author: LUONGO, Chief Judge.

text:
    Frank R. NUTIS, et al. v. PENN MERCHANDISING CORP., et al.
    No. 83-5708.
    United States District Court, E.D. Pennsylvania.
    June 18, 1985.
    Reconsideration Denied Aug. 15,1985.

      David L. Braverman, Fellheimer, Eichen & Goodman, Philadelphia, Pa., for plaintiffs.
    Stuart H. Savett, Kohn, Savett, Marion & Graf, Philadelphia, Pa., for defendants.
   OPINION

LUONGO, Chief Judge.

Plaintiffs in this action are minority shareholders in Penn Merchandising Corporation (“Old Penn”). Plaintiffs’ complaint alleges that various officers, directors and controlling shareholders of Old Penn violated federal securities laws in executing a plan to eliminate minority shareholders at an inadequate price. The complaint also charges violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968, and of state law. Presently before me is defendants’ motion to dismiss or, in the alternative, for summary judgment. For the reasons stated below, I will dismiss the complaint.

I. Factual Background

In September of 1983, Old Penn’s Board of Directors approved an agreement of merger between Old Penn and New Penn Merchandising Corporation (“New Penn”). New Penn, a privately held corporation formed in order to effectuate the planned merger, owned 73% of Old Penn’s issued and outstanding common stock. The agreement provided that Old Penn would be merged into New Penn, with New Penn being the surviving corporation. Common shareholders other than New Penn were to receive $4.00 per share of Old Penn common stock.

Plaintiffs, minority shareholders of Old Penn common stock, allege that $4.00 per share does not represent the fair value of the stock. They claim that defendants, including Old Penn, New Penn, and persons in control of the two corporations, had formulated a plan to eliminate Old Penn’s minority shareholders. Old Penn, pursuant to the alleged plan, offered on March 31, 1983 to purchase up to 350,000 shares of Old Penn common stock at $4.00 per share. Old Penn ultimately purchased 399,500 shares. In connection with the tender offer, defendants did not disclose any intention to take Old Penn private. Plaintiffs assert that Old Penn common stock was worth substantially more than $4.00 per share, but that defendants’ failure to disclose their alleged plan resulted in an artificially low selling price.

In October of 1983, defendants sent out a proxy statement soliciting minority shareholder approval of the merger agreement which the board had adopted in September. According to plaintiffs, this proxy statement revealed for the first time defendants’ plan to eliminate the minority shareholders by forcing them to sell their common stock for $4.00 per share.

Plaintiffs allege that defendants, in effectuating their plan to take Old Penn private, violated the federal securities laws in several respects. The first count of their complaint charges that defendants violated § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5. According to plaintiffs, defendants planned to eliminate the minority shareholders by acquiring their stock at an unfairly low price. Pursuant to this plan, defendants knowingly and recklessly made false and misleading statements in the tender offer documents dated March 31, 1983 and the proxy statement dated October 12, 1983. In Count II, plaintiffs allege that defendants violated § 14(a) of the 1934 Act, 15 U.S.C. § 78n(a), and Rule 14a-9, 17 C.F.R. § 240.14a-9, by issuing a false and misleading proxy statement. Count III charges that defendants, except for Old Penn, are liable under § 20 of the 1934 Act, 15 U.S.C. § 78t, as “controlling persons” who participated in the alleged fraudulent scheme. Count IV charges violations of the RICO statute, 18 U.S.C. §§ 1961-1968. Counts V and VI set forth state law claims, charging common law fraud and breach of fiduciary duty. Plaintiffs seek rescission of the merger or a declaration that the merger is void, actual damages, treble damages under RICO, and attorneys’ fees and costs of suit.

Defendants have moved to dismiss the complaint under Fed.R.Civ.P. 12(b)(6) or, in the alternative, for summary judgment. According to defendants, the overriding theme of plaintiffs’ complaint is that the minority shareholders were treated unfairly. Citing Santa Fe Industries v. Green, 430 U.S. 462, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977), defendants note that such a charge may give rise to a state law claim, but cannot be the basis for an action under the federal securities laws. Defendants argue that plaintiffs, notwithstanding their vigorous attempts to circumvent the Santa Fe rule, have not sufficiently alleged the element of deception required to state a cause of action under federal law. If the claims under the securities laws are without merit, the RICO charges, based on substantially the same allegations of wrongdoing, must also fall, and the pendent state law claims must be dismissed.

Plaintiffs have not yet had the opportunity to conduct discovery. Because summary judgment is generally inappropriate at this stage of a case, I will consider only defendants’ motion to dismiss. See Allen Organ Co. v. North American Rockwell Corp., 363 F.Supp. 1117, 1124 (E.D.Pa.1973). In deciding defendants’ motion, I am mindful of my obligation to accept as true the factual allegations of the complaint, together with any reasonable inferences therefrom. Dismissal of the complaint is appropriate only if “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, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). See also In re Catanella, 583 F.Supp. 1388,1393 & n. 2 (E.D.Pa.1984).

II. Plaintiffs’ Federal Securities Law Claims

As defendants have noted, plaintiffs’ complaint and memoranda opposing defendants’ motion to dismiss represent a tortuous effort to bring what are essentially state law claims within the jurisdiction of a federal court. Although plaintiffs have struggled to characterize defendants’ activities as manipulative and deceptive, the heart of their complaint is that defendants treated the minority shareholders of Old Penn unfairly. The Supreme Court has made clear that such a claim is not cognizable under the federal securities laws. Santa Fe Industries v. Green, 430 U.S. 462, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977).

Santa Fe establishes that a breach of fiduciary duty, absent deception, misrepresentation or nondisclosure, does not violate § 10(b) or Rule 10b-5. Id. at 476, 97 S.Ct. at 1302. A plaintiff cannot circumvent the Santa Fe holding simply by alleging that a defendant made misrepresentations concerning whether a transaction was fair to minority shareholders. Biesenbach v. Guenther, 588 F.2d 400, 402 (3d Cir.1978). According to the Third Circuit:

[I]t is bemusing, and ultimately pointless, to charge that directors perpetrated a “material omission” when they failed to (a) discover and adjudge faithless motives for their actions and (b) announce such a discovery in reporting the products of their managerial efforts and judgment. The securities laws, while their central insistence is upon disclosure, were never intended to attempt any such measures of psychoanalysis or reported self-analysis. The unclean heart of a director is not actionable, whether or not it is “disclosed,” unless the impurities are translated into actionable deeds or omissions both objective and external.

Id. (quoting Lavin v. Data Systems Analysts, Inc., 443 F.Supp. 104, 107 (E.D.Pa.1977) , affd mem., 578 F.2d 1374 (3d Cir.1978) ). As the Ninth Circuit has noted, a contrary holding would “eviscerate the obvious purpose of the Santa Fe decision, and ... permit evasion of that decision by artful legal draftsmanship.” Panter v. Marshall Field & Co., 646 F.2d 271, 289 (7th Cir.), cert. denied, 454 U.S. 1092, 102 S.Ct. 658, 70 L.Ed.2d 631 (1981) (quoting Hundahl v. United Benefit Life Insurance Co., 465 F.Supp. 1349, 1366 (N.D.Tex.1979) ). See also Bucher v. Shumway, 452 F.Supp. 1288 [1979-1980 Transfer Binder] Fed.Sec.L.Rep. (CCH) ([97, 142 (S.D.N.Y.1979), affd mem., 622 F.2d 572 (2d Cir.), cert. denied, 449 U.S. 841, 101 S.Ct. 120, 66 L.Ed.2d 48 (1980).

Having set forth the general principles applicable to claims brought by minority shareholders, I will examine plaintiffs’ specific allegations. Reduced to essentials, plaintiffs’ amended complaint alleges the following:

1. That defendants failed to disclose at the time of the tender offer their intention to take Old Penn private, thereby establishing an artificial ceiling on the price of Old Penn common stock;

2. That defendants failed to disclose that the merger as a whole and the merger price of $4.00 per share in particular were “grossly unfair” to minority shareholders; and

3. That defendants concealed the fact that minority shareholders would not receive the benefit of certain Old Penn assets should the merger be approved.

At time of oral argument, plaintiffs attempted to present certain other theories in support of their claim. In considering defendants’ motion to dismiss, however, I must confine myself to the allegations of the amended complaint.

A. The Tender Offer

In Count I, plaintiffs challenge the March, 1983 tender offer under § 10(b) of the 1934 Act and Rule 10b-5. Plaintiffs claim the documents issued in connection with the tender offer were misleading and deceptive in that they failed to reveal defendants’ intention to take Old Penn private and eliminate the minority shareholders. According to the complaint, defendants’ failure to disclose their plan damaged plaintiffs by establishing an artificial ceiling of $4.00 per share on the price of Old Penn common stock.

Section 10(b) forbids manipulative and deceptive activities “in connection with the purchase or sale” of securities. In order to state a claim under § 10(b) and Rule 10b-5, the complaint must allege: first, that misrepresentation or deception occurred; second, that plaintiffs purchased or sold securities; and third, that the misrepresentation or deception occurred “in connection with” the purchase or sale of a security. Ketchum v. Green, 557 F.2d 1022, 1025 (3d Cir.), cert. denied, 434 U.S. 940, 98 S.Ct. 431, 54 L.Ed.2d 300 (1977). See also Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975); Superintendent of Insurance v. Bankers Life & Casualty Co., 404 U.S. 6, 92 S.Ct. 165, 30 L.Ed.2d 128 (1971). As to the first element, the complaint states that defendants at the time of the tender offer intended to take Old Penn private and failed to disclose their plan in the tender documents. In considering defendants’ motion to dismiss, I will assume that the alleged nondisclosure constituted a deceptive practice within the meaning of § 10(b).

