author: KRAM, District Judge.

text:
    EMPIRE VOLKSWAGEN, INC., et al., Plaintiffs, v. WORLD-WIDE VOLKSWAGEN CORP., Defendant.
    No. 81 Civ. 5038 (SWK).
    United States District Court, S.D. New York.
    Jan. 24, 1986.
    As Amended Feb. 27, 1986.
    See also 95 F.R.D. 398.

      Robinson, Perlman and Kirschner, P.C., by Lawrence M. Rosenstock, Jay D. Lu-kowski, New York City, for plaintiffs.
    Rosenman Colin Freund Lewis & Cohen, by Arnold I. Roth, Arthur S. Linker, Lee A. Barkan, Judy A. Suben, New York City, for defendant.
   KRAM, District Judge.

Plaintiff Empire Volkswagen, Inc. (“Empire Volkswagen”), was previously engaged in the retail sale of automobiles in Poughkeepsie, New York, pursuant to a franchise agreement with defendant. Plaintiff Empire Volkswagen d/b/a Empire Porsche Audi, Inc. (“Empire Porsche Audi”), sold Porsche and Audi automobiles, also in Poughkeepsie, pursuant to a franchise agreement with the defendant. Plaintiff Empire City Motors, Inc. (“Empire City”), sold Ford automobiles at the same location in Poughkeepsie. Plaintiff Donald Amerling alleges he was the majority owner of the three businesses at all relevant times. Plaintiff Susanne Properties Corp. (“Susanne Properties”), owned the premises occupied by the three car dealerships. Defendant World-Wide Volkswagen Corp. (“World-Wide”), distributes Volkswagen in New York, Connecticut, and New Jersey.

Plaintiffs bring eight claims against the defendant, all arising out of the franchise relationship between Empire Volkswagen, Empire Porsche Audi, and World-Wide Volkswagen, which began in September, 1975 and ended in February, 1981. Plaintiffs bring their claims under the federal and state antitrust laws, federal and state legislation protecting automobile franchises, and common law contract and tort principles. Defendant asserts two counterclaims for the purchase price of goods it allegedly sold to plaintiffs.

The case is currently before the Court on defendant’s motion for judgment on the pleadings and in the alternative, for summary judgment. For the following reasons, defendant’s motion is GRANTED in part and DENIED in part.

A party is entitled to a judgment on the pleadings if, based on the pleadings themselves, the party is entitled to relief. Fed. R.Civ.P. 12(c). When matters outside the pleadings are presented to the Court, the motion shall be treated as one for summary judgment under Fed.R.Civ.P. 56. Since the parties have made extensive submissions in the form of affidavits and exhibits, the Court will treat the motion as one for summary judgment.

A motion for summary judgment lies only when there is no genuine issue of material fact. This Court’s role is to determine whether there are issues to be tried. Heyman v. Commerce and Ind. Ins. Co., 524 F.2d 1317, 1319-20 (2d Cir.1975). The burden is on the moving party to show that no such issues exist. Addickes v. Kress and Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). In testing whether the movant has met this burden, the Court must resolve all ambiguities against the movant. Heyman, 524 F.2d at 1320. Nonetheless, “the mere possibility that a factual dispute may exist, without more, is not sufficient to overcome a convincing presentation by the moving party.” Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980) (emphasis in original). Speculation, conclusory allegations, and mere denials are not enough to raise genuine issues of fact.

I. Federal Antitrust Claims

A. Exclusive Dealing

Plaintiffs allege that following its commencement as a Ford dealer in May, 1977, defendant attempted to impose an exclusive car dealing policy on them through a number of discriminatory actions, including decreasing the number of cars it shipped to them for sale. This, plaintiffs claim, violated Section One of the Sherman Act, 15 U.S.C. § 1, and Section Three of the Clayton Act, 15 U.S.C. § 14.

Section 1 of the Sherman Act prohibits contracts, combinations, or conspiracies in restraint of trade. 15 U.S.C. § 1. Section 3 of the Clayton Act prohibits a person from selling goods on the condition that the purchaser not deal in the goods of a competitor, where the effect of such condition might lessen competition in the particular line of commerce. 15 U.S.C. § 14. Exclusive dealing requirements are not per se illegal, but rather, are prohibited under both Acts only if performance of the exclusive dealing arrangement will foreclose competition in a substantial share of the line of commerce affected. Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 327, 81 S.Ct. 623, 628, 5 L.Ed.2d 580 (1961). The threshold question under both Acts, however, is whether an exclusive dealing arrangement did in fact exist. Id. at 330, 81 S.Ct. at 629.

Defendant has shown there are no material facts at issue regarding plaintiffs’ exclusive dealing charges. In September, 1975 Empire Volkswagen opened. In October, 1975, Empire Porsche Audi opened. Neither of the franchise arrangements required plaintiffs to deal exclusively in Volkswagens, Porsches, or Audis. Empire Volkswagen and Empire Porsche Audi both operated out of the same facility. In May, 1977, Empire City commenced operations as a Ford dealership, using the same showroom and facilities as. Empire Volkswagen and Empire Porsche Audi.

The defendant’s policy concerning exclusive dealing was to allow its dealers to sell the automobiles of another manufacturer provided they did so from a separate facility. Plaintiffs clearly understood this to be defendant’s policy.

The undisputed established facts show the dealership arrangement defendant attempted to impose on plaintiffs was not an exclusive arrangement. Plaintiffs remained free to sell automobiles provided by other manufacturers, provided they did so from other facilities. See White and White, Inc. v. American Hospital Supply Corp., 540 F.Supp. 951, 1028 (W.D.Mich.1982) (if the buyer retains the freedom to purchase the product from sellers of its own choosing, there is no exclusive arrangement), rev. on other grounds, 723 F.2d 495 (6th Cir.1983). Although plaintiffs recognize that they were free in principle to deal with Ford, they argue that this freedom was illusory because plaintiffs did not have the capital to open a separate facility. This argument is misguided. Defendant did not attempt to coerce the plaintiffs into an exclusive dealership arrangement, but to require plaintiffs to sell Ford cars from separate facilities. Defendant was permitted to impose this restriction, regardless of plaintiffs’ financial circumstances.

Plaintiffs also have submitted evidence indicating that defendant induced them to begin their dealership even though it was undercapitalized, and knew about plaintiffs’ financial difficulties when defendant urged them to open new facilities. They thus allege defendant’s actions were in bad faith. Such allegations of bad faith dealing are not cognizable antitrust claims.

B. Resale Price Maintenance

Plaintiffs’ second antitrust claim is that defendant penalized them for failing to sell cars at defendant’s suggested retail prices. They allege that defendant’s actions were in furtherance of a retail price maintenance scheme in violation of 15 U.S.C. § 1.

Resale price maintenance schemes are per se illegal under Section One of the Sherman Act. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 775, 104 S.Ct. 1464, 1469, 79 L.Ed.2d 775 (1984). However, unilateral action by a party to set retail prices is not illegal. Id. An antitrust plaintiff must prove a scheme to set prices between at least two parties.

The plaintiff has the burden of presenting sufficient evidence to prove the existence of an agreement to fix prices. Id., 104 S.Ct. at 1470. To carry its burden:

something more than evidence of complaints is needed. There must be evidence that tends to exclude the possibility that the manufacturer and nontermi-nated distributors were acting independently. ... [T]he antitrust plaintiff should present direct or circumstantial evidence that reasonably tends to prove that the manufacturer and others “had a conscious commitment to a common scheme designed to achieve an unlawful objective.”

Id. at 1471, quoting Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 111, n. 2 (3d Cir.1980), cert. den., 451 U.S. 911, 101 S.Ct. 1981, 68 L.Ed.2d 300 (1981).

Evidence that retailers complained to distributors that other retailers were selling at a discount does not remove a plaintiff’s burden of proving the existence of an agreement to fix prices. Id., 104 S.Ct. at 1471, n. 8. A plaintiff must show an actual agreement and prove that the manufacturer sought the retailer’s agreement to maintain prices, and that the retailer communicated its agreement to do so to the manufacturer. Id. at 1471, n. 9. An agreement between a manufacturer and only one retailer to fix prices is sufficient to prove an agreement. Id. at 1472.

Even considering plaintiffs’ exhibits and affidavits as true, they fail to demonstrate an agreement between WorldWide and its distributor to fix prices. While defendant threatened its dealers that it would take harsh action if they discounted, none of the threats contained any reference to agreements between World-Wide and dealers, and all of the threats were unilateral. For example, R.W. Josenhanss, defendant’s executive vice-president, told the dealers that if he caught them selling cars “under maximum gross profit, I will make it tough-” Dep. of Larry Winters at 85. Such unilateral attempts by a distributor to set retail prices are not illegal, and there is no evidence that any of the dealers agreed not to discount prices.

Defendant’s other alleged attempts to force plaintiffs to stop discounting — including direct threats and decreasing Empire Volkswagen’s car allotment until it stopped discounting — also are merely unilateral actions, and fail to show any price-fixing agreement.

The only other evidence the plaintiffs advert in support of their claim is a letter sent to defendant by an employee of another Volkswagen dealer, Amerling Volkswagen, which is owned by plaintiff Donald Amerling’s father, Murray Amerling. The letter complained about a discount sale Empire Volkswagen had made. While such complaints alone do not support the existence of an agreement, plaintiffs argue that this letter, in conjunction with other evidence, proves the existence of an agreement. First, World-Wide threatened to retaliate against dealers if they discounted, a threat of which all dealers were aware. Second, Murray Amerling stated he had his employee write the letter to “get Donald [Amerling] to get back in the horn.” M. Amerling Dep. at 662. Third, WorldWide’s response to the letter was to investigate the sale and analyze how much profit Empire Volkswagen was losing by failing to sell at suggested retail prices.

This evidence, taken as a whole, fails to prove the existence of any agreement between World-Wide and the dealer to set prices. The letter from Amerling Volkswagen does not refer to any agreement. It does not accuse Empire Volkswagen of acting against an agreement Amerling Volkswagen had with World-Wide not to discount retail prices; it just asks for sales advice. Murray Amerling’s statement, when viewed in the context of his deposition, merely indicated that it was difficult to compete with a dealer selling cars at less than cost. It was not an agreement not to discount. Finally, defendant’s analysis did not refer to a price maintenance agreement that Empire Volkswagen was undercutting. Rather, it merely stated Volkswagen was losing profits. In conclusion, defendant’s motion for summary judgment on plaintiff’s price fixing claim is granted.

