author: SHADUR, District Judge.

text:
    Donald J. GUY, Plaintiff, v. DUFF & PHELPS, INC. and Claire V. Hansen, Defendants.
    No. 84 C 2813.
    United States District Court, N.D. Illinois, E.D.
    July 12, 1985.

      James J. Moylan, Chicago, Ill., for plaintiff.
    Edward C. Fitzpatrick, Chicago, C. Joseph Yast, Shelley L. Rice, Steven E. Handler, Lord, Bissel & Brook, Chicago, Ill., for defendants.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Donald Guy (“Guy”) charges Duff & Phelps, Inc. (“Duff & Phelps”) and its Chairman of the Board and Chief Executive Officer Claire Hansen (“Hansen”) violated:

1. Securities Exchange Act (“1934 Act”) § 10(b) (15 U.S.C. § 78(j)) and SEC Rule 10b-5 promulgated under the 1934 Act (17 C.F.R. § 240.10b-5),
2. Illinois Securities Law of 1953 (“Blue Sky Law”) § 13 A (Ill.Rev.Stat. ch. 12172, ¶ 137.13 A) and
3. their common-law fiduciary duties to Guy,

as well as committing common-law fraud, when they forced Guy to sell his Duff & Phelps stock back to the company upon termination of his employment. Defendants have now moved under Fed.R.Civ.P. (“Rule”) 56 for summary judgment as to all Guy’s claims. For the reasons stated in this memorandum opinion and order, the motion is granted.

Facts

1. Guy’s Termination

Duff & Phelps is an Illinois corporation engaged in the business of providing investment research, credit ratings, financial consulting and management services. In 1978 Guy joined Duff & Phelps as a vice president responsible for developing Duff & Phelps’ computer capability and for studying, teaching and implementing new methods of quantitative analysis in investment research and management.

Before joining Duff & Phelps Guy had been an assistant professor of finance at Purdue University, where he had formed his own securities investment advisory business based on a computer model. In 1981, while still employed by Duff & Phelps, Guy applied to the Commodities Futures Trading Commission to become a registered commodities trading advisor. Then he began a small commodity trading business without informing anyone at Duff & Phelps.

Guy operated the business from his home and then from an office in the basement of a friend’s home (Guy Dep. 6-7, 292-94). He did some of the work at Duff & Phelps’ offices between 7:00 and 7:30 a.m., before Duff & Phelps’ regular business hours (id. at 154). Guy used Duff & Phelps’ telephones and occasionally its computer in his business (id. at 131, 154, 171-72). By July 1983 Guy had 50 to 60 customers and managed portfolios with total assets of about $4 million (id. at 105-06, 108, 124). Earnings from the business exceeded $95,-000 in 1982 and $43,000 during the first 8V2 months of 1983.

Duff & Phelps did not learn of Guy’s business until late May or early June 1983, when Hansen questioned Guy about the early morning phone calls he received at work (Guy Dep. 148-51; Hansen Dep. 33-34). Guy told Hansen about the business and provided him with documents at his request (Guy Dep. 150-51; Hansen Dep. 35-44). About a month later Hansen told Guy he would have to abandon his own business if he wanted to stay with Duff & Phelps (Guy Dep. 163-64), giving Guy another month to think over his choice (id. at 164). On July 29 Guy met with Hansen again and said he would not give up his own business (Hansen Dep. 61). Hansen then fired him effective December 31,1983. That date was later advanced to September 15,1983 by agreement (at least in the sense Guy was given a choice between September 1 and 15) (Guy Dep. 188-89, 245).

2. Guy’s Duff & Phelps Stock

As a Duff & Phelps officer, Guy had the right to purchase Duff & Phelps stock through a payroll deduction plan. He bought 200 shares under a Stock Restriction and Purchase Agreement, Paragraph 7 of which required him to sell the shares back to the company at book value on his termination:

7. Upon the termination of the employment with the Corporation of any of the undersigned individuals for any reason, including resignation, discharge, death, disability or retirement, the individual whose employment is terminated or his estate shall sell to the Corporation, and the Corporation shall buy, all shares of the Corporation then owned by such individual or his estate. The price to be paid for such shares shall be equal to the adjusted book value (as hereinabove defined) of the shares on the December 31 which coincides with, or immediately precedes, the date of termination of such individual’s employments.

When Guy left his employment he accordingly surrendered his shares and received their book value.

3. Proposed Security Pacific Acquisition

In 1982 Security Pacific Corporation (“Security Pacific”) expressed an interest in acquiring Duff & Phelps (Richeson Dep. 9-16, 21, 24-25). After some preliminary meetings, the companies began serious negotiations in May 1983 (Jeffries Dep. 30-31, 36). At least four face-to-face bargaining sessions were held in June (id. at 25-27, 38). Guy and Duff & Phelps differ as to whether an agreement in principle was reached by the end of July (a subject discussed in greater detail under Duty of Disclosure), but in any case the anticipated purchase price of probably $50 million far exceeded the book value of Duff & Phelps’ stock. No deal was consummated, and on August 11 Security Pacific cut off discussions altogether (Richeson Dep. 52, 55, 61, 265-66).

On December 1, 1983 Security Pacific rekindled discussions, and on January 10, 1984 the companies announced publicly they had agreed to an acquisition. On March 23 they executed a definitive agreement. However, the agreement was conditioned on approval of the terms by the Federal Reserve Board. After extended delay, such approval was refused. On January 9,1985 Security Pacific announced the deal was off.

While Guy was deciding whether to stay with Duff & Phelps he was never told of the possible acquisition by Security Pacific (Hansen Dep. 5). Guy first learned of the deal when it was publicly announced January 10, 1984.

In April 1984 Guy filed this action for money damages. On January 17, 1985, just a week after the companies publicly announced they had called it quits, Guy moved for leave to amend his complaint to add an alternative remedy of rescission (for convenience the First Amended Complaint, filed February 25, 1985, will be termed the “Complaint”).

Contentions of the Parties

Guy maintains the companies had reached an agreement in principle before Hansen gave him the choice whether to remain with Duff & Phelps or continue his own business. He asserts that agreement was material information that should have been disclosed to him, for he would have opted to stay at Duff & Phelps had he been aware of Security Pacific’s lucrative proposal.

Among other grounds for summary judgment defendants urge:

1. Duff & Phelps had no duty to disclose the potential acquisition.
2. Guy has asserted only speculative damages. Failure to show actual damages dooms both the federal and state law claims.
3. Guy’s prayer for rescission under the 1934 Act was not timely filed.
4. Guy’s prayer for rescission under the Blue Sky Law is defective both because it is untimely and because that statute provides a rescission remedy only to stock purchasers, not sellers.

Those contentions will be dealt with in turn.

Duty of Disclosure

Guy cannot prevail on any count of the Complaint unless Duff & Phelps had a duty to disclose to him the contemplated acquisition by Security Pacific. Duff & Phelps contends it had no such duty because:

1. Negotiations were terminated and the deal was “dead” between August 11 and December 1, 1983, a period that spanned Guy’s termination date.
2. No agreement in principle had been reached by Duff & Phelps and Security Pacific at any time before Guy’s August 15, 1983 termination.

Except to the extent it may bear on the second proposition as an element factually supporting it, the first of those arrows is wide of the mark — for the relevant time period for disclosure was the period during June and July 1983 when Hansen confronted Guy and forced him to make a decision. Though Guy’s actual departure postdated the August 11 breakdown of negotiations, he had reached his decision before that date.

But Duff & Phelps’ second arrow strikes home. It is clear (and the parties agree) there is no duty to disclose mere negotiations — at least that has been clear until the newly-issued Michaels decision discussed later in this opinion. All the pre-Michaels authority teaches disclosure is mandated only when agreement, or at least an “agreement in principle,” has been achieved. Greenfield v. Heublein, Inc., 742 F.2d 751, 756 (3d Cir.1984), cert. denied, — U.S. -, 105 S.Ct. 1189, 84 L.Ed.2d 336 (1985); Reiss v. Pan American World Airways, 711 F.2d 11, 13-14 (2d Cir.1983). And Guy Mem. 25 concedes no “agreement in principle” is reached until the parties have at least agreed on both price and the structure of the deal.

Reiss dealt with a situation legally parallel to that posed by Guy: a complaint by a Pan American securities holder that if then-pending merger negotiations had been disclosed he would have reached a different decision about disposition of those securities. It explained why disclosure is not required — why instead it is actually improper in securities law terms — before all the significant components of a deal have been worked out (711 F.2d at 14):

Such negotiations are inherently fluid and the eventual outcome is shrouded in uncertainty. Disclosure may in fact be more misleading than secrecy so far as investment decisions are concerned. We are not confronted here with a failure to disclose hard facts which definitely affect a company’s financial prospects. Rather, we deal with complex bargaining between two (and often more) parties which may fail as well as succeed, or may succeed on terms which vary greatly from those under consideration at the suggested time of disclosure. We have no doubt that had Pan Am disclosed the existence of negotiations on August 15 and had those negotiations failed, we would have been asked to decide a section 10b-5 action challenging that disclosure.

As the final sentence indicates, had Duff & Phelps “disclosed the existence of negotiations” to Guy, as the result of which Guy decided to stay with Duff & Phelps and give up his lucrative side business, and had the Duff & Phelps-Security Pacific deal ultimately fallen through, Duff & Phelps would have been vulnerable to a Guy lawsuit charging the disclosure had been misleading and he had been damaged.

Greenfield, 742 F.2d at 756 put the same concept in somewhat different though substantively identical terms (emphasis added):

With specific reference to merger discussions, we have held that, so long as they are preliminary, no duty to disclose arises. Staffin [v. Greenberg ], 672 F.2d [1196,] 1205-07 [(3d Cir.1982) ]. We reasoned that because disclosure of such tentative discussions may itself be misleading to shareholders, preliminary merger discussions are immaterial as a matter of law. Id. at 1206; see also Susquehanna Corp. v. Pan American Sulphur Corp., 423 F.2d 1075, 1084-85 (5th Cir.1970). We recognized, however, that as merger discussions progress, the need to protect shareholders from the potentially misleading disclosure gives way to the right of the shareholders to have notice of corporate developments important to their investment decisions. Thus, we further held that “[w]here an agreement in principle [to merge] has been reached a duty to disclose does exist.” Staffin, 672 F.2d at 1207.

