Table of Contents - Massachusetts School of Law

REMEDIES: PURSUING AND ENDING CONFLICT Professor Michael L. Coyne 500 Federal Street Andover, MA 01810 Phone: (978) 681-0800 coyne@mslaw.edu © 2003 Michael L. Coyne. All Rights Reserved Syllabus MASSACHUSETTS SCHOOL OF LAW REMEDIES: PURSUING AND ENDING CONFLICT SYLLABUS PROFESSOR COYNE WEBPAGE: mslaw.edu/coyne.htm E-Mail: coyne@mslaw.edu Reason is not measured by size or height, but by principle. Epictetus 60 A.D. SECTION 1 Overview of Remedies and Alternatives to Court Coyne’s Chart on Procedure Lawyer Turns Peacemaker Seven Steps to Effective Mediation Settling the Score Injunctions Rule. 65 -- Injunctions Weinberger v. Romero Barcelo, 456 U.S. 305 (1982) Clinton v. Nagy, 411 F.Supp. 1396 (1974) Norwalk Code v. Norwalk Board of Education, 298 F.Supp. 203 (1968) SECTION 2 Give Martin a Ticket to Ride How Level the Playing Field McGuiness v. Univ. of New Mexico, 170 F.3d 974 (1998) Toyota Motor Mfg. v. Williams, 534 U.S. 184, 151 L. Ed.2d 615 (2002) EEOC v. Waffle House, 122 S.Ct. 754 (2002) Remedies in Domain Name Lawsuits (www.patents.com/pubs/jmls.htm) SECTION 3 Business Relationships Jurisdiction, Trademarks, Servicemarks, G.L. c.93A and the Franchise Relationship Burger King v. Rudzewicz, 471 U.S. 462 (1985) Anthony’s Pier 4, Inc. v. HBC Assoc., 411 MA 451 (1991) Disclosure For Franchisors Zapata v. Dairy Mart, 381 Mass. 284 (1980) www.startupjournal.com/franchise/ Rule 4 -- Service of Process SECTION 4 Attorney’s Rights and Obligations Concurrent Federal and State Court Remedies and Discovery Duties Unioil v. E.F. Hutton, 809 F.2d 540 (1986) Frivolity Punished Here First Principles ii Lawyers and Their Games Are Leading Us Down the Tubes Judge Rejects a Libel Claim Over Donnie Brasco Movie First Technology Safety Systems v. Depinet, 11 F.3d 641 (1993) Using Computers to Level the Playing Field Sailing Into Cyberspace Rule 11 -- Signing of Pleadings SECTION 5 Practice Issues Related to Injunctions Campbell Soup v. Giles, 47 F.3d 467 (1995) Live Testimony and Insuring Compliance Republic of Philippines v. New York Land, 852 F.2d 33 (1988) Magistrates and Specificity The Original Great American Chocolate Chip Cookie Company v. River Valley Cookies, 970 F.2d 273 (1992) Rule 52 -- Findings by the Court Rule 58 -- Entry of Judgment SECTION 6 Bonds Franks v. GMC Truck Center, 847 F.2d 890 (1990) Aoude v. Mobil Oil, 862 F.2d 890 (1990) Doctors’ Assoc. v. Stuart, 85 F.3d 975 (1996) Equifax v. Hitz, 905 F.2d 1355 (1990) Rule 12 – Motion to Dismiss SECTION 7 Insurance Practice Issues, including G.L. c.176D and G.L. c.93A Timpson v. Transamerica, 41 Mass. App. Ct. 344 (1996) Brandley v. U.S. Fidelity, 819 F. Supp. 101 (1993) Caplan v. Fellheimer, 886 F. Supp.498 (1995) Rule 56 -- Summary Judgment SECTION 8 Class Action Contracts to Arbitrate, Mediate and Forum Selection Issues Carnival Cruise Lines v. Shute, 499 U.S. 585 (1991) Federal Judge With a Radical Past Goes Mainstream Guiness-Harp v. Jos. Schlitz Brewing, 613 F.2d 468 (1980) Rosenberg v. Merrill, Lynch, Pierce, Fenner and Smith, 965 F. Supp. 190 (1997) Thiessen v. General Electric, 267 F.3d 1095 (2001) Rule 23 – Class Actions SECTION 9 Contracts For Personal Services and Enforcement Wombs For Rent ABC v. Warner Wolf, 52 NY2d 394 (1981) Vanessa Redgrave v. BSO, 557 F. Supp. 230 (1983) Florida Panthers Hockey Club v. Miami Sports Authority, 939 F. Supp. 855(1996) Johnson v. Calvert, 851 F.2d 776 (1993) Culliton v. Beth Israel, 435 MA 285 (2001) In Gestational Surrogacies, All Parties Bear Risk Quandary on Donor Eggs: What to Tell the Children Surrogate Mom Surrenders Girl to Parents Rules 26-27 --Discovery iii G.L.c. 46, §4B SECTION 10 Special Relief For Families G.L. c.209A Burke v. Rivo, 406 Mass. 764 (1990) Mark v. Kahn, 333 Mass. 517 (1956) Knighton v. Knighton, 252 Ala. 520 (1949) Edgar v. Edgar, 403 Mass. 616 (1988); 406 Mass. 628 (1990) Breaking Up Is Hard To Do The Push For Parent Education http://www.dufi.duq.edu Rules 5 and 6 --Service of Pleadings and Computation of Time to Respond SECTION 11 Valuation of Damages Strzelecki v. Blaser Lakeside Indus., 139 Mich. App. Ct. 1191 (1984) Campins v. Capels, 461 NE2d 712 (1984) Griffin v. G.M.C., 380 Mass. 362 (1980) Krasnecky v. Meffen, 777 N.E. 2d 1286 (2002) A Woman’s Worth: Gender Bias in Damage Awards Proving Partial Loss of Earning Capacity Ten Mistakes Adjusters See Attorneys Make Explaining Pain Seeking Recovery For Loss of Enjoyment of Life Rule 51 --Instructions to the Jury SECTION 12 Declaratory Judgments and the Anti-Injunction Statute Federal and State Issues Steffel v. Thompson, 415 U.S. 452 (1974) Mitchum v. Foster, 407 U.S. 225 (1972) Rule 57 -- Declaratory Judgment SECTION 13 Interference With Real Property Rights Peters v. Archambault, 361 Mass. 91 (1972) Boomer v. Atlantic Cement, 26 NY2d 219 (1970) Pate v. City of Martin, 614 SW2d 46 (1981) Myers v. Arnold, 403 NE2d 316 (1980) Rule 13 --Counterclaims SECTION 14 Constructive Trusts,, Resulting Trusts and Declaratory Judgments Sanguinetti v. Nantucket Construction, 5 Mass. App. Ct. 227 (1977) Sullivan v. Rooney, 404 Mass. 160 (1989) Fortin v. Roman Catholic Bishop of Worcester, 416 Mass. 781 (1994) Nessralla v. John H. Peck, 403 Mass. 757 (1989) SECTION 15 Attachments and Post-Judgment Remedies Digital Equipment v. Currie Enterprises, 42 F.R.D. 16 D. Mass.(1992) Aviation Supply v. RSBI Aerospace, 999 F.2d 314 (1993) Rule 66 -- Receivers Rule 68 -- Offer of Judgment iv Rule 69 -- Execution Consider the requirements of Rule 11 while you read these cases. Is it good lawyering, or just plain dishonest, to fail to attempt to give any notice on a TRO? Under what circumstances is it appropriate to use an injunction to force a speedier resolution of a case? Under what circumstances would you inform your client to intentionally violate a court order? How does a lawyer balance the need to make money on hourly fees with the client’s right to a quick settlement? You are required to participate in each class, and your grade will be lowered if you choose not to participate. You are required to email me your list of what the three fundamental things someone should know about the area of the law you intend to enter or about the field in which you presently work. How will you insure that as a lawyer you will always represent clients at a very high skill level? I look forward to hearing from you. v Table of Contents Syllabus .......................................................................................................................... ii Table of Contents ........................................................................................................... vi Table of Authorities ......................................................................................................... x Section One: Remedies & Alternatives to Court .............................................................. 1 Articles .................................................................................................................... 2 The Lawyer Turns Peacemaker ....................................................................... 2 Clinching the Case Before Trial: Seven steps to effective mediation ............. 10 Injunctions ................................................................................................................. 16 FRCP 65. Injunctions ......................................................................................... 17 Cases .................................................................................................................... 18 Weinberger v. Romero Barcelo...................................................................... 18 Clinton v. Nagy .............................................................................................. 37 Norwalk Code v. Norwalk Board of Education................................................ 42 Section Two .................................................................................................................. 46 Article .................................................................................................................... 46 Just How Level A Playing Field ...................................................................... 46 Cases .................................................................................................................... 49 PGA Tour v. Martin ........................................................................................ 49 McGuiness v. Univ. of New Mexico, ............................................................... 76 Toyota Motor Mfg. v. Williams........................................................................ 82 EEOC v. Waffle House .................................................................................. 92 Article .................................................................................................................. 114 Remedies in Domain Name Lawsuits: ......................................................... 114 Section Three: Business Relationships ....................................................................... 136 Cases: ................................................................................................................. 136 Burger King v. Rudzewicz ............................................................................ 136 Anthony’s Pier 4, Inc. v. HBC Assoc. ........................................................... 153 Article .................................................................................................................. 177 The Trials of a Franchisee ........................................................................... 177 Disclosure For Franchisors .......................................................................... 179 Case: ................................................................................................................... 202 Zapatha v. Dairy Mart .................................................................................. 202 Web Resources ................................................................................................... 213 www.startupjournal.com/franchise/ .............................................................. 213 FRCP 4 Service of Process ............................................................................. 213 Section Four: Attorney’s Rights and Obligations ......................................................... 218 Concurrent Federal and State Court Remedies and Discovery Duties .................... 218 Case .................................................................................................................... 218 Unioil v. E.F. Hutton ..................................................................................... 218 Articles: ............................................................................................................... 228 Frivolity Punished Here ................................................................................ 228 First Principles ............................................................................................. 229 Lawyers And Their Games .......................................................................... 235 Case: ................................................................................................................... 237 First Technology Safety Systems v. Depinet ................................................ 237 vi Articles: ............................................................................................................... 249 Using the Computer to Level the Playing Field ............................................ 249 Sailing Into Cyberspace ............................................................................... 250 FRCP 11 Signing of Pleadings ........................................................................ 256 Section Five: Practice Issues Related to Injunctions ................................................... 257 Cases: ................................................................................................................. 257 Campbell Soup v. Giles ............................................................................... 257 Republic of Philippines v. New York Land .................................................... 264 The Original Great American Chocolate Chip Cookie Company v. River Valley Cookies........................................................................................................ 269 FRCP 52 Findings by the Court Judgment on Partial Findings ........................ 279 FRCP 58 Entry of Judgment ............................................................................ 280 Section Six: Bonds ...................................................................................................... 281 Cases: ................................................................................................................. 281 Franks GMC Truck Center v. General Motors .............................................. 281 Aoude v. Mobil Oil ........................................................................................ 285 Doctors’ Assoc. v. Stuart.............................................................................. 293 Equifax Services v. Hitz ............................................................................... 304 FRCP 12 Motion to Dismiss ............................................................................. 311 Section Seven: Insurance Practice Issues: Including G.L. c.176D and G.L. c. 93A ..... 313 Cases: ................................................................................................................. 313 Timpson v. Transamerica Insurance ............................................................ 313 Brandley v. U.S. Fidelity ............................................................................... 320 Caplan v. Fellheimer .................................................................................... 331 FRCP 56 Summary Judgment ......................................................................... 337 G.L. c. 93A ...................................................................................................... 338 G.L. c. 176D .................................................................................................... 347 Section Eight: Class Action Contracts To Arbitrate, Mediate, and Forum Selection Issues ......................................................................................................................... 359 Case: ................................................................................................................... 359 Carnival Cruise Lines v. Shute ..................................................................... 359 Article: ................................................................................................................. 371 Federal Judge With a Radical Past Goes Mainstream ................................. 371 Cases: ................................................................................................................. 373 Guiness-Harp v. Jos. Schlitz Brewing .......................................................... 373 Rosenberg v. Merrill, Lynch, Pierce, Fenner and Smith ............................... 378 Thiessen v. G. E. Capital ............................................................................. 394 FRCP 23 Class Actions ................................................................................... 410 Section Nine: Contracts For Personal Services and Enforcement ............................... 412 Cases: ................................................................................................................. 412 ABC v. Warner Wolf .................................................................................... 412 Vanessa Redgrave v. BSO .......................................................................... 421 Florida Panthers Hockey Club v. Miami Sports Authority ............................. 435 Johnson v. Calvert ....................................................................................... 440 Culliton v. Beth Israel ................................................................................... 469 Articles: ............................................................................................................... 477 Wombs For Rent ..................................................................................................... 477 In Gestational Surrogacies, All Parties Bear Risk ........................................ 477 Quandary on Donor Eggs: What to Tell the Children ................................... 483 Surrogate Mom Surrenders Girl to Parents .................................................. 487 vii The Sperminator .......................................................................................... 488 FRCP 26 General Provisions Governing Discovery; Duty of Disclosure ......... 494 FRCP 27 Depositions Before Action or Pending Appeal .................................. 500 G.L.c. 46, §4B: Artificial insemination .............................................................. 501 Section Ten: Special Relief For Families ..................................................................... 502 G.L. c. 209A. Abuse Prevention...................................................................... 502 Cases: ................................................................................................................. 513 Burke v. Rivo ............................................................................................... 513 Mark v. Kahn ............................................................................................... 521 Knighton v. Knighton .................................................................................... 525 Edgar v. Edgar (1988) ................................................................................. 529 Edgar v. Edgar (1990) ................................................................................. 532 Articles: ............................................................................................................... 534 Breaking Up Is Hard To Do .......................................................................... 534 The Push For Parent Education ................................................................... 542 Web Resources ................................................................................................... 548 www.dufi.duq.edu ........................................................................................ 548 FRCP 5 Serving and Filing Pleadings and Other Papers ................................. 548 FRCP 6 Time ................................................................................................... 550 Section Eleven: Valuation and Damages .................................................................... 551 Cases: ................................................................................................................. 551 Strzelecki v. Blaser Lakeside Indus ............................................................. 551 Campins v. Capels ....................................................................................... 555 Griffin v. G.M.C. ........................................................................................... 567 Krasnecky v. Meffen .................................................................................... 573 Articles ................................................................................................................ 578 A Woman’s Worth: Gender Bias in Damage Awards ................................... 578 Proving Partial Loss of Earning Capacity ..................................................... 585 Ten Mistakes Adjusters See Attorneys Make ............................................... 590 Explaining Pain ............................................................................................ 593 Seeking Recovery For Loss of Enjoyment of Life ........................................ 593 FRCP 51 Instructions to the Jury ..................................................................... 593 Section Twelve: Declaratory Judgments and the Anti-Injunction Statute ..................... 594 Federal and State Issues ........................................................................................ 594 Cases: ................................................................................................................. 594 Steffel v. Thompson ..................................................................................... 594 Mitchum v. Foster ........................................................................................ 612 FRCP 57 Declaratory Judgment ...................................................................... 624 Section Thirteen: Interference With Real Property Rights ........................................... 625 Cases: ................................................................................................................. 625 Peters v. Archambault ................................................................................. 625 Boomer v. Atlantic Cement .......................................................................... 634 Pate v. City of Martin ................................................................................... 642 Myers v. Arnold ............................................................................................ 645 FRCP 13 Counterclaims .................................................................................. 652 Section Fourteen: Constructive Trusts, Resulting Trusts and Declaratory Judgments 653 Cases: ................................................................................................................. 653 Sanguinetti v. Nantucket Construction ......................................................... 653 Sullivan v. Rooney ....................................................................................... 661 Fortin v. Roman Catholic Bishop of Worcester ............................................ 664 viii Nessralla v. John H. Peck and Others ......................................................... 670 Section Fifteen: Attachments and Post-Judgment Remedies ...................................... 674 Cases: ................................................................................................................. 674 Digital Equipment v. Currie Enterprises ....................................................... 674 Aviation Supply v. RSBI Aerospace ............................................................. 685 Article: ................................................................................................................. 690 The Humanity Of Lawyers ........................................................................... 690 FRCP 66 Receivers Appointed by Federal Courts ........................................... 692 FRCP 68 Offer of Judgment ............................................................................ 692 FRCP 69 Execution ......................................................................................... 692 Appendix ..................................................................................................................... 694 Federal Rules Of Civil Procedure (with Forms) ................................................ 694 Civil Procedure Review .................................................................................... 694 ix Table of Authorities Cases ABC v. Warner Wolf .................................................................................................... 412 Anthony’s Pier 4, Inc. v. HBC Assoc. .......................................................................... 153 Aoude v. Mobil Oil ....................................................................................................... 285 Aviation Supply v. RSBI Aerospace............................................................................. 685 Boomer v. Atlantic Cement .......................................................................................... 634 Brandley v. U.S. Fidelity .............................................................................................. 320 Burger King v. Rudzewicz ........................................................................................... 136 Burke v. Rivo ............................................................................................................... 513 Campbell Soup v. Giles ............................................................................................... 257 Campins v. Capels ...................................................................................................... 555 Caplan v. Fellheimer ................................................................................................... 331 Carnival Cruise Lines v. Shute .................................................................................... 359 Clinton v. Nagy .............................................................................................................. 37 Culliton v. Beth Israel .................................................................................................. 469 Digital Equipment v. Currie Enterprises ....................................................................... 674 Doctors’ Assoc. v. Stuart ............................................................................................. 293 Edgar v. Edgar (1988) ................................................................................................. 529 Edgar v. Edgar (1990) ................................................................................................. 532 EEOC v. Waffle House ................................................................................................. 92 Equifax Services v. Hitz............................................................................................... 304 First Technology Safety Systems v. Depinet ............................................................... 237 Florida Panthers Hockey Club v. Miami Sports Authority............................................. 435 Fortin v. Roman Catholic Bishop of Worcester ............................................................ 664 Franks GMC Truck Center v. General Motors ............................................................. 281 Griffin v. G.M.C. .......................................................................................................... 567 Guiness-Harp v. Jos. Schlitz Brewing.......................................................................... 373 Johnson v. Calvert ...................................................................................................... 440 Knighton v. Knighton ................................................................................................... 525 Krasnecky v. Meffen.................................................................................................... 573 Mark v. Kahn ............................................................................................................... 521 McGuiness v. Univ. of New Mexico, .............................................................................. 76 Mitchum v. Foster........................................................................................................ 612 Myers v. Arnold ........................................................................................................... 645 Nessralla v. John H. Peck and Others ......................................................................... 670 Norwalk Code v. Norwalk Board of Education ............................................................... 42 Pate v. City of Martin ................................................................................................... 642 Peters v. Archambault ................................................................................................. 625 PGA Tour v. Martin ....................................................................................................... 49 Republic of Philippines v. New York Land ................................................................... 264 Rosenberg v. Merrill, Lynch, Pierce, Fenner and Smith ............................................... 378 Sanguinetti v. Nantucket Construction ........................................................................ 653 Steffel v. Thompson .................................................................................................... 594 Strzelecki v. Blaser Lakeside Indus ............................................................................. 551 Sullivan v. Rooney....................................................................................................... 661 x The Original Great American Chocolate Chip Cookie Company v. River Valley Cookies ................................................................................................................................ 269 Thiessen v. G. E. Capital............................................................................................. 394 Timpson v. Transamerica Insurance ........................................................................... 313 Toyota Motor Mfg. v. Williams ....................................................................................... 82 Unioil v. E.F. Hutton .................................................................................................... 218 Vanessa Redgrave v. BSO ......................................................................................... 421 Weinberger v. Romero Barcelo ..................................................................................... 18 Zapatha v. Dairy Mart .................................................................................................. 202 Statutes G.L. c. 46, §4B: Artificial insemination ........................................................................ 501 G.L. c. 93A ................................................................................................................. 338 G.L. c. 176D ................................................................................................................ 347 G.L. c. 209A. Abuse Prevention ................................................................................. 502 Rules Federal Rules Of Civil Procedure (with Forms) ........................................................... 694 FRCP 4 Service of Process ........................................................................................ 213 FRCP 5 Serving and Filing Pleadings and Other Papers ........................................... 548 FRCP 6 Time ............................................................................................................. 550 FRCP 11 Signing of Pleadings .................................................................................... 256 FRCP 12 Motion to Dismiss ........................................................................................ 311 FRCP 13 Counterclaims.............................................................................................. 652 FRCP 23 Class Actions ............................................................................................... 410 FRCP 26 General Provisions Governing Discovery; Duty of Disclosure ..................... 494 FRCP 27 Depositions Before Action or Pending Appeal ............................................. 500 FRCP 51 Instructions to the Jury................................................................................. 593 FRCP 52 Findings by the Court Judgment on Partial Findings .................................... 279 FRCP 56 Summary Judgment .................................................................................... 337 FRCP 57 Declaratory Judgment.................................................................................. 624 FRCP 58 Entry of Judgment ....................................................................................... 280 FRCP 65 Injunctions ..................................................................................................... 17 FRCP 66 Receivers Appointed by Federal Courts....................................................... 692 FRCP 68 Offer of Judgment ........................................................................................ 692 FRCP 69 Execution ..................................................................................................... 692 Articles A Woman’s Worth: Gender Bias in Damage Awards .................................................. 578 Breaking Up Is Hard To Do ......................................................................................... 534 Clinching the Case Before Trial: Seven steps to effective mediation ............................. 10 Disclosure For Franchisors ......................................................................................... 179 Explaining Pain ........................................................................................................... 593 Federal Judge With a Radical Past Goes Mainstream ................................................ 371 First Principles............................................................................................................. 229 Frivolity Punished Here ............................................................................................... 228 In Gestational Surrogacies, All Parties Bear Risk ........................................................ 477 Just How Level A Playing Field ..................................................................................... 46 Lawyers And Their Games .......................................................................................... 235 Proving Partial Loss of Earning Capacity .................................................................... 585 Quandary on Donor Eggs: What to Tell the Children .................................................. 483 Remedies in Domain Name Lawsuits: ......................................................................... 114 xi Sailing Into Cyberspace .............................................................................................. 250 Seeking Recovery For Loss of Enjoyment of Life ........................................................ 593 Surrogate Mom Surrenders Girl to Parents ................................................................. 487 Ten Mistakes Adjusters See Attorneys Make .............................................................. 590 The Humanity Of Lawyers ........................................................................................... 690 The Lawyer Turns Peacemaker ...................................................................................... 2 The Push For Parent Education .................................................................................. 542 The Sperminator ......................................................................................................... 488 The Trials of a Franchisee .......................................................................................... 177 Using the Computer to Level the Playing Field ............................................................ 249 Web Resources www.dufi.duq.edu ........................................................................................................ 548 www.patents.com/pubs/jmls.htm ................................................................................. 114 www.startupjournal.com/franchise/ .............................................................................. 213 xii Section One: Remedies & Alternatives to Court 1 Articles The Lawyer Turns Peacemaker ABA Journal August, 1996 With mediation emerging as the most popular form of alternative dispute resolution, the quest for common ground could force attorneys to reinterpret everything they do in the future Richard C. Reuben Richard C. Reuben, a lawyer, is a reporter with the ABA Journal. Copyright © 1996 by the American Bar Association; Richard C. Reuben The soft-spoken scholar stood before the brightest lights of the nation's legal community 20 years ago, offering a radically different vision of the American justice system. "One might envision by the year 2000 not simply a courthouse but a dispute resolution center, where the grievant would first be channeled through a screening clerk who would then direct him to the process, or sequence of processes, most appropriate to his type of case," Professor Frank E.A. Sander of Harvard Law School told the Pound Conference, which was called to address public dissatisfaction with the justice system and chaired by Chief Justice Warren Burger Twenty years later, Sander's vision for a multidoor courthouse, for the most part, remains unrealized. But the modern alternative dispute resolution, or ADR, movement, as it has come to be known, is well under way, shaping the contours of justice in the 21st century. No doubt millions of people and businesses have benefited from simpler, less stressful modes of dispute resolution. Moreover, ADR is primed for much greater growth, as witnessed by the breathtaking expansion of court-related programs, the rush of lawyers and nonlawyers alike to mediation training seminars, and the pledge of thousands of businesses and large law firms to consider ADR options. But the child born of necessity is still, at best, teetering between adolescence and adulthood. For all of its potential to reshape the ways problems are solved, it still shows a dark side--coercion, conflicts, competency issues and commercialism--that leaves even many supporters privately concerned about the future course it will take. Such questions have led critics to condemn ADR as just another assault on juries and the civil justice system. They charge that its secret, kangaroo courts deliver a skewed brand of justice that fails to provide adequate remedies for weaker parties such as women and minorities, and that it favors parties who generate repeat business and gives the powerful a way around the law. The legal profession has long had a strained relationship with ADR, and a new ABA Journal poll confirms a continuing unease with ADR amid broad support for such efforts. The poll, a random sampling of ABA members, shows an almost even split on the 2 desirability of mandatory ADR programs, the need for additional procedural safeguards, and the ability of lawyers to manipulate the ADR system. But it also confirms a preference for mediation over litigation and arbitration as the dispute resolution method of choice, which is consistent with other signs mediation is gaining ground. Still, only half of those polled prefer mediation to litigation. Remarkably, more than half of all respondents say they have not even been involved in any ADR hearing during the past five years. "I'm not surprised," says Marc Galanter, a law professor at the University of Wisconsin Law School and an authority on the court system, noting that the reality of ADR has never matched the hopes of its boosters. Nor has any other independent study been able to verify the claims of those advocates that it is usually faster, cheaper and more satisfying for the parties than traditional litigation, or that ADR has materially shrunk state or federal court dockets. "It certainly is proving no panacea for problems with the justice system," Galanter adds. "I would say its effects have been marginal, compared to good court management." ADR's real impact, Galanter continues, has been to expand perceptions of options available for dispute resolution--a phenomenon he calls "process pluralism"-and to bring resolution techniques to disputes much earlier in the process, before conflict escalates into legal warfare. For lawyers, though, the growth of process pluralism figures to change the nature of their role and possibly even the importance of it, in the event that dispute resolution develops as an adjunct to the legal system rather than an integral part. Arrival of Mediation A fundamental difference between mediation and binding methods of dispute resolution is that in mediation, the parties decide themselves how to resolve their dispute by talking out their differences, with the mediator helping them get past their "positions" so that their real interests can be addressed. Legal rules are relevant but not dispositive--just one of many factors to consider along with feelings and the importance of a continuing relationship between the parties. Where there is little room for a simple, sincere apology in litigation--other than as an admission to be used to tactical advantage--such empathy can be the turning point of a mediation. In this way, the promise of mediation is to transform conflict into resolution at its very core, rather than merely providing an answer to the superficial dispute. "Mediation is the sleeping giant of ADR because it is a totally different process than trial and arbitration adjudication," notes Harvard's Sander. For example, where Harvard Law School's fictional Professor Kingfield personified the terror of legal education, one of the nation's leading mediation trainings meets at a Zen Buddhist monastery in Northern California, where participants on a diet of beans, breads and nuts are encouraged to rise early and meditate with the monks before their training. Yet despite its novelty, the ABA Journal poll found a preference among ABA members 3 for mediation over arbitration or traditional litigation, with law firms expanding their mediation practices more than arbitration. Another marker of the mediation preference is that the federal courts have not adopted a single arbitration program since 1991, while mediation programs continue to expand, in a pattern also seen in the state courts. Even in the securities industry, dominated by mandatory and binding arbitration in recent years, a blue ribbon task force of the National Association of Securities Dealers recently recommended that mediation options be significantly expanded. Judith Filner, a senior lawyer with National Institute for Dispute Resolution--which funded many of the programs implemented in the 1980s, and is now directing much of its energies into teaching youth how to resolve conflicts peacefully--says mediation's attraction stems from the public's "phenomenal dissatisfaction" with the court system, regularly reinforced by such debacles as the trials of the Menendez brothers and O.J. Simpson. "The feeling is that there is no justice in the courts and that people can solve their problems better themselves," Filner says. "They are looking for something different, and mediation provides that." Still, it is a lot for a time-honored, rule-bound profession like law to take, historically preferring to leave the "touchy-feely stuff" to the social workers and therapists. But research by the Stanford (University) Center on Conflict and Negotiation, the Harvard Negotiation Project, and others in the years since the Pound Conference continues to confirm that these concerns really do affect clients and their decisions. The more sophisticated mediation techniques become, and the more attorneys and their clients learn about mediation, the more that people with problems are being drawn to mediation and its transformative power. Nancy Rogers, a mediation scholar at the Ohio State University College of Law in Columbus, credits the mandatory mediation programs in many courts for getting the ball rolling. "The strongest indicator of whether lawyers are likely to recommend mediation for a client seems to be whether they have had a case involving a mediation before," Rogers says, citing a recent study of Ohio lawyers. "If they had been involved in a mediation, they were much more willing to recommend its use again." Mediation, though, raises questions not found in law. Does "the law" even have a place in a mediation, or will it just co-opt the mediation process? How should an attorney advise a client in mediation? Does mediation constitute the practice of law for purposes of malpractice and other professional standards? "Experienced lawyers trying their hand at mediation often find the difference in orientation awkward and frustrating," says Gary Friedman, a mediator and trainer in Mill Valley, Calif. "Attorneys accustomed to seizing power in law practice must learn to give it away to the parties in a mediation," he says. "That's counterintuitive for lots of lawyers whose habits are such that they feel the essence of being a good lawyer is controlling their client." 4 Despite these concerns, the leading commercial providers of ADR services, which just five years ago were touting the virtues of arbitration, see the handwriting on the wall and are gearing their services primarily toward mediation for now. Even American Arbitration Association President William K. Slate finds himself insisting, "Triple A's emphasis is not on arbitration but on providing whatever kind of dispute resolution services the customer wants." It may be telling that his organization has even considered changing its name. Waning of Arbitration The very reasons for mediation's rise also shed some light on why arbitration--so faddish a decade ago--has lost its sizzle, and, apart from the securities and employment contexts, may well be contracting: It's a lot like litigation. In arbitration, the parties present their cases to a neutral of their choosing. For larger cases, it is common to have a panel of three arbitrators. The hearings are informal and are not governed by traditional rules of evidence or civil procedure; arbitrators do not even have to consider the law when making their decisions. Court-related programs tend not to be binding because of the state and federal constitutional rights to a jury trial. But contractual arbitration generally does not allow for appeals, apart from arbitrator bias or misconduct. "Arbitration tends to be the same as litigation, only less," says James J. Alfini, dean of the Northern Illinois University College of Law in DeKalb. It is most appropriate, he adds, when the parties need particular expertise in deciding a dispute, when time or confidentiality is of the essence, or when the dispute is so small that a trial just doesn't make economic sense. James F. Henry, president of the New York-based Center for Public Resources' Institute for Dispute Resolution, an ADR think tank for corporate lawyers, large law firms and academics, agrees. He says many companies that adopted arbitration policies for a broad range of issues in the past decade are backing away from them one way or another. "If you were to ask our membership what they thought of arbitration, perhaps more than 50 percent would want nothing to do with it because they perceive it--rightfully or wrongfully--as too expensive, slow and having a lot of the shortcomings and baggage of litigation without the benefit of appeal," Henry says. One problem is that there is a lot of statutory and common law on arbitration. That gives lawyers room to manipulate the system, and courts have upheld the use of such old litigation favorites as demurrers, motions in limine and summary judgment in arbitration. As a result, whether arbitration is faster and cheaper than litigation really hinges on the parties and their interests in being in arbitration--and hard- nosed lawyering can escalate arbitration costs and length to rival those of litigation. Just ask Tom Dunlap, vice president and general counsel of the California- based Intel 5 Corp., a manufacturer of computer chips. His company had a dispute with Advanced Micro Devices Inc. over microprocessor technology surrounding the 386 computer chip that a predispute arbitration clause routed into arbitration. The proceeding lasted seven years, cost about $100 million, and included several rounds of collateral litigation--for what Dunlap describes as a basic contract dispute. Advanced Micro Devices Inc., v. Intel Corp., 9 Cal.4th 362 (1994). A lot of the time and expense came about because prehearing discovery is generally not available in arbitration, Dunlap says. That led to a lengthy and expensive examination of witnesses. "Much of the arbitration ended up being discovery by teams of lawyers in front of an arbitrator we were paying for," he notes. As can often be the case, the scope of the arbitrator's power was another issue, Dunlap says. While he says the arbitration clause conferred limited authority to decide the dispute, the arbitrator construed his powers under the clause to the broadest extent, even going so far as to award benefits to Advanced Micro Devices that Dunlap contends could not have been awarded under the contract. The California Supreme Court said the scope of the arbitrator's power was up to the arbitrator, and, deferring to that, upheld the arbitration award. That ruling led the parties--in an ironic twist--to settle in 1994, in a mediation. Today Dunlap says the arbitration was "a very slow, expensive and unsatisfying process," and says Intel is one of those companies that no longer use predispute arbitration clauses, preferring informal negotiation and mediation instead. The Intel case is hardly an isolated example of how lawyers' tactics and other dimensions can distort the arbitration process--a concern acknowledged by more than a third of the ABA Journal poll respondents. The California Supreme Court is considering allegations that a health maintenance organization dragged out the arbitrator selection process in a medical malpractice case until the complainant died. Engalla v. The Permanente Medical Group, SO4881. A study of arbitrations involving the Kaiser Permanente Health Care Program introduced into evidence in that case found that they typically take nearly 29 months, from complaint to award, as compared to 15-19 months in the relevant trial court. Mediation's Awkward Age The controversies surrounding mediation tend to be more subtle than those in arbitration because it is a less formal process. For instance, the purpose of arbitration is clear but less so than that of mediation. Some experts believe mediation should facilitate the parties' own resolution of the problem by digging deep into the interests and feelings underlying the surface dispute. Mediators who take this more therapeutic approach would in a divorce mediation, for example, try to work through the parties' feelings of anger or resentment or rejection that led to the breakdown of the marriage. Then they can let that cleansing process pave the way for mutually acceptable terms of property settlement and child custody-and maybe even reconciliation. 6 Other mediators, however, say this approach is best left to therapists. They say the proper purpose of mediation is just to bring the parties into an amicable accord--much like the settlement conferences that continue to shape lawyers' and judges' understanding of mediation. Still others contend that mediators should provide subject matter expertise, acting essentially as sounding boards to help the parties evaluate the merits of the dispute or the proposed settlement. "There is a lot of diversity of approach in the field, and one of the things we're beginning to see is that there is not a single model that works in all situations," says James Boskey, law professor at Seton Hall School of Law in New Jersey. "What works in a divorce mediation may not work in a community or a business mediation." The diversity of mediators' backgrounds makes even self-regulation enormously difficult, and some say impossible, even though such efforts are often critical to the institutionalization of any profession. The ABA's Section on Dispute Resolution, the Society of Professionals in Dispute Resolution, and the AAA ran into this problem last year in the most significant attempt to date at ethical standards of conduct for mediators. In a bold, though controversial, move, the drafters concluded that mediators should only try to facilitate the parties' own resolution, and went so far as to admonish professionals who serve as mediators--including lawyers--to "refrain from providing professional advice." "Mediation by definition is facilitative, and while there may be other approaches that bring about dispute resolution, they aren't mediation," says Kimberlee K. Kovach, formerly a professor at the South Texas College of Law and a reporter for the effort who is chair-elect of the Dispute Resolution Section. Qualifications and regulatory oversight present similar problems. What kind of training should good mediators have, and how should they be regulated, if at all? Hanging Out a Shingle In most states, there are stiffer requirements to become a hair stylist than there are to become a mediator. Only a small handful--Florida, New Jersey and Hawaii--have adopted qualifications requirements. Many merely require completion of 40 hours of training, while in others, a law license is enough. Florida is the only state to go the further step of implementing a disciplinary process for mediators. While many mediators contend that standards and regulation are inappropriate, many other experienced mediators say they already see an element of hucksterism. They also warn that bad training can lead to poor results for clients and a black eye for the nascent profession. "There are people out there trying to make money any way possible, taking the training and hanging out their shingle as mediators without having a clue of what they are 7 doing," laments Marvin E. Johnson, an attorney-mediator in Silver Spring, Md. For example, experts agree that domestic cases involving a history of violence require special attention because of the possibility of physical reprisals, and yet this dynamic is often left out of trainings. State legislatures need to bite the bullet and establish qualification, licensing and disciplinary standards for mediators just as they do for other professions, Johnson adds. But that may be easier said than done, says Mary Kay LeFevour, executive director of the Society of Professionals in Dispute Resolution, which has produced two studies in recent years analyzing ADR standards. "There are many paths to competence, such as life skills and on-the-job experience, as well as professional training." But, she stresses, "Just because [people have] a professional degree doesn't mean that they're going to be good mediators." It remains to be seen, however, whether the services of lawyers will be necessary at all, particularly in areas of mediation that require a specialized background. "We don't know now whether, and to what extent, the legal profession will be the predominant vehicle for ADR services," notes the CPR's Henry. He says that role could be assumed by leading commercial providers of ADR like Judicial Arbitration and Mediation Service/Endispute (JAMS) and Triple A, as well as nonlawyers not bound by legal professional ethics or standards. "It's a competitive market, and while we're getting a lot of inquiries from lawyers, we're also getting a lot from psychologists, social workers, human resource personnel and other professionals," says LeFevour. Jack Unroe, president of JAMS, compares the situation to the recent history of the medical profession. "There was a day when physicians controlled the whole formula for how health care was provided, but they failed to respond to a changing environment and let it get away from them," Unroe says. "Big law firms have the same risk with ADR." Many firms already are taking steps in that direction, not only by considering ADR options but by establishing ADR divisions within their firms. Some are also beginning to offer their services as arbitrators and mediators. Still, the integration of ADR and the law promises to be difficult. As the Journal poll shows, the bar continues to be uneasy about ADR. It would be easy to shrug off such ambivalence, and occasional hostility, as mere protectionism for attorney fees--an argument overwhelmingly rejected in the poll. However, lawyers know that legal rules also balance the playing field between parties and provide for an ordered process; arbitration and mediation do neither. Drumming Up Business A related complaint is that the arbitrator's unbridled discretion is affected by many hidden experiences and predispositions, such as cultural and professional biases. For example, 89 percent of all arbitrators who hear securities-related complaints--ranging from fraud allegations to sexual harassment--are white males with an average age of 8 60, according to a 1994 General Accounting Office study. Many of them spent their professional careers in the brokerage industry. An even more subtle version of the problem stems from the need for private arbitrators to generate business, which some claim can skew their decisionmaking. "My experience is that arbitrators usually just want to 'split the baby' in order to make both parties happy--or at least to try to avoid alienating either party to remain on 'the list' for future business," says Tom Vance, risk manager for the city of Anaheim, Calif. To date, the repeat-player problem has largely been a matter of anecdotes and perceptions. But in a study that could be a potential breakthrough, University of Indiana researcher Lisa Bingham claims to have begun statistically documenting the phenomenon. Bingham studied 270 AAA nonunion employment law cases, finding repeat players far more common among employers and that employer-repeat players had a much higher victory rate. In figures separately computed for the ABA Journal, she looked at the 232 claims brought by employees and found that the odds are 5-to-1 against the employee in a repeat-player case, while the odds are 2.4-to- 1 in favor of the employee in nonrepeat-player cases. Bingham says she believes the problem "stems from an imbalance of information in selecting the arbitrator." Repeat players have the resources and incentive to track the predispositions of arbitrators on certain types of facts, which can prove invaluable when selecting a neutral. Nonrepeat players without such information and resources, typically blue- and pinkcollar workers, "have no facts on which to veto an arbitrator, even a well-respected one," she adds. The only way to get around such problems is to increase upfront disclosure, she maintains, because the hearings are private and arbitration awards are not published. Looking Past 2000 While some growth of ADR seems assured, the acceptance that is the key to its expansion is less so. Arbitration, mediation and settlement enhancement techniques are frequently forced upon litigators and their clients by courts and legislatures. This has the positive effect of introducing ADR on a broader scale but can also breed resentment and other unintended consequences. "Five years ago, you could just call up the other lawyer and talk things out," complains Kirk Watson, a personal injury lawyer with Whitehurst, Harkness, Watson, London, Ozmun & Galow in Austin, Texas. "Now, you generally have to go to mediation for at least a day," he says, adding it is often unfair to his clients because insurers won't negotiate before a mediation, and then often come to the mediation unfamiliar with the case. 9 Moreover, coercive mediation programs also thrust parties into the same kinds of commercial pressures that create repeat-player problems in arbitration. Less scrupulous mediators who are paid by the hour have an economic incentive to keep the parties in the room longer, and to use whatever tactics it takes to get the parties to settle so that they can continue to advertise high settlement rates. One answer to the economic incentive problem--at least for court-related programs--is for ADR services to be provided free to the parties, paid for by the government as part of the bill for public justice. "Mediation ought to be on par with adjudication," says Harvard's Sander. "There is no reason why someone should be able to get a judge for free, but have to pay for a mediator, arbitrator or other ADR service when they are compelled to go into ADR." Many court-related ADR programs use volunteer arbitrators or mediators. But Michael Broderick, director of Hawaii's extensive and innovative ADR program, stresses, "You can only go to the pro bono well so many times." As these debates show, the very systems devised to solve disputes more efficiently have bred disputes of their own. Such are the challenges for ADR, and public justice itself, at the onset of the next millennium. Clinching the Case Before Trial: Seven steps to effective mediation Diana Santa Maria and Marc A. Gregg TRIAL Journal of The Association of Trial Lawyers of America Settling a case before trial often involves mediation. In its most basic form, mediation is a process in which a neutral third party called a mediator acts to encourage and facilitate the resolution of a dispute between two or more parties. It is a nonadversarial process designed to help the disputing parties reach a mutually acceptable agreement. In mediation, decision-making authority rests with the parties. The role of the mediator is to assist them in identifying issues, fostering joint problem solving, and exploring settlement options. Since each party wants to mold any settlement to its own benefit, the actual process can combine elements of show-and-tell and poker. Whether mediation before trial is court-ordered or voluntary, lawyers have a duty to their clients to maximize the potential for settling fairly and equitably. Of course, not all cases can be settled. Where it is clear there is absolutely no chance of settlement, you should ask the court to be excused from mediation to avoid wasted effort and any unnecessary expense. 10 However, even when a case does not resolve in mediation, the experience may prove invaluable because the information that is gleaned during negotiations may compel the parties to take a new approach to the case. Mediation affords an attorney the unique opportunity to evaluate an opponent's style and the issues an opponent will be emphasizing at trial. It will also allow the attorney to assess how well an opponent responds to the weaknesses in a case. This is often the same kind of information lawyers seek through depositions and carefully planned discovery requests. The following tips can help produce a successful mediation. 1. Choose a mediator carefully. Opinions differ on the importance of choosing a mediator. Some attorneys believe that the choice has little or no bearing on the outcome, so they give little thought to this part of the process. However, we believe that choosing an appropriate mediator is as important and deserves as much of a lawyer's attention as selecting jurors for trial. Unlike at trial, the parties at mediation settle the case among themselves rather than submitting to the decision of a judge or jury. However, whether in trial or mediation, lawyers are obligated to provide clients with the same level of care, be it in selecting jurors or in selecting a mediator. Lawyers who have a working knowledge of the mediators in the local circuit and who carefully consider mediators' personality styles, backgrounds, and suitability for a given case are paving the way for a successful mediation. A mediation is essentially a negotiation between the parties and is governed by the same principles that apply to any negotiation.1 The process varies depending on the personalities, goals, and strategies of the participants--including the mediator. To a great extent the personality styles of the participants determine the outcome. Since the mediator's job is to facilitate a resolution that the parties and their counsel working alone cannot accomplish, the mediator's style can be a great aid--or a great impediment--to the negotiation. Understanding personality characteristics and negotiating styles will give you an advantage at mediation. Negotiating styles may be identified and grouped according to four basic personality types: directors, influencers, steady types, and compliant types.2 Directors, as their name suggests, want immediate results. They accept challenges, and they make things happen. Directors seek power and authority, prestige and challenge. They need others to weigh the pros and cons of an action and calculate risks. If you know that certain parties or their counsel are directors, selecting a directing mediator is likely to bring the mediation to a quick, but perhaps premature, conclusion. Any settlement would tend to be accomplished quickly, but your client could get shortchanged in the process. Influencers are articulate "people person" types who make favorable impressions on others. They want to be popular, and social recognition is important to them, as is freedom of expression. Influencers need others to seek out the facts and focus on the 11 task at hand. An influencing-type mediator may be able to keep a mediation socially lubricated, so that directing parties do not reach an impasse or walk out too soon. The chances for a settlement between two directing parties would tend to be increased with a wellrespected, influencing-type mediator. Steady types are patient people who focus on getting the job done. They want security and prefer the status quo unless valid reasons indicate change is necessary. Steady types need others who can react quickly to unexpected change and extend themselves in new ways to meet the challenges of an accepted task. A steady-type mediator could be particularly effective when the parties are influencers, providing a patient focus on the facts and the job at hand. Any settlement would be more likely to account for all the facts and needs of the parties. Details that otherwise might be overlooked by influencing or directing types will more likely be covered. Compliant types tend to concentrate on key details. They focus on key directives and standards. They want a sheltered environment with standard operating procedures and security. Compliant types need others to delegate important tasks and expand their own authority. A compliant type may be most useful in a mediation between director and influencer parties, accepting delegation of various tasks and providing no challenge to the parties' desire for control and expression. In this situation, a settlement would likely take into consideration the concerns and fully articulated positions of the parties. The complianttype mediator, under the circumstances, would act more as a messenger between the parties. The implications of this kind of analysis for the mediation process are readily apparent. The point is that the process and outcome of any mediation will depend, in large part, on who the participants are. So, it is important to select a mediator appropriate to the psychodynamics of a particular case, given the parties, issues, and counsel involved. 2. Prepare for mediation, and know the client's bottom line. Prepare and plan the mediation as if you were preparing for trial. Show confidence, commitment, and professionalism at every stage of the process. Remember, the opposing party is evaluating all aspects of the mediation. Be prepared and prepare your client, because the possibility always exists that the mediation will reach an impasse. Be sure the client is prepared to discontinue the process if it appears futile. Know the client's bottom line. Confirm it beforehand, and be clear about this. If you are ambivalent on this point, your ambivalence will be construed as less than a full commitment to the client's position. Be prepared to end the mediation if it becomes clear that the client's bottom line will not be reached. An exception to this rule occurs when new information emerges that materially affects the client's position. You then need to be prepared to work with the client to agree on a 12 new bottom line so that the mediation can continue. Clients who are well informed about the process are more relaxed and make a better impression. Ensure that the client knows the purpose of mediation, the gamesmanship involved, and the likely goals and strategies of the other party. Clients need to know that they are an integral part of an effective presentation and that they should display an appropriate attitude during the mediation despite any negative feelings they have toward the other party. Clients should come to your office appropriately attired and ready to finalize strategies at least two to three hours before the mediation begins. Communicate clearly to the client what the odds of a successful outcome are if the case goes to trial. The client is relying on your guidance to make informed decisions. Analyze all offers from the other side with realistic expectations. Make counteroffers that consider the client's bottom line, the appropriateness of the last offer discussed, as well as the history of the mediation's give and take. However, do not consider how long the mediation has already taken. Mediation can reach a good result at any time, be it 1 hour or 23 hours into the process. Always try to approach each point in the negotiation with fresh energy to avoid mental traps that could adversely affect the client. 3. Negotiate at a time and place that is advantageous. Avoid negotiations that take place too early or too late in the day or in too close proximity to another unrelated, important event, such as an important hearing on the same day. You need to be able to adjust your schedule to stay longer than planned for your client if the mediation is flowing and purposeful. Ensure that all the key participants are as focused and alert as possible. At minimum, the mediation should take place on neutral, comfortable ground that is convenient to counsel, client, and mediator. You and your client should arrive early to familiarize yourselves with the environment and the surrounding facilities. Avoid bringing along the entire case file, but do have all supporting documents, such as accident reports, medical records, applicable case law, and economic loss analysis. If necessary, also bring appropriate support staff to assist with document retrieval. When possible, use this time to set up visual aids that will keep the mediation visually lively. Make sure all electronic equipment is operational and correctly positioned. In personal injury cases, use blow up exhibits of the client's injuries and other key pieces of evidence. Mount on poster board and visually enhance important documents and critical medical records, just as you would for trial. A little extra expense and attention to these details could make a tremendous difference in the way your case is evaluated by your opponent. 4. Share information strategically. By the time a case reaches mediation, quite a bit of information has already been disclosed by each side, particularly if the case has been litigated for a while. Before putting the matter into suit, you may have presented the other party with a demand package that disclosed your theory of liability and outlined your client's damages. At the 13 mediation, you should build the initial presentation on this previously disclosed information, emphasizing the elements that support a favorable settlement. It is possible that the other party and the other party's counsel have taken a relatively routine approach to the case until the mediation. Use mediation to hammer home your case, exposing the reasons why the plaintiff will win big at trial. Address your case's potential weaknesses, but also explain why the strengths of your position outweigh any weaknesses and why you will obtain a favorable verdict at trial. Let the other side see how the case will play to a jury. In some cases, it may be advantageous to show a short video highlighting the strengths of the case. The video should include excerpts of depositions of key experts and beforeand-after witnesses, scenes of the client before and after the injury, newspaper articles noting the client's achievements, and accolades awarded to the client before the injury. These can take any form desired, as there are no evidentiary rules at mediation. Remember, there are no guarantees that the case will be settled. Even though each party should arrive at mediation prepared to resolve the case in good faith, part of the other side's motivation may be to prepare for trial--not to actually resolve the case. Do not disclose any more elements of your position than you have to in order to achieve a satisfactory settlement that is fair to all the parties. On a related note, reserve some information to use later in the mediation. A successful mediation may take hours to resolve. If you allow your opponent to understand your position too early, he or she will make an offer based on that understanding. Withholding some information allows you to reveal your position in stages, and a more satisfactory settlement for all parties is likely to result, based on a better understanding of your client's position. 5. Prepare the mediator. Several weeks before the mediation, prepare a written overview of the case--for the mediator's eyes only--that gives a quick, accurate reference to all pertinent information, and hand-deliver it to the mediator immediately before the mediation. Stamp it confidential, because this is your work product, which reflects your mental impressions of the case. For example, in a personal injury case, include the client's name, date of the collision, current age and age at the time of the collision, and employment information and earnings on the date of injury. Also provide the facts of the case, counsel's theory of liability and the other side's defenses, as well as why those defenses fail or don't materially affect a favorable outcome for your client. In addition, give a detailed description of the client's current damages, including all injuries, the impact on the client's life, the assessments of all treating physicians and other experts, related medical bills, and out-of-pocket and earnings losses. Include a detailed description of the client's future prospects. Provide specific information about the client's future economic losses, including medical needs and earnings capacity losses prepared by an economist or vocational rehabilitation consultant. Also give a summary of the insurance limits or resources available from the 14 other party and any coverage issues that may apply. A good mediator should be impartial, which implies a commitment to aid all parties, not any individual party, in moving toward an agreement.3 This commitment is mandatory in Florida, which has adopted mediator qualification requirements and to our knowledge is the only state to implement a disciplinary process for mediators.4 Nothing in this obligation, however, precludes the mediator from making a professional determination that the case should be resolved on one party's terms. In fact, any agreement based on the mediator's impartial view of the merits of each side's case will be entirely appropriate from the perspective of the mediator's statutory or ethical obligations, as long as the mediator remains impartial.5 If you are comfortable with and respect the mediator, let him or her be your sounding board. When meeting privately with the mediator, be candid when discussing any offers the other side may have made. If uncertain, ask the mediator for strategic input as to what the next move in the process should be. Mediation statutes generally provide that, with certain very limited exceptions, nothing that is said to a mediator during private caucus may be disclosed to the other party or anyone else without the disclosing party's consent, and the confidentiality of all mediation proceedings, including any disclosure of records or materials, must be maintained.6 This confidentiality requirement encourages open and honest negotiation by the parties. A good mediator will recognize the strengths and the weaknesses of the plaintiff's case-and the defendant's--and steer both disputing parties toward a fair and equitable result. 6. Use the mediator as a messenger. Certain information cannot be conveyed to the other side without evoking adverse--or even hostile--reactions. For example, a non-negotiable aspect of your position can rarely be brought directly to the other party without causing that party to raise an equally nonnegotiable position. This can be unfortunate, because these delicate facts may be the key to a successful negotiation. By expressing this information to the mediator in private and encouraging the mediator to communicate it to the other side, potentially explosive reactions may then be defused. The mediator's job is to move the parties off their initial positions toward settlement. Provide the documents, facts, or theories that go to the heart of the other party's weaknesses to gain additional leverage for your client. Doing so helps bring the other side closer to a fair settlement. Although being candid with a good mediator is important, let the mediator discover all the case facts over time. A mediator who understands the plaintiff's bottom line too soon will spend less time exploring available options and may miss an opportunity to effect a more equitable settlement. A mediator who arrives at a gradual understanding of the plaintiff's position will be more likely to engage in new methods of problem solving to settle an old and frustrating problem. Remember, mediation is a journey for all the participants, and shortcuts may shortchange the process, possibly to the client's detriment. 15 For example, there is often a chance--however slight--that you could be underestimating the value of your case. In fact, the opponent may be willing to pay more than your client's bottom line. By allowing the mediation process to run its course, both sides may facilitate a creative solution in which the parties reach an unexpected--but mutually agreeable--settlement. 7. Seal the deal in writing. A clearly written agreement is the goal of mediation. Ensure that this document carefully describes the intent and agreement between the parties and is signed by all parties and their counsel. The time frame for all payments should be clear, as should any unacceptable release terms. This way, elements of the settlement not explicitly addressed in the written agreement will be unenforceable. The agreement should be written by one person, with input from each of the parties. This reduces the opportunity for error that can result when too many hands create a document. The agreement can be comprehensive or merely memorialize the basic elements of the settlement, depending on how the parties wish to construct the binding aspects of the agreement. At a minimum, the agreement should ensure that all the key elements of the settlement, including the respective obligations of the parties, are sufficiently detailed so as not to be subject to interpretation later. Ambiguity can kill the deal. Given the evolving trend toward mediation as a viable and sometimes mandatory exercise in dispute resolution, the future promises to test the traditional role of trial lawyers in ways that will challenge their imaginations and creativity. Trial lawyers need to be alert to maximizing the potential benefits that mediation may bring to their cases. Notes 1. A number of books have been written on mediation from many perspectives. A varied sampling would include ROGER FISHER & WILLIAM URY, GETTING TO YES (1991); JOHN PATRICK DOLAN, NEGOTIATE LIKE THE PROS (LawTalk 1991); ALVIN L. GOLDMAN, SETTLING FOR MORE (1991); HERB COHEN, YOU CAN NEGOTIATE ANYTHING (1982). 2. DOLAN, supra note 1, at 12-13. 3. See generally Richard C. Reuben, The Lawyer Turns Peacemaker, A.B.A. J., Aug. 1996, at 55. 4. FLA. R. CERTIFIED CT.-APPOINTED MEDS. 10.070. This rule is mandatory in Florida. 5. Id. 6. Id. at 10.080. Diana Santa Maria is the managing partner of The Law Offices of Diana Santa Maria in Fort Lauderdale, Florida. Marc A. Gregg is an associate with the firm. Injunctions 16 FRCP 65. Injunctions (a) Preliminary Injunction. (1) Notice. No preliminary injunction shall be issued without notice to the adverse party. (2) Consolidation of Hearing With Trial on Merits. Before or after the commencement of the hearing of an application for a preliminary injunction, the court may order the trial of the action on the merits to be advanced and consolidated with the hearing of the application. Even when this consolidation is not ordered, any evidence received upon an application for a preliminary injunction which would be admissible upon the trial on the merits becomes part of the record on the trial and need not be repeated upon the trial. This subdivision (a)(2) shall be so construed and applied as to save to the parties any rights they may have to trial by jury. (b) Temporary Restraining Order; Notice; Hearing; Duration. A temporary restraining order may be granted without written or oral notice to the adverse party or that party's attorney only if (1) it clearly appears from specific facts shown by affidavit or by the verified complaint that immediate and irreparable injury, loss, or damage will result to the applicant before the adverse party or that party's attorney can be heard in opposition, and (2) the applicant's attorney certifies to the court in writing the efforts, if any, which have been made to give the notice and the reasons supporting the claim that notice should not be required. Every temporary restraining order granted without notice shall be indorsed with the date and hour of issuance; shall be filed forthwith in the clerk's office and entered of record; shall define the injury and state why it is irreparable and why the order was granted without notice; and shall expire by its terms within such time after entry, not to exceed 10 days, as the court fixes, unless within the time so fixed the order, for good cause shown, is extended for a like period or unless the party against whom the order is directed consents that it may be extended for a longer period. The reasons for the extension shall be entered of record. In case a temporary restraining order is granted without notice, the motion for a preliminary injunction shall be set down for hearing at the earliest possible time and takes precedence of all matters except older matters of the same character; and when the motion comes on for hearing the party who obtained the temporary restraining order shall proceed with the application for a preliminary injunction and, if the party does not do so, the court shall dissolve the temporary restraining order. On 2 days' notice to the party who obtained the temporary restraining order without notice or on such shorter notice to that party as the court may prescribe, the adverse party may appear and move its dissolution or modification and in that event the court shall proceed to hear and determine such motion as expeditiously as the ends of justice require. (c) Security. No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained. No such security shall be required of the United States or of an officer or agency thereof. The provisions of Rule 65.1 apply to a surety upon a bond or undertaking under this rule. 17 (d) Form and Scope of Injunction or Restraining Order. Every order granting an injunction and every restraining order shall set forth the reasons for its issuance; shall be specific in terms; shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained; and is binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise. (e) Employer and Employee; Interpleader; Constitutional Cases. These rules do not modify any statute of the United States relating to temporary restraining orders and preliminary injunctions in actions affecting employer and employee; or the provisions of Title 28, U.S.C., § 2361, relating to preliminary injunctions in actions of interpleader or in the nature of interpleader; or Title 28, U.S.C., § 2284, relating to actions required by Act of Congress to be heard and determined by a district court of three judges. Cases Weinberger v. Romero Barcelo 456 U.S. 305 (1982) Caspar W. WEINBERGER, Secretary of Defense, et al., Petitioners, v. Carlos ROMERO-BARCELO et al. No. 80-1990. Supreme Court of the United States Argued Feb. 23, 1982. Decided April 27, 1982. Elinor H. Stillman, Washington, D. C., for petitioners. John A. Hodges, Washington, D. C., for respondents. WHITE, Justice. The issue in this case is whether the Federal Water Pollution Control Act (FWPCA or Act), 86 Stat. 816, as amended, 33 U.S.C. § 1251 et seq. (1976 ed. and Supp.IV), requires a district court to enjoin immediately all discharges of pollutants that do not comply with the Act's permit requirements or whether the district court retains discretion to order other relief to achieve compliance. The Court of Appeals for the First Circuit held that the Act withdrew the courts' equitable discretion. Romero-Barcelo v. Brown, 643 F.2d 835 (1981). We reverse. 18 Section I For many years, the Navy has used Vieques Island, a small island off the Puerto Rico coast, for weapons training. Currently all Atlantic Fleet vessels assigned to the Mediterranean Sea and the Indian Ocean are required to complete their training at Vieques because it permits a full range of exercises under conditions similar to combat. During air-to-ground training, however, pilots sometimes miss land-based targets, and ordnance falls into the sea. That is, accidental bombings of the navigable waters and, occasionally, intentional bombings of water targets occur. The District Court found that these discharges have not harmed the quality of the water. In 1978, respondents, who include the Governor of Puerto Rico and residents of the island, sued to enjoin the Navy's operations on the island. Their complaint alleged violations of numerous federal environmental statutes and various other Acts. [FN1] After an extensive hearing, the District Court found that under the explicit terms of the Act, the Navy had violated the Act by discharging ordnance into the waters surrounding the island without first obtaining a permit from the Environmental Protection Agency (EPA). [FN2] Romero-Barcelo v. Brown, 478 F.Supp. 646 (P.R.1979). FN1. The complaint charged the Navy with violations of the National Environmental Policy Act of 1969, 42 U.S.C. § 4321 et seq. (1976 ed. and Supp.IV); the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq. (1976 ed. and Supp.IV); the Clean Air Act Amendments of 1977, 42 U.S.C. § 7401 et seq. (1976 ed., Supp.IV); the Noise Control Act of 1972, 42 U.S.C. § 4901 et seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq.; the Endangered Species Act of 1973, 16 U.S.C. § 1531 et seq.; the National Historic Preservation Act of 1966, 16 U.S.C. § 470 et seq.; the Coastal Zone Management Act of 1972, 16 U.S.C. § 1451 et seq.; the Marine Mammal Protection Act of 1972, 16 U.S.C. § 1361 et seq. (1976 ed. and Supp.IV); the Rivers and Harbors Appropriation Act of 1899, 33 U.S.C. § 401 et seq.; various Amendments to the United States Constitution, congressional and Presidential directives concerning cessation of Navy operations on the neighboring island of Culebra, and Puerto Rico law. FN2. The District Court also found that the Navy had violated the National Environmental Policy Act (NEPA) by failing to file an Environmental Impact Statement (EIS) or a reviewable environmental record to support a decision not to file such a statement, Romero-Barcelo v. Brown, 478 F.Supp. 646, 705 (P.R.1979), and had failed to nominate historic sites to the National Register as required under the National Historic Preservation Act. Ibid. It ordered the Navy to nominate such sites and to file an EIS. Id., at 708. The Court of Appeals remanded issues under the Endangered Species Act and the National Historic Preservation Act to the District Court for further consideration. Romero-Barcelo v. Brown, 643 F.2d 835, 858, 860, 862 (1981). It vacated the order involving NEPA and remanded with orders to dismiss because the Navy had filed an EIS in the interim. Id., at 862. Only the issue involving the FWPCA is before this Court. Under the FWPCA, the "discharge of any pollutant" requires a National Pollutant Discharge Elimination System (NPDES) permit. 33 U.S.C. §§ 1311(a), 1323(a) (1976 19 ed. and Supp.IV). The term "discharge of any pollutant" is defined as "any addition of any pollutant to the waters of the contiguous zone or the ocean from any point source other than a vessel or other floating craft." 33 U.S.C. § 1362(12) (emphasis added). Pollutant, in turn, means "dredged spoil, solid waste, incinerator residue, sewage, garbage, sewage sludge, munitions, chemical wastes, biological materials, radioactive materials, heat, wrecked or discarded equipment, rock, sand, cellar dirt and industrial, municipal, and agricultural waste discharged into water...." 33 U.S.C. § 1362(6) (emphasis added). And, under the Act, a "point source" is"any discernible, confined and discrete conveyance, including but not limited to any pipe, ditch, channel, tunnel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feeding operation, or vessel or other floating craft from which pollutants are or may be discharged...." 33 U.S.C. § 1362(14) (1976 ed., Supp.IV) (emphasis added). Under the FWPCA, the EPA may not issue an NPDES permit without state certification that the permit conforms to state water quality standards. A State has the authority to deny certification of the permit application or attach conditions to the final permit. 33 U.S.C. § 1341. As the District Court construed the FWPCA, the release of ordnance from aircraft or from ships into navigable waters is a discharge of pollutants, even though the EPA, which administers the Act, had not promulgated any regulations setting effluent levels or providing for the issuance of an NPDES permit for this category of pollutants. [FN3] Recognizing that violations of the Act "must be cured," 478 F.Supp., at 707, the District Court ordered the Navy to apply for an NPDES permit. It refused, however, to enjoin Navy operations pending consideration of the permit application. It explained that the Navy's "technical violations" were not causing any "appreciable harm" to the environment. [FN4] Id., at 706. Moreover, because of the importance of the island as a training center, "the granting of the injunctive relief sought would cause grievous, and perhaps irreparable harm, not only to Defendant Navy, but to the general welfare of this Nation." [FN5] Id., at 707. The District Court concluded that an injunction was not necessary to ensure suitably prompt compliance by the Navy. To support this conclusion, it emphasized an equity court's traditionally broad discretion in deciding appropriate relief and quoted from the classic description of injunctive relief in Hecht Co. v. Bowles, 321 U.S. 321, 329-330, 64 S.Ct. 587, 591-592, 88 L.Ed. 754 (1944): "The historic injunctive process was designed to deter, not to punish." FN3. The EPA issues effluent limitations for categories and classes of point sources. See generally E. I. du Pont de Nemours & Co. v. Train, 430 U.S. 112, 97 S.Ct. 965, 51 L.Ed.2d 204 (1977); 40 CFR part 400 et seq. (1981). In a situation somewhat similar to that before us, the Secretary of the Interior has, under the Migratory Bird Treaty Act, 16 U.S.C. § 703 et seq. (1976 ed. and Supp.IV), regulated deposit of shot into water by duck hunters who miss their targets. National Rifle Assn. v. Kleppe, 425 F.Supp. 1101 (D.C.1976), affirmance order, 187 U.S.App.D.C. 240, 571 F.2d 674 (1978). FN4. The District Court wrote: "In fact, if anything, these waters are as aesthetically acceptable as any to be found anywhere, and Plaintiff's witnesses unanimously testified as to their being the best fishing grounds in Vieques." 478 F.Supp., at 667. "[I]f the truth be said, the control of large areas of Vieques [by the Navy] probably constitutes a positive 20 factor in its over all ecology. The very fact that there are in the Navy zones modest numbers of various marine species which are practically nonexistent in the civilian sector of Vieques or in the main island of Puerto Rico, is an eloquent example of res ipsa loquitur." Id., at 682 (footnote omitted). FN5. The District Court also took into consideration the delay by plaintiffs in asserting their claims. It concluded that although laches should not totally bar the claims, it did strongly militate against the granting of injunctive relief. Id., at 707. The Court of Appeals for the First Circuit vacated the District Court's order and remanded with instructions that the court order the Navy to cease the violation until it obtained a permit. 643 F.2d 835 (1981). Relying on TVA v. Hill, 437 U.S. 153, 98 S.Ct. 2279, 57 L.Ed.2d 117 (1978), in which this Court held that an imminent violation of the Endangered Species Act required injunctive relief, the Court of Appeals concluded that the District Court erred in undertaking a traditional balancing of the parties' competing interests. "Whether or not the Navy's activities in fact harm the coastal waters, it has an absolute statutory obligation to stop any discharges of pollutants until the permit procedure has been followed and the Administrator of the Environmental Protection Agency, upon review of the evidence, has granted a permit." 643 F.2d, at 861. The court suggested that if the order would interfere significantly with military preparedness, the Navy should request that the President grant it an exemption from the requirements in the interest of national security." [FN6] FN6. Title 33 U.S.C. § 1323(a) (1976 ed., Supp.IV) provides, in relevant part: "The President may exempt any effluent source of any department, agency, or instrumentality in the executive branch from compliance with any such a requirement if he determines it to be in the paramount interest of the United States to do so.... No such exemptions shall be granted due to lack of appropriation unless the President shall have specifically requested such appropriation as part of the budgetary process and the Congress shall have failed to make available such requested appropriation. Any exemption shall be for a period not in excess of one year, but additional exemptions may be granted for periods of not to exceed one year upon the President's making a new determination. The President shall report each January to the Congress all exemptions from the requirements of this section granted during the preceding calendar year, together with his reason for granting such exemption." Because this case posed an important question regarding the power of the federal courts to grant or withhold equitable relief for violations of the FWPCA, we granted certiorari, 454 U.S. 813, 102 S.Ct. 88, 70 L.Ed.2d 81 (1981). We now reverse. Section II [1][2] It goes without saying that an injunction is an equitable remedy. It "is not a remedy which issues as of course," Harrisonville v. W.S. Dickey Clay Mfg. Co., 289 U.S. 334, 337-338, 53 S.Ct. 602, 603, 77 L.Ed. 1208 (1933), or "to restrain an act the injurious consequences of which are merely trifling." Consolidated Canal Co. v. Mesa 21 Canal Co., 177 U.S. 296, 302, 20 S.Ct. 628, 630, 44 L.Ed. 777 (1900). An injunction should issue only where the intervention of a court of equity "is essential in order effectually to protect property rights against injuries otherwise irremediable." Cavanaugh v. Looney, 248 U.S. 453, 456, 39 S.Ct. 142, 143, 63 L.Ed. 354 (1919). The Court has repeatedly held that the basis for injunctive relief in the federal courts has always been irreparable injury and the inadequacy of legal remedies. Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 61, 95 S.Ct. 2069, 2077, 45 L.Ed.2d 12 (1975); Sampson v. Murray, 415 U.S. 61, 88, 94 S.Ct. 937, 951, 39 L.Ed.2d 166 (1974); Beacon Theaters, Inc. v. Westover, 359 U.S. 500, 506-507, 79 S.Ct. 948, 954-955, 3 L.Ed.2d 988 (1959); Hecht Co. v. Bowles, supra, at 329, 64 S.Ct., at 591. [3][4] Where plaintiff and defendant present competing claims of injury, the traditional function of equity has been to arrive at a "nice adjustment and reconciliation" between the competing claims, Hecht Co. v. Bowles, supra, at 329, 64 S.Ct., at 592. In such cases, the court "balances the conveniences of the parties and possible injuries to them according as they may be affected by the granting or withholding of the injunction." Yakus v. United States, 321 U.S. 414, 440, 64 S.Ct. 660, 675, 88 L.Ed. 834 (1944). "The essence of equity jurisdiction has been the power of the Chancellor to do equity and to mould each decree to the necessities of the particular case. Flexibility rather than rigidity has distinguished it." Hecht Co. v. Bowles, supra, 321 U.S., at 329, 64 S.Ct., at 592. [5][6] In exercising their sound discretion, courts of equity should pay particular regard for the public consequences in employing the extraordinary remedy of injunction. Railroad Comm'n. v. Pullman Co., 312 U.S. 496, 500, 61 S.Ct. 643, 645, 85 L.Ed. 971 (1941). Thus, the Court has noted that "[t]he award of an interlocutory injunction by courts of equity has never been regarded as strictly a matter of right, even though irreparable injury may otherwise result to the plaintiff," and that "where an injunction is asked which will adversely affect a public interest for whose impairment, even temporarily, an injunction bond cannot compensate, the court may in the public interest withhold relief until a final determination of the rights of the parties, though the postponement may be burdensome to the plaintiff." Yakus v. United States, supra, 321 U.S., at 440, 64 S.Ct., at 675 (footnote omitted). The grant of jurisdiction to ensure compliance with a statute hardly suggests an absolute duty to do so under any and all circumstances, and a federal judge sitting as chancellor is not mechanically obligated to grant an injunction for every violation of law. TVA v. Hill, 437 U.S., at 193, 98 S.Ct., at 2301; Hecht Co. v. Bowles, 321 U.S., at 329, 64 S.Ct., at 591. [7] These commonplace considerations applicable to cases in which injunctions are sought in the federal courts reflect a "practice with a background of several hundred years of history," Hecht Co. v. Bowles, supra, at 329, 64 S.Ct., at 591-92, a practice of which Congress is assuredly well aware. Of course, Congress may intervene and guide or control the exercise of the courts' discretion, but we do not lightly assume that Congress has intended to depart from established principles. Hecht Co. v. Bowles, supra, at 329, 64 S.Ct., at 591. As the Court said in Porter v. Warner Holding Co., 328 U.S. 395, 398, 66 S.Ct. 1086, 1089, 90 L.Ed. 1332 (1946): "Moreover, the comprehensiveness of this equitable jurisdiction is not to be denied or limited in the absence of a clear and valid legislative command. Unless a statute in so many words, or by a necessary and inescapable inference, restricts the court's 22 jurisdiction in equity, the full scope of that jurisdiction is to be recognized and applied. 'The great principles of equity, securing complete justice, should not be yielded to light inferences, or doubtful construction.' Brown v. Swann, 10 Pet. 497, 503 [9 L.Ed. 508] ..." In TVA v. Hill, we held that Congress had foreclosed the exercise of the usual discretion possessed by a court of equity. There, we thought that "[o]ne would be hard pressed to find a statutory provision whose terms were any plainer" than that before us. 437 U.S., at 173, 98 S.Ct., at 2291. The statute involved, the Endangered Species Act, 87 Stat. 884, 16 U.S.C. § 1531 et seq., required the District Court to enjoin completion of the Tellico Dam in order to preserve the snail darter, a species of perch. The purpose and language of the statute under consideration in Hill, not the bare fact of a statutory violation, compelled that conclusion. Section 7 of the Act, 16 U.S.C. § 1536, requires federal agencies to "insure that actions authorized, funded, or carried out by them do not jeopardize the continued existence of [any] endangered species ... or result in the destruction or modification of habitat of such species which is determined ... to be critical." The statute thus contains a flat ban on the destruction of critical habitats. It was conceded in Hill that completion of the dam would eliminate an endangered species by destroying its critical habitat. Refusal to enjoin the action would have ignored the "explicit provisions of the Endangered Species Act." 437 U.S., at 173, 98 S.Ct., at 2291. Congress, it appeared to us, had chosen the snail darter over the dam. The purpose and language of the statute limited the remedies available to the District Court; only an injunction could vindicate the objectives of the Act. That is not the case here. An injunction is not the only means of ensuring compliance. The FWPCA itself, for example, provides for fines and criminal penalties. 33 U.S.C. §§ 1319(c) and (d). Respondents suggest that failure to enjoin the Navy will undermine the integrity of the permit process by allowing the statutory violation to continue. The integrity of the Nation's waters, however, not the permit process, is the purpose of the FWPCA. [FN7] As Congress explained, the objective of the FWPCA is to "restore and maintain the chemical, physical, and biological integrity of the Nation's waters." 33 U.S.C. § 1251(a). FN7. The objective of this statute is in some respects similar to that sought in nuisance suits, where courts have fully exercised their equitable discretion and ingenuity in ordering remedies. E.g., Spur Industries, Inc. v. Del E. Webb Development Co., 108 Ariz. 178, 494 P.2d 700 (1972); Boomer v. Atlantic Cement Co., 26 N.Y.2d 219, 309 N.Y.S.2d 312, 257 N.E.2d 870 (1970). This purpose is to be achieved by compliance with the Act, including compliance with the permit requirements. [FN8] Here, however, the discharge of ordnance had not polluted the waters, and, although the District Court declined to enjoin the discharges, it neither ignored the statutory violation nor undercut the purpose and function of the permit system. The court ordered the Navy to apply for a permit. [FN9] It temporarily, not permanently, allowed the Navy to continue its activities without a permit. FN8. Federal agencies must comply with the water pollution abatement requirements "in the same manner, and to the same extent as any 23 nongovernmental entity...." 33 U.S.C. § 1323(a) (1976 ed., Supp.IV). S.Rep.No. 92-414, p. 80 (1971), U.S.Code Cong. & Admin.News 1972, pp. 3668, 3746, pointed to "[f]ederal agencies such as the Department of Defense" for failing to abate pollution. FN9. The Navy applied for an NPDES permit in December 1979. In May 1981, the EPA issued a draft NPDES permit and a notice of intent to issue that permit. The FWPCA requires a certification of compliance with state water quality standards before the EPA may issue an NPDES permit. 33 U.S.C. § 1341(a). The Environmental Quality Board of the Commonwealth of Puerto Rico denied the Navy a water quality certificate in connection with this application for an NPDES in June 1981. In February 1982, the Environmental Quality Board denied the Navy's reconsideration request and announced it was adhering to its original ruling. In a letter dated April 9, 1982, the Solicitor General informed the Clerk of the Court that the Navy has filed an action challenging the denial of the water quality certificate. United States v. Commonwealth of Puerto Rico, Civ. Action No. 82-0726 (Dist.Ct.PR). In Hill, we also noted that none of the limited "hardship exemptions" of the Endangered Species Act would "even remotely apply to the Tellico Project." 437 U.S., at 188, 98 S.Ct., at 2298. The prohibition of the FWPCA against discharge of pollutants, in contrast, can be overcome by the very permit the Navy was ordered to seek. [FN10] The Senate Report to the 1972 Amendments explains that the permit program would be enacted because "the Committee recognizes the impracticality of any effort to halt all pollution immediately." S.Rep.No.92-414, p. 43 (1971), U.S.Code Cong. & Admin.News 1972, p. 3709. That the scheme as a whole contemplates the exercise of discretion and balancing of equities militates against the conclusion that Congress intended to deny courts their traditional equitable discretion in enforcing the statute. FN10. As we have explained, the 1972 Amendments to the FWPCA established the NPDES as "a means of achieving and enforcing the effluent limitations. Under the NPDES, it is unlawful for any person to discharge a pollutant without obtaining a permit and complying with its terms. An NPDES permit serves to transform generally applicable effluent limitations and other standards-- including those based on water quality--into the obligations (including a timetable for compliance) of the individual discharger, and the Amendments provide for direct administrative and judicial enforcement of permits.... With few exceptions, for enforcement purposes a discharger in compliance with the terms and conditions of an NPDES permit is deemed to be in compliance with those sections of the Amendments on which the permit conditions are based.... In short, the permit defines, and facilitates compliance with, and enforcement of, a preponderance of a discharger's obligations under the Amendments." EPA v. California ex rel. State Water Resources Control Board, 426 U.S. 200, 205, 96 S.Ct. 2022, 2025, 48 L.Ed.2d 578 (1976) (footnote omitted). Other aspects of the statutory scheme also suggest that Congress did not intend to deny courts the discretion to rely on remedies other than an immediate prohibitory injunction. Although the ultimate objective of the FWPCA is to eliminate all discharges of pollutants into the navigable waters by 1985, the statute sets forth a scheme of phased compliance. As enacted, it called for the achievement of the "best practicable 24 control technology currently available" by July 1, 1977, and the "best available technology economically achievable" by July 1, 1983. 33 U.S.C. § 1311(b). This scheme of phased compliance further suggests that this is a statute in which Congress envisioned, rather than curtailed, the exercise of discretion. [FN11] FN11. We have, however, held some standards related to phased compliance to be absolute. See EPA v. National Crushed Stone Assn., 449 U.S. 64, 101 S.Ct. 295, 66 L.Ed.2d 268 (1980). In Middlesex County Sewerage Authority v. National Sea Clammers Ass'n., 453 U.S. 1, 101 S.Ct. 2615, 69 L.Ed.2d 435 (1981), we concluded that the federal common law of nuisance was pre-empted by the FWPCA and other similar Acts: "In the absence of strong indicia of a contrary congressional intent, we are compelled to conclude that Congress provided precisely the remedies it considered appropriate." Id., at 15, 101 S.Ct., at 2623; see Milwaukee v. Illinois, 451 U.S. 304, 101 S.Ct. 1784, 68 L.Ed.2d 114 (1981). But, as we have also observed in construing this Act: "The question ... is not what a court thinks is generally appropriate to the regulatory process, it is what Congress intended...." E. I. du Pont de Nemours & Co. v. Train, 430 U.S., at 138, 97 S.Ct., at 980. Here we do not read the FWPCA as intending to abolish the courts' equitable discretion in ordering remedies. The FWPCA directs the Administrator of the EPA to seek an injunction to restrain immediately discharges of pollutants he finds to be presenting "an imminent and substantial endangerment to the health of persons or to the welfare of persons." 33 U.S.C. § 1364(a) (1976 ed., Supp.IV). This rule of immediate cessation, however, is limited to the indicated class of violations. For other kinds of violations, the FWPCA authorizes the Administrator of the EPA "to commence a civil action for appropriate relief, including a permanent or temporary injunction, for any violation for which he is authorized to issue a compliance order...." 33 U.S.C. § 1319(b). [FN12] The provision makes clear that Congress did not anticipate that all discharges would be immediately enjoined. Consistent with this view, the administrative practice has not been to request immediate cessation orders. "Rather, enforcement actions typically result, by consent or otherwise, in a remedial order setting out a detailed schedule of compliance designed to cure the identified violation of the Act." Brief for Petitioners 17. See Milwaukee v. Illinois, 451 U.S. 304, 320-322, 101 S.Ct. 1784, 1794-1795, 68 L.Ed.2d 114 (1981). Here, again, the statutory scheme contemplates equitable consideration. FN12. The statute at issue in Hecht Co. v. Bowles, 321 U.S. 321, 64 S.Ct. 587, 88 L.Ed. 754 (1944), contained language very similar to that in § 1319(b). It directed the Price Administrator to seek "a permanent or temporary injunction, restraining order, or other order" to halt violations. Id., at 322, 64 S.Ct., at 588. The Court determined that such statutory language did not require the court to issue an injunction even when the Administrator had sued for injunctive relief. In Hecht Co., the court's equitable discretion overrode that of the Administrator. If a court can properly refuse an injunction in the circumstances of Hecht Co., the exercise of its discretion seems clearly appropriate in a case such as this, where the EPA Administrator was not a party and had not yet expressed his judgment. The action of the District Court permitted it to obtain the benefit of the EPA's recommendation before deciding to enjoin the discharge. In Hecht Co., unlike here, the violations had ceased by the time the injunction was sought. The Court, however, explained that "the cessation of violations, whether before or 25 after the institution of a suit by the Administrator, is no bar to the issuance of an injunction." Id., at 327, 64 S.Ct., at 590. Thus, contrary to the dissent's characterization, post, at 1811, the Court did not base its decision on the fact that violations had ceased. Both the Court of Appeals and respondents attach particular weight to the provision of the FWPCA permitting the President to exempt federal facilities from compliance with the permit requirements. 33 U.S.C. § 1323(a) (1976 ed., Supp.IV). [FN13] They suggest that this provision indicates congressional intent to limit the court's discretion. According to respondents, the exemption provision evidences Congress' determination that only paramount national interests justify failure to comply and that only the President should make this judgment. FN13. See n. 6, supra. We do not construe the provision so broadly. We read the FWPCA as permitting the exercise of a court's equitable discretion, whether the source of pollution is a private party or a federal agency, to order relief that will achieve compliance with the Act. The exemption serves a different and complementary purpose, that of permitting noncompliance by federal agencies in extraordinary circumstances. Executive Order No. 12088, 3 CFR 243 (1979), which implements the exemption authority, requires the federal agency requesting such an exemption to certify that it cannot meet the applicable pollution standards. "Exemptions are granted by the President only if the conflict between pollution control standards and crucial federal activities cannot be resolved through the development of a practicable remedial program." Brief for Petitioners 26, n. 30. Should the Navy receive a permit here, there would be no need to invoke the machinery of the Presidential exemption. If not, this course remains open. The exemption provision would enable the President, believing paramount national interests so require, to authorize discharges which the District Court has enjoined. Reading the statute to permit the exercise of a court's equitable discretion in no way eliminates the role of the exemption provision in the statutory scheme. Like the language and structure of the Act, the legislative history does not suggest that Congress intended to deny courts their traditional equitable discretion. Congress passed the 1972 Amendments because it recognized that "the national effort to abate and control water pollution has been inadequate in every vital aspect." S.Rep.No.92414, p. 7 (1971), U.S.Code Cong. & Admin.News p. 3674. The past failings included enforcement efforts under the Rivers and Harbors Appropriation Act of 1899 (Refuse Act), 33 U.S.C. § 401 et seq. The "major purpose" of the 1972 Amendments was "to establish a comprehensive long-range policy for the elimination of water pollution." S.Rep.No.92-414, supra, at 95, U.S.Code Cong. & Admin.News at 3758. The permit system was the key to that policy. "The Amendments established a new system of regulation under which it is illegal for anyone to discharge pollutants into the Nation's waters except pursuant to a permit." Milwaukee v. Illinois, supra, at 310-311, 101 S.Ct., at 1788-1789; see generally EPA v. California ex rel. State Water Resources Control Board, 426 U.S. 200, 96 S.Ct. 2022, 48 L.Ed.2d 578 (1976). Nonetheless, "[i]n writing the enforcement procedures involving the Federal Government the Committee drew extensively ... upon the existing enforcement provisions of the Refuse Act of 1899." 26 S.Rep.No.92-414,supra, at 63, U.S.Code Cong. & Admin.News p. 3730. Violations of the Refuse Act have not automatically led courts to issue injunctions. See Reserve Mining Co. v. EPA, 514 F.2d 492, 535-538 (CA8 1975); United States v. Rohm & Haas Co., 500 F.2d 167, 175 (CA5 1974), cert. denied, 420 U.S. 962, 95 S.Ct. 1352, 43 L.Ed.2d 439 (1975); United States v. Kennebec Log Driving Co., 491 F.2d 562, 571 (CA1 1973), on remand, 399 F.Supp. 754, 759-760 (Me.1975). Section III This Court explained in Hecht Co. v. Bowles, 321 U.S. 321, 64 S.Ct. 587, 88 L.Ed. 754 (1944), that a major departure from the long tradition of equity practice should not be lightly implied. As we did there, we construe the statute at issue "in favor of that interpretation which affords a full opportunity for equity courts to treat enforcement proceedings ... in accordance with their traditional practices, as conditioned by the necessities of the public interest which Congress has sought to protect." Id., at 330, 64 S.Ct., at 592. We do not read the FWPCA as foreclosing completely the exercise of the court's discretion. Rather than requiring a district court to issue an injunction for any and all statutory violations, the FWPCA permits the district court to order that relief it considers necessary to secure prompt compliance with the Act. That relief can include, but is not limited to, an order of immediate cessation. The exercise of equitable discretion, which must include the ability to deny as well as grant injunctive relief, can fully protect the range of public interests at issue at this stage in the proceedings. The District Court did not face a situation in which a permit would very likely not issue, and the requirements and objective of the statute could therefore not be vindicated if discharges were permitted to continue. Should it become clear that no permit will be issued and that compliance with the FWPCA will not be forthcoming, the statutory scheme and purpose would require the court to reconsider the balance it has struck. Because Congress, in enacting the FWPCA, has not foreclosed the exercise of equitable discretion, the proper standard for appellate review is whether the District Court abused its discretion in denying an immediate cessation order while the Navy applied for a permit. We reverse and remand to the Court of Appeals for proceedings consistent with this opinion. It is so ordered. Justice POWELL, concurring. I join the opinion of the Court. In my view, however, the record clearly establishes that the District Court in this case did not abuse its discretion by refusing to enjoin the immediate cessation of all discharges. Finding that the District Court acted well within the equitable discretion left to it under the Federal Water Pollution Control Act (FWPCA), I would remand the case to the Court of Appeals with instructions that the decision of the District Court should be affirmed. [FN*] FN* The District Court's thorough opinion demonstrates the reasonableness of its decision in light of all pertinent factors, including of course the evident purpose of the statute. The District Court concluded as matters of fact that the 27 Navy's violations have caused no "appreciable harm," Romero-Barcelo v. Brown, 478 F.Supp. 646, 706 (PR1979), and indeed that the Navy's control of the area "probably constitutes a positive factor in its over all ecology," id., at 682. Moreover, the District Court found it "abundantly clear from the evidence in the record ... that the training that takes place in Vieques is vital to the defense of the interests of the United States." Id., at 707. Balancing the equities as they then stood, the District Court declined to order an immediate cessation of all violations but nonetheless issued affirmative orders aimed at securing compliance with the law. See id., at 708. As I read its opinion, the District Court did not foreclose the possibility of ordering further relief that might become appropriate under changed circumstances at a later date. The propriety of this disposition is emphasized by the dissenting opinion of Justice STEVENS, post, at 1808. I agree with his view that Congress may limit a court's equitable discretion in granting remedies under a particular statute, and that some statutes may constrain discretion more narrowly than others. I stand with the Court, however, in finding no indication that Congress intended to limit the court's equitable discretion under the FWPCA in the manner suggested by Justice STEVENS. As the Court's remand order might be thought to leave open whether the District Court in this case acted within its range of permissible discretion under the FWPCA, it would promote both clarity and economy for us to hold now that the District Court did not abuse its discretion and that its decision should be reinstated. STEVENS, Justice, dissenting. The appropriate remedy for the violation of a federal statute depends primarily on the terms of the statute and the character of the violation. Unless Congress specifically commands a particular form of relief, the question of remedy remains subject to a court's equitable discretion. [FN1] Because the Federal Water Pollution Control Act does not specifically command the federal courts to issue an injunction every time an unpermitted discharge of a pollutant occurs, the Court today is obviously correct in asserting that such injunctions should not issue "automatically" or "mechanically" in every case. It is nevertheless equally clear that by enacting the 1972 Amendments to the FWPCA Congress channeled the discretion of the federal judiciary much more narrowly than the Court's rather glib opinion suggests. Indeed, although there may well be situations in which the failure to obtain an NPDES permit would not require immediate cessation of all discharges, I am convinced that Congress has circumscribed the district courts' discretion on the question of remedy so narrowly that a general rule of immediate cessation must be applied in all but a narrow category of cases. The Court of Appeals was quite correct in holding that this case does not present the kind of exceptional situation that justifies a departure from the general rule. FN1. Cf. Steelworkers v. United States, 361 U.S. 39, 54-59, 80 S.Ct. 1, 177, 182-185, 4 L.Ed.2d 12 (Frankfurter and Harlan, JJ., concurring). The Court's mischaracterization of the Court of Appeals' holding is the premise for its essay on equitable discretion. This essay is analytically flawed because it overlooks the limitations on equitable discretion that apply in cases in which public interests are implicated and the defendant's violation of the law is ongoing. Of greater importance, the Court's opinion grants an open-ended license to federal judges to carve gaping 28 holes in a reticulated statutory scheme designed by Congress to protect a precious natural resource from the consequences of ad hoc judgments about specific discharges of pollutants. Section I Contrary to the impression created by the Court's opinion, the Court of Appeals did not hold that the District Court was under an absolute duty to require compliance with the FWPCA "under any and all circumstances," ante, at 1803, or that it was "mechanically obligated to grant an injunction for every violation of law," ibid. The only "absolute duty" that the Court of Appeals mentioned was the Navy's duty to obtain a permit before discharging pollutants into the waters off Vieques Island. [FN2] In light of the Court's opinion the point is worth repeating--the Navy, like anyone else, [FN3] must obey the law. FN2. "Whether or not the Navy's activities in fact harm the coastal waters, it has an absolute statutory obligation to stop any discharges of pollutants until the permit procedure has been followed and the Administrator of the Environmental Protection Agency, upon review of the evidence, has granted a permit." Romero-Barcelo v. Brown, 643 F.2d 835, 861 (CA1 1981). This statement by the Court of Appeals is entirely consistent with the comments in the Senate Report on the legislation that "[e]nforcement of violations ... should be based on relatively narrow fact situations requiring a minimum of discretionary decision making or delay," and that "the issue before the courts would be a factual one of whether there had been compliance." S.Rep.No. 92-414, pp. 64, 80 (1971), U.S.Code Cong. & Admin.News 1972, pp. 3730, 3746. FN3. The statute expressly subjects federal agencies to all laws "respecting the control and abatement of water pollution in the same manner, and to the same extent as any nongovernmental entity." 33 U.S.C. § 1323(a) (1976 ed., Supp.IV). Indeed, Congress required federal agencies "to provide national leadership in the control of water pollution," S.Rep.No. 92-414, supra, at 67, U.S.Code Cong. & Admin.News 1972, p. 3733, and to "be a model for the Nation," H.R.Rep.No. 92-911, p. 118 (1972). The Court of Appeals did not hold that the District Court had no discretion in formulating remedies for statutory violations. It merely "conclude[d] that the district court erred in undertaking a traditional balancing of the parties' competing interests." Romero-Barcelo v. Brown, 643 F.2d 835, 861 (CA1 1981). The District Court was not free to disregard the "congressional ordering of priorities" and "the judiciary's 'responsibility to protect the integrity of the ... process mandated by Congress.' " Ibid. (quoting Jones v. Lynn, 477 F.2d 885, 892 (CA1 1973)). The Court of Appeals distinguished a statutory violation that could be deemed merely "technical" from the Navy's "[utter disregard of] the statutory mandate." 643 F.2d, at 861-862. It then pointed out that an order prohibiting any discharge of ordnance into the coastal waters off Vieques until an NPDES permit was obtained would not significantly affect the Navy's training operations because most, if not all, of the Navy's targets were land-based. Id., at 862, n. 55. Finally, it noted that the statute authorized the Navy to obtain an exemption from the President if an injunction would have a significant effect on national security. Id., at 862; see 33 U.S.C. § 1323(a) (1976 ed., Supp.IV). 29 Under these circumstances--the statutory violation is blatant and not merely technical, and the Navy's predicament was foreseen and accommodated by Congress--the Court of Appeals essentially held that the District Court retained no discretion to deny an injunction. The discretion exercised by the District Court in this case was wholly at odds with the intent of Congress in enacting the FWPCA. In essence, the District Court's remedy was a judicial permit exempting the Navy's operations in Vieques from the statute until such time as it could obtain a permit from the Environmental Protection Agency or a statutory exemption from the President. The two principal bases for the temporary judicial permit were matters that Congress did not commit to judicial discretion. First, the District Court was persuaded that the pollution was not harming the quality of the coastal waters, see Romero-Barcelo v. Brown, 478 F.Supp. 646, 706-707 (PR 1979); and second, the court was concerned that compliance with the Act might adversely affect national security, see id., at 707-708. The Court of Appeals correctly noted that the first consideration is the business of the EPA [FN4] and the second is the business of the President. [FN5] FN4. "Not only are the technical problems difficult--doubtless the reason Congress vested authority to administer the Act in administrative agencies possessing the necessary expertise--but the general area is particularly unsuited to the approach inevitable under a regime of federal common law. Congress criticized past approaches to water pollution control as being 'sporadic' and 'ad hoc,' S.Rep.No. 92-414, p. 95 (1971), 2 Leg.Hist. 1511, apt characterizations of any judicial approach applying federal common law, see Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 319 [75 S.Ct. 368, 373, 99 L.Ed. 337] (1955)." Milwaukee v. Illinois, 451 U.S. 304, 325, 101 S.Ct. 1784, 1796, 68 L.Ed.2d 114. FN5. In my opinion the national security considerations that were persuasive to the District Court are not matters that are suitable for judicial evaluation. Congress has wisely given the President virtually unlimited authority to exempt the military from the statute on national defense grounds. If those grounds justify an exemption in this case, the Navy clearly should have obtained it from its Commander in Chief, not from a judge unlearned in such matters. This Court, however, makes the curious argument that the Presidential exemption was intended to permit noncompliance with the statute and therefore merely complements the equitable discretion of a district court also to authorize noncompliance. Ante, at 1806. The Court unfairly uses the Court of Appeals' opinion in this case as a springboard for a lecture on the principles of equitable remedies. The Court of Appeals' reasoning was correct in all respects. It recognized that the statute categorically prohibits discharges of pollutants without a permit. Unlike the Court, see ante, at 1804, it recognized that the requested injunction was the only remedy that would bring the Navy into compliance with the statute on Congress' timetable. [FN6] It then demonstrated that none of the reasons offered by the District Court for refusing injunctive relief was consistent with the statute or was compelling under the circumstances. The position of the Court of Appeals in effect was that the federal courts' equitable discretion is constrained by a strong presumption in favor of enforcing the law as Congress has written it. By reversing, the Court casts doubt on the validity of that position. This doubt is especially 30 dangerous in the environmental area, where the temptations to delay compliance are already substantial. [FN7] FN6. The District Court ordered the Navy to file for an NPDES permit " 'with all deliberate speed.' " Romero-Barcelo v. Brown, 478 F.Supp. 646, 708 (PR 1979) (quoting Brown v. Board of Education, 349 U.S. 294, 301, 75 S.Ct. 753, 756, 99 L.Ed. 1083). FN7. It is ironic that the Court comes to the aid of the Navy even though Congress authorized an executive exemption for federal (particularly military) operations but no analogous exemption for important private activities, and even though Congress intended federal agencies to assume a leadership role in the water pollution control effort. To paraphrase the Senate Report, the Federal Government cannot expect private industry to obey the law by ceasing discharges of pollutants until a permit is obtained if the Federal Government is not willing to obey the same law or at least invoke a statutory exemption. See S.Rep.No. 92-414, p. 67 (1971). Section II Our cases concerning equitable remedies have repeatedly identified two critical distinctions that the Court simply ignores today. The first is the distinction between cases in which only private interests are involved and those in which a requested injunction will implicate a public interest. Second, within the category of public interest cases, those cases in which there is no danger that a past violation of law will recur have always been treated differently from those in which an existing violation is certain to continue. Yakus v. United States, 321 U.S. 414, 441, 64 S.Ct. 660, 675, 88 L.Ed. 834, illustrates the first distinction. The Court there held that Congress constitutionally could preclude a private party from obtaining an injunction against enforcement of federal price control regulations pending an adjudication of their validity. In any balancing process, the Court explained, special deference must be given to the public interest: "Even in suits in which only private interests are involved the award is a matter of sound judicial discretion, in the exercise of which the court balances the conveniences of the parties and possible injuries to them according as they may be affected by the granting or withholding of the injunction.... "But where an injunction is asked which will adversely affect a public interest for whose impairment, even temporarily, an injunction bond cannot compensate, the court may in the public interest withhold relief until a final determination of the rights of the parties, though the postponement may be burdensome to the plaintiff." Id., at 440, 64 S.Ct., at 675 (footnote omitted). In that case, the public interest, reflected in an act of Congress, was in opposition to the availability of injunctive relief. The Court stated, however, that the public interest factor would have the same special weight if it favored the granting of an injunction: "This is but another application of the principle, declared in Virginia Ry. Co. v. System Federation, 300 U.S. 515, 552, [57 S.Ct. 592, 601, 81 L.Ed. 789], that 'Courts of equity may, and frequently do, go much farther both to give and withhold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved.' " Id., at 441, 64 S.Ct., at 675. Hecht Co. v. Bowles, 321 U.S. 321, 64 S.Ct. 587, 88 L.Ed. 754, which the Court 31 repeatedly cites, did involve an attempt to obtain an injunction against future violations of a federal statute. That case fell into the category of cases in which a past violation of law had been found and the question was whether an injunction should issue to prevent future violations. Cf. United States v. W. T. Grant Co., 345 U.S. 629, 633-636, 73 S.Ct. 894, 897-899, 97 L.Ed. 1303; United States v. Oregon Medical Society, 343 U.S. 326, 332-334, 72 S.Ct. 690, 695-696, 96 L.Ed. 978. Because the record established that the past violations were inadvertent, that they had been promptly terminated, and that the defendant had taken vigorous and adequate steps to prevent any recurrence, the Court held that the District Court had discretion to deny injunctive relief. But in reaching that conclusion, the Court made it clear that judicial discretion "must be exercised in light of the large objectives of the Act. For the standards of the public interest, not the requirements of private litigation, measure the propriety and need for injunctive relief in these cases." 