author: HAROLD L. MURPHY, District Judge.

text:
    Charles BURGER, Charlene Burger, and Wesley Charles Burger, Plaintiffs, v. MURRAY COUNTY SCHOOL DISTRICT, Micheal Elrod, Arnold Gray, Peggy Dunn, William Hatton, Mickey Jones, William Ross, Maynard Young, Individually and as Members of the Murray County Board of Education, Defendants.
    Civ. A. No. C83-349R.
    United States District Court, N.D. Georgia, Rome Division.
    June 29, 1984.
    Burt DeRieux, Eileen M. Crowley, Greene, Buckley, DeRieux & Jones, Atlanta, Ga., for plaintiffs.
    Dean B. Donehoo, Chatsworth, Ga., F. Gregory Melton, Timothy H. Allred, Dalton, Ga., for defendants.
   ORDER

HAROLD L. MURPHY, District Judge.

The narrow issue before the Court in this action is which party should bear the burden of proof in regard to the appropriateness of defendant Murray County School District’s (the School District) proposal that Wesley Charles Burger be removed from the residential program at the Davison School to a day program in the Murray County School System. The Court finds that the School District should bear the burden of proof.

BACKGROUND

Wesley Charles Burger is a thirteen year old boy. He suffers from aphasia and as a result qualifies to receive a free and appropriate public education (FAPE) pursuant to the Education of All Handicapped Children Act (EAHCA). Although the record is not entirely clear in this regard, it appears that in 1976 the School District placed Wesley in classes at the Dalton Child Development Center. He remained there until sometime in 1978. Wesley was next placed at the United Cerebral Palsey School. However, the United Cerebral Palsy School is a preschool, so a year later Wesley was refused readmittance because of his age.

In 1979 the School District placed Wesley in the residential program at the Davison School in Atlanta. Wesley attended this school for the school years beginning in September of 1979, 1980, and 1981. During this time the School District paid for all of Wesley’s costs associated with attending the Davison School.

In July, 1982 the School District, after reevaluating Wesley’s Individual Education Program, (IEP) determined that Wesley should be removed from the Davison School and placed in a self-contained learning disabilities class in the Murray County School System. Wesley’s parents objected to the new IEP and proposed placement. Two administrative hearings were held. Following the hearings Wesley’s parents filed suit in this Court.

DISCUSSION

The EAHCA is a funding statute that was enacted with the purpose of assisting the states in providing handicapped children with access to levels of education previously denied them. At the center of the EAHCA is the mandate that participating states provide handicapped children with a FAPE. To meet this goal, an IEP must be developed for each child. The IEP has been described as “the educational blueprint that specifies how the child is to be taught, sets goals and determines how progress is to be measured.” Tatro v. State of Texas, 703 F.2d 823 (5th Cir.1983). The EAHCA calls for joint participation by school officials, teachers, parents, and sometimes the child in formulating the IEP. 20 U.S.C. § 1401(19). However, despite the statutorily recognized importance of involving parents in the development of the IEP, the primary responsibility for formulating IEPs rests with state and local educational agencies. Hendrick Hudson District Board of Education v. Rowley, 458 U.S. 176, 102 S.Ct. 3034, 73 L.Ed.2d 690 (1981).

As previously stated, the Court is not presently concerned with the ultimate issue of whether Wesley should attend the Davison School or a special class in the Murray County School System. The question now before the Court is whether Wesley’s parents must establish that the proposed IEP and change of placement are inappropriate or whether the School District has the burden of proving their propriety. Defendants advance several arguments in support of the position that plaintiffs should bear the burden of proof in this action. Defendants cite Rowley to show that the relevant inquiries before the Court are:

First, has the State complied with the procedures set forth in the Act?” And second, is the individualized educational program developed through the Act’s procedures reasonably calculated to enable the child to receive educational benefits?” If these requirements are met, the State has complied with the obligations imposed by Congress and the courts can require no more.

Id. at 206, 207, 102 S.Ct. at 3051. However defendant mistakenly states that the Rowley quote establishes that plaintiffs must prove the above. The Rowley Court, in this portion of the opinion, was delineating the parameters of a district court’s review of EAHCA actions and in no way was suggesting how the burden of proof be allocated in regard to these questions.

Defendants next refer to the decision in Bales v. Clark, 523 F.Supp. 1366 (E.D.Va.1981). In Bales the court did require that plaintiffs, the child’s parents, bear the burden of proof. But Bales is factually distinguishable from this case. In Bales, the parents were the ones seeking to change the existing placement. Here it is the School District that wishes to change the status quo. Furthermore, the parents were seeking reimbursement for the costs attendant with a summer program that they had unilaterally placed their child in. Therefore, Bales is not especially relevant to this action.

In addition, the Court does not find Bales to be persuasive from the standpoint of legal reasoning. The Bales opinion offered no authority whatsoever for placing the burden of proof on the plaintiffs. Also, the Bales court stated no reasons as to why it would be best to allocate the burden of proof as it did. For example, there was no discussion of why placing the burden of proof on the parents on these facts would further the policies upon which the EAH-CA is premised. On the facts before it the Bales court may have reached the correct decision regarding burden of proof, but this Court does not find Bales to be a good springboard on the issue of how the burden of proof should be allocated generally in EAHCA cases.

Lastly defendants argue that in this instance it would be mistaken to place the burden of proof on them because they seek to change the status quo since they are the ones attempting to better “mainstream” Wesley. Clearly, an important purpose behind the EAHCA is to foster the educating of handicapped children in environments where they will have the opportunity to learn alongside with non-handicapped children. However the cases interpreting the EAHCA, from Rowley on down, make clear that while the goal of mainstreaming is to be achieved whenever possible, “congress recognized that regular classrooms would not be a suitable setting for the education of many handicapped children.” Hendrick Hudson District Board of Education v. Rowley, 458 U.S. 176, 181 n. 4, 102 S.Ct. 3034, 3038 n. 4, 73 L.Ed.2d 690 (1981). See also Colin K. By John K. v. Schmidt, 715 F.2d 1, 7 n. 5 (1st Cir.1983). Therefore, mainstreaming, despite its importance, should only constitute one factor in many in regard to the development of an appropriate IEP. As such, the Court is not convinced that the party opposing mainstreaming should necessarily bear the burden of proof.

In addition, as the Court understands the record, defendant’s argument regarding mainstreaming is somewhat misleading on these facts. Defendants want to place Wesley in a self-contained learning disabilities class. While the class might be located in a building in which non-handicapped children attend school, it would certainly not constitute a regular educational environment. Therefore, the Court fails to see how defendants can seriously argue that they are attempting to mainstream Wesley.

A canvass of the cases dealing with the burden of proof issue reveals that the burden has been imposed either upon the party seeking to change the status quo or upon the school district. The Court finds the former group of cases to be the most persuasive. In Lang v. Braintree School Committee, 545 F.Supp. 1221 (D.Mass.1982), the child, Margaret, had been attending classes in a special private school. The school district decided that she could obtain a FAPE at a Braintree public school. The parents opposed the move. Noting the preference in the EAHCA for “maintaining the status quo where the child is receiving an appropriate education,” the court placed the burden of proof on the school district. Id. at 1228. Likewise, in Doe v. Brookline School Committee, 722 F.2d 910, 919 (1st Cir.1983), the Court held that

in view of the congressional preference for maintenance of current educational placement, a party that seeks to modify an existing educational placement, program or services must proceed by a motion for preliminary injunction. As with issues of funding interim placement, ... the party seeking a modification of the status quo should bear the burden of proof.

