author: REYNOLDS, Chief Judge.

text:
    Kathryn L. LILLGE, personally and as personal representative of the Estate of Raymond L. Lillge, Plaintiffs, v. JOHNS-MANVILLE CORPORATION, et al., Defendants, v. OWENS-CORNING FIBERGLASS CORP., Third Party Plaintiff, v. NICOLET, INC., et al., Third Party Defendants.
    Civ. A. No. 82-C-1287.
    United States District Court, E.D. Wisconsin.
    Feb. 22, 1985.
    Albert J. Goldberg, Milwaukee, Wis., for plaintiff.
    Donald H. Carlson, Milwaukee, Wis., for defendant Johns-Manville Sales.
    Mark S. Young, Milwaukee, Wis., for third Party defendant Owens-Corning Fiberglass.
    Robert H. Riley, Chicago, 111., for third party defendant Owens-Illinois.
    Frank R. Terschan, Milwaukee, Wis., for third party defendant Nicolet, Inc.
    James Samuelsen, Milwaukee, Wis., for third party defendants H.K. Porter Co. and Southern Asbestos.
    Jeffrey A. Schmeckpeper, Milwaukee, Wis., for defendant Eagle-Picher Ind.
    Nancy Rice Gruber, Milwaukee, Wis., for defendant Keene Corp.
    James A. Pitts, Racine, Wis., for defendant Pittsburgh Corning.
    John D. Bird, Jr., Milwaukee, Wis., for defendant Jim Walter Corp.
    Arnold J. Wightman, Madison, Wis., for third party defendant Ryder Industries.
    James P. O’Neill, Milwaukee, Wis., for third party defendant Atlas Asbestos.
    Arthur J. Vlasak, Milwaukee, Wis., for third party defendant Forty-Eight Insulations.
    James P. Brennan, Milwaukee, Wis., for third party defendant Raybestos Manhattan.
    Thomas H. Harrington, Milwaukee, Wis., for third party defendant Fibreboard Corp.
    James G. Doyle, Brookfield, Wis., for third party defendant Standard Asbestos.
    James E. Culhane, Milwaukee, Wis., for third party defendant GAF Corp.
    Frank M. Coyne, Madison, Wis., for third party defendant American Mut. Liability Ins.
    Robert E. Wrenn, Milwaukee, Wis., for defendant Owens-Illinois.
    Donald C. Fellows, Milwaukee, Wis., for third party defendant Rock Wool Mfg.
    Peter S. Nelson, Appleton, Wis., for third party defendant Armstrong Cork Co.
   DECISION AND ORDER

REYNOLDS, Chief Judge.

This is a products liability action arising out of injuries allegedly caused by exposure to asbestos fibers. Jurisdiction is based on diversity. The plaintiff alleges in count four of her complaint that the defendants, in their manufacture and distribution of asbestos products, adhered to practices and customs of the industry respecting the manner of use and warnings to users of asbestos products, and that they engaged in a common enterprise with other manufacturers and purveyors of asbestos products that created an unreasonable risk of injury. Eagle-Picher Industries, Incorporated, a defendant in this action, has moved to dismiss count four on the ground that Wisconsin law does not recognize the theory of enterprise liability. I agree that the doctrine of enterprise liability, as that term is used by the courts of other states, has been rejected by the Wisconsin Supreme Court, and therefore count four should be dismissed.

In Collins v. Eli Lilly Co., 116 Wis.2d 166, 342 N.W.2d 37 (1984), the Wisconsin Supreme Court resolved the issue of whether products liability plaintiffs are held to traditional requirements of proving causation when the manufacturer of the injuring product cannot readily be identified. The plaintiff in Collins was the daughter of a woman who took the drug DES during pregnancy. The defendants were various former manufacturers of DES. Appealing from an order granting summary judgment for the defendants, plaintiff argued that the theories of alternative liability, concerted action liability, enterprise liability, civil conspiracy, and market share liability provided legal bases for her action. The Wisconsin Supreme Court rejected each of these proffered doctrines, and created a risk-contribution theory of liability.

The complaint in the present case refers specifically to an unreasonable risk of harm created by the defendants' adherence to industry customs and practices. Thus, under this claim, the industry-wide standard is the cause of the injury, and the defendants should bear the cost of injuries because they control the industry standards. Yet in the context of asbestosis litigation, as in the context of DES-cervical cancer litigation, the number of potential defendants is so great that the assumption that all the defendants jointly controlled the risk of injury is weak. Id. at 186, 187 n. 8, 342 N.W.2d at 47 n. 8. On this ground, I reject the enterprise liability theory as inapplicable to asbestos-related products liability litigation.

THEREFORE, IT IS ORDERED that Eagle-Picher Industries’ motion to dismiss count four of the complaint is granted.


source: Caselaw Access Project

author: TERENCE T. EVANS, District Judge.

license: Public Domain

text:
    Richard J. HACKETT, Charles B. Pasternak, Frank Rogers, Robert G. Seneff, Sr., Joseph V. Velk, Dale T. and Marion B. Lemonds, William H. Muller, Monroe J. and Judith A. Adrian, Dr. Bernard R. Duke, Dr. Donn D. Fuhrmann, Cesar A. Garvida, Leland C. and Marilyn Hart, Dr. R.J. Jahimiak, Earl D. Kelling, Gary E. Kreul, Dr. Anselm O. Lam, Manfred and Elaine Nuhn, Delmar Rasmusson, John M. and Mary M. Schneider, Omelan M. Sydor and Dr. Carlos C. Yu, Plaintiffs, v. VILLAGE COURT ASSOCIATES, Martin J. Gregorcich, Ronald L. Sloane, Charter Securities Corporation, First Securities Corporation, Equable Securities Corporation, General Investment Sales Corporation, All American Management Corporation, and Gibbs, Roper, Loots & Williams, Defendants.
    Civ. A. No. 82-C-1060.
    United States District Court, E.D. Wisconsin.
    Feb. 26, 1985.

      William Wiseman, Smith & O’Neil, S.C., Milwaukee, Wis., for plaintiffs.
    Bruce Bauer, Quarles & Brady, Milwaukee, Wis., for Gibbs, Roper.
    James O’Neill, Arnold, Murray, O’Neill & Schimmel, Milwaukee, Wis., for Gregoreich.
    Gaar Steiner, Michael, Best & Friedrich, Milwaukee, Wis., for remaining defendants.
   DECISION and ORDER

TERENCE T. EVANS, District Judge.

The defendant securities brokers and defendant Gibbs, Roper, Loots & Williams have filed motions to dismiss certain of plaintiffs’ claims against them.

This is a securities fraud case brought by the limited partners in Village Court Associates, a limited partnership organized to own, acquire, and operate a commercial office complex in Elm Grove, Wisconsin. The defendants include Village Court Associates, two of the general partners, several securities firms who acted as brokers for the limited partnership offerings, and Gibbs, Roper, Loots & Williams, legal counsel to Village Court Associates. T.T. Masonry, Inc., the owner and land contract vendor of the property, and First Bank (N.A.), the holder of certain promissory notes of which plaintiffs are the makers, intervened in the action. Upon the motion of T.T. Masonry, Inc. default judgment on its claims was entered against defendants Village Court Associates, Martin J. Gregorcich and Ronald L. Sloane, and summary judgment was granted against the plaintiffs. On October 29, 1984, it was ordered that T.T. Masonry, Inc. held absolute title to the property.

In the present motions the moving defendants have raised arguments against a number of the plaintiffs’ claims, and as to some, the plaintiffs agree that dismissal is proper. Plaintiffs acquiesce in the dismissal of (1) claims against the securities dealers and the law firm under section 17(a) of the Securities Act of 1933 (15 U.S.C. § 77q(a)); (2) the claims pled against the law firm under section 15 of the 1933 Act (15 U.S.C. § 77o) and section 20 of the 1934 Act (15 U.S.C. § 78t(a)); (3) the claim pled against the law firm under § 551.59(4), Wis.Stats. and the claim pled against the law firm defendant and the broker dealer defendants under 18 U.S.C. § 1961. Two issues remain for decision:

(1) whether the plaintiffs can maintain against the law firm defendant the claim sounding in negligent misrepresentation and malpractice; and
(2) whether plaintiffs’ claims against the law firm defendant and the broker/dealer defendants under section 12 of the 1933 Act (15 U.S.C. §171) must be dismissed.

On the first issue, Gibbs, Roper, Loots & Williams argues that Wisconsin law does not permit third parties to maintain a negligence or malpractice action against an attorney. The law firm represented the limited partnership, not the limited partners; thus the limited partners, it is argued, have no claim against the firm. Plaintiffs, on the other hand, contend that Wisconsin law on this point is evolving and that the claim would be recognized by the Wisconsin courts.

Each side relies on the same cases but reads them differently. Under Wisconsin law a long-standing rule has existed that an attorney is not liable to third parties for acts committed in the exercise of his duties. An exception was recognized for fraudulent misrepresentation. See Goerke v. Vojvodich, 67 Wis.2d 102, 226 N.W.2d 211 (1975).

In Auric v. Continental Casualty Co., 111 Wis.2d 507, 331 N.W.2d 325 (1983), the court recognized another exception: a beneficiary of a will was allowed to sue an attorney for negligence in drafting or supervising the execution of the will. The decision to recognize the exception was based on the state’s “long-standing public policy supporting the right of a testator to make a will and have its provisions carried out.” At 514, 331 N.W.2d 325.

Next, in Citizens State Bank v. Timm, Schmidt & Co., 113 Wis.2d 376, 335 N.W.2d 361 (1983), the court considered the liability of an accountant. The issue was whether an accountant could be held liable for the negligent preparation of an audit to a third party who relied on the report. The conclusion was that the accountant could be held liable.

In some ways Timm parallels the situation in the instant case and the plaintiffs rely heavily on it, stating that no logical distinction can be drawn between accountants and attorneys. The law firm, however, argues that if the Wisconsin court had wanted to hint that the case should be read expansively, their hints would have-been more obvious.

The holding in Timm and the statement of the issues indicate that the court is concerned with accountants only. Nevertheless, in arriving at the result, the court relies on its decision in Auric, supra:

In this state, although the liability of accountants to third parties not in privity has not been examined, the liability of an attorney to one not in privity was recently examined in Auric [citation omitted]. This court concluded that an attorney may be held liable to a will beneficiary not in privity for the attorney’s negligence in supervising the execution of a will, [citation omitted]. Part of the rationale for this decision was that the imposition of liability would make attorneys more careful in the execution of their responsibilities to their clients. At 384, 335 N.W.2d 361.

