author: NEAHER, District Judge.

text:
    FEDERAL DEPOSIT INSURANCE CORP., Plaintiff, v. Robert BORNE, Gloria Chizner as Executrix of the Estate of Leo Chizner, and Jeron Realty, Inc., Defendants.
    No. 81 CV 1096 (ERN).
    United States District Court, E.D. New York.
    Dec. 21, 1984.

      Ira L. Hyams, Jericho, N.Y., for plaintiff.
    D’Amato, Forchelli, Libert, Schwartz, Mi- . neo & Weinstein by Jack L. Libert, Richard C. Goldberg, Mineóla, N.Y., and Granville Crabtree, Albert Sanchez, Sarasota, Fla., for defendant Borne.
    Meissner, Tisch & Kleinberg by Samuel Rosenberg, New York City, for defendant Chizner.
   MEMORANDUM AND ORDER

NEAHER, District Judge.

This case is before the Court upon plaintiff’s motion for summary judgment and defendant Borne’s motion to amend the answer. It arises from three notes which evidence financial transactions related to defendants’ real estate business dealings. In essence, the three counts of the complaint comprise three separate lawsuits and will be treated as such. Mindful of the context of summary judgment, the facts are related as they appear in defendants’ opposing papers. Significantly, plaintiff’s papers do not controvert any of the alleged facts, but do contest their legal consequences.

Robert Borne was president of Twin Ridge Properties, Inc., a subsidiary of Willow Industries, Inc. In 1972 Willow Industries, an entity in which Borne owned stock, developed, through Twin Ridge, a project of garden apartments located in Baltimore. Union Dime Savings Bank and the B.F. Saul Real Estate Investment Trust provided financing in the form of a mortgage commitment. At scheduled intervals, money would be disbursed as the project moved toward completion.

Unfortunately, the scheduled timetable could not be met. In response, Twin Ridge sought an extension of the financing, to which B.F. Saul agreed if Twin Ridge would add $350,000 to the project. Similar to the prior arrangement, this money would be infused into the project in installments as the project neared completion.

Twin Ridge’s source of funds was a personal loan from Borne, who consulted Warren Eichele, Vice President of the Franklin National Bank (FNB). Borne explained that B.F. Saul wanted the right to obtain the funds directly from the bank. To accommodate this requirement, Borne applied for a letter of credit on December 17, 1973, which FNB granted to B.F. Saul for the account of Twin Ridge on December 19, 1973. Under the letter, as the architects certified stages of completion of the project, FNB would disburse funds to B.F. Saul by agreeing to pay their drafts drawn on the Twin Ridge account. Apparently, to fund this account, Borne borrowed money from FNB, which funds he loaned to Twin Ridge. When Twin Ridge received this money, B.F. Saul would notify FNB to reduce the letter of credit accordingly.

Documents demonstrate partial performance of what Borne contends was the entire agreement between himself and FNB. On May 10, 1974, when the architects certified the project as 75% complete, Borne disbursed $100,000 to Twin Ridge, and B.F. Saul notified FNB to reduce the letter of credit to $250,000. This process was repeated on June 24, 1974, in the amount of $125,000, which reduced the letter of credit to $125,000. On each occasion, Borne executed a promissory note in favor of FNB. As collateral for the obligations, Borne had pledged shares of Willow Industries valued at $349,500.

Borne’s FNB bank ledger reveals that on May 22, 1974 he borrowed $100,000 and on June 24, 1974, $125,000. Both notes were due August 22, 1974. On that date he borrowed $225,000 on a note due September 23, 1974, which was renewed October 23, 1974, due November 22, 1974. Circumstances surrounding this last renewal provide the backdrop of events underlying the counterclaim.

Plaintiff entered the picture when FNB was declared insolvent in October 1974. Borne and Myron Friedman, an investment advisor, met with a Mr. Lebow of the FDIC. They explained the above-related arrangement and the importance of the last installment to successful completion of the project. Lebow renewed the $225,000 note and acknowledged his understanding and comprehension of the transaction. At the time, Lebow “assured me that I should renew the note and that the final installment of the letter of credit would in fact be honored.” Borne affidavit 1Í12. Having received this assurance, Borne did not look elsewhere for financing and renewed the note fully expecting plaintiff to make the last installment on the letter of credit. On October 31, 1974, however, plaintiff informed American Security and Trust Co., the successor to B.F. Saul, that it would not honor the last installment on the letter' of credit. Eventually foreclosure ensued, rendering Borne’s Willow Industries shares of stock worthless. Subsequently, plaintiff commenced this suit to recover on the October 23, 1974 renewal note.

I.

Concerning the $225,000 note, which is the subject of Count I of the complaint, Borne relies on U.C.C. § 3-119(1), which provides:

“As between the obligor and his immediate obligee or any transferee the terms of an instrument may be modified or affected by any other written agreement executed as a part of the same transaction, except that a holder in due course is not affected by any limitation of his rights arising out of the separate written agreement if he had no notice of the limitation when he took the instrument.”

Borne asserts that the letter of credit was a written agreement executed as part of the same transaction concerning the obligation at issue. Thus, the letter of credit modified the note and as a result, plaintiff’s right of enforcement is necessarily conditioned upon its compliance with the letter of credit.

Significantly, neither the note nor the letter of credit refer to one another. See VonBlaine v. Saunders, 80 A.2d 52, 53 (D.C.App.1951); McPherson v. Longview United Pentecostal Church, Inc., 540 S.W.2d 424, 432 (Tex.Civ.App.1976). Without the affidavits of Borne, Friedman, and Eichele, a relationship between the note and the letter of credit could not be inferred by reading these documents alone. Borne conceded during his deposition that the letter of credit did not appear to memorialize his recollection of the entire agreement between himself and FNB. In fact, when asked, “What is your recollection of the agreement?”, Borne answered, “I think it was oral.” He also testified that this agreement was referred to in a “put agreement”, identified as Plaintiff’s Exhibit 5 during the deposition, which agreement neither side has submitted.

Notably, too, there is no showing that the agreement between Borne and FNB explicitly conditioned repayment of any portion of the funds advanced to Borne upon FNB’s honoring the entire letter of credit. See Home v. Law Research Service, Inc., 35 A.D.2d 931, 316 N.Y.S.2d 367, 369 (1st Dept.1970) (per curiam), aff'd, 28 N.Y.2d 969, 323 N.Y.S.2d 707, 272 N.E.2d 80 (1971); see also Liberty Capital Group v. Rich, 78 A.D.2d 342, 434 N.Y.S.2d 432, 435 (1st Dept. 1981); Paul v. Weiss, 48 Misc.2d 683, 265 N.Y.S.2d 687, 693 (Sup.Ct. Sullivan Co.1965), aff'd, 24 A.D.2d 1054, 265 N.Y.S.2d 625 (3d Dept.1965) (per curiam); compare Hartley v. Hollman, 376 P.2d 1005, 1007 (Alaska 1962); Continental Supermarket, etc. v. Soboski, 210 Pa. Super. 304, 232 A.2d 216 (1967).

. From the context of the transactions, one would have expected this term to be part of a written agreement between FNB and Borne. But, to establish that the note is part of another agreement, Borne, of necessity, has supplemented his asserted written agreement (letter of credit) with parol evidence and evidence of partial performance. In this case, the evidence of partial performance does not permit an inference that Borne’s obligation to pay the note of August 22,1974 is conditioned upon FNB’s loaning him an additional $125,000 to be used to fund the account named in the letter of credit. By its terms the letter of credit is for B.F. Saul as between FNB and its customer account, Twin Ridge. See Fewox v. Tallahassee Bank & Trust Co., 249 So.2d 55, 57 (Fla.App.1971), cert. denied, 252 So.2d 799 (Fla.1971).

Moreover, to satisfy § 3-119(1), the “written agreement” must embody whatever modifies or affects the terms of the note. See Wayne v. Braun, 292 N.W.2d 578, 580 (N.Dak.1980); Sanden v. Hanson, 201 N.W.2d 404, 408 (N.Dak. 1972); National Refining Co. v. Zuckerman, 183 S.W.2d 390, 392 (Mo.App.1944). The terms of an otherwise unambiguous and complete note may not be varied by resort to extra-writing evidence as Borne attempts to do in this case. Main Bank of Chicago v. Baker, 86 Ill.2d 188, 56 Ill.Dec. 14, 427 N.E.2d 94, 100 (1981); see Adam-son v. Faircloth, 158 Ga.App. 401, 280 S.E.2d 376, 377 (1981); Crosby v. Jordan, 123 Ga.App. 83, 179 S.E.2d 537, 539 (1970). The parties engaged in what are, on their face, independent contracts designed to accomplish the additional funding of the Twin Ridge development. Additionally, even if the Court were to agree that there is a writing. which modifies or affects Borne’s obligation to pay the note, Borne cannot enforce the contract embodied by the writing, and, at the same time, inconsistently maintain that he has been discharged from the note. See Taco Nacho, Inc. v. Hasty House Restaurants, Inc., 436 So.2d 403, 405 (Fla.App.1983).

