author: JAMES McGIRR KELLY, District Judge.

text:
    UNITED STATES of America v. Joseph G. DiBONA, et al.
    Civ. A. No. 83-1311.
    United States District Court, Pennsylvania.
    March 21, 1985.

      Dennis C. Egan, U.S. Dept, of Justice, Washington, D.C., for plaintiff.
    Bernard L. Shapiro, Philadelphia, Pa., for defendants.
   MEMORANDUM AND ORDER

JAMES McGIRR KELLY, District Judge.

Presently before the court is defendants’ motion for reconsideration of my January 15, 1985 order denying their motion for a protective order. The defendants state two reasons why the January 15th order should be vacated. First, the information the government needs to discover is not relevant. Second, the government is relying upon “grand jury materials” in contravention of Fed.R.Crim.P. 6(e). After careful consideration of both these issues, the court will deny defendants’ motion for the reasons set forth below. The facts of this instant action have been set out in detail in my Memorandum and Order of November 9, 1984. Each of the issues will be addressed separately.

DISCUSSION

A. Are the documents sought to be produced relevant?

Fed.R.Civ.P. 26(b)(1) provides that the parties “may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action____” The parties will be given broad discretion as to what materials can be discovered.

In the instant action, the government seeks to obtain testimony from RDL employees concerning their labor and material records on a series of defense contracts undertaken by RDL. They also seek some of RDL’s personnel and business records. Defendants argue that discovery should be limited to only the two contracts which are the basis of this action against them. The information which plaintiff seeks is relevant in calculating and proving that it suffered damages. The government is attempting to compare labor hours on other contracts to those that were logged on the ones now in question. Defendants have not named any specific objections as to why this information should not be discovered or if it is overly burdensome or any other legal reason for reversing my order. Reconsideration on this basis will be denied.

B. Is the discovery request based upon information derived from the illegal use of grand jury material?

The government is in possession of two audits conducted by the Defense Contract Audit Agency (DCAA). These audits were performed on the two contracts that are the subject of this civil action. The history of how the audit was conducted will be helpful in understanding why the defendants’ contention must be rejected.

The DCAA is responsible for auditing defense contract projects as required by the Department of Defense. The two contracts which underlie this civil action for false claims were the subject of an audit in 1979. The agency conducts audits in accordance with legislative power delegated to it by 32 C.F.R. 7-104.41(A)-(C). Subsection (b) authorizes the contracting officer or his representatives to examine the books and business records of the contractor to determine if they properly reflect all direct and indirect costs associated with performing it. The DCAA has the right to examine the records at all reasonable times.

The audits conducted by DCAA in 1979 were incomplete because the defendants withheld access to certain key records. As a result, the DCAA issued a “qualified audit” report noting that certain information was lacking.

In 1982 a grand jury indicted RDL, Inc. and Messrs. Rights and DiBona for, inter alia, submitting false and fictitious statements to the government along with obstructing the DCAA audit.

As part of the grand jury process, the business records detailing the labor and material costs of two defense projects were subpoenaed. A DCAA agent, at the request of the government, examined these records and based on their information he was able to complete the 1979 audits of RDL’s contract work. The irregularities the audits revealed were instrumental in securing the convictions of Messrs. Rights and DiBona. The use of the business records in the antecedent criminal action is not challenged by the defendants. They do, however, object to the use of the audit in the subsequent civil action believing that it constitutes illegal use of grand jury material.

The Federal Rules of Criminal Procedure provide that matters occurring before the grand jury may not be disclosed unless otherwise provided for by the rules. Rule 6(e)(2). Rule 6(e)(3)(B) states that “grand jury material” shall not be utilized except to assist the attorney for the government in the performance of his duties to enforce federal criminal law. The rules do provide that grand jury material may be disclosed by court order.

It is the defendants’ fervent contention that the audit was the product of the grand jury process; that it could not be used outside of the criminal proceeding and that since the government did not obtain a court order releasing the audit, its use is forbidden and the complaint must be dismissed. See United States v. Sells Engineering, Inc., 463 U.S. 418, 103 S.Ct. 3133, 77 L.Ed.2d 743 (1983). In my memorandum of December 7, 1984, addressing a similar issue raised by the defendants, I discussed the Sells decision by noting:

... [T]he Supreme Court held that attorneys in the Civil Division of the Justice Department may not have automatic access to and disclosure of grand jury materials in the possession of the prosecutors but must instead seek a court order for access to this evidence. Sells [103 S.Ct.] at 3147.
The Court’s decision was based upon three main considerations all flowing from the historical policy of preserving grand jury secrecy. First, the court believed that if grand jury matters and information were disclosed to persons other than the prosecutor involved in the criminal proceeding it would diminish the willingness of witnesses to come forward and testify fully with candor. If a witness believes he may have to continuously appear before a myriad of judicial bodies investigating the subject he has information about, it may inhibit the citizen’s desire to come forward and testify. Sells at 3142.
Second, because of the active role taken by the government’s attorneys during a grand jury investigation, automatic disclosure may invite abuses of the process through manipulation of the grand jury to ferret out additional evidence useful in a civil suit. The grand jury has investigative powers not available to a civil attorney through normal discovery procedures. The use of a grand jury to elicit this information in a civil action is per se improper. United States v. Proctor and Gamble, 356 U.S. 677, 683-684 [78 S.Ct. 983, 986-987, 2 L.Ed.2d 1077] (1958).
And lastly, as a corollary to the previous point, if the government was allowed unlimited access to grand jury material, it would circumvent the carefully crafted and more limiting discovery rules material, it would circumvent the carefully crafted and more limiting discovery rules imposed upon it in a civil action. Sells, supra, at 3143.

United States of America v. DiBona, 601 F.Supp. 1162, 1164 (1984).

I believe that the rule of law announced in the Sells decision is inapplicable to these facts for the following reasons. First, there is a question as to whether these business records are grand jury materials since the records do not directly or indirectly reveal what transpired before the grand jury. In Re Grand Jury Matters (Catania), 682 F.2d 61, 63 (3d Cir.1982). But even more fundamental than that issue is that the three basic concerns expressed by the court in Sells are not present in this fact pattern. First, the business records used by the DCAA do not impinge the secrecy of the grand jury process. Second, I do not view the use of the DCAA audit in this proceeding as the result of an automatic disclosure by the Justice Department’s Criminal Division to its Civil Division counterpart. The DCAA viewed the business records under its congressional authority to examine material and labor costs of defense contracts. Defendants do not contend that the audit or the examination by DCAA of their records was not authorized. That the results of the audit were used in both a criminal proceeding and this civil action is not proof that a violation occurred. It cannot be said that information was illegally disclosed when the party who saw it was authorized by Congress to see it. The DCAA’s action will not, in my view, invite abuses of the grand jury process by allowing the government’s criminal attorney to manipulate the grand jury to ferret out useful evidence in civil suits. The legitimate exercise of the DCAA’s authority to review business records does not come at the expense of the rules governing discovery. The DCAA did not need the grand jury process to circumvent the system since it possessed the right and power to view the materials on its own authority. Defendants’ motion for reconsideration will be denied. The use of the audit report generated by the DCAA is not the result of illegal use of grand jury material. An appropriate order follows.

ORDER

AND NOW, this 21st day of March, 1985, for the reasons set forth in the foregoing Memorandum, it is ORDERED that:

1. Defendants’ motion for reconsideration of the January 15, 1985 Order is DENIED.

2. Defendants shall produce those RDL, Inc. business documents requested by the plaintiff within ten (10) days of the date of this Order.-

3. Defendants shall comply with plaintiff’s discovery request by designating within ten (10) days the person or persons with sufficient knowledge concerning RDL, Inc.’s defense contract transactions involving material costs and labor costs.

4. The depositions of the person or persons named in Order Number Three (3) shall be completed on or before April 15, 1985.

      . 7-104.41 Audit by Department of Defense reads in part:
      (b) ... [T]he Contracting Officer or his representatives shall have the right to examine books, records, documents, and other evidence and accounting procedures and practices, sufficient to reflect properly all direct and indirect costs of whatever nature claimed to have been incurred and anticipated to be incurred for the performance of this contract. ******
      (c) ... The right of examination shall extend to all documents necessary to permit adequate evaluation of the cost or pricing data submitted, along with the computations and projections used therein.


source: Caselaw Access Project

author: McNAMARA, District Judge.

license: Public Domain

text:
    Eleftherios STAMOULOS v. HOWLAND PANAMA S.A., Springfield Shipping Co. Panama S.A., Central American Steamship Agency, Inc.
    Civ. A. No. 84-667.
    United States District Court, E.D. Louisiana.
    March 28, 1985.
    Lawrence S. Kullman, New Orleans, La., for plaintiff.
    Robert H. Murphy, New Orleans, La., for defendants.
   McNAMARA, District Judge.

Before this court is the motion of the Defendant, Howland Panama S.A. (How-land), to Dismiss on the grounds of forum non conveniens. The Motion, which was scheduled to be heard Wednesday, March 27, 1985, is before this court without oral argument. After notifying counsel for Plaintiff and Defendants, this matter was taken under submission.

Eleftherios Stamoulos, a citizen of Greece, brought this action under the Jones Act, 46 U.S.C. § 688, and the General Maritime Law against his employer, Howland Panama S.A., a corporation existing under the laws of the Nation of Panama with its principal office and sole base of operation in Montevideo, Uruguay, to recover for injuries allegedly sustained on August 13, 1982 in the service of the M/V OLYMPIC PROGRESS. As noted, Defendant has moved to dismiss the case on the grounds that it was brought in a forum non conveniens.

Counsel for Plaintiff submitted a memorandum in opposition to this Motion in which he chose not to submit any written opposition to Howland’s Motion to Dismiss.

The court has considered the choice of law factors enunciated in Lauritzen v. Larson, 345 U.S. 571, 73 S.Ct. 921, 97 L.Ed. 1254 (1953) and Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306, 90 S.Ct. 1731, 26 L.Ed.2d 252 (1970) and finds by application of these factors, that the Eastern District of Louisiana is an inconvenient forum in which to try Stamoulos’ case against How-land Panama S.A. The court further finds that U.S. law is not applicable and that Greek law is applicable. The proper judicial forum for this action is in Greece.

