author: WILLIAM C. LEE, District Judge.

text:
    Larry J. ADAMS; Lena M. Adams; Walter L. Vandybogurt; American Truck Stops of Indiana, Inc.; and Tri-State Oasis, Inc., Plaintiffs, v. STATE of Indiana, Indiana Department of Revenue; M.F. Renner, Commissioner of Indiana Department of Revenue; James W. Poe, Administrator, Indiana Department of Revenue, Motor Fuel Tax Division; and Jack Hanna, Defendants.
    Civ. No. F 85-279.
    United States District Court, N.D. Indiana, Fort Wayne Division.
    Nov. 27, 1985.

      Donald C. Swanson, Jr. and Stanley L. Campbell, Swanson & Campbell, Fort Wayne, Ind., for plaintiffs.
    David A. Redmond and James R. Green, Deputy Attys. Gen., Indianapolis, Ind., for defendants.
   ORDER

WILLIAM C. LEE, District Judge.

This matter is before the court on the defendants’ motion to dismiss. The parties have fully briefed the issues raised by the motion. For the following reasons, the motion to dismiss will be granted.

This cause arises out of the assessment of a Special Motor Fuel Tax by the defendant Indiana Department of Revenue pursuant to the provisions of I.C. 6-6-2.1-101, et seq. In February, 1985, the Motor Fuel Tax Division of that Department assessed taxes in the amount of $309,317.63 against American Truck Stops of Indiana, Inc., a corporation whose shareholders were plaintiffs Larry Adams, Lena Adams, and Walter Vandybogurt, as well as assessing $96,908.38 against Larry Adams. The plaintiffs have brought this action under 42 U.S.C. § 1983, seeking a permanent injunction against the collection of the assessment, and damages from defendant Jack Hanna, an investigator for the Motor Fuel Tax Division, as well as a pendent state claim for interference with business relationships against Hanna.

In deciding a motion to dismiss for failure to state a claim, this court must take the well pleaded factual allegations of plaintiffs complaint as true. Ashbrook v. Hoffman, 617 F.2d 474 (7th Cir.1980). A complaint should be dismissed for failure to state a claim only if it appears “beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). However, Conley has never been interpreted literally. Sutliff, Inc. v. Donovan Companies, 727 F.2d 648, 654 (7th Cir.1984). The test is whether a complaint contains either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory. Car Carriers, Inc. v. Ford Motor. Co., 745 F.2d 1101, 1106 (7th Cir.1984). This court must consider the complaint in the light most favorable to the plaintiff and must resolve every reasonable doubt in favor of the claimant. Henry C. Beck Co. v. Fort Wayne Structural Steel, 701 F.2d 1221 (7th Cir.1983). “The heavy costs of modern federal litigation ... counsel against launching the parties into pretrial discovery if there is no reasonable prospect that the plaintiff can make out a cause of action from the events narrated in the complaint.” Sutliff, 727 F.2d at 654.

Viewing the complaint in light of these principles, the relevant facts appear to be as follows. Plaintiffs Larry and Lena Adams and Walter Vandybogurt were shareholders and officers of American Truck Stops of Indiana, Inc. (“American”) and Tri-State Oasis, Inc. (“Tri-State”). American operated a truck stop in Pierceton, Indiana, selling fuel, gasoline and other services, while Tri-State operated a truck stop/restaurant in Tekonsha, Michigan.

On November 28, 1984, Jack Hanna appeared at the American truck stop in Pierceton and told Larry Adams and Vandybogurt that there was $5,000.00 in special fuel tax owing and that he was there to lock and seal the pumps of the truck stop. Adams and Vandybogurt offered to pay the tax immediately, but Hanna refused to accept the payment and proceeded to lock the pumps. The pumps stayed locked for four days, and American lost business and good will as a result, and was eventually forced to permanently close and cease its business activities.

On February 3, 1985, the defendants State of Indiana, Indiana Department of Revenue, M.F. Renner, as Commissioner of the Department of Revenue, and James W. Poe, as Administrator of the Department of Revenue, issued a notice of tax due under the special motor fuel tax statutes to American in the amount of $309,317.63, and to Larry Adams in the amount of $96,-908.38. The amount of the assessments was based on a special fuel tax investigation conducted by Hanna. On March 25, 1985, counsel for the plaintiffs notified the state that the plaintiffs were protesting the assessments because the fuel stored at the American truck stop in Pierceton had been transferred to Tri-State’s truck stop in Michigan, which the plaintiffs contend makes the fuel exempt from taxation under I.C. 6-6-2.1-301.

An administrative hearing was scheduled for May 8,1985 at 2:00 p.m. in Indianapolis, Indiana. With knowledge that the plaintiffs located themselves at the Tri-State Michigan location, the defendants nevertheless did not send notice of the hearing to the plaintiffs. In fact, the plaintiffs found out about the hearing only because Hanna called the Tri-State truck stop on the afternoon of the 8th. When Adams’ counsel called down to Indianapolis, the Motor Fuel Tax Division hearing officer, Madeline Chandler, confirmed that no notice had been sent to the Tri-State address or to counsel, but had been sent to the Pierceton address. Chandler advised counsel that no meaningful continuance of the hearing would be granted, and that the plaintiffs’ protest would be denied for failure to appear at the hearing. This denial was memorialized in a letter issued May 16, 1985 by the Motor Fuel Tax Division.

The plaintiffs contend that the assessments at issue here were based on false information contained in Hanna’s investigation report. Hanna knew the information was false, and the investigation and assessments were part of a pattern of harassing the plaintiffs to pressure them into aiding Hanna and Dennis S. Guillaume, an Indiana State Police officer, in a criminal investigation. Hanna’s harassment occurred not only at the American truck stop, but also at the Tri-State location in Michigan and at the Fort Wayne offices of Ortho-Manor, Inc., an orthopedic supply store run by Larry and Lena Adams. As a result of Hanna’s actions, American has ceased to do business, and Tri-State and the Adamses have been forced into involuntary bankruptcy.

Count I of the complaint alleges that the assessment of the taxes and the denial of plaintiffs’ protest deprived the plaintiffs of due process under the fourteenth amendment. Count I seeks a permanent injunction against the State, the Department of Revenue, and their agents preventing the enforcement or collection of any monies or properties pursuant to assessments for special fuel taxes. Count II alleges that Hanna, acting under color of state law, violated plaintiffs’ fourteenth amendment rights and seeks damages for the losses suffered as a result of Hanna’s action. Count III seeks damages from Hanna under the state law theory of interference with business relationships.

The defendants’ motion to dismiss Count I offers three grounds for dismissal: (1) the Anti-Injunction Act, 28 U.S.C. § 1341, prevents the issuance of an injunction to restrain the collection of a tax; (2) sovereign immunity prevents suit against the state or its agencies and agents; and (3) notions of comity. Defendants urge dismissal of Count II on principles of comity and because the plaintiffs fail to state a claim under 42 U.S.C. § 1983, given the principles of Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981). Finally defendants argue that Count III should be dismissed for lack of pendent jurisdiction when the main federal claims are dismissed.

Count I — Anti-Injunction Act and Comity

Defendants seek dismissal of Count I, which seeks a permanent injunction against the assessment of special fuel taxes, on the basis of the Anti-Injunction Act, 28 U.S.C. § 1341 (also referred to as the Tax Injunction Act), which provides:

The district court shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under state law where a plain, speedy, and efficient remedy may be had in the courts of such state.

The Act clearly prohibits this court from issuing an injunction in this case if a “plain, speedy, and efficient remedy” exists in the Indiana courts. Rosewell v. LaSalle National Bank, 450 U.S. 503, 512, 101 S.Ct. 1221, 1228, 67 L.Ed.2d 464 (1981); Fromm v. Rosewell, 771 F.2d 1089, 1092 (7th Cir.1985).

As plaintiffs readily admit, there is a remedy under Indiana law. I.C. 6-6-2.1-1105 provides:

A person who claims that any tax, penalty, or interest was erroneously or illegally collected under this chapter [Special Fuel Tax] or that a refund was wrongfully denied, may initiate suit against the state. The circuit court of Marion County has original jurisdiction of the suit, and the suit must be commenced within two (2) years after:
(1) the date of payment of the tax, penalty, or interest; or
(2) the date of final rejection by the administrator of the refund claim.

The real issue here is whether the remedy is “plain, speedy and efficient.”

The Supreme Court has made it clear that the principal purpose of the Anti-Injunction Act was “to limit drastically federal district court jurisdiction to interfere with so important a local concern as the collection of taxes.” California v. Grace Brethren Church, 457 U.S. 393, 408, 102 S.Ct. 2498, 2508, 73 L.Ed.2d 93 (1982); Rosewell, 450 U.S. at 522, 101 S.Ct. at 1233. The Act embodied Congress’ recognition that “the autonomy and fiscal stability of the States survive best when state tax systems are not subject to scrutiny in federal courts.” Fair Assessment in Real Estate Ass’n v. McNary, 454 U.S. 100, 102-03, 102 S.Ct. 177, 179, 70 L.Ed.2d 271 (1981). Consistent with this view, the Rosewell Court defined “plain, speedy and efficient” in procedural terms:

On its face, the “plain, speedy and efficient remedy” exception appears to require a state-court remedy that meets certain minimal procedural criteria ... The overall purpose of the Tax Injunction Act is consistent with the view that the “plain, speedy and efficient remedy” exception to the Act’s prohibition was only designed to require that the state satisfy certain procedural criteria____

450 U.S. at 512, 522, 101 S.Ct. at 1229, 1233-34 (emphasis in original). The most important procedural criteria that the remedy must meet is that it provides a “full hearing and judicial determination” of the controversy, id. at 514, 101 S.Ct. at 1230, such that the taxpayer may assert his federal rights and secure a review in the Supreme Court. Id. at 513, 101 S.Ct. at 1229, quoting Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 300-01, 63 S.Ct. 1070, 1074, 87 L.Ed. 1407 (1943). The language of the Supreme Court’s Rosewell decision appears to make it clear that the state remedy will be considered “plain, speedy and efficient” if the remedy, with the minimal procedural criteria built in, merely exists. See Rosewell, 450 U.S. at 515, 515 n. 19, 101 S.Ct. at 1230, 1230 n. 19.

