author: BARBOUR, District Judge.

text:
    EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Plaintiff, v. Granville S. DUNAWAY, Defendant.
    Civ. A. No. J85-0424(B).
    United States District Court, S.D. Mississippi, Jackson Division.
    Jan. 23, 1986.

      Clinton M. Guenther, Jackson, Miss., for plaintiff.
    Granville S. Dunaway, pro se.
   MEMORANDUM OPINION AND ORDER

BARBOUR, District Judge.

Plaintiff, Employers Insurance of Wausau, a Mutual Company, (“Employers’ ”), brought this action to recover against Defendant damages caused by the intentional burning and destruction of the Coachlight Restaurant and Lounge in Jackson, Mississippi, on November 26, 1983. At the time, Defendant leased the premises and operated a restaurant therein. He received no portion of the insurance payments. As the insurance carrier for the owners of the property, Employers’ has had to pay the sum of $189,013.41 for damages and losses incurred as a result of the fire. Employers’ is now seeking to recover that sum and additional damages from Defendant in this subrogation action and has moved for summary judgment with respect to the claims for actual, compensatory and punitive damages.

PARTIES

Plaintiff is a Wisconsin corporation doing business in Mississippi with its principal place of business in Wisconsin. Defendant was a resident of Hinds County, Mississippi, when the action complained of herein occurred, but is now incarcerated at the Federal Correctional Institution at Fort Worth, Texas, pursuant to the sentence imposed by this Court in May, 1984, after Defendant pled guilty to maliciously damaging or destroying or attempting to damage or destroy by means of fire or explosives, the property insured by Plaintiff. Federal jurisdiction over this action is based upon complete diversity of citizenship.

FACTS

The Clerk entered default herein on June 28, 1985, but Defendant thereafter filed his answer on July 2, 1985. Since Plaintiff has now elected to proceed on the merits through filing a Motion for Summary Judgment, this Court finds that the entry of default should be set aside for good cause in order that this action can proceed on the merits.

While the pro se Defendant has not responded to Plaintiff's Motion for Summary Judgment, the pleadings, affidavits and exhibits upon which this Motion is based show that there is no genuine issue as to any material fact and that Plaintiff is entitled, as a matter of law, to part of the relief requested in its Complaint.

•. In support of the Motion for Summary Judgment, Plaintiff has attached an affidavit establishing that it paid the amount of $189,013.41 to its insured pursuant to a special multi-peril insurance policy on the property known as the Coachlight Inn. Both the testimony given by the Defendant in criminal proceedings against him before this Court, U.S. v. Dunaway, Criminal Action No. J84-00008(B), and the answer filed by the Defendant herein clearly establish that Defendant intentionally participated in the destruction of that property. Plaintiff has also attached to its motion a copy of a release and subrogation receipt whereby its insured attested to the receipt of $189,-013.41 in full payment of losses as a result of the fire and agreed to subrogate Employers’ to all of the rights and claims which he might have against any person liable for the losses. Subrogation is also provided for in the insurance policy pursuant to which the claim was paid.

LAW

This right of subrogation entitled Employers’ under Mississippi law, after payment with respect to the loss, to recover against a third person whose wrongful act caused that loss. See Oxford Production Credit Association v. Bank of Oxford, 16 So.2d 384, 388,196 Miss. 50 (1944). Since it is undisputed that Defendant’s wrongful act caused the loss, Employers’ is entitled to judgment against Defendant to the extent of its payment.

In addition to the amount of its payment, Employers’ also seeks to recover punitive damages and prejudgment interest from Defendant. Employers’ has not cited, and this Court cannot find, any authority supporting the right of a subrogee to recover damages over and above the amount of its payment which gives rise to the right of subrogation. To the contrary, this Court reads Mississippi law as limiting the recovery of the subrogee to the amount of its payment. Thus, in Oxford Production Credit Association, supra, the court stated as follows:

It is generally conceded that, subject to statute, an insurer, on payment of a loss, acquires the right to be subrogated pro tanto to any and all rights which the insured may have against, not only the principal, but also third persons whose wrongful act or neglect caused the loss, (emphasis added).

16 So.2d at 388. This statement can only be interpreted as limiting the insurer’s right to subrogation to the amount of its payment with respect to the loss.

In the instant case, Employers’ also expressly provided for the right of subrogation in its policy with the subrogors. The policy in question states as follows:

Subrogation. This company may require from the insured an assignment of all right of recovery against any party for loss to the extent that payment thereof is made by this Company, (emphasis added).

The Mississippi Supreme Court has held that where subrogation is expressly provided for in an insurance policy, the insurer’s right to subrogation must be measured by and depends solely on the terms of the clause of the policy dealing with subrogation. See Home Insurance Company v. Hartshorn, 91 So. 1, 2, 128 Miss. 282 (1922). This Court therefore holds that Employers’ rights of recovery against the Defendant are limited by the extent of its payment to its insured and that it cannot, as subrogee, recover punitive damages or prejudgment interest.

Although the pro se Defendant has not filed a cross-motion for summary judgment, Plaintiff has admitted that there are no material issues of fact and that the entire case is thus ripe for decision. The Court therefore holds that, as a matter of law, Plaintiff cannot prevail on the claims for punitive damages and prejudgment interest. These claims will, therefore, be dismissed sua sponte with prejudice.

In accordance with the above, Plaintiff’s Motion for Summary Judgment is granted as to its claim for actual damages in the amount of $189,013.41, and is denied as to the claims for punitive damages and prejudgment interest.

A separate judgment will be entered in accordance with the holdings herein as required by the provisions of Rule 58 of the Federal Rules of Civil Procedure.


source: Caselaw Access Project

author: TOM S. LEE, District Judge.

license: Public Domain

text:
    Christopher COLUMBUS, Plaintiff, v. RELIANCE INSURANCE COMPANY, et al., Defendants.
    Civ. A. No. J85-0405(L).
    United States District Court, S.D. Mississippi, Jackson Division.
    Jan. 23, 1986.
    Cotton Ruthven, Waller & Waller Attys., Jackson, Miss., for plaintiff.
    W. Scott Welch, III, Butler, Snow, O’Mara, Stevens & Cannada, Jackson, Miss., for Reliance.
    James L. Carroll, Jackson, Miss., for GAB & Summerlin.
   MEMORANDUM OPINION

TOM S. LEE, District Judge.

Plaintiff, Christopher Columbus, initiated this action in the Circuit Court of the First Judicial District of Hinds County, Mississippi against Reliance Insurance Co. (Reliance), GAB Business Services, Inc. (GAB) and R.D. Summerlin. The case was removed to this court by the defendants pursuant to 28 U.S.C. § 1441, alleging fraudulent joinder of GAB and Summerlin and diversity of citizenship under 28 U.S.C. § 1332. The plaintiff and Summerlin are residents of Mississippi and GAB and Reliance are corporations organized and existing under the laws of Delaware and Pennsylvania, respectively. Plaintiff has filed a motion to remand and defendants GAB and Summerlin have filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).

The action herein is a suit for actual damages under a fire insurance policy providing coverage for the plaintiff and for punitive damages for the alleged bad faith of the defendants in handling his claim. The complaint states: “Defendant [Reliance] hired defendant GAB and its agent, defendant Summerlin and used its superior financial position to abuse and mistreat the plaintiff ...” and “[Defendant Summerlin] individually, while acting as agent for the other defendants, sought to insult the plaintiff ...” The amended complaint alleges that “GAB ... was employed as the adjustor ...” and that “R.D. Summerlin through his acts set out to and did intentionally induce Defendant United Pacific Insurance Company to breach its insurance contract with Plaintiff.” According to the complaint and amended complaint, Summerlin’s acts all involved his alleged failure to disclose certain knowledge to the defendant insurance company and his alleged delay in carrying out his adjusting duties. Neither Summerlin nor GAB were actual parties to the insurance contract and the law is well-settled in Mississippi that an agent who is acting within his authority for a disclosed principal and who is not himself a party to the contract is not liable on any contract of the principal. See Shemper v. Hancock Bank, 206 Miss. 775, 40 So.2d 742 (1949); Ketcham v. Mississippi Outdoor Displays, Inc., 203 Miss. 52, 33 So.2d 300 (1948); Cone Mills Corp. v. Hurdle, 369 F.Supp. 426 (N.D.Miss.1974); Chipman v. Lollar, 304 F.Supp. 440 (N.D.Miss.1969).

In B. Inc. v. Miller Brewing Company, 663 F.2d 545 (5th Cir.1981), the Fifth Circuit held that, in order to establish fraudulent joinder, the removing party must show there is “no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in State court.” Id. at 549. In the case sub judice, the basis of the plaintiff’s claim against the defendants GAB and Summerlin is their handling of the adjustment of a claim under an insurance contract. The Mississippi Supreme Court recently held in Griffin v. Ware, 457 So.2d 936 (Miss.1984), that “adjusters employed by an insurer, who were not parties to the agreement for insurance, are not subject to an implied duty of good faith and fair dealing to the insured,” and that they were consequently not liable under the insurance contract in question. The court relied upon Gruenberg v. Aetna Insurance Company, 9 Cal.3d 566, 108 Cal.Rptr. 488, 510 P.2d 1032 (1973), wherein the California Supreme Court dismissed claims against several non-insurer defendants who were not parties to the insurance agreement and therefore not subject to any implied duty arising out of the contractual relationship. The court in Gruenberg also held that, where the agents of the insurer were acting within that relationship with their principal, they were not personally liable for the acts committed in conformity with that relationship.

The plaintiff contends that Griffin and Gruenberg dealt only with contractual claims and not with the torts of intentional infliction of mental distress and intentional interference with a business relationship allegedly set out in the complaint. In Griffin, the precise issue before the court was “whether adjusters employed by an insurer, who were not parties to the agreement for insurance, are subject to an implied duty of good faith and fair dealing to the insured.” Id. at 936. The court answered the question in the negative, relying in part on Progressive Casualty Insurance Company v. Keys, 317 So.2d 396 (Miss.1975). According to the Griffin court, Keys held “that an adjuster is not liable to an insured for his actions in adjusting the claim for an insurer,” Griffin, 457 So.2d 936, a much broader holding than that of Griffin. Griffin also relied on Gruenberg, which is limited to the plaintiff’s claim of the breach of a duty of good faith and fair dealing and did not “consider the possibility that they may have committed another tort in their respective capacities as total strangers to the contract of insurance.” Griffin, 457 So.2d at 940 (quoting, Gruenberg, 510 P.2d at 1034). It cannot be said that GAB and Summerlin were acting as “total strangers to the contract” when, according to the complaint and amended complaint, their relationship with the plaintiff arose only because of the existence of the contract and all of their actions were undertaken in the context of adjusting plaintiffs claims.

