author: ALLEN SHARP, Chief Judge.

text:
    Richard MAZANEC, Barbara Mazanec, Patricia Mazanec, Susan Mazanec, Angela Mazanec, and the Greenhouse Academy, a not-for-profit corporation, Plaintiffs, v. NORTH JUDSON-SAN PIERRE SCHOOL CORPORATION, James F. Moore, Superintendent of North Judson-San Pierre School Corporation, Steven J. Moerlein, Prosecuting Attorney for the 44th Judicial Circuit of the State of Indiana, Marilyn Mabry, State Attendance Officer for the State of Indiana, each of whom is sued individually and in his/her official capacity, Defendants.
    No. S 81-219.
    United States District Court, N.D. Indiana, South Bend Division.
    Aug. 7, 1985.

      Richard and Barbara Mazanec, pro se.
    Richard LaSalvia, South Bend, Ind., for plaintiffs.
    George B. Huff, Jr., David Michael Wall-man, Deputy Attys. Gen., Indianapolis, Ind., B. Patrick Maloy, Knox, Ind., for defendants.
   MEMORANDUM AND ORDER

ALLEN SHARP, Chief Judge.

I.

This case has now been the subject of a published opinion of this court in Mazanec v. North Judson-San Pierre School Corporation, 552 F.Supp. 873 (1982), and two published opinions by the United States Court of Appeals for this Circuit. See Mazanec v. North Judson-San Pierre School Corporation, 750 F.2d 625 (7th Cir.1984) and, most recently, on May 31, 1985, now found at 763 F.2d 845 (7th Cir.1985). It is with the mandate contained in that last opinion of the Court of Appeals that this court will now attempt to comply. In the interest of fairness and justice this court again held oral argument in this case on the 19th day of July, 1985, in South Bend, Indiana and at the request of the plaintiffs agreed to entertain supplemental briefing and proposed findings in order to comply with both Rule 52 of the Federal Rules of Civil Procedure and the mandate of the Court of Appeals. This will also reflect the necessary findings and conclusions as required by Rule 52.

From the last proceedings held in this court it is readily apparent that counsel for these plaintiffs retained a very expansive view of the issues which remain in this case. Counsel for the plaintiffs took the view that the most recent opinion of the Court of Appeals written by Judge Posner decides solely the question of abstention and the remaining comments therein are merely dicta and do not constitute the law of this case. While this court does not entertain such a restrictive view of that opinion it will in the interest of caution deal with all of the issues that are deemed to remain the proper subject of the decision of this court based on the proceedings and record in this case.

Plaintiffs counsel would have this court issue an injunction that is essentially advisory to all who are in positions of prosecutorial authority in the State of Indiana as to what approach should be taken in cases involving the education of school age children in the so-called home school setting. Such an effort would be wholly advisory and is not mandated by the record in this case. As the record here well illustrates, the factual patterns vary and each prosecutor must examine each case in light of the constitutional and statutory values involved. It is not for this court to use its extensive injunctive authority to issue such a manual for state prosecutors.

It was explicitly conceded at the last oral argument in this court that no damage claim is here made against David M. Geisler as Prosecuting Attorney of the 44th Judicial Circuit of the State of Indiana (Starke County) or his successor in office. Prosecutor Geisler and his successor in office are certainly entitled to immunity from any damage claim under the clear and explicit teaching of Imbler v. Packtman, 424 U.S. 409, 96 S.Ct. 984, 47 L.Ed.2d 128 (1976) and its progeny. The plaintiffs do argue that the present prosecuting attorney of the 44th Judicial Circuit of the State of Indiana remains in this case for purposes of injunctive relief which is prospective in nature. It is beyond any dispute whatsoever that any and all criminal charges that were brought against Barbara Mazanec by the prosecuting authorities of the State of Indiana which in any way relate to the subject matter of this case have either been dismissed or resolved. This record is absolutely void of any suggestion whatsoever that the present prosecuting attorney or indeed anyone with prosecutorial authority in the State of Indiana has any intention whatsoever of prosecuting Barbara Mazanec or any of the other plaintiffs in regard to the method in which Barbara Mazanec desires and chooses to educate her children. Therefore, there remains no bases in this record for any type of prospective injunctive relief as to the prosecuting attorney who has jurisdiction in Starke County, Indiana.

II.

The plaintiffs have conceded that any damage claim against Marilyn V. Mabry as State Attendance Officer in the Department of Public Instruction in the State of Indiana would be precluded by the Eleventh Amendment of the United States Constitution as defined in Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984), and most recently reaffirmed by the Supreme Court of the United States in Kentucky v. Graham, — U.S.-, 105 S.Ct. 3099, 87 L.Ed.2d 114 (1985), and Atascadero State Hospital v. Scanlon, — U.S. -, 105 S.Ct. 3142, 87 L.Ed.2d 171 (1985). For cases dealing with the Eleventh Amendment in this court see Burr v. Duckworth, 547 F.Supp. 192 (1982); Elliott v. Hinds, 573 F.Supp. 571 (1983); Hendrix v. Indiana State Public Defender System, 581 F.Supp. 31 (1984); Wellman v. Trustees of Purdue University, 581 F.Supp. 1228 (1984); and Schott v. Helper, 101 F.R.D. 99 (1984). See also, Owen v. Lash, 682 F.2d 648 (7th Cir.1982). Therefore, no damage claim may be successfully asserted, and indeed none has been proven as against the defendant, Marilyn V. Mabry, in her aforesaid official capacity. Neither is there any basis for any damage claim against Marilyn V. Mabry, even in a nominal sum, in her individual capacity.

Marilyn V. Mabry testified in this court and this court was greatly impressed with her credibility as a witness and her competence as a very sensitive public official. She is a member of a minority race. She appears to be aware of the rights and aspirations of other persons who represent minority thought or positions in this society. She fulfilled her statutory obligations to the State of Indiana and dealt with Barbara Mazanec competently and in a highly sensitive manner. There is nothing in this record to indicate in any way that Marilyn V. Mabry violated the constitutional rights of any of the plaintiffs in this case. There is no manifestation of her interest to do so. It is suggested that some way or other Marilyn V. Mabry, an official in the Department of Public Instruction of the State of Indiana, had some kind of constitutional or statutory duty to instruct the prosecutors in the State of Indiana in regard to so-called truancy prosecutions that may spring from efforts at so-called home study situations. Ms. Mabry is not a lawyer nor does she pretend to be a constitutional scholar. She had no duty under the statutes of the State of Indiana to provide any legal guidance to the prosecutors of the State of Indiana on this subject. Under the Constitution and statutes of the State of Indiana it is not contemplated that she participate directly in the exercise of prosecutorial discretion. Under Ind.Code § 20-8.1-3-16 the state attendance officers had authority to initiate civil court actions whenever necessary for the enforcement of compulsory attendance laws. This authority continues. See Ind.Code § 4-26-3-20.1 as amended by P.L. 20-1984, Sect. 201. In any event this state attendance officer in no way exercised her statutory authority to initiate any court action here. The prosecuting attorneys are constitutional officers in the State of Indiana and their functions are separate and distinct from those of the Department of Public Instruction and it would be wholly inappropriate to place these kinds of burdens on administrative officials who find themselves in the position that Ms. Mabry found herself in dealing with Barbara Manazec and the other plaintiffs here. The record in this case leads clearly to the conclusion that the defendant Mabry is entitled to damage immunity under Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982).

Barbara Mazanec phoned Ms. Mabry for information regarding the compulsory attendance act and failed to even disclose that she (Mazanec) was attempting to establish a home school. Section 1983 requires official action not official clairvoyance. Barbara Mazanec testified that Ms. Mabry “did the best she could” in this matter. Ms. Mabry gave no testimony in the state criminal cases against Mazanec.

It is also clear that Marilyn V. Mabry in her official capacity or in her individual capacity is in no way now threatening to or attempting to interfere with the First Amendment free exerise rights of the plaintiffs in this case. Therefore, no claims for either damage or injunctive relief are here made as against Marilyn V. Mabry individually or officially. Therefore, Marilyn V. Mabry is entitled to judgment.

III.

Likewise, there is no basis for damage or injunctive relief stated in the record of this case as against North Judson-San Pierre School Corporation. The very most that they did was to approve, after the fact, the actions of its then Superintendent James F. Moore. Therefore, no basis for damage or injunctive relief is stated against the North Judson-San Pierre School Corporation. This court is well aware that the so-called good faith defense on damage issues cannot be asserted by the school corporation. Owen v. City of Independence, 445 U.S. 622, 100 S.Ct. 1398, 63 L.Ed.2d 673 (1980).

The last defendant that must be dealt with in this record is James F. Moore. James F. Moore was under a statutory obligation to inquire into the existence of school age children located within the North Judson-San Pierre School Corporation who might not be complying with the statutes of the State of Indiana regarding mandated school attendance. This court saw and heard James F. Moore as a witness and remains convinced that he is a highly credible witness and a most competent public school administrator. He has been involved in an official capacity in other school corporations in the State of Indiana where there are significant segments of the population who choose, as they have a right to do under Pierce v. Society of Sisters, 268 U.S. 510, 45 S.Ct. 571, 69 L.Ed. 1070 (1925) and under Yoder v. Wisconsin, 406 U.S. 205, 92 S.Ct. 1526, 32 L.Ed.2d 15 (1972), to educate their children in facilities other than those provided in the public schools. His testimony and experience reflected the appropriate respect for those who choose another option to public education. His dealings with Barbara Mazanec were totally professional and he attempted to deal with a difficult and sensitive subject in a wholly appropriate and professional manner.

The Mazanees withdrew their children from the North Judson-San Pierre School Corporation and enrolled them in an entity known as the Santa Fe Community School Corporation (Santa Fe) located in New Mexico. The Mazanec children and Barbara were, for a time, physically present in New Mexico working with the staff at Santa Fe to implement an acceptable home study program. Superintendent Moore received a letter from Santa Fe indicating the enrollment of the Mazanec children there and accepted same. The next school year, acting on reports that the Mazanec children were again in the school district, Moore contacted Santa Fe and was advised that these children were no longer enrolled there. He attempted to locate the children and learn about their current arrangements for their education. He was met with a Mazanec stone wall in regard to these efforts. He passed on the information to the prosecutor and signed an affidavit as to the facts then apparent. On the basis of what he knew at the time he did not violate any of the constitutional rights of any of the plaintiffs in this case by conveying the information he had then acquired to the prosecuting attorney for the 44th Judicial Circuit of the State of Indiana. The responsibility for the filing and the dismissal of the criminal charges were in the hands of the prosecuting attorney and not of Mr. Moore and the school corporation. There is no evidence in this record that James F. Moore gave to the prosecuting attorney information that was at the time inaccurate or untrue. It is correct that James F. Moore and others concerned have acquired, mostly as a result of the evidence presented in this trial, a better understanding of the posture and position taken by Barbara Mazanec in regard to the education of her children. Had she made those feelings known and had she presented the version of events that were presented in this trial to Mr. Moore at the time of his inquiries his attitude about the subject might have been entirely different. Nonetheless he simply reported those certain facts to the prosecuting authorities who then proceeded to initiate a prosecution. There is no evidence nor it is contended that James F. Moore or the school corporation had any constitutional or statutory authority over that prosecution or indeed exercise any other kinds of control over it. James F. Moore and the school corporation cannot be held responsible in damages for what happened in the course of and as a result of that prosecution.