The remedy provided by I.C. 6-6-2.1-1105 appears to contain the minimal procedural criteria required by Rosewell. That section allows a taxpayer who claims that the taxes paid were erroneously or illegally collected to sue the state in the circuit court of Marion County. The fact that the taxes must first be paid does not render the remedy procedurally inadequate; the Great Lakes Dredge Court found that a remedy which requires payment and then a suit for a refund was “adequate,” 319 U.S. at 300, 63 S.Ct. at 1074, and Rosewell points out that Congress was aware of the state practice of requiring payment under protest before entertaining a suit for refund, and approved of such a methodology because it allowed states to operate during protracted tax litigation. 450 U.S. at 523, 101 S.Ct. at 1234. The Indiana statute allows for a plaintiff to claim the tax was erroneously or illegally collected; the plaintiffs’ claims of constitutional violations in the manner and method of Hanna’s investigation and report, the assessment on the basis of that report, and the failure to offer a meaningful hearing on the protest of the assessment, can all fall under the “illegally collected” basis for a suit under I.C. 6-6-2.-1-1105. Thus, 6-6-2.1-1105 appears to be a “plain, speedy and efficient remedy” as defined by Rosewell.

The plaintiffs argue that the remedy provided in I.C. 6-6-2.1-1105 is unavailable to them because they are unable to pay the assessment so as to claim a wrongful payment and seek a refund. Prior to the Supreme Court’s decision in Rosewell, the Seventh Circuit appeared to be sympathetic to this claim. In 28 East Jackson Enterprises, Inc. v. Cullerton, 523 F.2d 439 (7th Cir.1975), cert. denied, 423 U.S. 1073, 96 S.Ct. 856, 47 L.Ed.2d 83 (1976), the Seventh Circuit stated that where a plaintiff does not have and cannot borrow sufficient funds to pay the full tax, a payment under protest and suit for refund remedy available under Illinois statutes was “not available.” In LaSalle Natl Bank v. Rosewell, 604 F.2d 530 (7th Cir.1979), rev’d, 450 U.S. 503, 101 S.Ct. 1221, 67 L.Ed.2d 464 (1981), the Seventh Circuit read earlier Supreme Court precedent as expressing a “concern with the economics of dispute resolution ... so while redress was theoretically possible in the state courts, the remedy’s diseconomies rendered it inadequate,” citing 28 East Jackson. 604 F.2d at 536. The court therefore held that while relief was possible under the Illinois suit for refund statute, the fact that the state did not pay interest on the taxes collected “imposes undue costs on taxpayers seeking redress” so as to make the remedy inadequate. Id.

The Supreme Court’s Rosewell decision reversed LaSalle Natl Bank, completely ignoring the economic effect on the taxpayer in determining that the remedy was adequate so as to invoke the Anti-Injunction Act. The focus on the procedural aspect of the remedy — i.e., does the remedy provide a full hearing — strongly suggests that the Rosewell Court adopted a view' of the “plain, speedy and efficient remedy” language which looks only to the process and not the situation of the taxpayer in that process. In a subsequent case, the Seventh Circuit abandoned its focus on economic impact and “diseconomies” when it held that a taxpayer who would have to register its trucks with the State of Wisconsin, thereby incurring twenty to thirty thousand dollars in expense, in addition to having to pay $800,000.00 in fees, cannot claim that the state’s suit for refund statute was inefficient because of “undue hardship.” Schneider Transport, Inc. v. Cattanach, 657 F.2d 128, 133 (7th Cir.1981), cert. denied, 455 U.S. 909, 102 S.Ct. 1257, 71 L.Ed.2d 448 (1982). The Schneider court’s analysis suggests a focus only on the process:

The Tax Injunction Act, however, is concerned only with the procedural sufficiency of a state remedy. Rosewell ... Indeed, Schneider’s argument that “undue hardship” renders a remedy insufficient is drawn from a statement in the Rosewell decision which concerned procedural matters ... As its reference was to the procedural elements of the remedy, it does not apply to Schneider’s complaint that compliance will cost it money. As in Rosewell, Schneider’s complaint addresses “a more substantive concern ... The procedural method for correction of [its] tax bills remains the same,” whether Schneider must incur additional expenses or not. An economic burden does not affect Schneider’s ability to obtain a “full hearing and judicial determination of its claim.” 450 U.S. at 514, 101 S.Ct. at 1230.

657 F.2d at 133-34. Thus, it is doubtful that the Seventh Circuit would continue to follow its pre-Rosewell precedents — the economic burden posed by requiring prepayment of the tax does not affect the fact that the state remedy would provide the process necessary to invoke the Anti-Injunction Act.

Plaintiffs argue that an inability to pay is different from the situation where payment is a hardship but nevertheless possible. In the latter, the remedy is available, though at a price. But the former situation would, in the plaintiffs’ eyes, leave them without a remedy in the state courts, so that a federal cause of action should be recognized. However, the focus on process set forth in Rosewell does not make such a distinction. The Ninth Circuit, interpreting Rosewell, has thrice held that a “demonstrated inability to pay a tax does not avoid the jurisdictional bar of § 1341.” Air Polynesia, Inc. v. Freitas, 742 F.2d 546, 548 (9th Cir.1984); Redding Ford v. California State Bd. of Equalization, 722 F.2d 496, 497 (9th Cir.1983), cert. denied, — U.S. -, 105 S.Ct. 84, 83 L.Ed.2d 31 (1984); Wood v. Sargeant, 694 F.2d 1159, 1160 (9th Cir.1982). The rationale behind this holding is simple — the “plain, speedy and efficient remedy” language is a narrow exception to the general policy of the Anti-Injunction Act, and so should be narrowly construed. Redding Ford, 722 F.2d at 497, citing Rosewell, 450 U.S. at 524, 101 S.Ct. at 1233-34. In a post-Rosewell world, the test is “whether a state remedy ever existed for the plaintiffs,” not whether that remedy can in fact be utilized. Sappington v. Commonwealth of Pennsylvania, 535 F.Supp. 429, 431 (E.D.Pa.1982) (fact that a state remedy is now unavailable because of the statute of limitations does not render the remedy insufficient). Thus, the plaintiffs’ inability to pay the special fuel tax assessments here does not render the remedy of I.C. 6-6-2.1-1105 unavailable or inefficient. I.C. 6-6-2.1-1105 is a “plain, speedy and efficient remedy” for purposes of the Anti-Injunction Act, and thus the court does not have jurisdiction over Count I of the complaint.

Independent of whether the court is correct as to the adequacy of 6-6-2.1-1105, the plaintiffs here may have a second state remedy: a state action for injunctive relief. The general rule in Indiana is that an injunction against the enforcement or collection of a tax cannot issue until the taxpayer pays that part of the tax which he concedes is legally due. Chadwick v. City of Crawfordsville, 216 Ind. 399, 24 N.E.2d 937 (1940); City of Jeffersonville v. Louisville & J. Bridge Co., 169 Ind. 645, 83 N.E. 337 (1908). However, the Indiana Supreme Court has recognized that this general rule “is not applicable to cases where the entire tax fails on account of an assessment wholly illegal, as it is impossible for the court to determine an amount due; there being no legal tax assessed.” Wilt v. Bueter, 186 Ind. 98, 115 N.E. 49, 49 (1917). Here, the plaintiffs claim that they owe no special fuel taxes because the fuel that was stored at the American truck stop in Pierceton was transported to and sold in Michigan, thereby exempting the fuel from tax by virtue of I.C. 6-6-2.1-301(1). That section provides that “special fuel sold for export or exported from Indiana to another state, territory, or foreign country” shall be exempt from the special fuel tax. Taking these facts as true, it seems possible for the plaintiffs to argue that the special fuel tax assessments were “illegal” in that they were made in disregard for I.C. 6-6-2.1-301(1). Under Wilt, they could seek an injunction without having to pay any taxes at all. The Seventh Circuit has held that a district court does not have jurisdiction over a suit seeking to restrain the collection of state taxes when a state action for injunction is available, 28 East Jackson, 523 F.2d at 441-42, because “a remedy by injunction is a plain, speedy and efficient remedy within the meaning of 28 U.S.C. 1341.” Id. at 441. Thus, the plaintiffs here have a second means by which to pursue their claim in state court, thereby depriving this court of jurisdiction over Count I.

The defendants also urge dismissal on the basis of principles of comity. The Supreme Court long ago recognized the important and sensitive nature of state tax systems and the need for federal court restraint:

It is upon taxation that the several states chiefly rely to obtain the means to carry on their respective governments, and it is of the utmost importance to all of them that the modes adopted to enforce the taxes should be interfered with as little as possible. Any delay in the proceedings of the officers, upon whom the duty is devolved of collecting the taxes, may derange the operations of government and thereby cause serious detriment to the public.

Dows v. Chicago, 78 U.S. (11 Wall.) 108, 110, 20 L.Ed. 65 (1871). As a result, the Supreme Court has held that principles of federalism, expressed in concepts of comity, bar § 1983 actions against the validity of state taxes in federal courts. Fair Assessment in Real Estate Ass’n v. McNary, 454 U.S. at 116, 102 S.Ct. at 186. See Bd. of Education of Valley View Community School Dist., 713 F.2d 1316, 1320 (7th Cir.1983). It is clear from these precedents, and from the principles of federalism that pervade them, that this court must refrain from interfering in the operations of the State of Indiana. That state has defined the procedures and remedies available for those challenging a special fuel tax assessment; this court must respect Indiana’s decisions as to its tax collection procedures. Therefore, Count I must be dismissed on principles of comity as well.

Precisely because the court finds that Count I must be dismissed both because of the Anti-Injunction Act and comity, it will not address the defendants’ third ground for dismissal: sovereign immunity.

Count II — Comity and Parratt v. Taylor

Count II seeks damages under § 1983 from Hanna only. Hanna argues that Count II should be dismissed both on the basis of the principles of comity outlined above, and on the basis of Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981), because an adequate postdeprivation state remedy exists.

In Fair Assessment in Real Estate Ass’n v. McNary, 454 U.S. 100, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981), the Supreme Court held that a § 1983 claim for damages against county officials who ran a state tax collection system was barred by principles of comity when plain, adequate and complete state remedies exist. 454 U.S. at 116, 102 S.Ct. at 186. The rationale for this decision was that

damages actions, no less than actions for an injunction, would hale state officers into federal court every time a taxpayer alleged the requisite elements of a § 1983 claim. We consider such interference to be contrary to “the scrupulous regard for the rightful independence of state governments which should at all times actuate the federal courts.”

Id. at 115-16, 102 S.Ct. at 186, quoting Matthews ¶. Rodgers, 284 U.S. 521, 525, 52 S.Ct. 217, 219, 76 L.Ed. 447 (1932). The Seventh Circuit recently followed this rule in Fromm v. Rosewell, 771 F.2d 1089, 1092 (7th Cir.1985). Because the Supreme Court made it clear that “plain, adequate and complete” for purposes of comity meant the same as “plain, speedy, and efficient” does under the Anti-Injunction Act, 454 U.S. at 116 n. 8, 102 S.Ct. at 186 n. 8, and this court has already found that I.C. 6-6-2.1-1105 and the injunction provisions of Indiana law are “plain, speedy and efficient” for purposes of the Anti-Injunction Act, this damage claim against Hanna must be dismissed on principles of comity.