321 U.S., at 331, 72 S.Ct., at 694. Indeed, the Court emphasized that any exercise of discretion "should reflect an acute awareness of the Congressional admonition" in the statute at issue. Ibid. In contrast to the decision in Hecht, today the Court pays mere lipservice to the statutory mandate and attaches no weight to the fact that the Navy's violation of law has not been corrected. [FN8] The Court cites no precedent for its holding that an ongoing deliberate violation of a federal statute should be treated like any garden-variety private nuisance action in which the chancellor has the widest discretion in fashioning relief. [FN9] FN8. The Navy has been in continuous violation of the statute during the entire decade since its enactment. FN9. Indeed, I am unaware of any case in which the Court has permitted a statutory violation to continue. Our prior cases involving the appropriate remedy for an ongoing violation of federal law establish a much more stringent test than the Court applies today. Thus, in United States v. City and County of San Francisco, 310 U.S. 16, 60 S.Ct. 749, 84 L.Ed. 1050, a case in which the Government claimed that the city's disposition of electric power was prohibited by an Act of Congress, the Court held that "this case does not call for a balancing of equities or for the invocation of the generalities of judicial maxims in order to determine whether an injunction should have issued." Id., at 30, 60 S.Ct., at 757. "The equitable doctrines relied on do not militate against the capacity of a court of equity as a proper forum in which to make a declared policy of Congress effective." Id., at 31, 60 S.Ct., at 757. An injunction to prohibit continued violation of that policy "is both appropriate and necessary." Ibid. [FN10] FN10. In the steel seizure case, Justice Frankfurter rejected "the Government's argument that overriding public interest prevents the issuance of the injunction despite the illegality of the seizure": " 'Balancing the equities' when considering whether an injunction should issue, is lawyers' jargon for choosing between conflicting public interests. When Congress itself has struck the balance, has defined the weight to be given the competing interests, a court of equity is not justified in ignoring that pronouncement under the guise of exercising equitable discretion." Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 609-610, 72 S.Ct. 863, 896-897, 96 L.Ed. 1153 (concurring opinion). 32 In Albemarle Paper Co. v. Moody, 422 U.S. 405, 95 S.Ct. 2362, 45 L.Ed.2d 280, the Court plainly stated that an equitable remedy for the violation of a federal statute was neither automatic on the one hand, nor simply a matter of balancing the equities on the other. [FN11] Albemarle holds that the district court's remedial decision must be measured against the purposes that inform the Act of Congress that has been violated. Id., at 417, 95 S.Ct., at 2371. FN11. "The petitioners contend that the statutory scheme provides no guidance, beyond indicating that backpay awards are within the District Court's discretion. We disagree. It is true that backpay is not an automatic or mandatory remedy; like all other remedies under the Act, it is one which the courts 'may' invoke. The scheme implicitly recognizes that there may be cases calling for one remedy but not another, and--owing to the structure of the federal judiciary--these choices are, of course, left in the first instance to the district courts. However, such discretionary choices are not left to a court's 'inclination, but to its judgment; and its judgment is to be guided by sound legal principles.' United States v. Burr, 25 F.Cas. 30, 35 (No. 14,692d) (CC Va. 1807) (Marshall, C. J.). The power to award backpay was bestowed by Congress, as part of a complex legislative design directed at a historic evil of national proportions. A court must exercise this power 'in light of the large objectives of the Act,' Hecht Co. v. Bowles, 321 U.S. 321, 331 [64 S.Ct. 587, 592, 88 L.Ed. 754] (1944). That the court's discretion is equitable in nature, see Curtis v. Loether, 415 U.S. 189, 197 [94 S.Ct. 1005, 1010, 39 L.Ed.2d 260] (1974), hardly means that it is unfettered by meaningful standards or shielded from thorough appellate review. In Mitchell v. [Robert] DeMario Jewelry, 361 U.S. 288, 292 [80 S.Ct. 332, 335, 4 L.Ed.2d 323] (1960), this Court held, in the face of a silent statute, that district courts enjoyed the 'historic power of equity' to award lost wages to workmen unlawfully discriminated against under § 17 of the Fair Labor Standards Act of 1938, 52 Stat. 1069, as amended, 29 U.S.C. § 217 (1958 ed.). The Court simultaneously noted that 'the statutory purposes [leave] little room for the exercise of discretion not to order reimbursement.' 361 U.S., at 296 [80 S.Ct., at 337]. "It is true that '[e]quity eschews mechanical rules ... [and] depends on flexibility.' Holmberg v. Armbrecht, 327 U.S. 392, 396 [66 S.Ct. 582, 584, 90 L.Ed. 743] (1946). But when Congress invokes the Chancellor's conscience to further transcendent legislative purposes, what is required is the principled application of standards consistent with those purposes and not 'equity [which] varies like the Chancellor's foot.' Important national goals would be frustrated by a regime of discretion that 'produce [d] different results for breaches of duty in situations that cannot be differentiated in policy.' Moragne v. States Marine Lines, 398 U.S. 375, 405 [90 S.Ct. 1772, 1790, 26 L.Ed.2d 339] (1970)." Albemarle Paper Co. v. Moody, 422 U.S. 405, 415-417, 95 S.Ct. 2362, 2370-2371, 45 L.Ed.2d 280 (footnotes omitted). Section III The Court's discussion of the FWPCA creates the impression that Congress did not intend any significant change in the enforcement provisions of the Rivers and Harbors Appropriation Act of 1899. See ante, at 1806-1807. The Court goes so far as to suggest that the FWPCA is little more than a codification of the common law of 33 nuisance. [FN12] The contrast between this casual attitude toward the FWPCA and the Court's writing in Milwaukee v. Illinois, 451 U.S. 304, 101 S.Ct. 1784, 68 L.Ed.2d 114, is stark. In that case the Court refused to allow federal judges to supplement the statutory enforcement scheme by enjoining a nuisance, whereas in this case the question is whether a federal judge may create a loophole in the scheme by refusing to enjoin a violation. Why a different standard should be used to define the scope of judicial discretion in these two situations is not explained. FN12. "The objective of this statute is in some respects similar to that sought in nuisance suits, where courts have fully exercised their equitable discretion and ingenuity in ordering remedies. E.g., Spur Industries, Inc. v. Del E. Webb Development Co., 108 Ariz. 178, 494 P.2d 700 (1972); Boomer v. Atlantic Cement Co., 26 N.Y.2d 219, 309 N.Y.S.2d 312, 257 N.E.2d 870 (1970)." Ante, at 1804, n.7. In Milwaukee v. Illinois the Court described the FWPCA in these terms: "The statutory scheme established by Congress provides a forum for the pursuit of such claims before expert agencies by means of the permit-granting process. It would be quite inconsistent with this scheme if federal courts were in effect to 'write their own ticket' under the guise of federal common law after permits have already been issued and permittees have been planning and operating in reliance on them." Id., at 326, 101 S.Ct., at 1797. Ironically, today the Court holds that federal district courts may in effect "write their own ticket" under the guise of federal common law before permits have been issued. The Court distinguishes TVA v. Hill, 437 U.S. 153, 98 S.Ct. 2279, 57 L.Ed.2d 117, on the ground that the Endangered Species Act contained a "flat ban" on the destruction of critical habitats. Ante, at 1804. But the statute involved in this case also contains a flat ban against discharges of pollutants into coastal waters without a permit. [FN13] Surely the congressional directive to protect the Nation's waters from gradual but possibly irreversible contamination is no less clear than the command to protect the snail darter. [FN14] To assume that Congress has placed a greater value on the protection of vanishing forms of animal life than on the protection of our water resources is to ignore the text, the legislative history, [FN15] and the previously consistent interpretation of this statute. [FN16] FN13. Indeed, this proposition has been consistently, repeatedly, and unequivocally reaffirmed by this Court: "The discharge of 'pollutants' into water is unlawful without a permit issued by the Administrator of the EPA or, if a State has developed a program that complies with the FWPCA, by the State." Train v. Colorado Public Interest Research Group, 426 U.S. 1, 7, 96 S.Ct. 1938, 1941, 48 L.Ed.2d 434. "Under the NPDES, it is unlawful for any person to discharge a pollutant without obtaining a permit and complying with its terms." EPA v. California ex rel. State Water Resources Control Board, 426 U.S. 200, 205, 96 S.Ct. 2022, 2025, 48 L.Ed.2d 578. "We conclude that, at least so far as concerns the claims of respondents, Congress has not left the formulation of appropriate federal standards to the courts through application of often vague and indeterminate nuisance concepts and maxims of equity jurisprudence, but rather has occupied the field through the establishment of a comprehensive regulatory program supervised by an expert administrative agency." Milwaukee v. Illinois, 451 U.S., at 317, 101 S.Ct., at 1792. In EPA v. National Crushed Stone 34 Assn., 449 U.S. 64, 101 S.Ct. 295, 66 L.Ed.2d 268, the Court read the "plain language of the statute," id., at 73, 101 S.Ct., at 302, to require private firms "either to conform to BPT standards or to cease production." Id., at 76, 101 S.Ct., at 303. FN14. "Congress' intent in enacting the Amendments was clearly to establish an all-encompassing program of water pollution regulation. Every point source discharge is prohibited unless covered by a permit, which directly subjects the discharger to the administrative apparatus established by Congress to achieve its goals." Milwaukee v. Illinois, 451 U.S., at 318, 101 S.Ct., at 1792 (emphasis in original; footnote omitted). FN15. The Senate Report emphasized that "if the timetables established throughout the Act are to be met, the threat of sanction must be real, and enforcement provisions must be swift and direct." S.Rep.No. 92-414, p. 65 (1971), U.S.Code Cong. & Admin.News 1972, p. 3731. FN16. "The establishment of such a self-consciously comprehensive program by Congress, which certainly did not exist when Illinois v. Milwaukee [406 U.S. 91, 92 S.Ct. 1385, 31 L.Ed.2d 712] was decided, strongly suggests that there is no room for courts to attempt to improve on that program with federal common law." Milwaukee v. Illinois, supra, at 319, 101 S.Ct., at 1793. Today's holding that a federal court has inherent power to grant exemptions from the statutory permit requirement presents a dramatic contrast with the holding in Milwaukee v. Illinois: "Federal courts lack authority to impose more stringent effluent limitations under federal common law than those imposed by the agency charged by Congress with administering this comprehensive scheme." 451 U.S., at 320, 101 S.Ct., at 1794. It is true that in TVA v. Hill there was no room for compromise between the federal project and the statutory objective to preserve an endangered species; either the snail darter or the completion of the Tellico Dam had to be sacrificed. In the FWPCA, the Court tells us, the congressional objective is to protect the integrity of the Nation's waters, not to protect the integrity of the permit process. Ante, at 1804. Therefore, the Court continues, ante, at 1804, a federal court may compromise the process chosen by Congress to protect our waters as long as the court is content that the waters are not actually being harmed by the particular discharge of pollutants. On analysis, however, this reasoning does not distinguish the two cases. Courts are in no better position to decide whether the permit process is necessary to achieve the objectives of the FWPCA than they are to decide whether the destruction of the snail darter is an acceptable cost of completing the Tellico Dam. Congress has made both decisions, and there is nothing in the respective statutes or legislative histories to suggest that Congress invited the federal courts to second-guess the former decision any more than the latter. A disregard of the respective roles of the three branches of government also tarnishes the Court's other principal argument in favor of expansive equitable discretion in this area. [FN17] The Court points out that Congress intended to halt water pollution gradually, not immediately, and that "the scheme as a whole contemplates the exercise 35 of discretion and balancing of equities." Ante, at 1805. In the Court's words, Congress enacted a "scheme of phased compliance." Ibid. Equitable discretion in enforcing the statute, the Court states, is therefore consistent with the statutory scheme. FN17. See also n.5, supra. The Court's sophistry is premised on a gross misunderstanding of the statutory scheme. Naturally, in 1972 Congress did not expect dischargers to end pollution immediately. [FN18] Rather, it entrusted to expert administrative agencies the task of establishing timetables by which dischargers could reach that ultimate goal. These timetables are determined by the agencies and included in the NPDES permits; the conditions in the permits constitute the terms by which compliance with the statute is measured. [FN19] Quite obviously, then, the requirement that each discharger subject itself to the permit process is crucial to the operation of the "scheme of phased compliance." By requiring each discharger to obtain a permit before continuing its discharges of pollutants, Congress demonstrated an intolerance for delay in compliance with the statute. It is also obvious that the "exercise of discretion and balancing of equities" were tasks delegated by Congress to expert agencies, not to federal courts, yet the Court simply ignores the difference. FN18. "The Committee believes that the no-discharge declaration in Section 13 of the 1899 Refuse Act is useful as an enforcement tool. Therefore, this section [§ 301] declares the discharge of pollutants unlawful. The Committee believes it is important to clarify this point: No one has the right to pollute. "But the Committee recognizes the impracticality of any effort to halt all pollution immediately. Therefore, this section provides an exception if the discharge meets the requirements of this section, Section 402, and others listed in the bill." S.Rep.No. 92-414, supra, at 43, U.S.Code Cong. & Admin.News 1972, 3709. FN19. "An NPDES permit serves to transform generally applicable effluent limitations and other standards--including those based on water quality-- into the obligations (including a timetable for compliance) of the individual discharger, and the Amendments provide for direct administrative and judicial enforcement of permits. With few exceptions, for enforcement purposes a discharger in compliance with the terms and conditions of an NPDES permit is deemed to be in compliance with those sections of the Amendments on which the permit conditions are based. In short, the permit defines, and facilitates compliance with, and enforcement of, a preponderance of a discharger's obligations under the Amendments." EPA v. California ex rel. State Water Resources Control Board, 426 U.S., at 205, 96 S.Ct., at 2025 (citations omitted). Section IV The decision in TVA v. Hill did not depend on any peculiar or unique statutory language. Nor did it rest on any special interest in snail darters. The decision reflected a profound respect for the law and the proper allocation of lawmaking responsibilities in our Government. [FN20] There we refused to sit as a committee of review. Today the Court authorizes free-thinking federal judges to do just that. Instead of requiring adherence to carefully integrated statutory procedures that assign to nonjudicial decisionmakers the responsibilities for evaluating potential harm to our water supply as 36 well as potential harm to our national security, the Court unnecessarily and casually substitutes the chancellor's clumsy foot for the rule of law. FN20. "Our individual appraisal of the wisdom or unwisdom of a particular course consciously selected by the Congress is to be put aside in the process of interpreting a statute. Once the meaning of an enactment is discerned and its constitutionality determined, the judicial process comes to an end. We do not sit as a committee of review, nor are we vested with the power of veto. The lines ascribed to Sir Thomas More by Robert Bolt are not without relevance here: " 'The law, Roper, the law. I know what's legal, not what's right. And I'll stick to what's legal.... I'm not God. The currents and eddies of right and wrong, which you find such plain-sailing, I can't navigate, I'm no voyager. But in the thickets of the law, oh there I'm a forester.... What would you do? Cut a great road through the law to get after the Devil? ... And when the last law was down, and the Devil turned round on you--where would you hide, Roper, the laws all being flat? ... This country's planted thick with laws from coast to coast--Man's laws, not God's-and if you cut them down ... d'you really think you could stand upright in the winds that would blow then?... Yes, I'd give the Devil benefit of law, for my own safety's sake.' R. Bolt, A Man for All Seasons, Act I, p. 147 (Three Plays, Heinemann ed. 1967). "We agree with the Court of Appeals that in our constitutional system the commitment to the separation of powers is too fundamental for us to preempt congressional action by judicially decreeing what accords with 'common sense and the public weal.' Our Constitution vests such responsibilities in the political branches." TVA v. Hill, 437 U.S. 153, 194-195, 98 S.Ct. 2279, 2301-2302, 57 L.Ed.2d 117. I respectfully dissent. Clinton v. Nagy 411 F.Supp. 1396 (1974) Brenda CLINTON, Plaintiff, v. John S. NAGY et al., Defendants. No. C 74--994. 411 F.Supp. 1396 United States District Court, N.D. Ohio, E.D. Nov. 14, 1974. Rita P. Reuss and Charles E. Guerrier, Cleveland, Ohio, for plaintiff. 37 Richard B. Mills, Asst. Law Director, Cleveland, Ohio, for defendants. LAMBROS, District Judge. Plaintiff, Brenda Clinton, brought this action, through her mother and next friend Johnnie Clinton, seeking the issuance of a temporary restraining order and a preliminary and permanent injunction against defendants John S. Nagy, Commissioner of the Division of Recreation of the City of Cleveland; Robert Maver, Director of the Cleveland Browns Muny Football Association; Charles Hall, Director of Class 'F' Muny League teams; and Ralph J. Perk, Mayor of the City of Cleveland. Plaintiff filed the action pursuant to 42 U.S.C. s 1983 and seeks to enjoin defendants from depriving her of equal recreational opportunities because of her sex and a declaratory judgment that the policies, customs, and practices of the defendants are in violation of the Constitution and laws of the United States. Notice of a hearing on the motion for temporary relief was afforded defendants, and this matter was heard on Friday, November 1, 1974. The Court granted plaintiff's motion for the temporary restraining order. The Court's ruling therein is set forth with more particularity below. Plaintiff's claim is that she is a twelve year old female who expressed her interest to her mother and to Mr. William Thomas, coach of the 97th Street Bulldogs football team, in September, 1974, of her desire to play football with Mr. Thomas' team. The 97th Street Bulldogs football team is licensed by the City as part of the Cleveland Browns Muny Football Association. Plaintiff alleges that neither her mother nor Coach Thomas have any objections to plaintiff's participation on the team. Affidavits of Mrs. Clinton and Mr. Thomas support her allegations. Mrs. Clinton testified by affidavit that on September 28, 1974, she signed a Medical Service Agreement, which is required of all Muny league players, in order that her daughter Brenda could participate in league play. It appears that the other requirements of the Cleveland Browns Muny Football Association were met by the plaintiff, and that on September 28, 1974 plaintiff was suited and prepared to play with the 97th Street Bulldogs. On that date, and on several subsequent Saturday afternoons, plaintiff was suited and ready to play but was informed by defendant Charles Hall that she would not be permitted to play because she was a female. At defendant Maver's request, Mrs. Clinton then signed a waiver, not required of males who participated in the Association's program, absolving the City and its agents from liability for any injuries which plaintiff might receive. Mrs. Clinton signed this waiver upon the representation of an employee of the Division of Recreation and a letter from Robert Maver that if the special waiver was signed, plaintiff would be able to play football with the team on October 19, 1974. However, on October 18, 1974, Mrs. Clinton was notified that although the waiver had been received, Brenda could not play because that 'was the law.' Plaintiff, therefore, instituted this suit seeking an order to restrain the defendants from denying her an opportunity to qualify to participate as a member of the 97th Street Bulldogs in the last games of the Season, on Saturday, November 2, 1974 and Saturday, November 9, 1974, solely on the basis of her sex. At the hearing on the temporary restraining order, the defendants, through counsel, did not dispute that the reason that plaintiff was not permitted to play with the Bulldogs was because of her sex. The defendants argued, however, that the City's rules and regulations which govern the 38 playing of sports specifically exclude females from participating in contact sports [FN1] and that such exclusion is lawful because it bears a rational relationship to a legitimate state purpose of providing for the safety and welfare of females. FN1. Defendants' Exhibits 1 and 3, received as joint exhibits, were a letter from the Director of Secondary Schools classifying certain sports, including football, as contact sports and the Constitution and Rules of the Ohio High School Athletic Association 1974--75. Defendants stated that Section 2, of the High School Rules which provides that: 'Boys teams must be composed of boys only, in all contact sports.' has been adopted by the Division of Recreation and governs Muny league play. Accordingly, the sole issue before this Court at the hearing on the motion for a temporary restraining order was whether plaintiff had shown a substantial likelihood of success on the merits of her claim that the defendants should be enjoined from enforcing the City's regulations which exclude females from the opportunity to qualify for participation in Muny league football, a contact sport, because such regulations do not bear a reasonable relationship to any legitimate state purpose. Morris v. Michigan State Board of Education, 472 F.2d 1207 (6th Cir. 1973). In this regard, defendants urged that the exclusion of females from contact sports was necessary for their safety and welfare and asserted that the testimony of its medical experts at the hearing on the merits would establish that the rule adopted by the Cleveland Division of Recreation is rationally related to that purpose. Defendants contended that their experts would testify that even at age ten, eleven, or twelve, boys are beginning to develop speed and greater physical stamina at a faster pace than are girls of those ages. It appears to the Court that the expected testimony which defendant indicated would defeat plaintiff's motion for a temporary restraining order was based upon the alleged naturally heavier musculature and generally greater speed of males between the ages of eight to twelve. Although the defendants stated, moreover, that the testimony of two medical experts would show that based upon a statistical analysis of variable strengths, males were generally stronger than females, the present action was not brought as a class action seeking to enjoin defendants from refusing to allow all females to play football. This action was brought by one named- plaintiff who alleges that she has a right to pursue the opportunity to qualify to play football with the Muny leagues. There was no indication that defendants planned to assert at the hearing on the preliminary injunction that Miss Clinton does not meet those standards required of the other members of the 97th Street Bulldogs, except for the fact that she is a female. Nor did it appear that defendants planned to offer testimony from which this Court could arguably draw an inference that physical trauma will in every case have more of an impact on girls than boys or that girls are always more susceptible to disease as a result of physical trauma. The plaintiff has cited several recent cases in which courts have struck down school regulations which bar females from participating in school athletics solely on the basis of their sex. [FN2] Defendants argued, however, that all of those cases have involved the question of whether the school or athletic board had a legitimate state purpose in denying women an equal opportunity to qualify for non-contact sports, and the defendants cite a recent Sixth Circuit case for the proposition that although a temporary restraining order was properly granted against the defendants from enforcing a school regulation barring women athletes from participating in non-contact sports, the issuance 39 of a temporary restraining order against the enforcement of a regulation excluding women from contact sports would be improper since that regulation would bear a reasonable relationship to a legitimate state purpose. Morris v. Michigan State Board of Education, 472 F.2d 1207 (1973). This Court is unable to agree with the defendants' interpretation of the Morris case in this regard. FN2. For an excellent survey of the cases and authorities on the question of discrimination against women in interscholastic sport activities see Brenden v. Independent School District 742, 477 F.2d 1292 (8th Cir. 1973). In Morris, two high school girls sought injunctive relief against the enforcement of a regulation of the Michigan High School Athletic Association which prohibited them from participating on their school's interscholastic tennis team. The district court issued a temporary restraining order against the defendants, and thereafter, as the Court of Appeals noted, the scope of the pleadings was expanded to include as a class, all girls in Michigan high schools who wanted to participate in interscholastic non-contact sports. The district court judge subsequently issued a preliminary injunction in which he enjoined the defendants from preventing or obstructing females from full participation in interscholastic athletics and athletic contests solely because of their sex. On appeal, the Sixth Circuit noted that the district court failed to limit his injunctive order to non-contact sports. The Sixth Circuit remanded the case to the district court for modification of the injunctive order to limit its scope to non-contact sports, not because the record supported a finding that the state had a legitimate state purpose in excluding females from contact sports, but rather because there was no case or controversy before the district court in that action regarding the constitutionality of such an exclusion. The Sixth Circuit in Morris did, however, state with regard to the non- contact exclusion that where a regulation is based upon a classification by sex, that 'classification is subject to scrutiny under the Equal Protection Clause of the Fourteenth Amendment to ascertain whether there is a rational relationship to a valid state purpose.' 472 F.2d at page 1209. And, despite the fact that the application of this test in the case was limited to non- contact sports in the pleadings, it would appear that this is the appropriate test to be applied in the instant case in which the regulation pertains to a contact sport. In evaluating the plaintiff's motion for the issuance of a temporary restraining order herein the Court concludes that plaintiff has shown a substantial likelihood of success of the merits of her claim that defendants have precluded her from participating in the Muny League football games because she is a female, and solely because she is a female. Defendants have offered no evidence, nor did defendants indicate that they would present evidence to this Court that Miss Clinton does not possess the qualifications and physical ability required of male members to participate in the league's games. The defendants offered no argument nor did they put forward a factual basis on which this Court could conclude that Miss Brenda Clinton is more susceptible to injury than are the other 'Bulldogs.' In addition, in response to the Court's inquiry, defendants stated that equipment is issued to every qualified member of the Muny league teams. That equipment includes shoulder pads, face guards, helmets and mouth pieces. The Court is satisfied, without an indication of expected testimony to the contrary, that those safeguards deemed adequate to protect the male members of the team will be similarly adequate protection for Brenda Clinton. 40 Defendants argued, however, that even if Brenda were qualified to play as a 'Bulldog' the temporary restraining order should not issue because she had made no showing that she would suffer irreparable harm if she were not permitted to play with that team. The Court is unable to concur in defendants' assertion. Of course, females have not engaged in traditionally male sports, and as a result, in many instances females lack the requisite training to qualify for membership on all-male teams, particularly those teams established for the playing of 'contact' sports. Perhaps those who find merit in the more traditional male-female roles may have great difficulty in understanding how a young girl will suffer irreparable harm if she is precluded from engaging in the rough and sometimes even brutal contest of football. Many adults, no doubt, may feel that young girls will in fact suffer great harm, both physically and socially, if they are permitted to participate in 'boys" games. However, football is by its very nature a physically dangerous game, and the threat of injuries to young boys has alarmed many parents in the community for years. Nevertheless, organized contact sports such as football continue to be played, and those individual who encourage young men to participate in these sports seem to do so with a sincere belief that although the game is potentially dangerous, the rewards which will be reaped from participation in the game offset the potential dangers. Organized contact sports have generally been thought of as an opportunity and means for a young boy to develop strength of character, leadership qualities and to provide competitive situations through which he will better learn to cope with the demands of the future. Yet, although these are presumably qualities to which we desire all of the young to aspire, the opportunity to qualify to engage in sports activities through which such qualities may be developed has been granted to one class of the young and summarily denied to the other. It is necessary that we begin to focus on the individual rather than thinking in broad generalities, which have oftentimes resulted in the imposition of irrational barriers, against one class or another. The issue before this Court is whether one young person, Brenda Clinton, who apparently qualifies to play with the 97th Street Bulldogs in every respect except for her sex, should be given the opportunity to participate in the game of football and to develop strength and character in that way in which she, with her mother's approval, believes will be the most valuable to her. The Court concluded that to deprive a qualified twelve year old girl of an opportunity to engage in that activity would cause her to suffer irreparable harm, particularly in light of the fact that there are only two remaining games this season, on November 2, 1974 and November 9, 1974. The motion for the temporary restraining order is granted. Accordingly, the defendants, their agents, employees, and all persons having actual knowledge of this order are hereby enjoined from prohibiting plaintiff Brenda Clinton from participating as a member of the 97th Street Bulldogs in its football games solely because of her sex. As this Court has already cautioned plaintiff, nothing in this order should be construed as requiring Coach Thomas to put Brenda Clinton into a game, should he determine that she does not qualify on the day of a game or should he deem another member of the team to be better suited to play in the position for which Miss Clinton has qualified. This matter is set down for a hearing on plaintiff's motion for a preliminary injunction, to be consolidated with a hearing on the merits of her claim for permanent injunctive and 41 declaratory relief on November 26, 1974, at 1:30. IT IS SO ORDERED. Norwalk Code v. Norwalk Board of Education 298 F.Supp. 203 (1968) NORWALK CODE, a/k/a Norwalk Chapter of the Congress of Racial Equality and Roodner Court Fair Rent Association et al., Plaintiffs, v. NORWALK BOARD OF EDUCATION, a/k/a the Board of Education of the City of Norwalk, Connecticut, Defendant. 298 F.Supp. 203 Civ. No. 12624. United States District Court D. Connecticut. Sept. 4, 1968. Jonathan W. Lubell, of Lubell & Lubell, New York City (Stephen L. Fine, Westport, Conn., on the brief), for plaintiffs. Robert H. Rubin, Sp. Corp. Counsel of City of Norwalk, South Norwalk, Conn., for defendant. MEMORANDUM OF DECISION DENYING PLAINTIFFS' APPLICATION FOR A TEMPORARY RESTRAINING ORDER TIMBERS, Chief Judge. Plaintiffs move for a temporary restraining order to prevent defendant from closing the Nathaniel Ely School, South Norwalk, Connecticut, pending determination of their motion for a preliminary injunction in this class action. Their motion is based on the pleadings, supporting affidavits, briefs and oral argument of counsel on September 3, 1968. After due consideration, the Court holds that plaintiffs' motion for a temporary restraining order should be denied. In addition, pursuant to Rule 65(a)(2), Fed.R.Civ.P., the Court orders that the trial of the action on the merits be advanced and consolidated with the hearing on the motion for a preliminary injunction. Plaintiffs' motion for a temporary restraining order accordingly is denied. FACTS Plaintiffs Norwalk Core (Core), Roodner Court Fair Rent Association (Association) and two minor children allege that defendant Norwalk Board of Education (Board), while committed to racial integration in the schools and cognizant of the important advantages 42 of the neighborhood school concept, nevertheless has preserved neighborhood public elementary schools only in middle class and upper middle class white neighborhoods. It is alleged that the Board 'has intentionally abandoned or destroyed and permitted to lie unused' public elementary schools in the low income Black and Puerto Rican neighborhoods. This, it is claimed, constitutes a double standard denying the class which plaintiffs claim to represent the right to attend an integrated neighborhood school and compelling them to be transported into white neighborhoods. That the busing operates in one direction only is said to be a denial of equal protection of the law under the guise of racial integration. Plaintiffs seek a declaratory judgment holding this discriminatory practice unconstitutional; a permanent injunction prohibiting the maintenance of white neighborhood schools without at the same time instituting a Black neighborhood school policy; and a permanent mandatory injunction to compel the Board to produce a Black neighborhood school policy for approval by the Court. The Board denies all the allegations except those which attribute to it a policy of promoting racial integration; and the Board alleges special defenses, including standing, failure to state a claim, lack of jurisdiction, unconstitutionality of relief sought, administrative discretion, and failure to exhaust remedies available under Connecticut law. CLAIMS OF THE PARTIES WITH RESPECT TO THE TEMPORARY RESTRAINING ORDER SOUGHT Plaintiffs, in requesting a temporary restraining order, seek to maintain the status quo as of the time of commencement of this action; such status quo is said to be threatened by the Board's announced plans to discontinue the pre- kindergarten and kindergarten classes at the Nathaniel Ely School prior to the start of the present school year. [FN1] This decision allegedly was made after commencement of the present action, and is said to be 'directly harmful' to plaintiffs' case and an 'affirmative move' by the Board to undermine the purposes of the suit. The four and five year old children who would attend Nathaniel Ely are now to be bused, exposed to hazards and disadvantages, and deprived of comfort and self-confidence. Their parents will be deprived of a local forum in which to air their views. The affidavits submitted in support of the instant motion reiterate these allegations. FN1. During oral argument counsel for the Board stated that only the kindergarten classes are being discontinued and that the pre-kindergarten program would continue to be operated at the School. The Board, in opposition to the instant motion, accuses plaintiffs of laches in not moving for the present relief until just before the beginning of the school year, alleging that plaintiffs have been award of the Board's intention to discontinue the kindergarten program at Nathaniel Ely since May or June, 1968. During the time between plaintiffs' notice of the Board's intentions and the instant motion, the Board claims it has expended money to institute the busing program. In addition, it claims it could not staff the school adequately now were the Court to order its reopening. Notwithstanding this factual controversy, the Board urges that granting of the restraining order would be contrary to recent constitutional doctrine in that it would have the necessary effect of depriving the 43 children of the opportunity to attend an integrated school by compelling them to attend a segregated kindergarten in a building devoid of other school activities. OPINION [1][2][3][4][5] A motion for a temporary restraining order is addressed to the discretion of the Court. It seeks to preserve the status quo pending hearing on the motion for a preliminary injunction and trial on the merits. Although its denial may work injury to the movant, this alone is insufficient to compel its issuance. The movant has no 'right' to a temporary restraining order. Instead, the Court must balance the validity of the claims asserted against the nature of the acts to be enjoined, and evaluate the movant's probability of success in the underlying action. Thus, while irreparable injury is a prerequisite, it is not controlling. 7 Moore's Federal Practice P65.04-.05 (2d ed. 1966). In the present controversy, plaintiffs are asserting rights against a public instrumentality. At this late date, the temporary restraining order they seek may disrupt the educational policy of the community of Norwalk. As noted in Yakus v. United States, 321 U.S. 414, 440-41 (1944): 'Where an injunction is asked which will adversely affect a public interest for whose impairment, even temporarily, an injunction bond cannot compensate, the court may in the public interest withhold relief until a final determination of the rights of the parties, though the postponement may be burdensome to the plaintiff. * * * This is but another application of the principle, declared in Virginian Ry. Co. v. System Federation, 300 U.S. 515, 552, that 'Courts of equity may, and frequently do, go much farther both to give and withhold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved.' [6] Returning to the more general area of a temporary restraining order, the law in this Circuit is clear that, like a preliminary injunction, it is an extraordinary remedy which will not be granted unless there is a clear showing of probable success and irreparable injury. See American Metropolitan Enterprises of New York, Inc. v. Warner Bros. Records, Inc., 389 F.2d 903, 904 (2 Cir. 1968); Clairol Incorporated v. Gillette Company, 389 F.2d 264, 265 (2 Cir. 1968); Santos v. Bonnano, 369 F.2d 369, 370 (2 Cir. 1966); Imperial Chemical Industries Limited v. National Distillers and Chemical Corp., 354 F.2d 459, 462 (2 Cir. 1965); Societe Comptoir De L'Industrie Cotonniere Establissements Boussac v. Alexanders Department Stores, Inc., 299 F.2d 33, 35 (2 Cir. 1962). [7] While, as noted above, irreparable injury, during the pendency of the action, is insufficient by itself to mandate the granting of a temporary restraining order, it is nevertheless 'the most significant condition which much be present * * *.' Capital City Gas Company v. Phillips Petroleum Company, 373 F.2d 128, 131 (2 Cir. 1967). In the present controversy, however, the allegations of irreparable injury focus primarily on the harm which may result if permanent relief is denied. The only claim of injury during the pendency of the action concerns possible damage to the young children incident to being bused and the potential disruption of the academic year if the Nathaniel Ely School is temporarily closed and plaintiffs later are successful. Conversely, it is urged that the order would work no harm to the children who could continue to attend their neighborhood school, nor to the Board which could move the children later if the Board ultimately prevails on the merits. 44 These claims, however, clearly ignore the adverse consequences of a temporary restraining order on the children themselves: it would continue the de facto economic segregation existing at Nathaniel Ely by compelling Black and Puerto Rican children to attend an unintegrated school. On this motion plaintiffs do not seek to have the Court order the busing of white children into the Ely School during the pendency of the action. This is their ultimate goal; but until it is attained it is difficult to see the 'irreparable harm' which will result from placing these young children in a racially integrated environment, albeit one somewhat removed from their home neighborhood. This exposure of young children of all races to the acknowledged benefits of an integrated school is the goal of both sides in the present dispute; the critical difference concerns only the location of this exposure. To deny the exposure in order to preserve a segregated neighborhood school would seem itself to be inconsistent with the relief sought by plaintiffs. [8] While the issuance of a temporary restraining order 'serves as an equitable policing measure to prevent the parties from harming one another during the litigation' and to retain the status quo, Hamilton Watch Co. v. Benrus Watch Co., Inc., 206 F.2d 738, 742 (2 Cir. 1963), where as here the alleged disruption of the status quo may be beneficial to both parties and not hinder the effectuation of whatever relief this Court grants in the underlying action, the motion should be denied. Just as a local neighborhood Black school is arguably preferable to no school, Griggs v. Cook, 272 F.Supp. 163 (N.D.Ga.), aff'd per curiam, 384 F.2d 705 (5 Cir. 1967), so is a non- neighborhood integrated school arguably preferable to a neighborhood segregated school. Admittedly, the most desirable goal is a combination of integration with white and Black neighborhood schools; but this alternative is unavailable on the present motion. The operation of a school is within the discretion of the local board. While a federal court may have jurisdiction when that board violates an individual's constitutional rights, the anticipated closing of the Nathaniel Ely School would impose no such violation. [9] This is no way implies a resolution of the ultimate issues in the underlying action; but it recognizes, for purposes of the instant motion alone, the position of the Supreme Court in Brown v. Board of Education, 349 U.S. 294, 299 (1955), that 'school authorities have the primary responsibility for elucidating, assessing and solving these problems; courts will have to consider whether the action of school authorities constitutes good faith implementation of governing constitutional principles.' $The good faith of the Board and the minimal nature of the harm which the present closing of the Ely School will impose, pending determination of plaintiffs' rights in subsequent proceedings in this action, do not justify the granting of a temporary restraining order. [10] In denying plaintiffs' present motion, the Court wishes to indicate its intended utilization of the procedure of Rule 65(a)(2), Fed.R.Civ.P., should plaintiffs renew their claim on a motion for a preliminary injunction. This will enable the Court to consolidate the trial of the action on the merits with the hearing on the motion for a preliminary injunction, to avoid the repetition of evidence at trial and to expedite final determination of this sensitive issue. As recently noted in Singleton v. Board of Education, 387 F.2d 349 (4 Cir. 1967), such procedure provides a means of avoiding the piecemeal vindication of civil rights which results from the issuance of preliminary injunctions in complex fact situations. That court, as does this Court, while recognizing that relief at a later date might be detrimental, recommended acceleration of the case on the trial calendar and use of Rule 65(a)(2) to hear the merits at the same time. 387 F.2d at 350- 45 51. ORDER Ordered that (1) Plaintiffs' motion for a temporary restraining order is denied. (2) In the event plaintiffs claim their motion for a preliminary injunction for hearing, the Clerk is directed to advance the trial of the action on the merits and to consolidate the trial with the hearing on the motion for a preliminary injunction. Section Two Article Just How Level A Playing Field GOLF: Just How Level A Playing Field?; Casey Martin Says He Needs A Cart to Play; the PGA Says No By MARCIA CHAMBERS Copyright 1998 The New York Times Company The New York Times January 15, 1998 Is a professional golf organization entitled to make its own rules, or should it be forced to obey broad civil rights disabilities laws that could change the competitive nature of the game? That is the main legal question raised in a lawsuit brought by Casey Martin, a 25-yearold professional golfer from Eugene, Ore., who has Klippel-Trenaunay-Weber syndrome, a congenital circulatory disorder that hinders his ability to walk. He has sued the PGA Tour for the right to ride in a cart to play on the Nike Tour, which is one of the PGA's satellite tours. The Americans With Disabilities Act, considered the most extensive civil rights legislation to pass Congress since the Civil Rights Act of 1964, has been keenly felt in the worlds of architecture, transportation and employment. Now it makes its entry into the world of professional sport. 46 Legal experts say that Casey Martin v. the PGA Tour Inc. is the first case in which a professional athlete has invoked the disabilities act to play competitive sports. The lawsuit has caused an intense debate in the world of sport, where disabling injuries are common and lawsuits are not typically used to change the rules of play to accommodate a disabled player. Martin's disorder worsened, his lawyers said, when the Hooter mini-tour, one of the stepping stones to the Nike Tour, refused to let him use a cart last year. "He is now in danger of fracture, and there is a high possibility of amputation," said William Wiswall, a personal injury attorney from Eugene, who represents Martin. An outstanding golfer at Stanford University, where he was Tiger Woods's roommate, Martin either walked or was allowed to use a cart. At Stanford, the National Collegiate Athletic Association permitted him to use a cart in competition. Last weekend, Martin won the Nike Tour's first tournament of the season, the Lakeland Classic. And he will be allowed to play at the South Florida Classic, which starts today in Pompano Beach, Fla. He would not have been playing at all if the PGA Tour had its way. But a Federal magistrate in Eugene last November issued a preliminary injunction ordering the Tour to provide a cart for Martin in the final qualifying rounds for the Nike or PGA Tour. Martin went to court after the Tour refused to lift a no-cart rule it requires for the final rounds. In his lawsuit, he said if he could not compete in the qualifying rounds, "he would be unable to pursue his profession at this high level." A preliminary injunction is considered an extraordinary measure, one that has the effect of direct intervention in the affairs of an organization. Typically, it is ordered if the judge believes the plaintiff will eventually prevail on the merits of his case. A judge will also weigh which side will suffer irreparable harm. "The balance of hardship tips overwhelmingly in favor of plaintiff, and any hardship to defendant is de minimus," Magistrate Thomas M. Coffin said in granting the preliminary injunction, which was extended to include the first two Nike events because they precede the next Federal court hearing, which is scheduled for Feb. 2. But the hearing on making the preliminary injunction permanent will only be held if Martin's case survives the Tour's motion for a summary judgment. In it, the Tour is asking the court to dismiss all of Martin's claims because it says that as a matter of law, the disabilities act does not apply to the Tour. The Tour has stipulated that Martin's disability falls under the act's definition of disabled, but there the agreement ends. The Tour asserts that it is a private entity not subject to the provisions of the disability act, under an exception in the act that specifically exempts "private clubs or establishments." The Tour's lawyers said that "while plaintiff's golf skills and accomplishments may be notable, and perhaps even inspirational, Congress never intended the A.D.A. to require a private organization such as the PGA Tour to change the rules of its tournaments to accommodate a would-be participant." Stephen F. Gold, an expert on the disabilities act for the Public Interest Law Center of Philadelphia, says the act does not exempt professional sports from its reach. The Tour, 47 he said, was not a private entity; the section cited by the Tour regarding private clubs, he said, refers to private country or social clubs, not to a huge entity engaged in putting on major, lucrative golf tournaments with $3 million purses. As for Martin, Gold said: "He is a worker. He is making a living. He is not asking for pity or charity. He wants an equal opportunity to hit the ball, and the A.D.A. gives him that right." The Tour says to assert such a right, Martin must be an employee of the Tour. But is Martin an employee? From the outside it may look that way, but the Tour is a complicated entity. Actually, he and the other Tour members are independent contractors, who belong to a nonprofit trade association or business league called the PGA Tour. Neither the Tour nor its commissioner are considered employers. Indeed, their roles are reversed. The Tour players as independent contractors hire the tour administrators to manage their tournaments. The players earn no salaries; their earnings come by way of tournament prize money. The PGA Tour Commissioner, Tim Finchem, says that what this case is ultimately about is "whether or not the courts should make the rules for the game or the governing body of the game should make those rules." The courts have typically deferred to the sports bodies, believing that those who are closest to the game understand it best. Golf and other sports are littered with examples of revolutionary equipment whose banning was upheld by the courts after sports officials explained how the new equipment would change the nature of the game -- a self-correcting golf ball, a specially balanced golf shoe, a double-strung tennis racquet dubbed the spaghetti racquet. In those cases, the losers were inventors and manufacturers, but here, if the Tour wins, the loser will be an athlete. The Tour says that it has been a conscientious follower of the disability act's mandate when it comes to access to tournaments for viewing purposes, but that is a far cry from changing the rules of competitive golf "inside the ropes," as Finchem put it. "We think that endurance is a part of our sport," Finchem said. "Walking has been an integral part of the competition on all Tours and has been uniformly recognized as an integral part of the competition by all the major bodies in golf for a long, long time." How this policy applies to the Senior Tour, where players are permitted to take carts, is a question Martin's attorneys will address. What the disabilities act requires is that a "reasonable accommodation" be made for a disabled person who otherwise can do his job. But what is a "reasonable accommodation" in the context of sports, where the concept of a level playing field lies at the core of the enterprise? At 18 holes on a cool, clear day, most players would probably choose to walk, even if they could ride. Providing a cart to a disabled golfer might be a reasonable accommodation. But in the stifling heat and humidity of a Southern summer weekend? Or in rain delays that leave some players with 30 or more holes to play on a single day? Those are the kinds of imponderables the Tour would like to avoid. The Tour's witness list for the Feb. 2 hearing includes Arnold Palmer, who was deposed by both sides in California this week. 48 Cases PGA Tour v. Martin 532 U.S. 661, 121 S.Ct. 1879 Supreme Court of the United States PGA TOUR, INC., Petitioner, v. Casey MARTIN. No. 00-24. Argued Jan. 17, 2001. Decided May 29, 2001. STEVENS, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and O'CONNOR, KENNEDY, SOUTER, GINSBURG, and BREYER, JJ., joined. SCALIA, J., filed a dissenting opinion, in which THOMAS, J., joined. H. Bartow Farr, III, Washington, DC, for petitioner. Roy L. Reardon, New York City, for respondent. Barbara D. Underwood, Washington, DC, for United States as amicus curiae, by special leave of the Court, supporting respondent. Justice STEVENS delivered the opinion of the Court. This case raises two questions concerning the application of the Americans with Disabilities Act of 1990, 104 Stat. 328, 42 U.S.C. § 12101 et seq., to a gifted athlete: first, whether the Act protects access to professional golf tournaments by a qualified entrant with a disability; and second, whether a disabled contestant may be denied the use of a golf cart because it would "fundamentally alter the nature" of the tournaments, § 12182(b)(2) (A)(ii), to allow him to ride when all other contestants must walk. I Petitioner PGA TOUR, Inc., a nonprofit entity formed in 1968, sponsors and cosponsors professional golf tournaments conducted on three annual tours. About 200 golfers participate in the PGA TOUR; about 170 in the NIKE TOUR [FN1]; and about 100 in the SENIOR PGA TOUR. PGA TOUR and NIKE TOUR tournaments typically are 4-day events, played on courses leased and operated by petitioner. The entire field usually competes in two 18-hole rounds played on Thursday and Friday; those who survive the 49 "cut" play on Saturday and Sunday and receive prize money in amounts determined by their aggregate scores for all four rounds. The revenues generated by television, admissions, concessions, and contributions from cosponsors amount to about $300 million a year, much of which is distributed in prize money. FN1. After the trial of the case, the name of the NIKE TOUR was changed to the Buy.com TOUR. There are various ways of gaining entry into particular tours. For example, a player who wins three NIKE TOUR events in the same year, or is among the top- 15 money winners on that tour, earns the right to play in the PGA TOUR. Additionally, a golfer may obtain a spot in an official tournament through successfully competing in "open" qualifying rounds, which are conducted the week before each tournament. Most participants, however, earn playing privileges in the PGA TOUR or NIKE TOUR by way of a three-stage qualifying tournament known as the "Q-School." Any member of the public may enter the Q-School by paying a $3,000 entry fee and submitting two letters of reference from, among others, PGA TOUR or NIKE TOUR members. The $3,000 entry fee covers the players' greens fees and the cost of golf carts, which are permitted during the first two stages, but which have been prohibited during the third stage since 1997. Each year, over a thousand contestants compete in the first stage, which consists of four 18- hole rounds at different locations. Approximately half of them make it to the second stage, which also includes 72 holes. Around 168 players survive the second stage and advance to the final one, where they compete over 108 holes. Of those finalists, about a fourth qualify for membership in the PGA TOUR, and the rest gain membership in the NIKE TOUR. The significance of making it into either tour is illuminated by the fact that there are about 25 million golfers in the country. [FN2] FN2. Generally, to maintain membership in a tour for the succeeding year, rather than go through the Q-School again, a player must perform at a certain level. Three sets of rules govern competition in tour events. First, the "Rules of Golf," jointly written by the United States Golf Association (USGA) and the Royal and Ancient Golf Club of Scotland, apply to the game as it is played, not only by millions of amateurs on public courses and in private country clubs throughout the United States and worldwide, but also by the professionals in the tournaments conducted by petitioner, the USGA, the Ladies' Professional Golf Association, and the Senior Women's Golf Association. Those rules do not prohibit the use of golf carts at any time. [FN3] FN3. Instead, Appendix I to the Rules of Golf lists a number of "optional" conditions, among them one related to transportation: If it is desired to require players to walk in a competition, the following condition is suggested: "Players shall walk at all times during a stipulated round." App. 125. 50 Second, the "Conditions of Competition and Local Rules," often described as the "hard card," apply specifically to petitioner's professional tours. The hard cards for the PGA TOUR and NIKE TOUR require players to walk the golf course during tournaments, but not during open qualifying rounds. [fn4] ON THE SENIOR PGA tour, WHICH IS LIMITED to golfers age 50 and older, the contestants may use golf carts. Most seniors, however, prefer to walk. [FN5] FN4. The PGA TOUR hard card provides: "Players shall walk at all times during a stipulated round unless permitted to ride by the PGA TOUR Rules Committee." Id., at 127. The NIKE TOUR hard card similarly requires walking unless otherwise permitted. Id., at 129. Additionally, as noted, golf carts have not been permitted during the third stage of the Q-School since 1997. Petitioner added this recent prohibition in order to "approximat[e] a PGA TOUR event as closely as possible." Id., at 152. FN5. 994 F.Supp. 1242, 1251 (D.Or.1998). Third, "Notices to Competitors" are issued for particular tournaments and cover conditions for that specific event. Such a notice may, for example, explain how the Rules of Golf should be applied to a particular water hazard or man-made obstruction. It might also authorize the use of carts to speed up play when there is an unusual distance between one green and the next tee. [FN6] FN6. See, e.g., App. 156-160 (Notices to Competitors for 1997 Bob Hope Chrysler Classic, 1997 AT & T Pebble Beach National Pro-Am, and 1997 Quad City Classic). The basic Rules of Golf, the hard cards, and the weekly notices apply equally to all players in tour competitions. As one of petitioner's witnesses explained with reference to "the Masters Tournament, which is golf at its very highest level ... the key is to have everyone tee off on the first hole under exactly the same conditions and all of them be tested over that 72-hole event under the conditions that exist during those four days of the event." App. 192. II Casey Martin is a talented golfer. As an amateur, he won 17 Oregon Golf Association junior events before he was 15, and won the state championship as a high school senior. He played on the Stanford University golf team that won the 1994 National Collegiate Athletic Association (NCAA) championship. As a professional, Martin qualified for the NIKE TOUR in 1998 and 1999, and based on his 1999 performance, qualified for the PGA TOUR in 2000. In the 1999 season, he entered 24 events, made the cut 13 times, and had 6 top-10 finishes, coming in second twice and third once. 51 Martin is also an individual with a disability as defined in the Americans with Disabilities Act of 1990 (ADA or Act). [FN7] Since birth he has been afflicted with KlippelTrenaunay-Weber Syndrome, a degenerative circulatory disorder that obstructs the flow of blood from his right leg back to his heart. The disease is progressive; it causes severe pain and has atrophied his right leg. During the latter part of his college career, because of the progress of the disease, Martin could no longer walk an 18-hole golf course. [FN8] Walking not only caused him pain, fatigue, and anxiety, but also created a significant risk of hemorrhaging, developing blood clots, and fracturing his tibia so badly that an amputation might be required. For these reasons, Stanford made written requests to the Pacific 10 Conference and the NCAA to waive for Martin their rules requiring players to walk and carry their own clubs. The requests were granted. [FN9] FN7. 42 U.S.C. § 12102 provides, in part: "The term 'disability' means, with respect to an individual-"(A) a physical or mental impairment that substantially limits one or more of the major life activities of such individual ....." FN8. Before then, even when Martin was in extreme pain, and was offered a cart, he declined. Tr. 564-565. FN9. When asked about the other teams' reaction to Martin's use of a cart, the Stanford coach testified: "Q. Was there any complaint ever made to you by the coaches when he was allowed a cart that that gave a competitive advantage over the-"A. Any complaints? No sir, there were exactly--exactly the opposite. Everybody recognized Casey for the person he was, and what he was doing with his life, and every coach, to my knowledge, and every player wanted Casey in the tournament and they welcomed him there. "Q. Did anyone contend that that constituted an alteration of the competition to the extent that it didn't constitute the game to your level, the college level? "A. Not at all, sir." App. 208. When Martin turned pro and entered petitioner's Q-School, the hard card permitted him to use a cart during his successful progress through the first two stages. He made a request, supported by detailed medical records, for permission to use a golf cart during the third stage. Petitioner refused to review those records or to waive its walking rule for the third stage. Martin therefore filed this action. A preliminary injunction entered by the District Court made it possible for him to use a cart in the final stage of the Q-School and as a competitor in the NIKE TOUR and PGA TOUR. Although not bound by the injunction, and despite its support for petitioner's position in this litigation, the USGA voluntarily granted Martin a similar waiver in events that it sponsors, including the U.S. Open. III In the District Court, petitioner moved for summary judgment on the ground that it is 52 exempt from coverage under Title III of the ADA as a "private clu[b] or establishmen[t]," [FN10] or alternatively, that the play areas of its tour competitions do not constitute places of "public accommodation" within the scope of that Title. [FN11] The Magistrate Judge concluded that petitioner should be viewed as a commercial enterprise operating in the entertainment industry for the economic benefit of its members rather than as a private club. Furthermore, after noting that the statutory definition of public accommodation included a "golf course," [FN12] he rejected petitioner's argument that its competitions are only places of public accommodation in the areas open to spectators. The operator of a public accommodation could not, in his view, "create private enclaves within the facility ... and thus relegate the ADA to hop-scotch areas." 984 F.Supp. 1320, 1326-1327 (D.Or.1998). Accordingly, he denied petitioner's motion for summary judgment. FN10. Title 42 U.S.C. § 12187 provides: "The provisions of this subchapter shall not apply to private clubs or establishments exempted from coverage under Title II of the Civil Rights Act of 1964 (42 U.S.C. § 2000-a(e)) or to religious organizations or entities controlled by religious organizations, including places of worship." FN11. See § 12181(7). FN12. § 12181(7)(L). At trial, petitioner did not contest the conclusion that Martin has a disability covered by the ADA, or the fact "that his disability prevents him from walking the course during a round of golf." 994 F.Supp. 1242, 1244 (D.Or.1998). Rather, petitioner asserted that the condition of walking is a substantive rule of competition, and that waiving it as to any individual for any reason would fundamentally alter the nature of the competition. Petitioner's evidence included the testimony of a number of experts, among them some of the greatest golfers in history. Arnold Palmer, [FN13] Jack Nicklaus, [FN14] and Ken Venturi [FN15] explained that fatigue can be a critical factor in a tournament, particularly on the last day when psychological pressure is at a maximum. Their testimony makes it clear that, in their view, permission to use a cart might well give some players a competitive advantage over other players who must walk. They did not, however, express any opinion on whether a cart would give Martin such an advantage. [FN16] FN13. "Q. And fatigue is one of the factors that can cause a golfer at the PGA Tour level to lose one stroke or more? "A. Oh, it is. And it has happened. "Q. And can one stroke be the difference between winning and not winning a tournament at the PGA Tour level? "A. As I said, I've lost a few national opens by one stroke." App. 177. 53 FN14. "Q. Mr. Nicklaus, what is your understanding of the reason why in these competitive events ... that competitors are required to walk the course? "A. Well, in my opinion, physical fitness and fatigue are part of the game of golf." Id., at 190. FN15. "Q. So are you telling the court that this fatigue factor tends to accumulate over the course of the four days of the tournament? "A. Oh definitely. There's no doubt. . . . . . "Q. Does this fatigue factor that you've talked about, Mr. Venturi, affect the manner in which you--you perform as a professional out on the golf course? "A. Oh, there's no doubt, again, but that, that fatigue does play a big part. It will influence your game. It will influence your shot-making. It will influence your decisions." Id., at 236-237. FN16. "Q. Based on your experience, do you believe that it would fundamentally alter the nature of the competition on the PGA Tour and the Nike Tour if competitors in those events were permitted to use golf carts? "A. Yes, absolutely. "Q. Why do you say so, sir? "A. It would--it would take away the fatigue factor in many ways. It would--it would change the game. . . . . . "Q. Now, when you say that the use of carts takes away the fatigue factor, it would be an aid, et cetera, again, as I understand it, you are not testifying now about the plaintiff. You are just talking in general terms? . . . . . "A. Yes, sir." Id., at 238. See also id., at 177-178 (Palmer); id., at 191 (Nicklaus). Rejecting petitioner's argument that an individualized inquiry into the necessity of the walking rule in Martin's case would be inappropriate, the District Court stated that it had "the independent duty to inquire into the purpose of the rule at issue, and to ascertain whether there can be a reasonable modification made to accommodate plaintiff without frustrating the purpose of the rule" and thereby fundamentally altering the nature of petitioner's tournaments. Id., at 1246. The judge found that the purpose of the rule was to inject fatigue into the skill of shot-making, but that the fatigue injected "by walking the course cannot be deemed significant under normal circumstances." Id., at 1250. 54 Furthermore, Martin presented evidence, and the judge found, that even with the use of a cart, Martin must walk over a mile during an 18-hole round, [FN17] and that the fatigue he suffers from coping with his disability is "undeniably greater" than the fatigue his able-bodied competitors endure from walking the course. Id., at 1251. As the judge observed: FN17. "In the first place, he does walk while on the course--even with a cart, he must move from cart to shot and back to the cart. In essence, he still must walk approximately 25% of the course. On a course roughly five miles in length, Martin will walk 1 1/4 miles." 994 F.Supp., at 1251. "[P]laintiff is in significant pain when he walks, and even when he is getting in and out of the cart. With each step, he is at risk of fracturing his tibia and hemorrhaging. The other golfers have to endure the psychological stress of competition as part of their fatigue; Martin has the same stress plus the added stress of pain and risk of serious injury. As he put it, he would gladly trade the cart for a good leg. To perceive that the cart puts him--with his condition--at a competitive advantage is a gross distortion of reality." Id., at 1251-1252. As a result, the judge concluded that it would "not fundamentally alter the nature of the PGA Tour's game to accommodate him with a cart." Id., at 1252. The judge accordingly entered a permanent injunction requiring petitioner to permit Martin to use a cart in tour and qualifying events. On appeal to the Ninth Circuit, petitioner did not challenge the District Court's rejection of its claim that it was exempt as a "private club," but it renewed the contention that during a tournament the portion of the golf course " 'behind the ropes' is not a public accommodation because the public has no right to enter it." 204 F.3d 994, 997 (2000). The Court of Appeals viewed that contention as resting on the incorrect assumption that the competition among participants was not itself public. The court first pointed out that, as with a private university, "the fact that users of a facility are highly selected does not mean that the facility cannot be a public accommodation." Id., at 998. [FN18] In its opinion, the competition to enter the select circle of PGA TOUR and NIKE TOUR golfers was comparable because "[a]ny member of the public who pays a $3000 entry fee and supplies two letters of recommendation may try out in the qualifying school." Id., at 999. The court saw "no justification in reason or in the statute to draw a line beyond which the performance of athletes becomes so excellent that a competition restricted to their level deprives its situs of the character of a public accommodation." Ibid. Nor did it find a basis for distinguishing between "use of a place of public accommodation for pleasure and use in the pursuit of a living." Ibid. Consequently, the Court of Appeals concluded that golf courses remain places of public accommodation during PGA tournaments. Ibid. FN18. It explained: "For example, Title III includes in its definition 'secondary, undergraduate, or post-graduate private school [s].' 42 U.S.C. § 12181(7)(J). The competition to enter the most elite private universities is intense, and a relatively select few are admitted. That fact clearly does not remove the universities from the statute's definition as places of public accommodation." 204 F.3d, at 998. 55 On the merits, because there was no serious dispute about the fact that permitting Martin to use a golf cart was both a reasonable and a necessary solution to the problem of providing him access to the tournaments, the Court of Appeals regarded the central dispute as whether such permission would "fundamentally alter" the nature of the PGA TOUR or NIKE TOUR. Like the District Court, the Court of Appeals viewed the issue not as "whether use of carts generally would fundamentally alter the competition, but whether the use of a cart by Martin would do so." Id., at 1001. That issue turned on "an intensively fact-based inquiry," and, the court concluded, had been correctly resolved by the trial judge. In its words, "[a]ll that the cart does is permit Martin access to a type of competition in which he otherwise could not engage because of his disability." Id., at 1000. The day after the Ninth Circuit ruled in Martin's favor, the Seventh Circuit came to a contrary conclusion in a case brought against the USGA by a disabled golfer who failed to qualify for "America's greatest--and most democratic--golf tournament, the United States Open." Olinger v. United States Golf Assn., 205 F.3d 1001 (C.A.7 2000). [FN19] The Seventh Circuit endorsed the conclusion of the District Court in that case that "the nature of the competition would be fundamentally altered if the walking rule were eliminated because it would remove stamina (at least a particular type of stamina) from the set of qualities designed to be tested in this competition." Id., at 1006 (internal quotation marks omitted). In the Seventh Circuit's opinion, the physical ordeals endured by Ken Venturi and Ben Hogan when they walked to their Open victories in 1964 and 1950 amply demonstrated the importance of stamina in such a tournament. [FN20] As an alternative basis for its holding, the court also concluded that the ADA does not require the USGA to bear "the administrative burdens of evaluating requests to waive the walking rule and permit the use of a golf cart." Id., at 1007. FN19. The golfer in the Seventh Circuit case, Ford Olinger, suffers from bilateral avascular necrosis, a degenerative condition that significantly hinders his ability to walk. FN20. For a description of the conditions under which they played, see Olinger v. United States Golf Assn., 205 F.3d, at 1006-1007. Although the Seventh Circuit merely assumed that the ADA applies to professional golf tournaments, and therefore did not disagree with the Ninth on the threshold coverage issue, our grant of certiorari, 530 U.S. 1306, 121 S.Ct. 30, 147 L.Ed.2d 1052 (2000), encompasses that question as well as the conflict between those courts. IV Congress enacted the ADA in 1990 to remedy widespread discrimination against disabled individuals. In studying the need for such legislation, Congress found that "historically, society has tended to isolate and segregate individuals with disabilities, and, despite some improvements, such forms of discrimination against individuals with 56 disabilities continue to be a serious and pervasive social problem." 42 U.S.C. § 12101(a)(2); see § 12101(a)(3) ("[D]iscrimination against individuals with disabilities persists in such critical areas as employment, housing, public accommodations, education, transportation, communication, recreation, institutionalization, health services, voting, and access to public services"). Congress noted that the many forms such discrimination takes include "outright intentional exclusion" as well as the "failure to make modifications to existing facilities and practices." § 12101(a)(5). After thoroughly investigating the problem, Congress concluded that there was a "compelling need" for a "clear and comprehensive national mandate" to eliminate discrimination against disabled individuals, and to integrate them "into the economic and social mainstream of American life." S.Rep. No. 101-116, p. 20 (1989); H.R.Rep. No. 101-485, pt. 2, p. 50 (1990), U.S.Code Cong. & Admin.News 1990, pt. 2, pp. 303, 332. In the ADA, Congress provided that broad mandate. See 42 U.S.C. § 12101(b). In fact, one of the Act's "most impressive strengths" has been identified as its "comprehensive character," Hearings on S. 933 before the Senate Committee on Labor and Human Resources and the Subcommittee on the Handicapped, 101st Cong., 1st Sess., 197 (1989) (statement of Attorney General Thornburgh), and accordingly the Act has been described as "a milestone on the path to a more decent, tolerant, progressive society," Board of Trustees of Univ. of Ala. v. Garrett, 531 U.S. 356, 375, 121 S.Ct. 955, 148 L.Ed.2d 866 (2001) (KENNEDY, J., concurring). To effectuate its sweeping purpose, the ADA forbids discrimination against disabled individuals in major areas of public life, among them employment (Title I of the Act), [FN21] public services (Title II), [FN22] and public accommodations (Title III). [FN23] At issue now, as a threshold matter, is the applicability of Title III to petitioner's golf tours and qualifying rounds, in particular to petitioner's treatment of a qualified disabled golfer wishing to compete in those events. FN21. 42 U.S.C. § § 12111-12117. FN22. § § 12131-12165. FN23. § § 12181-12189. Title III of the ADA prescribes, as a "[g]eneral rule": "No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation." 42 U.S.C. § 12182(a). The phrase "public accommodation" is defined in terms of 12 extensive categories, [FN24] which the legislative history indicates "should be construed liberally" to afford people with disabilities equal access" to the wide variety of establishments available to the nondisabled. [FN25] 57 FN24. "(A) an inn, hotel, motel, or other place of lodging, except for an establishment located within a building that contains not more than five rooms for rent or hire and that is actually occupied by the proprietor of such establishment as the residence of such proprietor; "(B) a restaurant, bar, or other establishment serving food or drink; "(C) a motion picture house, theater, concert hall, stadium, or other place of exhibition or entertainment; "(D) an auditorium, convention center, lecture hall, or other place of public gathering; "(E) a bakery, grocery store, clothing store, hardware store, shopping center, or other sales or rental establishment; "(F) a laundromat, dry-cleaner, bank, barber shop, beauty shop, travel service, shoe repair service, funeral parlor, gas station, office of an accountant or lawyer, pharmacy, insurance office, professional office of a health care provider, hospital, or other service establishment; "(G) a terminal, depot, or other station used for specified public transportation; "(H) a museum, library, gallery, or other place of display or collection; "(I) a park, zoo, amusement park, or other place of recreation; "(J) a nursery, elementary, secondary, undergraduate, or postgraduate private school, or other place of education; "(K) a day care center, senior citizen center, homeless shelter, food bank, adoption agency, or other social service center establishment; and "(L) a gymnasium, health spa, bowling alley, golf course, or other place of exercise or recreation." § 12181(7) (emphasis added). FN25. S.Rep. No. 101-116, at 59; H.R. No. 101-485, pt. 2, at 100, U.S.Code Cong. & Admin.News 1990, pt. 2, at pp. 303, 382-383. [1] It seems apparent, from both the general rule and the comprehensive definition of "public accommodation," that petitioner's golf tours and their qualifying rounds fit comfortably within the coverage of Title III, and Martin within its protection. The events occur on "golf course[s]," a type of place specifically identified by the Act as a public accommodation. § 12181(7)(L). In addition, at all relevant times, petitioner "leases" and "operates" golf courses to conduct its Q-School and tours. § 12182(a). As a lessor and operator of golf courses, then, petitioner must not discriminate against any "individual" in the "full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations" of those courses. Ibid. Certainly, among the "privileges" offered by petitioner on the courses are those of competing in the Q-School and playing in the tours; indeed, the former is a privilege for which thousands of individuals from the general public pay, and the latter is one for which they vie. Martin, of course, is one of those individuals. It would therefore appear that Title III of the ADA, by its plain terms, prohibits petitioner from denying Martin equal access to its tours on the basis of his disability. Cf. Pennsylvania Dept. of Corrections v. Yeskey, 524 U.S. 206, 209, 118 S.Ct. 1952, 141 L.Ed.2d 215 (1998) (holding that text of Title II's prohibition of discrimination by "public entities" against disabled individuals "unmistakably includes State prisons and prisoners within its coverage"). [2] Petitioner argues otherwise. To be clear about its position, it does not assert (as it 58 did in the District Court) that it is a private club altogether exempt from Title III's coverage. In fact, petitioner admits that its tournaments are conducted at places of public accommodation. [FN26] Nor does petitioner contend (as it did in both the District Court and the Court of Appeals) that the competitors' area "behind the ropes" is not a public accommodation, notwithstanding the status of the rest of the golf course. Rather, petitioner reframes the coverage issue by arguing that the competing golfers are not members of the class protected by Title III of the ADA. [FN27] FN26. Reply Brief for Petitioner 1-2. FN27. Martin complains that petitioner's failure to make this exact argument below precludes its assertion here. However, the Title III coverage issue was raised in the lower courts, petitioner advanced this particular argument in support of its position on the issue in its petition for certiorari, and the argument was fully briefed on the merits by both parties. Given the importance of the issue, we exercise our discretion to consider it. See Harris Trust and Sav. Bank v. Salomon Smith Barney Inc., 530 U.S. 238, 245-246, n. 2, 120 S.Ct. 2180, 147 L.Ed.2d 187 (2000); Carlson v. Green, 446 U.S. 14, 17, n. 2, 100 S.Ct. 1468, 64 L.Ed.2d 15 (1980). [3] According to petitioner, Title III is concerned with discrimination against "clients and customers" seeking to obtain "goods and services" at places of public accommodation, whereas it is Title I that protects persons who work at such places. [FN28] As the argument goes, petitioner operates not a "golf course" during its tournaments but a "place of exhibition or entertainment," 42 U.S.C. § 12181(7)(C), and a professional golfer such as Martin, like an actor in a theater production, is a provider rather than a consumer of the entertainment that petitioner sells to the public. Martin therefore cannot bring a claim under Title III because he is not one of the " 'clients or customers of the covered public accommodation.' " [FN29] Rather, Martin's claim of discrimination is "job-related" [FN30] and could only be brought under Title I--but that Title does not apply because he is an independent contractor (as the District Court found) rather than an employee. FN28. Brief for Petitioner 10, 11. FN29. Id., at 19 (quoting 42 U.S.C. § 12182(b)(1)(A)(iv)). FN30. Brief for Petitioner 15; see also id., at 16 (Martin's claim "is nothing more than a straightforward discrimination-in-the- workplace complaint"). [4] The reference to "clients or customers" that petitioner quotes appears in 42 U.S.C. § 12182(b)(1)(A)(iv), which states: "For purposes of clauses (i) through (iii) of this subparagraph, the term 'individual or class of individuals' refers to the clients or 59 customers of the covered public accommodation that enters into the contractual, licensing or other arrangement." Clauses (i) through (iii) of the subparagraph prohibit public accommodations from discriminating against a disabled "individual or class of individuals" in certain ways [FN31] either directly or indirectly through contractual arrangements with other entities. Those clauses make clear on the one hand that their prohibitions cannot be avoided by means of contract, while clause (iv) makes clear on the other hand that contractual relationships will not expand a public accommodation's obligations under the subparagraph beyond its own clients or customers. FN31. Clause (i) prohibits the denial of participation, clause (ii) participation in unequal benefits, and clause (iii) the provision of separate benefits. As petitioner recognizes, clause (iv) is not literally applicable to Title III's general rule prohibiting discrimination against disabled individuals. [FN32] Title III's broad general rule contains no express "clients or customers" limitation, § 12182(a), and § 12182(b)(1)(A)(iv) provides that its limitation is only "[f]or purposes of" the clauses in that separate subparagraph. Nevertheless, petitioner contends that clause (iv)'s restriction of the subparagraph's coverage to the clients or customers of public accommodations fairly describes the scope of Title III's protection as a whole. FN32. Brief for Petitioner 20 (clause (iv) "applies directly just to subsection 12182(b)"); Reply Brief for Petitioner 4, n. 1 (clause (iv) "does not apply directly to the general provision prohibiting discrimination"). We need not decide whether petitioner's construction of the statute is correct, because petitioner's argument falters even on its own terms. If Title III's protected class were limited to "clients or customers," it would be entirely appropriate to classify the golfers who pay petitioner $3,000 for the chance to compete in the Q-School and, if successful, in the subsequent tour events, as petitioner's clients or customers. In our view, petitioner's tournaments (whether situated at a "golf course" or at a "place of exhibition or entertainment") simultaneously offer at least two "privileges" to the public--that of watching the golf competition and that of competing in it. Although the latter is more difficult and more expensive to obtain than the former, it is nonetheless a privilege that petitioner makes available to members of the general public. In consideration of the entry fee, any golfer with the requisite letters of recommendation acquires the opportunity to qualify for and compete in petitioner's tours. Additionally, any golfer who succeeds in the open qualifying rounds for a tournament may play in the event. That petitioner identifies one set of clients or customers that it serves (spectators at tournaments) does not preclude it from having another set (players in tournaments) against whom it may not discriminate. It would be inconsistent with the literal text of the statute as well as its expansive purpose to read Title III's coverage, even given petitioner's suggested limitation, any less broadly. [FN33] FN33. Contrary to the dissent's suggestion, our view of the Q-School does not make "everyone who seeks a job" at a public accommodation, through "an open 60 tryout" or otherwise, "a customer." Post, at 1901 (opinion of SCALIA, J.). Unlike those who successfully apply for a job at a place of public accommodation, or those who successfully bid for a contract, the golfers who qualify for petitioner's tours play at their own pleasure (perhaps, but not necessarily, for prize money), and although they commit to playing in at least 15 tournaments, they are not bound by any obligations typically associated with employment. See, e.g., App. 260 (trial testimony of PGA commissioner Timothy Finchem) (petitioner lacks control over when and where tour members compete, and over their manner of performance outside the rules of competition). Furthermore, unlike athletes in "other professional sports, such as baseball," post, at 1901, in which players are employed by their clubs, the golfers on tour are not employed by petitioner or any related organizations. The record does not support the proposition that the purpose of the Q-School "is to hire," ibid., rather than to narrow the field of participants in the sporting events that petitioner sponsors at places of public accommodation. [5] Our conclusion is consistent with case law in the analogous context of Title II of the Civil Rights Act of 1964, 78 Stat. 243, 42 U.S.C. § 2000a et seq. Title II of that Act prohibits public accommodations from discriminating on the basis of race, color, religion, or national origin. § 2000a(a). In Daniel v. Paul, 395 U.S. 298, 306, 89 S.Ct. 1697, 23 L.Ed.2d 318 (1969), applying Title II to the Lake Nixon Club in Little Rock, Arkansas, we held that the definition of a "place of exhibition or entertainment," as a public accommodation, covered participants "in some sport or activity" as well as "spectators or listeners." We find equally persuasive two lower court opinions applying Title II specifically to golfers and golf tournaments. In Evans v. Laurel Links, Inc., 261 F.Supp. 474, 477 (E.D.Va.1966), a class action brought to require a commercial golf establishment to permit black golfers to play on its course, the District Court held that Title II "is not limited to spectators if the place of exhibition or entertainment provides facilities for the public to participate in the entertainment." [FN34] And in Wesley v. Savannah, 294 F.Supp. 698 (S.D.Ga.1969), the District Court found that a private association violated Title II when it limited entry in a golf tournament on a municipal course to its own members but permitted all (and only) white golfers who paid the membership and entry fees to compete. [FN35] These cases support our conclusion that, as a public accommodation during its tours and qualifying rounds, petitioner may not discriminate against either spectators or competitors on the basis of disability. FN34. Title II of the Civil Rights Act of 1964 includes in its definition of "public accommodation" a "place of exhibition or entertainment" but does not specifically list a "golf course" as an example. See 42 U.S.C. § 2000a(b). FN35. Under petitioner's theory, Title II would not preclude it from discriminating against golfers on racial grounds. App. 197; Tr. of Oral Arg. 11-12. V [6] As we have noted, 42 U.S.C. § 12182(a) sets forth Title III's general rule prohibiting public accommodations from discriminating against individuals because of their 61 disabilities. The question whether petitioner has violated that rule depends on a proper construction of the term "discrimination," which is defined by Title III to include: "a failure to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the entity can demonstrate that making such modifications would fundamentallyalter the nature of such goods, services, facilities, privileges, advantages, or accommodations." § 12182(b)(2)(A)(ii) (emphasis added). Petitioner does not contest that a golf cart is a reasonable modification that is necessary if Martin is to play in its tournaments. Martin's claim thus differs from one that might be asserted by players with less serious afflictions that make walking the course uncomfortable or difficult, but not beyond their capacity. In such cases, an accommodation might be reasonable but not necessary. In this case, however, the narrow dispute is whether allowing Martin to use a golf cart, despite the walking requirement that applies to the PGA TOUR, the NIKE TOUR, and the third stage of the Q-School, is a modification that would "fundamentally alter the nature" of those events. [7] In theory, a modification of petitioner's golf tournaments might constitute a fundamental alteration in two different ways. It might alter such an essential aspect of the game of golf that it would be unacceptable even if it affected all competitors equally; changing the diameter of the hole from three to six inches might be such a modification. [FN36] Alternatively, a less significant change that has only a peripheral impact on the game itself might nevertheless give a disabled player, in addition to access to the competition as required by Title III, an advantage over others and, for that reason, fundamentally alter the character of the competition. [FN37] We are not persuaded that a waiver of the walking rule for Martin would work a fundamental alteration in either sense. [FN38] FN36. Cf. post, at 1903 (SCALIA, J., dissenting) ("I suppose there is some point at which the rules of a well-known game are changed to such a degree that no reasonable person would call it the same game"). FN37. Accord, post, at 1904 (SCALIA, J., dissenting) ("The statute seeks to assure that a disabled person's disability will not deny him equal access to (among other things) competitive sporting events--not that his disability will not deny him an equal chance to win competitive sporting events"). FN38. As we have noted, the statute contemplates three inquiries: whether the requested modification is "reasonable," whether it is "necessary" for the disabled individual, and whether it would "fundamentally alter the nature of" the competition. 42 U.S.C. § 12182(b)(2)(A)(ii). Whether one question should be decided before the others likely will vary from case to case, for in logic there seems to be no necessary priority among the three. In routine cases, the fundamental alteration inquiry may end with the question whether a rule is essential. Alternatively, the specifics of the claimed disability might be examined within the context of what is a reasonable or necessary modification. Given the concession by petitioner that the modification sought is reasonable and 62 necessary, and given petitioner's reliance on the fundamental alteration provision, we have no occasion to consider the alternatives in this case. As an initial matter, we observe that the use of carts is not itself inconsistent with the fundamental character of the game of golf. From early on, the essence of the game has been shot-making--using clubs to cause a ball to progress from the teeing ground to a hole some distance away with as few strokes as possible. [FN39] That essential aspect of the game is still reflected in the very first of the Rules of Golf, which declares: "The Game of Golf consists in playing a ball from the teeing ground into the hole by a stroke or successive strokes in accordance with the rules." Rule 1-1, Rules of Golf, App. 104 (italics in original). Over the years, there have been many changes in the players' equipment, in golf course design, in the Rules of Golf, and in the method of transporting clubs from hole to hole. [FN40] Originally, so few clubs were used that each player could carry them without a bag. Then came golf bags, caddies, carts that were pulled by hand, and eventually motorized carts that carried players as well as clubs. "Golf carts started appearing with increasing regularity on American golf courses in the 1950's. Today they are everywhere. And they are encouraged. For one thing, they often speed up play, and for another, they are great revenue producers." [FN41] There is nothing in the Rules of Golf that either forbids the use of carts, or penalizes a player for using a cart. That set of rules, as we have observed, is widely accepted in both the amateur and professional golf world as the rules of the game. [FN42] The walking rule that is contained in petitioner's hard cards, based on an optional condition buried in an appendix to the Rules of Golf, [FN43] is not an essential attribute of the game itself. FN39. Golf is an ancient game, tracing its ancestry to Scotland, and played by such notables as Mary Queen of Scots and her son James. That shot-making has been the essence of golf since early in its history is reflected in the first recorded rules of golf, published in 1744 for a tournament on the Leith Links in Edinburgh: "Articles & Laws in Playing at Golf "1. You must Tee your Ball, within a Club's length of the [previous] Hole. "2. Your Tee must be upon the Ground. "3. You are not to change the Ball which you Strike off the Tee. "4. You are not to remove, Stones, Bones or any Break Club for the sake of playing your Ball, Except upon the fair Green/ & that only/ within a Club's length of your Ball. "5. If your Ball comes among Water, or any Watery Filth, you are at liberty to take out your Ball & bringing it behind the hazard and Teeing it, you may play it with any Club and allow your Adversary a Stroke for so getting out your Ball. "6. If your Balls be found anywhere touching one another, You are to lift the first Ball, till you play the last. "7. At Holling, you are to play your Ball honestly for the Hole, and, not to play upon your Adversary's Ball, not lying in your way to the Hole. "8. If you should lose your Ball, by its being taken up, or any other way, you are to go back to the Spot, where you struck last & drop another Ball, And allow your Adversary a Stroke for the misfortune. "9. No man at Holling his Ball, is to be allowed, to mark his way to the Hole with 63 his Club or, any thing else. "10. If a Ball be stopp'd by any person, Horse, Dog, or any thing else, The Ball so stop'd must be play'd where it lyes. "11. If you draw your Club, in order to Strike & proceed so far in the Stroke, as to be bringing down your Club; If then, your Club shall break, in, any way, it is to be Accounted a Stroke. "12. He, whose Ball lyes farthest from the Hole is obliged to play first. "13. Neither Trench, Ditch, or Dyke, made for the preservation of the Links, nor the Scholar's Holes or the Soldier's Lines, Shall be accounted a Hazard; But the Ball is to be taken out/Teed/and play'd with any Iron Club." K. Chapman, Rules of the Green 14-15 (1997). FN40. See generally M. Campbell, The Random House International Encyclopedia of Golf 9-57 (1991); Golf Magazine's Encyclopedia of Golf 1- 17 (2d ed.1993). FN41. Olinger v. United States Golf Assn., 205 F.3d 1001, 1003 (C.A.7 2000). FN42. On this point, the testimony of the immediate past president of the USGA (and one of petitioner's witnesses at trial) is illuminating: "Tell the court, if you would, Ms. Bell, who it is that plays under these Rules of Golf ... ? "A. Well, these are the rules of the game, so all golfers. These are for all people who play the game. "Q. So the two amateurs that go out on the weekend to play golf together would-would play by the Rules of Golf? "A. We certainly hope so. "Q. Or a tournament that is conducted at a private country club for its members, is it your understanding that that would typically be conducted under the Rules of Golf? "A. Well, that's--that's right. If you want to play golf, you need to play by these rules." App. 239. FN43. See n. 3, supra. Indeed, the walking rule is not an indispensable feature of tournament golf either. As already mentioned, petitioner permits golf carts to be used in the SENIOR PGA TOUR, the open qualifying events for petitioner's tournaments, the first two stages of the QSchool, and, until 1997, the third stage of the Q- School as well. See supra, at 18841885. Moreover, petitioner allows the use of carts during certain tournament rounds in both the PGA TOUR and the NIKE TOUR. See supra, at 1885, and n. 6. In addition, although the USGA enforces a walking rule in most of the tournaments that it sponsors, it permits carts in the Senior Amateur and the Senior Women's Amateur championships. [FN44] 64 FN44. Furthermore, the USGA's handicap system, used by over 4 million amateur golfers playing on courses rated by the USGA, does not consider whether a player walks or rides in a cart, or whether she uses a caddy or carries her own clubs. Rather, a player's handicap is determined by a formula that takes into account the average score in the 10 best of her 20 most recent rounds, the difficulty of the different courses played, and whether or not a round was a "tournament" event. Petitioner, however, distinguishes the game of golf as it is generally played from the game that it sponsors in the PGA TOUR, NIKE TOUR, and (at least recently) the last stage of the Q-School--golf at the "highest level." According to petitioner, "[t]he goal of the highest-level competitive athletics is to assess and compare the performance of different competitors, a task that is meaningful only if the competitors are subject to identical substantive rules." [FN45] The waiver of any possibly "outcome-affecting" rule for a contestant would violate this principle and therefore, in petitioner's view, fundamentally alter the nature of the highest level athletic event. [FN46] The walking rule is one such rule, petitioner submits, because its purpose is "to inject the element of fatigue into the skill of shot-making," [FN47] and thus its effect may be the critical loss of a stroke. As a consequence, the reasonable modification Martin seeks would fundamentally alter the nature of petitioner's highest level tournaments even if he were the only person in the world who has both the talent to compete in those elite events and a disability sufficiently serious that he cannot do so without using a cart. FN45. Brief for Petitioner 13. FN46. Id., at 37. FN47. 994 F.Supp., at 1250. The force of petitioner's argument is, first of all, mitigated by the fact that golf is a game in which it is impossible to guarantee that all competitors will play under exactly the same conditions or that an individual's ability will be the sole determinant of the outcome. For example, changes in the weather may produce harder greens and more head winds for the tournament leader than for his closest pursuers. A lucky bounce may save a shot or two. [FN48] Whether such happenstance events are more or less probable than the likelihood that a golfer afflicted with Klippel- Trenaunay-Weber Syndrome would one day qualify for the NIKE TOUR and PGA TOUR, they at least demonstrate that pure chance may have a greater impact on the outcome of elite golf tournaments than the fatigue resulting from the enforcement of the walking rule. FN48. A drive by Andrew Magee earlier this year produced a result that he neither intended nor expected. While the foursome ahead of him was still on the green, he teed off on a 322-yard par four. To his surprise, the ball not only 65 reached the green, but also bounced off Tom Byrum's putter and into the hole. Davis, Magee Gets Ace on Par-4, Ariz. Republic, Jan. 26 2001, p. C16, 2001 WL 8510792. Further, the factual basis of petitioner's argument is undermined by the District Court's finding that the fatigue from walking during one of petitioner's 4-day tournaments cannot be deemed significant. The District Court credited the testimony of a professor in physiology and expert on fatigue, who calculated the calories expended in walking a golf course (about five miles) to be approximately 500 calories--"nutritionally ... less than a Big Mac." 994 F.Supp., at 1250. What is more, that energy is expended over a 5-hour period, during which golfers have numerous intervals for rest and refreshment. In fact, the expert concluded, because golf is a low intensity activity, fatigue from the game is primarily a psychological phenomenon in which stress and motivation are the key ingredients. And even under conditions of severe heat and humidity, the critical factor in fatigue is fluid loss rather than exercise from walking. Moreover, when given the option of using a cart, the majority of golfers in petitioner's tournaments have chosen to walk, often to relieve stress or for other strategic reasons. [FN49] As NIKE TOUR member Eric Johnson testified, walking allows him to keep in rhythm, stay warmer when it is chilly, and develop a better sense of the elements and the course than riding a cart. [FN50] FN49. That has been so not only in the SENIOR PGA TOUR and the first two stages of the Q-School, but also, as Martin himself noticed, in the third stage of the Q-School after petitioner permitted everyone to ride rather than just waiving the walking rule for Martin as required by the District Court's injunction. FN50. App. 201. See also id., at 179-180 (deposition testimony of Gerry Norquist); id., at 225-226 (trial testimony of Harry Toscano). [8] Even if we accept the factual predicate for petitioner's argument--that the walking rule is "outcome affecting" because fatigue may adversely affect performance--its legal position is fatally flawed. Petitioner's refusal to consider Martin's personal circumstances in deciding whether to accommodate his disability runs counter to the clear language and purpose of the ADA. As previously stated, the ADA was enacted to eliminate discrimination against "individuals" with disabilities, 42 U.S.C. § 12101(b)(1), and to that end Title III of the Act requires without exception that any "policies, practices, or procedures" of a public accommodation be reasonably modified for disabled "individuals" as necessary to afford access unless doing so would fundamentally alter what is offered, § 12182(b)(2)(A)(ii). To comply with this command, an individualized inquiry must be made to determine whether a specific modification for a particular person's disability would be reasonable under the circumstances as well as necessary for that person, and yet at the same time not work a fundamental alteration. See S.Rep. No. 101-116, at 61; H.R.Rep. No. 101-485, pt. 2, at 102, U.S.Code Cong. & Admin.News 1990, pt. 2, at pp. 303, 385 (public accommodations "are required to make decisions based on facts applicable to individuals"). Cf. Sutton v. United Air Lines, Inc., 66 527 U.S. 471, 483, 119 S.Ct. 2139, 144 L.Ed.2d 450 (1999) ("[W]hether a person has a disability under the ADA is an individualized inquiry"). [9][10] To be sure, the waiver of an essential rule of competition for anyone would fundamentally alter the nature of petitioner's tournaments. As we have demonstrated, however, the walking rule is at best peripheral to the nature of petitioner's athletic events, and thus it might be waived in individual cases without working a fundamental alteration. Therefore, petitioner's claim that all the substantive rules for its "highestlevel" competitions are sacrosanct and cannot be modified under any circumstances is effectively a contention that it is exempt from Title III's reasonable modification requirement. But that provision carves out no exemption for elite athletics, and given Title III's coverage not only of places of "exhibition or entertainment" but also of "golf course[s]," 42 U.S.C. § § 12181(7)(C), (L), its application to petitioner's tournaments cannot be said to be unintended or unexpected, see § § 12101(a)(1), (5). Even if it were, "the fact that a statute can be applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth." Pennsylvania Dept. of Corrections v. Yeskey, 524 U.S., at 212, 118 S.Ct. 1952 (internal quotation marks omitted). [FN51] FN51. Hence, petitioner's questioning of the ability of courts to apply the reasonable modification requirement to athletic competition is a complaint more properly directed to Congress, which drafted the ADA's coverage broadly, than to us. Even more misguided is Justice SCALIA's suggestion that Congress did not place that inquiry into the hands of the courts at all. According to the dissent, the game of golf as sponsored by petitioner is, like all sports games, the sum of its "arbitrary rules," and no one, including courts, "can pronounce one or another of them to be 'nonessential' if the rulemaker (here the PGA TOUR) deems it to be essential." Post, at 1902-1903. Whatever the merit of Justice SCALIA's postmodern view of "What Is [Sport]," post, at 1902, it is clear that Congress did not enshrine it in Title III of the ADA. While Congress expressly exempted "private clubs or establishments" and "religious organizations or entities" from Title III's coverage,42 U.S.C. § 12187, Congress made no such exception for athletic competitions, much less did it give sports organizations carte-blanche authority to exempt themselves from the fundamental alteration inquiry by deeming any rule, no matter how peripheral to the competition, to be essential. In short, Justice SCALIA's reading of the statute renders the word "fundamentally" largely superfluous, because it treats the alteration of any rule governing an event at a public accommodation to be a fundamental alteration. Under the ADA's basic requirement that the need of a disabled person be evaluated on an individual basis, we have no doubt that allowing Martin to use a golf cart would not fundamentally alter the nature of petitioner's tournaments. As we have discussed, the purpose of the walking rule is to subject players to fatigue, which in turn may influence the outcome of tournaments. Even if the rule does serve that purpose, it is an uncontested finding of the District Court that Martin "easily endures greater fatigue even with a cart than his able-bodied competitors do by walking." 994 F.Supp., at 1252. The purpose of the walking rule is therefore not compromised in the slightest by allowing Martin to use a cart. A modification that provides an exception to a peripheral 67 tournament rule without impairing its purpose cannot be said to "fundamentally alter" the tournament. What it can be said to do, on the other hand, is to allow Martin the chance to qualify for and compete in the athletic events petitioner offers to those members of the public who have the skill and desire to enter. That is exactly what the ADA requires. [FN52] As a result, Martin's request for a waiver of the walking rule should have been granted. FN52. On this fundamental point, the dissent agrees. See post, at 1902 ("The PGA TOUR cannot deny respondent access to that game because of his disability"). [11] The ADA admittedly imposes some administrative burdens on the operators of places of public accommodation that could be avoided by strictly adhering to general rules and policies that are entirely fair with respect to the able-bodied but that may indiscriminately preclude access by qualified persons with disabilities. [FN53] But surely, in a case of this kind, Congress intended that an entity like the PGA not only give individualized attention to the handful of requests that it might receive from talented but disabled athletes for a modification or waiver of a rule to allow them access to the competition, but also carefully weigh the purpose, as well as the letter, of the rule before determining that no accommodation would be tolerable. FN53. However, we think petitioner's contention that the task of assessing requests for modifications will amount to a substantial burden is overstated. As Martin indicates, in the three years since he requested the use of a cart, no one else has sued the PGA, and only two other golfers (one of whom is Olinger) have sued the USGA for a waiver of the walking rule. In addition, we believe petitioner's point is misplaced, as nowhere in § 12182(b)(2)(A)(ii) does Congress limit the reasonable modification requirement only to requests that are easy to evaluate. The judgment of the Court of Appeals is affirmed. It is so ordered. Justice SCALIA, with whom Justice THOMAS joins, dissenting. In my view today's opinion exercises a benevolent compassion that the law does not place it within our power to impose. The judgment distorts the text of Title III, the structure of the ADA, and common sense. I respectfully dissent. I The Court holds that a professional sport is a place of public accommodation and that respondent is a "custome[r]" of "competition" when he practices his profession. Ante, at 68 1891-1892. It finds, ante, at 1892, that this strange conclusion is compelled by the "literal text" of Title III of the Americans with Disabilities Act of 1990(ADA), 42 U.S.C. § 12101 et seq., by the "expansive purpose" of the ADA, and by the fact that Title II of the Civil Rights Act of 1964, 42 U.S.C. § 2000a(a), has been applied to an amusement park and public golf courses. I disagree. The ADA has three separate titles: Title I covers employment discrimination, Title II covers discrimination by government entities, and Title III covers discrimination by places of public accommodation. Title II is irrelevant to this case. Title I protects only "employees" of employers who have 15 or more employees, § § 12112(a), 12111(5)(A). It does not protect independent contractors. See, e.g., Birchem v. Knights of Columbus, 116 F.3d 310, 312-313 (C.A.8 1997); cf. Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322-323, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992). Respondent claimed employment discrimination under Title I, but the District Court found him to be an independent contractor rather than an employee. Respondent also claimed protection under § 12182 of Title III. That section applies only to particular places and persons. The place must be a "place of public accommodation," and the person must be an "individual" seeking "enjoyment of the goods, services, facilities, privileges, advantages, or accommodations" of the covered place. § 12182(a). Of course a court indiscriminately invoking the "sweeping" and "expansive" purposes of the ADA, ante, at 1889-1890, 1892, could argue that when a place of public accommodation denied any "individual," on the basis of his disability, anything that might be called a "privileg[e]," the individual has a valid Title III claim. Cf. ante, at 1890. On such an interpretation, the employees and independent contractors of every place of public accommodation come within Title III: The employee enjoys the "privilege" of employment, the contractor the "privilege" of the contract. For many reasons, Title III will not bear such an interpretation. The provision of Title III at issue here (§ 12182, its principal provision) is a public-accommodation law, and it is the traditional understanding of public-accommodation laws that they provide rights for customers. "At common law, innkeepers, smiths, and others who made profession of a public employment, were prohibited from refusing, without good reason, to serve a customer." Hurley v. Irish-American Gay, Lesbian and Bisexual Group of Boston, Inc., 515 U.S. 557, 571, 115 S.Ct. 2338, 132 L.Ed.2d 487 (1995) (internal quotation marks omitted). See also Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 85 S.Ct. 348, 13 L.Ed.2d 258 (1964). This understanding is clearly reflected in the text of Title III itself. Section 12181(7) lists 12 specific types of entities that qualify as "public accommodations," with a follow-on expansion that makes it clear what the "enjoyment of the goods, services, etc." of those entities consists of--and it plainly envisions that the person "enjoying" the "public accommodation" will be a customer. For example, Title III is said to cover an "auditorium" or "other place of public gathering," § 12181(7)(D). Thus, "gathering" is the distinctive enjoyment derived from an auditorium; the persons "gathering" at an auditorium are presumably covered by Title III, but those contracting to clean the auditorium are not. Title III is said to cover a "zoo" or "other place of recreation," § 12181(7)(I). The persons "recreat[ing]" at a "zoo" are presumably covered, but the animal handlers bringing in the latest panda are not. The one place where Title III specifically addresses discrimination by places of public accommodation through "contractual" arrangements, it makes clear that discrimination against the other party to the contract is not covered, but only discrimination against "clients or customers 69 of the covered public accommodation that enters into the contractual, licensing or other arrangement." § 12182(b)(1)(A)(iv). And finally, the regulations promulgated by the Department of Justice reinforce the conclusion that Title III's protections extend only to customers. "The purpose of the ADA's public accommodations requirements," they say, "is to ensure accessibility to the goods offered by a public accommodation." 28 CFR, Ch. 1, pt. 36, App. B, p. 650 (2000). Surely this has nothing to do with employees and independent contractors. If there were any doubt left that § 12182 covers only clients and customers of places of public accommodation, it is eliminated by the fact that a contrary interpretation would make a muddle of the ADA as a whole. The words of Title III must be read "in their context and with a view to their place in the overall statutory scheme." Davis v. Michigan Dept. of Treasury, 489 U.S. 803, 809, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989). Congress expressly excluded employers of fewer than 15 employees from Title I. The mom-and-pop grocery store or laundromat need not worry about altering the nonpublic areas of its place of business to accommodate handicapped employees-- or about the litigation that failure to do so will invite. Similarly, since independent contractors are not covered by Title I, the small business (or the large one, for that matter) need not worry about making special accommodations for the painters, electricians, and other independent workers whose services are contracted for from time to time. It is an entirely unreasonable interpretation of the statute to say that these exemptions so carefully crafted in Title I are entirely eliminated by Title III (for the many businesses that are places of public accommodation) because employees and independent contractors "enjoy" the employment and contracting that such places provide. The only distinctive feature of places of public accommodation is that they accommodate the public, and Congress could have no conceivable reason for according the employees and independent contractors of such businesses protections that employees and independent contractors of other businesses do not enjoy. The United States apparently agrees that employee claims are not cognizable under Title III, see Brief for United States as Amicus Curiae 18- 19, n. 17, but despite the implications of its own regulations, see 28 CFR, Ch. 1, pt. 36, App. B, p. 650 (2000), appears to believe (though it does not explicitly state) that claims of independent contractors are cognizable. In a discussion littered with entirely vague statements from the legislative history, cf. ante, at 1889, the United States argues that Congress presumably wanted independent contractors with private entities covered under Title III because independent contractors with governmental entities are covered by Title II, see Brief for United States as Amicus Curiae 18, and n. 17--a line of reasoning that does not commend itself to the untutored intellect. But since the United States does not provide (and I cannot conceive of) any possible construction of the terms of Title III that will exclude employees while simultaneously covering independent contractors, its concession regarding employees effectively concedes independent contractors as well. Title III applies only to customers. The Court, for its part, assumes that conclusion for the sake of argument, ante, at 1891-1892, but pronounces respondent to be a "customer" of the PGA TOUR or of the golf courses on which it is played. That seems to me quite incredible. The PGA TOUR is a professional sporting event, staged for the entertainment of a live and TV audience, the receipts from whom (the TV audience's admission price is paid by advertisers) pay the expenses of the tour, including the cash prizes for the winning 70 golfers. The professional golfers on the tour are no more "enjoying" (the statutory term) the entertainment that the tour provides, or the facilities of the golf courses on which it is held, than professional baseball players "enjoy" the baseball games in which they play or the facilities of Yankee Stadium. To be sure, professional ballplayers participate in the games, and use the ballfields, but no one in his right mind would think that they are customers of the American League or of Yankee Stadium. They are themselves the entertainment that the customers pay to watch. And professional golfers are no different. It makes not a bit of difference, insofar as their "customer" status is concerned, that the remuneration for their performance (unlike most of the remuneration for ballplayers) is not fixed but contingent--viz., the purses for the winners in the various events, and the compensation from product endorsements that consistent winners are assured. The compensation of many independent contractors is contingent upon their success--real estate brokers, for example, or insurance salesmen. As the Court points out, the ADA specifically identifies golf courses as one of the covered places of public accommodation. See § 12181(7)(L) ("a gymnasium, health spa, bowling alley, golf course, or other place of exercise or recreation"); and the distinctive "goo[d], servic[e], facilit[y], privileg [e], advantag[e], or accommodatio[n]" identified by that provision as distinctive to that category of place of public accommodation is "exercise or recreation." Respondent did not seek to "exercise" or "recreate" at the PGA TOUR events; he sought to make money (which is why he is called a professional golfer). He was not a customer buying recreation or entertainment; he was a professional athlete selling it. That is the reason (among others) the Court's reliance upon Civil Rights Act cases like Daniel v. Paul, 395 U.S. 298, 89 S.Ct. 1697, 23 L.Ed.2d 318 (1969), see ante, at 1892-1893, is misplaced. A professional golfer's practicing his profession is not comparable to John Q. Public's frequenting "a 232-acre amusement area with swimming, boating, sun bathing, picnicking, miniature golf, dancing facilities, and a snack bar." Daniel, supra, at 301, 89 S.Ct. 1697. The Court relies heavily upon the Q-School. It says that petitioner offers the golfing public the "privilege" of "competing in the Q-School and playing in the tours; indeed, the former is a privilege for which thousands of individuals from the general public pay, and the latter is one for which they vie." Ante, at 1890-1891. But the Q-School is no more a "privilege" offered for the general public's "enjoyment" than is the California Bar Exam. [FN1] It is a competition for entry into the PGA TOUR--an open tryout, no different in principle from open casting for a movie or stage production, or walk-on tryouts for other professional sports, such as baseball. See, e.g., Amateurs Join Pros for New Season of HBO's "Sopranos," Detroit News, Dec. 22, 2000, p. 2 (20,000 attend open casting for "The Sopranos"); Bill Zack, Atlanta Braves, Sporting News, Feb. 6, 1995 (1,300 wouldbe players attended an open tryout for the Atlanta Braves). It may well be that some amateur golfers enjoy trying to make the grade, just as some amateur actors may enjoy auditions, and amateur baseball players may enjoy open tryouts (I hesitate to say that amateur lawyers may enjoy taking the California Bar Exam). But the purpose of holding those tryouts is not to provide entertainment; it is to hire. At bottom, open tryouts for performances to be held at a place of public accommodation are no different from open bidding on contracts to cut the grass at a place of public accommodation, or open applications for any job at a place of public accommodation. Those bidding, those applying--and those trying out--are not converted into customers. By the Court's reasoning, a business exists not only to sell goods and services to the public, but to 71 provide the "privilege" of employment to the public; wherefore it follows, like night the day, that everyone who seeks a job is a customer. [FN2] FN1. The California Bar Exam is covered by the ADA, by the way, because a separate provision of Title III applies to "examinations ... related to applications, licensing, certification, or credentialing for secondary or post-secondary education, professional, or trade purposes." 42 U.S.C. § 12189. If open tryouts were "privileges" under § 12182, and participants in the tryouts "customers," § 12189 would have been unnecessary. FN2. The Court suggests that respondent is not an independent contractor because he "play[s] at [his] own pleasure," and is not subject to PGA TOUR control "over [his] manner of performance," ante, at 1892 n. 33. But many independent contractors--composers of movie music, portrait artists, script writers, and even (some would say) plumbers--retain at least as much control over when and how they work as does respondent, who agrees to play in a minimum of 15 of the designated PGA TOUR events, and to play by the rules that the PGA TOUR specifies. Cf. Community for Creative Non-Violence v. Reid, 490 U.S. 730, 751-753, 109 S.Ct. 2166, 104 L.Ed.2d 811 (1989) (discussing independent contractor status of a sculptor). Moreover, although, as the Court suggests in the same footnote, in rare cases a PGA TOUR winner will choose to forgo the prize money (in order, for example, to preserve amateur status necessary for continuing participation in college play) he is contractually entitled to the prize money if he demands it, which is all that a contractual relationship requires. II Having erroneously held that Title III applies to the "customers" of professional golf who consist of its practitioners, the Court then erroneously answers--or to be accurate simply ignores--a second question. The ADA requires covered businesses to make such reasonable modifications of "policies, practices, or procedures" as are necessary to "afford" goods, services, and privileges to individuals with disabilities; but it explicitly does not require "modifications [that] would fundamentally alter the nature" of the goods, services, and privileges. § 12182(b)(2)(A)(ii). In other words, disabled individuals must be given access to the same goods, services, and privileges that others enjoy. The regulations state that Title III "does not require a public accommodation to alter its inventory to include accessible or special goods with accessibility features that are designed for, or facilitate use by, individuals with disabilities." 