While it is not a part of the basic tenets of the Jehovah’s Witness faith to educate their children in a non-public school setting, it is most apparent that there is a basic hostility to governmental institutions and officials. A classic example of same is found in West Virginia State Board of Education v. Barnette, 319 U.S. 624, 63 S.Ct. 1178, 87 L.Ed. 1628 (1943). See also Palmer v. Board of Education of City of Chicago, 603 F.2d 1271 (7th Cir.1979). That anti-official syndrome is readily apparent in the dealings between Barbara Mazanec and school officials and rendered the same most difficult for both.

In any event the defendant Moore is clearly entitled to the immunity defense under Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982). See also Davis v. Scherer, — U.S. -, 104 S.Ct. 3012, 82 S.Ct. 139 (1984); and Mitchell v. Forsyth, — U.S. -, 105 S.Ct. 2806, 86 L.Ed.2d 411 (1985).

The progeny of Harlow in this circuit is relevant. The Harlow defined immunity is available to Mr. Moore and the school board members but not to the school corporation. The final en banc holding in Egger v. Phillips, 710 F.2d 292 (7th Cir.1983), cert. denied, — U.S.-, 104 S.Ct. 284, 78 L.Ed.2d 262 (1983) granted immunity to an FBI supervisor who transferred an agent in alleged violation of the latter’s free speech rights. Benson v. Scott, 734 F.2d 1181 (7th Cir.1984) granted immunity to the Attorney General of Illinois for denying representation to a contract employee and not providing some due process review. Johnson v. Brelje, 701 F.2d 1201 (7th Cir.1983) granted immunity to state officials for supervising and establishing policies for a state mental institution. In Silverman v. Ballantine, 694 F.2d 1091 (7th Cir.1982) immunity was granted to state police officers who could not reasonably have known that an individual had a right to counsel at the time of his arrest.

IV.

At the end of the three day trial of this case this court indicated that the fundamental issue to be resolved was the request for relief by way of declaratory judgment with reference to the free exercise rights under the First Amendment of the Constitution of the United States of those parents, guardians or custodians who desire to educate their children in a so-called home school setting.

This court was deeply impressed with the apparent character and knowledge of the oldest daughter, Patricia Mazanec, who testified in the trial of this case. This court was particularly impressed with her in regard to literary subjects.

There was also full compliance with enrollment and attendance requirements of I.C. § 20-8.1-3-17. One of the distinct pluses was the frequent and regular use made of the North Judson Public Library and its interlibrary loan facility and the extensive reading habits that sprang therefrom.

The Greenhouse curriculum was not born from thin air but was the product of educational experts at the Santa Fe Community School. The specific testimony of Edward Nagel in evaluating the quality of the Greenhouse instruction is considered highly credible here. In a more general sense the same can be said for the testimony of Dr. Raymond C. Moore.

This court was also impressed with much of the expert testimony offered by the plaintiff in regard to the quality of education that is possible in the home school environment. Some of that testimony approached levels of profundity. It is not for this court to make a value Judgment as to whether or not the kind of education that Barbara Mazanec provided for her children is the most desirable. It is the function of this court to decide whether that education constitutes “instruction equivalent to that given in the public schools” under Ind.Code § 20-8.1-3-34 and the record here discloses that it is. Ms. Mabry testified that she was aware of 178 home school situations in the State of Indiana and the record would infer that perhaps there might be considerably more. The plaintiffs do not challenge the facial validity of the statute of the State of Indiana here in question. Ind.Code § 20-8.1-3-34 provides in part:

It is unlawful for a parent to fail, neglect or refuse to send his child to a public school for the full term as required under this chapter unless the child is being provided with instruction equivalent to that given in the public schools.

They do not contend and did not contend in the most recent oral argument that said statute is facially invalid when examined in the light of the free exercise clause of the First Amendment of the Constitution of the United States. It is therefore unnecessary for this court to determine the constitutional validity of that statute. By its language and by the apparent manner in which it is being implemented it is not violative of those provisions of the First Amendment.

This court has no difficulty with the values that were announced in Pierce v. Society of Sisters, 268 U.S. 510, 45 S.Ct. 571, 69 L.Ed. 1070, 60 years ago. Nor does this court have any difficulty in concurring with those courts that have found within the ambit of the free exercise clause a constitutional right to educate ones children in an educationally proper home environment, understanding that the State retains a legitimate interest in the fulfillment of certain minimal requirements as established legislatively and administratively as a matter of public policy. This court is aware of and concurs in the decisional line which honors the good faith efforts of parents to educate their children at home. Minnesota v. Newstrom, — Minn. —, 371 N.W.2d 525 (1985); State v. Popanz, 112 Wis.2d 166, 332 N.W.2d 750 (1983); Roemhild, v. State, 251 Ga. 569, 308 S.E.2d 154 (1984); Bangor Baptist Church v. State of Maine, 576 F.Supp. 1299 (D.Maine 1983); Delconte v. State, 313 N.C. 384, 329 S.E.2d 636 (1985); and Grigg v. Georgia, 224 Va. 356, 297 S.E.2d 799 (1982).

Near the turn of this century the Appellate Court of Indiana recognized home study as an option. State v. Peterman, 32 Ind.App. 665, 70 N.E. 550 (1904). (It is now doubtful that the requirements of a formally licensed or certified teacher as there required would now pass constitutional muster.)

In this case this court has determined on the basis of the testimony of Mrs. Mazanec, her oldest daughter and of the experts proffered by the plaintiffs at trial that the instruction provided in the Greenhouse Academy by the plaintiff was “equivalent to that given in the public schools” as that term is defined in Ind.Code § 20-8.1-2-34.

It is not seriously contended here that the aforesaid statute runs afoul of Wisconsin v. Yoder, 406 U.S. 205, 92 S.Ct. 1526, 32 L.Ed.2d 15 (1972). It is unnecessary to here decide whether or not these plaintiffs as members of the Jehovah’s Witness stand fully in the free exercise shoes of the Amish in Yoder. Having made the decision on the basis of the record in this case that there is “equivalent instruction” much of the rest of this case falls by the wayside. It is therefore unnecessary to determine in this case the full parameters of “equivalent” and indeed whether the term is constitutionally vague. It is the present position of the defendant school authorities, both State and local, that equivalent education is occurring and that is the basis for their assertion on the record in this case that no further interference with the operation of the Greenhouse Academy by these plaintiffs in regard to the education of these children is contemplated.

V.

The record here has a strong flavor of mootness as defined in Richardson v. Ramirez, 418 U.S. 24, 94 S.Ct. 2655, 41 L.Ed.2d 551 (1974). At this point the record fails to indicate that any allegedly wrongful behavior could reasonably be expected to recur. Vitek v. Jones, 445 U.S. 480, 100 S.Ct. 1254, 63 L.Ed.2d 552 (1980). The present prosecutor has categorically indicated a total lack of intent to prosecute these plaintiffs for their present mode of operating the Greenhouse Academy. The record here simply fails to invoke the teaching of Southern Pacific Terminal Co. v. Interstate Commerce Commission, 219 U.S. 498, 31 S.Ct. 279, 55 L.Ed. 310 (1911)-

VI.

There is no basis in this record justifying an award of punitive damages under Smith v. Wade, 461 U.S. 30, 103 S.Ct. 1625, 75 L.Ed.2d 632 (1983). This conclusion assumes that such damages could not be awarded against a school corporation in the face of City of Newport v. Fact Concerts, 453 U.S. 247, 101 S.Ct. 2748, 69 L.Ed.2d 616 (1981). This court has been able to locate four eases that have applied the Newport immunity to local school corporations. See In re Bruce Selcraig, 705 F.2d 789, 797 (5th Cir.1983); Singh v. Superintending School Committee of the City of Portland et al., 601 F.Supp. 865, 867 (D.Maine 1985); Wells v. Dallas Independent School Dist., 576 F.Supp. 497, 509-10 (N.D.Tex.1983); and Okeson v. Tolley School District No. 25, 570 F.Supp. 408, 412 (D.N.D.1983). No cases contra have been located. There is simply here no showing of “reckless or callous indifference” as required in Smith v. Wade in this record.

VII.

This court is not here and now called upon to decide whether or not the plaintiffs are prevailing parties sufficient to trigger an award of any counsel fees under Title 42 U.S.C. § 1988. If such a request is timely made under the provisions thereof and the case law interpreting the same, this court will deal with it in an appropriate manner and at an appropriate time.

Based on the record presently before the court it is this court’s determination that costs which might be assessed under Title 28 U.S.C. § 1920 shall be borne by each party and no costs under that statute will be assessed. In sum, no damage or injunctive relief is here entered. It is declared that the instruction given is equivalent to that given in the public schools. The Clerk shall enter judgment accordingly in accordance with this memorandum and opinion. SO ORDERED.

      . The prosecutor is a constitutional officer in the State of Indiana under the Constitution of Indiana. Art. VII, Section 16:
      Prosecuting Attorneys. There shall be elected in each judicial circuit by the voters thereof a prosecuting attorney, who shall have been admitted to the practice of law in this State before his election, who shall hold his office for four years, and whose term of office shall begin on the first day of January next succeeding his election. The election of prosecuting attorneys under this section shall be held at the time of holding the general election in the year 1974 and each four years thereafter.
      Likewise education is honored in the Constitution of Indiana, Article VIII, including the creation of the office of State superintendent of public instruction in Section 8 thereof.

