author: HENRY WOODS, District Judge.

text:
    OLIN WATER SERVICES; Performance Products & Services Group; and Olin Corporation, a Virginia Corporation, Plaintiff, v. MIDLAND RESEARCH LABORATORIES, INC.; Bruce E. Donigan; and John W. Garmon, Defendants.
    No. LR-C-84-845.
    United States District Court, E.D. Arkansas, W.D.
    Oct. 30, 1984.

      Frederick K. Starrett, Ralston & Frieden, Topeka, Kan., for plaintiff.
    David R. Schlee, Kansas City, Mo., W.H. Dillahunty, Little Rock, Ark., for defendants.
   ORDER GRANTING PRELIMINARY INJUNCTION

HENRY WOODS, District Judge.

On October 19, 1984, plaintiff’s application for preliminary injunction came on for hearing. Plaintiff Olin Water Services is a Virginia corporation with its principal place of business in the State of Connecticut. Defendant Midland Research Laboratories, Inc. is a Kansas corporation registered to do business in Arkansas. Defendants Donigan and Garmon are residents of Arkansas. An amount greater than Ten Thousand Dollars ($10,000.00) exclusive of interest and costs is in controversy between the parties. The injunction is requested to prohibit defendants Garmon and Donigan from violating the terms of agreements not to compete which they executed while in the employ of Olin. Both parties put on evidence at the hearing, and the case was taken under advisement to give counsel the opportunity to submit briefs. The matter is now ripe for decision.

The application for preliminary injunction requires evaluation of four criteria: 1) the threat of irreparable harm to Olin if the injunction is not granted; 2) the harm that will result to Midland if the injunction is granted; 3) the probability that Olin will succeed on the merits at the trial of the case; and 4) the public interest. Dataphase Systems, Inc. v. C L Systems, 640 F.2d 109 (8th Cir.1981). These four factors will be considered seriatim.

Olin asserts that it will be irreparably harmed if the requested injunction is not granted. The evidence indicated that Garmon and Donigan, who were originally employed as salesmen by Olin, left that employment and went to work in a sales capacity for Midland. Midland sells the same type of water treatment products and services as does Olin. Shortly after becoming employed by Midland, Donigan began to contact Olin customers in Arkansas, and succeeded in getting several such customers to stop doing business with Olin and start doing business with Midland. These customers had previously been serviced by Donigan or Garmon when they were employed by Olin. Donigan also contacted several active prospects who were on a list of prospects being worked by Olin at the time he left Olin. Garmon claimed not to have contacted any Olin customers, but admitted that he has serviced former Olin customers after they have been converted into Midland customers by Donigan. There was evidence that Garmon and Donigan were Midland’s only Arkansas employees, and that Midland was not active in Arkansas prior to hiring Garmon and Donigan. There is no evidence that either Garmon or Donigan has established as Midland customers any businesses that were not formerly Olin customers. The activity of Garmon and Donigan has caused not only immediate loss of customers to Olin, but corresponding loss of business goodwill, references to potential customers, and future business. These losses are continuing in nature and are irreparable.

This Court must next consider the harm that will result to the defendants if the injunction is granted. The evidence showed that there are thousands of potential customers for the services of Olin, Midland, and similar companies in Arkansas. The injunction sought by Olin would impose only a slight restraint on Midland activities. It would prevent only two Midland employees from contacting a very limited number of enterprises in this area. They would be prohibited from contacting existing customers of Olin in Arkansas, now 18 in number; from contacting active or established prospects of Olin in Arkansas who were so established at the time Garmon and Donigan left Olin; and from revealing customer information about Olin customers to other water treatment service providers. No other Midland employee is restrained from contacting Olin customers, and Garmon and Donigan are not restrained from contacting any potential customer except for those who were established prospects of Olin at the time they left Olin. The potential harm to the defendants is virtually nonexistent. Therefore, the second prong of Dataphase is satisfied.

The third criterion in Dataphase is frequently the most difficult to apply. Is there a probability that Olin will prevail on the merits of its case? A great deal of evidence was presented at the hearing on this matter, and the Court is satisfied that Olin has a very good chance of prevailing on the merits at trial.

A threshold issue is what law applies to the agreements in question, Arkansas law or Kansas law. A federal court must apply the conflict of laws rules prevailing in the state in which it sits. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Arkansas law does not rely on any one factor in determining what law applies to a contract, but looks to several alternatives: the law of the state in which the contract was made, the law of the state in which the contract is performed, the law chosen by the parties, if there is sufficient nexus; or the “significant contacts” or “center of gravity” test. Tiffany Industries v. Commercial Grain Bin Co., 714 F.2d 799 (8th Cir.1983). Under such a flexible test, either Kansas law or Arkansas law might apply. However, it is the finding of this Court that the agreements in question would probably be upheld under either Arkansas or Kansas law.

Under both Arkansas and Kansas law, the test of a covenant not to compete is whether the restraint of competition is reasonable under the facts and circumstances of the particular case. All-State Supply, Inc. v. Fisher, 252 Ark. 962, 483 S.W.2d 210 (1972); Eastern Distributing Co., Inc. v. Flynn, 222 Kan. 666, 567 P.2d 1371 (1977). Reasonableness, in turn, hinges on considerations of time and territory. The restraint must not be for an overly-long period of time, nor may it involve an unnecessarily large territory. Id. In addition, neither Arkansas nor Kansas will enforce a covenant not to compete if its object is to prevent only ordinary competition, but both jurisdictions recognize that “customer contacts” is a legitimate interest to be protected. Borden, Inc. v. Huey, 261 Ark. 313, 547 S.W.2d 760 (1977), Flynn, supra. The theory of customer contacts “gains added weight where the business is one in which the employee is the sole or primary contact with the customers and in which a close personal relationship with them is fostered, enabling the employee to control such business as a personal asset.” Flynn, supra, 567 P.2d at 1377. The only real difference in Arkansas and Kansas law on the subject of covenants not to compete appears to be that Arkansas law will invalidate the entire agreement if any portion of it is found to be objectionable, Rector-Phillips-Morse, Inc. v. Vroman, 253 Ark. 750, 489 S.W.2d 1 (1973), whereas Kansas law may strike or alter the objectionable portions and allow the remainder to be effective, Flynn, supra, 567 P.2d at 1378-79.

With these principles in mind, the agreements in question must be analyzed. The relevant provisions of the agreement signed by Garmon are as follows:

That, in the event of the termination of his employment for any reason ... for a period of twelve (12) months after such termination, he will not, under any circumstances, directly or indirectly, either on his own account or in the service of others, engage in the sale, management ..., distribution or promotion of the sale of products of the kind or nature sold by Olin ... involving prospects or customers within his most recent assigned territory or sales management responsibility area who were established during or previous to his tenure of employment.

The relevant provisions of the agreement signed by Donigan are as follows:

That, in the event of the termination of his employment for any reason ... for a period of twelve (12) months after such termination, he will not, under any circumstances, directly or indirectly, either on his own account or in the service of others, engage in the sale, distribution or promotion of the sale of products of the kind or nature sold by Olin ..., to prospects or customers within his most recent assigned sales territory who were established during or previous to his tenure of employment.

The agreements not to compete cover a period of one year from termination of employment. This period of restraint has been held to be reasonable both by the Arkansas courts, All-State Supply, Inc. v. Fisher, supra, and by the Kansas courts, Flynn, supra. This Court must abide by the decision of the state courts as to the reasonability of the period of one year.

As for the territorial restriction, in each case it is defined in terms of the most recent area over which the employee had responsibility, and the Court finds such restriction to be reasonable. Testimony established that personal relationships between the salesperson and the customer, and the service record developed by the salesperson, are of paramount importance in the sale of water treatment products. Garmon and Donigan had the opportunity to develop solid relationships with customers in their assigned territories, and to establish q good track record for service in those territories. There is no question that the water treatment business is one in which it is appropriate to protect customer contacts by means of a covenant not to compete, and the agreements in question restrict competition as narrowly as possible. They are therefore reasonable restraints.

Based on the above analysis, it is clear that what the agreements not to compete seek to restrain is not ordinary competition, but unfair competition. Therefore, under Arkansas or Kansas law, the agreements are valid and enforceable. Orkin Exterminating Co. of Arkansas v. Murrell, 212 Ark. 449, 206 S.W.2d 185 (1947); Flynn, supra. A necessary concomitant of a finding that only unfair competition is restrained by the agreements is the finding that the agreements do not violate public policy, or infringe the public interest. The public has an interest in restraining unfair competitive practices that is as strong as its interest in permitting freedom in fair competitive practices. The fourth prong of the Dataphase test does not militate against entry of the requested injunction.

Several issues raised by the defendants remain to be considered. Defendants claim that the agreements in question are not supported by consideration. It was established at the hearing that Garmon and Donigan were employees “at will,” and could therefore be terminated at any time for any reason. This Court finds that the continued employment of Garmon and Donigan by Olin was sufficient consideration to support the agreements not to compete signed by them. Credit Bureau Management Company v. Huie, 254 F.Supp. 547 (E.D.Ark.1966).