28 CFR § 36.307 (2000); see also 28 CFR, ch. 1, pt. 36, App. B, p. 650 (2000). As one Court of Appeals has explained: "The common sense of the statute is that the content of the goods or services offered by a place of public accommodation is not regulated. A camera store may not refuse to sell cameras to a disabled person, but it is not required to stock cameras specially designed for such persons. Had Congress purposed to impose so enormous a burden on the retail sector of the economy and so vast a supervisory responsibility on the federal courts, we think it would have made its intention clearer and would at least 72 have imposed some standards. It is hardly a feasible judicial function to decide whether shoestores should sell single shoes to one-legged persons and if so at what price, or how many Braille books the Borders or Barnes and Noble bookstore chains should stock in each of their stores." Doe v. Mutual of Omaha Ins. Co., 179 F.3d 557, 560 (C.A.7 1999). Since this is so, even if respondent here is a consumer of the " privilege" of the PGA TOUR competition, see ante, at 1890, I see no basis for considering whether the rules of that competition must be altered. It is as irrelevant to the PGA TOUR's compliance with the statute whether walking is essential to the game of golf as it is to the shoe store's compliance whether " pairness" is essential to the nature of shoes. If a shoe store wishes to sell shoes only in pairs it may; and if a golf tour (or a golf course) wishes to provide only walk-around golf, it may. The PGA TOUR cannot deny respondent access to that game because of his disability, but it need not provide him a game different (whether in its essentials or in its details) from that offered to everyone else. Since it has held (or assumed) professional golfers to be customers "enjoying" the "privilege" that consists of PGA TOUR golf; and since it inexplicably regards the rules of PGA TOUR golf as merely "policies, practices, or procedures" by which access to PGA TOUR golf is provided, the Court must then confront the question whether respondent's requested modification of the supposed policy, practice, or procedure of walking would "fundamentally alter the nature" of the PGA TOUR game, § 12182(b)(2)(A)(ii). The Court attacks this "fundamental alteration" analysis by asking two questions: first, whether the "essence" or an "essential aspect" of the sport of golf has been altered; and second, whether the change, even if not essential to the game, would give the disabled player an advantage over others and thereby "fundamentally alter the character of the competition." Ante, at 1893-1894. It answers no to both. Before considering the Court's answer to the first question, it is worth pointing out that the assumption which underlies that question is false. Nowhere is it writ that PGA TOUR golf must be classic "essential" golf. Why cannot the PGA TOUR, if it wishes, promote a new game, with distinctive rules (much as the American League promotes a game of baseball in which the pitcher's turn at the plate can be taken by a "designated hitter")? If members of the public do not like the new rules--if they feel that these rules do not truly test the individual's skill at "real golf" (or the team's skill at "real baseball") they can withdraw their patronage. But the rules are the rules. They are (as in all games) entirely arbitrary, and there is no basis on which anyone--not even the Supreme Court of the United States--can pronounce one or another of them to be "nonessential" if the rulemaker (here the PGA TOUR) deems it to be essential. If one assumes, however, that the PGA TOUR has some legal obligation to play classic, Platonic golf--and if one assumes the correctness of all the other wrong turns the Court has made to get to this point--then we Justices must confront what is indeed an awesome responsibility. It has been rendered the solemn duty of the Supreme Court of the United States, laid upon it by Congress in pursuance of the Federal Government's power "[t]o regulate Commerce with foreign Nations, and among the several States," U.S. Const., Art. I, § 8, cl. 3, to decide What Is Golf. I am sure that the Framers of the Constitution, aware of the 1457 edict of King James II of Scotland prohibiting golf because it interfered with the practice of archery, fully expected that sooner or later the paths of golf and government, the law and the links, would once 73 again cross, and that the judges of this august Court would some day have to wrestle with that age-old jurisprudential question, for which their years of study in the law have so well prepared them: Is someone riding around a golf course from shot to shot really a golfer? The answer, we learn, is yes. The Court ultimately concludes, and it will henceforth be the Law of the Land, that walking is not a "fundamental" aspect of golf. Either out of humility or out of self-respect (one or the other) the Court should decline to answer this incredibly difficult and incredibly silly question. To say that something is "essential" is ordinarily to say that it is necessary to the achievement of a certain object. But since it is the very nature of a game to have no object except amusement (that is what distinguishes games from productive activity), it is quite impossible to say that any of a game's arbitrary rules is "essential." Eighteen-hole golf courses, 10-foot-high basketball hoops, 90-foot baselines, 100-yard football fields--all are arbitrary and none is essential. The only support for any of them is tradition and (in more modern times) insistence by what has come to be regarded as the ruling body of the sport--both of which factors support the PGA TOUR's position in the present case. (Many, indeed, consider walking to be the central feature of the game of golf--hence Mark Twain's classic criticism of the sport: "a good walk spoiled.")I suppose there is some point at which the rules of a well-known game are changed to such a degree that no reasonable person would call it the same game. If the PGA TOUR competitors were required to dribble a large, inflated ball and put it through a round hoop, the game could no longer reasonably be called golf. But this criterion--destroying recognizability as the same generic game--is surely not the test of "essentialness" or "fundamentalness" that the Court applies, since it apparently thinks that merely changing the diameter of the cup might "fundamentally alter" the game of golf, ante, at 1893. Having concluded that dispensing with the walking rule would not violate federalPlatonic "golf" (and, implicitly, that it is federal-Platonic golf, and no other, that the PGA TOUR can insist upon) the Court moves on to the second part of its test: the competitive effects of waiving this nonessential rule. In this part of its analysis, the Court first finds that the effects of the change are "mitigated" by the fact that in the game of golf weather, a "lucky bounce," and "pure chance" provide different conditions for each competitor and individual ability may not "be the sole determinant of the outcome." Ante, at 1895. I guess that is why those who follow professional golfing consider Jack Nicklaus the luckiest golfer of all time, only to be challenged of late by the phenomenal luck of Tiger Woods. The Court's empiricism is unpersuasive. "Pure chance" is randomly distributed among the players, but allowing respondent to use a cart gives him a "lucky" break every time he plays. Pure chance also only matters at the margin--a stroke here or there; the cart substantially improves this respondent's competitive prospects beyond a couple of strokes. But even granting that there are significant nonhuman variables affecting competition, that fact does not justify adding another variable that always favors one player. In an apparent effort to make its opinion as narrow as possible, the Court relies upon the District Court's finding that even with a cart, respondent will be at least as fatigued as everyone else. Ante, at 1897. This, the Court says, proves that competition will not be affected. Far from thinking that reliance on this finding cabins the effect of today's opinion, I think it will prove to be its most expansive and destructive feature. Because step one of the Court's two-part inquiry into whether a requested change in a sport will "fundamentally alter [its] nature," § 12182(b)(2)(A)(ii), consists of an utterly unprincipled 74 ontology of sports (pursuant to which the Court is not even sure whether golf's "essence" requires a 3-inch hole), there is every reason to think that in future cases involving requests for special treatment by would-be athletes the second step of the analysis will be determinative. In resolving that second step--determining whether waiver of the "nonessential" rule will have an impermissible "competitive effect"--by measuring the athletic capacity of the requesting individual, and asking whether the special dispensation would do no more than place him on a par (so to speak) with other competitors, the Court guarantees that future cases of this sort will have to be decided on the basis of individualized factual findings. Which means that future cases of this sort will be numerous, and a rich source of lucrative litigation. One can envision the parents of a Little League player with attention deficit disorder trying to convince a judge that their son's disability makes it at least 25% more difficult to hit a pitched ball. (If they are successful, the only thing that could prevent a court order giving the kid four strikes would be a judicial determination that, in baseball, three strikes are metaphysically necessary, which is quite absurd.) The statute, of course, provides no basis for this individualized analysis that is the Court's last step on a long and misguided journey. The statute seeks to assure that a disabled person's disability will not deny him equal access to (among other things) competitive sporting events--not that his disability will not deny him an equal chance to win competitive sporting events. The latter is quite impossible, since the very nature of competitive sport is the measurement, by uniform rules, of unevenly distributed excellence. This unequal distribution is precisely what determines the winners and losers--and artificially to "even out" that distribution, by giving one or another player exemption from a rule that emphasizes his particular weakness, is to destroy the game. That is why the "handicaps" that are customary in social games of golf--which, by adding strokes to the scores of the good players and subtracting them from scores of the bad ones, "even out" the varying abilities--are not used in professional golf. In the Court's world, there is one set of rules that is "fair with respect to the able-bodied" but "individualized" rules, mandated by the ADA, for "talented but disabled athletes." Ante, at 1897-1898. The ADA mandates no such ridiculous thing. Agility, strength, speed, balance, quickness of mind, steadiness of nerves, intensity of concentration--these talents are not evenly distributed. No wild-eyed dreamer has ever suggested that the managing bodies of the competitive sports that test precisely these qualities should try to take account of the uneven distribution of God-given gifts when writing and enforcing the rules of competition. And I have no doubt Congress did not authorize misty-eyed judicial supervision of such a revolution. *** My belief that today's judgment is clearly in error should not be mistaken for a belief that the PGA TOUR clearly ought not allow respondent to use a golf cart. That is a close question, on which even those who compete in the PGA TOUR are apparently divided; but it is a different question from the one before the Court. Just as it is a different question whether the Little League ought to give disabled youngsters a fourth strike, or some other waiver from the rules that makes up for their disabilities. In both cases, whether they ought to do so depends upon (1) how central to the game that they have organized (and over whose rules they are the master) they deem the waived provision to be, and (2) how competitive--how strict a test of raw athletic ability in all aspects of the competition--they want their game to be. But whether Congress has said 75 they must do so depends upon the answers to the legal questions I have discussed above--not upon what this Court sententiously decrees to be "decent, tolerant, [and] progressive," ante, at 1889-1890 (quoting Board of Trustees of Univ. of Ala.v. Garrett, 531 U.S. 356, 375, 121 S.Ct. 955, 148 L.Ed.2d 866 (2001) (KENNEDY, J., concurring)). And it should not be assumed that today's decent, tolerant, and progressive judgment will, in the long run, accrue to the benefit of sports competitors with disabilities. Now that it is clear courts will review the rules of sports for "fundamentalness," organizations that value their autonomy have every incentive to defend vigorously the necessity of every regulation. They may still be second-guessed in the end as to the Platonic requirements of the sport, but they will assuredly lose if they have at all wavered in their enforcement. The lesson the PGA TOUR and other sports organizations should take from this case is to make sure that the same written rules are set forth for all levels of play, and never voluntarily to grant any modifications. The second lesson is to end open tryouts. I doubt that, in the long run, even disabled athletes will be well served by these incentives that the Court has created. Complaints about this case are not "properly directed to Congress," ante, at 18961897, n. 51. They are properly directed to this Court's Kafkaesque determination that professional sports organizations, and the fields they rent for their exhibitions, are "places of public accommodation" to the competing athletes, and the athletes themselves "customers" of the organization that pays them; its Alice in Wonderland determination that there are such things as judicially determinable "essential" and "nonessential" rules of a made-up game; and its Animal Farm determination that fairness and the ADA mean that everyone gets to play by individualized rules which will assure that no one's lack of ability (or at least no one's lack of ability so pronounced that it amounts to a disability) will be a handicap. The year was 2001, and "everybody was finally equal." K. Vonnegut, Harrison Bergeron, in Animal Farm and Related Readings 129 (1997). McGuiness v. Univ. of New Mexico, 170 F.3d 974 (1998) 170 F.3d 974 United States Court of Appeals, Tenth Circuit. Kevin M. McGUINNESS, Plaintiff-Appellant, v. UNIVERSITY OF NEW MEXICO SCHOOL OF MEDICINE, Defendant-Appellee. No. 97-2249. Nov. 4, 1998. Dennis W. Montoya, Law Offices of Dennis W. Montoya, Rio Rancho, New Mexico for Plaintiff-Appellant. 76 Paul R. Ritzma, Law Offices, Legal Bureau/RMD, State of New Mexico, Santa Fe, New Mexico for Defendant-Appellee. Before PORFILIO, EBEL, and KELLY, Circuit Judges. ORDER The order and judgment filed on November 4, 1998, shall be published. The published opinion is attached to this order. OPINION PAUL KELLY, Jr., Circuit Judge. Plaintiff-Appellant Kevin M. McGuinness brought this action against the DefendantAppellee, the University of New Mexico School of Medicine ("the medical school") for violation of the Americans with Disabilities Act, 42 U.S.C. § § 12101-12213 ("the ADA"). The district court granted summary judgment for the medical school. On appeal, Mr. McGuinness argues that genuine issues of material fact exist on the following issues: (1) whether he suffers from a disability under the ADA, (2) whether he is entitled to a reasonable accommodation for such disability, (3) the degree of discretion built into the medical school's grading policy, (4) whether he was employed by the medical school, and (5) whether the medical school discriminated against him, under 42 U.S.C. § 12112(b)(4), because of his association with his disabled son. He also contends the district court erred in refusing to allow him to amend his complaint to include Rehabilitation Act and "association discrimination" claims. Finally, he argues that the court abused its discretion in failing to address "serious misconduct" by defense counsel. Our jurisdiction arises under 28 U.S.C. § 1291, and we affirm the district court's grant of summary judgment. Because we may treat new claims asserted in a plaintiff's response to a summary judgment motion as a motion to amend and review such claims de novo, we need not reach the issue of whether the district court improperly refused to let Mr. McGuinness amend his complaint. Finally, we hold that the magistrate judge did not abuse his discretion in choosing not to impose sanctions on the Defendant. Background When Mr. McGuinness entered the University of New Mexico Medical School in 1992, he had a bachelor of science degree in chemistry and biology, a degree in physiological psychology, and a doctorate in psychology. He had worked as a forensic chemist, and he continued to work as a clinical psychologist during medical school. Mr. McGuinness experienced anxiety in chemistry and mathematics courses in both graduate and undergraduate school but developed study habits that allowed him to overcome his difficulties. At the beginning of each medical school class, the professors explained the school's written grading policy, which included consideration of natural breaks or clusters in the 77 students' performance, as well as each student's numerical average. During his basic biochemistry course in medical school, Mr. McGuinness informed the professor of his anxiety but indicated that he needed no test-taking accommodations. See Aplt.App. at 489, 491. He requested only that the professor set clear grading standards for the course and not regard him as lazy. See Aplt.App. at 491. The professor recommended that he see a clinical psychologist on the medical school faculty. At the end of the basic biochemistry course, Mr. McGuinness learned that he had received a grade of "marginal," even though his numerical average exceeded seventy percent, which he believed merited a "satisfactory" grade. According to the medical school's grading policy, students who receive "marginal" grades in more than fifteen percent of their first-year courses must repeat the first year or leave the program. When Mr. McGuinness earned another "marginal" grade in cardiovascular pulmonary physiology, more than fifteen percent of his first-year grades were "marginal." He was offered but refused the opportunity to take makeup exams in biochemistry, and, after three makeup tests in the cardiovascular/pulmonary block, he still did not obtain a "satisfactory" grade. Mr. McGuinness chose not to repeat the first-year curriculum. Instead, he filed suit against the University of New Mexico Medical School. In his complaint, Mr. McGuinness attempted to assert a claim under the ADA but failed to distinguish between Title I and Title II; neither did he raise a claim under the statute's "association discrimination" provision, 42 U.S.C. § 12112(b)(4). Whereas Title I proscribes discrimination against employees or prospective employees because of their disabilities, see 42 U.S.C. § § 12111-12112, Title II bars public entities from discriminating on the basis of disability in the provision of programs and benefits. See 42 U.S.C. § § 12131-12132. In his response to the medical school's motion for summary judgement, Mr. McGuinness attempted to (1) separate his Title I and Title II claims, (2) add a claim under the Rehabilitation Act of 1973, and (3) assert an "association discrimination" claim under the ADA. See Aplt.App. at 374-76, 380-82. He subsequently filed a motion to extend case management deadlines that included an informal request for leave to amend his complaint. See Aplt.App. at 203-06. The district court denied this motion. See Aplt.App. at 164-65. The district court granted summary judgment for the medical school on the ground that Mr. McGuinness was not disabled within the meaning of the ADA. Although Mr. McGuinness was not allowed to amend his complaint, the district court nevertheless ruled on the "association discrimination" claim. See Aplt.App. at 25-26. It held that Mr. McGuinness did not offer facts sufficient to support a cause of action under § 12112(b)(4) because he was neither employed by the medical school, nor did he show that the medical school discriminated against him because of his association with his disabled son. See id. The district court did not rule on Mr. McGuinness' Rehabilitation Act claim. Discussion A. ADA Claims We review a grant of summary judgment de novo. See Den Hartog v. Wasatch Academy, 129 F.3d 1076, 1081 (10th Cir.1997). Under Fed.R.Civ.P. 56(c), we must determine whether a genuine issue of material fact is in dispute and, if not, whether the district court correctly applied the substantive law. Id. at 1081. 78 [1] The parties agree that Mr. McGuinness has an "anxiety disorder" that manifests itself when he takes chemistry and mathematics tests. The district court correctly held that such a disorder, limited to certain academic subjects, does not constitute a disability under the ADA. On appeal, we treat the Title I and Title II claims separately, even though they did not appear in this manner in the complaint, because Mr. McGuinness raised them both in his response to the medical school's motion for summary judgment. See Viernow v. Euripides Dev. Corp., 157 F.3d 785, 790 n. 9 (10th Cir.1998) (citing Evans v. McDonald's Corp., 936 F.2d 1087, 1090-91 (10th Cir.1991))( new claims raised in plaintiff's opposition to summary judgment treated as a motion to amend the complaint). [2] According to Title II of the ADA, "no qualified individual with a disability shall, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity." 42 U.S.C. § 12132. Under Title II, the plaintiff does not have to be an employee of the defendant. See, e.g., McPherson v. Michigan High School Athletic Assoc., 119 F.3d 453, 459 (6th Cir.1997)(reviewing a Title II claim by a student-athlete against a high school sports program). However, Mr. McGuinness' Title II claim fails because he has not shown that he has a disability within the meaning of the ADA. [3][4] Under Title II, a "qualified individual" is someone with a disability who "with or without reasonable modifications ... meets the essential eligibility requirements" to receive public services or participate in a public program. 42 U.S.C. § 12131(2). The term "disability" means "a physical or mental impairment that substantially limits one or more of the major life activities" of the individual. 42 U.S.C. § 12102(2)(A). According to the Supreme Court, an impairment need not appear on a specific list of disorders to constitute a "disability." See Bragdon v. Abbott, 524 U.S. 624, 118 S.Ct. 2196, 2202, 141 L.Ed.2d 540 (1998). Nor must it affect those aspects of a person's life that have a public or economic character. See id. at 2205. Indeed, in the case of physical impairment like HIV infection, a disability can be latent and asymptomatic. See id. at 2204. However, the plain meaning of the word "major" requires that the activity be significant, in order to be covered by the ADA. See id. [5] Because the ADA does not define the phrases "substantially limits" or "major life activity," this circuit has looked to the EEOC regulations to construe the statute's meaning. See Sutton v. United Air Lines, 130 F.3d 893, 900 (10th Cir.1997). The regulations illustrate the meaning of "major life activity" with such examples as "caring for oneself, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, and working." 29 C.F.R. § 1630.2(i); see also Sutton, 130 F.3d at 900 (following the regulations' definition of "major life activity"). We assess three factors to determine whether an individual is "substantially limited" in a major life activity: (1) the nature and severity of the impairment, (2) the duration or expected duration of the impairment, and (3) the permanent or expected long- term impact of the impairment. See Sutton, 130 F.3d at 900 (citing 29 C.F.R. § 1630.2(j)(2)). [6] Mr. McGuinness contends that his anxiety impairs his "academic functioning," not his ability to work, and that the regulations' definition of substantial limitations on "working" should not control the outcome of this case. However, the deciding principles of employment discrimination cases can be applied to ADA claims in the educational 79 context. See McPherson, 119 F.3d at 460. In employment cases, we have held that an individual does not suffer a disability under the ADA if his disability does not prevent him from performing "a class of jobs or a broad range of jobs in various classes as compared to the average person having comparable training, skills, and abilities." Siemon v. AT&T Corp., 117 F.3d 1173, 1176 (10th Cir.1997) (quoting 29 C.F.R. § 1630.2(j)(3)(1)). For example, in MacDonald v. Delta Air Lines, Inc., 94 F.3d 1437 (10th Cir.1996), we held that an airline mechanic whose impaired vision prevented him from taxiing aircraft was not disabled under the ADA because he was only disqualified from "a single, particular job." Id. at 1445; see also Bolton v. Scrivner, Inc., 36 F.3d 939, 942 (10th Cir.1994) (stating that working "does not necessarily mean working at the job of one's choice"). By analogy, Mr. McGuinness must demonstrate that his anxiety impedes his performance in a wide variety of disciplines, not just chemistry and physics. This he has failed to do. [7] Moreover, Mr. McGuinness admits that, in the past, he has been able to mitigate his anxiety in chemistry and math by altering his study habits. See Aplt.App. at 19-20. Under the law of this circuit, we must consider the plaintiff's ability to mitigate his impairment in determining if that impairment substantially limits a major life activity. See Sutton, 130 F.3d at 902-3. Just as eyeglasses correct impaired vision, so that it does not constitute a disability under the ADA, an adjusted study regimen can mitigate the effects of test anxiety. See id. at 903. In the instant case, McGuinness has earned college degrees and pursued a career in the subjects that trigger his anxiety. While he experienced difficulties in his first-year of medical school, his poor performance did not require that he leave the program: He could have repeated the first year. As we held in Sutton, "it is the actual effect on the individual's life that is important in determining whether an individual is disabled under the ADA." Id. at 902. For the purposes of the ADA, inability to pursue one career, such as medicine, does not constitute a severe impact on an individual's life. See, e.g., Welsh v. City of Tulsa, 977 F.2d 1415, 1419 (10th Cir.1992) (holding that plaintiff was not disabled under the Rehabilitation Act, which defines "disability" the same way as the ADA, merely because he could not be a firefighter). [8][9] Even if Mr. McGuinness had shown a disability under the ADA, he could not demand an unreasonable accommodation from the medical school. See, e.g., Milton v. Scrivner, Inc., 53 F.3d 1118, 1124 (10th Cir.1995). Educational institutions are accorded deference with regard to the level of competency needed for an academic degree. See Doherty v. Southern College of Optometry, 862 F.2d 570, 575 (6th Cir.1988)(discussing reasonable accommodations under the Rehabilitation Act). Requiring the University of New Mexico to advance Mr. McGuinness to the next level of the medical school program would represent a substantial, rather than a reasonable accommodation. See id. (holding that an education institution is not required to waive a course requirement deemed reasonably necessary for the conferral of an academic degree). For the foregoing reasons, summary judgment for the medical school is appropriate on Mr. McGuinness' Title II claim. [10][11] Because we may treat new issues raised in a plaintiff's response to a summary judgment motion as a request to amend, we also review Mr. McGuinness' § 12112(b)(4) "association discrimination" claim. See Viernow, 157 F.3d at 790 n. 9. The district court held that Mr. McGuinness did not state a valid cause of action under the ADA's 80 "association discrimination" provision, § 12112(b)(4), even though it refused to allow him to amend his complaint to include this claim. See Aplt.App. at 25-26, 164-65. Although we note that the district court's procedure was inconsistent, we agree that Mr. McGuinness did not satisfy the basic elements of an "association discrimination" claim. [12][13] Because the "association discrimination" provision falls under Title I of the ADA, the plaintiff must show an employment relationship with the defendant. See Den Hartog, 129 F.3d at 1081-82. To state a claim under Title I of the ADA, the defendant must be "an employer, employment agency, labor organization, or joint labormanagement committee" that employs the plaintiff. 42 U.S.C. § 12111(2),(4). Mr. McGuinness has failed to show the existence of such an employment relationship between himself and the medical school. Unless a student receives remuneration for the work he performs, he is not considered an employee. See O'Connor v. Davis, 126 F.3d 112, 116 (2d Cir.1997), cert. denied, 522 U.S. 1114, 118 S.Ct. 1048, 140 L.Ed.2d 112 (1998). Nor are medical students, as opposed to medical interns or residents, considered "student employees" of the government. See 5 U.S.C. § 5351(2). [14] The fact that Mr. McGuinness completed federal employment applications, took a federal oath of office, and was covered by the New Mexico Tort Claims Act, see Aplt. Br. at 39, does not make him an employee of a state- run medical school. An organization, such as a university, may confer certain benefits on an individual and exercise a modicum of control over him without establishing a master-servant relationship. See Graves v. Women's Prof'l Rodeo Ass'n, 907 F.2d 71, 72-73 (8th Cir.1990). Thus, as a threshold matter, Mr. McGuinness failed to establish the employment element of his Title I claim. [15] Neither didMr. McGuinness satisfy the discrimination element of § 12112(b)(4). He presented evidence that the school knew he had a child with cerebral palsy, but not that such awareness was a "determining factor" in the decision to make him repeat the first-year program. See Den Hartog, 129 F.3d at 1085 (setting forth the elements of a claim under § 12112(b)(4)); Rogers v. Int'l Marine Terminals, 87 F.3d 755, 760-61 (5th Cir.1996) (affirming summary judgment where plaintiff failed to show that he was terminated because of a relative's disability). Thus, we hold that the medical school is entitled to summary judgment on the "association discrimination" claim as well. B. Rehabilitation Act Claim [16] Mr. McGuinness' cause of action under the Rehabilitation Act, 29 U.S.C. § 794, contains the same flaw as his ADA claims: He has not shown that he suffers from a disability covered by the statute. The Rehabilitation Act proscribes discrimination against disabled persons who are otherwise qualified for participation in programs receiving federal funding, including public universities. See 29 U.S.C. § 794(a), (b)(2)(A). The statute defines "disability" in the same way as the ADA. See Bragdon v. Abbott, 524 U.S. 624, 118 S.Ct. 2196, 2202, 141 L.Ed.2d 540 (1998); Siemon v. AT&T Corp., 117 F.3d 1173, 1176 (10th Cir.1997). [17] An impairment limited to specific stressful situations, such as the mathematics and chemistry exams which trigger Mr. McGuinness' anxiety, is not a disability under the Rehabilitation Act. See, e.g., Gonzagowski v. Widnall, 115 F.3d 744, 746-47 (10th Cir.1997). Nor is granting the plaintiff a passing grade a reasonable accommodation if 81 university officials believe that he has not demonstrated competency in subject matter necessary for a medical degree. See Doherty v. Southern College of Optometry, 862 F.2d 570, 575 (6th Cir.1988). C. Failure to Sanction Defendant [18] Under the authorization of the district court, a United States magistrate judge sanctioned the plaintiff for violating a court order and Rule 16-402 of the Rules of Professional Responsibility. See Aplt.App. at 5-11. Mr. McGuinness does not appeal this decision. Rather, he asserts that the district court should have addressed misconduct by defense counsel. He contends that, by lodging a complaint with the magistrate judge, defense counsel chilled the flow of information necessary for Mr. McGuinness' case and thus improperly wielded the Rules of Professional Conduct as a tactical weapon. [19] We review decisions to impose sanctions for abuse of discretion and note that the "[d]etermination of the correct sanction for a discovery violation is a fact-specific inquiry that the district court is best qualified to make." Ehrenhaus v. Reynolds, 965 F.2d 916, 920 (10th Cir.1992). Here, the magistrate judge decided thatplaintiff's counsel improperly obtained an affidavit from an emeritus professor who was the full-time assistant dean of student affairs at the medical school and a member of the steering committee that made decisions regarding Mr. McGuinness' status. CGSee CG Aplt.App. at 279. Plaintiff's counsel violated a protective order barring him from ex parte contact with this individual. CGSee CG Aplt.App. at 86. The magistrate judge did not abuse his discretion in imposing the sanction, nor does the record reflect that he overlooked misconduct by the defendant. Mr. McGuinness' argument is without merit. AFFIRMED. Toyota Motor Mfg. v. Williams 534 U.S. 184, 151 L. Ed.2d 615 (2002) 122 S.Ct. 681, 534 U.S. 184 Supreme Court of the United States TOYOTA MOTOR MANUFACTURING, KENTUCKY, INC., Petitioner, v. Ella WILLIAMS. No. 00-1089. Argued Nov. 7, 2001. Decided Jan. 8, 2002. 82 O'CONNOR, J., delivered the opinion for a unanimous Court. John G. Roberts, Jr., Washington, DC, for petitioner. Barbara B. McDowell, Lansing, MI, for the United States as amicus curiae, by special leave of the Court in support of petitioner. Robert L. Rosenbaum, Lexington, KY, for respondent. Justice O'CONNOR delivered the opinion of the Court. Under the Americans with Disabilities Act of 1990 (ADA or Act), 104 Stat. 328, 42 U.S.C. § 12101 et seq. (1994 ed. and Supp. V), a physical impairment that "substantially limits one or more ... major life activities" is a "disability." 42 U.S.C. § 12102(2)(A) (1994 ed.). Respondent, claiming to be disabled because of her carpal tunnel syndrome and other related impairments, sued petitioner, her former employer, for failing to provide her with a reasonable accommodation as required by the ADA. See § 12112(b)(5)(A). The District Court granted summary judgment to petitioner, finding that respondent's impairments did not substantially limit any of her major life activities. The Court of Appeals for the Sixth Circuit reversed, finding that the impairments substantially limited respondent in the major life activity of performing manual tasks, and therefore granting partial summary judgment to respondent on the issue of whether she was disabled under the ADA. We conclude that the Court of Appeals did not apply the proper standard in making this determination because it analyzed only a limited class of manual tasks and failed to ask whether respondent's impairments prevented or restricted her from performing tasks that are of central importance to most people's daily lives. I Respondent began working at petitioner's automobile manufacturing plant in Georgetown, Kentucky, in August 1990. She was soon placed on an engine fabrication assembly line, where her duties included work with pneumatic tools. Use of these tools eventually caused pain in respondent's hands, wrists, and arms. She sought treatment at petitioner's in-house medical service, where she was diagnosed with bilateral carpal tunnel syndrome and bilateral tendinitis. Respondent consulted a personal physician who placed her on permanent work restrictions that precluded her from lifting more than 20 pounds or from "frequently lifting or carrying ... objects weighing up to 10 pounds," engaging in "constant repetitive ... flexion or extension of [her] wrists or elbows," performing "overhead work," or using "vibratory or pneumatic tools." Brief for Respondent 2; App. 45-46. In light of these restrictions, for the next two years petitioner assigned respondent to various modified duty jobs. Nonetheless, respondent missed some work for medical leave, and eventually filed a claim under the Kentucky Workers' Compensation Act. Ky.Rev.Stat. Ann. § 342.0011 et seq. (1997 and Supp.2000). The parties settled this claim, and respondent returned to work. She was unsatisfied by petitioner's efforts to accommodate her work restrictions, however, and responded by bringing an action in the United States District Court for the Eastern District of Kentucky alleging that petitioner had violated the ADA by refusing to accommodate her disability. That suit 83 was also settled, and as part of the settlement, respondent returned to work in December 1993. Upon her return, petitioner placed respondent on a team in Quality Control Inspection Operations (QCIO). QCIO is responsible for four tasks: (1) "assembly paint"; (2) "paint second inspection"; (3) "shell body audit"; and (4) "ED surface repair." App. 19. Respondent was initially placed on a team that performed only the first two of these tasks, and for a couple of years, she rotated on a weekly basis between them. In assembly paint, respondent visually inspected painted cars moving slowly down a conveyor. She scanned for scratches, dents, chips, or any other flaws that may have occurred during the assembly or painting process, at a rate of one car every 54 seconds. When respondent began working in assembly paint, inspection team members were required to open and shut the doors, trunk, and/or hood of each passing car. Sometime during respondent's tenure, however, the position was modified to include only visual inspection with few or no manual tasks. Paint second inspection required team members to use their hands to wipe each painted car with a glove as it moved along a conveyor. Id., at 21-22. The parties agree that respondent was physically capable of performing both of these jobs and that her performance was satisfactory. During the fall of 1996, petitioner announced that it wanted QCIO employees to be able to rotate through all four of the QCIO processes. Respondent therefore received training for the shell body audit job, in which team members apply a highlight oil to the hood, fender, doors, rear quarter panel, and trunk of passing cars at a rate of approximately one car per minute. The highlight oil has the viscosity of salad oil, and employees spread it on cars with a sponge attached to a block of wood. After they wipe each car with the oil, the employees visually inspect it for flaws. Wiping the cars required respondent to hold her hands and arms up around shoulder height for several hours at a time. A short while after the shell body audit job was added to respondent's rotations, she began to experience pain in her neck and shoulders. Respondent again sought care at petitioner's in-house medical service, where she was diagnosed with myotendinitis bilateral periscapular, an inflammation of the muscles and tendons around both of her shoulder blades; myotendinitis and myositis bilateral forearms with nerve compression causing median nerve irritation; and thoracic outlet compression, a condition that causes pain in the nerves that lead to the upper extremities. Respondent requested that petitioner accommodate her medical conditions by allowing her to return to doing only her original two jobs in QCIO, which respondent claimed she could still perform without difficulty. The parties disagree about what happened next. According to respondent, petitioner refused her request and forced her to continue working in the shell body audit job, which caused her even greater physical injury. According to petitioner, respondent simply began missing work on a regular basis. Regardless, it is clear that on December 6, 1996, the last day respondent worked at petitioner's plant, she was placed under a nowork-of-any-kind restriction by her treating physicians. On January 27, 1997, respondent received a letter from petitioner that terminated her employment, citing her poor attendance record. 84 Respondent filed a charge of disability discrimination with the Equal Employment Opportunity Commission (EEOC). After receiving a right to sue letter, respondent filed suit against petitioner in the United States District Court for the Eastern District of Kentucky. Her complaint alleged that petitioner had violated the ADA and the Kentucky Civil Rights Act, Ky.Rev.Stat. Ann. § 344.010 et seq. (1997 and Supp.2000), by failing to reasonably accommodate her disability and by terminating her employment. Respondent later amended her complaint to also allege a violation of the Family and Medical Leave Act of 1993 (FMLA), 107 Stat. 6, as amended, 29 U.S.C. § 2601 et seq. (1994 ed. and Supp. V). Respondent based her claim that she was "disabled" under the ADA on the ground that her physical impairments substantially limited her in (1) manual tasks; (2) housework; (3) gardening; (4) playing with her children; (5) lifting; and (6) working, all of which, she argued, constituted major life activities under the Act. Respondent also argued, in the alternative, that she was disabled under the ADA because she had a record of a substantially limiting impairment and because she was regarded as having such an impairment. See 42 U.S.C. § § 12102(2)(B)-(C) (1994 ed.). After petitioner filed a motion for summary judgment and respondent filed a motion for partial summary judgment on her disability claims, the District Court granted summary judgment to petitioner. Civ. A. No. 97-135 (Jan. 26, 1999), App. to Pet. for Cert. A-23. The court found that respondent had not been disabled, as defined by the ADA, at the time of petitioner's alleged refusal to accommodate her, and that she had therefore not been covered by the Act's protections or by the Kentucky Civil Rights Act, which is construed consistently with the ADA. Id., at A-29, A-34 to A-47. The District Court held that respondent had suffered from a physical impairment, but that the impairment did not qualify as a disability because it had not "substantially limit[ed]" any "major life activit[y]," 42 U.S.C. § 12102(2)(A). App. to Pet. for Cert. A-34 to A-42. The court rejected respondent's arguments that gardening, doing housework, and playing with children are major life activities. Id., at A-35 to A-36. Although the court agreed that performing manual tasks, lifting, and working are major life activities, it found the evidence insufficient to demonstrate that respondent had been substantially limited in lifting or working. Id., at A-36 to A-42. The court found respondent's claim that she was substantially limited in performing manual tasks to be "irretrievably contradicted by [respondent's] continual insistence that she could perform the tasks in assembly [paint] and paint [second] inspection without difficulty." Id., at A-36. The court also found no evidence that respondent had had a record of a substantially limiting impairment, id., at A-43, or that petitioner had regarded her as having such an impairment, id., at A-46 to A-47. The District Court also rejected respondent's claim that her termination violated the ADA and the Kentucky Civil Rights Act. The court found that even if it assumed that respondent was disabled at the time of her termination, she was not a "qualified individual with a disability," 42 U.S.C. § 12111(8) (1994 ed.), because, at that time, her physicians had restricted her from performing work of any kind, App. to Pet. for Cert. A47 to A-50. Finally, the court found that respondent's FMLA claim failed, because she had not presented evidence that she had suffered any damages available under the FMLA. Id., at A-50 to A-54. Respondent appealed all but the gardening, housework, and playing-with- children 85 rulings. The Court of Appeals for the Sixth Circuit reversed the District Court's ruling on whether respondent was disabled at the time she sought an accommodation, but affirmed the District Court's rulings on respondent's FMLA and wrongful termination claims. 224 F.3d 840 (2000). The Court of Appeals held that in order for respondent to demonstrate that she was disabled due to a substantial limitation in the ability to perform manual tasks at the time of her accommodation request, she had to "show that her manual disability involve[d] a 'class' of manual activities affecting the ability to perform tasks at work." Id., at 843. Respondent satisfied this test, according to the Court of Appeals, because her ailments "prevent[ed] her from doing the tasks associated with certain types of manual assembly line jobs, manual product handling jobs and manual building trade jobs (painting, plumbing, roofing, etc.) that require the gripping of tools and repetitive work with hands and arms extended at or above shoulder levels for extended periods of time." Ibid. In reaching this conclusion, the court disregarded evidence that respondent could "ten[d] to her personal hygiene [and] carr[y] out personal or household chores," finding that such evidence "does not affect a determination that her impairment substantially limit[ed] her ability to perform the range of manual tasks associated with an assembly line job," ibid. Because the Court of Appeals concluded that respondent had been substantially limited in performing manual tasks and, for that reason, was entitled to partial summary judgment on the issue of whether she was disabled under the Act, it found that it did not need to determine whether respondent had been substantially limited in the major life activities of lifting or working, ibid., or whether she had had a "record of" a disability or had been "regarded as" disabled, id., at 844. We granted certiorari, 532 U.S. 970, 121 S.Ct. 1600, 149 L.Ed.2d 466 (2001), to consider the proper standard for assessing whether an individual is substantially limited in performing manual tasks. We now reverse the Court of Appeals' decision to grant partial summary judgment to respondent on the issue of whether she was substantially limited in performing manual tasks at the time she sought an accommodation. We express no opinion on the working, lifting, or other arguments for disability status that were preserved below but which were not ruled upon by the Court of Appeals. II The ADA requires covered entities, including private employers, to provide "reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual with a disability who is an applicant or employee, unless such covered entity can demonstrate that the accommodation would impose an undue hardship." 42 U.S.C. § 12112(b)(5)(A) (1994 ed.); see also § 12111(2) ("The term 'covered entity' means an employer, employment agency, labor organization, or joint labor-management committee"). The Act defines a "qualified individual with a disability" as "an individual with a disability who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires." § 12111(8). In turn, a "disability" is: "(A) a physical or mental impairment that substantially limits one or more of the major life activities of such individual; "(B) a record of such an impairment; or "(C) being regarded as having such an impairment." § 12102(2). [1] There are two potential sources of guidance for interpreting the terms of this definition--the regulations interpreting the Rehabilitation Act of 1973, 87 Stat. 361, as 86 amended, 29 U.S.C. § 706(8)(B) (1988 ed.), and the EEOC regulations interpreting the ADA. Congress drew the ADA's definition of disability almost verbatim from the definition of "handicapped individual" in the Rehabilitation Act, § 706(8)(B), and Congress' repetition of a well- established term generally implies that Congress intended the term to be construed in accordance with pre-existing regulatory interpretations. Bragdon v. Abbott, 524 U.S. 624, 631, 118 S.Ct. 2196, 141 L.Ed.2d 540 (1998); FDIC v. Philadelphia Gear Corp., 476 U.S. 426, 437-438, 106 S.Ct. 1931, 90 L.Ed.2d 428 (1986); ICC v. Parker, 326 U.S. 60, 65, 65 S.Ct. 1490, 89 L.Ed. 2051 (1945). As we explained in Bragdon v. Abbott, supra, at 631, 118 S.Ct. 2196, Congress did more in the ADA than suggest this construction; it adopted a specific statutory provision directing as follows: "Except as otherwise provided in this chapter, nothing in this chapter shall be construed to apply a lesser standard than the standards applied under title V of the Rehabilitation Act of 1973 (29 U.S.C. § 790 et seq.) or the regulations issued by Federal agencies pursuant to such title." 42 U.S.C. § 12201(a) (1994 ed.). [2] The persuasive authority of the EEOC regulations is less clear. As we have previously noted, see Sutton v. United Air Lines, Inc., 527 U.S. 471, 479, 119 S.Ct. 2139, 144 L.Ed.2d 450 (1999), no agency has been given authority to issue regulations interpreting the term "disability" in the ADA. Nonetheless, the EEOC has done so. See 29 CFR § § 1630.2(g)-(j) (2001). Because both parties accept the EEOC regulations as reasonable, we assume without deciding that they are, and we have no occasion to decide what level of deference, if any, they are due. See Sutton v. United Air Lines, Inc., supra, at 480, 119 S.Ct. 2139; Albertson's, Inc. v. Kirkingburg, 527 U.S. 555, 563, n. 10, 119 S.Ct. 2162, 144 L.Ed.2d 518 (1999). [3] To qualify as disabled under subsection (A) of the ADA's definition of disability, a claimant must initially prove that he or she has a physical or mental impairment. See 42 U.S.C. § 12102(2)(A). The Rehabilitation Act regulations issued by the Department of Health, Education, and Welfare (HEW) in 1977, which appear without change in the current regulations issued by the Department of Health and Human Services, define "physical impairment," the type of impairment relevant to this case, to mean "any physiological disorder or condition, cosmetic disfigurement, or anatomical loss affecting one or more of the following body systems: neurological; musculoskeletal; special sense organs; respiratory, including speech organs; cardiovascular; reproductive, digestive, genito-urinary; hemic and lymphatic; skin; and endocrine." 45 CFR § 84.3(j)(2)(i) (2001). The HEW regulations are of particular significance because at the time they were issued, HEW was the agency responsible for coordinating the implementation and enforcement of § 504 of the Rehabilitation Act, 29 U.S.C. § 794 (1994 ed. and Supp. V), which prohibits discrimination against individuals with disabilities by recipients of federal financial assistance. Bragdon v. Abbott, supra, at 632, 118 S.Ct. 2196 (citing Consolidated Rail Corporation v. Darrone, 465 U.S. 624, 634, 104 S.Ct. 1248, 79 L.Ed.2d 568 (1984)). [4] Merely having an impairment does not make one disabled for purposes of the ADA. Claimants also need to demonstrate that the impairment limits a major life activity. See 42 U.S.C. § 12102(2)(A) (1994 ed.). The HEW Rehabilitation Act regulations provide a list of examples of "major life activities" that includes "walking, seeing, hearing," and, as relevant here, "performing manual tasks." 45 CFR § 84.3(j)(2)(ii) (2001). 87 To qualify as disabled, a claimant must further show that the limitation on the major life activity is "substantia[l]." 42 U.S.C. § 12102(2)(A). Unlike "physical impairment" and "major life activities," the HEW regulations do not define the term "substantially limits." See Nondiscrimination on the Basis of Handicap in Programs and Activities Receiving or Benefiting from Federal Financial Assistance, 42 Fed.Reg. 22676, 22685 (1977) (stating HEW's position that a definition of "substantially limits" was not possible at that time). The EEOC, therefore, has created its own definition for purposes of the ADA. According to the EEOC regulations, "substantially limit[ed]" means "[u]nable to perform a major life activity that the average person in the general population can perform"; or "[s]ignificantly restricted as to the condition, manner or duration under which an individual can perform a particular major life activity as compared to the condition, manner, or duration under which the average person in the general population can perform that same major life activity." 29 CFR § 1630.2(j) (2001). In determining whether an individual is substantially limited in a major life activity, the regulations instruct that the following factors should be considered: "[t]he nature and severity of the impairment; [t]he duration or expected duration of the impairment; and [t]he permanent or long-term impact, or the expected permanent or long-term impact of or resulting from the impairment." § § 1630.2(j)(2)(i)-(iii). III The question presented by this case is whether the Sixth Circuit properly determined that respondent was disabled under subsection (A) of the ADA's disability definition at the time that she sought an accommodation from petitioner. 42 U.S.C. § 12102(2)(A). The parties do not dispute that respondent's medical conditions, which include carpal tunnel syndrome, myotendinitis, and thoracic outlet compression, amount to physical impairments. The relevant question, therefore, is whether the Sixth Circuit correctly analyzed whether these impairments substantially limited respondent in the major life activity of performing manual tasks. Answering this requires us to address an issue about which the EEOC regulations are silent: what a plaintiff must demonstrate to establish a substantial limitation in the specific major life activity of performing manual tasks. [5][6] Our consideration of this issue is guided first and foremost by the words of the disability definition itself. "[S]ubstantially" in the phrase "substantially limits" suggests "considerable" or "to a large degree." See Webster's Third New International Dictionary 2280 (1976) (defining "substantially" as "in a substantial manner" and "substantial" as "considerable in amount, value, or worth" and "being that specified to a large degree or in the main"); see also 17 Oxford English Dictionary 66-67 (2d ed.1989) ( "substantial": "[r]elating to or proceeding from the essence of a thing; essential"; "[o]f ample or considerable amount, quantity, or dimensions"). The word "substantial" thus clearly precludes impairments that interfere in only a minor way with the performance of manual tasks from qualifying as disabilities. Cf. Albertson's, Inc. v. Kirkingburg, supra, at 565, 119 S.Ct. 2162 (explaining that a "mere difference" does not amount to a "significant restric[tion]" and therefore does not satisfy the EEOC's interpretation of "substantially limits"). [7][8][9] "Major" in the phrase "major life activities" means important. See Webster's, supra, at 1363 (defining "major" as "greater in dignity, rank, importance, or interest"). "Major life activities" thus refers to those activities that are of central importance to daily 88 life. In order for performing manual tasks to fit into this category--a category that includes such basic abilities as walking, seeing, and hearing--the manual tasks in question must be central to daily life. If each of the tasks included in the major life activity of performing manual tasks does not independently qualify as a major life activity, then together they must do so. [10] That these terms need to be interpreted strictly to create a demanding standard for qualifying as disabled is confirmed by the first section of the ADA, which lays out the legislative findings and purposes that motivate the Act. See 42 U.S.C. § 12101. When it enacted the ADA in 1990, Congress found that "some 43,000,000 Americans have one or more physical or mental disabilities." § 12101(a)(1). If Congress intended everyone with a physical impairment that precluded the performance of some isolated, unimportant, or particularly difficult manual task to qualify as disabled, the number of disabled Americans would surely have been much higher. Cf. Sutton v. United Air Lines, Inc., 527 U.S., at 487, 119 S.Ct. 2139 (finding that because more than 100 million people need corrective lenses to see properly, "[h]ad Congress intended to include all persons with corrected physical limitations among those covered by the Act, it undoubtedly would have cited a much higher number than [43 million disabled persons] in the findings"). [11] We therefore hold that to be substantially limited in performing manual tasks, an individual must have an impairment that prevents or severely restricts the individual from doing activities that are of central importance to most people's daily lives. The impairment's impact must also be permanent or long term. See 29 CFR § § 1630.2(j)(2)(ii)-(iii) (2001). [12][13] It is insufficient for individuals attempting to prove disability status under this test to merely submit evidence of a medical diagnosis of an impairment. Instead, the ADA requires those "claiming the Act's protection ... to prove a disability by offering evidence that the extent of the limitation [caused by their impairment] in terms of their own experience ... is substantial." Albertson's, Inc. v. Kirkingburg, 527 U.S., at 567, 119 S.Ct. 2162 (holding that monocular vision is not invariably a disability, but must be analyzed on an individual basis, taking into account the individual's ability to compensate for the impairment). That the Act defines "disability" "with respect to an individual," 42 U.S.C. § 12102(2), makes clear that Congress intended the existence of a disability to be determined in such a case-by-case manner. See Sutton v. United Air Lines, Inc., supra, at 483, 119 S.Ct. 2139; Albertson's, Inc. v. Kirkingburg, supra, at 566, 119 S.Ct. 2162; cf. Bragdon v. Abbott, 524 U.S., at 641-642, 118 S.Ct. 2196 (relying on unchallenged testimony that the respondent's HIV infection controlled her decision not to have a child, and declining to consider whether HIV infection is a per se disability under the ADA); 29 CFR pt. 1630, App. § 1630.2(j) (2001) ("The determination of whether an individual has a disability is not necessarily based on the name or diagnosis of the impairment the person has, but rather on the effect of that impairment on the life of the individual"); ibid. ("The determination of whether an individual is substantially limited in a major life activity must be made on a case-by-case basis"). [14][15] An individualized assessment of the effect of an impairment is particularly necessary when the impairment is one whose symptoms vary widely from person to person. Carpal tunnel syndrome, one of respondent's impairments, is just such a 89 condition. While cases of severe carpal tunnel syndrome are characterized by muscle atrophy and extreme sensory deficits, mild cases generally do not have either of these effects and create only intermittent symptoms of numbness and tingling. Carniero, Carpal Tunnel Syndrome: The Cause Dictates the Treatment 66, Cleveland Clinic J. Medicine 159, 161-162 (1999). Studies have further shown that, even without surgical treatment, one quarter of carpal tunnel cases resolve in one month, but that in 22 percent of cases, symptoms last for eight years or longer. See DeStefano, Nordstrom, & Uierkant, Long-term Symptom Outcomes of Carpal Tunnel Syndrome and its Treatment, 22A J. Hand Surgery 200, 204-205 (1997). When pregnancy is the cause of carpal tunnel syndrome, in contrast, the symptoms normally resolve within two weeks of delivery. See Ouellette, Nerve Compression Syndromes of the Upper Extremity in Women, 17 J. of Musculoskeletal Medicine 536 (2000). Given these large potential differences in the severity and duration of the effects of carpal tunnel syndrome, an individual's carpal tunnel syndrome diagnosis, on its own, does not indicate whether the individual has a disability within the meaning of the ADA. IV The Court of Appeals' analysis of respondent's claimed disability suggested that in order to prove a substantial limitation in the major life activity of performing manual tasks, a "plaintiff must show that her manual disability involves a 'class' of manual activities," and that those activities "affec[t] the ability to perform tasks at work." See 224 F.3d, at 843. Both of these ideas lack support. [16] The Court of Appeals relied on our opinion in Sutton v. United Air Lines, Inc., for the idea that a "class" of manual activities must be implicated for an impairment to substantially limit the major life activity of performing manual tasks. 224 F.3d, at 843. But Sutton said only that "[w]hen the major life activity under consideration is that of working, the statutory phrase 'substantially limits' requires ... that plaintiffs allege they are unable to work in a broad class of jobs." 527 U.S., at 491, 119 S.Ct. 2139 (emphasis added). Because of the conceptual difficulties inherent in the argument that working could be a major life activity, we have been hesitant to hold as much, and we need not decide this difficult question today. In Sutton, we noted that even assuming that working is a major life activity, a claimant would be required to show an inability to work in a "broad range of jobs," rather than a specific job. Id., at 492, 119 S.Ct. 2139. But Sutton did not suggest that a class-based analysis should be applied to any major life activity other than working. Nor do the EEOC regulations. In defining "substantially limits," the EEOC regulations only mention the "class" concept in the context of the major life activity of working. 29 CFR § 1630.2(j)(3) (2001) ("With respect to the major life activity of working [,] [t]he term substantially limits means significantly restricted in the ability to perform either a class of jobs or a broad range of jobs in various classes as compared to the average person having comparable training, skills and abilities"). Nothing in the text of the Act, our previous opinions, or the regulations suggests that a class-based framework should apply outside the context of the major life activity of working. [17][18] While the Court of Appeals in this case addressed the different major life activity of performing manual tasks, its analysis circumvented Sutton by focusing on respondent's inability to perform manual tasks associated only with her job. This was error. When addressing the major life activity of performing manual tasks, the central 90 inquiry must be whether the claimant is unable to perform the variety of tasks central to most people's daily lives, not whether the claimant is unable to perform the tasks associated with her specific job. Otherwise, Sutton 's restriction on claims of disability based on a substantial limitation in working will be rendered meaningless because an inability to perform a specific job always can be recast as an inability to perform a "class" of tasks associated with that specific job. [19] There is also no support in the Act, our previous opinions, or the regulations for the Court of Appeals' idea that the question of whether an impairment constitutes a disability is to be answered only by analyzing the effect of the impairment in the workplace. Indeed, the fact that the Act's definition of "disability" applies not only to Title I of the Act, 42 U.S.C. § § 12111-12117 (1994 ed.), which deals with employment, but also to the other portions of the Act, which deal with subjects such as public transportation, § § 12141-12150, 42 U.S.C. § § 12161-12165 (1994 ed. and Supp. V), and privately provided public accommodations, § § 12181-12189, demonstrates that the definition is intended to cover individuals with disabling impairments regardless of whether the individuals have any connection to a workplace. [20][21] Even more critically, the manual tasks unique to any particular job are not necessarily important parts of most people's lives. As a result, occupation-specific tasks may have only limited relevance to the manual task inquiry. In this case, "repetitive work with hands and arms extended at or above shoulder levels for extended periods of time," 224 F.3d, at 843, the manual task on which the Court of Appeals relied, is not an important part of most people's daily lives. The court, therefore, should not have considered respondent's inability to do such manual work in her specialized assembly line job as sufficient proof that she was substantially limited in performing manual tasks. [22] At the same time, the Court of Appeals appears to have disregarded the very type of evidence that it should have focused upon. It treated as irrelevant "[t]he fact that [respondent] can ... ten[d] to her personal hygiene [and] carr[y] out personal or household chores." Ibid. Yet household chores, bathing, and brushing one's teeth are among the types of manual tasks of central importance to people's daily lives, and should have been part of the assessment of whether respondent was substantially limited in performing manual tasks. [23] The District Court noted that at the time respondent sought an accommodation from petitioner, she admitted that she was able to do the manual tasks required by her original two jobs in QCIO.App. to Pet. for Cert. A-36. In addition, according to respondent's deposition testimony, even after her condition worsened, she could still brush her teeth, wash her face, bathe, tend her flower garden, fix breakfast, do laundry, and pick up around the house. App. 32-34. The record also indicates that her medical conditions caused her to avoid sweeping, to quit dancing, to occasionally seek help dressing, and to reduce how often she plays with her children, gardens, and drives long distances. Id., at 32, 38-39. But these changes in her life did not amount to such severe restrictions in the activities that are of central importance to most people's daily lives that they establish a manual task disability as a matter of law. On this record, it was therefore inappropriate for the Court of Appeals to grant partial summary judgment to respondent on the issue of whether she was substantially limited in performing manual tasks, and its decision to do so must be reversed. 91 [24] In its brief on the merits, petitioner asks us to reinstate the District Court's grant of summary judgment to petitioner on the manual task issue. In itspetition for certiorari, however, petitioner did not seek summary judgment; it argued only that the Court of Appeals' reasons for granting partial summary judgment to respondent were unsound. This Court's Rule 14.1(a) provides: "Only the questions set out in the petition, or fairly included therein, will be considered by the Court." The question of whether petitioner was entitled to summary judgment on the manual task issue is therefore not properly before us. See Irvine v. California, 347 U.S. 128, 129-130, 74 S.Ct. 381, 98 L.Ed. 561 (1954). Accordingly, we reverse the Court of Appeals' judgment granting partial summary judgment to respondent and remand the case for further proceedings consistent with this opinion. So ordered. EEOC v. Waffle House 534 U.S. 279, 122 S.Ct. 754 534 U.S. 279, 122 S.Ct. 754 Supreme Court of the United States EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Petitioner, v. WAFFLE HOUSE, INC. No. 99-1823. Argued Oct. 10, 2001. Decided Jan. 15, 2002. STEVENS, J., delivered the opinion of the Court, in which O'CONNOR, KENNEDY, SOUTER, GINSBURG, and BREYER, JJ., joined. THOMAS, J., filed a dissenting opinion, in which REHNQUIST, C.J., and SCALIA, J., joined, post, p. 766. Justice STEVENS delivered the opinion of the Court. The question presented is whether an agreement between an employer and an employee to arbitrate employment-related disputes bars the Equal Employment Opportunity Commission (EEOC) from pursuing victim-specific judicial relief, such as backpay, reinstatement, and damages, in an enforcement action alleging that the employer has violated Title I of the Americans with Disabilities Act of 1990(ADA), 104 Stat. 328, 42 U.S.C. § 12101 et seq. (1994 ed. and Supp. V). I 92 In his application for employment with respondent, Eric Baker agreed that "any dispute or claim" concerning his employment would be "settled by binding arbitration." [FN1] As a condition of employment, all prospective Waffle House employees are required to sign an application containing a similar mandatory arbitration agreement. See App. 56. Baker began working as a grill operator at one of respondent's restaurants on August 10, 1994. Sixteen days later he suffered a seizure at work and soon thereafter was discharged. Id., at 43-44. Baker did not initiate arbitration proceedings, nor has he in the seven years since his termination, but he did file a timely charge of discrimination with the EEOC alleging that his discharge violated the ADA. FN1. The agreement states: "The parties agree that any dispute or claim concerning Applicant's employment with Waffle House, Inc., or any subsidiary or Franchisee of Waffle House, Inc., or the terms, conditions or benefits of such employment, including whether such dispute or claim is arbitrable, will be settled by binding arbitration. The arbitration proceedings shall be conducted under the Commercial Arbitration Rules of the American Arbitration Association in effect at the time a demand for arbitration is made. A decision and award of the arbitrator made under the said rules shall be exclusive, final and binding on both parties, their heirs, executors, administrators, successors and assigns. The costs and expenses of the arbitration shall be borne evenly by the parties." App. 59. After an investigation and an unsuccessful attempt to conciliate, the EEOC filed an enforcement action against respondent in the Federal District Court for the District of South Carolina, [FN2] pursuant to § 107(a) of the ADA, 42 U.S.C. § 12117(a) (1994 ed.), and § 102 of the Civil Rights Act of 1991, as added, 105 Stat. 1072, 42 U.S.C. § 1981a (1994 ed.). Baker is not a party to the case. The EEOC's complaint alleged that respondent engaged in employment practices that violated the ADA, including its discharge of Baker "because of his disability," and that its violation was intentional, and "done with malice or with reckless indifference to [his] federally protected rights." The complaint requested the court to grant injunctive relief to "eradicate the effects of [respondent's] past and present unlawful employment practices," to order specific relief designed to make Baker whole, including backpay, reinstatement, and compensatory damages, and to award punitive damages for malicious and reckless conduct. App. 3840. FN2. Because no evidence of the employment practices alleged in the complaint has yet been presented, we of course express no opinion on the merits of the EEOC's case. We note, on the one hand, that the state human rights commission also investigated Baker's claim and found no basis for suit. On the other hand, the EEOC chooses to file suit in response to only a small number of the many charges received each year, see n. 7, infra. In keeping with normal appellate practice in cases arising at the pleading stage, we assume, arguendo, that the EEOC's case is meritorious. 93 Respondent filed a petition under the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., to stay the EEOC's suit and compel arbitration, or to dismiss the action. Based on a factual determination that Baker's actual employment contract had not included the arbitration provision, the District Court denied the motion. The Court of Appeals granted an interlocutory appeal and held that a valid, enforceable arbitration agreement between Baker and respondent did exist. 193 F.3d 805, 808 (C.A.4 1999). The court then proceeded to consider "what effect, if any, the binding arbitration agreement between Baker and Waffle House has on the EEOC, which filed this action in its own name both in the public interest and on behalf of Baker." Id., at 809. After reviewing the relevant statutes and the language of the contract, the court concluded that the agreement did not foreclose the enforcement action because the EEOC was not a party to the contract, and it has independent statutory authority to bring suit in any federal district court where venue is proper. Id., at 809-812. Nevertheless, the court held that the EEOC was precluded from seeking victim-specific relief in court because the policy goals expressed in the FAA required giving some effect to Baker's arbitration agreement. The majority explained: "When the EEOC seeks 'make-whole' relief for a charging party, the federal policy favoring enforcement of private arbitration agreements outweighs the EEOC's right to proceed in federal court because in that circumstance, the EEOC's public interest is minimal, as the EEOC seeks primarily to vindicate private, rather than public, interests. On the other hand, when the EEOC is pursuing large-scale injunctive relief, the balance tips in favor of EEOC enforcement efforts in federal court because the public interest dominates the EEOC's action." Id., at 812. [FN3] FN3. One member of the panel dissented because he agreed with the District Court that, as a matter of fact, the arbitration clause was not included in Baker's actual contract of employment. 193 F.3d, at 813. Therefore, according to the Court of Appeals, when an employee has signed a mandatory arbitration agreement, the EEOC's remedies in an enforcement action are limited to injunctive relief. Several Courts of Appeals have considered this issue and reached conflicting conclusions. Compare EEOC v. Frank's Nursery & Crafts, Inc., 177 F.3d 448 (C.A.6 1999) (employee's agreement to arbitrate does not affect the EEOC's independent statutory authority to pursue an enforcement action for injunctive relief, backpay, and damages in federal court), with EEOC v. Kidder, Peabody & Co., 156 F.3d 298 (C.A.2 1998) (allowing the EEOC to pursue injunctive relief in federal court, but precluding monetary relief); Merrill Lynch, Pierce, Fenner Smith, Inc. v. Nixon, 210 F.3d 814(C.A.8), cert. denied, 531 U.S. 958, 121 S.Ct. 383, 148 L.Ed.2d 295 (2000) (same). We granted the EEOC's petition for certiorari to resolve this conflict, 532 U.S. 941, 121 S.Ct. 1401, 149 L.Ed.2d 344 (2001), and now reverse. II [1] Congress has directed the EEOC to exercise the same enforcement powers, remedies, and procedures that are set forth in Title VII of the Civil Rights Act of 1964 when it is enforcing the ADA's prohibitions against employment discrimination on the basis of disability. 42 U.S.C. § 12117(a) (1994 ed.). [FN4] Accordingly, the provisions 94 of Title VII defining the EEOC's authority provide the starting point for our analysis. FN4. Section 12117(a) provides: "The powers, remedies, and procedures set forth in sections 2000e-4, 2000e-5, 2000e-6, 2000e-8, and 2000e-9 of this title shall be the powers, remedies, and procedures this subchapter provides to the Commission, to the Attorney General, or to any person alleging discrimination on the basis of disability in violation of any provision of this chapter, or regulations promulgated under section 12116 of this title, concerning employment." When Title VII was enacted in 1964, it authorized private actions by individual employees and public actions by the Attorney General in cases involving a "pattern or practice" of discrimination. 42 U.S.C. § 2000e- 6(a) (1994 ed.). The EEOC, however, merely had the authority to investigate and, if possible, to conciliate charges of discrimination. See General Telephone Co. of Northwest v. EEOC, 446 U.S. 318, 325, 100 S.Ct. 1698, 64 L.Ed.2d 319 (1980). In 1972, Congress amended Title VII to authorize the EEOC to bring its own enforcement actions; indeed, we have observed that the 1972 amendments created a system in which the EEOC was intended "to bear the primary burden of litigation," id., at 326, 100 S.Ct. 1698. Those amendments authorize the courts to enjoin employers from engaging in unlawful employment practices, and to order appropriate affirmative action, which may include reinstatement, with or without backpay. [FN5] Moreover, the amendments specify the judicial districts in which such actions may be brought. [FN6] They do not mention arbitration proceedings. FN5. "(g) Injunctions; appropriate affirmative action; equitable relief; accrual of back pay; reduction of back pay; limitations on judicial orders "(1) If the court finds that the respondent has intentionally engaged in or is intentionally engaging in an unlawful employment practice charged in the complaint, the court may enjoin the respondent from engaging in such unlawful employment practice, and order such affirmative action as may be appropriate, which may include, but is not limited to, reinstatement or hiring of employees, with or without back pay (payable by the employer, employment agency, or labor organization, as the case may be, responsible for the unlawful employment practice), or any other equitable relief as the court deems appropriate. Back pay liability shall not accrue from a date more than two years prior to the filing of a charge with the Commission. Interim earnings or amounts earnable with reasonable diligence by the person or persons discriminated against shall operate to reduce the back pay otherwise allowable." 42 U.S.C. § 2000e-5(g)(1) (1994 ed.). FN6. Section 2000e-5(f)(3) provides: "Each United States district court and each United States court of a place subject to the jurisdiction of the United States shall have jurisdiction of actions brought under this subchapter. Such an action may be brought in any judicial district in the State in which the unlawful employment practice is alleged to have been 95 committed, in the judicial district in which the employment records relevant to such practice are maintained and administered, or in the judicial district in which the aggrieved person would have worked but for the alleged unlawful employment practice, but if the respondent is not found within any such district, such an action may be brought within the judicial district in which the respondent has his principal office. For purposes of sections 1404 and 1406 of title 28, the judicial district in which the respondent has his principal office shall in all cases be considered a district in which the action might have been brought." [2] In 1991, Congress again amended Title VII to allow the recoveryof compensatory and punitive damages by a "complaining party." 42 U.S.C. § 1981a(a)(1) (1994 ed.). The term includes both private plaintiffs and the EEOC, § 1981a(d)(1)(A), and the amendments apply to ADA claims as well, § § 1981a(a)(2), (d)(1)(B). As a complaining party, the EEOC may bring suit to enjoin an employer from engaging in unlawful employment practices, and to pursue reinstatement, backpay, and compensatory or punitive damages. Thus, these statutes unambiguously authorize the EEOC to obtain the relief that it seeks in its complaint if it can prove its case against respondent. Prior to the 1991 amendments, we recognized the difference between the EEOC's enforcement role and an individual employee's private cause of action in Occidental Life Ins. Co. of Cal. v. EEOC, 432 U.S. 355, 97 S.Ct. 2447, 53 L.Ed.2d 402 (1977), and General Telephone Co. of Northwest v. EEOC, 446 U.S. 318, 100 S.Ct. 1698, 64 L.Ed.2d 319 (1980). Occidental presented the question whether EEOC enforcement actions are subject to the same statutes of limitations that govern individuals' claims. After engaging in an unsuccessful conciliation process, the EEOC filed suit in Federal District Court, on behalf of a female employee, alleging sex discrimination. The court granted the defendant's motion for summary judgment on the ground that the EEOC's claim was time barred; the EEOC filed suit after California's 1-year statute of limitations had run. We reversed because "under the procedural structure created by the 1972 amendments, the EEOC does not function simply as a vehicle for conducting litigation on behalf of private parties," 432 U.S., at 368, 97 S.Ct. 2447. To hold otherwise would have undermined the agency's independent statutory responsibility to investigate and conciliate claims by subjecting the EEOC to inconsistent limitations periods. In General Telephone, the EEOC sought to bring a discrimination claim on behalf of all female employees at General Telephone's facilities in four States, without being certified as the class representative under Federal Rule of Civil Procedure 23. 446 U.S., at 321322, 100 S.Ct. 1698. Relying on the plain language of Title VII and the legislative intent behind the 1972 amendments, we held that the EEOC was not required to comply with Rule 23 because it "need look no further than § 706 for its authority to bring suit in its own name for the purpose, among others, of securing relief for a group of aggrieved individuals." Id., at 324, 100 S.Ct. 1698. In light of the provisions granting the EEOC exclusive jurisdiction over the claim for 180 days after the employee files a charge, we concluded that "the EEOC is not merely a proxy for the victims of discrimination and that [its] enforcement suits should not be considered representative actions subject to Rule 23." Id., at 326, 100 S.Ct. 1698. Against the backdrop of our decisions in Occidental and General Telephone, Congress 96 expanded the remedies available in EEOC enforcement actions in 1991 to include compensatory and punitive damages. There is no language in the statutes or in either of these cases suggesting that the existence of an arbitration agreement between private parties materially changes the EEOC's statutory function or the remedies that are otherwise available. III [3][4] The FAA was enacted in 1925, 43 Stat. 883, and then reenacted and codified in 1947 as Title 9 of the United States Code. It has not been amended since the enactment of Title VII in 1964. As we have explained, its "purpose was to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). The FAA broadly provides that a written provision in "a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Employment contracts, except for those covering workers engaged in transportation, are covered by the FAA. Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001). [5][6][7] The FAA provides for stays of proceedings in federal district courts when an issue in the proceeding is referable to arbitration, and for orders compelling arbitration when one party has failed or refused to comply with an arbitration agreement. See 9 U.S.C. § § 3 and 4. We have read these provisions to "manifest a 'liberal federal policy favoring arbitration agreements.' " Gilmer, 500 U.S., at 25, 111 S.Ct. 1647 (quoting Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Absent some ambiguity in the agreement, however, it is the language of the contract that defines the scope of disputes subject to arbitration. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 57, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995) ( "[T]he FAA's proarbitration policy does not operate without regard to the wishes of the contracting parties"). For nothing in the statute authorizes a court to compel arbitration of any issues, or by any parties, that are not already covered in the agreement. The FAA does not mention enforcement by public agencies; it ensures the enforceability of private agreements to arbitrate, but otherwise does not purport to place any restriction on a nonparty's choice of a judicial forum. IV The Court of Appeals based its decision on its evaluation of the "competing policies" implemented by the ADA and the FAA, rather than on any language in the text of either the statutes or the arbitration agreement between Baker and respondent. 193 F.3d, at 812. It recognized that the EEOC never agreed to arbitrate its statutory claim, id., at 811 ("We must also recognize that in this case the EEOC is not a party to any arbitration agreement"), and that the EEOC has "independent statutory authority" to vindicate the public interest, but opined that permitting the EEOC to prosecute Baker's claim in court "would significantly trample" the strong federal policy favoring arbitration because Baker had agreed to submit his claim to arbitration. Id., at 812. To effectuate this policy, the 97 court distinguished between injunctive and victim-specific relief, and held that the EEOC is barred from obtaining the latter because any public interest served when the EEOC pursues "make whole" relief is outweighed by the policy goals favoring arbitration. Only when the EEOC seeks broad injunctive relief, in the Court of Appeals' view, does the public interest overcome the goals underpinning the FAA. [FN7] FN7. This framework assumes the federal policy favoring arbitration will be undermined unless the EEOC's remedies are limited. The court failed to consider, however, that some of the benefits of arbitration are already built into the EEOC's statutory duties. Unlike individual employees, the EEOC cannot pursue a claim in court without first engaging in a conciliation process. 42 U.S.C. § 2000e-5(b) (1994 ed.). Thus, before the EEOC ever filed suit in this case, it attempted to reach a settlement with respondent. The court also neglected to take into account that the EEOC files suit in a small fraction of the charges employees file. For example, in fiscal year 2000, the EEOC received 79,896 charges of employment discrimination. Although the EEOC found reasonable cause in 848 charges, it only filed 291. Equal Employment Opportunity Commission, Enforcement Statistics and Litigation (as visited Nov. 18, 2001), http:// www.eeoc.gov/stats/enforcement.html. In contrast, 21,032 employment discrimination lawsuits were filed in 2000. See Administrative Office, Judicial Business of the United States Courts 2000, Table C-2A (Sept. 30, 2000). These numbers suggest that the EEOC files less than two percent of all antidiscrimination claims in federal court. Indeed, even among the cases where it finds reasonable cause, the EEOC files suit in less than five percent of those cases. Surely permitting the EEOC access to victim- specific relief in cases where the employee has agreed to binding arbitration, but has not yet brought a claim in arbitration, will have a negligible effect on the federal policy favoring arbitration. Justice THOMAS notes that our interpretation of Title VII and the FAA "should not depend on how many cases the EEOC chooses to prosecute in any particular year." See post, at 775, n. 14 (dissenting opinion). And yet, the dissent predicts our holding will "reduce that arbitration agreement to all but a nullity," post, at 772, "discourag[e] the use of arbitration agreements," post, at 773, and "discourage employers from entering into settlement agreements," post, at 774. These claims are highly implausible given the EEOC's litigation practice over the past 20 years. When speculating about the impact this decision might have on the behavior of employees and employers, we think it is worth recognizing that the EEOC files suit in less than one percent of the charges filed each year. If it were true that the EEOC could prosecute its claim only with Baker'sconsent, or if its prayer for relief could be dictated by Baker, the court's analysis might be persuasive. But once a charge is filed, the exact opposite is true under the statute--the EEOC is in command of the process. The EEOC has exclusive jurisdiction over the claim for 180 days. During that time, the employee must obtain a right-to-sue letter from the agency before prosecuting the claim. If, however, the EEOC files suit on its own, the employee has no independent cause of action, although the employee may intervene in the EEOC's suit. 42 U.S.C. § 2000e-5(f)(1) (1994 ed.). In fact, the EEOC takes the 98 position that it may pursue a claim on the employee's behalf even after the employee has disavowed any desire to seek relief. Brief for Petitioner 20. The statute clearly makes the EEOC the master of its own case and confers on the agency the authority to evaluate the strength of the public interest at stake. Absent textual support for a contrary view, it is the public agency's province--not that of the court--to determine whether public resources should be committed to the recovery of victim- specific relief. And if the agency makes that determination, the statutory text unambiguously authorizes it to proceed in a judicial forum. Respondent and the dissent contend that Title VII supports the Court of Appeals' bar against victim-specific relief, because the statute limits the EEOC's recovery to "appropriate" relief as determined by a court. See Brief for Respondent 19, and n. 8; post, at 768-769 (THOMAS, J., dissenting). They rely on § 706(g)(1), which provides that, after a finding of liability, "the court may enjoin the respondent from engaging in such unlawful employment practice, and order such affirmative action as may be appropriate, which may include, but is not limited to, reinstatement or hiring of employees, with or without back pay ... or any other equitable relief as the court deems appropriate." 42 U.S.C. § 2000e-5(g)(1) (1994 ed.) (emphasis added). They claim this provision limits the remedies available and directs courts, not the EEOC, to determine what relief is appropriate. The proposed reading is flawed for two reasons. First, under the plain language of the statute the term "appropriate" refers to only a subcategory of claims for equitable relief, not damages. The provision authorizing compensatory and punitive damages is in a separate section of the statute, § 1981a(a)(1), and is not limited by this language. The dissent responds by pointing to the phrase "may recover" in § 1981a(a)(1), and arguing that this too provides authority for prohibiting victim-specific relief. See post, at 769, n. 7. But this contention only highlights the second error in the proposed reading. If "appropriate" and "may recover" can be read to support respondent's position, then any discretionary language would constitute authorization for judge-made, per se rules. This is not the natural reading of the text. These terms obviously refer to the trial judge's discretion in a particular case to order reinstatement and award damages in an amount warranted by the facts of that case. They do not permit a court to announce a categorical rule precluding an expressly authorized form of relief as inappropriate in all cases in which the employee has signed an arbitration agreement. [FN8] FN8. Justice THOMAS implicitly recognizes this distinction by qualifying his description of the courts' role as determining appropriate relief "in any given case," or "in a particular case." See post, at 768, 769. But the Court of Appeals' holding was not so limited. 193 F.3d 805, 812 (C.A.4 1999) (holding that the EEOC "may not pursue relief in court ... specific to individuals who have waived their right to a judicial forum"). [8][9][10][11][12] The Court of Appeals wisely did not adopt respondent's reading of § 706(g). Instead, it simply sought to balance the policy goals of the FAA against the clear language of Title VII and the agreement. While this may be a more coherent approach, it is inconsistent with our recent arbitration cases. The FAA directs courts to place arbitration agreements on equal footing with other contracts, but it "does not 99 require parties to arbitrate when they have not agreed to do so." Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989). [FN9] See also Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404, n. 12, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) ("[T]he purpose of Congress in 1925 was to make arbitration agreements as enforceable as other contracts, but not more so"). Because the FAA is "at bottom a policy guaranteeing the enforcement of private contractual arrangements," Mitsubishi Motors Corp. v. Soler Chrysler--Plymouth, Inc., 473 U.S. 614, 625, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985), we look first to whether the parties agreed to arbitrate a dispute, not to general policy goals, to determine the scope of the agreement. Id., at 626, 105 S.Ct. 3346. While ambiguities in the language of the agreement should be resolved in favor of arbitration, Volt, 489 U.S., at 476, 109 S.Ct. 1248, we do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because the policy favoring arbitration is implicated. "Arbitration under the [FAA] is a matter of consent, not coercion." Id., at 479, 109 S.Ct. 1248. Here there is no ambiguity. No one asserts that the EEOC is a party to the contract, or that it agreed to arbitrate its claims. It goes without saying that a contract cannot bind a nonparty. Accordingly, the proarbitration policy goals of the FAA do not require the agency to relinquish its statutory authority if it has not agreed to do so. FN9. In Volt, the parties to a construction contract agreed to arbitrate all disputes relating to the contract and specified that California law would apply. When one party sought to compel arbitration, the other invoked a California statute that authorizes a court to stay arbitration pending resolution of related litigation with third parties not bound by the agreement when inconsistent rulings are possible. We concluded that the FAA did not pre-empt the California statute because "the FAA does not confer a right to compel arbitration of any dispute at any time; it confers only the right to obtain an order directing that 'arbitration proceed in the manner provided for in [the parties'] agreement.' " 489 U.S., at 474-475, 109 S.Ct. 1248 (quoting 9 U.S.C. § 4). Similarly, the FAA enables respondent to compel Baker to arbitrate his claim, but it does not expand the range of claims subject to arbitration beyond what is provided for in the agreement. Our decision in Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995), is not inconsistent with this position. In Mastrobuono, we reiterated that clear contractual language governs our interpretation of arbitration agreements, but because the choice-of-law provision in that case was ambiguous, we read the agreement to favor arbitration under the FAA rules. Id., at 62, 115 S.Ct. 1212. While we distinguished Volt on the ground that we were reviewing a federal court's construction of the contract, 514 U.S., at 60, n. 4, 115 S.Ct. 1212, regardless of the standard of review, in this case the Court of Appeals recognized that the EEOC was not bound by the agreement. When that much is clear,Volt and Mastrobuono both direct courts to respect the terms of the agreement without regard to the federal policy favoring arbitration. Even if the policy goals underlying the FAA did necessitate some limit on the EEOC's statutory authority, the line drawn by the Court of Appeals between injunctive and victimspecific relief creates an uncomfortable fit with its avowed purpose of preserving the 100 EEOC's public function while favoring arbitration. For that purpose, the category of victim-specific relief is both overinclusive and underinclusive. For example, it is overinclusive because while punitive damages benefit the individual employee, they also serve an obvious public function in deterring future violations. See Newport v. Fact Concerts, Inc., 453 U.S. 247, 266-270, 101 S.Ct. 2748, 69 L.Ed.2d 616 (1981) ("Punitive damages by definition are not intended to compensate the injured party, but rather to punish the tortfeasor ..., and to deter him and others from similar extreme conduct"); Restatement (Second) of Torts § 908 (1977). Punitive damages may often have a greater impact on the behavior of other employers than the threat of an injunction, yet the EEOC is precluded from seeking this form of relief under the Court of Appeals' compromise scheme. And, it is underinclusive because injunctive relief, although seemingly not "victim-specific," can be seen as more closely tied to the employees' injury than to any public interest. See Occidental, 432 U.S., at 383, 97 S.Ct. 2447 (REHNQUIST, J., dissenting) ("While injunctive relief may appear more 'broad based,' it nonetheless is redress for individuals"). [13] The compromise solution reached by the Court of Appeals turns what is effectively a forum selection clause into a waiver of a nonparty's statutory remedies. But if the federal policy favoring arbitration trumps the plain language of Title VII and the contract, the EEOC should be barred from pursuing any claim outside the arbitral forum. If not, then the statutory language is clear; the EEOC has the authority to pursue victimspecific relief regardless of the forum that the employer and employee have chosen to resolve their disputes. [FN10] Rather than attempt to split the difference, we are persuaded that, pursuant to Title VII and the ADA, whenever the EEOC chooses from among the many charges filed each year to bring an enforcement action in a particular case, the agency may be seeking to vindicate a public interest, not simply provide make-whole relief for the employee, even when it pursues entirely victim-specific relief. To hold otherwise would undermine the detailed enforcement scheme created by Congress simply to give greater effect to an agreement between private parties that does not even contemplate the EEOC's statutory function. [FN11] FN10. We have held that federal statutory claims may be the subject of arbitration agreements that are enforceable pursuant to the FAA because the agreement only determines the choice of forum. "In these cases we recognized that '[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.' [Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) ]." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). To the extent the Court of Appeals construed an employee's agreement to submit his claims to an arbitral forum as a waiver of the substantive statutory prerogative of the EEOC to enforce those claims for whatever relief and in whatever forum the EEOC sees fit, the court obscured this crucial distinction and ran afoul of our precedent. FN11. If injunctive relief were the only remedy available, an employee who signed an arbitration agreement would have little incentive to file a charge with the EEOC. As a greater percentage of the work force becomes subject to 101 arbitration agreements as a condition of employment, see Voluntary Arbitration in Worker Disputes Endorsed by 2 Groups, Wall Street Journal, June 20, 1997, p. B2 (reporting that the American Arbitration Association estimates "more than 3.5 million employees are covered" by arbitration agreements designating it to administer arbitration proceedings), the pool of charges from which the EEOC can choose cases that best vindicate the public interest would likely get smaller and become distorted. We have generally been reluctant to approve rules that may jeopardize the EEOC's ability to investigate and select cases from a broad sample of claims. Cf. EEOC v. Shell Oil Co., 466 U.S. 54, 69, 104 S.Ct. 1621, 80 L.Ed.2d 41 (1984) ("[I]t is crucial that the Commission's ability to investigate charges of systemic discrimination not be impaired"); Occidental Life Ins. Co. of Cal. v. EEOC, 432 U.S. 355, 368, 97 S.Ct. 2447, 53 L.Ed.2d 402 (1977). V [14][15] It is true, as respondent and its amici have argued, that Baker's conduct may have the effect of limiting the relief that the EEOC may obtain in court. If, for example, he had failed to mitigate his damages, or had accepted a monetary settlement, any recovery by the EEOC would be limited accordingly. See, e.g., Ford Motor Co. v. EEOC, 458 U.S. 219, 231-232, 102 S.Ct. 3057, 73 L.Ed.2d 721 (1982) (Title VII claimant "forfeits his right to backpay if he refuses a job substantially equivalent to the one he was denied"); EEOC v. Goodyear Aerospace Corp., 813 F.2d 1539, 1542 (C.A.9 1987) (employee's settlement "rendered her personal claims moot"); EEOC v. U.S. Steel Corp., 921 F.2d 489, 495 (C.A.3 1990) (individuals who litigated their own claims were precluded by res judicata from obtaining individual relief in a subsequent EEOC action based on the same claims). As we have noted, it "goes without saying that the courts can and should preclude double recovery by an individual." General Telephone, 446 U.S., at 333, 100 S.Ct. 1698. [16] But no question concerning the validity of his claim or the character of the relief that could be appropriately awarded in either a judicial or an arbitral forum is presented by this record. Baker has not sought arbitration of his claim, nor is there any indication that he has entered into settlement negotiations with respondent. It is an open question whether a settlement or arbitration judgment would affect the validity of the EEOC's claim or the character of relief the EEOC may seek. The only issue before this Court is whether the fact that Baker has signed a mandatory arbitration agreement limits the remedies available to the EEOC. The text of the relevant statutes provides a clear answer to that question. They do not authorize the courts to balance the competing policies of the ADA and the FAA or to second-guess the agency's judgment concerning which of the remedies authorized by law that it shall seek in any given case. Moreover, it simply does not follow from the cases holding that the employee's conduct may affect the EEOC's recovery that the EEOC's claim is merely derivative. We have recognized several situations in which the EEOC does not stand in the employee's shoes. See Occidental, 432 U.S., at 368, 97 S.Ct. 2447 (EEOC does not have to comply with state statutes of limitations); General Telephone, 446 U.S., at 326, 100 S.Ct. 1698 (EEOC does not have to satisfy Rule 23 requirements); Gilmer, 500 U.S., at 32, 111 S.Ct. 1647 (EEOC is not precluded from seeking classwide and equitable relief in court on behalf of an employee who signed an arbitration agreement). And, in this 102 context, the statute specifically grants the EEOC exclusive authority over the choice of forum and the prayer for relief once a charge has been filed. The fact that ordinary principles of res judicata, mootness, or mitigation may apply to EEOC claims, does not contradict these decisions, nor does it render the EEOC a proxy for the employee. The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion. It is so ordered. Justice THOMAS, with whom THE CHIEF JUSTICE and Justice SCALIA join, dissenting. The Court holds today that the Equal Employment Opportunity Commission (EEOC or Commission) may obtain victim-specific remedies in court on behalf of an employee who had agreed to arbitrate discrimination claims against his employer. This decision conflicts with both the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., and the basicprinciple that the EEOC must take a victim of discrimination as it finds him. Absent explicit statutory authorization to the contrary, I cannot agree that the EEOC may do on behalf of an employee that which an employee has agreed not to do for himself. Accordingly, I would affirm the judgment of the Court of Appeals. I Before starting work as a grill operator for respondent Waffle House, Inc., Eric Scott Baker filled out and signed an employment application. This application included an arbitration clause providing that "any dispute or claim concerning Applicant's employment with Waffle House, Inc., or any subsidiary or Franchisee of Waffle House, Inc., or the terms, conditions or benefits of such employment ... will be settled by binding arbitration." App. 59. The Court does not dispute that the arbitration agreement between Waffle House and Baker falls comfortably within the scope of the FAA, see Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001), which provides that "[a] written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable." 9 U.S.C. § 2. Neither does the Court contest that claims arising under federal employment discrimination laws, such as Baker's claim that Waffle House discharged him in violation of the Americans with Disabilities Act of 1990(ADA), 42 U.S.C. § 12101 et seq. (1994 ed. and Supp. V), may be subject to compulsory arbitration. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 23, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (holding that a claim arising under the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. § 621 et seq. (1994 ed.), may be subject to compulsory arbitration). [FN1] The Court therefore does not dispute that Baker, by signing an arbitration agreement, waived his ability either to bring an ADA claim against Waffle House in court or, consequently, to obtain relief for himself in that forum. 103 FN1. Admittedly, this case involves a claim under the ADA while Gilmer addressed compulsory arbitration in the context of the ADEA. Nevertheless, I see no reason why an employee should not be required to abide by an agreement to arbitrate an ADA claim. In assessing whether Congress has precluded the enforcement of an arbitration agreement with respect to a particular statutory claim, this Court has held that a party should be held to an arbitration agreement "unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue." Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). Here, the text of the ADA does not suggest that Congress intended for ADA claims to fall outside the purview of the FAA. Indeed, the ADA expressly encourages the use of arbitration and other forms of alternative dispute resolution, rather than litigation, to resolve claims under the statute: "Where appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including settlement negotiations, conciliation, facilitation, mediation, factfinding, minitrials, and arbitration, is encouraged to resolve disputes arising under this [Act]." 42 U.S.C. § 12212 (1994 ed.). The EEOC, in its complaint, sought to obtain the victim-specific relief for Baker that he could not seek for himself, asking a court to make Baker whole by providing reinstatement with backpay and compensatory damages and to pay Baker punitive damages. [FN2] App. 39-40. In its responses to interrogatories and directives to produce filed the same day as its complaint, the EEOC stated unambiguously: "All amounts recovered from Defendant Employer in this litigation will be received directly by Mr. Baker based on his charge of discrimination against Defendant Employer." Id., at 52. The EEOC also admitted that it was "bring[ing] this action on behalf of Eric Scott Baker." [FN3]Id., at 51. FN2. The EEOC, in its prayer for relief, also requested that the court enjoin Waffle House from engaging in any discriminatory employment practice and asked the court to order Waffle House to institute policies, practices, and programs which would provide equal employment opportunities for qualified individuals with disabilities, and which would eradicate the effect of its past and present unlawful employment practices. App. 39. The Court of Appeals concluded that Baker's arbitration agreement did not preclude the EEOC from seeking such broad-based relief, and Waffle House has not appealed that ruling. See 193 F.3d 805, 813, n. 3 (C.A.4 1999). FN3. Although the EEOC's complaint alleged that Waffle House engaged in "unlawful employment practices," in violation of § 102(a) of the ADA, 42 U.S.C. § 12112(a) (1994 ed.), it mentioned no instances of discriminatory conduct on the part of Waffle House other than its discharge of Baker. App. 38 (emphasis added). 104 By allowing the EEOC to obtain victim-specific remedies for Baker, the Court therefore concludes that the EEOC may do "on behalf of ... Baker" that which he cannot do for himself. The Court's conclusion rests upon the following premise advanced by the EEOC: An arbitration agreement between an employer and an employee may not limit the remedies that the Commission may obtain in court because Title VII "grants the EEOC the right to obtain all statutory remedies in any action it brings." [FN4]Brief for Petitioner 17. The EEOC contends that "the statute in clear terms authorizes [it] to obtain all of the listed forms of relief," referring to those types of relief set forth in 42 U.S.C. § 2000e-5(g)(1) (1994 ed.) (including injunctive relief and reinstatement with backpay) as well as the forms of relief listed in § 1981a(a)(1) (compensatory and punitive damages). Brief for Petitioner 17-18. Endorsing the EEOC's position, the Court concludes that "these statutes unambiguously authorize the EEOC to obtain the relief that it seeks in its complaint if it can prove its case against respondent." Ante, at 761. FN4. Title I of the ADA expressly incorporates "[t]he powers, remedies, and procedures set forth in [Title VII]." 42 U.S.C. § 12117(a). That includes the procedures applicable to enforcement actions as well as the equitable relief available under § 2000e-5(g). The Court's position, however, is inconsistent with the relevant statutory provision. For while the EEOC has the statutory right to bring suit, see § 2000e-5(f)(1), it has no statutory entitlement to obtain a particular remedy. Rather, the plain language of § 2000e-5(g)(1) makes clear that it is a court's role to decide whether to "enjoin the respondent ..., and order such affirmative action as may be appropriate, which may include, but is not limited to, reinstatement or hiring of employees, with or without back pay ... or any other equitable relief as the court deems appropriate." (Emphasis added.) Whether a particular remedy is "appropriate" in any given case is a question for a court and not for the EEOC. [FN5] See Albemarle Paper Co. v. Moody, 422 U.S. 405, 415416, 95 S.Ct. 2362, 45 L.Ed.2d 280 (1975) ("The [Title VII] scheme implicitly recognizes that there may be cases calling for one remedy but not another, and ... these choices are, of course, left in the first instance to the district courts"); Selgas v. American Airlines, Inc., 104 F.3d 9, 13, n. 2 (C.A.1 1997) ("It is clear that in a Title VII case, it is the court which has discretion to fashion relief comprised of the equitable remedies it sees as appropriate, and not the parties which may determine which equitable remedies are available"). FN5. The EEOC also points out that Title VII gives the EEOC, and not an individual victim of discrimination, the choice of forum when the EEOC files an enforcement action. See § 2000e-5(f)(3). Since the statute gives the victim no say in the matter, the EEOC argues that an employee, by signing an arbitration agreement, should not be able to effectively negate ex ante the EEOC's statutory authority to choose the forum in which it brings suit. Brief for Petitioner 21-23. The Court, wisely, does not rely heavily on this argument since nothing in the Court of Appeals' decision prevents the EEOC from choosing to file suit in any appropriate judicial district set forth in § 2000e-5(f)(3). Rather, the Court of Appeals' holding only limits the remedies that the EEOC may obtain when it decides to institute a judicial action. See 193 F.3d, at 806-807. 105 Had Congress wished to give the EEOC the authority to determine whether a particular remedy is appropriate under § 2000e-5, it clearly knew how to draft language to that effect. See § 2000e-16(b) (providing that the EEOC shall have the authority to enforce § 2000e-16(a)'s prohibition of employment discrimination within federal agencies "through appropriate remedies, including reinstatement or hiring of employees with or without back pay, as will effectuate the policies of this section"). But Congress specifically declined to grant the EEOC such authority when it empowered the Commission to bring lawsuits against private employers. Both the original House version and the original Senate version of the Equal Employment Opportunity Act of 1972 would have granted the EEOC powers similar to those possessed by the National Labor Relations Board to adjudicate a complaint and implement a remedy. See H.R. 1746, 92d Cong., 1st Sess., § 706(h) (1971), and S. 2515, 92d Cong., 1st Sess., § 4(h) (1971), reprinted in Legislative History of the Equal Employment Opportunity Act of 1972, pp. 7-8, 164-165. These bills were amended, however, once they reached the floor of both Houses of Congress to replace such "cease-and-desist" authority with the power only to prosecute an action in court. See 117 Cong. Rec. 32088-32111 (1971); 118 Cong. Rec. 3965-3979 (1972). The statutory scheme enacted by Congress thus entitles neither the EEOC nor an employee, upon filing a lawsuit, to obtain a particular remedy by establishing that an employer discriminated in violation of the law. [FN6] In both cases, 42 U.S.C. § 2000e5(g)(1) governs, and that provision unambiguously requires a court to determine what relief is "appropriate" in a particular case. [FN7] FN6. The Court, in fact, implicitly admits as much. Contradicting its earlier assertion that the "statutes unambiguously authorize the EEOC to obtain the relief that it seeks in its complaint if it can prove its case against respondent," ante, at 761 (emphasis added), the Court later concludes that the statutory scheme gives the trial judge "discretion in a particular case to order reinstatement and award damages in an amount warranted by the facts of that case." Ante, at 763. FN7. Similarly, the EEOC's authority to obtain legal remedies is also no greater than that of an employee acting on his own behalf. Title 42 U.S.C. § 1981a(a)(2), which was enacted as part of the Civil Rights Act of 1991, Pub.L. 102-166, 105 Stat. 1072, provides that the EEOC or an employee "may recover compensatory and punitive damages" in addition to the forms of relief authorized by § 2000e-5(g)(1). (Emphasis added.) Nothing in § 1981a(a), however, alters the fundamental proposition that it is for the judiciary to determine what relief (of all the relief that plaintiffs "may recover" under the statute) the particular plaintiff before the court is entitled to. The statutory language does not purport to grant the EEOC or an employee the absolute right to obtain damages in every case of proven discrimination, despite the operation of such legal doctrines as time bar, accord and satisfaction, or (as in this case) binding agreement to arbitrate. 106 II Because Congress has not given the EEOC the authority to usurp the traditional role of courts to determine what constitutes "appropriate" relief in a given case, it is necessary to examine whether it would be "appropriate" to allow the EEOC to obtain victim-specific relief for Baker here, notwithstanding the fact that Baker, by signing an arbitration agreement, has waived his ability to seek such relief on his own behalf in a judicial forum. For two reasons, I conclude it is not "appropriate" to allow the EEOC to do on behalf of Baker that which Baker is precluded from doing for himself. A To begin with, when the EEOC litigates to obtain relief on behalf of a particular employee, the Commission must take that individual as it finds him. Whether the EEOC or an employee files a particular lawsuit, the employee is the ultimate beneficiary of victim-specific relief. The relevance of the employee's circumstances therefore does not change simply because the EEOC, rather than the employee himself, is litigating the case, and a court must consider these circumstances in fashioning an "appropriate" remedy. [FN8] FN8. I agree with the Court that, in order to determine whether a particular remedy is "appropriate," it is necessary to examine the specific facts of the case at hand. See ante, at 763. For this reason, the statutory scheme does not permit us to announce a categorical rule barring lower courts from ever awarding a form of relief expressly authorized by the statute. When the same set of facts arises in different cases, however, such cases should be adjudicated in a consistent manner. Therefore, this Court surely may specify particular circumstances under which it would be inappropriate for trial courts to award certain types of relief, such as victim-specific remedies. As a result, the EEOC's ability to obtain relief is often limited by the actions of an employee on whose behalf the Commission may wish to bring a lawsuit. If an employee signs an agreement to waive or settle discrimination claims against an employer, for example, the EEOC may not recover victim- specific relief on that employee's behalf. See, e.g., EEOC v. Cosmair, Inc., 821 F.2d 1085, 1091 (C.A.5 1987); EEOC v. Goodyear Aerospace Corp., 813 F.2d 1539, 1543 (C.A.9 1987); see also EEOC: Guidance on Waivers Under the ADA and Other Civil Rights Laws, EEOC Compliance Manual (BNA) N:2345, N:2347 (Apr. 10, 1997) (hereinafter EEOC Compliance Manual) (recognizing that a valid waiver or settlement agreement precludes the EEOC from recovering victim-specific relief for an employee). In addition, an employee who fails to mitigate his damages limits his ability to obtain relief, whether he files his own lawsuit or the EEOC files an action on his behalf. See Ford Motor Co. v. EEOC, 458 U.S. 219, 231-232, 102 S.Ct. 3057, 73 L.Ed.2d 721 (1982). An employee's unilateral attempt to pursue his own discrimination claim may also limit the EEOC's ability to obtain victim-specific relief for that employee. If a court rejects the merits of a claim in a private lawsuit brought by an employee, for example, res judicata bars the EEOC from recovering victim-specific relief on behalf of that employee in a later action. See, e.g., EEOC v. Harris Chernin, Inc., 10 F.3d 1286, 1291 (C.A.7 1993). 107 In all of the aforementioned situations, the same general principle applies: To the extent that the EEOC is seeking victim-specific relief in court for a particular employee, it is able to obtain no more relief for that employee than the employee could recover for himself by bringing his own lawsuit. The EEOC, therefore, should not be able to obtain victim-specific relief for Baker in court through its own lawsuit here when Baker waived his right to seek relief for himself in a judicial forum by signing an arbitration agreement. The Court concludes that the EEOC's claim is not "merely derivative" of an employee's claim and argues that "[w]e have recognized several situations in which the EEOC does not stand in the employee's shoes." Ante, at 766. The Court's opinion, however, attacks a straw man because this case does not turn on whether the EEOC's "claim" is wholly derivative of an employee's "claim." Like the Court of Appeals below, I do not question the EEOC's ability to seek declaratory and broad-based injunctive relief in a case where a particular employee, such as Baker, would not be able to pursue such relief in court. Rather, the dispute here turns on whether the EEOC's ability to obtain victim- specific relief is dependent upon the victim's ability to obtain such relief for himself. The Court claims that three cases support its argument that the EEOC's claim is not "merely derivative" of an employee's claim. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S., at 24, 111 S.Ct. 1647; General Telephone Co. of Northwest v. EEOC, 446 U.S. 318, 325, 100 S.Ct. 1698, 64 L.Ed.2d 319 (1980); Occidental Life Ins. Co. of Cal. v. EEOC, 432 U.S. 355, 368, 97 S.Ct. 2447, 53 L.Ed.2d 402 (1977). Once the actual nature of the dispute is properly understood, however, it is apparent that these cases do not support the Court's position, for none of them suggests that the EEOC should be allowed to recover victim-specific relief on behalf of an employee who has waived his ability to obtain such relief for himself in court by signing a valid arbitration agreement. In Gilmer, for example, this Court addressed whether arbitration procedures are inadequate in discrimination cases because they do not allow for "broad equitable relief and class actions." 500 U.S., at 32, 111 S.Ct. 1647. Rejecting this argument, the Court noted that valid arbitration agreements "will not preclude the EEOC from bringing actions seeking class-wide and equitable relief." Ibid. Conspicuously absent from the Court's opinion, however, was any suggestion that the EEOC could obtain victimspecific relief on behalf of an employee who had signed a valid arbitration agreement. Cf. ibid. Similarly, in General Telephone, this Court held only that lawsuits filed by the EEOC should not be considered representative actions under Federal Rule of Civil Procedure 23. In reaching this conclusion, the Court noted that "the EEOC is not merely a proxy for the victims of discrimination." 446 U.S., at 326, 100 S.Ct. 1698. To be sure, I agree that to the extent the EEOC seeks broad-based declaratory and equitable relief in court, the Commission undoubtedly acts both as a representative of a specific employee and to "vindicate the public interest in preventing employment discrimination." Ibid. But neither this dual function nor anything in General Telephone detracts from the proposition that when the EEOC seeks to secure victim- specific relief in court, it may obtain no more relief for an individual than the individual could obtain for himself. 108 Even the EEOC recognizes the dual nature of its role. [FN9] See EEOC Compliance Manual N:2346 (citing General Telephone, supra, at 326, 100 S.Ct. 1698). In its compliance manual, the EEOC states that "every charge filed with the EEOC carries two potential claims for relief: the charging party's claim for individual relief, and the EEOC's claim to 'vindicate the public interest in preventing employment discrimination.' " EEOC Compliance Manual N:2346. It is for this reason that"a private agreement can eliminate an individual's right to personal recovery, [but] it cannot interfere with EEOC's right to enforce ... the ADA ... by seeking relief that will benefit the public and any victims of an employer's unlawful practices who have not validly waived their claims." Id., at N:2347. [FN10] FN9. The EEOC has consistently recognized that the Commission represents individual employees when it files an action in court. In this case, for instance, the EEOC stated in its answers to interrogatories that it brought this action "on behalf of Eric Scott Baker." See Part I, supra. Moreover, the EEOC has maintained in numerous cases that its attorneys have an attorney-client relationship with charging parties and their communications with charging parties are therefore privileged. See, e.g., EEOC v. Johnson & Higgins Inc., 78 FEP Case 1127 (SDNY 1998); EEOC v. McDonnell Douglas Corp., 948 F.Supp. 54 (E.D.Mo.1996). FN10. This Court has recognized that victim-specific remedies also serve the public goals of antidiscrimination statutes. See, e.g., McKennon v. Nashville Banner Publishing Co., 513 U.S. 352, 357-358, 115 S.Ct. 879, 130 L.Ed.2d 852 (1995). Nevertheless, when the EEOC is seeking such remedies, it is only serving the public interest to the extent that an employee seeking the same relief for himself through litigation or arbitration would also be serving the public interest. It is when the EEOC is seeking broader relief that its unique role in vindicating the public interest comes to the fore. The Commission's motivation to secure such relief is likely to be greater than that of an individual employee, who may be primarily concerned with securing relief only for himself. In the final case cited by the Court, Occidental Life Ins. Co. v. EEOC, this Court held that state statutes of limitations do not apply to lawsuits brought by the EEOC, because "[u]nlike the typical litigant against whom a statute of limitations might appropriately run, the EEOC is required by law to refrain from commencing a civil action until it has discharged its administrative duties." 432 U.S., at 368, 97 S.Ct. 2447. The Court also noted that the 1-year statute of limitations at issue in that case "could under some circumstances directly conflict with the timetable for administrative action expressly established in the 1972 Act." Id., at 368- 369, 97 S.Ct. 2447. Precluding the EEOC from seeking victim-specific remedies in court on behalf of an employee who has signed an arbitration agreement, however, would in no way impede the Commission from discharging its administrative duties nor would it directly conflict with any provision of the statute. In fact, such a result is entirely consistent with the federal policy underlying the Court's decision in Occidental: that employment discrimination claims should be resolved quickly and out of court. See id., at 368, 97 S.Ct. 2447. 109 B Not only would it be "inappropriate" for a court to allow the EEOC to obtain victimspecific relief on behalf of Baker, to do so in this case would contravene the "liberal federal policy favoring arbitration agreements" embodied in the FAA. See Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Under the terms of the FAA, Waffle House's arbitration agreement with Baker is valid and enforceable. See Part I, supra. The Court reasons, however, that the FAA is not implicated in this case because the EEOC was not a party to the arbitration agreement and "[i]t goes without saying that a contract cannot bind a nonparty." Ante, at 764. The Court's analysis entirely misses the point. The relevant question here is not whether the EEOC should be bound by Baker's agreement to arbitrate. Rather, it is whether a court should give effect to the arbitration agreement between Waffle House and Baker or whether it should instead allow the EEOC to reduce that arbitration agreement to all but a nullity. I believe that the FAA compels the former course. [fn11] FN11. The Court also reasons that "the FAA enables respondent to compel Baker to arbitrate his claim, but it does not expand the range of claims subject to arbitration beyond what is provided for in the agreement." Ante, at 764, n. 9. The Court does not explain, however, how the EEOC's ADA claim on Baker's behalf differs in any meaningful respect from the ADA claim that Baker would have been compelled to submit to arbitration. By allowing the EEOC to pursue victim-specific relief on behalf of Baker under these circumstances, the Court eviscerates Baker's arbitration agreement with Waffle House and liberates Baker from the consequences of his agreement. Waffle House gains nothing and, if anything, will be worse off in cases where the EEOC brings an enforcement action should it continue to utilize arbitration agreements in the future. This is because it will face the prospect of defending itself in two different forums against two different parties seeking precisely the same relief. It could face the EEOC in court and the employee in an arbitral forum. The Court does not decide here whether an arbitral judgment would "affect the validity of the EEOC's claim or the character of relief the EEOC may seek" in court. [FN12] Ante, at 766. Given the reasoning in the Court's opinion, however, the proverbial handwriting is on the wall. If the EEOC indeed is "the master of its own case," ante, at 763, I do not see how an employee's independent decision to pursue arbitral proceedings could affect the validity of the "EEOC's claim" in court. Should this Court in a later case determine that an unfavorable arbitral judgment against an employee precludes the EEOC from seeking similar relief for that employee in court, then the Court's jurisprudence will stand for the following proposition: The EEOC may seek relief for an employee who has signed an arbitration agreement unless that employee decides that he would rather abide by his agreement and arbitrate his claim. Reconciling such a result with the FAA, however, would seem to be an impossible task and would make a mockery of the rationale underlying the Court's holding here: that the EEOC is "the master of its own case." Ibid. 110 FN12. In the vast majority of cases, an individual employee's arbitral proceeding will be resolved before a parallel court action brought by the EEOC. See Maltby, Private Justice: Employment Arbitration and Civil Rights, 30 Colum. Human Rights L.Rev. 29, 55 (1998) (reporting that in arbitration the average employment discrimination case is resolved in under nine months while the average employment discrimination case filed in federal district court is not resolved for almost two years). Assuming that the Court means what it says, an arbitral judgment will not preclude the EEOC's claim for victim-specific relief from going forward, and courts will have to adjust damages awards to avoid double recovery. See ante, at 766. If an employee, for instance, is able to recover $20,000 through arbitration and a court later concludes in an action brought by the EEOC that the employee is actually entitled to $100,000 in damages, one assumes that a court would only award the EEOC an additional $80,000 to give to the employee. Suppose, however, that the situation is reversed: An arbitrator awards an employee $100,000, but a court later determines that the employee is only entitled to $20,000 in damages. Will the court be required to order the employee to return $80,000 to his employer? I seriously doubt it. The Court's decision thus places those employers utilizing arbitration agreements at a serious disadvantage. Their employees will be allowed two bites at the apple--one in arbitration and one in litigation conducted by the EEOC--and will be able to benefit from the more favorable of the two rulings. This result, however, discourages the use of arbitration agreements and is thus completely inconsistent with the policies underlying the FAA. C While the Court explicitly decides today only "whether the fact that Baker has signed a mandatory arbitration agreement limits the remedies available to the EEOC," ibid., its opinion sets this Court on a path that has no logical or principled stopping point. For example, if "[t]he statute clearly makes the EEOC the master of its own case," ante, at 763, and the filing of a charge puts the Commission "in command of the process," ibid., then it is likely after this decision that an employee's decision to enter into a settlement agreement with his employer no longer will preclude the EEOC from obtaining relief for that employee in court. While the Court suggests that ordinary principles of mootness "may apply to EEOC claims," ante, at 766, this observation, given the reasoning in the Court's opinion, seems largely beside the point. It should go without saying that mootness principles apply to EEOC claims. For instance, if the EEOC settles claims with an employer, the Commission obviously cannot continue to pursue those same claims in court. An employee's settlement agreement with an employer, however, does not "moot" an action brought by the EEOC nor does it preclude the EEOC from seeking broad-based relief. Rather, a settlement may only limit the EEOC's ability to obtain victim-specific relief for the employee signing the settlement agreement. See, e.g., Goodyear Aerospace Corp., 813 F.2d, at 1541-1544. 