author: KANE, District Judge.

text:
    David BORROEL, Plaintiff, v. LAKESHORE, INC., a Michigan corporation, and General Motors Corporation, a Delaware corporation, Defendants, and LAKESHORE, INC., a Michigan corporation, Defendant and Third-Party Plaintiff, v. DICK CORPORATION, a Pennsylvania corporation, Third-Party Defendant.
    No. 84-K-1707.
    United States District Court, D. Colorado.
    Sept. 24, 1985.

      Susan Smith Fisher, Breit, Best, Rich-man & Bosch and Patricia C. Coan, Brauer & Buescher, Denver, Colo., for plaintiff.
    James A. Smith, Hall & Evans, Denver, Colo., for Lake Shore, Inc.
    Charles L. Casteel & Michael J. Gallagher, Davis, Graham & Stubbs, Denver, Colo., for General Motors Corp.
    Kim B. Childs, Cooper & Kelley, Denver, Colo., for Dick Corp.
   MEMORANDUM OPINION AND ORDER

KANE, District Judge.

In this diversity action the Dick Corp. has moved for summary judgment on the claims presented in a third party complaint against it brought by Lake Shore, Inc. For the reasons below, summary judgment on the first claim for relief is denied. Summary judgment is granted on the second, third and fourth claims for relief.

BACKGROUND

Dick leased from Lake Shore a Terex Ts-24B loadrunner scraper. For purposes of the summary judgment motion, Dick admits there is an express agreement between it and Lake Shore which contains the following terms:

REPAIRS:
Lessee shall, at its expense, maintain the machinery in good operating condition, repair and appearance, and shall have all maintenance and repair work performed only by qualified persons ...
LIABILITY:
... Lessee covenants and agrees to indemnify and save Lessor harmless of and from any and all liability arising out of the use, maintenance and/or delivery of said Equipment.
INSURANCE:
LESSEE ASSUMES ALL RISK AND LIABILITY for and agrees to indemnify, save and hold LESSOR and manufacturer harmless from ... all loss, damage, claims, penalties, liability and expenses including attorney’s fees howsoever arising or incurred because of the Equipment or the storage, use or operation thereof.

The plaintiff, David Borroel, was injured while operating the Terex TS-24B loadrunner scraper. Borroel was employed by Dick at the time of the injury. Borroel was paid personal injury benefits by Dick under the Colorado Workmen’s Compensation Act. Section 8-42-102, Colo.Rev.Stat. (Supp.1984) provides:

An employer who has complied with [the Act] ... shall not be subject to ... any other liability for the death of or personal injury to any employee, except as provided in said articles; and all causes of action, actions at law, suits in equity, proceedings, and statutory and common law rights and remedies for and on account of such death of or personal injury to any such employee and accruing to any person are abolished except as provided in said articles.

Borroel brought an action against Lake Shore for strict liability, negligence, breach of express warranties, misrepresentation, negligent misrepresentation and damages. Lake Shore then filed a third party complaint against Dick alleging that Dick is or may be liable to Lake Shore for express contractual indemnity, negligence, products liability and contribution. Dick has moved for summary judgment on Lake Shore’s third party claims asserting that the claims are barred by the Colorado Workmen’s Compensation Act. In the alternative, Dick argues that even if Lake Shore’s indemnity claim is not barred by the Act, the lease agreement cannot reasonably be construed as an intentional forfeiture by Dick of its protection from suit under the Act. Lake Shore has responded with a brief opposing Dick’s motion for summary judgment.

Summary judgment is a drastic remedy. The Tenth Circuit has cautioned that any relief pursuant to Rule 56 of the Federal Rules of Civil Procedure should be applied with care. Jones v. Nelson, 484 F.2d 1165, 1168 (10th Cir.1973). Rule 56 states that summary judgment shall be rendered when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Pleadings and factual issues of material fact must be viewed in the light most favorable to the party opposing summary judgment. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157-59, 90 S.Ct. 1598, 1608-09, 26 L.Ed.2d 142 (1970). Unless the moving party can demonstrate his entitlement beyond a reasonable doubt, summary judgment must be denied. Norton v. Liddell, 620 F.2d 1375, 1381 (10th Cir.1980).

Because the issues presented in this case vary in complexity, I will first address Dick’s motion for summary judgment on Lake Shore’s negligence and contribution claims. I will then address Dick’s motion for summary judgment on Lake Shore’s claim for express contractual indemnity. The last issue I will address is Dick’s motion for summary judgment on Lake Shore’s claim for products liability.

I

NEGLIGENCE

In Lake Shore’s second claim for relief, Lake Shore asserts that Dick owed a duty to Lake Shore to maintain and repair the Terex TS-24B loadrunner scraper and that Dick was negligent in performing that duty. The rule, however, is that an employer who complies with the Colorado Workmen’s Compensation Act cannot be subject to a common law action for damages brought by a third person. Holly Sugar Corp. v. Union Supply Co., 194 Colo. 316, 572 P.2d 148, 150 (1977); Hilzer v. MacDonald, 169 Colo. 230, 454 P.2d 928, 931 (1969); Ward v. Denver & R.G.W.R. Co., 119 F.Supp. 112 (D.Colo.1954). Lake Shore’s claim for negligence is a common law action “for and on account of” the employee’s personal injury. Accordingly, Dick’s motion for summary judgment on Lake Shore’s second claim for relief is granted.

II

CONTRIBUTION

In Lake Shore’s fourth claim for relief, Lake Shore asserts that Dick is or may be liable to Lake Shore pursuant to the provisions of the Uniform Contribution Among Tortfeasors Act, Colo.Rev.Stat. § 13-50.5-101 to 13-50.5-106 (Supp.1984). Section 102(1) of the Act establishes a right of contribution “where two or more persons become jointly or severally liable in tort for the same injury.” Colo.Rev.Stat. § 13-50.-5-102(1).

In Public Service Co. of Colo. v. District Court In & For The City & County of Denver, 638 P.2d 772 (Colo.1981), the Colorado Supreme Court specifically declined to consider whether a third party may bring a claim for contribution against an employer who has complied with the provisions of the Workmen’s Compensation Act. The court observed, however, that the majority view is that the employer cannot be held liable for contribution or indemnity in the absence of a preexisting legal relationship or a duty between the parties. Id. at 776.

Two decisions in this federal district have held that an employer who complies with the Workmen’s Compensation Act cannot be subject to third party actions for contribution. Greer v. Intercole Automation, Inc., 553 F.Supp. 275 (D.Colo.1982); Hammond v. Kolberg Manufacturing Corp., 542 F.Supp. 662 (D.Colo.1982). The district court’s rationale was that an employer who complied with the Workmen’s Compensation Act was immune from common law liability. Consequently, the employer could not become jointly and severally liable in tort so as to trigger a right of contribution in a third party. Greer, 553 F.Supp. at 276-77; Hammond, 542 F.Supp. at 663.

In light of the two district court decisions and the majority viewpoint, I hold that Dick cannot be subject to a third party action for contribution. Therefore, Dick’s motion for summary judgment on Lake Shore’s fourth claim for relief is granted.

IV

EXPRESS CONTRACTUAL INDEMNITY

Lake Shore alleges in its first claim for relief that Dick is liable to Lake Shore on the contract of indemnification for all or a part of any judgment that may enter in favor of the plaintiff and against Lake Shore. Dick argues that the claim is barred by the Workmen’s Compensation Act.

Common law actions for indemnity are clearly barred by the act. Holly Sugar Corp., 572 P.2d at 150; Hilzer, 454 P.2d at 931; Ward, 119 F.Supp. 112. I have not found, however, and the parties have not presented any controlling Colorado cases that have considered whether actions based on express contracts of indemnity between third parties and employers are barred by the Colorado Workmen’s Compensation Act. “We are, therefore, faced with a situation where we must attempt to construe the law of the State of Colorado in the manner in which the Supreme Court of Colorado would if faced with the same facts and issue---- In so doing we may look to all resources, including decisions of other states, as well as Colorado and federal decisions, and to the general weight and trend of authority.” City of Aurora, Colorado v. Bechtel Corp., 599 F.2d 382, 386 (10th Cir.1979); Bennett v. Furr’s Cafeterias, Inc., 549 F.Supp. 887, 892 (D.Colo.1982).

The Act on its face seems to preclude “all causes of action” against an employer “accruing to any person” except as stated in the Act. Moreover, strong dicta indicate that the Act bars all other causes of action:

Clearly, [the Act] expresses an intent by the Colorado legislature to render such an employer immune from all liability, save that imposed by the Workmen’s Compensation Act itself.
Particularly the phrase “and accruing to any and all persons whomsoever” would seem to leave no room for any other construction. To place any other meaning upon this legislative language would do violence to the plain meaning of these words, and would violate the basic rule of statutory construction that in the absence of a specialized or technical usage of a word it will be given its generally accepted meaning within the phrase where used.

Ward, 119 F.Supp. at 114; see also Greer, 553 F.Supp. at 276; Public Service Co. of Colo., 638 P.2d at 776.

