided she (1) indemnifies the Farm and Dr. Swann from any resultant liability, and (2) distributes the net proceeds of any monies recovered to Dr. Swann first, to reimburse him for any expenses incurred by him and the Farm in any actions involving the Association.

From these facts and the proposed proof outlined in the pretrial order it is without dispute that no proof will be presented linking past or future financial damage to the operation of the mileage rule other than the bare assertion by Mrs. Swann that if the restriction of time and place with respect to horse shows for class entrants were enjoined, the Farm’s shows would be more successful.

The Farm’s Lack of Standing

While the Supreme Court has delineated a six factor test to aid the court’s evaluation of whether a plaintiff has standing to sue under the antitrust laws, Associated General Contractors v. California State Council of Carpenters, 459 U.S. 519, 535-43, 103 S.Ct. 897, 907-11, 74 L.Ed.2d 723 (1983), the only issue presented by the Association’s motion for summary judgment is whether the Farm has presented a sufficient factual basis to establish that it has suffered any legally cognizable injury. The Farm argues that the Association’s practices have and will continue unreasonably to exclude the Farm from competing in the market on favorable dates of its choosing. Due to its inability to schedule horse shows freely, the Farm claims that it is faced with “threatened loss or damage by a violation of the antitrust laws” sufficient to establish a claim for relief under § 16 of the Clayton Act. 15 U.S.C. § 26.

The distinction between the standing requirements for injunctive relief and treble damage recovery under the antitrust laws have been noted previously in the opinion of September 20, 1984. The standard for establishing injury sufficient to support a claim under § 16 of the Clayton Act is more liberal than the standard applied to damage claims under § 4. In re Multidistrict Vehicle Air Pollution M.D.L. No. 31, 481 F.2d 122, 130 (9th Cir. 1973). Section 16 provides a right of action for threatened as well as past injuries, Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 130, 89 S.Ct. 1562, 1580, 23 L.Ed.2d 129 (1969); for indirect injuries, Barr v. Dramatists Guild, Inc., 573 F.Supp. 555 (S.D.N.Y.1983); and in certain circumstances, for injuries which do not strictly threaten the “commercial interests” of a party. Bratcher v. Akron Area Board of Realtors, 381 F.2d 723, 724 (6th Cir.1967).

In the context of this case, however, the above cited extensions of the equitable standard for antitrust standing are largely irrelevant. The Farm claims that the Association’s Mileage Rule causes a direct injury to its profitability, a business and commercial interest. Moreover, the actions constituting the basis for the Farm’s claim extend back to 1980. In view of the longstanding nature of alleged injury and in the absence of any change in circumstances, the Farm cannot claim that it faces the threat of any greater harm than has allegedly occurred in the past. Thus, where the alleged violations “have been in existence long enough for their potential effects ... to manifest themselves, the difference in the [Section 4 and Section 16] standards is not so consequential.” Merit Motors, Inc. v. Chrysler Corp., 569 F.2d 666, 670 n. 14 (D.C.Cir.1977). See also Van Dyk Research Corp. v. Xerox Corp., 631 F.2d 251, 255 n. 2 (3d Cir.1980). Under these circumstances, therefore, it would be inappropriate to allow speculation about possible injury to the Farm. Instead, the Farm’s evidence regarding its past and present injury due to the Mileage Rule will be determinative of whether it has standing to bring this antitrust action.

The Farm argues that it has established injury by demonstrating two essential facts: (1) that horse shows which are recognized by the Association are more desirable to exhibitors and (2) that the Association has denied the Farm recognition for certain horse shows conducted on particular dates of the year. This evidence, the Farm asserts, demonstrates that the Farm has suffered decreased profitability. To support its claim, the Farm relies heavily on the case of Zenith Radio Corp. v. Hazeltine Research, Inc., supra, in which the plaintiff corporation was excluded from selling its products in the Canadian marketplace for a period of several years due to a conspiracy which denied Zenith an import license.

The Farm cites the Zenith opinion for the proposition that the defendant’s intent to exclude a competitor from a market is sufficient to establish legal injury to permit standing in an antitrust suit. While this reading finds some support in the language used by the court, it ignores the factual findings which formed the underpinnings of the Supreme Court’s holding. The Court overruled the Circuit Court’s dismissal of Zenith’s claim, not because of any disagreement regarding the intent of defendants, but rather because the Supreme Court found adequate evidence of the effects of those actions on plaintiff’s business. The Court found both that Zenith suffered a reduced market share due to the denial of an import license and that the effects of the reduced market share continued to cause reduced profitability during the period under consideration. 395 U.S. at 116-19, 89 S.Ct. at 1572-74. As the Court concluded, fact of injury is to be inferred from “ ‘the proof of defendants’ wrongful acts and their tendency to injure plaintiff’s business, and from the evidence of the decline in prices, profits and values, not shown to be attributable to other causes____’” Id. at 123, 89 S.Ct. at 1576 (quoting Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 264, 66 S.Ct. 574, 579-80, 90 L.Ed.2d 652 (1946)) (emphasis added).

The disparity between the extensive factual demonstration provided in the Zenith case and the negligible factual proof in this one indicates that the two cases do not stand on the same footing. Here, the Farm has demonstrated only that it does not intend to offer any evidence regarding the alleged injury to its profitability. The only effect from the imposition of the Mileage Rule which the Farm can demonstrate is that it was unable to schedule certain types of rated horse shows on certain dates which it had requested.

Since the Farm was given recognition for as many shows as it requested, this case does not present an instance of broad market exclusion; therefore, the fact that Association recognition confers a competitive advantage is not proximately related to the Farm’s claim. Rather, the Farm must provide some evidence to indicate that the types of shows for which it sought recognition on certain dates would have been more profitable than the shows which were eventually scheduled on other dates. The facts proffered by the Farm are simply inadequate. The Farm contends in the pretrial order that the Mileage Rule restrictions forced them to hold horse shows on dates or with ratings which “it did not consider most favorable from an economically competitive standpoint.” Pretrial Order at 19. Beyond this, the Farm’s brief simply states that the Farm has “staged horse shows, paying their expenses, receiving their revenues, enjoying their profits, and suffering their losses.” Plaintiff’s Brief at 7. While the Mileage Rule apparently has caused the Farm some inconvenience, these allegations simply do not indicate that the Farm has suffered any injury redressable under the antitrust laws. Cf. McClure v. Undersea Industries, Inc., 671 F.2d 1287, 1289 (11th Cir.1982) (since antitrust fact of damage cannot be based on mere speculation, directed verdict is appropriate where no evidence is proffered other than plaintiff’s allegations).

Moreover, the Farm has refused to supplement its scant factual presentation with any expert testimony which would explain how the Association’s practices might be expected to cause injury to a horse show operator. While such testimony might not establish standing when unsupported by sufficient facts, Merit Motors, supra, at 673, the lack of expert testimony in the context of the present case renders the Farm without any evidentiary support to oppose the Association’s motion for summary judgment.

