author: GENE CARTER, District Judge.

text:
    UNITED STATES of America v. Jerry SMITH. UNITED STATES of America v. James K. MARIEA.
    Criminal Nos. 85-00019 P, 85-00020 P.
    United States District Court, D. Maine.
    July 30, 1985.

      William H. Browder, Jr., Asst. U.S. Atty., Portland, Me., for U.S.
    Joseph Field, Brunswick, Me., for both Mariea and Smith.
   MEMORANDUM OF DECISION AND ORDER

GENE CARTER, District Judge.

Defendant James Mariea, a member of the armed forces stationed at the United States Naval Air Station in Brunswick, Maine, is charged with three offenses, defined under the law of the State of Maine, alleged to have been committed within the federal enclave of the United States Naval Air Station. These charges are: (1) operating a motor vehicle under the influence of intoxicating liquor, under 29 M.R.S.A. § 1312-B; (2) eluding police, under 29 M.R. S.A. § 2501-A(3); and (3) leaving the scene of an accident, under 29 M.R.S.A. § 894. The charges are brought against him in the United States District Court on the Government’s theory that the state criminal statutes are made applicable to him under the Assimilative Crimes Act (ACA), 18 U.S.C. § 13. The Defendant demanded a jury trial and subsequently filed, on April 22,1985, a motion to dismiss the pending charges against him.

Defendant Jerry Smith, a member of the armed forces stationed at the United States Naval Air Station in Brunswick, Maine, is charged with operating a motor vehicle under the influence of intoxicating liquor under 29 M.R.S.A. § 1312-B pursuant to the ACA. Like Defendant Mariea, Defendant Smith demanded a jury trial and subsequently filed a Motion to Dismiss the charge.

Because the preliminary issues raised in the two Motions to Dismiss are identical, the Court has, without objection, consolidated the cases for hearing and decision on the motion.

Defendants raise three grounds for dismissal. Two of those grounds have no merit. Their third argument merits closer analysis. They argue that the charges brought against them are punishable under the Uniform Code of Military Justice (UCMJ), 10 U.S.C. § 801, et seq., and that the provisions of the UCMJ are “enactments of Congress” within the meaning of the ACA which preclude assimilation of state statutes punishing conduct punishable under the UCMJ.

The issue is simple: whether the federal Assimilative Crimes Act assimilates state statutes punishing conduct which is also punishable under the Uniform Code of Military Justice. The Assimilative Crimes Act provides:

Whoever within or upon any of the places now existing or hereafter reserved or acquired as provided in section 7 of this title, is guilty of any act or omission which, although not made punishable by any enactment of Congress, would be punishable if committed or omitted within the jurisdiction of the State, Territory, Possession, or District in which such place is situated, by the laws thereof in force at the time of such act or omission, shall be guilty of a like offense and subject to a like punishment.

18 U.S.C. § 13. Thus, the crimes charged here are punishable under state law, made federal law by the ACA, unless they are made punishable “by any enactment of Congress.”

The Uniform Code of Military Justice is an enactment of Congress. See 10 U.S.C. § 801, et seq. The Court of Appeals for the Fourth Circuit has held, however, that it is not an “enactment of Congress” within the meaning of the Assimilative Crimes Act. United States v. Walker, 552 F.2d 566 (4th Cir.1977). In Walker, the defendant was a member of the armed forces who was convicted of drunk driving within a military reservation in Virginia. His conviction was based on a Virginia state law, applied pursuant to 18 U.S.C. § 13, supra, and took place in the United States District Court. The defendant argued that he could not be charged under the state law because drunken driving was punishable under Article 111 of the Uniform Code of Military Justice, 10 U.S.C. § 911, a congressional enactment.

The Fourth Circuit, in a footnote, rejected the defendant’s argument for three reasons. 552 F.2d at 568, n. 3. The Court stated that the defendant’s construction of the ACA would produce a result inconsistent, first, with “well-established doctrine ... that district courts have at least concurrent jurisdiction with military courts over offenses committed by military, personnel,” and, second, “with the modern trend toward trying military personnel before district courts where the offense is essentially civilian in nature.” Id. Third, the Court stated that the defendant’s construction of the ACA would mean that civilians and military personnel would receive disparate treatment for precisely the same conduct on a military reservation. Because the Court did not “believe that Congress intended ... these anomalies,” the Court construed “any enactment of Congress” as used in 18 U.S.C. § 13 to mean only enactments “of general applicability.” Since the UCMJ normally applies only to military personnel, it is not an enactment of general applicability.

The Government urges this Court to adopt the construction of 18 U.S.C. § 13 set forth in Walker. The Fourth Circuit’s decision does not bind this Court, and the Defendants argue that the Walker court’s briefly-stated rationale is incorrect and should be rejected. The Court is persuaded that a more thorough exploration of the meaning of the Assimilative Crimes Act is justified.

The starting point for statutory interpretation is the language of the statute itself. See Ciampi v. Secretary of Health and Human Services, Inc., 687 F.2d 518, 524 (1st Cir.1982), Massachusetts Financial Services, Inc. v. Securities Investor Protection Corp., 545 F.2d 754 (1st Cir.1976). If the language is plain, courts should enforce it according to its terms, unless adherence to the language would lead to an absurd result or one at variance with the policy of the statute. Massachu setts Financial Services, 545 F.2d at 756. The First Circuit explained:

A basic principle which must guide our approach to the instant case is that a statute’s plain language is the primary indicator of its meaning:
It is elementary that the meaning of a statute must, in the first instance, be sought in the language in which the act is framed, and if that is plain, and if the law is within the constitutional authority of the lawmaking body which passed it, the sole function of the courts is to enforce it according to its terms. Caminetti v. United States, 242 U.S. 470, 485 [37 S.Ct. 192, 194, 61 L.Ed. 442] ... (1917).
Of course, deference to the plain meaning rule should not be unthinking or blind. We would go beyond the plain meaning of statutory language when adherence to it would produce an absurd result or “an unreasonable one ‘plainly at variance with the policy of the legislation as a whole.’ ”

Id. (citations omitted). It is undisputed that the Uniform Code of Military Justice is an enactment of Congress, within the plain meaning of the phrase. Thus, it appears that the UCMJ is included within the plain language which excepts conduct punishable by “any enactment of Congress” from the operation of the federal Assimilative Crimes Act.

The Fourth Circuit in Walker found reason to narrow the reach of the plain language, “any enactment of Congress,” to Congressional enactments “of general applicability.” This Court is not persuaded by Walker that there exist “anomalies” that justify departure from the plain language of this Act, particularly in light of the clear purpose of the Act. The Court will address the anomalies listed by the Fourth Circuit in Walker.

Contrary to the Walker court’s assertion, a broader construction of the phrase, “any enactment of Congress,” is not inconsistent with the doctrine that, under 18 U.S.C. § 3231, district courts have concurrent jurisdiction with military courts over offenses committed by military personnel. Section 3231 of Title 18 simply provides that district courts have original jurisdiction “of all offenses against the laws of the United States.” The jurisdictional question is whether there has been an offense against the “laws of the United States” within the meaning of 18 U.S.C. § 3231. The question in this case — whether a particular state law is assimilated by the Assimilative Crimes Act — is entirely distinct, and its resolution is not logically dependent upon the issue of concurrent jurisdiction.

The Fourth Circuit in Walker also notes “the modern trend toward trying military personnel before district courts where the offense involved is essentially civilian in nature.” 556 F.2d at 568, n. 3. Again, the question here is whether there is an offense charged under the Assimilative Crimes Act. Assuming that there is a policy favoring trial of military personnel in civil courts, such trial can only be of offenses cognizable in a federal court. The Maine OUI statute is only cognizable as defining a federal criminal offense for purposes of prosecution in a federal court if the offense defined by the state law is assimilated by the Assimilative Crimes Act. The policy alluded to in Walker cannot afford the grounds for transmutation of a state offense into a federal offense; that can only be done by application of the language and purpose of the Assimilative Crimes Act.

Finally, the Court in Walker was concerned that civilians on military reservations would be subject to a different law than military personnel for precisely the same conduct. This would be true in any instance in which the UCMJ happens to overlap the criminal law in the state where a military reservation is located. Disparate treatment of civilians and soldiers is a manifest premise of the UCMJ; its existence and its content demonstrate a congressional purpose to give particularized treatment to military personnel for certain conduct identified by Congress. Disparate treatment may result any time a person in the military is charged under the UCMJ for conduct also punishable under state law. In essence, the Fourth Circuit’s rationale in Walker would mean that the offenses made specifically punishable by the UCMJ are impliedly repealed by the more general Assimilative Crimes Act.

The purpose of the Assimilative Crimes Act is to fill gaps “where no action of Congress has been taken to define the missing offenses.” Williams v. United States, 327 U.S. 711, 719, 66 S.Ct. 778, 782, 90 L.Ed. 962 (1946); United States v. Marcyes, 557 F.2d 1361, 1364 (9th Cir.1977). The ACA does not apply where another federal statute makes criminal the same conduct condemned under state law. United States v. Best, 573 F.2d 1095, 1098 (9th Cir.1978); United States v. Patmore, 475 F.2d 752, 753 (10th Cir.1972). It is with reference to the fundamental purpose of the ACA to fill gaps in the federal law that the language of the Act must be construed. Where there is no gap to be filled, the ACA does not apply.