Defendants also allege that Olin’s request for injunctive relief is barred by laches, unclean hands and estoppel. None of these theories has any support in the law. Midland claims that it has been prejudiced by Olin’s delay of some three months in seeking this injunction, but has presented no proof to support that contention. Garmon and Donigan have been, and remain, at liberty to contact a huge pool of potential customers in Arkansas. Absent prejudice to defendants, the defense of laches is inapplicable. The claim of unclean hands is based on the allegation that Olin wrongfully terminated both Garmon and Donigan. Not only is this contention not supported by the evidence, but it is irrelevant to the issue of whether a preliminary injunction should issue. No case law on point has been cited in support of this argument, and it must be laid to rest.

Defendants claim that Olin is es-topped to seek injunctive relief because it did not replace Garmon and Donigan after their termination. This Court is unable to perceive how that fact, even if conclusively established, could have any bearing on the violation of Garmon’s and Donigan’s agreements not to compete, in view of testimony that Olin’s Arkansas representative could adequately sell and service all of its existing Arkansas customers even before the piracy of Garmon and Donigan began.

Finally, defendants allege that the agreements, not to compete, which were signed in 1978, were superseded by agreements signed by Garmon and Donigan in 1982. There is a complete lack of evidence to support this allegation, and it therefore cannot be considered.

It is therefore the finding and the order of this Court that a preliminary injunction should issue to restrain Garmon and Donigan from any further violation of the agreements not to compete which were executed by them. The terms of that injunction are as follows, to-wit:

1) Defendant Garmon is preliminarily enjoined from contacting, prior to July 13, 1985, Olin’s Arkansas customers or prospects who were existing or established pri- or to July 13, 1984, for the purpose of promotion or sale of products of the kind or nature sold by Olin. Garmon is also preliminarily enjoined from revealing to Midland or any other water treatment service provider any customer information which he acquired while in the employ of Olin.

2) Defendant Donigan is preliminarily enjoined from contacting, prior to February 24, 1985, Olin’s Arkansas customers or prospects who were existing or established prior to February 24, 1984, for the purpose of promotion or sale of products of the kind or nature sold by Olin. Donigan is also preliminarily enjoined from revealing to Midland or any other water treatment service provider any customer information which he acquired while in the employ of Olin.

3) All defendants and their agents, servants, employees, and anyone acting in concert with them, are preliminarily enjoined from retaining or refusing to return to Olin confidential information and materials acquired during the employment of Garmon and Donigan with Olin, including but not limited to customer lists, prospect files and lists, and all copies thereof.

IT IS FURTHER ORDERED that bond be set in the amount of $10,000.00.


source: Caselaw Access Project

author: THOMAS F. HOGAN, District Judge.

license: Public Domain

text:
    CHRYSLER CORPORATION, Plaintiff, v. GENERAL MOTORS CORPORATION and Toyota Motor Corporation, Defendants.
    Civ. A. No. 84-0115.
    United States District Court, District of Columbia.
    Oct. 30, 1984.

      See also 589 F.Supp. 1182.
    Joseph A. Califano, Gerald M. Rosberg, Hamilton Fox, Dewey, Ballantine, Bushby, Palmer & Wood, Washington, D.C., Leonard Joseph, Joseph Angland, Dewey, Ballantine, Bushby, Palmer & Wood, New York City, for plaintiff.
    Patrick J. McCartan, Washington, D.C., Richard Pogue, Cleveland, Ohio, John Newman, Jones, Day, Reavis & Pogue, Washington, D.C., for General Motors.

      Earl W. Kintner, Michael Jaffe, Robert B. Hirsch, Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C., for Toyota Motor Corp.
    Edward T. Hand, Dept, of Justice, Washington, D.C., amicus curiae.
   MEMORANDUM OPINION AND ORDER

THOMAS F. HOGAN, District Judge.

This matter is before the Court on a motion by plaintiff Chrysler Corporation (“Chrysler”) to strike the affirmative defense of unclean hands raised in the answers filed by defendants General Motors Corporation (“GM”) and Toyota Motor Corporation (“Toyota”). At the hearing held on this matter, the Court issued a bench ruling granting plaintiff’s motion to strike. This opinion supplements the bench ruling.

Plaintiff filed suit under Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, and Section 7 of the Clayton Act, 15 U.S.C. § 18, seeking to enjoin GM and Toyota from combining in a joint venture to produce and market subcompact automobiles for sale in the United States. Complaint, ¶¶ 1 and 2. In their answers, GM and Toyota, inter alia, raise the defense of unclean hands. GM Answer, Sixth Defense; Toyota Answer, Sixth Defense. Toyota in its answer also charges Chrysler with bringing suit for improper and anti-competitive motives. Toyota Answer, Sixth Defense.

The primary issue raised by plaintiff’s motion to strike is whether the defense of unclean hands remains viable under Section 16 of the Clayton Act, 15 U.S.C. § 26. Section 16 provides:

Any person [or] corporation ... shall be entitled to sue for and have injunctive relief ... against threatened loss or damage by a violation of the antitrust laws ... when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity, under the rules governing such proceedings ____

15 U.S.C. § 26. Defendants contend that because unclean hands remains a defense in traditional equity suits, the Court should allow defendants to raise it as an affirmative defense in this antitrust action. Citing Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211, 71 S.Ct. 259, 95 L.Ed. 219 (1951), and Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968), plaintiff argues that the Supreme Court has dispensed with the unclean hands defense in antitrust actions.

In Kiefer-Stewart, the plaintiff sought treble damages under the Sherman Act, 15 U.S.C. §§ 1, 15, charging defendant with price-fixing in the sale of liquor. At trial, defendant introduced evidence to demonstrate that plaintiff had violated antitrust laws by agreeing with other wholesalers to set minimum prices for the sale of liquor. The Supreme Court ruled that the district court did not err in instructing the jury that plaintiff’s role in a price-fixing conspiracy was no defense to plaintiff's cause of action. 340 U.S. at 214, 71 S.Ct. at 261. The Court reasoned that plaintiff’s actions “could not legalize the unlawful combination by [defendants] nor immunize them against liability to those they injured.” Id. (citations omitted).

The Court in Perma Life considered the related issue of whether a private party filing suit for treble damages under the Sherman and Clayton Acts may be barred from recovery because of participation in the conspiracy. The Court ruled that the doctrine of in pari delicto is not a defense to antitrust actions. Perma Life Mufflers, Inc., 392 U.S. at 140, 88 S.Ct. at 1985. Citing Kiefer-Stewart, the Court reasoned that because private suits serve important public purposes it is inappropriate to allow common law defenses such as in pari delicto to bar recovery. Id. at 138, 88 S.Ct. at 1984. As the Court explained:

[T]he purposes of the antitrust laws are best served by insuring that the private action will be an ever-present threat to deter anyone contemplating business behavior in violation of the antitrust laws. The plaintiff who reaps the reward of treble damages may be no less morally reprehensible than the defendant, but the law encourages his suit to further the overriding public policy in favor of competition. A more fastidious regard for the relative moral worth of the parties could only result in seriously undermining the usefulness of the private action as a bulwark of antitrust enforcement. And permitting the plaintiff to recover a windfall gain does not encourage continued violations by those in his position since they remain fully subject to civil and criminal penalties for their own illegal conduct.

Id. at 139, 88 S.Ct. at 1984.

The reasons cited in Kiefer-Stewart and Perma Life for denying the defenses of unclean hands and in pari delicto are controlling in this case. Private parties filing suit under the antitrust laws function as “private attorneys general” representing the public interest. See Javelin Corp. v. Uniroyal, Inc., 546 F.2d 276, 280 (9th Cir.1976). Congress established the private right of action for the very purpose of insuring effective enforcement of the antitrust laws. Trebuhs Realty Co. v. News Syndicate Co., 107 F.Supp. 595, 599 (S.D.N.Y.1952). The public interest in preventing anticompetitive injury would be dampened tremendously if defendants were allowed to raise the defense of unclean hands in antitrust actions brought by private parties. Id.

Defendants point out that Kiefer-Stewart and Perma Life, decided under Section 4 of the Clayton Act, were treble damage suits and not equity actions where injunctive relief is sought. Furthermore, citing Graham v. Triangle Publications, Inc., 233 F.Supp. 825, 832 n. 24 (E.D.Pa.1964), affd per curiam on other grounds, 344 F.2d 775 (3d Cir.1965), defendants contend that traditional principles of equity, which permit the unclean hands defense, should be held to apply in this case because Chrysler is seeking injunctive relief and not treble damages. Defendants’ arguments have been duly considered. However, the Court is not convinced that Kiefer-Stewart and Perma Life should be read as narrowly as defendants suggest. Nor is the Court convinced that traditional equity principles should apply in a case such as this.

