author: GOETTEL, District Judge.

text:
    AMERICAN FEDERATION OF TELEVISION AND RADIO ARTISTS, AFL-CIO, Plaintiff, v. BENTON & BOWLES, INC., Defendant.
    No. 85 Civ. 1067 (GLG).
    United States District Court, S.D. New York.
    Feb. 3, 1986.

      Mortimer Becker, New York City, for plaintiff; Robert M. Jaffe, George C. Zafer-iou, of counsel.
    Davis & Gilbert, New York City, for defendant; Howard J. Rubin, Janet Linn, of counsel.
   GOETTEL, District Judge.

The plaintiff, American Federation of Television and Radio Artists, AFL-CIO (“AFTRA”), brought this action to vacate and modify a portion of an arbitration award. AFTRA now moves for summary judgment pursuant to Fed.R.Civ.P. 56. The defendant, Benton & Bowles, Inc. (“B & B”), cross-moves for summary judgment confirming the award.

I. Background

The facts on this motion are essentially undisputed. The action is, therefore, ripe for summary judgment.

AFTRA is a labor union representing, among others, television performers throughout the United States. Defendant B & B, as part of its business, produces television programs. Both AFTRA and B & B were, at all pertinent times, parties to a collective bargaining agreement known as the 1979-82 AFTRA National Code of Fair Practice for Network Television Broadcasting (the “TV Code”). The TV Code governs the terms and conditions of employment of performers on programs originally produced for network television.

A. The TV Code

The TV Code sets a pay-scale for compensating performers when programs in which they appeared are subsequently rebroadcast. The compensation varies depending on the nature of the rebroadcast. The TV Code provides for “re-play” fees in the event a program is rebroadcast over “free” television, as opposed to cable or pay television. An addenda to the Code specifies substantially smaller fees payable when a program is released for exhibition on pay cable, on basic cable, in flight, or on video cassette.

The TV Code also restricts a producer’s right to “edit” a previously broadcast program without first obtaining AFTRA’s consent on mutually agreeable terms and conditions. Specifically, subparagraph 73(d) of the TV Code provides, in pertinent part, that “no excerpt, part, portion, segment or version of any program or edited variation thereof or combination of program material, may be used in any manner or for any purpose unless AFTRA consents thereto upon terms and conditions as mutually agreed upon.” Jaffe Affidavit, Exhibit A 1173(d). However, a producer has the right to “replay an edited-down program, where editing is required by program time exigencies.” Id. Disputes between a producer and AFTRA are arbitrable under a very broad arbitration clause in the TV Code.

B. The Dispute

In 1981 and 1982, B & B produced “Texas,” a soap opera. During those years, “Texas” was exhibited over the facilities of the National Broadcasting Company (“NBC”) television network. “Texas” was seen over “free” television. Each episode of “Texas” as originally produced and exhibited was sixty minutes in length. NBC cancelled “Texas” in December 1982.

B & B thereafter entered into an agreement with WTBS Superstation, Inc. (“Su-perstation”) to provide “Texas” to Supers-tation for exhibition as two thirty-minute episodes on consecutive days each week. B & B did not obtain AFTRA’s consent to provide “Texas” to Superstation in two thirty-minute versions as opposed to one sixty-minute program. Commencing on October 3, 1983, Superstation exhibited the original “Texas” episodes over the facilities of WTBS, a “free” television station in the Atlanta area, and, simultaneously, via satellite to cable television systems throughout the country.

As compensation for these rebroadcasts, B & B paid performers who appeared on the episodes of each program the fees payable under the TV Code when a network television program is rebroadcast over basic cable. AFTRA objected to this, contending that “Texas” performers were entitled to both the basic cable fee and to the far greater payment for rebroadcasts over free television. A dispute having arisen between AFTRA and B & B concerning the fees paid by B & B to the performers who appeared on “Texas” and with respect to B & B’s right to edit “Texas” into two thirty-minute programs, AFTRA served and filed an arbitration demand, pursuant to the arbitration provisions of the TV Code.

On November 26, 1984, following nine separate days of hearing memorialized in over 1100 pages of trial transcript and 90 exhibits, the arbitration panel rendered its opinion and award. Bertram T. Kupsinel, the neutral arbitrator and chairman of the arbitration panel wrote the opinion. The B & B-designated arbitrator concurred. The AFTRA-designated arbitrator dissented.