The reasons given by the Fourth Circuit in Walker for departing from the plain meaning and the purpose of the ACA do not withstand analysis. See, supra. Neither Walker nor any of the cases cited by the parties or found by the Court during its own research address the critical question as to why Congress would elect to enact duplicative punishments for the same conduct committed by members of the armed forces. The Fourth Circuit in Walker, in essence, purportedly found a congressional preference for punishment of drunk driving by military personnel under state law as applied by the ACA over punishment under the specific UCMJ provision barring drunk driving. Since drunk driving is illegal in every state, the construction adopted by Walker would render Article 111 of the UCMJ nugatory, at least with respect to offenses committed on military reservations in the United States. The Court must presume that Congress had a rational basis for enacting Article 111 of the UCMJ, and that Congress found that military interests required that the UCMJ single out drunk driving and certain other offenses also generally punishable under state law for punishment under military law. Otherwise, such UCMJ provisions would be rendered meaningless.

Because Congress has enacted a specific provision forbidding drunk driving by servicemen, there is no gap to be filled by the Assimilative Crimes Act. No reason has been advanced, nor can one be found, why Congress would have intended that conduct by servicemen which it has specifically proscribed under the UCMJ should also be punishable under the general mandate of the ACA. Such a construction is inconsistent with the plain meaning of the ACA and its purpose to fill gaps in federal criminal law. Accordingly, “any enactment of Congress” must be construed to include the provisions of the Uniform Code of Military Justice.

This construction is consistent with the view expressed by the Court of Appeals for the Eighth Circuit in United States v. Butler, 541 F.2d 730 (8th Cir.1976). Interestingly, the District Court in Butler had construed the phrase, “any enactment of congress,” as used in the ACA, as being limited to laws applicable only to federal enclaves. This construction is virtually the polar opposite of that espoused in Walker, supra. The Court of Appeals vacated the District Court’s decision, refusing to accept such a narrow construction of the ACA. Butler, 541 F.2d at 733. The court determined that “any enactment” includes federal laws of general applicability. The court relied on the plain meaning, history and purpose of the Act. First, the meaning of the term “any enactment” (emphasis added) is clear. Id. Second, the history of the Act supports a broad construction of the phrase, “any enactment.” Id. Finally, with respect to purpose, the court noted:

The legislative history of the ACA demonstrates that its purpose was not to equalize, but to fill the voids in the criminal law applicable to federal enclaves created by the failure of Congress to pass specific criminal statutes.

Id. at 733-74. Thus, the court rejected the view that one purpose of the ACA is to provide equal treatment for all persons, civilian and military, on federal enclaves. Compare Walker, supra, 552 F.2d at 568, n. 3.

Finally, this Court assigns no weight in the decision of this case to two decisions that cite Walker for the proposition that drunk driving is not made punishable by any enactment of Congress. See United States v. Best, 573 F.2d 1095, 1098 (9th Cir.1978); United States v. Holley, 444 F.Supp. 1361, 1367 (D.Md.1977). In neither Holley nor Best did the opinions indicate that the defendants were members of the military to whom the Uniform Code of Military Justice was applicable. Thus, these decisions are inapposite.

The Government has cited two regulatory schemes which purport to apply state traffic laws to civilians and military personnel on federal military installations. Operation of the Navy Instruction (OPNA-VINST) 11200.5B, ch. 4, § 4-3 directs all installation commanders to establish vehicle codes applicable to the operation of motor vehicles on their installations. Pursuant to OPNAVINST 11200.5B, the commanding officer at Brunswick Naval Air Station issued Naval Air Station Brunswick Instruction (NASBINST) 5560.9G, which incorporates all of the vehicular traffic laws of the State of Maine. The only penalties provided for in NASBINST 5560.9G are imposition of “traffic points” and suspension of operators’ permits. NASBINST 5560.9G, Enclosure 5, §§ (2), (3) and (5). The offenses are adjudicated by “Traffic Hearing” at the security office of the air station under NASBINST 5560.9G, Enclosure 5, § 1.

In addition, Department of Defense Regulations, 32 C.F.R. § 210.1, et seq., provide that state vehicular laws be adopted and made applicable on military installations. 32 C.F.R. § 210.2(b). The penalty for any violation is a fine of not more than fifty dollars or imprisonment for not more than thirty days, or both. Id. § 210.3(c).

The Informations filed in these cases charge only violations of 18 U.S.C. § 13 (the ACA) and the appropriate state statute. No violations of either of the above regulatory schemes have been alleged. No issues as to the appropriate procedures for enforcing the regulations discussed above or as to this Court’s jurisdiction to hear such matters are before this Court. Nor have the parties raised any question as to whether these regulatory schemes provide a more appropriate forum for adjudication of these matters than this Court. The Court has determined that the ACA does not assimilate, as against military personnel subject to the provisions of the UCMJ, state statutes punishing offenses that are enumerated in the UCMJ. Accordingly, all counts charging violations of such state statutes under authority of the ACA must be dismissed.

The Government does not dispute that operating under the influence, see 29 M.R.S.A. § 1312-B, is an “act or omission” punishable under Article 111 of the UCMJ. Defendant Smith has been charged only with operating under the influence. Accordingly, the Information filed against him must be dismissed. In addition, Count I of the Information filed against Defendant Mariea must be dismissed.

Defendant Mariea also has been charged in Count II with leaving the scene of an accident under 29 M.R.S.A. § 894 and the ACA. No provision of the Uniform Code of Military Justice or any other enactment of Congress specifically punishes such conduct. Accordingly, 29 M.R.S.A. § 894 is properly assimilated under the ACA, and Defendant Mariea’s Motion to Dismiss must be denied as to Count II.

Defendant Mariea has been charged in Count III of the Information with attempting to elude a law enforcement officer by driving at a reckless rate of speed which resulted in a high-speed chase under 29 M.R.S.A. § 2501-A(3) and the ACA. The Government states that this offense is “analogous” to Article 95 of the UCMJ, 10 U.S.C. § 895, which provides:

Any person subject to this chapter who resists apprehension or breaks arrest or who escapes from custody or confinement shall be punished as a court-martial may direct.

Courts have taken differing approaches to the question of whether a particular act or omission punishable under state law is the same act or omission punishable under a particular federal statute. The more restrictive approach holds that the ACA may be applied as long as the “precise act” punishable under state law is not proscribed by federal law. See, e.g., United States v. Brown, 608 F.2d 551, 554 (5th Cir.1980); Fields v. United States, 438 F.2d 205 (2d Cir.1971). A less restrictive approach characterizes the issue as being whether the “generic acts” punishable under state law are punishable by an enactment of Congress. See United States v. Butler, 541 F.2d 730 (8th Cir.1976). The Court in Butler explained:

The test is not whether the same elements of proof are contained in both state and federal statutes, but whether the acts of the defendant are made punishable under any enactment of Congress. As Williams [v. United States, 327 U.S. 711, 66 S.Ct. 778, 90 L.Ed. 962 (1946)] makes clear, “acts” under the ACA does not refer to “individual acts of the parties” but, rather, in a “generic sense” to acts of a general type or kind which are prohibited.

Id. at 737.

Without deciding between the two approaches, the Court finds that even under the Butler analysis the Government is not precluded from charging Defendant Mariea with a violation of 29 M.R.S.A. § 2501-A(3) under the authority of the ACA. The act punishable under Article 95 of the UCMJ is resisting apprehension or breaking arrest. The act punishable under 29 M.R.S.A. § 2501-A(3) is attempting to elude an officer by driving at a reckless rate of speed which results in a high-speed chase. While the attempt to elude may arguably be the same “generic act” as resisting apprehension, the additional elements of the state statute proscribe a very different kind of conduct, implicating different interests of society, than that punishable under Article 95 of the UCMJ. Therefore, 29 M.R.S.A. § 2501-A(3) is assimilable under the ACA, and the Motion to Dismiss must be denied as to Count III.

Defendants make a further argument as to why all the pending charges should properly be brought before a court-martial under the UCMJ. Article 134 of the UCMJ, 10 U.S.C. § 934 makes punishable in a court-martial “all disorders and neglects to the prejudice of good order and discipline in the armed forces, all conduct of a nature to bring discredit upon the armed services, and crimes and offenses not capital,” though not specifically mentioned in the UCMJ. 10 U.S.C. § 934. The Manual for Courts-Martial, United States, 1984, promulgated by Executive Order 12473 (Aug. 1, 1984), contains an explanation and elucidation of Article 134. The Manual purports to bring within the scope of Article 134 all conduct not specifically punishable under the UCMJ but punishable under state law by means of the ACA. See Manual, Part IV, IT 60(c)(4)(c)(ii). Such crimes would be punishable in a court-martial. Id. Defendants argue that because the state offenses to which the ACA applies are incorporated in Article 134 of the UCMJ by the Manual, such offenses should only be tried in a court-martial.

This Court disagrees. The mere fact that the UCMJ has incorporated, by executive interpretation, all offenses punishable under the ACA does not divest this Court of jurisdiction to try charges properly brought before it under the ACA. The ACA is a federal statute, and this Court has jurisdiction to try offenses properly chargeable under the ACA by virtue of 18 U.S.C. § 3231.

Accordingly, it is ORDERED:

(1) that the Information filed against Defendant Jerry Smith be, and is hereby, DISMISSED;
(2) that Court I of the Information filed against Defendant James K. Mariea be, and is hereby, DISMISSED;
(3) that Defendant James K. Mariea’s Motion to Dismiss Counts II and III of the Information be, and is hereby, DENIED.

So ORDERED.

