Pacamor Bearings v. Minebea, Ltd. CV-90-271-SD 07/13/95 P UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEW HAMPSHIRE
Pacamor Bearings, Inc., et al
v. Civil No. 90-271-SD
Minebea Co., Ltd., et al
O R D E R
Pending before the court at this time is a plethora of
motions; this order addresses the following of same: (1)
plaintiffs' motion for leave to amend their complaint; (2)
defendants' motion for partial summary judgment; (3) defendants'
motion to dismiss or, in the alternative, for entry of an order
compelling substitution or joinder of Wells Fargo Bank, N.A., as
plaintiff; and (4) defendants' motion for certification under 28
U.S.C. § 1292(b) of issues regarding plaintiffs' standing to sue.
Each motion has been objected to by the nonmoving party.
A. Plaintiffs' Motion to Amend Complaint (document 111)
Plaintiffs move for leave to file an amended complaint which
(1) adds two claims for relief under the Sherman Act, 15 U.S.C. §
2; (2) deletes the conspiracy claims previously dismissed by this court;1 and (3) deletes plaintiffs' claim for relief under the
Anti-Dumping Act of 1916. Defendants object only to plaintiffs'
attempt to add two Sherman Act claims to their complaint.
In addition, plaintiffs have filed a motion for leave to
file a reply memorandum (document 121), and defendants have filed
a corresponding motion for leave to file a response to said reply
memorandum (document 122). Both motions are herewith granted,
and the memoranda attached thereto have been filed as of the date
of this order. Further, there being no objection to plaintiffs'
reguest to delete their previously dismissed conspiracy claims
(Counts II and IV) and their Anti-Dumping Act claim (Count III),
plaintiffs' motion to amend is herewith granted with respect to
said claims. The court turns now to plaintiffs' reguest to add
two Sherman Act claims to their complaint.
1. Rule 15(b)
Plaintiffs assert, in part, that their motion to amend is
intended to conform the pleadings to the evidence in accordance
with Rule 15(b), Fed. R. Civ. P.
Rule 15(b) provides in relevant part that "[w]hen issues not
raised by the pleadings are tried by express or implied consent
xIn an order dated January 14, 1991, this court dismissed plaintiffs' conspiracy claims for failure to state a claim.
2 of the parties, they shall be treated in all respects as if they
had been raised in the pleadings." Rule 15(b) is generally
invoked when the need to amend the pleadings does not become
apparent until the trial has commenced or, in some cases, until
the trial has come to a close. See generally, 6A C h a r l e s A. W r i g h t
et al ., F ed er al Pr a ct i c e a n d P r o c e d u r e : C ivil 2 d § 14 91 (1990)
(hereinafter W r i g h t & M iller) . See also DCPB, Inc. v. Lebanon, 957
F .2d 913, 916-17 (1st Cir. 1992).
Procedurally, this action is still in the pretrial stages.
Therefore, it should go without saying that the issues raised in
plaintiffs' proposed Sherman Act claims have not been "tried".
Further, as is evident from defendants' opposition to plaintiffs'
motion, defendants have not given their express or implied
consent to trial of the issues raised in said proposed claims.
For these reasons, the court finds that plaintiffs are not
entitled to amend their complaint to conform to the evidence
under Rule 15(b) at this stage in the proceedings. Instead,
plaintiffs' motion to amend must be evaluated under Rule 15(a),
Fed. R. Civ. P.
2. Rule 15(a)
Rule 15(a), Fed. R. Civ. P., provides in relevant part that
leave to amend a party's pleadings "shall be freely given when
3 justice so requires." The Supreme Court, interpreting Rule
1 5 (a), has offered the following guidance to courts on the
question of whether justice requires that a motion to amend be
granted.
If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared reason--such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.--the leave sought should, as the rules require, be "freely given."
Roman v. Davis, 371 U.S. 178, 182 (1962) . Accord Resolution
Trust Corp. v. Gold, 30 F.3d 251, 253 (1st Cir. 1994) ("Leave to
amend is to be 'freely given' unless it would be futile or
reward, inter alia, undue or intended delay." (citations
omitted)); Executive Leasing Corp. v. Banco Popular de Puerto
Rico, 48 F.3d 66, 71 (1st Cir. 1995).
"A party's belated attempt to revise its pleadings requires
that a court examine the totality of the circumstances and
exercise sound discretion in light of the pertinent balance of
equitable considerations." Quaker State Oil Refining Corp. v.
Garritv Oil C o ., 884 F.2d 1510, 1517 (1st Cir. 1989). "While
courts may not deny an amendment solely because of delay and
4 without consideration of the prejudice to the opposing party, it
is clear that 'undue delay' can be a basis for denial . . .
Haves v. New England Millwork Distribs., Inc.,602 F.2d 15, 19
(1st Cir. 1979) (citations omitted). Further, "'[w]here . . .
considerable time has elapsed between the filing of the complaint
and the motion to amend, the movant has the burden of showing
some "valid reason for his neglect and delay."'" Grant v. News
Group Boston, ___ F.3d ___ , , No. 94-2191, 1995 U.S. Ap p .
LEXIS 9740, at *15 (1st Cir. Apr. 28, 1995) (guoting Stepanischen
v. Merchants Despatch Transp. Corp., 722 F.2d 922, 933 (1st Cir.
1983) (guoting Haves, supra, 602 F.2d at 19-20)) .
a. Undue Delay
This action was filed on June 15, 1990, and has thus been
working its way toward trial for some five years. In light of
the considerable amount of time that has elapsed between the
filing of the complaint and the pending motion to amend,2 the
court finds that plaintiffs have "'the burden of showing some
valid reason for [their] neglect and delay.'" Grant, supra, ___
F.3d at ___ , 1995 U.S. App. LEXIS 9740, at *15 (guoting
Stepanischen, supra, 722 F.2d at 933) (other citations omitted).
