text:
    David HERNANDEZ, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    No. C-80-4402-MHP.
    United States District Court, N.D. California.
    Nov. 4, 1985.

      A. Keith Lesar, Aptos, Cal., Robert E. Taren, Santa Cruz, Cal., for plaintiff.
    Lynn K. Richardson, Asst. U.S. Atty., San Francisco, Cal., for defendant.
   AMENDED MEMORANDUM AND ORDER

PATEL, District Judge.

Plaintiff brings this action pursuant to 42 U.S.C. § 405(g) to obtain judicial review of a final decision of the Secretary of Health and Human Services (“the Secretary”) denying his claim for Social Security disability benefits.

Plaintiff suffered a back injury in an industrial accident in June 1977 and first applied for disability benefits in December 1978. This application was denied and plaintiff did not appeal. In July 1979 plaintiff petitioned to reopen the action claiming both physical and mental impairments resulting from the injury. The claim was also denied initially and again on reconsideration. Plaintiff appealed to an Administrative Law Judge (“AU”). In a decision dated May 27, 1980 the AU ruled that plaintiff was not disabled as he was physically able to work at a sedentary, light, or medium level of activity. The Appeals Council approved the decision of the AU on October 10, 1980 making the AU’s decision the final decision of the Secretary.

Plaintiff next appealed to the district court. On August 18, 1982 this court upheld the Secretary’s ruling as to plaintiff’s ability to perform sedentary, light, or medium work. However, the court remanded the case as the AU failed to make “specific findings showing that plaintiff has the physical and mental capacity to perform specific jobs” in the national economy. Hernandez v. Heckler, NO. C-80-4402, slip op. at 3 (N.D.Cal. August 18, 1982). On January 31, 1984 the AU ruled that plaintiff’s “exertional impairments are not so severe as to preclude him from working at a medium level of activity.” Relying on previous determinations that plaintiff’s emotional condition was not disabling and interpreting the testimony of the vocational expert, the AU concluded that “there are no credible nonexertional vocationally limiting impairments, ... [and] the claimant is still able and fit to perform a wide range of operator jobs in the region of the economy in which he resides.”

The Appeals Council adopted this decision on May 11, 1984 making it the final decision of the Secretary. Plaintiff again filed a timely appeal to this court. The case is now before the court on cross-motions for summary judgment. For the reasons set forth below the court finds the decision of the Secretary unsupported by substantial evidence in the record as a whole. Therefore, the decision is reversed and the case is remanded for the sole purpose of determining the date plaintiffs disability terminated and payment of benefits. Facts

Plaintiff David Hernandez was born on December 3, 1955 and is a resident of Watsonville, California. His employment history is comprised entirely of arduous manual labor, first as an employee of a local cannery and then in a slaughterhouse. Although plaintiff graduated from high school, testing done for rehabilitation purposes indicates reading vocabulary and comprehension abilities at the ninth grade level, math abilities at the sixth grade level, difficulties with oral expression, and certain visual-motor weaknesses.

On May 31, 1977 plaintiff suffered a back injury as a result of an industrial accident. He continued to work until June 10, 1977 when he was forced to quit because of pain. He was temporarily totally disabled from June 10 until November 24, 1977 when his treating physician released him to return to light duty. However, plaintiff did not return to work as he continued to suffer from pain and emotional disturbances stemming from the injury.

In September 1977 plaintiff began psychotherapy with Dr. Steven Lynch for problems resulting from the injury. Over the next three years plaintiff was evaluated by several other orthopedic and psychiatric specialists who concluded that he was not disabled as a result of his physical injury but that a psychological component hampered his ability to return to work. The court examined this evidence and concluded that plaintiffs physical and emotional problems did not preclude him from engaging in all substantial gainful activity. Hernandez v. Heckler, NO. C-80-4402, slip op. at 2-3 (N.D.Cal. August 18, 1982).

At the remand hearing plaintiff introduced further psychological evaluation by his treating psychologist Dr. Lynch and consultative psychologist Isidoro Quiroga; the deposition of psychiatrist Walter Wilcox; and the decision and order of State Rehabilitation Counselor Lynn Pimental. Much of this information consisted of updated evaluations of information presented at the first hearing. In addition, testimony was provided by James P. Whelan, a vocational consultant hired by defendant.

Dr. Lynch’s report focused on a series of three MMPI tests administered to plaintiff in 1977, 1978, and 1981. The 1977 MMPI revealed an anxiety reaction with obsessive-compulsive features of a severity usually associated with confused thinking. The 1978 MMPI indicated a marked reduction in anxiety with an increase in depression and manifestations of psychological reactions. The 1981 MMPI demonstrated significant improvement and a probable return to the personality features present prior to the injury in 1977. Dr. Lynch interpreted these results as follows:

At his first testing David would be described as having a very poor self-concept. He probably felt helpless to act in bettering his situation. He probably had good intentions but was fairly incapable of carrying them through. The prognosis for successful employment with a person with such an ego-strength score is very poor. At his second testing he showed improvement but still indicated a poor self-concept. He was relatively unable to face challenges and badly needed ego-building in order to deal with his problems. At the time of the third testing he was much improved and now shows enough ego-strength to deal effectively with life’s stresses and with minor setbacks.

Dr. Quiroga evaluated plaintiff in 1980 and 1981. His second evaluation appears in the record of the second hearing. Dr. Quiroga characterizes plaintiff as a person with a passive-aggressive personality type who, at the time of his injury, had not successfully achieved emancipation from his family. Dr. Quiroga opined that plaintiff’s emotional difficulties “are related to his industrial injury as well as to his pre-injury emotionally vulnerable condition or personality organization and limits extensively his ability to function successfully in the job market.” He further stated, “[a]t this point, under the present circumstances, I do not believe that David is likely to benefit from Vocational Rehabilitation.”

Dr. Wilcox, a psychiatrist engaged by the Workers Compensation Carrier, examined plaintiff on April 11, 1979. In the June 25, 1981 deposition submitted at the remand hearing Dr. Wilcox reiterated his opinion of April 1979 that he did not believe plaintiff could return to work for psychiatric reasons. He stated that plaintiff’s continuing symptomology (pain) represented a physical manifestation of his emotional disturbance and diagnosed plaintiff’s condition as an anxiety neurosis secondary to back injury. He further stated that he disagreed with a psychiatric evaluation done by psychiatrist Melvyn Shoor on February 12, 1980 in which Dr. Shoor concluded that plaintiff was not psychiatrically disabled and was capable of full employment within orthopedic limitations.

Finally, plaintiff introduced the Decision and Order of Lynn Pimental, Rehabilitation Consultant for the California Division of-Industrial Accidents Rehabilitation Bureau. This decision refers to a Decision and Order issued on December 12, 1980 wherein plaintiff was found not suitable for rehabilitation services at that time due to his multiplicity of problems.

Discussion

The standard the court must apply in reviewing the Secretary’s decision is whether that decision was supported by substantial evidence on the record as a whole and whether the Secretary applied the proper legal standards. 42 U.S.C. § 405(g); Delgado v. Heckler, 722 F.2d 570, 572 (9th Cir.1983). Substantial evidence is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971).

The determination of disability in cases such as the instant one where plaintiff’s injuries are not so severe as to preclude all gainful employment is two-fold. Heckler v. Campbell, 461 U.S. 458, 461-62, 103 S.Ct. 1952, 1954-55, 76 L.Ed.2d 66 (1983). First, the Secretary must determine plaintiff’s present job qualifications— age, education, work experience, physical ability, and other relevant factors such as plaintiff’s psychological condition. With respect to Mr. Hernandez, this determination was made at the first administrative hearing and included both his physical and psychological limitations. Neither was believed to be so severe as to preclude him from working altogether. The court upheld this determination in its August 1982 order. Hernandez v. Heckler, slip op. at 2-3 (N.D.Cal. August 18, 1982).

Second, the burden moves to the Secretary “to show that other substantial work for which plaintiff is qualified exists in the national economy.” Thompson v. Schweiker, 665 F.2d 936, 939 (9th Cir. 1982). The Secretary may use the medical-vocational guidelines (“the grids”) if they fully describe the claimant’s abilities and limitations. Campbell, 461 U.S. at 462 n. 5, 103 S.Ct. at 1995 n. 5. If, as in this case, the grids do not completely describe the plaintiff’s vocational abilities the Secretary must use the testimony of a vocational expert to identify specific jobs in the national economy which a person with plaintiff’s abilities and limitations can perform. Jones v. Heckler, 760 F.2d 993, 998 (9th Cir.1985) (error to apply the grids where plaintiff possesses limitations not factored into the guidelines). Until specific jobs are identified taking into account all of plaintiff’s limitations, including psychological ones, the determination of disability is incomplete.

According to this court’s order, the task of the ALJ at the remand hearing was to “make specific findings showing that plaintiff has the physical and mental capacity to perform specific jobs.” Hernandez v. Heckler, slip op. at 3 (N.D.Cal. August 18, 1982). After receiving the evidence of plaintiff’s emotional condition summarized above and the testimony of a vocational consultant the AU concluded: “considering any nonexertional features, I find that the evidence establishes that the claimant is still able and fit to perform a wide range of operator jobs in the region of the economy in which he resides.” For the reasons stated below, this conclusion is not supported by substantial evidence in the record as a whole.