The Court’s disposition of the above issue does not preclude Borne from proving a contract which plaintiff breached. Allegedly, this contract arose when Borne explained his arrangement with FNB to plaintiff’s representative, Lebow, and Le-bow allegedly agreed to fund the last installment on the letter of credit. In his answer, as part of the second affirmative defense, Borne did not allege this theory of plaintiff’s liability. In If 10 he stated simply that plaintiff’s predecessor, FNB, breached the contract, detailed in 1111 5-9. In the proposed amended answer Borne seeks to preserve this defense as pleaded in the original answer and to reallege similar but slightly altered facts. In the counterclaim, 111118-22, both FNB and plaintiff allegedly breached the contract, resulting in a loss of $600,000 (loss of value of Willow Industries stock plus lost rents and profits from Twin Ridge development).

The proposed counterclaim appears to be compulsory. See Fed.R.Civ.P. 13(a). The breach occurred on or about October 31, 1974, when plaintiff informed the successor to the beneficiary of the letter of credit that it would not pay the third installment. Borne Affidavit 1112; Friedman Affidavit 11 5.

“In contract cases, the cause of action accrues and the Statute of Limitations begins to run from the time of the breach.”

John J. Kassner & Co. v. City of New York, 46 N.Y.2d 544, 550, 415 N.Y.S.2d 785, 389 N.E.2d 99 (1979) (citations omitted). Consequently, if Borne had asserted this counterclaim when he filed his answer in March 1981, it would have been time barred under the six-year statute of limitations of N.Y. C.P.L.R. § 213. The time bar reduces the significance of the counterclaim. Borne may only use the counterclaim to defeat his liability on the note, i.e., as a set-off. See 3 Moore’s Federal Practice ¶ 13.11.

In response to the motion to amend the answer, plaintiff asserts that Borne waived the right to interpose any defense, set-off, or counterclaim in the note.

“A waiver of the right to assert a setoff or counterclaim is not against public policy and has been enforced by this court (see Bank of New York v. Cariello, 69 A.D.2d 805, 415 N.Y.S.2d 65). However, such a waiver will not be enforced so as to bar a viable setoff or counterclaim sounding in fraud (see Sterling Nat. Bank & Trust Co. of N.Y. v. Giannetti, 53 A.D.2d 533, 384 N.Y.S.2d 176).

FDIC v. Frank L. Marino Corp., 74 A.D.2d 620, 425 N.Y.S.2d 34, 35-36 (2d Dept.1980) (memorandum). As the Court implies in Cariello, this waiver would not preclude a separate, but now time barred, lawsuit. Relying on the rule, however, Borne contends that his claim sounds in fraud. Specifically, Lebow deceived Borne when he “assured” Borne that the rest of the money on the letter of credit would be forthcoming. Buoyed by these assurances, Borne signed the renewal note. Borne Affidavit II12. Plaintiff counters that Borne was already indebted to the bank when he signed the renewal note on October 23, 1974 and, therefore, plaintiff could have sued him then. Instead, Borne received a gratuitous extension of the obligation.

Abruptly, what has been offered plainly in a proposed amended answer as a counterclaim for breach of contract is now characterized as fraud. The proposed amendment, however, contains not even a hint that its basis is Lebow’s alleged statements nor a claim that plaintiff “knew or should have known at the time Borne signed the renewal note that the rest of the money contracted for in the letter of credit would not be advanced.” Defendant’s Memorandum of Law filed November 21, 1984 at 15.

“It has long been the law of New York that an expression of opinion may constitute actionable fraud. A statement of a man’s opinion, estimate or prediction is a representation of his state of mind and, like his intent, is ‘as much a fact as the state of his digestion.’ Mere predictions, however, may not form the basis for an action for fraud when both parties have equal access to the facts, or when it is obvious that the declarant is using a subjective standard. In these situations, reliance on the opinions is deemed unreasonable. However, where one party does have superior knowledge, the expression of an opinion implies that the declarant knows facts which support that opinion and that he knows nothing which contradicts the statement.”

Magnaleasing, Inc. v. Staten Island Mall, 428 F.Supp. 1039, 1042-43 (S.D.N.Y.1977) (citations omitted). Relying on Magnaleasing, Inc., Borne asserts that Lebow had superior knowledge of whether plaintiff would honor the letter of credit. This entire line of argument overlooks the context of a motion to file an amended answer. Nothing in the proposed pleading treats or mentions Lebow’s statements, which Borne has labeled as both opinions and assurances, much less the crucial allegation that Lebow did not believe whatever it was (opinion or assurance) that he had represented to Borne.

“A cause of action for fraud can only be based upon the misrepresentation of a present or past fact. The mere failure to keep contractual promises of future acts will not sustain an action for fraud.”

Hotel Constructors, Inc. v. Seagrave Corp., 574 F.Supp. 384, 387 (S.D.N.Y.1983) (citations omitted). Moreover,

“[a] purely conclusory allegation that defendants never intended to perform, standing alone, could not convert a claim for breach of contract into one for fraudulent inducement to contract.”

Id. at 388 (citations omitted). Possibly, Borne can draw a pleading which alleges fraud arising from the transaction at issue, but he has not done so. As a result, on the record as it now stands, the waiver provision of the note defeats the proposed amended answer as it relates to Count I of the complaint; accordingly, plaintiff’s motion for summary judgment on Count I of the complaint is granted.

II.

The second count of the complaint seeks recovery upon a note endorsed by Leo Chizner. On August 19, 1974 Friedman executed a note for $9,000, 7% interest per year, naming Chizner as payee. Chizner endorsed the note, unconditionally guaranteed its payment, and delivered it to FNB. Plaintiff alleges that a balance of $1,013.35 plus interest at 10% per year since June 9, 1976 is now due plus attorney’s fees and costs of collection, all as provided in the note.

Chizner raises two separate defenses in his answer. The first is the same as Borne’s regarding FNB’s alleged breach of the aforementioned letter of credit, and by affidavit, Chizner’s attorney relies upon and adopts Borne’s papers in support of the defense. There is no evidence, however, which connects this note or Chizner to the letter of credit, a situation confirmed by ¶ 7 of the affidavit of Samuel Rosenberg, attorney for the Chizner estate, to wit:

“7. A trial of this action will establish that Mr. Chizner was an associate and principal with Mr. Borne in various corporations which are part and parcel of this litigation, to wit: Twin Ridge Properties, Inc., Willow Industries, Inc. and Jeron Realty, Inc. Chizner and Borne jointly participated in management decisions as well as financial planning and borrowing in connection with the activities of these corporations. They jointly participated and dealt with the various financial institutions involved with these corporations, including the Franklin National Bank prior to its demise. In’ short, Chizner’s participation in these various activities closely paralleled the activities and the decisions of Mr. Borne. Therefore, the defenses as well as the triable issues clearly demonstrated in the opposition papers on behalf of Mr. Borne apply equally to the defenses and issues as they pertain to the defendant, Chizner.”

Despite these allegations, Borne’s supporting papers disclose not even an iota of evidence which gives Chizner any rights against FNB. Similarly, concerning the remaining defenses, which Borne also asserts, there is nothing to demonstrate a want of consideration or economic duress by FNB, and neither transaction was usurious.

Accordingly, because the papers reveal no issue of fact concerning Chizner’s liability upon the note treated in Count II of the complaint, plaintiff is entitled to summary judgment thereon.

III.

The third count of the complaint concerns all three defendants. On September 5, 1974, Jeron Realty, Inc. executed and delivered a promissory note for $25,000, 14V2% interest per year, due December 5, 1974, to FNB. Prior to delivery Chizner endorsed the note and unconditionally guaranteed payment. On July 15, 1970 Borne and Chizner had also jointly executed a continuing guarantee of payment to FNB of Jeron’s obligations. Either Borne or Chizner could cancel his respective guarantee on written notice.

In his affidavit, Borne avers that the “loan officer” (unidentified) of FNB told him, “I would have no personal liability for payment of [the note].” Borne Affidavit at 12. As further evidence of his intent not to guarantee this note, which intent he communicated to FNB, he adds that he signed the note only as an officer of Jeron and, in contrast with Chizner, refused to indorse or otherwise guarantee the instrument.

“Where, as here, the guarantor has the right to limit the life of the contract by giving notice to terminate in accordance with its provisions, his right is absolute and if plaintiff, knowing of the guarantor’s intent to terminate, acquiesced therein and assured the guarantor that the agreement was no longer in effect and nobody would use it against him, such conduct on its part might well be found to constitute a waiver of the contract requirement of written notice of termination.”

Alside Aluminum Supply Co. v. Berliner, 32 A.D.2d 731, 302 N.Y.S.2d 180, 181-82 (4th Dept.1969) (memorandum) (citation omitted). Given this statement of law, the only issue in the context of summary judgment is whether Borne’s affidavit raises an issue of fact as to whether FNB in effect modified the guarantee by orally waiving the requirement of written cancellation. Under Berliner, where an alleged oral modification of the guaranty precluded the entry of summary judgment for the plaintiff, Borne’s affidavit raises a genuine issue of material fact. Cf. Chemical Bank v. Sepler, 60 N.Y.2d 289, 294 n. 2, 469 N.Y.S.2d 609, 457 N.E.2d 714 (1983). Accordingly, plaintiff’s motion for summary judgment upon Count III of the complaint must be denied as to Borne. Similar to Count II, neither Borne nor Chizner has submitted anything which raises any issue of fact concerning the other defenses asserted in the pleadings. See n. 1, supra.