This court is, therefore, of the opinion that, based on the claims in the original complaint, plaintiff would not be able to establish a cause of action against GAB and Summerlin in state court. Accordingly, the motion to remand should be denied. The court is also of the opinion that neither the original complaint nor the amended complaint state a cause of action against GAB and Summerlin and that their motion to dismiss should be granted.

It is, therefore, ordered that the motion of defendants GAB and Summerlin to dismiss is granted and the motion of the plaintiff to remand is hereby denied.


author: ENSLEN, District Judge.

text:
    Leon WASHINGTON, suing on his behalf and as Personal Representative of the Estate of Hardy James, Jr., Plaintiff, v. Dean STARKE; Ronald Kienzle; Michael Krugh; Keith Diamond; Thomas Yops; Maurice Crandell; Dale Easton; Benton Township; the City of Benton Harbor; Berrien County; Jack Drach; Forrest (Nick) Jewell; and Sam Watson, Defendants.
    No. K 85-252.
    United States District Court, W.D. Michigan, S.D.
    Jan. 24, 1986.

      James Gould, Grand Rapids, Mich., for plaintiff.
    Stephen Small, Benton Harbor, Mich., for Benton Tp., Drach, Kienzle, Diamond & Krugh.
    Timothy Downs, Detroit, Mich., for Benton Harbor Police Dept., Starke, Easton, Watson and City of Benton Harbor.
    Stanley Stek, Grand Rapids, Mich., for Yops, Crandell, Berrien County & Jewell.
   OPINION

ENSLEN, District Judge.

This opinion is intended to supplant the Court’s oral opinion delivered at the hearing held on November 27, 1985. The instant case was brought by plaintiff, Leon Washington, suing on his own behalf and as the personal representative of the estate of his late brother, Hardy James, Jr. There are three separate groups of defendants in this action: (1) the City of Benton Harbor, the city’s Public Safety Director, Sam Watson, and two police officers, Dean Starke and Dale Easton; (2) Benton Township, its Chief of Police, Jack Drach, and three police officers, Ronald Kienzle, Keith Diamond and Michael Krugh; and (3) Berrien County, its Sheriff, Forrest Jewell, and two deputies, Thomas Yops and Maurice Crandell. The case arises out of the June 20, 1982 shooting death of Mr. James, plaintiffs decedent, and alleges violations of 42 U.S.C. §§ 1981, 1983, 1985(3) & 1986 and the fourth, fifth, sixth, eighth and fourteenth amendments to the United States Constitution, in addition to the pendent state claims of negligence, gross negligence and wrongful death.

The Court is currently considering three dispositive motions brought by various defendants. Defendants Starke, Easton and Watson have moved for summary judgment on plaintiff’s claims against them in their individual capacities under § 1983 on the basis of qualified immunity. Defendants Yops, Crandell, Jewell and Berrien County have also moved to dismiss and/or for summary judgment on the following grounds: (1) that Yops, Crandell and Jewell, in their individual capacities, are qualifiedly immune from plaintiff’s § 1983 claims; (2) that plaintiff has failed to state a claim under §§ 1981 and 1985 upon which relief can be granted; (3) that plaintiff’s claim under § 1986 is barred by that section’s one year statute of limitations; and (4) that Yops, Crandell, Jewell and Berrien County are all either immune or qualifiedly immune from plaintiff’s pendent state claims. Defendant City of Benton Harbor has filed a motion to dismiss and/or for summary judgment claiming that the federal allegations against it fail to state a claim upon which relief can be granted and pleading governmental immunity from the pendent state claims. I note that defendants Benton Township, Drach, Kienzle, Diamond and Krugh have not filed any motions to dismiss or for summary judgment on their own behalf in this case, but they have joined the motions filed by the other defendants.

The facts giving rise to this action are, briefly, as follows. In the early morning hours of June 20, 1982, Mr. James and two accomplices broke and entered the Comet True Value Hardware Store in Benton Township. Officers Diamond and Kienzle responded to a B&E call and arrived at the scene shortly after 3:00 a.m., reporting a broken window. Soon thereafter, the other five officers arrived to provide backup assistance. Kienzle, Diamond and Yops entered the building while the other officers remained outside. Officer Kienzle alerted the others that he had discovered a large pile of guns near the broken window. Upon further investigation, Kienzle encountered Mr. James lying in the aisle but before an arrest could be made James fled toward the window entrance and the guns. Kienzle identified himself and ordered the suspect to halt but James continued to run toward the window and the weapons. Officer Kienzle then fired three shots from his .357, all missing the suspect. After James exited through the window, he struggled briefly with Deputy Crandell but eventually broke loose and continued to flee on foot in a westerly direction. While Krugh, Crandell and Starke pursued James, officers Kienzle, Diamond and Easton arrested his accomplices inside the store. Krugh, Crandell and Starke all shouted at the suspect to stop, but to no avail. Officer Krugh fired three rounds from his shotgun, apparently nicking James in the right hand. When he continued to run, Officer Starke fired two rounds from his .38, the second of which struck Mr. James in the back of the skull and killed him. The body was recovered 298 feet from the spot where Officer Starke shot.

Plaintiff’s § 1983 claim is based upon the Supreme Court’s March 27, 1985 ruling in Tennessee v. Garner, 471 U.S. -, 105 S.Ct. 1694, 85 L.Ed.2d 1 (1985). In Garner, the Court held that the fourth amendment’s prohibition of unreasonable seizures forbids the use of deadly force to prevent the escape of a suspected felon unless it is necessary to prevent the escape and the officer has probable cause to believe that the suspect poses a significant threat of death or serious physical injury to the officer or others. Id. 471 U.S.-, 105 S.Ct. at 1697, 85 L.Ed.2d at 4. Therefore, Garner effectively overruled the common law, “fleeing felon” rule that allowed the use of deadly force as a last resort to apprehend a fleeing felon and effect an arrest. While the fleeing felon rule was, at one time, followed in all common law jurisdictions, the Court noted that it had been increasingly eroded or abandoned in recent years. In particular, the Court cited a 1982 study that found that 86.8% of the nation’s police departments had internal regulations restricting the use of deadly force to apprehend a nondangerous, escaping felony suspect. Id. 471 U.S.-, 105 S.Ct. at 1705, 85 L.Ed.2d at 14 (citing K. Mantulia, A Balance of Forces: A Report of the International Association of Chiefs of Police 161 (1982) (table)).

Furthermore, the Court employed the familiar fourth amendment balancing principle in its analysis. As announced in Camara v. Municipal Court, 387 U.S. 523, 87 S.Ct. 1727, 18 L.Ed.2d 930 (1967), a court must “balance the nature and quality of the intrusion on the individual’s Fourth Amendment interests against the importance of the governmental interests alleged to justify the intrusion.” Gamer, 471 U.S. at-, 105 S.Ct. at 1699, 85 L.Ed.2d at 7. Considering the totality of the circumstances, the Court concluded that the government’s interest in apprehending a nondangerous fleeing felon did not justify the use of deadly force. Id. 471 U.S. at-, 105 S.Ct. at 1700, 85 L.Ed.2d at 8.

In determining whether a newly announced fourth amendment decision such as Garner is to be applied retroactively to pending criminal and civil/constitutional cases, courts look primarily to the novelty of the decision (i.e., whether it represents a clear break with settled precedent and police practices or merely extends an existing principle to a new fact situation). United States v. Johnson, 457 U.S. 537, 102 S.Ct. 2579, 73 L.Ed.2d 202 (1982). Because the Garner decision was not entirely unanticipated in the law enforcement community and because it applied the well-known balancing test, at least one Circuit Court of Appeals has held that the new fleeing felon rule announced in that Opinion should, theoretically, apply retroactively. See Acoff v. Abston, 762 F.2d 1543, 1548-49 (11th Cir.1985). I emphasize the word “theoretically” because the Acoff court conceded that police officers might be protected from retroactive liability under Garner by the doctrine of qualified immunity. Id. at 1550.

The law of qualified immunity for public officials was recently purged of its subjective elements and reshaped into an entirely objective test. See Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982). The Harlow Court stated that:

[Gjovernmental officials performing discretionary functions generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.
Reliance on the objective reasonableness of an official’s conduct, as measured by reference to clearly established law, should avoid excessive disruption of government and permit the resolution of many insubstantial claims on summary judgment. On summary judgment, the judge appropriately may determine, not only the currently applicable law, but whether that law was clearly established at the time an action occurred. If the law at the time was not clearly established, an official could not reasonably be expected to anticipate subsequent legal developments, nor could he fairly be said to “know” that the law forbade conduct not previously identified as unlawful.

Id. at 818, 102 S.Ct. at 2738 (emphasis added) (footnotes and citations omitted). Because qualified immunity is truly an immunity from suit, as opposed to a mere defense to liability, a defendant is entitled to a determination on the issue prior to the commencement of discovery. Id. For that reason, I suspended discovery in this case until I could decide these motions. Furthermore, the Supreme Court held just this summer that a denial of a motion raising qualified immunity is immediately appealable. See Mitchell v. Forsyth, 472 U.S. -,-, 105 S.Ct. 2806, 2815, 86 L.Ed.2d 411, 425 (1985).

The real question in this case, as in all cases involving the claim of wralified immunity, is whether the conduct of the individual defendants violated a clearly established constitutional or statutory right, and if so, whether the individual defendants should reasonably have been aware of that right at the time of their actions. Again I must stress that the reasonableness of defendants’ actions is an entirely objective inquiry; all other circumstances, be they subjective knowledge or expectations, are irrelevant for purposes of qualified immunity. Davis v. Scherer, 468 U.S. 183,-, 104 S.Ct. 3012, 3018, 82 L.Ed.2d 139, 147 (1984). In the instant case, there were no “statutes” per se controlling the individual defendants’ conduct. Therefore, this court must determine whether there was a clearly established constitutional right of plaintiffs decedent, as of June 20, 1982, not to be shot as a fleeing felon by any or all of the individual defendants.