It is a close question whether the Wisconsin Supreme Court would apply Timm to attorneys. If faced with the issue, my guess (hopefully educated guess) is that it would not. The extension would be a dramatic break with the past. No sufficiently compelling public policy exists in the commercial setting involving the sale of securities to justify an extension of liability here. Certainly there is nothing like the strong public policy relied on in Auric. Sitting in a diversity case I decline, in this situation, to push Wisconsin law beyond its present frontiers. The motion to dismiss the claim is granted.

On the second issue, the law firm and the broker defendants argue first that there is no aider and abettor liability recognized in this circuit under section 12(2) of the Securities Act of 1933 (15 U.S.C. § 111). In addition, the brokers argue that they cannot be held liable as principals under § 12.

The issue as to aiders and abettors is not settled in this circuit. The case on which defendants place heavy reliance, Sanders v. John Nuveen & Co., 619 F.2d 1222 (7th Cir.1980), does not provide clear answers.

Plaintiffs rely on Stern v. American Bankshares, 429 F.Supp. 818 (E.D.Wis.1977), in which the court held that one could aid and abet a section 12 violation if certain conditions were met. Quoting from a Third Circuit case, the court stated that the elements necessary for liability to ensue are:

(1) that an independent wrong exists;
(2) that the aider and abettor know of the wrong’s existence; and
(3) that substantial assistance be given in effecting that wrong. At 825.

Because in this case there is a section 10(b) claim asserted against both the law firm and the broker/dealers, there is little logic in pursuing a section 12 claim under the aiding and abetting theory. When one is dealing with principals, rather than aiders or abettors, section 12 offers the advantage over section 10(b) of not requiring proof of scienter. However, when aiders and abettors are involved, that advantage may be lost.

In Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976), in arriving at its conclusion that a private cause of action under 10(b) would not lie in the absence of intent to deceive, manipulate, or defraud, the court noted the contrast between section 10(b) and other civil remedies in the 1933 Act, including section 12, which allow for recovery based on negligent conduct. The court observed that the sections allowing for recovery based on negligence contained procedural safeguards not found in section 10(b). To allow a claim for negligent conduct to be brought under 10(b), then, would allow a plaintiff to circumvent the procedural requirements of the other statutes. In other words, section 12(2), for instance, imposes procedural requirements on a plaintiff, however, it has an advantage; a defendant can be held liable for negligent conduct. The advantage of section 10(b) is that the procedural requirements are not present, but on the downside, the plaintiff must prove intent to deceive.

However, if a plaintiff chooses to pursue a claim of aiding and abetting a section 12(2) violation, under the rationale of Stem, supra, on which plaintiffs here rely, he loses the advantages of section 12(2). Stem, I believe, eliminates from section 12(2) violations for negligent conduct on the part of aiders and abettors as opposed to principals. As stated in Stern:

Implicit in these cases is that the participation be evidenced by some affirmative action done with knowledge of the fraud and with the intent to assist the violator in effecting the wrong____ At 825.

There would seem to be little point in pursuing both a 10(b) claim and a claim under section 12(2) as an aider and abettor against the same defendants. Accordingly, the aiding and abetting claims are dismissed.

As to the claim against the broker/dealers as principals under section 12, a ruling will be reserved pending a more fully developed record on their position at trial.

IT IS THEREFORE ORDERED that the motion of Gibbs, Roper, Loots & Williams and the broker/dealers is granted in part and denied in part, as indicated herein. The section 12 claims based on aiding and abetting are DISMISSED. Additionally, the claims against these deféndants under section 17(a) of the 1933 Act and the racketeering statute, 18 U.S.C. § 1961, are DISMISSED. The claims against Gibbs, Roper, Loots & Williams under section 15 of the 1933 Act, § 551.59(4), Wis.Stats., and under negligence or malpractice theories are also DISMISSED.


author: ANNE E. THOMPSON, District Judge.

text:
    Joseph AZZOLINA, individually and on behalf of all others similarly situated, Plaintiffs, v. UNITED STATES POSTAL SERVICE, Defendant.
    Civ. No. 83-4867(AET).
    United States District Court, D. New Jersey.
    Feb. 26, 1985.

      Abramoff, Christie, Fox & Zaro by Gary E. Fox, Tinton Falls, N.J., for plaintiffs.
    W. Hunt Dumont, U.S. Atty. by Irene Dowdy, Asst. U.S. Atty., Trenton, N.J., for defendant.
   ANNE E. THOMPSON, District Judge.

This matter is before the court on cross motions for summary judgment. The defendant also moves to dismiss for lack of subject matter jurisdiction. The plaintiff is Joseph Azzolina. He purports to bring his complaint as a class action but has not moved for class certification as required by FED.R.CIV.P. 23. The defendant is the United States Postal Service (“U.S.P.S.”).

The facts appear to be as follows. Azzolina is challenging the selection by the U.S. P.S. of a particular parcel of real estate for a new main post office in Middletown, New Jersey. The existing main post office is located at the intersection of Route 35 and King’s Highway. The United States leases the land for the existing post office from Azzolina Land Corporation. The president of the corporation is Joseph Azzolina, the plaintiff in this matter.

In the spring of 1982, a decision was made to build a new, larger post office to replace the existing one. In June 1982, Seymour Weiner, a U.S.P.S. employee in the Real Estate Division of the United States Postal Service’s Northeast Region, was assigned the task of seeking a suitable site. On June 26, 1982, Mr. Weiner sent to eleven area post offices an advertisement soliciting offers for a site in the general area of the main office. A press release followed. Mr. Weiner also sent approximately 25 flyers with the advertisement to owners of property that might be suitable. A courtesy copy was sent to the township. Mr. Weiner met with Richard Cramer, Middletown’s Planning Director. He asked Mr. Cramer to notify other township officials about the post office relocation project and volunteered to meet with any township representatives and interested groups. He also informed Mr. Cramer that the U.S.P.S. would give priority to any real estate offered by the township itself. Mr. Cramer offered no specific recommendations concerning suitable sites.

Mr. Weiner received eight bids for property located in the desired area. One of the bids was offered by Azzolina Land Corporation and was on King’s Highway, directly across the street from the existing post office. A Site Evaluation Team, which included Mr. Weiner, visited the eight sites in September 1982. The team unanimously selected an unimproved site located on Route 35 close to Harmony Road. This site is adjacent to a Channel Lumber Store near a Sears shopping complex and approximatley 1.4 miles north along Route 35 from the existing post office.

Mr. Weiner sent letters to the state and area clearinghouses designated in the Office of Management & Budget Circular No. A-95 to be notified of certain federal projects. After inquiry, he was informed by the Tri-State Planning Commission that the New Jersey Bureau of State and Regional Planning, Department of Community Affairs (Trenton, New Jersey), was the single body to be notified of such projects in New Jersey. He wrote again to the New Jersey Department of Community Affairs, notifying it that a specific site had been selected and enclosing additional information about the Harmony Road property. Mr. Weiner’s letter was acknowledged, but he received no comments about his selection.

Mr. Weiner determined that the proposed building on Harmony Road did not require an Environment Impact Statement (EIS) or an Environmental Assessment (EA). According to the U.S.P.S. Environmental Protection Handbook, buildings of less than 20,000 square feet are considered not to have a significant environmental impact unless there are extraordinary circumstances. The proposed building is to cover only 8,568 square feet and Mr. Weiner noted no extraordinary circumstances.

Mr. Cramer presented the site selection to the Middletown Planning Board at their meeting on November 10, 1982. Mr. Weiner offered to attend the meeting, but was told that it was not necessary. It appears that the Planning Board did not object to the site, but was concerned about the design of the building, the parking lot and landscaping.

On November 12, 1982, the U.S.P.S. accepted the offer to buy the Harmony Road site. The purchase went to settlement on December 14, 1982, and a press release followed.

However, in early January 1983, Mr. Weiner learned that there were objections to the new post office site. On February 7, 1983, Mr. Weiner and other U.S.P.S. representatives attended a public meeting of the Township Committee. Mr. Weiner advised them that the U.S.P.S. would seriously consider any alternative site that might be offered.

Shortly after the meeting, Mr. Azzolina offered to lease to the U.S.P.S. for $1.00 a year the site that he had originally offered in his bid. The U.S.P.S. hired an independent consulting firm to prepare a Limited Environmental Assessment. In addition, an independent engineering firm prepared a preliminary analysis of site preparation costs for the plaintiff’s site and the Harmony Road site. The estimated preparation costs of the plaintiff’s site were in excess of $600,000, while the costs for the Harmony Road site were estimated at $20,000. On the basis of these reports, the U.S.P.S. did not accept Mr. Azzolina’s offer.

Meanwhile, the Township attempted to find an alternative site. However, on June 21, 1983, Mayor Paul Linder wrote a letter to Mr. Weiner which stated as follows:

I regret to advise you that our proposal to offer this site for your use is not feasible, since it lies within a natural detention basis. Our concerns to obtain a site situated near the present Post Office location that provides easy access are still unresolved, as efforts to locate such a site have been fruitless. Thank you for your patients in waiting to see if we could develop a counter-proposal to your proposed site next to Channel Lumber Company.

Accordingly, Mr. Weiner advised the mayor that the U.S.P.S. would soon be selecting an architect for the facility on Harmony Road.

Mr. Azzolina filed a service complaint with the Postal Rate Commission pursuant to 39 U.S.C. § 3662. The complaint was dismissed on the motion of the U.S.P.S. by an order issued September 2, 1983. The complaint in this court was filed on December 12, 1983. Mr. Azzolina’s claims are based on his assertion that the new post office will not be in the historic center of the township. He asserts that by not filing an EIS, the U.S.P.S. violated the National Environmental Policy Act, 42 U.S.C. § 4321, et seq. (“NEPA”). He also asserts that the U.S.P.S. did not comply with the Intergovernmental Cooperation Act, 31 U.S.C. § 6501, et seq., (“ICA”), and Executive Order 12372, which require federal agencies to consult with state and local representatives in connection with certain federal projects. Finally, the plaintiff claims that the site selection was arbitrary, capricious and an abuse of discretion.

Before implementing a major federal action which will have a significant effect on the quality of the human environment, a federal agency must prepare an EIS. 42 U.S.C. § 4332(2)(C). The Third Circuit has assumed without deciding that the proper standard to apply in reviewing an agency decision not to prepare an EIS is whether the decision was reasonable under the circumstances. Township of Springfield v. Lewis, 702 F.2d 426 (3d Cir.1983).

Azzolina does not contend that the construction of the post office would cause any tangible physical environmental damage. Rather, his claim is that the township is in the process of relocating municipal services from outlying areas to the historic center of the community at King’s Highway and Route 35. Thus, Mr. Azzolina asserts that the new location for the post office would interfere with the “community’s plans for unified municipal services and hopes for a beneficial consolidation of mailing addresses.”