C. The Arbitration Opinion and Award

Bertram Kupsinel’s opinion concludes that B & B violated the TV Code by exhibiting the one-hour program as two one-half hour programs without obtaining AFTRA’s consent. According to the opinion, this editing was not required by “program time exigencies.” With respect to the fee dispute, the panel found that the TV Code did not address the question of what fees were due when a program is simultaneously shown on both free TV and basic cable. Nor had the parties ever agreed on this question.

The arbitration panel specifically rejected the remedies requested by each party. These included AFTRA’s suggestion that it award both a replay fee and a cable fee, B & B’s invitation to deem sufficient the basic cable fee that it had already paid, and AFTRA’s suggestion that it award double the cable fee, in addition to any other fee award, to compensate for the improper editing.

The panel recognized that the parties had previously tried and failed to settle their dispute. It therefore refused to direct the parties to negotiate, since such a direction would have served no purpose. Instead, it ordered that

Benton & Bowles, Inc. shall forthwith pay to each performer an additional sum of money equal to the amount already paid to each performer in “Texas” to date for rebroadcasts on WTBS.
Should any further rebroadcasts of the program “Texas” take place in the same one-half hour format, then each performer shall be paid double the amount each had been paid for rebroadcasts on WTBS prior to the date of this award.

Jaffe Affidavit, Exhibit B.

D. The Current Action

Both parties agree that their dispute was arbitrable. But, according to the plaintiff, the arbitrators exceeded the scope of their contractual authority as proscribed by sub-paragraph 95(g) of the TV Code which states, “Nothing herein contained shall be deemed to give the arbitrators the authority, power or right to alter, amend, change, modify, add to or subtract from any of the provisions of this Code.” Jaffe Affidavit, Exhibit A 1195(g)e. AFTRA maintains that a literal reading of the TV Code requires payment of both a replay fee and a cable fee, and that the arbitrators had no right to depart from the express provisions of the TV Code in this regard. It also challenges their authority to exceed their powers and permit Superstation to continue to rebroad-east “edited” programs without AFTRA’s permission. AFTRA now seeks an order vacating in part and modifying in part the award by including therein (1) a direction enjoining B & B from further editing or using edited versions of “Texas” without obtaining AFTRA’s consent, and (2) a direction to B & B to pay performers who appeared in the “Texas” episodes the combined basic cable and replay fees that it had sought before the arbitrators. Alternatively, AFTRA seeks an order vacating the entire award and directing the arbitrators to render a new award consistent with the foregoing.

II. Discussion

The federal courts have narrowly circumscribed review of arbitration awards, recognizing that such review derogates from the purpose of arbitration itself. Nevertheless, the powers of an arbitrator are “not unlimited in the' resolution of labor disputes. The arbitrator is confined to the interpretation and application of the collective bargaining agreement, and although he may construe ambiguous contract language, he is without authority to disregard or modify plain and unambiguous provisions.” Detroit Coil Co. v. International Association of Machinists and Aerospace Workers, 594 F.2d 575, 579 (6th Cir.), cert. denied, 444 U.S. 840, 100 S.Ct. 79, 62 L.Ed.2d 52 (1979). In construing ambiguous provisions, the arbitrator is free to examine the entire contract, its content, prior negotiations between the parties, industry practice, and any other indicia of the parties intentions. Torrington Co. v. Metal Products Workers Union Local 1645, 362 F.2d 677, 681 (2d Cir.1966) (negotiations); Desert Palace, Inc. v. Local Joint Executive Board, 679 F.2d 789, 792 (9th Cir.1982) (language, content, and other indicia); Detroit Coil Co., supra, 594 F.2d at 579 (practices of the shop). Likewise, an arbitrator may fashion a remedy to meet an unanticipated problem.

As long as a plausible solution is available within the general framework of the agreement, the arbitrator has the authority to decide what the parties would have agreed on had they foreseen the particular item in dispute. See F. Elkouri & E. Elkouri, How Arbitration Works 299-302 (3d Ed.1973). In such cases, judicial review is limited to whether the arbitrator’s solution can be rationally derived from some plausible theory of the general framework or intent of the agreement.