The Fifth Circuit has adopted a similar position. In Tatro v. State of Texas, 703 F.2d 823 (5th Cir.1983) (Tatro II), the court was faced with the question of whether a child’s need for Clean Intermittant Catheterization (CIC) fell within the ambit of EAHCA. The school district was asserting that it did not, and if the child, who was currently attending special classes in a public school, required such care she should be moved to a residential setting or another institution providing CIC.' The Court placed the burden of proof upon the school district stating that

We are convinced that the central role of the IEP in the educational scheme contemplated by the EAHCA and in the standard of review developed in Rowley gives rise to a preumption in favor of the educational placement established by Amber’s IEP. Moreover, because the IEP is jointly developed by the school district and the parents, fairness requires that the party attacking its terms should bear the burden of showing why the educational setting established by the IEP is not appropriate.

Id. at 830.

The EAHCA was designed to offer handicapped children educational opportunities that had heretofore eluded them. Obvious advantages inhere to any child who is permitted to learn in a stable environment. This advantage may have even more meaning to the handicapped child. Therefore, when the suggestion is made that a child, who falls under the aegis of the EAHCA and is currently learning in what has been deemed to be an appropriate setting, be moved to a different facility, the party advocating the move should bear the burden of proving its propriety.

ACCORDINGLY, the School District should bear the burden of proof in regard to the proposed IEP involved in this action.

      . 20 U.S.C. § 1400 et seq.

      . A proposed change in placement has explicitly been recognized as the type of fundamental change that triggers the requirements of 20 U.S.C. § 1415. Tilton, By Richards v. Jefferson County Board of Education, 705 F.2d 800 (6th Cir.1983) (involving transfer from regular school to special school).

      . See 20 U.S.C. § 1415(c). The parties disagree about the results of these hearings. The Court has not yet been furnished with a copy of the transcripts from these hearings and therefore makes no judgment at this time concerning the findings of the hearing officers.

      . In the seminal EAHCA decision, Hendrick Hudson District Board of Education v. Rowley, 458 U.S. 176, 102 S.Ct. 3034, 73 L.Ed.2d 690 (1981), the Supreme Court held that a state satisfies the FAPE requirement by "providing personalized instruction with sufficient support services to permit the child to benefit educationally from that instruction.” Rowley at 203, 102 S.Ct. at 3049.

      . The courts have uniformly held that parents who make unilateral changes or parents who make changes during the pendency of proceedings are not entitled to reimbursement for costs associated with those changes. See e.g. Rowe v. Henry County School Board, 718 F.2d 115 (4th Cir.1983).

      . In Bales the court relied heavily on the provisions of Va.Code § 22.1-213 et seq. (1980). Although this is not stated in the opinion, it is possible that one section in the Code specifically provides that plaintiffs will bear the burden of proof in EAHCA challenges. Other state codes do contain provisions allocating the burden of proof in these cases. See e.g. Grimes v. Board of Education, 3 EHLR 552:279 (1981).

      . The Court also notes that in Georgia Association of Retarded Citizens v. McDaniel, 716 F.2d 1565, 1576 (11th Cir.1983), the Eleventh Circuit Court of Appeals cited Bales as subscribing to the proposition that it was acceptable for a school district to adopt policies which inhibited consideration of the individual needs of children; a position emphatically rejected in McDaniel. While this rejection does not speak directly to the burden of proof issues, it does cast an aspersion on the overall soundness of the Bales decision.

      . Children in special classes are not considered to be mainstreamed. 20 U.S.C. § 1412(5).

      . For a case holding simply that the burden rests with the school district see Davis v. District of Columbia Board of Education, 530 F.Supp. 1209 (D.D.1982). Unfortunately this opinion suffers from the same lack of analysis as Bales.

      . This was done despite the court’s acknowledgement of the mainstreaming mandate.

      . The Fifth Circuit has also placed the burden on the school district due to the remedial nature of the Act and the parents’ lack of knowledge. S-1 v. Turlington, 635 F.2d 342 (5th Cir.1981).


source: Caselaw Access Project

author: DIANA E. MURPHY, District Judge.

license: Public Domain

text:
    NETWORK SYSTEMS CORPORATION, Plaintiff, v. MASSTOR SYSTEMS CORPORATION, Defendant.
    Civ. No. 4-84-192.
    United States District Court, D. Minnesota, Fourth Division.
    July 12, 1984.
    Robert T. Edell, Merchant, Gould, Smith, Edell, Welter & Schmidt, Minneapolis, Minn., and Gregory Markel, Davis, Markel, Dwyer & Edwards, New York City, appeared on behalf of plaintiff.
    David C. Forsberg, and Jeffrey Shaw, Briggs & Morgan, St. Paul, Minn., appeared on behalf of defendant.
   ORDER

DIANA E. MURPHY, District Judge.

Plaintiff, Network Systems Corporation (Network), brought this action for damages, declaratory and injunctive relief against defendant, Masstor Systems Corporation (Masstor), alleging violations of patent law, breach of contract, breach of confidential relationship, misappropriation of trade secrets, and copyright violations. Jurisdiction is alleged under 28 U.S.C. §§ 1132, 1338, 17 U.S.C. § 501 et seq., and Minn.Stat. §§ 303.13 and 543.19. This matter is now before the court upon the motion of Masstor for dismissal for lack of personal jurisdiction and improper venue or, alternatively, for transfer of venue.

I.

Network, a Delaware corporation based in Minnesota, manufactures and markets sophisticated electronics products that permit otherwise incompatible computers and computer peripheral subsystems to be interconnected in data networks. The product involved in this litigation is an adapter system called HYPERchannel which permits interconnection at high data transmission speeds.

Masstor is a California corporation headquartered in California. Masstor has marketed for the last few years a computer software program compatible with Network’s HYPERchannel adapters called MASSNET.

In November, 1979, Masstor and Network entered into a contract whereby Network agreed to supply its adapter systems for sale along with Masstor’s software. Recently, Masstor has announced its intention to manufacture and market its own adapter (the MCU) which will be compatible with the MASSNET software. Masstor has produced a prototype MCU.'

Network’s complaint alleges: (1) that Masstor’s adapter does or will infringe Network’s Patent No. 4,086,534, a device which facilitates high speed data pulse communications and which is utilized by Network in manufacturing HYPERchannel adapters; (2) that, under the 1979 Contract, Masstor obtained from Network certain proprietary information for use solely in connection with Network’s equipment, but which Masstor has used in violation of that agreement, to develop its own adapter system; (3) that Masstor has breached a confidential relation between it and Network; (4) that Masstor gained access to and has misappropriated Network’s trade secrets; and (5) that Network has provided Masstor certain copyrighted documents, which Network has copied.

II.

This court’s determination of the existence of personal jurisdiction in this matter is a two part process, requiring the court to ascertain, first, whether the requirements of one of Minnesota’s long arm statutes are met, and, second, whether the exercise of the court’s jurisdiction over defendants complies with the requirements of due process. See Aftanase v. Economy Baler Co., 343 F.2d 187, 190 (8th Cir.1965). Because Minnesota’s long arm statutes extend jurisdiction of Minnesota’s courts to the maximum limit consistent with due process, the latter question is controlling.