As noted, courts considering actions under the antitrust laws must be concerned with protection of the public interest as well as redressing private injury. The claim that the plaintiff has himself violated the law cannot be allowed to overshadow plaintiff's cause of action and the potential vindication of the public interest. This is especially true in equity actions because “Courts of equity may ... go much farther both to give and withhold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved.” Virginian R. Co. v. System Federation, 300 U.S. 515, 552, 57 S.Ct. 592, 601, 81 L.Ed. 789 (1937); see Trebuhs Realty Co. v. News Syndicate Co., supra, 107 F.Supp. at 599. As in the case with actions at law, actions in equity must yield to the overall public policy of enforcing antitrust laws. Trebuhs Realty Co. v. News Syndicate Co., 107 F.Supp. at 599. Permitting the unclean hands defense in this case would have a seriously damaging effect on Chrysler’s ability to seek meaningful equitable relief under the antitrust laws. Of course, defendants may enforce their claims against Chrysler in a separate action.

Defendants have chiefly relied on Graham v. Triangle Publications, Inc. The preceding discussion has demonstrated why this reliance is not compelling. Additionally, the Court notes that Triangle Publications and other cases cited by defendants predate the Supreme Court’s decision in Perma Life. Since that ruling, lower courts have almost uniformly declined to permit the unclean hands defense in antitrust suits where injunctive relief is sought. See American Motor Inns, Inc. v. Holiday Inns, Inc., 365 F.Supp. 1073, 1098 (D.N.J.1973), modified on other grounds, 521 F.2d 1230 (3d Cir.1975); Natcontainer Corp. v. Continental Can Co., 362 F.Supp. 1094, 1099 (S.D.N.Y.1973); Skil Corp. v. Black & Decker Manufacturing Co., 351 F.Supp. 65, 66 (N.D.Ill.1972); Credit Bureau Reports, Inc. v. Retail Credit Co., 358 F.Supp. 780, 796-97 (S.D.Tex.1971), affd, 476 F.2d 989 (5th Cir., 1973). But see Heldman v. United States Lawn Tennis Ass’n, 354 F.Supp. 1241, 1249 (S.D.N.Y. 1973) (even though unclean hands “may provide no defense to an antitrust violation when the merits are being decided,” this doctrine may be invoked in a request for a preliminary injunction).

The Court declines to delay in striking the defense of unclean hands, for as Judge Tyler observed in United States v. Schenley Industries, Inc., [1966] Trade Cas. (CCH) 1171, 897 at 83,149, permitting discovery and the development of the case under the unclean hands defense “would serve only to divert and protract [the] litigation, with concomitant expense.”

Accordingly, for the reasons stated in this Opinion, and upon consideration of the pleadings and supporting memoranda submitted by the parties, and in accordance with the Court’s bench ruling, it is by the Court this 29th day of October, 1984, hereby:

ORDERED that the motion to strike the affirmative defense of unclean hands is hereby granted; and it is

FURTHER ORDERED that GM’s Sixth Defense is hereby stricken; and it is

FURTHER ORDERED that Toyota’s Sixth Defense is hereby stricken.


author: LUONGO, Chief Judge.

text:
    SHULMAN RECORD CO., INC. v. NEW PLAN REALTY TRUST.
    Civ. A. No. 84-3239.
    United States District Court, E.D. Pennsylvania.
    Oct. 30, 1984.
    William Goldstein, Greenstein, Gorelick, Price, Silverman & Laveson, Philadelphia, Pa., for plaintiff.
    Mark E. Kogan, Abramson, Cogan, Kogan, Freedman & Blackman, Philadelphia, Pa., for defendant.
   MEMORANDUM

LUONGO, Chief Judge.

This is a contract action between Shulman Record Co., Inc., a Pennsylvania corporation, and New Plan Realty Trust, a Massachusetts business trust. New Plan Realty Trust has filed a motion to dismiss plaintiffs complaint for lack of subject matter jurisdiction on the ground that many of the shareholders/beneficiaries of the defendant trust are Pennsylvania citizens. I will deny the motion.

In Navarro Savings Assn. v. Lee, 446 U.S. 458, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980), the Supreme Court ruled that the individual trustees of a Massachusetts business trust could invoke federal diversity jurisdiction on the basis of their own citizenship “without regard to the citizenship of the trust beneficiaries'.” 446 U.S. at 466, 100 S.Ct. at 1784. The question raised by defendant’s motion is whether Navarro requires that only the trustees’ citizenship be considered where an express business trust is sought to be held liable because of a lease executed by a person who was not a trustee of the defendant when the lease was executed. I conclude that it does.

The declaration of trust involved in this case gave the defendant’s trustees powers virtually identical to those enjoyed by the trustees in Navarro. Article II of the trust accords the trustees the “full, absolute and exclusive power, control and authority over the Trust Property, the Trust Estate and the business and affairs of the Trust, to the same extent as if the Trustees were the sole and absolute owners thereof in their own right...” Declaration of Trust of New Plan Realty Trust, Art. II, § 2.1. Cf. Navarro 446 U.S. at 459, 100 S.Ct. at 1781. Given the similarity of the instant trust to that described in Navarro, I cannot avoid Navarro’s conclusion that the trustees are the “real parties to the controversy.” 446 U.S. at 465, 100 S.Ct. at 1784. To hold otherwise would permit similar business trusts to invoke as plaintiffs the diversity jurisdiction of a federal court by disregarding the citizenship of its shareholders, but, when named as defendants, to raise the citizenship of the shareholders as a jurisdictional barrier to the same tribunal.

Defendant seeks to distinguish Navarro on the ground that the instant controversy involves the liability of the trust as an association whereas Navarro involved the power of the trustees. This distinction is not persuasive. The ultimate benefit or burden that results from litigation will affect the trust’s shareholders without regard to whether the trustees or the trust itself is named as a party. Moreover, the fine distinction defendant seeks to draw would undermine the relative simplicity of the rule adopted by the Navarro Court. See Navarro, 446 U.S. at 464 & n. 13, 100 S.Ct. at 1783 & n. 13; Trent Realty Associates v. First Federal Savings and Loan Association of Philadelphia, 657 F.2d 29, 32 (3d Cir.1981).

The fact that the transaction at issue was not personally entered into by a trustee does not require a different result. So long as the trustees possess and exercise their ordinary power to manage assets for the benefit of others, the trustees are the real parties to the trust’s litigation.

I recognize that this interpretation of Navarro requires me to depart from the principle adopted in Fox v. Prudent Resources Trust, 382 F.Supp. 81, 92-93 (E.D. Pa.1974), and approved by the Third Circuit Court of Appeals in Riverside Memorial Mausoleum, Inc. v. UMET Trust, 581 F.2d 62, 65 (3d Cir.1978). As Justice Black-mun’s dissenting opinion in Navarro noted, however, the approach taken by the Navarro majority is in conflict with the holding of Fox and those decisions that followed it. Navarro, 446 U.S. at 466 n. 1, 100 S.Ct. at 1784 n. 1 (Blackmun, J., dissenting).

Thus, in the absence of binding appellate pronouncement that the Supreme Court intended the citizenship of an active, express business trust to depend on the character of the transaction that gave rise to the litigation, I conclude that Navarro compels me to look only to the citizenship of the trustees to determine whether diversity jurisdiction exists. Because plaintiff is a citizen of Pennsylvania and none of the trustees are Pennsylvania citizens, diversity jurisdiction exists, and I will accordingly deny defendant’s motion.


text:
    Raymond THOMAS, Plaintiff, v. Larry NORRIS, Warden; Marvin Evans, Assistant Warden; and A.L. Lockhart, Director, Arkansas Department of Correction, Defendants.
    No. PB-C-84-429.
    United States District Court, E.D. Arkansas.
    Oct. 30, 1984.
    Raymond Thomas, pro se.
    Patricia G. Cherry, Asst. Atty. Gen., State of Ark., Little Rock, Ark., for defendants.
   ORDER

HENRY WOODS, District Judge.

This case comes before the Court on defendants’ motion for summary judgment, supported by the affidavit of A.L. Lock-hart, the Director of the Arkansas Department of Correction. Fed.R.Civ.P. 56(b) requires that “When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial.” While plaintiff contests defendants’ position on the motion for summary judgment, he has advanced no evidence in support of his opposition.

The facts of this case are not substantially in dispute. It is admitted that Muslim religious services at the Maximum Security Unit of the Arkansas Department of Correction have been temporarily suspended as a result of disturbances connected with such services at the Cummins Unit. The ringleaders of the Cummins disturbances were transferred to the Maximum Security Unit, and Muslim services at the Maximum Security Unit were then temporarily suspended due to potential security risks. Lockhart’s affidavit states that the situation is being evaluated weekly, and that “as the threat to security decreases, it is likely that the services will be reinstituted.”