Based upon the foregoing, plaintiff’s motion for summary judgment upon Counts I and II of the complaint is granted, plaintiff’s motion for summary judgment upon Count III of the complaint is granted as to Chizner but denied as to Borne, and defendant Borne’s motion to amend the answer is granted with the recovery on the counterclaim limited to a set-off of his liability, if any, on Count III.

SO ORDERED.

      . By way of explanation, the complaint is drawn in three counts, which, in terms of the joinder of defendants, merge only in Count III. Allegedly, of the defendants, on Count I Borne alone is liable as the maker of the note, on Count II Chizner alone is liable as the guarantor/endorser of the note, and on Count III Jeron Realty, Inc. is liable as the maker of the note, Chizner is liable as a guarantor/endorser, and Borne is liable as a guarantor. This structuring of the complaint understandably produced separate answers from Chizner and Borne.
      Chizner's answer asserts three defenses. The first is the same as Borne’s second defense, which relates to the above-mentioned letter of credit. The second defense is actually two defenses: want of consideration and economic duress resulting in contracts of adhesion. The third defense is usury. All the defenses seemingly contest all the counts; however, Chizner has offered only Borne’s evidence upon the first defense and no evidence of the other defenses.
      Borne’s answer follows a similar pattern. His first defense, .want of jurisdiction, has been abandoned. His second defense relates to the letter of credit. The third defense is actually two defenses: want of consideration and economic duress resulting in contracts of adhesion. The fourth defense is a set-off assertedly arising because FNB released Donald Zucher from his obligation to purchase the collateral for the note in Count I. Borne has offered no evidence upon the third, fourth, and fifth defenses. See Fed.R.Civ.P. 56(e).


source: Caselaw Access Project

author: DONALD E. O’BRIEN, District Judge.

license: Public Domain

text:
    LISLE CORPORATION, Plaintiff, v. Jerry Clyde EDWARDS, Defendant. Jerry Clyde EDWARDS, Individually, and d/b/a Edwards Tool Co., Plaintiff, v. SNAP-ON TOOLS CORPORATION, et al., Defendants.
    Civ. Nos. 83-77-W, 84-411-E.
    United States District Court, S.D. Iowa, C.D.
    Dec. 21, 1984.

      David A. Jacobson, Kutak, Rock & Huie, Omaha, Neb., Charles L. Smith, Telpner & Smith, Council Bluffs, Iowa, Jon 0. Nelson and Robert C. Ryan, Allegretti, Newitt, Witcoff & McAndrews, Ltd., Chicago, 111., for plaintiff.
    Lyle A. Rodenburg, Council Bluffs, Iowa, Joseph J. Boswell, P.C., George L. Williamson, Mobile, Ala., for defendant.
   ORDER

DONALD E. O’BRIEN, District Judge.

This matter comes before the Court on the parties’ cross motions for summary judgment. Argument was heard on these motions on July 12, 1984 in Council Bluffs, Iowa. The parties have recently reported to the Court by letter that they believe the motions for summary judgment are fully submitted and ready for decision. The Court agrees. Plaintiff Lisle’s motion for summary judgment- is granted; Defendant Edwards’ motion for summary judgment is denied. As a result, Lisle will be allowed to continue to manufacture and sell the tool under the Agreement.

Jerry Clyde Edwards (Edwards) invented and patented an air-powered windshield track cutting tool. He then entered into a nonexclusive license agreement (Agreement) with Lisle Corporation (Lisle) which permitted Lisle to manufacture the tool and then market it. In return for the right to make and sell the tool, Lisle pays Edwards a royalty of 3% of the sale price. One of Lisle’s customers is Snap-On Tools Corporation (Snap-On), which resells the tool under the trade name of “Bluepoint.” This controversy began when Edwards sued Snap-On in Alabama state court for, among other things, infringement of Edwards’ patent. That case, now Edwards v. Snap-On Tools Corp¡, Civil No. 84-411-E, was removed and then transferred to this Court.

Lisle Corporation brought this complaint against Jerry Clyde Edwards seeking declaratory judgment of noninfringement of patent, and damages and specific performance for breach of contract. Defendant Edwards counterclaimed for patent infringement and breach of the non-exclusive license agreement. The Court has consolidated the ease of Edwards v. Snap-On Tools Corp., Civil No. 84-411-E, with the action brought by Lisle. The two critical issues before this Court are (1) whether Lisle has infringed upon Edwards’ patent and (2) whether Edwards could terminate the nonexclusive license agreement because of Lisle’s breach.

Infringement. Whoever makes, uses or sells any patented invention without authority infringes upon the patent. 35 U.S.C. § 271(a). Thus, the question is whether the sales of the tool from Lisle to Snap-On were “authorized.” From the undisputed facts in the record, the Court concludes that the sales from Lisle to Snap-On were authorized by the non-exclusive license agreement. The sale of a tool by Lisle to an entity which resales the tool is not a “sublicense.” Edwards is entitled to only one royalty payment per tool and not a royalty payment each time a tool is resold. The license agreement does not prevent Lisle from selling the tool to customers who will resell it.

Termination of the Non-Exclusive License Agreement. The Court must consider (1) if Lisle breached the Agreement, (2) whether the Agreement is still in force, and (3) if it is not in force, when was it terminated.

1. Breach. In view of this Court’s holding regarding infringement, the Court rejects Edwards’ contention that Lisle breached the Agreement by granting a sub-license to Snap-On. The sale of tools to Snap-On for resale does not amount to a sub-licensing. Rather, it is an authorized sale under the terms of the Agreement. Therefore, Edwards cannot rely on this ground as a breach of contract which justifies the termination of the license agreement.

Article VII, entitled Marking, states:

LICENSEE shall apply the appropriate patent notice to all LICENSED UNITS sold by it in accordance with the provisions of Title 35, Section 287, of the United States Patent Statutes and the corresponding foreign law where applicable.

It is clear the Agreement required Lisle to mark the patent number on each of the tools manufactured. It is undisputed that Lisle failed to do this. However, it is also undisputed that Lisle had corrected this failure to mark all outgoing tools by December 1, 1983. Thus, the Court holds that, at one time, Lisle was violating the terms of the Agreement.

2. Termination — Rectified Breaches. Article IV(2) of the Agreement provides:

In the event of failure of LICENSEE to make payment to LICENSOR when due hereunder, or of LICENSEE to comply with any other obligation imposed on it by this Agreement, LICENSOR may at its election at any time thereafter terminate this Agreement by not less than ninety (90) days written notice specifying such failure, unless LICENSEE within ninety (90) days from the date of service of such notice shall have rectified all breaches specified in said notice.

First, the Court holds the letter from Edwards’ attorney dated November 3, 1983 was notice of the election to terminate as contemplated by Article IV(2). While Lisle may have had notice of its non-marking breach earlier, it did not have notice of the election to terminate until it received this letter. Therefore, the Court holds that, at the minimum, the Agreement was valid and in force until February 5, 1984.

Lisle contends the Agreement could not be terminated because Lisle rectified the nonmarking breach prior to the February 5, 1984 termination date. Edwards contends that Lisle would have to stamp all unmarked tools which are now in circulation in order to properly rectify the breach. The Court concludes that the definition of the term “rectified” as used in the Agreement is appropriately determined on these motions for summary judgment. See Trnka v. Elanco Products Co., 709 F.2d 1223, 1227 (8th Cir.1983). The meaning of “rectified” must be determined with reference to the particular breach at issue. In the context of the failure to mark the tools with the patent number, the Court holds that the term “rectified” does not mean all unmarked tools which went out of Lisle’s plant must be marked. To interpret “rectified” in that manner would give it a meaning which require Lisle to do that which is, in Edwards’ words, a “practical impossibility.” Furthermore, this interpretation of “rectified” in the context of nonmarking is appropriate in light of Edwards’ ability to obtain injunctive relief for infringement under 38 U.S.C. § 287. The fact that Edwards has shown no harm as a result of the nonmarking indicates that the problem has been corrected. The Court recognizes the possibility that the nonmarking may cause Edwards problems in the future and, if the issue were before the Court, the Court would be inclined to find that the term “rectified” means Lisle would have to foot the bill for obtaining injunctive relief under § 287. Accordingly, the Court concludes Lisle has rectified, i.e., remedied or corrected, the breach of nonmarking within the 90-day period. Thus, Edwards cannot rely upon this breach as a ground for termination.

In the alternative, the Court notes that Edwards’ legal action against Snap-On is contrary to the basic purpose of the license ■ agreement, i.e., that the patentee will not sue the licensee or its customers. Thus, the Court holds that Edwards is unable to avail himself to the contractual right of termination because of his failure to live up to the Agreement’s purpose.

