text:
    Judi WEAVER, Plaintiff, v. Norman J. GROSS, et al., Defendants.
    Civ. A. No. 84-1944.
    United States District Court, District of Columbia.
    March 28, 1985.

      William H. Horkan, Lynn E. Berry, Farifax, Va., for plaintiff.
    Russell H. Gardner, Jeanne M. Phelan, Wolf Pokempner & Hillman, Baltimore, Md., Christopher Hassell, Brault, Grahma, Scott & Brault, Washington, D.C., for defendants.
   MEMORANDUM OPINION AND ORDER

THOMAS F. HOGAN, District Judge.

Plaintiff, a white female, has brought this action against the individual directors, officers and stockholders of 1330 19th Street Corporation (“the Corporation”) for damages arising from the termination of her employment as a bartender at the nightclub “Numbers” operated by the Corporation. Plaintiff alleges that she was terminated as the result of her association with a black person while she was on the premises of Numbers as a customer on December 7, 1982. Specifically, plaintiff alleges that on that evening she was seen by the defendant Norman Gross leaving Numbers in the company of several acquaintances, one of whom was a black man. The plaintiff further alleges that, upon seeing the plaintiff in the company of the black gentleman, defendant Gross said to the assistant manager of Numbers, “Did you see who she walked out of here with? I want her out of here. I don’t even want her in this place, effective now.” The following day, December 8, 1982, plaintiff’s employment with Numbers was terminated.

Plaintiff maintains that she was discharged from her employment in accordance with a discriminatory policy to prevent blacks from patronizing Numbers or being employed by the Corporation, developed and implemented by the defendants in conjunction with one another, as the sole officers, directors and stockholders of the Corporation, in violation of 42 U.S.C. §§ 1981 and 1985 and the District of Columbia Human Rights Act, D.C.Code §§ 1-2512 and 1-2526 (Count 1). Plaintiff has also brought common law pendant claims against defendant Gross for intentional interference with advantageous business relations (Count 2) and defamation (Count 3).

This case is presently before the Court on the motion of defendants Polar, Curtis and Lubeznik to dismiss Count one, and defendant Gross’ motion to dismiss Counts two and three for failure to state a claim upon which relief can be granted, Fed.R. Civ.P. 12(b)(6), or for lack of subject matter jurisdiction, Fed.R.Civ.P. 12(b)(1).

Count One: Federal Civil Rights/D.C. Human Rights Act

Section 1981 of the Civil Rights Act of 1866 provides:

All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts ... as is enjoyed by white citizens.

42 U.S.C. § 1981. Section 1981 has been recognized to prohibit racial discrimination in the making and enforcement of purely private contracts as a valid exercise of Congress’ power under the Thirteenth Amendment to eradicate the badges and incidents of slavery. Runyon v. McCrary, 427 U.S. 160, 168, 96 S.Ct. 2586, 2593, 49 L.Ed.2d 415 (1976).

With respect to those potentially liable, it has been held that officers, directors and employees of a corporation may become personally liable when they intentionally cause an infringement of the rights secured by § 1981, regardless of whether the corporation may also be held liable. See e.g., Tillman v. WheatonHaven Recreation Association, Inc., 517 F.2d 1141, 1146 (4th Cir.1975); Jeter v. Boswell, 554 F.Supp. 946, 953-54 (N.D.W.Va.1983); Manuel v. International Harvester, 502 F.Supp. 45, 49-50 (N.D.Ill.1980). In the present case, the plaintiff alleges that defendant Gross commented on her association with a black person, and initiated the termination of her employment as the result of that incident. The plaintiff has, therefore, stated a prima facie ease under § 1981 against defendant Gross.

As to the other defendants, however, there is no allegation that they were present at the time the statement was made, or otherwise directly participated in the decision to fire the plaintiff. Instead, plaintiff alleges only that these defendants, along with Gross, adopted a policy to deny blacks admittance to Numbers and employment with the corporation. In Tillman v. Wheaton-Haven Recreation Association, Inc., 517 F.2d 1141 (4th Cir.1975), the Fourth Circuit recognized that the adoption of a discriminatory policy by a corporation’s board of directors could serve as the basis of § 1981 liability against individual directors, but only when they personally voted for the policy, or otherwise directly participated in the corporation’s tort. Id. at 1144; see also Curtis v. Loether, 415 U.S. 189, 94 S.Ct. 1005, 39 L.Ed.2d 260 (1974) (action brought under statutes forbidding racial discrimination fundamentally for the redress of a tort). Thus, in Tillman the court held that the plaintiff had stated a cause of action under § 1981 against the directors of a community swimming pool association who voted to deny blacks membership. Id. at 1144-46.

The present case lacks the same type of direct correlation between the adoption of the policy alleged by the plaintiff and harm allegedly suffered by the plaintiff as was present in Tillman. The plaintiff here raises no allegation that any of the individual defendants voted specifically to discharge her because of her association with blacks, or even that they generally adopted a policy to dismiss white employees who fraternized with blacks. Therefore, because the plaintiff has alleged no policy adopted by defendants Polar, Curtis and Lubeznik directly involving retaliation against whites for their association with blacks, the plaintiff has failed to state a claim against those defendants under § 1981.

The plaintiff also asserts injury under Section 1985 of the Civil Rights Act of 1871 as the result of the defendants’ alleged policy to discriminate against blacks. Section 1985 provides:

If two or more persons ... conspire ... for the purpose of depriving, either directly or indirectly, any person or class of persons of the equal protection of the laws, or of equal privileges and immunities under the laws ... whereby another is injured in his person or property, or deprived of having and exercising any right or privilege of a citizen of the United States, the party so injured or deprived may have an action for recovery of damages ... against one or more of the conspirators.

42 U.S.C. § 1985(3) (emphasis added).

In Novotny v. Great American Federal Savings & Loan Ass’n, 584 F.2d 1235 (3rd Cir.1978) (en banc), reversed on other grounds, 442 U.S. 366, 99 S.Ct. 2345, 60 L.Ed.2d 957 (1979), the Third Circuit held that a male employee had standing under § 1985(3) where he alleged he was discharged as the result of challenging the corporation’s policy of discrimination against women. Id. at 1244-45. In so holding, the court stated:

Section 1985(3) provides for a cause of action in any instance where “in furtherance of the object of” a proscribed conspiracy an act is done “whereby another is injured in his person or property.” By its terms, the statute gives no hint of any requirement that the “other” must have any relationship to the “person or class of persons” which the conspiracy seeks to deprive of equal protection, privileges or immunities.

Id. at 1244. The court further cited the legislative history of the Act in support of its conclusion that membership in the class against which the conspiracy is directed is not necessary to state a cause of action under § 1985(3). Id. at 1244-45.

Even assuming that a rationale similar to that set forth in Novotny with respect to standing also distinguishes § 1985 from § 1981 with respect to intent, and the necessary directness of the correlation between the policy alleged and the injury suffered, a different potential barrier to plaintiff’s § 1985 action arises in terms of the present debate in the law as to whether corporate officers, directors and employees of a single corporation can conspire under § 1985(3) so as to find them personally liable. In Novotny, supra, the Third Circuit held that directors and officers of a corporation may be held liable for conspiracy in their individual capacities under § 1985(3), relying primarily on cases recognizing criminal conspiracies among corporate officers and directors. 584 F.2d at 1256-59. The greater weight of authority has held, however, that because a corporation cannot conspire with itself, the officers and directors of a corporation generally cannot be held liable under § 1985(3) for actions taken in concert with one another. E. g., Girard v. 94th St. & Fifth Avenue Corp., 530 F.2d 66 (2d Cir.), cert. denied, 425 U.S. 974, 96 S.Ct. 2173, 48 L.Ed.2d 798 (1976); Baker v. Stuart Broadcasting Company, 505 F.2d 181, 183 (8th Cir.1974); Dombrowski v. Dowling, 459 F.2d 190, 197 (7th Cir.1972); Stathos v. Bowden, 728 F. 2d 15, 21 (1st Cir.1984); Craft v. Board of Trustees, 516 F.Supp. 1317, 1324 (N.D.Ill.1981); Rackin v. University of Pennsylvania, 386 F.Supp. 992, 1005-06 (E.D.Pa.1974). This Court agrees that, because the general rule of corporate law remains that directors, officers and employees are agents of a corporation, and may act on its behalf, they generally should not be held to be conspirators. In drawing exceptions to this rule, therefore, this Court disagrees with those courts which have taken the position that a conspiracy can be found among corporate agents where more than a single act of discrimination is alleged by the plaintiff. See Stathos, 728 F.2d at 21, Craft, 516 F.Supp. at 1324; Rackin, 386 F.Supp. at 1005-06. As observed by Judge Owens in Coley v. M & M Mars, Inc., 461 F.Supp. 1073 (M.D.Ga.1978), this approach creates the “conceptual difficulty ... that the number of discriminatory acts can create a conspiracy although each act is committed by a single entity.” Id. at 1076. Instead, the relevant inquiry is whether the acts of the defendants were in fact taken on behalf of the corporation, each acting within the scope of their employment, or instead were taken solely for personal, non-business motivations. Coley, 461 F.Supp. at 1077; see also Rivas v. State Bd. for Community Colleges, 517 F.Supp. 467, 472 (D.Colo.1981); cf. Herrmann v. Moore, 576 F.2d 453, 459 (2d Cir.).

