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{
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"url": "https://static.case.law/"
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UNITED STATES of America, Appellee, v. Daniel Dee VEON, Appellant.
No. 72-1889.
United States Court of Appeals, Ninth Circuit.
Feb. 12, 1973.
Claude 0. Allen, Oakland, Cal., for appellant.
James L. Browning, Jr., U. S. Atty., F. Steele Langford and Jerry K. Cimmet, Asst. U. S. Attys., San Francisco, Cal., for appellee.
Before TRASK, GOODWIN and WALLACE, Circuit Judges.
PER CURIAM:
Daniel Dee Veon appeals from convictions of violations of 21 U.S.C. § 841 (a) (1) (possession of marijuana with intent to distribute); two counts of 21 U.S.C. § 843(b) (use of telephone to commit or to facilitate commission of felonies under Title 21); 21 U.S.C. § 846 (conspiracy to distribute and to possess with intent to distribute marijuana).
Defendant contends the district court erred: (1) in restricting the reeross-examination of a government witness; (2) in receiving into evidence a tape recording and a written transcript of the tape; and (3) in submitting the case to the jury, upon evidence which he asserts was insufficient to support the verdict.
Customs agents observed a load of 400 kilograms of marijuana being brought in from Mexico. The agents arrested the smugglers and had them make a “controlled delivery” to Donald Lynch, their employer. Lynch was arrested and agreed to cooperate with police. With police listening and taping the call, Lynch phoned Veon and told him that the “stuff” was in for “Gary.” Veon said, “Yeah, okay, uh?” Lynch replied, “Same old thing.” Veon signified assent. This call is the basis for the second count of the indictment.
At trial, Lynch testified that the call was made pursuant to a pattern he had prearranged with Veon. When Lynch’s employees would arrive with a shipment, Lynch would telephone Veon and Veon would send Geary Willingham, an employee of Veon, to pick up the contraband and pay Lynch at a pre-arranged location. Lynch testified that he disposed of all his marijuana through Veon.
Lynch, carrying a tape recorder, met Willingham, and in a brief conversation the name “Danny” was mentioned twice. This tape recording became the disputed exhibit. Willingham picked up the marijuana and was arrested. He testified that he was employed by Veon and acted at his request.
The same night that Lynch was. arrested, he received another call from Veon in which Veon stated that he could get only $9,000 that night, and that he would deliver it later. This call is the basis for count three of the indictment. Still later, Lynch received a call from Veon in which Veon told Lynch that “Gary” had been “busted” and that he (Veon) was going to a motel.
The alleged restriction on cross-examination occurred when defense counsel attempted to re-examine a prosecution witness for the fifth time. The curtailment of repetitious examination on a marginally relevant point was a legitimate exercise of the court’s discretion. United States v. Haili, 443 F.2d 1295, 1299 (9th Cir. 1971).
The objection to the use of the tape recording is equally without merit. The defense had obtained a discovery order to furnish copies of any statements obtained through “electronic surveillance.” The government furnished a copy of the tape of the Veon-Lynch conversation, and said that it had another tape in which Yeon’s voice was not heard, but which would be furnished upon request. No request was made. The tape was nonetheless made available to the defense before Willingham testified and before the defense had relinquished its right to recall Lynch for further cross-examination.
The Jenks Act, 18 U.S.C. § 3500, gives the defense the right to have copies of statements of witnesses to government agents only after they have testified. In this ease, the defense had possession of the tape before cross-examination was concluded. But even if the defense was entitled under the discovery order to have the tape before trial, a point we need not decide, the defense was not prejudiced by the late receipt. Veon knew that both Lynch and Willingham had agreed to testify for the prosecution. The tape added little to the testimony; all mentions of “Danny” in the tape came from Lynch, so the tape did not detract from Veon’s argument that Lynch was implicating him (Veon) in an attempt to reduce his own guilt. There was no error in receiving the tape.
The government argues that the suffieiency-of-the-evidence point is not available on appeal because no objection was made on this basis at the close of the trial. Enriquez v. United States, 338 F.2d 165 (9th Cir.), cert. denied, Cura v. United States, 380 U.S. 957, 85 S.Ct. 1095, 13 L.Ed.2d 973 (1964); Lucas v. United States, 325 F.2d 867 (9th Cir. 1963). We agree with the government. But in any event we are satisfied that there was abundant evidence to support the verdict. We notice the point only because it became necessary to examine the record in order to deal with the other points urged.
Affirmed.
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{
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John OTERO and Grace Otero, his wife, Appellants, v. INTERNATIONAL UNION OF ELECTRICAL, RADIO AND MACHINE WORKERS (IUE) an association, Ap-pellee.
No. 71-1716.
United States Court of Appeals, Ninth Circuit.
Feb. 9, 1973.
W. Roy Tribble (argued), Chandler, Ariz., for appellants.
Melvin Warshaw, Asst. Gen. Counsel ' (argued), Ruth Weyand, Richard Seupi, International Union of Electrical, Radio, & Machine Workers, Washington, D.C., Herbert B. Finn, of Finn & Van Baalen, Phoenix, Ariz., for appellee.
Before BARNES, KILKENNY and GOODWIN, Circuit Judges.
PER CURIAM:
The district court had jurisdiction of this action, though not by reason of diversity, which does not here exist. 28 U.S.C. § 1332; United Steel Workers of America v. Bouligny, Inc., 382 U.S. 145, 150-151, 86 S.Ct. 272 (1965). Jurisdiction depends on the existence herein of a collective bargaining contract between an employer (itself a union) and a “labor organization” representing the employer’s employees. (See. 301, Labor Management Relations Act of 1947, 29 U.S. C., Sec. 185).
The undisputed facts presented by affidavits on the motion heard indicate a settlement was arrived at after proceedings were instituted by the union representing the employee (herein Council of Industrial Organizers, or “Council”) on Otero’s behalf. These proceedings were but partially completed; and had proceeded to, but not through, available arbitration proceedings (Motion for Summary Judgment, Exhibit A, Contract; Article VII, Sec. 2). At that point, a complete and final settlement was agreed upon between the Union employer (IUE) and the employee’s designated representative (Council), which involved a change of position on each side and the delivery of two substantial sums of money to Otero. While Otero refused to sign certain releases, he cashed the checks amounting to $5,380.64.
No failure on the part of the Council of Industrial Organizers to act, and no unfairness on its part in acting for the plaintiff, was charged by Otero, either at the time of settlement, or in his complaint, or on the hearing of the motion for summary judgment.
“The parties herein agreed upon a method for final adjustment of all grievances. They further agreed that this would be final and binding upon the parties involved . . . (between the two unions). . . . This clearly was a matter subject to the contractual requirement. ... A party is entitled to no more than he bargained for and received under the contract. Chambers v. Beaunit Corporation, 404 F.2d 128 (6th Cir. 1968).”
Alonso v. Kaiser Aluminum & Chemical Corporation, D.C., 345 F.Supp. 1356, 1360 (1971), affirmed per curiam (4th Cir. 1972), 69 L.C. ¶ 13001.
The grievance and arbitration procedure contained in the Council — IUE’s collective agreement is plaintiff’s sole and exclusive remedy. Republic Steel v. Maddox, 379 U.S. 650, 652-659, 85 S.Ct. 614, 13 L.Ed.2d 580 (1964).
We agree with the district court that no claim is stated. See: Baca v. Sipes, 386 U.S. 171, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967); Woody v. Sterling Aluminum Products, Inc., 365 F.2d 448 (8th Cir. 1966), cert. denied 386 U.S. 957, 87 S.Ct. 1026, 18 L.Ed.2d 105 (1967); Dessert Coca Cola v. General Sales Drivers, 335 F.2d 198 (9th Cir. 1964); C.C.H. (L.L.R.) 3255.55 (p. 8240); Andrews v. Louisville & Nashville R. Co., 406 U.S. 320, 92 S.Ct. 1562, 32 L.Ed.2d 95 (1972).
The summary judgment granted appel-lee is affirmed.
. This was also an action by an employee against an employer alleging wilful and malicious charges of stealing property, re-suiting in the discharge of the employee. It was also based on the granting of a motion for summary judgment.
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{
"author": "PER CURIAM:",
"license": "Public Domain",
"url": "https://static.case.law/"
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UNITED STATES of America, Plaintiff-Appellee, v. Richard Donald GILLIS, Defendant-Appellant.
No. 72-1687.
United States Court of Appeals, Ninth Circuit.
Feb. 14, 1973.
Taylor J. Daigneault (argued), of Daigneault, Abel & Daigneault, Torrance, Cal., for defendant-appellant.
John M. Newman, Asst. U. S. Atty. (argued), Eric A. Nobles, Asst. U. S. Atty., William D. Keller, U. S. Atty., Los Angeles, Cal., for plaintiff-appellee.
Before MERRILL, KOELSCH, and KILKENNY, Circuit Judges.
PER CURIAM:
Appellant Gillis was convicted by a jury on both counts of a two-count indictment charging possession of an unregistered machine gun [26 U.S.C. § 5861 (d) ], and the sale of said gun without paying the transfer tax required by 26 U.S.C. § 5811 [26 U.S.C. § 5861(e)]. On this appeal he urges three points: (1) that the sale was to a government agent and therefore exempted from the transfer tax; (2) that the jury was improperly instructed on possession; and (3) that the prosecutor’s comments in closing argument constituted prejudicial misconduct. None has merit.
26 U.S.C. § 5811 levies a $200 per weapon tax on the transfer of firearms, the tax to be paid by the transferor. Appellant sold a Beretta 9mm machine gun to an undercover agent of the Alcohol, Tobacco, and Firearms Division of the Treasury Department, but paid no tax. He contends that the sale to such an agent is exempted from the transfer tax requirements of § 5811 by the provisions of 26 U.S.C. § 5852(a), which provides: “Any firearm may be transferred to the United States or any department, independent establishment, or agency thereof, without payment of the transfer tax imposed by section 5811.” However, the exemption statute itself provides that a transfer is not tax-exempt “. . . unless the transfer ... is performed pursuant to an application in such form and manner as the Secretary or his delegate may by regulations prescribe.” 26 U.S.C. § 5852(f). The Secretary has issued specific regulations controlling the manner in which a tax-exempt transfer to the government may be effectuated. 26 C.F.R. § 179.89 provides that, while a transfer to the government may be made without payment of the tax, “ . . the procedures for the transfer of a firearm as provided in § 179.90 shall be followed in a tax-exempt transfer. . . . ” 26 C.F.R. § 179.90(c) expressly provides that, “The transferor shall be responsible for establishing the exempt status of the transferee before making a transfer under the provisions of this section. Therefore, before engaging in transfer negotiations with the transferee, the transferor should satisfy himself of the claimed exempt status of the transferee and the bona fides of the transaction. . . . An unapproved transfer or a transfer to an unauthorized person may subject the transferor to civil and criminal penalties. (See sections 5852, 5861, and 5871, I.R.C.).” Cf. United States v. Freed, 401 U.S. 601, 605, 91 S.Ct. 1112, 28 L.Ed.2d 356 (1971). Thus, even if appellant might have invoked the exemption provisions of § 5852(a) he failed to fulfill the necessary conditions precedent to their application.
In its instructions, the court not only defined possession, but also explained what constituted termination of possession in line with appellant’s defense that he had abandoned the gun and was later entrapped by the government agent into retaking possession. These instructions were correct and germane to the issues.
Finally, with respect to the matter of the prosecutor’s comments, the record shows that defense counsel vigorously appealed to the jury to acquit because the particular acts were trivial and innocuous. The District Attorney, in rebuttal, pointed out several potentially unlawful uses to which an illicitly purchased weapon of this type might be put. We have examined the transcript of the arguments, and we agree with the trial court that the comments were invited and not improper. See Tenorio v. United States, 390 F.2d 96 (9th Cir. 1968), cert. denied, 393 U.S. 874, 89 S.Ct. 169, 21 L.Ed.2d 145; Chatman v. United States, 411 F.2d 1139 (9th Cir. 1969).
The judgment is affirmed.
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"author": "PER CURIAM:",
"license": "Public Domain",
"url": "https://static.case.law/"
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UNITED STATES of America, Plaintiff-Appellee, v. Gordon Fred JOHNSON, Defendant-Appellant.
No. 72-2601.
United States Court of Appeals, Ninth Circuit.
Feb. 20, 1973.
Keith C. Monroe, Santa Ana, Cal., for defendant-appellant.
William D. Keller, U. S. Atty., Barry Russell, Eric A. Nobles, Asst. U. S. Atty., Los Angeles, Cal., for plaintiff-appellee.
Before ELY and GOODWIN, Circuit Judges, and SCHWARTZ, District Judge.
Honorable Edward J. Schwartz, Chief Judge, United States District Court for the Southern District of California, sitting by designation.
PER CURIAM:
Johnson was convicted of aiding and abetting the distribution of LSD, a Schedule I controlled substance, in violation of 21 U.S.C. § 841(a)(1) and 18 U.S. C. § 2. In urging reversal, he claims that the trial court erred in determining that the defendant’s extra-judicial statements were made freely and voluntarily, and in admitting the statements in evidence at the trial. He alleges, further, that the court failed to find that defendant had waived his Miranda rights, and, absent such a finding, deprived him of a fair trial by admitting the statements in evidence.
We conclude that the trial court’s determinations were supported by the evidence. A hearing on the issue of voluntariness was held out of the jury’s presence as required by Jackson v. Denno, 378 U.S. 368, 84 S.Ct. 1774, 12 L.Ed. 2d 908 (1964). Upon hearing the conflicting testimony concerning the events surrounding the statements of March 7 and March 9, the court stated that it believed the testimony of the agents that the defendant had been advised of his rights on both occasions, and that it disbelieved the defendant’s testimony. The court found that the defendant’s decision to make the statements “constituted a reasoned choice,” and that he made the statements freely and voluntarily.
It is also apparent from the trial court’s statement that defendant’s decision “constituted a reasoned choice” that the court found defendant to have waived his Miranda rights. A Miranda waiver may be implied where warranted from the facts and circumstances of the particular case. United States v. Hilliker, 436 F.2d 101 (9th Cir., 1970). Though the court must find that a defendant waived his rights knowingly before it admits his statements in evidence, it is not required to express such finding in the exact same words in every case. After first denying any knowledge of drug activities, the defendant told one of the government agents that he wished to make a statement and wanted to cooperate with the government. He thereupon made two statements to the agents and offered to lead them to an LSD manufacturing operation on the island of Maui, Hawaii. The trial court properly inferred a waiver under the circumstances of this case.
Affirmed.
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{
"author": "PER CURIAM:",
"license": "Public Domain",
"url": "https://static.case.law/"
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YORK-SHIPLEY, INC., Plaintiff-Appellee, v. ATLANTIC MUTUAL INSURANCE COMPANY et al., Defendants-Appellants.
No. 72-2361.
United States Court of Appeals, Fifth Circuit.
Feb. 23, 1973.
Roland R. Parent, Miami, Fla., Joseph J. Magrath, New York City, for defendants-appellants.
Adams, George & Wood, Miami, Fla., for Atlantic Mut. Ins. Co.
Thomas J. Schulte, Suarez, Carricarte & Freire, Miami, Fla., for Int’l Fwdrs.
Before BELL and THORNBERRY, Circuit Judges, and GROOMS, District Judge.
PER CURIAM:
In this cargo insurance case, the district court found that at the time of the damage, the plaintiff-appellee, YorkShipley, Inc., was the owner of the boiler in question. This was clearly erroneous since the cargo was shipped C.I.F. port of destination. Title to the boiler passed to the consignee when it was shipped from Miami in accordance with the terms of the contract. York-Shipley had no property rights in the boiler at the time it was damaged, and therefore had no insurable interest. Because York-Shipley, Inc. lacks standing to bring this suit, we need not reach the other errors assigned. We reverse.
York-Shipley held an ocean marine open cargo policy issued to it by the appellant, Atlantic Mutual Insurance Co., covering all of York-Shipley’s international shipments of “lawful goods and merchandise consisting principally of heating equipment and parts.” The policy contained a provision reading in pertinent part, as follows:
“Authority is hereby given to the assured to issue this company’s special policies of insurance which will be supplied on request. Such special policies are to be issued only in accordance with the terms and conditions of the policy, and are not transferable unless countersigned by the assured.”
Such special policies are used when an assured sells on terms (e. g., C.I.F.) which require it to obtain insurance for the benefit of its customers abroad. The special policy takes the place of the open policy with respect to the particular shipment for which it is issued and contains, in full or by reference, all of the provisions necessary to single shipment insurance.
In the instant case, such a special policy was issued covering two boilers while in transit from Miami to Guatemala, and the policy was forwarded, along with the bill of lading and freight receipt, to York-Shipley’s consignee in South America. In effect, then, as regards the insurance, York-Shipley was merely the agent of its foreign customer for obtaining insurance on the goods sold.
Article 2, § 320 of the Uniform Commercial Code defines the term “C.I.F.” to mean “that the price includes in a lump sum the cost of goods and the insurance and freight to the named destination. . . . ” Section 320 also spells out the duties of the seller under a C.I.F. destination contract: (1) he must put the goods into the possession of a carrier at the port of shipment and obtain a bill of lading, (2) load the goods and obtain a receipt from the carrier showing that the freight has been paid, (3) obtain a policy of insurance covering the goods while in transit,’ (4) prepare an invoice of the goods and procure any other documents required to offset shipment or comply with the contract, and (5) forward and tender with commercial promptness all the documents in due form and with any indorsement necessary to perfect the buyer’s rights. Section 320 concludes that “[u]nder the term C.I.F. . . . unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand, delivery of the goods in substitution for the documents.” (Emphasis supplied). Under the UCC, as well as at common law, title to goods shipped C.I.F. passes upon their delivery to the carrier. UCC Art. 2, § 401; see id. art. 2, § 509; Smith Co. v. Marano, 1920, 267 Pa. 107, 110 A. 94. See generally Bender’s U.C.C. Service, Dursenberg & King, Sales and Bulk Transfers § 8.02[2] [b] at 8-17 (1968).
Accordingly, once York-Shipley put the boilers in the possession of the carrier in Miami, it no longer had any interest in them. Indeed, it was prohibited from tendering the goods instead of the appropriate documents. YorkShipley therefore has' no insurable interest in the cargo and, consequently, has no standing to sue. Standing depends upon whether the party has such a “personal stake in the outcome of the controversy as to assure . . . concrete adverseness. . . .” Baker v. Carr, 1962, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663; See Sierra Club v. Morton, 1971, 405 U.S. 727, 732, 92 S.Ct. 1361, 31 L.Ed.2d 636; Flast v. Cohen, 1968, 392 U.S. 83, 101, 88 S.Ct. 1942, 20 L.Ed.2d 947. York-Shipley has no interest in the outcome of this suit, other than that of an unsecured creditor of its foreign customer. Such an interest is insufficient to meet the requisites of standing.
Reversed.
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Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant, v. Im HATTON, Individually and doing business as Air Control Engineering Company, Defendant-Appellee.
No. 72-2703.
United States Court of Appeals, Fifth Circuit.
Feb. 27, 1973.
Richard F. Schubert, Sol. of Labor, U. S. Dept, of Labor, Washington, D. C. , M. J. Parmenter, Regional Sol., William E. Everheart, Carin Ann Clauss, Donald S. Shire, Attys., U. S. Dept, of Labor, Dallas, Tex., Jacob I. Karro, Atty., U. S. Dept, of Labor, Washington, D. C., for plaintiff-appellant.
L. H. Warburton, Jr., Alice, Tex., for defendant-appellee.
Before ALDRICH SIMPSON and CLARK, Circuit Judges.
Hon. Bailey Aldrich, Senior Circuit Judge of the First Circuit, sitting by designation.
PER CURIAM:
The Secretary of Labor sought to enjoin defendant-appellee, individually and as a commercial employer, from violating the minimum wage and overtime provisions of the Fair Labor Standards Act, Title 29 U.S.C. Section 201 et seq. The district court held the defendant was not within coverage of the Act and denied the requested relief. We reverse.
Defendant-appellee Hatton is a sole proprietorship located in Alice, Texas. The business has three employees. It installs, repairs and maintains air conditioning and heating systems, including duct work, in residential properties. Approximately ninety per cent (90%) of Hatton’s purchases were manufactured in Texas. The Secretary claims Hatton is an “enterprise engaged in commerce” as required by Sec. 3(s) of the Act, Title 29 U.S.C. Section 203 (s), and therefore subject to the minimum wage and overtime standards of Sections 6 and 7 of the Act, Title 29 U.S.C. Sections 206 and 207.
The theory of “enterprise coverage” by which the Secretary hopes to apply the Act to defendant-appellee was introduced into the law by amendment in 1961. We stated the purpose of “enterprise coverage” in Montalvo v. Tower Life Building, 5 Cir. 1970, 426 F.2d 1135, 1139. Limiting coverage of the Act to enterprises which are in more than one business would frustrate that purpose of eliminating fragmentation of the Act’s application. Accordingly, defendant-appellee is not exempt from the Act’s requirements solely because it is engaged in only one business. See Schultz v. W. R. Hartin & Son, Inc., 4 Cir. 1970, 428 F.2d 186; Wirtz v. Melos Construction Corp., 2 Cir. 1969, 408 F.2d 626; the textual references to a single establishment in Sections 3(r) and (s) of the Act, Title 29 U.S.C. Section 203(r) and (s); H.Rept.No.75, Fair Labor Standards Amendments of 1961, 87th Cong., 1st Sess., p. 7; S.Rept.No.145, Fair Labor Standards Act of 1961, 87th Cong., 1st Sess., p. 41, U.S.Code Cong. & Admin. News 1961, p. 1620; and S.Rept.No.1487, Fair Labor Standards Amendments of 1966, 89th Cong., 2d Sess., p. 7, U.S. Code Cong. & Admin.News 1966, p. 3002.
The 1961 and subsequent amendments further expanded coverage of the Act by introducing a sweeping definition of “enterprise engaged in commerce or in the production of goods for commerce”:
“(s) ‘Enterprise engaged in commerce or in the production of goods for commerce’ means an enterprise which has employees engaged in commerce or in the production of goods for commerce, including employees handling, selling, or otherwise working on goods that have been moved in or produced for commerce by any person, and which—
(1) during the period February 1, 1967, through January 31, 1969, is an enterprise whose annual gross volume of sales made or business done is not less than $500,000 (exclusive of excise taxes at the retail level which are separately stated) or is a gasoline service establishment whose annual gross volume of sales is not less than $250,000 (exclusive of excise taxes at the retail level which are separately stated), and beginning February 1, 1969, is an enterprise whose annual gross volume of sales made or business done is not less than $250,000 (exclusive of excise taxes at the retail level which are separately stated);
(2) is engaged in laundering, cleaning, or repairing clothing or fabrics;
(3) is engaged in the business of construction or reconstruction, or both; or
(4) is engaged in the operation of a hospital, an institution primarily engaged in the care of the sick, the aged, the mentally ill or defective who reside on the premises of such institution, a school for mentally or physically handicapped or gifted children, a preschool [an] elementary or secondary school, or an institution of higher education (regardless of whether or not such hospital, institution, or school is public or private or operated for profit or not for profit).
Any establishment which has as its only regular employees the owner thereof or the parent, spouse, child, or other member of the immediate family of such owner shall not be considered to be an enterprise engaged in commerce or in the production of goods for commerce or a part of such an enterprise, and the sales of such establishment shall not be included for the purpose of determining the annual gross volume of sales of any enterprise for the purpose of this subsection.”
Title 29 U.S.C. Section 203 (s).
Defendant appellee is within that definition because it met the two requirements necessary for inclusion: (1) the court below found as a fact that most of the parts used by the employees in their work “were manufactured outside of and had moved in commerce getting to Texas” and this, we hold, is the same thing as saying the defendantappellee’s employees were “handling, selling, or otherwise working on goods that have been moved in or produced for commerce by any person”; and (2) the business of installing, repairing and maintaining air conditioning and heating systems, including duct work, in residential properties is an enterprise “engaged in the business of construction or reconstruction or both”. Holding that no other requirement exists, we find defendant-appellee is covered by the Fair Labor Standards Act.
Reversed and remanded.
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{
"author": "ALFRED T. GOODWIN, Circuit Judge:",
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Martha A. WILLGING, Individually and as executrix of the estate of John Z. Willging, Appellee, v. UNITED STATES of America, Appellant.
No. 26618.
United States Court of Appeals, Ninth Circuit.
Feb. 5, 1973.
Paul M. Ginsberg, Atty. (argued), Meyer Rothwacks, Elmer J. Kelsey, Attys., Johnnie Walters, Asst. Atty. Gen., Dept, of Justice, Washington, D. C., Dean C. Smith, U. S. Atty., Spokane, Wash., for appellant.
Gary C. Randall (argued), Scott B. Lukins, of Lukins, Seelye & Randall, P. S., Spokane, Wash., for appellee.
Before ELY and GOODWIN, Circuit Judges, and FERGUSON, District Judge.
The Honorable Warren J. Ferguson, United States District Judge for the Central District of California, sitting by designation.
ALFRED T. GOODWIN, Circuit Judge:
The government appeals a district court judgment, 313 F.Supp. 297, granting the taxpayer a refund of part of the income taxes she paid in 1966.
Mrs. Willging and her husband were wheat farmers, owning community property, and reporting their income on the accrual basis. To determine their income for each year, they would add to the sales price of products sold during the year the value of their closing inventory and would subtract from this figure the value of their opening inventory. Treas.Reg. § 1-61-4. Inventories were valued under the “farm price” method (market price less direct costs of disposition), Treas.Reg. § 1.471-6; expenses were deducted in the year in which they were incurred. Treas.Reg. § 1.162-12.
The value of the Willging’s opening grain inventory for 1966 was $1,195. On November 15, 1966, Mr. Willging died. At that time the value of the grain inventory was $37,953.98. The grain had the same value at the end of the year.
Mrs. Willging contends that the entire increase in the value of the 1966 crop inventories between the first of the year and November 15 escapes taxation because Int.Rev.Code of 1954, § 1014, stepped up the basis of the grain to its market value on the death of her husband. In the alternative, she argues that the half of the crop which vested in her on November 15 by virtue of the community-property laws escapes taxation.
The basic thrust of Mrs. Willging’s first argument is that accrual-basis farmers should be treated the same as cash-basis farmers. A cash-basis farmer who dies owning an appreciated inventory is not taxable on the unrealized appreciation. Nor does his spouse take over a potential tax liability, for she receives upon his death a stepped-up basis under § 1014(b)(1). Rev.Rul. 58-436, 1958-2 Cum.Bull. 366. If the property is owned by the community (in a community-property state) there is still no realization upon the death of one spouse. The surviving spouse is entitled to a stepped-up basis under § 1014(b)(6) if at least one half of the whole of the community interest in such property was includable in determining the value of the decedent’s gross estate.
However, because Mr. Willging elected to be taxed under the accrual method of accounting, the value of the grain was “realized” when it increased his inventory value. No sale was necessary for realization. Mr. Willging’s death did not have the effect of accruing items which would not otherwise have been accrued, § 451(b), but it did serve as an occasion (the closing of his tax year) foru taxing the income he had received during his last taxable year. Section 1014 does not affect the imposition of this fax. The distinction between the taxation of cash and accrual-basis farmers on death is not fortuitous, but follows directly from the method of accounting used by the respective taxpayers. We see no reason to force the Commissioner to permit all accrual-basis farmers effectively to switch to the cash basis in the year of death. Cf. United States v. Catto, 384 U.S. 102, 113-117, 86 S.Ct. 1311, 16 L.Ed.2d 398 (1966).
Only half of the accrued increase in value of the inventories was taxed on the death of Mr. Willging because the other half vested in Mrs. Willging by' virtue of the community property laws. Mrs. Willging contends that, even if her husband was properly taxable on his half on the inventory, she is not taxable on her half because the stepped-up basis provided by § 1014(b)(6) for community property is substituted for the beginning-of-the-year inventory value which she would normally use. Mrs. Willging points out that § 1014 applies “except as otherwise provided in this section,” § 1014(a), and that the Commissioner makes no contention that the crops represent “income in respect of a decedent,” which is excepted from the application of § 1014, §§ 691, 1014(c). She contends that § 1014(b)(6) entitles her to the benefit of a stepped-up basis without the disadvantage of current taxation on the increase in value, although for a noncommunity spouse of an accrual taxpayer this would be impossible. (For § 1014 to apply to a noncommunity spouse, the property is required to have been held by the decedent, and the decedent would have been taxable on the accrued increase.)
Mrs. Willging claims more for § 1014 than Congress intended. We do not rely ' on the failure of the regulations under which the taxpayer computed her income to refer to the “basis” of the crops involved. “Basis” is a general tax accounting term whose use cannot be so tightly circumscribed. See 85 Harv.L. Rev. 880, 884 (1972). Moreover, the Code recognizes that “basis” is a concept relevant to the computation of inventories, § 1013, and the Commissioner allows cash-basis farmers the step-up denied here although the regulations under which they compute their income make no use of the term “basis.” Treas.Reg. § 1.61-4(a).
The real issue in this case is one of realization. Section 1014 operates to exempt unrealized property income from tax on the death of the owner of the property; it does not reach back to income realized before death. Income is realized under an accrual method of accounting “when all the events have occurred which fix the right to receive such income and the amount thereof can be determined with reasonable accuracy.” Treas.Reg. § 1.451-1 (a). Because of the nature of the market for farm produce, the Commissioner allows farmers to use the increase in inventories as a realizing event. This was the method of accounting chosen by the taxpayer. It follows that § 1014 does not help Mrs. Willging, for, although it may increase her basis, it does so after the income from her crops has been realized. The time of the mechanical computation of income, at the end of the year, is irrelevant. To hold otherwise would be to make the sale of crops the determining event although the taxpayer had adopted a system of accounting which did not distinguish between sale and increase in inventory value. This would constitute a change of accounting method without the consent of the Secretary, proscribed by § 446(e).
We are reinforced in our conclusion by a consideration of the purpose of § 1014(b)(6). Given our holding that tax was due on the income accrued by Mr. Willging in the year of his death, the benefit for which Mrs. Willging contends would be peculiar to community-property taxpayers. Section 1014(b)(6) was designed to equalize the incidence of taxation between community-property and common-law states, not to provide a special benefit to community-property taxpayers. Stanley v. C. I. R., 338 F.2d 434 (9th Cir. 1964); Bath v. United States, 211 F.Supp. 368, 370 (S.D.Tex. 1962), aff’d per curiam, 323 F.2d 980 (5th Cir. 1963).
Reversed.
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In the Matter of GREEN MILL INN, INC., a California corporation, Bankrupt 117739. Kal W. LINES, Trustee in Bankruptcy, Appellant, v. The NATIONAL CASH REGISTER COMPANY, Appellee.
No. 26658.
United States Court of Appeals, Ninth Circuit.
Feb. 2, 1973.
Raymond L. Mushrush (argued), of Jacobs & Mushrush, James M. Conners, Trustee, San Francisco, Cal., for appellant.
Merrill J. Schwartz (argued), George F. Dunker, of Stark, Stewart, Simon & Sparrowe, Oakland, Cal., for appellee.
Before TRASK, CHOY, and GOODWIN, Circuit Judges.
PER CURIAM:
The district court overruled its bankruptcy referee, and allowed The National Cash Register Company to repossess property sold to a bankrupt under a title-retaining contract. The trustee in bankruptcy appeals. We affirm.
The thrust of the appeal is that National Cash Register’s financing statement as filed did not comply with California’s version of the Uniform Commercial Code.
Cal. Commercial Code § 9402(1) requires such a financing statement to show, inter alia, the name and mailing address of the debtor and to bear the signature of the debtor. Section 9402(5) saves a filing that is in “substantial compliance” with § 9402(1).
The financing statement here in question gave the name of the debtor on line one as “Taylor, Máxime.” The form carried the signature of the debtor on line nine as “Green Mill’Inn, Inc., by Máxime Taylor, President.” In fact, Green Mill Inn, Inc., was the entity purchasing the property.
Because the office of the Secretary of State of California was able, through cross-indexing, to locate the filing in both the corporate and individual names, actual notice was thus available to anyone interested in the filing. The district court held that the defective, or ambiguous, filing, aided by the probability of actual notice, substantially complied with the statutory requirements, and thus preserved the security interest of the seller against rival creditors.
The district judge who decided this case also decided In re Thomas, 310 F.Supp. 338 (N.D.Cal.1970), aff’d 466 F.2d 51 (9th Cir. 1972). There, an individual (Thomas), doing business under a fictitious name (West Coast Avionics), bought goods under a conditional-sale contract for which the seller filed the security statement listing the debtor’s name as West Coast Avionics. The district judge noted that the Secretary of State did not cross-index unincorporated names in the situation there presented. Since there was no means by which creditors of Thomas could learn from the Secretary’s records that Thomas was buying property on credit under the name of West Coast Avionics, a financing statement showing West Coast Avionics as debtor did not substantially comply with Cal. Commercial Code § 9402(1).
We believe that the difference between the two cases perceived by the district judge is a valid one. No creditor was misled or prejudiced by the ambiguity in the document filed by National Cash Register. Anyone seeking to determine if the bankrupt had any outstanding security interests on its property would have been given notice of National Cash Register’s claim. There was therefore no error in treating the ambiguous document as one filed in substantial compliance with Cal. Commercial Code § 9402(1). Affirmed.
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Jerry WHITE, Petitioner-Appellant, v. L. B. SULLIVAN, Commissioner of Alabama Prison System, et al., Respondents-Appellees.
No. 73-1385.
United States Court of Appeals, Fifth Circuit.
Feb. 22, 1973.
Jerry White, pro se.
Arthur K. Bolton, Atty. Gen., Atlanta, Ga., for respondents-appellees.
Before THORNBERRY, GOLDBERG and RONEY, Circuit Judges.
PER CURIAM:
Jerry White, an Alabama State prisoner incarcerated in the Mt. Meigs Medical and Diagnostic Center, has applied to this Court for leave to appeal in forma pauperis from the district court’s summary dismissal of a Civil Rights complaint filed by him. We grant the motion and summarily affirm in part and summarily vacate and remand in part.
In the action filed below, White sought damages and relief in the nature of injunction on behalf of himself and twenty-six prisoners in solitary confinement arising out of the prison officials’ refusal to allow the solitarily confined prisoners to communicate with the courts and their attorneys. Although White failed to allege that he was in solitary confinement and was then being denied access to the courts, he stated that “he is a part of an institutional population which must live from day to day under constant threats of [such] misconduct.” He further argued that “[i]t seems therefore that Plaintiff is injured, is a member of a class which is injured and is thus competent to maintain a class action for himself and others similarly situated.”
The district court peremptorily dismissed the complaint on grounds that White could not properly maintain an action complaining of the conditions of solitary confinement on behalf of those so confined, if he himself was not presently subjected to those conditions.
We agree with the court below insofar as it concluded that White was not a member of the class of twenty-six prisoners for which damages and injunctive relief was sought; and that ruling is affirmed. We do not, however, agree with the court’s conclusion that White did not present a justiciable controversy on behalf of himself and the other prisoners of Mt. Meigs who face the daily threat of suffering from the denial of access to court while in solitary confinement.
A similar situation was presented to this Court in Massimo v. Henderson, 5th Cir. 1972, 468 F.2d 1209. In that case the appellant, who was incarcerated in the United States Penitentiary at Atlanta, filed a petition for mandamus and for in-junctive relief seeking the release of two fellow inmates from solitary confinement, and enjoining the further use of the solitary cells due to the allegedly subhuman conditions therein. Although the appellant himself was no longer confined in solitary, this Court held that the district court was clearly erroneous in dismissing the appellant’s action for injunctive relief on grounds that he was not involved in the action. The district court’s dismissal of that part of the action seeking the release of the two other inmates was affirmed since the appellant was not an attorney and not qualified to file on their behalf.
On the basis of Massimo, swpra, we hold that Petitioner White has the requisite standing to maintain this action on his own behalf and on behalf of those not presently confined in solitary, but who face threatened imposition of alleged unconstitutional conditions of imprisonment when placed in solitary confinement.
Therefore, the district court’s dismissal of the class action on behalf of the twenty-six prisoners in solitary confinement is affirmed; and the dismissal of the class action on behalf of the general prison population threatened with being placed in solitary is vacated and remanded for consideration on the merits of the allegations.
Affirmed in part; vacated and remanded in part.
. 28 U.S.C. § 1915.
. 42 U.S.C. § 1981 et seq.; 28 U.S.C. §§ 2201 and 2202.
. It is appropriate to dispose of this case summarily. See Groendyke Transportation, Inc. v. Davis, 5th Cir. 1969, 406 F.2d 1158.
. See Andrade v. Hauck, 5th Cir. 1971, 452 F.2d 1071.
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Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. SIX FLAGS OVER GEORGIA, LTD., and Great Southwest Atlanta Corp., Defendants-Appellants.
No. 72-2990.
United States Court of Appeals, Fifth Circuit.
Argued Feb. 7, 1973.
Decided Feb. 22, 1973.
Rehearing and Rehearing En Banc Denied April 10, 1973.
Arthur J. Riggs, Dallas, Tex., Charles Kelso, Atlanta, Ga., for defendants-appellants.
Richard F. Schubert, Sol. of Labor, Jacob I. Karro, Atty., U. S. Dept, of Labor, Washington, D. C., Beverley R. Worrell, Regional Sol., James H. Wood-son, Atty., Atlanta, Ga., Carin Ann Clauss, Donald S. Shire, U. S. Dept, of Labor, Office of Sol., Washington, D. C., for plaintiff-appellee.
Before ALDRICH SIMPSON and CLARK, Circuit Judges.
Hon. Bailey Aldrich, Senior Circuit Judge of the First Circuit, sitting by designation.
PER CURIAM:
The Secretary of Labor brought this action against Six Flags over Georgia, Ltd., and Great Southwest Atlanta Corp., hereinafter, collectively, GSA, to enjoin alleged violations of the Fair Labor Standards Act and to compel the payment of overtime to certain employees. On a stipulated record both parties moved for summary judgment. The court ruled in favor of the Secretary and GSA appeals.
GSA operates an amusement park at Atlanta, Georgia of very substantial size. During the season it has over 1600 employees, sharply reduced during the off-season, of which some 100 are engaged in maintenance and repairs. From year to year the park remodels, and erects new structures, new buildings, and new places of entertainment, in order to maintain public interest. This new construction is mostly done during the off-season, much of the work being contracted out. During the off-season GSA pays all of its employees wages within the act, but during the season it does not, by virtue of the exemption afforded by 29 U.S.C. § 213(a)(3) to amusement and recreational establishments. During the season a small amount of new work is done by what are normally maintenance employees. It is for this that the Secretary asserts liability.
GSA concedes, as it must, that a general contractor employed by it to do this construction work would not be conducting a recreational establishment. GSA is in no better position. It is the character of the work, not the source of the remuneration, that controls. Cf. Hodgson v. Colonnades, Inc., 5 Cir., 472 F.2d 42 (1973) (fact employees “changing the premises” are on hotel pay-roll irrelevant). The nature of the work is what gives rise to the need for an exemption ; the exemption is not a subsidy accorded to an employer because of his principal activities.
Nor does it make any difference that the employee is doing mixed work. In any week that any particular employee does some non-exempt work he is covered fully, not pro rata. Hodgson v. Wittenburg Livestock Co., 5 Cir., 1972, 464 F.2d 1219; Mitchell v. Hunt, 5 Cir., 1959, 263 F.2d 913. GSA says that this makes an accounting problem for it. With the. legislation on the books, the problem is of its own making.
Affirmed.
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Gregorio P. VALDEZ, Petitioner-Appellant, v. E. P. PERINI, Superintendent Marion Correctional Institution, Respondent-Appellee.
No. 72-2141.
United States Court of Appeals, Sixth Circuit.
Feb. 21, 1973.
Gregorio P. Valdez, pro se.
William J. Brown, Atty. Gen. of Ohio, Leo J. Conway, Asst. Atty. Gen., Columbus, Ohio, for respondent-appellee.
Before WEICK, EDWARDS and CELEBREZZE, Circuit Judges.
PER CURIAM.
Petitioner was convicted of second degree murder in 1958, and was sentenced from ten years to life imprisonment. Subsequently he was released on parole. In July, 1970, his parole was revoked without a hearing (a hearing was not required under Ohio law) and petitioner was returned to the state correctional institution. In October, 1971, petitioner filed in the District Court an application for a writ of habeas corpus, alleging that he had been denied constitutional rights in that his parole was revoked summarily. The District Court held that there was no constitutional right to a hearing prior to a parole revocation, relying on our decision in Rose v. Haskins, 388 F.2d 91 (6th Cir.), cert. denied, 392 U.S. 946, 88 S.Ct. 2300, 20 L.Ed.2d 1408 (1968).
Petitioner then appealed to this Court. Pursuant to Rule 9 of the Rules of this Circuit, we ordered that the judgment below be vacated and that the case be remanded for reconsideration in light of the decision of the Supreme Court in Morrissey v. Brewer, 408 U.S. 471, 92 S. Ct. 2593, 33 L.Ed.2d 484 (1972). Morris-sey held that the due process clause of the Fourteenth Amendment requires that a reasonably prompt informal inquiry be conducted by an impartial hearing officer prior to the revocation of parole.
Our remand to the District Court would necessarily require that Court to consider and determine whether Morris-sey was retrospective in application. The District Court quoted a portion of the opinion in Morrissey to the effect that it was to apply “ . . .to future revocations of parole . . . . ” (408 U.S. at 490, 92 S.Ct. 2593).
The District Court then expressed confusion over the fact that while the Supreme Court had instructed that that decision be prospective in application, the decision was retrospective with respect to Morrissey himself since his parole revocation obviously had occurred prior to the date of the decision. Nevertheless, the District Court held that Mor-rissey was not to be applied retroactively-
Petitioner has moved this Court for appointment of counsel to represent him in his appeal. We deny his motion and we dismiss the appeal pursuant to Rule 9 of the Rules of this Circuit.
If it were necessary for this Court to make an independent determination as to the retroactive application of Morrissey, which is the sole issue in petitioner’s appeal, the assistance of counsel would indeed be warranted. However, as the District Court noted, specific instructions on the prospective effect of Mor-rissey were given in the body of that opinion.
In our opinion, the fact that Mor-rissey was applied retroactively to Morrissey himself, creates no confusion. The reason for such a result was explained in Desist v. United States, 394 U.S. 244, 89 S.Ct. 1030, 22 L.Ed.2d 248 (1969), wherein Katz v. United States, 389 U.S. 347, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967), was held to be prospective in application. The Court stated:
“Of course, Katz himself benefited from the new principle announced on that date, and, as our Brother Douglas observes, to that extent the decision has not technically been given wholly prospective application. But, as we recently explained in Stovall v. Denno, 388 U.S. 293, 301, 87 S.Ct. 1967, 1972, 18 L.Ed.2d 1199, the fact that the parties involved in the decision are the only litigants so situated who receive the benefit of the new rule is ‘an unavoidable consequence of the necessity that constitutional adjudications not stand as mere dictum.’ Whatever inequity may arguably result from applying the new rule to those ‘chance beneficiaries’ is ‘an insignificant cost for adherence to sound principles of decision-making.’ Ibid.” (394 U.S. at 254, 255, n. 24, 89 S.Ct. at 1036.).
The petitioner’s appeal is without merit and it is therefore dismissed. Rule 9, Sixth Circuit.
. Such a determination would require consideration of the fact that the rule of Morrissey goes to the reliability of the evidence upon which revocation is based, and the fact that the retroactive application of Morrissey would place an overwhelming burden on the states. Desist v. United States, 394 U.S. 244, 249, 89 S.Ct. 1030, 22 L.Ed.2d 248 (1969). Compare United States v. White, 401 U.S. 745, 91 S.Ct. 1122, 28 L.Ed.2d 453 (1971), and Stovall v. Denno, 388 U.S. 293, 87 S.Ct. 1967, 18 L.Ed.2d 1199 (1967) with Williams v. United States, 401 U.S. 646, 91 S.Ct. 1148, 28 L.Ed.2d 388 (1971) and United States v. United States Coin & Currency, 401 U.S. 715, 91 S.Ct. 1041, 28 L.Ed.2d 434 (1971).
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Robert Edward LEHMAN, Appellant, v. The CITY OF PITTSBURGH, et al.
No. 72-1949.
United States Court of Appeals, Third Circuit.
Submitted on Briefs Jan. 19,1973.
Decided Feb. 21, 1973.
John H. Bingler, Thorp, Reed & Armstrong, Pittsburgh, Pa., for appellant.
Daniel M. Curtin, Asst. City Sol., Ralph Lynch, Jr., City Sol., Pittsburgh, Pa., for appellees.
Before VAN DUSEN and ADAMS, Circuit Judges and BARLOW, District Judge.
OPINION OF THE COURT
PER CURIAM:
This is an action by Robert E. Lehman against the City of Pittsburgh, the Mayor of Pittsburgh, the Assistant Executive Secretary for Personnel of Pittsburgh, the Civil Service Commission of Pittsburgh, the President and Commissioner of the Civil Service Commission, and a second Commissioner of the Civil Service Commission. The plaintiff, who was born and raised in Pittsburgh and who since May 24, 1971 has again resided in that city, complains that he was deprived of the opportunity to apply for a Civil Service job as a result of Pittsburgh’s durational residency ordinance, which requires that applicants for city employment must reside in the city for two years immediately preceding such application. Claiming that this ordinance violates his rights to equal protection of the law and deprives him of privileges and immunities secured by the Constitution and laws of the United States, plaintiff invoked the district court’s jurisdiction under 28 U.S.C. § 1343 and sought both injunctive relief and damages under 42 U.S.C. § 1983.
The district court dismissed the complaint on the grounds that (1) the court lacked subject matter jurisdiction, because the complaint failed to raise a substantial federal question; and (2) the complaint failed to state a claim upon which relief could be granted.
We affirm that portion of the district court’s order dismissing the complaint as to the City of Pittsburgh and the Civil Service Commission of Pittsburgh. Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961), held that a municipality is not a “person” for the purpose of § 1983 suits for damages and is not, therefore, subject to suit. This holding has been extended to bar such suits against city agencies, United States ex rel. Gittlemacker v. County of Philadelphia, 413 F.2d 84 (3d Cir. 1969); see Pierson v. Ray, 386 U.S. 547, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967). It has also been applied by this Court to § 1983 suits for injunctive relief. Educational Equality League v. Tate, 472 F.2d 612, n. 1 (3d Cir., filed Jan 11, 1973).
As to the individual defendants, we reverse and remand since it is clear that such officials and employees of cities and municipal agencies are “persons” for the purpose of § 1983 suits. E. g., Pierson v. Ray, 386 U.S. 547, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967); Monroe v. Pape, supra; Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908); Lewis v. Kugler, 446 F.2d 1343 (3d Cir. 1971).
On the claim that Pittsburgh’s dura-tional residency ordinance denies the plaintiff the equal protection of the laws, the district court, on remand, should consider the applicability of e. g., Dunn v. Blumstein, 405 U.S. 330, 92 S.Ct. 995, 31 L.Ed.2d 274 (1972); Shapiro v. Thompson, 394 U.S. 618, 89 S.Ct. 1322, 22 L.Ed.2d 600 (1969); Walker v. Yucht, 352 F.Supp. 85 (D.Dela., filed Dec. 6, 1972) (3-judge court) (Adams, Circuit Judge); Wellford v. Battaglia, 343 F.Supp. 143 (D.Dela.1972) (Stapleton, J.); Krzewinski v. Kugler, 338 F.Supp. 492 (D.N.J.1972) (3-judge court)
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James Hugh RIDGEWAY, Appellant, v. Terrell Don HUTTO, Commissioner of Correction, State of Arkansas, Appellee.
No. 72-1637.
United States Court of Appeals, Eighth Circuit.
Feb. 20, 1973.
Kenneth Coffelt, Little Rock, Ark., filed brief for appellant.
Ray Thornton (former Atty. Gen.) and Henry Ginger, Deputy Atty. Gen., Little Rock, Ark., filed brief for appel-lee.
Before HEANEY, BRIGHT and ROSS, Circuit Judges.
PER CURIAM.
The petitioner appeals from the denial of his habeas corpus petition in federal District Court. The facts are not in dispute and have been agreed upon by the parties in a stipulation filed in this Court on November 30, 1972:
“Appellant was charged in the Circuit Court of Pulaski County, Arkansas, under information, filed by the Prosecuting Attorney with the crime of assault with intent to kill one Gene Ray Cannon. The information alleged that appellant did unlawfully, feloniously, wilfully and with malice aforethought make an assault upon Gene Ray Cannon with a deadly weapon, to-wit: a knife, then and there cutting him, the said Gene Ray Cannon with said knife then and there held in the hands of him, the said James Hugh Ridge-way.—
“In the trial of the case the prosecuting witness, Cannon, testified, and there was no other proof to the contrary on the part of the State, that appellant Ridgeway shot him with a gun, and did not cut him with a knife; that another person, Butch Vaughn, cut him with a knife. The three were on the river bank when the assault occurred.”
The appellant’s conviction was affirmed by the Arkansas Supreme Court in Ridgeway v. State, 472 S.W.2d 108 (1971).
The appellant’s sole contention on this appeal is that his right to be “informed of the nature and the cause of the accusation” as guaranteed by the Sixth and Fourteenth Amendments was violated at trial due to a fatal variance between the allegations in the information and the proof at trial.
We believe the appellant waived any objection he might otherwise have had because he failed to object to the variance at trial. It is clear that the appellant did not object at trial to the introduction of the variant evidence. See, Jackson v. United States, 123 U.S.App.D.C. 276, 359 F.2d 260, 264 & n.3, cert. denied, 385 U.S. 877, 87 S.Ct. 157, 17 L.Ed.2d 104 (1966). Furthermore, even though the appellant did move for a directed verdict at the close of the state’s case and at the close of all the evidence, there is no indication that these motions were based on the variant proof submitted by the state so as to preserve this question for appeal. 2 Wright, Federal Practice and Procedure, § 516 at 378-379 (1969); cf., McIntyre v. United States, 380 F.2d 822, 826 (8th Cir.), cert. denied, 389 U.S. 992, 88 S.Ct. 493, 19 L.Ed.2d 487 (1967).
In any event, a careful examination of the record reveals that the appellant was not prejudiced by the fact that the proof varied from the allegations in the information. The appellant’s theory at trial was that although he was in the immediate vicinity of the crime, another person committed both the shooting and knifing. Thus, the variant proof did not prejudice the defendant’s defense. See, United States v. Covington, 411 F.2d 1087, 1089 (4th Cir. 1969). In addition, there is no indication that the appellant was surprised by the variant proof and no motion was made to the court for a continuance for the purpose of preparing a new defense. See, United States v. Covington, supra; United States v. Costello, 381 F.2d 698, 701 (2nd Cir. 1967).
Affirmed.
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Gene Patrick GAREAU, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee.
No. 72-1546.
United States Court of Appeals, Sixth Circuit.
Submitted Jan. 29, 1973.
Decided Feb. 15, 1973.
Gene Patrick Gareau, in pro. per.
Frederick M. Coleman, U. S. Atty., Edward S. Molnar, Asst. U. S. Atty., Cleveland, Ohio, for respondent-appellee.
Before PHILLIPS, Chief Judge, and CELEBREZZE and McCREE, Circuit Judges.
PER CURIAM.
This is an appeal from the dismissal of a petition for a writ of habeas corpus and the denial of a motion to reconsider the petition. Because the United States Attorney has not favored this court with a brief in response to the brief- of appellant as required by Fed.R.App.P. 31(a), this appeal has been heard and decided upon the brief of appellant and the record.
Appellant is presently serving concurrent sentences in Ohio state prison as a result of a 1968 conviction for armed robbery and shooting with intent to kill. In 1965, appellant pled guilty in federal court to violation of 26 U.S.C. § 5851 (1964), for which he received, and has served, a sentence of three years’ imprisonment. After he completed serving his federal sentence, the Supreme Court held that assertion of the Fifth Amendment’s privilege against self-incrimination provided a complete defense to prosecutions'under the provisions of the National Firearms Act to the violation of which appellant had pled guilty, Haynes v. United States, 390 U.S. 85, 88 S.Ct. 722, 19 L.Ed.2d 923 (1968), and that this ruling was to be given retroactive application. See United States v. United States Coin & Currency, 401 U.S. 715, 91 S.Ct. 1041, 28 L.Ed.2d 434 (1971); Decker v. United States, 402 U.S. 937, 91 S.Ct. 1604, 29 L.Ed.2d 106 (1971), vacating and remanding 423 F.2d 726 (6th Cir. 1970).
On the authority of these decisions, appellant filed a petition for a writ of habeas corpus, alleging that he was in custody in violation of the Constitution because his federal conviction had the effect of increasing the time that he must serve in state prison before he will be eligible for parole. The District Court dismissed the petition initially because of the decision of this court in Decker, supra, that Haynes v. United States, supra, was not to be accorded retrospective effect. Following the vacation of Decker by the Supreme Court, appellant moved for reconsideration of the dismissal of his petition. The District Court denied his motion because it regarded appellant’s petition as a motion to vacate sentence under 28 U.S.C. § 2255 and, since appellant was not serving his federal sentence when the petition was filed, the attack on his federal conviction was “moot.”
Consistent with the teaching of the Supreme Court in United States v. Morgan, 346 U.S. 502, 505, 74 S.Ct. 247, 249, 98 L.Ed. 248 (1954), that “in behalf of the unfortunates, federal courts should act in doing justice if the record makes plain a right to relief,” we determine that the District Court should have treated “the record as adequately presenting a motion in the nature of a writ of error coram nobis enabling the trial court to properly exercise its jurisdiction.” And the collateral consequences of appellant’s federal conviction demonstrate that his claim is not moot. See Carafas v. LaVallee, 391 U.S. 234, 88 S.Ct. 1556, 20 L.Ed.2d 554 (1968); United States v. Morgan, supra, 346 U.S. at 512-513, 74 S.Ct. 247, 98 L.Ed. 248; cf. United States v. Tucker, 404 U.S. 443, 92 S.Ct. 589, 30 L.Ed.2d 592 (1972).
Moreover, it is clear from the authorities cited above that appellant’s 1965 federal conviction is constitutionally infirm. Accordingly, we reverse and remand with instructions to vacate the 1965 federal judgment of conviction and the sentence imposed pursuant thereto. See United States v. Morgan, supra, 346 U.S. at 513, 74 S.Ct. 247, 98 L.Ed. 248.
Reversed and remanded.
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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{
"author": "RIVES, Circuit Judge: BY THE COURT:",
"license": "Public Domain",
"url": "https://static.case.law/"
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UNITED STATES of America, Plaintiff-Appellee, v. Jo Anna Newby CARAWAY a/k/a Jo Newby and Daniel Elden Scales, Defendants-Appellants.
No. 72-2198.
United States Court of Appeals, Fifth Circuit.
Jan. 15, 1973.
As Amended Feb. 14, 1973.
Rehearing En Banc Granted April 4, 1973.
Melvyn Kessler, Miami, Fla. (Court-appointed), for Caraway.
Sky E. Smith, Miami, Fla. (Court-appointed), for Scales.
Robert W. Rust, U. S. Atty., Lawrance B. Craig, II, Asst. U. S. Atty., Miami, Fla., for plaintiff-appellee.
Before RIVES, THORNBERRY and GOLDBERG, Circuit Judges.
RIVES, Circuit Judge:
Defendants, Jo Anna Newby Caraway and Daniel Elden Scales, were charged in a two-count indictment with (1) conspiracy to violate 21 U.S.C. § 952(a), and (2) intentionally and knowingly violating § 952(a) by importing six pounds of marijuana.
Initially, each defendant pleaded not guilty to both counts. After denial of their joint motion to suppress “all evidence seized,” both defendants asked and were granted permission to withdraw the plea of not guilty as to Count II and to plead nolo contendere to that count. The district judge, upon accepting their pleas of no contest, admonished defendants in the following exchange:
“THE COURT: .... Have each of you had an opportunity to discuss with your lawyers the entry of a plea of nolo contendere as to Count II?
“THE DEFENDANTS: Yes, sir.
“THE COURT: Have your lawyers advised you that there has been an agreement between the Government and defense counsel that should you plead nolo contendere and be found guilty the Court would put Miss Caraway or Miss Newby on probation and would sentence Mr. Scales to six months ?
“Have both of you understood that?
“THE DEFENDANTS: Yes, sir.
“THE COURT:' Do each of you agree to that?
“THE DEFENDANTS: Yes, sir.
“THE COURT: Do you both understand that a plea of nolo contendere is tantamount, in effect, to a plea of guilty.
“THE DEFENDANTS: Yes, sir.” [Tr. pp. 68, 69.]
“THE COURT: Has anyone, other than what I have said with respect to the agreement with the Government, exercised any force, interrogation or duress of any kind or made any promises to you, other than what I have said, in order to induce you to plead nolo contendere to this charge ?
“THE DEFENDANTS: No, sir.
“MR. SMITH [Attorney for Scales]: The only other statements which were made to the defendants was concerning their right to appeal, and the Court advised them that Mr. Scales would be allowed the same condition of release pending appeal?
“THE COURT: Yes, sir.” [Emphasis added.] [Tr. pp. 69, 70.]
On imposition of sentence, the Court further informed defendants that:
“ . . . . It is the further order of the Court that each of you shall continue to remain at liberty pending appeal upon bond under the same terms and conditions heretofore set. it
“Now, it is my duty to advise each of you that you have an absolute right to appeal from this judgment and sentence and that you are entitled to be represented by an attorney at all times. . . . ” [Emphasis added.] [Tr. p. 74.]
Defendants, through this appeal, contest the validity of the warrantless search by Customs Agents of Scales’ boat and allege trial court error in denying their motion to suppress the fruits of that search. Since their nolo con-tendere plea precluded the necessity of introducing evidence, defendants attack a search whose constitutional stature is not a jurisdictional issue.
Under normal circumstances, a plea of nolo contendere is the legal equivalent of a guilty plea and a waiver of all non jurisdictional defects. Lott v. United States, 1961, 367 U.S. 421, 81 S.Ct. 1563, 6 L.Ed.2d 940; Zebelman v. United States, 10 Cir. 1964, 339 F.2d 484, 485; United States v. Moretti, 2 Cir. 1965, 353 F.2d 672, 673; 3 Wright, Federal Practice & Procedure § 678, p. 140 n. 28. However, when the trial court and defendant enter an explicit agreement that a no contest plea preserves objections to the evidence found admissible by denial of the motion to suppress, this Court has felt constrained to honor such an agreement. United States v. Rosenberg, 5 Cir. 1972, 458 F.2d 1183; United States v. Kelehar, 5 Cir. 1972, 470 F.2d 176. Cf., United States v. Wysocki, 1972, 457 F.2d 1155, 1162. See also Jaben v. United States, 8 Cir. 1964, 333 F.2d 535, 538, aff’d, 381 U.S. 214, 85 S.Ct. 1365, 14 L.Ed.2d 345.
In United States v. Doyle, 2 Cir. 1965, 348 F.2d 715, 719, cert. denied, 382 U.S. 843, 86 S.Ct. 89, 15 L.Ed.2d 84, Judge Friendly recognized that,
“There are a number of ways to deal sensibly with such a ease without departing from the principle of Parrino, [United States v. Parrino, 2 Cir. 1953, 203 F.2d 284, 286-287], A plea expressly reserving the point accepted, by the court with the Government’s consent or a stipulation that the facts are as charged in the indictment are two; failing either of these, the defendant can simply stand on his not guilty plea and put the Government to its proof without developing a case of his own.”
(Emphasis added.) (Footnote omitted.) Continuing, Judge Friendly discussed Jaben and quoted from his examination of the record in Jaben “not brought to our attention by counsel for either side” that
“* * * this [the record] shows that Jaben pleaded nolo on the express condition ‘that the defendant will then have an opportunity to have the question as to whether the said count is barred by the statute of limitations decided upon by the Eighth Circuit Court of Appeals or by the Supreme Court, and that the plea of nolo conten-dere is not to preclude the defendant from taking an appeal on the issue at that time.’ ”
348 F.2d at 719.
Our rationale for recognizing this type of express agreement is twofold. First, we are reluctant to establish a rigid rule requiring a defendant to undergo the costly and futile ordeal of a complete trial, when the State could easily prove its case by the evidence claimed to b.e illegally obtained and by no other evidence, and the defendant merely seeks to preserve a single, nonjurisdictional issue. See United States v. Warden of Attica State Prison, 2 Cir. 1967, 381 F.2d 209. Second, of the combined requisites, “voluntariness” and “intelligence” (see Brady v. United States, 1970, 397 U.S. 742, 747 n. 4, 90 S.Ct. 1463, 25 L.Ed.2d 747), for equivalence to a valid guilty plea, a nolo plea, conditioned on right to appellate review of a motion to suppress evidence, might now (since McMann v. Richardson, 1970, 397 U.S. 759, 768-771, 90 S.Ct. 1441, 25 L.Ed.2d 763) meet the test of being “voluntary,” but the conditioning of the plea on a right to appellate review demonstrates that it was not so “intelligently” entered as to waive deprivation of the non jurisdictional defect sought to be reviewed; and more especially so, where, at the time of pleading, the practice of the reviewing court is to honor such a condition allowed by the trial court.
The pivotal marijuana, which defendants are charged with importing, arrived at Miami International Airport, from Jamaica, concealed in a steamer trunk. The trunk was addressed to Jo Anna Caraway, 1555 Griffin Road, Miami, Florida (the Marina address), Customs officials, suspicious of the trunk’s contents, placed it in the Cus-'Mpms Seizure Room where it lay unclaimed for three days.
On the third day, Mr. Cole, a resident of the Marina where Scales’ houseboat was docked, arrived to claim the trunk. Customs officials opened the trunk at the airport in Cole’s presence, discovered the marijuana, and immediately arrested Cole. Under interrogation, Cole professed his innocence, implicated the defendants in the importation plot and claimed to have seen defendants smoking marijuana on Scales’ boat.
Customs agents, evidently convinced that Cole was blameless, enlisted his aid in conducting a “controlled delivery.” The trunk was secured; Cole was instructed to return to the Marina as planned, and Customs officials secretly closed in on the rendezvous. At the Marina entrance, Scales stopped Cole and apprehensively asked him why he was delayed. Cole panicked and said, “There’s marijuana in the trunk and we are all going to get busted.” [Tr., p. 26.] Scales then turned to Miss Caraway, who was seated in a nearby car, and said, “Get out of here.”
Both Scales and Miss Caraway were immediately arrested. The trunk never left Cole’s truck. Yet, Customs officials proceeded to thoroughly search Scales’ unoccupied houseboat moored some distance away. This critical search turned up no additional contraband, but did expose letters addressed to Miss Caraway which referred to the marijuana shipment. [This fact does not appear in the record, but on oral argument counsel for Miss Caraway admitted that the letters contained references to the marijuana.]
Not only was Scales’ boat unoccupied, but also one of its engines was dismantled on the dock [Tr., p. 49], suggesting that the boat might have been inoperative. Nevertheless, Customs officials proceeded to make a warrantless, exploratory search of the boat.
Customs Agent Larry Morphis, attempting to justify the boat search, testified that,
“The way I figured, if a person is involved in smuggling with airline cargo and he has a boat and he has been known to smoke marijuana and all the other things we had, I figured it indicated a search of the boat, as far as my occupation is concerned.” [Tr., pp. 36, 37.]
In answer to later questions by defense counsel, Mr. Morphis elaborated on his reasons for conducting the boat search:
“Q. Agent Morphis, you made the statement that for many reasons you intended to search the vessel. Those were your words, I believe?
“A. Yes.
“Q. Can you list those reasons that you intended to search the vessel?
U
“A. . . . and that would be that here were the people who lived on the boat who, to the best of ray knowledge, appeared to be involved in the smuggling of marijuana via Pan American Airlines Cargo.
“Now, regardless of whether they were innocent or guilty, that along with the fact that they had been known to smoke marijuana and they had a boat, I thought that indicated that this boat should be searched . . . . ” [Tr., pp. 41, 42.]
Confronted with these feeble justifications for the boat search, the district judge initially granted defendants’ motion to suppress, stating that,
“ . . . There is no evidence that Customs ever knew this boat was out of the country. I can’t go with you at all on the theory that this is a border search.
“I know of no case in the entire case history which permits as a border search a search, for example, of a home or a permanent place of residence or a boat unless there is some knowledge that that boat has been outside the territorial waters of the United States.”
[Tr., p. 53.] After reasoning that Scales’ boat was not within the ambit of a border search, the district judge went on to puncture the Government’s claim of probable cause.
“I could see their interest in it [the boat], for example, if that steamer trunk had been delivered and taken on board that boat. But here you have a situation where it never did get on board that boat. I don’t see how Customs could have any right to search that boat at all without a search warrant, and I don’t think they have probable cause, really, to even get a search warrant.
“I am going to grant the motion to suppress, gentlemen.”
[Tr., p. 55.] After a short recess and consultation with government attorneys, the district judge abruptly overturned his prior ruling and denied defendants’ motion to suppress. He based his sudden reversal solely on 19 U.S.C. § 1581(a), which he had not previously considered. The pertinent portions of 19 U.S.C. § 1581(a) provide that,
“Any officer of the customs may at any time go on board of any vessel or vehicle at any place in the United States or within the customs waters . . . and examine the manifest and other documents and papers and examine, inspect, and search the vessel or vehicle and every part thereof and any person, trunk, package, or cargo on board, and to this end may hail and stop such vessel or vehicle, and use all necessary force to impel compliance.”
The district judge, in his initial ruling, expressly held that the Customs’ boat search was not prompted by probable cause, nor was it within the scope of a legitimate border search. Although he ultimately denied defendants’ motion to suppress, the district judge never abandoned that earlier holding. Since the probable cause and border search issues are mixed questions of law and fact, this Court must give strong credence to the district court’s ruling on those issues.
19 U.S.C. § 1581(a), admittedly the sole basis for denial of defendants’ motion to suppress, does not vitiate the basic protection from unreasonable government intrusions provided by the fourth amendment. That statute, while literally broad enough to support any vessel search, may sweep only as widely as the fourth amendment permits. All searches must conform to the fundamental constitutional test of reasonableness. The warrantless search of Scales’ boat was manifestly unreasonable notwithstanding section 1581(a).
I. The Border Search Justification
Customs officials conducting' border searches have the exceptional power to search without probable cause. Carroll v. United States, 1925, 267 U.S. 132, 45 S.Ct. 280, 69 L.Ed. 543; Cervantes v. United States, 9 Cir. 1959, 263 F.2d 800, 803; King v. United States, 9 Cir. 1965, 348 F.2d 814, 817. That power, although enabling “mere suspicion”based searches, does not obviate the necessity of compliance with the constitutional standard of reasonableness. Boyd v. United States, 1886, 116 U.S. 616, 623, 6 S.Ct. 524, 29 L.Ed. 746; Morales v. United States, 5 Cir. 1967, 378 F.2d 187.
Border search principles apply to an extended area radiating from the border, but broader than the immediate border area. Government officials may delay the search of a suspect vehicle entering the Country in order to trace the vehicle to its destination and sweep the guilty parties in with the contraband. See Rodriguez-Gonzales v. United States 9 Cir. 1967, 378 F.2d 256; Thomas v. United States, 5 Cir. 1967, 372 F.2d 252; United States v. Henderson, 5 Cir. 1972. 469 F.2d 1074.
Customs officials cannot, however, give unreasonable elasticity to the border concept. In outlining the limits of an extended border search, the court in Alexander v. United States, 9 Cir. 1966, 362 F.2d 379, 382, suggested that the government action be tested by
“ . . .a determination whether the totality of the surrounding circumstances, including the time and distance elapsed as well as the manner and extent of surveillance, are such as to convince the fact finder with reasonable certainty that any contraband which might be found in or on the vehicle at the time of search was aboard the vehicle at the time of entry into the jurisdiction of the United States.”
Applying the Alexander standard, the Customs search of Scales’ boat cannot conceivably fall within the ambit of an extended border search. The contraband was never placed on the boat. The boat did not cross any border. The district court ruling simply reinforces that conclusion.
II. The Probable Cause Justification
If the Customs officials were outside the bounds of a border search when they entered Scales’ boat, their actions cannot be justified unless based on probable cause. But no facts were known which, together with rational inferences from those facts, could have warranted this intrusion. The district judge, when confronted with the evidence, ruled that no probable cause existed. In light of the record before this Court, that decision appears irrefutable.
Searches conducted outside the judicial process are per se unreasonable subject to a few well-established exceptions. Katz v. United States, 1967, 389 U.S. 347, 356, 88 S.Ct. 507, 19 L.Ed.2d 576. Accord, Coolidge v. New Hampshire, 1971, 403 U.S. 443, 454-455, 91 S. Ct. 2022, 29 L.Ed.2d 564. Customs officials made a full exploratory search of Scales’ boat without a warrant. Yet, there was no danger that the suspect vehicle would escape from the jurisdiction. Chambers v. Maroney, 1970, 399 U.S. 42, 90 S.Ct. 1975, 26 L.Ed.2d 419. Nor did Customs agents possess any reliable information suggesting the necessity of an immediate search. Cole’s tale of nocturnal pot parties was unsubstantiated, and he was personally involved in the importation as well as previously unknown to law enforcement authorities.
III. Application of 19 U.S.C. § 1581(a)
The trial judge reversed his ruling on the motion to suppress solely on the basis of section 1581(a). Section 1581(a) has never been interpreted to grant the sweeping power which its language implies. In Fish v. Brophy, S.D.N.Y.1931, 52 F.2d 198, a New York district court held invalid a warrantless Customs search of defendant’s pleasure boat, allegedly authorized by section 581 of the Tariff Act of 1922 (the identically worded predecessor of 19 U.S.C. § 1581(a)). The Brophy court ruled that section 581 authorized searches only where the detained boat was required to carry a manifest, and manifests are required only in the case of vessels arriving in the United States with cargo from foreign ports. The Brophy court emphatically stated that, “It is hard to believe that the Legislature intended, in section 581, to place private pleasure boats in the same position as vessels importing cargo into the United States.” 52 F.2d at 201.
In a later case involving the Customs’ search of a fishing boat, United States v. Coppolo, D.N.J.1932, 2 F.Supp. 115, Judge Avis, in interpreting the exact statute at issue here, rejected the Bro-phy holding that the Tariff Act applied only to vessels carrying cargo from a foreign port. Instead, he found the search illegal under the theory that a government officer has the right to board a vessel to inspect the manifest and observe the cargo, but cannot conduct an exploratory search unless the initial boarding reveals “apparent violation of the navigation or revenue laws.”
The Customs’ search of Scales’ boat was illegal under the rationale of either the Brophy or Coppolo cases. Scales’ boat was apparently inoperable, utilized as a stationary home, and clearly incapable of transporting cargo. To apply section 1581(a) to such a case would impart to that statute unconstitutional scope.
Reversed and remanded.
Granting Motion for Rehearing En Banc
Before JOHN R. BROWN, Chief Judge, and WISDOM, GEWIN, BELL, THORNBERRY, COLEMAN, GOLDBERG, AINSWORTH, GODBOLD, DYER, SIMPSON, MORGAN, CLARK, INGRAHAM and RONEY, Circuit Judges.
BY THE COURT:
A majority of the Judges in active service, on the Court’s own motion, having determined to have this case reheard en banc,
It is ordered that this cause shall be reheard by the Court en banc on briefs without oral argument. The Clerk will specify a briefing schedule for the filing of supplemental briefs.
. 21 U.S.C. § 952(a) :
“It shall be unlawful ... to import into the United States from any place outside thereof, any controlled substance in schedule I or II of sub-chapter I of this chapter . . . , except that . . . [such substance] may be so imported under such regulations as the Attorney General shall prescribe . . . .”
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2024-08-24T03:29:51.129235
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{
"author": "PELL, Circuit Judge.",
"license": "Public Domain",
"url": "https://static.case.law/"
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Richard J. SENNOTT and Joan Sennott, Plaintiffs-Appellees, v. RODMAN & RENSHAW, Defendant-Appellant.
No. 71-1201.
United States Court of Appeals, Seventh Circuit.
Argued April 24,1972.
Decided Jan. 18, 1973.
Rehearing En Banc Denied March 28, 1973.
Howard Lewis Fink, Robert Dunn Glick, Ira S. Kolb, Chicago, Ill., for defendant-appellant.
Patrick W. O’Brien, James W. Gladden, Jr., Chicago, Ill., for plaintiffs-appellees.
Before SWYGERT, Chief Judge, PELL, Circuit Judge, and LARAMORE, Senior Judge
Senior Judge Don N. Laramore is sitting by designation from the United States Court of Claims.
PELL, Circuit Judge.
. Appellant Rodman & Renshaw, a securities brokerage house and member of the New York Stock Exchange, appeals from an adverse judgment in the district court awarding appellees Richard and Joan Sennott damages of $99,600 plus prejudgment interest. Appellant was found vicariously liable for the damage caused Sennott and his wife by the fraudulent securities manipulations of Jordan Rothbart, a former associate of Rodman & Renshaw and son of a partner in the firm. Judgments were also entered against Jordan Rothbart and his father, William Rothbart. Only Rodman & Renshaw (Rodman) appealed.
Jordan Rothbart, a commodities speculator and securities dealer apparently possessed of persuasive sales ability but a lesser standard of integrity, had at one time but not subsequent to 1958, been an employee of Rodman. No express authority to act on behalf of that firm existed subsequent to 1958; indeed it fairly appears that he was at the times here involved persona non grata to Rodman notwithstanding his father’s status as a partner therein. In 1962, the Securities and Exchange Commission in an order had held that Jordan had between 1955 and 1957, while employed by another broker-dealer, violated certain anti-fraud provisions of the Securities Act. In 1958, his registration as a representative of a member of the National Association of Securities Dealers, Inc. had been revoked because of deceptive practices in the sale of securities. The Sennotts were unacquainted with this background at any material time here involved.
Jordan became a member of the Chicago Board of Trade in 1960 and engaged thereafter as a trader for his own account in commodities. Through his dealings at the Board of Trade, Jordan became acquainted with Richard Sennott who was also an active trader. Sennott traded both for himself and for the Hon-eymead Trading Corporation of which he was an officer.
As their relationship developed, Sen-nott, a more experienced commodities trader, recommended various transactions to Jordan who reciprocated by encouraging Sennott to take advantage of Jordan's father’s expertise in the securities market. Specifically, Jordan told Sennott that his father had made money in the stock market for several members of the Board of Trade and that if Sen-nott ever wished to open a stock trading account Jordan would have one opened for him at Rodman & Renshaw. Initially Sennott declined to act on Jordan’s recommendations, but in January 1964, in response to Jordan’s assertion that his father thought a particular stock was a good buy, Sennott asked Jordan to purchase a limited number of shares for him. Jordan immediately went to the special Rodman telephone located on the floor of the Board of Trade and arranged for the purchase of Sennott’s order through Rodman.
In the same month Jordan arranged for Sennott to open a trading account with Rodman in the name of his, Sen-nott’s, wife. Trading through that account and six others which he subsequently opened, Sennott’s trading volume with Rodman for the two-year period between 1964 and 1966 totalled more than $2,000,000. Approximately seventy per cent of this trading was done through accounts opened by Jordan Rothbart, and much of it was done on the recommendation of Jordan or his father. A typical transaction involved Jordan advising Sennott that his father believed a particular stock should be bought or sold, Sennott indicating a desire to purchase, and Jordan going to the Rodman phone on the Board of Trade floor and calling in the order. Shortly thereafter Sennott would receive a mailed confirmation slip from Rodman. Sennott, of course, paid brokerage fees on all of these transactions.
In February, 1964, Jordan and Sen-nott had a conversation on the floor of the Board of Trade during which Jordan told him that Skyline Homes, Inc. (Skyline) was about to be listed on the New York Stock Exchange but that the company needed more shares to be eligible. In an effort to meet the requirement, Skyline stock was made a secondary offering through Rodman & Renshaw at approximately $40 per share. Jordan’s offer to procure a portion of this offering for Sennott was accepted, and it was agreed that Jordan would place an order with Rodman for 2,000 shares of Skyline. Sennott received the shares in April and went immediately to the offices of Rodman & Renshaw to deliver a check for the shares. It was on this occasion that Sennott first met William Rothbart.
While there was nothing fraudulent or improper about this or the previous sales, it was the precursor for the deception which followed. In March 1964, shortly after the order for 2,000 shares of Skyline was placed but before Sennott met William Rothbart, Jordan approached Sennott with respect to the purchase of additional shares of Skyline stock, this time through stock options which allegedly had been made available to Jordan through his father’s dealings with Skyline. The district court’s Finding of Fact Number 9 correctly sets forth the representations made by Jordan Rothbart:
“. . . Rothbart told Sennott that a number of options for the purchase of Skyline Homes, Inc. stock had been made available to him, that the options had initially been offered to his father William Rothbart, a partner in Rodman & Renshaw, in return for services his father had rendered Skyline Homes, Inc. in the secondary public offering referred to above and also for helping Skyline Homes, Inc. become listed on the American Stock Exchange, but that, when Rothbart^ father turned down the offer because SEC regulations forbid such transactions on the part of broker-dealers, the options had been made available to him. Jordan Rothbart said that he was willing to exercise some of the options on behalf of Sennott. Jordan Rothbart also told Sennott that he was going to exercise some of the options for himself and that all the money for the options would be held in escrow in New York City until the time came for the exercise of the option rights. He told Sennott that the options would be exercised for shares of Skyline Homes, Inc. stock within seven months and that he would then deliver shares of said stock to Sennott at a price of $26.50 per share.”
At the time these representations were made, Skyline was selling for approximately $40 per share. Lured by a discount of that magnitude, Sennott agreed to purchase Skyline stock through the option plan. On seven separate occasions between March 18 and October 2, 1964, Sennott placed orders and delivered checks to Jordan Rothbart for Skyline stock at the option price. Payments for these orders totalled approximately $142,000. No stock options of the type described by Jordan ever existed and the representations were obviously designed to defraud Sennott. Instead of depositing the payments in an escrow account in New York, Jordan placed each check in his wife’s personal checking account at the First National Bank of Highland Park and subsequently used the money to pay his own substantial trading losses.
When Jordan Rothbart first proposed the purchase of Skyline stock through the option arrangement, it was agreed that neither party would divulge the nature of their dealings. In accordance with that agreement each of the seven payments was recorded only by handwritten cash receipts prepared by Sen-nott and signed by Jordan Rothbart.
When the stock which had been set for delivery on October 18, 1964, did not materialize, Sennott inquired as to the reason for the delay. He was told by Jordan that there was no reason for concern, that the temporary delay was caused by the S.E.C.’s refusal to list Skyline on the New York Stock Exchange until the company had more shareholders. Satisfied with this explanation and with Jordan’s assurance that the stock would be forthcoming soon, Sennott took no further action with respect to the Skyline options until early November 1964 when he was summoned to a meeting with the managing partner of Rodman & Renshaw, Vernon Carroll.
The circumstances of this meeting warrant detailed scrutiny. In October or early November, Jordan Rothbart approached Sennott on the floor of the Board of Trade and asked him to accompany him to a public phone to speak with William Rothbart. In the course of their conversation, William Rothbart told Sennott that Mr. Carroll wanted to meet with him to discuss the Skyline options but that the matters which Mr. Carroll wished to discuss were none of his business. Sennott was then advised not to cooperate with Carroll. Accompanied by Jordan, Sennott went to the offices of Rodman & Renshaw that afternoon to meet with Carroll. Jordan’s father met them at the door and again told Sennott the option transactions were none of Carroll’s business. At this time, he also added that Sennott should not worry, he would get his stock options. All three men then went to Carroll’s office where Carroll produced several of the checks Sennott had given Jordan Rothbart for the options. Carroll then sought to question Sennott with respect to how the cheeks happened to have been endorsed by Dolores Rothbart (Jordan’s wife) and deposited in her account in the First National Bank of Highland Park. Sennott, while admittedly shocked by this revelation, told Carroll it was none of his business and refused to disclose the nature of his dealings with Jordan. Immediately after the conference, Sennott asked Jordan Rothbart about the checks and was told that they were deposited in the Rothbart account so Jordan, who asserted he was purchasing equal amounts of Skyline stock, could pay for the total stock purchase with a single check. Apparently this explanation satisfied Sennott since he made no further inquiries on the matter. Indeed, when again summoned to Carroll’s office a few weeks later, he voluntarily signed a letter of indemnity protecting Rodman & Renshaw from liability for any failure on their part to investigate fully the signatures on the checks.
However, when several months had passed without delivery, Sennott again pressed Jordan for an explanation. On February 26, 1965, as a result of this inquiry, Jordan delivered 1,000 shares of Skyline common stock in street name to Sennott. This stock was purchased through Jordan’s own broker, not Rod-man & Renshaw, on the open market and merely signed over to Sennott in an effort to deceive him into believing he was receiving part of his “stock options.” The deception was effective for, although Sennott continued his requests for the balance of the stock, he made no further inquiry into the actual facts surrounding the late options.
Between February 26, 1965, and January 20, 1966, Jordan delivered an additional 2,200 shares of Skyline common stock to Sennott. Delivery of this stock was made in six installments. As before, each delivery consisted of stock purchased on the open market for the market price. As set forth in detail below, the value of the shares at the time received totalled $82,600.
In the spring of 1966, Sennott, who apparently had been oblivious to the waving banners of suspect practices of which he was the victim, learned that another member of the Board of Trade had filed a $75,000 claim against Jordan Rothbart with the Board of Directors alleging a fraudulent scheme remarkably similar to the circumstances of Sennott’s own transactions with Jordan. At approximately the same time, Sennott also learned that Jordan Rothbart had previously been expelled from the securities market. Until that time, Sennott had been unaware of Jordan’s prior fraudulent practices or his dismissal from Rod-man. In spite of these revelations, however, Sennott clung to the hope that the stock would be delivered, and, in an effort to facilitate that vain hope, when summoned before the Business Conduct Committee investigating Jordan Roth-bart, he refused to cooperate or disclose his dealings. Indeed, not until May 1966, after numerous delivery dates had passed without receipt of further shares of stock, did Sennott go to William Rothbart to inquire about the stock options. Sennott described his meeting with William Rothbart at the Rodman office. “I let Bill know exactly what was going on as far as no delivery of the Skyline Homes, that he [Jordan] was probably going to be expelled from the Chicago Board of Trade, at which time Bill Rothbart told me there was nothing he could do about it.”
Jordan was expelled from the Board of Trade in June 1966 for refusing to turn his financial records over to the Business Conduct Committee. At that point he ceased coming to the floor of the Board of Trade and Sennott discontinued his unsuccessful efforts to procure delivery of the stock by telephone. Only after all else had failed did Sennott approach Rodman with evidence of the scheme.
At the conclusion of a bench trial on the merits, the trial judge found Rod-man vicariously liable for the losses caused the Sennotts. Liability was based upon several theories set forth in the court’s conclusions of law. First, the court concluded that William Roth-bart “knowingly assisted and participated in the efforts of Jordan Rothbart to defraud plaintiffs,” in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 adopted by the Securities and Exchange Commission thereunder, Section 9(a)(4) of the Securities Exchange Act of 1934, and Section 17(a) of the Securities Act of 1933. The court then held that not only William Rothbart’s knowledge of the solicitation of stock business by Jordan at the Board of Trade but also his knowledge of the false representations to Sennott regarding Skyline was acquired within the scope of the Rodman partnership business and therefore was imputed to and binding upon Rodman. In addition, the judge concluded that because Rodman “knew or should have known” of the illegal conduct of William and Jordan Rothbart, it was equally liable with them for the false representations. The trial judge also held Rodman accountable for Jordan Rothbart’s action because it “aided and abetted” in the fraud in that, in breach of its broker-agent fiduciary duty, it failed to inform Sennott of Jordan’s background. Finally, the trial court imposed liability on Rodman on the ground that Rodman failed to act in good faith with respect to its duties as a “controlling person” over William and Jordan Rothbart, Section 20(a) of the 1934 Act, 15 U.S.C. § 78t(a).
The ground rules for our review are well-established and need not be repeated here. The applicable standards are collected and summarizd by Judge Hastings in Prince v. Packer Manufacturing Company, 419 F.2d 34, 36-37 (7th Cir. 1969). Assigning the matter of credibility to the district court we turn therefore to a determination of whether there is substantial evidence to support the findings of fact and whether the court erred as to the applicable law.
Taking the agency questions first, it is clear that Rodman must be deemed to have had knowledge of all of the securities transactions which Jordan solicited for his father prior to the inception of the fraudulent stock option scheme. In that situation, the knowledge of William Rothbart is, under general principles of agency, imputed to the partnership. Had plaintiff been defrauded in one of those transactions, Rodman’s liability would seem to be unquestionable. Those transactions, however, do not comprise the substance of this lawsuit. On the contrary, the facts upon which liability must be established in this case, if at all, are critically different. While the evidence leaves no doubt that William Rothbart, having processed the orders and his firm having received a broker’s fee, had knowledge of the solicitations of Jordan in the prior transactions, the record is silent as to a basis upon which the district court could properly have inferred that William had knowledge at any pertinent time of his son’s stock option deception.
We are at a loss as to the basis in the record for the district court’s conclusion that William Rothbart “knowingly assisted and participated” in the fraud. Indeed, the first contact the plaintiff had with William respecting the options took place in November 1964, after all of the payments for the stock had been made. This is not a pertinent time. There is no evidence that prior to the Carroll meeting William Rothbart did anything to induce Sennott to subject himself to Jordan’s defalcations, nor that he had any knowledge of what was transpiring until after the fact.
Further, we find no reason to belive that Sennott considered William Roth-bart to be any part of the transaction other than that he had been the original offeree of the mythical options. In fact, Sennott himself indicated that his understanding of Jordan’s stricture of confidentiality to be he should not say a word about the transaction to anybody including William Rothbart. Sennott also testified that it was never his understanding that the option shares were coming from or through Rodman but he imagined they would be coming from the Skyline corporation itself. Finally, Sen-nott admitted on cross-examination that he had testified in his deposition that when asked by investigators for the Illinois Securities Commission, which was looking into his complaint against Jordan, whether William Rothbart had ever participated or conspired with Jordan to perpetrate the option fraud, he had replied, “[N]o, not to my knowledge.”
Citing Crittendon v. State Oil Company, 78 Ill.App.2d 112, 115, 222 N.E.2d 561, 563-564 (1966), Sennott contends on this appeal that Rodman & Renshaw is estopped by its conduct from claiming that Jordan was not its representative. Again, we do not disagree as to the transactions handled through that firm, but those are not the ones with which we are now concerned. Sennott also speaks of “apparent agency” established by Rodman. Without becoming involved in the semantic niceties of distinctions, if any, between ostensible agency, apparent agency, and agency by estoppel, we note that Crittendon (78 Ill.App.2d at 116, 222 N.E.2d at 564) states that “[i]t is essential to the application of the doctrine of estoppel that such conduct or representations be relied and acted upon
Under Sennott’s theory of apparent authority or estoppel, therefore, plaintiff would be required to prove that he was relying upon Jordan’s apparent authority, and hence on Rodman, when he decided to purchase the Skyline options. Reliance is not evident from the record before us. Indeed, the converse is clearly demonstrated, for not only did the fraudulent representations never involve Rodman but both Sennott and Jordan Rothbart actively sought to prevent Rod-man from discovering the option transactions. Sennott agreed to keep the option plan secret, including from Rodman, and intentionally used personal payment receipts to record Sennott’s payments. The strongest evidence of the plaintiffs’ lack of reliance upon Rodman, however, is seen in Sennott’s refusal to cooperate with Carroll’s inquiry into the endorsements on Sennott’s checks. Had Sennott been relying on Rodman’s participation in the option plan, it is unlikely that he would have refused even to discuss the matter with a representative of Rodman. On the contrary, Sennott’s own statements belie such reliance. Responding to an inquiry by defendant’s attorney, Sennott observed, “[W]ith regard to this money that had been invested, I really felt that this thing would have completely gone undetected by Rodman & Renshaw had not that check been made out of the profit sharing.”