Plaintiff claims that his constitutional rights are being violated by the suspension of Muslim services. While a permanent suspension of such services might indeed constitute a violation, the temporary suspension involved in this case does not. While freedom to believe any religious tenets is absolute, the freedom to exercise those beliefs is not. Sharp v. Sigler, 408 F.2d 966 (8th Cir.1969). This is especially true in the context of prison worship services. The State clearly has an interest in maintaining order, security, and discipline within its prisons, and has broad discretion to promote those interests. Otey v. Best, 680 F.2d 1231 (8th Cir.1982). Where, as here, prison officials produce evidence that permitting the exercise of first amendment rights would create a potential security risk, the courts must defer to their judgment unless the prisoner produces substantial evidence that the officials have exaggerated their response to security considerations or that their beliefs are unreasonable. Id. at 1233. Plaintiff has advanced no such evidence. Without such evidence, there is no genuine issue of material fact to be tried. Plaintiffs first amendment rights have not been violated, and the motion for summary judgment must be granted.


author: BRIEANT, District Judge.

text:
    Joseph Patrick Thomas DOHERTY, Plaintiff, v. UNITED STATES DEPARTMENT OF JUSTICE, William French Smith, Roger B. Clegg, James K. Hall, and Lee F. Laster, Defendants.
    No. 84 Civ. 3197-CLB.
    United States District Court, S.D. New York.
    Oct. 30, 1984.
    Mary B. Pike, New York City, for plaintiff.
    Rudolph W. Giuliani, U.S. Atty. for the Southern District of New York by Thomas E. Moseley, Sp. Asst. U.S. Atty., New York City, for defendants.
   MEMORANDUM AND ORDER

BRIEANT, District Judge.

Plaintiff, Joseph Patrick Thomas Doherty, seeks to obtain certain records of the Federal Bureau of Investigation (“FBI”) pursuant to the Freedom of Information Act (“FOIA”). This Court has subject matter jurisdiction pursuant to 5 U.S.C. § 552. The Government has moved pursuant to Rule 12, F.R.Civ.P. for an order dismissing this action, essentially for want of standing.

The Government asserts, and this Court assumes that plaintiff is a 29 year old British subject from the Six Counties, who entered the United States on a false passport in the early part of 1982 and found employment, residing here until his arrest more than a year later. According to the Government Memorandum submitted in support of this motion, Mr. Doherty belonged first to a youth gang, and at age 17 joined the Provisional Wing of the Irish Republican Army in its fight for independence. The Government goes on to inform the Court that while so engaged, Mr. Doherty was convicted for transporting explosives in a hijacked car. Released after serving five years in prison, Mr. Doherty was convicted of murder, sentenced to life imprisonment, escaped from prison and came to the United States as a fugitive. He is now resisting deportation and/or extradition. In a seven page description, Mr. Doherty is described in lurid detail as a terrorist, a liar, a smuggler of arms, an ambusher and a hostage-taker, who used a machine gun in a residential neighborhood, all apparently in what he regards as a fight for freedom and in support of a just cause. However, the Court is perplexed as to how these prior acts become relevant upon the construction of the FOIA or whether an undocumented resident alien may sue thereunder.

In June, 1983, plaintiff was apprehended by the Immigration and Naturalization Service (“INS”). On July 5, 1983 plaintiff wrote to the FBI and requested documents “retrievable in a search for files listed under [his] name.” Plaintiffs request was made pursuant to 5 U.S.C. §§ 552 and 552a of the FOIA and the Privacy Act of 1974.

The Department of Justice denied plaintiff’s request, asserting that its FBI records were exempt under 5 U.S.C. § 552(b)(7)(A), the subsection which protects from disclosure records compiled for law enforcement purposes, the production of which would interfere with enforcement proceedings. Upon administrative appeal, the Department of Justice affirmed the decision to deny plaintiff access to the agency records on that ground. Having exhausted his administrative remedy, plaintiff filed his complaint on May 8, 1984.

Rather than litigate the applicability of the claimed exemption from disclosure, the Government has chosen to move for dismissal of plaintiff’s complaint under Rule 12(b)(1) and (b)(6). Its position is that the complaint fails to state a claim because an undocumented alien has no right to access to information under the FOIA. Thus the narrow issue presented to this Court is whether, under § 552(a)(4)(B), Doherty is able to sue at all.

Since 1966, when Congress enacted the FOIA, the Act has been interpreted to require broad disclosure. Department of Air Force v. Rose, 425 U.S. 352, 360-62, 96 S.Ct. 1592, 1598-99, 48 L.Ed.2d 11 (1976). The FOIA revised the public disclosure section of the Administrative Procedure Act, 5 U.S.C. § 1002, because Congress found that agencies were not disclosing sufficiently information which ought to be available to the public. S.Rep. No. 813, 89th Cong., 1st Sess. 3-4 (1965); H.R.Rep. No. 1497, 89th Cong., 2d Sess. 1-6, reprinted in 1966 U.S. Code Cong. & Adm. News 2418, 2418-22 [hereinafter cited as House Report].

In order to achieve the goal of broad disclosure, the FOIA requires an agency to make information available unless it falls within one of the nine exemptions listed in § 552(b). NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214, 221, 98 S.Ct. 2311, 2316, 57 L.Ed.2d 159 (1978). The list of exemptions is exclusive, 5 U.S.C. § 552(c), and the exemptions are to be narrowly construed. Title Guarantee Co. v. NLRB, 534 F.2d 484, 488-89 (2d Cir.1976). In sum, the basic policy of the Act is to promote public disclosure, not secrecy. Department of Air Force v. Rose, 425 U.S. at 361, 96 S.Ct. at 1599. Mindful of this Congressional purpose, this Court must consider the meaning of the statutory language defining who has a right to receive the Government’s records, and who may complain to the district court when such access is denied.

Section 552(a)(3) states that “each agency, upon any request for records which (A) reasonably describes such records and (B) is made in accordance with published rules stating the time, place, fees (if any), and procedures to be followed, shall make the records promptly available to any person ” (emphasis added). Under established principles of statutory construction, this Court must first examine the language of the statute and give the statutory terms their ordinary meaning. “Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive.” Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980).

Section 552(a)(3) by its terms applies to “any person.” Likewise, §§ 552(a)(1) and 552(c) refer to “the public.” Section 552(a)(4)(B), the judicial review section, refers to the “complainant.” Nothing in the literal language of the statute suggests that disclosure depends upon the status as to citizenship or residency of the person requesting information. Nevertheless, the Government contends that the FOIA restricts judicial review to American citizens. Because the Government disputes the ordinary meaning of the statutory terms, the Court will consult the legislative history of the Act, although no ambiguity is perceived. Congress knows the difference between “persons” and “citizens.” Both terms appear frequently in legislation and in the Constitution itself. They are different in meaning, and the difference is well known.

One of the ways that Congress broadened the Government’s disclosure obligations when it passed the FOIA was to eliminate at least one aspect of standing as a ground for resistance. Before 1966, the statute provided that records be made available to “persons properly and directly concerned except information held confidential for good cause found.” House Report, 1966 U.S. Code & Adm. News at 2421, quoting § 3 of the Administrative Procedure Act. The FOIA eliminated the “properly and directly concerned” or “none of your business” test or defense, partly because it was “relied upon almost daily to withhold Government information from the public.” Id. at 2422. Eliminating this test also served to shift any emphasis from who was making the request, to whether the records themselves ought to be public information. As one commentator explained the Act’s new text:

“The Act’s sole concern is with what must be made public or not made public. The Act never provides for disclosure to some private parties and withholding from others. The main provision of section 3 says that information is to be made available ‘to the public’ and the central provision of subsection (c) requires availability of records to ‘any person.’ [UJnder the Act, Uncle Sam’s information is either made public or not made public. The Act never requires it to be protected from all except those who have a special need for it.” Davis, The Information Act: A Preliminary Analysis, 34 U.Chi.L.Rev. 761, 765 (1967).

In adding to the textual change making records available to any person, Congress in 1966 provided no restrictive definition of the term “person.” Unlike the Privacy Act of 1974, which states that “the term ‘individual’ means a citizen of the United States or an alien lawfully admitted for permanent residence,” 5 U.S.C. § 552a(a)(2), the FOIA nowhere alters or limits the ordinary meaning of the term “person.” Nor does the FOIA alter the earlier definitional section of the Administrative Procedure Act which states that a person is “an individual, partnership, corporation, association or public or private organization other than an agency.” 5 U.S.C. § 551(2) (1977)

Upon comparing the text of the FOIA with the text of the Privacy Act, this Court believes that the Congress, for whatever reason of its own, was aware of the difference between the terms “person” and “citizen,” and intentionally chose the former for the FOIA and the latter for the Privacy Act. Thus the definition in § 551(2) encompasses any individual, including plaintiff in the case at bar.

The reports of the Senate and the House of Representatives are replete with references to “any person” and “the public.” The rationale behind the policy of disclosing records to anyone is that the public as a whole has a right to know how the United States Government is operating. House Report, 1966 U.S. Code Cong. & Adm. News at 2422. The objective of disclosure is to create an informed, intelligent electorate. Id. at 2429. This result or goal is independent of the status or citizenship of the person who actually makes the request or seeks relief from a denial of access. See Cox v. United States Department of Justice, 576 F.2d 1302, 1305, n. 5 (8th Cir. 1978).