The ALJ asked the vocational expert, Mr. Whelan, to testify as to the jobs a person of plaintiffs age, education and past experience could perform, taking into account his academic skills and poor visual-motor integration. Whelan stated that based on these factors plaintiff would be able to perform approximately 25% of the total jobs that exist in California. At no time did the ALJ ask Mr. Whelan to reconsider the hypotheticals in terms of the psychological evidence plaintiff proffered. As to the psychological evidence itself, Mr. Whelan testified that the poor self-concept identified by Dr. Lynch is not determinative of disability but that the information in Dr. Wilcox’ deposition “suggests a pessimistic outlook for Mr. Hernandez in terms of employability.”

On cross-examination Mr. Whelan testified that plaintiff’s psychological impairments would affect the scope of plaintiff’s employment opportunities. In response to questions regarding Dr. Lynch’s test results, he opined, “to the extent that Mr. Hernandez was considered to be dysfunctional by Dr. Lynch, in view of the (inaudible) as on the MMPI and particularly the first and second testings, to that extent he would likely not be able to benefit by labor market participation.” In addition, in response to counsel’s questions Mr. Whelan clarified that his testimony that plaintiff could perform 25% of the jobs within California did not take into account plaintiff’s psychological limitations.

It is apparent from the transcript that the AU’s failure to pose hypotheticals to the expert regarding psychological impairments was based on his rejection of the evidence of such impairments. In so doing the AU lost sight of the purpose of the remand hearing, which was to determine the parameters of plaintiff’s disability by specifying those jobs in the economy he could perform based on his physical and mental limitations. As the AU’s hypotheticals fail to set forth all plaintiff’s impairments they cannot constitute substantial evidence to support his findings. Gallant v. Heckler, 753 F.2d 1450, 1456 (9th Cir.1984) (“[t]he most appropriate way to ensure the validity of the hypothetical question posed to the vocational expert is to base it upon evidence appearing in the record, whether it is disputed or not”).

Therefore, the court finds that the Secretary’s conclusion that plaintiff was not disabled as he had the physical and mental capacity to perform a significant number of jobs in the national economy is unsupported by substantial evidence. Indeed, the unrefuted evidence in the record supports a finding of disability, for the vocational expert indicated that plaintiff’s impairments as described by psychologists as early as 1977 would preclude him entering the labor market. Accordingly, the decision of the ALJ is reversed and the court finds plaintiff entitled to disability benefits commencing on the date of his injury.

Plaintiff seeks a closed period of disability benefits ending July 1981. However, the record is equivocal as to when his disability ceased. Although Dr. Lynch’s report indicates that plaintiff’s disability ended by July 1981 the report recognizes that other evaluations of plaintiff's condition reached different conclusions. As it is the role of the Secretary to resolve conflicts in the evidence, Vincent v. Heckler, 739 F.2d 1393, 1395 (9th Cir.1984), the court remands the case to her solely for the purpose of determining the date plaintiff’s disability ended and payment of benefits.

IT IS SO ORDERED.

      . Dr. Shoor's report was part of the proceedings with respect to plaintiffs workers’ compensation benefits and was not introduced by either party in any of the proceedings pertaining to plaintiffs Social Security status.

      . The Secretary argues that the unappealed denial of plaintiff’s November 5, 1978 application for disability benefits creates a continuing presumption of nondisability which must be overcome by plaintiff’s showing of changed circumstances. Booz v. Secretary of Health and Human Services, 734 F.2d 1378, 1379 (9th Cir. 1984); Lyle v. Secretary of Health and Human Services, 700 F.2d 566, 568-69 (9th Cir.1983). Defendant’s argument is based on the application of res judicata principles to the Secretary’s November 1978 decision. See Lyle, 700 F.2d at 568 n. 2 (“frjes judicata principles are properly applied in the context of administrative decisions, although in such a context 'the res judicata doctrine is not as rigid as it is with courts’ ’’).

        Res judicata is an affirmative defense which is waived if not raised in the pleadings. FountWip, Inc. v. Reddi-Whip, Inc., 568 F.2d 1296, 1299-1300 n. 1 (9th Cir.1978) (res judicata defense not raised in pleadings or pretrial statement not preserved); see generally, 18 Wright, Miller & Cooper, Federal Practice and Procedure, § 4405. The court finds the defense waived in the instant case as the Secretary failed to raise it in the answer to the complaint, the first motion for summary judgment, or in the court-ordered remand proceeding. Weekes v. Atlantic National Insurance Co., 370 F.2d 264, 271-72 (9th Cir.1966) (trial court has discretion to permit or deny belated assertion of res judicata defense).

      . The date of onset is well before March 1979, the date plaintiffs insured status terminated.


source: Caselaw Access Project

author: EDWARD WEINFELD, District Judge.

license: Public Domain

text:
    Bernard J. KAMIN, Plaintiff, v. Daniel KOREN, Defendant. MOSPORT PARK (GRAND PRIX), INC., Plaintiff, v. NEW YORK GRAND PRIX INC. and Daniel Koren, Defendants.
    Nos. 85 Civ. 6410 (EW), 85 Civ. 6411 (EW).
    United States District Court, S.D. New York.
    Nov. 4, 1985.
    Kaplan Kilsheimer & Foley, New York City, for plaintiffs; Richard J. Kilsheimer, of counsel.
    Shereff, Friedman, Hoffman & Goodman, New York City, for defendants; Andrew J. Levander, Gary R. Clewley, Alyson B. Cummings, of counsel.
   OPINION

EDWARD WEINFELD, District Judge.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

These actions center about contracts with respect to a proposed Grand Prix automobile race to be conducted in New York City.

Bernard J. Kamin, the plaintiff in one action, is a lawyer of Toronto, Canada, who, in addition to his legal activities, is employed by Mosport Park, Ltd., a Canadian corporation, in an entreprenurial as well as legal capacity. Mosport Park (Grand Prix), Inc., the plaintiff in the other action, is a Canadian corporation formed as an affiliate or subsidiary of Mosport Park, Ltd., to enter into agreements that are the subject of this action (both are referred to hereafter as Mosport).

The defendants are New York Grand Prix, Inc., a New York State corporation organized to promote a “Grand Prix Race” in the greater New York metropolitan area and Daniel Koren, its chief executive officer. Koren had been active in the promotion, development and construction of that project for several years prior to November 12, 1984, when the agreements here at issue were entered into and continued with such activities thereafter. Associated with him in the initial stages of the venture were John Rosart and his affiliates (“Rosart” or “Rosart interests”).

A project of this nature requires substantial financing, construction of a racing site, public relations, engineering, architectural and landscaping services, sales promotion and various other activities. In addition, it requires the authorization and approval of an international supervisory group known as the Formula One Constructors Association (“FOCA"), which was granted sometime in 1982. The project, from its inception in 1981, ran into the not unusual delays encountered in negotiations with departments, boards and agencies of New York City, whose consents were required with respect to various aspects of the project as it moved forward, which included but was not limited to environmental impact statements, building, fire and other permits and approvals. Although much progress had been made with respect to these matters under the executive leadership of Koren and substantial funds, almost $1 million, had been advanced by John Rosart, also a Canadian citizen, and members of his family, in November 1984 the project was still in the developmental state and in need of additional financing. Prior thereto, Rosart, for whom Kamin had performed some legal services in real estate matters, met with Harvey M. Hudes, also a Canadian citizen who was president and general manager and a principal of Mos-port and associated with Kamin. Hudes and Kamin were experienced in the development and promotion of racing projects in Canada and other countries.

Following a number of conferences among Hudes, Kamin, Koren and Rosart, a series of agreements were entered into on November 12, 1984, which are at the heart of this litigation. As one of the parties to subscription and shareholders agreements, Mosport agreed to purchase 1,295 shares of New York Grand Prix for $500,000, of which $50,000 was payable upon execution of the agreements, the balance of installments of $50,000 each on December 1, 1984 and January 1, 1985; $200,000 on February 1, 1985 and $150,000 on March 1, 1985, the latter two payments subject to deferral, dependent upon the date a contract was entered into with the City of New York permitting the New York Grand Prix race. The shareholders agreement also provided that the Rosart interests and Koren, who already had invested heavily in New York Grand Prix, each contribute shares to the capital of New York Grand Prix under a recapitalization provision. In addition, Rosart agreed to purchase 1, 295 additional shares of New York Grand Prix payable in installments, the first of which, $50,000, was paid upon execution of two subscription agreements and like installments payable on December 1, 1984 and January 1, 1985; $200,000 on February 1, 1985 and $150,000 on March 1, 1985, the latter two, however, subject to deferment dependent upon the date of the contract between the New York City Parks Department and New York Grand Prix. The shareholders agreement provided that New York Grand Prix would enter into four-year consulting agreements with Mosport, the Rosart interests and another shareholder, Connor Clark & Company, Ltd. The shareholders agreement also provided that New York Grand Prix would continue to employ Koren as President and Chief Executive Officer for four years.