Plaintiffs have also satisfied the second element. The complaint alleges that, under the merger agreement, plaintiffs as minority shareholders must surrender their shares of Old Penn stock. They thus have standing as “forced sellers” to allege that defendants’ actions in relation to the merger violated § 10(b) and Rule 10b-5. See Engl v. Berg, 511 F.Supp. 1146, 1152 (E.D.Pa.1981); Dower v. Mosser Industries, 488 F.Supp. 1328, 1334 n. 4 (E.D.Pa.1980), affd, 648 F.2d 183 (3d Cir.1981).

The question of whether plaintiffs have satisfied the third element is more difficult to resolve. The United States Supreme Court has held that the “connection” requirement of § 10(b) is met if a party “suffered an injury as a result of deceptive practices touching its sale of securities as an investor.” Superintendent of Insurance v. Bankers Life & Casualty Co., 404 U.S. at 12-13, 92 S.Ct. at 168-170. As the Court of Appeals for the Third Circuit has noted, this language “could be interpreted to cover practically all disputes relating to intra-corporate management.” Ketchum v. Green, 557 F.2d at 1027. The Third Circuit, however, refused to read Bankers Life so broadly.

In Ketchum, plaintiffs claimed they had been fraudulently induced to vote for defendants’ reelection as directors. Once defendants were reelected, the board of directors removed plaintiffs as corporate officers and voted to compel the sale and corporate repurchase of plaintiffs’ stock. Id. at 1024. The district court, holding that defendants’ alleged misrepresentations were not “in connection with” the forced sale of plaintiffs’ securities, dismissed the complaint for failure to state a claim under § 10(b) and Rule 10b-5. The Third Circuit affirmed. According to the court, the fraudulent activities of the defendants in Bankers Life had “undergirded the securities transaction.” In contrast, the forced sale of the Ketchum plaintiffs’ stock was at best an indirect consequence of defendants’ purported misrepresentations. The court concluded that even under Bankers Life a closer nexus was required between an alleged misrepresentation and a securities transaction. Id. at 1028. See also Zuckerman v. Harnischfeger Corp., 591 F.Supp. 112, 121 (S.D.N.Y.1984); Teltronics Services v. Anaconda-Ericsson, Inc., 587 F.Supp. 724, 731 (E.D.N.Y.1984), affd sub nom. In re Teltronies Services, 762 F.2d 185 (2d Cir.1985); Issen v. GSC Enterprises, 508 F.Supp. 1278, 1286-87 (N.D.Ill.1981).

In this case, as in Ketchum, the relationship between defendants’ alleged deception and the ultimate forced sale is attenuated. Plaintiffs contend that the tender offer and the merger agreement were part of a broad conspiracy to freeze out the minority shareholders at an inadequate price. Specifically, they claim that, due to omissions in the tender offer documents, the price of Old Penn stock was artificially depressed. As a result, the minority shareholders were forced under the merger agreement to accept an unfairly low price for their shares.

The United States District Court for the District of Delaware has held that misrepresentations in tender offer materials were “in connection with” a subsequent merger under which plaintiff shareholders were forced to surrender their shares. The court thus permitted plaintiffs to challenge the alleged misrepresentations under § 10(b) even though they had not tendered their shares in response to the tender offer. Valente v. PepsiCo, Inc., 454 F.Supp. 1228, 1237-38 (D.Del.1978). In light of the Third Circuit’s decision in Ketchum, I hesitate to adopt Valente’s expansive interpretation of the “connection” requirement. Because I conclude that the complaint must fall on other grounds, however, I will assume that plaintiffs have alleged sufficient “connection” to satisfy the threshold requirements of a § 10(b) claim. See Bloor v. Carro, Spanbock, Londin, Rodman & Fass, 754 F.2d 57, 61 (2d Cir.1985).

Once plaintiffs have satisfied the preliminary requirements of § 10(b), they must prove certain other elements. First, the alleged misrepresentations or omissions must be material. Second, the acts of which plaintiffs complain must have caused their alleged injuries. Affiliated Ute Citizens v. United States, 406 U.S. 128, 153— 54, 92 S.Ct. 1456, 1472, 31 L.Ed.2d 741 (1972). Plaintiffs’ complaint is deficient as to both of these elements.

A misrepresentation or omission in a tender offer document is material if there is “a substantial likelihood that, under all the circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder.” Flynn v. Bass Brothers Enterprises, 744 F.2d 978, 985 (3d Cir.1984) (quoting TSC Industries v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 2132, 48 L.Ed.2d 757 (1976)).

The question of materiality is particularly complex where, as in this case, the votes of the minority shareholders who challenge a transaction were not needed to approve the transaction. A number of courts, including the Third Circuit Court of Appeals, have held that information is material if it would affect a reasonable shareholder’s decision whether to surrender his shares or pursue remedies provided to minority shareholders by state law. See, e.g., Healey v. Catalyst Recovery of Pennsylvania, Inc., 616 F.2d 641, 645-48 (3d Cir.1980); United States v. Margola, 662 F.2d 622, 626 and cases cited n. 1 (9th Cir.1981); United Canso Oil & Gas, Ltd. v. Catawba Corp., 566 F.Supp. 232, 240 (D.Conn.1983). See also Santa Fe Industries v. Green, 430 U.S. at 474 n. 14, 97 S.Ct. at 1301 n. 14. As the Court of Appeals for the Ninth Circuit has stated, “[a] reasonable investor will not view a fact as significant unless he could respond to the fact’s disclosure by protecting himself from possible financial loss.” Margola, 662 F.2d at 626.

Under these standards, I must determine what effect, if any, defendants’ failure to disclose alleged merger plans at the time of the tender offer could have had on a reasonable shareholder considering the proposed merger. If defendants had at the time of the tender offer a concrete plan to effectuate a “going private” merger, information concerning the merger would have been material to shareholders deciding whether to tender their shares. See, e.g., Greenfield v. Heublein, Inc., 742 F.2d 751, 756-57 (3d Cir.1984), cert. denied, — U.S. -, 105 S.Ct. 1189, 84 L.Ed.2d 336 (1985). Plaintiffs, however, claim they were injured because of the effect of defendants’ nondisclosures on the terms of the merger agreement, not because of an investment decision they made at the time of the tender offer.

The complaint alleges that minority shareholders were first informed of the proposed merger when defendants issued a proxy statement soliciting shareholder support for their plans. Plaintiffs were thus in possession of the allegedly essential information before the merger was accomplished, and could make an informed decision either to surrender their shares or to pursue state law remedies. Plaintiffs chose to bring this suit rather than to accept the proposed merger terms. The complaint sets forth no allegations from which I can infer that plaintiffs would have acted any differently had defendants disclosed their merger plans at the time of the tender offer. Under the standards set forth in Healey, nondisclosures in the tender documents were immaterial to the plaintiffs’ investment decisions at the time of the merger. See Healey, 616 F.2d at 647-48. See also Issen v. GSC Enterprises, 508 F.Supp. 1278,1292 (N.D.Ill.1981) (“The fact that the defendants had been discussing going private for two years was not material to and would have had no effect upon [plaintiff’s] investment decision whether to tender his shares or seek an injunction once the merger had occurred.”)

Plaintiffs’ complaint is also deficient with respect to the element of causation. Plaintiffs claim that defendants, through omissions in the tender materials, artificially depressed the price of Old Penn common stock. Plaintiffs further contend that, because the market price was depressed, defendants were able to offer minority shareholders a totally inadequate price under the merger agreement.

Initially, I note that these contentions are inferential arguments, not allegations of fact. Although in deciding this motion I must accept the facts as alleged in plaintiffs’ complaint, I need accept only the reasonable inferences to be drawn from those facts. See D.P. Enterprises v. Bucks County Community College, 725 F.2d 943, 944 (3d Cir.1984); Billard v. Rockwell International Corp., 683 F.2d 51, 54 (2d Cir.1982); Columbia Pictures Industries v. Redd Horne, Inc., 568 F.Supp. 494, 501 (W.D.Pa.1983), affd, 749 F.2d 154 (3d Cir.1984).

The factual allegations in the complaint belie plaintiffs’ argument that defendants’ alleged nondisclosures caused them an injury cognizable under the federal securities laws. As discussed above, defendants’ merger plans were publicized before the merger was approved by Old Penn shareholders. Plaintiffs argue that the merger price was set on the basis of a market price which was artificially depressed because the public was not aware of the merger. The alleged relationship is simply too attenuated to permit an inference that defendants’ failure to disclose their plans earlier was responsible for the injuries plaintiffs claim. See Bloor v. Carro, Spanbock, Londin, Rodman & Fass, 754 F.2d 57, 61-62 (2d Cir.1985); Zuckerman v. Harnischfeger Corp., 591 F.Supp. 112, 120-21 (S.D.N.Y.1984); Teltronics Services v. Anaconda-Ericsson, Inc., 587 F.Supp. 724, 732 (E.D.N.Y.1984), affd sub nom. In re Teltronics Services, 762 F.2d 185 (2d Cir.1985); In re Catanella, 583 F.Supp. 1388 (E.D.Pa.1984).

Plaintiffs’ argument is further undercut by inconsistencies in the complaint. Paragraph 16 of the complaint alleges:

In connection with the March 1983 tender offer, defendants failed to disclose to the minority common shareholders of Old Penn or to the investing public that defendants intended to take Old Penn private and thus eliminate minority common stockholders of Old Penn. As a consequence of defendants’ failure to disclose said plan, defendants artificially established a ceiling on the selling price of Old Penn common stock at approximately $4.00 per share. At the same time that defendants had established this artificially low selling price, purchasers of Old Penn common stock, other than defendants, were required to pay substantially in excess of said artificial ceiling because defendants controlled the very “thin market” for Old Penn common stock. Had defendants disclosed their intention to take Old Penn private and thus eliminate minority common stockholders, the common stock of Old Penn would have sold in the open market at prices materially in excess of $4.00 per share, thus reflecting the true value of the common stock.