Plaintiffs maintain that there has been no undue delay here
2Plaintiffs' motion to amend was filed on March 10, 1995.
5 because plaintiffs sought to amend their complaint shortly after
new evidence which supported a Sherman Act claim came to light.
After discovering this "new" evidence, plaintiffs assert they
sought defendants' consent to their motion to amend by letter
dated September 28, 1994. A series of communications between the
parties followed, culminating in defendants' November 10 refusal
to consent to the motion to amend.
Shortly thereafter, the parties agreed to mediate this case
and filed a joint motion to hold the proceedings in abeyance
pending mediation. Said motion, which was granted by the court
on December 15, 1994, provided in relevant part.
In order for the parties to devote all of their energy and attention to the settlement process, they have agreed, subject to the approval of this Court, that these proceedings, including discovery and filing of additional motions, should be held in abeyance temporarily. The parties have also agreed that the suspension of proceedings and lapse of time associated therewith shall be without prejudice to their positions with respect to any issue relating to the timing or timeliness of filings or other matters in connection with this case.
Joint Motion filed Dec. 9, 1994 (document 105) 5 2 (emphasis
added).
On February 10, 1995, the parties filed with the court a
Joint Status Report and Reguest to Renew Motions, indicating that
their mediation had been unsuccessful. By letter dated February
6 17, 1995, plaintiffs renewed their request for defendants'
consent to their motion to amend. Defendants declined to give
such consent, and plaintiffs filed the pending motion on March
10, 1995.
Defendants first contend that plaintiffs have failed to
adequately explain the three-month delay between plaintiffs'
first notification to defendants of their intent to amend and
their actual filing of the motion.3
In light of plaintiffs' diligent efforts between
September 28 and November 10, 1994, to obtain defendants' consent
to their motion to amend, the parties' subsequent agreement to
mediate the case, and their corresponding agreement that the
lapse of time associated with their mediation efforts would not
prejudice their positions "with respect to any issue relating to
the timing or timeliness of filings or other matters in
connection with this case," Joint Motion 5 2, the court finds
that plaintiffs have met their burden of showing some valid
reason for the delay between September 1994 and March 1995.
Accordingly, the court turns to the question of whether
plaintiffs have shown some valid reason why their proposed
defendants exclude from their calculations the time between December 15, 1994, when the court stayed the case pending mediation, and February 10, 1995, when the parties notified the court that their mediation efforts had failed.
7 amendments were not made prior to September 1994.
Plaintiffs justify their delay by explaining that they
notified defendants of their intent to add the proposed Sherman
Act claims as soon as new evidence supporting such claims came to
light during the course of discovery. Defendants respond that
plaintiffs' "claim of 'newly discovered evidence' is disingenuous
at best," Defendants' Opposition Memorandum at 5, and cannot
explain the four-year delay between the filing of this action and
plaintiffs' current attempt to amend.
Plaintiffs repeatedly indicate in their motion and related
memoranda that the proposed Sherman Act claims are "based on the
same wrongful conduct" and the "same operative facts" as the
claims set forth in their Second Amended Complaint.4 Affidavit
'Specifically, plaintiffs assert they
have clearly made allegations in their earlier pleadings that to the extent that Defendants engaged in predatory conduct, it was with the intent to harm competition. See Second Amended Complaint 55 "33," "43," "59" and "76." Plaintiffs have also made allegations of predatory and other anti competitive conduct in the existing Complaint. See Second Amended Complaint, 55 "1," "33," "37," "38," "40," "41," "42," "44," "48," "51," "58," "64," "68," "69," "70" and "76". These allegations state that Plaintiffs' claims were based on the belief that Defendants' culpable conduct was intentional and was designed to destroy competition. The allegations in the existing Complaint also state that Defendants did of Daniel M. Sleasman 55 10-13 (attached to Plaintiffs' Motion).
Simultaneously, plaintiffs contend that their proposed claims are
based on newly discovered evidence such that they could not have
moved to amend their complaint any earlier.
One of the examples of newly discovered evidence plaintiffs
cite is evidence that defendants engaged in a multi-year fraud
involving the substitution of a new, less costly "DD" steel for
the industry-recognized 440C stainless steel in the manufacture
of miniature & instrument (M&I) ball bearings. Although the
evidence reguired to support this allegedly wrongful conduct may
be described as "newly discovered," plaintiffs cannot maintain
that they were unaware until recently of the fact that said
conduct occurred. Indeed, their Second Amended Complaint is
based in part on the allegation that defendants imported and sold
"ball bearings which were not made of the grade of metal
represented by Defendants," Second Amended Complaint 5 44, and
that defendants profited from their "misrepresentations .. . o f
the bearings as containing 440C grade steel," id. 5 68.
As additional examples of the "newly discovered evidence"
upon which the proposed Sherman Act claims are based, plaintiffs
succeed to some degree in this illegal enterprise.
Plaintiffs' Memorandum at 12. point to evidence showing that defendants engaged in predatory
pricing by selling ball bearings below cost. Again, although
this evidence may be "new," the contention that defendants
engaged in such conduct is not. In their Second Amended
Complaint, plaintiffs allege that defendants "commonly and
systematically imported, sold and caused to be imported and sold
miniature ball bearings within the United States at a price
substantially less than the market value or wholesale price of
such articles," id. 5 41, as well as "at a price substantially
less than the actual cost of said article," id. 5 42. Plaintiffs
further allege that "said sale and importation has been done with
the intent of destroying or injuring the ball bearing industry in
the United States." Id. 5 43.