All agreements, however designated— the shareholders agreement, the subscription agreements, the consulting agreements and the employment agreement— were executed simultaneously. The shareholders agreement contained a provision for á Board of Directors of three and that the shareholders vote their shares in favor of Koren, Rosart and one individual designated by Mosport as directors, and to cause the election of Koren as Chief Executive Officer.

The subscription agreements provided that no shares subscribed for thereunder were to be issued to the subscriber until the full purchase price had been paid; further, that in the default of payment of installments due for subscribed shares, all payments previously made and rights to shares were forfeited; and all monies paid converted into a ten-year subordinated loan bearing interest.

It is undisputed that Mosport paid the first installment upon execution of the contracts, but did not pay the installments due on December 1, 1984 and January 1, 1985, each in the sum of $50,000. However, plaintiffs contend that on April 22, 1985, the shareholders agreed to amend the November 12, 1984 agreement and chose not to treat Mosport’s nonpayment of the installments as a default. The alleged agreement was oral. The defendants deny there was a modification of the terms of the original agreement.

At a meeting of the Board of Directors of New York Grand Prix held on August 15, 1985 (not attended by Kamin) Koren and Rosart terminated the Mosport consulting agreement for cause because of Mos-port’s default in the payment of the amounts due under the Mosport subscription agreement. At a special meeting of shareholders held on the same day, Koren and Rosart voted to remove Kamin' as a director based upon Mosport’s failure to pay the balance of the payments due under the subscription agreement, which resulted in “ill will” among the directors and because Kamin’s continued presence on the Board was “disruptive” and his “unilateral actions in the past were potentially dangerous to the Corporation [New York Grand Prix].”

The two plaintiffs, Kamin and Mosport, in their respective actions seek the following relief: an accounting by Koren as a director and President of New York Grand Prix; the removal of Koren as chief officer and director of New York Grand Prix; a declaration that New York Grand Prix breached the consulting agreement by failure to pay $43,750, the amount claimed by Mosport for services rendered; a declaration that the subscription agreement was amended on April 22, 1985, so that Mosport was not in default thereunder by reason of the nonpayment of installments as specified in the agreement of November 12, 1984; specific performance of the claimed amended agreement allegedly entered into on April 22, 1985; and a declaration that Kamin continues to be a member of the Board of Directors. The defendants categorically deny the default was waived and the plaintiffs’ charges and dispute plaintiffs’ various claims for relief.

Upon commencement of these actions, plaintiffs moved for a preliminary injunction, which the defendants opposed. However, the case was tried upon the merits pursuant to Fed.R.Civ.P. 65(a)(2). The principal witnesses who testified were Kamin and Hudes on behalf of plaintiffs and Rosart on behalf of the defendants. Their testimony as to significant matters was in sharp conflict.

Based upon the Court’s trial notes, which include a contemporaneous appraisal of each witness, a word-by-word reading of the post-trial stenographic transcript of the trial record, the demeanor of the witnesses, an evaluation of their credibility and the reasonable inferences to be drawn from established facts and surrounding circumstances, this Court concludes that plaintiffs have failed to sustain their burden of proof. Kamin’s penchant for writing letters containing self-serving statements and his testimony with glib and ready explanations of adverse events are not a substitute for facts. The Court finds that neither he nor Hudes were credible witnesses as to material matters.

In the light of the default upon the failure to pay the $100,000 due on December 1, 1984 and January 1, 1985, plaintiffs nonetheless contend that this did not affect Mosport’s claim under the consulting agreement nor Kamin’s right to remain as Mosport’s designee on the Board of Directors under the shareholders agreement. As previously noted, they assert that the default was waived orally and a new agreement entered into which substantially modified the written agreements of November 12, 1984. The Court finds otherwise. Under the shareholders agreement, Mosport agreed to purchase 1,295 shares of New York Grand Prix for a total purchase price of $500,000 “subject to the terms and conditions of a Subscription Agreement of even date which is attached hereto as Exhibit C.” That subscription agreement provided that “no shares ... shall be issued to the undersigned until the full purchase price has been paid.” Thus, Mosport never became an unconditional shareholder of New York Grand Prix. While the interested parties discussed the plaintiffs’ default, it was never waived and no new agreement was entered into. Moreover, the shareholders agreement itself provides that “no modification, amendment, or waiver of any provision of this Agreement shall be effective unless in writing and signed by the parties against whom enforcement thereof is sought.” Under New York law, such provisions are binding on the parties absent a showing that an oral agreement was entered into and that there was partial performance or substantial reliance. Plaintiffs have made no such showing.

The agreements entered into on November 12, 1984 were central to one another; they were interdependent and so understood by the parties and accordingly, defendants were justified in declaring the consulting agreement at an end and to remove Kamin as Mosport’s designated member of the Board of Directors by reason of that default. The fact that the agreements did not state in kaec verba they were interdependent does not control. “[SJeparate written agreements executed at the same time may be considered in law as one agreement, but only if the parties so intended. Whether the parties intended that the ... agreements should be interdependent is a question of fact which turns upon the circumstances of each case.” The evidence fully establishes the agreements were interdependent and that the parties so intended. The circumstances preceding, leading to and surrounding their execution indicate that intent. While each agreement was executed separately, each is made part of the shareholders agreement either as an attached exhibit or by reference. It is beyond peradventure that the consulting agreement would not have been entered into absent Mosport’s agreement to purchase and pay for shares of stock in New York Grand Prix.

While plaintiffs contend that the consulting agreement was entered into to secure their expertise in auto racing, the fact is that the project was well on its way before they entered into the contracts. While their expertise was known, the evidence sustains a finding it was the funds to be derived from Mosport’s purchase of stock that was the prime consideration for the November agreements and the evidence leaves little room for doubt that no contract would have eventuated had Mosport not committed itself for the $500,000 for the purchase of stock. To hold that these were separate and independent agreements having no relationship to one another not only is contrary to the intent of the parties as manifested by all of the surrounding circumstances, but flies in the face of common sense.

Even if the consulting agreement survived plaintiffs’ default, Mosport did not render any compensable services. Analysis of the alleged services for which compensation is now sought indicates they were inquiries of architects, public relations counsel and others as to the progress of the project. These inquiries were in plaintiffs’ self-interest in seeking to maintain their position in New York Grand Prix despite their default and by no fair standard were they consultation services rendered on behalf of the defendants for which they are entitled to compensation.

The insignificance of the alleged services for which Mosport claims $43,750 was perhaps best described by a public relations consultant to New York Grand Prix, without any interest in the outcome of the litigation. He and his firm had served in that capacity from the very inception of the project, and the witness testified that Kamin would call him from time to time on an irregular basis to obtain information as to how things were moving — “he would call and want to know how things were, what was happening, and I would describe and sort of bring him up to date____ I cannot remember Mr. Kamin making any suggestion as to how I should proceed or should not proceed.”

Plaintiffs contend that the removal of Kamin from the Board of Directors by the shareholders violated the shareholders agreement and was unlawful. New York Grand Prix’s by-laws provide for the removal of directors at any time “with or without cause.” The evidence at trial supports a finding that Kamin’s removal was justified whether with or without cause. Moreover, Mosport’s right under the shareholders agreement to designate a member of the Board of Directors was dependent upon its being a shareholder of New York Grand Prix. As noted above, upon Mosport’s default after making the first payment of $50,000, it was not entitled to receive shares of stock, none were issued to it, and the $50,000 was converted into a subordinated loan. Kamin is not entitled to reinstatement on the Board of Directors.

Finally, plaintiffs allege Koren issued two New York Grand Prix checks, one in the sum of $3,500 and the other in the sum of $20,000, upon his sole signature and contrary to a requirement of the shareholders agreement that checks in excess of $2,000 be countersigned by one other officer and cheeks in excess of $5,000 be countersigned by two other officers. Accordingly, plaintiffs urge that these actions warrant the removal of Koren as an officer and director. While the physical signature of another officer does not appear on the checks at issue, Rosart, whose testimony the Court finds credible on this and other matters, testified that because he was in Toronto at the time, he telephoned an executive at the Bank where New York Grand Prix funds were on deposit and authorized the payment of the checks, the payees of which had rendered services to New York Grand Prix and to whom the amounts of the checks were due. It is undisputed that both cheeks were issued in payment of obligations due to the payees from New York Grand Prix. While the check for $20,000 signed by Koren and approved by Rosart did not contain a third signature as required under the shareholders agreement and therefore breached that agreement, the Court finds the issuance of that check in payment of a corporate debt did not result in any damage to plaintiffs or New York Grand Prix. In the absence of injury to Mosport, assuming it was a shareholder at the time of the issuance of the check, or to New York Grand Prix, that single incident furnishes no ground for plaintiffs’ contention that Koren should be removed from his position as an officer and director of the corporation. This was no instance of diversion of corporate funds.