Desert Palace, Inc., supra, 679 F.2d at 793. See also United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 80 S.Ct. 1358, 1361, 4 L.Ed.2d 1424 (1960). (“When an arbitrator is commissioned to interpret and apply the collective bargaining agreement, he is to bring his informed judgment to bear in order to reach a fair solution of a problem. This is especially true when it comes to formulating remedies. There is a need for flexibility in meeting a wide variety of situations. The draftsmen may never have thought of what specific remedy should be awarded to meet a particular contingency.”)

However, an arbitrator may not ex- ' ceed the limits of his contractual authority. If the arbitrator’s award is not derived in some rational way from the collective bargaining agreement, it must be overturned. Detroit Coil Co., supra, 594 F.2d at 579. In particular, where a clause in an agreement to arbitrate prohibits an arbitrator from adding to or modifying an agreement, additions or modifications to that agreement will be vacated. Torrington Co. v. Metal Products Workers Union Local 1645, supra, 362 F.2d 677.

The plaintiff contends that the arbitrators erred in formulating a remedy to compensate the performers for the rebroadcasts when the TV Code itself provided one. In so arguing, they misread the panel’s findings. Although the arbitrators stated that Superstation is both a free television and a basic cable system, Opinion of the Chairman at 9, Jaffe Affidavit, Exhibit B, their essential finding was that the TV Code did not contemplate the existence of such a hybrid broadcasting network and did not require that performers be reimbursed with both cable and replay fees. Thus, the panel was free to fashion a remedy to meet this novel situation. The arbitrators awarded a rebroadcast fee that falls between the basic cable and television replay fees. Although far closer to the former than to the latter, it appears plausibly derived from the “general framework of the agreement.” In the absence of a viable alternative, we decline to upset this aspect of the award.

The arbitrators’ decision with respect to the improper editing is more troublesome. The panel found that rebroadcasting “Texas” in one-half hour segments without AFTRA’s consent was a violation of the TV Code. The panel’s award, which implicitly authorizes the continued showing of one-half hour episodes, runs directly contrary to this uneontested finding. This aspect of the arbitrators’ award exceeded the limits of their contractual authority. We therefore vacate and remand this award to the arbitrators with an instruction to modify the award to enjoin B & B from showing “Texas” in the future in any form other than the original one-hour programs without AFTRA’s consent and with further instructions to delete the reference in the fifth paragraph of the award to “in the same one-half hour format.” The award is to remain unchanged in all other respects.

III. Conclusion.

The decision of the arbitrators is vacated. The Clerk will enter a judgment of remand to the arbitration panel to proceed in accordance with this opinion.

SO ORDERED.

      . Hundreds, if not thousands, of producers have signed this agreement.

      .It reads,
      All disputes and controversies of every kind and nature whatsoever between any Producer and AFTRA or between any Producer and any member of AFTRA, arising out of or in connection with this Code, and any contract or engagement (whether overscale or not, and whether at the minimum terms and conditions of this Code or better) in the field covered by this Code as to the existence, validity[,] construction, meaning, interpretation, performance, non-performance, enforcement, operation, breach, continuance, or termination of this Code and/or such contract or engagement, shall be submitted to arbitration in accordance with the following procedure and such arbitration shall be conducted under the Voluntary Labor Arbitration Rules then obtaining of the America[n] Arbitration Association except as otherwise provided herein.
      Jaffe Affidavit, Exhibit A ¶ 95.

      . Superstation cancelled “Texas" in June 1984.

      . However, he felt compelled to state his disagreement with many of the conclusions reached in the opinion.

      . In accord with the general policy against modification of arbitration awards, section 11 of the Federal Arbitration Act, 9 U.S.C. § 11 (1982), permits modification of an award in three, very-limited circumstances. The section permits modification when, "(1) there is an evident material miscalculation of figures or a material mistake in ... description ...; (2) the arbitrators have awarded upon a matter not submitted to them ...; (3) the award is imperfect in matter of form not affecting the merits of the controversy.” Id. Since, AFTRA has not and cannot allege that any of these circumstances are present, we are powerless to modify the award. The only relief that we can provide is an order vacating the award and remanding to the arbitrators for further proceedings.