Plaintiffs first notified defendants of their intent to seek
leave to amend their complaint in September 1994. Review of the
record in this case leads the court to conclude that the "newly
discovered evidence" plaintiffs point to in order to justify
their four-year delay in seeking to amend their complaint is
evidence that supports the allegations already set forth in the
Second Amended Complaint. The court further finds that the
proposed Sherman Act claims are, as plaintiffs repeatedly
contend, based on the same wrongful conduct as the claims set
forth in their Second Amended Complaint. In light of these
10 findings, the court concludes that plaintiffs' four-year delay in
seeking to add the proposed Sherman Act claims is properly
characterized as "undue" delay for which plaintiffs have not
provided an adeguate justification.
__________ b. Prejudice to Defendants
Concomitant to the court's consideration of whether
plaintiffs' delay was undue or something less is consideration of
whether defendants will be prejudiced in any way if plaintiffs
are permitted to add their proposed Sherman Act claims.
Plaintiffs contend, inter alia, that defendants will not be
prejudiced by their proposed claims because the amendment "merely
provides an additional remedy based upon new evidence of the same
type of acts already alleged in the Existing Complaint."
Plaintiffs' Reply Memorandum at 10. Plaintiffs further contend
that there is no prejudice to defendants because discovery is
still pending and their amendments will not reguire any discovery
extensions. Defendants counter that they will be prejudiced by
the need to conduct additional discovery and obtain expert
witnesses in order to define the relevant market and analyze
their economic power in that market.
Under section 2 of the Sherman Act, it is illegal to
"monopolize, or attempt to monopolize, or combine or conspire
11 with any other person or persons, to monopolize any part of the
trade or commerce among the several States . . . 15 U.S.C. §
2 (Supp. 1995).5 Plaintiffs' proposed Sherman Act claims include
a claim of actual monopolization and a claim of attempted
monopolization.
In order to prove actual monopolization in violation of
section 2, plaintiffs would be required to establish (1) that
defendants possessed monopoly power6 in the relevant market, and
(2) "willful acquisition or maintenance of that power as
distinguished from growth or development as a consequence of a
superior product, business acumen, or historic accident." United
States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966); see also
Data Gen. Corp. v. Grumman Svs. Support Corp., 36 F.3d 1147,
5"The purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself. It does so not out of solicitude for private concerns but out of concern for the public interest." Spectrum Sports, Inc. v. McQuillan. ___ U.S. , _, 113 S. C t . 884, 891-92 (1993) (citations omitted).
6"Monopoly power" is defined as "'the power to raise prices to supra-competitive levels or . . . the power to exclude competition in the relevant market either by restricting entry of new competitors or by driving existing competitors out of the market.'" U.S. Anchor Mfg. v. Rule Indus., 7 F.3d 986, 994 (11th Cir. 1993) (quoting American Key Corp. v. Cole Na t '1 Corp., 762 F.2d 1569, 1581 (11th Cir. 1985)), cert, denied, U.S. , 114 S. C t . 2710 (1994).
12 1181-82 (1st Cir. 1994). To prove the attempted monopolization,
plaintiffs would be required to establish "(1) that the
defendant[s] ha[ve] engaged in predatory or anticompetitive
conduct with (2) a specific intent to monopolize and (3) a
dangerous probability of achieving monopoly power." Spectrum
Sports, supra, 113 S. C t . at 890-91.
Plaintiffs' proof of defendants' predatory or
anticompetitive conduct is the same proof plaintiffs are relying
upon to prove their existing claims. Proof of such conduct may
also be "sufficient to prove the necessary intent to monopolize .
. . ." Spectrum Sports, supra, 113 S. C t . at 892. Accordingly,
additional discovery into these areas does not appear to be
necessary if plaintiffs' proposed amendments are allowed.
However, in order to prove that defendants possessed actual
monopoly power or a dangerous probability of achieving monopoly
power, plaintiffs will be required to offer proof on how the
relevant market is defined and on defendants' monopoly power or
market share in the defined market. See, e.g., U.S. Anchor Mfg.,
supra, 7 F.3d at 994 ("Defining the market is a necessary step in
any analysis of market power and thus an indispensable element in
the consideration of any monopolization or attempt case arising
under section 2." (citing Walker Process Eguip., Inc. v. Food
Mach. & Chem. Corp., 382 U.S. 172, 177 (1965); American Key.
13 Corp., supra, 762 F.2d at 1579)); Spectrum Sports, supra, 113 S.
C t . at 892 ("[D]emonstrating the dangerous probability of
monopolization in an attempt case . . . reguires inguiry into the
relevant product and geographic market and the defendant's
economic power in that market.").
"Most attempts to measure monopoly power involve guantifying
the degree of concentration in a relevant market and/or the
extent of a particular firm's ability to control productive
capacity in that market." U.S. Anchor Mfg., supra, 7 F.3d at
994. "'Relevant determinants of the market power of a . . .
predator . . . include its absolute and relative market shares,
and those of competing firms; the strength and capacity of
current competitors; the potential for entry; the historic
intensity of competition; and the impact of the legal or natural
environment.'" Id. (guoting International Tel. & Tel. Corp., 104
F.T.C. 208, 412 (1984)) (citations and footnotes omitted in U.S.
Anchor Mfq.).
The court, having reviewed the existing claims in this
action, finds that the addition of plaintiffs' proposed Sherman
Act claims would reguire discovery into matters that were not
previously part of this action and that such discovery is likely
to further delay these proceedings. Infusion of such matters
into this case may also reguire the parties to obtain additional
14 experts in order to analyze defendants' economic power in the
relevant market.
"'The further along a case is toward trial, the greater the
threat of prejudice and delay when new claims are belatedly
added.'" Executive Leasing, supra, 48 F.3d at 71 (guoting
Rodriguez v. Banco Central Corp., 990 F.2d 7, 14 (1st Cir.
1993)). The court finds that at this stage in the instant
action, defendants would be prejudiced if plaintiffs were allowed
to amend their complaint by adding two Sherman Act claims.