Accordingly, the Motion of Howland Panama S.A. to Dismiss on the grounds of forum non conveniens is hereby GRANTED and Stamoulos’ case against Howland will be conditionally dismissed with prejudice. If Stamoulos decides to file suit in Greece against Howland within ninety (90) days of dismissal, Howland shall meet the following conditions: that Howland Panama S.A. submit to service of process and jurisdiction in the appropriate Greek court in which Stamoulos shall have filed suit; that in the Greek proceeding, Howland Panama S.A. formally waive any statute of limitations defense that has matured since the commencement of this action in the Eastern District of Louisiana; that in the Greek court, Howland Panama S.A. formally agree to make available therein all relevant witnesses and documents within its control; that in the Greek proceedings, Howland Panama S.A. formally agree to satisfy any final judgment rendered by the court; and that should Howland Panama S.A. fail to promptly meet any of these conditions, the court shall resume jurisdiction over this case.


text:
    Eleftherios STAMOULOS v. HOWLAND PANAMA S.A., Springfield Shipping Co. Panama S.A., Central American Steamship Agency, Inc.
    Civ. A. No. 84-667.
    United States District Court, E.D. Louisiana.
    April 15, 1985.

      Lawrence S. Kullman, New Orleans, La., for plaintiff.
    Robert H. Murphy, New Orleans, La., for defendants.
   McNAMARA, District Judge.

Eleftherios Stamoulos, a citizen of Greece, brought this action under the Jones Act, 46 U.S.C. § 688, and the general maritime law against Howland Panama S.A., Springfield Shipping Company Panama S.A., and Central American Steamship Agency, Inc., to recover for injuries allegedly sustained on August 13, 1982 in the service of the M/V OLYMPIC PROGRESS. On March 28, 1985, 610 F.Supp. 453, this court granted Howland’s Motion to Dismiss on the grounds of forum non conveniens. Defendants, Springfield and Central American, now move for Summary Judgment seeking to dismiss the claims against them. For the reasons stated below, the Motions will be granted and Stamoulos’ case will be dismissed.

FACTS

On July 29, 1982, Stamoulos signed a maritime employment agreement in Piraeus, Greece, with Springfield, who openly served as an agent and representative of Howland for purposes of executing the employment agreement. Stamoulos was hired to serve as a junior engineer aboard the M/V OLYMPIC PROGRESS. He joined the vessel in Mexico shortly thereafter. The Plaintiff alleges that on August 13, 1982, he was involved in an accident aboard the M/V OLYMPIC PROGRESS.

The maritime employment agreement between Stamoulos and Howland Panama S.A. was written in Greek, executed in Greece, and clearly provides that any dispute between the parties arising out of this employment relationship would be resolved exclusively by Greek courts.

The M/V OLYMPIC PROGRESS is a Greek flag vessel, registered under the laws of Greece, which is owned by How-land Panama S.A., a Panamanian corporation with its principle office and sole base of operation located in Montevideo, Uruguay. The employment agreement expressly designates Howland Panama S.A. as the sole employer of Stamoulos.

Defendant, Springfield Shipping Company Panama S.A. is a corporation existing under the laws of the Nation of Panama with its principle office and sole base of operation in Greece. The directors and officers of Springfield are all British and Uruguaian nationals and citizens. Essentially, Springfield is a maritime agency which negotiates employment contracts with seamen on behalf of vessel owners. In this instance, Springfield was a disclosed agent of Howland in which it acted specifically to locate seamen to serve as crew members aboard the M/V OLYMPIC PROGRESS in 1982. Springfield is an entity independent of both the owner, How-land, and the vessel, M/V OLYMPIC PROGRESS. Springfield had no ownership interest in the vessel.

Defendant, Central American is a corporation existing under the laws of the State of New York, with its principle place of business in New York. Central American also had no ownership interest in the M/V OLYMPIC PROGRESS and no control over the hiring of crew members and made no decision regarding the operation of the vessel. Central American only provided husbanding agency services to the vessel and her owners in August, 1982.

I. SPRINGFIELD’S MOTION FOR SUMMARY JUDGMENT

Stamoulos argues that summary judgment in favor of Springfield is improper because there are contested material facts as to whether Springfield was his “employer” for purposes of Jones Act liability.

It is axiomatic that an employer-employee relationship is essential before liability may be imposed under the Jones Act. Spinks v. Chevron, 507 F.2d 216 (5th Cir. 1975). The Fifth Circuit in Guidry v. South Louisiana Contractors, Inc., 614 F.2d 447 (5th Cir.1980), set forth the proper legal standard to be applied under the Jones Act to determine whether an employer-employee relationship has been established.

“A Jones Act claim also requires proof of an employment relationship either with the owner of the vessel or with some other employer who assigns the worker to a task creating a vessel connection, for “by the express terms of the Jones Act an employer-employee relationship is essential to recovery.” Spinks v. Chevron Oil Co., 507 F.2d 216, 224 (5th Cir.1975). The employer need not be the owner or the operator of the vessel. Barrios v. Louisiana Construction Materials Co., 465 F.2d 1157 (5th Cir.1972). Independent contractors may be liable under the act, Mahramas v. American Export Isbrandtsen Lines, Inc., 475 F.2d 165, 171 (2nd Cir.1973); Barrios v. Louisiana Construction Materials Co., 465 F.2d 1157 (5th Cir.1972). And a third person who borrows a worker may become his employer if the borrowing employer assumes enough control over the worker. Ruiz v. Shell Oil Co., 413 F.2d 310 (5th Cir.1969). However, even if a seaman is deemed to be a borrowed servant of one employer, this does not automatically mean that he ceases to be his immediate employer’s servant for Jones Act purposes. Spinks v. Chevron Oil Co., 507 F.2d 216, 224 (5th Cir.1975). And it may also be possible for a seaman to have more than one Jones Act employer. Id. at 225-26.

Id. at 452.

In the present case, Springfield acted specifically as an agent and representative of Howland Panama S.A. when entering into a maritime employment agreement with Stamoulos. The applicable employment agreement clearly sets forth that Howland Panama solely was the employer of Stamoulos and that Springfield was a disclosed agent acting on behalf of How-land for purposes of executing the employment agreement with Stamoulos.

The Plaintiff relies upon Guidry v. South Louisiana Contractors, Inc., 614 F.2d 447 (5th Cir.1980) and Spinks v. Chevron Oil Co., 507 F.2d 216 (5th Cir.1975), to establish that Springfield was Stamoulos’ Jones Act employer. However, these cases are inapposite to the present situation. Both Guidry and Spinks dealt with the offshore drilling operations where companies customarily contract for all labor. In those cases, a person hired and paid by one party was then loaned out to another party who assumed control of the work operations and the employee. In those cases, the immediate employer was not acting as a crewing agent but rather was acting as an independent contractor, contracting out the services of its employees to oil exploration companies. Furthermore, the facts of this case indicate that the maritime employment agreement establishes that Howland Panama S.A., as owner of the M/Y OLYMPIC PROGRESS, was ultimately liable for Stamoulos’ wages pursuant to the Greek collective agreement in force.

The facts of the instant case are similar to Volyrakis v. M/V ISABELL, 668 F.2d 863 (5th Cir.1982). In that case the Fifth Circuit held that a New York corporation serving as an agent for the vessel cannot be held liable under the Jones Act for an injury sustained by a crew member of that vessel. In Volyrakis, the agent performed no activities relative to hiring the plaintiff, had no control over the hiring or firing of the vessel’s crew and made no decisions concerning the direction and supervision of the vessel’s crew. Under the facts of that case, the Fifth Circuit affirmed the District Court’s dismissal of the plaintiff’s claims against the vessel’s agent. The only significant factual distinction between Volyrakis and the instant case, is that in this case the agent did perform certain activities with regard to hiring the Plaintiff but did so only as a disclosed agent of Howland Panama. This court finds that factual distinction to be of no legal significance.

It is firmly established that an agent for the vessel owner, even though signing the shipping articles of the employee, does not become the employer of the seaman under the Jones Act or the general maritime law. Cosmopolitan Shipping Co., Inc. v. McAllister, 337 U.S. 783, 69 S.Ct. 1317, 93 L.Ed, 1692 (1949); Fink v. Shepard, 337 U.S. 810, 69 S.Ct. 1330, 93 L.Ed. 1709 (1949); Cruz v. Maritime Overseas Corp., 1963 A.M.C. 1870 (S.D.N.Y.1962).

In light of the foregoing, Stamoulos has failed to establish the requisite facts which are necessary to form an employer-employee relationship with Springfield. The uncontroverted facts indicate that Springfield had no ownership interest in the M/V OLYMPIC PROGRESS and was simply negotiating employment contracts with seamen as a disclosed agent on behalf of How-land in August 1982. Furthermore, the Plaintiff has no basis to assert a general maritime law claim against Springfield.

Accordingly, the court GRANTS Springfield Shipping Company’s Motion for Summary Judgment DISMISSING, with prejudice, the Plaintiff’s claims under the Jones Act and general maritime law against Springfield.

II. CENTRAL AMERICAN’S MOTION FOR SUMMARY JUDGMENT

The Plaintiff concedes that he does not have a cause of action against Central American under the Jones Act or for unseaworthiness under the general maritime law. See, Damaskinos v. Societa Navigacion Interamericana, S.A. Panama, 255 F.Supp. 919 (S.D.N.Y.1966); Dassigienis v. Cosmos Carriers and Trading Corp., 1970 A.M.C. 1517 (S.D.N.Y.1970); Raglin v. Norton Lilly & Co., 1981 A.M.C. 686 (S.D.N.Y.1981).

In this instance, the Plaintiff however contends that he has a cause of action against Central American in maritime tort. The Plaintiff argues that Central American owes a duty to Stamoulos to assist the vessel owner in providing the Plaintiff with appropriate medical attention as a result of his injuries.

The evidence is clear that Central American was merely a husbanding agent which acted on specific instructions from its principals and had no authority, without specific instruction, to take any action whatsoever with respect to an injured seaman. There is no evidence that Central American failed to fulfill its duties as husbanding agent. Outside of its duties as husbanding agent, Central American owed no independent duty to Plaintiff. As noted, in Jones Act and general maritime cases, a husbanding agent has not been held liable for personal injuries suffered by a seaman. Similarly, this court concludes that Central American, as a husbanding agent, is not liable for Plaintiff’s personal injuries as a result of a maritime tort.