The foregoing shall constitute the Court’s findings of fact and conclusions of law. Judgment may be entered accordingly-

SO ORDERED.

      . Plaintiffs refer to the shareholders agreement as a "Management and Recapitalization Agreement.”

      . See Defendants’ Exh. F, at 4. Koren and Rosart’s shares represented 95% of the outstanding shares. Herb Abramson, representing the only other shareholders, Connor Clark & Company and Technifund, Inc., was also present at the shareholders meeting but abstained from voting those shares.

      . Plaintiffs argue that although the Rosart interests failed to make any installment payments after the initial payment of $50,000 on November 12, 1984, no action has been taken against them. Plaintiffs ignore the fact that Rosart, having previously invested $900,000 in New York Grand Prix, was a shareholder, unlike Mosport. Furthermore, whatever claims, if any, New York Grand Prix may have against Rosart, they are irrelevant to those asserted by plaintiffs and are not issues in this case.

      . Plaintiffs' Exh. 1, para. 10.2.

      . See Grandonico v. Consortium Communications Int'l, Inc., 566 F.Supp. 1288 (S.D.N.Y.1983); Rose v. Spa Realty Assocs., 42 N.Y.2d 338, 366 N.E.2d 1279, 397 N.Y.S.2d 922 (1977); Cliffs Management Corp. v. Great Eastern Management Corp., 85 A.D.2d 584, 445 N.Y.S.2d 460 (1981), appeal dismissed, 56 N.Y.2d 643, 436 N.E.2d 194, 450 N.Y.S.2d 787 (1982); see also N.Y.Gen.Oblig.Law § 15-301 (McKinney 1963 & Supp. 1984-1985).

        . Lowell v. Twin Disc, Inc., 527 F.2d 767, 769-70 (2d Cir.1975); see abo Dynamics Corp. of America v. International Harvester Co., 429 F.Supp. 341, 345-46 (S.D.N.Y.1977).

      . Tr. at 235-36.

      . Cf. Rudman v. Cowles Communications, Inc., 30 N.Y.2d 1, 280 N.E.2d 867, 330 N.Y.S.2d 33 (1972); Ripley v. International Rys. of Central America, 8 N.Y.2d 430, 171 N.E.2d 443, 209 N.Y.S.2d 289 (1960).

      . Tr. at 306-08.

      . Defendants’ Exh. H, at 6; see also N.Y.Bus. Corp.Law § 706 (McKinney 1963 & Supp.1984-1985).

      . Cf. O'Toole v. Greenberg, 64 N.Y.2d 427, 477 N.E.2d 445, 488 N.Y.S.2d 143 (1985); Swiss Forest Homeowners Ass’n, Inc. v. Ole Olsen, Ltd., 38 A.D.2d 619, 326 N.Y.S.2d 366 (1971); Lewis v. Lewis, 59 Misc.2d 525, 299 N.Y.S.2d 755 (Civ.Ct. 1969).


author: BIGGERS, District Judge.

text:
    Albert C. STAHELI, Plaintiff, v. UNIVERSITY OF MISSISSIPPI, a Four Year State Supported Institution of Higher Learning of the State of Mississippi; Porter Fortune, Professor Emeritus and Former Chancellor of the University of Mississippi, in His Official and Individual Capacities; Peter Wagner, Academic Vice Chancellor of the University of Mississippi, in His Official and Individual Capacities; Joseph Sam, Graduate School Dean and Vice Chancellor for Research of the University of Mississippi, in His Official and Individual Capacities; Allie Smith, Dean of the School of Engineering of the University of Mississippi, in His Official and Individual Capacities; George Brunton, Chairman of the Department of Geology and Geological Engineering of the University of Mississippi, in His Official and Individual Capacities; William R. Reynolds, Tenured Member of the Department of Geology and Geological Engineering, in His Official and Individual Capacities; and Gerald Turner, Chancellor of the University of Mississippi, in His Official Capacity, Defendants.
    No. WC84-94-NB-D.
    United States District Court, N.D. Mississippi, W.D.
    Nov. 4, 1985.

      David G. Hill, Oxford, Miss., for plaintiff.
    Ed Davis Noble, Jr., Jackson, Miss., John H. Dunbar, Oxford, Miss., Mary Ann Connell, University of Miss., University, Miss., for defendants.
   MEMORANDUM OPINION

BIGGERS, District Judge.

This cause came before the court on two motions for summary judgment filed on behalf of all defendants in this case. The defendants herein are the University of Mississippi (hereinafter the “University”), Gerald Turner, present Chancellor of the University who is sued in his official capacity, and Porter Fortune, Harvey Lewis, Peter Wagner, Joseph Sam, Allie Smith, George Brunton, and William Reynolds, high-echelon present and former employees of the University who are sued in both their official and their individual capacities. For convenience, all above-named defendants except the University and Gerald Turner are collectively referred to as. the “individual defendants.” After careful consideration of the thoroughly-researched and well-written briefs of all the parties, the court is now in a position to rule on these motions.

This case, involving an alleged wrongful denial of tenure at the University, requires a brief synopsis of the official tenure procedure set forth in the University publication entitled A Handbook for Faculty and Staff. Faculty members become eligible for tenure review each fall after satisfactory completion of a five-year probationary period. An employee may be considered only twice for tenure. Eligible candidates are notified at least one week before departmental tenure review meetings and may submit dossiers for consideration. Thereafter, the tenured department members review each candidate and cast advisory votes. After consideration of the advisory votes, the department chairperson gives an independent recommendation to the dean of the school or college. If the department chairperson advises against tenure, the application stops, subject to appeal procedures hereinafter described. However, if the department chairperson gives a favorable recommendation, the candidate’s application and portfolio goes through four advisory reviews. Following these reviews, the application, portfolio, and advisory comments are sent to the Chancellor of the University, who determines in his discretion whether a particular candidate merits tenure. If the Chancellor approves the application, he notifies the candidate by letter. However, if tenure is not granted, the Chancellor informs the department chairperson through a memorandum which sets forth the reasons for the unfavorable decision. The department chairperson then notifies the unsuccessful candidate, who may obtain a copy of the memorandum.

Upon either unfavorable recommendation by the department chairperson or disapproval by the Chancellor, the candidate may appeal to the Tenure Committee. This committee, composed of the Senate of the Faculty, reviews the decision and submits an advisory recommendation to the Chancellor. Thereafter, the Chancellor in his discretion takes whatever action he deems appropriate.

In the present case, the plaintiff became a candidate for tenure with the University Department of Geology and Geological Engineering in October, 1982. Although the acting department chairperson recommended tenure, all review personnel advised to the contrary. The adverse recommendations purportedly were premised on the plaintiff’s lack of national publication, his perceived inability to teach upper-level courses, and his active recruitment of unqualified persons as department majors. When the application and advisory comments reached the Chancellor, he cited the plaintiffs lack of national publication and denied tenure. The plaintiff appealed to the Tenure Committee, which overwhelmingly advised that tenure be granted. Despite this recommendation, the Chancellor did not change his decision.

In accordance with University tenure policy, the plaintiff was invited the following fall to submit additional materials or publications for tenure evaluation. The plaintiff offered no further materials, the department committee voted against tenure, and the department chairperson did not make a favorable recommendation. Although the plaintiff was entitled to appeal this determination, he apparently took no further action. Nevertheless, the Faculty Senate on its own accord resolved that tenure should be granted. The Chancellor took no action on this resolution; furthermore, the plaintiff was not offered a teaching position after the 1984-85 academic year.

The plaintiff asserts three interrelated causes of action. First, the plaintiff contends that all defendants except Gerald Turner violated his due process rights as secured by the fifth amendment, the fourteenth amendment, and 42 U.S.C. § 1983 (1981), and proximately caused loss of employment income, loss of professional reputation, emotional distress, and physical illness. Secondly, the plaintiff alleges that the individual defendants conspired in both their official and individual capacities to deny him tenure, increased compensation, and summer employment, thereby violating his due process rights under the fifth amendment, the fourteenth amendment, and 42 U.S.C. § 1983, as well as his first amendment rights to free speech and association. Finally, the plaintiff propounds a pendent state claim that the individual defendants acting in their individual capacities violated his rights under the laws of the State of Mississippi. The plaintiff seeks declaratory relief, compensatory and punitive damages with interest from the individual defendants, an injunction requiring the University and Gerald Turner as Chancellor to grant full tenure to the plaintiff retroactive to the first tenure denial, court costs, and reasonable attorney fees.