That depiction of the Scylla and Charybdis confronted by securities lawyers representing public companies in the corporate acquisition field finds its echo in New York Stock Exchange (“NYSE”) Listed Company Manual (“Manual”) (Security Pacific is a NYSE-listed company) and in the 1934 Act’s disclosure obligations implemented by SEC Form 8-K.

Section 2 of the NYSE Manual is captioned “Disclosure and Reporting Material Information.” Though other portions have some relevance here, Section 202.01 is specifically apropos and is reproduced as an appendix to this opinion. It makes plain the Security Pacific obligations extended to imposing on Duff & Phelps the same duty Security Pacific itself had to prevent “untimely and inadvertent disclosure of corporate plans.” And that means avoiding disclosure to anyone outside top management — Guy of course included. Only in that way can a public company maintain the delicate balance mandated by 1934 Act § 10(b) and Rule 10b-5:

1. If the investing public learns prematurely of a favorable corporate acquisition in the works (and the prospective $50 million Duff & Phelps deal was certainly that to Security Pacific), and the acquisition does not then materialize, investors who have bought Security Pacific on the strength of the premature information may have a solid securities law cause of action because of the inflated price they have paid.
2. Late disclosure of the same kind of favorable acquisition that has reached the deal stage may provide an equally solid cause of action for investors who have sold stock at a lower figure than the market would have attached to the stock had it known of the acquisition.

Had disclosure been made to Guy as he now claims should have been done, the NYSE Manual would have mandated Security Pacific’s going public immediately with information as to the negotiation (see the portion of Section 202.01 to which emphasis has been added in the appendix) — thus rendering Security Pacific vulnerable to a wide class of investors if the transaction did not proceed to fruition. Guy cannot expect the tail of his private interest to wag the dog of a public company and its public obligations in that manner.

This Court does not of course mean to suggest the Rule 10b-5 legal standards differ (or should differ) for public and privately-held corporations (see the Michaels case hereafter discussed, rejecting a more subjective standard of materiality for the closely-held corporation). What is critical to remember in this case is that Security Pacific had (1) a duty to withhold public disclosure when premature, (2) a duty to make public disclosure when the deal jelled and (3) as a corollary of controlling importance here, a duty to require the party with which it was dealing — Duff & Phelps — to prevent premature leaks by limiting knowledge to the few persons who had to be informed to enable negotiations to move forward. And Duff & Phelps owed a corresponding duty to maintain confidentiality, to avoid the pollution of the market and a distorted trading pattern in Security Pacific stock. That foreclosed— as a matter of affirmative obligation — Duff & Phelps' disclosure to Guy during the preliminary negotiation period.

In another startling example of coincidence (see n. 4), just as this opinion was being placed in final form this Court received last week’s opinion of our Court of Appeals in Michaels v. Michaels, 767 F.2d 1185 (7th Cir.1985). Michaels too involved claims by a seller of stock in a closely-held corporation that material information had been withheld that, if revealed, would have affected his decision to sell. There too the assertedly withheld information had to do (at least in part) with the possible acquisition of the corporation by another company. And there too the seller’s claims were grounded in 1934 Act § 10(b), Rule 10b-5, common-law fraud and breach of fiduciary duty.

Michaels, 767 F.2d at 1196 first recognized the doctrine of Greenfield and Reiss:

The need to protect shareholders from potentially misleading disclosure of preliminary merger negotiations, the courts reason, outweighs the right of shareholders to have notice of corporate developments important to their investment decisions. Greenfield, 742 F.2d at 756.

But Michaels did not need to decide whether to adopt the “price and structure” standard of materiality of those cases (767 F.2d at 1195). It declined to find nondisclosure was immaterial as a matter of law, under the circumstances posed in Michaels, simply because the “price and structure” threshold had not been overcome. It did so because of the absence of a public market for the stock at issue there (the plaintiff was one of only three shareholders in a family-owned company) (id. at 1196).

This Court holds the totally contrasting situation confronting Duff & Phelps brings this case within the Greenfield-Reiss doctrine rather than the Michaels exception to that doctrine. As already discussed, the status of Security Pacific as a public company (though Duff & Phelps was not) implicated for Duff & Phelps, as well as for Security Pacific itself, all the market-affecting considerations found controlling in Greenfield-Reiss and like cases (and acknowledged and approved in Michaels, id. at 1196). In Michaels the only other shareholders who could conceivably be protected from potentially misleading premature disclosure were the non-disclosing defendants themselves, while here the opposite was true: Securities law guaranteed just such protection to the entire universe of Security Pacific shareholders and potential investors.

Indeed precisely the same considerations cause Guy to founder on an independent requirement of his claims. As Michaels, id. at 1199 put it in the securities law context:

To prevail on a section 10(b) or Rule 10b-5 claim, a plaintiff must also prove scienter — an intent to deceive. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 212-14 [96 S.Ct. 1375, 1390-91, 47 L.Ed.2d 668] (1976).

Ordinarily a defendant’s knowing withholding of material information could lead to an inference of intent to deceive {id. at 1199). But here Hansen’s focus was unquestionably on Guy’s newly-discovered moonlighting activities, and it is beyond question that was the motivation for seeking Guy's departure (had that not been so, Hansen would not have given Guy the option to stay with Duff & Phelps if he abandoned his own business). Against that backdrop and given Duff & Phelps, secrecy obligation to Security Pacific until the latter could go public on an agreement in principle, Guy is not reasonably entitled to an inference of scienter — the intent to deceive.

In sum, the litmus test for the duty to disclose (and relatedly, perhaps for the necessary ingredient of scienter as well) is whether the discussions with Security Pacific had reached the “agreement in principle” stage when Guy had to know the material facts for reaching his decision. That is the standard the litigants here had agreed to pre-Michaels, and that is the standard this Court finds controlling postMichaels for the reasons just explored at length.

Where the parties diverge on that score is in their assessment of the state of negotiations as of the end of July 1983. Guy asserts an agreement in principle had been reached, while Duff & Phelps says the parties were still negotiating basic terms. Even when reasonable inferences are drawn (as they must be) in Guy’s favor, the record simply does not support his position.

Guy bases his contention on excerpts from the depositions of one negotiator for each side: Duff & Phelps’ Francis Jeffries (“Jeffries”) and Security Pacific’s Will Richeson, Jr. (“Richeson”). But their testimony does not by any stretch establish an agreement in principle.

Jeffries’ testimony indicates a tentative agreement as of July 29, 1983 on the total purchase price and the fact the deal would be for cash rather than stock (Jeffries Dep. 64-69). Jeffries spoke only of those terms. Nothing in his testimony could lead to an inference the myriad other aspects of the deal had been worked out. And of course anyone who has handled major corporate acquisitions knows a $50 million transaction necessarily involves much more than the bottom-line number to reflect the “agreement in principle” that triggers disclosure.

Richeson’s deposition testimony likewise speaks only of negotiations (Richeson Dep. 40-42, 48-50). Nowhere does he even hint a comprehensive deal had been reached. At most the inference from his testimony is comparable to that from Jeffries’ deposition: that a tentative price had been reached by late July 1983.

Indeed the undisputed facts support precisely the opposite inference from that urged by Guy. They confirm that no agreement in principle was reached at that time. That conclusion is buttressed by the breakoff of negotiations less than two weeks later (August 11, 1983), a fact strongly indicative of the fact the parties had never come to terms before that time. And as suggested earlier, the same conclusion is reinforced by the otherwise unexplainable failure of publicly-traded Security Pacific to announce an “agreement in principle” during the summer of 1983 — a failure that would have breached its NYSE and SEC obligations had such an understanding in fact been reached. When (after the December 1983 revival of negotiations by Security Pacific) an agreement in principle was finally reached in January 1984, Security Pacific did. issue the required public disclosure- release. Security Pacific’s obvious awareness of the nature and proper timing of mandated disclosure is shown by the fact it made that public announcement January 10, 1984, though the formal agreement between the parties was not signed until March 23, 1984.

Absence of a duty to disclose is obviously fatal to the 1934 Act claim and to the claim under the Blue Sky Law, which applies the same “material nondisclosure” standard. And the common law claims fail as well, for defendants cannot be deemed to have committed a fraud or breached a fiduciary duty by failing to disclose information that was “immaterial as a matter of law” {Greenfield, 742 F.2d at 756) and that they would have been wrong in disclosing.

This resolution of the disclosure issue alone entitles defendants to summary judgment. However, as stated earlier (and in part because of the need to have distinguished the result in Michaels, as this Court has done), some other problematic aspects of Guy’s claims will be addressed as well.

Failure To Show Actual Damages

Rule 56(e) provides:

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.

In response to Duff & Phelps’ motion, Guy has produced no specific evidence as to his having suffered actual damages from defendants’ nondisclosures and the forced resale of his stock to Duff & Phelps. Defendants say that failure also entitles them to summary judgment as to each of the damage claims.

1. 1934 Act Damage Claim

Were Guy unable to show actual damages, that deficiency would plainly be fatal to his federal damage claim. 1934 Act § 28(a) (15 U.S.C. § 78bb(a)) provides:

[N]o person permitted to maintain a suit for damages under the provisions of this chapter shall recover, through satisfaction of judgment in one or more actions, a total amount in excess of his actual damages on account of the act complained of.

Madigan, Inc. v. Goodman, 357 F.Supp. 1331, 1335 (N.D.Ill.1973), aff'd in part and rev’d in part, 498 F.2d 233 (7th Cir.1974) recognized speculative losses are not recoverable:

It [is] clear that the question of damages turns not on what the plaintiffs might have gained, but what has been lost by being allegedly deceived into a purchase. The defendants are liable for such damages as naturally and proximately resulted from the alleged fraud; they are bound to make good the loss sustained____ It is clear that liability does not include the speculative fruits of unrealized profit.

Thus Guy’s bald assertion (Mem. 17) that his damages are “real” falls far short of meeting his burden under Rule 56(e).

But Guy is entitled to reasonable inferences from record facts. And the aborted Security Pacific deal, if consummated, would have generated a price many times what Guy realized for his shares.

It is true that deal was predicated on a potential synergism the Federal Reserve Board rejected, and the best evidence the contract price was thus rendered excessive was the ensuing rejection of the deal by arms’ length purchaser Security Pacific. Moreover it must always be remembered Guy was a minority stockholder in a closely-held corporation, with no active market for its stock (see Michaels, 767 F.2d at 1197). That renders less suspect, as a measure of fair market value in the absence of a buyer for the entire corporation, the book value of Guy’s small percentage interest.