Hanna also offers an alternative ground for dismissing Count II. He argues that the principles of Parratt v. Taylor control this case. In Parratt, a state prisoner sued state prison officials under § 1983 alleging that their negligent loss of a hobby kit he had ordered through the mail deprived him of property without due process of law. The Supreme Court held that the negligent deprivation of property to an individual does not violate the Due Process Clause of the fourteenth amendment if the state makes available a meaningful postdeprivation remedy. 451 U.S. at 543-44, 101 S.Ct. at 1917. The Supreme Court has subsequently extended Parratt to intentional deprivations of property as well. Hudson v. Palmer, — U.S.-, 104 S.Ct. 3194, 3204, 82 L.Ed.2d 393 (1984).

Two refinements emerge from the Parratt doctrine. The first is that in order for Parratt to apply, the loss of property must be occasioned by a random, unauthorized act of a state employee, and not by conduct pursuant to established state procedure. Logan v. Zimmerman Brush Co., 455 U.S. 422, 435-36, 102 S.Ct. 1148, 1157-58, 71 L.Ed.2d 265 (1982). The rationale behind this refinement is that losses occasioned by random acts cannot be predicted, so that that state cannot be expected to provide a meaningful predeprivation hearing, Parratt, 451 U.S. at 541, 101 S.Ct. at 1916, while established state procedure would allow for a predeprivation hearing. The second refinement is that Parratt applies only to claims of procedural due process, that is, claims under the fourteenth amendment; Parratt will not bar a claim of a violation of some other substantive constitutional right. See Wolf-Lillie v. Sonquist, 699 F.2d 864, 871 (7th Cir.1983). The court must therefore determine what claim the plaintiffs present here, and then examine it in light of Parratt.

The complaint reveals that Hanna’s harassment and intentional misrepresentations produced primarily economic results. The plaintiffs contend that Hanna’s actions resulted in the tax assessments against American and Larry Adams, as well as the business ruin of American and the bankruptcies of Larry and Lena Adams and Tri-State. Thus, the plaintiffs contend that Hanna’s actions deprived them of property rights in their businesses by causing the assessments and financial ruin. Such a right does not implicate substantive constitutional provisions; the claim here is simply one of a deprivation of property without due process of law, a claim for procedural due process under the fourteenth amendment. In addition, the complaint indicates that Hanna’s acts were random and unauthorized; there is no allegation that Hanna acted under an established state procedure or that any state officials were involved in Hanna’s harassment and misrepresentations other than a State Police officer who is not a defendant here. Thus, in light of the two refinements described above, the Parratt analysis would apply.

The issue under Parratt is whether there is a sufficient postdeprivation remedy in the state so that the procedural due process concerns implicated by the property interest can be satisfied without reference to § 1983. Hanna points to the Indiana Tort Claims Act, I.C. 34-4-16.5-1, et seq., as a state remedy which was available to the plaintiffs. The Act creates a method whereby tort claims against a governmental entity (including the state and state agencies) as well as governmental employees can be brought. I.C. 34-4-16.5-6 allows for a claim against the state provided that the Attorney General and the appropriate agency receive notice of the claim within 180 days after a loss occurs, and I.C. 34-4-16.5-12 requires that the state deny the claim as a prerequisite to bringing suit. I.C. 34-4-16.5-3 then limits the liability of the state in these pertinent respects:

A governmental entity or an employee acting within the scope of his employment is not liable if a loss results from:
* * >h * * *
(5) the initiation of a judicial or administrative proceeding;
(6) the performance of a discretionary function;
(7) the adoption and enforcement of or failure to adopt or enforce a law, including rules and regulations, unless the act of enforcement constitutes false arrest or false imprisonment;
* * * * * *
(13) misrepresentation if unintentional____

The issue here is whether the plaintiffs can avail themselves of this remedy. The biggest hurdle is I.C. 34-4-16.5-3(5-7), which might offer a defense to Hanna. Because Hanna only filed the investigative report which led the Motor Fuel Tax Division to issue the tax assessments, and the administrative proceedings concerning the assessments were in fact instituted by the plaintiffs, it does not appear that Hanna could assert limitation (5) above. Further, while an investigation of a potential crime is considered a “discretionary function” under the statute, see Crouch v. Hall, 406 N.E.2d 303, 304 (Ind.App.1980), it is clear that the statute does not give absolute immunity to the investigator or enforcer of a law. The Crouch court quoted the language of Clipse v. Gillis, 20 Wash.App. 691, 695-96, 582 P.2d 555, 558 (1978), which stated that “[i]n the absence of corrupt or malicious motives, public officers are not personally liable for errors or mistakes of judgment in the performance of duties involving the exercise of judgment and discretion.” (Emphasis supplied). This concept was expanded by the court in Seymour Natl. Bank v. State, 179 Ind.App. 295, 384 N.E.2d 1177 (1979):

to say that the legislature intended the state and its employees to be immune from actual implementation of the decision to enforce a law would be to sanction and permit negligent and even reckless implementation of such a decision ... We do not believe the legislature intended “enforcement” [in I.C. 34-4-16.-5-3(7)] to shield negligent and reckless conduct in the carrying out of a decision to enforce the law.

Id. at 1186. The allegation that Hanna intentionally misrepresented the facts of his investigation so as to cause an exorbitant assessment of special fuel taxes due would surely fall within this recognized exception to I.C. 34-4-16.5-3(6-7). Further, the intentional nature of the misrepresentation would take this claim outside I.C. 34-4-16.5-3(13) as well. It therefore appears that the plaintiffs could seek damages under the Act, thereby giving them an adequate postdeprivation remedy in the state courts. Thus, Parratt and Hudson v. Palmer counsel that the plaintiffs’ § 1983 claim in Count II must be dismissed because the procedural due process guaranteed by the fourteenth amendment is provided by the State of Indiana.

Count III — Pendent State Claim

Count III asserts a state law claim against Hanna for interference with the business relationships of the plaintiffs. The complaint acknowledges that the claim is a pendent state claim.

Pendent jurisdiction is “a judge-made doctrine of expediency and efficiency derived from the general Art. Ill language conferring power to hear all ‘cases’ arising under federal law or between diverse parties.” United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). It is a “doctrine of discretion, not of plaintiff’s right. Its justification lies in considerations of judicial economy, convenience and fairness to litigants; if these are not present a federal court should hesitate to exercise jurisdiction over state claims, even though bound to apply state law to them.” Id. at 726, 86 S.Ct. at 1139.

The Seventh Circuit has “indicated a strong preference for the dismissal of pendent or ancillary claims whenever the district court disposes of the federal claim or claims prior to trial.” United States v. Zima, 766 F.2d 1153, 1158 (7th Cir.1985); American Natl. Bank & Trust Co. v. Bailey, 750 F.2d 577, 581 (7th Cir.1984), cert. denied, — U.S. -, 105 S.Ct. 2324, 85 L.Ed.2d 842 (1985). The district court faced with pendent state claims after dismissing the federal claims must follow a two-step process: (1) it must determine whether it had the power to exercise jurisdiction over the pendent claim (because the federal claim was substantial and there was a common nucleus of operative fact between the state and federal claims), and (2) it must exercise its discretion to determine whether such jurisdiction should be retained. Zima, 766 F.2d at 1158. It appears that the first step is satisfied in this case, and thus the court must consider the factors of judicial economy, convenience and fairness to the litigants in determining whether to exercise its discretion and retain jurisdiction of Count III.

Because Count III only seeks damages from Hanna, it seems obvious that the plaintiffs will seek to obtain the relief sought in Count I in a state court proceeding, whether it is brought pursuant to I.C. 6-6-2.1-1105 or as an equitable action for injunctive relief. Plaintiffs may also decide to pursue their state remedies against Hanna under the Tort Claims Act. This separate state lawsuit or lawsuits would pose a serious judicial diseconomy by creating multiple lawsuits to decide one dispute. Multiple lawsuits also pose problems of convenience for the litigants who must do twice or thrice the work that one lawsuit would pose. The ability to bring all of the issues in this case within the confines of a single lawsuit in the state court would allow for a single test of the propriety of the assessment and of Hanna’s actions in bringing the assessment about. That is economical, convenient, and fair to the litigants. Therefore, the court will exercise its discretion and dismiss the pendent state claim.

Conclusion

For the reasons stated above, the motion to dismiss the complaint will be GRANTED.

      . An argument could be made (although the complaint does not even hint at it) that Hanna’s actions also deprived the plaintiffs of a liberty interest in conducting their businesses. It is not at all clear that such a claim would actually amount to a cognizable liberty interest; research does not reveal cases which recognize conduct of a business as a liberty interest in this context. A closely related area, involving damage to an individual’s reputation which impinges on the individual’s ability to obtain a job or carry on his profession, reveals that a liberty interest is implicated only when (1) the individual’s good name, reputation, honor or integrity are at stake by such charges as immorality, dishonesty, alcoholism, disloyalty, Communism or subversive acts, or (2) the state imposes a stigma or other disability on the individual which forecloses other opportunities. Munson v. Friske, 754 F.2d 683, 693 (7th Cir.1985). Assuming that the plaintiffs here can make out a liberty interest claim, however, the analysis would be the same: such liberty interests only implicate procedural due process under the fourteenth amendment, and not some substantive constitutional provision.

      . The plaintiffs might argue that the 180 day notice requirement of I.C. 34 -4-16.5-6 prevents them from now bringing suit under the Tort Claims Act. The section provides that notice must be provided within 180 days “after the loss occurs." There is at least a plausible argument to be made that the loss arising from the assessment would not occur until some part of the assessment is paid, which plaintiffs have made clear has not yet occurred. Economic loss like the ceasing of business operations or the filing of bankruptcy would not occur until the date of that event; if one presumes that the plaintiffs were still in business after the May 8, 1985 hearing in Indianapolis, then it may be possible to file timely notice of the loss. Further, the notice provisions of the Act are to be read in conjunction with the purpose of the Act. Indiana courts have held that substantial compliance with the notice provisions will suffice when the purpose of the Act has been satisfied. Galbreath v. City of Indianapolis, 253 Ind. 472, 255 N.E.2d 225 (1970); Bd. of Aviation Commissioners of St. Joseph County v. Hestor, 473 N.E.2d 151, 154 (Ind.App.1985). The purpose of the Act is to advise the political subdivision of an incident so that it may promptly investigate the surrounding circumstances. Hestor, 473 N.E.2d at 154. While actual knowledge of an incident by the political subdivision will not relieve a claimant of the duty to give notice, id.; Burggrabe v. Bd. of Public Works of City of Evansville, 469 N.E.2d 1233 (Ind.App.1984), substantial compliance can be sufficient, and can be achieved without any writing at all. Delaware County v. Powell, 272 Ind. 82, 393 N.E.2d 190, 192 (1979); Lawrence County Commissioners v. Chorely, 398 N.E.2d 694 (Ind.App.1979). The filing of the complaint in this case may be sufficient to constitute substantial compliance with the notice requirements. The court therefore concludes that the 180 day notice requirement would not bar a Tort Claims Act suit.