In considering Masstor’s motion to dismiss for lack of jurisdiction, the facts alleged by the complaint are taken to be true, and the motion should be denied unless Network fails to make out a prima facie case of jurisdiction. Hardrives, Inc. v. City of LaCrosse, Wisconsin, 307 Minn. 290, 240 N.W.2d 814, 818 (1976).

Masstor appears to have sufficient contacts with Minnesota related to this litigation to sustain personal jurisdiction here. The parties have had a contractual relationship for over four years during which time Network has manufactured adaptors in Minnesota and shipped them to various destinations as directed by Masstor. Masstor has apparently also sent employees to Network in Minnesota for training. Masstor executives have come to Minnesota to meet with Network representatives on numerous occasions relating to the contractual relationship involved here. Based on these contacts related to this suit, the motion to dismiss for lack of jurisdiction should be denied.

III.

With respect to Masstor’s argument for dismissal or, in the alternative, transfer for improper venue, Masstor argues 28 U.S.C. § 1400(b) applies, while Network argues 28 U.S.C. § 1391 can be used. 28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in actual (as opposed to threatened) patent infringement cases. Under § 1400(b), venue is limited to the district where the defendant resides or where the defendant has committed acts of infringement and has a regular and established place of business. Network argues that 28 U.S.C. § 1391, a general venue statute, applies because this is a case of threatened and not actual infringement. In section 1391 actions, venue can be in any judicial district in which the defendant is incorporated, licensed to do business, or doing business.

28 U.S.C. § 1400(b) is the appropriate basis for venue of the patent infringement allegations in this case. These allegations appear to relate to present infringement; a prototype has been developed and produced, active marketing for that device has been undertaken, customers have been lined up, etc. Indeed, Network’s complaint puts the allegations of infringement in the present tense: it states that “defendant has manufactured or is about to manufacture, adapter systems which infringe plaintiff’s [patent]”; “defendant will continue with the manufacture” unless enjoined; and asks for a decree that “defendant has infringed or is about to infringe” Network’s patent. (Emphasis added.)

The United States Supreme Court has held that section 1400(b) is the sole and exclusive venue provision in patent infringement actions and that it is not to be supplemented by the provisions of section 1391. Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 77 S.Ct. 787, 1 L.Ed.2d 786 (1957). See also Lighting Systems v. International Merchandising Associates, Inc., 464 F.Supp. 601 (W.D.Pa.1979). This specific venue statute, 1400(b), reflects a Congressional awareness of the technical nature of patent litigation and the particular advantage in limiting its prosecution to forums where the acts of infringement occurred and where the defendant is located. See Hoffacker v. Bike House, 540 F.Supp. 148 (N.D.Cal.1981); Bradford Novelty Co. v. Manheim, 156 F.Supp. 489 (S.D.N.Y.1957). A plaintiff cannot avoid or defeat the specific provisions of section 1400(b) by couching a complaint for actual infringement in language of threatened infringement. See Joseph F. Corcoran Shoe Co. v. Frank Noone Shoe Co., 164 USPQ 341 (S.D.N.Y.1969); Proler Steel Corp. v. Luria Brothers & Company, 223 F.Supp. 87 (S.D.Tex.1963). Thus the general venue provisions of section 1391 must give way where Congress has established such a specific section dealing with a certain cause of action, i.e. patent infringement.

Similarly, Network cannot circumvent the specific venue provisions of section 1400(b) by joining other causes of action which can be venued in Minnesota and arguing “pendent venue”. The doctrine of pendent venue has received limited application and acceptance and has been rejected in numerous cases involving section 1400(b). See Max Daetwyler Corp. v. Input Graphics, Inc., 541 F.Supp. 115 (E.D.Pa.1982); Hoffacker v. Bike House, 540 F.Supp. 148 (N.D.Cal.1981); Goggi Corp. v. Outboard Marine Corp., 422 F.Supp. 361 (S.D.N.Y.1976); Bradford Novelty Co. v. Manheim, 156 F.Supp. 489 (S.D.N.Y.1957). The growing line of authority holds that a court may not entertain a patent claim when the specific requirements of the patent venue statute are not satisfied notwithstanding proper venue over related claims. See Hoffacker, supra; Lighting Systems v. International Merchandising Associates, Inc., 464 F.Supp. 601 (W.D.Pa.1979); Locke Mfg. Co. v. Sabel, 244 F.Supp. 829 (W.D.Ky.1965).

Thus, proper venue of the patent infringement claims herein is in California where Masstor resides and where the alleged acts of infringement occurred. Accordingly, pursuant to 28 U.S.C. § 1400(b) and the interests of justice, the patent infringement claims should be transferred to the United States District Court for the Northern District of California.

IV.

Finally, since the patent infringement claim should be transferred to California, and the issue arises whether the other claims should be transferred as well. The court in Lighting Systems, supra, addressed this same situation and stated:

It would seem absurd for this court to sever the patent infringement claim and transfer it ... while retaining the [other] counts ... For us to retain the [other] counts while the patent infringement action is being tried in [a different court] would be intolerable judicial inefficiency leading to possible inconsistent results on the same set of facts.

Id. at 606. This court agrees with the reasoning and holding in Lighting Systems. See also Bradford Novelty Co., supra. All the claims in this case should be transferred in the interests of justice under 28 U.S.C. §§ 1406(a) and 1404(a) to the United States District Court for the Northern District of California. See Koehring Co. v. Hyde Construction Co., 324 F.2d 295 (5th Cir.1963), reh’g denied, 383 U.S. 939, 86 S.Ct. 1062, 15 L.Ed. 857 (1966).

ORDER

Accordingly, based on all the files, records, and proceedings herein,

IT IS HEREBY ORDERED that

1. Defendant’s motion to dismiss is denied.

2. Defendant’s motion to transfer is granted and this ease is transferred to the United States District Court for the Northern District of California.

      . Hardrives, Inc. v. City of LaCrosse, Wisconsin, 307 Minn. 290, 240 N.W.2d 814, 818 (1976).


author: NORTHROP, Senior District Judge.

text:
    WANG LABORATORIES, INC. v. Norman D. BURTS, et al.
    Civ. A. No. N-84-1977.
    United States District Court, D. Maryland.
    Oct. 1, 1984.
    On Motion to Dismiss Amended Complaint Jan. 28, 1985.

      Barry L. Steelman, and Kaplan & Kaplan, Baltimore, Md., and H. Kenneth Kudon, and Cooter & Gell, Washington, D.C., for plaintiff.
    Daniel G. Downer, Jr., and Burgmeier, Buppert & Downer, Annapolis, Md., for defendant William D. Duncan.
    Kenneth B. Folstein, Greenbelt, Md., for defendants David A. Neubrech, Lisa A. Burch,. Comptec, Inc. and Basys, Inc.
   MEMORANDUM

NORTHROP, Senior District Judge.

This is a civil action for damages brought by Wang Laboratories, Inc. (Wang) under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. (RICO) and the common law of misrepresentation and conversion. Currently pending before the Court are motions to dismiss filed by defendants William D. Duncan (Duncan), David A. Neubrech (Neubrech), Norton L. Jeffers (Jeffers), Lisa A. Burch (Burch), Basys, Inc. (Basys) and Comptec, Inc., (Comptec) pursuant to Rules 9(b) and 12(b) of the Federal Rules of Civil Procedure.