A constitutional right or entitlement of the type asserted here may be of two origins. It may arise directly from the text of the Constitution as interpreted by the courts. An example of this is the fourth amendment right announced in Garner. Alternatively, it may arise out of the substantive laws and regulations of the states, and be protected by the due process clause of the fourteenth amendment. See generally Meachum v. Fano, 427 U.S. 215, 223-27, 96 S.Ct. 2532, 2537-40, 49 L.Ed.2d 451 (1976).

|4] A review of the constitutional common law as of June 20, 1982, reveals that there was no “clearly established constitutional right” not to be shot under the “fleeing felon” rule. As I have already indicated, the U.S. Supreme Court addressed the issue for the first time in the 1985 Gamer decision. Certainly other courts had struck down the rule. See e.g., Sauls v. Hutto, 304 F.Supp. 124 (E.D.La.1969); People v. Ceballos, 12 Cal.3d 470, 116 Cal. Rptr. 233, 526 P.2d 241 (1974); Rose v. State, 431 N.E.2d 521 (Ind.App.1982); Giant Food, Inc. v. Scherry, 51 Md.App. 586, 444 A.2d 483 (1982). However, the Sixth Circuit Court of Appeals had, on more than one occasion, refused to hold that the fleeing felon rule was unconstitutional or overturn statutes codifying its terms. See Garner v. Memphis Police Dep’t, 600 F.2d 52 (6th Cir.1979), rev’d, — U.S. -, 105 S.Ct. 1694, 85 L.Ed.2d 1 (1985); Wiley v. Memphis Police Dep’t, 548 F.2d 1247 (6th Cir.), cert. denied, 434 U.S. 822, 98 S.Ct. 65, 54 L.Ed.2d 78 (1977); Beech v. Melancon, 465 F.2d 425 (6th Cir.1972), cert. denied, 409 U.S. 1114, 93 S.Ct. 927, 34 L.Ed.2d 696 (1973). Similarly, less than four months before the incident giving rise to the instant litigation, the Michigan Court of Appeals had expressly upheld the common law fleeing felon rule in this state. Werner v. Hartfelder, 113 Mich.App. 747, 318 N.W.2d 825 (1982), leave to appeal denied, 418 Mich. 906, 342 N.W.2d 520 (1984). See also People v. Gonsler, 251 Mich. 443, 232 N.W. 365 (1930). Since the controlling precedent in 1982 in both state and federal courts specifically upheld the common law fleeing felon rule, it cannot be said that the acts of the individual defendants on that fateful night violated any “clearly established” common law-constitutional right.

Nevertheless, the question remains whether that right was clearly established by means of legislative or administrative action. As I have already stated, Michigan had no statutory law on point. See Garner, 471 U.S. at- n. 16, 105 S.Ct. at 1704 n. 16, 85 L.Ed.2d at 13 n. 16. That leaves the issue of administratively created constitutional rights. In Davis v. Scherer, supra, the Supreme Court discussed the impact of state regulations on the question of an official’s qualified immunity. In Davis, the lower courts had held that while a state employee’s discharge was not in violation of clearly established due process principles, the Florida officials responsible for the discharge had nevertheless forfeited their qualified immunity from § 1983 liability because they had not followed clear administrative regulations and their conduct was not otherwise reasonable. In reversing this ruling, the Supreme Court held that the mere violation of a state statute or administrative regulation does not cause a public official to lose his qualified immunity unless the statute or regulation itself creates a constitutional entitlement, the violation of which would give rise to § 1983 liability. Davis, 468 U.S. at-& n. 12, 104 S.Ct. at 3019-20 & n. 12, 82 L.Ed.2d at 149-50 & n. 12. In justification of this ruling, the Court offered the following:

Appellee proposes that his new rule for qualified immunity be limited by requiring that plaintiffs allege clear violation of a statute or regulation that advanced important interests or was designed to protect constitutional rights. Yet, once the door is opened to such inquiries, it is difficult to limit their scope in any principled manner. Federal judges would be granted large discretion to extract from various statutory and administrative codes those provisions that seem to them sufficiently clear or important to warrant denial of qualified immunity. And such judgments fairly could be made only after an extensive inquiry into whether the official in the circumstances of his decision should have appreciated the applicability and importance of the rule at issue. It would become more difficult, not only for officials to anticipate the possible legal consequences of their conduct, but also for trial courts to decide frivolous suits without protracted litigation.

Id. 468 U.S. at-, 104 S.Ct. at 3020-21, 82 L.Ed.2d at 150-51 (footnote omitted).

Subsequent to Davis, the Sixth Circuit decided the case of Spruytte v. Walters, 753 F.2d 498 (6th Cir.1985). In that case, the court determined that a state regulation allowing prison inmates to receive books that did not threaten prison security created a type of property or liberty interest that was protected by fourteenth amendment due process, and that a policy directive of the Michigan Department of Corrections that prohibited inmates from receiving books except from publishers was inconsistent with the state regulation and, hence, invalid. The court went on to hold that the state regulation created a clearly established constitutional right of which the defendant prison administrators should reasonably have been aware. For that reason, the state officials lost their qualified immunity from a cause of action for damages under § 1983 resulting from their refusal to allow an inmate to receive a paperback dictionary from his mother. In distinguishing the facts of Spruytte from the facts of Davis, the Sixth Circuit noted that:

in the context of a violation of due process, the critical distinction between regulations that bear upon the constitutional right and those that do not is collapsed into the distinction between regulations that give rise to the protected interest and regulations that merely provide what process is due once a protected interest has been found____ Violation of a state regulation that defines specific substantive predicates becomes relevant because state law determines whether a claimant has a protected interest.

Id. at 511.

In the case at bar, plaintiff argues that there were indeed “regulations” bearing upon and giving rise to the constitutional right he asserts, not in the form of a state administrative rule but rather intradepartmental policies of the defendant police departments. The Benton Harbor Police Department had in effect, at the time of the shooting, Departmental General Order 76-10-12-A, which provided in pertinent part:

A. FIREARMS MAY BE USED IN THE FOLLOWING SITUATIONS:
4. Fleeing Offender — Only when it is a known felon who has used, or threatened to use, deadly force in the commission of a crime and all other attempts to prevent the escape have failed. An important aspect in making the decision to use deadly force is:
a. Whether or not to delay the arrest may result in additional injury or death to officer or other persons.
b. The likelihood of a non-violent apprehension at a later date.
B. FIREARMS SHALL NOT BE USED IN THE FOLLOWING INSTANCES:
5. Suspicion of Felony — Deadly force shall not be used on mere suspicion that a crime, no matter how serious, has been committed, or that the person being sought committed the crime. The officer either should have witnessed the crime or have sufficient and reliable information to know as a virtual certainty that the suspect committed an offense in which deadly force was used or threatened.
** Note that the crime of burglary in and of itself is not considered a violent felony. Therefore, deadly force shall not be used to prevent the escape of a burglary suspect. Better a delayed apprehension of a suspect, who in many eases is a juvenile, than placing an officer in legal jeopardy.

The purpose of this General Order, issued by the City’s Police Chief in 1976, was to “provide the officer with guidelines which will result in the proper and legal use of firearms and protect the officer from subsequent criminal or civil action.” The Chief noted in the introductory comments to the order that, at least in 1976, Michigan law regarding the use of deadly force in the apprehension of fleeing felons was unclear. The upshot of the order was not that it was unconstitutional, either under state or federal law, to use deadly force in such situations, but from the aspect of the department and the individual officer, it was better to be safe than sorry. It also appears that the Berrien County Sheriff’s Department had a similar intradepartmental regulation in effect at the time of the incident. From the evidence that I have received, and from the representations made to me by counsel, it further appears that the Benton Township Police Department did not have such a policy, but rather followed the Michigan common law as announced in Werner v. Hartfelder, supra.

The Benton Harbor department’s regulation is phrased in such a way that it restricts the officer’s discretion in the use of deadly force. In this respect, an analogy could be drawn to the prison transfer case of Hewitt v. Helms, 459 U.S. 460, 103 S.Ct. 864, 74 L.Ed.2d 675 (1983) and its progeny, which held that the use of mandatory language in a state statute which substantially restricts the discretion of a public official ..in otherwise discretionary functions may create a protected liberty interest in the prisoner. See id. at 470-73, 103 S.Ct. at 870-72. However, a strong counter argument could be made that since the instant departmental order’s restrictions turned on the observations and conclusions of the individual officer, it did not “substantially restrict” the officers discretion in the use of deadly force. Because the officers at the scene were told that the suspect had been in the vicinity of a pile of weapons inside the building, and because the suspect had already struggled with Deputy Crandell, they might have concluded that Mr. James was armed and dangerous and that the use of deadly force was fully justified under the regulations. To my knowledge, no federal reported opinion has discussed the effect of such disputed and subjective factual considerations on the issue of qualified immunity in a Garner-type situation. Fortunately, I need not decide that issue here for other issues control.

In my opinion, the intradepartmental policies or regulations of the Benton Harbor Police Department and the Berrien County Sheriff’s Department did not have the force and effect of state law or administrative regulation. For that reason, they could not and did not create a protected liberty interest in plaintiff’s decedent not to be shot as a fleeing felon. Although all parties have filed numerous briefs on this issue, no persuasive authority has been cited to me, and I have found none in my own exhaustive research, indicating that a local governmental department with no statutory rule making authority can create such a constitutional interest through its own departmental policies. It would be quite ironic if the instant regulations did create such a right. Were that the case, plaintiffs cause of action under § 1983 would depend entirely upon which officer from which department actually shot him. Had he been shot by an officer from Benton Township (and it appears that he was shot and wounded by defendant Krugh), he would have no § 1983 claim because Benton Township followed the common law rule allowing the apprehension of fleeing felons by the use of deadly force. It would be ludicrous to hold that an individual’s cause of action for deprivation of constitutionally protected liberty interests depends upon whose bullet strikes him when the state and federal law in force at the time plainly allowed all of the officers to shoot at him. For these reasons, I conclude that there was no clearly established constitutional or statutory law restricting the individual defendants’ discretionary conduct and, hence, the individual defendants are entitled to qualified immunity from damage liability from plaintiff’s § 1983 claim.