        Finally, even if the 180 days has run, so that a claim under the Act is now time-barred, the remedy would still be adequate for purposes of a Parratt analysis. Justice Rehnquist’s plurality opinion made it clear that the fact that a remedy was available but unused, or that it did not provide all the relief sought "does not mean that the state remedies are not adequate to satisfy the requirements of due process.” 451 U.S. at 543-44, 101 S.Ct. at 1917. Because the court finds that a claim under the Act could be brought, the 180 day notice requirement’s effect on plaintiffs potential Tort Act claims is of no moment.


source: Caselaw Access Project

author: JOSEPH H. YOUNG, District Judge.

license: Public Domain

text:
    TRANSAMERICA ICS, INC. v. DEPENDABLE CONTAINER & CHASSIS SERVICE, INC. OF BALTIMORE.
    Civ. No. Y-84-3329.
    United States District Court, D. Maryland.
    Nov. 29, 1985.

      Kieron F. Quinn and Robert B. Kershaw, Baltimore, Md., for plaintiff.
    James R. Eyler and Stephen J. Hughes, Baltimore, Md., for defendant Dependable Container.
    Roy L. Mason and Larry A. Ceppos, Baltimore, Md., for defendant Marine Repair Services.
    Joseph A. Schwartz, III, Baltimore, Md., for third-party defendant Apex Oil Co.
   JOSEPH H. YOUNG, District Judge.

MEMORANDUM

Plaintiff Transamerica ICS, Inc. (“ICS”) filed suit against Dependable Container Chassis & Service, Inc. (“Dependable”) for the still-unexplained loss of 113 20-foot steel containers while the containers were in Dependable’s care and custody pursuant to a depot agreement between the parties. Dependable brought a third-party action against Marine Repair Services of Maryland, Inc. (“Marine”), claiming that it had entrusted the containers to Marine’s care. This Court heard the case without a jury October 18, 1985, and makes the following findings of fact and conclusions of law, whether or not so specifically designated.

FINDINGS OF FACT

1. ICS is an owner and lessor of 20 and 40 foot intermodal shipping containers and is incorporated under the laws of the State of Delaware, with its principal place of business in White Plains, New York.

2. Dependable was a container depot operator between 1977 and March, 1984, and is incorporated under the laws of the State of Maryland, with its principal place of business prior to its cessation of business in March, 1984, in Baltimore City.

3. Marine Repair is a container depot operator with a place of business at 1701 Highland Avenue.

4. On or about April 1, 1980, ICS and Dependable entered into a written depot agreement for the repair and storage of ICS containers by Dependable in exchange for a fee. At all material times the aforesaid agreement was in effect between ICS and Dependable.

5. The depot agreement provided that Dependable would:

Use all reasonable care to protect the equipment of ICS in its possession from loss or damage and should be liable for any such loss or damage resulting from agent’s lack of care or that of its employees, agents or servants.

6. Between January, 1981 and September, 1982, ICS delivered to the Old North Point Road depot facility operated by Dependable for storage hundreds of containers among which were 113 20-foot steel ocean-going shipping containers identified by container number.

7. Dependable repositioned ICS’s 113 ocean-going shipping containers to its nearby Highland Avenue container storage facility for storage. By October 8, 1982, all of ICS’s 113 containers had been repositioned to and were located upon the Highland Avenue container storage facility.

8. By letter agreement dated September 22, 1982, effective as of August 9, 1982, Marine Repair subleased Dependable’s Highland Avenue container storage facility from Dependable and undertook all of Dependable’s rights and obligations pursuant to its lease with Apex Oil Company pertaining to the property.

9. When Dependable vacated the Highland Avenue premises, it left a group of ICS containers, including the 113 missing ICS containers, on the Highland Avenue premises.

10. Dependable left the ICS containers in a long, narrow shed, piled three deep, where the containers were not easily visible and even a rough estimate of the number of containers in the shed was impossible upon casual visual inspection.

11. Vincent Marino, Vice President of Marine, requested that Henry Johnson, Vice-President of Dependable, remove the containers from the Highland Avenue premises. Johnson assured Marino that he would remove the containers within three months, and Marino agreed to let the containers remain on the site as a favor to Johnson.

12. Marine made repeated requests to Dependable to remove the containers from the Highland Avenue premises. Finally, after several months had passed and it became apparent that Dependable would not move the containers, Marino, Johnson, and Vincent Marino, Sr., the Corporate President of Marine, entered into a verbal agreement whereby Dependable agreed to pay Marine for the storage of the ICS containers until it could move the containers elsewhere.

13. Under the terms of the agreement Dependable agreed to pay Marine for storing the containers from the date Marine had sub-leased the Highland Avenue site. Dependable said that there were 323 ICS containers left at the Highland Avenue site. Marine accepted that figure without making its own inventory and billed Dependable on the basis of that number.

14. Despite the oral agreement, Marine made repeated requests to Dependable to remove the containers from the property. The arrangement was unprofitable for Marine because depot operators dealing with ocean-going containers make their profits from the repair of the containers, not storage. In addition, the shed was a particularly valuable part of the Highland Avenue site because it protected containers from the elements, and Marine could not satisfy the requests of its customers to store other containers in the shed. As a result, Marine continually raised its storage charges to Dependable, eventually billing Marine $2,000 a month — three times the going industry rate — in an attempt to goad Dependable into removing the ICS containers.

15. Marine was aware that Dependable was experiencing financial difficulties at the time, largely as a result of a general downturn in the container industry. Dependable’s other facilities were full of unused containers during the period 1982-January, 1984, and it had no place to put the ICS containers. Dependable was also experiencing management difficulties during that period. As a result, Dependable lagged behind in its payments to Marine for the storage of the ICS containers, paying over $17,000 to Marine from mid-1983 to the end of that year, but failing to pay $12,732 in additional charges that were due Marine.

Í6. In late 1983, Vincent Marino, Jr. finally entered into a direct leasing agreement with ICS for the storage of its containers at the Highland Avenue facility. As part of its agreement with Marine, ICS paid Marine the balance of $12,732 owed by Dependable for the storage of the ICS containers.

17. During this entire period all bills submitted by Dependable to ICS for storage charges relating to the containers at Highland Avenue were paid.

18. At the request of ICS, Marine conducted an inventory of the ICS containers at Highland Avenue in early 1984 and discovered that 113 of the containers were missing.

19. It is the custom in the ocean-going-container depot business to keep inventory of all containers brought to the depot by use of a filing card system. The containers are numbered, and a separate card is maintained for each container. It is also the custom of the depot business to document transfers of the care and custody of containers with interchange receipts (“TIRs”). The TIRs reflect movements of containers in and out of a depot operator’s control, and bear notations with respect to required repairs.

20. When Marine took over the subleased premises at Highland Avenue from Dependable, the offices of the depot were in a shambles. No inventory cards for the remaining ICS containers were found. Dependable did not send TIRs to ICS evidencing any change of control over the containers, and in fact continued to bill ICS for storage fees.

21. When Dependable vacated the Highland Avenue site, it left behind other containers in addition to the ICS containers. During the fall of 1982 Dependable dispatched some of those containers out of the Highland Avenue site. Marine performed the actual labor in moving the containers for a fee, but Dependable arranged for the customers to pick up the containers, took care of the paperwork, and generated TIRs reflecting those transfers.

22. During the whole period Dependable left the ICS containers at Highland Avenue, Dependable never conducted an inventory of the containers, and did not keep a card system on the containers or transfer a card system for the containers to Marine. Henry Johnson of Dependable occasionally visited the Highland Avenue site, but never conducted more than a casual visual inspection of the ICS containers.

23. Marine did not conduct an inventory of the ICS containers until requested to do so by ICS in early 1984. Marine considered the ICS containers a nuisance, the responsibility of Dependable, and made no attempt to move them or dispatch them.

24. The Highland Avenue site was an open industrial park. Dependable leased the premises from Apex Oil Company. Apex provided a security guard at the front entrance to the park. There was no evidence that either Dependable or Marine considered Apex responsible for security at the site. After working hours the site was deserted. A used container retailer apparently operated out of another part of the site. There was no evidence that the security provided at the Highland Avenue site fell beneath the general security standards of the industry.

25. Removal of a single ICS 20-foot container from the Highland Avenue facility would require a forklift, a forklift operator, a chassis and a truck and driver to lift, load and remove the container from the depot.

26. Each of ICS’s 113 containers were distinctively painted with ICS’s red-brown color, and conspicuously identified with ICS’s logos and container numbers and prefixes.

27. Investigation of the loss of its 113 containers has failed to establish the circumstances surrounding the loss or the location of any of the ICS containers.

28. There is no market for used, seaworthy containers. The evidence indicated that used, damaged containers sold for $700-1200 during 1982-1984. There was conflicting testimony regarding the price of new containers during the period.

29. ICS’s 113 containers had a depreciated stated replacement value of $244,580. Depreciated stated replacement value is calculated by a formula which ICS uniformly used to value leasable used containers which are lost or constructively lost by damage. It is a method of valuation of leasable used containers used throughout the container leasing industry. ICS representative Emil Sommer testified that it cost ICS $2200 to buy new containers and ship them from Korea. The stated replacement value of the containers is thus less than their actual replacement value.

30. ICS did not lose any business because of the disappearance of the 113 containers; no dispatch requests for those particular containers were received by Dependable or Marine. The evidence was insufficient to establish that the loss of the containers represented a loss of capital to ICS that would justify an award of prejudgment interest.