I.

Plaintiff Wang is a Delaware corporation with its principal place of business in Massachusetts. Defendants Comptec and Basys are Maryland corporations, each having its principal place of business in Maryland. Comptec is the parent company of Basys. Comptec allegedly “dominates” and controls the “day to day activities” of Basys. The individual defendants were or are officers and/or directors of these two corporations.

Through its complaint, Wang alleges that in July, 1980, it entered into a contract with Comptec, by virtue of which Comptec was to purchase Wang computer equipment for resale in the Washington, D.C. area (the contract). By the end of 1981, Comptec had a delinquent balance with Wang in excess of one million dollars. Although reluctant, Wang extended the aforementioned contract with Comptec through June 30, 1982. The extension was based in part on an exchange of correspondence and a meeting on January 8, 1982, wherein Comptec agreed to apply all discounts earned thenceforth to its delinquent balance.

By letter dated April 15, 1982, defendant Norman A. Burts (Burts), the president and chief executive officer of Comptec, submitted a list of potential customers to Wang. These customers represented possible payments to Wang of $81,345. It is alleged that Burts knew when he wrote the letter that the information contained therein was false, and that the purpose of the letter was to fraudulently induce Wang to continue shipping computer equipment to Comptec.

Wang further alleges that at least as early as the January 8, 1982 meeting, the defendants, by virtue of their positions in Comptec or Basys, “devised and began to implement a scheme to defraud Wang of the money Comptec owed Wang and to misappropriate part or all of such money to themselves.” Complaint at ¶ 21. In furtherance of this scheme, the defendants allegedly manipulated Comptec by, inter alia, misappropriating to themselves deposits toward the purchase of Wang equipment, selling Wang equipment to end users outside the D.C. area, passing through the United States mails worthless checks, and misrepresenting Comptec as an authorized Wang dealer after the termination of the Wang contract. It is further alleged that in August 1982, defendant Burts attempted to blackmail Wang by conditioning repayment of the balance due Wang upon Wang’s shipment of equipment following termination of the contract.

On this basis, Wang makes a RICO Act and two state law claims. With regard to RICO, Wang asserts that in effecting their fraudulent scheme, defendants committed acts indictable under both the federal mail fraud statute, 18 U.S.C. § 1341, and the federal wire fraud statute, 18 U.S.C. § 1343; that defendant Burts’ aforementioned acts constituted extortion; that such acts are “racketeering activity” within the meaning of 18 U.S.C. § 1961(1); that Comptec, Inc. is engaged in interstate commerce and is an “enterprise” within the meaning of 18 U.S.C. § 1961(4); that, alternatively, the defendants are an “enterprise” functioning as a continuing unit for a common purpose; that the activities of the enterprise^) is a “pattern of racketeering activity” within the meaning of 18 U.S.C. § 1961(5); that plaintiff has been injured in its business and property; and that plaintiff is therefore entitled to recover treble damages, court costs and attorneys’ fees under 18 U.S.C. §§ 1964(a) and 1964(c), which provides civil remedies for any person injured by reason of a violation of 18 U.S.C. § 1962.

Defendants assert that plaintiff has failed to properly allege certain elements of a RICO civil cause of action. In addition, and perhaps primarily, defendants contend that plaintiff has pleaded its fraud claims with insufficient particularity, thereby justifying dismissal under FED.R.CIV.P. 9(b). Finally, defendants challenge the sufficiency of the state law claims.

II.

Under RICO, Congress has deemed it “unlawful for any person through a pattern of racketeering activity ... to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in ... interstate or foreign commerce.” 18 U.S.C. § 1962(b). It is also unlawful for “any person employed by or associated with any enterprise ... to conduct or ... participate ... in the conduct of such enterprise’s affairs through a pattern of racketeering activity____” Id. Section 1962(c). Further, it is unlawful to conspire to violate any of these sections. Id. Section 1962(d). A party suffering an injury in his business or property from a violation of RICO may sue for treble damages and attorneys’ fees. 18 U.S.C. § 1964(c).

Defendants have asserted that Wang fails to plead facts sufficient to describe a violation of RICO. Specifically, defendants submit that there have been insufficient allegations of two incidents of “racketeering activity” by the enterprise and that Wang has not alleged an “injury to business or property” within the meaning of 18 U.S.C. § 1964(c). Neither of these arguments withstand analysis.

18 U.S.C. § 1961(1) defines “racketeering activity” to include “any act or threat involving ... extortion ... [or] any act which is indictable under any of the following provisions of Title 18, United States Code: ... section 1341 (relating to mail fraud), section 1343 (relating to wire fraud)----” The complaint clearly alleges at least two acts in furtherance of the conspiracy that may be in violation of the mail and wire fraud statutes. Additionally, defendant Burts’ alleged extortion is an “act” included in the definition of “racketeering activity.” See Complaint 1122(b), (c) and (e) and 1123. Cf. United States v. Weatkerspoon, 581 F.2d 595, 602 (7th Cir.1978) (each act is a separate offense under RICO even if there is but one scheme involved). Wang has met its pleading burden with respect to allegations of “racketeering activity.”

In order for a plaintiff to have standing to bring a RICO claim, he must allege an “injury in his business or property” by reason of a violation of RICO. 18 U.S.C. § 1964(c). While this injury requirement has been problematic, see Blakey, The RICO Civil Fraud Action in Context: Reflections on Bennett v. Berg, 58 Notre Dame L.Rev. 237, 328-29 (1982); Blakey and Gettings, Racketeer Influence and Corrupt Organizations (RICO): Basic Concepts—Civil and Criminal Remedies, 53 Temple L.Q. 1009, 1040-41 (1980), this Court concludes that Wang’s allegations of injury to its business reputation and customer goodwill in addition to its loss of revenues satisfied the injury requirement of 18 U.S.C. § 1964(c). See Kimmel v. Peterson, 565 F.Supp. 476, 495 (E.D.Pa.1983) (Plaintiff’s allegations of monetary losses as a result of defendant’s fraud sufficiently allege “injury” under 18 U.S.C. § 1964(c)); Hellenic Lines, Ltd. v. O’Hearn, 523 F.Supp. 244, 248 (S.D.N.Y.1981) (the corporation was injured for purposes of RICO if, as alleged, it sustained monetary damages).

In sum, the Court concludes that Wang has stated a RICO claim sufficient to withstand defendants’ motion insofar as it is based on FED.R.CIV.P. 12(b)(6). See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957); 5 C. Wright and A. Miller, Federal Practice and Procedure: Civil § 1356 (1969 and supp. 1984) .

III.

All the defendants in this action argue that the complaint fails to plead fraud with the particularity required by FED.R.CIV.P. 9(b). Specifically, defendants contend that the complaint fails to allege with sufficient particularity (1) the individual defendant’s participation with the RICO enterprise, and (2) any link between the individual defendants and the alleged acts of racketeering activity. Wang, in response, asserts that it has been as specific in framing the complaint as possible at this stage of the proceedings, and that supplementary factual allegations will be made as the information is obtained through discovery.