      . [A]n arbitrator is confined to interpretation and application of the ... agreement; he does not sit to dispense his own brand of industrial justice. He may of course look for guidance from many sources, yet his award is legitimate only so long as it draws its essence from the collective bargaining agreement. When the arbitrator's words manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of the award. United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 80 S.Ct. 1358, 1361, 4 L.Ed.2d 1424 (1960).

      . The Court can not find fault with the arbitrators' conclusion that ordering further negotiations would have been fruitless. See supra p. 685.


source: Caselaw Access Project

author: EDWARD WEINFELD, District Judge.

license: Public Domain

text:
    Frederick ZISSU, Plaintiff, v. BEAR, STEARNS & CO., a New York Limited Partnership, Barry West, Carleton A. Holstrom, Encore Exploration, Inc., a Delaware corporation, Hearts Energy, Inc., a New York corporation, Gerald B. Cramer, Richard D. Segal, Edward J. Rosenthal, John Doe and Richard Roe, Inc., Defendants.
    No. 84 Civ. 7383.
    United States District Court, S.D. New York.
    Feb. 4, 1986.

      Jaffe & Schlesinger, P.A., Springfield, N.J., for plaintiff; Robert H. Jaffe, Arthur Swidler, of counsel.
    Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for Bear, Stearns, defendants; Max Gitter, Robert P. Haney, of counsel.
    Rosenman, Colin, Freund, Lewis & Cohen, New York City, for Encore, defendants; Gerald Walpin, Steven S. Miller, Brian G. Lustbader, Richard L. Claman, of counsel.
   EDWARD WEINFELD, District Judge.

Plaintiff commenced this action upon allegations, among others, that defendants Bear, Stearns & Co. (“Bear Stearns”), Encore Exploration, Inc. (“Encore”) and other defendants acting in concert had violated sections 12(2) and 15 of the Securities Act of 1933, section 10(b) of the 1934 Act, and Rule 10b-5 promulgated thereunder. In substance, plaintiff charged that he was induced to execute a subscription agreement to purchase ten (10) units of a limited partnership known as Encore Exploration 1981-LC, L.P. (“Encore 1981”) at a total cost of $1,500,000 by untrue statements of material fact and by omissions of material facts in original and supplemental selling documents prepared by representatives of Encore and Bear Stearns. Encore 1981 was to engage in a drilling operation for oil and gas. The defendants categorically denied the plaintiff’s charges and in resisting his claims, relied upon the very documents upon which plaintiff predicated his claims. After a twelve-day trial, the jury reported a verdict in favor of the defendants.

PLAINTIFF’S MOTION FOR A NEW TRIAL

The plaintiff now moves for a new trial with respect to his claims pursuant to Rule 59(a) of the Federal Rules of Civil Procedure. The application is so clearly without substance that it borders on the frivolous and does not warrant detailed discussion. Sharp issues of fact were presented which the jury decided adversely to plaintiff’s contentions. Indeed, the testimony of Zissu, the plaintiff, and defense witnesses was in such conflict on material matters that the Court in its instructions to the jury suggested that the “irreconcilable difference in testimony is not inadvertence or lack of recollection.”

Especially frivolous is that branch of his motion for a new trial on the ground that it was highly prejudicial in the prosecution of his claim to allow the defendants to assert before the jury their counterclaims, referred to hereafter, and that prejudicial statements were made by counsel for the Encore defendants in summation. As to the first branch of this claim, no more need be said than that at no time during the course of the litigation did plaintiff make any such contention as to the assertion of the counterclaims in this action. Moreover, the evidence plaintiff now argues prejudiced the presentation of his claims would have been admissible to rebut those claims absent the counterclaims.

Plaintiffs final contention — that a portion of Encore’s counsel’s summation prejudiced his right to a fair trial — considered against the totality of the evidence, the plaintiff’s contradictory deposition and trial testimony, the Court’s specific instruction as to these particular litigants’ right to a fair determination based solely on the evidence and the law, is, to understate it, bordering on the absurd. Again, it is significant that counsel for plaintiff, who now urges this claim, offered no objection when the argument was advanced or even thereafter. Accordingly, plaintiff’s motion for a new trial is denied.