In Coley the Court held that the complaint sufficiently alleged personal racial motivations, as opposed to business motivations, in asserting that employees had harassed the plaintiff on the job because of his race. Id. at 1076-77. This Court agrees with the holding of Coley that a complaint sufficiently alleges the likelihood of personal, nonbusiness motivation where discriminatory activity is attributed to mere employees. Id. Such a holding may also be justified when discriminatory activity is attributed to only a few of a Corporation’s officers and directors. However where, as here, the complaint alleges that all of the officers, directors and stockholders of a corporation adopted an allegedly discriminatory policy this Court cannot find that policy, however misguided, distinct from the operation and management of the Corporation’s business. Accordingly, the plaintiff’s proper recourse lies against the corporation as an entity, and plaintiff’s § 1985(3) claims against all of the defendants must be dismissed.

Count one of the complaint also alleges violations of the District of Columbia Human Rights Act, D.C.Code § 1-2512; 1-2526. Like the federal civil rights laws, the District’s statute also outlaws employment discrimination and conspiracies to deprive persons of their rights. However, the Human Rights Act requires an individual to elect between the filing of a complaint with the District of Columbia Office of Human Rights and the filing of a private cause of action. Id. § 1-2556; Brown v. Capitol Hill Club, 425 A.2d 1309, 1312 (D.C.App.1981). The defendants’ reply to the plaintiff’s opposition to the motion to dismiss includes a copy of a complaint apparently filed by the plaintiff with the District of Columbia Office of Human Rights, and asserts that the plaintiff is therefore barred from bringing this claim here as well. The defendants’ pleading, however, is not accompanied by supporting affidavit, and the plaintiff has not had an opportunity to respond to this assertion. The Court will therefore afford the defendants an opportunity to supplement their position on this issue, also permitting the filing of an appropriate response by the plaintiff.

Count Two: Intentional Interference with Business Relationship/Wrongful Discharge

Plaintiff has also brought a claim in Count two against only defendant Gross for tortious interference with advantageous business relationship, or wrongful discharge, the complaint being unclear on its fact which tort is alleged. In either case, Count two fails to state a claim against defendant Gross. Tortious interference with contractual relations arises when a defendant interferes with a contract between the plaintiff and some third party. Donohoe v. Watt, 546 F.Supp. 753, 757 (D.D.C.1982), aff’d, 713 F.2d 864 (D.C.Cir.1983); Business Equipment Center, Ltd. v. De Jur-Amsco Corp., 465 F.Supp. 775, 788 (D.D.C.1978). Because a corporation cannot act other than through its officers and agents, a corporate officer is an implied party to the contract and, therefore, does not have the third-party status necessary to be liable for tortious interference with contract. Donahue, 546 F.Supp. at 757 (claim for intentional interference with business relationship brought against officer of corporation that discharged plaintiff dismissed). In the present case, defendant Gross is an officer of the corporation and cannot be held liable for tortious interference with contract.

Plaintiff apparently argues in the alternative that Gross may be individually held liable for the tort of wrongful discharge. The District of Columbia, however, does not recognize the tort of wrongful discharge, adhering instead, without exception, to the principle that an employee for an indefinite term is terminable at will. Ivy v. Army Times Publishing Co., 428 A.2d 831 (D.C.App.1981). See also Uriarte v. Perez-Molina, 434 F.Supp. 76, 79-80 (D.D.C.1977).

Therefore, plaintiffs claims against defendant Gross in Count two must be dismissed.

Count Three: Defamation

Finally, plaintiff asserted a claim for defamation against defendant Gross in Count three, but now concedes that it is barred by the statute of limitations. Accordingly, Count three shall be dismissed.

Conclusion

Therefore, for the reasons set forth above, it is this 27th day of March, 1985

ORDERED that

1) Plaintiffs claims under 42 U.S.C. § 1981 in Count one are dismissed as to defendants Curtis, Polar and Lubeznik;

2) Plaintiffs claims under 42 U.S.C. § 1985(3) in Count one are dismissed as to all defendants;

3) The defendants shall supplement their motion with respect to plaintiffs claims under the D.C. Human Rights Act within 10 days of the date of this order; and

4) Counts two and three of the Complaint are hereby dismissed.

      . A complaint may be dismissed for failure to state a claim upon which relief may be granted only where it appears beyond doubt that plaintiff can prove no set of facts entitling him to relief. Bouchet v. National Urban League, Inc., 730 F.2d 799, 805 (D.C.Cir.1984) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957)). For this purpose, the complaint is to be construed in the light most favorable to the plaintiff, with all well-pled allegations of fact and reasonable conclusions therefrom taken as true. See e.g., Shear v. National Rifle Association of America, 606 F.2d 1251, 1253 (D.C.Cir.1979); see generally 5 C. Wright & A. Miller, Federal Practice and Procedure, Civil § 1357 (1969 & Supp.1984).

      . It has been held that whites can have standing under § 1981 for discrimination they have suffered as the result of their activities with or on behalf of blacks. Des Vergnes v. Sukank Water District, 601 F.2d 9 (10th Cir.1979), vacated on other grounds, 454 U.S. 807, 102 S.Ct. 81, 70 L.Ed.2d 76 (1981); Winston v. Lear-Siegler, Inc., 558 F.2d 1266 (6th Cir.1977); DeMatteis v. Eastman Kodak Co., 511 F.2d 306 (2d Cir.1975).

      . Defendant Gross has not, in fact, moved to dismiss Count one.

      . The fact that whites have standing under § 1981, see supra note 2, does not change the need for the direct relationship between the type of policy allegedly instituted and the injury suffered in order to demonstrate the requisite intent under § 1981.

      . In Griffin v. Breckenridge, 403 U.S. 88, 91 S.Ct. 1790, 29 L.Ed.2d 338 (1971), the Supreme Court held that § 1985 does reach purely private conspiracies as long as there is "some racial, or perhaps otherwise class-based, invidiously discriminatory animus behind the conspi-ator’s action.” Id. 91 S.Ct. at 1798-99. However, § 1985 is a purely remedial statute, embodying no substantive rights of its own. Therefore, the plaintiff must be able to point to a violation of some other federal status or constitutional provision, and in the absence of state action must be able to point to one which is violated by purely private conduct. United Brotherhood of Carpenters & Joiners v. Scott, 463 U.S. 825, 103 S.Ct. 3352, 77 L.Ed.2d 1049 (1983) (§ 1985 does not create a cause of action for "private violations” of the First or Fourteenth Amendments). In light of this Court’s conclusion, infra, that a conspiracy under § 1985 cannot be alleged against these defendants individually for actions taken by them as officers and directors of the Corporation, the Court need not decide whether the remaining § 1981 claim against defendant Gross alone could serve as the underlying violation for a § 1985 claim against all of the alleged conspirators. See Thompson v. International Association of Machinists, 580 F.Supp. 662, 667-68 (D.D.C.1984) (§ 1981 may be the federal right violated for § 1985 purposes). Furthermore, the Court notes that in Great American Federal Savings & Loan Association v. Novotny, 442 U.S. 366, 99 S.Ct. 2345, 60 L.Ed.2d 957 (1979), the Supreme Court held that violations of Title VII could not be redressed through § 1985. However, because plaintiff does not allege that she was discharged for opposing unlawful employment practices against others as would be actionable under 42 U.S.C. § 2000e-3(a), this Court does not view Novotny as a barrier to the § 1985 claim.

      . See, supra, note 15.

      . Even under this rationale considering the number of discriminatory acts, the plaintiff here would not state a claim for conspiracy against the defendants individually. Those courts that have recognized conspiratorial liability on this theory have found more than a single act of discrimination against that plaintiff. See Stathos, supra; Craft, supra; Rackirt, supra. Here, although the plaintiff alleges that the defendants have engaged in a longstanding policy of discriminating against blacks, and have taken various acts under that policy, the plaintiff does not allege that she, personally, was the target of more than one such act.

      . The Complaint itself reflects that plaintiff's allegations are brought against the defendants for actions taken in their official capacity, and blurs the distinction between the defendants as individuals and the corporate entity. The Complaint states that the defendants, as the officers, directors, and stockholders of the corporation, "set and established the operating policies of the Corporation which operated Numbers.” (Complaint at ¶¶ 7, 8, 9, 10).

      . The plaintiff has, in fact, filed another action against the Corporation as an entity, arising out of the same set of facts at issue here. That case, also pending before this Court, is presently stayed by virtue of the Corporation’s petition for bankruptcy. Weaver v. 1330 Nineteenth Street Corp., C.A. No. 83-1945 (D.D.C.).

      . Although defendant Gross has not moved to dismiss the § 1985 claim, because an individual cannot conspire alone, this Court will sua sponte dismiss this claim as to defendant Gross as well as the other defendants.


source: Caselaw Access Project

author: JACKSON, District Judge.

license: Public Domain

text:
    UNITED STATES of America v. Lucy Wright DUFF, Robert J. Woodruff.
    Crim. Nos. 84-0487-01, 84-0484.
    United States District Court, District of Columbia.
    March 28, 1985.