On its face, the complaint sets forth in general form a scheme allegedly devised and implemented by Comptec and Burts to defraud Wang. The other defendants are alleged to be in a position to control or be controlled by Comptec in furtherance of this-scheme. Other than the defendants’ respective positions with the corporations, however, there is no allegation of their individual participation in the alleged fraud. Instead, Wang groups all twelve defendants together under the heading of “defendants” in three conclusory paragraphs. See Complaint ¶ s 21, 22 and 23. Even when read in conjunction with FED. R.CIV.P, 8(a), the Court concludes that these allegations are not sufficiently particular to satisfy Rule 9(b).

Initially, Wang must specify what role Basys played in the alleged scheme. Other than alleging Basys was dominated by Comptec, there are no allegations that Basys ever dealt with Wang. By the same token, there are no allegations linking Basys’ directors and officers to the scheme allegedly implemented by Burts and Comptec. Moreover, it is alleged that with respect to Comptec, defendant Burts is and was the president and chief executive officer and the principal mover behind the fraudulent scheme. The extent of participation of defendants Jeffers, Burch and Duncan in Comptec and in the alleged plan needs to be explicated. The same holds true for the other defendants not party to the instant motions.

In sum, the Court concludes that while the allegations state a RICO claim against defendants Burts and Comptec, they do not sufficiently allege a cause of action against the individual defendants or Basys. Pretrial discovery may be needed to elucidate the exact parameters of the fraudulent scheme, but at this juncture the complaint does not allege, even in general terms, the relationship of the individual defendants to the purported scheme. Additional discovery by Wang should not be necessary to rectify the vagueness inherent in its pleading. See Bennett v. Berg, 685 F.2d 1053 (8th Cir.1982), cert. denied, — U.S.-, 104 S.Ct. 527, 78 L.Ed.2d 710 (1983) (dismissing a RICO claim under 9(b)); Hellenic Lines, Ltd. v. O’Hearn, 523 F.Supp. 244 (S.D.N.Y.1981) (same).

IV.

Count II alleges that the named defendants converted and conspired to convert monies that Comptec agreed to assign to Wang. Defendants argue that while there may have been an obligation to pay Wang, failure to do so does not translate into an action for conversion. Wang offers no opposition. This Court agrees with the defendants’ position.

To constitute an action of conversion under Maryland law, there must be an unlawful or tortious taking or exercise of dominion by the defendant over the plaintiff’s property. See e.g. Saunders v. Mullinix, 195 Md. 235, 240, 72 A.2d 720 (1949); Western Maryland Dairy v. Maryland Wrecking Co., 146 Md. 318, 327, 126 A. 135 (1924); Staub v. Staub, 37 Md.App. 141, 376 A.2d 1129 (1977). As a general rule, however, failure to pay a contractual debt is not the equivalent of conversion. See W. Prosser, Law of Torts § 15, at 82-83 (4th ed. 1971); Restatement (Second) of Torts § 242, comment f (1965). And, while no Maryland case appears to address the issue directly, decisions in other jurisdictions uniformly hold that “there can be no conversion of an ordinary debt.” Jensen v. State Bank of Allison, 518 F.2d 1, 5 (8th Cir.1975) (applying Iowa law). See also Lyxell v. Vautrin, 604 F.2d 18, 21 (5th Cir.1979) (applying Alabama law); United States Fidelity and Guaranty Co. v. Bass, 619 F.2d 1057, 1060 (5th Cir.1980) (applying Alabama law); Dawkins v. National Liberty Life Insurance Co., 263 F.Supp. 119, 121 (D.S.C.1967) (applying South Carolina law).

If Wang can plead facts sufficient to support its conversion claim under Maryland law, it may advance that claim in an amended complaint. Now, however, to the extent Count II seeks recovery in conversion for a contractual debt, it will be dismissed pursuant to FED.R.CIV.P. 12(b)(6).

V.

Count III makes allegations only against defendants Burts and White. No other defendants are named in this count. Indeed, the prayer for relief for Count III seeks damages against Burts and White alone. To the extent Count III can be construed to state a claim against any defendant except White and Burts, it is dismissed. FED.R.CIV.P. 12(b)(6).

VI.

In conclusion, Count I is dismissed against all defendants except Burts and Comptec. Count II is dismissed in its entirety, and Count III is dismissed against all defendants except Burts and White. Wang is granted leave to file an amended complaint within 20 days. The motions for stay of discovery under FED.R.CIV.P. 26(c) are granted and discovery is stayed pending further order of this Court.

A separate order confirming the within rulings will be entered.

ON MOTION TO DISMISS AMENDED COMPLAINT

By Order dated October 1, 1984, this Court dismissed Count I of the original complaint as to all defendants except Comptec, Inc. (“Comptec”) and Norman D. Burts (“Burts”); dismissed Count II in its entirety; dismissed Count III as to all defendants except Burts and Von L. White (“White”); and stayed all discovery pending further Order. Plaintiff, Wang Laboratories, Inc. (“Wang”), thereafter filed a motion to lift the discovery stay as to Comptec. Comptec, in turn, filed a memorandum in opposition to this motion.

On October 22, 1984, Wang filed a two-count amended complaint. This amended complaint was met with motions to dismiss filed by William D. Duncan (“Duncan”), David A. Neubrech (“Neubrech”), Lisa A. Burch (“Burch”), Comptec and Basys, Inc. (“Basys”). Wang filed a memorandum in opposition to Duncan’s motion to dismiss on November 26, 1984, and a memorandum in opposition to the other motions to dismiss on January 22, 1985.

By letter dated December 6, 1984, the Court, sua sponte, requested briefs on the application of Sedima, S.P.R.L. v. Imrex Co., 741 F.2d 482 (2d Cir.1984), cert. granted, — U.S.-, 105 S.Ct. 901, 83 L.Ed.2d 917 (1985), to Count I of the amended complaint. Counsel for the parties submitted the requested briefs. The Court will now rule on all pending motions. No hearing is necessary. Local Rule 6.

SEDIMA

In Sedima, S.P.R.L. v. Imrex, Co., 741 F.2d 482 (2d Cir.1984), cert. granted, — U.S. -, 105 S.Ct. 901, 83 L.Ed.2d 917 (1985), the Second Circuit, over a blistering dissent, limited the breadth of the civil RICO statutes by imposing two stringent standing requirements upon persons seeking to allege a cause of action under the civil RICO statutes. One of these requirements was a conviction of a RICO predicate offense. In this Court’s opinion, the Sedima conviction requirement provided a workable bright-line test for limiting the civil RICO statutes to exclude “garden variety” business fraud. Acceptance of the Sedima rationale in this case would, of course, mandate dismissal of Count I because no conviction has been alleged.

After careful consideration of the statute’s history and purpose, the development of the applicable case law and a review of Fourth Circuit precedent, the Court concludes that it cannot follow Sedima's criminal conviction standing requirement.

As this Court’s December 6, 1984 letter -stated, the breadth of civil RICO statutes has been the subject of great dispute7 and a split among the United States Courts of Appeal has developed. See e.g. and compare, Sedima, supra, with Alexander Great Co. v. Tiffany Industries, Inc., 742 F.2d 408 (8th Cir.1984). On the district court level, some courts have followed Sedima, interpreting it as a revival of the “organized crime nexus” requirement. See e.g. Atlantic Federal S & L Ass’n v. Dade S & L Ass’n, 592 F.Supp. 1089 (S.D.Fla.1984); Aliberti v. E.F. Hutton & Co., Inc., 591 F.Supp. 632 (D.Mass.1984). Other district courts, have' rejected the Sedima standing requirements. See e.g. Maxwell v. Southwest Nat'l Bank, 593 F.Supp. 250 (D.Ka.1984); Ora Corp. v. Vinson, 596 F.Supp. 1546 (D.S.C.1984).