The Farm need not quantify the damages sustained in order to obtain injunctive relief, Treasure Valley Potato Bargaining Ass’n v. Ore-Ida Foods, Inc., 497 F.2d 203, 218 (9th Cir.1974), nor does the law of antitrust standing require that the Farm demonstrate with certainty its profitability in a hypothetical market devoid of any restrictions imposed by the Association. See Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563, 51 S.Ct. 248, 250-51, 75 L.Ed. 544 (1931). The Farm nevertheless must set forth sufficient facts regarding its business operations to demonstrate that it has suffered some injury. Since, after the completion of extensive discovery, the Farm has not offered any evidence to demonstrate damage to its business, and since no such demonstration will be produced at trial, there exist no material issues of fact to preclude an award of summary judgment. See First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-90, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968); Reading Industries, Inc. v. Kennecott Copper Corp., 631 F.2d 10, 13 n. 6 (2d Cir.1980).

The Grant of Summary Judgment

The trial of this action, non-jury, with over one thousand proposed exhibits, twenty-two witnesses, and deposition testimony will be expensive for the parties and time consuming for the court. As set forth above, some legal injury must be established to provide standing, even if the evidence is limited due to the absence of any experience of horse show operation without the Mileage Rule. In the absence of even a proffer of such evidence, the Association is entitled to relief by summary judgment if Rule 56 is to be given any weight. That determination obviates the necessity to resolve the Olympic exemption claimed by the Association.

Submit judgment on notice.

IT IS SO ORDERED.


source: Caselaw Access Project

license: Public Domain

text:
    Joseph MORAN, Plaintiff, v. KIDDER PEABODY & CO., a corporation, and Bruce Barbers, an individual, Defendants.
    No. 84 Civ. 9110 (RWS).
    United States District Court, New York.
    Sept. 30, 1985.

      Felix T. Gilroy, Staten Island, N.Y., for plaintiff.
    Shanley & Fisher, P.C., New York City (Matthew Farley and Robert G. Brehme, New York City, of counsel), for defendant Kidder Peabody & Co.
   OPINION

SWEET, District Judge.

Defendants Kidder Peabody & Co. (“Kidder”) and Bruce Barbers (“Barbers”) have moved to dismiss the amended complaint of plaintiff Joseph Moran (“Moran”) under Rules 9(b) and 12(b)(6), Fed.R.Civ.P. For the reasons set forth below the motion is granted and the amended complaint dismissed without costs.

The initial complaint was dismissed pursuant to an opinion of May 7, 1985, familiarity with which is assumed. Leave to replead was granted, and the amended complaint is now attacked by Kidder as insufficient to satisfy the requirements of Rule 9(b) and to set forth federal jurisdiction under Rule 12(b)6.

The Facts

The amended complaint describes a series of events, all too familiar. Moran, “a businessman engaged in car sales,” met Barbers, a registered representative of Kidder, in its Morristown office, and the seller became a buyer. Moran transferred his trading account from Tradex Corporation to Kidder, a registered broker dealer.

Barbers assured Moran he would save on commissions as a result of the transfer, and Moran executed a Customers Agreement and a Put and Call Options agreement on June 18, 1983, and thereafter deposited funds with Kidder for trading purposes. Moran contends that credits were thereafter posted to Moran’s account as a result of trades in Oak Industries Inc. stock. Although Barbers informed Moran that the trades were recorded in error, the credits remained in the account. In addition, certain errors were made with respect to the Member Authority to Transfer and Receive Account (Form 412) the apparent effect of which was to conceal that Moran’s account was a margin account. According to Moran, the effect of these actions was to maintain an artificial credit in his account for approximately six weeks, which Barbers used to cover the purchase of various unauthorized and unrequested securities. Barbers allegedly represented to Moran that these unauthorized trades, referred to in paragraphs 7 and 10 of the amended complaint, were mistakes which would be corrected.

On August 18, 1983 Kidder settled Moran’s account with Tradex, which represented a margin account of $25,401.00 rather than a credit of approximately $19,000.00 as it had previously been recorded. The effect of this settlement and the rectification of the Oak Industries errors in combination with the allegedly unauthorized transactions entered into by Barbers was apparently to create an insufficient cash balance in Moran’s account. Moran complained to a Kidder supervisor and deposited an additional $10,000 “to keep everything going.” Notwithstanding, on September 7 Kidder liquidated Moran’s account resulting in.an $89,768.95 loss. Barbers is alleged to have earned $11,000 in commissions by his conduct.

Discussion

While the amended complaint is replete with conclusory allegations, for the purposes of these motions, Moran’s own definition of his cause is accepted. In determining the sufficiency of a complaint pursuant to a motion under Fed.R.Civ.P. 12(b)(6), a court must accept the plaintiff’s allegations in the complaint as true and resolve every doubt in favor of the plaintiff. Conley v. Gibson, 335 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Jenkins v. McKeithen, 395 U.S. 411, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969). A complaint should not be dismissed for failure to state a claim “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, supra, 355 U.S. at 45-56, 78 S.Ct. at 101-2.

To an extent, the amended complaint successfully cures the defects of the original complaint under Fed.R.Civ.P. 9(b). Moran has submitted a one count amended complaint, alleging securities fraud violations under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C., Section 78j(b), rule 10(b)-5, 17 C.F.R., Section 240.-10(b)-5. The amended complaint paints a clear and concise picture of a fraudulent act. Moran was induced to transfer his account from his former brokerage house, Tradex Corporation, to Kidder based on the statements of Barbers that he would pay less commissions than at his former brokerage house. Moran would concede that this act in and of itself would not be grounds for legal action. It is rather the first step in the fraudulent conduct of Barbers which resulted in Moran’s loss of approximately $90,000.00, in less than six weeks.

By reference to the transactions at issue in the conversations, the complaint sets forth the times at which various additional misrepresentations were allegedly made by Barbers while he was an employee of Kidder. In paragraphs 7-10 the complaint states the nature of the representations made by Moran as well as the context in which they were made. Furthermore, the complaint specifies the consequences to Moran of Barbers’ fraud. The specific statements in the complaint set forth both specific deceptions by the defendants and a general scheme to defraud him. Moran’s amended pleadings satisfy this Circuit’s requirements for pleading fraud with particularity. See Todd v. Oppenheimer & Co., Inc., 78 F.R.D. 415, 420-21 (S.D.N.Y.1978).

However, the complaint fails to establish grounds for the exercise of federal jurisdiction over Moran’s claim. In order to state a claim under section 10(b), Moran must allege that (1) the defendants misrepresented or omitted to state material facts in connection with the purchase or sale of a security; (2) Moran relied to his detriment upon defendants misrepresentations and omissions; and (3) defendants made their misrepresentations or omissions with scienter. Savino v. E.F. Hutton & Co., Inc., 507 F.Supp. 1225, 1231 (S.D.N.Y.1981).