In light of the importance of establishing a causal nexus between defendants’ acts and plaintiffs’ alleged losses, I am disturbed by plaintiffs’ failure to state precisely when they purchased their shares and what effect defendants’ nondisclosures had upon their investment. See Zuckerman, 591 F.Supp. at 120. Instead of setting forth facts, plaintiffs are apparently attempting to construct a theory under which defendants’ nondisclosures caused injury to buyers, sellers, and continuing holders of Old Penn stock all at one time; to everyone, in fact, but defendants themselves. Plaintiffs’ cannot have it both ways. If Old Penn stock could command prices higher than $4.00 per share, I cannot accept plaintiffs’ argument that defendants’ actions in connection with the tender offer established an artificial ceiling of $4.00 per share. If defendants controlled the market for Old Penn stock, it is not plausible to argue that disclosure of defendants’ merger plans would have caused the market price to rise substantially. Plaintiffs’ arguments are too speculative to support their claim that defendants’ acts caused them injury. See Rubenstein v. IU International Corp., 506 F.Supp. 311, 316-18 (E.D.Pa.1980).

In short, notwithstanding plaintiffs’ complex arguments concerning the relationship between the tender offer and the merger price, plaintiffs’ complaint is essentially no more than a charge that the merger price was unfair. Plaintiffs have a remedy under state law if their allegations are true. They have not stated a claim under federal law.

B. The Proxy Statement

In Counts I and II, plaintiffs claim that defendants violated §§ 10(b) and 14(a) of the 1934 Act, together with Rules 10b-5 and 14a-9, by issuing a false and misleading proxy statement. In particular, they claim defendants failed to disclose that the proposed payment of $4.00 per share was inadequate and misrepresented the merger as fair to the shareholders of Old Penn. The Third Circuit has squarely rejected such allegations, holding that failure to disclose a breach of fiduciary duty is not a misrepresentation actionable under the federal securities laws. Biesenback v. Guenther, 588 F.2d 400, 402 (3d Cir.1978).

The other grounds upon which plaintiffs attack the proxy statement are also insufficient to state a claim. The complaint charges defendants with failure to reveal that minority shareholders would not be entitled to a share of Old Penn’s restricted earnings escrow account should the merger be approved. The complaint also alleges that defendants did not disclose the fact that they had selected a merger date which would deprive the minority of Old Penn's substantial Christmas season profits.

According to the complaint, the escrow fund consisted entirely of profits earned by Old Penn. Plaintiffs have not alleged that defendants concealed the existence or size of the fund, or that the fund was anything other than an asset of Old Penn which would normally be transferred to New Penn pursuant to the proposed merger. Under Pennsylvania law, shareholders are not entitled to a dividend or distribution merely because the corporation has surplus profits. Jones v. Costlow, 349 Pa. 136, 141-42, 36 A.2d 460, 463 (1944). Plaintiffs were informed they would receive $4.00 per share under the merger agreement, and had no legitimate expectation that they would share directly in either the escrow fund or Old Penn’s Christmas season profits. The claim that defendants concealed their intention to deprive plaintiffs of these profits is merely a restatement of plaintiffs’ contention that defendants misrepresented the merger as fair when they in fact intended to “freeze out” the minority at an inadequate price. Under Santa Fe and Biesenback, plaintiffs have not sufficiently alleged the element of deception required to state a federal cause of action with respect to the proxy statement.

C. “Controlling Persons” Liability

Count III of the complaint charges that defendants, with the exception of Old Penn, are “controlling persons” liable under § 20 of the 1934 Act, 15 U.S.C. § 78t, for the securities law violations alleged in Counts I and II. Because of my disposition of the underlying counts, Count III must also be dismissed for failure to state a claim. Moss v. Morgan Stanley, Inc., 719 F.2d 5, 17 (2d Cir.1983), cert. denied sub nom. Moss v. Newman, — U.S.-, 104 S.Ct. 1280, 79 L.Ed.2d 684 (1984); Warner Communications, Inc. v. Murdoch, 581 F.Supp. 1482, 1496 (D.Del.1984).

III. RICO

Count IV charges defendants with violation of the RICO statute, 18 U.S.C. §§ 1961-1968. Section 1962 of RICO makes it unlawful for any person to acquire or maintain an interest in, or control of, an enterprise through a pattern of racketeering activity, or with income derived from such activity. Id. § 1962(a) & (b). Persons employed by an enterprise are prohibited from conducting the affairs of the enterprise through a pattern of racketeering activity. Id. § 1962(c). It is also unlawful to conspire to violate the statute. Id. § 1962(d). Section 1961(1) sets forth specific “predicate acts” which constitute “racketeering activity,” including securities fraud and mail fraud. A “pattern of racketeering activity” requires the commission of two or more predicate racketeering acts within a ten year period. Id. § 1961(5).

Section 1964(c) of RICO creates a private right of action, including the right to recover treble damages, for “[a]ny person injured in his business or property by reason of a violation of section 1962.” In their motion to dismiss the complaint, defendants have raised complex questions concerning the scope of civil liability under RICO. I need not reach those questions, however, in light of my dismissal of plaintiffs’ securities claims.

The RICO count arises from the same set of facts as that upon which plaintiffs’ securities law claims are based. The racketeering acts charged against defendants consist of their alleged § 10(b) and § 14(a) violations. Without a valid claim of securities fraud, there are no predicate acts of racketeering to support a RICO cause of action. Plaintiffs’ RICO count falls on the same grounds as their securities law claims. See Moss v. Morgan Stanley, Inc., 719 F.2d 5, 19-20 (2d Cir.1983), cert. denied sub nom. Moss v. Newman, — U.S.-, 104 S.Ct. 1280, 79 L.Ed.2d 684 (1984); In re Catanella, 583 F.Supp. 1388, 1425 (E.D.Pa.1984); Warner Communications, Inc. v. Murdoch, 581 F.Supp. 1482, 1498-99 (D.Del.1984); Tenaglia v. Cohen, No. 83-1814, slip op. at 15-16 (E.D.Pa. Mar. 8, 1984); Somerville v. Major Exploration, Inc., 576 F.Supp. 902, 913-14 (S.D.N.Y.1983).

IV. Pendent Jurisdiction

Plaintiffs have failed to state a claim under §§ 10(b) and 14(a) of the 1934 Act. In the words of Judge Giles: “Much like dominoes, the section 20(a) and RICO claims must also fall, leaving the complaint devoid of a federal cause of action.” In re Catanella, 583 F.Supp. at 1438. Exercise of pendent jurisdiction over the state law claims set forth in Counts V and VI is therefore unjustified. See United Mine Workers of America v. Gibbs, 383 U.S. 715, 726-27, 86 S.Ct. 1130, 1139-1140, 16 L.Ed.2d 218 (1966); Catanella, 583 F.Supp. at 1437-38. I will grant defendants’ motion to dismiss the entire complaint.

Plaintiffs have requested leave to amend. They have already amended their complaint in response to defendants’ motion to dismiss, and have had ample opportunity to set forth any facts which would support a federal securities law claim. Plaintiffs’ cryptic presentation at time of oral argument gave me no indication that amendment will cure the defects in the complaint, and I will not authorize an effort to circumvent Santa Fe Industries v. Green through still more artful pleading.

      . The merger apparently had not been consummated when plaintiffs filed their complaint. The complaint, however, alleges that New Penn, the company formed "solely to effectuate the Merger Agreement,” owns 73% of Old Penn’s common stock. Amended Complaint at f 11. Plaintiffs argue that the merger is therefore assured, and I accept their argument for purposes of deciding defendants’ motion to dismiss.

      . Defendants include: Old Penn, a Pennsylvania corporation; New Penn, a Delaware corporation recently formed by certain controlling shareholders of Old Penn; Schottenstein Stores and Value City, controlling shareholders formerly of Old Penn and presently of New Penn; Jerome, Alvin and Saul Schottenstein, officers and directors and formerly controlling shareholders of Old Penn, and controlling shareholders of New Penn; Myron Kaplan, president and a controlling shareholder of both corporations; James Cooke, a member of Old Penn's board of directors; Thomas Ketteler, an officer and director of Old Penn and an officer of Schottenstein Stores; and Louis Pearlman, an officer and director of Old Penn and an officer of and general counsel to Schottenstein Stores.

      . Defendants also argue that the allegations of fraud in the complaint are not stated with particularity as required by Fed.R.Civ.P. 9(b). Plaintiffs’ allegations are sufficiently specific to "place the defendants on notice of the precise misconduct with which they are charged." Rule 9(b) is therefore satisfied. Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir.1984), cert. denied, — U.S.-, 105 S.Ct. 1179, 84 L.Ed.2d 327 (1985).

      . Section 10(b) makes it unlawful for any person, directly or indirectly:
      To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
      15 U.S.C. § 78j(b).

      . Rule 10b-5 provides:
      It shall be unlawful for any person, directly or indirectly, ...
      (a) To employ any device, scheme, or artifice to defraud,
      (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
      (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.
      17 C.F.R. § 240.10b-5.