      . The Indiana statutes dealing with compulsory school attendance are extensive and are codified in West Annotated Indiana Code, Title 20, Sections 20-8.1-3-1 through 20-8.1-3-37. Only those sections thereof that are directly relevant here are specifically set out.
      20-8.1-3-11 Attendance officers; duties
      Sec. 11. Every attendance officer shall have the following duties:
      (a) He shall serve subject to the rules, direction, and control of the superintendent in his attendance district.
      (b) He shall maintain an office at a place designated by the superintendent.
      (c) He shall be on duty during school hours and at such other times as the superintendent may request.
      (d) He shall keep records and make reports as required by the state board of education.
      (e) He shall visit the homes of children who are absent from school or who are reported to be in need of books, clothing, or parental care.
      (f) When the superintendent directs or approves it, he shall bring suit to enforce any provision of this chapter which is being violated.
      (g) He shall serve written notice on any parent whose child is out of school illegally.
      (h) He shall visit factories where children are employed.
      (i) He shall perform such other duties as are necessary for complete enforcement of this chapter.
      20-8.1-3-14 Attendance; powers of state board of education
      Sec. 14. The state board of education shall exercise general supervision by resolution over the attendance system of the state. The state board of education may adopt rules pertaining to the state attendance system and the enforcement of this chapter in accordance with IC 4-22-2. With the exception of ex officio attendance officers, the state board of education may remove any local attendance officer.
      20-8.1-3-16 State attendance officers; appointment; removal; duties; powers
      Sec. 16. State Attendance Officer: Appointment; Removal; Duties; Powers, (a) The state superintendent of public instruction shall appoint a state attendance officer. The state attendance officer shall serve at the pleasure of the state superintendent of public instruction and may be removed by him at any time.
      (b) The state attendance officer shall:
      (1) exercise general supervision over the attendance officers of the state;
      (2) visit the various attendance districts throughout the state;
      (3) inspect the work of the attendance officers; and
      (4) investigate the manner in which this chapter is being enforced.
      (c) The state attendance officer is empowered to initiate court actioin whenever necessary for the enforcement of this chapter.
      20-8.1-3-17 Compulsory attendance
      Sec. 17. Subject to the specific exceptions under this chapter, each child shall attend either a public school which the child is entitled to attend under IC 20-8.1-6.1 or some other school which is taught in the English language. A child is bound by the requirements of this chapter from the earlier of the date on which he officially enrolls in a school or he reaches the age of seven (7), until the date on which he reaches the age of sixteen

        (16). A child less than seven (7) years of age who is withdrawn from school is not subject to the requirements of this chapter until he is re-enrolled or reaches age seven (7). A child for whom education is compulsory under this section shall attend school each year:
      (1) for the number of days public schools are in session in the school corporation in which the child is enrolled in Indiana; or
      (2) if the child is enrolled outside Indiana, for the number of days the public schools are in session where the child is enrolled.
      20-8.1-3-23 Attendance records
      Sec. 23. (a) An accurate daily record of the attendance of each child who is not less than seven (7) years of age and not more than sixteen (16) years of age shall be kept by every public and private school.
      (b) In a public school, the record shall be open at all times for inspection by attendance officers, school officials, and agents of the division of labor. Every teacher shall answer fully all lawful inquiries made by an attendance officer, school official, or agent of the department of labor.
      (c) In a private school, the record shall be required to be kept solely to verify the enrollment and attendance of any particular child upon request of the state superintendent of public instruction or the superintendent of the school corporation in which the private school is located.
      20-8.1-3-32 Enforcement of chapter
      Sec. 32. Enforcement of Chapter. It is the duty of each superintendent, attendance officer and state attendance official to enforce the provisions of this chapter in their respective jurisdictions and to execute the affidavits authorized under this section. This duty is several and the failure of one (1) or more to act shall not excuse any other official from his obligation to enforce this chapter. Affidavits against parents for violations of this chapter shall be prepared and filed in the same manner and under the procedure prescribed for filing affidavits for the prosecution of public offenses. Affidavits under this section shall be filed in the circuit court of the county in which the affected child resides. The prosecuting attorney shall file and prosecute actions under this section as in other criminal cases. The court shall promptly hear cases brought under this section.


source: Caselaw Access Project

author: MENCER, District Judge.

license: Public Domain

text:
    PPG INDUSTRIES, INC., Plaintiff, v. SYSTONETICS, INC., Defendant.
    Civ. A. No. 85-0598.
    United States District Court, W.D. Pennsylvania.
    Aug. 7, 1985.

      Charles W. Kenrick, Dickie McCamey & Chilcote, P.C., Pittsburgh, Pa., for plaintiff.
    Thomas A. Pistone, Newport Beach, Cal., W. Gregg Kerr, Ray C. Stoner, Pittsburgh, Pa., for defendant.
   OPINION

MENCER, District Judge.

PPG Industries, Inc., a Pennsylvania corporation having its principal place of business in Pittsburgh, Pennsylvania, brought this action in the Western District of Pennsylvania against Systonetics, Inc., a California corporation having its principal place of business in Fullerton, California. Subject matter jurisdiction is proper in this court pursuant to 28 U.S.C. § 1332(a)(1) which grants district courts original jurisdiction over all civil actions where the amount in controversy exceeds $10,000 and the parties are citizens of different states.

PPG Industries, Inc. [hereinafter PPG] filed its complaint on March 13, 1985, alleging in Count I Breach of Contract and Breach of Express and Implied Warranty, in Count II Negligent and Intentional Misrepresentation, and in Count III Negligence, all in connection with the purchase of certain computer equipment and technology from Systonetics, Inc. [hereinafter Systonetics].

Presently before the Court is a Motion filed by the defendant to Transfer, Stay or Dismiss this action. Both PPG and Systonetics have submitted briefs and affidavits in support of their respective positions. We will first consider defendant’s motion to transfer this case to the Central District of California pursuant to 28 U.S.C. § 1404(a).

VENUE

The defendant does not contend that PPG chose a venue which is technically improper. For a diversity case like this one, Section 1391(a) of Title 28 United States Code provides that “[a] civil action wherein jurisdiction is founded only on diversity of citizenship may ... be brought only in the judicial district where all plaintiffs or all defendants reside, or in which the claim arose.” Venue is entirely proper under section 1391(a) in the Western District of Pennsylvania wherein the plaintiff resides.

The determination of whether to transfer a case is one within the sound discretion of the Court. In reaching its determination, the Court must keep in mind the convenience of transfer and the fairness of such a transfer. The purpose of section 1391(a) as interpreted by the United States Supreme Court is to prevent the waste “of time, energy and money” and “to protect litigants, witnesses and the public against unnecessary inconvenience and expense----” Van Dusen v. Barrack, 376 U.S. 612, 616, 84 S.Ct. 805, 809, 11 L.Ed.2d 945 (1964), citing Continental Grain Co. v. Barge FBL-585, 364 U.S. 19, 26, 27, 80 S.Ct. 1470, 1474, 1475, 4 L.Ed.2d 1540 (1960).

The burden is on the moving party to establish facts supporting a motion to transfer. A balancing of proper interests must weigh heavily in favor of the transfer. Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir.1970), cert. denied, 401 U.S. 910, 91 S.Ct. 871, 27 L.Ed.2d 808 (1971). Four factors to be weighed by this Court are: (1) plaintiff’s choice of forum; (2) the relative ease of access to sources of proof; (3) availability of compulsory process for attendance of unwilling witnesses and the cost of obtaining attendance of willing witnesses; and (4) practical considerations which will make trial of a case easy, expeditious and inexpensive. Erie Press Systems v. Shultz Steel Co., 548 F.Supp. 1215 (W.D.Pa.1982).

Before examining the four factors, we must first determine whether the proposed transferee district is one where the action “might have been brought.” In the present case, the Central District of California is a proper district wherein this action might have been brought by PPG, pursuant to §§ 1391(a) and (c), since Systonetics resides in Fullerton, California, which is within the Central District of California. Thus, the threshold requirement under § 1404(a), that the action “might have been brought” in the Central District of California, has been satisfied.

We will turn now to the four factors to be considered by the Court when making its determination of whether or not to transfer this case. First, this Court gives great weight to the plaintiffs legally sound choice of filing this lawsuit in the Western District. Shutte v. Armco Steel Corp., supra.

Second, in considering relative ease of access to sources of proof, the customized software purchased from Systonetics by PPG allegedly failed to perform satisfactorily in Pittsburgh, Pennsylvania. Although substantially all preparation programming and implementation of the software was performed over a period of two years at Systonetics’ headquarters in Fullerton, California, numerous documents relevant to this litigation are also located in Pittsburgh. This Court is of the view that the parties’ contentions are equal with respect to this factor.

The defendant has not carried its burden on the third factor, the availability of compulsory process for attendance of unwilling witnesses and the cost of obtaining attendance of willing witnesses. Although Systonetics has mentioned the names of a former PPG employee and several former Systonetics employees who were involved in the development of PPG’s customized software and who are currently California residents, it has failed to make the necessary statements concerning what their testimony will cover or demonstrate the materiality of such evidence such that this Court may properly balance the parties’ interests. Follansbee Metals Co., Inc. v. John T. Clark & Son of N.H., Inc., 387 F.Supp. 574, 581 (W.D.Pa.1974). In fact, the plaintiffs have submitted an affidavit indicating that at least three of the witnesses listed by Systonetics as former employees of Systonetics who currently reside in California, would have testimony favorable to PPG.

The fourth factor, practical considerations which will make trial of a case easy, expeditious and inexpensive, does not weigh in favor of transfer. The fact that this case may proceed to trial two or three months more quickly in the Central District of California does not justify its transfer. Witnesses for the parties are located in both states, and activities giving rise to this lawsuit occurred in both California and Pennsylvania. This Court may consider the relative financial strength of the parties. Although Systonetics employs less than 100 full-time employees, it is financially able to defend the case in the Western District of Pennsylvania. A transfer to the Central District of California would merely shift the inconvenience from Systonetics to PPG.

A party's choice of forum should not be lightly disturbed. After consideration of all factors, the Court is of the view that the balancing of proper interests does not weigh heavily in favor of transfer. Thus, the defendant has failed to carry its burden and the Motion to Transfer will be denied.

As the action filed by Systonetics in the Central District of California was dismissed by that court on the basis of the “first to file” rule, defendant’s Motion to Stay this action pending its resolution is moot.

IN PERSONAM JURISDICTION

Having affirmatively answered the question of whether venue is proper in the Western District of Pennsylvania, we turn now to a discussion of whether in personam jurisdiction exists over the defendant in Pennsylvania. In a diversity action, the amenability of a foreign corporation to suit is determined by the law of the forum state. Pennsylvania’s Long Arm Statute, 42 Pa.C.S.A. § 5322(b) provides that “jurisdiction ... shall extend to all persons ... to the fullest extent allowed under the Constitution of the United States and may be based on the most minimum contact with this Commonwealth allowed under the Constitution of the United States.”