The Sennotts also place considerable reliance on Blackburn v. Dean Witter, 201 Cal.App.2d 518, 19 Cal.Rptr. 842 (5th Dist.Ct.App.1962), a case which they assert is “squarely in point.” There, a registered representative of the defendant brokerage house persuaded the plaintiff to invest in stock of a nonexistent company. The plaintiff then, as Sennott did here, sold some stock through the brokerage house to finance the purchase of the nonexistent stock. The brokerage house was subsequently found liable for the fraudulent acts of its representative. While Blackburn is factually similar to this case, a major distinction exists. The plaintiff in the Blackburn case was a customer who believed that he was purchasing stock through the brokerage house in the same manner as he had previously made purchases, and, as such, was relying on the expertise and integrity of the brokerage. Both the agency and the reliance elements were unquestionably present. Here, however, while some type of implied agency may well have existed as to other transactions, there was no reliance upon this agency in the transactions in question. Simply stated, the damage Jordan Rothbart inflicted upon the plaintiffs was a result of Sennott’s misplaced reliance upon Jordan Rothbart and not upon Rodman & Renshaw.
Having reviewed the record at length and found that the evidence supports neither plaintiffs’ theory that William Rothbart had knowledge of his son’s, reprehensible scheme which was imputable to Rodman nor their theory of apparent authority, we are forced to reject the trial court’s factual findings and legal conclusions with respect to these issues.
Our findings on these issues are also dispositive of plaintiffs’ other theories of liability. As to their position that Rodman was guilty of “aiding and abetting” in the option scheme, our conclusion that the evidence does not support the trial judge’s finding that William Rothbart had knowledge of the fraudulent scheme precludes imposition of liability on this basis. Without a showing that a Rodman partner or agent had knowledge of the fraudulent acts, and in the absence of a showing that here Jordan was purporting to act for Rodman, there is no basis for holding Rodman liable for acts of third parties.
Similarly, plaintiffs’ theory and the trial court’s finding that Rodman is liable under Section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78t(a) as a “controlling person” over William and Jordan Rothbart is without merit. The trial judge found that Rod-man was in a position to control both men and that the partnership “did not act in good faith in exercising such control.” That finding, while sufficient to impose liability on Rodman for any of the pre-option scheme stock solicitations in which Sennott actually relied upon Rodman’s involvement in deciding whether to act, is not an adequate foundation upon which to base liability where Rodman was admittedly not considered to be involved in the transaction. Rodman’s duty to control its partners and agents, as well as its past employees, in situations such as this extends only to transactions with or by these parties where Rodman is itself involved. To extend it further would be to impose liability upon Rodman for virtually any act of its past or present employees and partners regardless of how remote and unrelated that act might be to Rodman & Renshaw. We are not inclined to read Section 78t so expansively.
For these reasons the judgment below is reversed as to Rodman & Renshaw, and the cause is remanded with instructions to dismiss the complaint as to Rod-man & Renshaw and to enter judgment for said defendant.
Reversed and remanded.
. The district court made the additional finding that Jordan Rothbart solicited orders for Rodman & Renshaw from at least five other members of the Board of Trade. These orders and sales were accomplished by the use of the Rodmau telephone, and in each instance the member placing the order dealt exclusively with Jordan Rothbart.
. $10,000 of the amount was paid by Honeymead and is not involved in this appeal.
.
Amounts Number of Closing Received Date Shares Price by Sennott
2/26/65 1,000 $27.25 $27,250.00
3/ 3/65 600 27.625 16,575.00
5/ 4/65 200 29.50 5,900.00
8/ 3/65 400 24.375 9,750.00
8/ 5/65 300 24.00 7,200.00
12/13/65 200 22.75 4,550.00
1/20/66 500 22.75 11,375.00
$82,600.00 3,200
. This would seem consistent with Sen-nott’s description of his May 1966 meeting with William Rothbart at which he “let Bill know exactly what was going on as far as no delivery of the Skyline Homes. . . . ” When questioned about that meeting, Sennott stated in deposition:
“And at this particular time is when I said, ‘Well, you know, Bill, whether you realize it or not, it was supposedly offered to you and that because you were a senior partner in Rodman & Renshaw, Jordie told me, under the 8EC rules you couldn’t accept it.’
“He said, ‘Well, that’s not true.’ He said, T knew nothing of the stock options in Skyline.’
“And again I asked him, ‘Why did you tell me before going to Carroll’s office not to worry? I’d get my stock options in Skyline.’
“He said, ‘Because Jordie had assured me that you would.’ ”
. In addition, Section 78t governing the liabilities of “controlling persons” provides in part:
“(a) Every person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action.”
Liability is not imposed where the controlling person exercises good faith or does not induce the act which gives rise to the cause of action. Here, Rodman may not have acted in good faith with respect to the legitimate stock solicitation by Jordan Rothbart of which William Rothbart had knowledge but Rodman’s lack of knowledge of the fraudulent stock option scheme creates an entirely different situation. We do not see how Rodman can be found to have exercised bad faith with respect to a transaction of which it had no knowledge. It is equally clear that Rodman did not “induce” the acts of Jordan Roth-bart, and without bad faith or inducement there can be no liability under this section.
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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UNITED STATES of America, Appellant, v. Frank GERVATO, Appellee.
No. 72-1334.
United States Court of Appeals, Third Circuit.
Argued Nov. 14, 1972.
Decided Jan. 26, 1973.
Carl L. Melone, U. S. Atty., James J. Tansey, Criminal Division, Department of Justice, Washington, D. C., for appellant.
Stanford Shmukler, Philadelphia, Pa., Richard P. Abraham, Philadelphia, Pa., of counsel, for appellee.
Before ALDISERT, GIBBONS and HUNTER, Circuit Judges.
OPINION OF THE COURT
JAMES HUNTER, III, Circuit Judge.
We review in this case the validity of a district court decision that a warrant to search a private dwelling cannot constitutionally be executed in the known absence of the occupant unless exigent circumstances exist. As far as we know, this question has not been decided by either the Supreme Court or any federal court of appeals.
On March 24, 1971, agent Glanz of the Federal Bureau of Narcotics and Dangerous Drugs (BNDD) obtained a warrant authorizing him to search appellee Frank Gervato’s apartment in the daytime for Dimethyltryptamine, a controlled dangerous drug, and chemicals and equipment used in its manufacture. About 5:30 p. m., Glanz and two BNDD chemists drove to appellee’s apartment which had been under surveillance by BNDD agents since approximately 12:30 p. m. that day. These agents had seen Gervato leave the premises sometime after 1:00 p. m. and not return, and Glanz was so informed by radio when he arrived around 6:00 p. an. Glanz then proceeded to appellee’s door, knocked, and announced his official identity and his reason for wanting to enter the apartment. When he received no reply he knocked again and then forced open the door. Once inside the apartment, Glanz and the other agents were met by the owner of the building and two young men, who had entered through a door connecting the apartment with a delicatessen. Glanz showed the owner a copy of the search warrant and agreed to the owner’s request to be present while the apartment was searched. The warrant was then executed with 78 items being seized. The agents departed about 9:00 p. m., leaving behind a copy of the search warrant and a list of the items seized. Ger-vato, who apparently knew nothing about the search, returned home a few minutes later.
On July 15, 1971, a two count indictment was returned charging appellee with illegally manufacturing and possessing lysergic acid amide, in violation of the Federal Food and Drug Act. On November 29, 1971, appellee filed a pretrial motion to suppress the evidence uncovered by the March 24 search. This motion was sustained by the district court on March 1, 1972 on the ground that the known absence of appellee made the search unreasonable and therefore in violation of the Fourth Amendment. United States v. Gervato, 340 F.Supp. 454 (E.D.Pa.1972). Specifically, the district court said that “[a] man’s home should not be forcibly entered in his absence to serve a search warrant, absent some exigent circumstance which it is up to the Government to show, especially in a case such as this where the house was under surveillance and the agents knew before going to the door that no one was home.” Id. at 463. The government has appealed this decision pursuant to 18 U.S.C. § 3731. We reverse because we do not believe that the Fourth Amendment requires the occupant to be present before his home can be searched under- a valid search warrant and because we do not think that the present search was unreasonable.
The Supreme Court has examined on many occasions the history and purposes of the Fourth Amendment. E. g., Warden v. Hayden, 387 U.S. 294, 301, 87 S.Ct. 1642, 18 L.Ed.2d 782 (1967); Stanford v. Texas, 379 U.S. 476, 481-485, 85 S.Ct. 506, 13 L.Ed.2d 431 (1965); Marcus v. Search Warrant, 367 U.S. 717, 724-729, 81 S.Ct. 1708, 6 L.Ed.2d 1178 (1961); Frank v. Maryland, 359 U.S. 360, 363-366, 79 S.Ct. 804, 3 L.Ed.2d 877 (1959); Boyd v. United States, 116 U.S. 616, 624-629, 6 S.Ct. 524, 29 L.Ed. 746 (1874). This history shows that the primary purpose of the Amendment was to put an end to the general warrants and writs of assistance under which officers of the Crown had been empowered to conduct general searches and seizures. James Otis denounced these writs as “ ‘the worst instrument of arbitrary power, the most destructive of English liberty, and the fundamental principles of law, that ever was found in an English law book’ since they placed ‘the liberty of every man in the hands of every petty officer.’ ” The historic occasion of that denunciation, at a famous 1761 debate in Boston, has been characterized as “perhaps the most prominent event which inaugurated the resistance of the colonies to the oppressions of the mother country. ‘Then and there,’ said John Adams, ‘then and there was the first scene of the first act of opposition to the arbitrary claims of Great Britain. Then and there the child Independence was born.’ ” Boyd v. United States, supra at 625, at 529 of 6 S.Ct.
In order to understand the Founding Fathers’ perspective on writs of assistance, it is instructive to consider the history of the controversial general warrant in England. As Stanford v. Texas, supra at 482-483 of 379 U.S., at 510 of 85 S.Ct. points out:
“What is significant to note is that the history is largely a history of conflict between the Crown and the press. It was in enforcing the laws licensing the publication of literature and, later, in prosecutions for seditious libel that general warrants were systematically used in the sixteenth, seventeenth, and eighteenth centuries. ... In later years warrants were sometimes more specific in content, but they typically authorized the arrest and search of the ¿remises of all persons connected with the publication of a particular libel, or the arrest and seizure of all the papers of a named person thought to be connected with a libel.”
In the Colonies, the hated writs of assistance were also frequently used to search for evidence of crime or of illegally imported goods.
A few years prior to the outbreak of the American Revolution, the use of general warrants to aid in prosecutions for seditious libel was judicially condemned in England in two landmark cases, Wilkes v. Wood, 19 How.St.Tr. 1153 (1763) and Entick v. Carrington, 19 How.St.Tr. 1029 (1765). In the former case, John Wilkes had boldly denounced the English government in issue No. 45 of the North Briton. By authority of a warrant issued by the Secretary of State, Wilkes was carried away, and his house was then searched and his papers indiscriminately seized. Wilkes sued and obtained a verdict of one thousand pounds against one of the perpetrators of the search and four thousand pounds against the Secretary of State. In his opinion, Lord Camden condemned the “general warrant, where no inventory is made of the things thus taken away, and where no offenders’ names are specified in the warrant, and therefore a discretionary power given to messengers to search wherever their suspicions may chance to fall.” 19 How.St.Tr. at 1167. However, while Lord Camden was obviously distraught at what he viewed as a “ridiculous warrant against the whole English nation,” there is no indication that he believed the warrant could not be executed in Wilkes’ absence.
In Entick v. Carrington, supra, a warrant based on a charge of seditious libel issued for the arrest of Entick, the author of a publication called Monitor or British Freeholder, and for the seizure of all his papers. The King’s messengers executing the warrant ransacked Entick’s home for four hours and carted away great quantities of books and papers. In an opinion which the Supreme Court has recognized as a wellspring of the rights now protected by the Fourth Amendment, Lord Camden declared the general warrant for the seizure of papers contrary to the common law, despite its long history. “This power,” he said, “so assumed by the secretary of state is an execution upon all the party’s papers, in the first instance. His house is rifled; his most valuable secrets are taken out of his possession, before the paper for which he is charged is found to be criminal by any competent jurisdiction, and before he is convicted either of writing, publishing, or being concerned in the paper.” 19 How.St.Tr. at 1064.
The district court in the present case placed great emphasis on one passage in Entick from which it concluded that the common law prohibited the execution of a search warrant if no one was on the premises. Upon examination of that passage in the context of the entire opinion, however, we do not believe that such a conclusion is justified. Lord Camden’s concern in both Wilkes and Entick was with the unrestricted discretion of those who executed the warrants and not with the presence or absence of either plaintiff. Consequently, after reviewing these two cases along with the other authorities cited by the district court, we do not think that the common law prohibited searches in the absence of the occupant at the time the Fourth Amendment was adopted.
Entick and Wilkes, when considered with the Supreme Court eases already discussed, show that the search and seizure provision of the Fourth Amendment was primarily designed to protect against warrantless searches and seizures and those conducted under an indiscriminate general authority. There is no indication that the Founding Fathers were also concerned that the power to search should be dependent on the presence of the occupant.
In light of this history, it is significant to note that neither the Supreme Court nor any court of appeals has ever hinted or suggested, despite many opportunities to do so, that a search warrant should be executed only in the presence of the possessor or occupant of the property searched. See, e. g., Stoner v. California, 376 U.S. 483, 84 S.Ct. 889, 11 L.Ed.2d 856 (1964); Chapman v. United States, 365 U.S. 610, 81 S.Ct. 776, 5 L.Ed.2d 828 (1961); Agnello v. United States, 269 U.S. 20, 46 S.Ct. 4, 70 L.Ed. 145 (1925); Spinelli v. United States, 382 F.2d 871 (8th Cir. 1971), rev’d on other grounds, 393 U.S. 410, 89 S.Ct. 584, 21 L.Ed.2d 637 (1969); United States v. Ravich, 421 F.2d 1196 (2d Cir. 1970), cert. denied, 400 U.S. 834, 91 S.Ct. 69, 27 L.Ed.2d 66 (1970); United States v. Maroney, 339 F.2d 710 (3d Cir. 1965).
In addition, Rule 41, F.R.Cr.P. 18 U.S.C., does not provide, among its mandatory requirements, that a search warrant should be executed only in the presence of the occupant. Since this Rule was promulgated by the Supreme Court, it appears likely that the Court did not consider the presence of the occupant to be a common law or constitutional requirement. Rule 41(d) provides in part that an inventory “shall be made in the presence of the applicant for the warrant and the person from whose possession or premises the property was taken, if they are present. . . .” (Emphasis added). This “if” phrase also suggests that the Court did not believe that the Fourth Amendment requires presence. Cf. United States v. Scolnick, 392 F.2d 320 (3d Cir. 1968), cert. denied, 392 U.S. 931, 88 S.Ct. 2283, 20 L.Ed.2d 1389 (1968).
Parenthetically, we agree with the district court and appellee that 18 U.S.C. § 3109 has no bearing on the present case, either as an authorization justifying agent Glanz’s conduct or as an authority forbidding that conduct. United States v. Gervato, supra at 457, of 340 F.Supp. However, when the search is authorized as it was here, then the procedural requirements of § 3109, which are directed at avoiding breaches of the peace, must be followed. Those requirements were followed in this ease.
Having decided that the Fourth Amendment does not prohibit per se searches conducted in the absence of the occupant, we now hold that the present search was reasonable under the circumstances. In order to obtain a search warrant today, the government must show that it has probable cause for its issuance, and the warrant must identify the property to be seized and name or describe the person or place to be searched. Rule 41(c), F.R.Cr.P. 18 U. S.C. This provides an individual with considerably more protection than did the general warrant of the sixteenth, seventeenth and eighteenth centuries which permitted unrestricted searches and seizures. Rule 41(d) also requires that a person be given an inventory of goods seized or that it be left at the place where the property was taken, something which was not necessary with the general warrant.
Despite this, the district court indicated that a search warrant executed in the absence of the occupant constitutes an unreasonable search because there exists the possibility of a general search and “pilferage by officers of the law.” It is, of course, true that either or both of these abuses could occur. However, we agree with the government that the requirement for judicial supervision prior to issuance provides adequate protection against the general warrant. Rule 41(e), F.R.Cr.P. 18 U.S.C. With respect to pilferage, Rule 41(c) and 18 U.S.C. § 3105 restrict the execution of search warrants to certain civil officers of the United States. In addition, Rule 41(d) mandates that an inventory be made of items seized, and it requires that this inventory be made in the presence of the person from whose possession of premises the property was taken or in the presence of at least one credible person other than the applicant for the warrant.
In addition to the above considerations, it is unlikely that the presence of the occupant at the beginning of a search would significantly reduce the possibility of pilferage or a general search. Frequently he would be placed under arrest, handcuffed, and sometimes removed from the premises before the search is completed. Even if this does not happen, when the executing party involves several officers, a number of areas can be searched at once making it impossible for the occupant to observe everything that happens. The district court has not suggested that these procedures are impermissible, but only states that the occupant must be present before a search can begin. This requirement will not avoid the possibility of pilferage or a general search, however, since in most instances these abuses could just as easily occur whether or not the occupant is present when the search commences. Consequently, for this reason as well as for those stated in the above paragraph, we reject the district court’s finding that the execution of a search warrant in the absence of the occupant significantly increases the likelihood of a general search or pilferage and is therefore unreasonable.
The district court also indicated that a search begun in the absence of the occupant is unreasonable because of the possibility of unnecessary property damage in a broken lock and door. However, we do not believe that this alone is a sufficient detriment to make a search unreasonable where a warrant based on probable cause has been obtained.
There is also a second issue in this case which must be discussed. A few days after the search, a BNDD agent told appellee’s attorney that he would like to interview appellee. The attorney agreed, and on April 2, 1971, appellee went to the Philadelphia Regional Office with his attorney. While there, he made an unsigned statement which the district court ordered suppressed as the fruit of an illegal search. Since we have found that the search in this case was constitutional, however, there is no reason to suppress this statement.
For the foregoing reasons, the order of the district court sustaining the motion to suppress evidence will be vacated and the cause remanded for further consideration.
. See Stanford v. Texas, supra at 484 of 379 U.S., 85 S.Ct. 506, and Boyd v. United States, supra at 626-627 of 116 U.S., 6 S.Ct. 524.
. The district court refers to a passage in a different version of Entick v. Carring-ton, 95 Eng.Rep.R. 807, 817 (1765). This passage reads:
“The warrant in our case was an execution in the first instance, without any previous summons, examination, hearing the plaintiff, or proof that he was the author of the supposed libels; a power claimed by no other magistrate whatever (Scroggs C. J. always excepted) ; it was left to the discretion of these defendants to execute the warrant in the absence or presence of the plaintiff, when he might have no witness present to see what they did; for they were to seize all papers, bank bills, or any other valuable papers they might take away if they were so disposed; there might be nobody to detect them.”
. If anything, the Supreme Court has indicated in dictum that a search is permissible in the absence of the occupant. Alderman v. United States, 394 U.S. 165, 178, 89 S.Ct. 961, 22 L.Ed.2d 176 (1969). See also Blakey, Aspects of the Evidence Gathering Process in Organized Crime Cases: A Preliminary Analysis, in The President’s Commission on Law Enforcement and Administration of Justice, Task Force Report: Organized Crime 80, 97 (1967).
. This position is supported by the American Law Institute Official Draft No. 1, Model Code of Pre-Arraignment Procedure (July 15, 1972), Part II, Search and Seizure, §§ 220.3(4) and (6), which provide :
“(4) Service of Warrant. In the' course of any search or seizure pursuant to the warrant, the executing officer shall read and give a copy of the warrant to the person to be searched, or the person in apparent control of the premises to be searched, as the case may be. The copy shall be read and furnished before undertaking the search or seizure unless the officer has reasonable cause to believe that such action would endanger the successful execution of the warrant with all practicable safety, in which case it shall be read and furnished as soon as is practicable. If the premises are unoccupied by anyone in apparent and responsible control, the officer shall leave a copy of the warrant suitably affixed to the premises. (Emphasis added.)
“(6) List of Things Seized. Upon completion of the search, the officer shall make a list of the things seized, and shall deliver a receipt embodying the list to the person from whose possession they are taken, or the person in apparent control of the premises from which they are taken, as the ease may be. The list shall be prepared in the presence of the person to whom the receipt is to be delivered. If the premises are unoccupied by anyone in apparent and responsible control, the executing officer shall, if practicable, secure the presence of one or more apparently credible persons to witness the preparation of the list, and shall leave the receipt suitably affixed to the premises." (Emphasis added.)
. 18 U.S.C. § 3109 provides:
“The officer may break open any outer or inner door or window of a house, or anything therein, to execute a search warrant, if, after notice of his authority and purpose, he is refused admittance or when necessary to liberate himself or a person aiding him in the execution of the warrant.”
. See Miller v. United States, 357 U.S. 301, 313, 78 S.Ct. 1190, 2 L.Ed.2d 1332 (1958); see also Wong Sun v. United States, 371 U.S. 474, 83 S.Ct. 407, 9 L.Ed.2d 441 (1963).
. Rule 41 (c) provides in pertinent part:
“The warrant shall be directed to a civil officer of the United States authorized to enforce or assist in enforcing any law thereof or to a person so authorized by the President of the United States.”
18 U.S.C. § 3105 provides:
“A search warrant may in all cases be served by any of the officers mentioned in its direction or by an officer authorized by law to serve such warrant, but by no other person, except in aid of the officer on his requiring it, he being present and acting in its execution.”
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{
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Donald DAVIS, Jr., a minor by His mother and next friend, Mrs. Sadie Davis, et al., Plaintiffs-Appellees, v. SCHOOL DISTRICT OF the CITY OF PONTIAC, INC., et al., Defendants-Appellants.
No. 71-1868.
United States Court of Appeals, Sixth Circuit.
Argued Oct. 10, 1972.
Decided Feb. 13, 1973.
Kent,' Circuit Judge, dissented and filed opinion.
Robert E. Manley, Cincinnati, Ohio, on brief, for appellants; Dudley & Patterson by Harold W. Dudley and William R. Lightbody, Pontiac, Mich., of counsel.
William Waterman, Elbert L. Hatch-ett, Pontiac, Mich., on brief, for appel-lees.
Before EDWARDS, McCREE, and KENT, Circuit Judges.
PER CURIAM.
Defendant School District appeals from an order requiring it to create a position for a third Assistant Superintendent and to hire a Negro to fill the position. Appellant contends that this order interferes with the pedagogical discretion of its officials and that the district does not require a third Assistant Superintendent and, indeed, cannot afford to hire one.
The order appealed from is supplementary to a comprehensive desegregation order entered by the District Court upon a finding of purposeful segregation of the school system. See Davis v. School District of City of Pontiac, 309 F.Supp. 734 (E.D.Mich.1970), aff’d, 443 F.2d 573 (6th Cir. 1971), cert. denied, 404 U.S. 913, 92 S.Ct. 233, 30 L.Ed.2d 186 (1971). In affirming this earlier order, we remanded the case to the District Court for continuing supervision of the desegregation of the system. In July 1971, the District Court conducted a hearing on motions for modification of the desegregation plan initially approved, and at the conclusion of that hearing, the court entered its order containing the provision attacked in this appeal.
It is clear that, when there has been segregation produced by government action, the power of district courts to shape appropriate remedies is broad, and if the creation of a particular administrative position appears to a district court to be useful in carrying out the constitutional mandate to desegregate a school system, appellate courts should not interfere with this discretionary exercise.
Accordingly, because the order in question in this appeal merely recited that the position was to be created by defendant and filled by a black person, we would have ordinarily assumed that it was made in the exercise of the discretion and for the purpose referred to above. However, in colloquy, the transcription of which was furnished the court, the District Judge gave some indication that he entered this part of the supplemental order either because he believed that the board had promised to make such an appointment earlier and had not kept its word with him or because some particular racial balance at the administrative level was desirable for reasons other than to accomplish the desegregation of the school system.
Because we are unable to determine the basis for the entry of the court’s order regarding the creation of this administrative position, we vacate this provision of the order to permit him to consider whether the creation of such a position and its filling by a black person in the light of current conditions within the school system is indicated to dismantle the unconstitutional condition that he found to exist.
Vacated and remanded for proceedings not inconsistent with this opinion. No costs will be allowed because a public question is involved.
KENT, Circuit Judge
(dissenting).
I find myself unable to join in the opinion of the majority. I recognize that the power of District Courts to shape appropriate remedies to eliminate school segregation deliberately imposed by Government action is broad, and if the record demonstrates a need for a particular administrative position to assist in carrying out the constitutional mandate to desegregate such school system, then the appellate court should not interfere if the trial judge in the exercise of his discretion orders the creation of such an administrative position. However, I cannot agree that an appellate court should ever “assume” that any portion of a broad desegregation order was necessarily made by the trial judge in the exercise of discretion and for the purpose of eliminating unconstitutional segregation of the races within the school without appropriate findings of fact and conclusions of law to support the exercise of such broad discretion.
The record in this case does not reflect any facts which would justify the conclusion that the composition of the administrative staff at the level concerned resulted from any unconstitutional segregation or that the desegregation of such staff or the creation of any new position on such staff would make any substantial contribution to the desegregation of the Pontiac schools. In fact, the undisputed record demonstrates that the school board determined a third assistant superintendent position to be unnecessary, particularly in the light of the financial straits in which the school district found itself. The district judge not only did not find any constitutional violation on the part of the school board because of its failure to have a black assistant superintendent, neither did he find that the creation of such a position was necessary to accomplish the desegregation of the schools. Rather, as stated by the district judge, prior to the entry of the order from which this appeal is taken, as the basis for the entry of the order, “and I don’t see how you can have integration at every other level and still not have it at the assistant superintendent level. I think it is good for the black children out there in terms of image. I think it is good for the white children out in Pontiac to see a black assistant superintendent of schools. I think it is good for people at the policy level to have a black person in there, sitting in, knowing precisely what is happening in that school system. I think it is healthy for the entire community.” (Supp.App., pp. 136-7). (Emphasis added).
As previously stated, the determination of the appropriate remedies to eliminate past wrongs is necessarily broad, but in the absence of a finding that specific steps are necessary to accomplish the elimination of such wrongs there is no authority in a court of equity to impose upon parties to the action remedies which the trial judge may think would be good policy. Policy is for the school authorities, except as and unless such policy creates a condition which offends the Constitution. As pointed out in Swann v. Board of Education, 402 U.S. 1, 15-16, 91 S.Ct. 1267, 1276, 28 L.Ed.2d 554 (1971):
“However, a school desegregation case does not differ fundamentally from other eases involving the framing of equitable remedies to repair the denial of a constitutional right. The task is to correct, by a balancing of the individual and collective interests, the condition that offends the Constitution.
“In seeking to define even in broad and general terms how far this remedial power extends it is important to remember that judicial powers may be exercised only on the basis of a constitutional violation. Remedial judicial authority does not put judges automatically in the shoes of school authorities whose powers are plenary. Judicial authority enters only when local authority defaults.
“School authorities are traditionally charged with broad power to formulate and implement educational policy and might well conclude, for example, that in order to prepare students to live in a pluralistic society each school should have a prescribed ratio of Negro to white students reflecting the proportion for the district as a whole. To do this as an educational policy is within the broad discretionary powers of school authorities; absent a finding of a constitutional violation,' however, that would not be within the authority of a federal court. As with any equity case, the nature of the violation determines the scope, of the remedy. In default by the school authorities of their obligation to proffer acceptable remedies, a district court has broad power to fashion a remedy that will assure a unitary school system.”
At the time of the oral argument in this court counsel informed the court that one of the [two] assistant superintendents had resigned and that there was a vacancy at this level of the administrative staff of the School District of the City of Pontiac. It may be that on remand, as ordered by the majority, the school board will consider the appointment of a black assistant superintendent not because the district judge thinks it would be good for the black children but rather because an honest, sincere effort to locate a competent black person qualified to be assistant superintendent of the Pontiac schools would clearly demonstrate that the defendant school board recognizes its obligation to desegregate the Pontiac schools and staff at all levels.
On this record, however, absent findings by the district judge that the failure to create a position for a third assistant superintendent to be filled by a black person was necessary to complete the elimination of segregation within the Pontiac schools, I cannot concur in the opinion of the majority. I would reverse.
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BASTIAN-BLESSING, DIVISION OF GOLCONDA CORPORATION, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
No. 72-1456.
United States Court of Appeals, Sixth Circuit.
Feb. 21, 1973.
Paul F. Gleeson, Chicago, Ill., Arthur B. Smith, Jr., Van H. Yiot, Chicago, Ill., on brief; Vedder, Price, Kaufman & Kammholz, Chicago, Ill., of counsel, for petitioner-appellant.
Allison W. Brown, Jr., N.L.R.B., Mar-eel Mallet-Prevost, Asst. General Counsel, Steven C. Kahn, Atty., N.L.R.B., Washington, D. C., Jerome H. Brooks, Director, Region 7, N.L.R.B., Detroit, Mich., on brief, for respondent-appellee.
Before EDWARDS and CELE-BREZZE, Circuit Judges, and HAST-IE, Senior Circuit Judge.
Honorable William H. Hastie, Senior Judge, U. S. Court of Appeals for the Third Circuit sitting by designation.
EDWARDS, Circuit Judge.
Bastian-Blessing petitions to set aside and the Board seeks enforcement of an order of the National Labor Relations Board finding the employer guilty of 8(a)(5) and 8(a)(1) violations of the National Labor Relations Act, 29 U.S.C. § 158(a)(5) and (1) (1970), by unilaterally terminating an employee health insurance plan which had previously been in force through insurance with Aetna Life Insurance Company.
The employer, purporting to maintain the same benefits, undertook self-insurance. Subsequent to the termination of the Aetna coverage, it informed the union as to what it had done and discussed the reasons for the change, but declined to go back to the Aetna insurance contract when requested to do so.
The Board found that the Aetna termination materially affected mandatory subjects of bargaining in relation to health insurance in that two material changes were made in benefits under the company self-insurance program and in that, in addition, the enforceability, administration and funding of the plan were affected. The Board’s order required Bastian-Blessing to restore the status quo by reinstating the contract with Aetna.
The Board Decision and Order of December 16, 1971, is reported at 194 N.L.R.B. 95 (1971), and its Supplemental Decision of March 30, 1972, is reported at 195 N.L.R.B. 167 (1972).
The material facts of this case do not appear to this court to be in dispute. Petitioner does dispute the inferences which the Trial Examiner and the Board drew from those facts, along with the legal conclusions drawn therefrom. Specifically, Bastian-Blessing claims that after termination of the Aetna insurance contract, it engaged in good faith negotiations with the union concerning its health insurance program, which served to satisfy the bargaining obligation under the Act. It also claims that the Board was without authority to order it to reinstate the insurance contract between it and Aetna Life, since it claims that the identity of the insurance carrier is not a mandatory subject for bargaining.
Petitioner, Bastian-Blessing, is a division of a conglomerate, Golconda Corporation, which merged with Astro Controls, Inc., the previous parent corporation of Bastian-Blessing, while this controversy was going on. Local 893 of the Brotherhood of Carpenters has been bargaining agent since 1953 only for 165 employees of the Bastian-Blessing Division. Aetna Life Insurance Company had been the Bastian-Blessing group insurance carrier since World War II. It issued a group insurance policy containing the benefits negotiated between Local 893 and Bastian-Blessing in 1959. This policy was continued in effect, with some changes resulting from collective bargaining, up until August 1, 1970, when the company canceled the contract unilaterally, without prior notice to the union.
The group health insurance plan was a contributory plan. Each employee paid $1.00 per week toward its cost and the employee contributions represented approximately 40% of the premium cost, with the employer paying the rest.
The Trial Examiner found a relationship between increasing benefit costs and the sudden termination of the Aetna contract:
In the fiscal year ending April 20, 1967 (as reported on Form D-2 to the Department of Labor), the total premiums paid Aetna (for over 1,500 employees) amounted to $395,318. Aetna paid out benefits, and put in reserves, a total of $312,696, and refunded over $56,000 to the Company. By fiscal 1969, with somewhat fewer employees, the total premiums had increased almost $100,000, to $493,372, and the total benefit charges had increased over $229,000 (73 percent) to $541,852. Instead of a cash rebate as in 1967, there was a deficit in 1969 of $92,883. (The 1969 Form D-2 shows that Aet-na retained $30,053 for expenses, as compared to fiscal 1968 expenses of $28,765 — an increase of less than $1,500. In fiscal 1967, which included a period of time when the Company’s own employees were processing claims for Aetna, the Aetna expenses were $15,559. The amount of commissions decreased from $3,756 in 1967 to $2,625 in 1969, whereas taxes increased from $6,776 to $11,725.)
Despite the increased costs, the Union negotiated further health benefits in its new 3-year collective-bargaining agreement, effective from December 1, 1969, through November 30, 1972. Nothing was said in the negotiatioñs about canceling the Aetna policy or changing carriers. * * * Thus, I find that although the reference to the old Aetna employee booklet was' deleted, the Company and the Union still bargained for a continuation of the Aetna plan. (Following these 1969 negotiations, the Company contracted with Aetna to amend Group Policy GC-40,636 to provide the increased benefits.)
The Trial Examiner and the Board found also that when Bastian-Blessing instituted its self-insurance plan as described in its “Company Insurance Certificate,” it omitted entirely two significant employee benefits: a conversion privilege without evidence of insurability, and the certainty of coverage of new-born babies under the $20,000 major medical benefit.
The Board further found that Bas-tain-Blessing’s cancellation of the Aetna contract deprived its employees of enforceability of the prior master contract and of Aetna’s administration of that contract:
In the negotiations for the current 1969-1972 collective-bargaining agreement, as previously found, the Company and the Union bargained for a continuation of the Aetna plan, with various increased benefits which the Company thereupon contracted with Aetna to provide. Under this union-negotiated plan, not only was the payment of the employees’ health benefits ensured in writing by the 56-page Aetna Group Policy GC-40,636 (the master contract), but also the interpretation and application of the group policy was placed in the hands of the well-known group insurance carrier, Aetna.
The Company’s unilateral and irrevocable August 1 cancellation of the Aetna group policy, and the January 7 issuance of its “Company Insurance Certificate,” deprived the employees of both the protection of the enforceable master contract, and (as discussed later) Aetna’s interpretation and application of it.
The January 7 “Certificate” did not contain all the pertinent provisions governing the payment of benefits. It was a modified copy of the most recent Aetna “Group Insurance Certificate” (employee booklet), and was thus only a “summary of the essential features” of the previous Aetna insurance coverage. It failed to set out such provisions in the Aetna master contract as (a) what employees are eligible (permitting coverage of full-time employees working temporarily on a part-time basis), (b) eligibility after 3 months of continuous service, (c) requirement of written request, etc., for coverage of dependents, (d) effective date for dependent’s coverage if application is made within 31 days, and if made thereafter, (e) the specific amount of nonoccupational disability weekly benefit ($52, as set out in bargaining agreement), (f) method of computing “average weekly earnings” for determining 70 percent limitation on weekly benefit, (g) exclusions and limitations applied in the event a family member is disabled when the maximum benefit is increased, (h) no benefits if prohibited in jurisdiction of residence, and (i) employer shall not “discriminate unfairly between individuals in similar situations” in administration of the provisions.
In many places where the January 7 Certificate is copied from the Aetna employee booklet, the Company has substituted the words, “the Plan,” for the words, “the group policy.” For example, on the cover page of the Certificate, the sentence from the Aetna employee booklet containing the words, “certain terms of the Group Policy,” was changed to read, “The kinds of coverage and certain terms of the Plan applicable thereto are described on this and the following pages of this Certificate.” (Emphasis supplied.) In other places in the Certificate, there still remain repeated references to “the group policy.” Thus former references in the Aetna “employee [booklet”] sic to “the group policy” now appear in the January 7 Certificate in such phrases as: “subject to the terms of the Plan,” “payable under the Plan,” “subject to the terms of the group policy,” “if included in the Plan,” “benefits provided under the Plan,” “coverage under the Plan,” “subject to the limits provided in the Plan,” “Employee’s insurance under the group policy,” and “coverage under the group policy.” These references in the Certificate to “the Plan” and “the group policy” are evidently made (as were the references in the Aetna employee booklet) to the detailed provisions in the now-canceled Aetna Group Policy GC-40,636. Therefore the Certificate issued on January 7 is not a self-contained document setting out all the provisions of the self-insured health program. Furthermore, there appears not to be in existence any such document, which would be enforceable as the Aetna group policy was.
Finally, the Board noted that Bas-tian-Blessing’s witnesses left unanswered questions concerning funding of the self-insurance program. The Board considered this uncertainty over funding an adverse impact on the employees’ previously-negotiated benefits.
HOLDING
We believe that the history of collective bargaining between these parties, including the negotiations which resulted in the level of benefits under the insurance plan which was in effect prior to August 1, 1970, indicates clearly that there was substantial evidence on this record taken as a whole to support the finding of the Board as described in its Supplemental Decision of March 30, 1972:
In our Decision and Order herein, we found that the Aetna insurance plan for active employees was a provision of the contract between the Union and Respondent, and we therefore held that Respondent’s mid-term unilateral change to a self-insured plan for its active employees was a violation of Section 8(a)(5). Benefits for retired employees were not involved.
Health insurance benefits clearly represent mandatory subjects for bargaining. NLRB v. Scam Instrument Corp., 394 F.2d 884 (7th Cir. 1968); McLean v. NLRB, 333 F.2d 84 (6th Cir. 1964); Inland Steel Co. v. N.L.R.B., 170 F.2d 247 (7th Cir.), cert. denied, 336 U.S. 960, 69 S.Ct. 887, 93 L.Ed. 1112 (1948).
Where, as here, these benefits have been determined by an existing collective bargaining agreement, a unilateral change violates the express language of both Section 8(d) and Section 8(a)(5).
We believe the controlling case on this issue, is NLRB v. Katz, 369 U.S. 736, 82 S.Ct. 1107, 8 L.Ed.2d 230 (1962), wherein the Supreme Court said:
The duty “to bargain collectively” enjoined by § 8(a)(5) is defined by § 8(d) as the duty to “meet and confer in good faith with respect to wages, hours, and other terms and conditions of employment.” Clearly, the duty thus defined may be violated without a general failure of subjective good faith; for there is no occasion to consider the issue of good faith if a party has refused even to negotiate in fact — “to meet . . . and confer” —about any of the mandatory subjects. A refusal to negotiate in fact as to any subject which is within § 8(d), and about which the union seeks to negotiate, violates § 8(a)(5) though the employer has every desire to reach agreement with the union upon an over-all collective agreement and earnestly and in all good faith bargains to that end. We hold that an employer’s unilateral change in conditions of employment under negotiation is similarly a violation of § 8(a)(5), for it is a circumvention of the duty to negotiate which frustrates the objectives of § 8(a)(5) much as does a flat refusal.
* * * Unilateral action by an employer without prior discussion with the union does amount to a refusal to negotiate about the affected conditions of employment under negotiation, and must of necessity obstruct bargaining, contrary to the congressional policy. It will often disclose an unwillingness to agree with the union. It will rarely be justified by any reason of substance. It follows that the Board may hold such unilateral action to be an unfair labor practice in violation of § 8(a)(5), without also finding the employer guilty of over-all subjective bad faith. NLRB v. Katz, supra at 742-743, 747, 82 S.Ct. at 1111, 1114. (Footnotes omitted.)
In McLean v. N.L.R.B., 333 F.2d 84 (6th Cir. 1964), this court relied upon the Katz case in upholding a finding of a Section 8(a)(5) violation by an employer’s unilateral change of a health insurance plan:
In our opinion, Katz compels a finding of an § 8(a)(5) violation here. Blue Cross insurance was an alternative plan, as opposed to the union’s health insurance plan, which should have been negotiated with it. This is part of the statutory duty to bargain collectively. McLean v. NLRB, supra at 87.
We do not think that BastianBlessing’s meetings with the union after it had, without notice, effected the unilateral changes described above served to excuse its violations of its duty to bargain. This record contains substantial evidence to support the Trial Examiner and the Board’s rejection of the petitioner’s good faith argument based on subsequent bargaining and over-all conduct. In addition, there is clearly no union acquiescence in or failure to protest the unilaterally wrought changes here as is found in the cases relied upon by petitioner. Cf. Georgia Pacific Corporation, 150 N.L.R.B. 885 (1965); Hartman Luggage Co, 145 N.L.R.B. 1572 (1964); NLRB v. Cone Mills Corp., 373 F.2d 595 (4th Cir. 1967).
To this court, however, the most difficult question pertains to the explicit order of the Board to reinstate “the Aetna Life Insurance Company group health insurance which was terminated August 1, 1970.” Both parties seem to interpret this order as requiring not just the identical contract with its identical benefits, administration, and funding, but the identical company as well. We have found, however, no case law which squarely supports the proposition that the specific insurance carrier for a group health plan is a mandatory subject for bargaining. This identical issue was the subject of a motion for rehearing of the instant case before the NLRB after the Supreme Court decided Allied Chemical Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157, 92 S.Ct. 383, 30 L.Ed.2d 341 (1971). The Board analyzed petitioner’s argument relying on Chemical Workers as follows:
In Pittsburgh Plate Glass, the Supreme Court held that retired employees are not “employees” within the meaning of the Act, and are not included in the “bargaining unit,” and therefore that the employee group health insurance plan negotiated by the Company and the Union was only a permissive and not a mandatory subject for bargaining with respect to the Company’s retired employees. For these reasons, the Court concluded that the Company’s unilateral midterm modification “ . . . of a permissive term such as retirees’ benefits . . . ” did not violate the Act. On the other hand, the Court affirmed well established prior holdings of the Board and the Courts that “ . . . mandatory subjects of collective bargaining include pension and insurance benefits for active employees, and an employer’s mid-term unilateral modification of such benefits constitutes an unfair labor practice.”
In our Decision and Order herein, we found that the Aetna insurance plan for active employees was a provision of the contract between the Union and Respondent, and we therefore held that Respondent’s mid-term unilateral change to a self-insured plan for its active employees was a violation of Section 8(a)(5). Benefits for retired employees were not involved.
It may be that, as respondent attempts to demonstrate by analogy, benefit levels are in some circumstances severable from their source of “brand name.” We need not decide that broad question here. In our previous decision in this case, we found that Respondent’s change from Aetna involved a substantive loss, at least in terms of Aetna’s administration and funding. Thus, under the facts of this case, the identity of the carrier was a mandatory subject of bargaining, and the benefit to be restored is a single “ball of wax” — the preexisting Aetna plan. (Footnote omitted.)
We have sought to find a way to separate the carrier from the benefits in this case, and we have failed. The peculiar terms of the bargaining contract here obviously incorporate by reference or necessary implication important sections of the Aetna contract. The history of this bargaining relationship shows that bargaining on health insurance historically was related to the Aetna contract. The employees, by terms of the labor-management contract, were made major contributors to the costs of the Aetna contract. Under these facts, the Board’s remedy that the benefits be restored by restoring “the preexisting Aetna plan” as a single “ball of wax” appears justified.
We emphasize that the conclusion reached herein is governed by the facts of this case and is not to be interpreted as a ruling by this Court that the naming of an insurance carrier for an employee group benefit plan, in the absence of other considerations, is a mandatory subject for bargaining.
Enforcement is granted.
. Local 893, United Brotherhood of Carpenters & Joiners of America, AFL-CIO.
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UNITED STATES of America, Appellee, v. John MACKEY, Appellant. UNITED STATES of America, Appellee, v. James KING, Appellant.
Nos. 72-1749, 72-1925.
United States Court of Appeals, Fourth Circuit.
Feb. 26, 1973.
Certiorari Denied June 11, 1973.
See 93 S.Ct. 2782.
George Beall, and Paul M. Rosenberg, Baltimore, Md., on brief for appellees.
Robert B. Bamhouse, and Jonathan A. Azrael, Baltimore, Md., for appellants.
Before BOREMAN, Senior Circuit Judge, WINTER and CRAVEN, Circuit Judges.
PER CURIAM:
John Mackey and James King appeal from their convictions by a jury, on pleas of not guilty, of robbery of a federally insured federal savings and loan association by intimidation, larceny from said association and assault committed during the commission of the robbery, in violation of 18 U.S.C. § 2113(a), (b), and (d), respectively. They complain that (1) their constitutional rights were denied when the Government showed photographs to certain witnesses without the attendance of counsel; (2) the trial court denied their motion to compel a preliminary hearing; (3) sentences were imposed on all three counts of the indictment; (4) there were no blacks on the jury which convicted them; (5) a prosecution witness was permitted to testify as to his reasons for not attempting to prevent the robbers from taking the money; and (6) the evidence was insufficient to support their convictions. Except as to (3) above, we find no merit in these assignments of error and therefore affirm the judgments of conviction and remand the case for imposition of a single sentence.
Mackey and King were charged with being two of four persons involved in the armed robbery on November 5, 1971, of the National Permanent Federal Savings and Loan Association in Langley Park, Maryland. They were arrested in the vicinity of the loan association’s parking lot within minutes of the robbery and at that time each was carrying a pillowcase full of money. The serial numbers of some of the stolen currency had been prerecorded, and the money recovered from one of the pillowcases was shown to include this “bait money.”
The loan association was equipped with movie cameras which operated during the robbery. None of the perpetrators wore masks. The developed film and sets of photographic prints were subsequently introduced into evidence. Certain of these prints were also shown to government witnesses prior to trial. It is this showing which Mackey and King allege violated their constitutional rights.
It is not disputed that defense counsel were not present when these prints were shown to the prosecution witnesses. Mackey and King argue that the rule of United States v. Wade, 388 U.S. 218, 87 S.Ct. 1926, 18 L.Ed.2d 1149 (1967) requiring the presence of counsel at post-indictment lineups, should be extended to include postindictment photographic identification procedures.
This precise issue was argued before the Supreme Court on January 10, 1973, in United States v. Ash, 149 U.S.App.D.C. 1, 461 F.2d 92 (1972), cert. granted, 407 U.S. 909, 92 S.Ct. 2436, 32 L.Ed.2d 682. But that issue is not pertinent in the instant case since the use of photographs here did not result in identification. The pictures were not shown to the witnesses in an attempt to have them identify someone from a number of choices. Rather, pictures of the robbery itself, depicting scenes which the witnesses had actually observed, were used to clarify, explain and demonstrate the events as they occurred, and to refresh the witnesses’ recollections thereof. There was no possibility of impermissibly suggestive procedures being used to influence any identifications by the witnesses, for they were not making identifications. Therefore no right to counsel existed during this procedure. Cf. United States v. Hines, 147 U.S.App.D.C. 249, 455 F.2d 1317 (1971), cert. denied, 406 U.S. 975, 92 S.Ct. 2427, 32 L.Ed.2d 675 (1972); United States v. Ware, 147 U.S.App.D.C. 249, 455 F.2d 1317 (1971), cert. denied, 406 U.S. 969, 92 S.Ct. 2427, 32 L.Ed.2d 669 (1972) (no right to counsel when pictures of a lineup, at which counsel was present, were used only to refresh witnesses’ memories.)
Mackey and King have failed to advance any arguments which persuade us to reconsider our long-standing rule that the return of an indictment by the grand jury eliminates the requirement of holding a preliminary hearing. The purpose of both is to insure the existence of probable cause before an accused is brought to trial. That purpose is fully effectuated by either. United States v. Chase, 372 F.2d 453 (4 Cir. 1957), cert. denied, 387 U.S. 907, 87 S.Ct. 1688, 18 L.Ed.2d 626; Barber v. United States, 142 F.2d 805 (4 Cir. 1944), cert. denied, 322 U.S. 741, 64 S.Ct. 1054, 88 L.Ed. 1574.
Mackey and King, both black, claim that their constitutional rights were violated since there were no blacks on the petit jury. It is true, of course, that the Government may not purposefully or deliberately deny-to Negroes participation as jurors in the administration of justice due to racial prejudice and discrimination. Alexander v. Louisiana, 405 U.S. 625, 92 S.Ct. 1221, 31 L.Ed.2d 536 (1972); Swain v. Alabama, 380 U.S. 202, 85 S.Ct. 824, 13 L.Ed.2d 759 (1965). However, the mere fact that a defendant in a particular case is tried by an all-white jury is not sufficient to establish a denial of his constitutional rights. Swain v. Alabama, supra; United States v. Canty, 422 F.2d 358 (4 Cir. 1970). No fact tending to show racial discrimination other than the absence of blacks on the jury has been alleged or shown.
Mackey and King-are correct in their claim that the sentences on two counts of the three-count indictment under 18 U.S.C. § 2113 must be vacated, since all counts stem from the same oc-, currence. The case is therefore remanded to the district court for vacating the sentences on two counts once the judgments of conviction have become final. United States v. Spears, 442 F.2d 424 (4 Cir. 1971).
We have carefully considered the additional claims advanced by Mackey and King and have found them to be without merit.
Affirmed and remanded.
. 41 U.S.L.W. 3335 (Jan. 16, 1973).
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UNITED STATES of America, Plaintiff-Appellant, v. Arnold F. HABIG and Jerome M. Schroering, Defendants-Appellees.
No. 71-1654.
United States Court of Appeals, Seventh Circuit.
Argued Sept. 14, 1972.
Decided Jan. 24, 1973.
Certiorari Denied May 7, 1973.
See 93 S.Ct. 2145.
Stanley B. Miller, U. S. Atty., Indianapolis, Ind., Fred B. Ugast, Tax Division, John P. Burke, Atty., U. S. Department of Justice, Washington, D. C., for plaintiff-appellant.
Fred P. Bamberger, Evansville, Ind.; John W. Houghton, Indianapolis, Ind., for defendants-appellees.
Before SWYGERT, Chief Judge, and KILEY and FAIRCHILD, Circuit Judges.
SWYGERT, Chief Judge.
This appeal is from an order by the district court suppressing the use of certain evidence in a criminal tax evasion prosecution. The evidence was obtained by Government agents during the prein-dictment investigation. Entered pursuant to a motion under Fed.R.Crim.P. 41(e), the order followed an evidentiary hearing and was based on findings of fact and conclusions of law made by the district judge. The hearing was conducted in conformity with the remand ordered by this court in an earlier appeal. United States v. Habig, 413. F.2d 1108 (7th Cir., 1969).
The issues in this appeal differ materially from those presented when the case was before us initially. The Government now contends that the decision in United States v. Dickerson, 413 F.2d 1111 (7th Cir., 1969), does not control the disposition of the issues here despite its earlier concession to the contrary. This shift of position requires that we first decide a corollary issue: whether the “law of the case” doctrine precludes our resolution of the main issue. A separate question relates to whether any fourth amendment violations occurred during the Government’s investigation which would require suppression of the questioned evidence. It was not necessary for us to reach this last issue in the earlier appeal because we were of the view that an application of the Dickerson rule was sufficient to resolve the question.
Briefly, the relevant facts developed at the hearing are as follows. On February 15, 1963 Charles E. Lawrence, an agent of the Internal Revenue Service, was assigned the routine civil audit of a consolidated income tax return filed by the Jasper Corporation for the year ending June 30, 1961. The consolidated return covered eleven corporations, ten of them subsidiaries of the Jasper company. The agent was also assigned the civil audit of the separate tax returns of three of the subsidiary companies for the year ending June 30, 1960. During its progress, the audit was expanded to include other fiscal years.
On the recommendation of a firm of independent certified public accountants which had prepared the returns, Seid-man & Seidman, the agent in February 1963 visited Jerome M. Schroering, the comptroller of the Jasper company and each of its subsidiaries. After identifying himself and stating his assignment, Lawrence secured Sehroering’s cooperation for an examination of the records of Jasper and its subsidiaries at their respective offices.
Lawrence spent from March to July of 1963 examining the records of Jasper and four subsidiary companies. As a result of his examination, Lawrence discovered certain discrepancies which led to his belief that a tax fraud had been perpetrated through records of fictitious intercompany sales of lumber. Lawrence thereupon submitted a referral report “for potential fraud cases” to his group supervisor, and at the end of March, 1964 the ease was accepted by the Intelligence Division of the_ Internal Revenue Service for a full-scale investigation. Special Agent Russell C. Hicks was assigned to conduct the investigation with the aid of agent Lawrence. The district judge found that the investigation “from its inception was upon Arnold F. Habig and Jerome M. Schroering.” Habig was the largest single stockholder of the corporations and their chief executive officer. After Hicks’ assignment, Lawrence at Hicks’ direction obtained and examined numerous corporate records. On September 21, 1964 Hicks and Lawrence met by appointment with Schroering at the Jasper corporation offices. Hicks, upon being introduced to Schroering, stated: “I am a Special Agent with the Intelligence Division; Mr. Kelly [of Seidman] knows what my job is. I am here to determine if there is [sic], any criminal aspects involved in the case.” Hicks then requested and received permission from Schroering to examine additional books and records of the corporations, which the agents subsequently spent considerable time examining. They also copied some of the documents being examined.
The investigation continued into 1965, when Hicks requested that Schroering provide him with additional documents. Schroering complied, and had the assembled records delivered to the offices of the Evansville company where Hicks and Lawrence examined them. During September 1965 the two agents met with Schroering and Habig in the offices of the Intelligence Division of the IRS. At the meeting, which was Habig’s first personal contact with either of the agents, both Habig and Schroering were interrogated regarding the affairs under investigation. The district court found that no warnings of constitutional rights were given nor was either defendant advised that he was the subject of a criminal investigation. Subsequently, between November 1965 and February 1966, the agents copied numerous documents and records of the corporations. The district court found that this copying was undertaken in a secretive manner and without the consent of either Sehroering or Habig. In August an indictment was returned against these two defendants.
The district judge found that the agents had acted improperly in their conduct of the investigation after January, 1964:
The plaintiff’s agents after February 11, 1964 had the duty upon the first contact with defendants to advise them of their constitutional rights and advise them that they were the subject of a criminal investigation. The statements, information and leads to evidence obtained by the plaintiff’s agents from the defendants after February 11, 1964 were illegally obtained by reason of the failure of the plaintiff’s agents to fulfill such duty as the criminal investigation was focused on the two (2) defendants from and after February 11, 1964.
Moreover, the district judge inferred “that the corporations and the defendants would not have consented to the criminal investigation had they known of the deceit practiced by plaintiff’s agents prior to September 21, 1964,” in failing to warn the defendants of the changed nature of the ongoing investigation.
I
The “law of the ease” doctrine comes typically to bear when an appellate court has before it for a second time a controversy in which it has previously made a ruling of law. Strictly applied, the doctrine serves to bar an attack on the prior ruling by either party to the suit, much like the doctrine of res judicata. This court, however, has not adhered to a rigid application of the doctrine. Many years ago, Judge Evans wrote:
[T]he view that appeals to us, and which we adopt, merely recognizes the law of the case as one of public policy and private peace, and one to be followed generally, and departed from rarely. It is, however, not an inexorable rule, and should not be applied where the law as announced is clearly erroneous; and establishes a practice which is contrary to the best interests of society, and works a manifest injustice in the particular case. Luminous Unit Co. v. Freeman-Sweet Co., 3 F.2d 577, 580 (7th Cir., 1924).
See also Kaku Nagano v. Brownell, 212 F.2d 262 (7th Cir., 1954); Bowles v. Good Luck Glove Co., 150 F.2d 853 (7th Cir.), cert. denied, 326 U.S. 794, 66 S.Ct. 484, 90 L.Ed. 483 (1945); LeBold v. Inland Steel Co., 136 F.2d 876 (7th Cir.), cert. denied, 320 U.S. 787, 64 S.Ct. 196, 88 L.Ed. 473 (1943). This view is peculiarly appropriate here. The Government in the first appeal conceded that the rule we would fashion in Dickerson should apply to the instant prosecution. The concession was improvident and led us to imply that the rule announced in Dickerson controlled this case. As we shall demonstrate, that implication was erroneous.
II
In Dickerson we held that “Miranda warnings must be given to the taxpayer by either the revenue agent or the special agent at the inception of the first contact with the taxpayer after the case has been transferred to the Intelligence Division.” 413 F.2d at 1116-1117. The question before us here is whether the rule announced in Dickerson applies to corporate records and leads obtained by internal revenue agents for use as evidence in a criminal prosecution. We hold that it does not.
It is well established that a corporate officer or other custodian of corporate books has no constitutional right to refuse production of corporate records in response to a lawful request therefor even though the records may incriminate him personally. Wilson v. United States, 221 U.S. 361, 31 S.Ct. 538, 55 L.Ed. 771 (1911). A corporation must submit its books and records whenever properly required to do so, and, since the privilege against self-incrimination is a purely personal one, it cannot be utilized on behalf of a corporation. United States v. White, 322 U.S. 694, 699, 64 S.Ct. 1248, 88 L.Ed. 1542 (1944). It necessarily follows that a corporate officer, even though he is a prospective criminal defendant, is not entitled to Miranda warnings when requested to produce corporate records. In such a situation Dickerson does not apply.
In support of their position, the defendants rely on Curcio v. United States, 354 U.S. 118, 77 S.Ct. 1145, 1 L.Ed.2d (1957). That case held that a custodian of a union’s books cannot be compelled by contempt order to reveal the whereabouts of the books after he had testified that his refusal to produce the books was based on the fact that he did not then possess them. The case is inappo-site here. No claim is made that either Habig or Schroering ever asserted that the corporate records requested by the agents were not possessed by them and that the deception found by the trial court to have been practiced served subsequently to induce their unknowing revelation of the location of absent records. Indeed, the fact that all the records requested by the agents were produced leaves the defendants no room to argue that the situation here falls within the ambit of Curcio.
III
The defendants contend that the fourth amendment rights of their corporations were violated because they, as corporate officers, were not given Miranda-type warnings required under the fourth amendment to assure a knowing and intelligent consent to search. We reject this contention. This court only recently held that warnings required by the fifth and sixth amendments under Miranda are not sine qua non to a valid waiver of fourth amendment rights. United States v. Young, 471 F.2d 109 (7 Cir. 1972). In that case the defendant had invited police officers into his home and invited them to “look around.” They found and seized incriminating evidence in the personal possession of the defendant. We held that the fourth amendment required no Miranda-type warnings in advance of the search in that situation; a fortiori, no such warnings need be given to custodians of corporate records during a criminal tax investigation.
IV
The district judge held that “deceit” had been practiced by agents Lawrence and Hicks prior to September 21, 1964; on that date Hicks informed Schroering that he was a Special Agent of the Intelligence Division and that a criminal investigation was underway. The deceit referred to by the judge encompassed the period from March 27, 1964, when the Intelligence Division started a full-scale criminal investigation, to the September 21 meeting. The judge found that neither defendant was aware during that period that a criminal investigation was then in progress or that Hicks had been assigned as a Special Agent to conduct the investigation. He further found that the true nature of the investigation was actively concealed from the defendants and all others eon-nected with Jasper and its subsidiaries: “Mr. Hicks . . . remained submerged from the view of the taxpayers and secretly conducted the search for evidence of crime through the facade of Mr. Lawrence who was accepted and known to everyone as the civil agent of the Internal Revenue Service.” Finally, the judge found that the corporate records assembled by Schroering for the agents' inspection in a private room of the Evansville Veneer & Lumber Company offices were photocopied by the agents “behind closed doors without the permission or authorization or knowledge of anyone, including the defendants.” The last finding has no relevance to the issue before us. The undisputed fact is that these records were assembled and made available to the agents at the direction of Schroering for the acknowledged purpose of inspection. Whether they merely looked at the records or copied them, even clandestinely, is beside the point.
It is not to be gainsaid, nonetheless, that corporations do have rights under the fourth amendment that may be asserted under certain circumstances. In a Clayton Act civil prosecution, this court held in Knoll Associates v. FTC, 397 F.2d 530 (7th Cir., 1968), that the theft of corporate documents which were turned over to the Government for its use constituted an unreasonable search and seizure within the meaning of the fourth amendment and that the corporate defendant was entitled to invoke this constitutional protection. Similarly, corporate officers may have fourth amendment rights with respect to corporate records. In Mancusi v. DeForte, 392 U.S. 364, 88 S.Ct. 2120, 20 L.Ed.2d 1154 (1957), a union officer was protected from a warrantless search of a union office (jointly shared by the officer) from which union records were seized. Also see United States v. Rosenberg, 416 F.2d 680 (7th Cir., 1969).
In the case before us there was no theft of corporate records nor any other form of trespass on corporate property. The fact that a criminal investigation had been started was concealed from the defendants for a period of time did not make involuntary the otherwise voluntary consent of Schroering to inspection of the corporate records. Schroering was aware of Lawrence’s identity as an Internal Revenue agent, and Schroering had no constitutional privilege to refuse the production of corporate records when Lawrence so requested, provided the records requested were relevant to tax matters under investigation. It was his duty to make the records available regardless of whether the investigation had shifted from a civil to a criminal emphasis or whether he might himself be incriminated. Wilson v. United States, supra; see Curcio v. United States, supra; United States v. Sclafani, 265 F.2d 408, 415 (2d Cir.), cert. denied, 360 U.S. 918, 79 S.Ct. 1436, 3 L.Ed.2d 1534 (1959). The same is true with respect to Habig. It is irrelevant that no summons, subpoena, or search warrant was used. If production of the records had been refused, the agents could have obtained them by summons under 26 U.S.C. §§ 7602, 7604. The fact that the agents did not resort to this measure does not mitigate against the consensual production of the records. Greene v. United States, 296 F.2d 841, 843 (2d Cir., 1961).
The order of suppression is vacated insofar as that order covered the corporate records of Jasper and its subsidiaries and any leads which the Government agents obtained from those records during their investigation. In all other respects the order is affirmed, and the case is remanded for trial.
. The ten subsidiaries were: The Borden Cabinet Company; Evansville Veneer & Lumber Company; Cabinet Manufacturing Corporation; Jasper American Manufacturing Company; Jasper Style Masters, Inc.; S. S. & S. Manufacturing Company; Lafayette Manufacturing Company; W. W. Kimball Company; Kimball Piano, Ine.; and Habig Manufacturing, Inc.
. The Government concedes that Dickerson serves to bar the admission into evidence of all oral statements made by Schroering and Habig after Hicks came into the case. We do not, therefore, modify that portion of the district court order suppressing oral statements.
. Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966).
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UNITED STATES of America, Plaintiff-Appellee, v. Jack BILLINGSLEY, Defendant-Appellant.
No. 72-1645.
United States Court of Appeals, Sixth Circuit.
Feb. 21, 1973.
Ivan E. Barris, Detroit, Mich., for defendant-appellant.
James W. Russell, Asst. U. S. Atty., for plaintiff-appellee; Ralph B. Guy, Jr., U. S. Atty., Flint, Mich., on brief.
Before PECK and MILLER, Circuit Judges, and O’SULLIVAN, Senior Circuit Judge.
PECK, Circuit Judge.
The appellant was tried before a jury and convicted of a violation of 18 U.S.C. § 1951, known as the Hobbs Act, which amended the Anti-Racketeering Act, for forcing the hiring of unwanted and superfluous workers by threatening a work stoppage. The case arose from an incident growing out of the construction of a warehouse in Flint, Michigan, to be built directly under some high tension lines which ran perpendicular to the length of the warehouse. Six high tension lines crossed the warehouse, each one of which carried 138,000 volts of electricity.
The construction company, the W. H. Mechem Company, arranged in advance with the power company to de-energize the three lines closest to that portion of the warehouse directly beneath the high tension wires. On the Sunday morning when this work was to be done, the appellant, the business agent of the union local, whose duties included allocation of manpower, arrived at the job site with about ten experienced journeymen iron-workers. He had a conversation with Dewey Mechem, the job manager, which formed the basis for the appellant’s eventual conviction.
Of the 12 ironworkers on this job, one was a “book man” '(an experienced journeyman tradesman) from another local, and 11 were “permit men” (available men who were given permits to work by the business agent of the local union); permit men are less experienced than book men. Mechem testified that the appellant stated that unless he hired five of the men with him he would shut the job down by causing a labor dispute. The appellant testified that he requested, out of a concern for safety, that five journeymen ironworkers be hired because of their greater experience. The five men were hired, although a foreman testified that he had to shut down a crane at noon because he could not get any work out of the five men hired at the insistence of the appellant. In addition, evidence was introduced which tended to show that the men with the appellant had been drinking prior to the time they arrived at the job site.
At trial, the central theory of the defense was that the appellant was acting in his capacity of business agent for the union local and was motivated by a concern for the safety of the men. Accordingly, the appellant contends that when the District Court agreed to give the government’s proposed instruction No. 1:
“I charge you that under the statute it is not necessary that Mr. Billingsley received any direct benefit; as used in the statute, the term extortion includes obtaining from any employer by the use of actual or threatened force, violence and fear, money in the form of wages to be paid to employees for imposed and unwanted services.”
the defense was entitled to have its proposed instruction No. 3 given to the jury. The appellant argues that this instruction sets out the accepted principle that the Hobbs Act does not curtail legitimate labor demands:
“Ladies and gentlemen of the jury, the anti-racketeering statute under which the charges are based has no reference or bearing on action by a labor leader, honestly acting and representing members of his union. It has reference to and bears on interference with interstate commerce by the compulsory payment of money extorted by a labor leader. The act clearly is protective to labor organizations, and labor members and their membership, as it is to employers.”
The gravamen of the appellant’s objection is that the government’s instruction fails to state that the Hobbs Act does not prohibit all demands pertaining to a labor dispute, but only prohibits those demands that are motivated solely by an intent to commit extortion. The government’s position is that since this theory of the defense was set forth in the general portions of the Court’s charge, no specific instruction was required. United States v. Wingo, 394 F.2d 484 (6th Cir. 1968). The issue, then, is whether the general charge of the Court contained the substance of the requested instruction. In the relevant part of the Court’s general instruction, the Court instructed the jury that:
“. . . the principal issue before you is the intent with which the defendant threatened to call a work stoppage. The government claims that it was done with the intent and purpose of requiring the Mechem Company to put on and use unwanted and superfluous employees. .The defendant claims that is what was done for the purpose of achieving safety in the work operation. As I have already indicated, the burden is upon the government to prove their claim, or theory, beyond a reasonable doubt.”
This portion of the charge sets forth the theory of each party clearly and concisely. Other instructions described the offense in the terms of the statute. It is not alleged that the jury was either confused or misled. It is presumed that the jury was one of average intelligence which could evaluate instructions describing the offense with reference to the statutory language and setting out the contentions of the adverse parties; this jury sat for two days, and, in light of this and other instructions, must be presumed to have known the elements of the offense with which the defendant was charged and the theories of the defense and the prosecution. United States v. Malfi, 264 F.2d 147, 151 (3d Cir.), cert. denied, 361 U.S. 817, 80 S.Ct. 57, 4 L.Ed.2d 63 (1959); United States v. Gordon, 242 F.2d 122, 126-127 (3d Cir. 1957).
In addition, the denial of a proffered request which is in any respect incorrect is not error. United States v. Kelly, 349 F.2d 720, 759 (2d Cir. 1965). Although the appellant’s requested instruction stated that legitimate labor activities are not prohibited by the Hobbs Act, it failed to state that the ramifications of legitimate labor activities could become unlawful. See United States v. Green, 246 F.2d 155, 160 (7th Cir. 1957), in which the Court refused to approve a similar instruction that stated only that legitimate labor disputes were not prohibited by the Hobbs Act. Our review of the record of this case and the relevant authorities satisfies us that the appellant was not prejudiced by the Court’s refusal to give this instruction.
Secondly, the appellant contends that the District Court should not have admitted evidence of the appellant’s bad reputation. At least three circuits have considered this question, and each has held that evidence of the defendant’s bad reputation is admissible in a Hobbs Act prosecution to show that the victim of the threats acted out of fear and that the victim’s fear was reasonable. United States v. Tropiano, 418 F.2d 1069 (2d Cir. 1969), cert. denied, 397 U.S. 1021, 90 S.Ct. 1258, 25 L.Ed.2d 530 (1971); Carbo v. United States, 314 F.2d 718 (9th Cir. 1963), cert. denied, 377 U.S. 953, 84 S.Ct. 1625, 12 L.Ed.2d 498 (1964); Callanan v. United States, 223 F.2d 171 (8th Cir.), cert. denied, 350 U.S. 862, 76 S.Ct. 102, 100 L.Ed. 764 (1955). The appellant asks that this Court decline to follow these decisions since there is a strong possibility that a defendant will be convicted on the evidence of his bad reputation alone.
We have considered the appellant’s contentions, and the decisions of the Second, Eighth and Ninth Circuits and we find that the reasoning of these decisions is the more persuasive. These decisions rest upon the fact that extortion is an essential element of the Hobbs Act and to prove extortion, it is essential to show that there was a generation of fear in the victim. The reasonableness of actual or anticipated fear is a vital element in these cases, and the reputation of the defendant therefore becomes relevant since such a reputation frequently conveys a tacit threat of violence. Accordingly, the reputation of the defendant is admissible not to show that he was a bad man and likely to commit a crime, but to indicate that the threats of the defendant were not idle. We agree with the other circuits which have considered this question and hold that the evidence of the bad reputation of the defendant is admissible for the limited purpose of showing the fear and its reasonableness caused by the threats of the defendant.
The appellant next contends that if the reputation evidence is admissible, as we hold, a reversal is nevertheless required in this case because the Court failed to give a cautionary instruction to the jury limiting the use of this potentially prejudicial evidence. However, this issue is not properly before this Court because the defense counsel failed to bring to the Court’s attention its failure to give such an instruction. The record shows that the Court indicated at the time of his ruling to admit the reputation evidence that a cautionary instruction would be given as requested by the defense counsel; the instruction was not given, and no objection to this oversight was made. A party may not assign as error any portion of the charge or omission from the charge unless he objects thereto before the jury retires. Rule 30, F.R.Crim. Proc., Wilson v. Wiman, 386 F.2d 968 (6th Cir. 1967), Cowen v. United States, 241 F.2d 105 (6th Cir. 1957). The purpose of this rule is to require the counsel to act in time to give the judge an opportunity to correct his error. Rucker v. United States, 92 U.S.App.D.C. 336, 206 F.2d 464 (D.C.Cir.1953). The relatively slight nature of the reputation evidence in this case precludes a finding of plain error which would allow, us to consider the question in the absence of a timely objection. In Carbo and Tropiano, supra, the reputation evidence involved acts of violence and former criminal acts, and limiting instructions were given by the Court, and were upheld on appeal. In this case, however, the reputation evidence was only that the defendant was “sort of domineering, dictating to contractors,” and the prejudicial nature of this testimony is so slight that the failure to give a cautionary instruction does not constitute plain error.
The appellant contends that the trial court failed to instruct the jury that an essential element of the Hobbs Act is that the victim must be placed in either economic or physical fear. However, since no objection to this alleged error was made by defense counsel, we must first consider whether the oversight amounts to plain error prejudicial to the appellant. The omission of an allegedly necessary instruction does not constitute plain error if the instructions viewed in their entirety adequately protected the defendant. United States v. Harris, 458 F.2d 670, 678 (5th Cir. 1972). In the general charge to the jury concerning the statutory offense in issue, the Court said:
“The term ‘extortion’ means the obtaining of property from another induced by wrongful use of force, violence, or fear. The word fear should be given its ordinary meaning as including fear of economic loss. It is not limited to loss by injury, and hence the threat of a work stoppage would come within the definition of an economic loss of the victim.”
In addition, we note that the existence of fear in the mind of the victim was not placed in issue by the defense either during the trial or in closing argument. When the evidence and defense counsel’s argument do not raise an element of the crime as an issue in the case, and the trial court is not apprised that it must prepare a specific instruction to cover the issue, the failure of the court should not be treated as plain error. United States v. McKenzie, 409 F.2d 983 (2d Cir. 1969). There is nothing in the record of this case that would lead us to believe that the omission of a specific instruction on this point constituted reversible error.
The appellant also contends that the Court should have permitted him to reopen the case for the limited purpose of introducing additional evidence concerning the height of the crane relative to the overhead wires. Inasmuch as this decision is vested in the sound discretion of the trial court, and inasmuch as courts should be extremely reluctant to grant reopeningsyand inasmuch as evidence of the height of the boom was available to the defense and was introduced in evidence during the trial, we cannot find that the District Court abused its discretion in denying the appellant’s motion to reopen the case for this purpose. United States v. Wade, 364 F.2d 931 (6th Cir. 1966), Eason v. United States, 281 F.2d 818 (9th Cir. 1960).
We have considered the remaining contentions of the appellant, including the contention that a new trial should have been granted, and we find that they are without merit. The judgment of the District Court is affirmed.
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Pedro GONZALES et al., Plaintiffs-Appellants, v. Clifton W. CASSIDY, Jr., et al., Defendants-Appellees, John Richard Hayes, III, et al., Plaintiffs-Intervenors-Appellants.
No. 71-3344.
United States Court of Appeals, Fifth Circuit.
Feb. 15, 1973.
William L. Garrett, Edward W. Dunbar, Andrew Monson, Dallas, Tex., for plaintiffs-appellants.
Crawford C. Martin, Atty. Gen., Jay Floyd, Asst. Atty. Gen., Austin, Tex., for defendants-appellees.
Before DYER, Circuit Judge, SKELTON, Judge, and INGRAHAM, Circuit Judge.
Hon. Byron G. Skelton, of the U. S. Court of Claims, sitting by designation.
. The text of these sections as they existed at the time of the suit was as follows:
Sec. 4. The operator of every motor vehicle which is in any manner involved in an accident within the State, in which any person is killed or injured or in which damage to the property of any one person, including himself, to an apparent extent of at least One Hundred Dollars ($100) is sustained, shall within ten (10) days after such accident report the matter in writing to the Department. Such report, the form of which shall be prescribed by the Department, shall contain information to enable the Department to determine whether the requirements for the deposit of security under Section 5 are inapplicable by reason of the existence of insurance or other exceptions specified in this Act. Any written report of accident in accordance with Section 44, Chapter 421, Acts of the Fiftieth Legislature, Regu- . lar Session, 1947, as last amended by Chapter 363, Acts of the Fifty-third Legislature, Regular Session, 1953, compiled as Article 6701d, Section 44, Vernon’s Texas Civil Statutes, if actually made to the Department, shall be sufficient provided it also contains the information required herein. The Department may rely upon the accuracy of the information unless and until it has reason to believe that the information is erroneous. If such operator be physically incapable of making such report, the owner of the motor vehicle involved in such accident shall, within ten (10) days after learning of the accident, make such report. The operator or the owner shall furnish such additional relevant information as the Department shall require.
Security; determination of amount; suspension of license and registrations ; notice; exceptions
Sec. 5. (a) If twenty (20) days after the receipt of a report of a motor vehicle accident within this State which has resulted in bodily injury or death, or damage to the property of any one person of at least One Hundred Dollars ($100), the Department does not have on file evidence satisfactory to it that the person. who would otherwise be required to file security under Subsection (b) of this Section has been released from liability, or has been finally adjudicated not to be liable, or has executed a duly acknowledged written agreement providing for the payment of an agreed amount in installments with respect to all claims for injuries or damages resulting from the accident; the Department shall determine the amount of security which shall be sufficient in its judgment, and in no event less than Two Hundred Dollars ($200) to satisfy any judgment or judgments for damages resulting from such accident as may be recovered against each operator or owner.
(b) The Department shall, within sixty (60) days after the receipt of such report of a motor vehicle accident, suspend the license and all registrations of each operator and owner of a motor vehicle in any manner involved in such accident, and if such operator or owner is a nonresident the privilege of operating a motor vehicle within this State, and the privilege of the use within this State of any motor vehicle owned by him unless such operator, owner or operator and owner shall deposit security ' in the sum so determined by the Department and in no event less than Two Hundred Dollars ($200), and unless such operator and owner shall give proof of financial responsibility; provided notice of such suspension shall be sent by the Department to such operator and owner not less than ten (10) days prior to the effective date of such suspension and shall state the amount required as security and the necessity for proof of financial responsibility. Where erroneous information is given the Department with respect to the matters set forth in subdivisions 1, 2 and 3 of Subsection (c) of this Section, it shall take appropriate action as hereinbe-fore provided, within sixty (60) days after receipt by it of correct information with respect to said matters.
Duration of suspension
Sec. 7. The license and registration and nonresident’s operating privilege suspended as provided in Section 5 shall remain so suspended and shall not be renewed nor shall any such license or registration be issued to such person until:
1. Such person shall deposit and file or there shall be deposited and filed on his behalf the security and proof required under Section 5 and under this Section; or
2. Two (2) years shall have elapsed following the date of such accident and evidence satisfactory to the Department has been filed with it that during such period no action for damages arising out of the accident has been instituted, provided such person files proof of financial responsibility; or
3. Evidence satisfactory to the Department has been filed with it of a release from liability, or a final adjudication of nonliability, or a duly acknowledged written agreement, in accordance with subdivision 4 of Section 6; provided, however, in the event there shall be any default in the payment of any installment under any duly acknowledged written agreement, then, upon notice of such default, the Department shall forthwith suspend the license and registration or nonresident’s operating privilege of such person defaulting which shall not be restored unless and until
(a) Such person deposits and thereafter maintains security as required under Section 5 in such amount as the Department may then determine and files proof of financial responsibility; or
(b) Two (2) years shall have elapsed following the date when such security was required and during such period no action upon such agreement has been instituted in a court in this State, provided such person gives proof of financial responsibility.
INGRAHAM, Circuit Judge:
The question in this appeal is whether plaintiff-appellant Gonzales and the class he seeks to represent are bound by the res judicata effect of a prior class suit involving the same class (represented by a different named plaintiff), the same defendants and the same issues. We agree with Gonzales that the class was inadequately represented when the class representative in the prior suit failed to appeal from the trial court’s judgment. We reverse and remand.
The prior suit began in May 1969. Antonio Gaytan filed suit as a class action against Clifton Cassidy, Chairman of the Texas Department of Public Safety, in the United States District Court for the Western District of Texas, seeking a declaratory judgment that the Texas Safety Responsibility Act was unconstitutional and an injunction against its enforcement. Gaytan, an uninsured motorist, had been involved in an automobile accident in Texas, and pursuant to §§ 4, 5(a), 5(b) and 7 of the Act his driver’s license and the registration receipt on his vehicle were suspended without a hearing on liability or fault because he did not post security - — as required by the Act — for the damages claimed by the adverse party. A three-judge court was convened, 28 U.S.C., §§ 2281 and 2284, and denied Gaytan and his class any relief by its holding that the Act was constitutional. On direct appeal to the Supreme Court, 28 U. S.C. § 1253, the district court’s judgment was vacated, and the case was remanded for reconsideration in light of Bell v. Burson, 402 U.S. 535, 96 S.Ct. 1586, 29 L.Ed.2d 90 (1971), which was decided after the three-judge court’s decision.
In Bell the Supreme Court held the Georgia Motor Vehicle Safety Responsibility Act unconstitutional as violative of procedural due process. The Georgia Act, like the Texas statute under attack in Gaytan, provided that the motor vehicle registration and driver’s license of an uninsured motorist involved in an accident would be suspended unless the motorist posted security for the amount of damages claimed by an aggrieved party, but did not provide for a hearing on liability or fault prior to the suspension.
On remand the three-judge court accordingly held the Texas Act unconstitutional. But, regarding the scope of relief to which Gaytan and his class were entitled, the court held:
“This order shall apply retroactively to the Plaintiff ANTONIO R. GAY-TAN, and prospectively from June 30, 1971, to all members of the class represented by said Plaintiff.”
Having obtained full relief for himself, Gaytan did not appeal the court’s denial of retroactive relief to the other members of his class.
The present action began in the Northern District of Texas on June 24, 1971, after the Supreme Court vacated the first Gaytan decision, but before the case was heard on remand. Pedro Gonzales filed a class action against Cassidy, the defendant in Gaytan, seeking the same relief as had been sought by Gay-tan in his suit. On July 1, 1971, the Gonzales court entered a temporary restraining order in favor of Gonzales and the other named plaintiffs in his action, prohibiting the defendant from suspending their licenses and vehicle registration receipts. This was before the amended order in Gaytan was rendered but only one day after the first order denying retroactive relief to all of the class except Gaytan was entered. On August 19, 1971, the Gaytan court entered its amended and final order. Then on August 25, 1971, the Gonzales court ordered a show cause hearing as to why its temporary restraining order of July 1 should not be made permanent. This hearing was held on September 28 and the court reasoned that, because Gayton v. Cassidy was a class action and because Gonzales and the class he sought to represent were members of the Gay-tan class, the principles of res judicata foreclosed their claims. Gonzales appeals claiming that Gaytan’s failure to appeal the final three-judge order in Gaytan v. Cassidy rendered his representation of the class inadequate, therefore precluding res judicata from attaching to that judgment.
To answer the question whether the class representative adequately represented the class so that the judgment in the class suit will bind the absent members of the class requires a two-pronged inquiry: (1) Did the trial court in the first suit correctly determine, initially, that the representative would adequately represent the class ? and (2) Does it appear, after the termination of the suit, that the class representative adequately protected the interest of the class? The first question involves us in a collateral review of the Gaytan trial court’s determination to permit the suit to proceed as a class action with Gaytan as the representative, while the second involves a review of the class representative’s conduct of the entire suit — an inquiry which is not required to be made by the trial court but which is appropriate in a collateral attack on the judgment such as we have here. Our discussion will treat each question separately.
The starting point in a trial court’s determination to allow a suit to proceed as a class action is Rule 23(a) of the Federal Rules of Civil Procedure, which provides the prerequisites to a class action as follows:
One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
The primary contention in this appeal is that Gaytan did not meet the requirements of 23(a) (4). Remembering that at this point we are only concerned with the court’s initial determination that Gaytan would be an adequate representative, we look to the criteria on which the decision should be based. There are two: (1) the representative must have common interests with the unnamed members of the class; and (2) it must appear that the representative will vigorously prosecute the interests of the class through qualified counsel. We have little difficulty in concluding that Antonio Gaytan met both of these requirements when he filed his suit in May of 1969. He was an uninsured motorist as were the members of his class; he had an automobile accident in Texas and had failed to post the necessary security under the Act as had the members of his class; his license and registration receipt were suspended without a hearing on liability or fault just as occurred to the members of his class. Likewise, he had the same basic interests in not having his license suspended or in having the suspension revoked as did the other members of his class. It is clear then that Gaytan had common interests which coincided with those of the class he sought to represent. Furthermore, there are no allegations that Gaytan’s attorney was not fully qualified to handle the case, or that, initially at least, he would not vigorously prosecute the action. The fact that Gaytan’s counsel appealed to the Supreme Court after the three-judge court’s adverse decision and subsequently won a reversal of that decision points significantly to counsel’s qualification to handle the litigation. Therefore we cannot refuse to give res judicata effect to the judgment in Gaytan v. Cassidy on the basis that the trial court in that case erroneously determined that Gaytan would be an adequate representative of the class.
The second question is whether Gay-tan’s conduct of the entire suit was such that due process would not be violated by giving res judicata effect to the judgment in that suit. This is the crucial issue when the judgment in a class action is under collateral attack. Our first step, however, is to examine subdivisions (b) and (c) of Rule 23 in order to establish the proper context in which to make this inquiry.
Subdivision (b) of Rule 23 provides :
An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:
(1) the prosecution of separate actions by or against individual members of the class would create a risk of
(A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or
(B) adjudications with respect to individual members of the class which would as a practical matter be disposi-tive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or
(2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunc-tive relief or corresponding declaratory relief with respect to the class as a whole; or
(3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.
Gaytan v. Cassidy obviously fits within (b)(2) — thus, to be specific, we are dealing with the res judicata effect of the judgment in a (b)(2) type of class action. Subdivision (c) (3) provides: “The judgment in an action maintained as a class action under subdivision (b)(2), whether or not favorable to the class, shall include and describe those whom the court finds to be members of the class . .” Although the Gaytan court’s opinion, neither originally nor on remand, describes the class it considered Gaytan to be representing, we agree with the lower court here that Gonzales and the class he seeks to represent were members of the Gay-tan class and would at first blush appear bound by the Gaytan decision. But our inquiry into the binding effect of Gay-tan does not end with Rule 23 for, “although thus declaring that the judgment in a class action includes the class, as defined, subdivision (c)(3) does not disturb the recognized principle that the court conducting the action cannot predetermine the res judicata effect of the judgment; this can be tested only in subsequent action. See Restatement, Judgments § 86, comment (h), § 116 (1942).” Advisory Committee’s Notes to Rule 23 F.R.C.P., 28 U.S.C.A. at 301; Moore 23.60 at 1203. As a general rule though, a judgment in a class action will bind the absent members of the class. The exception to this general rule is grounded in due process. Due process of law would be violated for the judgment in a class suit to be res judicata to the absent members of a class unless the court applying res judicata can conclude that the class was adequately represented in the first suit. Hansberry v. Lee, 311 U.S. 32, 61 S.Ct. 115, 85 L.Ed. 22 (1942). See Sam Fox Publishing Co. v. United States, 366 U.S. 683, 691, 81 S.Ct. 1309, 6 L.Ed.2d 604 (1961); Dierks v. Thompson, 414 F.2d 453 (1st Cir., 1969); Eisen v. Carlisle and Jacquelin, 391 F.2d 555 (2nd Cir., 1968); Mersay v. First Rep. Corp. of America, 43 F.R.D. 465 (S.D.N.Y., 1968).
The 1966 amendments to Rule 23 eliminated the distinctions between true, hybrid and spurious class actions and the differing res judicata effect of each type of action, thus broadening the effect of res judicata under the amended rule. It follows then that a court — whether it be the trial court making its initial 23(a)(4) determination, or a subsequent court considering a collateral attack on the judgment in a class action — must stringently apply the requirement of adequate representation. Judge Frankel has noted:
“There are, of course, some obvious limitations in any case upon the extent to which absent parties will be concluded. For one thing, as the Advisory Committee observed, such parties have a clear right in some later litigation to attack the judgment which purports to bind them. In such a later case, at least the basic considerations going to the fairness of holding them bound will be open for reexamination. Factors which were not brought to the attention of the first court — including, most centrally, the adequacy of representation in the first suit; [citing Hansberry v. Lee, supra] — may lead to a changed perspective.”
M. Frankel, Some Preliminary Observations Concerning Civil Rule 23, 43 F.R.D. 39 (1967). And, as Justice Harlan observed: “The judgment in a class action will bind only those members .of the class whose interests have been adequately represented by existing parties to the litigation.” Sam Fox Publishing Co. v. United States, supra, 366 U.S. at 691, 81 S.Ct. at 1314. Our inquiry then into the adequacy of class representation for purposes of res judicata is made with the understanding that generally the class will be bound unless the party attacking the judgment can show that the class was inadequately represented.
What standards should determine whether Gaytan adequately represented the class in Gaytan v. Cassidy? In Mersay v. First Republic Corp. of America, supra, the trial court was making the 23(a)(4) determination of whether the named plaintiff would adequately represent the class when it said, “the primary criterion is the forthrightness and vigor with which the representative party can be expected to assert and defend the interests of the members of the class, so as to insure them due process.” Id. 43 F.R.D. at 470. This precept is equally applicable to the determination which must be made by a court when a class action judgment is under collateral attack. We hold that the primary criterion for determining whether the class representative has adequately represented his class for purposes of res judicata is whether the representative, through qualified counsel, vigorously and tenaciously protected the interests of the class. A court must view the representative’s conduct of the entire litigation with this criterion as its guidepost.
We have previously recognized that Gaytan’s 'representation was more than adequate up to the time the three-judge court entered its final order on remand. The narrow question, therefore, is whether Gaytan’s failure to appeal this order, which denied retroactive relief to all members of the class except Gaytan, constitutes inadequate representation of the class so that they are not bound by the judgment. We are compelled to hold that Gaytan’s failure to prosecute an appeal on behalf of the other members of his class rendered his representation of them inadequate. For this reason, the judgment in Gaytan v. Cassidy cannot be res judicata to the class.