      . Defendants first argue that the Complaints are defective because they fail to comply with Fed. R.Crim.P. 7(a) and (c). Any defects have been cured by the Government’s filing of Informations, procedurally acceptable to the Defendants, against each Defendant.
      Defendants also argue that the ACA does not assimilate state civil violations, but only criminal violations. All of the charges brought in these cases are denominated criminal offenses under state law and, therefore, Defendants’ argument is unavailing. See 29 M.R.S.A. § 1312-B and State v. Freeman, 487 A.2d 1175 (Me.1985); 29 M.R.S.A. § 894; 29 M.R.S.A. § 2501-A(3).

      . If Defendants intend to argue that Article 134 of the UCMJ precludes application of state law through the ACA because it purports, by executive interpretation, to punish all conduct punishable under state law, the Court rejects the argument. Unlike Article 111 and other provisions of the UCMJ, Article 134 is a general provision. Something more specific than the broadly comprehensive language of Article 134 is required to demonstrate a congressional intent that the ACA should not apply because of the existence of an enactment of Congress that punishes the same conduct.


source: Caselaw Access Project

license: Public Domain

text:
    UNITED STATES of America v. Rocco DiMAURO.
    Crim. No. 85-00009-01-B.
    United States District Court, D. Maine.
    July 30, 1985.

      Timothy C. Woodcock, Asst. U.S. Atty., Bangor, Me., for U.S.
    William N. Palmer, Bangor, Me., for defendant.
   MEMORANDUM AND ORDER ON MOTION FOR RELEASE ON BAIL PENDING APPEAL

GENE CARTER, District Judge.

I.

Before the Court is Defendant’s Application for Bail Pending Appeal From a Judgment of Conviction, filed on July 12, 1985. Defendant was convicted by a jury verdict returned on April 11, 1985, of the offense of aiding and abetting, pursuant to 18 U.S.C. § 2, the offense of possession with intent to distribute approximately 7.5 grams of cocaine in violation of 21 U.S.C. § 841(a)(1). On July 3, 1985, the Court imposed a sentence of incarceration for a period of five (5) years to be followed by a mandatory special parole term of three (3) years. Defendant was at large on bail throughout the proceedings and up to the time of imposition of sentence. At the conclusion of the sentencing on July 3, 1985, the Court revoked the Defendant’s bail on the Government’s motion and remanded the Defendant to the custody of the United States Marshal, pursuant to the applicable provisions of the Bail Reform Act of 1984, Pub.L. No. 98-473, § 203, 98 Stat. 1981-82 (codified at 18 U.S.C. § 3143(b)). The denial was without prejudice to the Defendant’s right to make a further request, on written submissions pursuant to the Local Rules, seeking release on bail pending appeal. The Defendant seeks once again by the present application to be admitted to bail pending appeal. Notice of appeal was timely filed on July 6, 1985.

The offense of which this Defendant stands convicted was committed on November 29, 1984, subsequent to the effective date of the Bail Reform Act of 1984, a part of the Comprehensive Crime Control Act of 1984, which was enacted into law on October 12, 1984. The provisions of the 1984 Act apply to the determination of the pending application for bail pending appeal. See United States v. Miller, 753 F.2d 19, 21 (3d Cir.1985); United States v. Kenney, 603 F.Supp. 936, 938 (D.Me.1985) (holding that the bail provisions of the 1984 Act apply to defendants convicted of offenses occurring before October 12, 1984, but convicted and sentenced after that date).

II.

Title 18 U.S.C. § 3143(b) provides as follows:

RELEASE OR DETENTION PENDING APPEAL BY THE DEFENDANT — The judicial officer shall order that a person who has been found guilty of an offense and sentenced to a term of imprisonment, and who has filed an appeal of a petition for a writ of certiorari, be detained, unless the judicial officer finds—
(1) by clear and convincing evidence that the person is not likely to flee or pose a danger to the safety of any other person or the community if released pursuant to section 3142(b) or (c); and (2) that the appeal is not for purpose of delay and raises a substantial question of law or fact likely to result in reversal or an order for a new trial.
If the judicial officer makes such findings he shall order the release of the person in accord with the provisions of section 3142(b) or (c).

Under this statutory formulation, the Defendant now has the burden of proving, on an application to be released on bail pending appeal, four elements which have been defined as follows:

(1) that the defendant is not likely to flee or pose a danger to the safety of any other person or the community if released;
(2) that the appeal is not for purpose of delay;
(3) that the appeal raises a substantial question of law or fact; and
(4) that if that substantial question is determined favorably to defendant on appeal, that decision is likely to result in reversal or an order for a new trial of all counts on which imprisonment has been imposed.

United States v. Miller, 753 F.2d at 24; United States v. Giancola, 754 F.2d 898, 901 (11th Cir.1985).

A.

As to the first element, the burden of proof assigned to the Defendant by the statute is that of proof by “clear and convincing evidence.” 18 U.S.C. § 3143(b)(1); United States v. Kenney, 603 F.Supp. at 938-39. The Court finds that the Defendant has not here carried his burden of proving by clear and convincing evidence that he is not likely to flee nor has he proven that he will not cause a danger to the community if enlarged on bail.

The evidence adduced at trial displays that this Defendant played a very significant role in assisting the codefendant Sousa in committing the distribution offense. The evidence reflects that the codefendant Sousa, who pleaded guilty and testified against the Defendant at trial, was a close personal friend of the Defendant for many years. It is clear from the evidence that Sousa enlisted the Defendant’s aid in obtaining transport to Maine for Sousa’s purpose of completing the prearranged transaction concerning the drugs in Maine, and that he did so on the basis of his friendship with the Defendant. At the time of the transaction, the evidence shows, the Defendant played an active role in dividing the cocaine and weighing the portion to be distributed to the Government’s informant, Christianson, and a codefendant, Scott LaCombe, who was fatally wounded by gunfire on the evening before he was to appear before this Court for sentence.

The Defendant at the time of the transaction also engaged in discussions about the future supplying of cocaine and gave a knowledgeable dissertation to the parties then present on the subject of the quality of the cocaine that would be forthcoming in the future.

Against these circumstances, defense counsel urges the Court to set the facts (1) that the Defendant has not failed to appear before the Court whenever requested to do so; (2) that the Defendant is a long-time resident of Melrose, Massachusetts, where he has lived in the past with his mother and father; (3) that the Defendant and his wife now live in Everett, Massachusetts with their eighteen-month-old son at a location alleged to be approximately five miles from his childhood home and family; (4) that the Defendant has significant family contacts with the Melrose/Everett area; (5) that the Defendant’s parents are willing to place bail liens on their real property to secure his release pending appeal; (6) that the Defendant has no record of felony convictions except that presently under appeal; (7) that the Defendant has previously satisfied a two-year term of probation; and (8) that the Defendant has employment available to him as a roofer, to which he would return pending the result on appeal.

Even if it be assumed that these facts are well proven, they would not, taken together, constitute clear and convincing evidence that he will not flee if admitted to bail pending appeal. As this Court has previously noted in the Kenney case:

The risk he now faces is much enhanced over that which he faced prior to trial or even prior to sentencing. He had, prior to trial, some level of belief that he would prevail at trial. That provided a counter-balancing incentive to appear for trial, for to fail to do so would be to wholly forfeit the opportunity to prevail at trial. Even prior to sentencing, he could hope for leniency. Now he faces the certainty of ... [incarceration for a term of five years], subject only to his success on appeal.

United States v. Kenney, 603 F.Supp. at 939.

Secondly, as noted in the Kenney case, any “indicia of reliability” to be garnered from the Defendant’s conduct prior to his involvement in the events giving rise to this present offense “are negated by the social irresponsibility and lack of personal character” demonstrated by his relapse into cocaine trafficking after having had the experience of being convicted in the Massachusetts state court on April 14, 1981, of possession of cocaine and having served a two-year term of incarceration. The written Presentence Investigation Report shows that this conviction resulted from Defendant’s sale of two grams of cocaine to a police undercover agent. The Defendant’s reputation for responsibility, whatever it may be, prior to these events, is wholly undone by the gravity of his conduct in resuming cocaine trafficking. Further, the evidence produced at trial justifies the inference that this Defendant has been involved at some level of significance in an ongoing course of trafficking in cocaine. His knowledgeability about the quality of cocaine and his close friendship and association with his codefendant, Sousa, reflect, in the view of the Court, a strong likelihood that the events which led to his conviction here were but part of a continuing series of drug transactions. The factors pointed to by defense counsel do not refute in a clear and convincing manner conclusions that are justified by the evidence with respect to the likely motivations of this Defendant not to appear for service of a substantial period of incarceration should the appeal be unsuccessful nor that this Defendant would be unlikely to continue to trade in narcotics in the event he were to be enlarged upon bail. Narcotics trading is recognized to be conduct of the most qualitatively harmful kind to the interests of society. Courts interpreting various provisions of the Bail Reform Act of 1984 have held that the likelihood of continued trafficking in narcotics constitutes a danger to the community. United States v. Payden, 598 F.Supp. 1388, 1398 (S.D.N.Y.1984); United States v. Aiello, 598 F.Supp. 740, 744 (S.D.N.Y.1984).

Accordingly, the Court concludes that this Defendant has not demonstrated by clear and convincing evidence that he is unlikely to flee. The Court is further convinced that no restriction short of revocation of his bail is reasonably likely to secure his appearance in answer to the judgment of this Court upon resolution of the appeal. Likewise, the Court concludes that the Defendant has not demonstrated by clear and convincing evidence that he is unlikely to engage in narcotics trafficking during the period that he might be enlarged upon bail and that, in the absence of such a showing, he does pose a danger to the community if released pending appeal.