The Court in Proctor & Schwartz v. Cleveland Lumber Co., 228 Pa.Super. 12, 323 A.2d 11, 15 (Pa.Super.1974) articulated a three-step analysis to determine whether sufficient contacts are present for the exercise of jurisdiction: (1) the defendant must have purposefully availed itself of the privilege of acting within the forum state thereby invoking the benefits of its law; (2) the cause of action must arise out of the defendant’s conduct within the forum state; and (3) the defendant must have substantial connection with the forum state to make the exercise of jurisdiction reasonable. We will apply the three-step analysis to determine whether or not Systonetics has contacts with the Commonwealth of Pennsylvania sufficient for the exercise of jurisdiction. The plaintiff bears the burden of establishing sufficient facts to establish jurisdiction.

Some of the negotiations between PPG and Systonetics relative to the purchase of the customized software occurred in Pittsburgh, Pennsylvania. Prior negotiations and contemplated future consequences may be considered in evaluating whether Systonetics had sufficient minimum contacts with Pennsylvania. Burger King Corp. v. Rudzewicz, — U.S. -, -, 105 S.Ct. 2174, 2185, 85 L.Ed.2d 528 (1985). In addition, the software was installed in Pennsylvania by Systonetic employees. The parties contemplated that the computer software would be installed in Pittsburgh. Therefore, the defendant could only have fulfilled its contract by entering Pennsylvania which, in fact, it did. Systonetics’ prior negotiations and contemplated future conduct are sufficient to meet the requirements of Proctor and Burger King.

The second prong of the Proctor test has also been satisfied. The cause of action asserted by PPG arose out of the defendant’s activities within Pennsylvania. The failure of the computer system to perform satisfactorily arises out of the negotiations and subsequent sale and installation of that same computer system in Pennsylvania.

Finally, the exercise of jurisdiction over Systonetics is reasonable as it does not violate notions of “fair play and substantial justice.” Systonetics’ previous contacts with this state and its ongoing relationship with the plaintiff leads us to conclude that a trial in Pennsylvania would not be unfair to the defendant. As the Supreme Court of the United States noted in International Shoe:

to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations, and, so far as those obligations arise out of or are connected with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue.

International Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 159, 90 L.Ed. 95 (1945).

After weighing the four factors in this case, this Court is of the view that Systonetics’ acts have a substantial enough connection with the Commonwealth of Pennsylvania to make it reasonable for this court to assert jurisdiction over it. Systonetics knew that PPG was a Pennsylvania corporation due to its course of dealings with the corporation, and it could “reasonably foresee that its breach of this contract would have an impact on Pennsylvania commerce and inflict some degree of economic harm in the state.” Strick Corporation v. A.J.F. Warehouse Distributors, Inc., 532 F.Supp. 951, 960 (E.D.Pa.1982). An exercise of personal jurisdiction over the defendant in this case fully complies with the due process requirements of the United States Constitution.

An appropriate order will be issued.

      . 28 U.S.C. § 1404(a) provides:
      For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.


author: EDELSTEIN, District Judge:

text:
    William F. BOLAND, Plaintiff, v. BANK SEPAH-IRAN (New York Agency), Defendant. Charles W. BOYLE, Plaintiff, v. BANK SEPAH-IRAN (New York Agency), Defendant.
    Nos. 84 Civ. 5836 (DNE), 84 Civ. 5838 (DNE).
    United States District Court, S.D. New York.
    Aug. 8, 1985.

      Henry L. Bayles, New York City, for plaintiffs.
    Kornstein Veisz & Wexler, New York City, for defendant; Daniel J. Kornstein, Marvin Wexler, John M. Devlin & Debra S. Weaver, New York City, of counsel.
   OPINION AND ORDER

EDELSTEIN, District Judge:

Defendant has moved to dismiss these consolidated diversity actions for lack of subject-matter jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(1). The court has not addressed the motion because this case was improvidently removed from state court. In the context of considering whether to remand or dismiss this case, the court finds that United States courts have subject-matter jurisdiction over plaintiffs’ claims. The case is hereby remanded to the state court.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs are citizens of the United States and defendant Bank Sepah (“Sepah”) is an Iranian corporation with an agency in New York. In January 1975, plaintiff William F. Boland (Boland) was hired as operations manager by Bank Sepah’s New York agency. He was later promoted to assistant managing director. Plaintiff Charles W. Boyle (Boyle) was hired as operations manager by Bank Sepah’s New York agency in January 1978.

After Ayatollah Khomeini and the Revolutionary Party took power in Iran in February 1979, the administration of Bank Sepah was replaced. Plaintiffs allege that the new bank administration, together with the “Islamic Revolutionary Committee of New York” (the “Committee”), sought to terminate their employment without cause. To that end, on March 30, 1979, the members of the Committee drew up a written report (the “Report”) that accused plaintiffs of embezzlement and conspiracy, recommended their dismissal, and proposed that only Iranians be hired in the future. The Report was apparently circulated in New York and Iran. Boland was discharged on April 17, 1979 and Boyle on April 26, 1979.

On January 19, 1981, as part of the settlement of the Iranian hostage crisis, the United States and Iran agreed to create an international arbitral tribunal at the Hague (“the Tribunal”) for settling pending claims of the nationals of both countries against the government of the other. The Tribunal was given jurisdiction over claims arising out of debts, contracts, expropriations, and other measures affecting property rights. Declaration II, Article II, HI. Claims in excess of $250,000 were to be filed by the claimant’s government; claims. for lesser amounts were to be filed by the claimant himself. Declaration II, Article III, ¶ 3. All claims had to be filed by January 19, 1982. Id. ¶ 4.

In November 1979, plaintiffs Boland and Boyle each brought five causes of action against Bank Sepah in New York State Supreme Court. The claims for “abusive discharge” were dismissed. The claims for breach of employment contract were brought before the Tribunal by the State Department, pursuant to Declaration II, Article III, ¶ 4, and subsequently stayed by the state court pending their resolution in the Hague.

Arguing that only the Hague Tribunal could rule on plaintiffs’ remaining tort claims — counts 4 and 5, Sepah brought motions to dismiss these claims for lack of subject-matter jurisdiction. These motions were denied. Defendant moved for and was granted reargument. Upon reargument, the State Supreme Court affirmed its prior decision. On appeal, the Appellate Division, First Department, affirmed the orders of the Supreme Court. Also, defendant’s motion for summary judgment before the State Supreme Court was denied.

Plaintiffs’ tort claims were removed to this court pursuant to 28 U.S.C. § 1441(d). This court finds that the removal was improvident and the case is consequently remanded.

DISCUSSION

I. The Petition for Removal

A district court may remand a case to state court if at any time before final judgment it is found that the ease was improvidently removed. 28 U.S.C. § 1447(c); Martin v. Wilkes-Barre Publishing Co., 567 F.Supp. 304 (M.D.Pa.1983). In determining whether to remand, the district court should construe the removal statute strictly against removal and in favor of remand and give weight to the extent to which the action had progressed before the state court. Shamrock Oil Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 872, 85 L.Ed. 1214 (1941); Corporacion Venezolana de Fomento v. Vintero Sales, 629 F.2d 786, 790 (2d Cir.1980), cert. denied, 449 U.S. 1080, 101 S.Ct. 863, 66 L.Ed.2d 804 (1981); Martropico Compania Naviera, S.A. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina), 428 F.Supp. 1035, 1037 (S.D.N.Y.1977). Failure to comply with the time limitations for removal constitutes an improvident removal. Irving Trust Co. v. Century Export & Import, 464 F.Supp. 1232 (S.D.N.Y.1979).

Section 1446(b) title 28 of the United States Code requires that the petition for removal be filed within thirty days of receipt of the initial pleading. Defendant received the complaint on December 17, 1981. Defendant’s Petition for Removal. The petition for removal was not filed until August 15, 1984. Thus, defendant’s petition was untimely.

There is one exception to section 1446(b): The thirty-day period may be extended if defendant shows cause. 28 U.S.C. § 1441(d); Martropico Compania Naviera S.A., supra, 428 F.Supp. at 1038. A showing of cause to justify an extension of the section 1446(b) time requirement is rarely found, in keeping with the practice of construing the removal statutes in favor of remand. In Martropico, supra, section 1441(d) became effective while the state action was pending, but more than thirty days after defendant received the complaint. 428 F.Supp. at 1037. The court ruled that the change effected by the removal statute was not a voluntary act of the plaintiff, and did not constitute “cause” to extend the thirty-day period. Id. at 1038. Similarly, action by a state court that might be deemed to make a case removable does not justify extending the time period for removal. Touche Ross & Co. v. Manufacturers Hanover Trust Co., 503 F.Supp. 222, 223 (S.D.N.Y.1980). To justify an extension of the thirty-day removal period, defendant must demonstrate some unusual set of circumstances. See Gray v. Permanent Mission of the People’s Republic of the Congo to the United Nations, 443 F.Supp. 816, 821 (S.D.N.Y.), aff'd mem., 580 F.2d 1044 (2d Cir.1978). In Gray, “cause” was shown because defendant was (1) not properly served, (2) did not understand its rights under American law, and (3) did not retain counsel until after default judgment was already entered. Id. at 820-21.

Defendant’s petition for removal yields no evidence of such circumstances. Defendant notes that it was “apparently obliged, by the Algerian Declarations and otherwise, to exhaust [all] remedies before removing pursuant to 28 U.S.C. § 1441(d).” Defendant’s Petition for Removal. The Algerian Declarations do not refer to an “exhaustion of remedies” requirement and defendant does not support this proposition with case law. Given the stringent requirements for a showing of cause, defendant’s vague and unsupported allusions to an “exhaustion of remedies” requirement do not constitute “cause” as required by section 1441(d). See Touche Ross & Co. v. Manufacturers Hanover Trust Co., supra, 503 F.Supp. at 222; Martropico Compania Naviera S.A., supra, 428 F.Supp. at 1038; Irving Trust v. Century Export & Import, supra, 464 F.Supp. at 1240. Furthermore, it is clear that defendant’s petition for removal should be rejected based on the extent to which this action had progressed in state court. Corporacion Venezolana de Fomento v. Vintero Sales, supra, 629 F.2d at 790. To maintain this suit in federal court after the extensive motion practice already conducted in state court would promote a duplicative and wasteful policy of judicial administration. Corporacion Venezolana de Fomento v. Vintero Sales, supra, 629 F.2d at 790; Martropico Compania Naviera S.A., supra, 428 F.Supp. at 1038; Touche Ross & Co. v. Manufacturers Hanover Trust Co., supra, 503 F.Supp. at 223.