CONCLUSIONS OF LAW

Under Maryland law which governs this diversity case, “To constitute a bailment there must be an existing subject matter, a contract with reference to it which involves possession of it by the bailee, delivery, actual or constructive, and acceptance, actual or constructive.” Broadview Apartments v. Baughman, 30 Md.App. 149, 151, 350 A.2d 707 (1976), quoting Refining Co. v. Harvester Co., 173 Md. 404, 415, 196 A. 131 (1938). There can be no doubt, and Dependable concedes, that the depot agreement between ICS and Dependable created a bailment. Under the law of bailments and the terms of the contract, Dependable owed ICS a duty of reasonable care for the containers.

Dependable argues that it discharged its duty of reasonable care by leaving the containers with Marine. It claims that Marine should contribute to, or indemnify it against, any judgment against Dependable in favor of ICS, because it claims that Marine was a sub-bailee. Neither argument holds up under the evidence.

Dependable argues that it left the ICS containers on Marine’s lot, that the ICS containers therefore received the same care as the other containers on Marine’s lot, and that there was no evidence that Marine’s care for the containers on the lot fell beneath standards of care in the industry. But the evidence showed that Marine did not give the ICS containers the same level of care it gave its own containers. Marine did not keep inventory cards for the ICS containers, and did not take an inventory of those containers, as it did with its own containers. Based upon the repeated requests of Marine to remove the containers, Dependable knew that Marine considered the ICS containers a nuisance and considered them the exclusive property of Dependable. From the casual inspections of the Highland Avenue site by Mr. Johnson, Dependable knew that Marine was exercising absolutely no control or dominion over the containers. Marine simply left the containers where it found them, and repeatedly asked Dependable to move them off the premises.

Dependable’s failure to return the containers makes out a prima facie case of lack of due care. Charles J. Miller, Inc. v. McClung-Logan Equipment Co., 40 Md.App. 585, 392 A.2d 1153 (1978). Assuming arguendo that leaving the containers with Marine was sufficient to rebut the presumption of negligence, ICS proved by a preponderance of the evidence that Dependable was negligent in several specific respects. Dependable did not provide Marine with inventory cards of the ICS containers. Johnson’s casual visual inspections of the shed where the ICS containers were stored were not sufficient to detect the disappearance of even a considerable number of the containers. Given the difficulties of removing the containers, any conscious theft must have resulted from someone’s knowledge that Dependable was not properly keeping track of the ICS containers. If the disappearance was the result of confusion or inadvertance, the confusion was engendered by Dependable’s virtual abandonment of the ICS containers in a non-visible part of the Highland Avenue site. And if the containers disappeared over a long period of time, which seems probable given the difficulties of moving and disposing of the containers, then Dependable’s failure to keep an inventory of the containers prevented it from discovering and stopping the gradual disappearance of the containers.

It is also clear that Marine is not required to indemnify Dependable for Dependable’s own negligence. Dependable did not deliver the containers to Marine, and Marine did not take possession of them, two necessary preconditions for the creation of a bailment. There was no delivery because Dependable did not turn over any inventory cards to Marine, never generated any TIRs to ICS indicating that it had renounced possession over the containers, and did not tell Marine that Marine was free to deal with ICS directly until mid-1983. Dependable dispatched other containers that it left at Highland Avenue and did not require Marine to dispatch them.

Marine never took possession of the containers because it never moved them, never took an inventory of them, never dispatched them. Marine made it clear that it considered the containers the responsibility of Dependable, and also clearly told Dependable that it wanted nothing to do with the containers and wanted the containers removed.

The storage payments did not change the nature of the relationship between Dependable and Marine; both parties clearly understood that the containers were the responsibility of Dependable. Marine wanted the containers off its property, and the escalating payments were part of the effort to get Dependable to move the containers. Under the circumstances the payments created a lease only, similar to the lease of a parking space which does not create an easement. Broadview Apartments, supra.

Marine made it clear that it allowed Dependable to leave the containers at Highland Avenue reluctantly, and nothing more. Under the mutual understanding of their relationship, Marine owed Dependable no duty to take an inventory of the ICS containers or to provide after-hours security.

Accordingly, the Court will enter judgments for plaintiff ICS and third-party defendant Marine. The Court holds that the stated depreciation value of the missing containers — $244,580—is the best measure of plaintiff's damage.


author: SHADUR, District Judge.

text:
    CENTRAL ILLINOIS SAVINGS & LOAN ASSOCIATION, Plaintiff, v. DUPAGE COUNTY BANK OF GLENDALE HEIGHTS, et al., Defendants.
    No. 85 C 3451.
    United States District Court, N.D. Illinois, E.D.
    Nov. 29, 1985.
    Supplemental Opinion and Order Jan. 7, 1986.

      James S. Barber, Arvey, Hodes, Costello & Burman, Chicago, 111., for Dupage Bank.
    Kenneth L. Cunniff, Chicago, 111., for Powers.
    Morton Denlow, Carolyn J. Gallagher, Dardick & Denlow, Chicago, 111., for Leskovisek and Otten.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Central Illinois Savings & Loan Association (“Central”) originally launched this multiparty litigation by filing a ten-count Complaint (the “Central Complaint”) against DuPage County Bank of Glendale Heights (“Bank”) and several of Bank’s directors, officers and employees, as well as two other banks. Central charges Bank with:

1. a “pattern of racketeering activity” in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968 (Count I);
2. breach of contract (Count VIII); and
3. common law fraud (Count IX);

all arising out of Bank’s sale to Central of a group of promissory notes secured by real estate mortgages. Bank has in turn filed an amended Third-Party Complaint (the “Bank Complaint”) under Fed.R.Civ.P. (“Rule”) 14(a) against Gloria Andrews Leskovisek (“Leskovisek”), Joan Otten (“Otten”), W. Jeanne Powers (“Powers”) and three other individuals, seeking recovery via implied indemnity.

Leskovisek, Otten and Powers now move under Rule 12(b)(6) to dismiss the DuPage Complaint. For the reasons stated in this memorandum opinion and order, those motions are granted.

Facts

On January 20, 1983 Central purchased 16 promissory notes — each secured by a real estate mortgage — from Bank for a total price of approximately $750,000 (Bank Ans. ¶ 4(d)). Bank represented to Central each mortgage was current (Central Complaint Ex. B), and Bank continues to assert that was so (Bank Ans. ¶ 4(c)). But Central premises its Complaint on the allegation the mortgages were in default when Bank assigned them to Central (Central Complaint 114(e)).

Central’s loan policy required it to examine the mortgage documents before acquiring them for its loan portfolio (Bank Complaint 1113). Hence before assigning the 16 notes and mortgages to Central, Bank turned each loan file over to Central to allow Central to check the borrower’s payment history {id.). Those files contained receipts indicating some borrowers had made delinquent payments {id.). Nevertheless Central purchased the 16 notes and mortgages.

In April 1985 Central filed this action, advancing a melange of claims. Bank contends any liability it might owe to Central would spring not from its own actions but rather from the failure of Leskovisek, Otten and Powers to exercise due care in examining the loan file. That negligence, says Bank, entitles it to indemnification.

Leskovisek, Otten and Powers counter with three arguments:

1. Implied indemnity in Illinois has been extinguished by the Illinois Contribution Among Joint Tortfeasors Act (the “Act,” Ill.Rev.Stat. ch. 70, ¶¶ 301-305).
2. No intentional tortfeasor can obtain indemnity.
3. RICO’s comprehensive character indicates Congress intended to preclude a right to indemnity.

pleaded factual allegations in the Bank Complaint, drawing all reasonable factual inferences in Bank’s favor. Wolf oik v. Rivera, 729 F.2d 1114, 1116 (7th Cir.1984). Because the Bank Complaint is contingent on Bank’s liability under the Central Complaint, allegations in the latter document are also accepted as true even though they are disputed in Bank’s Amended Answer ("Bank Ans.’’). Of course no actual findings of fact are made or implied by the recital in the text.

This opinion will first treat briefly with the choice-of-law issue, then consider each of those contentions in turn.

Choice of Law

Bank seeks indemnity from the third-party defendants on two of Central’s claims — the RICO claim (Count I) and the common-law fraud claim (Count IX). Central’s RICO claim confers federal-question jurisdiction on this Court under 28 U.S.C. § 1331. Central’s common-law claim is properly before this Court under the doctrine of pendent jurisdiction because it “derivet ] from a common nucleus of operative fact” with the RICO claim (which also sounds in fraud). United Mine Workers of America v. Gibbs, 383 U.S. 715, 725, 86 5. Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). Bank’s right to indemnity on Central’s RICO claim (if it exists at all) must be grounded in federal law. Cf. Northwest Airlines, Inc. v. Transport Workers Union of America, AFL-CIO, 451 U.S. 77, 90, 101 S.Ct. 1571, 1580, 67 L.Ed.2d 750 (1981) (employer’s asserted right to contribution from union based on liability for Title VII violation derived either from the federal statute or from federal common law). But despite the “common nucleus” involved in the common-law claim, United States ex rel. Hoover v. Franzen, 669 F.2d 433, 437 (7th Cir.1982) (footnote omitted) explains state law — here Illinois law —controls that claim:

[T]his crucial choice-of-law issue [ ] is implicit in the exercise of pendent jurisdiction. The pendent state law claim is governed in all respects by state law____ Merely because the state law claim is in federal court does not lead to the application of federal law. As Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) and its offspring make clear, absent a valid and controlling federal law, state law governs a state law claim (even in nondiversity cases).

Even though the parties have been inattentive to that distinction, citing federal and state precedents indiscriminately, this opinion will analyze Bank’s indemnity claims on those separate bases.

Indemnity for Liability Based on Common-Law Fraud

Complaint Count IX, which sounds in common-law fraud, accuses Bank of fraudulently representing to Central that the notes and mortgages were not in default. Bank seeks to invoke the implied indemnity concept to shift to the third-party defendants Bank’s entire potential liability to Central.

Leskovisek, Otten and Powers retort the implied indemnity doctrine is dead in Illinois, having been extinguished by the Act. In that respect Act § 302(a) is its critical provision:

Except as otherwise provided in this Act, where 2 or more persons are subject to liability in tort arising out of the same injury to person or property, or the same wrongful death, there is a right of contribution among them, even though judgment has not been entered against any or all of them.

Bank first contends Act § 302(a) applies only to personal injury claims and thus does not affect the viability of implied indemnity as a risk-shifting concept in this business fraud case. It is hard to see how that can be advanced with a straight face: Section 302(a) speaks of “liability in tort” without any limitation, and it explicitly extends its coverage to “injury to person or property.” Fraud claims are unquestionably within the plain language of Act § 302(a).

Bank next says the traditional common-law right to indemnity based on a qualitative distinction between the alleged negligence of the indemnitor and indemnitee is preserved by Act § 303:

The pro rata share of each tortfeasor shall be determined in accordance with his relative culpability.