PLAINTIFF’S MOTION FOR JUDGMENT N.O.V. PURSUANT TO FED.R.CIV.P. 50(b)

Plaintiff, a senior partner in a New York City law firm, has engaged extensively in securities transactions. In addition to his legal partnership, he is the chief executive of a company whose shares are traded on the New York Stock Exchange, and also is the chief executive of another company whose shares are traded on the American Stock Exchange. In late 1981, aware that his taxable income was in excess of $600,-000, he sought to obtain the benefit of a tax shelter and with that objective purchased the ten shares of the Encore limited partnership pursuant to a Private Offering Memorandum (“POM”). Plaintiff executed a series of documents in which, among other matters, he set forth his experience in making such purchases; represented that he has “such knowledge and experience in financial and business matters” that he is “capable of evaluating the merits and risks of an investment [in Encore 1981]” and that he was “able to bear the substantial economic risks of my investment.” Plaintiff further warranted that he was informed that his investment was a “speculative one and involves a high degree of risk,” and that he understood that Encore 1981 was “newly organized, has no financial or operating history and is a speculative venture.”

Based on the foregoing representations and an indemnity provision referred to hereafter, the defendants Encore and Bear Stearns each asserted a counterclaim that it had sustained damages for legal fees and other costs in defending against the claims asserted by plaintiff. The jury reported a verdict in favor of each defendant upon its counterclaim for breach of warranty, but found in favor of plaintiff on Encore’s additional counterclaim, charging him with fraud in inducing the sale of the Encore shares. Upon consent of the parties, the issue of damages was tried to the Court, but before the conclusion of this branch of the trial they stipulated the amount of damages incurred in defending against plaintiff’s suit, to wit, the sum of $235,000 by Bear Stearns and the sum of $320,000 by Encore, without prejudice to the right of plaintiff to challenge the award.

The plaintiffs motion for an n.o.v. order is based upon contentions that as a matter of contract law the defendants are barred from recovering damages for attorneys’ fees and costs incurred in defending against plaintiff’s securities fraud claims; that the counterclaims are prohibited by section 14 of the 1933 Act and section 29 of the 1934 Act; and that the indemnity agreement is against public policy. ■

We consider each of these contentions separately.

A. Contract Principles

Paragraph 8 of the Subscription Agreement provides:

I understand the meaning and legal consequences of the representations and warranties contained in paragraph 2 hereof, and I agree to indemnify and hold harmless the Partnership and each general and limited partner thereof from and against any and all loss, damage or liability due to or arising out of a breach of any representation or warranty of mine, whether contained in the Partnership Agreement or this Subscription Agreement. Notwithstanding any of the representations, warranties, acknowledgments or agreements made herein by me, I do not thereby or in any other manner waive any rights granted to me under federal or state securities laws.

Plaintiff, in the assertion and prosecution of his claims leading to the trial and in his deposition and trial testimony, made statements at variance with the warranties contained in the Subscription Agreement. Zis-su first argues, even assuming the validity of the foregoing indemnification provision, it does not expressly mention attorneys’ fees and costs in defending a suit brought by an investor and since a contract must be strongly construed against the party who prepared it (the defendants), they are not entitled to indemnity for attorneys’ fees and costs as a matter of contract law.

It is correct that under New York law, contracts are strictly construed against the drafter if there is doubt or ambiguity as to the meaning of the contract’s terms. This particular rule of construction is to be used only as a last resort, when all other rules of construction fail. While the above quoted indemnity provision does not expressly specify attorneys’ fees, New York courts have held that broad indemnification provisions should be interpreted to extend to such fees. The all inclusive language of the clause “to indemnify and hold harmless the Partnership and each general partner ... from and against any and all loss, damage or liability ...” is not ambiguous and is sufficiently comprehensive to include loss or damage for payment of attorneys’ fees and costs incurred by plaintiff’s breach of the warranties.

Plaintiff’s additional contention that the indemnity provision in effect overcomes the American rule that each litigant pays his own legal fees referred to in Alyeska Pipeline Service Co. v. Wilderness Society, is equally without merit. Alyeska specifically noted that imposition of legal fees and costs in a litigation upon a losing litigant is not foreclosed when there is an “enforceable contract.” Here there was such an express undertaking by plaintiff in the event of a breach of his warranty and representations.