Finding that plaintiffs' delay in moving to amend has been
undue and that defendants will be prejudiced by such amendments,
the court herewith denies plaintiffs' motion for leave to amend
insofar as said motion seeks to add claims under section 2 of the
Sherman Act.
B. Defendants' Motion for Partial Summary Judgment (document 73)
Defendants move for partial summary judgment on (1)
plaintiffs' state law claims insofar as said claims involve
alleged international price discrimination, (2) plaintiffs' Anti-
Dumping Act claims, and (3) plaintiffs' unjust enrichment claim.7
7In what has become common practice for the parties to this action, defendants have filed a motion for leave to file a response to plaintiffs' objection to the instant motion (document 85), and plaintiffs have responded with a motion for leave to file a surreply to defendants' response (document 91). Said
15 As discussed at page 2 of this order, plaintiffs have dropped
their Anti-Dumping Act claims from this action. Defendants'
arguments with respect to said claims are therefore moot.
1. Summary Judgment Standard
Under Rule 56(c), Fed. R. Civ. P., summary judgment is
appropriate if the evidence before the court shows "that there is
no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law."
The summary judgment process
involves shifting burdens between the moving and the nonmoving parties. Initially, the onus falls upon the moving party to aver "'an absence of evidence to support the nonmoving party's case.'" Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir. 1990) (guoting Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)). Once the moving party satisfies this reguirement, the pendulum swings back to the nonmoving party, who must oppose the motion by presenting facts that show that there is a "genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986) (citing Fed. R. Civ. P. 56(e)). . . .
LeBlanc v. Great American Ins. Co., 6 F.3d 836, 841 (1st Cir.
1993), cert, denied, ___ U.S. , 114 S. C t . 1398 (1994).
"Essentially, Rule 56(c) mandates the entry of summary
motions are herewith granted, and the memoranda attached thereto have been filed as of the date of this order.
16 judgment 'against a party who fails to make a showing sufficient
to establish the existence of an element essential to that
party's case, and on which that party will bear the burden of
proof at trial.'" Mottolo v. Fireman's Fund Ins. Co., 43 F.3d
723, 725 (1st Cir. 1995) (guoting Celotex Corp., supra, 477 U.S.
at 322). When the nonmoving party bears the burden of proof at
trial and fails to make such a showing, "there can no longer be a
genuine issue as to any material fact: the failure of proof as to
an essential element necessarily renders all other facts
immaterial, and the moving party is entitled to judgment as a
matter of law." Smith v. Stratus Computer, Inc., 40 F.3d 11, 12
(1st Cir. 1994) (citing Celotex Corp., supra, 477 U.S. at 322-
23), cert, denied, 115 S. C t . 1958 (1995).
In determining whether summary judgment is appropriate, the
court construes the evidence and draws all justifiable inferences
in the nonmoving party's favor. Anderson, supra, 477 U.S. at
255; Data Gen. Corp., supra, 36 F.3d at 1159.
2. The State Law Claims
Plaintiffs assert claims under New Hampshire law for unfair
competition (Count V), unjust enrichment (Count VI), and tortious
interference with contract (Count VII). Defendants move for
partial summary judgment as to said claims "insofar as they
17 involve alleged international price discrimination or allegedly
illegal international pricing of the sort proscribed by the 1916
Anti-Dumping Act, 15 U.S.C. § 72, . . . because any such claims
are pre-empted by federal law and because application of state
law to such allegations would be unconstitutional . . . ."
Defendants' Memorandum at 1.
Plaintiffs respond that they "never intended their state law
claims to include 'international price discrimination,'"
Plaintiffs' Memorandum at 15, and they therefore do not object to
defendants' motion as long as the motion is limited to carving
out conduct in violation of the Anti-Dumping Act from the state
law claims. In stating that they do not object to defendants'
motion thus framed, plaintiffs assert that their state law claims
encompass other wrongful pricing practices such as predatory
pricing, as well as unfair and anti-competitive conduct such as
defendants' alleged misrepresentations about the composition of
their products.8
Defendants' motion for partial summary judgment as to
plaintiffs' state law claims is granted insofar as said claims
8In their reply brief, defendants argue, inter alia, that plaintiffs' Second Amended Complaint fails to state a claim for predatory pricing. However, because this argument was not properly raised and briefed in defendants' motion, the court will not consider it here.
18 are based on allegations of international price discrimination or
illegal international pricing in violation of the Anti-Dumping
Act. To the extent that plaintiffs' state law claims are based
on other illegal conduct, said claims survive defendants' present
motion.
3. Unjust Enrichment
In Count VI, plaintiffs assert the following claim for
unjust enrichment:
Defendants have received all financial benefits, revenue and profits as a direct result of their misrepresentations (i) of the USA as the true country of origin for imported ball bearings and (ii) of the bearings as containing 440C grade steel. Defendants have received financial benefits and revenue as a direct result of selling bearings below cost. Defendants have profited and been enriched by the retention of revenue and profits and increased market share for miniature ball bearings at the expense of Plaintiffs. Said profits and enrichment are contrary to eguity and are unconscionable to retain because they are against public policy favoring fair competition and trade. Defendants should be forced to make restitution to Plaintiffs for said unjust enrichment.
Second Amended Complaint 55 68-72.
Defendants move for summary judgment as to said claim,
arguing that restitution for unjust enrichment is a guasi-
19 contractual remedy that does not apply to this case. Defendants
further argue that plaintiffs are not entitled to such a remedy
because they conferred no "benefit" on defendants.
"'The doctrine of unjust enrichment is that one shall not be
allowed to profit or enrich himself at the expense of another
contrary to equity.'" Cohen v. Frank Developers, Inc., 118 N.H.