Summary. The Court holds the following:

1. Lisle did not “sublicense” Snap-On and, thus, did not breach the license agreement in its dealings with Snap-On.

2. Lisle did not receive notice of the election to terminate until November 7, 1983.

3. Lisle had rectified the nonmarking error by December 1, 1983, well before the expiration of the 90-day period which commenced running on November 7, 1983.

4. By suing Snap-On, Lisle’s customer, Edwards acted contrary to the basic purpose of the license agreement and, thus, is unable to invoke the termination provision of the license agreement based upon the nonmarking error.

Relief. The Court will declare that Lisle has not infringed upon the patent of Edwards, Patent No. 3,924,327, and that Edwards has breached the license agreement. The Court will grant specific enforcement of the license agreement and will permanently enjoin Edwards, his agents, and employees from asserting against Plaintiff Lisle or Snap-On the claim of infringement of Edwards’ patent based on the manufacture, use and sale of the windshield removing tool made by Lisle. Plaintiff has prayed for attorney fees and costs pursuant to 35 U.S.C. § 285 and 28 U.S.C. § 1927. Section 285, Title 35, provides:

The court in exceptional cases may award reasonable attorney fees to the prevailing party.

Section 1927, Title 28, reads:

Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.

The Court will not rule on the request for attorney fees until it has received additional pleadings from the parties outlining their positions. With respect to the attorney fees issue, the Court holds that a dispute regarding the interpretation of the term “rectified” was a good faith controversy over the meaning of the contract. The Court makes this holding to provide the parties with a starting point on the issue of attorney fees. The parties should not draw any inferences from this holding as to what the Court’s ultimate ruling will be regarding attorney fees.

IT IS THEREFORE ORDERED that Defendant Edwards’ amended cross-motion for summary judgment and motion for partial summary judgment shall be denied.

IT IS FURTHER ORDERED that Plaintiff Lisle’s motion for summary judgment is granted.

IT IS FURTHER ORDERED that

1. The Court declares that Lisle has not infringed upon the patent of Edwards, Patent No. 3,924,327. The Court further declares that Edwards has breached the license agreement.

2. Lisle is granted specific enforcement of the license agreement against Edwards.

3. Edwards, his agents, and employees are permanently enjoined from asserting against Plaintiff Lisle or Snap-On the claim of infringement of Edwards’ patent based on the manufacture, use, and sale of the windshield removing tool made by Lisle.

IT IS FURTHER ORDERED that the plaintiff shall have twenty days from the date this Order is filed to file additional pleadings regarding its request for attorney fees. Thereafter, defendant shall respond to plaintiff’s pleadings within fifteen days.

IT IS FURTHER ORDERED that the parties shall review the issues in Edwards v. Snap-On, Civil No. 84-411-E, and make a report to the Court within fifteen days from the filing of this Order setting out their contentions as to the effect of this Order on the issues presented in Edwards v. Snap-On.


author: REYNOLDS, Chief Judge.

text:
    Scott M. KARR, Plaintiff, v. STRONG DETECTIVE AGENCY, INC., Defendant.
    Civ. A. No. 83-C-553.
    United States District Court, E.D. Wisconsin.
    Dec. 26, 1984.
    Robert J. Lowe, Milwaukee, Wis., for plaintiff.
    Dean P. Lairig, Milwaukee, Wis., for defendant.
   DECISION AND ORDER

REYNOLDS, Chief Judge.

The issue before the Court in this Fair Labor Standards Act (FLSA) action, is the defendant’s motion for partial summary judgment. In claims 1 and 2, the plaintiff seeks amounts allegedly due for unpaid minimum wage and overtime compensation pursuant to 29 U.S.C. § 216(b). In claim 3 the plaintiff seeks reimbursement for expenses under his employment agreement with the defendant. The defendant’s motion for summary judgment on claims 1 and 2 will be granted.

The pleadings, depositions, answers to interrogatories and affidavits on file, viewed in the light most favorable to the plaintiff, show that there is no genuine issue as to any material fact. As an employee of the defendant detective agency, the plaintiff was placed as a warehouse worker with Roundy’s Inc. on April 15, 1979. The plaintiff was treated and paid like all other Roundy’s employees, but in addition to his warehouse duties, he observed and reported on the activities of other Roundy’s employees. At the end of each work day, the plaintiff wrote a report detailing his surveillance findings and submitted the reports to the detective agency which forwarded them to Roundy’s.

The plaintiff’s assignment at Roundy’s lasted for over 3V2 years. During this period, he joined the union which represented Roundy’s warehouse employees and was paid $10-13 per hour plus benefits. In addition, the detective agency paid him $1 for each hour he worked at Roundy’s. The plaintiff estimates that he spent V2 hour at the end of each work day preparing the surveillance reports.

The plaintiff contends that the FLSA requires the detective agency to pay him at least the minimum wage for every hour he worked at Roundy’s during this period, and IV2 times that rate for any overtime. The defendant relies on the interpretation of the Wage and Hour Administrator, 29 C.F.R. § 791.2, to argue that the undisputed facts show that Roundy’s and the detective agency were joint employers of the plaintiff.

The administrative interpretation is entitled to great weight. Under that interpretation, unless the facts demonstrate that Roundy’s and the detective agency were acting “entirely independently of each other” and were “completely disassociated” with respect to the plaintiff’s employment; a joint employment relationship is established. A joint employer is entitled to take credit toward minimum wage and overtime requirements for all payments made to the employee by the other joint employer.

I find that the relevant facts in this action establish a joint employment relationship. The plaintiff’s surveillance activities simultaneously benefitted both employers, and the warehouse work was a necessary adjunct to the surveillance activity. Consequently, Roundy’s and the detective agency were not acting independently of each other and the defendant’s motion for partial summary judgment must be granted since the plaintiff’s aggregate wages more than meet the FLSA minimum wage and overtime requirements.

IT IS THEREFORE ORDERED that the defendant’s motion for partial summary judgment is granted and claims 1 and 2 of the plaintiff’s complaint are dismissed.


author: BUA, District Judge.

text:
    FRIEDMAN, EISENSTEIN, RAEMER & SCHWARTZ, a partnership, Practice Development Institute Ltd., an Illinois corporation, Plaintiffs, v. Allan B. AFTERMAN, The CPA Consulting Group, Ltd., an Illinois corporation, and Donald W. Bernard, Defendants.
    No. 83 C 9609.
    United States District Court, N.D. Illinois, E.D.
    Dec. 26, 1984.

      Leonard A. Nelson, Schoenberg, Fisher & Newman, Ltd., Chicago, 111., for plaintiffs.
    Sherwin D. Abrams, Terry G. Chapman, Abrams, Rifkin & Chapman, Chicago, 111., for defendants.
   ORDER

BUA, District Judge.

Before the Court is defendants’ motion tó dismiss the complaint for failure to state a claim and lack of subject matter jurisdiction. For the reasons stated herein, defendants’ motion is denied.

In considering a motion to dismiss, the Court must accept all well-pleaded material facts as true and must make all reasonable inferences in a light most favorable to the plaintiff. City of Milwaukee v. Saxbe, 546 F.2d 693, 704 (7th Cir.1976). The Court, however, is not required to accept legal conclusions that may be alleged or that may be drawn from the pleaded facts. Id. Under these principles, the following facts are assumed as true for purposes of this motion.

Plaintiff Friedman, Eisenstein, Raemer & Schwartz (“the Friedman partnership”) is a partnership of certified public accountants doing business in Chicago, Illinois. Plaintiff Practice Development Institute, Ltd. (“PDI”) is an Illinois corporation engaged in the business of advising accountants on various areas of the accounting profession. Defendants Allan B. Afterman (“Afterman”) and Donald W. Bernard (“Bernard”) are certified public accountants doing business in Northfield, Illinois. Defendant CPA Consulting Group, Ltd. (“CCG”) is an organization which, like PDI, is engaged in the business of advising accountants on various areas of the accounting profession. Afterman is the principal owner of CCG.

Copyright Infringement Claim

In Count I of their five-count complaint, plaintiffs allege copyright infringement and invoke the Court’s jurisdiction under 28 U.S.C. §§ 1331 and 1338. Plaintiffs allege that the Friedman partnership is the owner of a publication entitled “Practitioners Technical Bulletin,” which has been registered with the United States Copyright Office in compliance with the Copyright Act of 1976. See Complaint, ¶¶ 5, 6 and Exhibit A. Plaintiffs further allege that defendants have infringed the copyrighted material by distributing a publication entitled “Accounting & Auditing Update Service.” Id. at 117.

In order to state a claim of copyright infringement, a complaint must allege ownership, registration and infringement. 2A Moore’s Federal Practice, ¶ 8.17[7], at 8-189 (1984). Plaintiffs’ complaint alleges facts supporting each element and clearly complies with Rule 8’s requirement of a “short and plain statement of the claim.” Fed.R.Civ.P. 8(a). Other details of plaintiffs’ copyright claim may be obtained by discovery. Defendants’ reliance upon Burns v. Rockwood Distributing Co., 481 F.Supp. 841 (N.D.Ill.1979), is misplaced. In Burns, the complaint failed to allege that the plaintiff had complied with the registration provisions of the. Copyright Act. Id. at 845. Here, plaintiffs specifically allege compliance with the Act. See Complaint IF 6.