B.

The Government here generates no issue as to the second element upon which Defendant bears the burden of proof, that is, that the appeal is not pursued for purpose of delay. The Government states, “the Government is prepared to accept defense counsel’s representation that the instant appeal is not taken for the purpose of delay.” Response of United States to Defendant’s Application for Release Pending Appeal at 7 (unnumbered). Accordingly, it is not necessary for the Court to address this issue, there being no evidence to the contrary before the Court.

C.

Next, the statute requires that the appeal raise “a substantial question of law or fact.” The teaching of Miller, supra, is that the Court is not to assess the likelihood that the Defendant will prevail on an issue pending appeal. United States v. Miller, 753 F.2d at 23. The statute “cannot reasonably be construed to require the district court to predict the probability of reversal.” Id. It is required that the Court determine whether any issue raised in the appeal raises a “significant question ... which is either novel, which has not been decided by controlling precedent, or which is fairly doubtful.” Id. This is a more burdensome requirement than that set out in the 1966 Act that the Court determine whether the issue is “frivolous.” Id. Put another way:

In short, a “substantial question” is one of more substance than would be necessary to a finding that it was not frivolous. It is a “close” question or one that very well could be decided the other way.

United States v. Giancola, 754 F.2d at 901. The substantiality of a question raised on appeal must be determined on a case-by-case basis. Id.

Only two issues are generated on this appeal as it is presently filed: (1) whether the evidence adduced at trial was sufficient to sustain the conviction, and (2) whether prejudicial error was committed by the Court’s evidentiary ruling permitting certain government witnesses to utilize transcripts of tape recordings made at the time of the transaction in question to refresh their recollections as to the words used by the various parties to the transaction. With respect to this last issue, it is the Defendant’s contention that these witnesses’ “improper testimony that their recollections resulted, in part, from a tape in the Government’s possession bolstered their credibility, doing substantial harm to the Defendant’s defense.” Application for Bail Pending Appeal from a Judgment of Conviction, at 3.

The Court is fully satisfied that the Defendant’s deficiency of the evidence argument raises no issue of any substantiality whatever. The evidence adduced against this Defendant was clear, unequivocal, and was compelling in its weight. On appeal this evidence will be reviewed in the light most favorable to the Government. Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942). The evidence need not exclude every reasonable hypothesis so long as the totality of the evidence permits a conclusion of guilt beyond a reasonable doubt. United States v. Miller, 589 F.2d 1117, 1137 (1st Cir.1978), cert. denied, 440 U.S. 958, 99 S.Ct. 1499, 59 L.Ed.2d 771 (1979). It clearly does so. The Court is fully satisfied that the evidence adduced at trial will withstand such an analysis on appeal.

Considering the second issue, the Court is likewise convinced that it is not one that generates substantial questions. It is well established that on the laying of the proper foundation, a witness may be permitted to use anything which the witness says will refresh his recollection as to the events to which he testifies. United States v. Rappy, 157 F.2d 964, 967 (2d Cir.1946) (“Anything may in fact revive a memory: a song, a scent, a photograph, an allusion, even a past statement known to be false.”). The character of the documents so utilized, here a transcript made from a tape recording of the conversation of the participants at the time of the transaction in question, does not prohibit the utilization of the document for purposes of refreshing a witness’ recollection. Even were that to be the case, no discrete objection was made by defense counsel on that basis to the utilization of the transcript. To the extent that the document utilized by the witness is claimed to be in error, that is a legitimate arena for cross-examination and, according to the Court’s recollection, without benefit of a transcript, the accuracy of the transcript was the subject of cross-examination. In any event, a witness’ recollection as refreshed by any document is properly the subject of cross-examination, and the inaccuracy of the document used for refreshment purposes is a matter which goes to the weight, not to the admissibility, of the witness’ testimony as refreshed.

Accordingly, the Court concludes that neither of the issues generated in the pending appeal raise substantial questions within the meaning of 18 U.S.C. § 3143(b)(2).

D.

Finally, the Court is to determine if a resolution of a substantial question on the appeal in favor of the Defendant “is likely to result in reversal or an order for a new trial of all counts on which imprisonment has been imposed.” United States v. Miller, 753 F.2d at 24. This language goes to “the significance of the substantial issue to the ultimate disposition of the appeal.” Id. at 23. As the Court in Miller further observed, “a question of law or fact may be substantial but may, nonetheless, in the circumstances of a particular case, be considered harmless, to have no prejudicial effect, or to have been insufficiently preserved.” Id. The question at inquiry is whether the issue “is so integral to the merits of the conviction on which defendant is to be imprisoned that a contrary appellate holding is likely to require reversal of the conviction or a new trial.” Id.; see also United States v. Giancola, 754 F.2d at 901.

Here, there is no need for the Court, in order to dispose of the pending Application at the present stage, to consider this fourth element since the Court has concluded that neither of the issues generated on appeal are substantial. In the interest of completeness in its findings, for purposes of appellate review, however, the Court will state its view on the subject. Clearly, if the Defendant’s argument of insufficiency of the evidence were to be resolved in his favor, that result would mandate either a judgment of acquittal or a new trial. The papers presently before the Court, however, do not specifically identify those aspects of the evidence which the Defendant contends to be insufficient to support the conviction. In the absence of such a showing, the Court is without any ability to evaluate the impact upon the result of the appellate proceeding of the specific insufficiencies which Defendant contends to exist in the evidence. Defendant bears the burden of making such a showing in order to succeed on the Application. 18 U.S.C. § 3143(b).

With respect to the latter appellate issue concerning the refreshment of the recollection of some of the Government’s witnesses, the Court is fully satisfied that, even if Defendant should prevail on that issue, the result would not require a new trial or result in a mandate of reversal. The Court is persuaded that the narrow contours of the complaint of the Defendant in this respect required specific preservation of the issue. Such preservation at trial did not occur. Finally, that portion of the witness’ testimony which was not the subject of refreshment by the use of the transcript, was more than sufficient to justify a jury in reaching a conclusion that a transaction in cocaine occurred at the time and place in question and that this Defendant did in fact aid and abet in the completion of that transaction in violation of the law. If nothing else, the evidence clearly shows that he did assist in weighing out and dividing the cocaine that was involved in the transaction. For that reason, resolution of any claimed deficiency in the recollection of the witnesses as to what was said on that occasion by the Defendant or other parties to the transaction is not essential to an evidentiary showing sufficient to permit a jury to conclude beyond a reasonable doubt that he was guilty of the offense of aiding and abetting that transaction.

Accordingly, the Defendant’s Application for Bail Pending Appeal From a Judgment of Conviction is hereby DENIED.

So ORDERED.


author: TERENCE T. EVANS, District Judge.

text:
    Bruce HAMMER and Jacqueline Hammer, Plaintiffs, v. ROAD AMERICA, INC.; American Motorcyclist Association, Inc.; Sports Car Club of America, Inc.; and Sports Car Club of America, Inc.—Chicago Region, Defendants.
    Civ. A. 84-C-426.
    United States District Court, E.D. Wisconsin.
    July 31, 1985.

      Michael I. Tarnoff, Warshafsky, Rotter, Tarnoff, Gesler & Reinhardt, S.C., Milwaukee, Wis., for plaintiffs.
    Thomas Arenz, Frisch, Dudek & Slattery, Milwaukee, Wis., for defendants.
   DECISION and ORDER

TERENCE T. EVANS, District Judge.

On Sunday, May 23, 1982, Bruce Hammer fell from his motorcycle while negotiating a turn during a race at the Road America Race Track, Elkhart Lake, Wisconsin. Hammer, a professional motorcycle racer, was severely injured and rendered paraplegic as a result of the accident.

Hammer and his wife, Jacqueline, have sued the various defendants, those responsible for the race, for negligence. The defendants have moved for summary judgment. They contend that a release signed by Hammer as a prerequisite to joining the American Motorcyclist Association bars him from maintaining this suit. Hammer argues that the release is an exculpatory contract which should not be enforced because it is contrary to public policy and further, that the presence of disputed facts precludes the granting of the defendants’ motion.

The release signed by Mr. Hammer is a comprehensive one. If valid, it protects all of the defendants from this suit. By its terms, it purports to release:

The American Motorcyclist Association, the promoters presenting sanctioned events, the owners and lessees of premises on which sanctioned events take place, the participants in sanctioned events, the owners, sponsors and manufacturers of all racing equipment upon the premises, and the officers, directors, officials, representatives, agents and employees of all of them, of and from all liability, loss, claims, demands and possible causes of action that may otherwise accrue from any loss, damage or injury (including death) to my person or property, in any way resulting from, or arising in connection with, or related to, any sanctioned event and whether arising while engaged in competition or in practice or preparation therefore, or while upon, entering or departing from said premises, from any cause whatsoever including without limitation the failure of anyone to enforce rules and regulation [sic] failure to make inspections, or the negligence of other persons.

Mr. Hammer was required to sign this release in order to obtain the professional racing competition license necessary for him to participate in motorcycle races. In addition to the release language quoted above, Hammer also signed an entry form given to him by the American Motorcyclist Association titled “Official Series Entry” in which he applied to race at Elkhart Lake, as well as four other race tracks. This document contained “release and hold-harmless” language similar to that previously quoted.

Lastly, in order to participate in the various weekend racing events at Elkhart Lake on May 22 and 23,1982, Hammer signed another document which stated:

RELEASE of LIABILITY and ASSUMPTION of RISK is contained in the Application for the Competition License issued to signer hereof.