The case law is clear than an EIS is not required unless the primary impact of the project is on the natural environment. Once this threshold requirement is met, secondary socio-economic effects should be considered. However, socio-economic effects alone are insufficient to trigger the requirement of an EIS. Goodman Group, Inc. v. Dishroom, 679 F.2d 182 (9th Cir.1982); Image of Greater San Antonio, Texas v. Brown, 570 F.2d 517 (5th Cir.1978); Breckinridge v. Rumsfeld, 537 F.2d 864 (6th Cir.1976), cert. denied, 429 U.S. 1061, 97 S.Ct. 785, 50 L.Ed.2d 777 (1977); Township of Dover v. U.S.P.S., 429 F.Supp. 295 (D.N.J.1977).

Certainly, there is not always a bright line between physical and socio-economic impact. Thus, courts have required an EIS when the proposed project threatened the character of an area, but only after finding that the federal action “either threatened the physical resources of the area, by posing significant traffic, population-concentration, or water-supply problems, or proposed the irreversible alteration of the historic attributes of rare sites.” Goodman Group, supra, at 185 (and cases cited therein).

In this context, the plaintiff’s reliance on the case, City of Rochester v. U.S.P.S., 541 F.2d 967 (2d Cir.1976), is misplaced. In Rochester, the U.S.P.S. proposed to close an inner-city mail processing facility and open a new facility in a suburban area seven miles out of the city. The Court of Appeals found that by not preparing an EIS, the U.S.P.S. “wholly neglected consideration of possibly major environmental effects associated with this project.” Id. at 973. The court cited the transfer of 1400 employees as having substantial environmental effects including increasing commuter traffic by car between the in-city residents and the new job site; loss of job opportunities for inner city residents who could not make the commute; the moving of employees to the suburbs to be closer to their job, leading to economic and physical deterioration of downtown Rochester; and abandonment of the present downtown facility which could contribute to “an atmosphere of urban decay and blight, making environmental repair of the surrounding area difficult if not infeasible.” Id. In addition, the court noted that a project of this size would have a significant effect on the physical environment of the proposed suburban site. Id. at n. 7. Thus, the court in Rochester was concerned with physical deterioration of the inner city and traffic problems, along with the accompanying socio-economic impact. See also, Township of Dover, supra, (Moving the processing operation of the post office from Dover to Hamilton, New Jersey did not have any physical impact requiring an EIS).

Unlike the situation in Rochester, the plaintiff has cited no physical impact which would result from the proposed move of the Middletown post office 1.4 miles up the road. An inner-city is not being abandoned to decay, employees’ places of residence will not be affected, an historical area is not being demolished and there is not even evidence that traffic patterns will be altered in any significant manner. While the location of the new post office may frustrate the township’s hopes of centralizing all municipal services, there is no physical impact on the existing environment which would trigger the need for an EIS. Since Mr. Azzolina has come forward with no evidence of a primary impact on the physical environment, the U.S.P.S.’s decision that no EIS was necessary was reasonable under the circumstances. Since the court finds that no EIS was required, it will not reach the question of whether the implementing guidelines of the U.S.P.S. violate the NEPA.

The plaintiff also alleges that the U.S. P.S. violated the ICA and E.O. 12372. The relevant portion of the ICA now appears at 31 U.S.C. § 6506(a), (b) and (c). The ICA and the Executive Order create procedural requirements for federal agencies involved in providing federal financial assistance and direct federal development for states and localities. The federal agencies are to provide opportunities for consultation and communication and to make efforts to accommodate state and local concerns.

In making his claim under the ICA, the plaintiff relies on Rochester, supra. The court in that case described the obligations of a federal agency under the ICA as follows:

While the ICA does not expressly provide that the Postal Service necessarily must confer with, much less incorporate the views of, local planning agencies regarding its development decisions, it does require that the local views be ‘fully considered’ for the purposes of ‘plan formulation, evaluation, and review.’ 42 U.S.C. § 4231(b)____ Under the ICA ... the agency has an affirmative obligation to develop a reviewable record, including a list of the factors which support its decision to act in disharmony with local planning objectives, so that a reviewing court can determine whether the agency has acted arbitrarily or capriciously in claiming it has fully considered, but rejected, local planning objectives. (Citations omitted).

541 F.2d at 976.

From the record before the court it appears that the U.S.P.S. was exemplary in fulfilling the mandate of the ICA. Mr. Weiner notified state and local officials of his search for a new site; he consulted with the planning director; when complaints arose, the construction on Harmony Road was tabled for six months until other possibilities could be fully explored. The record is clear why the site offered by Mr. Azzolina was rejected. Moreover, the township itself was unable to propose an alternative site and the mayor thanked Mr. Weiner for his patience. Rather than trampling on local interests, Mr. Weiner appears to have been especially sensitive to the township’s concerns. Simply, there was no alternative site available. Accordingly, the court will grant summary judgment to the U.S.P.S. on the plaintiff’s claim under the ICA.

Finally, the plaintiff asserts that the U.S.P.S.’s site selection was arbitrary and capricious. In deciding this claim, the court relies on Tedesco v. U.S.P.S., 553 F.Supp. 1387 (W.D.Pa.1983), to find that the plaintiff does not have a private right of action to bring service-related complaints in federal district court.

In conclusion, summary judgment is granted to the U.S.P.S. The claim that the U.S.P.S. acted arbitrarily and capriciously is dismissed for lack of subject matter jurisdiction. Finally, Mr. Azzolina’s motion for summary judgment is denied.


author: DIAMOND, District Judge.

text:
    Robert B. GRAHAM, Jr., et ux, Plaintiffs, v. INTERNAL REVENUE SERVICE, Defendant.
    Civ. A. No. 83-30.
    District Court of United States, W.D. Pennsylvania.
    Oct. 30, 1984.

      Rev. Robert B. Graham, Jr., Patricia A. Graham, pro se.
    Thomas A. Daley, Asst. U.S. Atty., Pittsburgh, Pa., for defendant.
   MEMORANDUM OPINION

DIAMOND, District Judge.

Presently before this court is defendant’s motion for summary judgment based upon the plaintiffs’ alleged improper filing of claims for refund and for abatement of interest and penalties on the plaintiffs’ federal income taxes. For the reasons set forth below, the motion will be granted.

The pro se plaintiffs in this case seek a refund for overpayments of their federal income taxes for 1972 and 1973. The plaintiffs also request the abatement of interest and penalties for taxable years 1974, 1975 and 1980.

Claim For Refund

The plaintiffs filed their 1972, 1973, 1974 and 1975 federal income tax returns on September 29, 1980. In 1972 and 1973, the plaintiffs’ tax payments consisted of taxes withheld from plaintiff Robert Graham’s pay. Plaintiffs now seek a refund of $408.97 for 1972 and $1,200.65 for 1973 on the theory that the withheld taxes in those years exceeded their tax liability.

In 1981, the Internal Revenue Service denied the plaintiffs’ claim for refunds for taxable years 1972 and 1973. It alleged that the law does not provide for refunding or crediting tax that was paid more than three years before the filing of the claim.

Pursuant to 26 U.S.C. § 6511(a), any claim for credit or refund of an overpayment of any tax must be filed within three years from the time the return was filed or two years from the time the tax was paid, whichever of such expires later. Furthermore, 26 U.S.C. § 6511(b)(1) provides that no claim for credit or refund shall be allowed or made after the expiration of the period of limitation prescribed in subsection (a) unless a claim for credit or refund is filed by the taxpayer within such period. Finally, 26 U.S.C. § 6511(b)(2) limits those claims for refunds to those taxes paid within three years before the claim is filed. Section 6511(b)(2) provides in pertinent part:

If the claim was filed by the taxpayer during the 3-year period prescribed in subsection (a), the amount of the credit or refund shall not exceed the portion of the tax paid within the period immediately preceding the filing of the claim, equal to 3 years plus the period of any extension of time for filing the returns.

The consequence of the above provisions is to prohibit any refund of taxes that were paid more than three years before the claim was filed. McLeod II v. United States, 82-1 U.S.T.C., para. 9177 (Ct.Cl.1982). In the instant case, the amount of credit or refund which can be made is limited to taxes paid after September 29, 1977, because as indicated above, the plaintiffs did not file their federal income tax returns for 1972 and 1973 until September 29, 1980. In addition, pursuant to 26 U.S.C. § 6513(b), the taxes withheld in 1972 and 1973 are deemed to have been paid on April 15,1973, and 1974, respectively. Consequently, because no amounts were paid during the limitation period, the allowable credit or refund is zero. Craiglow v. United States, 76-2 U.S.T.C., para. 9779 (Ct.C1.1976).

The plaintiffs, however, claim entitlement to the refund despite their late filing based on an alleged representation by Internal Revenue Service personnel that they should postpone filing any tax returns until they were able to file all years due at one time. In McLeod II, supra, the court refused to extend the time for filing a claim for refund based on the plaintiffs’ similar claim that they had been misled by Internal Revenue Service representatives’ statements. The court enunciated its reasoning:

The plaintiffs may be contending that those statements by Service representatives constituted an extension of time for filing the return. The Treasury regulation, promulgated pursuant to the code provision permitting such extensions, I.R.C. § 6081, however, requires that an application for extension must be filed “in writing” with the Internal Revenue Service officer with whom the filing is to be made and on or before the due date of such filing. Treas.Reg. § 1.6081-l(b)(l).

McLeod II, 82-1 U.S.T.C. at para. 9177.

The plaintiffs in the instant case have not satisfied the above-mentioned provisions. Therefore, they are precluded from alleging that the statements by the Internal Revenue Service personnel constituted an extension of time for filing a claim. In addition, as the court stated in McLeod II, “such extensions of time normally are granted to a fixed date and do not permit the open-ended extension the plaintiff’s claim would involve.” McLeod II, 82-1 U.S.T.C. at para. 9177.

Claim For Abatement

The plaintiffs also seek abatement of interest and penalties for taxable years 1974, 1975 and 1980 based on hardship due to lost records and illness within the plaintiffs’ family.

The Internal Revenue Service has moved for summary judgment on the ground that pursuant to 26 U.S.C. § 6404(b), a taxpayer is not permitted to file a claim for an abatement with respect to income taxes. Furthermore, the Internal Revenue Service asserts that the plaintiffs are not entitled to maintain this suit even as one for a refund under 26 U.S.C. § 7422 as no claims for refund have been filed. We agree.

Title 26 U.S.C. § 6404 provides in pertinent part:

§ 6404. Abatements
(a) General Rule. — The Secretary or his delegate is authorized to abate the unpaid portion of the assessment of any tax or any liability in respect thereof, which—
(1) is excessive in amount, or
(2) is assessed after expiration of the period of limitation properly applicable thereto, or
(3) is erroneously or illegally assessed.
(b) No claim for abatement of income, estate, and gift taxes. — No claim for abatement shall be filed by a taxpayer in respect of an assessment of any tax imposed under subtitle A or B.