      . Despite allegations that defendants artificially depressed the price of Old Penn stock, the complaint does not state a claim for manipulation under § 10(b). The Supreme Court has characterized manipulation as “ 'virtually a term of art when used in connection with securities markets.’ ... The term refers generally to practices, such as wash sales, matched orders, or rigged prices, that are intended to mislead investors by artificially affecting market activity.” Santa Fe Indus, v. Green, 430 U.S. 462, 476, 97 S.Ct. 1292, 1302, 51 L.Ed.2d 480 (1977) (quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 199, 96 S.Ct. 1375, 1384, 47 L.Ed.2d 668 (1976)). The March, 1983 tender offer, even if accompanied by misrepresentations which may have affected prices or violated the securities laws, was not an "artificial act[] of stimulative trading designed to mislead investors” concerning the market demand for Old Penn stock. Hundahl v. United Benefit Life Ins. Co., 465 F.Supp. 1349, 1360, 1363 (N.D.Tex.1979). See also Billard v. Rockwell Int'l Corp., 683 F.2d 51, 56 (2d Cir.1982); Radol v. Thomas, 556 F.Supp. 586, 590 (S.D.Ohio 1983).

      . Plaintiffs' complaint alleges that defendants controlled enough of Old Penn's stock to accomplish the merger without the approval of the minority shareholders. Amended Complaint at 1[11.

      . Plaintiffs have also alleged that the proxy statement issued in connection with the merger contained certain material misrepresentations and omissions. I have determined that these allegations are without merit, for reasons discussed later in this opinion.

      . This case is thus distinguishable from Western Hemisphere Group, Inc. v. Stan West Corp., Fed. Sec.L.Rep. (CCH) ¶ 91,858 (S.D.N.Y.1984). Plaintiffs in Western Hemisphere claimed that defendants, in order to induce plaintiffs to sell out a stock position, concealed plans to take Stan West Corporation public. Plaintiffs had invested in and made a loan to Stan West largely because of an anticipated public offering of Stan West stock. Defendants then told plaintiffs that the company no longer intended to go public in the near future, and offered either to convert plaintiffs' loan into stock or to repay the loan in exchange for plaintiffs’ surrender of their shares. Plaintiffs, unaware that the company was making arrangements to go public, surrendered their shares. The court found that information concerning such arrangements was clearly material in that it would have affected plaintiffs’ decision whether to surrender their shares or convert their loan to stock. Id. at 90,278. In contrast, plaintiffs in the instant case have not alleged a sufficient connection between defendants’ nondisclosures and any investment decisions which plaintiffs had to make.

      . The causation requirement has several aspects, as Judge Giles recently explained in In re Catanella, 583 F.Supp. 1388, 1414-17 (E.D.Pa.1984). First, the "in connection with” requirement discussed above is closely related to the requirement of causation. Ketchum v. Green, 557 F.2d at 1028-29; Catanella, 583 F.Supp. at 1414. Second, "transaction causation," or reliance, is required. The activities which plaintiffs challenge must have caused them to engage in the securities transaction in question. Id. The question of whether plaintiffs had to make an investment decision which was affected by a misrepresentation has been treated as a causation issue. See, e.g., Madison Consultants v. Federal Deposit Ins. Corp., 710 F.2d 57, 64 (2d Cir.1983); Saint Louis Union Trust Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 562 F.2d 1040, 1048-50 (8th Cir.1977), cert. denied, 435 U.S. 925, 98 S.Ct. 1490, 55 L.Ed.2d 519 (1978). The Third Circuit, however, has treated this question as one of materiality. Healey v. Catalyst Recovery, 616 F.2d at 647-49. My discussion of causation, therefore, is limited to "loss causation,” or the requirement that defendants’ activities have caused plaintiffs economic harm. See Bloor v. Carro, Spanbock, Londin, Rodman & Fass, 754 F.2d 57, 61 (2d Cir.1985); Catanella, 583 F.Supp. at 1414, 1415-17.

      . Section 14(a) provides:
      It shall be unlawful for any person, ... in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect of any security (other than an exempted security) registered pursuant to section 781 of this title.
      15 U.S.C. § 78n(a).

      . Rule 14a-9 provides:
      No solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting or other communication, written or oral, containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading.
      17 C.F.R. § 240.14a-9(a).

      . The principles enunciated in Santa Fe v. Green apply to claims brought under § 14(a) as well as those brought under § 10(b). See, e.g., Gaines v. Haughton, 645 F.2d 761, 779 (9th Cir. 1981), cert. denied, 454 U.S. 1145, 102 S.Ct. 1006, 71 L.Ed.2d 297 (1982); Rubenstein v. IU Int'l Corp., 506 F.Supp. 311, 315 (E.D.Pa.1980).

      . Old Penn is a Pennsylvania corporation, and the parties apparently assume in their arguments that Pennsylvania law applies to the state law issues in this case. I see no reason to reject their assumption.

      . Pellman v. Cinerama, Inc., 503 F.Supp. 107 (S.D.N.Y.1980), which plaintiffs cite in support of their arguments, is inapposite. In Pellman, the complaint alleged that defendants had sold certain properties at a loss in order to reduce reported corporate profits before submitting a merger proposal to the shareholders. Id. at 109 & n. 1. Plaintiffs in the instant case claim not that defendants reduced corporate profits to facilitate acquisition of control, but that defendants timed the merger so as to prevent plaintiffs from sharing in certain profits. Once again, plaintiffs are simply complaining that the merger was unfair.

      . Count IV charges that defendants’ racketeering activity also consisted of disseminating false tender offer and proxy materials in violation of 18 U.S.C. § 1341, which prohibits use of the United States mail to further a fraudulent scheme. Because plaintiffs have not stated a claim for securities fraud in connection with those materials, their mail fraud claim is also without merit. See Warner Communications, Inc. v. Murdoch, 581 F.Supp. 1482, 1499 (D.Del. 1984).

      . The parties have also filed certain discovery motions. Because I will grant defendants’ motion to dismiss, I will dismiss as moot defendants' motion to stay discovery and plaintiffs’ motion to compel production of documents.


source: Caselaw Access Project

author: ENSLEN, District Judge.

license: Public Domain

text:
    Anthony V. TAGLIA, Plaintiff, v. PABST BREWING COMPANY, a Delaware corporation, Defendant.
    No. K 82-308.
    United States District Court, W.D. Michigan, S.D.
    Oct. 26, 1983.
    Thomas Carey, Kalamazoo, Mich., for plaintiff.
    Thomas Obenberger, Milwaukee, Wis., and Charles Ritter, Kalamazoo, Mich., for defendant.
   OPINION

ENSLEN, District Judge.

This is an age discrimination suit brought by Anthony V. Taglia, a Michigan resident, against Pabst Brewing Company, Inc., a Delaware corporation with its principal offices in Milwaukee, Wisconsin. As originally filed, the three count Complaint sought a judgment against Defendant in excess of $10,000 along with punitive and exemplary damages, attorney fees and costs under the following statutes and common law theories: (1) Age Discrimination in Employment Act (ADEA) as codified at 29 U.S.C. §§ 621, et seq.; (2) Elliott-Larsen Civil Rights Act as codified at M.C.L.A. §§ 37.2101, et seq.; (3) Plaintiffs alleged breach of a covenant of appurtenant to the employment relationship that Defendant would not breach Plaintiffs employment without just cause. This case was brought before the Court by virtue of its jurisdiction over federal questions and pendent state claims.

On October 25, 1983, the Court granted Plaintiffs Motion to Amend its Complaint so as to allege a fourth cause of action, negligent discharge of Plaintiff, and an additional basis for the Court’s jurisdiction, diversity of citizenship.

I.

Defendant has moved for summary judgment on those counts alleging violations of ADEA and the Elliott-Larsen Civil Rights Act. Since the only basis for this Court’s jurisdiction alleged in the original Complaint was the existence of a federal question, Defendant also requested that the case be dismissed if the Court granted summary judgment on the ADEA claim. Now that the Plaintiff has been allowed to plead diversity of citizenship — an allegation which Defendant has so far not refuted— the Court is not required to dismiss the case even if it grants Defendant’s Motion for Summary Judgment on Plaintiff's federal claim.

To warrant the grant of summary judgment, the moving party bears the burden of establishing the non-existence of any genuine issue of fact that is material to a judgment in his favor. Adickes v. S.H. Kress & Company, 398 U.S. 144, 147, 90 S.Ct. 1598, 1603, 26 L.Ed.2d 142 (1970); United States v. Articles of Device ... Diapulse, 527 F.2d 1008, 1011 (C.A.6 1976); Nunez v. Superior Oil Company, 572 F.2d 1119 (C.A.5 1978); Tee-Pak, Inc, v. St. Regis Paper Company, 491 F.2d 1193 (C.A.6 1974). If no genuine issue as to any material fact is established, the moving party is entitled to judgment as a matter of law. Chavez v. Noble Drilling Company, 567 F.2d 287 (C.A.5 1978); Irwin v. U.S., 558 F.2d 249 (C.A.5 1977).

In determining whether or not there are issues of fact requiring a trial, “the inferences to be drawn from the underlying facts contained in the (affidavits, attached exhibits, and depositions) must be viewed in the light most favorable to 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); Bohn Aluminum & Brass Corporation v. Storm King Corporation, 303 F.2d 425 (C.A.6 1962). Even if the basic facts are not disputed, summary judgment may be inappropriate when contradictory inferences may be drawn from them. United States v. Diebold, supra; E.E.O.C. v. United Association of Journeymen & Apprentices of the Plumbing & Pipefitting Industry, Local 189, 427 F.2d 1091, 1093 (C.A.6 1970). In making this determination, the Court must make reference to the entire record and all well pleaded allegations are to be accepted as true. Dayco Corporation v. Goodyear Tire and Rubber Company, 523 F.2d 389 (C.A.6 1975); Holmes v. Insurance Company of North America, 288 F.Supp. 325 (D.C.Mich.1968); Mahler v. U.S., 196 F.Supp. 362 (D.C.Pa.1961). These guidelines will be adhered to as substantive issues of the motion are examined.

II.