Accordingly, there being no genuine issue of material fact in this case concerning Defendant, Central American Shipping Company, its Motion for Summary Judgment is GRANTED and Plaintiff’s cause of action against the Defendant, Central American is hereby DISMISSED.


author: HAROLD H. GREENE, District Judge.

text:
    AMERICAN TRADING TRANSPORTATION COMPANY, Plaintiff, v. UNITED STATES of America, et al., Defendants. ATLANTIC RICHFIELD COMPANY, Plaintiff, v. UNITED STATES of America, et al., Defendants.
    Civ. A. Nos. 84-3409, 84-3536.
    United States District Court, District of Columbia.
    March 29, 1985.

      Jeffrey R. Masi, Anne E. Mickey, Linda L. Martin, Bogle & Gates, Washington, D.C., for plaintiffs American Trading Transp. Co., Inc., et al.
    John H.E. Bayly, Asst. U.S. Atty., Washington, D.C., for federal defendants.
    James F. Ford, Timothy B. Shea, Maritime Admin., U.S. Department of Transp., Washington, D.C., of counsel.
    Mark P. Schlefer, Michael Joseph, Kominers, Fort, Schlefer & Boyer, Washington, D.C., for plaintiffs Atlantic Richfield Co.
    Richard H. Saltsman, Bowman, Conner, Touhey & Petrillo, Washington, D.C., for defendants-intervenors Archon Shipping, Inc. and American Petrofina, Inc.
    William E. McDaniels, Kevin T. Baine, Williams & Connolly, Washington, D.C., for defendant-intervenor Seatrain Lines.
    Jonathan Blank, John W. Angus, III, Preston, Thorgrimson, Ellis & Holman, Washington, D.C., for defendants-intervenors Seatrain Lines, Inc. and Boston VLCC Tankers, Inc., VI.
   MEMORANDUM

HAROLD H. GREENE, District Judge.

At issue in these cases is the application of section 506 of the Merchant Marine Act of 1936, 46 U.S.C. § 1156. Plaintiffs in the American Trading case, owners of American flag ships built without subsidy which operate in the domestic trade, brought suit to invalidate a decision of the Maritime Administration (Marad) to permit two subsidized American vessels to operate in that trade. The owners of the subsidized vessels were permitted to intervene as defendants. The related Atlantic Richfield action challenges Marad’s decision not to permit that company’s vessel, the “Arco Spirit,” to enter the domestic trade. American Trading Transportation Company, Seatrain, and Boston VLCC were permitted to intervene in that action.

On November 9, 1984, this Court denied American Trading’s motion for a temporary restraining order, and the matter is now before the Court on motions for preliminary injunction filed both by American Trading and by Arco.

It is clear — and all parties agree — that these cases involve a review of agency decisions and rulemaking, and that this Court’s responsibility is therefore limited to a determination of whether Marad’s action was arbitrary, capricious, an abuse of discretion, or otherwise not in accordanee with law. 5 U.S.C. § 706(2)(A); Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971). The limited scope of judicial review in these cases, the substantial record before the Court, and the fact that there has been voluminous briefing and two oral arguments in these cases, makes it possible for the Court to dispose of them upon the merits.

I

It is the purpose of the Merchant Marine Act to foster the development and maintenance of the United States’ merchant marine. One of the methods employed to accomplish this objective has been the development of two separate fleets — one to compete in the foreign trade and the other to operate in the domestic trade. Assistance is provided to vessels built in American shipyards which are destined for operation in the foreign trade in the form of construction-differential subsidies (CDS). However, in order to prevent the subsidized fleet from unfairly competing against unsubsidized vessels, the former are prohibited, as a general matter, from operating in the domestic trade.

The Secretary of Transportation has authority to permit subsidized vessels to enter the domestic market after full repayment of their CDS, or upon grant of a waiver for up to six months per year with pro rata repayment of the CDS. The Secretary’s decision under this scheme is a “highly discretionary” one (Seatrain Shipbuilding Corp. v. Shell Oil Co., supra, 444 U.S. at 589, 100 S.Ct. at 810), and it requires a balancing of a number of factors. Indeed, while the Secretary must consider the impact of a waiver upon the unsubsidized fleet (Shell Oil Co. v. Kreps, 445 F.Supp. 1128 (D.D.C.1977)) that is not the sole determinative factor: the Act permits a waiver to be granted whenever “necessary or appropriate to carry out the purposes of the Act” — and those purposes are very broad.

II

In September 1984, three subsidized vessels, the “Brooklyn,” the “Maryland,” and the “Arco Spirit” applied to Marad for permission to enter the domestic trade to carry crude oil from Valdez, Alaska to the Panama Canal. All three vessels are Very Large Crude Carriers (VLCCs) over 100,-000 deadweight tons (dwt) in size. On October 3,1984, notice of the applications was published in the Federal Register, and comments were solicited, 49 Fed.Reg. 39143-44 (1984). Fourteen interested parties filed comments, and the applicants were given an opportunity to respond. On October 19, 1984, the Administrator extended the comment period to permit parties to comment on a potentially relevant court decision, Atlantic Richfield Co. v. United States, Civil Action No. 84-0139 (D.D.C. October 12, 1984), and the protestors filed additional comments and the applicants responded accordingly. Following the receipt of these comments, Marad denied requests for the filing of additional comments (see infra), and on November 7, 1984, it issued a brief order granting waivers to the “Brooklyn” and the “Maryland” but denying the “Arco Spirit” application. On November 16, 1984, the agency issued an opinion explaining in detail the reasons for the November 7 order.

Marad’s decision has been challenged by plaintiffs in both cases as being arbitrary, capricious, and an abuse of discretion. More specifically, American Trading challenges both the instant waiver proceeding and the propriety of the underlying regulation, while Arco challenges the authority of Marad to grant a waiver to some vessels but to deny it to others.

III

On June 29, 1977, Marad published a final rule setting forth eligibility and other requirements for the carriage of Alaskan oil in the domestic trade by tank vessels which were built with CDS. 42 Fed.Reg. 33035 (June 29, 1977). According to the regulation, it has as its purpose the satisfaction of carriage requirements for Alaskan oil in the domestic trade after utilization of suitable vessels built without the benefit of CDS. The regulation is essentially procedural, that is, it does not list the factors which the Secretary will consider in making a determination under section 506. It does, however, contain one relevant substantive determination — that only vessels of over 100,000 dwt will be regarded as suitable for the Alaska-Panama Canal trade. The effect of this regulation, which is critical here, is as follows. A “suitable” subsidized vessel, i.e., one larger than 100,-000 dwt, may apply for a waiver to enter this trade, and a “suitable” unsubsidized vessel has the power to protest and block the issuance of a waiver. However, a vessel not meeting the 100,000 dwt threshold is able to do neither. See 46 C.F.R. 250.

In the seven years in which the regulation has been in effect, Marad has issued at least 15 decisions pursuant thereto, repeatedly stating that protests of vessels under 100,000 dwt would not be permitted to block the grant of waivers, and upholding its earlier determination that smaller vessels are not “suitable” for the trade. See, e.g., Dockets S-741 to 743 Arco Transportation Co., MA October 7, 1983, at 15.

Plaintiffs in the American Trading case own or operate unsubsidized vessels which fall short of the 100,000 dwt limitation, and accordingly, when they protested the application of other vessels to enter the domestic trade, Marad did not consider their views. In this proceeding, these plaintiffs have presented two separate challenges to the regulation as well as numerous challenges to the waiver determination made in favor of the “Brooklyn” and the “Maryland.” The Court first considers the challenges to the regulation.

First. Plaintiffs claim that the regulation violates the Administrative Procedure Act (5 U.S.C. § 553) by its failure to include a concise statement explaining the basis for the choice of 100,000 dwt as the size of a suitable vessel. While the APA requirement that rules shall incorporate a concise statement of basis and purpose is an important tool for ensuring reasoned regulations, the agency’s failure to comply — assuming arguendo that the regulation is inadequate in that regard — does not help these plaintiffs. Plaintiffs have waited seven years to challenge the regulation. Several of the plaintiffs, which were in existence and in the shipping business at the time, did not submit comments or otherwise participate in the rulemaking process. The one plaintiff which did participate, ITOC, specifically proposed the definition of “suitable vessel” which it seeks to challenge here. Under these circumstances, plaintiffs cannot now challenge the rule. National Resources Defense Council v. Nuclear Regulatory Commission, 666 F.2d 595, 602 (D.C.Cir.1981); Nader v. Nuclear Regulatory Commission, 513 F.2d 1045, 1054-55 (D.C.Cir.1975).

Second. Similar considerations serve to undermine plaintiff’s other challenge to the regulation. Plaintiffs claim that because the regulation does not permit vessels of less than 100,000 dwt to block the issuance of a waiver, it fails to consider competitive effect and is thus inconsistent with the law. See Shell Oil Company v. Kreps, supra, 445 F.Supp. 1128. However, plaintiffs do not rely on the competitive conditions as they existed when the regulation was adopted; rather, they assert that “since the promulgation of 46 C.F.R. Part 250, the supply of and demand for tanker tonnage in the domestic trades have fundamentally changed,” and that for that reason it violates the statutory command. Plaintiff’s Memorandum at 32.

If, in fact, it is true that market conditions have so changed as to alter the competitive effect rationale of the regulation, the proper procedure would have been to petition the agency for a new rulemaking rather than to institute a court challenge to the validity of the existing regulation. A new rulemaking would permit all interested parties to present their views, and it would also permit the agency to utilize its recognized expertise in adopting the proper rule. Certainly, consistently with proper administrative practice, Marad should be given the opportunity to make the initial determination of whether conditions have changed to the extent that the current rule no longer adequately considers the interests of the domestic fleet; the Court cannot make that decision ab initio.

In any event, the Court could not find that plaintiffs have shown the limitation imposed by the Secretary to be arbitrary, capricious, or an abuse of discretion. Marad has determined that VLCCs “are the most economical for operation from the standpoint of the shipper,” that they enjoy economies of scale; and that “small ships could not be considered to be competitive with the VLCCs in the Alaska/Panama trade and that it would be unfair to both the charters and the ultimate consumer to require the charter of all available small vessels, even though they are unsuitable for the trade.” Marad Opinion at 52-54. Those determinations are at a minimum rational conclusions in furtherance of the statutory objective of the maintenance of a merchant marine “composed of the best-equipped, safest, and most suitable types of vessels.” 46 U.S.C. § 1101.