Having determined that this case was not properly removed, this court must determine whether it should remand or dismiss the case. If state-court jurisdiction is found, the court will remand the case; if no jurisdiction is found, the case will be dismissed. Bond v. Doig, 433 F.Supp. 243 (D.N.J.1977); C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure (Civil) § 3739, at 570-71 (2d ed. 1985). In this case, the state court has jurisdiction if plaintiffs’ tort claims can be maintained in United States courts instead of at the Hague Tribunal. The parties have addressed the issues involved in the jurisdiction of United States courts over plaintiffs’ claims in conjunction with defendant’s motion to dismiss. The same framework of discussion used by the parties in conjunction with the 12(b)(1) motion is adopted in considering whether to remand or dismiss.

II

Jurisdiction Over Plaintiffs’ Claims

Defendant asserts, contrary to the rulings of the state courts, that (1) United States courts do not have jurisdiction to determine the jurisdiction of the Tribunal, (2) the Tribunal has jurisdiction, and United States courts therefore do not, over plaintiffs’ tort claims, and (3) various policy arguments and the act of state doctrine preclude consideration of those claims by a United States court.

A

The Jurisdiction of United States Courts to Determine Whether the Tribunal has Jurisdiction

United States courts have consistently engaged in interpretation of the jurisdictional provisions of the Algerian Declarations. See, e.g., Rockwell Int’l Systems, Inc. v. Citibank, N.A., 719 F.2d 583, 585-87 (2d Cir.1983) (interpreting the Algerian Declarations and holding that United States courts have jurisdiction to grant preliminary injunctive relief in claims that may come before the Tribunal); Hawaiian Agronomics Co. (Int’l) v. Government of Iran, 518 F.Supp. 596, 598-99 (C.D.Cal.1981) (determining that claims did not fall within the jurisdiction of the Tribunal and thus were properly before the district court); Itek Co. v. First Nat’l Bank of Boston, 511 F.Supp. 1341, 1346 (D.Mass.1981) (interpreting the Algerian Declarations and executive orders as exempting cases involving standby letters of credit from the Tribunal’s jurisdiction), vacated on other grounds, 704 F.2d 1 (1st Cir.1983) (court affirms finding of subject-matter jurisdiction and notes district court’s power to issue injunctive relief). Even when claims present novel jurisdictional issues, American courts have the power to determine whether a claim falls within the ambit of the Tribunal’s jurisdiction. See, e.g., Rockwell Int’l Systems, Inc. v. Citibank, N.A., 719 F.2d 583 (2d Cir.1983); Itek Co. v. First Nat’l Bank of Boston, 511 F.Supp. 1341 (D.Mass.1981), vacated on other grounds, 704 F.2d 1 (1st Cir.1983).

Defendant contends, inter alia, that the Tribunal has jurisdiction to determine jurisdiction over plaintiffs’ tort claims because plaintiffs have invoked the power of the Tribunal by filing their contract claims at the Hague. Defendant’s Memorandum of Law at 6. It is true that at least one court has interpreted Section 3 of Executive Order No. 12294, 46 Fed.Reg. 14111 (1981), as giving the Tribunal the power to decide whether a particular claim is within its jurisdiction. See Jafari v. Islamic Republic of Iran, 539 F.Supp. 209, 212 (N.D.Ill.1982). But Section 3 of Executive Order No. 12294 refers only to those claims which are actually submitted to the Tribunal. Article VII, II2 of Declaration II is clear on this point: “Claims referred to the Arbitral Tribunal shall, as of the date of filing such claims with the Tribunal, be considered excluded from the jurisdiction of the courts of Iran, or of the United States, or of any other court.” While plaintiffs’ contract claims have been referred to the Tribunal, their tort claims have not. Therefore, plaintiffs have not invoked the power of the Tribunal to adjudicate their tort claims. See also Stewart, The Iran-United States Claims Tribunal: A Review of Developments 1983-84, 16 Law & Pol’y Int’l Bus, 677, 746-47 (1984); E-Systems, Inc. v. Iran, Iranian Assets Litig.Rep. 6,103 (Andrews Publications) (Feb. 18, 1983) (“once a counterclaim has been initiated before the Tribunal, the subject matter of that claim is excluded from the jurisdiction of any other court”) (emphasis added). Thus Executive Order No. 12294 does not preclude this court from deciding the proper jurisdiction for plaintiffs’ tort claims.

Further support for the proposition that United States courts have jurisdiction to determine jurisdiction in this case is found in Article VI, 114 of Declaration II, which states that “[a]ny question concerning the interpretation or application of this agreement shall be decided by the Tribunal upon the request of either Iran or the United States.” Article VI H 4. Neither the United States nor, apparently, Iran has requested the Tribunal to decide this issue, as they have in prior jurisdictional disputes, see, e.g., Itek v. First Nat’l Bank of Boston, supra, 511 F.Supp. at 1346, 1347 (rejecting the view that jurisdictional disputes must be referred to the Tribunal even when the United States’ position is that they may be heard in United States courts); Request of the United States for a Determination of the Tribunal’s Jurisdiction Over Iranian Bank Standby Letter of Credit Claims, United States v. Iran, Iranian Assets Litig. Rep. (Andrews Publications) 5,763 (Dec. 3, 1982). Rather than urging that the Tribunal decide the instant jurisdictional issue, the Statement of Interest of the United States assures this court of its jurisdiction over plaintiffs’ tort claims. Statement of Interest of the United States at 2, 9-10, May 19,1983, Defendant’s Reply Memorandum of Law. This statement is persuasive in a court’s determination regarding the jurisdiction of the Tribunal. See Gulf Ports Crating Co. v. Ministry of Roads and Transportation, supra, 674 F.2d at 319 (affirming the district court, which followed a recommendation of the Statement of Interest of the United States as to the Tribunal’s jurisdiction); Itek Co. v. First National Bank of Boston, supra, 511 F.Supp. at 1346 n. 14, 1347 (relying upon a statement of interest filed by the United States).

B

The Tribunal’s Jurisdiction Over Plaintiffs’ Tort Claims

Defendant contends that plaintiffs’ claims are within the purview of the Algerian Declarations and that American courts therefore do not have jurisdiction over those claims.

On first blush, Declaration I appears to provide the Tribunal with the foundation for a broad jurisdiction: “It is the purpose of both parties, within the framework of and pursuant to the provisions of the two Declarations of the Government of the Democratic and Popular Republic of Algeria, to terminate all litigation as between the Government of each party and the nationals of the other, and to bring about the settlement and termination of all such claims through binding arbitration.” Declaration I, If A. But the actual provision for the Tribunal’s jurisdiction, in Declaration II, is less expansive:

An International Arbitral Tribunal ... is hereby established for the purpose of deciding claims of nationals of the United States against Iran and claims of nationals of Iran against the United States, and any counterclaim which arises out of the same contract, transaction or occurrence that constitutes the subject matter of that national’s claim, if such claims and counterclaims are outstanding on the date of this agreement, ... and arise out of debts, contracts (including transactions which are the subject of letters of credit or bank guarantees), expropriations or other measures affecting property rights____

Declaration II, Article II, ¶ 1.

The Tribunal has counseled a restrictive interpretation of provisions establishing the scope of an arbitral tribunal. Grimm v. The Government of the Islamic Republic of Iran, Iranian Assets Litig.Rep. (Andrews Publications) 6,140 (Feb. 18, 1983). Specifically, the Tribunal has narrowly circumscribed the scope of the “arising out of contracts” clause, the only language in Article II, 111 that is disputed by the parties, Plaintiff’s Memorandum of Law at 25; Defendant’s Memorandum of Law at 16. See, e.g., American Bell Int’l, Iranian Assets Litig.Rep. (Andrews Publications) 8,717 (June 22, 1984) (counterclaim alleging improper influence to acquire contractual privileges did not “arise out of contracts” for the purposes of Article II, 111); Harza, Iranian Assets Litig.Rep. (Andrews Publications) 5,958 (Jan. 21, 1983) (letter of credit guaranteeing a contractual transaction did not “arise out of” that transaction); White Westinghouse Int’l Co. v. Bank Sepah-Iran, New York Agency, Iranian Assets Litig.Rep. (Andrews Publications) 4,880, 4,881 (July 2, 1982) (the Tribunal does not have jurisdiction over a counterclaim alleging damages arising from plaintiff’s “illegitimate access” to bank documents). Even a counterclaim for tax and social security obligations incurred on account of specific provisions in a contract is not deemed to “arise out of” that underlying contract for the purposes of Article II, 111. Pereira v. Islamic Republic of Iran, Iranian Assets Litig.Rep. (Andrews Publications) 8,184, 8,185 (Mar. 23, 1984) (Mosk, J., concurring). Indeed, the Tribunal has made it clear that a claim or counterclaim only “arises out of contract” if the contract, and the contract alone, imposes the obligations that form the basis of the suit. Pereira v. Islamic Republic of Iran, supra, Iranian Assets Litig.Rep. at 8,185-86 (Mosk, J., concurring); T.C.S.B. v. Islamic Republic of Iran, Iranian Assets Litig.Rep. (Andrews Publications) 8,230, 8,235-36 (Mar. 16, 1984). A claim based upon the application of the law to the particular situation of one party — even if that claim is closely related to the contract and “but for” the contract, the claim would not exist — does not “arise out of contract,” and the Tribunal does not have jurisdiction over such claims. T.C.S.B. v. Islamic Republic of Iran, supra, Iranian Assets Litig.Rep. at 8,235-36; Pereira v. Islamic Republic of Iran, supra, Iranian Assets Litig.Rep. at 8,185-86 (Mosk, J., concurring).

In addition, the Tribunal has suggested that if Iran and the United States had intended the Tribunal to have jurisdiction over claims for damage to persons as opposed to property, the two governments would have used explicit language to that effect in the Algerian Declarations. See Grimm v. Government of the Islamic Republic of Iran, Iranian Assets Litig.Rep. (Andrews Publications) 6,141-42. Consistent with this view, the Tribunal has been notably unwilling to entertain tort claims involving claims for damage to persons. See id.; Hoffland Honey Co. v. Nat’l Iranian Oil Co., Iranian Assets Litig.Rep. (Andrews Publications) 6,011 (Jan. 26, 1983). Consequently, it is not unreasonable to assume that had jurisdiction over tort claims arising out of contracts been intended for the Tribunal, express language to that effect would also have been incorporated into the Algerian Declarations.