111 The real question addressed by the Court's decision today is whether an employee can enter into an agreement with an employer that limits the relief the EEOC may seek in court on that employee's behalf. And if, in the Court's view, an employee cannot compromise the EEOC's ability to obtain particular remedies by signing an arbitration agreement, then I do not see how an employee may be permitted to do the exact same thing by signing a settlement agreement. See Scherk v. Alberto-Culver Co., 417 U.S. 506, 511, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974) (noting that one purpose of the FAA is to place arbitration agreements " 'upon the same footing as other contracts' " (citation omitted)). The Court's reasoning, for example, forecloses the argument that it would be inappropriate under 42 U.S.C. § 2000e-5(g)(1) for a court to award victim-specific relief in any case where an employee had already settled his claim. If the statutory provision, according to the Court, does not "permit a court to announce a categorical rule precluding an expressly authorized form of relief as inappropriate in all cases in which the employee has signed an arbitration agreement," then it surely does not "constitute authorization for [a] judge-made, per se rul[e]" barring the EEOC from obtaining victimspecific remedies on behalf of an employee who has signed a valid settlement agreement. Ante, at 763. Unfortunately, it is therefore likely that under the logic of the Court's opinion the EEOC now will be able to seek victim-specific relief in court on behalf of employees who have already settled their claims. Such a result, however, would contradict this Court's suggestion in Gilmer that employment discrimination disputes "can be settled ... without any EEOC involvement." 500 U.S., at 28, 111 S.Ct. 1647. More importantly, it would discourage employers from entering into settlement agreements and thus frustrate Congress' desire to expedite relief for victims of discrimination, see Ford Motor Co. v. EEOC, 458 U.S., at 221, 102 S.Ct. 3057; Occidental Life, 432 U.S., at 364-365, 97 S.Ct. 2447, and to resolve employment discrimination disputes out of court. See 42 U.S.C. § 12212 (encouraging alternative means of dispute resolution, including settlement negotiations, to avoid litigation under the ADA). III Rather than allowing the EEOCto undermine a valid and enforceable arbitration agreement between an employer and an employee in the manner sanctioned by the Court today, I would choose a different path. As this Court has stated, courts are "not at liberty to pick and choose among congressional enactments, and when two statutes are capable of co-existence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective." Pittsburgh & Lake Erie R. Co. v. Railway Labor Executives' Assn., 491 U.S. 490, 510, 109 S.Ct. 2584, 105 L.Ed.2d 415 (1989). In this case, I think that the EEOC's statutory authority to enforce the ADA can be easily reconciled with the FAA. Congress has not indicated that the ADA's enforcement scheme should be interpreted in a manner that undermines the FAA. Rather, in two separate places, Congress has specifically encouraged the use of arbitration to resolve disputes under the ADA. First, in the ADA itself, Congress stated: "Where appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including settlement negotiations, conciliation, facilitation, mediation, factfinding, minitrials, and arbitration, is encouraged to resolve disputes arising under this chapter." 42 U.S.C. § 12212 112 (emphasis added). Second, Congress used virtually identical language to encourage the use of arbitration to resolve disputes under the ADA in the Civil Rights Act of 1991. See Pub.L. 102-166, § 118, 105 Stat. 1081. [FN13] FN13. This provision states: "Where appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including settlement negotiations, conciliation, facilitation, mediation, factfinding, minitrials, and arbitration, is encouraged to resolve disputes arising under the Acts or provisions of Federal law amended by this title." Among "the Acts or provisions of Federal law" amended by the Civil Rights Act of 1991 was the ADA. See Pub.L. 102-166, § 118, 105 Stat. 1081. The EEOC contends that these provisions do not apply to this dispute because the Commission has not signed an arbitration agreement with Waffle House and the provisions encourage arbitration "only when the parties have consented to arbitration." Reply Brief for Petitioner 17. Remarkably, the EEOC at the same time questions whether it even has the statutory authority to take this step. See Brief for Petitioner 22, n. 7. As a result, the EEOC's view seems to be that Congress has encouraged the use of arbitration to resolve disputes under the ADA only in situations where the EEOC does not wish to bring an enforcement action in court. This limiting principle, however, is nowhere to be found in § 12212. The use of arbitration to resolve all disputes under the ADA is clearly "authorized by law." See Part I, supra. Consequently, I see no indication that Congress intended to grant the EEOC authority to enforce the ADA in a manner that undermines valid and enforceable arbitration agreements. [FN14] FN14. I do not see the relevance of the Court's suggestion that its decision will only "have a negligible effect on the federal policy favoring arbitration" because the EEOC brings relatively few lawsuits. Ante, at 762-763, n. 7. In my view, either the EEOC has been authorized by statute to undermine valid and enforceable arbitration agreements, such as the one at issue in this case, or one should read the Commission's enforcement authority and the FAA in a harmonious manner. This Court's jurisprudence and the proper interpretation of the relevant statutes should not depend on how many cases the EEOC chooses to prosecute in any particular year. I simply see no statutory basis for the Court's implication that the EEOC has the authority to undermine valid and enforceable arbitration agreements so long as the Commission only opts to interfere with a relatively limited number of agreements. In the last 20 years, this Court has expanded the reach and scope of the FAA, holding, for instance, that the statute applies even to state-law claims in state court and preempts all contrary state statutes. See Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995); Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984). I have not always agreed with this Court's jurisprudence in this area, see, e.g., Allied-Bruce, supra, at 285-297, 115 S.Ct. 834 (THOMAS, J., dissenting), but it seems to me that what's good for the goose is good for the gander. The Court should not impose the FAA upon States in the absence of any 113 indication that Congress intended such a result, see Southland, supra, at 25-30, 104 S.Ct. 852 (O'CONNOR, J., dissenting), yet refuse to interpret a federal statute in a manner compatible with the FAA, especially when Congress has expressly encouraged that claims under that federal statute be resolved through arbitration. Given the utter lack of statutory support for the Court's holding, I can only conclude that its decision today is rooted in some notion that employment discrimination claims should be treated differently from other claims in the context of arbitration. I had thought, however, that this Court had decisively repudiated that principle in Gilmer. See 500 U.S., at 27-28, 111 S.Ct. 1647 (holding that arbitration agreements can be enforced without contravening the "important social policies" furthered by the ADEA). For all of these reasons, I respectfully dissent. Article Remedies in Domain Name Lawsuits: www.patents.com/pubs/jmls.htm Remedies in Domain Name Lawsuits: How is a domain name like a cow? By Carl Oppedahl(1) Note: This is a draft of an article which has now been published as 15 John Marshall Journal of Computer & Information Law 437 (1997). Copyright 1997 Oppedahl & Larson. In three short years the Internet domain name has gone from an intellectual curiosity to one of the most hotly contested forms of intellectual property. While thousands of domain names have been fought over, only a tiny handful of court opinions have been written. There is as yet no well-developed body of law regarding remedies in domain name cases. This article offers a framework for analysis and proposes an answer to a central question: Under what circumstances ought a court to take away a domain name from one party and give it to another? Background The significance of an Internet domain name derives fundamentally from the significance of the Internet itself. The Internet is the single most pervasive and potent agent of change in modern society. It has unified the email systems of all the individuals, companies and organizations in the world: any two persons, anywhere on the planet, 114 may communicate via email, regardless of the types of computers and software that they use.(2) It has made possible the World Wide Web, an interlinked structure which now makes a significant fraction of the body of human knowledge available to anyone with an Internet connection and a web browser. The Web allows anyone to be an instant publisher, and the publication is not only instant but worldwide. The World Wide Web has enabled a variety of meta-applications such as Web search engines (e.g. Alta Vista, Lycos, and Yahoo!(3)) which permit searching the Web quickly and thoroughly. People sharing any interest, no matter now obscure, can learn of each others' existence and devote arbitrarily large amounts of time and energy to that interest, whatever it may be. From its origins the Internet has been consensus-driven and uncontrolled by any government or central authority, and in this way differs from other agents of change (telephone, broadcast radio, broadcast television) which were, early on, taken completely under the control of regulators and governments. Even the terminology of the Internet's organization shows its consensus-based nature: where other media are defined by "standards"(4) and "specifications", the interaction of elements of the Internet is set forth by "Requests for Comment" or RFCs. An author, any author, may publish an RFC for consideration by the Internet community. If a consensus develops around a particular RFC then it may come to be adopted and followed by the entirety of the Internet, at which point it enjoys the status that a "standard" or "specification" has in other industries.(5) There are thousands of RFCs, and they define, for example, how computer systems exchange email, and how computer systems are to exchange information on how best to route data packets to each other. Some commenters refer to the Internet as "anarchic", a term which is meant to convey the absence of central planning and the inability of any government to control it, but of course in an important sense the Internet is not anarchic at all: it functions only because every computer connected to it behaves in precisely the manner set forth in myriad RFCs, not deviating an iota from the prescribed behavior. All interaction via the World-Wide Web relies upon URLs (uniform resource locators), each of which is comprised of a protocol identifier, a domain name defining a physical host, and optional location information within the host.(6) A typical URL is http://www.patents.com/nsi/iip.sht, which contains the domain name patents.com and which would be meaningless if the patents.com domain name did did not function. All email interaction relies upon email addresses, each of which likewise contains a domain name without which the email address would not function. In principle a URL or email address could be an arbitrary string of characters, no easier to remember than a street address, a numeric telephone number, a geographic latitude or longitude, or the internal hardware (MAC) address of one's Ethernet card. And indeed some URLs and email addresses are largely or wholly arbitrary.(7) But for many purposes it is desirable that a URL or email address be easily remembered. Notably, many television advertisements end with a web address which a viewer might use to obtain more information about the goods or services touted in the advertisement. The web address serves this purpose well only if it is easily remembered, which necessarily requires that the domain name which forms part or all of the web address be likewise easily remembered. A series of rather unfortunate historical accidents have led to a present day in which many large companies perceive it to be extremely important not only that a domain name be easily remembered, but also that it be easily guessed, which is quite a different thing. A company named "Brown Enterprises" may wish it could have the domain name "brown.com" since that might be a first guess made by a would- 115 be visitor to the web site of Brown Enterprises. This perception has led to bitter legal disputes, for example the recent case in which Juno Electric, a maker of light fixtures, took steps to attempt to deprive Juno Online, an email service provider, of the domain name juno.com. Had the steps initiated by Juno Electric reached their conclusion, some seven hundred thousand email customers of Juno Online would have lost their ability to receive email. Juno Electric presumably wanted to possess the domain name so that would-be visitors to its web site could guess the address www.juno.com and thereby reach the web site. Commenters have suggested that the present-day emphasis on domain names is inappropriate and that in coming years search engines and other metalayers of Internet interaction will develop that make domain names unimportant (and thus, not worth fighting over).(8) The views of such commenters cannot be ignored, considering generally the fast pace of change within the Internet, and considering as a particular example the web search engines which now play a crucial role in the Web and which did not even exist three years ago. The fact remains, however, that at the present time domain names are hotly contested; the courts and the legal profession have no choice but to attempt to understand the purpose and function of domain names, and to try to develop sensible principles according to which domain name disputes will be decided and resolved. In particular, it is necessary to develop a law of remedies for domain names. Categorizing Disputes The domain names disputes that are publicly known have been listed and summarized by several commenters.(9) Several distinctions may be drawn among the disputes. Uniqueness. Some domain names are identical to unique names. Panavision and Actmedia, to name two examples, are trademarks each of which is held by only one company worldwide. The company owning the trademark Panavision found that someone else had registered the domain name panavision.com and had no difficulty convincing a US District Court to order that it be given the domain name; the same occurred in the case of actmedia.com (But see a note, below, about the Actmedia case). Other domain names, for example perfection.com and clue.com, are identical to words in common use in the English language. Presence or absence of commercial activity. Some domain names are used in commercial activity, while others are not. This is significant because many commonly asserted causes of action (e.g. the United States' Lanham Act, the United States' Federal Trademark Dilution Act) expressly direct themselves only to commercial activity. Presence or absence of allegedly offending conduct above and beyond mere possession of the domain name itself. As will be discussed in more detail below, in a substantial fraction of domain name disputes the plaintiff presents the case as if it were a traditional trademark case with goods or services being marketed in a way that allegedly gives rise to confusion, while the reality is that no goods or services are involved, let alone confusion. In such disputes it becomes clear that the complaint, reduced to its essence, is "we wish we had registered the domain name first, and we really want to have the domain name now". The past conduct of the defendant domain name owner is generally irrelevant in such cases, and in some of them there has been no conduct whatsoever other than the mere registration of a domain name. 116 Presence or absence of a legitimate basis for use of the domain name. Some domain names are identical to words or phrases which anyone could plausibly use. The domain name "homes.com" could be plausibly used by anyone doing anything involving homes, from real estate brokerage to house construction. The domain name roadrunner.com could be plausibly used by anyone located in New Mexico, where the state bird is the roadrunner and dozens of companies are named Roadrunner.(10) In contrast, it is difficult to imagine who, other than the publisher of The New York Times, could offer an innocent reason to use newyorktimes.com. Analogizing Domain Names Attempts have been made to analogize domain names to other things. Some commenters have stated that domain names are of no greater legal significance than street addresses, urging that since people don't litigate over street addresses, courts should ignore demands regarding domain names. This analogy fails for the simple reason that one generally does not choose one's street address, while every domain name is expressly selected by its owner.(11) It is somewhat instructive to turn to the body of cases relating to North American toll-free 800 telephone numbers, in which the letters on the telephone dial give rise to easily remembered sequences of digits. But the comparison only goes so far, in that a telephone customer might obtain a telephone number without knowing that it "spells" some word or phrase that is important to someone else. In contrast a domain name's spelling is evident from the domain name itself. A party obtaining the telephone number 1-800-698-4637 may truly be unaware that it spells 1-800-NYTIMES, but the same may not be plausibly said of someone who registers the domain name nytimes.com.(12) In a recent interesting case, an enterprising party obtained a telephone number that happened to spell 800-H0LIDAY, notable because the second digit after "800" was a zero rather than the digit "6" corresponding to the letter "O". (The number 800-HOLIDAY was owned by the motel chain Holiday Inns Inc., plaintiff in the action.) The practical result was that this party occasionally received calls in which people intended to dial 800-HOLIDAY (all letters) but who mistakenly dialed the digit zero instead of a 6, and offered to book hotel rooms for such people. The district court ruled in favor of Holiday Inns, Inc. On appeal, the Sixth Circuit Court of Appeals noted that this party did not overtly trade on the name "Holiday" and took pains to identify itself when answering the telephone, thus negating any consumer confusion that might have arisen. The Court of Appeals felt that no remedy was needed and reversed, deciding the case against the plaintiff.(13) A strong analogy may be drawn between domain names and stock exchange ticker symbols. With ticker symbols (which are by their nature limited to only a few characters) it is unsurprising that a company might sometimes find its desired ticker symbol already to have been taken by someone else. As with domain names, ticker symbols are allocated in the first instance on a first- come, first-served basis. In what is perhaps the only published case involving ticker symbols, a company MDT Corp., plaintiff, wanted the ticker symbol MDT, only to find that it was already in use by the company Medtronic Inc.. The court ruled against the plaintiff, finding no remedy to be necessary. Notably, the ticker symbol had been in use for some 12 years, a factor the court apparently found relevant in view of MDT Corp's tardy presentation of a claim to the ticker symbol.(14) 117 It is suggested that while attempts to analogize domain names to other property rights may yield insights, the legal community (and the Internet community) should be prepared for the possibility that domain names may turn out to be sui generis. Is a domain name property? One question that arises, albeit only briefly, is whether a domain name is property. One factor suggesting that the answer is in the affirmative is that domain names issued by most registration authorities (that of Israel being a notable exception(15)) are capable of being bought and sold. It is of some interest that Network Solutions, Inc. ("NSI"), the registration authority administering COM and other top-level domains until 1998, has taken the position that domain names are property. In an attempt to use federal interpleader(16) to escape judicial review of its actions regarding the domain name clue.com, NSI stated the following in its interpleader complaint: 22. Network Solutions, as an impartial and unbiased stakeholder, has no interest in the property in dispute and is prepared to assign the registration and use of the "CLUE.COM" domain name as determined by the Court.(17) Interpleader is available only with respect to property, and thus NSI had to take the position that the clue.com domain name was property so as to attempt to avail itself of interpleader. Perhaps the most telling indications that domain names may be property are simply that parties have gone to court to attempt to obtain them, and courts have been willing to order that domain names be transferred from one party to another. If one reaches an affirmative answer to the question whether domain names are property, a related question is, who owns them? Does the domain name registration authority own the domain names, in which case a domain name "owner" merely has some entitlement to use its domain name, but does not actually "own" it? Or does the party who has registered the domain name, and who uses it, the legal owner of the domain name? Perhaps the question is merely one of semantics: perhaps it is irrelevant whether we say that what people are fighting over is the domain name itself, or as NSI characterized it, "the registration and use of" the domain name. Parties to domain name lawsuits know perfectly well what it is that they want, and in most cases it is the domain name. For purposes of this article we will defer the question of whether domain names are property, but will simply employ the shorthand that the registrant is the "domain name owner," and that what is being fought over is "the domain name". Remedies which Trademark Owners have Sought Trademark owners have sought a variety of remedies against domain name owners. Most prayers for relief have fallen into two general categories: cease-and-desist relief and transfer-the-domain- name relief. Here is a typical prayer for relief in an actual domain name lawsuit: Wherefore, plaintiff respectfully prays: That defendants, individually and collectively, their agents, servants, employees, representatives, attorneys, related companies, successors, assigns, and all others in active concert or participation with defendants or any of them, be preliminarily and then 118 permanently enjoined and restrained: (a) From using the GLAD trademark, any colorable imitation of the GLAD trademark, and any thing or mark confusingly similar thereto or likely to cause dilution of the distinctiveness of the GLAD trademark or injury to plaintiff's business reputation; (b) From representing by any means whatsoever, directly or indirectly, that defendants, any products or services offered by defendants including, without limitation, telecommunications services on the Internet, are associated in any way with plaintiff or its products or services, and from otherwise taking any other action likely to cause confusion, mistake or deception on the part of purchasers or consumers; and (c) From doing any other acts or things calculated or likely to cause confusion or mistake in the mind of the public or to lead purchasers or consumers into the belief that defendants' products or services come from or are the products or services of plaintiff, or are somehow sponsored or underwritten by, or affiliated with, plaintiff, and from otherwise unfairly competing with plaintiff or misappropriating that which rightfully belongs to plaintiff. That defendants, individually and collectively, their agents, servants, employees, representatives, attorneys, related companies, successors, assigns, and all others in active concert or participation with defendants or any of them, take affirmative steps to dispel such false impressions that heretofore have been created by defendants' use of the GLAD trademark. That defendants be required to relinquish the registration of the Domain Name "GLAD.COM" and to be limited to use of a Domain Name or Names that do not use the GLAD trademark, any colorable imitation of such trademark, or any thing or mark confusingly similar thereto or likely to cause dilution of the distinctiveness of such trademark or injury to plaintiff's business reputation. That defendants account to plaintiff for defendants' profits arising from the foregoing acts of dilution, infringement, unfair competition and misappropriation. That, pursuant to 15 U.S.C. º 1117, plaintiff be awarded judgment for three times the defendants' profits, in accordance with the accounting demanded in the preceding paragraph. That plaintiff have and recover its costs, including its reasonable attorneys' fees and disbursements in this action, pursuant to 15 U.S.C. º 1117. That a declaration and judgment be entered by this Court that defendants' registration, establishment and use of "GLAD.COM" to identify its Internet Domain is likely to cause confusion with plaintiff's famous registered GLAD mark and that such registration and use constitute trademark infringement, unfair competition and trademark dilution by defendants and that Network Solutions, Inc. be directed to transfer the registration for the "GLAD.COM" Domain Name from defendants to plaintiff. That plaintiff have such other and further relief as the Court may deem just and proper.(18) 119 The prayer for relief, up to paragraph 7, reads like any boilerplate trademark prayer for relief, seeking essentially cease-and-desist relief. Paragraph 7 differs from trademark boilerplate in that it asks that the court "direct" that the domain name be transferred "from defendants to plaintiff". It is this "transfer-of-domain-name" relief that is the focus of this article. It is extremely interesting to note how different a domain name lawsuit (such as that from which the above except was taken) can be from a traditional trademark lawsuit. In a traditional trademark lawsuit the defendant has sold goods or services, or has offered to sell goods or services, and it is the sale or offer that is alleged to have given rise to infringement. The complaint from which the above excerpt was taken alleged no sale of goods or services, nor any offer to sell goods or services. No commercial activity of any kind was alleged in the complaint. The only conduct complained of was the mere registration of the domain name glad.com, without more. And indeed at the time the complaint was filed, so far as the author is aware the owner of the glad.com domain name had done nothing with it whatsoever other than register it. As it happens, the glad.com lawsuit settled, so no judicial factfinding occurred. However, in light of suggestions made later in this paper, it is also interesting to note that First Brands was by no means the only company that might have felt it was entitled to the use of the word "glad". In the United States alone, for example, there are over two hundred businesses called "Glad".(19) Domain names ending in ".com" are worldwide, so it is pertinent to look outside the United States for companies that might feel entitled to the use of the word "glad". Procter & Gamble Limited has a British trademark(20) for "glad" for detergents. International Business Machines Corp. has a French trademark(21) for "glad" for electrical apparatus. L'Oral S.A. has a Swiss trademark(22) for "glad" for cosmetic products. Any rule of law relating to remedies in domain name cases must necessarily take into account a world in which there is more than one company using a particular name. Possible Bases for Domain Name Remedies Every lawsuit ever filed relating to domain names has based its claims, at least in part, on trademark law. Thus it is important to keep clearly in mind the traditional trademark remedies. When a trademark owner wins a trademark infringement case, the most commonly granted remedy is an injunction, that is, an order that the infringer must cease and desist from particular conduct.(23) The simple reason for this is that if the conduct is causing ongoing harm, no award of money damages would be adequate to compensate the plaintiff; only an injunction will provide suitable relief.(24) In relatively rare cases (those involving counterfeiting) the court also orders impoundment and destruction of goods.(25) It bears noting that the trademark owner doesn't get to keep the infringer's goods, but is merely entitled to destroy them.(26) Finally it bears noting that awards of money damages are exceedingly rare in trademark cases. One treatise says that "it is a realistic and cautious view" to say that "obtaining a strongly worded injunction should be viewed as a 'win' in a trademark infringement case and that recovery of a monetary award of any kind is problematical."(27) Traditional trademark cases typically involve sales of allegedly infringing goods or 120 services. Yet in many domain-name-related cases, no allegation is made that any goods or services are being sold or offered for sale. Indeed a substantial number of cases have been brought in which the only conduct complained of is that the domain name owner registered the domain name and has refused to give it to the plaintiff. Thus it appears that in developing a law of domain name remedies, it is important to distinguish between: cases in which conduct above and beyond registration of a domain name (presumably, conduct giving rise to customer confusion) somehow forms a part of the basis for the trademark claim, and cases in which the only conduct complained of is that the domain name owner now owns the domain name. The closely related, but distinct, legal theory alleged in nearly all domain name lawsuits is dilution. While many states have had anti-dilution laws for many years, a great shift in American trademark law occurred in January of 1996 when Congress enacted a federal anti-dilution law.(28) This new law provides an injunctive remedy for any conduct that "dilutes" a trademark, regardless of whether the conduct gives rise to customer confusion, the only requirement for this relief being that the trademark is "famous". One's first reaction, upon learning of such a law, is to attempt to locate Congress's definition of "famous" in the Act, since this determines who the eligible plaintiffs are for this extraordinarily powerful relief. It is thus rather striking to find that Congress did not see fit to define "famous", but instead did no more than provide a nonbinding list of eight factors which courts are free to apply or not as they see fit in their efforts to determine whether a trademark is "famous". Sen. Patrick Leahy said this about the Act: It is my hope that this antidilution statute can help stem the use of deceptive Internet addresses taken by those who are choosing marks that are associated with the products and reputations of others.(29) Given the absence of any definition of "famous," and Sen. Leahy's comments, it is perhaps unsurprising to observe that every single subsequent US lawsuit by a trademark owner relating to a domain name has asserted the Federal Trademark Dilution Act. It is likewise unsurprising that each such lawsuit has been accompanied by a brief quoting the statement by Sen. Leahy. The trademark plaintiff drafting a domain name complaint need not hesitate in inserting a dilution claim, for the simple reason that there is no way to rule out the possibility, however remote, that the court might find the trademark to be "famous". The dilution claim offers the great advantage that the plaintiff need not prove confusion as in a traditional trademark claim. There is, however, one salient drawback to the dilution claim, namely that the federal anti-dilution act provides an exhaustive list of available remedies(30), and transfer of a domain name is not among them. The chief remedy is a simple injunction,(31) and in exceptional cases an award of money damages.(32) Thus, for the trademark plaintiff whose goal is to possess a domain name, the Federal Trademark Dilution Act is (or should be) of little or no help other than as a make-weight together with other theories of relief. Remedies Granted By Network Solutions, Inc. No discussion of domain name remedies would be complete without a mention of the peculiar trademark domain name policy of Network Solutions, Inc, (NSI) the temporary administrator of most Internet domain names (including all .com domains) under a fiveyear government contract that expires in 1998. Under NSI's policy,(33) a trademark 121 owner can obtain preliminary relief without the bother of showing any likelihood of success on the merits nor any irreparable harm. All the trademark owner need do is write two letters, one to the domain name owner and a second one to NSI, and NSI will deactivate the domain name. Similar relief from an ordinary court would require the above-mentioned showings of likelihood of success and irreparable harm, and would also require the posting of a bond to protect the domain name owner in the event the relief was improvidently granted. NSI's policy has come under attack from all sides. The Domain Name Rights Coalition, which speaks for domain name owners, says NSI's policy is "unfair", and that it "favors large companies, even when their claims may be unsustainable."(34) A recent article in Wired magazine says: Network Solutions' policy shows a fundamental misunderstanding of trademark law and offers a novel interpretation of it: the trademark holder is always right; domain-name holders must prove their innocence. And the only place to do that is in court.(35) The Internet subcommittee of the International Trademark Association, which represents trademark owners, recently issued a paper which "proposes that the current NSI Dispute Policy be recognized as a failure and eliminated, [and] that domain name disputes be left to the courts."(36) For the trademark owner that happens to have a goal of gaining possession of a domain name, the NSI policy is not fully satisfactory, for the simple reason that NSI does not transfer the domain name to the trademark owner. Nonetheless, the NSI policy promotes that goal, because in some cases getting a domain name placed "on hold" under the policy will cause the domain name owner to be put out of business, which then permits the trademark owner to apply to NSI for the domain name and thus to obtain it. A most unfortunate direct effect of the NSI policy has been to make trademark owners (and, perhaps, courts) think that somehow the possession of a trademark registration, without more, entitles the trademark owner to a remedy. Many trademark owners thus think of the NSI policy as a perfectly proper weapon to use in cases where an ordinary court would not rule in their favor. A recent sequence of events underscores the intellectual poverty of the NSI policy. In 1989 a company called Publishing Perfection was incorporated and began doing business under that name. In November of 1994 the company registered the domain name perfection.com. The word "perfection" is, to state the obvious, a common English word and it is difficult to imagine circumstances in which one company would have to answer to another for the use of such a domain name (absent, of course, traditional trademark confusion). Everything changed in 1995 when NSI began following its now-notorious trademark domain name policy. Hasbro, a maker of children's games, noted that its "perfection" trademark for children's games was text-identical to the domain name owned by Publishing Perfection, and in mid-1996 asked NSI to commence a challenge proceeding against Publishing Perfection. NSI did so(37) and scheduled a date for the domain name to be cut off. As it happens, the domain name owner and Hasbro have agreed to a series of extensions of time and the domain name has not yet been cut off, although at any particular moment there has always been some date certain in the future at which the domain name would be cut off. In late 1996 the L'Oral cosmetics company noted 122 that its "perfection" trademark for cosmetics was text-identical to the domain name owned by Publishing Perfection, and in December 1996 asked NSI to commence a challenge proceeding. L'Oral was apparently unaware that Hasbro had, just months earlier, made a similar request of NSI. To the credit of L'Oral and the domain name owner, they managed to reach a private resolution that avoided the spectacle of NSI proceeding with two different challenge proceedings with two different companies that presumably had comparable claims to the domain name. But the sequence of events illustrates one of the primary flaws in the NSI policy, namely that it fails completely to take account of the possibility that two or more parties may coexist in the use of a trademark, and that it might easily be the case that no one of them is entitled to take the domain name from any of the others. Reported cases in which domain name transfers were ordered In traditional goods-and-services trademark cases, the usual remedy (if any) is ceaseand-desist relief relating to the disputed goods and services. But it is apparent that many domain name cases are different from traditional trademark cases. In three recently reported cases, there were no goods or services, and indeed no conduct other than registration of the domain name, yet the court ordered that the domain name be transferred from the domain name owner to the trademark owner. Let us consider each case in turn. ACTMEDIA.COM.(38) (Much of what follows is superseded by newly discovered information about the Acmedia "opinion" as detailed in a note, below.) A company called Actmedia, Inc., which owns a US trademark registration for ACTMEDIA,(39) went to Network Solutions, Inc. to sign up for the domain name actmedia.com, and found that a company called Active Media, Int'l Inc. had already registered it. Actmedia did what many companies do these days when they find that the desired domain name is already taken -- they sued the domain name owner. In a very short statement of findings that does little to guide practitioners, the court found the domain name owner's actions to constitute trademark infringement and ordered that the domain name be given over to the plaintiff. The court was silent on the source of its authority to order that the domain name be transferred. Not only did the Actmedia opinion omit to mention the basis for its remedy, the opinion also based its conclusions on a misunderstanding about how the Internet works. The court said that the "[d]efendant's reservation of [actmedia.com] has precluded Plaintiff from reserving an Internet domain name incorporating its registered Mark." In reality, the plaintiff was not so precluded. First, there are over 180 top-level domains in the Internet, of which "com" is only one. The trademark owner could have registered actmedia.org or a domain name in the ".us" domain, either of which would have been "an Internet domain name incorporating its registered mark." Second, even within the "com" domain it would have been quite easy for the trademark owner to reserve an Internet domain name incorporating its registered Mark, for example actmediainc.com or actmediainc.com. The Actmedia judgment was not appealed, so one can only speculate as to whether an appellate court would have attached any significance to this particular misunderstanding. Probably what the court meant to say was something rather different, namely that 123 "[d]efendant's reservation of [actmedia.com] has precluded Plaintiff from reserving the particular domain name that is made by adding '.com' to the company name of 'actmedia'". In other words, probably the court assumed, but did not bother to say openly, that the only top-level domain suitable for the plaintiff's use was the ".com" domain, and that the the only domain name acceptable to the plaintiff was the particular ".com" domain constructed by adding ".com" to "actmedia". As it happens, "actmedia" is apparently a unique mark; a search of online trademark databases for many countries revealed no registrations owned by anyone other than the plaintiff. That, together with the apparent overlap of lines of business (media presumably overlapping with media) may explain why the court concluded that "[d]efendants' commercial activities" were likely to cause confusion, and why the court found the Illinois Anti-Dilution Act to have been violated. It may also explain why the Court apparently felt justified not only in granting the usual trademark infringement relief (enjoining further conduct) but in additionally ordering that the actmedia.com domain name be transferred to the plaintiff. INTERMATIC.COM.(40) Intermatic Inc., the plaintiff, was the owner of a trademark registration for "intermatic"(41) for a variety of goods relating to its main line of business: timers that turn electrical equipment on and off at various times of day. Intermatic Inc. tried to register the domain name intermatic.com and found that it had been registered by Mr. Toeppen. Indeed it found that Mr. Toeppen had registered about 240 domain names, including intermatic.com, deltaairlines.com, britishairways.com, crateandbarrell.com, ramadainn.com, eddiebauer.com, greatamerica.com, neimanmarcus.com, northwestairlines.com, ussteel.com, and unionpacific.com. The trademark owner sued Mr. Toeppen, alleging trademark infringement, trademark dilution, and related causes of action. The Intermatic court wrote a thirty-two page opinion which opened by saying "Welcome to cyberspace!" One of the problems faced by the court was the apparent inapplicability of substantive law to the conduct. Mr. Toeppen was not, it seems, engaged in any overt commercial activity with the contested domain name intermatic.com. Visitors to the intermatic.com web site were greeted with a decidedly noncommercial street map of the greater Champaign-Urbana area. Yet the Federal Trademark Dilution Act explicitly limits itself to commercial activity, and thus on its own terms did not provide a remedy to the trademark owner. The remainder of the Lanham Act likewise limits itself to fact patterns in which "goods or services" are changing hands "in commerce", and Mr. Toeppen was apparently intentionally avoiding the provision of goods or services and anything resembling commerce. Trademark plaintiffs, when faced with a domain name owner defendant that is not engaged in commerce, have strained to find something to fill the place of the traditional goods and services of a traditional trademark lawsuit. One approach is to urge (as the Intermatic plaintiff apparently did) that because the three letters com are taken from the word commercial, then the use of a domain name ending in com is necessarily commercial (and thus counts as commercial activity even in the absence of any other conduct). And indeed the designers of the Internet offer support for this view in the official document RFC 1591, which says in pertinent part: "This domain [COM] is intended for commercial entities, that is companies." Yet the Intermatic court said, instead, "The use of the first level domain designation '.com' does not in and of itself 124 constitute a commercial use." In the face of all this, the court in the intermatic.com case might have chosen to write an opinion stating that registration of an Internet domain name, without more, can nonetheless count as trademark infringement. If it had done so, this would have been new law and perhaps bad law. Instead, the court strained to find something commercial in Toeppen's conduct, and it found two items. First, Toeppen had, for a brief time, used the mark "Intermatic" in connection with the sale of a computer software program. (The court says nothing that would permit the reader to discern whether the "software program" was in an area of goods or services likely to be confused with those of the trademark owner.) But this use had ceased prior to the effective date of the Federal Trademark Dilution Act, the court noted, and thus it was with some apparent relief that the court was able to point to a second indicium of commercial activity. "At oral argument Toeppen's counsel candidly conceded that one of Toeppen's intended uses for registering the Intermatic name was to eventually sell it back to Intermatic or to some other party." The court went on to say that "Toeppen's desire to resell the domain name is sufficient to meet the 'commercial use' requirement of the Lanham Act." The intermatic.com court, to its credit, did understand domain names better than the actmedia.com court. The plaintiff was "technically capable," the Court explained, "of establishing its web page at another domain name including, for example, intermaticinc.com and is technically capable of establishing at any available domain name a web page featuring the INTERMATIC mark and any other Internet-related marketing or business information." Yet even the intermatic.com court seemed to overlook that com is but one of several top-level domain names in which the trademark owner might obtain a domain name, stating incorrectly that "[t]he practical effect of Toeppen's conduct is to enjoin Intermatic from using its trademark as its domain name on the Internet." In reality, Intermatic could have registered intermatic.org or a domain name in the ".us" domain, either of which would have enabled the trademark owner to "us[e] its trademark as its domain name on the Internet." Having found Toeppen's conduct to be "in commerce" (a finding which the court felt followed automatically from the worldwide nature of the Internet) and "commercial," having found violation of the Illinois state anti-dilution law, and having found that "intermatic" is a unique trademark, the court ordered that the intermatic.com domain name be given over to the trademark owner. The court did not explain how the transferof-domain-name relief followed from the Illinois state anti-dilution law. PANAVISION.COM.(42) In what is by now a familiar sequence of events, the plaintiff Panavision International L.P. went to register the domain name panavision.com, only to find that it had been previously registered by someone else. Panavision was armed by a registered trademark for "panavision"(43) and filed suit, alleging federal and California state dilution. The court found that "panavision" was "famous" under the Federal Trademark Dilution Act. In support of this finding, the court noted that the word "panavision" was not "found in the dictionary" and had enjoyed a "long period of exclusive use" by the plaintiff. Indeed a search of online trademark databases for many countries shows no trademark registrations other than those to the plaintiff. As with Actmedia and Intermatic, there did 125 not seem to be a plurality of other companies with comparable claims to the domain name. The Panavision court, like the Intermatic court, next faced the difficulty that the antidilution laws expressly limit themselves to "commercial" activity, and that Mr. Toeppen had taken pains not to do anything that was commercial (in the ordinary sense of the word) with the domain name. The Panavision court openly recognized this problem, noting that "[r]egistration of a trade[mark] as a domain name, without more, is not a commercial use of the trademark and therefore is not within the prohibitions of the Act." Like the Intermatic court, the Panavision court supplied the missing commercial activity by construing Mr. Toeppen's conduct so as to trigger the anti-dilution laws. Toeppen's "business" is to register trademarks as domain names and then to sell the domain names to the trademarks' owners. Toeppen's business is evident from his conduct with regard to Panavision and his conduct in registering the domain names of many other companies. The court listed some of the "many other companies" and the corresponding domain names registered by Mr. Toeppen: aircanada.com, anaheimstadium.com, camdenyards.com, lufthansa.com, and yankeestadium.com. As did the Actmedia and Intermatic courts, the Panavision court appeared to misunderstand the Internet. The court stated that "Toeppen was able ... to eliminate the capacity of the Panavision marks to identify and distinguish Panavision's goods and services on the Internet." The court further found that "Toeppen's conduct ... prevented Panavision from using its marks in a new and important business medium." Of course, Panavision could have used its marks in many ways other than as a domain name, for example in the text of a web site. In this way Panavision could quite well have "identif[ied] and distinguish[ed] Panavision's goods and services on the Internet. Panavision could also have registered panavision.org or a domain name in the .us domain. Notwithstanding any factual misunderstandings, having found "commercial" activity, and having found the mark to be "famous", then as in the Actmedia and Intermatic cases, the court unhesitatingly found for the plaintiff. But as in the Actmedia and Intermatic cases, there was a difficulty that the court declined to address squarely -- the pesky issue that the dilution law on its own terms only permits the court to award cease-anddesist relief. The court said nothing to explain where a basis could be found for the extrastatutory relief of an ordered transfer of a domain name. Analysis of the Reported Cases The reported cases are extraordinarily fact-specific. Perhaps most importantly, the Intermatic and Panavision cases appear to have involved judges who disapproved generally of Mr. Toeppen's conduct. Each judge felt compelled to list numerous other domain names held by Mr. Toeppen as part of showing a pattern of behavior.(44)January 29, 1998 Each case also involved what appeared to be a truly unique mark. Each of the three marks is coined. None of the three marks can be found in a dictionary. Searches of online databases show but a single trademark owner for the mark, in each case the plaintiff in the action. Searches of directories of corporations show few or no other 126 companies named for the mark. In contrast, consider other domain name cases in which domain name owners, in the face of challenges by trademark owners, have been in and out of court and have retained their domain names. These cases include roadrunner.com,(45) dci.com,(46) ty.com,(47) clue.com,(48) disc.com,(49)regis.com,(50) and juno.com.(51) The cases have many factors in common. None of the domain names corresponds to a unique mark: roadrunner, clue, disc, regis, and juno are common dictionary words, ty is a person's name, and dci is an acronym for a three-word company name. In each case, there are dozens or even hundreds of other companies that use the same name or the same trademark, and thus the trademark owner presenting the trademark challenge is but one of many possible claimants to the use of the domain name. The Panavision court acknowledged that some trademarks are held by multiple parties: "[t]raditionally, trademark law has permitted multiple parties to use the same mark for different classes of goods or services." Where a domain name in dispute corresponds to a trademark that is held by multiple parties, it seems possible that the court would conclude that in the absence of confusion, there is no reason to disturb the ownership of the domain name. Designing a Rule of Law for Domain Name Remedies It will be recalled that this article poses the question: Under what circumstances ought a court to take away a domain name from one party and give it to another? Any effort to answer that question must necessarily attempt to harmonize with the already-decided cases, as well as to generate fair and just results going forward. The following table is offered to attempt to categorize the various types of domain name disputes that have arisen and that are likely to arise in future. Factor I Factor II Category Is trademark coined, not in the dictionary, and unique? Factor III Has domain name owner registered numerous domain names corresponding to coined, unique trademarks? Factor IV Is domain name owner doing anything at all with the domain name? Ayes Toeppen cases Byes Actmedia (see note) C - glad, no yes doesn't matter no yes yes no yes no 127 Factor V Is domain name owner actually causing confusion with trademark owner's goods or services? doesn't matter Did trademark Proper owner assert remedy challenge promptly after domain name was registered? doesn't matter transfer domain name doesn't matter transfer domain name doesn't matter none perfection D no no yes yes E doesn't matter doesn't matter no no relevant to preliminary relief and to lability no ceaseanddesist only none A Discussion of Factors The factors which courts might take into account in fashioning a remedy will be discussed in turn. I. Is the trademark coined, not in the dictionary, and unique? The relevance of this factor is not directly discussed in the the Actmedia, Intermatic, and Panavision cases, yet given that the remedy given in those cases is different in kind from any trademark remedy heretofore granted by a court, the factor is apparently important. Perhaps the underlying policy reason for a forced transfer of the domain name is simply judicial economy. If it can be said that there is realistically only one party who could plausibly have use of the domain name, then granting only cease-and-desist relief, possibly followed by registration of the domain name by some third party, would simply lead to another trademark lawsuit, this one against the new owner of the domain name. The specter is a never-ending series of lawsuits in which undeserving parties have to be sued, one by one, to cause a cessation of infringing use. As will be discussed below, this factor is the sole factor which, in the author's view, might sometimes justify transferthe-domain-name relief. "Famous" does not mean "unique." The value of the uniqueness factor to the court is simply that it has the potential to simplify the question of who might credibly claim the domain name. But it is important to distinguish this factor from, for example, the definition (or, rather, non-definition) of "famous" in the Federal Trademark Dilution Act. With the passage of years it is possible to imagine a court determining that "Ford" is famous in the area of automobiles, in the area of fashion models ("Ford Models"), and in the area of theater (the Ford Theater in Washington). Yet even if there were a finding that "Ford" is famous, this would not and could not lead to a conclusion that any particular one of the famous mark-holders is uniquely entitled to own the domain name ford.com. Instead, for a court to reach a meaningful conclusion that only one party is entitled to a domain name, it would be necessary to make a fact-finding that exactly one company is so entitled. This finding would require at a minimum a trademark search in each of the generally available online trademark databases(52) as well as company-name searches in a comprehensive selection of online company-name databases.(53) In addition, the subject trademark should be searched in web search engines such as Alta Vista. Only if all of these resources come up empty (save for references to the plaintiff trademark owner), and if the trademark owner actively affirms that it is unaware of any other possible claimants to the domain name, should the court consider exercising its equitable power to order a transfer of the domain name to the plaintiff. Otherwise, the court should decline to so order. 128 II. Has the domain name owner registered numerous domain names corresponding to coined, unique trademarks? In each of the two Toeppen cases, the court went to some length to detail the numerous coined and unique trademarks which Toeppen had registered as domain names. Recounting such a roster of domain names is surely emotionally satisfying (and may play a meaningful role in inferring the infringementrelated state of mind of the domain name owner) but should play no part whatsoever in selecting the remedy to apply. The reason is simple: no matter how strongly one disapproves of the domain name owner, such disapproval should not be redirected to the general public, some of whom may have as strong a claim on the domain name as the plaintiff. The extreme and nearly unprecedented remedy of an order of transfer of the domain name should be reserved for the few cases where it is conclusively shown that there is no colorable claimant to the domain name other than the plaintiff, and a roster of other domain names owned by the defendant does nothing to support such a showing. III. Is the domain name owner doing anything at all with the domain name? In the Toeppen cases much attention was paid to this question, for the simple reason that the Lanham Act applies on its own terms only to commercial activity, and someone who is doing nothing is necessarily not doing anything commercial. But this factor goes more to liability than to the selection of remedy. IV. Is domain name owner actually causing confusion with trademark owner's goods or services? This factor was studiously ignored in the Panavision, and Intermatic cases, for the simple reason that it would have been difficult or impossible to show such confusion. The Actmedia case stated in conclusory fashion that confusion was likely but said nothing to show what basis there was for such a conclusion. (See note, below, for more information on the Actmedia case.) In the case of a non-unique trademark (i.e. a trademark shared by two or more companies) the transfer-the-domain-name remedy should be unavailable and the only remaining question would be whether cease-anddesist relief should be available. The presence or absence of actual or likely confusion is, of course, extremely relevant to the question of whether there is trademark liability, in the absence of which no trademark remedy at all would be appropriate. V. Did the trademark owner assert its challenge promptly after the domain name was registered? Still another factor that a court might be urged by the parties to consider is whether the trademark owner presented its challenge promptly after registration of the domain name, or whether it allowed months or even years to pass before presenting its claim. Many of the highly visible domain name lawsuits(54) are ones in which the triggering event was the act of the trademark owner attempting for the first time to register a domain name, only to find that the domain name had been registered by someone else some months or years ago. In many of these cases, the suspicion raised in the mind of a skeptical reader is that the allegation of infringement recited by the trademark owner is mere bluster, intended to overcome embarrassment at not having been savvy enough to apply for the domain name earlier. Such an allegation, in the case of a non-unique trademark and a challenge raised only years after the domain name owner obtained the domain name, tends to ring hollow, especially when the trademark owner is unable to point to any particular conduct by the domain name owner that supposedly infringes, other than ownership of the domain name itself.(55) The passage of a long time between registration of a domain name, and the challenge by a trademark owner, especially when combined with a finding that numerous companies use the 129 trademark (i.e. that it is a shared trademark rather than a coined, unique one) tend to negate a finding of trademark liability, and thus tend to negate the grant of any remedy at all. The general fact-pattern categories The Intermatic and Panavision cases fall within category A. Due to the unique and coined nature of the trademarks, it is suggested that it need not matter whether the trademark owner asserted a claim promptly after registration of the domain name. However, for the grant of the hitherto unprecedented relief of an order that the domain name change hands, it is suggested that the court require a full and credible showing that there is no one else who might be entitled to claim the domain name. This article suggests that for the grant of such sweeping relief, it is not enough that the defendant not oppose the sweeping relief. After all, the defendant may be aware that it is going to lose and thus may have little incentive to assist the court in crafting judicially sound equitable relief. Indeed in many such cases there may be no meaningful commentary from the defendant due to a failure to appear or failure to be represented by competent counsel (or to be represented by counsel at all). Instead, as mentioned above in connection with factor I, this article suggests that sweeping transfer-the-domain-name relief should be considered by a court sitting in equity only after a thorough and credible showing that there are no other colorable claimants to the domain name. Stated differently, if a court were to grant such relief in the absence of such a showing, this would merely reward the trademark owner (who shares some trademark with other trademark owners) who happens to win the race to the courthouse. Indeed the trademark plaintiff that asks the court to order that a domain name be transferred to it, with undisclosed knowledge that other trademark owners have equally colorable claims to the domain name, is coming to the court with unclean hands and should not be given equitable relief. A court sitting in equity, with a trademark claim presented together with a request that a domain name be transferred, should also bear in mind that the purpose of the trademark and unfair competition laws is to protect the public, not merely to protect the particular trademark owner who happens to stand before the court as plaintiff. This highlights the fact that parties not before the court (members of the public and other trademark owners) may have colorable claims to the domain name, and that absent a due inquiry into this possibility a transfer of domain name would be quite likely to do harm to parties not represented in the action. What's more, the court that orders such a transfer without having made such an inquiry is simply setting the stage for yet another fight over the domain name, and adding to the workload of the courts. The Actmedia case does not fit squarely within category A, for the reason that little or no factual basis was offered for the remedy granted. It is possible, given the brevity of the Actmedia opinion, that there was no meaningful opposition by the domain name owner (see note, below). In such cases it is, as mentioned above, encumbent upon the court to consider not only the plaintiff but also the public, and make due inquiry before granting a remedy that affects the general public and perhaps other would-be claimants to the domain name. Where the court becomes aware (or where the plaintiff discloses to the court) that there 130 are two or more companies with the same trademark, equity suggests that before any action is taken by the court tending to make the domain name available to the plaintiff (even a mere release of the domain name by the defendant back into the hands of the registration authority), reasonable notice ought to be given to the other colorable claimants to the domain name. Otherwise the court sitting in equity will again be simply rewarding a race to the courthouse, and of course practices that reward races to the courthouse tend to engender unnecessary and hasty litigation, and tend to lead to inequitable results for the losers of the race. Categories C and E are the most interesting and, for lawyers counseling domain name owners, the most distressing. These are categories encompassing the increasingly common fact pattern of the company that attempts to register a domain name, only to find that the desired domain name was already registered by someone else. Clearly, given that domain names are registered on a first-come, first-served basis, what the company should have done was to register the domain name earlier. Notwithstanding this, the company covets the domain name and discovers that it happens to have a trademark registration identical to the text of the domain name. The company then sues the domain name owner, seeking an order that the domain name be transferred. This article suggests that such an order should be denied, for several reasons. First, to rule otherwise would raise the specter of endless litigations, as each of the trademark holders takes its turn suing whoever happens to have the domain name. Stating this differently, transfer-the-domain-name relief is appropriate only if the trademark being asserted is coined and unique. The vast majority of trademarks are not coined, are not unique, and are in fact shared by numerous parties who are in different lines of business. In cases where the trademark is non- unique and where no confusion is present or likely, it is simply indefensible to order a transfer of the domain name, and indeed is also inappropriate to grant any remedy at all. Second, it must be remembered that strictly speaking, there is no remedy in trademark law or dilution law that calls for transfer of a domain name. The Lanham act speaks of cease-and-desist relief and (relatively rare) awards of money damages, but not of transfers of property. Likewise the Federal Trademark Dilution Act calls only for ceaseand-desist relief (and damage awards but only in exceptional cases). Third, where the plaintiff's claim is properly understood as nothing more than "we wish we had registered the domain name earlier and want the court to force the owner to give it to us", then the delay of months or years from the registration of the domain name belies any claim that the domain name, by itself, somehow counts as infringement. The plaintiff should be denied a remedy and should be encouraged to select a different domain name. Such cases amount to what has been called "reverse domain name hijacking", and commenters have suggested that the trademark owner who attempts such reverse hijacking may run the risk of cancelation of the trademark.(56) Fourth, the Internet generally, and the World Wide Web in particular, relies on stable domain names and URLs. The Web simply would not work if URLs tended to change from time to time due to court actions brought by merely covetous plaintiffs. In the case where a domain name owner is not infringing any trademarks and has selected a name that is non-unique, the court simply should not grant any remedy that disturbs the stability of the domain name or URL. To do so harms the innocent domain name owner 131 by harming and perhaps destroying the domain name owner's business, and harms the Internet community generally by rendering unusable their browser bookmarks and hypertext links to the domain name. Categories C and E bring to mind the following passage from Gulliver's Travels: For example, if my neighbour hath a mind to my cow, he hires a lawyer to prove that he ought to have my cow from me. I must then hire another to defend my right, it being against all rules of law that any man should be allowed to speak for himself. Now in this case, I who am the true owner lie under two great disadvantages. First, my lawyer, being practiced almost from his cradle in defending falsehood, is quite out of his element when he would be an advocate for justice, which as an office unnatural, he always attempts with great awkwardness, if not with ill will. The second disadvantage is, that my lawyer must proceed with great caution: or else he will be reprimanded by the judges, and abhorred by his brethren, as one who would lessen the practice of the law. And therefore I have but two methods to preserve my cow. The first is to gain over my adversary's lawyer with a double fee, who will then betray his client by insinuating that he hath justice on his side. The second way is for my lawyer to make my cause appear as unjust as he can, by allowing the cow to belong to my adversary; and this if it be skilfully done will certainly bespeak the favour of the bench.[...] In pleading, [the neighbour's lawyers] studiously avoid entering into the merits of the cause, but are loud, violent, and tedious in dwelling upon all circumstances which are not to the purpose. For instance, in the case already mentioned: they never desire to know what claim or title my adversary hath to my cow, but whether the said cow were red or black, her horns long or short; whether the field I graze her in be round or square, whether she was milked at home or abroad, what diseases she is subject to, and the like; after which they consult precedents, adjourn the cause from time to time, and in ten, twenty, or thirty years come to an issue. (Jonathan Swift, Gulliver's Travels, Part IV, Ch. 5, 1726.) Courts need to recognize mere covetousness when it is presented in the guise of a trademark lawsuit, and need to be prepared to deny relief in such cases. Conclusion Clumsy policymaking by NSI, a poorly drafted US Federal Trademark Dilution Act, and the hard facts presented by the first few domain-name-transfer cases have combined to yield an awkward mix of precedents and fact patterns for domain name trademark disputes. It is hoped that as courts encounter new and different fact patterns, the law of domain name trademark remedies will develop in a way that is fair to non-infringing domain name owners, that promotes stability of URLs and domain names, and that provides meaningful remedies for owners of the handful of trademarks that are truly unique. Footnotes (1) Partner, Oppedahl & Larson, email: oppedahl@patents.com. JD Harvard University 1981 (2) The Internet-style email address, with a user name and domain name conjoined with 132 an "@" sign, is now standard worldwide and all other forms of email address have fallen out of use. (3) <http://www.altavista.digital.com>, <http://www.lycos.com>, and <http://www.yahoo.com> respectively. (4) For example, in the United States, the National Technical Standards Committee promulgates NTSC Standards for broadcast television. (5) There are by now over a thousand RFCs, one of which is RFC 1591 <ftp://rs.internic.net/rfc/rfc1591.txt>, discussed below. RFC 1591 determines, among other things, the role of a domain name registration authority with respect to disputes over Internet domain names. (6) The majority of URLs begin with "http://" which stands for Hypertext Transport Protocol. It is commonplace to omit the "http://" and most web browsers will supply it if the user does not enter it. A URL that begins with "http://" may be variously referred to as a "web address" or "web page address" or "web site address". (7) For example, many CompuServe email addresses begin with nine randomlyassigned numerical digits. (8) Don Mitchell, Scott Bradner, & K Claffy, In whose domain: name service in adolescence, <http://ksgwww.harvard.edu/iip/bradner.html>. (9) Jonathan Agmon, Stacey Halpern and David Pauker, What's in a Name, <http://www.law.georgetown.edu/lc/internic/domain1.html>; NSI Flawed Domain Name Policy information page, <http://www.patents.com/nsi.sht>; and Electronic Frontier Foundation's "Internet Address & Domain Name Disputes" Archive, <http://www.eff.org/pub/Intellectual_property/Internet_address_disputes/>. (10) The author was counsel for Roadrunner Computer Systems, Inc. in the case of Roadrunner Computer Systems, Inc. v. Network Solutions, Inc., (cite) now concluded. (11) This point was, so far as the author is aware, first made clearly by Mr. Albert Tramposch of the World Intellectual Property Organization in a posting in a discussion group hosted by the Internet Ad Hoc Committee. (12) It should also be borne in mind that in most of the countries of the world, there are no letters on telephone dials, or the letters are in different places than in North America. In addition, in most of the countries of the world a toll-free call does not particularly relate to the number "800". Thus the law relating to disputes over 800 numbers is of only limited significance in an attempt to develop a consistent worldwide body of law relating to domain names. (13) Holiday Inns Inc. v. 800 Reservation Inc., 86 F.3d 619, 39 U.S.P.Q.2d 1181 (6th cir. 1996) (14) MDT Corp. v. New York Stock Exchange Inc., 858 F.Supp. 1028, 30 U.S.P.Q.2d 1849 (C.D. Cal. 1994) (15) See Domain Name assignment rules in Israel at <http://www.isoc.org.il/ildomain.html>. (16) There are two types of federal interpleader, so-called Rules interpleader (F.R.C.P. 22) and statutory interpleader (28 USC º 2361). (17) Complaint for Interpleader Pursuant to 28 U.S.C. º 1335, Network Solutions, Inc. v. Clue Computing, Inc. et al., 96 civ. 1530, filed June 21, 1996, D. Colorado. NSI's attempt to use federal interpleader in this case was ruled improper not because domain names are not property, but on other grounds, see Network Solutions, Inc. v. Clue Computing, Inc., 41 U.S.P.Q.2d 1062 (D.Colo. 1996). The court, explaining why interpleader was not proper with respect to the clue.com domain name, likened NSI to "a wrongdoer with respect to the subject matter of the suit", said that NSI was not "free from blame in causing the controversy", and said that NSI was improperly seeking "to 133 escape adjudication of its contractual duties, and possible liability, in [a previously filed] state court action." (18) First Brands Properties Inc. v. Weitzman, et al., 96 civ. 2193, D. Md. (filed July 16, 1996). (19) Search performed in Dun & Bradstreet "Duns Market Identifiers" in January of 1997 (available at Dialog file 516) (20) Great Britain trademark reg. no. 752245 (21) French trademark reg. no. 1536267 (22) Swiss trademark reg. no. R 266562 (23) See generally McCarthy on Trademarks º 30.02 et seq. "It is difficult to imagine an unfair competition case where damages are adequate to remedy the problem of defendant's continued acts." (24) Id. (25) See generally McCarthy on Trademarks º 30.16[2][g] and cases cited there. (26) See generally McCarthy on Trademarks º 30.04[5] and cases cited there. (27) McCarthy on Trademarks º 30.24[2] (28) Federal Trademark Dilution Act of 1995, 15 USC º 1125(c). (29) Cong. Rec. Dec. 29, 1995, S19312. (30) The Act offers only an "injunction against [the diluter's] commercial use in commerce of a mark or tradename..." except in the special case in which wilfulness is shown. (31) pinpoint cite in 15 USC º 1125(c). (32) pinpoint cite in 15 USC º 1125(c). (33) <ftp://rs.internic.net/policy/internic/internic-domain-6.txt> (34) <http://www.domain-name.org/intro.html> (35) <http://www.wired.com/wired/4.10/updata.html> (36) <http://www.inta.org/intaprop.htm> (37) Under NSI's policy, NSI does nothing to investigate whether any actual trademark infringement is going on, but it merely mechanically checks to see if the trademark and domain name are identical, in which case it schedules a cutoff of the domain name at a date certain, generally 30 days later. In the case of perfection.com, the presentation of two distinct trademarks (one for children's games, another for cosmetics) led to NSI mechanically making the same check and presumably would have led to NSI's determination that both trademark owners deserved to receive the benefit of NSI's preliminary injunctive relief. (38) Actmedia, Inc. v. Active Media Int'l Inc., 1996 WL 466527 (N.D.Ill., Jul 17, 1996) (No. 96C3448) (See note, below.) (39) US trademark reg. no. 1,389,370 (40) Intermatic Inc. v. Toeppen, 1996 US Dist. Lexis 14878, 40 USPQ2d (BNA) 1412 (N.D.Ill, 1996) (41) US trademark reg. no. 1,117,588 (42) Panavision Int'l L.P. v. Toeppen, 945 F.Supp. 1296, __ USPQ2d ___ (C.D. Cal. 1996) (43) US trademark reg. no. 1,160,790 (44) Another reported Toeppen case is American Standard Inc. v. Toeppen, 1996 US Dist Lexis 14451 (C.D. Ill., 1996). In that case, the domain name americanstandard.com was transferred from Mr. Toeppen to the plaintiff. The case is of little or no precedential value, however, because it was entered "on consent" of Mr. Toeppen. (45) Roadrunner Computer Systems, Inc. v. Network Solutions, Inc., E.D. Va. 96-civ- 134 413-A. The author was counsel for Roadrunner Computer Systems, Inc. (46) DCI v. Network Solutions, Inc., M.D. Tenn. 96-civ-429 (47) Giacalone v. Network Solutions, Inc., N.D. Cal. 96-civ-20434 (48) Clue Computing v. Network Solutions, Inc., District Court, Boulder County, Colorado 96-civ-694-5 (49) DISC v. Network Solutions, Inc., D. Colo. 96-civ-1551 (50) Regis v. Network Solutions, Inc., N.D. Cal. 96-civ-20551 (51) Juno Online v. Network Solutions, Inc., E.D. Va. 96-civ-1505 (52) There are commercial databases providing comprehensive coverage of trademarks in the United States, in Canada, and in most of Europe, for example the Thomson & Thomson Trademarkscan databases. (53) There are commercial databases providing comprehensive coverage of company names in North America, Europe, Japan, and other areas, for example from Standard & Poors and from Dun & Bradstreet. (54) E.g. Roadrunner.com, Clue.com, Regis.com, DCI.com, Disc.com, Actmedia.com, Panavision.com, Intermatic.com. (55) Examples of cases which, as perceived by the author, ring hollow in this way are the glad.com case, the clue.com case, the juno.com case, and the perfection.com case. (56) Stephen J. Davidson and Nicole A. Engisch, Applying the Trademark Misuse Doctrine to Domain Name Disputes, <http://cla.org/TM_MIS/T-MISUSE.htm> Update Actmedia case: June 21, 1997 The author is indebted to Steven T. Shelton who was kind enough to pass along the results of some digging in the court files of the US District Court for the Northern District of Illinois. Mr. Shelton has provided to me copies of papers according to which the parties in the Actmedia case stipulated to a final judgment and permanent injunction. The parties signed and filed with the Court a stipulation reciting that "upon entry of the attached Final Judgment and Permanent Injunction by the Court", the case would be dismissed. This essentially coerces the judge to enter the Final Judgment, even if it contains an incorrect statement of the law or the facts (as is the case here), since if the judge refuses to do so, there is the danger that the case will not be dismissed and the judge will be stuck with an active case on his docket and no sure prospect of getting rid of the case. The problem, of course, is that the signing of a publishable opinion such as this one affects far more than the named parties in a case. It is the view of this writer that any judge who permits his or her signature to be placed upon a Final Judgment that contains an incorrect statement of the law or the facts, so as to dispose conveniently of a case, is doing a grave disservice to the general public and to future litigants, and casts an unfavorable light upon the Court. And in this writer's view, that is exactly what happened in this case. The "opinion" in the Actmedia case has been cited dozens and dozens of times since July of 1996 in discussions of the development of domain name trademark law and in cease-and-desist letters sent by domain name challengers, and it has misserved the Internet community due to its inaccuracies. Judge Zagel should not have signed this Final Judgment without requiring that factual and legal inaccuracies be corrected first. And the lawyers in the case (J. Douglas Baldridge of Collier Shannon in Washington DC, Thomas A. O'Donnell, Jr. of Hoffman 135 Estates, IL) should be ashamed of themselves for furthering such a result. Section Three: Business Relationships Cases: Burger King v. Rudzewicz 471 U.S. 462, 105 S.Ct. 2174 (1985) BURGER KING CORPORATION, Appellant v. JOHN RUDZEWICZ, Appellant No. 83-2097. Supreme Court of the United States Argued Jan. 8, 1985. Decided May 20, 1985. Joel S. Perwin argued the cause and filed briefs for appellant. Thomas H. Oehmke argued the cause and filed a brief for appellee. Justice BRENNAN delivered the opinion of the Court. The State of Florida's long-arm statute extends jurisdiction to "[a]ny person, whether or not a citizen or resident of this state," who, inter alia, "[b]reach [es] a contract in this state by failing to perform acts required by the contract to be performed in this state," so long as the cause of action arises from the alleged contractual breach. Fla.Stat. § 48.193(1)(g) (Supp.1984). The United States District Court for the Southern District of Florida, sitting in diversity, relied on this provision in exercising personal jurisdiction over a Michigan resident who allegedly had breached a franchise agreement with a Florida corporation by failing to make required payments in Florida. The question presented is whether this exercise of long-arm jurisdiction offended "traditional conception[s] of fair play and substantial justice" embodied in the Due Process Clause of the Fourteenth Amendment. International Shoe Co. v. Washington, 326 U.S. 310, 320, 66 S.Ct. 154, 160, 90 L.Ed. 95 (1945). Section I A 136 Burger King Corporation is a Florida corporation whose principal offices are in Miami. It is one of the world's largest restaurant organizations, with over 3,000 outlets in the 50 States, the Commonwealth of Puerto Rico, and 8 foreign nations. Burger King conducts approximately 80% of its business through a franchise operation that the company styles the "Burger King System"--"a comprehensive restaurant format and operating system for the sale of uniform and quality food products." App. 46. [FN1] Burger King licenses its franchisees to use its trademarks and service marks for a period of 20 years and leases standardized restaurant facilities to them for the same term. In addition, franchisees acquire a variety of proprietary information concerning the "standards, specifications, procedures and methods for operating a Burger King Restaurant." Id., at 52. They also receive market research and advertising assistance; ongoing training in restaurant management; [FN2] and accounting, cost-control, and inventory-control guidance. By permitting franchisees to tap into Burger King's established national reputation and to benefit from proven procedures for dispensing standardized fare, this system enables them to go into the restaurant business with significantly lowered barriers to entry. [FN3] FN1. Burger King's standard Franchise Agreement further defines this system as "a restaurant format and operating system, including a recognized design, decor, color scheme and style of building, uniform standards, specifications and procedures of operation, quality and uniformity of products and services offered, and procedures for inventory and management control...." App. 43. FN2. Mandatory training seminars are conducted at Burger King University in Miami and at Whopper College Regional Training Centers around the country. See id., at 39; 6 Record 540-541. FN3. See App. 43-44. See generally H. Brown, Franchising Realities and Remedies 6-7, 16-17 (2d ed. 1978). In exchange for these benefits, franchisees pay Burger King an initial $40,000 franchise fee and commit themselves to payment of monthly royalties, advertising and sales promotion fees, and rent computed in part from monthly gross sales. Franchisees also agree to submit to the national organization's exacting regulation of virtually every conceivable aspect of their operations. [FN4] Burger King imposes these standards and undertakes its rigid regulation out of conviction that "[u]niformity of service, appearance, and quality of product is essential to the preservation of the Burger King image and the benefits accruing therefrom to both Franchisee and Franchisor." Id., at 31. FN4. See, e.g., App. 24-25, 26 (range, "quality, appearance, size, taste, and processing" of menu items), 31 ("standards of service and cleanliness"), 32 (hours of operation), 47 ("official mandatory restaurant operating standards, specifications and procedures"), 48-50 (building layout, displays, equipment, vending machines, service, hours of operation, uniforms, advertising, and promotion), 53 (employee training), 55-56 (accounting and auditing requirements), 59 (insurance requirements). Burger King also imposes extensive standards governing franchisee liability, assignments, defaults, and termination. See id., at 61-74. Burger King oversees its franchise system through a two-tiered administrative structure. 137 The governing contracts provide that the franchise relationship is established in Miami and governed by Florida law, and call for payment of all required fees and forwarding of all relevant notices to the Miami headquarters. [FN5] The Miami headquarters sets policy and works directly with its franchisees in attempting to resolve major problems. See nn. 7, 9, infra. Day-to-day monitoring of franchisees, however, is conducted through a network of 10 district offices which in turn report to the Miami headquarters. FN5. See id., at 10-11, 37, 43, 72-73, 113. See infra, at 2187. The instant litigation grows out of Burger King's termination of one of its franchisees, and is aptly described by the franchisee as "a divorce proceeding among commercial partners." 5 Record 4. The appellee John Rudzewicz, a Michigan citizen and resident, is the senior partner in a Detroit accounting firm. In 1978, he was approached by Brian MacShara, the son of a business acquaintance, who suggested that they jointly apply to Burger King for a franchise in the Detroit area. MacShara proposed to serve as the manager of the restaurant if Rudzewicz would put up the investment capital; in exchange, the two would evenly share the profits. Believing that MacShara's idea offered attractive investment and tax-deferral opportunities, Rudzewicz agreed to the venture. 6 id., at 438-439, 444, 460. Rudzewicz and MacShara jointly applied for a franchise to Burger King's Birmingham, Michigan, district office in the autumn of 1978. Their application was forwarded to Burger King's Miami headquarters, which entered into a preliminary agreement with them in February 1979. During the ensuing four months it was agreed that Rudzewicz and MacShara would assume operation of an existing facility in Drayton Plains, Michigan. MacShara attended the prescribed management courses in Miami during this period, see n. 2, supra, and the franchisees purchased $165,000 worth of restaurant equipment from Burger King's Davmor Industries division in Miami. Even before the final agreements were signed, however, the parties began to disagree over sitedevelopment fees, building design, computation of monthly rent, and whether the franchisees would be able to assign their liabilities to a corporation they had formed. [FN6] During these disputes Rudzewicz and MacShara negotiated both with the Birmingham district office and with the Miami headquarters. [FN7] With some misgivings, Rudzewicz and MacShara finally obtained limited concessions from the Miami headquarters, [FN8] signed the final agreements, and commenced operations in June 1979. By signing the final agreements, Rudzewicz obligated himself personally to payments exceeding $1 million over the 20-year franchise relationship. FN6. The latter two matters were the major areas of disagreement. Notwithstanding that Burger King's franchise offering advised that minimum rent would be based on a percentage of "approximated capitalized site acquisition and construction costs," id., at 23, Rudzewicz assumed that rent would be a function solely of renovation costs, and he thereby underestimated the minimum monthly rent by more than $2,000. The District Court found Rudzewicz' interpretation "incredible." 7 Record 649. With respect to assignment, Rudzewicz and MacShara had formed RMBK Corp. with the intent of assigning to it all of their interest and liabilities in the franchise. Consistent with the contract documents, however, Burger King insisted that the two remain personally liable for their franchise obligations. See App. 62, 109. Although the franchisees contended that Burger King officials had given them oral assurances 138 concerning assignment, the District Court found that pursuant to the parol evidence rule any such assurances "even if they had been made and were misleading were joined and merged" into the final agreement. 7 Record 648. FN7. Although Rudzewicz and MacShara dealt with the Birmingham district office on a regular basis, they communicated directly with the Miami headquarters in forming the contracts; moreover, they learned that the district office had "very little" decisionmaking authority and accordingly turned directly to headquarters in seeking to resolve their disputes. 5 id., at 292. See generally App. 5-6; 5 Record 167-168, 174-179, 182-184, 198-199, 217-218, 264-265, 292-294; 6 id., at 314-316, 363, 373, 416, 463, 496. FN8. They were able to secure a $10,439 reduction in rent for the third year. App. 82; 5 Record 222-223; 6 id., at 500. The Drayton Plains facility apparently enjoyed steady business during the summer of 1979, but patronage declined after a recession began later that year. Rudzewicz and MacShara soon fell far behind in their monthly payments to Miami. Headquarters sent notices of default, and an extended period of negotiations began among the franchisees, the Birmingham district office, and the Miami headquarters. After several Burger King officials in Miami had engaged in prolonged but ultimately unsuccessful negotiations with the franchisees by mail and by telephone, [FN9] headquarters terminated the franchise and ordered Rudzewicz and MacShara to vacate the premises. They refused and continued to occupy and operate the facility as a Burger King restaurant. FN9. Miami's policy was to "deal directly" with franchisees when they began to encounter financial difficulties, and to involve district office personnel only when necessary. 5 id., at 95. In the instant case, for example, the Miami office handled all credit problems, ordered cost-cutting measures, negotiated for a partial refinancing of the franchisees' debts, communicated directly with the franchisees in attempting to resolve the dispute, and was responsible for all termination matters. See 2 id., at 59-69; 5 id., at 84-89, 94-95, 97-98, 100-103, 116-128, 151-152, 158, 163; 6 id., at 395-397, 436-438, 510-511, 524-525. B Burger King commenced the instant action in the United States District Court for the Southern District of Florida in May 1981, invoking that court's diversity jurisdiction pursuant to 28 U.S.C. § 1332(a) and its original jurisdiction over federal trademark disputes pursuant to § 1338(a). [FN10] Burger King alleged that Rudzewicz and MacShara had breached their franchise obligations "within [the jurisdiction of] this district court" by failing to make the required payments "at plaintiff's place of business in Miami, Dade County, Florida," ¶ 6, App. 121, and also charged that they were tortiously infringing its trademarks and service marks through their continued, unauthorized operation as a Burger King restaurant, ¶¶ 35-53, App. 130-135. Burger King sought damages, injunctive relief, and costs and attorney's fees. Rudzewicz and MacShara entered special appearances and argued, inter alia, that because they were Michigan residents and because Burger King's claim did not "arise" within the Southern District of Florida, the District Court lacked personal jurisdiction over them. The District Court 139 denied their motions after a hearing, holding that, pursuant to Florida's long-arm statute, "a nonresident Burger King franchisee is subject to the personal jurisdiction of this Court in actions arising out of its franchise agreements." Id., at 138. Rudzewicz and MacShara then filed an answer and a counterclaim seeking damages for alleged violations by Burger King of Michigan's Franchise Investment Law, Mich.Comp.Laws § 445.1501 et seq. (1979). FN10. Rudzewicz and MacShara were served in Michigan with summonses and copies of the complaint pursuant to Federal Rule of Civil Procedure 4. 2 id., at 102-103. After a 3-day bench trial, the court again concluded that it had "jurisdiction over the subject matter and the parties to this cause." App. 159. Finding that Rudzewicz and MacShara had breached their franchise agreements with Burger King and had infringed Burger King's trademarks and service marks, the court entered judgment against them, jointly and severally, for $228,875 in contract damages. The court also ordered them "to immediately close Burger King Restaurant Number 775 from continued operation or to immediately give the keys and possession of said restaurant to Burger King Corporation," id., at 163, found that they had failed to prove any of the required elements of their counterclaim, and awarded costs and attorney's fees to Burger King. Rudzewicz appealed to the Court of Appeals for the Eleventh Circuit. [FN11] A divided panel of that Circuit reversed the judgment, concluding that the District Court could not properly exercise personal jurisdiction over Rudzewicz pursuant to Fla.Stat. § 48.193(1)(g) (Supp.1984) because "the circumstances of the Drayton Plains franchise and the negotiations which led to it left Rudzewicz bereft of reasonable notice and financially unprepared for the prospect of franchise litigation in Florida." Burger King Corp. v. MacShara, 724 F.2d 1505, 1513 (1984). Accordingly, the panel majority concluded that "[j]urisdiction under these circumstances would offend the fundamental fairness which is the touchstone of due process." Ibid. FN11. MacShara did not appeal his judgment. See Burger King Corp. v. MacShara, 724 F.2d 1505, 1506, n. 1 (CA11 1984). In addition, Rudzewicz entered into a compromise with Burger King and waived his right to appeal the District Court's finding of trademark infringement and its entry of injunctive relief. See 4 Record 804-816. Accordingly, we need not address the extent to which the tortious act provisions of Florida's long-arm statute, see Fla.Stat. § 48.193(1)(b) (Supp.1984), may constitutionally extend to out-of-state trademark infringement. Cf. Calder v. Jones, 465 U.S. 783, 788-789, 104 S.Ct. 1482, 14861487, 79 L.Ed.2d 804 (1984) (tortious out-of-state conduct); Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 776, 104 S.Ct. 1473, 1479, 79 L.Ed.2d 790 (1984) (same). [1][2] Burger King appealed the Eleventh Circuit's judgment to this Court pursuant to 28 U.S.C. § 1254(2), and we postponed probable jurisdiction. 469 U.S. 814, 105 S.Ct. 77, 83 L.Ed.2d 25 (1984). Because it is unclear whether the Eleventh Circuit actually held that Fla.Stat. § 48.193(1)(g) (Supp.1984) itself is unconstitutional as applied to the circumstances of this case, we conclude that jurisdiction by appeal does not properly lie and therefore dismiss the appeal. [FN12] Treating the jurisdictional statement as a petition for a writ of certiorari, see 2 8 U.S.C. § 2103, we grant the petition and now 140 reverse. FN12. The District Court had found both that Rudzewicz fell within the reach of Florida's long-arm statute and that the exercise of jurisdiction was constitutional. The Court of Appeals did not consider the statutory question, however, because, as Burger King acknowledged at argument, that court "accepted the parties' stipulation" that § 48.193 reached Rudzewicz "in lieu of [making] a determination of what Florida law provides." Tr. of Oral Arg. 12. Burger King contends that an appeal is proper "on the basis of the Circuit Court's holding that given that stipulation the statute was unconstitutional as applied." Id., at 13 (emphasis added). We disagree. Our "overriding policy, historically encouraged by Congress, of minimizing the mandatory docket of this Court in the interests of sound judicial administration," Gonzalez v. Automatic Employees Credit Union, 419 U.S. 90, 98, 95 S.Ct. 289, 294, 42 L.Ed.2d 249 (1974) (construing 28 U.S.C. § 1253), would be threatened if litigants could obtain an appeal through the expedient of stipulating to a particular construction of state law where state law might in fact be in harmony with the Federal Constitution. Jurisdiction under 28 U.S.C. § 1254(2) is properly invoked only where a court of appeals squarely has "held" that a state statute is unconstitutional on its face or as applied; jurisdiction does not lie if the decision might rest on other grounds. Public Service Comm'n v. Batesville Telephone Co., 284 U.S. 6, 7, 52 S.Ct. 1, 76 L.Ed. 135 (1931) (per curiam ). Consistent with "our practice of strict construction" of § 1254(2), Fornaris v. Ridge Tool Co., 400 U.S. 41, 42, n. 1, 91 S.Ct. 156, 157, n. 1, 27 L.Ed.2d 174 (1970) (per curiam ), we believe that an appeal cannot lie where a court of appeals' judgment rests solely on the stipulated applicability of state law. Rather, it must be reasonably clear that the court independently concluded that the challenged statute governs the case and held the statute itself unconstitutional as so applied. The Court of Appeals did neither in this case, concluding simply that "[j]urisdiction under these circumstances would offend the fundamental fairness which is the touchstone of due process." 724 F.2d, at 1513. Of course, if it were clear under Florida law that § 48.193(1)(g) governed every transaction falling within its literal terms, there could be no objection to a stipulation that merely recognized this established construction. But the Florida Supreme Court has not ruled on the breadth of § 48.193(1)(g), and several state appellate courts have held that the provision extends only to the limits of the Due Process Clause. See, e.g., Scordilis v. Drobnicki, 443 So.2d 411, 412-414 (Fla.App.1984); Lakewood Pipe of Texas, Inc. v. Rubaii, 379 So.2d 475, 477 (Fla.App.1979), appeal dism'd, 383 So.2d 1201 (Fla.1980); Osborn v. University Society, Inc., 378 So.2d 873, 874 (Fla.App.1979). If § 48.193(1)(g) is construed and applied in accordance with due process limitations as a matter of state law, then an appeal is improper because the statute cannot be "invalid as repugnant to the Constitution ... of the United States," 28 U.S.C. § 1254(2), since its boundaries are defined by, rather than being in excess of, the Due Process Clause. See, e.g., Calder v. Jones, supra, 465 U.S., at 787-788, n. 7, 104 S.Ct., at 1486, n. 7; Kulko v. California Superior Court, 436 U.S. 84, 90, and n. 4, 98 S.Ct. 1690, 1695-1696, and n. 4, 56 L.Ed.2d 132 (1978). Section II A 141 [3][4] The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful "contacts, ties, or relations." International Shoe Co. v. Washington, 326 U.S., at 319, 66 S.Ct., at 160. [FN13] By requiring that individuals have "fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign," Shaffer v. Heitner, 433 U.S. 186, 218, 97 S.Ct. 2569, 2587, 53 L.Ed.2d 683 (1977) (STEVENS, J., concurring in judgment), the Due Process Clause "gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit," World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980). FN13. Although this protection operates to restrict state power, it "must be seen as ultimately a function of the individual liberty interest preserved by the Due Process Clause" rather than as a function "of federalism concerns." Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702-703, n. 10, 102 S.Ct. 2099, 2104- 2105, n. 10, 72 L.Ed.2d 492 (1982). [5][6][7] Where a forum seeks to assert specific jurisdiction over an out- of-state defendant who has not consented to suit there, [FN14] this "fair warning" requirement is satisfied if the defendant has "purposefully directed" his activities at residents of the forum, Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104 S.Ct. 1473, 1478, 79 L.Ed.2d 790 (1984), and the litigation results from alleged injuries that "arise out of or relate to" those activities, Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984). [FN15] Thus "[t]he forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State" and those products subsequently injure forum consumers. World-Wide Volkswagen Corp. v. Woodson, supra, 444 U.S., at 297- 298, 100 S.Ct., at 567-568. Similarly, a publisher who distributes magazines in a distant State may fairly be held accountable in that forum for damages resulting there from an allegedly defamatory story. Keeton v. Hustler Magazine, Inc., supra; see also Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984) (suit against author and editor). And with respect to interstate contractual obligations, we have emphasized that parties who "reach out beyond one state and create continuing relationships and obligations with citizens of another state" are subject to regulation and sanctions in the other State for the consequences of their activities. Travelers Health Assn. v. Virginia, 339 U.S. 643, 647, 70 S.Ct. 927, 929, 94 L.Ed. 1154 (1950). See also McGee v. International Life Insurance Co., 355 U.S. 220, 222-223, 78 S.Ct. 199, 200-201, 2 L.Ed.2d 223 (1957). FN14. We have noted that, because the personal jurisdiction requirement is a waivable right, there are a "variety of legal arrangements" by which a litigant may give "express or implied consent to the personal jurisdiction of the court." Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, supra, at 703, 102 S.Ct., at 2105. For example, particularly in the commercial context, parties frequently stipulate in advance to submit their controversies for resolution within a particular jurisdiction. See National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 84 S.Ct. 411, 11 L.Ed.2d 354 (1964). Where such forum-selection provisions have been obtained through "freely negotiated" agreements and are 142 not "unreasonable and unjust," The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 1916, 32 L.Ed.2d 513 (1972), their enforcement does not offend due process. FN15. "Specific" jurisdiction contrasts with "general" jurisdiction, pursuant to which "a State exercises personal jurisdiction over a defendant in a suit not arising out of or related to the defendant's contacts with the forum." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S., at 414, n. 9, 104 S.Ct., at 1872, n. 9; see also Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952). [8] We have noted several reasons why a forum legitimately may exercise personal jurisdiction over a nonresident who "purposefully directs" his activities toward forum residents. A State generally has a "manifest interest" in providing its residents with a convenient forum for redressing injuries inflicted by out-of-state actors. Id., at 223, 78 S.Ct., at 201; see also Keeton v. Hustler Magazine, Inc., supra, 465 U.S., at 776, 104 S.Ct., at 1479. Moreover, where individuals "purposefully derive benefit" from their interstate activities, Kulko v. California Superior Court, 436 U.S. 84, 96, 98 S.Ct. 1690, 1699, 56 L.Ed.2d 132 (1978), it may well be unfair to allow them to escape having to account in other States for consequences that arise proximately from such activities; the Due Process Clause may not readily be wielded as a territorial shield to avoid interstate obligations that have been voluntarily assumed. And because "modern transportation and communications have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity," it usually will not be unfair to subject him to the burdens of litigating in another forum for disputes relating to such activity. McGee v. International Life Insurance Co., supra, 355 U.S., at 223, 78 S.Ct., at 201. [9][10] Notwithstanding these considerations, the constitutional touchstone remains whether the defendant purposefully established "minimum contacts" in the forum State. International Shoe Co. v. Washington, supra, 326 U.S., at 316, 66 S.Ct., at 158. Although it has been argued that foreseeability of causing injury in another State should be sufficient to establish such contacts there when policy considerations so require, [FN16] the Court has consistently held that this kind of foreseeability is not a "sufficient benchmark" for exercising personal jurisdiction. World-Wide Volkswagen Corp. v. Woodson, 444 U.S., at 295, 100 S.Ct., at 566. Instead, "the foreseeability that is critical to due process analysis ... is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." Id., at 297, 100 S.Ct., at 567. In defining when it is that a potential defendant should "reasonably anticipate" out-of- state litigation, the Court frequently has drawn from the reasoning of Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239-1240, 2 L.Ed.2d 1283 (1958): FN16. See, e.g., World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 299, 100 S.Ct. 559, 568, 62 L.Ed.2d 490 (1980) (BRENNAN, J., dissenting); Shaffer v. Heitner, 433 U.S. 186, 219, 97 S.Ct. 2569, 2588, 53 L.Ed.2d 683 (1977) (BRENNAN, J., concurring in part and dissenting in part). "The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. The 143 application of that rule will vary with the quality and nature of the defendant's activity, but it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." [11][12][13] This "purposeful availment" requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of "random," "fortuitous," or "attenuated" contacts, Keeton v. Hustler Magazine, Inc., 465 U.S., at 774, 104 S.Ct., at 1478; WorldWide Volkswagen Corp. v. Woodson, supra, 444 U.S., at 299, 100 S.Ct., at 568, or of the "unilateral activity of another party or a third person," Helicopteros Nacionales de Colombia, S.A. v. Hall, supra, 466 U.S., at 417, 104 S.Ct., at 1873. [FN17] Jurisdiction is proper, however, where the contacts proximately result from actions by the defendant himself that create a "substantial connection" with the forum State. McGee v. International Life Insurance Co., supra, 355 U.S., at 223, 78 S.Ct., at 201; see also Kulko v. California Superior Court, supra, 436 U.S., at 94, n. 7, 98 S.Ct., at 1698, n. 7. [FN18] Thus where the defendant "deliberately" has engaged in significant activities within a State, Keeton v. Hustler Magazine, Inc., supra, 465 U.S., at 781, 104 S.Ct., at 1481, or has created "continuing obligations" between himself and residents of the forum, Travelers Health Assn. v. Virginia, 339 U.S., at 648, 70 S.Ct., at 929, he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by "the benefits and protections" of the forum's laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well. FN17. Applying this principle, the Court has held that the Due Process Clause forbids the exercise of personal jurisdiction over an out-of-state automobile distributor whose only tie to the forum resulted from a customer's decision to drive there, World-Wide Volkswagen Corp. v. Woodson, supra; over a divorced husband sued for child-support payments whose only affiliation with the forum was created by his former spouse's decision to settle there, Kulko v. California Superior Court, 436 U.S. 84, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978); and over a trustee whose only connection with the forum resulted from the settlor's decision to exercise her power of appointment there, Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). In such instances, the defendant has had no "clear notice that it is subject to suit" in the forum and thus no opportunity to "alleviate the risk of burdensome litigation" there. World-Wide Volkswagen Corp. v. Woodson, supra, 444 U.S., at 297, 100 S.Ct., at 567. FN18. So long as it creates a "substantial connection" with the forum, even a single act can support jurisdiction. McGee v. International Life Insurance Co., 355 U.S., at 223, 78 S.Ct., at 201. The Court has noted, however, that "some single or occasional acts" related to the forum may not be sufficient to establish jurisdiction if "their nature and quality and the circumstances of their commission" create only an "attenuated" affiliation with the forum. International Shoe Co. v. Washington, 326 U.S. 310, 318, 66 S.Ct. 154, 159, 90 L.Ed. 95 (1945); World-Wide Volkswagen Corp. v. Woodson, 444 U.S., at 299, 100 S.Ct., at 568. This distinction derives from the belief that, with respect to this category of "isolated" acts, id., at 297, 100 S.Ct., at 567, the reasonable foreseeability of litigation in the forum is substantially diminished. 144 [14][15] Jurisdiction in these circumstances may not be avoided merely because the defendant did not physically enter the forum State. Although territorial presence frequently will enhance a potential defendant's affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor's efforts are "purposefully directed" toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there. Keeton v. Hustler Magazine, Inc., supra, 465 U.S., at 774-775, 104 S.Ct., at 1478; see also Calder v. Jones, 465 U.S., at 778- 790, 104 S.Ct., at 1486-1487; McGee v. International Life Insurance Co., 355 U.S., at 222-223, 78 S.Ct., at 200-201. Cf. Hoopeston Canning Co. v. Cullen, 318 U.S. 313, 317, 63 S.Ct. 602, 605, 87 L.Ed. 777 (1943). [16][17][18] Once it has been decided that a defendant purposefully established minimum contacts within the forum State, these contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with "fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S., at 320, 66 S.Ct., at 160. Thus courts in "appropriate case[s]" may evaluate "the burden on the defendant," "the forum State's interest in adjudicating the dispute," "the plaintiff's interest in obtaining convenient and effective relief," "the interstate judicial system's interest in obtaining the most efficient resolution of controversies," and the "shared interest of the several States in furthering fundamental substantive social policies." World-Wide Volkswagen Corp. v. Woodson, supra, 444 U.S., at 292, 100 S.Ct., at 564. These considerations sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required. See, e.g., Keeton v. Hustler Magazine, Inc., supra, 465 U.S., at 780, 104 S.Ct., at 1481; Calder v. Jones, supra, 465 U.S., at 788-789, 104 S.Ct., at 1486-1487; McGee v. International Life Insurance Co., supra, 355 U.S., at 223-224, 78 S.Ct., at 201-202. On the other hand, where a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable. Most such considerations usually may be accommodated through means short of finding jurisdiction unconstitutional. For example, the potential clash of the forum's law with the "fundamental substantive social policies" of another State may be accommodated through application of the forum's choice-of-law rules. [FN19] Similarly, a defendant claiming substantial inconvenience may seek a change of venue. [FN20] Nevertheless, minimum requirements inherent in the concept of "fair play and substantial justice" may defeat the reasonableness of jurisdiction even if the defendant has purposefully engaged in forum activities. World-Wide Volkswagen Corp. v. Woodson, supra, 444 U.S., at 292, 100 S.Ct., at 564; see also Restatement (Second) of Conflict of Laws §§ 36-37 (1971). As we previously have noted, jurisdictional rules may not be employed in such a way as to make litigation "so gravely difficult and inconvenient" that a party unfairly is at a "severe disadvantage" in comparison to his opponent. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 18, 92 S.Ct. 1907, 1917, 32 L.Ed.2d 513 (1972) (re forum-selection provisions); McGee v. International Life Insurance Co., supra, 355 U.S., at 223-224, 78 S.Ct., at 201-202. FN19. See Allstate Insurance Co. v. Hague, 449 U.S. 302, 307-313, 101 S.Ct. 145 633, 637-640, 66 L.Ed.2d 521 (1981) (opinion of BRENNAN, J.). See generally Restatement (Second) of Conflict of Laws §§ 6, 9 (1971). FN20. See, e.g., 28 U.S.C. § 1404(a) ("For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought"). This provision embodies in an expanded version the common-law doctrine of forum non conveniens, under which a court in appropriate circumstances may decline to exercise its jurisdiction in the interest of the "easy, expeditious and inexpensive" resolution of a controversy in another forum. See Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-509, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947). B (1) [19][20] Applying these principles to the case at hand, we believe there is substantial record evidence supporting the District Court's conclusion that the assertion of personal jurisdiction over Rudzewicz in Florida for the alleged breach of his franchise agreement did not offend due process. At the outset, we note a continued division among lower courts respecting whether and to what extent a contract can constitute a "contact" for purposes of due process analysis. [FN21] If the question is whether an individual's contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's home forum, we believe the answer clearly is that it cannot. The Court long ago rejected the notion that personal jurisdiction might turn on "mechanical" tests, International Shoe Co. v. Washington, supra, 326 U.S., at 319, 66 S.Ct., at 159, or on "conceptualistic ... theories of the place of contracting or of performance," Hoopeston Canning Co. v. Cullen, 318 U.S., at 316, 63 S.Ct., at 604. Instead, we have emphasized the need for a "highly realistic" approach that recognizes that a "contract" is "ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction." Id., at 316-317, 63 S.Ct., at 604- 605. It is these factors--prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing--that must be evaluated in determining whether the defendant purposefully established minimum contacts within the forum. FN21. See, e.g., Lakeside Bridge & Steel Co. v. Mountain State Construction Co., 445 U.S. 907, 909-910, 100 S.Ct. 1087, 1088-1089, 63 L.Ed.2d 325 (1980) (WHITE, J., dissenting from denial of certiorari) (collecting cases); Brewer, Jurisdiction in Single Contract Cases, 6 U.Ark. Little Rock L.J. 1, 7-11, 13 (1983); Note, Long-Arm Jurisdiction in Commercial Litigation: When is a Contract a Contact?, 61 B.U.L.Rev. 375, 384-388 (1981). [21] In this case, no physical ties to Florida can be attributed to Rudzewicz other than MacShara's brief training course in Miami. [FN22] Rudzewicz did not maintain offices in Florida and, for all that appears from the record, has never even visited there. Yet this franchise dispute grew directly out of "a contract which had a substantial connection with that State." McGee v. International Life Insurance Co., 355 U.S., at 223, 78 S.Ct., at 201 (emphasis added). Eschewing the option of operating an independent local enterprise, Rudzewicz deliberately "reach[ed] out beyond" Michigan and negotiated with a Florida corporation for the purchase of a long- term franchise and the manifold 146 benefits that would derive from affiliation with a nationwide organization. Travelers Health Assn. v. Virginia, 339 U.S., at 647, 70 S.Ct., at 929. Upon approval, he entered into a carefully structured 20-year relationship that envisioned continuing and widereaching contacts with Burger King in Florida. In light of Rudzewicz' voluntary acceptance of the long-term and exacting regulation of his business from Burger King's Miami headquarters, the "quality and nature" of his relationship to the company in Florida can in no sense be viewed as "random," "fortuitous," or "attenuated." Hanson v. Denckla, 357 U.S., at 253, 78 S.Ct., at 1239; Keeton v. Hustler Magazine, Inc., 465 U.S., at 774, 104 S.Ct., at 1478; World-Wide Volkswagen Corp. v. Woodson, 444 U.S., at 299, 100 S.Ct., at 568. Rudzewicz' refusal to make the contractually required payments in Miami, and his continued use of Burger King's trademarks and confidential business information after his termination, caused foreseeable injuries to the corporation in Florida. For these reasons it was, at the very least, presumptively reasonable for Rudzewicz to be called to account there for such injuries. FN22. The Eleventh Circuit held that MacShara's presence in Florida was irrelevant to the question of Rudzewicz's minimum contacts with that forum, reasoning that "Rudzewicz and MacShara never formed a partnership" and "signed the agreements in their individual capacities." 724 F.2d, at 1513, n. 14. The two did jointly form a corporation through which they were seeking to conduct the franchise, however. See n. 6, supra. They were required to decide which one of them would travel to Florida to satisfy the training requirements so that they could commence business, and Rudzewicz participated in the decision that MacShara would go there. We have previously noted that when commercial activities are "carried on in behalf of" an out-of-state party those activities may sometimes be ascribed to the party, International Shoe Co. v. Washington, 326 U.S. 310, 320, 66 S.Ct. 154, 160, 90 L.Ed. 95 (1945), at least where he is a "primary participan[t]" in the enterprise and has acted purposefully in directing those activities, Calder v. Jones, 465 U.S., at 790, 104 S.Ct., at 1487. Because MacShara's matriculation at Burger King University is not pivotal to the disposition of this case, we need not resolve the permissible bounds of such attribution. The Court of Appeals concluded, however, that in light of the supervision emanating from Burger King's district office in Birmingham, Rudzewicz reasonably believed that "the Michigan office was for all intents and purposes the embodiment of Burger King" and that he therefore had no "reason to anticipate a Burger King suit outside of Michigan." 724 F.2d, at 1511. See also post, at 2190 (STEVENS, J., dissenting). This reasoning overlooks substantial record evidence indicating that Rudzewicz most certainly knew that he was affiliating himself with an enterprise based primarily in Florida. The contract documents themselves emphasize that Burger King's operations are conducted and supervised from the Miami headquarters, that all relevant notices and payments must be sent there, and that the agreements were made in and enforced from Miami. See n. 5, supra. Moreover, the parties' actual course of dealing repeatedly confirmed that decisionmaking authority was vested in the Miami headquarters and that the district office served largely as an intermediate link between the headquarters and the franchisees. When problems arose over building design, site-development fees, rent computation, and the defaulted payments, Rudzewicz and MacShara learned that the Michigan office was powerless to resolve their disputes and could only channel their communications to Miami. Throughout these disputes, the Miami headquarters and the 147 Michigan franchisees carried on a continuous course of direct communications by mail and by telephone, and it was the Miami headquarters that made the key negotiating decisions out of which the instant litigation arose. See nn. 7, 9, supra. [22][23] Moreover, we believe the Court of Appeals gave insufficient weight to provisions in the various franchise documents providing that all disputes would be governed by Florida law. The franchise agreement, for example, stated: "This Agreement shall become valid when executed and accepted by BKC at Miami, Florida; it shall be deemed made and entered into in the State of Florida and shall be governed and construed under and in accordance with the laws of the State of Florida. The choice of law designation does not require that all suits concerning this Agreement be filed in Florida." App. 72. See also n. 5, supra. The Court of Appeals reasoned that choice-of-law provisions are irrelevant to the question of personal jurisdiction, relying on Hanson v. Denckla for the proposition that "the center of gravity for choice-of-law purposes does not necessarily confer the sovereign prerogative to assert jurisdiction." 724 F.2d, at 1511-1512, n. 10, citing 357 U.S., at 254, 78 S.Ct., at 1240. This reasoning misperceives the import of the quoted proposition. The Court in Hanson and subsequent cases has emphasized that choice-of-law analysis --which focuses on all elements of a transaction, and not simply on the defendant's conduct--is distinct from minimum-contacts jurisdictional analysis-which focuses at the threshold solely on the defendant's purposeful connection to the forum. [FN23] Nothing in our cases, however, suggests that a choice-of-law provision should be ignored in considering whether a defendant has "purposefully invoked the benefits and protections of a State's laws" for jurisdictional purposes. Although such a provision standing alone would be insufficient to confer jurisdiction, we believe that, when combined with the 20-year interdependent relationship Rudzewicz established with Burger King's Miami headquarters, it reinforced his deliberate affiliation with the forum State and the reasonable foreseeability of possible litigation there. As Judge Johnson argued in his dissent below, Rudzewicz "purposefully availed himself of the benefits and protections of Florida's laws" by entering into contracts expressly providing that those laws would govern franchise disputes. 724 F.2d, at 1513. [FN24] FN23. Hanson v. Denckla, 357 U.S., at 253-254, 78 S.Ct., at 1239-1240. See also Keeton v. Hustler Magazine, Inc., 465 U.S., at 778, 104 S.Ct., at 1480; Kulko v. California Superior Court, 436 U.S., at 98, 98 S.Ct., at 1700; Shaffer v. Heitner, 433 U.S., at 215, 97 S.Ct., at 2585. FN24. In addition, the franchise agreement's disclaimer that the "choice of law designation does not require that all suits concerning this Agreement be filed in Florida," App. 72 (emphasis added), reasonably should have suggested to Rudzewicz that by negative implication such suits could be filed there. The lease also provided for binding arbitration in Miami of certain condemnation disputes, id., at 113, and Rudzewicz conceded the validity of this provision at oral argument, Tr. of Oral Arg. 37. Although it does not govern the instant dispute, this provision also should have made it apparent to the franchisees that they were dealing directly with the Miami headquarters and that the Birmingham district office was not "for all intents and purposes the embodiment of Burger King." 724 F.2d, at 1511. 148 (2) [24][25] Nor has Rudzewicz pointed to other factors that can be said persuasively to outweigh the considerations discussed above and to establish the unconstitutionality of Florida's assertion of jurisdiction. We cannot conclude that Florida had no "legitimate interest in holding [Rudzewicz] answerable on a claim related to" the contacts he had established in that State. Keeton v. Hustler Magazine, Inc., 465 U.S., at 776, 104 S.Ct., at 1479; see also McGee v. International Life Insurance Co., 355 U.S., at 223, 78 S.Ct., at 201 (noting that State frequently will have a "manifest interest in providing effective means of redress for its residents"). [FN25] Moreover, although Rudzewicz has argued at some length that Michigan's Franchise Investment Law, Mich.Comp.Laws § 445.1501 et seq. (1979), governs many aspects of this franchise relationship, he has not demonstrated how Michigan's acknowledged interest might possibly render jurisdiction in Florida unconstitutional. [FN26] Finally, the Court of Appeals' assertion that the Florida litigation "severely impaired [Rudzewicz'] ability to call Michigan witnesses who might be essential to his defense and counterclaim," 724 F.2d, at 15121513, is wholly without support in the record. [FN27] And even to the extent that it is inconvenient for a party who has minimum contacts with a forum to litigate there, such considerations most frequently can be accommodated through a change of venue. See n. 20, supra. Although the Court has suggested that inconvenience may at some point become so substantial as to achieve constitutional magnitude, McGee v. International Life Insurance Co., supra, 355 U.S., at 223, 78 S.Ct., at 201, this is not such a case. FN25. Complaining that "when Burger King is the plaintiff, you won't 'have it your way' because it sues all franchisees in Miami," Brief for Appellee 19, Rudzewicz contends that Florida's interest in providing a convenient forum is negligible given the company's size and ability to conduct litigation anywhere in the country. We disagree. Absent compelling considerations, cf. McGee v. International Life Insurance Co., 355 U.S., at 223, 78 S.Ct., at 201, a defendant who has purposefully derived commercial benefit from his affiliations in a forum may not defeat jurisdiction there simply because of his adversary's greater net wealth. FN26. Rudzewicz has failed to show how the District Court's exercise of jurisdiction in this case might have been at all inconsistent with Michigan's interests. To the contrary, the court found that Burger King had fully complied with Michigan law, App. 159, and there is nothing in Michigan's franchise Act suggesting that Michigan would attempt to assert exclusive jurisdiction to resolve franchise disputes affecting its residents. In any event, minimumcontacts analysis presupposes that two or more States may be interested in the outcome of a dispute, and the process of resolving potentially conflicting "fundamental substantive social policies," World-Wide Volkswagen Corp. v. Woodson, 444 U.S., at 292, 100 S.Ct., at 564, can usually be accommodated through choice-of-law rules rather than through outright preclusion of jurisdiction in one forum. See n. 19, supra. FN27. The only arguable instance of trial inconvenience occurred when Rudzewicz had difficulty in authenticating some corporate records; the court offered him as much time as would be necessary to secure the requisite authentication from the Birmingham district office, and Burger King ultimately 149 stipulated to their authenticity rather than delay the trial. See 7 Record 574-575, 578-579, 582, 598-599. [26] The Court of Appeals also concluded, however, that the parties' dealings involved "a characteristic disparity of bargaining power" and "elements of surprise," and that Rudzewicz "lacked fair notice" of the potential for litigation in Florida because the contractual provisions suggesting to the contrary were merely "boilerplate declarations in a lengthy printed contract." 