Zissu further argues that the provision in paragraph 8 which states that the representations, warranties and agreements referred to therein do not constitute a waiver of any rights under the securities laws conflicts with the first sentence — the indemnification provision. The argument proceeds that since the second is more specific than the first, it should be read as an exception to the indemnification clause precluding holding Zissu liable for defendants’ attorneys’ fees. However, the two sentences are not in conflict; they do not modify or limit each other. Defendants did not seek to hold Zissu liable for the exercise of his rights under the securities laws, but rather for his breaches of the representations he made in the Agreement. Zissu retained his right to sue under the securities laws, which he did; however, he did not have a right to breach the warranties he made. Plaintiff, in large measure, based his lawsuit upon statements contrary to his warranties, testified upon both his deposition and upon the trial contradictory of his warranties, which breaches required defendants to incur legal fees and other expenses in resisting his claims and defending this lawsuit.

Zissu’s final argument based on contract law is that the indemnification provision does not give Bear Stearns as broker-dealer a right to indemnity; that it only applies to the general and limited partners. However, it is beyond dispute that Bear Stearns was not only the broker-dealer, but also a special limited partner in Encore 1981. It was in that capacity that Bear Stearns was entitled to recover on its counterclaim for breach of Zissu’s warranties.

B. The Claim that the Warranties Provision Violated § 14 of the 1933 Act and § 29(a) of the 1934 Act

Section 14 of the 1933 act and a similar nonwaiver provision of section 29(a) of the 1934 Act provides:

Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this subchapter or of the rules and regulations of the Commission shall be void.

Plaintiff contends that the counterclaims are barred by the foregoing provisions and that he cannot be held liable for exercising his right to commence this action for alleged violations of the 1933 and 1934 Acts. But he was not barred from asserting and prosecuting his claim of alleged violations of those Acts; indeed, this very action flies in the face of that claim and of the express recognition that the indemnity provision was not a waiver of plaintiff’s rights under federal or state securities laws. The counterclaim is based upon matters wholly independent of any alleged violations of the securities acts; it is based upon his representations and warranties and his breach thereof. Had he not breached his warranties, as the jury found, his action would have been a straightforward suit based upon the asserted violations by the defendants of the securities acts and whether he sustained or failed to carry his burden of proof, would not have brought into play the defendants’ counterclaims.

C. Indemnity Agreement vs. Public Policy

Zissu’s final thrust is that permitting the defendants to recover attorneys’ fees based on the indemnification clause violates public policy; that it would have an in terrorem effect on other investors by discouraging them from bringing suit to enforce the securities laws out of fear of having to pay attorneys’ fees to defendants, even if there were merit to the claim but the investor failed to carry his burden of proof.

The issue before this Court is whether enforcing this indemnity agreement on these facts is contrary to the policies underlying the securities laws. The Court need not address whether enforcement of all indemnity provisions between an investor and any issuer of securities is contrary to policy. Enforcing the indemnification provision in this Subscription Agreement did not deter Zissu and need not deter other investors from bringing suits to enforce their rights under the securities laws. The only potential chilling effect is on those investors who make representations in a subscription agreement which they later repudiate. It would discourage such investors from using their own fraudulent conduct in order to bring unjustified lawsuits.

The indemnification provision does not permit the defendants to recover attorneys’ fees because Zissu sued them for alleged violations of the securities laws. It was triggered, as already noted, by plaintiffs own conduct when he breached the representations which caused loss and damage to the defendants. It was his representations upon which defendants relied in selling the limited partnership shares to plaintiff. Zissu was the one who made the counterclaims possible. If Zissu had not made written representations and then repudiated them to allege securities laws violations by the defendants, the indemnification clause would not have come into play. Moreover, not only is enforcement of this indemnification clause not contrary to securities law policies, but the securities laws authorize courts to award attorneys’ fees on these facts. Section 11(e) of the 1933 Act provides that courts may award costs and reasonable attorneys’ fees if the plaintiff’s suit is without merit. The issue of whether Zissu breached warranties that he understood Encore 1981 was a speculative investment with a high degree of risk, that he was not relying on any representations other than those in the POM, that he had carefully reviewed the POM and Subscription Agreement, and that he was capable of calculating the risks of investing in Encore 1981, were submitted to the jury. The jury returned a verdict in favor of Encore and Bear Stearns, finding that Zissu had breached warranties made to those defendants. It was those warranties which defendants relied upon in deciding to sell units of the oil and gas partnership to Zissu and it was these warranties that Zissu repudiated in his allegations in the commencement of this action, in sworn statements made in pretrial depositions and in his trial testimony. Where an investor repudiates warranties previously made for the purpose of bringing a suit, enforcement of the indemnification clause comports with existing policies of the securities laws.