C. Group Boycott

Plaintiffs also claim defendant’s actions constituted a group boycott in violation of 15 U.S.C. § 1. In order to make out a claim for a group boycott under Section 1 of the Sherman Act, the plaintiffs must first show the existence of concerted action. See United States v. General Motors Corp., 384 U.S. 127, 139-45, 86 S.Ct. 1321, 1327-30, 16 L.Ed.2d 415 (1966). In General Motors, the Court found “a classic conspiracy in restraint of trade: joint collaborative action by the dealers, the appellee associations, and General Motors to eliminate a class of competitors ...” Id. at 140, 86 S.Ct. at 1327. In tne present case, there is no evidence that World-Wide participated in any arrangement with other dealers, explicit or otherwise, to force Empire Volkswagen to adhere to its pricing and sales policies. The only evidence of such an agreement was described in Section I.B. supra, and does not establish the existence of joint activity. Defendant’s motion for summary judgment on plaintiffs’ claim of an illegal group boycott is thus granted.

D. Plaintiffs’ Standing to Raise the Antitrust Claims

Since defendant has been granted summary judgment on plaintiffs’ federal antitrust claims, the Court need not consider defendant’s claim that plaintiffs Amerling, Susanne Properties, and Empire City lack standing to sue.

II. Federal Automobile Dealers’ Day in Court Act Claims

A. The Application of the Act to World-Wide Volkswagen

The Automobile Dealers’ Day in Court Act, 15 U.S.C. § 1222, (“ADDA”), provides an automobile dealer with a cause of action against an automobile manufacturer who fails to act in good faith in performing or complying with the terms of an automobile dealership franchise or in terminating the franchise with the dealer. The definition of “automobile manufacturer” includes a corporation engaged in the manufacturing or selling of cars, including any corporation which acts for and is under the control of a manufacturer in connection with distributing its cars. 15 U.S.C. § 1221(c). WorldWide claims it is neither a manufacturer nor under the control of one, and hence is not subject to liability under the Act.

The courts are in conflict over what the Act requires to establish “control.” The Ninth Circuit has held that the distributor and manufacturer must be related to each other as an agent and principal in order to establish the requisite control. Stansifer v. Chrysler Motors Corp., 487 F.2d 59, 65-66 (9th Cir.1973). At least two other district courts have held that an agency relationship is not necessary to bring a distributor within the Act. Grappone, Inc. v. Subaru, 403 F.Supp. 123, 136-37 (D.N. H.1975); DeCantis v. Mid-Atlantic Toyota Distributors, Inc., 371 F.Supp. 1238, 1244 (E.D.Va.1974). Rather, if the manufacturer has the power to direct the course of dealing between a distributor and its retail dealers, the requisite control is established. DeCantis, 371 F.Supp. at 1244; see Grappone, 403 F.Supp. at 135 (control established when distributor is an intermediary body through which the will of the manufacturer is imposed on dealers).

The Court is persuaded by the latter line of authority. The thrust of the ADDA is to prevent automobile manufacturers from exerting their economic advantage over dealers by forcing dealers to adhere to unfair and inequitable requirements. The Act attempts to balance the power of dealers and manufacturers by giving dealers a cause of action against manufacturers, or those under their control, who made wrongful demands on dealers. See Woodard v. General Motors Corporation, 298 F.2d 121, 127 (5th Cir.1962). A strict agency oriented definition of “control” would undercut the Act, and allow both distributors and manufacturers to avoid liability under the ADDA while allowing manufacturers to impose unfair demands on dealers. Manufacturers could set up a network of independently owned distributors who were required, pursuant to the terms of the distributorship agreement, to impose wrongful demands on the dealer. Under such a system, a distributor would not be liable because it was not a manufacturer’s agent, and a manufacturer would avoid liability because it was not a party to the franchise agreement. To allow a distributor and manufacturer to bypass the strictures of the Act because the distributor is independently owned would undermine the Act’s purpose if the manufacturer controlled the distributor’s relations with the dealers. Thus, as the Court in Grappone, supra, held, as long as the manufacturer controls the terms the distributor imposes on the dealer, the distributor can be held liable under the Act. 403 F.2d at 136.

Based on the proper standard of control, summary judgment for defendant is not appropriate. While the plaintiffs admit that World-Wide is an independently owned automobile distributor, they assert that it is nevertheless under the control of Volkswagen of America (“VWOA”), which manufactures Volkswagens in the United States. The terms of the distributorship agreement between World-Wide and VWOA indicate that unresolved factual issues regarding the extent of control VWOA exerts over World-Wide and WorldWide’s dealers still remain.

For example, the agreement prohibits World-Wide from changing beneficial ownership or executive officers without VWOA’s prior consent. More importantly, VWOA retains a significant amount of control over dealers through the agreement. VWOA must approve both the initial appointment of dealers and dealership agreements. World-Wide must approve all changes in the structure and location of dealers’ showrooms, and all sales of dealerships. World-Wide, in turn, cannot grant such approvals without the prior written consent of VWOA. World-Wide also must pass to dealers any suggestions VWOA has for them. World-Wide must forward these suggestions in its own name, without changes in substance, and must require the dealers to consider suggestions. WorldWide must also maintain schools for its dealers which comply with VWOA’s standards. World-Wide must implement specific rules regarding dealers’ operating hours, facilities, and personnel. Numerous other aspects of a dealer’s business are to be supervised by World-Wide pursuant to its agreement with VWOA. These include used car sales, advertising, and design of salesrooms. In light of this, summary judgment for defendant on the ground that World-Wide is not a manufacturer within the meaning of the ADDA is not appropriate, and is denied.

B. World-Wide’s Liability under the Act

In order to be liable under the ADDA, a manufacturer must fail “to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, canceling, or not renewing the franchise with said dealer ...” 15 U.S.C. § 1222. The term “good faith” in the ADDA has a specific, narrow meaning, and is not to be construed liberally. Bob Maxfield, Inc. v. American Motors Corp., 637 F.2d 1033, 1038 (5th Cir.) cert. den., 454 U.S. 860, 102 S.Ct. 315, 70 L.Ed.2d 158 (1981). Autohaus Brugger, Inc. v. Saab Motors, Inc., 567 F.2d 901, 911 (9th Cir.), cert. den., 436 U.S. 946, 98 S.Ct. 2848, 56 L.Ed.2d 787 (1978).

In order to lack good faith, a manufacturer must exercise coercion and intimidation and make threats against the dealer. Autowest, Inc. v. Peugeot, Inc., 434 F.2d 556, 561 (2d Cir.1970). Assessing whether or not an action is coercive requires consideration of all the circumstances of a case. Sherman v. British Leyland Motors, Ltd., 601 F.2d 429, 445 (9th Cir.1979). Coercion and intimidation are shown when the manufacturer makes a wrongful demand on the dealer, H. C. Blackwell Co., Inc. v. Kenworth Truck Co., 620 F.2d 104, 107 (5th Cir.1980) and then threatens to or does impose sanctions for failure to adhere to the demands. Marquis v. Chrysler Corp., 577 F.2d 624, 633, (9th Cir.1978); Autohaus Bruger, 567 F.2d at 911. There thus must be a causal connection between the wrongful demand and the sanctions or threatened sanctions. Autowest, 434 F.2d at 561.

In the instant case, plaintiffs have alleged essentially three wrongful demands by defendant: that plaintiffs cease selling Fords from the Volkswagen showroom, that plaintiffs sell Volkswagens at the defendant’s suggested retail price, and that plaintiffs construct a separate facility from which to sell Porsche and Audi automobiles. Plaintiffs have alleged that as a result of their failure to adhere to these demands, defendant withheld automobiles from them. Plaintiffs also allege that defendant acted in bad faith in terminating Empire Volkswagen's dealership, since the termination resulted from defendant’s dissatisfaction with plaintiffs’ failure to heed their demands.

Under the ADDA, in the proper circumstances, a manufacturer’s demand that a dealer adhere to its retail price suggestions is a wrongful demand. Randy’s Studebaker Sales, Inc. v. Nissan Motors Corp., 533 F.2d 510, 516 (10th Cir.1976); Autowest, 434 F.2d at 561. Curtailment of automobile shipments as a penalty for failure to adhere to such demands is an impermissible sanction. Randy’s Studebaker, 533 F.2d at 516. There are disputed issues of fact as to whether, in fact, defendant made such demands upon plaintiff, and whether defendant curtailed car shipments to plaintiffs due to their failure to adhere to the demand.

The parties agree that when plaintiffs signed the franchise agreement with defendant, they agreed to construct a separate facility from which to sell Porsche-Audi automobiles. Defendant’s attempt to enforce such a contractual provision would generally not constitute a wrongful demand. Milos v. Ford Motor Co., 317 F.2d 712, 716-17 (3rd Cir.1963). Plaintiffs raise numerous factual issues, however, regarding whether the defendant attempted to impose this agreement in bad faith. They claim that defendant assured them that the agreement was only a matter of form and that defendant would not enforce it, and that defendant attempted to enforce the agreement only after plaintiffs began discounting, as a means of forcing plaintiffs to cease discounting.

The defendant’s demand that plaintiffs cease selling Ford automobiles from the Volkswagen showroom, assumed true for the purposes of the ADDA claim, was not wrongful, given the circumstances of the case. While Congress was concerned in the ADDA with a dealer’s right to sell automobiles of other manufacturers, Rea v. Ford Motor Co., 497 F.2d 577, 585 (3rd Cir.1974), defendant in this case was reasonable. Defendant did not demand that plaintiffs cease selling Fords altogether, but rather that they stop selling them from the same showroom as Volkswagens. Further, the Court finds that there is no genuine issue of fact that Fords and Volks-wagens were competitive lines of cars, and that plaintiffs’ showroom was not large enough to accommodate sales of both lines of cars. In light of the combination of these factors, defendant’s demand that plaintiffs cease selling Fords from the Volkswagen showroom was reasonable.

The basis of plaintiffs’ wrongful termination complaint is that defendant wrongfully ceased dealing with Donald Amerling as the principal dealer of Empire Volkswagen, and, following a stock transfer through which Murray Amerling received a majority share in Empire Volkswagen, dealt with Murray Amerling alone. Defendant’s action in ignoring Donald Amer-ling eventually led to the termination of plaintiffs’ dealership. Plaintiffs raise questions of fact as to defendant’s good faith in ceasing to deal with Donald Amerling. The primary factual issue they raise is whether defendant followed its own procedures, dictated in its agreement with VWOA, in removing Donald Amerling as principal dealer. This, coupled with WorldWide’s disagreement with Amerling over pricing policies, raises the issue of whether defendant was unreasonably anxious to rid itself of Donald Amerling.