      Lucy Duff, pro se.
    Robert J. Woodruff, pro se.
    John Finnegan, Asst. U.S. Atty., Washington, D.C., for the U.S.
   MEMORANDUM AND ORDER

JACKSON, District Judge.

Lucy Duff and Robert Woodruff appeal pro se from their convictions by a United States magistrate of a violation of a National Park Service regulation, 36 C.F.R. § 50.19(e)(9), which prohibits individuals’ wielding signs or placards while standing motionless within the mid-portion of the White House sidewalk. Although appellants concede their knowing and willful violation of the regulation, and do not contest the fairness of their trial, they nevertheless contend that their convictions should be overturned because the regulation is unconstitutional. For the reasons set forth below, the' magistrate’s judgments will be affirmed.

The facts are undisputed. On October 31, 1984, at approximately 1:00 p.m., Officer John T. McClure of the U.S. Park Police observed appellants Duff and Woodruff, holding signs, standing in the center portion of the sidewalk in front of 1600 Pennsylvania Avenue. Officer McClure testified at trial that after two or three minutes he approached the appellants, advised them that they were in violation of the regulation, and asked whether they would comply with it. Ms. Duff and Mr. Woodruff each responded negatively,- and the officer accordingly placed them under arrest. Appellants neither objected to nor resisted their arrests.

Officer McClure was the only government witness. Appellants did not cross-examine or offer evidence of their own, but they did read a prepared statement as to their reasons for disobeying the regulation. They were found guilty, and each was sentenced to 30 days’ imprisonment, with execution of the sentence suspended, and one year’s unsupervised probation. This appeal followed.

The Court of Appeals for the D.C. Circuit has recently determined § 50.-19(e)(9) to be constitutional in most of the respects appellants say it is not. White House Vigil v. Clark, 746 F.2d 1518 (D.C.Cir.1984). This Court is, of course, obliged to follow that decision. Noting that the government had not entirely prohibited expressive activities either on the White House sidewalk in its entirety or in the “center zone,” the court stated that the government “may adopt reasonable ‘time, place and manner’ restrictions on the exercise of free speech, so long as the restrictions are content-neutral, are narrowly tailored to serve a significant governmental interest, and leave open ample alternative channels of communication.” 746 F.2d at 1526-27. It then found that § 50.19(e)(9) is all of the above: content-neutral—indeed, content-silent; “narrowly tailored” to serve the governmental interest involved, i.e., the aesthetics of the front of the executive mansion; and affecting no “alternative channel of communication” imagination can devise so long as it is not pursued in a static posture. The decision thus lays to rest, as far as this Court is concerned, most of appellants’ arguments.

The circuit court did not, however, have occasion to consider in White House Vigil whether the regulation comports with the Equal Protection Clause. Appellants contend that individuals who take to the sidewalk in front of the White House to protest are likely to be people of “modest means,” unable to afford more effective forms of communication. Therefore, they say, the regulation discriminates on the basis of wealth.

The Supreme Court has stated that “[W]hen government regulation discriminates among speech-related activities in a public forum, the Equal Protection Clause mandates that the legislation be finely tailored to serve substantial state interests, and the justifications offered for any distinctions it draws must be carefully scrutinized.” Carey v. Brown, 447 U.S. 455, 461-62, 100 S.Ct. 2286, 2290-91, 65 L.Ed.2d 263 (1980). See also Police Department of Chicago v. Mosley, 408 U.S. 92, 98-99, 101, 92 S.Ct. 2286, 2291-92, 2293, 33 L.Ed.2d 212 (1972). So scrutinized, however, it is obvious that the regulation at issue here makes no distinctions at all on its face, on the basis of wealth or otherwise. And appellants suggest no reason to suppose the penurious to be generically any less ambulatory than the rest of the population and, thus, unable to keep moving while they make their statements, which is all the regulation requires of them.

In summary, as the court of appeals noted in White House Vigil:

The center zone restriction burdens speech only in an indirect and insubstantial way. Protesters are free to engage in a wide variety of expressive activities within the center zone; they are only precluded while there from engaging in stationary protest. The center zone occupies no more than seven percent of the total length of the sidewalk; protesters may remain stationary along any portion of the remainder.

746 F.2d at 1537.

For the foregoing reasons, therefore, the Court holds that 36 C.F.R. § 50.19(e)(9) is constitutional, and it is, this 27th day of March, 1985,

ORDERED, that the magistrate’s judgments of conviction are affirmed.

      . Section 50.19(e)(9) reads, in pertinent part: No signs or placards shall be held, placed or set down on the center portion of the White House sidewalk, comprising ten yards on either side of the center point of the sidewalk; Provided, however, that individuals may demonstrate while carrying signs on that portion of the sidewalk if they continue to move along the sidewalk.
      The term "White House sidewalk” is defined in § 50.19(a)(5) as “the south sidewalk of Pennsylvania Avenue, NW., between East and West Executive Avenues, NW.," i.e., in front of the White House opposite Lafayette Park.

      . Ms. Duff was carrying a sign which read, "People not for profit.” Mr. Woodruffs sign said, “DSA, here we stand.”

      . Appeal to a district court from a magistrate’s judgment of conviction is authorized by 18 U.S.C. § 3402 and Rule 7 of the Rules of Procedure for the Trial of Misdemeanors Before United States Magistrates.

      . The court also affirmed the constitutionality of other portions of the regulation concerning the size, construction and placement of signs and placards, and the restrictions in § 50.-19(e)(10) on the placement of parcels and other containers on the White House sidewalk. It is only the “center zone” portion of § 50.19(e)(9) which is of present concern, however, because appellants were not charged with violation of any other provision.

      . The portion of the sidewalk in question is the area within 10 yards to either side of the center point of the sidewalk. Officer McClure testified at trial that the center point of the sidewalk is easily identifiable, because it is designated by a unique decorative column on the fence.
      For protesters’ purposes the "center zone” provides a "special backdrop" which they believe essential to the effectiveness of protest activities, because it visually enhances any statements made from there. As the court of appeals noted in White House Vigil, however, there is also a clear view of the White House from non-central portions of the sidewalk. 746 F.2d at 1538.

      . See also Regan v. Time, Inc., — U.S. -, 104 S.Ct. 3262, 3266-67, 82 L.Ed.2d 487 (1984); Clark v. Community For Creative Non-Violence, - U.S. -, 104 S.Ct. 3065, 3069, 82 L.Ed.2d 221 (1984); Heffron v. International Society for Krishna Consciousness, Inc., 452 U.S. 640, 647-48, 101 S.Ct. 2559, 2563-64, 69 L.Ed.2d 298 (1981); Virginia Pharmacy Board v. Virginia Citizens Consumer Council, 425 U.S. 748, 771, 96 S.Ct. 1817, 1830, 48 L.Ed.2d 346 (1976); Consolidated Edison Co. v. Public Service Commission, 447 U.S. 530, 535, 100 S.Ct. 2326, 2332, 65 L.Ed.2d 319 (1980).

      . In Kovacs v. Cooper, 336 U.S. 77, 69 S.Ct. 448, 93 L.Ed. 813, reh'g denied, 336 U.S. 921, 69 S.Ct. 638, 93 L.Ed. 1083 (1949), the Supreme Court upheld the constitutionality of a municipal ordinance forbidding the use on public streets of "sound trucks" or other instruments which emit "loud and raucous noises" and are attached to vehicles. Although Kovacs was decided in the context of the First, not the Fourteenth, Amendment, the Court made the equally apposite observation: “That more people may be more easily and cheaply reached by sound trucks, perhaps borrowed without cost from some zealous supporter, is not enough to call forth constitutional protection for what those charged with public welfare reasonably think is a nuisance when easy [alternate] means of publicity are open.” 336 U.S. at 88-89, 69 S.Ct. at 454.


author: BUA, District Judge.

text:
    William E. WAITES and Richard G. Pinkett, individually and on behalf of a class of all persons similarly situated, Plaintiffs, v. FIRST ENERGY LEASING CORP., et al., Defendants. and Bruce E. KAHLER, Plaintiff, v. FIRST ENERGY LEASING CORP., et al., Defendants.
    Nos. 84 C 10257, 84 C 11001.
    United States District Court, N.D. Illinois, E.D.
    March 28, 1985.

      William Gleeson, Arnold A. Pagniucci, Fay Clayton, Charles J. Ryan, Jr., Joy K. Fallon, Sachnoff, Weaver & Rubenstein, Ltd., Chicago, Ill., for plaintiffs.
    Francis J. Higgins, John W. Rotunno, Thomas L. Fink, Bell, Boyd & Lloyd, Chicago, Ill., Leon P. Gold, Fran M. Jacobs, Mary W. Richardson, Shea & Gould, New York City, for defendants Touche Ross & Co. and Thomas P. Flanagan.
   ORDER

BUA, District Judge.

Before the Court is the motion of the defendants Touche Ross & Co. and Thomas P. Flanagan to transfer these actions to the United States District Court for the Eastern District of New York pursuant to 28 U.S.C. § 1404(a). For the reasons stated herein, defendants’ motion is’ granted and the cases are transferred to the U.S. District Court for the Eastern District of New York.