Gaytan, through his attorney, vigorously represented the class until he obtained individual Relief. The problem is that he was representing approximately 150,000 persons, who, although having had their licenses and registration receipts suspended without due process, were denied any relief by the three-judge court’s prospective only application of its decision. So long as an appeal from this decision could not be characterized as patently meritless or frivolous, Gaytan should have prosecuted an appeal. Otherwise, it cannot be said that he vigorously and tenaciously protected the interests of the class he was purporting to represent, or that all members of the class had been afforded due process of law by having a full day in court. It is axiomatic that an appeal is a significant element in the judicial process. Gaytan’s failure to prosecute an appeal deprived the members of his class, whose rights were not vindicated by the three-judge court’s decision, of full participation in this process.
Appellees do not meet the argument that Gaytan’s failure to appeal rendered him an inadequate representative of the class. Instead, they advance an estoppel-type argument to support the proposition that Gonzales cannot raise the inadequate representation issue. Their position is that since counsel for Gonzales was aware that on remand the Gaytan court denied retroactive relief by his June 30, 1971 order, and finally denied such relief in its amended order of August 19, Gonzales is estopped to attack the judgment collaterally because he should have intervened in Gaytan for the purposes of appeal. We reject this contention.
First, as the' 1966 amendments to Rule 23 clearly illustrate, the purpose of a class action is to allow as few as one member of a class to prosecute an action for the benefit of the class if the requirements of 23(a) and (b) are met. This is one reason why the requirement of 23(a)(4) is stringently applied. The purpose of Rule 23 would be subverted by requiring a class member who learns of a pending suit involving a class of which he is a part to monitor that litigation to make certain that his interests are being protected; this is not his responsibility — it is the responsibility of the class representative to protect the interests of all class members.
Secondly, it would simply be inequitable to foreclose Gonzales from attacking the Gaytan judgment on the facts of our case. The Gaytan court rendered its initial order on remand denying retroactive application of its decision that the Texas Act was unconstitutional on June 30, 1971. The Gonzales court, nevertheless, entered a temporary restraining order on July 1, 1971, prohibiting the defendants in Gonzales (which are the same as those in Gaytan) from suspending plaintiffs-appellants’ licenses or registration receipts. Thereafter, a motion was filed in Gaytan for clarification of the court’s order. This •motion was granted and on August 19, 1971, the Gaytan court issued an amended order giving relief only to the named plaintiff Gaytan and to those persons whose effective date of suspension occurred after June 30, 1971. Thus, there was not a final appealable judgment in Gaytan until August 19. Meanwhile, the Gonzales court’s temporary restraining order remained in effect throughout this period of time. On August 28, 1971, the Gonzales court entered an order to show cause why its temporary restraining order should not be made permanent and set a hearing for September 28, 1971. By September 28th it was already too late for Gonzales to intervene for the purpose of prosecuting an appeal in Gaytan. Nevertheless, the Gonzales court held that Gaytan was res judicata to plaintiffs-appellants’ claims. The only remedy then available to Gonzales was to appeal the court’s decision to apply res judicata.
While some attorneys might have possessed the omniscience to have begun seeking intervention in Gaytan after that court’s June 30th decision, we cannot fault counsel here for not doing so when one day later they obtained the relief which they were seeking in another court. Also, inasmuch as the Gaytan decision on remand was subsequently amended during the time the temporary restraining order was in effect, we cannot say that counsel should have sought intervention during this time. Nor is counsel to be faulted for not seeking-intervention after August 19, 1971. The Gonzales court shortly thereafter ordered a hearing as to why the temporary restraining order should not be made permanent. To require counsel to have sought intervention in Gaytan while awaiting the hearing in Gonzales would require too much. In these circumstances the application of res judicata cannot be sustained.
On remand there will be at least two issues. The first will be whether this action may be maintained as a class action. The district court denied Gonzales’s motion to allow this suit to proceed as a class action. In light of our decision and for reasons of judicial economy, we think the district court should reexamine this decision, and if it concludes that Gonzales meets the prerequisites of 23(a) and (b), it would seem appropriate to allow a class action. The second issue will be the retroactivity question. We express no views on the resolution of this issue.
Reversed and remanded.
. Gaytan v. Cassidy, 317 F.Supp. 46 (W.D.Tex., 1970) (Three-judge court). The decision was subsequently vacated by the Supreme Court, 403 U.S. 902, 91 S.Ct. 2202, 29 L.Ed.2d 677 (1971), and reversed on remand, Gaytan v. Cassidy, No. SA69CA153 (W.D.Tex., June 30, 1971, amended August 19, 1971).
. Tex.Bev.Civ.Stat.Ann., Art. 6701h (1969).
. 317 F.Supp., at 49. The court relied on Gillaspie v. Department of Public Safety, Tex., 259 S.W.2d 177 (1953), cert. den., 347 U.S. 933, 74 S.Ct. 625, 98 L.Ed. 1084, in which the Texas Supreme Court upheld the Act under a similar constitutional attack.
. Writing for a unanimous court, Mr. Justice Brennan declared:
“Once licenses are issued, as in petitioner’s case, their continued possession may become essential in the pursuit of a livelihood. Suspension of issued licenses thus involves state action that adjudicates important interests of the licensees. In such cases the licenses are not to be taken away without that procedural due process required by the Fourteenth Amendment. [Citations omitted]. This is but an application of the general proposition that relevant constitutional restraints limit state power to terminate an entitlement whether the entitlement is denominated a ‘right’ or a ‘privilege.’ ” [Citations omitted.]
402 U.S. at 539, 91 S,.Ct. at 1589. He continued:
“[D]ue process requires that when a State seeks to terminate an interest such as that here involved, it must afford ‘notice and opportunity for hearing appropriate to the nature of the case’ before the termination becomes effective.” [Citations omitted].
Id. at 542, 91 S.Ct. at 1591.
. Gaytan v. Cassidy, No. SA69CA153 (W.D.Tex., June 30, 1971, amended August 19, 1971). The amended order clarified the original order by explaining that it granted relief only to those persons whose effective date of suspension occurred after June 30, 1971, and to Gaytan whose suspensions occurred prior to June 30.
. On appeal appellants assert that because “some of the motorists in this cause . were only the registered owners of automobiles which were driven by someone else at the time of the respective accidents,” their claims are not typical to those of Gaytan in that he was the driver of his vehicle. This contention approaches the frivolous for, although Rule 23(a)(3) requires that “the claims or defenses of the representative parties are typical of the claims or defenses of the class,” it is obvious that this is a distinction without a difference and appellants offer no reason why this distinction would prevent Gaytan from representing their interests. Gaytan was typical of the class within the meaning of Rule 23(a) (3) because he did not have interests which conflicted with those of the class, and because his claims for relief were based on the same legal or remedial theory as the appellants in the case at bar. See Katz v. Carte Blanche Corp., 52 F.R.D. 510 (W.D.Pa., 1971); Mersay v. First Rep. Corp. of America, 43 F.R.D. 465 (S.D.N.Y., 1968); 7 C. Wright and A. Miller, Federal Practice and Procedure, § 1764 at 614 (1972) [hereinafter cited as Wright and Miller].
. Since Gonzales and the other named plaintiffs fell within the group to whom only prospective relief had been granted by the Gaytan court, in that their licenses had been suspended prior to June 30, 1971, they were denied relief by the application of res judicata. Plaintiff Louanner H. Edwards was granted relief, for the reason that his license had not been suspended prior to June 30. At this time the court also denied the request that the Gonzales suit be maintained as a class action.
. We rejected appellants’ assertion that Gaytan’s claims were not typical of the class within the meaning of 23(a) (3) in note 7, supra.
. See Epstein v. Weiss, 50 F.R.D. 387 (E.D.La., 1970); Herbst v. Able, 47 F.R.D. 11 (S.D.N.Y., 1969); Dolgow v. Anderson, 43 F.R.D. 472 (E.D.N.Y., 1968),; Mersay v. First Rep. Corp. of America, 43 F.R.D, 465 (S.D.N.Y.1968). See, generally, 3B J. Moore, Federal Practice, ¶ 2302-.07 (2d Ed. 1969). [hereinafter cited as Moore]; Wright and Miller, § 1765. In Eisen v. Carlisle and Jacquelin, 391 F.2d 555, 562 (2nd Cir., 1968), the court also noted:
“[A]n essential concomitant of adequate representation is that the party’s attorney be qualified, experienced and generally able to conduct the proposed litigation. Additionally, it is necessary to eliminate so far as possible the likelihood that the litigants are involved in a collusive suit or that plaintiff has interests antagonistic to those of the remainder of the class.”
. This question necessarily requires a hindsight approach to the issue of adequate representation, and in no way reflects on the Q-aytan court’s conclusion that Gaytan would adequately represent the class.
. One distinction between members of a class in a (b)(1), (b)(2), or (b)(3), action is that absent (b),(l) and (b) (2) members do not have the privilege of opting out of the suit that is accorded to class members in a (b) (3) suit. See Research Corp. v. Asgrow Seed Co., 425 F.2d 1059 (9th Cir., 1970); Smith v. Alleghany Corp., 394 F.2d 381 (2nd Cir., 1968); Moore, ¶ 23.60 at 1202. Also, the mandatory notice requirements of 23(e) (2). do not apply to (b) (1) and (b),(2) actions even though the discretionary notice provisions of (d) (2) are applicable. As a result of these distinctions class members in (b) (1) and (b) (2) actions must necessarily rely on the representative to protect their interests.
. See, e. g. Calagaz v. Calhoun, 309 F.2d 248 (5th Cir., 1962), in which the court noted that the theory of a class action is that all members of the class are before the court in person of their representative and. can, therefore, be justly bound by the court’s decree. The court concluded, however, with the reminder that for the class to be bound it must be adequately represented.
. See generally, Moore, ¶¶ 23.01, 23.07 [1], 23.60, and App. 23.08.11.
. See, e. g., Eisen v. Carlisle and Jacquelin, supra, 391 F.2d at 562, in which Judge Medina stated: “[A]s a result of the sweeping changes in Rule 23, a court must now carefully scrutinize the adequacy of representation in all class actions.” Hohmann v. Packard Inst., 43 F.R.D. 192, 196 (N.D.Ill, 1967), rev’d on other grounds 399 F.2d 711 (7 Cir., 1968) (adequacy of representation should be considered more stringently under the amended rule); Fischer v. Kletz, 41 F.R.D. 377, 382 (S.D.N.Y., 1966) (question of adequate representation has become considerably more significant under amended Rule 23).
. This conclusion does not mean, either explicitly or implicitly, that the Graytam, court erred when it denied retroactive application of its decision, and our conclusion should not be read as questioning that decision.
. See note 15, supra.
. The problems encountered by counsel here are illustrative of the problems encountered by lawyers, trial courts and appellate courts when two or more (b) (1) or (b),(2) class actions are proceeding simultaneously in the federal courts. Perhaps a partial solution will be found in the provisions dealing with multidis-triet litigation, 28 U.S.G. § 1407.
In Texas, which has four federal districts with divisions within each district, it is particularly important for district courts to be aware of what other courts are doing and to coordinate their efforts where possible. In this regard the courts might consider adopting a procedure whereby the clerk’s office in the respective districts or divisions would circulate a list briefly summarizing the (b) (1). and (b) (2) class actions then pending.
. The Supreme Court’s recent decision in Robinson v. Neil, 409 U.S. 505, 93 S.Ct. 876, 35 L.Ed.2d 29 (1973), may furnish some guidance to the district' court.
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Agnes GELLERT and Lisa Gellert, d/b/a Danish Import Company, Appellees, v. UNITED AIRLINES, a Delaware corporation, Appellant.
No. 72-1451.
United States Court of Appeals, Tenth Circuit.
Argued and Submitted Nov. 15, 1972.
Decided Feb. 16, 1973.
Ray R. Christensen, of Christensen, Gardiner, Jensen & Evans, Salt Lake City, Utah, for appellant.
Arthur H. Nielsen, Salt Lake City, Utah (Michael Gottfredson, and Nielsen, Conder, Hansen & Henriod, Salt Lake City, Utah, with him on the brief), for appellees.
Before HILL and SETH, Circuit Judges, and CHRISTENSEN, District Judge.
SETH, Circuit Judge.
The plaintiffs brought this action against the defendant air carrier for damages alleged to have resulted from a delay in a shipment of ski clothing samples sent from New York to San Francisco.
The trial court directed a verdict for plaintiffs on the issue of liability, holding that the carrier was liable for all damages to plaintiffs’ business resulting from the delay, and submitted to the jury only the question of the amount of such damages. The jury returned a verdict against appellant in the amount of $43,000.00, and the carrier has taken this appeal.
Plaintiffs-appellees, Agnes and Lisa Gellert, mother and daughter, were importers and sellers of ski wear. They began this business in 1960, and conducted it from their home in Salt Lake City, Utah. In the spring of 1968, ap-pellees made a trip to Europe, and made arrangements with manufacturers of ski apparel to supply them on an exclusive basis. They also obtained samples of merchandise which they displayed at shows across the United States, as had been their custom. These shows were for the purpose of allowing prospective buyers to examine the samples of merchandise and place orders for them. Appellees would then order the needed goods in bulk from their European suppliers and on arrival ship the merchandise to their customers.
In the spring of 1968, appellees exhibited at the Los Angeles and Denver shows. After the Denver show, there was a show in New York, a show in Seattle, and the final show in San Francisco. Appellee, Lisa Gellert, attended and conducted the New York show, and at its conclusion the samples were packaged and addressed to appellees at their San Francisco hotel. Lisa Gellert then called appellant, United Airlines, and arranged for the shipment of the boxes of samples to San Francisco. A representative of appellant picked up the packages on Thursday, April 25, 1968, at appellee’s New York hotel. The declared value of the shipment was $1,500.00.
On Friday, Lisa Gellert arrived in San Francisco and called appellant to inquire if the shipment had arrived. It had not, and did not thereafter. The show opened Sunday, and appellees were still without the samples sent from New York. The show closed five days later. Appellees, still without the samples, received orders for approximately $4,000.-00 worth of goods, whereas the previous year, their orders at the San Fráncisco show had totaled approximately $40,000.-00. All the samples shipped from New York arrived in Salt Lake City some three days after the closing of the San Francisco show.
In addition to the loss of sales in San Francisco, appellees testified that thirteen of appellees’ European suppliers terminated business with them because of the lack of orders. Appellees asserted that they lost other sales that they had made because the orders they did get were too small for suppliers to deliver. Because of this, appellees had to cancel orders that had been placed with them and lost customers.
After appellees put on their evidence, and appellant put the applicable tariff rules into evidence, the trial court directed a verdict on the issue of liability in favor of the appellees.
Appellant’s first argument is that under the applicable tariff rules, the maximum amount of liability assumed by it as a carrier was $1,500.00, the declared value of the boxes to be shipped to San Francisco. The carrier urges that we hold that certain provisions of Rule 32 of the Official Air Freight Tariff No. 1-B applicable to this transaction limited its liability to the declared value of the shipment. This Rule 32(A) provides in pertinent part:
y“(l) In consideration of carrier’s rate for the transportation of any shipment, which rate in part is dependent upon the value of the shipment as determined pursuant to Rule 52, the shipper and all of the parties having an interest in the shipment agree that the value of the shipment shall be determined in accordance with the provisions of Rule 52 and that the total liability of the carrier shall in no event exceed the value of the shipment as so determined.
* * * * * *
“(3) Except as provided in paragraph A(4) and A(5) of this rule, the total liability of the carrier shall in no event exceed—
(a) The value of the shipment as determined pursuant to Rule 52, or
(b) The actual value of the shipment, or
(c) The amount of any damages actually sustained, whichever is the least.”
On the other hand, appellees direct us to Rule 30(3) of Official Air Freight Tariff No. 1-B which provides:
“(3) (Not applicable to U.A.) The carrier shall not be liable in any event for any consequential or special damages arising from transportation subject to tariffs governed by these rules, whether or not the carrier had knowledge that such damages might be incurred.”
“U.A.” in the above quotation refers to United Airlines, and indicates that this defendant carrier did not elect to come within the Rule 30(3).
The carrier takes the position that it is liable for consequential damages because it elected not to come within the above Rule 30(3) whereunder it could have excluded liability for such damages. However, as indicated above, it urges that its total liability for all damages is the amount that the shipper declared to be the value. This conclusion, it asserts, should also follow because its compensation for the shipment, both to meet its cost of carriage and the risk of loss, was determined in part by the amount of the declared value. The charge for the shipment in issue was determined in part by the value declared by the plaintiffs, thus if the value declared had been higher, the cost of the risk portion would have been greater. See Hart v. Pennsylvania R.R., 112 U.S. 331, 5 S.Ct. 151, 28 L.Ed. 717, and Adams Express Co. v. Cronin-ger, 226 U.S. 491, 33 S.Ct. 148, 57 L.Ed. 314.
The carrier thus argues that the “value” of the shipment, as to which the declaration limits its liability under Rule 32, includes consequential damage value of the nature here claimed. The shippers argue that the carrier was liable for all consequential damages which resulted regardless of declared value, since it did not elect to come within Rule 30(3) of Tariff No. 1-B.
Rule 32, by its terms, is not restricted in applicability to the loss or damage of the shipment, as the shippers here contend, but expressly states that the “ . . . total liability of the carrier shall in no event exceed the value of the shipment. . . . ” It is our view that the decision in Southeastern Express Co. v. Pastime Amusement Co., 299 U.S. 28, 57 S.Ct. 73, 81 L.Ed. 20 (1936), is applicable to, and controls, the case at bar. In that case, the Supreme Court held that no damages above the declared value could be recovered since a tariff filed pursuant to a federal act known as the Carmack Amendment, 49 U.S.C. § 20(11), limited liability to a certain amount unless the shipment was declared to be of greater value, in which event liability was limited to the greater value. The tariff there provided: “Unless a greater value is declared and stated herein the shipper agrees that the value of the shipment is as last above set out and that the liability of the company shall in no event exceed such value.” See also Marquette Cement Mfg. Co. v. Louisville & Nashville R. R., 406 F.2d 731 (6th Cir.), and Randolf v. American Airlines, Inc., 103 Ohio App. 172, 144 N.E.2d 878.
The authorities have long held that a carrier cannot by contract exempt itself from liability for its own negligence. Adams Express Co. v. Cronin-ger, 226 U.S. 491, 33 S.Ct. 148, 57 L.Ed. 314. However, it can reasonably limit the extent of liability by giving the shipper a reasonable choice “ . and the right to agree upon a rate proportionate with the value of the property transported.” Thus there would seem to be some substantial doubt as to whether the carrier here could exempt itself from all liability for consequential damages. It apparently held such doubt also. This doubt in turn raises a serious question as to the validity or effectiveness of the Rule 30(3) in any event. Thus we must apply what we consider to be the effective rule relating to the liability. This is Rule 32(A) quoted above. In view of the above doubts relating to Rule 30(3), the terms used in Rule 32(A): “actual value of the shipment,” “damages actually sustained,” and “value of the shipment as determined pursuant to Rule 52,” all must mean and include consequential damages of the nature here sought to be recovered. This construction makes the “value” terms in Rule 32(A) mean not only a limit on the “total liability,” as expressly stated in the rule, but also to include all liabilities for loss, damage, or delay — direct or consequential. Thus the “total” of the dollars, and the “total” of types of liability were meant to be included.
Thus with the applicability of Rule 32(A) to these circumstances, with the express agreement thereby arising as to the limit on all damages, with the opportunity so presented to the shipper to select the declared limit, with the compensation for the shipment thereby commensurate with the risk assumed, the transaction comes within the established law relating to common carriers, as above described.
The judgment is set aside and the case is remanded to the trial court with directions to dismiss the complaint and the cause.
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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UNITED STATES of America, Plaintiff-Appellee, v. The BOARD OF SCHOOL COMMISSIONERS OF the CITY OF INDIANAPOLIS, INDIANA et al., Defendants-Appellants.
No. 72-1031.
United States Court of Appeals, Seventh Circuit.
Argued Sept. 13, 1972.
Decided Feb. 1, 1973.
Certiorari Denied June 25„ 1973.
See 93 S.Ct. 3066.
C. Wendell Martin, John 0. Moss, Indianapolis, Ind., for defendants-appellants.
David L. Norman, Asst. Atty. Gen., Brian K. Landsberg, Atty., Dept, of Justice, Washington, D. C., Stanley B. Miller, U. S. Atty., Indianapolis, Ind., for plaintiff-appellee.
Before ENOCH, Senior Circuit Judge, and FAIRCHILD and PELL, Circuit Judges.
PELL, Circuit Judge.
This is an appeal from an order by the district court finding that the Board of School Commissioners for the School City of Indianapolis, Indiana (“School City”) had been following a course of de jure segregation in violation of the holding of the Supreme Court in Brown v. Board of Education of Topeka, 347 U.S. 483, 74 S.Ct. 686, 98 L.Ed. 873 (1954) (Brown I). On the basis of this finding, the district court determined as a conclusion of law that it had authority to order the School City to take “affirmative action” to convert to a unitary system. The district court, as trier of fact, made detailed findings of fact to support the ultimate finding of de jure segregation and we shall not attempt to recapitulate those findings, except where specifically required. We do note, however, that the court specifically found that (1) on May 17, 1954 (the date of the decision in Brown I), the School Board was operating a dual school system, that is, it was found to have had a “deliberate policy of segregating minority (Negro) students from majority (white) students,” and (2) that the Board had not changed its policies so as to eliminate such de jure segregation on or before May 31, 1968 (the date on which the Government filed its complaint), 332 F.Supp. at 658.
Before turning to appellants’ contentions, we first enunciate a few general principles on which the opinion of this court is based. In order to support a finding of de jure segregation, it is not necessary that there be a complete separation of the races. Certainly school systems totally segregated by force of a state law have been found to violate Brown I, but other districts in which segregation has been only partially effective (that is, in which there are some integrated schools) have been held to be equally in violation. See Davis v. School District of City of Pontiac, Inc., 309 F.Supp. 734, 740 (E.D.Mich.1970), aff’d, 443 F.2d 573 (6th Cir. 1971); United States v. Board of Education, Independent School District No. 1, Tulsa County, Oklahoma, 429 F.2d 1253 (10th Cir. 1970). Further, the actions of the Board of School Commissioners and its duly-appointed representatives and agents may be sufficient to constitute de jure segregation without being based on a state law, or even if they are in derogation of state law forbidding segregation. See Keyes v. School District No. 1, Denver, Colorado, 445 F.2d 990 (10th Cir. 1971), cert. granted, 404 U.S. 1036, 92 S.Ct. 707, 30 L.Ed.2d 728 (1972); Bradley v. Milliken, (6th Cir., filed Dec. 8, 1972) (slip op. at pp. 49-50).
Another principle which comes into play in examining the district court’s opinion relates to the affirmative duty placed on a school board “to convert to a unitary system in which racial discrimination would be eliminated root and branch.” Green v. County School Board of New Kent County, 391 U.S. 430, 437-438, 88 S.Ct. 1689, 1694, 20 L.Ed.2d 716 (1968). This affirmative duty attaches to any school system guilty of de jure segregation at the date it became illegal under Brown I, May 17, 1954. Thus, we reject the distinction, proposed in the district court by the amicus curiae, between violation (initial, e. g., Brown 1) cases and remedial (enforcement, e. g., Brown II) cases, for a court in a remedial case when it is considering what remedy to order looks to the same factors as it did when it determined that there was a violation of the mandate of Brown I. A school board, after years of de jure segregation, cannot blithely say that it has become “color blind” the day before a suit is filed and thereby avoid liability. As the Supreme Court recognized in Swann v. Charlotte-Mecklenburg Board of Education, 402 U.S. 1, 18, 91 S.Ct. 1267, 28 L.Ed.2d 554 (1971), not all “invidious racial distinctions” are readily eliminated. It is in this sense clear that factors viewed as being reflective of de jure segregation in remedial cases would be similarly significant in the initial determination of whether or not there has been a violation of constitutional rights. It is in this way that the remedial cases are relevant to the present case.
On this appeal, defendants basically present two arguments: first, that the district court erred as a matter of law in basing its finding of de jure segregation on the evidence of mere racial imbalance in the schools, and second, that the district court’s finding that segregation resulted from the School Board’s actions, and therefore was de jure, was clearly erroneous. Although the first point might' appear to be subsumed in the second, there is a distinction between the two as the second assumes, ar-guendo, that the district court did not make the mistake claimed in the first point.
Appellants first assert that there is no constitutional duty to remedy the effects of racial imbalance or to maintain any particular racial balance in the public schools. The Government does not quarrel with this assertion, and, indeed, insofar as it relates to purely de facto segregation, unaided by any state action, it is the law of this circuit, Bell v. School City of Gary, Indiana, 324 F.2d 209 (7th Cir. 1963), aff’g 213 F.Supp. 819 (N.D.Ind.1963). The Board contends that since no student since Brown I has ever been compellecj to go to a school because of his race nor denied admission to a school because of race, the racial imbalance presented in the record cannot support a finding of de jure segregation. In sum, appellants seek to portray this case as one of de facto segregation only, and argue that there is no duty to alleviate such racial imbalance which the Board did not cause. Deal v. Cincinnati Board of Education, 369 F.2d 55 (6th Cir. 1966); Bell v. School City of Gary, supra.
The difficulty with this line of reasoning is that it does not comport with the findings of fact of the district court. As Judge Kiley has said for this court,
“The weakness in this argument is that the district court did not find that defendants inherited an innocent de facto segregation situation, but found that they inherited from their predecessors a discriminatorily segregated school system which defendants subsequently fortified by affirmative and purposeful policies and practices which effectually rendered de jure the formerly extant de facto segregation. . . . This is not a case of mere ‘inaction’ under the court’s finding of the unlawful actions of the Board.” United States v. School District 151 of Cook County, Illinois, 404 F.2d 1125, 1131 (7th Cir. 1968).
The present case — in which, as will be discussed below, the district court found gerrymandering of districts, segregation of faculty, and other indicia of a dual system — stands in marked contrast to the Deal and Bell cases, above, where the district courts made specific findings of no such discriminatory practices by the boards. Similarly, the present case is unlike Banks v. Muncie Community Schools, 433 F.2d 292 (7th Cir. 1970), where the court remarked that the record failed to disclose evidence of either racial motivation in board policies or a history of racial segregation from which such motivation might be inferred. Here, the district court commented extensively on both aspects in its opinion.
But appellants point to the language in the Supreme Court’s opinion in Swann, supra, 402 U.S. at 24-25, 91 S.Ct. 1267, which states that a particular racial balance is not necessary in each school and that one-race schools may be acceptable. They extrapolate from this that, since the only evidence before the trial judge was that of racial imbalance, the holding must be clearly erroneous, Rule 52(a), Fed.R.Civ.P. Our review of the record and the district court’s opinion convinces us that this contention cannot be sustained. What the district court’s opinion relates is a pattern of decision-making which it determined reflected a successful plan for de jure segregation. Although it might not be possible to infer the requisite discriminatory intent from any one instance or example in the record, it is clear that the district court found a purposeful pattern of racial discrimination based on the aggregate of many decisions of the Board and its agents. See Davis v. School District of the City of Pontiac, Inc., 443 F.2d 573, 576 (6th Cir. 1971).
The appellants deny any conscious motivation on the part of their predecessors or themselves to foster, or even continue, segregation policies in the school system; however, in examining that which was in existence at the time of Brown I and that which transpired thereafter, the courts are not precluded from drawing the normal inference of intent from consciously consummated acts. Intent, in this sense, may or may not be consistent with expressed motivation.
There is no doubt that the statistics as to the extreme racial imbalance in various schools, especially those schools previously segregated by state law until 1949, was one of the factors which the district judge considered. But even though no particular racial balance is per se necessary, Swann does not say that such imbalance may not be considered as one factor from which the district court may infer a segregatory intent.
Inasmuch as our review of the district court’s order, as discussed hereinafter, reflects that the racial imbalance was only one factor considered by the district court, we reject appellants' first contention that the finding of de jure segregation was based merely on evidence of racial imbalance.
The Board also rests its case on the alleged mistake of the district court in inferring de jure segregation from various acts which encouraged racial imbalance in the schools. It argues that these underlying findings of fact are clearly erroneous insofar as they place the blame for the present system’s racial imbalance on actions taken by the Board and its agents. To show de jure segregation, rather than de facto segregation, the Government must show improper intent and causation. Throughout the trial and in its brief in this court, the Board emphasized not only its lack of intent, but also that the schools which are predominantly or completely black would have become so no matter what the Board did as long as it maintained some policy approximating that of a neighborhood school system. It is to these contentions that we now turn.
Initially, we must consider appellants’ contention that they have adhered nondiscriminatorily to a policy of neighborhood schools. We are, of course, limited by the fact that we can only set aside the district court’s findings if they are clearly erroneous, Rule 52(a), Fed.R.Civ.P., and cannot substitute our “findings” for those of the district court, Northcross v. Board of Education of Memphis, Tennessee, City Schools, 397 U.S. 232, 235, 90 S.Ct. 891, 25 L.Ed.2d 246 (1970), as requested by appellants in oral argument, even though much of the record is documentary. We also note that appellants are most strenuous in their denial of any present discriminatory activity, leaving the actions of the 1950’s as little more than ancient history with minimal or no probative value for this case. At this point, we need only note that most of the practices and policies discussed below were present in May of 1954 and that the evidence of both segregatory intent and causation is substantial enough to support the district court’s findings. Further, as noted above, the fact that the Board’s predecessors were guilty of unlawful segregation after Brown I does have an impact on the Board’s case today. It placed the Board thereafter under an affirmative duty to eliminate all vestiges of the dual system.
The district court made detailed findings regarding a number of practices which it considered supported the ultimate finding of de jure segregation. Perhaps the most extensive finding related to gerrymandering of school attendance zones within the allegedly neutral framework of the neighborhood school system. In the Board’s initial set of neighborhood boundary lines, the district court found,
“[they] were drawn with knowledge of racial residential patterns and the housing discrimination underlying it. Not only did the Board not attempt to promote desegregation, but the boundary lines tended to cement in the segregated character of the elementary schools.” 332 F.Supp. at 666.
Our examination of the record shows this finding to be supported by substantial evidence. Most characteristic is the district carved out for School 64 which exactly covers a small enclave of blacks on the southeast side of Indianapolis. That it was easy for the Board to superimpose these geographical limitations on the patterns of residential discrimination discussed by the district court does not make the congruency of housing and school boundaries inevitable. It was just such a use of boundary lines to lock in previous segregation which was condemned in United States v. School District 151, supra, 404 F.2d at 1132, and United States v. Board of Education, Tulsa County, Okla., supra, 429 F.2d at 1255 and 1259.
This questionably fortuitous superimposing of boundary lines was highlighted by the district court when it alluded to the inconsistent application of the generally accepted principles for drawing zones for neighborhood schools, thereby increasing racial imbalance, 332 F.Supp. at 666, n. 54. Such evidence was considered probative of the existence of a dual school system in United States v. Board of Education, Tulsa County, Okla., supra, 429 F.2d at 1256. On the whole, we think that the record is clearly sufficient to support a finding of gerrymandering of school boundary lines. Certainly, we are unable to say* that the finding is clearly erroneous. Once again, it is not any one specific change which would allow a court to find such a fact, but the pattern and practice from which the court could infer the impermissible occurrence. Cf. Downs v. Board of Education of Kansas City, 336 F.2d 988 (10th Cir. 1964). The district court in the present case rejected similar explanations raised by appellants, at least as to some of the changes, and we cannot say that this finding is clearly erroneous on the record before us. We agree with the court in Keyes v. School District No. 1, Denver, Colorado, supra, 445 F.2d at 999, that “we can perceive no rational explanation why state imposed segregation of the sort condemned in Brown should be distinguished from racial segregation intentionally created and maintained through gerrymandering, building selection and student transfers.” See also United States v. Jefferson County Board of Education, 372 F.2d 836, 876 (5th Cir. 1966), aff’d en banc, 380 F.2d 385 (5th Cir. 1967).
In support of the finding of a policy of gerrymandering school boundaries was the use of optional attendance zones discussed by the district court at 332 F. Supp. at 668. Although the Board asserted a variety of explanations for these optional zones, there is no doubt that its effect was to allow whites in racially mixed neighborhoods to choose to attend a “white” school and blacks to attend a “black” school. There was testimony in the record as to informal practices of encouraging low achievers and problem students who were black to go to all-black Crispus Attucks High School. This practice was identical to one condemned in Smuck v. Hobson, 132 U.S.App.D.C. 372, 408 F.2d 175, 183 (1969), aff’g Hobson v. Hansen, 269 F.Supp. 401 (D.D.C.1967). Moreover, since the optional attendance zones in the present case were superimposed upon a system with a substantial history of state-enforced segregation, we find particularly applicable those cases which have questioned freedom-of-choice plans as a means for eliminating de jure segregation.
In Green v. County Board New Kent County, supra, and Raney v. Board of Education of the Gould School District, 391 U.S. 443, 88 S.Ct. 1697, 20 L.Ed.2d 727 (1968), the Supreme Court, although not holding freedom-of-choice plans to be unconstitutional per se, stressed that they were not always an effective way of desegregating a dual system, and, in fact, might serve only to perpetuate separation of the races by placing the burden for desegregation on the children and their parents rather than on the school board where it belonged. If we follow the Supreme Court’s mandate in Monroe v. Board of Commissioners of the City of Jackson, 391 U.S. 450, 88 S.Ct. 1700, 20 L.Ed.2d 733 (1968), and look at the effect of the free transfer plan on the school system, then it becomes quite clear that the district court’s disapproval of these optional attendance zones was not clearly erroneous. of
Further reinforcing the district court’s opinion was the stipulated fact that “it had been the general policy and practice of the defendants and their predecessors in office ... to assign teachers (including substitute teachers) and staff members to schools, . . . so that, in general, the faculty and staff of each school mirrored the racial composition of the school’s student body.” Such a practice was condemned by the court in Davis v. School District, of the City of Pontiac, Inc., supra, 443 F.2d at 574 and 576. But more significantly, the practice was impliedly condemned by the Supreme Court in Swann v. Charlotte-Mecklenburg Board of Education, supra, 402 U.S. at 18, 91 S.Ct. at 1277: “Independent of student assignment, where it is possible to identify a ‘white school’ or a ‘Negro school’ simply by reference to the racial composition of teachers and staff, the quality of school buildings and equipment, or the organization of sports activities, a prima facie case of violation of substantive constitutional rights under the Equal Protection Clause is shown.” The fact that after the Government initiated this suit the Board of School Commissioners by stipulation agreed to eliminate this policy and assign teachers on a nonracial basis under court supervision will be discussed hereinafter. At this point, we only note that as of 1968, substantial faculty segregation (to match the student segregation — whether de jure or de facto) was the admitted policy of the Indianapolis school system.
The district court also referred to Board practice concerning construction of additions to existing schools and temporary transportation of students when there was overcrowding prior to any permanent resolution of a given situation, 332 F.Supp. at 667-668 and 669. Further, the court noted that the construction of new schools fitted into a pattern of promoting racial imbalance and isolation, 332 F.Supp. at 668-669. Once again, the general finding of fact as to intent made by the district court is a permissible inference from the evidence presented by the record. There were several instances cited in which additions were built to adjoining schools of opposite racial makeup rather than building a new school between them which would have had a racially mixed student body. It was a similar pattern of construction of additions to existing schools on which the court relied in part in finding de jure segregation in United States v. Board of Education, Tulsa County, Okla., supra, 429 F.2d at 1256. In addition, the placement and usage of junior high schools was stressed by the Government in its case in chief. In those examples, certain intermediate grade pupils were put into junior high schools with the pupils coming from elementary feeder schools basically of one race makeup even though another elementary school not used for feeding, containing basically pupils of the opposite race, was as close to the junior high school and often was more overcrowded than the feeder schools.
With respect to the district court’s findings on the Board’s choice of sites for new schools, of particular interest is the fact that the two newest high schools have been constructed in the furthest extremities of the School City, as far as possible from the center city black areas. Although the construction of schools to service these rapidly developing areas was indeed necessary, their location at the most distant points of the School City apparently was viewed by the district court as one further fact from which it inferred a segregatory intent, an inference which we cannot say is clearly erroneous on the record as a whole. As this court said in United States v. School District 151, supra, 404 F.2d at 1133, “it does not follow from the absence of a duty to achieve racial balance that a Board may deliberately select sites to achieve racial segregation.” Nor, we will add to the foregoing statement, may a Board deliberately but unnecessarily select sites the obvious result of which is the achievement of racial segregation.
Similarly, the Chief Justice’s opinion in Swann v. Charlotte-Mecklenburg Board of Education, supra, 402 U.S. at 20-21, 91 S.Ct. 1267, emphasized that construction of new schools was one of the most potent weapons in maintaining a segregated school system, both by constructing new schools in white suburban areas far from black residential areas, thus allowing racial separation without significant departure from the often enunciated principles of “neighborhood schools,” and by promoting further residential segregation by denoting specific areas as white or black. See also United States v. Jefferson County Board of Education, supra, 372 F.2d at 876.
From the above, we conclude that the findings of the district court are not clearly erroneous, that, in fact, the factors cited by the judge to support the ultimate finding are relevant and significant considerations, not only in our opinion, but also in the opinions of various courts which have dealt with similar cases, and that the inference as to the improper intent which the judge drew from the patterns he saw was proper. As to this last point, we can only emphasize that there are very few cases of school segregation today in which the defendants admit that they had an improper intent. Such intent may then be properly inferred from the objective actions. The district court’s opinion refers not only to specific examples but also to aggregate findings: for example, the court stated, “according to the evidence, there have been approximately 350 boundary changes in the system since 1954. More than 90% of these promoted segregation.” 332 F.Supp. at 670. See Keyes v. School District No. 1, Denver, Colo., supra, 445 F.2d at 1000. There is substantial evidence to support the inference.
There is one further contention raised by appellants that we must consider. As noted above, appellants denied both that they had a segregatory intent and that their actions were the proximate cause of the present severe racial imbalance in many of the schools in Indianapolis. The Board argued that whatever patterns of de jure segregation existed in the past, today’s segregation was de facto, if that. Therefore, it is argued, nothing the Board could have done would have prevented such a situation from occurring unless it had rejected the concept of neighborhood schools altogether, something which the courts have not required in the absence of de jure segregation. This contention is not easily answered since, as the district court’s opinion reflects, other forces both public and private have had significant impact on residential housing patterns in Indianapolis. Arguably, Brown I and Brown II would still reach such conduct even if the result was clearly inevitable. But we can add that in the present case we believe that the district court’s finding is not clearly erroneous when it lays at least a substantial part of the blame on defendants and their predecessors and agents. The Supreme Court in Swann, as well as many other courts, has recognized that school policy has a substantial impact on residential patterns as well as vice versa. Thus, the appellants are not the victims, of the inevitable since their predecessors’ actions have contributed in substantial part to the present pattern. Furthermore, even the appellants cannot successfully argue that the marginal eases in racially mixed areas are inevitable. Those schools which might have racially mixed enrollments today but due to the practices found by the district court are either predominantly white or predominantly black are clearly within the Board’s responsibility. Finally, it would be improper to allow the Board to follow policies which constantly promote segregation and then defend on the presumption of inevitability.
A related consideration is found in appellants’ protestations that they have in the last several years taken substantial steps to correct any possible inequities inherited from their predecessors in office. The district court’s opinion shows, however, that even after the date the suit was filed, defendants continued in some of the patterns which the court found to be segregatory. Even giving the appellants the benefit of all doubts as to the last few years, we would agree with the court in Davis v. School District of City of Pontiac, Inc., supra, 443 F.2d at 575: “However, these same contentions were presented at trial and the District Court, while acknowledging recent efforts to improve the situation, nevertheless found the new policies inadequate to cure the effects of years of purposeful segregation.” Especially as to actions taken after the date on which the suit was filed, as praiseworthy as they may be, such actions go more to the propriety of granting equitable relief rather than to the merits of the district court’s findings. We might also note that since 1968, when this suit was filed, the Board has rejected a plán of desegregation propounded at the Board’s request by a team of educators from the Office of Education, Department of Health, Education and Welfare. Although there was certainly no requirement that the Board accept the proposal, the unqualified rejection of a similar plan was found to be probative of an improper intent in United States v. School District 151, supra, 404 F.2d at 1133.
In sum, this case was tried to a judge who obviously gave it considerable conscientious thought and attention and by able counsel on both sides. We have examined the court’s findings of fact and are unable to say the findings are clearly erroneous that during much of the period from 1954 to 1968 the Board continued affirmative policies which promoted a dual system, and that last-minute efforts have been totally insufficient to eliminate the consequences of those years of discrimination. Since the district ■ court’s findings of fact are not clearly erroneous, and since the court correctly stated the law based on those findings, the judgment of the district court is affirmed.
Affirmed.
. The district court’s Memorandum of Decision is set out in full as United States v. Board of School Commissioners of City of Indianapolis, Indiana, 332 F.Supp. 655 (S.D.Ind.1971).
. The district court noted at 332 F.Supp. at 675-676 that by special act of the Indiana legislature the School City of Indianapolis is no longer coterminous with the civil or corporate city of Indianapolis. We draw no inferences from this fact.
. The district court ordered interim relief and, pursuant to Brown v. Board of Education of Topeka, 349 U.S. 294, 75 S.Ct. 753, 99 L.Ed. 1083 (Brown II), retained jurisdiction to order further relief. In its brief, the School City questioned the specific interim relief regarding the Forest Manor Middle School, but that controversy was settled prior to oral argument.
. In 1949, the Indiana General Assembly passed an Act requiring desegregation on a phased basis, ending the official State policy of segregation, Acts 1949, ch. 186, p. 603.; Burns Ind.Stat.Ann. §§ 28-6106 to 28-6112 (1970), IC 1971, 20-8-6-1 to 20-8-6-7.
. In Bell, there was a specific finding that there was no change in the school district boundary lines, and thus no gerrymandering. Also in Bell there were examples of black students being transferred from predominantly black schools to predominantly white schools to relieve overcrowding.
. There were over 190 exhibits introduced into evidence by the parties, many with multiple sub-parts. Yet, it would be inaccurate to say that the documentary evidence was all that was involved since the trial lasted several days, with the transcript covering over 2000 pages if three depositions admitted into evidence are included.
. The most graphic example of such gerrymandering is found in the feeder schools chosen to send students to all-black Crispus Attucks High School in 1954, the year Brown I was decided, and continued for years thereafter.
. We note that such inferences are not unique to this area of the law. The doctrine of “conscious parallelism” in antitrust law involves a similar inference of intent from objective factors. See Antitrust Developments, 1955-1968, at 22-24. See also Littleton v. Berbling, 468 F.2d 389, 408 (7th Cir. 1972).
. The integration of Crispus Attucks High School, the desegregation of faculty appointments, and the majority to minority transfer program were adopted only after this suit was filed.
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{
"author": "PELL, Circuit Judge.",
"license": "Public Domain",
"url": "https://static.case.law/"
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UNITED STATES of America, Plaintiff-Appellee, v. Robert Haines WALDRON, Defendant-Appellant.
No. 71-1230.
United States Court of Appeals, Seventh Circuit.
Argued Sept. 15, 1972.
Decided Feb. 8, 1973.
Joseph Beeler, Federal Defender Program, Chicago, Ill., for defendant-appellant.
James R. Thompson, U. S. Atty., William T. Huyck, Theodore T. Scudder, Asst. U. S. Attys., Chicago, Ill., for plaintiff-appellee.
Before HASTINGS, Senior Circuit Judge, and PELL and STEVENS, Circuit Judges.
PELL, Circuit Judge.
This is an appeal from a conviction for refusal to submit to induction in violation of 50 U.S.C. App. § 462. Defendant Waldron, a registrant of a Fort Wayne, Indiana board, attended the Art Institute of Chicago, graduating in June 1968. During his attendance there he received a II-S student deferment, 32 C.F.R. § 1622.25 (1968). In order to obtain that deferment he had executed Selective Service [SSS] Form 104, requesting an undergraduate deferment on September 18, 1967. Following his graduation, he was reclassified I-A, 32 C.F.R. § 1622.10 (1968), on July 2, 1968. He immediately appealed this classification requesting a III-A hardship deferment, 32 C.F.R. § 1622.30, but this appeal was rejected by both his local board and his appeals board. On December 30, 1968, Waldron was mailed his order to report for induction. The date scheduled was February 5, 1969.
Shortly thereafter, Waldron filed a form requesting conscientious objector classification. The local board notified Waldron on January 24, 1969, that it had considered his application but “found no grounds for reopening your classification.” However, on January 28, 1969, Colonel Rhodes, the Indiana State Director of Selective Service, reviewed Wal-dron’s file and recommended that “the local board give postponement and ask registrant in for interview as per LBM #41 [Local Board Memorandum 41].” The board thereupon sent Waldron SSS Form 264 stating that by authority of SSS Regulation 1632.2 Waldron’s order to report for induction was postponed until February 19, 1969. A letter accompanied the form advising Waldron that he would be given an “interview” by the board on February 5, 1969. On February 6, the board sent Waldron two letters, the first advising him that it “found no grounds for reopening your classification after you [sic] being interviewed” and the second ordering him to report for induction on February 19, 1969. Because he was living in Chicago, Waldron had the order to report transferred to Chicago. On March 27, 1969, Waldron refused to submit to induction.
On this appeal Waldron raises two principal grounds for reversal: first, that his application for conscientious objector status was improperly denied, both substantively and procedurally; and second, that he was impermissibly precluded from obtaining a I-S(C) deferment, 32 C.F.R. § 1622.15 (1968), during the school year 1968-69 while he was in graduate school. For the purposes of this appeal we will assume, arguendo, that Waldron did present a prima facie case for conscientious objector status. Our first determination is whether or not such a claim was barred by Ehlert v. United States, 402 U.S. 99, 91 S.Ct. 1319, 28 L.Ed.2d 625 (1971).
Admittedly, if the induction notice of December 30, 1968, is deemed to be the controlling notice, then Waldron’s, conscientious objector claim was late and barred by Ehlert. To avoid the force of the Ehlert decision, Waldron argues that the order of December 30, 1968, was superseded by the letter of February 6, 1969, and, thus, his conscientious objector claim of January 1969 was timely filed. In support of his position, Wal-dron cites Rodriguez v. United States, 452 F.2d 659 (7th Cir. 1971), and White v. United States, 422 F.2d 1254 (9th Cir. 1970).
In Rodriguez, the defendant had failed to report for induction because of extremely bad weather and consequently had been ordered to report a second time. This court held that the second order cancelled the first so as to make timely the defendant’s application for a III-A classification .filed before the second order to report was mailed. The White case presents a slightly different factual situation with the Ninth Circuit holding that a second order to report for civilian work following White’s refusal to report superseded the prior order and made timely his III-A application. The Government urges us to distinguish these cases on the ground that they involved dependency claims based on “objectively identifiable” and “extraneous” circumstances beyond the registrant’s control, as opposed, apparently, to a volitional claim. Cf. Ehlert, supra, 402 U.S. at 104-105, 91 S.Ct. 1319.
We think, however, that the clear answer here is that the postponement of Waldron’s induction by the board as a result of Waldron’s application for conscientious objector status was just that, a postponement, and as such no new order issued on February 6. The granting of a courtesy interview, even erroneously, if at the request of the registrant should not, by virtue of its necessitating an induction postponement, be used to make timely all previously filed claims. Othei’wise, a local board could never grant a courtesy interview without concatenating reopening. We think this result is precluded by Ehlert and its rationale. In reference to the “legal limbo” in which a registrant is placed while his induction is postponed, we note only that it was at Waldron’s request and only for a brief period of time. See United States v. Benson, 469 F.2d 1356 (7th Cir. 1972), where far longer postponements were held not to be prejudicial.
Waldron also urges that the intervention by the State Director effectively reopened his classification, thus circumventing the bar of Ehlert. We first note that the local board treated the postponement and interview as being pursuant to 32 C.F.R. § 1632.2, and not as a mandatory reopening under 32 C.F.R. § 1625.3. Regulation § 1625.2, however, as the Supreme Court held in Ehlert, “barred presentation to the local board of a claim that allegedly arose between mailing of a notice of induction and the scheduled induction date.” 402 U.S. at 108, 91 S.Ct. at 1325. (Emphasis added.) There being no basis for the board to assume that the State Director had invoked 32 C.F.R. § 1625.3, it is clear that the board could not have reopened Waldron’s classification. See Wright v. Ingold, 445 F.2d 109 (7th Cir. 1971).
Waldron argues that even if reopening were improper under 32 C.F.R. § 1625.2, the State Director’s request nevertheless mandated a reopening under 32 C.F.R. § 1625.3(a). He analogizes his position to that in United States v. Aufdenspring, 439 F.2d 388 (9th Cir. 1971), United States v. Noonan, 434 F.2d 582 (3d Cir. 1970), cert. denied, 401 U.S. 981, 91 S.Ct. 1190, 28 L.Ed.2d 333 (1971), and Miller v. United States, 388 F.2d 973 (9th Cir. 1967). Each case is, however, distinguishable from the case before us. In Aufdenspring, the language of the letter from the California Headquarters was construed as releasing the board from any restrictions. This distinction was relied upon by the Ninth Circuit itself in United States v. Hand, 443 F.2d 826 (9th Cir. 1971). In Noonan, the State Director’s letter was much stronger than the oral statement of Colonel Rhodes. Miller is the source of the doctrine of de facto reopening, but, although the language has some relationship to the present case, a significant fact is that Miller by a letter had claimed conscientious objector status before his induction notice was mailed and thus the case has an inapposite foundation for us. Further, on their facts, all three of the above cases are distinguished from Waldron’s in that in each there was “written” communication from the state headquarters to the local board, a requirement of 32 C.F.R. § 1625.3. Colonel Rhodes’s advice was merely oral and thus failed to comply with the regulation.
In his reply brief, Waldron concedes that there was no “order,” but argues that the “State Director authorized it [the board] to reopen his classification.” While the State Director can release the local board from the constraints of § 1625.2, e. g., United States v. Aufden-spring, supra, we do not find “authorized” to be equatable' with “ordered.” While we recognize that some of the state headquarters’ written communications in the Miller line of cases scarcely seem to be couched in mandatory terms, and without determining that we would have reached the same conclusion as those courts did on the facts before them, we do note the Miller court language that the “effect of what the State Director did was to open up the situation ... in the same manner and to the same extent as if the induction order had not been issued.” 388 F.2d at 975. We feel compelled to no such conclusion in the present case by the oral recommendation of postponement and interview. We do not, however, rest our determination solely on the oral nature of the communication as we would not find the Miller effect even if the State Director’s recommendation had been in a formal written communication.
Even if we were to assume, arguendo, that the State Director, in contradistinction to an ordered release from the § 1625.2 restraints, could delegate his authority to reopen to the local board, we find no basis for thinking that the delegation would be appropriate in the present type of case. All of the eases cited by Waldron were instances in which the State Director was found by the reviewing court actually to have exercised his reopening authority under § 1625.3. We do not see any instance of an intermediate position between § 1625.2 and § 1625.3 with the State Director delegating his authority to the local board. The regulations just do not include such authority. That the courtesy interview recommended by the State Director may have been pointless, insofar as the board’s authority was concerned in light of the subsequent decision in Ehlert, does not require us to rewrite the regulations to provide authority that did not otherwise exist.
Since we hold that the State Director did not reopen Waldron’s classification, it is immaterial what statement the board made to Waldron in denying him reopening since the board was “barred” from reopening on any grounds, Ehlert, supra. Waldron urges, however, that we cannot know that the local board relied on § 1625.2 for not reopening his classification, and therefore we must reverse. If, as we held in Wright v. Ingold, supra, the board had no power even to consider a late conscientious objector claim, then no reasons are necessary. Such cases as United States v. Stetter, 445 F.2d 472 (5th Cir. 1971), cited by appellant, are inapplicable since the court in those cases was not reviewing a post-induction-order claim, but rather one timely filed. Ehlert has made the area here involved sui generis in selective service law by the use of the term “barred.”
Finally, Waldron asserts, because the local board may have passed on the merits of his claim for conscientious objector status, he may not be able to get such review in the Armed Services and that his case is controlled by cases such as United States v. Ziskowski, 465 F.2d 480 (3d Cir. 1972), and United States v. Alioto, 469 F.2d 722 (1st Cir. 1972), rather than by Ehlert. The Third Circuit reached its result on language from the local board similar to that we have before us. It was held that this language might be interpreted by the armed forces as a ruling on the merits (sincerity) of the registrant’s claim, thus barring any in-service review. Since this would create that sort of “no-man’s” land that Ehlert had said should not exist, the Third Circuit reversed the conviction. The First Circuit likewise reached this result in Alioto. Apparently neither circuit has adopted a rule such as that stated in Wright v. Ingold, supra. In this Circuit, the local board has no power to reopen and thus any ruling must perforce be on grounds of lateness insofar as the armed forces may be concerned. Any ruling on the merits by the board, being impermissible in this Circuit, would not be reviewed by the courts and could not serve to bar subsequent in-service adjudication of conscientious objector status without amounting to a denial of due process and thereby allowing a writ of habeas corpus to issue. Thus, we find the Ziskow-ski-Alioto rationale inapplicable in the present case.
Apart from his conscientious objector claim, Waldron claims error in the denial of an opportunity to obtain a I-S (C) student deferment until the end of the academic year for his graduate school work during the school year 1968-69. The local board advised Waldron that there were no graduate deferments available. In part, this denial was based on the regulation adopted by the Selective Service System, 32 C.F.R. § 1622.-15(b), which dealt with eligibility for Class I-S. Waldron contends that this regulation is in derogation of the underlying act, § 6(h)(1) of the Military Selective Service Act of 1967 [MSSA of 1967], 50 U.S.C. App. § 456(h)(1) (1968), in that it disqualified from I-S (C) all students (a) who had received II-S deferments even though the deferment was only as a graduate student, (b) who had received a II-S deferment only under the provision of the law prior to the MSSA of 1967, or (c) who had received a II-S deferment without “requesting” it. This court has held that the first error referred to above would require reversal of a conviction, Foley v. Hershey, 409 F.2d 827 (7th Cir. 1969). Appellant may be correct as to the other two alleged errors as well. We do not have to reach those issues because it is clear that, even if the regulation is over-broad, Waldron was clearly within the permissible scope of the regulation. This is not a First Amendment case where it may be permissible to challenge for over-breadth a statute whose constitutionally permissible scope would include a prohibition of the defendant’s actions. We will not overturn a conviction under an overbroad regulation when the action was within the valid prohibition of the underlying statute. Here, the record shows that Waldron had received his II-S deferment as an undergraduate, under the 1967 Act, and at his request, all in accordance with the statute itself.
Finally, Waldron contends, even though he may have requested a II-S deferment by the execution of SSS Form 104, that the form was so misleading as to vitiate the request at least to the extent that it was deemed to constitute a waiver of future I-S(C) deferments after he had received his baccalaureate degree. There are two types of student deferments. The II-S, full-time student deferment is found in Section 6(h)(1) of the MSSA of 1967 while the I-S(C) deferment for a student to finish his year in school is found in 50 U.S.C. App. § 456(i). SSS Form 104 in quoting from Section 6(h) (1) omits the language of the section which creates the exception to eligibility for the I-S(C) deferment which is otherwise mandated by § 456(i). Waldron argues that he was affirmatively misled by the form in that he did not realize in requesting a II-S deferment as an undergraduate student he was waiving a future I-S(C) deferment when a graduate student. At first glance this is an appealing argument but to accept it is to ignore the entirety of SSS Form 104, for the next sentence states:
“Any person who requests and is granted a student deferment under this paragraph, shall, upon the termination of such deferred status or deferment, and if qualified, be liable for induction as a registrant within the prime age group irrespective of his actual age, unless he is otherwise deferred under one of the exceptions specified in the preceding sentence [extreme hardship to dependents or for graduate study, occupation, or employment necessary to the maintenance of the national health, safety, or interest] .”
We find that this sentence clearly and undeniably advises the registrant that following his II-S student deferment, he may obtain a further deferment only if he falls within one of the two specified categories. Waldron did not. Thus, a I-S(C) deferment was by this language precluded.
For the reasons hereinbefore given the judgment of the district court is affirmed.
Affirmed.
. While we have categorized Waldron’s contentions into two principal ones, his brief on appeal proposes numerous supportive issues of claimed error. The Government contends that some of these had been waived by being first raised on appeal. This is denied by Waldron. We do not find it necessary to reach the question of waiver.
. We note that this language may be broader than Congress meant as it could be read to bar other deferments if the registrant had received a II-S under the MSSA of 1967. But that question is not before this court. All we need to say is that the language was sufficiently clear to advise Waldron that he would not be eligible for a I-S(C) deferment at a later date, and so the form is not misleading so as to vitiate the request required by the Act itself.
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{
"author": "PER CURIAM:",
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Jose T. LUNA, Petitioner-Appellant, v. Dr. George BETO, Director, Texas Department of Corrections, Respondent-Ap-pellee.
No. 72-3282
Summary Calendar.*
United States Court of Appeals, Fifth Circuit.
Feb. 26, 1973.
William T. Armstrong, Staff Atty., Staff Counsel for Inmates, Texas Dept, of Corrections, Weldon, Tex., for petitioner-appellant.
Crawford Martin, Atty. Gen., Austin, Tex., for respondent-appellee.
Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges.
PER CURIAM:
Luna’s sole complaint on appeal is that he was denied a fair trial in the Texas state court as evidenced by an affidavit of one juror which impeached his own verdict.
We agree with the district court that “the case fits within the well-settled general rule that a juror will not be heard to impeach his own verdict.” Cunningham v. United States, 5 Cir. 1966, 356 F.2d 454.
Affirmed.
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{
"author": "PER CURIAM:",
"license": "Public Domain",
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UNITED STATES of America, Plaintiff-Appellee, v. Ronald Floyd ROBERTS, Defendant-Appellant.
No. 72-3161.
Summary Calendar.
United States Court of Appeals, Fifth Circuit.
Feb. 21, 1973.
Rehearing Denied March 15, 1973.
James A. Johnston, Edward B. Clout-man, III, Dallas, Tex., for defendant-appellant.
Frank D. McCown, U. S. Atty., Ft. Worth, Tex., William F. Sanderson, Jr., Asst. U. S. Atty., Dallas, Tex., for plaintiff-appellee.
Before THORNBERRY, GOLDBERG and RONEY, Circuit Judges.
Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir. 1970, 431 F.2d 409, Part I.
PER CURIAM:
This is an appeal from a conviction for failure to submit to induction into the armed forces. Appellant was ordered to report for induction on March 23, 1971. After a series of postponements, he filed with his local board a dependency questionnaire, in an effort to obtain a III-A “hardship” deferment based on his mother’s alleged physical and emotional dependence upon him. After the local board had rejected appellant’s hardship claim and again ordered him to report for induction, appellant’s mother telephoned the clerk of the local board and informed her that she had suffered a severe lumbar strain requiring one week’s hospitalization followed by a period of therapy during which appellant’s assistance was needed to enable her to use traction equipment. No record of this telephone conversation appeared in appellant’s file, because the clerk independently determined that the information “would not affect the young man’s status or classification” (T. 39).
Relying on United States v. Jackson, 5th Cir. 1972, 454 F.2d 821, appellant argues that the clerk’s determination to exclude Mrs. Roberts’ message from his file precluded the local board from considering the information and thus denied him the right to an administrative appeal in the event the board chose not to reopen his file. We agree that the clerk had no authority independently to exclude Mrs. Roberts’ message from the file, but appellant’s reliance on Jackson is nevertheless misplaced. There, the clerk had excluded facts (a physician’s report that the registrant suffered from functional hypoglycemia) that arguably formed the basis for a medical deferment. In the instant case, however, the claim that appellant was needed to help his mother use traction equipment during a relatively brief period of therapy could not even arguably entitle appellant to a hardship deferment. Accordingly the judgment is
Affirmed.
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{
"author": "LEWIS R. MORGAN, Circuit Judge:",
"license": "Public Domain",
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Clinton MANGES, Plaintiff-Appellant, v. William B. CAMP et al., Defendants-Appellees.
No. 72-1962.
United States Court of Appeals, Fifth Circuit.
March 1, 1973.
Jack Skaggs, James Harris Denison, Jr., Harlingen, Tex., for plaintiff-appellant.
William S. Sessions, U. S. Atty., San Antonio, Tex., Walter H. Fleischer, Anthony J. Steinmeyer, Dept, of Justice, Washington D. C., Ralph Langley, Emerson Banach, Jr., San Antonio, Tex., for defendants-appellees.
Before JOHN R. BROWN, Chief Judge, and THORNBERRY and MORGAN, Circuit Judges.
LEWIS R. MORGAN, Circuit Judge:
Clinton Manges, owner of controlling interest in the stock of The Groos National Bank, received an order on March 4, 1971, from the Comptroller of the Currency of the United States, prohibiting Manges “from further participation in any manner in the conduct of the affairs of The Groos National Bank”. Manges filed suit in the district court below seeking a permanent injunction against the Comptroller from continuing this order in force. The district court dismissed the suit for want of jurisdiction due to 12 U.S.C. § 1818(i), a withdrawal statute. This case involves appeal of that dismissal.
This court has determined that jurisdiction does lie in this specific case, that the withdrawal statute is not applicable here, and that the Comptroller acted outside of his proper statutory authority.
FACTS
On October 8, 1965, Clinton Manges was convicted upon his plea of guilty to the charge of making a false statement to the Small Business Administration, in violation of 15 U.S.C. § 645. Manges was sentenced to pay a fine of Two Thousand Five Hundred ($2,500.00) Dollars, and he did so pay on October 11, 1965. In December of 1970, Manges began purchasing shares of the common stock of The Groos National Bank of San Antonio, Texas. By February 2, 1971, he had obtained controlling interest of the Bank’s common stock. Manges reported this acquisition to the Comptroller of the Currency on February 14, 1971, along with other required information concerning his background. The 1965 conviction was included in that information. Manges, on February 16, 1971, presented written requests to the Bank’s Board of Directors asking them to pass certain resolutions. The Board took no action.
The Comptroller of the Currency then issued the order of March 4, 1971, which prohibited Manges from participating in any manner in the conduct of the affairs of the Bank. A copy of the order was sent to Manges and to The Groos National Bank. Pursuant to this order, the Bank (the Board of Directors) refused Manges’ participation in its affairs and prevented him from voting his stock. Manges, in July of 1971, requested that the Comptroller clarify the order of March 4, 1971. The Comptroller acknowledged Manges’ request and said nothing.
This case was commenced December 20, 1971, when Manges requested that the Comptroller be permanently enjoined from continuing in force and effect his order of March 4th. Manges further requested that a preliminary injunction be issued against the Board of Directors of The Groós National Bank preventing them from taking any action to his financial detriment as concerns control of said Bank. The district court dismissed, basing its decision on 12 U.S.C. § 1818(i), a withdrawal statute.
ISSUES
Manges, on appeal, not only contends that the Comptroller was acting beyond the scope of his authority in 12 U.S.C. § 1818(g)(1), but he also attacks the constitutionality of 12 U.S.C. § 1818(h)(2) and § 1818(i), as violative of the due process and equal protection guarantee of the Fifth Amendment. Manges further states that judicial review of this statute should be allowed and cannot be excluded in this situation. These contentions should not be taken lightly. If Manges’ claims are true, then he has suffered grievous harm due to the action by the Comptroller of the Currency, possibly in violation of the United States Constitution. The government naturally asserts that the Comptroller was acting well within his designated authority under the statute and was in no way violating any of Manges’ guaranteed rights. This court, therefore, feels careful scrutiny of th.e statute in question and the intent behind it is demanded.
JURISDICTION
This court, however, upon reading 12 U.S.C. § 1818(h)(2) and § 1818(i), is not so convinced that the Comptroller was within his designated statutory authority. Further, if the Comptroller was not acting within his authority granted by Congress, then 12 U.S.C. § 1818(i) could not withdraw jurisdiction.
There is, however, a very strong court created exception to withdrawal statutes. This exception comes into play when there has been a clear departure from statutory authority, and thereby exposes the offending agency to review of administrative action otherwise made unreviewable by statute.
Two recent decisions by the Supreme Court give concrete support to the concept that a clear departure from designated authority demands judicial review. In Oesterich v. Selective Service System, 393 U.S. 233, 89 S.Ct. 414, 21 L.Ed.2d 402 (1968), a draft board granted a divinity student exemption from military service as provided for by law. Then the board revoked this exemption and ordered the student inducted due to conduct unrelated to the granting or continuing of that exemption. The Military Selective Service Act of 1967 provided that there would be no pre-induction judicial review of the classification or processing of the registrant. The Supreme Court held that the draft board clearly departed from its statutory mandate and acted in a lawless manner. Supra at 238, 89 S.Ct. 414. Justice Douglas stated on behalf of the Court that concerning the statute itself “[n]o one, we believe, suggests that § 10(b)(3) [withdrawal section of the statute] can sustain a literal reading . . . Examples are legion where literalness in statutory language is out of harmony either with constitutional requirements or with an Act taken as an organic whole.” (citations omitted). Supra at 238, 89 S.Ct. at 417.
Also, in Breen v. Selective Service System, 396 U.S. 460, 90 S.Ct. 661, 24 L.Ed.2d 653 (1970), under similar facts, the Court once again ruled that a clear departure from statutory mandate was present and justified judicial review. Supra at 467, 90 S.Ct. 661. Justice Harlan in his concurrence was careful to point out that the Court’s judicial scrutiny of Breen’s legal contention, unlike review of factual and discretionary decisions, in no way hindered the function of the Selective Service System which was the primary concern of Congress in enacting this withdrawal section. Supra at 468, 90 S.Ct. 661.
The question then before this court is whether or not the Comptroller acted within the scope of his authority as Congress so intended it to be.
The precise language of 12 U.S.C. § 1818(g)(1) states “Whenever any . . person participating in the conduct of the affairs of such bank, is charged in any information, indictment, or complaint authorized by a United States attorney, with the commission of or participation in a felony involving dishonesty or breach of trust, the appropriate Federal banking agency may, by written notice served upon such . . . person . . . prohibit him from further participation in any manner in the conduct of the affairs of the bank. A copy of such notice shall also be served upon the bank. Such suspension and/or prohibition shall remain in effect until such information, indictment, or complaint is finally disposed of or until terminated by the agency.” This language, on its face, certainly appears to speak to the present tense, that is to say, it speaks to the situation where a person is presently involved and participating in the affairs of a bank and is presently charged with a felony. The Comptroller has asserted this language was intended to go not only to the present, but also to any past felony charges or convictions that might have occurred as regards Manges.
Because what has occurred, on its face, appears highly suspect as regards the safeguarding of individual rights guaranteed under the Constitution, this court must seek the precise intent Congress had in promulgating this legislation.
After reviewing carefully the legislative history concerning this Act there can be no doubt that Congress never intended to establish a procedure such as the one utilized here by the Comptroller, H.R.Rep. 2077, 89th Cong., 2nd Sess., 1966; S.Rep. 1482, 89th Cong., 2nd Sess., 1966, U.S.Code Cong. & Admin. News 1966, p. 3532; 112 Cong.Rec. 24980-25026 (1966); 112 Cong.Rec. 20077-20248 (1966). Further, if the Comptroller’s argument were taken as true and this statute were to operate as the Comptroller asserts, then this could be the only section of the statute whereby judgment of one individual was in no way reviewable by any court or administrative procedure.
This court at no time has overlooked the intent of Congress to provide safeguards to ensure that the public and financial institutions shall not be subject to loss due to infiltration by criminal or dishonest elements. There are other provisions of this statute that not only safeguard the institutions involved, but also appear to provide adequate procedural safeguards to guarantee that no individual shall have his rights violated due to the arbitrary action of one individual or even the arbitrary action of a group of individuals. It should be noted that 1818(g)(1) is the only section that could possibly subject a person to possible arbitrary and capricious judgment of one individual. No other section of the statute has such a provision. In all other situations judgment as to fitness as regards the criminal background of an individual resides in the collective judgment of a number of individuals rather than in a single person. What Congress did intend in promulgating 1818(g)(1) was to routinely eliminate any person who is convicted or charged with a felony involving a breach of trust while he is at the same time participating in the affairs of a national bank.
This routine removal, however, cannot be the case with Clinton Manges. If this section did apply to Clinton Manges, then logically any person in the United States who has ever been convicted of a felony and who also owns stock in a national bank could be deprived of effective ownership of that stock by the unreviewable order of a single government administrator.
This court notes that the draft of the original bill was amended so as to provide that the Federal Reserve Board and not a single individual should be designated with removal powers as regards national bank officials. The Senate Committee on Banking and Currency reported to the full Senate that:
The duty and responsibility of suspending or removing bank officials is a quasi-judicial function of the highest delicacy, requiring the most careful balancing of the interests of the institutions and officials involved, on the one hand, and the interest of the depositors, savers, borrowers, and the Government and the public generally on the other hand. To permit suspensions and removals without thorough consideration would be unfair to the institutions and officers involved. Any procedure which would permit this would have a harmful effect on the banking system itself and on depositors, borrowers and the public. S.Rep.No.1432, 89th Cong., 2 Sess., page 3, (1966), U.S.Code Cong. § Admin.News 1966, p. 3540.
Although this refers to bank officials, certainly a person owning controlling interest in a bank should be within the purview of this concept.
This construction of the statute then properly avoids serious constitutional questions raised herein by appellant Manges relating to the lack of any hearing. By this decision, we do not in any way comment on any of the possible constitutional issues involved in this suit or any constitutional issues that may be raised as pertains to this statute in later suits.
This court then finds that the Comptroller was not acting within the scope of his proper authority under 1818(g)(1), thus, exposing himself to judicial review under the doctrine of Oesterich and Breen, supra. This case also involves a clear departure from statutory authority though not as obvious on its face as in the Selective Service cases above. There can be no doubt after considering the intent and purpose Congress had in promulgating this legislation that this court should and does have jurisdiction in this specific situation.
It is the order of this court that the judgment below be reversed and the injunction granted as to the Comptroller of the Currency of the United States prohibiting him from acting under Section 1818(g)(1) as to Clinton Manges. This action then of the Comptroller being void and of no effect can no longer serve as authority for the Directors of The Groos National Bank to refuse Manges’ participation in the affairs of that bank. Therefore, an injunction will lie as to those Directors if they refuse Manges’ participation, basing their action upon that order of the Comptroller. The order of the lower court dismissing the suit by Clinton Manges against the Comptroller of the Currency of the United States is
Reversed and remanded for proceedings not inconsistent with this opinion.
. 12 U.S.C. § 1818(g)(1).
. This court is following the recommendation of the United States Senate “ . - . the power to suspend or remove an officer or director of a bank or savings and loan association is an extraordinary power, which can do great harm to the individual affected ... it must be strictly limited and carefully guarded.” 112 Cong.Rec. 20083 (1966).
. Manges has been deprived of effective ownership of several million dollars worth of stock without .notice, hearing, or any judicial review or administrative procedure other than the decision of one man, the Comptroller of the Currency. This is clearly not allowable under our present system of constitutional government. In Joint Anti-fascist Refugee Comm. v. McGrath, 341 U.S. 123, 168, 71 S.Ct. 624, 647, 95 L.Ed. 817 (1951), (concurring opinion) Justice Frankfurter stated that essential to due process of law is “the right to be heard before being condemned to suffer grievous loss of any kind, even though it may not involve the stigma and hardships of a criminal conviction.” Where tangible property is taken, either directly or indirectly, there is no doubt that the opportunity for hearing must exist. Londoner v. Denver, 210 U.S. 373, 28 S.Ct. 708, 52 L.Ed. 1103 (1908).
. Evidence of this specific intent to routinely remove persons charged -with a felony is substantiated by Senator Proxmire in his discussion of another section of this statute. 112 Cong.Rec. 20245 (1966).
. This court lias found that there is a common nucleus of operative fact in this case and, therefore, pendent jurisdiction as to The Groos National Bank and its directors clearly exists. United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).
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Caselaw Access Project
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2024-08-24T03:29:51.129683
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{
"author": "VAN DUSEN, Circuit Judge. ALDISERT, Circuit Judge",
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BLUE BIRD FOOD PRODUCTS CO., Appellant, v. BALTIMORE & OHIO RAILROAD COMPANY.
Nos. 71-1901 to 71-1904.
United States Court of Appeals, Third Circuit.
Argued March 7, 1972.
Resubmitted under Third Circuit Rule 12(6) on Nov. 20, 1972.
Decided Feb. 20, 1973.
Aldisert, Circuit Judge, dissented and filed opinion.
Walter W. Rabin, Meltzer & Schiffrin, Philadelphia, Pa., for appellant.
Alan Edward Casnoff, Frederick H. Ehmann, Jr., Norman R. Bradley, Philadelphia, Pa., for appellee.
Before BIGGS, VAN DUSEN and ALDISERT, Circuit Judges.
OPINION OF THE COURT
VAN DUSEN, Circuit Judge.
Blue Bird Food Products Co. (“Blue Bird”) appeals from the district court’s entry of judgment for the Baltimore & Ohio Railroad Company (“B & Q”) with respect to four actions filed by Blue Bird against B & O. Blue Bird claimed damages from B & O under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 20(11), in connection with four carloads of fresh hams shipped to it from a midwest packing company via the B & O. After a non-jury trial extending through three days, the district court entered judgment in favor of B & O, apparently on the ground that Blue Bird had not made out a prima facie case. For the reasons to be stated, we will vacate the judgment and remand the case to the district court for further proceedings consistent with this opinion.
In Missouri Pacific Railroad Company v. Elmore & Stahl, 377 U.S. 134, 84 S.Ct. 1142, 12 L.Ed.2d 194 (1964), the Court set forth the circumstances in which a carrier may be held liable for damages pursuant to 49 U.S.C. § 20(11):
“[Ujnder federal law, in an action to recover from a carrier for damage to a shipment, the shipper establishes his prima facie case when he shows delivery in good condition, arrival in damaged condition, and the amount of damages. Thereupon, the burden of proof is upon the carrier to show both that it was free from negligence and that the damage to the cargo was due to one of the excepted causes relieving the carrier of liability.” 377 U.S. at 138, 84 S.Ct. at 1145. (Emphasis added.)
The disagreement between the parties to the instant appeal revolves around the first requirement for a prima facie case set forth in Elmore & Stahl, supra, that is, whether the hams were in good condition when delivered from the shipper to the initial carrier.'
Blue Bird introduced no direct testimony before the district court that the hams involved in these suits were delivered to the carrier in good condition. Instead, Blue Bird proposed to satisfy this requirement by the introduction into evidence of the bill of lading for each of the four ham shipments. The following language appeared in each of the four bills of lading:
“RECEIVED, subject to the classifications and tariffs in effect on the date of the issue of this Bill of Lading, . . . the property described below, in apparent good order, except as noted (contents and condition of contents of packages unknown) .” (Emphasis added.)
The “property” referred to in this language was variously described in the body of each bill of lading as “4 LONG HOOKS 58 RACKS” weighing 40046 pounds, “2527 pea Fresh Meats” weighing 36047 pounds, “1 LOT GRN MT PK CUTS” weighing 39712 pounds, and “loose fresh pork picnics” weighing 39478 pounds. None of the bills of lading listed an exception to the “apparent good order” of the hams when delivered to the initial carrier. Three of the four bills of lading indicated that the hams were being shipped pursuant to “Plan 2-Y^”; the fourth did not indicate a routing plan.
In Tuschman v. Pennsylvania Railroad, 230 F.2d 787 (3d Cir. 1956), this court held that a representation in a bill of lading that goods were received “in apparent good order” establishes a prima facie case of delivery in good order with respect to all aspects of the goods which were open to inspection and visible, but that the carrier may show that the alleged damage was caused in whole or in part by a condition which was not apparent when it received the goods:
“The acknowledgment by the bill of lading of the crane’s apparent good order was prima facie evidence that, as to all parts which were open to inspection and visible, the crane was in good order at the point of origin. This did not preclude the railroad from showing that the alleged damage in whole or part proceeded from some cause or causes which existed, but which were not apparent when it received the crane.” 230 F.2d at 791.
See also Nelson v. Woodruff, 66 U.S. 156, 160, 162, 1 Black 156, 17 L.Ed. 97 (1861). This evidentiary rule set forth in Tusch-man is consistent with the language contained in the bill of lading, since this language represents only that the goods were received from the shipper in “apparent” good order; any defects in those parts of the goods which were not open to inspection and visible would presumably not be “apparent” to the carrier and thus would not be included within the carrier’s representation.
The district court, however, concluded that the “apparent good order” representation in the bill of lading did not create a prima facie case with respect to the four ham shipments involved in the ease sub judice. The basis for this judgment by the district court was its implicit finding that in these four eases the shipper loaded the hams in a trailer provided by the shipper and then “sealed” the trailer before delivering it back to the carrier for shipment to the consignee. The district court determined that when merchandise is delivered to a carrier in a “sealed” trailer it is not “open and visible,” and held that in these circumstances the consignee who sues the carrier for damage to the goods cannot establish his prima facie case by means of the “apparent good order” representation in the bill of lading but must instead “establish by direct evidence that the goods were delivered to the carrier in good order.” 329 F.Supp. at 1118.
After the initial argument in this case and the filing of majority and dissenting opinions, which were vacated by the panel following consideration of a Petition for Rehearing, a pre-hearing conference was held in September 1972 and, thereafter, a supplemental stipulation was filed at the direction of this court (see F.R.A.P. 10(e)) amplifying the description of Plan 2-14, which had been contained in the trial court record in a one-sentence stipulation (see note 8 above).
Because the comments of counsel at the September pre-hearing conference (see note 8 above) and the Stipulation and statements thereafter filed make clear that there is no agreement between counsel on the facts concerning the sealing of these trailers and the existence or nonexistence of a “custom in the industry for the party loading the shipment into the trailer to place its seal upon the trailer,” we have concluded that the equivocal last sentence of Mr. Roeder’s testimony quoted in note 8 above does not constitute a sufficient evidentiary basis to support a finding that these trailers were sealed in view of the burden resting on the carrier to come forward with evidence showing a sealing of the trailers, making the condition of their contents non-apparent when received, under Tusch-man above at page 4. Since 1966 Mr. Roeder has been assigned to Philadelphia and the trailers were delivered to the carrier in the midwest in 1968. As stated by Judge Aldisert, speaking for the court, in Krasnov v. Dinan, 465 F.2d 1298, 1302 (3d Cir. 1972), a finding bearing “no rational relationship to the supporting evidentiary data” is clearly erroneous. Hence there was no proper basis for the conclusion of the district court that no part of the contents of the trailers was “open and visible,” as well as the conclusion that the shipper cannot establish his prima facie case by means of the “apparent good order” representation in the bill of lading.
The district court received evidence on many factual issues which it did not determine because of its findings that the contents of the trailer were not open and visible. For example, there was testimony indicating that a visual inspection at the point of shipment would not have disclosed the defects in the hams because spoilage is caused by a micro-organism not apparent to the naked eye, even though present in sufficient quantity to effect such spoilage. This contention is opposed by plaintiff-appellant. Also, because of the rear door on the trailer and the manner of loading, there was testimony that only the hams adjacent to those doors would have been subject to examination.
For the foregoing reasons, the district court judgment will be vacated and the case remanded for further proceedings consistent with this opinion.
ALDISERT, Circuit Judge
(dissenting).
This is the second time this panel has considered this appeal. When it was first before us, the majority filed an opinion reversing the district court, charging that court with making a finding which was clearly erroneous. I filed a dissenting opinion. Following a petition for rehearing, there was a reconsideration by the same panel. The majority now find as clearly erroneous that which they specifically found in their first opinion as “not clearly erroneous.” I again dissent. This time I dissent not only from the conclusion reached by the majority but also the method utilized to reach it.
This appeal requires review of a non-jury determination that a shipper failed to establish a prima facie case that shipments of hams were in good condition at the time of delivery to a railroad carrier. At trial, the shipper relied upon an acknowledgment in the railroad’s bill of lading that the goods were “in apparent good order.” The railroad contended that this acknowledgment in the bill of lading fails to satisfy the prima facie evidence rule because the phrase refers only to shipments “which were open to inspection and visible,” Tuschman v. Pennsylvania Railroad Co., 230 F.2d 787, 791 (3d Cir. 1956), whereas here the hams were received by the railroad in sealed trailers.
The district court found that the goods were loaded into trailers by the shippers, and that these trailers were then sealed and placed on the railroad’s freight cars for transportation. Based on its finding that the trailers were sealed, the court concluded that the railroad was not bound by the “apparent good order” statement on the bill of lading because “[w]here merchandise is sealed in a trailer . . . the contents are not open and visible.” 329 F.Supp. 1118.
The majority determine that application of the clearly erroneous rule dictates rejection of this critical finding. When this appeal was before this panel for original consideration, the majority stated that “the district court’s finding that the trailers were ‘sealed’ by the shipper before delivery to the carrier is supported by substantial evidence and is not clearly erroneous.” The majority properly observed in their first opinion that the “later stipulation of the parties concerning Plan 2-¼ did not by its terms negate the testimony of Mr. Roeder.” The majority now hold there is not “a sufficient evidentiary basis to support a finding that these trailers were sealed.” (page 107.).
The majority attempt to justify this oscillation by ascribing some significance to certain statements made by appellate counsel, not at trial in the district court, but adduced at a pre-argument hearing conducted after the original decision by this court, thirteen months after the district court trial took place. I am in total disagreement with this approach and would affirm the judgment of the district court.
What divides this court, after reconsideration, is basically the same difference in jurisprudential philosophy which divided it upon initial consideration. Ours is a fundamental difference in what we perceive to be the appropriate role of an appellate court in reviewing facts found by a trial court sitting without a jury. Regretfully, there is very little in the approach taken by the majority with which I can generate even a modicum of agreement.
The district court observed:
Critical to our decision are these facts. The rail carrier furnishes a piggyback trailer to the shipper, who cools and loads the shipment in a trailer which he is required to pre-cool. The shipper then seals the trailer. The trailer is then delivered to the piggyback train for cross country transit.
329 F.Supp. at 1117-1118.
The majority view, as clearly erroneous, the finding that the trailers were sealed. This was an important finding, for it was on this basis that the district court was able to draw the distinction “between those cases in which the merchandise being shipped were open to inspection and visible. Tuschman v. Pennsylvania Railroad Co., [230 F.2d 787, 3d Cir. 1956], and a situation wherein a loaded and sealed trailer is delivered to a carrier. Lincoln Farm Products Corp. v. Central Railroad Co. of New Jersey [81 N.J.Super. 161, 195 A.2d 200 (1963)].” 329 F.Supp. at 1118.
I find sufficient evidence in the record to sustain the trial court’s finding that the trailers were sealed. As the majority concede: (1) the shipments were made under “Plan 2-44” (page 104); and (2) it was the uncontradicted testimony of Mr. Roeder, a witness for the railroad: “In a plan two and a quarter, the shipper would affix the seal to the rear door, that trailer would be received at the ramp, or the trailer received under seal.”
Notwithstanding the uncontradicted record before the district court, the majority would by judicial fiat distort the trial record and infect it with dubious matters adduced at a F.R.A.P. 33 pre-hearing conference before an appellate court. With all due respects, I cannot detect the faintest tint of the relevancy of a post-trial, post-appellate argument disagreement “between counsel on the facts concerning the sealing of these trailers.” The function of an appellate court is to review only the record which was before the district court in order to determine whether that court committed error. Thus, I consider it highly improper for an appellate court to consider any evidence, stipulation, or statements of counsel which were not before the trial court at the time the decision under review was made. F.R.A.P. 10. Hunt v. Local Board No. 197, 438 F.2d 1128, 1146 (3d Cir. 1971), (dissenting opinion, Aldisert, J., joined by Van Dusen, J.).
Yet, that is precisely what the majority has done in reaching its conclusion. In an attempt to fashion some basis for the conclusion that there was insufficient evidence at trial “to support a finding that these trailers were sealed” (page 107), the majority rely on matters presented to an appellate court which were not before the district court. They rely on “comments of counsel” and “the Stipulation and statements thereafter filed [which] make clear there is no agreement between counsel on the facts concerning the sealing of these trailers and the existence or non-existence of a ‘custom in the industry for the party loading the shipment into the trailer to place its seal upon the trailer,’ .” (pages 106, 107.) Moreover, even if such a procedure did not offend my concepts of appellate review, the substance of post-trial disagreement of facts by trial counsel is totally inconsequential.
In concluding “there was not a sufficient evidentiary basis to support a finding that these trailers were sealed,” (page 107) the majority pointedly ignore Mr. Boeder’s testimony:
Q. Do you ever break the seals on those trailei-s?
A. Once in a while we do break the seals.
Q. For what purpose would you break the seals?
A. [A description of the circumstances.]
* * *
Q. Do you inspect all the loads that come into Philadelphia ?
A. No, we don’t.
Q. Where would that notation be if the seal were broken ?
A. We would make a notation on the waybill, and we would also make a notation in our seal record book.
Q. If you know, were the seals broken in any of these four cases?
A. Not to my knowledge.
(Record at 132-133.) (Emphasis supplied.)
The irrefutable and controlling fact is, as the majority explicitly conceded in their original opinion, that no evidence was introduced at trial to offset the critical evidence that the trailers were shipped under Rule 2*4, and Mr. Roeder’s testimony that the trailers shipped under Rule 2*4 were sealed.
Accordingly, I would affirm the judgment of the district court.
. The district court’s opinion is reported at 329 F.Supp. 1116 (E.D.Pa.1971).
. 49 U.S.C. § 20(11) provides in relevant part as follows:
“Any common carrier, railroad, or transportation company subject to the provisions of this chapter receiving property for transportation from a point in one State . . . to a point in another State shall issue a receipt or bill of lading therefor, and shall be liable to the lawful holder thereof for any loss, damage, or injury to such property caused by it or by any common carrier, railroad, or transportation company to which such property may be delivered or over whose line or lines such property may pass within the United States . . . when transported on a through bill of lading, and no contract, receipt, rule, regulation, or other limitation of any character whatsoever shall exempt such common carrier, railroad, or transportation company from the liability imposed; and any such common carrier, railroad or transportation company so receiving property for transportation from a point in one State . . . to a point in another State . . . , or any common carrier, railroad, or transportation company delivering said property so received and transported shall be liable to the lawful holder of said receipt or bill of lading or to any party entitled to recover thereon, whether such receipt or bill of lading has been issued or not, for the full actual loss, damage, or injury to such property caused by it or by any such common carrier, railroad or transportation company to which such property may be delivered or over whose line or lines such property may pass within the United States when transported on a through bill of lading, notwithstanding any limitation of liability or limitation of the amount of recovery or representation or agreement as to value in any such receipt or bill of lading, or in any contract, rule, regulation, or in any tariff filed with the Interstate Commerce Commission; and any such limitation, without respect to the manner or form in which it is sought to be made is declared to be unlawful and void:....”
. Exhibit P-2 at 32a.
. Exhibit P-3 at 33a.
. Exhibit P-4 at 34a.
. Exhibit P-1 at 31a.
. Exhibit P-1 at 31a contains no routing-plan. However, Blue Bird appears to have conceded that this trailerload was also shipped under Plan 2-1/4. See N.T. 314.
. During tlie course of the trial, the parties stipulated that Plan 2-1/4 is a “commonly known” plan “in which the shipper loads a trailer belonging to the initial carrier; that the carrier then picks up the loaded trailer at the point of origin, transports the trailer across country to its ramp in Philadelphia and that then consignee picks up such trailer at the ramp.” N.T. 316-17. Nothing was said in this stipulation respecting the sealing of the trailer. At a pre-hearing conference held in September 1972, counsel for defendant conceded that “the record does not specifically indicate that the trailers were sealed” (p. 4) and “there is no specific witness who . . . said that in these four cases the trailer was sealed at origin by the shipper.” See Glick v. White Motor Company, 458 F.2d 1287, 1291 (3d Cir. 1972); see, also, for example, Chwalow v. Commissioner of Internal Revenue, 470 F.2d 475, 477 (3d Cir. 1972), showing that this court has given effect to statements by counsel concerning the facts in documents filed in this court after appeal. However, Mr. Roeder, a witness for B & O, testified :
“Q Now, what is a seal on a trailer?