According to Bank, the term “relative culpability” preserves the common-law active-passive distinction. That contention fails for two reasons.

First, Act § 303 comes into play only after Act § 302 has established the availability or unavailability of contribution or indemnity. If (but only if) the Act § 302 answer is “yes,” Act § 303 simply defines the comparative extent of each contributing tortfeasor’s liability. Hence Act § 303 returns the relevant inquiry for current purposes to Act § 302.

Second, Bank wholly ignores the impact on the implied indemnity concept (one of total risk-shifting) of the Act’s technique of dividing liability according to culpability. As this Court recently pointed out in U.S. Home Corp. v. George W. Kennedy Construction Co., 617 F.Supp. 893, 896-97 (N.D.Ill.1985):

[I]t should be obvious from the very origins of implied indemnity that passage of the Act, which removed a good part of the policy underpinnings from the indemnity doctrine, would work some dramatic changes in indemnity as well as contribution. And that has in fact taken place.
>Jc # # J(e >)t
Today, with a contribution regime in place, the rationale for any kind of full shifting of responsibility (under any label) has lost much of its force. And so it is that Morizzo [v. Laverdure ], 127 Ill.App.3d [767,] 774 [83 Ill.Dec. 46, 51], 469 N.E.2d [653,] 658 [ (1st Dist.1984) ] teaches that, absent an express contract for indemnification (and none is involved here), implied indemnification is not even arguably viable after passage of the Act except perhaps in two situations:
However, none of these [post-Act] cases [including Van Jacobs v. Parikh, 97 Ill.App.3d 610 [52 Ill.Dec. 770], 422 N.E.2d 979 (1st Dist.1981) and Lowe v. Norfolk & Western Railway Co., 124 Ill.App.3d 80 [79 Ill.Dec. 238], 463 N.E.2d 792 (5th Dist.1984)] addressed the question raised by the failure of the legislature to provide for the specific preservation of the right of express or implied indemnity.
As we interpret Van Jacobs, this court held that implied indemnity is not extinguished by the passing of the Contribution Act for cases involving some pre-tort relationship between the parties which gives rise to a duty to indemnify, e.g., in cases involving vicarious liability (lessor-lessee; employer-employee; owner and lessee; master and servant). In Lowe, this court held that implied indemnity was still viable with respect to “upstream” claims in a strict liability action.
Except possibly for those causes of action based on the theories of indemnity just enumerated, it is our opinion that the Contribution Act extinguished a cause of action for active-passive indemnity in Illinois.

Post-Morizzo case law has taught that only the four specified pre-tort relationships remain as potential sources for post-Act indemnity (rather than the listed relationships being merely exemplary). Allison v. Shell Oil Co., 133 Ill.App.3d 607, 611, 88 Ill.Dec. 720, 723, 479 N.E.2d 333, 336 (5th Dist.1985).

This case (like U.S. Home) does not involve an express contract for indemnification. Nor does Bank present an “upstream” claim in a strict liability action. Consequently Bank’s indemnification claim must depend on the existence of “some pre-tort relationship between the parties which gives rise to a duty to indemnify.” Morizzo, 127 Ill.App.3d at 774, 83 Ill.Dec. at 51, 469 N.E.2d at 658.

Bank says it is not directly liable for the alleged fraud perpetrated on Central. Instead Bank urges it is only vicariously liable for the negligent failure of Central’s employees — Leskovisek, Otten and Powers — to examine the mortgage files adequately before the assignment. It is an understatement to say that is not the sort of “vicarious liability” situation identified in Morizzo, for Central’s fraud charge against Bank rests not on an implied imputation of Central’s employees’ negligence to Bank, but rather on Bank’s own allegedly intentional misrepresentations.

There is another (and wholly independent) fatal flaw in Bank’s claim for indemnity under Illinois law. Chicago College of Osteopathic Medicine v. George A. Fuller Co., 719 F.2d 1335, 1342 (7th Cir.1983) (emphasis added) teaches such a right must in all events stem from a contractual relationship between the prospective indemnitor and indemnitee:

As we interpret these cases, we hold that Illinois law as it now stands does allow a third party action for indemnity where the third party plaintiff and the third party defendant were contracting parties and the third party plaintiff bears no independent fault in the harm to the original plaintiff.

Here no contractual relationship ever existed between Bank and Leskovisek, Otten or Powers. Bank’s bald assertion of a pretort relationship, stemming from Central’s duty to examine the loan files delivered by Bank before the assignment, bears no resemblance to the type of relationships identified in Morizzo: Each of the lessor-lessee, employer-employee, owner-lessee and master-servant pairings is directly contractual. Bank’s allegation of pre-tort contacts with Leskovisek, Otten and Powers does not meet the test of the Illinois cases.

Bank’s indemnity claim under Illinois law thus falls, fatally wounded from several directions. It is needless to prolong the discussion by applying the Act in a wholly different way: to determine the comparative liability for that fatality.

Indemnity for Liability under RICO

Bank also seeks indemnity for its potential liability to Central under the RICO claim stated in Complaint Count I. In response, Leskovisek, Otten and Powers correctly contend a defendant subject to liability for a RICO violation cannot obtain indemnification.

During the last five years the Supreme Court has considered — and in each case rejected — defendants’ rights to obtain contribution for violations of the Equal Pay Act of 1963 and Title VII of the Civil Rights Act of 1964 (Northwest Airlines, 451 U.S. 77, 101 S.Ct. 1571) and of the Sherman and Clayton Acts (Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981)). Although those cases addressed only claims for contribution, their rationale equally bars Bank’s claim for indemnity. Anderson v. Local Union No. 3, International Brotherhood of Electrical Workers, 582 F.Supp. 627, 633 (S.D.N.Y.), aff'd, 751 F.2d 546 (2d Cir.1984).

Northwest Airlines, 451 U.S. at 90, 101 S.Ct. at 1580 teaches Bank’s right to indemnity under RICO could arise either (1) as an implied cause of action under that statute or (2) as a part of the federal common law. Neither theory works in this case.

I. Implication of a Private Right of Action

To determine whether a federal statute impliedly creates a private right of action, this Court must focus on congressional intent. Daily Income Fund, Inc. v. Fox, 464 U.S. 523, 104 S.Ct. 831, 839, 78 L.Ed.2d 645 (1984) once again identifies the familiar considerations this Court should explore to that end:

That intent may in turn be discerned by examining a number of factors, including the legislative history and purposes of the statute, the identity of the class for whose particular benefit the statute was passed, the existence of express statutory remedies adequate to serve the legislative purpose, and the traditional role of the states in affording the relief claimed.

Without question RICO’s statutory language does not expressly create a right to indemnity in favor of RICO defendants. Nor does it suggest one. Certainly RICO was not “enacted for the benefit of a special class of which [Bank] is a member,” Cannon v. University of Chicago, 441 U.S. 677, 689, 99 S.Ct. 1946, 1953, 60 L.Ed.2d 560 (1979). On the contrary, Bank’s liability to Central on its RICO claim will depend on Bank itself having committed RICO-prohibited criminal conduct. That necessarily would align Bank not as an intended beneficiary of Congress’ solicitude, but (Piper v. Chris-Craft Industries, Inc., 430 U.S. 1, 37, 97 S.Ct. 926, 947, 51 L.Ed.2d 124 (1977)):

[t]o the contrary, [as] a member of the class whose activities Congress intended to regulate for the protection and benefit of an entirely distinct class____

RICO’s structure also counsels against recognition of an implied right to indemnity in Bank’s favor. RICO expressly provides for both criminal and private civil enforcement. Moreover, allowing a right to indemnity would frustrate the very purpose of the treble-damage remedy created by RICO (28 U.S.C. § 1964(c)). As Texas Industries, 451 U.S. at 639, 101 S.Ct. at 2066 put it (after quoting the same language from Piper):

The very idea of treble damages reveals an intent to punish past, and to deter future, unlawful conduct, not to ameliorate the liability of wrongdoers.

Finally, RICO’s legislative history contains no support for DuPage’s insistence on a right to indemnity. That silence joins with all the other already-discussed factors to compel the conclusion Congress did not intend to create an implied right to indemnity from RICO-based liability.

2. Federal Common-Law Right to Indemnity

Among the shaky underpinnings for Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) was its pronouncement that (id. at 78, 58 S.Ct. at 822):

There is no federal general common law. Though the error of Erie’s subversion of the Supremacy Clause is too well entrenched to get a fresh look at this point, its overbroad statement about the total absence of federal common law has not proved similarly untouchable. Texas Industries, 451 U.S. at 640, 101 S.Ct. at 2066 acknowledges federal courts have in fact fashioned federal common law in “some limited areas”:
those in which a federal rule of decision is “necessary to protect uniquely federal interests,” Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 426 [84 S.Ct. 923, 939, 11 L.Ed.2d 804] (1964), and those in which Congress has given the courts the power to develop substantive law, Wheeldin v. Wheeler, [373 U.S. 647, 652, 83 S.Ct. 1441, 1445, 10 L.Ed.2d 605 (1963)].

Bank’s claim for indemnity does not qualify under those or any other theories. RICO’s civil remedies, and the federal interests they assertedly protect, are at this very moment the subject of active congressional debate (the aftermath of Sedima, S.P.R.L. v. Imrex Co., — U.S. -, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985)). But for current purposes the rule of decision must be that expressed in Texas Industries, 405 U.S. at 642, 101 S.Ct. at 2067, in rejecting a federal common-law right to contribution under the antitrust laws (Texas Industries is persuasive both because RICO’s civil remedies drew heavily on the remedies structure in the antitrust field and because the Texas Industries analysis is inherently probative):

Nevertheless, a treble-damages action remains a private suit involving the rights and obligations of private parties. Admittedly, there is a federal interest in the sense that vindication of rights arising out of these congressional enactments supplements federal enforcement and fulfills the objects of the statutory scheme. Notwithstanding that nexus, contribution among antitrust wrongdoers does not involve the duties of the Federal Government, the distribution of powers in our federal system, or matters necessarily subject to federal control even in the absence of statutory authority. Cf. Bank of America v. Parnell, 352 U.S. 29, 33 [77 S.Ct. 119, 121, 1 L.Ed.2d 93] (1956). In short, contribution does not implicate “uniquely federal interests” of the kind that oblige courts to formulate federal common law.

It is equally true that Bank’s assertion of a right to indemnity under RICO primarily affects only the division of liability between private parties. No “uniquely federal interests” are involved.