I. FACTS

These actions are brought by plaintiffs William E. Waites, Bruce Kahler, and Richard G. Pinkett, who purchased the defendants’ tax-shelter securities in Chicago, Illinois, Tulsa, Oklahoma, and Chagrin Falls, Ohio, respectively. Plaintiffs have alleged the existence of a nationwide securities fraud scheme involving fifty-five defendants. Defendants Touche and Flanagan have jointly moved under 28 U.S.C. § 1404(a) to transfer this action to the Eastern District of New York. Defendant Stuart Becker & Company joined in and adopted Touche’s motion to transfer. Defendants Zayle A. Bernstein and Bernstein, Bernstein, Bernstein, Stein & Rush (BBBS&R) joined in plaintiffs’ opposition to the transfer.

These suits involve allegations that the defendants created or otherwise participated in a sophisticated tax shelter scheme designed to defraud investors by inducing them to invest in certain energy management equipment to be installed in business or industrial facilities. Essentially, plaintiffs’ complaint alleges that the energy management system was leased to various entities who would then sell an energy savings service to commercial users of energy. Plaintiffs also allege that participation in this program was marketed nationwide through a promotional package entitled “Energy Systems Equipment Leasing Program.” This promotional material allegedly incorporated independent engineering appraisals of the equipment in question, a description of the Energy Minder Systems, a tax opinion and legal opinion prepared by Bernstein and BBBS&R, a supporting tax opinion prepared by Larry Kars, accounting information prepared by Touche as well as other representations concerning the program and the relationships between the various participants.

There are three other civil actions filed alleging fraud in this energy leasing tax shelter scheme. The other actions are against many of the defendants named in this case and are pending in the Western District of Michigan and the Northern District of Georgia. In addition, certain defendants have filed a motion to transfer the actions to this Court for consolidated pretrial proceedings with the Judicial Panel on Multidistrict Litigation, pursuant to 28 U.S.C. § 1407.

There are three other actions related to the alleged fraudulent tax scheme. First, there is an investigation by the New York Attorney General, naming many of the same defendants, entitled In re An Inquiry of the Attorney General of the State of New York pursuant to Article 23-A of the General Business Law in regard to the practice of First Energy Leasing Corp., et al., Index No. 41457/84 (“In re First Energy”). Second, there is a civil tax fraud action brought by the United States in the Eastern District of New York, entitled United States v. OEC Leasing Corp., et al., CV 84-4112. Finally, defendant First Energy Leasing obtained a Temporary Restraining Order in New York state court to prevent Touche Ross from interfering with First Energy’s use of Touche’s Report in the marketing of the securities.

II. DISCUSSION

Section 1404(a), 28 U.S.C., provides:

For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.

In order to show that transfer of venue is proper, the moving party must establish that (1) venue is proper in the transferor court; (2) venue is proper and in the transferee court, and (3) the transfer is for the “convenience of the parties and witnesses, in the interest of justice.” Central States, Southeast and Southwest Areas Pension Fund v. Brown, 587 F.Supp. 1067, 1069 (N.D.Ill.1984). Although the party seeking transfer bears the burden of establishing that a transfer of venue is proper, the burden under § 1404(a) is substantially less than a transfer under the doctrine of forum non conveniens. Id.; see Norwood v. Kirkpatrick, 349 U.S. 29, 75 S.Ct. 544, 99 L.Ed.2d 789 (1955).

A. Venue

Jurisdiction for the plaintiffs’ complaint is grounded upon 15 U.S.C. §§ 77v, 78aa. Venue is proper under § 77v where “the defendant is found or is an inhabitant or transacts business, or in the district where the offer or sale took place, if defendant participated therein, ...” 15 U.S.C. § 77v. Venue is proper under § 78aa where “the defendant is found or is an inhabitant or transacts business, ...” 15 U.S.C. § 78aa.

In the present case, participation in the alleged fraudulent tax shelter scheme was sold in Chicago; two defendants reside in Chicago; and eighteen defendants reside in the Eastern District of New York. Thus, venue is proper in both transferor and transferee districts.

B. Plaintiffs’ Choice of Forum

Plaintiffs’ choice of forum is entitled to substantial weight unless that forum lacks any significant contact with the underlying cause of action. Hotel Constructors, Inc. v. Seagrave Corp., 543 F.Supp. 1048, 1050 (N.D.Ill.1982). In the present case, the only relationship to this district is the sale of the tax shelter and the fact that defendants Touche and Flanagan reside here. Plaintiffs make no showing that any activities by Touche and Flanagan in Chicago contributed to the underlying tax fraud scheme. Whether the defendant promoters and manufacturers are liable for misrepresenting the value of their tax shelters and, if so, the amount of that liability are issues which have no relationship to this district. The alleged fraudulent tax shelter scheme arose out of the promoters’ activities in the Eastern District of New York and some of the energy management systems were manufactured there. Since the plaintiffs’ choice of forum lacks any significant contact with the underlying cause of action, their choice of forum will not be given substantial weight, but rather will be given “equal consideration along with other factors which must be considered under § 1404.” Id. at 1051.

C. Convenience of the Parties and Witnesses

Plaintiffs’ complaint alleges that the defendants, in the course of offering and selling the tax shelter, made fraudulent misrepresentations in overvaluing the energy management- systems. According to the New York Attorney General’s investigation, some of the units were manufactured in New York and some in Florida. However, all of the promoters reside in and around the Eastern District of New York. In addition, the Touche Report came out of the New York office of Touche Ross. Many of the individual defendants are officers and employees of the promoters, manufacturers and suppliers.

The greatest geographic dispersion among defendants is in the group of service companies, which are spread throughout the country. However, the testimony of officers and employees of the service companies will not be nearly as important as the testimony of the officers and employees of the promoters, manufacturers and suppliers, most of which are located in the Eastern District of New York. Plaintiffs argue that they will contribute important testimony to this case and the fraud allegations. However, there is no indication that any of the investors had knowledge of the scheme to overvalue the systems before or at the time of the alleged fraudulent offering and sales.

In considering the convenience of potential witnesses, the court must consider not only the number of witnesses located in the respective districts, but also the nature and quality of their testimony in relationship to the issues in the case. Central States, Southeast and Southwest Areas Pension Fund v. Brown, supra, 587 F.Supp. at 1070. The principal witnesses are those material to the court’s decision on a motion to transfer under § 1404(a). SEC v. First Nat. Finance Corp., 392 F.Supp. 239, 241 (N.D.Ill.1975). In the present case, it is clear that the number of important material witnesses is greatest by far in the Eastern District of New York and therefore the convenience of the witnesses favors transfer there.

Regarding the convenience of the parties, eighteen defendants reside in the Eastern District of New York: two of the three promoters, nine of twenty-two individual defendants, two of three suppliers, one of three manufacturers, and three of eleven service companies. Seven other key defendants are located in New York City, adjacent to the Eastern District of New York, and seven more defendants are located in Pennsylvania, predominantly in Philadelphia. Ten defendants are located in Florida. The remaining thirteen defendants are spread over Texas (3), California (2), Illinois (2), and one each in New Jersey, Ohio, Washington, Maryland, Connecticut, and Massachusetts. On balance, therefore, it is reasonable to conclude that the Eastern District of New York, where more key defendants are located than any other district, is a more convenient forum for the defendants and the principal witnesses. SEC v. First Nat. Finance Corp., supra, 392 F.Supp. at 241.

D. Interests of Justice

As a general rule, cases should be transferred to districts where related actions are pending. Id. While these are not cases which can be consolidated with cases pending in the transferee district, id., the pendency of a dissimilar action is a factor favoring transfer when duplication of discovery efforts could be avoided by proper judicial coordination. Impervious Paint Indus. Ltd. v. Ashland Oil, 444 F.Supp. 465, 468 (E.D.Pa.1978). In the present case, it is likely that the civil tax fraud action brought by the government in the Eastern District of New York will yield discovery on the issue of overvaluation of the energy management systems—an issue which is relevant to the allegations of fraud and misrepresentation in these cases. Therefore, the presence of the related discovery in U.S. v. OEC Leasing Corp., et al., supra, favors the transfer of this action to the Eastern District of New York.

In addition, most of the documentary evidence will likely be located in the Eastern District of New York where the promoters and creators of the alleged fraudulent tax shelter scheme reside. The location of documentary evidence, including corporate books and records, is a proper factor in considering the interest of justice. Hess v. Gray, 85 F.R.D. 15, 26 (N.D.Ill.1979); SEC v. First Nat. Finance Corp., supra, 392 F.Supp. at 241, 242. Therefore, the presence of most of the documentary evidence relevant to these cases in the Eastern District of New York favors the transfer of these actions there.

III. CONCLUSION

The presence in the Eastern District of New York of most defendants, principal witnesses, documentary evidence, and a related action establishes a “clear balance of inconvenience” compelling this Court to transfer these cases. Therefore, the defendants’ motion to transfer these actions to the Eastern District of New York is granted.

IT IS SO ORDERED.


author: CONABOY, District Judge.

text:
    Ralph BARNES, Jr., Administrator of the Estate of Phyllis Ann Barnes, deceased, Plaintiff, v. Daniel L. BONIFACIO, Defendant.
    Civ. No. 85-0132.
    United States District Court, M.D. Pennsylvania.
    March 28, 1985.