On the other hand, the overwhelming majority of courts in jurisdictions outside of Colorado hold that express contracts for indemnification are not barred by Workmen’s Compensation Acts. See eg., City of Artesia v. Carter, 94 N.M. 311, 610 P.2d 198 (1980), cert. denied, 94 N.M. 628, 614 P.2d 545; DeShaw v. Johnson, 155 Mont. 355, 472 P.2d 298 (1970); see also Titan Steel Corp. v. Walton, 365 F.2d 542, 549 (10th Cir.1966) (construing Utah law); Forward v. Cotton Petroleum Corp., 540 F.Supp. 122 (D.Colo.1982) (Kane, J.) (construing Wyoming law); Rucker Co. v. M & P Drilling Co., 653 P.2d 1239 (Okla.1982); Parks v. Union Carbide Corp., 602 S.W.2d 188 (Mo.1980); Republic Steel Corp. v. Glaros, 12 Ohio App.2d 29, 230 N.E.2d 667 (1967); see generally 2A A. Larson, Workmen’s Compensation § 76.42 & n. 37 (1983 & Supp.Dec.1984).

Courts reason that the cause of action arises out of a contractual right which is independent of the exclusive jurisdiction provisions of the Workmen’s Compensation Act. See e.g., Titan Steel Corp. v. Walton, 365 F.2d 542, 549 (10th Cir.1966); Redford v. City of Seattle, 94 Wash.2d 198, 615 P.2d 1285 (1980); Manson-Osberg. Co. v. State, 552 P.2d 654 (Alaska 1976); DeShaw v. Johnson, 155 Mont. 355, 472 P.2d 298 (1970); 2A A. Larson, supra, § 76.41. The Montana Supreme Court explains:

[T]he immunity conferred is only against actions for damages on account of the employee’s injury; a third party’s action for indemnity is not exactly for “damages” but for reimbursement, and it is not on account of the employee’s injury, but on account of breach of an independent duty owed by the employer to the third party.

DeShaw, 472 P.2d at 302 (citing 2 A. Larson, supra, § 76.30 at 235).

Courts also hold that it is not against public policy to allow an employer freely and voluntarily to assume such contractual obligations. The reasoning of the New Mexico Court of Appeals is illustrative:

Enforcing express contracts of indemnity is no more than enforcing the loss distribution agreed to by the contracting parties____ This arrangement to distribute the loss does not offend any policy concerned with securing the payment of workmen’s compensation; the compensation payable is not affected by the indemnity agreement. This arrangement does not depart from the policy of limiting the employer’s liability; that policy remains intact. All that is involved is the employer’s departure from the policy. If the employer desires to voluntarily relinquish his statutory protection, he may do so____ such a relinquishment is consistent with the policy favoring the right to contract.

City of Artesia, 610 P.2d at 201; see also Titan, 365 F.2d at 549; Olsen v. Shell Oil Co., 595 F.2d 1099 (5th Cir.1979), cert. denied, 444 U.S. 979, 100 S.Ct. 480, 62 L.Ed.2d 405; Lechuga, Inc. v. Montgomery, 12 Ariz.App. 32, 467 P.2d 256 (1970).

Only one court, the Alabama Supreme Court, has addressed the question and failed to adopt the majority approach. Paul Krebs & Associates v. Mathews & Fritts Construction Co., 356 So.2d 638 (Ala.1978); 2A A. Larson, supra, § 76.43. The court reasoned that to allow a third party to recover against the employer for injury to an employee would be to allow indirectly what is prohibited directly by the statute and would write into the legislation an exception which was not there. Id. at 639.

In sum, there is the seemingly clear language of the statute and strong dicta in the cases on one side and the large majority approach on the other. It would be easier to make a decision if the Colorado General Assembly had specifically addressed express contracts in the Act, as some legislatures have done. Although the law is unclear, I must' make a decision. I adopt the majority approach and hold that a cause of action based on a contractual right of indemnity is independent of the exclusive jurisdiction provisions of Colorado’s Workmen’s Compensation Act. I do so because this ruling favors freedom of contract. Further, the holding will not contravene the policy of the Workmen’s Compensation Act, which is “to protect employees who suffer injuries arising out of their employment and to give injured workers a reliable source of compensation.” Engelbrecht v. Hartford Accident and Indemnity Co., 680 P.2d 231 (Colo.1984); Bellendir v. Kezer, 648 P.2d 645, 647 (Colo.1982).

An important requirement, however, is that the indemnity provision be made “without the exercise of superior bargaining power, and ... clearly and unequivocally [express] the intention of the parties.” United States v. Haskin, 395 F.2d 503 (10th Cir.1968) (citing Titan, 365 F.2d at 549). In this case, Dick has presented no evidence showing that it had less bargaining power than Lake Shore when the contract was made. Moreover, I cannot determine whether the contract “clearly and unequivocally [expresses] the intention of the parties.”

Under Colorado law, the law of the place where the contract was made governs its nature, validity, and interpretation. Mr. Steak, Inc. v. River City Steak, Inc., 460 F.2d 666, 668 (10th Cir.1972); Kloberdanz v. Joy Manufacturing Co., 288 F.Supp. 817, 820 (D.Colo.1968); Western Enterprises, Inc., v. Robo-Sales, Inc., 28 Colo.App. 157, 470 P.2d 931, 932 (1970). Dick has not presented evidence on where the contract was made. Thus, I cannot determine the nature or validity of the contract, and I cannot at this juncture interpret the contract. Nor can I follow a universal rule of construction because courts differ on how contracts of this type should be construed. Therefore, Dick has not shown that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law. Accordingly, Dick’s motion for summary judgment on Lake Shore’s first claim for relief is denied.

IV

PRODUCTS LIABILITY

Finally, I address Lake Shore’s third claim for relief based upon the Prod-

uct Liability Act, Colo.Rev.Stat. § 13-21-401 to 13-21-406 (Supp.1984). An essential element in any product liability suit is the sale of the product by the defendant. Simien v. S.S. Kresge Co., 566 F.2d 551 (5th Cir.1978); Anderson v. John Deere Co., No. 83-K-119, slip op. (D.Colo. Aug. 14, 1985). In this case, Dick leased the product from Lake Shore and provided it to Borroel for use in his employment. Dick did not sell the product. Nor was Dick a “manufacturer”, or a “seller”. Accordingly, I grant Dick’s motion for summary judgment on Lake Shore’s third claim for relief.

Accordingly, IT IS HEREBY ORDERED that the motion for summary judgment is denied on the first claim for relief and granted on the second, third and fourth claims for relief.

      . In Public Service Co. of Colorado, the Colorado Supreme Court concluded that, in light of the view of a majority of jurisdictions, the trial court did not abuse its discretion in denying leave to file a third party complaint.

      . The common law tort theory of indemnity applies "when one party is primarily liable and the party seeking indemnity is secondarily liable.” Vickery v. Reliable Electric Co., 703 F.2d 488, 490 (1983); W. Prosser, Handbook of the Law of Torts, 312 (4th ed. 1971).

      . "Moreover, § 102 flatly insulates the complying employer from 'any other liability for the death of or personal injury to any employee;' thereby abolishing ‘all causes of action ... for and on account of [an employee’s injury or death] and accruing to any person

      . "In Colorado this court has held that an employer who has complied with the Workmen's Compensation Act cannot be held liable for indemnification to third parties.”

      . Colorado Workmen's Compensation Act is "nearly identical" to New Mexico’s act. Hammond, 542 F.Supp. at 662. (The court was construing the 1973 act). One of the major cases relied upon by Dick in its briefs is Hill Lines, Inc. v. Pittsburgh Plate Glass Co., 222 F.2d 854 (10th Cir.1955). In that case the Tenth Circuit was interpreting New Mexico law. In light of the holding in City of Artesia, Hill Lines is no longer good law.

      . Colorado Workmen’s Compensation Act is "nearly identical" to the Montana Act. Holly Sugar Corp., 572 P.2d at 151. (The court was construing the 1973 Act).

      . Several state statutes specifically provide that there shall be no right of recovery against the employer by a third person, whether by indemnity or contribution, in the absence of a written agreement entered into before the injury. See e.g., Arbaugh v. Procter & Gamble Mfg. Co., 80 Cal.App.3d 500, 145 Cal.Rptr. 608 (1978); Bell v. Koppers Co., 481 Pa. 454, 392 A.2d 1380 (1978); Ealand v. Gulf, C. & S.F. Ry. Co., 411 S.W.2d 591 (Tex.Civ.App.1967); Gibbs v. Carolina Power & Light Co., 265 N.C. 459, 144 S.E.2d 393 (1965). An example of a statute completely forbidding express-indemnity contracts is Nevada’s. Corrao Construction Co., Inc. v. Curtis, 94 Nev. 569, 584 P.2d 1303 (1978).

      . For example, many courts have not construed similar contracts as indemnifying a person against his own negligence because the contract does not refer expressly to negligence. See, e.g., Zimmerman v. Baca, 346 F.Supp. 172, 178 (D.Colo.1972); Doyle v. Missouri Valley Constructors, Inc., 288 F.Supp. 125, 128 (D.Colo.1968); see generally 175 ALR 30 & n. 11 (1948). Some courts, however, do not follow such a strict rule. See e.g., Miller & Co. of Birmingham, Inc. v. Louisville & N.R. Co., 328 F.2d 73 (5th Cir.1964), cert. denied, 377 U.S. 966, 84 S.Ct. 1648, 12 L.Ed.2d 737; General Accident Fire & Life Assurance Corp. Ltd. v. Smith & Oby Co., 272 F.2d 581 (6th Cir.1959); Metropolitan Paving Co. v. Gordon Herkenhoff & Associates, Inc., 66 N.M. 41, 341 P.2d 460 (1959).