512, 518, 389 A.2d 933, 937 (1978) (quoting American Univ. v.
Forbes, 88 N.H. 17, 19-20, 183 A. 860, 862 (1936)). See also
R e s t a t e m e n t of R e s t i t u t i o n § 1 (1937) ("A person who has been
unjustly enriched at the expense of another is required to make
restitution to the other.").
"In the absence of a contractual agreement, a trial court
may require an individual to make restitution for unjust
enrichment if he has received a benefit which would be
unconscionable to retain." Petrie-Clemons v. Butterfield, 122
N.H. 120, 127, 441 A.2d 1167, 1171 (1982) (citing Morgenroth &
Assocs., Inc. v. Town of Tilton, 121 N.H. 511, 514, 431 A.2d 770,
772 (1981); Presbv v. Bethlehem Village Dist., 120 N.H. 493, 495,
416 A.2d 1382, 1383 (1980)). "A plaintiff is entitled to
restitution if he shows that there was unjust enrichment either
through wrongful acts or passive acceptance of a benefit that
would be unconscionable to permit the defendant to retain." R.
Zoppo Co. v. City of Manchester, 122 N.H. 1109, 1113, 453 A.2d
20 1311, 1313 (1982) (citing Cohen, supra, 118 N.H. at 518, 389 A.2d
at 937); see also Petrie-Clemons, supra, 122 N.H. at 127, 441
A.2d at 1172 ("Unjust enrichment may exist when an individual
receives a benefit as a result of his wrongful acts, or when he
innocently receives a benefit and passively accepts it." (citing
Nute v. Blaisdell, 117 N.H 228, 232, 374 A.2d 923, 925 (1977)) .
It is the responsibility of the trial court to "determine
whether the facts and eguities of a particular case warrant a
remedy in restitution." Petrie-Clemons, supra, 122 N.H. at 127,
441 A.2d at 1172 (citing Presbv, supra, 120 N.H. at 495-96, 416
A.2d at 1384).
The parties to this action were competitors in the M&I ball
bearing industry. By way of their unjust enrichment claim,
plaintiffs seek to recover profits and revenues they allegedly
lost to defendants because of defendants' purported violations
of the Lanham Act, 15 U.S.C. §§ 1051-1128 (1976 & Supp. 1995),
and New Hampshire's law against unfair competition. New Hampshire
Revised Statutes Annotated § 358-A (1955 & Supp. 1994).
Plaintiffs contend that the availability of the eguitable
remedy of restitution for unjust enrichment is not limited to
situations in which there is an express or implied contractual
relationship between the parties in guestion. In support
thereof, plaintiffs cite Cohen, supra, in which the New Hampshire
21 Supreme Court stated, "We recognize that restitution does not
always contemplate an express agreement. It may apply to
contracts implied in fact or to obligations imposed by law
without regard to the intention or assent of the parties, who are
bound because of justice or reason." Cohen, supra, 118 N.H. at
518, 389 A.2d at 936 (citing State v. Haley, 94 N.H. 69, 72-73,
46 A.2d 533, 535 (1946)). Plaintiffs contend that the federal
and state laws upon which their other claims are based all
contain "obligations imposed by law" on defendants. Plaintiffs
further contend that defendants were unjustly enriched in the
form of increased profits and revenues at plaintiffs' expense as
a result of their violations of the legal obligations set forth
in those federal and state laws.
Plaintiffs' argument misconstrues the law of restitution in
general and the Cohen case in particular. The "obligations
imposed by law" referred to in Cohen are "guasi contracts"; that
is, agreements or contracts implied at law. See, e.g., Haley,
supra, 94 N.H. at 72, 46 A.2d at 535 ("Quasi contracts are 'legal
obligations arising, without reference to the assent of the
obligor, from the receipt of a benefit the retention of whichis
unjust, and reguiring the obligor to make restitution.'" (guoting
W o o d w a r d , Q uasi C on tr act s § 3)); Presbv, supra, 120 N.H. at 495,416
A.2d at 1383 (same). Obligations imposed on a party under
22 federal and state statutory and common law are not the type of
"obligations imposed by law" that generally give rise to a claim
for restitution.
Further, all claims seeking restitution rest, at bottom, on
a plaintiff's ability to show that it conferred a benefit on the
defendant. Here, the benefit purportedly received by defendants
is increased revenues and profits, at plaintiffs' expense, as a
result of defendants' alleged violations of various state and
federal laws.
While it is said that a defendant is liable [under the doctrine of unjust enrichment] if 'eguity and good conscience' reguires, this does not mean that a moral duty meets the demands of eguity. There must be some specific legal principle or situation which eguity has established or recognized, to bring a case within the scope of the doctrine.
American Univ., supra, 88 N.H. at 19-20, 183 A. at ___.
Plaintiffs have not cited, nor has this court found, any New
Hampshire law cases that support plaintiffs' contention that
profits gained by defendants as a result of their alleged
violations of the Lanham Act and New Hampshire's law against
unfair competition constitute the unjust receipt and retention of
a "benefit" for which restitution is reguired.
The court finds and rules that the circumstances of this
case do not warrant a remedy under the doctrine of unjust
23 enrichment. Instead, plaintiffs' recovery of the profits
allegedly gained by defendants must come, if at all, through the
claims brought by plaintiffs under the federal and state laws
allegedly violated by defendants. Defendants' motion for summary
judgment is accordingly granted as to Count VI.
C. Substitution or Joinder of Wells Fargo Bank (document 79)
Defendants' move to dismiss or, in the alternative, for
entry of an order compelling substitution or joinder of Wells
Fargo Bank, N.A. (WFB), as plaintiff under Rules 17 and 21, Fed.
R. Civ. P. In support thereof, defendants contend that the named
plaintiffs have completely abandoned their interest in this
action to WFB and are therefore no longer the real party in
interest. Defendants' motion raises several different arguments,
each of which is addressed here in turn.