      Thomas J. Sharkey, Ustynoski, Sharkey & Marusak, Hazleton, Pa., for plaintiff.
    Cody H. Brooks, Henkelman, Kreder, O’Connell & Brooks, Scranton, Pa., for defendant.
   MEMORANDUM AND ORDER

CONABOY, District Judge.

This is a wrongful death/survival action filed by Ralph Barnes, Jr., Administrator of the Estate of Phyllis Ann Barnes (decedent) against Daniel L. Bonifacio. The complaint alleges that the decedent was a passenger in Defendant’s automobile traveling on U.S. Route 63 in Adair County, Missouri, when Defendant’s automobile collided with another vehicle, thus resulting in the injury and death of decedent. The Plaintiff argues that the collision, injuries and death were caused by Defendant’s careless, reckless and negligent operation of his automobile.

The pleadings before us indicate that the events giving rise to this cause of action occurred in the State of Missouri, the Defendant resides in the State of New Jersey and the Plaintiff is a resident of the Commonwealth of Pennsylvania. Plaintiff’s jurisdictional claim is based on diversity.

Currently before the court is Defendant’s motion to dismiss the complaint. The appropriate briefs have been filed and this matter is now ripe for our consideration.

The Defendant’s motion to dismiss has been filed pursuant to Federal Rule of Civil Procedure 12(b)(2) and asserts that this Court does not have jurisdiction over the named Defendant.

In order for this Court to exercise in personam jurisdiction over a Defendant who is not present in the Commonwealth of Pennsylvania, the Plaintiff must demonstrate that Defendant has “minimum contacts” with the forum. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). The “minimum contacts” thresholds at the point where the Defendant could expect to avail himself to the laws of the forum and must be such that he reasonable could anticipate being haled to the court of the forum. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980).

The Plaintiff contends that the Defendant met the decedent in Pennsylvania, had visited the decedent in Pennsylvania and had invited the decedent to travel to Missouri. Plaintiff argues that these activities meet the threshold of minimum contacts to make Defendant amenable to in personam jurisdiction in this forum. In light of the above-cited cases, we must disagree. The minimum contact must be such that the Defendant could expect to avail the courts of the forum. It appears that the contacts asserted were purely social and thus do not meet the minimum contact threshold.

Plaintiff also contends that the Defendant is amenable to the Pennsylvania long-arm statute as his actions have caused “harm” in Pennsylvania. Here too, we must disagree with Plaintiffs argument. In order for the Pennsylvania long-arm statute to come into play, an act or omission in a foreign forum must have a direct, first instance result of harm in Pennsylvania. Rosen v. Solomon, 374 F.Supp. 915 (1974). We find Plaintiffs attempt to bring extrapolated harm into the realm of the Pennsylvania long-arm statute to be erroneous.

At this point, it would appear that this Court is without in personam jurisdiction and it is within our power to grant Defendant’s motion to dismiss. However, to do so would be travesty, as Plaintiff may now be barred from pursuit of his claim in another forum.

We feel that justice is best served if we deny Defendant’s motion to dismiss and exercise our discretionary power by transferring this matter to a district court with in personam jurisdiction over the Defendant. In this way, Plaintiff may have his day in court and Defendant will be in a convenient forum that has jurisdiction over his person. This plan has been approved and employed in similar eases and we feel it is most judicious in nature. Founds v. Shedaker, 278 F.Supp. 32 (E.D.Pa.1968); Schwilm v. Holbrook, 661 F.2d 12 (3d Cir.1981); Junior Spice, Incorporated v. Turbotville Dress, Inc., 339 F.Supp. 1189 (E.D.Pa.1972), see Piper Aircraft Co. v. Reyno, 454 U.S. 235, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981).


author: SHADUR, District Judge.

text:
    HARRIS TRUST AND SAVINGS BANK, Plaintiff, v. SLT WAREHOUSE COMPANY, INC., Defendant.
    No. 84 C 9991.
    United States District Court, N.D. Illinois, E.D.
    March 28, 1985.

      James M. Breen, James F. Gebhart, Chapman & Cutler, Chicago, for plaintiff.
    Donald L. Mrozek, Keith E. Graham, Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Chicago, for defendant.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Harris Trust and Savings Bank (“Harris”) has charged SLT Warehouse Company, Inc. (“SLT”) with breach of duty and failure to exercise due care as a warehouseman of grain in which Harris held a security interest. SLT now moves under 28 U.S.C. § 1404(a) (“Section 1404(a)”) for transfer of this action to the United States District Court for the Western District of Kentucky. For the reasons stated in this memorandum opinion and order, the motion is granted.

Facts

Both Harris’ place of incorporation and its principal place of business are in Illinois. As to SLT, both those relationships are with Missouri. SLT is licensed to do business in both Illinois and Kentucky and conducts field warehousing operations in both states.

This action arises out of warehousing services SLT provided to Wathen’s Elevators, Inc. (“Wathen’s”) in Henderson County, Kentucky between 1977 and 1982. To obtain credit from Harris for grain purchases, Wathen’s turned over to SLT control of the grain storage facilities and inventory on Wathen’s property. Wathen’s would purchase grain from farmers and store it with SLT. SLT would issue a non-negotiable warehouse receipt to Harris, to secure the latter’s interest in the grain. SLT could not release grain for resale without Harris’ prior approval.

SLT hired Wathen’s bookkeeper and office manager Raymond Sheets (“Sheets”) to conduct SLT’s warehousing operation on Wathen’s premises. Sheets’ duties to SLT included maintaining grain elevator and inventory records, preparing and issuing the warehouse receipts to Harris and obtaining executed withdrawal records for grain released for shipment. Harris in turn employed the First National Bank in Henderson (“Henderson Bank”) as its agent to deal with Sheets and SLT. Henderson Bank processed the paperwork, including the warehouse receipts, for Wathen’s line of credit. Upon notification by Henderson Bank that the proper paperwork had been completed, Harris would wire funds to Wathen’s.

In March 1982 Wathen’s ceased operations and filed for bankruptcy. When Harris attempted to enforce its security interest in Wathen’s remaining inventory it discovered soybeans and white corn valued at over $435,000 were missing. Harris then filed its Complaint here against SLT:

1. Counts I and II charge SLT with failure to exercise the due care required of warehousemen under Kentucky common law.
2. Count III asserts SLT (through Sheets) breached its duty to notify Harris of a change in Wathen’s financial condition that rendered Wathen’s unable to perform its agreement with Harris.
3. Count IV charges SLT violated its Kentucky statutory duty (Ky.Rev.Stat. § 359.110) to deliver grain promptly upon demand by Harris.

Wathen’s bankruptcy has also given rise to other lawsuits currently pending in the Western District of Kentucky.

Section 1404(a) Standards

Section 1404(a) provides:

For the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.

As this Court has had frequent occasion to explain, a district court’s discretion to transfer a case under Section 1404(a) is broader than its discretion to dismiss under the older doctrine of forum non conveniens. Norwood v. Kirkpatrick, 349 U.S. 29, 32, 75 S.Ct. 544, 546, 99 L.Ed. 789 (1955). Section 1404(a) does not accord plaintiff’s choice of forum the decisive weight it enjoyed under forum non conveniens. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 253, 102 S.Ct. 252, 264, 70 L.Ed.2d 419 (1981). Today the choice of forum is only one of many factors to consider. And for over 30 years it has been clear that factor merits minimal consideration where (as here) the chosen forum bears no relation to the events giving rise to the cause of action. Chicago, Rock Island & Pacific R.R. Co. v. Igoe, 220 F.2d 299, 304 (7th Cir.1955); Berks v. Rib Mountain Corp., 571 F.Supp. 500, 501 n. 2 (N.D.Ill.1983).

Nonetheless a transfer will not be ordered “if the result is merely to shift the inconvenience from one party to another.” 15 Wright & Miller, Federal Practice & Procedure: Jurisdiction § 3848, at 246. SLT has the burden of demonstrating that litigation of this action in Illinois would result in a “clear balance of inconvenience.” Hotel Constructors, Inc. v. Seagrave Corp., 543 F.Supp. 1048, 1050 (N.D.Ill.1982).

That balancing process involves the factors identified in Section 1404(a): the convenience of parties and witnesses and “the interest of justice.” As for the last catchall item, Piper Aircraft, 454 U.S. at 241 n. 6, 102 S.Ct. at 258 n. 6 (citations omitted) recapitulated from Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947) (the classic case on forum non conveniens) the various considerations generally grouped under the “interest of justice” rubric:

The factors pertaining to the private interests of the litigants included the “relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view would be appropriate to the action; and all other practical problems that make trial of a case easy, expeditious and inexpensive.” ... The public factors bearing on the question included the administrative difficulties flowing from Court congestion; the “local interest in having localized controversies decided at home”; the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action; the avoidance of unnecessary problems in conflict of laws, or in the application of foreign law; and the unfairness of burdening citizens in an unrelated forum with jury duty.