Under the above provision, it is clear to the court that the Internal Revenue Service cannot be compelled to abate any income tax assessments. Therefore, the plaintiffs are unable to make a claim for abatement of assessments and are thus not entitled to an abatement of interest and penalties for taxable years 1974, 1975 and 1980.

Finally, the plaintiffs having paid the total amount of tax, penalties and interest for taxable years 1974, 1975 and 1980, we find that the plaintiffs are also unable to maintain this suit, even as one for a refund, as no claim for refund has been filed pursuant to 26 U.S.C. § 7422.

From the foregoing, it appears that there is no genuine issue of material fact and that the defendant is entitled to summary judgment under Rule 56, Fed.R.Civ.P., as a matter of law.

An appropriate order will follow.


author: McCUNE, District Judge.

text:
    Ellen D. WITT, Plaintiff, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., a corporation, and Marc L. Gold, an individual, Defendants.
    Civ. A. No. 84-1175.
    United States District Court W.D. Pennsylvania.
    Feb. 6, 1985.

      Richard Finberg, Pittsburgh, Pa., for plaintiff.
    Richard Lane, Pittsburgh, Pa., for defendants.
   MEMORANDUM

McCUNE, District Judge.

Plaintiff, Ellen D. Witt, brings this action against defendants, Merrill Lynch, Pierce, Fenner & Smith, Inc. (hereinafter Merrill Lynch), and Marc L. Gold (hereinafter Gold). Witt, a Pittsburgh resident, opened a cash management account in March, 1982, and an options account in April, 1982, with Merrill Lynch at its Bethesda, Maryland office. Gold was plaintiff’s account executive. Three months later the Bethesda office was closed and Witt’s accounts were transferred by Merrill Lynch to its Washington, D.C. office. Gold remained the account executive.

Witt invested $45,000.00 with defendants, which is alleged to be money from a $50,000.00 inheritance. Plaintiff alleges that from August, 1982, to February, 1984, her account was reduced to $13,500.00 as a result of defendants’ churning and improper choice of investments.

On October 15, 1984, plaintiff filed an amended complaint, adding three counts. Defendants have filed numerous motions relevant to plaintiff’s original complaint, which we will address seriatim.

Motion to Dismiss

Count 4 of plaintiff’s original complaint alleges a manipulative and deceptive scheme by defendants in violation of Title IX of the Organized Crime Control Act, Racketeer Influenced and Corrupt Organizations (RICO), 18 U.S.C. § 1961 et seq. (1983). By letter dated January 11, 1985, counsel for plaintiff concedes that Count 4 must be dismissed as to Defendant Merrill Lynch based upon the recent case, B.F. Hirsch v. Enright Refining Company, Inc., 751 F.2d 628 (3d Cir.1984). In that case, the court held that under 18 U.S.C. § 1962(c), the predicate for Count 4 herein, the “person” subject to liability cannot be the same entity as the “enterprise.” Since Witt alleged that Merrill Lynch is an enterprise, Count 4 must be dismissed against it on the basis of Hirsch.

Defendant Gold argues that Count 4 must be dismissed against him for a variety of reasons. The only argument of merit is the claim that RICO is inapplicable because Gold has not been convicted of the predicate criminal acts. A recent case in the Second Circuit Court of Appeals so holds. Sedima, S.P.R.L. v. Imrex Co., Inc., 741 F.2d 482 (2d Cir.1984). See also Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2d Cir.1984) and Furman v. Cirrito, 741 F.2d 524 (2d Cir.1984) filed the same day.

In October, 1984, the contrary view was expressed in Haroco v. American National Bank & Trust Co. of Chicago, 747 F.2d 384 (7th Cir.1984), by the Seventh Circuit Court of Appeals. The Haroco court rejected Sedima and concluded that a civil RICO plaintiff need not allege an injury to business or property resulting from the underlying acts of racketeering. The Supreme Court granted certiorari in both Sedima and Haroco on January 15, 1985, and has scheduled them for argument together. _ U.S. _, 105 S.Ct. 901, 83 L.Ed.2d 917; _ U.S. _, 105 S.Ct. 902, 83 L.Ed.2d 917.

The Court of Appeals for the Third Circuit has not ruled on this issue, and there is a split among the decisions of the district courts. Compare Gilbert v. Prudential-Bache Securities, Inc., No. 83-1513 (E.D.Pa. January 10, 1984) with In re Catanella and E.F. Hutton and Co., 583 F.Supp. 1388 (E.D.Pa.1984). In light of our court of appeals’ direction that courts adopt a liberal approach to RICO pleadings at the motion to dismiss stage, Seville Industrial Machinery Corp. v. Southmost Machinery Corp., 742 F.2d 786 (3d Cir.1984), we will deny the motion to dismiss Count 4 as to defendant Gold. The Workbench of New York City v. Willow Grove Associates, No. 84-3861 (E.D.Pa. January 15, 1985).

Defendants also move to dismiss Counts 8 and 9 of the original complaint. Count 8 alleges a violation of Rules 405 and 435 of The New York Stock Exchange, and Count 9 asserts a violation of Art. Ill § 2 of the National Association of Securities Dealers (NASD) Rules of Fair Practice. We agree with the court in Jacobson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 605 F.Supp. 510 (W.D.Pa.1984), and adopt its reasoning therein, that there is no private right of action against defendants, either express or implied, under the New York Stock Exchange and NASD Rules. Therefore, we will grant the motion to dismiss Counts 8 and 9.

Motion for Change of Venue

Defendant Gold argues that venue is improper for Counts 5-9. He asserts that the appropriate statutory section to determine proper venue is 28 U.S.C. § 1391(b), not § 1391(a) which relates to jurisdiction based solely on diversity of citizenship. Section 1391(b) provides,

A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside or in which the claim arose, except as otherwise provided by law.

The significance of this section is that it eliminates the alternative of venue where all of the plaintiffs reside, found in § 1391(a).

We find, based upon the facts alleged, that the claim arose in this district. However, even if that determination is in error,, the final phrase of § 1391(b) must not be disregarded. “[Ejxcept as otherwise provided by law” ensures that proper venue established under other statutory authority will be proper also for other related violations alleged. Since venue is proper under SEA and RICO (indeed defendants do not attempt to challenge venue under SEA), venue is also proper for the remaining claims. In re Penn Central Securities Litigation, 338 F.Supp. 438 (E.D.Pa.1972).

We are not inclined to grant a discretionary change of venue. Defendant Gold acknowledged in his affidavit that he transacted business in Pennsylvania by telephone and by the mails to customers of Merrill Lynch. Affidavit 116. Further, defendants have not supported their claim of hardship or inconvenience as required by Plumtree, Inc. v. Stockment, 488 F.2d 754 (3d Cir.1973). Therefore, the motion for a change of venue will be denied.

Motion for More Definite Statement

Defendant Merrill Lynch asserts that plaintiff has not filed a pleading with the requisite clarity and particularity required in Fed.R.Civ.P. 9(b). We note that defendant Gold has not joined in this motion. We agree with plaintiff that the questions raised by this motion are matters for discovery, not pleading. The complaint complies with Fed.R.Civ.P. 9(b) in that it contains sufficient detail to apprise defendants of the claims against them, and allows them to formulate a meaningful response. In re Catanella and E.F. Hutton and Co., supra. Thus, the motion for a more definite statement will be denied.

Motion to Compel Arbitration

When Witt opened her cash management account in March, 1982, and the options account in April, 1982, the customer agreements contained provisions that provide for arbitration of the parties’ claims, should a controversy arise.

Defendants acknowledge in their brief, as they must, that the claims under the SEA and RICO are not arbitrable. Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953); S.A. Mineracao Da Trinadade-Samitri v. Utah International, Inc., 576 F.Supp. 566 (S.D.N.Y.1983), as amended, 579 F.Supp. 1049 (S.D.N.Y.1984). Since the common law claims are factually identical to the securities law and RICO claims, the issue becomes whether the arbitrable claims may be severed.

The Ninth, Eleventh and Fifth Circuit Courts of Appeals have refused to sever and order arbitration “when the facts supporting all of the claims are intertwined.” Byrd v. Dean Witter Reynolds, 726 F.2d 552, 554 (9th Cir.1984), cert. granted, _ U.S. _, 104 S.Ct. 3509, 82 L.Ed.2d 818. See also Belke v. Merrill Lynch, Pierce, Fenner & Smith, 693 F.2d 1023 (11th Cir.1982); Miley v. Oppenheimer & Co., 637 F.2d 318 (5th Cir.1981). The Sixth, Seventh and Eighth Circuit Courts of Appeals have rejected the intertwining doctrine. Surman v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 733 F.2d 59 (8th Cir.1984); Liskey v. Oppenheimer & Co., 717 F.2d 314 (6th Cir.1983); Dickinson v. Heinold Securities, Inc., 661 F.2d 638 (7th Cir.1981). The Court of Appeals for the Third Circuit has not addressed this issue.

We believe that severance is “impractical if not impossible” in this case. Belke v. Merrill Lynch, Pierce, Fenner & Smith, supra, at 1026. Until the Supreme Court resolves the conflict among the courts of appeals, as it soon will since Byrd is pending before it, we are inclined to agree with Byrd and Belke. Because the factual issues in all of plaintiff’s claims appear to be identical, we decline to sever the common law claims and refer them to arbitration. Thus, the motion to compel arbitration will be denied.


text:
    Jane DOE, Plaintiff, v. UNITED STATES DEPARTMENT OF JUSTICE, et al., Defendants.
    Civ. A. No. 83-1499.
    United States District Court, District of Columbia.
    Oct. 31, 1983.

      Joseph B. Scott, David H. Shapiro, Washington, D.C., for plaintiff.
    Paul Blankenstein, Thomas Millet, Dept, of Justice, Washington, D.C., for defendants.
   MEMORANDUM

GESELL, District Judge.

Plaintiff was terminated from her position as a GS-15 attorney at the Department of Justice on May 26, 1981, because of conduct detrimental to the Department. Claiming a “constitutional tort” and denial of due process, she sues the Department and six present or former officials of the Department in both their individual and official capacities, requesting reinstatement, backpay, and $2,500,000 in damages. Defendants have moved to dismiss and the issues have been thoroughly briefed and argued. For reasons set forth below, defendants’ motion must be granted.

It is clear from paragraph 28 of the complaint that plaintiff’s principal allegation against the individual defendants in their individual capacity is that they disseminated false information in legal circles relating to her termination which injured her reputation as a competent, capable and sober attorney. Dismissal is requested on the ground that this claim is barred by the one-year statute of limitations governing defamation.