I now turn my attention to the remaining issues in the Berrien County defendants’ motion to dismiss. Defendants claim that plaintiff’s §§ 1981 and 1985 claims should be dismissed pursuant to Fed.R.Civ.P. 12(b)(6) because they are insufficiently pled. Section 1981 prohibits the denial of equal protection under the law on the basis of race. Section 1985 prohibits racially based conspiracies to deny an individual his civil rights. Because I find that plaintiff’s complaint sufficiently alleges that his decedent was denied his civil rights on the basis of racial animus and pursuant to a conspiracy evidenced by the actions and practices of the defendants, defendants’ motion is, in this respect, denied. See Leonard v. City of Frankfort, 752 F.2d 189 (6th Cir.1985) (§ 1981); Marlowe v. Fisher Body, 489 F.2d 1057 (6th Cir.1973) (§ 1985).

Defendants also move to dismiss plaintiff’s claim under 42 U.S.C. § 1986 as untimely. Section 1986 specifically provides that “no action under the provisions of this section shall be sustained which is not commenced within one year after the cause of action has accrued.” Plaintiff’s cause of action accrued on June 20, 1982. The instant complaint was not filed in this court until May 22, 1985. Therefore, the § 1986 claim is untimely and must be dismissed. Defendants’ motion is granted in this respect.

The Berrien County defendants also claim that plaintiff’s pendent state claims should be dismissed for various reasons. Because this court has not yet decided whether it should exercise pendent jurisdiction over these State claims, I will reserve ruling on this aspect of defendants’ motion with the following exception. Any state cause of action against Sheriff Jewell is untimely as brought outside the two-year statute of limitations period of M.C.L.A. 600.5805(5). Thus, the pendent claims against defendant Jewell are dismissed.

Finally, the City of Benton Harbor has filed a motion to dismiss and/or for summary judgment accompanied by a skeletal, one-page brief in support thereof. Although it is not set out in any understandable form, it appears to argue that the City is entitled to some form of qualified immunity from plaintiff’s federal claims. Qualified immunity is, of course, unavailable to municipalities. Brandon v. Holt, 469 U.S. -, 105 S.Ct. 873, 83 L.Ed.2d 878 (1985). This aspect of the city’s motion is denied. The remainder of the motion goes to plaintiff’s pendent state claims. Once again, I will reserve judgment on these issues until such time as the court determines that pendent jurisdiction should be exercised over these claims.


author: BILLINGS, District Judge.

text:
    David LaROCHE, as Trustee of the LaRoche Grantor Income Trust v. VERMONT FEDERAL BANK, FSB. VERMONT FEDERAL BANK, FSB and William J. Cody, Jr., v. David LaROCHE, as Trustee of the LaRoche Grantor Income Trust and LaRoche Grantor Income Trust.
    Civ. A. Nos. 85-238, 85-241.
    United States District Court, D. Vermont.
    Jan. 24, 1986.
    William W. Pearson, Downs, Rachlin & Martin, Burlington, Vt., and Martha V. Gordon, Manchester, N.H., for David La-Roche.
    Clarke A. Gravel and Robert B. Hemley, Gravel & Shea, Burlington, Vt., and Joseph M. Hassett, John C. Keeney, Jr., Martha L. Roadstrum, James G. Middlebrooks, Hogan & Hartson, Washington, D.C., for Vermont Federal Bank, FSB and William Cody.
   OPINION AND ORDER

BILLINGS, District Judge.

On November 29, 1985, David LaRoche as Trustee of the LaRoche Grantor Income Trust, and the LaRoche Grantor Income Trust (hereinafter collectively referred to as “LaRoche”) filed with this Court, pursuant to Fed.R.Civ.P. 56, a motion for summary judgment in their favor concerning the validity of Section 8 of the Vermont Federal Bank Charter. On December 6, 1985, David LaRoche requested the Court to decide his complaint by summary judgment rather than by trial. Pursuant to the December 6, 1985 stipulation, the Court considered the evidence presented in the motion for summary judgment of Vermont Federal Bank, FSB (hereinafter “VFB”) filed with this Court October 2, 1985, along with supporting papers subsequently filed, and the summary judgment motion of La-Roche filed November 29, 1985, along with supporting papers subsequently filed. For the reasons stated below the Court holds that Section 8 of the VFB Charter is valid and enforceable; the summary judgment motion of LaRoche is DENIED and judgment is entered in favor of VFB and William J. Cody, Jr.

PROCEDURAL BACKGROUND

LaRoche commenced a tender offer for the purchase of VFB’s stock, $.01 per value per share, on September 13, 1985 pursuant to a Summary Advertisement, an Offer to Purchase and a Letter of Tender. On that same date, David LaRoche filed an action against VFB in this Court for a declaratory judgment that Section 8 of the VFB Charter was unenforceable and for injunctive relief against its enforcement. Subsequently, VFB and William J. Cody, Jr. (“Cody”) brought an action to enjoin La-Roche from making a tender offer for VFB stock on grounds that the offer (a) violated Section 8 of the VFB Charter and (b) contained misleading statements of material fact and omitted material facts in violation of the Securities Exchange Act of 1934. These cases were consolidated September 18, 1985.

On September 18, 1985, after a hearing, this Court enjoined LaRoche from proceeding with the September 13, 1985 tender offer to purchase 123,800 shares of VFB common stock. LaRoche appealed the decision but later withdrew the appeal.

FINDINGS OF FACT

The parties do not dispute the facts. On November 17, 1985, VFB converted from a federal mutual savings bank to a federal stock savings bank pursuant to 12 U.S.C. §§ 1725, 1726, 1730 and Federal Home Loan Bank Board (“FHLBB”) regulations promulgated thereunder, 12 C.F.R. § 563b. The initial charter of VFB contained a provision prohibiting any acquisition or offer to acquire beneficial ownership of more than 10 percent of VFB’s outstanding common stock for a period of one year after conversion, as required by 12 C.F.R. § 563b.

On December 27, 1983, pursuant to 12 U.S.C. § 1464(a) and 12 C.F.R. § 552.4, the Board of Directors of VFB (“Board”) received preliminary approval from the FHLBB for what is now Section 8 of the Charter of VFB. As part of its application for preliminary approval the Board had submitted an opinion of counsel that the proposed amendment was allowed by Vermont law. The legal opinion was that of Clarke Gravel, a director of VFB and counsel to Gravel, Shea and Wright, Ltd., the general counsel of VFB. VFB disclosed Mr. Gravel’s status as a board director to the FHLBB in its proxy statement dated December 29, 1983. Attachment C to the Declaration of Cody dated September 16, 1985 at p. 4, 7. The shareholders of VFB approved Section 8 on January 30, 1984. Section 8 became effective on February 15, 1984, upon filing with the FHLBB, pursuant to 12 C.F.R. § 552.4.

DISCUSSION

LaRoche attacks the legality of Section 8 of the VFB Charter on four grounds. First, LaRoche alleges that the approval of Section 8 by the FHLBB was invalid because the FHLBB acted arbitrarily and capriciously in approving it. Second, La-Roche claims that Section 8 violates the Williams Act. Third, they contend that the charter amendment violates Vermont law. Finally, it is alleged that Section 8 is an unreasonable restraint on trade. VFB and Cody oppose LaRoche's motion on all grounds. The Court will consider each of the issues raised by LaRoche seriatium.

1. Approval of Section 8 by the FHLBB On December 27, 1983, upon the application of the Board of VFB pursuant to 12 U.S.C. § 1464(a) and regulations promulgated thereunder, 12 C.F.R. § 552.4(e) (anti-takeover provisions), the FHLBB gave preliminary approval to Section 8. FHLBB regulation 12 C.F.R. § 552.4(c) requires “an opinion, acceptable to the [FHLBB], of counsel independent from the [VFB] that the proposed Charter provision would be permitted to be adopted by a corporation chartered by the state in which the principal office of [VFB] is located.” Accompanying the VFB application was a legal opinion of Mr. Gravel of Gravel, Shea and Wright, Ltd. that Vermont law permitted the charter amendment.

LaRoche attacks the preliminary approval of Section 8 by the FHLBB on two fronts. First, LaRoche claims that the legal opinion of Mr. Gravel did not qualify as an opinion of independent counsel because Mr. Gravel was a board director of VFB and counsel to the law firm serving as outside counsel to VFB. Additionally, La-Roche contends that the opinion of Mr. Gravel addressed the legality under Vermont law of only part of the proposed charter amendment. Thus, LaRoche argues that the approval of the amendment by the FHLBB was arbitrary and capricious.

The Second Circuit Court of Appeals has held that a lawyer, who is a board member and a member of the law firm acting as outside counsel to the corporation, is presumed to be a disinterested director. Maldonado v. Flynn, 597 F.2d 789, 794 (2d Cir.1979) (Weinfeld, J.). Disinterest was defined to be the “lack of any financial stake by a director in the transaction under consideration.” Id. at 793. The court noted that until such time that board membership by outside counsel is forbidden the courts must assume that the outside counsel-director acts in a disinterested manner. Id. at 794. LaRoche argues that reliance on Maldonado v. Flynn is misplaced because the issue here does not turn on whether Mr. Gravel was a disinterested director, but whether he qualified as independent counsel.

Even assuming Mr. Gravel did not qualify as independent counsel in a technical sense, the FHLBB had the discretion under § 552.4(c) to accept Mr. Gravel’s opinion. Mr. Gravel’s status as a VFB board member was disclosed to the FHLBB in VFB proxy forms submitted to the FHLBB on December 29, 1983. LaRoche argues that this disclosure of Mr. Gravel’s status was insufficient because it was made apart from the Section 8 approval application and it came two weeks after the FHLBB had given preliminary approval. This argument fails to acknowledge that notwithstanding the fact the disclosure came two weeks after preliminary approval it came six weeks before the effective date of Section 8. Moreover, the document in which the disclosure occurred was directly related to the formal approval of Section 8 because the disclosure was made in the proxy statements presented to VFB shareholders in deciding whether to adopt Section 8.

The Court finds VFB’s disclosure of Mr. Gravel’s status to the FHLBB to have been sufficient to allow the FHLBB to determine whether, in its discretion, the FHLBB would accept it. Since the FHLBB sought no further opinions, the Court concludes that the FHLBB used its discretion as provided by the FHLBB regulation to accept Mr. Gravel’s opinion and that the acceptance of the opinion by the FHLBB was in no way arbitrary or capricious. “The arbitrary and capricious standard is highly deferential; agency action is presumed to be valid.” Oneida Indian Nation of N.Y. v. Clark, 593 F.Supp. 257, 262 (N.D.N.Y. 1984).