Applying the Standards

1. Convenience of Parties

Harris contends there is a major imbalance in the “convenience of parties” factor because Missouri corporation SLT would be equally inconvenienced by an Illinois or Kentucky venue, while Illinois-based Harris would find litigating here much more convenient than a Kentucky venue. However, two items on the Kentucky side of the balance tip the scales back most of the way toward equilibrium:

1. Because the actors, events and property at issue in this lawsuit are all located in Kentucky (Hinderer Aff. ÍI4), all direct discovery must be carried out there. Harris would thus have to carry on substantial litigation activities in Kentucky even if Illinois venue were preserved.
2. SLT is already involved in extensive litigation in Kentucky related to Wathen’s bankruptcy (Hinderer Aff. ¶¶ 6, 7, 8). It would therefore find a Kentucky venue significantly more convenient than an Illinois venue, where it would also have to retain additional counsel.

In sum, “convenience of parties” weighs only slightly in Illinois’ favor.

2. Convenience of Witnesses

“Convenience of witnesses” strongly favors Kentucky. Certainly the most important witnesses in this action are Sheets and the other Wathen’s and Henderson Bank employees involved in the operation of the Wathen’s grain elevator. All those people are Kentucky residents (Hinderer Aff. ¶ 9).

Harris attempts to avoid that obvious analysis by (1) identifying two Illinois employees it intends to call as witnesses and (2) urging SLT has not committed itself to calling a single specific Kentucky resident. But those arguments are only so much smoke:

1. Harris’ employee-witnesses would only authenticate documents and verify account balances (Breen Aff. ¶ 9). Even were that testimony not obviated by stipulation (as it might well be), it would not be nearly as important as that of Sheets and other Kentucky occurrence witnesses.
2. Harris is disingenuous in contending SLT fails to identify a single Kentucky witness. Harris’ own complaint singles out Kentucky resident Sheets as the most important actor in this affair. And although it is too early for SLT to commit itself to calling specific witnesses, SLT has clearly indicated—and Harris must concede—the prime prospects are all Kentuckians.

3. Interest of Justice

“Interest of justice,” as given content in Piper Aircraft, also points decidedly toward Kentucky. Of the four relevant considerations in this area, two favor Kentucky slightly and two do so strongly.

(a) Access to grain elevators. Kentucky-based litigation would allow inspection of the location where the grain was stored. That must be viewed as no more than a marginal consideration, because there is no indication at this stage of the proceedings that such access will be necessary.
(b) Judicial economy. SLT and Harris differ strenuously over the state of Wathen’s non-bankruptcy litigation in the Western District of Kentucky. There is no assurance that any aspect of this litigation could be coordinated with that pending in Kentucky. But a Kentucky venue offers at least the remote possibility of such coordination, while none exists in Illinois.
(c) Application of Kentucky law. Kentucky common and statutory law govern this action. Piper Aircraft, 455 U.S. at 285, 102 S.Ct. at 255 teaches a diversity case should, when possible, be decided by a court most at home with the applicable state law. Harris retorts the Kentucky law to be applied here is simple and should therefore not be a factor in the current motion. But at this early stage only a soothsayer could predict how sticky the legal issues might become. Moreover, no matter how simple the law may be, Piper Aircraft (drawing on Gulf Oil) also stresses the “local interest in having localized controversies decided at home.”
(d) Availability of compulsory process. There is no contest on this important factor. Key witness Sheets is a Kentucky resident and is not currently an employee of SLT (Harris Surreply Mem. 1). Thus neither the parties nor this Court could compel him to testify in Illinois. Other Wathen’s and Henderson Bank employees appear to be in the same position. Although the lack of compulsory process is normally not a strong factor unless the potential witness has demonstrated recalcitrance, it would be imprudent to proceed in a forum where none of the important witnesses is subject to process. That would unnecessarily risk a major impediment to an effective trial.

Conclusion

This is clearly a Kentucky case. Although the convenience of the parties favors Illinois slightly, the convenience of witnesses and the interest of justice far overbalance the scales toward Kentucky. SLT’s motion is granted, and this action is transferred to the Western District of Kentucky.

      . That convenient shorthand reference is a possessive noun, making it awkward to engage in proper usage where that noun is itself employed in the possessive form (as in "Wathen’s's employees”). With apologies to grammatical purists, for ease of expression this opinion will cheat a bit by simply referring, for example, to "Wathen’s employees.”

      . See, e.g., Associated Mills, Inc. v. Rush-Hampton Industries, 588 F.Supp. 1164, 1165-66 (N.D.Ill.1984).

      . Both parties agree this action could have been brought originally in either Kentucky (where the action arose) or Illinois (Harris' residence). This opinion will therefore discuss only the "balance of convenience” in litigating in one or the other of those forums.

      . Contrary to Harris’ assertions, SLT does not simply assume potential witnesses are Kentucky residents. SLT has tendered the affidavit of Amy Rehm Hinderer, its counsel in the Kentucky litigation, stating all Wathen’s and Henderson Bank employees are Kentucky residents.

      . Although SLT argues the location of Wathen’s and Henderson Bank’s records point in Kentucky’s favor, it has offered no facts indicating those records are so voluminous that photocopying and transport would be a problem. Consequently that factor does not have any real force on the present showing. Met-L-Wood Corp. v. SWS Industries, Inc., 594 F.Supp. 706, 710 (N.D.Ill.1984).

      . Harris and SLT dispute which state has a greater interest in the litigation. Harris invokes Illinois’ interest in protecting its citizens from economic injury. But that concern is more germane to a choice-of-law dispute. In that respect the applicable law is not affected by a Section 1404(a) transfer. Van Dusen v. Barrack, 376 U.S. 612, 639, 84 S.Ct. 805, 820, 11 L.Ed.2d 945 (1964).


author: PATRICK F. KELLY, District Judge.

text:
    Lorena G. ROUSE, Plaintiff, v. PEOPLES NATURAL GAS COMPANY, Defendant.
    No. 83-1873-K.
    United States District Court, D. Kansas.
    March 29, 1985.
    David L. Patton, Patton & Kerbs, Dodge City, Kan., for plaintiff.
    Don W. Bostwick, Adams, Jones, Robinson & Malone, Wichita, Kan., for defendant.
   MEMORANDUM AND ORDER

PATRICK F. KELLY, District Judge.

Plaintiff Lorena G. Rouse brings this suit against Peoples Natural Gas Company for breach of implied employment contract. Peoples moved for summary judgment on the ground that there was no contract implied in fact. For the reasons stated below, the Court grants the defendant’s motion for summary judgment.

There was no written contract of employment between Ms. Rouse and Peoples. Rouse contends that a contract implied in fact arises from certain terms of the employment manual which set forth discipline and termination procedures, and from the prior conduct of Peoples, including a promotion, positive performance evaluations, and salary increases. Peoples contends that Ms. Rouse was terminated because of discourteous treatment toward a customer. She had received on one prior occasion a verbal warning that such conduct would not be tolerated. On the second occasion, she was discharged during a conversation with her supervisor. This discharge was not in accordance with procedures set forth in the employment manual which included an initial verbal discussion with the supervisor, a written summary outlining the misconduct, and written notice to the employee when the company was considering discharge of the employee.

Ms. Rouse contends that the employment manual constitutes an employment agreement implied in fact. Ms. Rouse contends the company’s manner of discharging her was not in accordance with the policies and procedures set forth in the employment manual, and the company thereby breached its employment contract with Ms. Rouse. Ms. Rouse further contends that the company’s favorable conduct toward her prior to her discharge and her reliance on that conduct created an implied contract. Ms. Rouse points to a favorable written performance evaluation, her promotion from temporary to full status, a salary increase, and two letters of commendation from company executives, as company conduct substantiating her claim of implied contract.

The defendant, Peoples Natural Gas Company, on the other hand, argues that the employment manual cannot be the basis of an implied contract because it was not mutually agreed upon, does not reflect mutual assent or a meeting of the minds, and is only a unilateral expression of the company’s policies. Peoples argues that because there was no express or implied contract, Ms. Rouse’s employment was terminable at the will of either party.

The general rule in Kansas is stated in Johnson v. National Beef Packing Co., 220 Kan. 52, 551 P.2d 779 (1976), wherein the Court stated as follows:

[I]n the absence of a contract, express or implied, between an employee and his employer covering the duration of employment, the employment is terminable at the will of either party, and the employee states no cause of action for breach of contract by alleging that he has been discharged.

Id. at 54, 551 P.2d 779. The plaintiff in Johnson argued that the employment manual constituted an express or implied contract. The Court found that the manual contained no express provisions for a fixed term of employment, nor was there any language from which a contract could be inferred. The Court found that the manual was a general statement of company policies regarding employees’ benefits. The Court stated the manual was only a unilateral expression of company policy and procedures; its terms were not bargained for by the parties and any benefits conferred by it were mere gratuities; and that no meeting of the minds was evidenced by the company’s unilateral act of publishing company policies. The Court held that the employment manual did not constitute an enforceable contract.

This Court, in Fletcher v. Wesley Medical Center, 585 F.Supp. 1260 (D.Kan.1984), recognized Johnson to mean that an employment handbook could be one of the relevant circumstances from which the parties’ intent to contract could be inferred. Id. at 1264. The Court, however, went on to narrowly view the Johnson holding and stated that Johnson was consistent with the case of Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 292 N.W.2d 880 (1980). Toussaint held that employer statements of policy, such as an employment manual, could give rise to contractual rights in employees without evidence that the parties mutually agreed that the policy statements would create contractual rights and although the manual is a unilateral statement of company policy. This Court, in Fletcher, and in its Order of May 8, 1984, overruling defendant’s motion to dismiss in the instant case, believed that the Kansas Supreme Court would accept the reasoning of Toussaint. Nevertheless, this Court is now convinced that Toussaint is not the law of Kansas. This Court understands the rule of Kansas, as set forth in Johnson v. National Beef Packing Co., to mean that express statements in an employment manual cannot alone create contractual rights in the employee; an employment manual alone, if it is merely a unilateral expression of company policy, if it is not bargained for between the employer and the employee, and if it is not a reflection of mutual assent between the parties, cannot alone be the basis of an implied contract. Nonetheless, an employment manual may be one of the relevant circumstances from which an implied contract can be inferred.