1. The Relationship Between WFB and This Action
On October 7, 1986, Pacamor Bearings, Inc., and Kubar
Bearings, Inc., a subsidiary of Pacamor, filed for bankruptcy
under Chapter 11 of the Bankruptcy Act. Three years later,
Kubar's bankruptcy proceedings were converted from Chapter 11 to
Chapter 7, and William McCarthy was appointed as the Chapter 7
24 Trustee of Kubar.
On June 15, 1990, the instant action was filed in this court
by Pacamor and McCarthy as trustee for the bankrupt estate of
Kubar. Two years later, on June 10, 1992, Pacamor's bankruptcy
proceedings were also converted to Chapter 7, and Philip J.
Danaher was appointed as the Chapter 7 Trustee of Pacamor.
WFB is a secured creditor of both Pacamor and Kubar. During
the course of Kubar's bankruptcy proceedings, WFB moved for an
order directing McCarthy to abandon to WFB all of his right,
title, and interest in this lawsuit.9 Following a hearing on
W F B 's motion, the bankruptcy court indicated it would permit
abandonment of the lawsuit "upon satisfaction of certain
conditions to be worked out between the Bank and the Trustee . .
. ." In re Kubar Bearings, Inc., Chp. 7 Case No. 86-11478, slip
op. at 2 (Bankr. N.D.N.Y. Mar. 15, 1993) (Defendants' Exhibit 2).
Shortly thereafter, WFB and McCarthy entered into a stipulation
resolving and settling various matters and disputes between them
(the Kubar Stipulation). On March 13, 1993, the bankruptcy court
approved the Kubar Stipulation and adopted it in full as an order
of the court. The court further
9WFB made this motion pursuant to § 554 (b) of the Bankruptcy Code, which states that "[o]n reguest of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconseguential value and benefit to the estate." 11 U.S.C. § 554(b) (1993).
25 ORDERED, that the effect of the abandonment and transfer of the Minebea Lawsuit (and the proceeds thereof) to the bank shall mean that the Bank has sole control over the management, supervision and disposition of the Minebea Lawsuit, including the decision whether or not to advance monies to fund such litigation and all decisions concerning the prosecution and settlement of the Minebea Lawsuit and any and all appeals arising therefrom and the Bank shall exercise such control in its sole and absolute discretion without seeking further approval of the Court, the Trustee or any other party;
Id. at 3-4 .
The Kubar Stipulation states in relevant part that WEB and
McCarthy stipulate, consent, and agree that
The Trustee, Kubar and the Kubar estate hereby abandon to the Bank the Minebea Lawsuit and all of their right, title and interest therein, including the proceeds thereof. Notwithstanding such abandonment, the Bank shall pay to the (a) Trustee, for the benefit of the Kubar estate, free and clear of any lien or claim of the Bank, (i) five (5%) percent of the first $2,500,000 of the Net Recovery10 . . . from the settlement.
10The Kubar Stipulation defines "Net Recovery" as
all monies recovered by the Bank in connection with the Minebea Lawsuit which monies would have otherwise been payable to the Kubar estate, whether through judgment, settlement or otherwise less (i) all costs and expenses, including attorneys fees, incurred by the Bank in connection with the Minebea Lawsuit and (11) all attorneys fees, expert witness fees and any other expenses arising out of or relating to the Minebea Lawsuit (including, but not limited to, the fees and expenses of the law firm of
26 judgment or any other disposition of the Minebea Lawsuit, (ii) seven and one-half (7^%) percent of the Net Recovery between $2,500,000 and $5,000,000 and (iii) seventy (70%) percent of the Net Recovery in excess of $5,000,000 and (b) United States Department of Commerce, free and clear of any lien or claim of the Bank, two and one half (2^%) percent of the first $5,000,000 of the Net Recovery. The Bank shall have sole control over the management, supervision and disposition of the Minebea Lawsuit, including the decision whether or not to advance monies to fund such litigation and all decisions concerning the prosecution and settlement of the Minebea Lawsuit and any and all appeals arising therefrom and shall exercise such control in its sole and absolute discretion without seeking approval of the Trustee, the Bankruptcy Court or any other party.
Kubar Stipulation at 5-6.
A stipulation nearly identical in form and substance to the
Kubar Stipulation was entered into between WEB and Danaher as the
Chapter 7 Trustee of Pacamor (the Pacamor Stipulation)
(Defendants' Exhibit 1). The bankruptcy court approved and
adopted the Pacamor Stipulation in full on April 12, 1993.
2. Standing
Defendants maintain that this action must be dismissed
because plaintiffs no longer have standing to pursue their
claims.
O'Connell and Aronowitz)."
Kubar Stipulation at 6 (Defendants' Exhibit 2).
27 "In essence the question of standing is whether the litigant
is entitled to have the court decide the merits of the dispute or
of particular issues." Warth v. Seldin, 422 U.S. 490, 498
(1975). The doctrine of standing "involves 'a blend of
constitutional requirements and prudential considerations.'"
Vote Choice, Inc. v. DiStefano, 4 F.3d 26, 36 (1st Cir. 1993)
(quoting Valley Forge Christian College v. Americans United for
Separation of Church and State, Inc., 454 U.S. 464, 471 (1982)).
"On the constitutional side. Article III limits federal court
adjudication to matters which achieve the stature of justiciable
cases or controversies." Id. This generally means "that a
plaintiff 'allege personal injury fairly traceable to the
defendant's allegedly unlawful conduct and likely to be redressed
by the requested relief.'" County of Riverside v. McLaughlin,
500 U.S. 44, 51 (1991) (quoting Allen v. Wright, 468 U.S. 737,
751 (1984) ) .