      . Colo.Rev.Stat. § 13-21-401(1) provides:
      “Manufacturer" means a person or entity who designs, assembles, fabricates, produces, constructs, or otherwise prepares a product or a component part of a product prior to the sale of the product to a user or consumer. The term includes any seller who has actual knowledge of a defect in a product or a seller of a product who creates and furnishes a manufacturer with specifications relevant to the alleged defect for producing the product or who otherwise exercises some significant control over all or a portion of the manufacturing process or who alters or modifies a product in any significant manner after the product comes into his possession and before it is sold to the ultimate user or consumer. The term also includes any seller of a product who is owned in whole or significant part by the manufacturer or who owns, in whole or significant part, the manufacturer. A seller not otherwise a manufacturer shall not be deemed to be a manufacturer merely because he places or has placed a private label on a product if he did not otherwise specify how the product shall be produced or control, in some significant manner, the manufacturing process of the product and the seller discloses who the actual manufacturer is.

      . Colo.Rev.Stat. § 13-21-401(3) provides:
      "Seller” means any individual or entity, including a manufacturer, wholesaler, distributor, or retailer, who is engaged in the business of selling or leasing any product for resale, use, or consumption.


source: Caselaw Access Project

author: WILLIAM C. CONNER, District Judge:

license: Public Domain

text:
    ALBEST METAL STAMPING CORPORATION, Plaintiff, v. RANDOLPH-RAND CORPORATION and Application Art Laboratories, Co., Ltd., Defendants.
    No. 84 Civ. 4412 (WCC).
    United States District Court, S.D. New York.
    Sept. 24, 1985.
    Abraham Friedman, New York City, for plaintiff.

      Abelman Frayne Rezac & Schwab, New York City, for defendants; Jeffrey A. Schwab, New York City, of counsel.
   OPINION AND ORDER

WILLIAM C. CONNER, District Judge:

This action seeks a declaratory judgment of the invalidity and non-infringement of U.S. utility patent No. 4,021,891 (“ ‘891 patent”) and U.S. design patents Nos. 247,467 and 247,468 which cover magnetic clasps for women’s handbags and which are owned by defendant Application Art Laboratories (“AAL”) and exclusively licensed to defendant Randolph-Rand Corporation. Defendants have counterclaimed for alleged infringement of the patents in suit by plaintiff.

The action is before the Court on (1) plaintiff’s motion for partial summary judgment and for dismissal of the counterclaims on the ground that the patents in suit are invalid and/or unenforceable (a) because of fraud and inequitable conduct in the prosecution of the applications therefor in the U.S. Patent and Trademark Office (“PTO”) in failing to call to the attention of the PTO examiner prior patents and publications which were cited against the applications for corresponding German and Japanese patents, and (b) because the claims of the ’891 patent are fully anticipated by both cited and uncited prior art; and (2) defendants’ cross-motion for summary judgment dismissing the complaint on the ground of res judicata.

Both motions are denied in all respects.

The patented inventions

The ’891 patent was issued to AAL on an application filed April 18, 1974 in the name of Tamao Morita of Tokyo, Japan. It covers a magnetic clasp having two separable parts, one of which is attached to the body of a handbag and the other of which is attached to the flap. The “female” part includes a permanent magnet, for example of cylindrical shape, with opposite planar faces of opposite polarity, and with a hole, for example of cylindrical shape, extending axially through the magnet from one face to the other. The remote face of the magnet is covered by a ferromagnetic pole plate which extends across one end of the hole. The “male” part consists of a ferromagnetic pole plate which is adapted to overlie the adjacent face of the magnet and which has projecting from its inner face a ferromagnetic rod of the same shape as the hole and of slightly smaller-cross-sectional size so as to fit into the hole and of such length that its outer end can contact the pole plate on the female part when the pole plate on the male part is near or just touches the adjacent face of the magnet. This completes a ferromagnetic path from one pole plate through the hole in the magnet to the opposite pole plate and concentrates the magnetic flux to increase the magnetic attraction between the two parts and their resistance to axial separation.

The projection of the rod on the male part into the hole in the magnet of the female part provides a mechanical interlock which prevents lateral sliding movement of the two parts relative to one another and provides a more secure closure.

In an alternative construction, the pole plate on the female part is also provided with a ferromagnetic rod shaped and sized to fit into the hole in the magnet and of such length as to project only part way through the magnet. The rod on the male part is correspondingly shortened so that the ends of the two rods come into contact when the pole plate on the male part is near or just touches the adjacent face of the magnet. The rod on the male part likewise projects into the hole in the magnet to provide the mechanical interlocking action described above.

The outer edge and one or both faces of the magnet may be covered with a non-ferromagnetic material, such as brass, to further concentrate the magnetic field of the magnet through the ferromagnetic path as well as improving the appearance of the device and providing means, such as a projecting flange, to facilitate attachment of the parts to a handbag, for example by sewing through holes in the flange.

The two design patents in suit, issued to AAL on applications filed December 17, 1975 in the name of Tamao Morita, cover the appearance of the device shown in the utility patent. The designs shown in the two patents are virtually identical except that in one of them the device is of circular cross-sectional shape while in the other it is of rectangular shape.

The cited prior art

The prior U.S. patents to Brett (No. 3,141,216), and Daddona (No. 3,372,443) show magnetic garment clasps which are similar to that of the ’891 patent except that both parts of the clasp include a permanent magnet. Each magnet is of cylindrical shape, with a cylindrical hole extending axially through it, with the remote planar faces of each magnet covered by a circular pole plate of ferromagnetic material with a rod of ferromagnetic material extending axially from each plate through the hole in its magnet, in position to contact the adjacent end of the rod on the mating part. The outer end portion of the rod of the “male” part projects into the hole in the magnet of the “female” part to provide a mechanical interlock and prevent lateral sliding of the two parts relative to one another. In the devices of both Brett and Daddona, the edges and remote faces of the magnets are enclosed in a formed housing which, although not specifically disclosed as such, is presumably of non-ferromagnetic metal. The Brett and Daddona devices would be functionally identical with that of the ’891 patent in suit if the magnet on the male part were eliminated and its rod correspondingly shortened to allow the pole plate on the male part to come into contact with or adjacent to the proximate face of the magnet on the female part.

The prior Robinson U.S. patent No. 2,901,278 bridges this gap. It discloses a magnetic latch for doors in which the “female” part has a permanent magnet of cylindrical shape with a cylindrical hole extending axially through it. Overlying the remote planar surface of the magnet is a circular ferromagnetic pole plate. The “male” part has a circular ferromagnetic pole plate with a ferromagnetic rod projecting axially from it through the hole in the magnet, with the outer end of the rod contacting the pole plate of the female part. However, the rod, instead of being rigidly fixed on the pole plate of the male part, is axially slidable in it and a leaf spring biases the rod outwardly toward the female part so that as the two parts approach one another, the magnetic attraction between them becomes effective while the pole plate of the male piece is still a substantial distance from the proximate surface of the magnet. When the outer end of the rod contacts the pole piece of the female part, the rod slides inwardly relative to the pole piece on the male part, against the resistance of the spring, to allow the male pole piece to engage the proximate surface of the magnet. Although this is not discussed by Robinson, nor significant in a door latch, the projection of the rod on the male part into the hole in the magnet of the female part obviously would provide a mechanical interlock to prevent lateral relative movement of the two parts.

The Robinson device fully anticipates Claim 1, the only independent claim of the ’891 patent in suit, except for the limitation that the rod is “rigidly attached” to the male pole plate.

The cited prior art is therefore quite close to the claims of the '891 patent, and no claims were allowed in the application for the ’891 patent until after all the claims had been repeatedly rejected as obvious in view of this art and a notice of appeal had been filed. Indeed, it is not clear why the PTO examiner suddenly changed his mind and allowed the claims following a telephone interview with the applicant’s attorney.

The uncited German patents

In support of argument of fraud or inequitable conduct with respect to the ’891 patent, plaintiff relies principally upon the failure of the applicant to call to the attention of the PTO German patent No. 1,127,-509 which was issued in 1962 to Dr. Hermann Fahlenbrach, and which was cited against an application for German patent corresponding to the ’891 patent. The most relevant embodiment of the Fahlenbrach device is shown in Figures 1 and la of that patent. These figures, like all of the other figures of Fahlenbrach, show only one post of a magnetic clasp device. There is no specific disclosure of the structure of the mating part; presumably it is of identical construction. The part shown includes a permanent magnet of circular cross-section with a cylindrical hole extending axially through it. The remote surface of the magnet is covered by a circular pole plate of ferromagnetic material which has an integral cylindrical rod extending axially from it through the hole. The outer surface of the rod is flush with the proximate face of the magnet.

Thus when the part is mated with a similar part (or with an alternative form of part having a ferromagnetic pole plate without a magnet) there is no mechanical interlocking of the two parts to prevent lateral sliding of one relative to the other. Fahlenbrach nowhere attaches any significance to the shape or juxtaposition of the parts of his device. His sole emphasis is on the ratio of the cross sectional areas of the magnet and the ferromagnetic rod to provide maximum magnetic force.