Under all the circumstances, then, it might well be that to infer anything about damages, absent any better showing by Guy, would be impermissible guesswork— not “reasonable inference.” Nonetheless the enormous disparity between the price under the failed Security Pacific transaction and Duff & Phelps’ historic book value might arguably be viewed as implying some damages from Guy’s forced sale at the latter figure — perhaps enough of a factual issue to stave off summary judgment. Those conflicting alternatives need not be resolved, however, given the result already reached in this opinion.

2. Illinois Common-Law Claims

Guy's common-law fraud and breach of fiduciary duty claims would also fail absent proof of actual damages. Actual injury is an essential element of fraud in Illinois. Cole v. Ignatius, 114 Ill.App.3d 66, 74, 69 Ill.Dec. 820, 826, 448 N.E.2d 538, 544 (1st Dist.1983); 19 I.L.P. Fraud § 15, at 580 (1956) and 1985 pocket part, and cases there cited; see W. Keeton, Prosser & Keeton on the Law of Torts § 110, at 765 (5th ed. 1984). Guy has provided, and this Court can locate, no authority for applying a different rule to the fiduciary-breach claim.

Nor would that result be changed by the prayer in Guy’s First Amended Complaint for punitive damages as to each of the common-law claims. Punitive damages may not be awarded in the absence of actual or compensatory damages. In re Busse, 124 Ill.App.3d 433, 438, 79 Ill.Dec. 747, 751, 464 N.E.2d 651, 655 (1st Dist.1984).

Once again this Court need not resolve the parties’ conflicting positions. It is unnecessary to reject a claim more than once, and the common-law damage claims have already failed the duty-of-disclosure test.

3. Blue Sky Law Damage Claim

Unlike the damage claims already discussed, Guy’s Blue Sky Law damage claim also fails for a more fundamental reason not addressed by either party: That statute does not provide a damage remedy. Both in its original version (see Law § 13 A) and as amended (see Law § 13 G), the exclusive private civil remedy it prescribes is rescission. See also Shofstall v. Allied Van Lines, Inc., 455 F.Supp. 351, 358 (N.D.Ill.1978) and Rotstein v. Reynolds & Co., 359 F.Supp. 109, 112-13 (N.D.Ill.1973) (each refusing to imply a remedy for damages under the Blue Sky Law).

Guy has tendered no authority that would permit this Court to imply a damage remedy. No Illinois court has done so during the more than three decades the Blue Sky Law has been on the books — and of course that is the strong inference from the General Assembly’s specific creation of a private rescission remedy, and no other, in the statutory section (Law § 13) captioned “Civil Remedies.” Indeed Guy Mem. 31 acknowledges (albeit in another context) the strong weight of authority in this District Court is against implying remedies under the Illinois statute.

Timeliness of the 1934 Act Prayer for Rescission

Guy’s effort to rescind his stock sale via an Amended Complaint came late in the day — fully nine months after he originally filed suit and over a year after the public announcement of the Duff & Phelps-Security Pacific acquisition agreement. Defendants correctly argue that attempt is untimely under the 1934 Act.

Baumel v. Rosen, 412 F.2d 571, 574 (4th Cir.1969), cert. denied, 396 U.S. 1037, 90 S.Ct. 681, 688, 24 L.Ed.2d 681 (1970) — perhaps the leading case on the subject of 1934 Act rescission claims — teaches:

Rescission is a radical move, and the law exacts the election of that course to be asserted without wait. The demand is that advice of the determination be given within a reasonable time after discovery of the ground for rescission.

Accord, Occidental Life Insurance Co. of North Carolina v. Pat Ryan & Associates, 496 F.2d 1255, 1268 (4th Cir.), cert. denied, 419 U.S. 1023, 95 S.Ct. 499, 42 L.Ed.2d 297 (1974); Gannett Co. v. Register Publishing Co., 428 F.Supp. 818, 827-28 & n. 21 (D.Conn.1977) and cases there cited. Under Baumel and its progeny, delays of as little as one month in demanding rescission have been held to bar claims. Wassel v. Eglowsky, 399 F.Supp. 1330, 1364 (D.Md.1975).

Guy Mem. 14-15 attempts to avoid the impact of those cases by (1) appealing to the general rule that a laches defense may not be asserted without a showing of delay and prejudice and (2) saying defendants have shown no prejudice here. But the simple answer is the laches doctrine, applied in the patent infringement cases cited by Guy, is not at all implicated in the rescission of securities purchases or sales. In that area, Baumel and its progeny compel an early decision by the injured party— not belated second-guessing.

Even beyond the securities field, general rescission doctrine focuses almost exclusively on delay. Most cases stressing the need for the prompt assertion of rescission rights make no reference to the doctrine of laches, and do not at all mention any need to show prejudice in addition to delay. See, e.g., Lichter v. Goss, 232 F.2d 715, 720 (7th Cir.1956); Farmers Automobile Insurance Association v. Pursley, 130 Ill.App.2d 980, 985-86, 267 N.E.2d 734, 738 (5th Dist.1971). Those cases treat the prompt election requirement as an integral component of rescission doctrine not dependent on another area of the law. Some earlier cases even treated delay in pursuing rescission as simply an election to proceed with the contract. See, e.g., Knutson v. Metallic Slab Form Co., 128 F.2d 408, 411 (5th Cir.1942).

Even those rescission cases that have made reference to the laches doctrine have downplayed the prejudice element. Schoenbrod v. Rosenthal, 36 Ill.App.2d 112, 120, 183 N.E.2d 188, 192 (1st Dist.1962) explained in a case — like this one — involving a fraud claim:

In cases based on fraud far greater emphasis is placed on the delay in asserting the claim than on a change of circumstances, for an unreasonable lapse of time between discovering the supposed fraud and bringing the suit is of itself prejudicial to the party charged with fraud. The very nature of the charge calls for prompt action. An unexplained delay raises an immediate doubt as to a plaintiffs right to ask the intervention of a court of equity which is an appeal to justice and good conscience. One who requests the help of a court of equity must be of good faith and must be diligent in prosecuting his claim. The natural reaction of a person who has been defrauded is to cry out in protest and to move with alacrity in seeking redress. When he does neither, his claim and his motives are suspect.

By any standard, then, promptness alone will determine whether Guy may proceed with his rescission claim.

And on that score Guy has simply not acted with the speed the cases mandate. Contrary to Guy’s assertion, his rescission remedy could have been invoked in January 1984, as soon as the companies publicly announced their acquisition plans and Guy knew he had a securities claim. At that time, with the Security Pacific transaction awaiting Federal Reserve Board confirmation, Guy could have demanded a return to the status quo. That would have had a double aspect:

1. Guy would have been required to return the purchase price of his shares.
2. As a Duff & Phelps stockholder once again, he (a) would later have realized his ratable share of the sale price to Security Pacific if that deal went ahead or (b) would have remained locked into his nonmarketable Duff & Phelps minority position if it did not.

Obviously that rescission alternative did not then appeal to him. Whether he viewed the Security Pacific deal as a sure thing, or whether he was unwilling to give up the proceeds of sale, or whether he found the prospect of a return to the Duff & Phelps stockholder fold (to be viewed as a presumably hostile minority owner) unattractive, or whether a combination of those and other factors was at work, is a matter on which this Court need not guess. Whatever his motivation, Guy plainly found the prospect of damages more appealing at the time.

Under the principles demanding prompt rescission, Guy cannot switch signals now simply because he has decided the January 1985 cancellation of the acquisition suddenly rendered rescission more attractive than damages. Guy’s prayer for rescission is clearly untimely.

Unavailability of Rescission Under the Blue Sky Law

Much the same might well be said of Guy’s Blue Sky Law claim. All the considerations mandating prompt assertion of rescission claims apply with equal force to any such prayer for relief under that statute. Indeed, in the one specifically-prescribed private civil remedy under the Blue Sky Law — a purchaser’s right of rescission under Law § 13 A — the claim must be asserted within six months (Law § 13 B). That is a timetable Guy would not meet under any reasonable view of the event that started the clock running.

But that is really beside the mark, for the Blue Sky Law does not in terms give an injured seller a right of rescission at all. Only one provision of the statute might arguably be read that way, and it is a provision Guy himself has not even addressed.

It must be remembered Blue Sky Laws were created solely to provide purchaser-oriented remedies. In all the original 19 sections of the carefully-crafted statute, only one subsection spoke of injured sellers at all. Law § 12 F has always read (emphasis added):

It shall be a violation of the provisions of this Act for any person:
* * * * * *
F. To engage in any transaction, practice or course of business in the sale or purchase of securities which works or tends to work a fraud or deceit upon the purchaser or seller thereof.

Every other provision talks only of purchasers and their rights and remedies. But the only statutory consequence of the quoted violation — the only place Law § 12 F is referred to at all — is in the potential of criminal prosecution under Law § 14 B.

By contrast, the civil remedies portion of the Blue Sky Law was specifically designed to protect only purchasers by giving them rescission rights. Law § 13 A (referred to at the outset of this section) expressly states (emphasis added):

Every sale made in violation of the provisions of this Act shall be voidable at the election of the purchaser____

Law §§ 13 A, B and C repeatedly refer exclusively to purchasers in speaking of those who may assert a right of rescission. Such careful drafting, particularly when it is eyed in light of the more expansive terms of Law §§ 12 and 14, leaves no room for an implied civil remedy on behalf of sellers. And as Guy implicitly conceded in his memorandum, no court has ever implied such a remedy.

That is the backdrop against which the 1977 amendment adding Law §§ 13 F and 13 G must be read. Under the first of those provisions the Attorney General may file suit in any circuit court:

to enjoin those persons who are continuing or doing any act in violation of this Act or to enforce compliance with this Act. Upon a proper showing the court shall grant a permanent or preliminary injunction or shall order rescission of any sales, or purchase of equity securities determined to be unlawful under this Act or order of the Secretary.

And Law § 13 G(l) contains nearly identical language authorizing private parties in interest to file suit to prevent violators:

from continuing or doing any act in violation of or to enforce compliance with this Act.

In language parallel to that of Law § 13 F, Law § 13 G(l) also authorizes courts to grant injunctions and to order rescission of unlawful sales.

Even though both subsections thus authorize rescission, they were plainly designed simply to add prospective relief to the exclusively retroactive civil and criminal remedies always provided by the Blue Sky Law. Of course the Attorney General’s only role under Law § 13 F can be to enjoin ongoing violations and enforce future compliance (for by definition that public official suffers no damages in the legal sense), and the following subsection’s nearly identical language plainly seems intended only to grant like authority to private parties in interest. That prospective (rather than retrospective) thrust of both subsections is emphasized by their focus on “continuing” or “doing” violative acts and “enforcfing] compliance” with the Blue Sky Law. Rescission under both those provisions is thus only an adjunct to injunctive relief, where rescission may be needed to render prospective compliance meaningful or even possible.