Apparently, the thrust of the Government’s argument is that notwithstanding the “any person” language of subsection (a)(3), Congress never intended to carry that language over to the judicial remedy section, 552(a)(4)(B). In other words, the Government asks the Court to conclude that even if broad disclosure may be had by any person, any person is not entitled to sue — citizens alone were provided the enforcement remedy if their requests were rejected without justification. This Court cannot interpret the FOIA in such a restrictive manner. There is nothing in the statute to suggest that the person to whom disclosure must be made under subsection (a)(3) is not the same person who may file a complaint under subsection (a)(4). To suggest otherwise assumes a wrong without a remedy. If a person has the right to file a request under the FOIA, reason dictates that the same person must also have the right to file a complaint under subsection (a)(4)(B). The statute nowhere differentiates between the “person” entitled to receive disclosable information and the “complainant” entitled to sue.

Although the Government contends that “[t]he 1966 legislative history could not be plainer in limiting relief to citizens,” for every reference to “citizens,” provided in the Government’s citations, there is to be found another equally significant reference to “person.” For example, the House Report accompanying the proposed FOIA states that “[a]n aggrieved person is given the right to file an action in the district where he resides____” [Emphasis added here and in the balance of the paragraph]. 1966 U.S. Code Cong. & Adm. News at 2426. Again in the Attorney General’s Memorandum on the Public Information Section of the [Revised] Administrative Procedure Act, we find the following statement: “Any person from whom an agency has withheld a record after proper request under subsection (c) may file a complaint in the appropriate United States District Court.” Staff of Senate Comm, on the Judiciary, 93rd Cong., 2d Sess., Freedom of Information Act Sourcebook: Legislative Materials, Cases, Articles 226 (Comm. Print 1974) [hereinafter cited as Source-book]. In the Senate debates on the FOIA, the Republican Policy Committee stated, “[u]nder this legislation, if a request for information is denied, the aggrieved person has the right to file an action in a U.S. District Court ____” Sourcebook at 59. Senate Report No. 89-813 states: “The aggrieved person can bring an action in the district court ____” Sourcebook at 43. While the Government is correct in noting that there are other similar statements which use the word “citizen,” the Court does not find a clear legislative intention to grant a right to sue to citizens rather than to persons.

The relatively few cases in which this issue of standing has been raised have held that the complainant’s identity or status has no bearing on whether the complainant has a right to request the Government records. For example, in Moorefield v. United States Secret Service, 611 F.2d 1021 (5th Cir.), cert. denied, 449 U.S. 909, 101 S.Ct. 283, 66 L.Ed.2d 139 (1980), the complainant had been twice convicted for threatening the life of the President. The court held that the convictions were irrelevant to Moorefield’s right to see the requested file — “Moorefield may see the documents if anyone is allowed to do so by the FOIA.” Id. at 1023, n. 2. (Emphasis in original).

In another case where the complainant was a prisoner, the Court of Appeals for the Eighth Circuit explained:

“Neither his status nor his particular interest in the information at issue can play any part in our consideration of his FOIA request, for ‘the Act precludes consideration of the interests of the party seeking relief.’ Soucie v. David, 448 F.2d 1067, 1077 (D.C.Cir.1971) .... The conclusions we reach in this case relate solely to possible uses by any member of the public.” Cox v. United States Department of Justice, supra, 576 F.2d at 1305, n. 5.

These and other similar cases reflect the view that what matters is the character of the requested information, not the identify of the requesting person.

Although the plaintiffs in Moorefield and Cox were both United States citizens, it is not at all clear that citizenship is a prerequisite to maintaining a FOIA action. In DeLaurentiis v. Haig, 528 F.Supp. 601 (E.D.Pa.1981), affd 686 F.2d 192 (3d Cir. 1982), an Italian citizen residing in Italy was a plaintiff in an FOIA action. Although his co-plaintiff was his wife, a United States citizen, Mr. DeLaurentiis is named in the caption as a plaintiff and the court treated him as such.

In a slightly different context, a plaintiff has argued that Congress’ intent in enacting one of the exemptions to disclosure was to protect only American citizens and not citizens of foreign countries. Stone v. Export-Import Bank of the United States, 552 F.2d 132 (5th Cir.1977). There the court held that the use of the term “person” in the FOIA is not limited to American individuals or organizations. Id. at 136. Therefore, information obtained from a Soviet Russian bank was information “obtained from a person” within the meaning of 5 U.S.C. § 552(b)(4).

A recent decision concerning a FOIA request by a “citizens watch” group stated in dictum that:

“Under the Freedom of Information Act, the identity of the requester is immaterial; for example, there is no statutory bar to the military attache of the soviet embassy filing FOIA requests for information from the CIA and the FBI on the same basis as a United States citizen.” Military Audit Project v. Casey, 656 F.2d 724, 730-31, n. 11 (D.C.Cir.1981)

That comment is of particular interest in this case, where the Government has argued that:

“Under the construction of FOIA implicit in Doherty’s request, the head of the KGB could literally make a FOIA request for all FBI counter-intelligence files and then sue in federal court to enforce his view of FOIA. Congress could surely not have intended such an absurd result in order to vindicate the citizen’s right to know.” (Memorandum of Law in Support of Government’s Motion to Dismiss and/or for Summary Judgment, at 12).

Such a case is not now before us; the KGB is not a “person,” and presumably has or will obtain the information referred to through normal channels of espionage and leaks. It seems to have no need to rely on the FOIA.

Turning then to Doherty’s status in the present action, there is no statutory basis for denying him the right to sue even though the Government contends that the FOIA is inapplicable to a “foreign terrorist [who] seeks to rummage through Government files.” (Memorandum of Law in Support of Government’s Motion to Dismiss and/or for Summary Judgment, at 12). If, as in DeLaurentiis, supra, a non-resident alien can file a complaint and litigate the applicability of the exemptions claimed by the requested agency, it does not appear to this Court that Mr. Doherty’s status as an undocumented or “illegal” alien should create any special bar to suit. Indeed, it has been held recently that an excludable alien physically present within United States territory can claim protections of the Fifth and Fourteenth Amendments to the U.S. Constitution and enjoy access to the courts to enforce such rights. Jean v. Nelson, 711 F.2d 1455, 1484 (11th Cir.1983), rev’d in part, 727 F.2d 957 (11th Cir.1984) (en banc)] Fernandez-Roque v. Smith, 567 F.Supp. 1115, 1125-26 (N.D.Ga.1983), rev’d, 734 F.2d 576 (11th Cir.1984).

Finally, it appears that there is absolutely no bar to a friend or a journalist filing the FOIA request on plaintiff’s behalf and then filing a complaint once the request has been denied. If “any member of the public” can request information and sue to enforce the federal government’s disclosure obligations, see NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 136-37, 95 S.Ct. 1504, 1509-10, 44 L.Ed.2d 29 (1975), there is no reason why plaintiff cannot enjoy access to the courts in the country where he currently — albeit perhaps unlawfully— resides.

Congress having enacted this supposedly remedial legislation, it is the duty of the bureaucrats holding non-exempt information to comply with its provisions promptly and cheerfully unless and until the statute is revised by Congress, and it is the obligation of this Court to enforce compliance in the same vein when it is appropriate to do so. The legislative goals will not be served by engrafting on the statute’s plain meaning, a judicial exception of the sort urged here; an exception which leads to delay and will require litigation of facts having nothing to do with the merits, such as the citizenship of a complainant or the validity of his green card. If the Government were to prevail on its motion here, in the next case, it will become a litigable issue whether a citizen complainant is not the real party in interest, because acting as a mere agent for an undisclosed illegal alien terrorist principal. Those who find the statute too costly and burdensome should address themselves to Congress rather than inventing new pleas in bar.

The Government’s motion to dismiss the complaint is denied. A scheduling conference of counsel will be held before the Court on December 6, 1984 at 9:30 A.M. in Courtroom 705 to resolve any remaining issues in this case in order that a final judgment may be entered.

So Ordered.

      . The definition of "person” in 5 U.S.C. § 551 has continued in force through the 1966 enactment of the FOIA and its amendment in 1974. See, e.g., Neal-Cooper Grain Co. v. Kissinger, 385 F.Supp. 769, 776 (D.D.C.1974); Stone v. Export-Import Bank of the United States, 552 F.2d 132, 136 (5th Cir.1977).

      . Under the Privacy Act, 5 U.S.C. § 552a (1977) an alien cannot gain access to agency records. Raven v. Panama Canal Co., 583 F.2d 169 (5th Cir.1978). Thus it is clear that Congress could have restricted access similarly under the FOIA had it chosen to do so.

      . During the hearings preceding enactment of the FOIA, the Congress did in fact receive notice that the use of the word “person" might bestow rights under the FOIA on aliens. The Comptroller General wrote to the subcommittee that "we believe the reference to 'any person’ ... is too broad. We think that the individuals being given access to Government records should, at least, be citizens of the United States____” This advice was not heeded. Hearings on S. 1160 et al. before the Subcomm. on Administrative Practice and Procedure of the Senate Comm, on the Judiciary, 89th Cong., 1st Sess. 376 (1965).