Plaintiff urges that the complaint specifies a constitutional tort sounding in conspiracy and that the appropriate statute of limitations is the general three-year statute. In the absence of a federal statute governing such a claim the most analogous state limitations period applies. Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 95 S.Ct. 1716, 44 L.Ed.2d 295 (1975). Even accepting plaintiff’s characterization, however, damage to reputation is still central to the claim. McClam v. Barry, 697 F.2d 366 (D.C.Cir.1983). The skill of the pleader cannot change the substance of the case. Viewing the complaint as a whole and applying the rationale of McClam and Church of Scientology of California v. Foley, 640 F.2d 1335 (D.C.Cir.) (en banc), cert. denied, 452 U.S. 961, 101 S.Ct. 3110, 69 L.Ed.2d 972 (1981), the Court holds that the proper statute of limitations to apply is the District of Columbia one-year statute of limitations which governs defamation actions. D.C.Code § 12-301(4) (1981).

The complaint recites that “upon her removal from her positon [sic] with the Department, the officials who are named defendants here allowed, permitted, aided and abetted in the spreading of the charges and the allegations by other officials ...” Complaint ¶ 28 [emphasis added]. Suit was filed on May 25, 1983, two years after plaintiff was terminated. Publication of the allegedly defamatory remarks “upon her removal” thus took place well over a year before suit was filed, and the claim is therefore barred by § 12-301(4).

Plaintiff also seeks recovery against the Department of Justice and its officers for an alleged violation of due process because she was denied a hearing prior to her termination. This claim must also fail as a matter of law. As the detailed allegations of the complaint clearly demonstrate, plaintiff was fully informed as to the charges against her, was presented with affidavits from witnesses detailing her misconduct, and was given an opportunity to respond. Her claim that she was entitled to more elaborate procedural protection prior to the decision to terminate her, including a trial-like hearing at which she could confront her accusers, is without merit. Arnett v. Kennedy, 416 U.S. 134, 94 S.Ct. 1633, 40 L.Ed.2d 15 (1974); Goss v. Lopez, 419 U.S. 565, 581, 95 S.Ct. 729, 739, 42 L.Ed.2d 725 (1975); Foster v. Ripley, 645 F.2d 1142, 1150-51 (D.C.Cir.1981). She was an employee in the so-called “excepted service” and as such had no property interest in continued employment and did not have the full panoply of procedural and substantive remedies which Congress has provided government employees in the competitive service. Congress did not choose to provide such remedies for persons in plaintiffs category in the Civil Service Reform Act and due process does not require that those remedies be available.

Plaintiff attempts to show a violation of the Department’s regulations in her termination, citing regulations of the Office of Professional Responsibility (OPR) dealing with misconduct by employees and the Department’s Employees’ Assistance Program (EAP) designed to provide rehabilitative assistance for alcoholics. These regulations, however, are not applicable to her situation.

OPR was created for the benefit of the Department, not individual employees. Its powers and duties are delineated in 28 C.F.R. § 0.39a, upon which plaintiff relies. That provision, however, grants an employee no right to appeal to OPR for protection and places no obligation on the employee’s superiors to refer charges to OPR before dismissing the employee. Plaintiff cannot complain, therefore, because her superiors chose not to refer the charges against her to OPR for investigation. Moreover, her discharge was approved by a higher official not immediately concerned, consistent with the OPR scheme had it been invoked.

Similarly, the EAP guidelines cited by plaintiff are inapposite to her case. Plaintiff was discharged not for alcoholism but for conduct detrimental to the Department and for lying to her superiors. Indeed, plaintiff denies having an alcohol problem and her work prior to discharge had been free of any alcohol problem. Moreover, the EAP, even if applicable to plaintiffs case, would not have affected the decision to terminate plaintiff. See DOJ Order 1792.1, II 7c (May 15, 1978). Accordingly, plaintiff was not denied due process in the decision to terminate her.

Plaintiff vigorously argues that her termination carries a heavy stigma and that the Constitution affords her a right to a full hearing. A government employee’s liberty interests are implicated where in terminating the employee the government “make[s] any charge against him that might seriously damage his standing and associations in the community” or “impose[s] on him a stigma or other disability that foreelose[s] his freedom to take advantage of other employment opportunities.” Board of Regents v. Roth, 408 U.S. 564, 573, 92 S.Ct. 2701, 2707, 33 L.Ed.2d 548 (1972). However, the Court need not reach the issue of whether the allegations of the complaint, if taken as true, show that plaintiff’s liberty interests have been implicated.

If the government has infringed plaintiff’s liberty interests by directly or indirectly disclosing the reasons for her dismissal, “the remedy mandated by the Due Process Clause of the Fourteenth Amendment is ‘an opportunity to refute the charge.’ [Roth,] 408 U.S., at 573 [92 S.Ct., at 2707].” Codd v. Velger, 429 U.S. 624, 627, 97 S.Ct. 882, 884, 51 L.Ed.2d 92 (1977). Such a hearing to clear one’s name does not encompass a right to reinstatement, back pay or damages, even if the charges are refuted. Plaintiff does not allege that she ever requested a hearing to clear her name and does not seek one by this complaint. Absent a denial of such a request, no violation of due process can be demonstrated, Arnett, 416 U.S. at 157, 94 S.Ct. at 1645 (Rehnquist, J.), and plaintiff’s complaint must fail as a matter of law.

Numerous other issues are raised by defendants’ motion which need not be considered, since the considerations recited above are dispositive. The complaint must be dismissed, and an appropriate Order is filed herewith.

      . The Department informed plaintiff that she was being terminated for drinking beer during a deposition and, on a separate occasion, behaving in an intemperate manner in front of clients and witnesses. Additionally, she was charged with lying to her superiors concerning these two incidents.

      . At oral argument plaintiffs counsel was specifically asked by the Court when the plaintiff contends the most recent "publication” took place. Counsel could provide nothing more than vague allegations of publication at an unspecified time by a Justice Department attorney now deceased, and it is apparent to the Court that plaintiff cannot point to an instance of publication within the statutory period. Plaintiff argues, however, that the statute has not run because the tort alleged is "ongoing” in nature. The Court rejects this view. Defamation occurs on publication, and the statute of limitations runs from that date. See Fitzgerald v. Seamans, 553 F.2d 220, 227 (D.C.Cir.1977).

      . 28 C.F.R. § 0.39a(b) does provide certain protections to "whistleblowers.” No claim is made that plaintiff falls into this category.


author: HATTER, District Judge.

text:
    Jack ABADJIAN, Mark Ball, Joseph Brown, Ben Ceson, John Eghenian, Brad May, Nassir Mazarei, Donald Prouse, Al Rosenstein, Herb Schweizer, Aram Shishmanian, Joe Smiderle, and Stephen Webber, Plaintiffs, v. GULF OIL CORPORATION, a Pennsylvania corporation; Gulf Oil Real Estate Development Corporation, a wholly owned subsidiary of Gulf Oil Corporation; Robert W. Baldwin; J. Roger Kemple; Tom Otjen; Joe Mayers; George Williams; Otto Meyer; Glen R. Jensen, Thrifty Oil Co., a California corporation; and DOES 1 through 100, inclusive, Defendants.
    No. CV 83-6686:TJH(Px)
    United States District Court, C.D. California.
    March 9, 1984.

      Kenneth P. Roberts, Mark E. Lehman, Shapiro, Laufer, Krane, Jacobson & Poseli, Los Angeles, Cal., for plaintiffs.
    Jack D. Fudge, Michael L. Hickok, Ralph Zarefsky, McCutchen, Black, Verleger &

      Shea, Los Angeles, Cal., Donald C. Smaltz, Leighton M. Anderson, Thomas H. Mabie, Smaltz & Neelley, Los Angeles, Cal., for defendants.
   MEMORANDUM OPINION

HATTER, District Judge.

This cause of action arises from the decision of Gulf Oil Corporation (“Gulf”) to withdraw from the Southern California gasoline market and to sell its service stations in the area to Thrifty Oil Company (“Thrifty”). With the exception of plaintiff Herb Schweizer, each plaintiff occupies and operates a gasoline service station under a lease originally executed with Gulf before June, 1978. Plaintiffs can be classified into two sub-groups according to the marketing plan they have adopted from Gulf. Some of the plaintiffs operate their leased service stations under a single supply agreement with Gulf and market fuel purchased from the company using its trademark, trade name and symbol. The remaining plaintiffs operate “unbranded” service stations pursuant to several continuous supply agreements with Gulf. All these stations were included in the service stations Gulf agreed to sell to Thrifty.

The “unbranded” operators allegedly discontinued their use of Gulf trademarks and symbols on the suggestion of the company. Plaintiffs contend that because Gulf had difficulty competing in the Southern California market it decided to create a debranding program for its independent operators. The first amended complaint alleges that in January, 1978, Gulf called a general operators meeting which several plaintiffs attended. (See First Amended Complaint, ¶! 14.) According to plaintiffs, Gulf announced a new marketing program at this meeting, whereby branded Gulf service station operators would debrand their stations and sell Gulf motor fuel without the benefit of trademarks and logos. (See First Amended Complaint, ¶ 14.) In exchange, Gulf allegedly promised the proposed debranded operators an increased supply of motor fuel at reduced rates, if they agreed to the new marketing plan. Id. Consequently, several operators agreed to adopt this plan.

Following the announced debranding program, Gulf prepared to sell its assets in the Southern California market to another oil distributor. In 1979, Gulf initially planned to sell all of its assets located in the Los Angeles Division, which covered the states of Arizona, California, and Nevada, as part of a “package deal.” The available package included Gulf’s asphalt plants, its Santa Fe Springs Refinery, and more than three hundred service stations, including the stations leased to the plaintiffs. By September, 1980, Gulf had accepted an offer from Thrifty covering the leased service stations, (rather than the entire “package deal”) and the parties executed a written agreement (the “1980 Letter Agreement”) acknowledging the proposed transaction.

After Gulf notified the independent operators about the Thrifty sale, the relationship between Gulf and the independent operators deteriorated. In August 1981, plaintiffs filed their original complaint in state court alleging several violations of state and federal law. Most of the counts in the complaint were premised on state law. The state counts involved claims for fraud, violations of the California Franchise Investment Law, estoppel, unfair competition and requests for declaratory and injunctive relief arising from an alleged conspiracy between Gulf and Thrifty to violate plaintiffs’ rights under both state and federal law. Thrifty sought unlawful detainer actions against the leases as their new landlord.