Finally, as defendants note, SEC Rule 146 required them to ascertain whether plaintiff was capable of evaluating the risks of the investment or financially able to bear the risk. This was one of the reasons they required plaintiff to complete the subscription agreement and confidential offeree questionnaire. If this indemnification agreement is not enforceable, it would undermine the securities laws to the extent that investors would be free to make misrepresentations with impunity and issuers would be wholly unable to accurately assess the qualifications of potential investors in risky ventures such as this one.

It is ironic that the plaintiff should urge public policy considerations to relieve him of his indemnity agreement. Enforcement of his agreement is not only not contrary to public policy considerations, but indeed is required in the public interest. Here a lawyer, a sophisticated and experienced trader in securities, who in two months purchased and sold $50,000,000 in United States Treasury bills, sat before a jury and when questioned about the documents here at issue repeatedly sought to belittle their sanctity by sneeringly referring to them as “boiler plate,” seeking to convey to the jury they were mere scraps of paper without any legal significance. Indeed, public policy considerations require that Zissu be held to his express obligation in order to encourage respect for the law and to impress upon him and others that specifically defined commitments and representations are not scraps of paper to be disregarded at will. If enforcement of this indemnification clause on these facts deters future Frederick Zissus from repudiating expressly stated representations and testifying at depositions and upon trials contrary to the facts warranted, it is fatuous to argue that it is contrary to public policy.

DEFENDANTS’ MOTION FOR ATTORNEYS’ FEES UNDER § 11(e)

Encore and Bear Stearns move for costs and reasonable attorneys’ fees pursu- ’ ant to section 11(e) of the Securities Act of 1933. Section 11(e) provides:

In any suit under this or any other section of this subchapter the court may, in its discretion, require an undertaking for the payment of the costs of such suit, including reasonable attorney’s fees, and if judgment shall be rendered against a party litigant, upon the motion of the other party litigant, such costs may be assessed in favor of such party litigant (whether or not such undertaking has been required) if the court believes the suit or the defense to have been without merit, in an amount sufficient to reimburse him for the reasonable expenses incurred by him, in connection with such suit, such costs to be taxed in the manner usually provided for taxing of costs in the court in which the suit was heard.

For the Court to award attorneys’ fees, it must find that plaintiff’s suit was “without merit.” The Second Circuit has held that this means the Court must find that the suit “borders on the frivolous or has been brought in bad faith.” Mere failure of the plaintiff to present sufficient evidence to support his claims does not in itself support a finding of frivolity.

While the Court recognizes that costs and attorneys’ fees should not be awarded simply because the defendants prevailed, Zissu’s claims were utterly without merit. Indeed, any verdict by the jury-other than that reported on plaintiff’s claims would have been so clearly against and contrary to the weight of the evidence that the Court would have been required to set it aside. If there ever has been a case involving frivolous or bad faith claims, it is this one. Plaintiff, a sophisticated investor, purchased units of a highly risky oil and gas venture, Encore 1981, in the hopes of obtaining tax advantages. When the venture was less successful in locating oil and gas than had been hoped, plaintiff brought suit alleging that defendants had made material misstatements and material omissions in violation of section 12(2) of the 1933 Act and section 10(b) of the 1934 Act. Upon the entire record, it is an understatement merely to say that this was a strike suit instituted for its nuisance and settlement value. It was a brazen attempt by plaintiff to disregard his contractual obligation.