“A The seal is a metal band fixed to the rear door. Generally the seal has numbers on it.
“Q Who affixes that seal, if you know?
“A In a plan two and a quarter, the shipper would affix the seal to the rear door, that trailer would be received at the ramp, or the trailer received under seal.” (Emphasis supplied.)
The above testimony does not establish a custom and is too indefinite to form, the basis of a finding that the shipper sealed these trailers in light of paragraph 6 of the Stipulation filed October 16, 1972, describing Plan 2-1/4 in detail without any reference to the sealing of the trailers. See pages 106, 107, including fóot-notes 11-13.
. Whether this determination was intended to be a finding of fact or a legal conclusion is not entirely clear. No mention of whether the contents of each of the trailers was “open and visible” was made in the district court’s initial presentation of facts, after which the district court observed that “[s]ince these facts are not in dispute there is presented solely an issue of law as to whether the plaintiff has provided sufficient proof to establish that the hams were in good condition at the time they were turned over to the carrier.” 329 F.Supp. at 1118. The district court then declared:
“We are impelled to conclude that a distinction must be drawn between those cases in which the merchandise being shipped were open to inspection and visible. Tuschman v. Pennsylvania Railroad Co., supra, and a situation wherein a loaded and sealed trailer is delivered to a carrier. Lincoln Farm Products Corp. v. Central Railroad Company of New Jersey, 81 N.J.Super. 161, 195 A.2d 200, supra.
“It seems to us that when the contents of a shipment are open and visible to inspection, the “apparent good order” notation establishes a prima facie case. We are not persuaded that this rule is applicable to the circumstances that prevail here. Where merchandise is sealed in a trailer, and the contents are not open and visible, the plaintiff must establish by direct evidence that the goods wore delivered to the carrier in good order.”
We assume, for purposes of this decision, that the district court has made a finding of fact that the contents of the trailers were not “open and visible,” but note that F.R.Civ.P. 52(a) requires that the trial court “shall find the facts specially and state separately its conclusions of law thereon.” See Pepi, Inc. v. Helcar Corp., 458 F.2d 1062 (3d Cir., 1972).
. Due to the incomplete and ambiguous testimony at the trial describing Plan 2-14 and the condition of the trailers when delivered to the carriers, the possibility of supplementing the record through stipulation or otherwise with (1) a more complete description of this plan, which constituted a “tariff” referred to in the bill of lading, and (2) a statement of the condition of the trailer door seals and the visibility of the trailer contents at the time of delivery to the carrier was recognized in paragraph C of the order directing that these appeals be resubmitted to the panel. This paragraph C provided:
“C. A pre-hearing conference will be held at a date to be set in early September by a later order of the court for discussion of the factual and legal issues relevant to determination of the district court action, including the following:
“1. Was any part of the contents of the trailer ‘open and visible’ in view of the testimony of Mr. Boeder that the door to the trailer could be easily opened and other evidence in the record? If some part of the contents was open and visible, did the damage alleged by Blue Bird result, in whole or in part, from a cause which would have been apparent from a reasonable inspection of the contents in light of the manner in which the contents were loaded?
“2. Is the carrier bound by the representation in the bill of lading that the ‘property described below’ was recieved ‘in apparent good order’ when no statement was placed on such bill that the contents of the trailer were not subject to inspection?
“3. Is the trailer a ‘package’ within the meaning of the phrase ‘(contents and condition of packages unknown)’ in the bill of lading?
“4. Does the phrase ‘subject to the classifications and tariffs in effect on the date of the issue of this Bill of Lading’ in the bill of lading affect the duty of the carrier to make an inspection of the contents of the trailers?”
. Paragraph 6 of the Stipulation filed in this court on October 16, 1972, pursuant to the order of the panel at the pre-hear-ing conference (pp. 39-40), contains this language:
“6. Under Plan 11-14 the railroad supplies a trailer at consignor’s loading point. The trailer is then loaded by the consignor, picked up by the railroad and transported to its ramp, carried to the railroad ramp nearest the consignee, and removed from the flatcar for pick up at the railroad ramp by the consignee. The trailer is then transported by the consignee from the railroad ramp to the consignee’s door and is unloaded by the consignee and then returned empty to the railroad.
“The items which set forth provisions applicable to the plan generally known as Plan 11-% are items 28046-0, at page 103 of Supplement 42 of tariff 450-D, and item 3208-E of supplement 42 to tariff 450-D. Item 28046-0 provides, inter alia, that the consignor will perform the loading of cargo into the trailer at the point of origin. The other provisions applicable to Plan 11-14 are set forth in item 3208-E. . . .”
Since the parties concede that the hams were shipped pursuant to Plan 214 (note 7 above), the language “subject to the classifications and tariffs in effect on the date of issue of this Bill of Lading” makes the terms of the tariff applicable. See, e. g., Central of Georgia Ry. Co. v. Griner & Rustin, 33 Ga.App. 705, 127 S.E. 878, 880-881 (Court of Appeals of Georgia 1925).
. Pursuant to the following paragraph 8 of the Stipulation filed in this court (see note 11 above), plaintiff-appellant and defendant-appellee each filed a STATEMENT in this court on October 16, 1972:
“8. The parties differ as to whether certain other items in tariff 450-D and the supplements thereto are relevant to the subject matter before the Court, and it is agreed that each party may present to the Court, in addition to this Stipulation, a statement setting forth those items in tariff 450-D and its supplements which that party feels should be called to the attention of the Court.”
. See penultimate sentence of STATEMENT BY APPELLEE filed October 16, 1972.
. See also Chalk v. Beto, 429 F.2d 225, 227 (5th Cir. 1970); Transport Mfg. & Equip. Co. v. Fruehauf Trailer Co., 295 F.2d 223, 227 (8th Cir. 1961); 9 Wright & Miller, Federal Practice & Procedure, Civil § 2585 at pp. 733-734 (1971).
. The district court apparently did not realize that the facts recited in this language were “in disjjute”: “merchandise is sealed in a trailer, and the contents are not open and visible” (329 F.Supp. at 1118).
. On remand it would appear appropriate for the district court to have the record before it supplemented and to make new findings of fact and conclusions of law on various issues, including these (see F.R.Civ.P. 59(a) and 54(b); 5A Moore’s Federal Practice U 52.13 at 2765-2766) :
A. Was any part of the contents of the trailer “open and visible” in light of the time and condition of its being sealed and the party responsible for such sealing?
B. Is there a custom governing the sealing of such trailers shipped under Plan 2-% (see note 13 above) ?
If the trailer was sealed with a strong lock by the shipper, the district court would appear to have been correct in its conclusion that the contents of the trailer were “not open and visible,” 329 F.Supp. at 1118, and, hence, the defendant was not bound by the “apparent good order” representation in the bills of lading. See Armour Research Foundation of Ill. I. of T. v. Chicago R. I. & P. R.R., 311 F.2d 493, 494 (7th Cir. 1963). On the other hand, if easily removable “metal bands” were used to seal the trailer or the seals were placed by the carrier, such representation may have been sufficient to make out a prima facie case. See, e. g., Yeckes-Eichenbaum v. Texas Mexican Railway Co., 165 F.Supp. 204, 206-207 (S.D.Tex.1958), rev’d on other grounds, 263 F.2d 791 (5th Cir. 1959).
Also, the nature of the lock on the trailer door and the party responsible for it might require the conclusion that the “apparent good order” representation was negatived by the language “(contents and condition of contents of package unknown).-” Cf. Serrano v. United States Lines, 238 F.Supp. 383, 387 (S.D.N.Y.1965); Glass-Tite Industries v. Spector Freight Systems, 102 R.I. 301, 230 A.2d 254 (1987). We agree with Judge Friendly that the question of what constitutes a package “demands a solution better than the courts can afford.” See Leather’s Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800, 814 (2d Cir. 1971) ; Rules, Regulations, and Practices of Regulated Carriers With Respect to the Processing of Loss and Damage Claims, ICC Ex Parte No. 263, 340 I.C.C. 515, 606-613 (1972). It would appear that a revision of the normal language now used on bills of lading would be appropriate for Trailer-On-Flat-Car (TOFC) service, which has proved beneficial to rail carriers, shippers, and the public. See Substituted Service in Piggyback, 322 I.C.C. 301, 307, 322 (1964).
. The district court noted that (329 F. Supp. at 1118) :
“This disposition obviates the necessity for any discussion of the other points raised.”
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f2d_474/html/0110-01.html
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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{
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UNITED STATES of America, Appellee, v. Billy Gene THOMAS, Appellant.
No. 72-1524.
United States Court of Appeals, Tenth Circuit.
Argued and Submitted Nov. 15, 1972.
Decided Feb. 16, 1973.
Certiorari Denied June 4, 1973.
See 93 S.Ct. 2758.
Robert L. Christensen, Albuquerque, N. M., for appellant.
Richard J. Smith, Asst. U. S. Atty. (Victor R. Ortega, U. S. Atty., on the brief), for appellee.
Before HILL and SETH, Circuit Judges, and CHRISTENSEN, District Judge.
SETH, Circuit Judge.
Defendant-appellant, Billy Gene Thomas, was found guilty by a jury on six counts charging the possession with intent to distribute, distribution of heroin and amphetamines, and conspiracy to so distribute in violation of several sections of 21 U.S.C. § 801 et seq., commonly called the Comprehensive Drug Abuse Prevention and Control Act of 1970.
Counsel was appointed for appellant by the court on September 22, 1971, following the filing of a criminal complaint against appellant on September 21, 1971. On September 28, 1971, appellant and his appointed counsel appeared at a preliminary hearing. The Government was present, represented by counsel. On September 29, 1971, the court denied a motion for reduction of the $10,000.00 bond it had previously set. Thereafter, on October 18, 1971, Special Agent in Charge of the Albuquerque Division of the Bureau of Narcotics and Dangerous Drugs, David Canaday, went to the New Mexico State Prison and obtained a written statement from appellant in the absence of and without the knowledge of plaintiff’s attorney.
While appellant argues that he gave agent Canaday this statement only because he was promised that if he cooperated with the agents, he would be released from prison on his own recognizance and would be placed on probation, it is not disputed that the interview was requested by appellant and that appellant read and signed a Miranda type waiver of rights form.
On October 19, 1971, the indictment charging appellant was handed down. The next day, after agent Canaday admittedly conferred with the prosecuting attorney, appellant was released from prison on his own recognizance by the United States Magistrate on motion of the Government.
At appellant’s trial, the statement was offered in evidence by the prosecution and was admitted over the objection of defense counsel. The circumstances surrounding the statement were developed. It was used by the Government in its cross-examination of appellant after appellant had voluntarily taken the stand to testify in his own behalf.
Appellant contends that by allowing the prosecuting attorney to use appellant’s statement, which was obtained without informing his attorney of the impending interview and thus giving the attorney a reasonable opportunity to be present at the interview, is to condone conduct by the prosecution which can be considered to be unethical. The canons of ethics governing the actions of attorneys in all United States Courts in this circuit prohibit an attorney from communicating about the controversy with a party on the other side of the case who is represented by an attorney. This canon of ethics has been held to mean that it is improper to so communicate even if the party agrees to be interviewed without his attorney being present. The canon is applicable to criminal as well as civil cases. See 42 Neb.L.Rev. 483.
Other courts have expressed concern over the violation of this canon. See, for example, United States v. Pour Star, 428 F.2d 1406 (9th Cir.). The majority in Coughlan v. United States, 391 F.2d 371 (9th Cir.), stated at page 372:
“We, on the other hand, do not want to be considered as lending our approval to the practice, if indeed a practice exists, of interviewing accused persons in jail in the absence of counsel. The better, fairer and safer practice is to afford the defendant’s attorney reasonable opportunity to be present.”
The Fifth Circuit, in Wilson v. United States, 398 F.2d 331 (5th Cir.), when dealing with this problem said at page 333:
“However, this Court agrees with the dissenting opinion [in Coughlan, supra] as to the impropriety of Government interrogation of a person in custody pending trial, in the absence of counsel which the interrogator knew had been appointed to represent the defendant.”
Although in the case before us it is questionable if agent Canaday knew that appellant had counsel, this makes no difference, and the canon was violated when the statement was sought to be used over defendant’s objection. We have not passed on this question before and the proecution had no notice of the position of this court on the subject until this appeal.
We are not here presented with the question of admissibility of a statement obtained from an accused after he has once declined to make a statement or requested an attorney to be appointed. See People v. Fioritto, 68 Cal.2d 714, 68 Cal.Rptr. 817, 441 P.2d 625 (1968), and our holding here should not be so interpreted.
What we do hold, however, is that once a criminal defendant has either retained an attorney or had an attorney appointed for him by the court, any statement obtained by interview from such defendant may not be offered in evidence for any purpose unless the accused’s attorney was notified of the interview which produced the statement and was given a reasonable opportunity to be present. To hold otherwise, we think, would be to overlook conduct which violated both the letter and the spirit of the canons of ethics. This is obviously not something which the defendant alone can waive.
A violation of the canon of ethics as here concerned need not be remedied by a reversal of the case wherein it is violated. This does not necessarily present a constitutional question, but this is an ethical and administrative one relating to attorneys practicing before the United States courts. The problem is initially one for the trial courts; however, in appeals such as this in the future the concerned attorneys will appear before this court and consideration of the matter will be therein undertaken as to occurrences taking place after this opinion has been circulated. The enforcement officials are agents of the prosecuting party, and in the event use is made of information secured by interviews of the nature which here took place, short of its introduction in evidence, the problem will be dealt with in the proper case. That issue is not here presented.
The Government has referred us to Dillon v. United States, 391 F.2d 433 (10th Cir.), decided by this court. Although at first glance Dillon is seemingly dispositive of the issue presented in this appeal, a review of the briefs in that case indicates that the impropriety of the use of this type of evidence as a violation of the canons of ethics was not there presented to the court for its consideration. Thus the issue before us was not there met.
The issue was presented as an Escobe-do matter with a new warning after the FBI took over the interrogation following questioning by state officers. It appears that the canons issue was raised but not decided in Massiah v. United States, 377 U.S. 201, 84 S.Ct. 1199, 12 L.Ed.2d 246. See also the dissent therein.
We find no error, and the case is affirmed.
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Bobbye STONSIFER, Plaintiff-Appellant, v. COURTNEY’S FURNITURE COMPANY, INC., an Oklahoma corporation, Defendant-Appellee.
No. 72-1518.
United States Court of Appeals, Tenth Circuit.
Argued and Submitted Jan. 11, 1973.
Decided Feb. 15, 1973.
David C. Shapard of Shapard & Sha-pard, Oklahoma City, Okl., for plaintiff-appellant.
Kenneth R. Webster, of McKinney, Stringer & Webster, Oklahoma City, Okl., for defendant-appellee.
Before MURRAH, SETH and DOYLE, Circuit Judges.
WILLIAM E. DOYLE, Circuit Judge.
This is a slip and fall case which occurred on January 4, 1970, on premises known as the Wildwood Apartments in Oklahoma City, Oklahoma. Plaintiff had visited the premises for the purpose of looking at an apartment. She had parked in the space allotted for automobiles and had crossed the lawn to get to the manager’s office. After seeing the apartment she departed by taking a different route and in doing so traveled a sidewalk on the north side of the apartment house. Allegedly this sidewalk sloped downward and off to one side. At the time that the plaintiff was walking on it, it was covered with ice and had been for some four days. As a result of the fall the plaintiff suffered a broken pelvis and other injuries which are described in the pleadings.
The defendant-appellee took the plaintiff’s deposition on January 20, 1971, and on the basis of this deposition filed a motion for summary judgment. The trial court first denied the motion and later granted it on May 19, 1972. The basis for the court’s ruling was that “[t]he owner of premises has no obligation to warn an invitee, who knew or should have known the condition of the property, against patent and obvious dangers.” The court went on to say that an invitee assumes all normal and ordinary risks and that the owner is under no duty to reconstruct or alter the premises. Finally, the court said that the plaintiff was fully aware of the snow and ice on the sidewalk and was fully aware of the obvious hazards.
The plaintiff’s deposition revealed that although the day in question, January 4, 1970, was clear, there had been snow and cold on preceding days. The plaintiff admitted that she had seen ice on the sidewalk at the time of getting out of her car. She further stated that she had taken perhaps five steps on the ice before the fall. In addition, she said that although she had not seen the ice prior to stepping on the sidewalk, she became aware of it once she was on the sidewalk
In granting summary judgment the trial court applied the decision of the Supreme Court of Oklahoma rendered in Buck v. Del City Apartments, Inc., 431 P.2d 360 (Okl.1967). In the Buck case the plaintiffs, husband and wife, had been guests at a motel. The plaintiff wife fell on icy steps in front of the motel unit or cabin. The weather was inclement and the plaintiffs were fully aware of this. It was determined that the plaintiff held the status of guest and not tenant. Notwithstanding this, the action of the trial court in dismissing the case for insufficiency of the evidence was affirmed. The Oklahoma Supreme Court’s opinion noted that “[t]he owner or person in charge of the premises, is not obligated to warn an invitee, who knew or should have known of the condition of the property, against patent and obvious dangers.” Saying that “[t]he invitee assumes all normal or ordinary risks incident to the use of the premises, and the owner or occupant is under no legal duty to reconstruct or alter the premises so as to remove known and obvious hazards, nor is he liable to an invitee for an injury resulting from a danger which was obvious and should have been observed in the exercise of ordinary care,” the court went on to say:
The duty to keep premises in a reasonably safe condition for the use of the invited public applies solely to defects or conditions which may be characterized as in the nature of hidden dangers, traps, snares, pitfalls, and the like — things which are not readily observable. The law does not require the owner or occupant of land to warrant that the invitee shall suffer no injury upon the premises; his duty is discharged when reasonable care is taken to prevent the invitee’s exposure to dangers which are more or less hidden, and not obvious. In the absence of a duty neglected or violated, there can be no actionable negligence. Beatty v. Dixon, Okl., 408 P.2d 339; Herndon v. Paschal, Okl., 410 P.2d 549; Sullins v. Mills, [395 P.2d 787] supra; Pruitt v. Timme, Okl., 349 P.2d 4.
It is clear from the evidence that the wife knew or should have known of the general weather conditions. The dangers from them are universally known and were equally as apparent to her as they were to the motel-keepers. There is no evidence here that the usual hazard from the icy condition was in any way increased by an act of the motelkeepers. Where there is no act on the part of the owner or occupant of the premises creating a greater hazard than that brought about by natural causes, dangers created by the elements, such as the forming of ice and the falling of snow, are universally known, and all persons on the property are expected to assume the burden of protecting themselves from them. Sullins v. Mills, supra; see also Hallett v. Furr’s, Inc., 71 N.M. 377, 378 P.2d 613; Forbes v. Ruff, 72 N.M. 173, 381 P.2d 960; Carter v. Davis, 74 N.M. 443, 394 P.2d 594.
Significant here was the court’s conclusion that
mere slipperiness of snow or ice in its natural state and accumulations does not give rise to liability. Plaintiffs’ argument is based on authorities from jurisdictions which have modified the traditional common-law view. These authorities are not persuasive to us.
As the court points out in the Buck case, there are some jurisdictions which have modified the traditional common-law viewpoint which obtains in Oklahoma. These cases have imposed a burden on the landlord to exercise a duty of care to an invitee on the premises. They require the exercise of reasonable care toward the invitee and even call for anticipating and remedying conditions which expose the invitee to an unreasonable risk of harm.
The plaintiff appellant seeks to bring herself within the Oklahoma exception which allows an invitee to recover where the condition is in the nature of a trap, snare or pitfall. However, the district court refused to find that the condition, even though the sidewalk slanted away from the building and to the side, constituted such a latent hazard. Unquestionably, this would furnish the only tenable legal theory for the plaintiff, for it is very clear that Oklahoma follows the trap, snare or pitfall approach which holds the owner liable to an invitee if, but only if, he maintains a hidden or latent hazardous condition.
At bar the trial court first denied the defendant-appellee’s motion for summary judgment, but later granted it. This later and final action was based unquestionably on the decision in Buck v. Del City Apartments, Inc., supra. We cannot say that the trial court failed to accurately follow the Oklahoma law or failed to apply it to the admissions of the plaintiff given in her deposition which was taken by defendant’s counsel.
The judgment of the district court is affirmed.
. Thus, Prosser on Torts 404 (3rd ed. 1964), points out that where the condition is such that the invitee cannot negotiate it, even though he is fully aware of the conditions, that the court or a jury may he allowed to find that the obviousness, warning or even knowledge is not enough. The following cases are cited:
King Soopers, Inc. v. Mitchell, 1959, 140 Colo. 119, 342 P.2d 1006; Reboni v. Case Bros., 1951, 137 Conn. 501, 78 A.2d 887 (electric wires close to crane) ; [Csiz] Czismadia v. P. Ballantine & Sons, 2 Cir. 1961, 287 F.2d 423 (slippery floor); McCracken v. Curwensville Borough, 1932, 309 Pa. 98, 163 A.217, 86 A.L.R. 1379 (icy highway); Ward v. Avery, 1931, 113 Conn. 394, 155 A. 502 (slippery floor); Williamson v. Derry Elec. Co., 1938, 89 N.H. 216, 196 A. 265 (same); Seelbach, Inc. v. Mellman, 1943, 293 Ky. 790, 170 S.W.2d 18; Poster v. A. P. Jacobs & Associates, 1948, 85 Cal.App.2d 746, 193 P.2d 971. Cf. New Orleans & N. E. R. Co. v. Brooks, 1936, 175 Miss. 147, 154, 165 So. 804, 806 (carrier provided reasonable alternative, but knew that public used unsafe way anyway).
Id. at 404 n. 59.
See also Restatement of the Law of Torts 2d § 343(a).
. The deposition is unsatisfactory in that the plaintiff was led through some 66 pages of formal and rigid questioning and was never allowed to tell her story in her own way. We are convinced, however, that her admissions as to knowledge of the weather conditions generally and as to cognizance of the ice in particular were such that the result would not have changed even if she had been allowed to express herself with spontaneity.
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{
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"license": "Public Domain",
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UNITED STATES of America, Plaintiff-Appellee, v. BOB LAWRENCE REALTY, INC., et al., Defendants-Appellants.
No. 72-1655.
United States Court of Appeals, Fifth Circuit.
Feb. 13, 1973.
Rehearing Denied March 16, 1973.
Glenville Haldi, Atlanta, Ga., for defendants-appellants.
John W. Stokes, Jr., U. S. Atty., David L. Norman, Asst. Atty. Gen., Martin Barenblat, John N. Mitchell, Atty. Gen., Carl W. Gabel, Civil Rights Div., U. S. Dept, of Justice, Washington, D. C., for plaintiff-appellee.
Charles L. Weltner, Atlanta, Ga., for Stanley.
Earle B. May, Jr., Atlanta, Ga., for D. L. Stokes.
Wesley R. Asinof, Atlanta, Ga., for Reeves & Reeves.
Noah J. Stone, Julian E. Gortatowsky, Atlanta, Ga., for Heimerich.
Before GOLDBERG, AINSWORTH and INGRAHAM, Circuit Judges.
GOLDBERG, Circuit Judge:
This case presents the first appellate challenge to the constitutionality of 42 U.S.C. § 3604(e), the “anti-blockbusting” provision of the Fair Housing Act of 1968, Title VIII of the Civil Rights Act of 1968, 42 U.S.C. § 3601 et seq. We find that § 3604(e) falls within the constitutional authority of Congress to enact legislation to enforce the Thirteenth Amendment and that § 3604(e) does not violate the First Amendment. The District Court enjoined appellant from violating § 3604(e). We affirm.
This action was brought by the Department of Justice pursuant to Title VIII of the Civil Rights Act of 1968, 42 U.S.C. § 3601 et seq., alleging that appellant, Bobby L. Lawrence, President of Bob Lawrence Realty, Inc., and four other Atlanta, Georgia real estate brokers had undertaken “blockbusting” activities prohibited by 42 U.S.C. § 3604(e). The government’s complaint seeking injunc-tive relief arose out of all the defendants’ solicitation activities in racially transitional areas in southeast Atlanta. It alleged (1) that the defendants participated, individually and collectively, in a pattern or practice of resistance to the enjoyment of rights granted by the Act, and (2) that a group of persons had been denied rights secured by the Act, raising an issue of general public importance. See, 42 U.S.C. § 3613.
The District Court denied several motions filed by appellant and various other defendants, including motions to dismiss, for a more definite statement, for a jury trial, and for a severance. United States v. Bob Lawrence Realty, Inc., N.D.Ga.1970, 313 F.Supp. 870 (Lawrence I). Following the denial of these motions, appellant and two other defendants filed separate motions_for summary judgment, which the District Court denied. The District Court held, however, that the government’s affidavits and documentary evidence were insufficient to make out an “individual pattern or practice” of violations by appellant, and granted summary judgment as to that issue. The District Court also held that triable issues of fact existed as to whether appellant had participated in a “group pattern or practice” of unlawful conduct and as to whether there had been a denial of rights secured by the Act to a group of persons raising an issue of general public importance. United States v. Bob Lawrence Realty, Inc., N.D.Ga.1971, 327 F.Supp. 487 (Lawrence II).
Shortly before the trial, consent decrees were entered against two of the five original defendants, and the action against a third was dismissed. The case as it pertained to appellant and the other remaining defendant then proceeded to trial. The District Court 'made the following findings of fact, which are more fully set out in its opinion. United States v. Mitchell, N.D.Ga.1971, 335 F.Supp. 1004.
Appellant is a real estate broker licensed by the State of Georgia to engage in the listing and selling of real estate, and employs twenty seven sales personnel who act as his agents. During the period with which this action is concerned, appellant did business in the Candler Road — McAfee area in southeast Atlanta. Appellant was aware that this area has been a racially transitional area since 1968, approximately two years before the action was filed. Prior to 1968 the racial composition of the area was all white, ■ but as blacks began moving into the area in 1968, whites began moving out. Two of appellant’s sales personnel made representations prohibited by 42 U.S.C. § 3604(e) to four different individuals. Although these representations did not constitute an “individual pattern or practice” of violating the Act, they were made as part of a “group pattern or practice” of violating the Act by all agents in the area.
The District Court did not consider the evidence sufficient to raise an issue of general public importance as required by 42 U.S.C. § 3613 and made no finding as to whether a group of persons had been denied rights under the Act. The District Court also made no finding concerning appellant’s counterclaim and cross-action to recover attorney’s fees and for damages.
On December 27, 1971, the District Court issued its opinion and order enjoining appellant from further unlawful conduct, from which ruling only appellant appeals.
On appeal to this Court, appellant launches a scatter gun attack on the District Court’s order. As we perceive appellant’s brief, he presents four arguments: (1) 42 U.S.C. § 3604(e) is unconstitutional; (2) the Attorney General lacks standing to maintain this action; (3) the injunctive relief is improper; and (4) appellant is entitled to recover reasonable attorney’s fees.
I. CONSTITUTIONALITY OF SECTION 3604(e)
Blockbusting has been described as a process through which individuals stimulate and prey
“ . . .on racial bigotry and fear by initiating and encouraging rumors that negroes . . . [are] about to move into a given area, that all non-negroes . . . [will] leave, and that the market values of properties [will] descend to ‘panic prices’ with residence in the area becoming undesirable and unsafe for non-negroes.”
Contract Buyers League v. F & F Investment, N.D.Ill.1969, 300 F.Supp. 210, 214. See generally, Note, Blockbusting, 59 Geo.L.J. 170 (1970); Note, Blockbusting: A Novel Statutory Approach to an Increasingly Serious Problem, 7 Colum. J. of Law & Soc. Sci. 538 (1971). Blockbusting practices “ . . . constitute a fundamental element in the perpetuation of segregated neighborhoods, racial ghettos and the concomitant evils which have been universally recognized to emanate therefrom.” Brown v. State Realty Co., N.D.Ga.1969, 304 F.Supp. 1236, 1240. In order to attack this pernicious example of a \ capitalistic ethic gone astray, Congress enacted 42 U.S.C. § 3604(e), the anti-blockbusting provision of the Fair Housing Act of 1968. Congress was aware that as laudable and necessary as the profit motive might be for our socio-economic system, it must on occasion yield to more humane and compassionate mores which are inherent in the, system itself, and necessary for its survival.
Appellant argues that § 3604(e) is unconstitutional on two grounds: (A) Congress does not have authority to enact the statute. (B) The statute violates the First Amendment.
A. Congressional authority
In evaluating appellant’s first contention that Congress has no authority to enact § 3604(e), we are given much guidance by the decision of the United States Supreme Court in Jones v. Mayer Co., 1968, 392 U.S. 409, 88 S.Ct. 2186, 20 L.Ed.2d 1189. In upholding the constitutionality of 42 U.S.C. § 1982, the Court stated:
“Our starting point is the Thirteenth Amendment, for it was pursuant to that constitutional provision that Congress originally enacted what is now § 1982. The Amendment consists of two parts. Section 1 states:
‘Neither slavery nor involuntary servitude, except as a punishment for crime whereby the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.’ Section 2 provides :
‘Congress shall have power to enforce this article by appropriate legislation.’
“As its text reveals, the Thirteenth Amendment ‘is not a mere prohibition of State laws' establishing or upholding slavery, but an absolute declaration that slavery or involuntary servitude shall not exist in any part of the United States.’ It has never been doubted, therefore, ‘that the power vested in Congress to enforce the article by appropriate legislation,’ ibid., includes the power to enact laws ‘direct and primary, operating upon .the acts of individuals, whether sanctioned by state legislation or not.’ ”
“Thus, the fact that § 1982 operates upon the unofficial acts of private individuals, whether or not sanctioned by state law, presents no constitutional problem. If Congress has power under the Thirteenth Amendment to eradicate conditions that prevent Ne-groes from buying and renting property because of their race or color, then no federal statute calculated to achieve that objective can be thought to exceed the constitutional power of Congress simply because it reaches beyond state action to regulate the conduct of private individuals. The constitutional question in this case, therefore, comes to this: Does the authority of Congress to enforce the Thirteenth Amendment ‘by appropriate legislation’ include the power to eliminate all racial barriers to the acquisition of real and personal property? We think the answer to that question is plainly yes.”
“ ‘By its own unaided force and effect,’ the Thirteenth Amendment ‘abolished slavery, and established universal freedom’. Whether or not the Amendment itself did any more than that — a question not involved in this case — it is at least clear that the Enabling Clause of that Amendment empowered Congress to do much more. For that clause clothed ‘Congress with power to pass all laws necessary and proper for abolishing all badges and incidents of slavery in the United States’. (Emphasis added.)”
392 U.S. at 437-439, 88 S.Ct. at 2202-2203, 20 L.Ed.2d at 1206-1207. (Citations and footnotes omitted.)
We think that the mandate of Jones is clear. This Court will give great deference, as indeed it must, to the congressional determination that § 3604(e) will effectuate the purpose of the Thirteenth Amendment by aiding in the elimination of the “badges and incidents of slavery in the United States.” Jones v. Mayer Co., supra, 392 U.S. at 439, 88 S.Ct. at 2203, 20 L.Ed.2d at 1207; Brown v. State Realty, supra, 304 F.Supp. at 1240. Appellants have failed to present any argument that impugns the reasonableness of the congressional determination. Indeed, no such argument can be made in light of the role that blockbusting plays in creating and in perpetuating segregated housing patterns and thus in preventing “ . . . a dollar in the hands of a Negro . . . [from purchasing] the same thing as a dollar in the hands of a white man.” Jones v. Mayer Co., supra, 392 U.S. at 443, 88 S.Ct. at 2205, 20 L.Ed.2d at 1209; see also, Note, Discriminatory Housing Markets, Racial Unconscionability, and Section 1988: The ‘Contract Buyers League’ Case, 80 Yale L.J. 516 (1971). We find that the Thirteenth Amendment empowers Congress to enact § 3604(e).
B. Blockbusting and the First Amendment
Appellant contends that § 3604(e) constitutes an unconstitutional prior restraint by Congress on the right to free speech. In rejecting this contention, the court below stated:
“It is evident that the statute did not make mere speech unlawful. What it does make unlawful is economic exploitation of racial bias and panic selling. We conclude that the statute is one regulating conduct, and that any inhibiting effect it may have upon speech is justified by the Government’s interest in protecting its citizens from discriminatory housing practices and is not violative of the First Amendment.”
Lawrence I, supra, 313 F.Supp. at 872.
We agree with the District Court. As Judge Sobeloff said in United States v. Hunter, 4 Cir. 1972, 459 F.2d 205, cert. denied, 1972, 409 U.S. 934, 93 S.Ct. 235, 34 L.Ed.2d 189, a case that held that 42 U.S.C. § 3604(c) does not violate the First Amendment:
“It is now well settled that, while ‘freedom of communicating information and disseminating opinion’ enjoys the fullest protection of the First Amendment, ‘the Constitution imposes no such restraint on government as respects purely commercial advertising.’ Valentine v. Chrestensen, 316 U.S. 52, 54, 62 S.Ct. 920, 921, 86 L.Ed. 1262 (1942). See Breard v. City of Alexandria, 341 U.S. 622, 641-645, 71 S.Ct. 920, 95 L.Ed. 1233 (1951); New York State Broadcasters Ass’n Inc. v. United States, 414 F.2d 990, 998-999 (2nd Cir. 1969), cert. denied, 396 U.S. 1061, 90 S.Ct. 752, 24 L.Ed.2d 755 (1970); Banzhaf v. F C C, 132 U.S.App.D.C. 14, 405 F.2d 1082, 1099-1103 (1968), cert. denied, sub nom. Tobacco Institute, Inc. v. F C C, 396 U.S. 842, 90 S.Ct. 50, 24 L.Ed.2d 93 (1969); Capital Broadcasting Co. v. Mitchell, 333 F.Supp. 582 (D.D.C.1971), (three-judge court), aff’d sub nom. Capital Broadcasting Co. v. Klein-dienst, Acting Attorney General, 405 U.S. 1000, 92 S.Ct. 1289, 31 L.Ed.2d 472 (1972).”
United States v. Hunter, supra, 459 F.2d at 211-212.
Section 3604(e) regulates commercial activity, not speech. The statute is aimed at the commercial activities of those who would profiteer off the ills of society, conduct that the Thirteenth Amendment empowers Congress to regulate. We think the court in United States v. Mintzes, D.Md.1969, 304 F.Supp. 1305, correctly analyzed the statute when it said:
“The words ‘for profit,’ as used in section 3604(e) include the purchase of property by prohibited means with the hope of selling it for a larger price, but the words are not limited to such a transaction. They were evidently included in § 3604(e) to distinguish and eliminate from the operation of that subsection statements made in social, political or other contexts, as distinguished from a commercial context, where the person making the representations hopes to obtain some financial gain as a result of the representations. See Halsted v. S. E. C., 86 U.S.App.D.C. 352, 182 F.2d 660, 668 (1950).”
304 F.Supp. at 1312.
Appellant argues that an individual cannot properly be enjoined from making racial representations to obtain the business of a potential seller when the racial statement presents the truth. But it is clear that just as “[t]he state can prohibit the use of the street for the distribution of purely commercial leaflets, even though such leaflets may have ‘a civic appeal, or a moral platitude’ appended,” Jamison v. Texas, 1943, 318 U.S. 413, 417, 63 S.Ct. 669, 672, 87 L.Ed. 869, 873, the federal government may in some circumstances prohibit purely commercial speech made in connection with conduct which Congress can permissibly regulate or prohibit. Any informational value in a statement violative of § 3604(e) is clearly outweighed by the government’s overriding interest in preventing blockbusting. See, United States v. O’Brien, 1968, 391 U.S. 367, 88 S.Ct. 1673, 20 L.Ed.2d 672.
The only “speech” proscribed by § 3604(e) is commercial speech made to gain profit from racial representations. If § 3604(e) were to reach a non-commercial statement, a political statement, or a purely informational statement, it would naturally be subject to First Amendment attack. See, United States v. Hunter, supra, 459 F.2d at 212 n. 9. However, it doesn’t, and so § 3604(e) does not violate the First Amendment.
II. STANDING OF THE ATTORNEY GENERAL
42 U.S.C. § 3613 provides:
“Whenever the Attorney General has reasonable cause to believe that any person or group of persons is engaged in a pattern or practice of resistance to the full enjoyment of any of the rights granted by this subchap-ter, or that any group of persons has been denied any of the rights granted by this subchapter and such denial raises an. issue of general public importance, he may bring a civil action in any appropriate United States district court by filing with it a complaint setting forth the facts and requesting such preventive relief, including an application for a permanent or temporary injunction, restraining order, or other order against the person or persons responsible for such pattern or practice or denial of rights, as he deems necessary to insure the full enjoyment of the rights granted by this subchapter.”
The Attorney General thus has standing to sue whenever (1) there is an “individual” or a “group” pattern or practice violative of the Fair Housing Act or (2) whenever a group of persons has been denied rights granted by the Act and that denial raises an issue of general public importance.
The District Court found that appellant had not participated in an “individual pattern or practice,” but that the evidence established:
“ . . . by overwhelming preponderance ... a ‘group’ pattern or practice by all agents in the area, both defendants and non-defendants, and that some agent or agents of each of the defendants did knowingly participate in such pattern or practice, at least in some measure or to some degree.”
United States v. Mitchell, supra, 335 F.Supp. at 1006 (footnotes omitted). The District Court found that appellant participated in the “group pattern or practice” when two of his agents made forbidden representations to four individuals. Id. The District Court made no finding as to whether or not a group of persons had been denied rights granted by the Fair Housing Act.
As we interpret appellant’s brief, he argues that the Attorney General did not have standing to sue him once the District Court found that appellant had not participated in an “individual pattern or practice.” Appellant bases this argument on two grounds. He urges: (1) that the Attorney General must prove that appellant participated in an “individual pattern or practice” to have standing to obtain relief for a “group pattern or practice”; and (2) that the Attorney General must allege and prove a conspiracy or concerted action in order to have standing to obtain injunctive relief against a “group pattern or practice” of violating the Act.
The clear meaning of § 3613 directly refutes appellant’s first contention. Section 3613 authorizes the Attorney General to bring an action in District Court whenever he “has reasonable cause to believe that any person or group of persons is engaged in a pattern or practice of resistance to the full enjoyment of any of the rights granted by this subchapter. . . .” Unless we are to construe the phrase “group of persons” as totally superfluous, there is no need for each member of the “group of persons” to be engaged in an “individual pattern or practice” of violating the Act before the Attorney General has standing to sue. The statute was thus intended to reach the illegal activities of a group of persons even if the individual members of the group of persons were not engaged in an “individual pattern or practice.” We decline to contradict the clear inference of § 3604(e) by adopting appellant’s argument.
Appellant’s second contention that the “group of persons engaged in a pattern or practice of resistance to the full enjoyment of [§ 3604(e)] . . . ” must have engaged in a conspiracy or concerted action before the Attorney General has standing to sue is also erroneous. In considering the meaning of the “pattern or practice” requirement, this Court has said:
“We turn now to the question whether the 1969 [violations] . . . were isolated incidents or part of a pattern or practice of discrimination under the Fair Housing Act of 1968. The Act does not define ‘pattern or practice’, and the phrase is not explained by the legislative history. Relevant, however, are judicial and legislative interpretations of the phrase under earlier civil rights acts, such as the Civil Rights Act of 1960, 42 U.S.C.A. § 1971(e). The words ‘pattern or practice’ were not intended to be esoteric words of art. There is nothing magic in their meaning. United States v. Mayton, 5 Cir. 1964, 335 F.2d 153, 158-159. To be sure, they were intended to encompass more than an ‘isolated or accidental or peculiar event.’ See Hearings on H.R. 10327 Before the House Committee on the Judiciary, 86th Cong., 2d Sess. 13; United States v. Mayton, supra, at 158-159.”
“The number of [violations] . . . is not determinative. United States v. Ramsey, 5 Cir. 1964, 331 F.2d 824, 837 (concurring opinion). Nevertheless, we do note that in a case brought under the Act involving ‘blockbusting,’ three § 3604 violations were sufficient to establish a pattern or practice. United States v. Mintzes, D.Md. 1969, 304 F.Supp. 1305, 1314-1315. In any event, no mathematical formula is workable, nor was any intended. Each case must turn on its own facts.”
United States v. West Peachtree Tenth Corp., 5 Cir. 1971, 437 F.2d 221, 227. Guided by this standard, we must now interpret the terms “pattern or practice” in the context of a group of persons alleged to be violating § 3604(e).
Blockbusting by its very nature does not require concerted action or a conspiracy to wreak its pernicious damage. There is, for example, no need for XYZ Realty to conspire with ABC Homes to set off a pattern or practice of activities violating the act. The sociological phenomenon of a transitional area is enough to attract blockbusters intent upon culling all the profits that can be derived from the area. The very essence of the phenomenon is that a large number of competitors individually besiege an area seeking to gain a share of the market.
“If there be any doubt as to the meaning of the statute it is our function to construe the language of the statute so as to give effect to the intent of Congress . . . .” Saxon v. Georgia Ass’n of Ind. Ins. Agents, Inc., 5 Cir. 1968, 399 F.2d 1010, 1015. To interpret § 3613 as requiring proof of a conspiracy before the Attorney General has standing to seek to enjoin a group pattern or practice of blockbusting would be to seriously restrict the congressional intent to stop blockbusting practices and to unjustifiably restrict the power which Congress gave to the Attorney General to proceed against group patterns or practices. We decline to do so. Even though there may be no “individual pattern or practice” of blockbusting, a “group pattern or practice” of blockbusting is established when a number of individuals utilize methods which violate § 3604(e).
The District Court finding that a group of persons was engaged in a pattern or practice of violating § 3604(e) demonstrates the efficacy of the Attorney General’s decision that he had “reasonable cause to believe that any person or group of persons [was] engaged in a pattern or practice of resistance to [§ 3604(e)] . . . ” See, United States v. Ironworkers Local No. 1, 7 Cir. 1971, 438 F.2d 679, 681-682, cert. denied, 1971, 404 U.S. 830, 92 S.Ct. 75, 30 L.Ed.2d 60, and of the District Court’s finding that the Attorney General has standing to sue.
III. PROPRIETY OF INJUNCTIVE RELIEF
Appellant argues in his brief that:
“The evidence conclusively shows that Bob Lawrence had done everything humanly possible to eliminate any possible violation of any act, particularly the 1968 Civil Rights Act. On one isolated afternoon in April of 1969 three calls were made on homeowners which did not result in any illegal representation being made. Before that time — no complaint. After that time — no complaint. Without the imminent danger of repetition, there is no equity jurisdiction.”
He asks this Court to make the following findings:
“A finding that injunctive relief is inappropriate to Bob Lawrence.
A finding that Bob Lawrence has committed no prohibited act.
A finding that Bob Lawrence has not engaged in any ‘pattern or practice’ designed to deny to any person his civil rights.”
Appellant’s argument that injunctive relief is improper in this action is apparently based on his belief that since he is totally innocent of any violation of the Act, he is being enjoined solely on the basis of activities of other real estate agents in the area, and furthermore, that equity should not intervene because there is no danger that he will violate the Act in the future. The District Court, however, explicitly found: (1) that appellant had violated § 3604(e); (2) that there was a group pattern of violating the Act by all the agents in the area; and (3) that appellant participated in that pattern or practice. United States v. Mitchell, supra, 335 F.Supp. at 1006.
Appellant failed to order a transcript of the trial below. As a result, we do not have an adequate record which will permit this Court to find the District Court’s fact findings clearly erroneous. In Green v. Aetna Ins. Co., 5 Cir. 1968, 397 F.2d 614, 619, we stated:
“It is the burden of the appellant under Federal Rule of Civil Procedure 75(b) to ‘include in the record a transcript of all evidence relevant to such finding * * *.’ ‘if [he] intends to urge on appeal that a finding * * * is unsupported by the evidence or contrary to the evidence * * *’. See also, Smith v. United States, 287 F.2d 299 (5 Cir. 1961); Horton v. United States Steel, 286 F.2d 710-713 (5 Cir. 1961) and Rea Const. Co. v. B. B. McCormick and Sons, 255 F.2d 257 (5 Cir. 1958).”
The District Court finding that appellant violated the Act does not support appellant’s inexplicable contention that “he has done nothing wrong,” that he is “perfectly innocent himself,” and that the trial court recognized “the complete lack of any evidence of any illegal activities on behalf of Bob Lawrence.” Appellant’s failure to provide this Court with an adequate record precludes us from finding otherwise. Green v. Aetna Ins. Co., supra; Watson v. Button, 9 Cir. 1956, 235 F.2d 235; Jensen v. United States, 9 Cir. 1964, 326 F.2d 891.
Similarly, appellant’s argument that an injunction should not have issued because there is no danger that he will violate the Act in the future is misguided. United States v. W. T. Grant Co., 1953, 345 U.S. 629, 73 S.Ct. 894, 97 L.Ed. 1303, stated the rule of law that governs this case:
“The case may nevertheless be moot if the defendant can demonstrate that ‘there is no reasonable expectation that the wrong will be repeated.’ The burden is a heavy one. Here the defendants told the court that the interlocks no longer existed and disclaimed any intention to revive them. Such a profession does not suffice to make a case moot although it is one of the factors to be considered in determining the appropriateness of granting an injunction against the now-discontinued acts.
Along with its power to hear the case, the court’s power to grant in-junctive relief survives discontinuance of the illegal conduct. Hecht Co. v. Bowles, [321 U.S. 321, 64 S.Ct. 587, 88 L.Ed. 754], supra; Goshen Mfg. Co. v. Hubert A. Myers Mfg. Co., 242 U.S. 202, 37 S.Ct. 105, 61 L.Ed. 248 (1916). The purpose of an injunction is to prevent future violations, Swift & Co. v. United States, 276 U.S. 311, 326, 48 S.Ct. 311, [314], 72 L.Ed. 587, [597] (1928) and, of course, it can be utilized even without a showing of past wrongs. But the moving party must satisfy the court that relief is needed. The necessary determination is that there exists some cognizable danger of recurrent violation, something more than the mere possibility which serves to keep the case alive.
The chancellor’s decision is based on all the circumstances; his discretion is necessarily broad and a strong showing of abuse must be made to reverse it. To be considered are the bona fides of the expressed intent to comply, the effectiveness of the discontinuance and, in some cases, the character of the past violations.”
United States v. W. T. Grant Co., supra, 345 U.S. at 633, 73 S.Ct. at 897, 97 L.Ed. at 1309-1310 (footnotes omitted).
The District Court found that injunctive relief was appropriate. Appellant has not shown that the District Court abused its discretion. It does not appear that there was no danger of recurrent violation. In fact, before this Court appellant not only denies any unlawful conduct, in the face of the District Court’s explicit finding, but even inexplicably denies to this Court that the District Court made such a finding. He persists in claiming that his agents have the right to do in the future what they did in the past. The District Court’s broad discretion in granting injunctions in these instances is not easily upset, and in the face of appellant’s own inability to recognize his transgressions of the Act, we decline to assume that he will not violate the Act in the future. The District Court correctly exercised its discretion to issue an injunction properly tailored so as to keep interference with appellant’s business at a minimum compatible with full compliance with the law. See, United States v. West Peachtree Tenth Corp., supra, 437 F.2d at 228-229.
IV. ATTORNEY’S FEES
Appellant’s contention that equitable principles require that the government pay its attorney’s fees is utterly frivolous. The government’s suit was neither harassing nor unmeritorious. Equity does not require that the District Court grant attorney’s fees to a party found to have violated a federal statute by blockbusting in a racially transitional area.
Y. CONCLUSION
The anti-blockbusting statute, § 3604(e), is an attempt by Congress to disprove the belief, held by many, that the Thirteenth Amendment made a promise the Nation cannot keep. Integrated housing is deemed by many to be an a priori requirement before our schools can be realistically integrated. See generally Fiss, Racial Imbalance in the Public Schools: The Constitutional Concepts, 78 Harv.L.Rev. 564, 585-588 (1965); Report of the United States Commission on Civil Rights, Racial Isolation in the Public Schools (1967). Brushing these polemics aside, it is indisputable that white flight is a blight upon the democratized society we envision and this Congressional Act is in the mainstream of that vision. We hold that § 3604(e) is a constitutional exercise of congressional authority to enact legislation to effectuate the Thirteenth Amendment. Any informational value that may be found in speech uttered in furtherance of blockbusting is clearly outweighed by the power of Congress to regulate the purely commercial activity of blockbusting. In an attempt to avoid responsibility for violating § 3604(e), appellant has proposed that this Court engraft unnecessary, extraneous requirements upon § 3613, requirements which would hinder the Attorney General’s ability to enforce the Fair Housing Act, and which are inconsistent with the language and purpose of § 3613. We refuse to misinterpret § 3613 by reading in requirements not harmonious with the clear intent of the statute. Finding that the District Court properly enjoined appellant from further violation of the Act, we affirm.
Affirmed.
. 42 U.S.C. 3604(e) (Section 804(e), Civil Rights Act of 1968)
SEC. 804. As made applicable by section 803 and except as exempted by sections 803(b) and 807, it shall be unlawful—
* # * * *
(e) For profit, to induce or attempt to induce any person to sell or rent any dwelling by representations regarding the entry or prospective entry into the neighborhood of a person or persons of a particular race, color, religion, or national origin.
. See, Part II, infra.
. Appellant then filed a counterclaim and cross-action against the government seeking attorney’s fees and damages for abuse of prosecution and undue litigation.
. A real estate broker acts as a middle man in the housing market. Willing sellers list their homes with an individual real estate broker and the real estate broker, through agents, then shows listed homes to potential _ buyers, presenting the potential buyers’ offers to the listing seller. The real estate broker earns a commission from the listing seller only when sales are consummated.
. A real estate salesperson’s earnings are derived from the commission earned by the real estate broker and increase in direct proportion to the number of houses sold.
. The District Court issued the following injunction“It is therefore considered, ordered and adjudged:
“(1) That the defendants and their agents, employees, successors, and all those acting in concert or participation with them, be and they are hereby permanently enjoined from inducing or attempting to induce any person to sell or rent any dwelling by any explicit or implicit representations regarding the entry into the neighborhood of a person or persons of a particular race, color, religion, or national origin ;
“(2) a. That the defendants shall instruct each salesman, agent, and employee of the provisions of the Fair Housing Act and of this decree, his obligations and duties thereunder, and that failure to comply with these obligations and duties may result in dismissal or other appropriate action. This instruction shall be given within ten (10) days of the entry of this decree, and thereafter within ten (10) days of hiring of any new salesmen, employees, and agents. The defendants shall secure from each salesman, employee, and agent a signed statement certifying that he understands his obligations and duties not to discriminate against any person on account of race, color, religion, or national origin in relation to the sale or rental of dwellings, or the employment of personnel;
“b. That the defendants shall conduct all solicitation effort in such a manner so that the types and amount of solicitation activity shall be essentially similar in all areas in which the defendants conduct business and the defendants shall not conduct a greater amount or a different type of solicitation in areas which are inhabited by Negroes, or partially inhabited by Negroes, than in areas which are not so inhabited;
“c. That the defendants shall make a notation on their records to indicate the race of each person who purchases a house, or sells a house, in the course of their business;
“d. That the defendants in all of their real estate transactions, shall provide their services without distinctions based on race or color;
“(3) That in case of a dispute as to any future charge by plaintiff that this order has been violated by defendants, either individually or jointly, the parties, in an attempt to resolve such dispute, shall attempt to conciliate the matter which is the subject of the allegation within 30 days after the other party has been notified of the alleged violation, and a party shall not apply to this court for additional relief or other appropriate relief within such 30-day period, provided that nothing shall prevent a party from applying to the court in the event that the alleged violation is an explicit violation of the order, as found by the court, and the utilization of the procedure described above would result in irreparable injury to the victim of the alleged discrimination; and
“ (4) That this order shall be effective for a period of two years from this date, provided, however, that for good cause shown, the parties may move this court for an extension or modification of the order, as appropriate, upon giving the other party 30 days notice prior to moving for such modification or extension.
“Representatives of the plaintiff shall be permitted to inspect and copy all pertinent records of the defendants at any and all reasonable times, provided, however, that the plaintiff shall endeavor to minimize any inconvenience to the defendants from the inspection of such records.”
United States v. Mitchell, supra, 335 F. Supp. at 1007-1008.
. See note 1, supra.
. The Supreme Court has consistently recognized congressional power to legislate in furtherance of the elimination of racial discrimination. See, Griffin v. Breckenridge, 1971, 403 U.S. 88, 91 S.Ct. 1790, 29 L.Ed.2d 338 (power under Thirteenth Amendment); Katzenbach v. McClung, 1964, 379 U.S. 294, 85 S.Ct. 377, 13 L.Ed.2d 290 (power under interstate commerce); Katzenbach v. Morgan, 1966, 384 U.S. 641, 86 S.Ct. 1717, 16 L.Ed.2d 828 (power under Fourteenth Amendment); South Carolina v. Katzenbach, 1966, 383 U.S. 301, 86 S.Ct. 803, 15 L.Ed.2d 769 (power under Fifteenth Amendment); cf. Palmer v. Thompson, 1971, 403 U.S. 217, 227, 91 S.Ct. 1940, 29 L.Ed.2d 438, 446 (power under Thirteenth Amendment).
. Having found constitutional authority for Congress to enact § 3604(e) in the Thirteenth Amendment, we pretermit any discussion of Congress’s authority under either the Commerce Clause or the Fourteenth Amendment.
. The cases relied on by appellant, such as New York Times v. Sullivan, 1964, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686, and New York Times Co. v. United States, 1971, 403 U.S. 713, 91 S.Ct. 2140, 29 L.Ed.2d 822, reaffirm the constitutional principle that speech made in a political or informational context deserves the highest degree of protection from governmental restraint. Those cases do not, however, stand for the principle that the government cannot regulate speech made incidental to a purely commercial activity. The motivation for words employed in blockbusting is the profit to be made by the speaker or writer. If the words used to induce selling, with concomitant profits for the broker, had any other motivation, our judicial conscience would be twinged by our devotion to the First Amendment. See United States v. Hunter, supra, 459 F.2d at 211 n. 6.
. There is no simple definition of a “pattern or practice,” see, United States v. West Peachtree Tenth Corp., 5 Cir. 1971, 437 F.2d 221, 227, however, it is clear that an individual can violate the act by isolated illegal representations not rising to the level of an “individual pattern or practice.” See 42 U.S.C. § 3604(e).
. See, note 14, infra.
. The District Court found as follows :
“The evidence at the trial disclosed many illuminating things about what happens in a residential neighborhood when it becomes racially transitional. For example, if these cases are typical — • and the court believes they are — the following consequences can be predicted as inevitable, and beyond dispute: First, a sense of panic and urgency immediately grips the neighborhood and rumors circulate and recirculate about the extent of the intrusion (real or fancied), the effect on property values and the quality of education. Second, there are sales and rumors of sales, some true, some false. Third, the frenzied listing and sale of houses attracts real estate agents like flies to a leaking jug of honey. Fourth, even those owners who do not sell are sorely tempted as their neighbors move away, and hence those who remain are peculiarly vulnerable. Fifth, the names of successful agents are exchanged and recommended between homeowners and frequently the agents are called by the owners themselves, if not to make a listing then at least to get an up-to-date appraisal. Constant solicitation of listings goes on by all agents either by house-to-house calls and/or by mail and/or by telephone, to the point where owners and residents are driven almost to distraction.”
United States v. Mitchell, supra, 335 F.Supp. at 1005-1006.
. In addition, we find that the Attorney General had standing under the second alternative of § 3613. The District Court held:
In view of the foregoing injunction no ruling is made on the government’s further contention that a group of persons has been denied rights under the Act, first because the evidence here, in the view of the court, is not sufficient to raise an issue of general public importance as required by 42 U.S.C.A. § 3613, and second, because the individuals affected are each assured of a remedy under 42 U.S.C.A. § 3612 in any event.
United States v. Mitchell, supra, 335 F.Supp. at 1008. This ruling was error. The District Court’s specific finding that appellant had violated § 3604(e) shows the denial of the rights of a group of persons, both white and black, to be free from racial inducements to sell and from the results of such racial' inducements.
The District Court erred in requiring evidence that an issue of general public importance was presented. It is not for the District Court to determine when an issue of public importance justifying the intervention of the Attorney General is tised. See United States v. Greenwood Municipal Separate School Dist., 5 Cir. 1969, 406 F.2d 1086, 1090. Just as the Attorney General has discretion when to exercise the prosecutorial function in criminal cases, United States v. Cox, 5 Cir. 1965, 342 F.2d 167; Smith v. United States, 5 Cir. 1967, 375 F.2d 243; contra, K. Davis, Discretionary Justice (1969), so too the Attorney General must have a wide discretion to determine when an issue of public importance justifying his intervention under § 3613 is raised. See Boyd v. United States, E.D.N.Y.1972, 345 F.Supp. 790, 794. Once the Attorney General alleged that he had reasonable cause to believe that a violation of § 3604(e) denied rights to a group of persons and that this denial raised an issue of general public importance, he had standing to commence an action in District Court and to obtain injunctive relief upon a finding of a violation of the Act. See United States v. Northside Realty Assoc., 1971, N.D.Ga., 324 F.Supp. 287, 394; compare United States v. Greenwood Municipal Separate School Dist., supra, with United States v. Ironworkers Local No. 1, supra, 438 F.2d at 681-682; but see United States v. Hunter, supra.
. Appellant's citation of Headnote 18 Grismer et al. v. Merger Mines Corp., E.D. Wash.1942, 43 E.Supp. 990, is clearly inapplicable, as are all other authorities cited by appellant. In none o£ those cases were attorney’s fees awarded to a losing party.
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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Chuck “C.O.” BESHEAR, Plaintiff-Appellant, v. Clara WEINZAPFEL and Esther Wein-zapfel, d/b/a Weinzapfel Tavern, Defendants-Appellees.
No. 71-1657.
United States Court of Appeals, Seventh Circuit.
Argued Oct. 27, 1972.
Decided Feb. 20, 1973.
Fairchild, Circuit Judge, filed a concurring opinion.
Theodore Lockyear, Evansville, Ind., for plaintiff-appellant.
Fred P. Bamberger, Evansville, Ind., for defendants-appellees.
Before HASTINGS, Senior Circuit Judge, and FAIRCHILD and PELL, Circuit Judges.
PELL, Circuit Judge.
Plaintiff Beshear, a patron of defendants’ tavern, while exiting therefrom, allegedly fell and suffered injuries. His diversity suit for damages was dismissed by the district court for failure to prosecute. Beshear’s motion to reopen the case under Rule 60(b), Fed.R.Civ.P., was denied and this appeal followed.
The suit was filed May 20, 1970. Defendants filed their answer on June 22, 1970. Discovery commenced July 15, 1970. The case was assigned for a pretrial conference for September 4, 1970. At that conference the district court, granting defendants’ motions, removed the case from the pretrial and trial calendars. The court noted that the case being the last case on the calendar would not have been reached in the October term. The case was assigned for a pretrial conference on January 13, 1971. At the conference, plaintiff’s attorney announced to the court “that he had written to his client requesting authority to dismiss the action and was awaiting his reply and ... in the event his client did not grant authority to dismiss the suit, [he] would file a petition for leave to withdraw as counsel for the plaintiff.”
On March 8, 1971, the case was assigned for a pretrial conference for April 30, 1971. On March 12, plaintiff’s attorney petitioned for authority to withdraw his appearance. Attached to the petition was a copy of a letter dated January 12, 1971, sent by certified mail to plaintiff advising him that the attorney was going to withdraw his appearance “within a period of ten days from the date of this letter.” The letter pointed out that repeated attempts had been made to find witnesses that Beshear had indicated had previously fallen at the accident site, that none of these had been reached, and that it had been found that some of them did not exist. Further, the letter reminded plaintiff that the attorney had suggested dismissing the claim, which Beshear had indicated he did not want to do, and therefore the attorney felt that he could not “proceed with the matter any further, and that if you want the case to continue, it would be well for you to obtain another attorney.”
The district court granted the attorney’s petition to withdraw on April 6, 1971. A copy of the court’s entry was sent to Beshear by certified mail. At the scheduled pretrial conference on April 30, 1971, Beshear did not appear either in person or by counsel and defendants filed their motion to dismiss because plaintiff had unreasonably failed to prosecute the action. The district court on the same day granted the motion and dismissed plaintiff’s complaint with prejudice. A copy of the court’s entry was sent to Beshear by certified mail. Return receipts for all of the certified mail mentioned hereinbefore were returned executed by an “agent” of Be-shear and there is no claim he did not receive any of them. A copy of the motion to dismiss, to which was attached an attorney’s affidavit detailing Beshear’s derelictions in respect to prosecuting the suit, was also mailed to the plaintiff.
Thereafter the courthouse door was not darkened by Beshear, either personally or by counsel, until May 24, 1971, the date on which the case was listed on the court’s calendar for trial. At that time by attorney (#2), plaintiff filed a motion for relief from the order of dismissal. The motion contains no reference to any of the grounds for relief specified in Rule 60(b), nor indeed to the Rule itself; however, we may assume that Rule was the intended vehicle for relief seeking. The motion was not accompanied by any memorandum of authorities or argument but did have attached to it the affidavit of Beshear. That one-page document recited that he had never received any notice of any kind that a pretrial conference was to be held on April 30, 1971. For the purpose of this appeal we assume that he also intended to say that he was otherwise unaware of the fact that the pretrial conference had been scheduled. The affidavit then states that on April 12th he had received a copy of the trial calendar showing the case was set for trial on May 24, 1971, that having knowledge his first attorney had withdrawn, he took steps to procure another lawyer for the purpose of attending and appearing “in Court on May 24th for the purpose of asking for continuance or if necessary, to appear at trial in this case.” The affidavit is silent as to the date on which Beshear first took steps to procure the new counsel, as to whether any trial preparations had actually been made in the event trial had been found to be “necessary” on the 24th, and as to any contention that the plaintiff did possess a mertiorious claim despite the correspondence from his first attorney indicating substantial doubt as to the provability of the case. The affidavit was not executed until May 22nd, two days before it was filed.
On June 7, 1971, defendants filed a detailed memorandum containing argument and citing authorities in opposition to the motion for relief. On June 18, 1971, another firm of attorneys (#3) filed an appearance for Beshear. The record does not indicate that anything else was filed by the new firm other than the written appearance. On June 29, 1971, the district court denied the motion for relief. Notice of appeal was timely filed by the third set of attorneys as to the denial of the motion. Thereafter, another attorney (#4) also entered the fray and made the argument before this court. We are unable to say whether the arguments made to this court might have been persuasive to the district court. None of them was made, and the district court only had the bare factual bones contained in Beshear’s affidavit, being that he had not known of the pretrial conference, that he had gotten an attorney sometime before the May 24th supposed trial date (although he had been aware since January that he might have to get another attorney and since early April that he would in fact have to do so), and that the attorney was prepared to appear on the 24th, hopefully to secure a continuance.
At the time of filing the motion for relief, Beshear could in the alternative have launched a direct appeal from the dismissal. 9 Wright & Miller, Federal Practice and Procedure: Civil § 2376 (1971). In doing what he did here, it would appear that he followed what we deem ordinarily to be the better practice of bringing to the attention of the trial court at some appropriate time before appeal the errors which it is claimed have been committed. The district court already familiar with the case is thereby given an opportunity to correct any mistakes it might have made and the parties will avoid the expenses and delays involved in appeals. Unfortunately, while Beshear took a step in the right direction, the travel toward the point of being of assistance to the court in determining whether it had committed error was so slight as to be of minimal consequence.
Irrespective of whether there had been a direct appeal from the dismissal or an appeal from the denial of the Rule 60(b) motion, the district court will not be reversed in the absence of an abuse of discretion. Wright & Miller, supra; 3 Barron & Holtzoff, Federal Practice and Procedure (Wright ed.) § 1323. We recognize also as well-established law that the federal courts have been generally liberal in setting aside dismissals upon a proper showing of “mistake, inadvertence, surprise, or excusable neglect” (the first set of reasons for relief in Rule 60(b)). Beshear on this appeal also urges that he is entitled to relief under the last catchall category of 60(b), “any other reason justifying relief from the operation of the judgment.” Although this clause is also probably generally interpreted liberally, Professor Moore has stated that “[a]fa-sent exceptional and compelling circumstances, a party will not be granted relief from a judgment under clause (6): even though relief from the judgment might have been obtained had an appeal been taken, . . . .”7 Moore, Federal Practice ff 60.27[1], at 348 (1972). We do not find exceptional or compelling circumstances in the present case so as to call into play the catchall clause. Basically, the question presented to us is whether the obvious neglect was excusable and, even if it prima facie was, whether under the particular circumstances there nevertheless was an absence of abuse of discretion.
The leading case involving a dismissal for want of prosecution following failure of attendance at a pretrial conference is Link v. Wabash Railroad Co., 370 U.S. 626, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962). The Supreme Court expressly refrained from deciding whether unexplained absence from a pretrial conference would alone justify a dismissal but held such failure in the context of other evidence of similar purport could be considered as justifying a dismissal.
At the time the district court dismissed the action, there was a context of facts, which we have set forth herein-before, reflecting a lack of prosecutive intent which went beyond the mere failure to attend the pretrial conference. On the basis of contextual facts known or apparent to the district court at the time of dismissal, we cannot say there was a clear abuse of discretion. The question remains, however, whether the facts adduced on the motion for relief when brought to the attention of the court were of a sufficiency to make the denial of the motion an abuse of discretion.
To a considerable extent the factual situation as it appeared to the district court, which we have recited at the beginning of this opinion, speaks for itself in justification of the rulings of the district court. No point is served in repeating each of the salient factors. Nevertheless, we do note certain particularly significant aspects. Particularly salient is the fact that the court was aware in January that counsel either was going to dismiss or in the absence of consent from the client was going to withdraw. In that context, a pretrial conference was set for the end of April. Further, on March 12, 1971, the attorney did file his petition to withdraw with notice to Beshear. This petition was granted early in April with notice to Be-shear. At the end of that month there was no indication that Beshear, who had had ample time within which to secure substitute counsel, had not determined to abandon his case notwithstanding his apparent disinclination to go along with his attorney’s recommendation to dismiss.
We also note that the district court may have had doubts about the good faith of the 60(b) motion. While the attached affidavit refers to the receipt of the trial calendar on April 12th, it is singularly silent as to when the first contact was made with a new attorney. It was definitely known by May 5th that the case had been dismissed, yet the affidavit talks in terms of going into court on May 24th for the purpose of asking for the continuance of a nonexistent case or if necessary to try the nonexistent case without any indication that here had been trial preparation.
While the wide discretion of a district court in passing upon a motion under Rule 60(b) has been said to indicate that its action should not be set aside lightly without a showing of abuse of discretion, Wojton v. Marks, 344 F.2d 222, 225 (7th Cir. 1965), we are also aware that the district court when confronted with such a motion should view the right to relief with liberality, Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 245 (3d Cir. 1951). To the extent that any doubt might thereby have been created as to whether the district court should have granted Beshear the right to a trial on the merits, that doubt is dissipated by a significant insufficiency in the motion and the further proceedings below in support of the motion.
The record reflects a complete absence of any regard for a salutary rule that a 60(b) motion should be buttressed by a showing of the existence of a meritorious claim or defense. The most recent and extensive exposition of this requirement is found in Gomes v. Williams, 420 F.2d 1364 (10th Cir. 1970). There, a default judgment was entered against defendant when his attorney failed to appear and answer due to the fact that the summons mailed by the defendant to his attorney was almost certainly destroyed in a mail truck fire —a case of excusable neglect. In his Rule 60(b) petition, Gomes’s attorney stated, “We do have a good defense to the claim itself, but especially we have a good defense to any allegation of fraud.” 420 F.2d at 1366. The Tenth Circuit held that the lack of anything more than mere allegations of a meritorious defense was by itself a sufficient ground for. denying relief under Rule 60(b). See also Moldwood Corp. v. Stutts, 410 F.2d 351 (5th Cir. 1969); Consolidated Masonry & Fireproofing, Inc., v. Wagman Construction Corp., 383 F.2d 249, 251-252 (4th Cir. 1967); Smith v. Kincaid, 249 F.2d 243, 245 (6th Cir. 1957); Rutland Transit Co. v. Chicago Tunnel Terminal Co., 233 F.2d 655, 657 (7th Cir. 1956); 7 Moore, supra, ¶ 60.27[1], at 351; 3 Barron & Holtzoff, Federal Practice and Procedure (Wright ed.) § 1217.
In the present ease, not only had the plaintiff not alleged sufficient facts to constitute a meritorious claim, but, in fact, the district judge had before him the record of the pretrial conference at which Beshear’s attorney had stated that he intended to withdraw if Beshear did not dismiss the complaint because he did not feel it to be a meritorious claim.
We do not intend to suggest that the party moving for relief under 60(b) must show that he would prevail if a merit trial occurred but he must show facts which, if established, might reasonably be said to be a basis for recovery. The significance of some such showing is reflected in Horn v. Intelectron Corp., 294 F.Supp. 1153, 1155 (S.D.N.Y.1968), in which the district court in exercising its discretion in favor of the moving party observed that the “propriety of granting the motion is reinforced by the fact that the defendant raises both respectable factual and legal defenses on the merits . . . .”
Mr. Justice Black in dissenting in Link v. Wabash Railroad Co., supra, 370 U.S. at 648-649, 82 S.Ct. 1386, 8 L.Ed.2d 734, adverts to the proposition that the purpose of ending congestion in the courts should be no basis for dismissing cases without notice. While not unmindful of the ever increasing load of litigation in all courts, both federal and state, we agree that courts have been created for the very purpose of trying cases on their merits and that dismissals with prejudice and default judgments should not be utilized as a handy instrument for lessening the case load burden. We do not rest our decision on that basis but we do find Mr. Justice Black’s dissent illuminating on one of the principal premises of our decision in his reference to “merit” in the case of the dismissed party. Thus, he stated,
“Where a case has so little merit that it is not being prosecuted, a trial court can of course properly dispose of it under fair constitutional procedures. There is not one fact in this record, however, from which an inference can be drawn that the case of Link against the Wabash Railroad Company is such a case.” 370 U.S. at 648, 82 S.Ct. at 1398. (Emphasis added.)
In the case before us, at the time the trial judge ruled on the motion to dismiss and the subsequent motion for relief, there was nothing in the record to cause him to believe there was any merit. Indeed, the only inference was to the contrary. The case before us remains unchanged in this regard.
Mr. Justice Black also observed (370 U.S. at 649, 92 S.Ct. 1386) that the court congestion would not be alleviated on final analysis because the recipient of the unjust ruling would resort to appellate remedies. While this may be true on the subject of court congestion as a raison d’etre for dismissal, it has no application here where the contention of merit has never been advanced. Indeed, it is our opinion that it is essential that it have been advanced to the district court as a part of the 60(b) motion and not for the first time on appeal. We refuse to draw an inference that the filing of a 60(b) motion or the prosecution of an appeal connotes merit. The burden of showing a basis for the relief cannot be that lightly met.
Beshear contends that 60(b) relief should be granted in accordance with equitable principles of justice. In our understanding, however, equity contemplates even and fair-handed balancing. To reinstate a cause of action without any real basis for thinking that there was merit to it would scarcely seem to be according equity to the defendants.
Beshear also contends that the dismissal was in violation of the district court’s own Rule 7 which provides for 15 days’ opportunity to respond to a motion to dismiss and that the district court was estopped to dismiss because Beshear was aware that the trial was set for May 24, 1971. We find no merit in either contention. The issue regarding the local court notice rule was never presented to the district court and must be deemed to have been effectively waived. We do not know what significance the district court might have attached to this contention because it was not brought to its attention. We do note, however, that this is not a case of a motion to dismiss because of a failure of the complaint to state a claim upon which relief might be granted, as certainly there the court should hear the opposition grounds. The Supreme Court made it clear in Link v. Wabash Railroad Co. supra, that absence of notice as to the possibility of dismissal or the failure to hold an adversary hearing does not necessarily render such a dismissal void. All of the circumstances must be considered, and the court has the inherent power to dismiss sua sponte for lack of prosecution. 370 U.S. at 630 and 632, 82 S.Ct. 1386.
The matter of estoppel perhaps could be inferred from the 60(b) motion, although the claim of reliance at best is amorphous and as previously noted the legal issue as such was never supported by memoranda containing citation of authorities or argument. Further, the thin predicate of this claim of Beshear is the routine official calendar in which presumably all of the cases to be tried are listed with their trial dates. The basis for reliance became shaky shortly after April 6 when Beshear knew he no longer was represented by an attorney, and it evaporated completely on May 5, 1971, when Beshear became aware that his case had been dismissed. One should not have to be a lawyer to know that a case that has been dismissed will not be tried even though it had earlier been listed on a trial calendar. Nevertheless, Be-shear did not appear in court for nearly three weeks thereafter. For Be-shear’s #2 attorney to rely safely on not doing anything in the interim, he would have had to assume among other things that the trial was to be held on May 24th notwithstanding a dismissal, lack of a pretrial conference, and lack of completion of discovery.
It had been made clear to the district court that Beshear’s first counsel had no confidence in the merits of the case. Successive counsel have put forward no contrary notion. Nevertheless it is now contended, inter alia, on appeal that the district court because of the attorney-client privilege should not have considered the letter which the attorney wrote Beshear expressing his opinion of the case, a copy of the letter having been attached to the motion to withdraw. We have no way of knowing that the district court did give any consideration to this letter. In any event, the attorney two months before the motion to dismiss was filed had announced in open court his intention to withdraw if the client did not authorize dismissal. Also this matter was first presented in this litigation in Beshear’s reply brief and we do not find it to be a basis for reversal.
Trial courts may on occasion have a feeling that upon appellate review of their exercise of discretion homage is paid to the fact that reversal should occur only where it is clear that abuse of discretion has existed and thereafter the matter is decided upon the basis of how the reviewing judges would have ruled if they had been considering the case in the first place. We reject this ah initio concept if it does exist and adopt the standards collected in Particle Data Laboratories, Inc. v. Coulter Electronics, Inc., 420 F.2d 1174, 1178 (7th Cir. 1969):
“ ‘Generally, an appellate court may set aside a trial court’s exercise of discretion only if the exercise of such discretion could be said to be arbitrary.’ Sears, Roebuck and Co. v. American Mutual Liability Insurance Co., 7 Cir., 372 F.2d 435, 438 (1967). ‘[Discretion is abused only where no reasonable man would take the view adopted by the trial court. If reasonable men could differ as to the propriety of the action taken by the trial court, then it cannot be said that the trial court abused its discretion.’ Delno v. Market St. Ry. Co., 9 Cir., 124 F.2d 965, 967 (1942).”
Having considered this appeal in the light of these standards, we are satisfied that the district court did not abuse its discretion and we therefore affirm the judgment of dismissal.
Affirmed.
FAIRCHILD, Circuit Judge
(concurring).
Plaintiff’s counsel had been permitted to withdraw April 6 and plaintiff received a copy of the order. The pretrial conference for April 30 had previously been set, but there is no suggestion that plaintiff was ever notified. Under the circumstances a presumption that his counsel told him is unreasonable. Dismissal for failure to appear without no-tic of his duty to do so seems to me an abuse of discretion. I could agree, however, that because of the lack of diligence and other deficiencies in the motion to reinstate, the denial of that motion was not an abuse of discretion.
. Although most of the cases cited are concerned with the reopening by defendants of default judgments, we do not conceive that this is a material distinction from the present case. What the courts were saying was that vague allegations, which conceivably might be sufficient to avoid being held subject to attack for failure to state a cause under the Federal Rules of Civil Procedure, may not be sufficiently definite to justify relief under Rule 60(b).
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Joseph P. MOODY et al., Appellants, v. ALBEMARLE PAPER COMPANY, a Virginia corporation et al., Appellees. Equal Employment Opportunity Commission, Amicus Curiae.
No. 72-1267.
United States Court of Appeals, Fourth Circuit.
Argued Oct. 3, 1972.
Decided Feb. 20, 1973.
Boreman, Senior Circuit Judge, concurred in respect to testing issue, but dissented in respect to back pay issue, and filed opinion.
Albert V. Bryan, Senior Circuit Judge, concurred in respect to back pay issue, but dissented in respect to testing issue, and filed opinion.
See also, D.C., 50 F.R.D. 494.
George Cooper, New York City, and Robert Belton, Charlotte, N. C. (J. Le-Vonne Chambers, Chambers, Stein, Ferguson & Lanning, Charlotte, N. C., T. T. Clayton, Clayton & Ballance, Warrenton, N. C., Conrad O. Pearson, Durham, N. C. , Jack Greenberg, William L. Robinson, Morris J. Bailer, Eric C. Schnap-per, New York City, on brief), for appellants.
Leonard Appel, Washington, D. C., (Warren Woods, Betty Southard Murphy, Wilson, Woods & Villalon, Washington, D. C., and James B. Ledford, Charlotte, N. C., on brief), for appellee, Halifax Local No. 425, United Papermakers and Paperworkers, AFL-CIO.
Francis V. Lowden, Jr., Richmond, Va. (Paul M. Thompson, Hunton, Williams, Gay & Gibson, Richmond, Va., Gordon G. Busdicker, Faegre & Benson, Minneapolis, Minn., Julian R. Allsbrook, Allsbrook, Benton, Knott, Allsbrook & Cranford, Roanoke Rapids, N. C., Charles F. Blanchard, and Yarborough, Blanchard, Tucker & Denson, Raleigh, N. C., on brief), for appellees, Albemarle Paper Co. and others.
Martin Slate, Atty., E. E. O. C. (John De J. Pemberton, Jr., Acting Gen. Counsel, Julia P. Cooper, Chief, Appellate Section, E. E. O. C., on brief), for ami-cus curiae, E. E. O. C.
Before BOREMAN and BRYAN, Senior Circuit Judges, and CRAVEN, Circuit Judge.
CRAVEN, Circuit Judge:
This is a class action arising under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. Plaintiffs are representative members of the class composed of all Negroes employed at defendant’s Roanoke Rapids plant and all Negroes who may hereafter apply for employment at the Roanoke Rapids plant. The multitude of defendants is occasioned by changes in corporate ownership which occurred subsequent to the institution of the action. Since the Roanoke Rapids operation has at all pertinent times been called the Albemarle Paper Company, the corporate defendants will hereinafter be referred to as Albemarle.
The district court found that Albe-marle practiced racially disciminatory employment practices prior to July 2, 1965, and that the effect of that discrimination had been perpetuated through a job seniority system. Thus, the district court enjoined Albemarle and the defendant union, Halifax Local 425, United Papermakers and Paper-workers, AFL-CIO, from discriminating against Negro employees, and ordered that the job seniority system be abolished and a plant-wide seniority system be implemented. There has been no appeal from these provisions of the court’s decree.
The district court refused to order the abolition of or changes in the pre-em-ployment testing procedures used by Al-bemarle. Plaintiffs appeal from the district court’s determination. Judge Bore-man concurs with Judge Craven in reversing and remanding to the district court on this issue. Judge Bryan dissents.
The district court also refused to award the plaintiffs back pay. Judge Bryan concurs with Judge Craven in reversing the district court on this issue. Judge Boreman dissents.
The effect of this division in the court is to reverse and remand the district court’s determination as to the testing procedures and the refusal to award back pay.
I
TESTING PROCEDURES
Prior to 1958, no employment personnel tests were given to applicants for employment at Albemarle. In 1956, the personnel manager was requested to design a screening program for selection of employees for certain departments. In this connection, the Revised Beta Examination (Beta) and the Bennett Mechanical Comprehension were selected to test applicants. A brief study was made at that time to determine the usefulness of the Beta test.
About 1963, the then personnel manager discontinued using the Bennett Mechanical Test since it had not been studied. Use of the Wonderlic Test, A and B series, was initiated at that time. Whereas the Beta is a non-verbal test developed to measure the intelligence of illiterate and non-English speaking individuals, the Wonderlic Tests are verbal tests of general mental ability. Use of the Wonderlic Tests was adopted in connection with the Beta because Albemarle felt it essential for new employees to have a certain level of verbal facility because of the increasing technical nature of the operation and the increasing use of printed instructions in the operation of machinery and the like.
The operations of Albemarle are, like other pulp and paper mills, organized on a departmental basis. For purposes of employee classification and promotion, each department is organized into one or more lines of progression. Entrance into each department is effected at the bottom of a line of progression and employees move up, depending on their ability and experience, as vacancies occur. In all, Albemarle has 11 separate departments containing 17 lines of progression. Since 1963, applicants for 8 of these departments and 14 of the lines of progression were required to score successfully on the Beta and Wonderlic pre-employment tests.
After the Supreme Court decision in Griggs v. Duke Power Co., 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971), Albemarle hired an expert in industrial psychology and testing to conduct a validation study of its pre-em-ployment testing procedures. A validation study determines whether test results have a significant relationship to actual performance on the job. The technique adopted for the validation study of Albemarle’s tests was concurrent validation. In concurrent validation, a sample of current employees occupying the jobs, or job groups, in question is selected. These employees are then given the tests, and the test scores compared with one or more criteria of the employees’ ability to perform their jobs.
Albemarle’s validation study covered 10 job groups in only 8 of the 14 lines of progression, and 5 of the 8 departments for which the tests are required. The sample of employees was generally selected from the higher level jobs and encompassed approximately 30 percent of the different jobs for which tests are required. The test scores from that sample were compared with two supervisors’ comparative ratings of employees in each job slot. The criteria for the supervisors’ ratings was: “Excluding a man’s attitude, just how well the guy can do the job when he’s feeling right.” (A. 471). No job analysis was done for the jobs in question.
Albemarle’s expert found that one of the tests was validated for 9 of the 10 job groups studied. However, both tests were valid for only one job group.
The effect of the district court’s approval of Abemarle’s testing procedure is to approve a validation study done without job analysis, to allow Albemarle to require tests for 6 lines of progression where there has been no validation study at all, and to allow Albemarle to require a person to pass two tests for entrance into 7 lines of progression when only one of those tests was validated for that line of progression. We think this was error.
Title VII of the Civil Rights Act “proscribes not only overt discrimination but also practices that are fair in form, but discriminatory in operation.” Griggs v. Duke Power Co., 401 U.S. 424, 431, 91 S.Ct. 849, 853, 28 L.Ed.2d 158 (1971). If an employment practice, though facially neutral as the testing procedures here, is shown to have a differential impact on minority employment, it is prohibited unless the employer can prove business necessity. Griggs, at 432, 91 S.Ct. 849. The plaintiffs made a sufficient showing below that Albemarle’s testing procedures have a racial impact. It was thus incumbent upon Albemarle to establish business necessity by showing that its testing requirements “have a manifest relationship to the employment in question.” Griggs, at 432, 91 S.Ct. at 854. United States v. Jacksonville Terminal Co., 451 F.2d 418, 455-457 (5th Cir. 1971).
While § 703(a)(2), (h) specifically authorizes professionally developed tests not used to discriminate, Griggs makes clear that that section allows only those tests proven to be job related. 401 U.S. at 436, 91 S.Ct. 849. In so holding, the Court gave great deference to the interpretation of the Act evinced in a set of guidelines by the enforcing agency, the Equal Employment Opportunity Commission. Griggs, at 433-434, 91 S.Ct. 849. We have also recently noted with approval these guidelines. Robinson v. Lorillard Corp., 444 F.2d 791, 798 n. 7 (4th Cir. 1971).
We think Albemarle has failed in several respects to show that its tests are job related, have a manifest relationship to employment, and have been validated in accordance with EEOC guidelines.
In developing criteria of job performance by which to ascertain the validity of its tests, Albemarle failed to engage in any job analysis. Instead, test results were compared with possibly subjective ratings of supervisors who were given a vague standard by which to judge job performance. Other courts have expressed skepticism about the value of such ill-defined supervisor appraisals. See, e. g., Rowe v. General Motors Corp., 457 F.2d 348, 452 (5th Cir. 1972). Also Cooper and Sobol have stated in their article, Seniority and Testing Under Fair Employment Laws: A General Approach to Objective Criteria of Hiring and Promotion, 82 Harv.L.Rev. 1598, 1662 (1969):
Supervisory ratings, for example, which are possibly the single most common performance measure used in validity studies, are subject to personal prejudice. When test scores are correlated with such ratings, the validation, if it can be called that, is of questionable value and may simply prove that the test has the same bias as the supervisors.
Likewise, in this regard the EEOC guidelines provide:
(3) The work behaviors or other criteria of employee adequacy which the test is intended to predict or identify must be fully described; and, additionally, in the case of rating techniques the appraisal form(s) and instructions to the rater (s) must be included as part of the validation evidence. Such criteria may include measures other than actual work proficiency, such as training time, supervisory ratings, regularity of attendance and tenure. Whatever criteria are used they must represent major or critical work behaviors as revealed by careful job analyses.
(4) In view of the possibility of bias inherent in subjective evaluation, supervisory rating techniques should be carefully developed, and the ratings should be closely examined for evidence of bias.
29 C.F.R. § 1607.5(b) (1970).
We agree that some form of job analysis resulting in specific and objective criteria for supervisory ratings is crucial to a proper concurrent validation study. See, Western Addition Community Organization v. Alioto, 340 F.Supp. 1351, 1354-1355 (N.D.Cal.1972). To require less is to leave the job relatedness requirement largely to the good faith of the employer and his supervisors. The complaining class is entitled to more under the Act.
Even if the validation procedures had been proper, it was error to approve the testing procedures for lines of progression where there had been no validation study. In this case the tests were approved as a requirement for 6 lines, of progression for which the tests had not been validated. While it is true that a test need not always be validated for each job for which it is required, there are narrow limits on when a test may be used without validation. The EEOC guidelines provide:
(2) Where a test is to be used in different units of a multiunit organization and no significant differences exist between units, jobs, and applicant populations, evidence obtained in one unit may suffice for the others. 29 C.F.R. § 1607.4(c) (1970).
In this case, a failure to perform job analyses in the lines of progression involved in the validation study and in the other lines of progression for which the tests are required prevents concluding that no significant differences exist in the jobs in question.
Not only was it error to approve the testing procedures for lines of progression not validated, but it was also error to approve requiring applicants to pass two tests for positions where only one test was validated. Albemarle seeks to justify this under the business necessity rule. Albemarle originally hires all employees into a pool. From this pool the employees move into a line of progression as vacancies occur. Since it is not known into which line of progression an employee will be placed, Albemarle asserts there is nothing wrong with requiring all employees to be qualified for any line.
Albemarle has not shown that hiring all employees into a pool is necessary to the safe and efficient operation of its business, nor has it shown that hiring employees for specific lines of progression is not an acceptable alternative. This they were required to prove to justify their policies under the business necessity test. Robinson v. Lorillard Corp., 444 F.2d 791, 798 (4th Cir. 1971).
Thus we hold that the district court erred in upholding the validity of the pre-employment personnel tests and in refusing to enjoin their use.
II
BACK PAY
Title 42 U.S.C. § 2000e-5(g) provides in relevant part:
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 reinstatement or hiring of employees, with or without back pay ....
The district court found that Albemarle had practiced discriminatory employment practices and that these practices had been perpetuated through a job seniority system. Consequently, the district court enjoined Albemarle and the defendant union, Halifax Local 425, from continuing the discriminatory practices. Nevertheless, the district court, finding an award of back pay to be within his discretion, refused to award back pay to the complaining class. The reasons given by the district court for refusing such an award were that the claim for back pay was filed nearly five years after the institution of the action, and that there was no evidence of bad faith noncompliance with the Act. Neither of these is sufficient to justify the district court’s refusal to award back pay.