724 F.2d, at 1511-1512, and n. 10. See also post, at 2190 (STEVENS, J., dissenting). Rudzewicz presented many of these arguments to the District Court, contending that Burger King was guilty of misrepresentation, fraud, and duress; that it gave insufficient notice in its dealings with him; and that the contract was one of adhesion. See 4 Record 687-691. After a 3-day bench trial, the District Court found that Burger King had made no misrepresentations, that Rudzewicz and MacShara "were and are experienced and sophisticated businessmen," and that "at no time" did they "ac [t] under economic duress or disadvantage imposed by" Burger King. App. 157- 158. See also 7 Record 648-649. Federal Rule of Civil Procedure 52(a) requires that "[f]indings of fact shall not be set aside unless clearly erroneous," and neither Rudzewicz nor the Court of Appeals has pointed to record evidence that would support a "definite and firm conviction" that the District Court's findings are mistaken. United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948). See also Anderson v. Bessemer City, 470 U.S. 564, 573-576, 105 S.Ct. 1504, ---- - ----, 84 L.Ed.2d 518 (1985). To the contrary, Rudzewicz was represented by counsel throughout these complex transactions and, as Judge Johnson observed in dissent below, was himself an experienced accountant "who for five months conducted negotiations with Burger King over the terms of the franchise and lease agreements, and who obligated himself personally to contracts requiring over time payments that exceeded $1 million." 724 F.2d, at 1514. Rudzewicz was able to secure a modest reduction in rent and other concessions from Miami headquarters, see nn. 8, 9, supra; moreover, to the extent that Burger King's terms were inflexible, Rudzewicz presumably decided that the advantages of affiliating with a national organization provided sufficient commercial benefits to offset the detriments. [FN28] FN28. We do not mean to suggest that the jurisdictional outcome will always be the same in franchise cases. Some franchises may be primarily intrastate in character or involve different decisionmaking structures, such that a franchisee should not reasonably anticipate out-of-state litigation. Moreover, commentators have argued that franchise relationships may sometimes involve unfair business practices in their inception and operation. See H. Brown, Franchising Realities and Remedies 4-5 (2d ed. 1978). For these reasons, we reject Burger King's suggestion for "a general rule, or at least a presumption, that participation in an interstate franchise relationship" represents consent to the jurisdiction of the franchisor's principal place of business. Brief for Appellant 46. Section III [27] Notwithstanding these considerations, the Court of Appeals apparently believed that it was necessary to reject jurisdiction in this case as a prophylactic measure, reasoning that an affirmance of the District Court's judgment would result in the exercise of jurisdiction over "out-of-state consumers to collect payments due on modest personal purchases" and would "sow the seeds of default judgments against franchisees owing 150 smaller debts." 724 F.2d, at 1511. We share the Court of Appeals' broader concerns and therefore reject any talismanic jurisdictional formulas; "the facts of each case must [always] be weighed" in determining whether personal jurisdiction would comport with "fair play and substantial justice." Kulko v. California Superior Court, 436 U.S., at 92, 98 S.Ct., at 1696-1697. [FN29] The "quality and nature" of an interstate transaction may sometimes be so "random," "fortuitous," or "attenuated" [FN30] that it cannot fairly be said that the potential defendant "should reasonably anticipate being haled into court" in another jurisdiction. World-Wide Volkswagen Corp. v. Woodson, 444 U.S., at 297, 100 S.Ct., at 567; see also n. 18, supra. We also have emphasized that jurisdiction may not be grounded on a contract whose terms have been obtained through "fraud, undue influence, or overweening bargaining power" and whose application would render litigation "so gravely difficult and inconvenient that [a party] will for all practical purposes be deprived of his day in court." The Bremen v. Zapata Off-Shore Co., 407 U.S., at 12, 18, 92 S.Ct., at 1914, 1917. Cf. Fuentes v. Shevin, 407 U.S. 67, 94-96, 92 S.Ct. 1983, 2001-2002, 32 L.Ed.2d 556 (1972); National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 329, 84 S.Ct. 411, 421, 11 L.Ed.2d 354 (1964) (BLACK, J., dissenting) (jurisdictional rules may not be employed against small consumers so as to "crippl[e] their defense"). Just as the Due Process Clause allows flexibility in ensuring that commercial actors are not effectively "judgment proof" for the consequences of obligations they voluntarily assume in other States, McGee v. International Life Insurance Co., 355 U.S., at 223, 78 S.Ct., at 201, so too does it prevent rules that would unfairly enable them to obtain default judgments against unwitting customers. Cf. United States v. Rumely, 345 U.S. 41, 44, 73 S.Ct. 543, 545, 97 L.Ed. 770 (1953) (courts must not be " 'blind' " to what " '[a]ll others can see and understand' "). FN29. This approach does, of course, preclude clear-cut jurisdictional rules. But any inquiry into "fair play and substantial justice" necessarily requires determinations "in which few answers will be written 'in black and white. The greys are dominant and even among them the shades are innumerable.' " Kulko v. California Superior Court, 436 U.S., at 92, 98 S.Ct., at 1697. FN30. Hanson v. Denckla, 357 U.S., at 253, 78 S.Ct., at 1239; Keeton v. Hustler Magazine, Inc., 465 U.S., at 774, 104 S.Ct., at 1478; World-Wide Volkswagen Corp. v. Woodson, 444 U.S., at 299, 100 S.Ct., at 568. For the reasons set forth above, however, these dangers are not present in the instant case. Because Rudzewicz established a substantial and continuing relationship with Burger King's Miami headquarters, received fair notice from the contract documents and the course of dealing that he might be subject to suit in Florida, and has failed to demonstrate how jurisdiction in that forum would otherwise be fundamentally unfair, we conclude that the District Court's exercise of jurisdiction pursuant to Fla.Stat. § 48.193(1)(g) (Supp.1984) did not offend due process. The judgment of the Court of Appeals is accordingly reversed, and the case is remanded for further proceedings consistent with this opinion. It is so ordered. Justice POWELL took no part in the consideration or decision of this case. 151 Justice STEVENS, with whom Justice WHITE joins, dissenting. In my opinion there is a significant element of unfairness in requiring a franchisee to defend a case of this kind in the forum chosen by the franchisor. It is undisputed that appellee maintained no place of business in Florida, that he had no employees in that State, and that he was not licensed to do business there. Appellee did not prepare his French fries, shakes, and hamburgers in Michigan, and then deliver them into the stream of commerce "with the expectation that they [would] be purchased by consumers in" Florida. Ante, at 2182. To the contrary, appellee did business only in Michigan, his business, property, and payroll taxes were payable in that State, and he sold all of his products there. Throughout the business relationship, appellee's principal contacts with appellant were with its Michigan office. Notwithstanding its disclaimer, ante, at 2185, the Court seems ultimately to rely on nothing more than standard boilerplate language contained in various documents, ante, at 2187, to establish that appellee " 'purposefully availed himself of the benefits and protections of Florida's laws.' " Id., at 2187. Such superficial analysis creates a potential for unfairness not only in negotiations between franchisors and their franchisees but, more significantly, in the resolution of the disputes that inevitably arise from time to time in such relationships. Judge Vance's opinion for the Court of Appeals for the Eleventh Circuit adequately explains why I would affirm the judgment of that court. I particularly find the following more persuasive than what this Court has written today: "Nothing in the course of negotiations gave Rudzewicz reason to anticipate a Burger King suit outside of Michigan. The only face-to-face or even oral contact Rudzewicz had with Burger King throughout months of protracted negotiations was with representatives of the Michigan office. Burger King had the Michigan office interview Rudzewicz and MacShara, appraise their application, discuss price terms, recommend the site which the defendants finally agreed to, and attend the final closing ceremony. There is no evidence that Rudzewicz ever negotiated with anyone in Miami or even sent mail there during negotiations. He maintained no staff in the state of Florida, and as far as the record reveals, he has never even visited the state. "The contracts contemplated the startup of a local Michigan restaurant whose profits would derive solely from food sales made to customers in Drayton Plains. The sale, which involved the use of an intangible trademark in Michigan and occupancy of a Burger King facility there, required no performance in the state of Florida. Under the contract, the local Michigan district office was responsible for providing all of the services due Rudzewicz, including advertising and management consultation. Supervision, moreover, emanated from that office alone. To Rudzewicz, the Michigan office was for all intents and purposes the embodiment of Burger King. He had reason to believe that his working relationship with Burger King began and ended in Michigan, not at the distant and anonymous Florida headquarters.... "Given that the office in Rudzewicz' home state conducted all of the negotiations and wholly supervised the contract, we believe that he had reason to assume that the state of the supervisory office would be the same state in which Burger King would file suit. Rudzewicz lacked fair notice that the distant corporate headquarters which insulated itself from direct dealings with him would later seek to assert jurisdiction over him in the courts of its own home state.... 152 "Just as Rudzewicz lacked notice of the possibility of suit in Florida, he was financially unprepared to meet its added costs. The franchise relationship in particular is fraught with potential for financial surprise. The device of the franchise gives local retailers the access to national trademark recognition which enables them to compete with betterfinanced, more efficient chain stores. This national affiliation, however, does not alter the fact that the typical franchise store is a local concern serving at best a neighborhood or community. Neither the revenues of a local business nor the geographical range of its market prepares the average franchise owner for the cost of distant litigation.... "The particular distribution of bargaining power in the franchise relationship further impairs the franchisee's financial preparedness. In a franchise contract, 'the franchisor normally occupies [the] dominant role'.... "We discern a characteristic disparity of bargaining power in the facts of this case. There is no indication that Rudzewicz had any latitude to negotiate a reduced rent or franchise fee in exchange for the added risk of suit in Florida. He signed a standard form contract whose terms were non-negotiable and which appeared in some respects to vary from the more favorable terms agreed to in earlier discussions. In fact, the final contract required a minimum monthly rent computed on a base far in excess of that discussed in oral negotiations. Burger King resisted price concessions, only to sue Rudzewicz far from home. In doing so, it severely impaired his ability to call Michigan witnesses who might be essential to his defense and counterclaim. "In sum, we hold that the circumstances of the Drayton Plains franchise and the negotiations which led to it left Rudzewicz bereft of reasonable notice and financially unprepared for the prospect of franchise litigation in Florida. Jurisdiction under these circumstances would offend the fundamental fairness which is the touchstone of due process." 724 F.2d 1505, 1511-1513 (1984) (footnotes omitted). Accordingly, I respectfully dissent. Anthony’s Pier 4, Inc. v. HBC Assoc. 411 MA 451 (1991) ANTHONY'S PIER FOUR, INC., et al. v. HBC ASSOCIATES et al. (and a consolidated case). 411 Mass. 451, 583 N.E.2d 806 Supreme Judicial Court of Massachusetts, Suffolk. Argued Sept. 4, 1991. Decided Dec. 30, 1991. Joel A. Kozol, Lee H. Kozol, Boston, with him, for plaintiff. 153 Gael Mahony, John A.D. Gilmore, Frances S. Cohen, Martha Born, Anita S. Lichtblau, William B. Forbush and Timothy B. Tomasi, Boston, with him, for HBC Associates et al. Francis C. Lynch, Boston, was present but did not argue, for Channel Parking & Development, Inc., et al. Before LIACOS, C.J., and ABRAMS, NOLAN, O'CONNOR and GREANEY, JJ. ABRAMS, Justice. This case arises from two agreements (agreements), dated August 1, 1983, between Anthony's Pier Four, Inc. (Anthony's), [FN1] and HBC Associates (HBC), [FN2] providing for HBC's acquisition and development of Fan Pier. [FN3] FN1. Anthony's is owned and operated by Anthony Athanas (Athanas) and members of his immediate family. Pier Four, Inc., Anthony's Hawthorne, Inc., and Boston Mariner, Inc., also are family entities. FN2. HBC was a joint venture of two corporations, HT-Boston, Inc., and Carpenter Properties, Inc. In March, 1987, Carpenter Properties was succeeded by Carpenter Fan Pier Associates Limited Partnership with FP, Inc., as its sole general partner. FN3. One, the development agreement, gives HBC the right to develop the Fan Pier site, to purchase a portion of the premises on which residential units were to be built, and to lease portions on which nonresidential units were to be built. The other, the hotel ground lease, leases part of the site to HBC for the development and operation of a hotel. The development was halted in May, 1987, as a result of a dispute between Anthony's and HBC. In January, 1988, Anthony's sued HBC. On the same day, HBC brought suit against Anthony's. Each claimed contract violations against the other (as well as other claims). The cases were consolidated for trial. After a jury-waived trial, the judge ruled that Anthony's violated the express terms of the agreements and the implied covenant of good faith and fair dealing. The judge rejected HBC's claim that Anthony's was liable to HBC under G.L. c. 93A (1990 ed.). Thereafter, there was a trial on damages. The judge ruled in favor of HBC in the sum of $42.6 million, plus postbreach expenses incurred by HBC and monies owed by Anthony's and others for the cost of joint development consultants. [FN4] Both parties appeal. FN4. The judge entered a partial final judgment against Anthony's, reserving ruling on an issue regarding how that judgment might be satisfied. See note 18 and section 10, infra. Anthony's argues that we should (1) vacate the proceedings; (2) not accord the judge's findings and rulings any deference; (3) conclude that the inconsistencies in the judge's findings and rulings preclude appellate review; (4) reject the judge's determination that there was a material breach of the express contract; (5) reject the judge's conclusion that Anthony's had violated the implied covenant of good faith and fair dealing; (6) affirm the judge's holding that Anthony's is not liable to HBC under G.L. c. 93A; (7) 154 reverse the determination on liability for evidentiary errors; (8) determine that the judge erred in using an improper measure of damages, making erroneous evidentiary rulings on damages, committing a mathematical error, and awarding postbreach expenditures; (9) determine that the judge erred in holding a number of Athanas family ventures jointly and severally liable for environmental consultants' fees; and (10) reverse the judge's partial final judgment and enter a judgment for Anthony's. HBC cross-appealed the denial of its claims for violation of G.L. c. 93A. Both sides filed applications for direct appellate review. We allowed the applications. We affirm the award of expectancy damages, postbreach rent and taxes paid by HBC to Anthony's, and consultants' fees. We set aside the award of postbreach expenditures not attributable to rent or taxes. We reverse so much of the judgment as denied G.L. c. 93A damages to HBC. We remand the matter to the trial judge for further proceedings consistent with this opinion. Facts The judge found the following facts. Fan Pier is a parcel (approximately eighteen and one half acres) of undeveloped land located in South Boston. Fan Pier abuts Pier Four to the east. HBC's development plans for Fan Pier included a high-rise hotel, office towers, luxury condominiums, and a marina. At the time that HBC was developing Fan Pier, Anthony's was developing Pier Four. Anthony's was planning a smaller but similar development on Pier Four, which was also to include a hotel, condominiums, and office and retail space. The agreements between Anthony's and HBC to develop the Fan Pier site, among other things, confer on Anthony's limited rights of approval of changes in HBC's basic development plan. [FN5] Specifically, the 1983 development agreement provides that changes in the development team and the basic development plan shall be subject to the approval of Athanas. In the agreement, "Athanas acknowledges that the [b]asic [d]evelopment [p]lan was flexible and tentative since it was prepared before extensive engineering studies of the property were made and before HBC commenced the public process of obtaining permits and approvals. Therefore, Athanas's approval of a change in the [b]asic [d]evelopment [p]lan will be required only if such change would have a materially adverse effect on the factors set forth in (i), (ii), or (iii) below [the review conditions]." The factors are: "(i) ensuring that the changes are consistent with the [b]asic [d]evelopment [p]lan as previously approved; (ii) ensuring that a hotel is located reasonably close to [Anthony's] remaining property to the extent consistent with its being a waterfront hotel, it being understood that HBC shall not be required to construct the hotel closer than Pier 2; and (iii) ensuring that the design of such hotel integrates with and is not detrimental to [Anthony's] property adjacent to the [Fan Pier site]...." FN5. The basic development plan is defined in the contract as "the preliminary site plans and preliminary massing studies for such development, showing alternative approaches to such development." The basic development plan was a general, conceptual document. It did not provide details about such specifics as internal or external designs of buildings or the flow of traffic but rather was intended to convey to Athanas basic information about the development of the site (e.g., uses). The basic development plan was submitted to and approved by Anthony's in July, 1981, with the caveat that "this approval does not apply to any off- site improvements shown on the [p]lan, and because the [p]lan does not show insufficient detail the allocation of the property between [r]esidential and [c]ommercial, this approval does not cover that aspect of the [p]lan." 155 The agreements also stipulate that "HBC shall submit a reasonable explanation" of any changes in the basic development plan. Anthony's covenants that "approval shall not be unreasonably withheld or delayed and shall be deemed given if Athanas has failed to respond with specified objections within fourteen days after receipt by Athanas of HBC's request and the requisite information." Anthony's and HBC's development efforts were cooperative, with shared consultants, coordinated planning, and joint filings for public approvals. Their goal was to develop projects which would be fully integrated and compatible with each other. Representatives of Anthony's, including Athanas himself, appeared along with HBC representatives before numerous groups--from public agencies to the Boston Globe newspaper--to promote the Fan Pier and Pier Four projects. [FN6] The Fan Pier project director met with Athanas regularly in order to keep him informed of HBC's progress and to review with him decisions HBC faced as it proceeded. [FN7] FN6. At these meetings, both HBC and Anthony's presented drawings and scale models of the projects which illustrated the integration and compatibility of the Fan Pier and Pier Four projects. Athanas publicly expressed his support and enthusiasm for the Fan Pier project at these meetings. FN7. During discussions with the HBC project director, Athanas said that, although he did not intend to start construction of Pier Four until after construction had begun on Fan Pier, he wanted the securing of basic permits for the two projects to proceed simultaneously. In 1984, HBC changed architects for the Fan Pier project. Athanas and his sons travelled to Chicago with HBC representatives to interview the new architectural firm (the second architects). The second architects began work on a new master plan for Fan Pier that fall. They met with Anthony's architects to coordinate the development of the Fan Pier and Pier Four master plans. [FN8] The second architects presented their preliminary master plan to Athanas at two meetings in November, 1984. FN8. Later, HBC hired different architects to design some of the individual Fan Pier buildings. HBC's main architectural team, the second architects, prepared guidelines for these architects in order to ensure that their individual designs conformed to the requirements of the master plan. In March, 1985, Athanas convened a meeting with the Fan Pier project director to express his concern that the Fan Pier project was moving ahead of the Pier Four project, and reiterated his desire to have the two projects proceed in tandem through the government permitting process. In response, the Fan Pier project director advised Athanas to hire a development adviser in order to ensure that the Pier Four development proceeded apace and in tandem with the Fan Pier project. A few months later, Anthony's hired such an adviser. Through the spring and summer of 1985, the second architects worked on developing a "lesser scale alternative," a refinement of their first development scheme. In the fall of 1985, HBC learned that Anthony's had, like HBC, dismissed its first architect and retained a new architectural firm. The replacement firm was instructed to prepare a new 156 master plan for the Pier Four development that would integrate with the Fan Pier plan. In late 1985 and early 1986, architects for HBC and Anthony's made a series of joint presentations of the Fan Pier and Pier Four plans to public and government agencies. In January, 1986, just before the filing for the first round of applications for governmental approvals, Athanas, his development adviser, and counsel met with HBC, its counsel, and project manager to review the Fan Pier plans in order to ensure that the plans for which public approval would be sought had the approval of Anthony's under the agreement. At the meeting, an HBC architect presented the design features of the plan, and other HBC representatives presented various development aspects of the plan, including the distribution of uses and the vehicular parking provisions for each use. HBC representatives also fielded questions about the plans. At another meeting held later that month, Anthony's counsel said that Athanas approved of the lesser scale alternative which had been discussed at the meeting. [FN9] FN9. Anthony's counsel added only one caveat to this approval: Athanas requested further information regarding the design of the pedestrian bridge at the project's easternmost point. In 1986, HBC prepared a video to show to potential Fan Pier development investors. The video included an interview with Athanas, in which he praised the second architects' design and its integration with the Pier Four design. That same year, Anthony's development adviser printed an informational brochure about the Pier Four project. The brochure, intended to enlist support for the project, was shown to potential investors and governmental and community groups. Athanas reviewed the brochure. The brochure spoke glowingly of the Fan Pier project and its integration with the Pier Four project. [FN10] FN10. In the summer of 1987, after Anthony's had formally disapproved of the project, Anthony's development adviser ran a second printing of the brochure, which continued to describe in glowing terms those aspects of the Fan Pier of which Anthony's purported to disapprove. In early 1987, Anthony's counsel, responding to HBC's request for written approval of HBC's revised development team and basic development plan, drafted a letter to HBC saying, "We see very little problem other than our concern of allocation between residential and commercial, which we reserved on approval of the original [b]asic [d]evelopment [p]lan." In the fall of 1986, Athanas and his development adviser learned that another harborfront deal had been far more lucrative for the landlord than the Fan Pier deal promised to be for Anthony's. They began to grumble about the price terms of the deal with HBC and to pressure HBC to increase the compensation to Anthony's. Initially, their demands focused on a claim that HBC was only entitled to purchase the area beneath the footprints [FN11] of the residential buildings at ground level. [FN12] This claim threatened to frustrate HBC's plan to build the underground parking, which HBC viewed as necessary to the development's ability to attract tenants. [FN13] Anthony's development adviser said that, even though HBC was not entitled to purchase more land, Anthony's would be willing to sell HBC the land lying outside the footprints for a higher price than that provided for land purchases in the original agreements. While 157 they did raise a few other financial issues, neither Anthony's nor its development adviser raised any concerns relating to the design features of the Fan Pier development at that time. FN11. "Footprint" refers to the dimensions of a building at its outermost definition. FN12. The development agreement states, in pertinent part, that HBC has the right to purchase "the portion of the [r]esidential [d]evelopment necessary or desirable for the building footprints (plus areas and easements directly and exclusively related thereto)." The development agreement also provides that "[i]f HBC purchases the [r]esidential [d]evelopment ... Athanas shall execute and deliver to HBC a quit claim deed in the form attached hereto as Exhibit C." The form of deed expressly states that parking facilities are included. FN13. HBC had presented a plan to Athanas and his development adviser in late 1985 and early 1986 which included the underground garage area (extending beyond the footprints) HBC intended to purchase. No objection was raised at that time. At a December meeting between the parties, Anthony's escalated its demands. On December 30, one of Anthony's attorneys called one of HBC's attorneys with more demands, stating that Athanas "was very unhappy with the deal that he had made back in 1983." At a January 23 meeting convened to discuss the outstanding issues, Anthony's did not express any objections to any design feature of the Fan Pier plans. At a mid-February meeting, Anthony's representatives complained about the lease that HBC had negotiated with a law firm that was to be the anchor tenant in the Fan Pier commercial real estate. At least as early as February 17, 1987, Anthony's retained a new law firm. They were retained, from the outset, to assist Anthony's in its efforts to alter the terms of the original agreements. On February 25, Anthony's development adviser wrote a "ground lease issues" list in which she identified the "Goal" as obtaining "market value for everything." She defined market value as "$4 million per acre, or $40 per [Floor/Area Ratio] office square foot" (far more than HBC was obligated to pay under the agreements). On the same day she drafted what she referred to as the "big red flag letter," so named because it was intended to attract attention. The main points of that letter were included in a letter sent the next day to HBC by Anthony's new attorneys. The letter identified as the "most serious questions" Anthony's compensation under the agreement and the sale of land to HBC in connection with the residential real estate. After receiving this letter, HBC representatives met with Athanas to discuss the issue. At that meeting, Athanas said, among other things, "[He] made a lousy deal, and [he] need[ed] more money;" the "whole list of issues was really only about money and that he had to get more money to be satisifed;" and that "his kids were only going to get a lousy $750,000 a year out of [the] arrangement." At a meeting the next day, Athanas declared, "We have no deal." On March 2, 1987, HBC responded to Anthony's letter of February 26 by communicating its desire "to undertake immediately a good faith effort to discuss [Anthony's] concerns." At a March 4 meeting, Anthony's development adviser said that certain "physical, economic and timing changes," which, she asserted, had occurred 158 since the agreements had been signed in 1983, "warranted" Pier Four's position that HBC had to "renegotiate" its terms. Athanas again complained of being undercompensated under the agreements. Anthony's representatives still had not objected to any features of the Fan Pier design plans as of this meeting. On March 18, Anthony's attorney wrote to HBC's attorney asking him to "clarify" the "question of approval by [his] client of the basic development plan," stating that his "records [were] not clear on this point, so that [he was] unable to conclude whether or not the approval was given and, if it has, of what specific plan." On March 30, the attorney followed up his request with a telephone call, stating that he had been unable to find any written approval of the Fan Pier plan in the file that Anthony's former attorneys had turned over to him. HBC's attorney responded by saying that there had been no formal, written approval, but that Athanas, his family members, and their representatives had expressed their approval of the project throughout the process and on more than one public occasion. The HBC lawyer also expressed his surprise that Anthony's lawyer had questions about approval of the plans at such a late stage. Three days later, Anthony's attorney wrote to the HBC attorney: "As you know, on what we understand is the existing record, our position is that there has been no approval of the current development plan, which is, among other things, inconsistent with my clients' economic expectations." This was the first time that an Anthony's representative had indicated that Anthony's did not approve of the Fan Pier development plans. In its May 18 response, HBC stated that it believed that no approval by Athanas of HBC's development plan (as it existed at that time) was required, because none of the changes in that plan materially, adversely affected the "review conditions." Nevertheless, HBC asked that Anthony's, in light of its letter, formally approve the current Fan Pier development plans. Only with such approval, HBC felt, could it continue to seek investment partners and government permits and approvals. Ten days later, having received no response from Anthony's, one of the HBC principals arranged to meet with Athanas. At that meeting Athanas said, "This is not about approval of the plan. This is about money. After you get the letter, let's sit down and we will talk about it." On May 29, Anthony's officially notified HBC by letter that its development plans for Fan Pier had been disapproved. The letter was signed by Athanas and said, "My view is that such approval is needed, that it has never been requested until now, and that it has never been given." In his letter, Athanas asserted that HBC had never provided him with an explanation of changes in the plan, and that he therefore was unable "to evaluate the effect of the change on [his] interests." [FN14] FN14. The specific features Athanas complained of were: vehicular and pedestrian access, the eastern elevation of one of the buildings, the hotel truck entrance, the corner of the hotel closest to the connection to Pier Four, and the design for the hotel tower. This was the first time Athanas had voiced these complaints to HBC. When HBC representatives called Athanas a few days later, Athanas told them that HBC had a "moral obligation" to pay him more, and that they "had plenty of room in [their] deal to pay [him] more money. That is why the letter was sent." When an HBC 159 representative called Athanas's son, Anthony Athanas, Jr., to see if the deadlock could be broken, Athanas, Jr., responded, "I'd rather look out of my window on nothing than on a lousy deal." In response to Anthony's disapproval of the Fan Pier plans, HBC suspended its efforts to secure approval from various governmental agencies necessary to complete the project and stopped work on the project. It continued, however, to pay rent and property taxes and spent over two million dollars on consulting fees. It did not make public Anthony's disapproval, hoping to resolve matters and proceed with the project. On January 19, 1988, HBC and Anthony's brought suit against each other. [FN15] HBC sought declaratory relief and damages for breach of contract and breach of the implied covenant of good faith and fair dealing, as well as restitution, specific performance and G.L. c. 93A damages. Anthony's sought declaratory relief and damages for the breach by HBC of its contractual duty to proceed expeditiously with the development, [FN16] and of its covenant of good faith and fair dealing, as well as G.L. c. 93A damages. The cases were consolidated for trial. The trial was bifurcated into phases on liability and damages. FN15. On the same day, Anthony's conveyed record title in Fan Pier to the Fan Yards Nominee Trust. Athanas's four sons are the trustees of the Fan Yards Nominee Trust. Channel Parking & Development, Inc., is general partner of the Fan Yards Partnership. Boston Mariner is a company incorporated in 1985 to advise the Athanas companies and Athanas family in matters relating to the Pier Four and Fan Pier projects. Pier Four, Inc., is another Athanas family entity. At the time that HBC and Anthony's entered into the agreements, Pier Four, Inc., owned Pier Four. Later, Pier Four, Inc., was merged into Anthony's Hawthorne, Inc. Anthony's Hawthorne, Inc., also owned and controlled by the Athanas family, owns Pier Four. These parties (Fan Yards parties) filed briefs addressing only issues relevant to the January 19, 1988, conveyance. See sections 9 and 10, infra. FN16. HBC "covenant[ed with Anthony's] to proceed expeditiously with the [h]otel [d]evelopment (subject only to obtaining the requisite [p]ermits and [a]pprovals) including seeking financing and [p]ermits and [a]pprovals in normal sequence for projects of this type." The first occasion on which Anthony's complained of HBC's alleged failure to "proceed expeditiously" was in an amended complaint submitted after it had received HBC's complaint. In the phase I (liability) trial, the judge ruled that Anthony's purported disapproval of HBC's development plan was a breach of both the express terms of the agreements and the implied covenant of good faith and fair dealing. The judge found that, from August 1, 1983, when the hotel ground lease was executed, until May 29, 1987, when Anthony's sent the disapproval letter, HBC had proceeded expeditiously in normal sequence for projects of this type. The judge denied HBC's claim for violation of G.L. c. 93A. The judge further ruled that HBC had not violated its implied covenant of good faith and fair dealing. At the conclusion of the phase II (damages) trial, the judge awarded HBC expectancy damages for breach of the agreements (and, in the alternative, reliance damages), plus 160 additional amounts for reasonable postbreach expenses incurred by HBC and for money owed to HBC by Anthony's and other Athanas entities for the cost of joint development consultants. [1] 1. Request to vacate the proceedings. During the early part of the phase I (liability) trial, the judge met separately with the principals of each side and their counsel in an effort to help the parties reach a settlement. The judge asked counsel to sign a stipulation. The stipulation states, in pertinent part, that "persons present during the mediation session who have been, are or may be witnesses in the case will not speak to the Court concerning the events about which they have testified or may testify" and that "no claims for appellate or other relief will be made based on the process itself, and ... no claim will be made that any finding of the Court is based on or affected by information the Court may receive during the mediation process." The judge approved the stipulation. [FN17] Anthony's asserts that "public policy demands the condemnation of the practice, regardless of any consent or waiver, and that a judgment following such practice must be held to be void." The short answer to this claim is that it is untimely, unfounded, and unmeritorious. In essence, Anthony's is claiming that litigants may "anticipate a favorable decision, reserving a right to impeach it or set it aside if it happens to be against them for a cause which was well known to them before or during the trial." Krattenstein v. G. Fox & Co., 155 Conn. 609, 616, 236 A.2d 466 (1965). See Timm v. Timm, 195 Conn. 202, 203205, 487 A.2d 191 (1985). No attorney and no litigant may use a "heads I win, tails you lose" strategy with a judge. FN17. Anthony's does not make a specific claim of prejudice; rather, it claims that the mediation was per se error. Anthony's says, "What effect these ex parte conferences may have had on the judge is not ascertainable." "The judicial process can hardly tolerate the practice of a litigant with knowledge of circumstances suggesting possible bias or prejudice holding back, while calling upon the court for hopefully favorable rulings, and then seeking recusal when they are not forthcoming." Franks v. Nimmo, 796 F.2d 1230, 1234-1235 (10th Cir.1986). See Polaroid Corp. v. Eastman Kodak Co., 867 F.2d 1415, 1420 (1st Cir.), cert. denied, 490 U.S. 1047, 109 S.Ct. 1956, 104 L.Ed.2d 425 (1989) ("the risk of injustice to the parties weights far more heavily on [HBC's] side of the scales; ... and the public's confidence in the judicial process ... would be more likely to be undermined if the law were to countenance a sundering of the result [almost four years] later on grounds other than the merits"). [2] 2. Deference to the judge's factual findings. Anthony's relies almost exclusively on Cormier v. Carty, 381 Mass. 234, 408 N.E.2d 860 (1980), in arguing that we should not accord the judge's findings of fact the customary deference. In Cormier, this court held that we would apply "stricter scrutiny" to findings of a judge "which fail to evidence 'a badge of personal analysis.' " Cormier, supra at 237, 408 N.E.2d 860, quoting In re Las Colinas, Inc., 426 F.2d 1005, 1010 (1st Cir.1970). At the same time, however, we noted that "the 'clearly erroneous' standard of review specified by [Mass.R.Civ.P. 52(a), 365 Mass. 816 (1974) ] is not displaced." Cormier, supra, 381 Mass. at 237, 408 N.E.2d 860. See Commonwealth v. Hawkesworth, 405 Mass. 664, 670, 543 N.E.2d 691 (1989); First Pa. Mortgage Trust v. Dorchester Sav. Bank, 395 Mass. 614, 622 n. 12, 481 N.E.2d 1132 (1985). Thus, even 161 in the event of verbatim adoption of a submission of counsel, an appellate court "carefully scrutinizes the record, but does not change the standard of review." Hawkesworth, supra, 405 Mass. at 669 n. 5, 543 N.E.2d 691, citing United States v. Marine Bancorporation, 418 U.S. 602, 615 n. 13, 94 S.Ct. 2856, 2866-67 n. 13, 41 L.Ed.2d 978 (1974). [3] The record indicates that the judge so revised HBC's proposed findings and conclusions "that it is clear that the findings are the product of his independent judgment." Cormier, supra, 381 Mass. at 238, 408 N.E.2d 860, quoting Markell v. Sidney B. Pfeifer Found., Inc., 9 Mass.App.Ct. 412, 418, 402 N.E.2d 76 (1980). Contrary to Anthony's claim, the judge did not reproduce HBC's proposed findings and conclusions verbatim. Although he adopted many of them, the judge also rejected a number of HBC's proposed findings and conclusions. In addition, the judge deleted specific language from some of HBC's submissions that he did adopt, incorporated some of Anthony's proposed findings, and drafted findings and conclusions of his own. [FN18] Anthony's claim on this issue is without merit. FN18. A review of the trial transcript confirms that the judge was engaged in the proceedings and in command of the issues. Anthony's accuses the judge, among other things, of "abdicating his judicial responsibility;" his performance, Anthony's says, "mocks the deliberative process." Anthony's accusations are unfounded and unsupported by the record. In a case that Anthony's itself describes as "bitterly contested ... with an enormous record," the judge, working with very limited resources, disposed of complex litigation in just over two years. Anthony's requested that the case be expedited, and the judge did so. The case was filed on January 19, 1988. The phase I memorandum of decision, findings of fact, rulings of law, and order was entered on April 14, 1989. The phase II memorandum of decision, findings of fact and rulings of law was entered on January 8, 1990. The judgment, memorandum of decision and order, and partial final judgment were entered on February 22, 1990. 3. Internal consistency of findings of fact and conclusions of law. Anthony's directs this court's attention to a number of the judge's findings and conclusions that it alleges are internally inconsistent. From these purported inconsistencies, Anthony's argues that the judge's findings and conclusions fail to reflect the basis of his decision and therefore preclude appellate review. This claim is without merit. [FN19] Most of the alleged inconsistencies Anthony's cites do not arise from judicial error but, rather, are the product of Anthony's disagreement with the judge's findings of fact, and his resulting interpretation of the agreements. [FN20] FN19. We conclude, infra, that the judge's ruling that Anthony's violated the implied covenant of good faith and fair dealing cannot be squared with his denial of damages under G.L. c. 93A to HBC. While this is a substantial inconsistency, it by no means renders the judge's findings and rulings unreviewable. FN20. In addition to the conflict between the judge's rulings on the implied covenant of good faith and fair dealing and G.L. c. 93A (see note 19, supra, and section 6, infra ), there are a few inconsequential inconsistencies in the judge's findings. The argument, however, that these minor oversights fatally taint a record compiled over seventy-nine days of trial including over one thousand 162 findings of fact and thirty-five rulings of law, together occupying 445 pages, may be characterized most charitably as frivolous. For example, in his first ruling of law on liability, the judge said that "any changes between HBC's BRA [m]aster [p]lan ... and the [b]asic [d]evelopment [p]lan are changes within the meaning of the 1983 [d]evelopment [a]greement." The judge prefaced his second ruling of law by saying, "To the extent that any changes between HBC's current [m]aster [p]lan ... and the [b]asic [d]evelopment [p]lan ... are changes within the meaning of the [d]evelopment [a]greement...." Anthony's argues that these two rulings are inconsistent. There is no substantial inconsistency. Similarly, in his second ruling of law on liability, the judge first concluded that the changes at issue did not have "an effect" on the review conditions and second ruled that the changes did not have a "materially adverse effect" on them. Of course, if the changes had no effect on the review conditions, they could not have had a materially adverse effect on them. [4] As an example of the alleged inconsistencies between the judge's rulings of law and his underlying findings of fact, Anthony's points to the judge's ruling that "any changes between HBC's BRA [Boston Redevelopment Authority] [m]aster [p]lan [a version of the second architects' master plan revised by the BRA and the plan in effect at the time of the breach] ... and the [b]asic [d]evelopment [p]lan are changes within the meaning of the 1983 [d]evelopment [a]greement." This ruling, Anthony's contends, is inconsistent with finding 546, in which the judge found that the same plan "is simply another 'interpretation of the narrative plan and its fundamental goals,' and as such is entirely consistent with the Basic Development Plan and a fortiori does not materially and adversely affect the three [r]eview [c]onditions in the [1983] [d]evelopment [a]greement." The judge determined that differences between HBC's BRA master plan and the basic development plan are "changes" within the meaning of the 1983 development agreement, but that not all differences or "changes" between the two plans trigger Anthony's disapproval rights because not all changes materially and adversely affect the three review conditions. [FN21] We conclude that there is no inconsistency. FN21. The review conditions appear in the text at ----, supra. Anthony's similarly argues that the judge's ruling that HBC's BRA master plan did not require Anthony's approval was inconsistent with his judgment for HBC. Anthony's argues, as it did at trial, that withholding approval that was not required cannot be a violation of the agreement. This assumes that, under the contract, Anthony's was required only to approve those changes that it might rightfully disapprove. The judge ruled, however, that the agreement provided that, where HBC sought Anthony's approval for a change, Anthony's was required to give its approval unless it rightfully could withhold it. The approval was needed to obtain both financing and needed governmental approvals and permits. The judge ruled that Anthony's failure to approve the change was therefore a violation of both the express agreement and the implied covenant of good faith and fair dealing. The purported inconsistency thus results not from judicial error but from Anthony's disagreement with the judge's findings of fact and conclusions of law. [5] Finally, Anthony's argues that the judge's ruling that the BRA master plan did not require Anthony's approval renders superfluous the judge's findings that Anthony's in 163 fact publicly approved the plan. This alleged inconsistency between the rulings of law and the findings of fact is based entirely on Anthony's interpretation of the agreements, which the judge rejected. As discussed above, Anthony's maintains that its disapproval of the BRA Master Plan could not be a breach of contract because its approval was not required. The judge found, however, that Anthony's already had publicly approved the plan. These findings form part of the factual basis for the judge's conclusion that Anthony's purported disapproval letter of May 29, 1987, was a violation of the express agreement. [6] 4. Violation of the express agreement. Under the 1983 agreements, Anthony's had the right to disapprove changes in the basic development plan only to the extent that such changes had "materially adverse effect[s]" on one of the review conditions. [FN22] See note 21, supra. The judge ruled that the changes embodied in the BRA master plan did not have a "materially adverse effect" on the review conditions. Anthony's, therefore, had no right to disapprove them. The judge further ruled that Anthony's approval of the BRA master plan had been "unreasonably withheld" in violation of its contractual duty. FN22. The review conditions were drafted so as to ensure that any subsequent changes would be consistent with the basic development plan, that a waterfront hotel would be located as near as possible to Athanas's remaining property, and that the design of such a hotel was consistent with that of the adjacent Pier 4 development. Anthony's disputes the trial judge's conclusion that the changes embodied in the BRA master plan had no "materially adverse effect" on the review conditions. Anthony's claims that by replacing the first architect's master plan with the BRA master plan, HBC scrapped the basic development plan and substituted another, quite different blueprint for development. Anthony's maintains that this action clearly was inconsistent with the basic development plan--as it replaced that plan with another. Anthony's claims that it therefore had a right under the contract to disapprove the BRA development plan unless HBC provided it with a reasonable explanation of the changes. [FN23] Because HBC failed to submit such an explanation, Anthony's contends, Anthony's disapproval of the BRA master plan was not a violation of the agreement. FN23. Neither party disputes that HBC did not send Anthony's an explanation of the changes embodied in the BRA master plan in response to Anthony's letter of May 29, 1987. The judge found, however, that HBC had extensively explained the BRA master plan to Anthony's and, indeed, that Anthony's and its officers and employees had repeatedly approved the plan in public and private statements. At root, this claim is grounded on Anthony's contention that the original master plan was the basic development plan. [FN24] The judge, however, expressly rejected that contention. The judge found that although the original master plan resembled the basic development plan, the two differed from one another on the very details that Anthony's purported to disapprove in the later BRA master plan. The substitution of the BRA master plan for the original master plan was not a change that, in itself, threatened inconsistency with the basic development plan, and therefore it did not trigger Anthony's disapproval rights. 164 FN24. Anthony's also argues that the judge drained its disapproval rights of all meaning when he held that the "[b]asic [d]evelopment [p]lan is a general narrative and illustrative statement of development concepts, including 'preliminary site plans and preliminary massing studies ... showing alternative approaches' " to development. According to Anthony's, the basic development plan comprised only the site plans and preliminary massing studies and not the narrative portion of the booklet. In addition to its facial inconsistency with Anthony's contention that the first architects' original master plan was the basic development plan, this argument merely quarrels with the facts found by the judge. The judge's finding that the basic development plan comprised a narrative interpretation of the site plans and massing studies as well as the plans and studies themselves is supported by the record. [7] Anthony's next attack on the judge's conclusions is that if, as the judge ruled, HBC was not required to seek Anthony's approval of the BRA master plan, then Anthony's withholding of its approval could not constitute a breach of the agreement. The judge, however, ruled that Anthony's disapproval was a breach of contract. The judge read the contract as requiring HBC to submit a plan for Anthony's approval if, and only if, the changes therein had a "materially adverse effect" on the review conditions--that is, if the plan triggered Anthony's right to disapprove. The judge further interpreted the agreements, however, to require Anthony's approval if Anthony's was presented with a plan that HBC need not have submitted for approval. Anthony's approval was critical for the project's financiers and to obtain needed government approvals and permits. The judge's ruling that, by failing to give its approval, Anthony's violated the express terms of the agreement was correct. There was no error. [8] Anthony's contends that, even if it violated the agreement, its breach was not material, and HBC therefore was not justified in renouncing the contract. Anthony's attempts to minimize the effect of the May 29, 1987, letter by arguing that, given the proportions of the deal, the letter was too small and ambiguous a dispute to constitute a material breach. We do not agree. The judge found that, but for the letter, HBC would have begun construction of the hotel by the outside closing date. The letter thus had a profound effect on the transaction. As the judge's finding indicates, HBC was unable, as a practical matter, to perform its obligations under the agreements after Anthony's sent the letter. The breach thus compromised "an essential and inducing feature of the contract," the duty of HBC to begin construction of the hotel by the outside closing date. Bucholz v. Green Bros., 272 Mass. 49, 52, 172 N.E. 101 (1930). See Petrangelo v. Pollard, 356 Mass. 696, 700-701, 255 N.E.2d 342 (1970). Anthony's further contends that HBC's postbreach conduct constitutes a waiver of its claim for breach. After the breach, HBC continued to pay monthly rent and real estate taxes, requested a tolling of the outside closing date, gave notices of closing on the residential, marina, and nonhotel commercial parcels, and continued to pay architects' and consultants' fees. From these facts, Anthony's argues that HBC waived its right to renounce the contract based on Anthony's breach. "The short answer to this contention is that [Anthony's] did not plead waiver as an affirmative defense and the issue was not raised, considered, nor passed upon in the [trial] court.... The defense cannot be raised 165 in this court for the first time." (Citations omitted.) Nakdimen v. Baker, 111 F.2d 778, 782 (8th Cir.), cert. denied, 311 U.S. 665, 61 S.Ct. 22, 85 L.Ed. 427 (1940). See Atlas Assurance Co. v. Standard Brick & Tile Corp., 264 F.2d 440, 443 (7th Cir.1959). See Middlesex & Boston Ry. Co. v. Aldermen of Newton, 371 Mass. 849, 859, 359 N.E.2d 1279 (1977) ("The failure to comply with this rule [Mass.R.Civ.P. 8(c), 365 Mass. 750 (1964) ] is, without more, sufficient reason for holding that the defenses of waiver and estoppel are not now open to the defendants"). "Generally, a failure to plead an affirmative defense results in the waiver of that defense and its exclusion from the case." 5 C.A. Wright & A.R. Miller, Federal Practice and Procedure § 1278, at 477 (2d ed. 1990). There is no reason not to follow the general rule here. [FN25] FN25. Moreover, Anthony's trial strategy was to claim that HBC could not meet the outside closing date. In light of Anthony's trial strategy, we would not reach the waiver argument even if waiver had been pleaded. "The theory of law on which by assent a case is tried cannot be disregarded when the case comes before an appellate court for review of the acts of the trial judge." Kagan v. Levenson, 334 Mass. 100, 106, 134 N.E.2d 415 (1956), quoting Santa Maria v. Trotto, 297 Mass. 442, 447, 9 N.E.2d 540 (1937). Commonwealth v. Phoenix, 409 Mass. 408, 416 n. 4, 567 N.E.2d 193 (1991). Commonwealth v. Roberts, 407 Mass. 731, 737, 555 N.E.2d 588 (1990). Commonwealth v. George, 406 Mass. 635, 636 n. 4, 550 N.E.2d 138 (1990). Matter of Saab, 406 Mass. 315, 322 n. 10, 547 N.E.2d 919 (1989). [9][10][11] 5. Violation of the implied covenant of good faith and fair dealing. "Every contract implies good faith and fair dealing between the parties to it." Warner Ins. Co. v. Commissioner of Ins., 406 Mass. 354, 362 n. 9, 548 N.E.2d 188 (1990), quoting Kerrigan v. Boston, 361 Mass. 24, 33, 278 N.E.2d 387 (1972). See Clark v. State St. Trust Co., 270 Mass. 140, 152-153, 169 N.E. 897 (1930). The implied covenant of good faith and fair dealing provides "that neither party shall do anything that will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract...." Drucker v. Roland Wm. Jutras Assocs., 370 Mass. 383, 385, 348 N.E.2d 763 (1976), quoting Uproar Co. v. National Broadcasting Co., 81 F.2d 373, 377 (1st Cir.), cert. denied, 298 U.S. 670, 56 S.Ct. 835, 80 L.Ed. 1393 (1936). The judge concluded that Anthony's purported disapproval of the BRA master plan destroyed or injured HBC's right to receive the fruits of the contract and thus violated the implied covenant. This ruling was amply supported by the evidence in the record. The judge found that at a meeting in October, 1986, Anthony's development adviser warned that Anthony's belief that the "agreements 'did not represent current market value [of the Fan Pier land and development rights]' would affect how [Anthony's] 'dealt' with HBC." On February 26, 1987, the judge found, Athanas met with representatives of HBC. At that meeting, Athanas explained that he had "made a lousy deal ... and ... need[ed] more money." He further noted that a list of issues that his representatives had previously raised with HBC "was really only about money and that [Athanas] had to get more money to be satisfied." Athanas opined that the law firm that assisted him in drafting the agreements "had done a lousy job and that [Athanas's] kids were only going to get a lousy $750,000 a year out of [the] arrangement." The judge also found that Anthony's disapproval of the BRA master plan was, by Athanas's admission of May 28, 1987, "not about approval of the plan" but rather "about money." 166 The judge found that after sending the letter, Athanas explained to HBC's representatives that he wanted "more money" than the agreements provided. "That is why," Athanas explained, "the [May 29] letter was sent." The judge further found that although Anthony's purported to disapprove the BRA master plan, Athanas admitted: "I'm not really disapproving the project. I want to get more money." Finally, the judge found that in June, 1987, Athanas's son told HBC that he would "rather look out of [his] window on nothing than on a lousy deal." The judge found that a number of the positions and actions taken by Anthony's, culminating with the purported disapproval of the BRA master plan, were designed to "forc[e] financial concessions from HBC." Anthony's approval was crucial to HBC's efforts to obtain financial backing as well as governmental permits and approvals. Knowing that it thus could apply pressure on HBC, Anthony's withheld its approval in an attempt to force HBC to sweeten the deal. Anthony's use of a discretionary right under the agreements as a pretext justifies the judge's ruling that Anthony's breached the covenant of good faith and fair dealing. See Northern Heel Corp. v. Compo Indust., Inc., 851 F.2d 456, 471 (1st Cir.1988) (applying Massachusetts law, court found violation of implied covenant of good faith and fair dealing in repudiation that was "but a tool engineered to serve th[e] illicit purpose" of extracting price concessions). See E.A. Farnsworth, Contracts § 7.17(a), at 329 (1990) ( "It is, therefore, bad faith to use discretion 'to recapture opportunities forgone on contracting' as determined by the other party's reasonable expectations--to refuse 'to pay the expected cost of performance,' " quoting Burton, Breach of Contract and the Common Law Duty to Perform in Good Faith, 94 Harv.L.Rev. 369, 369, 372-373 [1980] ). [12] Anthony's asks us to hold that, in contracts between sophisticated businesspeople, no covenant of good faith and fair dealing is implied. We decline so to hold. We note that Anthony's cites no authority to support its contention. Indeed, the rule is clear in Massachusetts that every contract is subject to an implied covenant of good faith and fair dealing. Warner Ins. Co. v. Commissioner of Ins., supra, 406 Mass. at 362 n. 9, 548 N.E.2d 188. Kerrigan v. Boston, supra, 361 Mass. at 33, 278 N.E.2d 387. Anthony's further maintains that, because he did not find "bad faith," the judge erred in ruling that Anthony's violated the implied covenant of good faith and fair dealing. There was no error. An examination of the record suggests that the trial judge redacted the references to Anthony's bad faith in HBC's proposed findings of fact so that his findings of fact would be consistent with his decision to deny HBC's claim under G.L. c. 93A. The deletions thus read are not inconsistent with the judge's determination that Anthony's violated the implied covenant of good faith and fair dealing. 6. HBC's claim under G.L. c. 93A. In its cross-appeal, HBC contends that the judge's ruling that Anthony's violated the covenant of good faith and fair dealing cannot be squared with his denial of HBC's claim under G.L. c. 93A. Anthony's agrees that the two rulings cannot be squared. [FN26] HBC contends that on the record before us, Anthony's conduct amounts to an "unfair or deceptive act or practice" as a matter of law and that, therefore, the judge erred in denying HBC's claim for damages under G.L. c. 93A. We agree. FN26. Anthony's contends, however, that it is the judge's ruling that it violated 167 the implied covenant of good faith and fair dealing that must be set aside. We do not agree. See section 5, supra. [13] General Laws c. 93A, § 2 (a ) (1990 ed.), makes unlawful any "[u]nfair ... acts or practices in the conduct of any trade or commerce." This prohibition is "extended to those engaged in trade or commerce in business transactions with others similarly engaged" by G.L. c. 93A, § 11. Datacomm Interface, Inc. v. Computerworld, Inc., 396 Mass. 760, 779, 489 N.E.2d 185 (1986), citing Manning v. Zuckerman, 388 Mass. 8, 12, 444 N.E.2d 1262 (1983). We have said that conduct "in disregard of known contractual arrangements" and intended to secure benefits for the breaching party constitutes an unfair act or practice for c. 93A purposes. Wang Laboratories, Inc. v. Business Incentives, Inc., 398 Mass. 854, 857, 501 N.E.2d 1163 (1986). See Hannon v. Original Gunite Aquatech Pools, Inc., 385 Mass. 813, 825, 434 N.E.2d 611 (1982) (if proved, submission of low bid followed by demand for more money after award of contract would constitute violations of c. 93A). See also Pepsi-Cola Metropolitan Bottling Co. v. Checkers, Inc., 754 F.2d 10, 17-19 (1st Cir.1985) (commercial extortion giving rise to c. 93A liability, and treble damages, where defendant withheld payment due under contract not because of dispute over liability or inability to pay but, rather, as " 'wedge' against [plaintiff] 'to enhance [defendant's] bargaining power for more product"). [14][15] Under G.L. c. 93A, § 11, HBC is entitled to multiple (not more than treble and not less than double) damages if Anthony's acted "knowingly" or "wilfully" in violation of § 2. "A judge need not make an express finding that a person wilfully or knowingly violated G.L. c. 93A, § 2, as long as the evidence warrants a finding of either" (emphasis in original). Service Publications, Inc. v. Goverman, 396 Mass. 567, 578 n. 13, 487 N.E.2d 520 (1986). Although the judge made no finding as to Anthony's knowledge or wilfulness, it is clear from the judge's findings of fact that Anthony's acted knowingly and wilfully. Anthony's knowing use of a pretext to coerce HBC into paying Anthony's more than the contract required establishes wilfulness as a matter of law. See section 5, supra; Pepsi- Cola Metropolitan Bottling Co., Inc. v. Checkers, Inc., supra at 18 ("[T]he evidence is sufficient to support its determination that [the defendants] ... were guilty of a willful violation of ... c. 93A. The court was entitled to believe that [the defendants] ... had withheld monies which they legally owed as a form of extortion--to force Pepsi to do what otherwise it could not be legally required to do"). Cf. Datacomm Interface, Inc. v. Computerworld, Inc., supra, 396 Mass. at 780, 489 N.E.2d 185 ("Actions involving fraudulent representations in knowing disregard of the truth encompass culpable, 'willful' behavior under the statute"); Service Publications, Inc. v. Goverman, supra, 396 Mass. at 578 n. 13, 487 N.E.2d 520; Shaw v. Rodman Ford Truck Center, Inc., 19 Mass.App.Ct. 709, 711, 477 N.E.2d 413 (1985); Computer Sys. Eng'g, Inc. v. Qantel Corp., 740 F.2d 59, 68 (1st Cir.1984). Anthony's attempt to force HBC to increase Anthony's compensation was a knowing and wilful violation of G.L. c. 93A, § 2, as a matter of law. See Pepsi-Cola Metropolitan Bottling Co., Inc. v. Checkers, Inc., supra at 18. [16] We recognize that there may be "cases where an act might be unfair if practiced upon a commercial innocent yet would be common practice between two people engaged in business." Spence v. Boston Edison Co., 390 Mass. 604, 616, 459 N.E.2d 80 (1983). In such circumstances, a claimant would have to show greater "rascality" than would a less sophisticated party. Id. Anthony's conduct, however, more than meets the standard of an "unfair or deceptive act or practice"--even taking into account 168 that both parties to the transaction were sophisticated business people. See section 5, supra. Anthony's replies, correctly, that the judge's determination that Anthony's did not engage in any unfair or deceptive act or practice is one of fact and therefore must stand unless clearly erroneous. The judge's extensive findings as to Anthony's violation of the implied covenant of good faith and fair dealing, however, established as a matter of both fact and law that Anthony's actions were unfair or deceptive. See section 5, supra. We therefore remand the action to the trial court for determination of reasonable attorney's fees [FN27] and for the awarding of damages pursuant to G.L. c. 93A, § 11. [FN28] FN27. In its complaint, HBC prayed for an award of attorneys' fees under G.L. c. 93A. As we explain in the text, this prayer should be allowed. HBC has made no separate request for an award of appellate attorneys' fees. In these circumstances, we conclude that, as a matter of discretion, we should not award appellate attorney's fees. See Patry v. Liberty Mobilehome Sales, Inc., 394 Mass. 270, 272, 475 N.E.2d 392 (1985). FN28. The judge, of course, should not, in multiplying the damages, include that portion of the judgment that represents prejudgment interest. McEvoy Travel Bureau, Inc. v. Norton Co., 408 Mass. 704, 716, 563 N.E.2d 188 (1990). 7. Exclusion of evidence of postbreach events and the testimony of Anthony's proffered rebuttal expert. Anthony's maintains that the judge erred in excluding evidence of events after May 29, 1987. [FN29] Anthony's contends that the excluded evidence demonstrates that the judge clearly was in error to rule that "HBC would have met the [o]utside [c]losing [d]ate of December 31, 1988, ... but for the May 29, 1987, disapproval letter." The judge ruled that the evidence proffered by Anthony's was relevant, if at all, only to collateral issues and would be needlessly cumulative. FN29. The evidence that Anthony's sought to introduce was: BRA plans prepared in October, 1987, questioning the designs of the internal canal and the hotel; testimony that one of the nine major architectural firms working for HBC quit the project in October, 1987; a December, 1987, memorandum, prepared by an HBC employee after a public meeting, that lists a number of concerns the BRA had about the project; a construction schedule prepared in the summer of 1987 that shows a 1991 date for the beginning of construction; evidence that HBC attempted to redesign the entire project in the fall of 1987 by hiring a new architectural firm; and evidence that the previous architect had stopped work on the Fan Pier project sometime after May 29, 1987. [17][18][19] Whether evidence is relevant is a question "addressed to the sound discretion of the trial judge." Commonwealth v. Booker, 386 Mass. 466, 469, 436 N.E.2d 160 (1982), citing Commonwealth v. Chretien, 383 Mass. 123, 135-136, 417 N.E.2d 1203 (1981). See Commonwealth v. Good, 409 Mass. 612, 621, 568 N.E.2d 1127 (1991). The issue "of relevancy is 'a matter on which the opinion of the trial judge will be accepted on review except for palpable error.' " Booker, supra, 386 Mass. at 470, 436 N.E.2d 160, quoting Commonwealth v. Young, 382 Mass. 448, 463, 416 N.E.2d 944 (1981). There was no error in the judge's ruling excluding evidence of 169 postbreach events surrounding the Fan Pier development. The judge found that, but for the May 29, 1987, letter, HBC would have met the outside closing date. The judge reasonably could have concluded that postbreach events were substantially influenced, if not caused, by the disapproval letter. There was ample evidence to support the judge's conclusion that, but for Anthony's breach of contract, HBC could and would have been able to perform its obligations. [20] Anthony's also maintains that the judge erred in prohibiting its rebuttal expert from testifying that, given HBC's own scheduling assumptions, it could not have commenced construction of the hotel by the outside closing date. The rebuttal witness was called after fifty days of trial during which both parties had submitted voluminous evidence focused on the issue of HBC's ability or inability to meet the outside closing date. In these circumstances, "[a] trial judge has substantial discretion in determining whether to allow the presentation of rebuttal evidence." Mason v. General Motors Corp., 397 Mass. 183, 193, 490 N.E.2d 437 (1986). The judge found, by "overwhelming evidence," that, but for the May 29, 1987, letter, HBC would have met the outside closing date. We are not persuaded by Anthony's contention that had the judge heard the expert's testimony, his factual findings and conclusion would have been different. [FN30] FN30. The judge heard a full offer of proof on the expected rebuttal testimony. The excluded evidence supported Anthony's claim that HBC could not meet the outside closing date. See Drake v. Goodman, 386 Mass. 88, 92, 434 N.E.2d 1211 (1982) ("There is no right to present rebuttal evidence that only supports a party's affirmative case"). Assuming, without deciding, that the judge erred, Anthony's could not show that the proffered evidence would have altered the judge's determination. HBC offered abundant evidence, which the judge obviously found credible, that it would have met the outside closing date. Thus, Anthony's would not be able to show prejudice in this jury-waived trial. Cf. Boston v. Board of Educ., 392 Mass. 788, 798, 467 N.E.2d 1318 (1984) (excluded evidence contained nothing of assistance; court's conclusion and outcome of case would have been the same if evidence had been admitted). 8. Damages issues. The judge awarded HBC $42.6 million in expectancy damages. In the alternative, the judge ruled that HBC is entitled to $14,583,987.50 in reliance damages, representing HBC's reasonable expenditures in connection with the Fan Pier project and the lost interest on that money. [FN31] FN31. The judge also awarded HBC $2,388,850.15 (plus interest from the date of the filing of the original complaint) for reasonable postbreach expenditures incurred by HBC and $347,216 (plus interest), the sum he found Anthony's and other Athanas entities owed HBC for the cost of joint development activities. [21] A. Measure of damages. Anthony's argues that the judge used a mistaken measure of expectancy damages. According to Anthony's, the judge equated HBC's expectancy damages with the value of the land itself, failing to take into account the contract and the various risks and duties that it imposed. Anthony's is mistaken. The judge ruled "that HBC's expectancy damages can be measured by the value of its 170 interests under the 1983 [a]greements as of May 29, 1987, the date of the breach ..." (emphasis added). HBC's expert testified as to the value of HBC's rights under the agreements to develop the Fan Pier property, purchase the residential land, and lease the commercial real estate. The judge accepted the expert's methodology, but then discounted the expert's figures to take into account development risks and uncertainties. There was no error in the judge's measure of expectancy damages. [22] Anthony's also argues that HBC was limited to seeking special damages (i.e., lost profits), and that the judge was therefore in error in awarding them general damages (i.e., fair market value of interests under agreements less compensation due to Anthony's). Anthony's corollary to this argument is that, because in this case lost profits are too speculative and too remote a measure of damages, HBC is entitled to zero expectancy damages. Anthony's relies on American Mechanical Corp. v. Union Mach. Co. of Lynn, Inc., 21 Mass.App.Ct. 97, 102, 485 N.E.2d 680 (1985). That case does not assist its claim. In that case, the Appeals Court noted that "the aim in measuring damages in the event of a breach is to place the injured party in as good a position as he would have been in had the contract been performed." Id. at 101, 485 N.E.2d 680. As a result, the Appeals Court rejected a rigid formulaic approach to damages which would have undercompensated the plaintiff in that case. [FN32] FN32. Many of Anthony's arguments on the damages issues reflect its fundamental disagreement with the judge's determination that HBC would have been able to perform its obligations under the agreements. Anthony's argues that HBC is not entitled to damages, as it could not meet the outside closing date. Because we have concluded that the judge's rulings on that issue were correct, we do not comment on these arguments. [23][24] B. Admission of expert testimony regarding comparably valued real estate was not erroneous. Anthony's claims that the parcels of real estate used by HBC's expert as "comparables" are, as a matter of fact and law, not comparable to the Fan Pier property. The judge has broad discretion in accepting evidence on comparable values; his decision will be reversed only if manifestly erroneous. Iris v. Hingham, 303 Mass. 401, 408-409, 22 N.E.2d 13 (1939). Fourth Nat'l Bank of Boston v. Commonwealth, 212 Mass. 66, 68, 98 N.E. 686 (1912). Anthony's specific arguments regarding the purported dissimilarities between the "comparables" and the Fan Pier property bear only on the weight of the evidence. [FN33] FN33. E.g., comparing land assemblage sales to single sales, see Keating v. Duxbury Hous. Auth., 11 Mass.App.Ct. 934, 935, 416 N.E.2d 553 (1981); R.H. White Realty Co., Inc. v. Boston Redevelopment Auth., 3 Mass.App.Ct. 505, 507-508, 334 N.E.2d 637 (1975); comparing sales in one location to sales in another, see Lee v. Commonwealth, 361 Mass. 864, 865, 281 N.E.2d 239 (1972); Boyd v. Lawrence Redevelopment Auth., 348 Mass. 83, 85-86, 202 N.E.2d 297 (1964); comparing properties which differ in zoning, see Gregori v. Springfield, 348 Mass. 395, 397, 204 N.E.2d 113 (1965); Lee, supra. [25] Anthony's further asserts that the testimony of HBC's expert regarding the value of the "comparables" was based on inadmissible hearsay. Anthony's argues that it was error to allow the HBC expert to give his opinion based on the contents of recorded deeds because the contents of those deeds (square footage and sales prices) were not 171 independently admissible, and, further, even if the contents were admissible, the expert should only have been allowed to state his opinion without the contents of those deeds being admitted in evidence. [FN34] FN34. Witnesses with direct knowledge of the transactions testified as to the square footage and sale prices of ten of the "comparables." At a minimum, then, as to these witnesses, the testimony clearly was not hearsay. HBC's expert verified the information he obtained from the deeds by speaking with a party (or the party's counsel) to each of the comparable transactions. The direct testimony of these parties, had it been offered, would have been independently admissible. HBC was not required to "produc[e] exhibits and witnesses whose sole function is to construct a proper foundation for the expert's opinion." Department of Youth Servs. v. A Juvenile, 398 Mass. 516, 531, 499 N.E.2d 812 (1986). [26][27] Nor did the judge err in allowing HBC's expert to testify to the sale prices and square footage of comparable properties in order to explain the basis for his opinion of Fan Pier's value. "[W]hen, as here, an expert's statements concerning matters on which he has relied are admitted for the limited purpose of laying the foundation for his opinion and are presented to the jury [or judge] in a manner that avoids prejudice to the opposing party, the trial judge's discretion should not be disturbed." Simon v. Solomon, 385 Mass. 91, 106, 431 N.E.2d 556 (1982). Anthony's did not dispute the accuracy of any of the comparable sales data. Nor does Anthony's dispute the qualifications of the expert, or that he can give an ultimate opinion on valuation. Even if it were error, we discern no prejudice on this record. The judge found that HBC's valuation expert "failed to make those adjustments which the Court is of the opinion should have been made to substantially reduce the price paid for the comparable sales in relation to the Fan Pier property. The judge accordingly concluded that the dissimilarities between the "comparables" and the Fan Pier property required that figure arrived at by HBC's expert be reduced by approximately sixty per cent. [FN35] FN35. Newton Girl Scout Council, Inc. v. Massachusetts Turnpike Auth., 335 Mass. 189, 138 N.E.2d 769 (1956), on which Anthony's relies, is not to the contrary. In Newton Girl Scout, the Massachusetts Turnpike Authority (authority) called an expert who did "not appear to have had special experience in determining the value of the type of camp property" involved in that case. Id. at 199, 138 N.E.2d 769. The authority's expert testified to the price for which a single property, adapted to an entirely different use, had been sold three years earlier. The president of the Girl Scouts who, unlike the authority's expert, was very knowledgeable about the camp property, was not permitted to give her opinion of the value of the property. In light of the authority's expert's lack of knowledge concerning camp property, as well as the exclusion of the Girl Scouts' expert, we said that the authority's expert testimony regarding a sole, allegedly "comparable" transaction was prejudicial to the Girl Scouts. [28] C. Exclusion of the testimony of four of Anthony's witnesses. Anthony's argues that the judge committed prejudicial error in excluding the testimony of four witnesses called to testify about the risks and uncertainties involved in the Fan Pier development. According to Anthony's, these experts would have opined that HBC's expectancy interest was zero, either because HBC could not meet the outside closing date, "no 172 knowledgeable developer would pay anything for HBC's rights," or "it is not possible to determine with any reasonable certainty that HBC's interests had any value as of the date of the breach." The judge, following argument of counsel and a review of offers of proof and the witnesses' answers to interrogatories, excluded their testimony because, unlike Anthony's two other expert witnesses who were real estate appraisers, they could not provide testimony that would be new and of assistance to the judge. [FN36] The judge told Anthony's that he wanted evidence on valuation, not on liability. [FN37] These witnesses would have relitigated liability issues. The judge reasonably could exclude that testimony. FN36. The judge already had determined in the phase I trial that, as a matter of law, but for Anthony's breach, HBC would have obtained all necessary permits and approvals and met the outside closing date. See supra at 822-823. He accordingly sought testimony regarding the value of HBC's interests (factoring in all the risks and uncertainties) rather than testimony which sought to reopen an issue already litigated. FN37. Anthony's position was that there was no liability because HBC could not meet the outside closing date and hence no damages. Anthony's had ample opportunity to offer evidence on valuation while preserving the liability issues for appeal. It chose not to do so. [29][30] Further, a judge has discretion to exclude expert testimony. Nally v. Volkswagen of Am., Inc., 405 Mass. 191, 197, 539 N.E.2d 1017 (1989). Commonwealth v. Dockham, 405 Mass. 618, 628, 542 N.E.2d 591 (1989). It is also within the discretion of the judge to exclude excessively cumulative evidence, including expert testimony. Commonwealth v. Durning, 406 Mass. 485, 497, 548 N.E.2d 1242 (1990). Commonwealth v. Wilson, 381 Mass. 90, 116, 407 N.E.2d 1229 (1980). Commonwealth v. Ranahan, 23 Mass.App.Ct. 201, 204, 500 N.E.2d 1349 (1986). The judge did not err in excluding the testimony of Anthony's experts who were not expert in valuing real estate transactions. [31] D. Award of damages. Anthony's argues that the judge's damages award "is merely plucked from the air, and rests upon no evidentiary foundation." Anthony's claims that the judge "thoroughly rejected" the analysis of HBC's valuation expert, and that his damages award perforce has no basis. In fact, the judge rejected only the expert's final figures, not his method. He found that, "[a]lthough the adjustment process used by [HBC's expert] represents standard appraisal methodology when valuing land by the comparable sales method, [the expert] failed to make those adjustments which the Court is of the opinion should have been made to substantially reduce the price paid for the comparable sales in relation to the Fan Pier property." [32] "Valuation is a question of fact, and we will not disturb a judge's determination unless it is clearly erroneous." Sarrouf v. New England Patriots Football Club, Inc., 397 Mass. 542, 550, 492 N.E.2d 1122 (1986). Here, the judge's damages award fell within the range of value opinions testified to at trial. See General Dynamics Corp. v. Assessors of Quincy, 388 Mass. 24, 35-36, 444 N.E.2d 1266 (1983). Anthony's has not met its burden of showing that the damages award is clearly erroneous. See First Pa. Mortgage Trust v. Dorchester Sav. Bank, 395 Mass. 614, 621, 481 N.E.2d 1132 (1985); Delano Growers' Coop. Winery v. Supreme Wine Co., 393 Mass. 666, 681-683, 473 173 N.E.2d 1066 (1985). [33] We do not agree that the judge's damages award lacks an evidentiary foundation. HBC offered substantial evidence as to its damages. The judge heard twelve witnesses during twenty-seven days of trial and reviewed 169 exhibits and forty-five documents. His findings of facts are recorded in 270 numbered paragraphs. The judge complied with his duty of "articulat[ing] the essential grounds of his decision," Schrottman v. Barnicle, 386 Mass. 627, 638, 437 N.E.2d 205 (1982); he is not required to itemize every component of that decision. New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 472, 420 N.E.2d 298 (1981). [34] E. Alleged mathematical error in calculating the damages award. Anthony's claims that, in calculating HBC's damages award, the judge made a mathematical error. HBC's expert opined as to the value of both HBC's interests in Fan Pier and Anthony's projected compensation under the agreements. The judge rejected both of these figures as too high, and substituted his own figures. He arrived at his damages award by subtracting the compensation due Anthony's from the value of HBC's interests. According to Anthony's, however, while the judge was free to discount the value of HBC's interests, he was barred from similarly discounting Anthony's projected compensation. The latter figure, argues Anthony's, is a constant. We disagree. Anthony's compensation under the agreements has several components: the contract price to be paid for the residential land, inflated by 100% of the Consumer Price Index (CPI) increase between July, 1983, and the date of closing; ten per cent of HBC's share of net sales and rental profits generated from development of the residential land; basic rent for the hotel lease plus a two-stage escalation rent; and basic rent for the commercial and marina leases plus escalation rent. There are many uncertain variables involved in this compensation package: how many acres HBC ultimately would buy and develop, the CPI, inflation, and HBC's sales and profits, to name just a few. The judge found that HBC's expert, in assessing the present value of Anthony's compensation under the agreements, used formulas and variables designed to maximize projected payments to Anthony's. [FN38] In discounting HBC's expert's valuation of HBC's interests, the judge was free concomitantly to discount the expert's valuation of Anthony's compensation. [FN39] FN38. E.g., HBC's valuation expert assumed that escalation rent would be paid to Anthony's annually and not deferred, as it might have been. FN39. Finally, Anthony's argues that HBC is not entitled to reliance damages because it failed to prove that its expenditures were reasonable. If HBC is entitled to reliance damages, Anthony's argues, it is not entitled to recover expenditures made before the contract was signed, interest on prebreach expenditures, or postbreach expenditures. Because the judge awarded reliance damages merely as an alternative to expectancy damages, and because we affirm the expectancy damages, we do not address these arguments. F. Postbreach expenditures. The judge awarded HBC "as damages reasonable postbreach expenditures of $2,388,850.15." Of this amount, $1,249,843.09 represents "reasonable postbreach 174 expenses incurred in an effort to mitigate damages." The other $1,139,007.06 of the award represents money paid to Anthony's as rent and taxes. We reverse the first award, and affirm the second. [35][36] As for the $1,249,843.09, Anthony's argues that HBC is not entitled to these postbreach expenditures because HBC did not meet its burden of proving that they were reasonably incurred in an effort to mitigate its losses. We agree. "Damages are recoverable for special losses incurred in a reasonable effort, whether successful or not, to avoid harm that the defendant had reason to foresee as a probable result of his breach when the contract was made." Restatement, Contracts, § 336(2). See, e.g., John Hetherington & Sons, Ltd. v. William Firth Co., 210 Mass. 8, 25, 95 N.E. 961 (1911). However, "[t]he plaintiff, having the burden of proof, must of course show that the expenses incurred were reasonable." Automated Donut Syss., Inc. v. Consolidated Rail Corp., 12 Mass.App.Ct. 326, 335, 424 N.E.2d 265 (1981). Accord, Tampa Elec. Co. v. Nashville Coal Co., 214 F.Supp. 647, 652 (M.D.Tenn.1963) ("The critical factor in determining a plaintiff's duty to mitigate is whether the method which he employed to avoid consequential injury was reasonable in the circumstances existing at the time"). During the damages phase of the trial HBC offered no evidence that any of its expenditures were reasonably incurred in an effort to mitigate its losses. Accordingly, the award of $1,249,843.09 is reversed. [37][38] The award to HBC for its postbreach payment to Anthony's of rent and taxes appears to be based on a theory of restitution. In calculating the amount of the expectancy damages, the judge valued HBC's rights under the agreements as of the date of the breach. He arrived at this value by subtracting the consideration due to Anthony's from the fair rental value of the commercial land (in each year of the leases) and from the fair market value of the residential land. [FN40] The judge similarly calculated the consideration due to Anthony's from the date of the breach. The amount of the postbreach rent and tax payments was included in this figure. In order to avoid counting this figure twice in Anthony's favor, the judge concluded that the postbreach rent and tax payments had to be returned to HBC. This amount, along with all other consideration due to Anthony's, was then subtracted from the gross value of HBC's rights under the agreements to arrive at HBC's net expectancy. Because the judge had subtracted the postbreach rent and tax payments from the amount he determined HBC was owed as expectancy damages, he correctly ordered the amount of those actual payments to be returned to HBC in the award. On remand, however, this portion of the award should be excluded from the damages considered under G.L. c. 93A because it is in the nature of restitution and not damages. FN40. In order to value HBC's leasehold interests the judge, for "each year of the lease, ... deduct[ed] ... from the fair rental value the consideration owed to Anthony's" under the agreements. He then totalled this value, discounted it to its present value, and arrived at a total of $36 million. Similarly, in valuing HBC's option rights in the residential land, the judge calculated "the fair market value of the residential land less the value of the consideration due to Anthony's on the purchase of the residential land" under the agreements. After discounting to present value, he arrived at a figure of $6.6 million. The total of the two figures, $42.6 million, is the amount of the expectancy damages award. [39] 9. Joint liability. In 1984, HBC hired environmental consultants. HBC and 175 Anthony's entered into an agreement to share the environmental consultants' work and fees. During the phase I trial, HBC and Anthony's stipulated that Anthony's had not reimbursed HBC for its share of the fees. The judge entered judgment against Boston Mariner, Inc., Pier Four, Inc., and Anthony's Hawthorne, Inc., jointly and severally with Anthony's, for their share of the environmental consulting fees incurred in connection with the Fan Pier and Pier Four projects. Boston Mariner, Pier Four, Inc., and Anthony's Hawthorne argue that, because only Anthony's was a party to the stipulation, only Anthony's should be held liable. There was substantial evidence from which the judge could reasonably find that Boston Mariner, Pier Four, Inc., and Anthony's Hawthorne were all parties to the agreement regarding the environmental consultants' fees. The stipulation does not state that Anthony's was the only Athanas entity which was a party to the agreement regarding the environmental consultants' fees. Indeed, Anthony's counsel informed the judge that the stipulation was "very limited" and "not that detailed." The work done by the environmental consultants benefited both the Fan Pier and Pier Four projects. By implication, then, it also benefited Pier Four, Inc., and Anthony's Hawthorne, Inc., entities with an ownership interest in Pier Four, as well as the Athanas family's development company, Boston Mariner. There was no error. [40] 10. Conveyance to Fan Yards Nominee Trust. On January 19, 1988, the same day that the parties brought suit against each other, Anthony's recorded a deed transferring record title in Fan Pier to the Fan Yards Nominee Trust, the trustees of which are Athanas's four sons. In response, HBC amended its complaint to add the Fan Yards parties as defendants and to allege (1) the facts of the transfer of the land; and (2) that either the transfer of the Fan Pier property was invalid or that the transferees were bound by the obligations of the original 1983 agreements, including liability for breaches by Anthony's. At the conclusion of the phase I trial on liability, the judge issued an interlocutory order enjoining Anthony's and the Fan Yards parties, among others, from conveying, leasing or otherwise alienating the Fan Pier property. Just before the phase II trial on damages began, HBC sought to raise the issue of the validity of the conveyance of the Fan Pier property to the Fan Yards Nominee Trust. The judge noted that it was possible he might find no damages, in which case the conveyance issue would be moot, and said, "I would rather not accept anything in reference to collection or anything else or judgment." At the conclusion of the damages trial, the judge granted HBC's motion to enter partial final judgment under Mass.R.Civ.P. 54(b), 365 Mass. 820 (1974), instead of a final judgment, in order to leave open for future determination HBC's claims concerning collection on the judgment. Anthony's now seeks entry of a final judgment solely against Anthony's Pier Four, Inc., and HBC seeks entry of a final judgment jointly and severally against Anthony's and the Fan Yards parties. We reject each party's request. The judge did not abuse his discretion in reserving the issues regarding the conveyances and the collection for the judgment. See Dattoli v. Hale Hosp., 400 Mass. 175, 176, 508 N.E.2d 100 (1987). We affirm his partial final judgment under Mass.R.Civ.P. 54(b). The factual record is insufficient for us to enter a final judgment. Unlike the case cited by HBC as authority for the proposition that we, rather than the 176 trial judge, may enter a final judgment, the evidence on the issue of collection of the judgment has not been heard by the judge and is not before us on this appeal. Cf. Weinstein v. Miller, 249 Mass. 516, 520, 144 N.E. 387 (1929). It is for the trial judge, after hearing, to enter the final judgment. This matter is remanded to the trial judge for determination whether the Fan Pier parties are jointly and severally liable to HBC and other issues concerning the collection of the judgment. 11. Summary. We affirm so much of the partial final judgment as awarded expectancy damages, postbreach rent and taxes paid by HBC to Anthony's, and consultants' fees. We set aside the award of postbreach expenditures not attributable to rent or taxes. We reverse so much of the judgment as denied G.L. c. 93A damages to HBC. We remand the matter to the trial judge for further proceedings consistent with this opinion. So ordered. Article The Trials of a Franchisee Store Owners Claim Franchisers Squeeze Them in a Variety of Ways By Maria Shao, Globe Staff Copyright 1993 Globe Newspaper Company The Boston Globe July 18, 1993 Caveat franchisee. As franchising has grown in popularity -it has also caused discontent among franchisees. Now franchisees are forming pressure groups, seeking greater regulation and filing lawsuits in response to the pitfalls many have faced. Here are three franchising tales gone sour: Brian and Sylvia Ray bet - and lost - their life savings. He left a 20-year position at Grossman's Inc., the building supply company, and she gave up her real estate brokerage practice to take a crack at their own business. The Hingham couple spent $100,000 to open a Subway Sandwich franchise in 1989. Their downfall came because of a complicated leasing hassle, they say. The Rays subleased from Subway Real Estate Leasing Corp., which had leased from the landlord. Their troubles started in December 1990, when creditors foreclosed on the building, 177 jeopardizing the Rays' leasing arrangements. Over the next two years, during which the building was sold, Subway failed in its obligation to make comparable leasing arrangements, the Rays charge. The new sublease finally proposed to them would have raised their rent from $2,100 to $3,100 and put them out of business, the Rays say. "We did not own the lease. Subway doesn't allow you to touch the lease in any way," says Sylvia. She calls it a "very dangerous setup" that gives the franchisee virtually no control. What's more, Subway "stopped taking all our calls," adds Sylvia. When the Rays started withholding royalties from Subway, the Milford, Conn., the franchiser immediately terminated their franchise agreement, they say. The Rays - and Subway - were eventually evicted. Their lawsuit against Subway's parent, Doctor's Associates Inc., is going into arbitration. A Subway spokesman says: "We feel the Rays are totally inaccurate. I have to refrain from comment pending the arbitration." Brian Ray, 42, who now works for a beer distributor at night, says: "You assume that Subway is a big corporation, that they're going to protect you. But you have zero rights." Joseph E. Sanchez Jr., a former McDonald's Corp. franchise owner, says the fast-food giant racially discriminated against him by assigning him stores in less economically desirable communities. Critics call it the "redlining" of minority franchisees. Sanchez, a 44-year-old Hispanic, testified to Congress recently that he suffered "ethnic and racial abuses" from McDonald's officials when he was a franchisee from 1985 to 1991. Although the Oak Brook, Ill., franchiser had promised to give him a restaurant in a relatively affluent suburb of Houston, Sanchez says, it placed him in a less commercially desirable area, resulting in a signficiant financial loss to him. When he later tried to move from Houston, Sanchez charges, a McDonald's manager told him that, due to the demographics of the neighborhood, he could sell his shop only to an Anglo or a Hispanic, but not a black. Sanchez ended up trading his Houston outlet for one in Baltimore. But McDonald's failed to inform him that the restaurant in Baltimore's Park Heights/Pimlico area was plagued by vandalism and drug use, the former franchisee says. What's more, he says McDonald's told him to maintain an allblack work force to reflect neighborhood demographics. He left McDonald's in 1991 and filed a lawsuit alleging breach of contract, civil rights violations and other charges. A federal court in Baltimore dismissed his suit; Sanchez has appealed. A spokeswoman for McDonald's says it won't discuss the litigation. Sanchez, who now works for the Washington Police Department, says the McDonald's stint cost him $600,000, not counting debt. He says he would advise others against going into franchising: "I call it indentured servitude." Like the Rays, James S. Neher has had his entrepreneurial dreams dashed by a real estate dispute. Neher left his job as an optician for a Rhode Island drugstore chain and paid $350,000 in 1990 to buy a Pearle Vision franchise in North Dartmouth. The Dallas-based franchiser handled Neher's lease negotiations. Unbeknownst to him, however, it negotiated an exorbitant rent, says Neher. In June 1992 his rent doubled to $32 a square foot, even though the going rate is $8 to $14, Neher says. The rent hike, to $3,750 a month, forced him to lay off one of his four emloyees, requiring him to work up to 72 hours a week, he says. "I'm sweating every month, wondering how I'm going to pay this," bemoans the optician, who has sued 178 Pearle for damages. "I assumed Pearle is such a big name, it must be a good system. I should have been more aware when I jumped in." A spokeswoman for Pearle, a unit of Grand Metropolitan PLC, says Pearle negotiated the lease at Neher's request. "An appraiser has determined the rent is at fair market value," she says. "Pearle has handled this matter professionally." Disclosure For Franchisors 40 NO. 6 Prac. Law. 23 Practical Lawyer September, 1994 DISCLOSURE FOR FRANCHISORS Carol McErlean and Gayle Cannon [FNa] Copyright 1994 by The American Law Institute; Carol McErlean and Gayle Cannon DO FRANCHISEES REALLY KNOW what they're getting into? Even business-savvy clients sometimes overestimate the earning potential of a franchise opportunity, or the nature and amount of support that they will receive from the franchisor in operating the franchised business. (For an excellent discussion of how to evaluate franchise opportunities, see David Laufer and Patrick Carter, Evaluating a Franchise Opportunity (with checklist), 40 The Practical Lawyer 59 (April 1994)). Misjudging the franchise opportunity can be a very costly mistake or the franchisee, and one from which the franchisee may never completely recover financially. But if misjudging the franchise opportunity can be risky for the potential franchisee, a failure to make full disclosure can be downright disastrous for the franchisor. Failing to make full disclosure invites misunderstandings and false assumptions. It wastes a valuable opportunity for the franchisor to tout its successes and the advantages of its franchising system. It shrinks the likelihood that the franchisee will properly evaluate its ability to function well in the franchisor's system. It robs the franchisor of an opportunity to size up the potential franchisee and judge its potential for success. It carries a tremendous risk of failure for all concerned. In this article, we discuss the legal requirements of disclosure, the disclosure process, the disclosure document, and how to keep the disclosure document current. LEGAL REQUIREMENTS FOR DISCLOSURE -- Federal law and the laws of many states outline disclosure requirements for franchisors. Federal Trade Commission Rule 179 The Federal Trade Commission Rule "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures" (the "FTC Rule"), requires disclosure of material facts by franchisors and sellers of certain business opportunities before closing the sale of a franchise. 16 C.F.R. pt.436. The rule is a broad one, but certain exemptions apply. The FTC Rule exempts some parties by definition (such as Business Opportunity Trade Shows and fractional franchises) and other industries by informal staff advisory opinions (such as automobile dealership franchises) when the FTC finds that application of the FTC Rule is not necessary to prevent unfair and deceptive practices. See, e.g., Porsche Cars of North America, Inc., [1992-1993 Transfer Binder] Business Franchise Guide (CCH) paragraph 10,153 (Jan. 25, 1993). Proposed Changes to Federal Law Congress has proposed changes to federal disclosure laws and regulations in recent years. Although none of the proposals have been acted on, they may hint at the direction disclosure law may take in the future. Disclosure Proposal The proposed disclosure bill would codify current FTC disclosure rules, add mandatory disclosures and actual operating data relating to sales, costs, and earnings, prohibit fraud in franchise sales, and furnish a private civil action for injunctive relief and damages. Like current law, the proposed bill would preempt state franchise law only to the extent state law provides less protection. Failure to provide the required information would constitute the omission of a material fact in violation of the Act. Although most of the disclosure categories generally track current disclosure requirements, differences do exist. The disclosure act would require two new disclosure categories: a mandatory earnings claim and a discussion of the possible sale or change in control of the franchisor. Proposed Franchise Data Bill The proposed Federal Franchise Data and Public Information Act would require the Department of Commerce to collect and publish data from franchise disclosure documents filed with the department by franchisors. The Census Bureau would be required to analyze statistical data on franchises as part of its five-year business survey. State Laws Twenty-nine states have general franchise or business opportunity laws which, if they apply without an exemption, require disclosure (either with or without prior registration depending on the state and the offering) before any sale. Those states include: -- California; -- Connecticut; 180 -- Florida; -- Georgia; -- Hawaii; -- Illinois; -- Indiana; -- Iowa; -- Kentucky; -- Maine; -- Maryland; -- Michigan; -- Minnesota; -- Nebraska; -- New Hampshire; -- New York; -- North Carolina; -- North Dakota; -- Ohio; -- Oklahoma; -- Oregon; -- Rhode Island; -- South Carolina; -- South Dakota; -- Texas; -- Utah; -- Virginia; 181 -- Washington; and -- Wisconsin. Of these states, Georgia, Nebraska, Ohio, and Oregon have no registration requirement. State Variations A cardinal rule of safe disclosure is to review the law of the state where the transaction will take place. There is little uniformity among the states in their disclosure requirements, and the only safe course is to find out exactly what the state demands before proceeding with the transaction. For example, many states have specific laws requiring disclosure before the sale of franchises in the gasoline, motor vehicle, liquor, or other industries. Alabama and Louisiana, although they do not require disclosures, make any misrepresentations in disclosures or earnings claims an unfair trade practice. Foreign Disclosure Requirements Similarly, several countries have disclosure laws or regulations. Examples include Mexico, France, Bermuda, and the province of Alberta in Canada. Australia is considering adoption of U.S. style disclosure documents. And the European Franchise Federation is considering adopting a U.S. style disclosure requirement. Transfers The sale of a franchise by a franchisee does not require disclosure unless the buyer has significant contact with the franchisor or the terms of the franchise are changed materially. FTC Rule Interpretative Guides I.B.2, 1 Business Franchise Guide (CCH) paragraph 6220. Amendments Renewals, the opening of new outlets, and amendments to existing franchises do not require disclosure. FTC Rule Interpretative Guides I.B.2, CCH paragraph 6220. But see Cal. Fran. Invest. Law, Cal. Corp. Code paragraph 31125, requiring registration and disclosure for certain modifications. Other Laws Failure to disclose may also give rise to common law actions for fraudulent concealment, or for fraud when there is a duty to disclose under state laws. See e.g., Williams v. Dresser Industries, Inc., 795 F. Supp. 1144 (N.D. Ga. 1992), interpreting 182 Georgia common law fraud and its statute requiring pre-sale disclosure when there is a suppression of a material fact. Extraterritorial Application Nine states (California, Maryland, Michigan, New York, North Dakota, Oregon, Rhode Island, South Dakota, and Wisconsin) provide for extraterritorial application of their registration and disclosure statutes, even for sales to non-U.S. franchisees. The FTC's staff has taken that position with respect to a U.S. franchisor and a non-U.S. franchisee transaction, but has never pursued an enforcement action. Liability for Failure To Disclose Currently, both federal and state laws impose penalties on franchisors for failures to make appropriate disclosures. FTC Rule The FTC can impose civil penalties of up to $10,000 per day. 15 U.S.C. paragraph 45(m)(1)(A)-(C). The FTC can also require rescission, reformation, or payment of refunds or damages, 15 U.S.C. paragraph 57b(b); and can issue cease and desist orders, 15 U.S.C. paragraph 45(b). Currently, there is no private right of action under the FTC Rule. Mon- Shore Management, Inc. v. Family Media, Inc., 584 F. Supp. 186 (S.D.N.Y. 1984). The previously discussed proposed federal legislation would provide a private right of action, if enacted. State Laws State franchising and business opportunity laws, and state consumer fraud statutes (which typically cover the sale of franchises and frequently make any violation of the FTC Rule a state law violation) generally provide a private right of action for rescission, damages, multiple or punitive damages, costs, and attorneys' fees. See, e.g., Az. Consumer Fraud Act, Ariz. Rev. Stat. Ann. paragraph 44-1521 et seq.; Article 16.15(b), Tx. Business Opportunity Act, Tex. Rev. Civ. Stat. Ann. art. 5069-16.15(b), granting private remedies for failure to comply with the FTC Rule regarding disclosure through enforcement under the Tx. Deceptive Trade Practices-Consumer Protection Act, Tex. Bus. & Com. Code Ann. paragraph 17.50; Flower World of America, In c. v. Wenzel, 122 Ariz. 319, 594 P.2d 1015 (Ariz. Ct. App. 1978; and Rodopoulos v. Sam Piki's Enters., Inc., 570 So.2d 661 (Ala. 1990). Individuals Liable Liability for failure to make appropriate disclosures can extend to: 183 -- Directors and officers; -- Brokers and subfranchisors; -- Attorneys and accountants; and -- Other individuals, through FTC enforcement actions. Directors and Officers In addition to the franchise company itself, most state laws expressly impose joint and several liability for disclosure violations on directors, principal officers, controlling persons, and employees who aid the violation or are responsible for compliance. See, e.g., Cal. Fran. Invest. Law, Cal. Corp. Code paragraph 31302. Brokers and Subfranchisors Note that because franchise brokers and subfranchisors are jointly responsible for compliance with disclosure laws, they are jointly liable for violations. This creates a particularly difficult situation in subfranchising when the franchisor does not participate in sales and has no ability to police the process. The new Uniform Franchise Offering Circular ("UFOC") guidelines clarified that area: developers are included in the definition of subfranchisors. Attorneys and Accountants Although the general rule is that professionals are liable only to their clients, an exception applies when an attorney or accountant prepares material upon which a third party foreseeably may rely. See, e.g., Courtney v. Waring, 237 Cal. Rptr. 233 (Cal. Ct. App. 1987) (attorneys liable to franchisees for legal malpractice for negligent preparation of offering circular; note that Waring was an officer and director of franchisor, although that fact was not relied upon in the decision). FTC Enforcement Actions Successful recent FTC franchise enforcement actions have led to U.S. Justice Department criminal prosecutions against individuals for conspiracy. See, e.g., FTC v. Fax Corporation of America, [1992-1993 Transfer Binder] Business Franchise Guide (CCH) paragraph 10,030, in which the court held an individual defendant in contempt of court for violations of both an asset freeze and a final judgment order for permanent injunction. In 1993, the principal of the company was criminally indicted. THE DISCLOSURE DOCUMENT -- Set forth below is a summary list of the mandatory categories of disclosure under the current requirements of the FTC Rule and pursuant to the current UFOC Guidelines. These categories will change under the New UFOC 184 Guidelines described below. Mandatory Categories There are four mandatory categories of information that must be included in a disclosure document: -- Information about the franchisor; -- Information about the franchised business; -- A description of the franchise agreement; and -- Supporting facts for any earnings claims. The Franchisor The disclosure statement must include the following information about the franchisor: -- The business history of the company; -- The employment history of officers and directors; -- The litigation history of the company, directors, and officers; -- The bankruptcy history of the company and certain individuals; and -- Financial statements. The Franchised Business The disclosure statement must contain the following information about the franchised business: -- A description of the franchised business; -- The franchisee's initial investment; -- Required purchases or suppliers; -- Financing provided; -- Services provided by the franchisor; -- Trademarks licensed; -- Patents and copyrights; 185 -- Restrictions on sales; -- Arrangements with public figures; -- Existing and terminated franchisees; -- Site selection; and -- Training. The Franchise Agreement The franchisor must disclose the following information about the franchise agreement in the disclosure documents: -- Fees to be paid; -- The exclusive area; -- The extent of the franchisee's personal participation; -- Renewal; -- Termination; -- Repurchase; -- Modification; -- Transfer; -- Death of the franchisee; -- The term of the agreement; and -- Covenants not to compete. Earnings Claims Earnings claims are optional. Franchisors may make such claims about the franchise as part of the inducement to a prospective franchisee. If the franchisor does so, it must make certain disclosures to prevent any misunderstanding of the claims. An earnings claim is any oral, written, or visual representation to a prospect which can be used to calculate, state, or suggest any sales, income, or profit levels. Claims of past or potential future earnings, or the presentation of data such as costs from which income or profits could be calculated by arbitrarily selecting sales figures, all are 186 "earnings claims." FTC Rule Interpretative Guides III, CCH paragraph 6254. Under the FTC disclosure format, a separate Earnings Claim Document is used. The FTC format earnings claim is generally more expensive and more difficult to prepare than an earnings claim under the new UFOC format. Under the UFOC format, earnings claims must: -- Appear as Item 19 of the UFOC document; -- Be included in full in the Offering Circular; -- Have a reasonable basis at the time they are made; -- Include descriptions of factual bases and material assumptions; -- Include a concise summary of the basis for the claim (i.e., whether the claim is based on actual experience of franchised units); -- Include a statement that substantiating data will be made available for review; and -- Contain a conspicuous statement that a new franchisee's individual results are likely to differ. Item 19 was revised in November 1986; the revised version was approved by the FTC in June 1987, and it has been approved by all of the registration states. Certain registration states have more stringent requirements regarding the use of earnings claims. Copies of a form franchise agreement, standard amendments, and all other documents to be executed are included as exhibits in the disclosure document. Other "Material" Information In addition to required categories of disclosure, common law theories of fraud and most state franchise laws make it unlawful to sell a franchise if material facts are omitted. [A2] See, e.g., Cal. Fran. Invest. Act, Cal. Corp. Code paragraph 31201. FTC Restrictions The FTC Rule merely provides that no contrary information can be provided, and in fact prohibits the inclusion of information not required by the FTC Rule or state law. 16 C.F.R. paragraph 436.1(f) and Interpretative Guides, I.D.1.e; CCH paragraph 6227. Failures To Disclose A number of recent cases have involved claims of franchisor liability for failure to disclose matters not covered by mandatory categories. See, e.g., Noble v. C.E.D.O. Inc., 374 N.W.2d 734 (Minn. Ct. App. 1985) (franchisor liable for failure to disclose restaurant site was landfill and potential methane fume problem); Vaughn v. General 187 Foods Corp., [1985-1986 Transfer Binder] Bus. Franchise Guide (CCH) ¶ 8482 (N.D. Ind. May 3,1985)(jury verdict of $14 million for failure to disclose proposed sale of Burger Chef to General Foods), rev'd, [A1]797 F.2d 1403 (7th Cir. 1986), cert. denied, 479 U.S. 1087 (1987). Choosing the Disclosure Format As discussed above, the franchisor can use either the FTC or UFOC disclosure formats. There are, however several factors which affect the choice. Limits on Availability of FTC Document The FTC Disclosure Document prescribed in the FTC Rule complies with FTC Rule disclosure requirements but is not acceptable in most states with state franchise laws. The FTC format is still acceptable even though the FTC has adopted the New UFOC Guidelines. UFOC Document Widely Available The UFOC document--developed by the Midwest Securities Commissioner's Association (now known as "NASAA")--complies with FTC Rule disclosure requirements and is acceptable (with some differing state requirements) in all states with state franchise laws. All or Nothing at All Either the entire FTC disclosure document or the entire UFOC must be used; the franchisor cannot combine parts of each. In the past, some franchisors (primarily startup franchisors) have elected the FTC Rule over the UFOC due to the somewhat less restrictive disclosure requirements under the FTC format relating to the use of audited financial statements, franchise brokers, bankruptcy and litigation history, and franchisee terminations. Preemption The FTC Rule preempts state or other laws to the extent those laws are inconsistent with the FTC Rule. If the law or regulation provides a prospective franchisee with equal or greater protection than that provided by the FTC Rule, the state or other law is not deemed inconsistent. See FTC Rule, 16 C.F.R. paragraph 436.3, note 2. See CCH paragraph 2003 for a chart describing which state franchise laws preempt the FTC Rule requirements. Multistate Documents 188 Both the FTC Rule and state laws require disclosure in terms of state- specific information. It is possible to have a separate document for each state, or to combine disclosure for a number of states in a single document. Many franchisors have separate documents for each registration state (because of required and unique state changes) and a single document for non- registration "FTC" states. In any case, it is essential to identify the state(s) included on the cover and receipts for each disclosure document. The New UFOC Guidelines recognize and, in some instances, facilitate the use of asingle circular. Central Source for Multistate Information In December 1990, the NASAA Franchise & Business Opportunities Committee completed its State Specific Project ("Project"). Appearing as Appendix B-1 to the UFOC Guidelines (CCH paragraph 5826), the Project provides a centralized source for much of the information (e.g., filing fees, number and type of copies, agent for service of process, etc.) that franchisors require for various types of filings. Parts 3 through 6 of the Project contain standard language relating to certain specific disclosure items, such as renewal and termination rights, post-termination covenants not to compete, termination upon bankruptcy, and liquidated damages provisions. USING THE NEW UFOC DOCUMENTS -- The FTC approved revised UFOC Guidelines (the "New Guidelines") on December 30, 1993. The New UFOC Guidelines were drafted and adopted for a variety of reasons including: making offering circulars more readable, understandable, and shorter; requiring new disclosure categories; clarifying and updating the existing format; and eliminating unnecessary disclosure categories or those of minimal use. Whether the New UFOC Guidelines will accomplish all these goals remains to be seen. Summary of Key Differences The New UFOC Guidelines will require a complete rewrite of every offering circular. The changes are extensive and significant in both format and substance. Set forth below is a summary of some of the most significant changes by item. Instructions, Cover Page, and Table of Contents The New Guidelines make the following changes in the opening sections of the disclosure documents: -- "Plain English" must be used throughout the circular; -- When possible, the franchisor must estimate the franchisee's costs and anticipate increases of amounts paid to both franchisors and third parties; -- The franchisor must include a risk factor disclosure regarding venue and arbitration provisions if applicable; and 189 -- Simplify certain requirements which facilitate use of multistate documents. Item 1: Background Information The New Guidelines require the following in the Background Information section of the disclosure document: -- We/You definitions; -- The Predecessor definition has been simplified and certain affiliate disclosure is now required; and -- The franchisor must describe any regulations specific to the industry in which the franchise operates. Item 2: Business Experience The Business Experience section of the disclosure document clarifies the required broker disclosure and must include officers, directors, and applicable executives of each broker. Item 3: Litigation The Litigation History section of the disclosure document must now specify the following: -- Litigation history of predecessors and affiliates selling franchises under franchisor's principal trademark; Litigation falling under a new, broader "materiality" standard; -- Confidential settlement terms; and -- Litigation falling under a new, broader "held liable" standard, which may include lawsuits previously dropped from circulars. Item 4: Bankruptcy Under the Bankruptcy section of the disclosure document, the new guidelines now require: -- Disclosure of affiliate and foreign bankruptcies; and -- Bankruptcies that have occurred in the past 10 years (the old time period was 15 years). 190 Item 5: Initial Fee The Initial Fee section now includes: -- An expanded definition of "initial franchise fee" that includes any initial fees paid to the franchisor before opening; -- A requirement that the franchisor disclose any formula or range for any non-uniform initial fees. Item 6: Ongoing Fees The new Ongoing Fees section now requires: -- A simplified tabular chart format; and -- A statement disclosing voting power of franchisor outlets on fees imposed by cooperatives and, if the franchisor controls the cooperative, a range of fees. Item 7: Initial Investment The revised Initial Investment section now calls for: Mandatory use of tables to identify initial costs and expenses; and -- An estimate of amount of "additional funds" necessary to operate the business during a reasonable start-up period and a description of the basis for that figure. Item 8: Required Purchases The franchisor must disclose the following in the Required Purchases section of the document: -- Required purchases and leases and any sourcing restrictions; -- Disclosure of franchisor and affiliate revenue from required purchases and leases; -- Purchasing or distribution cooperatives; -- A description of all consideration the franchisor receives on sales by suppliers to franchisees; and -- Disclosure of whether the franchisor negotiates purchase arrangements with suppliers on behalf of franchisees. 191 Item 9: Franchisee's Obligations (New Item) A new section, "Franchisee's Obligations," has been added to the UFOC disclosure document. This section requires a tabular listing of the franchisee's obligations under the franchise agreement and other documents, with cross-references to such documents. Item 10: Financing The revised Financing section calls for the following: -- Disclosure of all "indirect offers of financing"; -- Comprehensive tabular disclosures (these are strongly suggested, not required); -- Attachment of financing documents as exhibits to the offering circular; and -- Disclosure of the franchisee's potential liabilities upon default. Item 11: Franchisor Obligations The Franchisor Obligations section now requires the following: -- Detailed disclosures regarding administration of any advertising fund and the use of advertising dollars; -- New, detailed computer system disclosures; -- An operations manual table of contents or statement that informs the potential franchisee of its right to review the manual before sale; and -- Detailed training program disclosures, including subjects taught and hours of classroom and on-the-job training. Item 12: Territory The revised UFOC document requires the following disclosures with respect to territory: -- Whether the franchisor may establish other channels of distribution using the franchisor's trademarks; and -- Whether the franchisor has any plans to operate or franchise a business under a different trademark when the business sells products or services similar to the franchisee's business. 