The uncontroverted allegations of Plaintiff’s Complaint, Plaintiff’s Responses to Defendant’s Interrogatories and Plaintiff’s depositions show the following facts. Plaintiff, Anthony Taglia, was employed by Defendant Pabst Brewing Company, Inc. (Pabst) on February 1, 1954. Defendant is a well-known corporation engaged in the business of brewing and distributing beer. During his tenure, Plaintiff was a member of Defendant’s sales department and progressed from the position of “Merchandiser” to that of “Lakes Division Manager”, a position in which he supervised the sale of Pabst beer in Michigan and Ohio. At the time of his termination on December 2, 1981, Plaintiff was 55 years old and had worked for Pabst for 28 years.

Plaintiff received a number of promotions during his tenure with Pabst. In 1959, he was transferred from Chicago, Illinois, where he had worked in the merchandising department, to Kalamazoo, Michigan, in order to become district manager for sales in southwestern Michigan. In 1967, Plaintiff became state, manager for sales in one-half of the State of Michigan and in 1969, assumed responsibility for sales in the entire state. Finally, Plaintiff became Lakes Division Manager in 1973, which was the position he held until his discharge in 1981. Defendant replaced Plaintiff with a 50 year old individual named Art Hutchinson. Despite Plaintiff’s belief that his age contributed to or was the reason for his dismissal, he never received any information from third parties employed by Defendant that this was actually the case.

The period between 1973 and 1981 was turbulent for Pabst in terms of declining sales and market share. From 1979 to 1981 its national sales on either a barrelage or dollar basis were decreasing at the rate of 10% per annum. This figure was commensurate with the sales decline in the Lakes Division. While such a precipitous drop in sales concerned Defendant, Plaintiff said that this was accepted because in 1978 the company changed marketing strategies by marketing a “premium” beer instead of a popularly priced beer. Nevertheless, from the mid-1970’s to 1981, Pabst’s position in the industry in terms of beer sales slipped from third to fourth.

Prior to his termination, Plaintiff had heard rumors about a reduction in the sales force. A company memorandum dated October 30, 1981 ordered all regional and division managers to evaluate the personnel supervised by them. The memorandum referred to depressed sales and the need to reassess manpower demands.

Not surprisingly, Plaintiff was not consulted as to which division managers would be terminated in the personnel reduction. Although Plaintiff knew that management was contemplating a reduction in the sales, his own termination came as a complete surprise. There were apparently five similarly situated employees dismissed at the beginning of December, 1981. Plaintiff said that all of them believed their discharge was due to their age; however, it is clear that Plaintiff never had spoken personally to only one of these persons, Phil Miller from New York City.

The evidence shows that Defendant’s management personnel made certain statements regarding the age of the sales force in the mid-1970’s. In 1974, at a division meeting in Milwaukee, Wisconsin, Jack Reifenrath, apparently one of Plaintiff’s superiors, said that the average age at Pabst sales force was 50, that the company needed to hire younger people who were “promotable” and that the company needed employees with more education than the present work force had.

The second instance of remarks directed to the sales force’s age occurred sometime between 1974 and 1976 and were made by Herb Brittain, then General Sales Manager. Plaintiff recollected Brittain as saying that the district managers, some of whom were in their 50’s, were not as productive as younger people would be. Finally, during a meeting with Brittain in 1977, Plaintiff recalled Brittain’s showing him a list of employees and pointing out the persons over 50 years old. Brittain had also said something about the company’s needing a younger sales force although Plaintiff could not recall his remarks specifically. Plaintiff believed that Brittain kept this list in order to monitor the age of the company’s employees but admitted Brittain never said as much.

III.

This Opinion will first consider the propriety of granting a summary judgment motion on Plaintiff’s federal claim. 29 U.S.C. § 623(a) provides as follows:

(a) It shall be unlawful for an employer—
(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age; (2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely effect his status as an employee, because of such individual’s age; or (3) to reduce the wage rate of any employee in order to comply with this chapter.

29 U.S.C. § 631(a) provides as follows:

The prohibitions in this chapter shall be limited to individuals who are at least 40 years of age but less than 7.0 years of age.

The Sixth Circuit has taken a cautious approach in fashioning the procedure by which a Plaintiff may establish a prima facie case in an age discrimination lawsuit. A defendant in such lawsuit shall be entitled to summary judgment if the plaintiff is unable to make out a prima facie case from the undisputed material facts. Thus, a defendant must show that certain material facts are undisputed and that from those facts, Plaintiff is unable to establish a prima facie case.

Several Circuits have borrowed the criteria set forth by the Supreme Court in McDonnell Douglas v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973) for establishing a prima facie ease of race discrimination in lawsuits brought pursuant to Title VII of the Civil Rights Act of 1964. Under the McDonnell Douglas criteria, a plaintiff must show that (1) he is a member of the protected class; (2) he applied for the job and was rejected; (3) he was qualified for the job and (4) after his rejection, the employer continued to seek applications for the particular job. McDonnell Douglas v. Green, supra, at 802, 93 S.Ct. at 1824. The Sixth Circuit has adopted these guidelines as one of the means by which Plaintiff may establish a prima facie case. As molded to fit an age discrimination context, the McDonnell Douglas -type of case demand that Plaintiff demonstrate that (1) he is a member of the protected class; (2) he was discharged; (3) he was qualified for the position and (4) he was replaced by a younger person. Ackerman v. Diamond Shamrock, 670 F.2d 66 (C.A.6 1982).

The Sixth Circuit has refused to restrict the elements of a prima facie age discrimination case to the McDonnell Douglas criteria. In Laugesen v. Anaconda Company, 510 F.2d 307 (C.A.6 1975), the appellate court said the following:

While it may not be unreasonable to assume in a proper case the guidelines established in McDonnell Douglas v. Green can be applied in an age discrimination jury case, we believe it would be inappropriate simply to bar them automatieally ... we do not here decide whether Congress intended that actions under the Age Act must invariably be guided by the law applicable to Title VII cases. That the law embodied in a separate act has its own unique history at least counsels the examiner to consider the particular problems sought to be reached by the statute. 510 F.2d at 312.

The Sixth Circuit again noted in Ackerman v. Diamond Shamrock, supra, that the McDonnell Douglas criteria were not to be routinely applied to age discrimination suits:

A mechanical application of the McDonnell Douglas guidelines might bar the suit of a worthy ADEA (Age Discrimination in Employment Act) claimant. In other cases, an overly mechanical application could supply an ADEA plaintiff with a triable claim where none exists. 670 F.2d at 70.

The Ackerman court also noted that the Sixth Circuit approaches age discrimination suits on a case-by-case basis. Id.

In Blackwell v. Sun Electric Corporation, supra, the court held that an age discrimination plaintiff could establish a prima facie case by one of four methods: (1) McDonnell Douglas criteria; (2) statistical information; (3) direct evidence of discrimination and (4) circumstantial evidence other than that which is used in the McDonnell Douglas criteria. Id. at 1180.

IV.

In its Motion for Summary Judgment, Defendant makes two arguments. After correctly noting that McDonnell Douglas guidelines are applicable to age discrimination cases, Defendant states that one element of the Plaintiffs prima facie case must be a showing that he was replaced by a younger employee outside of the protected class which includes all persons between the age of 40 and 70. Plaintiffs understanding of the McDonnell Douglas prima facie case does not comport with the law in this Circuit. In Ackerman v. Diamond Shamrock, supra, the court did not incorporate into the elements of a McDonnell Douglas -type case the requirement that Plaintiff be replaced by someone outside the protected class. Indeed, it appears that the Sixth Circuit has not addressed this specific issue. The question was briefly alluded to in a footnote in Blackwell v. Sun Electric Corporation, supra, wherein the appellate court said the following:

Several courts have held in an ADEA plaintiff did not prove that he or she was replaced by a younger employee in order to establish a prima facie case. See, e.g., Loeb v. Textron, 600 F.2d 1003, 1013 (1st Cir.1979); Douglas v. Anderson, 656 F.2d 528 (9th Cir.1981). They reason that such an employer might hire an older worker in order to thwart an age discrimination suit if this were a requirement. Since the Plaintiff in this case was replaced by an employee outside the protected class, we need not consider this issue. 696 F.2d at 1181.

Several circuits have held that in making out a case under the McDonnell Douglas criteria, the plaintiff need not show he is replaced by a person outside of the protected class or even a younger person. See, Loeb v. Textron, 600 F.2d 1003 (C.A.1 1979); White v. Mississippi State Oil and Gas Board, 650 F.2d 540 (C.A.5 1981); McCuen v. Home Insurance Company, 633 F.2d 1150 (C.A.5 1981); Douglas v. Anderson, 656 F.2d 528 (C.A.9 1981).

The aforementioned cases offer persuasive reasons for their refusal to incorporate such a requirement into this sort of prima facie case. For example, the discriminating employer might replace the discharged employee with someone within the protected class so as to fend off the threat of a lawsuit. With such a requirement, an employer could avoid a lawsuit by replacing a 69 year old employee with a 40 year old person. Also, in those instances where there is a general reduction in the work force and older employees are the target of such a reduction, there is no reason for having such a requirement since a general reduction does not involve the replacement of employees. See, Douglas v. Anderson, supra, at 533. Moreover, if this requirement is imposed in those instances in which a plaintiff has been replaced by a specific person, then the plaintiff in a lawsuit involving work force reduction has an easier time in proving his case since he does not have the additional burden of showing that a replacement was of a certain age. See, McCuen v. Home Insurance Company, supra at 1151-52. These reasons persuade the Court not to engraft this requirement to the McDonnell Douglas-type prima facie case.