      . In Neat-Cooper Grain Co. v. Kissinger, 385 F.Supp. 769 (D.D.C.1974), a decision which goes beyond the plain meaning of the statute and which this Court does not accept as correctly decided, the court held that a foreign government was a “person” within the terms of the FOIA. Id. at 776. The request for information was made "by or on behalf of the Mexican Government.” The 1974 debate in the House of Representatives reveals an intention not to extend a right of action to foreign governments:
      "MR. ROUSSELOT. I thank the gentleman for yielding. Does this legislation mean that foreign governments or individuals from foreign governments will have the same kind of access as any American citizen, or is it just limited to American citizens?
      I am referring especially in the case where an individual has to go to a court suit.
      MR. MOORHEAD of Pennsylvania. The legislation says any person, that would exclude foreign governments.
      MR. ROUSSELOT. What about a foreign ambassador or a foreign alien, say the Russian Ambassador?
      MR. MOORHEAD of Pennsylvania. I would think if he had standing in a court as an individual, not as an ambassador, that he would have the same rights in connection with this; subject, of course, to the limitations provided in the original act.” Staff of Senate Comm, on the Judiciary, 94th Cong., 1st Sess., Freedom of Information Act and Amendments of 1974 (P.L. 93-502) Source Book: Legislative History, Texts, and Other Documents 241-42 (Comm. Print 1975).

      . If plaintiff were able to fit into the definition of "refugee," the United States might have an international duty to provide him with access to its courts of law. Protocol Relating to the Status of Refugees, Jan. 31, 1967, 19 U.S.T. 6223, T.I.A.S. No. 6577, 606 U.N.T.S. 267, art. 16(3) (entered into force for the United States Nov. 1, 1968).


author: NAUMAN S. SCOTT, District Judge.

text:
    Stephen M. FRAZIER v. COLUMBIA GAS DEVELOPMENT CORPORATION.
    Civ. A. No. 83-1872.
    United States District Court, W.D. Louisiana, Alexandria Division.
    Oct. 31, 1984.
    Hicks & Brown, C. James Hicks, Alexandria, La., for plaintiff.
    Stafford, Stewart & Potter, Larry A. Stewart, Alexandria, La., for Road Equipment Co., Inc.
    Davidson, Meaux, Sonnier & McEUigott, John E. McEUigott, Jr., Lafayette, La., for Columbia Gas Development Corp.
    Gist, Methvin, Hughes & Munsterman, George C. Gaiennie, III and Howard B. Gist, III, Alexandria, La., for Consolidated Operating Co., Inc.
    Bolen & Erwin, James A. Bolen, Jr., Alexandria, La., for Angelina Cas. Ins. Co.
    Mouton, Roy, Carmouche, Bivins, Judice & Henke, Alan K. Breaud, Lafayette, La., for Mission National Ins. Co.
   RULING

NAUMAN S. SCOTT, District Judge.

This matter is before the Court on the motion of third-party defendant Consolidated Operating Company, Inc. (Consolidated) for summary judgment declaring Columbia Gas Development Corporation’s (Columbia) claim for contractual indemnity against it null and void under LSA-R.S. 9:2780. For the reasons hereinafter set out, the motion should be and it is hereby GRANTED in part and DENIED in part.

This personal injury action was filed against Columbia by plaintiff Stephen M. Frazier who seeks damages for injuries which he allegedly sustained while employed by Consolidated and working on a stationary platform owned by Columbia off the coast of Gueydan, Louisiana. Frazier alleges he was injured on or about June 12, 1983. Suit was filed on August 1, 1983, with jurisdiction based on the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. §§ 1331-1333. On January 30, 1984, Columbia filed a third-party complaint against Consolidated seeking contractual indemnity. The basis for Columbia’s claim in this regard is paragraph 5 of the Master Service Agreement entered into between Columbia (designated therein as Company) and Consolidated (designated therein as Contractor) on November 9, 1982 which provides in pertinent part:

“d.(ii) Contractor agrees to indemnify, defend, hold and save Company ... harmless from all claims ... arising out of or from injury to or death of ... Contractor, its agents ... (and) employees ... howsoever and by whomever caused, which occurs during the course of, or enroute to or from, Contractor’s work and performance of services hereunder, and even though occasioned, brought about or caused in whole or in part by the act, negligence or strict liability, whether primary, secondary, imputed or vicarious, of Company ... regardless of whether Contractor et al are found to have been negligent.”

Consolidated opposes the enforcement of these provisions since the contract was entered into after the effective date of LSA-R.S. 9:2780 (Act 427 of Louisiana Regular Session of 1981, effective September 11, 1981). Thus, Columbia claims, the provisions are null and void.

I.

Under the OCSLA “the civil and criminal laws of each adjacent State” apply as surrogate Federal law “(t)o the extent that they are applicable and not inconsistent with (the) Act or other Federal laws and regulations of the Secretary.” 43 U.S.C. § 1333(a)(2)(A); See, e.g., Rodrigue v. Aetna Casualty and Surety Company, 395 U.S. 352, 89 S.Ct. 1835, 23 L.Ed.2d 360 (1969). Therefore, unless it can be shown that LSA-R.S. 9:2780 is inconsistent with the “Act or other Federal laws and regulations”, it must be applied.

Defendant contends that under federal law, a corporation may recover indemnity for its own negligence if the applicable contract expressly so provides. See, U.S. v. Seckinger, 397 U.S. 203, 212, 90 S.Ct. 880, 885, 25 L.Ed.2d 224, 233 n. 17 (1970). This being so, defendant claims, then § 2780 is inconsistent with federal law and, as such, should not be applied under the OCSLA.

Of utmost importance to us in our analysis is the phrase “and not inconsistent with this Act or other Federal laws and regulations of the Secretary.” 43 U.S.C. § 1333(a)(2)(A). This language is not ambiguous; we think its meaning is clear. State law must apply except where it is inconsistent with the OCSLA itself, other Federal statutes or regulations promulgated by the Secretary. This interpretation is compelled by the use of the word “laws” (as opposed to the word “law” which might imply a body of law — federal common law) and by the use of the correlative word “other”, referring to this act or other acts. Certainly this word “laws” does not refer to federal common law. We find that the words “other Federal laws” refers to other Federal acts or statutes.

II.

Having found that Section 2780 applies to the indemnity agreement found herein, our inquiry now turns to what effect it has on Columbia’s claim for contractual indemnity. As was stated by Judge Shaw of this District in his well reasoned ruling in Home Ins. Co. v. Garber Industries, Inc., 588 F.Supp. 1218, 1222 (W.D.La. 1984):

“(The parties) assert that section 2780 nullifies the indemnity agreements in their entirety because they contain provisions which purport to provide for defense and indemnity against (the Company’s) own negligence. These assertions are not fully supported by the statutory language, however. Subsection (B) of the Act plainly stated that an oilfield indemnity agreement ‘is void and unenforceable to the extent that it purports to or does provide’ for defense and indemnity against the negligence or other fault of the indemnitee or, among others, independent contractors who are directly responsible to the indemnitee. This language compels the conclusion that section 2780 nullifies an oilfield indemnity agreement only to the extent that the agreement purports to defend and indemnify a party against the consequences of its own negligence. Application of section 2708 leaves the indemnity agreement valid and enforceable in all other respects.”

Thus, in the instant case, Columbia cannot enforce the agreement to indemnify, and defend Columbia against its own negligence. This part of Consolidated’s motion is granted. On the other hand, however, Consolidated must indemnify and defend Columbia to the extent that the agreement covers claims that are not caused by the negligence or other fault of Columbia or one of its agents, directors, officers, employees and/or co-lessees.

Motion GRANTED in part and DENIED in part.

      . LSA-R.S. 9:2780 provides in pertinent part: A. The legislature finds that an inequity is foisted on certain contractors and their employees by the defense or indemnity provisions, either or both, contained in some agreements pertaining to wells for oil, gas or water, or drilling for minerals which occur in a solid, liquid, gaseous, or other state, to the extent those provisions apply to death or bodily injury to persons. It is the intent of the legislature by this Section to declare null and void and against public policy of the state of Louisiana any provision in any agreement which requires defense and/or indemnification, for death or bodily injury to persons, where there is negligence or fault (strict liability) on the part of the indemnitee ...
      B. Any provision contained in, collateral to, or affecting an agreement pertaining to a well for oil, gas or water, or drilling for minerals which occur in a solid, liquid, gaseous or other state, is void and unenforceable to the extent that it purports to or does provide for defense or indemnity, or either, to the indemnitee against loss or liability for damages arising out of or resulting from death or bodily injury to persons, which is caused by or results from the sole or concurrent negligence or fault (strict liability) of the indemnitee ...

      . This precise legal issue was raised but not addressed in Home Ins. Co. v. Garber Industries, Inc., 588 F.Supp. 1218, 1223 n. 8 (W.D.La.1984). In that case, Judge Shaw noted that “there is an issue as to whether section 2780 is inconsistent with federal law ...,” citing Doucet v. Gulf Oil Corporation, No. 82 — 4818 (E.D.La., May 17, 1984), recalled, No. 82-4818 (E.D.La., June 20, 1984).