It is not doubted that plaintiffs’ tort claims are related to plaintiffs’ dismissal and thus related to their employment contract. First, the reasons for plaintiffs’ dismissal, if their allegations are correct, are also the grounds for their discrimination claim, viz. the fact that they are not Iranians. Second, according to plaintiffs’ view, the allegedly libelous Report was drawn up to provide a pretext for the dismissal of the plaintiffs. Plaintiff Boland’s Complaint at ¶ 10; Plaintiff Boyle’s Complaint at ¶ 10. But it is equally clear that, as in Pereira v. Islamic Republic of Iran, supra, plaintiffs’ tort claims are based upon the application of the law to their particular situation, and not upon specific provisions of their employment contract. The obligations of Sepah that form the basis for plaintiffs’ tort claims — the “obligation” to refrain from libel and from discrimination — do not arise out of provisions of the employment contract and thus the tort claims do not “arise out of contract” according to the Tribunal’s interpretation of that phrase. This finding coupled with the Tribunal’s reluctance to entertain tort claims lead this court to the conclusion that the Tribunal does not have jurisdiction over plaintiffs’ tort claims.

C

The Act of State Doctrine

Finally, defendant contends that the act of state doctrine bars United States courts from reviewing plaintiffs’ claims. Under the act of state doctrine, “courts of one country will not sit in judgment on the action of the government of another done within its own territory.” Underhill v. Hernandez, 168 U.S. 250, 252, 18 S.Ct. 83, 84, 42 L.Ed. 456 (1897). The doctrine does not preclude such a judgment when the act in question concerns a thing or interest located beyond the confines of the foreign state’s territory. Restatement (Second) of Foreign Relations § 43(1) (1965). Courts take a pragmatic approach in determining whether an act of a foreign country is an extraterritorial one. Maltina Co. v. Cawy Bottling Co., 462 F.2d 1021, 1027 (5th Cir.), cert. denied, 409 U.S. 1060, 93 S.Ct. 555, 34 L.Ed.2d 512 (1972). The determining factor is where the act comes to fruition. Tabacalera Severiano Jorge, S.A. v. Standard Cigar Co., 392 F.2d 706, 716 (5th Cir.), cert. denied, 393 U.S. 924, 89 S.Ct. 255, 21 L.Ed.2d 260 (1968). If the act does not come to complete fruition within a foreign state, then the Act of State Doctrine will not be applied. See, e.g., United Bank Ltd. v. Cosmic Intern Inc., 542 F.2d 868, 873 (2d Cir.1976) (act of state doctrine does not apply when confiscation ordered by foreign state occurs in United States if such act is inconsistent with American law and policy); Maltina Co. v. Cawy Bottling Co., 462 F.2d 1021 (5th Cir.1972) (a confiscatory decree of a foreign country aimed at that country’s extraterritorial nationals is not within the ambit of the Act of State Doctrine); F. Palicio y Compania, S.A. v. Brush, 256 F.Supp. 481, 488 (S.D.N.Y.1966) (act of state doctrine did not apply because the trademarks in question, registered in this country, had a local identity and situs apart from the foreign manufacturer), aff'd mem., 375 F.2d 1011 (2d Cir.), cert. denied, 389 U.S. 830, 88 S.Ct. 95, 19 L.Ed.2d 88 (1967).

The act that precipitated plaintiffs’ claims was the decision by the new administration of Bank Sepah to discharge them. Plaintiff’s Complaint at 3. This act occurred in Iran. Id. However, the actual act of discharging and the writing and some of the publication of the allegedly libelous Report had their situs in New York. Thus defendant’s decision in Iran to discharge plaintiffs and its request for the Report did not come to complete fruition in Iran. Further, plaintiffs’ claims mostly concern the extraterritorial effect of the decision by defendant to discharge plaintiffs. See Zwack v. Kraus Bros. and Co., 237 F.2d 255, 259 (2d Cir.1956). United States courts are thus not precluded from examining the validity of plaintiffs’ complaint, Restatement (Second) of Foreign Relations § 43(1), and they need give effect to defendant’s act only if that act is consistent with the policy and law of the United States. Id. § 43(2). Because libel and discrimination are not consistent with this country’s law, United States courts need not give effect to defendant’s act, and the state court is not prevented from hearing plaintiffs’ claims.

COSTS

Local Rule 25(a) provides that defendants “shall file a bond in the penal sum of $500.00, conditioned that the defendant or defendants will pay costs and disbursements incurred by reason of the removal proceedings should it be determined that the case was not removable or was improperly removed.” Given the fact that the issues briefed in the motion to dismiss were relevant to the remand of this action, the costs to be imposed against the defendant shall be limited to the penal sum of $500.00.

CONCLUSION

Defendant’s petition for removal was improvidently filed. Therefore, we do not consider its motion to dismiss for lack of subject-matter jurisdiction. The Tribunal does not have jurisdiction over plaintiffs’ tort claims, and the act of state doctrine and other policy rationales do not preclude United States courts’ jurisdiction. Therefore, the state court has jurisdiction over plaintiffs’ tort claims, and the case is remanded to the state court. Costs of $500.00 are assessed against defendant for the improvident removal of this action.

SO ORDERED.

      . For the purposes of this motion, the phrase "United States courts” includes both federal and state courts.

      . For the purposes of this motion, plaintiffs’ allegations are accepted as true. Transport v. Trucking Unlimited, 404 U.S. 508, 515, 92 S.Ct. 609, 614, 30 L.Ed.2d 642 (1971); United States v. New Wrinkle, Inc., 342 U.S. 371, 376, 72 S.Ct. 350, 352, 96 L.Ed. 417 (1952).

      . Two declarations comprise the settlement: (1) The Declaration of the Democratic and Popular Republic of Algeria (Declaration I) and (2) The Declaration of the Government and Popular Republic of Algeria Concerning the Settlement of Claims by the Government of the United States of America and the Government of the Islamic Republic of Iran (Declaration II).

      . Count 1 was for breach of employment contract, counts 2 and 3 were for abusive discharge, count 4 was for the libel of the Report, and count 5 was for the discriminatory actions taken because plaintiffs are Americans and Christians. Plaintiff's Memorandum of Law at 5.

      . It is notable that defendant did not petition for removal until after the state court denied its motions to dismiss and for summary judgment. To allow a defendant to remove the case after such extensive motion practice provides the defendant with a "second bite at the apple,” a practice that is generally frowned upon. See, e.g., Donaldson, Lufkin & Jenrette v. Los Angeles County, 542 F.Supp. 1317 (S.D.N.Y.1982) (a district court hearing first-filed of two "mirror image” actions should determine whether first-filed action should be dismissed in favor of later-filed action to avoid inconsistent rulings and duplication of judicial effort). Such a practice is not only wasteful but also unfair to the plaintiff, who can not avail himself of the procedure of removal. See 28 U.S.C. § 1441.

      . Even Gulf Ports Crating Co. v. Ministry of Roads and Transportation, 674 F.2d 318 (5th Cir.1982), which noted in dicta that "[a]ny disputes as to the tribunal’s jurisdiction are to be resolved by the tribunal itself,” 674 F.2d at 320 n. 2, engaged in interpretation of the language of the Algerian Declarations and examined the intent behind them to arrive at its jurisdictional decision, id.

      . Apparently, the issue of the Tribunal’s jurisdiction over tort claims arising out of contract has not previously been raised before the Tribunal.

      . Executive Order 12294 reads, in relevant part: "Suspension under this Order of a claim or a portion thereof submitted to the Iran-United States Claims Tribunal for adjudication shall terminate upon a determination by the Tribunal that it does not have jurisdiction over such claim or such portion thereof.” 46 Fed.Reg. 14111 (1981).

      . Defendant, relying on Islamic Republic of Iran v. Pahlavi, 94 A.D.2d 374, 464 N.Y.S.2d 487 (1st Dept.1983), also asserts that plaintiffs’ claims should be barred from this forum because of their political nature. Defendant’s Memorandum of Law at 36-39. Pahlavi concerned the claims of the current government of Iran against the former Shah and his family. Id. 464 N.Y.S. at 488. Pahlavi thus has little bearing on the instant claims, involving American nationals employed in the United States by a foreign corporation with offices in the United States.
      Defendant also notes that the purpose of the Algerian Declarations was to remove claims such as the plaintiffs’ from the fora of the sovereign adversaries and bring the claims before the more neutral and depoliticized forum of the Tribunal. Defendant’s Memorandum of Law at 23. Yet, as noted above, the Tribunal itself has attenuated rather than broadened its jurisdiction, allowing those claims that fall outside its jurisdiction to be heard in Iranian or American courts, see Declaration II, Article VII, ¶ 2; Executive Order 12,294, reprinted in 50 U.S.C. § 1701 (1982); Stewart, The Iran-United States Claims Tribunal: A Review of Developments 1983-84, 16 Law & Pol’y Int’l Bus., 677, 749 (1985).


author: MILTON POLLACK, Senior District Judge.

text:
    SPINNERIN YARN CO., INC., Plaintiff, v. APPAREL RETAIL CORPORATION, Defendant.
    No. 84 Civ. 6840 (MP).
    United States District Court, S.D. New York.
    Aug. 8, 1985.

      Sidney S. Korzenik, New York City, for plaintiff.
    Hahn & Hessen by Steven J. Mandelsberg, New York City, for defendant.
   DECISION AND OPINION

MILTON POLLACK, Senior District Judge.

This is a diversity action by plaintiff, Spinnerin Yarn Company, against defendant, Apparel Retail Corporation, for the price of yarn ordered by and delivered to a manufacturer of finished goods, viz., Stoll Industries, pursuant to a credit line made available by defendant to Stoll’s yarn suppliers. Defendant counterclaims against Spinnerin for monies it allegedly paid by mistake for Stoll’s account.

The case was tried to the Court at a Bench trial. Based on an evaluation of the proofs presented, including a resolution of all issues of credibility, the Court finds and concludes that the plaintiff failed to sustain its burden of proof on the complaint and the defendant failed to sustain its burden of proof on the counterclaim.

No Proof of a Contract

Spinnerin is a supplier of yarn to garment manufacturers. Apparel is a retail “off-price” buyer of garments. Stoll Industries is a knitter of garments for numerous purchasers, and is also the collective name for East Side Clothing, Metropolis Knitting, and Stoll Industries.

Spinnerin claims that Apparel breached an oral contract to pay for yarn ordered by Stoll to be fabricated into goods for Apparel. Spinnerin asserts that it delivered yarn to Stoll, at Apparel’s request, and sent the purchase orders to Apparel, which repeatedly promised to sign them. Apparel has refused to pay for the yarn delivered on the purchase orders which it did not sign, claiming that the understanding of the parties, at the outset, was that it would accept only those of Stoll's orders which it had signed in advance. Spinnerin replies that Apparel’s “agent”, Stoll, assented to the contracts and that Apparel waived any requirement of written assent through its course of conduct.