It appears that Plaintiff may well be able to make out a McDonnell Douglas -type prima facie case. Plaintiff, age 55 at the time of his discharge was clearly a member of the protected class. He was apparently replaced by a person.five years younger than him. Finally, Plaintiffs history of promotions suggests that he was a qualified and capable employee. An employer’s disputing a Plaintiff’s job qualifications will not preclude a Plaintiff’s making out a prima facie case. With respect to this, Blackwell v. Sun Electric Corporation, supra, said the following:

Moreover, if we were to hold that plaintiff’s prima facie case fails if his qualifications are challenged by the defendant we would effectively preclude age discrimination suits of this kind. Then, a defendant would always be able to challenge the plaintiff’s qualifications for the job, and the issue would be taken away from the jury. Id. at 1181.

Defendant’s second argument is that even if the McDonnell Douglas criteria are not applied, Plaintiff has failed to produce any evidence of age discrimination and, in his deposition, has contradicted or rendered immaterial the material allegations of his Complaint. Defendant refers to three particular allegations in the original Complaint — ¶¶ 9, 11, 12 — which it believes are unsupported or contradicted by Plaintiff’s deposition testimony. In his Amended Complaint, Plaintiff has deleted both his reference to statements made by the Defendant’s agents beginning around 1974, regarding the age of its émployees and the allegation that Defendant kept a list of employees over age 50. Plaintiff has retained allegations, originally set out in ¶ 11 that Defendant’s agents explained the dismissal of Plaintiff as being due to his advanced age. The Court will consider the evidence from Plaintiff’s deposition which may have supported the deleted allegations since the same evidence is pertinent in determining whether Plaintiff has not garnered enough circumstantial evidence, whether disputed or undisputed, to make out a prima facie case under the fourth method noted in Blackwell v. Sun Electric Corporation, supra.

Defendant makes three points in its second argument. It first claims that any age related statements made by its agents are immaterial since Plaintiff could not remember any such statements having been made within the four year period prior to his termination. Second, Plaintiff could not, during his deposition, identify any third parties who had allegedly been told by Defendant’s agents that Plaintiff was dismissed because of his age. Third, Plaintiff was equivocal in his deposition as to whether Defendant kept a list of employees over age 50. While he believed this to be the case, he admitted that the list Brittain showed him was simply a list of all employees.

Defendant’s points are well taken; however, the Court believes the evidence and its inferences raise factual disputes, sufficient to make out a circumstantial case of age discrimination and thus constitute a prima facie case under the fourth method noted in Blackwell v. Sun Electric Corporation, supra, at 1180. Plaintiff testified that five division managers were terminated at the same time, This simultaneous dismissal may not have been simply coincidental, especially in light of the statements made by Reifenrath and Brittain several years earlier. Although the aforementioned statements were made long before Plaintiffs termination, they indicate Defendant’s sensitivity about the age of its sales force. As its market share and sales continued to decrease during the late 1970’s, at a rate that surely would have alarmed the management of any corporation, Defendant may have decided that he could not retain the same number of employees and that the older ones had to be replaced first. The Court finds the disputed factual issues have been raised regarding Defendant’s intent and underlying motivation in replacing Plaintiff. Furthermore, the Court does not find that Defendant has shown Plaintiff will be unable to put on enough circumstantial evidence other than the sort used in meeting the McDonnell Douglas criteria to make out a prima facie case. See, Blackwell v. Sun Electric Corporation, supra, at 1180.

V.

Defendant’s Motion for Summary Judgment regarding Plaintiff's age discrimination claim founded on the Elliott-Larsen Civil Rights Act, M.C.L.A. §§ 37.-2101 et seq., must also be denied. In Gallaway v. Chrysler Corporation, 105 Mich.App. 1, 306 N.W.2d 368, the Michigan Court of Appeals held that a plaintiffs burden of proof in an age discrimination lawsuit was properly set forth by the Sixth Circuit in Laugesen v. Anaconda Company, supra. The Gallaway court interpreted Laugesen to hold that a plaintiff must show that age was a determining factor in the employer’s decision to terminate him/her in an age discrimination suit brought under Michigan law. See also, Adama v. Doehler-Jarvis, Division of N.L. Industries, Inc., 115 Mich.App. 82, 320 N.W.2d 298 (1982); Summers v. Sears, Roebuck & Company, 549 F.Supp. 1157 (E.D.Mich.1982). Therefore, under Michigan law, if a plaintiff alleges facts which are sufficient to raise a factual issue as to whether age was a determining factor in his dismissal, then summary judgment must be denied. In part IV of this Opinion, the Court referred to the circumstantial evidence and the inferences which may be drawn from the same in addressing the question of whether Plaintiff would be unable to make out a prima facie case under the fourth method noted in Blackwell v. Sun Electric Corporation, supra, at 1180. It is clear from the evidence noted in that portion of the Opinion that Plaintiff has raised a factual question as to whether his age was a determining factor in his dismissal. The Court refers the parties to that discussion of circumstantial evidence as an explanation for the denial of the Defendant’s Motion for Summary Judgment on the state claim.

      . Once a Plaintiff establishes a prima facie case under the McDonnell Douglas criteria or by any other methods discussed hereinafter, then the burden shifts to the employer to produce the legitimate nondiscriminatory reason for his decision. See Blackwell v. Sun Electric Corporation, 696 F.2d 1176 (C.A.6 1983). However, the burden of persuasion always remains with the Plaintiff. As the Supreme Court noted in Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981), the case dealing with alleged sex discrimination in defendant’s employment practices, the employer may rebut a plaintiff’s prima facie case by clearly explaining the nondiscriminatory reasons for its action. With respect to this, the court said the following:
      The defendant need not persuade the court that it was actually motivated by the proffered reasons ... It is sufficient in the defendant’s evidence raises a genuine issue of fact as to whether it discriminated against the plaintiff. To accomplish this, the defendant must clearly set forth, through the introduction of admissible evidence, the reasons for the plaintiff’s rejection. 450 U.S. 254-55, 101 S.Ct. 1094-95.
      Once a defendant has articulated a nondiscriminatory reason for its decision, then plaintiff must show that this was just a pretext in order to successfully carry the burden of persuasion. McDonnell Douglas v. Green, 411 U.S. at 804, 93 S.Ct. at 1825.

      . Paragraph 9 of Plaintiff’s original Complaint provided as follows:
      That defendant acting through its agents, beginning around 1974, began mentioning the advancing age of its employees as a factor of concern in making employment decisions within the context that the management expressed the idea that it could hire younger men off the streets to train for positions currently held by older employees.
      Paragraph 11 of Plaintiff’s original Complaint provided as follows:
      That defendant, through one or more of its agents have explained the termination of plaintiff to third parties as being the result of plaintiffs advanced ages (sic).
      Paragraph 11 of Plaintiff’s original Complaint provided as follows:
      That defendant's employees over 50, earmarking said employees for early retirement or early termination explaining to persons at defendant’s regular meeting that employees over the age of 50 could not be retained by the corporation until normal retirement because there wasn’t room for them with the number of younger people it wanted to promote through the ranks.


author: DITTER, District Judge.

text:
    Patricia A. CINQUE, Plaintiff, v. WHITMAN’S CHOCOLATES and Bakery and Confectionery Workers International Union of America Local 6, Defendants.
    Civ. A. No. 82-2299.
    United States District Court, E.D. of Pennsylvania.
    April 2, 1984.

      Affirmed, 3d Cir., 755 F.2d 917.
    Harry C. Citrino, Philadelphia, Pa., for plaintiff.
    Thomas Langenberg, St. Louis, Mo., Mark D. Terstsky, Norristown, Pa., for Whitman’s Chocolates.
    Warren J. Borish, Meranze, Katz, Spear & Wilderman, Philadelphia, Pa., for Local 6.
   ORDER

DITTER, District Judge.

AND NOW, this 22nd day of March, 1984, the summary judgment motions of both defendants are granted. Plaintiff brought this action under Section 301(a) of the Labor Management Relations Act, 29 U.S.C. § 185. Whitman’s is alleged to have wrongfully discharged plaintiff and the union is alleged to have breached its duty of fair representation. Both defendants have moved for summary judgment on the basis that plaintiff’s claims are barred by the applicable statute of limitations.

All claims brought under Section 301(a) of the Labor Management Relations Act must be brought within six months after exhaustion of internal union procedures. DelCostello v. International Brotherhood of Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983). Exhaustion is deemed to occur “when it becomes clear that further internal [union] appeals would be futile.” Scott v. International Brotherhood of Teamsters, 725 F.2d 226, 229 (3d Cir.1983). This six month statute of limitations may be applied retroactively. Id. at 228-29.

In this case the complained of conduct culminated with the union, through its agent David Goodwin, refusing to file a grievance on plaintiff’s behalf. This occurred on March 30, 1980. {See “Brief on behalf of Plaintiff” at 4-5). Even accepting plaintiffs conclusory allegation that counsel for the union was contacted “during the latter part of 1980” but refused to respond after representing that an agreement would be worked out, (see Complaint ¶¶ 21 & 22), it should have been obvious by early 1981 that the union was not taking further action. Because the suit was not filed until May 4, 1982, over six months elapsed after it became obvious that further union appeals would be futile. For this reason plaintiffs claim is time barred. DelCostello, supra.


author: WISEMAN, Chief Judge.

text:
    Jerry REED and T.S.C. Productions, Inc., Plaintiffs, v. AMOCO OIL COMPANY, Defendant.
    No. 3-84-0576.
    United States District Court, M.D. Tennessee, Nashville Division.
    Oct. 3, 1984.

      Mark J. Patterson, Don L. Smith, Nashville, Tenn., for plaintiffs.
    Robert J. Walker, R. Dale Grimes, Nashville, Tenn., Robert M. Newbury, Chicago, 111., for defendant.
   MEMORANDUM

WISEMAN, Chief Judge.