A preliminary question is presented as to the applicable law in this case. Hammer contends that California law should be applied; however he also asserts that the application of Wisconsin law will lead to an identical result. Defendants argue that Wisconsin law should apply, with the law of Ohio as an alternative.

Wisconsin and California have similar approaches to the enforceability of exculpatory contracts. Neither state favors contracts which exonerate parties from acts of future negligence. Both hold that such contracts are to be strictly construed. Arnold v. Shawano County Agr. Society, 106 Wis.2d 464, 470, 317 N.W.2d 161 (Ct.App.1982); Ferrell v. Southern Nevada Off-Road Enthusiasts, 147 Cal.App.3d 309, 318, 195 Cal.Rptr. 90, 95 (1983). Both also hold that releases will not bar claims that were not within the contemplation of the parties at the time they were executed. 106 Wis.2d at 47, 317 N.W.2d 161; 147 Cal.App.3d at 318, 195 Cal.Rptr. 90. Also, adhesion contracts in which the parties seeking exculpation possess decisively greater bargaining power have been declared unenforceable on public policy grounds in both states. Discount Fabric House v. Wisconsin Telephone Co., 117 Wis.2d 587, 593, 345 N.W.2d 417 (1984), Graham v. Scissor-Tail, Inc., 28 Cal.3d 807, 817, 623 P.2d 165, 171 Cal.Rptr. 604, 610 (1981).

Although no obvious conflict appears between California and Wisconsin law, California appears to have slightly more stringent standards when evaluating the enforceability of contracts. For that reason, I find it necessary to decide which law is applicable to this case.

In diversity cases, federal courts are obliged to apply the conflict of law rules of the state in which they sit. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). Wisconsin courts use the “dominant interest” approach when determining what law should be applied in a given case. Zelinger v. State Sand & Gravel Co., 38 Wis.2d 98, 105-106, 156 N.W.2d 466 (1968). In choosing the applicable law, five factors are surveyed: the predictability of results, the maintenance of interstate and international order, simplification of the judicial task, advancement of the forum’s governmental interest, and the application of the better rule of law.

Predictability of results is enhanced when all participants in a race are governed by the same law. Logic would suffer if each participant in a given race were governed, for instance, by the law of his home state — a situation that would lead to different results for persons injured in the same event. The strong interest in predictability may, on its own, support the utilization of Wisconsin law to this case.

The second and third factors, effect upon interstate travel or commerce and simplification of the judicial task, have little relevance here, as this court is equally able to apply Wisconsin, California, or Ohio law. The fourth factor, however, will be furthered by the application of Wisconsin law. Wisconsin courts have historically exhibited concern about incidents occurring within its borders. Moreover, Wisconsin clearly has a governmental interest as to the effect of exculpatory agreements within the state. The last factor, the application of the better rule of law, is too close to call. When all of these factors are considered, however, I believe that Wisconsin law must be applied in this case.

The following facts are clear: (1) Mr. Hammer read the release; (2) he does not claim that he misunderstood it or failed to appreciate its import; and, significantly, (3) he does not claim that the type of accident he experienced was outside of his awareness or contemplation when he signed it. These facts distinguish this case from most, if not all, of the cases that have refused to enforce exculpatory contracts.

The risks and hazards of racing are well known. They are a source of the sport’s appeal both to racers and spectators. The risks and hazards are consciously borne to attain some other certain benefits, both tangible and intangible. As Hammer explained at his deposition:

Racers are well aware what the potential for danger or potential injury. We’re all optimists and have high regard for our skills and control over the situation, so I would state that I was well aware of the potential for injuries, and that I considered the potential many times, but I — and I knew of racers that had died as a result of racing injuries, but what all racers do, and what I did is examine the circumstances of their death say, well, that won’t happen to me, because they made a mistake or something like that.

It is important to note here that Bruce Hammer was injured while negotiating a turn — the touchstone of the sport of racing. The most exciting part of any race (except a straight one) is the turn, and the sharper the better. That’s why the thrills of sports from cycle racing to bobsledding are intensified in direct proportion to the “danger” of the curve.

The object of the race is to cover the distance as fast as possible. Certainly, a racer will increase his safety if he slows down in the turn. A racer, however, will try, if he wants to do well, to take the turn as fast as he can without losing control of his cycle. The closer he gets to the danger point the better will be his performance, but the greater will be his risk. Therein lies the allure of racing.

Bruce Hammer voluntarily, knowingly and expressly chose to confront the risks and to bear their potential costs. No public policy prohibited him from doing so, and no public policy precludes this court from giving effect to his written promise not to hold these defendants responsible should he be overcome by the hazards of his chosen sport.

I turn now to the law and note that most jurisdictions routinely enforce exculpatory agreements in the racing context. See e.g., Trumbower v. Sports Car Club of America, Inc., 428 F.Supp. 1113 (W.D.Okla.1976); Gore v. Tri-County Raceway, Inc., 407 F.Supp. 489 (M.D.Ala.1974); LaFrenz v. Lake County Fair Board, 172 Ind.App. 389, 360 N.E.2d 605 (1977); Schlessmann v. Henson, 83 Ill.2d 82, 46 Ill.Dec. 139, 413 N.E.2d 1252 (1980); Morrow v. Auto Championship Racing Ass’n, 8 Ill.App.3d 682, 291 N.E.2d 30 (1972); Winterstein v. Wilcom, 16 Md.App. 130, 293 A.2d 821 (1972); Lee v. Allied Sports Association, Inc., 349 Mass. 544, 209 N.E.2d 329 (1965); Theroux v. Kedenberg Racing Assoc., 50 Misc.2d 97, 269 N.Y.S.2d 789 (1965); Corpus Christi Speedway v. Morton, 219 S.W.2d 903 (Tex.Civ.App.1955).

The most recent statement of Wisconsin law regarding the effect of exculpatory agreements in the context of racing events is in the Wisconsin Supreme Court decision of Arnold, et al. v. Shawano County Agricultural Society, et al., 111 Wis.2d 203, 330 N.W.2d 773 (1983), and the Court of Appeals decision in the same case, Arnold, et al. v. Shawano County Agricultural Society, et al., 106 Wis.2d 464, 317 N.W.2d 161 (1981). These decisions held that while exculpatory agreements are subject to close scrutiny and are to be strictly construed, they are enforceable in Wisconsin.

In Arnold, the Wisconsin Supreme Court made clear that the touchstone for analysis of exculpatory agreements was the “contemplation of the parties when the contract was executed.” Id., 111 Wis.2d at 211, 330 N.W.2d 773. In order for the exculpatory contract to be enforced, it is necessary that “the contract clearly expresses the intent of the parties so that with the surrounding circumstances, it is clear the parties knowingly agreed to excuse one of them from otherwise responsible acts.” Id. at 213, 330 N.W.2d 773.

The Arnold decisions envision that summary judgment would be appropriate in many cases involving releases in the racing context. In citing language from Plummer v. Leonhard, 44 Wis.2d 686, 692, 172 N.W.2d 1 (1969), the court noted that “where the facts are undisputed, the scope [of the exculpatory contract] has been held to be for the court.” Id., Ill Wis.2d at 212, 330 N.W.2d 773.

An application of Arnold, supra, requires an examination of its facts. Leroy J. Arnold was injured in a stock car race at the Shawano County Fairgrounds. His car crashed through a guardrail, left the track, and then ran into a utility pole and lumber pile outside the race track. His car then caught fire, and race track personnel used chemical extinguishers in an attempt to put it out while Arnold was still in the car. Arnold contended that he sustained brain damage as a result of the rescue operation in combination with the “toxic effects” of the fire extinguishing chemicals.

On these facts, the Court of Appeals held that the trial court had properly granted summary judgment with regard to Arnold’s principal allegations. The Court of Appeals held, 106 Wis.2d at 471, 317 N.W.2d 161:

We also conclude that LeRoy’s [Arnold’s] allegations that the defendants were negligent in maintaining the racetrack’s surface, its guardrail, and the area adjacent to the track were properly resolved by summary judgment. The language of the release clearly indicates an intent by the parties to relieve the defendants of liability for injuries resulting from a broad range of accidents that occur in auto races.

The Supreme Court did not disturb this finding when it held that the Shawano County Agricultural Society was entitled to partial summary judgment. Indeed, the Supreme Court noted, at 212:

The exculpatory contract states that it covers any loss, liability or damages whether caused by the negligence of releasees or otherwise. This language is not free of ambiguity. While it would be reasonable to assume that this exculpatory contract was intended to preclude liability for such things as negligent maintenance of the track or the negligent driving of another driver participant, we cannot conclude that this contract was meant to cover negligent rescue operations.

In this case, Mr. Hammer’s tragic accident cannot be meaningfully distinguished from the situations discussed by both the Court of Appeals and the Supreme Court as being appropriate for summary judgment.

The Wisconsin Supreme Court held additionally that there were two material issues of disputed facts making summary judgment on all of plaintiff’s claims inappropriate. The first was whether the injuries from the toxic chemicals claimed to constitute negligent rescue and occurring off the track were within the contemplation of the parties when the release was signed. The second disputed issue of fact related to a qualification in the release itself that limited the release’s effect to a “Restricted Area” within the track. The driver and his car left the Restricted Area and also left the race track property and ended up in a nearby lumber yard, where he was sprayed with the fire extinguishing chemicals. The court held that it was not clear whether the release was meant to encompass conduct outside both the restricted area and the track where the fire was extinguished. Factual issues like these are not presented in this case, where only general “safe place” type allegations are made.