"Over and above its constitutional requisites, 'the doctrine
of standing also embodies prudential concerns regarding the
proper exercise of federal jurisdiction.'" Vote Choice, supra, 4
F.3d at 37 (quoting United States v. AVX Corp., 962 F.2d 108, 114
(1st Cir. 1992)). These "judicially self-imposed limits on the
exercise of federal jurisdiction," include "the general
prohibition on a litigant's raising another person's legal
rights, the rule barring adjudication of generalized grievances
28 more appropriately addressed in the representative branches, and
the requirement that a plaintiff's complaint fall within the zone
of interests protected by the law invoked." Allen, supra, 468
U.S. at 751 (citing Valley Forge Christian College, supra, 454
U.S. at 474-75).
Defendants contend that plaintiffs, by abandoning their
claims in this suit to WEB, have lost their standing.
Defendants' argument rests on the prudential limitation that a
plaintiff "generally must assert his own legal rights and
interests, and cannot rest his claim to relief on the legal
rights or interests of third parties." Warth, supra, 422 U.S. at
499 (citations omitted); see also Diamantis v. Milton Bradley
C o ., 772 F.2d 3, 4 (1st Cir. 1985) ("It is well settled under the
standing doctrine that a party ordinarily may not assert the
legal rights of others.").
There is no dispute that plaintiffs had standing to sue at
the time they initiated this action. Although plaintiffs have
abandoned all of their "right, title and interest" in this action
to WEB, plaintiffs have retained the right to receive a
percentage of the net recovery, if any, from the action. The
court finds that this particular situation does not fall within
the scope of the prudential limitation that a plaintiff "cannot
rest his claim to relief on the legal rights or interests" of a
third party, Warth, supra, 422 U.S. at 499, and therefore
29 declines to dismiss this action for lack of standing. Instead,
under the circumstances outlined by the parties, the court finds
that the proper inquiry is whether WEB should be substituted or
added as a plaintiff under the Federal Rules of Civil Procedure.
_____ 3. Substitution or Joinder
Defendant next contend that this action should be dismissed
because plaintiffs are no longer the real party in interest. In
the alternative, defendants seek, pursuant to Rules 17 and 21,
Fed. R. Civ. P., either to have WEB substituted as the plaintiff
in this case or to have WEB joined as an additional plaintiff.
Rule 17 provides that "[e]very action shall be prosecuted in
the name of the real party in interest." Rule 17(a), Fed. R.
Civ. P. "The purpose of the rule is to prevent multiple or
conflicting lawsuits by persons such as assignees, executors, or
third-party beneficiaries, who would not be bound by res judicata
principles." Gogolin & Stelter v. Karn's Auto Imports, Inc., 886
F.2d 100, 102 (5th Cir. 1989) (citing W r i g h t & M iller supra, §
1541). Rule 17 applies to situations where "an interest has been
transferred prior to the commencement of the suit . . . ." 7A
W right & M iller, supra, § 1958, at 553.
It is undisputed that Pacamor and McCarthy were the real
parties in interest at the time this action was commenced.
However, during the course of this action, plaintiffs abandoned
30 "all of their right, title and interest" in this action to WEB,
except for the right to receive a percentage of any net recovery
from this action. Where, as here, there has been a transfer of
interest during the pendency of the action, the court must apply
Rule 25(c), rather than Rule 17, to determine whether a
substitution of parties should occur. See 7A W r i g h t & M iller,
supra, § 1958, at 553 ("Rule 25(c) speaks to the situation in
which there is 'any transfer of interest' during the pendency of
an action."); 3B J a m e s W m . M o o r e , M o o r e 's F e d e r a l P r a c t i c e 5 25.08, at
25-57 - 25-58 (2d ed. 1995) ("Subdivision (c) of Rule 25 deals
with transfers of interest during the course of the action. Rule
2 5 (c) may be compared and contrasted with the situation where the
transfer of occurs prior to the action, which is controlled by
Rule 1 7 (a). But where the transfer of interest takes place
during the course of the action, Rule 25(c) controls . . . . ") .
Rule 25, entitled "Substitution of Parties", states in
pertinent part,
(c) Transfer of Interest. In case of any transfer of interest, the action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party.
"A motion under Rule 25(c) for joinder or substitution of a
party after suit has been commenced is addressed to the sound
discretion of the court, taking into account all the exigencies
31 of the situation." EPIC v. Tisch, 89 F.R.D. 446, 448 (E.D.N.Y.
1981) (citing McComb v. Raw River Lumber Co., 177 F.2d 129 (9th
Cir. 1949)). "Rule 25(c) is not designed to create new
relationships among parties to a suit but is designed to allow
the action to continue unabated when an interest in the lawsuit
changes hands." In the Matter of Covington Grain Co. (Collateral
Control Corp. v. Deal), 638 F.2d 1362, 1364 (5th Cir. Unit B
1981) .
"The most significant feature of Rule 2 5 (c) is that it does
not reguire that anything be done after an interest has been
transferred. The action may be continued by or against the
original party, and the judgment will be binding on his successor
in interest even though he is not named." 7A Wright & Miller,
supra, § 1958, at 555.
As described herein at section C.l. of this order, the named
plaintiffs abandoned their interests in this action to W E B during
the course of their Chapter 7 bankruptcy proceedings. The court
finds that said abandonment was, in effect, an assignment of the
plaintiffs' interests in this action to W E B . Compare 4 C o l l i e r on
Bankruptcy § 5 5 4 . 0 2 [2], at 554-7 (Lawrence P. King ed. 1995)
("abandonment constitutes a divesture of all interests in
property that were property of the estate") with 6 A m . Ju r . 2d
Assignments § 1, at 185 (1963) ("A legal assignment is a transfer
or setting over of property, or of some right or interests
32 therein, from one person to another, and unless in some way
qualified, it is properly the transfer of one's whole interest in
an estate, or chattel, or other thing.").