I. Introduction

Before this Court is a motion by plaintiffs, Jerry Reed and Thompson Station Congregation, Inc. [Jerry Reed], for a preliminary injunction to stop defendant Amoco Oil Company from using the advertising slogan “We go that extra mile” in its nationwide advertising campaign. Plaintiffs allege that defendant’s use of this slogan infringes upon their own use of the phrase “Goin’ the extra mile” in conjunction with an advertisement campaign that plaintiffs developed and have licensed to various independent tire dealers and distributors for use in promoting tires and automotive services. Plaintiffs maintain that the alleged infringement violates federal statutory trademark law, (15 U.S.C. § 1051 et seq.), the common law of trademark, and Tennessee statutory law concerning dilution of a trademark (T.C.A. § 47-25-433). The Court denies plaintiffs’ motion for preliminary injunction because it finds that plaintiffs have failed to demonstrate a likelihood of success on the merits as to any of the three claims against defendant.

II. Facts

Plaintiffs own the rights to and license an advertising campaign package developed sometime in 1982 that features the voice and image of Jerry Reed and uses as its theme the phrase “Goin’ the extra mile.” Plaintiffs, however, have not registered the phrase with the Federal Patent and Trademark Office. The advertising campaign package was offered to independent tire dealers across the country, with some twenty-one tire retailers and distributors in fourteen states licensing the package. The phrase “Goin’ the extra mile” functions both as a tag line for the entire advertisement package in offering the campaign to tire dealers and as a slogan for the tire dealer/licensee to use in selling his products to the general public.

Apparently, in November of 1983, defendant Amoco Oil Company began a nationwide advertising campaign that used the phrase “We go that extra mile” in conjunction with its well-known trademark/logo “AMOCO.” Defendant’s expenses in advertising its products using “We go that extra mile” as a tag line have been in excess of fourteen million dollars. The advertising campaign used by Amoco was to promote the sale of gasoline, motor oil, and automobile maintenance services as well as to promote the general image of Amoco as being an oil company that would make that extra effort to satisfy its customers.

Because of the appearance of the Amoco campaign, plaintiffs allege that they were and are unable to further market their “Goin’ the extra mile” campaign. However, no fact before this Court indicates that Amoco had an evil motive in selecting the form of its advertisement campaign or that Amoco purposefully tried to frustrate the continued licensing of plaintiffs’ campaign to independent tire dealerships. Furthermore, Amoco does not manufacture or sell tires nor does it require its dealers to carry a certain type of tire.

III. Federal Statutory Claim

Plaintiffs move this Court to issue a preliminary injunction under 15 U.S.C. § 1125(a) against Amoco’s further use of the phrase “We go that extra mile.” This Court in a recent trademark case stated the factors to consider in deciding whether to issue a preliminary injunction under the federal statute. The factors are “(a) whether the plaintiff has shown a strong or substantial likelihood of success on the merits, (b) whether the plaintiff has shown irreparable injury, (c) whether the issuance of a preliminary injunction would cause substantial harm to others, and (d) whether the public interest would be served by issuing a preliminary injunction.” WLWC Centers, Inc. v. Winners Corp., 563 F.Supp. 717, 726 (M.D.Tenn.1983).

a. Likelihood, of Success on the Merits

In examining plaintiffs’ likelihood of success on the merits this Court must proceed from a general proposition — i.e., when dealing with an unfair competition/trademark infringement case, courts recognize that one’s original use of a phrase should be protected if the phrase is distinctive. Nevertheless, courts are reluctant to allow one to obtain monopoly rights to the use of a common word or phrase. Jewel Companies, Inc. v. Westhall Co., 413 F.Supp. 994, 1000 (N.D.Ohio 1976) (citing Standard Paint Co. v. Trinidad Asphalt Mfg. Co., 220 U.S. 446, 31 S.Ct. 456, 55 L.Ed. 536 (1911); see Amstar Corp. v. Domino’s Pizza, Inc., 615 F.2d 252, 265 (5th Cir.1980). In order to be protectable under trademark law the term or phrase must identify the source of the product or service to its consuming public and also distinguish that product from others. See 1 J. Gilson, Trademark Protection and Practice § 2:01 (1974). The more common a phrase is, the more it appears in everyday parlance, less is the likelihood that the phrase identifies the source of a certain product, and less is the likelihood that it deserves trademark protection absent a strong showing of a protectable interest by the party who first used the phrase and claims trademark infringement. Compare Norm Thompson Outfitters, Inc. v. General Motors Corp., 448 F.2d 1293 (9th Cir.1971) (prior use of phrase “Escape from the ordinary” not protectable); and B & L Sales Associates v. H. Daroff & Sons, Inc., 421 F.2d 352 (2d Cir.1970) (prior use of phrase “come on strong” not protectable) with Application of Marriott Corporation, 517. F.2d 1364 (C.C.P.A.1975) (prior use of phrase “We smile more” is deemed protectable in light of subsequent use of same phrase by a rival hotel chain).

At issue in the instant case is the use of some form of the phrase “to go the extra mile.” In order for plaintiffs to show a likelihood of success on the merits they must illustrate that they have a protectable interest in the use of the phrase. Whether the phrase is protectable or not depends upon how the phrase is classified. Trademark law divides all terms/phrases into four categories: (1) generic, (2) descriptive, (3) suggestive, and (4) arbitrary or fanciful. See Winners Corp., 563 F.Supp. at 719. If the term is generic, it identifies the product (e.g., Band-Aid and aspirin) rather than the producer and thus is not protectable as a trademark. If a term is descriptive of a good or service, it describes to the purchasing public some characteristic, quality function, component or other property of the product (e.g., “Finger lickin’ good”). J. Gilson, supra § 2.03. As such the term does not identify the source of the product, and therefore in order for a descriptive phrase to be protectable, it must have a “secondary meaning” which associates the product and its source to the consumer (e.g., in the mind of the consumer “Finger lickin’ good” equals Kentucky Fried Chicken). If a phrase is suggestive it calls upon the consumer to use his imagination to associate the phrase with the source of the product or service and as such is protectable under trademark law (e.g., term “Metalock” would describe literally a lock made of metal, but as used it suggests to the consumer’s imagination a process offered by a particular source to make cold repairs on cracked metal. Engineered Mechanical Services v. Applied Mechanical Technology, 584 F.Supp. 1149 (M.D.La.1984)). Finally, if the term is fanciful or arbitrary, it is considered inherently distinctive and thus protectable under trademark law because the term forces the consumer in a non-contextual, arbitrary manner to link a certain product with its source (e.g., "Kodak” or defendant’s own “Amoco”). See Amoco Oil Company v. Amerco, Inc., 192 U.S.P.Q. 729 (CCPA 1976); see also 1 J. McCarthy, Trademarks and Unfair Competition, §§ 11:2-11:4 (1973). The Court finds that the phrase “Goin’ the extra mile” is not generic. Aside from this finding, the Court encounters difficulty in further classifying what type of phrase “Goin’ the extra mile” should be. Further, classification is difficult because of the dual use of the phrase — first as a thematic tag line used by plaintiffs to represent the entire advertisement package to tire dealers and distributors, and second as a slogan for the tire dealers to use in trying to sell their tires to the general public. To further categorize the phrase within the arbitrary — suggestive—descriptive spectrum this Court must examine the associational ties that the relevant consuming public has developed with respect to each of the two uses of “Goin’ the extra mile.” On the one hand is the general consuming public which buys tires from the tire dealers that license the advertisement campaign from the plaintiffs. As to this consumer group the products sold are tires and the services associated with tire sales and maintenance. On the other hand is the group of independent tire dealers and distributors which may or may not license plaintiffs’ advertising package. The product in this instance is an advertisement campaign.

This Court finds that as to the general consuming public the phrase “Goin’ the extra mile” functions as an advertisement or slogan. In order to be protected under trademark law, the phrase at a minimum must identify the source of the product advertised. J. Gilson, supra at § 2:10. The Court finds that the tire dealers/licensees have licensed plaintiffs’ advertisement package to convey a message about their product, i.e., that their tires and service are better, and not to create in the minds of the public some associational link between “Goin’ the extra mile” and their particular tire dealership. See J. Gilson, supra at 2:02 p. 2-7, § 2:10. The phrase does not arbitrarily point to the product’s source nor does it suggest in the minds of the general public any specific source; rather, it describes the type of quality and service the general consumer could expect from the particular tire dealership/licensee. Being descriptive, the phrase must have developed a secondary meaning within the relevant market in order to be a protectable mark. Winners Corp., 563 F.Supp. at 720. The Court holds that in relation to the general public, the plaintiffs are not likely to succeed in showing a secondary meaning for the phrase “Goin’ the extra mile.” The Court also finds that Amoco’s subsequent use of a similar phrase has not caused the likelihood that the general public would confuse the products of Amoco with those of Jerry Reed and/or his licensees. Thus, as to the general public plaintiffs’ phrase is a weak mark not deserving of trademark protection.