In this case, Mr. Hammer fell off from his motorcycle and slid into a protective barrier along the side of the track. He did not leave the track. There was nothing about this accident that was not in the reasonable contemplation of the parties when the exculpatory agreement was signed. Clearly, this accident was the type contemplated by the release.

It is also worthy of note that the Wisconsin Supreme Court observed (Id., 111 Wis.2d at 213, 330 N.W.2d 773, Note 4) that its decision in Arnold was “consistent” with decisions of other courts in other jurisdictions with regard to the requirement that the intent of the parties to the exculpatory contract must be carefully examined. An examination of the cases cited by the Supreme Court discloses that in each judgment was granted for the defense on the issue of the applicability of an exculpatory contract.

Lastly, it should be noted that in addition to exculpatory language, the agreement here also contains an express assumption of risk by Hammer. Under Wisconsin law, the defense of assumption of risk still applies to situations where there is a consensual relationship between the defendant and the plaintiff. Switzer v. Weiner, 230 Wis. 599, 603, 284 N.W. 509 (1939). See also, Polsky v. Levine, 73 Wis.2d 547, 552, 243 N.W.2d 503 (1976).

The defense of express assumption of risk is described in § 496B, Restatement (Second) of Torts:

A plaintiff, who by contract or otherwise expressly agrees to accept a risk of harm arising from the defendants’ negligence or reckless conduct cannot recover for such harm, unless the agreement is invalid as contrary to public policy.

The defense is particularly appropriate here in light of Mr. Hammer’s deposition testimony, which leaves no doubt that he had gained a thorough appreciation of the risks associated with motorcycle racing over a period of at least a decade, and agreed to assume those risks. The assumption of risk language is explicit. Plaintiff’s testimony that he understood the language is unequivocal. There simply is no reason to be found in Wisconsin law or public policy why effect should not be given to Bruce Hammer’s promise to assume the risk of motorcycle racing.

This, of course, is not a happy result. One would like to see Mr. Hammer fully compensated for his disabling injury. Motorcycle racers like him would be better served in the future, however, by having adequate disability and life insurance contracts in force either personally or through their professional groups. Not to do so leaves them out in the cold, as an exculpatory release like the one present here is harder to successfully negotiate around than the most difficult of hairpin turns.

The defendants’ motion for summary judgment is GRANTED. The claim of Bruce Hammer is DISMISSED.

The result reached here leaves alive only the claim of Jacqueline Hammer for loss of consortium. Her claim, of course, is a separate cause of action. Schwartz v. Milwaukee, 54 Wis.2d 286, 293, 195 N.W.2d 480 (1972). I am aware of how the loss of consortium claim was considered by the Wisconsin courts in the two Arnold decisions, see 106 Wis.2d 464, 469, 317 N.W.2d 161, and 111 Wis.2d 203. 214. 330 N.W.2d 773. Under the facts of this case, however, Jacqueline Hammer’s claim may no longer be viable.

As previously noted, Bruce Hammer did more than just release these defendants from liability for their negligent acts when he signed his application for a competitive racing license. He also expressly assumed the risk of injury. The agreement that he signed states:

I know the risk and danger to myself and property while upon said premises or while participating or assisting in a sanctioned event, and I do so voluntarily and in reliance, not upon the property, equipment, facilities and existing conditions furnished by others, but upon my own judgment and ability, and I thereby assume all risk for loss, damage or injury (including death) to myself and my property from any cause whatsoever and whether or not attributable to the negligence of others.

The defense of contributory negligence on the part of Bruce Hammer would be a valid defense to the claim of his wife. By signing the release, Bruce Hammer expressly assumed the risk of injury and, by participating in the race, he undoubtedly is susceptible to a finding of contributory negligence. Although the continued vitality of Jacqueline’s claim is not formally before me, I believe it should be addressed soon, and I direct that the parties be prepared to discuss it at a status conference in this case to be conducted on September 3, 1985, at 8:30 a.m.


author: GILMORE, District Judge.

text:
    Craig HALL, Individually and derivatively in the right of First Federal of Michigan, Plaintiff, v. James ALIBER; Donald H. Mitzel; Warren D. Couger; Paul Borman; Gerald J. DeNooyer; James L. Dingwall; Hans Gehrke, Jr.; Alfred R. Glancy, III; Charles M. Heidel; Philip J. Meathe; Henry R. Nolte, Jr.; Fred C. Reynolds; Ronald K. Seelhoff; Jervis C. Webb; Eresteen R. Williams; Max M. Fisher; Marjorie S. Fisher; Jane F. Sherman; Phillip W. Fisher; Mary D. Fisher; Julie Fisher Cummings; Marjorie Fisher Aronow; Martinique Hotel, Inc.; Salomon Brothers Inc., and First Federal of Michigan, a federally chartered capital stock Savings and Loan Association, Defendants.
    No. 85-CV-72289-DT.
    United States District Court, E.D. Michigan, S.D.
    July 31, 1985.
    Butzel, Keidan, Simon, Myers & Graham by Douglas G. Graham, Elliot A. Spoon, John Wm. Butler, Jr., Bruce L. Sendek, Detroit, Mich., Akin, Bump, Strauss, Hauer & Feld by David C. Musslewhite, Philip N. Smith, Jr., Margaret L. Vandervalk, Judith B. Baumgartner, Dallas, Tex., for plaintiff.
    Bodman, Longley & Dahling by Theodore Souris, Charles N. Raimi, Detroit, Mich., Wachtell, Lipton, Rosen & Katz by Warren R. Stern, New York City, N.Y., for Salomon Brothers, Inc.
    Wilmer, Cutler & Pickering by James Robertson, Washington, D.C., Clark, Klein & Beaumont by David M. Hayes, Detroit, Mich., for First Federal of Michigan and First Federal’s Officers and Directors.
    Warren D. Couger, Detroit, Mich., for First Federal of Michigan.
    Honigman, Miller, Schwartz & Cohn by William G. Christopher, David B. Jaffe, Detroit, Mich., for Max M. Fisher.
   OPINION

GILMORE, District Judge.

This shareholders’ derivative action challenges the sale of stock to the Fisher group, and is before the Court upon consideration of defendants’ motion to dismiss the complaint because of inadequacy of class representation and failure to make demand upon First Federal of Michigan. The Court finds plaintiff to be an inadequate class representative for various reasons, primarily because of the conflict of interest that exists with respect to plaintiff’s disclosed intention to purchase a majority of First Federal’s shares and takeover the association, and the position of other shareholders as potential sellers of First Federal stock. The Court also finds that plaintiff’s failure to make demand on First Federal prior to bringing this action is not excused, as plaintiff has failed to raise a reasonable doubt that either a majority of the board of directors who approved the Fisher group sale were disinterested and independent, or that the directors’ decision to approve the sale was not a valid business judgment. For these reasons, the Court grants defendants’ motion to dismiss the entire complaint.

I

This is an action by plaintiff Craig Hall, who is the largest shareholder of defendant First Federal, owning approximately 9.9 percent of its outstanding stock. Defendant First Federal is a federally chartered savings and loan association, with its principal place of business in Michigan. Fourteen of the fifteen directors of First Federal are named as defendants. The plaintiff’s father is the only director who is not named as a defendant, and he is the only director who voted against the sale of stock to the Fisher group, which is the basis of this lawsuit. Of the fourteen directors, two are officers of the association. James Aliber is chairman of the board of directors and the chief executive officer of First Federal, and defendant Donald Mitzel is a director, as well as president, of First Federal. Senior vice president Warren Couger is also named as a defendant, as are all of the members of the so-called Fisher group who bought stock in the sale at issue here. Finally, Salomon Brothers, Inc., a Delaware corporation, with its principal place of business in New York, is a defendant. Salomon Brothers acted as a broker and investment banker for First Federal.

Plaintiff has filed a three-count amended complaint alleging both individually and derivatively on behalf of the shareholders of First Federal: in count 1, breach of fiduciary duty of care, loyalty and fair dealing with plaintiff and other shareholders by acting in bad faith and self interest, and by negligently failing to exercise independent judgment in approving the sale of stock to the Fisher Group; in count 2, violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), by employing a scheme to defraud plaintiff, as the purchaser of securities, and First Federal, as the seller of securities, and Section 13(d) of the 1934 Act, 15 U.S.C. § 78m(d), in failing to disclose the nature of the Fisher group sale; and in count 3, common law fraud in connection with the sale to the Fisher group.

Plaintiff contends that the Fisher group sale was but one in a series of measures taken by the officers and directors of First Federal to entrench existing management. Other actions include the adoption of golden parachute agreements, favorable stock option plans for management, and staggered elections of directors. By November of 1984, the plaintiff had acquired approximately 9.9 percent of the outstanding stock of First Federal, and publicly disclosed this in filings with the Federal Home Loan Bank Board. Plaintiff contends that defendants have attempted various tactics from that time to ward off any possible proxy battle and takeover of management by him. One such tactic, according to plaintiff, was a lawsuit filed by First Federal in March of 1985 and dismissed nine days later upon Hall’s filing of an amended Schedule 13D with the Federal Home Loan Bank Board, and upon agreement of First Federal to pay plaintiff $250,000 for expenses and to issue a public letter of apology to Hall in return for Hall’s agreement not to acquire more than 10 percent of the outstanding stock of First Federal for a period of 90 days. First Federal of Michigan v. Hall, civil action No. 85-CV-71004-DT. After the commencement of the instant lawsuit, another lawsuit was started by plaintiff against First Federal claiming that First Federal had failed to fulfill its obligation under the agreement to pay the $250,000 in expenses. Hall v. First Federal of Michigan, civil action no. 85-CV-72342-DT, filed on May 28, 1985.