In summary, plaintiffs have raised material issues of fact as to whether defendant acted in good faith under the terms of the ADDA, and defendant’s motion is denied except as to defendant’s demand that plaintiffs cease selling Ford automobiles. On that issue, summary judgment is granted as the demand was not wrongful as a matter of law.

C. Plaintiffs’ Standing To Sue

Under the ADDA, only automobile dealers have standing to bring a suit against automobile manufacturers. 15 U.S.C. § 1522. The term “automobile dealer” is defined as any person, partnership, corporation, or association operating under the terms of a franchise and engaged in the distribution of passenger cars. 15 U.S.C. § 1221(c). Defendant argues that plaintiffs Empire City, Susanne Properties, and Donald Amerling do not have standing to bring an action under the ADDA because they are not automobile dealers.

Under the ADDA, when an automobile “dealership is doing business in the corporate form and where the corporation is the party to the franchise agreement, Section 1221(c) dictates that the ‘locus of the right of action is the corporation’.” Olson Motor Co. v. General Motors Corp., 703 F.2d 284 (8th Cir.), quoting Vincel v. White Motor Corp., 521 F.2d 1113, 1120 (2d Cir.1975) cert. den., 464 U.S. 894, 104 S.Ct. 240, 78 L.Ed.2d 231 (1983). Thus, only the corporation has standing to bring a claim under the ADDA. The only exceptions to this standing rule are that when the corporation cannot sue, Kavanaugh v. Ford Motor Co., 353 F.2d 710 (7th Cir.1965), or, when the franchise agreement was conditioned on the individual dealer’s participation in the dealership, York Chrysler-Plymouth, Inc. v. Chrysler Credit Corp., 447 F.2d 786 (5th Cir.1971), an individual dealer may sue the manufacturer.

Under these principles, neither Susanne Properties nor Empire City have standing to sue. Neither corporation is a party to the franchise agreement with World-Wide. Plaintiff Donald Amerling does not have standing to sue either. The record shows without dispute only that he was the majority shareholder and that his ownership could not be transferred without the distributor’s approval. This sort of reliance on Amerling’s participation does not rise to the level of reliance required in York, supra. Nor is Empire Volkswagen unable to pursue this litigation in the same way as the corporation in Kavanaugh, supra, was unable to sue. Thus, only Empire Volkswagen may bring this action under the ADDA.

III. State Law Claims

A. New York State Automobile Dealers Act

New York General Business Law § 197 prohibits an automobile manufacturer or distributor from terminating any contract or franchise to sell new motor vehicles “except for cause.” N.Y.Gen. Bus.Law § 197. The purpose of this act is to provide judicial relief to small motor vehicle dealers from unfair and inequitable practices. Two Wheel Corp. v. American Honda Corp., 506 F.Supp. 806, 816 (E.D.N.Y.) aff'd, 633 F.2d 206 (2d Cir.1980). Thus, “principles of fundamental fairness must guide application of § 197 to the facts of this case.” Id. Based on the facts in dispute as described in Section II., supra, fundamental fairness requires that plaintiffs be allowed to raise this claim at trial.

Plaintiffs’ claim under N.Y.Gen.Bus. § 198 must be dismissed. Section 198 allows a court, during the pendency of an action brought pursuant to Section 197, to enjoin a distributor not to terminate the franchise in question. The record indicates that plaintiffs’ dealership was terminated before the commencement of this action, rendering such relief impossible.

B. New York State Antitrust Law

Plaintiffs contend that defendant’s actions also violated New York State’s antitrust law, N.Y.Gen.Bus.Law § 340. Section 340, however, prohibits only a “contract, agreement, arrangement, or combination” which restrains trade. Id. at 1. Since the Court has already found in Section I., supra, that there was no such agreement to restrain trade, plaintiffs’ claim under Section 340 is dismissed.

C. Intentional Interference With Contractual Relationships

Plaintiffs claim that defendant’s action constituted wrongful interference with the contractual relationships existing between Empire City and Ford Motor Company. Plaintiffs also claim World-Wide interfered with the contractual relationship among Empire Volkswagen, Empire Porsche Audi, and Empire City on the one hand, and Susanne Properties and Donald Amerling on the other hand. To succeed on a claim of wrongful interference, plaintiffs must show that World-Wide intentionally interfered with plaintiffs contractual relations. Navarro v. Fiorita, 271 A.D. 62, 66, 62 N.Y.S.2d 730, 733 (1st Dep’t. 1946), aff'd, 296 N.Y. 783, 71 N.E.2d 468 (1947). As described in Section II., supra, there is a factual dispute as to WorldWide’s intentions in dealing with plaintiffs. Defendant’s summary judgment motion on this claim is thus denied.

D. Breach of Contract

Plaintiffs Empire Volkswagen, Empire Porsche Audi, and Donald Amer-ling allege defendant breached its contractual agreement with them. Defendant alleges that only Empire Volkswagen was a party to the agreement and thus only it can bring a claim for breach of contract. There is no issue that the dealership agreement is between Empire Volkswagen and World-Wide Volkswagen. Nor is there any allegation that Amerling or Empire Porsche Audi is a third-party beneficiary to this contract. Thus, defendant’s motion for summary judgment as to Amerling’s and Empire Porsche Audi’s breach of contract claim is granted.

IV. Defendant’s Counterclaims

Defendant brought two counterclaims against plaintiffs, alleging they failed to pay for supplies World-Wide delivered to them, and now move for summary judgment on these counterclaims. Given the Court’s finding that there are material facts at issue as to defendant’s good faith in dealing with the plaintiffs, there is some question as to defendant’s responsibility for plaintiff’s alleged failure to pay. Summary judgment is thus denied.

SO ORDERED.

      . The Court is aware that this statement is hearsay, but assumes its truth for the purposes of this motion.

      . In Martin Motor Sales, Inc. v. Saab-Scania of America, 452 F.Supp. 1047, 1051 (S.D.N.Y.1978), aff'd, 595 F.2d 1209 (2d Cir.1979), the district court held that defendant, a Saab distributor and wholly owned subsidiary of manufacturer Saab-Sweden, was the manufacturer’s agent and thus suable under the Automobile Dealers Act. The Court, however, did not consider the issue of whether or not a relationship weaker than an agency relationship with a manufacturer would suffice to bring a distributor within the Act.


source: Caselaw Access Project

author: SHADUR, District Judge.

license: Public Domain

text:
    UNITED STEELWORKERS OF AMERICA, AFL-CIO, Plaintiff, v. FERMET RECLAMATION, LTD., Defendant.
    No. 85 C 7466.
    United States District Court, N.D. Illinois, E.D.
    Jan. 24, 1986.
    William H. Schmelling, Chicago, Ill., for plaintiff.
    Edwin C. Thomas, John P. Morrison, Bell, Boyd & Lloyd, Chicago, Ill., for defendant.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

United Steelworkers of America, AFL-CIO (“Union”) has sued Fermet Reclamation, Ltd. (“Fermet”) to compel arbitration of two labor grievances under Labor Management Relations Act § 301, 29 U.S.C. § 185 (“Section 301”). Now both litigants have moved for summary judgment under Fed.R.Civ.P. (“Rule”) 56. For the reasons stated in this memorandum opinion and order, Union’s motion is granted and Fermet’s is denied.

Facts

In late May 1984 Fermet employee Jerry Simpson (“Simpson”) underwent surgery at a hospital in Joliet, Illinois. Though he had expected the cost of that surgery to be paid through Fermet’s group health insurance plan, on June 21, 1984 Fermet’s insurance carrier wrote Simpson (Ex. 1-1) coverage had been denied.

On July 16 Union filed a grievance with Fermet on Simpson’s behalf, saying it was Fermet’s responsibility under the Union-Fermet collective bargaining agreement (the “CBA”) to provide Simpson with health insurance coverage. That grievance (the “Insurance Grievance”) was filed on a printed “Grievance Report” form, signed by Simpson and two Union representatives (Ex. C). Fermet President Dennis Bloom (“Bloom”) denied the Insurance Grievance that same day, using the “Answer of Company Representative” space provided on the back of the form (id). No reason for the denial was specified.

On August 9 (24 days later) Union Sub-District Director Earl Schroeder (“Schroeder”) wrote Bloom (Ex. D, emphasis in original):

As per the Labor Agreement between the parties, you are hereby notified that [Union] is appealing your answer on Jerry Simpson who was denied group insur-anee as per Agreement Article XIV, Section 1.
I would appreciate your calling me to set up a meeting on the above subject which has to be done in seven (7) days after your decision in step (b), unless a longer period is mutually agreed upon.

Bloom did not respond.

On either August 14 or 15 Simpson was cleared for return to work by his doctor. When he reported for duty, he claims Bloom told him “he would not be allowed to return to work until the insurance coverage disputes were resolved” (see Ex. J at 3). Then on August 16 Bloom wrote Schroeder stating his “understanding that no contract exists with [Union]” (Ex. E) and:

Therefore, no terms or provisions of that document can have application.

Union next filed another grievance (the “Lockout Grievance”) September 12 (Ex. F), protesting Simpson’s having been “locked out” (not being allowed back to work). Five days later Bloom sent Union a denial of the Lockout Grievance (id.) as not having been filed within five days of the triggering event — Fermet’s August 14 or 15 refusal to allow Simpson to return to work.

Schroeder then referred the matter to Union counsel Schmelling, who on October 24 wrote Bloom about his refusal to move further on the Insurance and Lockout Grievances, concluding (Ex. G):

At your earliest convenience, please furnish me with a written explanation of your company’s position with respect to these matters. Failure on your part to respond to this letter within two weeks of its receipt will leave the Union with little alternative but to initiate legal proceedings seeking to protect Mr. Simpson's contractual and statutory rights and to enforce the employer’s bargaining obligation under the National Labor Relations Act.

That letter resulted in a November 15 meeting between Union and Fermet, attended by Schmelling, Schroeder, Bloom and Thomas. Some events of that meeting are disputed, but two matters are agreed-upon results of the meeting:

1. Fermet acknowledged the CBA was in effect.
2. Provision was made for Simpson to return to work (and he did so November 20 or 25).

What the parties dispute is the bargaining stance Fermet took at the meeting: Bloom Aff. 1116 says “we indicated that Fermet would not settle or arbitrate the [Insurance] grievance,” while Schroeder says (Aff. ¶ 12):

At the November 15, 1984 meeting, no demand for arbitration was made and none was rejected. The meeting ended on the understanding that both parties would attempt to check further into the facts surrounding Mr. Simpson’s griev-anees in order to reach satisfactory settlement.

Thus Fermet R.Mem. 6 accurately characterizes as an “issue of fact”:

Whether on or before November 15,1984 meeting between the parties and their counsel, Fermet “agreed to pursue further attempts to resolve” the July 15, 1984 grievance.