This Court will not take the lead in revolutionizing the Blue Sky Law by granting a new private retrospective remedy to sellers. Such a reading would pose a real anomaly: In a purchaser-oriented statute, it would exempt sellers from the stringent procedural and temporal requirements imposed on purchasers by Law §§ 13 A and B. It would strain credulity to argue the Illinois legislature would have worked such a drastic change in such a meticulously worded statute by means of those cryptic amendments in Law §§ 13 F and G(l). Guy has not sought solace in the amendments — and this Court will not construct a haven for him there.

Conclusion

There is no genuine issue of material fact. For at least one (and likely more than one) reason, defendants are entitled to a judgment as a matter of law. This action is dismissed with prejudice.

Appendix

202.00 Material Information

202.01 Internal Handling of Confidential Corporate Matters

Unusual market activity or a substantial price change has on occasion occurred in a company’s securities shortly before the announcement of an important corporate action or development. Such incidents are extremely embarrassing and damaging to both the company and the Exchange since the public may quickly conclude that someone acted on the basis of inside information.

Negotiations leading to mergers and acquisitions, stock splits, the making of arrangements preparatory to an exchange or tender offer, changes in dividend rates or earnings, calls for redemption, and new contracts, products, or discoveries are the type of developments where the risk of untimely and inadvertent disclosure of corporate plans are most likely to occur. Frequently, these matters require extensive discussion and study by corporate officials before final decisions can be made. Accordingly, extreme care must be used in order to keep the information on a confidential basis.

Where it is possible to confine formal or informal discussions to a small group of the top management of the company or companies involved, and their individual confidential advisors where adequate security can be maintained, premature public announcement may properly be avoided. In this regard, the market action of a company’s securities should be closely watched at a time when consideration is being given to important corporate matters. If unusual market activity should arise, the company should be prepared to make an immediate public announcement of the matter.

At some point it usually becomes necessary to involve other persons to conduct preliminary studies or assist in other preparations for contemplated transactions, e.g., business appraisals, tentative financing arrangements, attitude of large outside holders, availability of major blocks of stock, engineering studies and market analyses and surveys. Experience has shown that maintaining security at this point is virtually impossible. Accordingly, fairness requires that the company make an immediate public announcement as soon as disclosures relating to such important matters are made to outsiders.

The extent of the disclosures will depend upon the stage of discussions, studies, or negotiations. So far as possible, public statements should be definite as to price, ratio, timing and/or any other pertinent information necessary to permit a reasonable evaluation of the matter. As a minimum, they should include those disclosures made to outsiders. Where an initial announcement cannot be specific or complete, it will need to be supplemented from time to time as more definitive or different terms are discussed or determined.

Corporate employees, as well as directors and officers, should be regularly reminded as a matter of policy that they must not disclose confidential information they may receive in the course of their duties and must not attempt to take advantage of such information themselves.

In view of the importance of this matter and the potential difficulties involved, the Exchange suggests that a periodic review be made by each company of the manner in which confidential information is being handled within its own organization. A reminder notice of the company’s policy to those in sensitive areas might also be helpful.

A sound corporate disclosure policy is essential to the maintenance of a fair and orderly securities market. It should minimize the occasions where the Exchange finds it necessary to temporarily halt trading in a security due to information leaks or rumors in connection with significant corporate transactions.

While the procedures are directed primarily at situations involving two or more companies, they are equally applicable to major corporate developments involving a single company.

      . To avoid awkward repetition of "Blue Sky Law” each time that statute needs to be cited, such citations in this opinion will take the simple form “Law § —" (omitting entirely the ¶ 137 portion of the citation and including only the numbers following the decimal point, to correspond to the internal section numbering of the Blue Sky Law).

      . Rule 56 imposes on the party moving for summary judgment the burden of establishing the lack of a genuine issue of material fact. Korf v. Ball State University, 726 F.2d 1222, 1226 (7th Cir.1984). For that purpose the court must, in viewing the evidence, draw all reasonable inferences in the light most favorable to the nonmovant — here Guy. Hermes v. Hein, 742 F.2d 350, 353 (7th Cir.1984). Throughout this opinion the recitals of fact adhere to that principle.

      . This Court’s disposition of the case on the first of those grounds, and its discussion of the other grounds, render unnecessary any consideration of the several other issues raised in defendants’ memoranda and not mentioned in this paragraph of the text.

      . This analysis of the law applicable to the Duff & Phelps-Security Pacific negotiations, and the obligation of nondisclosure to Guy, is really reinforced by the most recent development in this area — a brand new release from the SEC. On July 8, 1985 the SEC issued a ruling that a public company's statement "there were no corporate developments that could account for” a surge in its stock price, made while preliminary negotiations for its acquisition were actually under way, was "materially false and misleading.” That was referred to by a major July 10 Wall Street Journal article (at page 27 of the Midwest Edition) as a "surprising SEC decision” that “conflicts with a recent ruling [Greenfield] by a federal appeals court in Philadelphia." That article closes by quoting the SEC’s former general counsel as saying "the commission has tried to overrule a federal appellate court.” What is most significant for current purposes is (1) the corporate release in question was precisely in the universally accepted mold (and was indeed the one required by the NYSE Manual unless "rumors or unusual market activity [had] indicate[d] that information on impending developments ha[d] leaked out,” NYSE Manual § 202.03) and (2) the SEC ruling is recognized as an effort to work a substantial change in existing law.

       All of us are familiar with the tipper-tippee phenomenon, in which the inevitable spread of unauthorized information from even the smallest leak often creates a sharp upturn or downturn in price, triggering NYSE — or even SEC— inquiry and sometimes even a suspension in trading. See n. 4.

      . In that respect it is profitable to contrast the totally different situation in Michaels, where the undisclosed discussions were (1) a preliminary conversation with an investment firm about possibly looking for a buyer and (2) a preliminary further inquiry of a consultant to a possible acquiring company — someone with whom plaintiff himself had also previously met — asking him to follow up (as promised in plaintiff’s presence at the first meeting) about any possible interest in renewing the earlier preliminary discussion. There the deliberate withholding of information from an insider who had been privy to earlier acquisition discussions plainly misled him into believing no sale of the business was in contemplation — an egregious case of material nondisclosure. As Michaels said {id. at 1196, emphasis added):
      Thus [plaintiff] had a right as a shareholder to know about corporate developments, but there was no offsetting need to protect other shareholders and investors from potentially misleading disclosure.

      As already explained at length, that could not be said here.

      . This Court cannot fairly read the comment from the bench by its colleague Judge William Hart in Jordan v. Duff & Phelps, 84 C 2428, Tr. at 6 (Mar. 29, 1985) (Pl.Ex.J) — as Guy urges — as a fully studied ruling that prejudice is a prerequisite to barring an untimely rescission claim. There is no indication the authorities presented to this Court had been tendered to and considered by Judge Hart at that time.

      . In that respect Guy refers to the possibility of an equitable extension under Martin v. Orvis Brothers & Co., 25 Ill.App.3d 238, 246, 323 N.E.2d 73, 79 (1st Dist.1974):
      The six months rule regarding notice is not a statute of limitations, but rather, an equitable feature built into the statute to protect against state claims.
      But even were the statute applicable, and even if this Court had the power to ignore its unconditional limitation (a matter as to which there is considerable doubt), Martin itself confirms this is precisely the sort of case for which the deadline was created (id.):

      Its purpose is to prevent purchasers, who have sufficient knowledge of the remedies available to them, from waiting the entire statute of limitations to decide whether to elect rescission.

      . Westlaw reflects no Illinois case that discusses Law § 13 G. That research tool leads only to the passing reference in Witter v. Buchanan, 132 Ill.App.3d 273, 291, 87 Ill.Dec. 131, 146, 476 N.E.2d 1123, 1136 (1st Dist.1985).


source: Caselaw Access Project

author: NORMAN W. BLACK, District Judge.

license: Public Domain

text:
    Deborah S. McPHERSON, Individually and as Executrix and Personal Representative of the Estate of Marc McPherson, Deceased, and as legal guardian for the minor child, Jeremy S. Creech v. UNION OIL COMPANY OF CALIFORNIA, et al.
    Civ. A. No. H-83-1574.
    United States District Court, S.D. Texas, Houston Division.
    July 15, 1985.

      Michael Perrin, Fisher, Gallagher, Perrin & Lewis, Houston, Tex., for plaintiff McPherson.
    G. Wesley Urquhart, Vinson & Elkins, Houston, Tex., for Offshore Logistics, Inc.
    Vilhelm Hesness, Houston, Tex., Attorney Ad Litem.
    L.S. Carsey, Fulbright & Jaworski, Houston, Tex., for Air Logistics, Div. of Offshore Logistics, Inc., Heliflight Systems, Inc., Air Logistics, Inc.
    Kenneth D. Kuykendal, Royston, Rayzor, Vickery & Wms, Houston, Tex., for Union Oil Co. of California.
    Eric D. Archer, Ensearch Corp., Dallas, Tex., for Pool Offshore Co.
    Thomas A. Brown, Brown, Sims & Ayre, Houston, Tex., for Offshore Production Contractors.
    Larry F. York, Baker & Botts, Austin, Tex., for Manufacturers Hanover Leasing, and Bell Helicopter Textron, Inc.
   MEMORANDUM AND ORDER

NORMAN W. BLACK, District Judge.

Pending before this Court is Defendant The United States of America’s Motion to Dismiss Plaintiff’s Second Amended Complaint. The United States requests that its Motion to Dismiss Plaintiff’s First Amended Complaint with attached memorandum of law be extended to Plaintiff’s Second Amended Complaint. In view of the similarity of the relevant allegations contained in the respective complaints, the Court grants this request. After due consideration of the motion, plaintiff’s reply and the legal arguments interposed by counsel, the Court concludes that the instant motion is meritorious.