The sale to the Fisher group was official on May 15, 1985 when the officers and directors approved the sale of 950,000 shares of its common stock to the group at a price that is claimed by plaintiff to have been lower than the actual value of the stock, with certain restrictions on transfer of stock and voting rights. The stock purchased by the Fisher group cannot be sold without permission of First Federal, and is required to be voted for two years in favor of management in any contest for control. Further, the Fisher group is entitled to the election of a director of its choice without shareholder approval. Additionally, the group was given broad indemnity from liability that may result from the sale.

Because of this sale, plaintiff’s percentage ownership of First Federal dropped, and he had to purchase an additional 97,000 shares on the open market on May 20 and 21 in order to maintain his 9.9 percent ownership of the outstanding stock of First Federal. On May 23, plaintiff commenced this action, seeking primarily to rescind this sale.

In his most recent Schedule 13D filing, plaintiff has disclosed his intention to purchase up to 24.9 percent of the outstanding common stock of First Federal through the use of personal funds and borrowing, pursuant to customary margin agreements with brokerages and banks, and to seek the removal of certain current management without triggering the golden parachute agreements. He has also stated that he is considering various alternatives that would enable him to acquire up to 51 percent of the common stock, and that, upon selecting a particular course of action, he intends to acquire an additional 26.1 percent of the common stock to bring his total holdings to 51 percent of the outstanding common stock of the First Federal.

Defendants have filed a motion to dismiss all counts of plaintiffs complaint on the following grounds: 1) plaintiff cannot adequately represent other shareholders of First Federal in a shareholders’ derivative action, and cannot bring an individual action for breach of fiduciary duties; 2) plaintiff failed to make proper demand on the board of directors before bringing the action, and has failed to allege adequate reasons for not making such a demand, and 3) plaintiff has failed to state a cause of action or plead fraud with particularity in counts II and III. In addition, Salomon Brothers moves to dismiss for failure to state any claim against it.

II

The first issue is the adequacy of representation by plaintiff in a derivative stockholders’ suit. Rule 23.1 of the Federal Rules of Civil Procedure provides:

The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of the shareholders or members similarly situated in enforcing the right of the corporation or association.

The leading Sixth Circuit case on adequacy of representation is Davis v. Comed, Inc., 619 F.2d 588 (6th Cir.1980). The Davis court discussed several factors that courts examine in considering whether a derivative plaintiff meets the requirements of Rule 23.1.

Among the elements which the courts have evaluated in considering whether the derivative plaintiff meets Rule 23.1’s representation requirements are: economic antagonisms between representative and class; the remedy sought by plaintiff in the derivative action; indications that the named plaintiff was not the driving force behind the litigation; plaintiff’s unfamiliarity with the litigation; other litigation pending between the plaintiff and defendants; the relative magnitude of plaintiff’s personal interests as compared to his interest in the derivative action itself; plaintiff’s vindictiveness toward the defendants; and, finally, the degree of support plaintiff was receiving from the shareholders he purported to represent.

Id. at 593-94.

To analyze this case under the Davis standard, this Court must first consider the economic antagonism between the purported class representative and the class. Here there is classic conflict. Plaintiff has announced his intention to attempt to buy additional stock and obtain control of First Federal, as indicated by his Schedule 13D filed with the Federal Home Loan Bank Board on June 17, 1985. This fact is undisputed. While plaintiff is in the posture of a buyer, every other shareholder is a potential seller. Plaintiff has announced his intention to buy an additional 41.1 percent of stock, and to do so he would need to buy 2.64 million additional shares. A price variation of just $1 a share would cost him $2,640,000. His obvious interest is to keep the price of the stock down, if he is seeking to acquire this much, and the obvious interest of the other shareholders is to keep the price up and to get the best possible price for their stock.

A second point, closely related to the first, is the relative magnitude of plaintiff’s personal interest as compared to his interest in the derivative action itself. Rescission or damages for the sale to the Fisher group would either increase the equity holdings of the shareholders by the amount they were reduced as a result of the issuance of 960,000 new shares or would increase the equity capital of the corporation by an amount equal to the difference between what the Fisher group paid for the stock and its actual value. Certainly plaintiff’s challenge of this stock sale, purportedly on behalf of the shareholders, is of lesser magnitude than his personal interest in acquiring an additional 41.1 percent of all of the outstanding common stock.

A third factor is other litigation pending between the plaintiff and defendants. This is the second of three lawsuits in this District. In addition, there are extensive proceedings pending before the Federal Home Loan Bank Board. In Davis, supra, the court noted that: “A very significant factor ... is that Davis has been involved in litigation with the defendants in several courts. This derivative action appears to be just one more skirmish in a larger war between Davis and some of the defendants, perverted into a weapon____” Id. at 597. That is precisely the situation we have here.

The next factor to be considered under Davis is the remedies sought by the plaintiff in the derivative action. Here, as in Davis, plaintiff seeks rescission of the transaction as an alternative to damages. While plaintiff prefers rescission of the sale because it would increase his percentage of ownership in First Federal, the Court is not convinced that other shareholders could not be adequately compensated by monetary damages.

The fifth factor to consider is the degree of support for the plaintiff by other shareholders. Here, no other shareholder has joined in this action, and plaintiff offers letters of inquiry and support from only five of the more than 5,000 shareholders of First Federal.

The next factor under Davis is plaintiff’s vindictiveness towards defendants. While it may be difficult to measure, the Court finds it clearly apparent that there is not a good relationship between the parties. The record reflects some vindictiveness in this case.

There are several indications that plaintiff is the driving force behind the litigation. Defendants concede that factor, as they concede the factor of plaintiff’s familiarity with litigation. Thus, out of the eight Davis factors, only two favor plaintiff, and one is somewhat inconclusive.

The Court concludes, therefore, that plaintiff is not an adequate representative for a derivative action under Fed.R.Civ.P. 23.1.

III

The determination on adequacy of representation is dispositive of the lawsuit. Nevertheless, the Court will determine the other issues raised in the motion to dismiss. Defendants’ second argument is that the derivative claims are defective because of plaintiff’s failure to make demand on the board of directors before filing this lawsuit. Rule 23.1 of the Federal Rules of Civil Procedure provides:

The complaint shall also allege with particularity the efforts, if any, made by the plaintiff to obtain the action he desires from the directors or comparable authority and, if necessary, from the shareholders or members, and the reasons for his failure to obtain the action or for not making the effort.

There has been considerable argument here about the choice of law, and whether there is a federal common law. First Federal is not incorporated in any state but is a federally chartered association. Based upon an analysis of the new Michigan statute, infra, and existing federal cases on the demand requirement, the Court concludes that there is a federal common law, and there is no basic difference between it and the law of Michigan.

The Michigan Business Corporation Act, enacted in 1973, provides in pertinent part: “In such an action the complaint shall allege (b) with particularity the effort of the plaintiff to secure the initiation of the action by the board or the reasons for not making the effort.” M.C.L.A. § 450.-1491(2). No Michigan case has been decided on this issue since the passage of this statute in 1973. Siegel, Schulman and Moscow, in their 1979 treatise, Michigan Business Corporations, address the question of demand under Michigan law, and state:

At this writing there have been no Michigan cases decided under the Act that have interpreted the demand requirement. As suggested above, the Michigan courts obviously will not require that demand be made upon a board when the majority of the board are wrongdoers or controlled by wrongdoers. On the other hand, the Act, like the Delaware chancery rules, requires the plaintiff to set forth “with particularity” the reasons for not making demand. Thus, it is quite possible that Michigan courts, like [Aronson v. Lewis, 473 A.2d 805 (Del.1984) ] will closely scrutinize pleadings alleging domination and wrongdoing to assure . that the demand requirement is not avoided by conclusory, nonparticularized allegations.

Id. at § 4.22, pp. 28-0 (Cum.Supp.1984).

Aronson v. Lewis, 473 A.2d 805 (Del.1984), is a leading case from Delaware on this point, from a court which is respected and often followed in corporate matters. The demand requirement under Delaware law is similar to that contained in the Michigan Business Corporation Act and Fed.R. Civ.P. 23.1 in that it requires the plaintiff to set forth “with particularity” the reasons for not making demand. The Aron-son court closely scrutinized the pleadings to assure that the demand requirement was not avoided by conclusory, nonparticularized allegations. The derivative plaintiff in Aronson challenged certain loans and an employment agreement with a director who was also a 47 percent shareholder, and the chancery court excused demand on the grounds of futility. The Delaware Supreme Court reversed, stating:

[DJemand can only be excused where facts are alleged with particularity which create a reasonable doubt that the directors’ action was entitled to the protections of the business judgment rule. Because the plaintiff failed to make a demand, and to allege facts with particularity indicating that such demand would be futile, we reverse the Court of Chancery____ (emphasis added)

Id. at 808.

The court emphasized that derivative suits, by their nature, impinge upon managerial preogatives, and that the demand requirement reflects the judicial preference that corporate decision-making, including the decision to litigate, be made in the first instance by the board of directors or the majority of shareholders. According to the court:

“[T]he demand requirement ... exists at the threshold, first to insure that a stockholder exhausts his intracorporate remedies, and then to provide a safeguard against strike suits. Thus, by promoting this form of alternative dispute resolution, rather than immediate recourse to litigation, the demand requirement is a recognition of the fundamental precept that directors manage the business and affairs of corporations.
In our view the entire question of demand futility is inextricably bound to issues of business judgment and the standards of that doctrine’s applicability ... Absent an abuse of discretion, that judgment will be respected by the courts. The burden is on the party challenging the decision to establish facts rebutting the presumption.