For these reasons, the Court rejects the claim that the Secretary’s refusal to permit smaller vessels to block waivers for subsidized VLCCs is arbitrary or capricious or that it reflects a disregard of the requirements of the law.

IV

Plaintiffs also argue that the rulemaking procedure which resulted in the grant of these waivers denied them due process because Marad refused to allow a third round of comments after plaintiffs submitted allegedly new information relating to Mar-ad’s financial interest in Seatrain and thus of bias, prejudice, and precommitment.

It is true, of course, that Marad has a substantial financial stake in Seatrain, and that ordinarily a decision-maker should be free of an economic stake in the decision. But the curious mixture of financial interest and decision-making that is present here was established by the Congress in the Merchant Marine Act and is thus not open to question by the Court. Indeed, the Supreme Court itself has recognized that, in view of this congressional directive, Mar-ad is entitled to take into consideration “the Government’s position as guarantor of substantial financial obligations.” Seatrain Shipbuilding Corp. v. Shell Oil Co., supra, 444 U.S. at 588, 100 S.Ct. at 809.

As for plaintiffs’ specific claim of denial of due process because of the refusal of Marad to reopen the proceedings, it would have merit only if the relationship between Marad and Seatrain and Seatrain’s financial difficulties constituted newly-discovered, hitherto unknown facts — something they clearly were not. Everyone in the industry has been aware of this relationship and of the Seatrain reorganization for as long as these factors have existed, and it is simply disingenuous of the American Trading plaintiffs to assert that they represented a new issue deserving of yet another round of briefing.

In short, nothing “new” was raised by the comments which plaintiff proposed to submit, and it certainly was not an abuse of discretion for the agency to refuse to extend the comment period after this stale issue was raised at a late stage of the proceedings.

Finally, the Administrator has explicitly stated that the financial issues raised by the applications were not necessary for its final decision and that “the argument was not considered; rather the policy was continued by evaluating the applications apart from the applicant’s financial ability to make Title XI payments.” Marad Opinion at 47. That statement — that the applications met the standards for waivers without the necessity for consideration of the financial implications to the United States — is entirely credible, if only because the record fully supports the agency’s conclusion that there was a need for additional YLCCs in the trade and that “suitable” unsubsidized vessels were not available to block the waivers. Accordingly, there was no denial of due process.

V

Atlantic Richfield claims in Civil Action No. 84-3536 that its application for a waiver with respect to one of its vessels was denied on an unreasonable and discriminatory basis. It is true, and the record shows, that waivers were granted for two vessels owned by Arco’s competitors, and that Arco’s own waiver application was denied, but this does not, without more, demonstrate unconstitutional discrimination.

It is Arco’s position that once Marad had concluded that the trade needed vessels in addition to the unsubsidized ones already operating, it was required to allow any CDS vessel wishing to do so to operate in that trade, and that, by denying one application at the same time that others were granted, the agency unlawfully discriminated against Arco in violation of the Equal Protection Clause. That argument lacks merit.

To begin with, the record supports Mar-ad’s determination that “a present need for two CDS VLCC tankers is evident” (Marad Opinion at 58), and that determination is not seriously challenged. Arco does claim, however, that it is beyond Marad’s jurisdiction to decide which two VLCCs should be granted waivers, and that, to the contrary, it must permit all CDS vessels to enter the trade and thus to permit the market to decide which two will remain.

This view is not consistent with the statutory framework which establishes a case-by-case, discretionary waiver system. See note 5, supra. If the Arco approach were the one intended by the Congress, the Secretary would not have been given the power to consider applications and to grant waivers. Instead, the procedure would have been for the Secretary simply to certify a need for CDS vessels in the domestic trade, and then any and all CDS vessels would automatically have the right to compete in that trade for six months. That, as indicated above, is plainly not the approach intended by Congress.

Arco’s view that the sole legitimate consideration in the granting of waivers is the protection of non-CDS vessels also represents an overly narrow view of the statu- ■ tory language. As noted supra, the statute permits the grant of waivers when “necessary or appropriate to carry out the purposes of the Act.” While protection of the unsubsidized fleet is one of the principal purposes of the Act, Marad may also consider, consistently with the statutory purposes, how the waiver system will ensure efficient and economic utilization of the CDS vessels needed in the domestic trade. For these reasons, the Court concludes that a determination to grant waivers only to the number of vessels for which there is a present need does not violate the statutory intent.

Arco also claims that the determination to grant waivers to the “Brooklyn” and the “Maryland” but not the “Arco Spirit” was irrational or capricious. Four reasons were given by Marad for the denial of the “Arco Spirit” application. These are: “(1) of the three applicants it has most recently had gainful employment, (2) its vessel is least in position to meet the loading schedule established by Exxon, (3) its application is the most uncertain regarding anticipated employment of the vessel, and (4) dividing the time period between applicants would be disruptive to the trade and expensive in terms of positioning costs.” Marad Opinion at 60.

Arco is correct in noting that the fourth reason does not support a distinction between the “Arco Spirit” and the other two applicants. However, the other three reasons clearly provide a rational basis upon which the Secretary could make a distinction between the “Arco Spirit” and the other two vessels, and the Atlantic Rich-field challenge to the Marad decision therefore must also fail.

For these reasons, the Court will grant judgment to the defendants and dismiss the complaints.

      . Marad permitted the "Brooklyn,” chartered by Archon and American Petrofina and the "Maryland,” owned by Boston VLCC Tankers, Inc. VI, and chartered by Seatrain, Inc., to enter the domestic trade for six-month periods beginning on December 15, 1984 and November 15, 1984, respectively.

      . In general, courts will not consolidate a decision on a preliminary injunction with a decision on the merits without a separate trial. In this case, it is clear that all relevant evidence is before the Court, and that no prejudice will result from a decision on the merits. See generally, 11 Wright & Miller, Federal Practice and Procedure § 2950. Indeed, in the Atlantic Richfield case, plaintiff specifically suggested that the Court dispose of the case on the merits. Plaintiffs Reply Memorandum in Support of Motion for Preliminary Injunction at 7.

      . 46 U.S.C. § 1101 provides:
      It is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine (a) sufficient to carry its domestic water-borne commerce and a substantial portion of the water-borne export and import foreign commerce of the United States and to provide shipping service essential for maintaining the flow of such domestic and foreign water-borne commerce at all times, (b) capable of serving as a naval and military auxiliary in time of war or national emergency, (c) owned and operated under the United States flag by citizens of the United States, insofar as may be practicable, (d) composed of the best-equipped, safest, and most suitable types of vessels, constructed in the United States and manned with a trained and efficient citizen personnel, and (e) supplemented by efficient facilities for shipbuilding and ship repair. It is declared to be the policy of the United States to foster the development and encourage the maintenance of such a merchant marine.

      . Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 100 S.Ct. 800, 63 L.Ed.2d 36 (1980).

      . The Merchant Marine Act provides that subsidy-constructed vessels are limited to the foreign trade unless "[t]he Secretary ... consents] in writing to the temporary transfer of such vessel to service other than [foreign service] for periods not exceeding six months in any year, whenever the Secretary may determine that such transfer is necessary or appropriate to carry out the purposes of this Chapter.” 46 U.S.C. § 1156.

      . The basic purpose of the Act is to ensure a merchant marine “composed of the best-equipped, safest, and most suitable types of vessels, constructed in the United States and manned with a trained and efficient citizen personnel” and supplemented by domestic shipbuilding facilities. 46 U.S.C. § 1101. Accordingly, the Secretary is responsible for guaranteeing the overall well-being of the American merchant marine, including supervision of the CDS program and of the ship financing guarantee program (46 U.S.C § 1271-1279c), a responsibility which is not limited to the protection of unsubsidized vessels in the domestic trade.

      . Additionally, of the three segments of the Alaska oil trade — Alaska-West Coast trade, Alaska-Panama Canal trade, and Panama Canal-Atlantic/Gulf Coast trade — the regulation is limited to the Alaska-Panama Canal trade.

      . Independent U.S. Tankers Owners Committee (ITOC) v. Lewis, 690 F.2d 908, 918 (D.C.Cir.1982).

      . Furthermore, where, as here, the industry appears to have negotiated the regulations with the agency and the classifications are apparently obvious to entities in the trade (see, e.g., Memorandum of Seatrain Lines in Opposition to Plaintiff’s Motion at 28-29; ITOC Comments on Proposed Rule), a court would not be justified in striking the agency rule seven years later because of the lack of an adequate statement of basis. Alabama Ass’n of Ins. Agents v. Board of Governors, 533 F.2d 224, 236 (5th Cir.1976), vacated in part, 558 F.2d 729 (5th Cir.1977).

      . The agency construction of a statute is of course entitled to deference unless there are compelling indications that it is wrong. Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 89 S.Ct. 1794, 23 L.Ed.2d 371 (1969); Lead Industries Ass’n v. Environmental Protection Agency, 647 F.2d 1130, 1147 (D.C.Cir.1980).

      . Marad has also determined that smaller vessels carry a very small proportion of the Alaskan-Panama trade, whether or not CDS vessels are in the market (Marad Opinion at 56), further buttressing the conclusion that these vessels are not suitable for the trade.

      . As noted above, Seatrain is the charterer of the “Maryland.” Marad, through the CDS program, has an interest in the Seatrain group which plaintiffs estimate at $200-$300 million. Seatrain is currently in reorganization under Chapter 11 of the Bankruptcy Code and its ability to repay its obligations to the U.S. government clearly depends upon the success of the reorganization. See Response of Boston VLCC VI, Inc., Administrative Record at 81.

      . The specific issue arose formally in this proceeding when Bulkfleet Marine, owner and operator of unsubsidized vessels, stated in its comments that the grant of the waivers "may cause defaults of government guaranteed financing programs such as Title XI by rippling displacement.” Bulkfleet's Comments, Administrative Record at 65. In response, Boston VLCC noted the potential economic injury to the United States (or Marad) if the waivers were not granted because of the detrimental effect this would have on the Seatrain reorganization and that company’s ability to repay its obligations. Response of Boston VLCC, Inc., Administrative Record at 81.

      . The agency’s financial interests extend to both the subsidized and unsubsidized portions of the fleet, a fact likewise well known in the industry. Seatrain Shipbuilding Corp. v. Shell Oil Co., supra; ITOC v. Lewis, 690 F.2d 908 (D.C.Cir.1982).