State Law Claims

Plaintiffs invoke the Court’s jurisdiction over Counts II through V under 28 U.S.C. § 1338(b) and the doctrine of pendent jurisdiction. Counts II, III and V allege that defendant Afterman breached an employment contract; Count IV charges Afterman with theft of plaintiffs’ client mailing lists.

Under 28 U.S.C. § 1338(b), the Court may exercise jurisdiction over unfair competition claims which are joined with a “substantial and related” copyright claim. The Seventh Circuit has outlined two tests for determining whether an unfair competition claim is “related” for purposes of § 1338(b). First, the “more liberal view” holds that two claims are related if they have the same “factual nucleus” required for pendent jurisdiction under United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1965). Second, the “more restrictive view” holds that two claims are related only if they “rest upon substantially identical facts.” Powder Power Tool Corp. v. Powder Actuated Tool Co., 230 F.2d 409, 413 (7th Cir.1956). The Seventh Circuit has twice expressly declined to decide which test should be applied in this Circuit. See Pate Co. v. RPS Corp., 685 F.2d 1019, 1026 (7th Cir. 1982); Particle Data Laboratories, Inc. v. Coulter Electronics, Inc., 420 F.2d 1174 (7th Cir.1969). This Court, however, predicts that the Seventh Circuit when faced squarely with the issue, will follow the Second Circuit and adopt the “more liberal view” of § 1338(b). See Maternally Yours, Inc. v. Your Maternity Shop, 234 F.2d 538 (2d Cir.1956); Thompson Tool Co., Inc. v. Rosenbaum, 443 F.Supp. 559 (D.Conn.1977). Accordingly, the issue in this case is whether plaintiffs’ state law claims and the copyright claim are derived from a common nucleus of operative facts.

The facts alleged in Counts II through V are as follows: Counts II and III allege that on May 1, 1981, plaintiffs entered into an employment contract with defendant Afterman. The agreement allegedly provided that Afterman would be employed by plaintiffs as Director of Professional Development. In December, 1982, Afterman voluntarily terminated the employment contract. Paragraph 3 of the employment contract prohibited Afterman from rendering professional services to plaintiffs’ clients for a period of three years following termination of his employment. Plaintiffs allege that Afterman breached paragraph 3 by rendering services to plaintiffs’ clients and distributing a newsletter entitled “Accounting & Auditing Update Service” to plaintiffs’ clients.

In Count IV of the Complaint, plaintiffs allege that Afterman stole plaintiffs’ mailing lists of clients during his period of employment. Count V alleges that After-man breached another provision of the employment contract by not submitting certain royalties to plaintiffs as required by the contract.

It is apparent that the facts alleged in Counts II through V of the Complaint arise from the employment relationship between plaintiffs and defendant Afterman. Issues relating to the scope and terms of the employment relationship between After-man and plaintiffs will undoubtedly arise at the trial of these Counts. Regarding the copyright claim, defendants apparently intend to contest plaintiffs’ ownership rights in the material. The resolution of the ownership issue may turn on the Court’s interpretation of the employment relationship between Afterman and plaintiffs. For these reasons, the breach of contract claims in Counts II, III and V; the theft claim in Count IV; and the copyright claim in Count I derive from a common nucleus of operative facts. See United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). Additionally, these claims are such that plaintiffs would ordinarily expect them to be tried in one judicial proceeding. Given the important policies of conservation of judicial energy and the avoidance of multiplicity of litigation, the Court exercises its discretion, pursuant to 28 U.S.C. § 1338(b) and the doctrine of pendent jurisdiction, to accept jurisdiction over Counts II through V of plaintiffs’ Complaint. See Rosado v. Wyman, 397 U.S. 397, 405, 90 S.Ct. 1207, 1214, 25 L.Ed.2d 442 (1969); United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). The Court, however, retains the option of dismissing Counts II through V without prejudice should plaintiffs.’ copyright claim be dismissed before trial. See Buethe v. Britt Airlines, Inc., 749 F.2d 1235, 1239-1241 (7th Cir.1984).

Conclusion

For all of the above reasons, defendants’ motion to dismiss is denied.

IT IS SO ORDERED.


author: CARL O. BUE, Jr., District Judge.

text:
    Kenneth R. SHELTON v. George HESS, et al.
    Civ. A. No. H-82-1307.
    United States District Court, S.D. Texas, Houston Division.
    Dec. 26, 1984.

      David Lopez, Houston, Tex., for plaintiff. Evelyn Tatum, Asst. Atty. Gen., Austin, Tex., for defendant.
   ORDER

CARL O. BUE, Jr., District Judge.

Pending before the Court is defendants’ motion for sanctions in which defendants request that the Court disqualify plaintiff’s counsel, Mr. David Lopez, from participating in this lawsuit. Briefly stated, defendants assert that they have been prejudiced by conferences had between defendant Miller and Mr. Lopez in which matters pertaining to this cause of action were discussed without informing or receiving the consent of defense counsel. Such conferences represent a violation of Canons 7 and 9 of the Texas Code of Professional Responsibility (TEX.REV.CIV.STAT. Title 14 App. Art. 12, § 8). Plaintiff’s counsel, while admitting that a conference between himself and Mr. Miller did occur, emphatically denies that the communication was “on the subject of the representation” and affirmatively asserts that the conference, held only after detailed safeguards were undertaken to insure that Mr. Miller understood the potential for prejudice, concerned Mr. Miller’s own lawsuit against the University of Houston, defendant Hess, and others. After careful consideration of the memoranda, the entire record in this cause and argument of counsel as well as the relevant law, the Court is of the opinion that defendants’ motion should be granted for the reasons discussed below.

Background

Plaintiff, Kenneth R. Shelton, a former employee of the University of Houston, brought this action in May of 1982, alleging, among other things, that defendants violated his civil rights by terminating him from his employment as a peace officer of the University campus police. It was his contention that in the latter part of 1981, the activities of the campus police appeared to be directed in many respects toward political, rather than law enforcement, purposes, as for example by utilizing criminal charges, or the threat of such charges, to obtain the resignation of specific faculty and staff members of the University. He contended, further, that when he reported an awareness of such activities to his supervisors, the defendants retaliated against him by inter alia denying him participation in certain desired staff development programs, by forcing him to resign his position at the University, by damaging his reputation, and by threatening him with serious bodily injury. In his prayer for relief, Mr. Shelton sought compensatory damages in the amount of $150,000.00 from each of the individually named defendants, punitive damages in the amount of $50,000.00 as to defendants Hess, Munitz, and Osborne, $200,000.00 as to defendant Miller, and $150,000.00 as to defendant Stevens, as well as declaratory and injunctive relief.

On February 27, 1984, some two years into the development of this lawsuit, Mr. Lopez conferred with defendant Miller, Assistant Chief of the University of Houston Campus Police, without seeking prior consent from defendants’ counsel, Ms. Evelyn Tatum. Although the circumstances surrounding the planning of that conference as well as the subject matter discussed during the conference are vigorously contested by the parties, it is admitted that such conference did occur. On April 2, 1984, less than one week after the conference was held, plaintiff’s motion for leave to file its second amended complaint, dropping the punitive damages claim as to defendant Miller, and adding University counsel, Pat Bailey as a party-defendant, was filed. The complaint was amended also so as to modify the cause of action as to defendant Miller in the following manner: “The acts of Defendant Miller seeking to have the Plaintiff voluntarily waive and abandon his rights to substantive and procedural due process were brought about by the specific direction and suggestion of Defendant Bailey in an effort to obstruct the proper administration of justice and to conceal the improper activities of the University of Houston Campus Police Department.” (Plaintiff’s Second Amended Complaint at Paragraph 35A).

On May 18, 1984, defendant Miller informed Ms. Tatum - by letter that he no longer wanted the Attorney General’s office to represent him “in the Shelton mat-, ter.” That communication was followed by a letter from Mr. Lopez to Ms. Tatum dated May 29, 1984, in which Mr. Lopez stated:

It is my understanding that defendant John L. Miller has informed you that he no longer wishes to be represented by the Attorney General’s office. At your earliest convenience, I would appreciate your filing a formal withdrawal with the court. Please inform me if in behalf of the other defendants you have any objection to execution of a stipulation for dismissal of Mr. Miller in accordance with the provisions of Rule 41(a), Federal Rules of Civil Procedure.

On July 30, 1984, defendant Miller, “with the help of Mr. Lopez,” (Testimony of Mr. Miller) filed his notice of substitution of counsel, setting forth the following:

Now comes John Miller ... acting pro se, and gives notice to the Court ... of the substitution of himself, pro se, as attorney in charge. The undersigned Defendant has informed the attorney heretofore appearing in his behalf, Evelyn S. Tatum ... that he does not wish to be represented by her or any other attorney in the office of the attorney general, and that he wishes to appear in this action pro se. The undersigned Defendant has made specific demand upon Ms. Tatum to withdraw as his attorney, and Ms. Tatum has failed and refused to do so.