The alleged federal question jurisdiction arises from plaintiffs’ claim that the September, 1980, sales agreement between Thrifty and Gulf terminated plaintiffs’ franchises and obligated Gulf, under the provisions of the Petroleum Marketing Practices Act (the “PMPA”), 15 U.S.G. § 2801 et seq., to offer plaintiffs first refusal rights before closing the Thrifty sale. In opposition, Gulf argues: (1) whether there is a franchise relationship with each plaintiff, and (2) if yes, then the franchise relationship has been assigned to Thrifty as part of the sale of assets transaction. Thus, the defendants claim none of plaintiffs’ rights have been violated under the PMPA.

In November, 1981, defendants first petitioned for removal to federal court asserting that the amended state complaint alleged a federal question under the PMPA. However, this Court remanded the entire case to state court for the following reasons. First, the Court found jurisdiction over Thrifty unattainable under the Act since Thrifty is not plaintiffs’ franchisor. Secondly, the Court found jurisdiction over the claims against Gulf could not be maintained because it could not sever Gulf’s claims from the nonremovable claims against Thrifty. Finally, the Court remanded on the grounds that the Ninth Circuit does not recognize pendent party jurisdiction. See Aldinger v. Howard, 513 F.2d 1257 (9th Cir.1975), aff'd. 427 U.S. 1, 96 S.Ct. 2413, 49 L.Ed.2d 276 (1976).

Defendants now seek a second opportunity at removal. This most recent removal petition, filed October 17, 1983, contends that plaintiffs’ October, 1983, filing of a motion for summary adjudication in state court under the PMPA justifies removal to federal court. At the subsequent removal hearing, the Court requested additional information concerning the merits of defendants’ claim that Thrifty is a franchisor as contemplated under the Act. Defendants submit the Santa Fe Springs Refinery Contract (“SFSR Contract”), which assigns Gulf’s rights in supply agreements with independent dealer-operators to Thrifty, as proof supporting their renewed claim of federal jurisdiction of the counts relating to Thrifty. Thus, the Court faces a reconsideration of its earlier remand order and addresses the issue of defendant’s timeliness in this second removal petition.

Timeliness of the Present Removal Petition

Plaintiffs are generally considered the masters of their complaints and free to decide the forum in which to bring an action. However, Congress has provided a mechanism for a defendant to gain access to a federal tribunal though the plaintiff brings his action in state court. Under the removal statute, a defendant need only show that the removal petition is timely filed and that a federal court has original jurisdiction over the action. 28 U.S.C. §§ 1446(b) and 1446(a).

Section 1446(b) sets forth a thirty day limitation for filing a petition once a basis for removability exists. Here, plaintiffs assert that defendants second removal petition, filed October 17,1983, is untimely and should relate back to the filing date for the original complaint, not the date when plaintiffs filed for summary adjudication in state court. Thus, plaintiffs argue this Court lacks jurisdiction over the petition.

However, the statutory time limit for removal petitions is merely a “formal and modal requirement”; it is not jurisdictional. See Fristoe v. Reynolds Metal Co., 615 F.2d 1209, 1212 (9th Cir.1980); 1A Moore’s Federal Practice and Procedure ¶ 0.168[3.-5] (1974 ed.). Even if the Court adopted the relation back argument, plaintiffs would be estopped from objecting to the timeliness of the removal petition, since defendants’ present petition for removal is based on plaintiffs’ own October 5, 1983 motion for summary adjudication of actions arising “under PMPA.” Id. At a minimum, the court may find that plaintiffs most recent summary judgment motion extends the time period for defendants to file a removal petition. Moreover, the plain language of the removal statute provides that the thirty day period commences after defendants receive “a copy of an amended pleading, motion, order or other paper” from which removability can be ascertained. § 1446(b) (emphasis added). Thus, defendants' petition falls within the necessary time limitation.

Theories for Removability

In a removal action involving multiple defendants, movants can invoke several theories to support federal jurisdiction. They can remove on the grounds that the cause of action arises under federal law, or they can rely on diversity of citizenship, or they can remove under the pendent party theory. 28 U.S.C. § 1441; See also Aldinger v. Howard, 513 F.2d 1257 (9th Cir.1975), aff'd., 427 U.S. 1, 96 S.Ct. 2413, 49 L.Ed.2d 276 (1976); Schroeder v. Trans-World Airlines, Inc., 702 F.2d 189, 191 (9th Cir.1983). In the present action, diversity and pendent party jurisdiction are unavailable to these defendants. The complaint indicates that several defendants, including Thrifty, are California residents or citizens, thus, complete diversity does not exist as to them. In addition, the Ninth Circuit strongly disapproves of pendent party jurisdiction unless the parties can show an independent ground of jurisdiction exists over the claims against the pendent party. See, Benson v. U.S. Small Business Administration, 644 F.2d 1366, 1367 (9th Cir.1981); Libby, McNeill, and Libby v. City National Bank, 592 F.2d 504, 510 (9th Cir.1978); Ayala v. United States, 550 F.2d 1196 (9th Cir.1977). Therefore, this Court’s decision on removability turns on the federal character of the claims against Thrifty.

The Merits of Federal Jurisdiction in this Case

Federal jurisdiction under the PMPA must be decided on the merits because the jurisdictional issue and substantive issues are so intertwined with the resolution of crucial facts. Sun Valley Gasoline, Inc. v. Ernst Enterprises, Inc., 711 F.2d 138, 139 (9th Cir.1983). In PMPA cases, the Ninth Circuit has instructed the district courts to avoid dismissal for lack of subject matter jurisdiction solely on the face of the pleadings. Id. at 139-40. Relying on the Sun Valley holding, defendants contend the Ninth Circuit has prohibited jurisdictional fact finding under PMPA without a trial on the merits. Thus, they argue that by asserting a federal claim against Thrifty on the face of their papers plaintiffs have created a jurisdictional issue which must be resolved at trial.

This Court does not read the holding of Sun Valley as broadly as defendants wish. In ruling on a challenge to subject matter jurisdiction, a district court is ordinarily free to hear evidence regarding jurisdiction before trial, resolving factual disputes where necessary. Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir.1983); Thornhill Publishing Co. v. General Telephone and Electronics Corp., 594 F.2d 730, 733 (9th Cir.1979). Courts have been careful to distinguish between the standards of jurisdictional analysis under motions to dismiss and jurisdictional fact finding in summary judgment proceedings. Augustine, 704 F.2d at 733-34. In Sun Valley, the district court dismissed, pursuant to Fed.R.Civ.P. 12(h)(3), ten counts of the complaint that alleged PMPA violations on the grounds defendant noted the absence in the complaint of an allegation regarding defendants ability to use a refiner’s trademark, commonly referred to as “branding authority.” Sun Valley, 711 F.2d at 139. Later, the court of appeals refused to uphold the dismissal of the PMPA claims without specific jurisdictional fact finding by the court under the Act. Id. at 141. However, the court of appeals left open the district court’s ability to resolve PMPA jurisdictional questions in summary judgment proceedings by noting, “[w]e do not exclude the possibility that these claims may be suitable for Rule 56 disposition.” Id.

In an exemplary pretrial proceeding where the party seeking dismissal prevailed, the court had an opportunity to develop substantial evidence on the interrelated jurisdictional and factual issues under the rigorous standards of Rule 56. See Thornhill, 594 F.2d at 735-36 (Sherman Act case in which Ninth Circuit affirmed summary judgment on the issue of interstate commerce under the Act after reviewing deposition testimony and exhibits). Similarly, in the instant case, this Court has had an opportunity to conduct an extensive review of the record and of matters outside the pleadings to resolve the material issues. The parties seeking remand will prevail on the basis of the undisputed material facts and underlying law. However, my decision is limited solely to the questions relating to jurisdiction over the claims against Thrifty.

The purpose of PMPA is to establish “minimum Federal Standards governing the termination and nonrenewal of franchise relationships for the sale of motor fuel by the franchisor or supplier of such fuel.” Checkrite Petroleum, Inc. v. Amoco Oil Co., 678 F.2d 5, 7 (2d Cir.1982), quoting S.Rep. No. 95-731, 95th Cong., 2d Sess. 15, reprinted in [1978] U.S.Code Cong. & Ad.News 873, 873 (emphasis added). Congress enacted PMPA to protect franchisees from arbitrary or discriminatory termination of their franchises. S.Rep. No. 95-731, supra at 874. The Act limits the termination of any franchise except on the specifically enumerated grounds and upon compliance with notice requirements. 15 U.S.C. §§ 2802(a), (b)(1). Crucial elements that extend jurisdiction under the Act are the existence of a franchise relationship and the occurrence of an event within the regulatory scheme of the statute. See 15 U.S.C. § 2802.

The status of Gulf as plaintiffs’ initial franchisor is undisputed. Both the branded and unbranded dealers operated their stations under supply agreements with Gulf which predated June, 1978. Even the unbranded dealers sold Gulf gasoline under the company’s trade name before the new marketing program in 1978. Thus, the branded dealers operate under a franchise agreement described in 15 U.S.C. § 2801(1)(A); the unbranded dealers operate under a franchise within the reach of 15 U.S.C. § 2801(l)(B)(ii)(II). The triggering event for PMPA jurisdiction over these dealers arose when Gulf allegedly terminated the dealers franchises. The claims against Thrifty arises from the same nucleus of facts. Therefore, defendants can properly remove this action only if independent grounds of federal jurisdiction can be established over Thrifty.

The absence of an independent franchise agreement between Thrifty and plaintiffs defeated defendant’s first attempt at removal. Defendants now contend that Gulf’s assignment under the SFSR contract to Thrifty created a “franchise relationship” between Thrifty and plaintiffs. However, the record lacks any evidence of a subsequent contract between Thrifty and plaintiffs; the record lacks any proof of a marketing plan by Thrifty for plaintiffs; finally, the parties do not mention the existence of any franchise fee imposed upon plaintiffs by Thrifty. All of the above items are essentially components of a franchise agreement. See e.g. Cal.Corp.Code § 31005 (West 1977); See also 34 Cal.Jur.3d, Franchise, Distribution, and Dealership Contracts § 1 (3d ed. 1977).

Moreover, the issue of Thrifty’s lack of Gulf trademark rights is undisputed. Thrifty generally asserts that the SFSR contract included “branding authority or trademark rights”, but it points to the specific terms of that agreement noting, “Although, in general, ‘Gulf indicia’ are excluded from the sale under paragraph 2.07 of the SFSR Contract____” See Thrifty’s Supplemental Memorandum In Support of Jurisdiction at 4. This Gulf indicia represents the trademark rights essential to finding a valid franchise relationship. See 15 U.S.C. §§ 2801(l)(B)(i) and (2).