None of the allegations contained in the amended complaint identifies a specific misstatement or omission made in connection with the purchase or sale of a specific security. Assuming that the alleged alterations of Form 412 were a misstatement by the defendants, Moran has failed to allege an adequate connection between Form 412 and the purchase or sale of any particular security. As noted in the earlier opinion, Moran did not discover the alterations until after trading was completed, and there is no suggestion that he made any investment decision or acted in any manner in reliance on the form.

As to the alleged reports made by Barbers concerning the status of Moran’s account, Moran has not alleged that they were made in connection with the purchase or sale of any securities. Even if these status reports resulted in the account remaining at Kidder, the mere retention of a brokerage account does not form the basis of a claim under Rule 10b-5 because any misrepresentation did not induce the purchase or sale of a particular security in reliance upon any report from Barbers. Troyer v. Karcagi, 476 F.Supp. 1142, 1198 (S.D.N.Y.1979). Moran contends in paragraph 11 that Barbers promised but failed to purchase stocks requested by Moran. However, only actual purchasers or sellers of a security have standing to maintain an action under Rule 10b-5. Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 731, 95 S.Ct. 1917, 1919, 1923, 44 L.Ed.2d 539 (1975).

Moran goes on to say that he “relied on the statements made by defendant Barbers regarding the status of his account and, even from time to time, sold additional stocks through defendants Kidder, Peabody and Barbers,” 1111. However, even assuming that this statement is intended to allege that Moran would not have sold certain unidentified stocks but for his understanding from Barbers of the status of his account, an interpretation which may not be accurate given the overall context of the statement, the line between the misstatements as to the condition of Moran’s account and any securities allegedly sold by Moran in reliance on these misstatements is not sufficient to sustain a claim under Rule 10b-5 because the misstatements are of a general nature and are not in reference to any particular security. Although significant to the course of conduct, the alleged misrepresentations as to the status of the account and the manner in which it was being handled by Barbers did not relate to specific securities and thus do not state an action for fraud under 10b-5. See SEC v. Drysdale Securities Corp., 606 F.Supp. 295, 299 (S.D.N.Y.1985); Chemical Bank v. Arthur Andersen & Co., 726 F.2d 930 (2d Cir.1984).

Whether or not a broker faithfully performs a customer’s orders is an agency question. See Busch v. E.F. Rothschild & Co., 23 A.D.2d 189, 259 N.Y.S.2d 239 (A.D. 1st Dept.1965). Because he has failed to establish grounds for federal jurisdiction, Moran’s 10b-5 claims are therefore dismissed.

In light of the previous decision and the granting of leave to amend, the claims will be dismissed with prejudice. As Judge Friendly noted in Denny v. Barber, 576 F.2d 465, 471 (2d Cir.1978) where a district court judge puts plaintiff’s counsel “on the plainest notice of what was required,” justice does not require the court to “engage in still a third go-around.” See also Decker v. Massey-Ferguson Ltd., 681 F.2d 111, 115 (2d Cir.1982) (district court’s refusal to give plaintiff’s attorneys a third attempt to restate securities fraud allegations not an abuse of discretion).

IT IS SO ORDERED.


author: SHADUR, District Judge.

text:
    William J. DARRAS, et al., Plaintiffs, v. TRANS WORLD AIRLINES, INC., et al., Defendants.
    No. 85 C 08267.
    United States District Court, N.D. Illinois, E.D.
    Sept. 30, 1985.
    Philip H. Corboy, Chicago, 111., for plaintiffs.

      Conklin & Adler, Ltd., John W. Adler, James F. Murphy, Chicago, 111., for defendants.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Trans World Airlines, Inc. (“TWA”) has just purported to remove this action from the Circuit Court of Cook County, Illinois, relying on two asserted grounds of federal jurisdiction:

1. According to TWA’s petition, this action “arises under a treaty of the United States, to wit, the Warsaw Convention____” Count II of the Complaint filed by William and Violette Darras (“Darrases”) does in fact rely on the Warsaw Convention.
2. TWA also asserts diversity of citizenship exists, despite the fact Darrases and TWA’s co-defendant Cove Travel, Inc. (“Cove”) are both Illinois citizens. TWA’s theory is that “upon information and belief” Cove was joined “solely for purposes of defeating removal to federal court.”

Because TWA’s removal petition is insufficient on its face, this case is remanded sua sponte.

Even on its Count II federal-question jurisdictional predicate, TWA must still be unsuccessful in its removal effort unless it also prevails on its fraudulent-joinder proposition as to Cove. That is so because 28 U.S.C. § 1446(a) (“Section 1446(a)”) requires all defendants to join in or consent to the removal petition, Hardesty v. General Foods Corp., 608 F.Supp. 992 (N.D.Ill. 1985), with limited exceptions — one of them being a plaintiff’s joinder of a defendant simply to keep the case out of the federal courts (see the extensive discussion in 1A Moore’s Federal Practice 110.161[2] (2d ed. 1985)). And here Cove has not joined with TWA in the removal petition.

On that fraudulent-joinder issue, TWA must fail. Darrases were among the passengers on the TWA plane hijacked at the Athens airport and held hostage by terrorists. They have sued Cove on the theory it — their travel agent — sold the air travel ticket in conjunction with TWA. Among other things Cove, like TWA, is charged with negligence in (Complaint ¶ 8(e)):

Failing to advise passengers that the security precautions and procedures in effect at the Athens Airport were inadequate and unsatisfactory for the safety of passengers.

This Court need not try (or even pretry) this case to determine that allegation is non-frivolous. People look to their travel agents to make plans for them — recommending (if not indeed selecting) airlines, routes, places to stop, places to stay. It is at least tenable for Darrases to urge Cove should be charged with negligence in scheduling Darrases for a flight that went through Athens. Indeed if TWA is chargeable on that theory — a matter this Court need not decide — it is hard to see why Cove might not be as well. There is thus no way Darrases can be argued to have run afoul of the principle so well stated in B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir.1981) (footnote omitted, emphasis in original):

The burden of persuasion placed upon those who cry “fraudulent joinder” is indeed a heavy one. In order to establish that an in-state defendant has been fraudulently joined, the removing party must show either that there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court; or that there has been outright fraud in the plaintiff’s pleadings of jurisdictional facts.

Accordingly Cove cannot be deemed as a matter of law to have been joined as a co-defendant as a sham to defeat federal jurisdiction. Because Cove has not joined in the removal petition, this action has been “removed improvidently and without jurisdiction” within the meaning of 28 U.S.C. § 1447(c). This Court therefore sua sponte remands this action to the Circuit Court of Cook County. TWA is ordered to pay any costs and disbursements that may have been incurred by reason of the removal.


author: EDWARD WEINFELD, District Judge.

text:
    Albert BRYAN, Plaintiff, v. CHEMICAL BANK, Defendant.
    No. 85 Civ. 7047 (EW).
    United States District Court, S.D. New York.
    Oct. 1, 1985.
    Charles E. Morrison, New York City, for plaintiff.
    John B. Wynne, New York City, for defendant.
   OPINION

EDWARD WEINFELD, District Judge.