Moreover, as this opinion’s earlier discussion has shown, nothing in RICO’s statutory language or legislative history suggests Congress intended federal courts to expand or alter the civil remedies already created by RICO. As Northwest Airlines, 451 U.S. at 97, 101 S.Ct. at 1583 said:

In almost any statutory scheme, there may be a need for judicial interpretation of ambiguous or incomplete provisions. But the authority to construe a statute is fundamentally different from the authority to fashion a new rule or to provide a new remedy which Congress has decided not to adopt. Cf. Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 625 [98 S.Ct. 2010, 2015, 56 L.Ed.2d 581 (1978)]. The presumption that a remedy was deliberately omitted from a statute is strongest when Congress has enacted a comprehensive legislative scheme including an integrated system of procedures for enforcement.

That last sentence aptly describes RICO, and it is not for this Court to reshape the remedial structure Congress has created.

As if that were not enough, indemnity concepts do not fit the RICO claim here in any case. Central predicates Bank’s RICO liability on its alleged mail and wire fraud in violation of 18 U.S.C. §§ 1341 and 1343. Intent to defraud is an essential ingredient of each offense; see, e.g., United States v. Pintar, 630 F.2d 1270, 1280 (8th Cir.1980) (mail fraud); United States v. Dorfman, 532 F.Supp. 1118, 1123 (N.D.Ill.1981) (wire fraud). And indemnity “cannot be allowed in favor of an intentional tortfeasor.” Anderson, 582 F.Supp. at 633. Thus Bank’s claim for indemnity would fail regardless of whether this Court were to recognize such a hypothetical right under some civil RICO claims.

Conclusion

Both of Bank’s claims for indemnity fail to state a cause of action. This Court therefore dismisses Bank’s Complaint against Leskovisek, Otten and Powers.

SUPPLEMENTAL OPINION AND ORDER

On November 29, 1985 this Court issued its opinion (the “Opinion”) dealing in part with the current status of the implied indemnity doctrine in Illinois, particularly in light of the Illinois Contribution Among Joint Tortfeasors Act, Ill.Rev.Stat. ch. 70, 111 301-305. This brief supplemental opinion is issued sua sponte in light of last month’s decision of the Illinois Appellate Court for the First Appellate District in Heinrich v. Peabody International Corp., 139 Ill.App.3d 289, 93 Ill.Dec. 544, 486 N.E.2d 1379 (1985).

When this Court wrote the Opinion, it rejected implied indemnity in the context of this case, though it recognized that then-existing Illinois Appellate Court decisions might find the doctrine still viable under special circumstances not present here. Heinrich, on remand from the Illinois Supreme Court (99 I11.2d 344, 76 Ill.Dec. 800, 459 N.E.2d 935 (1984)), has now gone all the way: It spurns implied indemnity in its entirely (139 Ill.App.3d 289, at 301-02, 93 IlLDec. 544, at 553, 486 N.E.2d 1379, at 1388):

We consider that the historical relationship between indemnity and contribution, the policies supporting the adoption of contribution by our supreme court, the legislature’s intent in passing the Contribution Act evidenced by what was said and what was not said, the broad statutory scheme and the specific language of the Act setting forth the general application of contribution (Ill.Rev.Stat.1979, ch. 70, par. 302(a)), all weigh in favor of a finding that implied indemnity has been abolished.

Under this Court’s view of the workings of Erie v. Tompkins (see, e.g., Abbott Laboratories v. Granite State Insurance Co., 573 F.Supp. 193, 196-200) (N.D.Ill.1983)), where there is a division of authority among Illinois Appellate Districts (and there is), Heinrich controls this case. Accordingly the Opinion’s ruling rejecting implied indemnity here is reconfirmed unconditionally.

      . On August 27, 1985 Central voluntarily dismissed Heritage Standard Bank & Trust Company without prejudice.

      . Bank has also filed a cross-claim for indemnity against three of the other defendants named in the Central Complaint.

      . Originally the Bank Complaint also named five other individuals as third-party defendants. On June 27, 1985 Bank voluntarily dismissed those others without prejudice.

      . For purposes of the current Rule 12(b)(6) motion, this Court has accepted as true the well-

      . Leskovisek was Central’s President and one of its directors (Bank Complaint ¶ 4). Otten acted as an Assistant Secretary of Central {id. ¶7). Powers was Central’s Secretary-Treasurer and one of its directors {id. ¶ 5).

      . All the disputants are strangely silent as to Central Complaint Count VIII’s breach of contract claim, addressing the indemnification issue solely in terms of Bank’s potential tort liability (even though the Bank Complaint’s prayer for indemnification speaks in terms of any liability on Bank’s part). Perhaps all the parties recognize Bank’s breach-of-contract liability could not trigger a right of indemnity in any event. See this Court’s discussion of that issue in U.S. Home Corp. v. George W. Kennedy Construction Co., 617 F.Supp. 893, 895 (N.D.Ill.1985).

      . All the operative facts of the Central-Bank transaction were Illinois-based.

      . Less politely, that kind of wholly empty legal position is a prime candidate for Rule 11 treatment.

      . As this Court said in U.S. Home, even this analysis gives Bank the benefit of the doubt as to current Illinois implied indemnity doctrine. Earlier this year Holmes v. Sahara Coal Co., 131 Ill.App.3d 666, 676, 86 Ill.Dec. 816, 822-823, 475 N.E.2d 1383, 1389-90 (5th Dist.1985) surveyed the field (including extensive law review discussion) and concluded in a split decision "that the Contribution Act has extinguished all actions for implied indemnity____” Holmes obviously felt free to resolve that issue for itself in view of the Illinois Supreme Court’s 1984 declinations of an invitation to do so, awaiting further development in the Appellate Courts. Heinrich v. Peabody International Corp., 99 Ill.2d 344, 350-51, 76 Ill.Dec. 800, 803-04, 459 N.E.2d 935, 938-39 (1984); Simmons v. Union Electric Co., 104 Ill.2d 444, 453, 85 Ill.Dec. 347, 351, 473 N.E.2d 946, 950 (1984). Though Holmes has been questioned even within the Fifth Appellate District (see Allison, 133 Ill.App.3d at 609-11, 612, 88 Ill.Dec. at 722-23, 724, 479 N.E.2d at 335-36, 337, which follows the Morizzo analysis), if it were to provide the rule of decision here, this opinion’s discussion of the indemnity claim under Illinois law would have been reduced to a single sentence rejecting it.

      . This does not of course foreclose the possibility that negligence by Central's employees in examining the mortgage documents might render Central’s reliance on Bank’s misrepresentations unreasonable and thus defeat Central’s claim in the first instance. That prospect, however, must remain for the future — it does not vitiate Central’s claim in Rule 12(b)(6) terms.

      . Portions of RICO’s scattered legislative history may be found at H.R.Rep. No. 1549, 91st Cong., 2d Sess. 1, reprinted in 1970 U.S.Code Cong. & Ad.News 4007 and S.Rep. No. 617, 91st Cong., 1st Sess. 1 (1969).

      . There is no need to dwell at length on Erie's deficiencies in scholarship. See 2 W.W. Cross-key, Politics and the Constitution in the History of the United States, ch. xxiii-xxvi (1953); cf. Friendly, In Praise of Erie — and of the New Federal Common Law, 39 N.Y.U.L.Rev. 383 (1964).


author: BUA, District Judge.

text:
    PRODUCTION CONTRACTORS, INC., Plaintiff, v. WGN CONTINENTAL BROADCASTING CO., Defendant.
    No. 85 C 9805.
    United States District Court, N.D. Illinois, E.D.
    Nov. 29, 1985.

      Scott Hodes, Gary L. Starkman, Donald F. Spak, Arvey, Hodes, Costello & Burman, Chicago, 111., for plaintiff.
    David W. Maher, James H. Alesia, Samuel Fifer, Carol Anne Been, Reuben & Proctor, Lawrence Gunnels, Chicago, 111., for defendant.
   ORDER

BUA, District Judge.

Before the Court are cross-motions for summary judgment in a declaratory judgment action involving federal and state copyright and unfair competition claims. For the reasons stated herein, defendant’s motion is granted and plaintiff’s motion is denied regarding the claims based on federal copyright and unfair trade practice law. Accordingly, the plaintiff’s remaining claims, based on state and common law theories of misappropriation, unjust enrichment and unfair competition, are dismissed for lack of pendent jurisdiction.

I. FACTS

Plaintiff Production Contractors, Inc. (PCI), an Illinois corporation, brought this declaratory judgment action, pursuant to 28 U.S.C. § 1338 and 28 U.S.C. §§ 2201-02, in order to protect its rights in the planning, organization, and promotion of a Christmas parade in Chicago. PCI creates special events and provides technical services for special events produced by others. In that connection, PCI is the organizer and promoter of the 1985 McDonald’s Charity Christmas Parade, which will be held on Thanksgiving Sunday, December 1, 1985, on Michigan Avenue between Balbo Drive and Wacker Drive in Chicago.

The parade will consist of over 100 participating units. Such units include decorative floats, horse troops, marching bands, bagpipe groups, tumblers, dancers, large helium-filled balloons, novelty acts, political figures, entertainers, and the first appearance of the year by Santa Claus in Chicago. PCI has incurred expenses in promoting and organizing the parade. Some of these expenses will be recovered from sponsorship fees paid by McDonald’s Corporation, Ace Hardware, Hyatt Hotels, and Midway Airlines.

On October 31, 1985, PCI sold the exclusive Chicago area television broadcast rights in the parade to the American Broadcasting Company (ABC), which owns and operates television station WLS-TV in Chicago. WLS is the “Official Television Station of the 1985 McDonald’s Charity Christmas Parade.” In addition to the Chicago broadcast rights, PCI has sold broadcast rights in the parade in other cities throughout the United States.

On November 6, 1985, PCI informed defendant WGN-TV, and other local television stations, that WLS had been granted the exclusive broadcast rights for the parade. Defendant WGN intends to telecast the parade, using its own personnel and equipment, simultaneously with WLS’ telecast. WGN will sell advertising time for the two-hour broadcast.

On November 18, 1985, PCI demanded that WGN not televise the parade. On November 19,1985, WGN responded that it presently intends to televise the parade. PCI claims that it will be liable to WLS for recoupment of advertising revenues if WLS’ share of the television audience for the parade falls below a certain level due to WGN’s competing telecast.

II. DISCUSSION

The above facts are not disputed. The following legal issues are raised in the parties’ motions: (A) whether plaintiff is entitled to federal copyright protection for the organization and promotion of the parade; (B) whether WGN’s telecast of the parade constitutes false advertising and trade deception under the Lanham Act; (C) whether plaintiff’s state and common law claims are preempted by Section 301(a) of the federal Copyright Act; (D) whether the court has pendent jurisdiction over the state and common law claims; and (E) whether the plaintiff has a cause of action under the state and common laws.