192 Item 13: Trademarks The new Trademarks section requires: -- A simplified focus on "principal" trademarks licensed to the franchisee by the franchisor; and -- A specific legend if the franchisor does not have a federally registered trademark (the new UFOC document no longer requires disclosure of state registered trademarks). Item 14: Patents The Patent section of the disclosure document requires a discussion, in general terms, of proprietary information communicated to the franchisee. Item 15: Operation of Business The Operation of Business section now requires disclosure of restrictions which a franchisor places on managers, whether in writing or by practice. Item 16: Restrictions on Goods and Services Sold by Franchisee The Restrictions on Goods and Services Sold by the Franchisee section now requires specific disclosure of whether the franchisor has the right to change the types of approved goods and services and whether there are limits on the right to make changes. Item 17: Termination and Other Events The section discussing Termination and Other Events now requires: -- A simplified tabular format with cross-references to the franchise and other related agreements; and -- Specific disclosure of arbitration, mediation, choice of forum or choice of law provisions, and integration or merger clauses. Item 18: Public Figures Public figures can be a potent part of the franchisee's advertising. The new Public Figures section requires the disclosure of public figures who are used in the franchise name or symbol or are used in selling franchises to franchisees. Item 19: Earnings Claims 193 The Earnings Claims section, which was discussed above, has not been substantially changed. Item 20: Statistics The Statistics section is to some extent dependent on state law. Check each registration state's laws and regulations to find out how current the disclosures must be. The UFOC Guidelines call for fiscal year-end statistics; some states require statistics current to within 90 to 120 days after the application date. The Statistics section also requires the following: -- Disclosure of company-owned units; -- Information as of the close of the franchisor's last three fiscal years; -- Disclosure of at least 100 franchises most proximate to the location of the proposed franchisee; -- Disclosure as company-owned units any franchises owned by principals of the franchisor; -- Classifications of terminated franchisees that have been modified and expanded; and -- Statistics on transfers of franchises. Item 21: Financial Statements The new Financial Statements section now requires the following: -- A two-year comparative format of balance sheets, income statements, statements of operations, stockholders equity, and cash flows; and -- Audited financial statements of an affiliate, when used as a guarantor's financial statement. Gathering Information for the New UFOC To comply with the New UFOC Guidelines, franchisors should compile the necessary information for preparing and revising the Offering Circular, including: -- Information on future franchisee cost increases; -- All collateral documents, including operations manuals; -- Information about corporate structure, to determine disclosure requirements; 194 -- Information relating to disclosure issues for affiliate and predecessor litigation; -- Analyses of unreported and settled litigation for the last 10 years to ascertain if it meets new standards; -- Analyses of all bankruptcy histories; -- Recordkeeping for non-uniform fees; -- Information from company-owned and franchised outlets on costs and expenses during at least the first three months of business or other appropriate start-up phase; -- Supplier programs and consideration received from suppliers; Information (including from affiliates) on revenue from sales and leases to franchisees; -- Franchisee obligations, to ensure that all significant obligations are stated in the franchise agreement; -- Formal arrangements with financial institutions and final versions of financing documents; -- Clear descriptions of computer hardware and software systems; -- A list of the number of franchises and company-owned outlets in existence as of the close of each of the franchisor's last three fiscal years; -- Last known home addresses and telephone numbers of terminated franchisees; -- All franchisees which have been terminated during the franchisor's last three fiscal years so that terminations can be categorized in accordance with new Item 20 categories; and -- Accounting information in a two-year comparative format of balance sheets, income statements, statements of operations, stockholders equity, and cash flows. Verification Regardless of the format used, and in addition to the specific suggestions for preparing for the New UFOC Guidelines, everything reasonably possible should be done to ensure that the disclosure document is accurate and complete. To protect the franchisor and its officers, directors, and principals vis-a-vis each other, and for yourself: -- Have litigation counsel sign off on litigation disclosure (or non- disclosure) even when no opinion is involved; -- Circulate litigation and bankruptcy questionnaires to all directors, officers, and executives every year, and have each sign off on his or her "bio"; 195 -- Whenever possible, have officers or managers sign off on sections covering their areas of responsibility, e.g., operations on the franchisee list, accounting on earnings claims, and the like; and -- Review amendment and materiality standards with all personnel regarding their areas of responsibility. THE DISCLOSURE PROCESS -- There are four major components to the disclosure process: timing, meeting the requirements of multistate disclosure, obtaining receipts, and policing the process. Timing The FTC Rule requires that the disclosure document, with forms of all agreements, be given to the franchisee on the earlier of: -- The first personal (face-to-face) meeting held for the purpose of discussing the possible sale of franchise; or -- Ten business days before execution of any binding documents or franchisee's payment of any consideration. See FTC Rule, 16 C.F.R. ss436.1(a), 436.2(g) and 436.2(o). The franchisor must give copies of all agreements to be executed, completed except for signatures, to the prospective franchisee at least five business days before execution. FTC Rule, 16 C.F.R. s 436.1(g). Multistate Disclosure State disclosure laws can be triggered if any one or combination (depending on state law) of the following occur within a state: -- The prospective franchisee is a state resident; -- The franchise will be operated in the state; -- The franchise offer originates in the state; -- The franchise offer is received in the state; -- Negotiations occur in the state; or -- The offer is accepted in the state. If the laws of more than one state apply, it may be necessary (unless exemptions exist) to provide a prospect with disclosure documents for each such state. (Get receipts for all!) To the extent that the franchise agreements differ, the presumption is that the 196 contract for the state where the business is to be located should apply (although a few state regulators can be extremely touchy on this issue). Receipts Always obtain receipts, preferably notarized, for delivery of the disclosure document, any addenda, the FTC Earnings Claim Document (if used), and the completed agreements to be executed. Illinois administrators require a franchisor filing an annual report to include photocopies of the signature pages and the receipt pages for each franchise sold during the year preceding the renewal date. Content and Delivery of Receipts The forms of receipts should contain the document name(s), date, state, and detailed list of exhibits included in the disclosure document. Be sure that delivery of the disclosure materials is made to the right person(s): -- Each of individual franchisee(s); -- The executive corporate officer of a corporate franchisee; -- The managing general partner of any partnership; or -- The manager of a limited liability company. Policing the Process Before "closing," police sales procedures by having each prospective franchisee (and perhaps salesperson, separately or together), insert dates, complete blanks, and initial each item of a statement in front of someone else at the company with "clout," confirming: -- The date the disclosure document was received; -- The date any disclosure addendum was received; -- The date of the first face-to-face meeting with a franchisor salesperson (by name); -- The date that any completed copies of the franchise agreement and any other documents (without signatures) were received; -- The date the franchise agreement and any other documents were signed; -- The earliest date any check or money was delivered (name the recipient); -- That no oral, written, or visual claim or representation which contradicted the 197 disclosure document was made (provide space to respond if you anticipate any exceptions); and -- That no oral, written, or visual claim or representation was used to calculate, state, or suggest any sales, income, or profit levels (provide space to respond if you anticipate any exceptions). CHANGES -- Disclosure documents sometimes need to be amended. We discuss below annual updates, amendments for material changes, negotiated changes, and the procedure for making changes. Annual Updates Disclosure statements must be completely updated annually, preferably all at the same time. Registration States In registration states, renewals (or amendments in states having indefinite registrations) are required annually. In many states, registrations expire within a specified number of days after the fiscal year-end. FTC States In FTC states, if the disclosure document used (with only state-specific changes) is currently registered in at least one state, the document can be updated as required by the registration state. If the document is not registered anywhere, it must be updated within 90 days of the fiscal year-end. If the updated disclosure document is not available on time, SALES MUST STOP! FTC Rule Interpretative Guides, Section I.D.1.c.; CCH paragraph 6227. Preparing for Changes Start the preparation of financial statements for the past fiscal year early, especially for a December 31st fiscal year-end. Failure to get audited financial statements on time is one of the most frequent causes for late renewals and consequent "stop selling" under the FTC Rules. Collect information (memos, notes, and the like) throughout the year. Include mandatory changes and voluntary "wish list" changes resulting from problems of the past year and inclusion of good ideas you've seen. Reread all of the disclosure document to check for changes and inconsistencies. Pay particular attention to (or do) the following: -- Personnel changes, especially new brokers; 198 -- Litigation. Review all audit responses, check for counterclaims on franchisor suits, check with statutory agent and courts; -- Incorporate changes made to franchise programs, contracts, and fees; -- Verify investment costs with recent franchises; -- Verify earnings claims against current information; -- Verify the list of active franchisees and number terminated, not renewed, or repurchased; -- Review all contract amendments in the past year and consider the need to include them; and -- Consider other possible issues (contemplated sale or merger of company, major marketing shifts, and so on). Amendments for Material Changes Changing circumstances may sometimes demand material changes to the disclosure documents. For example, personnel may resign, or the franchisor may encounter litigation, financial setbacks, or franchisee terminations. Or the changes may be voluntary. The franchisor may revise its contract, fee, or program, or add new personnel. What constitutes a material change to a disclosure document varies depending on whether you consult the FTC definition or state law definitions. In the case of the small or start-up franchisor, small changes may well be material. FTC Definition The FTC definition of materiality is analogous to traditional securities law: anything with a substantial likelihood of influencing a prospective franchisee in making a significant decision, or relating to the franchise or having a significant financial effect. State Law Definitions State law definitions vary greatly, and many contain nonexclusive lists of very specific defined occurrences. For example, Maryland specifies the termination or failure within three months of the greater of 1 per cent or five franchisees regardless of location, or the lesser of 15 per cent or two franchisees. Md. Regs. Code, s02.02.10.01B(1). NegotiatedChanges Negotiated changes constitute a special area in franchising law. The general policy is that all prospects must be fully informed, treated equally, and given the same opportunities (without regard to bargaining power) if similarly situated. Thus, the 199 franchisor's willingness to negotiate any item must be disclosed. Some state law variations are discussed below. Virginia Law Virginia law provides that a franchisee may, at his or her option, void the franchise if not given the opportunity to negotiate all provisions (other than uniform image and quality standards). Va. Retail Franchising Act, Va. Code Ann. s13.1-565(b). California Law Until September 16, 1989, California's interpretation of its Franchise Investment Law did not permit negotiated changes. On that date, regulations under the California Franchise Investment Law were amended to permit negotiated changes in certain limited situations. See Cal. Code Regs. tit. 10 s310.100.2. New York Law New York, like California, previously did not permit negotiated changes in the sale of franchises; however, on August 3, 1990, the New York Supreme Court held that the New York statute does not prohibit negotiated changes. The court reasoned that while regulations prohibiting negotiated changes may protect existing franchisees, the intent of the New York franchise registration law (N.Y. Gen. Bus. Law, sections 680 through 695) was to protect prospective franchisees. See Southland Corp. v. Abrams, 560 N.Y.S. 2d 253 (N.Y. Sup. Ct. 1990). Staying on the Safe Side To avoid legal and practical problems of negotiated agreements, a franchisor should attempt to accommodate reasonable, foreseeable needs of franchisees. A small or start-up franchisor does not have the marketing leverage to sell unconscionable contracts, and they generally lead to problems later anyway. Here are some suggestions: -- Consider standard addenda (to be included in the disclosure document) for lengthy special provisions that will only apply in special cases, such as multiple unit sales if sales are typically for a single unit; -- Consider stating a range and a formula or other basis for determining the "negotiated" item; or -- For a negotiated change not contemplated by disclosure, document the reason and basis (other than leverage!) and consider amendment of the disclosure document (with possible exception for a single instance under such unique circumstances that it is almost certain never to recur). 200 Procedures for Amending Disclosure The procedure for amending disclosure documents will vary depending on whether the change occurs in an FTC or registration state. Registration States In a registration state, file the post-effective amendment (addendum or revised pages) promptly and stop selling until the amendment is approved unless the state regulator approves interim sales. FTC States Updating disclosure for material changes is required quarterly, but prospects must be informed of material changes before entering the relationship. FTC Earnings Claim Documents must be current when used. FTC Rule Interpretative Guides, Section I.C.4.; CCH paragraph 6225. For a disclosure document that is not registered anywhere, reflect material changes by an addendum, or by changing affected pages, placing the word "revised" and the revision date on each affected page, on the cover (under the effective date), and in the index following the caption of each affected item, and changing the receipt. It is not necessary to update the entire UFOC (generally, new financial statements need not be inserted), but all material changes should be made. For example, an adverse change in a franchisor's financial condition exceeding 10 per cent is a material change requiring new financial statements. Sales in Process When a material change occurs after a prospect has received a disclosure document, but before entering the relationship, give the prospect an addendum or revised disclosure document, obtain a receipt, and wait 10 more business days before taking money or signing contracts. CONCLUSION -- In the final analysis, disclosure is good for everybody. It can spare the franchisee the hardship of a failed business and a franchisor the legal costs that are so often the result of unmet expectations. [FNa] Carol McErlean is a partner with the Chicago law firm of Rudnick & Wolfe. Gayle Cannon is a partner with Cannon & Cannon, in Dallas. This article is based on a paper the authors prepared for an August 1993 seminar sponsored by the ABA's Forum on Franchising. 201 Case: Zapatha v. Dairy Mart 381 Mass. 284 (1980) Elaine ZAPATHA et al.[FN1] v. DAIRY MART, INC. 381 Mass. 284, 408 N.E.2d 1370 FN1. Bernard Zapatha, husband of Elaine. Supreme Judicial Court of Massachusetts, Hampden. Argued April 10, 1980. Decided Aug. 5, 1980. Joseph D. Rosenbloom, Springfield, for defendant. Edward J. Barry, Springfield, for plaintiffs. Before HENNESSEY, C. J., and QUIRICO, BRAUCHER, WILKINS and ABRAMS, JJ. WILKINS, Justice. We are concerned here with the question whether Dairy Mart, Inc. (Dairy Mart), lawfully undertook to terminate a franchise agreement under which the Zapathas operated a Dairy Mart store on Wilbraham Road in Springfield. The Zapathas brought this action seeking to enjoin the termination of the agreement, alleging that the contract provision purporting to authorize the termination of the franchise agreement without cause was unconscionable and that Dairy Mart's conduct was an unfair and deceptive act or practice in violation of G.L. c. 93A. The judge ruled that Dairy Mart did not act in good faith, that the termination provision was unconscionable, and that Dairy Mart's termination of the agreement without cause was an unfair and deceptive act. We granted Dairy Mart's application for direct appellate review of a judgment that stated that Dairy Mart could terminate the agreement only for good cause and that the attempted termination was null and void.[FN2] We reverse the judgments. FN2. Because, as we were advised at oral argument, the Zapathas continued to operate the store while the case was pending in the Superior Court, the damages awarded in a separate judgment under G.L. c. 93A appear to have been limited to costs and attorney's fees. Mr. Zapatha is a high school graduate who had attended college for one year and had also taken college evening courses in business administration and business law. From 1952 to May, 1973, he was employed by a company engaged in the business of electroplating. He rose through the ranks to foreman and then to the position of 202 operations manager, at one time being in charge of all metal finishing in the plant with 150 people working under him. In May, 1973, he was discharged and began looking for other opportunities, in particular a business of his own. Several months later he met with a representative of Dairy Mart. Dairy Mart operates a chain of franchised "convenience" stores. The Dairy Mart representative told Mr. Zapatha that working for Dairy Mart was being in business for one's self and that such a business was very stable and secure. Mr. Zapatha signed an application to be considered for a franchise. In addition, he was presented with a brochure entitled "Here's a Chance," which made certain representations concerning the status of a franchise holder.[FN3] FN3. It included the following statements: ". . . you'll have the opportunity to own and run your own business . . ."; "We want to be sure we're hooking up with the right person. A person who sees the opportunity in owning his own business . . . who requires the security that a multi- million dollar parent company can offer him . . . who has the good judgment and business sense to take advantage of the unique independence that Dairy Mart offers its franchisees . . . We're looking for a partner . . . who can take the tools we offer and build a life of security and comfort . . ." Dairy Mart approved Mr. Zapatha's application and offered him a store in Agawam. On November 8, 1973, a representative of Dairy Mart showed him a form of franchise agreement, entitled Limited Franchise and License Agreement, asked him to read it, and explained that his wife would have to sign the agreement as well. Under the terms of the agreement, Dairy Mart would license the Zapathas to operate a Dairy Mart store, using the Dairy Mart trademark and associated insignia, and utilizing Dairy Mart's "confidential" merchandising methods. Dairy Mart would furnish the store and the equipment and would pay rent and gas and electric bills as well as certain other costs of doing business. In return Dairy Mart would receive a franchise fee, computed as a percentage of the store's gross sales. The Zapathas would have to pay for the starting inventory, and maintain a minimum stock of saleable merchandise thereafter. They were also responsible for wages of employees, related taxes, and any sales taxes. The termination provision, which is set forth in full in the margin, [FN4] allowed either party, after twelve months, to terminate the agreement without cause on ninety days' written notice. In the event of termination initiated by it without cause, Dairy Mart agreed to repurchase the saleable merchandise inventory at retail prices, less 20%. FN4. "(9) The term of this Limited Franchise and License Agreement shall be for a period of Twelve (12) months from date hereof, and shall continue uninterrupted thereafter. If DEALER desires to terminate after 12 months from date hereof, he shall do so by giving COMPANY a ninety (90) day written notice by Registered Mail of his intention to terminate. If COMPANY desires to terminate, it likewise shall give a ninety (90) day notice, except for the following reasons which shall not require any written notice and shall terminate the Franchise immediately: "(a) Failure to pay bills to suppliers for inventory or other products when due. "(b) Failure to pay Franchise Fees to COMPANY. "(c) Failure to pay city, state or federal taxes as said taxes shall become due and payable. "(d) Breach of any condition of this Agreement." 203 The Dairy Mart representative read and explained the termination provision to Mr. Zapatha. Mr. Zapatha later testified that, while he understood every word in the provision, he had interpreted it to mean that Dairy Mart could terminate the agreement only for cause. The Dairy Mart representative advised Mr. Zapatha to take the agreement to an attorney and said "I would prefer that you did." However, he also told Mr. Zapatha that the terms of the contract were not negotiable. The Zapathas signed the agreement without consulting an attorney. When the Zapathas took charge of the Agawam store, a representative of Dairy Mart worked with them to train them in Dairy Mart's methods of operation. In 1974, another store became available on Wilbraham Road in Springfield, and the Zapathas elected to surrender the Agawam store. They executed a new franchise agreement, on an identical printed form, relating to the new location. In November, 1977, Dairy Mart presented a new and more detailed form of "Independent Operator's Agreement" to the Zapathas for execution. Some of the terms were less favorable to the store operator than those of the earlier form of agreement.[FN5] Mr. Zapatha told representatives of Dairy Mart that he was content with the existing contract and had decided not to sign the new agreement. On January 20, 1978, Dairy Mart gave written notice to the Zapathas that their contract was being terminated effective in ninety days. The termination notice stated that Dairy Mart "remains available to enter into discussions with you with respect to entering into a new Independent Operator's Agreement; however, there is no assurance that Dairy Mart will enter into a new Agreement with you, or even if entered into, what terms such Agreement will contain." The notice also indicated that Dairy Mart was prepared to purchase the Zapathas' saleable inventory. FN5. In his testimony, Mr. Zapatha said that he objected to a new provision under which Dairy Mart reserved the option to relocate an operator to a new location and to a requirement that the store be open from 7 A.M. to 11 P.M. every day. Previously the Zapathas' store had been open from 8 A.M. to 10 P.M. There were other provisions, such as an obligation to pay future increases in the cost of heat and electricity, that were more burdensome to a franchisee. A few changes may have been to the advantage of the franchisee. The judge found that Dairy Mart terminated the agreement solely because the Zapathas refused to sign the new agreement. He further found that, but for this one act, Dairy Mart did not behave in an unconscionable manner, in bad faith, or in disregard of its representations. There is no evidence that the Zapathas undertook to discuss a compromise of the differences that led to the notice of termination. On these basic facts, the judge ruled that the franchise agreement was subject to the sales article of the Uniform Commercial Code (G.L. c. 106, art. 2) and, even if it were not, the principles of unconscionability and good faith expressed in that article applied to the franchise agreement by analogy. He further ruled that (1) the termination provision of the agreement was unconscionable because it authorized termination without cause, (2) the termination without cause violated Dairy Mart's obligation of good faith, and (3) the termination constituted "an unfair method of competition and unfair and deceptive 204 act within the meaning of G.L. c. 93A, s 2." Section I 1. We consider first the question whether the franchise agreement involves a "transaction in goods" within the meaning of those words in article two of the Uniform Commercial Code (G.L. c. 106, s 2-103, as appearing in St.1957, c. 765, s 1), and that consequently the provisions of the sales articles of the Uniform Commercial Code govern the relationship between the parties. The Zapathas point specifically to the authority of a court to refuse to enforce "any clause of the contract" that the court finds "to have been unconscionable at the time it was made." G.L. c. 106, s 2-302, as appearing in St.1957, c. 765, s 1.[FN6] They point additionally to the obligation of good faith in the performance and enforcement of a contract imposed by G.L. c. 106, s 1-203, and to the specialized definition of "good faith" in the sales article as meaning "in the case of a merchant . . . honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade." G.L. c. 106, s 2-103(1)(b), as appearing in St.1957, c. 765, s 1.[FN7] FN6. General Laws c. 106, s 2-302, as appearing in St.1957, c. 765, s 1, reads as follows: "s 2-302. Unconscionable Contract or Clause "(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. "(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination." FN7. Generally throughout the Uniform Commercial Code, "good faith" is defined to mean "honesty in fact in the conduct or transaction concerned." G.L. c. 106, s 1-201(19). The definition of "good faith" in the sales article includes a higher standard of conduct by adding a requirement that "merchants" observe "reasonable commercial standards of fair dealing in the trade." G.L. c. 106, s 2103(1)(b). There is no doubt that Dairy Mart is a "merchant" as defined under the sales article. See G.L. c. 106, s 2-104. We need not pause long over the question whether the franchise agreement and the relationship of the parties involved a transaction in goods. Certainly, the agreement required the plaintiffs to purchase goods from Dairy Mart. "Goods" for the purpose of the sales article means generally "all things . . . which are movable." G.L. c. 106, s 2105(1), as appearing in St.1957, c. 765, s 1. However, the franchise agreement dealt with many subjects unrelated to the sale of goods by Dairy Mart.[FN8] About 70% of the goods the plaintiffs sold were not purchased from Dairy Mart. Dairy Mart's profit was intended to come from the franchise fee and not from the sale of items to its franchisees. Thus, the sale of goods by Dairy Mart to the Zapathas was, in a commercial sense, a minor aspect of the entire relationship. [FN9] We would be disinclined to import automatically all the provisions of the sales article into a relationship 205 involving a variety of subjects other than the sale of goods, merely because the contract dealt in part with the sale of goods. Similarly, we would not be inclined to apply the sales article only to aspects of the agreement that concerned goods. Different principles of law might then govern separate portions of the same agreement with possibly inconsistent and unsatisfactory consequences. FN8. Where agreements have involved "goods," as defined in the Code, as well as other property or services, courts have attempted to ascertain whether the sale of goods was "their predominant factor, their thrust, their purpose, reasonably stated" (Bonebrake v. Cox, 499 F.2d 951, 960 (8th Cir. 1974)), and, if so, to apply the Code to the agreements. See Pittsburgh-Des Moines Steel Co. v. Brookhaven Manor Water Co., 532 F.2d 572, 580 (7th Cir. 1976); De Filippo v. Ford Motor Co., 516 F.2d 1313, 1323 (3d Cir.), cert. denied, 423 U.S. 912, 96 S.Ct. 216, 46 L.Ed.2d 141 (1975) (not primarily the sale of goods); Bonebrake v. Cox, supra at 960; Lincoln Pulp & Paper Co. v. Dravo Corp., 436 F.Supp. 262, 275 (D.Me.1977) (predominantly a service contract); Ranger Constr. Co. v. Dixie Floor Co., 433 F.Supp. 442, 444-445 (D.S.C.1977); Burton v. Artery Co., 279 Md. 94, 102-115, 367 A.2d 935 (1977). Accordingly, courts have applied the Uniform Commercial Code to distributorship agreements even though such agreements have concerned more than the sale of goods. See, e. g., Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129, 134 (5th Cir.), cert. denied, 434 U.S. 938, 100 S.Ct. 288, 62 L.Ed.2d 198 (1979). FN9. The essential thrust of the transaction was an exchange of intangible rights, obligations and services. Viewed in a realistic economic light, the franchise agreement contemplated the licensing by Dairy Mart of an entire "business format," including a trademark, a system of doing business, and the right to occupy a fully equipped store, in return for which it was to receive a franchise fee and the expectation that the Zapathas' efforts, in keeping with their obligations under the agreement, would enhance the goodwill of the Dairy Mart franchise chain as a whole. (1) We view the legislative statements of policy concerning good faith and unconscionability as fairly applicable to all aspects of the franchise agreement, not by subjecting the franchise relationship to the provisions of the sales article but rather by applying the stated principles by analogy. See Commonwealth v. DeCotis, 366 Mass. 234, 242, 316 N.E.2d 748 (1974), quoted in note 12 infra. This basic common law approach, applied to statutory statements of policy, permits a selective application of those principles expressed in a statute that reasonably should govern situations to which the statute does not apply explicitly. See Note, Article Two of the Uniform Commercial Code and Franchise Distribution Agreements, 1969 Duke L.J. 959, 980- 985. Section II (2, 3) 2. We consider first the plaintiffs' argument that the termination clause of the franchise agreement, authorizing Dairy Mart to terminate the agreement without cause, on ninety days' notice, was unconscionable by the standards expressed in G.L. c. 106, s 2-302.[FN10] The same standards are set forth in Restatement (Second) of Contracts s 234 (Tent. Drafts Nos. 1-7, 1973). The issue is one of law for the court, and the test is to be made as of the time the contract was made. G.L. c. 106, s 2-302(1), and 206 comment 3 of the Official Comments. See W.L. May, Co. v. Philco-Ford Corp., 273 Or. 701, 707, 543 P.2d 283 (1975). In measuring the unconscionability of the termination provision, the fact that the law imposes an obligation of good faith on Dairy Mart in its performance under the agreement should be weighed. See W.L. May, Co. v. PhilcoFord Corp., supra at 709, 543 P.2d 283. FN10. The agreement permitted immediate termination on the occurrence of certain conditions which are not involved in this case. (4) The official comment to s 2-302 states that "(t)he basic test is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one- sided as to be unconscionable under the circumstances existing at the time of the making of the contract. . . . The principle is one of prevention of oppression and unfair surprise . . . and not of disturbance of allocation of risks because of superior bargaining power." Official Comment 1 to U.C.C. s 2-302.[FN11] Unconscionability is not defined in the Code, nor do the views expressed in the official comment provide a precise definition. The annotation prepared by the Massachusetts Advisory Committee on the Code states that "(t)he section appears to be intended to carry equity practice into the sales field." See 1 R. Anderson, Uniform Commercial Code s 2-302:7 (1970) to the same effect. This court has not had occasion to consider in any detail the meaning of the word "unconscionable" in s 2-302.[FN12] Because there is no clear, all-purpose definition of "unconscionable," nor could there be, unconscionability must be determined on a case by case basis (see Commonwealth v. Gustafsson, 370 Mass. 181, 187, 346 N.E.2d 706 (1976)), giving particular attention to whether, at the time of the execution of the agreement, the contract provision could result in unfair surprise and was oppressive to the allegedly disadvantaged party. FN11. The comment has been criticized as useless and at best ambiguous (J. White & R. Summers, The Uniform Commercial Code, 116 (1972)), and s 2- 302 has been characterized as devoid of any specific content. Leff, Unconscionability and the Code (The Emperor's New Clause, 115 U.Pa.L.Rev. 485, 487-489 (1967)). On the other hand, it has been said that the strength of the unconscionability concept is its abstraction, permitting judicial creativity. See Ellinghaus, In Defense of Unconscionability, 78 Yale L.J. 757 (1969). FN12. In Lechmere Tire & Sales Co. v. Burwick, 360 Mass. 718, 277 N.E.2d 503 (1972), we considered a credit card application that purported to place on the customer the risk of loss arising from the improper use of a lost card if the holder had not given written notice of the loss to the seller. We said the contract was an "adhesion" contract to be construed strictly against the seller but that the agreement was not so unconscionable as to be unenforceable. Id. at 720-721, 277 N.E.2d 503. We noted that "(t)here is every reason of public policy for protecting consumers from contractual provisions, not brought home to them, which are or may be unconscionable. . . . Compare the policy expressed in G.L. c. 106, s 2-302." Id. at 721 n.3, 277 N.E.2d at 506. Commonwealth v. DeCotis, 366 Mass. 234, 316 N.E.2d 748 (1974), involved the question whether a landowner's imposition on mobile home owners of resale charges for which the landlord rendered no services was an unfair act or practice under G.L. c. 93A. We said that "(t)hat provision of the Uniform Commercial Code which permits a court to refuse to enforce a contract or a contract provision which is 207 unconscionable provides a reasonable analogy here. See G.L. c. 106, s 2-302." Id. at 242, 316 N.E.2d at 754. We concluded that the absence of consideration for the charge and the uneven bargaining position of the parties made the practice unfair under G.L. c. 93A. (5) We start with a recognition that the Uniform Commercial Code itself implies that a contract provision allowing termination without cause is not per se unconscionable. See Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129, 138 (5th Cir. 1979) ("We seriously doubt, however, that public policy frowns on any and all contract clauses permitting termination without cause."); Division of Triple T Serv., Inc. v. Mobil Oil Corp., 60 Misc.2d 720, 730, 304 N.Y.S.2d 191 (1969), aff'd 34 App.Div.2d 618, 311 N.Y.S.2d 961 (N.Y.1970). Section 2-309(3) provides that "(t)ermination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable." G.L. c. 106, s 2-309, as appearing in St.1957, c. 765, s 1. This language implies that termination of a sales contract without agreed "cause" is authorized by the Code, provided reasonable notice is given. See Rockwell Eng'r Co. v. Automatic Timing & Controls Co., 559 F.2d 460, 463 (7th Cir. 1977); Aaron E. Levine & Co. v. Calkraft Paper Co., 429 F.Supp. 1039, 1049-1050 (E.D.Mich.1976); Artman v. International Harvester Co., 355 F.Supp. 482, 490 (W.D.Pa.1973); Weilersbacher v. Pittsburgh Brewing Co., 421 Pa. 118, 121, 218 A.2d 806 (1966). There is no suggestion that the ninety days' notice provided in the Dairy Mart franchise agreement was unreasonable. (6, 7) We find no potential for unfair surprise to the Zapathas in the provision allowing termination without cause. We view the question of unfair surprise as focused on the circumstances under which the agreement was entered into.[FN13] The termination provision was neither obscurely worded, nor buried in fine print in the contract. Contrast Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 449 (D.C.Cir.1965). The provision was specifically pointed out to Mr. Zapatha before it was signed; Mr. Zapatha testified that he thought the provision was "straightforward," and he declined the opportunity to take the agreement to a lawyer for advice. The Zapathas had ample opportunity to consider the agreement before they signed it.[FN14] Significantly, the subject of loss of employment was paramount in Mr. Zapatha's mind. He testified that he had held responsible jobs in one company from 1952 to 1973, that he had lost his employment, and that he "was looking for something that had a certain amount of security; something that was stable and something I could call my own." We conclude that a person of Mr. Zapatha's business experience and education should not have been surprised by the termination provision and, if in fact he was, there was no element of unfairness in the inclusion of that provision in the agreement. See Fleischmann Distilling Corp. v. Distillers Co., 395 F.Supp. 221, 233 ("(i)t is the exceptional commercial setting where a claim of unconscionability will be allowed"). Contrast Johnson v. Mobil Oil Corp., 415 F.Supp. 264, 268- 269 (illiterate service station operator incapable of reading dealer contract). FN13. As we shall note subsequently, the concept of oppression deals with the substantive unfairness of the contract term. This two-part test for unconscionability involves determining whether there was "an absence of meaningful choice on the part of one of the parties, together with contract terms which are unreasonably favorable to the other party." Williams v. Walker- 208 Thomas Furniture Co., 350 F.2d 445, 449 (D.C.Cir.1965). See Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129, 139 (5th Cir. 1979). The inquiry involves a search for components of "procedural" and "substantive" unconscionability. See generally Leff, Unconscionability and the Code The Emperor's New Clause, 115 Pa.L.Rev. 485 (1967). See also Johnson v. Mobil Oil Corp., 415 F.Supp. 264, 268 (E.D.Mich.1976); Fleischmann Distilling Corp. v. Distillers Co., 395 F.Supp. 221, 232- 233 (S.D.N.Y.1975). FN14. This is true as to the initial agreement for the Agawam store and obviously true as to the subsequent identical agreement for the Springfield store. (8) We further conclude that there was no oppression in the inclusion of a termination clause in the franchise agreement. We view the question of oppression as directed to the substantive fairness to the parties of permitting the termination provisions to operate as written. The Zapathas took over a going business on premises provided by Dairy Mart, using equipment furnished by Dairy Mart. As an investment, the Zapathas had only to purchase the inventory of goods to be sold but, as Dairy Mart concedes, on termination by it without cause Dairy Mart was obliged to repurchase all the Zapathas' saleable merchandise inventory, including items not purchased from Dairy Mart, at 80% of its retail value. There was no potential for forfeiture or loss of investment. There is no question here of a need for a reasonable time to recoup the franchisees' initial investment. See McGinnis Piano & Organ Co. v. Yamaha Int'l Corp., 480 F.2d 474, 480 (8th Cir. 1973); Gellhorn, Limitations on Contract Termination Rights Franchise Cancellations, 1967 Duke L.J. 465, 479-481. The Zapathas were entitled to their net profits through the entire term of the agreement. They failed to sustain their burden of showing that the agreement allocated the risks and benefits connected with termination in an unreasonably disproportionate way and that the termination provision was not reasonably related to legitimate commercial needs of Dairy Mart. See Gellhorn, supra at 512. See also Central Ohio Co-op Milk Producers, Inc. v. Rowland, 29 Ohio App.2d 236, 281 N.E.2d 42, 58 Ohio Op.2d 421, 423 (1972); W.L. May, Co. v. Philco-Ford Corp., 273 Or. 701, 708, 543 P.2d 283 (1975). To find the termination clause oppressive merely because it did not require cause for termination would be to establish an unwarranted barrier to the use of termination at will clauses in contracts in this Commonwealth, where each party received the anticipated and bargained for consideration during the full term of the agreement. Section III (9) 3. We see no basis on the record for concluding that Dairy Mart did not act in good faith, as that term is defined in the sales article ("honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade"). G.L. c. 106, s 2103(1)(b). There was no evidence that Dairy Mart failed to observe reasonable commercial standards of fair dealing in the trade in terminating the agreement. If there were such standards, there was no evidence of what they were. (10, 11) The question then is whether there was evidence warranting a finding that Dairy Mart was not honest "in fact." The judge concluded that the absence of any commercial purpose for the termination other than the Zapathas' refusal to sign a new franchise agreement violated Dairy Mart's obligation of good faith. Dairy Mart's right to terminate was clear, and it exercised that right for a reason it openly disclosed. The 209 sole test of "honesty in fact" is whether the person was honest. See Industrial Nat'l Bank v. Leo's Used Car Exch. Inc., 362 Mass. 797, 801, 291 N.E.2d 603 (1973). We think that, whether or not termination according to the terms of the franchise agreement may have been arbitrary, it was not dishonest.[FN15] FN15. Under G.L. c. 106, s 1-203, "(e)very contract . . . imposes an obligation of good faith in its performance or enforcement " (emphasis supplied). We shall assume that an act of termination falls within the "performance" of the agreement. See Baker v. Ratzlaff, 1 Kan.App.2d 285, 288, 564 P.2d 153 (1977). But see Summers, "Good Faith" in General Contract Law and the Sales Provisions of the Uniform Commercial Code, 54 Va.L.Rev. 195, 252 (1968). (12, 13) The judge concluded that bad faith was also manifested by Dairy Mart's introductory brochure, which made representations of "security, comfort, and independence." Although this brochure and Mr. Zapatha's mistaken understanding that Dairy Mart could terminate the agreement only for cause could not be relied on to vary the clear terms of the agreement, the introductory brochure is relevant to the question of good faith. However, although the brochure misstated a franchisee's status as the owner of his own business, it shows no lack of honesty in fact relating to the right of Dairy Mart to terminate the agreement. Furthermore, by the time the Zapathas executed the second agreement, and even the first agreement, they knew that they would operate the franchise, but that they would not own the assets used in the business (except the goods to be sold); that the franchise agreement could be terminated by them and, at least in some circumstances, by Dairy Mart; and that in fact the major investment of funds would be made by Dairy Mart. We conclude that the use of the brochure did not warrant a finding of an absence of "honesty in fact." See Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129, 138 (5th Cir. 1979); Mason v. Farmers Ins. Cos., 281 N.W.2d 344, 347 (Minn.1979).[FN16] FN16. It has been suggested that, despite the limited definition of good faith in the Code, in some contexts the general obligation of good faith in s 1-203 can be used to import an objective standard of "decency, fairness or reasonableness in performance or enforcement" into a contract to which it applies. Farnsworth, Good Faith Performance and Commercial Reasonableness Under the Uniform Commercial Code, 30 U.Chi.L.Rev. 666, 668 (1963). Good faith in this sense can be regarded as an "excluder," barring varied forms of unreasonable conduct in different circumstances. See Summers, "Good Faith" in General Contract Law and the Sales Provisions of the Uniform Commercial Code, 54 Va.L.Rev. 195, 196 (1968). Rather than stretch the Code definition of good faith beyond the plain meaning of the words used to define good faith, we prefer, as we are about to do, to analyze the question of fairness and reasonableness independently of the Code. Section IV 4. Although what we have said disposes of arguments based on application by analogy of provisions of the sales article of the Uniform Commercial Code, there remains the question whether the judge's conclusions may be supported by some general principle of law. The provisions of the Uniform Commercial Code with which we have dealt by analogy in this opinion may not have sufficient breadth to provide protection from 210 conduct that has produced an unfair and burdensome result, contrary to the spirit of the bargain, against which the law reasonably should provide protection. See Restatement (Second) of Contracts s 231 (Tent. Drafts Nos. 1-7 1973); Corbin, Contracts s 654A (C.K. Kaufman 1980 Supp.).[FN17] FN17. The unconscionability provision of G.L. c. 106, s 2-302, concerns circumstances determined at the time of the making of the agreement and relates only to the unconscionability of a term or terms of the contract. The "good faith" obligation of G.L. c. 106, s 1-203, deals with "honesty in fact," a question of the state of mind of the merchant or of his adherence to whatever reasonable commercial standards there may be in his trade. A merchant's conduct might not be dishonest and might adhere to reasonable standards, if any, in his trade and thus might be in good faith under s 1-203, and yet be unfair and unreasonably burdensome. (14) The law of the Commonwealth recognizes that under some circumstances a party to a contract is not free to terminate it according to its terms. In Fortune v. National Cash Register Co., 373 Mass. 96, 104-105, 364 N.E.2d 1251 (1977), we held that where an employer terminated an at will employment contract in order to deprive its employee of a portion of a commission due to him, the employer acted in bad faith. There, the employer correctly argued that termination of the employee was expressly permitted by the contract, and that all amounts payable under the terms of the contract at the time of termination had been paid. We concluded, however, that the law imposed an obligation of good faith on the employer and that the employer violated that obligation in terminating the relationship in order to avoid the payment of amounts earned, but not yet payable. The Legislature has limited the right of certain franchisors to terminate franchise agreements without cause.[FN18] On the other hand, the Legislature has not adopted limitations on the right to terminate all franchise agreements in general, and its failure to do so is understandable because of the varied nature of franchise arrangements, where such varying factors exist as the relative bargaining power of the parties, the extent of investment by franchisees, and the degree to which the franchisee's goodwill, as opposed to that of the franchisor, is involved in the business operation. Further, in recognition of a general duty of good faith and fair dealing in business transactions under the law of the Commonwealth, c. 93A of the General Laws imposes on any person who engages in the conduct of any trade or commerce an obligation not to use any "unfair or deceptive acts or practices," as defined in G.L. c. 93A, s 2(a), as appearing in St.1967, c. 813, s 1, in dealing with another person who engages in any trade or commerce. G.L. c. 93A, s 11, as amended through St.1979, c. 72, s 2. FN18. See G.L. c. 93B, s 4(3)(e), (4) concerning the cancellation or nonrenewal of a motor vehicle dealer's franchise and requiring good cause for manufacturer's or distributor's action; G.L. c. 93E, ss 5, 5A, requiring cause for a supplier's termination or nonrenewal of a gasoline station dealer's agreement and imposing an obligation on the supplier to repurchase merchantable products sold to the dealer. New Jersey has a Franchise Practices Act of general applicability that "prohibits a franchisor from terminating, cancelling or failing to renew a franchise without good cause which is defined as the failure by the franchisee to substantially comply with the requirements imposed on him by the franchise. N.J.S.A. 56:10-5." Shell Oil Co. v. 211 Marinello, 63 N.J. 402, 409, 307 A.2d 598, 602 (1973), cert. denied, 415 U.S. 920, 94 S.Ct. 1421, 39 L.Ed.2d 475 (1974). Although the act applied only prospectively (N.J.S.A. 56:10-8), in the Marinello case the New Jersey Supreme Court applied the expressed public policy to bar termination of a service station operator's franchise in the absence of good cause, as so defined. The special status of service station operators has prompted some courts to adopt common law rules requiring good cause for termination in spite of contract language that seemed to allow termination without cause. See Arnott v. American Oil Co., 609 F.2d 873, 880-884 (8th Cir. 1979), cert. denied, --- U.S. ---, 100 S.Ct. 1852, 64 L.Ed.2d 272; Atlantic Richfield Co. v. Razumic, 480 Pa. 366, 390 A.2d 736 (1978); Ashland Oil, Inc. v. Donahue, 223 S.E.2d 433 (W.Va.1976). (15) We thus analyze the case before us in terms of whether in terminating the agreement Dairy Mart failed to act in good faith in a broader sense than the term is used in G.L. c. 106, s 1-203, or dealt unfairly with the Zapathas, and whether Dairy Mart engaged in any unfair or deceptive act or practice. Much of what we said in discussing unconscionability and bad faith in terms of the Uniform Commercial Code applies here and need not be repeated. There is no showing that Dairy Mart usurped funds to which the Zapathas were reasonably entitled. Certainly Dairy Mart did not deprive the Zapathas of income that they had fairly earned, as the employer attempted to do in the Fortune case. We know nothing of any goodwill that the Zapathas had developed in their own name. There was no showing that, by their special efforts, the Zapathas built up the business at the Springfield store. As far as the record shows, they would lose no financial investment on termination and would not be left with unsaleable inventory or special purpose supplies and equipment. Chapter 93A, s 2(b), instructs us to look to interpretations of the Federal Trade Commission Act in construing the meaning of the words "unfair or deceptive acts or practices" in G.L. c. 93A, s 2(a). No case or Federal Trade Commission interpretation has been brought to our attention making the termination at will of a franchise agreement of the character involved here an unfair or deceptive act or practice.[FN19] FN19. The Federal Trade Commission adopted a rule in December, 1978, effective July 21, 1979, requiring franchisors to make certain disclosures in a separate document furnished to prospective franchisees. Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures, 16 C.F.R. s 436. The Zapathas do not rely on this rule. We are most concerned, as was the judge below, with the introductory circular that Dairy Mart furnished Mr. Zapatha. The judge ruled that the introductory circular contained misleading information concerning the Zapathas' status as franchisees. However, we cannot find in that document any deception or unfairness that has a bearing on the right of Dairy Mart to terminate the agreement as it did. A representative read the termination clause to Mr. Zapatha before the Zapathas signed the agreement. Mr. Zapatha declined an invitation to take the agreement to a lawyer. He understood individually every word of the termination clause. Moreover, when Dairy Mart terminated the agreement, it offered to negotiate further, and the Zapathas did not take the opportunity to do so. Unless we were to take the position that termination without cause of a franchise agreement of the character involved here is prohibited invariably by the law of the 212 Commonwealth, a position we decline to adopt (cf. Richey v. American Automobile Ass'n, --- Mass. --- [FNa], 406 N.E.2d 675), Dairy Mart lawfully terminated the agreement because there was no showing that in terminating it Dairy Mart engaged in any unfair, deceptive, or bad faith conduct. FNa. Mass.Adv.Sh. (1980) 1425. Judgments reversed. Web Resources www.startupjournal.com/franchise/ FRCP 4 Service of Process II. COMMENCEMENT OF ACTION; SERVICE OF PROCESS, PLEADINGS, MOTIONS, AND ORDERS Rule 4. Summons (a) Form. The summons shall be signed by the clerk, bear the seal of the court, identify the court and the parties, be directed to the defendant, and state the name and address of the plaintiff's attorney or, if unrepresented, of the plaintiff. It shall also state the time within which the defendant must appear and defend, and notify the defendant that failure to do so will result in a judgment by default against the defendant for the relief demanded in the complaint. The court may allow a summons to be amended. (b) Issuance. Upon or after filing the complaint, the plaintiff may present a summons to the clerk for signature and seal. If the summons is in proper form, the clerk shall sign, seal, and issue it to the plaintiff for service on the defendant. A summons, or a copy of the summons if addressed to multiple defendants, shall be issued for each defendant to be served. (c) Service with Complaint; by Whom Made. (1) A summons shall be served together with a copy of the complaint. The plaintiff is responsible for service of a summons and complaint within the time allowed under subdivision (m) and shall furnish the person effecting service with the necessary copies of the summons and complaint. (2) Service may be effected by any person who is not a party and who is at least 18 years of age. At the request of the plaintiff, however, the court may direct that service be effected by a United States marshal, deputy United States marshal, or other person or officer specially appointed by the court for that purpose. Such an appointment must be made when the plaintiff is authorized to proceed in forma pauperis pursuant to 28 U.S.C. § 1915 or is authorized to proceed as a seaman under 28 U.S.C. § 1916. (d) Waiver of Service; Duty to Save Costs of Service; Request to Waive. 213 (1) A defendant who waives service of a summons does not thereby waive any objection to the venue or to the jurisdiction of the court over the person of the defendant. (2) An individual, corporation, or association that is subject to service under subdivision (e), (f), or (h) and that receives notice of an action in the manner provided in this paragraph has a duty to avoid unnecessary costs of serving the summons. To avoid costs, the plaintiff may notify such a defendant of the commencement of the action and request that the defendant waive service of a summons. The notice and request (A) shall be in writing and shall be addressed directly to the defendant, if an individual, or else to an officer or managing or general agent (or other agent authorized by appointment or law to receive service of process) of a defendant subject to service under subdivision (h); (B) shall be dispatched through first-class mail or other reliable means; (C) shall be accompanied by a copy of the complaint and shall identify the court in which it has been filed; (D) shall inform the defendant, by means of a text prescribed in an official form promulgated pursuant to Rule 84, of the consequences of compliance and of a failure to comply with the request; (E) shall set forth the date on which the request is sent; (F) shall allow the defendant a reasonable time to return the waiver, which shall be at least 30 days from the date on which the request is sent, or 60 days from that date if the defendant is addressed outside any judicial district of the United States; and (G) shall provide the defendant with an extra copy of the notice and request, as well as a prepaid means of compliance in writing. If a defendant located within the United States fails to comply with a request for waiver made by a plaintiff located within the United States, the court shall impose the costs subsequently incurred in effecting service on the defendant unless good cause for the failure be shown. (3) A defendant that, before being served with process, timely returns a waiver so requested is not required to serve an answer to the complaint until 60 days after the date on which the request for waiver of service was sent, or 90 days after that date if the defendant was addressed outside any judicial district of the United States. (4) When the plaintiff files a waiver of service with the court, the action shall proceed, except as provided in paragraph (3), as if a summons and complaint had been served at the time of filing the waiver, and no proof of service shall be required. (5) The costs to be imposed on a defendant under paragraph (2) for failure to comply with a request to waive service of a summons shall include the costs subsequently incurred in effecting service under subdivision (e), (f), or (h), together with the costs, 214 including a reasonable attorney's fee, of any motion required to collect the costs of service. (e) Service Upon Individuals Within a Judicial District of the United States. Unless otherwise provided by federal law, service upon an individual from whom a waiver has not been obtained and filed, other than an infant or an incompetent person, may be effected in any judicial district of the United States: (1) pursuant to the law of the state in which the district court is located, or in which service is effected, for the service of a summons upon the defendant in an action brought in the courts of general jurisdiction of the State; or (2) by delivering a copy of the summons and of the complaint to the individual personally or by leaving copies thereof at the individual's dwelling house or usual place of abode with some person of suitable age and discretion then residing therein or 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. (f) Service Upon Individuals in a Foreign Country. Unless otherwise provided by federal law, service upon an individual from whom a waiver has not been obtained and filed, other than an infant or an incompetent person, may be effected in a place not within any judicial district of the United States: (1) by any internationally agreed means reasonably calculated to give notice, such as those means authorized by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents; or (2) if there is no internationally agreed means of service or the applicable international agreement allows other means of service, provided that service is reasonably calculated to give notice: (A) in the manner prescribed by the law of the foreign country for service in that country in an action in any of its courts of general jurisdiction; or (B) as directed by the foreign authority in response to a letter rogatory or letter of request; or (C) unless prohibited by the law of the foreign country, by (i) delivery to the individual personally of a copy of the summons and the complaint; or (ii) any form of mail requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the party to be served; or (3) by other means not prohibited by international agreement as may be directed by the court. (g) Service Upon Infants and Incompetent Persons. Service upon an infant or an incompetent person in a judicial district of the United States shall be effected in the 215 manner prescribed by the law of the state in which the service is made for the service of summons or other like process upon any such defendant in an action brought in the courts of general jurisdiction of that state. Service upon an infant or an incompetent person in a place not within any judicial district of the United States shall be effected in the manner prescribed by paragraph (2)(A) or (2)(B) of subdivision (f) or by such means as the court may direct. (h) Service Upon Corporations and Associations. Unless otherwise provided by federal law, service upon a domestic or foreign corporation or upon a partnership or other unincorporated association that is subject to suit under a common name, and from which a waiver of service has not been obtained and filed, shall be effected: (1) in a judicial district of the United States in the manner prescribed for individuals by subdivision (e)(1), or by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the defendant, or (2) in a place not within any judicial district of the United States in any manner prescribed for individuals by subdivision (f) except personal delivery as provided in paragraph (2)(C)(i) thereof. (i) Service Upon the United States, and Its Agencies, Corporations, or Officers. (1) Service upon the United States shall be effected (A) by delivering a copy of the summons and of the complaint to the United States attorney for the district in which the action is brought or to an assistant United States attorney or clerical employee designated by the United States attorney in a writing filed with the clerk of the court or by sending a copy of the summons and of the complaint by registered or certified mail addressed to the civil process clerk at the office of the United States attorney and (B) by also sending a copy of the summons and of the complaint by registered or certified mail to the Attorney General of the United States at Washington, District of Columbia, and (C) in any action attacking the validity of an order of an officer or agency of the United States not made a party, by also sending a copy of the summons and of the complaint by registered or certified mail to the officer or agency. (2) Service upon an officer, agency, or corporation of the United States, shall be effected by serving the United States in the manner prescribed by paragraph (1) of this subdivision and by also sending a copy of the summons and of the complaint by registered or certified mail to the officer, agency, or corporation. (3) The court shall allow a reasonable time for service of process under this subdivision for the purpose of curing the failure to serve multiple officers, agencies, or corporations of the United States if the plaintiff has effected service on either the United States attorney or the Attorney General of the United States. 216 (j) Service Upon Foreign, State, or Local Governments. (1) Service upon a foreign state or a political subdivision, agency, or instrumentality thereof shall be effected pursuant to 28 U.S.C. § 1608. (2) Service upon a state, municipal corporation, or other governmental organization subject to suit shall be effected by delivering a copy of the summons and of the complaint to its chief executive officer or by serving the summons and complaint in the manner prescribed by the law of that state for the service of summons or other like process upon any such defendant. (k) Territorial Limits of Effective Service. (1) Service of a summons or filing a waiver of service is effective to establish jurisdiction over the person of a defendant (A) who could be subjected to the jurisdiction of a court of general jurisdiction in the state in which the district court is located, or (B) who is a party joined under Rule 14 or Rule 19 and is served at a place within a judicial district of the United States and not more than 100 miles from the place from which the summons issues, or (C) who is subject to the federal interpleader jurisdiction under 28 U.S.C. § 1335, or (D) when authorized by a statute of the United States. (2) If the exercise of jurisdiction is consistent with the Constitution and laws of the United States, serving a summons or filing a waiver of service is also effective, with respect to claims arising under federal law, to establish personal jurisdiction over the person of any defendant who is not subject to the jurisdiction of the courts of general jurisdiction of any state. (l) Proof of Service. If service is not waived, the person effecting service shall make proof thereof to the court. If service is made by a person other than a United States marshal or deputy United States marshal, the person shall make affidavit thereof. Proof of service in a place not within any judicial district of the United States shall, if effected under paragraph (1) of subdivision (f), be made pursuant to the applicable treaty or convention, and shall, if effected under paragraph (2) or (3) thereof, include a receipt signed by the addressee or other evidence of delivery to the addressee satisfactory to the court. Failure to make proof of service does not affect the validity of the service. The court may allow proof of service to be amended. (m) Time Limit for Service. If service of the summons and complaint is not made upon a defendant within 120 days after the filing of the complaint, the court, upon motion or on its own initiative after notice to the plaintiff, shall dismiss the action without prejudice as to that defendant or direct that service be effected within a specified time; provided that if the plaintiff shows good cause for the failure, the court shall extend the time for service for an appropriate period. This subdivision does not apply to service in a foreign 217 country pursuant to subdivision (f) or (j)(1). (n) Seizure of Property; Service of Summons Not Feasible. (1) If a statute of the United States so provides, the court may assert jurisdiction over property. Notice to claimants of the property shall then be sent in the manner provided by the statute or by service of a summons under this rule. (2) Upon a showing that personal jurisdiction over a defendant cannot, in the district where the action is brought, be obtained with reasonable efforts by service of summons in any manner authorized by this rule, the court may assert jurisdiction over any of the defendant's assets found within the district by seizing the assets under the circumstances and in the manner provided by the law of the state in which the district court is located. Section Four: Attorney’s Rights and Obligations Concurrent Federal and State Court Remedies and Discovery Duties Case Unioil v. E.F. Hutton 809 F.2d 540 (1986) United States Court of Appeals, Ninth Circuit. UNIOIL, INC., et al., Plaintiffs, and Heck Oil, Inc.; Heck & Heck, Inc.; and Mark Zelezny, Plaintiffs-Appellants, v. E.F. HUTTON & CO., INC.; Kurt Feshback; Stockbridge Partners, Inc.; Richard Jacoby; Haim Pekelis; Shearson-American Express, Inc.; and Goldman Sachs & Co.; and Donaldson, Lufkin & Jenrette Securities Corp., Defendants-Appellees. No. 85-6024. Argued and Submitted June 3, 1986. Decided Oct. 15, 1986. As Amended on Denial of Rehearing and Rehearing En Banc Feb. 26, 1987. 218 Alioto & Alioto, Joseph L. Alioto, Joseph M. Alioto, Patricia E. Henle, Sharon S. Chandler, Lewis, D'Amato, Brisbois & Bisgaard, San Francisco, Cal., Roy G. Weatherup, Robert L. Kaufman, Haight, Dickson, Brown & Bonesteel, Santa Monica, Cal., for plaintiffs-appellants. C. Stephen Howard, Tuttle & Taylor, Inc., Paul A. Richler, Judith K. Otamura- Kester, Los Angeles, Cal., Keesal, Young & Logan, Terry Ross, Ben Suter, San Francisco, Cal., Frank Kaplan, Alschuler, Grossman & Pines, Los Angeles, Cal., for defendantsappellees. Appeal from the United States District Court for the Central District of California. Before WALLACE, FARRIS, and CANBY, Circuit Judges. OPINION WALLACE, Circuit Judge: Heck & Heck, Inc. and Heck Oil, Inc. (the Heck companies) and Zelezny, along with their counsel, Joseph L. Alioto (Alioto) of the firm of Alioto & Alioto, and Donald Barton (Barton) of the firm of Donaldson & Barton, appeal from the district court's order granting their motion under rule 41(a)(2), Fed.R.Civ.P., for voluntary dismissal of their claims on condition that they reimburse the defendants $165,774.84 in expenses and attorneys' fees. Alioto appeals from the district court's order imposing sanctions against him for violations of rule 11, Fed.R.Civ.P., in the amount of $294,141.10. We dismiss the appeal from the rule 41(a)(2) order for lack of appellate jurisdiction. We have jurisdiction pursuant to 28 U.S.C. § 1291 over Alioto's appeal from the rule 11 sanctions, and we affirm. I Unioil, Inc. (Unioil) is a company engaged in oil and gas exploration and production. During 1983, the price of Unioil's publicly traded stock soared from $1.25 per share early in the year to $13.75 per share in mid-December. At the beginning of February 1984, the stock was trading around $10 per share. In early February 1984, Unioil's stock sharply declined. On February 7, the Wall Street Journal published an article reporting that several professional investors were selling Unioil stock "short" (i.e., were selling for future delivery stock that they did not yet own) in the belief that it was overvalued. The article stated that some of Unioil's public announcements had proven to be too optimistic. It also disclosed that Unioil's chairman of the board of directors, Richards, had twice previously been cited by the Securities and Exchange Commission for making false and misleading statements. In the days following publication of this article, Unioil stock further plummeted to $2.625 per share. On March 21, 1984, Unioil, Richards, the Heck companies and Zelezny, filed a complaint in district court. The Heck companies owned large blocks of Unioil shares. Zelezny, a stockbroker, also owned Unioil shares. In addition, the named plaintiffs 219 purported to be representatives of a class of all other Unioil shareholders. Alioto and Barton acted jointly as counsel for all plaintiffs. They sued several brokerage houses and individuals (the defendants), alleging a concerted scheme to sell Unioil stock short in violation of federal antitrust and securities laws, RICO, and various California laws. The complaint further alleged that the defendants had defamed Unioil and Richards. The role of Zelezny in this purported class action litigation merits special focus. Since the Heck companies were major shareholders of Unioil and appeared to be closely aligned with Unioil management including Richards, Zelezny was the only named plaintiff with the appearance of independence from Unioil leadership. Zelezny had his first contact with this litigation when Barton, the referring co-counsel, approached him in February 1984 about the alleged market manipulation of Unioil stock. Barton, not Zelezny, first raised the subject of Zelezny's becoming a named plaintiff in the case. Zelezny had not yet agreed to become a named plaintiff when Unioil announced in late February 1984 that it and a group of its shareholders had retained Alioto to institute a class action alleging market manipulation of Unioil stock. Alioto never spoke with Zelezny prior to filing the complaint, nor did he inquire whether Barton had investigated Zelezny's suitability as a named plaintiff in the purported class action. Alioto learned from Barton only that Zelezny had sold Unioil stock the day after the Wall Street Journal article appeared. On May 3, 1984, the defendants commenced a deposition of Zelezny. The following day, Zelezny failed to appear for the continuation of his deposition. Instead, Barton announced that Zelezny had decided to withdraw as a named plaintiff and would not appear for further deposition questioning. The defendants then obtained a magistrate's order requiring Zelezny to complete his deposition. Zelezny appeared for three more days of testimony. Zelezny's deposition testimony was, in the judgment of the district court, "in many critical respects contrary to the allegations of the complaint": (1) whereas the complaint alleged that defendants' short selling and fraudulent misrepresentations drove the price of Unioil stock down and caused shareholders to sell at a loss, Zelezny testified that, aware that short selling was occurring, he purchased rather than sold Unioil shares in the belief that the price of the shares would eventually be driven up when the short sellers had to cover; (2) whereas the complaint alleged that plaintiffs sold Unioil shares at artificially depressed prices between December 1, 1983 and February 29, 1984, Zelezny testified that he thought that Unioil was selling at a fair price until February 7, 1984; and (3) whereas the complaint alleged that plaintiffs engaged in stock transactions based on false statements by defendants, Zelezny testified that he never bought or sold Unioil stock in reliance on anything said by any of the defendants. On May 14, one day before Zelezny's deposition was to resume again, Barton announced that Zelezny would not appear, that neither plaintiffs nor their attorneys would appear for any further depositions, and that plaintiffs would voluntarily dismiss their complaint. On May 15, 1984, plaintiffs filed a notice purporting to dismiss their entire action without prejudice pursuant to Fed.R.Civ.P. 41(a)(1). One defendant objected to the notice on the ground that dismissal of an alleged class action requires court approval under rules 23(e) and 41(a)(1), Fed.R.Civ.P. Plaintiffs then moved pursuant to rule 41(a)(2), Fed.R.Civ.P., for a court order approving the dismissal of their action without prejudice. In support of their motion, plaintiffs cited three Unioil 220 shareholder class actions that had been filed against Unioil and Richards in mid-April 1984. These actions named Unioil and Richards as defendants and alleged that mismanagement was the cause of the decline in the price of Unioil stock. Perceiving that Alioto and Barton would face a conflict of interest in representing both Unioil and the class of Unioil shareholders, plaintiffs stated their desire not to assert claims on behalf of the shareholder class. In response to plaintiffs' rule 41(a)(2) motion, defendants asked the district court to require, as a condition of any dismissal without prejudice, that plaintiffs and their counsel pay defendants' attorneys' fees and costs incurred in the action. Pursuant to Fed.R.Civ.P. 11, defendants further sought sanctions of attorneys' fees and costs against plaintiffs' counsel on the grounds that plaintiffs' counsel undertook representation of plaintiffs with conflicting interests and failed to conduct a reasonable inquiry into the factual basis of the complaint. At this juncture, Unioil and Richards, through newly retained counsel, withdrew their motion for court approval of dismissal of their claims. In November 1984, the district court entered an order granting the motion of the Heck companies and Zelezny for dismissal without prejudice of their individual and class claims on condition that these plaintiffs and/or their counsel--Alioto and Barton-"reimburse defendants for their costs and expenses, including attorneys' fees, reasonably incurred in defending against the class action claims." The district court imposed another condition that is not at issue on this appeal. The district court also imposed rule 11 sanctions of attorneys' fees and costs against Alioto. The court held that Alioto's conduct had violated rule 11 in three respects: (1) Alioto did not conduct a reasonable investigation into the facts upon which the class allegations were made or into the potential conflict of interest that was inherent in undertaking representation of the class of Unioil shareholders in an action in which Unioil was one of the named plaintiffs; (2) Alioto tried to disengage from class discovery without cause and from the class action suit without court approval; (3) Alioto submitted declarations, in opposition to defendants' motions, that plainly did not comport with the requirements for statements under oath. Alioto then moved the court to reconsider its order on the ground that the court had failed to consider material facts that had been brought to its attention. In an order dated January 14, 1985, the district judge found that Alioto's arguments were without basis and were made in bad faith. She therefore ordered that Alioto be further sanctioned under rule 11 in the amount of attorneys' fees and costs reasonably incurred by defendants in opposing the motion to reconsider. The district court referred the determination of the amount of attorneys' fees and costs on the rule 41(a)(2) condition and under the rule 11 sanctions to a magistrate. In an order entered in June 1985, the district court confirmed the magistrate's recommendation that plaintiffs' voluntary dismissal without prejudice of their class action claims be conditioned on the payment by the Heck companies, Zelezny, Alioto, or Barton of $165,774.84 to defendants. The court further confirmed that the rule 11 sanctions required Alioto to pay to defendants within thirty days $294,141.10, such amount to be reduced by any reimbursement received by defendants during that period under the rule 41(a)(2) condition. 221 In an order entered in March 1986, the district court dismissed Unioil's and Richards' individual claims with prejudice for failure to prosecute. Unioil and Richards are not parties to this appeal. II The Heck companies, Zelezny, Alioto, and Barton purport to appeal from the district court's rule 41(a)(2) order conditioning the dismissal without prejudice of their claims on the reimbursement to defendants of costs and attorneys' fees in the amount of $165,774.84. While no party raises the issue, we must address sua sponte whether we have jurisdiction over this appeal. See Baumann v. Arizona Department of Corrections, 754 F.2d 841, 843 (9th Cir.1985). [1][2] We may readily reject one seeming jurisdictional defect--the fact that the order appealed from is interlocutory in that it was entered at a time when the claims of Unioil and Richards remained to be decided by the district court. Absent a certificate under Fed.R.Civ.P. 54(b), such an order is generally not appealable. In Anderson v. Allstate Insurance Co., 630 F.2d 677 (9th Cir.1980) (Allstate), however, we described an exception to the finality rule: we held that we may treat an interlocutory order as a final order when that portion of the case that remained in the district court has subsequently been terminated. Id. at 680-81. Because Unioil's and Richards' claims have since been dismissed with prejudice, we may, under Allstate, disregard the fact that they previously rendered the district court's order interlocutory. This, however, is not the end of our jurisdictional inquiry, for a far more troubling difficulty besets this appeal. Rule 41(a)(2), governing voluntary dismissal by court order, provides in part: "Except as provided in [rule 41(a)(1) ], an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such terms and conditions as the court deems proper." Fed.R.Civ.P. 41(a)(2). As we explained recently in Lau v. Glendora Unified School District, 792 F.2d 929 (9th Cir.1986) (per curiam) (Lau), an order granting a conditional voluntary dismissal does not take effect of its own force. Id. at 930. Rather, the plaintiff has "a reasonable period of time within which [either] to refuse the conditional voluntary dismissal by withdrawing [the] motion for dismissal or to accept the dismissal despite the imposition of conditions." Id. at 931. [3] Here, the Heck companies and Zelezny have neither withdrawn their motions for voluntary dismissal under rule 41(a)(2) nor expressly accepted the conditional voluntary dismissal. Three courses of action present themselves. First, we could conclude that the failure expressly to accept the conditional voluntary dismissal renders it inoperative. If so, their claims survive in the district court, the order from which they and counsel appeal is interlocutory, and we are without jurisdiction. Second, we could determine that by not withdrawing their motions for voluntary dismissal within a reasonable time, the Heck companies and Zelezny must be deemed to have accepted the conditional voluntary dismissal. Under this approach, the district court's order would be final. Third, as we did in Lau, 792 F.2d at 930, we could remand this case to the district court in order that they could clearly choose either to withdraw their motions for voluntary dismissal or to accept the conditional voluntary dismissal. We cannot pursue the first course of action. Lau makes clear that a plaintiff must affirmatively act to withdraw a motion for voluntary dismissal. To construe inaction as 222 rejection of a conditional voluntary dismissal would conflict with Lau. [4] We are left to choose between our second and third courses of action. Significantly, Lau in no way indicates that we should always remand when a plaintiff has neither withdrawn the motion for voluntary dismissal nor accepted the conditional voluntary dismissal. On the contrary, Lau expressly left open "whether a plaintiff who fails to withdraw the motion for dismissal [may] be regarded as having consented to the conditions attached." 792 F.2d at 931. We merely deemed remand "appropriate under [the] circumstances," as we observed both that the district court had not expressly granted plaintiff the option of withdrawing her motion for voluntary dismissal and that we had not previously held that plaintiffs should be made aware of such an option. Id. We therefore read Lau to hold that remand may be appropriate where a plaintiff neither knew nor had reason to know of the option of withdrawing the motion for voluntary dismissal. Unlike the plaintiff in Lau, the Heck companies and Zelezny were plainly aware of their option to withdraw the motion for voluntary dismissal. In their reply memorandum opposing defendants' request for rule 41(a)(2) conditions, they explicitly spelled out this option, citing as authority the very District of Columbia Circuit case that Lau follows. Under these circumstances, a remand to the district court would be pointless. [5][6] Deciding a question left open by Lau, we therefore hold that a plaintiff who knows or has reason to know that he may withdraw his motion for dismissal will be deemed to have consented to the conditions attached to the voluntary dismissal unless he withdraws his motion within a reasonable time. The Heck companies and Zelezny have not withdrawn their motions within a reasonable time, but have instead pursued an appeal. It follows that they must be deemed to have accepted the district court's conditional voluntary dismissal. Therefore, the rule 41(a)(2) order from which they and counsel appeal is a final order. [7][8] That the order granting the conditional voluntary dismissal is final, however, does not alone mean that we have jurisdiction. To be appealable, an order must be adverse to the appealing party. As a general rule, a plaintiff may not appeal a voluntary dismissal because it is not an involuntary adverse judgment against him. Wickland Oil Terminals v. Asarco, Inc., 792 F.2d 887, 893 (9th Cir.1986); Seidman v. City of Beverly Hills, 785 F.2d 1447, 1448 (9th Cir.1986) (per curiam). [9] The circuits have provided a range of answers to the question whether this general rule applies to a conditional voluntary dismissal. The Sixth Circuit has held that conditional voluntary dismissals are not appealable, since the plaintiff has agreed to the order, even if with reluctance. Scholl v. Felmont Oil Corp., 327 F.2d 697, 700 (6th Cir.1964); see also 9 C. Wright & A. Miller, Federal Practice & Procedure § 2376, at 247. In LeCompte v. Mr. Chip, Inc., 528 F.2d 601 (5th Cir.1976) (LeCompte), the Fifth Circuit adopted an intermediate position, holding that a plaintiff can appeal a rule 41(a)(2) conditional dismissal that "involves prejudice in a legal sense." Id. at 604. In LeCompte, the trial court, while denominating its order a dismissal without prejudice, id. at 603, had imposed rule 41(a)(2) conditions that "severely circumscribed [plaintiff's] freedom to bring a later suit." Id. at 604; see id. at 602 (conditions included 223 requirement that any subsequent suit be brought in same court and only upon showing of extraordinary circumstances). The Fifth Circuit distinguished the usual conditions attached to a voluntary dismissal[, which] involve prejudice only in a practical sense (e.g., paying costs or expenses, producing documents, producing witnesses). The imposition of this type condition does not amount to the type of "legal prejudice" which would entitle a plaintiff to appeal the grant of the dismissal he obtains. Id. at 603; see also Yoffe v. Keller Industries, Inc., 580 F.2d 126, 129-31 (5th Cir.1978) (Yoffe), cert. denied, 440 U.S. 915, 99 S.Ct. 1231, 59 L.Ed.2d 464 (1979). The Seventh Circuit is most expansive in its view of appellate jurisdiction over voluntary conditional dismissals. In Cauley v. Wilson, 754 F.2d 769, 770-71 (7th Cir.1985), the Seventh Circuit held that it had jurisdiction of voluntary dismissals conditioned on payment of fees, "at least in cases in which a plaintiff requests a dismissal in order to proceed in state court." Id. at 771; see also id. at 770-71 (suggesting, arguably erroneously, that the District of Columbia Circuit has held that it has jurisdiction over appeals of voluntary dismissals conditioned on payment of fees). We spoke on the issue in Coursen v. A.H. Robins Co., 764 F.2d 1329 (9th Cir.) (Coursen), corrected, 773 F.2d 1049 (9th Cir.1985), where we held that a dismissal with prejudice was appealable, whether voluntary or involuntary. 764 F.2d at 1342-43, corrected, 773 F.2d at 1049. In the course of so holding, we stated, "A plaintiff may appeal a voluntary dismissal which imposes a condition that creates sufficient prejudice in a legal sense." 764 F.2d at 1342. We cited LeCompte as authority for this proposition, and also cited, with a see also signal, a case involving involuntary dismissal, Gardiner v. A.H. Robins Co., 747 F.2d 1180, 1186-87 (8th Cir.1984). Coursen, 764 F.2d at 1342-43. Accepting the statement in Coursen that a plaintiff may appeal a conditional voluntary dismissal that imposes sufficient legal prejudice, we must determine whether the condition of costs and attorneys' fees imposed on the rule 41(a)(2) order in this case renders the order appealable. We find it especially significant that our statement in Coursen is supported by a citation to the Fifth Circuit's opinion in LeCompte, rather than to its more recent opinion in Yoffe. LeCompte differs from Yoffe in at least one important respect: whereas LeCompte holds that a "usual" rule 41(a)(2) condition, such as "payment of costs and attorney's fees," does not involve legal prejudice, 528 F.2d at 603, Yoffe indicates that a condition imposing a "clearly unreasonable" amount of costs and fees may amount to appealable legal prejudice. 580 F.2d at 131. Thus, consistent with Coursen and LeCompte, we hold that a condition of costs and attorney's fees does not involve legal prejudice and therefore does not render a conditional voluntary dismissal adverse and appealable. In so holding, we in no way intend to suggest that we find the amount of costs and fees in this case clearly unreasonable. Nor do we foreclose the possibility that review of clearly unreasonable conditions could be obtained through a writ of mandamus. [10] Because the condition of costs and attorneys' fees that plaintiffs and counsel challenge does not involve legal prejudice, it is not adverse, and we have no jurisdiction over this appeal. We therefore dismiss the appeal of the rule 41(a)(2) order. III 224 [11] Alioto challenges on several grounds the district court's imposition of rule 11 sanctions against him. The jurisdictional defect that precludes our review of the district court's rule 41(a)(2) order does not apply to Alioto's rule 11 appeal, since the court's imposition of sanctions is plainly adverse to him. An order imposing sanctions solely upon counsel, a non-party to the underlying action, is immediately appealable as a final order. Optyl Eyewear Fashion International Corp. v. Style Companies, Ltd., 760 F.2d 1045, 1047 n. 1 (9th Cir.1985); Kordich v. Marine Clerks Association, 715 F.2d 1392, 1393 (9th Cir.1983). [12][13][14] Rule 11, as amended in 1983, states in part: Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in his individual name.... The signature of an attorney ... constitutes a certificate by him that he has read the pleading, motion, or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.... If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee. Fed.R.Civ.P. 11. A violation of rule 11 need not be premised on a finding of subjective bad faith. Zaldivar v. City of Los Angeles, 780 F.2d 823, 829 (9th Cir.1986) (Zaldivar). Rather, an attorney violates rule 11 whenever he signs a pleading, motion, or other paper without having conducted a reasonable inquiry into whether his paper is frivolous, legally unreasonable, or without factual foundation. Id. at 830-31. An attorney also violates rule 11 whenever he signs a paper that is filed for a purpose that is improper under an objective standard. Id. at 831 & n. 9. In Zaldivar, we set forth the following standards of review for orders imposing rule 11 sanctions: If the facts relied upon by the district court to establish a violation of the Rule are disputed on appeal, we review the factual determinations of the district court under a clearly erroneous standard. If the legal conclusion of the district court that the facts constitute a violation of the Rule is disputed, we review that legal conclusion de novo. Finally, if the appropriateness of the sanction imposed is challenged, we review the sanction under an abuse of discretion standard. Id. at 828 (footnote omitted). A. The primary ground--indeed, according to Alioto's reply brief, the sole ground--upon which the district judge imposed rule 11 sanctions in her November 1984 order was that Alioto had failed to conduct a reasonable inquiry into the facts upon which the class allegations in the complaint were based and into the potential conflict of interest inherent 225 in representing a class of Unioil shareholders while at the same time representing Unioil and Richards. [15] Whether Alioto's inquiry was reasonable must be determined in light of the circumstances in which he acted. See Fed.R.Civ.P. 11 advisory committee note ("The standard is one of reasonableness under the circumstances.") From factual findings of the district court that Alioto has not shown to be clearly erroneous, we conclude that the relevant circumstances include (1) that Alioto had reason to know that Zelezny was the only named plaintiff with the appearance of independence from Unioil and its management; (2) that Alioto had never previously worked with Barton and knew virtually nothing about him, his experience, or his inquiry into Zelezny's suitability as a class plaintiff; and (3) that the Alioto firm is, and represented itself as, experienced and specialized in complex business litigation. There was a substantial retainer paid to Alioto and there was ample time for investigation and, therefore, there were no severe constraints of time or money that impeded Alioto's inquiry. Finally, we consider it significant that the class allegations filed by Alioto threatened defendants with massive liability and foreseeably aroused a vigorous and costly defense. Just as the gravity of foreseeable injury is relevant to determining a party's standard of care in a negligence case, so should the cost of a foreseeable response by opposing parties be relevant to determining an attorney's standard of reasonable inquiry. We now consider whether Alioto conducted a reasonable inquiry into the facts upon which the class allegations were based. Alioto does not dispute the district court's findings that he never spoke with Zelezny prior to filing the complaint and that he never asked of, or learned from, Barton information bearing on whether Zelezny was a sophisticated investor, whether Zelezny had relied upon any of the defendants' representations, and whether Zelezny would fairly and adequately represent the class. According to a finding of fact that we do not find clearly erroneous, Alioto knew only that Zelezny had sold Unioil stock the day after the Wall Street Journal article was published. We agree with the district court that, aware of this fact alone, Alioto had no reasonable basis for determining that Zelezny's "claims or defenses [were] typical of the claims or defenses of the class," Fed.R.Civ.P. 23(a)(3), or that Zelezny would "fairly and adequately protect the interests of the class," Fed.R.Civ.P. 23(a)(4). [16] Alioto offers three basic arguments to support his contention that he did not violate rule 11. First, he argues that his reliance on Barton satisfied the requirement of reasonable inquiry. We agree that reliance on forwarding co-counsel may in certain circumstances satisfy an attorney's duty of reasonable inquiry. See Fed.R.Civ.P. 11 advisory committee note. In relying on another lawyer, however, counsel must "acquire[ ] knowledge of facts sufficient to enable him to certify that the paper is wellgrounded in fact." Schwarzer, Sanctions Under the New Federal Rule 11--A Closer Look, 104 F.R.D. 181, 187 (1985). An attorney who signs the pleading cannot simply delegate to forwarding co-counsel his duty of reasonable inquiry. Id. [17] Second, Alioto appears to argue that he did not violate rule 11 since Zelezny was in fact a proper class plaintiff. The core of Alioto's argument is that Zelezny's lack of reliance on defendants' alleged misrepresentations is irrelevant to his viability as a class representative since, under Blackie v. Barrack, 524 F.2d 891 (9th Cir.1975), cert. denied, 429 U.S. 816, 97 S.Ct. 57, 50 L.Ed.2d 75 (1976), proof of subjective reliance is unnecessary to establish a rule 10b-5 claim. But see, e.g., Lewis v. Johnson, 92 F.R.D. 226 758, 759-60 & n. 1 (E.D.N.Y.1981) (even though class action plaintiffs need not prove reliance in a securities fraud case, certification must be denied when the putative class plaintiff is subject to atypical reliance and materiality defenses that might prejudice the class' chances of success). Alioto did not make this argument as a defense to the imposition of rule 11 sanctions in the district court and has provided us with no reasons for his failure to do so. Therefore, because we believe that no manifest injustice will result if we decline to consider the issue, we will not address it here. See Alexopulos v. Riles, 784 F.2d 1408, 1411 (9th Cir.1986). [18] Third, Alioto argues that the Heck companies were proper class plaintiffs and that we must give substantial weight to his investigation into their claims in deciding whether his inquiry into the facts underlying the class allegations was reasonable. We disagree. Alioto had reason to know that the Heck companies appeared to be closely aligned with Unioil and its management. The district court did not err in determining that a reasonably competent business attorney should have realized, upon reading the Wall Street Journal article, the strong possibility that Unioil shareholders would sue Unioil management. Under these circumstances, Alioto had a duty to take reasonable steps to ensure that the class claims were represented by a plaintiff independent of Unioil management and otherwise qualified under rule 23(a). Alioto took no such steps. [19] We therefore hold that the district court did not err in concluding that Alioto violated rule 11 by not making a reasonable inquiry into the facts on which the class allegations of the complaint were based. For similar reasons, we affirm the district court's conclusion that Alioto failed to conduct a reasonable inquiry into the potential conflict of interest inherent in representing a class of Unioil shareholders together with Unioil and Richards. As we just stated, the district court properly found that a reasonably competent business attorney should have recognized from the beginning the clear likelihood that Unioil shareholders would bring suit against Unioil management. We focus only on the duty Alioto had to conduct a reasonable inquiry into whether he should bring the class claims in the face of the potential conflict of interest. The record indicates that Alioto made no reasonable inquiry into the potential conflict of interest prior to filing the complaint. The district court properly determined that Alioto thereby violated rule 11. Because Unioil management was not found liable for a rule 11 violation, we need not assess defendants' allegation that the class claims filed by Alioto were part of a ploy by Unioil management to divert shareholders from suing Unioil and its management. The district court provided at least two additional grounds for its imposition of sanctions in its November 1984 order. Because we conclude that the primary grounds by themselves are sufficient to sustain the sanctions imposed in the November 1984 order, we have no reason to address these additional grounds. B. [20] In its January 1985 order imposing rule 11 sanctions on Alioto for filing a motion to reconsider, the district judge found that Alioto had made "a total lack of any showing that the court [had] failed to consider a material fact presented to it." She further found that Alioto had unnecessarily and unreasonably multiplied the litigation. On appeal, Alioto argues only that he had a good ground to bring the motion, since the district court in its November 1984 order had, he argues, failed to consider evidence that he had relied on Barton. The district judge, however, had not failed to consider such evidence; on the 227 contrary, she had held that the evidence was not sufficient to show that Alioto had relied on Barton. We affirm the court's ruling that Alioto's motion to reconsider violated rule 11. C. [21] Once a court finds that an attorney has violated rule 11, it must impose sanctions. Zaldivar, 780 F.2d at 831; accord Albright v. Upjohn Co., 788 F.2d 1217, 1221-22 (6th Cir.1986); Westmoreland v. CBS, Inc., 770 F.2d 1168, 1174-75 (D.C.Cir.1985) (Westmoreland ). Rule 11 authorizes a court to impose "an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee." Fed.R.Civ.P. 11. "The selection of the type of sanction to be imposed lies of course within the district court's sound exercise of discretion." Westmoreland, 770 F.2d at 1175. [22] In its November 1984 and January 1985 orders, the district court ordered sanctions against Alioto in the amount of reasonable expenses, including attorneys' fees, incurred because of the papers filed in violation of rule 11. This type of sanction plainly comports with rule 11, and we find no abuse of discretion. [23] Alioto further challenges the amount of the rule 11 sanctions-- $294,141.10, to be offset by any reimbursement received by defendants within thirty days pursuant to the rule 41(a)(2) conditional voluntary dismissal. Assisted by a magistrate, the district court determined this amount after careful proceedings in which Alioto fully participated. Alioto's arguments on appeal amount to nothing more than a blanket charge that the amount of the sanctions is patently unreasonable. We agree that the expenses and attorneys' fees determined to have been incurred by the defendants were substantial. But we cannot find them patently unreasonable in light of the massive liability that the complaint filed by Alioto threatened to impose upon multiple defendants. AFFIRMED IN PART; DISMISSED IN PART. Articles: Frivolity Punished Here Frivolity Punished Here By Steve Pyke The Boston Globe January 18, 1998 Like to watch lawyers suffer? Situate yourself outside the Federal courthouse in Denver around 6:15 A.M. on Thursdays. You’ll see a couple of dozen sleepy attorneys dragging 228 into “the Breakfast Club,” a unique exercise in courtroom management devised by U.S. District Judge Edward W. Nottingham, a stern Bush appointee who deeply resents wasted time. Roughly once a week, Nottingham forces lawyers to show up for dawn hearings, as a lash for raising what he considers frivolous matters. Nottingham is well known in Denver legal circles for being strict. In one recent example, he tore into a lawyer for U S West, the local phone company, for refusing to respond to documents because they had been faxed rather than hand-delivered, and he’s been known to dish out fines when he thinks petty legal posturing slows justice’s wheels. Whether it all imparts useful lessons is debatable. The judge won’t discuss it, and most of his victims are afraid to complain. But some say they’re just grateful it isn’t worse. “The guy has a lifetime appointment,” says one recent breakfast clubber. “He could make us dress up in bunny suits if he wanted.” First Principles First Principles By Michael L. Coyne, Associate Dean Massachusetts School of Law December 1997 Lawyers and law professors too often have a narrow, exclusive and arrogant view of themselves and of the legal profession. That is a view that militates against using experts from other disciplines to educate law students, and often means lawyers look only to legal solutions to problems clients face and not the business and moral solutions to those issues. Far too often, the avenues we as lawyers pursue involve costly litigation or other adversarial strategies, to the exclusion of accommodation and compromise. No one expects any more from my profession, since lawyers have been trained for the last one hundred years in that very manner. But you should. You should demand more from us, and our profession must do a better job of meeting your demands. My law school, the Massachusetts School of Law, has been in the forefront of reforming legal education and developing the kind of lawyer a changing society demands. As one would expect, however, MSL has met opposition from those invested in maintaining the status quo. Nonetheless change has come, and further change is certain. One need only look to the changes that have occurred in this country since 1921, when the American Bar Association joined the process of training lawyers, to know that even an organization which influences the corridors of power in this country must change or become irrelevant. The ABA’s first serious effort to affect the education and training of lawyers was made in 1891, in response to the Jacksonian Revolution, when the ABA declared its first official policies on those issues--the rest was all details. Today, more than 95% of law students in America are educated at ABA controlled law schools, where the difference in the types of educational experience offered amounts to little more than which brand of white bread you want for your sandwich. 229 Compared to 1921, today’s society is far more inclusive, far busier, generally far more privileged, and far more concerned about progress than maintenance of the status quo. In this ever expanding global community, traditional barriers to progress are being ripped down through competition, the use of the internet and the demise everywhere of centralized governments. The internet and its revolutionary communication capabilities will heighten these developments at unfathomable speeds. The advancements in the next ten years in business, law and other professions, which will be made possible by use of internet and information technology, will be far greater than all of those (then) unheard of technological breakthroughs which occurred during the earlier part of this century. The challenge, as with every technological advancement, is to ensure that society is prepared to benefit from this improvement. Society must be equally ready to deal with unfavorable developments that accompany these changes. (“First, Army NeoNazis, Now Racists on Internet Worry Germany,” The New York Times, p.A12, December 16, 1997.) Neither of my professions, law and education, nor any other profession, will be able to remain an island in this sea of change. Therefore, in order to remain relevant, law schools must become more interdisciplinary in their training of law students, more open in their embrace of conflict resolution instead of conflict escalation, and more expansive in their development of students’ communication skills. Lawyers’ presentations will need to focus more on persuasion instead of evoking anger and more disagreement. Students must learn that communication should be used to build consensus, not create further division. A lawyer should utilize her or his ears and mouth in proportion to their given quantity. Lawyers must become less removed from, and more emphathetic with, clients’ problems. They must also become better able to deal with the moral dilemmas faced by those that seek to serve others. More lawyers must again aspire to become valued counselors, advisors and trusted family friends. Because of their training, intelligence, analytical skills and developed diligence-diligence that I am hopeful has been properly demanded at a rigorous educational institution--lawyers are well equipped to deal with the internet and information age. By training, we operate much like efficient computers. We assemble vast amounts of information, use logic to sort and organize that information, and then apply that information to various principles to come to a conclusion, before moving on to the next problem. Unfortunately, that is also precisely the problem with much of law school training today. Our ability to analyze logically is a well-honed skill. Not so well honed is our ability to reason well, to arrive not only at a logical solution, but to arrive at a solution which factors in considerations of morality, principles and unassailable ethics. To paraphrase Horace, intelligence without wisdom falls of its own weight. Apathy and indifference have replaced caring and compassion throughout much of law school training, and we are not a better profession for it. Students come into our law schools with high ideals and we law professors spend the next three or four years disabusing them of these values. We chide students who come to us believing in fundamental concepts of human decency. We applaud the calculated and passionless application of statutes and precedent. Our sense of superiority and belief in “The Law” cause us to reject the notion of morality. For morality comes laden with religious overtones, and that is not intellectual enough for us. Pristine logic is exalted above reasoned consideration. 230 But our students are right! We must remember that there are fundamental concepts of human decency, fundamental concepts of morality, and fundamental principles of fairness by which a community abides. We must stop apologizing for believing in basic principles of common decency. Let us all answer this call to responsibility. There should be little difference among principled lawyers, principled business people or principled athletes (far too often an oxymoron, with the exception of individuals like Nomar Garciaparra and please God, do not prove me wrong on this one; we have been waiting since 1918, and I think we are getting close). Law professors should do more to develop the values many of our students believe in. Nearly half of the students entering law school want to help people by practicing public interest law. Law professors disparage this idealism because our prestige is elevated when our students enter the high paying sphere of corporate law. Too often, idealistic law students see their classmates being courted by large law firms with promises of wealth and position. Students who are overwhelmed with crushing debt burdens are ill equipped to resist the tempting fruits sown by their hard work, and instead abandon their idealism. Law professors should do more to encourage principled behavior and break this self-serving cycle. An individual today can strangle his boss and actually complain that his subsequent firing was harsh and unfair. For some reason, people will actually listen to him and members of our profession lend their good names to his cause. Deviations from established principles, and a fixation on whether one’s actions are legally permissible rather than right, have caused the confusion existing in the world today. These established principles have always existed despite differences in age, sex, ethnicity, race, religion, and class. Common decency has become so vague and rare a concept (not to mention a principle to live one’s life by) as to be undefinable in the minds of too many lawyers, business people and other individuals. One lawyer representing the American Bar Association told me he had no idea what fairness was when I told him that the Massachusetts School of Law only asked to be treated fairly in its dealings with his client. Shame on him if he was lying. God help us all if he was telling the truth! Lawyers, both good and bad, and despite their personal frailties and errors, are nonetheless still significant leaders in their communities. Lawyers are the people we turn to with our darkest secrets and most troubling problems. These are people whom we hope can help us through some of the greatest difficulties we face. But current approaches to legal education fail to instill the wisdom to adequately address, never mind attempt to solve, the problems that all humans face. Many of the problems dealing with birth, life, sex, disease, death, disappointment and grief are never addressed in law school. Doctors and counselors know the three rules of grief counseling. Why not us? People no longer care about what is right or wrong, but only whether something is legally permissible. Society as a whole demands that lawyers deal with issues not solely from a legal perspective, but, from a moral and principled perspective as well. In order to accomplish this, future lawyers must be schooled to deal with the business and moral concerns involved with these issues and properly assume their call to responsibility. It is a mistake to favor, as the Law School Admission Test does, applicants to law school who are coldly analytical over feeling and thinking individuals. It is a mistake to view intelligence as purely mathematical and linguistic. There are multiple intelligences, 231 as Howard Gardner recognized, and they should be cultivated to maximize the potential of all future lawyers. We must recognize and applaud the fact that there are many ways of addressing the problems confronting society. It is a mistake to train lawyers to replace their basic notions of common decency, their caring and compassion, with cold analytical reasoning. It is a mistake to ask the law and lawyers to provide the answers to fundamental questions of what is right or wrong without providing any real exposure in law school to these issues, and it is a mistake to look only to the law for guidance on what is fundamentally right or wrong. It is ultimately bad for business, leadership and the law if the law continues to be viewed in isolation from business, government or moral perspectives. Throughout American history, the law has been a guiding influence and significant force for constructive change and improvement in society. The law has protected the rights of all people to vote, to marry, to be born or not be born, to be free from environmental disasters, and to be protected from dangerous products. As a reformed smoker, I am glad we are getting there on tobacco. It is interesting to note that the most criticized group of lawyers in this country, personal injury lawyers, earned the glory on that one. I am relieved it is someone else’s law school which is responsible for producing the lawyers who concealed the evidence for all those years. The law, however great it is, is not the exclusive force of change and improvement in society. To expect the law and lawyers to remedy all wrongs or provide the solutions for every issue is foolhardy. This is especially so in view of the fact that, at most law schools, little has changed in the training of lawyers since shortly after the turn of the century. Good law school training should school students in disciplines such as psychology, economics, business, medicine, philosophy, and ethics. A true interdisciplinary approach to the study of law recognizes that. Good lawyers do not deal with legal issues in isolation from the ethical, business, corporate or practical issues involved with a client’s problems, and neither should law school instruction. Partnerships between undergraduate schools and law schools, like the type MSL has established, which provide an integrated six year approach to undergraduate and law school study is a good first step. Law schools must more often reach out to other disciplines and, like MSL, offer collaborative courses which are team-taught by faculty members from both graduate programs and are open to all students in those programs. Law schools, much like such forward thinking schools as Boston University and Eckerd College, should form partnership relationships with businesses. Hopefully, all involved will profit from the experience. Philosophy, psychology and ethics should be part and parcel of each course taught at a law school. In order to implement ethics across the curriculum, MSL requires every professor, in every course, to address at least five ethical issues encountered in the practice of law in that field of study. As is traditional, the code of ethics is the principle source used for resolving these issues. However important a code of ethics is to our profession, it should not be the sole source of guidance in resolving these dilemmas. Guidance on these issues should be sought from the great philosophers, leaders and theologians (from Confucius to Dylan--Bob, that is). Critical thought on these issues needs to be encouraged. The approach to solutions to these issues should not be 232 confined simply to what the law says is right or wrong, but should include the teachings of Aquinas and Kant and place value on reason, human dignity and natural rights. While Hippocrates’ one mistake was to banish all spirituality from the healing arts, it is the American Bar Association which has discouraged the development of law schools founded with significant religious or secular principles, e.g., Oral Roberts, CBN, Antioch, CUNY and Massachusetts School of Law. Some of these law schools have been forced to close, others have been forced to abandon their principals (not a typo) and discard their principles and only one continues to chart its course according to distant stars. Why should we doubt that if one feels better as a result of prayer, then he or she should pray more often? According to a recent survey, health care executives believe that prayer, meditation and spiritual practices can enhance healing and medical treatment, yet the overwhelming majority of HMO health plans and institutions fail to encourage those beliefs. (The Boston Globe, p.A3, December 16, 1997.) Why should we doubt that if principles outside the law can provide more beneficial results, then lawyers should look outside the law for solutions? The desegregation of schools was long overdue even if the great decision of Brown v. Board of Education was nearly devoid of precedent and citations. Our country was formed by people with shared values and beliefs. It is these bedrock principles that allowed our civilization to develop. Yet today, extreme tolerance erodes our very foundation. The pendulum has swung too far in the opposite direction. Fear of being labeled politically incorrect prevents us from denouncing many forms of reprehensible behavior. Every action can be excused due to some unfortunate prior experience or blamed on the victim. So, this downward spiral of irresponsibility and lack of accountability continues. Under such a mindset, much like Sisyphus and equally deserving, we are doomed to eternal failure. Law schools must educate students in the basic principles of good citizenship. Law schools must teach students to practice the highest standards of professionalism, ethical conduct and service--service to clients, community, associates, and the legal system. Special emphasis should be placed on moral ideals and on preparing students to participate in the business and legal communities as knowledgeable and caring professionals. Lawyers need to develop better listening skills. Law schools should teach students less about conflict escalation and litigation perpetuation, and more on how best to eliminate conflict and resolve disagreements efficiently and amicably. In order to develop students’ conflict resolution skills, MSL has changed the orientation of its first year civil procedure course to include the teaching of conflict resolution skills. While students continue to learn the traditional rules of procedure, federal and state court jurisdiction, they also, and as importantly, learn how to use that process and others to promote a just resolution of legal disputes cases. Law schools should emphasize creative and cost-effective dispute resolution over the valueless scorched earth strategy that prevails today. Unless we are willing to reorient the basic courses taught in law school, we will be unable to effectively change the type of lawyers our nation’s law schools produce. As a result, critics will continue to question our profession and seek alternatives. In order to compete effectively in the internet and information age, extensive instruction in effective written and oral communication skills must be provided. After the next 233 decade, to say one should be technologically proficient and computer literate is the equivalent of saying that a law school graduate should know how to read and how to use the telephone. The communication possibilities provided by this new age are boundless. The time of the Jetsons is upon us and we must embrace it. Now we can send letters and memoranda instantly, video conference from our desktops, instantly access more information than we can read in multiple lifetimes, nearly effortlessly make multimedia presentations and talk to our computer and have it respond. We are fast approaching the time when having at least one computer in the home will be as common as having a telephone. In fact, the phone will be incorporated into the computer. Many people involved with law schools still lament the loss of the rotary dial telephone and are ill prepared to deal with this new age. The anti-philosophists should not be allowed to seize this opportunity and to resist further reform simply because this coming age will not be techno-utopia. Let us do more to encourage the development of Lincoln Barton Gates, counselor and attorney at law. Let us create a lawyer with the wisdom and communication skills of Abraham Lincoln, the heart and courage of Clara Barton, and the vision and business skills of Bill Gates. None of these people, incidentally, received the standard education in their field. Those with superior communication skills will flourish in the next decade, and law schools must encourage transmedia skills across the curriculum. MSL furthers the development of better communication and lawyering skills by having its students participate in very rigorous writing, logic and communication skills programs. Students are required to take a required writing, logic and communication skills course in five of their six semesters of study at law school. Students develop writing, thinking, advocacy and presentation skills. Also, students become proficient in the use of traditional information resources as well as today’s technology. Outdated notions of “the library” are being replaced by the concept of a boundless information center, staffed not by librarians, but by information and technology professionals. Existing library professionals must be retooled in order to realize the full potential of this new media. MSL also places special emphasis on improving oral communication skills through its Interdisciplinary Presentation Skills project which involves all first year courses. The program has been so successful that MSL intends to extend it to upper level courses. Merging the courses of first year study, professors and students work cooperatively on cross-curriculum projects, and the students make an oral presentation to that group of professors. During the presentations, students are questioned in depth, much like the oral exam experience in other doctoral programs. Also, as required in court, first year students stand in class when they speak and debate issues. MSL also encourages better communication skills by offering an elective course solely devoted to oral advocacy skills. In addition, its case preparation courses teach students how to make presentations in court. More can be done to increase students’ proficiency in multimedia skills. The Sesame Street generation is receptive to this form of instruction and professors should lead the way by incorporating multimedia instruction and presentations into their pedagogy. Law school instruction must become less abstract, and professors must avoid monistic adherence to appellate decisions to teach law students. Far too much emphasis is placed on appellate analysis and advocacy, a skill few lawyers will ever use. Other law schools must also develop a “Law in Context Program” like MSL’s, where in each 234 course professors address issues from a broader-than-legal perspective, drawn on knowledge gained from other disciplines. Much like what is done in the field of medicine, we are teaching our students to understand and address the ills affecting their clients, and not simply to treat the symptoms that the clients experience. Like MSL, schools must also offer numerous small classes and varied clinical programs taught by practicing professionals which afford students the opportunity to learn from these professionals and gain valuable real-world experience to use in law and business. Schools must refocus their efforts on excellence in teaching students and developing performance-based outcomes. A rededication to a student and values-centered model of education will encourage the development of compassionate lawyers and counselors who have been exposed to a rigorous, well-rounded educational experience under the tutelage of scholars, judges and professionals. Through the marriage of principles, technology, communication and professional skills development, we can create a lawyer more responsive to society’s needs at affordable levels in an atmosphere of mutual respect and cooperation. If the legal profession is to honor its responsibility to society, we must find and encourage students who are committed to improving the legal profession and the lives of others. In this ever increasing technological age, more than ever, we need to remember fundamental concepts of human decency. We need to remember the basic principles that allowed our civilization to develop. We need to treat all people, including ourselves, with respect and compassion. We need the lawyer who was a trusted friend and counselor to the family. We need the lawyer who could offer comfort and assistance in times of need and who understood the problems real people faced. Law schools need to do more to develop that lawyer. In selecting candidates to law school, we need to look less at “objective” test scores and more at the traits that make a good lawyer: diligence, basic intelligence, common sense, character, a good heart and an honest mind. We must again offer opportunity for all to enter this great profession, not just the privileged few. We must stop forcing those that enter our profession to mortgage their soul on the altar of law school tuition with the attendant problems that it creates. Only then will the public view the legal profession with the esteem it seeks and which it might rightfully deserve. Lawyers And Their Games LAWYERS AND THEIR GAMES ARE LEADING US DOWN THE TUBES David Nyhan, Globe Staff The Boston Globe Copyright 1998 Friday, January 9, 1998 Op-Ed Page 235 When the games lawyers play become too much for me, I unwind my customary "Can't we do something about these legal eagles?" creed. It's that time. The actual number of card-carrying barristers in this overlawyered nation was just shy of 1 million when I resolved to stop counting: Every time I looked, the so-and-sos were multiplying like fruit flies. Our "nation of laws" is corrupted by the fact that we've molted into a "nation of lawyers." There are too many of them; there are too many opportunities for them to create mischief; they exact a tremendous toll, in fees, delays, canceled business, and ruined private lives; and the good they do in many cases seems to be outweighed by the friction and drag they impose on modern American society. The machinations by which the Colorado jury in the Terry Nichols trial became unhinged are the latest example of a legal system gone haywire. The jurors' failure to see justice done left Nichols and his family grinning happily, while their lawyers crooned blather about how the system is supposed to work. Relatives of the hundreds of persons maimed or killed in the attack in Oklahoma City endured fresh grief thanks to that runaway-from-responsibility jury. The jury's forewoman, Niki Deutchman, infuriated the survivors with a speech denouncing the government. Betraying a bias that, had it been detected beforehand, might have disqualified her from jury duty, she voiced the cockamamie theory that it was the government's fault to begin with: "The goverment's attitude -- and the FBI is definitely included in that -- is where all of this comes from in the first place. . . . It's time for the government to be more respectful and be aware of us as people with inalienable rights. I can understand how someone would be unhappy with the government." Mouthing the sort of drivel one gets from talk-show government-bashers with their eyeballs too close together, the jury forewoman casually obliterated the "inalienable rights" of 168 people blown to bits by the bomb Nichols helped build, the 500 people who were wounded by Nichols's conspiratorial hand, and the thousands of people who grieved over our worst-ever terror attack. But people like Deutchman turn up in the jury system. It seems there is no shortage of previously anonymous citizens who take the lottery ticket of jury duty as their chance to make some kind of personal statement about the system. We saw it in the first O.J. trial, where nonwhite jurors settled their personal scores with the LA cops by acquitting a man damned by conclusive scientific evidence. We saw a bit of this by the jury in the Louise Woodward murder trial, where the judge decided to rein in a prosecution he felt went too far, and a jury that seemed to follow along. We saw it in the first Rodney King trial, where an all-white jury acquitted the policemen who were videotaped beating the man surrounded by police. And we see it in dozens of other episodes, not just jury trials, where lawyers, or the people who need lawyers, twist, distort, and manipulate the legal system in ways that appear to mock the concept of justice. 236 It's not always the lawyers, I have to admit. The spectacle of Theodore Kaczynski bringing his murder-by-mailbomb trial to a halt by denouncing his court-appointed lawyers is ludicrous. It's the taxpayer who picks up the tab for the alleged Unabomber's pricey defense, elaborate security arrangements, and for what will undoubtedly be a maximum-security prison stint of permanent duration, depending on whether he's sentenced to death. What's he got to lose by ranting that he's not a mental case? It looks to me as if the system is deranged, and not just the defendant. Or take the Paula Jones fiasco. Please. Does anyone doubt that if it were not for a clique of lawyers hired by shadowy enemies of an incumbent president, this thing would have been broomed long ago? Do you really think that it will be a "victory for the system" if Paula gets to march into the White House next week to listen as Clinton answers her lawyers' interrogations? Don't give me that "no man is above the law" bull; what we have now is a system where no law is worth respecting, because the legal trade mucks everything up. We've given over too much to lawyers; the evidence is overwhelming. Concepts like "truth" or "shame" have expired. No more the age-old admonition to confess your sins, mend your ways, make atonement, accept responsibility for your acts. Now it's: Hire a lawyer, the slipperier, the better. Look no further than the sappy performance of state Senator Dianne Wilkerson of Roxbury, who evaded payment of five years' worth of taxes. When the Democrats running the state Senate made their "ethics" ruling, the sound of her wrist being slapped was drowned out by the laughter of those who think our solons took a dive. Here's a senator who writes the laws cheating on her taxes five years running. So they strip her of her committee chairmanship? Big deal. "I respectfully disagree with the decision that has been made," said she, having escaped jail time for a crime that routinely puts others behind bars," but I respect their right to make it." Beautiful. Is she a lawyer? You had to ask? Of course she's a lawyer. I rest my case. Case: First Technology Safety Systems v. Depinet 11 F.3d 641 (1993) United States Court of Appeals, Sixth Circuit. FIRST TECHNOLOGY SAFETY SYSTEMS, INC., a Michigan Corporation, PlaintiffAppellee, v. Paul DEPINET; Steven Fuhr; Barry Wade; Vector Research, Inc., DefendantsAppellants. 237 No. 93-3019. Argued Nov. 19, 1993. Decided Dec. 15, 1993. Jennifer J. Dawson, Marshall & Melhorn, Toledo, OH, Jon D. Kreucher, and Jon H. Kingsepp (argued and briefed), William J. Clemens, Howard & Howard, Bloomfield Hills, MI, for plaintiff-appellee. Jack G. Fynes, Stephen A. Rothschild (argued and briefed), Shumaker, Loop & Kendrick, Toledo, OH, for defendants-appellants. Before: KENNEDY, MILBURN, and GUY, Circuit Judges. MILBURN, Circuit Judge. Defendants appeal the district court's order denying their motion to vacate an order granting plaintiff's request for immediate ex parte order of inventory and impoundment. On appeal, the issue is whether the district court abused its discretion in refusing to vacate its ex parte order, which permitted plaintiff and its counsel, accompanied by the United States Marshal, to enter defendants' business premises and inventory and impound computer programs, computer printouts, and documents bearing the name of plaintiff or its predecessor, and to copy and inventory defendants' business records (purchase orders, invoices, correspondence, customer lists, and customer information materials). For the reasons that follow, we reverse and remand. I. On April 3, 1992, plaintiff First Technology Safety Systems, Inc. ("FTSS") filed a verified complaint against defendants for unfair competition, unfair trade practices, conversion, receiving and concealing trade secrets, tortious interference with contract or business advantage, breach of contract, and copyright infringement. At the same time, plaintiff filed an emergency motion for ex parte order of seizure and impoundment of evidence, which stated [p]ursuant to 17 U.S.C. § 503 and [Federal Rule of Civil Procedure] 65, plaintiff FTSS requests the Court to enter an ex parte order directing the United States Marshall [sic] to seize and impound certain materials which constitute critical evidence in this litigation, yet are likely to be destroyed or concealed by defendants if an ex parte seizure order is not entered. J.A. 95. Within its complaint, brief, and affidavits supporting its motion, plaintiff presented the following information to the district court. Until December 1990, plaintiff was the sole designer and manufacturer of anthropomorphic test devices, more commonly known as crash test dummies. Plaintiff owned various inventions, trademarks, trade secrets, and 238 copyrights on the vehicle crash test dummies and their related calibration software programs, manufacturing processes, component parts, customer lists, contacts, pricing information, and marketing strategy. On December 19, 1990, defendants Stephen Fuhr and Barry Wade, employees of plaintiff, formed defendant Vector Research, Inc. to compete with plaintiff in the design and manufacture of crash test dummies and related calibration software. The day before Vector's incorporation, Fuhr terminated his employment with plaintiff, but Wade continued to be employed as plaintiff's senior project engineer until January 4, 1991. Defendant Paul Depinet continued to be employed as plaintiff's data acquisitions supervisor until March 8, 1991. Plaintiff alleged that Fuhr, Wade, and Depinet violated their fiduciary duty as employees of plaintiff by using plaintiff's trade secrets, proprietary information, and copyrighted materials to build Vector's business. Plaintiff submitted employee proprietary agreements which were signed by the individual defendants during their employment with FTSS. [FN1] These agreements address the trade secrets and proprietary information that an employee is prohibited from disclosing except for the benefit of FTSS. In addition, the agreements prohibited those individuals who had signed them from disclosing such information directly or indirectly after termination of employment with plaintiff and required return of any confidential information to FTSS. FN1. Plaintiff asserted that defendant Wade also signed the proprietary information agreement, but the exhibit attached to the complaint is the signature page of Wade's acknowledgment and agreement to the contents of plaintiff's employee handbook. Plaintiff alleged that computer media from one of its predecessors included information on costing, history of customers, customer information including the identity of customers, customer contracts, and other secrets related to the marketing of crash test dummies. This information had been transferred to a backup computer media that had been in the actual custody of Fuhr while he worked for plaintiff, but at the time plaintiff filed the complaint, this computer media could not be located. Shortly after Vector was formed, it allegedly contacted potential customers whose identity defendants could have only procured via the customer lists accessible to the former FTSS employees. The vice-president of finance for FTSS averred that a quotation submitted to a potential customer was turned down as plaintiff was informed that the order for calibration equipment was awarded to Vector Research. Eleven days after Vector's incorporation, defendants produced a price list for crash test dummies, calibration equipment, component replacement parts, and data acquisition software effective January 1, 1991. [FN2] The affidavit of George Pitarra, the former president and CEO of plaintiff, stated that it was "extremely unlikely" that a start-up company could develop and implement computer software for the calibration of crash test dummies in less than one year or could develop and market the full line of crash test dummy equipment described in Vector's price list in less than two years. Plaintiff alleged that information regarding the calibration of the crash test dummies, as well as the software involved, was a trade secret and was prohibited from distribution by former employees as evidenced by the employee proprietary information agreements. 