Plaintiff, Albert Bryan, filed this action on September 6, 1985, challenging his termination as Tax Manager of the Asset Based and Personal Lending Division of Chemical Bank. The complaint alleges that his termination was the result of race discrimination in violation of the Civil Rights Act of 1866, 42 U.S.C. § 1981, and age discrimination in violation of the Age Discrimination in Employment Act, 29 U.S.C. § 621. Plaintiff moves for a preliminary injunction reinstating him and restraining defendant from disseminating any infoririation concerning his discharge.

Plaintiff was discharged over 16 months ago, on May 2, 1984, allegedly for gross negligence. Alleging that he was a victim of race discrimination, plaintiff availed himself of the provisions of a consent decree entered into by Chemical Bank and its black employees, and appealed his termination to the Bank’s ombudsman. On November 21, 1984, the ombudsman concluded: “The decision to terminate Complainant’s employment was not, in my opinion, based on his race, but rather on the Bank’s legitimate interest in protecting its assets.” Plaintiff then appealed the ombudsman’s decision to an independent special master, whose position, like that of ombudsman, was created under the terms of the consent decree. The parties engaged in discovery from December 1984 through the spring of 1985. From late June to early August 1985, seven days of testimony were taken before the special master and 75 exhibits were introduced into evidence. The special master scheduled an eighth day of hearings for September 4, 1985, but plaintiff failed to appear. Instead, plaintiff commenced this action charging both race and age discrimination.

To obtain the requested preliminary injunctive relief, plaintiff must demonstrate: (1) the threat of irreparable harm in the absence of an injunction, and (2) either (a) a likelihood of success on the merits, or (b) sufficiently serious grounds for litigation and a balance of hardships that tips decidedly in his favor. “Perhaps the single most important prerequisite for the issuance of a preliminary injunction is a demonstration that if it is not granted the applicant is likely to suffer irreparable harm before a decision on the merits can be rendered.” The Court finds that plaintiff has failed to meet his burden.

After eight months of litigation before the special master, sixteen months after being terminated, and on the eve of a decision by the special master, plaintiff now claims he will be irreparably harmed if he is not reinstated immediately. Plaintiff, who voluntarily availed himself of the consent decree procedures and who has been represented by the same counsel throughout those proceedings, will not be heard to challenge a proceeding commenced by him that is now sub judice before the special master on the asserted claim of lack of jurisdiction and to obtain the drastic remedy of injunction. This sudden shift by plaintiff, on the eve of a decision, does not meet the first prong of the requirements for injunctive relief — irreparable injury. Upon oral argument, it was acknowledged that plaintiff chose to ignore the advice of his employment counselors and not seek employment outside his area of specialization for some time after his termination.

With respect to plaintiff’s request for an injunction barring dissemination of information harmful to his reputation, plaintiff has offered no evidence supporting his contention that Chemical Bank has made the reasons for his termination known. In fact, the evidence before the Court not only indicates that it is the Bank’s official policy not to release such information, but that the Bank has not received any inquiries regarding plaintiff from prospective employers.

Not only has plaintiff failed to make the “strong showing of irreparable injury” required when mandatory injunctive relief is sought, but he has not demonstrated why monetary damages will not adequately compensate him for any harm he suffers in the time it takes to reach a final determination on the merits. If plaintiff should prevail on the merits of his claims, damages are available to “make [him] whole for injuries suffered on account of unlawful employment discrimination.”

Accordingly, plaintiff’s motion for a preliminary injunction is denied.

SO ORDERED.

      . Plummer v. Chemical Bank, 80 Civ. 7364 (WCC).

        . Kenneth J. Kelly Aff., Exh. A. The Court agrees with plaintiff that the statement in Mr. Kelly's affidavit that the Bank’s ombudsman, Claude Weir, is black is irrelevant. The race of the ombudsman has no bearing whatsoever on the validity of his decisions or on his ability to perform his tasks.

      . See, e.g., Buckingham Corp. v. Karp, 762 F.2d 257 (2d Cir.1985); Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70 (2d Cir.1979).

      . Citibank, N.A. v. Citytrust, 756 F.2d 273, 275 (2d Cir.1985).

      . The parties have informed the Court that a decision by the special master is expected within two weeks.

      . Janice L. Won Aff., paras. 3-4.

      . Doe v. New York University, 666 F.2d 761, 773 (2d Cir.1981).

      . See Jackson Dairy, 596 F.2d at 72; Robinson-Pitts v. Board of Educ., 544 F.Supp. 187, 188-89 (S.D.N.Y.1982); see also Sampson v. Murray, 415 U.S. 61, 92 n. 68, 94 S.Ct. 937, 953 n. 68, 39 L.Ed.2d 166 (1974); Stewart v. United States I.N.S., 762 F.2d 193, 199 (2d Cir.1985).

      . Albermarle Paper Co. v. Moody, 422 U.S. 405, 418, 95 S.Ct. 2362, 2372, 45 L.Ed.2d 280 (1975).


author: GUNN, District Judge.

text:
    Renardo PEEBLES, Plaintiff, v. Gerard T. FREY, et al., Defendants.
    No. 84-1041C(6).
    United States District Court, E.D. Missouri, E.D.
    Oct. 2, 1985.
    As Corrected Oct. 7, 1985.
    Linda Shapiro, St. Louis, Mo., for plaintiff.
    William Webster, Atty. Gen., Pat Perkins, Asst. Atty. Gen., Jefferson City, Mo., for defendants.
   ORDER NUNC PRO TUNC

GUNN, District Judge.

The Memorandum Opinion of the Court in the above-styled case dated October 1, 1985, is corrected to read as follows:

Memorandum Opinion

Plaintiff, an inmate at the Missouri Correctional Center at Pacific, Missouri, has filed a two count complaint. Defendants are the director and a division head of the Missouri Department of Corrections and Human Resources and the superintendent and certain correctional officers at the Pacific facility. The first count charges all defendants with conduct in violation of Title 42 U.S.C. § 1983 which deprived him of his eighth amendment right to be free from cruel and unusual punishment. The second count is for money damages against defendant correctional officers Crouch, Scott and Wilson for common law assault and battery.

Jurisdiction of the Court is by virtue of 28 U.S.C. §§ 1331 and 1343.

Based on the following findings of fact and conclusions of law as found by the Court, judgment is for the defendants.

The incident giving rise to plaintiff’s cause of action is the result of a physical confrontation between plaintiff and three correctional officers occurring at the Pacific facility on January 26, 1984.

According to defendants, two correctional officers, defendants Sgt. Crouch and Officer Scott, were giving orientation instructions to newly arrived inmates. Plaintiff was housed in the nearby special management unit — a maximum security facility.

During the orientation, annoying vituperations were shouted by plaintiff, apparently designed to interrupt the instruction program. Plaintiff was directed to be quiet, but his offensive actions only increased.