The evidence clearly establishes that Apparel never agreed to be liable generally for the yarn purchased by Stoll. Apparel was simply one of Stoll’s customers, purchasing finished garments from Stoll. There is no credible proof that Stoll ever acted as Apparel’s agent or manufactured goods with yarn purchased on Apparel’s account. Spinnerin’s repeated attempts to find an agency between Apparel and Stoll and contracts between Apparel and Spinnerin, where none exist, have added to the confusion surrounding this relatively simple case.

The credible testimony at trial was that sometime prior to 1983, Apparel had established a $500,000 line of credit to permit Stoll to purchase material from various suppliers, e.g., Deering Milliken and others. Apparel’s Chairman had extended the credit line to Stoll, which was having some financial difficulties, as a personal accommodation to Stoll’s principal. If a supplier to Stoll wanted to avail itself of the Apparel-Stoll credit line, it submitted orders to Shelly Karp, Director of Manufacturing of Apparel Buying, a division of defendant, for credit approval. As Apparel approved each extension of credit to any one of Stoll’s several suppliers, it reduced Stoll’s available credit line accordingly.

In early 1983, Spinnerin’s sales agent telephoned Karp and told him that Stoll had said that Apparel was providing credit for Stoll. The sales agent had negotiated an order with Stoll and wanted to sell it yarn, guaranteed by the Apparel credit line. Karp told Spinnerin’s sales agent to submit the order for signature so that Karp could determine whether to accept and extend credit to Stoll to enable it to the purchase yarn from Spinnerin. Both Karp and Spinnerin’s sales agent testified that Apparel expressly conditioned any agreement to extend credit on Apparel’s prior written acceptance and signature.

On March 9,1983, shortly after Spinnerin discussed with Apparel the possibility of providing credit to Stoll, plaintiff’s factor, Midlantic, wrote Apparel to verify the relationship between Stoll and Apparel: “Spinnerin has been calling in orders on your account for Metropolis and you have agreed to be responsible for the payment of the invoices.” On March 11, 1983, Karp responded to Midlantic: “Please be advised that we will be responsible only for Purchase Orders that, myself, or an authorized representative of Apparel Buying, has signed, as we have done with all the Spinnerin orders.”

The parties followed a routine procedure for securing Apparel’s acceptance of each order. Stoll’s executives Rossi or Kuhl would execute a purchase order with Spinnerin’s sales agent; the sales agent would then forward the purchase order and contract to Karp for possible acceptance and signature and would notify Midlantic of the potential sale. (The parties also refer to these contracts as purchase orders.) Karp would then consult Apparel’s Controller, Daniel Harper, to determine whether Stoll was within the contemplated credit limit; Karp’s only concern in deciding whether to accept the order was whether Stoll had exceeded its credit line. If Stoll had not exceeded its credit limit, Karp would sign the contract and forward the documents to Stoll; Stoll would then verify the amount, price, color, and style of the yarn specified in the contract. If Karp did not approve the credit, the documents were also sent to Stoll, unsigned. Karp and Spinnerin’s sales agent both testified that none of the documents, signed or unsigned, were ever returned directly to Spinnerin from Apparel. Spinnerin’s sales agent went to Stoll to pick up the signed contracts.

All the purchase orders accompanying the contracts had the “Metropolis” name on them and had been signed by Peter Rossi of Metropolis. Four of the contracts identified the buyer as “Metropolis Ktg c/o Apparel Buying Corp.” Although the remaining contracts were on a printed form which denominated Apparel as “Buyer,” Karp testified that: 1) he did not notice that the designation on the printed form was not appropriate for a guarantor of a credit line as distinct from a purchaser of yarn; 2) he did not pay attention to the printed designation on the documents when Harper brought them to him; and, 3) he was concerned only with the bottom line dollar amount. The contracts, which had been prepared by Spinnerin, did not have a line for “credit approval”; Karp signed on the line marked “Buyers Signature” to signify his approval of credit for Stoll. Indeed, Spinnerin’s sales agent never testified that Apparel was the user of the yarn, although he acknowledged that Apparel was lending its credit line in the Stoll transactions. It is also worth noting that subsequent change of orders, prepared by Spinnerin and Stoll to alter Stoll’s order, identified “Metropolis” (not Apparel) as the “customer.”

Karp testified that on several occasions, plaintiff’s sales agent called him to explain what Stoll was ordering. Karp told the sales agent that he did not care what merchandise Stoll was purchasing, but that if Stoll wanted Apparel’s credit guarantee, Stoll should send the order and Karp would decide whether to sign it or not, depending on the open-to-buy credit line, and would send it back to Stoll.

In late summer 1983, Stoll apparently closed up shop. Meanwhile, Apparel was receiving late notices from Midlantic, requesting payment for yarn delivered to Stoll. Apparel refused to pay for the yarn on unsigned orders. On August 12, 1983, Midlantic wrote Spinnerin, advising plaintiff of Apparel’s limited obligation to it:

“We have placed the following invoices at your risk as the customer [Apparel] advises that they did not order the goods • and do not have purchase orders covering the same.”

On September 7, 1983, Midlantic again wrote plaintiff:

“Apparel Buying only agreed to pay for goods where they signed the purchase orders in advance____ Please bear in mind that shipments to Metropolis do not constitute credit approvals unless you have the proper documentation____ We have no choice but to leave the Apparel Buying invoices at your risk ...”

On December 29, 1983, Karp wrote the Spinnerin, seeking to ascertain defendant’s liability and informing plaintiff that its records were incomplete. Karp wrote,

“We have never assumed general liability for the debts of Metropolis/Stoll Industries. We have on occasion executed purchase orders for the purpose of ordering goods to be delivered to Metropolis/Stoll Industries and obviously we intended to be liable for such shipments; but only for such shipments made on purchase orders signed by our duly authorized officer.”

The evidence clearly establishes that Apparel never agreed to supply credit for Stoll for all yarn purchased by Stoll from Spinnerin. Rather, each order was a separate offer which Apparel was free to accept or reject. Apparel said that it would accept only by signing the contracts. Spinnerin never obtained Apparel’s written consent, i.e., acceptance, for the orders in this case; since no contracts existed between Spinnerin and Apparel, Apparel is not liable for the yarn. Cf Reprosystem, B.V. v. SCM Corp., 727 F.2d 257, 261 (2d Cir.), cert. denied, — U.S. -, 105 S.Ct. 110, 83 L.Ed.2d 54 (1984) (where parties intend to be bound only after a formal contract is signed, no agreement until such signing).

The Court does not credit Spinnerin’s sales agent’s testimony, which is at variance with the facts on numerous material issues. The sales agent testified that Karp said that Stoll was Apparel’s agent; that Stoll would knit the yarn which would be fabricated into merchandise for Apparel; that Karp and Harper directed the yarn to be shipped prior to signing a confirmation; and, that they said time was of the essence and they would sign the contracts when sent. Contrary to the sales agent’s testimony, there is absolutely no proof that Spinnerin’s yarn was fabricated into goods for Apparel’s account. In fact, Apparel extended credit to Stoll to purchase goods from numerous suppliers to be fabricated into goods for numerous customers. Furthermore, there is no proof that Spinnerin would have been unable to receive a signed acceptance from Apparel within the time it usually took to deliver the yarn, i.e., from one to three weeks, if Apparel was supposed to send the contracts directly to Spinnerin.

Spinnerin attempts to circumvent the fact that Apparel, itself, never accepted the contracts, in writing, by arguing that Apparel accepted the contracts through its “agent” Stoll, through its failure to object in writing to the invoices, and through its conduct.

Spinnerin claims that defendant is liable for the unsigned orders because Stoll was Apparel’s agent and acted with actual or apparent authority. The existence of apparent authority is a question of fact; the party asserting its existence must show that the principal was “responsible for the appearance of authority in the agent to conduct the transaction in question.” Ford v. Unity Hospital, 32 N.Y.2d 464, 299 N.E.2d 659, 664, 346 N.Y.S.2d 238, 244 (N.Y.1973).

The testimony and documentary evidence clearly establish that Stoll was not Apparel’s agent and did not have actual or apparent authority. Apparel never said that Stoll was its agent and Apparel never acted as if Stoll were its agent. Apparel simply established a $500,000 credit line for Stoll to draw upon in its transactions with numerous suppliers, including plaintiff. Similarly, there is no proof that Stoll acted as Apparel’s agent; Apparel was but one of many customers who purchased finished merchandise from Stoll. In fact, Apparel negated any inference that Stoll was its agent; Apparel told both Spinnerin and Midlantic that it would pay only for yarn which it had approved credit, in writing, in advance. In short, there is no credible evidence that Stoll had the authority to obligate Apparel to pay for the yarn and such authority was credibly denied.

Spinnerin also says that Apparel’s written acceptance was unnecessary because, under UCC § 2-201(2), Apparel accepted the contracts and the invoices pursuant thereto when it failed to object, in writing, to them. Plaintiff misconstrues the purpose and effect of UCC § 2-201(2); that section does not make a contract where none existed. Section 2-201(2) is an exception to the general Statute of Frauds requirement of a writing for the sale of goods for the price of $500 or more. Section 2-201(2) provides:

“Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) [section 2-201(1) ] against such party unless written notice of objection to its contents is given within ten days after it is received.”

One New York court has held,

“Failure to object in writing within ten days does not signify assent to the terms of the writing; it merely deprives the recipient of the opportunity to raise the statute of frauds as a defense. Therefore it is for the trier of fact to determine whether there was or was not an oral contract.”

Pecker Iron Works, Inc. v. Sturdy Concrete Co., 96 Misc.2d 998, 410 N.Y.S.2d 251, 254 (N.Y.Civ.Ct., Queens Cty 1978). Similarly, the Seventh Circuit, applying New York law has held,

“The only effect of failure to object to a written confirmation of an oral offer or agreement under Section 2-201 is to take away from the receiving merchant the defense of the Statute of Frauds. Although Section 2-201 may make enforceable an oral agreement which was in fact reached by the parties, it does not relieve the party seeking enforcement of the alleged oral agreement of the obligation to prove its existence.”