LaRoche also argues that the FHLBB acted arbitrarily and capriciously when it failed to follow § 552.4(c), which requires a legal opinion of the charter amendment’s validity under state law. LaRoche claims that the submitted opinion of Mr. Gravel addressed incompletely the validity of Section 8 under Vermont law. Since the opinion of Mr. Gravel did not address the Section 8 provision providing for preapproval disclosure of an offer to the VFB board of directors, the Court agrees with LaRoche that the opinion was incomplete.

As stated earlier, § 552.4(c) gives the FHLBB discretion to accept the opinion of independent counsel regarding a charter’s validity under state law. Clearly, if the FHLBB concluded that the opinion was insufficient it could have sought additional information. On the other hand,, the FHLBB had the discretion to forego further information. The latter case can easily be understood given the FHLBB’s openly stated purpose of using state law as a reference point only:

The [FHLBB] does not view this policy [of analyzing state law] as an abandonment of its primacy over the operations of federal associations but rather as the federalization of state rules. The use of homestate corporate law as a referent allows federal associates to take advantage of rapidly evolving state law. The Board, however, retains full authority to independently judge the merits of proposed anti-takeover provisions.

48 Fed.Reg. 44177 (9/28/83) (emphasis added).

Given its authority to pre-empt state law, its openly stated position to determine independently the merits of proposed charter provisions and its discretion under § 552.4, the Court cannot conclude that the failure of the FHLBB to seek a more complete assessment of the validity of Section 8 under Vermont law was arbitrary and capricious. “The [arbitrary and capricious] standard mandates judicial affirmance if a rational basis for the agency’s decision is presented.” Environmental Defense Fund, Inc., v. Costle, 657 F.2d 275, 283 (D.C.Cir.1981) (citing Bowman Transportation, Inc., v. Arkansas-Best Freight Systems, Inc., 419 U.S. 281, 290, 95 S.Ct. 438, 444, 42 L.Ed.2d 447 (1974)).

2. Allegations of Williams Act Violations

LaRoche claims that Section 8 violates the Williams Act and 17 C.F.R. § 240.14d-2 concerning offers to purchase. He argues that Section 8 violates the Williams Act because it requires an offeror seeking to acquire more than 10% ownership of VFB to receive a two-thirds vote of the VFB Board or to obtain approval of the FHLBB along with furnishing copies to the VFB Board. LaRoche claims that the pre-offer submittal to the VFB Board or the FHLBB constitutes a tender offer under the SEC’s expansive view of offers. LaRoche Memorandum of Law dated November 27, 1985 at p. 13-15. Since it is a tender offer, LaRoche continues, it must meet the disclosure requirements of Regulation 14D which neither alternative of Section 8 does.

LaRoche’s argument misses a critical point. Congress charged the FHLBB with enforcing the securities laws concerning federal savings institutions and the FHLBB approved Section 8. Securities Exchange Act of 1934 § 12(i), 15 U.S.C. § 781(i) (1982); 12 C.F.R. § 563d.l (1985). “In respect to any securities issued by insured institutions, the powers, functions and duties vested in the Securities and Exchange Commission (the ‘Commission’) to administer and enforce sections 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of the Securities Exchange Act of 1934 are vested in the [FHLBB] effective October 28, 1974.” 12 C.F.R. § 563d.l.

Additionally, the Section 8 requirements on the acquisition of stock, as approved by the FHLBB, are supported by public policy. The current upheavals in the banking system warrant some controls being placed on the buying and selling of bank ownership, especially for recently converted banks:

By its action, the [FHLBB] sought to lessen the vulnerability of newly-converted institutions to attempts to take unfair advantage of the results of conversion, to protect, in a variety of other respects, the integrity of the conversion process and to insure that conversions are accomplished in a manner that strengthens the converting association and are consistent with the purposes of the conversion program.

49 Fed.Reg. 7356 (Feb. 29, 1984) (citing 41 Fed.Reg. 50414 (Nov. 16, 1976)).

VFB sought and received FHLBB approval of Section 8 and subsequently received stockholder approval. The Court finds Section 8 to have been validly approved by the FHLBB under its authority and holds that Section 8 does not violate the Williams Act.

3. Alleged Violation of Vermont Law

The legal opinion of Mr. Gravel submitted to the FHLBB pursuant to § 552.-4(c) has been attacked by LaRoche on grounds that Mr. Gravel failed to analyze completely the validity of Section 8 under Vermont law and this Court has agreed with LaRoche. Additionally, LaRoche contends that § 1862, § 1879 and § 1926 of the Vermont Business Corporation Act do not support VFB’s position that Section 8 is valid under Vermont law.

Section 1862 permits a corporation “[to] limit or deny the voting rights of ... the shares of any class to the extent not inconsistent with the provisions of this Chapter.” Section 1879 allows the Articles of Association to limit stock voting rights. Section 1926 provides that a corporate charter may contain “[a] provision not inconsistent with law which the incorporators elect to set forth.” LaRoche contends that these provisions do not support the validity of Section 8 because they focus on the internal affairs of the company. LaRoche notes correctly that tender offers do not implicate the internal affairs of the target company. Edgar v. Mite Corp., 457 U.S. 624, 645, 102 S.Ct. 2629, 2642, 73 L.Ed.2d 269 (1982).

Assuming the stretched interpretation that the cited Vermont statutes do not support VFB’s contention of the validity of Section 8, LaRoche has not cited any statutes or case law that justifies a contrary conclusion. To reach that end point La-Roche argues circuitiously and erroneously that preacquisition disclosures to incumbent management violate the Williams Act and the Commerce Clause and therefore Section 8 must violate Vermont law. This Court has already found that no Williams Act violations exist and that the FHLBB validly approved Section 8.

No Vermont law has been cited by any party on this question and the Court has not found any; thus, the Court operates in a vacuum. The Court concludes that taking the position most favorable to LaRoche, the validity of Section 8 under Vermont is unresolved. However, since the FHLBB views state law as a reference point only and retains independent authority to approve federal savings bank charters notwithstanding state law the resolution of Vermont law is not critical to the validity of Section 8. See 48 Fed.Reg. 44177 (9/28/83).

4. Alleged Unreasonable Restraint on Alienation

Finally, LaRoche argues that Section 8 is an unreasonable restraint on alienation. They contend that except by preacquisition disclosure of a tender offer to the VFB Board all acquisition routes of certain offerors are foreclosed and the stockholders’ ability to sell their stock extremely limited. LaRoche’s Memorandum of Law dated November 27, 1985 at p. 20.

LaRoche notes the general disfavor of courts concerning restraints on alienation. Glenn v. Seaview, 154 NJ.Super. 69, 380 A.2d 1175, 1177 (1977); Globe v. Hasner, 333 F.2d 413, 415 (2d Cir.1964) cert. denied 379 U.S. 969, 85 S.Ct. 666, 13 L.Ed.2d 562 (1965). He cites Tracey v. Franklin, 31 Del.Ch. 477, 67 A.2d 56, 59-60 (1949) for the proposition that the validity of restrictions on transfers must be authorized by statute, reasonable in nature and not contrary to public policy. LaRoche states that no Vermont statute authorizes the Section 8 restrictions and that the restrictions are unreasonable. LaRoche’s Memorandum of Law dated November 27, 1985 at p. 20. LaRoche contends no public policy is met by Section 8 because it serves only to retain control for and promote the policies of the incumbent management. Id.

Section 8 was validly approved by the FHLBB under its authority to regulate federal savings banks. Congress explicitly gave the FHLBB the power to govern federal savings bank charters:

In order to provide local mutual thrift institutions in which people may invest their funds in order to provide for financing of homes, the Board is authorised, under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation and regulation of associations to be known as “Federal Savings and Loan Associations” or “Federal Mutual Savings Banks” ... and to issue charters therefor.

12 U.S.C. § 1464(a)(1) (1976 ed., Supp.IV) (emphasis added). Further, “Congress plainly envisioned that federal savings and loans would be governed by what the Board — not any particular State — deemed to be the ‘best practices!.” Fidelity Federal Savings & Loan Association v. DeLa Cuesta 458 U.S. 141, 161, 102 S.Ct. 3014, 3026, 73 L.Ed.2d 664 (1981). “Federal regulations have no less pre-emptive effect than federal statutes.” Id. at 153, 102 S.Ct. at 3022.

Beyond the authority of the FHLBB to approve Section 8, valid public policy reasons support its validity. Stock restrictions, such as Section 8, encourage mutual banks to convert to stock banks thus placing the banks on more solid financial structures. These restrictions are especially important during the vunerable times right after conversion when the banks are clear take-over targets. Further, the Court believes that the Section 8 restrictions are reasonable. Stockholders are not prohibited from selling their shares and stock purchasers with more than 10% ownership of VFB may retain and vote the excess shares if they follow one of the two options in Section 8. Therefore, the Court finds no unreasonable restraint on alienation.

CONCLUSION

Section 8 of the VFB Charter is valid and enforceable. The motion for summary judgment of LaRoche is DENIED and judgment is entered in favor of VFB and Cody.

SO ORDERED.

      . The tender offer named only the Trust as purchaser, but David LaRoche conceded that his interests in the tender offer and the Trust’s interests were the same. David LaRoche and Laroche Grantor Income Trust Memorandum of Law in Support of Objection to Motion for Summary Judgment and Cross Motion for Summary Judgment dated November 27, 1985 at p. 2.