      . Equal protection is denied when there is unlawful discrimination in the administration of an otherwise neutral law. Yick Wo v. Hopkins, 118 U.S. 356, 6 S.Ct. 1064, 30 L.Ed. 220 (1886). However, plaintiff does not allege that it was excluded because of prejudice or any intentional or purposeful discrimination. Its sole claim is that the Administrator is precluded from making a rational distinction under the statute to grant certain vessels waivers while denying others.

      . A need was anticipated for an additional VLCC in February. This does not mean, as Arco seems to imply, that Marad had to grant three six-month waivers beginning in November or December because there might be a future need for a third vessel. The Administrator could find that a need for only two CDS vessels existed in November, and he could defer any decision as to the need for CDS vessels for February. The Marad opinion specifically notes that “[djenial of Arco’s application is without prejudice to its reapplying at any time.” Marad Opinion at 60.

      . It does, however, support the Secretary’s determination that only two vessels should be permitted to enter the trade.

      . It is undisputed, for example, that of the three vessels, the "Arco Spirit” was the most recently employed. Furthermore, Atlantic Rich-field concedes in its reply memorandum that its vessel would not have been able to meet the November 15 loading deadline. Arco Reply at 5.


author: EDWARD C. REED, Jr., District Judge.

text:
    Mary Sue AUSTIN, Bob Green, and Penny Carlucci, Plaintiffs, v. C & L TRUCKING, INC., an Arkansas corporation, et al., Defendants.
    CV-R-82-57-ECR.
    United States District Court, D. Nevada.
    March 29, 1985.

      Ralston Lercara Courtney, Coalinga, Cal., Calvin R.X. Dunlap, Reno, Nev., for plaintiffs.
    Eugene J. Waite, Jr., Reno, Nev., for C & L Trucking, Inc. & Larry Allen Brooks.
    No Appearance was entered by Kelly Capps, individually, or Junior Landis, individually.
   ORDER

EDWARD C. REED, Jr., District Judge.

Defendants C & L Trucking, Inc. (“C & L”), and Larry Allen Brooks (“Brooks”) move this Court pursuant to Fed.R.Civ.P. 50(b) for Judgment Notwithstanding the Verdict for punitive damages on the grounds that (1) named defendants Junior Landis (“Landis”) and Kelly Capps (“Capps”) are not parties subject to the jurisdiction of the Court and, furthermore, absolutely no evidence was offered by any party relating to Landis or Capps; (2) there was insufficient evidence for the jury to award punitive damages against defendant C & L because there was no evidence that employer C & L was aware of a brake problem prior to the collision or that C & L had ratified any alleged wrongful conduct of its employee defendant Brooks; and (3) there was insufficient evidence for the jury to award punitive damages against Brooks because there was no evidence establishing that Brooks possessed the actual malice required by law.

Facts

This case arose out of a vehicle collision on July 16, 1981, in Lovelock, Nevada, between a passenger car driven, owned and occupied by plaintiffs, all citizens of California, and a tractor-trailer combination truck driven by defendant Brooks and owned by defendant C & L, both citizens of Arkansas. A suit was filed in this Court on February 19, 1982, alleging jurisdiction on the grounds of diversity of citizenship of parties and a controversy in excess of $10,-000. 28 U.S.C. § 1332. Plaintiffs sought to serve defendants with process pursuant to NRS 14.070, which provides for service on operators, masters and principals of motor vehicles involved in collisions and accidents within the state. C & L and Brooks were served in this manner, answered, conducted discovery and filed pretrial motions with the court. Capps was also served with process pursuant to NRS 14.070, but did nothing. Capps did not answer or plead in the case or appear at the trial.

No service of process was made on Landis in conformity with the said statute. Landis, like Capps, did nothing. He did not answer or plead in the case. Landis did appear at the trial, but only as the case agent for C & L, and not in any individual capacity.

On November 20, 1984, a jury trial was held in this court. C & L and Brooks admitted liability, that the truck’s brakes were bad, and that the driver, Brooks, was acting within the scope of his employment by C & L at the time of the accident. The only issue before the jury, therefore, was that of compensatory and/or punitive damages. Before the case went to the jury, defendants argued that there was insufficient evidence for an award of punitive damages. However, verdicts were returned on November 26, 1984, and judgments were entered on December 4, 1984, in favor of plaintiffs as follows:

(1) in favor of plaintiff Penny Carlucci against defendants jointly and severally for actual or compensatory damages in the sum of $4,400, and for punitive and exemplary damages against the respective defendants C & L ($667), Capps ($500), Landis ($500) and Brooks ($333).
(2) in favor of plaintiff Leonard Ray Austin against defendants jointly and severally for actual or compensatory damages in the sum of $5,400; and for punitive and exemplary damages against the respective defendants C & L ($667), Capps ($500), Landis ($500) and Brooks ($333).
(3) in favor of plaintiff Mary Sue Austin against defendants jointly and severally for actual or compensatory damages in the sum of $21,800, and for punitive and exemplary damages against the respective defendants C & L ($2,667), Capps ($2,000), Landis ($2,000) and Brooks ($1,333).

I

Preservation of right to make motion

Defendants in this case now move for a judgment notwithstanding the verdict pursuant to Fed.R.Civ.P. 50(b) on the issue of punitive damages. The Rule provides in pertinent part:

Whenever a motion for a directed verdict made at the close of all the evidence is denied or for any reason is not granted, the court is deemed to have submitted the action to the jury subject to a later determination of the legal questions raised by the motion. Not later than 10 days after entry of judgment, a party who has moved for a directed verdict may move to have the verdict and any judgment entered thereon set aside and to have judgment entered in accordance with his motion for a directed verdict; ... If a verdict was returned the court may allow the judgment to stand or may reopen the judgment and either order a new trial or direct the entry of judgment as if the requested verdict had been directed.

A motion for judgment notwithstanding the verdict must be preceded by a motion for directed verdict and must be on the same grounds as the earlier motion. Issues raised in both motions must be examined as a matter of law and not as an attempt to reweigh the facts found by the jury. Mutual Ben. Health & Accident Ass’n. v. Thomas, 123 F.2d 353, 355 (8th Cir.1941).

Although a few circuits rigidly adhere to the letter of Rule 50(b) regarding timing of the previous motion for directed verdict, a more flexible approach is followed by many circuits, including the Ninth. See Bachtel v. Mammoth Bulk Carriers, Ltd., 605 F.2d 438, 441-42 (9th Cir.1979), overruled on other grounds Brown v. American Mail Line, Ltd., 625 F.2d 221, 223 (9th Cir.1980); Bonner v. Coughlin, 657 F.2d 931, 938 (7th Cir.1981). These cases allow a motion for judgment n.o.v. to be brought following earlier motions for directed verdict at close of plaintiffs case, where a request also was made for jury instruction to return a verdict in the moving party’s favor. See also Splitt v. Deltona Corp., 662 F.2d 1142 (5th Cir.1981) (Where defendant argued strenuously against a jury instruction permitting punitive damages, right to move for judgment n.o.v. on the issue of punitive damages was preserved even though the earlier motion for directed verdict had been on a different issue); Quinn v. Southwest Wood Products, Ind., 597 F.2d 1018 (5th Cir.1979).

In the present case, defendants asked permission from the court to move for directed verdict on the issue of punitive damages at the close of the case. The court reserved arguments on this issue for the settlement of jury instructions, at which time the defendants strongly objected to Instruction # 69 on punitive damages, on the ground of insufficient evidence. This Court now holds that, in the present case, defendants’ right to move for judgment notwithstanding the verdict under Fed.R.Civ.P. 50(b) has been preserved.

Standard of Review

Judgment notwithstanding the verdict is proper only where the evidence presented by the moving party allows only one reasonable conclusion as to the verdict, the one being alleged, Garter-Bare Co. v. Munsingwear, Inc., 723 F.2d 707, 709 (9th Cir.1984); Cal. Computer Products v. Intern. Business Machines, 613 F.2d 727, 733 (9th Cir.1979); Kaplan v. Burroughs Corp., 611 F.2d 286, 290 (9th Cir.1979); Fountila v. Carter, 571 F.2d 487 (9th Cir. 1978). The key issue is whether there is substantial evidence to support the jury’s verdict. Garter-Bare Co. at 709.

II

Service of Process on Capps and Landis

Defendants allege that Capps and Landis are not proper parties in this action because neither personally was served with process and because neither waived service by appearing in his personal capacity at trial. Further, defendants claim that all papers filed by counsel for C & L and Brooks reflect the fact that this counsel represented only these two defendants and did not respond on behalf of Capps and/or Landis.

Plaintiffs counter-argue that, if so, counsel for C & L and Brooks lacks standing to move for judgment n.o.v. on behalf of non-clients, and that, to do so, would be a clear conflict of interest. We do not have to reach this argument because this Court has the power to decide, sua sponte, whether Capps and/or Landis were served and if not, to dismiss the action against them for lack of jurisdiction. Fed.R.Civ.P. m

Plaintiffs attempted to serve process on Capps and Landis on February 19, 1982, pursuant to Fed.R.Civ.P. 4 and NRS 14.070. On that date, Fed.R.Civ.P. 4(d)(1) provided in pertinent part that:

Service shall be made as follows: Upon an individual ... by delivering a copy of the summons and of the complaint to an agent authorized by appointment or by law to receive service of process.

Fed.R.Civ.P. 4(e)(1) for service on out of state parties provided in pertinent part as follows:

Whenever ... a rule of court of the state in which the district court is held provides for service of summons ... upon a party not an inhabitant of or found within the state, ... service may ... be made under the circumstances and in the manner prescribed in the ... rule.