In Robinson v. Lorillard Corp., 444 F.2d 791 (4th Cir. 1971), a case which also dealt with a seniority system which perpetuated past discriminatory practices, the defendants made the contentions presented to us here.
The complaint filed by the plaintiffs in the District Court did not specifically request an award of back pay . ' . . At a pretrial hearing concerning the appropriateness of a class action, one of the lawyers for the plaintiffs clearly indicated that the suit was one for injunctive relief rather than recovery of lost wages. It was not until well after trial of the case, though before the judge had entered a decision, that a request was made for additional relief in the form of back pay for the class.
444 F.2d at 802-803. In Robinson, as here:
[Bjeeause the obligation to provide back pay stems from the same source as the obligation to reform the seniority system, any general defenses relevant to the back pay award were equally relevant to the suit for injunc-tive relief .... The defendants have in no way been prejudiced by the belated claim.
444 F.2d at 803.
Other courts have held likewise. The Fifth Circuit held, in United States v. Hayes Int’l Corp., 456 F.2d 112 (1972), that the broad aims of Title VII require that the issue of back pay be fully developed and determined even though it was not raised until the post-trial stage of litigation.
Also, the Seventh Circuit, in a case which was not a class action, remanded the case in order that “ ‘relief should be made available to all who were so damaged whether or not they filed charges and whether or not they joined in the suit.’ ” Sprogis v. United States Air Lines, Inc., 444 F.2d 1194, 1202 (7th Cir.), cert. denied, 404 U.S. 991, 92 S.Ct. 536, 30 L.Ed.2d 543 (1971).
In Robinson the argument was also made that back pay should not be awarded where the defendant had acted in good faith. Put negatively, the argument, urged by Albermarle, is
that back pay should not be awarded in the absence of a specific intent to discriminate. A corollary argument is that the award was improper in light of the unsettled state of the law. The principal answer to both points is that back pay is not a penalty imposed as a sanction for moral turpitude; it is compensation for the tangible economic loss resulting from an unlawful employment practice. Under Title VII the plaintiff class is entitled to compensation for that loss, however benevolent the motives for its imposition.
444 F.2d at 804. See also, Johnson v. Goodyear Tire & Rubber Co., 349 F.Supp. 3, (S.D.Tex., 1972) (also a seniority case where good faith was present).
The only significant difference between Robinson and the present case is that in Robinson the district court had awarded back pay and the district court below refused to award back pay. The question then is whether, in light of the broad aims of Title VII, this court may affirm the opposite result as to back pay on similar factual situations because such award rests in the discretion of the district judge.
“Discretion in a legal sense necessarily is the responsible exercise of official conscience on all the facts of a particular situation in the light of the purpose for which the power exists.” Bowles v. Goebel, 151 F.2d 671, 674 (8th Cir. 1945) (emphasis added). Thus in determining the proper scope of the exercise of discretion, the objective sought to be accomplished by the statute must be given great weight. Hecht Co. v. Bowles, 321 U.S. 321, 331, 64 S.Ct. 587, 88 L.Ed. 754 (1944). Where a district court fails to exercise discretion with an eye to the purposes of the Act, it must be reversed. Wirtz v. B. B. Saxon Co., 865 F.2d 457 (5th Cir. 1966); Shultz v. Parke, 413 F.2d 1364 (5th Cir. 1969).
“The clear purpose of Title VII is to bring an end to the proscribed discriminatory practices and to make whole, in a pecuniary fashion, those who have suffered by it.” Bowe v. Colgate-Palmolive Co., 416 F.2d 711, 720 (7th Cir. 1969). In light of the congressional purpose, courts should give “a wide scope to the act in order to remedy, as much as possible, the plight of persons who have suffered from discrimination in employment opportunities.” Rowe v. General Motors Corp., 457 F.2d 348, 354 (5th Cir. 1972).
Also, as we stated in Robinson, “[t]he back pay award is not punitive in nature, but equitable — intended to restore the recipients to their rightful economic status absent the effects of the unlawful discrimination.” 444 F.2d at 802. See also, Johnson v. Georgia Highway Express, Inc., 417 F.2d 1122, 1125 (5th Cir. 1969).
Because of the compensatory nature of a back pay award and the strong congressional policy embodied in Title VII, a district court must exercise its discretion as to back pay in the same manner it must exercise discretion as to attorney fees under Title II of the Civil Rights Act. See Bowe, supra 416 F.2d at 719. Thus, a plaintiff or a complaining class who is successful in obtaining an injunction under Title VII of the Act should ordinarily be awarded back pay unless special circumstances would render such an award unjust. Newman v. Piggie Park Enterprises, 390 U.S. 400, 88 S.Ct. 964, 19 L.Ed.2d 1263 (1968). See Bowe, supra 416 F.2d at 719-720.
Because there are no such special circumstances here, on remand the district court should include an award of back pay in its order. It is to be remembered, of course, that a back pay award is limited to damages which are actually suffered. Lea v. Cone Mills Corp., 438 F.2d 86 (4th Cir. 1971).
Reversed.
B OREM AN, Senior Circuit Judge
(concurring in part and dissenting in part):
I am in agreement with the result reached by Judge Craven in that portion of his opinion which holds that Albe-marle Paper Company has failed to show a business relationship between the racially biased tests administered to pro--spective employees, and its personnel requirements. However, from that portion of his opinion reversing the district court’s refusal to award back pay, I must respectfully dissent.
The appellants advance multiple theories in their effort to persuade this court to modify the relief granted below to include an award of back pay. The two arguments approved and adopted by Judge Craven are: first, the equation of § 706(g) of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-5(g), with § 706(k) of the Act, 42 U.S.C. § 2000e-5(k), which provides for an award of attorney’s fees in the discretion of the court and under which the federal courts have held attorney’s fees are to be awarded as of course, in the absence of “special circumstancesand second, that failure to grant back pay was an abuse of discretion under Robinson v. Lorillard, 444 F.2d 791 (4 Cir. 1971).
In Lea v. Cone Mills, 438 F.2d 86, 88 (4 Cir. 1971), this court, over my strenuous objections stated in dissent, extended the holding of the Supreme Court in Newman v. Piggie Park Enterprises, 390 U.S. 400, 402-403, 88 S.Ct. 964, 19 L.Ed.2d 1263 (1968), that attorney’s fees should ordinarily be granted in suits under Title II of the Act, to include suits under Title VII as well. A study of the relevant sections and the reasoning behind the Newman and Lea decisions reveals the fallacy of a comparison between the provision for attorney’s fees and for back pay.
The pertinent provisions with respect to the allowance of attorney’s fees under Title II and Title VII are virtually identical, and each was considered by Congress as sufficiently significant to be expressed in an individual subsection. However, the grant of authority to award back pay is found in a completely different subsection of Title VII, the congressional separation of these two provisions indicating an intent to treat them independently. Furthermore, the subsection in which the provision for back pay is found generally sets out the equitable remedies which the district court may utilize in fashioning relief should the complaining party prevail, indicating no congressional intent to give an award of back pay any greater presumption of appropriateness than its companion remedies.
More significant, however, is the reason for which the district courts’ discretion was found to be limited with respect to the award of attorney’s fees to prevailing parties plaintiff. In bringing an action against an employer (or manager of a public accommodation under Title II) for discrimination in the operation of his business, the plaintiff is more than a private party litigant; he acts as a “private attorney-general” in vindicating the interests of the public, and it is this advancement of the commonweal that is the basis for allowing attorney’s fees as of course. Such a public purpose is not present in the more delicate task of fashioning the appropriate equitable relief to fit the peculiar fact pattern of each case, and the monetary award is intended to redress purely private inequities.
I must conclude, therefore, that the award of back pay, unlike the grant of attorney’s fees, is an element of affirmative relief which has been entrusted to the more general discretion of the district courts.
Judge Craven’s opinion also apparently adopts the view that this court’s decision in Robinson v. Lorillard, supra stands for the proposition that under facts similar to those in Robinson, it would be an abuse of the district court's discretion to deny a request for back pay. Such a construction misinterprets the holding in Robinson and the proper scope of appellate review of discretionary decisions. The burden of persuasion falls on the party attempting to show an abuse of discretion and not on the successful party below. In Robinson the holding of this court was that the appellant company failed to show, under the factual situation before the district court, that it was an abuse of discretion to award back pay, not that back pay was mandated under those circumstances. The term “discretion” denotes that more than one acceptable alternative is available and the choice of the most appropriate is properly left in the hands of the district courts which are more intimately involved with the ambiance of the cases and the merits of each position than are the Courts of Appeal.
‘We must keep in mind that the discretion is to be exercised by the district court and not by a court of review. This court should not substitute its discretion for that of the district court.’ ” (Emphasis supplied by Larson.) Larson v. United States, 296 F.2d 167, 170 (8 Cir. 1961).
The first reason assigned by the district court for its refusal to award back pay — that there was no evidence of bad faith noncompliance with the Act as evidenced by the active recruitment of Negroes into the company’s training program for certain skilled lines of progression as early as 1964, the company-initiated merger of some lines of progression to increase advancement opportunities and good faith attempts to validate its testing procedures — is not sufficiently compelling, in and of itself, to support a denial of back pay. In Robinson this court made clear that the remedy of back pay is not in the nature of a punishment but is an equitable measure to restore those discriminated against to their proper economic position had the complained of actions not occurred. This is not to say, however, that the good faith of the company may never be taken into account in considering and determining the proper relief to be granted. Should there exist equitable factors of which the district court may properly take cognizance, and which are supportive of a decision to deny back pay, then innocence and good faith efforts on the part of the employer may be factors to be weighed in the balancing of equities.
Some insight into the proper application of that equitable balancing power may be gained from an examination of the third argument advanced by the appellants, a comparison of § 706(g) with § 10(c) of the National Labor Relations Act, 29 U.S.C. § 160(c). In the case of Phelps Dodge v. N.L.R.B., 313 U.S. 177, 61 S.Ct. 845, 85 L.Ed. 1271 (1941), which was decided under § 10(c), the Labor Board had ordered reinstatement of a discriminatorily discharged employee together with a full award of back pay, although the employee had not earned wages during the period of his lay-off. In remanding to the Board for modification in light of the principle of mitigation of damages, the Supreme Court stated:
[T]he advantages of a simple rule must be balanced against the importance of taking fair account, in a civilized legal system, of every socially desirable factor in the final judgment. The Board, we believe, overestimates administrative difficulties and underestimates its administrative resourcefulness. Here again we must avoid the rigidities of an either-or-rule. The remedy of back pay, it must be remembered, is entrusted to the Board’s discretion; it is not mechanically compelled by the Act. And in applying its authority over back pay orders, the Board has not used stereotyped formulas but has availed itself of the freedom given it by Congress to attain just results in diverse, complicated situations. (313 U.S. at 198, 61 S.Ct. at 854.)
The primary factor given by the district court in the instant case was prejudice to the interests of the company arising from representations made by the appellants in their status as plaintiffs below. During the early stages of this case, the company moved for Summary Judgment and in replying to that motion, the plaintiffs set out the limits of the relief sought:
It is important to understand the exact nature of the class relief sought by plaintiffs. No money damages are sought for any member of the class not before the court, nor is specific relief in the way of job changes, promotions or the like being sought for any member of the class not before the court. The only relief sought for the class as a whole is that defendants be enjoined from treating the class as a separate group and discriminating against the class as a whole in the future. ...
[T]he matter of specific individual relief for other class members is not before this Court.
Judge Craven in the majority opinion erroneously characterizes the prayer for back pay as merely a tardy request, when as illustrated above, it in fact was a reversal of express representations made three and one-half years prior to the request for additional relief. This situation is plainly distinguishable from Robinson, in which the oral representation by counsel for the plaintiffs that no monetary relief was sought was made at pre-trial conference. The prejudice to Albemarle stemmed not from a failure of defenses, with which this court was concerned in Robinson, but from the unconscionably long delay between the express disclaimer and the unindicated, abrupt reversal of position.
Rule 54(e), Federal Rules of Civil Procedure, provides that the federal courts “shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief in his pleadings,” but this is not the ordinary case of a mere failure to request a specific form of relief ; here there was an express and formal disclaimer of intention to seek that particular remedy. An opposng party should be permitted to rely on such a statement, and to the extent that in relying thereon he has acted to his detriment, Rule 54(c) does not mandate the grant of the contested award.
More importantly, Rule 54(c) is merely the vehicle by which the party is to obtain the “relief to which he is entitled.” The relief and the entitlement thereto are to be determined by the district court under § 706(g), and Rule 54(c) cannot compel the grant of relief which is within the discretion of the district court. The court below did not base its refusal to award back pay on the failure to request such relief pursuant to Rule 8(a), F.R.Civ.P., but by virtue of its discretionary powers under § 706(g); the source of the claim of authority for granting the award sought is the very source relied upon by the court below to deny the request.
I do not find it possible to say that the reasons assigned by the district court in support of its decision not to award back pay show an abuse of discretion, and I would therefore affirm the decision below. Under the circumstances here I would not be willing, in any event, to go beyond a direction to the district court to investigate the propriety of awarding back pay with respect to those named plaintiffs actually before the court since the representations of the appellants in their Memorandum in Opposition to Summary Judgment explicitly indicate an intent to seek affirmative, individual monetary relief only for themselves, a relatively small group, and for no others.
ALBERT V. BRYAN, Senior Circuit Judge
(dissenting in part, and concurring in part):
I would affirm the District Court’s refusal to enjoin the employee testing practices of Albemarle Paper Company. However, I would reverse for its depri-val of the employees of an opportunity to recover back pay, if any, lost by reason of the practice of fixing seniority on a job instead of a plant basis.
One cannot read the District Judge’s opinion without being impressed by its thoroughness, completeness and fairness. Overall, save for the disallowance of back pay just mentioned, I think the opinion honors the dictates of the Civil Rights Act of 1964 and squares with the exactions of the Act as expounded in Griggs v. Duke Power Company, 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971).
While Judge Craven’s recitation of the facts is altogether accurate, I would add this synopsis. A full appraisal of the Court’s ruling calls for review of the steps taken by Albemarle to meet the statute’s demands. Before the effective date of the Civil Rights Act of 1964, Al-bemarle commenced recruitment of black applicants from the nearby high schools for participation in the company’s apprentice program. It also sought applications from among its black employees.
Following Griggs, Albemarle conducted validation studies of its testing requirements. To this end an acknowledged expert in such matters was retained. He gauged his study by the manual, among others, issued August 1, 1970 by the Equal Employment Opportunity Commission, entitled “Guidelines of Employee Selection Procedures”. Pursuant to his directions each employee was given three well-known tests, the Wonderlic, Forms A and B, and the Beta. The tests purported to show the employee’s capability to do the work assigned him. His performance was thereafter rated twice by two different supervisors, who made independent evaluations without knowledge of his test scores.
The test results and job ratings were sent to Purdue University for statistical correlation. The District Judge found:
“35. The results of the validation study, presented both in statistical and graphical form, showed positive correlations of a statistically significant nature for nine of the ten specific job groupings. . . . ”
The expert advised that “the company utilize these tests for its initial hiring”, observing, however, that “no test or set of tests will validate for all jobs.” With this evidence in mind, I look to the errors ascribed in Judge Craven’s opinion to the District Court’s refusal to direct Albemarle to abolish or change its testing procedures.
I. First, I cannot agree that the employer did not validate the tests and relate them to the jobs in all the lines of skilled employment. The District Judge found otherwise, saying: “The group tested was typical of employees in the skilled lines of progression”. This, for me, is a conclusion that the groups tested fairly exemplified the remaining groups and also fairly represented the qualifications existing in all the skilled lines. This reading of his factual findings is reinforced by his later statement: The personnel tests administered at the plant have undergone validation studies and have been proven to be job related”. (Accent added.) This statement, I understand, encompasses all the groups at the plant, whether tested directly or by sample. Such a method of testing in a multiunit organization is, as noted by Judge Craven, approved by the Guidelines of Employee Selection Procedures, supra, § 1607.5.
The breadth of the expert’s survey is described in his report as follows:
“General Summary:
“Inspection of the correlations and charts shown in this report shows quite conclusively that both the Beta and Wonderlic A tests can be reasonably used for both hiring and promotion for most of the jobs in this mill. . The EEOC could not reasonably object to these standards in the light [of] the validation data covered in this report.” (Accent added.)
Secondly, in view of the findings by the Court that validation studies had been applied to the personnel tests and that the tests had been proved to be job related, I cannot join in the determination that discrimination resulted from the absence of “job analyses”. It seems to me that these findings necessarily recognize that the equivalent of “job analysis” was utilized. In rating the employees, the jobs’ features were undeniably considered, for the supervisors were unquestionably familiar with these elements.
Thirdly, also unwarranted, it seems to me, is criticism of the District Court’s acceptance of the company’s practice of “requiring applicants to pass two tests for positions where only one test was validated”. The two are the Beta and Wonderlic. Beta (non-language) measures merely native intelligence, while Wonderlic (verbal) tests reading ability. The District Court justifies its approval of Albemarle’s utilizing both tests because it was a business necessity. The Court found that the complexity of Albe-marle’s newly adopted machinery made reading an absolute requirement for the safe and efficient operation of the machines and called for employees “with a high level of native intelligence”. A personal inspection of the machinery revealed the intricacy to the judge.
Each of these aptitude tests is “demonstrably a reasonable measure of job performance”. Griggs, at 436, 91 S.Ct. at 856. Thus they are their own proof of their validation. My understanding is that a test cannot be declared discriminative if it searches for an indispensable factor of a job. Griggs, supra, at 431, 91 S.Ct. 849.
It does not appear from the District Judge’s findings that low scores on one or both tests would bar all applicants for employment. Decisions on employment in non-technical areas are apparently not made solely upon test results, but include such considerations as experience, references and interviews.
In my judgment the District Judge, in regard to the testing requirements, exercised a cautious solicitude, both for the employees’ entitlements and the employer’s obligations under the Civil Rights Act of 1964. His injunction against a high school education as a job prerequisite and against the use of job seniority instead of plant seniority removed the employees’ sustainable grievances. Ten days were devoted to the hearing of the case — July 26 to August 5, 1971. With this industry and application, along with the knowledge of the rigors of Griggs, as well as of the EEOC guidelines, the District Judge did not, to my mind, omit or deviate in any significant degree from the Act. It must be remembered, throughout, that the three items of the District Judge’s determination just enumerated constitute findings of fact, and I cannot say they are clearly erroneous.
II. Lastly, recovery was asked by the plaintiffs for “the amount of pay which would have accrued to the employees had there been no unlawful practice”. Under the Act, 42 U.S.C. § 2000e-5(g), back pay may be ordered in accompaniment of an injunction — and only then— against an employer who has engaged in “an unlawful employment practice” and has done so “intentionally”.
As Judge Craven notes, the District Court found that “Albemarle has practiced racially discriminatory employment . prior to July 2, 1965 and that the effect of this discrimination had been perpetuated through a job seniority system”. Accordingly the Court issued an injunction, pursuant to the Act, against the maintenance of this discrimination, terming it “an unlawful employment practice” and concluding that it had been committed “intentionally”. No objection was made by the employer to this finding and conclusion, and no appeal taken from the injunctive order. Indeed, in the oral argument of the appeal the appellee-defendants conceded that the District Judge had indeed stated this conclusion on “intentionally”.
For this reason I think back pay lost by an employee through the company’s resort to job-seniority should be recovered. Of course, the reimbursable loss must be proved to be the direct result of the invidious practice and, as Judge Craven admonishes, the grant of monetary relief is not to exceed the “damages which are actually suffered”.
Conclusion
In sum, as set forth in Part I hereof, I dissent from Part I of Judge Craven’s opinion; but I concur with the award, in his Part II, of back pay insofar as it is granted for loss occasioned by the job seniority practice, as explained in my Part II.
. It was demonstrated in plaintiff’s exhibits that on the Wonderlic Series 96 percent of whites passed as opposed to 64 percent of blacks. This corresponds with . the national average as determined in a study by the authors of the test. Negro Norms, A Study of 38,452 Job Applicants for Affirmative Action Programs, E. F. Wonderlic & Assoc., Inc. (1970).
. “[T]he applicable test is not merely whether there exists a business purpose for adhering to a challenged practice. The test is whether there exists an overriding legitimate business purpose such that the practice is necessary to the safe and efficient operation of the business. Thus, the business purpose must be sufficiently compelling to override any racial impact; the challenged practice must effectively carry out the business purpose it is alleged to serve; and there must be available no acceptable alternative policies or practices which would better accomplish the business purpose advanced, or accomplish it equally well with a lesser differential impact.”
Robinson v. Lorillard Corp., 444 F.2d 791, 798 (4th Cir. 1971). See also, Note, Employment Testing: The Aftermath of Griggs v. Duke Power Company, 72 Colum.L.Rev. 900, 908 (1972).
. § 703(a) (2), (h) provides in relevant part:
“Notwithstanding any other provision of this subchapter, it shall not be an unlawful employment practice for an employer ... to give and to act upon the results of any professionally developed ability test provided that such test, its administration or action upon the results is not designed, intended or used to discriminate because of race, color, religion, sex or national origin.” 42 U.S.C.A. § 2000e-2(h).
. The appellants also question the validity of the validation study because the employees tested were primarily from higher level, rather than entry level, positions. As pointed out by the EEOC guidelines, 29 C.F.R. § 1607.4(c)(1) (1970), such a validation technique is permissible only where new employees will progress to the higher level “within a reasonable time and in a great majority of cases.” As stated by Cooper & Sobol, Seniority and Testing under Fair Employment Laws: A General Approach to Objective Criteria of Hiring and Promotion, 82 Harv.L.Rev. 1598, 1649 (1969):
In addition, the problems inherent in test use are compounded by the fact that the higher level jobs may not be reached for several years, during which time an employee may improve his capabilities. This possibility seems particularly likely in the case of an individual whose potential has been artificially suppressed through discrimination, in education and otherwise. In order for a promotability interest to justify test use, therefore, it is essential that the test have been properly evaluated and shown to be predictive of performance at some job level to which promotions can be expected in the reasonable future.
In Griggs the Court failed to reach the question of whether a testing procedure which takes into account higher level job requirements is permissible. 401 U.S. at 432, 91 S.Ct. 849. We likewise fail to reach this question because of insufficient evidence below as to the time in which it takes an employee to progress to higher level jobs.
. For examples of such special circumstances said to justify refusal of a back pay award, see Schaeffer v. San Diego Yellow Cabs, Inc., 462 F.2d 1002 (9th Cir., June 20, 1972); Le Blanc v. Southern Bell Tel. & Tel. Co., 333 F. Supp. 602, 610-611 (E.D.La.1971), aff’d, per curiam, 460 F.2d 1228 (5th Cir. 1972).
. Lea v. Cone Mills, 438 F.2d 86, 88 (4 Cir. 1971).
. Accord, Wooten v. Moore, 400 F.2d 239, 242 (4 Cir. 1968).
. Title II, 42 U.S.C. § 2000a-3(b) :
(b) In any action commenced pursuant to this subehapter, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney’s fee as part of the costs, and the United States shall be liable for costs the same as a private person.
Title VII, 42 U.S.C. § 2000e-5(k) :
(k) In any action or proceeding under this subchapter the court, in its discretion, may allow the prevailing party, other than the Commission or the United States, a reasonable attorney’s fee as part of the costs, and the Commission and the United States shall be liable for costs the samo as a private person.
. The authorities generally deal with injunctive relief as within the discretion of the district courts. E. g. Sprogis v. United Air Lines, 444 F.2d 1194, 1202 (7 Cir. 1971).
. Lea v. Cone Mills, 438 F.2d 86, 88 (4 Cir. 1971). See, Jenkins v. United Gas Corp., 400 F.2d 28, 32 (5 Cir. 1968). Developments in the Law — Employment Discrimination and Title VII of the Civil Rights Act of 1904, 84 Harv.L.Rev. 1109, 1254 (1971).
. See, Austin v. Reynolds Metals, 327 F.Supp. 1145, 1153 (E.D.Va.1970).
. E. g., Schaeffer v. San Diego Yellow Cabs, 462 F.2d 1002, 1006 (9 Cir. 1972); LeBlanc v. Southern Bell Tel. & Tel., 460 F.2d 1228, 1229 (5 Cir. 1972): United States v. Dillon Supply Co., 429 F.2d 800, 804 (4 Cir. 1970); Johnson v. Georgia Highway Express, 417 F.2d 1122, 1125 (5 Cir. 1969). Developments in the Law — Employment Discrimination and Title VII of the Civil Rights Act of 1964, 84 Harv.L.Rev. 1109, 1265 (1971).
. LeBlanc v. Southern Bell Tel. & Tel., 460 F.2d 1228, 1229 (5 Cir. 1972).
. The Supreme Court has defined “discretion” as follows:
The term “discretion” denotes the absence of a hard and fast rule. . When invoked as a guide to judicial action it means a sound discretion, that is to say, a discretion exercised not arbitrarily or wilfully, but with regard to what is right and equitable under the circumstances and the law, and directed by the reason and conscience of the judge to a just result.
Langnes v. Green, 282 U.S. 531, 541, 51 S.Ct. 243, 247, 75 L.Ed. 520 (1931).
. United States v. Dillon Supply Co., 429 F.2d 800, 804 (4 Cir. 1970) :
The government has urged us to remand with directions to enter specific injunctive relief. After careful consideration we have concluded to deny this request. The fashioning of effective une! appropriate injunctive relief depends in part on the discretion of the district court. The function of the courts of appeal is to review the relief which the district court grants in light of finding's and the supporting record and to determine if there has been an abuse of discretion.
. In 1963 the company discontinued the use of the Bennett Mechanical Comprehension Test, which is regarded to be racially biased (See Cooper and Sobol, Seniority and Testing Under Fair Employment Laws: A General Approach to Objective Criteria of Hiring and Promotion, 82 Harv.L.Kev. 1598, 1641 n. 16 (1969)) in favor of Wonderlic A & B tests.
. 444 F.2d 791 at 802, 804.
. See, Schaeffer v. San Diego Yellow Cabs, 462 F.2d 1002, 1006-1007 (9 Cir. 1972).
. The answer was filed on November 22, 1966.
. The request was first communicated to the company on June 4, 1970.
. Illustrations of the detriment arising from the reliance of the defendants upon the express disclaimer by the plaintiffs of their intention to seek back pay for members of the class generally, were argued before the district court at pretrial conferences: (1) The extensive period of time taken for prosecution of the suit exposed the defendants to the unexpected hazard of a potentially enormous award, unavailable for consideration during their continued efforts to arrive at a settlement, and which threatened the financial viability of the defendant paper mill. (2) During the hiatus with respect to the back pay claim, the paper mill was sold by the defendant Ethyl Corp. to the defendant Iloerner-Waldorf Corp., with the transfer agreement taking express notice of the pend-ency of suit, a strong indication of the impact the status of that suit had upon the deliberations of the principals. (3) The inordinately long delay tended to preclude the defendants from adequately preparing a defense to individual claims, due to the impossibility or impracticality of deposing witnesses and claimants nearly five years after the occurrences of events of which plaintiffs complain.
. Rental Development Corp. v. Lavery, 304 F.2d 839, 842 (9 Cir. 1962).
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G. H. JETT and Bart B. Chamberlain, Jr., Plaintiffs-Appellees, v. Albert Barnes ZINK, as individual trustee for Sterling Oil of Oklahoma, Inc., Defendant, Sterling Oil of Oklahoma, Inc., et al., Defendants-Appellants. G. H. JETT and Bart B. Chamberlain, Jr., Plaintiffs-Third Party PlaintiffsAppellees, v. Albert Barnes ZINK, as individual trustee for Sterling Oil of Oklahoma, Inc., Defendant, W. H. James, Jr., etc., et al., Defendants-Appellants, Cornwall Trading Corporation et al., Third Party Defendants-Appellees. Albert Barnes ZINK, as individual trustee for Sterling Oil of Oklahoma, Inc., Plaintiff, W. H. James, Jr., etc., et al., Plaintiffs-Appellants, v. G. H. JETT and Bart B. Chamberlain, Jr., Defendants-Third Party PlaintiffsAppellees, Cornwall Trading Corporation et al., Third Party Defendants-Appellees.
Nos. 71-2745, 72-1637.
United States Court of Appeals, Fifth Circuit.
Feb. 9, 1973.
Rehearing and Rehearing En Banc Denied March 30, 1973.
Willis C. Darby, Jr., Mobile, Ala., for appellants.
Harold Parkman, Charles B. Arendall, Jr., Mobile, Ala., for Chamberlain and Citronelle.
Lester M. Bridgeman, Washington, D. C., Wm. DeWitt Reams, Lewis G. Odom, Jr., Montgomery, Ala., M. A. Marsal, Mobile, Ala., for Chamberlain and others.
Sam W. Pipes, III, Mobile, Ala., for Pack and Kahn.
Joseph M. Matranga, Mobile, Ala., for G. H. Jett.
Champ Lyons, Montgomery, Ala., for Equity and Cornwall.
C. A. L. Johnstone, Jr., Mobile, Ala., for James E. Kemp, Four States Drilling Co., and Big Four Oil Co.
Albert J. Tully, Mobile, Ala., for Zink.
Before COLEMAN, AINSWORTH and DYER, Circuit Judges,
DYER, Circuit Judge:
These appeals are before us for the third and hopefully final time in the protracted litigation over the purchase of certain oil leases and a gathering system in or near Mobile County, Alabama. As in each of the two previous appeals, the questions presented do not concern the merits of the dispute, but instead ask us to decide the forum — state or federal — in which the “main” battle should properly be joined. We find that the district court’s refusal to enjoin the pending state court proceeding and its recognition of the res judicata effect of that court’s final judgment were not erroneous. Therefore we affirm the judgment of the district court in both appeals.
When this case was first before this court we described the state of the litigation as it existed in early 1964 as “convoluted.” Jett v. Zink, 5 Cir. 1966, 362 F.2d 723, cert. denied, 385 U.S. 987, 87 S.Ct. 600, 17 L.Ed.2d 448. The ensuing eight years have clarified little except Chamberlain’s unabated desire to have the case heard in a state court and Sterling Oil Company’s equally strong preference for a federal court. To understand our resolution of these competing interests in the two present appeals we find it necessary to repeat a small portion of the voluminous procedural history of this case.
I. Factual Background
In 1963 Jett and Chamberlain brought suit against Sterling Oil in the Circuit Court of Mobile County, Alabama, seeking a declaratory judgment as to the validity of the “Sterling Agreement,” or, in the alternative, a favorable construction of that agreement. (This case will be referred to as the Jett-Chamberlain action). There being complete diversity among the parties and an adequate amount in controversy, Sterling Oil removed the case to federal court. Soon thereafter, petitions were filed on behalf of Pack, Kahn, and Geo. H. Jett Drilling Company, among others, to intervene in the removed action; Jett and Chamberlain then moved to add these parties as plaintiffs, and, based on the anticipated granting of all these motions, moved to remand for lack of diversity jurisdiction. While the motions were pending, the three intervenors had a suit filed on their behalf, primarily against Jett, Chamberlain, and Sterling Oil, in the Circuit Court of Mobile County, Alabama. (This case will be referred to as the Pack-Kahn action). The requested relief was identical to that sought in the Jett-Chamberlain action. Despite an apparent absence of complete diversity in the Pack-Kahn action, Sterling Oil removed it, alleging fraudulent joinder and the existence of a separable controversy. Pack and Kahn then had motions filed to remand. On January 6, 1964, the district court denied the petitions to intervene and the motions to remand, and Jett, Chamberlain, Pack, and Kahn appealed.
Although the exact scope of our opinion disposing of these appeals is questioned it clearly decided two things. First, in the Jett-Chamberlain appeal we said that, since none of the non-party petitioners was an indispensable party, the district court’s refusal to remand the case was proper. Secondly, in the Pack-Kahn appeal we held that, on the state of the record as it existed then, there was no clear and persuasive evidence of fraud inherent in the bringing of that action while motions to intervene in the Jett-Chamberlain action were still pending; we thus ordered the Pack-Kahn action remanded.
With the decision made that the federal forum was appropriate for one action and inappropriate for the other, the opinion concluded:
The result is unfortunate in that it leaves the same issues pending simultaneously in a state and federal court but we see no escape from our conclusion. The parties here brought it upon themselves in their battle over the forum in which to try their case.
362 F.2d at 730.
As all parties now concede, our decision signaled the start of a race to the courthouse. Despite our signal, which was supposed to remove the brakes from the wheels of justice, it took an additional five years for either of the cases to get in gear. ■ The interim saw a great deal in the way of sparks — extensive discovery, another unsuccessful removal, and interminable procedural squabbling —but little motion down the road to a decision. Finally, in February 1971, the district court, on its own motion, began pre-trial proceedings that were intended to lead to a federal trial beginning July-12, 1971. In response to this federal warm-up, Chamberlain’s group filed in the state court a motion to have the Pack-Kahn action set for trial before the Jett-Chamberlain action; it ultimately was set for trial May 4, 1971. Sterling Oil in turn reacted to this development on April 15, 1971, by asking the district court for a preliminary and permanent injunction against the state court proceeding. On April 20, 1971, the district court heard argument on the motion for preliminary injunction and on April 28, 1971, denied relief. Sterling Oil appealed this denial, but was unsuccessful in obtaining an injunction pending appeal from either the district court or this court. Subsequently this appeal was dismissed for lack of prosecution.
With the final impediment removed, the state court began six weeks of hearings in the first phase of its trial — determining the validity vel non of the Sterling Agreement — and on July 10, 1971, that court entered an interlocutory decree finding it valid. Having made extensive, although at that point unsatisfactory, progress in the resolution of several substantial questions and having invested considerable time, Chamberlain’s group on July 12, 1971, the day the federal trial was to begin, filed a motion in the district court to stay the federal proceedings pending a final determination in the state court. After hearings on July 12 and 14, the district court granted that motion. Additionally, at the hearing on July 14, Sterling Oil’s petition for permanent injunction filed on April 15, 1971, was submitted to the court without further argument; this petition was denied July 16, 1971. Sterling Oil’s appeal from this denial is before us as appeal number 71-2745.
Free of the complications that a simultaneous federal trial would have caused, the state court reconvened on August 2, 1971, for phase two of its trial. After weeks of hearings, that court issued its final decree November 4, 1971. Withdrawing its interlocutory decree of July 10, it found the Sterling Agreement to be unenforceable, but subsequently held that Sterling Oil was entitled to a finders fee and reasonable compensation for services totaling in excess of $500,000. This decree was incorporated into the pleadings of the Jett-Chamberlain action and on January 27, 1972, the district court granted the Chamberlain group’s motion for summary judgment based on the res judicata effect of the state court decree. Sterling Oil’s appeal from the summary judgment is before us as appeal number 72-1637.
II. Number 71-27b5
Separated from the chaff, Sterling Oil’s argument essentially is that its right to proceed in a federal forum has been frustrated by the district court’s refusing to halt the pending state court action. Recognizing that in order to be entitled to such an injunction it must come within the provisions of 28 U.S.C. A. § 2283, Sterling Oil has advanced four theories in support of its position. Our examination of these theories, however, must proceed from a proper awareness of the potential state-federal conflicts generated by that section and its predecessors, as recently explained by the Supreme Court in Atlantic C.L.R.R. v. Brotherhood of Locomotive Engineers, 1970, 398 U.S. 281, 90 S.Ct. 1739, 26 L.Ed.2d 234. The Court there cautioned against loose construction of the exceptions to section 2283, and stated that any doubts about the propriety of such a federal injunction should be resolved in favor of permitting the state courts to proceed, “with relief from error, if any, through the state appellate courts and ultimately this Court.” 398 U.S. at 287, 90 S.Ct. at 1743. This statement is particularly relevant where, as is the case here, the final state judgment is currently on appeal in the Alabama state court system.
A. Fraud
Because no Act of Congress expressly authorizes an injunction in this situation, Sterling Oil has relied primarily upon qualifying under the “where necessary in aid of its jurisdiction” language, one of the other two exceptions to section 2283. It first argues that the Pack-Kahn action, filed after the district court had obtained jurisdiction over the Jett-Chamberlain action by removal, raised identical issues and was a fraudulent attempt by Chamberlain to defeat federal jurisdiction. Because a federal district court after removal may enjoin further state proceedings in that action by a plaintiff (see Lowe v. Jacobs, 5 Cir. 1957, 243 F.2d 432, cert. denied, 355 U.S. 842, 78 S.Ct. 65, 2 L.Ed.2d 52; Peters v. Standard Oil Co., 5 Cir. 1949, 174 F.2d 162, and Armstrong v. Alliance Trust Co., 5 Cir. 1942, 126 F.2d 164), Sterling Oil argues that a federal court should enjoin a state proceeding fraudulently brought by the original plaintiff but in the name of third persons, if that action is in fact merely an attempt to .litigate in state court the same issues already removed.
The evidence in the record upon which Sterling Oil bases its allegations of fraud is of two kinds. First there are depositions of Pack, Kahn, and Jett which show that, although they were financially interested in the dispute with Sterling Oil, they did not follow the litigation closely and did not originate the idea of either intervening in the JettChamberlain action in federal court or bringing the Pack-Kahn action in state court. Instead each individual stated that his interests were similar to Chamberlain’s and that he had given Chamberlain general authority to act on his behalf in the litigation. The second kind of evidence is documents showing that Chamberlain acted on this authority to retain counsel for his “group” and to have that counsel file the Pack-Kahn action.
At two different times in 1966 we had occasion to consider partially developed allegations of fraud in the Pack-Kahn action. On the first appeal, confronted only with the fact that the action had been filed while the plaintiffs’ petitions to intervene were still pending, we invoked the hornbook rule that “fraud is never presumed but must be established by clear and persuasive evidence” and concluded that no fraud had been proved. After the Supreme Court had denied certiorari on that appeal, Sterling Oil moved this court to recall its mandate, claiming that the just completed Jett deposition raised “serious questions” as to the true motivation behind the bringing of the Pack-Kahn action. This motion was denied.
Sterling Oil now says that all the evidence of fraud is before us and asserts that “the admissions of Pack, Kahn and Jett conclusively establish that the only purpose of the Pack-Kahn action was to deprive Sterling Oil of Sterling’s federally created right to have the Jett-Chamberlain-Sterling controversy decided in a federal forum.” We disagree. As we stated on the first appeal:
[T]here was good reason for bringing the second suit in order to assure the plaintiffs therein [Pack, Kahn, and Geo. H. Jett Drilling Company] a day in court in the event that they were not admitted as parties plaintiff in the earlier suit, as indeed they were not. The question is whether they have stated a cause of action against any of the defendants whose presence in the litigation would destroy complete diversity of citizenship of the parties. We think they have.
362 F.2d at 729-730. The now apparent fact that Chamberlain controlled both pieces of litigation is cause for serious concern, but it does not constitute “clear and persuasive evidence” of fraud. Chamberlain had been given authority to act for Pack, Kahn, and Jett and he was justified in bringing a suit in their names to protect their interests.
B. Quasi In Rem Jurisdiction
Sterling Oil’s second ground for seeking an injunction as “necessary in aid of [the federal court’s] jurisdiction” is its argument that the Jett-Chamberlain action is quasi in rem and that once the federal court took jurisdiction of that case, it was required to protect it by enjoining a state action which raised identical issues. See generally Pacific Indemnity Co. v. Acel Delivery Service, Inc., 5 Cir. 1970, 432 F.2d 952, cert. denied, 1971, 401 U.S. 955, 91 S.Ct. 973, 28 L.Ed.2d 238. Sterling Oil contends that the action is one to settle title to and rights in certain property, that it asked for an accounting in its counterclaim and later has requested specific performance, and that the whole agreement gave it an equitable lien and imposed a constructive trust on Jett and Chamberlain.
To dispose of this quasi in rem contention we need only look to the first appeal in this case and to the assertions of the parties before the court at that time. Although the legal questions there centered on the indispensability of certain parties, much of the argument was directed at determining whether the Jett-Chamberlain action was in rem, quasi in rem, or in personam. In an attempt to defeat the arguments as to indispensability of parties, Sterling argued throughout its briefs that the Sterling Agreement was carefully drawn to make the obligations of Jett and Chamberlain personal obligations, that the Agreement was a mere contract to pay money and transfer oil royalties, and that the Agreement clearly stated that it did not operate as a conveyance to Sterling of any interest in the leases or any other estate in land. Jett and Chamberlain, on the other hand, maintained that the controversy unquestionably concerned an interest in land. From this Sterling now argues that, because we stated in the first appeal that the Sterling Agreement bound Jett and Chamberlain to convey “certain ‘overriding royalties’ and other interests in properties,” we rejected its earlier contentions that the action was in personam, 362 F.2d at 727; thus it concludes that it is not precluded from adopting a new argument after its initial argument was rejected. We find little merit in this contention.
There is nothing in our first opinion which would indicate that we rejected the in personam theory advanced by Sterling Oil. Sterling Oil argues that we held that the Sterling Agreement purported to convey interests in real property; actually we held that the Agreement bound Jett and Chamberlain to convey such interests at some later date. If our earlier decision can be read to have any effect on the question of the status of the Jett-Chamberlain action, it would be that the opinion is more consistent with Sterling Oil’s first line of argument than it is with Sterling Oil’s new position. It is inconceivable that this court would have allowed the Paek-Kahn action to be remanded if, after extensive argument on the quasi in rem-in personam argument, it in fact had concluded that the action was one which required the exclusive jurisdiction of the federal court. Sterling Oil has argued one position before this court and now, after obtaining the benefit of that position, has advanced an admittedly inconsistent position in hopes of prevailing again. We hold that it is precluded from utilizing such a tactic. Cf. Scarano v. Central R. Co., 3 Cir. 1953, 203 F.2d 510; Iselin v. La Coste, 5 Cir. 1945, 147 F.2d 791; Texas Co. v. Gulf Refining Co., 5 Cir. 1928, 26 F.2d 394, cert. denied, 278 U.S. 625, 49 S.Ct. 27, 73 L.Ed. 545.
C. Partial Summary Judgment
As an alternative basis for reversal Sterling Oil argues that, because of a partial summary judgment entered by the district court on November 3, 1966, in the Jett-Chamberlain action, an injunction should have been issued “to protect or effectuate its judgment.” We hold that this judgment is not within the scope of the third exception of section 2283.
Jett and Chamberlain’s original complaint alleged that the Sterling Agreement was null and void because Sterling Oil had not qualified to do business in Alabama at the time the Agreement was entered into. Alternatively, they asked for a declaratory judgment construing the contract favorably to them. On August 19, 1966, Sterling Oil moved for a partial summary judgment on the sole question whether it had qualified to do business at the proper time; it also asked for a “declaratory judgment that the Sterling Agreement is a valid existing agreement . . . .” This motion was granted November 3, 1966, and the court’s order found the Agreement to be a “valid enforceable and subsisting agreement.” That order, however, was supplemented by a new order on November 15, 1966, which explained that the court’s earlier order was only intended to dispose of the question of Sterling’s qualifying to do business. The November 15 order continued:
in using such language [as to the validity of the Agreement] the court had no intention of determining the meaning or enforceability vel non of any of the specific provisions of the Sterling Agreement which are the subject of controversy between the parties to this cause.
If any doubt remained as to the limited scope of this order, it was removed on March 11, 1971, when the district court denied Sterling Oil’s motion, based on the partial summary judgment, to strike amendments to Jett and Chamberlain’s complaint and answer to counterclaim. These amendments, filed April 17, 1968, questioned the validity of the Sterling Agreement on grounds of fraud, misrepresentation, duress, and business compulsion. Thus, the district court refused to give its 1966 order final res judicata effect on the question of the validity of the Sterling Agreement. That it was not necessary to protect this “judgment” by an injunction is also apparent from the state of the record on July 16, 1971, the date the injunction was denied. ' At that time both the district court and the state court had found the Sterling Agreement valid insofar as Sterling Oil’s having qualified to do business was concerned. No conflict existed and, in the absence of any other reason for protecting the partial summary judgment, the district court had rendered no judgment that warranted protection under section 2283.
D. Pendency of Two Suits
Finally, Sterling Oil contends that, under Alabama law, the pendency of both a state and a federal case involving the same parties and issues is vexatious as a matter of law and argues that this entitles it to an injunction of the state proceeding. Regardless of the Alabama law on this question, it is clear under federal law that the dual court structure of our federal system creates a situation in which the same case can be heard simultaneously in a state court and a federal court. See e. g., Kline v. Burke Construction Co., 1922, 260 U.S. 226, 43 S.Ct. 79, 67 L.Ed. 226. We recognized that this was such a case in our first opinion. 362 F.2d at 730. Since the determination whether a federal injunction of a state proceeding should issue under section 2283 must be made by reference to federal law, we conclude that two such actions can proceed concurrently so long as it has not been demonstrated that either is in rem or quasi in rem.
Taken separately, none of Sterling Oil’s theories properly entitle it to an injunction against the state proceeding; even when viewed collectively they fail to establish the impropriety of the state action necessary to overcome the restrictive construction placed on section 2283 by Atlantic C.L.R.R., supra.
III. 72-1637
Sterling Oil has advanced only one argument as to why, with the JettChamberlain action stayed and the Pack-Kahn action free to proceed, a final judgment in the latter should not be res judicata in the former. It contends that the district court considered the July 10, 1971, order of the state court res judicata and that the parties agreed on July 14, 1971, to raise no “new issues” in the state court if that action were allowed to continue. This statement, while correct, does not aid Sterling Oil. The July 10 state court order was virtually identical to the November 15, 1966, partial summary judgment in the district court, and dealt with Sterling Oil’s having qualified to do business. While withdrawn by the state court’s final judgment, it was not contradicted; instead the Sterling Agreement was invalidated on grounds which had already been incorporated in the federal pleadings prior to July 14, 1971 and which were therefore not “new” in terms of the parties’ agreement. Because it was conceded that the PackKahn action raised issues which were identical to those raised in the Jett-Chamberlain action, we hold that the district court correctly granted summary judgment in the Jett-Chamberlain action based on the final state judgment in the Pack-Kahn action.
Number 71-2745 is dismissed in part and affirmed in part, and number 72-1637 is affirmed.
. The merits of the dispute, to the extent that they concern us, are adequately set out in our 1966 opinion. 362 F.2d 723.
. The Sterling Agreement entered into by Jett, Chamberlain, and Sterling Oil attempted to define the interests of these parties in an oil field purchased by Jett and Chamberlain. The Agreement is described in greater detail in 362 F.2d at 727.
. Sterling Oil also filed a suit against Jett and Chamberlain in federal court asking for various forms of relief under the Sterling Agreement that amounted to the same relief sought in its counterclaim in the Jett-Chamberlain action.
. The term “Chamberlain’s group” has reference to the apparent control given Chamberlain over the two related cases by virtually all interested persons, except of course Sterling Oil. This control is apparent from the deposition of Pack, Kahn, and Jett, and from an agreement entered into between Chamberlain, Cornwall, Citronelle Properties, Inc., and The Equity Corporation. See Part II A of this opinion infra.
. Sterling Oil also applied for prohibitory relief in the Alabama Supreme Court. After a hearing on April 30, 1971, that application was denied on May 3, 1971.
. Sterling Oil later amended its Notice of Appeal to include the district court’s order of July 14, 1971, which granted a stay of the federal proceedings. See footnote 12 infra.
. The federal action filed by Sterling Oil (see footnote 3 supra) had been consolidated with the Jett-Chamberlain action for trial and was included within the scope of the district court’s order granting summary judgment.
. 28 U.S.C.A. § 2283 provides:
A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of it jurisdiction, or to protect or effectuate its judgments.
. Despite indications in the record that some other parties had intended to join as plaintiffs in the Pack-Kahn action, the only named plaintiffs were Pack, Kahn, and Geo. H. Jett Drilling Company, which was controlled 100% by Jett.
. This same counsel also apparently prepared and filed the Jett-Chamberlain action, prepared and filed the petitions to intervene in that action, and assisted in the preparation of the answer of several defendants to the Pack-Kahn action. All of these services were billed to Chamberlain.
. Sterling Oil cites for this proposition, Watson v. Mobile & O.R.R., 1937, 233 Ala. 690, 173 So. 43, which states that the pendency of the federal case may be pled in abatement in the state action. See also Fegaro v. South Central Bell, 1971, 287 Ala. 407, 252 So.2d 66.
. Sterling Oil has also attempted to attack, by. amended notice of appeal in No. 71-2745, the validity of the district court’s order of July 14, 1971, staying the Jett-Chamberlain action. See footnote 6 supra. In addition to there being a serious question about whether the order was appealable (see Jackson Brewing Co. v. Clarke, 5 Cir. 1962, 303 F.2d 844, cert. denied, 371 U.S. 891, 83 S.Ct. 190, 9 L.Ed.2d 124), Sterling Oil’s amended notice of appeal was filed far beyond the time limit allowed for such notices by Fed.R.App.P. 4(a). The order was entered on July 14, 1971, but the amended notice of appeal was not filed until November 1, 1971. As such this aspect of appeal No. 71-2745 is dismissed.
In its argument on the propriety of this stay order, Sterling Oil made an oblique reference to the Federal Arbitration Act, 9 U.S.C.A. § 1 et seq. To the extent that this argument is addressed to the stay order, the above dismissal disposes of it. If, however, Sterling Oil is arguing that this Act supports in some way its request for an injunction, we need only point out that the Act provides no independent right to a federal forum. See Ballantine Books, Inc. v. Capital Distributing Co., 2 Cir. 1962, 302 F.2d 17; Metro Industrial Painting Corp. v. Terminal Construction Co., 2 Cir. 1961, 287 F.2d 382, cert. denied, 368 U.S. 817, 82 S.Ct. 31, 7 L.Ed.2d 24; Robert Lawrence Co. v. Devonshire Fabrics, Inc., 2 Cir. 1959, 271 F.2d 402, cert. granted, 1960, 362 U.S. 909, 80 S.Ct. 682, 4 L.Ed.2d 618, petition for cert. dismissed per stipulation, 364 U.S. 801, 81 S.Ct. 27, 5 L.Ed.2d 37.
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2024-08-24T03:29:51.129235
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{
"author": "CRAVEN, Circuit Judge:",
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UNITED STATES of America, Appellee, v. Alfred ERDOS, Appellant.
No. 72-1328.
United States Court of Appeals, Fourth Circuit.
Argued Oct. 30, 1972.
Decided Feb. 14, 1973.
William E. McDaniels and Aubrey M. Daniel, III, Washington, D. C. (Williams, Connolly & Califano, Washington, D. C., on brief), for appellant.
Justin W. Williams, Asst. U. S. Atty. (Brian P. Gettings, U. S. Atty., on brief), for appellee.
Before HAYNSWORTH, Chief Judge, and CRAVEN and WIDENER, Circuit Judges.
CRAVEN, Circuit Judge:
On August 30, 1971, in the American Embassy in the new Republic of Equatorial Guinea, Alfred Erdos killed Donald Leahy. Both were American citizens and embassy employees, with Erdos occupying the position of senior diplomat or charge d’affairs.
Returned to the United States, Erdos was tried and convicted of voluntary manslaughter in the District Court for the Eastern District of Virginia. On appeal, the more important issues raised are whether the district court: (1) had jurisdiction to try Erdos for a crime occurring within an American embassy located in(a foreign country; (2) erred in holding that venue lay in the Eastern District of Virginia rather than the District of Massachusetts where the plane bearing Erdos first landed; and (3) improperly curtailed the cross-examination of a psychiatrist from a psychiatric treatise. We conclude there was jurisdiction and venue, and that the district judge’s error in curtailing cross-examination was not sufficiently prejudicial to require reversal. We have also considered the other 13 assigned points of error and find them to be without merit. Accordingly, the judgment below will be affirmed.
Jurisdiction
The district court based jurisdiction upon 18 U.S.C. § 7, which provides in part:
The term “special maritime and territorial jurisdiction of the United States”, as used in this title, includes:
(3) Any lands reserved or acquired for the use of the United States, and under the exclusive or concurrent jurisdiction thereof, or any place purchased or otherwise acquired by the United States by consent of the legislature of the State in which the same shall be, for the erection of a fort, magazine, arsenal, dockyard, or other needful building. [Emphasis added].
The power of Congress to lawfully proscribe the killing of an American citizen by another American citizen within a diplomatic compound located in a foreign country is, we think, beyond question. U.S.Const, art. III, § 2; United States v. Flores, 289 U.S. 137, 146-147, 53 S.Ct. 580, 77 L.Ed. 1086 (1933); United States v. Bowman, 260 U.S. 94, 96-98, 43 S.Ct. 39, 67 L.Ed. 149 (1922). The-problem is not one of power but of intention, i. e., statutory construction. Erdos contends that the district court lacked jurisdiction to try him for an offense committed outside the territorial limits of the United States because Congress has not exercised its constitutional power so as to extend American criminal court jurisdiction to the United States Embassy in Equatorial Guinea. It is urged that 18 U.S.C. § 7(3) must be read to apply only to areas within the geographical boundaries of «the United States and may not be given extraterritorial effect.
The embassy in question is leased by the United States from a private citizen of the new Republic of Equatorial Guinea. This lease agreement does not itself defeat criminal jurisdiction, however, since fee simple “ownership” of the property by the United States is not a prerequisite to such jurisdiction. As the court in United States v. Archer, 51 F.Supp. 708 (S.D.Cal.1943), said at 709:
A consulate is, ordinarily, a building owned by the Government of the United States. And although it be not owned by the United States, it is a part of the territory of the United States of America.
In Bowman, supra, 260 U.S. at 98-99, 43 S.Ct. 39, both public and private ships on the high seas were characterized as “constructively” a part of the territory of the United States. Subsection (3) is not framed in the language of conveyancing. The test, as to property within or without the United States, it one of practical usage and dominion exercised over the embassy or other federal establishment by the United States government.
The much harder question is whether the third phrase of § 7(3) (dealing with places acquired by the federal government with the consent of the states and thus presumably within the territorial boundaries of the United States) modifies and limits the more general coverage of the preceding two phrases. The meaning is not perfectly clear. Nor is the legislative history. Such an interpretation is not implausible, and, indeed, it is possible that when the statute was enacted the attention of the Congress was not in the slightest focused on extraterritorial jurisdiction. But if so, why the broad general language of phrases one and two — wholly unnecessary to implement the establishment of forts, dockyards and other needful buildings within the states plainly accomplished by phrase three ?
Where the power of the Congress is clear, and the language of exercise is broad, we perceive no duty to construe a statute narrowly. The first two phrases connected by the conjunctive “and” relate to and modify each other. The result is to create a jurisdictional category: lands reserved or acquired for the use of the United States and under its exclusive or concurrent jurisdiction. It is only the third phrase, separated from the first two by a comma and the disjunctive “or,” that limits jurisdiction to places acquired (within the United States presumably) by the consent of state legislatures. We think the third phrase is independent of and does not modify the first two, and so read, the sentence describes two kinds of places or lands within the “special” jurisdiction of the United States.
We hold that 18 U.S.C. § 7(3) is a proper grant of “special” territorial jurisdiction embracing an embassy in a foreign country acquired for the use of the United States and under its concurrent jurisdiction. We further hold that 18 U.S.C. § 1112 is a specific grant of subject matter jurisdiction with respect to manslaughter committed at a place within the special maritime and territorial jurisdiction of the United States.
Venue
Venue, in cases of crimes committed outside any district, is controlled by 18 U.S.C. § 3238, which provides in part that venue shall be in the district within the United States where the offender “is arrested or first brought.” The statute has a long history. It was first enacted in 1790, amended in 1825, again in 1874, and most recently in 1963. In its original form, the statute used the word “apprehended.” The 1825 version used the words “first apprehended.” In the 1874 version the word “found” was substituted for the words “first apprehended,” but in the latest reenactment, the Congress reverted to the original idea of restraint and substituted the word “arrested” for the word “found.” The legislative history of the 1963 version explains that “The term ‘found’ in most cases means ‘arrested.’ ” 1963 U.S. Code Cong. & Ad.News 660.
The various versions of the statute have been construed time and again. E. g., United States v. Provoo, 215 F.2d 531, 537 (2d Cir. 1954); United States v. Townsend, 219 F. 761, 762 (2d Cir. 1915). The eases seem to agree, whether construing the words “found,” “apprehended,” or “first apprehended,” that'the Congress had restraint in mind. We think the phrase in the current version of the statute that venue shall be in the district in which the offender “is arrested or is first brought” means simply “arrested” — i. e., that venue is in that district within the United States where the offender is first restrained of his liberty in connection with the offense charged. Obviously, “first brought” could plausibly be interpreted to mean what it says, so that wherever an offender (traveling by air) touches down in the United States, that is the place where trial must be had. But it is settled otherwise. “First brought” within the context of the statute means first brought in custody with liberty restrained. United States v. Ross, 439 F.2d 1355, 1358 (9th Cir. 1971); Provoo, supra, at 537; Chandler v. United States, 171 F.2d 921, 927, 932-933 (1st Cir. 1948); Kerr v. Shine, 136 F. 61, 63-65 (9th Cir. 1905).
The commercial airplane in which Erdos returned to the United States was scheduled to make its initial landing in the United States at Dulles International Airport — located in the Eastern District of Virginia. Instead, it made an unscheduled intermediate stop in Boston, Massachusetts.
Erdos contends that the District of Massachusetts is the district with exclusive venue because that is the district into which he was “first brought.” He would be correct but for the judicial gloss, to which we have adverted, that has long since been applied to the statute.
The district court found as a fact that Erdos was not in custody on the return flight to the United States, nor in Boston, stating that “all the evidence was he was free to go where he wanted to,” even when the plane landed at Dulles. The district court, consequently, determined that Erdos was “first found” at Dulles when he was served with the complaint and summons upon his arrival there. For reasons previously stated, we read “first found” as meaning arrested. But it does not matter, for the record is clear that, if not arrested at Dulles, Erdos was subsequently arrested at Alexandria, also within the jurisdiction of the district court.
Findings of fact by a district court in a criminal case may not be disturbed on appeal unless they are clearly erroneous. Campbell v. United States, 373 U.S. 487, 493, 83 S.Ct. 1356, 10 L.Ed.2d 501 (1963); United States v. Graves, 428 F.2d 196, 200 (5th Cir. 1970). After carefully examining the record we believe there was ample evidence from which the district court could find that Erdos was not in custody within the meaning of 18 U.S.C. § 3238 when his flight landed in Boston and, therefore, that venue was appropriate in the Eastern District of Virginia since that was the district in which he was first arrested.
Cross-Examination
At trial Erdos admitted killing Leahy and pleaded insanity as his defense. In furtherance of his defense, Erdos called as witnesses four psychiatric nurses who had attended him during his hospitalization and two psychiatrists. In rebuttal the government called two court-appointed psychiatrists, both of whom testified on direct examination that Erdos was only feigning mental illness after he killed Leahy.
While cross-examining one of the court-appointed psychiatrists, counsel for Erdos attempted to question the witness from an apparently recognized psychiatric treatise. The district judge sustained the government’s objections to the use of the psychiatric treatise after the witness said that he had “read portions of it . . . [but was] not familiar with the whole text.”
There has been much progress in recent years toward expanding the “learned treatise” exception to the hearsay rule to allow liberal cross-examination of expert witnesses from respected texts. This trend was recognized and approved by the Supreme Court in Reilly v. Pinkus, 338 U.S. 269, 275, 70 S.Ct. 110, 94 L.Ed. 63 (1949), and expressly adopted by this court in Lawrence v. Nutter, 203 F.2d 540 (4th Cir. 1953), at 543:
We need go no further in the pending case than to hold that the attention of an expert may be called in the course of cross examination to statements in conflict with his testimony contained in relevant scientific works which he recognizes as authoritative. This holding accords . . . with the more liberal view taken in the recent cases ....
Before allowing cross-examination from a treatise, however, it must be established that the book is known by the witness and is a generally respected authority in the relevant field. Reilly, supra, 338 U.S. at 275, 70 S.Ct. 110; Lawrence, supra, 203 F.2d at 542. Since the district court prevented counsel for Erdos from establishing the authenticity and authority of the book, we assume it to be a “learned treatise” for purposes of appeal. We hold it was error to restrict cross-examination from this text. But error alone is not sufficient to justify reversal. Erdos was given every opportunity during his trial to present evidence supporting his defense of insanity. He was allowed ample latitude both in the direct examination of his own numerous witnesses and on cross-examination of the court-appointed psychiatrists. We think the curtailing of the cross-examination of one witness from one particular treatise during a lengthy trial was not error so grave as to require reversal where extensive evidence was properly admitted on the issue in question. Erdos’s rights were not substantially affected by this incorrect ruling, and we therefore disregard the error.
Affirmed.
. 18 U.S.C. § 1112 provides :
(a) Manslaughter is the unlawful killing of a human being without malice. It is of two kinds :
Voluntary — Upon a sudden quarrel or heat of passion.
Involuntary — In the commission of an unlawful act not amounting to a felony, or in the commission in an unlawful manner, or without due caution and circumspection, of a lawful act which might produce death.
(b) Within the - special maritime and territorial jurisdiction of the United States,
Whoever is guilty of voluntary manslaughter, shall be imprisoned not more than ten years;
Whoever is guilty of involuntary manslaughter, shall be fined not more than $1,000 or imprisoned not more than three years, or both.
. See e. g., 42 Cong.Rec. 590, 1186 (1909) (remarks of Senator Heyburn and Congressman Sherley).
. 18 U.S.C. § 3238 provides:
The trial of all offenses begun or committed upon the high seas, or elsewhere out of the jurisdiction of any particular State or district, shall be in the district in which the offender, or any one of two or more joint offenders, is arrested or is first brought; but if such offender or offenders are not so arrested or brought into any district, an indictment or information may be filed in the district of the last known residence of the offender or of any one of two or more joint offenders, or if no such residence is known the indictment or information may be filed in the District of Columbia.
. See Orfield, Venue in Federal Criminal Cases, 17 U.Pitt.L.Rev. 375, 393-398 (1956).
. The following colloquy between counsel for Erdos and the district judge demonstrates agreement that Erdos’s movements after his arrival at Dulles were not restrained.
THE COURT: [T]hey claim when he landed he was never in custody, that they did give a summons, just like a parking ticket, to appear on a certain clay, but he was not arrested, he was free to go where he wanted to.
MR. MeDANIELS : That is correct.
THE COURT: And he did go where he wanted to.
MR. MeDANIELS: That is correct.
. See Proposed Rules of Evidence for United States Courts and Magistrates, R. 803(18), 50 F.R.D. 183, 302 (1972); 0 "VVigmore on Evidence §§ 1090-1700 (3d ed. 1940).
. 28 U.S.C. § 2111 provides :
On the hearing of any appeal or writ of certiorari in any case, the court shall give judgment after an examination of the record without regard to errors or defects which do not affect the substantial rights of the parties.
Fed.R.Orim.P. 52(a) provides:
Any error, defect, irregularity or variance which does not affect substantial rights shall be disregarded.
See Chapman v. California, 386 U.S. 18, 22, 87 S.Ct. 824, 17 L.Ed.2d 705 (1907).
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{
"author": "LEVIN H. CAMPBELL, Circuit Judge.",
"license": "Public Domain",
"url": "https://static.case.law/"
}
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SECURITIES AND EXCHANGE COMMISSION, Plaintiff, Appellee, and Securities Investor Protection Corporation, Applicant, Appellee, v. Harry G. MILNER, etc., et al., Defendants, Appellees, Doris L. Higgins et al., Creditors, Appellants.
No. 72-1291.
United States Court of Appeals, First Circuit.
Argued Dec. 4, 1972.
Decided Feb. 20, 1973.
Richard S. Bowers, Jr., Brookline, Mass., with whom Robert S. Marsh, Waltham, Mass., was on brief, for appellants.
Gordon A. Martin, Jr., Boston, Mass., with whom Martin, Morse & Wylie, Boston, Mass., David M. Roseman, and Tyler & Reynolds, Boston, Mass., were on brief, for appellee, Gordon A. Martin, Jr., Trustee of Karle R. Berglund d/b/a Colonial Investment Securities.
Theodore H. Focht, Washington, D. C., with whom Wilfred R. Caron, Washington, D. C., was on brief, for appellee Securities Investor Protection Corp.
Before COFFIN, Chief Judge, AL-DRICH and CAMPBELL, Circuit Judges.
LEVIN H. CAMPBELL, Circuit Judge.
Appellants Higgins and Landgren were employed as securities salesmen by Karle R. Berglund d/b/a Colonial Investment Securities (“Colonial”), formerly a registered broker-dealer of securities, whose business is now being liquidated by a Trustee appointed in the district court under provisions of the Securities Investor Protection Act of 1970 (the “Act"), 15 U.S.C. § 78aaa et seq. Higgins has claims against Colonial for commissions, for losses as a customer, and as a general creditor of Berglund. Landgren has a minute claim for commissions. Both appeal from the district court’s order directing the Trustee, Martin, to make distribution in accordance with his first amended report and plan (the “plan”).
While appellants launch a variety of attacks upon the plan, and the Act, we reach only one of them because of the failure, discussed below, to raise them appropriately in the district court. The issue we reach, and remand for further consideration, is whether the Trustee may now pay as expenses of administration Colonial’s liability to customers, and others, incurred after it went into receivership.
The facts, briefly, are as follows:
On January 15, 1971, Colonial, upon petition of the SEC, was enjoined from security law violations and a Receiver, James C. Donnelly, Jr., was appointed. Mr. Donnelly filed a surety bond in the amount of $50,000. In February, he petitioned the district court for leave to continue Colonial’s business, on the ground that as a sale of its assets was being negotiated it would be detrimental to creditors not to preserve its assets (principally its sales force, customers, and arrangements with mutual funds). The petition was allowed, after hearing, but with limitations: business was to be limited to the solicitation of mutual fund sales, not including the sale of general securities; no funds or security certificates were to pass through Colonial except as necessary to complete existing contracts or orders; the sole purpose of continuing activity would be to preserve saleable assets; and Karle A. Berglund was to have no part in the management of the business except as necessary to consummate the sale of assets.
In spite of the court’s order, Colonial, apparently without supervision and with Berglund’s participation, continued to sell general securities as well as mutual funds, incurring heavy liability to customers and others.
On April 1, 1971, with court approval, assets of Colonial were sold for $70,000 to a third party free from liability. Because the Receiver was in ill health, the court on May 7, 1971, appointed Mr. Martin as co-Reeeiver. Mr. Donnelly has since died.
In August, 1971, the Securities Investor Protection Corporation (SIPC) applied to have Colonial liquidated under the Act. On August 6, 1971, the court ordered that Colonial’s customers needed such protection, and appointed co-Receiver Martin as SIPC Trustee. The Trustee thereafter, with the court’s approval, paid Colonial’s customers the value of their net equities on the filing date from funds advanced by SIPC, there being no “single and separate fund” assets for the purpose. See 15 U.S.C. § 78fff. The Trustee returned specifically identifiable securities to customers. From the sale proceeds and SIPC advances, he also paid fees to Don-nelly and to counsel and others for services during the receivership, and the expenses of the SIPC trusteeship.
By June of 1972, the Trustee, having about $58,000 on hand from the proceeds of the sale of Colonial’s assets, prepared a plan which, with later minor amendments, became the plan here in issue. He proposed to distribute the entire $58,000 “in payment of the expenses of administration of Receiver James C. Donnelly.” About three-quarters of this would go to customers who had transactions with the Receiver between January 15, 1971 (the date Mr. Donnelly took office) and March 31, 1971 (the date of the sale of Colonial’s assets). The balance would go to salesmen for net commissions during the same period; for goods and services then received; and to reimburse SIPC for certain advances for administration. The Trustee would treat all items, including the customers’ claims, as expenses of administration, hence as having priority over the claims of general creditors. Nothing would be left for the latter.
Appellants’ only claim of significance to this appeal is that of Miss Higgins, as a general creditor, for $25,000 or more. It derives from loans, principally to Berglund personally, which she made in 1968 and 1970. Although the plan makes no provision for the claim, the Trustee advises us that he accepts it, along with others, for consideration in the event of more assets.
Miss Higgins’ claims as a customer and for commissions earned during the receivership would be substantially paid under the plan, although non-mutual fund commissions were deleted, resulting in a somewhat lesser amount than the Trustee had initially proposed. In this appeal, she does not complain about the amount of these proposed distributions.
Landgren had a commission claim for $104.65, reduced in the final plan to $93.37. He does'not now complain about the proposed distribution, and has no discernible interest in this appeal.
The amended plan was approved on July 26, 1972, after two district court hearings. The first, on July 10, 1972, was preceded by written notice, formulated and mailed by court order, and received by both appellants in early June. The notice, accompanied by a copy of the plan, provided for a creditors’ meeting on June 20, 1972, and stated that objections to the plan were to be filed “in writing” with the district court within ten days after the June 20 meeting. Hearing on “any objections thereto which have been timely filed” was set for July 10 at 11:30 a. m. at the district court.
Miss Higgins personally attended the June 20 meeting of creditors. Land-gren was represented toy present counsel. On June 26, she wrote the Trustee detailing her general claims against Berg-lund and stating that it was not her “intention or desire to interfere” with the proposed plan, but wished her additional claims considered after “those of the a) customers, b) creditors, e) salesmen have been settled.”
On July 10, 1972 both appellants were represented in the district court by present counsel who undertook to express disagreement with the plan. No written objections had been tendered, however, and for that reason the court declined to entertain counsel’s oral objections, except those regarding the proposed deletion of commissions on nonmutual fund sales. The amended plan was filed soon after July 10, 1972, (differing from the former only by deleting general commissions and including several small claims as to which timely objections had been filed).
On July 18, 1972, appellants’ counsel wrote a letter to the Trustee’s counsel. Presented to the court on July 21, the objections therein were overruled after discussion between court and counsel. Distribution pursuant to the amended plan was thereafter ordered. The points raised in the July 18 letter are largely irrelevant to those raised before us; however there is an oblique reference to the sale of securities, as distinguished from mutual funds, during the receivership. Charitably it might be said that this called attention to the general issue of the Receiver’s failure to comply with the court’s order.
We think the district court was entirely warranted in declining to entertain oral objections to the plan. Even were we to ignore Higgins’ uncounselled, letter of June 26, 1972, which acquiesced in the plan’s priorities, her attorney did not later file anything in writing except the letter of July 18, 1972. District courts are not required to entertain vague, unformulated protests from attorneys and clients who disregard clear and patently reasonable advance instructions to reduce their complaints to writing.
We thus decline to consider appellants’ attack upon the alleged unconstitutionality of the Act. It was not raised in the district court. Counsel’s oral remark that “even the question of constitutionality may be involved here” presented nothing upon which the district court might be expected to act. Only rarely do we hear constitutional arguments in the first instance. Talmanson v. United States, 386 F.2d 811, 812 (1st Cir. 1967), cert. den. 391 U.S. 907, 88 S.Ct. 1658, 20 L.Ed.2d 421 (1968). The question sought to be raised is neither so substantial nor material as to lead us to make an exception. Well before the Act, securities customers were recognized as retaining a special interest in customer property; both earlier practice and valid social and economic aims would seem to provide a rational basis for the “single and separate fund” provisions. (See § 60e of the Bankruptcy Act, 11 U.S.C. § 96(e)). Moreover, appellants’ concern with the Act’s constitutionality seems largely premised upon a misanalysis of the plan: e. g. their belief that the Trustee’s purported authority for priority payment of customers and others for claims during the receivership stems from the Act’s single and separate fund provisions. To the contrary, the Trustee asserts authority under a familiar bankruptcy provision (§ 64a(l) of the Bankruptcy Act, 11 U.S.C. § 104a(l), incorporated in the Act at 15 U.S.C. § 78fff(c)), granting priority to the “costs and expenses of administration, including the actual and necessary costs and expenses of preserving the estate.”
The appellants’ non-constitutional points, other than the one hereinafter mentioned, fall in an analogous category. In no meaningful sense were they raised below.
While the appellants’ lack of diligence in the district court causes us to refuse to consider the constitutional and most of the legal questions which they now seek to raise, it does not warrant our by-passing one important question: namely, whether the Trustee may now pay out all the remaining property largely for receivership liabilities incurred through the apparent dereliction of the Receiver.
The question was tangentially raised below; but, quite apart from that, given strong indication that a receiver may entirely have failed to carry out his duties, the court had reason to investigate on its own.
Here, not only were non-mutual fund shares sold; but other parts of the order may have been disregarded — by permitting Berglund to remain in the business and, possibly, by permitting funds and certificates to pass through Colonial. It is difficult to imagine how $43,000 of customer claims could have arisen within several months had the Receiver complied with the terms of the order and his fiduciary obligations.
The Trustee, as we understand him, does not deny that this may be so, but relies upon Reading Co. v. Brown, 391 U.S. 471, 88 S.Ct. 1759, 20 L.Ed.2d 751 (1968) as warranting payment as expenses of administration of claims stemming from a receiver’s default. Perhaps so, although it is not immediately clear to us that that case, involving a negligent fire loss, necessarily controls these different facts. In any event, we are unwilling to apply Reading, over objection however inartful, on a record which tells us virtually nothing about the circumstances and details of the claims and the Receiver’s actions. Moreover, it would be relevant to know why action upon the Receiver’s bond has not been undertaken.
We accordingly vacate the district court’s order directing distribution in accordance with the plan. We remand for further proceedings in the district court which will consider the appropriateness of treating customers’ and other claims during the receivership as expenses of administration, and further whether recovery should be sought under the Receiver’s bond. Thereafter, the plan should be modified or not, and approved, as the district court may determine. Our remand to the district court is not to be taken as reopening, or creating the possibility of raising, the matters disposed of in this opinion as not sufficiently presented below.
Remanded for further proceedings consistent herewith.
. While referred to for convenience as “it”, Colonial was merely a name used by Berg-lund for his securites operations. Colonial has no legal standing separate from Berglund individually.
. The receivership was created under the district court’s general equity powers. Trusteeship under the Act did not occur until later.
. The filing date was January 12, 1971, the date the equity receivership proceeding was commenced. See 15 U.S.C. § 78eee (b) (4) (B) (ii).
. In the plan, the Trustee cites § 64a (1) of the Bankruptcy Act, 11 U.S.C. § 104a (1), making it clear that the purported priority status of these items rests not on the single and separate fund provisions of tlie Act, but on the theory that the claims against the Receiver during that period are properly expenses of administration.
. Under 15 U.S.C. § 78fff(e) “the court may make appropriate provision for proof and enforcement of all claims against the debtor. . . . ”
. Miss Higgins who ran the general securities desk at Colonial, was represented by experienced counsel in May, 1971, when she sued Berglund on her 1968 and 1970 demands in the state court. The action was stayed upon the petition of the SIPO Trustee. Miss Higgins retained her present counsel in July, 1972. We have no reason to assume, given this background, that she was lacking in sophistication or did not know where to find counsel.
. Counsel did not follow the conventional practice of preparing objections and submitting them with a motion for permission to file late. Written objections not only focus the court’s attention but in a proceeding like this, give the trustee and other creditors fair notice of matters they may wish to answer.
. We recognize that Mr. Donnelly may have been ill and that whatever happened may not be such as to reflect personally upon him.
. We are not to be understood as passing upon the question one way or the other at this juncture. We expressly leave it open for further consideration by the district court after the inquiry ordered below.
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AG PRO, INC., Plaintiff-Appellant, v. Bernard A. SAKRAIDA, Defendant-Appellee.
No. 72-1108.
United States Court of Appeals, Fifth Circuit.
Feb. 5, 1973.
J. Pierre Kolisch, Portland, Or., Frank H. Hunter, El Paso, Tex., for plaintiff-appellant.
J. F. Hulse, El Paso, Tex., for defendant-appellee.
Before RIVES, WISDOM and RO-NEY, Circuit Judges.
RIVES, Circuit Judge:
Ag Pro, Inc., plaintiff-appellant (hereafter plaintiff), sued Sakraida, defendant-appellee (hereafter defendant), for infringement of the D. J. Gribble, et al. (hereafter Gribble/Bennett) Patent 3,-223,070, titled “Dairy Establishment.” On the first hearing the district court granted defendant’s motion for summary judgment. This Court reversed and remanded for a trial on the merits. Ag Pro v. Sakraida, 5 Cir., 1971, 437 F.2d 99.
On remand the trial was commenced and completed on the same day. The district court received suggested findings of fact and conclusions of law from both sides, adopted those of the defendant, and adjudged
“* * * that said Patent No. 3,223,070 held by Plaintiff does not constitute invention, is not patentable, and is not a valid patent, it being a combination patent, all of the elements of which are old in the dairy business, long prior to 1963, and the combination of time as described in the said patent being neither new nor meeting the test of non-obviousness, Defendant is entitled to judgment.”
(App. 175.)
Having held the patent invalid, the district court did not determine the issue of infringement. We reverse and remand.
The patent is limited to the construction and arrangement of the floor areas of the barn and the means for storing a volume of water on or immediately above the floor so that, when the water is suddenly released, it will clean all of the barn floor areas without the use of hand labor. According to the letters patent, all barn floor areas can be thoroughly cleaned in a very few minutes, where previously it took hours of labor and use of larger quantities of water to achieve an inferior result. The patent contains three claims, but only Claims 1 and 3 are here involved. (App. 18.) In simplified form, those two claims call for a dairy barn having the following elements :
1) A paved, sloped barn floor with downhill drains;
2) individual cow stalls elevated above floor level but designed to facilitate accumulation of cow excrement on the dairy floor;
3) paved feeding and milking areas integrated into the flush system;
4) a dam which collects water in a pool uphill from or directly on the dairy floor and abruptly openable to send a sheet of water cascading through the dairy sweeping the manure to the downhill drains.
Admittedly, all the elements are old. However, prior to this patent, the concept of a controlled sheet of water to do the scouring and washing of the floor had not been used in barn construction. The prior art involved the use of spot delivery of water by high pressure hoses. None of the prior art documents shows a floor washing means constructed to collect a pool of water uphill from or on the floor so that, when the water is abruptly released, it will flow as a sheet to wash almost instantaneously all barn floor areas and discharge cow offal into drains. That is the crucial element of this patent.
The plaintiff’s patent is a modest commercial success. Over 70 dairies spanning the United States now utilize the patented manure flush system. Each installation is licensed under the patent pursuant to a one-payment, standard fee of $1500.00 plus $1.00 per cow. (App. 190, 191.)
A valid patent must be, not only novel and useful, but also nonobvious. 35 U.S.C. § 103. While the ultimate question of patent validity is one of law, a determination of nonobviousness rests on several basic factual inquiries. Those inquiries, prompted by § 103, are three in number.
“Under § 103, the scope and content of the prior art are to be determined; differences between the prior art and the claims at issue are to be ascertained ; and the level of ordinary skill in the pertinent art resolved.”
Graham v. John Deere Co., 1966, 383 U.S. 1, 17, 86 S.Ct. 684, 694, 15 L.Ed.2d 545.
The crucial issue of obviousness can only be resolved through reference to the precise facts presented, not through logical or intuitive analysis distorted by the invention's simplicity and retrospective self-evidence.
In the instant case, plaintiff presented cogent and convincing evidence that the gap between its patented system and the prior art was wide and ultimately bridged only by the inventive powers of Gribble and Bennett. In contrast, defendant did not supplement the prior art references initially available to the Patent Office, nor did he cite examples of simultaneous solutions. Instead, he merely relied upon three conclusory affidavits and the testimony of one witness who admitted that no similar device existed in the prior art. (App. 246.)
A short sketch of the evidence available to the trial court will highlight the lopsided factual foundation on which the determination of the patent’s validity must rest.
(1) Evidence Presented by Defendant
While considering the Gribble/Bennett patent application in 1963, the Patent Office examiner had before him nine prior art patents and two prior art publications. Defendant introduced into evidence the two publications and only five of the patents. (Def. Exhibits 2, 3, 4, 5, 6, 7 and 8.) No other specific example of the prior art was revealed by defendant at trial.
Instead, defendant’s meager presentation consisted of three cursory affidavits attached to the original motion for summary judgment and the solitary testimony of Mr. Robert Price at trial.
The three affiants, Sakraida, W. C. Fairbanks and Archie Sharp, each swore to have knowledge of prior flush systems analogous to the Ag Pro patent, and each volunteered the subjective judgment that appellant’s invention was obvious. (App. 91-102.) These simplistic statements, rendered without the aid of cross-examination and devoid of specific illustrations of similar inventions, add little to an understanding of the prior art.
Defendant’s single trial witness, Mr. Robert Price, who runs a dairy in El Paso, Texas, testified that certain elements of appellant’s patented invention were known to the prior art, specifically, paved, sloped floors with downhill drains and raised stalls. (App. 239-249.) Yet, Mr. Price admitted that the patented dam-release flooding technique was novel even to him.
(2) Evidence Presented by Plaintiff
In contrast to defendant’s paltry factual presentation, plaintiff developed a full and lucid view of both the prior art and its own inventive “breakthrough.” Plaintiff skillfully juxtaposed the prevalent pre-1963 cleaning techniques with its own flush system and painted a convincing picture of a nonobvious advance.
Plaintiff supplemented its vivid documentary evidence, including picture brochures, magazine articles and a short film strip, with the testimony of George Huber, a retired agricultural engineer from the University of Oregon. Mr. Huber, properly qualified as an expert witness, provided the only technical analysis of the prior art. Mr. Huber carefully examined each of the five patents and two articles cited by defendant as representative of the prior art. He came to the same conclusion previously reached by the Patent Office — none of defendant’s prior art references anticipated plaintiff’s invention.
The Supreme Court held in Graham v. John Deere, supra, 383 U.S. at 19, 86 S.Ct. 684, that 35 U.S.C. § 103, passed in 1952, merely codified pre-existing requirements and did not relax the standard for patentability. As early as 1851, in Hotchkiss v. Greenwood, 52 U.S. (11 How.) 248, 13 L.Ed. 683, the Supreme Court posited the condition that a patentable invention must evidence more ingenuity and skill than that possessed by an ordinary mechanic acquainted with the business. That basic standard remains intact. Section 103 simply substitutes the- term “nonobvious” for prior terms such as “invention” and “ingenuity” in order to emphasize the objective nature of the test and avoid the misunderstanding stemming from the controversial phrase “flash of creative genius” coined in Cuno Corp. v. Automatic Devices Corp., 1941, 314 U.S. 84, 62 S.Ct. 37, 86 L.Ed. 58.
Thus, novelty, utility and wide commercial success are not enough to assure patentability. A combination is unpatentable, notwithstanding novelty and usefulness, if it is, in view of the prior art, an obvious expedient of a skilled worker in the art. See Deller’s Walker on Patents, 2nd ed., § 71, p. 333. Hence, where the defendant in a combination patent infringement suit offers references to the prior art to negate patentability, those references may not be combined to anticipate the patented claim unless they suggest to one with ordinary skill in the art doing what the applicant has claimed.
None of the prior art references proffered by defendant in this case, independently or combined, suggest that plaintiff’s novel flooding mechanism was an obvious advancement in the art. To the contrary, the record reveals that those skilled in the art reacted to the advancement with surprise (see App. 208; 266). Different evidence referring to truly analogous prior patents or simultaneous solutions might have compelled a finding of obviousness, but this record is devoid of such evidence.
Certainly, the gravitational principle that water runs downhill is both old and obvious; yet, plaintiff does not seek to patent gravity. Instead, plaintiff strives to acquire official recognition of its rights in a precise combination of mechanical components capable of harnessing a sudden rush of water to effectively clean a modern dairy barn. The prior art did not mother this audacious device; Gribble and Bennett’s inventive faculties did.
The clearly erroneous standard of review is applicable to findings of fact in a patent case. See F.R.Civ.P. Rule 52; Railex Corp. v. Speed Check Co., 5 Cir. 1972, 457 F.2d 1040; American Seating Co. v. Southeastern Metals Co., 5 Cir. 1969, 412 F.2d 756, 758. Although this Court has viewed with disfavor a trial judge’s uncritically accepting proposed findings, this unfortunate practice does not erase the clearly erroneous rule. Louis Dreyfus & CIE. v. Panama Canal Co., 5 Cir. 1962, 298 F.2d 733.
Anticipation' of the contested patent by prior art structures is largely a question of fact, but the critical issue of nonobviousness requires a mixed factual-legal determination. Laitram Corp. v. Deepsouth Packing Co., 5 Cir. 1971, 443 F.2d 928, 932; Anderson’s Black Rock, Inc. v. Pavement Salvage Co., 1969, 396 U.S. 57, 90 S.Ct. 305, 24 L.Ed.2d 258.
In the instant case, the district judge did not specifically find that the patent was anticipated by prior art structures. (See App. 164-177.) He did conclude that plaintiff’s invention was obvious, and, as a mixed factual-legal determination, that conclusion must be given strong credence by this Court. But the facts presented at trial clearly do not support a finding of obviousness under the three-pronged Graham test, and, even under the strictures of a limited standard of review, this Court must reverse.
The Presumption of Patent Validity
A patent is presumed valid and the burden of establishing its invalidity rests on the party asserting it. See 35 U.S.C. § 282. Although the presumption of patent validity is rebuttable, Radio Corp. of America v. Radio Engineering Labs, 1934, 293 U.S. 1, 55 S.Ct. 928, 79 L.Ed. 163, the quantum of proof needed to rebut that presumption is greater than a mere preponderance of the evidence. Hobbs v. United States, 5 Cir. 1971, 451 F.2d 849, 856; Railex Corp. v. Speed Check, supra, 457 F.2d at 1040.
If it can be demonstrated that the Patent Office was not shown or did not consider additional pertinent prior art, the presumption of validity is. weakened. B. F. Goodrich Co. v. Rubber Latex Products, Inc., 6 Cir. 1968, 400 F.2d 401; Stamicarbon, N.V. v. Escambia Chemical Corp., 5 Cir. 1970, 430 F.2d 920. But presentation by defendant of exactly the same prior art references relied on by the Patent Office reinforces, rather than destroys, the presumption of validity. Stamicarbon. N.V. v. Escambia Chemical Corp., supra p. 926; Johns-Manville Corp. v. Cement Asbestos Products Co., 5 Cir. 1970, 428 F.2d 1381.
Accordingly, this Court has seen fit to override the statutory presumption of patent validity where previously undisclosed references to analogous prior art structures are revealed at trial, Ramirez v. Perez, 5 Cir. 1972, 457 F.2d 267; see also Graham v. John Deere, supra, 383 U.S. at 26, 86 S.Ct. 684, but the circumstances in this case compel a contrary result.
At trial, defendant cited only five prior art patents, all of which were previously considered by the Patent Office. Defendant introduced a single witness. That witness’ ambiguous testimony, balanced against the impressive array of evidence proffered by plaintiff, failed to rebut the presumption of patent validity. Yet, the district court did not once mention the patent’s presumptive validity in its findings of fact and conclusions of law.
The Requirement of Nonobviousness
The requirements for patentability are primarily statutory. The purpose of the patent laws is “to promote the Progress of * * *' useful Arts, by securing for limited Times to * * * Inventors the exclusive Right to their * * * Discoveries.” U.S.Const., Art. I, § 8, cl. 8. That purpose is implemented by 35 U.S.C. § 101, defining a patentable invention as one that is both new and useful, and § 103 further requiring that,
“A patent may not be obtained though the invention is not identically disclosed or described as set forth in § 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.”
The concept of nonobviousness is elusive. The patentability of any given invention can only be determined by applying general principles gleaned from relevant eases to the specific facts involved, with a constant eye on the constitutional purpose of the patent laws.
In the first Supreme Court case interpreting section 103, Graham v. John Deere, supra, the Court held two separate patents unpatentable. The first, an asserted advancement in plow shank design, was found to be substantially identical to a prior patent, not considered by the Patent Office, whose parts were simply inverted. The second structure, a plastic finger sprayer with “hold-down” cap, lacked the requisite nonob-viousness, because the advancement rested upon an “exceedingly small and quite non-technical mechanical differenee[s] in a device which was old in the art.” Graham, supra, 383 U.S. at 36, 86 S.Ct. at 703. Although the Court in Graham clearly rejected the Fifth Circuit rationale that an invention is patentable when it produces an “old result in a cheaper and otherwise more advantageous way,” what precise test, if any, that Court substituted is unclear.