1. Due Process Claims

(a) Property Interest

The plaintiff contends that he was deprived of a property interest, the “expectancy of tenure,” without due process in violation of the fifth and fourteenth amendments and of 42 U.S.C. § 1983. The fifth amendment restricts only actions by the federal government, see, e.g., Rutherford v. United States, 702 F.2d 580, 582 n. 4 (5th Cir.1983) (application of fifth amendment limited to federal action); Guthrie v. Alabama By-Products Co., 328 F.Supp. 1140, 1143 (N.D.Ala.1971) (same), aff'd., 456 F.2d 1294 (5th Cir.), cert. denied, 410 U.S. 946, 93 S.Ct. 1352, 35 L.Ed.2d 613 (1973), and a claim under this amendment is improper in this case since no federal action is alleged. However, the claims under both the fourteenth amendment and section 1983 for deprivation by the state of a property interest remain for consideration, see, e.g., Board of Regents v. Roth, 408 U.S. 564, 569, 92 S.Ct. 2701, 2705, 33 L.Ed.2d 548, 556 (1972) (fourteenth amendment cause of action for deprivation of property interest); Vail v. Board of Education of Paris Union School District No. 95, 706 F.2d 1435, 1436 (7th Cir.1983) (section 1983 cause of action for deprivation of property interest), aff'd. per curiam by divided court, 466 U.S. 377, 104 S.Ct. 2144, 80 L.Ed.2d 377 (1984).

In order to prevail under either the fourteenth amendment or section 1983, the plaintiff must possess a property interest under the law of the state. See, e.g., Board of Regents v. Roth, 408 U.S. at 577, 92 S.Ct. at 2709, 33 L.Ed.2d at 561 (existence of property interest a question of state law). Undoubtedly, an expectancy of tenure constitutes a protected property interest in some cases, see, e.g., Lucas v. Chapman, 430 F.2d 945, 947 (5th Cir.1970); Ferguson v. Thomas, 430 F.2d 852, 856 (5th Cir.1970); for example, when an employee’s expectations are not unilateral, but are based on statute, contract, or a mutually explicit understanding. See Board of Regents v. Roth, 408 U.S. at 578, 92 S.Ct. at 2709, 33 L.Ed.2d at 561. Furthermore, the existence of an expectancy of tenure may be resolved in some cases as a matter of law, see, e.g., Wells v. Doland, 711 F.2d 670, 675 (5th Cir.1983) (affirmance of summary determination of no expectancy of tenure at McNeese State University in Louisiana; no evidence indicated tenure recommendation tantamount to tenure grant); Montgomery v. Boshears, 698 F.2d 739, 742 (5th Cir.1983) (same at University of Southern Mississippi; tenure procedures followed and no evidence of de facto tenure presented).

In the present case, the plaintiff was recommended by his department chairperson for tenure; however, all four reviewers advised against such a grant. The plaintiff has produced no evidence demonstrating that the Chancellor routinely bestows tenure over unanimous advisory dis-approvals. Furthermore, although the Tenure Committee subsequently recommended tenure, no evidence was presented regarding the usual effect of such a recommendation, especially in conjunction with unanimous disapproval by reviewing personnel. Thus, the plaintiff in effect argues that mere recommendation for tenure by his department chairperson creates an expectancy of tenure constituting a property interest protected by due process considerations. Cf. Wells v. Doland, 711 F.2d at 675 (affirmance of summary determination of no expectancy of tenure absent evidence that tenure recommendation' constitutes tenure grant). In view of the specific provisions of the University tenure policy, and in the absence of evidence of a mutually explicit understanding between the plaintiff and the University of a right to tenure, this court determines that the plaintiff had no property interest; accordingly, the court need not review the adequacy of the plaintiff’s appellate procedures. Cf. id. (no constitutional right to hearing for nontenured professor absent protected property or liberty interest).

The defendants’ motions for summary judgment on this ground are well taken and will be granted.

(b) Liberty Interest

The plaintiff asserts deprivation of a liberty interest due to alleged defamatory charges by the defendants. Among the requirements for this cause of action, the plaintiff must demonstrate that “the governmental agency has made or is likely to make the ... stigmatizing charges public ‘in any official or intentional manner, other than in connection with the defense of a [related legal] action.’ ” Wells v. Hico Independent School District, 736 F.2d 243, 256 (5th Cir.1984), quoting Ortwein v. Mackey, 511 F.2d 696, 699 (5th Cir.1975). Inasmuch as plaintiff concedes lack of evidence that any defendants publicly stigmatized the plaintiff, the defendants’ motions for summary judgment on this issue are well taken and will be granted.

2. Conspiracy Claims

The plaintiff advances conspiracy claims under 42 U.S.C. § 1983 and the fifth and fourteenth amendments against the individual defendants in both their official and individual capacities, asserting that he was denied tenure, summer employment, and increased compensation in a wrongful concerted effort to keep the Mining and Mineral Resources Institute (MMRI) program at the University at his expense. As previously discussed, the fifth amendment claim is improper due to lack of federal action; thus, this court need consider only the conspiracy claim as it relates to the fourteenth amendment and to section 1983.

30 U.S.C. §§ 1221-1230 (1984) delineates federal involvement in MMRI programs. Generally, 30 U.S.C. § 1221 (1984) authorizes a grant of federal funds to one eligible college in each participating state. 30 U.S.C. § 1230(a) (1984) establishes eligibility requirements with respect to type and quality of educational programs. 30 C.F.R. § 890.6(c) (1984), in interpreting these requirements, provides that a school must employ “at least four full-time permanent faculty members ... conducting instruction and research in mining and mineral extraction.” Id. The plaintiff contends that the University’s MMRI program was jeopardized due both to accreditation problems and to lack of four professors possessing expertise in “mining and mineral extraction,” an area plaintiff apparently does not teach. Thus, the plaintiff asserts that the individual defendants conspired to deny the plaintiff tenure so as to use the plaintiff’s salary amount to acquire a mining and mineral research professor, and thereby to preserve the MMRI program and its concomitant federal funds for the University.

Construing the facts most favorably to the non-movant, see Adickes v. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 1609, 26 L.Ed.2d 142, 155 (1970) (construction of facts favorably to non-movant on summary judgment motion), the alleged acts of the defendants do not constitute a conspiracy. This court has determined that the non-tenured plaintiff had no property interest in his employment after the end of his contract period; thus, the University, through the acts of its employees in an official capacity, could decline to renew its employment contract with the plaintiff for any or no reason, see Sindermann v. Perry, 430 F.2d 939, 944 (5th Cir.1970), aff'd., 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972), except for constitutionally impermissible reasons such as race, religion, or exercise of rights guaranteed by the Constitution or laws. Perry v. Sindermann, 408 U.S. 593, 597, 92 S.Ct. 2694, 2697, 33 L.Ed.2d 570, 577 (1972); Ferguson v. Thomas, 430 F.2d at 857. Since the University was empowered not to rehire the plaintiff in order to obtain another professor possessing different qualifications, the alleged actions of the defendants in their official capacities would not have been wrongful. NAACP v. Claiborne Hard ware Co., 393 So.2d 1290, 1301 (Miss.1980) (conspiracy must be tainted with illegality, requiring agreement either to do unlawful act or to do lawful act by unlawful means), amended, 405 So.2d 115 (Miss.1981), rev’d. on other grounds, 458 U.S. 886, 102 S.Ct. 3409, 73 L.Ed.2d 1215 (1982).

Although individual defendants in their individual capacities conceivably could conspiratorially deprive an employee of his employment, there is no allegation in this case that the individual defendants took any actions other than in their University employment capacities. Thus, the plaintiff cannot prevail on this claim against the individual defendants in their individual capacities. Cf. Nelson Radio & Supply Co. v. Motorola, 200 F.2d 911, 914 (5th Cir. 1952) (no conspiracy action against individuals absent allegation that corporate agents acted outside their normal capacities).

Accordingly, the defendants’ motions for summary judgment as to this cause of action are well taken and will be granted.

3. First Amendment Claim

(a) Tenure Denial

The plaintiff also contends that tenure was denied in retaliation for his exercise of first amendment free speech rights, and that such action violated his fourteenth amendment due process rights. See NAACP v. Claiborne Hardware Co., 458 U.S. 886, 907 n. 43, 102 S.Ct. 3409, 3422 n. 43, 73 L.Ed.2d 1215, 1232 n. 43 (1982) (first amendment freedoms protected by fourteenth amendment from invasion by state). Specifically, the plaintiff claims that the tenure denial was due to his public criticism of the University’s method of disposing of the remains of laboratory animals.

Even though the plaintiff has no expectancy of tenure amounting to a property interest, he cannot be deprived of employment for assertion of constitutional rights. See Perry v. Sindermann, 408 U.S. at 597, 92 S.Ct. at 2697, 33 L.Ed.2d at 577; Ferguson v. Thomas, 430 F.2d at 857. The parties dispute the basis for the tenure denial; thus, a genuine issue of material fact exists regarding this cause of action.

The plaintiff has asserted his first amendment cause of action against the individual defendants in both their official and their individual capacities. Approval or disapproval of the tenure application was an employment duty of the defendants; therefore, the defendants’ actions were only within their official capacities. Thus, the individual defendants’ motions for summary judgment as to the first amendment claim will be granted as to claims asserted for actions in their individual capacities but will be denied as to claims asserted for actions within their official capacities. Cf. Lloyd Corp. v. Tanner, 407 U.S. 551, 567, 92 S.Ct. 2219, 2228, 33 L.Ed.2d 131, 142 (1972) (first amendment limitation on acts by state rather than private parties); Peterson v. Talisman Sugar Corp. 478 F.2d 73, 81 (5th Cir.1973) (same). Furthermore, the first amendment claim against the individual defendants for actions within their official capacities will be limited as hereinafter provided.