      . Section 8 of the VFB Charter states in pertinent part:

        Limitations on Acquisitions of Control and Offers to Acquire Control:

      A. Vote Required for Acquisition of Control. No person (as defined in subsection D hereof) shall acquire control (as defined in subsection D hereof) of the savings bank unless such acquisition has been approved prior to its consummation by the affirmative vote of the holders of at least two-thirds of the outstanding Voting Stock (as defined in subsection D hereof) entitled to vote at a duly constituted meeting of shareholders called for such purpose.
      B. Excess Shares. In the event that Control of the savings bank is acquired in violation of subsection A hereof, all, shares of Voting Stock owned by the Person so acquiring Control in excess of the number of shares the beneficial ownership of which is deemed under subsection D.2 hereof to confer Control of the savings bank shall be considered from and after the date of their acquisition by such Person to be “excess shares” for purposes of this Section 8. Such excess shares shall thereafter no longer be entitled to vote on any matter or take other shareholder action or be counted in determining the total number of outstanding shares for purposes of any matter involving shareholder action, and the Board of Directors may cause such excess shares to be transferred to an independent trustee for sale on the open market or otherwise, with the expenses of such trustee to be paid out of the proceeds from such sale.
      C. Approval Required for Offers to Acquire Control. No person shall make any offer (as defined in subsection D hereof) to acquire Control of the savings bank unless such Person has received prior approval to make such Offer by complying with either of the following procedures:
      1. The Offer shall have been approved by two-thirds of all voting members of the Board of Directors; or

      2. (a) Obtained from the Board, pursuant to Section 407(q) or Section 408(e) (as applicable) of the National Housing Act or any successor provision of law and as and in the manner provided by all applicable regulations of the Board promulgated thereunder, authority to acquire Control of the savings bank, such authority to have been obtained by (i) filing with the Board all notices, submissions and other documents or information required by such applicable law and regulations and (ii) receiving (in any such case) the Board’s affirmative approval of, or (in cases governed by such Section 407(q) upon the Board’s failure to disapprove following the expiration of all notice periods and any extensions thereof, the acquisition of Control by such Person as provided in such applicable law and regulations, and
      (b) Furnished to the Board of Directors, concurrently with such Person’s filing thereof with the Board, a complete copy of all notices, submissions and documents (including all exhibits thereto) and other information filed by such Person with the Board pursuant to such applicable law and regulations.

      . Rule 14d-3(a) requires the following disclosure of the bidder:
      1. Files with the Commission ten copies of a Tender Offer Statement on Schedule 14D-1, including all exhibits thereto;
      2. Hand delivers a copy of such Schedule 14D-1 including all exhibits thereto..
      i) To the subject company at its principal executive office; and
      ii) To any other bidder, which has filed a Schedule 14D-1 with the commission relating to a tender offer which has not yet terminated for the same class of securities of the subject company, at such bidder’s principal executive office or at the address of the person authorized to receive notices and communications (which is disclosed on the cover sheet of such other bidder’s Schedule 14D-1);
      3. Gives telephone notice of the information required by Rule 14d-6(e)(2)(i) and (ii) and mails by means of first class mail a copy of such Schedule 14D-1, including all exhibits thereto:
      i) To each national securities exchange where such class of the subject company's securities is registered and listed for trading---- and
      ii) To the National Association of Securities Dealers, Inc., ("NASD”) if such class of the subject company's securities is authorized for quotation in the NASDAQ interdealer quotation system.

      . Since the Court found no Williams Act violations the Court need not address VFB’s contention that the preacquisition disclosure required by Section 8 does not violate the Williams Act because the disclosure is confidential. Reply Memorandum of VFB in Support of its Motion for Summary Judgment dated December 6, 1985 at p. 9.

      . VFB cited a recently approved charter of a federal savings stock institution, but the Court, recognizing the pre-emptive authority of federal regulation over state law, is not convinced the Vermont Secretary of State's approval supports VFB’s position that Vermont law permitted the charter. VFB’s Memorandum in Support of the Motion for Summary Judgment dated October 2, 1985 at p. 9, n. 2.

      . The Court is assuming that Section 8 is a restriction on alienation, although VFB claims it is not because the shares are negotiable. Moran v. Household International, Inc., 490 A.2d 1059, 1079 (Del.Ch.1985) (no restriction on alienation even though the stockholders’ rights to sell shares are limited because the negotiability of the shares is not conditioned).


author: H. FRANKLIN WATERS, Chief Judge.

text:
    VAN HALEN MUSIC, et al., Plaintiffs, v. Edwin T. PALMER, et al., Defendants.
    Civ. No. 85-5074.
    United States District Court, W.D. Arkansas, Fayetteville Division.
    Jan. 24, 1986.

      R. Steven Jones of Wright, Lindsey & Jennings, Little Rock, Ark., and John B. Nelson of Jackson, Walker, Winstead, Cantwell & Miller, Dallas, Tex., for plaintiffs.
    Larry Froelich, Fayetteville, Ark., for defendants.
   MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

This action for copyright infringement under Title 17 of the United States Code is currently before the court on plaintiffs’ motion for summary judgment. Plaintiffs allege that the defendants publicly performed five copyrighted musical compositions at a Fayetteville private club known as The Gazebo on June 15 and 16, 1984. The court has jurisdiction of the cause pursuant to 28 U.S.C. § 1338(a).

Infringement

A. Congress granted owners of copyrighted musical works exclusive rights to publicly perform their copyrighted compositions. See 17 U.S.C. § 106(4). To establish a prima facie case for infringement of copyright in musical compositions, a plaintiff must prove the following five elements:

(1) the originality and authorship of the compositions involved;
(2) compliance with all formalities required to secure a copyright under Title 17, United States Code;
(3) that plaintiffs are the proprietors of the copyrights of the compositions involved in this action;
(4) that the compositions were performed publicly for profit [by the defendants]; and
(5) that the defendants had not received permission from any of the plaintiffs or their representatives for such performance.

Boz Scaggs Music v. KND Corp., 491 F.Supp. 908, 912 (D.Conn.1980).

A prima facie case as to the first three elements may be made by submitting certified copies of copyright registration certificates and any subsequent assignments. Fourth Floor Music, Inc. v. Der Place, Inc., 572 F.Supp. 41, 43 (D.Neb.1983); Remick Music Corp. v. Interstate Hotel Co., 58 F.Supp. 523, 531 (D.Neb.1944), affd, 157 F.2d 744 (8th Cir.1946), cert. denied, 329 U.S. 809, 67 S.Ct. 622, 91 L.Ed. 691 (1946) reh’g denied, 330 U.S. 854, 67 S.Ct. 769, 91 L.Ed. 1296 (1947).

B. In considering plaintiffs’ motion for summary judgment, we note that summary judgment should be granted only when there is “no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” Fed.R. Civ.P. 56(c). The court in making its determination must view the facts in the light most favorable to the party opposing the motion, giving that party the benefit of all reasonable inferences to be drawn from the facts. Howard v. Russell Stover Candies, Inc., 649 F.2d 620 (8th Cir.1981). It is an extreme remedy and not to be granted unless the “movant has established his right to a judgment with such clarity as to leave no room for controversy and that the other party is not entitled to recover under any discernible circumstances.” Bellflower v. Pennise, 548 F.2d 776 (8th Cir.1977). However, summary judgment may well be appropriate in this type of case. See, e.g., Fourth Floor Music, Inc., supra; Boz Scaggs Music, supra; and KECA Music, Inc. v. Dingus McGee’s Co., 432 F.Supp. 72 (W.D.Mo.1977).

C. Based upon the pleadings, affidavits and depositions submitted to the court, we find that there is no genuine issue as to any of the following material facts:

The Gazebo is a private club which is owned and operated by Gazebo Association, Inc., a nonprofit corporation organized under Arkansas law. Essentially a dance club, the Gazebo is open to any of its approximately 1600 members who paid a $10.00 membership fee and to nonmember guests who pay a $3.00 cover charge. The club serves mixed drinks, beer and wine; it hires a disc jockey (DJ) who plays recorded dance music. At all times pertinent to this action, defendant Edwin T. Palmer, Jr., has been president and manager of the Gazebo. In that capacity he makes management decisions for the club and directs its daily operation. (Palmer deposition at 14). Among his duties as manager of the club, Mr. Palmer was responsible for making or approving personnel decisions (Palmer dep. at 8), setting wage and salary levels (Palmer dep. at 8-9), hiring DJs (Palmer dep. at 9), booking any live entertainment (Palmer dep. at 11-12), reviewing and approving membership applications (Palmer dep. at 16), setting cover charges for nonmembers (Palmer dep. at 17), and opening the club for business (Palmer dep. at 15). Mr. Palmer indicated that although each DJ chose the music for any particular evening, he as manager had final say over the type of music played. (Palmer dep. at 15).

In addition to his management duties, Mr. Palmer signed the application for a private club permit (Dep.Ex. 8) and the application for renewal of the permit (Dep.Ex. 2); he was listed as the permittee on the permit itself (Dep.Ex. 1). Mr. Palmer signed the lease for the club premises as president of the Gazebo Association, Inc., and individually as guarantor (Dep.Ex. 3).

Mr. Palmer admitted that he had been in contact with ASCAP on a number of occasions prior to June of 1984, although he could not remember the exact number or dates of the contacts. Communications between ASCAP representatives and Mr. Palmer generally involved attempts to persuade Mr. Palmer to purchase a licensing agreement for use of songs copyrighted by ASCAP members. See deposition exhibits 5 and 6. Mr. Palmer was frequently advised of the necessity for securing a license and the consequences of his failure to do so. Mr. Palmer made the decision to refuse to purchase a licensing agreement (Palmer dep. at 27) and usually threw away correspondence from ASCAP (Palmer dep. at 31). The Gazebo never secured a license to perform musical works of ASCAP members.

On June 16, 1984, two ASCAP investigators visited the Gazebo during its business hours. Over a period of approximately four hours the investigators listed each song played by the DJ and, when known, the recording artist. The inspection reports revealed that the following four ASCAP songs were played during the time the investigators were present:

(1) When Doves Cry Prince Nelson (a/k/a
Prince)
(2) 1999 Prince Nelson
(3) Miss Me Blind George O’Dowd (a/k/a
Boy George), Michael
Craig, Jonathan Moss, Roy
Hay (a/k/a Culture Club)
(4) Easy Lionel Ritchie

See affidavits of Betty Boswell and Ronald Boswell. By affidavit of counsel, plaintiffs have produced copies of certificates of copyright registration and, where necessary, assignments of copyright which demonstrate that plaintiffs are owners of copyrights for the above listed compositions. The defendants have not disputed this fact. Neither have they claimed that they ever held a license nor secured in any other fashion permission to perform copyrighted musical works.

D. Based upon our findings that the foregoing facts are essentially undisputed, we must conclude that plaintiffs have established that their copyrights on the four listed songs have been infringed. Because the defendants have offered no substantive evidence or argument which would raise any genuine issue of material fact, we find that plaintiffs Controversy Music, Virgin Music, Inc., Jobete Music Co., Inc., and Brockman Enterprises, Inc., are entitled to summary judgments on their claims for copyright infringement.