German patent No. 1,068,149 issued in 1959 to Herbert Closset is even less relevant. It discloses a magnetic door catch in which the female part has two elongated rectangular magnets arranged parallel to one another with a space between them to receive an elongated ferromagnetic flange projecting from the male part. The inner faces of the two magnets are of like polarity. The outer and remote faces of the two magnets are supported on and enclosed within a rectangular housing of ferromagnetic material. Although the projection of the flange on the male part does interlock with the space between the magnets of the

female part to prevent lateral relative movement, this is not discussed in the Closset patent nor significant in a door latch where lateral sliding movement is prevented by the hinged mounting of the door.

The Fahlenbrach and Closset German patents are therefore clearly less relevant to the invention claimed in the ’891 patent in suit than the art cited by the PTO during prosecution of the application therefor and the citation of these additional references would not conceivably have affected the decision to issue the patent. There was accordingly no fraud or inequitable conduct involved in failing to call these patents to the attention of the PTO. Kimberly-Clark Corp. v. Johnson & Johnson, 745 F.2d 1437, 1455-56 (Fed.Cir.1984).

Plaintiff, in its reply memorandum in support of the motion, makes much of the fact that in a recent re-examination of the ’891 patent, the PTO has rejected all of the claims for obviousness in view of the German patents to Closset and Fahlenbrach, among others. This does not alter this Court’s firm opinion that the German patents are less relevant than the cited art. It only creates additional doubt as to why the PTO allowed the claims over the cited art in the first instance.

Alleged anticipation of the ’891 patent claims

However, the Court does not agree with plaintiff’s contention that the claims of the '891 patent in suit are fully anticipated by one or more of the prior patents discussed above and are thus invalid under 35 U.S.C. § 102. Brett and Daddona fail to anticipate Claim 1 of the ’891 patent in that the pole plate of the male part is not “removably positioned against” the proximate face of the magnet on the female part; instead, a magnet on the male part is interposed between them. As previously mentioned, Robinson fails to anticipate Claim 1 in that the rod on the male part is not “rigidly attached” to the pole plate on that part. Fahlenbrach fails to anticipate Claim 1 because the rod on the male part is not “extending through” the hole in the magnet on the female part. Closset fails to anticipate Claim 1 in that it discloses no magnet with a hole extending through it from a face of one polarity to a face of the opposite polarity.

The remaining claims of the ’891 patent, all being dependent on Claim 1 and incorporating by reference all of its limitations, among others, are a fortiori not anticipated by any of this prior art.

The motion for partial summary judgment as to the ’891 patent is therefore denied.

The design patents

Plaintiff contends that in prosecuting the applications for the two design patents in suit the applicant was guilty of fraud or inequitable conduct in failing to disclose to the PTO an advertisement by Maroquinerie Sellerie & Bagages de France (“SAB”) which was cited during prosecution of the corresponding applications for Japanese design patents.

The SAB advertisement shows several clasps which are apparently of the mechanical (spring detent) type rather than the magnetic type of the patents in suit. The SAB clasps differ substantially in appearance from those shown in the design patents in suit.

While the SAB designs are arguably more similar in appearance to the patented designs than those shown in the advertisements cited during prosecution of the applications for the design patents in suit, the SAB designs are not so clearly material to the prosecution of the Morita applications that an intent to mislead the PTO by failing to disclose the SAB advertisement may be presumed. A patent applicant is not obligated to disclose to the PTO prior art, even if it is more relevant than that cited, unless it is material in the sense that there is a substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue. American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1362 (Fed.Cir.), cert. denied, — U.S. -, 105 S.Ct. 95, 83 L.Ed.2d 41 (1984).

The differences between the SAB designs and those of the patents in suit are sufficiently significant that the Court cannot conclude that fraud has been established with the requisite “clear, unequivocal and convincing evidence.” Orthopedic Equipment Co. v. All Orthopedic Appliances, Inc., 707 F.2d 1376, 1383 (Fed.Cir.1983).

Defendants’ cross-motion for summary judgment

In their cross-motion for summary judgment, defendants seek dismissal of the complaint on the ground of res judicata allegedly arising out of a consent decree which the parties signed and filed in an earlier declaratory judgment action essentially duplicating the present action. The parties agreed to settle the earlier action by an agreement which permitted plaintiff to manufacture or import and sell a modified construction of magnetic clasp and required it to pay a royalty thereon to defendant Randolph-Rand. The agreement provided that the complaint and defendants’ counterclaims for patent infringement would be dismissed without prejudice. But when Judge Pollack of this Court, to whom the case was assigned, signed the consent decree, he sua sponte modified it to provide that the complaint and counterclaims were dismissed “with prejudice.” Apparently plaintiff found little market for the modified construction which it was licensed to make, and has reverted to its original construction which defendants had charged to infringe the patents in suit.

It is undisputed that plaintiff never consented to a dismissal with prejudice of the prior action, and it should not be deprived of its legal right to assert the claims therein without consent or due process of law.

Indeed, if the dismissal of plaintiffs action for a declaratory judgment of invalidity and non-infringement is deemed to have been dismissed with prejudice, so must defendants’ counterclaim for infringement, so that defendants could never again sue plaintiff for infringement of the patents in suit — a result which defendants would doubtless find intolerable.

Under the circumstances, the dismissal must be treated as one without prejudice, as the parties agreed. Defendants’ cross-motion must therefore be denied. Summary

Both motions are denied in all respects.

SO ORDERED.

      . Claim 1, the only independent claim of the '891 patent, reads as follows:
      1. A magnetic lock closure for use with handbags and similar containers comprising: magnetic means for supplying magnetic attraction having a first side and a second side of opposite polarities and a hole therethrough between said two sides;
      first ferromagnetic materials means rigidly secured to said first side of said magnetic means over said hole for centering the force of the magnetic attraction of said magnetic means; and
      second ferromagnetic material means removably positioned against said second side of said magnetic means for contacting and being attracted to said first ferromagnetic means through said hole, said second ferromagnetic material means comprised of:
      a plate adjacent said second side of said magnetic means over said hole, and a rod the shape of said hole rigidly attached to said plate extending through said hole and contacting said first ferro-magnetic material means, whereby said second ferromagnetic material means is magnetically attracted and connected to said first ferro-magnetic materials means through said hole.


author: GENE CARTER, District Judge.

text:
    UNITED STATES of America v. David K. BUCKLEY.
    Crim. No. 84-00008-04-B.
    United States District Court, D. Maine.
    Sept. 24, 1985.
    William H. Browder, Jr., Asst. U.S. Atty., Portland, Me., for plaintiff.
    David K. Buckley, pro se.
   MEMORANDUM AND ORDER ON DEFENDANT’S MOTION FOR BAIL PENDING APPEAL DATED AUGUST 1, 1985

GENE CARTER, District Judge.

The Court has fully reviewed the Defendant’s Motion for Admission to Bail Pending Appeal, filed on August 28, 1985, and all of the numerous submissions thereon made by the Defendant, together with the Government’s response. The Defendant appears to contend that the Bail Reform Act of 1984 is not applicable to the pending motion for bail pending appeal because he had previously been admitted to bail pri- or to trial and prior to imposition of sentence, under the 1966 Act.

The record here discloses that this Defendant appeared on February 1, 1985, after the effective date of the Bail Reform Act of 1984 (October 12, 1984) for imposition of sentence. Sentence was imposed at that time pursuant to 18 U.S.C. § 4205(d) for accomplishment of a study thereunder. At that time, he was remanded to the custody of the United States Marshal in execution of the sentence imposed. He became at that point a person detained. The Defendant’s application for admission to bail, filed on April 22, 1985, was denied on May 2, 1985. The Court was then of the view that this Defendant had not made the requisite showing under the Bail Reform Act of 1984, 18 U.S.C. § 3141, et seq., required by Section 3143, by clear and convincing evidence that he is a person “not likely to flee or pose a danger to the safety of any other person or the community if released pursuant to Section 3142(b) or (c).” Such finding was not necessary at that time, however, as Defendant’s admission to bail would have defeated the purpose of the Section 4205(d) study sentence, e.g., to obtain a psychiatric study and advice to the Court in respect to the study questions posed by the Court to be answered by the study. For that reason bail was denied. Thereafter, on June 7, 1985, following the completion of the study required by the Court, the Defendant appeared and a final judgment was imposed on that date, sentencing Defendant to serve a five-year term of imprisonment. On June 17, 1985, the Defendant filed a notice of appeal. On August 28,1985, a motion to be admitted to bail pending appeal was filed. It is that motion that is now pending before the Court.

On this record, it is clear that at the time final sentence was imposed on this Defendant on June 7, 1985, he was a person in custody pursuant to the prior interim study sentence imposed on February 1, 1985. Accordingly, his reliance upon United States v. Angiulo, 755 F.2d 969 (1st Cir.1985), is misplaced. There the Court clearly authorized the application of the provisions of the Bail Reform Act of 1984 to defendants detained on the effective date of the Act, October 12, 1984.