(b) Eleventh Amendment Bar

Although the plaintiff has alleged a viable first amendment claim against the individual defendants for actions taken in their official capacity, the eleventh amendment limits the relief available. See, e.g., Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 100, 104 S.Ct. 900, 908, 79 L.Ed.2d 67, 78 (1984) (eleventh amendment immunity of state agencies, officials, and employees when the real, substantial party in interest is state). In the present case, a retrospective award of money damages would come from state funds; thus, summary judgment is appropriate as to the damages claim against the individual defendants in their official capacity. See Edelman v. Jordan, 415 U.S. 651, 663, 94 S.Ct. 1347, 1356, 39 L.Ed.2d 662, 673 (1974) (eleventh amendment bar to suit by private parties for retrospective liability to be paid from public funds in state treasury). Accordingly, the plaintiff may seek only injunctive and declaratory relief from the University and present Chancellor Gerald Turner for the actions of the individual defendants within their official capacities.

4. Pendent State Claim

Finally, the plaintiff asserts a pendent state claim of defamation against defendant Allie Smith, Dean of the School of Engineering, apparently for derogatory statements allegedly made by Smith during his evaluation of the plaintiff. Pendent jurisdiction is a doctrine of discretion, see United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218, 228 (1966), and depends on considerations of judicial economy, convenience, and fairness to litigants. Id. Inasmuch as the court has granted summary judgment on the plaintiffs claim of a liberty interest deprivation, which cause requires publication, judicial economy is not promoted by exercise of pendent jurisdiction over a state law defamation claim. Accordingly, this court declines jurisdiction over this pendent state claim.

Conclusion

Summary judgment is appropriate and will be granted as to the individual defendants, the University, and present Chancellor Gerald Turner on all claims except for the plaintiffs alleged claim that he was denied tenure because of his exercise of his first amendment rights. With respect to this first amendment claim, the summary judgment motions will be denied; however, for the reasons heretofore stated, the first amendment claim is limited to only declaratory and injunctive considerations.

An-order will issue accordingly.

      . The University publication A Handbook for Faculty and Staff provides that tenure is conferred only through written communication from the Chancellor after a candidate satisfactorily completes a five-year probationary period and complies with all handbook tenure procedures.

      . The plaintiff contends that his presentation of papers at national and regional conferences either constituted national publication or was in lieu thereof. The court is not reviewing the correctness of the tenure decision and thus need not resolve this issue. See Megill v. Board of Regents, 541 F.2d 1073, 1077 (5th Cir.1976) (court not reviewing body of tenure decisions of Board of Regents).

      . The plaintiffs efforts undisputedly contributed to a sharp increase in geology majors, which in turn probably enabled the University to obtain primary responsibility in the state for education of this field. However, reviewing personnel asserted that many University geology majors were insufficiently qualified.

      . At the time of the alleged violations, present Chancellor Gerald Turner had no connection with the University.

      . No Mississippi statute creates a sufficient basis for an expectancy of tenure. Furthermore, the tenure policies of Mississippi’s state-supported universities, which undisputedly are relatively uniform, probably do not cause such an expectancy. See Montgomery v. Boshears, 698 F.2d 739, 742 (5th Cir.1983) (no expectancy of tenure at University of Southern Mississippi on facts); Wood v. University of Southern Mississippi, 539 F.2d 529, 531-32 (5th Cir.1976) (same).

      . A clear oral promise of employment may create an expectancy of tenure constituting a property interest. See, e.g., Vail v. Board of Education of Paris Union School District No. 95, 706 F.2d 1435, 1437 (7th Cir.1983) (existence of property interest when superintendent, at direction of hiring authority, orally assured employee of future employment contract extension), aff’d. per curiam by divided court, 466 U.S. 377, 104 S.Ct. 2144, 80 L.Ed.2d 377 (1984). In the present case, the plaintiff allegedly was assured by his department chairman that he was meeting tenure requirements. However, the plaintiff does not assert that such representations were at the Chancellor's direction. Inasmuch as University policy provides that only the Chancellor can grant tenure, such an unauthorized representation as a matter of law could not create a mutually explicit understanding of entitlement to tenure.

      . However, 30 U.S.C. § 1230(b) (1984) provides that a university program found eligible under the Surface Mining Control and Reclamation Act of 1977 shall be considered "eligible" for the MMRI program for a period of four fiscal years beginning October 1, 1984.

      . In 1981, the Accreditation Board for Engineering and Technology (ABET) issued an order requiring the University Department of Geology and Geological Engineering to "show cause” why the Bachelor of Science degree in Geological Engineering should not lose national accreditation. This degree became non-accredited effective September, 1985.

      . Furthermore, a university, like a corporation, cannot conspire with itself. See, e.g., Lieberman v. Gant, 474 F.Supp. 848, 875 (D.Conn.1979) (bar of intracorporate conspiracy doctrine to conspiracy action against officers and employees of university for acts in official capacity), aff’d. on other grounds, 630 F.2d 60 (2d Cir. 1980); Johnson v. University of Pittsburgh, 435 F.Supp. 1328, 1370 (W.D.Pa.1977) (same); Ned-die v. Pennsylvania State University, 412 F.Supp. 1264, 1276 (M.D.Pa.1976) (same); cf. Webb v. Culberson, Heller & Norton, Inc., 357 F.Supp. 923, 924-25 (N.D.Miss.1973) (corporate action through officials and representatives not conspiracy with corporation). Since a university acts through its employees, cf. 357 F.Supp. at 924 (corporation acts through officers and representatives), the alleged official acts of the individual defendants are not actionable.

      . The plaintiff also alleges an unspecified deprivation of his first amendment right to free association. Inasmuch as the plaintiff advances no argument regarding this allegation, the court treats such claim as abandoned.

      . Subsequent to the plaintiffs public criticisms, the University changed its method of laboratory animal disposal.

      . Qualified immunity applies to actions of the individual defendants in their official capacity unless such actions deprive the plaintiff of "clearly established rights.” See Davis v. Scherer, 468 U.S. 183, -, 104 S.Ct. 3012, 3021, 82 L.Ed.2d 139, 147 (1984). Inasmuch as the plaintiff’s first amendment free speech rights are clearly established, the court cannot hold as a matter of law that the defendants’ actions in their official capacities were protected by qualified immunity in this case.

      . The plaintiff alleges unidentified “state law” claims, but actively argues only defamation against defendant Allie Smith. Thus, this court treats any other state law claims as abandoned.


author: WEINSTEIN, Chief Judge.

text:
    AMF INCORPORATED, Plaintiff, v. BRUNSWICK CORPORATION, Defendant.
    No. CV-85-2743.
    United States District Court, E.D. New York.
    Nov. 4, 1985.

      Bergson, Borkland, Margolis & Adler, Washington, D.C. by Hugh Latimer, Bruce M. Bettigole, for plaintiff.
    Blodnick, Schultz & Abramowitz, P.C., Lake Success, N.Y. by Frederick Newman, for defendant.
   MEMORANDUM and ORDER

WEINSTEIN, Chief Judge.

In this case of first impression, AMF Incorporated seeks to compel Brunswick Corporation to comply with their agreement to obtain a non-binding advisory opinion in a dispute over the propriety of advertising claims. For reasons indicated below, the agreement to utilize an alternative dispute resolution mechanism must be enforced.

I. FACTS

AMF and Brunswick compete nationally in the manufacture of electronic and automatic machinery used for bowling centers. In earlier litigation before this court, AMF alleged that Brunswick had advertised certain automatic scoring devices in a false and deceptive manner. Brunswick responded with counterclaims regarding advertisements for AMF’s pinspotter, bowling pins and automatic scorer. In 1983 the parties ended the litigation with a settlement agreement filed with the court. Any future dispute involving an advertised claim of “data based comparative superiority” of any bowling product would be submitted to an advisory third party, the National Advertising Division (“NAD”) of the Council of Better Business Bureaus, to determine whether there was experimental support for the claim.

Paragraph 9 of the agreement reads as follows:

If either party shall hereafter publish or disseminate any claim by advertisement or promotional materials of any kind or nature, which expressly or impliedly refer to a comparative superiority of a bowling product manufactured, sold or distributed by either of them, as compared to a similar product manufactured, sold or distributed by the other, which claim shall expressly or impliedly be based on data, studies or tests (hereafter “data based comparative superiority”) such claims shall be subject to the provisions of this paragraph____
Should either party make a claim to data based comparative superiority, the other may request that substantiation for the same be delivered to the agreed upon advisory third party, subject to the provisions of this agreement, whereupon the, party who has made the claim shall promptly comply.
Both parties agree to submit any controversy which they may have with respect to data based comparative superiority of any of their products over that of the other to such advisory third party for the rendition of an advisory opinion. Such opinion shall not be binding upon the parties, but shall be advisory only----

NAD was created in 1971 by the American Advertising Federation, American Association of Advertising Agencies, Association of National Advertisers, and the Council of Better Business Bureaus “to help sustain high standards of truth and accuracy in national advertising.” It monitors television, radio, and print advertising, and responds to complaints from individual consumers, consumer groups, local Better Business Bureaus, competitors, professional and trade associations, and state and federal agencies. If NAD finds that the advertising claims are unsupported, and the advertiser refuses to modify or discontinue the advertising, the organization will complain to the appropriate governmental authority. See Statement of Organization and Procedures of the National Advertising Review Board, at ¶ 2.1A. Voluntary compliance with NAD’s decisions has been universal. Reportedly no advertiser who has participated in the complete process of a NAD investigation and NARB appeal has declined to abide by the decision.