Background

Defendant argues that plaintiff’s allegations against it should be dismissed pursuant to Fed.R.Civ.P. 12(b)(6). The Court notes however that the instant motion is predicated in part on the doctrine of sovereign immunity. Various courts have characterized such challenges as implicating jurisdictional- considerations. See Williams By and Through Sharpley v. United States, 581 F.Supp. 847 (S.D.Ga.1983), aff'd, 747 F.2d 700 (11th Cir.1984). Other courts have analyzed such challenges as arising under Fed.R.Civ.P. 12(b)(6). See Canadian Transport Co. v. United States, 430 F.Supp. 1168 (D.D.C.1977), aff'd in part, rev’d in part, 663 F.2d 1081 (D.C.Cir.1980). The Court will treat the instant motion as arising under Rule 12(b)(6) because the relevant issues and means of analysis are unaffected by the designation of the instant motion.

A court confronted with a motion to dismiss brought under Fed.R.Civ.P. 12(b)(6) must not dismiss a complaint for failure to state a claim unless it appears beyond doubt that the pleader can prove no set of facts in support of the claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). The Court must construe the allegations of the complaint in favor of the pleader and consider all well pleaded, material factual allegations as true. Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Jenkins v. McKeithen, 395 U.S. 411, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969).

Facts

Accordingly, the facts of the instant controversy are as follows. Plaintiff’s decedent, Marc McPherson, was a helicopter pilot employed to transport men and supplies to and from certain offshore drilling rigs. On March 2,1982, McPherson piloted a Bell 206B helicopter to the vicinity of a fixed oil drilling platform owned by Union Oil of California. This auxiliary platform was located at High Island Block 334B in the Gulf of Mexico, 117 miles south-southwest of Cameron, Louisiana. As McPherson attempted to land the helicopter on the platform’s helipad, the aircraft struck the surrounding safety netting and crashed into the Gulf.

Subsequently, the widow of the deceased pilot filed this wrongful death and survival action individually and on behalf of McPherson's estate and his minor child, Jeremy Creech. Plaintiff seeks an award of damages against various defendants, including the United States of America.

Claims

The plaintiff seeks to impose liability on the United States for certain allegedly negligent acts or omissions of the Federal Aviation Administration (FAA) and the United States Coast Guard. The plaintiff’s claims may be characterized as follows. First, the plaintiff asserts that the above-referenced entities negligently failed to promulgate certain safety standards. Second, the plaintiff alleges that the FAA negligently performed certain approval and certification procedures.

Negligent Failure to Regulate

The plaintiff alleges that the FAA and the U.S. Coast Guard are charged with regulating and promoting aviation safety and with regulating and inspecting drilling platforms and landing areas in the Gulf of Mexico. Further, the plaintiff alleges that these agencies are charged with the duty of ensuring that helipads on drilling platforms are properly marked, lighted, equipped with safety devices and are of adequate size and construction. The plaintiff maintains that these entities negligently failed to require that the accident site be properly marked, lighted, constructed and equipped. Plaintiff asserts that such negligence caused or was a substantial factor in causing Mr. McPherson’s death.

Additionally, the plaintiff maintains that the FAA is responsible for ensuring that commercial helicopters are properly maintained, supervised, inspected, equipped and operated. Apparently, the plaintiff contends that the FAA negligently failed to issue certain safety regulations to promote the safety of the accident helicopter. The plaintiff asserts that such negligence caused or was a substantial factor in causing Mr. McPherson’s death.

Negligent Approval and Certification

Finally, the plaintiff alleges that the FAA negligently approved and certified the operations manual and procedures of Defendant Air Logistics. Plaintiff alleges that such negligence caused or was a substantial factor in causing Mr. McPherson’s death.

The Government’s Position

The United States argues that it is under no duty to issue regulations regarding helipads on stationary offshore oil rigs. Accordingly, the United States argues that it may not be held liable in tort for any failure to issue such regulations. Additionally, the United States maintains that it is under no duty to ensure that commercial helicopters remain in an airworthy condition after the issuance of an air taxi certificate. Consequently, the United States argues that allegations regarding failure to ensure proper maintenance and operation of the accident helicopter do not articulate any cognizable action in tort. Finally, the United States argues that the plaintiff may not maintain any action premised upon the FAA’s allegedly negligent approval and certification of the operations manual and procedures of defendant Air Logistics. In this instance, the government argues that the plaintiff is attempting to obtain judicial review of discretionary regulatory activity through the vehicle of a tort suit. The government argues that separation of powers principles prohibit judicial review of discretionary regulatory activities.

In response, the plaintiff argues that certain statutory provisions require the FAA to issue regulations concerning the safety of helicopters. Similarly, the plaintiff argues that the United States Coast Guard is statutorily required to issue regulations regarding helipads “on or under” the high seas. In both instances the plaintiff alleges that these statutory mandates have been ignored. The plaintiff alleges that this failure to regulate is a proper basis for liability.

Issues

It would appear that the issues to be addressed are as follows: (1) Does the United States, through the FAA and Coast Guard, have a duty to issue regulations regarding helipads on fixed oil drilling platforms? (2) Does the United States, through the FAA, have a duty to issue specific regulations regarding specific safety requirements (such as mandatory inclusion of proper shoulder harnesses in helicopters)? (3) In a related vein, does the United States, through the FAA, have a duty to ensure that an aircraft remain in an airworthy condition after the issuance of an air taxi certificate? (4) Do separation of powers principles prohibit judicial review of FAA acceptance and certification procedures subject of this suit?

Discussion

As an initial matter, it would appear that the instant action is within this Court’s admiralty jurisdiction. It is established in this circuit that the Death on the High Seas Act, 46 U.S.C. § 761 et seq. (DOHSA) applies to a helicopter crash on the high seas. See Tallentire v. Offshore Logistics, Inc., 754 F.2d 1274 (5th Cir.1985), cert. granted, — U.S. -, 106 S.Ct. 60, 88 L.Ed.2d 48 (1985); Smith v. Pan Air Corp., 684 F.2d 1102 (5th Cir.1982) (An accident occurred after the rotor blade of a helicopter struck a crane ball hanging from the arm of a crane situated on a fixed platform. The court held that DOHSA and admiralty substantive law governed the claim.)

Jurisdiction against the United States in admiralty must be founded on the Suits in Admiralty Act, 46 U.S.C. §§ 741 et seq. (SAA), McCormick v. United States, 680 F.2d 345 (5th Cir.1982). The act provides that appropriate proceedings may be brought against the United States “in cases where ... if a private person or property were involved, a proceeding in admiralty could be maintained.” 46 U.S.C. § 742. The act encompasses “all maritime tort claims against the United States where the plaintiff would have an action in admiralty were the defendant a private person rather than the government.” McCormick, 680 F.2d at 349. If an action is properly maintainable under the SAA, it may not be brought under the Federal Tort Claims Act. Id.; 28 U.S.C. § 2680(d).

Failure to Regulate

To articulate a cognizable cause of action in tort, the plaintiff must establish that the government owed the decedent a duty to issue regulations relating to helipads on fixed oil drilling platforms. The plaintiff must identify a statute or common law principle imposing such a duty. The plaintiff argues that § 2 of the Coast Guard Act, 14 U.S.C. §§ 1 et seq. imposes such a duty. The section provides in pertinent part:

The Coast Guard shall ... promulgate and enforce regulations for the promotion of safety of life and property on and under the high seas and waters subject to the jurisdiction of the United States governing all matters not specifically delegated by law to some other executive department.

The plaintiff argues that this section requires the Coast Guard to issue regulations relating to helicopter landing facilities on fixed offshore drilling units. The defendant argues that the plaintiff has mistaken statutory authority to regulate for a duty to issue specific regulations. This Court agrees. As the court observed in Faust v. South Carolina State Highway Department, 721 F.2d 934, 938 (4th Cir.1983), cert. denied, 467 U.S. 1226, 104 S.Ct. 2678, 81 L.Ed.2d 874 (1984), the “assumption by the government of authority to regulate a particular activity should not render it liable in tort when it fails to exercise that authority to protect an individual from injury” (citing Zabala Clemente v. United States, 567 F.2d 1140 (1st Cir.1977), cert. denied, 435 U.S. 1006, 98 S.Ct. 1876, 56 L.Ed.2d 388 (1978). It follows then that the instant statute does not impose a duty upon the Coast Guard to issue specific regulations that a particular member of the public might find desirable. Nor has the plaintiff identified any comparable “private person” duty derived from common law principles. In the absence of such a duty imposed by statute, regulation or common law, there is no basis for tort liability.

Further, it does not appear that the FAA is under a duty to issue specific regulations regarding specific safety requirements absent a specific legislative mandate or comparable private person duty. The plaintiff argues that 49 U.S.C. § 1421(a)(1) provides such a statutory mandate. The Section provides:

(a) The Administrator is empowered and it shall be his duty to promote safety of flight of civil aircraft in air commerce by prescribing and revising from time to time:
(1) such minimum standards governing the design, materials, workmanship, construction, and performance of aircraft ... as may be required in the interest of safety.

Again, the plaintiff argues that this section imposes a duty on the FAA to issue regulations concerning specific safety measures such as installation of shoulder harnesses. This Court cannot agree. As the court in Garbarino v. United States, 666 F.2d 1061, 1065 (6th Cir.1981) observed, 49 U.S.C. § 1421(a)(1)-(6) “requires only that the administrator prescribe such minimum standards as may be required in the interests of safety. Deciding what those standards are to be and whether such standards are to include [certain] ... criteria, is the type of policy decision” that is committed to the agency’s discretion. Id.; see also Fielder v. United States, 423 F.Supp. 77 (C.D.Cal.1976). As a general rule, the mere fact that a statute grants a power to act does not create a liability for damages resulting from failure to exercise such power. Thus, a statute which merely makes provision to secure the safety or welfare of the public as an entity, is not subject to a construction establishing civil liability. 73 Am.Jr.2d, Statutes § 432. “It is obvious that one of the purposes of the Federal Aviation Act was to promote air travel safety; but this fact hardly creates a legal duty to provide a particular class of passengers particular protective measures.” Zabala Clemente v. United States, 567 F.2d at 1144. Thus, in the absence of a statute explicitly requiring the agency to issue specific safety regulations, we must attempt to identify a comparable “private person” duty. As indicated above, the plaintiff has failed to identify such a duty.

In addition, the plaintiff argues that the United States, through the FAA, has a duty to ensure that an aircraft remains in an airworthy condition even after the issuance of an air taxi certificate. It appears, however, that the duty to ensure that an aircraft remains in an airworthy condition lies with the operator. See 14 C.F.R. §§ 135.25(a)(2), 135.71. The FAA merely polices compliance. As the Supreme Court observed in United States v. S.A. Empresa De Viacao Aerea Grandense (Varig Airlines), 467 U.S. 797, 104 S.Ct. 2755, 2769, 81 L.Ed.2d 660 (1984), the FAA “has a statutory duty to promote safety in air transportation, not to insure it.”