In an effort to quell plaintiff’s verbal outburst and to talk to him, Sgt. Crouch and Officer Scott opened plaintiff’s cell door. Plaintiff burst forth from his cell and refused to re-enter. As a common disciplinary tactic, Officer Scott commenced to remove plaintiff’s personal belongings to a nearby empty cell, and both Scott and Crouch then attempted to coax defendant into a cell. Plaintiff refused to move from the passageway in which he was standing and continued to shout threats at the correctional officers.

Shift Commander Lt. Wilson, also a defendant, appeared on the scene at this point and attempted verbally to persuade plaintiff to enter a cell. As Wilson reached for plaintiff’s arm to guide him to a cell, plaintiff grabbed Wilson, shoving him backwards. A chain and whistle attached to Wilson’s shirt were broken and Wilson sustained scratches to his neck as a result of plaintiff’s actions. As it appeared to him that Lt. Wilson was being knocked to the floor, Sgt. Crouch sprang forth and with his fist struck a blow to plaintiff’s forehead, causing plaintiff to fall to the floor. Plaintiff was then handcuffed and taken to the institution hospital where two cuts on his forehead were covered with a butterfly bandage strip.

Plaintiff’s version differs mightily. He contends that the verbal assault was not his but came from another cell and that the officers’ harassment was part of an ongoing hassle against him. He asserts that he struck no one, but was hit on the forehead by Sgt. Crouch’s handcuffs.

The Court in this nonjury case acts as factfinder and passes on the credibility of the witnesses. Charles Schmitt & Co. v. Barrett, 670 F.2d 802, 805 (8th Cir.1982). In this instance the Court finds in favor of defendants’ version of what transpired. The primary issue, then, is whether excessive force was used to quell the disturbance created by the plaintiff. Clearly, it was not.

Conclusions of Law

It is evident that in 42 U.S.C. § 1983 contexts, it is not the function of the federal courts to run the prisons nor to supervise the discipline of inmates. Frazier v. Ciccone, 506 F.2d 1022, 1024 (8th Cir.1974); Sawyer v. Sigler, 445 F.2d 818, 819 (8th Cir.1971).

To state a cause of action under 42 U.S.C. § 1983, the plaintiff must establish three elements. (1) The defendants must act under color of state law; (2) the defendants’ action must be intentional; and (3) the defendants must deprive the plaintiff of rights secured by the United States Constitution. Monell v. Dept. of Social Services, 436 U.S. 658, 691-92, 98 S.Ct. 2018, 2036-37, 56 L.Ed.2d 611 (1978); Chapman v. Musich, 726 F.2d 405, 407 (8th Cir.1984). In this instance plaintiff urges a violation of eighth amendment rights by reason of his experience of unusual pain and suffering. For recovery, plaintiff must establish that the quantum of unnecessary and wanton pain that has been inflicted upon him is sufficient to shock the conscience. Ingraham v. Wright, 430 U.S. 651, 670, 97 S.Ct. 1401, 1412, 51 L.Ed.2d 711 (1977); Black Spotted Horse v. Else, 767 F.2d 516 (8th Cir.1985); Peebles v. Bishop, 428 F.Supp. 864, 865 (E.D.Mo. 1977).

It can be assumed that defendants acted under color of state law and that their actions were intentional. Thus, the first two steps of the foregoing requirements have been met. The question remains whether any constitutional rights were violated. Was the use of force here unreasonable and the consequential damage of such severity as to constitute an eighth amendment infraction? Obviously not.

In Johnson v. Glick, 481 F.2d 1028 (2nd Cir.1973), it was held that a court must examine the need for use of force, the relationship between the need and the amount of force that was used, the injury involved, and whether force was applied in a good faith effort to maintain discipline or to maliciously and sadistically harm the inmate. Id. at 1033. This test was adopted by the Eighth Circuit in Bauer v. Norris, 713 F.2d 408, 412 (8th Cir.1983), and Putman v. Gerloff, 639 F.2d 415, 420 (8th Cir.1981). Bauer also states that the use of force in any. matter “cannot be viewed in isolation, but must be considered in the context of all the circumstances____” Id. at 412. The Supreme Court has recognized that prison life contains the “ever-present potential for violent confrontation,” and as a result prison officials must be “permitted to take reasonable steps to forestall such a threat, and they must be permitted to act before the time when they can compile a dossier on the eve of a riot.” Jones v. North Carolina Prisoners Labor Union, Inc., 433 U.S. 119, 132-33, 97 S.Ct. 2532, 2541-42, 53 L.Ed.2d 629 (1977).

Smith v. Thomas, 475 F.Supp. 1135 (E.D. Ark.1979), is appropriate to the circumstances here. In Smith, a guard who had repeatedly hit a prisoner with a “slapper” was found not to have violated the prisoner’s rights primarily because the prisoner was involved in a scuffle with a prison employee. Likewise, in this case, the plaintiff Peebles had shoved and scratched Lt. Wilson, and was required to be subdued through physical force. Moreover, in plaintiff’s case, it was a single blow to the head with a fist, rather than numerous blows to the head with a “slapper” as occurred in Smith v. Thomas. See also Williams v. Kelley, 624 F.2d 695 (5th Cir.1980) (death of pre-conviction detainee caused by choke hold of guard prior to an attack by victim not actionable under 42 U.S.C. § 1983).

Pearl v. Perry, No. 85-1657 (8th Cir. Sept. 5, 1985) is also uniquely on point to the situation here. In Pearl, the plaintiff inmate sought 42 U.S.C. § 1983 relief and damages for alleged infringement against eighth amendment rights as the result of being sprayed with teargas. Pearl contended that the use of force by means of teargas was unreasonable and unwarranted when prison officials sought to place him in a “quiet cell” over his and his cellmate’s objection. Pearl also asserted — as the plaintiff does here — that the guard’s actions were part of a continuing scheme of harassment.

Just as the Court concluded in Smith and Pearl that the guards’ behavior in stemming the actions of a rebellious prisoner were necessary to control the situation, the Court in this case finds that the force applied by the defendant correctional officers was reasonable and necessary under the facts and circumstances of the case. Defendants’ conduct was not part of any plan against plaintiff to beleaguer as he contends.

In this instance, there was an overt threat to authority, and prompt action was required. The single fist blow to plaintiff’s forehead was warranted and was not excessive. Defendants’ actions do not afford plaintiff basis for award of any damages to the § 1983 claim or the common law assault and battery count.

Inasmuch as plaintiff has no legitimate claim against the subordinate correctional officers, inter alia, no foundation exists for a cause of action against the defendant supervisory officials.

Judgment for all defendants.


author: COBB, District Judge.

text:
    Jasper J. TATE v. OVERSEAS BULKTANK CORPORATION.
    Civ. A. No. B-84-594-CA.
    United States District Court, E.D. Texas, Beaumont Division.
    Oct. 3, 1985.
    Bill J. Sanders, Sanders & Sanders, Beaumont, for plaintiff.
    Alan Sampson, Benckenstein, Oxford, Radford & Johnson, Beaumont, for defendant.
   MEMORANDUM OPINION

COBB, District Judge.