In March and April 1985, Brunswick advertised its product, Armor Plate 3000, in a trade periodical called Bowler’s Journal. Armor Plate is a synthetic laminated material used to make bowling lanes. It competes with the wood lanes produced by AMF. “The wood lane. A relic of the past,” claims the advertisement, under a sketch of a horse and buggy. It goes on to detail the advantages of Armor Plate; and, as indicated in the footnote to the advertisement, strongly suggests that research supports the claim of durability as compared to wood lanes.

By replacing your worn out wood lanes with Armor Plate 3000, Brunswick’s high tech laminated surface, what you’re doing is saving money. Up to $500.00 per lane per year in lost revenue and upkeep.
That’s because today’s high technology has helped make Armor Plate 3000 so tough and good looking that it seems to last forever.*

* Continuing independent research projects that Armor Plate 3000 will now last over twenty years before the possible need arises to replace a small lane area much like replacing a broken board in a wood lane.

AMF, disputing the content of the advertisement, sought from Brunswick the underlying research data referred to in the footnote. Brunswick replied that having undertaken the expense of research it would not make the results available to AMF. Thereupon AMF informed Brunswick that it was invoking Paragraph 9 of the settlement agreement and requested that Brunswick provide substantiation to an independent third party. Brunswick responded that its advertisement did not fall within the terms of the agreement. AMF now brings this action to compel Brunswick to submit its data to the NAD for nonbinding arbitration.

II. THE AGREEMENT COVERS THE DISPUTE

The agreement on its face covers the dispute. It provides, in relevant part, that:

If either party shall [1] hereafter publish or disseminate any claim by advertisement or promotional materials of any kind or nature, which [2] expressly or impliedly refers to a comparative supe riority of a bowling product manufactured, sold or distributed by either of them, as compared to a similar product manufactured, sold or distributed by the other, [3] which claim shall expressly or impliedly be based on data, studies or tests (hereafter “data based comparative superiority”) [4] such claims shall be subject to the provisions of this paragraph____

(Emphasis supplied.) The advertisement (1), was published after the agreement of June 30, 1983. It (2), impliedly refers to comparative superiority of a Brunswick bowling product over one of AMF. It is (3), impliedly based on data and tests. Thus (4), the dispute is subject to the agreement.

The agreement also provides for a method of substantiation of the claim without resort to litigation. It reads:

Should either party make a claim to data based comparative superiority, the other may request that substantiation for the same be delivered to the agreed upon advisory third party, subject to the provisions of this agreement, whereupon the party who has made the claim shall promptly comply.
Both parties agree to submit any controversy which they may have with respect to data based comparative superiority of any of their products over that of the other to such advisory third party for the rendition of an advisory opinion. Such opinion shall not be binding upon the parties, but shall be advisory only....

The agreement specifies NAD as the appropriate third party. It states:

The parties agree that the National Advertising Division of the Council of Better Business is agreeable to each as the advisory third party. Should NAD not agree to undertake any such advisory opinion, the parties undertake to mutually agree upon other procedures for the review of advertising claims.

NAD has agreed to undertake to examine the data and render an opinion.

III. LAW

A. Arbitration

1. The Act

AMF characterizes the settlement agreement as one subject to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. The Act provides for enforcement of agreements to “settle” disputes arising after the agreement was entered into. In relevant part it reads:

A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2 (1982) (emphasis supplied). The issue posed is whether “a controversy” would be “settled” by the process set forth in the agreement.

Brunswick argues that the parties did not contemplate the kind of arbitration envisaged by the Act because the opinion of the third party is not binding on AMF and Brunswick and the agreement cannot settle the controversy. Arbitration, Brunswick argues, must present an alternative to litigation; that is, it must provide “a final settlement of the controversy between the parties.”

Arbitration is a term that eludes easy definition. One commentator has pointed out that “difficulty with terminology seems to have persisted throughout the entire development of arbitration.” G. Taylor, Preface to E. Witte, Historical Survey of Labor Arbitration vi (1952). He suggests that arbitration has become “synonymous with ‘mediation’ and ‘conciliation.’ ” Id. Case law has done little to sharpen the definition. See, e.g., City of Omaha v. Omaha Water Co., 218 U.S. 180, 194, 30 S.Ct. 615, 616, 54 L.Ed. 991 (1910) (“An arbitration implies a difference, a dispute, and involves ordinarily a hearing____”).

The Federal Arbitration Act, adopted in 1925, made agreements to arbitrate enforceable without defining what they were. Contemporary eases provide a broad description of arbitration: “[a] form of procedure whereby differences may be settled.” Pacific Indemnity Co. v. Insurance Co. of North America, 25 F.2d 930, 931 (9th Cir. 1928); Berkovitz v. Arbib & Houlberg, 230 N.Y. 261, 130 N.E. 288, 290 (1921). At no time have the courts insisted on a rigid or formalistic approach to a definition of arbitration.

Case law following the passage of the Act reflects unequivocal support of agreements to have third parties decide disputes — the essence of arbitration. No magic words such as “arbitrate” or “binding arbitration” or “final dispute resolution” are needed to obtain the benefits of the Act. See City of Omaha v. Omaha Water Co., 218 U.S. 180, 194, 30 S.Ct. 615, 616, 54 L.Ed. 991 (1910) (dictum) (“a plain case of the submission of a dispute or difference which had to be adjusted ... was in fact an arbitration, though the arbitrators were called appraisers”).

The history of the Federal Arbitration Act indicates a strong desire by Congress to reject the centuries-old “jealousy” of the courts which hindered the enforcement of contracts to have a non-judicial person decide disputes which otherwise might require adjudication by courts. See H.R.Rep. No. 96, 68th Cong., 1st Sess. at 1 (1924). In the words of the House report:

Arbitration agreements are purely matters of contract, and the effect of the bill is simply to make the contracting party live up to his agreement. He can no longer refuse to perform his contract when it becomes disadvantageous to him.

Id.

As the Supreme Court pointed out in Dean Witter Reynolds, Inc. v. Byrd, — U.S. -, 105 S.Ct. 1238, 1243, 84 L.Ed.2d 158 (1985), compelling arbitration “successfully protects the contractual rights of the parties and their rights under the Arbitration Act.” As “a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration____”. Moses M. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983). See also Allegaert v. Perot, 548 F.2d 432, 437 (2d Cir.) (“judicial hostility to the arbitration process is, and should remain, a thing of the past”), cert. denied, 432 U.S. 910, 97 S.Ct. 2959, 53 L.Ed.2d 1084 (1977); City of Meridian, Miss. v. Algernon Blair, Inc., 721 F.2d 525, 527-28 (5th Cir.1983); GAF Corporation v. Werner, 66 N.Y.2d 97, 495 N.Y. S.2d 312, 485 N.E.2d 977 (“the Act is ‘a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural problems to the contrary,’ ” quoting Moses M. Cone Memorial Hospital, supra, 460 U.S. at 24, 103 S.Ct. at 941).

An adversary proceeding, submission of evidence, witnesses and cross-examination are not essential elements of arbitration. Cf. P. Spiegelman, An Introduction to the Lawyer’s Role in Dispute Resolution (unpublished manuscript attached to Petitioner’s Supplemental Brief in Support of Its Petition for Arbitration as Exhibit 5) at 15. The Second Circuit has set a standard of “fundamental fairness” in arbitration; rules of evidence and procedure do not apply with the same strictness as they do in federal courts. See Bell Aerospace Co. v. Local 516, UAW, 500 F.2d 921 (2d Cir. 1974).

Arbitration is a creature of contract, a device of the parties rather than the judicial process. If the parties have agreed to submit a dispute for a decision by a third party, they have agreed to arbitration. The arbitrator’s decision need not be binding in the same sense that a judicial decision needs to be to satisfy the constitutional requirement of a justiciable case or controversy. Cf. C.A. Wright, Law of Federal Courts 53 ff. (4th ed. 1983).

2. Application of the Act to the Facts

Under the circumstances of this case, the agreement should be characterized as one to arbitrate. Obviously there is a controversy between the parties — is there data supporting Brunswick’s claim of superiority. Submission of this dispute will at least “settle” that issue, even though the parties may want to continue related disputes in another forum.