NRS 14.070 provided for service of process on operators of motor vehicles involved in collisions and accidents in the state, in pertinent part as follows:

1. The use and operation of a motor vehicle over the public roads, streets or highways, or in any other area open to the public and commonly used by motor vehicles, in the State of Nevada by any person, either as principal, master, agent or servant, shall be deemed an appointment by the operator on behalf of himself and his principal or master, ... of the director of the Department of Motor Vehicles to be his true and lawful attorney upon whom may be served all legal process in any action or proceeding against him, his principal or master, ... growing out of such use or resulting in damage or loss to person or property, and the use or operation signifies his agreement that any such process against him which is so served has the same legal force and validity as though served upon him personally within the State of Nevada.
2. Service of process must be made by leaving a copy of the process with a fee of $5 in the hands of the director of the Department of Motor Vehicles or in his office, and such service shall be deemed sufficient upon the operator if notice of service and a copy of the process is sent by registered or certified mail by the plaintiff to the defendant at the address supplied by the defendant in his accident report, if any, and if not, at the best address available to the plaintiff, and a return receipt signed by the defendant or a return of the Post Office Department stating that the defendant refused to accept delivery or could not be located, or that the address was insufficient, and the plaintiff’s affidavit of compliance therewith are attached to the original process and returned and filed in the action in which it was issued ...

Plaintiffs delivered a copy of the summons and complaint addressed to each defendant, Capps, Landis, C & L and Brooks, to the Nevada director of the Department of Motor Vehicles and mailed a copy of the summons and complaint by certified mail, return receipt requested, to C & L, Capps and Landis at the address provided for C & L in the accident report: P.O. Box 409, Judsonia, Arkansas 72081. Receipts returned from the mail service on C & L, Capps and Landis all seem to have been signed by the same person, without indication of whether this person was an addressee or an agent. C & L’s receipt was signed, “C & L Trucking,” Capps’ receipt was signed “Kelly Capps” and Landis’ receipt was signed “C & L Trucking.”

There is no dispute that C & L was properly served in this manner under NRS 14.070, as a principal or master of operator Brooks. This Court now finds that Capps’ signature on his receipt also constitutes a “return receipt signed by the defendant” within the meaning of the statute, and that Capps, therefore was properly served.

However, Landis did not sign his return receipt personally. Plaintiffs have failed to show that C & L is an alter ego for Landis such that the signature “C & L Trucking” would constitute a receipt signed by “the defendant.” Although Landis was named in the complaint personally and as doing business as C & L Trucking, and the complaint alleged that he was the owner of the trucking business, plaintiffs offered no evidence to show this fact. There also was no evidence that C & L was a corporate sham, existing solely to shield other parties from liability for alleged acts of employees. Further, Landis did not waive service by answering the complaint, conducting discovery or appearing in his personal capacity at trial. Therefore, this Court finds that Landis was not properly served under NRS 14.070 in this case and is not a proper party before this Court.

Plaintiffs argue that it would be unjust to dismiss the award of punitive damages against Landis for lack of service after the jury has returned its verdict. Plaintiffs reason that if he had been dismissed earlier, the jury could have increased its award against the remaining defendants to reach some mathematical amount for punitive damages. This argument is without merit. Punitive damages are personal to a given defendant and must be based on that defendant’s degree of culpability, maliciousness, oppressiveness and fault, and awarded in an amount sufficient to punish that particular defendant. NRS 14.010(2). It is improper to claim that punitive damages against some defendants might have been increased if another defendant were not in the case.

Judgment against Landis

In that there has been no lawful service of process on Landis, any judgment entered against him in this matter is null and without effect. One is not bound by a judgment in personam resulting from litigation to which he has not been made a party by service of process. Zenith Corp. v. Hazeltine, 395 U.S. 100, 110, 89 S.Ct. 1562, 1569, 23 L.Ed.2d 129 (1969); Aleknagik Natives Ltd. v. Andrus, 648 F.2d 496, 510 (9th Cir.1980).

Judgment against Capps

A civil action is commenced by filing a complaint with the court. Thereafter, the Clerk of the court issues a summons, which is served along with the complaint on the defendant. Fed.R.Civ.P. 3, 4. A defendant is required to serve his answer within 20 days after receiving the service of the summons and complaint, unless a different time is fixed by the court. Fed.R. Civ.P. 12. Service pursuant to Fed.R. Civ.P. 4(e) may be made under the Nevada Rules of Civil Procedure which also require an answer within 20 days after service. If a party against whom affirmative relief is sought fails to plead or otherwise to defend as provided in the Rules, the Clerk of the eourt upon a showing that such service has been made, is required to enter the party’s default. Fed.R.Civ.P. 55. It is inappropriate to have a trial and assess damages against a non-answering party, without further proceedings.

In the present ease, Capps was served with process pursuant to NRS 14.-070, and did not answer or file any papers with this Court. In addition, he did not appear at trial to defend himself. Therefore, the judgment that has been entered against Capps in this case must be set aside. However, Capps may be subject to the entry of a default judgment against him, and may be subject to further proceedings in this case.

Ill

Punitive damages against C & L Trucking, Inc.

Nevada law allows punitive damages to be awarded where a defendant is “... guilty of oppression, fraud or malice, express or implied.” NRS 42.010(1). These damages are awarded in addition to those for compensation for the sake of example and for the purpose of punishing the wrongdoer. NRS 42.010(2). See also Summa Corp. v. Greenspun, 96 Nev. 247, 256, 607 P.2d 569 (1980).

The punitive damages awarded against defendant C & L were justified under the doctrine of respondeat superior, holding the employer liable for the acts of his employee. The Nevada Supreme Court has said that:

The relation between parties to which responsibility attaches to one, for the acts of negligence of the other, must be that of superior and subordinate, or, as it is generally expressed, of master and servant, in which the latter is subject to the control of the former. The responsibility is placed where the power exists. Having power to control, the superior or master is bound to exercise it to the prevention of injuries to third parties, or he will be held liable. The responsibility attaches to the superior, upon the principal qui facit per alium facit per se. (Who acts through another acts for himself.)

Wells, Inc. v. Shoemake, 64 Nev. 57, 64, 177 P.2d 451, 455 (1947). See also National Convenience Stores v. Fantauzzi, 94 Nev. 655, 657-658, 584 P.2d 689, 691-692 (1978); Molino v. Asher, 96 Nev. 814, 817, 618 P.2d 878 (1980).

Defendants nevertheless contend that we should be limited by the doctrine of Summa Corp. v. Greenspun, that punitive damages cannot be awarded against a principal when that principal did not know of the employee’s wrongful conduct and did not authorize it. 96 Nev. at 257, 607 P.2d 569. However, the facts in Summa Corp. differ from those in the case at bar. In Summa Corp., the employee deliberately withheld information about an oral recission agreement from the employer and the employer recorded a therefore voidable deed of trust without knowledge of the oral recission agreement. In that case, liability for punitive damages was not imputed to the employer. In the present case, however, there is no evidence that Brooks deliberately withheld any information regarding the condition of the truck’s brakes from his employer, C & L. In addition, C & L authorized repair of the truck’s brakes, and promptly paid the bill where C & L took responsibility for the truck’s condition, liability for punitive damages imputed to it. See Prell Hotel Corp. v. Antonacci, 86 Nev. 390, 392, 469 P.2d 399 (1970) (liability was imposed on employer for employee’s willful tort committed within the scope of his employment); Forrester v. S.P. Co., 36 Nev. 247, 284-295, 134 P. 753, 136 P. 705 (1913) and the cases cited therein (the principal or master is liable in exemplary damages for the wrongful, wanton, and oppressive acts of the agent or servant when acting within the scope of his employment, although not authorized or ratified.) See also National Convenience Stores v. Fantauzzi, 94 Nev. 655, 584 P.2d 689 (1978) (employer found liable under respondeat superior for actions of employee driving within scope of employment); Wagon Wheel Saloon & Gambling Hall v. Mavrogan, 78 Nev. 126, 369 P.2d 688 (1962) (where unsafe condition exists that has been created by employee, invitee to premises need not prove the owner’s notice or knowledge of the dangerous condition and such knowledge is imputed to the owner.) For these reasons, where it was not shown that employee Brooks deliberately withheld information regarding the condition of the truck brakes from his employer C & L, it is not necessary for the plaintiffs to show that C & L had actual knowledge of the defective condition of the brakes. This knowledge is imputed to C & L through the operation of the doctrine of respondeat superior.

IV

Punitive damages awarded against Brooks

Defendants contend that there was insufficient evidence to support the jury’s verdicts against driver-employee Brooks because there was no proof that he acted with actual malice. Defendants distinguish negligence and even unconscionable irresponsibility from malice in fact, saying that the latter requires evidence of willfulness or that the damage was either intended or a necessary consequence of the act. See Village Development Co. v. Filice, 90 Nev. 305, 526 P.2d 83 (1974) (award of punitive damages was reversed where there was evidence of unconscionable irresponsibility in a land sales deal but not enough evidence to show oppression, fraud or malice in fact on the part of defendant sellers.) Plaintiffs, however, contend that Brooks was more than merely negligent in his action and that he showed a wanton disregard for the safety of all persons on the roadway.

Whether the record contains sufficient evidence to justify an award of punitive damages is a question of law, and for the court to decide. U.S. Fidelity v. Peterson, 91 Nev. 617, 540 P.2d 1070 (1975). Where the necessary factual basis for punitive damages exists, the amount of the award rests with the sound discretion of the jury. Leslie v. Jones Chemical Co., 92 Nev. 391 at 394, 551 P.2d 234 (1976). See also Caple v. Raynel Campers, Inc., 90 Nev. 341, 526 P.2d 334 (1974).

In the present case, service station and tow business operator Jack Shearer testified that plaintiffs’ car was stopped at a stop light and that defendants’ truck struck the car from the rear at a speed of 30-35 miles an hour. The car was totally damaged with the rear section bent down to the ground. Shearer also testified that the driver of the truck (Brooks) was upset and stated that he did not have any brakes, which proved to be true. Shearer continued to testify that he repaired the brakes at C & L’s request, that the old brakes were burned up, and, in Shearer’s opinion, that they had been that way for some time. Therefore, there is sufficient evidence to show that the truck’s brakes were faulty at the time of the accident, had been in faulty condition for some time, and that Brooks was aware of this fact.

Malice in fact may be inferred from a conscious disregard of an accepted safety procedure by the defendant. Leslie v. Jones Chemical Co., 92 Nev. 391, 394, 551 P.2d 234 (1976). In Leslie, a cylinder of defendant’s chlorine gas exploded spewing compressed chlorine over a hotel swimming pool and patio area, injuring plaintiffs. The Nevada Supreme Court said that:

the jury reasonably could conclude that the defendants consciously and deliberately disregarded known safety procedures regarding the handling of chlorine cylinders in reckless disregard of possible results, and that such evidence sufficiently established malice in fact to allow punitive damages.