Id. at 811-12.

The court concluded that:

[I]n determining demand futility the Court of Chancery in the proper exercise of its discretion must decide whether, under the particularized facts alleged, a reasonable doubt is created that: (1) the directors are disinterested and independent and (2) the challenged transaction was otherwise the product of a valid exercise of business judgment.

Id. at 814.

In other words, according to Aronson, the plaintiff must allege a prima facie ease of either breach of duty of loyalty (i.e., self-dealing) or breach of duty of care (i.e., neglect or grossly negligent decision-making) before demand will be excused.

A number of federal cases have interpreted the demand requirement in Fed.R. Civ.P. 23.1. In Heit v. Baird, 567 F.2d 1157 (1st Cir.1977), the court relied heavily upon an earlier First Circuit case, In re Kauffman Mutual Fund Actions, 479 F.2d 257, cert. denied, 414 U.S. 857, 94 S.Ct. 161, 38 L.Ed.2d 107 (1973). Referring to Kauffman, the Heit court said:

We stated that in order to make out sufficient participation by outside directors in the complained of conduct to excuse demand upon them, a complaint had to do more than allege approval of the conduct by these directors.

“Where mere approval of the corporate action, absent self-interest or other indication of bias, is the sole basis for establishing the director’s ‘wrongdoing’ and hence for excusing demand on them, plaintiff’s suit should ordinarily be dismissed.”

Id. at 1160, quoting 479 F.2d at 265.

Another decision interpreting Rule 23.1 on the demand requirement is Lewis v. Graves, 701 F.2d 245 (2d Cir.1983), where the court said:

While we have not had occasion to rule on the issue of whether mere approval or acquiescence establishes futility, there is more than ample authority from other circuits that it does not. (citations omitted) The fact that a corporation’s directors have previously approved transactions subsequently challenged in a derivative suit does not inevitably lead to the conclusion that those directors, bound by their fiduciary obligations to the corporation, will refuse to take up the suit. This is particularly true where the directors’ prior acquiescence was obtained through fraud or where the dealings in question otherwise went sour for the corporation. Moreover, Rule 23.1 would be substantially diluted if prior board approval standing alone established futility. Derivative suits are almost invariably directed at major, allegedly illegal, corporate transactions. By virtue of their offices, directors ordinarily participate in the decision making involved in such transactions____ Excusing demand on the mere basis of prior board acquiescence, therefore, would obviate the need for demand in practically every case.

Id. at 248.

In the instant case, Hall alleges that he has not made demand on the board as it would be futile, because: 1) all but one of the 15 members of the board were named defendants, 2) the challenged actions were taken or specifically approved by board members, 3) the defendant directors have breached their fiduciary duties to the shareholders, and 4) the directors have a personal interest in the subject matter of the action, and are themselves wrongdoers and could not be reasonably expected to pursue this action.

To reiterate, there have been no cases interpreting the demand requirements in the new Michigan act, but Siegel, Schulman and Moscow, supra, point out that Aronson is most likely to be followed. At the outset, the Aronson court explicitly considered and rejected the first two reasons given for failure to make demand, that is, that the directors are named as defendants in the action and previously approved of the challenged action. The Court rejected these arguments, finding that this “bootstrap” approach would effectively abrogate the demand requirement.

The third reason given by plaintiff is that the directors have breached their fiduciary duties. This reason, if alleged with particularity, is sufficient to excuse demand under Aronson. Regarding breach of duty of loyalty, nowhere has Hall alleged that any of the directors in this case has a pecuniary interest in the stock transaction itself, or that any director stands to profit economically from it. It is significant to note in this context that all except two of the directors are outside directors who have no employment relationship, other than as a member of the board, with First Federal. Hall has not alleged that negotiations with the Fisher group were not conducted at arms-length. Furthermore, plaintiff has failed to allege any fact indicating that the outside directors were controlled by management or otherwise acted in bad faith. Accordingly, he has failed to create by the allegations any reasonable doubt that the majority of the board of directors who approved the sale was disinterested and independent. In other words, plaintiff has failed to allege a breach of duty of loyalty.

The essence of plaintiffs complaint is that the board breached its fiduciary duties to the shareholders when it authorized the sale of 950,000 shares to the Fisher group for a below-market price. Defendants contend that plaintiff has failed to raise a reasonable doubt that the board did anything other than exercise its valid business judgment in approving the sales transaction. They contend specifically that the complaint is defective because it fails to allege the sale of stock for cash was not a proper corporate action designed to increase equity capital, increase the ratio of deposits to capital, and increase the protection of depositors in the Federal Insurance Fund. Defendants also contend that the complaint failed to allege that the ways and means of raising additional equity capital had not been under discussion by the board and under active consideration by a committee of the board, or that First Federal could have sold 950,000 shares on May 15 at a higher net price to the company, or that it could have initiated any public or private stock offering whose proceeds could be expected to have equal or higher net present value. Finally, defendants argue that the complaint fails to allege that the directors were not fully informed of the terms of the transaction, that Salomon Brothers did not make its views known at the meeting, or that its views were disregarded, or that First Federal’s outside counsel was not present or did not make his views known, or that his views were not followed.

In considering whether plaintiff has stated a prima facie case of breach of duty of care, it is important to note initially that decisions whether to sell additional stock, and on what terms to do so, are matters generally committed to the discretion of the board of directors, and the board is entitled to a presumption that it acted in good faith and exercised valid business judgment. See, e.g., Heit, supra, at 1162. See also Siegal, Schulman and Moscow, Michigan Business Corporations, § 5.08 (1979). Plaintiff has provided a lengthy list of factors that the board failed to consider, including whether better alternatives for raising capital were available, whether $14 was a fair price, whether it was necessary for First Federal to raise additional capital, whether there were other potential purchasers for the 950,000 shares, the propriety of the agreement restricting the transfer of the stock, the- legality of the broad- indemnity given to the purchasers, and whether the advice given by Salomon Brothers was complete. However, plaintiff has failed to set forth any facts showing that the board of directors did not consider these factors or alternatives, or that they failed to seek or follow the advice of Salomon Brothers or of counsel.

One outside director, Jervis C. Webb, was not at the meeting, did not vote on the transaction, and there is no reason whatever to show that he could not have called upon outside businessmen to form and work with him on a disinterested special litigation committee. See Note, “Derivative Suits and the Special Litigation Committee — A Question of Balance in Michigan Law, 29 Wayne L.R. 149 (1982). Instead, he was named as a defendant in this action. The Court is not convinced by plaintiff’s argument that, because Mr. Webb failed to second the motion for reconsideration of the decision to sell the stock when it was proposed by plaintiff’s father at a later board meeting, he was not sufficiently disinterested in the matter.

Given the sound rationale' behind the business judgment rule and the good-faith presumption that attaches to board actions, particularly here where the plaintiff has failed to allege any self-dealing on the part of the outside directors, or control of the directors by management, together with the difficulty of ascertaining from the complaint the complete facts surrounding the sales transaction, the Court finds that this is a case where demand should have been made. It is unclear to what extent the purchase and sale was to create capital, to what extent the sale price was reasonable, to what extent the board relied on advice, and so forth. Clearly, plaintiff has failed to allege facts sufficient to support a claim of breach of duty of care. Accordingly, the Court cannot assume automatically that the board, or an independent litigation committee appointed for this purpose, would not rescind the sale or decline to pursue litigation. Thus demand was not excused in this case under either F.R.C.P. 23.1 or the Michigan statute.

IV

As to counts II and III, these are actions that may be maintained individually by plaintiff. Count II, which alleges violations of Section 10(b) of the Securities Exchange Act of 1934, must be dismissed, however, because plaintiff is neither a buyer nor a seller of the stock involved. Additionally, plaintiff has failed to allege fraud under Section 10(b) with sufficient particularity to sustain the claim under Benoay v. Decker, 517 F.Supp. 490 (E.D.Mich.1981), aff'd, 735 F.2d 1363 (6th Cir.1984). With reference to alleged violations of Section 13(d) of the 1934 Act contained in count II, the Court finds the allegations related to disclosure of the nature of the Fisher group sale insufficient to state a claim.

Finally, with reference to count III, there is no individual claim of reliance upon the sale. There are insufficient allegations of fraud to sustain a fraud action, and therefore count III will be dismissed.

Defendant Salomon Brothers Inc. moves separately for dismissal on the grounds that the complaint contains no allegations that could support a claim against it. The Court holds that no cause of action has been stated against Salomon Brothers Inc., which creates an additional ground for dismissing this defendant.

Therefore, for the reasons given, the entire lawsuit will be dismissed.

      . Further, plaintiff is obviously not an adequate representative in a derivative action since he initially brought this suit in his own right, and still attempts to proceed individually, in the alternative to his derivative claim. Of course, he could not maintain a claim for breach of fiduciary duty as an individual plaintiff in his own right, since that cause of action belongs to the corporation and must be brought as a derivative action. Walton v. Morgan Stanley & Co., Inc., 623 F.2d 796 (2d Cir.1980); Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727 (3d Cir.1970), cert. denied, 401 U.S. 974, 91 S.Ct. 1190, 28 L.Ed.2d 323 (1971).