Approximately one week later, Mr. Lopez notified Ms. Tatum that he intended to discuss with Mr. Miller settlement of plaintiff’s claims against him and that it was possible that plaintiff would be willing to dismiss Miller from the case upon stipulation. (Letter to Ms. Tatum dated August 8, 1984)

At a conference held in Chambers on August 20, 1984, the Court heard counsels’ argument with respect to defendants’ motion for sanctions. Defendant Miller, also present at the conference, and Ms. Tatum both testified under oath as to the facts surrounding the meeting between Mr. Lopez and Mr. Miller. In addition, counsel stipulated that “if called to give sworn testimony,” Mr. Lopez “would testify to the same effect as the statement of facts as my memorandum.” The facts set out in plaintiff’s memorandum which are of particular consequence to this motion include the following:

Defendant Hess, through officers and members of his department, has engaged in a far ranging effort to utilize his power as Chief of the University of Houston Police Department to avoid responsibility for the actions alleged in this lawsuit. These actions have included harassment and disciplinary actions against officers in the department believed by Defendant Hess to have sympathy for the Plaintiff
In January, 1984, one of the officers being subjected to harassment and disciplinary actions by Defendant Hess because of the relationship of that officer to this case apparently contacted Defendant Miller.
In their discussion, Defendant Miller told that officer that he felt that Defendant Hess had similarly acted against him, Defendant Miller, because Defendant Hess perceived that Defendant Miller liked and was sympathetic to the Plaintiff.
Defendant Miller expressed to that officer a desire to communicate with the Plaintiff and also to secure the services of Plaintiff’s counsel in his own lawsuit against Defendant Hess ...
... Plaintiff stated that on the basis of information he had received from other officers, and his conversation with Defendant Miller, that he had come to believe that Defendant Miller at all times had had sympathy for him, the Plaintiff, but that Defendant Miller had been directed to act against the Plaintiff by Defendant Hess and other officials of the University of Houston ...
The conference related to Mr. Miller’s own case. That case involves his separation from employment with the University of Houston Police Department and what he considers to be a violation of his rights. The conference did not involve any discussion of this case, other than to the extent that Defendant Miller attributes the actions against him as being related to a perceived sympathy for the Plaintiff ...

(Plaintiff’s Memorandum in Opposition to Motion for Sanctions at pages 4, 5, 6, and 8.) After hearing argument of counsel as well as testimony presented, the Court, seeking to maintain the status quo, denied defendants’ counsel’s request to withdraw from the representation of Mr. Miller and took under advisement defendants’ motion for sanctions.

On October 15, 1984, defendant Miller, by and through his attorney of record, Mr. Lopez, filed his original complaint against, among others, the University of Houston; George Hess, Chief of the University of Houston Campus Police; Barry Munitz, Chancellor; George Osborne, Interim Vice Chancellor and Dean of Students; and Pat Bailey, University Counsel. Mr. Miller asserted inter alia the following:

Under the administration of George Hess, the Department has been utilized for personal or political purposes in derogation of the rights of individuals who .have been subjected to unlawful surveillance and detention, unwarranted charges, and official oppression.

He contended further that he had made consistent efforts to persuade Mr. Hess to correct the police department’s policies and practices and that by so doing caused defendants to retaliate against him and violate his civil rights by falsely accusing him of improper personal conduct and by constructively discharging him from his employment at the University of Houston. Mr. Miller contended that the acts of which he complained occurred on or about October 19, 1982.

The Law

Defendants argue that plaintiff's counsel should be disqualified from further representation of plaintiff in this cause of action because of a violation of DR 7-Í04. They contend that such a violation not only prejudices the defendants’ ability to defend themselves, but represents a violation of Canon 9.

The Fifth Circuit, aware of the ever-increasing attempts to disqualify counsel as purely a tactical manuever, has consistently advised that to be disqualified pursuant to Canon 9, a two-prong test must be satisfied. First, while there need be no proof of actual wrongdoing, moving counsel must establish “at least a reasonable possibility that some specifically identifiable impropriety did in fact occur.” And second, moving counsel must show that “the likelihood of public suspicion or obloquy outweighs the social interests which will be served by a lawyer’s continued participation in a particular case.” Included in the Fifth Circuit’s analysis is a balancing of prejudices to the parties involved. Woods v. Covington County Bank, 537 F.2d 804, 813 (5th Cir.1976); Doe v. A Corporation, 709 F.2d 1043 (5th Cir.1983); reh’g and reh’g en banc denied, 717 F.2d 1399 (5th Cir.1983); see also Gibbs v. Paluk, 742 F.2d 181 (5th Cir.1984).

The Eighth Circuit has held that “[i]n determining whether an attorney should be disqualified from participating in a lawsuit because of an alleged violation of DR 7-104, three competing interests must be balanced: (1) the client’s interest in being represented by counsel of its choice; (2) the opposing party’s interest in a trial free from prejudice due to disclosures of confidential information; and (3) the public’s interest in the scrupulous administration of justice.” Meat Price Investigators Ass’n. v. Spencer Foods, 572 F.2d 163, 165 (8th Cir.1978). Using either the two-prong test of the Fifth Circuit in Woods or the three-prong test of the Eighth Circuit in Spencer Foods, it is clear to this Court that the scales of justice tip in favor of defendants.

In focusing upon the first prong of the Woods test, whether there has been a showing that there is a reasonable possibility that some specific impropriety has, in fact, or will, in fact, occur, this Court has little difficulty in discerning that the conferences had between Mr. Miller and Mr. Lopez are strongly suggestive of a DR 7-104 violation and readily represent the “specific impropriety” plaintiff’s counsel is in danger of violating or has violated. However, plaintiff urges vigorously that a violation of DR 7-104 has not occurred as a result of the communications had between Mr. Lopez and Mr. Miller because such conferences were not “on the subject of the representation.” Nonetheless, Mr. Lopez admitted in his memorandum to the Court that Mr. Miller, seeking Mr. Lopez to represent him in his own cause of action against the University of Houston and defendant Hess, attributed “the actions against him as being related to a perceived sympathy for plaintiff.” Moreover, in his complaint against the defendants, Mr. Miller contends that “under the administration of George Hess, the [University Police] Department has been utilized for personal or political purposes ... ”. This allegation is strikingly similar to plaintiff’s claim in the lawsuit sub judice in which he asserts that “[t]oward the latter part of 1981, the Plaintiff became increasingly aware that the activities of the campus police appeared to be directed in many respects toward political, rather than law enforcement, purposes ...” (Plaintiff’s Second Amended Complaint, Paragraph 18).

Further, both plaintiff and Mr. Miller have been employed in positions in the University of Houston Campus Police Department; both contend that they were wrongfully discharged during the latter parts of 1981 and 1982; and both contend that defendants University of Houston, George Hess, Gerald Osborne, Rayford Stephens, Barry Munitz, and Pat Bailey were responsible for the alleged wrongful acts occurring against them. In the opinion of this Court these similarities seem inextricably intertwined with Mr. Miller’s assertions that the actions against him by defendant Hess are a result of a “perceived sympathy for plaintiff.” Finding that the matters discussed were sufficiently “on the subject of the representation,” the Court concludes that the first prong of the test as set out in Woods has been satisfied.

In applying the second prong of the Woods test to the instant case, the Court must determine whether the likelihood of public suspicion outweighs the social interest in Mr. Lopez’s continued representation of plaintiff. Within this prong lies a weighing of the relative harm to the plaintiff and remaining co-defendants. Woods, 537 F.2d at 813, 819; Gibbs v. Paluk, 742 F.2d at 181; Spencer Foods, 572 F.2d at 165; W.T. Grant Co. v. Haines, 531 F.2d 671 (2nd Cir.1976). In this case, the likelihood that the image of the legal profession will be somehow undermined or tarnished by the continuance of the relationship between Mr. Lopez and Mr. Miller and the likelihood that the remaining co-defendants will be severely hampered in their defense outweighs the right of a civil litigant to counsel of his choice. As previously noted, Mr. Lopez has represented Mr. Shelton since May of 1982. Accordingly, the Court recognizes that as a result of this ruling, plaintiff will suffer abrupt deprivation of his counsel as well as added expense, and the litigation will be disrupted while he secures new counsel However, the Court also recognizes that if Mr. Lopez is allowed to continue to represent both plaintiff and co-defendant, Mr. Miller, in their respective lawsuits arising out of difficulties experienced within the University of Houston police department, the remaining co-defendants will likely suffer irreparable prejudice to their ability to defend.