      . Under “ejusdem generis” canon of statutory construction where general words follow the enumeration of particular classes of things, the general words will be construed as applying only to things of the same general class as those enumerated. Black’s Law Dictionary, 5th ed. p. 464.

      . We find the reasoning of Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188, 1194 (1938), persuasive, if not controlling: "Except in matters governed by the Federal Constitution or by Acts of Congress, the law to be applied in any case is the law of the State. And whether the law of the State shall be declared by its Legislature in a statute or by its highest court in a decision is not a matter of federal concern. There is no federal general common law. Congress has no power to declare substantive rules of common law applicable in a State whether they be local in their nature or ‘general’, be they commercial law or a part of the law of torts. And no clause in the Constitution purports to confer such a power upon the federal courts.”

      . A survey of applicable case law appears to be in agreement with our above holding: Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971) (State statute of limitations applied over the federal common law doctrine of laches); Olsen v. Shell Oil Co., 708 F.2d 976 (5th Cir.1983) (applied Louisiana law on inflationary factors in damage awards instead of "federal” law, in absence of a particular federal statute); Evans v. Chevron Oil Co., 438 F.Supp. 1097, 1099 (E.D.La.1977), aff’d without opinion, 616 F.2d 565, 566 (5th Cir.1980) (applied Louisiana law on inflation); Olsen v. Shell Oil Co., supra, 708 F.2d at 984 (applied LSA-R.S. 13:4203 on matter of prejudgment interest).

      . Like Forest Oil Corporation in the Garber case, see note 7, 588 F.Supp. at 1222, it appears Columbia contemplated just such a limited invalidation of the indemnity agreement:
      5d.(i) To the extent the following provisions of contractual indemnity is permitted by applicable law, ...

      . "As a practical matter, this means only that Columbia will be entitled to its costs of defense for Consolidated if the (trier of fact) finds that Columbia, etc. were not negligent or otherwise at fault.” Garber, supra, 588 F.Supp. at 1223.


author: ERWIN, District Judge.

text:
    CONSUL, LTD., Plaintiff, v. TRANSCO ENERGY COMPANY, formerly known as Transco Companies, Inc. and Transcontinental Gas Pipe Line Corporation, Defendants.
    No. C-82-574-WS.
    United States District Court, M.D. North Carolina, Winston-Salem Division.
    Oct. 31, 1984.
    Don R. House and Mary Ward Root, Winston-Salem, N.C., Dudley H. Chapman, Washington, D.C., for plaintiff.

      Charles F. Vance, Jr. and W. Andrew Copenhaver, Winston-Salem, N.C., John L. Jeffers, Houston, Tex., for defendants.
   MEMORANDUM OPINION

ERWIN, District Judge.

This matter is before the court on defendants’ motions for partial summary judgment on plaintiff’s cause of action under Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. For the reasons which follow, the court will allow both of the defendants’ motions.

The Parties

The plaintiff Consul, Ltd. (Consul), is a corporation organized and existing under the laws of the State of North Carolina, with its principal place of business in Winston-Salem, North Carolina. During all pertinent times herein, Consul was engaged in, among other things, the business of developing, locating, acquiring, and programming natural gas procurement for a number of major industrial clients. Consul began this aspect of its business in response to the shortage of natural gas experienced by industrial users in North Carolina and other southern states in the mid-1970’s. It was the goal of Consul to develop ultimately a program through its corporate clients of joint-venture exploration and development of natural gas sources to assure those industrial users of sufficient quantities of natural gas for future plant operations.

Transco Energy Company (Transco) is a corporation organized and existing under the laws of the State of Delaware, with its national offices at Houston, Texas. The stockholders approved a change in the name of this corporation from Transco Companies, Inc. to Transco Energy Company at the annual meeting held in May 1982.

Transcontinental Gas Pipe Line Corporation (Pipe Line) is a corporation organized and existing under the laws of the State of Delaware, with its national offices at Houston, Texas. Pipe Line is registered to do business in the State of North Carolina. Pipe Line is a wholly owned subsidiary, and the principal subsidiary of Transco.

Statement of the Case

This case was filed on May 24, 1982 alleging violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. The defendants answered the complaint on July 14, 1982 and filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

The grounds for the motion were that the complaint failed to state a claim against defendants Transco Energy Company (Transco Energy) and its wholly owned subsidiary Transcontinental Gas Pipe Line Corporation (Transco), in that: (1) Transco Energy and Transco do not possess the duality required to form an offense under Section 1 of the Sherman Act; (2) Transco and Transco Energy function as a single unit; and (3) Transco and Transco Energy do not compete or hold themselves out as competitors in any market anywhere.

On August 3, 1982, plaintiff filed its memorandum in opposition to the motion to dismiss. Each party filed the necessary brief, and oral arguments were conducted on October 19, 1982. The court allowed defendants’ motion to dismiss, but permitted plaintiff thirty days to amend its complaint. Plaintiff filed its amended complaint on November 19, 1982, and on December 17, 1982, defendants renewed their motion to dismiss. The grounds being in essence the amended complaint neither alleges that a violation of Section 1 of the Sherman Act occurred nor states who the participants in the alleged conduct were. (Pleading No. 31.) Plaintiff responded to this motion, the parties each filed the necessary briefs, and on February 24, 1983, the court denied defendants’ motion to dismiss. The defendants filed their motions for partial summary judgment on April 20, 1984. The plaintiff responded on May 15, 1984. Arguments were heard on May 29, 1984, at which time, the court allowed both sides to file an additional memorandum. Because of the apparent complexities of this case, the court will set forth both motions of the defendants as follows as they appear in the record.

Rule 56, Sherman Act, Section 1 Motion

1. Consul’s claim under Section 1 of the Sherman Act arises out of Transco’s alleged failure to assist Consul in competing against Transco for the purchase of a certain gas supply, The Greens Creek Field in Mississippi. After a seesaw of expectations and hopes in the midst of a changing regulatory environment, Consul’s plans (as a broker for its clients) to purchase and resell the Green’s Creek gas pursuant to certain federal emergency regulations collapsed, and Transco purchased this gas supply based on perceived long-term needs for its entire pipeline system. Nothing in the Sherman Act or any other law obligated Transco to promote or even assist Consul’s competing business schemes, although Transco did assist Consul at the request of certain suppliers and purchasers. Indeed, the Sherman Act encourages competition, and Transco remained free to promote its own interests in obtaining gas from Greens Creek. In short, Transco’s competition for the Greens Creek gas is fully protected by law, and certainly no cause of action arises under the federal antitrust laws against such competition.
2. In an effort to dodge the basic facts of the case — which are simply that after both Transco and Consul had long tried to buy this gas, the Greens Creek owners decided, based on federal regulatory developments, that the only sensible solution was to sell to Transco — Consul has embellished its Amended Complaint with florid allegations that its failure to get the Greens Creek gas was the result of an illegal combination in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Specifically, Consul alleges that Transco combined with third parties, including gas producers, gas distribution companies, and industrial end users, to coerce these third parties to boycott Consul.
3. Transco is entitled to summary judgment on this Section 1 claim on the ground that, unless Consul is able under Rule 56(e) to come forward with evidence not previously adduced, there is no evidence to support the existence of any such combination to coerce third parties to boycott Consul, and, indeed, Transco affirmatively denies the existence of any such combination.

Defendants' Motion for Partial Summary Judgment on Consul’s Cause of Action Under Section 1 of the Sherman Act at 1-3.

Rule 56, Sherman Act, Section 2 Motion

1. As stated above in Transco’s concurrently filed motion for partial summary judgment with respect to Consul’s Section 1 claim, this suit arises out of Transco’s alleged failure to assist Consul in competing against Transco for the purchase of a certain gas supply, the Greens Creek Field in Mississippi. Now, in both of its two claims for relief in its Amended Complaint, Consul has charged Transco with monopolizing and attempting to monopolize the purchase of natural gas from various geographic markets in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. In its second claim for relief, Consul added the charge that Transco monopolized and attempted to monopolize the arrangement of purchases of natural gas as well. In brief, Consul alleges that Transco has a “natural monopoly” in the transportation of natural gas in certain areas, and that Transco has used this “natural monopoly” to obtain a monopoly over the purchase and arrangement of purchases of natural gas in various areas, including the Greens Creek Field, all to the injury of Consul. After extensive discovery, however, Consul has failed to develop any evidence tending to prove that it was injured by any actions of Transco that it alleges violated the antitrust laws. Since Consul has come forward with no evidence that Transco caused it any injury, as it must do to recover damages under Section 4 of the Clayton Act, 15 U.S.C. § 15, Transco is entitled to summary judgment on Consul’s claims for damages based on Section 2 of the Sherman Act.
2. In paragraph 30 of its Amended Complaint, Consul alleges that the relevant market is (a) the Greens Creek Field in Mississippi, (b) the Holiday Creek Field in Mississippi, and (c) “All other sources of natural gas from which there is no presently economically feasible alternative means of transportation other than Defendants’ pipeline and not presently sold or otherwise legally committed to Defendant____” Consul alleges that Transco monopolized and/or attempted to monopolize the purchase of natural gas and the arrangement of purchases of natural gas from these markets. To prove a violation of Section 2 of the Sherman Act, however, Consul must prove that Transco monopolized or attempted to monopolize a relevant market. As a matter of law, the market defined by Consul is not a relevant geographic market because its parameters have not been clearly defined by probative evidence and, in any event, the vaguely alleged market is not the competitive arena within which competition for the purchase of natural gas supplies takes place. The market for the purchase of natural gas, at the least, is a nationwide market. The market Consul defines is small relative to the competitive arena and is badly and selectively fragmented. Any Section 2 claim must be predicated on a showing of market power in some relevant market. Transco is therefore entitled to summary judgment on Consul’s Section 2 claim on the ground that Consul has developed no evidence of Transco’s market share or market power in any relevant geographic market.