However, as the later text discussion reflects, Fermet is wrong in labeling that issue “material” — for on the current motions it is not “outcome-determinative” (except in a sense the parties’ submissions to this Court did not focus on at all).

On March 25, 1985 Schmelling phoned Thomas to request arbitration of the grievances (Union R.Mem. 8). That request was followed up by an April 5, 1985 written demand for arbitration (Ex. J). Fermet’s May 6, 1985 response (Ex. L) agreed to arbitrate a third grievance (arising out of Simpson’s eventual discharge), but said as to the two involved here:

1. Fermet “maintains its refusal to arbitrate” the Insurance Grievance because:
(a) Union had failed to comply with the CBA’s timetable, and
(b) as a substantive matter, the question whether Fermet had met its contractual obligation to provide health insurance was “simply not an arbitra-ble matter.”
2. Though the Lockout Grievance was also not filed within the CBA-prescribed time period, Fermet would agree to arbitrate the timeliness question. But if Union should prevail as to timeliness, Fer-met would insist the arbitration of the merits must proceed before another arbitrator.

There matters stood until Union filed this action August 26, 1985.

CBA Provisions

CBA Art. V sets out the grievance procedure established by the parties (Ex. A at 4-5):

When differences arise between the Company and the Union and/or employees covered by this Agreement as to the meaning and/or application of the provisions of this Agreement, such differences shall be settled in accordance with the following provisions:
* * * * * He
SECTION 2. (a) A complaint shall first be taken up by the aggrieved employee with the foreman directly in charge, either personally or through a Grievance Committeeman and an answer on the grievance shall be given to such aggrieved employee not later than the end of the next working day.
(b) If the matter is not satisfactorily settled under step (a) the grievance shall be reduced to writing, signed by the aggrieved employee and a member of the Grievance Committee, and submitted to the management of the Company or a representative thereof within five (5) days after answer provided for in step (a). The Company shall then provide a written answer to such aggrieved employee, the Union Grievance Committee and the United Steelworkers of America within five (5) work days, thereafter, unless a longer period is mutually agreed upon.
(c) If the matter is not satisfactorily settled in step (b) the matter shall be taken up by the full Grievance Committee, a representative of the United Steelworkers of America, the aggrieved employee, and with management or with the representative thereof within seven (7) days after the decision in step (b), and an answer shall be given in writing within five (5) days thereafter, unless a longer period is mutually agreed upon.
(d)If the matter is not settled to the satisfaction of the Union or the Company in the previous steps, it shall then be referred to an Arbitrator for final deter-mination_ The decision of the Arbitrator, when made in writing with the reasons assigned therefor, shall be final and binding on both parties and the parties hereto agree to abide thereby. The expense of the arbitration, if any, shall be borne equally by both parties. The Arbitrator shall have no power to add to, or to subtract from, or to modify any of the terms of this Agreement.

Art. V, § 5 (emphasis added) deals with the timeliness questions that form Fermet’s main (though not sole) defense to this action:

SECTION 5. Time Limit for Filing Grievances: All grievances related to discharge, disciplinary actions, demotions and promotions, layoffs and recalls or other grievances in connection with the increase and decrease of the working force must be filed in writing within five (5) working days of the date of the cause of the grievance occurrence, and all other grievances must be filed in writing within fifteen (15) calendar days from the day the grievance occurred. In the event a grievance is not filed within the above time limitations, or in the event a grievance is filed and appeal is not taken in any of the steps of the grievance procedure set forth in this Article, or if an appeal is filed and no answer made thereto within the time limitations therein specified, the said grievance shall be deemed settled on the basis of the last answer or unanswered appeal, and the same subject matter shall not be considered or made the subject matter of any other grievance.

Insurance Grievance Analysis

At least from the time of the Steelworkers Trilogy, and continuing through last month’s decision by our Court of Appeals in Graphic Communications Union, Chicago Paper Handlers’ & Electrotypers’ Local No. 2 v. Chicago Tribune Co., 779 F.2d 13, 15-16 (7th Cir.1985), judicial deference to collective bargaining commitments to arbitration has been consistent and strong. As one of the Trilogy (American Manufacturing, 363 U.S. at 567-68, 80 S.Ct. at 1346) put it:

The function of the court is very limited when the parties have agreed to submit all questions of contract interpretation to the arbitrator. It is confined to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract. Whether the moving party is right or wrong is a question of contract interpretation for the arbitrator.

This is not to say, of course, that judicial abdication is called for by the mere presence of an arbitration clause. It remains necessary for the court to look at the scope of the arbitration provision and whether the issues in controversy come within that scope.

Thus Union and Fermet correctly agree the merits of the Insurance Grievance are irrelevant in a suit to compel arbitration. Though Fermet has asserted to Union it considers denial of the Insurance Grievance to have been substantively justified under the CBA, it does not press that argument here.

Instead Fermet’s opposition to arbitration of the Insurance Grievance is principally grounded in the timing provisions of CBA Art. V. Simpson and the Union representatives signed and submitted the Grievance Report form July 16. Whether that represented the Section 2(a) or Section 2(b) step under the CBA is not really clear. But in either event Fermet did precisely what the CBA requires: It answered the grievance (denying it the same day it was received) in the space marked “Answer of Company Representative.”

Depending on whether the Grievance Report was a Section 2(a) or 2(b) step, Union then had five days (see Section 2(b)) or seven days (see Section 2(c)) to take the next grievance step, unless a longer period was mutually agreed upon. But Union’s response did not come until August 9 (or 24 days later), when Schroeder wrote Bloom (Ex. D):

[Union] is appealing your answer on Jerry Simpson.... That response reads in terms of taking the grievance process to the next step, which Schroeder at least appears to regard as “step (b)” (Section 2(b)). But whichever step it represented, Schroeder’s response was not timely in CBA terms.

Fermet argues such untimeliness resulted in the Insurance Grievance being “deemed settled” in Section 5 terms on the basis of Fermet’s denial. And if a grievance is “settled,” Fermet says Section 2(d) —the arbitration clause — does not come into play at all, for that clause provides that only matters “not settled to the satisfaction of the Union or the Company in the previous steps” shall be referred to an arbitrator.

Of course it is certainly an odd locution, on the facts here, to speak of the Insurance Grievance as having been “settled to the satisfaction of the Union....” And it might perhaps be argued that the term “settled to the satisfaction” has a different meaning in Section 2(d) — which defines ar-bitrability — than the meaning of “deemed settled” in Section 5 — which says only that the identical subject matter cannot be the predicate for a new grievance. If that were so — if Section 5 were literally limited to its label of “Time Limit for Filing Grievances” — Section 2(d) would not contain its own timetable for referring to arbitration a “matter ... not settled to the satisfaction of the Union or the Company.” In that event, Fermet’s contention based on timeliness might not be so clearly correct as it argues to be the case.

Indeed, a reading of the CBA as not rendering the Insurance Grievance “settled” in the sense now urged by Fermet is not so strained as it might seem at first blush. One month after Bloom had written “denied” on that grievance, and three weeks after Union had not triggered the next step in the grievance procedure— which Fermet now says “settled” the matter adversely to Simpson and Union for all purposes — Simpson claims Bloom spoke of the matter as not “resolved” (Ex. J at 3):

Upon being released from his physician to return to active employment on August 15, 1984, Mr. Simpson contacted Fermet. According to Mr. Simpson, President Bloom advised Simpson that he would not be allowed to return to work until the insurance coverage disputes were resolved.

If that were so, it would seriously undercut the notion the grievance was “settled to the satisfaction of the Union [and] the Company.”

But it is unnecessary to consider whether the CBA — hardly a model of draftsmanship — is susceptible to the possible construction outlined above. For purposes of this opinion it will rather be assumed that Fermet is right: that Union did not pursue all the grievance-to-arbitration steps in a timely manner, so as to permit invocation of the CBA’s arbitration clause.

That pro-Fermet assumption can be made safely here, because Fermet cannot succeed in this case unless it also prevails on a corollary to that assumption. Fermet claims it agreed to submit grievances to arbitration only if the CBA’s timetable were met. And that, it says, brings into play another facet of the Trilogy (Warrior. & Gulf, 363 U.S. at 582, 80 S.Ct. at 1352):

[Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.

But on the facts tendered to this Court, Fermet is wrong on its corollary premise. First of all, at least in substantive terms the issue of arbitrability of the Insurance Grievance is for an arbitrator, not this Court (Communication Workers ofAmer- iea v. Western Electric Co., 751 F.2d 203, 206 (7th Cir.1984)):

The weight of the authority supports the rule that a court should compel arbitration of the arbitrability issue where the collective bargaining agreement contains a standard arbitration clause, the parties have not clearly excluded the arbitrability issue from arbitration, and deciding the issue would entangle the court in interpretation of substantive provisions of the collective bargaining agreement and thereby involve consideration of the merits of the dispute.

And second, on what might be termed the 'procedural aspect (timeliness) of the Insurance Grievance, it is plain that Union’s noncompliance with the CBA timetable is not dispositive:

1. If Union’s version of the facts were accepted, Fermet did not stand on that noncompliance, for it agreed nonetheless to treat the dispute as still open “in order to reach satisfactory settlement” (Sehroeder Aff. ÍI 12), rather than taking the position it was already “settled” (CBA Section 5).
2. At worst, Bloom Aff. ¶ 16 matches up with Sehroeder Aff. ¶ 12 to create a factual issue in that respect.

In the posture of events just outlined, this second aspect of the question whether Fermet agreed to submit the Insurance Grievance to arbitration is also for an arbitrator and not for this Court. Such is the plain teaching of John Wiley & Sons v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964), where a collective bargaining agreement established a three-step grievance process, with arbitration as the final step “in the event that the grievance shall not have been resolved or settled” in the prior step (id. at 556, 84 S.Ct. at 917). It was conceded the union had not pursued the first two steps, and the employer argued against an order to compel arbitration on the ground the procedural prerequisites had not been followed: That argument did not persuade the Court (id. at 556-58, 84 S.Ct. at 917-18):

We think that labor disputes of the kind involved here cannot be broken down so easily into their “substantive” and “procedural” aspects. Questions concerning the procedural prerequisites to arbitration do not arise in a vacuum; they develop in the context of an actual dispute about the rights of the parties to the contract or those covered by it. In this case, for example, the Union argues that Wiley’s consistent refusal to recognize the Union’s representative status after the merger made it “utterly futile — and a little bit ridiculous to follow the grievance steps as set forth in the contract.”
******
Once it is determined, as we have, that the parties are obligated to submit the subject matter of a dispute to arbitration, “procedural” questions which grow out of the dispute and bear on its final disposition should be left to the arbitrator. Even under a contrary rule, a court could deny arbitration only if it could confidently be said not only that a claim was strictly “procedural,” and therefore within the purview of the court, but also that it should operate to bar arbitration altogether, and not merely limit or qualify an arbitral award. In view of the policies favoring arbitration and the parties’ adoption of arbitration as the preferred means of settling disputes, such cases are likely to be rare indeed.