This action was commenced by Jasper J. Tate. In his original complaint filed on June 20, 1984, plaintiff alleged that he was wrongfully discharged from the Overseas Bulktank Corporation’s vessel the S/S OVERSEAS ARTIC, a tanker which carried crude oil. Plaintiff further alleged in his original complaint that because of his “wrongful discharge” he suffered emotional distress, was entitled to maintenance and cure and punitive damages.

This action is now before this court on defendant’s motion for summary judgment.

FACTS

The Particulars of Engagement show that the plaintiff became an employee of the defendant for duty on the S/S OVERSEAS ARTIC on March 31, 1984, as an oiler/maintenance/utility man. This employer-employee relationship continued until June 4, 1984. On June 4, 1984, the plaintiff was given what is best described as a letter entitled “Dismissal for Cause” signed by the 3rd, 2nd, and Chief engineers of the S/S OVERSEAS ARTIC. It is also noted that the plaintiff had oral notice of his discharge prior to receiving the dismissal for cause letter on June 4, 1985.

The tanker S/S OVERSEAS ARTIC is equipped with two distinct systems. One is an inert gas system which reduces the oxygen content in the cargo areas of a ship by circulating the ship’s carbon monoxide into the cargo areas. The purpose of this system is to reduce the possibility of explosion of flammable fumes which remain in the, cargo tanks after oil is discharged from an oil tanker. The other system expels carbon and soot build-up by utilizing blown steam. The process of removing the carbon is referred to as blowing the ship’s tubes. It is important that the inert gas system and the steam procedure are not in operation at the same time, since steam carries a positive charge which increases the risk of explosion.

After leaving port May 26, 1984, the S/S OVERSEAS ARTIC engaged its inert gas system. Later, with the inert gas system still engaged, the plaintiff informed a fellow-employee, an oiler, to “put the steam on.” Putting the steam on refers to the first step in the “blowing the tubes” process. It is necessary for the blowers to be turned on before the tubes can be blown. Thus there remained only one step to be taken to engage the inert gas system and it was the job of the plaintiff to inform the oiler that the inert gas system was engaged. At this point, the second assistant reprimanded the plaintiff, and then conferred with the chief engineer. An argument between all three then ensued and the plaintiff was ordered to leave the engine room.

The plaintiff in his deposition related the events in the following manner:

Q. What did the second assistant say?
A. That’s what he said, what I just said: ‘What’s the matter with you, you stupid bastard? Don’t you see the I.G. system is on?’
Q. What was your response?
A. I said, “Yes, I know it’s on.” I knew then it was a mistake. I should have held the oiler back, but I didn’t think about it and my engineer didn’t think about it. We don’t blow the tubes.

The S/S OVERSEAS ARTIC Particulars of Discharge show that the plaintiff left the employ of the defendant June 4, 1984, at the port where he first joined the ship. The plaintiff then instituted this action.

It is the opinion of this court that the defendant’s motion for summary judgment should be granted and the plaintiff’s complaint dismissed, for the following reasons: (1) the plaintiff’s employment contract provided for termination at will; (2) any state law claims have been pre-empted by the collective bargain agreement.

I. PLAINTIFF’S EMPLOYMENT CONTRACT PROVIDED FOR TERMINATION AT WILL

The Shipping Articles of the S/S OVERSEAS ARTIC provide, in part:

Either party may terminate this agreement for himself by giving to the other at least 24 hours notice prior to arrival of vessel at any United States Port exclusive of Alaska or Hawaii. It is also agreed that the provisions of the respective collective bargaining agreements shall be incorporated as part of the Shipping Articles described above.

The Collective Bargaining agreement provides in § 4 of Article I the following:

The union agrees that the company has the right to reject ... or to discharge any member of the unlicensed personnel who, in the opinion of the company is not satisfactory. If the union considers ... the discharge of any member of the unlicensed personnel as being without reasonable cause such action by the company shall be dealt with under the grievance procedure.

Thus, by contract the plaintiff was an employee subject to discharge at will by his employer on 24 hours’ notice. In Smith v. Atlas Off-Shore Boat Service, Inc., 653 F.2d 1057 (5th Cir.1981), the Court of Appeals for this Circuit held that “The maritime employer may discharge a seaman for good cause, for no cause, or even, in most circumstances, for morally reprehensible cause.” At p. 1063. In Smith the Court did recognize a cause of action for wrongful discharge and damages for mental anguish. However, the court also noted:

The cause of action we recognize is limited. It subjects the employer to liability for compensatory damages if, and only if, the seaman can establish that a substantial motivating factor in the employer’s decision to discharge him was the seaman’s personal injury action arising out of the employment relation. It does not prevent the employer from discharging the seaman for any or no reason, unless that reason is the seaman’s filing of a personal injury claim. (Emphasis added)

The plaintiff sustained no personal injury, and his suit was based on his wrongful or “negligent” breach of contract.

The Texas Supreme Court has also recognized a similar narrow exception. In Sabine Pilot Service, Inc. v. Hauck, 687 S.W.2d 733 (Tex.1985), it was held that an exception exists for an employee who is discharged for the sole reason' that the employee refused to perform an illegal act.

After a careful reading of both the Smith and Sabine opinions, this court concludes that the rationale behind both opinions is to prohibit employers from exerting economic pressure on their employees to perform acts contrary to public policy. No facts have been presented or pleaded in the case at bar concerning employer overreaching, nor did the plaintiff in his deposition reveal any such facts.

Thus, pursuant to Smith and the contractual provisions cited above, there exists no cause of action for the plaintiff to assert in regard to negligent discharging of a seaman based on general maritime law. It is also important to note the plaintiff did not pursue any grievance procedure provided for by the collective bargaining agreement.

II. STATE LAW CLAIMS ARE PREEMPTED BY THE COLLECTIVE BARGAINING AGREEMENT.

The plaintiff also alleges that the defendant tortiously interfered with the collective bargaining agreement and general business relations between the plaintiff’s union and the defendant. For this proposition, the plaintiff cites Gonzales v. Guiterrez, (Tex.App. — San Antonio, 04-83-00414, 9-17-85). Shortly before the hearing on the motion for summary judgment, the plaintiff asked this court for leave to file an amended complaint stating a cause of action for libel.

In Strachan v. Union Oil Company, 768 F.2d 703 (5th Cir.1985), the Court of Appeals for this Circuit stated:

The law is completely clear that employees may not resort to state tort or contract claims in substitution for their rights under the grievance procedure in a collective bargaining agreement.

At p. 704. The Court continued:

Even defammation claims under state law have been preempted by the grievance-arbitration procedure unless malice is shown.