Defendants’ Motion for Partial Summary Judgment on Consul’s Cause of Action Under Section 2 of the Sherman Act at 1-3.

Background

Prior to the enaction of the Natural Gas Policy Act of 1978,15 U.S.C. §§ 3301-3432, federal regulation provided that gas sold from a given field for shipment via an interstate pipeline would permanently dedicate that gas to interstate commerce, and, therefore, subjected to federal price regulation. Consul had located natural gas in the Greens Creek Field in Mississippi and felt it could acquire this supply.

Greens Creek also represented a substantial volume of gas that Transco desired to acquire for its pipeline system which traverses property not far from the Green Creek Field, and it delivers gas to customers along the East Coast of the United States. Consul attempted to acquire gas from producers of Greens Creek Field for its North Carolina and Virginia clients. The producers in the Greens Creek Field were anxious to sell their gas, but they did not want to dedicate the field to the interstate system described above.

Transco applied on behalf of one of the gas producers, Hank Harkins, to the Federal Power Commission (“FPC,” later changed to the Federal Energy Regulatory Commission “FERC”), for a limited term certificate known as Order 533.

This application was made prior to Consul’s contact with the Greens Creek producers and if accepted would have given Transco the ability to purchase gas for a two-year period without dedicating the Greens Creek Field to federal price regulation. The application was denied, and an appeal was taken to the Court of Appeals for the District of Columbia. In the spring of 1978, Consul made overtures to the Greens Creek producers concerning Order 2-68 sales and Order 533 sales of Greens Creek gas to North Carolina and Virginia buyers. Applications were submitted requesting that the 533 sales be permitted. However, the FERC denied these applications. Soon after this, the Natural Gas Policy Act became law. This Act allowed producers of gas to sell their product in interstate commerce without subjecting the source of the gas to federal price regulation. In light of the legislation, the producers withdrew from all contractual arrangements with Consul and entered into agreements with Transco.

Contentions of Plaintiff

Consul contends that defendants had a negative impact, including causing delay, on a FERC meeting and thereby caused an adverse action by FERC on Consul’s two-year 533 application. The plaintiff further contends that the FERC’s denial of its 533 application was the result of the anti-competitive behavior of the defendants and thus was a violation of Sections 1 and 2 of the Sherman Act. It is undisputed that Transco agreed to and did file the necessary applications with the FERC. Further, it is undisputed that the FERC denied the 533 application as submitted by Transco on behalf of Consul.

The plaintiff’s proof would consist of the testimony of Kenneth B. Wilson, president of Consul, Ltd., and Tenney I. Dean, Jr., vice president of Consul, Ltd., concerning what they heard staff members of the FERC say at an FERC meeting. The defendants contend that the statements proffered by the plaintiff are hearsay and therefore inadmissible.

Discussion

Rule 801 of the Federal Rules of Evidence provides:

Rule 801. Definitions

The following definitions apply under this article:
(a) Statement. A “statement” is (1) an oral or written assertion or (2) nonverbal conduct of a person, if it is intended by him as an assertion.
(b) Declarant. A “declarant” is a person who makes a statement.
(c) Hearsay. “Hearsay” is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.

The evidence proffered by the plaintiff, if admissible, would show that the FERC staff members wanted to preserve gas from a source known as the Greens Creek Field for Transco. Greens Creek represented a substantial volume of gas which Transco desired to acquire for its pipeline system. In other words, the matter asserted would be that the FERC wanted to save Greens Creek gas for Transco. Two examples of the evidence which the plaintiff proffers are in the form of affidavits of Mr. Wilson and Mr. Dean. Mr. Wilson states in his affidavit:

12. I was present at the FERC staff conference on November 1. Some of my recollections regarding that staff conference were elicited by Mr. John Jeffers during my deposition. I heard the commissioners question the staff on the following points: “These industrial users are qualified to make 533 purchases, aren’t they?” “What’s wrong with the price?”, “Won’t the price of this gas jump from $1.85 to $2.25 within a month because of the new legislation?” I observed at the meeting was that [sic] the staff did not want the applications to be approved, but instead wanted the gas to go to Transco for system gas. The commissioners, however, were concerned about the critical need of the high-priority industrial users. At the point (at the last minute before adjournment) when it became obvious that the commissioners were going to vote for approval, the staff raised the issue of the intrastate price of gas within Mississippi. The information they reported to the Commission was erroneous and contradicted in the affidavits contained within the 533 applications.

Wilson Affidavit at 8, If 12.

Mr. Dean states in his affidavit:

6. I was present at the staff conference on November 1, 1978. The initial staff member’s statement to the Commission regarding our clients’ applications was, “These applications concern the Greens Creek gas which we have seen before that Transco should be getting. We disapprove of these applications." One of the commissioners immediately asked why the applications should be disapproved since the users were qualified and the gas prices would increase significantly within a matter of thirty days. The staff did not responde [sic] directly to this query, but indicated their belief that the industrial clients should look elsewhere for gas and that the Greens Creek gas should be made available to the interstate market through Transco at the much higher NGPA rate of $2.25 per mcf, an increase of 40 cents per mcf over the contract price____

Dean Affidavit at 5, ¶ 6.

A statement made out of court is hearsay if it is offered for the truth of the matter asserted therein. Framing this case in terms of Rule 801, the “matter asserted” .was that the FERC staff wanted to preserve the gas for Transco. The question is whether the assertion is true. In other words, whether or not Transco influenced the FERC’s staff becomes the pivotal question. The statements of Dean and Wilson go to the heart of the matter. They are not proffered only to show that the statements were made or to show that the statements were false. Instead, they are proffered to show that the FERC felt that the gas was reserved for Transco.

Inadmissible evidence cannot defeat a motion for summary judgment. As stated in Broadway v. City of Montgomery, 530 F.2d 657 (5th Cir.1976):

The district judge was of the opinion that the conversation between Terry and Crosland was cloaked with privilege and therefore inadmissible. We need not reach the issue of privilege, inasmuch as Crosland’s testimony consisted wholly of hearsay which would not be competent evidence at trial____
The obvious function of summary judgment is to avoid a useless trial. Defendants have made a convincing showing that no genuine issue as to any material fact exists and that they are entitled to judgment as a matter of law; plaintiffs, on the other hand, have failed to come forward with the necessary countervailing evidence to defeat summary judgment.

Broadway, 530 at 661 (footnotes and citations omitted).

No admissible evidence exists with regard to the events leading to the FERC denial of Transco’s application on behalf of Consul for 533 sales. In addition, Consul has failed to adequately allege that Transco’s actions caused the FERC to delay its decision until just before the Natural Gas Policy Act became law.

This court is well aware of the principle that summary judgment should be used sparingly in antitrust cases. However, this court is also cognizant of the recent cases which have approved of summary judgment as an appropriate method of disposing of antitrust cases. “Rule 56 should not ‘be read out of antitrust cases.’ ” Hester v. Martindale-Hubbell, Inc., 493 F.Supp. 335, 342 (E.D.N.C.1980) (quoting First National Bank v. Cities Service, 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968)), affd, 659 F.2d 433 (4th Cir.1981). It is well settled that a plaintiff, in order to avoid summary judgment in a case arising under the Sherman Act, must “aver significant probative facts in support of the allegations contained in the complaint, especially in light of defendants’ specific averments to the contrary.” Terry’s Floor Fashions v. Burlington Industries, 568 F.Supp. 205, 209-10 (1983). This statement of the law is applicable to both Section 1 and Section 2 Sherman Act claims. Consequently, the plaintiff’s failure to present any sustainable issue of fact with regard to the conspiracy allegation as well as its failure to proffer any admissible evidence concerning a causal link between Transco’s behavior and Consul’s failure to receive the benefit of Section 533 sales, give rise to the possibility of granting summary judgment to the defendants. This court is of the opinion that summary judgment is appropriate in this case.

The court will enter an Order simultaneously herewith disposing of a part of this action in accordance with this Memorandum Opinion.

      . FERC Order 533 provided that natural gas could be sold for up to two years in interstate commerce and through an interstate pipeline without becoming subject to FERC jurisdiction and price regulation if such sales are approved by the FERC.