239 FN2. However, the letter attached to Vector's price list stated, "[a]s you are well aware, this is a complex industry and we ask that you bear with us as we bring our facility and products on-line. Not all items listed are immediately available for shipment. We will be sending you more specific information on product availability as we reach full production capacity." J.A. 37. In November 1991, plaintiff's president attended an international auto safety exhibition in Paris, France, where defendant Endevco gmbh [FN3] sponsored a stand and was representing Vector Research crash test dummies for sale. At the show, a crash test dummy manufactured by plaintiff was displayed in Vector's exhibit. Later that same month, both the president and the FTSS chairman attended a similar exhibit in Birmingham, England, and again encountered an FTSS crash test dummy displayed under Vector's advertising poster. The Endevco representative manning the stand acknowledged that the crash test dummy was indeed manufactured by plaintiff but stated it would not be removed from the stand. FN3. As of November 24, 1992, defendants Endevco Corp., Endevco-U.K. Ltd., Endevco-France, and Endevco gmbh were dismissed as defendants after stipulating to a permanent injunction. In its brief supporting the ex parte motion, plaintiff argued that immediate relief was necessary. The evidence of the defendants' misconduct is now in the defendants' possession. For example, the dummy calibration software which is now being sold by defendants as their product is not in plaintiff's possession. That software can be identified by the source code and other identifying factors and compared to plaintiff's copyrighted software. Similarly, the plaintiff's engineering drawings, Bills of Materials, patterns and processes, and customer lists can be readily identified as the plaintiff's property. However, it is current business practice to store many business records electronically on computer tapes, floppy disks and hard disks. Not only is information stored in this manner easier to use than printed materials, it also is easier to destroy. Stated quite simply, if the incriminating evidence which proves the plaintiff's allegations still exists, it can now be seized and impounded but, given the character of the defendants' activities, it is very unlikely that such evidence would ever be produced through normal discovery if ex parte impoundment is not ordered. Plaintiff does not seek the impoundment of the defendants' own dummies, or component parts, or business records. The plaintiff does not ask the Court to seize the defendants' inventory and thus stop defendants from continuing to manufacture and sell their product. All the plaintiff seeks is the impoundment of evidentiary materials relevant to the allegation that the defendants built their business using plaintiff's property. Impoundment and destruction of the defendants' computer software and any other infringing material can await a full hearing on the merits, but the critical evidence of defendants' wrongdoing must be seized now. J.A. 99-100. Plaintiff represented to the district court that the requested ex parte order of seizure and impoundment was authorized by law under 17 U.S.C. § 503 and Federal 240 Rule of Civil Procedure 65. After considering the materials presented by plaintiff, the district court granted the ex parte order of inventory and impoundment and an order to seal the record. The seizure order, which was drafted by plaintiff's counsel, permitted the United States Marshal along with representatives of the plaintiff to inventory and impound certain materials from the business facilities of Vector. The order also provided that plaintiff and its attorneys be allowed to inspect, copy, and photograph all such seized materials. The order authorized the marshal to impound a variety of items that could be identified as belonging to plaintiff or its predecessors in interest, such as blueprints, computer printouts, computer programs, and documents bearing the name of plaintiff or its predecessor. The order further authorized the copying and inventory of all invoices and purchase orders for parts, customer lists, or other customer information materials held by the defendant, and all correspondence between defendant Vector Research and the plaintiff or the Endevco defendants. The impounded and copied materials were to be retained by the marshal or plaintiff's counsel in trust for the court. The order also required that the plaintiff deposit a cash or surety bond in the amount of $2,000. On April 8, 1992, at approximately 5:00 p.m., two U.S. Marshals, accompanied by plaintiff's counsel, two FTSS employees, an attorney for plaintiff's local counsel's law firm, two other employees of the law firm, and a computer consultant, accessed Vector's facility to carry out the court's order. Approximately one hour later and after copying machines were set up, the marshals left the premises, leaving the rest of the search party unattended. [FN4] All parties left the premises at approximately 11:00 p.m. The seized materials [FN5] were held in trust for the court by plaintiff's local counsel's law firm because the marshals had no space to hold these materials. All individuals involved in the search of the Vector facility signed confidentiality agreements relating to the information viewed. On April 16, 1992, defendant filed a motion to vacate the order of impoundment and inventory and to request an immediate hearing. That same day, the district court held a pretrial conference in response to the hearing request. All counsel were present in chambers. At this conference, the court entertained arguments from defendants' counsel on the motion to vacate and addressed defendants' concerns regarding the execution of the ex parte order. At that time, the materials were transferred to the custody of a United States Magistrate Judge, where they remain today. FN4. Defendants contend that the marshals did not return. The affidavits of the two FTSS employees who carried out the order state that "[t]he U.S. Marshals left the building between 6 p.m. and 9 p.m." J.A. 177 & 180. FN5. It is unclear what was actually seized. Plaintiff contends that no original documents or software were taken but rather only copies were made. Defendants contend that original computer disks were seized. Plaintiff responds that several computer disks were removed from the Vector facility at the behest of one of the defendants because copying would be a lengthy process and that those disks were immediately returned to Vector after they had been duplicated. 241 On December 18, 1992, after the parties had filed several briefs on the matter, the district court entered a memorandum and order denying defendants' motion to vacate the order granting plaintiff's request for immediate ex parte order of inventory and impoundment. The district court held that "under the Supreme Court Rules of Practice, the ex parte seizure order was not improper," and, in addition, "under Rule 65(d), the order was proper as plaintiff demonstrated the necessity to prevent immediate and irreparable injury." J.A. 88. This timely appeal followed. On March 1, 1993, plaintiff filed in this court a motion to dismiss for lack of subject matter jurisdiction, arguing that 28 U.S.C. § 1292(a) did not vest jurisdiction because no activity was enjoined and that the matter was best left until discovery of the impounded documents was initiated and a final decision was reached on the merits. On May 12, 1993, after defendants had filed a brief in opposition and plaintiff had replied, a panel of this court denied the motion to dismiss the appeal. II. [1][2] We review the district court's denial of defendants' motion to vacate the ex parte order of inventory and impoundment under an abuse of discretion standard. We review the granting or denial of a preliminary injunction for an abuse of discretion, e.g., Forry, Inc. v. Neundorfer, Inc., 837 F.2d 259, 262 (6th Cir.1988), and the same standard of review is appropriate here because the denial of defendants' motion to vacate the ex parte seizure order had the effect of a preliminary injunction. An abuse of discretion exists when the district court applies the wrong legal standard, misapplies the correct legal standard, or relies on clearly erroneous findings of fact. See, e.g., Fleischut v. Nixon Detroit Diesel, Inc., 859 F.2d 26, 30 (6th Cir.1988). The district court justified the ex parte seizure order as a proper exercise of its authority under the Copyright Act, 17 U.S.C. § 503(a), [FN6] which authorizes the court to order the impounding of all copies infringing the plaintiff's copyright along with any means for reproducing these infringing copies, and also under Fed.R.Civ.P. 65. The Copyright Act does not provide a standard for the district court's decision to grant an order of impoundment; rather, § 503 leaves this decision to the discretion of the district court by providing that "[a]t any time while an action under this title is pending, the court may order the impounding, on such terms as it may deem reasonable." 17 U.S.C. § 503(a) (emphasis added). The Copyright Rules following 17 U.S.C. § 501 purport to establish a procedure for ex parte seizure and impoundment of the articles subject to impoundment under § 503(a). [FN7] FN6. At any time while an action under this title is pending, the court may order the impounding, on such terms as it may deem reasonable, of all copies or phonorecords claimed to have been made or used in violation of the copyright owner's exclusive rights, and of all plates, molds, matrices, masters, tapes, film negatives, or other articles by means of which such copies or phonorecords may be reproduced. 17 U.S.C. § 503(a). 242 FN7. Rule 3. Upon the institution of any action ... the plaintiff ... may file with the clerk ... an affidavit stating upon the best of his knowledge, information and belief, the number and location, as near as may be, of the alleged infringing copies, records, plates, molds, matrices, etc., or other means for making the copies alleged to infringe the copyright, and the value of the same, and with such affidavit shall file with the clerk a bond executed by at least two sureties and approved by the court.... Rule 4. Such bond shall bind the sureties in a specified sum, to be fixed by the court, but not less than twice the reasonable value of such infringing copies, plates, records, molds, matrices, or other means for making such infringing copies, and be conditioned for the prompt prosecution of the action, suit or proceeding; for the return of said articles to the defendant, if they or any of them are adjudged not to be infringements, or if the action abates, or is discontinued before they are returned to the defendant; and for the payment to the defendant of any damages which the court may award to him against the plaintiff or complainant. Upon the filing of said affidavit and bond, and the approval of said bond, the clerk shall issue a writ directed to the marshal ... directing the said marshal to forthwith seize and hold the same subject to the order of the court.... Rule 5. The marshal shall thereupon seize said articles ... using such force as may be reasonably necessary in the premises, and serve on the defendant a copy of the affidavit, writ, and bond by delivering the same to him personally ... and shall make immediate return of such seizure, or attempted seizure, to the court.... Rule 6. A marshal who has seized alleged infringing articles, shall retain them in his possession, keeping them in a secure place, subject to the order of the court. Rule 7. Within three days after the articles are seized, and a copy of the affidavit, writ and bond are served as hereinbefore provided, the defendant shall serve upon the clerk a notice that he excepts to the amount of the penalty of the bond, or to the sureties of the plaintiff ..., otherwise he shall be deemed to have waived all objection to the amount of the penalty of the bond and the sufficiency of the sureties thereon. If the court sustain[s] the exceptions it may order a new bond to be executed by the plaintiff or complainant, or in default thereof within a time to be named by the court, the property to be returned to the defendant. Rule 9. The defendant, if he does not except to the amount of the penalty of the bond or the sufficiency of the sureties of the plaintiff or complainant, may make application to the court for the return to him of the articles seized, upon filing an affidavit stating all material facts and circumstances tending to show that the articles seized are not infringing copies, records, plates, molds, matrices, or means for making the copies alleged to infringe the copyright. Defendants argue that plaintiff did not comply with the Copyright Rules, and even if the Copyright Rules were complied with, the ex parte seizure order was still not justified. Defendants' objections to the district court's holding that the Copyright Rules had been complied with are meritless, but defendants' argument that the ex parte order was nevertheless unauthorized by law is correct. [3] The district court addressed defendants' objections and held that there was general compliance with the Copyright Rules. Defendants' first objection is that the affidavits filed by FTSS in support of its ex parte motion did not state to anyone's best 243 "knowledge, information and belief, the number and location" of the alleged infringing copies or the value of these copies as required by Rule 3. The district court properly rejected this argument because the complaint identified the location of defendants' principal place of business, the order of seizure was directed to that location, and that was the sole location searched. [4] Second, defendants argue that plaintiff's bond was not equal to twice the reasonable value of the allegedly infringing articles that were to be seized as required by Rule 4. The court set the bond at $2,000. However, defendants submitted the affidavit of Steven Fuhr, which stated that the value of the articles seized and copied exceeded $2.2 million. Fuhr seems to base his estimate on the value of the information contained in the business records that plaintiffs were permitted to copy. Because, as discussed below, these Copyright Rules are only relevant to the seizure of the infringing goods, the value of the information contained in the seized business records is irrelevant in setting the bond amount. Therefore, the district court's finding that $2,000 was sufficient bond was not clearly erroneous. [5] Third, defendants complain that instead of the clerk's issuing a writ, as provided in Rule 4, there was only the ex parte order of the district court. However, by issuing the order, the districtcourt avoided a possible due process problem. See Paramount Pictures Corp. v. Doe 1, 821 F.Supp. 82, 87-88 (E.D.N.Y.1993). Therefore, the district court did not abuse its discretion by issuing a seizure order instead of allowing the clerk to issue a writ of seizure. [6] Fourth, defendants contend that they were not served with a copy of the bond at the time of the seizure, as required by Rule 5. In its order denying defendants' motion, the district court stated that it could not determine whether a copy of the bond was actually served at the time of the seizure and, accordingly, ordered plaintiff to submit a copy of the bond to defendants. Therefore, the district court corrected any problem that may have been caused in this respect. [7] Finally, defendants charge impropriety because the Marshal's office did not retain the seized articles but rather they were kept by plaintiff's local counsel for nine days before being transferred to the magistrate judge. However, Rule 6 provides that the Marshal should retain the seized articles "subject to the order of the court." The ex parte seizure order specifically authorized the law firm to hold the seized materials in trust for the court because the marshals had insufficient space to hold the materials. Undoubtedly, the better practice would be to require the U.S. Marshal to retain the impounded items. However, in the circumstances of this case, we cannot say that the district court abused its discretion by allowing the law firm to hold the items in trust for the court. Thus, the district court did not abuse its discretion by holding that the Copyright Rules were complied with in this case. [FN8] FN8. However, whether compliance with the Copyright Rules is a sufficient basis on which to justify an ex parte order of impoundment under 17 U.S.C. § 503 is a matter of some debate. Some courts have held that compliance with the Copyright Rules is constitutionally insufficient and require that the plaintiff meet the burdens imposed by Federal Rule of Civil Procedure 65(b) for the granting of ex parte injunctive relief. Paramount Pictures Corp. v. Doe 1, 821 F.Supp. 82, 85-87 (E.D.N.Y.1993); WPOW, 244 Inc. v. MRLJ Enters., 584 F.Supp. 132, 134- 35 (D.D.C.1984); see also American Can Co. v. Mansukhani, 742 F.2d 314, 321-324 (7th Cir.1984) (holding that ex parte seizure order in trade secrets case was abuse of discretion because there was no valid reason for proceeding ex parte and not complying with the requirements of Fed.R.Civ.P. 65(b)); Paul S. Owens, Impoundment Procedures Under the Copyright Act: The Constitutional Infirmities, 14 Hofstra L.Rev. 211 (1985) (suggesting that use of Fed.R.Civ.P. 65 would cure the "constitutional infirmities" of impoundment procedure prescribed by the Rules of Practice). The Second Circuit, however, has noted that the Copyright Rules have never been explicitly repealed by the Supreme Court or Congress. Warner Bros. Inc. v. Dae Rim Trading, Inc., 877 F.2d 1120, 1124 (2d Cir.1989); see also Duchess Music Corp. v. Stern, 458 F.2d 1305 (9th Cir.), cert. denied, 409 U.S. 847, 93 S.Ct. 52, 34 L.Ed.2d 88 (1972); Jondora Music Publishing Co. v. Melody Recordings, Inc., 362 F.Supp. 494 (D.N.J.1973), vacated, 506 F.2d 392 (1974), cert. denied, 421 U.S. 1012, 95 S.Ct. 2417, 44 L.Ed.2d 680 (1975). [8] However, the ex parte order issued by the district court was too broad to fall within the authorization of 17 U.S.C. § 503 and the Copyright Rules. The district court's order permitted the plaintiff to seize not only computer software that allegedly infringed plaintiff's copyrights but also to copy defendants' business records, including "[a]ll invoices and purchase orders for parts, customer lists or other customer-information materials held by the defendants, and all correspondence between the defendant Vector Research, Inc. and the plaintiff or the Endevco defendants." J.A. 119. In this connection, we note that the district court's memorandum and order denying defendants' motion fails to address the propriety of the seizure of business records despite defendants' focus on this aspect of the ex parte order. The parts of the district court's order allowing plaintiff to seize defendants' business records were not authorized by 17 U.S.C. § 503(a). [FN9] The language of § 503(a) only authorizes the impoundment of goods that infringe plaintiff's copyrights and articles that can be used to copy those infringing goods. [FN10] Furthermore, the Copyright Rules make it a ground for return of seized articles that those articles are neither infringing copies nor the means of producing infringing copies. See Copyright Rules 4 and 9. The business records that the district court ordered to be seized in this case were not alleged to have infringed plaintiff's copyrights and were not means by which infringing goods could be copied. The business records were no more than possible evidence of the alleged infringement. Moreover, § 503 was not meant to give the copyright holder a means to preserve evidence generally. It is well established that "[t]he primary purpose of impoundment is to maintain the feasibility of the eventual destruction of items found at trial to violate the copyrights laws by safeguarding them during the pendency of the action." Midway Mfg. Co. v. Omni Video Games, Inc., 668 F.2d 70, 72 (1st Cir.1981) (citing Jewelers' Circular Publishing Co. v. Keystone Publishing Co., 274 F. 932, 936 (S.D.N.Y.1921) (L. Hand, J.), aff'd, 281 F. 83 (2d Cir.), cert. denied, 259 U.S. 581, 42 S.Ct. 464, 66 L.Ed. 1074 (1922)). The seizure of these business records was only for the purpose of preserving evidence of defendants' allegedly wrongful conduct. Because business records, such as those ordered to be seized in this case, are not the type of items that are subject to impoundment under 17 U.S.C. § 503(a), the district court's order permitting plaintiff to seize defendants' business records was not authorized by § 503. See Warner Bros. Inc. v. Dae Rim Trading, Inc., 877 F.2d 1120, 1126 (2d Cir.1989). 245 FN9. Plaintiff cites PRC Realty Systems v. National Ass'n of Realtors, 766 F.Supp. 453 (E.D.Va.1991), aff'd in part, rev'd in part, 972 F.2d 341 (4th Cir.1992), for the proposition that "[t]he items which may be impounded [under § 503(a) ] include any that are relevant to copyright protection." Brief of Appellee 19. However, review of that case fails to reveal any discussion regarding the scope of permissible impoundment under § 503. FN10. Compare the Trademark Counterfeiting Act of 1984, which provides that in [c]ivil actions arising out of use of counterfeit marks ... the court may, upon ex parte application, grant an order ... providing for the seizure of goods and counterfeit marks involved in such violation and the means of making such marks, and records documenting the manufacture, sale, or receipt of things involved in such violation. 15 U.S.C. § 1116(d)(1)(A) (emphasis added). The Copyright Act, on the other hand, provides no such express authorization to seize records. [9][10][11] Because the district court's order was not authorized by 17 U.S.C. § 503, the Copyright Rules do not provide the proper procedure. In the absence of specific rules, such as the Copyright Rules, the district court must proceed under the general rules governing injunctive relief. Id. at 1124; see also Fed.R.Civ.P. 1 and Copyright Rule 1. Federal Rule of Civil Procedure 65 provides the procedure that the district court must follow when granting injunctive relief. The only type of injunctive relief that a district court may issue ex parte is a temporary restraining order. Fed.R.Civ.P. 65(b). However, [a] temporary restraining order may be granted without written or oral notice to the adverse party or that party's attorney only if (1) it clearly appears from specific facts shown by affidavit or by the verified complaint that immediate and irreparable injury, loss, or damage will result to the applicant before the adverse party or that party's attorney can be heard in opposition, and (2) the applicant's attorney certifies to the court in writing the efforts, if any, which have been made to give the notice and the reasons supporting the claim that notice should not be required. Id. "[T]he Rule 65(b) restrictions 'on the availability of ex parte temporary restraining orders reflect the fact that our entire jurisprudence runs counter to the notion of court action taken before reasonable notice and an opportunity to be heard has been granted both sides of a dispute.' " Reed v. Cleveland Bd. of Educ., 581 F.2d 570, 573 (6th Cir.1978) (quoting Granny Goose Foods, Inc. v. Brotherhood of Teamsters, 415 U.S. 423, 439, 94 S.Ct. 1113, 1124, 39 L.Ed.2d 435 (1974)). Furthermore, ex parte restraining orders should be limited to preserving the status quo only for so long as is necessary to hold a hearing. Granny Goose, 415 U.S. at 439, 94 S.Ct. at 1124. The parties disagree as to whether the seizure order only preserved the status quo. Plaintiff argues that the order did no more than was necessary to preserve the status quo by taking "an unaltered snapshot of [defendants'] operation at a particular point in time." Brief of Appellee 27. Plaintiff notes that the documents authorized for impoundment were all relevant to the merits of the case and were only copied, not taken 246 from defendants, so that defendants' operation would not be affected. Defendants, on the other hand, argue that this order went beyond preserving the status quo. Defendants cite Warner Bros. Inc. v. Dae Rim Trading, Inc., 877 F.2d 1120, 1125 (2d Cir.1989), which stated: "An order issued without notice directing an agent of plaintiff's attorney to search a defendant's premises, seize goods, documents and records and deliver them to the attorney, is not an order aimed at maintaining the status quo." [12][13] Regardless of whether the district court's order in this case merely preserved the status quo, plaintiff was required by Fed.R.Civ.P. 65(b) to show that the circumstances were appropriate for ex parte relief. The normal circumstance for which the district court would be justified in proceeding ex parte is where notice to the adverse party is impossible, as in the cases where the adverse party is unknown or is unable to be found. American Can Co. v. Mansukhani, 742 F.2d 314, 322 (7th Cir.1984). Plaintiff does not argue that this justification is present in this case. There is, however, another limited circumstance for which the district court may proceed ex parte: where notice to the defendant would render fruitless further prosecution of the action. See id.; In re Vuitton et Fils S.A., 606 F.2d 1 (2d Cir.1979); Paramount Pictures Corp. v. Doe 1, 821 F.Supp. 82, 89 (E.D.N.Y.1993). [14] In order to justify proceeding ex parte because notice would render further action fruitless, the applicant must do more than assert that the adverse party would dispose of evidence if given notice. "Where there are no practical obstacles to giving notice to the adverse party, an ex parte order is justified only if there is no less drastic means for protecting the plaintiff's interests." American Can, 742 F.2d at 323. In this case, the district court could have ordered the defendants not to disturb any of the items listed in the seizure order and held an immediate adversarial hearing to determine whether the seizure order should issue. Therefore, plaintiffs must show that defendants would have disregarded a direct court order and disposed of the goods within the time it would take for a hearing. [15] The applicant must support such assertions by showing that the adverse party has a history of disposing of evidence or violating court orders or that persons similar to the adverse party have such a history. For example, in In re Vuitton, a famous manufacturer of expensive luggage explained its need for an ex parte restraining order by pointing to its experience in several previous actions it had filed against similar counterfeiters selling luggage unlawfully infringing the manufacturer's trademark. The manufacturer explained that in those previous actions its efforts were foiled because the counterfeiters, after receiving notice of the pending action, simply transferred their inventories to other members of a closely-knit group of counterfeiters. The Second Circuit held that the district court abused its discretion by not issuing the ex parte order because the manufacturer had made a sufficient showing of why notice should not be given to the defendants. In re Vuitton, 606 F.2d at 4-5. However, American Can, 742 F.2d at 322-25, a case from the Seventh Circuit, demonstrates the limits of this circumstance. In that trade secrets case, the district court issued an ex parte order permitting the plaintiff, accompanied by U.S. Marshals, to enter defendant's business premises and seize samples of the allegedly infringing inks and to copy all documents relating to defendants' sale of jet inks, defendants' production documents, and defendants' correspondence with plaintiff's customers. Id. at 318. On appeal from the ensuing preliminary injunction, the Seventh Circuit held that issuing the 247 seizure order ex parte was an abuse of discretion because there was no valid reason for proceeding ex parte and not complying with Fed.R.Civ.P. 65(b). Plaintiff had supported its argument that notice would have rendered fruitless the further prosecution of the action by asserting that the defendants, after receiving notice, "would have immediately caused [defendants] to alter the inks in their factory and secrete the pertinent documents." Id. at 322. The court noted that it "agree[d] with the Second Circuit that ex parte orders of very limited scope and brief duration may be justified in order to preserve evidence where the applicant shows that notice would result in destruction of evidence" but held that plaintiff's unsupported assertions that defendants would destroy evidence were insufficient to show the need for proceeding ex parte. Id. at 323. In the present case, the only justification given to the district court for proceeding ex parte was that it is current business practice to store many business records electronically on computer tapes, floppy disks and hard disks. Not only is information stored in this manner easier to use than printed materials, it also is easier to destroy. Stated quite simply, if the incriminating evidence which proves the plaintiff's allegations still exists, it can now be seized and impounded but, given the character of the defendants' activities, it is very unlikely that such evidence would ever be produced through normal discovery if ex parte impoundment is not ordered. Brief in Support of Emergency Motion for Ex Parte Order of Seizure and Impoundment of Evidence, J.A. 99-100. [16] Showing that the adverse party would have the opportunity to conceal evidence is insufficient to justify proceeding ex parte. If it were, courts would be bombarded with such requests in every action filed. The applicant must show that the adverse party is likely to take the opportunity for such deceptive conduct. Plaintiff contends that "the character of defendants' activities" shows that defendants were likely to conceal evidence. Plaintiff was seemingly referring to defendants' having allegedly unlawfully usurped plaintiff's business opportunities and allegedly violating their confidentiality agreements with plaintiff. These allegations are insufficient. Plaintiff did not show that defendants, or persons involved in similar activities, had ever concealed evidence or disregarded court orders in the past. In this appeal, plaintiff argues that defendants have very recently displayed their propensity to conceal evidence. Plaintiff contends that [d]espite a formal discovery request for all loans to Vector, Defendants- Appellants concealed from the production of documents evidence that a supplier to FTSS which has access to confidential FTSS product specifications invested heavily in Defendants' business three months after it was formed. This information was only revealed after documents had been subpoenaed from a third party. Brief of Appellee 25-26. This contention is irrelevant to a determination of whether plaintiff made a sufficient showing to the district court before the district court proceeded ex parte to order the copying of defendants' business records because this alleged concealment took place after the ex parte order had been issued. Furthermore, it would be inappropriate for this court to consider plaintiff's contention because there has been no determination as to its accuracy. Therefore, plaintiff failed to make an adequate showing to the district court that notice to defendants would have rendered fruitless the further prosecution of the action. [17] Thus, the district court abused its discretion in issuing the ex parte order of 248 inventory and impoundment. The court was required to apply the standard provided in Fed.R.Civ.P. 65(b) for granting ex parte relief, because neither 17 U.S.C. § 503(a) nor the Copyright Rules authorizes the copying of business records, which the district court's order permitted. Plaintiff did not make a sufficient showing of at least one prerequisite for obtaining an ex parte order under Fed.R.Civ.P. 65(b); namely, why notice should not have been required. Plaintiff did not sufficiently show that it was necessary to proceed ex parte and that there were no less extreme remedies available. Plaintiff's assertion that defendants would conceal evidence if given notice because defendants allegedly misappropriated trade secrets and infringed plaintiff's copyrights is insufficient to establish that notice to the defendants would have rendered fruitless further prosecution of the action. Because plaintiff failed to comply with Fed.R.Civ.P. 65(b), the district court's ex parte order of inventory and impoundment was an abuse of discretion. Therefore, the district court's order denying defendants' motion to vacate that ex parte order was, likewise, an abuse of discretion. [FN11] FN11. Having concluded that the ex parte order was an abuse of discretion, we need not address defendant's Fourth Amendment argument. III. For the reasons stated, the district court's order denying defendants' motion to vacate the order granting plaintiff's request for immediate ex parte order of inventory and impoundment is REVERSED, and this case is REMANDED for further action consistent with this opinion. The district court is ORDERED to immediately return to defendants all items taken from defendants pursuant to the ex parte order of inventory and impoundment, including all photocopies and electronic copies made, but the district court may condition the return of these items by such safeguards as it deems necessary to prevent the secretion, alteration, or destruction of the returned items. Articles: Using the Computer to Level the Playing Field Using the Computer to Level the Playing Field Robert LeRoux Hernandez The Association of Trial Lawyers of America The combination of computer software and access to the Internet allows sole practitioners to prepare cases as thoroughly as lawyers at large firms. Not long ago, a sole practitioner could feel virtually blown out of the water when taking on a defendant represented by a large firm or a government entity that could call on the 249 resources of an entire legal department. Now, with the introduction of the personal computer (PC) and user-friendly software applications, a well-organized lawyer in a small office may even get a leg up on larger organizations. The key is to understand that the PC is like an extension of the brain. When properly used, it can enhance everything the lawyer does best and improve weak areas. The PC is a great equalizer, providing efficient access to information, organization, and communication. The computer can replace large chunks of associate, paralegal, and clerical time-lowering overhead, freeing up resources, and becoming the lawyer's most valuable assistant. Although I have used WordPerfect 6.1 for Windows for several years, only recently have I come to appreciate the full impact of some of its features. The computer screen is now my desktop, and through this word-processing program I have speedy access to nearly all the files, features, and programs I need to do my work. Following are some recommendations for maximizing use of your PC. Customize your toolbar. A customized toolbar provides immediate access to the features you use most often. For example, with a click of the mouse you can pull down an address book or card file, a list of cases with key telephone numbers, a spreadsheet and bookkeeping program, or a timekeeping system. While working on a case, you can connect to a court through the Pacer System to check on a docket entry or download the entire docket.1 While working on a motion or brief, you can click into LEXIS-NEXIS to conduct immediate research on a legal issue, then paste relevant parts directly into the work. Copyright © 1998, The Association of Trial Lawyers of America. All rights reserved. Sailing Into Cyberspace Sailing Into Cyberspace Phyllis Weiss Haserot and Mark Pruner The Association of Trial Lawyers of America Introduction In the 1990s, lawyer marketing has taken a new direction--into cyberspace. The Internet and commercial online services are here to stay. So far, lawyers' biggest use of the World Wide Web is publishing on home pages. The Web is the graphical and interactive section of the Internet. Anyone can construct a "Web site" to distribute information. (More later on how to do this.) A Web site is a collection of hypertext documents on the Web that carries and distributes multimedia information. 250 Web sites can be viewed by anyone with an Internet connection and a Web site browser, such as Netscape's Navigator or Microsoft's Internet Explorer. Some "online networks," such as Compuserve and America Online--private fee-based computer communications systems--include Internet access and Web browsers with their services. The online world--which includes both the Internet and online networks--provides the opportunity to use electronic mail, discussion groups, public and private online seminars, electronic research, and Web sites (or home pages) to communicate with clients, prospective clients, experts, and other attorneys. We would not argue that online is better than--or even as good as--face-to-face interactions. However, the Internet and online networks provide the opportunity to "meet" with and easily stay in touch with people, both within and beyond your local area, whom you would not be able to see very often, if at all. They are also an efficient way to get work done jointly. For example, online networks provide the means to develop new and ongoing business relationships by • • • • • • sending frequent e-mail notes to clients and prospects; participating in online seminars; posting comments, questions, and responses in substantive or general interest forums; moderating discussion groups; responding to law firm or public inquiries; and answering inquiries of clients, prospects, or colleagues in a private area. The more you interact with others online, the more likely you are to build fruitful relationships. However, this is clearly a long-term strategy. You'll need patience and persistence. But as more current and prospective clients come online, your dedicated efforts will be rewarded. This is particularly true for local and regional firms that will find few of their local competitors online now. Easy links Lawyers are currently using cyberspace techniques that successfully enhance their client relationships and help them to better serve and impress new prospects. This kind of interaction will grow through the end of the decade and change the feel and the format of marketing. Once a firm is connected to the online world, the link's value can be maximized by using it regularly for • • • • sending current items of interest to clients; setting up a firm "help desk" for use by clients; sending clients documents and "staying in touch" notes; and asking clients periodically, "How am I doing?" Keeping up a steady stream of communication with clients is effective marketing. True, 251 much of this type of communicating can be done by mail or fax, but it is much faster and easier, and usually cheaper, to do this by e-mail. In order to quickly respond to e-mail messages from clients wanting updates on their cases, an attorney could have a prototype reply form on the computer that can be filled out and pasted into an e-mail message. For an even quicker reply, client information can be kept in a database that is inserted automatically in the appropriate places on the reply form. Moving one step further, online networks also provide a private area for online meetings between you and your clients and other people you invite to join you. These meetings should be made accessible only with an approved password. You can also experiment with private areas for seminars; discussions; and a library containing bulletins, articles, resumes, and newsletters that can be downloaded. You can use these areas to enhance your relationships with clients from the start of a case through to its completion. Online seminars in private areas are convenient for all attendees. Many firms still hold seminars on either the clients' or the firm's premises. Online seminars can serve as an alternative or as a follow-up to these sessions. Transcripts, outlines, and supporting documents from each seminar can be made available in a virtual library for access at any time while saving the cost of printing and distributing. To build your reputation among a large audience, you can use the public online discussion groups on CompuServe, America Online, or other similar services. You can participate as a moderator, panelist, or contributor. One attorney from a large firm who serves as a forum moderator and has obtained clients from his online activities says his marketing efforts have become thoroughly integrated. Not only has he gotten direct referrals and leads online, but he has also been asked to write articles and speak at conferences about online marketing and about substantive information he has provided in online conversations. Several of his firm's clients appreciate his command of online systems and rely on him to assist in their cases through those resources. He and his firm are convinced that his online activities have attracted new clients and generated additional business from existing clients. Similar success stories come from lawyers in small firms or sole practices. In fact, small firms and sole practitioners have an advantage since in the rapidly changing online world, the small firm's ability to make quick decisions gives it an advantage over large bureaucratic firms. Online marketing success takes initiative, not large-firm fire power. Building relationships takes frequent online contact or postings; patience; and prompt responses to inquiries, online requests for proposals, and discussion items. The expected online response time is shorter than that of other media, and your clients' expectations must be met to maintain good relationships. In general, both parties have to be online. However, there are services that will convert e-mail messages to faxes. These services can be very useful when only a few mailing list members are not online. Developing a Web site 252 Most of the initiatives discussed here also apply to developing and maintaining an Internet site on the World Wide Web. An interactive, substantive, and frequently updated site will be of value to visitors and will help build fruitful relationships. If a Web site is done well, it will be a worthwhile investment of your time and energy. But too many undistinguished legal home pages are lost in the clutter of thousands of other Web sites. The basics of Web site creation are not hard to learn. Many attorneys have created effective sites. If you want to create your own, you will need to learn what HTML (hypertext markup language) is, how to manipulate graphics, and how to use Internet software to transfer files. All but the largest firms will also need a Web site hosting service to connect their site to the Internet. Firms creating a site should request a domain name of the type: www.firmname.com. First-year costs for do-it-yourself Web sites are roughly $1,000 to $2,000, depending on the cost of the Web site service and whether you buy or simply download the free software that is available on the Net. By far, the largest cost for the do-it-yourselfer is the attorney's own nonbillable time. For this reason, and because most attorneys don't have enough experience to know what good layout and appropriate graphics are, most attorneys should use professional designers. All design firms are new simply because the Web is new, but experience still counts. Look at design firms' work for law firms. Talk to firms about how they plan to market your site. A good design firm should showcase your strengths and integrate the Web site into your present and future marketing plans. The cost for a brochure-type Web site can be as low as $1,000 but generally is around $2,000 to $5,000. A customized Web site with a marketing plan is in the $5,000 to $30,000 range, depending on the size and complexity of the site and quality of the graphics. Promoting a Web site If a Web site reads like a brochure, why would anyone look at it more than once? If the site has only Martindale-Hubbell-type information, why would someone want to see this message twice? A helpful exercise in designing a Web site is to first draft a press release to be issued when your site is complete. You will answer two questions with this exercise: Who is the audience? Why is your site or firm compelling? Many firms put their newsletters on their site, hoping clients will appreciate the convenience of having this ready reference. Maybe one of the articles will remind a client with a similar problem to ask the firm for help. But this approach misses the power of a Web site, because, unlike a newsletter, a Web site should be interactive. A site can take readers to sources anywhere in the world via hypertext links. All law firm sites should have a set of links to address the clients' information needs. An extensive set of links in a specific area is known as a jumpsite. It organizes the information of 253 interest and gives the client a reason to revisit the site. Pictures can be added to a Web site and, unlike the print medium, these can be linked to other Web sites. Another audience that a Web site should attract is prospective clients. Topics that are important to clients, such as dealing with child custody problems, losing a job, starting a new business, and buying a house, become dry when reduced to abstract legal principles. To create a good Web site, a firm needs to address these emotional issues in human terms. The more human the presentation, the more interesting the site will be to those who visit it. In addition, a site can provide a variety of other services such as these: • • • You are handling a controversial case and the newspapers are not covering your side because the other side is using professional public relations consultants. Put your version on your Web site (after checking your local ethics rules). The opposition may become more amenable to settlement when it no longer controls what the public reads. You and some of your clients often travel. Set up interactive calendars on your site to allow you to schedule meetings from your laptop. You handle divorce cases. Create a frequently asked questions page on divorce procedures with hypertext links to appropriate statutes. When you create something that didn't exist before, you have a story to tell. Adding the capability for interaction always creates interest. A quiz, a survey, an interactive slide show are all more compelling than just dry noninteractive text. Once you have a compelling Web site, you have a lever to generate publicity about the firm and to prospect for new clients. It is vital to get the attention of visitors to your site immediately. A Web site is no place for the subtle building of an argument, and if you don't get a viewer's attention immediately, you are likely to lose that person. Tell the viewer what the firm is about. Be direct. There is no better way to get someone's attention than with a good graphic image. But remember that graphics frequently take a while to download, so use them strategically and sparingly. The look and feel of the site should complement the firm's brochure and other promotional material about the firm. Simplicity and directness apply to your site's layout as well. It is important to make navigating the site as easy as possible. The home page should present information about what is on the site. Each link off the home page should have a summary for that section. The bottom of each page should have a navigation bar that links to each major part of the site. As the site grows and becomes more complicated, maps of the site and eventually search engines can be used as additional navigational tools. Market the site everywhere The ways to market your site are limited only by your imagination. First, you should add your Universal Resource Locator (URL), the Web site's address, 254 to your letterhead, business card, and firm brochure. A client mailing is an important method of Web site marketing. Send literature or floppy disks instructing your clients how to go online. Create a jumpsite and write a newsletter about it. Archive with links to author biographies, jumpsites, government resources, and so on. Each item, whether it appeared first in print or on the Web, should have a counterpart in the other medium. Use a news release or an article to target trade journals and association newsletters that clients read. Reporters are some of the most "wired" people. They are interested in new information sources and stories. Reporters can also recognize another "me-too" site, so contact them only with something newsworthy. An excellent way for a larger law firm to debut a complicated site is to present it at an introductory seminar. For a large site, there is nothing like a tour to let clients and prospective clients see and appreciate the site's potential. Online marketing needs to go beyond search engines, which are of limited assistance. Like other forms of advertising, links on popular search engines such as Yahoo! can be bought. However, a free exchange of links to and from sites related to your practice is more common. Many people will want links to your site, even without your granting a link back, if you provide good information. As with any effort to develop your firm, you should carefully plan online relationship building and marketing, judiciously allocating time and resources. Forecast How big will the impact of technology and the Internet be on marketing? Technology and the online world are changing so rapidly that no one can predict the future of legal marketing. A reasonable forecast envisions an almost universal use of e-mail, teleconferencing sessions through computers, substitution of print newsletters with online versions, and more interactive use of home pages as gateways to intranets, internal Internet-like systems. While Internet lawyer directories will let clients screen potential counsel and lawyers' Web sites will provide information in depth, the selection of counsel will still be a personal decision. Ultimately, the Internet will prove to be more useful to lawyers for legal services delivery (for example, research, joint work with clients and other lawyers, and the distribution of documents and education) than for actual business development. Face-to-face communication will still be important for business development. However, lawyers will become more proficient and comfortable with displaying their personalities and developing and maintaining client relationships online to supplement and complement these in-person activities. Attorneys will need to accept that marketing online is a long-term investment, requiring quick responses, substantive information, creativity and initiative, and a willingness to provide information. In many ways, cyberspace opens up creative possibilities and helps to level the playing field for individual lawyers and firms of all sizes. 255 Phyllis Weiss Haserot is the president of Practice Development Counsel, New Yorkbased consultants in business development and service quality for law firms. She can be reached at phaserot@counsel.com. Mark Pruner is an attorney and president of Web Counsel, a Greenwich, Connecticut-based company that designs and advises on Internet Web pages for lawyers. His Web site is at www.webcounsel.com. This article contains excerpts from articles by the authors in The New York State Bar Journal and The Rainmaker's Review. FRCP 11 Signing of Pleadings Rule 11. Signing of Pleadings, Motions, and Other Papers; Representations to Court; Sanctions (a) Signature. Every pleading, written motion, and other paper shall be signed by at least one attorney of record in the attorney's individual name, or, if the party is not represented by an attorney, shall be signed by the party. Each paper shall state the signer's address and telephone number, if any. Except when otherwise specifically provided by rule or statute, pleadings need not be verified or accompanied by affidavit. An unsigned paper shall be stricken unless omission of the signature is corrected promptly after being called to the attention of the attorney or party. (b) Representations to Court. By presenting to the court (whether by signing, filing, submitting, or later advocating) a pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,-(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; (2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law; (3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief. (c) Sanctions. If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation. (1) How Initiated. (A) By Motion. A motion for sanctions under this rule shall be made separately from 256 other motions or requests and shall describe the specific conduct alleged to violate subdivision (b). It shall be served as provided in Rule 5, but shall not be filed with or presented to the court unless, within 21 days after service of the motion (or such other period as the court may prescribe), the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected. If warranted, the court may award to the party prevailing on the motion the reasonable expenses and attorney's fees incurred in presenting or opposing the motion. Absent exceptional circumstances, a law firm shall be held jointly responsible for violations committed by its partners, associates, and employees. (B) On Court's Initiative. On its own initiative, the court may enter an order describing the specific conduct that appears to violate subdivision (b) and directing an attorney, law firm, or party to show cause why it has not violated subdivision (b) with respect thereto. (2) Nature of Sanction; Limitations. A sanction imposed for violation of this rule shall be limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated. Subject to the limitations in subparagraphs (A) and (B), the sanction may consist of, or include, directives of a nonmonetary nature, an order to pay a penalty into court, or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of some or all of the reasonable attorneys' fees and other expenses incurred as a direct result of the violation. (A) Monetary sanctions may not be awarded against a represented party for a violation of subdivision (b)(2). (B) Monetary sanctions may not be awarded on the court's initiative unless the court issues its order to show cause before a voluntary dismissal or settlement of the claims made by or against the party which is, or whose attorneys are, to be sanctioned. (3) Order. When imposing sanctions, the court shall describe the conduct determined to constitute a violation of this rule and explain the basis for the sanction imposed. (d) Inapplicability to Discovery. Subdivisions (a) through (c) of this rule do not apply to disclosures and discovery requests, responses, objections, and motions that are subject to the provisions of Rules 26 through 37. Section Five: Practice Issues Related to Injunctions Cases: Campbell Soup v. Giles 47 F.3d 467 (1995) CAMPBELL SOUP COMPANY, Plaintiff, Appellant, v. Paul D. GILES, Defendant, Appellee. 257 No. 95-1072. United States Court of Appeals, First Circuit. Heard Feb. 7, 1995. Decided Feb. 17, 1995. Bernard J. Bonn III, with whom Kara W. Swanson, Deborah W. Kirchwey and Dechert Price & Rhoads, Boston, MA, were on brief, for appellant. Keith C. Long, with whom Christa A. Arcos, Anne T. Zecha and Warner & Stackpole, Boston, MA, were on brief, for appellee. Before TORRUELLA, Chief Judge, BOWNES, Senior Circuit Judge, and STAHL, Circuit Judge. TORRUELLA, Chief Judge. After having worked for some thirteen years in a series of sales positions at plaintiff Campbell Soup Co., defendant Paul Giles resigned to undertake similar employment at one of Campbell's chief competitors. Campbell promptly filed suit, alleging that Giles would inevitably use or disclose various trade secrets in the performance of his new duties. Among the relief sought was a preliminary injunction barring Giles from assuming his new position (at least through the end of the fiscal year) or from otherwise making use of Campbell's trade secrets. The district court denied the request for preliminary injunctive relief, finding that Campbell had satisfied none of the four criteria governing the award thereof. Campbell now appeals, complaining principally that the court erred in failing to conduct an evidentiary hearing prior to so ruling. We affirm. Section I. Giles has worked in Campbell's New England division since 1981 in a progressively more responsible series of sales posts. In 1989, he became "Director of Retail," charged with managing the regional sales force. In February 1991, he was promoted to "Category Sales Manager" for soups, in which capacity he assisted in the development and implementation of Campbell's sales and marketing plans. And in October 1993, upon being named one of three "Area Directors," he assumed a greater role in implementing such plans (for both the soup and grocery product lines) and acquired direct responsibility for several large retail accounts. [FN1] FN1. Each of the Area Directors in the New England division handle different customer accounts. These three directors, along with the two Category Sales Managers (one for soups; one for grocery products), all report to the Regional Manager, who in turn reports to Campbell's New Jersey headquarters. On November 1, 1994, Giles left Campbell's employ to undertake analogous duties at 258 Pet, Inc., the manufacturer of Progresso soups (among other products) and one of Campbell's chief competitors. His new position--as Sales Manager for Pet's New England Division--involves the management of several brokers selling the company's products (soup and other foods) to regional customers. Campbell filed this diversity action against Giles shortly thereafter, claiming breach of contract, [FN2] misappropriation of trade secrets, and unfair and deceptive trade practices. Giles responded by advancing a series of counterclaims, including one for intentional interference with contractual relations. FN2. Upon beginning work for Campbell back in 1981, Giles had signed a "Patent-Trade Secret Agreement" obliging him not to "use, divulge, or publish" any of the company's trade secrets without consent, either during such employment or thereafter. (No non-competition agreement, however, was ever signed.) Campbell's breach-of-contract claim alleged a violation of this trade secret agreement. The trade secrets identified by Campbell as being in Giles' possession fall into two categories: (1) marketing information for the 1995 fiscal year (which runs from August 1994 through July 1995); and (2) the existence and nature of a secret project ("the project") involving a new product line scheduled to be launched in 1995. The marketing information was said to include such data as proposed sales expenditures, the timing of promotional efforts such as advertisements and coupons, pricing strategies and other efforts to compete with competitors, and projected net unit costs (including the lowest price that could be charged customers). Campbell asserted that such information was highly confidential, since its disclosure would enable a competitor to modify its marketing plans to counteract those of Campbell. It alleged that Giles was privy to all such information. And it claimed that Giles, in undertaking to market Progresso soups in direct competition with Campbell in the same region in which he used to operate, would be unable (even in good faith) to avoid using such information. In turn, Campbell stated that the project involved a new product line designed to compete directly with some of Pet's products. Only thirty to forty of its employees (out of a total work force of 40,000) were said to even know of the project's existence; Giles was one of the few who had been informed of the details. And any premature disclosure of the project, it argued, would enable a competitor to adapt its marketing plans so as to undermine the entire venture. In response, Giles maintained that most of the marketing information was no longer confidential--having been disclosed to customers at the outset of the fiscal year and being otherwise available through published sales materials and syndicated data sources. [FN3] And he insisted that, even if he were in possession of confidential marketing information, he would be in no position to exploit it to Campbell's detriment. As one of fifty-nine division sales managers at Pet, his responsibility was to implement rather than concoct market strategies. Pet's annual marketing plans (like Campbell's) were by then well into effect and could not easily be altered. And since the peak of the "soup season" ended in March or April, and since most customers placed their orders up to four months in advance, there was minimal room left for competitive positioning this year. As to the project, Giles flatly denied any knowledge thereof. He also affirmed that he intended to abide fully by his confidentiality obligations to his former employer, adding that Pet had taken pains to ensure that he would do so. 259 FN3. The surveys of such organizations as Information Resources, Inc. and Nielsen, he argued, recorded such information as items and quantities sold, the date and price, the type of advertising employed, and the accompanying store display. The district court declined to grant a temporary restraining order and thereafter, in a detailed decision, denied Campbell's motion for a preliminary injunction. Based on its review of the documentary evidence presented, it concluded that: (1) Campbell had failed to establish a likelihood of success on the merits; (2) withholding an injunction would not irreparably harm Campbell, whereas barring Giles from assuming his new position would likely damage his career; and (3) the public interest tilted in Giles' favor, especially given the absence of a non-competition agreement. More particularly, the court found as follows. Whereas the project likely qualified as a trade secret, most of the marketing information was no longer confidential in light of its public disclosure. Whereas Giles was privy to the marketing information, he likely lacked any knowledge of the project. Even if some of the marketing data remained secret, and even if Giles knew of the project, he was unlikely to use or disclose any such information in his new position. And even if he did, any harm to Campbell would likely be compensable through money damages. Section II. [1] On appeal, Campbell does not dispute that the district court properly enunciated the test governing the award of a preliminary injunction--one which requires consideration of (1) the movant's likelihood of success on the merits, (2) the potential for irreparable harm, (3) a balancing of the relevant equities, and (4) the effect on the public interest. See, e.g., Sunshine Dev., Inc. v. FDIC, 33 F.3d 106, 110 (1st Cir.1994); Gately v. Commonwealth of Massachusetts, 2 F.3d 1221, 1224-25 (1st Cir.1993), cert. denied, 511 U.S. 1082, 114 S.Ct. 1832, 128 L.Ed.2d 461 (1994). Nor, apart from one misplaced objection, does Campbell dispute that the district court properly applied Massachusetts trade secret law. [FN4] Rather, Campbell challenges the court's ruling on procedural grounds--arguing that the court erred in denying the preliminary injunction without conducting an evidentiary hearing and without promulgating adequate findings of fact under Fed.R.Civ.P. 52(a). We disagree. FN4. The parties are in agreement that the information at stake here is of the type that, at least potentially, can qualify as trade secrets. See, e.g., Kroeger v. Stop and Shop Cos., 13 Mass.App.Ct. 310, 316-17, 432 N.E.2d 566 (1982) (marketing information can constitute trade secret). They likewise agree that, were it established that Giles possessed trade secrets and was likely to use or disclose them in the course of his new duties, he could properly be barred from doing so. See, e.g., Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 839, 282 N.E.2d 921 (1972) (even in absence of applicable contractual provision, departing employee may be enjoined from using or disclosing confidential information entrusted to him during employment, based on implied contract stemming from employer/employee relationship). Campbell's only complaint in this regard is that the district court improperly focused on Giles' potential disclosure of trade secrets while ignoring his potential use thereof. Yet, while the court did refer solely to "disclosure" on various occasions, it elsewhere referred to improper or inevitable "use." It is evident that, rather than intending any distinction 260 between the two terms, the court was simply employing a shorthand formula. Indeed, Campbell's counsel himself referred to the "inevitable disclosure doctrine" in a letter to the court. [2][3] As this court has previously observed, "an evidentiary hearing is not an indispensable requirement when a court allows or refuses a preliminary injunction" under Fed.R.Civ.P. 65. Aoude v. Mobil Oil Corp., 862 F.2d 890, 893 (1st Cir.1988). Unlike some other courts that have adopted "categorical rules" in this regard, we have indicated that "the balancing between speed and practicality versus accuracy and fairness" should be entrusted to the district court's discretion. Jackson v. Fair, 846 F.2d 811, 819 (1st Cir.1988). As such, the lower court's determination as to the need for an evidentiary hearing will be overturned "only if a clear abuse of discretion is shown." Id. To be sure, when the parties' competing versions of the pertinent factual events are in sharp dispute, such that the propriety of injunctive relief hinges on determinations of credibility, "the inappropriateness of proceeding on affidavits [alone] attains its maximum." SEC v. Frank, 388 F.2d 486, 491 (2d Cir.1968); accord, e.g., Jackson, 846 F.2d at 819. Campbell argues that such was the case here. We nonetheless find no abuse of discretion, for several reasons. [4] First, it is apparent that Campbell was afforded "a fair opportunity to present relevant facts and arguments to the court, and to counter the opponent's submissions." Aoude, 862 F.2d at 894; accord, e.g., Schulz v. Williams, 38 F.3d 657, 658 (2d Cir.1994) (per curiam) (where material facts are contested, the district court need not engage in "a full evidentiary hearing conducted in open court" but must offer the parties "a reasonable opportunity to put forth, and to oppose, the disputed evidence"); Stanley v. University of Southern California, 13 F.3d 1313, 1326 (9th Cir.1994) (same). Over the course of eighteen days, Campbell submitted an abundance of materials: a verified complaint, three initial affidavits, a total of seven reply affidavits (on two successive occasions), a legal memorandum, four letter briefs, excerpts from a treatise, and copies of pertinent case law. [FN5] The court also twice entertained oral argument-- first on an ex parte basis from Campbell, and then during a nearly hour-long session attended by both parties. Such a wealth of submissions, we think, was sufficient to provide the court with "adequate documentary evidence upon which to base an informed, albeit preliminary conclusion." SEC v. G. Weeks Securities, Inc., 678 F.2d 649, 651 (6th Cir.1982) (emphasis deleted) (quoted in Aoude, 862 F.2d at 894). FN5. Giles, in turn, filed an answer, four initial affidavits, two reply affidavits, three letter briefs and a memorandum. Second, the extent to which material factual issues were genuinely in dispute here diminishes somewhat upon closer inspection. With regard to its marketing information, Campbell does not contest that most such data is disclosed to customers at the start of each fiscal year or is otherwise readily available. It focuses instead on a few discrete items--primarily the lowest net cost of its products and the timing of its promotional campaigns. Yet Campbell has not taken issue with Giles' assertions (1) that the height of the soup season ends in March or April and (2) that customers typically place their orders up to four months in advance. Together, these assertions suggest that there is minimal room left for competitive maneuvering in this fiscal year. [FN6] As well, its claim that Pet can easily and quickly modify its marketing tactics in response to the actions of its competitors is at odds with its repeated contention that its own marketing plans can 261 be adjusted only with great difficulty. And Campbell has not seriously disputed that Giles' new duties are confined to implementing, rather than developing, Pet's marketing plans. [FN7] Given these factors, we think the district court was warranted in finding that Giles' knowledge of any confidential marketing information would not result in irreparable harm to Campbell. FN6. Campbell has no objections to Giles working at Pet in any capacity after July 1995--by which time a new annual marketing plan (which has yet to be created) will have been implemented and the project will have been announced. FN7. The middle-level sales position held by Giles at Campbell (and now at Pet) is in sharp contrast to that of the senior executive in Pepsico, Inc. v. Redmond, No. 94C6838, 1994 WL 687544 (N.D.Ill. Dec. 15, 1994), a case on which Campbell heavily relies. Nor has there been any suggestion that Pet was attempting to "raid" Campbell personnel (senior or otherwise); it is undisputed that Giles was recruited through a "headhunter"--several months after Campbell's 1995 marketing plans had been developed (and discussed with customers). With regard to Giles' knowledge of the project, it can well be argued that the nature of the parties' respective submissions provided a supportable basis for crediting Giles' averments over those proffered by Campbell. [FN8] The district court appeared to do so (although some ambiguity attends the matter). [FN9] Yet we need not dwell on this particular issue, for the court proceeded to find that (1) Giles was unlikely to disclose the project to Pet even if he knew of it and (2) Campbell would not be irreparably harmed even if he did so. Campbell has not drawn these conclusions into serious question. The record contains no indication that Giles is dishonest or would be inclined to breach his confidentiality agreement with Campbell. In turn, as mentioned, Campbell's assertion that Pet could readily alter its marketing strategies, particularly at this point in the soup season, in order to undermine the project is questionable. As well, the launch of the project is supposedly imminent; Campbell argued below, in fact, that it was originally slated to be released in January 1995. Again, therefore, we think the evidence before the court was sufficient to support a conclusion that Campbell was unlikely to suffer irreparable harm in this regard. FN8. For example, Campbell initially averred that Giles was the sole employee in the New England division who had been informed of the project. Following Giles' retort that such a scenario was implausible in light of his rank in the office hierarchy, Campbell revised its position to state that he had been the first (of several) in the region to be contacted. In turn, three Campbell executives based in New Jersey averred they had disclosed the details of the project to Giles in a telephone conference call. Yet they were unable to identify the date thereof, except to say it had occurred in "late September or early October, 1994." No supporting documentary evidence was provided. Giles replied that the only conference call in which he had participated occurred on May 3, 1994 (on matters unrelated to the project). And he submitted copies of his personal calendar that appeared to corroborate this assertion. Campbell offered no response. FN9. The court first stated that Campbell had "failed to present sufficient proof ... 262 that the Project was, in fact, disclosed to Giles." With regard to this same issue, however, it noted on the next page: "In light of the substantial factual dispute which is not resolved by the pleadings, the Court is compelled to rule against Campbell which bears the burden of proof on its motion...." Finally, we reiterate what was emphasized in Aoude: "Even where Rule 65 factfinding is desirable, it is designed to be tentative--'preliminary'--in nature.... The web of conclusions upon which a preliminary injunction rests are 'statements as to probable outcomes,' nothing more." 862 F.2d at 894 (quoting Goyco de Maldonado v. Rivera, 849 F.2d 683, 686 (1st Cir.1988)); accord, e.g., Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1423 (9th Cir.1984) (in preliminary injunction context, district court need not make "binding findings of fact" but instead need only "find probabilities that the necessary facts can be proved"). For the reasons discussed above, we think the documentary evidence was sufficient to permit an informed, albeit preliminary, conclusion that injunctive relief was unwarranted. While an evidentiary hearing would undoubtedly have been helpful in light of the number of disputed issues and the lack of discovery, we are unprepared to say that the court abused its discretion in failing to conduct one. [FN10] FN10. Campbell's related claim--that the court engaged in inadequate factfinding--can be summarily rejected. The length of the court's written decision belies any general complaint in this regard. And to the extent Campbell is challenging the court's isolated reference to "the substantial factual dispute which is not resolved by the pleadings," see note 9 supra, any error in this regard (if any there be) was harmless for the reasons just discussed. Section III. [5] Also requiring resolution is Campbell's motion to impound all appellate papers, which has been allowed on a provisional basis only and which Giles opposes. Any confidential information contained in such papers is properly withheld from public disclosure. Yet the only information conceivably falling within that category are the few details provided about the project; nothing in the descriptions of Campbell's marketing information can possibly be deemed sensitive. Accordingly, the motion to impound is granted only until such time as the project is publicly announced, at which point all appellate papers will be unsealed. See, e.g., Pepsico, Inc. v. Redmond, 46 F.3d 29 (7th Cir.1995). Campbell is directed to notify this court when such announcement occurs. [FN11] FN11. Given our resolution of this appeal, we have no occasion to address Giles' assertion that Campbell's complaint fails to satisfy the $50,000 threshold requirement for diversity jurisdiction. We leave that matter to the district court in the first instance. The order of the district court dated December 23, 1994 is affirmed. The limited injunction entered by this court on January 12, 1995 is dissolved. The motion to impound all appellate papers is allowed on a temporary basis. 263 Republic of Philippines v. New York Land 852 F.2d 33 (1988) The REPUBLIC OF the PHILIPPINES, Appellee, v. NEW YORK LAND CO., Joseph Bernstein, Ralph Bernstein, the Canadian Land Co. of America, Herald Center Ltd., and Nyland (CF8) Ltd., Appellants. No. 772, Docket 87-7498. United States Court of Appeals, Second Circuit. Argued April 4, 1988. Decided June 7, 1988. Michael J. Silverberg, New York City (Lawrence M. Sands, Philips, Nizer, Benjamin, Krim & Ballon, New York City, of counsel), for appellants New York Land Co., Joseph Bernstein, and Ralph Bernstein. Philip R. Carter, New York City (Bernstein & Carter, New York City, of counsel), for appellants Canadian Land Co. of America, Herald Center Ltd., and Nyland (CF8) Ltd. Jeffrey J. Greenbaum, New York City (Clive S. Cummis, James M. Hirschhorn, Elana L. Gershen, Sills Cummis Zuckerman Radin Tischman Epstein & Gross, P.A., New York City, Severina Rivera, Washington, D.C., Morton Stavis, Center for Constitutional Rights, New York City, of counsel), for appellee. Before OAKES and WINTER, Circuit Judges, and CEDARBAUM, District Judge. [FN*] FN* Hon. Miriam Goldman Cedarbaum of the United States District Court for the Southern District of New York, sitting by designation. OAKES, Circuit Judge: This appeal is from two orders ("the 1987 orders") of the United States District Court for the Southern District of New York, Pierre N. Leval, Judge, which granted, in modified form, a request by The Republic of the Philippines ("The Republic") that a court officer be appointed to oversee the management of several New York City properties. The underlying lawsuit, the history of which is explained in some detail in Republic of the Philippines v. Marcos, 806 F.2d 344 (2d Cir.1986), cert. denied, --- U.S. ----, 107 S.Ct. 2178, 95 L.Ed.2d 835 (1987), and which we will not repeat here, involves The Republic's claim that five New York properties [FN1] are beneficially owned, at least in part, by Ferdinand and Imelda Marcos, who purchased those properties with money wrongfully extracted from the government of the Philippines. The lawsuit names the Marcoses, several of their associates, the holding companies which own the buildings of record, and the buildings' managers. Our earlier opinion upheld a preliminary injunction issued by Judge Leval in May 1986 ("the 1986 injunction") which barred the defendants from 264 transferring or encumbering the properties. The appellants here are the corporations and individuals who own or manage 40 Wall Street, the Crown Building, and Herald Center. The fourth property, located at 200 Madison Avenue and owned by the Glockhurst Corp., N.V., is also covered by Judge Leval's 1987 orders, but the owners and managers have chosen not to appeal as to it. The fifth property, Lindenmere, is no longer part of this action. [FN2] FN1. The five properties include the following: (1) 40 Wall Street, a 71-story office building owned by Nyland (CF8) Ltd., a Netherlands Antilles corporation which in turn is owned by three Panamanian corporations that issued "bearer" shares to unknown persons. (2) The Crown Building, previously the Genesco Building, at 57th Street and Fifth Avenue, owned by The Canadian Land Co. of America, formerly a Netherlands Antilles corporation called Lastura Corp., which in turn is owned by three other Panamanian corporations that also issued "bearer" shares. (3) Herald Center, previously the Korvette Building, at Sixth Avenue and 34th Street, which is owned by Herald Center Ltd., formerly Voloby Ltd., a British Virgin Islands corporation. Herald Center Ltd. is owned by three other Panamanian corporations, again issuers of "bearer" shares. (The above three properties have been managed by the appellants Joseph and Ralph Bernstein.) (4) 200 Madison Avenue, at the southwest corner of 36th Street and Madison Avenue, which is owned by Glockhurst Corp., N.V., which in turn is owned by the same three Panamanian corporations that own Herald Center Ltd. (5) Lindenmere, an estate in Suffolk County, Long Island, in the town of Brookhaven, Center Moriches, Long Island. Lindenmere was originally purchased by Luna 7 Corp., which was owned by several Filipinos, and was later conveyed to Ancor Holdings, N.V., a Netherlands Antilles corporation. Beneficial ownership is claimed by defendant Antonio Floirendo, a Philippine businessman and close associate of Ferdinand and Imelda Marcos. FN2. In a consent decree entered July 31, 1987, defendant Antonio Floirendo admitted that the estate had been held by Ancor Holdings, N.V., in constructive trust for the benefit of The Republic of the Philippines, and the property was transferred to The Republic. A brief overview of this action's progress since our last opinion should be helpful. After Judge Leval had issued the 1986 injunction, but before The Republic filed its motion for an order appointing a receiver to manage the four commercial properties, Citibank filed a complaint on November 18, 1986, to foreclose its mortgage on 40 Wall Street. On April 24, 1987, Judge Whitman Knapp, of the United States District Court for the Southern District of New York, entered a preliminary injunction appointing Cushman & Wakefield, Inc., as receiver for 40 Wall Street. Citibank, N.A. v. Nyland (CF8) Ltd., 86 Civ. 9181 (WK) (S.D.N.Y.), aff'd, 839 F.2d 93 (2d Cir.1988). On November 25, 1986, a suit was filed by Karl Peterson, who claimed on behalf of Adnan Khashoggi to act for the corporations which own 40 Wall Street, the Crown Building, and Herald Center. That suit was assigned to Judge Leval. This complaint charged the Bernsteins and New York Land Co. with seizing control of the corporations from their rightful owners and with mismanaging and looting the properties, and sought declaratory relief and damages. Canadian Land Co. v. Bernstein, 86 Civ. 9087 (PNL) (S.D.N.Y. filed Nov. 25, 1986). 265 Judge Leval issued a temporary restraining order ("TRO") and scheduled a conference to be held on December 2, 1986, to consider Peterson's motion for a preliminary injunction. On that date The Republic moved to consolidate its action with the Canadian Land action, to intervene as of right in that action, and to appoint a receiver for the properties. The Bernstein defendants submitted affidavits in opposition to the motions, but did not request an evidentiary hearing. On January 12 and 13, 1987, after the TRO in the Canadian Land action had expired and before the order of January 13, appointing a receiver, was entered, Joseph Bernstein caused payment of $557,349.11 to be made from the property-owning corporations (the accounts of which were in the name and under the control of New York Land Co.) to New York Land Co. and to his law firm, Bernstein, Carter & Deyo. In Judge Leval's opinion and order of January 13, 1987, Republic of the Philippines v. Marcos, 653 F.Supp. 494 (S.D.N.Y.1987), he found that The Republic had made "a clear, convincing showing of need justifying the appointment of a receiver," id. at 496, based primarily on numerous conflicts of interest inherent in the Bernsteins' management of the properties, the Bernsteins' claim that they had purchased the companies which owned the buildings they managed, and the service of mortgage and loan default notices on all of the buildings. Id. at 496-98. Judge Leval then suggested that Cushman & Wakefield, Inc., be appointed as a receiver for the buildings, subject to its willingness to serve and to alternative suggestions from the parties. Id. at 499-500. After hearing from the parties, Judge Leval modified his original order on April 29, 1987. 86 Civ. 2294 (PNL) (S.D.N.Y. Apr. 29, 1987). Rather than appoint a receiver, Judge Leval left the Bernsteins' management in place, and appointed Cushman & Wakefield to serve as a "Special Property Advisor" to the three buildings, and to 40 Wall Street should the Citibank receivership be terminated. His order specified that the special property advisor would have full access to the accounts, premises, and personnel of the properties, for the purpose of advising the court as to the propriety of all expenditures and other actions involved in the management of the properties. The order further provided that the special property advisor would not take actual or constructive possession of the properties, or title to the properties, and expressly stated that the advisor was not a receiver. The order also included an injunction against expenditures, leases, and contractual arrangements involving the properties without prior court approval. It is important to note that this appeal involves only the 1987 orders; the appellants have not questioned any of the actions taken by the special property advisor or any subsequent order of the district court concerning any particular expenditures or claim for fees, nor have they requested the district court to reconsider the 1986 injunction. Therefore, our analysis is limited to whether the form of relief was proper, whether Judge Leval followed the proper procedures and made the necessary findings to support the orders, and whether the orders constituted a taking of property in violation of due process. DISCUSSION [1] On review we must determine whether Judge Leval abused his discretion in ordering the 1987 injunction and appointing the special property advisor. As to the injunction we may refer to Doran v. Salem Inn, Inc., 422 U.S. 922, 931-32, 95 S.Ct. 2561, 2568, 45 266 L.Ed.2d 648 (1975) ("the standard of appellate review is simply whether the issuance of the injunction, in light of the applicable standard, constituted an abuse of discretion"), Stormy Clime Ltd. v. ProGroup, Inc., 809 F.2d 971, 973 (2d Cir.1987), and Ferguson v. Tabah, 288 F.2d 665, 675 (2d Cir.1961). The standard to be applied in reviewing the appointment of a special property advisor, on the other hand, is not entirely clear. While the appointment of a receiver is an extraordinary remedy, which "should be employed with the utmost caution and granted only in cases of clear necessity to protect plaintiff's interests in the property," 12 C. Wright & A. Miller, Federal Practice and Procedure § 2983, at 21 (1973), here the district court's order was far less intrusive. The advisor's role, as noted above, is essentially to monitor the management of the buildings and advise the court. More intrusive is the provision in the 1987 orders which requires that no payments or transfers be made without court approval. That order is subject to the oft-repeated standard set down in Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir.1979) (per curiam), which requires a showing of irreparable harm and either a likelihood of success on the merits or "sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief." The 1986 injunction concerned the transfer of the properties; this injunction concerns the possible dissipation of the properties. Both are aimed at preserving the property until the true owners can be determined. Judge Leval recognized that the management company lacked meaningful oversight from either legal or beneficial owners, and acted to preserve the property until the true owner could be determined. His findings clearly support the injunctions as issued. In enjoining disbursements without court approval and in appointing the special property advisor, Judge Leval properly relied on our earlier opinion in this case which held, inter alia, that The Republic had shown "sufficient evidence as to all five properties to support the district court's grant of a preliminary injunction based on its findings of irreparable harm and probable ownership by the Marcoses," Republic of the Philippines v. Marcos, 806 F.2d at 352, as well as a showing that the balance of hardships weighed in favor of The Republic. There was nothing presented to the court which would call these conclusions into doubt; instead, the filing of the Canadian Land action, the filing of a lawsuit by the Bernsteins in which they claimed to be the owners of the buildings, Manhattan Land Co. v. Marcos, 86 Civ. 9729 (PNL) (S.D.N.Y. Dec. 19, 1986), and the notices of default served on the various buildings only reinforce the need for protective measures. [2] In light of all these factors, it was appropriate for Judge Leval to appoint the special property advisor. The district court is expected to use the flexibility traditionally associated with equitable remedies, see Lemon v. Kurtzman, 411 U.S. 192, 200-01, 93 S.Ct. 1463, 1469, 36 L.Ed.2d 151 (1973); Hecht Co. v. Bowles, 321 U.S. 321, 329, 64 S.Ct. 587, 592, 88 L.Ed. 754 (1944) ("[f]lexibility rather than rigidity has distinguished" equitable remedies), and its broad discretion means our review is "correspondingly narrow." Lemon v. Kurtzman, 411 U.S. at 200, 93 S.Ct. at 1469. Although there are few cases where a "special fiscal agent" has been utilized, see Roach v. Margulies, 42 N.J.Super. 243, 246, 126 A.2d 45, 47 (App.Div.1956), Judge Leval's order accomplished clearly necessary oversight in a manner which is no more intrusive than necessary. Cf. Ferguson v. Tabah, 288 F.2d at 674-75. While the term "special property advisor" does not often appear in our decisions, we have implicitly approved the appointment of a "Special Fiscal Agent" to examine the records of a brokerage firm and make a report to 267 the court, SEC v. Alan F. Hughes, Inc., 461 F.2d 974, 982-84 (2d Cir.1972) (special fiscal agent's report basis for upholding appointment of receiver), and have frequently approved the use of "special masters" in situations where close supervision, but not a shift of control, was deemed necessary. [FN3] See, e.g., EEOC v. Local 638, 532 F.2d 821, 829 (2d Cir.1976) ("administrator" appointed under Title VII to remedy past discrimination and to develop union affirmative action plan); Inmates of Attica Correctional Facility v. Rockefeller, 453 F.2d 12, 25 (2d Cir.1971) (appointment of "federal monitors" to prevent brutality by prison guards); Powell v. Ward, 487 F.Supp. 917, 935 (S.D.N.Y.1980) (designated "special master" to oversee compliance with prison reform injunction), aff'd and modified on other grounds, 643 F.2d 924 (2d Cir.) (per curiam), cert. denied, 454 U.S. 832, 102 S.Ct. 131, 70 L.Ed.2d 111 (1981). See also Whitman v. Fuqua, 549 F.Supp. 315, 326 (W.D.Pa.1982) (appointment of federal magistrate to oversee company's ongoing business); Fed.R.Civ.P. 53; cf. Fed.R.Civ.P. 66; 16 W. Fletcher, Cyclopedia of the Law of Private Corporations §§ 7671, 7675, at 31-35, 44-47 (rev. perm. ed. 1979). FN3. Our use of a special master to oversee corporate operations extends back at least over a century to the epic struggle over the control of the Erie Railroad among Jim Fiske, Jay Gould, and Cornelius Vanderbilt and others. In Erie Ry. v. Heath, 8 F.Cas. 761 (C.C.S.D.N.Y.1871) (No. 4,513), the circuit court held Jay Gould, president of the Erie Railway Co., in contempt for refusing to turn over certain books and documents to a court-appointed master. There Judge Blatchford, after noting the basis for the appointment of the master and the extent of the master's authority, noted that [i]n executing, under the order made by the court, and the rules which govern the court, the power of calling for books and documents, the master will, of course, see to it that as little inconvenience as possible is caused to the company in the way of interrupting its business, or the use by it of the books needed for the investigation. Id. Judge Leval's order strikes us as applying similar restraint. Here Judge Leval's solution to the problem accounted for all the identifiable private interests at stake, preserved the property until such time as a final solution may be reached, and allowed the properties to continue to function. While changing conditions, or particular orders by the district court under the injunction, may require reconsideration, at present we have only praise for Judge Leval's handling of the situation. [3] Appellants also claim that there should have been an evidentiary hearing before the order was issued. However, our record indicates that while they had the opportunity, they never asked for such a hearing. We recently held that "[o]n a motion for preliminary injunction, where 'essential facts are in dispute, there must be a hearing ... and appropriate findings of fact must be made.' " Fengler v. Numismatic Americana, Inc., 832 F.2d 745, 747 (2d Cir.1987) (quoting Visual Sciences, Inc. v. Integrated Communications, Inc., 660 F.2d 56, 58 (2d Cir.1981)). In Fengler, it was clear that "essential facts" were disputed. Here, however, the uncertainty of ownership, the defaults, the lack of cooperation with discovery, and other questionable conduct by the Bernsteins either had been clearly demonstrated in the prior stages of this case or not controverted by the defendants. It is not a rigid requirement that oral testimony be taken on a motion for a preliminary injunction, Redac Project 6426, Inc. v. Allstate Ins. Co., 402 F.2d 789, 790 (2d Cir.1968), and here the prior hearings and affidavits, and the 268 court's findings supporting the earlier injunction, provided an adequate basis for the court's decision. The most significant factors, i.e., the confusion over ownership and the prior defaults, would have remained essentially unchanged by any additional evidence. [4] The Bernsteins' claim that Judge Leval's orders failed to satisfy Rules 52(a) and 65(d) of the Federal Rules of Civil Procedure also lacks merit. These rules require a district court to set forth the findings of fact and conclusions of law which support its order and to provide its reasons for issuing an injunction. The purpose of these rules is two-fold: to aid the trial court by requiring it to marshal the evidence before it and, more importantly, to aid us in our review. See Fengler, 832 F.2d at 748; 9 C. Wright & A. Miller, Federal Practice and Procedure § 2571, at 679-80 (1971). The two orders here, read together and in light of our decision when this case came up on the appeal from the grant of a preliminary injunction, clearly satisfy these standards. [5] Nor did the district court's decision constitute a "taking" of property without notice and opportunity for a hearing. See Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972). The appellants received ample notice, and the opportunity to argue and present evidence. In fact, Judge Leval's willingness to modify his January 13 order at the appellants' request is clear evidence that their arguments received due consideration. Moreover, appellants have not even been divested of possession. Judgment affirmed. The Original Great American Chocolate Chip Cookie Company v. River Valley Cookies 970 F.2d 273 (1992) The ORIGINAL GREAT AMERICAN CHOCOLATE CHIP COOKIE COMPANY, INCORPORATED, Plaintiff-Appellant, v. RIVER VALLEY COOKIES, LIMITED, Robert M. SIGEL, Paula Sigel, et al., Defendants-Appellees. No. 91-3312. United States Court of Appeals, Seventh Circuit. Argued May 1, 1992. Decided July 20, 1992. Rehearing and Rehearing En Banc Denied Sept. 4, 1992. Rene A. Torrado, Jr., Karen L. Pszanka-Layng, Charlotte M. Gibberman, Vedder, Price, Kaufman & Kammholz, Chicago, Ill., John T. Marshall (argued), Carol E. Kirby, Powell, 269 Goldstein, Frazer & Murphy, Atlanta, Ga., for plaintiff-appellant. Robert Boehm, Konstantinos Armiros (argued), Gary I. Blackman, Boehm & Pearlstein, Chicago, Ill., for defendants-appellees. Before CUDAHY, POSNER, and EASTERBROOK, Circuit Judges. POSNER, Circuit Judge. Discussion This case arises from a squabble between a franchisor that we shall call the "Cookie Company" and the Sigels, who had a franchise to operate a Cookie Company store in a shopping mall in Aurora, Illinois. The company terminated the Sigels' franchise but they continued to sell cookies under the company's trademark, using batter purchased elsewhere after their supply of Cookie Company batter ran out. So the company sued them (and their corporate entity) to enjoin their violating the Trademark Act, 15 U.S.C. §§ 1051 et seq., and moved for a preliminary injunction. The Sigels counterclaimed, charging that their franchise had been terminated in violation both of the franchise agreement and of the Illinois Franchise Disclosure Act, Ill.Rev.Stat. ch. 121 1/2 , ¶ 1719, and moving for a preliminary injunction directing the Cookie Company to restore their franchise. (Both parties had additional grounds for their motions, but these need not be discussed.) The district court granted the Sigels' motion and denied that of the Cookie Company, 773 F.S. 1123 (N.D.Ill.1991), which appeals under 28 U.S.C. § 1292(a)(1). There is a question about our jurisdiction, characteristically unremarked by the parties. Rule 65(d) of the Federal Rules of Civil Procedure requires that "every order granting an injunction ... shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained." The magistrate judge recommended that the district judge grant the Sigels' motion for a preliminary injunction, and he obliged. The magistrate judge's opinion contains no actual injunction order, however, and the judgment order entered at the direction of the district judge states in its entirety: "The Court adopts and incorporates Magistrate Judge Bucklo's Report and Recommendation pursuant to 28 U.S.C., SECTION 636(b)(1) as Appendix A to this Order." So there was no injunction order but merely an incorporation by reference of the draft of an injunction contained in the Sigels' motion. This fell far short of compliance with Rule 65(d). Schmidt v. Lessard, 414 U.S. 473, 94 S.Ct. 713, 38 L.Ed.2d 661 (1974) (per curiam). A violation of Rule 65(d), as we explained in Chicago & North Western Transportation Co. v. Railway Labor Executives' Association, 908 F.2d 144, 149-50 (7th Cir.1990), does not deprive the appellate court of jurisdiction but can have jurisdictional consequences. An injunction that does not comply with the rule may not place the person "enjoined" under any legal obligation, in which event he would lack the tangible stake in seeking to vacate it that Article III of the Constitution requires in any proceeding sought to be maintained in any federal court, including a court of appeals. An injunction that has no binding force at all simply cannot be appealed. Bates v. Johnson, 901 F.2d 1424, 1428 (7th Cir.1990). Although a defective permanent injunction might be recharacterized as a declaratory 270 judgment in order to preserve appellate jurisdiction, that route is not open here because we have a preliminary injunction and there is no appellate jurisdiction over preliminary declaratory judgments--assuming there is such a creature. Courts occasionally use the term as shorthand for the fact that a declaratory judgment is often a prelude to a request for coercive remedies. E.g., Preferred Risk Ins. Co. v. Gill, 30 Ohio St.3d 108, 112, 507 N.E.2d 1118, 1122 (1987). That irrelevant usage to one side, one case denies that there is such a thing as a preliminary declaratory judgment, Sigel v. Salisbury, 379 F.Supp. 317, 324 (W.D.Pa.1974), while other cases affirm its existence. In re MCorp, 101 B.R. 483, 485 (S.D.Tex.1989), vacated on other grounds under the name MCorp Financial, Inc. v. Board of Governors, 900 F.2d 852 (5th Cir.1990), aff'd and rev'd, 502 U.S. 32, 112 S.Ct. 459, 116 L.Ed.2d 358 (1991); In re Public Service Co., 108 B.R. 854, 867 (Bankr.N.H.1989); Pletz v. Secretary of State, 125 Mich.App. 335, 372, 336 N.W.2d 789, 807 (1983). But the essential point is that no counterpart to 28 U.S.C. § 1292(a)(1) authorizes an appeal from a nonfinal declaratory judgment. The acid test of whether a purported injunction is appealable is whether it is in sufficient though not exact compliance with Rule 65(d) that a violation could be punished by contempt or some other sanction. The test is satisfied. After the district judge entered his order adopting the magistrate judge's recommendation, the Cookie Company successfully moved for an order requiring the corporate defendant to post a $10,000 injunction bond. By making that motion the company acknowledged that it was enjoined; and it would be estopped to deny this should the Sigels, having posted the injunction bond, later move to enforce the injunction. Moreover, the order granting the motion to require the posting of a bond states, "Parties to comply with contract," and terse as this command is we think it placed the company under a legal obligation enforceable by contempt or other sanctions should it violate the terms of the franchise agreement while the preliminary injunction was in force. The case is like Schmidt v. Lessard, supra, where the Supreme Court held that the district court's violation of Rule 65(d) had not deprived the Court of appellate jurisdiction. The judge had merely entered a judgment "in accordance with the Opinion," and the opinion had merely told the defendants "not to enforce 'the present Wisconsin scheme' [for involuntary commitment] against those in the appellees' class." 414 U.S. at 475-76, 94 S.Ct. at 715. It was a scandalously inadequate form of injunction. But it was not a nullity and it was therefore appealable. The doctrine of pendent appellate jurisdiction furnishes an alternative ground for our appellate jurisdiction. Asset Allocation & Management Co. v. Western Employers Ins. Co., 892 F.2d 566, 569 (7th Cir.1989); Patterson v. Portch, 853 F.2d 1399, 1403 (7th Cir.1988). The denial of the Cookie Company's motion for a preliminary injunction was unquestionably appealable under 28 U.S.C. § 1292(a)(1), and the grant of the Sigels' motion was the mirror image of that ruling. We turn to the merits. In defense of their injunction the Sigels point out correctly that they didn't have to show that they would in fact prevail at trial--only that they had a sufficient likelihood of prevailing to warrant the issuance of an order that would avert the irreparable harm with which the termination of the franchise threatened them. The greater that harm, and the less the irreparable harm to the Cookie Company if the injunction were denied, the less of a showing the Sigels had to make that they had the better case on the merits. Diginet, Inc. v. Western Union ATS, Inc., 958 F.2d 1388, 271 1393 (7th Cir.1992), and cases cited there. So we ought to consider first whether the balance of irreparable harms is as one-sided in the Sigels' favor as the district court believed. The Sigels used borrowed money to invest $125,000 to $130,000 in fixtures and other improvements. If the preliminary injunction is dissolved they will have to cease operating the store as a Cookie Company franchise and we may assume with them that their income from the store will as a result drop to zero. The Cookie Company has offered to let them assign the franchise, for a consideration that presumably would enable the Sigels to recover most, perhaps all, of their investment--or more, for that matter. But they claim not to have sufficient other income to make the payments required to service the loan until the assignment is complete, and they fear that in the interim the loan will be called and they will lose their home and the other assets that they pledged-- two houses, and a retirement fund, of Mrs. Sigel's father--as collateral for it. This is a wobbly footing for a finding of irreparable harm. The Cookie Company gave the Sigels an opportunity to assign the franchise back in August 1990, and again in October of that year (the suit was not brought until February 1991). They have only themselves to blame if they dallied in taking up either offer. Moreover, foreclosures are not instantaneous, so even if it takes the Sigels a while to find an assignee it is unlikely that they will lose the collateral for the loan in the interim. To be balanced against this dubious showing of irreparable harm to the Sigels is the real though unquantified harm to the Cookie Company of being forced to continue doing business with a franchisee who not only committed rampant violations of the franchise agreement but also infringed the franchisor's trademarks. It is irreparable harm. The company cannot eliminate it by obtaining an award of damages from the Sigels, because no one supposes them capable of paying substantial damages. The harm may well exceed that of the Sigels should the injunction be vacated, unless some special weight ought to be given to the fact that their personal as distinct from merely business assets are in jeopardy, an issue not discussed by the district court. This omission makes it difficult for us to understand the basis for the court's conclusion that the balance of harms favored the issuance of a preliminary injunction in the Sigels' favor. Even if the court was right on that issue, there are two reasons to suppose that the Sigels had a somewhat heavier burden of demonstrating a solid likelihood of winning on the merits than in the usual case of one-sided irreparable harm. The first is that the injunction requires the parties to maintain a cooperative relationship for its duration by enjoining the Cookie Company "from failing and refusing to sell cookie batter, accessories and promotional items as needed and requested by defendants." Such an injunction imposes a continuing duty of supervision on the issuing court, and this can be a drain on scarce judicial resources. Courts should be, and generally are, reluctant to issue "regulatory" injunctions, that is, injunctions that constitute the issuing court an ad hoc regulatory agency to supervise the activities of the parties. Marble Co. v. Ripley, 77 U.S. (10 Wall.) 339, 358-59 19 L.Ed. 955 (1870); Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380, 391-92 (7th Cir.1984); Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129, 134 n. 3 (5th Cir.1979); Rodriguez v. VIA Metropolitan Transit System, 802 F.2d 126, 132 (5th Cir.1986); Bethlehem Engineering Export Co. v. Christie, 105 F.2d 933, 935 (2d Cir.1939) (L. Hand, J.); Berliner Gramophone Co. v. Seaman, 110 Fed. 30, 34 (4th Cir.1901); Charles Alan Wright & Arthur R. Miller, 272 Federal Practice and Procedure § 2942, at pp. 375-76 (1973); cf. McKnight v. General Motors Corp., 908 F.2d 104, 115 (7th Cir.1990). The reluctance is not total; there is no scarcity of elaborate regulatory decrees, particularly in civil rights suits against public institutions. Spangler v. Pasadena City Board of Education, 611 F.2d 1239, 1245 n. 5 (9th Cir.1979) (concurring opinion). Still, the cost (broadly conceived) of regulatory decrees to the judiciary is a factor weighing against the grant of equitable relief in this case. Second, although the Sigels tell us they have additional evidence, not presented at the preliminary injunction hearing, that they plan to introduce at trial, this is not a case in which the merits perforce are so undeveloped at the preliminary injunction stage that a one-sided showing of irreparable harm would warrant a preliminary injunction even if the moving party could demonstrate only a modest likelihood of victory at trial, so unreliable would the forecast of the outcome be. Most of the facts bearing on the parties' dispute in this case are uncontested and the issue is their proper legal characterization, for which (as we noted just the other day in Central States, Southeast & Southwest Areas Pension Fund v. Slotky, 956 F.2d 1369, 1374 (7th Cir.1992)) no trial is necessary. It ought to be possible at this stage of the case to get a good fix on the merits. If despite all we have said the Sigels could win this appeal even if they persuaded us that their chances of victory at trial were no better than 50-50, they would still lose, because their chances are, so far as we are able to judge, much worse. We discuss first whether the Sigels committed violations of the franchise that, under the agreement, entitled the Cookie Company to yank the franchise, and second whether the violations constituted "good cause" within the meaning of the Illinois Franchise Disclosure Act, which forbids the termination without good cause of a franchise before its expiration date. The agreement defines "material breaches" to include, among other things, "failing to maintain and operate the Cookie System Facility in a good, clean, wholesome manner and in strict compliance with the standards then and from time to time prescribed by" the Cookie Company; selling any product not authorized by the Cookie Company; failing to pay any service fee within 10 days after it is due; failing to pay any of the company's invoices within that period; underreporting gross sales (on which the Cookie Company's royalty from its franchisees royalty is based) by 1 percent or more; or failing to maintain certain insurance coverage. A material breach entitles the Cookie Company to terminate the franchise if the breach "is not totally remedied and cured within five (5) days after written notice of such event is sent to" the franchisee. Any three breaches, whether or not material, entitle the company to terminate the franchise within a 12month period without giving the franchisee notice or an opportunity to cure. The Sigels received the franchise in 1985. Between 1987 and the issuance of the preliminary injunction last year, they committed a number of material breaches. They repeatedly failed to furnish insurance certificates indicating that the Cookie Company was an additional insured on the Sigels' liability insurance policy. They paid four invoices (aggregating either $13,000 or $30,000--the record is unclear) more than 10 days after they were due, which meant more than 20 or more than 40 days after billing, because the agreement gave the Sigels either 10 or 30 days to pay their bills, depending on what kind of bill it was. (The average delay beyond the due date was either 28 days or 31 days; again the record is unclear.) They made five other late 273 payments. Seven times they sent the Cookie Company checks that bounced. They flunked several inspections by the company's representatives, who found oozing cheesecake, undercooked and misshapen cookies, runny brownies, chewing gum stuck to counters, and ignorant and improperly dressed employees. An independent auditor found that in a three-year period the Sigels had underreported their gross sales by more than $40,000 (a nontrivial 2.8 percent of the total--almost three times the allowed margin of error); the result was to deprive the Cookie Company of almost $3,000 in royalties. After the company terminated the franchise, the Sigels pretended it was still in effect, refused to vacate the premises, and violated the franchise agreement by selling unauthorized products--cookies made with batter not supplied by the Cookie Company. After most of these violations the company sent the Sigels a notice of default and the violations were then cured, though not always within 5 days as required by the franchise agreement. The company relies on the alternative ground for termination-three or more violations within a 12-month period, a ground that does not require notice or an opportunity to cure. By the Sigels' own account, most of the violations occurred within an even shorter period in 1989 and 1990 when the store was being mismanaged by the person whom the Sigels (who live in St. Louis) had hired to run it. The fact that the Cookie Company may, as the Sigels argue, have treated other franchisees more leniently is no more a defense to a breach of contract than laxity in enforcing the speed limit is a defense to a speeding ticket. The fact particularly pressed by the Sigels that their violations may have been the fault not of the Sigels themselves but of their manager and that they ceased when the manager was replaced is similarly irrelevant. Liability for breach of contract is strict. Patton v. Mid-Continent Systems, Inc., 841 F.2d 742, 750 (7th Cir.1988). It does not require proof of inexcusable neglect or deliberate wrongdoing. Even if it did, the Sigels would lose because the misconduct of a manager within the scope of his employment is attributed to the owner even in a negligence case. The case must be treated as if they had managed the store in person. We do not share the popular prejudice against absentee ownership but the Sigels cannot be allowed to obtain a legal advantage by virtue of being absentee owners. The district court did not doubt that the Sigels had provided cause for the cancellation of their franchise under the terms of the contract. But it held that an Illinois court would not enforce those terms because they were "commercially unreasonable." Although the term, as we shall see, is not entirely foreign to the common law of Illinois, no state, as far as we know, recognizes commercial unreasonableness as a separate ground for refusing to enforce a contract. There are plenty of grounds for refusing to enforce contract terms (sometimes whole contracts), including fraud, duress, unconscionability, illegality, and penalty, but commercial unreasonableness is not one of them, though it may bear on some of them. As for the Illinois Franchise Disclosure Act, it does not use the term commercial reasonableness or any synonym for it. It does require that a franchisor show good cause to terminate a franchise before its expiration; but "good cause" is a defined term which means, so far as relates to this case, either "the failure of the franchisee to comply with any lawful provisions of the franchise or other agreement and to cure such default after being given notice thereof and a reasonable opportunity to cure such default, which in no event need be more than 30 days," or, "without the requirement of notice and an opportunity to cure, situations in which the franchisee ... repeatedly fails to 274 comply with the lawful provisions of the franchise or other agreement." Ill.Rev.Stat. ch. 121 1/2 , ¶¶ 1719(b), (c)(4). We need not decide whether the five days that the franchise agreement allowed for the cure of defaults was unreasonably short. The company bases its right to cancel the agreement not on the Sigels' failure to cure their violations in timely fashion once they were brought to their attention but on the repeated violations within a 12-month period. The Sigels argue that committing a mere three violations, all that the agreement required to entitle the Cookie Company to terminate their franchise, does not necessarily equate to "repeatedly" failing to comply with the agreement. That is another question we need not decide. Even if the agreement violated the Franchise Disclosure Act by failing to specify some higher number, this would authorize the court, not to strike the entire provision, but only to restrict it to cases in which the franchisee's violations could fairly be described as repeated--and here it should be pointed that there is no 12-month limitation in the Act. If ever there was a case of "repeated" violations, it is this case. That does not end our inquiry. Illinois like other states requires, as a matter of common law, that each party to a contract act with good faith, and some Illinois cases say that the test for good faith "seems to center on a determination of commercial reasonability." Dayan v. McDonald's Corp., 125 Ill.App.3d 972, 993, 81 Ill.Dec. 156, 171, 466 N.E.2d 958, 973 (1984); Kawasaki Shop of Aurora, Inc. v. Kawasaki Motors Corp., 188 Ill.App.3d 664, 675, 136 Ill.Dec. 4, 10, 544 N.E.2d 457, 463 (1989); see also Lippo v. Mobil Oil Corp., 776 F.2d 706, 714 n. 14 (7th Cir.1985). The equation, tentative though it is ("seems to center on"), makes it sound as if, contrary to our earlier suggestion, the judges have carte blanche to declare contractual provisions negotiated by competent adults unreasonable and to refuse to enforce them. We understand the duty of good faith in contract law differently. There is no blanket duty of good faith; nor is reasonableness the test of good faith. [19][20][21] Contract law does not require parties to behave altruistically toward each other; it does not proceed on the philosophy that I am my brother's keeper. That philosophy may animate the law of fiduciary obligations but parties to a contract are not each other's fiduciaries, Continental Bank, N.A. v. Everett, 964 F.2d 701, 704-06 (7th Cir.1992); Dyna-Tel, Inc. v. Lakewood Engineering & Mfg. Co., 946 F.2d 539, 543 (7th Cir.1991); Market Street Associates Limited Partnership v. Frey, 941 F.2d 588, 593-95 (7th Cir.1991); Kham & Nate's Shoes No. 2, Inc. v. First Bank of Whiting, 908 F.2d 1351, 1357 (7th Cir.1990)--even if the contract is a franchise. Murphy v. White Hen Pantry, 691 F.2d 350, 354 (7th Cir.1982). Contract law imposes a duty, not to "be reasonable," but to avoid taking advantage of gaps in a contract in order to exploit the vulnerabilities that arise when contractual performance is sequential rather than simultaneous. Market Street Associates Limited Partnership v. Frey, supra, 941 F.2d at 593-96. Suppose A hires B to paint his portrait to his satisfaction, and B paints it and A in fact is satisfied but says he is not in the hope of chivvying down the agreed-upon price because the portrait may be unsaleable to anyone else. This, as we noted in Morin Building Products Co. v. Baystone Construction, Inc., 717 F.2d 413, 415 (7th Cir.1983), would be bad faith, not because any provision of the contract was unreasonable and had to be reformed but because a provision had been invoked dishonestly to achieve a purpose contrary to that for which the contract had been made. The same would be true here, we may assume, if the Sigels had through their efforts built the Aurora cookie store into an immensely successful franchise and the Cookie Company had tried to appropriate the value they had created by canceling the franchise 275 on a pretext: three (or four, or five, or for that matter a dozen) utterly trivial violations of the contract that the company would have overlooked but for its desire to take advantage of the Sigels' vulnerable position. Wright-Moore Corp. v. Ricoh Corp., 908 F.2d 128, 136-37 (7th Cir.1990). This has not been shown. Not only were many of the violations not trivial, but there is no suggestion of exceptional performance by the Sigels. True, it was a new franchise, and it has been doing well ever since the incompetent manager was booted out; but it is in a prime location, and the company in negotiating the terms of the franchise rated it a "good" franchise--one very likely to do well. The value added by the Sigels is in any event irrelevant because the company did not attempt to take over the franchise. It offered to let the Sigels assign the franchise and keep the proceeds of the assignment, and it gave them enough time to do this, as we have seen, that they could have avoided financial embarrassment had they been willing to give up the franchise. So it is unlikely that the company was trying to appropriate any values created by the Sigels. At argument the Sigels' able counsel disclaimed any suggestion that the Cookie Company had behaved opportunistically; he ascribed the cancellation of their franchise to the spitefulness of an officer of the Cookie Company. The law generally and in this instance does not provide remedies for spiteful conduct or refuse enforcement of contractual provisions invoked out of personal nastiness. Rideout v. Knox, 148 Mass. 368, 19 N.E. 390 (1889) (Holmes, J.); cf. Proimos v. Fair Automotive Repair, Inc., 808 F.2d 1273, 1275 (7th Cir.1987). (Though a number of states do recognize liability in cases where out of pure spite a landowner builds a fence that blocks his neighbor's light or view. 1 Fowler V. Harper, Fleming James, Jr. & Oscar S. Gray, The Law of Torts § 1.26, at pp. 107-08 (2d ed. 1986); Stewart E. Sterk, "Neighbors in American Land Law," 87 Colum.L.Rev. 55, 62- 63 (1987).) So penetrating an inquiry into personality would be beyond the realistic capacities of the courts in contract cases. The law does as we have emphasized provide a remedy in the name of good faith against opportunistic behavior, in the sense of behavior designed to change the bargain struck by the parties in favor of the opportunist; franchise statutes such as the Illinois Franchise Disclosure Act are also concerned with preventing opportunism. Wright-Moore Corp. v. Ricoh Corp., 908 F.2d at 136-37. But so far at least, the Sigels have not presented any evidence of such behavior on the part of the Cookie Company. The term "commercial reasonableness" has cropped up in a few Illinois cases in connection with unconscionability. Reuben H. Donnelley Corp. v. Krasny Supply Co., 227 Ill.App.3d 414, 420, 169 Ill.Dec. 521, 525, 592 N.E.2d 8 (1991); Anders v. Mobil Chemical Co., 201 Ill.App.3d 1088, 1097, 147 Ill.Dec. 779, 784, 559 N.E.2d 1119, 1124 (1990); Frank's Maintenance & Engineering, Inc. v. C.A. Roberts Co., 86 Ill.App.3d 980, 989-90, 42 Ill.Dec. 25, 32, 408 N.E.2d 403, 410 (1980). But they give the term a restricted meaning. The doctrine of unconscionability, closely allied as it is to fraud and duress, is designed to prevent overreaching at the contract-formation stage. The presence of a commercially unreasonable term, in the sense of a term that no one in his right mind would have agreed to, can be relevant to drawing an inference of unconscionability but cannot be equated to it. Lincoln Cardinal Partners v. Barrick, 218 Ill.App.3d 473, 478, 161 Ill.Dec. 189, 193, 578 N.E.2d 316, 320 (1991); Amoco Oil Co. v. Ashcraft, 791 F.2d 519, 522 (7th Cir.1986). We do not understand the Sigels to be arguing that when they were negotiating for the franchise the Cookie Company took advantage of their ignorance or desperation to force unreasonable terms upon them. The Sigels are not vulnerable consumers or helpless workers. They are business people who bought a franchise (actually two, though the other isn't in issue in this case) 276 in another state as an investment to be managed by local managers. They were not forced to swallow unpalatable terms. They have rightly declined even to argue unconscionability. The preliminary injunction should have been denied for the additional reason that the Sigels had infringed the Cookie Company's trademarks, in violation of the Trademark Act. (The Sigels do not, and cannot, S & R Corp. v. Jiffy Lube Int'l, Inc., 968 F.2d 371, 374-75, 376, 377-78 (3d Cir.1992), deny the violation.) Unclean hands is a traditional defense to an action for equitable relief. The purpose is to discourage unlawful activity, and is as relevant to preliminary as to final relief. Shondel v. McDermott, 775 F.2d 859, 868 (7th Cir.1985). It is true that a modern chancellor unlike his medieval forbears does not have uncabined discretion to punish moral shortcomings by withholding equitable relief. Polk Bros., Inc. v. Forest City Enterprises, Inc., 776 F.2d 185, 193 (7th Cir.1985); Proimos v. Fair Automotive Repair, Inc., supra, 808 F.2d at 1275. Modern equity is a system of entitlements. But equitable relief is costly to the judicial system, especially in a case such as this where the relief sought would cast the court in a continuing supervisory role. It would make no sense to incur that cost on behalf of someone who was trying to defraud the person against whom he was seeking the court's assistance. "One who has defrauded his adversary to his injury in the subject matter of the action will not be heard to assert a right in equity." Fruhling v. County of Champaign, 95 Ill.App.3d 409, 417, 51 Ill.Dec. 508, 513, 420 N.E.2d 1066, 1071 (1981), quoted in Polk Bros., Inc. v. Forest City Enterprises, Inc., supra, 776 F.2d at 193; see also id. at 194. The Sigels argue that they had no choice but to infringe the Cookie Company's trademarks surreptitiously, because, had they stopped selling cookies under the company's trademarks after the company stopped shipping batter to them, they would have been forced to default on their promissory note. They are wrong. They had a choice. They could have sued the company for breach of contract and violation of the disclosure law and moved for a preliminary injunction in that action. Instead of following that route, the open and honorable one, they infringed the company's trademarks covertly and did not move for an injunction until they were discovered and sued for infringement. They should not be rewarded with a preliminary injunction for their putting their franchisor to the expense of suing them for trademark infringement. Although, as we explained in Polk Bros., the course of decisions in Illinois (it is Illinois' version of the doctrine of unclean hands that we must apply in this diversity case) has not run entirely true, 776 F.2d at 194, we think an Illinois court would deny an injunction to a firm that by its fraudulent conduct had precipitated the very suit in which it was seeking the injunction. "If the plaintiff creates or contributes to the situation on which it relies, the court denies equitable relief in order to deter the wrongful conduct." Id. at 193. In pooh-poohing their misconduct the Sigels place too much weight on our decision in Lippo. That decision held that the particular franchise agreement, which did not have the same terms as the one here, made the sale of misbranded product a curable violation. The decision, interpreted narrowly in Beermart, Inc. v. Stroh Brewery Co., 804 F.2d 409, 412 (7th Cir.1986), should not be understood to stand for the broader proposition that trademark infringement by a franchisee is a trivial offense that should never entitle the franchisor to cancel the franchise, or for the still broader proposition that in a dispute between franchisee and franchisor the judicial thumb should be on the franchisee's pan of the balance. All other objections to one side (for example, the judicial oath, which, echoing Deuteronomy, requires judges to judge "without respect to 277 persons"), such a tilt is hardly likely to help franchisees as a group. James A. Brickley, Federick H. Dark & Michael S. Weisbach, "The Economic Effects of Franchise Termination Laws," 34 J. Law & Econ. 101 (1991). The more difficult it is to cancel a franchise, the higher the price that franchisors will charge for franchises. So in the end the franchisees will pay for judicial liberality and everyone will pay for the loss of legal certainty that ensues when legal principles are bent however futilely to redistributive ends. The idea that favoring one side or the other in a class of contract disputes can redistribute wealth is one of the most persistent illusions of judicial power. It comes from failing to consider the full consequences of legal decisions. Courts deciding contract cases cannot durably shift the balance of advantages to the weaker side of the market; they can only make contracts more costly to that side in the future, because franchisors will demand compensation for bearing onerous terms. Amoco Oil Co. v. Ashcraft, supra, 791 F.2d at 522. The Cookie Company appealed not only from the grant of the Sigels' motion for a preliminary injunction but also from the denial of its motion for a preliminary injunction against the Sigels' violation of its trademarks. To this part of the company's appeal the Sigels do not deign to reply. We take this to be a concession that they have no defense to the motion. The Cookie Company is entitled to the injunction that it sought, and we remand for its entry. REVERSED AND REMANDED, WITH DIRECTIONS. CUDAHY, Circuit Judge, dissenting. The majority opinion is notable for one thing at least: it fails throughout even to mention that the district court has broad discretion to issue or deny a preliminary injunction. Hoosier Penn Oil Co. v. Ashland Oil Co., 934 F.2d 882, 884-85 (7th Cir.1991). Our review, intended to be deferential, has become in this case plenary, and its tone suggests a detailed and certain knowledge of the equities which I think is wholly lacking at this level of review. The fact is that a respected magistrate judge examined the elements of this controversy in painstaking detail and her work was approved after a de novo review by a conscientious district judge. Close as they are to the events and the actors, it ill behooves us to brush aside their efforts with hardly a passing nod. Nor does their invocation of "commercial reasonableness" seem to me in any way out of step with Illinois law. See, e.g., Dayan v. McDonald's Corp., 125 Ill.App.3d 972, 81 Ill.Dec. 156, 171, 466 N.E.2d 958, 973 (1984) (observing that "the test used by most courts in defining good cause [to terminate a franchise agreement] seems to center on a determination of commercial reasonability"). I find the majority's discussion of the balance of harms highly implausible. The majority's decision puts the Sigels out of business. The majority speculates that the Sigels will be able to salvage something economically, but this is only speculation. The decision of the district court, on the other hand, would merely have preserved the status quo pending full consideration of the merits. It seems to me obvious--painfully so--that the Sigels have far more to lose than does the Cookie Company. 