Thus it really does not matter whether the question of arbitrability vel non in light of the sequence of events is labeled as one of waiver, or of the purpose and effect of the possibly ambiguous “settled” language in the two CBA sections, or something else — nor does it matter whether the question, however labeled, is characterized as “substantive” or “procedural.” What does control is that here, as in Wiley, the arguably “procedural” question — whether Union’s failure to pursue the grievance timetable bars arbitrability in the factual context described in this opinion — surely “grow[s] out of the dispute and bear[s] on its final disposition.” And Wiley’s lesson is that question “should be left to the arbitrator,” just as the “substantive” questions of the grievance’s merits should be left to the arbitrator if Union prevails on the first question.

That view of Wiley is strongly buttressed by a recent decision of our Court of Appeals (incidentally not cited by either party). Beer, Soft Drink, Water, Fruit Juice, Carbonic Gas, Liquor Sales Drivers, Helpers, Inside Workers, Bottlers, Warehousemen, School, Sightseeing, Charter Bus Drivers, General Promotional Employees of Affiliated Industries, Local Union No. 744 v. Metropolitan Distributors, Inc., 763 F.2d 300, 302 (7th Cir.1985) read Wiley in the precise way suggested by this opinion:

[0]nce a court determines that the parties to a collective bargaining agreement are obligated to submit the subject matter of their dispute to arbitration, then any procedural questions growing out of the dispute and bearing on its final disposition should be left to the arbitrator.

And Metropolitan Distributors, id. at 303 (footnote omitted) went on to apply Wiley in a way that might well have been written for this case:

[W]e affirm the district court’s conclusion that the union’s alleged failure to submit its members’ grievances within the time limitations specified in the collective bargaining agreement is an issue of procedural arbitrability which should be reserved for the arbitrator. Since it is clear that the parties are obligated to submit the subject matter of their dispute concerning severance pay to the arbitrator as provided in the collective bargaining agreement ... we conclude that under Wiley any procedural issues dealing with the timeliness of the union’s filing of the grievances should be presented to the arbitrator.

Accord, Local Union No. 51, International Brotherhood of Electrical Workers v. Illinois Power Co., 357 F.2d 916, 918-19 (7th Cir.), cert. denied, 385 U.S. 850, 87 S.Ct. 78, 17 L.Ed.2d 79 (1966) (question of union’s waiver by delay in filing grievance is for arbitrator to decide), specifically relied on and followed in Metropolitan Distributors. That Metropolitan Distributors-Illinois Power conclusion should extend a fortiori to the type of issues posed by this case, where the “procedural” issue of timeliness is intertwined with the other already-identified factual issues and with their impact on arbitrability under the CBA.

Thus the presence of limited factual disputes between the parties does not foreclose summary judgment. Instead it points at most to the need for those disputes to be resolved by the arbitrator as factfinder. In Rule 56 terms the parties’ factual differences are non-outcome-determinative. Big O Tire Dealers, Inc. v. Big O Warehouse, 741 F.2d 160, 163 (7th Cir.1984). Union is entitled to summary judgment as to arbi-trability of the Insurance Grievance (including the issue of its timeliness).

That conclusion requires consideration of Fermet’s other challenge to the arbitrability of the Insurance Grievance: its assertion that this action was untimely filed. Two questions must be answered in that respect:

1. What is the appropriate limitations period for Section 301 actions to compel arbitration?

2. When did the statute begin to run?

As to the first question, Congress did not specify a limitations period for Section 301 actions. International Union, United Automobile, Aerospace & Agricultural Implement Workers of America (UAW), AFL-CIO v. Hoosier Cardinal Corp., 383 U.S. 696, 704-05, 86 S.Ct. 1107, 1113, 16 L.Ed.2d 192 (1966) therefore said:

Accordingly, since no federal provision governs, we hold that the timeliness of a § 301 suit, such as the present one, is to be determined, as a matter of federal law, by reference to the appropriate state statute of limitations.

Hoosier Cardinal was (id. at 705 n. 7, 86 S.Ct. at 1113 n. 7):

essentially an action for damages caused by an alleged breach of an employer’s obligation embodied in a collective bargaining agreement. Such an action closely resembles an action for breach of contract cognizable at common law.

Though the Court thus “borrowed” a state limitations statute governing contract actions, it expressly reserved the question (id.):

[w]hether other § 301 suits different from the present one might call for the application of other rules on timeliness. ...

Fifteen years after Hoosier Cardinal, the Court made it clear not every Section 301 suit characterized by the plaintiff as one for breach of a collective bargaining agreement would be governed by limitations applicable to breach-of-contract actions. In United Parcel Service, Inc. v. Mitchell, 451 U.S. 56, 101 S.Ct. 1559, 67 L.Ed.2d 732 (1981) a discharged employee had gone through arbitration, the result of which was to uphold his discharge. He then sued his union (alleging breach of the collective bargaining agreement) (id. at 58-59, 62, 101 S.Ct. at 1561-62, 1563). That lawsuit looked to the Court more like an action to vacate an arbitration award than an action for breach of contract, because the employee was trying to undo the unfavorable result of the arbitration process. Therefore the Court applied the state’s 90-day limitations period for actions to vacate arbitration awards (id. at 64, 101 S.Ct. at 1564), noting also the federal policy favoring “relatively rapid disposition of labor disputes” (id. at 63, 101 S.Ct. at 1564, quoting Hoosier Cardinal, 383 U.S. at 707, 86 S.Ct. at 1114).

Mitchell must be perceived in light of its narrow grant of certiorari, limited to consideration of which state statute to apply (and consequently not whether federal labor policy might call for another approach) (id. at 60 n. 2, 101 S.Ct. at 1562 n. 2). Hence no attention was paid (save in the just-cited cautionary footnote) to the possibility that National Labor Relations Act § 10(b), 29 U.S.C. § 160(b) (“Section 10(b)”) —a six-month limitations period for NLRB unfair-labor-practice suits — might better fill the bill. When that possibility was later posed in DelCostello v. International Brotherhood of Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983), the Court in fact considered and adopted the Section 10(b) standard.

Both DelCostello and Mitchell were “hybrid § 301/fair representation” cases {Del-Costello, 462 U.S. at 165, 103 S.Ct. at 2291) in which a discharged employee challenged not only the employer’s adverse action but also the adequacy of the union’s prosecution of his grievance through contractual grievance processes. Fermet says Union’s action here is not “hybrid” — involving no claim of Union misfeasance — so DelCostel-lo is distinguishable.

That is to be sure a factual difference, but it misses (or distorts) the entire point of what is involved here. Mitchell was a case in which an employee had suffered an unfavorable arbitration award and wanted to get out from under its adverse impact. Not surprisingly the Court found that effort resembled — in state law terms — a suit to vacate an arbitration award (precisely what the employee wanted, though he sought other relief as well). Even though DelCostello partook of the same character, the Court — then having the Section 10(b) option before it — found the union’s improper actions smacked most of an unfair labor practice, thus triggering the application of that limitations period. Section 10(b) was applied because of the parallel nature of the challenged conduct, not just because of the identity of the union as co-defendant.

What is the relevant analogy here? Surely a suit to force a party to live up to its promise to go to arbitration bears no real similarity to a post-arbitration lawsuit to enforce the arbitration award. Instead the defendant’s claimed misconduct here has a double aspect:

1. As a broken promise, it is a garden-variety breach of contract.
2. As an employer’s violation of a collective bargaining agreement, it carries at least the flavor of an unfair labor practice vis-a-vis the plaintiff union (see DelCostello, 462 U.S. at 170, 103 S.Ct. at 2293).

Because of the first resemblance, the claim might call for a conventional contract limitations period; because of the second, it might call for the Section 10(b) period. Nothing commends the third alternative urged by Fermet: the wholly non-parallel (and substantially abbreviated) vacation-of-arbitration-award limitations period.

In short, Mitchell is totally unpersuasive here as a precedent. And as between Hoosier Cardinal and DelCostello, the same reasoning that led the Supreme Court to its more recent choice of Section 10(b) as the closest analogy applies with equal force here. This Court will apply that six-month limitations period. Accord, Federation of Westinghouse Independent Salaried Unions v. Westinghouse Electric Corp., 736 F.2d 896, 899-901 (3d Cir.1984); United Food & Commercial Workers International Union, AFL-CIO v. Cudahy Co., No. 84 C 1377, slip op. at 6-7 (N.D.Ill.1985); Millmen’s Union Local No. 1120 v. Pay Less Drug Stores Northwest, Inc., 589 F.Supp. 675, 676-78 (D.Ore.1984).

Because this action was brought August 26, 1985, it was timely filed if Union’s cause of action arose on or after February 26, 1985. That date represents the watershed for Fermet’s act of rejecting arbitration in a manner sufficiently unequivocal that Union knew or should have known of that decision.

That inquiry triggers the second hot dispute between the parties. Fermet says the triggering event came not later than Union’s October 24 letter to Bloom, which said failure to receive a response to Union’s demand for information within two weeks would (Ex. G):

leave the Union with little alternative but to initiate legal proceedings seeking ... to enforce the employer’s bargaining obligation under the National Labor Relations Act.

But Fermet obviously prefers to ignore the fact there was a response to that letter: Fermet agreed to a meeting to discuss the Insurance Grievance, and that meeting was held November 15. It is patent nonsense for Fermet to argue, as it does, that (Mem. 13):

plaintiff was aware of defendant’s unequivocal refusal to settle or arbitrate the grievance as of October 24....

Fermet’s fallback position looks to the November 15 meeting itself as the date it made its bargaining stance unequivocal. Bloom Aff. ¶ 16 says he then “indicated that Fermet would not settle or arbitrate” the Insurance Grievance. But as already mentioned more than once in this opinion, that statement is directly contradicted by Schroeder Aff. 1112, with its statement that both parties agreed “to check further into the facts ... in order to reach satisfactory settlement.” Were the issue one for this Court to resolve, Schroeder’s affidavit would foreclose summary judgment in Fer-met’s favor.