Negligent Certification

Finally, the plaintiff alleges that the United States, through the FAA, negligently approved and certified the operations manual and procedures of Defendant Air Logistics. In this instance, the United States argues that the certification procedure is a discretionary regulatory function. Accordingly, the United States argues that separation of powers principles preclude judicial review of such actions in the guise of a tort suit under the SAA.

As an initial matter, it is apparent that the certification procedure subject of this suit is in the nature of a discretionary regulatory function. See Varig Airlines, 104 S.Ct. at 2755 (discretionary function exception to FTCA precludes a tort action based upon the conduct of the FAA in certificating aircraft for use in commercial aviation).

Although the SAA contains no explicit discretionary function exception, the government argues that separation of powers principles require the judiciary to refrain from reviewing the propriety of discretionary actions. The government’s argument is primarily predicated upon the rationale utilized by courts to support “en-grafting” the discretionary function exception provided in the Federal Tort Claims Act on to the Suits in Admiralty Act. In Canadian Transport Co. v. United States, 663 F.2d 1081, 1085 (D.C.Cir.1980), the court observed:

We believe that the doctrine of separation of powers requires that in cases arising under the Suits in Admiralty Act, courts should refrain from passing judgment on the appropriateness of actions which meet the requirements of the discretionary function exception of the FTCA.

The court noted that while the legislative history of the Suits in Admiralty Act is inconclusive on the point, the legislative history of the FTCA “suggests that the exemption for discretionary functions ... was derived from the doctrine of separation of powers, a doctrine to which the courts must adhere even in the absence of a statutory command.” Id. at 1086. The court relied upon Dalehite v. United States, 346 U.S. 15, 73 S.Ct. 956, 97 L.Ed. 1427 (1953). In Dalehite the Supreme Court observed that the exception “was drafted as a clarifying amendment.” Id. at 26, 73 S.Ct. at 963. The Dalehite court referred to the testimony of the Assistant Attorney General who advised that “ ‘the cases embraced within [the new] subsection would have been exempted from [the prior bill] by judicial construction.’ ” Id. at 27, 73 S.Ct. at 963 (quoting statement by Assistant Attorney General Francis M. Shea at hearings before the House Committee on the Judiciary, 77th Cong. 2d Sess., on H.R. 5373 and H.R. 6463, p. 29). As the Supreme Court noted in Varig Airlines, supra, 104 S.Ct. at 2763, Congress “believed that claims of the kind embraced by the discretionary function exception would have been exempted from the waiver of sovereign immunity by judicial construction.” (emphasis added).

The plaintiff relies primarily upon DeBar deleben Marine Corp. v. United States, 451 F.2d 140 (5th Cir.1971) in support of her argument that the SAA is not subject to an implied discretionary function exception. This Court concludes that De-Bardeleben does not ineluctably support rejection of the government’s position. The specific issue presented in DeBardeleben was the propriety of engrafting the FTCA’s misrepresentation exception on to the SAA. Thus, any endorsement of the view that the SAA is not subject to an implied discretionary function exception is dictum. Second, in light of Varig Airlines, it would appear that the issue confronting this Court is not the propriety of importing FTCA exceptions. Rather, the Court is compelled to recognize the inherent limitations on the exercise of judicial functions. This Court must decline the invitation to second-guess the propriety of a discretionary regulatory function. See Gemp v. United States, 684 F.2d 404, 408 (6th Cir.1982); Gercey v. United States, 540 F.2d 536, 539 (1st Cir.1976), cert. denied, 430 U.S. 954, 97 S.Ct. 1599, 51 L.Ed.2d 804 (1977); Estate of Callas v. United States, 682 F.2d 613, 619 (7th Cir.1982); Canadian Transport Co., 663 F.2d at 1081; Williams By and Through Sharpley, 581 F.Supp. at 847; In Re: Ocean Ranger Sinking Off Newfoundland on February 15, 1982, 632 F.Supp. 72 (E.D.La.1985).

Accordingly, it is ORDERED that the United States of America’s Motion to Dismiss Plaintiff’s Second Amended Complaint is GRANTED. It is therefore ORDERED that all' actions filed against the United States herein are DISMISSED WITH PREJUDICE.

      . To the extent that the plaintiff relies on Indian Towing Co. v. United States, 350 U.S. 61, 76 S.Ct. 122, 100 L.Ed. 48 (1955), such reliance is misplaced. In Indian Towing the Supreme Court held that when the government gratuitously undertakes to perform a service upon which members of the public rely, it must perform the service in a careful manner. This "good Samaritan” doctrine does not apply to the instant scenario.

      . It would appear that this argument would apply with equal force to those claims predicated upon the government's failure to regulate. As indicated above, decisions regarding the type and scope of safety regulations are within agency discretion. See Garbarino, 666 F.2d 1061; Miller v. United States, 522 F.2d 386, 387 (6th Cir.1975). Accordingly, as the text below indicates, separation of powers principles preclude review of these types of basic policy decisions.


author: NEALON, Chief Judge.

text:
    Joseph LYNN, Plaintiff, v. Linda SMITH, et al., Defendants.
    Civ. No. 84-1032.
    United States District Court, M.D. Pennsylvania.
    Aug. 13, 1985.

      Terrence Gallagher and Robert Farrell, Lawrence J. Moran, Scranton, Pa., for plaintiff.
    Thomas Blozusiak, Office of Atty. Gen., Allentown, Pa., John G. Knorr, III, Office of Atty. Gen., Harrisburg, Pa., for defendants.
   MEMORANDUM AND ORDER

NEALON, Chief Judge.

Plaintiff filed this action dated August 1, 1984, pursuant to 28 U.S.C. §§ 1331, 1343 and 42 U.S.C. § 1985(3), requesting injunctive relief and damages for alleged violations of the First and Fourteenth Amendment, as well as a state claim of intentional infliction of emotional distress. It is the plaintiff’s claim that the defendants have punished him for filing internal grievances and will continue to do so if they are not restrained. The plaintiff filed an application for a temporary restraining order (TRO) on August 13, 1984, which was granted August 14, 1984, restraining the defendants from suspending Mr. Lynn from his employment. The TRO remains in effect by consent of the parties. The defendants filed a Motion for Summary Judgment dated October 25, 1984 and brief in support thereof dated November 5, 1984. On November 26, 1984, plaintiff filed a brief in opposition to the motion and on December 10, 1984, the defendants filed a reply brief. By Order dated February 11, 1985, the court granted the plaintiff’s request for additional time in which to pursue further discovery. The plaintiff filed a supplemental brief in opposition to the motion for summary judgment on April 9, 1985 and the defendants filed their supplemental brief in support of the motion on May 13, 1985. The motion is now ripe for disposition. For the reasons set forth below, the motion for summary judgment will be granted as to all issues except plaintiff’s claim of invasion of privacy in his grievance dated June 26, 1984, and the emotional distress claim.

■ The parties are all employed by the Bureau of Claim Settlement in the Pennsylvania Department of Public Welfare. In addition, Mr. Lynn is chief shop steward for his union in the Luzerne Area Office of the Department of Public Welfare. Between June of 1981 and August of 1984, Mr. Lynn filed approximately thirty grievances under the contract procedure on behalf of others in the shop and himself. Several of the grievances filed concern themselves with typical employer-employee disputes such as overtime compensation, travel time, reimbursement for expenses, leave requests and disputed disciplinary actions. Others, however, deal with matters such as interfering with union business, discrimination, harassment and invasion of privacy.

On July 26, 1984, Linda Smith, Acting Director of Field Operations, Department of Public Welfare, acting through Theresa Dunbar, Area Executive, Department of Public Welfare, made several changes in Mr. Lynn’s work. Ms. Smith changed his headquarters, his supervisor and his work assignment. In addition, Mr. Lynn received a letter dated August 8, 1984 informing him that he would be suspended for three days based upon insubordination. The parties do not dispute that these changes took place, only what the defendants’ motivation was as to why they took place. It is the plaintiff's contention that these actions were undertaken to punish him for filing grievances. The defendants deny this.

I. FIRST AMENDMENT

The plaintiff alleges that Ms. Smith and Ms. Dunbar have punished him for filing grievances in the past and for refusing their request to abstain from filing any grievance in the future. This, he contends, violates his First Amendment right to freedom of speech.

The leading Supreme Court case in the First Amendment area is Pickering v. Board of Education, 391 U.S. 563, 88 S.Ct. 1731, 20 L.Ed.2d 811 (1968). As a general rule, citizens do not relinquish all of their First Amendment rights when they become public employees. Id. However, the state “has interests as an employer in regulating the speech of its employees that differ significantly from those it possesses in connection with regulation of the speech of the citizenry in general.” Id. at 568, 88 S.Ct. at 1734. Accordingly, courts must “arrive at a balance between the interests of the [employee] ..., as a citizen, in commenting upon matters of public concern and interest of the State, as an employer, in promoting the efficiency of the public services it performs through its employees.” Id. The Court in Pickering explained that as a general rule, a school board may not dismiss an employee for criticizing school policies that are of public interest unless the speech contains knowingly or recklessly false statements, undermines the ability of a teacher to function, or interferes with the operation of the school. Id. at 568-72, 88 S.Ct. at 1734-36. See also McGee v. South Pemiscot School District, 712 F.2d 339, 342 (8th Cir.1983); Czurlanis v. Albanese, 721 F.2d 98, 102 (3d Cir.1983); Monsanto v. Quinn, 674 F.2d 990, 993 (3d Cir.1982).

In Trotman v. Board of Trustees, 635 F.2d 216, 224-25 (3d Cir.1980), cert. denied, 451 U.S. 986, 101 S.Ct. 2320, 68 L.Ed.2d 844 (1981), the Court of Appeals reviewed the three step process usually required in examining a public employee’s claim of retaliation for engaging in protective activity. See also Monsanto v. Quinn, supra; and Czurlanis v. Albanese, supra. First, the plaintiff must show that the activity in question was protected. See Pickering v. Board of Education, supra. If successful in demonstrating that the activity was protected, the plaintiff must then show that the activity was a substantial or motivating factor in the decision or action taken against the claimant. Mt. Healthy City School District Board of Education v. Doyle, 429 U.S. 274, 287, 97 S.Ct. 568, 576, 50 L.Ed.2d 471 (1977). Lastly, the defendant has the opportunity to defeat the plaintiff’s claim by demonstrating that the same action would have been taken even in the absence of the protected conduct. Givhan v. Western Line Consolidated School District, 439 U.S. 410, 416-17, 99 S.Ct. 693, 697, 58 L.Ed.2d 619 (1979); Mt. Healthy City School District Board of Education v. Doyle, 429 U.S. at 287, 97 S.Ct. at 576; Paschal v. Florida Putlic Employees Relations Commission, 666 F.2d 1381, 1384 (11th Cir.), cert. denied 457 U.S. 1109, 102 S.Ct. 2911, 73 L.Ed.2d 1319 (1982).