The second relevant market to examine is that consisting of tire dealers and distributors — the potential licensees of plaintiffs’ advertisement campaign. Plaintiffs claim that this group identifies the phrase “Goin’ the extra mile” with Jerry Reed and his advertising package. Plaintiffs therefore maintain that the phrase may be “arbitrary” but if not, then certainly is a suggestive phrase and thus deserves trademark protection. Defendant argues that the phrase is descriptive without a secondary meaning, yet fails to state what characteristic, quality, or function of the advertisement campaign that “Goin’ the extra mile” describes. Although not willing to classify the phrase as arbitrary, the Court is inclined to agree with plaintiffs that since the advertisement package is presented to the tire dealers as the “Goin’ the extra mile” campaign, the phrase probably suggests the source of the product to the tire dealers and/or has a secondary meaning among this group that associates the phrase with Jerry Reed. Unfortunately, a showing of suggestiveness or descriptiveness with secondary meaning is not enough. In addition, plaintiffs must show “that defendant’s actions cause a likelihood of confusion among the relevant buyer class.” J. McCarthy, supra § 15.1. Absent a showing of a likelihood of confusion of products created by subsequent use of a mark, the Court will not issue an injunction against defendant’s use of the same or similar mark. See Amstar Corp., 615 F.2d at 265 (issuance of injunction reversed upon finding that use of the word “Domino” by defendant pizza delivery service did not create confusion among consumers as to whether the pizzas were made by defendant or by the plaintiff which produced sugar sold under the identical mark). Determining whether a likelihood of confusion exists is a question for the Court to decide in light of certain factors. Frisch’s Restaurants, Inc. v. Elby’s Big Boy, 670 F.2d 642, 651 (6th Cir.1982); see WSM, Inc. v. Tennessee Sales Co., 709 F.2d 1084, 1086 (M.D.Tenn.1983). The Court has reviewed the likelihood of confusion under the instant facts in relation to (1) the strength of the mark, finding “Goin’ the extra mile” to be weak, (2) the relatedness of the goods, finding plaintiffs’ advertisement campaign adequately dissimilar from Amoco’s gas and automotive services, (3) the similarity of the mark, finding the marks adequately dissimilar in their respective appearances and uses, (4) any proof of actual confusion, finding no confusion as to the source of the products, (5) the marketing channels used, finding that both plaintiffs and defendant employed similar marketing channels such as radio, television, and point of sale materials like posters, banners, etc., (6) the likely degree of purchaser care, finding the independent tire dealer to be one who should exercise much care in knowing the source of the advertisement campaign he plans to license, (7) the intent behind Amoco's subsequent use of “We go that extra mile,” finding no evil intent and finally (8) the likelihood of defendant expanding the product line, finding Amoco very unlikely to start producing advertisement packages to license to independent tire dealers. See Winners Gory., 563 F.Supp. at 721-26 (discussed the eight factors to be examined in determining the likelihood of product confusion) (citing Frisch’s Restaurants, Inc., 670 F.2d at 648). Thus, while plaintiff may be able to illustrate that the “Goin’ the extra mile” campaign is suggestive or has obtained a secondary meaning among independent .tire dealers that identifies the campaign with Jerry Reed, this Court holds that plaintiffs probably will not succeed on the merits of showing that confusion of products and their sources likely will result due to Amoco’s use of the “We go that extra mile” slogan.

Therefore, with regard to both relative markets, plaintiffs have not shown a likelihood of success on the merits. Plaintiffs’ mark serves a descriptive function for the general public, yet has not obtained a secondary meaning in the minds of the general public that would identify the source of the product. Among independent tire dealers the phrase may be suggestive or may be descriptive with an acquired secondary meaning, yet no likelihood of confusion exists as a result of defendant’s subsequent use of the same or similar mark. Thus, under federal trademark law, there is substantial doubt that plaintiffs can show a likelihood of success on the merits. See Wendy’s International, Inc. v. Big Bite, Inc., 576 F.Supp. 816, 821 (S.D.Ohio 1983).

b. Other Factors for the Preliminary Injunction

Having decided that plaintiffs have not carried their burden in showing a likelihood of success on the merits, this Court finds it unnecessary to examine closely the remaining requirements for a preliminary injunction. Suffice it to say that no other factor (irreparable harm to the plaintiff, lack of hardship on defendant, or public interest concerns) weighs so much in favor of plaintiffs, if at all, so as to outweigh the effect of plaintiffs’ inability to show a likelihood of success on the merits.

IV. Common Law Claim

Plaintiffs’ common law claim presupposes the existence of a trademark valid under common law. Determining whether a mark is protectable under the common law is closely analogous to, if not identical with, the determination made under the federal trademark infringement laws. Winners Cory., 563 F.Supp. at 718 n. 1; see Jewel Companies, 413 F.Supp. at 999. The core question is whether the two uses of the mark by plaintiffs and defendant create a likelihood of product confusion among the relevant group of consumers. See Amstar Cory.,. 615 F.2d at 265. As indicated earlier, the Court finds no likelihood of confusion in this case. The independent tire dealer is not likely to think that Jerry Reed is “pushing” Amoco products in his advertisement package, nor is a member of the general public likely to confuse the source of the tires he carefully purchases from Jerry Reed’s licensee with that of the gas he casually buys from Amoco. Accordingly, plaintiffs’ claim based on the common law is without merit and no injunction shall issue based upon that claim.

Y. Tennessee Anti-Dilution Statute

Finally, plaintiffs request a preliminary injunction based on the alleged violation of T.C.A. § 47-25-433 (anti-dilution statute). Section 47-25-433 states: “Likelihood ... of dilution of the distinctive quality of ... a mark valid at common law ... shall be a ground for relief notwithstanding ... the absence of confusion as to the source of goods or services.” Thus, in order to be protected under this statute, plaintiffs’ mark must be “distinctive,” or “unique.” If plaintiffs’ mark is not distinctive, there is nothing to be diluted by subsequent use of a similar mark. See Amstar Corporation, 615 F.2d at 265; Holiday Inns, Inc. v. Holiday Out In America, 481 F.2d 445, 450 (5th Cir.1973); Norm Thompson Outfitters, 448 F.2d at 1299. The Court finds that as to the phrase “Goin’ the extra mile” plaintiffs are not likely to show the “distinctive quality” necessary to claim a cause of action under this statute. Therefore, plaintiffs’ request for preliminary injunction based on this statute is denied.


author: NEESE, District Judge.

text:
    Wendell E. HOOD, Petitioner, v. Warden Howard COOK, et al., Respondents.
    Civ. A. No. 3:84-1200.
    United States District Court, M.D. Tennessee, Nashville Division.
    Nov. 16, 1984.
    Wendell Eugene Hood, pro se.
    Jerry Smith, Asst. Atty. Gen., Nashville, Tenn., for respondents.
   MEMORANDUM OPINION, ORDER AND CERTIFICATE

NEESE, District Judge.

This is an application by the petitioner Mr. Wendell E. Hood for the federal writ of habeas corpus. 28 U.S.C. § 2254(a). Mr. Hood, who is in custody within this district, was convicted in the Circuit Court of Carroll County, Tennessee (on his plea of guilty) of “arson of personal property” on April 9, 1984. This Court, however, may not now consider the applicant’s claims that his conviction was in violation of the Constitution because he has not given the courts of Tennessee the initial opportunity to pass-upon and correct those alleged errors.

It is elementary that a state prisoner must exhaust his available state-remedies by presenting his federal-constitutional claims to the state-courts as a condition-precedent to seeking federal habeas corpus relief. 28 U.S.C. § 2254(b), (c); Preiser v. Rodriguez, 411 U.S. 475, 477, 93 S.Ct. 1827, 1830[2], 36 L.Ed.2d 439 (1973). The exhaustion-doctrine springs from considerations of comity as between the states, on the one hand, and the federal government, on the other, and is designed “ * * * to give the state an initial opportunity to pass upon and correct alleged violations of its prisoners’ federal rights. * * * ” Wilwording v. Swenson, 404 U.S. 249, 250, 92 S.Ct. 407, 408, 30 L.Ed.2d 418 (1971). This rule is to be enforced rigorously and must be considered by the Court sua sponte. Alcorn v. Smith, 724 F.2d 37, 39 (6th Cir.1983).

The requirement, that an applicant for the federal writ of habeas corpus have exhausted his state remedies prior to seeking relief by way of federal habeas corpus procedure, means that every ground raised in Mr. Hood’s petition herein must have been presented fairly to the Supreme Court of Tennessee; otherwise, the petition must be dismissed in its entirety. Rose v. Lundy, 455 U.S. 509, 522, 102 S.Ct. 1198, 1205, 71 L.Ed.2d 379 (1982); Bowen v. State of Tennessee, 698 F.2d 241, 243-244[2] (6th Cir., en banc 1983). The burden of showing compliance with the exhaustion-rule is on the petitioner. Clonce v. Presley, 640 F.2d 271, 273[2] (10th Cir.1981); Baldwin v. Lewis, 442 F.2d 29, 35[4] (7th Cir.1971).

Mr. Hood makes no claim of having presented any of the grounds raised herein to any court of Tennessee, much less to its highest Court. As an explanation for his failure to pursue his state-remedies, the petitioner states that his lawyers “ * * * expressed it wouldn’t help and result in no good. * * * ” That, however, is not sufficient to excuse nonexhaustion: “ * * *

Only after some clear manifestation on the record that a state court will not entertain petitioner's constitutional claims even if fairly presented will the exhaustion requirement be disregarded as futile. * * ” Eaton v. Wyrick, 528 F.2d 477, 482[14] (8th Cir.1975).

State courts, the same as federal courts, have a constitutional obligation to safeguard personal liberties and to uphold federal law, Stone v. Powell, 428 U.S. 465, 493, n. 35, 96 S.Ct. 3037, 3052, n. 35, [8], 49 L.Ed.2d 1067 (1976); and, in the absence of some reason to believe differently, this Court must assume that, if Mr. Hood’s conviction was a product of a violation of the federal Constitution, the courts of Tennessee will be receptive to his claims. The petitioner must present his claims herein to the courts of Tennessee under that state’s Post-Conviction Procedure Act, T.C.A. §§ 40-30-101, et seq., before resorting to this Court. Parker v. Rose, 728 F.2d 392, 394-395 (6th Cir.1984).

The petition herein hereby is

DISMISSED under Rule 4, 28 U.S.C. fol. § 2254, for the failure of the petitioner to have exhausted his available state-remedies. Inasmuch as there has been no effort whatsoever to comply with the exhaustion rule, a certificate of probable cause shall NOT issue. 28 U.S.C. § 2253; Rule 22(b). F.R.App.P.