It is highly likely that if Brunswick’s claims are found by NAD to be supported that will be the end of AMF’s challenge to the advertisement. Should the claims not be found to be supported, it is probable that Brunswick will change its advertising copy. Viewed in the light of reasonable commercial expectations the dispute will be settled by this arbitration. That it may not end all controversy between the parties for all times is no reason not to enforce the agreement.

The mechanism agreed to by the parties does provide an effective alternative to litigation, even though it would not employ an adversary process. That the arbitrator will examine documents in camera and ex parte does not prevent recognition of the procedure as arbitration since the parties have agreed to this special practice in this unique type of dispute. Courts are fully familiar with the practice since prosecutorial and business secrets often require protection by ex parte and in camera proceedings during the course of a litigation.

In a confidential-submission scheme, such as the one agreed to here, adversarial hearings cannot take place. But this fact does not militate against application of the Act. Rather it supports arbitration since the special arbitrator may be more capable of deciding the issue than is a court which relies so heavily on the adversary process. Moreover, the particular arbitrator chosen by these parties is more capable than the courts of finding the faint line that separates data supported claims from puffery in the sometimes mendacious atmosphere of advertising copy.

B. Contract to Employ an Alternative Dispute-Resolution Mechanism

1. Consent Agreements as Enforceable Contracts

Whether or not the agreement be deemed one to arbitrate, it is an enforceable contract to utilize a confidential advisory process in a matter of serious concern to the parties. The agreement may be enforced in equity. Through the equitable relief of specific performance Brunswick may be compelled to surrender its “comparative data based” information to the NAD for inquiry as to deceptiveness.

The law of New York would apply since the settlement agreement was executed and filed in New York. See Index Fund, Inc. v. Insurance Co. of North America, 580 F.2d 1158, 1162 (2d Cir.1978), cert. denied, 440 U.S. 912, 99 S.Ct. 1226, 59 L.Ed.2d 461 (1979) (“greatest interest” analysis favors application of New York law to contract dispute); S.D. Hicks & Son Co. v. J.T. Baker Chemical Co., 307 F.2d 750 (2d Cir.1962) (contract made in New York and contemplating performance in New York governed by New York law).

New York would be likely to enforce such an agreement whose practical commercial benefits to both parties is so clear. In the memorable language of Judge Cardozo granting equitable relief in a contract action:

The law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal. It takes a broader view today____ [T]he whole writing may be “instinct with an obligation,” imperfectly expressed____

Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (1917).

If the agreement’s force is found in the fact that it was part of a settlement of a federal litigation so that, arguably, federal law applies, the result is no different. The Second Circuit has recently made clear the strong public policy requiring agreements between parties in settlement of litigation to be construed as enforceable contracts. See Berger v. Heckler, 771 F.2d 1556, 1568, (2nd Cir.1985). In the words of the Court of Appeals:

A defendant who has obtained the benefits of a ... termination of the litigation ... cannot then be permitted to ignore such affirmative obligations as were imposed by the decree.

Id. at 1569. Accord, Schurr v. Austin Galleries of Illinois, 719 F.2d 571 (2d Cir. 1983). Undoubtedly this general rule is applicable in New York. See Hallock v. State, 64 N.Y.2d 224, 485 N.Y.S.2d 510, 474 N.E.2d 1178 (1984); Heimuller v. Amoco Oil Co., 92 A.D.2d 882, 459 N.Y.S.2d 868 (2d Dep’t 1983); Myers v. Bernard, 38 A.D.2d 619, 326 N.Y.S.2d 279 (3d Dep’t 1971) (stipulations of settlement to be construed as contracts).

The fact that the agreement terminating the litigation was not formally signed by the court does not affect enforceability. It is the agreement terminating the litigation, rather than the court’s imprimatur, that gives rise to the obligation.

The settlement agreement evinces a clear intent by both parties to require confidential submission to the NAD of disputes concerning advertised data-based claims of superiority. This settlement facilitated the termination of AMF’s lawsuit and Brunswick’s counterclaim. Both parties bargained for and benefited from the stipulation.

2. Equity Jurisdiction

Untenable is the defendant’s argument that there is an adequate remedy at law so that equity is without jurisdiction. Specific performance is available as a remedy where the remedy at law is not appropriate if such equitable relief will not force a “vain order.” See, e.g., Union Pacific Railroad Co. v. Chicago, R.I. & P.R. Co., 163 U.S. 564, 16 S.Ct. 1173, 41 L.Ed. 265 (1896); Pennington v. Ziman, 13 A.D.2d 769, 216 N.Y.S.2d 1 (1st Dep’t 1961); Restatement (Second) of Contracts, §§ 357-366 (1981).

The agreement itself recognized that the legal process would not adequately address the parties’ needs. Through their contract the parties have identified an “injury” sufficient to require the dispute resolution mechanism they thought most appropriate.

The alternative dispute resolution (ADR) procedure agreed upon in the settlement is designed to reduce the acrimony associated with protracted litigation and to improve the chances of resolving future advertising disputes. This form of ADR is designed to keep disputes of this kind out of court.

The value of this settlement agreement lies largely in the particular experience and skill of the NAD as a resolver of disputes. In the fourteen years since its formation, the NAD has developed its own process of reviewing complaints of deceptiveness, coupling relative informality and confidentiality with safeguards to ensure procedural fairness. See NAD Guide for Advertisers and Advertising Agencies, attached to Petitioner AMF’s Supplemental Brief in Support of Its Petition for Arbitration as Exhibit 2. As the NAD puts it: “Speed, informality and modest cost are three chief benefits of [this] self-regulatory system.” Id. at 3. To these advantages of the special ADR system designed by the parties is added the unique ability of the NAD to decide what is fair in advertising. A judge might make this inquiry, but ultimately it would have to defer to the very expertise that NAD offers without resort to the courts.

General public policy favors support of alternatives to litigation when these alternatives serve the interests of the parties and of judicial administration. Here AMF and Brunswick agreed in June 1983 that a special ADR mechanism would serve them better than litigation. Such decisions are encouraged by no less an observer than the Chief Justice of the United States. In his words, ADR devices are often superior to litigation “in terms of cost, time, and human wear and tear.” Remarks of Warren E. Burger, Chief Justice of the United States, at the Twin Cities Advisory Council of the American Arbitration Association, St. Paul, Minn., August 21, 1985. See also, e.g., J. Marks, E. Johnson & P. Szanton, Dispute Resolution in America 25-50 (1984); Center for Public Resources, A Manual of Innovative Corporate Strategies for the Avoidance and Resolution of Legal Disputes (1980); Bush, Dispute Resolution Alternatives and the Goals of Civil Justice: Jurisdictional Principles for Process Choice, 1984 Wis.L.Rev. 893, 973-94 (comparing costs of adjudication with those of alternative dispute resolution processes); Falsgraf, Towards Swifter Justice, ABA Journal, Nov. 1985, p. 8 (“use of alternative dispute resolution mechanisms will ultimately make more justice available to more people, with less expense and less delay”).

As suggested by the “Plan for Court-Annexed Arbitration, United States District Court, Eastern District of New York,” effective January 1, 1986, the specific policy of this court is to enforce ADR agreements. In most instances they reduce the need for court trials and save clients time and money.

A remedy at law would be inadequate since it could only approximate the skilled, speedy and inexpensive efforts available by way of specific performance. A law suit would deny AMF the practical specialized experience that the parties agreed to have available for an examination of data-based comparative advertising. A court decision and an NAD decision would have different effects on the parties’ reputations within the bowling products industry. In short, a remedy at law falls short of providing many of the advantages of specific performance.

To deem specific performance “a vain order” would be to say that AMF and Brunswick settled their earlier litigation with a nullity. This characterization of a valid settlement agreement filed in court is unwarranted. Cf. Firefighters Local Union No. 1784 v. Stotts, 467 U.S. 561, 104 S.Ct. 2576, 81 L.Ed.2d 483 (1984); Williams v. Vukovich, 720 F.2d 909, 920 (6th Cir.1983); Artvale, Inc. v. Rugby Fabrics Corp., 303 F.2d 283 (2d Cir.1962) (judicial reluctance to scrutinize merits of bargain in consent decrees).

IV. CONCLUSION

The new advertisement is not so explicit in denigrating the competitor’s product as the former advertisements that were subject to the prior litigation. But for the readers — purchasers of bowling alleys — the effect is much the same. The current dispute is at least as important to the parties as the former one that resulted in litigation, a settlement, and an agreement on a process for resolving further disputes about advertising.

AMF’s petition to compel the submission of data pursuant to Paragraph 9 of the settlement agreement of June 30, 1983 is enforceable under the Federal Arbitration Act and pursuant to this court’s equity jurisdiction.

Brunswick shall submit its substantiation for the following claim: “Continuing independent research projects that Armor Plate 3000 will now last over 20 years before the possible need arises to replace a small lane area much like replacing a broken board in a wood lane” to the National Advertising Division of the Council of Better Business Bureaus, Inc., for an advisory opinion as provided for in Paragraph 9 of the Agreement of June 30, 1983.

So Ordered.