278 The majority's review of the facts here is so lopsided as to be almost droll-- if it were not serious business. For example, the majority states that the Sigels "flunked several inspections by the company's representatives." Ante at 278. But the Sigels were never informed that their operation of their franchise fell so far below acceptable standards of cleanliness and quality as to constitute an event of default. In fact, the magistrate judge found no evidence that the Sigels even knew what constituted a passing (or failing) grade on such an inspection. The magistrate judge's detailed probing of all these points is considerably more balanced and fair than that of the majority. The discussion of the Illinois Franchise Disclosure Act is equally one-sided. Illinois did not enact this law because it thought franchisors were being abused by their franchisees, as the majority seems to believe. Apparently, the legislators had not read enough scholarly musings to realize that any efforts to protect the weak against the strong would, through the exhilarating alchemy of economic theory, increase rather than diminish the burden upon the powerless. I agree that the thumb of judges ought not be placed on the scales of justice. But judges have no obligation to ignore the numerous thumbs already put down on the side of economic power, nor the thumb of the legislature on the other side. Finally, while I do not in principle approve the use of "counterfeit" cookie batter, I would not single this out as a leading social evil of our time. As a matter of fact, the majority makes considerably more fuss about it than does the Cookie Company. Apparently, the batter used by the Sigels was of unquestioned quality, and they turned to it in desperation when they were cut off from their contract source. I would affirm the judgment of the district court and I respectfully dissent. FRCP 52 Findings by the Court Judgment on Partial Findings (a) Effect. In all actions tried upon the facts without a jury or with an advisory jury, the court shall find the facts specially and state separately its conclusions of law thereon, and judgment shall be entered pursuant to Rule 58; and in granting or refusing interlocutory injunctions the court shall similarly set forth the findings of fact and conclusions of law which constitute the grounds of its action. Requests for findings are not necessary for purposes of review. Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses. The findings of a master, to the extent that the court adopts them, shall be considered as the findings of the court. It will be sufficient if the findings of fact and conclusions of law are stated orally and recorded in open court following the close of the evidence or appear in an opinion or memorandum of decision filed by the court. Findings of fact and conclusions of law are unnecessary on decisions of motions under Rule 12 or 56 or any other motion except as provided in subdivision (c) of this rule. (b) Amendment. On a party's motion filed no later than 10 days after entry of judgment, the court may amend its findings--or make additional findings--and may amend the judgment accordingly. The motion may accompany a motion for a new trial under Rule 279 59. When findings of fact are made in actions tried without a jury, the sufficiency of the evidence supporting the findings may be later questioned whether or not in the district court the party raising the question objected to the findings, moved to amend them, or moved for partial findings. (c) Judgment on Partial Findings. If during a trial without a jury a party has been fully heard on an issue and the court finds against the party on that issue, the court may enter judgment as a matter of law against that party with respect to a claim or defense that cannot under the controlling law be maintained or defeated without a favorable finding on that issue, or the court may decline to render any judgment until the close of all the evidence. Such a judgment shall be supported by findings of fact and conclusions of law as required by subdivision (a) of this rule. FRCP 58 Entry of Judgment (a) Separate Document. (1) Every judgment and amended judgment must be set forth on a separate document, but a separate document is not required for an order disposing of a motion: (A) for judgment under Rule 50(b); (B) to amend or make additional findings of fact under Rule 52(b); (C) for attorney fees under Rule 54; (D) for a new trial, or to alter or amend the judgment, under Rule 59; or (E) for relief under Rule 60. (2) Subject to Rule 54(b): (A) unless the court orders otherwise, the clerk must, without awaiting the court's direction, promptly prepare, sign, and enter the judgment when: (i) the jury returns a general verdict, (ii) the court awards only costs or a sum certain, or (iii) the court denies all relief; (B) the court must promptly approve the form of the judgment, which the clerk must promptly enter, when: (i) the jury returns a special verdict or a general verdict accompanied by interrogatories, or (ii) the court grants other relief not described in Rule 58(a)(2). (b) Time of Entry. Judgment is entered for purposes of these rules: (1) if Rule 58(a)(1) does not require a separate document, when it is entered in the civil docket under Rule 79(a), and (2) if Rule 58(a)(1) requires a separate document, when it is entered in the civil docket under Rule 79(a) and when the earlier of these events occurs: 280 (A) when it is set forth on a separate document, or (B) when 150 days have run from entry in the civil docket under Rule 79(a). (c) Cost or Fee Awards. (1) Entry of judgment may not be delayed, nor the time for appeal extended, in order to tax costs or award fees, except as provided in Rule 58(c)(2). (2) When a timely motion for attorney fees is made under Rule 54(d)(2), the court may act before a notice of appeal has been filed and has become effective to order that the motion have the same effect under Federal Rule of Appellate Procedure 4(a)(4) as a timely motion under Rule 59. (d) Request for Entry. A party may request that judgment be set forth on a separate document as required by Rule 58(a)(1). Section Six: Bonds Cases: Franks GMC Truck Center v. General Motors 847 F.2d 890 (1990) FRANK'S GMC TRUCK CENTER, INC. v. GENERAL MOTORS CORPORATION, Appellant. No. 88-5112. United States Court of Appeals, Third Circuit. Argued May 3, 1988. Decided May 24, 1988. Michael S. Waters (argued), Lois H. Goodman, Carpenter, Bennett & Morrissey, Newark, N.J., Burton L. Ansell, General Motors Corp., Detroit, Mich., for appellant. Nicholas L. Ribis (argued), Bruce R. Volpe, James J. O'Hara, Ruth M. Meyer, Ribis, Graham, Verdon & Curtin, Morristown, N.J., for appellee. Before GIBBONS, Chief Judge, and MANSMANN and COWEN, Circuit Judges. 281 OPINION OF THE COURT COWEN, Circuit Judge. This appeal arises from an order of the district court, which granted a preliminary injunction in favor of Frank's GMC Truck Center ("Frank's GMC") compelling General Motors ("GM") to continue to supply heavy-duty truck parts and to process warranty claims on heavy-duty trucks filed by Frank's GMC. GM had ceased supplying heavyduty trucks, and related parts and warranty service, to Frank's GMC as a result of its decision to withdraw from the heavy-duty truck market. Because we conclude that Frank's GMC has not been irreparably injured and because the district court failed to require the posting of a bond as mandated by Fed.R.Civ.P. 65(c), we find that the injunction was improvidently granted and will reverse. Section I. Frank's GMC has been a GM franchisee since 1937, and has sold the full line [FN1] of GM trucks since 1973. In October 1986, GM informed Frank's GMC that it had formed a joint venture with A.B. Volvo, known as Heavy Truck Corporation ("Volvo/GM") (in which GM was to be a minority participant) to manufacture and market heavy-duty trucks in North America. As a consequence of the joint venture, GM also advised Frank's GMC that it was no longer going to manufacture and supply them with heavy-duty trucks and parts. Nevertheless, Frank's GMC anticipated receiving heavy-duty trucks from the joint venture because of its past superior sales record with GM. However, in July of 1987 Volvo/GM informed Frank's GMC that it would not be selected to market and service these trucks on behalf of the joint venture. In addition, Frank's GMC was informed that it should cease taking orders for GM heavy-duty trucks and that orders for heavy-duty truck parts would be considered on a case-by-case basis. FN1. GM manufactures three lines of trucks: "heavy-duty" (fully loaded gross vehicle weight ("GVW") in excess of 33,000 lbs.), "medium-duty" (GVW of between 14,000 and 33,000 lbs.), and "light-duty" (GVW less than 14,000 lbs.). After its request for reconsideration was denied by GM, Frank's GMC filed an action in the Superior Court of New Jersey and, in addition to money damages, sought injunctive relief preventing GM from discontinuing its supply of heavy- duty trucks to Frank's GMC. GM removed the action to the United States District Court for the District of New Jersey and the application for an injunction was heard on January 5, 1988. After hearing argument and reviewing the submissions, the district court denied Frank's GMC's request for an injunction preventing GM from terminating its supply of new heavy-duty trucks, finding that it had met its burden only on the issue of likelihood of success. Nevertheless, the court granted ad interim relief in part by ordering GM to continue supplying parts and warranty administration for heavy-duty trucks to Frank's GMC pending the outcome of the litigation. The district court, while observing that it was "unclear [as to] the irreparable nature of the damage [Frank's GMC] may suffer from General Motor's refusal to continue to supply it heavy-duty parts," App. at 235, nonetheless determined that the equities demanded that GM continue to supply parts and warranty service. After the district court denied its motion for reconsideration, GM 282 appealed to this Court. Section II. "We have consistently held that our review of the grant or denial of preliminary injunctions is limited to determining whether there has been an abuse of discretion, an error of law, or a clear mistake in the consideration of the proof." Moteles v. University of Pennsylvania, 730 F.2d 913, 918 (3d Cir.), cert. denied, 469 U.S. 855, 105 S.Ct. 179, 83 L.Ed.2d 114 (1984); see also Marxe v. Jackson, 833 F.2d 1121, 1125 (3d Cir.1987); Morton v. Beyer, 822 F.2d 364, 367 (3d Cir.1987). Our scope of review is narrow because "the grant or denial of a preliminary injunction is almost always based on an abbreviated set of facts, requiring a delicate balancing ... [that] is the responsibility of the district judge...." United States Steel Corp. v. Fraternal Ass'n of Steelhaulers, 431 F.2d 1046, 1048 (3d Cir.1970); Marxe, 833 F.2d at 1125. We have recognized many times that the grant of injunctive relief is an extraordinary remedy, United States v. City of Philadelphia, 644 F.2d 187, 191 n. 1 (3d Cir.1980), which should be granted only in limited circumstances. To obtain this ad interim relief, a movant "must demonstrate both a likelihood of success on the merits and the probability of irreparable harm if relief is not granted." Morton, 822 F.2d at 367. "[W]e cannot sustain a preliminary injunction ... where either or both of these prerequisites are absent." In re Arthur Treacher's Franchisee Litig., 689 F.2d 1137, 1143 (3d Cir.1982); Morton, 822 F.2d at 367. A. [1] In this case, it is clear to us that there is an insufficient basis upon which a finding of irreparable injury can be made to support the district court's order compelling GM to provide parts and warranty support. [FN2] The assertions of Frank's GMC, even if true, do not constitute irreparable harm. [FN3] FN2. Because of our finding on this issue, we do not reach the question whether there is sufficient evidence to warrant a finding that Frank's GMC will likely prevail on the merits. FN3. Initially, we would note that the court below expressly doubted that there was irreparable harm, but nevertheless granted injunctive relief based on equitable considerations: "Here the equities of the case rest in favor of the grant of temporary relief as to the continuation of warranty support and the continued distribution of parts and accessories necessary for service." App. at 236-37. This is an insufficient basis upon which to grant injunctive relief where the applicant has an adequate remedy at law, in this case money damages. [2] Frank's GMC asserts that it adduced proof that its overall business will suffer from the loss of its heavy-duty truck business because a potential customer will be more reluctant to purchase medium and light-duty trucks from a dealer that does not sell or market heavy-duty trucks. Thus, Frank's GMC claims that it has lost and will continue to lose sales because it does not sell the full line of GM trucks. Frank's GMC also avers that it presented proof that sales are related to service, and that the sale of a truck engenders a continuing service relationship. Frank's GMC alleges that the loss of its 283 ability to perform both regular and warranty service on GM heavy-duty trucks (and to receive the substantial revenue generated therefrom), because of its difficulty in obtaining GM parts and the lack of GM warranty support, will cause irreparable damage to its on-going business. What clearly stands out in all of Frank's GMC's arguments is that, absent the ad interim relief provided by the district court, Frank's GMC would stand to lose sales and service customers, and therefore profits. Even assuming for purposes of argument that Frank's GMC's assertions are true and that it will in fact suffer substantial lost profits as a result of GM's withdrawal from the heavy-duty truck market, the harm flowing therefrom is compensable by money damages. The availability of adequate monetary damages belies a claim of irreparable injury. In Morton, supra, we noted that a purely economic injury, compensable in money, cannot satisfy the irreparable injury requirement: "Although we are not insensitive to the financial distress suffered by [the plaintiff], we do not believe that loss of income alone constitutes irreparable harm." Morton, 822 F.2d at 372. [FN4] Likewise, since Frank's GMC has failed to articulate and adduce proof of actual or imminent harm which cannot otherwise be compensated by money damages, it has failed to sustain its substantial burden of showing irreparable harm. The district court, thus, erred in granting the injunction. FN4. If anything the plaintiff's position in Morton was more sympathetic than Frank's GMC's in that Morton's job was his sole source of income. Here, while the heavy truck component may account for as much as 25.6% of Frank's GMC's gross profit, Frank's GMC may still rely on the other aspects of its business. Indeed, despite Frank's GMC's assertions to the contrary, the court below found that Frank's GMC's loss of this market segment does not place its continued business survival in serious jeopardy. In addition, Frank's GMC sells heavy-duty trucks produced by manufacturers other than GM, which may partially offset the void caused by the GM withdrawal. B. [3][4] We also recognize, however, an additional independent basis for reversal. The district court failed to require Frank's GMC, as a successful applicant, to post a bond. This failure is in direct conflict with Rule 65(c) of the Federal Rules of Civil Procedure, which mandates that a court when issuing an injunction must require the successful applicant to post adequate security. [FN5] Although the amount of the bond is left to the discretion of the court, the posting requirement is much less discretionary. While there are exceptions, the instances in which a bond may not be required are so rare that the requirement is almost mandatory. We have held previously that absent circumstances where there is no risk of monetary loss to the defendant, the failure of a district court to require a successful applicant to post a bond constitutes reversible error. System Operations, Inc. v. Scientific Games Dev. Corp., 555 F.2d 1131, 1145-46 (3d Cir.1977). [FN6] Here, there was evidence in the record indicating that GM would incur substantial costs in complying with the terms of the injunction. [FN7] Indeed, the district court recognized that "although harm would occur to GM if the preliminary injunction was continued and not stayed or dissolved ... it is not irreparable, and pales in significance to the potential loss of Plaintiff." App. at 290. Given the clear possibility that GM could be 284 forced to incur costs with no way to seek restitution if Frank's GMC does not prevail, it was error for the court below to deny GM's request for a bond. FN5. Rule 65(c) states, in relevant part: (c) Security. No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained. Fed.R.Civ.P. 65(c). The reason for this requirement is simple: The party against whom an injunction is issued has no legal or equitable means to recover against the applicant for a wrongful grant of the injunction (i.e., where the applicant does not prevail in the main action), other than the bond. FN6. Because we reverse the district court's order granting an injunction based on the absence of irreparable injury and the failure to require the posting of security, we need not reach GM's other arguments. FN7. The record reflects that if Frank's GMC does not prevail GM will have been damaged: (1) by any difference in the amount it will receive from Frank's GMC as payment for the parts it must provide to Frank's GMC and the amount it pays to obtain these parts; and (2) by the amount it will expend to set up and administer a warranty service program, as well as the claims it will have to pay to Frank's GMC for doing the work (because Volvo/GM agreed to assume responsibility for warranty service). Frank's GMC argues that any damages incurred by GM are purely of its own making because GM has made the choice to dismantle its warranty support and sell off or transfer its parts inventory. However, this argument is spurious as GM would incur costs in complying with the injunction whether it phased parts and warranty services out and had to reconstitute them, or whether GM itself continued to maintain them. Section III. We conclude that Frank's GMC did not meet its affirmative burden of showing irreparable injury. Therefore, the district court improvidently granted ad interim relief. Furthermore, the district court erred in issuing the injunction without requiring Frank's GMC to post a bond. For the foregoing reasons, we will reverse and remand with instructions to vacate the preliminary injunction. Aoude v. Mobil Oil 862 F.2d 890 (1990) Salim AOUDE, Plaintiff, Appellant, v. MOBIL OIL CORPORATION, et al., Defendants, Appellees. No. 88-1625. 285 United States Court of Appeals, First Circuit. Nov. 3, 1988. Decided Dec. 8, 1988. Rehearing Denied Dec. 30, 1988. David Berman with whom Berman & Moren, Lynn, Mass., was on brief, for plaintiff, appellant. Robert M. Gault with whom Andrew N. Nathanson, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Mass., and Charles B. Straus, III, New York City, were on brief, for defendants, appellees. Before BREYER and SELYA, Circuit Judges, and CAFFREY, [FN*] Senior District Judge. FN* Of the District of Massachusetts, sitting by designation. SELYA, Circuit Judge. Plaintiff-appellant Salim Aoude, defendant-in-counterclaim, polemizes mightily against a preliminary injunction issued by the United States District Court for the District of Massachusetts in favor of defendant-appellee- counterclaimant Mobil Oil Corporation (Mobil). In the end, Aoude huffs and puffs, but he fails to blow down the edifice which the district court competently constructed from the facts of record and the applicable law. Cf. The Three Little Pigs 16-18 (E. Blegvad ed. 1980) (house three). Section I The material facts brook little disagreement. Plaintiff, a successful entrepreneur, rented a service station on Turnpike Road, Shrewsbury, Massachusetts from defendant. He operated it for several years under a Mobil franchise. Aoude knew that Mobil ordinarily frowned upon a dealer leasing more than one station at a time. He also knew that Mobil routinely provided in the operative documents for prior written consent as a precondition to effective alienation of a franchise or lease. John Monahan operated another Mobil station in Shrewsbury, located on Maple Avenue. When Monahan decided to bow out, plaintiff smelled the wafting breeze of opportunity. He haggled with Monahan for many weeks, knowing full well that he would need Mobil's written approval in order to cinch a deal. Aoude and Monahan kept these negotiations in the bosom of the lodge; it was only after the two reached a firm accord that plaintiff informed Bruce McFarland, defendant's marketing representative, of his takeover intentions. Aoude and McFarland arranged to meet on June 16, 1987. [FN1] Beforehand, unbeknownst to Mobil, Aoude and Monahan had signed and substantially performed a formal written agreement. Plaintiff took possession of the station on the weekend of June 13-14, began to operate it for his own account, received title to the equipment and personalty from Monahan, and paid the agreed consideration in full 286 ($90,000). The payment was not conditioned on Mobil's approval. FN1. There is a fribbling disparity: defendant contends the meeting occurred on June 16, 1987; plaintiff fixes it one day later. The discrepancy is of no moment. We use the earlier date because the district court found the meeting to have taken place then. See Aoude v. Mobil Oil Corp., Civ. Nos. 87-3037-N, 88-1044N, slip op. at 4 (D.Mass. Aug. 5, 1988). On June 16, Aoude conferred with McFarland and Michael Urbonas, McFarland's immediate superior. Aoude understood that neither man could sanction the transaction; the decision necessitated ascension to a higher rung of the corporate ladder. Following the meeting, Mobil commenced the intracorporate review process through which it was to determine whether to allow the transfer. Plaintiff, betimes, had costumed himself in grandmother's clothes, so to speak, embarking on a coverup to camouflage the fact that his deal with Monahan was a fait accompli. Notwithstanding that Aoude had begun to operate the station to his own behoof, he arranged to have all transactions with Mobil continue in Monahan's name and dealer number, and to have all payments to Mobil funnelled through Monahan's checking account. At this stage of our narration, factual disputes begin popping up in various places. Most are beside the present point. The key conflict is as to what McFarland said--or not--after the initial meeting. Plaintiff swears McFarland told him on June 19 that Mobil had approved the transfer, and plaintiff claims to have acted on this assurance. Defendant denies the averment whilst accusing Aoude of shady business tactics and worse. We do not think we need to resolve this, or other, contradicted facts. It suffices that on July 8 the axe fell: Aoude concedes that Judith Schultz, the district manager, informed him then that Mobil would not give its assent. Plaintiff was not about to let his prey slip through a contractual crack. Although Monahan repeatedly offered to return the money and rescind the transaction, Aoude kept control of the station. Monahan fronted by holding himself out as the dealer. In late 1987, plaintiff sued Mobil (Civ. No. 87- 3037-N), attaching to the complaint what purported to be a copy of the Aoude/Monahan purchase agreement. After discovery proved that the agreement was a fake, [FN2] Mobil notified Monahan that, because of his complicity in the fraud, it was terminating the franchise. Aoude responded by filing a second action (Civ. No. 88-1044-N) which substantially replicated the allegations of the earlier one, but substituted an ostensibly genuine purchase contract for the bogus agreement. Mobil loosed a pack of pleadings and motions in reply. FN2. In his discussion with Schultz, plaintiff inflated the price paid Monahan (presumably to give him better leverage in dealing with Mobil). The next day, at Aoude's instigation, he and Monahan prepared an ersatz agreement (inserting a price of $175,000), backdated it, and signed it. Aoude now admits that the document was bogus. Among other things, both sides requested interim injunctions. Aoude sought to restrain Mobil from terminating the lease-cum-franchise. Mobil, pursuant to a counterclaim, asked that Aoude be banned from continuing to trespass at the Maple Avenue site. On June 2, 1988 the district court acted. In a brief order, it denied Aoude's motion for preliminary injunctive relief and granted Mobil's cross-motion. This appeal followed. 287 [FN3] FN3. When the district court ruled, it assured the parties that a "memorandum [would] follow." Some two months later, that promise was kept. See Aoude v. Mobil Oil Corp., supra note 1. Section II The criteria for preliminary injunctive relief are not much in doubt. See, e.g., Hypertherm, Inc. v. Precision Products, Inc., 832 F.2d 697, 699 & n. 2 (1st Cir.1987); Massachusetts Ass'n of Older Americans v. Sharp, 700 F.2d 749, 751 (1st Cir.1983); Auburn News Co. v. Providence Journal Co., 659 F.2d 273, 277 (1st Cir.1981), cert. denied, 455 U.S. 921, 102 S.Ct. 1277, 71 L.Ed.2d 461 (1982); Planned Parenthood League of Massachusetts v. Bellotti, 641 F.2d 1006, 1009 (1st Cir.1981). Those criteria can be summarized as follows: 1. The likelihood of merits' success; 2. The potentiality for irreparable injury. 3. A balancing of the relevant equities (most importantly, the hardship to the nonmovant if the restrainer issues as contrasted with the hardship to the movant if interim relief is withheld); and 4. The effect on the public interest of a grant or denial of the restrainer. In the case at bar, it is perfectly clear that the trial court applied the appropriate standard. See Aoude v. Mobil Oil Corp., Civ. Nos. 87-3037-N, 88-1044-N, slip op. at 8 (D. Mass. Aug. 5, 1988). We need not dwell on the substance of the district court's determination. Given the facts recounted above, Aoude has bitten off more than he can wolf down: the decision to issue an interim injunction seems well within the court's considerable discretion. On the substance of the case, therefore, we find interlocutory relief to be supportable for substantially the reasons set forth in Judge Nelson's trenchant opinion. See id. at 8-12. We need only add three brief comments as to this aspect of the matter. A. Enjoining a Trespass. Plaintiff tries to convince us that Massachusetts law does not allow courts to enjoin a trespass. We believe it indisputable that, in the Commonwealth as elsewhere, a continuing trespass on real property--such as the district court supportably found that Aoude was perpetrating--can properly be enjoined. See, e.g., Chesarone v. Pinewood Builders, Inc., 345 Mass. 236, 240, 186 N.E.2d 712 (1962); Doody v. Spurr, 315 Mass. 129, 134, 51 N.E.2d 981 (1944); Boston & Maine Railroad v. Sullivan, 177 Mass. 230, 232, 58 N.E. 689 (1900). The venerable case upon which Aoude relies for a contrary proposition, Washburn v. Miller, 117 Mass. 376 (1875), does not assist his cause. For one thing, the trespass in Washburn was not a continuing one; for another, the Washburn plaintiff was not threatened with irreparable harm. Id. at 378. Indeed, Justice Devens's opinion is prefaced with the following assurance: It is not doubted that an injunction could properly be issued to restrain one from the 288 commission of an alleged trespass where the damage liable to be occasioned thereby would be irreparable.... Id. at 377. Aoude's argument is meritless. B. Altering the Status Quo. Plaintiff's grievance that the injunction altered the status quo comprises little more than a complaint about whose ox was gored. To be sure, the order ousted Aoude from Maple Avenue--but only after the district court found that "he had no business being on the station." Aoude, supra, slip op. at 12. By removing the trespasser, the court in effect restored the status quo, that is, "the last uncontested status which preceded the pending controversy." Westinghouse Elec. Corp. v. Free Sewing Machine Co., 256 F.2d 806, 808 (7th Cir.1958) (emphasis supplied); see also Tanner Motor Livery, Ltd. v. Avis, Inc., 316 F.2d 804, 809 (9th Cir.) (similar), cert. denied, 375 U.S. 821, 84 S.Ct. 59, 11 L.Ed.2d 55 (1963). In any event, the status quo doctrine is one of equity, discretion, and common sense, not woodenly to be followed. On the peculiar facts of this case, the preliminary injunction is not vulnerable to attack even if it is seen as changing the status quo. C. Waiver. The ululation that Mobil forfeited its entitlement to demand the right of prior written approval consists more of sound than substance. As we have observed before, "the Massachusetts standard for waiver is an uncompromising one." Paterson-Leitch Co. v. Massachusetts Municipal Wholesale Electric Co., 840 F.2d 985, 992 (1st Cir.1988). To establish waiver, it was incumbent upon Aoude to show "clear, decisive, and unequivocal conduct on the part of [defendant's] authorized representative ... indicating that [defendant] would not insist on adherence to the [provision]." Glynn v. City of Gloucester, 9 Mass.App.Ct. 454, 462, 401 N.E.2d 886, 892 (1980). On this record--and having mind that the burden of proving waiver devolves upon the party asserting it, see Paterson-Leitch, 840 F.2d at 992--we cannot say that the district court erred in resolving this issue, preliminarily, against appellant. [FN4] FN4. We do not comment on the asseveration that Mobil was estopped from enforcing its reserved right of written approval. The district court limned four separate reasons why estoppel would likely fail to carry the day. Aoude, supra, slip op. at 8-11. Without discussing them all, we need only note that one of these reasons--the lack of detrimental reliance--seems virtually unarguable in light of the fact that plaintiff and Monahan consummated and substantially performed their behind-the-back bargain before McFarland is alleged to have made any verbal commitment whatever. Section III Despite the fact that we find the preliminary injunction abundantly grounded in the record, we must go further. Appellant has raised a three-part procedural challenge, claiming that the order was issued (1) without a hearing, (2) in the absence of contemporaneous findings, and (3) devoid of a bond stipulation. The assertions are factually accurate; it remains for us, however, to consider their legal implications. 289 A. Lack of a Hearing. The district court granted the contested injunction without convening an evidentiary hearing or hearing oral argument. Normally, we would look askance at such a praxis. As a general rule, where issues of fact are disputed, an evidentiary hearing is a highly desirable prelude--if not a necessary concomitant--to the granting of an interlocutory injunction. See Syntex Ophthalmics, Inc. v. Tsuetaki, 701 F.2d 677, 682 (7th Cir.1983); Forts v. Ward, 566 F.2d 849, 851 (2d Cir.1977). Yet an evidentiary hearing is not an indispensable requirement when a court allows or refuses a preliminary injunction. See, e.g., Syntex Ophthalmics, 701 F.2d at 682 (evidentiary hearing not mandated where "evidence already in the district court's possession" enabled it to reach reasoned conclusions); Town of Burlington v. Department of Education, 655 F.2d 428, 433 (1st Cir.1981) (evidentiary hearing not essential where parties exercised ample opportunity to make written submissions and plaintiff failed to submit affidavits or make offers of proof); SEC v. Frank, 388 F.2d 486, 490 (2d Cir.1968) (evidentiary hearing not compulsory for issuance of preliminary injunction in instances where "[t]he taking of evidence would serve little purpose"). Rather than accepting Aoude's invitation to sponsor some inflexible rule, we prefer a more pragmatic approach. Considering time constraints which obtain in the Fed.R.Civ.P. 65 milieu, the burdens imposed on the federal judiciary may sometimes render live evidentiary hearings impracticable. Moreover, the priority for such hearings is relatively low in certain cases; sometimes the critical facts are undisputed or the availability of documented evidence dispels the need for taking testimony. Even where Rule 65 factfinding is desirable, it is designed to be tentative--"preliminary"--in nature; as we see it, the term "preliminary injunction" is not the result of a random labelling process, casually adopted. The web of conclusions upon which a preliminary injunction rests are "statements as to probable outcomes," nothing more. Goyco de Maldonado v. Rivera, 849 F.2d 683, 686 (1st Cir.1988); Jimenez Fuentes v. Torres Gaztambide, 807 F.2d 236, 238 (1st Cir.1986) (en banc), cert. denied, 481 U.S. 1014, 107 S.Ct. 1888, 95 L.Ed.2d 496 (1987). Because final resolution of factual conflicts is reserved to time of trial (absent a stipulation by the parties or an order of court merging the hearings on preliminary and permanent injunctive relief, see Fed.R.Civ.P. 65(A)(2)), the judge must be accorded some reasonable leeway in truncating the proceedings. For these reasons, we think that in certain settings a matter can adequately be 'heard' on the papers. Cf. Cia. Petrolera Caribe, Inc. v. Arco Caribbean, Inc., 754 F.2d 404, 411 (1st Cir.1985) (Fed.R.Civ.P. 56's "reference to a 'hearing' does not necessarily imply oral argument"). The test should be substantive: given the nature and circumstances of the case, did the parties have a fair opportunity to present relevant facts and arguments to the court, and to counter the opponent's submissions? If the question is close and time permits, then doubt should be resolved in favor of taking evidence. Here, sufficient opportunity was afforded. The original case had been pending for some months; the district judge was obviously familiar with it; and the parties had made many submissions. When the district court passed upon the cross-motions, it had before it a record equally as informative as that produced at most Rule 65 evidentiary hearings: detailed briefs, affidavits from six of the principal witnesses, hundreds of pages of testimony from Aoude and Monahan on deposition, and more than two dozen 290 documentary exhibits. Unlike the usual case, the litigants had enjoyed the benefits of extensive discovery by the time the injunction motions were filed. Though there was considerable controversy as to what occurred after June 16, the critical facts as to what transpired earlier were not genuinely in dispute. Given this panoply of circumstances, we believe that plaintiff had a fair opportunity to present relevant information to the court. There was no reversible error on this score. See Syntex Ophthalmics, supra, 701 F.2d at 682; SEC v. G. Weeks Securities, Inc., 678 F.2d 649, 651 (6th Cir.1982) (interim injunction may issue without oral testimony if court has "before it adequate documentary evidence upon which to base an informed, albeit preliminary conclusion") (emphasis in original); Socialist Workers Party v. Illinois State Board of Elections, 566 F.2d 586, 587 (7th Cir.1977) (per curiam) (denial of evidentiary hearing before issuance of injunction harmless where appellants have not "demonstrated that anything that could have arisen in a factual hearing would have altered the result"), aff'd, 440 U.S. 173, 99 S.Ct. 983, 59 L.Ed.2d 230 (1979); SEC v. Frank, supra, 388 F.2d at 490-91; RossWhitney Corp. v. Smith Kline & French Laboratories, 207 F.2d 190, 198 (9th Cir.1953) ("a preliminary injunction may be granted upon affidavits"); cf. HMG Property Investors, Inc. v. Parque Industrial Rio Canas, Inc., 847 F.2d 908, 914-15 (1st Cir.1988) (district court could fix provisional remedy without convening evidentiary hearing). [FN5] FN5. Appellant's complaint that the district court did not hear oral argument on the cross-motions need not occupy us for long. Granting or denying oral argument is discretionary. See Domegan v. Fair, 859 F.2d 1059, 1065-66 (1st Cir.1988); Cia. Petrolera Caribe, 754 F.2d at 411; see also D.Mass.Loc.R. 17(d). Nothing about the motions for injunctive relief was so extraordinary as to hamstring the district court's exercise of its discretion in this case. B. Delayed Findings. Fed.R.Civ.P. 52(a) requires that "in granting or refusing interlocutory injunctions the court shall ... set forth the findings of fact and conclusions of law which constitute the grounds of its action." The district judge failed to comply with this directive when issuing the preliminary injunction in Mobil's favor. This omission, appellant tells us, necessitates reversal. [FN6] Defendant disagrees; it argues that the later memorandum filed by the judge cured the defect. FN6. No claim is made that the injunction itself is inexplicit or that its form is otherwise at odds with the requirements of Fed.R.Civ.P. 65(d). We understand that overtaxed district courts, struggling with burgeoning case loads, are often unable to ignore their dockets and generate instant written opinions. We appreciate, too, that Rule 65 hearings frequently arise on an emergency basis and cry out for celerity in the judicial response. In this case, for example, the clock was ticking on Mobil's notice and the court acted four short days before the date fixed for termination of the Maple Avenue franchise. Even such exigencies, however, do not excuse noncompliance with Rule 52(a). Written findings need not be elaborately scripted. Furthermore, if the case is complicated and the press of time is great, the rule supplies a workable solution: "It will be sufficient if the findings of fact and conclusions of law are stated orally and recorded in open court following the close of the evidence...." Fed.R.Civ.P. 52(a). When a court orders exceptional relief, such as an interlocutory injunction, the parties are entitled to know the basis on which the court 291 presumed to act. We do not mean to lay down a rigid rule. A district court is certainly entitled to some latitude in this regard. Findings and conclusions may be made in outline form and supplemented later. Or, if the urgency is acute and the court's calendar chock-a-block, some delay in issuing findings would be understandable. Here, the court waited for some two months before delivering its findings. That was simply too long to be acceptable, the circumstances considered. Though an error was committed, nothing turns on it in this case. While the district court should certainly have made known its findings and conclusions more nearly contemporaneously with the granting of injunctive relief, Aoude was not harmed thereby; he does not claim, for instance, an inability to decipher the order and conform his conduct to it. Nor does he suggest any justifiable anodyne. The usual practice which an appellate court follows when the trial court's findings are insufficient is to remand for a clearer expression. See, e.g., SquirtCo v. Seven-Up Co., 628 F.2d 1086, 1092 (8th Cir.1980); Complaint of Ithaca Corp., 582 F.2d 3, 4 (5th Cir.1978) (per curiam). That would be an empty ritual here: the findings have now been made, and they are more than adequate. As the Supreme Court has noted in kindred circumstances: "It would be useless ... to reverse the order granting the temporary injunction and remand the cause" when the district court has issued findings after the appeal is filed but before it is briefed and argued. Gibbs v. Buck, 307 U.S. 66, 78, 59 S.Ct. 725, 732, 83 L.Ed. 1111 (1939). See also Reinstine v. Rosenfield, 111 F.2d 892, 894 (7th Cir.1940) (similar). Accordingly, while cautioning the district courts that strict adherence to the Civil Rules is the better practice, we see no point in disturbing the interim injunction on the basis of a now-remedied defect. [FN7] FN7. This is not a case where the district court, after an appeal has been taken, attempted to modify or amend earlier findings. In that situation, Fed.R.Civ.P. 52(b) would come into play, and a somewhat different set of considerations would obtain. C. Absence of a Bond. Aoude argues before us that the district court erred in issuing the preliminary injunction without requiring Mobil to post bond. See Fed.R.Civ.P. 65(c) ("[n]o ... preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined"). Yet the district court was not earlier requested to set a bond, so we turn a deaf ear to this plaint. After all, "we have regularly declined to consider points which were not seasonably advanced below." Clauson v. Smith, 823 F.2d 660, 666 (1st Cir.1987) (collecting representative First Circuit cases); see also Clarkson Co. v. Shaheen, 544 F.2d 624, 632 (2d Cir.1976) (similar; involving Rule 65(c) bond requirement). Because posting of a bond is not a jurisdictional prerequisite to the validity of a preliminary injunction, and because appellant did not raise the matter below, we reject the assignment of error as untimely. [FN8] FN8. Although we need not examine this aspect of the matter further, we note that the problem is likely moot. The record reflects that, after appellant filed his 292 opening brief in this court, Mobil requested the district court to fix a bond. Judge Nelson set security at $60,000 on August 30, 1988 and Mobil has apparently posted a bond in that amount in district court. Section IV We need go no further. To the extent that appellant urges other grounds for reversal of the interlocutory injunction, they are either adequately covered by the district court's opinion, or so jejune as not to merit discussion, or both. In particular, the claim that the court below misused its discretion in declining to issue a restraining order in Aoude's favor trenches upon the frivolous. What appellant labors to portray as a robust haboob is not even a gentle zephyr. The house, we think, is sturdy enough to withstand the prevailing winds. The order of the district court granting appellee's motion for a preliminary injunction and denying appellant's motion for the same is affirmed. Costs in favor of appellee. Doctors’ Assoc. v. Stuart 85 F.3d 975 (1996) DOCTOR'S ASSOCIATES, INC., Plaintiff-Appellee, v. Donald A. STUART and Martin Schwarze, Defendants-Appellants. No. 1340, Docket 95-7760. United States Court of Appeals, Second Circuit. Argued April 18, 1996. Decided June 4, 1996. Edward W. Dunham, Wiggin & Dana, New Haven, CT, for Plaintiff- Appellee. David Duree, Reinert & Duree, P.C., St. Louis, MO (Nicholas Wocl, Tooher, Puzzuoli & Wocl, Stamford, CT, of counsel), for Defendants-Appellants. Before: MINER, McLAUGHLIN, and LEVAL, Circuit Judges. McLAUGHLIN, Circuit Judge: Plaintiff, Doctor's Associates, Inc., is the franchisor for the popular "Subway" sandwich shops. Defendants, Donald Stuart and Martin Schwarze, two Subway franchisees, appeal from a decision and order of the United States District Court for the District of 293 Connecticut (Peter C. Dorsey, Chief Judge ), ordering them to arbitrate with Plaintiff, and issuing a preliminary injunction that barred them from prosecuting a lawsuit against Doctor's Associates, Inc. in Illinois state court. BACKGROUND Doctor's Associates, Inc. ("DAI") is a Florida corporation with its principal place of business in Florida. Defendants own and operate two Subway sandwich shops in Illinois. Pursuant to Federal Trade Commission disclosure regulations, see 16 C.F.R. § 436.1 et seq., promulgated under the Federal Trade Commission Act, 15 U.S.C. § 45, DAI provides all prospective franchisees with a Uniform Franchise Offering Circular ("UFOC"). The UFOC contains copies of both a standard Subway franchise agreement and a Subway sublease agreement. Franchisees then have some time to review those documents before deciding whether to purchase a Subway franchise. After a Subway franchise is purchased, DAI helps the franchisee to find a site for the Subway shop. If DAI approves the site, it requires each franchisee to sublease the premises from one of several real-estate leasing companies that are affiliated with DAI. All franchise agreements (though not the subleases) contain an arbitration clause, substantially identical to the following: Any controversy or claim arising out of or relating to this contract or the breach thereof shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association at a hearing to be held in Bridgeport, Connecticut, or whichever city in which the Company is then headquartered, [FN1] and judgment upon an award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The commencement of arbitration proceedings by an aggrieved party to settle disputes arising out of or relating to this contract is a condition precedent to the commencement of legal action by either party. FN1. Defendants entered into two franchise agreements with DAI. The first agreement provides that arbitration is only "to be held in Bridgeport, Connecticut." The second agreement contains the language as it appears here. The franchise agreements also contain a Connecticut choice of law clause. As noted, the sublease agreements contain no arbitration clause; they do, however, have a "cross-default" provision, which provides, in relevant part: If at any time during the term of this Sublease, Sublessee shall default in the performance of any of the terms, covenants or conditions of the aforesaid Franchise Agreement ... Sublessor, at its option, may terminate this lease ... and upon such termination, Sublessee shall quit and surrender the leased premises to Sublessor.... Under this provision, therefore, the franchisee's breach of the franchise agreement is also a breach of the sublease; and the sublessor may bring an action to evict the franchisee/sublessee. In 1990, Defendants opened their first Subway sandwich shop in Granite City, Illinois. 294 Later they bought a second Subway franchise. DAI allegedly promised to approve any appropriate site Defendants found for the second franchise in Bethalto, Illinois. After locating two potential spots in Bethalto, Defendants asked DAI for approval, but were told that both sites were too close to another Subway sandwich shop located in Wood River, Illinois. DAI then allegedly permitted another franchisee to open a Subway shop in Bethalto, at or near the spots picked by Defendants. Despite Defendants' objections, DAI made Defendants locate their second Subway store in Granite City, less than two miles from Defendants' first store. The opening of this second shop cut into the sales of Defendants' first Granite City shop. Defendants sued DAI, its owners, and development agents in Illinois state court (the "Illinois action"), seeking a declaratory judgment that the arbitration clause in the franchise agreement is unenforceable. They also sought damages for violation of the Illinois Franchise Disclosure Act, breach of the covenant of good faith and fair dealing, violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, and common law fraud. Within two weeks, DAI filed a petition, in the United States District Court for the District of Connecticut, to compel arbitration against Defendants, pursuant to 9 U.S.C. § 4. DAI also asked for a preliminary injunction, barring Defendants from prosecuting their Illinois action. The district court held a hearing on the petition to compel arbitration and the motion for a preliminary injunction. Meanwhile, back in Illinois, the state court entered summary judgment, declaring the arbitration clause void and unenforceable. Ignoring the state judgment, the district court in Connecticut entered an order, compelling Defendants to arbitrate with DAI. It also issued a preliminary injunction, enjoining Defendants from further prosecuting their Illinois action. The district court did not require DAI to post an injunction bond. After the district court issued that order, this Court issued its opinion in Doctor's Associates v. Distajo, 66 F.3d 438 (2d Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 1352, 134 L.Ed.2d 520 (1996), a consolidation of seventeen cases involving disputes between DAI and various franchisees. In Distajo, we reversed orders entered in the United States District Court for the District of Connecticut compelling arbitration and issuing preliminary injunctions, and we remanded for further hearings solely to evaluate the franchisees' defenses to arbitration of fraud, alter ego, and waiver. See id. Defendants went back to Illinois where they filed with the Illinois Supreme Court a "Motion for Supervisory Order," collaterally attacking both the district court's decision in this case and our decision in Distajo. The Illinois Supreme Court summarily denied the motion. Defendants now return to us, appealing the order that compelled arbitration and that enjoined them from prosecuting their Illinois action. They contend that: (1) the district court does not have personal jurisdiction over them, because the arbitration clause is unenforceable and service was improper; (2) venue is improper in Connecticut; (3) they 295 are entitled to a jury trial; (4) the district court does not have the authority to enjoin the Illinois action; and (5) the district court abused its discretion in not requiring DAI to post an injunction bond. [FN2] We reject all the claims raised in this scattershot appeal. FN2. On this appeal, Defendants raise several other issues, which they concede this Court flatly rejected in Distajo. Defendants say they raised these issues solely to preserve them in the event the Supreme Court granted certiorari in Distajo. In any event, the Supreme Court has now denied certiorari. See --U.S. ----, 116 S.Ct. 1352, 134 L.Ed.2d 520 (1996). DISCUSSION Section I. Personal Jurisdiction Defendants argue that the district court lacked personal jurisdiction over them for two reasons: (A) they cannot be found to have consented to contractual personal jurisdiction if the arbitration agreement is unenforceable; and (B) DAI served its Petition to Compel Arbitration and Summons on Defendants' attorney, rather than on Defendants personally. We reject both contentions. A. Contractual Personal Jurisdiction When a party agrees "to arbitrate in [a state], where the [Federal Arbitration Act] makes such agreements specifically enforceable, [that party] must be deemed to have consented to the jurisdiction of the court that could compel the arbitration proceeding in [that state]. To hold otherwise would be to render the arbitration clause a nullity." Victory Transp. Inc. v. Comisaria General de Abastecimientos y Transportes, 336 F.2d 354, 363 (2d Cir.1964), cert. denied, 381 U.S. 934, 85 S.Ct. 1763, 14 L.Ed.2d 698 (1965); see also Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Lecopulos, 553 F.2d 842, 844 (2d Cir.1977); Island Territory of Curacao v. Solitron Devices, Inc., 489 F.2d 1313, 1317 (2d Cir.1973), cert. denied, 416 U.S. 986, 94 S.Ct. 2389, 40 L.Ed.2d 763 (1974). Defendants argue, however, that they cannot be deemed to have consented to personal jurisdiction if the arbitration clause is unenforceable. And, they assert the arbitration clause is unenforceable because: (1) DAI fraudulently induced them into the arbitration agreement; (2) the arbitration agreement is unconscionable; and (3) DAI waived its right to arbitrate. (1) Fraudulent Inducement Defendants contend that DAI fraudulently induced them into executing the franchise agreements by falsely representing that arbitration was a condition precedent to the institution of legal action by either party to the franchise agreement. DAI, however, had reserved to itself the right to bring summary eviction proceedings against its franchisees through DAI's affiliated leasing companies. Defendants also claim that DAI failed to mention that its standard operating procedure was to bring summary eviction actions against franchisees for alleged breaches of the franchise agreement. The district court found this defense insufficient as a matter of law, and we agree. In Distajo, we held that it is the district court's responsibility-- not the arbitrators'--to decide whether an arbitration clause was fraudulently induced. See Distajo, 66 F.3d at 296 457. "The essential elements of an action in fraud ... are: (1) that a false representation was made as a statement of fact; (2) that it was untrue and known to be untrue by the party making it; (3) that it was made to induce the other party to act on it; and (4) that the latter did so act on it to his injury." Miller v. Appleby, 183 Conn. 51, 54-55, 438 A.2d 811 (1981) (citation omitted); see also Clark v. Haggard, 141 Conn. 668, 672- 73, 109 A.2d 358 (1954); 12 Samuel Williston, The Law of Contracts § 1487, at 324-27 (Walter H.E. Jaeger ed., 3d ed.1970). Defendants have utterly failed to allege, much less prove, sufficient facts indicating that they were defrauded into agreeing to arbitrate. Before purchasing their franchises, Defendants received a Uniform Franchise Offering Circular ("UFOC") from DAI. The UFOC included copies of both the standard franchise agreement and the sublease. Although the franchise agreement contains an arbitration clause, the sublease does not; rather, it provides that if the sublessee breaches the franchise agreement, the sublessor may terminate the sublease and bring an eviction action. These clauses were not camouflaged, and Defendants cannot now complain that they failed to read or inquire into the meaning of those documents. Cf. Cohen v. Wedbush, Noble, Cooke, Inc., 841 F.2d 282, 288 (9th Cir.1988) ("Whether [plaintiffs] read the agreement but did not notice the arbitration clause, or chose not to read the agreement at all, their reliance on [defendant's] alleged misrepresentation was unreasonable in light of the clear and explicit language of the contract."); Pierson v. Dean, Witter, Reynolds, Inc., 742 F.2d 334, 339 (7th Cir.1984) (parties "cannot use their failure to inquire about the ramifications of [an arbitration] clause to avoid the consequences of agreed-to arbitration"). Even if we were satisfied that DAI made false representations to these franchisees, Defendants have failed to show that they relied on those statements to their injury. No Subway leasing company has ever sued Defendants, and DAI has demanded that Defendants' claims be sent to arbitration. Thus, Defendants' assertion that DAI concealed an intention not to arbitrate is absurd on its face, since arbitration is precisely what DAI is attempting to compel in this proceeding. We therefore find that the district court properly held, as a matter of law, that DAI did not fraudulently induce Defendants into signing the agreement to arbitrate. (2) Unconscionability Defendants next claim that the arbitration clause, as enforced by DAI, is unconscionable, because the franchise agreement does not disclose that: (1) the American Arbitration Association ("AAA") charges as much as $5,000 for filing and administration fees; (2) the high cost of arbitrating in Connecticut--including travel and lodging expenses for the franchisee and his or her attorney--necessitates the franchisee to win the arbitration to break even financially; (3) the franchisee must pay half of the hourly charges of the arbitrators, who are often attorneys with high-priced rates; (4) the AAA relies on DAI to provide it with repeat business and thus has a bias in favor of DAI; and (5) DAI primarily resolves its disputes with the franchisees by filing, or threatening to file, eviction lawsuits in the name of its affiliated leasing companies, instead of arbitrating as represented by the franchise agreements. We are unpersuaded by Defendants' claims. 297 The " 'purpose of the unconscionability doctrine is to prevent unfair surprise and oppression.' " David L. Threlkeld & Co. v. Metallgesellschaft Ltd. (London), 923 F.2d 245, 249 (2d Cir.) (quoting Pierson, 742 F.2d at 339), cert. dismissed, 501 U.S. 1267, 112 S.Ct. 17, 115 L.Ed.2d 1094 (1991); see also Restatement (Second) of Contracts §§ 208, 211. We find that the arbitration clause in the DAI franchise agreement did not ambush these Defendants. First, Defendants were aware, based on the language of the arbitration agreement, that they would have to travel to either Florida or Connecticut if an arbitrable dispute arose. See infra pt. II. Such forum selection clauses are not unconscionable. See Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 476, 109 S.Ct. 1248, 1254, 103 L.Ed.2d 488 (1989) ("[T]he federal policy is simply to ensure the enforceability, according to their terms, of private agreements to arbitrate."); see also Snyder v. Smith, 736 F.2d 409, 419 (7th Cir.), cert. denied, 469 U.S. 1037, 105 S.Ct. 513, 83 L.Ed.2d 403 (1984). Moreover, the arbitration clause itself provides that: [e]ach party will be responsible for their [sic] own costs in conjunction with the arbitration proceeding. If Franchisee commences action in any court prior to an arbitrator's final decision on the controversy or claim, Franchisee will be responsible for all expenses incurred by both [DAI] and Franchisee in the Arbitration and the Court proceedings. Thus, Defendants were on notice that they were at least liable for their own costs in the arbitration proceedings. Certainly they could have inquired about the typical fees charged by the AAA and its arbitrators. See generally Volt Info. Sciences, 489 U.S. at 479, 109 S.Ct. at 1256 ("Arbitration under the [FAA] is a matter of consent, not coercion, and parties are generally free to structure their arbitration agreements as they see fit."). In addition, Defendants have failed to present any credible evidence indicating bias on the part of the AAA--or its arbitrators--in favor of DAI in this case, particularly because Defendants' claims have not yet gone to arbitration. See 9 U.S.C. § 10(a); see also Sheet Metal Workers Int'l Ass'n v. Kinney Air Conditioning Co., 756 F.2d 742, 746 (9th Cir.1985) ("The party alleging evident partiality must establish specific facts which indicate improper motives on the part of the [arbitrators]."); In re Andros Compania Maritima, S.A., 579 F.2d 691, 700-01 (2d Cir.1978). And, finally, we reject Defendants' claim that the arbitration clause is unconscionable because it does not disclose that DAI primarily resolves its disputes with franchisees, not by actual arbitration, but by filing, or threatening to file, eviction lawsuits in the name of its affiliated leasing companies. As noted previously, no Subway leasing company has ever brought or threatened to bring eviction proceedings against these Defendants; and, in fact, DAI is attempting to compel arbitration through this federal action. Thus, we find that the arbitration clause is not unconscionable. (3) Waiver Defendants assert that DAI acted inconsistently with the right to arbitrate, by customarily filing or threatening to file eviction lawsuits, in the name of its alter ego leasing companies, against its franchisees, instead of submitting disputes to arbitration. On the facts of this particular case, we disagree. 298 The question whether a party's conduct amounts to waiver of arbitration is purely a legal one, subject to de novo review. Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20, 25 (2d Cir.1995). The factual determinations upon which to base the waiver determination, however, will not be reversed unless clearly erroneous. Id. "We recognize that there are strong federal policies in favor of arbitration and that a waiver of arbitration ' "is not to be lightly inferred." ' " Com-Tech Assocs. v. Computer Assocs. Int'l, Inc., 938 F.2d 1574, 1576 (2d Cir.1991) (quoting Rush v. Oppenheimer & Co., 779 F.2d 885, 887 (2d Cir.1985) (quoting Carcich v. Rederi A/B Nordie, 389 F.2d 692, 696 (2d Cir.1968))); see also Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 225-26, 107 S.Ct. 2332, 2336-37, 96 L.Ed.2d 185 (1987). This preference for arbitration "ha[s] led to its corollary that any doubts concerning whether there has been a waiver are resolved in favor of arbitration." Leadertex, 67 F.3d at 25 (citing Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983)). Nonetheless, a court may refuse to enforce an arbitration agreement where, for example, "the alleged defaulting party has acted inconsistently with the right to arbitrate." St. Mary's Medical Ctr. v. Disco Aluminum Prods. Co., 969 F.2d 585, 588 (7th Cir.1992). The waiver determination must be based on the circumstances and context of the particular case, "with a healthy regard for the policy of promoting arbitration." Leadertex, 67 F.3d at 25; see also St. Mary's Medical Ctr., 969 F.2d at 588. In Distajo, DAI franchisees raised the same waiver defense as here. In that case, we held: that the issue of DAI's waiver of arbitration is for the district court to resolve on remand [in the first instance]. The factual contentions to be resolved include whether the leasing companies were mere alter egos of DAI. If DAI was responsible for the eviction proceedings, it must then be determined whether prosecution of those eviction actions constituted litigation of "substantial issues going to the merits." This inquiry will require a determination of whether, in fact, the particular eviction proceedings were based on the cross-default provisions of the subleases. Distajo, 66 F.3d at 456-57 (citation and footnote omitted) (emphasis added). In so holding, however, we did not "reach the question of how the district court should resolve this issue" on remand. Id. at 456 n. 13. Although DAI concedes that it controls the decisions to file eviction actions in general, it has never brought, nor has it threatened to bring, eviction proceedings against these Defendants. Where, as here, DAI has not instituted any "particular eviction proceedings" against the franchisee/ sublessee, DAI obviously cannot be deemed to have waived its right to arbitrate with that franchisee. See id. at 457. As the district court held, Defendants cannot rely on the fact that DAI has brought eviction proceedings against other franchisees as a basis for DAI's waiver of its contractual right to arbitrate in this case. See Doctor's Assocs. v. Stuart, No. 3:95CV01065, slip op. at 3-4 (D.Conn. July 27, 1995); see also Leadertex, 67 F.3d at 25 ("waiver is decided in the context of the case"). (4) Hearing 299 Defendants add a contention that, at the very least, the district court was required to conduct a hearing on the personal jurisdiction issue. See Fed.R.Civ.P. 12(d); AAACON Auto Transp., Inc. v. Klee, 356 F.Supp. 319, 321 (S.D.N.Y.1973). Here, the district court did hold a hearing on whether the arbitration agreement was enforceable, and it concluded that it was. Although the court did not specifically label the hearing as one to ascertain personal jurisdiction, its finding that the arbitration agreement was valid clearly indicates the nature of the hearing. Having thus rejected all Defendants' defenses to the arbitration clause, we find that the district court properly exercised personal jurisdiction over Defendants. See Victory Transp., 336 F.2d at 363. B. Service of Process Defendants further cavil that their attorney, rather than Defendants themselves, was served with the papers to compel arbitration. The arbitration clause here provides that "[a]ny controversy or claim arising out of or relating to this contract or the breach thereof shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association." (Emphasis added). Because the arbitration clause specifically incorporates the AAA's Commercial Arbitration Rules, we look to those rules to determine the method for service of process to which the parties have agreed. See, e.g., Martin Domke, Domke on Commercial Arbitration § 14.02, at 220 (Gabriel M. Wilner ed., 1995). AAA Rule 40, entitled "Serving of Notice," provides, in relevant part: Each party shall be deemed to have consented that any papers, notices, or process necessary or proper for the initiation or continuation of an arbitration under these rules; for any court action in connection therewith; ... may be served on a party by mail addressed to the party or its representative at the last known address or by personal service, in or outside the state where the arbitration is to be held, provided that reasonable opportunity to be heard with regard thereto has been granted to the party. The AAA and the parties may also use facsimile transmission ... or other written forms of electronic communication to give the notices required by these rules. AAA Commercial Arbitration Rule 40 (emphasis added). Here, Defendants' attorney, David Duree, is unquestionably their representative, and there is no dispute that Duree received DAI's papers in accordance with applicable AAA rules. Thus, service of process was proper. See Victory Transp., 336 F.2d at 364; Lawn v. Franklin, 328 F.Supp. 791, 794 (S.D.N.Y.1971) (Gurfein, J.); see also Lecopulos, 553 F.2d at 845. Section II. Venue Defendants also assert that the district court erred by holding Connecticut a proper venue for this action. We find this argument bewildering. A party who agrees to arbitrate in a particular jurisdiction consents not only to personal jurisdiction but also to venue of the courts within that jurisdiction. See, e.g., Farr & Co. 300 v. Cia. Intercontinental De Navegacion De Cuba, S.A., 243 F.2d 342, 346 (2d Cir.1957). Because Defendants consented to personal jurisdiction in the District of Connecticut, see supra pt. I, they also consented to venue there. Defendants, however, attempt to cozen us with a semantic sleight-of- hand. In its Petition to Compel Arbitration, DAI averred that: "[v]enue is proper under 28 U.S.C. § 1391(a)(3) because this Court has personal jurisdiction over the defendants, and the District of Connecticut is the only judicial district in which this action may be brought under 9 U.S.C. § 4." Plaintiff's Petition to Compel Arbitration ¶ 5. Pursuant to the arbitration clause in one of Defendants' franchise agreements, however, arbitration may be commenced "in Bridgeport, Connecticut, or whichever city in which the company is then headquartered." (Emphasis added); see supra note 1 and accompanying text. DAI is now headquartered in Fort Lauderdale, Florida. Thus, pursuant to the language of the arbitration clause, Defendants claim: [t]hat means arbitration is required to take place in either Fort Lauderdale, Florida or Bridgeport, Connecticut. Accordingly, venue does not lie in Connecticut under 28 U.S.C. § 1391(a)(3) because there is another district in which the action may otherwise be brought. Defendants have argued that venue lies in the Southern District of Florida, not Connecticut. Defendants would be estopped to make the same argument about venue in the Southern District of Florida. Accordingly, this Court has no choice but to transfer this case to the Southern District of Florida. Appellants' Brief at 12 (citation omitted). This argument borders on the absurd. Section 1391(a) provides: (a) A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which the defendants are subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought. 28 U.S.C. § 1391(a) (emphasis added). The phrase "if there is no district in which the action may otherwise be brought" indicates that venue may be based on § 1391(a)(3) "only if neither [§ 1391(a)(1) or (2) ] can be satisfied." 1A Moore's Federal Practice ¶ 0.342[3], at 4083. It does not mean that venue is improper in one district merely because there is another equally appropriate district in which the defendants are subject to personal jurisdiction at the time the action is commenced. See id. Pursuant to the arbitration agreement, both Florida and Connecticut are proper venues, and thus Defendants "consented to the jurisdiction of the district court in [Connecticut], where the petition [to compel arbitration] was filed." Farr & Co., 243 F.2d at 346. Section III. Jury Trial Demand Defendants assert that they are entitled to a jury trial on their arbitration defenses of fraud and waiver. A party resisting arbitration "cannot obtain a jury trial merely by demanding one;" rather, he bears " 'the burden of showing that he is entitled to a jury trial under § 4 of the [FAA].' " Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1154 (5th Cir.1992) (citation omitted), cert. denied, 506 U.S. 1079, 113 S.Ct. 301 1046, 122 L.Ed.2d 355 (1993). "[T]o warrant a trial under 9 U.S.C. § 4, the issue raised must be 'genuine.' " Interbras Cayman Co. v. Orient Victory Shipping Co., S.A., 663 F.2d 4, 7 (2d Cir.1981) (quoting Almacenes Fernandez S.A. v. Golodetz, 148 F.2d 625, 628 (2d Cir.1945)). To establish a genuine issue entitling a party to a jury trial, " 'an unequivocal denial that the agreement [to arbitrate] had been made [is] needed, and some evidence should [be] produced to substantiate the denial.' " Id. (quoting Almacenes Fernandez, 148 F.2d at 628); see also Interocean Shipping Co. v. National Shipping & Trading Corp., 462 F.2d 673, 677 (2d Cir.1972); Dillard, 961 F.2d at 1154 (party demanding jury trial "must make at least some showing that under prevailing law, he would be relieved of his contractual obligation to arbitrate if his allegations proved to be true," and must also "produce at least some evidence to substantiate his factual allegations"). In Distajo, the franchisees also made a demand for a jury trial on their arbitration defense issues. We noted that: [b]y so holding [that the issues of waiver and fraudulent misrepresentation are matters for the district court, not the arbitrators], we do not purport to reach the question of how the district court should resolve this issue. The defendants' jury demands should be considered by the district court in the first instance. Distajo, 66 F.3d at 456 n. 13; see also id. at 457 n. 15. As discussed in Part I, supra, Defendants have totally failed to establish that there are genuine issues concerning their defenses of fraud and waiver. We conclude, therefore, that the district court properly found that there was no genuine issue for trial. Section IV. Authority to Enjoin Illinois suit Defendants next argue that the district court erred by enjoining Defendants from prosecuting their Illinois action because: (1) the district court did not have personal jurisdiction over them; and (2) the scope of the preliminary injunction is overly broad in that it prevents Defendants from suing not only DAI, but also DAI's agents and owners. We reject these claims. As discussed in Part I, supra, the district court did have personal jurisdiction over Defendants. In regard to the scope of the injunction, Defendants' counsel raised this precise argument before the Seventh Circuit in Kroll v. Doctor's Assocs., 3 F.3d 1167 (7th Cir.1993), a case which, now at a later stage in its proceedings, was heard in tandem with the instant appeal. In Kroll, a franchisee, represented by Defendants' attorney, David Duree, sued DAI, its agents, and owners in Wisconsin state court. DAI removed the case to federal court, and moved to dismiss or stay the Wisconsin action pending arbitration in accordance with the franchise agreement. The district court stayed the Wisconsin action, and the Seventh Circuit affirmed. In so holding, the Court explained: Kroll also argues that his [Wisconsin] lawsuit should, at the very least, be allowed to proceed against the individual [agents and owners of DAI] since he "did not agree to arbitrate anything with [those agents and owners]." We have previously 302 observed, however, that section three of the Federal Arbitration Act "plainly requires that a district court stay litigation where issues presented in the litigation are the subject of an arbitration agreement." We went on to hold that a stay must be granted, even in favor of persons that are not party to the agreement containing the arbitration clause, if the litigation is an attempt "to evade the agreed-upon resolution of their disputes in the arbitration forum by introducing the identical controversy against a party who is ultimately liable for the arbitrating party's acts." ... Kroll's suit against [DAI's owners and agents] has no plausible purpose other than to evade its duty to arbitrate its disputes with DAI. Accordingly, a stay must issue in favor of [those agents and owners]. Kroll, 3 F.3d at 1171 (citations omitted); see also Mosca v. Doctors Assocs., 852 F.Supp. 152, 155 (E.D.N.Y.1993) ("This court will not permit Plaintiffs to avoid arbitration simply by naming individual agents of the party to the arbitration clause and suing them in their individual capacity."). We likewise find that Defendants' Illinois action against DAI and its owners and agents is a bald attempt to evade its duty to arbitrate with DAI. Thus, the district court properly enjoined Defendants' Illinois action. See, e.g., ACLI Gov't Sec., Inc. v. Rhoades, 963 F.2d 530, 532-33 (2d Cir.1992). Section V. Bond Requirement Finally, Defendants are distressed that the district court did not require a preliminary injunction bond. Again, we disagree. Federal Rule of Civil Procedure 65(c) provides that "[n]o ... preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper ...." Fed.R.Civ.P. 65(c) (emphasis added). The phrase "in such sum as the court deems proper": indicates that the District Court is vested with wide discretion in the matter of security and it has been held proper for the court to require no bond where there has been no proof of likelihood of harm, or where the injunctive order was issued "to aid and preserve the court's jurisdiction over the subject matter involved." Ferguson v. Tabah, 288 F.2d 665, 675 (2d Cir.1961) (citations omitted); see also Clarkson Co. v. Shaheen, 544 F.2d 624, 632 (2d Cir.1976) ( "[B]ecause, under Fed.R.Civ.P. 65[c], the amount of any bond to be given upon the issuance of a preliminary injunction rests within the sound discretion of the trial court, the district court may dispense with the filing of a bond." (citations omitted)). Here, Defendants have not shown that they will likely suffer harm absent the posting of a bond by DAI. Moreover, the purpose of the injunction here was merely to preserve the district court's jurisdiction over the action to compel arbitration. Thus, we find that the district court did not abuse its discretion in dispensing with the bond. CONCLUSION 303 We have fully considered all other claims advanced on this appeal, and find them unavailing. For the foregoing reasons, the decision of the district court is AFFIRMED. Equifax Services v. Hitz 905 F.2d 1355 (1990) EQUIFAX SERVICES, INC., d/b/a Equifax Commercial Specialists f/k/a White & White Inspection and Audit Service, Inc., Plaintiff-Appellee, v. Steven A. HITZ, Defendant-Appellant. No. 89-3069. 905 F.2d 1355 United States Court of Appeals, Tenth Circuit. June 4, 1990. Robert Vogel (Kris Arnold on the brief) of Evans & Mullinix, Kansas City, Kan., for defendant-appellant. W. Robert King of Morris & Larson, Overland Park, Kan., for plaintiffappellee. Before LOGAN, BARRETT, and EBEL, Circuit Judges. LOGAN, Circuit Judge. Background In this diversity action, defendant Steven A. Hitz appeals under 28 U.S.C. § 1292(a) from a preliminary injunction issued in favor of plaintiff Equifax Services, Inc. (Equifax), prohibiting Hitz from violating covenants not to compete with his former employer, White & White Inspection and Audit Service, Inc. (White & White), plaintiff's predecessor. Defendant also challenges the district court's exercise of personal jurisdiction over him, the amount of the bond the court required plaintiff to post, and the denial of defendant's motion to transfer venue. We affirm. White & White was a Missouri corporation, with its principal offices in Kansas, which provided survey and audit services for insurance companies. Defendant was employed by White & White as a branch manager in southern California over the course of several years. In 1988, purchasers of the stock of White & White merged the corporation with Equifax, a Georgia corporation. Equifax conducts the former business of White & White through Equifax Commercial Specialists, an unincorporated division with its principal offices in Kansas. Stating that he objected to the merger, defendant resigned to become the president and a director of Golden Coast Investigative Services, a competing enterprise organized shortly before defendant's resignation. Defendant's wife 304 owns ninety-five percent of Golden Coast. Equifax brought suit in a Kansas state court for damages and injunctive relief, alleging that defendant was violating covenants in his employment contract with White & White prohibiting him from competing in California, either alone or in concert with other former White & White personnel, for a period of two years after his departure, and prohibiting him from using confidential information obtained as a White & White employee. Defendant removed the case to the United States District Court for the District of Kansas, where the district court, after a hearing, granted Equifax a preliminary injunction that prohibited defendant from violating the restrictive covenants in his employment contract, required Equifax to post only a $10,000 bond, and denied defendant's motion for a transfer of venue to the Central District of California. Defendant challenges each of these actions on appeal, as well as the district court's exercise of personal jurisdiction over him. Section I After the hearing on the preliminary injunction, the district court made findings of fact from which it concluded that it had personal jurisdiction over defendant. The material facts are not in dispute, therefore, we review the district court's conclusion de novo. See Rambo v. American Southern Ins. Co., 839 F.2d 1415, 1417 (10th Cir.1988). A In a diversity case such as this one, the district court's exercise of personal jurisdiction must comport with the standards of both the forum state's long-arm statute and the United States Constitution. Id. at 1416; see Fed.R.Civ.P. 4(e). Here, these inquiries are essentially the same, because "[t]he Kansas long arm statute [Kan.Stat.Ann. § 60308(b) ] is liberally construed to assert personal jurisdiction over nonresident defendants to the full extent permitted by the due process clause of the Fourteenth Amendment to the U.S. Constitution." Volt Delta Resources, Inc. v. Devine, 241 Kan. 775, 740 P.2d 1089, 1092 (1987). For purposes of personal jurisdiction, "the constitutional touchstone remains whether the defendant purposefully established 'minimum contacts' in the forum State," Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1985) (quoting Internat ional Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945)), and "the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there," id. (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980)). When specific jurisdiction [FN1] is based upon a contractual dispute, we must evaluate "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing ... in determining whether the defendant purposefully established minimum contacts with the forum." Id. 471 U.S. at 479, 105 S.Ct. at 2185. "[P]arties who 'reach out beyond one state and create continuing relationships and obligations with citizens of another state' are subject to regulation and sanctions in the other State for the consequences of their activities." Id. at 473, 105 S.Ct. at 2182 (quoting Travelers Health Ass'n v. Virginia, 339 U.S. 643, 647, 70 S.Ct. 927, 929, 94 L.Ed. 1154 (1950)). And if a defendant's actions cause foreseeable injuries in another state, it is, "at the very 305 least, presumptively reasonable for [the defendant] to be called to account there for such injuries." Id. 471 U.S. at 480, 105 S.Ct. at 2186. FN1. This is a case of specific jurisdiction because this litigation arises out of or is related to the defendant's contacts with his Kansas employer. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 & n. 8, 104 S.Ct. 1868, 1872 & n. 8, 80 L.Ed.2d 404 (1984). Defendant's contacts with Kansas arise mainly from the fact that he was employed by a corporation with its principal offices in Kansas. [FN2] The district court, in a brief analysis, concluded that jurisdiction over defendant is proper because "defendant chose to be employed by a corporation with its principal place of business in Kansas." I R. tab 18, at 6. Because a contract with an out-of-state party cannot alone justify personal jurisdiction in the foreign state, Burger King, 471 U.S. at 478, 105 S.Ct. at 2185, this statement is too sweeping. But we believe that the nature of defendant's relationship with his Kansas employer supports the district court's exercise of personal jurisdiction over defendant in Kansas in this dispute arising out of that relationship. FN2. For diversity purposes, this makes White & White a citizen of Kansas. 28 U.S.C. § 1332(c). We recognize that White & White has merged into Equifax and now operates as an unincorporated division with its principal offices in Kansas. See Brunswick Corp. v. Jones, 784 F.2d 271, 275 n. 3 (7th Cir.1986) (for diversity purposes, unincorporated division's citizenship is same as corporation of which it is a part). There is still diversity, of course, because Equifax is a Georgia corporation. And for purposes of personal jurisdiction, we attach no significance to the mere change in corporate form. Hitz's contacts with Kansas and Kansas' interests in this dispute are essentially unchanged by the merger. Although defendant worked solely in southern California, as a branch manager in charge of White & White offices there, his only direct supervision came from White & White employees in Kansas. Defendant had regular contact with White & White employees in Kansas, both by telephone, mail, and through electronic data communications. Defendant's customers were invoiced from and made payment directly to White & White in Kansas. Defendant and his personnel were paid directly by White & White from Kansas, and that company's Kansas office reimbursed expenses for defendant's offices and provided those offices with necessary materials and supplies. Defendant also negotiated the terms of his employment contract directly with White & White's president, a contract which paid him $120,000 to $140,000 per year over his last two years of employment. There were no intermediaries between defendant and his employer in Kansas. Cf. Corporate Investment Business Brokers v. Melcher, 824 F.2d 786, 789 n. 4 (9th Cir.1987) (lack of intermediary between resident franchisor and nonresident franchisee supported jurisdiction over franchisee). Indeed, defendant admitted at the hearing that he knew that any disputes regarding his employment contract would originate in Kansas. R.Supp. 1, at 52. See also FMC Corp. v. Varonos, 892 F.2d 1308, 1313-14 (7th Cir.1990) (jurisdiction over nonresident employee in suit by resident employer); Union Carbide Corp. v. UGI Corp., 731 F.2d 1186, 1190 (5th Cir.1984) (same); InterCollegiate Press, Inc. v. Myers, 519 F.Supp. 765, 768-69 (D.Kan.1981) (same; 306 defendant employee "dealt directly with the home office rather than through a regional supervisor"); cf. Pittsburgh Terminal Corp. v. Mid Allegheny Corp., 831 F.2d 522, 52629 (4th Cir.1987) (jurisdiction over nonresident director in shareholder derivative suit on behalf of resident corporation); T.M. Hylwa, M.D., Inc. v. Palka, 823 F.2d 310, 314-15 (9th Cir.1987) (jurisdiction over nonresident accountant in suit by resident client). Defendant's only significant physical presence in Kansas in connection with his employment was to attend a training session when he was still an independent contractor working for White & White, and when he was summoned to White & White's Kansas offices for a reprimand shortly before he resigned. That defendant's employment duties were carried out exclusively in California, however, cannot defeat jurisdiction. See Burger King, 471 U.S. at 476, 105 S.Ct. at 2184. "[T]he relationship among the defendant, the forum, and the litigation ... [is] the central concern of the inquiry into personal jurisdiction." Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2580, 53 L.Ed.2d 683 (1977). The underlying dispute arises from defendant's relationship with his employer, and that relationship was a California-Kansas one. Cf. Melcher, 824 F.2d at 789-90 (nonresident defendant-franchisee's forum related activity was its relationship with the resident plaintiff- franchisor). Defendant's two trips to Kansas merely reinforce the interstate character of that relationship. And the fact that defendant's employment contract provided it would be governed by Kansas law also reinforces defendant's "deliberate affiliation with the forum State and the reasonable forseeability of possible litigation there." Burger King, 471 U.S. at 482, 105 S.Ct. at 2187. Defendant's brief alleges that jurisdiction cannot be predicated upon his contractual relationship with his employer because of White & White's "overweening bargaining power," citing Burger King, 471 U.S. at 486, 105 S.Ct. at 2189. But defendant's claim of overweening bargaining power is not supported by the record. Defendant was a highly compensated management employee. That his attempted negotiations on his employment contract were fruitless does not mean that his free will was overcome. See id. at 484-85, 105 S.Ct. at 2188-89. "Absent compelling considerations, a defendant who has purposefully derived commercial benefit from his affiliations in a forum may not defeat jurisdiction there simply because of his adversary's greater net wealth." Id. at 483 n. 25, 105 S.Ct. at 2188 n. 25 (citation omitted). Defendant's primary argument for lack of jurisdiction is that none of his contacts with Kansas were purposeful, because they were required by his employer. But when forum contacts are a natural result of a contractual relationship, it indicates purposeful affiliation with the forum through an interstate contractual relationship. See Burger King, 471 U.S. at 479-81, 105 S.Ct. at 2185-87; FMC, 892 F.2d at 1313-14; CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 368 (2d Cir.1986). B "Once it has been decided that a defendant purposefully established minimum contacts within the forum State, these contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with 'fair play and substantial justice.' " Burger King, 471 U.S. at 476, 105 S.Ct. at 2184 (quoting International Shoe, 326 U.S. at 320, 66 S.Ct. at 160); see Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113-16, 107 S.Ct. 1026, 1033-35, 94 L.Ed.2d 92 (1987). 307 But "where a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable." Burger King, 471 U.S. at 477, 105 S.Ct. at 2184. In this regard, we will consider " 'the burden on the defendant,' 'the forum State's interest in adjudicating the dispute,' 'the plaintiff's interest in obtaining convenient and effective relief,' 'the interstate judicial system's interest in obtaining the most efficient resolution of controversies,' and the 'shared interest of the several States in furthering fundamental substantive social policies.' " Id. (quoting World-Wide Volkswagen, 444 U.S. at 292, 100 S.Ct. at 564). Defendant's assertion that litigation in Kansas is overly burdensome has already been considered and rejected by the district court's denial of defendant's motion to transfer venue. See Burger King, 471 U.S. at 483-84, 105 S.Ct. at 2187-88. And the state of Kansas has "a legitimate interest in holding [defendant] answerable on a claim related to" his contacts with that state. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 776, 104 S.Ct. 1473, 1479, 79 L.Ed.2d 790 (1984). "[T]he process of resolving potentially conflicting 'fundamental social policies' can usually be accommodated through choice-of-law rules rather than through outright preclusion of jurisdiction in one forum." Burger King, 471 U.S. at 483 n. 26, 105 S.Ct. at 2188 n. 26 (citation omitted). As we discuss below, the Kansas choice of law rules applicable in this case appear to be mechanical, not balancing the policies of the interested states. Nevertheless, the parties themselves have agreed upon the proper balance between the competing state policies by choosing Kansas law to govern their contract. Section II There are four prerequisites for the grant of a preliminary injunction: "(1) substantial likelihood that the movant will eventually prevail on the merits; (2) a showing that the movant will suffer irreparable injury unless the injunction issues; (3) proof that the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) a showing that the injunction, if issued, would not be adverse to the public interest." Lundgrin v. Claytor, 619 F.2d 61, 63 (10th Cir.1980). We will reverse the district court's grant of a preliminary injunction only for abuse of discretion. Id. A On the issue of likelihood of success on the merits, defendant argues that the district court erred in applying Kansas law to determine the validity of the covenant not to compete. Defendant contends that the covenant is unenforceable in California by virtue of Cal.Bus. & Prof.Code § 16600; he argues that the district court should have disregarded the contractual choice of Kansas law and applied California law because, as the employee's state of residence and performance under the contract, California has a materially greater interest in applying its law to invalidate the covenant not to compete, citing Restatement (Second) of Conflict of Laws § 187(2)(b) (1971 & Supp.1989). A diversity court must apply the choice-of-law rules of the forum state, Klaxon Co. v. 308 Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941), including the forum state's rule as to whether a contractual choice-of-law provision is enforceable, see Interfirst Bank Clifton v. Fernandez, 853 F.2d 292, 294 (5th Cir.1988). In a case in which there was no contractual choice-of-law clause, the Kansas Supreme Court refused to follow the Second Restatement 's balancing of the competing policies of interested states and opted to adhere to the lex loci contractus rule when it reflected Kansas public policy. St. Paul Surplus Lines Ins. Co. v. International Playtex, Inc., 245 Kan. 258, 777 P.2d 1259, 1267-70 (1989), cert. denied, 493 U.S. 1036, 110 S.Ct. 758, 107 L.Ed.2d 774 (1990); see also Missouri Pac. R.R. Co. v. Kansas Gas & Elec. Co., 862 F.2d 796, 798 n. 1 (10th Cir.1988). Although we could find no Kansas cases on point, we believe the Kansas courts would likewise refuse to weigh any conflict between Kansas' and California's laws and policies, if indeed there is conflict between them, [FN3] and would apply Kansas law in this litigation as agreed to by the parties in their contract. FN3. It is not clear that California law would invalidate the restrictive covenants at issue, insofar as enforcement is attempted here. See discussions of California law in Medtronic, Inc. v. Gibbons, 684 F.2d 565, 568 (8th Cir.1982); and Hollingsworth Solderless Terminal Co. v. Turley, 622 F.2d 1324, 1329-40 (9th Cir.1980). Although the covenant at issue covers a broad geographic region, Equifax apparently is not attempting to enforce it to the full extent of its language. In similar circumstances, the Kansas Supreme Court has upheld the right to enforce an overly broad covenant to the extent reasonably necessary to carry out the protective intent of the parties. Foltz v. Struxness, 168 Kan. 714, 215 P.2d 133, 137-38 (1950). We think it likely would do so in the circumstances before us. Defendant challenges Equifax' likelihood of success on the merits on a second ground. Defendant's employment contract with White & White provided that "[t]he duties and obligations of the [defendant] under this agreement shall inure [to] the benefit of the successors and assigns of White & White." I R. tab 15, exhibit A, at 4 ¶ 10(f). Nonetheless, defendant argues that Equifax cannot enforce the covenant not to compete, as White & White's successor, because personal service contracts are not assignable. This argument is flawed because it assumes a contract is only assignable in toto. A contract consists of a bundle of rights and duties, and whether rights are assignable or duties delegable depends on the particular rights and duties at issue. See generally Restatement (Second) of Contracts § 316 comment c (1981). Although an employee's duty to perform under an employment contract generally is not delegable, see id. § 318(2) & comment c, illustration 5, the right to enforce a covenant not to compete generally is assignable in connection with the sale of a business, see id. § 317 comment d, illustration 6. In the case of a merger, as here, the surviving corporation automatically succeeds to the rights of the merged corporations to enforce employees' covenants not to compete. See generally Alexander & Alexander, Inc. v. Koelz, 722 S.W.2d 311, 313 (Mo.Ct.App.1986); 6 W. Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 2579.3, at 739 (J. Reinholtz & M. Wasiunec rev. ed. 1989). B Defendant next argues that the district court erred in concluding that Equifax was being 309 irreparably harmed, that the only harm Equifax proffered was a loss of customers, and that this is readily compensable through money damages. There is language in a recent Kansas Court of Appeals case, Wichita Wire, Inc. v. Lenox, 11 Kan.App.2d 459, 726 P.2d 287, 291-92 (Ct.App.1986), in which there was no noncompete agreement, suggesting that a loss of established business is insufficient to establish irreparable harm. We are not fully satisfied that the Kansas Supreme Court would apply that rule in a case like the one before us. In any event, the doctrine of Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), does not apply to preliminary injunction standards, 11 C. Wright & A. Miller, Federal Practice and Procedure § 2943, at 390 (1973), and we believe that whether money damages will constitute an adequate remedy requires consideration of the difficulty of proving damages with any reasonable degree of certainty. Restatement (Second) of Contracts § 360(a) & comment b, at 172 ("The breach of a covenant not to compete may cause the loss of customers of an unascertainable number or importance."); see also Foundry Servs., Inc. v. Beneflux Corp., 206 F.2d 214, 216 (2d Cir.1953) (L. Hand, J., concurring). The district court credited testimony that "the insurance investigation business is based on personal contacts and a knowledge of the special needs and requirements of customers," I R. tab 18, at 11, a fact which complicates any damage estimate, see Medtronic, Inc. v. Gibbons, 684 F.2d 565, 566, 569 (8th Cir.1982). The district court found irreparable harm based upon "evidence suggest[ing] that it is impossible to precisely calculate the amount of damage [plaintiff] will suffer," I R. tab 18, at 12. This finding is not clearly erroneous. C The defendant makes further challenges to the district court's assessment of the requisite elements for a preliminary injunction and the evidence bearing upon them, but our review of the record reveals no abuse of discretion. Therefore, we affirm the grant of the preliminary injunction. Section III Defendant contends that the district court abused its discretion in requiring Equifax to post only $10,000 in security under Fed.R.Civ.P. 65(c). The rule requires a bond to secure damages from a wrongful injunction only "in such sum as the court deems proper," id., therefore, "the trial judge has wide discretion in the matter of requiring security," Continental Oil Co. v. Frontier Refining Co., 338 F.2d 780, 782 (10th Cir.1964). At the hearing on the preliminary injunction, defendant presented no evidence on the extent to which he would be harmed by an injunction. Therefore, we will not speculate that $10,000 is insufficient. Section IV Finally, defendant challenges the district court's failure to grant his motion for a transfer of venue to the United States District Court for the Central District of California. "It is entirely settled that an order granting or denying a motion to transfer under 28 U.S.C.A. § 1404(a) is interlocutory and not immediately appealable under 28 U.S.C.A. § 1291." 15 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3855, at 472 & n. 1 (2d ed. 1986 & Supp.1990) (citing cases). Even if we have discretion to review such an order in the course of a review of a preliminary injunction, see, e.g., Noxell Corp. v. 310 Firehouse No. 1 Bar-B-Que Restaurant, 760 F.2d 312, 314-15 (D.C.Cir.1985), we see no compelling reasons to do so in this case, see Howard Elec. & Mechanical Co. v. Frank Briscoe Co., 754 F.2d 847, 850-51 (9th Cir.1985). AFFIRMED. FRCP 12 Motion to Dismiss (a) When Presented. (1) Unless a different time is prescribed in a statute of the United States, a defendant shall serve an answer (A) within 20 days after being served with the summons and complaint, or (B) if service of the summons has been timely waived on request under Rule 4(d), within 60 days after the date when the request for waiver was sent, or within 90 days after that date if the defendant was addressed outside any judicial district of the United States. (2) A party served with a pleading stating a cross-claim against that party shall serve an answer thereto within 20 days after being served. The plaintiff shall serve a reply to a counterclaim in the answer within 20 days after service of the answer, or, if a reply is ordered by the court, within 20 days after service of the order, unless the order otherwise directs. (3) The United States or an officer or agency thereof shall serve an answer to the complaint or to a cross-claim, or a reply to a counterclaim, within 60 days after the service upon the United States attorney of the pleading in which the claim is asserted. (4) Unless a different time is fixed by court order, the service of a motion permitted under this rule alters these periods of time as follows: (A) if the court denies the motion or postpones its disposition until the trial on the merits, the responsive pleading shall be served within 10 days after notice of the court's action; or (B) if the court grants a motion for a more definite statement, the responsive pleading shall be served within 10 days after the service of the more definite statement. (b) How Presented. Every defense, in law or fact, to a claim for relief in any pleading, whether a claim, counterclaim, cross-claim, or third-party claim, shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion: (1) lack of jurisdiction over the subject matter, (2) lack of jurisdiction over the person, (3) improper venue, (4) insufficiency of process, (5) insufficiency of service of process, (6) failure to state a claim upon which relief can be granted, (7) failure to join a party under Rule 19. A motion making any of these defenses shall be made before pleading if a further pleading is permitted. No defense or objection is waived by being joined with one or more other defenses or objections in a responsive pleading or motion. If a pleading sets forth a claim for relief to 311 which the adverse party is not required to serve a responsive pleading, the adverse party may assert at the trial any defense in law or fact to that claim for relief. If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56. (c) Motion for Judgment on the Pleadings. After the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings. If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56. (d) Preliminary Hearings. The defenses specifically enumerated (1)-(7) in subdivision (b) of this rule, whether made in a pleading or by motion, and the motion for judgment mentioned in subdivision (c) of this rule shall be heard and determined before trial on application of any party, unless the court orders that the hearing and determination thereof be deferred until the trial. (e) Motion for More Definite Statement. If a pleading to which a responsive pleading is permitted is so vague or ambiguous that a party cannot reasonably be required to frame a responsive pleading, the party may move for a more definite statement before interposing a responsive pleading. The motion shall point out the defects complained of and the details desired. If the motion is granted and the order of the court is not obeyed within 10 days after notice of the order or within such other time as the court may fix, the court may strike the pleading to which the motion was directed or make such order as it deems just. (f) Motion to Strike. Upon motion made by a party before responding to a pleading or, if no responsive pleading is permitted by these rules, upon motion made by a party within 20 days after the service of the pleading upon the party or upon the court's own initiative at any time, the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. (g) Consolidation of Defenses in Motion. A party who makes a motion under this rule may join with it any other motions herein provided for and then available to the party. If a party makes a motion under this rule but omits therefrom any defense or objection then available to the party which this rule permits to be raised by motion, the party shall not thereafter make a motion based on the defense or objection so omitted, except a motion as provided in subdivision (h)(2) hereof on any of the grounds there stated. (h) Waiver or Preservation of Certain Defenses. (1) A defense of lack of jurisdiction over the person, improper venue, insufficiency of process, or insufficiency of service of process is waived (A) if omitted from a motion in the circumstances described in subdivision (g), or (B) if it is neither made by motion under this rule nor included in a responsive pleading or an amendment thereof permitted 312 by Rule 15(a) to be made as a matter of course. (2) A defense of failure to state a claim upon which relief can be granted, a defense of failure to join a party indispensable under Rule 19, and an objection of failure to state a legal defense to a claim may be made in any pleading permitted or ordered under Rule 7(a), or by motion for judgment on the pleadings, or at the trial on the merits. (3) Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action. Section Seven: Insurance Practice Issues: Including G.L. c.176D and G.L. c. 93A Cases: Timpson v. Transamerica Insurance 41 Mass. App. Ct. 344 (1996) Michael TIMPSON v. TRANSAMERICA INSURANCE COMPANY. No. 95-P-870. Appeals Court of Massachusetts, Suffolk. Argued June 6, 1996. Decided Sept. 19, 1996. Further Appellate Review Denied Nov. 27, 1996. David A. Murray, for plaintiff. Carol A. Kelly, Boston, for defendant. Before WARNER, C.J., and ARMSTRONG and KASS, JJ. WARNER, Chief Justice. Background The plaintiff, Michael Timpson brought this Superior Court action against the defendant, 313 Transamerica Insurance Company (Transamerica). Timpson's complaint contained two counts. Count I alleged that because Transamerica wrongfully failed to defend him in an action brought by reporter Lisa Olson, Transamerica should reimburse him for legal fees and associated costs incurred by him in the course of his defense against Olson's action. Count II alleged that Transamerica engaged in unfair claims settlement practices in violation of G.L. c. 93A and G.L. c. 176D, § 3. Timpson moved for summary judgment on both counts of his complaint. Transamerica filed a cross motion for summary judgment. After a hearing, the motion judge entered an order denying Timpson's motion for summary judgment and allowing Transamerica's cross motion. Timpson appeals from the ensuing judgments. We affirm. From the materials before the motion judge, the following appears. In May 1990, Transamerica and the owners of the New England Patriots football team (Patriots) entered into an insurance contract (the policy) which was effective through May 9, 1991. As a football player for the Patriots, Timpson was an "additional insured" under the policy, which required Transamerica to provide for the payment of Timpson's legal expenses, including attorneys fees, in the event that Timpson was sued in connection with conduct or acts allegedly engaged in while acting "within the scope of his duties" as a Patriot's employee. The allegations of Olson's complaint were to this effect. She was a sports reporter for the Boston Herald. On September 17, 1990, she conducted an interview in the Patriots' locker room with Patriots' player, Maurice Hurst. During the interview, another player, Zeke Mowatt, while naked, stood close to Olson, and proceeded to make crude remarks and gestures toward her. Timpson allegedly "laughed and shouted encouragement" to Mowatt. In addition, other players, naked, allegedly approached Olson, displayed their genitals to her, and made vulgar comments. James Oldham, a member of management personnel for the Patriots, was present during the incident and made no effort to stop the players' conduct. Olson's complaint named as defendants the Patriots and several players, including Timpson. Olson's complaint charged Timpson and other Patriots' players with sexual harassment, violation of her civil rights, intentional infliction of emotional distress, and interference with advantageous relations. After service of the summons and the complaint, Timpson demanded that Transamerica defend his claim. Transamerica refused and denied it had a duty to defend him because Timpson had acted "outside the scope of his duties as an employee of the New England Patriots." Olson's lawsuit was settled prior to trial, without Timpson conceding to any liability. Still, Timpson incurred legal costs and attorney's fees totaling $87,705.76. Timpson's request for reimbursement was denied by Transamerica. Transamerica maintained that Timpson's alleged conduct was performed outside the scope of his duties as a Patriots' employee and thus was not covered under the policy. Timpson argued below and on appeal that there was a possibility that the damages sought by him would be covered under the policy where he arguably (1) acted within the scope of employment, and (2) acted negligently. The Superior Court judge concluded, however, that the kinds of losses that might be proved that lay within the range of the 314 allegations of the complaint did not fit the expectation of insurance reasonably generated by the terms of the policy. See Sterilite Corp. v. Continental Cas. Co., 17 Mass.App.Ct. 316, 318-319, 458 N.E.2d 338 (1983). Therefore, the judge concluded that Transamerica appropriately did not defend Timpson. In reviewing a grant for summary judgment, we determine "whether, viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to a judgment as a matter of law." Mass.R.Civ.P. 56, 365 Mass. 824 (1974). Judson v. Essex Agric. & Technical Inst., 418 Mass. 159, 162, 635 N.E.2d 1172 (1994). Here, where both parties moved for summary judgment, and the evidence taken in the light most favorable to Timpson entitled Transamerica to a judgment as a matter of law on both counts of Timpson's complaint, the judge properly granted Transamerica's summary judgment motion and denied Timpson's motion. See Conley v. Massachusetts Bay Transp. Authy., 405 Mass. 168, 173-178, 539 N.E.2d 1024 (1989). 1. Transamerica's duty to defend. Generally, a duty to defend does not exist until it is shown that the person claiming coverage was, in fact, an insured under the policy. Windt, Insurance Claims and Disputes § 4.01 (3d ed. 1995). In Massachusetts, an insurer is obligated to undertake the defense of a third-party complaint against an insured when the allegations "are 'reasonably susceptible' of an interpretation that they state or adumbrate a claim covered by the policy terms." Sterilite Corp., 17 Mass.App.Ct. at 318, 458 N.E.2d 338. The scope of an insurer's duty to defend is "based not only on the facts alleged in the complaint but also on the facts that are known or readily knowable by the insurer." Desrosiers v. Royal Ins. Co. of America, 393 Mass. 37, 40, 468 N.E.2d 625 (1984). Specifically, "the process is one of envisaging what kinds of losses may be proved as lying within the range of the allegations of the complaint, and then seeing whether any such loss fits the expectation of protective insurance reasonably generated by the policy." Sterilite Corp., supra at 318, 458 N.E.2d 338. See also Boston Symphony Orchestra, Inc. v. Commercial Union Ins. Co., 406 Mass. 7, 13, 545 N.E.2d 1156 (1989); W.R. Grace & Co. v. Maryland Cas. Co., 33 Mass.App.Ct. 358, 364, 600 N.E.2d 176 (1992); Doe v. Liberty Mutual Ins. Co., 423 Mass. 366, 368-369, 667 N.E.2d 1149 (1996). However, when the allegations in the underlying complaint "lie expressly outside the policy coverage and its purpose, the insurer is relieved of the duty to investigate" or defend the claimant. Terrio v. McDonough, 16 Mass.App.Ct. 163, 168, 450 N.E.2d 190 (1983). Timpson argues that, according to the language of Olson's complaint, he qualifies as an "additional insured" under the policy, and, therefore, Transamerica had a duty to defend him. More particularly, he argues under Sterilite Corp., 17 Mass.App.Ct. 316, 458 N.E.2d 338; Boston Symphony Orchestra, Inc., 406 Mass. 7, 545 N.E.2d 1156; and W.R. Grace Co., 33 Mass.App.Ct. 358, 600 N.E.2d 176, that for the duty to defend to arise (1) there need only be a possibility that the range of the complaint's allegations is broad enough to permit a claim under the policy, and (2) the merits of the claim can never be grounds for an insurer to refuse unilaterally to defend the insured. Transamerica, on the other hand, contends that because Timpson was allegedly both (1) acting outside the scope of his employment duties, and (2) acting intentionally, 315 Timpson did not qualify as an "additional insured," and thus Transamerica is relieved of any duty to defend Timpson under the policy. See Terrio, 16 Mass.App.Ct. at 168-169, 450 N.E.2d 190. Applying the "duty to defend" analysis to this case, we conclude, as did the motion judge, that there was not enough in the Olson complaint to invoke the duty of Transamerica to defend under the policy provisions. See Sterilite Corp., 17 Mass.App.Ct. at 319, 458 N.E.2d 338. a. Conduct within the scope of Timpson's employment duties. The policy specifically requires that in order for Timpson to qualify as an "additional insured," the claim against him must be founded on conduct while he was "acting within the scope of his duties" as an employee of the named insured, the Patriots. It is Timpson's burden to prove, as a person claiming coverage under the policy, that he is an insured as defined by the policy. Gordon v. Safety Ins. Co., 417 Mass. 687, 689, 632 N.E.2d 1187 (1994), and cases cited. Although Timpson asserts that the allegations within the Olson complaint are broad enough to include a claim that he was "acting within the scope of his duties," the complaint fails to meet the elements of the applicable test, as delineated in Wang Labs, Inc. v. Business Incentives, Inc., 398 Mass. 854, 859, 501 N.E.2d 1163 (1986). Under Wang, the factors that determine whether an employee's tortious conduct was within the scope of his employment include whether (1) the conduct is of the kind he is employed to perform; (2) it occurs substantially within authorized time and space limits; and (3) it is motivated, at least in part, by a purpose to serve the employer. Wang Labs., Inc., supra at 859, 501 N.E.2d 1163, and cases cited. If, however, an employee "acts from purely personal motives ... in no way connected with the employer's interests," he is not acting within the scope of his employment. Pinshaw v. Metropolitan Dist. Commn., 402 Mass. 687, 694-695, 524 N.E.2d 1351 (1988), quoting from Prosser & Keeton, Torts § 506 (5th ed. 1984). Timpson argues that he meets the requirements of the Wang test, and that he was not acting for purely personal motives. Specifically, he contends that because the alleged conduct occurred in the locker room, the employer's workplace, and because he was engaged in some Patriots' team business, changing his clothing after a game, he meets part (2) of the Wang test. In short, he claims that his alleged conduct occurred substantially within authorized time and space limits of his job. Timpson also contends that he meets part (3) of the Wang test, because he was motivated in part by a purpose to serve his employer. Relying on Manning v. Grimsley, 643 F.2d 20 (1st Cir.1981) (professional baseball pitcher who intentionally threw a baseball toward hecklers and injured a spectator was found to have acted within scope of employment because heckler was interfering with ability to perform, and thus, quieting the heckler would likely result in better performance by himself and team), Timpson argues that employees have been held to have been acting in the interests of their employers, and within the scope of their employment, even though the act might have first appeared to have harmed the employer's interests. Timpson contends that he, like the baseball player in Manning, was acting to promote 316 better performance for the team. He explains that by laughing and shouting encouraging words to his male teammates--all of whom were allegedly sexually harassing a female reporter--Timpson was promoting team unity, which in turn, would lead to better playing by his team. Furthermore, Timpson argues that if he acted to promote better team performance, he was not acting for purely personal motives, but rather for the good of his employer. See Pinshaw, 402 Mass. at 694-695, 524 N.E.2d 1351. In addition, Timpson claims that because he was changing and a press interview was occurring at the time of the alleged conduct, he was doing actions "of the kind he is employed to perform" and, therefore, fulfilled part (1) of the test. Timpson's argument fails upon examination of the specific allegations within the Olson complaint. While Timpson may arguably have fulfilled element (2) of the Wang test (time and place element), he in no way satisfied elements (1) and (3). As for part (1) of the Wang test, Olson's complaint alleges that Timpson had signed a contract with the New England Patriots requiring him to cooperate with members of the media as part of his employment. Olson's complaint also alleges that Timpson and other players interfered with her efforts to interview another player, and that she left the locker room "[d]istraught as a result of the humiliation and harrassment." Thus, where Timpson made a legally enforceable promise to cooperate with the media, and then did exactly the opposite, he could not meet part (1) of the Wang test--he was not participating in "conduct ... of the kind he [was] employed to perform." Second, the conduct in which he allegedly did participate, sexual harassment, was not the kind of conduct that he ever would be legally employed to perform. Further, as for part (3) of the Wang test, it is difficult to envisage how Timpson's alleged conduct of encouraging Mowatt's behavior could ever be perceived as serving his employer. It is axiomatic that an employee is not serving his employer if he is acting counter to the Patriots' interests in maintaining good relations with the news media and counter to his employment contract. Such conduct is not performed in an effort to advance the Patriots' interests, but rather serves purely personal motives. See Pinshaw, 402 Mass. at 694-695, 524 N.E.2d 1351. By failing the Wang test, Olson's allegations as to Timpson's actions fall outside the scope of employment. On this basis, therefore, Transamerica properly refused to defend Timpson's claim. [FN1] FN1. Timpson proffers other arguments in support of his theory that the allegations of the Olson complaint were broad enough to include a claim that Timpson was acting within the scope of his employment at the time of the alleged conduct. We find no merit to these arguments. b. Allegations of Timpson's conduct as "intentional, extreme and outrageous." "An insurer has no obligation to defend when the allegations of a complaint describe with precision intentional conduct of a defendant which the insurance policy expressly excludes from coverage." Terrio, 16 Mass.App.Ct. at 168, 450 N.E.2d 190. Furthermore, as we have explained, where the allegations in the underlying complaint lie 317 expressly outside the policy coverage and its purpose, the insurer is even "relieved of the duty to investigate." Ibid. Here, the policy extends coverage to personal injury claims and obligates Transamerica to defend any suit against the insured seeking damages resulting from personal and bodily injuries to which the insurance applies. As in Terrio, supra, the policy explicitly excludes intentional conduct from coverage. Thus, for coverage to apply to Timpson, his alleged conduct must be unintentional. Olson's complaint contains allegations that Timpson sexually harassed Olson and attempted to embarrass and intimidate her with the intention of preventing her from reporting sports news solely because of her sex. Specifically, she charged Timpson and his cohorts with (I) sexual harassment, (II) violation of her civil rights, (III) intentional infliction of emotional distress, and (IV) interference with advantageous relations. Timpson argues that two of the four counts may be read to allege negligence, not intentional torts, and, therefore, his claim should be covered by the policy. Transamerica, on the other hand, contends that all four counts allege intentional conduct. Timpson concedes that counts III and IV allege intentional torts. However, he argues that counts I and II are "reasonably interpretable as including within their scope unintentional and/or negligent conduct," thereby creating the possibility that his claim falls under the policy. See Boston Symphony Orchestra, Inc., 406 Mass. at 11-13, 545 N.E.2d 1156 (even though complaint explicitly alleged contract damages, not covered by the policy, the court held the language of the complaint was interpretable as alleging tortious injury, which was covered under the policy). See also Sterilite Corp., 17 Mass.App.Ct. at 318-319, 458 N.E.2d 338. Timpson looks directly to the language of paragraphs 18 and 22 of the complaint, pointing out that it does not ascribe any motivation or intent to Timpson. [FN2] Further, he emphasizes that it is not for the insurer to deny a defense on the basis of the merits. Id. Thus, he argues, if there is any chance the complaint alleges negligence, which would bring the claim under the policy, even if there is strong indication that Timpson would lose on the merits of such a claim, Transamerica owed him a duty to defend. See Boston Symphony Orchestra, Inc., 406 Mass. at 10-13, 545 N.E.2d 1156; and Sterilite Corp., 17 Mass.App.Ct. at 318-320, 458 N.E.2d 338. FN2. Paragraph 18 alleges that Timpson "laughed and shouted encouragement to defendant Mowatt and made remarks which included, 'Make her look,' 'That's what she wants' and 'Is she looking?' Paragraph 22 alleges that another defendant said that "Timpson was one of those shouting encouragement." Moreover, regarding count I, Timpson contends that the sexual harassment charge is not necessarily predicated on the commission of an intentional tort. [FN3] (In fact, he claims that he did not intend to harass Olson sexually.) For further support, he looks to the language of the three statutes addressing sexual harassment, G.L. cc. 151A, 151B, and 151C, and notes that they provide that sexual harassment may occur in the absence of an intent to injure. [FN4] FN3. Timpson does not argue extensively that count II, the civil rights violation, is founded upon negligence as opposed to intentional conduct. However, upon 318 looking at the language within count II, it appears that Olson bases this violation on the sexual harassment charge preceding it-- which is, in fact, based on intentional conduct. See paragraph 46 ("The defendants ... interfered with and interrupted plaintiff's enjoyment of ... her rights by threats, intimidation and coercion ... by sexually harassing and verbally abusing the plaintiff as aforesaid"). FN4. See, e.g., G.L. c. 151B, § 1(18) (1990 ed.) (sexual harassment is verbal or physical conduct of sexual nature when conduct has "purpose or effect of unreasonably interfering with an individual's work performance" [emphasis supplied] ). However, all four of the charges allege conduct intentional in nature; the language within the complaint is clear and unambiguous. For example, at paragraph 49, Olson alleges that all of the "actions of the defendants ... set forth herein constituted unprivileged, intentional, extreme and outrageous" conduct. [FN5] Nowhere is the word "negligent" expressly mentioned or reasonably implied by the language of the complaint. Thus, regardless of the statutory language of G.L. cc. 151A, 151B, and 151C, and of the language of paragraphs 18 and 22 to which Timpson refers in a vacuum, Olson specifically averred "intentional" conduct, conduct not covered by the policy. [FN6] See Terrio, 16 Mass.App.Ct. at 168, 450 N.E.2d 190. In order for the intentional acts exclusion to apply, the insured need not specifically intend or anticipate the full extent of the injury which ultimately results; rather the exclusion can apply where the insured should have known that some harm was likely to occur as a result of a clearly intentional act. See Newton v. Krasnigor, 404 Mass. 682, 536 N.E.2d 1078 (1989) (insurance company not responsible for coverage on basis of intentional acts exclusion for property damage arising out of a fire set by minor insured where the minor did not specifically intend to cause substantial damage, but did intend to set a fire). But see Quincy Mut. Fire Ins. Co. v. Abernathy, 393 Mass. 81, 84, 469 N.E.2d 797 (1984) (an intentional act of an insured can still be covered if the insured does not specifically intend to cause harm or is not substantially certain that such harm will occur). While Timpson argues that he did not mean to hurt Olson severely, he should, of course, have been aware that laughing and shouting encouragement to his lewd and vulgar teammates would harm Olson in some way. FN5. Not only does the complaint repeatedly use phrases like that at paragraph 49, supra, that imbue intentional conduct to the entire complaint, but also each count of the complaint "incorporate[s] herein by reference" some preceding paragraphs outlining intentionality. Upon reading the complaint in parts and as a whole, it appears that the inclusion of such language repeatedly emphasizes that Olson was alleging "intentional" conduct. FN6. Transamerica also contends that as a matter of law, Olson would not be able to seek to recover in negligence from Timpson for the same acts which were the basis of the intentional conduct counts. See Worcester Ins. Co. v. Fells Acres Day School, Inc., 408 Mass. 393, 410, 558 N.E.2d 958 (concluding that if conduct is negligent it cannot also be intentional); Waters v. Blackshear, 412 Mass. 589, 590, 591 N.E.2d 184 (1992) (same); Doe v. Liberty Mutual Insurance Co., 423 Mass. 366, 370, 667 N.E.2d 1149 (1996) (same). 319 Where the language within Olson's complaint describes with "precision intentional conduct ... which the insurance policy expressly excludes from coverage," see Terrio, 16 Mass.App.Ct. at 168, 450 N.E.2d 190, and where it is not necessary that Timpson have specifically intended or anticipated the full extent of the injury which resulted from his actions, Timpson's alleged behavior was, in fact, intentional, and not negligent. c. Conclusion. In sum, we conclude that where Olson alleged that Timpson acted outside the scope of employment and acted intentionally, there is no possible way to envisage a loss that "fits the expectation of protective insurance reasonably generated by the policy." See Sterilite Corp., 17 Mass.App.Ct. at 318, 458 N.E.2d 338. Accordingly, the motion judge properly granted summary judgment in Transamerica's favor on count I of Timpson's complaint. 2. Statutory claims. Timpson also appeals from the entry of summary judgment in favor of Transamerica on his claims under G.L. c. 93A and c. 176D. Liability under count II of Timpson's complaint, a violation of G.L. c. 93A, the Massachusetts consumer protection law, is based upon the employment of unfair and deceptive acts and practices. Boston Symphony Orchestra, Inc., 406 Mass. at 14, 545 N.E.2d 1156. Doe v. Liberty Mutual Insurance Co., 423 Mass. at 371, 667 N.E.2d 1149. Timpson argues that Transamerica's actions in denying a defense to Timpson constitute "unfair claims in settlement practices" under both G.L. c. 93A and c. 176D, § 3(a ). However, where Timpson allegedly acted intentionally, outside the scope of his employment, he was not an "insured" under the policy, and, therefore, Transamerica rightfully declined to defend him. See Terrio, 16 Mass.App.Ct. at 168, 450 N.E.2d 190. [FN7] FN7. Even if Transamerica had relied on an ultimately incorrect, though plausible, interpretation of their policy when refusing to defend Timpson, they would not be found liable under G.L. c. 93A. See Gulezian v. Lincoln Ins. Co., 399 Mass. 606, 613, 506 N.E.2d 123 (1987); Boston Symphony Orchestra, Inc., 406 Mass. at 14-15, 545 N.E.2d 1156; Lumbermens Mut. Cas. Co. v. Offices Unlimited, Inc., 419 Mass. 462, 468, 645 N.E.2d 1165 (1995). Judgments affirmed. Brandley v. U.S. Fidelity 819 F. Supp. 101 (1993) Paul BRANDLEY and Gayle Brandley, Plaintiffs, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Defendant. Civ. A. No. 91-12875-MA. United States District Court, D. Massachusetts. 320 April 15, 1993. Opinion Vacated and Withdrawn Aug. 10, 1993. Hans R. Hailey, Law Office of Hans R. Hailey, Boston, MA, for plaintiffs. Denise K. Cahalane, Ralph C. Sullivan, Morrison, Mahoney & Miller, Boston, MA, for defendant. MEMORANDUM AND ORDER MAZZONE, District Judge. This matter arises from a claim for insurance coverage for personal injuries sustained by the plaintiffs in a two-vehicle automobile accident. The underlying claim has since been settled, but the plaintiffs' allegation that the insurer of the other driver has engaged in unfair claims settlement practices remains. The case is presently before me on cross motions for summary judgment. Section I. BACKGROUND On March 30, 1988, Paul and Gayle Brandley were driving east on Route 106 near Plainville, Massachusetts when they were hit by a pick-up truck which ran a red light at the intersection with Route 152. The Brandleys suffered serious personal injuries (Mrs. Brandley's injuries are particularly severe). The Brandleys' attorney first contacted United States Fidelity & Guaranty Company, the insurer of the other driver's employer, by letter on April 29, 1988. See Defendant's Ex. G(1). The parties agree that there was no response to this letter and that no further correspondence occurred until November 1989. See Defendant's Ex. G(2), G(4). When letters dated November 10, 1989 and December 8, 1989 failed to elicit any response from Fidelity, [FN1] demand was made pursuant to chapter 93A by letter dated May 14, 1990. See Defendant's Ex. G(7). Fidelity did not respond to the 93A demand until August 29, 1990, when it offered $7,500 in settlement of Paul's claims and $18,000 in settlement of Gayle's claims. See Plaintiffs' Ex. 7J. Because Fidelity did not respond to the 93A demand within thirty days, the Brandleys filed suit in Suffolk Superior Court on July 24, 1990 against Fidelity, the driver of the pick-up, and his employer. FN1. Fidelity did send the Brandleys' attorney a form letter dated February 27, 1990 indicating the name of the claims adjuster assigned to Paul's case and the claim number. See Plaintiffs' Ex. 7F. Fidelity sent a similar notice concerning Gayle's case on May 3, 1990. See Plaintiffs' Ex. 7H. The Brandleys' claims for damages against the driver and his employer were settled for $84,000 on the morning of the first day of trial in October 1991. The remaining defendant, Fidelity (a Maryland corporation), availed itself of diversity jurisdiction to remove the action to this court for resolution of the remaining count of the complaint, Count IV, which alleges that Fidelity engaged in unfair claims settlement practices in contravention of the M

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