The recent decision of the Kansas Court of Appeals in Allegri v. Providence-St. Margaret Health Center, 9 Kan.App.2d 659, 684 P.2d 1031 (1984), follows the rule of Johnson v. National Beef Packing Co. In Allegri, the Court of Appeals considered additional circumstances surrounding the case, notably prior conduct of the hospital persuading the employee to remain working for the hospital and to forbear private practice. In face of these facts, the Court of Appeals held that a question of fact remained as to whether there was a contract implied in fact on the basis of the total circumstances of that case. Allegri, however, does not modify the rule of Johnson. The Kansas rule remains that an employment manual, that is only a unilateral expression of company policy and is not bargained for, cannot alone be the basis of an employment contract. Accord, Bahr v. Blue Cross of Kansas, Inc., 672 P.2d 1107 (Kan.Ct.App.1983); Brown v. Wyandot Mental Health Center, 688 P.2d 745 (Kan.Ct.App.1984).

Courts in this district have consistently followed the rule of Johnson v. National Beef Packing Co. See, e.g., Owens v. City of Derby, Kan., 586 F.Supp. 37 (D.Kan.1984) (the employment manual was a unilateral statement of company policy and did not give rise to an express or implied contract); Laughlin v. Bd. of Co. Comm’rs of Johnson Co., Kan., No. 83-2315 (D.Kan. Aug. 27, 1984) (employment manual was a unilateral expression of county policy and did not constitute an express or implied contract); Kasselman v. Hydrocarbon Transportation, Inc., No. 77-1353 (D.Kan., Apr. 7, 1980) (employment manual was not bargained for, was unilateral, was merely gratuitous, and did not constitute a contract).

It is uncontroverted that the employment manual of Peoples was a unilateral expression of company policy; plaintiff in no way bargained for her position on the basis of the policies defined in the manual; there was no mutual assent or meeting of the minds with respect to the employment policies; and thus, under the law of Kansas, Peoples’ employment manual cannot be the basis of an implied contract. Ms. Rouse further argues that additional conduct by Peoples created an implied contract, that conduct being positive performance evaluations, letters of commendation, salary raises, and a promotion.

As the Court stated in Allegri, supra, whether the facts create an implied contract is generally a question of fact for the jury. In order for a court to grant summary judgment, the moving party must establish its entitlement to summary judgment beyond a reasonable doubt. Madison v. Deseret Livestock Co., 574 F.2d 1027, 1037 (10th Cir.1978).

This Court is convinced beyond a reasonable doubt that the uncontroverted facts surrounding this case, including express statements in the Peoples’ employment manual and prior conduct by Peoples, does not create an implied contract.


author: PATEL, District Judge.

text:
    James K. TOBIAS, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    No. C-83-4424-MHP.
    United States District Court, N.D. California.
    March 29, 1985.

      Mary M. Burke, Burke & Daniels, Point Richmond, Cal., for plaintiff.
    Joann Swanson, Asst. U.S. Atty., San Francisco, Cal., for defendant.
   AMENDED MEMORANDUM DECISION AND ORDER

PATEL, District Judge.

This is an action pursuant to § 205(g) of the Social Security Act, as amended, 42 U.S.C. § 405(g), for judicial review of a final decision of the Secretary of Health and Human Services (“HHS”) denying plaintiffs claim for disability benefits. Plaintiff filed an application for disability insurance benefits on March 15, 1982, based on disabling symptoms stemming from an industrial back injury. Upon denial of benefits plaintiff filed for a hearing before an Administrative Law Judge (“AU”). After consideration of the evidence at the hearing, the AU determined that plaintiff was severely impaired, unable to perform his usual work but able to perform light work. Based on these findings and considering his age, education and work experience, plaintiff was found not disabled. The Appeals Council denied plaintiff’s petition to have this decision reviewed.

The case is before this court on cross-motions for summary judgment and alternatively plaintiff moves for a remand. Having considered all the papers submitted by the parties and reviewed the record below, the court concludes that the decision of the AU is not supported by substantial evidence, and the motion of the plaintiff for remand must be granted.

Background

Plaintiff is a 52-year-old heavy truck driver and part-time custodian who suffered an industrial back injury on June 4, 1981. The record is undisputed that this injury resulted in a herniated disc at the L4-5 level. Despite recommendations for surgery, plaintiff refused. He did not return to any employment.

The record discloses that on August 8, 1981, Dr. Reiss examined plaintiff and found persistent low back pain with radiation into the buttocks and lower extremities which caused plaintiff to drag his left foot. Degenerative changes were noted but otherwise the findings were negative. On August 11, 1981, Dr. Powlan examined plaintiff and found an acute lumbar sprain and pain with mild radicular symptoms superimposed on degenerative changes. There was no sensory or motor deficit in the lower extremities but a one-inch discrepancy in calf circumference was noted. Tenderness and reduced flexion were noted but no spasms were mentioned.

On October 2, 1981, Dr. Reiss reexamined plaintiff and found inconsistent neurological signs with no atrophy. At Dr. Reiss’ request, Dr. Chow performed a neurological examination on October 12, 1981. No muscle weakness or atrophy was found and conservative care was recommended. The prognosis was optimistic for a return to work in a few weeks.

On November 24, 1981, Dr. Harter found the reflexes normal, no atrophy, weakness or fasciculation. A sensory loss in the right foot was found but there was no mention of muscle spasms. Dr. Harter found plaintiff elaborated his symptoms but recommended a myelogram and CT scan. Both tests indicated a herniated disc. Plaintiff refused surgery, which resulted in Dr. Harter’s final report on February 12, 1982. He restricted plaintiff from heavy lifting and prolonged standing and walking and stated the major ongoing treatment would be analgesics and muscle relaxants. The pain level was characterized as mild subjective pain with minimal objective findings.

Plaintiff began treatment with Dr. Hood in March 5, 1982. On physical examination, Dr. Hood found lumbar tenderness, limited motion and flexion, but essentially negative neurological findings. On July 29, 1982, Dr. Hood reported there was a spasm of the paralumbar muscles but the neurological exam remained essentially normal (Plaintiffs Exhibit “I” at 2). Additionally, there was no sensory loss in the right foot and no atrophy. He found plaintiff restricted to semisedentary work which permitted him to sit, stand or move at his will with no lifting or constant bending. On August 2, 1982, Dr. Hood felt plaintiff would never be employed again based on his severe back pain and lack of improvement.

On August 26, 1982, Dr. Malstrom examined plaintiff and found no spasm, tenderness or atrophy. While there was some sensory reduction in the right foot, the objective signs did not correlate well with the symptoms. He ordered plaintiff not to lift over 25 pounds, stoop, bend, pull, or push.

On August 30, 1982, Dr. Dorinson examined plaintiff and found a one-inch atrophy on the left calf with uncorrelated pain complaints on the right (Plaintiffs Exhibit “K” at 7). Plaintiff was precluded from heavy work and found to have slight pain in his lumbar area becoming slight to moderate on prolonged walking.

On January 30, 1984, Dr. Burke, a chiropractor, found pain, muscle weakness, atrophy, reflexes and positive neurological signs (Plaintiffs Exhibit “L” at 2). A thermogram was performed, confirming these findings.

Discussion

This court’s review is limited to whether the decision of the Secretary is supported by “substantial evidence,” or “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Johnson v. Harris, 625 F.2d 311, 312 (9th Cir.1980). The court must consider the evidence that both supports and detracts from the Secretary’s conclusion, and cannot affirm that conclusion “simply by isolating a specific quantum of supporting evidence.” Day v. Weinberger, 522 F.2d 1154, 1156 (9th Cir.1975).

“The Social Security Act defines ‘disability’ in terms of the effect a physical or mental impairment has on a person’s ability to function in the work place.” Heckler v. Campbell, 461 U.S. 458, 459-60, 103 S.Ct. 1952, 1953-54, 76 L.Ed.2d 66 (1983). The Act provides disability benefits only to those persons who are unable “to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.” 42 U.S.C. § 423(d)(1)(A).