In defining the “franchise relationship” under PMPA, the Congress recognized the interrelated nature of the leased premises with the motor fuel supply agreement in petroleum franchises. The Senate noted:

The franchise relationship in the petroleum industry is unusual, in fact perhaps unique, in that the franchisor commonly not only grants a trademark license, but often controls, and leases to the franchisee, the real estate premises used by the franchisee. In addition, the franchisor almost always is the primary, even exclusive, supplier of the franchisee’s principal item: motor fuel.

S.Rep. No. 95-731, 95th Cong., 2d Sess. 17, reprinted in 1978 U.S.Code Cong. & Ad. News 873, 875. Thus, it appears at first glance that Congress intended PMPA to reach every motor fuel supply agreement where the supplier is the primary source of fuel or the exclusive source. This broad reading of the statute could bring Thrifty within the definition of a franchisor “but for” the limiting language noted further in the legislative history. “The term ‘franchise’ is defined in terms of a motor fuel trademark license. It should be noted that the term is applicable only to the use of a trademark which is owned or controlled by a refiner.” Supra at 888 (emphasis added).

Although the Ninth Circuit remains silent on whether branding authority is essential to the existence of a franchise relationship under PMPA, see Sun Valley, 711 F.2d at 141, most courts favor the express need for granting trademark use to support a finding of a franchise relationship. See Lasko v. Consumers Petroleum of Connecticut, Inc., 547 F.Supp. 211, 219 (D.Conn.1981) (implying necessity of branding authority), and Blackwell v. Power Test Corp., 540 F.Supp. 802, 807 (D.N.J.1981) (SAME), aff'd. mem., 688 F.2d 818 (3d Cir.1982). Given the emphasis placed on the use of trademark rights in PMPA cases, only two alternative theories could possibly provide jurisdiction over Thrifty absent branding authority by Gulf. Either the Court must find (1) a valid assignment of the franchise relationship by Gulf to Thrifty, or (2) it must find that Gulf and Thrifty’s sales transaction involved a less than arms length deal between the parties. See Bsales v. Texaco, Inc., 516 F.Supp. 655, 661 (D.N.J.1981) (cited for the latter proposition).

The legislative history of PMPA allows the assignability of a. petroleum franchise as provided by state law. S.Rep. No. 95-731, supra at 901. In the absence of an express agreement, the applicable California statutes “clearly manifest a policy in favor of the free transferability of all types of property, including rights under contracts.” Farmland Irrigation Co. v. Dopplmaier, 48 Cal.2d 208, 222, 308 P.2d 732, 740 (1957); See Cal.Civ.Code § 1458 (West 1982); see also, Cal.Comm.Code § 2210 (West 1968). But, a closer analysis of the PMPA legislative history reveals a district court’s ability to invoke its equitable powers and preempt state law on assignability to comply with the overall scheme of the Act:

[Tjhere is an area in which Federal termination provisions under this legislation and state-granted rights of assignability of a franchise may conflict. It is intended that the harmonizing of these competing interests be left to judicial balancing of competing equities on a case-by-case basis. No hard and fast statutory rule would accomplish the desired goal of harmonizing the competing statutory objectives as equitably as application of general principles of equity to specific fact situations.

S.Rep. No. 95-731, supra at 901.

Under PMPA, a franchisor’s withdrawal from a relevant geographic market can amount to a termination of non-renewal of the franchise agreement that triggers both notice and first refusal rights for franchisors. See 15 U.S.C. § 2802(b)(2)(E). The undisputed facts indicate that Gulf intended to sell all its assets in the Los Angeles Division and to withdraw from the highly competitive Southern California gasoline market. The subsequent actions taken to sell plaintiffs’ leased premises and the Santa Fe Springs Refinery are incidental to Gulf’s stated purpose: market withdrawal. For this Court to find that the “package deal” involving Thrifty amounted to an assignment of the “franchise relationship,” and not a market withdrawal, would result in the complete circumvention of the Act. Thus, it is my determination view that Thrifty cannot hold the same status as a franchisor to these plaintiffs as held by Gulf. At most, Thrifty may have an assignment of the leased premises under state law if Gulf complied with PMPA in the first instance.

As a general rule, a contractual relationship between the individual parties is a precondition for jurisdiction under PMPA. See Bsales, 516 F.Supp. at 662 N. 4. However, a second alternative theory for PMPA jurisdiction over a noncontractual third party such as Thrifty involves a judicially recognized, narrow exception to the franchise relationship rule. In Bsales, the district court implied in dicta that through an “extraordinary situation” a landlord of premises used in a franchise operation may owe certain duties to the franchisee, even though the landlord is not a franchisor. 516 F.Supp. at 661. The district court noted:

[I]f the landlord and the franchisor enter into a lease which is not the product of arm’s length negotiations and that lease expires and is not renewed, then the franchisee may have a cause of action [under PMPA] against both the franchisor and the landlord. Similarly, the absence of an arm’s length relationship between the franchisor and the landlord at the time that an option to renew a lease is under consideration might give the franchisee rights against both parties, if the option is not exercised.

Id. at 661 (emphasis added).

In Bsales, similar to the allegations in this case, plaintiffs alleged a conspiracy existed between the franchisor and the landlord to deprive plaintiffs of their rights under PMPA. The district court did not find a conspiracy between the parties in the absence of “direct and explicit evidence of such a conspiracy.” 516 F.Supp. at 662. The court concluded that an inference of a conspiracy could not be made merely by an allegation that the defendants negotiated with their own interest in mind, absent proof that the franchisor exercised control over the new landlord. Id. at 662-63. Even a party’s negotiating in bad faith is not actionable under this theory. Id. at 663 n. 8.

The instant plaintiffs argue that defendants conspired to terminate their service station leases and deprive plaintiffs’ of their first refusal rights under PMPA. (See First Amended Complaint 1133b.) The only evidence plaintiffs allege establishes a conspiracy between defendants Thrifty and Gulf is the SFSR contract and the September 1980 letter agreement, but the undisputed facts demonstrate these agreements resulted from vigorous negotiations to purchase Gulf’s Los Angeles Division assets after Gulf decided to withdraw from that market. Although Gulf and Thrifty entered into a sales agreement that included the stations leased by plaintiffs, this Court finds plaintiffs have offered no evidence establishing an intent by either defendant to circumvent the Act. Nor is there any evidence that Gulf in any way controlled Thrifty’s actions during their negotiations or anytime afterwards. While the complaint properly alleges, inter alia, Gulf failed to comply with the notice, termination, and first refusal rights of plaintiffs as required by PMPA, these allegations are unrelated to any proven conspiracy between Gulf and Thrifty.

CONCLUSION

Having decided that the claims against Thrifty do not arise under PMPA, the Court no longer has an independent basis of subject matter jurisdiction to entertain plaintiffs state law claims against Thrifty. Limitations on the Court’s power to exercise “pendent party” jurisdiction and the interrelatedness of the claims against all the defendants requires this Court to remand the entire case. Thus, the motions of plaintiffs for remand to state court are granted and the Court does not make any further findings.

      . Plaintiff Herb Schweizer was one of several Gulf dealers to whom Gulf offered a right of first refusal to acquire its interest in the service station. Schweizer accepted Gulf’s offer and thus has no claim against it for noncompliance with the Petroleum Marketing Practices Act, 15 U.S.C. § 2801 et seq.

      . These plaintiffs are catagorized as "branded dealers.” They are identified as Jack Abadjian, Brad May, and Al Rosenstein.

      . Since the Court has already determined that the claims against Gulf and Thrifty are inextricably intertwined, removability under 28 U.S.C. § 1441(c) is also unavailable to these defendants. Section 1441(c) provides that a separate and independent federal claim may be joined with otherwise nonremovable state claims, thereby permitting removal of an entire action to federal court.

      . In addition, Barry W. Berkett, Vice President and Assistant Secretary of Thrifty Oil Co., testified through deposition testimony that he was unaware of any of the plaintiffs ever purchasing motor fuel from Thrifty as of December 2, 1983 (Berkett deposition at 16).

      . Thrifty has not, as of December 2, 1983, granted any of the plaintiffs the right to utilize the Gulf trademark (Berkett deposition at 36).

      . A contract may be nonassignable if the duties imposed upon one party is of such a personal nature that their performance by someone else would in effect deprive the contracting party of the benefit of its bargain. See Dopplmaier, 48 Cal.2d at 222, 308 P.2d at 740. It is possible that a franchise agreement involving trademark rights is such a contract, however, the present decision rests strictly on an interpretation of the federal statute involved in this case leaving questions of franchise agreement assignability to the state court for its resolution.

      . See I. Roger Kemple’s deposition testimony at 78-79; 99-100.


author: ROBERT H. HALL, District Judge.

text:
    Leland D. PALMER, Plaintiff, v. W. Harold NEAL, Defendant.
    Civ. A. No. C83-1694A.
    United States District Court, N.D. Georgia, Atlanta Division.
    March 20, 1984.

      Thomas J. Knight, Anniston, Ala., and Ray L. Weber, Akron, Ohio, for plaintiff.
    Van C. Wilks, Carrollton, Ga., for defendant.
   ORDER

ROBERT H. HALL, District Judge.

Plaintiff has brought this action seeking damages for defendant’s alleged fraud and breach of contract. Jurisdiction is predicated upon diversity of citizenship, 28 U.S.C. § 1332. Pursuant to this court’s order of December 19, 1983, the case has been resubmitted on defendant’s motion for judgment on the pleadings. In addition, defendant has now moved for an enlargement of the discovery period.

FACTS

On a motion for judgment on the pleadings the moving party concedes, for the purpose of the motion only, the accuracy of the well-pleaded factual allegations of his/her adversary’s pleadings. In addition, the factual allegations of the answer are taken as true where and to the extent that they have not been denied or do not conflict with those of the complaint. Stanton v. harsh, 239 F.2d 104 (5th Cir.1956). The following recital of facts is taken, therefore, from plaintiff’s complaint and, where appropriate, from defendant’s answer.

In July 1977 plaintiff and defendant entered into a partnership agreement to manufacture and sell protective spraying equipment. The parties agreed that plaintiff would be a 10% owner of the partnership and defendant a 90% owner. In September 1977 defendant incorporated the partnership and plaintiff was given an oral assurance that he would be given 10% of the stock of the corporation. The assets of the partnership were used as capitalization for the corporation. Plaintiff has never received any stock in the corporation.

In March 1978 plaintiff and defendant entered into an oral agreement to invent and construct an apparatus (ultimately known as “Mobile Apparatus for Spraying Protective Coatings”). By the terms of the agreement, each would be a joint owner of any resulting patent. The parties did develop the apparatus and they completed an application for a patent, declaring themselves to be joint inventors. Plaintiff and defendant worked closely with their patent attorney, Robert Linne, and they requested that he file their application.