We do not believe it “unjust” to apply the new Act to those, like appellant, who were in custody on October 12, 1984, because those then in custody are unlikely to have relied to their detriment upon the continued application of prior law.

Id., at 970. The rationale of that conclusion is that one in custody on the date the 1984 Act became effective could not claim to have relied upon the provisions of the 1966 Act to his detriment in seeking a new admission to bail on the effective date of the new Act. The logical extension of that rationale is that any Defendant who is lawfully in or is returned to custody after the effective date of the 1984 Act is subject to application of the 1984 Act for purposes of a new admission to bail, even though prior to being returned to custody he had been admitted to bail under the 1966 Act. Because such a Defendant seeks a new admission to bail after the effective date of the 1984 Act he cannot claim to have relied to his detriment upon the terms of the 1966 Act governing his new admission to bail. Defendant here is a person in custody since June 7, 1985, pursuant to the final judgment imposed on that date. The application of the provisions of the Act to him in determining whether or not he should be admitted to bail is clearly appropriate.

Defendant’s submissions do not indicate any sufficient evidentiary predicate to constitute a present showing by clear and convincing evidence that his situation in respect to likelihood of flight and danger to the community has changed since the Court committed him to custody on the interim study sentence imposed on February 1, 1985. The Court finds that he has not made a showing by clear and convincing evidence that he will not flee or that he does not pose a danger to the community if admitted to bail. 18 U.S.C. § 3143(b).

Defendant relies heavily in some of his written submissions upon his need to be admitted to bail in order to pursue pro se his pending appeal to the Court of Appeals for the First Circuit. The answer to these contentions is that those considerations are not properly considered by the Court to be sufficient under the provisions of the 1984 Act in and of themselves, and in the face of well-considered findings of likelihood of flight and danger to the community, to permit admission to bail pending appeal.

Accordingly, the Defendant’s Motion, filed on August 1, 1985, for Admission to Bail Pending Appeal is hereby DENIED.

So ORDERED.

APPENDIX A

      . It would seem that the holding of Angiulo requires application of the provisions of the 1966 Act only to that category of defendants who are admitted to bail under the 1966 Act and are brought before the Court after the effective date of the 1984 Act on an application to revoke the bail originally granted under the 1966 Act, and then, presumably, only upon a showing of prejudicial reliance upon the continuance of bail under the terms of the prior Act. Only defendants in that circumstance can ever claim reliance upon the terms of the 1966 Act for the continuance of the bail they are on when before the Court. Once such bail is lawfully ended, however, by, for example, imposition of sentence or decision on appeal occurring on or after the effective date of the 1984 Act, any claim to reliance upon application of the terms of the 1966 Act vanishes. The 1984 Act is in effect on any subsequent application to bail and it controls any new admission to bail.

      . The Court’s file is now in the Court of Appeals for the First Circuit pursuant to the Defendant's notice of appeal. A copy of the docket entries in this Court, which are the basis of the Court's fact-findings as to the procedural path of this case, is appended hereto as "Appendix A."


author: MacMAHON, District Judge.

text:
    WULLSCHLEGER & CO., INC., Plaintiff, v. JENNY FASHIONS, INC., Defendant.
    No. 84 Civ. 3449 (LFM).
    United States District Court, S.D. New York.
    Sept. 25, 1985.

      Carter, Ledyard & Milburn by Louis L. Stanton and John A. Maher, New York City, for plaintiff.
    Ruben, Schwartz & Schnall by Robert S. Arbeit, New York City, for defendant.
   OPINION

MacMAHON, District Judge.

This is an action by a seller, Wullschleger & Co., Inc., against a buyer, Jenny Fashions, Inc. (Jenny), for nonpayment of $28,-965.64, plus interest, for fabric sold and partially delivered to Jenny. Claiming a latent defect in the fabric, Jenny counterclaims for lost profits in the amount of $67,361.94, plus interest, alleging breach of both an express and an implied warranty of merchantability.

A bench trial was held on April 15 and 16, 1985. After carefully considering the exhibits, hearing and observing the witnesses, and weighing all the evidence and the arguments of counsel, we find the following facts:

FACTS

Plaintiff, a North Carolina corporation with its principal place of business in that state, converts unfinished cloth to a finished state which it sells to garment manufacturers. Jenny, a New York corporation with its principal place of business in New York City, sells women’s dresses made for it by contract sewing manufacturers. We have diversity jurisdiction.

In September 1983, David Pearl (Pearl), Jenny’s piece goods buyer, ordered a sample of six yards of light-weight polyester/rayon woven fabric, style 6697, from plaintiff. Aaron Talbert (Talbert), plaintiff’s salesman, expressly represented that the fabric was “first quality” under industry standards. Talbert knew that Jenny intended to use the fabric to manufacture women’s dresses but did not know the particular pattern or style Jenny intended to make.

Jenny, through its contractors, made the sample yardage into dresses having “circle” skirts, which are shaped by cutting the fabric in a semi-circular pattern and sewing the edges together in one seam. There was no apparent problem with the skirts, so Jenny decided to buy a large quantity of the fabric and make four styles of such dresses which it offered for sale to its customers.

Jenny’s customers placed orders for the dresses, and to fill them Jenny bought 37,-500 yards of the fabric from plaintiff during the period from October 13, 1983 to January 4, 1984. However, only 23,577 yards were delivered, at a price of $27,-107.81, for which Jenny paid $11,402.94, leaving an unpaid balance of $14,704.87.

Jenny, upon receipt, visually inspected the fabric for quantity and quality by placing samples on a measuregraph, an illuminated examining machine, and again no visible physical defects appeared. The invoices delivered with the fabric disclaimed: “No claims allowed after 10 days,” and “no allowance will be made after the goods have been cut.”

Jenny began cutting the fabric in December 1983 and ultimately received 5,078 completed dresses from its sewing contractors. In mid-January 1984, however, Jenny discovered that the hems of the circle skirts were distorted in that the bottom hem elongated as much as six inches from its original position when the skirts were pressed on a Hoffman press, a flat bed press with automatic steam heat. Unable to ascertain the cause of the distortion and suspecting defective fabric, Jenny attempted to purchase substitute fabric from three different mills, but none of the available fabric was suitable. Meanwhile, some of Jenny’s customers, who were dissatisfied with the distortion, had cancelled their orders, and, for ‘the same reason, Jenny cancelled the majority of its remaining orders after notifying plaintiff of the distortion problem and the resulting cancellations.

In April 1984, Jenny’s textile expert, Gerald M. Varley (Varley), inspected the fabric and found that a large portion was “skewed,” i.e., its warp (vertical) and filling (horizontal) yarns were not at right angles to each other. Plaintiff admits that some of the fabric was skewed and therefore not of “first quality.” Nevertheless, it disclaims liability, asserting that the distortion was caused not by the skew, but by Jenny’s misuse of the fabric.

DISCUSSION

Breach of Warranty

A warranty of merchantability of goods is implied in every sale where the seller is a merchant of goods of that kind. Thus, plaintiff, a merchant of fabric, impliedly warranted to Jenny that the fabric was reasonably fit for ordinary purposes and was at least of a medium quality of goodness. In addition, the statement of plaintiff’s salesman, Talbert, that the fabric was “first quality” in accordance with industry standards is an express warranty as to the condition of the fabric. Jenny reasonably relied on this representation in purchasing the fabric from plaintiff.

Plaintiff’s textile expert, Richard E. Kimble (Kimble), and Jenny’s expert, Varley, both testified that they performed industry-established tests, which showed that the fabric was skewed and therefore not of “first quality.” Despite this admitted defect, plaintiff contends that the fabric was still merchantable because it could have been used safely for straight panel skirts. We reject this argument.

Plaintiff certainly knew that circle skirts are an ordinary garment in the industry and that one of the ordinary uses of fabric sold to dress manufacturers was for that purpose. It therefore impliedly warranted that the fabric was suitable for making circle skirts. Moreover, Varley testified that, if not skewed, this fabric would have been suitable for that ordinary purpose, and Jenny’s sewing contractors had previously cut fabric in this same semi-circular pattern and the fabric had not distorted.

Plaintiff also argues that the skew was discoverable through reasonable physical inspection, and that Jenny, therefore, should be charged with constructive notice of the defect. The practice in the industry, however, is that the supplier, not the purchaser, of fabric inspects for defects such as skewing. Although Jenny’s employees inspected the fabric under the fluorescent light of a measuregraph, they were looking for obvious surface defects, not subtle off-filling defects. The surface nubs on the fabric, created by the rayon, virtually covered the entire fabric and concealed the skew from the untrained eye.

We find, therefore, that the skew was a latent defect not discoverable through reasonable physical inspection. Consequently, the disclaimers in plaintiffs invoices do not effectively relieve its liability for breach of warranty for selling defective goods.

Causation

To prevail in an action for breach of warranty, the buyer must establish not only that a warranty has been breached, but also that the breach was the proximate cause of the loss sustained. We turn now to the critical question of whether the skew was the proximate cause of the distortion.

Varley testified that the skew developed during the final finishing process, when the fabric was placed on very fine needles and passed on chains through a heat chamber with a temperature in excess of 300° Fahrenheit. One aim of this process is to orient the fabric back to its original position with warp and filling yarns at right angles. Once the fabric is heat set in a skewed position, however, it is under tremendous pressure to return to its normal 90° position. Varley opined that the heat and pressure from the Hoffman press relieved that stress, causing the yarns to move and distort the hems of the circle skirts.