What is Union’s version of the operative date? Union admits having demanded arbitration in the March 25, 1985 Schmelling-Thomas telephone conversation (Union R.Mem. 8). Were that (or, of course, the later date of Fermet’s negative response to that demand) the critical event, this action would have been timely filed. But this time the Bloom affidavit blocks summary judgment on the statute of limitations issue in favor of Union.

Fortunately the earlier discussion of arbi-trability also points the way toward solving the dilemma. In the course of resolving the previously-discussed factual issues, the arbitrator will perforce be called on to determine and make findings as to the factual issues that bear upon the timeliness of this action — most particularly what did or did not occur at the November 15 meeting. By contrast, the other possible alternative— that of a limited factual hearing by this Court on that score, to determine the timeliness of this action — would create the prospect of preempting the arbitrator’s decision of facts that could control timeliness of the grievance (thus doing violence to the principles already discussed at length).

Accordingly the parties are ordered to arbitrate all factual issues posed by the Insurance Grievance, including the events of the November 15 meeting. If Union proves successful in the arbitration, its effort to enforce the arbitration award before this Court will enable both parties to address the limitations question — as to the original timeliness of this action — in light of the arbitrator’s factual findings bearing on that question.

Lockout Grievance Analysis

All the foregoing discussion as to arbitrability of the Insurance Grievance (except, of course, the just-completed discussion as to timeliness of this action) has equal impact on the Lockout Grievance as well. That alone would be dispositive as to that grievance. But there is another wholly-independent reason that leads to the same result of compelling arbitration of that grievance too.

Fermet has placed itself in an odd position over the Lockout Grievance. In the course of pre-litigation negotiations between the parties, Fermet initially argued the Lockout Grievance was untimely filed under Section 2(b). Then, in Thomas’ May 6, 1985 letter to Schmelling (Ex. L at 2), Fermet agreed to arbitrate the question whether that grievance was timely filed, adding the proviso that if Union prevailed on that issue, arbitration of the merits would have to proceed before a second arbitrator.

Fermet adheres to that position before this Court. It insists it has agreed to arbitrate the Lockout Grievance, so relief from this Court is not required (more accurately, is not appropriate in case-or-controversy terms). Union argues that is not good enough: It points out there is no CBA provision for separating arbitration of procedural and substantive issues.

Fermet’s proposition is an impermissible unilateral alteration of the CBA. Just as one party has no right to insist on a specific person to arbitrate grievances (see Section 2(d)), so there is no one-sided right to insist on more than one arbitrator per grievance. If Fermet did not respect the impartiality of arbitration, it should not have agreed to that process when it signed the CBA. Clearly Fermet cannot have and eat its cake in the way it proposes.

Fermet has not taken the position that if it cannot have its two-step arbitration it will withdraw its consent to arbitrate. Nor has it argued in this Court any of its original grounds for opposing arbitration of the Lockout Grievance. But even if it did, it simply could not succeed in view of Metropolitan Distributors and the analysis in thip opinion. Union’s summary judgment motion must be granted as to the Lockout Grievance as well.

Conclusion

There are no genuine issues of material fact, and Union is entitled to a judgment as a matter of law. Fermet’s cross-motion for summary judgment is of course, denied. Fermet and Union are ordered to proceed forthwith to arbitration of the Insurance and Lockout Grievances in accordance with this opinion.

      . Familiar Rule 56 principles impose on the party moving for summary judgment the burden of establishing the lack of a genuine issue of material fact. Korf v. Ball State University, 726 F.2d 1222, 1226 (7thCir.1984). For that purpose the court must, in viewing the evidence, draw ail reasonable inferences in the light most favorable to the nonmovant. Hermes v. Hein, 742 F.2d 350, 353 (7th Cir.1984). Of course, the double perspective compelled by cross-motions for summary judgment has required each party to assert the lack of a genuine issue of material fact. And as the text discussion will reflect, though some factual differences do exist, no issue-determinative facts are in dispute.

      . For convenience, any future mention of a month and day alone, without specifying the year involved, refers to a date in 1984.

      . "Ex. — " citations refer to the exhibits verified by Union counsel William Schmelling ("Schmelling") and appended to Union’s opening memorandum.

      . Ex. 1-1 was addressed to Simpson in care of Fermet and bears a “June 25” receipt stamp. Union asserts (Union Stmt. Material Facts 4) Simpson was not shown the letter until July 15. Fermet does not controvert that. Its submissions recite only the letter’s date and when it was received at Fermet’s offices (see Ans. 9-10; Fermet R. Mem. 3). Under this District Court’s General Rule 12(f) Union's assertion is "deemed to be admitted."

      . That quoted language is taken from an April 5, 1985 letter from Schmelling to Fermet counsel Edwin Thomas ("Thomas”). Thomas’ May 6, 1985 response (Ex. L at 1) ”do[es] hot deem it necessary to respond to each of [Schmelling’s] factual statements," though Thomas then goes on to disclaim any admission of their accuracy. That disclaimer is echoed in Fermet R.Mem. at 5 n. 1. As n. 14 of this opinion reflects, the quoted unsworn version attributed to Simpson has not been accepted as true on the current motions.

      . For that purpose Bloom cited "Article 5 Section B” — an obvious reference to CBA Art. V, § 2(b). Bloom alternatively referred to the seven-day filing period established by CBA Art. V, § 2(c), though he did not explain how that section was relevant (as with the other provision, he simply cited it).

      . Bloom Aff. ¶ 20 gives the November 20 date, while Schmelling's April 5, 1985 letter to Thomas (Ex. J at 3) gives November 25. Schroeder Aff. If 13 puts the date "in late November.” Nothing hangs on the difference.

      . It should be observed both litigants have been inattentive to the Rule 56(e) requirement that affidavits "shall set forth such facts as would be admissible in evidence”: Both the Schroeder and the Bloom affidavits are conclusory rather than fact-testimonial in nature. But given the fact both parties have pursued the same course without objection, the situation is no different from a trial in which witnesses testify as to their conclusions regarding the effect of conversations (instead of properly telling who said what during the conversations), with no objections to the testimony being interposed by counsel. In that event the testimony is in evidence and may be considered.

      .That exception is discussed at the very end of the "Insurance Grievance” section of this opinion.

      . United Steelworkers of America v. American Manufacturing Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960); United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960); United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960).

      . Fermet also argues even if the Insurance Grievance is arbitrable in CBA terms, this Section 301 action is barred by the statute of limitations. That argument will be discussed below.

      . All further citations to CBA Art. V will simply take the form "Section — .” Given the single-digit CBA references, there can be no confusion with citations to Section 301, or to Section 10(b) of the National Labor Relations Act.

      . Neither litigant has really dealt with this question. One clue might be whether the signing Union representatives were from its Grievance Committee (see Section 2(b)), but no designation of that kind was made on the form. Along the same lines, though the grievance does not show to whom it was delivered, the response was by Bloom (a top management person) rather than a foreman (compare Section 2(b) with Section 2(a)). Another clue — this one pointing to Section 2(a) — is that the Fermet answer occupies the first space of the form’s reverse side, which also contains three more spaces labeled "Answer of Company next step.” As the later text discussion reflects, Schroeder's August 9 letter (Ex. D), though not entirely clear, seems to treat Bloom’s answer as one under Section 2(a) rather than 2(b).

      . Because Ex. J (a letter from Union's lawyer) simply reports Simpson’s version and no affidavit from Simpson has been tendered to this Court, Rule 56(e) precludes consideration of the hearsay statement. As the text reflects, this Court does not accept that statement as fact.

      . With all respect, that thin slice of Warrior & Gulf does not reflect its real flavor. Directly after the quoted language the Court went on to say (363 U.S. at 582-83, 80 S.Ct. at 1353, footnote omitted):
      Yet, to be consistent with congressional policy in favor of settlement of disputes by the parties through the machinery of arbitration, the judicial inquiry under § 301 must be strictly confined to the question whether the reluctant party did agree to arbitrate the grievance or did agree to give the arbitrator power to make the award he made. An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.

      .This Court will not be called on to resolve that difference. Nonetheless it is worth noting parenthetically that Union’s claim of Fermet’s willingness to try to resolve the Insurance Grievance, even after its initial rejection, may be rendered more plausible by Fermet's acknowledged agreement — at the same November 15 meeting — to abandon its prior position (Ex. E) that there was no CBA for Union to invoke at all. It will be recalled Bloom had assigned no reason for his flat and immediate July 16 "Grievance Denied” answer to the same-day filing of the Insurance Grievance. It could well be reasoned by a factfinder that Bloom’s action had in fact been predicated on Fermet’s position (confirmed in his next communication to Union, his August 16 letter (Ex. E)) "that no contract exists with ... Union." And from that premise the factfinder could well also conclude that the November 15 negotiating meeting, which produced Fermet’s agreement the CBA was in effect, also resulted in Fermet’s conciliatory willingness to waive or ignore procedural arguments and consider the merits of the disputes.

      . Interestingly enough, as to the Lockout Grievance Fermet’s lawyer has stated Fermet “will agree to arbitrate the question of timeliness in accordance with the authorities cited in [the Union lawyer’s] letter” (Ex. L at 2) — and the principal among those authorities was Communication Workers. Moreover, Fermet’s lawyer’s stated refusal to arbitrate the Insurance Grievance was not at all due to any claimed nonar-bitrability of the timeliness issue (which he labeled "a secondary issue at best,” id.), but rather because of his substantive objections on the merits (which are of course not a defense to this action, even in Fermet's view).

      . [Footnote by this Court] That aspect of Wiley is not wholly mirrored in this case, although for several months Fermet (like the employer in Wiley) refused to acknowledge the effectiveness of the CBA. As to the latter stance, there is considerable irony (and inconsistency) in Fer-met's having denied Union-advanced grievances because of the claimed non-existence of a contract, while it argues to this Court that Union did not comply with the terms of that very contract. But even aside from that factor, the fact that Wiley and this case are not wholly parallel in factual terms is not significant, for the legal principle that informed Wiley is wholly applicable here.

      . If it did not, the even-longer contract-breach limitations period would represent the alternative choice.


author: LAFFITTE, District Judge.

text:
    Dr. Olaguibeet A. LÓPEZ-PACHECO, Plaintiff, v. UNITED STATES of America, et al., Defendants.
    Civ. No. 80-0027 HL.
    United States District Court, D. Puerto Rico.
    Jan. 24, 1986.

      Arturo Aponte Parés, Roberto Buso Aboy, Noel Torres Colón, Olaguibeet A. López-Pacheco, Hato Rey, P.R., for plaintiff.
    Eduardo E. Toro Font, Asst. U.S. Atty., Hato Rey, P.R., for the U.S.
   OPINION AND ORDER

LAFFITTE, District Judge.