In this Circuit, the most recent word on RICO comes from Battlefield Builders, Inc. v. Swango, 743 F.2d 1060 (4th Cir.1984). In Battlefield Builders, Chief Judge Winter reversed a district court ruling that RICO did not apply to “garden variety” business frauds. In its analysis, the court did not suggest that RICO required any participation with organized crime, much less a conviction of a predicate offense. This Court is of the opinion that, faced with the decision, the Fourth Circuit would reject the criminal conviction requirement of Sedima. This Court is now faced with the decision and in light of Battlefield Builders, supra, holds that it cannot require an underlying criminal conviction in order to state a civil RICO claim.

Having addressed the Sedima issue, the Court turns to the pending motions to dismiss.

MOTIONS TO DISMISS

In its October 1, 1984 Memorandum Opinion, this Court carefully reviewed Wang’s RICO claim, defendants’ objection thereto, and the applicable law. After doing so, the Court held:

In sum, the Court concludes that Wang has stated a RICO claim sufficient to withstand defendants’ motion [to dismiss] insofar as it is based on FED.R. CIV.P. 12(b)(6). See Conley v. Gibson, 355 U.S. 41, 45-46 [78 S.Ct. 99, 101-102, 2 L.Ed.2d 80] (1957); 5C Wright and A. Miller, Federal Practice and Procedure: Civil § 1356 (1969 and supp. 1984).

Wang Laboratories, Inc. v. Burts, 612. F.Supp. 441, 445 (D.Md.1984). After concluding the RICO count was sufficient to withstand a FED.R.CIV.P. 12(b)(6) challenge, this Court went on to hold that the allegations were insufficient under FED.R.CIV.P. 9(b), and dismissed Count I as to all defendants except Comptec and Burts. Id., 445.

On October 22, 1984, Wang amended its complaint, alleging the same facts and elements to support its RICO claim, but alleging more facts about the participation of each defendant in the alleged conspiracy. The Court has reviewed the amended complaint and concludes that it alleges “sufficiently specific facts to put the defendants on notice of what the plaintiffs charge [they] did.” Oliver v. Bostetter, 426 F.Supp. 1082, 1087, 1089 (D.Md. 1977); see Windsor Associates, Inc. v. Greenfeld, 564 F.Supp. 273 (D.Md.1983).

Accordingly, the Court concludes that Count I of the amended complaint alleges sufficient facts under both FED.R.CIV.P. 12(b)(6) and 9(b). To the extent the individual’s participation in the alleged scheme is still unclear, that may be remedied through discovery. Further amendment to the amended complaint is not required by the Federal Rules and would serve no useful purpose. All motions to dismiss Count I will be denied by separate Order.

Count II makes allegations only against defendants Burts and White. No other defendants are named in this Count. Indeed, the prayer for relief for Count II seeks compensatory and punitive damages against Burts and White alone. Wang has offered no opposition to the other defendants’ motions to dismiss this Count. To the extent Count II can be construed to state a claim against any defendant except White and Burts, it is dismissed. FED.R.CIV.P. 12(b)(6).

CONCLUSION

The discovery stay imposed on October 1, 1984 will be vacated by separate Order. This ruling effectively moots Comptec’s motion to lift discovery stay. Discovery shall proceed in accordance with this Court’s Local Rules and the Federal Rules of Civil Procedure.

A separate Order confirming the within rulings will be entered.

      . James M. Tetrick was originally named as a defendant, but by stipulation the complaint against him has been dismissed.
      Other defendants, not parties to the instant motion, included Norman D. Burts, Toni M. Lefthouse, Ralph D. Crowe, Edward Ryner and Von L. White.

      . It is alleged that (1) Duncan is the former president of Basys; (2) Neubrech is the former president of Comptec; (3) Jeffers is a current director of Comptec; and (4) Burch is an officer and or managing agent of Comptec and/or Basys.

      . Rule 9(b) of the Federal Rules of Civil Procedure provides, with regard to averments of fraud, that “the circumstances constituting fraud ... be stated with particularity."

      . This Court’s decision is entirely consistent with Judge Miller's opinion in Windsor Associates v. Greenfeld, 564 F.Supp. 273 (D.Md.1983). There, unlike here, the complaint was sufficiently laden with particulars to apprise defendants of the claims against them. Id. at 280. Moreover, the complaint in Greenfeld did not group multiple defendants together under a general heading of "defendants.” Rather, the complaint particularized the participation and activities of the two defendants in the fraudulent scheme.

      . Wang does not object to defendant Duncan’s dismissal from this Count because “Wang has not alleged defendant Duncan to have participated in the activities which form the basis of Count II.” Wang’s Memorandum in Opposition to Duncan’s Motion to Dismiss at p. 14. This same concession has not been made to any other defendant. The Court finds this curious inasmuch as Count II seeks relief against "all defendants" and there is no difference between the allegations implicating Duncan and any other defendant, except Burts and Comptec.

      . The Court notes that the briefs on the Sedima, supra, issue were promptly submitted and thoroughly researched. The Court commends counsel for this effort.


author: DOWD, District Judge.

text:
    INVACARE CORPORATION, Plaintiff, v. SPERRY CORPORATION, Defendant.
    No. C83-4986.
    United States District Court, N.D. Ohio, E.D.
    Oct. 2, 1984.

      Ernest P. Mansour, Mansour, Gavin, Ger-lack & Manos, Cleveland, Ohio, for plaintiff.
    David A. Schaefer, Benesch, Friedlander, Coplan & Aronoff, Cleveland, Ohio, for defendant.
   ORDER

DOWD, District Judge.

Plaintiff, Invacare Corporation, filed the above-captioned case against defendant, Sperry Corporation, alleging fraud, negligence, and breach of contract involving the sale of a computer system. Sperry filed a motion for summary judgment asserting the statute of limitations bars this action, the complaint fails to state a valid claim and the written agreements between the parties limit the amount of damages recoverable. For the reasons which follow, the motion for summary judgment is denied.

FACTUAL ALLEGATIONS

Invacare alleges that in 1980 it decided to acquire a computer, together with programs capable of coordinating Invaeare’s accounting and manufacturing systems. Invacare alleges that Sperry sent a team of employees, described as manufacturing specialists, to examine Invacare’s operation and needs and to make recommendations to Invacare concerning the acquisition of a computer from Sperry. Invacare alleges further that after determining its requirements, Sperry recommended that Invacare purchase a Univac System 80 computer, together with certain programs and services which would fulfill Invacare’s needs and requirements.

Invacare alleges that in reliance upon Sperry’s expertise, Invacare entered into a series of agreements with Sperry commencing on November 25,1980, and supplemented subsequently on many occasions, for the acquisition of the Univac System 80 through a lease with an option to purchase.