Several post-Gratom cases have emphasized the necessity of a technical improvement and apparently permitted the ultimate issue of patentability to turn on a technical-nontechnical distinction. In United States v. Adams, 1965, 383 U.S. 39, 86 S.Ct. 708, 15 L.Ed.2d 572, a new wet cell battery was held patentable, because it constituted a combination which was a specific solution to technical problems. See Sterner Lighting, Inc. v. Allied Electrical Supply, Inc., 5 Cir. 1970, 431 F.2d 539, 542. In Sterner a novel lamp-post base design was found patentable under the following test:
“Whether the patentee has solved non-trivial technical problems by purposefully manipulating variables so as to elicit a synergistic result from his materials.” [Emphasis supplied.]
Other cases, rather than focusing on the technical complexity of the improvement, have stressed the reaction of experts in the art. If noted experts express initial disbelief, that fact is probative of nonobviousness. See United States v. Adams, supra p. 52, 86 S.Ct. 708; but see Railex Corp. v. Speed Check Co., supra, 457 F.2d at 1045, where an unexpected result was treated as relevant to novelty, not nonobviousness. The concepts are often intertwined.
All of the cases agree that considerations of commercial success, long felt but unresolved needs, and failure of other structures to achieve the same results are important secondary factors but not directly determinative of nonobviousness. Graham, supra, 383 U.S. at 17, 86 S.Ct. 684.
Although the plaintiff’s flush system does not embrace a complicated technical improvement, it does achieve a synergistic result through a novel combination. The Gribble/Bennett invention involves far more than a mere inversion of parts and the problem solved was not trivial. The little expert testimony presented at trial supports the conclusion that the system was initially viewed with disbelief. The inventors did not take a common structure and make a minor change like the tortilla maker in Ramirez v. Perez, supra, who merely removed the studs from a waffle iron. Instead, they constructed a totally new structure (although admittedly out of old parts) and achieved a dramatic result. If a mechanic reasonably skilled in the applicable art could have anticipated this result, the record does not show it.
On the basis of the record before us, we reverse the judgment of the district court and find that the patent is valid. The case is remanded for a determination of the issue of infringement, and for such further proceedings as may be appropriate, consistent with this opinion.
Reversed and remanded.
. “Claim 1. A dairy barn for cows and the like including a smooth, evenly contoured paved surface forming a floor providing a walking surface for cows in the barn, drain means for draining wash water from such floor opening to the top of the floor, said smooth, evenly contoured surface which forms such floor sloping toward said drain means whereby wash water discharged on the floor may be collected and disposed of through said drain means, said barn further including multiple rest areas with individual stalls for each cow and with each of said stalls having a bottom which is also of smooth pavement, but which is disposed at an elevation above the paved surface forming the floor, said stalls being dimensioned so that a cow can comfortably stand or lie in the stall, but offal from the cow falls outside, the stall bottom and onto the floor providing the walking surface in the barn, said barn further including defined feeding areas having feeding troughs with means for discharging feed to the troughs, a cow-holding arca, a milking area and a transfer area all bottomed with tire walking surface forming said floor in the barn ; and floor-washing means for washing the floor providing the walking surface in the barn where said floor bottoms said feeding, holding, milking and transfer areas operable to send wash water flowing over the floor with such water washing any cow offal thereon into said drain means, said floor-washing means including means located over a region of said floor which is uphill from said drain means constructed to collect water as a pool above said floor and operable after such collection of water as a pool to disperse the water as a sheet of water over said floor.”
“Claim 3. The barn of claim 1, wherein said floor-washing means comprises a dam for damming and collecting water as a pool directly on the floor, and such dam is abruptly openable to send such water as a sheet over the floor toward said drain means.” (App. 89, 90.)
. Mr. Huber’s scrutinization of defendant’s prior art references appears in the Appendix at pages 26.8 to 272 and includes the following findings:
(1) The magazine article proffered by Sakraida, “Cattle Shelters and Equipment for South Carolina,” Extension Agricultural Engineering Handbook No. 2 (82), merely describes a dairy barn floor plan and does not discuss cleaning procedures.
(2) Defendant’s second publication, “Tiie Way Cow’s Will Be Milked on Your Farm Tomorrow” by Babson Brothers Dairy Research Service, describes loose housing which requires either scraping or pressure hosing of manure.
(3) The Luks Patent, No. 1,968,564 (1934) deals with a movable milking apparatus with gutters and drains, but no dam.
(4) The Kreutzer Patent, No. 1,981,417 is a combination animal housing-feeding structure, but does not embrace cleaning procedures at all.
(5) The Kreutzer Patent, No. 1,981,418, also, does not involve barn cleaning.
(6) The MeCornack Patent, No. 2,081,-947 is a cleaning system based on gutters and a system of water pipes, not a dam-release system.
(7) The Bogert Patent, No. 2,233,766 utilizes a sprinkler system, again distinct from plaintiff’s patent.
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2024-08-24T03:29:51.129235
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{
"author": "THORNBERRY Circuit Judge: JOHN R. BROWN, Chief Judge, with whom COLEMAN, SIMPSON, CLARK, INGRAHAM and RONEY, Circuit Judges, GOLDBERG, Circuit Judge",
"license": "Public Domain",
"url": "https://static.case.law/"
}
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UNITED STATES of America, Plaintiff-Appellee, v. James Andrew COLBERT and Michael Beryl Reese, Defendants-Appellants.
No. 71-2097.
United States Court of Appeals, Fifth Circuit.
Feb. 14, 1973.
John R. Brown, Chief Judge, joined by Coleman, Simpson, Clark, Ingraham, and Roney, Circuit Judges, filed concurring opinion.
Goldberg, Circuit Judge, filed dissenting opinion.
Jack Drake, Drake & Knowles, University, Ala., for defendants-appellants.
Wayman G. Sherrer, U. S. Atty., L. Scott Atkins, John S. Salter, Asst. U. S. Attys., Birmingham, Ala., for plaintiff-appellee.
Before JOHN R. BROWN, Chief Judge, TUTTLE, Senior Circuit Judge, and WISDOM, GEWIN, BELL, THORN-BERRY, COLEMAN, GOLDBERG, AINSWORTH, GODBOLD, DYER, SIMPSON, MORGAN, CLARK, INGRA-HAM and RONEY, Circuit Judges.
THORNBERRY Circuit Judge:
Appellants Colbert and Reese were convicted in the district court of possession of unregistered sawed-off shotguns in violation of 26 U.S.C.A. § 5861(d). A panel of this court overturned the convictions on appeal holding the police searches which produced the weapons invalid under the Fourth Amendment. Having agreed to rehear this case en banc, we vacate the judgment of the panel and affirm the convictions.
The panel opinion set out the facts fully, and we repeat here only a somewhat abbreviated version. In the late afternoon of October 24, 1970, appellants Colbert and Reese were walking down a street in Birmingham, Alabama, carrying briefcases. Noticing that Colbert fit the description of a wanted suspected felon, officers Trimm and Pitts of the Birmingham police department approached appellants to question them. At the officers’ approach appellants set their briefcases on the sidewalk. They identified themselves as book salesmen but, when the officers asked to see their wares, i. e. the contents of the briefcases, appellants replied they did not have to show the officers anything and denied that they owned the briefcases or had any knowledge about them. The officers frisked Colbert and Reese. Appellants then began to walk away from the officers, leaving the briefcases on the sidewalk. The officers stopped them again and demanded of each to see some identification document. Reese produced a Georgia driver’s license, and Colbert said he had no identification card with him. The officers then asked each appellant to produce his draft card; when each denied possessing one, the officers arrested them for failure to carry a Selective Service registration certificate, a violation of 50 U.S.C.A.App. § 462, and placed them in the patrol car. While in the patrol car Reese again denied knowing anything about the briefcases. One of the officers then returned to the briefcases, opened them, and found the sawed-off shotguns inside. Appellants were eventually indicted for possession of the unregistered shotguns with illegal barrel lengths, and, after the trial judge denied their motion to suppress the weapons, they were convicted upon a jury verdict of guilty.
Of the four issues raised on this appeal, three concern the searches which produced the sawed-off shotguns: First, were the searches incident to a valid arrest under Chimel v. California, 1969, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685? Secondly, are the searches sustainable under the so-called “automobile exception” to the warrant requirement of the Fourth Amendment applied in Carroll v. United States, 1925, 267 U.S. 132, 45 S.Ct. 280, 69 L.Ed.2d 543? Thirdly, did appellants, by abandoning their briefcases, lose standing to object to the searches? The fourth issue is whether police officers were required by Miranda v. Arizona, 1966, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 to warn appellants of their rights before asking to see their draft cards.
The panel majority found the searches could not be sustained under the first and second theories argued by the government but did not comment on the abandonment theory; since it reversed on the search issue, the panel had no need to discuss the asserted Miranda problem. We predicate our affirmance on the abandonment theory only and intimate no view as to the two arguments treated in the panel opinion. Under our view of this case we are not required to reach the Miranda issue to dispose of this appeal.
I. Standing to Object to Search and Seizure
Only those persons whose privacy is invaded by a search have standing to object to it under the exclusionary rule codified in Rule 41(e), Fed. R.Crim.P.:
In order to qualify as a “person aggrieved by an unlawful search and seizure” one must have been a victim of a search or seizure, one against whom the search was directed, as distinguished from one who claims prejudice only through the use of evidence gathered as a consequence of a search or seizure directed at someone else.
Jones v. United States, 1960, 362 U.S. 257, 261, 80 S.Ct. 725, 731, 4 L.Ed.2d 697. Further, it is settled law that one has no standing to complain of a search or seizure of property he has voluntarily abandoned. See, e. g., Abel v. United States, 1960, 362 U.S. 217, 240-241, 80 S.Ct. 683, 698, 4 L.Ed.2d 668, 687; Hester v. United States, 1924, 265 U.S. 57, 44 S.Ct. 445, 68 L.Ed. 898; Parman v. United States, 1968, 130 U.S.App.D.C. 188, 399 F.2d 559, cert. denied 393 U.S. 858, 89 S.Ct. 109, 21 L.Ed.2d 126; Coleman v. Maxwell, 6th Cir. 1968, 387 F.2d 134, cert. denied 393 U.S. 1007, 89 S.Ct. 492, 21 L.Ed.2d 472, reh. denied 394 U.S. 912, 89 S.Ct. 1014, 22 L.Ed.2d 226; Feguer v. United States, 8th Cir. 1962, 302 F.2d 214, 248-249, cert. denied 371 U.S. 872, 83 S.Ct. 123, 9 L.Ed.2d 110.
Abandonment is primarily a question of intent, and intent may be inferred from words spoken, acts done, and other objective facts. United States v. Cowan, 2d Cir. 1968, 396 F.2d 83, 87. All relevant circumstances existing at the time of the alleged abandonment should be considered. United States v. Manning, 5th Cir. 1971, 440 F.2d 1105, 1111. Police pursuit or the existence of a police investigation does not of itself render abandonment involuntary. See Abel v. United States, supra; Edwards v. United States, 5th Cir. 1971, 441 F.2d 749; Lurie v. Oberhauser, 9th Cir. 1970, 431 F.2d 330. The issue is not abandonment in the strict property-right sense, but whether the person prejudiced by the search had voluntarily discarded, left behind, or otherwise relinquished his interest in the property in question so that he could no longer retain a reasonable expectation of privacy with regard to it at the time of the search. United States v. Edwards, supra, 441 F.2d at 753; cf. Katz v. United States, 1967, 389 U.S. 347, 88 S.Ct. 507, 19 L.Ed.2d 576.
The facts of this case show conclusively that Colbert and Reese abandoned their briefcases before the searches took place. In response to police questions they both disclaimed any interest in the briefcases and began to walk away from them. The police officers in no way compelled these actions. Under these circumstances appellants could entertain no reasonable expectation of privacy in them. Compare Lurie v. Oberhauser, supra, where a disclaimer of any ownership or possessory interest in a suitcase in the course of a police investigation was held sufficient without more to support a finding of abandonment. The legal effect of the abandonment is, as noted above, to deprive appellants of standing to challenge the subsequent searches.
Appellants argue that Jones v. United States, 1960, 362 U.S. 257, 80 S.Ct. 725, 4 L.Ed.2d 697, precludes a holding that appellants lacked standing to challenge the searches in the prosecution for possession of sawed-off shotguns. We disagree. Jones, a narcotics possession case, held generally that a defendant charged with a possession offense has standing as a matter of law to challenge a search which produced the allegedly possessed substance or thing, even if he does not assert a possessory interest in it. The rationale was that
to hold to the contrary, that is, to hold that petitioner’s failure to acknowledge interest in the narcotics or the premises prevented his attack upon the search, would be to permit the Government to have the advantage of contradictory positions as a basis for conviction. Petitioner’s conviction flows from his possession of the narcotics at the time of the search. Yet the fruits of that search, upon which the conviction depends, were admitted into evidence on the ground that petitioner did not have possession of the narcotics at that time. The prosecution here thus subjected the defendant to the penalties meted out to one in lawless possession while refusing him the remedies designed for one in that situation. It is not consonant with the amenities, to put it mildly, of the administration of criminal justice to sanction such squarely contradictory assertions of power by the Government. The possession on the basis of which petitioner is to be and was convicted suffices to give him standing under any fair and rational conception of the requirements of rule 41(e).
362 U.S. at 263-264, 80 S.Ct. at 732, 4 L.Ed.2d at 703-704. The rule established in Jones is based on the positions the prosecution takes at trial when the duration of the possession charged includes the time of the search. In the above quoted passage the Court focused on the defendant’s possession of the narcotics “at the time of the search.” When the time of the possession charged and the time of the, search coincide or overlap, it is indeed inconsistent for the government to argue the defendant lacked sufficient possession to confer standing to challenge the search but had sufficient possession at the same time for conviction. When, however, the government shows that the property was abandoned before the search, there is no such inconsistency. On the contrary, the government may argue without self-contradiction that a defendant had possession at one time for purposes of conviction, but at a later time lacked sufficient possession to confer standing to object to search and seizure. Accordingly, we do not think the Jones rule of standing was intended to prevent the government from showing voluntary pre-search abandonment, if it can, or to apply to a possession prosecution when such abandonment is shown. In United States v. Edwards, 5th Cir. 1971, 441 F.2d 749, a panel of this court, in holding a defendant lacked standing to challenge a search and seizure in a possession prosecution because of voluntary pre-search abandonment, did not consider Jones to be an obstacle, and we hold today that Jones is not an obstacle to such a ruling.
In apparent conflict with Edwards and with our holding in this case is Williams v. United States, 5th Cir. 1969, 412 F.2d 729. To the extent of this conflict Williams must be limited to its facts and no longer considered viable authority in this Circuit.
II. Miranda Warnings Before Draft Card Request
In addition to challenging the searches in this case, appellants argue that the police demand to see their draft cards was improper because it was not preceded by Miranda warnings. Under the government’s search-incident-to-valid-arrest argument a determination of the effect, if any, of the draft card requests on the validity of the arrests might be appropriate, but we have declined to take this approach. Since we find the searches in this case valid on the basis of appellant’s voluntary pre-search abandonment of the briefcases, we need not and do not decide whether Miranda warnings were required under the facts of this case.
Miranda requires suppression of the fruits of custodial police interrogation not preceded by proper warnings. It does not require overturning a conviction because of improper police procedure when no prejudice results to the defendant. The record reveals that appellants’ admissions, elicited by police questioning, that they had no draft cards in their possession were mentioned only at the hearing on the motion to suppress and never came to the attention of the jury. Hence, even if the draft card request was impermissible under Miranda, it did not lead to error in appellants’ trial or taint their convictions in any way.
Affirmed.
JOHN R. BROWN, Chief Judge, with whom COLEMAN, SIMPSON, CLARK, INGRAHAM and RONEY, Circuit Judges,
join (concurring):
I join in the Court’s opinion and the decision. Whatever doubt there might reasonably be about the abandonment approach followed by the Court, both as to that theory and generally, all of the doubts are removed by a circumstance not mentioned.
Before any search of the briefcases was made one of the officers saw one of the two defendants furtively dispose of several shotgun shells from his pocket which were then recovered and identified.
When tested in terms of a reasonable basis for the search, not the arrest as a basis for the search, this factor, in the circumstances presented, gave ample grounds to the officers.
True, people may possess shotgun shells and may transport and use them, most often perhaps in the role of sportsmen matching skills against nature’s feathered or other small creatures. But a couple of casual “hippie” dressed persons walking around in busy metropolitan Birmingham would not normally be carrying shotgun shells — certainly not without shotguns. Whatever innocuous inferences the law, with its laudable Fourth Amendment indulgence, might momentarily have to draw were radically changed by active, though furtive, behavior in trying to get rid of the shells, coupled with the even more strange actions in walking away from briefcases they had just previously been carrying.
At that stage a prudent officer could reasonably conclude that something was rotten in Denmark.
Adding altogether, at that moment there was reason to believe that the shells and the briefcases were not unrelated. If there were sawed-off guns in the briefcases, it was presumptively a crime. So the decision to search was a reasonable one in the classic statement of the Rule.
Although what was found does not itself justify the search, when what is found is what was suspected I do not consider that the law rejects the common experience of mankind which — in its everyday judgments having momentous consequences — at least treats what is discovered as a factor in determining the reasonableness of that which was anticipated.
The prudent officer must first be a prudent man. In testing the officer’s on-the-spot judgments we should not deny him the judgmental processes of the prudent man.
I would put it on the basis of a reasonable search as of the moment of the search and avoid the problems of search incident to arrest, abandonment or the like.
GOLDBERG, Circuit Judge
(dissenting) :
I dissent. I refuse to join my brothers as a pallbearer at the funeral of the Fourth Amendment in this Circuit. Although I find, rather disconcertingly, that my funeral dirge is a solo, nonetheless, I believe very strongly that the Court has erred in vacating the panel decision and affirming the district court’s denial of the motion to suppress.
I realize that the clamor for law and order in this country is well-founded, but to suppose for one minute that the desired result can be achieved by diluting established rights is to commit a mistake of the highest order. It may offend many people that under our system of criminal justice the criminal goes free when the constable blunders, but such is the law of the land. The Supreme Court has unequivocably mandated that the need to preserve the individual’s right of privacy against governmental intrusion often requires that this right take precedence over constabulary duties that must and should be done. It is unfortunate that this Court today treats the Fourth Amendment as if it were some cancerous tumor that must be constantly pared away lest it consume the whole. It is not our function to manufacture excuses for illegal police behavior, as the majority does here. The Fourth Amendment commands a greater respect.
No less than fourteen members of the Court have joined Judge Thornberry’s opinion which finds, for the first time in this litigation, that the briefcases were “voluntarily abandoned” and that appellants therefore have no standing to contest the search. The Court’s utilization of the abandonment principle on the facts of this case is at best dubious. Five members of this Court have joined Chief Judge Brown’s concurrence which, in my humble opinion, utterly ignores the basic thrust of the Supreme Court’s decisions in search and seizure, and totally rewrites the Fourth Amendment. Although a majority of the Court has not joined in the Chief Judge’s opinion, and it is therefore not the law of the Circuit, I feel impelled to respond to his opinion in this dissent. I will deal with each opinion separately.
I. ABANDONMENT
Judge Thornberry’s opinion accurately states the factual background of this case, and I do not think it necessary for me to reproduce the setting. I would merely emphasize the following: Prior to apprehending the two black suspects, the police had been observing them carrying the two briefcases, and there can be no question that the police knew the briefcases were in the possession of the defendants when they were originally apprehended. Furthermore, in the course of the same dialogue that produced the last minute disclaimer of ownership, Colbert responded to police questioning about the briefcases with remarks such as, “I don’t have to show you anything.”
It is true, as Judge Thornberry states, that “one has no standing to complain of a search or seizure of property he has voluntarily abandoned.” The Supreme Court, however, has given little guidance as to the outer limits of this doctrine, and to date the High Court’s use of the doctrine has been limited to situations such as the search of an apartment or hotel room which the defendant has unequivocally vacated, leading to the justifiable conclusion that he has surrendered his expectation of privacy in the premises, e. g., Abel v. United States, 1960, 362 U.S. 217, 80 S.Ct. 683, 4 L.Ed.2d 668, or the search for items discarded or left in plain view on an open field, e. g., Hester v. United States, 1924, 265 U.S. 57, 44 S.Ct. 445, 68 L.Ed. 898. The majority’s extension of this doctrine today to a situation of an equivocal verbal disclaimer in the face of impending police discovery is unwarranted. See Mascólo, The Role of Abandonment in the Law of Search and Seizure: An Application of Misdirected Emphasis, 20 Buff.L.Rev. 399 (1971).
The majority quite properly states as its test that, “abandonment is primarily a question of intent . . . and all relevant circumstances existing at the time of the alleged abandonment should be considered.” To state the law as such and then reach the conclusion that on the facts of this case Colbert and Reese voluntarily abandoned their briefcases is nothing short of incredible.
As stated earlier, the police had been watching the two men and without question knew Colbert and Reese were in possession of the “expensive looking briefcases” when stopped. There are statements throughout the record by Officer Trimm supporting this irrefutable fact, and the question that the majority deems crucial, “Are these your briefcases ?” must be regarded with that in mind. The first inkling of any “abandonment” came only after the appellants were apprehended by the state officers, arrested on wholly unrelated and somewhat dubious grounds, and given the Hobson’s choice of making either an incriminating admission or the obviously false disclaimer. Despite the fact that they had been arrested, the defendants were given no Miranda warnings prior to being asked about the briefcase. Even if the warnings were not required, their absence certainly added to the in terrorum atmosphere that existed at the time of the supposed “voluntary disclaimer.” See Brown v. Beto, 5 Cir. 1972, 468 F.2d 1284, (Oct. 27, 1972). Furthermore, the patently unbelievable disclaimer of possession was accompanied by statements from the appellants such as, “I don’t have to show you anything” and “I don’t have to say anything to you.” Such statements totally contradict the contention that this is a case of voluntary abandonment.
Allowing the statements of alleged disclaimer made under the duress of apprehension and the fear of inevitable discovery to constitute a waiver of constitutional rights is unprecedented. While abandonment may not require an instrument under seal or a notarial act, it should not be extracted from res gestae words, uttered in fear and without knowledge of legal effect. Abandonment must have some aspect of meaningful voluntariness, which is not, I think, generally found in the confines of a squad car during a period of custodial questioning.
Although the question of the volun-tariness of an abandonment has rarely been discussed in appellate opinions, the analogy to the cases involving voluntariness of consent to a search is extremely similar and the consent cases can provide much guidance. As with abandonment, if the trier of fact finds that consent has been voluntarily given to an otherwise invalid warrantless search, the aggrieved party has no standing to object in court to the search. The instant case is particularly close to the consent cases because unlike cases where an intent to abandon can be clearly inferred from the unequivocal act of discarding items or leaving them behind in vacated premises, the abandonment here was based primarily on a post-apprehension verbal denial of ownership. The record is clear that the officers knew full well that the briefcases belonged to Colbert and Reese, and for that reason the denial of ownership uttered in response to the officer’s question, is markedly similar to a statement of consent to a search. In both the consent and abandonment situations, the verbal waiver can not be held voluntary if, in fact, no real options were perceived. Bumper v. North Carolina, 1968, 391 U.S. 543, 88 S.Ct. 1788, 20 L.Ed.2d 797.
In United States v. Boukater, 5 Cir. 1969, 409 F.2d 537, this Court upheld the voluntariness of the consent given by the defendant to a search made after he was apprehended and after he had admitted his guilt to the crime for which the search was made. Recognizing that in cases where guilt had not been admitted a different result might obtain, Judge Thornberry found the law to be consistent with eases in other circuits:
“The thrust of those cases is that voluntary consent can rarely, if ever, be inferred where the suspect denies his guilt because a man who denies his guilt would not actually be willing for the police to search for contraband he knows will be discovered.”
409 F.2d at 539. See Channel v. United States, 9 Cir. 1960, 285 F.2d 217; Higgins v. United States, 1954, 93 U.S.App.D.C. 340, 209 F.2d 819. If the instant case does not fit under the rubric quoted above, it is difficult to imagine a ease that does.
Not only were defendants put to the Hobson’s choice of either admitting ownership of the incriminating evidence or denying ownership and allowing the search, there were no warnings of any kind given that would have informed defendants that had they not denied ownership, the police would not have been able to open the briefcases without first demonstrating to a magistrate that probable cause existed. I cannot believe that these defendants — who had already been followed by the police, stopped, •questioned in a somewhat harassing manner, and arrested on arguably pre-textual charges — could have expected the police to refrain from opening the briefcases had they responded affirmatively to the police’s query of ownership. What the majority calls a “voluntary abandonment” I would call simply a patently, unbelievable lie uttered in desperation.
The disclaimer was obviously prompted by the well-founded fear that the police were going to open the briefcases regardless of what answer was given; therefore why should they admit their crime? The fact that the trial court and the six Judges on this Court who have joined Chief Judge Brown’s opinion, had no trouble finding that the briefcases could have been opened by the police regardless of any “abandonment” indicates that my supposition as to defendants’ fears can hardly be considered groundless. Voluntariness implies that there was some meaningful alternative that could have been freely chosen and was not. Here, the predicament was clear: admit ownership and confess to the crime, or deny ownership and lose standing to challenge the otherwise illegal search and seizure. If the police did in fact have a right to search the briefcases, then the disclaimer is irrelevant. If the police did not have a right to search the briefcases absent disclaimer, as I believe was the case, the voluntariness of the disclaimer becomes crucial. The inescapable implication of the majority opinion is that had the defendants admitted ownership, the briefcases would not have been searched and therefore a meaningful choice did in fact exist for the two men.
In Perkins v. Henderson, 5 Cir. 1969, 418 F.2d 441, 442, which dealt with the voluntariness of a consent to a search, we said:
“To be valid, a waiver must be an intelligent relinquishment of a known right or privilege, Johnson v. Zerbst, 1938, 304 U.S. 458, 58 S.Ct. 1019, 82 L.Ed. 1461. A waiver cannot be valid unless the person knows that his permission may be freely and effectively withheld.”
See also, Bustamonte v. Schneckloth, 9 Cir. 1971, 448 F.2d 699, 700; Rosenthall v. Henderson, 6 Cir. 1968, 389 F.2d 514, 516. In Bumper v. North Carolina, supra, the Supreme Court suppressed evidence obtained during a search made of defendant’s premises under an invalid warrant. The government argued that even though the warrant was invalid, the inhabitants had, in fact, consented to the search. Rejecting this argument, the Court found that unless the person giving the consent could reasonably be attributed with the knowledge that consent could be withheld, the consent would be deemed involuntary and standing would not be lost. See also, Hoover v. Beto, 5 Cir. 1971, 439 F.2d 913.
It follows from these cases that a disclaimer of ownership, patently unbelievable to all who heard it, cannot be held voluntary when it is clear that the defendant had no idea that he could admit ownership and avoid the search from being made without a warrant. As with the consent cases, the police should be required to have some basis to believe the defendant understood the nature of the question and the options if they intend to rely on it later as a constitutional waiver.
Can it honestly be said that either Colbert or Reese should reasonably have known that had he admitted ownership the briefcases would not have been searched? The police knew the bags belonged to Colbert and Reese, Colbert and Reese knew the police knew, and only Colbert and Reese knew the bags contained guns. What answer should defendants have given to avoid this war-rantless search? It is not unreasonable to say that the police should not be able to rely on elicited waivers of this sort as a means of avoiding a magistrate’s determination. It is all too obvious that, in fact, the police were not relying on this disclaimer when they made the war-rantless search, and the fact that the government’s evidence at the suppression hearing was all directed towards proving probable cause and not abandonment bears this out.
A coerced lie cannot effect an abandonment. No one, but no one, could have believed that defendants were not in possession of the briefcases. To say that defendants knew they were waiving a constitutional right when they uttered these meaningless lies under the threat of imminent discovery is a fiction, pure and simple. This was not a case of physical abandonment — such as the vacation of premises or the discarding of an item in a trash can — where it is fair to say that the defendant knowingly relinquished any expectation of privacy he might have had in the item. Here, the “abandonment” consisted of an unknowing response to custodial interrogation. Are we to say that defendants should have known that despite all that had preceded the disclaimer, they still had a right to privacy in respect to the briefcases that the police would respect if the correct answer was given to the police query? If so, this directly contradicts the reasoning in Bumper. The knowing, voluntary quality necessary for verbal constitutional waivers under these circumstances was simply not present. Neither the police officers, the defendants, nor anyone on the streets of Birmingham that day could possibly have believed that anything was “abandoned,” voluntarily or otherwise, as a result of defendants’ lie.
Aside from the clearly erroneous factual conclusion reached by the majority here, I have other serious complaints with Judge Thornberry’s opinion.
A. No Fact-finding on Voluntariness
Not only has the majority erred in finding that the abandonment was voluntary, they have reached this conclusion without any factual finding having ever been made by the district court on this point. It is quite clear that throughout the suppression hearing the government’s evidence was directed solely towards proving probable cause. Whatever evidence was presented regarding the disclaimer was apparently given only to support the contention that the defendants were acting suspiciously. Evidence of the denial of ownership of briefcases that defendants clearly did own was invariably being presented as supportive of the suspicious atmosphere prior to the search. Indeed, at the end of the presentation of its case at the suppression hearing the government attorney stated to the court, “Your Honor, that is the Government’s evidence to support probable cause for the search.” Nowhere in the officer’s testimony was there any hint of the notion that the briefcases were searched because they had been abandoned. It was not until the very end of the suppression hearing that the government attorney stated, “We would offer another authority that we think the court should consider, that is, if the property had been abandoned by the defendant they have no standing.” This was the extent of the government’s submission on this issue.
The relevant factual findings by the district court in its memorandum opinion were:
“Defendant Colbert, who along with Reese had dropped his brief case when the officers approached, told the policemen he was a salesman but refused to say what he was selling or what wares he was carrying in his briefcase. Both Colbert and Reese subsequently disclaimed ownership or knowledge of the brief cases prior to the search and seizure of them.
it
“The search of the brief cases and the seizure of the guns found therein following the lawful arrest of the defendants met the criteria of Constitutional justification enumerated in Chimel v. California, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685 (1969).”
There was absolutely no factual finding on abandonment and certainly no finding on voluntariness.
If anything, the finding by the district court — that the search was necessary because the briefcases were still within the ambit of defendants’ control (as Chimel requires), — cuts against the abandonment theory here adopted by the majority In any event, no finding of fact was made, nor were facts developed, as to such questions as whether the defendants or even the police themselves ever considered the briefcases “abandoned” in any sense of the word, or whether the defendants reasonably could have been aware that they had any choice whatsoever when responding to the police inquiry. Most importantly, it cannot be overlooked that no finding was ever made by the district court on the ultimate factual question which the majority claims is dispositive of the case— the voluntariness of the abandonment.
The question of voluntariness of a constitutional waiver is a question of fact and this is well established. As we said in Landsdown v. United States, 5 Cir. 1965, 348 F.2d 405, 410:
“The question whether a defendant has consented to a search and seizure of his property is one of fact, to be determined in the first instance by the trial court.”
See also United States v. Elrod, 5 Cir. 1967, 441 F.2d 353, 355; Perkins v. Henderson, supra; Rosenthal v. Henderson, supra; Cipres v. United States, 9 Cir. 1965, 343 F.2d 95, 98. The majority, having ignored this settled procedural maxim, proceeds to make a factual finding on its own, and does so from a record that was not directed toward the specific issue decided. Wholly aside from this argument is the point made earlier, that the factual conclusion drawn from the facts that we do have in the record is totally unwarranted.
The burden of proof on the question of the voluntariness of a search and seizure waiver is squarely upon the government. See Bumper v. North Carolina, supra, 391 U.S. at 548-549, 88 S.Ct. 1788, 20 L.Ed.2d at 802; United States v. Pearson, 5 Cir. 1971, 448 F.2d 1207; United States v. Elrod, supra, 441 F.2d at 355; United States v. Payne, 9 Cir. 1970, 429 F.2d 169, 171; Rosenthal v. Henderson, supra, 389 F.2d at 516; United States v. De Larosa, 3 Cir. 1971, 450 F.2d 1057, 1066. Not only has the burden of proof been disregarded here, the Court has not even given the defendants an opportunity to develop facts in opposition to its sua sponte factual conclusion of volun-tariness. As long as the Court feels that abandonment is applicable on these facts, an application I seriously doubt, I would have at least remanded the case for factual findings on the question of voluntariness.
B. Standing and Jones v. United States
The majority opinion reads Jones v. United States, 1960, 362 U.S. 257, 80 S.Ct. 725, 4 L.Ed.2d 697, as consistent with the proposition that it is permissible to convict someone for a possessory crime while at the same time denying the person standing to challenge the incriminating search for the item possessed, if in fact the person had intentionally abandoned all expectations of privacy in the item or premises searched prior to the search. In this I agree. To hold otherwise would make it impossible ever to abandon the contraband involved in a possessory crime. But the majority takes the above exception to the basic rule of Jones (found in the long quote in Judge Thornberry’s opinion) too far.
In Jones, the police, in the process of a warrantless search of an apartment temporarily occupied but not rented by defendant, found narcotics in a bird’s nest located in an awning outside the window of the apartment. A short time before the search an officer standing outside the building had seen the defendant putting his hand on the awning. The Court of Appeals agreed with the district court that defendant did not have standing to challenge the warrant-less search because it was not defendant’s apartment that was being illegally searched. The Supreme Court reversed, finding that defendant should- not have Been denied standing. The Court reasoned :
“To establish ‘standing,’ Courts of Appeals have generally required that the movant claim either to have owned or possessed the seized property or to have had a substantial possessory interest in the premises searched. Since narcotics charges like those in the present indictment may be established through proof solely of possession of narcotics, a defendant seeking to comply with what has been the conventional standing requirement has been forced to allege facts the proof of which would tend, if indeed not be sufficient, to convict him. At the least, such a defendant has been placed in the criminally tendentious position of explaining his possession of the premises. He has been faced, not only with the chance that the allegations made on the motion to suppress may be used against him at the trial, although that they may is by no means an inevitable holding, but also with the encouragement that he perjure himself if he seeks to establish ‘standing’ while maintaining a defense to the charge of possession.”
362 U.S. at 261-262, 80 S.Ct. at 731, 4 L.Ed.2d at 702-703. Justice Frankfurter, speaking for the entire Court on this point, went on to recite these words, quoted in Judge Thornberry’s opinion, which I cannot avoid repeating:
“ . . .to hold that petitioner’s failure to acknowledge interest in the narcotics or the premises prevented his attack upon the search, would be to permit the Government to have the advantage of contradictory positions as a basis for conviction. Petitioner’s conviction flows from his possession of the narcotics at the time of the search. Yet the fruits of that search, upon which the conviction depends, were admitted into evidence on the ground that petitioner did not have possession of the narcotics at that time. The prosecution here thus subjected the defendant to the penalties meted out to one in lawless possession while refusing him the remedies designed for one in that situation. It is not consonant with the amenities, to put it mildly, of the administration of criminal justice to sanction such squarely contradictory assertions of power by the Government. The possession on the basis of which petitioner is to be and was convicted suffices to give him standing under any fair and rational conception of the requirements of Rule 41(e).”
362 U.S. at 263-264, 80 S.Ct. at 732, 4 L.Ed.2d at 703-704. Since Jones was being charged with having possessed the items at the moment the police apprehended him, the Court wisely reasoned that to forbid him to admit possession for Fourth Amendment purposes while at the same time convicting him for possession was fatally inconsistent.
The proposition that a defendant cannot be -convicted of a possessory crime, while at the same time be deemed “not in possession” for Fourth Amendment purposes has been consistently followed since Jones. See United States v. Love, 5 Cir. 1973, 470 F.2d 490 (Jan. 9, 1973); Williams v. United States, 5 Cir. 1969, 412 F.2d 729, 731; United States v. Gargiso, 2 Cir. 1972, 456 F.2d 584, 586 n. 3; Velasquez v. Rhay, 9 Cir. 1969, 408 F.2d 9, 10; Niro v. United States, 1 Cir. 1968, 388 F.2d 535, 537. The conviction here came for possession of the briefcases at the time defendants were apprehended. The Hobson’s choice given to the defendants by the police’s question is indistinguishable from the dilemma faced by the defendant at the suppression hearing that was condemned in Jones. In essence the government is saying, “the defendants had possession of the guns at the time of the apprehension for purposes of conviction but the defendants did not have possession at the time of the search for the purposes of standing.” The only way to get around Jones is to say, as the majority does, that between the time of apprehension and the time of search the cases were voluntarily abandoned. Since I refuse to go along with the majority’s finding that the disclaimer — made as it was under custodial conditions, with no knowledge of an alternative, and entirely unbelieveable to everyone who heard it — -was in any sense meaningful, I believe that the standing rationale of Jones is fully applicable.
C. Edwards and Lurie
The majority cites two cases to support its conclusion that the abandonment here was voluntary as a matter of law. Edwards v. United States, 5 Cir. 1971, 441 F.2d 749, is the primary authority for the majority’s holding. In Edwards, a panel of this Court upheld a police search of a car that was left on the highway by a fleeing suspect after a high speed chase. The suspects had simply stopped the car and fled, leaving the car behind, right in the hands of the pursuing police. That case can be distinguished on the facts. Abandonment can be found because the defendants unequivocably left the car on the road, engine running and lights still on. The court reasoned that by leaving the ear in this fashion defendants had knowingly relinquished any expectation of privacy they might otherwise have had in the car. Unlike the instant case, abandonment was not based on an unknowing verbal waiver that was precipitated by fear of inevitable and imminent discovery.
The court in Edwards did recognize that not every abandonment should be deemed voluntary. “The circumstances here were not sufficiently compelling to make involuntary the choice to abandon his car to the pursuing officer.” 441 F.2d at 753. It is hard to discern circumstances more compelling than existed in the instant case. Unless Edwards and the majority opinion in this case are read as saying all “abandonments” are voluntary per se, I do not see why either opinion even bothers discussing the problems under the rubric of voluntariness.
Even if Edwards could not be distinguished on its facts, it should not be followed for two additional reasons. First, although Judge Roney does not explicitly deal with this problem in his opinion in Edwards, it seems clear that the suppression hearing held by the district court in that case was at least in part directed towards an abandonment rationale. The panel quotes the officer’s testimony that he conducted the search, “because he [defendant] abandoned the car. . . . ” 441 F.2d at 751. There is no indication in the panel opinion as to whether the district court made any factual findings as to abandonment. In the instant case, where the facts are at best equivocal and the government’s evidence below was clearly directed at proving probable cause and not abandonment, the factual findings were clearly inadequate for us to make a voluntariness determination.
Secondly, insofar as the Court chooses to follow Edwards rather than Judge Thornberry’s opinion in Williams, I must disagree. The standing discussion in the Edwards opinion was based entirely on the standing cases involving vacated rooms and other similar situations, and it cited no authority for its finding that abandonment in the face of imminent police discovery can be voluntary. Furthermore, the search in Edwards, as that court explicitly found, was justified under Chambers v. Maroney, 1970, 399 U.S. 42, 90 S.Ct. 1975, 26 L.Ed.2d 419, regardless of any finding of abandonment. In short, the abandonment ground in Edwards was not only applied incorrectly, but was totally unnecessary to the court’s decision. I think this Court errs in making an en banc application of Edwards to the facts of this case.
The second case cited by the majority on this point is Lurie v. Oberhauser, 9 Cir. 1970, 431 F.2d 330. There the Ninth Circuit found a voluntary abandonment where the defendant refused to identify a suitcase containing contraband as his own even though he had earlier been seen with the suitcase and a claim check for the case had been found in his possession. The facts, although somewhat less compelling, are admittedly similar to the facts in the in'stant case. Lurie, however, can be distinguished because in that case “the District Court held that appellants abandoned the incriminating evidence and therefore have no standing to object to its search at the police station.” 431 F.2d at 333 [emphasis added] . Here, this factual finding was neither made nor addressed by the district court.
In any event, I feel Judge Ely’s dissent in Lurie is more convincing and a better statement of the applicable law. He said:
“I cannot, however, agree with the decision of my Brothers that the appellants have forfeited all right to challenge the admittedly unconstitutional search of their property. The majority reasons that the appellants have no sufficient standing to make the challenge because they did, in effect, abandon their property by disclaiming its ownership. I cannot accept that rationale, for, as I see it, the appellants really had no choice, when met with the questions put to them without adequate advance warning of their rights, except to utter their disclaimers of ownership or to sacrifice the right guaranteed to them by the Fifth Amendment. See Jones v. United States, 362 U.S. 257, 80 S.Ct. 725, 4 L.Ed.2d 697 (1960), wherein the Supreme Court specifically limited its opinion to crimes for which mere possession of contraband is sufficient for conviction (e. g. narcotics). I see no compelling distinction between that situation and that here involved, especially since the California appellate court, in reviewing appellants’ original convictions, remarked that mere possession of recently stolen property is sufficient for conviction when accompanied by ‘only * * * slight corroboration.’ People v. Lurie, 257 Cal.App.2d 98, 102, 64 Cal.Rptr. 637, 641 (1968).”
431 F.2d at 334.
In summary, I strongly believe that the majority has made an unwarranted and unprecedented expansion of the abandonment doctrine by applying it to the facts of this case, particularly in light of the total absence of factual findings on the issue of voluntariness by the trial court. To whittle away the Fourth Amendment in this fashion can only result in its eventual demise.
II.
Chief Judge Brown’s concurring opinion seems to say this: “Defendants were wearing hippie clothes, carried briefcases, and were seen discarding shotgun shells. The police therefore had a reasonable ground to believe that the briefcases contained guns.” It was therefore reasonable to search the briefcases without a warrant even though the defendants were safely confined in the police car and well beyond the permissible range of a Chimel search. I find this approach not only dangerous but also in flat contradiction of virtually every statement made by the Supreme Court on search and seizure in the last ten years.
The opinion says that between the shells and the “hippie” dress the officers “could reasonably conclude that something was rotten in Denmark, . there was reason to believe that the shells and the briefcases were not unrelated.” And finally, “the decision to search was a reasonable one in the classic statement of the rule.” Since the concurrence fails to cite any authority, it is difficult to discern just what rule it relied upon to uphold this warrantless search. From the language of the opinion I can perceive two possible rationales that are thought to justify finding a “reasonable decision” to search.
First, if the opinion is saying that the search was justified on the basis of reasonable suspicion, short of probable cause, the only viable legal rationale for upholding the warrantless search would be the need to protect the officer’s safety. E. g., Terry v. Ohio, 1968, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889; Adams v. Williams, 1972, 407 U.S. 143, 92 S.Ct. 1921, 32 L.Ed.2d 612. See also Chimel v. California, supra. Since the opening of the briefcases occurred while the men were safely in the confines of the police car, the case could hardly fit within the limited pat-down allowed in Terry or Adams, the search cannot stand up as one made for weapons on less than probable cause. The opinion specifically denies that it is based on search incident to arrest, see Chimel, supra, so I need not repeat the refutation of this argument that appears in my opinion for the panel. 454 F.2d 801.
Secondly, the concurrence could be read as saying that there was probable cause for the search and that the search was therefore justified. This is erroneous, first because there was no probable cause and secondly, even if there was, a warrant could and should have been obtained.
I have serious doubts as to whether, under any of the Supreme Court cases, there was probable cause to search these briefcases. There are, as Chief Judge Brown states, some grounds for saying the defendants’ behavior was suspicious. He points to the “hippie-type” dress of defendants, the discarded shells, the expensive briefcases, and the suspiciousness of the defendants’ behavior generally. It is important to remember that the police did not know Colbert and Reese, had no previous reason to be suspicious of them, and had absolutely no information of any sort (other than the aforementioned observations) at the time of the search, that would make them believe the briefcases contained contraband.
I realize that the dress of judges tends toward the conservative — white shirts and dark suits. I am shocked, however, that the Chief Judge can find, as a matter of law, that “hippie dress” is probative of illegal activity. As long as I am called upon to enter this dialogue, I must dissent to this line of reasoning. I do not subscribe to the thesis that every contemporary sartorial or tonsorial heterodoxy gives the cop on the beat the right to search, as the Chief Judge implies. Today we say that “hippie dress” is evidentiary of probable cause. Tomorrow, perhaps we will say that green patent-leather shoes, cerise shirts, or even bow ties, because of their nonconformity to prevailing norms, are also probative. I fail to see any limits to the dangerous implication in the Chief Judge’s opinion. The fact that the police saw these men carrying briefcases and saw one of them discard something, later found to be a few shotgun shells does not, in my opinion, constitute probable cause to search the briefcases. A mere suspicion, even if valid, does not necessarily constitute probable cause. See Giorde-nello v. United States, 1958, 357 U.S. 480, 78 S.Ct. 1245, 2 L.Ed.2d 1503; Brinegar v. United States, 1949, 338 U.S. 160, 69 S.Ct. 1302, 93 L.Ed.2d 1879; Beck v. Ohio, 1964, 379 U.S. 89, 85 S.Ct. 223, 13 L.Ed.2d 142.
Assuming arguendo that there was probable cause, the more important problem is that the concurrence totally ignores the fact that under every Supreme Court reading of the Fourth Amendment, a warrant is still required before a search can be made unless exigencies make it impractical for the police to get one. It is not for the police, or for the court after the fact, to assess the existence vel non of probable cause. Rather, the law requires that absent “exigent circumstances” probable cause is to be determined by a detached, neutral magistrate. Prior to reading the Chief Judge’s opinion I would have thought that this proposition was too well-established to dispute.. The following excerpt from Judge Godbold’s opinion in United States v. Resnick, 5 Cir. 1972, 455 F.2d 1127, 1131, amply sets out the basic rule;
“In United States v. Pearson, 448 F.2d 1207 (5th Cir. 1971), this Circuit noted the Supreme Court’s emphasis upon the disfavor attached to warrant-less searches expressed in Coolidge v. New Hampshire, 403 U.S. 443, 91 S.Ct. 2022, 29 L.Ed.2d 564 (1971), quoting from that case the following:
‘[T]he most basic constitutional rule in this area is that “searches •conducted outside the judicial process, without prior approval by judge or magistrate, are per se unreasonable under the Fourth Amendment — subject only to a few specifically established and well-delineated exceptions.” The exceptions are “jealously and carefully drawn,” and there must be “a showing by those who seek exemption * * * that the exigencies of the situation made that course imperative.” “[T]he burden is on those seeking the exemption to show the need for it.”' (Footnotes omitted.)
448 F.2d at 1211 quoting 403 U.S. at 454, 91 S.Ct. 2022, 29 L.Ed.2d at 576. In United States v. Sokolow, 450 F.2d 324 (5th Cir. 1971) and United States v. Drew, 451 F.2d 230 (5 Cir. 1971), we have again recognized the stringent burden upon the government of bringing itself within one of the narrowly-drawn, exceptions and of showing that the exigencies of the situation made it imperative to proceed ‘outside the judicial process, without prior approval by judge or magistrate.’ ”
See generally Note, 9 Houston Law Rev. 140 (1971).
The concurring opinion makes no pretense of relying explicitly on any of the recognized exigent circumstances exceptions to the warrant requirement. If the opinion says there were exigent circumstances, it simply does not accord with the facts. At the time the briefcases were searched, the defendants were safely in the police car, well removed from the cases. Had the two presumably-armed policemen still feared for their safety, they could have inter alia, (a) handcuffed the already arrested defendants, (b) locked the car doors, or (e) placed the briefcases in the trunk of the police car. The exigencies of the circumstances in no way required the added invasion of privacy that occurred here when the officers opened and searched the closed briefcases. In Chimel, the Supreme Court limited the permissible scope of warrantless searches as follows:
“When an arrest is made, it is reasonable for the arresting officer to search the person arrested in order to remove any weapons that the latter might seek to use in order to resist arrest or effect his escape. Otherwise, the officer’s safety might well be endangered, and the arrest itself frustrated. In addition, it is entirely reasonable for the arresting officer to search for and seize any evidence on the arrestee’s person in order to prevent its concealment or destruction. And the area into which an arrestee might reach in order to grab a weapon or evidentiary items must, of course, be governed by a like rule. .
There is ample justification, therefore, for a search of the arrestee’s person and the area ‘within his immediate control’ — construing that phrase to mean the area from within which he might gain possession of a weapon or destructible evidence.”
395 U.S. at 762-763, 89 S.Ct. at 2040.
Nor does this search fit within the so-called “car exception” to the warrant requirement. First, this was not a car in danger of being moved; rather, it was briefcases that could have easily been seized and brought before a magistrate as required by Coolidge v. New Hampshire in these situations, As we said in United States v. Brett, 5 Cir. 1969, 412 F.2d 401, 406:
“The fact that the police have custody of a prisoner’s property for the purpose of protecting it while he is incarcerated does not alone constitute a basis for an exception to the requirement of a search warrant. Preston v. United States, 376 U.S. 364, 84 S.Ct. 881, 11 L.Ed.2d 777. U
“We are not prepared to say that an accused whose effects are held by the police for safekeeping has, by the single fact alone of the police custody of the property, surrendered his expectations of the privacy of those effects.”
Secondly, unlike Chambers y. Maroney, supra, and other cases uphplding warrantless car searches under exigent circumstances, the existence of probable cause was here less than obvious, cf. Preston v. United States, supra. In any event, under Coolidge, the necessity for avoiding a magistrate’s determination of probable cause was simply not present. In short, “exigent circumstances” means there were practical reasons for not waiting to get a warrant. Here, where the defendants had already been arrested for draft card violations and were already in custody, there was no reason at all for not waiting.
Finally, if the Chief Judge’s opinion is read as saying that under the totality of circumstances the warrantless search was reasonable, even if not easily categorized under any of the recognized exceptions, I cannot agree. First, as nice as a rule of this type sounds, it is not the established test. If every search made with probable cause that turns up something incriminating is deemed reasonable ex post facto, why bother with the warrant requirement at all? Again, I fail to see the limits to this gestalt approach to the Fourth Amendment.
In addition, I do not think the Birmingham police acted reasonably here. Two black men in “hippie garb” were noticed by police on the streets of Birmingham, followed, and eventually stopped and questioned. They were arrested for failing to carry their draft cards, despite the fact that there was evidence that at least one of them protested that he was a veteran. After this arrest, the policemen immediately opened the “expensive-looking” briefcases which had obviously intrigued the officers from the moment the defendants were first seen carrying them. Unlike the Chief Judge, I am not prepared to consider what was eventually found as a result of the warrantless search to be a factor in determining the reasonableness of the search itself. This is totally inconsistent with prior law, and as with the rest of the concurring opinion, it seems to regard the Fourth Amendment as some minor nuisance.
If the police behavior in this case is considered “reasonable” under the Fourth Amendment, which insures “the right of the people to be secure in their persons, houses, papers, and effects.” I am troubled as to the future of the right to privacy in this country.
The on-the-spot judgment of an officer is subject to constitutional scrutiny, and his badge does not endow him with the power or right to abrogate the Fourth Amendment. I refuse, despite the im-portunings of our time, to desecrate the Fourth Amendment in the name of “law and order” and in order to redress people dressed in hippie clothes on the streets of Birmingham. In the name of “rottenness in Denmark” we have no right to do away with warrants and the other protections that our founding fathers put into the Constitution. I prefer hippies surreptitiously dropping shotgun shells to a police state where every “prudent” whim of a policeman becomes a constitutional nemesis.
Chief Judge Brown, in a recent opinion finding that the defendant’s consent to a warrantless search was involuntary and therefore the search invalid, stated:
“The criminal goes free, if he must, but it is the law that sets him free. Nothing can destroy a Government more quickly than its failure to observe its own laws, or worse, its disregard of the charter of its own existence.”
United States v. Elrod, supra, 441 F.2d at 356 (citing Mapp v. Ohio [367 U.S. 643, 81 S.Ct. 1684, 6 L.Ed. 1081]). Many will rue the day that they bartered away the Fourth Amendment in a surface attempt to make our streets safe. I refuse to join my brothers in this ill-fated endeavor.
. United States v. Colbert, 5th Cir. 1972, 454 F.2d 801.
. See generally Coolidge v. New Hampshire, 1971, 403 U.S. 443, 91 S.Ct. 2022, 29 L.Ed.2d 564.
. Rulo 41. Search and Seizure
* * :!: * *
(e) Motion for Return of Property and to Suppress Evidence. - A person aggrieved by an unlawful searcli and seizure may move the district court for the district in which the property was seized for the róturn of the property and to suppress for the use as evidence anything so obtained on the ground that (1) the property was illegally seized without warrant * * *.
. Edwards, decided two years after Williams, did not cite or refer to Williams.
. The panel opinion described it in this way:
. “Then Officer Trimm requested that each defendant produce his draft card. When both defendants denied possessing Selective Service cards, they were placed under arrest and charged with violating 50 U.S.C.A.App. § 462. As the defendants were being placed in the patrol car Officer Pitts noticed one of the defendants withdraw a number of shotgun shells from his pocket and throw them on the ground.”
The defendants do not challenge the factual accuracy of the Government’s brief to the panel (p. 3) :
“As they were being placed in the car, one of the officers observed one of the defendants throwing some shotgun shells to the ground. Defense counsel clearly established that the shells were found prior to the search of the briefcases.”
Nor do they as to the supplemental brief en banc (p. 3) :
“As defendants were being placed in the patrol car, Reese threw some shotgun shells to the ground. Thereafter, while defendants were sitting in the car, the officers returned to the briefcases and opened them, finding a shotgun in each.”
. The Court casts this in terms of search and seizure abandonment. I think it is easier, better and more realistic to avoid the intricate nuances of this standing concept by treating this activity for what it really is — strong, immediate evidence of conduct which may properly give rise to a conclusion that a crime is taking place.
. The Court has chosen not to discuss directly the grounds for invalidating the search relied on by the original panel, in particular, the failure of the search to qualify under any of the “exigent circumstances” exceptions to the warrant requirement. I therefore do not here confront these points directly. I adhere to my original opinion for the panel, reported at 454 F.2d 801.
. There is evidence in the record that Reese was a veteran, and in any event, the two men were never tried for any draft violation.
. In Fletcher v. Wainwright, 5 Cir. 1968, 399 F.2d 62, 64, Judge Thornberry, in reversing a district court’s denial of habeas relief found that there could be no voluntary abandonment where the items seized were thrown out of a window following an illegal police entry. Judge Thornberry said, “In such a situation it cannot be said that there was a ‘voluntary abandonment.’ ” Although that ease involved abandonment precipitated by illegal police behavior, I fail to see how the element of voluntariness is any different in the case now before us. In both instances the defendant was unwittingly forced into the alleged “abandonment” by the police.
. The fact that six members of this Court are apparently able to adopt both positions at the same time is sharply indicative of the overzealousness with which my brothers inter the Fourth Amendment.
. It is also clear that this burden is a heavy one. See United States v. DeLaRosa, supra; United States v. Robinson, 6 Cir. 1970, 430 F.2d 1141, 1143. It is usually framed in terms of the need for the waiver to be knowing and unequivocal and shown by clear and convincing evidence. See Bumper v. North Carolina, supra; Phelper v. Decker, 5 Cir. 1968, 401 F.2d 232, 236; Perkins v. Henderson, supra; Bustamonte v. Schneckloth, supra; see also Hoover v. Beto, 5 Cir. 1971, 439 F.2d 913, 919-20; United States v. Berkowitz, 1 Cir.1970, 429 F.2d 921, 925. Additionally, there has always been a strong presumption against the waiver of constitutional rights. Brookhart v. Janis, 1966, 384 U.S. 1, 86 S.Ct. 1245, 16 L.Ed.2d 314. The Second Circuit, adopting the view of the New York Court of Appeals, has stated the test for abandonment as follows:
“ ‘The abandonment of property is the relinquishing of all title, possession, or claim to or of it — a virtual intentional throwing away of it. It is not presumed. Proof supporting it must be direct or affirmative or reasonably beget the exclusive inference of the throwing away.’ Foulke v. N. Y. Consol. R. R. Co., 228 N.Y. 269, 273, 127 N.E. 237, 238, 9 A.L.R. 1384 (1920).”
United States v. Cowan, 2 Cir. 1968, 396 F.2d 83, 87.
. Indeed, my colleagues even voted to deny oral argument for the en banc reconsideration of this case.
. The Supreme Court did not even question the proposition that the defendant maintained a sufficient possessory interest in the narcotics that had been left sitting in the bird’s nest outside the apartment window.
. In Cash v. Williams, 6 Cir. 1972, 455 F.2d 1227, 1229, the court faced a similar problem.
“The state contends that appellant is without standing to challenge the search on the ground that he disclaimed any interest in the articles seized.
We cannot agree with this contention. In order to establish standing to contest a search, a defendant must show that he owned or possessed the seized property or that he had a possessory interest in or was present at the premises searched. An additional consideration arises from the fact that when the crime charged is one of possession, a defendant will not be forced to sacrifice his fifth amendment rights in order to assert his fourth amendment rights. Jones v. United States, 362 U.S. 257, 263-264, 80 S.Ct. 725, 4 L.Ed.2d 697 (1960). See also: Glisson v. United States, 406 F.2d 423, 427 (5th Cir. 1969); Weed v. United States, 340 F.2d 827, 829 (10th Cir. 1965); United States v. Eldridge, 302 F.2d 463, 464-465 (4th Cir. 1962); United States v. Lewis, 270 F.Supp. 807, 809 (S.D.N.Y.1967), aff’d, 392 F.2d 377 (2d Cir. 1968).”
. The disclaimer in Lurie came after Miranda warnings had been given and was not as clearly frivolous as were the disclaimers made by Colbert and Reese. In addition, the defendants in Imrie were arrested for the very crime for which the search was conducted, and there was no question of probable cause existing for the search of the suitcase. The probable cause in the instant case is close at best, see Part II, infra.
. Since “the rule” whatever it may be is apparently enunciated for the first time in the Chief Judge’s opinion, without a single citation to support or explain it, it is difficult to refute the claim that these facts constitute the “classic statement.”
. The record reveals that the defendants were given a pat-down prior to being placed in the squad car.
. There is some testimony in the record that one of the officers initially thought that Reese resembled another man wanted for a “serious” charge that the officer could not remember.
. The only evidence whatsoever in the record relating to the way defendants were dressed is the following testimony of Officer Trimm:
“Mr. Reese had a black hat, I would say a Spanish-wide brim type hat and more or less what I would call hippie type clothes. And Mr. Colbert had a black knee-length raincoat on over dark pants. I believe he had an Afro haircut and I don’t know what type shoes they had on.”
. In a recent opinion rejecting the government’s argument that a warrantless search was “reasonable,” Judge Morgan wrote:
It is, of course, an elementary constitutional principle that police officers must go before a neutral government official and obtain a search warrant before intruding into a private dwelling. This requirement attaches even though the facts within the knowledge of the police officers would have authorized the issuance of a warrant.
“The point of the Fourth Amendment, which often is not grasped by zealous officers, is not that it denies law enforcement the support of the usual inferences which reasonable men draw from evidence. Its protection consists in requiring that those inferences be drawn by a neutral and detached magistrate instead of being judged by the officer engaged in the often competitive enterprise of ferreting out crime. Any assumption that evidence sufficient to support a magistrate’s disinterested determination to issue a search warrant will justify the officers in making a search without a warrant would reduce the Amendment to a nullity and leave the people’s homes secure only in the discretion of police officers. Crime, even in the privacy of one’s own quarters, is, of course, of grave concern to society, and the law allows such crime to be reached on proper showing. The right of officers to thrust themselves into a home is also a grave concern, not only to the individual but to a society which chooses to dwell in reasonable security and freedom from surveillance. When the right of privacy must reasonably yield to the right of search is, as a rule, to be decided by a judicial officer, not by a policeman or Government enforcement agent.”
Johnson v. United States, 1948, 333 U.S. 10 at 13-14, 68 S.Ct. 367 at 369, 92 L.Ed. 436; accord Chimel v. California, 1969, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685; Katz v. United States, 1967, 389 U.S. 347, 88 S.Ct. 507, 19 L.Ed.2d 576; Camara v. Municipal Court, 1967, 387 U.S. 523, 87 S.Ct. 1727, 18 L.Ed .2d 930; Schmerber v. California, 1966, 384 U.S. 757, 86 S.Ct. 1826, 16 L.Ed.2d 908. If evidence obtained from a warrantless search is proffered at trial, the burden is on the prosecution to come within some exception to the warrant requirement. United States v. Jeffers, 1951, 342 U.S. 48, 72 S.Ct. 93, 96 L.Ed. 59; United States v. Edwards, 5 Cir. 1971, 441 F.2d 749; Williams v. United States, 5 Cir. 1967, 382 F.2d 48; see Johnson v. United States, supra. In the case at hand, we have carefully reviewed the record and there is simply no plausible explanation as to why customs officials failed to go before a magistrate and obtain a search -warrant. The government does state in its brief that the circumstances surrounding the raid on the Scheffer house were such that there was not enough time to secure a search warrant. This statement seems incredible, however, in view of the fact that customs agents, acting through the cooperating smugglers, actually planned the cocaine transfer and could have controlled the time at which it took place. Slight delay or the inconvenience of presenting facts to a magistrate are not sufficient circumstances to bypass the warrant requirement. Johnson v. United States, supra.
United States v. Sheffer, 5 Cir. 1972, 463 F.2d 567, 574-575 [Emphasis added.]
. Cf. United States v. Preston, 6 Cir. 1972, 468 F.2d 1007, where Judge Edwards applied a totality-reasonableness approach in a situation where this approach was arguably justified.
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ST. PAUL FIRE AND MARINE INSURANCE COMPANY and Boston Insurance Company, Plaintiffs, v. COMMODITY CREDIT CORPORATION et al., Defendants. UNITED STATES of America, Counter Plaintiff-Appellant, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY and Boston Insurance Company, Counter Defendants-Appellees.
No. 72-2237.
United States Court of Appeals, Fifth Circuit.
Feb. 15, 1973.
Frank McCown, U. S. Atty., Fort Worth, Tex., Walter H. Fleischer, Judith S. Feigin, Dept, of Justice, Washington, D. C., for appellant.
Marian Mayer Berkett, New Orleans, La., for Boston Ins. Co.
Bernard P. Evans, Donald M. Hunt, Lubbock, Tex., for St. Paul Fire & Marine Ins. Co.
James H. Milam, Lubbock, Tex., for 1st Nat. Bank.
Charles B. Jones, Lubbock, Tex., for Cochran.
Before GODBOLD, DYER and CLARK, Circuit Judges.
GODBOLD, Circuit Judge:
St. Paul Fire & Marine Insurance Co. and Boston Insurance Co. sued Commodity Credit Corporation (CCC) seeking a declaration of no liability on three bonds assuring performance by United Farmers Marketing Association (UFMA) of its obligations under a 1963 Cotton Cooperative Loan Agreement executed between UFMA and CCC. St. Paul and Boston were sureties on the three bonds; UFMA, an agricultural cooperative organized in Lubbock, Texas, was the principal; and CCC was the obligee. CCC counterclaimed for $265,000, the aggregate face amount of the three bonds, charging that UFMA’s failure to redeem 3,421 bales of cotton, released to UFMA under trust receipts, was a breach of the 1963 Agreement. By answer St. Paul and Boston denied liability on the principal grounds that they guaranteed only performance of the 1963 Loan Agreement and that UFMA’s failure to redeem was a breach of the trust receipt agreement, not the 1963 Loan Agreement. The sureties also interposed additional so-called “affirmative” defenses. The District Court found that sureties guaranteed only performance of the 1963 Loan Agreement, that UFMA's failure to redeem was a breach of the trust receipt agreement under which the bales were released to UFMA, and that the rights and duties created by the trust receipt agreement were not incorporated by reference into the 1963 Loan Agreement. Since it found the sureties’ primary defense a good one, the court did not consider the “affirmative” defenses. Accordingly, the District Court ruled that CCC take nothing on the counterclaim and granted sureties their requested declaratory relief. We find that UFMA’s failure to redeem the cotton was a breach of the 1963 Loan Agreement, and reverse and remand for further proceedings.
A brief description of the cotton price support scheme is in order. We preface our remarks, however, with this caveat. Our description is not intended to be exhaustive. We confine our discussion to those aspects of the price support scheme revealed in the record, drawing also on explanations and references in the government’s brief to which defendant sureties have not objected.
The Commodity Credit Corporation is an administrative agency of the United States created by Congress “[f]or the purpose of stabilizing, supporting, and protecting farm income and prices, of assisting in the maintenance of balanced and adequate supplies of agricultural commodities . . . and of facilitating the orderly distribution of agricultural commodities.” 15 U.S.C. § 714. See Rainwater v. U. S., 356 U.S. 590, 591, 78 S.Ct. 946, 2 L.Ed.2d 996, 998 (1958). As pertinent to this appeal, CCC effectuates cotton price supports by making nonrecourse loans to individual cotton producers in accordance with 7 U.S.C. § 1425, taking cotton as security. The loan-value is geared to price schedules set out in 7 U.S.C. § 1441. The cotton is stored in approved commercial warehouses, which issue warehouse receipts agaiiist the bales. When the loan matures the farmer may elect to pay the debt and redeem the cotton. Alternatively, since CCC’s only recourse is against the collateral, the farmer may allow the cotton to pass to CCC upon loan maturity and retain his loan proceeds. The government explains that if cotton prices rise above the loan value, the farmer usually will market the cotton and realize the profit. If cotton prices fall, he simply does not redeem the cotton. Thus the farmer is assured as a minimum the loan value for his cotton.
Individual cotton producers may combine their resources tc enhance profits by forming marketing associations as authorized by the Capper-Volstead Act § 1, 7 U.S.C. § 291. Recognizing the value to the individual producer of these marketing associations, CCC, pursuant to its regulatory authority, will make price support loans to an association. 7 C.F. R. § 1427.1375 (1963). For example, an individual producer may elect to tender to the association his warehouse receipts, which evidence cotton stored in approved commercial warehouses, and the association will promptly pay the producer for his receipts the loan value of his cotton. See id. § 1427.1375(c). The association then uses the receipts as collateral for CCC-sponsored loans. As in the case of individual producers the loan is nonrecourse, so the association may elect to allow the debt to mature without redeeming the collateral. If cotton prices rise, the cooperative may liquidate the debt and redeem and market the cotton. Profits are distributed to member producers on a cooperative basis.
As the parties point out, until maturity of the loan the individual producer, or the association in appropriate cases, has an equity interest in the. cotton that secures the loan. If cotton prices are above the loan value, the producer’s equity interest will roughly equal the difference between the loan principal plus interest and the cotton price. CCC regulations allow the producer to sell this equity interest without first redeeming the cotton. See 7 C.F.R. § 1427.1373 (1963). For example, the producer may sell his equity by obtaining a Form AA, which the equity purchaser executes and returns to CCC. CCC then mails the appropriate warehouse receipts to a designated bank, which releases them to the equity purchaser upon payment of the loan principal plus interest. By this scheme a producer may in effect sell his cotton without first liquidating the loan. Thus a producer’s inability to liquidate the loan will not prevent his realizing a gain from rising cotton prices.
The association may also sell its equity interest, although the mechanics for sale by it are not nearly so detailed in the regulations as the mechanics for sale by the individual producer. The pertinent regulation provides only:
[M] embers of . associations may act collectively in obtaining loans. The loan rates under this agreement will be the same as the loan rates to individual producers, and eligibility requirements with respect to the cotton and the producers tendering the cotton to the association and other loan provisions will he similar to those for loans to individual producers.
7 C.F.R. § 1427.1375 (1963) (emphasis added). The sale of equity interest by the association was, at least in 1963-64, accomplished in practice by use of trust receipts. CCC would release in trust to the association the warehouse receipts held as loan collateral. The terms of the trust were set out in the trust receipts, which provided in pertinent part:
[T]he [association] agrees to hold said warehouse receipts and any proceeds therefrom in trust for Commodity Credit Corporation and further agrees to return said warehouse receipts to the bank within 15 days after the date hereof (or such extension of time as may be granted by the Director of the New Orleans ASCS Commodity Office), unless the [association] has redeemed the cotton represented by said warehouse receipts in accordance with Section 12 of said Loan Agreement.
The intention of this arrangement is to protect and preserve, unimpaired, the lien of Commodity Credit Corporation on said warehouse receipts as security for the obligations of the [association] under said loan agreement.
The proceeds realized by the association on sale of the warehouse receipts would be forwarded to CCC to liquidate the loan and relieve the collateral from trust. As with the individual producer, then, the association could sell cotton collateral without first liquidating the loan. The major difference between sale by an individual producer and sale by an association was that the association acquired actual possession of warehouse receipts prior to sale, whereas the individual producer did not. Notably, this actual possession of receipts was the seed of this lawsuit.
Against the backdrop of the price support scheme, we set out the facts of this case. CCC and United Farmers Marketing Association (UFMA) in 1963 executed a Cotton Cooperative Loan Agreement which permitted UFMA to obtain CCC-sponsored loans by tendering to CCC the warehouse receipts of co-op members. Section 12 of the Agreement is central to this appeal. Tracking the regulatory scheme, § 12 specified UFMA’s right to redeem collateral prior to loan maturity:
12. Redemption of Loan Collateral. Prior to maturity of the loan indebtedness as provided in section 17, the Association shall have the right to redeem all or any part of the cotton upon payment to CCC of the loan indebtedness with respect to such cotton as set forth in section 5 hereof, less a fee of 15 cents per bale or accrued interest, whichever is less ....
Section 12 further set out the association’s obligations in the event it sold its equity interest prior to redemption of the collateral:
If the Association sells or permits its members to sell their interest in any cotton pledged to CCC hereunder, it shall redeem such cotton within 15 days from the date of such sale.
Finally, § 12 concludes by referring to the trust receipt method of effecting sale of the association’s equity interest:
CCC may, if it deems it desirable, release warehouse receipts to the Association against trust receipts acceptable to CCC.
Section 10 of the Agreement required the association to furnish a bond guaranteeing that the association would fully discharge all its obligations under the Agreement. Accordingly, UFMA secured from St. Paul and Boston broadly worded performance bonds in the aggregate face amount of $265,000. These bonds were substantively identical and provided in pertinent part:
WHEREAS, the principal has entered into a 1963 Cotton Cooperative Loan Agreement with CCC dated September 10, 1963 under which CCC has undertaken to make loans on cotton to the principal in accordance with the terms and conditions of that Agreement ; and
WHEREAS, the principal is required by the terms of that Agreement to discharge certain obligations in connection with such cotton:
NOW THEREFORE, the condition of this obligation is such that if the principal shall fully and completely discharge all obligations to CCC required by the said 1963 Cotton Cooperative Loan Agreement, or any amendment thereto heretofore or hereafter made, then this obligation to be null and void; otherwise to be and remain in full force and effect.
PROVIDED, HOWEVER, That this bond is executed upon the following express conditions:
(1) This bond shall cover only these obligations of the principal arising under the said 1963 Cotton Cooperative Loan Agreement or any amendments thereto heretofore or hereafter made, which arise during [a specified period].
(2) No extension of time or other waiver or amendment of the terms and conditions of the 1963 Cotton Cooperative Loan Agreement granted to the principal by CCC shall relieve the surety from its obligations hereunder, and the surety waives notice of any such extension, waiver, or amendment.
In accordance with the 1963 Loan Agreement, UFMA tendered cotton to CCC for loans and CCC released warehouse receipts in trust to UFMA. The value of warehouse receipts released to UFMA in trust during the 1963 season was approximately $54 million. For a month or so after the parties executed the September 1963 Agreement, UFMA functioned smoothly. In December 1963, however, CCC learned through standard periodic investigations that UFMA was experiencing trouble redeeming cotton collateral sold by UFMA, and that some trust receipts had been outstanding for more than 15 days. CCC was advised that UFMA did not have sufficient funds both to redeem cotton and to cover producer drafts of its individual members. CCC then directed the First National Bank of Lubbock, which was acting as UFMA’s servicing agent, to use available proceeds to cover producer drafts. To allow UFMA to rehabilitate itself, CCC officials waived the 15-day redemption requirement, and, at the same time, suspended UFMA’s trust receipt privileges.
While the December crisis raised the spectre of financial instability, CCC’s ensuing investigations revealed that UFMA’s problem was caused by administrative delays in processing warehouse receipts tendered to CCC by individual producers. In short, UFMA had been paying individual producers for their warehouse receipts more rapidly than it had been obtaining loan proceeds from CCC. At any rate, by December 30, 1963, UFMA had sufficient funds to redeem the cotton, and trust receipt privileges were resumed.
The second crisis came the following April. From March 27 through April 4, 1964, CCC released to UFMA, in trust, warehouse receipts evidencing 3,421 bales of cotton which had a loan value of $500,103.08. Upon receiving the warehouse receipts UFMA sold its interest in this cotton, but it did not redeem the collateral within 15 days of sale. Hindsight now shows that UFMA had been kiting its obligations — i. e. using proceeds of new loans to meet old obligations. The kite’s string ran out, in this case, with trust receipts covering the 3,421 bales in issue. By April 7 it was obvious that UFMA had no funds with which to redeem the 3,421 bales. CCC duly notified UFMA and sureties that UFMA was in default of its obligations and demanded payment. UFMA failed to redeem the collateral, and sureties have refused to indemnify CCC for its loss.
1. Jurisdiction and Applicable Law
Federal jurisdiction over the sureties’ suit for declaratory relief and CCC’s counterclaim was properly based on 15 U.S.C. § 714b, which provides that “[t]he district courts of the United States . . . shall have exclusive original jurisdiction, without regard to the amount in controversy, of all suits brought by or against the [Commodity Credit] Corporation.”
Construction of the suretyship contract between CCC on the one hand and St. Paul and Boston on the other must be determined by federal law. E. g., U. S. v. McCabe Co., 261 F.2d 539 (8th Cir. 1958); Colden v. Asmus, 322 F.Supp. 1163, 1164 (S.D.Cal.1971); U.S. v. Tyler, 220 F.Supp. 386 (N.D.Iowa 1963); see Priebe & Sons v. U.S., 332 U.S. 407, 411, 68 S.Ct. 123, 92 L.Ed. 32, 38 (1947); U. S. v. Standard Rice Co., 323 U.S. 106, 111, 65 S.Ct. 145, 89 L.Ed. 104, 107 (1944); Fansteel Metallurgical Corp. v. U. S., 145 Ct.Cl. 496, 172 F.Supp. 268, 270 (1959); Wright, Law of Federal Courts § 60, at 215 (1963). For guides to the “law of independent federal judicial decision,” U. S. v. Standard Oil Co., 332 U.S. 301, 308, 67 S.Ct. 1604, 1608, 91 L.Ed. 2067, 2072 (1947), we look principally to federal decisions in nondiversity cases, but without blinders to persuasive analogies from state law. See id. See also Moragne v. States Marine Lines, 398 U.S. 375, 408, 90 S.Ct. 1772, 26 L.Ed.2d 339, 361 (1970).
2. 1963 Loan Agreement Obligations
The threshold issue in the District Court was whether UFMA had breached the trust receipt agreement or the 1963 Loan Agreement. The court ruled that UFMA had breached only the trust receipt agreement. Since it also ruled that sureties bonded only Loan Agreement obligations, the court granted relief in favor of sureties.
Through the complicated factual setting of this case emerges a remarkably direct solution. Indisputably the sureties bonded obligations arising under the 1963 Cotton Cooperative Loan Agreement. Section 12 of that agreement provides that “[i]f the Association sells . its . interest in any cotton pledged to CCC hereunder, it shall redeem such cotton within 15 days from the date of such sale.” UFMA sold its interest in 3,421 bales that had been released in trust to UFMA, as authorized by the Loan Agreement: “CCC may, if it deems it desirable, release warehouse receipts to the Association against trust receipts acceptable to CCC.” UFMA did not redeem the collateral within 15 days of sale. By its failure to redeem UFMA breached the 1963 Loan Agreement. The 3,421 bales in issue had a loan value of about $0.5 million. The sureties are therefore pri-ma facie liable to indemnify CCC up to the $265,000 face amount of the bonds for CCC’s losses caused by UFMA’s breach of the Loan Agreement.
To this analysis sureties pose two objections. First, they suggest that CCC did not ground its lawsuit on the theory that UFMA’s sale and nonre-demption of cotton was a breach of the 1963 Agreement. We find that suggestion to be without merit. By paragraph 9 of its amended counterclaim, CCC alleged that UFMA “sold said 3,421 bales of cotton . . . did not return said 3,421 warehouse receipts to the Bank or to CCC, did not redeem said 3,421 bales of cotton, and did not hold the proceeds of the sale of said 3,421 bales of cotton in trust for CCC, all in breach of the terms of the loan agreement and the trust receipts.” (emphasis added) Therefore, the issue of breach of the Loan Agreement was properly before the District Court.
Sureties’ second argument is that CCC waived the 15-day redemption requirement, and in support thereof refer to testimony by CCC officials that CCC waived the 15-day requirement. In context, the testimony to which sureties refer relates to the crisis in December when UFMA fell behind in its obligations because of administrative difficulties. At that time CCC did waive the 15-day requirement to allow UFMA to rehabilitate itself. The testimony does not indicate, however, that CCC waived the redemption requirement in April, when the losses made the basis of this lawsuit occurred. To the contrary, non-waiver is unequivocally indicated by CCC’s timely insistence that UFMA redeem collateral, and its demand of April 13, 1964, that sureties indemnify CCC for losses caused by UFMA’s default. Sureties have failed to show a waiver of the 15-day redemption requirement in April.
3. “Affirmative” Defenses
At trial and on appeal sureties have relied on several so-called “affirmative” defenses which were independent of its lead argument that UFMA breached only trust receipt obligations. Appellees have stated their affirmative defenses to be the following: (1) CCC’s surrender and release of the pledged collateral deprived sureties of their right of subro-gation and released sureties from their obligations under the bonds; (2) CCC’s loss occurred prior to the time when Boston’s bond and St. Paul’s second bond became effective; (3) CCC failed to inform the bonding companies of the extraordinary risk of the defaults by UFMA before the last two bonds were written; (4) CCC failed to inform the bonding companies of defaults by UFMA after the bonds were written; (5) sureties are entitled to certain offsets in the event they are liable on their bonds. The trial court did not consider these defenses, since it found the sureties’ first defense a good one. We decline to address these issues for the first time on appeal, without findings of fact or conclusions of law for reference, and we remand the case to the trial court for consideration of sureties’ affirmative defenses.
4. Conclusion
As we read the opinion below, the District Court ruled in favor of sureties for three reasons: (1) UFMA breached only trust receipt obligations; (2) sureties bonded only Loan Agreement obligations; and (3) the Loan Agreement did not incorporate trust receipt obligations by reference. Because we have held that UFMA breached Loan Agreement obligations, which sureties indisputably bonded, we have not reached the issues concerning the precise scope of sureties’ bonds or the possibility of incorporation by reference. Our failure to reach these issues should not be construed as approval of the District Court’s views on them. If on remand either the scope of sureties’ bonds or the possibility of incorporation by reference is relevant to one or more of the affirmative defenses, the District Court should feel free to re-examine its views in light of the principle that a surety’s obligation should be construed by reading together all instruments, statutes, and regulations underlying the transaction. E. g., St. Paul Fire & Marine Ins. Co. v. Tennefos Constr. Co., 396 F.2d 623 (8th Cir. 1968); Triangle Elec. Supply Co. v. Mojave Elec. Co., 234 F.Supp. 293 (W.D.Mo.1964); see U. S. ex rel. Sherman v. Carter, 353 U.S. 210, 77 S.Ct. 793, 1 L.Ed.2d 776 (1957); U. S. ex rel. Strona v. Bussey, 51 F.Supp. 996 (D.C.Cal.1943).
The cause is reversed and remanded for proceedings not inconsistent with this opinion.
. By paragraph 9 of its amended counterclaim, CCC alleged:
“9. From March 27, 1964, through April 4, 1964, United obtained from the Bank 3,421 warehouse receipts representing 3,421 bales of cotton pledged by it under the loan agreement by issuing ten trust receipts, Nos. 409 through 418, inclusive, pursuant to the loan agreement. The loan indebtedness with respect to said 3,421 bales of cotton was Five Hundred Thousand One Hundred Three and 8/100 Dollars . ($500,103.08), plus interest and charges. United sold said 3,421 bales of cotton for the sum of Four Hundred Ninety-Nine Thousand Four Hundred Thirty-Five and 52/100 Dollars ($499,435.52). United did not return said 3,421 warehouse receipts to the Bank or to CCC, did not redeem said 3,421 bales of cotton, and did not hold the proceeds of the sale of said 3,421 bales of cotton in trust for CCC, all in breach of the terms of the loan agreement and the trust receipts. By reason of such breach by United, plaintiff lias been damaged to the extent of Five Hundred Thousand One Hundred Three and 8/100 Dollars ($500,103.08), plus interest and charges, the amount required to redeem said 3,421 bales of cotton, and [United] is indebted to plaintiff in this amount.”
. St. Paul and Boston filed separate answers, but each was identical in material respects to the other. The parties have not distinguished between the answers nor do we.
. Aside from the government’s explanations in its brief, the outline of the cotton price support scheme, as pertinent to this appeal, is derived from four sources: (1) Those portions of the Agricultural Act of 1949 codified at 7 U.S.C.A. §§ 1421-68 (1964), as amended, (Supp.1972) ; (2) CCC’s Cotton Loan Program Regulations, 7 C.F.R. §§ 1427.1351-1427.1376 (1963) ; (3) CCC’s Commercial Bank Handbook for Cotton Loan Servicing Agents; and (4) the opinion of the court below.
. Sureties suggest, in a footnote to their supplemental brief filed after oral argument, that CCC introduced no evidence of sale of cotton. The suggestion is unpersuasive. St. Paul in effect admitted in its answer that UFMA sold cotton :
“Cross-Defendant admits . . . that 3,421 bales of cotton were withdrawn on trust receipt by United, that United did not redeem said 3,421 bales of cotton and did not hold the proceeds of the sale of said 3,421 bales of cotton in trust for CCC . . . . ”
(emphasis added) Moreover, the record contains ample evidence of sale. For example, an “Analysis of Trust Activity” is included in the record, as well as an “Analysis of Deposits of Proceeds Received from Sale of Cotton Withdrawn on Trust Receipt.” These accounting schedules not only show dates of sale, but trace application of the sale proceeds.
. Perhaps sureties are obliquely suggesting that by prior acceptance of late performance in December, CCC is estopped to assert late performance in April. See 3A Corbin, Law of Contracts § 722, at 380 (I960). An estoppel defense would not succeed, however, for several reasons. First, sureties, as nonparties to the Loan Agreement, have not established their right to assert an equitable defense inuring to the benefit of a contractual party. Cf. The Phillips & Colby Constr. Co. v. Seymour, 91 U.S. 646, 23 L.Ed. 341 (1876). Secondly, estoppel defenses require a showing of prejudice, and sureties have abandoned their right to claim prejudice from time extensions by their agreement in the bond that “[n]o extension of time or other waiver or amendment of the terms and conditions of the 1963 Cotton Cooperative Loan Agreement granted to the principal by CCC shall relieve the surety from its obligations hereunder, and the surety waives notice of any such extension, waiver, or amendment.” See 10 Williston, Law of Contracts § 1223, at 729 (3d ed. 1967) (“If the surety assents to the extension of time in his original contract or before the extension is given, he will not be discharged on the ground either of the terms of his contract or of waiver . . . .”). Finally, even if the time for performance was in some way extended by CCC’s prior acceptance of late performance, it has been exceeded in this case. Not only did UFMA not redeem within 15 days; it had not redeemed by the filing of this appeal.
. See also the rule that consent to surrender of collateral may be implied from the custom of the business. 10 Williston, Law of Contracts § 1232 (3d ed. 1967).
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UNITED STATES of America, Plaintiff-Appellant, v. CROW, POPE AND LAND ENTERPRISES, INC., Defendant-Appellee.
No. 72-2381.
United States Court of Appeals, Fifth Circuit.
Feb. 14, 1973.
As Amended March 8, 1973.
John W. Stokes, Jr., U. S. Atty., Atlanta, Ga., Kent Frizzell, Asst. Atty. Gen., Carl Strass, Atty., Raymond N. Zagone, Edmund B. Clark, Dept, of Justice, Washington, D. C., for plaintiff-appellant.
Moretón Rolleston, Jr., Atlanta, Ga., for defendant-appellee.
Before GODBOLD, DYER and CLARK, Circuit Judges.
DYER, Circuit Judge:
This is an appeal from the district court’s decision, 340 F.Supp. 25, that the “Chattahoochee River between Peachtree Creek and Buford Dam is not a navigable water of the United States within the meaning of 33 U.S.C.A. §§ 403 and 407, and, therefore, the defendant . . is not subject to the provisions of those statutes.” We dismiss the appeal for want of jurisdiction.
The United States seeks to permanently enjoin Crow, Pope and Land Enterprises (CPLE) from polluting the Chattahoochee. Allegedly, pollutants are being dumped into the river as a result of CPLE’s expansion of an apartment complex known as Riverbend, which is located along the west bank at mile 306 of the Chattahoochee in Cobb County, Georgia. The Government argues that the river is a navigable water of the United States, that CPLE’s Riverbend construction on the floodplain of the Chattahoochee violates 33 U.S.C.A. § 403, and that as a result of the excavation and grading at the construction site CPLE is illegally depositing and discharging refuse into a navigable water in violation of 33 U.S.C.A. § 407. Moreover, the United States contends that an injunction should issue even if the Chattahoochee is not navigable between Peachtree Creek (mile 300) and Buford Dam (mile 348); for, notwithstanding its non-navigability, that segment of the river is a tributary of a navigable water and, therefore, the defendant’s conduct is still violative of § 407. It is undisputed that downstream from Peachtree Creek portions of the Chattahoochee are navigable.
At the hearing for a preliminary injunction, the parties stipulated that that single hearing “would constitute the final hearing on the issue of navigability”; CPLE entered into a consent order with the Government requiring the defendant to take certain affirmative measures to prevent further pollution of the Chattahoochee during the pendency of the suit; and both of the parties and the district court agreed to postpone consideration of the tributary issue. As a result of this agreement, neither of the parties submitted any evidence nor did either present legal argument on the Government’s tributary contention. Even though the parties had not yet had an opportunity to try this issue and despite the fact that the record was completely barren of any evidence on the question, the district court nevertheless entered an order not only determining that the stretch of the Chattahoochee in question was non-navigable, but also rejecting as without merit the Government’s tributary theory. Strangely, the court based its conclusion that CPLE was not liable under the tributary provisions of § 407 on the fact that there had been no showing that “what the defendant is depositing in the subject section of the river will either float or be washed downstream to a navigable portion of the river. . . . ”
Obviously, there had been no such proof because the court had, on the basis of the parties’ stipulation, agreed that it would reserve adjudication of this question for a later hearing to be held after it had concluded taking evidence on the navigability issue. Such a hearing on the tributary question was not held, and thus the court’s conclusion of law was impermissibly based on a total absence of evidence. There has been no adjudication of the tributary issue and consequently it remains open. Because the district court’s order can, therefore, in no way be construed as a final appeala-ble order within the meaning of 28 U.S. C.A. § 1291, this Court lacks jurisdiction to entertain the appeal.
The injunctive relief which the United States seeks is a single legal right or claim, although whether the Government is entitled to such relief depends on the resolution of alternative legal theories. In the case sub judice, the alleged unlawful acts and the two legal theories of relief are so intertwined as to constitute a single claim. The district court’s conclusion of non-navigability is not dispositive of the claim for an injunction. Whether or not the Chattahoochee is navigable from mile 300 to mile 348, and we intimate no opinion on that question, the United States may be entitled to the relief it seeks if it can prove the requisite facts to establish a violation of the tributary provisions of 33 U.S.C.A. § 407. While we recognize that, for the purposes of Rule 54(b) of the Federal Rules of Civil Procedure, a separate claim need not be predicated on acts entirely distinct from those on which all of the other asserted claims in the action are bottomed, a mere variation in legal theories is insufficient. See, e. g., Cott Beverage Corp. v. Canada Dry Ginger Ale, Inc., 2 Cir. 1957, 243 F.2d 795.