Leslie 92 Nev. at 393, 551 P.2d 234, citing NRS 42.010.

The same conclusion can be reached in the present case with regard to driving a large tractor-trailer combination truck on an interstate highway with defective brakes. In a concurring opinion in Leslie, Gunderson, C.J. and Zenoff, J., put it succinctly:

It is possible, of course, that some persons may view some kinds of consciously wanton conduct as less culpable than others. Still, where the record justifies the jury’s finding of requisite intention or willingness to injure, we believe a reduction of punitive damages may not be justified by the trial judge’s personal thoughts about the relative social acceptability of different kinds of willfully wrongful conduct.

Leslie 92 Nev. at 394, 551 P.2d 234.

It is reasonable to find in the present case, that Brooks’ driving his tractor-trailer combination truck on the interstate highway with defective brakes shows such wanton disregard for the safety of others and a willingness to injure, that the requisite malice in fact for punitive damages under NRS 14.010 exists. See Nevada Credit Rating Bur., Inc. v. Williams, 88 Nev. 601, 610, 503 P.2d 9 (1972).

IT IS, THEREFORE, HEREBY ORDERED that the judgment in this action against defendant Junior Landis is VACATED.

IT IS FURTHER ORDERED that the judgment in this action against defendant Kelly Capps is VACATED subject to further proceedings.

IT IS FURTHER ORDERED that the motion for judgment notwithstanding the verdict for punitive damages awarded in favor of the plaintiffs against defendant C & L Trucking, Inc. is DENIED.

IT IS FURTHER ORDERED that the motion for judgment notwithstanding the verdict for punitive damages awarded in favor of the plaintiffs against defendant Larry Allen Brooks is DENIED.


author: SPELLMAN, District Judge.

text:
    CHASSIS MASTER CORP. and Dade Chassis Master Corp., Plaintiffs, v. Nelson BORREGO and Mister Chassis, Inc., Defendants.
    No. 84-1720-CIV-SPELLMAN.
    United States District Court, S.D. Florida, Miami Division.
    April 1, 1985.

      Harley S. Tropin, Miami, Fla., for plaintiffs.
    James E. Wetterling, Miami, Fla., for defendants.
   MEMORANDUM OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW

SPELLMAN, District Judge.

This is an action for trademark infringement, trademark dilution, and for unfair competition. Plaintiffs’ claims arise out of defendants’ alleged unauthorized adoption of the name “Mister Chassis”, which the plaintiffs allege is confusingly similar to their federally registered trademark, CHASSIS MASTER PRECISION GUARANTEED, and their common law trademark, CHASSIS MASTER. The Court held a non-jury trial on the issue of plaintiffs’ entitlement to preliminary and permanent injunctive relief. This Memorandum Opinion comprises the Court’s Findings of Fact and Conclusions of Law.

I.

The plaintiffs, Chassis Master Corp. and Dade Chassis Master (“Chassis Master”) are Florida corporations engaged in specialized automotive repair services. These services include the correction of tire wear problems, suspension and steering problems and front end alignment.

Chassis Master Corp. owns the following federally registered trademark: CHASSIS MASTER PRECISION GUARANTEED. This trademark was registered in the U.S. Patent and Trademark Office on October 6, 1981, under Registration Number 1,172,-576, for automotive repair services. The plaintiffs have also used an abbreviation of their federally registered trademark, CHASSIS MASTER, and thus enjoy both federal and commonlaw trademark protection for the trademark CHASSIS MASTER. CHASSIS MASTER AND CHASSIS MASTER PRECISION GUARANTEED are hereinafter referred to as the Marks.

The plaintiffs have used the Marks to describe the services offered and, since 1978, have expended over one million dollars in advertising and promotion of their services under the Marks. They market their services by radio advertising, the distribution of a newspaper “Auto News”, and through solicitation of customers from the “trade” such as gas stations, tire stores, and body shops. In addition, they distribute brochures, leaflets and flyers. All of the plaintiffs’ advertising heavily features the CHASSIS MASTER Marks.

The defendant, Nelson Borrego (“Borrego”), was formerly the service manager of the Chassis Master located in Dade County. Nine days after he was fired from this position, he formed a corporation called “Mister Chassis.” Mister Chassis is located only a few miles from the Dade County Chassis Master and offers almost identical services.

In May of 1984, two months after Mister Chassis started selling to the public, counsel for Chassis Master sent demand letters to Borrego requesting him to immediately stop using the Mister Chassis name because it was confusingly similar to Chassis Master, and to change his brochures which plaintiffs claim were pirated from their own. Borrego did not respond to the demand letters sent to him and refused to stop using the Mister Chassis name or to change the brochures. This lawsuit ensued.

II.

In order to prevail on the trademark infringement claim, the plaintiffs must prove ownership of the CHASSIS MASTER and CHASSIS MASTER PRECISION GUARANTEED Marks and that the defendants’ use of “Mister Chassis” is likely to cause confusion or mistake among the public. See Chemical Corp. of America v. Anheuser-Busch, Inc., 306 F.2d 433 (5th Cir.1962), cert. denied, 372 U.S. 965, 83 S.Ct. 1089, 10 L.Ed.2d 129 (1963). There is no dispute that the Marks belong to Chassis Master and its related companies, and the Court, therefore, finds that the plaintiffs are the owners of the Marks.

The primary issue which must be proven, then, is that there is a likelihood of confusion, mistake or deception in Borrego’s use of the “Mister Chassis” name for his auto repair business. Id. This is true both under rulings of the federal courts under 15 U.S.C. § 1114(1) and 15 U.S.C. § 1125(a) and under the decisions of state courts.

There are many factors which bear upon the question of whether a sufficient likelihood of confusion has been shown in a trademark case. Among the factors to be considered are: (a) the type of trademark; (b) the similarity of the two marks, (c) the similarities of the product, (d) the similarity of retail outlets and purchasers, (e) the similarity of advertising media used, (f) the defendants’ intent, and (g) evidence of actual confusion. John J. Harland Co. v. Clarke Checks, Inc., 711 F.2d 966, 972 (11th Cir.1983). See also, Roto-Rooter Corporation v. O’Neal, 513 F.2d 44 (5th Cir.1975). In addition, the Court should consider previous contractual and business relations between the parties. Sun-Fun Products v. Suntan Research & Development, Inc., 656 F.2d 186, 189 (5th Cir. Unit B 1981). When these factors are weighed in the present case, it is abundantly clear that the defendants’ use of the name Mister Chassis is likely to cause confusion.

Type of Trademark: The scope of protection to be accorded to a registered mark depends upon the “strength” and distinctiveness of that mark. Amstar Corp. v. Domino’s Pizza, Inc., 615 F.2d 252, 259 (5th Cir.), cert. denied, 449 U.S. 899, 101 S.Ct. 268, 66 L.Ed.2d 129 (1980). “A strong trademark is one that is rarely used by parties other than the owner of the trademark” and is thus closely associated with the owner of the mark. Exxon Corp. v. Texas Motor Exchange of Houston, Inc., 628 F.2d 500, 504 (5th Cir.1980).

Webster’s Third New International Dictionary defines “chassis” as:

2a: the frame upon which is mounted the body (as of an automobile or airplane) ____
b: the frame and working parts as opposed to the body (as of an automobile).

Webster’s Third New International Dictionary defines “master” as:

c: being a person notably or supremely proficient in something; consummately accomplished or skilled.

In the present case, the term “chassis” as used in connection with the services offered by the parties is generic in that it conveys information about the nature of the service provided. Similarly, the term “master” is a descriptive or weak term.

Nonetheless, even a relatively weak mark is entitled to some protection, especially since, as a result of extensive advertising, the Chassis Master Marks have acquired and now enjoy a certain distinctiveness that is closely associated with the plaintiffs. Moreover, there are no competitors using the Marks in anything similar to the plaintiffs’ format, except for defendants’ recently adopted “Mister Chassis.”

Similarity of Marks: The terms “Chassis Master” and “Mister Chassis” are obviously very similar in appearance, pronunciation, and suggestion, the criteria adopted by the courts in determining similarity. See, e.g., Helene Curtis Industries, Inc. v. Church & Dwight Co., 560 F.2d 1325 (7th Cir.1977), cert. denied, 434 U.S. 1070, 98 S.Ct. 1252, 55 L.Ed.2d 772 (1978) (“Arm & Hammer” infringed by “Arm in Arm”); Clairol, Inc. v. Roux Laboratories, Inc., 442 F.2d 980, 58 CCPA 1170 (1971) (“Platinum Puff” infringed by “Platinum Plus”); Century 21 Real Estate v. Century Resorts International, Inc., 211 U.S.P.Q. 227, 231 (N.D.Ill.1981) (“Century Resorts International” found confusingly similar to “Century 21” and “likelihood of confusion is increased by the fact that both parties sell the same services to identical consumers”); Cyclonaire Corp. v. United States Systems, Inc., 209 U.S.P.Q. 310 (D.Kan. 1980) (“Cyclonaire” infringed by “Cycle Matric”); Purolator, Inc. v. Efra Distributors, Inc., 524 F.Supp. 471 (D.P.R.1981), affd, 687 F.2d 554 (1st Cir.1982) (“Puro filter” infringes upon “Purolator”); Burger Chef Systems, Inc. v. Burger Man, Inc., 492 F.2d 1398 (Cust. & Pat.App.1974) (“Burger Man” infringes “Burger Chef”); Mem Company, Inc. v. Hes Company, Inc., 149 U.S.P.Q. 8 (S.D.Cal.1966) (“London Leather” infringes “English Leather”); Masterpiece of Pennsylvania, Inc. v. Consolidated Novelty Co., 368 F.Supp. 550 (S.D.N.Y.1973) (“Alpine King” infringes “Mountain King”).

Moreover, there was evidence presented that Spanish speaking customers in Miami regularly refer to CHASSIS MASTER as “Master Chassis.” Thus, by merely changing one letter of a word Borrego was able to capitalize on the Chassis Master name and reputation. See Arthur Matney Co., Inc. v. Halcyon Essences Ltd., 207 U.S.P.Q. 77, 79 (E.D.N.Y.1979) (“Selene” confusingly similar to “Serena” ... to the Spanish-speaking customers”).

Finally, the manner in which the parties display the Marks on their signs and literature are also confusingly similar in that both use an abstract configuration representing a chassis.