Initially, in determining whether a motion for summary judgment by the defendants is appropriate, we must begin with an inquiry of whether Mr. Lynn’s oral or written speech was protected. To determine that issue, we must first ascertain whether the speech dealt with a matter of public concern and then balance the interests of the state, as an employer, against the interests of the employee, as a citizen. In Connick v. Myers, 461 U.S. 138, 146, 103 S.Ct. 1684, 1689, 75 L.Ed.2d 708 (1982), the Supreme Court held that where public employee’s activity “cannot be fairly characterized as constituting speech on a matter of public concern,” it is unnecessary for the court to scrutinize the reasons for the plaintiff’s discharge or the disciplinary action. Connick involved a former assistant district attorney unhappy about a transfer. She contended she was dismissed for compiling and distributing a questionnaire to her co-workers concerning office transfer policy, office morale, the need for a grievance committee, the level of confidence in supervisors and whether employees felt pressure to work in political campaigns. With the exception of the last issue, the Court held the questions posed by the plaintiff did not fall within the realm of matters of public concern. 461 U.S. at 148, 103 S.Ct. at 1690. The Court explained, “[wjhen employee expression cannot be fairly considered as relating to any matter of political, social or other concern to the community, government officials should enjoy wide latitude in managing their offices, without intrusive oversight by the judiciary in the name of the First Amendment.” Id. Accordingly, the Court in Connick made an essential distinction between speech by a public employee “as a citizen upon matters of public concern” and speech by an employee “upon matters of only personal interest.” Id. at 147, 103 S.Ct. at 1690. Only when an employee speaks upon a matter of public concern is a federal court the appropriate forum “in which to review the wisdom of a personnel decision taken by a public agency allegedly in reaction to the employee’s behavior.” Id. “Whether an employee’s speech addresses a matter of public concern must be determined by the content, form and context of a given statement, as revealed by the whole record.” Id. at 147-48, 103 S.Ct. at 1690. The Connick Court further explained:

[Plaintiff, here,] did not seek to inform the public that the district attorney’s office was not discharging its governmental responsibilities in the investigation and prosecution of criminal cases. Nor did [she] seek to bring to light actual or potential wrongdoing or breach of public trust on the part of the [district attorney] and others____ The questions reflect one employee’s dissatisfaction with the transfer and an attempt to turn that displeasure into a cause celebre.

461 U.S. at 148, 103 S.Ct. at 1690-91.

Unlike Connick, the plaintiff in Czurlanis, alleging he was suspended in retaliation for making a speech at a county board meeting, was found to have a protected First Amendment right. 721 F.2d at 107. Czurlanis, a senior mechanic at the Westfield Garage, addressed the board concerning precisely the questions which the court in Connick noted were not the subject of plaintiff’s speech there, i.e., whether county officials in the Division of Motor Vehicles were discharging their governmental responsibilities. Id. at 104. He sought to bring to light actual or potential wrongdoings or breach of public trust on the part of these officials. Czurlanis spoke as a concerned citizen and taxpayer and not as an aggrieved employee. The Court of Appeals explained that “[t]he fact that Czurlanis became aware of the matters which he raised at the board meeting through his employment with the county does not make these matters any less public concern.” Id. Therefore, they determined the speech in question approximated that in Pickering.

The Ninth Circuit Court of Appeals in McKinley v. City of Eloy, 705 F.2d 1110 (9th Cir.1983), distinguished matters of public concern from individual employee disputes in determining the degree of First Amendment protection to which a particular activity is entitled.

Speech by public employees may be characterized as not of ‘public concern’ when it is clear that such speech deals with individual personnel disputes and grievances and that the information would be of no relevance to the public’s evaluation of the performance of governmental agencies. See Connick. On the other hand, speech that concerns issues about which information is needed or appropriate to enable the members of society’ to make informed decisions about the operation of their government merits the highest degree of first amendment protection.

Id. (footnote omitted). The court in McKinley found the speech involved clearly a matter of public concern. The plaintiff’s speech dealt with the rate of compensation for members of the police force and, generally, with the working relationship between the police union and elected city officials. The Ninth Circuit explained:

First, compensation levels undoubtedly affect the ability of the city to attract and retain qualified police personnel, and. the competency of the police force is surely a matter of great public concern. Second, the interrelationships between city management and its employees is closely connected with ‘discipline and morale in the workplace’ — factors that ‘are related to an agency’s efficient performance of its duties.’ Connick, [461] U.S. at [148], 103 S.Ct. at 1691. See also id. at [160] n. 2, 103 S.Ct. at 1697 n. 2 (Brennan, J. dissenting). Third, the way in which an elected official or his appointed surrogates deal with diverse and sometimes opposing viewpoints from within government is an important attribute of public service about which the members of society are entitled to know. Finally, plaintiff’s speech was specifically and purposefully directed to the public both through city council meetings and a television interview.

Id. at 1114-15.

In another case involving a police officer, the court determined the officer’s speech did not involve matters of public concern. Lehpamer v. Troyer, 601 F.Supp. 1466 (N.D.Ill.1985). In Lehpamer, the plaintiff alleged, inter alia, the department retaliated against him for comments made on personnel decisions. The court found that “plaintiff’s questioning of defendant’s personnel policy does not involve matters of public concern merely because public monies and government efficiency are involved____ The Court’s finding is bolstered by the fact that plaintiff’s complaints would not enrich the public’s store of appropriate knowledge regarding the operation of the police department as it affects the public.” Id. at 1469 (citation omitted). See also Murray v. Gardner, 741 F.2d 434, 438 (D.C.Cir.1984) cert denied — U.S. -, 105 S.Ct. 1748, 84 L.Ed.2d 813 (where the court held the plaintiff, FBI special agent’s remarks about the method for determining layoffs and for alleging he had been coerced into keeping quiet about the matter, were not matters of general public concern or matters which would “enrich the public’s store of appropriate knowledge on the operation of the FBI”, but were rather “an example of the quintessential employee’s beef”).

In the case sub judice, the court must examine the plaintiff’s allegedly protected conduct to determine whether any of it is protected as defined by the Court in Connick. Those grievances which relate to travel time, overtime, leave requests, and the like, are clearly not matters of public concern but are of a personal employer-employee nature and not protected by the First Amendment. There are other grievances which the plaintiff would like the court to consider matters of public concern but which are also merely employee-employer disputes. For example, the plaintiff claims, another agent’s right to privacy was violated in the February 27, 1983 grievance because the defendants requested his "prognosis.” The plaintiff contends that the defendants are only entitled to the employee’s “diagnosis” and that the request for the prognosis was unconstitutional. This claim clearly is not a matter of public concern but is a private employer-employee dispute over semantics. Another such example appears in the January 30, 1984 grievance where the plaintiff alleges he received a reprimand letter regarding his use of the telephone. He also claims that he was denied representation at a conference with the defendants in Wilkes Barre and that these are in violation of the collective bargaining agreement. The enforcement of contracts and collective bargaining agreements may be in the best interests of the public as a whole. However, there are appropriate administrative and legal procedures for pursuing a breach of such agreement and bringing a claim for a violation of the First Amendment is not such a procedure.

The plaintiff also claims discrimination and retaliation by management as a result of his union duties as shop steward — grievance dated January 11, 1983. The Court in Connick “expressly did not hold that all speech concerning labor matters was not of public concern____ Rather, it simply properly rejected the effort to attach a broader meaning to statements of purely personal interest.” American Postal Workers Union v. United States Postal Service, 598 F.Supp. 564, 569 (D.D.C.1985) (a case in which a discharged postal worker and his union brought suit seeking reinstatement and back pay on the grounds that the discharge violated, inter alia, the First Amendment rights of the postal worker and his union). In American Postal Workers Union v. United States Postal Service, 595 F.Supp. 403 (D.D.C.1984), the court found that the postal workers letter in question concerned both public as well as private matters. The court explained:

The letter was designed to aid the Union in its efforts to convince the Postal Service to reinstate the jobs which had been terminated at the New London Post Office. This dispute over the jobs is a private dispute between the union and the Postal Service, but the effects of this dispute were not a purely private matter. It should be noted that Danko’s letter was but one part of a campaign to inform the public of delays in mail deliveries____ The public has a legitimate and pressing interest in the prompt delivery of the mails. Thus, to the extent that the lost jobs caused a delay of the mails, the private dispute was a matter of public concern.

Id. at 407. See also Murray v. Gardner, 741 F.2d at 438 (where the court stated: “the role of the whistle blower merits protection; the expressions of personal dissatisfaction by a discontented employee do not”). The dispute raised by the plaintiff here concerning his duties as a shop steward does not have a public component such as that present in American Postal Workers Union. The plaintiff’s claim that his First Amendment rights were violated because he is a shop steward who is attempting to remedy private employee-employer disputes is clearly a circumvention of the Supreme Court’s decision in Connick. Accordingly, this grievance also does not rise to the level of being protected speech under the First Amendment.

The plaintiff has filed one grievance, however, whose content may be construed as involving a matter of public concern. In the grievance dated June 26, 1984, the plaintiff claims invasion of privacy as a result of an internal memorandum sent to employees apparently requesting information concerning their activities during non-work hours. This claim may fit within Connick, although the internal memorandum referred to in the grievance is not a part of the record. The defendants will be directed to forward to the court a copy of the June 20, 1984 memorandum referred to by plaintiff in his June 26,1984 grievance.

Upon the court’s receipt of the June 20, 1984 Memorandum, plaintiff and defendants are directed to address the issue of whether plaintiff’s grievance concerning this memorandum is protected speech under Connick. The court will hold that portion of defendants’ Motion for Summary Judgment in abeyance as it relates to the grievance dated June 26, 1984, pending receipt of the internal memorandum and the briefs by both parties in accordance with this Memorandum.