For example, Mr. Miller has sought the discharge of the Attorney General’s Office as to his representation in the pending suit. Such a discharge is disruptive to the defense of Mr. Miller’s co-defendants in this action in that it produces a possible conflict of interest as between Ms. Tatum and Mr. Miller as the action proceeds since the State of Texas can theoretically be held liable for damages for the acts or omissions of state employees. See TEX.REV.CIV. STAT.ANN. arts. 6252-26 (Vernon Supp. 1984). Further, because Mr. Miller holds the attorney-client privilege as to the communications between himself and Ms. Tatum, the defense of this action as to the other defendants may become unfairly and unjustly complicated. Finally, because Mr. Miller and Mr. Lopez have established an ongoing relationship in a lawsuit sharing significant facts and legal issues with the one at bar, there exists a high risk that disclosures of confidential information relating to the case sub judice will pass from Mr. Miller to Mr. Lopez.

Finally, as to public policy considerations, the likelihood of public suspicion in this case is readily apparent by the following admitted facts. Plaintiff has had repeated conversations with defendant Miller regarding this lawsuit, Mr. Lopez has established a continuing relationship with defendant Miller as counsel in Mr. Miller’s own lawsuit against the University, plaintiff has sought to dismiss defendant Miller out of this lawsuit or at least reduce the damages as to Mr. Miller subsequent to a conference between Mr. Lopez and Mr. Miller, and Mr. Miller has sought to discharge the Attorney General’s Office as counsel for him in the lawsuit at bar. In this Court’s view, such a scenario of facts occurring within a relatively short time frame, rises to a level at which the public might be suspicious, and rightfully so, of the behavior of plaintiff’s counsel, even though he may actually have done no wrong. As the court stated in Woods:

The requirement that a lawyer avoid even the appearance of impropriety reflects the bar’s concern that some conduct which is in fact ethical may appear to the layman as unethical and thereby could erode public confidence in the judicial system or the legal profession.

537 F.2d at 813.

Conclusion

The law is clear in this Circuit that a District Court is obliged to take measures against unethical conduct occurring in connection with any proceeding before it. Woods, 537 F.2d at 810; Sanders v. Russell, 401 F.2d 241, 246 (5th Cir.1968). However, fully cognizant that the business of the Court is to dispose of litigation as well as to preserve a reasonable balance between the need to ensure ethical conduct of attorneys appearing before it and other social interests, this Court does not lightly separate plaintiff from the counsel of his choice. Nonetheless, in light of the totality of the circumstances, the Court has little choice but to conclude that the defendants have been and will be unfairly prejudiced by plaintiff’s and plaintiff’s counsel’s actions and that the ends of justice are most appropriately served by disqualifying Mr. Lopez from participating further in this lawsuit.

The fact that defendant Miller may have initiated the connection between himself and Mr. Lopez does not militate against the Court’s conclusion; nor does the fact that plaintiff not only participated in but encouraged the contacts between himself, Mr. Lopez and Mr. Miller. In this Court’s view, Mr. Lopez, in order to avoid the appearance of impropriety, should have avoided any form of direct affiliation with defendant Miller. Having failed to do so, defendants have been unfairly prejudiced. Accordingly, defendants’ motion for sanctions is granted and Attorney Lopez is hereby disqualified from representation of the plaintiff in this cause.

      . Canon 7: A Lawyer Should Represent a Client Zealously Within the Bounds of the Law
      DR 7-104: Communicating With One of Adverse Interest.
      (A) During the course of his representation of a client a lawyer shall not:
      (1) Communicate or cause another to communicate on the subject of the representation with a party he knows to be represented by a lawyer in that matter unless he has the prior consent of the lawyer representing such other party or is authorized by law to do so.
      Canon 9: A Lawyer Should Avoid Even the Appearance of Professional Impropriety

      . Although Mr. Shelton was reinstated to his position by the University of Houston grievance committee in May of 1983, he was again discharged; such discharge is presently the subject of another grievance within the University grievance process.


author: LUONGO, Chief Judge.

text:
    Wilmer B. GAY v. Thomas WATKINS, Assistant District Attorney, Joseph Cleary, Detective, Gaetan J. Alfano, Assistant District Attorney, Joseph A. Harrison, Deputy Court Administrator, Harold L. Randolph, Esquire, Robert B. Mozenter, Esquire, Irene E. Crystal, R.P.R., Official Court Reporter, Joel P. Trigiani, Esquire.
    Civ. A. No. 83-2089.
    United States District Court, E.D. Pennsylvania.
    Dec. 26, 1984.
    Wilmer B. Gay, pro se.
    F. Michael Medway, Philadelphia, Pa., for defendant Joel P. Trigiani.
   MEMORANDUM

LUONGO, Chief Judge.

This is a civil rights action filed by an inmate of Pennsylvania’s State Correctional Institution at Pittsburgh. On February 15, 1984, I granted motions for summary judgment in favor of all defendants except defendant Trigiani. Gay v. Watkins, 579 F.Supp. 1019 (E.D.Pa.1984). Now before me are the plaintiff’s “Motion for Judgment” against Trigiani and Trigiani’s cross-motion to dismiss or for summary judgment. I will grant Trigiani’s motion for summary judgment.

I have previously noted in this case that the gravamen of Gay’s complaint is that he has been deprived of access to various court records and documents which he feels are necessary to perfect his post-conviction remedies. Gay v. Watkins, 573 F.Supp. 706 (E.D.Pa.1983). I have also ruled, however, that Gay’s right of access to such documents has been satisfied if his various attorneys have had such access. Id. at 707.

The remaining defendant in this lawsuit was Gay’s court-appointed attorney during a portion of the plaintiff’s state post-conviction litigation. Gay seeks to hold Trigiani liable because of his failure to provide him personal copies of various records. For the reasons set forth in my earlier decisions, I conclude that Gay does not have a constitutional right to a personal copy of such documents.

Gay contends that his right of access to court records was not satisfied because Trigiani’s Answer to the Complaint and Answers to Interrogatories contradict his earlier assertion that he had access to the documents. This contention is without merit. Although Trigiani’s Answers to Interrogatories and his Answer to the Complaint suggest that he has not retained the court records of his former client, Trigiani has stated clearly — and repeatedly — that he had the relevant documents in his possession during his representation of Gay.

Finally, Gay’s complaint against Trigiani and his motion for judgment contain several allegations concerning Trigiani’s conduct as Gay’s attorney, particularly with respect to his failure to pursue the suppression by the prosecution of a witness’ statement which implicated Gay in the crime of which he was convicted. At the very most, such allegations amount to a claim of negligence which is not actionable under 42 U.S.C. § 1983.

      . Although plaintiff’s jurisdictional statement cites various provisions of Title 42 and Title 28 of the United States. Code, I have previously ruled that the substance of his claim is one for deprivation of constitutional rights under color of state law. 42 U.S.C. § 1983. See Gay v. Watkins, 579 F.Supp. 1019, 1020 n. 1 (E.D.Pa. 1984).

      . In view of this discussion, I need not decide whether Trigiani could be deemed a “state actor” for purpose of § 1983.


text:
    Richard Taylor CARDALL, Plaintiff, v. UNITED STATES of America, Defendant.
    Civ. A. No. C-84-0654.
    United States District Court, D. Utah, C.D.
    Dec. 26, 1984.

      Richard T. Cardall, plaintiff, pro se.
    Brent D. Ward, U.S. Atty., Bruce Lu-beck, Asst. U.S. Atty., D. Utah, Salt Lake City, Utah, for defendant.
   MEMORANDUM AND ORDER

SAFFELS, District Judge, Sitting by Designation.

The movant, Richard Taylor Cardall, has filed a motion for writ of error coram nobis seeking an order setting aside his October 14, 1975, securities fraud conviction. Cardall is no longer in custody and is awaiting sentencing on another conviction. He claims that the conviction at issue resulted from ineffective assistance of counsel in failing to object to an unconstitutional jury instruction. As a result, Cardall claims that a jury verdict was in effect directed against him by the court, Chief Judge Willis Ritter presiding.

At the culmination of a week-long trial, the court orally stated its instructions to the jury. Numerous times during the instructions the court told the jury that the burden of proof beyond a reasonable doubt was on the government. The jury was also instructed that “intent” was an element of the crimes alleged, that the government must establish intent “by evidence beyond a reasonable doubt,” and that “it is the law that a person intends the usual and probable consequences of his acts.”

Cardall’s counsel did not contemporaneously object to the instruction on intent, nor did he raise the issue on appeal. Counsel did not have an opportunity to review these instructions prior to closing arguments, as the court did not inform counsel of its proposed instructions as required by Rule 30, Federal Rules of Criminal Procedure. On appeal, the Tenth Circuit held that there were no grounds for reversal on the court’s violation of Rule 30, because no objection was made until after closing argument, and no evidence was presented to establish prejudice to the defendant. United States v. Cardall, 550 F.2d 604, 607 (10th Cir.1976).

The writ of error coram nobis is a writ used to correct fundamental errors which render a criminal proceeding irregular and invalid. Abel v. Tinsley, 338 F.2d 514 (10th Cir.1964). The court’s authority to grant coram nobis relief, the vacation of the conviction or sentence, is derived from the All Writs Section of the Judicial Code, 28 U.S.C. § 1651(a), which states that federal courts “may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles allowed.” Relief under the writ of error coram nobis is narrow and allowed “only under circumstances compelling such action to achieve justice.” United States v. Morgan, 346 U.S. 502, 511, 74 S.Ct. 247, 252, 98 L.Ed. 248 (1954). Coram nobis relief is available even after a defendant is released from custody. Id.