The ultimate burden is on the plaintiff to prove that he or she is “disabled” within the statutory definition. Harmon v. Finch, 460 F.2d 1229, 1231 (9th Cir.), cert. denied, 409 U.S. 1063, 93 S.Ct. 571, 34 L.Ed.2d 516 (1972). The burden rests on a claimant to show that a physical or mental impairment exists which prevents the claimant from engaging in his or her previous occupation. Hall v. Secretary of HEW, 602 F.2d 1372, 1375 (9th Cir.1979). Once this threshold burden is satisfied, the burden then shifts to the Secretary to produce evidence which shows that, given the claimant’s age, education, work experience and physical capacity, he or she can perform specified jobs in the national economy. Id. See also Cox v. Califano, 587 F.2d 988, 990 (9th Cir.1978); Davis v. Schweiker, 536 F.Supp. 90, 93 (N.D.Cal.1982); see generally 20 C.F.R. § 404.1520 et seq. (1983). The ALJ is permitted to draw inferences, logically flowing from the evidence in reaching his findings, Beane v. Richardson, 457 F.2d 758, 759 (9th Cir.), cert. denied, 409 U.S. 859, 93 S.Ct. 144, 34 L.Ed.2d 105 (1972), and where the evidence is susceptible of more than one interpretation or is conflicting, the AU’s decision must be upheld. Rhinehart v. Finch, 438 F.2d 920, 921 (9th Cir.1971).

Plaintiff first alleges that the AU’s failure to award disability was not based on substantial evidence and that the AU’s decision failed to consider whether plaintiff is disabled as defined by 20 C.F.R. Subpart P, Appendix 1, § 1.05 C; § 404.1562; or Appendix 2, rule 201.09.

Section 1.05 C recognizes that certain disorders of the spine are so severe that they establish a per se disability. The provision refers to:

Other vertebrogenic disorders (e.g., herniated nucleus pulposus ...) with the following persisting for at least 3 months despite prescribed therapy and expected to last 12 months. With both 1 and 2:
1. Pain, muscle spasm, and significant limitation of motion in the spine; and
2. Appropriate radicular distribution of significant motor loss with muscle weakness and sensory and reflex loss, (emphasis added)

20 C.F.R., Subpart P, Appendix 1, § 1.05 C. Plaintiff maintains he has met this requirement; alternatively, he contends the requirements of § 1.05 C can be satisfied in the disjunctive.

The ALJ’s finding that plaintiff did not meet the requirements of § 1.05 C are well supported by the medical findings indicating a lack of atrophy or muscle weakness required by subsection (2). The reports of Doctors Reiss, Chow, Harter, Hood and Malstrom supported such a finding. Only Doctors Powlan, Dorinson and Burke found atrophy. Plaintiff has alleged that the failure of the doctors relied upon by the AU to state actual measurements is fatal to their opinions and indicates their cursory examination or lack of equipment. The record reveals Dr. Powlan was the first to comment upon an atrophy in August 1981. However, Dr. Reiss found both before and after the single examination of Dr. Powlan, that there was no evidence of atrophy or muscle weakness. Subsequently, in October 1981, Dr. Chow also found no muscle atrophy or uncoordination.

In November 1981, Dr. Harter’s examination revealed that “the reflexes are normal and there is no atrophy, weakness, or fasciculation.” In July 1982, Dr. Hood found no atrophy or weakness (Plaintiff’s Exhibit “I” at 2). Finally, in August 1982, Dr. Malstrom found the calf and thigh circumferences equal. Since these facts show that conflicting evidence existed, the AU’s finding will not be disturbed. Rhinehart v. Finch, 438 F.2d at 921.

Plaintiff cites no authority to support a disjunctive reading of the regulation. The language of the provision itself clearly does not support such an interpretation. Section 1.05 C unambiguously requires the combination of the symptoms it describes in parts 1 and 2 and does not provide for alternatives.

Similarly, this court rejects plaintiff’s attempt to have § 1.05 C construed by the other sections in Subpart P resulting in a wholesale exchange of terms. Plaintiff argues the equivalence of “significant motor loss” which is required by § 1.05 C(2), and “significant nerve root involvement” based on his interpretation of § 11.00 C. This argument ignores the fact that § 11.00 C pertains to disability from “persistent disorganization of motor function.” Plaintiff has not shown such a condition nor do the facts warrant it. Because the sections are dissimilar, provisions of § 11.00 C cannot be imported into § 1.05 C so as to reduce the requirements of significant motor loss to merely showing a neurological component to the injury. The regulations clearly require appropriate motor, sensory and reflex losses in association with muscle weakness in order to establish per se disability. 20 C.F.R., Subpart P, Appendix 1, § 1.05 C(2).

The AU’s denial of disability under Sub-part P, Appendix 1 was supported by substantial evidence and must be upheld.

Plaintiff next contends that the AU failed to properly consider his claim as one satisfying 20 C.F.R. § 404.1562. That section requires a finding of disability where the individual has marginal education, has been engaged only in arduous unskilled work for 35 years or more, and there is no evidence of subsequent work and no transferable skills for either full or part-time work. Plaintiff completed the 7th grade in Mississippi and a high school program at Berkeley High School. These facts warrant the ALJ’s finding of a full high school education. The testing results submitted by plaintiff (Plaintiff’s Exhibit “A”) after the hearing showing a third grade vocabulary and reading comprehension at the first grade-sixth month level are insufficient to show he lacked the reasoning, arithmetic, and language skills indicative of marginal education.

Moreover, this court does not find that plaintiff engaged in arduous work for 35 years or more, a requirement for a finding of per se disability pursuant to 20 C.F.R. § 404.1562. Plaintiff was 52 years old at the time of the hearing. He apparently entered the work force in some unknown capacity cutting lumber after the seventh grade. This could establish a work history of the required length. However, his work with Alameda County was as a heavy truck driver, and he also worked part-time as a custodial assistant supervisor. Plaintiff’s duties were therefore not exclusively arduous. Section 404.1562 permits a finding of no disability where the work experience shows transferable skills even if they only permit part-time work. Both job descriptions completed by plaintiff show supervisory duties and completion of reports or orders. Even assuming plaintiff had marginal education and the required work history, his work experience demonstrated his skills to do paperwork and supervise other workers and could have been held to be transferable.

The court finds that substantial evidence was prepared to obviate the need for the AU to expressly consider § 404.1562.

Of greater concern to the court is plaintiff’s contention that the record does not provide substantial evidence to support the AU’s finding that plaintiff retained the residual functional capacity to do all the activities required in light work. Defendant had the burden of proof to show that other substantial work, for which plaintiff was qualified, existed in the national economy. Thompson v. Schweiker, 665 F.2d 936, 939 (9th Cir.1982).

The definition of light work in the regulations is:

(b) Light Work. Light work involves lifting no more than 20 pounds at a time with frequent lifting or carrying of objects weighing up to 10 pounds ... [A] job is in this category when it requires a good deal of walking or standing, or when it involves sitting most of the time with some pushing and pulling of arm or leg controls. To be considered capable of performing a full or wide range of light work, you must have the ability to do substantially all of these activities.

20 C.F.R. § 404.1567(b).

The ALJ concluded that “the preponderance of the medical evidence fails to disclose neurological deficits or other abnormalities indicative of a condition of such severity as to prevent the performance of a wide range of entry level, unskilled light work.” While the AU made a specific finding that plaintiff’s lifting ability of 25 pounds was greater than the light work requirement of 20 pounds, he did not apply the other definitional requirements nor indicate which portions of the record would support the conclusion that plaintiff had the ability to substantially perform walking, standing, sitting, pushing or pulling activities. See 20 C.F.R. § 404.1567(b). Moreover, none of the medical evidence squarely addresses what residual capacity plaintiff had with respect to these requirements. A survey of the record shows: Dr. Harter restricted plaintiff from prolonged standing and walking; Dr. Hood’s restriction was to semisedentary work which permits movement at will for sitting or standing and no lifting or constant bending (Plaintiff’s Exhibit “I” at 3); Dr. Malstrom’s restriction was against lifting over twenty-five pounds, with no stooping, bending, pulling or pushing; Dr. Dorinson precluded plaintiff from heavy work and found slight to moderate pain on prolonged walking (Plaintiffs Exhibit “K” at 7). These reports do not provide the necessary basis for the conclusion that plaintiff could walk, stand, sit, push or pull consistent with a light work definition. This action is therefore remanded to the Secretary for a determination of plaintiffs residual functional capacity to perform all the requirements of light work in accordance with § 404.-1567(b).

Additional reports (referred to herein as Plaintiffs Exhibits) have been submitted by plaintiff which may prove helpful in this determination. None of the additional medical reports alter this court’s conclusion concerning the AU’s decision on per se disability nor do they in and of themselves form sufficient cause for remand. See Chaney v. Schweiker, 659 F.2d 676 (5th Cir.1981). However, they may have a bearing on plaintiff’s ability to perform a full range of light work, and should be considered by the Secretary in further administrative proceedings.

In light of this description, there is no need to reach plaintiff’s further contention that he comes within 20 C.F.R., Subpart P, Appendix 2, rule 201.09. The AU’s findings on remand will determine the appropriate grid regulation.

Accordingly, for the reasons stated above, the cross-motions for summary judgment are DENIED. This case is REMANDED to the Secretary to apply the definitional requirements of § 404.1567(b) to determine plaintiff’s residual functional capacity in a manner not inconsistent with this order.

IT IS SO ORDERED.

      . Those medical reports designated as “Plaintiffs Exhibits” were not presented to the ALJ. Some of them appear to have been before the Appeals Council; others are submitted for the first time on review to this court. They may be considered by this court solely for the purpose of considering remand and then only if the new evidence is relevant and probative and there is good cause for failure to present it at the hearing. See Chaney v. Schweiker, 659 F.2d 676 (5th Cir.1981).