Plaintiff, Dr. Olaguibeet Antonio López-Pacheco, filed this action under the Federal Torts Claim Act (FTCA), 28 U.S.C. § 2670, et seq., and the First, Fifth, and Fifteenth Amendments of the Constitution against defendants, the United States Government, the Federal Bureau of Investigation (FBI), the United States Department of Justice, the Attorney General, and unknown agents of the FBI. Plaintiff claims he was injured as a result of FBI surveillance activity intruding in his privacy, reporting and disseminating inaccurate information, and failing to properly investigate the death of his son.

As a result of several motions presented to this Court by defendants the constitutional claims against all defendants were dismissed and the claim under the FTCA was dismissed against the FBI, the Department. of Justice, the Attorney General and unknown FBI agents. The only remaining claim to be tried in this case is the FTCA claim against the United States government. A non-jury trial on this issue was held December 17 and 18, 1984.

Prior to trial and after the plaintiff had presented his case, defendants submitted a Rulé 41(b) Motion for Involuntary Dismissal. Defendants claim that the court does not have jurisdiction under the FTCA. They argue that jurisdiction was lost when the constitutional claims were dismissed. Even if the Court finds it does have jurisdiction, defendants argue that plaintiff cannot state a claim under the FTCA because the actions of the FBI fall within the exception provided in section 2680(a) for the performance of a “discretionary function or duty” by a federal agency or employee of the Government. The court reserved its ruling on defendants’ motion in order to allow the parties to present all their evidence.

I. FACTUAL BACKGROUND.

Plaintiff, Dr. López-Pacheco, has been a veterinarian since 1943 and an attorney since 1963. He resides in Trujillo Alto, Puerto Rico. Dr. López-Pacheco is a long time supporter of independence for Puerto Rico by peaceful means. In 1946 he was one of the founders of the Partido Indepen-dentista Puertorriqueño (Independence Party of Puerto Rico). He is a member and has served as secretary for the Gran Ori-ente Nacional de Puerto Rico (GON). GON is a masonic-type organization which believes in “liberty, equality and fraternity” and advocates independence for Puerto Rico. Plaintiff has written articles for a GON publication, “Entre Columnas,” which attack U.S. involvement in Puerto Rico.

On various occasions plaintiff testified in support of independence before the United Nations Committee on the Decolonization of Puerto Rico. He has travelled to Cuba and Russia several times to discuss the status of Puerto Rico. On his last trip to Cuba, in 1979, he spoke with the Cuban press. While in Russia in 1971, he spoke over Radio Moscow and Radio Kiev. All of plaintiff’s trips to foreign countries were at his own expense.

Plaintiff has never been a member of the Puerto Rico Nationalist Party, the Movi-miento Pro-Independencia de Puerto Rico (MPI) or its successor, the Puerto Rico Socialist Party (PSP). He has never advocated violence to achieve the independence of Puerto Rico and has never been charged with violation of a federal law.

On March 20, 1962, Dr. López-Pacheco filed a complaint with the FBI asking for an investigation of the death of his son, Olaguibeet Angel López-Pacheco Vera. In the late 1960s, López-Pacheco’s son was stationed in Spokane, Washington, with the Air Force. He was killed in Washington on January 15,1962 during an altercation with two Spokane police officers and an Air Force police sergeant. Plaintiff believes his son was murdered because of his own and his son’s political beliefs supporting independence for Puerto Rico. After doing a Federal Tort Claims investigation, the FBI was satisfied that the son was killed while fleeing the scene of a motel robbery and that no civil rights violations were committed by the Spokane police or the Air Force Sergeant. Plaintiff claims the investigation was inadequate.

On July 23, 1975, López-Pacheco filed a Freedom of Information Act claim requesting information the FBI had on himself and the death of his son. The FBI sent plaintiff 111 pages pertaining to the subjects requested on March 19, 1976. Following a second request from plaintiff, a more complete set of documents, including an additional 98 pages, was sent on February 15, 1978.

The documents reveal that plaintiff has been under FBI surveillance since 1965. GON, the organization to which plaintiff belongs, has been reported on by the FBI since 1958. The FBI reports contain information on plaintiffs politically related activity within and independent of his membership in GON and information on his inquiry into his son’s death. The documents report on plaintiff’s activities dating back to 1949 when he was present at an independence party meeting protesting the use of vaccinations in Puerto Rico. Plaintiff presented some evidence that the investigation of himself and GON was part of the FBI’s Counterintelligence Program (Countelpro) to disrupt certain organizations seeking the independence of Puerto Rico. There was no indication, however, that the FBI infiltrated GON or harassed its members causing them to lose their jobs or to drop out of the organization.

Several items of information uncovered in the second set of documents were deleted from the first set. In particular, a document in the first set reporting on a meeting between López-Pacheco and the San Juan FBI office concerning the death of plaintiff’s son deleted the following sentence:

Any action in connection with this matter should be considered from the standpoint that the death of young López Pacheco may be utilized in the future by anti-U.S. elements in Puerto Rico for propaganda against the U.S. Government.

The first set of documents failed to disclose FBI reports recommending plaintiff be placed in Section A of the Reserve Index— an index of individuals believed to be a threat to Presidential safety. As part of this recommendation the FBI sent forms to the Secret Service checking the boxes which categorized plaintiff as:

3. /X/ ... potentially dangerous; or ... identified as member or participant in communist movement; or ... under active investigation as member of other group or organization inimical to U.S.
5. /X/ Subversives, ultrarightist, racists and fascists who meet one or more of the following criteria:
(a) Evidence of emotional instability (including unstable residence and employment record) or irrational or suicidal behavior;
(b) Expressions of strong or violent anti-U.S. sentiment.

This report along with plaintiff’s picture was distributed to several government security agencies in both 1966 and 1968.

At trial plaintiff presented himself as an honest, law abiding person who believes Puerto Rico should be an independent country, but who also believes in peaceful and harmonious co-existence with the United States. No evidence was adduced to the contrary. Plaintiff was visibly and sincerely upset by the FBI reports that he was a dangerous and emotionally unstable person. The Court is satisfied that plaintiff is neither dangerous nor emotionally unstable.

II. JURISDICTION UNDER THE FEDERAL TORTS CLAIM ACT.

We first consider defendant’s argument that this Court lost jurisdiction when the claims under the Constitution were dismissed leaving only a claim under the FTCA. The jurisdictional grant of the FTCA, 28 U.S.C. § 1346(b) gives the district court exclusive jurisdiction:

... of civil actions or claims against the United States, for money damages ... for injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.

Under this provision, the district court has jurisdiction only if: 1) there is personal injury as defined by state law, and 2) the act causing the “personal injury” would give rise to liability under state law if executed by an employee of a private corporation.

Though plaintiff does not claim to have been physically or financially harmed by the acts of defendant, his claim for damages for mental suffering is recognized by the laws of Puerto Rico. See 31 L.P.R.A. sect. 5141; Commercial Union Insurance Co. v. Gonzalez Rivera, 358 F.2d 480 (1st Cir.1966).

The task of this Court is to determine whether plaintiff has stated a claim for liability against the United States under the laws of Puerto Rico. Plaintiff states that the surveillance activity of the FBI violated his right to privacy under the Constitution of the Commonwealth of Puerto Rico and the Federal Constitution. Plaintiff, however, makes no claim under Puerto Rico law, only Federal Constitutional claims, based on the allegation that the FBI failed to investigate sufficiently the death of his son. Federal Constitutional torts are not separate grounds for liability under the FTCA. Eligio Castro v. United States, 775 F.2d 399 (1st Cir.1985); Birnbaun v. United States, 588 F.2d 319, 327 (2nd Cir.1978). Under 28 U.S.C. sect. 1346(b) liability must be based on the “laws of the place” where that action occurred. It follows that the sole claim remaining is plaintiffs claim of invasion of privacy under the Puerto Rico Constitution based on the FBI’s surveillance activities.

Article II, Sect. 8 of the Constitution of the Commonwealth of Puerto Rico provides:

Every person has the right to the protection of law against abusive attacks on his honor, reputation and private or family life.

Article II, Sect. 1 states:

The dignity of the human being is inviolable.

The history of the right of privacy under the Constitution of Puerto Rico is different from the Federal Constitutional right and from the tort claim for invasion of privacy recognized in many jurisdictions in the United States. Article II, sect. 8 was taken from a provision in the Universal Declaration of Human Rights. The Supreme Court of Puerto Rico has interpreted this Commonwealth constitutional right to privacy as having a broader scope than the federal constitutional counterpart. Colon v. Romero Barcelo, 112 D.P.R. 576 (1982). See Cortes Portalatin v. Hau Colon, 103 D.P.R. 738 (1975). In Cortes Portalatin the court stated:

Since this section [number 8 of art. II] as well as several others, represents a principle that aspires to universality and is distilled from very different legal systems, our scope for a just interpretation is very wide. We are not obliged by specific sets of historical rules. Our obligation is to follow the constitutional mandate in accordance with other provisions of our fundamental law and with the realities of our country.

The Puerto Rico courts have refrained from setting rigid limitations on the privacy protection of Article II, sect. 8. Whether a particular circumstance is a privacy interest protected by the Commonwealth Constitution is a decision left to the “prudent discretion” of the court to be decided with reference decisions or to concurring circumstances. Colon, supra, at 579.

Article II, sect. 8 has been interpreted by the courts of Puerto Rico as protecting the right to privacy within the home and within intimate family and personal relationships. Garcia Santiago v. Acosta, 104 D.P.R. 321 (1975); Figueroa v. E.L.A., 107 D.P.R. 250 (1978). It has also been held to protect a person from excessive publicity of false or intimate personal information. Quiñones v. E.L.A., 90 D.P.R. 791 (1964); Colon v. Romero Barcelo, supra.

In Colon, the family of a murder victim claimed their privacy was invaded when the government broadcast an advertisement for crime prevention using a “grotesque photograph” of the victim’s body without the family’s authorization. The court stated,

By virtue of this right, any person may object to the reproduction of his likeness or to have persons to whom no express or tacit authorization has been given obtain photographic proofs of the same. Prohibition to reproduce the likeness of another person extends to the theater, cinema, or television; ... when such action is contrary to the aggrieved person’s legitimate interests, specially if, according to the object of the photograph or to the mode and means of obtaining it, the same is shocking or was obtained against the will of the injured person.