Plaintiff contends that, since the temperature in the heat chamber was in excess of 300° and the temperature generated in the Hoffman press is only 240° to 250°, the press was not hot enough to cause the yarns to move. Although we recognize that this point has some validity, it is based on unsubstantiated evidence and, therefore, is too speculative to undermine Varley’s opinion. There was no documented evidence of the actual temperature in the heat chamber at the time the fabric was finished. Furthermore, neither plaintiff’s expert, nor a representative from the mill which performed the finishing process for plaintiff, testified as to the temperature in the chamber or the finishing process in general.

Plaintiff also argues that Varley’s skew and distortion tests fail to establish a causal connection between the skew and the distortion because the degree of skew did not vary proportionately with the degree of distortion. Varley explained, however, that the tests do not show such a direct correlation because the distortion test was conducted on the fabric vertically, whereas the skew test was conducted horizontally. Moreover, the degree of skew varied not only with different pieces of fabric, but also within the pieces themselves; therefore, it is very difficult to establish an exact and direct relationship between degree of skew and amount of distortion. The fact remains that there was a high degree of skew in the fabric, that Varley testified that the skew caused the fabric to stretch, and that the fabric stretched to such a degree that it was not merchantable.

Plaintiff contends that the skew could not have been the cause of the distortion because Kimble tested skirts made of both skewed and non-skewed fabric and found that both distorted when pressed. Although Kimble tested plaintiffs style 6697 fabric, it was not fabric taken from Jenny’s warehouse. There is no way, therefore, to determine whether the fabric he tested was finished at the same time as the fabric Jenny received. Since the evidence indicates that Jenny’s fabric was skewed when it was misaligned on pins and drawn through a heat chamber during the finishing process, the tests Kimble performed on fabric which may have been finished at a different time, under different conditions, are neither relevant nor conclusive as to the fabric Jenny received.

Finally, plaintiff argues that Jenny should neither have used this lightweight woven fabric for circle skirts, nor pressed it with a Hoffman press. The distortion occurred, argues plaintiff, because the fabric was cut along the bias and then pressed. According to accepted textile terminology, however, these circle skirts were not cut on the bias because they were not cut on a 45° angle. The cut along the circumference of the semi-circle, which intercepts the right angles of the warp and filling yarns, is not a cut on the bias, but rather is a “gravity bias,” which is the inevitable result of cutting a plain fabric to form a garment.

Plaintiff’s suggestion that Jenny should have pressed these skirts on a “Suzy Q,” a canvas dress form inflated with steam, instead of on a Hoffman press, is unfounded. A “Suzy Q” is used for delicate garments, such as bridal gowns, to remove wrinkles and to relax a garment from the inside out. Varley testified that he had never heard of its use on circle skirts. Moreover, plaintiff’s own invoices stated that the fabric could be ironed.

We find, therefore, that Jenny’s use of a Hoffman press was reasonably foreseeable, and accordingly conclude that the skew in the fabric was the proximate cause of the distortion in the circle skirts. We turn now to the question of damages.

Damages

Section 2-715(2)(a), N.Y. UCC (McKinney 1964), provides that a buyer may collect consequential damages resulting from a seller’s breach of warranty for “any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise____” Plaintiff contends that it did not have “reason to know” that Jenny would use its fabric for circle skirts, and therefore that it is not liable for Jenny’s lost profits.

This entire argument hinges on the allegation that Jenny should have known that plaintiff’s fabric was not suitable for circle skirts, and therefore that Jenny’s decision to cut it for circle skirts was effectively a misuse of the fabric. We find that this contention is simply not supported by the weight of the evidence.

Varley testified that the fabric was suitable for circle skirts. Moreover, circle skirts are neither unusual in the industry nor unique in any way. On the contrary, the making of such a skirt by a dress manufacturer is an ordinary use of fabric well within the inferred knowledge of the seller.

The fact that Jenny never specifically told plaintiff that it intended to make circle skirts is not determinative, for only those needs of the buyer which are particular must be made known to the seller. Jenny’s loss could not “reasonably be prevented by cover or otherwise.” Its attempts to cover by purchasing substitute fabric, although unsuccessful, were reasonable and made in good faith.

We find, therefore, that pursuant to N.Y. UCC § 2-715 Jenny is entitled to recover its lost profits resulting from the distortion of the skirts, because plaintiff had reason to know of Jenny’s intended use and Jenny made reasonable efforts to prevent its loss.

Plaintiff contends that Jenny’s basis for computing lost profits is too uncertain to warrant relief. Pursuant to New York law, however, “[w]hen it is certain that damages have been caused by a breach of contract, and the only uncertainty is as to their amount, there can rarely be any good reason for refusing on account of such uncertainty, any damages whatever for the breach.” Where a wrong has been done, the court will make a reasonable attempt to estimate damages.

In essence, Jenny seeks lost profits resulting from the cancellation of purchase orders for dresses to be made with plaintiff’s fabric. Jenny limits its claim to those purchase orders received through the end of January 1984, when it discovered that the fabric was defective. Two of the cancellations — one from Sears, Roebuck & Co. and one from Montgomery Ward— were documented. Pearl testified that the remaining purchase orders were cancelled by Jenny on the telephone. Six of these orders, received from Conston, Imperial Buyers, Ltd., Charming Shoppes, Cato Corp., Miller-Wohl Co., Inc. and Sizes Unlimited, were documented and admitted into evidence.

Jenny had no effective bookkeeping system, however, so entries on its style sheets are the only evidence of any other orders. These sheets are not only illegible, but also somewhat contradictory. Pearl could not testify as to who made the entries, nor when they were made. We are compelled to conclude that these sheets are not a reliable basis for establishing the amount of undocumented purchase orders.

We, therefore, find that on the basis of (1) the two cancellations received from Jenny’s customers, and (2) the six purchase orders cancelled by Jenny on the telephone, that Jenny would have received $82,155.50 in gross profits if plaintiff’s fabric had not been defective. (See Appendix attached.) We deduct from this amount (1) the $20,346.05 which Jenny recouped at close-out sales for defective dresses, (2) the $9,039.25 estimated labor rebate for unsewn dresses, and (3) the $15,704.87 balance due on fabric plaintiff delivered to Jenny, which leaves net lost profits in the amount of $37,065.33. (See Appendix attached.)

Pursuant to New York law, Jenny is also entitled to interest on this award which

“shall be computed from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred. Where such damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date.”

This action existed as of the date Jenny sustained damages due to the cancellation of purchase orders. The testimony, however, failed to establish what dates the various orders were cancelled. The rule in New York is that, when it is impossible to determine when damages actually were incurred, pre-verdict interest is computed from the commencement of the action. Jenny is therefore entitled to interest at a rate of nine (9%) per cent per annum, from May 16, 1984, the date of the commencement of this action, to the date of this opinion.

The foregoing constitutes our findings of fact and conclusions of law, pursuant to Rule 52, Fed.R.Civ.P.

Accordingly, the Clerk of the court is directed to enter judgment dismissing plaintiffs action in all respects, and granting defendant judgment on its breach of warranty claim in the amount of $37,-065.33, plus interest at a rate of nine (9%) per cent per annum, from May 16, 1984 to the date of this opinion, together with all costs of this action.

APPENDIX

Damages — Lost Profits

Documented Cancellations (for orders placed through 2/84 for 3,995 dresses totalling $55,741.00):

Sears, Roebuck & Co. Cancellation dated 2/7/84 for orders dated 1/25/84 for 1,700 dresses (Style 210), at $12.00 ea., and for 1,700 dresses (Style 220), at $13.50 ea.: $43,350.00

Montgomery Ward Cancellation dated 2/24/84 for orders dated 2/8/83 for 294 dresses (Style 2220), at $14.50 ea., and for 301 dresses (Style 2210), at $13.50 ea.: 8,327.00

Documented Orders cancelled by Jenny:

Conston 12/4/83 for 300 dresses (Style 220), at $14.50 ea.:- 4,350.00

Imperial Buyers Ltd. 12/7/83 order for 576 dresses (Style 2220), at $14.50 ea., and for 283 dresses (Style 2210), at $13.50 ea.: 12,172.50

Charming Shoppes 12/15/83 order for 250 dresses (Style 2220), at $15.00 ea.: 3,750.00

Cato Corp. 12/19/83 order for 300 dresses (Style 210), at $12.50 ea.: ' 3,750.00

Miller-Wohl Co., Inc. 12/20/83 order for 300 dresses (Style 220), at $13.40 ea.: 4,020.00

Sizes Unlimited 1/10/84 order for 168 dresses (Style 2220), at $14.50 ea.: 2,436.00

Total Gross Profits: $82,155.50

Deductions: Dresses (all styles) sold in close-out sales: $20,346.05

Labor Rebate 3,287 unsewn dresses to be manufactured at a labor cost of $2.75 ea.: 9,039.25

Unpaid Fabric Wullschleger delivered 23,577 yards in three orders dated 10/13/83, 12/ 5/83 and 12/28/83; Jenny paid $11,402.94 for the first order, leaving a net unpaid balance: 15,704.87

Total Deductions: 45,090.17

TOTAL NET LOST PROFITS: $37,065.33

      . N.Y. UCC §§ 2-313, 2-314 (McKinney 1964).