The plaintiff also appends to his First Amendment claim a theory that he has been injured based upon a type of prior restraint. He claims he is being punished not only for what he has said in the past, but also to prevent him from saying anything similar in the future. The defendants are correct in arguing that the plaintiff has not supported this claim with anything more than blind assertions. Therefore, the court will grant the defendants’ Motion for Summary Judgment on the pri- or restraint theory.

II. DUE PROCESS

Mr. Lynn next alleges that he has been deprived of “life, liberty or property” without due process of law. In his Brief in Opposition to defendants’ Motion for Summary Judgment, the plaintiff contends that even though there is a factual basis for this claim, he “does not further pursue the matter herein.” Plaintiff’s Opposition Brief at 13, Document No. 32 of the Record. Accordingly, the court will dismiss the due process claim.

III. EQUAL PROTECTION

The plaintiff next claims that the defendants have deprived him equal protection of the law in that he has been punished for acting as a union whistleblower. The court agrees with the defendants’ contention that plaintiff is, in fact, arguing he has been punished not for what he is, but for what he has done, i.e., filing grievances. Therefore, the plaintiff is not a member of any class for equal protection purposes. He merely makes an equal protection argument without any facts to support his claim. The defendant’s Motion for Summary Judgment regarding the equal protection claim will, therefore, be granted.

IV. SECTION 1983

The plaintiff additionally asserts that the defendants have deprived him of rights protected by 42 U.S.C. § 1983. It is clear that § 1983 does not provide any substantive rights, but serves only to ensure that there exists a vehicle for bringing an action for violations of the federal Constitution and laws. The plaintiff’s Opposition Brief sheds little light in explaining what his Section 1983 claim involves. The brief merely states: “That paragraph does not allege that defendants have violated 42 U.S.C. § 1983 but rather it alleges wrongdoings committed by the defendants as to which the plaintiff can seek recourse or remedy through the court. This paragraph generally includes in the complaint all of the wrongs committed by defendants against plaintiff.” Plaintiff’s Opposition Brief at 15, supra. The court believes all the plaintiff is attempting to do here is assert a catch all provision. Accordingly, since this Section 1983 claim is not in fact a separate claim, it does not merit further consideration and will be dismissed.

Y. SECTION 1985

The plaintiff’s final federal claim is that the defendants have violated 42 TJ.S.C. § 1985(3), providing a cause of action against two or more individuals who conspire “for the purpose of depriving ... any person ... of the equal protection of the laws____” Additionally, § 1985(3) requires an allegation of racial or perhaps some other “class-based” animus. Mr. Lynn asserts that the class he is a member of are whistleblowers or those who represent unions.

Regarding his membership in the class of union representatives, the Supreme Court has clearly foreclosed such a § 1985(3) claim. See United States Brotherhood of Carpenters and Joiners v. Scott, 463 U.S. 825, 103 S.Ct. 3352, 3358-61, 77 L.Ed.2d 1049 (1983). The court explained:

[It] cannot construe § 1985(3) to reach conspiracies motivated by economic or commercial animus. Were it otherwise, for example, § 1985(3) could be brought to bear on any act of violence resulting from union efforts to organize an employer or from the employer’s efforts to resist it, so long as the victim merely asserted and proved that the conduct involved a conspiracy motivated by an animus in favor of unionization, or against it, as the case may be____ We think that such a construction of the statute, which is at best only arguable and surely not compelled by either its language of legislative history, should be eschewed and that group actions generally resting on economic motivations should be deemed beyond the reach of § 1985(3).

Id. at 3361. Accordingly, the court will grant defendants Motion for Summary Judgment on the Section 1985 issue.

VI. INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS CLAIM

The plaintiff’s final claim is a state law tort claim for intentional infliction of emotional distress. The defendants present two arguments alleging this final claim should be dismissed. First, the defendants suggest that the alleged conduct is, arguably, an unfair labor practice within the meaning of the Public Employees Relations Act, 43 P.S. § 1101.1201(a) (Purdon 1984 Supp.). In such cases, the Act vests exclusive jurisdiction with the Pennsylvania Labor Relations Board. However, the court agrees with the plaintiff that the mere fact that an employer commits an intentional tort does not render such act an unfair labor practice. In this case, the court will deny defendants’ Motion for Summary Judgment based upon the Public Employees Relations Act.

The defendants’ second argument is essentially that the conduct complained of is not “extreme and outrageous” as required under Pennsylvania law. Pennsylvania has adopted the definition of intentional infliction of emotional distress contained in the Restatment (Second) of Torts. Section 46 of the Restatement provides:

One who by extreme and outrageous conduct intentionally or recklessly causes severe emotional distress to another is subject to liability for such emotional distress, and if bodily harm to the other results from it, for such bodily harm.

Restatement (Second) of Torts § 46 (1965 ed.). It is for the court to determine, in the first instance, whether the defendants’ conduct is so extreme and outrageous as to permit recovery. See Chuy v. Philadelphia Eagles Football Club, 595 F.2d 1265, 1274 (3d Cir.1979).

The defendants contend that merely changing Mr. Lynn’s supervisor, headquarters and assignment, and-suspending him for three days is not “atrocious” or “utterly intolerable in a civilized community.” As the Restatement indicates, liability should not extend to mere “annoyance, petty oppressions or other trivialities.” Restatement (Second) § 46 Comments (d). See Chuy v. Philadelphia Eagles Football Club, supra. Accordingly, the defendants suggest that the plaintiff’s allegations, even if true, do not sustain this cause of action.

The court is reluctant, at this stage, to accept the conclusions reached by the defendants. The issues, as presented by the defendants, would not constitute extreme and outrageous conduct as defined by the Pennsylvania courts. However, plaintiff’s contentions of persistent harassment and attempted coercion for filing union grievances, though generalized at this point, are of the type that a trier of fact might find do constitute extreme and outrageous conduct. Therefore, at this point of the proceedings, the court will deny the defendants’ request for summary judgment on the intentional infliction of emotional distress issue.

VII. IMMUNITY ISSUE

Finally, the defendants raise the defense of a qualified or good faith immunity from damages. The leading case in this area is Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982). The Supreme Court in Harlow formulated an objective standard to apply in determining the reasonableness of an official’s conduct. The Court explained: “[Gjovernment officials performing discretionary functions generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” Id. at 818, 102 S.Ct. at 2738. The Court further stated that “the judge may appropriately determine, not only the current applicable law, but whether that law was clearly established at the time the action occurred.” Id.

The defendants contend, that based upon the standard set forth in Harlow, they are entitled to a defense of immunity since Mr. Lynn’s claims are not clearly established as a matter of law: For example, the defendants cite Pickering, supra, in support of their position regarding the First Amendment claim. The Supreme Court in Pickering refused to provide a general standard in determining whether a particular statement is or is not a matter of public concern. 391 U.S. at 563, 88 S.Ct. at 1731. Accordingly, the defendants suggest, the law was not “clearly established.”

The plaintiff, however, alleges that the defendants “actually knew” that they were violating Mr. Lynn’s rights by retaliating against him for filing grievances and that they then tried to conceal their true motive. Lynn supports this claim by referring to the depositions of District Attorney Preate and Assistant District Attorney Barrasse. The depositions, he suggests, indicate Mr. Preate “personally told both defendants that if they retaliated against Joe Lynn for filing grievances that this would constitute a civil rights violation____ The defendants made clear that they would say they were transferring Joe Lynn for the purpose of cross-training to avoid legal action.” Plaintiff’s Opposition Brief at 17, Document No. 32 of the Record.

Justice Brennan, in a concurring opinion in Harlow, addresses the issue of the public official who actually knows he was violating the law, regardless of whether he could reasonably be expected to know the consequences of his actions. In such a case, the “unusually well-informed violator of constitutional rights” will not escape liability based on the standard announced in Harlow. 457 U.S. at 821, 102 S.Ct. at 2740 (Brennan, J., concurring). The plaintiff asserts that this is precisely the situation presented here. Since the depositions, if believed, clearly indicate that defendants were aware that retaliatory action taken against Mr. Lynn may be unconstitutional, the court will deny the defendants’ request for a grant of immunity.

An appropriate Order will enter.

      . The following is a summary of plaintiff's grievances supplied to the court with his motion for summary judgment:
      12/22/81 — Plaintiff grieves a letter of reprimand received by him due to delinquent work assignments and plaintiff’s sick leave. 11/24/82 — Plaintiff, as a union representative, grieves the travel compensation time and overtime policy.
      11/29/82 — Plaintiff, as a union representative, grieves the travel compensation time and overtime policy.
      12/ 8/82 — Plaintiff, as a union representative and on behalf of himself personally, grieves the agents being forced to do secretarial work when they don’t have the time and states he has been harassed for filing grievances.
      12/ 2/82 — Plaintiff, as a union representative, grieves another agent’s discipline.
      1/11/83 — Plaintiff, as a union representative, and on behalf of himself, grieves a memorandum distributed to agents which plaintiff claims discriminates against him for his union duties.
      2/27/83 — Plaintiff, as a union representative, grieves another agent's invasion of privacy when he was requested information concerning his return to work after a medical leave.
      5/26/83 — Plaintiff, as a union representative, grieves management’s interfering with union business by posting items on the union bulletin board.
      7/ 1/83 — Plaintiff grieves a discipline letter he received for working on union business during working hours.
      7/ 8/83 — Plaintiff, as a union representative, grieves a letter of reprimand received by another agent and alleges harassment, invasion of privacy, libel and discrimination.
      12/27/83 — Plaintiff grieves a reprimand letter received for improperly filing a leave slip. 1/10/84 — Plaintiff grieves over a deduction from his pay slip.
      1/30/84 — Plaintiff grieves a corrective action memo he received regarding his use of the telephone and claims harassment and discrimination and states he was denied legal counsel at a conference in Wilkes Barre.
      5/10/84 — Plaintiff grieves an incident which occurred at an office conference regarding plaintiffs criminal cases and claims harassment and discrimination.
      6/22/84 — Plaintiff grieves a memo he received and his failure to receive a mileage reimbursement.
      6/26/84 — Plaintiff, as a union representative and on behalf of himself, grieves a memo sent to all agents requesting information as to what they do on their personal time.
      6/29/84 — Plaintiff, as a union representative and on behalf of himself, grieves a memo received regarding compensable travel time.
      7/18/84 — Plaintiff grieves the denial of the leave he requested and claims discrimination and harassment.
      7/19/84 — Plaintiff grieves the denial of his requested overtime and/or back wages.

      . The three days suspension has been delayed by the court’s Order dated August 14, 1984.