Liability

By their amended pleadings, plaintiffs seek to impose liability on the Gazebo Association, Inc., Mr. Palmer and Shary Palmer.

It is well established that “one may be vicariously liable if he has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities.” The imposition of liability on a controlling individual is based upon the belief that the individual is in a position to control the conduct of the entity which is the “primary” infringer. (citations omitted).

Fourth Floor Music, supra, at 43. Vicarious liability may even be imposed on a controlling individual who has no knowledge of infringement. Boz Scaggs Music, supra, at 914.

In Fourth Floor Music liability was imposed on a corporate stockholder who exercised “a good bit of control over the day-to-day operations” of the infringing night club. In Boz Scaggs the court found that a corporate vice president and full-time manager of a radio station was jointly liable with the corporation because he had a direct stake in the financial success of the station and he oversaw the station’s daily operation. Applying this rationale to the uncontroverted facts in this case, we find that Mr. Palmer had the requisite control and financial stake to make him jointly liable with the Gazebo Association, Inc., for the infringing activities. The defendants' arguments against imposition of individual liability are irrelevant under copyright law.

There appears to be no evidence, however, that Ms. Palmer, as secretary of the corporation, exercised any significant control over the club’s operation. Her duties appear to have been entirely administrative. There is no indication that she made or participated in any decision regarding the purchase of an ASCAP license. Therefore, we find no basis for imposing liability on Ms. Palmer.

Relief

A. Under 17 U.S.C. § 502(a), “Any court having jurisdiction of a civil action under this title may ... grant ... final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright.” Having concluded that the defendants infringed the copyrights in the four compositions listed above, the court will enjoin the defendants from any further infringement of those works.

B. Pursuant to 17 U.S.C. § 504(a), plaintiffs may recover actual damages and profits or statutory damages. By their prayer for relief, plaintiffs have elected to recover statutory damages which the court may impose in the amount it considers just. 17 U.S.C. § 504(c)(1). Statutory damages may range from $250.00 to $10,000.00 for each incident of infringement. See section 504(c)(1).

By the affidavit of Alan J. Pécora, district manager of ASCAP, plaintiffs assert that the licensing fees for the Gazebo from September 1, 1980, through December 31,1985, would have been $5,045.41 and that ASCAP spent $610.87 in attempting to secure a license. In light of the facts of this case, we find that plaintiffs should recover the sum of $1,500.00 for each of the listed works for a total of $6,000.00. In addition to statutory damages, plaintiffs may also recover costs and attorney’s fees under 17 U.S.C. § 505. We find that plaintiffs are entitled to recover their costs in the amount of $610.87.

In regard to recovery of attorney’s fees, we note those factors cited in Boz Scaggs Music, supra, at 915, which may justify denial of reasonable attorney’s fees:

(1) The presence of a complex or novel issue of law litigated by the defendants in good faith;
(2) Defendants’ status as innocent rather than willful or knowing infringers;
(3) Bad faith on plaintiffs’ part in prosecuting the action; or
(4) A good faith attempt by the defendants to avoid infringement.

We find that none of these justifications are present in this case. Apart from their allegations that ASCAP attempted to collect its license fee like “a bunch of gangsters,” the defendants offer no other compelling reason to deny an award of attorney’s fees. Based upon the record before the court, Mr. Palmer’s attitude toward securing a license to perform copyrighted music might best be regarded as cavalier. Counsel for plaintiffs have submitted an affidavit reflecting fees of $4,873.00 and $528.32 in costs for Jackson, Walker, Win-stead, Cantwell & Miller, and $4,085.29 for local counsel Wright, Lindsey & Jennings.

Considering all the facts in this case, we believe that a reasonable attorney’s fee of $3,240.00 plus $528.32 in costs should be awarded to plaintiffs for representation by the Jackson, Walker, Winstead, Cantwell & Miller law firm. A reasonable attorney’s fee for local counsel will be approved upon submission of a statement of time and costs expended on this matter. The court will take that issue under advisement until such a statement can be submitted.

A separate order summarizing the findings and conclusions of the court will be concurrently entered with this memorandum opinion.

      . Mr. Palmer was also one of the incorporators of the Gazebo Association, Inc., and is a memher of its Board of Directors.

      . The court in Boz Scaggs Music, supra, at 911, described the American Society of Composers, Authors and Publishers (ASCAP) as an unincorporated association of over 23,000 members which on behalf of its members “licenses commercial radio and television stations, restaurants, nightclubs, and other establishments for non-dramatic public performances of copyrighted musical compositions owned by the members. If'a licensee fails to pay the fees properly owed to ASCAP and efforts to resolve the delinquency or breach are unsuccessful, ASCAP terminates its license with that user."

      . In their second amended complaint plaintiffs contend that Bad, Bad Leroy Brown by Jim Croce was played at the Gazebo on June 15, 1984. However, the only evidence submitted by plaintiffs concerns music performed on June 16. Having carefully reviewed the affidavits regarding that night’s performances, we find no indication that any version of Bad, Bad Leroy Brown, recorded or otherwise, was ever performed at the Gazebo. We must therefore conclude that plaintiffs Blendingwell Music, Inc., and MCA, Inc., have not made a prima facie case of copyright infringement. Their claim will be dismissed.


author: TASHIMA, District Judge.

text:
    KIRK-MAYER, INCORPORATED, etc., Plaintiff, v. PAC ORD, INC., etc., et al., Defendants.
    No. CV 83-7141 AWT.
    United States District Court, C.D. California.
    Jan. 24, 1986.

      J. Michael Hennigan, Dana Carli Brooks, Greenberg, Hennigan & Mercer, Beverly Hills, Cal., for plaintiff.
    Theodore K. Martin, Arcadia, Cal., for defendants.
   MEMORANDUM OPINION

TASHIMA, District Judge.

This is an action by an ousted government contractor against its successor for asserted violation of the Sherman Act, 15 U.S.C. §§ 1 & 2. Associated pendent state claims also are alleged. Defendants have moved for summary judgment on the Sherman Act § 2 claim and the pendent claims. Based on the uncontroverted facts, I conclude that as a matter of law, defendant Pac Ord, Inc., cannot be held liable under § 2, the only remaining federal claim. I, thus, dismiss the entire action.

I. THE UNDISPUTED FACTS

Pac Ord was the successful bidder for an exclusive “blue collar” contract to repair and maintain electronics equipment for the Naval Electronics Systems Engineering Center at Vallejo, California (the “Navelex Contract”). The Navelex Contract was for a three-year term beginning in 1982. Plaintiff Kirk-Mayer, Incorporated, had been the incumbent contractor for approximately 10 years, having last won a bid for a three-year contract in 1979. Four contractors submitted proposals (cost and technical) on the 1982 contract. Kirk-Mayer and Pac Ord, as the two lowest cost bidders, were invited by the Naval Supply Center in Oakland, California, to submit their best and final offers. Kirk-Mayer bid $9,020,968 and Pac Ord bid $8,786,230.59. As stated, the 1982 Navelex Contract for a three-year term was awarded to Pac Ord.

II. ISSUES

Under well-established rules governing the grant or denial of such motions, e.g., Simon v. United States, 756 F.2d 696, 697 (9th Cir.1985), the issues presented by Pac Ord’s motion for summary judgment on the § 2 claims are whether, on the uncontroverted facts, as a matter of law:

1. Pac Ord does not possess monopoly power in the relevant market, so as to defeat Kirk-Mayer’s monopolization claim.

2. The “dangerous probability of success” element is absent so as to preclude Kirk-Mayer's attempt to monopolize claim.

III. DISCUSSION

A. Section 2 Monopoly Power

The elements of a § 2 monopolization claim are well established. See, e.g., Aspen Skiing Co. v. Aspen Highlands Skiing Corp., — U.S. -, 105 S.Ct. 2847, 2854, 86 L.Ed.2d 467 (1985). One essential element is defendant’s possession of monopoly power — the power to control prices or exclude competition in the relevant market. E.g., Greyhound Computer Corp. v. International Business Mach. Corp., 559 F.2d 488, 496 (9th Cir.1977), cert. denied, 434 U.S. 1040, 98 S.Ct. 782, 54 L.Ed.2d 790 (1978). In this case, the definition of the relevant market is controverted. I accept for purposes of ruling on defendants’ motion, plaintiff’s contention of the relevant market. Plaintiff’s marketing expert has defined the services market as the market for five specific interrelated types of maintenance, repair, installation and fabrication services for Navy electronics equipment (Navelex blue collar services). He has defined the geographic market as the area within a 15-mile radius of the Navy’s facility at Vallejo, California. Thus, plaintiff’s definition of the relevant market is limited to the services rendered under the Navelex Contract awarded to defendant and four “peripheral” contracts for similar services at Vallejo. The question then is did Pac Ord possess monopoly power in this market?

New cases have analyzed market power in this context, i.e., an exclusive, fixed-price government contractor for a fixed term. The recent case of National Reporting Co. v. Alderson Reporting Co., 763 F.2d 1020 (8th Cir.1985), involved Sherman Act § 2 charges against the successful bidder for the court reporting services contract of the United States Tax Court. As in the case at bench, defendant Alderson underbid plaintiff National who had held the contract for several years prior thereto. There, the contracts were only for one-year terms. However, unlike the case at bench, the Tax Court’s policy was to allow the incumbent contractor to renew the contract if it agreed to do so at no increase in price and was rendering satisfactory services.

Thus, the Eighth Circuit observed that “Alderson could not control prices, because if it tried to raise its price, the contract would again be up for bids.” Id. at 1023. Further, there were “other court-reporting companies who can bid and try to undercut the company holding the contract.” Id. Thus, there also was no power in the incumbent contractor to exclude competition. Here, the absence of monopoly power is even clearer. Like National Reporting, the Navelex Contract here is for a fixed term at a fixed price. There is no power to exclude any competitor from bidding on the contract. The uncontroverted evidence is that there are numerous firms capable of bidding on the Navelex Contract and that non-incumbency was not a competitive disadvantage. Here, however, unlike Nation al Reporting, the incumbent holder of the Navelex Contract, including Pac Ord, could not extend the contract by agreeing not to raise its price. National Reporting is indistinguishable. I agree with its holding that in the circumstances of this case — a government contractor who obtains the contract for a fixed term at a fixed price in open bidding against a number of other bidders — the contractor does not have the power to control prices or exclude competition.