Colon, supra, at 578, citing Santos Briz, Derecho de Daños, 178, 179, Madrid (1963). The Puerto Rico Supreme Court allowed the family’s claim to stand because the published photograph was shocking, offensive and unauthorized. Furthermore, the court found that the publication was “unnecessary” and “avoidable” — that there were other means to spread the message of crime prevention. Were it not for these particular facts, it is unlikely that plaintiff would have stated a claim for invasion of privacy. The court explained that the publication of a photograph or information obtained while the individual was in a public sphere such as “meetings, demonstrations or other similar public acts or events” are not protected by the right of privacy. Id. at 578, citing Santos Briz, supra, at 178, 179.

In Quiñones plaintiff was mistakenly and unlawfully arrested; his photograph and fingerprints were taken and his name was included in the criminal register which was published in newspapers of wide circulation. Emphasizing that Article II, sect. 8 protects an individual from an attack on his reputation by publication of false information, the court found that plaintiff had stated a claim for invasion of his privacy.

In the present action plaintiff argues that the FBI’s surveillance activity invaded his privacy by interfering with his family and professional activities, by reporting inaccurate information classifying him as dangerous and emotionally unstable and by disseminating this information along with his photograph to various government agencies without his authorization. An examination of the evidence presented by plaintiff reveals that the information gathered by the FBI is exclusively public in nature. The agency reported on Dr. López-Pacheco’s attendance at public meetings, demonstrations and his travels. However, the FBI also sent classified form reports and plaintiff’s photograph to several government agencies categorizing plaintiff as dangerous and emotionally unstable. Plaintiff testified that these accusations by the FBI are false. No claim was made, nor was any evidence presented that the dissemination of the reports harmed plaintiff’s reputation in either his social or professional community. We consider whether these allegations and the evidence presented is sufficient to state a claim for invasion of privacy under Art. II, sect. 8.

The Supreme Court of Puerto Rico has held that Article II sects. 1 and 8 protect an individual from an attack on his reputation by excessive publication of shocking or offensive private information or excessive publication of false information. See Colon supra, and Quiñones, supra. The Puerto Rico courts have never defined what constitutes sufficient publication to state a claim for invasion of privacy. When the state court has not specifically decided the issue of state law presented to the district court in an FTCA claim, the district court must decide the question as it believes the state court would. See Birnbaum, supra, 588 F.2d 319, 323-326 (2nd Cir.1978); Socialist Workers Party v. Atty. General, 463 F.Supp. 515, 524-525 (S.D.N.Y.1978).

We find that plaintiff cannot substantiate a claim for invasion of privacy under the Puerto Rico Constitution. Clearly, the public information gathered on plaintiff is not protected by Article II, sects. 1 or 8. See Colon, supra. Furthermore, we find that the security reports on plaintiff disseminated to a few federal agencies entrusted with security matters were not sufficiently published to constitute a claim for invasion of privacy. Although the question of “excessive publication” has not been specifically defined under the laws of Puerto Rico, in both Colon and Quinones, where the Supreme Court recognized a privacy claim based on publicity, the publication was made in a newspaper of wide distribution. In Quinones the court specifically indicated that publication must be sufficiently diffuse to threaten the individual’s reputation. Here, publication was de minimus — the reports were disseminated to few government offices, they were classified and viewed by few persons. Furthermore, plaintiff makes no claim nor presents any evidence to indicate that the publication of these confidential reports harmed his reputation.

Since plaintiff has failed to state a claim under the laws of Puerto Rico, this Court is without jurisdiction to decide the merits of the case.

We realize that the question of the right of privacy under Puerto Rico’s Constitution and which factual situations are protected is a matter of judicial discretion. See Colon, supra. However, even if an insular court would find that plaintiff has stated a claim under Article II, sect. 8 and his privacy was invaded, the FTCA claim would fail because it falls within the “discretionary function” exception, 28 U.S.C. § 2680(a).

III. THE FEDERAL TORTS CLAIM ACT: THE “DISCRETIONARY FUNCTION” EXCEPTION.

Section 2680(a) provides that the United States’ general waiver of sovereign immunity under the FTCA shall not apply to:

Any claim based upon an act or omission of an employee of the Government ... or based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused.

This exception was designed by Congress “to preclude the application of the [FTCA] to a claim based upon an alleged abuse of discretionary authority by a regulating or licensing agency ... or other administrative activity not of a regulatory nature such as the execution of a federal project, and the like.” Hearing on H.R. 5373 and H.R. 6463 before the House Committee on the Judiciary, 77th Cong., 2nd See. 28, 33 (1942).

W’hich activities of a federal employee are “discretionary functions” continues to be problematic for the federal courts. Several tests were developed to determine when a government employee was performing a discretionary duty: the “planning-operational” test, derived from Dalehite v. United States, 346 U.S. 15, 73 S.Ct. 956, 97 L.Ed. 1427 (1953), the “good Samaritan” test defined in Indian Towing Co. v. U.S., 350 U.S. 61, 76 S.Ct. 122, 100 L.Ed. 48 (1955) and Ingham v. Eastern Airlines, 373 F.2d 227 (2nd Cir.1967), and a test based on “policy balancing”, see Canadian Transport Co. v. U.S., 663 F.2d 1081 (D.C.Cir.1980). The Supreme Court recently confirmed that the proper standard to be applied is the “planning-operational” test. U.S. v. S.A. Empresa de Viacao Aerea Rio Grandese, 467 U.S. 797, 104 S.Ct. 2755, 81 L.Ed.2d 660 (1985), see also Shuman v. U.S., 765 F.2d 283 (1st Cir.1985). Under this test, the nature of the conduct, rather than the status of the actor governs whether the “discretionary function” exception applies to a given case. S.A. Empresa, supra, 104 S.Ct. at 2765. The basic inquiry is whether the challenged acts of the Government employee are of the nature and quality that Congress intended to shield from tort liability. Id.

Few cases have been reported defining when surveillance activity of an intelligence agency is no longer discretionary and becomes operational. See Birnbaum, supra; Socialist Workers Party, supra. Birnbaum set a guideline to determine when surveillance falls outside the “discretionary” exception and becomes operational: to be “discretionary”, 1) the activity must be authorized by a statute, regulation or jurisdictional grant; and 2) it must not transgress the scope of that grant.

In Bimbaum, the CIA covertly opened the mail of American citizens sent to or received from the Soviet Union. Plaintiffs, whose mail had been opened and copied, sued the United States for compensatory damages under the FTCA. The court found that plaintiffs had stated a claim under state law and then held that the agency’s activities fell outside the scope of its authority and were not covered by the “discretionary function” exception of the FTCA. The CIA was chartered by legislative enactment in 1947 to gather foreign intelligence. Congress expressly barred the CIA from entering into internal security matters. Evidence in the case established that the CIA was intercepting and examining mail not only to satisfy its own need for intelligence about the U.S., but to obtain information on matters of domestic concern. The court found that the mail opening operation transgressed the scope of- the CIA charter and could not be considered a “discretionary function.” Hence, the U.S. was subject to liability for these acts under the FTCA.

Whether surveillance activities of the FBI fell within the “discretionary function” exception was raised by the U.S. government’s motion to dismiss in Socialist Workers Party, supra. Plaintiffs, Socialist Workers Party (SWP) organization and several individual members, alleged that the FBI instituted an operation to infiltrate, spy on and ultimately disrupt the activities of the SWP. Through a systematic scheme of interrogation and harassment, the agency caused two members to be discharged from their teaching positions. The court denied the government’s motion to dismiss. Based on plaintiffs’ allegations, the court found that the FBI activities had gone beyond the scope of their authority. The FBI was delegated authority to investigate crime and subversion. It had no authority to infiltrate a lawful organization with the purpose of disrupting its activities. Furthermore, the agency could not lawfully investigate a legitimate organization solely to gather information about their political beliefs and activities when there exists no crime-detection or law enforcement purpose. See Gibson v. Florida Legislative Committee, 372 U.S. 539, 83 S.Ct. 889, 9 L.Ed.2d 929 (1969).

The FBI’s surveillance activity at issue in this case is authorized under 28 U.S.C. sect. 533 and under 28 C.F.R. sect. 0.85. These provisions authorize the FBI to investigate violations of the laws of the United States and to investigate matters relating to espionage, sabotage, and subversive activities. Plaintiff is a vocal supporter of independence for Puerto Rico — he has written articles opposing American involvement in Puerto Rico, and has travelled to Cuba and Russia where he spoke with the press on the situation in Puerto Rico. The regulations governing the FBI, 28 C.F.R. sect. 0.85, specifically authorize the investigation into possible subversive activity. Based on this grant, we find that the FBI’s reporting activity in this case was officially authorized.

We further find that the agency acted within the scope of its authority. The agency did not go outside its jurisdiction as the CIA did in Birnbaum. Investigation of certain activities related to the independence of Puerto Rico is considered an internal security problem within the jurisdiction of the FBI. Historically, various minute groups advocating independence for Puerto Rico have from time to time transgressed the limits of constitutional advocacy and sought to attain their ideological goals through violence and other unlawful means. See Torruella, Juan R., The Supreme Court and Puerto Rico, Editorial Universitaria, Ch. V, 1985. In addition, the circumstances which convinced the court in Socialist Workers Party that the FBI had exceeded its authority do not exist here. Plaintiffs there alleged that the FBI engaged in an aggressive campaign to disrupt their organization and that FBI agents har-rassed and excessively interrogated SWP members causing two of them to lose their jobs. Here, there is no evidence that the FBI instituted any program to disrupt the activities of GON or any other organization to which plaintiff belonged. Nor is there any evidence that plaintiff was harassed or excessively interrogated by the FBI. The agency’s activities were confined to gathering public information concerning plaintiff’s political activities. Mr. López-Pache-co’s job as either a Veterinarian or a lawyer was not affected by this surveillance, which has long ceased.

For these reasons, we find that the activities of the government employees in this case are of the nature and quality that Congress intended to shield from tort liability and that they fall within the “discretionary function” sect. 2680(a) exception to the FTCA.

WHEREFORE, plaintiff’s remaining claim is hereby DISMISSED.

The Clerk shall enter judgment dismissing the complaint.

IT IS SO ORDERED.

      . It could well be that the check mark in paragraph 3 of the FBI Report referred to “under active investigation as member of other group or organization inimical to U.S.”; and the check mark in paragraph 5 to “expressions of strong ... anti U.S. feeling.”

      . There is no evidence that the reports were provided to local police or any other local government offices.

      . In a footnote, the court emphasized that it was deciding a motion to dismiss. Whether the FBI activities were within the discretionary function exception was an issue left for trial.

      . There is no evidence and the Court does not intimate that plaintiff was engaged in subversive activities while travelling abroad and espousing his views in support of independence for Puerto Rico, and in his criticism of the United States government.

      . Even if there were evidence to this effect plaintiff is not the proper party to bring the claim. The claim must be brought by the organization itself,