While coram nobis is a narrow and extraordinary remedy, its present scope encompasses not only errors of fact that effect legal proceedings, but also legal errors of a constitutional or fundamental proportion. United States v. Wickham, 474 F.Supp. 113, 116 (C.D.Cal.1979). On a writ of error coram nobis, the court may determine whether the defendant received effective assistance of counsel. See, e.g., Morgan v. United States, 396 F.2d 110 (2nd Cir.1968).

In considering a collateral attack on a criminal conviction on the basis of ineffective assistance of counsel, the court is guided by Strickland v. Washington, — U.S. -, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984). Cardall bears the burden of demonstrating that his counsel was not functioning as counsel guaranteed by the Sixth Amendment, and that counsel’s errors were so serious as to deprive the defendant of a fair trial, meaning one whose result is reliable. Id. — U.S. at -, 104 S.Ct. at 2064, 80 L.Ed.2d at 693. The proper standard for attorney performance is that of “reasonably effective assistance.” Id. Counsel has a duty to bring to bear such skill and knowledge as will render the trial a reliable adversarial testing process. Id. — U.S. at -, 104 S.Ct. at 2065, 80 L.Ed.2d at 694. Thus, to establish his right to coram nobis relief on the ground of ineffective assistance, Cardall must establish certain facts. First, Cardall must show that the instruction of the trial court violated his due process rights. Second, Cardall must show that reasonably effective counsel would have objected to the instruction. Third, Cardall must show that he was prejudiced by the instruction in that he was denied a fair trial.

In determining whether an isolated instruction violates a defendant’s due process rights, the court must consider the instruction in the context of the overall charge. Hux v. Murphy, 733 F.2d 737 (10th Cir.1984). In addition, in making a decision on collateral relief, the court must consider the ailing instruction as it relates to all components of the trial, including the testimony of the witnesses, the arguments of counsel, the exhibits admitted into evidence, and the instructions to the jury. United States v. Frady, 456 U.S. 152, 169, 102 S.Ct. 1584, 1595, 71 L.Ed.2d 816 (1982). Cardall contends that the instruction on intent given by the court, where intent was a disputed issue, could have been viewed by a reasonable juror as a mandatory presumption rather than a permissive inference. Sandstrom v. Montana, 442 U.S. 510, 515, 99 S.Ct. 2450, 2454, 61 L.Ed.2d 39 (1979), “An erroneous presumption on a disputed element of the crime renders irrelevant the evidence on the issue because the jury may have relied upon the presumption rather than upon that evidence. If the jury may have failed to consider evidence of intent, a reviewing court cannot hold that the error did not contribute to the verdict.” Connecticut v. Johnson, 460 U.S. 73, 85-86, 103 S.Ct. 969, 976-977, 74 L.Ed.2d 823 (1983) (plurality opinion). Such a presumption is the functional equivalent of a directed verdict on the issue of intent. Id. at 84, 103 S.Ct. at 976.

This court is reviewing Cardall’s conviction on collateral attack and not on direct appeal. The ailing instruction is reviewed in the context of the overall charge and as a component of the entire trial. Although the portion of the instruction which Cardall raises in this collateral attack was a misstatement of the law, this court cannot say that the ailing instruction by itself so infected the entire trial that the resulting conviction violates due process. United States v. Frady, supra, 456 U.S. at 169, 102 S.Ct. at 1595. The ailing instruction was included as just one part of one sentence in a transcript of instructions totaling fifty-five (55) pages. In its proper context, the other instructions identified the permissive nature of the presumption and certainly cured any defects in the ailing instruction. A reasonable juror could have been only left with the impression that he had a choice as to how to perceive the inferences of intent, and that it was not mandatory that he presume the defendant’s intent from his acts.

Even if the instruction had violated Sandstrom v. Montana, supra, this court is bound to conclude that Cardall was not denied effective assistance of counsel. Under similar circumstances, the Fifth Circuit Court of Appeals found trial counsel had not rendered ineffective assistance by failing to object to the trial judge’s jury instructions.

Sandstrom, the case in which the Supreme Court held such an instruction to be unconstitutional, was not decided until 1979, some three years after the petitioner’s trial. Counsel’s inability to foresee future pronouncements does not render his representation ineffective. As this court has said, “Clairvoyance is not a required attribute of effective representation.” Cooks v. United States, 461 F.2d 530 (5th Cir.1972).

Garland v. Maggio, 717 F.2d 199, 207 (5th Cir.1983).

Similarly, Cardall’s conviction occurred in October, 1975. Sandstrom, was not decided until 1979. His counsel can hardly be claimed to have been ineffective for failure to anticipate a Supreme Court ruling some four years thereafter.

Finally, under Strickland v. Washington, supra, Cardall bears the burden of showing that he was deprived of a fair trial, meaning one whose result is reliable. Although Cardall continues to assert his innocence, he has made no showing whatsoever that the instruction herein denied him of a conviction whose result was reliable.

IT IS BY THE COURT THEREFORE ORDERED that the motion of movant Richard Taylor Cardall for writ of error coram nobis is hereby denied.

      . Cardall was convicted on October 14, 1975, on nine counts involving securities fraud. He was initially sentenced to nine (9) consecutive five (5)-year terms, but shortly thereafter the sentence was reduced to nine consecutive two (2)-year terms.
      Cardall appealed his conviction, and the United States Court of Appeals for the Tenth Circuit affirmed. United States v. Cardall, 550 F.2d 604 (10th Cir.1976). The Tenth Circuit essentially found as follows on the issues on appeal: (1) the comments of Judge Ritter during the trial, though unjudicial, did not prejudice the jury against Cardall; (2) the court’s failure to comply with the requirements of Rule 30, Federal Rules of Criminal Procedure, did not constitute grounds for reversible error; (3) Cardall was not denied his right to allocution at the time of sentencing; and (4) the sentence imposed was not cruel and excessive.
      On January 27, 1978, Cardall moved for a modification of his sentence pursuant to Rule 35. On April 7, 1978, Judge Winner, sitting by designation, reduced the sentence and Cardall was released from custody. Judge Winner had not reduced the amount of the fine, however, and on July 26, 1978, Cardall filed a second motion pursuant Rule 35, which motion apparently was never ruled upon. Cardall filed this motion for writ of error coram nobis on July 25, 1984. The judges of the United States District Court for the District of Utah recused themselves, and the undersigned judge was designated to hear this matter.

      . The entire instruction on intent reads in the transcript as follows:
      "You are instructed that an essential element of the securities offenses charged is an intent to defraud, and this intent must be established by the evidence beyond a reasonable doubt.
      “‘Intent’ as used here means that the defendant must have had the purpose or willingness to defraud in mind. The existence of intent to devise and conduct such a scheme may be shown by the acts and declarations of the parties concerned and the surrounding circumstances as well as by direct evidence. Experience shows that direct evidence of fraudulent intent is not generally to be expected. And for that reason, the law permits a resort to circumstantial evidence as a means for finding the truth.
      "Moreover, since intent is largely a state of mind, and it is impossible to look into a man’s mind to see what went on, the only way you have to determine that question is to take into consideration all the facts and circumstances shown by the evidence as a whole. And one must also bear in mind that an intent may be inferred from the act itself, for it is the law that a person intends the usual and probable consequences of his acts.”
      [Tr. at p. 721-22.]

      . The movant has filed his petition for writ of error coram nobis as a civil action in this court. The United States Supreme Court has spoken of coram nobis as "a step in the criminal case.” United States v. Morgan, 346 U.S. 502, 505, n. 4, 74 S.Ct. 247, 249, n. 4, 98 L.Ed. 248 (1954). The courts have subsequently considered coram no-bis to be a “hybrid” action, and applied procedures similar to that on a motion to vacate. See United States v. Balistrieri, 606 F.2d 216 (7th Cir.1979), cert. denied 446 U.S. 917, 100 S.Ct. 1850, 64 L.Ed.2d 271 (1980); United States v. Tyler, 413 F.Supp. 1403 (M.D.Fla.1976). This court finds that Cardall’s pro se motion is properly filed and properly before this court.

      . Arguably, Hux v. Murphy, 733 F.2d 737 (10th Cir.1984), stands for the proposition that an instruction creating a mandatory presumption on the issue of intent does not cause reversible error if the court also instructs the jury that the prosecution must prove every element of the crime beyond a reasonable doubt. This court does not believe that Hux v. Murphy stands for such a proposition, and that such a proposition would run counter to the law as enunciated by the Supreme Court in Sandstrom v. Montana, 442 U.S. 510, 99 S.Ct. 2450, 61 L.Ed.2d 39 (1979), and Connecticut v. Johnson, 460 U.S. 73, 103 S.Ct. 969, 74 L.Ed.2d 823 (1983). Hux v. Murphy stands only for the proposition that a Sandstrom error must be viewed in the context of the overall charge. Id. 733 F.2d at 740, Each case must therefore be reviewed on its own particular facts.