Furthermore, assuming arguendo that the navigability issue and the tributary question are separate claims, the district court failed to comply with the certificate requirement of Rule 54(b), which is a jurisdictional prerequisite for an appeal of less than all of the claims in an action. Accordingly, although the parties and the court agreed that the hearing on the navigability question would be on the merits, with the intention of making the court’s order an appealable one, this Court lacks jurisdiction of the appeal. A multiple claims action in its entirety is a jurisdictional unit, and a decision on one of the claims does not constitute a final appealable order unless the district court makes “an express determination that there is no just reason for delay and . an express direction for entry of the judgment.” Fed.R.Civ.P. 54(b) ; see e. g., Bache & Co. v. Taylor, 5 Cir. 1972, 458 F.2d 395; Coulter v. Sears, Roebuck & Co., 5 Cir. 1969, 411 F.2d 1189; Travelers Indemnity Co. v. Erickson, 5 Cir. 1968, 396 F.2d 134. Additionally, even if the district court had made a Rule 54(b) certificate, this Court is not bound by that determination and is free to decide for itself whether there were multiple claims or merely variants of a single claim. See e. g., Howze v. Arrow Transportation Co., 5 Cir. 1960, 280 F.2d 403, cert. denied, 364 U.S. 920, 81 S.Ct. 285, 5 L.Ed.2d 260.
In accordance with the historic federal policy against piecemeal appeal, this appeal is
Dismissed for lack of jurisdiction and the cause is remanded to the district court for further proceedings.
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{
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POSEIDON SCHIFFAHRT, G.M.B.H., Plaintiff-Appellant, v. The M/S NETUNO, her engines, tackle, apparel, etc., Defendant-Appellee.
No. 72-1636.
United States Court of Appeals, Fifth Circuit.
March 1, 1973.
George H. Chamlee, Savannah, Ga., for plaintiff-appellant.
W. Spencer Connerat, Jr., Savannah, Ga., Raymond A. Ballard, Detroit, Mich., for defendant-appellee.
Before MORGAN, CLARK and IN-GRAHAM, Circuit Judges.
INGRAHAM, Circuit Judge:
On August 27, 1971, the Brazilian owned M/S Netuno collided with the M/V TransMichigan, a German owned vessel, in the waters of Lake Huron. The present action began in late September 1971, when Poseidon Schiffahrt, the corporate owner of the TransMichigan, filed an in rem libel action in the federal district court for the Southern District of Georgia. Although it is undisputed that the district court had jurisdiction of the res, the court declined to exercise its jurisdiction because another suit between the same parties, involving the same issues, was pending in the admiralty courts of Canada, and also upon principles of forum non conveniens. The court accordingly dismissed the libel. The issue on appeal is whether the district court used the proper legal standard in declining to exercise jurisdiction. We hold that it did not, and therefore vacate the district court’s order dismissing the libel and remand for further proceedings.
The outcome of this appeal turns on the interpretation of the Supreme Court’s decision in The Belgenland, 114 U.S. 355, 5 S.Ct. 860, 29 L.Ed. 152 (1885). The jurisdictional issue there concerned a federal court’s exercise of in rem jurisdiction arising from a collision on the high seas between two foreign vessels of different nationalities. The Court stated the controlling principles:
“[Ajlthough the courts will use a discretion about assuming jurisdiction of controversies between foreigners in cases arising beyond the territorial jurisdiction of the country to which the courts belong, yet where such controversies are communis juris, — that is, where they arise under the common law of nations,- — special grounds should appear to induce the court to deny its aid to a foreign suitor when it has jurisdiction of the ship or party charged. The existence of jurisdiction in all such cases is beyond dispute ; the only question will be whether it is expedient to exercise it.
* * -X- -X- -X- *
“The subject has frequently been before our own admiralty courts of original jurisdiction, and there has been but one opinion expressed, namely: that they have jurisdiction in such cases, and that they will exercise it unless special circumstances exist to show that justice would be better sub-served by declining it.”
Id. at 366-367, 5 S.Ct. at 865-866.
In Motor Distributors v. Olaf Pedersen’s Rederi A/S, 239 F.2d 463 (5th Cir., 1956), cert. denied, 353 U.S. 938, 77 S.Ct. 816, 1 L.Ed.2d 760, this court was reviewing a district court’s decision not to exercise jurisdiction in an in rem libel involving foreign vessels of different nationalities. Applying the general principles articulated in The Belgenland, the court concluded:
“[T]he rule is, . . . that jurisdiction should be taken unless to do so would work an injustice.”
239 F.2d at 465. In formulating this rule from the general principles set out in The Belgenland, the Motor Distributors court relied on the Second Circuit’s decision in The Western Farmer, 210 F.2d 754, 755-756 (2nd Cir., 1954), which held :
“[I]n the case of a collision on the high seas, an alien plaintiff has the privilege of suing an alien defendant wherever he can serve him, or attach his property; and that, if the defendant would avoid the suit, he must show that he will be unfairly prejudiced, unless it be removed to some other jurisdiction.”
The standard for a federal court to use in determining whether to exercise its jurisdiction in an in rem libel involving foreign vessels of different nationalities is, therefore, that the court should exercise its jurisdiction unless the defendant can establish that to do so would work an injustice.
In our case the district court did not apply this standard. Instead, the court appears to have used a balancing test as the following statement illustrates :
“Taken in the round, the considerations favoring nonentertainment of jurisdiction outweigh those in support of retention. ... No injustice will result from abstention.”
In reaching this conclusion the district court thoroughly analyzed the circumstances in this case and cannot be faulted for the conclusion reached on the basis of its analysis. The problem is that the court did not apply the proper standard while making its analysis.
As the Motor Distributors court held, the question is not whether an injustice will result if the court does not exercise jurisdiction, but whether exercising jurisdiction will result in an injustice. See note 3, supra. The distinction is more than one of semantics. Under the proper standard, the court must begin with the assumption it will exercise jurisdiction unless it is established, by the defendant, that an injustice would follow. The Motor Distributors rule requires an affirmative conclusion that to exercise jurisdiction “would work an injustice.” This conclusion was not reached by the district court as a basis for dismissing the libel. The decision must therefore be vacated and the cause remanded for the court to reassess its conclusion not to exercise jurisdiction using the proper legal standard.
Vacated and remanded.
. It appears that a substantial issue on the merits will be whether the collision oe-curred in United States or Canadian waters.
. We agree with the district court that the pending Canadian action, which was also commenced by Poseidon, is not “a true in rem action.” Poseidon Schiffahrt, G.M.B.H. v. M/S Netuno, 335 F.Supp. 684, 687 (S.D.Ga., 1972).
. We recognize, of course, that the decision to exercise jurisdiction is within the district court’s discretion. Canada Malting Co. v. Paterson Steamships Ltd., 285 U.S. 413, 419-420, 52 S.Ct. 413, 76 L.Ed. 837 (1932). This discretionary decision must, however, “be grounded upon correct legal principles.” Anglo-American Co. v. The S/T Mina D’Amico, 169 F.Supp. 908 (E.D.Va., 1959). See The Belgenland, 114 U.S. 355, 368, 5 S.Ct. 860, 29 L.Ed. 152 (1885).
. 335 F.Supp. at 690. The quoted sentence is similar to that used by the district court which was reversed in Motor Distributors because it applied the -wrong principles in its discretionary decision not to exercise jurisdiction.
“Instead of the rule being, as the trial court here stated, that jurisdiction should be denied unless such denial would work an injustice, the rule is, rather, that jurisdiction should be taken unless to do so would work an injustice.” Id., 239 F.2d at 465.
. The following factors seem to be the most influential in the court’s decision not to exercise jurisdiction: (1) that another action involving the same parties and the same issues was pending in a Canadian court; (2) that a counterclaim had been filed in the Canadian action ; (3) that all parties involved were signatories of the Brussels Convention; (4) that matters of international comity were involved; and (5) that the Georgia forum was not the most convenient forum.
This last factor is derived from the court’s reference to the doctrine of forum non conveniens. While this doctrine is applicable in admiralty cases and its application is peculiarly dependent on the facts present in a particular case, “unless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be disturbed.” Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947). The applicability of this doctrine to the case at bar should also be considered in light of the following statement by the Motor Distributors court at 467 of 239 F.2d:
“Moreover, something’ deeply significant in the whole field of maritime law is here at stake. With respect to oceangoing carriers it seems that one of the most universally recognized rules of law is that which gives the right to libelant, possessing a maritime lien against a vessel, to proceed in rem in the jurisdiction where the vessel is found.”
. The district court avoided applying the Motor Distributors rule by distinguishing that case on its facts. While this process of legal analysis is often a proper method for avoiding the application of a particular rule of law, the standard formulated in Motor Distributors is not to be restricted to the facts in that case. The purpose of the Motor Distributors rule is to furnish a framework — a method of analysis — to be used in all cases involving an in rem libel arising from a collision between foreign vessels of different nationalities. This, of course, does not mean that the decision of a district court must always be the same as that reached in Motor Dis-tribxitors; it only means that the decision must be reached by applying the Motor Distributors standard.
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{
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OCHSNER CLINIC, Petitioner-Cross Respondent, v. NATIONAL LABOR RELATIONS BOARD, Respondent-Cross Petitioner.
No. 72-1703.
United States Court of Appeals, Fifth Circuit.
Feb. 6, 1973.
Andrew P. Carter, David E. Walker, New Orleans, La., for petitioner-cross respondent.
Marcel Mallet-Prevost, Asst. Gen. Counsel, N.L.R.B., Washington, D. C., Charles M. Paschal, Jr., Regional Director, New Orleans, La., William R. Stewart, N.L.R.B., Washington, D. C., for respondent-cross petitioner.
Before JOHN R. BROWN, Chief Judge, and MOORE and RONEY, Circuit Judges.
Honorable Leonard P. Moore, Senior Circuit Judge of the Second Circuit, sitting by designation.
JOHN R. BROWN, Chief Judge.
Ochsner Clinic challenges the order of the National Labor Relations Board certifying the Union as the bargaining representative of its 22 X-ray technicians on the grounds that (i) the activities of the clinic are not within the coverage of the Act and (ii) even if these activities were covered, the Board failed to choose the appropriate bargaining unit. Finding these contentions to be substantially without merit, we grant the Board’s petition for enforcement.
Coverage .
The Clinic asserts that the Board has departed from all prior practice in assuming jurisdiction over the employer-employee relations within a medical clinic. This is incorrect. It is true, as Ochsner asserts, that prior to the case of Mayo Clinic, 168 NLRB 557 (1967), the Board had declined to take jurisdiction over voluntary associations of physicians. Nevertheless, in that case, and in the subsequent case of Quain and Ramstad Clinic, 173 NLRB 1185 (1968), the Board did assume jurisdiction where the employer was not primarily engaged in education and research or operating a non-profit hospital and did have an impact upon interstate commerce.
Those criteria are met here. Ochsner is not engaged primarily in education and research so as to come within the purview of the congressional purpose in exempting non-profit hospitals from the Labor Management Relations Act. But Ochsner does have a substantial impact upon interstate commerce. Not only was it expressly stipulated by the parties that Ochsner did a gross volume during the preceding six months in excess of $250,000 and purchased materials and supplies in excess of $50,000 during the period, but the record indicates that the partnership of some 200 physicians employs over 500 nurses, technicians, clerks, and other medical assistants.
Ochsner asserts that Mayo Clinic is not valid authority for the Board’s asserting jurisdiction — ties to interstate commerce notwithstanding — because there both parties petitioned the Board to assert its jurisdiction. Clearly, this is irrelevant — the Board’s decision whether to assert power over the parties is one of administrative discretion. NLRB v. Marinor Inns, Inc., 5 Cir., 1971, 445 F.2d 538, 541; NLRB v. WGOK, Inc., 5 Cir., 1967, 384 F.2d 500. Indeed, the congressional purpose to allow the Board to decline jurisdiction in an appropriate case is embodied in the statute. Thus, any prior instance where the Board declined to assert jurisdiction —Ochsner cites no cases of such abstention — would not preclude the power here.
Appropriate Unit
The contention that the Board failed to choose the most appropriate unit is without merit. It is so well established that the Board has wide authority under Section 9(b) to determine the proper bargaining unit, we need only state a few of the facts which indicate the Board made an appropriate choice in this case. At Ochsner Clinic, there are approximately 150 skilled technicians whose fields range from audiology to urology, and perhaps two dozen other areas in between. The radiological technologists (or X-ray technicians), 22 in number, form a separate department from other technicians. They are supervised independently of other clinic employees. They are subject to hire and discharge by the Chief Radiological Technologist, not the Personnel Department. Their salaries are established independently of other departments in the Clinic. Each technician must be registered by the American Registry of Radiological Technologists, a process which usually requires about two years of specialized training. Also, the X-ray technicians generally work in a separate area of the clinic, and have only limited interaction with other departments. Clearly, there were enough factors present here to sufficiently distinguish the X-ray technicians from other departments as a separate unit, appropriate for bargaining purposes. The unit chosen need not be the most appropriate, but only one which is appropriate under the circumstances. NLRB v. Li’l General Stores, Inc., 5 Cir., 1970, 422 F.2d 571, 573; NLRB v. Zayre Corp., 5 Cir., 1970, 424 F.2d 1159, 1165.
Finally, there is no indication here that there is any other organization either in existence or likely to be formed which could or would take on representation of such a coterie of diverse technicians. We do not suggest this is decisive, but it is certainly a factor since the Act contemplates representation. There can be no representation unless there is one to do the representing.
With this inherent discretion vested in the Board, we need not attempt to pierce the reasoning of the Board with X-ray precision. Rather we only need to satisfy ourselves that no arbitrary or capricious action can be detected which infects the decision. See Spartans Industries, Inc. v. NLRB, 5 Cir., 1969, 406 F.2d 1002, 1005.
Enforced.
. The Social Economic Organization of Staff Radiologic Technologists, apparently a purely local organization.
. Coverage under the National Labor Relations Act is, of course, coextensive with the powers of Congress under the Commerce Clause. NLRB v. Reliance Fuel Oil Corp., 1963, 371 U.S. 224, 83 S.Ct. 312, 9 L.Ed.2d 279; Bob’s Casing Crews, Inc. v. NLRB, 5 Cir., 1970, 429 F.2d 261, 262.
. 29 U.S.C.A. § 152(2).
. “The Board, in its discretion, may, by rule of decision or by published rules adopted pursuant to the Administrative Procedure Act, decline to assert jurisdiction over any labor dispute involving any class or category of employers, where, in the opinion of the Board, the effect of such labor dispute on commerce is not sufficiently substantial to warrant the exercise of its jurisdiction * * 29 U.S.C.A. § 164(c)(1).
. We find no merit in the contention that the Board was required by the Administrative Procedure Act to explain its assumption of jurisdiction. The actual assumption of jurisdiction in a real case is itself reviewable and no prior adjudication of the Board’s reversal of policy (if any there was) was necessary, particularly in the absence of a record. We have such a record in this case.
. See NLRB v. WKRG-TV, Inc., 5 Cir., 1973, 470 F.2d 1302, 1311 [1973],
. These specialties are Cardiovascular Technician, Claims Analyst, Clinic Coding Desk, Contact Lens Technician, Dietitian, Dispensing Optician, EEG Technician, EKG Technician, ENG Technician, Floating R.N. or L.P.N., Hospital Coding Desk, Interpreter, IVP Nurse, Kine Technician Licensed Practical Nurse, Life Insurance Analyst, Medical Photographer, Medical Secretarial Production and Work Flow Analyst, Nurse Technician, Ophthalmology Technician, Ophthalmology Technician and Secretary, Oral Surgery Technician, O.R. Technician, Orthopaedic Assistant, Ortho-paedic Technician, Photographic Quality Control Clerk, Registered Nurse, Training Director AOMF School of Radiological Technologists, X-Ray Dark Room Attendant, X-Ray Technician — Clinic Side, X-Ray Technician — Hospital Side.
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{
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UNITED STATES of America, Plaintiff-Appellee, v. Shelly TOWNSEND, Defendant-Appellant.
No. 72-2100
Summary Calendar.
United States Court of Appeals, Fifth Circuit.
Feb. 13, 1973.
John J. C. O’Shea, Lubbock, Tex. (Court appointed), for defendant-appellant.
Eldon B. Mahon, U. S. Atty., W. E. Smith, Asst. U. S. Atty., Ft. Worth, Tex., for plaintiff-appellee.
Before JOHN R. BROWN, Chief Judge, and GOLDBERG and MORGAN, Circuit Judges.
Rule 18, 5 Cir.; See Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir. 1970, 431 F.2d 409, Part. I.
JOHN R. BROWN, Chief Judge:
Shelly Townsend, the leader of Cleo’s Funky Express, a rock and roll band operating on and around Reese Air Force Base, Texas, was convicted of receiving and concealing, within the special territorial jurisdiction of the United States, amplifying equipment stolen from another band, the Neal Ford Foundation. He was acquitted of the disjunctive charge of theft of the same property. The case finally turns on whether possession of the property off the military base can give rise to the inference that the property was received or concealed on the base. We answer in the negative and reverse for a new trial.
There is clearly sufficient proof that Appellant received the property and converted it to his own use. Likewise, the evidence that Appellant had knowledge that the property was stolen is convincing. In fact, if Appellant had been convicted of theft of the property in question we would affirm that conviction.
If the theft charge had resulted in a conviction, by affirming it, we would of necessity hold that under our cases, there was sufficient evidence that Appellant removed, or aided in the removal of, the purloined items from Reese Air Force Base. However, we are compelled to the seemingly anomalous conclusion that there was no evidence that Appellant received and concealed the stolen property within the special territorial jurisdiction — the confines of Reese Air Force Base — of the United States. The facts which prompt this determination are as follows.
The evening of September 3, 1971, found appellant Townsend and friends driving around and drinking on a presumably innocent week-end jaunt. Their erratic course took them to Reese Air Force Base in Lubbock County, Texas, where Neal Ford and his band, the Neal Ford Foundation, was entertaining at the Officers’ Club. At 1:00 a. m. the Neal Ford Foundation” left the bandstand for the evening and left behind most of their equipment.
Shortly after 1:00 a. m. Sergeant Lloyd Edwards, the night manager of the Officers’ Club, proceeded to make his usual fire check which would be followed by locking up the club. In the ballroom, where the Neal Ford Foundation had been playing, he discovered Appellant sitting alone at a table. He queried Appellant as to what he was doing there to which Appellant replied that he was waiting to see the bartender, Cliff Colley. Appellant did not talk to Colley that evening although the latter was working in the main bar until sometime after 1:00 a. m.
Sergeant Edwards informed Appellant that he would have to leave, a direction with which Appellant complied. Sergeant Edwards saw Appellant leave with no object or anything else in his possession. Thereafter he locked all • of the doors to the club at 1:45 a. m. at which time he did not notice any of the equipment missing.
The following afternoon, September 4, the Neal Ford Foundation returned to the Officers’ Club to move their equipment to the Non-commissioned Officers’ Club where they were to play the next night. When they arrived they found that some of their equipment was missing. The missing property consisted of an amplifier, two boom microphone stands, microphones, and one tambourine.
After notifying the proper authorities Neal Ford began making his own inquiries to determine the location of his band’s equipment. From the selective nature of the theft, he apparently believed that the equipment had been stolen by another band. He learned that Appellant’s band (Cleo’s Funky Express), which had recently played at the Reese Air Force Base Officers’ Club, was performing at the Log Cabin Club in Post, Texas, some 50 miles from the base. Ford and his band left for Post, Texas, to see if this other group was using their equipment. Ford and his band sought the help of the Garza County Sheriff and went with him to the Log Cabin Club where they confronted Appellant. Ford identified the stolen equipment which was being used by Appellant’s group and the Sheriff took Appellant and the property in tow. Appellant made incriminating statements during the course of his arrest and detention which were admitted at trial. None of these statements would have tended to prove that Appellant possessed, received and concealed the property within the confines of Reese Air Force Base. The upshot of these statements was that Appellant had purchased the equipment knowing it was stolen but that he did not steal it himself.
After stipulating that Reese Air Force Base was a government reservation within the exclusive jurisdiction of the United States, Appellant called Brenda Davis. She had been drinking and riding around with Townsend who was also in the company of Eva Lois Morin and Albert J. Thomas in Thomas’s car.
Brenda Davis testified that the other three picked her up that evening at about 9:30 and that they went to Ráese Air Force Base after having been drinking heavily. They first visited the Officers’ Club at 11:00 a. m. when all four went in. They stayed a short time and continued “riding around” until they went back the second time — at about 1:00 a. m. Appellant went in alone and stayed five or ten minutes. She saw Appellant as he came out of the Club empty-handed. He did not open the trunk of the car. However, Appellant had earlier stated to her that he was going to the Club to pick up some equipment, but that no equipment was ever picked up. The other occupants of the vehicle testified to substantially the same facts which included statements that they were together until 3:00 a. m. and that no equipment was picked up. None of them recalled having heard anything about any equipment being picked up.
The members of Cleo’s Funky Express testified that they first saw the stolen band equipment the evening of September 4 — the theft having occurred in the early a. m. of that day — as they were loading their cars in Lubbock, Texas, some ten miles from Reese Air Force Base, under Appellant’s direction. The only evidence that the government produced of Appellant’s having received and concealed the property on Reese Air Force Base is the statement of Brenda Davis that Appellant told' her he was going to pick up some equipment. If the question were Appellant’s knowledge of the stolen character of the property we would have no difficulty in concluding that a guilty verdict could stand. However, when considered in the context of all the evidence including that of Sergeant Edwards and Brenda Davis that no equipment was missing or picked up, this statement — which did not on its face imply that the “picking up” was to be by theft — is not sufficient to sustain the conviction. And if the presumption from possession is not available we are forced to conclude that the government produced no evidence that Appellant received and concealed the property while within jurisdiction of the United States.
The court properly instructed the jury that it could conclude on the basis of Appellant’s possession of the recently stolen property that he had participated in its theft and find him guilty of the theft. Under our cases the jury could permissibly infer that Appellant knew that the amplifier was stolen and was a participant in the theft. The court did not instruct the jury that any other inferences could be drawn. Appellant does not challenge this instruction, as the government seems by its response to believe, nor would there be any purpose since he was acquitted of the charge of theft.
The government tries to save the conviction by arguing that the admitted possession and ample basis for imputing knowledge of the stolen character permitted the jury to infer that Appellant received the property on the military reservation. The inference drawn from possession of recently stolen property which would allow us to affirm conviction for theft or for receiving stolen property is of ancient and venerable vintage. On request of the Court the parties have filed supplemental briefs on the specific question of whether to the permissible inference of receiving (or concealing) stolen property the further inference can be drawn that the receipt or concealment of the stolen property occurred within the confines of Reese Air Force Base. We hold that it cannot.
Although availability of such inferences should normally be defined in the jury charge we nevertheless believe that if we were to find the inference reasonable we would not consider the jury’s drawing the inference grounds for reversal simply because they were not instructed that they might draw it. A jury may draw the reasonable inferences which the evidence warrants. The inference is not less reasonable because the court fails to point out that it is one that can be drawn from the evidence. If the inference of participation in theft which is distilled from possession of recently stolen property were not a reasonable inference based on common experience it would have to be struck down in the light of present constitutional doctrine, which requires “that there be a rational connection between the facts proved and the fact presumed.” Tot v. United States, 1943, 319 U.S. 463, 467, 63 S.Ct. 1241, 1245, 87 L.Ed.2d 519; United States v. Romano, 1965, 382 U.S. 136, 86 S.Ct. 279, 15 L.Ed.2d 210; Leary v. United States, 1969, 395 U.S. 6, 89 S.Ct. 1532, 23 L.Ed.2d 57; Yaccaro v. United States, 5 Cir., 1972, 461 F.2d 626.
There is an important difference between the inference from possession to theft and the inference from possession outside the jurisdiction of the United States to possession inside the jurisdiction of the United States. It comes down, not to a question of law as such, but to a question of geography. The difference is simply this, if possession would, as we have held, support the inference of theft it must support the inference of the location of the theft, because this theft could occur at only one single location. That is, the theft had to occur at the Officers’ Club. On the other hand, the receiving and concealing of the stolen property could have occurred for the first time at any number of locations which were not within the special jurisdiction of the United States. In fact, the only evidence on the question first places Appellant in possession of the stolen equipment at Lubbock, Texas — ten miles from the scene of the crime.
Because of the difference between the two inferences and the necessity that the act of concealing or receiving take place on the Base the numerous cases which hold that possession of recently stolen property gives rise to an inference of participation in the theft do not aid us in the decision of this case. Where, for example, as in Young v. Wainwright, 5 Cir., 1971, 439 F.2d 426, the Court held that possession of recently stolen property would support an inference of breaking and entering with intent to steal, the Court was dealing with a crime which could occur only in a single location, i. e., the location where the property was stolen during a burglary. Many cases likewise deal with the inference of knowledge that the property was stolen when it is possessed by a defendant shortly after the theft. These cases are of no aid in deciding the ease now before us.
Faced then with what is in effect a question of first instance we must, and do, decide that such an inference may not be employed.
In summary, we cannot avoid an uneasiness that an injustice may be done by pushing this inference to a new geographical frontier. Although Shelly Townsend was most certainly guilty of some participation in the theft of the equipment of the Neal Ford Foundation, this inference, whether charged by the Judge to the jury or used by it or an appellate court, rests on no confident assurance that it is more likely than not that he received the property on - the Base. As Judge Godbold said “there is no substantial rational relationship between possession of stolen goods with knowledge of their illegal character and the facts surrounding the manner in which they were stolen” [emphasis in original]. United States v. Martinez, 5 Cir., 1972, 466 F.2d 679 (concurring).
The evidence here suggests that Appellant was aware of the manner in which the theft occurred. But this suggestion is not the basis from which we can support a legal inference that he received and concealed them at the location of the theft or at some other spot on the Base. And suspicion that he did so is not enough to support a conviction. Cf. United States v. Gainey, 1965, 380 U.S. 63, 85 S.Ct. 754, 13 L.Ed.2d 658.
Although the District Court should have, upon Appellant’s motion, granted directed verdict at the close of the government’s case this is obviously a case in which the interests of justice require a remand for a new trial, Bryan v. United States, 1950, 338 U.S. 552, 70 S.Ct. 317, 94 L.Ed. 335, which we may do under United States v. Musquiz, 5 Cir., 1971, 445 F.2d 963, 966, since a motion for new trial was filed. The government should have the opportunity to prove if it can, facts showing that Appellant received or concealed the goods while still on Reese Air Force Base.
Reversed and remanded for new trial.
. 18 U.S.C.A. § 662.
“Receiving stolen property within special maritime and territorial jurisdiction
Whoever, within the special maritime and territorial jurisdiction' of the United States, buys, receives, or conceals any money, goods, bank notes, or other thing which may be the subject of larceny, which has been feloniously taken, stolen, or embezzled, from any other person, knowing the same to have been so taken, stolen, or embezzled, shall be fined not more than $1,000 or imprisoned not more than three years, or both; but if the amount or value of thing so taken, stolen or embezzled does not exceed $100, he shall be fined not more than $1,000 oi’ imprisoned not more than one year, or both.”
. 18 U.S.C.A. § 661.
“Within special maritime and territorial jurisdiction
Whoever, within the special maritime and territorial jurisdiction of the United States, takes and carries away, with intent to steal or purloin, any personal property of another shall be punished as follows:
If the property taken is of a value exceeding $100, or is taken from the person of another, by a fine of not more than $5,000, or imprisonment for not more than five years, or both; in all other cases, by a fine of not more than $1,000 or by imprisonment not more than one year, or both.
If the property stolen consists of any evidence of debt, or other written instrument, the amount of money clue thereon, or secured to bo paid thereby and remaining unsatisfied, or which in any contingency might be collected thereon, or the value of the property the title to which is shown thereby, or the sum which might be recovered in the absence thereof, shall be the value of the property stolen.”
. Appellant assails the judgment and commitment on a number of fronts. These include challenges to the indictment, the actions of the trial Judge in cautioning counsel on the need for candor by Appellant in making a pauper’s oath, and the sufficiency of the evidence on all points. Appellant’s charge that the indictment is insufficient in its allegations is without - merit. The allegedly prejudicial remarks by the trial Judge are unlikely to recur on retrial. The other claims of error are meritless.
. The other minor but indispensable elements of the crime — such as the value of the stolen property exceeding $100.00— were adequately shown.
. United States v. Cook, 5 Cir., 1969, 419 F.2d 1306; Thurmond v. United States, 5 Cir., 1967, 377 F.2d 448. Thurmond involves personal property stolen from a military base and a charge under 18 U.S. C.A. § 661, set out in note 2, supra.
. The government concedes that receipt or concealment of the stolen property within the confines of Reese Air Force Base is a necessary element of the crime. Government’s brief at 22.
. For all we can discern from the record it is possible — even likely — that someone would have had time to remove the equipment in the 30 to 40 minutes between Appellant’s being shown out and the securing of the doors. However, the simple answer to this is that the jury found Defendant-Appellant innocent of returning and stealing the equipment.
. Post, Texas, is located in Garza County.
. Because the evidence — which we need not detail — of Appellant’s control over the amplifier and other equipment is unequivocal, we are not troubled, as we might otherwise be, that at the time of the arrest he was probably not technically in sole possession of the property.
. The record does not suggest — and we make no suggestion — that these persons knew the equipment was stolen. As the leader and manager Appellant took on the job of acquiring the equipment for the group. None of the other members inquired — so far as the record discloses— as to the source of the equipment.
. See note 5, supra.
. Drawing inferences from the evidence before it is, besides judging the credibility of witnesses, the major function that the jury performs. No tenable thesis can be maintained that before a jury can draw an inference in a courtroom that its members ■would make without hesitation in everyday life, that it must be instructed that the inference is one that the law specifically recognizes. Of course, failure to instruct may be, and often is, a ground for reversal where preserved or under circumstances constituting plain error.
. Jenkins v. United States, 10 Cir., 1966, 361 F.2d 615; Hale v. United States, 5 Cir., 1989, 410 F.2d 147. Additional problems may arise -where possession is the crime, cf., United States v. Gordon, 5 Cir., 1970, 421 F.2d 1068, and United States v. Cameron, 5 Cir., 1972, 460 F.2d 1394.
. The government’s suggestion that Girson v. United States, 9 Cir., 1937, 88 F.2d 358 is authority for the proposition that the Courts have entertained and allowed the inference which would uphold this conviction is incorrect. That case dealt with the theft of government property. The theft of government property is presently covered by Section 641 of Title 18, U.S.C.A.
Whoever embezzles, steals, purloins, or knowingly converts to his use or the use of another, or without authority, sells, conveys or disposes of any record, voucher, money, or thing of value of the United States or of any department or agency thereof, or any property made or being made under contract for the United States or any department or agency thereof ; or
Whoever receives, conceals, or retains the same with intent to convert it to his use or gain, knowing it to have been embezzled, stolen, purloined or converted—
Shall be fined not more than $10,000 or imprisoned not more than ten years, or both; but if the value of such property does not exceed the sum of $100, he shall be fined not more than $1,000 or imprisoned not more than one year, or both.
The word “value” means face, par, or market value, or cost price, either wholesale or retail, whichever is greater.
As is plain from a single reading of this section the crime of receiving and concealing government property does not contain an element of receiving and concealing while on territory o f the United States. While it is probable that Congress could have made criminal the receiving and concealing of nongovernment property stolen from a federal reservation where the receiving and concealing occurred outside the federal reservation, the simple answer is that it did not. See United States v. Bowman, 1922, 260 U.S. 94, 43 S.Ct. 39, 67 L.Ed.2d 149. Leary, supra, clearly rejects the argument that because Congress could have made such an action criminal, the law will allow an inference that the commission of the action that Congress could have criminalized demonstrates the commission of the related action that Congress did criminalize.
. This may be no victory for the Appellant. If prosecution is possible under the Texas law, and we intimate no opinion as to whether this is the case, the penalty is considerably stiffer.
Vernon’s Rev.Pen.Code and Art. 1430 provides :
“Whoever shall receive or conceal property which has been acquired by another in such manner as that the acquisition comes within the meaning of the term theft, knowing the same to have been so acquired, shall be punished in the same manner as if he had stolen the property.”
and Article 1421 of the same code provides :
“Theft of property of the value of fifty dollars or over shall be punished by confinement in the penitentiary not less than two nor more than ten years.”
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{
"author": "PER CURIAM:",
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John J. JOYCE v. UNITED STATES of America, Appellant.
No. 71-2057.
United States Court of Appeals, Third Circuit.
Argued Jan. 18, 1973.
Decided Feb. 16, 1973.
Alan S. Rosenthal, John B. Scott, Attys., Department of Justice, Washington, D. C., L. Patrick Gray, III, Asst. Atty. Gen., Richard L. Thornburgh, U. S. Atty., for appellant.
Ronald H. Heck, Bagley, Sydor & Heck, Pittsburgh, Pa., for appellee.
Before VAN DUSEN, and ADAMS, Circuit Judges and BARLOW, District Judge.
OPINION OF THE COURT
PER CURIAM:
This is an action against the United States under the Federal Tort Claims Act, 28 U.S.C. §§ 1346(b), 2671, et seq. The plaintiff, John J. Joyce, is a United States Postal Service employee. He seeks recovery for injuries sustained when he was hit on the top of his head by a bar of soap that was either dropped or thrown from the window of a restroom on the third floor of the United States Post Office and Courthouse Building in Pittsburgh, Pennsylvania.
The incident occurred at approximately 5:45 A.M. on August 26, 1968, while Mr. Joyce was walking along the sidewalk adjacent to the Post Office and Courthouse Building and on his way to enter the building in order to commence his 6:00 A.M. shift as a postal clerk. At the time he received the blow, Mr. Joyce was approximately 300 to 350 feet from the employees’ entrance to the building on that portion of the sidewalk owned and maintained by the City of Pittsburgh.
Within two days after the incident occurred, Mr. Joyce notified the Bureau of Employees’ Compensation (hereinafter BEC) of his injuries. In the “Notice of Injury” filed with BEC, Mr. Joyce, in addition to describing the place where the injury occurred, the injury’s cause, and the nature of the injury, certified that “the injury described * * * was sustained in the performance of [his] duties as an employee of the United States Government. * * * ”
The filing of Mr. Joyce’s notice was followed on December 10, 1968, as required, by an official supervisor’s Report of Injury that was executed by the Assistant Postmaster. It provided BEC with summary answers to a variety of form questions relating to the accident and to Mr. Joyce’s injuries. Thereafter, on January 16, 1969, BEC approved for payment, on Mr. Joyce’s behalf, two medical bills incurred as a result of the accident and certified to BEC by the United States Public Health Service.
Approximately nine months later, BEC requested additional information concerning the accident from Mr. Joyce’s superiors. Then, on October 8, 1970, the examiner assigned to the case entered his findings formally approving the claim. In his “Notice of Injury,” Mr. Joyce stated that as a result of the blow to his head he had experienced “headaches, dizziness, and pain continually at the point where the bar of soap hit [him].” The only demonstrable injury described was the contusion of the head.
Shortly after its approval of the claim, BEC authorized Mr. Joyce to undergo further medical examinations in order to determine the full extent of his treatment needs. On October 16, 1970, BEC wrote to Mr. Joyce, advising him to make an appointment with the United States Public Health Service in Pittsburgh to be examined and treated, if necessary, for possible residual effects of the injury. A similar letter was also sent by BEC to the Public Health Service, confirming the authorization for further treatment and advising clinic officials how best to expedite BEC’s payment of any subsequent medical bills.
Having received no response from Mr. Joyce, BEC again wrote to him on February 17, 1971, asking for an explanation of why no medical reports had been received. Mr. Joyce did not respond to that letter.
On February 25, 1971, Mr. Joyce filed the present complaint against the United States under the Federal Tort Claims Act, seeking damages for a sum in excess of $10,000. Following several days of a non-jury trial, which commenced on May 20, 1971, the Government filed a motion for leave to amend the answer. In its motion, the United States asserted that the district court lacked jurisdiction to adjudicate plaintiff’s cause of action until such time as the Secretary of Labor, through BEC, determined that the injuries were not covered by the Federal Employees Compensation Act (FECA). The court was asked to stay its proceedings in order to allow plaintiff time to complete the processing of his FECA claim.
The district court, 329 F.Supp. 1242, denied the motion and entered judgment in favor of Mr. Joyce for approximately $35,000. The court held that a district court must defer to BEC only when the facts in a particular case raise a substantial question of FECA coverage and that since no such question was presented it was free to adjudicate the cause of action. Alternately, the district court stated that even if FECA coverage did, in fact, exist, because the FECA issue was raised so late in the proceedings, it had discretion whether to consider the Government’s motion and under the circumstances would deny such motion.
The FECA, 5 U.S.C. § 8101, et seq., provides the exclusive remedy for a Federal employee’s injuries covered by that Act.
The nature and purpose of the FECA were stated by this Court in Somma v. United States, 283 F.2d 149, 151 (3d Cir. 1960) :
“[The] Act sets up a comprehensive system of workmen’s compensation for federal employees. Congress provided that [the FECA] be interpreted and administered by a Bureau of Employees’ Compensation and an Appeals Board whose action is not reviewable by the courts. * * * Obviously, the purpose in so providing was to insure uniformity of interpretation and policy. * * * ”
The FECA has thus been made the exclusive remedy for federal employees within its coverage, and such employees have no election of remedies. See United States v. Demko, 385 U.S. 149, 87 S.Ct. 382, 17 L.Ed.2d 258 (1966).
As this Court recognized in Somma, supra, the Act explicitly provides that all questions “arising under” the FECA shall be decided by the Secretary of Labor, and his decision in allowing or denying a payment “is (1) final and conclusive for all purposes and with respect to all questions of law and fact; and (2) not subject to review by another official of the United States or by a court by mandamus or otherwise.” 5 U.S.C. § 8128(b).
The statutory test of coverage is whether the employee was injured “while in the performance of his duties.” 5 U.S.C. § 8102(a). In light of the foregoing, it is clear that an injured Federal employee must seek administrative relief before he files suit under the Federal Tort Claims Act, unless his injuries are clearly not sustained “while in the performance of his duties.”
As stated in Somma, supra, at 151 of 283 F.2d:
“Where * * * a substantial question of coverage exists especially in an area in which the [Appeals] Board has not as yet authoritatively spoken * * * it [is] extremely important that it have the opportunity to speak first.”
The circumstances present here did raise “a substantial question” of FECA coverage. Before filing the present action, Mr. Joyce submitted a “Notice of Injury” to BEC, in which he certified that his injuries were sustained in the performance of his duties as an employee of the United States, and the record reflects that FECA coverage was acknowledged by BEC and that BEC “accepted the injury for contusion of the head.” It is also undisputed “that two separate medical bills incurred as a result of the accident * * * were paid by the Bureau of Employees Compensation, United States Department of Labor.” These facts certainly raise “a substantial question” of coverage.
In Cobia v. United States, 384 F.2d 711 (10th Cir. 1967), cert. denied, 390 U.S. 986, 88 S.Ct. 1182, 19 L.Ed.2d 1290 (1968), the court, when confronted with a similar factual situation, ruled that an injured employee’s acceptance of FECA benefits created a bar to a later action under the Federal Tort Claims Act.
Although it is regrettable that the Government did not raise the FECA issue more promptly, once that issue was raised, the district court had no discretion to proceed to a final adjudication of the cause of action without first requiring the plaintiff to complete the processing of his administrative claim under the FECA. Where there is no jurisdiction over the subject matter, there is, as well, no discretion to ignore that lack of jurisdiction. See F.R.Civ.P. 12(h)(3), supra note 1.
It is well settled that no action lies against the United States unless authorized by Congress. E. g., Feres v. United States, 340 U.S. 135, 71 S.Ct. 153, 95 L.Ed. 152 (1950). And despite the fact that the Federal Tort Claims Act provides, broadly, that the district court shall have exclusive jurisdiction of civil actions on claims against the United States for money damages, a clear showing of relinquishment of sovereign immunity in the particular case is required to give jurisdiction for tort actions. Dalehite v. United States, 346 U.S. 15, 30-31, 73 S.Ct. 956, 97 L.Ed. 1427 (1953).
The judgment of the district court will be vacated and the matter remanded to the district court with instructions to stay any action pending outcome of the proceedings under the FECA.
. But see F.R.Civ.P. 12(h)(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.”
Although the district court relied in part upon DiFrischia v. New York Central Railroad, 279 F.2d 141 (3d Cir. 1960), that decision is distinguishable. There, although first filing an answer challenging the averment of diversity jurisdiction, the defendant later entered into a stipulation with the plaintiff that the district court did have jurisdiction. Nearly two years later, after extensive trial preparation and after the statute of limitations would have run on the plaintiff’s claim, the defendant filed a motion to dismiss for lack of jurisdiction. This Court held that under these unusual circumstances dismissal of the complaint was improper. “A defendant may not play fast and loose with the judicial machinery and deceive the courts.” 279 F.2d at 144. In the present case, there is no evidence of deception or that the 'government by “sitting on its rights” may cause the plaintiff an effective loss of his claim through the running of the statute of limitations.
. 5 U.S.C. § 8102(a) provides :
(a) The United States shall pay compensation as specified by this subchapter for the disability or death of an employee resulting from personal injury sustained while in the performance of his duty, unless the injury or death is—
(1) caused by willful misconduct of the employee;
(2) caused by the employee’s intention to bring about the injury or death of himself or of another; or
(3) proximately caused by the intoxication of the injured employee.
5 U.S.C. § 8116(c) provides:
(e) The liability of the United States or an instrumentality thereof under this subchapter or any extension thereof with respect to the injury or death of an employee is exclusive and instead of all other liability of the United States or the instrumentality to the employee, his legal representative, spouse, dependents, next of kin, and any other person otherwise entitled to recover damages from the United States or the instrumentality because of the injury or death in a direct judicial proceeding, in a civil action, or in admiralty, or by an administrative or judicial proceeding under a workmen’s compensation statute or under a Federal tort liability statute. However, this subsection does not apply to a master or a member of a crew of a vessel.
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In the Matter of MOULDED PRODUCTS, INC., Debtor. Stockholders’ Protective Committee for Moulded Products, Inc., Appellant, v. Richard H. BARRY, Trustee, et al., Appellees.
Nos. 72-1701, 73-1044.
United States Court of Appeals, Eighth Circuit.
Submitted Jan. 12, 1973.
Decided March 1, 1973.
Joe A. Walters, Minneapolis, Minn., for appellant.
Arthur L. Doten, Minneapolis, Minn., for appellees.
Before LAY, HEANEY and STEPHENSON, Circuit Judges.
HEANEY, Circuit Judge.
The Stockholders’ Protective Committee appeals from orders of the District Court with respect to a plan for reorganizing Moulded Products, Inc.
Moulded Products, Inc., is a publicly held corporation engaged primarily in the business of rotational molding. Its financial problems began in 1968, when it attempted to add. two major products to its line. The projects were unsuccessful. The ensuing financial strain overburdened Moulded Products, and, on July 6, 1971, it filed a petition for reorganization under Chapter X of the Bankruptcy Act, 11 U.S.C. § 501 et seq.
Two hundred and five claims were timely filed, including $9,581.05 in taxes, $271,761.52 in secured claims and $1,545,658.26 in unsecured claims. The largest unsecured claim was filed by the Monsanto Company. This claim of $787,229.00 was represented by promissory notes which were convertible into common stock. Monsanto also filed a claim as a shareholder of 200,000 shares of Class B stock. Similarly, 1,781 other shareholders filed interests totaling 776,188 shares of Class A stock.
The trustee filed a reorganization plan on May 23, 1972. His plan provided that the shareholders would receive one share of a new common stock for each ten dollars of positive net worth of the debtor attributable to their respective holdings of the old common stock. The effect of this provision is that all stockholders will be denied participation in the reorganization because the corporation was found to have a negative net worth. Secured claims were to be paid in full, and unsecured creditors were given the option of exchanging every ten dollars of their claims against the corporation for one share of the new common stock, or of accepting an unsecured promissory note for twenty percent of the value of their claim, due and payable four years from date of confirmation by the court of the reorganization plan. The reorganization plan was approved as to feasibility by the referee and the District Court. This ruling is not questioned on appeal.
The Stockholders’ Protective Committee raises three issues on appeal:
(1) That Monsanto’s unsecured claim should properly be classified as equity rather than a debt because of the close relationship between Monsanto and Moulded Products.
(2) That the trustee breached his fiduciary duty to the stockholders of Moulded Products in arranging for the assignment by Monsanto of its unsecured claim to Red River Enterprises, Inc., without notice to the stockholders and without giving the stockholders the same opportunity; and that because of the trustee’s wrongful activity, Red River’s claim should be limited to the consideration paid.
(3) That the debtor corporation was improperly valued, and that the District Court’s finding that the debtor was insolvent was clearly erroneous.
I. CLASSIFICATION OF MONSANTO’S INTEREST AS DEBT OR EQUITY.
To a large extent, the controversy before us centers around Monsanto’s interest in Moulded Products, which was subsequently assigned to Red River Industries, Inc. In 1968, Moulded Products, in an attempt to raise an additional one million dollars in capital, offered common stock to the public. When this offering failed to raise the necessary capital, Moulded Products agreed to transfer 200,000 shares of newly created Class B common stock to Monsanto for $700,000. Monsanto also agreed to lend Moulded Products additional working capital to be represented by corporate notes convertible into additional common stock. Moreover, Monsanto acquired an option to purchase sufficient additional shares of stock to make it owner of fifty-three and one-half percent of the outstanding common stock of Moulded Products. From 1969 to 1971, Monsanto made interest bearing loans to Moulded Products totaling $771,650. Under the reorganization proceedings, its claim, including interest, amounts to $787,229.
The Committee argues that, because of the above transactions, Monsanto was so deeply enmeshed in the affairs of Moulded Products and shared such a large part of the responsibility for its financial difficulty, its interest should be classified as equity and, therefore, subordinated to the claims of the other unsecured creditors. In support of this argument, the Committee cites Taylor v. Standard Gas and Electric Co., 306 U.S. 307, 59 S.Ct. 543, 83 L.Ed. 669 (1939). There, the Supreme Court held that the claim of a parent company against its insolvent subsidiary would be subordinated to the claims of certain shareholders other than the parent. The Court found that the subsidiary’s financial problems were due to the poor management inflicted upon it by the parent corporation. The Committee argues that this “Deep Rock” doctrine (named after the subsidiary in Taylor) should be extended to this case where there is no technical parent-subsidiary relationship because the substance of the relationship is the same.
A reviewing court in a reorganization proceeding has the power to subordinate claims, but this power is not to be exercised lightly. In re Kansas City Journal, 144 F.2d 791 (8th Cir. 1944). This ease is not a proper one for the exercise of the power to subordinate or for an extension of the “Deep Rock” doctrine. In Taylor, the subsidiary was completely controlled by the parent, and the disastrous management decisions came from the parent. Here, the two products which caused Moulded Products’ downfall were conceived and undertaken by the management of Moulded Products, which then approached Monsanto for financial backing. Although Monsanto did give financial backing to the project and encouraged Moulded Products to proceed, the evidence does not establish that it was primarily responsible for the financial disaster which occurred. On the contrary, the record reveals that Monsanto, in an effort to avoid anti-trust problems, retrained from involving itself in the management of Moulded Products.
The District Court, in an order of October 12, 1972, found that the loans and purchases of the stock interest by Monsanto were “for proper purposes, fair and reasonable, and of beneficial effect to the debtor.” It also found that Monsanto assisted Moulded Products financially and in other ways, but did not dominate or control it. The record does not indicate that the transactions between Monsanto and Moulded Products were other than in good faith with the welfare of the latter corporation in mind. Likewise, the record does not show that Monsanto itself was enriched at the expense of Moulded Products or that it v/as guilty of bad management. Therefore, we hold that the District Court’s findings with regard to the Monsanto claim were not clearly erroneous. Monsanto’s claim should be classified as an unsecured claim and Red River as Monsanto’s assignee should participate on an equal footing with other unsecured creditors in the reorganized corporation.
II. BREACH OF FIDUCIARY DUTY TO THE STOCKHOLDERS BY THE TRUSTEE.
The Committee argues that the trustee breached his fiduciary duty to the stockholders of Moulded Products when he negotiated the assignment by Monsanto of its unsecured claim and its Class B common stock for $95,000 to Red River Industries, Inc., ninety-seven percent of which was owned by J. D. Farnham, a close friend of the trustee. As a result of the assignment, Red River will control the reorganized corporation. The Committee contends that since the trustee did not give the shareholders the opportunity to buy Monsanto’s claim for the price paid by Red River, the assignment constituted a breach of the fiduciary duty by the trustee. It, therefore, argues that Red River’s claim should be limited to the consideration paid to acquire Monsanto’s claim.
A. Trustee’s Duty.
The trustee, appointed by the court in a reorganization proceeding, is a fiduciary and has an obligation to treat all interested parties fairly. Wolf v. Weinstein, 372 U.S. 633, 83 S.Ct. 969, 10 L.Ed.2d 33 (1963). This obligation includes fair treatment of creditors and stockholders. In re Los Angeles Lumber Products Co., 46 F.Supp. 77, 88 (S.D.Cal.1941). However, in this case, the District Court found that there was no breach of fiduciary duty on the part of the trustee, and we hold that this finding is not clearly erroneous.
Additional working capital was required for Moulded Products to be successfully reorganized. Monsanto refused to supply it. The best alternative available to the trustee was to find a purchaser for Monsanto’s interest who had the capacity and the willingness to furnish additional working capital. One stockholder tried to negotiate with Monsanto. He was unsuccessful. The employees, with the assistance of the trustee, then tried to buy Monsanto’s interest; they were unsuccessful. At that point, the trustee assisted Red River in negotiating an agreement with Monsanto for the purchase of its interest and induced Red River to guarantee a loan to supply working capital for Moulded Products. This loan was secured by a lien on the accounts receivable and the inventory. There is nothing in the record to indicate that any individual stockholder or group of stockholders, other than those who negotiated unsuccessfully, were interested in purchasing Monsanto’s interest and advancing working capital to the corporation. Perhaps the trustee should have actively pursued this possibility with the stockholders, but on the record before us, we cannot say that the trial court erred in holding that his failure to do so was not a breach of his fiduciary duties.
B. Limiting Red River Claim to the Amount of Consideration if Paid.
Holding as we do that the trustee did not breach his fiduciary duty in arranging for the sale of Monsanto’s claim to Red River, we can find no reason to limit Red River’s unsecured claim to the amount of consideration it paid.
An authoritative bankruptcy treatise states:
“Where claims or interests have been assigned or purchased, allowance thereof may be controverted on the ground that as a result of fraud, misrepresentation, overreaching or violation of a fiduciary obligation, such claims or interests were acquired for an inadequate consideration, and where this can be shown the court may disallow the claim or interest or (more often) allow it only for the amount actually paid.” (Footnotes omitted.)
6A Collier on Bankruptcy § 9.04 at 155-156 (14th ed. 1971).
The cases in which claims are limited to the amount of consideration paid generally deal with transactions where the assignee is in a fiduciary relationship with the corporation or is a close relative of someone in such a fiduciary relationship. There is no such relationship between Red River and Moulded Products. The record does not support the contention that Red River purchased Monsanto’s claim for an insufficient consideration, nor does it indicate that Red River had access to information not available to the shareholders when it purchased Monsanto’s claim. Moreover, there is no evidence of any fraud or misrepresentation. See, In re Automatic Equipment Mfg. Co., 106 F.Supp. 699 (D.Neb.1952). Consequently, we do not hold the District Court’s finding that the assignment was “for proper purposes, fair and reasonable and of beneficial effect to the debtor” to be clearly erroneous.
It is unfortunate that the shareholders of Moulded Products will lose their investment. However, they have been accorded all of their rights under Chapter X. They submitted an alternative plan for reorganization, which was properly rejected by the District Court. The shareholders’ plan, in which the shareholders would participate and Red River would participate on a subordinated basis, was predicated on a finding of solvency and a finding that the trustee breached his fiduciary duty. Neither of these findings was made. Because we uphold the District Court on its findings concerning solvency (see Part III of this opinion, infra) and breach of fiduciary duty, we hold that the District Court’s rejection of the shareholders’ plan was reasonable. Under the rule of absolute priorities, if the corporation is insolvent, the shareholders may not participate in the reorganized corporation. Consolidated Rock Products Co. v. DuBois, 312 U.S. 510, 61 S.Ct. 675, 85 L.Ed. 982 (1941).
Even if we were to limit Red River’s claim to the consideration it paid, the corporation would still be insolvent and the shareholders would not be affected by our ruling on this issue. Moreover, none of the creditors — secured or unsecured — has objected to the Monsanto-Red River transaction or to the status of Red River’s claim.
III. VALUATION.
The appellant contends the going concern value of Moulded Products was erroneously fixed at $900,000.
It is uncontested that the District Court used the proper measure of valuation. In reorganization proceedings, the test of the fair value of the debtor’s property is the earning power of the corporation as a going concern. Consolidated Rock Products Co. v. DuBois, supra 312 U.S. at 525, 61 S.Ct. 675. The debtor is insolvent if the aggregate amount of its property, as measured by its going concern value is insufficient to pay its debts. In re Muskegon Motor Specialities, 366 F.2d 522, 526 (6th Cir. 1966). The District Court found that Moulded Products was insolvent on July 6, 1971, when it filed its petition for reorganization and, on October 12, 1972, when the finding of insolvency was made, since on both dates its liabilities exceeded its going concern value of $900,000.
A determination by the District Court of valuation is a finding of fact and will not be reversed on appeal unless clearly erroneous. Dudley v. Mealey, 147 F.2d 268 (2nd Cir. 1945), cert. denied, 325 U.S. 873, 65 S.Ct. 1415, 89 L.Ed. 1991 (1945). However, the United States Supreme Court in Protective Committee for Independent Stockholders of TMT Trailer Ferry v. Anderson, 390 U.S. 414, 88 S.Ct. 1157, 20 L.Ed.2d 1 (1968), emphasized that if the District Court does not use the proper measure of future earnings, its valuation cannot stand even though the valuation could not be said to be clearly erroneous. The Committee contends that the District Court employed an improper measure of future earnings by using an earnings figure from which estimated interest payments had been deducted. The Committee contends that the amount of interest payments which will be made by the reorganized corporation is a highly speculative figure. Whether the corporation will be financed by equity investment or by loans under reorganization is an “arbitrary management decision,” and the trustee, if he desires, can greatly affect the going concern value by his choice of financing, if the earnings figure used to compute this value is reduced by the amount of estimated interest payments. Therefore, the Committee argues that the use of an earnings figure before deduction of interest payments is the only fair method of valuation.
The effect of using the Committee’s proposed measure of earnings would be that the going concern value of Moulded Products would probably exceed its liabilities, and the shareholders would not be excluded from participation in the reorganized corporation under the rule of absolute priorities. However, to accomplish this result, the Committee asks us to take an arbitrary approach to valuation and to use, in all instances, an earnings figure before interest payments have been deducted. To take such a stance would be directly contrary to the basic approach courts have taken in the past to valuation of debtor corporations in reorganization proceedings. This approach is that valuation must be determined on a case-by-case basis, and all relevant factors must be taken into consideration in each case in determining going concern value. Consolidated Rock Products Co. v. DuBois, supra, 312 U.S. at 526, 61 S.Ct. 675.
We have carefully examined the record before us and find that the District Court acted properly by taking interest payments into consideration in making its determination of valuation. Correspondence and testimony in the record indicate that the reorganized corporation will be financed heavily by loans. In addition, the corporation is assuming all secured debts of the old corporation. Consequently, interest payments will be a definite expense under reorganization.
The rationale underlying the case-by-case determination of valuation is to avoid past errors, guard against overcapitalization, afford the creditors and stockholders a fair and equitable distribution, and assume as far as possible that the new corporation will be able to meet its interest and dividend requirements. Consolidated Rock Products Co. v. DuBois supra 312 U.S. at 526, 61 S.Ct. 675; 6A Collier on Bankruptcy, supra, § 11.05. To adopt the Committee’s argument would result in too high a valuation of the corporation with all the attendant problems described above. We have carefully examined the record and hold that the District Court considered all relevant factors and that its finding as to valuation is not clearly erroneous.
Affirmed.
. The feasibility of this reorganization plan appears marginal, but we do not feel that the plan has so little merit as to permit us to set it aside on our own motion. To protect the interest of existing and future creditors and to improve the chances of success of the reorganized corporation, the trustee should proceed immediately to firm up the understanding that he has with Red River for that corporation to furnish adequate working capital to Moulded Products. Moreover, the referee must insist that the trustee advise him of major decisions before they are made so that he can approve or disapprove them. The referee must also proceed to fix the compensation of the trustee at a reasonable sum and to make that compensation a matter of record.
. According to the contract of sale, $75,000 of the purchase price was in consideration for assignment of the unsecured claim, and $20,000 was in consideration for assignment of the stock interest. Regarding its stock interest, Red River shares the fate of the other stockholders. Under tlie rule of absolute priorities, its stock interest is worthless, unless at the time of discharge, the corporation has a positive net worth. Red River will participate in the reorganized corporation only to the extent of its unsecured claim.
. See, 6 Collier on Bankruptcy § 7.01 fit 1144 (14th eel. 1971), where it stated:
“ * * * [0]nee reorganization becomes necessary, the procedure * * * should be based primarily on the criterion of what is best for the interests of the many whose money has been put into the corporation, as compared with the interests of the management and dominant groups, strategically powerful, who could otherwise force a plan favorable to themselves upon the general body of security holders.”
. In a letter to this Court, dated January 23, 1973, counsel for the Committee enclosed a letter, dated January 19, 1973, signed by four members of the Stockholders’ Protective Committee, stating their willingness to guarantee a secured $185,000 bank loan to Moulded Products if the present trustee is replaced. Since we find no breach of fiduciary duty by the trustee, we find the stockholders’ offer to be unreasonable.
. Liabilities as of July 6, 1971, totaled $2,161,176. Liabilities as of October 12, 1972, totaled $2,187,826.
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2024-08-24T03:29:51.129235
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James D. HODGSON, Secretary of Labor, United States Department of Labor, Appellee, v. CORNING GLASS WORKS, a corporation, Appellant.
Nos. 252, 349, Dockets 72-1229, 72-1230.
United States Court of Appeals, Second Circuit.
Argued Jan. 4, 1973.
Decided Feb. 2, 1973.
Carin Ann Clauss, Associate Sol. (Richard F. Schubert, Sol. of Labor, Francis V. LaRuffa, Regional Sol., Donald S. Shire, Helen W. Judd, Isabelle R. Cap-pello, and Sylvia S. Ellison, Washington, D. C., of counsel), for appellee.
Scott F. Zimmerman, Pittsburgh, Pa. (Reed, Smith, Shaw & McClay, John G. Wyman, and Walter P. DeForést, Pittsburgh, Pa., of counsel), for appellant.
Before FRIENDLY, Chief Judge, KAUFMAN, Circuit Judge, and HOLDEN, District Judge.
Chief Judge of the District Court for the District of Vermont, sitting by designation.
FRIENDLY, Chief Judge:
This appeal marks this Court’s first encounter with the Equal Pay Act of 1963, 29 U.S.C. § 206(d), one of the many beneficent remedial statutes enacted during the last decade which create new tasks for the federal courts. The burden is increased, perhaps needlessly, because, as is the case with other provisions of the Fair Labor Standards Act of which it forms a part, the Equal Pay Act has no provision for administrative fact-finding.
The controlling statute, 29 U.S.C. § 206(d)(1), of seeming simplicity, reads as follows:
No employer having employees subject to any provisions of this section shall discriminate, within any establishment in which such employees are employed, between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex: Provided, That an employer who is paying a wage rate differential in violation of this subsection shall not, in order to comply with the provisions of this subsection, reduce the wage rate of any employee.
I.
Since the parties broadly accept the factual findings of the district court, a brief summary will suffice.
The controversy concerns the wages paid by Corning Glass Works (“Corning”) to Class B, Class C, and General TV inspectors, in its A Factory, B & C Factory, and Pressware Plant at Corning, New York. Prior to 1925, Corning operated its plants only during the day, and found it unnecessary or undesirable to have a night shift. Between 1925 and 1930, however, the introduction of automatic production equipment made it necessary to institute a night inspection shift. Although, as the district judge found, Shultz v. Corning Glass Works, 319 F.Supp. 1161, 1170 (W.D.N.Y.1970), previously “women had filled most, if not all, of the inspection jobs on the day and afternoon shifts,” New York law then prohibited the employment of women between 10:00 P.M. and 6:00 A.M., and thus Corning had to recruit male employees for a steady night shift. They demanded and received wages comparable to what they were earning on other, often more demanding jobs in the plant, which were approximately twice those paid to the female inspectors. The base rate for the inspectors on the night shift was 53 cents per hour, as against 24 to 28 cents per hour for the female inspectors on the day shifts.
Thus a situation was created where the night inspection shift was all male, the day shift virtually all female, and the males received wages significantly higher than the females. This state of affairs persisted until the effective date of the Equal Pay Act — and beyond it— except for one brief period when, because of labor shortages during World War II, New York allowed women to work at night; women employed by Corning on the night shift during that period received the same wages as the men when they performed the same work. In 1944 the Corning, New York plants were organized by the American Flint Glass Workers Union and a collective bargaining agreement was negotiated which provided for the company’s first plant-wide night shift differential. But this change in Coming’s wage structure did not eliminate the higher base wage paid to male night inspectors since, in the case of the inspectors, the shift differential was superimposed upon the existing difference in wage scales. Similarly, although in 1953 New York changed its law to permit females over the age of 21 to work after midnight in factories operating multiple shifts where the Industrial Commissioner found transportation and safety conditions to be satisfactory and granted approval, the record does not reveal any application by Corning for such approval prior to 1966.
The Equal Pay Act became effective with respect to Coming’s Corning, New York plants on June. 11, 1964. Since Corning had previously maintained separate “male” and “female” rate schedules plant-wide, with the latter materially lower, the Act clearly called for action on its part. Corning therefore merged the separate schedules into one. However, so far as concerned the inspectors, this was a matter of theory only, since the day shift inspectors were assigned to lower wage groups, see 319 F.Supp. at 1165-1166. Thus, as the district court found, 319 F.Supp. at 1166, “the merger continued the historical difference in base hourly rates of the men and women inspectors working the three shifts.”
Coming’s first significant step toward eliminating the differential wage rates for male and female inspectors took place on June 1, 1966, when it opened the inspection jobs on the night shift to women, presumably with the approval of the State Industrial Commissioner. At this time Corning consolidated its theretofore separate male and female seniority lists, and women became eligible to bid for the higher paid night inspection jobs when vacancies occurred. It is undisputed that a considerable number of women took advantage of this opportunity; turnover in the night inspection jobs was substantial and over half the vacancies were taken by women. Still, the process required some time since women could not exercise their seniority to “bump” a less senior male night inspector.
The last significant event was Coming’s negotiation of a new collective bargaining agreement with the Flint Glass Workers Union, effective January 20, 1969. This abolished the separate base wage rates of day and night shift inspectors and increased the rate for all inspectors, so that the resulting base wage was the same for all three shifts and exceeded the wage rates on the steady night shift previously in effect. If the agreement had stopped at that point, there could be no substantial claim of further violation of the Equal Pay Act. However, the agreement provided for a higher “red circle” basic rate to every person employed before January 20, 1969, when working as an inspector on the night shift. At the time of the last hearing in the district court, over two years after the new agreement went into effect, all the night inspectors were being paid at the “red circle” rate; unless Corning changes its system, this is likely to continue for some time since at the date of the hearing over 500 laid-off inspectors had to be offered reemployment before any new inspectors could be hired.
The district court held that Corning had been in continuing violation of the Equal Pay Act; directed it to pay the night rate to all inspectors from November 1, 1964, see note 5 swpra, to January 20, 1969, and the “red circle” rate thereafter to all inspectors until true equalization was effected; awarded interest at the rate of 6% per annum on the amounts withheld; and issued an injunction against future violations of the Act of any kind with respect to all categories of employees at all plants except the branch plant at Wellsboro, Pennsylvania. Corning claims that it was never in violation of the Equal Pay Act; that if it was, any violation ended on June 1, 1966, when women became eligible to work on the night shift, or, at latest, on January 20, 1969, when the differences in basic wage rates were abolished; and that the broad injunction was unjustified. Although the issues are not free from doubt, we reject all contentions save the last.
II.
The parties are in agreement on the general approach we should follow. The initial question is whether the inspection jobs on the day and night shifts constituted “equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.” The Secretary has the burden on this, Shultz v. American Can Co., 424 F.2d 356, 360 (8 Cir. 1970); Hodgson v. Brookhaven Gen’l Hosp., 436 F.2d 719, 722 (5 Cir. 1970), and, if he has not sustained it, the complaint must be dismissed even if the wage differentials were unreasonably large in comparison with the actual differences in skill, effort, responsibility, or working conditions, and were based on discriminatory motivation; Congress did not intend to put either the Secretary or the courts in the business of evaluating jobs and determining what constituted a proper differential for unequal work. See 109 Cong.Reg. 9197-98, 9209 (1963); Hodgson v. Miller Brewing Co., 457 F.2d 221, 227 (7 Cir. 1972). The Secretary also has the burden of establishing a prima facie case that the wage differentials represent “discriminat[ion] ... on the basis of sex.” Shultz v. Wheaton Glass Co., 421 F.2d 259, 266 (3 Cir.), cert. denied, 398 U.S. 905, 90 S.Ct. 1696, 26 L.Ed.2d 64 (1970). Once the Secretary has sustained these burdens, the employer can escape liability only by bringing itself within one of the four exceptions, the one that is particularly relevant here being the general escape clause, “a differential based on any other factor other than sex.” On this the employer has the burden. Shultz v. Wheaton Glass Co., supra, 421 F.2d at 266; Shultz v. American Can Co., supra, 424 F.2d at 362.
Corning’s most basic contention — one-which, if sustained, would immediately end the case — is that work on a steady night shift is not performed under “working conditions” similar to work on day or afternoon shifts. To those uninitiated in the language of industrial relations, that would indeed seem to be true, and the District Court for the Middle District of Pennsylvania has so held, see note 7 supra. But, as said in one of Mr. Justice Frankfurter’s early opinions, “[t]he recognized practices of an industry give life to the dead words of a statute dealing with it.” United States v. Maher, 307 U.S. 148, 155, 59 S.Ct. 768, 771, 83 L.Ed. 1162 (1939). Statutory language addressed to experts must be read in the way the experts would understand it. See NLRB v. Highland Park Mfg. Co., 341 U.S. 322, 326-327, 71 S.Ct. 758, 95 L.Ed. 969 (1951) (Frankfurter, J., dissenting).
The legislative history of the Equal Pay Act supports the construction that the time at which work is performed was not regarded as a “working condition” but rather as a proper subject for “a differential based on any other factor other than sex.” The equal pay bills, H.R. 3861, 88th Cong., 1st Sess. (1963); S. 910, 88th Cong., 1st Sess. (1963), as originally introduced in Congress, would have required equal pay for “equal work on jobs the performance of which requires equal skills.” Ezra G. Hester, then Corning’s Director of Industrial Relations Research, testified before both House and Senate Committees in opposition to this formulation. He pointed out that most of industry was by then using formal job evaluation systems in order to establish equitable wage structures in their plants, and that most of these job classification systems considered three factors in addition to “skill,” to wit, effort, responsibility, and working conditions. As an example, he cited his own company’s plan, which was introduced into the record. Under “working conditions” the plan and the accompanying job evaluation sheets listed two factors: “surroundings” (requiring evaluation of exposure to elements, intensity, and frequency) and “hazards” (requiring evaluation of frequency of exposure to hazard, frequency of injury, and seriousness of injury); nothing was said about time of day worked or differences in shift. Mr. Hester testified that “Other companies use similar job evaluation sheets,” and urged the committees to amend the proposed legislation to conform to these industry practices. See Hearings on H.R. 3861 and Related Bills Before the Special Subcommittee on Labor of the House Committee on Education and Labor, 88th Cong., 1st Sess. 232-40 (1963); Hearings on S. 882 and S. 910 Before the Subcommittee on Labor of the Senate Committee on Labor and Public Welfare, 88th Cong., 1st Sess. 96-104 (1963).
In response to this, the bill was rewritten in committee and placed in its present form. Five House Committee members thus explained the change, H.R.Rep. No. 309, 88th Cong., 1st Sess. 8 (1963), U.S.Code Cong. & Admin.News, p. 690:
The concept of equal pay for jobs demanding equal skill has been expanded to require equal effort, responsibility, and similar working conditions as well. These factors are the core of all job classification systems and the basis for legitimate differentials in pay.
Earlier in the Report, at p. 3, U.S.Code Cong. & Admin.News, p. 689, the Committee had indicated where it thought shift differentials would fit into the statute:
Three specific exceptions and one broad general exception are also listed. . . As it is impossible to list each and every exception, the broad general exclusion [“differentials based on any other factor other than sex”] has also been included. Thus, among other things, shift differentials, restrictions on or differences based on time of day worked, hours of work, lifting or moving heavy objects, differences based on experience, training, or ability would also be excluded.
This persuasive explanation of how the bill took shape, and the evident understanding of the Committee, consistent with this explanation, of the structure of the amended bill, outweigh the point, strongly pressed by Corning, that Representative Goodell, who introduced the bill and had a hand in redrafting it, remarked during the course of an explanation of its provisions that “hours of work, difference in shift would logically fall within the working condition factor.” 109 Cong.Rec. 9209 (1963). Corning also relies upon a statement by Representative Thompson, chairman of the Subcommittee:
Thus, among other things, shift differentials, restrictions on or differences based on time of day worked, hours of work, lifting or moving heavy objects, differences based on experience, training, or ability would also be exempted under this act.
109 Cong.Rec. 9196. But this does not assist Corning; indeed, since it is apparent that Representative Thompson was only paraphrasing his Committee’s Report, this rather supports the construction that time of day differentials were covered under the catch-all exception rather than by the term “working conditions.”
Administrative interpretation by the Wage and Hour Administrator, which the Supreme Court has held entitled to deference, Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944), further indicates that shift differentials are to be considered a legitimate exception to the Act rather than to reflect a difference in working conditions which would make the statute inapplicable. 29 C.F.R. §§ 800.100 et seq. set out the Administrator’s interpretations of each of the provisions of the Equal Pay Act and each of the terms used in the Act. Under “similar working conditions,” § 800.132 says that “[generally, employees performing jobs requiring equal skill, effort, and responsibility are likely to be performing them under similar working conditions,” which in itself would seem to indicate that shift differences are not considered different working conditions since this is such a common situation. The only examples given of different working conditions are the salesman who works in a store as compared with the salesman who sells door to door, or one who does repair work in a shop as compared with one who does repair work in customers’ homes. In contrast, the Administrator recognizes the legitimacy of night shift differentials in § 800.145, under “Exceptions to Equal Pay Standard.”
Finally, while the case law is not conclusive, the decisions, other than the recent one between the same parties in the Middle District of Pennsylvania, see note 7 supra, are more favorable to the Secretary’s position on this issue than to Coming’s. See Shultz v. American Can Co., supra, 424 F.2d 356; Hodgson v. Miller Brewing Co., supra, 457 F.2d at 224-225 & n. 8; Wirtz v. Basic Inc., 256 F.Supp. 786 (D.Nev.1966).
Coming’s impressive evidence that night work not only is less attractive than day work but often causes physical and emotional problems thus does not carry the day. While the statute indeed permits all this to be taken into account, it is relevant under the catch-all exception, with its requirement that the employer establish that the differential was based on a factor other than sex, rather than making night work a different “working condition” and eliminating application of the statute altogether. Thus the question is whether the higher rate paid by Corning for night inspection work, until 1966 performed solely by males, was in fact intended as compensation for night work or constituted an added payment based in part upon sex.
A number of facts support the district court’s conclusion that the latter was the situation here. As the history set out above indicates, the higher night rate was in large part the product of the generally higher wage level of male workers and the need to compensate them for performing what were regarded as demeaning tasks. . The wage differential has never been regarded as compensation for night work. There was no evidence that any other night employees received higher pay than corresponding day workers until the plant-wide night differential was superimposed on the basic rates in 1944; since that time, it is apparent that the shift differential has been thought to compensate, fairly and adequately, employees other than inspectors for night work. Indeed, Corning had separate male and female salary schedules until June 11, 1964.
The plain fact is that the differentials here at issue arose because men would not work at the low rates paid the women day-time inspectors to perform what the men called “female work.” This is the very condition at which the Equal Pay Act was aimed. A higher rate paid to men for performing low-paid “female work” is not transformed into a permissible “differential based on any other factor other than sex” simply because the men work at night. We might, of course, have a different problem if New york had continued to prohibit the employment of women at night, but the prohibition had ended a decade before enactment of the Equal Pay Act, and there is nothing to indicate that Corning would have had any more difficulty in obtaining the Industrial Commissioner’s approval in 1964 than it did in 1966.
The only other basis advanced by Corning to challenge the district court’s finding that it initially violated the Act is its contention that the day and night shift inspection jobs were not “equal work . . . the performance of which requires equal skill, effort, and responsibility” because, some of the men on the night shift had to do their own “utility work,” involving a certain amount of packing and lifting the inspected articles and cleaning up around the inspection station, which, on the day shifts, was primarily performed by male helpers especially hired for such work. It is now well settled, however, that the jobs under analysis need not be identical in every respect before the Equal Pay Act is applicable; inconsequential differences can be disregarded as long as the jobs are “substantially equal.” Shultz v. Wheaton Glass Co., supra, 421 F.2d at 265; Shultz v. American Can Co., supra, 424 F.2d at 360; Hodgson v. Fairmont Supply Co., 454 F.2d 490, 493 (4 Cir. 1972). Applying this standard, the district court rejected Coming’s contention primarily on the ground that' Coming’s job evaluation plan “considered the utility work of so little consequence that these tasks were not included in the job descriptions of any of the inspectors.” 319 F.Supp. at 1169. As the court below noted, id., these job descriptions, prepared through observation of actual job performance in 1963 and 1964, are particularly significant here since they demonstrate Coming’s own view of the content of the jobs before its perspective was changed by the filing of this litigation. Other evidence also showed the inconsequentiality of this factor. Although some male inspectors on the night shift had at times been given the assistance of utility workers, Corning has always continued to pay all night inspectors at the same wage. Indeed, Coming’s Manager of Job Evaluation, Edward Noble, conceded that “there is very little difference from shift to shift” in the performance of these inspection jobs. There is ample support for the district court’s conclusion that the relevant jobs entail “substantially equal” work. Cf. Shultz v. American Can Co., supra, 424 F.2d at 360-361.
We thus approve the district court’s holding that when the Equal Pay Act took effect, Corning was violating it by paying higher base wages to the male night inspectors, and proceed to consider whether the violation has since been cured.
III.
Corning first contends that it cured its violation by opening the night shift to women in 1966 on what was clearly more than a token basis, but see note 6 supra. Although this argument seems persuasive at first blush, it must be rejected. Congress was quite specific how the injustice of unequal pay for equal work must be eradicated. Recognizing the weaker bargaining position of many women and believing that discrimination in wage rates represented unfair employer exploitation of this source of cheap labor, see, e. g., Hearings on H.R. 3861, supra, at 8 (statement of Secretary of Labor Wirtz), Congress declared that wage discrimination on the basis of sex “depresses wages and living standards” of the many families dependent on the income of women. Equal Pay Act § 2, 77 Stat. 56. Consequently it provided that an employer paying a wage differential violative of the Act should cure the'violation by raising the wage rates of the women. This intention, clearly enough expressed in the proviso of 29 U.S.C. § 206(d)(1), that “an employer who is paying a wage rate differential in violation of this subsection shall not, in order to comply with the provisions of this subsection, reduce the wage rate of any employee,” received express emphasis from the legislators. “The only way a violation could be remedied under the bill ... is for the lower wages to be raised to the higher.” Hearings on H.R. 3861, supra, at 65 (statement of Representative Griffin); see also H.R. Rep. No. 309, supra, at 3 (“The lower wage rate must be increased to the level of the higher.”)
In light of this apparent congressional understanding, we cannot hold that Corning, by allowing some — or even many — women to move into the higher paid night jobs, achieved full compliance with the Act. Coming’s action still left the inspectors on the day shift — virtually all women — earning a lower base wage than the night shift inspectors because of a differential initially based on sex and still not justified by any other consideration; in effect, Corning was still taking advantage of the availability of female labor to fill its day shift at a differentially low wage rate not justified by any factor other than sex. We thus join with every other court of appeals which has considered the issue in holding that merely opening the higher paid jobs to women as vacancies arise is not sufficient to comply with the requirements of the Equal Pay Act. Shultz v. American Can Co., supra, 424 F.2d at 359; Hodgson v. Square D Co., 459 F.2d 805, 808-809 (6 Cir. 1972), cert. denied, 409 U.S. 967, 93 S.Ct. 293, 34 L.Ed.2d 232 (1972); see also Hodg-son v. Miller Brewing Co., supra, 457 F.2d at 226-227.
We come finally to Coming’s contention that any violation was cured by the new collective bargaining agreement which became effective January 20, 1969. As previously indicated, this would clearly have been so if Corning had simply established a uniform day and night shift rate at least as high as the previous night shift rate, either with or without a plant-wide night differential. The problem stems from the “red circle” rate whereby any employee hired before January 20, 1969, receives a basic rate for night shift work some four to twelve cents per hour higher than for the day and afternoon shifts. Coming’s contention that this is a differential based on seniority, another permitted exception, is belied by the fact that it is paid only for work on the night shift. We cannot disagree with the district judge, Hodgson v. Corning Glass Works, 330 F.Supp. 46, 50 (W.D.N.Y. 1971), that, on the facts of this case, “the ‘red circle’ rate paid to night shift inspectors perpetuates the discrimination of the ‘supplemental escalating shift differential’ ” — the euphemism Corning has coined for the excess base wage rates paid to inspectors on the night shift.
We do not minimize the problems faced by Corning in changing policies originally resulting from New York law so that it will comply with the Equal Pay Act. It may well be that the wages originally paid the male inspectors on the steady night shift were more than the jobs were worth and were paid only because Corning could not get the men to do this work for less than they were receiving for labor requiring more skill or effort. With the benefit of hindsight, Corning could have avoided this suit — and its back pay liability — by opening the night shift to women once the New York law was changed in 1953, when there was no legal obstacle to reducing the night rate, or, perhaps more realistically in light of union pressures, holding the night rate and gradually increasing the day rate until the two met, as was finally done, save for the “red circle” provision, in 1969. Even with the passage of the Act, however, Corning had ample time to restructure its wage rates to comply with the Act’s provisions, for Congress postponed its effectiveness for one year, see Equal Pay Act § 4, 77 Stat. 57, in order to avoid the “severe hardship” immediate compliance might impose on employers. See S.Rep. No. 176, 88th Cong., 1st Sess. 5 (1963). But it did not do so, and upon the effectiveness of the Act, many of Coming’s options were foreclosed by the proviso previously discussed. If the result here seems harsh in view of the efforts Corning has been making since 1966, the harshness is that which may be inevitable when a legislature demands a drastic change in discriminatory practices that had too long been accepted.
IV.
Not content with requiring the payment of back wages which, with interest, will exceed $600,000, the district court issued a sweeping injunction, broadly incorporating the words of the Act and applicable to all Corning plants (save that in Wellsboro, Pennsylvania), which we quote in the margin.
We see no justification for this. Corning had been found to have violated the Equal Pay Act only with respect to one class of employee at its three plants in Corning, New York. As indicated, the violations were largely a result of the New York law which until 1953 had prohibited the employment of women at night. The Secretary’s case was by no means impregnable, and Corning had been endeavoring since 1966 — sincerely, if ineffectively — to bring itself into compliance. There was no evidence of widespread violations of the Act, either at the Corning plants or its 26 branch plants nationwide. The evidence rather was that the only other cases where a similar violation might exist were the inspection jobs in the plant at Wells-boro, Pennsylvania, which was excepted from the injunction because of a pending suit by the Secretary, and in a plant at Central Falls, Rhode Island, as to which the Secretary had also already instituted suit. Yet so broad an injunction put Corning under threat of contempt for any alleged violation of the Equal Pay Act in respect of any category of employee in all but one of Coming’s many plants.
We agree with the point made by the Eighth Circuit, in another Equal Pay Act case, Hodgson v. American Can Co., 440 F.2d 916, 921 (1972), that absent a showing of a policy of discrimination which extends beyond the plants at issue here, there is no basis for a nationwide injunction. Moreover, the Supreme Court has held that
the mere fact that a court has found that a defendant has committed an act in violation of a statute does not justify an injunction broadly to obey the statute and thus subject the defendant to contempt proceedings if he should at any time in the future commit some new violation unlike and unrelated to that with which he was originally charged.
NLRB v. Express Publishing Co., 312 U.S. 426, 435-436, 61 S.Ct. 693, 699, 85 L.Ed. 930 (1941). Since there is no showing here of the “proclivity for unlawful conduct” or “record of continuing and persistent violations of the Act” found to justify such an injunction in McComb v. Jacksonville Paper Co., 336 U.S. 187, 192, 69 S.Ct. 497, 500, 93 L.Ed. 599 (1949), the injunction must be narrowed accordingly. While Hodgson v. First Fed. Savings & Loan Ass’n, 455 F.2d 818, 825-827 (5 Cir. 1972), relied on by the Secretary, may have been correctly decided on its own facts, we cannot subscribe, in the light of Express Publishing and our own views, to all that was there said.
The injunction is modified by eliminating paragraph (3) and limiting the remaining paragraphs to inspectors at the three Corning plants. As so modified, the judgment is affirmed. No costs.
. Although the Secretary of Labor previously claimed that the wages paid to a fourth class of employees, TV Inspectors, also violated the Equal Pay Act, the district court seemingly held that the Secretary had not met his burden of proof that the work done by men and women on these jobs was equal and did not include these jobs in its back pay award. See Shultz v. Corning Glass Works, 319 F.Supp. 1161, 1168, 1171 (W.D.N.Y.1970). The Secretary has not appealed this aspect of the district court’s order.
. 1927 N.Y.Laws, ch. 453; 1930 N.Y.Laws, ch. 868.
. The record does not reveal whether, apart from the inspectors, Corning had paid more for night work before the institution of the plant-wide differential in the 1944 agreement. Corning suggested that there might have been other jobs performed by women during the day for which the company had to pay a higher wage to get men to perform at night. It seems relatively clear, however, that if a job had been performed on the day shift by men, men on the night shift would receive the same wage.
. 1953 N.Y.Laws, ch. 708, amending N.Y. Labor Law § 172, now N.Y. Labor Law § 173(3) (a)(1) (McKinney’s Consol. Laws, c. 31, 1965).
. It was stipulated that the statute of limitations barred all claims arising prior to November 1, 1964 and that any back pay awards in this action should run only from that date.
. In 1966 only 4 of 15 women requesting transfer to the night shift received this. The situation later improved so that 39 out of 61 requests were honored in 1967, and 42 out of 52 through November 7 in 1968.
. The reason for the exception was that an action with respect to the Wellsboro plant, on facts similar to those in the instant case, was then pending in the District Court for the Middle District of Pennsylvania. This has since been decided in favor of Corning, Hodgson v. Corning Glass Works, 341 F.Supp. 18 (1972), and is now on appeal to the Third Circuit.
. Edward W. Noble, Coming’s Manager of Job Evaluation, testifying in this case, gave a similar description of Corning’s job evaluation plan and said specifically that the time of day was not considered to be a “working condition.” See also the Dictionary of Occupational Titles (3d ed. 1965), published by the Manpower Administration of the Department of Labor. Volume II: Occupational Classification, at 656, defines working conditions as “the physical surroundings of a worker in a specific job,” and gives the following examples: inside work v. outside work, exposure to heat, cold, wetness, humidity, noise, vibration, hazards (risk of bodily injury), fumes, odors, toxic conditions, dust and poor ventilation. It does not mention night work.
. The first night, shift differential was only five cents per hour; the excess in the base rates paid the men working as inspectors on the night shift over that paid the women on the day shift was at that time on the order of fourteen cents per hour.
. Corning objects to the use made by the district court of the descriptions of the inspection jobs prepared for the Coming-Glass Works Job Evaluation Plan (CGW Plan) and, to a lesser degree, of those contained in an earlier plan prepared for Corning by Stevenson, Jordan & I-Iarrison -(SJ&H Plan). Insofar as the objection rests on the hearsay rule, it is answered not only by the business records statute, 28 TJ.S.G. § 1732(a), but by the status of these plans as admissions (in the ease of the SJ&H plan, an adoptive admission). Insofar as the objection rests on the point that application of the Equal Pay Act hinges on actual job content rather than the emjdoyer’s evaluation, see Hodgson v. Brookhaven Gen’l Hosp., supra, 436 F.2d at 724, the evaluation is nonetheless evidence, and often exceedingly good evidence, of the actuality; if either party seeks to show the contrary, it is open to him to do so. The job descriptions, together with the supporting testimony of Edward Noble, were sufficient to sustain the Secretary’s burden of proof on job equality.
. Corning also challenges' the district court’s calculation of the amount of back pay due. IV e see no merit in this contention.
. (1) The defendant shall not, contrary to section 6(d) (1) of the Act, discriminate on the basis of sex between employees employed within an establishment by paying wages to employees in such establishment at a rate less than the rate at which it pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility and which are performed under similar working conditions:
(2) The defendant shall not, contrary to section 6(d)(1) of the Act, reduce the wage rate of any employee in order to comply with the provisions of section 6(d) (1) of the Act:
(3) The defendant shall not, contrary to section 15(a)(1) of the Act, transport, offer for transportation, ship, deliver, or sell with knowledge that shipment or delivery or sale thereof in commerce is intended, any goods in the production of which any of its employees has hereafter been employed in violation of section 6(d)(1) of the Act:
(4) Defendants shall cease to withhold any amounts owing to any employee which have been withheld in violation of section 6(d) (1) of the Act.
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NATIONAL FAMILY INSURANCE COMPANY, a Minnesota corporation, Plaintiff-Appellant, v. EXCHANGE NATIONAL BANK OF CHICAGO, a National Banking Association, Defendant-Appellee.
No. 71-1617.
United States Court of Appeals, Seventh Circuit.
Argued Oct. 27, 1972.
Decided Feb. 20, 1973.
Rehearing Denied March 15, 1973.
Pell, Circuit Judge, dissented and filed opinion.
Dom J. Rizzi, Frank J. Pause, Chicago, Ill., for plaintiff-appellant.
Edgar Bernhard, Selwyn Zun, Robert W. Gettleman, Chicago, Ill., for defendant-appellee.
Before HASTINGS, Senior Circuit Judge, and FAIRCHILD and PELL, Circuit Judges.
HASTINGS, Senior Circuit Judge.
National Family Insurance Company, a Minnesota corporation (National Family), filed this action in the district court against Exchange National Bank of Chicago, a national banking association (Exchange Bank). Plaintiff is an insurance company and at all times herein concerned was 100 per cent reinsured by American Allied Insurance Company (American Allied) at a cost to plaintiff of more than $1,000,000 in premiums. American Allied was one of a group of insurance companies in Minnesota and Illinois owned and controlled by the Phillip Kitzer family. American Allied was adjudged to be insolvent by a Minnesota state court, and a receiver was appointed.
In brief, National Family seeks to recover substantial damages because of heavy losses it sustained by reason of Exchange Bank’s alleged fraudulent misrepresentations of the true financial status of plaintiff’s 100 per cent reinsurer, American Allied.