At p. 706. Citing Linn v. United Plant Guard Workers, 383 U.S. 53, 86 S.Ct. 657, 15 L.Ed.2d 582 (1966). No malice has been alleged by the plaintiff in this case. This court holds this principle pre-empts all claims made by the plaintiff under state law because the plaintiff has not pursued his rights given him under the collective bargaining agreement between his union and his employer. Furthermore, this court denies plaintiff’s request to amend his original complaint, as to do otherwise would be pointless in light of the holding in Strachan.

This court is of the opinion that the plaintiff’s complaint should be dismissed and the defendant’s motion for summary judgment should be granted. It is so ORDERED.

      . The court in Smith treated the wrongful discharge cause of action as an intentional tort arising under general maritime law and not under the Jones Act.


author: HUGH GIBSON, District Judge.

text:
    Julie M. MARTIN and Katrina M. Martin v. Margaret HECKLER, Secretary of the Department of Health and Human Services.
    Civ. A. No. G—83-137.
    United States District Court, S.D. Texas, Galveston Division.
    Oct. 7, 1985.
    Michael B. Hughes, McLeod, Alexander, Powel & Apffel, Galveston, Tex., for plaintiffs.
    C.J. Calnan, Asst. U.S. Atty., Houston, Tex., Frank V. Smith, III, Dallas, Tex., of counsel, for defendants.
   ORDER

HUGH GIBSON, District Judge.

Before the Court are the parties’ motions for summary judgment. Plaintiffs, the children of Dr. Winston L. Martin, appealed the decision of the Secretary of Health & Human Services denying them surviving children's benefits under the Social Security Act, 42 U.S.C. § 402. Dr. Martin has not been seen since his disappearance on December 25, 1976. The Secretary found that plaintiffs’ application could not be considered until seven (7) years have lapsed since the date of disappearance.

A claimant must demonstrate that the insured worker has died in order to obtain any survivor’s benefits on a lump sum death benefit. 30 FEDERAL PROCEDURE, L.Ed. Social Security & Medicare, § 71:109 (1985). The Secretary’s regulation provides that “a certified copy or extract from the public record of death” shall constitute the best evidence of a person’s death. See 20 CFR § 404.720(b). The regulation further provides that if a claimant cannot prove death but evidence of death is needed, he may invoke a presumption of death by submitting evidence showing the insured worker’s unexplained absence for at least seven (7) years. See 20 CFR § 404.721(b); Shelnutt v. Heckler, 723 F.2d 1131 (3rd Cir.1983).

In this case, the claimants submitted to the Administrative Law Judge and the Appeals Council a death certificate issued by the Texas Department of Health’s Bureau of Vital Statistics (see R. at 6, 162-163). The certificate cited “probable drowning” as the primary cause of death, based on the findings of the Probate Court which admitted Dr. Martin’s will, and based on an examination of what purported to be the remains of Dr. Martin found in the Galveston Yacht Basin. The certificate was signed by the County Medical Examiner and approved by the county judge.

A reviewing court has the power to interpret administrative regulations. Gomez v. Harris, 504 F.Supp. 1342 (D.Alaska 1981). The Court finds that the death certificate is the type of public record which, under 20 CFR § 404.720, constitutes the best evidence of death. With this type of evidence, the claimants no longer have to rely on the presumption of death or to satisfy the proof requirements of Section 20 CFR § 404.721. Section 404.721 applies only when a claimant must rely on “unexplained absence” as proof of death. Autrey v. Harris, 639 F.2d 1233 (5th Cir.1981). The Administrative Law Judge, however, disregarded the death certificate and applied section 404.721 instead of section 404.-720. This, the Court finds, constitutes legal error. Therefore, the Secretary’s decision must be reversed. As a matter of law, claimants have successfully proved the death of the insured worker.

Since the Administrative Law Judge did not make specific findings regarding claimants’ application and simply abated consideration until the seventh anniversary of Dr. Martin’s disappearance, the Court will remand this case to the Secretary for further proceedings in accordance with this Court’s holding. Accordingly, it is,

ORDERED, ADJUDGED and DECREED that:

1. defendant’s motion for summary judgment be DENIED;

2. plaintiffs’ motion for summary judgment be GRANTED;

3. the Secretary’s decision be REVERSED; this case be REMANDED to the Secretary for full consideration of plaintiffs’ application for benefits filed on September 9, 1977 in accordance with this Court's holding; and that the Secretary be instructed to grant such application if it is found to meet other statutory definitions of the Social Security Act, 42 U.S.C. § 402.


author: DORSEY, District Judge.

text:
    NORCO PRODUCTS, INC. v. MECCA DEVELOPMENT, INC.
    Civ. No. H-83-938 (PCD).
    United States District Court, D. Connecticut.
    Oct. 9, 1985.
    Ernest I. Gifford, Gifford, Van Ophem, Sheridan, Sprinkle & Nabozny, Birmingham, Mich., for plaintiff.
    Thomas R. Nesbitt, Jr., Brumbaugh, Graves, Donohue & Raymond, New York City, for defendant.
   RULING ON DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT

DORSEY, District Judge.

This is a civil action brought by Norco Industries, Inc. (Norco), against Mecca Development, Inc. (Mecca), alleging in separate counts Mecca’s (1) infringement of United States Design Patent No. 246,109 (Patent 109); (2) breach of a sales contract; and (3) unfair competition by virtue of false designation of origin in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). Pending is Mecca’s motion for summary judgment as to the patent’s validity asserted in Count I, also put in issue by Mecca’s affirmative defense and counterclaim which seek a declaration of its invalidity. Jurisdiction under 28 U.S.C. § 1338 is found. For the reasons set forth below, the motion is granted.

Facts

The design patent in question, issued on October 18, 1977, to Nils O. Rosaen, was assigned to Norco, of which Rosaen is president. The claim upon which Patent 109 is predicated is an ornamental design for a fluid filter, comprised of an enlarged diameter upper cap constructed of a solid material, a base cap of a solid material, and an intricate circular screen or mesh of filtering material extending from the base cap to an edge which leaves a space to the upper cap. The specifications for the patent are set forth in Exhibit A to the complaint.

The particular and separately patented article of manufacture embodying this design is a filter device used principally for specialized oil lubrication applications, including the high performance, automotive racing market. The filter device, sold separately, is mounted in a housing, such as to render visible only the enlarged diameter upper cap.

Mecca advances two principal arguments in support of its motion for partial summary judgment dismissing Norco’s infringement claim and declaring Patent 109 invalid under 35 U.S.C. § 171. Mecca challenges the validity of design Patent 109 claiming the filter lacks distinctive ornamental characteristics visible in its normal use. It also claims that the filter is functional, possessing only minor ornamental characteristics. As the first claim is dispositive, the second need not be addressed.