      . 28 U.S.C. § 1332.

      . N.Y. UCC § 2-314.

      . Nassau Suffolk White Trucks, Inc. v. Twin County Transit Mix Corp., 62 A.D.2d 982, 403 N.Y.S.2d 322 (2d Dept. 1978).

      . N.Y. UCC § 2-313; Kates Millinery, Ltd. v. Benay-Albee Corp., 144 Misc.2d 230, 450 N.Y.S.2d 975 (Civ.Ct. Queens Co.1982), aff’d, 120 Misc.2d 429, 467 N.Y.S.2d 348 (N.Y.App.Term 1983).

      . Holdridge v. Heyer-Schulte Corp. of Santa Barbara, 440 F.Supp. 1088 (N.D.N.Y.1977).

      . Varley performed three tests on ten different pieces of fabric taken from Jenny’s warehouse: (1) the American Society of Testing & Materials skew test; (2) the American Association of Textile Chemists dimensional stability test; and (3) a skirt panel distortion test. The relevant tests for us are the skew and distortion tests.
      The skew test showed that all of the fabric tested was skewed, and that the extent of skew ranged from %2.84 to %35.43. The maximum skew accepted in the industry for first quality fabric is %2.5. The majority of pieces of fabric, therefore, far exceeded the industry tolerance and clearly were not first quality.
      The distortion test showed that the hems of the circle skirts, made with the fabric, pressed with a Hoffman press and hung for several hours, exhibited elongation. The hems of the outer panels of the skirts, where the distortion was the greatest, stretched from 3'/4" to 7".

      . N.Y. UCC § 2-314; McCormack v. Lynn Imports, Inc., 114 Misc.2d 905, 452 N.Y.S.2d 821 (Dist.Ct. Nassau Co.1982).

      . Cf. Parente v. Bayville Marine, Inc., 43 A.D.2d 956, 353 N.Y.S.2d 24 (2d Dept.1974).

      . N.Y. U.C.C. §2-316(3)(b).

      . Official Comment 13 to N.Y. U.C.C. § 2-314.

      . The purpose of the finishing process is to stabilize the fabric to a specific width and to prevent future shrinkage in excess of 3°. Varley testified that skewing is frequently caused because the fabric is not evenly placed on the pins, or the chains on either side of the fabric are not properly synchronized.

      . Furthermore, Varley testified that under normal fabric construction conditions, fabric heat set at 300° would not be altered by a temperature lower than 300°. However, there was no expert testimony concerning the temperature required to move abnormally constructed or skewed fabric. Moreover, Varley testified that his tests indicated that the temperature in the heat chamber was below 300°.

      . Therefore, for example, where the majority of the skew occurred only at the top end of the fabric, it is possible that the garment panel would evidence little or no distortion at its hem. On the other hand, if the skew went across the entire piece of fabric, the panel would exhibit distortion.

      . "Bias" is a condition in woven fabric where the warp and filling yarns do not meet at right angles. Fabric cut on the bias is likely to stretch because in the bias area only one end of the yarn is being pulled, rather than both ends. The original patterns and markers used indicated that all the skirt panels were cut at right angles to the edge of the fabric. The fact that the circle skirt panels were 77" in length and 39‘/2" at the widest point made bias cutting on the 56V60" wide fabric impossible.

      . In using a plain fabric to make a circle skirt, the manufacturer knows that no two people have the same diameter of waist or contour of hip; therefore, "gravity bias” causes an uneven length to the hem of the skirt. Jenny compensated for this bias by making an adjustment in the marker which is the standard industry practice.

      . Cf. Anglo-Eastern Bulkskips Ltd. v. Ameron, Inc., 556 F.Supp. 1198, 1205 (S.D.N.Y.1982).

      . Official Comment 3 to N.Y. UCC § 2-715.

      . Lake Steel Erection, Inc. v. Egan, 61, A.D.2d 1125, 403 N.Y.S.2d 387 (4th Dept.), appeal dismissed, 44 N.Y.2d 848, 406 N.Y.S.2d 761, 378 N.E.2d 124 (1978).

      . Lexington Products, Ltd. v. B.D. Communications, Inc., 677 F.2d 251, 253 (2d Cir.1982), quoting Wakeman v. Wheeler & Wilson Mfg. Co., 101 N.Y. 205, 209, 4 N.E. 264, 206 (1886).

      . Id. See also Manniello v. Dea, 92 A.D.2d 426, 461 N.Y.2d 582 (3d Dept.1983).

      . Jenny cannot seek to collect for the cancellation of orders which were received after it was on notice of the defect in the fabric, for the damages incurred as a result of those cancellations do not proximately result from the breach of warranty. Official Comment 5 to N.Y. UCC § 2-715 (McKinney 1964).

      . Jenny requests lost profits of $4.78 per dress for 1,576 dresses which were never made and for which there were no orders. This request is denied because Jenny has not substantiated a profit of $4.78 per dress, nor has it demonstrated that these dresses would have been sold.

      . Jenny computed a labor rebate of $11,299.75 based on 4,109 unsewn dresses. This amount is reduced by 20% to reflect the fact that Jenny requested damages on a total of 7,648 dresses and we granted damages on only 6,172 dresses.

      . N.Y. CPLR § 5001(a), (b) (McKinney 1963).

      . Cohen v. Bratt & Doxey Supply Co., 51 A.D.2d 719, 379 N.Y.S.2d 155 (2d Dept.), motion to appeal denied, 39 N.Y.2d 706, 385 N.Y.S.2d 1025, 351 N.E.2d 437 (1976).

      . Morse v. Swank, Inc., 520 F.Supp. 829 (S.D.N.Y.1981); Marx & Co. v. Diners’ Club, Inc., 405 F.Supp. 1 (S.D.N.Y.1975).


text:
    Michael J. COAR, William D. Colbert, Bruce B. Hayes, Charles T. McArthur, Bruce Tierney, and United Transportation Union, Plaintiffs, v. METRO-NORTH COMMUTER RAILROAD COMPANY and Brotherhood of Locomotive Engineers, Defendants.
    No. 84 Civ. 5795 (LFM).
    United States District Court, S.D. New York.
    Sept. 25, 1985.
    Norton N. Newborn Co., L.P.A., Cleveland, Ohio, Schulman & Abarbanel, New York City by Norton N. Newborn, Cleveland, Ohio, Howard Schulman and James M. Altman, New York City, for plaintiffs.
    Walter E. Zullig, Jr., Gen. Counsel, and Robert M. Lutsberg, Metro-North Commuter R. Co., New York City, for Metro-North Commuter Railroad Company.
    Ross & Kraushaar Co., L.P.A., Cleveland, Ohio, Shapiro, Shiff, Beilly, Rosenberg & Fox, New York City by Harold A. Ross, Cleveland, Ohio, Sidney Fox, New York City, for Broth, of Locomotive Engineers.
   OPINION

MacMAHON, District Judge.

Plaintiffs move, pursuant to Rule 56, Fed.R.Civ.P., for summary judgment of their claims based on violations of the Railway Labor Act (RLA), 45 U.S.C. §§ 151 et seq. (1972). Defendants move, pursuant to Rules 12(b)(6) and 56, Fed.R.Civ.P., for an order dismissing the complaint. Since the essential facts are not in dispute, this action is ripe for summary judgment.

FACTS

Since January 1, 1985, the five individual plaintiffs have been employed by defendant Metro-North Commuter Railroad Company (Metro-North) as passenger engineers and have been members of the United Transportation Union (UTU), the bargaining representative for firemen, conductors and brakemen employed by Metro-North. UTU does not represent engineers in collective bargaining.

Defendant Brotherhood of Locomotive Engineers (BLE) is the executive bargaining representative for the class of passenger engineers employed by Metro-North. At various times, three of the individual plaintiffs have been members of BLE.

The current collective bargaining agreement negotiated by BLE and Metro-North provides for rates of pay, hours of work, health and welfare benefits, seniority rights and other terms and conditions of employment for the engineers. The agreement also contains discipline and investigation rules for the resolution of disputes involving the interpretation and application of the agreement’s provisions.

Rules 22 and 23 of the agreement provide that: a claim by a passenger engineer for compensation “may be made only by a claimant, or, on his behalf, by a duly accredited representative;” the passenger engineer and “his duly accredited representative will have the right to be present during” disciplinary investigations; and the representative may accompany the claimant at appeal hearings and may process appeals of any claim, grievance or disciplinary action on behalf of the engineer. Rule 1(c) defines “duly accredited representative” as the “General Chairman, Local Chairman of the [BLE] having jurisdiction or any elected or appointed officer of the [BLE] designated by the General Chairman.” In addition to having the right to be represented by BLE, engineers have the right to represent themselves in disciplinary hearings and in appeals under Rules 22 and 23.

Each of the five individual plaintiffs was subject to a disciplinary investigation by Metro-North in 1983 or 1984, and each sought to have UTU representation at those proceedings. Although Metro-North initially allowed one plaintiff to so proceed, it later determined that BLE was the only union which could represent engineers at grievance and disciplinary proceedings. Metro-North refused to permit UTU representatives to participate at such proceedings, except as observers.