C. Itoh & Co. v. Jordan Int’l Co., 552 F.2d 1228, 1232-33 (7th Cir.1977) (emphasis in the original).

Plaintiff cannot rely on a transmitted confirmation of a contract that never existed and then hold defendant to the nonexistent contract because defendant failed to object. Section 2-201(2) does not eliminate the requirement of mutual assent to a contract. See E. Y. Gilkey & Sons, Inc. v. A-E Architectural Materials, Inc., 86 App.Div.2d 970, 448 N.Y.S.2d 290, 291 (N.Y.App.Div.1982). Apparel never assented to the unsigned orders or the invoice copies pursuant thereto and therefore cannot be bound by them.

Spinnerin also claims that Apparel’s written consent was unnecessary because its conduct manifested its intent to be bound and thereby waived any requirement of written acceptance. In particular, Spinnerin claims that Apparel’s course of conduct in negotiating a “settlement” to extend the dates of unsigned purchase orders, paying for invoices which referred to unsigned orders, and not directly returning either signed or unsigned orders to plaintiff, constituted acceptance of the contract or, alternatively, waived the requirement of written assent. Neither argument has merit.

Under UCC § 2-207(3), “[cjonduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract.” Under all the facts and circumstances in evidence, Apparel’s conduct, as a matter of fact, did not recognize the existence of a contract. For example, after Apparel investigated and determined what confirmations were signed, it voluntarily paid Spinnerin $44,836.20. The letter accompanying the payment states,

“It is no coincidence that all of the invoices paid by this check relate to purchase orders signed by an officer of Apparel Buying Company. As you are aware, Apparel recognizes liability only for such invoices and this payment is not to be construed in any way as an admission of liability or waiver or release as to any and all unpaid invoices.”

Spinnerin claims that Apparel’s “acceptance” of a “settlement”, extending the date on which payment for deliveries was due, was conduct obligating it to pay for all the yarn sold to Stoll. Plaintiff’s sales agent wrote Karp, “Enclosed please find the list of orders from Apparel Buying, Corp., placed by Mr. Peter Rossi of Metropolis Knitting which will now have 60 days extra dating.” Spinnerin claims that the fact that some of the invoices listed in the letter referred to unsigned orders is evidence of the fact that Apparel knew it was obligated to pay for unsigned orders. However, Karp testified that he did not request an extension of payment and does not know why it was extended; he says that Apparel was not buying any yarn from Spinnerin. (During the relationship, payments were made not to Spinnerin, but to Midlantic, with whom Spinnerin factored the Stoll account). The letter does not state the reason for the extension or who requested it, and does not state that Apparel requested the extension or agrees that it owes the amounts contained therein. Incidentally, the letter on which Spinnerin relies establishes that the orders were placed by Metropolis, not Apparel. Spinnerin’s characterization of the “letter” as a “settlement”, with or for Apparel’s account, is unwarranted either by the content of the letter, accompanying documents, or testimony.

Spinnerin also claims that Apparel’s payment of invoices on orders which were not returned to plaintiff proves that defendant intended to pay for unsigned orders. However, there is no proof that the payments by Apparel’s former Controller Harper were intended to be an acceptance of all the other unsigned orders; during the same period that Harper was paying some of the unsigned orders, he was not paying other unsigned orders. Moreover, at least one of the orders that Spinnerin claimed was unsigned, actually was signed, but simply not returned by Stoll to Spinnerin.

To circumvent the signature requirement, Spinnerin also relies on UCC § 2-208(3), which provides that proof of a “course of performance shall be relevant to show a waiver or modification of any term inconsistent with such course of performance.” See also UCC § 2-209(4). However, UCC §§ 208(3) and 2-209(4) are applicable only if a contract has been established. As a matter of fact, they are of no relevance in proving the existence of a contract. In any event, as a matter of fact, under all the circumstances established by the credible evidence and reasonable inferences therefrom, Apparel did not waive the condition of a signature.

The issue of whether “the parties’ course of performance worked a waiver of one or more terms in their contract is a question for the factfinder.” Westinghouse Credit Corp. v. Shelton, 645 F.2d 869, 872 (10th Cir.1981). See also Stinnes Interoil, Inc. v. Apex Oil Co., 604 F.Supp. 978, 982 (S.D.N.Y.1985). The UCC waiver provisions, UCC §§ 2-208(3) and 2-209(4), are essentially “equitable” in nature. See T.J. Stevenson & Co. v. 81,193 Bags of Flour, 629 F.2d 338, 365 (5th Cir.1980).

In this case, there is no evidence supporting waiver through a course of conduct. Apparel made it clear that it would pay only for signed orders; the fact that it forwarded all orders to Stoll for verification and return does not, in any way, show that Apparel waived signature. Similarly, Apparel’s payment of some unsigned orders and refusal to pay others cannot establish a course of performance to pay all unsigned orders. Moreover, there is no evidence that Apparel knew about the extension of time for payments and intended to alter its entire course of performance. In fact, the evidence shows a course of performance at variance with Spinnerin’s interpretation of the contract. Spinnerin’s sales agent repeatedly retrieved signed orders from Stoll, not Apparel, while Spinnerin was continuing its performance. As already mentioned, under all the facts and circumstances, taking into consideration the credible testimony at trial, there was no waiver under the UCC.

Moreover, Spinnerin certainly has not proven waiver or estoppel under the common law. It has failed to adduce any proof that Apparel “intentionally] relinquished] ... a known right,” see Hadden v. Consolidated Edison Co., 45 N.Y.2d 466, 410 N.Y.S.2d 274, 275, 382 N.E.2d 1136, 1137 (N.Y.1978), and therefore has not established a waiver under the common law. Neither has Spinnerin proven that Apparel is estopped from relying on the condition of a written signature. There is absolutely no proof that Apparel knew that it was paying for unsigned orders (or why it did so) or was agreeing to extend the payment terms, or that Spinnerin continued to ship yarn to Stoll because of Apparel’s conduct. See Rosenthal v. National Life Ins. Co., 486 F.Supp. 1018, 1023 (S.D.N.Y.1980).

Also without merit is Spinnerin’s claim that Apparel hindered the performance of the condition by not responding to the purchase orders which Spinnerin sent to it. Spinnerin relies on the general rule that “[o]ne who unjustly prevents the performance or the happening of a condition of his own promissory duty thereby eliminates it as such a condition.” Spanos v. Skouras Theatres Corp., 364 F.2d 161, 169 (2d Cir.1966) (en banc).

Once again Spinnerin’s argument assumes the existence of a contract which does not exist. Absent a contract, Apparel had no obligation to Spinnerin beyond a merchant’s obligation to act in “good faith.” In any event, there is no evidence that Apparel acted other than in good faith, much less that it hindered Spinnerin's performance. Apparel did only what it told Spinnerin that it would do: namely, to consider whether to accept the orders under the established credit line and then return them to Stoll. Spinnerin has not proved that any “breach was the result of defendant’s fault,” Wagner v. Derecktor, 306 N.Y. 386, 391, 118 N.E.2d 570 (N.Y.1954), or that defendant made impossible the performance sought, Patterson v. Meyerhoffer, 204 N.Y. 96, 97 N.E. 472 (N.Y.1912) (although defendant knew plaintiff intended to purchase land to sell it to defendant, defendant bought the property before plaintiff could do so).

In short, Apparel neither agreed to extend credit on the unsigned purchase orders, nor waived the requirement of a writing, nor hindered Spinnerin’s performance. Spinnerin is not entitled to recover.

The Counterclaim — No Proof of Mistake

Apparel alleges that it mistakenly paid on unsigned orders and is entitled to recover those monies from Spinnerin. Apparel claims that after its Controller, Harper, left the company, it began investigating the accounts and transactions between the parties; and thereafter, its successor Controller, Steven Kravetz, concluded that money was erroneously paid by Harper to Spinnerin on unsigned orders.

Under New York law, “ ‘[a] person who has paid another an excessive amount of money because of an erroneous belief induced by a mistake of fact ... is entitled to restitution of the excess.’ ” ITT World Directories, Inc. v. Cia. Editorial de Listas, S.A., 525 F.2d 697, 700 (2d Cir.1975), quoting Restatement of Restitution § 20 (1937). However, a voluntary payment “under mistake of law, but with a full knowledge of all the facts, cannot be recovered.” Adrico Realty Corp. v. City of New York, 250 N.Y. 29, 32, 164 N.E. 732 (N.Y.1928).

In this case, the conclusory testimony of its witnesses is not sufficient to sustain Apparel’s burden of proof of mistake. Kravetz, Harper’s successor as Controller, testified that he did not know the “facts and circumstances” surrounding the payments. Similarly, Karp testified that he had only “limited knowledge” of the alleged error. Thus, the record is devoid of any proof as to why the questioned payments were made, whether Apparel made a mistake in fact or mistake of law, or the nature of the mistake of fact. Numerous hypotheses can be advanced (e.g., perhaps the Controller, who paid the invoices, failed to check with Karp to determine if the latter signed the orders); but, such hypotheses are not proof of mistake.

Discovery

A question concerning the scope of discovery has been raised. The Court closely supervised the discovery in this case, in accordance with Rule 26(b)(l)(i), Fed.R. Civ.P., to the limit the parties’ “unreasonably cumulative”, “burdensome”, and “expensive” discovery. In particular, the Court vacated Spinnerin’s Request for Admissions, which consisted of 71 sections and numerous subsections, and Interrogatories, which consisted of 17 sections and numerous subsections.

Throughout this case, Spinnerin has been under the mistaken impression that Apparel kept one set of accounts, detailing its purchases from Stoll and its credit advances to that company. The uncontradicted proof is that separate accounts were kept: one group setting forth the credit advances made to Stoll’s many suppliers and another setting forth Apparel’s finished goods, purchased from Stoll.

The Court ordered Apparel to provide Spinnerin with a letter detailing the state of accounts between Stoll and Apparel. Apparel complied, albeit on the eve of trial by sending the letter to Spinnerin’s counsel. At trial, Spinnerin claimed that the letter was incomplete. The Court gave Spinnerin’s counsel the option of going to Boston (where the records are kept) to review them or to question Apparel’s Controller, Kravetz; counsel chose to question Kravetz. After questioning Kravetz, counsel agreed that the matter was closed.

In any event, further discovery would be unnecessary because the nature of Apparel’s accounts was fully developed at trial. Spinnerin was seeking to discover what simply did not exist — a consolidated account of all Apparel’s transactions with and on behalf of Stoll.

Conclusion

Accordingly, the Complaint and Counterclaim are dismissed, on the merits, without costs. The parties, respectively, have failed to prove the claims asserted.

The foregoing shall constitute the findings of fact and conclusions of law required by Rule 52(a), Fed.R.Civ.P.

SO ORDERED.