The Court is of the view that the totality of the trial record reveals the frivolous nature of this lawsuit and that it was brought in bad faith. Because plaintiff’s claims boil down to mere disappointment with the amount of tax write-offs he obtained and the proof he introduced at trial was so replete with blatant contradictions and unsubstantiated allegations, the Court awards attorneys’ fees and costs to Bear Stearns and Encore under section 11(e).

So ordered.

      . 15 U.S.C. §§ 77/(2) and 77o.

      . 15 U.S.C. § 78j(b).

      .17 C.F.R. 240.10b-5 (1985).

      . See Berner v. British Commonwealth Pacific Airlines, Ltd., 346 F.2d 532, 542 (2d Cir.1965), cert. denied, 382 U.S. 982, 86 S.Ct. 559, 15 L.Ed.2d 472 (1966); see also Emery-Waterhouse Co. v. Rhode Island Hospital Trust Nat'l Bank, 757 F.2d 399, 410 (1st Cir.1985); Kokesh v. American S.S. Co., 747 F.2d 1092, 1095 (6th Cir.1984); Kehr v. Smith Barney, Harris Upham & Co., 736 F.2d 1283, 1286 (9th Cir.1984).

      . See 67 Wall Street Co. v. Franklin Nat'l Bank, 37 N.Y.2d 245, 371 N.Y.S.2d 915, 918, 33 N.E.2d 184, 187 (1975); Slatt v. Slatt, 477 N.Y.S.2d 178, 180 (1st Dept.1984), aff’d, 102 A.D.2d 475, 64 N.Y.2d 966, 488 N.Y.S.2d 645, 477 N.E.2d 1099 (1985); Dublirer v. Lascher, 96 A.D.2d 474, 464 N.Y.S.2d 790, 791 (1st Dept.1983); see also Prescott, Ball & Turben v. LTV Corp., 531 F.Supp. 213, 217 (S.D.N.Y.1981).

      . See Schering Corp. v. Home Ins. Co., 712 F.2d 4, 10 n. 2 (2d Cir.1983); Dorman v. Cohen, 66 A.D.2d 411, 413 N.Y.S.2d 377, 380 (1st Dept. 1979).

      . See, e.g., Lavorato v. Bethlehem Steel Corp., 91 A.D.2d 1184, 459 N.Y.S.2d 170, 171 (4th Dept.1983); Colon v. Automatic Retailers Ass’n Service, Inc., 74 Misc.2d 478, 343 N.Y.S.2d 874, 877-78 (Cir.Ct.N.Y.C.1972).

      . 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975).

      . Id. at 257, 95 S.Ct. at 1621.

      . 15 U.S.C. § 77n.

      . 15 U.S.C. § 78cc(a).

      .The defendants asserted their counterclaim upon an amendment only after it appeared that in his deposition plaintiff repudiated his warranties.

      . 15 U.S.C. § 77k(e).

      . 17 C.F.R. § 230.146.

        .See McDaniel v. Companies Minera Mar de Cortes, 528 F.Supp. 152, 162-64 (D.Ariz.1981).

      . 15 U.S.C. § 77k(e).

      . See Aid Auto Stores, Inc. v. Cannon, 525 F.2d 468, 471 (2d Cir.1975); Klein v. Shields & Co., 470 F.2d 1344, 1347 (2d Cir.1972); Rubin v. Long Island Lighting Co., 576 F.Supp. 608, 615 (E.D.N.Y.1984); Straus v. Holiday Inns, Inc., 460 F.Supp. 729 (S.D.N.Y.1978).

      . Aid Auto Stores, 525 F.2d at 471.

      . See, e.g., Unijax, Inc. v. Champion Int'l, Inc., 683 F.2d 678 (2d Cir.1983); Gehrhardt v. General Motors Corp., 581 F.2d 7 (2d Cir.1978).

      . Cf. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 210 n. 30, 96 S.Ct. 1375, 1389 n. 30, 47 L.Ed.2d 668 (1976); Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 740-41, 95 S.Ct. 1917, 1927-28, 44 L.Ed.2d 539 (1975).

      . The parties have stipulated that if the Court awards attorneys’ fees and costs under § 11(e), the amount will be the same as that stipulated to with respect to the breach of warranty counterclaim on which the defendants have prevailed.