There is no dispute that, pursuant to the BLE/Metro-North agreement, engineers are restricted to representation by BLE at grievance and disciplinary proceedings. Defendants contend that an engineer has no right to have UTU representation. Plaintiffs argue, however, that the restriction violates §§ 2 and 3 of the RLA, 45 U.S.C. §§ 152 and 153, and seek to have the restriction invalidated.

DISCUSSION

Jurisdiction

BLE initially argues that, pursuant to §§ 2 Ninth and 3 First of the RLA, 45 U.S.C. §§ 152 Ninth and 153 First, we lack subject matter jurisdiction to resolve this dispute. Section 2 Ninth of the RLA places exclusive and primary jurisdiction for the resolution of employee disputes concerning representation with the National Mediation Board.

BLE asserts that the question presented here is whether UTU or BLE will represent the individual plaintiffs at grievance and disciplinary proceedings, and, therefore, jurisdiction lies with the National Mediation Board. Alternatively, BLE argues that this action concerns a minor dispute involving the interpretation of who is a “duly accredited representative” under Rule 1(c) of the BLE/Metro-North agreement. Resolution of these minor disputes, including interpretation or application of agreements, is left to the National Railroad Adjustment Board (NRAB), pursuant to § 3 First (i) of the RLA.

The Supreme Court has determined that district courts have no authority to resolve jurisdictional controversies between unions and placed jurisdiction for resolution of these representational disputes with the National Mediation Board. However, the Supreme Court has not addressed the issue presented here, that is, “whether an employee’s assertion of ‘the privilege of choosing his own representative for the prosecution of his [grievance] claims’ under the {RLA] is justiciable.”

This is neither a purely jurisdictional dispute over which union is the appropriate representative, nor a minor dispute involving the interpretation or application of the provision regarding the “duly accredited representative.” This dispute involves whether the provisions of the BLE/MetroNorth agreement, which restrict an employee’s choice of representative for handling grievance and disciplinary proceedings, are valid in light of the rights of employees under the RLA.

It is well settled that courts have the power to enforce the RLA and that issues of validity are appropriate for judicial consideration. We find, therefore, that jurisdiction is proper here.

Representation under the RLA

The question before us now is whether the provision in the BLE/Metro-North agreement, restricting plaintiffs to BLE representation at grievance and disciplinary proceedings, is valid in light of the rights of employees under the RLA. Since no one provision of the RLA clearly addresses this issue, an examination of the purposes of the Act and the aggregate rights it provides is necessary.

One of the purposes of the RLA is to promote industrial peace and to avoid interruption of commerce. Additionally, the Act forbids limiting employees’ freedom to associate and their right to join a labor organization.

While a collective bargaining agreement may require an employee to belong to a union as a condition of employment, membership in any one of the national labor organizations, including BLE or UTU, is sufficient. The right of an employee to belong to any union implicitly carries with it the right to enjoy the privileges of membership, including representation by that union. “Inherent in the right of an employee to join a railway employees’ labor union of his choice is the right to enjoy fully the fundamental benefits of union membership. It is difficult to conceive of a benefit of union membership more fundamental than union representation in employee/employer dispute proceedings.”

Employees have the right to designate representatives, who need not be in the employ of the carrier, “without interference, influence, or coercion” by the carrier. Section 2 Second of the RLA provides that all disputes between a carrier and its employees shall be considered and, if possible, decided in conference between representatives designated and authorized by the carrier and by the employees interested in the dispute. “On its face, this provision guarantees an individual employee the right to prosecute his grievances through any representative he may designate,” including the minority union to which he belongs.

In McElroy v. Terminal R. Ass’n, 392 F.2d 966 (7th Cir.1968), cert. denied, 393 U.S. 1015, 89 S.Ct. 611, 21 L.Ed.2d 599 (1969), the court found that employees have the right to designate the minority union to which they belong as their representative at the company level and before the NRAB in disciplinary investigations and grievances. Defendants contend, however, that McElroy is inapplicable because it is factually distinguishable and the court incorrectly interpreted the RLA.

In McElroy, employees were allowed to shuttle between different crafts, i.e., firemen and engineers, represented by different unions. Here, although the BLE/Metro-North agreement specifically prohibits engineers from shuttling between crafts, they, like plaintiffs in McElroy, “have the right to maintain their membership in the [UTU] while working as engineers.” This right exists even though the UTU represents firemen, and not engineers, in collective bargaining. Membership in a minority union, guaranteed by the RLA, would be meaningless if the engineers could not designate the minority union as their representative at grievance and disciplinary proceedings.

Defendants also contend that the McElroy court misinterpreted the RLA by finding that a single employee could designate a minority union as representative. They argue that “representatives designated ... by the employee,” as stated in § 2 Second, refers to the collective designation of representatives by the majority of the employees. Since the employees, as a group, designated BLE to be their representative at collective bargaining, defendants conclude that only BLE may handle grievance and disciplinary proceedings.

We find, however, that “representatives designated by employees” may reasonably be interpreted to mean a representative designated by a single employee. “It is only with reference to craft organizations and collective bargaining, that is, craft action, that a union chosen as a representative must be that chosen by the majority.”

The rights of an individual employee are not diminished in the RLA by the rights of the majority. “ [T]he individual employee’s rights cannot be nullified merely by agreement between the carrier and the union. They are statutory rights, which he may exercise independently or authorize the union to exercise in his behalf.” The individual employee’s right to choose his own representative at grievance or disciplinary proceedings cannot be ignored or trampled either by the carrier or by the majority union. Legislative history supports this conclusion.

In hearings on the RLA before the House Committee on Interstate and Foreign Commerce, Commissioner Eastman commented:

“When it comes to collective bargaining in the matter of wages and working conditions, it seems to me plain that a company ought not be compelled to deal with more than one organization. It ought not to have to make bargains with two or three different organizations. But when it comes to the presentation of grievances, that is a different matter, and certainly an individual employee ought not to be stopped in any way from taking his grievance up directly with management, and I think that ought to apply to any group of employees.”

If an individual may present his own grievances, it follows that he may designate the representative of his choice to do likewise.

The combination of the right to designate a representative, without interference, and the right to belong to a minority union, plus the spirit of the RLA which ensures the rights of an individual, establishes that an employee is entitled to designate a representative other than his collective bargaining union at grievance and disciplinary proceedings. Any hardship which the carrier may face by dealing with different representatives is clearly outweighed by the hardship an employee would endure if represented by a union which he believes does not represent his best interests.

Accordingly, we grant plaintiffs’ motion for summary judgment and find that the individual plaintiffs are entitled to designate the UTU as their representative at grievance and disciplinary proceedings. Defendants’ motion to dismiss the complaint is denied in all respects.

So ordered.

      . Switchmen’s Union v. National Mediation Bd., 320 U.S. 297, 64 S.Ct. 95, 88 L.Ed. 61 (1943); General Committee v. M.-K.-T. R. Co., 320 U.S. 323, 64 S.Ct. 146, 88 L.Ed. 76 (1943); General Committee v. Southern Pac. Co., 320 U.S. 338, 64 S.Ct. 142, 88 L.Ed. 85 (1943).

      . McElroy v. Terminal R. Ass’n, 392 F.2d 966, 968 (7th Cir.1968), cert. denied, 393 U.S. 1015, 89 S.Ct. 611, 21 L.Ed.2d 559 (1969), citing to General Committee v. Southern Pac. Co., supra, 320 U.S. at 342, 64 S.Ct. at 144.

      . Chicago & N.W. R. Co. v. United Transportation Union, 402 U.S. 570, 578-81, 91 S.Ct. 1731, 29 L.Ed.2d 187 (1971), and cases cited therein.

      . Felter v. Southern Pac. Co., 359 U.S. 326, 327-28, 79 S.Ct. 847, 850, 3 L.Ed.2d 854 (1959); Brotherhood of R. Trainmen v. Howard, 343 U.S. 768, 774, 72 S.Ct. 1022, 1025, 96 L.Ed. 1283 (1952).

      . 45 U.S.C. § 151a.

      . 45 U.S.C. § 151a(2).

      . 45 U.S.C. § 152 Eleventh (a).

      . 45 U.S.C. § 152 Eleventh (c).

      . Taylor v. Missouri Pac. R. Co., 614 F.Supp. 1320, 1323, (E.D.La.1985).

      . 45 U.S.C. § 152 Third.

      . 45 U.S.C. § 152 Second.

      . McElroy, supra, 392 F.2d at 969.

      . McElroy, supra, 392 F.2d at 971.

      . General Committee v. Southern Pac. Co., 132 F.2d 194, 199 (9th Cir.), rev'd on other grounds, 320 U.S. 338, 64 S.Ct. 142, 88 L.Ed. 85 (1943).

      . Elgin, J. & E.R. Co. v. Burley, 325 U.S. 711, 740 n. 39, 65 S.Ct. 1282, 89 L.Ed. 1886 (1945) (employees have the right to present their own grievances to the NRAB).

      . Hearings of House Committee on Interstate and Foreign Commerce on the Railway Labor Act, H.R.Rep. No. 7650, 73d Cong., 2d Sess., p. 44.