Kirk-Mayer attempts to distinguish the case at bench factually from National Reporting on the basis that the Navelex Contract is only one of five “blue collar services” contracts at Vallejo and because it is the largest, the holder of the Navelex Contract (also referred to as the “build-to-print” contract) exercises monopoly power over the other four contracts. In 1981, two of these contracts were awarded to Kirk-Mayer and the remaining two to a third company. According to plaintiff, “without the build-to-print contract, Kirk-Mayer was unable to service” the two contracts and “relinquish[ed] them to Navelex.” The third company also relinquished its two contracts. Since then, these services also have been provided by Pac Ord. Thus, plaintiff argues that defendant by predatory (below cost) pricing gained a monopoly over the relevant market which includes all five contracts. The argument is unpersuasive. National Reporting’s analysis would apply regardless of whether the government chose to offer for bidding the Navelex work in one, two, five or any other number of contracts.

In substance, Kirk-Mayer’s contention is that all five blue collar contracts should be treated as a single, integrated economic unit, i.e., that scale economies made it uneconomical for a contractor to attempt to perform any of the remaining four Navelex contracts without the base of the build-to-print or Navelex Contract which was far larger than any of the others. Kirk-Mayer, in fact, refers to the remaining four contracts as “peripheral” contracts. Thus, Kirk-Mayer’s complaint concerning the remaining contracts does not depend on how the Navelex Contract was obtained by the successful bidder. Since under Kirk-Mayer’s theory, scale economies dictate that award of the four peripheral contracts will always follow the award of the Navelex Contract, economic realities dictate that the five contracts be treated as one. Thus, the gist of Kirk-Mayer’s § 2 complaint is exclusion from the Navelex Contract.

B. Section 2 Attempt to Monopolize

The Eighth Circuit also held in National Reporting that because of the defendant’s “inability to raise prices without undergoing another bidding process,” under the § 2 attempt claim “there was never a dangerous probability of success.” 763 F.2d at 1025. In this Circuit also “a dangerous probability of success,” is one of the “three elements of an attempt claim under section 2 of the Sherman Act.” William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 668 F.2d 1014, 1027 (9th Cir.1981), cert. denied, 459 U.S. 825, 103 S.Ct. 57, 74 L.Ed.2d 61 (1982).

Here too, because it was a short-term, fixed price contractor, Pac Ord could not raise prices or exclude competition. Thus, even assuming that Pac Ord’s bid was below its average variable costs, or marginal costs, it is highly doubtful that such pricing was “predatory” since Pac Ord could not reap predation’s benefits. See National Reporting, 763 F.2d at 1025; Inglis, 668 F.2d at 1031-32. The uncontroverted facts indicate that at this time there are 15 firms, in addition to the parties here, capable of bidding on the Navelex Contract, ie., actual or potential competitors. Pac Ord obviously cannot exclude any of those firms from bidding on the contract when its present term expires. In the meantime, under the contract, it is incapable of raising its price. In this uneontroverted factual circumstance there never could be a dangerous probability of success. Therefore, summary judgment appropriately also is granted on Kirk-Mayer’s § 2 attempt to monopolize claim.

C. Pendent State Claims

Kirk-Mayer’s complaint also asserts pendent claims under California law for violation of the Cartwright Act, Cal. Bus. & Prof.Code § 16700, et seq., and for violation of the Unfair Practices-Act, id. at § 17000, et seq. Defendants have moved for summary judgment on these claims as well or, in the alternative, that they be dismissed pursuant to the Court’s discretion under UMW v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966). Here, since all federal claims will now be dismissed, that factor weighs heavily in exercising the Court’s discretion under Gibbs.

“When federal claims are dismissed before trial, the question whether pendent state claims should still be entertained is within the sound discretion of the district court. Generally, dismissal of federal claims before trial dictates that the pendent state claims should also be dismissed.”

Schultz v. Sundberg, 759 F.2d 714, 718 (9th Cir.1985) (citations omitted). One situation where dismissal of state claims is proper is “When the state issues apparently predominate____” Wren v. Sletten Constr. Co., 654 F.2d 529, 536 (9th Cir. 1981). However, it may be proper to retain jurisdiction over state law claims after dismissal of all federal claims. See In re Nucorp Energy Sec. Litig., 772 F.2d 1486, 1491 (9th Cir.1985). Here, it is useful to treat the two pendent claims separately.

1. Cartwright Act. The basis of the summary judgment motion on the Cartwright Act claim is that it should be controlled by this Court’s earlier grant of summary judgment in defendant’s favor on the Sherman Act § 1 claim. That ruling was predicated on the uncontroverted showing of defendants that no conspiracy, agreement or other concerted action had been shown. The uncontroverted facts on the issue of the existence of a conspiracy have not changed since the Court’s grant of summary judgment to defendants on the § 1 claim.

The Cartwright Act, like the Sherman Act, requires a “trust,” “combination” or some other form of joint conduct. Cal. Bus. & Prof.Code § 16720. In fact, the Cartwright Act is “patterned upon the federal Sherman Act and ... hence federal cases interpreting the Sherman Act are applicable with respect to the Cartwright Act.” Chicago Title Ins. Co. v. Great W. Fin. Corp., 69 Cal.2d 305, 315, 70 Cal.Rptr. 849, 444 P.2d 481 (1968). Plaintiff, in fact, virtually has conceded on this issue and does not argue against summary judgment on the Cartwright Act claim. Thus, because the issue is identical to the Sherman Act § 1 issue previously decided, I exercise my discretion to determine this claim on the merits. See Bright v. Bechtel Petroleum, Inc., 780 F.2d 766, 771 (9th Cir.1986) (proper to decide pendent claim after dismissal of federal claim where both state and federal claims involved “the same issue”). I grant defendants’ summary judgment motion on this claim for the same reason the § 1 claim was dismissed earlier:

Although summary judgment is not ordinarily favored on this type of issue [absence of conspiracy] and plaintiff is permitted to rely on circumstantial evidence, the plaintiff is required to come forward with some support for its allegation. Program Eng ’g v. Triangle Publications, 634 F.2d 1188, 1195 (9th Cir. 1980). Here, defendants have rebutted with probative evidence every inference that plaintiff would ask the Court to draw. They have denied the alleged conspiracy and offered reasonable explanations for all of the circumstances that plaintiff suggests are suspicious. Even viewing plaintiffs evidence in the most favorable light, plaintiff has failed sufficiently to rebut defendants’ evidence to raise a genuine issue of material fact. Id. Accordingly, defendants are entitled to summary judgment on the § 1 claim.”

Memo. Order, Dec. 17, 1984.

2. Unfair Practices Act. The complaint also alleges a claim under the California Unfair Practices Act. Cal.Bus. & Prof.Code § 17000, et seq. This act, inter alia, prohibits sales below cost. Cal. Bus. & Prof.Code § 17043. As noted earlier, the predatory conduct alleged in this case — sales below cost — is a controverted issue of fact. The Unfair Practices Act, unlike the Cartwright Act, does not mirror federal law. It may proscribe conduct permitted under federal law. See Inglis, 668 F.2d at 1049. Therefore, since questions of fact remain and because state law analysis differs from the federal claims, the cases counsel that discretion should be exercised in favor of dismissal without prejudice.

IV. CONCLUSION

For the reasons stated, the Court grants defendants’ motion for summary judgment on the Second Claim, both for monopolization and attempt to monopolize, and on the Third Claim for violation of the Cartwright Act. The Court exercises its discretion under Gibbs to dismiss the Fourth Claim for violation of the California Unfair Practices Act without prejudice to its being pursued in state court.

      . The Court earlier granted defendants’ motion for partial summary judgment on plaintiffs claim under § 1 of the Sherman Act. The uncontroverted facts were that there was no conspiracy, agreement or other concerted action. See discussion in Part III.C.l, infra.

      . By accepting this definition for purposes of ruling on the pending motion (because it is a controverted issue of fact), the Court does not indicate its approval of it; rather, the Court is quite skeptical of the proffered market definition. See, e.g., Twin City Sportservice v. Charles O. Finley & Co., 512 F.2d 1264, 1271-72 (9th Cir.1975).

      . Minor exceptions to the fixed price concept do not materially affect the characterization of the contract as a fixed price contract.

      . As the discussion in Inglis indicates, there is some “uncertainty" about the meaning of this requirement. See id. at 1029-30. What appears to be an aberrant statement is made in Forro Precision, Inc. v. International Btlsiness Mach. Corp., 673 F.2d 1045, 1059 (9th Cir.1982), that “this Circuit has rejected the premise that probability of actual monopolization is an essential element of proof of attempt to monopolize." However, this statement has been treated as referring to something other than the "dangerous probability of success" element. See Aurora Enter., Inc. v. National Broadcasting Co., 688 F.2d 689, 695-96 (9th Cir.1982). Moreover, the more recent cases continue to follow the claim’s formulation set forth in Inglis. See, e.g., De Modena v. Kaiser Found. Health Plan, Inc., 743 F.2d 1388, 1395 (9th Cir.1984), cert. denied, — U.S.-, 105 S.Ct. 1230, 84 L.Ed.2d 368 (1985); Airweld, Inc. v. Aireo, Inc., 742 F.2d 1184, 1192 (9th Cir.1984), cert. denied, — U.S. -, 105 S.Ct. 1184, 84 L.Ed.2d 331 (1985). Thus, it is clear that the requirement continues to exist in this Circuit.

      . This circumstance also casts doubt on whether plaintiff can prove the existence of specific intent. See Inglis, 668 F.2d at 1027-28.

      . Although not alleged in its complaint, on the motion plaintiff takes the position that the Fourth Claim is also susceptible of being read as stating a claim under the "Unfair Competition Statutes,” Cal.Bus. & Prof.Code § 17200, et seq. In view of the disposition of this claim, it is unnecessary to reach the issue of whether a statutory unfair competition claim has been adequately alleged.

      . The Court notes that a state court action has been pending between the parties since 1982 and that unfair competition claims are asserted in that action. Even without such a pending action, no statute of limitations problems should be encountered because of California’s application of the equitable tolling doctrine to pendent claims dismissed under Gibbs. See Mattson v. City of Costa Mesa, 106 Cal.App.3d 441, 455 n. 3, 164 Cal.Rptr. 913 (1980).