Invacare alleges that the computer equipment was delivered to plaintiff in May of 1981 and it was operational in November of 1981, but that the Univac System 80 entirely failed of its essential purpose. Invacare alleges that the equipment supplied was incapable of operating the programs and the related data processing products furnished by Sperry. Invacare alleges the programs and the related data processing products were inadequate to fulfill Invacare’s needs. Invacare alleges further that, at the recommendation of Sperry, Invacare made additional acquisitions of equipment and programs from Sperry until November 30, 1982, upon the assurance by Sperry that the acquisitions would enable the Univac System 80 to perform its essential purpose. Invacare alleges that, in spite of the augmentation of the Univac System 80 through the additional acquisition of equipment and programs, the computer system continued to fail of its essential purpose.

Invacare alleges Sperry knew the Univac System 80 was entirely inadequate for Invacare’s needs and that such needs could only be fulfilled through equipment in computer systems costing more than twice the price of the Univac System 80. Invacare alleges Sperry recommended the Univac System 80 for the purpose of making its price appear lower than prices of Sperry’s competitors for Invacare’s business, so as to induce Invacare to purchase the Univac System 80. Invacare alleges further that Sperry advised Invacare that the Univac System 80 was “user-friendly,” operated by pushing a button, and that the programs provided would satisfy Invacare’s needs without requiring modifications or a data processing specialist to operate the system. Invacare alleges that Sperry made such representations knowing they were false and for the sole purpose of inducing Invacare to purchase the system.

Invacare alleges it demanded Sperry to accept the return of the Univac System 80, as augmented, and demanded Sperry to cancel the agreements reached between the parties, but Sperry refused to cancel the agreements or accept the return of the system. Invacare requests a return of the purchase price, as well as incidental, consequential, and punitive damages. Sperry denies Invaeare’s allegations and counterclaims for $55,232.64 allegedly owed to Sperry on account.

The parties entered into several agreements regarding the hardware, software, and service for the computer system. There appears to be four major agreements which were supplemented by other agreements. The first agreement, captioned Six Year Lease And Service Agreement, was signed by a representative of Invacare on October 22, 1980, and signed by a representative of Sperry on November 25, 1980. The second agreement is captioned Systems Service Agreement, which was signed by a representative of Invacare on October 24, 1980, and was signed by a representative of Sperry on November 25, 1980. The Systems Services Agreement provides for future services. The third agreement between the parties is captioned Five Year Lease and Service Agreement, which was signed by a representative of Invacare on February 16, 1981, and was signed by a representative of Sperry on March 16, 1981. The fourth agreement is captioned, Extended Term Lease and Service Agreement and License For Program Products, which was signed by a representative of Invacare on July 7, 1982, and was signed by a representative of Sperry on August 13, 1982.

All of the contracts were supplemented with other contracts in the form of purchase orders. However, all the supplemental contracts either contained the same provisions as the original contracts or incorporate the provisions of the original contracts. The parties entered into supplemental contracts as late as January, 1983. The complaint in this action was filed December 14, 1983.

DISCUSSION AND LAW

1. Statute of Limitations.

The contracts in dispute provide for a two year statute of limitations for any action, regardless of form, arising out of transactions occurring under or contemplated under the agreements. Sperry asserts that this action is barred by the two year statute of limitations provided in the contract and the two year statute of limitations provided in Ohio R.C. 2305.10. Revised Code § 2305.10 provides in pertinent part, “An action for bodily injury or injuring personal property shall be brought within two years after the cause thereof arose.”

Initially, the Court concludes that a four year statute of limitations applies to Invacare’s claim of fraud. Ohio R.C. § 2305.09 provides a four year statute of limitations when relief is sought on the ground of fraud. Sperry asserts that the two year statute of limitations provided in the contracts apply to Invacare’s claim of fraud, as well as other claims. The Court disagrees. Sperry cannot rely on a provision of the contracts to bar Invacare’s claim, when the claim alleges the contracts were induced through fraud. Ott v. Midland-Ross Corporation, 600 F.2d 24, 32 (6th Cir.1979); Dice v. The Akron, Canton & Youngstown Rd. Co., 155 Ohio St. 185, 190, 98 N.E.2d 301 (1951); Eller v. Turvene, 71 O.L.A. 375, 380, 131 N.E.2d 407 (Darke Cty.App.1955). Consequently, Invacare’s claim of fraud is not barred by the statute of limitations.

However, a two year statute of limitations applies to the claims of negligence and breach of contract. The initial contracts were entered into on November 25, 1980 and the majority of the hardware was delivered in May of 1981. In that this action was filed in December of 1983, Sperry asserts that the period of limitations had expired when the action was filed and the action is therefore barred.

If the agreement had in fact been completed and the products delivered by May of 1981, the Court would agree that the contract and negligence claims are barred. However, the parties continued to enter into supplemental agreements through January of 1983. These agreements covered hardware, software, and service, in an apparent attempt to remedy alleged deficiencies in the Univac System 80. Considering that Sperry accepted the benefits of the many supplemental contracts, it cannot now assert that the only contracts that apply for the purposes of the statute of limitations, are those contracts entered into more than two years before the commencement of this action. Upon a review of the contracts, the Court concludes that the contracts incorporate each other and are not independent agreements. Fairness dictates that the most appropriate time to commence the running of the period of limitations is the date of the final supplemental contract. Accordingly, Sperry’s motion for summary judgment premised upon the statute of limitations is denied.

2. Failure to State a Claim.

Sperry asserts Invacare’s allegations of fraud involve representations as to future performance. Sperry asserts further that representations as to future performance do not qualify as misstatements of existing fact upon which a cause of action for fraud can be based.

Invacare alleges that Sperry’s employees examined Invacare’s operation and recommended the Univac System 80 computer. Invacare alleges that Sperry’s employees represented that the Univac System 80, with certain programs, could process Invacare’s accounting and manufacturing systems. Such representations are not as to future performance, but apply to the capabilities of the Univac System 80, along with the appropriate programs, at the time of its delivery. Furthermore, Invacare alleges that upon the discovery that the Univac System 80 was deficient for its needs, Sperry employees represented that the system would work upon Invacare’s purchase of various additional hardware and software. Such representations are not representations as to future performance, but are representations as to the Univac System 80’s capabilities upon delivery to Invacare or upon delivery of the supplemental hardware and software. Consequently, Invacare alleges a valid claim of fraud regarding the alleged misrepresentations by Sperry employees of the Univac System 80’s capabilities.

Sperry asserts alternatively that the contractual integration provision in the agreements executed in October and November of 1980 bar Invacare’s claims regarding precontract misrepresentations. The contracts provide:

This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous proposals, both oral and written, negotiations, representations, commitments, writings, agreements and all other communications between the parties.

As noted above, if the contracts were in fact induced by fraud, Sperry cannot rely on provisions of the contract as a grounds for summary judgment on the fraud claim.

Sperry asserts further that Invacare’s second and third claims of negligence and fourth claim of breach of contract actually allege a claim for computer malpractice which is not actionable. As noted earlier, Invacare’s fourth claim involves an alleged breach of contract. Considering that there are numerous contracts involved in this action for computer hardware, software and service, and considering that Invacare alleges the system failed of its essential purpose, the Court views Invacare’s fourth claim as one of breach of contract which states a valid claim.