Similarity of Services: The services provided by the parties are virtually identical. Both are engaged in the specialized automotive repair services of chassis repair including the correction of tire wear problems; suspension and steering problems and front end alignment. Moreover, there was testimony that the services provided are somewhat unique in that both Chassis Master and Mister Chassis specialize in the new “uni-body” automobiles. In this circuit, the rule is that “the greater the similarity between the products and the services, the greater the likelihood of confusion.” John H. Harland v. Clarke Checks, Inc., 711 F.2d at 976.

Similarity of Customers: The parties direct their services towards the same customers. Both appeal to the trade and the general public and both have attempted to appeal to Latin customers. They sell their services in the same geographic area. The former fifth circuit has said that “dissimilarities between retail outlets for and the predominant consumers of the plaintiffs and defendant’s goods lessen the possibility of confusion, mistake, or deception.” Amstar Corp. v. Domino’s Pizza, Inc., 615 F.2d 252, 262 (5th Cir.), cert. denied, 449 U.S. 899, 101 S.Ct. 268, 66 L.Ed.2d 129 (1980). Obviously, the converse holds true — the greater the similarity between consumers, the greater the likelihood of confusion.

Similarity of Advertising Media Used: The defendants have adopted the same marketing techniques as Chassis Master. Indeed, the defendant hired a former sales representative from Chassis Master to solicit business from the “trade.”

Defendant’s Intent: The intent of the defendant in adopting the Mister Chassis mark is a factor, since, if the mark was adopted with the intent of deriving benefit from the reputation of Chassis Master or Chassis Master Precision Guaranteed, an inference may be drawn that there is confusing similarity. Restatement of Torts, § 729, comment f (1938). According to the former fifth circuit if

a plaintiff can show that a defendant adopted a mark with the intent of deriving benefit from the reputation of the plaintiff, that fact alone ‘may be sufficient to justify the inference that there is a confusing similarity.’

Exxon Corporation v. Texas Motor Exchange of Houston, Inc., 628 F.2d 500, 506 (5th Cir.1980) (citation omitted). See J. McCarthy, Trademark and Unfair Competition, (2d Ed.1984) § 23.32 (“If there is proof of defendant’s intent and purpose to trade on another’s goodwill by use of a similar mark, then the Court will follow the alleged infringer’s judgment and find a likelihood of confusion”). Moreover, recent cases have found that even when the defendant was only intending to copy a trademark as much as the law would allow, this must be considered as an intent to “cash in” on the plaintiff’s good will. See John H. Harland, 711 F.2d at 977-978; Sicilia Di R. Biebow & Co. v. Ronald Cox, 732 F.2d 417 (5th Cir.1984). The court in Sicilia explicitly rejected a narrow definition of bad intent. Rather, it found that the proper focus of inquiry is “whether defendant had the intent to derive benefit from the reputation or goodwill of the plaintiff.” Id. at 431 (citations omitted). This Court finds that Borrego unquestionably had such an intent.

Borrego testified that he never entertained thoughts of opening his own business until plaintiffs fired him and he was unable to find another job. The evidence in this case demonstrates that this claim is patently false. Borrego obviously planned to open his own business well before he was fired.

First of all, other Chassis Master employees testified that shortly after Borrego came to work at Chassis Master he began to solicit them to join him in a new business. Moreover, Borrego’s own story as to how he opened his own business is filled with contradictions. He was fired from Chassis Master on December 20, 1983. At trial, he claimed that he was too depressed before Christmas to look for a job or to do anything. “I then * * * decided to myself to wait until Christmas and New Years was over.” He also claimed that he looked for another job for three or four weeks before he decided to open his own business. But he testified that sometime before Christmas Eve he had discussed possible names for the new business with his wife. And it is undisputed that on December 28, 1983 he put a deposit down and signed a lease for the new business and the following day he incorporated under the name of Mister Chassis. Thus, notwithstanding Borrego’s claims that he decided to open his own business only after his job hunting efforts were unsuccessful, it took only nine days after he was fired from Chassis Master to set up Mister Chassis. And these nine days included the Christmas holiday.

Borrego also testified that he decided on the name “Mister Chassis” after it was suggested to him by a friend who owned a barber shop called “Mister Hair” and that he did not intend to derive any benefit from the Chassis Master name. But this Court has no doubt that Borrego’s intent in adopting the name “Mister Chassis” was to cash in on the plaintiffs’ reputation. Several Chassis Master employees testified that Borrego knew of and had commented upon the tendency of Spanish-speaking people to refer to “Chassis Master” as “Master Chassis” before he adopted the “Mister Chassis” name. He therefore was able to capitalize on the Chassis Master name by simply changing one letter.

Borrego’s wrongful intent is clearly evident in other areas as well. Borrego imitated the Chassis Master brochure and rate card. The “Certification and Guarantee” that Borrego gives customers after their cars are repaired by Mister Chassis is almost a wholesale copy of the “Certification and Guarantee” that Chassis Master provides. Borrego also adopted Chassis Master’s marketing techniques. In fact, Borrego hired a former Chassis Master marketing representative to visit the trade to encourage referrals.

Defendant’s Duty as a Second User: A sub-category of intent is the previous relationship of the parties. “A party with a prior relationship with the first mark has a greater duty to adopt a clearly distinguishable mark than does a mere stranger.” Cyclonaire Corp. v. United States Systems, Inc., 209 U.S.P.Q. 310, 314 (D.Kan.1980). See also Sicilia, 732 F.2d at 432 (“We think that Cox’s prior role as a distributor of Sicilia’s citrus juice provides additional evidence of his intent to trade on the goodwill of Sicilia”). Here, Borrego clearly knew of the Chassis Master trademark and breached his duty to avoid confusion. Indeed, the Court finds that Borrego intended to adopt a name and marketing techniques that were confusingly similar to those of Chassis Master.

Evidence of Actual Confusion: “Although evidence of actual confusion is not necessary to a finding of likelihood of confusion, it is nevertheless the best evidence of likelihood of confusion.” Amster, 615 F.2d at 263. The Court finds that although the evidence of actual confusion has been somewhat exaggerated by Chassis Master’s employees, there has been some actual confusion by the public.

III.

Based on the factors discussed above, the Court concludes that there is a likelihood that the defendants’ use of the name Mister Chassis is likely to cause confusion or mistake among the public. The defendants are therefore guilty of trademark infringement under both Section 1114(1) and Section 1125(a).

For most of the same reasons described above and the findings of fact, defendants are also guilty of common law unfair competition. See Professional Golfer’s Association of America v. Banker’s Life & Casualty Co., 514 F.2d 665 (5th Cir.1975). Unfair competition includes likelihood of customer confusion and passing off, and also acts as an “umbrella for all statutory and non-statutory causes of action arising out of business conduct which is contrary to honest practices in industrial or commercial matters.” American Heritage Life Insurance Co. v. Heritage Life Insurance Co., 494 F.2d 3, 14 (5th Cir. 1974).

The fact that the defendants copied the plaintiffs’ brochures and guarantees as well as adopting a confusingly similar name leads this Court to find that the defendants are guilty of unfair competition.

Florida’s Anti-Dilution Statute protects against “dilution of the distinctive quality of the trademark ... notwithstanding the absence of competition between the parties or of confusion as to source of goods or services.” Fla.Code Ann., § 495.151. Dilution occurs “where the use of the trademark by the subsequent user will lessen the uniqueness of the prior user’s mark with the possible result that a strong mark may become a weak mark.” Holiday Inns, Inc. v. Holiday Out In America, 481 F.2d 445, 450 (5th Cir.1973). Because the defendants’ use of “Mister Chassis” dilutes the value and uniqueness of plaintiffs’ “Chassis Master” mark, defendants are also guilty of trademark dilution in violation of Section 495.151, Florida Statutes. Community Federal Savings and Loan Association v. Orondorff 678 F.2d 1034 (11th Cir.1982).

Defendants are hereby found jointly and severally liable for trademark infringement, trademark dilution and unfair competition. The amount of damages shall be determined by the Court at a subsequent hearing.

Accordingly, it is ORDERED AND ADJUDGED that:

(1) The defendants, and all agents, servants, employees and representatives, and all persons, entities or corporations in active concert or participation with or acting under the direct or indirect control or authority of defendants, are hereby enjoined during the pendency of this action and permanently thereafter from directly or indirectly infringing the Marks in any manner and from engaging in unfair trade practices and unfair competition in any manner against the plaintiffs by means of any activities, including but not limited to using “MISTER CHASSIS” or any other confusingly similar name as defendants’ corporate name, or from promoting, offering for sale, or selling (i) any automotive repair services under the name “MISTER CHASSIS” or any other name confusingly similar to the Marks hereinabove specified, and (ii) distributing any advertising or promotional material bearing a confusing similarity to the Marks.

(2) Pursuant to Section 36 of the Lanham Trademark Act of 1946, 15 U.S.C. § 1118, defendants shall be required to either deliver up for destruction all documents, signs, or other material in their possession under their control bearing the name “MISTER CHASSIS” together with all related promotional and advertising materials, or (ii) defendants may, alternatively, obliterate the name “MISTER CHASSIS” from said documents, signs, or other materials, provided that such obliteration takes place within fifteen (15) days from the date hereof.

(3) Defendants shall immediately cease using their confusingly similar rate cards and guarantee.

(4) Defendants shall be required to file with this Court and serve on plaintiffs’ counsel within fifteen (15) days of these Findings of Facts and Conclusions of Law an affidavit, in writing and under oath, setting forth in detail the manner and form in which the defendants have complied with this Order.

      . In evaluating the credibility of Mr. Borrego’s testimony, this Court is reminded of the tailor who, in attempting to justify the exaggerated price for a sportcoat, explained to his anxious customer: “I must, of course, go to a great deal of difficulty in assembling such a fine coat. I must travel to Hawick, Scotland to purchase the cashmere, to a small outdoor market I know of in Tibet for the China silk lining, to Turin, Italy for the buttons, and then to Sydney, Australia to acquire the special thread I must use. A magnificent garment, such as the one you request," assured the tailor, "requires a lot of work.”
      The customer appreciated the Herculean efforts the tailor would soon undertake on his behalf and agreed to purchase the sportcoat. The customer took out his calendar and asked when his magnificent coat could be completed.
      The tailor smiled and responded immediately: "Would noon tomorrow be too late?"