A. Federal Copyright Protection

PCI claims that WGN’s intended broadcast of the parade will infringe on PCI’s copyright in the parade’s production. In support of its claim, PCI argues that the production of the parade (and the parade itself) falls within the definition of a “compilation” of creative works under Sections 101 and 103(a) of the Copyright Act. 17 U.S.C. §§ 101 and 103(a). PCI further contends that the manner in which PCI intends to arrange the flow of the parade, the floats it has created and the special items of interest that it has developed for the parade represent a protected compilation. In addition, PCI argues that the script of narration and the custom-made decorative floats are individually copyrightable. Finally, PCI argues that the telecast of the parade is a copyrightable work, akin to any other television broadcast.

WGN counters that it has a First Amendment privilege to broadcast a public parade on a public street before a large live audience. Second, WGN argues that plaintiff’s failure to secure, or even file for, copyright registration for the parade, the narration script and the decorative floats bars any suit for infringement for failure to comply with § 411(a) of the Copyright Act. 17 U.S.C. § 411(a). Third, WGN contends that PCI cannot avail itself of § 411(b) of the Copyright Act because the parade is not fixed and can never be fixed simultaneously with its transmission, i.e., telecast. 17 U.S.C. § 411(b). Fourth, WGN argues that the parade is not a “work of authorship,” as required in § 102 of the Copyright Act. 17 U.S.C. § 102(a). Fifth, WGN contends that the parade is not and cannot ever be “fixed in a tangible medium of expression,” as required in § 102 of the Copyright Act. Finally, WGN argues that its telecast of the parade falls within the “fair use” exception to copyright infringement. 17 U.S.C. § 107.

Section 102 provides for federal copyright protection of “original works of authorship fixed in any tangible medium of expression____” 17 U.S.C. § 102(a). The two elements most essential in establishing the existence of a copyright are: (1) a work of authorship; and (2) fixation, i.e., fixed in a tangible medium of expression.

In determining whether a parade, including its promotion and production, is a “work of authorship,” the Court finds, and the parties agree that there is, no case law supporting the proposition that the promotion and production of a parade is a work of authorship entitled to copyright protection. In his renowned treatise on copyright law, the late Professor Melville Nimmer cites a parade as an example of an event which is not an original work of authorship. M. Nimmer, 1 Nimmer on Copyright § 2.03[B][2] n. 33. Professor Nimmer discusses a parade in relation to its live broadcast: “If a live broadcast is not based upon a work of authorship, as in the case of a sporting event, a parade, etc., then no statutory copyright infringement would result from its reproduction.” Id.

The Court finds support for Professor Nimmer’s above conclusion in Section 102(b) of the Copyright Act which states:

In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.

17 U.S.C. § 102(b). In light of § 102(b)’s prohibition against copyrighting an idea and of Professor Nimmer’s conclusion, the Court finds that the idea of a Christmas parade is a common one, relatively simple and contains no original creative authorship. See Morrissey v. Proctor & Gamble, 379 F.2d 675, 678 (1st Cir.1967) (a “sweepstakes” contest was not an original creative work of authorship); Noble v. Columbia Broadcasting System, 270 F.2d 938 (D.C.Cir.1959) (idea for television program of spontaneous, unrehearsed, fictitious courtroom drama was not an original creative work of authorship). Therefore, the parade itself, including its production and promotion, is not a work of authorship entitled to copyright protection.

Even if the parade itself is not copyrightable, its telecast might be entitled to copyright protection if it is fixed in a tangible medium of expression. Section 101 provides that a “work consisting of sounds, images, or both, that are being transmitted, is ‘fixed’ for purposes of this title if a fixation of the work is being made simultaneously with its transmission.” 17 U.S.C. § 101. See also 17 U.S.C. § 411(b). The legislative history regarding section 101 specifically refers to the copyrightability of live telecasts of public events:

The bill seeks to resolve, through the definition of “fixation” in Section 101 ..., the status of live broadcasts— sports, news coverage, live performances of music, etc. — that are reaching the public in unfixed form but that are simultaneously being recorded. When a football game is being covered by four television cameras, with a director guiding the activities of the four cameramen and choosing which of their electronic images are sent out to the public and in what order, there is little doubt that what the cameramen and director are doing constitutes “authorship.” The further question to be considered is whether there has been a fixation. ... If the program content is transmitted live to the public while being recorded at the same time, ... the copyright owner would not be forced to rely on common law rather than statutory rights in proceeding against an infringing user of the live broadcast.

Notes of Committee on the Judiciary, House Report No. 94-1476, Title 17, United States Code Annotated (West Pub.1977) p. 14.

This passage of legislative history suggests that the live telecast of a parade is copyrightable because the telecast is a work of authorship which is fixed simultaneously with its transmission. In addition, there is some case law to support the proposition that a live telecast of a sporting event is copyrightable. National Association of Broadcasters v. Copyright Tribunal, 675 F.2d 367, 378 (D.C.Cir.1982); New Boston Television, Inc. v. Entertainment Sports Programming, 1981 Copyright Law Decisions (CCH) ¶ 25,293 (D.Mass.1981). See also Nimmer on Copyright, § 1.08[C][2] at 1-51. However, the Court finds the above cases distinguishable from this case. In New Boston, the district court considered the videotaping, excerpting and rebroadcasting of the plaintiff’s copyrighted films for defendant’s sports highlights. The court in New Boston noted, in the context of a “fair use” doctrine analysis, that the defendants had an opportunity to record the sporting events themselves but did not do so.

In the present case, WGN will use its own equipment, cameramen, and directors to create its own work of authorship in the parade telecast. WGN is not engaging in videotaping, tape-delays, or secondary transmission of WLS’ broadcast. Therefore, the cases involving copyright protection of live telecasts, especially of sporting events, do not apply here to provide a basis for copyright infringement by WGN of WLS’ telecast of the parade. Further, the Court holds that the telecast of the parade is a work of authorship fixed simultaneously with its transmission only for purposes of copyright protection from videotaping, tape-delays, or secondary transmissions. This protection does not extend to prevent another simultaneous live telecast by another television or radio station. See Pittsburgh Athletic Co. v. KQV Broadcasting Co., 24 F.Supp. 490 (W.D.Pa.1938) (unauthorized play-by-play broadcast of a baseball game from a nearby rooftop addressed under unfair competition and misappropriation theories). Therefore, WLS’ live telecast is not sufficiently “fixed” to prevent WGN’s simultaneous live telecast of the parade.

Since WGN will not use PCI’s script of narration in its independent telecast, the issue of registration and infringement of the script is irrelevant. In addition, the potential infringement of the decorative floats is barred under § 411(a) of the Copyright Act by PCI’s failure to obtain, or even file for, copyright registration for the floats. This failure is not excused by § 411(b) because the floats are “fixed” long before their transmission, i.e., when constructed, and they are tangible objects not falling within the “sounds” or “images” covered by § 411(b).

Finally, in light of its findings that the parade itself is not a work of authorship entitled to copyright protection and that the live telecast of the parade has no copyright protection against a simultaneous and independent live telecast, the Court grants defendant’s motion for summary judgment and denies plaintiff’s motion for summary judgment regarding federal copyright protection. Accordingly, the Court does not reach the questions concerning First Amendment privilege and the “fair use” exception to copyright infringement. Insofar as it overlaps the “fixation” issue under Section 411(b), the Court’s above analysis applies to that issue as well.

B. Lanham Act Protection

PCI argues that WGN’s telecast will violate Section 43(a) of the Lanham Act. 15 U.S.C. § 1125(a). In support of this argument, PCI asserts that: (1) WGN’s telecast of the parade will create a “false impression” of sponsorship; and (2) WGN’s telecast of the parade will divert viewers away from WLS’ telecast. Defendant WGN counters that PCI has failed to establish the “secondary meaning” necessary to associate the parade in the public’s mind with PCI as its source or originator. In addition, WGN asserts that the plaintiff has failed to produce any evidence of a likelihood of confusion created by WGN’s telecast.

The Court finds the result and reasoning in Walt-West Enterprises v. Gannett Co., 695 F.2d 1050 (7th Cir.1982) to be persuasive in the present case. In Walt-West, two competing FM radio stations disputed each other’s use of “FM 107” to designate a radio frequency near 107 mHz. The Seventh Circuit Court of Appeals reversed injunctive relief granted under Section 43(a), finding insufficient proof of secondary meaning in the designation of “FM 107.” The insufficient proof of secondary meaning was linked to the consequent failure of the plaintiff in Walt-West to prove likelihood of confusion in the public’s mind. Id. at 1063.

In the present case, PCI’s conclusory statement that WGN’s telecast of the parade will necessarily create the false impression that WGN is somehow connected with PCI falls far short of establishing likelihood of confusion and the secondary meaning associating PCI with the parade, which is a necessary basis for any public confusion.

C. State and Common Law Claims

Section § 1338(b), 28 U.S.C., provides for federal court jurisdiction over state and common law unfair competition claims when they are “joined with a substantial and related claim under the copyright ... laws.” 28 U.S.C. § 1338(b). Although a district court has subject matter jurisdiction of an unfair competition claim when it is joined with a substantial and related claim under the copyright laws, in the exercise of its discretion, the district court may dismiss the pendent claim when the federal claim is dismissed prior to trial. Jason v. Fonda, 526 F.Supp. 774, 778 (C.D.Cal.1981) (citing Wham-O-Mfg. Co. v. Paradise Mfg. Co., 327 F.2d 748, 753 (9th Cir.1964)). See also Davis v. United Artists, Inc., 547 F.Supp. 722, 728 (S.D.N.Y.1982) (copyright and trademark claims dismissed prior to trial).

In the present case, the Court finds no cause of action for plaintiff's claims under federal copyright and unfair trade practice laws. Accordingly, in the exercise of its discretion, the Court dismisses plaintiff’s remaining state and common law claims, based on unfair competition, misappropriation, and unjust enrichment, for lack of pendent jurisdiction. The Court notes that the plaintiff may very well have a good cause of action on its state and common law claims. However, since WGN does business in Illinois, diversity is lacking in this case and the Court has no jurisdiction to hear those claims.

III. CONCLUSION

For the reasons stated above, the Court grants defendant’s motion for summary judgment and denies plaintiff’s motion for summary judgment on its claims brought under the federal copyright and unfair trade practice laws. Accordingly, plaintiff’s remaining state and common law claims are dismissed for lack of pendent jurisdiction.

IT IS SO ORDERED.