On August 24, 1978, plaintiff ended his association with the defendant “due to misunderstandings and difficulties which had developed between the parties” (Plaintiff’s Complaint, 119). After ending his association with defendant, plaintiff became an employee of a company which shortly thereafter became a direct competitor of defendant’s company. (Defendant’s Answer, 11 s 4, 9, 14 and 19). One day after plaintiff left, defendant executed a new patent application declaring himself to be the sole inventor of the apparatus. Plaintiff has never executed nor signed any document assigning his ownership of the patent to any person. On January 19, 1982, a patent for the apparatus was issued solely to defendant. In May 1982 plaintiff first learned that defendant had caused the application to be filed in his name.

On August 11, 1983, plaintiff filed the present action alleging fraud and breach of contract. Defendant, on September 30, 1983, moved for judgment on the pleadings and for the taxation of attorney’s fees to plaintiff and/or plaintiff’s counsel. By order dated December 19, 1983, this court directed the parties to submit additional briefs addressing specific questions raised by the motion. The parties have now filed their additional briefs and upon consideration of the briefs, the court, for the reasons stated hereinafter, GRANTS defendant’s motion for judgment on the pleadings. Because of this ruling the court need not consider defendant’s motion for an enlargement of the discovery period.

DISCUSSION

Plaintiff has brought his complaint in three counts, Count One alleges fraud, Count Two and Three allege breach of contract. As in the earlier order the court will consider the counts separately.

I. Count One

Plaintiff initially asserted that the allegations of Count One support a cause of action for fraud. In its December order this court held that plaintiff had failed to allege the essential elements of a fraud action in Count One. Rather than dismissing Count One, however, the court directed the parties to brief three issues in this regard: (1) what, if any, cause of action does the first count establish; (2) what is the applicable statute of limitation for such action; and (3) should such statute be tolled under a theory of fraudulent concealment.

In his supplementary brief plaintiff continues to argue that Count One establishes fraud. Again the court rejects this theory; plaintiff has simply failed to allege the elements which would give rise to a cause of action for fraud by defendant on plaintiff. Most notably, plaintiff has failed to allege any misrepresentations made by defendant to plaintiff. The fact that defendant may have perpetrated a fraud on the United States Patent Office, by failing to name all inventors, may give rise to an action by the Patent Office. However, absent any misrepresentations (either by words or acts) to plaintiff, or reliance thereon, plaintiff does not have a cause of action for fraud.

In his supplementary brief plaintiff has also asserted that Count One establishes a cause of action for conversion of plaintiff’s property interest in the patent. The court need not decide the merits of this argument; even if plaintiff has stated a cause of action for conversion, such action is barred by the applicable statute of limitation.

The applicable statute of limitation for an action in trover to recover for wrongful conversion is four years from the date the cause of action arose. Ga. Off’l Code Ann. § 9-3-32 (1982). The cause of action arose on September 14, 1978, the date on which the patent application was filed in the Patent Office, absent plaintiff’s name. The proscribed period clearly expired before plaintiff instituted suit on August 11, 1983. The issue, therefore, is whether the statute of limitation was tolled by fraud on the part of the defendant.

Ga. Off’l Code Ann. § 9-3-96 (1982) provides that “[i]f the defendant ... [is] ... guilty of fraud by which the plaintiff has been debarred or deterred from bringing an action, the period of limitation shall run only from the time of plaintiff’s discovery of the fraud.” In this regard plaintiff contends that defendant acted fraudulently by failing to inform plaintiff that he (defendant) had applied for the patent in his name only.

As this court made clear in its December order, only actual fraud (i.e., involving moral turpitude) will toll the statute of limitation. Shipman v. Horizon Corp., 245 Ga. 808, 267 S.E.2d 244 (1980). Concealment can prevent the running of the statute of limitation but the concealment must be by a positive act; mere silence is not sufficient to toll the statute. “[T]here must be something more than a mere failure, with fraudulent intent, to disclose such conduct, unless there is on the party committing such wrong a duty to make a disclosure thereof by reason of facts and circumstances, or the existence between the parties of a confidential relation.” Id. at 809, 267 S.E.2d at 246 (emphasis added) (citing American Nat’l Bank v. Fidelity & Deposit Co., 131 Ga. 854, 68 S.E. 622 (1908)). The issue, therefore, is whether defendant had any duty to disclose his actions to plaintiff. It was this issue upon which the court requested further briefing.

In response to the court’s request for further briefing plaintiff argues that a fiduciary relationship existed between the parties and that, therefore, defendant was under a duty of disclosure to plaintiff. This court does not agree. Assuming, arguendo, that a fiduciary relationship did exist during the term of the partnership, such relationship was clearly terminated when plaintiff ended his association with defendant on August 24, 1978. This conclusion is supported by plaintiff’s statement that the association ended “due to misunderstandings and difficulties which had developed between the parties.” (Plaintiff’s Complaint, ¶ 9). The only concealment which plaintiff alleges as a basis for tolling was defendant’s failure to disclose that he (defendant) had filed an application in his sole name. At the time defendant failed to disclose this fact he had no duty of disclosure because any possible fiduciary relationship had ended. For this reason there is no basis for tolling the statute of limitation.

II. Count Two

In Count Two plaintiff alleges that defendant breached an oral agreement, made on or about September 1977, to provide plaintiff with 10% of the stock of the corporation known as Neal Manufacturing, Inc. Defendant, conceding only for this motion that such an agreement existed, contends that the statute of limitation has run on this cause of action. Ga. Off’l Code Ann. § 9-3-25 (1982) provides a four year statute of limitation on actions for breach of an oral contract.

In determining whether the statute of limitation provides a bar to this action the court must decide when the statutory period began to run. Plaintiff’s complaint makes no reference to a date by which plaintiff was to receive such stock and, as plaintiff points out, a corporation can issue stock at any time. For this reason the court directed the parties to brief the following issue: as of what date does a cause of action accrue on a debt that is not payable upon a specified date.

Plaintiff asserts that no cause of action accrues until a denial of the obligation is made by the debtor (here, the date defendant filed his answer — September 6, 1983). In contrast, defendant contends that the cause of action accrues when the debt arises, in this case September 1977.

The cases cited by defendant are persuasive authority for defendant’s proposition. In Teasley v. Bradley, 110 Ga. 497, 35 S.E. 782 (1900) the plaintiff loaned her brother-in-law money; there was no written evidence of the transaction and no agreement as to the time of repayment. The defendant raised the defense of the statute of limitation. After trial the defendant alleged error in a jury charge that stated that the statute of limitation did not run until a demand was made for the money. The Supreme Court of Georgia reversed, holding that the charge was error and that the statute of limitation began to run immediately when the loan was made.

Citing Teasley, the Georgia Court of Appeals, in Mallin v. Spickard, 103 Ga.App. 562, 120 S.E.2d 128 (1961), held that money loaned pursuant to an oral contract containing no agreement as to the time of repayment was due immediately, and that the statute of limitation period began to run at once against the promisee.

In a case extremely similar to the present case, Haswell v. Haswell, 84 Ga. App. 651, 67 S.E.2d 148 (1951), the Court of Appeals reached the same decision regarding the statute of limitation. In Haswell plaintiff sued on a written contract under which defendant was to execute his note for $360 to plaintiff. Plaintiff alleged that defendant had failed to execute any note. Assuming that the instrument was a binding, enforceable contract the court noted that “no time was specified therein as to when performance was due thereunder. Under such circumstances, performance was due and a right of action, if any, thereon accrued immediately upon the signing thereof by the parties.” Id. at 652, 67 S.E.2d at 149.

In the present case this court holds that, as no time was set for performance, the cause of action accrued at the date of the oral agreement, September 1977. Any action on this agreement is barred by the four year statute of limitation.

III. Count Three

In Count Three plaintiff alleges that defendant breached an oral agreement which provided that plaintiff and defendant would be joint owners of any patent issued for the apparatus. Again, because this agreement was oral, Ga. Off 1 Code Ann. § 9-3-25 (1982) is the applicable statute of limitation and four years is the proper statutory period. Any breach of this agreement by the defendant occurred on August 25, 1978, when defendant executed the patent application naming himself as sole inventor. Clearly four years elapsed before plaintiff instituted suit. The issue here, as in Count One, is whether the statute of limitation was tolled by fraud on the part of the defendant. For the reasons stated in the discussion of Count One, supra pp. 885-886, this court holds that the statute of limitation was not tolled and that, therefore, plaintiffs claim under Count Three is barred by the four year statute of limitation.

IV. Attorney’s Fees

In his motion for judgment on the pleadings defendant requests an award of attorney’s fees. The general rule in regard to attorney’s fees is that they are not taxable as costs. One clear exception to this rule is when a statute authorizes an award of fees. Because defendant has cited no statutory basis for an award in this case the court must conclude that defendant is relying on the “bad faith” exception to the general rule. Under this theory courts have assessed fees when the litigation was perceived as having been brought in bad faith. The fact that this court has held that plaintiff’s claims are barred by the statute of limitation does not require a finding that plaintiff instituted suit in bad faith. Defendant’s request is DENIED.

In summary, the court:

1) GRANTS defendant’s motion for judgment on the pleadings as to all counts of plaintiff’s complaint;
2) DENIES defendant’s motion for attorney’s fees; and
3) Does not reach defendant’s motion for extension of the discovery period.

The court’s action terminates this case.

      . Defendant’s Answer (¶ s 4, 14 and 19) alleges that any agreements were oral; this allegation does not conflict with any of plaintiff’s assertions and is, therefore, taken as true for the purpose of this motion.

      . The situation would be entirely different if plaintiff had alleged, for instance, that at the time defendant agreed that the parties would apply as joint inventors defendant had no intention of doing so. This could constitute a misrepresentation to plaintiff and thereby establish a cause of action for fraud.

      . The Patent Office can bring suit to cancel the patent due to fraud. United States v. Bell Tel Co., 128 U.S. 315, 9 S.Ct. 90, 32 L.Ed. 450 (1888). However, no private right of action exists against a patentee for fraudulent procurement of a patent. United States v. Pfizer Inc., 560 F.2d 323, 193 U.S.P.Q. 530 (8th Cir.1977). A private party may bring an antitrust action based on fraudulent procurement if the plaintiff can establish the elements of a violation of § 2 of Sherman Act. Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965). Although the present plaintiff is requesting treble damages there have been no allegations of monopolization as required by Walker.

      . "a) Fraud rnay be actual or constructive.
      b) Actual fraud consists of any kind of artifice by which another is deceived. Constructive fraud consists of any act of omission or commission, contrary to legal or equitable duty, trust, or confidence justly reposed, which is contrary to good conscience and operates to the injury of another.
      c) Actual fraud implies moral guilt; constructive fraud may be consistent with innocence.”
      Ga. Off'l Code Ann. § 23-2-51 (1982).