Discussion

The appearance of an article is protected by and crucial to the issua,nce of a design patent. Gorham Co. v. White, 81 U.S. (14 Wall) 511, 524-25, 20 L.Ed. 731 (1871). Accord, Rains v. Niaqua, Inc., 406 F.2d 275, 276 (2d Cir.), cert. denied, 395 U.S. 909, 89 S.Ct. 1751, 23 L.Ed.2d 222 (1969). To be patentable, a design must be new, inventive and ornamental, a product of aesthetic skill and artistic conception. Bliss v. Gotham Indust., 316 F.2d 848 (9th Cir.1963). A primarily functional invention is not patentable. See, e.g., A & H Mfg. Co. v. Contempo Card Co., 576 F.Supp. 894, 898 (D.R.I.1983); Barofsky v. GE, 396 F.2d 340, 342 (9th Cir.1968), cert. denied, 393 U.S. 1031, 89 S.Ct. 644, 21 L.Ed.2d 575 (1969); Heritage Quilts v. New Haven Comfort Prods., 466 F.Supp. 229, 231 (S.D. N.Y.1979).

A corollary enunciated in In re Stevens, 173 F.2d 1015, 1016 (C.C.P.A.1949), is that “articles which are concealed or obscure in normal use are not proper subjects for design patents, since their appearance cannot be a matter of concern.” See also, In re Koehring, 37 F.2d 421, 422 (C.C.P.A. 1930) (“articles which are more or less hidden from view when in use are not the proper subject-matter for design patents”); In re Cornwall, 230 F.2d 457, 459 (C.C.P. A.1956) (“patentability of a design cannot be based on elements which are concealed in the normal use of the device to which the design is applied”).

This principle retains its vitality. See, e.g., In re Zahn, 617 F.2d 261, 269 (C.C.P.A.1980); A & H Mfg. Co., 576 F.Supp. at 898-99 (invalidating a design patent for a foam pouch card jewelry display device, inasmuch as the foam pouch is “more or less hidden from view” in ordinary use, rendering it “an inconcinnous subject for a design patent”); Electronic Molding Corp. v. Mupac Corp., 529 F.Supp. 300, 302-03 (D.Mass.1981) (invalidating a design patent for an electronic terminal, the sole distinctive design feature was embedded in a panel board with only the non-distinctive, non-ornamental and non-new top cap and tail of the terminal visible); Contico Int’l v. Rubbermaid Commercial Prods., 506 F.Supp. 1072, 1076 (E.D.Mo.), aff'd, 665 F.2d 820 (8th Cir.1981) (sustaining the validity of a design patent of a dolly used with a refuse container, finding that normal usage of the dolly necessarily involved the frequent attachment and detachment of refuse containers, rendering the dolly “not concealed in [its] normal use”); Etter v. Watson, 147 F.Supp. 511, 512 (D.D.C.1957) (dismissing complaint challenging denial of a design patent for a heat exchanger encased when operating in a solid casing, noting that, inasmuch as “the apparatus is ordinarily used in a closed vessel ... it lacks the feature of patentable ornamentation necessary to support the issuance of a patent”).

Noting that the only part of the patented design which is visible in use is the unadorned, upper cap of the filter element, Mecca invokes this line of authority. Notwithstanding the visibility rule in the authorities noted above, Norco asserts the existence of relevant, disputed factual matters, and suggests a gloss upon the visibility rule such as would shield Patent 109 from the rule.

Relying on the declaration of Nils Rosaen, plaintiffs president and original owner of Patent 109, Norco asserts the existence of disputed factual issues as to the normal use of the device embodying the patented design. Norco first asserts that “[t]here is no reason why a filter embodying the patented design cannot be used in a transparent housing,” Memorandum of Opposition at 12, and then enumerates three reasons why such a housing would indeed make engineering sense. This claim is too insubstantial to present a triable issue. Nothing in the record indicates that a non-opaque housing has ever been contemplated, proposed or actually used with the design. The possibility of encasing a heretofore concealed design element in a transparent cover for no reason other than to avoid this rule cannot avoid the visibility rule, lest it become meaningless.

Indeed, the decisions in, inter alia, In re Stevens, 173 F.2d 1015 (patent denied for a rotary vacuum cleaner design because the brush normally was hidden from view inside a presumably opaque elongated cylinder); Etter v. Watson, 147 F.Supp. 511 (patent denied for design of a heat exchanger concealed inside a presumably opaque casing); and A & H Mfg. Co., 576 F.Supp. 894 (only the ordinary, normal use of the foam pouch jewelry display rack design in question would be considered), cannot be reconciled with the principles for which Norco argues. The rule’s restriction to consideration of the normal, expected use for which the configuration was designed cannot and should not be stretched to include mere possibilities as Norco proposes.

Norco next asserts, relying on the Rosaen declaration, that the normal use of a filter embodying the patented design embraces periodic cleaning, inspection, repair and replacement of the filter, as well as the display and sale of the filter during which the entire filter is visible. Contentions that such quotidian tasks, from which few items are immune, constitute “normal use” for purposes of the visibility rule, have been repeatedly and properly rebuffed. Design patents were not intended to provide protection for designs glimpsed in isolated circumstances. “Almost every article is visible when it is made and while it is being applied to the position in which it is to be used. Those special circumstances, however, do not justify the granting of a design patent on an article ... which is always concealed in its normal and intended use.” In re Stevens, 173 F.2d at 1016. Electronic Molding Corp., 529 F.Supp. at 303, stressed the need to define “normal use” in terms of the use of an item in the ordinary function for which it was designed and rebuffed a suggestion that the court in Contico Int’l v. Rubbermaid, 506 F.Supp. 1072, applied a much broader definition of “normal use” to include the display or sale of the item. There is no sound reason or logic for “normal use” to include the repair, service, replacement, sale or display of the article which incorporates the claimed design. While such occasions are of course “normal” in the sense of commonplace or routine occasions of an item’s use, for patent purposes “normal use” should be limited to the ordinary functioning for which it was designed, not incidents -in the article’s life which are not integral to its function and purpose. Items are not designed for sale, display, replacement or repair. Patents are granted to protect designs in their functional use.

Norco finally argues that the visibility rule should deny patentability solely to those designs the embodiments of which are permanently or completely concealed. This court does not view the rule so restrictively; concealment in “normal use” does not necessarily require permanent or complete concealment. Norco has not submitted nor has the court’s own research disclosed authority for the proposition cited. Cf. In re Koehring, 37 F.2d at 422 (citing the standard as “more or less hidden from view when in use,” rather than suggesting a more permanent or complete concealment). It is accordingly rejected.

For all the above reasons, the statutory presumption of the patent’s validity created by 35 U.S.C. § 282 is amply overridden. Accordingly, Mecca’s motion for partial summary judgment dismissing Norco’s infringement claim and declaring Patent 109 invalid is granted.

Trial on the remaining counts shall be scheduled promptly.

SO ORDERED.

      . The patentability of designs is governed by 35 U.S.C. § 171, which provides:
      Whoever invents any new, original and ornamental design for an article of manufacture may obtain a patent therefor, subject to the conditions and requirements of this title.
      The provisions of this title relating to patents for inventions shall apply to patents for designs, except as otherwise provided.

      . Norco does not appear to suggest that this cap is itself sufficiently distinctive and ornamental to render the design patentable.