In abandoning all of their right, title, and interest in
this action to WEB, Pacamor and McCarthy also gave WEB "sole
control over the management, supervision, and disposition of the
Minebea lawsuit . . . ." Pacamor Stipulation at 5; Kubar
Stipulation at 5-6. However, the named plaintiffs retained the
right to receive "free and clear of any lien or claim of the
Bank" a percentage of the net recovery from this action.
In determining whether WEB should be substituted for the
named plaintiffs or joined as a party under the circumstances
described herein, the court finds relevant the decision of the
district court in Tisch, supra, 89 F.R.D. at 446, a case in which
the named plaintiff had assigned "all right, title and interest
in any and all claims which have been or might be asserted
against defendants in this action." Id. at 448. In
consideration of this assignment, the plaintiff retained an
interest in the proceeds of the action "to the extent of 10% of
any recovery in excess of [the assignee's] legal expenses plus
one million dollars." Id.
In response to a Rule 25(c) motion to join the assignee as a
plaintiff, the Tisch court held.
In view of the fact that although the FDIC has assigned its claims against defendants to
33 the trustee it nonetheless has retained an interest in the outcome of the litigation, we find that substitution of the trustee for the FDIC is unwarranted. However in light of the assignment, and since the trustee in any event will be bound by any determination had herein, see O'Donohue v. First National Bank, 166 F. Supp. 233 (E.D. Pa. 1948), we conclude that joinder of the trustee is proper. Since both assignor and assignee are still real parties in interest, participation in this lawsuit by representatives of both is the most efficient way to insure that all issues will be fully litigated.
Id.
This court finds the rationale employed in Tisch to be
persuasive and determines, for substantially the same reasons set
forth therein, that joinder of WFB as a plaintiff in this action
is both proper and necessary to facilitate the conduct of this
litigation. In ordering that WFB be joined as a plaintiff, the
court notes that this joinder "in no way affects the substantive
rights of" the named plaintiffs or WFB, Tisch, supra, 89 F.R.D.
at 448, nor does it "create new relationships" among the parties
to this action, Covington Grain Co., supra, 638 F.2d at 1364.
Instead, the joinder of WFB should, as Rule 25(c) contemplates,
allow this action "to continue unabated [even though] an interest
in the lawsuit [has] change[d] hands." Id.
D. Defendants' Motion for Certification (document 97)
Defendants move pursuant to 28 U.S.C. § 1292(b) for
certification of this court's decision to allow Pacamor and
34 McCarthy to continue as named plaintiffs in this action.
Defendants maintain that said plaintiffs lack standing to assert
the claims put forth in this action and contend that
certification is required here because the issue of standing is a
controlling question of law over which there is a substantial
ground for difference of opinion.
Section 1292(b) states.
When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order . . . .
28 U.S.C. § 1292(b) (1993) (emphasis added). Section 1292(b)
"accord[s] the district courts circumscribed authority to certify
for immediate appeal interlocutory orders deemed pivotal and
debatable." Swint v. Chambers County Comm'n, U.S. , ,
115 S. C t . 1203, 1210 (1995).
The First Circuit admonishes that
[o]nly rare cases will qualify for the statutory anodyne; indeed, it is apodictic in this circuit that interlocutory certification of this sort "should be used sparingly and only in exceptional circumstances, and where the proposed intermediate appeal presents one or more difficult and pivotal questions of
35 law not settled by controlling authority."
In re San Juan Dupont Plaza Hotel Fire Litiq., 859 F.2d 1007,
1010 n.l (1st Cir. 1988) (quoting McGillicuddv v. Clements, 746
F.2d 76, 76 n.l (1st Cir. 1984)). In light of section 1292(b)'s
strictures, "the instances where section 1292(b) may
appropriately be utilized will, realistically, be few and far
between." Id.
Defendants' motion to dismiss or, in the alternative, for
entry of an order compelling substitution or joinder of WFB,
required the court to determine whether Pacamor and McCarthy
continued to have standing to sue after they abandoned their
interest in this action to WFB. The court declined to dismiss
this action for lack of standing, but ordered that WFB be added
as plaintiff under Rule 25(c), Fed. R. Civ. P.
Standing is generally a controlling question of law in that
if a plaintiff is found to lack standing, the action will be
dismissed. The doctrine of standing has been addressed at length
by both the Supreme Court and the First Circuit. Although
defendants disagree with the court's application of the
principles of standing to the facts of this case, the court does
not find there to be a substantial ground for difference of
opinion on the issue of standing in this action.
Here, the question of whether Pacamor and McCarthy have
standing is not dispositive since the court has ordered that WFB
36 be added as a plaintiff. Further, as discussed supra at section
C.3. of this order, the addition of WFB as a plaintiff does not
alter the landscape of this action. Instead, the addition of WFB
is merely a procedural matter which recognizes that Pacamor and
McCarthy transferred their interest in this action to WFB. For
these reasons, the court is of the opinion that an immediate
appeal of the standing issue will not materially advance the
ultimate termination of this litigation. The court therefore
denies defendants' motion for certification under 28 U.S.C. §
1292(b) of issues regarding plaintiffs' standing to sue.
Conclusion
For the reasons set forth hereinabove, plaintiffs' motion
for leave to amend (document 111) is granted in part and denied
in part; defendants' motion for partial summary judgment
(document 73) is granted; defendants' motion to dismiss (document
7 9) is granted in part and denied in part; and defendants' motion
for certification (document 97) is denied.
SO ORDERED.
Shane Devine, Senior Judge United States District Court
July 13, 1995
cc: James L. Kruse, Esg. Jack McKay, Esg. Daniel M. Sleasman, Esg. Garry R. Lane, Esg.