Invacare’s second and third claims are as follows:

19. Defendant was negligent in that, in recommending the Univac System 80, and its augmentation to plaintiff, it knew, or in the exercise of ordinary care, it should have known, that the systems were totally inadequate to provide a closed loop manufacturing system for plaintiff, in that the equipment delivered by defendant was incapable of operating the programs and related data processing products furnished by defendant and the programs and related data processing products were inadequate.
20. Defendant was negligent in advising plaintiff as set forth in paragraph 8 because in the exercise of ordinary care it should have known that the programs furnished could not satisfy plaintiffs requirements and that plaintiff would require a data processing specialist to operate its programs.
23. Defendant was negligent in assigning employees to examine plaintiffs requirements and to recommend data processing products to fulfill plaintiffs needs who lacked sufficient knowledge and expertise to fulfill these functions.

Such allegations state a valid claim of negligence. Negligence is the lack of ordinary care. It is a failure to exercise that degree of care which a reasonably prudent person would have exercised under the same or similar circumstances. See generally, W. Prosser, Law of Torts, 143-45 (4th Ed.1971). The Restatement of Torts provides:

Unless he represents that he has a greater or less skill or knowledge, one who undertakes to render services in the practice of a profession or trade is required to exercise the skill and knowledge normally possessed by members of that profession or trade in good standing in similar communities.

Restatement (Second) of Torts § 299A (1965). The comments to § 299A explain the section as follows:

This section is thus a special application of the rule stated in § 299. It applies to any person who undertakes to render services to another in the practice of a profession, such as that of physician or surgeon, dentist, pharmacist, occultist, attorney, accountant, or engineer. It applies also to any person who undertakes to render services to others in the practice of a skilled trade, such as that of airplane pilot, precision machinist, electrician, carpenter, blacksmith, or plumber. This section states the minimum skill and knowledge which the actor undertakes to exercise, and therefore to have. If he has in fact greater skill then that common to the profession or trade, he is required to exercise that skill, as stated in § 299, Comment b.

Id. Comment b.

Invacare alleges that the personnel provided by Sperry failed to perform at a level of ordinary care. If machinists, electricians, carpenters, blacksmiths, and plumbers, are held to the ordinary standard of care in their professions, the Court fails to see why personnel in the computer industry should be held to any lower standard of care. Invacare simply alleges negligence in a business setting. This does not give rise to a new tort of “computer malpractice.” Negligence in a business setting is clearly actionable, cf. First National Bank v. Small Business Administration, 429 F.2d 280, 287 (5th Cir.1970); United States v. Bernstein, 533 F.2d 775 (2d Cir.1976); cert. denied, 429 U.S. 998, 97 S.Ct. 523, 50 L.Ed.2d 608 (1976).

To support its assertion that Invacare fails to state a claim, Sperry cites Chatios Systems v. National Cash Register Corp., 479 F.Supp. 738 (D.N.J.1979); modified in part, 635 F.2d 1081 (3rd Cir.1980). In Chatios Systems, Inc., the Court held as follows:

Though not raised in the pleadings, in post-trial memoranda plaintiff has asserted two additional theories of liability. “Computer malpractice” and strict liability in tort are alleged to have been proven at trial.
The novel concept of a tort called “computer malpractice” is premised upon a theory of elevated responsibility on the part of those who render computer sales and service. Plaintiff equates the sale and servicing of computer systems with established theories of professional malpractice. Simply because an activity is technically complex and important to the business community does not mean that greater potential liability must attach. In the absence of sound precedential authority, the court declines the invitation to create a new tort. In view of the findings and conclusions, infra, the Court deems it unnecessary to rule explicitly on plaintiffs assertion of strict liability in tort.

Id. at 479 F.Supp. 741 n. 1.

The Court in Chatios Systems was concerned with creating a new tort on a theory of elevated responsibility on the part of those who render computer sales and service. Such a concept is not before this Court. Rather, Invacare’s claims allege a breach of the ordinary standard of care to which those in Sperry’s industry are held. Such allegations do not involve a new tort of “computer malpractice.” Consequently, Invacare’s allegations of negligence state a valid claim upon which relief can be granted.

3. Limitation on Damages.

The parties do not dispute that almost all of the contracts contain a provision limiting Sperry’s liability. In bold face type the contracts provide as follows:
IN NO EVENT SHALL SPERRY UNI-VAC BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR THE EXISTENCE, FURNISHING, FUNCTIONING, OR THE CUSTOMER’S USE OF ANY PRODUCTS OR SERVICES PROVIDED FOR IN THIS AGREEMENT. THE CUSTOMER’S SOLE AND EXCLUSIVE REMEDY FOR LIABILITY OF ANY KIND INCLUDING NEGLIGENCE, WITH RESPECT TO THE PRODUCTS AND SERVICES FURNISHED HEREUNDER, SHALL BE LIMITED TO THE REMEDIES PROVIDED IN ... THIS AGREEMENT.
THE CUSTOMER FURTHER AGREES THAT SPERRY UNIVAC SHALL NOT BE LIABLE FOR: (1) ANY LOSS OF USE, REVENUE OR PROFIT; (2) ANY CLAIM, DEMAND, OR ACTION AGAINST THE CUSTOMER BY ANY THIRD PARTY EXCEPT AS MAY BE PROVIDED ... HEREIN.

The language of this section is clear and unambiguous, with the effect of limiting Sperry’s liability for incidental and consequential damages arising out of the failure of the Univac System 80. However, for two reasons, the provisions are not a basis for summary judgment arising out of Invacare’s claims.

Primarily, as stated above, Sperry cannot shield itself with the language of a contract when Invacare’s allegations are that the contract itself was induced through fraud. Furthermore, Invacare alleges the Univac System 80, even as augmented, entirely failed of its essential purpose. It is axiomatic therefore, that Invacare alleges the contract failed of its essential purpose. Under certain circumstances, when a contract, including its damage limitation provision, entirely fails of its essential purpose and the product in question cannot be remedied through the means provided in the contract, the Court will disregard the contract, thereby allowing traditional damages. See generally, J. White and R. Summers, Uniform Commercial Code, § 12-10 (2nd ed. 1980).

The Court concludes there are genuine issues of material fact regarding whether to apply the provisions limiting damages in the contracts.

CONCLUSION

Pursuant to the reasons set forth above, Sperry’s motion for summary judgment is denied.

IT IS SO ORDERED.

      . Although plaintiff does not specifically allege breach of contract, plaintiff alleges the computer system failed of its essential purpose in the fourth claim of the complaint. Such a claim amounts to a breach of contract claim. Furthermore, in its brief in opposition to the motion for summary judgment, plaintiff characterizes the claim as one for breach of contract.

      . The agreements are attached as exhibits to Sperry's answer.

      . The Systems Service Agreement is the only contract which provides for a one-year statute of limitations.

      . Courts that have interpreted Ohio R.C. § 2305.10 have applied it to claims of negligence in a business setting. Mahalsky v. Salem Tool Co., 461 F.2d 581 (6th Cir.1972); AMF Inc. v. Computer Automation, Inc., 573 F.Supp. 924 (S.D.Ohio 1983).
      In some of the contracts the parties agreed Pennsylvania law would apply to disputes arising out of the contracts. Choice of law provisions in contracts are generally enforced by federal courts. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972); AMF Inc. v. Computer Automation, Inc., 573 F.Supp. 924, 926 (S.D.Ohio 1983). However, the choice of law provision only applies to the claim for breach of contract, it does not apply to the tort claims. AMF Inc., supra.

      . See supra text page 451.

      . See supra footnote 1.

      . See supra text page 451.