The instant appeal is by National Family from an order of the district court dismissing this action against Exchange Bank on the ground that it was barred by the running of the five-year Illinois statute of limitations, Illinois Revised Statutes, chapter 83, § 16 (1969), which provides that an action such as plaintiff’s herein “shall be commenced within 5 years next after the cause of action accrued.” Plaintiff seeks to avoid this limitation by relying on the “fraudulent concealment” exception set out in Illinois Revised Statutes, chapter 83, § 23 (1969), which provides: “If a person liable to an action fraudulently conceals the cause of such action from the knowledge of the person entitled thereto, the action may be commenced at any time within five years after the person entitled to bring the same discovers that he has such cause of action, and not afterwards.” This action having arisen in Illinois and being based upon diversity of citizenship, the Illinois law governing limitations applies. Bernard Food Industries, Inc. v. Dietene Co., 7 Cir., 415 F.2d 1279, 1282 (1969), cert. denied, 397 U.S. 912, 90 S.Ct. 911, 25 L.Ed.2d 92 (1970).
Plaintiff filed its complaint on September 25, 1970, and its notice of demand for jury trial on September 30, 1970. On October 15, 1970, defendant raised the limitations issue by filing its motion to dismiss the complaint on the ground that it failed to state a claim against defendant upon which relief could be granted because of the five-year limitations bar raised by chapter 83, § 16, supra. Thereafter, each party filed numerous exhibits, affidavits, counter-affidavits, depositions and mem-oranda in support of and in opposition to the motion to dismiss. Subsequently, pursuant to Rule 12(b), Federal Rules of Civil Procedure, Title 28, U.S.C.A., defendant’s motion to dismiss was treated as one for summary judgment.
On May 3, 1971, the district court filed its written opinion and order and concluded:
“The conflict that arises from the facts outlined above creates an issue that is not ripe for resolution on motion for summary judgment and would ordinarily be cause for denial. However, in view of the obviously complicated and lengthy litigation that will ensue on the trial of this cause, the court has decided to order a factual hearing solely to determine whether, in accordance with the standard set out earlier in this opinion, the statute of limitations began to run prior to September 23, 1965.”
We have carefully reviewed the trial court’s memorandum opinion of May 3, 1971. In our judgment it correctly summarizes the nature of the cause of action and the relation of parties thereto, as well as the position of American Allied and the “Kitzer Family” and its activities. The court properly treated the motion to dismiss as one for summary judgment. Sticker Industrial Supply Corp. v. Blaw-Knox Co., 7 Cir., 367 F.2d 744, 745 n.1 (1966).
We have examined the Illinois law cited by the trial court in its written opinion. The court correctly determined that, although the “fraudulent concealment” exception set out in chapter 83, § 23, supra, literally reads that the right of action for concealment of fraud remains for a period of five years from the date plaintiff actually discovers the fraud, yet the Illinois courts have applied the ordinary fraud standards to determine when the cause of action accrues. The applicable statutory period here commences at the time the plaintiff, through ordinary diligence, should have discovered the fraudulent actions causing its injury. “Mere silence of the defendant and mere failure on the part of the complainant to learn of a cause of action do not amount to such fraudulent concealment.” Jackson v. Anderson, 355 Ill. 550, 557, 189 N.E. 924, 927 (1934).
The trial court further found that the statutory period of five years was uninterrupted. It noted the complaint charged that the Kitzers and American Allied were customers of defendant Exchange Bank for almost four years from August 1, 1961, through June 5, 1965, and from that logically assumed that all acts of fraudulent representations must have occurred within that period. Insolvency proceedings against American Allied commenced June 10, 1965. Beginning as early as April 12, 1965, and continuing on through September 21, 1965, a total of 27 newspaper articles appeared in the St. Paul-Minneapolis area (where plaintiff is located) questioning various financial dealings of American Allied and reporting a suit against defendant Exchange Bank by the receiver of American Allied. These were attached as exhibits to defendant’s motion for dismissal and/or summary judgment. The court specifically found that “[tjhis publicity and the insolvent condition of American Allied would alone appear to be sufficient notice.”
However, because of plaintiff’s counter-showing by affidavit that it was unaware of any fraud on the part of defendant Exchange Bank until 1967, the trial court wisely decided that this conflict was not ripe for summary judgment disposition.
Following the foregoing order of May 3, 1971, certain depositions were taken by plaintiff and additional documentary evidence was filed. The next hearing on the limitations issue was held before the court the afternoon of June 9, 1971. Plaintiff presented the testimony of one witness. Both parties relied on depositions previously taken. The matter was not concluded but was next resumed on the afternoon of June 23,1971.
The hearing was resumed on the limitations issue previously considered and under the guidelines set out in the earlier order. Certain documents in the Minnesota state court insolvency matter were admitted in evidence, and all counsel were heard at length on the issue before the court. At the conclusion of the hearing the trial court orally announced the following findings and ruling from the bench:
“The hour is late, you have argued, all of you, adequately and capably. I have read the pleadings. We have had occasion to consider the matter earlier in the context of a ruling on a motion for summary judgment.
“I take the argument today to be in support of an alternative motion to dismiss, which is based solely on the statute of limitations, and it is on that sole issue that I am prepared to rule.
“It is the finding of the Court, after the consideration of the evidence that is available to me in the form of pleadings, depositions, and other matters called to my attention, that the misrepresentations of the Exchange National Bank which are basically what is sued upon, whether directly or indirectly, relate to the financial condition of American Allied. The extent to which Exchange National Bank may be involved in any financial machinations, as they have been called here, to bring about the insolvency, or even to conceal the insolvency of American Allied, are not relevant, except as they operate to deceive National Family as to the financial condition of American Allied.
- “The operative facts which put National Family on notice of their cause of action here are the evidences of insolvency of American Allied and nothing else. National’s faith in the misrepresentations causing it to believe that American Allied was solvent, ripened into a cause of action when National learned, or should have learned that American Allied was insolvent. It seems clear from the evidence the beginning of that knowledge certainly should have occurred somewhere around June 10th, 1965, when National found American Allied no longer able, because of insolvency and the Court ruling, to live up to its obligations under the reinsurance contract.
“The cause of action which is asserted here, therefore, ripened into a cause of action some time in June or in any event, no later than mid-September of 1965. The complaint here was filed more than five years after that date. Therefore, the motion to dismiss filed by the defendant, based on the statute of limitations, is granted.”
We have examined the record before the district court and understand the district court’s interpretation thereof to mean that plaintiff’^available information should HaveTbeen sufficient to. have put plaintiff upon notice of .its cause of action at a time between June 10 and mid-September 1965. The chronology of events and publicity involving defendant Exchange Bank which, through the exercise of ordinary diligence, should have caused plaintiff National Family to have discovered the fraudulent actions causing its injury, follows :
The newspaper articles appearing on April 12, 1965, related accusations by two state legislators that the Minnesota Insurance Commissioner (later indicted with the Kitzers and three bank officers) had misused his office and that $1,000,000 of American Allied funds had been transferred to an unauthorized Chicago bank account.
In June 1965, American Allied was no longer able to pay claims on its reinsurance obligations, and National Family began to pay them itself. Insolvency proceedings against American Allied were commenced in the Minnesota state courts on June 10, 1965. On August 4, 1965, American Allied was found to be insolvent, and a receiver was appointed. In June, July and August 1965, the newspaper articles earlier mentioned informed the public in that area concerning the alleged illegal activities of defendant Exchange Bank, certain of its officers, the Kitzers, the Minnesota Insurance ■ Commissioner, together with other attendant litigation, and the resulting insolvency of American Allied. Further publicity concerning the same subject matter appeared on September 14, 17 and 18, 1965. Deposition testimony of Jensch, plaintiff’s executive director, and of Lewis, its counsel, was also revealing of National Family’s pre-Sep-tember 23, 1965, awareness or cause for awareness of defendant Exchange Bank’s alleged fraudulent activities.
Without further detailing the evidence, we are satisfied that the district court was amply justified in finding and holding that plaintiff knew or should have known of its cause of action against defendant more than five years prior to filing its complaint on September 23, 1970.
Finally, plaintiff makes the belated contention that this case presented an issue of fact which should have been determined by a jury since it had originally filed a notice of demand for a jury trial. This charge is without merit and is raised for the first time in the instant appeal. The district court did not act summarily and refused to determine the limitations issue by summary judgment. It handed down a memorandum opinion to that effect on May 3, 1971. At that time it ordered a factual hearing solely to determine the limitations issue. This second hearing was held on June 9, 1971, and was resumed to completion on June 23, 1971. Plaintiff not only made no objection to this procedure but approved and fully participated in it by presenting witnesses, documentary evidence and arguments on its own behalf.
Quite aside from any question of plaintiff’s right to a jury trial on the limitations issue on a motion to dismiss, it is now too late for plaintiff to raise this question for the first time on appeal. Brown v. Wisconsin State Department of Public Welfare, 7 Cir., 457 F.2d 257, 259 (1972); Desert Palace, Inc. v. Salisbury, 7 Cir., 401 F.2d 320, 324 (1968). Cf. Washington Gas Light Co. v. Virginia Electric & Power Co., 4 Cir., 438 F.2d 248, 250 (1971).
Further, this procedural question is a matter governed by federal law, and there is ample authority that if any such right existed, plaintiff waived it by proceeding to the trial of that issue before the court without objection. Kearney v. Case, 79 U.S. (12 Wall.) 275, 284, 20 L.Ed. 395 (1871); Smith v. Cushman Motor Works, Inc., 8 Cir., 178 F.2d 953, 954 (1950). See also Bradley v. Maryland Casualty Co., 8 Cir., 382 F.2d 415, 420 (1967) (written by then-Circuit Judge Blackmun). Cf. Maytag Co. v. Meadows Manufacturing Co., 7 Cir., 45 F.2d 299, 301-302 (1930), cert. denied, 283 U.S. 843, 51 S.Ct. 489, 75 L.Ed. 1452 (1931).
Finding as we do that the limitations issue was correctly determined on its merits and that the procedural issue is without substance, the judgment of dismissal is affirmed.
Affirmed.
PELL, Circuit Judge
(dissenting).
, The well expressed opinion of Judge Hastings in my view correctly and succinctly sets forth the factual picture and legal issues in this appeal and reaches the proper result on the claim of right to a jury trial. Respectfully, however, I am unable to agree with the determination reached as to the principal issue and therefore dissent from that portion of the opinion.
That issue, as to which there seems to be no disagreement as to what it is, is whether prior to September 23, 1965, the plaintiff insurance company discovered or with reasonable diligence should have discovered the alleged fraudulent misrepresentations made by the defendant bank to the Minnesota Department of Insurance as to the financial condition of American Allied.
The district court did not find actual knowledge as I read its opinion, and the question remains whether there was constructive notice. The district court finds a sufficient basis for constructive notice in the fact, which was obvious to all interested parties, that American Allied was insolvent. It appears to me, however, that there is an insurmountable'gap between knowledge of the insolvency of A and being put on notice that B had misrepresented that solvency.
The majority opinion basically relies on the fact that the defendant bank was sometimes mentioned in the abundant newspaper publicity concerning the defalcations of American Allied’s agents and representatives. This was not, however, the basis on which the district court, which had all of the evidence before it, determined the issue. The district court simply stated, “The operative facts which put National Family on notice of their cause of action here are the evidences of insolvency of American Allied and nothing else.” (Emphasis added.)
It is not uncommon for con artists, corporate or individual, to utilize innocent banking institutions in connection with their machinations. Funds are deposited, shifted, withdrawn, put into blind accounts and otherwise maneuvered, often with great expedition. Loans including mortgages are often made to those with impure hearts because of a lack of knowledge thereof by the lending bank. In short, because a customer of a bank has had his acts of fraud and insolvency exposed does not implicate the lending or depository bank with knowledge thereof. I cannot therefore agree with the district court’s apparent holding that just because the plaintiff knew American Allied was insolvent it should have been aware that the defendant bank might have been implicated.
Conceding, however, that if the record shows other facts, even though not relied upon by the district court, justifying constructive notice we must affirm, I turn to that upon which the majority opinion relies, i. e., the newspaper publicity in which the name of the defendant bank was mentioned and certain depositions.
In my opinion, and respectfully to the analysis of Judge Hastings, these did not serve as a flag of implication. I would venture the opinion that the district judge may have so thought when he did not base his decision on the fact that publicity had mentioned the defendant bank.
While there were numerous newspaper articles which clearly established that American Allied was on a collision course with financial disaster, the defendant bank was not named in many of these articles.
The transfer of funds to “an unauthorized Chicago bank account” can mean no more in my opinion than that a deposit was made without necessary American Allied corporate authority. This might indicate that the bank was not sufficiently insistent upon corporate resolutions but would scarcely implicate the bank in any fraudulent machinations.
I cannot find that the newspaper articles in June, July or August 1965 informed the public in the St. Paul-Minneapolis area of any illegal activities of the defendant bank or its officials. These articles at most indicated that the bank was a depository of funds of American Allied and had made loans to it. An article on July 12 states that Kitzer, Senior, took funds from one of the companies and pledged the securities to the Exchange National Bank of Chicago to cover personal loans. This indicates a defalcation on the part of Kitzer but does not reflect that any bank had any knowledge that he was using other than his own personal assets.
An article of July 20, 1965, stated that Kitzer, Senior, “pledged securities belonging to the insurance firms as collateral for personal loans at a bank. The bank sold the bonds when Kitzer defaulted on his notes, but policy holders of the Bell firms have brought suit against the bank claiming it had no right to sell the bonds.”
Here the bank involved is not identified and at most, even assuming that plaintiff’s representatives should have been aware that the bank was the defendant bank, there is no showing that the bank was not properly taking steps to collect a loan which it had made on a bona fide basis.
An article of July 24, without identifying any bank specifically, stated that funds were being shifted between the Twin Cities and the Chicago, Illinois banks. There is no showing that whatever bank it may have been was aware of the shifting.
In an article of August 8, there is a vague reference to “the unexplained shift of $1.1 million in company money from St. Paul to Chicago, where the Kitzers headquartered.” The same article, again without identifying the bank stated: “He alleged that $200,000 in securities listed as company assets had been transferred to a Chicago bank and placed in Kitzer’s personal account or the account of someone named by him.”
On August IS, an article reflected that a grand jury had subpoenaed records from two named banks in Minneapolis and had also subpoenaed “two officials of a Chicago, Illinois, bank and a New York, N.Y., investment firm.”
On August 21, 1965, a suit was brought to foreclose a mortgage on the American Allied Building and the defendant bank is mentioned as the original mortgagee. Again, there is no showing other than a bona fide transaction. The article indicated that there would be a claim as to the legality of the mortgage but it is not an uncommon occurrence for dissident creditors to attempt to set aside liens which would otherwise make their claims less collectible.
In an article of September 10, 1965, an Illinois Insurance Department examiner was quoted as stating that certain money could not be properly considered as an asset of the American Allied firm “since it was prepledged - to the bank which granted Kitzer’s loan.” Thus, as late as September there was some authoritative indication that the bank which had granted Kitzer’s loan was doing so within the limits of proper banking practice.
It was not until an article of September 17, 1965 (five years and six days before the filing of the complaint here involved) that there was any specificity with regard to possible involvement of the defendant bank. An article of September 17 related that several suits had been filed against American Allied and its officers. One of these named the defendant bank as a party. With regard to the suit, the article stated the following: “It is alleged that the bank paid over the money to the Kitzers knowing that they were borrowing it for ‘their own personal use.’ It also is claimed that the Chicago bank assigned the mortgage to Mrs. Brown while proceedings were pending before Pearson to have the company declared insolvent.”
An article the next day also referred to the same suit and mentioned the further claim that the bank had assigned the mortgage to a Mrs. Brown while insolvency proceedings were pending.
The bank was charged, in still another article of September 18, with knowing that the Kitzers were borrowing for their own personal use. Finally, on September 21, an article stated that a vice-president of the defendant bank was expected to appear that day before the federal grand jury investigating the collapse of American Allied. This, of course, on the surface presents nothing more than the usual situation of calling in, where fraudulent financial schemes are involved, those who were acquainted with the financial affairs of the defrauding party. It has often been utilized as an initial source of inquiry.
While regretting the necessity of lengthening this dissent by the foregoing analysis, I have found it to be necessary to show that there was not, in my opinion, sufficient to establish a duty of diligent inquiry but at most there were suspicious but highly ambiguous circumstances of merely possible involvement of the defendant bank. Even the status of being suspicious did not really occur until about September 14. An analogous situation was reported in Grant v. National Bank, 97 U.S. 80, 24 L.Ed. 971 (1877), where the Court held that to invalidate a fraudulent preference the creditor must have had such knowledge of facts as to induce a reasonable belief of the debtor’s insolvency and it was not sufficient that he had some cause to suspect such insolvency.
The ease is of double significance here because it also involved a bank dealing with one who was found out to be insolvent. The Court summarized the situation at page 82:
“The circumstances calculated to excite their suspicions are very ably and ingeniously summed up in the brief of the appellant’s counsel; but we see nothing adduced therein which is sufficient to establish any thing more than cause for suspicion. That Miller borrowed money; that he had to renew his note; that he overdrew his account; that he was addicted to some incorrect habits; that he was somewhat reckless in his manner of doing business; that he seemed to be pressed for money, — were all facts well enough calculated to make the officers of the bank cautious and distrustful ; but it is not shown that any facts had come to their knowledge which were sufficient to lay any other ground than that of mere suspicion.”
With regard to the matter of the general test here applicable for imputing notice, the Tenth Circuit in Southwestern Petroleum Corporation v. Udall, 361 F.2d 650, 657 (10th Cir. 1966), stated:
“We agree that the test for imputing notice of a superior right is generally whether facts are sufficient to put an ordinarily prudent man on inquiry, an inquiry which, if followed with reasonable diligence, would lead to the discovery of defects in the title or of equitable rights of others affecting the property. The test is not what an extremely cautious person might do, but what a prudent one should do. Charles v. Roxana Petroleum Corp., 282 F. 983 (8th Cir.), cert. den. 261 U.S. 614, 43 S.Ct. 361, 67 L.Ed. 827.
“The existence of other later offers is not such a fact as to put Lowe on notice that a conflicting claim exists. This is a common situation which in itself should cause no suspicion.” (Emphasis added.)
Further, it is to be noted that a respectable-body of authority recognizes as “a broad, general proposition that no one is chargeable with constructive notice of a statement, advertisement, or other matter printed in a newspaper, in the absence of a statute expressly authorizing such publication and declaring the effect of a compliance with its terms, or unless it is seen by the person to be charged.” 58 Am.Jur.2d Notice § 17 (1971). Here there was no contention that any statute was applicable and there was a substantial doubt in the record as to the awareness of plaintiff’s representatives of the newspaper references to the defendant bank although it was clear they were aware of the insolvency of American Allied on which the district court rested its decision.
In my opinion there was not a sufficient basis in the newspaper articles to cause even suspicions that the bank was improperly involved with American Allied. In other words, an ordinarily prudent man would not have been put on inquiry as to the bank.
I would reach the same result as to the deposition testimony of Jensch and Lewis. Jensch testified that he may have been aware of the fact that the defendant had been mentioned in the newspaper articles but he assumed that the bank lent money to the Kitzers or were their financial backers or something like that. The deposition itself indicated that Jensch had attended a number of sessions of the insolvency trial and did make inquiries of a number of people but did not get very far asking questions. Apparently none of these questions were directed toward the bank because the name was not familiar to him. As far as Jensch’s testimony is concerned, I find no indication of any fact which would have caused him to think that the hearing or newspaper references to the defendant bank were other than that American Allied had an account at the bank and that the bank was attempting to protect collateral it had on a loan.
It appears to me that the indicia of fraudulent concealment on the part of the defendant bank were so minimal as to fall within the orbit of the principle stated in 54 C.J.S. Limitations of Actions § 189 at 193 (1948):
“The courts will not lightly seize on some small circumstance to deny relief to a party plainly shown to have been actually defrauded against those who defrauded him, on the ground that he did not discover the fact that he had been cheated as soon as he might have done; it is only where the party defrauded should plainly have discovered the fraud except for his inexcusable inattention that he will be charged with a discovery in advance of actual knowledge on the subject.”
Here, of course, the plaintiff has been denied by the limitations bar the opportunity of showing that it had been defrauded.
A person is only charged with the knowledge which proper inquiry would disclose where he has reasonable grounds for suspecting or inquiring, but here, there being a wide difference between suspicion and knowledge, evidence that there existed a suspicion in a person’s mind is not equivalent to evidence of notice. 58 Am.Jur.2d Notice § 13 (1971).
Even if it were to be assumed that there was such a reference to the defendant bank in the newspaper article of September 17, in which knowledge of improprieties on the part of American Allied by the bank was first specifically stated, in my opinion, the statute did not start running from the raising of the first flag of suspicion. This brings into play a rule of law which appears to me to be a matter of first impression.in the State of Illinois. However, this is merely an extension of the general rule which there is no reason for thinking Illinois would not follow. This rule, which might be termed “a reasonable period for inquiry” rule in the context of a statute of limitations situation, is stated in United States v. Booth-Kelly Lumber Co., 246 F. 970, 972 (D.Or.1917), as follows :
“Notice and knowledge of the fraud will set the statute in operation. No one questions the principle. But a party claiming fraud and lack of knowledge concerning it may be guilty of laches in ascertaining its existence, which will preclude him from asserting want of knowledge, where he has been let into facts and circumstances which are calculated to put a reasonably intelligent man upon inquiry as to the main fact, which inquiry, if seasonably pursued with reasonable diligence, would lead to a discovery of such main fact. Stated generally, the rule is that whatever puts a party upon inquiry amounts, in judgment of law, to notice, provided the inquiry becomes a duty and would lead to a knowledge of the real facts by the exercise of ordinary intelligence. The circumstances known to him must be such as ought reasonably to have excited his suspicion and led him to inquiry, and he must be allowed a reasonable time within which to make such inquiry before being affected with notice.” (Emphasis added.)
The principle is recognized in 66 C.J. S. Notice § llb(3) as follows:
“A person put on inquiry by facts is to be allowed a reasonable time in which to make such inquiry before being affected with notice. Neither law nor equity will impute to a person a knowledge of facts which he has not had a reasonable opportunity to ascertain. What constitutes a sufficient lapse of time for notice depends on the circumstances of the case.” (Footnotes omitted.)
The general rule has been stated in Nettles v. Childs, 100 F.2d 952, 957 (4th Cir. 1939), “if a person has actual knowledge of facts which would lead an ordinarily prudent man to make further investigation, the duty to make inquiry arises and the person is charged with knowledge of the facts which inquiry would have disclosed.” The logical extension of the rule would appear to be that he should not be charged with knowledge prior to inquiry or prior to a reasonable period of time which would be necessary for inquiry. To hold otherwise would be to place the person without actual knowledge in a less advantageous position than the person with actual knowledge.
I recognize that the “reasonable period for inquiry” rule has not been, as far as I have been able to discover, the subject of particularized application but only of general enunciation. The cases examined, however, have not evolved from close timewise situations such as the present case and there had not been a necessity for application of the rule. I also recognize in respect to the rule it could be argued that, once the waving flag is up, the prospective litigant has five years in which to inquire and to institute his suit, an arguably reasonable time. However, the litigant who has actual notice has a full five year statutory period following actual knowledge. I can conceive no valid reason in logic or justice for the prospective litigant in the uncertain and sometimes ambivalent area of fictitious constructive notice having less time, which would be true if he were denied a reasonable time to inquire diligently so as to verify what is at best only a clue.
The general rules of law pertaining to the imputing of knowledge following information or knowledge of certain extraneous facts which of themselves do not amount to, nor tend to show, actual notice, but which are sufficient to put a reasonably prudent man upon inquiry are summarized in 58 Am.Jur.2d Notice §§ 8 and 9 (1971). The text points out, however, that there must also be such circumstances that the inquiry, if made and followed up with reasonable care and diligence, would lead to the discovery of the truth, a questionable inference on the record before us. Finally, the Am.Jur. text recognizes the necessity of reasonable time for inquiry: “A reasonable cause to know is not equivalent to knowledge. Neither law nor equity will impute to a person knowledge of facts which he has not had a reasonable opportunity to ascertain.” 58 Am. Jur., supra, § 9.
It is obvious from the record in this case that the machinations of the top officials of American Allied had produced a complicated and murky picture involving dealings with several banks. Certainly the picture had not been brought into focus by September 23, 1965, in Minneapolis where a grand jury had been in session along with various suits and proceedings over the summertime. The state Insurance Commissioner was involved, and answers continued to be elusive.
I cannot see from the examination of the record that diligent inquiry would have produced knowledge of the defendant bank’s involvement even if inquiry had commenced a month or two before that date. Accordingly, I would hold that the statute of limitations did not commence until some time after September 23, 1965, and therefore that the suit was timely filed.
I have little patience with or sympathy for litigants who wait until the eve of the date when arguably the time of limitations might be considered as having expired, although it is not clear from the record when the first date became reasonably knowable that the defendant bank was involved. In any event, the statute of limitations allows five years in the case of fraudulent concealment and I do not conceive that the plaintiff here received its legal allowance.
The majority opinion determines as a matter of law that the action was filed beyond the statutory period of limitations. I would have determined as a matter of law that upon either of two bases the statutory period had not expired. Neither of the court’s opinions relies on the basis of the district court’s determination. Therefore, at the very least it would appear to me that there should be a reversal and a remand to determine factually, and not as a matter of law, whether there was a basis for a reasonably prudent person to have been alerted that the defendant bank might be improperly involved with American Allied, and, if so, specifically when the duty to exercise diligent inquiry arose and what would be a reasonable time thereafter in which to make the inquiry. Inasmuch as the district court’s decision rested on an incorrect ground, the record is questionably complete to supply the answers to the above essential questions.
I have herein addressed myself only to the limitations question and, of course, express no opinion as to whether there was an otherwise valid cause of action for fraudulent concealment stated in the plaintiff’s complaint.
. For convenience of reference, I have categorized by the term “constructive notice” factual situations in which there is a lack of actual notice but there is that which in the law is equated with actual notice. This is variously termed “implied notice,” “constructive notice,” “presumptive or imputed notice.” See 66 C.J.S. Notice §§ 5, 6 and 10 at 638, 639 and 642 (1950).
The Ninth Circuit expressed the thought that constructive notice includes “implied notice” and “inquiry notice,” the latter apparently being similar to or identical with “implied notice.” F. P. Baugh, Inc. v. Little Lake Lumber Company, 297 F.2d 692, 696 (9th Cir. 1961), cert. denied, 370 U.S. 909, 82 S.Ct. 1256, 8 L.Ed.2d 404 (1962).
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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UNITED STATES of America v. James D. HOCKENBERRY, Appellant.
No. 72-1425.
United States Court of Appeals, Third Circuit.
Argued Oct. 3, 1972.
Decided Feb. 21, 1973.
Louis Lipschitz, Philadelphia, Pa., and Stanton D. Levenson, Watzman, Leven-son & Snyder, Pittsburgh, Pa., for appellant.
Richard L. Thornburgh, U. S. Atty., James A. Villanova and Kathleen K. Cur-tin, Asst. U. S. Attys., Pittsburgh, Pa., for appellee.
Before SEITZ, Chief Judge, and HASTIE and HUNTER, Circuit Judges.
OPINION OF THE COURT
HASTIE, Circuit Judge.
James Hockenberry, a former county detective, has taken this appeal from his conviction of making a false material declaration under oath before a grand jury in violation of the recently enacted section 1623 of Title 18, United States Code. 84 Stat. 932. Hockenberry had testified before the grand jury only under judicial compulsion after he had been granted immunity under section 2514 of Title 18, United States Code. We must decide whether the trial judge committed reversible error in admitting into evidence against the accused at his perjury trial a truthful statement he had made to the grand jury on the same occasion as the alleged false statement but unrelated to it.
The indictment charged Hockenberry with falsely swearing to the grand jury that he had no knowledge of or connection with bribes or payoffs to county detectives by persons engaged in unlawful gambling and prostitution. At his trial he took the stand in his own defense and denied any such knowledge or connection. In an effort to discredit him as a wit-
ness, the prosecution cross-examined him, over objection, about other unrelated parts of his testimony before the grand jury. Part of the cross-examination was as follows:
“Q. Well, do you recall appearing before the Grand Jury on the 16th of March, 1971, and my questioning you about certain returns on search warrants that you have executed under oath?
“A. I recall that, yes.
“Q. You do recall?
“A. Yes.
“Q. Do you recall testifying that there were at least two instances that you had executed a sworn return on those search warrants, and the information in it was false?”
Then, after an objection had been overruled, the prosecution read two excerpts from Hockenberry’s grand jury testimony in which he admitted that on occasion, in the course of his work as a detective, he had signed affidavits wherein he falsely asserted personal knowledge of facts upon which search warrants were being sought.
It was the contention of the prosecution that appellant’s admission before the grand jury — stating that on occasion he signed false affidavits to obtain search warrants — could be introduced to impeach him as a witness. The prosecution reasoned that this evidence was relevant and competent to show a “pattern of deceit” and thus discredit Hock-enberry’s denial at trial that he had lied to the grand jury about the unrelated matter of accepting bribes from criminals.
Assuming that the law of evidence would permit such impeachment, there is a separate question whether this use of admissions made before the grand jury violated the immunity under which the admissions had been compelled. Hock-enberry originally had refused to testify before the grand jury, claiming Fifth Amendment privilege. He then was granted immunity under 18 U.S.C. § 2514 and ordered to testify. The admissions here in question were part of that testimony.
After prescribing a procedure for compelling testimony, section 2514 continues as follows:
“ . ' . . No such witness shall be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter or thing concerning which he is compelled, after having claimed his privilege against self-incrimination, to testify or produce evidence, nor shall testimony so compelled be used as evidence in any criminal proceeding (except in a proceeding described in the next sentence) against him in any court. No witness shall be exempt under this section from prosecution for perjury or contempt committed while giving testimony or producing evidence under compulsion as provided in this section.”
In this case appellant’s statements before the grand jury, truthful admissions of prior wrongdoing compelled under grant of immunity, certainly were used against him, since they were used to impeach his credibility as an accused person testifying in his own defense. Attempting to justify this disallowance of immunity, the government has found it necessary to argue that the use made of Hockenberry’s otherwise immunized testimony comes within the exception stated in the above quoted concluding provision of section 2514. The government reads that exception as meaning that, in a prosecution for perjury allegedly committed in the course of testimony required pursuant to section 2514, the statutory immunity does not cover either the allegedly false statement itself or anything else the accused may have said on the protected occasion. However, we think the exception is not that broad.
Under the narrowest arguable reading of the Fifth Amendment, Hockenberry was compelled to incriminate himself when he was required to admit before the grand jury that he had executed false affidavits to obtain search warrants. However, Congress had authorized and the courts have sanctioned judicial compulsion of otherwise self-incriminating testimony so long as full protection is given the witness against injury through future incriminating use of the compelled statement. Kastigar v. United States, 1972, 406 U.S. 441, 92 S.Ct. 1653, 32 L.Ed.2d 212. “Answers may be compelled regardless of the privilege if there is immunity from federal and state use of the compelled testimony or its fruits in connection with a criminal prosecution against the person testifying.”. Gardner v. Broderick, 1968, 392 U.S. 273, 276, 88 S.Ct. 1913, 1915, 20 L.Ed.2d 1082.
But quite apart from any question of self incrimination, a witness who testifies before a grand jury is required and sworn to tell the truth. The grant of immunity is superimposed upon that requirement. Protection is granted against future injurious use of the incriminating truth that the witness is required to speak, not against prosecution for or the use of any exculpatory falsehood that he may utter to avoid the required admission of wrongdoing. Hence, the immunity statute properly permits prosecution for perjury committed in an otherwise immunized statement and also the introduction in evidence of so much of the statement as is essential to establishing the corpus delicti.
To go beyond that and to argue, as the government does, that the immunity statute allows the use of any truthful admission of wrongdoing made in an immunized statement to discredit the individual as a witness in a subsequent prosecution, so narrows the statutory grant of immunity as to jeopardize its adequacy as a constitutional means of requiring self incrimination. But for the grant of immunity Hockenberry would have been privileged to refuse to admit to the grand jury his wrongdoing in the execution of affidavits to obtain search warrants. And if immunity that deprived him of that privilege is to be, as constitutionally it must, co-extensive with the privilege itself, his compelled admission of wrongdoing cannot later be used to discredit his effort to defend himself against a charge of some other wrongdoing. “Immunity from the use of compelled testimony . . . prohibits the prosecutorial authorities from using the compelled testimony in any respect . . . ” Powell, J., in Kasti-gar v. United States, supra, 406 U.S. at 453, 92 S.Ct. at 1661.
Finally, we have not overlooked the government’s reliance upon Harris v. New York, 1971, 401 U.S. 222, 91 S.Ct. 643, 28 L.Ed.2d 1, as supportive of what was done in this case. The Harris case holds that an arrested person’s voluntary incriminating statements, though inadmissible later as part of the prosecution’s ease in chief because the prisoner had not been advised of his right to counsel, may be used to impeach his credibility when he testifies as a witness in his own defense. In that case the Court was deciding how broad a sanction is necessary to vindicate the Miranda procedural requirement that an arrested suspect must be advised of his right to counsel before he shall be interrogated.
In contrast, the question here is the scope of the use immunity thát government must afford and the Congress has undertaken to grant a witness in order to justify compelling him to make an incriminating statement. In this situation, as we already have pointed out, the mandated quid pro quo is immunity coextensive with the privilege; to-wit, immunity from any damaging use of the compelled truthful statement in a future prosecution. The Harris rule does not compel a person to incriminate himself. The abridgement of immunity in this case does, and that is its invalidating vice.
Hockenberry’s conviction must be set aside and the cause remanded for a new trial.
. In its brief the government argues that “[t]he better rule . . . is to permit the use of testimony obtained under an immunity grant, where otherwise relevant and admissible, for the purpose of impeaching the immunized witness or an immunized defendant when (as here) he chooses to testify on his own behalf”.
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Caselaw Access Project
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{
"author": "RONEY, Circuit Judge:",
"license": "Public Domain",
"url": "https://static.case.law/"
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PLAINS GROWERS, INC., By and Through FLORISTS’ MUTUAL INSURANCE COMPANY, the real party in interest in this cause, Plaintiff-Appellant, v. ICKES-BRAUN GLASSHOUSES, INC. and Modine Manufacturing Company, Defendants-Appellees.
Summary Calendar.
No. 72-1578
United States Court of Appeals, Fifth Circuit.
Feb. 9, 1973.
Mickey C. Shyrock, Larry L. Gollaher, Dallas, Tex., for plaintiff-appellant.
L. A. White, R. A. Wilson, Amarillo, Tex., for defendants-appellees.
Before WISDOM, GODBOLD and RO-NEY, Circuit Judges.
Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al., 5th Cir. 1970, 431 F.2d 409, Part I.
RONEY, Circuit Judge:
Plaintiff’s greenhouses were damaged by fire caused by allegedly defective gas-fired heaters. Plains Growers, a Texas corporation, sued the seller, Iekes-Braun Glasshouses, Inc., and the manufacturer, Modine Manufacturing Company, both foreign corporations, in a Texas state court.
Defendants removed the case to federal District Court on diversity grounds. Plaintiff sought remand to the state court on the ground that the cause of action for the fire loss had been assigned by plaintiff to its insurance company, an Illinois corporation, and that since defendant Iekes-Braun was also an Illinois corporation, there was no diversity of citizenship. The District Court denied the motion for remand and thereafter ordered plaintiff to answer defendants’ interrogatories and to produce for inspection the allegedly defective heaters.
Plaintiff refused to permit discovery and sought dismissal of the case without prejudice. Voluntary dismissal without prejudice was denied, and the District Court dismissed the action against both defendants, with prejudice to plaintiff’s right to refile the cause in any court, because of its refusal to comply with orders for discovery. Plaintiff appeals. The appeal raises two issues: first, whether the Court had diversity jurisdiction, and second, whether the plaintiff had an absolute right under the Rules to a voluntary dismissal without prejudice. We affirm the Court’s jurisdiction but hold that the plaintiff was entitled to a voluntary dismissal without prejudice as to the defendant Modine.
JURISDICTION
On the motion for remand to the state court, Plains Growers submitted affidavits to prove that, at the time its fire loss was paid, the cause of action was assigned to Florists’ Mutual Insurance Company, an Illinois corporation, which was alleged to be the only real party in interest. Although Plains Growers maintained that it had no interest in the lawsuit, it remained the party plaintiff, and the insurance company has never been made a party. The present style of this case, “Plains Growers, Inc., by and through Florists’ Mutual Insurance Company, the real party in interest in this cause,” appears in this form for the first time in the appellate proceedings. Plains Growers, Inc. has never sought to amend its complaint to include Florists’ Mutual as an additional plaintiff. Florists’ Mutual has never sought to intervene in the suit.
The District Court held that:
“The insurance company has never been made a party to this cause of action. It is settled in the Fifth Circuit that a right of removal depends upon the case disclosed by the pleadings when the petition for removal is filed. Nunn v. Feltinton, 294 F.2d 450 (5th Cir. 1961).
“The pleadings on file at the time that this case was removed, as well as the parties to the suit at this time, show a complete diversity of citizenship, and as the amount in controversy is over $10,000, jurisdiction is conferred upon the United States District Court.”
Although the Court may look beyond the complaint to the record as a whole when the factual'basis of a party’s jurisdictional claim is challenged, no case has been cited which sustains the contention of plaintiff-appellant that, having voluntarily chosen to sue in the name of Plains Growers, Inc., as sole plaintiff, and not sue in the name of Florists’ Mutual, it can now defeat removal jurisdiction on the basis of the citizenship of Florists’ Mutual.
The citizenship of one who has an interest in the lawsuit but who has not been made a party to the lawsuit by plaintiff cannot be used by plaintiff on a motion to remand to defeat diversity jurisdiction.
The contention is made that Florists’ Mutual was an indispensable party from the beginning and that for this reason its citizenship must be taken into account in determining whether the federal court acquired jurisdiction. The short answer to this contention is that Florists’ Mutual never saw itself as an indispensable party, is not a party to the lawsuit, has not sought to become one, and plaintiff has failed to take any steps to make it a party of record in the proceedings. There is no basis for the plaintiff to complain when federal jurisdiction is determined by the citizenship of only those parties which plaintiff has chosen to include in the lawsuit. See Provident Tradesmens Bank & Trust Co., Adm’r v. Patterson, Adm’r, 390 U.S. 102, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968) and Saint Paul Mercury Indemn. Co. v. Red Cab Co., 303 U.S. 283, 58 S.Ct. 586, 82 L.Ed. 845 (1938).
VOLUNTARY DISMISSAL
In an apparent last-minute effort to avoid litigation in federal court, plaintiff filed against Modine, the manufacturer, notice of voluntary dismissal without prejudice pursuant to Rule 41(a)(1), Federal Rules of Civil Procedure, and moved the court for an order of dismissal without prejudice as to Ickes-Braun, the seller, following Rule 41(a)(2).
Plaintiff had to proceed by motion rather than notice against Ickes-Braun because that defendant had filed an answer and cross-claim. The court denied the motion and refused to dismiss the case against Ickes-Braun. Only on a showing of abuse of discretion can the denial of such a motion under Rule 41(a)(2) be reversed, and plaintiff does not here assert error as to the refusal to dismiss the case against Ickes-Braun.
As to Modine, however, plaintiff contends that it had an absolute right to dismissal on notice. By the time such notice was served by plaintiff, the District Court had denied the motion to remand the ease to the state court, overruled plaintiff’s objections to interrogatories, and ordered discovery. Modine had neither filed an answer nor moved for summary judgment, but by that time it had filed (1) a motion to dismiss for lack of personal jurisdiction, (2) a motion to challenge service of- process, and (3) written interrogatories.
The District Court, refusing to dismiss the action against Modine, decided first, that Modine’s response sought affirmative relief and constituted an answer within the contemplation of Rule 41(a)(1), so that voluntary dismissal by notice was impermissible, and second, that, treating plaintiff’s notice as a motion under Rule 41(a)(2), dismissal should be denied under the circumstances.
We would have no difficulty in affirming the refusal to dismiss the case against Modine if the attempt to obtain a dismissal were considered as a motion under Rule 41(a)(2), which places the matter within the court’s discretion. Where notice of dismissal under Rule 41(a) (1) fails, the notice may be considered a motion under Rule 41(a)(2) and the court may order the dismissal. The grounds for such a motion to dismiss Modine, however, would be no better than that asserted in plaintiff’s abortive attempt to dismiss the ease against Ickes-Braun, and plaintiff does not contend on this appeal that the court erred in finding that there were insufficient grounds to require a dismissal of Ickes-Braun. Under the circumstances of this case, we could not hold the denial of the motion for dismissal of Modine under Rule 41(a)(2) to be an abuse of discretion.
We hold, however, that under Rule 41(a)(1), plaintiff was entitled as a matter of right to dismissal without prejudice against Modine. This result is premised on two conclusions of law. First, we hold that the pleadings filed by Modine prior to the notice constituted neither an answer nor a motion for summary judgment, either of which would prohibit dismissal by notice; and second, we hold that plaintiff is entitled to a dismissal against one defendant under Rule 41(a), even though the action against another defendant would remain pending.
I.
Although some cases have held that certain pleadings which are neither an answer nor a motion for summary judgment will bar the right to a voluntary dismissal by notice under Rule 41(a)(1), they almost invariably have involved proceedings which joined issue on the controversy or brought the court into consideration of the merits of the controversy. Harvey Aluminum, Inc. v. American Cyanamid Co., 203 F.2d 105 (2d Cir. 1953), cert. denied, 345 U.S. 964, 73 S.Ct. 949, 97 L.Ed. 1383 [Extensive hearing on request for preliminary injunction]; Butler v. Denton, 150 F.2d 687 (10th Cir. 1945) [Petition for intervention tendered justiciable issues]; Robertson v. Limestone Mfg. Co., 20 F.R.D. 365 (W.D.S.C.1957) [Argument of motion for temporary restraining order]. See 9 C. Wright and A. Miller, Federal Practice & Procedure; Civil § 2363 (1971); 5 Moore’s Federal Practice 41.02(3) (2d ed. 1971).
In this case, Modine had not only failed to file an answer or a motion for summary judgment or any other pleading which joined issue on the merits of the controversy, but, at the time of the notice, was actually challenging the jurisdiction of the court to hear the merits of the cause by its motion to dismiss for lack of personal jurisdiction and its motion to challenge service of process. The trial court had not yet considered Modine’s motions. A notice of voluntary dismissal filed after motions challenging the jurisdiction of the person of the defendant is not untimely under Rule 41(a)(1). Kilpatrick v. Texas & P. Ry. Co., 166 F.2d 788 (2d Cir. 1948), cert. denied, 335 U.S. 814, 69 S.Ct. 32, 93 L.Ed. 369 (1948) and 337 U.S. 75, 69 S.Ct. 953, 93 L.Ed. 1223 (1949). The defendant’s filing of interrogatories which remained unanswered at the time of the notice could not prevent a dismissal by notice. See Sheldon v. Amperex Electronic Corp., 52 F.R.D. 1 (E.D.N.Y.1971), in which the trial court held that the fact that, in a patent infringement case, voluminous depositions had been taken before plaintiff had filed its notice did not bar dismissal.
The District Court erred in denying a voluntary dismissal on the ground that Modine’s response constituted the equivalent of the answer required by Rule 41(a)(1), F.R.Civ.P.
II.
Defendant Modine urges us to follow Harvey Aluminum, Inc. v. American Cyanamid Co., supra, by holding that a notice of voluntary dismissal under Rule 41(a)(1) cannot effect a dismissal against less than all of the defendants. Harvey reasoned that the word “action” in the rule that “an action may be dismissed by the plaintiff without order of court ... by filing a notice of dismissal” denotes the entire controversy, and that, for dismissal as to less than all of the defendants, the plaintiff should proceed under Rule 21, F.R.Civ. P., which provides for the dropping and adding of parties. Although some courts have appeared to follow Harvey, Philip Carey Mfg. Co. v. Taylor, 286 F.2d 782 (6th Cir. 1961); Neiman-Marcus Co. v. Lait, 14 F.R.D. 159 (S.D.N.Y.1953); cf. Robertson v. Limestone Mfg. Co., supra; see 2B W. Barron & A. Holtzoff, Federal Practice and Procedure § 911 (1961), other courts have followed what has been termed the “better view” by holding that a Rule 41(a) notice or motion can be effected against less than all of the defendants. Johnston v. Cartwright, 355 F.2d 32 (8th Cir. 1966); Young v. Wilky Carrier Corp., 150 F.2d 764 (3d Cir. 1945), cert. denied, 326 U.S. 786, 66 S.Ct. 470, 90 L.Ed. 477 (1946); Terry v. Pearlman, 42 F.R.D. 335 (D.Mass.1967); Southern Electric Generating Co. v. Allen Bradley Co., 30 F.R.D. 135 (S.D.N.Y.1962); United States v. E. I. DuPont de Nemours & Co., 13 F.R.D. 490 (N.D.Ill.1953); 9 Wright & Miller, Federal Practice & Procedure, § 2362; 5 Moore’s Federal Practice ¶ 41.06-1.
If only Rule 41(a)(1) would logically be affected by our ruling, Modine’s argument might be persuasive. The purpose of the Rule is to permit the plaintiff voluntarily to take the case out of court if no other party will be prejudiced. Piedmont Interstate Fair Ass’n v. Bean, 209 F.2d 942 (4th Cir. 1954); Ockert v. Union Barge Line Corp., 190 F.2d 303 (3d Cir. 1951). It can be reasonably argued that the court should determine whether the remaining parties will be prejudiced by the dismissal when the plaintiff seeks the dismissal of less than “all.” The difficulty comes from the use of the identical word “action” in Rule 41(a)(2), which requires a court order. There is little merit in an argument that the court could not dismiss the action as to less than all defendants upon motion, and yet there is nothing in the Rule to indicate an intent to make the word “action” mean “all” in 41(a)(1) and mean less than “all” in 41(a)(2).
It has been pointed out that the distinction is not critical in consideration of a motion under Rule 41(a)(2) because the court’s determination of such a motion would presumably turn on the same factors as would control a Rule 21 motion to drop a party or a Rule 15(a) motion to amend the pleadings. Johnston v. Cartwright, supra; Broadway & Ninety-Sixth St. Realty Corp. v. Loew’s, Inc., 23 F.R.D. 9 (S.D.N.Y.1958); Southern Electric Generating Co. v. Allen Bradley Co., supra. Nevertheless, reading the rules governing dismissal by notice and dismissal by motion together, we conclude that it was intended by the rule-makers to permit dismissal against such of the defendants as have not served an answer or motion for summary judgment, despite the fact that the case might remain pending against other defendants. The third-party claim of Iekes-Braun against Modine, as yet unanswered, would not bar a voluntary dismissal of plaintiff’s action.
The District Court’s order dismissing the cause against Modine Manufacturing Company with prejudice is vacated, and the cause is remanded for the entry of an order granting plaintiff a voluntary dismissal without prejudice as to such defendant.
Affirmed in part and vacated and remanded in part, with directions.
. The intervention of Florists’ Mutual after removal would probably not divest the federal court of diversity jurisdiction. See Wichita R. R. & Light Co. v. Public Util. Comm’n of Kansas, 260 U.S. 48, 43 S.Ct. 51, 67 L.Ed.2d 124 (1922); Ford v. United Gas Corp., 254 F.2d 817 (5th Cir. 1958); Virginia Electric & Power Co. v. Carolina Peanut Co., 186 F.2d 816 (4th Cir. 1951).
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{
"author": "OAKES, Circuit Judge:",
"license": "Public Domain",
"url": "https://static.case.law/"
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William RIVERA, Appellant, v. FARRELL LINES, INC., Appellee.
No. 346, Docket 72-1202.
United States Court of Appeals, Second Circuit.
Argued Jan. 17, 1973.
Decided Feb. 15, 1973.
Charles Sovel, New York City (Abraham E. Freedman, New York City, on the brief), for appellant.
Robert A. Lilly, New York City (Lilly, Sullivan & Purcell and Steven L. Bar-kan, New York City, of counsel), for ap-pellee.
Before FRIENDLY, Chief Judge, and OAKES and TIMBERS, Circuit Judges.
OAKES, Circuit Judge:
This appeal is from an order of the district court denying appellant’s post-trial motion for a new trial on the issue of damages or, in the alternative, on all issues. We agree that it was error for the district court to deny the motion and we reverse and remand for a new trial on all issues.
Appellant was employed as a mess man on the S.S. African Sun, an American flag merchant ship owned and operated by appellee. His duties included serving meals to the vessel’s crew. This work often took him to the crew pantry, which was located on the main deck between the crew mess hall and the ship’s main galley and in which desserts and other items needed during the course of a meal were stored.
From at least one previous voyage on the African Sun appellant was aware of an ever present difficulty working in the crew pantry. An inch or so of soapy water would back up from the floor drains, making the floor wet and slippery. The back-up resulted from water draining from the officers’ pantry directly overhead and then filling the drains in the pantry below. The condition had often been reported to the ship’s officers but had gone uncorrected.
During the evening meal of September 9, 1969, one of the crew members asked for ice cream for dessert, and appellant went to the pantry to fetch it. As he returned to the mess hall he slipped and fell on the wet pantry floor. The fall resulted in injury to his back.
Appellant brought suit under the Jones Act, 46 U.S.C. § 688, to recover for his injury. The defense was that appellant was injured as a result of his own contributory negligence, principally consisting of his continued work in the pantry despite his being well aware of the dangerous condition of the floor. To appellant’s counsel this defense, although named contributory negligence, sounded suspiciously like the defense of assumption of risk, long eliminated from maritime injury law by statute. At the conclusion of the evidence he therefore moved to strike the defense but his motion was denied.
The court then submitted the case to the jury which returned a general verdict and answered four special interrogatories. The interrogatories revealed that the jury found that an unseaworthy condition existed in the ship’s pantry; that appellee was negligent on the day of the accident; that the unseaworthiness and negligence played a part in bringing about appellant’s injury; and, most important for present purposes, that appellant was contributorily negligent. Under the applicable comparative negligence doctrine, see 35 Stat. 66 (1908), 45 U.S.C. § 53 (1946), incorporated by reference in 41 Stat. 1007 (1920), 46 U.S.C. § 688 (1946), the finding of contributory negligence went to reduce appellant’s recovery. Since no specific finding was made as to the total amount of damages that would have been awarded appellant absent any contributory negligence on his part, it is impossible to know how much appellant’s general verdict of $15,000 was affected by the finding.
Following the verdict, appellant moved for a new trial on the ground that there was no evidence of contributory negligence and the issue was thus improperly submitted to the jury. This appeal followed the denial of that motion.
The distinction between assumption of risk and contributory negligence is well established. In common law days the knowledgeable acceptance by an employee of a dangerous condition when and if such acceptance was necessary for the performance of his duties was assumption of risk. 2 F. Harper & F. James, The Law of Torts, § 21.4 (1956). Contributory negligence, on the other hand, connotes some careless act or omission on the part of the employee over and above that knowledgeable acceptance. Mumma v. Reading Co., 247 F.Supp. 252, 256-257 (E.D.Pa.1965). As the defense of assumption of risk has been abolished by statute — indeed, “every vestige” of the doctrine “obliterated,” Tiller v. Atlantic Coast Line Railroad Co., 318 U.S. 54, 58, 63 S.Ct. 444, 87 L.Ed. 610. (1943) — the first issue before us is whether the charge permitted assumption of risk to go to the jury in the guise of contributory negligence.
The only theory of contributory negligence the record reveals that was both argued by appellee’s counsel in summation and charged to the jury by the court was the argument that appellant was careless in moving in and about the pantry, knowing the sloppy condition of the floors. This theory, however, was really assumption of risk masquerading under another name, because it allowed a finding of contributory negligence on the strength of appellant’s knowledge that a dangerous condition in his line of duty existed and his working in that line of duty. Evidence of an act of negligence other than appellant’s knowledge of the dangerous condition in the pantry was not, though it should have been, required by the court’s charge in this ease. DuBose v. Matson Navigation Co., 403 F.2d 875, 878 (9th Cir. 1968); Smith v. United States, 336 F.2d 165, 168 (4th Cir. 1964); Mumma v. Reading Co., supra. See also Restatement (Second) of Torts § 496A, comments d and e at 562-65 (1965). Thus the verdict must be set aside since the finding of contributory negligence may well have been based on this error in the charge.
The court also charged the jury that appellant might have been contributorily negligent by not having “the common sense to go and say to somebody in charge, ‘Look, this has got to be cleaned up; I won’t work there until it is done.’ ” There have been holdings that failure to warn a superior officer of a dangerous condition can constitute contributory negligence on the part of a seaman and diminish his recovery for injuries suffered. Mroz v. Dravo Corp., 429 F.2d 1156, 1164 (3rd Cir. 1970); DuBose v. Matson Navigation Co., supra, 403 F.2d at 879. But those cases involved conditions which almost imperceptibly and over a long period of time led to an illness suffered by a single seaman. The danger they presented was not immediately obvious to superiors. See Mroz v. Dravo Corp., supra, 429 F.2d at 1164 (gas and smoke gradually leading to breathing defects); DuBose v. Matson Navigation Co., supra, 403 F.2d at 876-877 (light bumps on leg from kitchen workers leading to a cyst). Here, the danger from the wet and sloppy floor was open and obvious to anyone — including officers — who cared to look. Furthermore, unrebutted evidence presented at trial established that prior to the accident numerous complaints about the situation in the pantry had been made to no avail — -though not necessarily by appellant. See Mumma v. Reading Co., supra, 247 F.Supp. at 254. It cannot be known whether further complaint by appellant would have resulted in correction of the drain defect in time to avoid the accident or might on the other hand have provoked retributive treatment from his superior officers. Socony-Vacuum Oil Co. v. Smith, 305 U.S. 424, 430, 59 S.Ct. 262, 83 L.Ed. 265 (1939). If this theory of contributory negligence is submitted to the jury on retrial at all, it should be done so only with a caveat that the appellant was not duty bound to perform a futile act.
A third theory of contributory negligence was that appellant should have mopped up the wet pantry floor before crossing it. This theory was, however, neither argued by appellee in summation nor specifically mentioned in the court’s charge. There was evidence that appellant or another seaman cleaned up the pantry floor. But there was also unrebutted evidence that even after the pantry floor was mopped the back-up from the defective drain would simply recreate slippery ooze. Appellee, who had the burden of establishing appellant’s contributory negligence, made no showing that the floor in fact had not been mopped by appellant on the day of the accident or that the wet, sloppy condition would not quickly reoccur after it was cleaned up. It is our view that there was not enough evidence on this theory of contributory negligence to create a jury question.
The final theory of contributory negligence urged by appellee to support the jury’s verdict is that appellant unreasonably went to the pantry to get the requested ice cream when he could have gone around the pantry and to the galley and thereby avoided the accident. To support this, there was evidence that ice cream was stored in the galley as well as the pantry. But this alternate route theory, while relied on by the trial judge in denying appellant’s post-trial motion, was not argued by the appellee in summation nor specifically charged to the jury. Had appellant been given some notice of this theory, he points out, he would have presented evidence showing that mess men were not allowed to go into the galley during meals for fear that they would interfere with the work of the cooks and that this is the very reason desserts were stored in the pantry. He might also have shown how difficult this would have been in connection with the performance of his work under the circumstances. To allow a finding of contributory negligence on the basis of evidence which was at best incomplete and on a theory of which there was no real notice to the appellant could substantially prejudice him. On remand, doubtless the evidence of both sides of this issue will be fully presented.
A question remains, however, whether the new trial should cover all issues or be limited to the issues of contributory negligence and damages. Fed.R.Civ.P. 59(a) permits a remand for a partial new trial. Cf. Mason v. Mathiasen Tanker Industries, Inc., 298 F.2d 28, 32-33 (4th Cir.), cert. denied, 371 U.S. 828, 83 S.Ct. 23, 9 L.Ed.2d 66 (1962). Since we are left in the dark as to what the total award would have been absent the finding of contributory negligence and the extent to which that finding affected the verdict, as well as to whether there will be such a finding on a proper charge, we remand for a new trial on all issues. Caskey v. Village of Wayland, 375 F.2d 1004, 1009-1010 (2d Cir. 1967); 3 W. Barron & A. Holtzoff, Federal Practice and Procedure § 1307 at 386 (Wright ed. 1958).
Reversed and remanded for a new trial on all issues.
. 35 Stat. 66 (1908), 45 U.S.C. § 54 (1946) (railroad employees), as amended 53 Stat. 1404 (1939), 45 U.S.C. § 54 (1946), made applicable to seamen by 41 Stat. 1007 (1920), 46 U.S.C. § 688 (1946); cf. Socony-Vacuum Oil Co. v. Smith, 305 U.S. 424, 59 S.Ct. 262, 83 L.Ed. 265 (1939); Carter v. Schooner Pilgrim, Inc., 238 F.2d 702, 705 (1st Cir. 1956). In The Arizona v. Anelich, 298 U.S. 110, 122, 56 S.Ct. 707, 80 L.Ed. 1075 (1936), the Court pointed out that assumption of risk had not been a defense in maritime law even prior to the Jones Act. See G. Gilmore & C. Black, The Law of Admiralty 299 (1957).
. Although Mumma arose under the Federal Employers’ Liability Act, the provisions of the FELA abolishing defenses formerly available to employers are applicable to seamen by virtue of the Jones Act. See generally G. Gilmore & G. Black, supra note 1, at 296-98. Thus, Mumma’s distinction between contributory negligence and assumption of risk is applicable to this case.
. “If he knew the conditions which he claimed two inches of water, an inch and a half of water on the deck, did he take extra care?' (Emphasis supplied.)
. The court charged that if the jury accepted the appellee’s contentions the appellant “was guilty of carelessness in persisting in moving in and out of this pantry without more caution as to where he walked and how he walked and how he handled himself.”
. Special interrogatories that — properly explained — would eliminate some of the confusion for a reviewing court or the trial court determining post-trial motions might include:
1. Do you find that plaintiff has established his claim that the defendant was negligent and that its negligence was a proximate cause of plaintiff’s accident? (Answer yes or no.) ........
2. Do you find that plaintiff has established his claim that the ship African Sun was in an unseaworthy condition and this unseaworthiness was a proximate cause of plaintiff’s accident? (Answer yes or no.) ........
3. If the answer to either Question 1 or 2 above is “yes,” what is the total amount of damages to plaintiff? Answer in dollars and cents. $........
4. If the answer to both Questions 1 and 2 is “no,” your verdict is for the defendant, and you should put an “X” here, and you need not answer any further questions.........
5. In the event you have found above that the plaintiff is entitled to recover, do you find that the defendant has established its claim that plaintiff was himself negligent and that negligence was a proximate cause of the accident. (Answer yes or no.) ........
6. If the answer to Question 5 is “yes,” what percentage did plaintiff’s fault so contribute? ........ (If the answer to question 5 is “no,” do not answer this question. If you entered a percentage on this question, fill in its equivalent dollar amount here: $.........)
7. Subtract the dollar amount stated in Question 6 from the total amount of damages stated in Question 3 and enter here the difference, which will be the net amount of damages you find plaintiff is entitled to recover.
Question 3 total $........
—Question 6 amount $........
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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{
"author": "LUMBARD, Circuit Judge:",
"license": "Public Domain",
"url": "https://static.case.law/"
}
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UNITED STATES of America ex rel. Milton RIVERA, Relator-Appellant, v. Charles L. McKENDRICK, as Warden of Wallkill State Prison, Ulster County, New York, Respondent-Appellee.
No. 306, Docket 72-1701.
United States Court of Appeals, Second Circuit.
Argued Jan. 12, 1973.
Decided Feb. 15, 1973.
John R. Hupper, New York City (J. Barclay Collins, New York City, on the brief), for appellant.
Lillian Z. Cohen, Asst. Atty. Gen. (Louis J. Léfkowitz, Atty. Gen. of State of New York, and Samuel A. Hirshow-itz, First Asst. Atty. Gen., on the brief), for appellee.
Before LUMBARD, KAUFMAN and MANSFIELD, Circuit Judges.
LUMBARD, Circuit Judge:
Milton Rivera appeals from an order of the Southern District, dated April 19, 1972, which denied, after a hearing, his petition for habeas corpus. We affirm.
Rivera was convicted of robbery, assault, and possession of a dangerous weapon after trial before a jury in Kings County in 1965. On October 21, 1969 Rivera filed a petition for habeas corpus, alleging that his state court conviction, “which was based solely on the identification testimony of two victims of the crimes, was obtained in violation of due process of law, because the victims’ in-court identification of Rivera was tainted by impermissibly suggestive pretrial identification procedures used by the police.” U. S. ex rel. Rivera v. McKendrick, 448 F.2d 30, 31 (2d Cir. 1971), cert. denied 404 U.S. 1025, 92 S.Ct. 678, 30 L.Ed.2d 675 (1972). See Stovall v. Denno, 388 U.S. 293, 302, 87 S.Ct. 1967, 18 L.Ed.2d 1199 (1967); Simmons v. United States, 390 U.S. 377, 384, 88 S.Ct. 967, 19 L.Ed.2d 1247 (1968); United States ex rel. Phipps v. Follette, 428 F.2d 912, 914-915 (2d Cir.), cert. denied, 400 U.S. 908, 91 S.Ct. 151, 27 L.Ed.2d 146 (1970). Judge McLean denied the petition without holding an evidentiary hearing. Rivera appealed from this summary denial and we reversed, finding that “the totality of circumstances surrounding the out-of-court confrontations in this case — the photographs and then the one-man show-up twelve days after the crime— lead us to conclude that the pre-trial identification procedures used here were unnecessarily suggestive and conducive to mistaken identification.” United States ex rel. Rivera v. McKendrick, supra at 34.
Because the record was inadequate for a determination of whether the witnesses’ in-court identification was irreparably tainted by these procedures, we remanded the case to the district court for an evidentiary hearing on this matter.
As a full statement of the facts is contained in our opinion on the prior appeal, see United States ex rel. Rivera v. McKendrick, supra, we here repeat only so .much as is necessary: On March 5, 1965, two men, one dark-skinned and the other light-skinned, robbed a grocery store in Brooklyn. Two people were in the store at the time: Vega, an employee, and Vargas, a customer. The dark-skinned man, who held a gun on the two victims while the light-skinned man emptied the cash register, was later identified as Torres, Rivera’s co-defendant. As the light-skinned man attempted to take Vega’s wallet, a struggle broke out during which Vargas was shot twice. The light-skinned accomplice fled after the first shot and Torres followed soon after. The length of time that the two men spent in the store was estimated at three minutes. Torres was quickly arrested. Three days later an alarm was sent out for Rivera.
According to the trial testimony, both Vega and Vargas were subsequently shown a group of photographs of different men, including one of Rivera, for purposes of identification. There was also some suggestion that Vega may have been shown Rivera’s picture alone, either before or after the showing of the group of photographs. However, because New York has a rule which prohibits a witness from testifying about prior photographic identifications of a defendant, there was no testimony at the trial as to whether Vega or Varga’s picked out Rivera’s photographs, and the photographs which were shown to the victims were not offered in evidence.
Rivera was finally arrested in his attorney’s office on March 17, 1965. Detective Maxwell, the police officer investigating the case
. first took Rivera to the station house, and he then called Vega and instructed him to come to the hospital where he was “going to have someone down for him [Vega] to identify.” Maxwell presented Rivera to Vega in the hospital waiting room and asked Vega whether he “knew the guy.” Vega said “yes” and Rivera remained silent. Maxwell then took Rivera into Vargas’ hospital room, but there was no testimony as to whether Vargas identified him there. Maxwell never took either witness to the police station to identify Rivera in a lineup.
Both Vega and Vargas testified at trial in the Kings County Supreme Court, and both made an in-court identification of Rivera as the light-skinned man involved in the robbery.
United States ex rel. Rivera v. Mc-Kendrick, supra, 448 F.2d at 31-32.
The jury returned a verdict of guilty against both Rivera and Torres and the Appellate Division, Second Department, affirmed. People v. Rivera, 28 A.D.2d 687, 280 N.Y.S.2d 749 (2d Dept. 1967). Thereafter, the New York Court of Appeals (4-3) also affirmed. People v. Rivera, 22 N.Y.2d 453, 293 N.Y.S.2d 271. 239 N.E.2d 873 (1968).
We instructed the district court to inquire on remand into the circumstances surrounding the photographic sessions and the hospital confrontations, as well as the question of whether the victims had an adequate opportunity to observe Torres’ accomplice — all with a view to making a determination of the presence or absence of taint. Pursuant to our mandate Judge McLean conducted a thorough hearing on the question of taint in which all these matters were fully explored. Detective Maxwell and the two victims, Vega and Vargas, testified about events on the night of the robbery and about the subsequent pretrial identifications. Judge McLean found that the victims had had ample opportunity during the robbery to get a good look at the second man. The delicatessen was “a very small, narrow slot of a” store where “anybody in it could get a reasonably good idea of what was going on in any part of the establishment.” During the approximately three minutes that the robbery was in progress, Vega was able to get a “good look” at Torres’ accomplice, and Vargas, though slightly further away, also had “a good look at” the dark-skinned robber.
Immediately after the robbery Vega described the second robber “as being a light skinned Puerto Rican of about 21 years of age, thin faced” — a description which matches Rivera’s physical appearance. The evidence which was absent from the trial record but developed at the hearing concerning the two photographic identifications indicates that both Vega and Vargas positively selected Rivera’s photograph as that of the accomplice from a group of photographs that were presented to them. Similarly, not only Vega, but also Vargas unhesitatingly identified Rivera as Torres’ accomplice during the hospital show-up. Judge McLean stated that:
[b]oth these men testified before me that they knew all the time from the very beginning that this was the man who had robbed Vega and participated in the holdup . . . I accept their testimony. I find that they did know from the very • beginning that Rivera was the man, as I have no doubt he was.
Judge McLean concluded, therefore, that the victims’ in-court identifications were not tainted by the prior identifications which we thought had been impermissi-bly suggestive. United States ex rel. Rivera v. McKendrick, supra, 448 F.2d at 32. This finding of the absence of taint is fully supported by the record at the hearing. We therefore affirm Judge McLean’s denial of the petition.
We again commend assigned counsel, John R. Hupper and J. Barclay Collins, for their diligent and expert exposition of Rivera’s claims.
Affirmed.
. Detective Maxwell testified at the hearing before Judge McLean that Rivera came under suspicion after an investigation of Torres’ background and the places that Torres frequented in the Bronx revealed that Rivera fit the description of the accomplice and was known as an associate of Torres.
. Judge McLean’s findings were made orally at a hearing held on April 17, 1972. The language quoted here and later in the text comes from Judge McLean’s findings at this hearing.
. Despite the suggestion in the trial testimony that Vega may have been shown a single photograph of Rivera for identification purposes, no evidence as to this matter was developed at the hearing. It appears that both victims were presented with a group of photographs. Although the specific photographs which were used could not be located, Detective Maxwell testified that it was his practice at that time to select pictures of people from the same age and ethnic group as the suspect.
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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{
"author": "ROSENN, Circuit Judge.",
"license": "Public Domain",
"url": "https://static.case.law/"
}
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UNITED STATES of America, Appellant, v. Paul Gary RUBIN et al. UNITED STATES of America, Appellant, v. Louis Martin AGNES a/k/a Louis Martin.
Nos. 72-1689, 72-1690.
United States Court of Appeals, Third Circuit.
Argued Dec. 15, 1972.
Decided Feb. 13, 1973.
Jeffrey M. Miller, Asst. U. S. Atty., Philadelphia, Pa., for appellant.
Jonathan W. Miller, Defender Assoc, of Philadelphia Federal Court Division, Philadelphia, Pa., and Robert F. Simone, Philadelphia, Pa., for appellee.
Before SEITZ, Chief Judge, and AL-DISERT and ROSENN, Circuit Judges.
OPINION OF THE COURT
ROSENN, Circuit Judge.
This appeal deals with the nettlesome question of whether there were exceptional circumstances present to justify a warrantless search of a dwelling.
United States Customs agents entered a house and garage in Philadelphia without a warrant on July 28, 1971, and seized 90 pounds of hashish. Appellees Agnes and Agran, indicted for various offenses connected with importation of the hashish, successfully moved to suppress the seized evidence in the District Court for the Eastern District of Pennsylvania. The Government has appealed the suppression pursuant to 18 U.S.C. § 3781. We vacate the order and remand.
The facts surrounding the warrantless search are set out in the district court opinion:
Sometime during the month of July, 1971, federal customs agents received reliable information that a bronze statue containing a large shipment of illicit drugs, from a point somewhere in Europe, would be shipped to a hospital in this area. As a result of this information, agents or ‘look-outs’ were posted at the Philadelphia International Airport and the waterfront. On or about July 26, 1971, a crate, answering the general description given to the agents by the informant, was delivered to the Airport. Thereafter, Federal customs agents inspected the crate and statue; they then removed a small sample of the contents for chemical analysis. This sample was confirmed to be ‘hashish’, a controlled substance under Title 21, United States Code, Section 841(a)(1). The statue contained approximately ninety (90) pounds of ‘hashish’; it was addressed to Dr. Daniel Sill of the Board [sic] Street Hospital; Dr. Sill is not a co-defendant to this action. Thereafter, the crate was resealed and placed under constant surveillance. Subsequently, and as expected, a pickup was made on July 28, 1971, at approximately 4:00 p. m., by two men, one of whom was identified as Louis Martin Agnes (A/K/A Louis Martin), a defendant herein. The crate was taken from the Airport by defendant Louis Agnes, by car, to 1819 S. 9th Street in Philadelphia, where it was unloaded at about 5:00 P.M. Shortly thereafter, a custom’s agent was dispatched at approximately 5:10 P.M. on July 28, 1971, to prepare and procure a search warrant. Subsequently, defendant Agnes left the South Ninth Street address at about 6:00 P.M., without the crate, but in his car. He was, of course, placed under surveillance. During this surveillance, Agent Bergin testified that ‘it appeared to us that the vehicle [Agnes’ car] was becoming evasive and aware we were behind it, áhd we stopped it and took the operator in custody.’ The actual arrest occurred at a gasoline station (some six blocks from Agnes’ home), between 6:20 and 6:30 p. m. As he was being taken into custody, Agnes yelled to the gas station attendants and spectators, ‘Call my brother’. The agents testified that at this point they reasonably believed that there existed the ‘threat of destruction’ to the ‘hashish’, which had been delivered to defendant Agnes’ home. Thus, the agents proceeded to enter defendant’s home in order to preserve the evidence contained therein. Once inside, the officers found the co-defendants, Earl Melvin Agran, Paul Gary Rubin, and Jan Massaar, in the process of packing the ‘hashish’ for possible distribution; all were arrested and the ‘hashish’ seized. Of course, the search was made without a warrant, and subsequent to the arrest of defendant Agnes. Upon the arrest of Agnes, Agent Moss abandoned his efforts to procure a search warrant.
The district court rejected the Government’s argument that the warrantless search of 1819 South 9th Street was permissible because of the so-called “emergency doctrine.” The court, apparently construing a long line of Supreme Court opinions to require that Government officials have knowledge that evidence is actually being removed or destroyed, ordered the seized evidence suppressed.
On appeal, the Government argues that the district court applied too severe a standard in reviewing the warrantless search and that the evidence should be admissible because the agents had a reasonable belief that the hashish they knew was in the residence was about to be destroyed or removed.
Appellees Agnes and Agran maintain that the strict standard applied by the district court was correct. Agnes argues further that he was arrested without a warrant or probable cause, and that this fact also necessitates suppression of the seized evidence. Agran also argues that the evidence must be suppressed because entry first into the front door of 1819 South 9th Street and then into the rear garage door was made without announcement of purpose, in violation of 18 U.S.C. § 3109. Although this issue was not ruled on by the district court, Agran and Agnes had raised it as part of their original suppression motions.
The fourth amendment protects the right of the people to be secure in their homes by providing that search warrants shall not issue “but upon probable cause, supported by Oath or affirmation.” Although inferences may be drawn to support the need for a reasonable search, the amendment’s protection
consists in requiring that those inferences be drawn by a neutral and detached magistrate instead of being judged by the officer engaged in the often competitive enterprise of ferreting out crime.
Johnson v. United States, 333 U.S. 10, 14, 68 S.Ct. 367, 369, 92 L.Ed. 436 (1948). Despite the clear preference of the law for searches authorized by warrants, the Supreme Court has recognized several “exceptional circumstances”
in which, on balancing the need for effective law enforcement against the right of privacy, it may be contended that a magistrate’s warrant for search may be dispensed with.
Johnson v. United States, 333 U.S. at 14-15, 68 S.Ct. at 369. The Court noted that it might consider “exceptional circumstances” by stating that the circumstances in that case were different from one in which “evidence or contraband was threatened with removal or destruction.” 333 U.S. at 15, 68 S.Ct. at 369.
Subsequent to Johnson, the Supreme Court has in at least two cases noted that belief that evidence is being destroyed or removed might create an exceptional circumstance justifying a war-rantless search. In each, the Court, nonetheless, suppressed the evidence after finding no such circumstances. McDonald v. United States, 335 U.S. 451, 69 S.Ct. 191, 93 L.Ed. 153 (1948); United States v. Jeffers, 342 U.S. 48, 72 S.Ct. 93, 96 L.Ed. 59 (1951). In neither case did the Court find any surrounding circumstances indicating to police officers that the evidence was “likely to be destroyed,” McDonald v. United States, 335 U.S. at 455, 69 S.Ct. 191, or faced “imminent destruction, removal, or concealment,” United States v. Jeffers, 342 U.S. at 52, 72 S.Ct. 93.
The three recent Supreme Court cases which have sustained use of evidence obtained through warrantless searches offer little guidance as to the exact parameters of the emergency exception. Both Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968), setting guidelines for permissible “stop and frisk” procedures, and Warden v. Hayden, 387 U.S. 294, 87 S.Ct. 1642, 18 L.Ed.2d 782 (1967), involving search of the premises into which a felon under “hot pursuit” had fled, were premised on the “exceptional circumstance” that police officers must be able to protect themselves from bodily harm, rather than any Government claim that evidence would be removed or destroyed. Only Schmerber v. California, 384 U.S. 757, 86 S.Ct. 1826, 16 L.Ed.2d 908 (1966), involved the removal or destruction exception. The Court approved in Schmerber a warrantless blood test performed on an automobile driver who had been in an accident and was suspected of drinking. Although the Court found the administration of a blood test was within the area of privacy intrusions protected by the fourth amendment, it said a search warrant was not required because :
The officer in the present case, however, might reasonably have believed that he was confronted with an emergency, in which the delay necessary to obtain a warrant, under the circumstances, threatened ‘the destruction of evidence,’ Preston v. United States, 376 U.S. 364, 367, 84 S.Ct. 881, 11 L.Ed.2d 777. We are told that the percentage of alcohol in the blood begins to diminish shortly after drinking stops, as the body functions to eliminate it from the system.
384 U.S. at 770, 86 S.Ct. at 1835. Although, if scientific knowledge were imputed to the officer in Schmerber, it could be said he had knowledge that evidence was actually being destroyed, the Court spoke of “threatened” destruction. It would seem unwise to put undue emphasis on use of the word “threatened” in Schmerber. At the same time, however, it cannot be said that the Court was requiring the officer have knowledge evidence was in the process of destruction before any warrantless search could be approved.
The district court relied on three recent Supreme Court opinions, Chimel v. California, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685 (1969), Vale v. Louisiana, 399 U.S. 30, 90 S.Ct. 1969, 26 L.Ed.2d 409 (1970), and Coolidge v. New Hampshire, 403 U.S. 443, 91 S.Ct. 2022, 29 L.Ed.2d 564 (1971), in suggesting that actual knowledge that evidence was being destroyed or removed was required under the emergency exception. Although we recognize that each of these cases speaks of the high standards of exigency which must be present to justify warrantless searches, we cannot agree with the district court that these cases allow “emergency” justification only when the searching officers have knowledge that evidence is actually being removed or destroyed.
Three police officers arrived at petitioner’s home in Chimel, armed with an arrest warrant based on the burglary of a coin shop. Chimel was arrested when he returned from work, and, despite his objection, the officers conducted an extensive search through the house seeking the stolen coins. In finding this search incident to an arrest unjustified, the Court said:
The search here went far beyond the petitioner’s person and the area from within which he might have obtained either a weapon or something that could have been used as evidence against him. . . . The scope of the search was, therefore, ‘unreasonable’ under the Fourth and Fourteenth Amendments, and the petitioner’s conviction cannot stand.
395 U.S. at 768, 89 S.Ct. at 2043.
Chimel’s wife was present at the time of the arrest and search. Dissenting, Justice White therefore argued that exigent circumstances justifying a war-rantless search existed because of the combined facts of an arrest and the risk that evidence could be destroyed by the wife before a search warrant could be procured. In light of the dissent, it may perhaps be argued that Chimel can be read to reject the contention that war-rantless searches are justified to prevent a threatened destruction or removal of evidence. Such a reading, however, would misconstrue both the facts present in, and the rationale behind, the majority decision of Chimel. In Chimel the police had had time to obtain an arrest warrant. There was no showing that it would have been “unduly burdensome” for the police to have also obtained a search warrant. 395 U.S. at 768 n. 16, 89 S.Ct. 2034. No emergency had occurred during the arrest to indicate to the'officers that removal or destruction of evidence was imminent or threatened. The Court recognized the exceptions allowing warrantless searches, but found that none of them applied. 395 U.S. at 763 n. 8, 763 n. 9, 89 S.Ct. 2034. The thrust of Chimel was that the arrest of a man at home could not justify a search of his entire house. Nowhere in the majority opinion does the Court suggest that the emergency exception for the threatened destruction of evidence was not still recognized as sound law.
A search warrant was found invalid by the Court in Coolidge. The Court thus measured the validity of three searches of an automobile, which had been parked in defendant’s driveway and was then towed to the police station, by the standards for warrantless searches. One of the state’s theories for upholding the validity of the search was that an automobile may be searched without a warrant anytime there is probable cause, because of the danger that it will be removed. Carroll v. United States, 267 U.S. 132, 45 S.Ct. 280, 69 L.Ed. 543 (1925). The Court rejected this contention because the facts made it clear that there was no reason to believe the automobile would be moved before a warrant could be obtained. Coolidge v. New Hampshire, 403 U.S. at 460-464, 91 S.Ct. 2022. . The defendant was in custody; his wife, the only other adult occupant of his home, was not at home, and was, in fact, in the company of two policemen until after the time when the car was towed away. The Court was careful to note that under different facts, a warrantless search might have been justified:
Of course, if there is a criminal suspect close enough to the automobile so that he might get a weapon from it or destroy evidence within it, the police may make a search of appropriately limited scope. Chimel v. California, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685.
403 U.S. at 461 n. 18, 91 S.Ct. at 2035. The holding in Coolidge therefore was that when there is not even a reasonable threat that evidence could be destroyed, a warrantless search cannot be justified. There is, however, no requirement that officers have knowledge of destruction taking place to justify a warrantless search.
The district court relies most heavily on Vale v. Louisiana, 399 U.S. 30, 90 S. Ct. 1969, 26 L.Ed.2d 409 (1970), in suggesting that knowledge of the actual destruction or removal of evidence is required to sustain a warrantless search. Although the Court had always spoken of “threatened” destruction or removal of evidence in previous cases involving the emergency exception, in Vale, 399 U.S. at 35, 90 S.Ct. 1969, it spoke for the first time of goods “in the process of destruction.” Although the language might suggest that the emergency exception must be construed to require knowledge that the evidence is actually béing removed or destroyed, the omission of a single word should not be given such significance, especially in light of the facts in Vale. Officers with two warrants for Vale’s arrest were watching his house when they saw him perform various acts that appeared to the officers to involve sales of narcotics. They arrested Vale on his front steps and proceeded to search his house. The Louisiana Supreme Court had found the seized narcotics admissible evidence because such evidence is so easily removed or destroyed. The United States Supreme Court rejected this reasoning, stating:
[B]y their own account the arresting officers satisfied themselves that no one else was in the house when they first entered the premises.
399 U.S. at 34, 90 S.Ct. at 1972. The facts did not support a belief by the arresting officers that there was even a “threatened” destruction or removal of the narcotics. No exigent circumstances justifying the search existed. Further supporting suppression of the evidence in Vale was the lack of any evidence suggesting that “it was impracticable for them [the officers] to obtain a search warrant as well” as the arrest warrants which they did obtain. 399 U.S. at 35, 90 S.Ct. at 1972.
We have extensively reviewed the Supreme Court cases dealing with the emergency circumstances exception allowing warrantless searches to prevent removal or destruction of evidence. We find no requirement that officers must know of the removal or destruction in order to make the search. We are nonetheless obliged to explore the standard by which warrantless searches under emergency circumstances should be judged.
The fourth amendment does not forbid all searches and seizures but only such as are unreasonable. The Supreme Court in Schmerber observed that the fourth amendment’s proper function is “to constrain, not against all intrusions as such, but against intrusions which are not justified in the circumstances, or which are made in an improper manner.” 384 U.S. at 768, 86 S.Ct. at 1834. Thus, judging the legality of warrant-less searches involves, as emphasized in Johnson, a delicate- question of balancing the rights of the individual to be secure in his home against the interest of society in preventing the disappearance of evidence necessary to convict criminals. The strong individual interest has demanded there be “only ... a few specifically established and well delineated exceptions” to the warrant requirement. Coolidge v. New Hampshire, 403 U.S. at 455, 91 S.Ct. at 2032. The emergency circumstances exception is “established,” but it has not been “well delineated.” The Supreme Court has never spoken in a case such as this one where the searching officers know there is in fact a large quantity of contraband narcotics in a dwelling, and they are apprehensive that it may be removed or destroyed.
Many lower federal courts have, however, grappled with the problem of whether warrantless searches were justified by emergency circumstances. From their rulings, a framework within which to evaluate the circumstances in the present case can be established. Probable cause to believe contraband is present is necessary to justify a warrantless search, but it alone is not sufficient. Probable cause must exist to support any search; the role of the warrant-issuing magistrate is to determine whether probable cause exists. Mere probable cause does not provide the exigent circumstances necessary to justify a search without a warrant.
When Government agents, however, have probable cause to believe contraband is present and, in addition, based on the surrounding circumstances or the information at hand, they reasonably conclude that the evidence will be destroyed or removed before they can secure a search warrant, a warrantless search is justified. The emergency circumstances will vary from case to case, and the inherent necessities of the situation at the time must be scrutinized. Circumstances which have seemed relevant to courts include (1) the degree of urgency involved and the amount of time necessary to obtain a warrant, compare United States v. Pino, 431 F.2d 1043, 1045 (2d Cir. 1970), with Niro v. United States, 388 F.2d 535 (1st Cir. 1968); (2) reasonable belief that the contraband is about to be removed, United States v. Davis, 461 F.2d 1026, 1029-1030 (3d Cir. 1972); Hailes, v. United States, 267 A.2d 363 (D.C.C.A.1970); (3) the possibility of danger to police officers guarding the site of the contraband while a search warrant is sought, United States v. Pino, 431 F.2d at 1045; (4) information indicating the possessors of the contraband are aware that the police are on their trail, United States v. Doyle, 456 F.2d 1246 (5th Cir. 1972); and (5) the ready destructibility of the contraband and the knowledge “that efforts to dispose of narcotics and to escape are characteristic behavior of persons engaged in the narcotics traffic,” United States v. Manning, 448 F.2d 992, 998-999 (2d Cir. 1971); United States v. Davis, 461 F.2d at 1031-1032. In most cases where warrantless searches were not suppressed, a warrantless arrest was also involved. The present case is unique because the customs agents had no intention of making arrests when they entered the Agnes house, and the Government does not attempt to justify the search as incident to an arrest. The relevant criteria in determining whether the entry was constitutional, however, are similar.
A review of the facts surrounding the entry into the house and garage at 1819 South 9th Street convinces us that the customs agents “might reasonably have believed that [they were] confronted with an emergency, in which the delay necessary to obtain a warrant, under the circumstances, threatened ‘the destruction of evidence.’ ” Schmerber v. California, 384 U.S. at 770, 86 S.Ct. at 1835. The agents possessed more than enough information to establish probable cause that hashish was on the premises. Their inspection at the airport revealed hashish in the life-sized bronze bust statue, and the close trailing of the statue from the airport to the garage attached to Agnes’ home established its presence there. The agents also possessed information that the statue had been broken open by the time of the search, as “kief,” a form of hashish, was found all over Agnes’ clothes when he was arrested. They therefore could reasonably conclude that distribution of the hashish was in progress.
Although the agents conducting surveillance of the Agnes house had no information connecting the subsequently arrested defendants found in the garage with the narcotics trade, the agents were aware that men were in the Agnes household at the time the decision to search was made. At least one of them had been seen with Agnes at the time he backed his automobile into his garage with the crated statue in the trunk. The agents therefore could reasonably conclude that at least this person was involved in the narcotics operation.
Agnes intentionally pulled into a gasoline station a half dozen blocks from the searched premises, where it appeared to the agents he was known to some of the persons present. When arrested, he yelled, “Call my brother.” It was not unreasonable for agents to believe that this might well be a signal to alert persons still at 1819 South 9th Street of Agnes' arrest and of imminent police intervention into their activities, even though the agents did not see a telephone call made and had no knowledge of the existence of any brother of Agnes. The nature of the narcotics business necessitates rapid distribution of goods in order to prevent apprehension. Hashish is easily destroyed. Agnes was apprehended in the neighborhood of his home and 'apparently in the presence of people whom he knew. Earlier in the day other individuals had been observed entering and leaving his home. The delivery at the airport of the bronze bust filled with hashish had all the characteristics of a sophisticated operation. Although the agents had been watching both doors of the Agnes home, they could not be certain of how quickly the contraband could be destroyed or what surreptitious means might be available for its removal. The agents had reasonable grounds to conclude that in light of the emergency, it was necessary to enter the premises without awaiting the search warrant.
Appellees argue that the search was unreasonable because the agents at the house did not find out from Agent Moss, who had been sent to obtain a warrant, how soon he would accomplish his task. When Agnes was arrested about an hour later, Agent Moss had not yet returned. Appellees argue that Moss could have returned with a warrant within a short time, thus preventing the need for a warrantless search. Considering all the circumstances, however, the agents could reasonably have concluded that even a short wait might have been too long. An urgent emergency had arisen due to Agnes’ arrest and apparent signal. Warrantless searches have been struck down when the police have without justification not used the time available to seek a warrant. That was not the case here. When the crate was picked up at the airport, the agents were uncertain as to its destination. As soon as it did reach 1819 South 9th Street, they began the process of seeking a warrant. Only because exigent circumstances developed about an hour later did it seem necessary to act without awaiting the delivery of the warrant.
We do not minimize the historic and essential importance of the fourth amendment’s protection in shielding the citizen from unwarranted intrusions into his privacy. The strong preference of the Constitution for searches pursuant to warrants is clear. Only the emergency circumstances here justified the entry into Agnes’ house. These circumstances were sufficiently compelling in tipping the delicate balance in favor of protecting societal interests. Our vigilance in protecting the privacy of the individual in his home must not absolutely preclude officers of the law, when they are confronted with exigent circumstances, from effective criminal investigation and law enforcement in curbing illegal narcotics traffic. We therefore vacate the district court’s holding that the evidence seized at 1819 South 9th Street must be suppressed because of an unconstitutional search.
Although we vacate the district court’s order, we cannot finally dispose of appellees’ contentions. Both in the district court and here, appellees have also claimed that the entry into both house and garage were illegal because of the failure of the agents to announce their purpose and because of their forcible entry without a prior refusal of entry by the occupants, in violation of 18 U.S.C. § 3109. The district court, however, did not rule on this issue; and the Government has not briefed the issue on appeal. We therefore remand the case to the district court for a ruling on this issue and its effect on the admissibility of the seized evidence. Appellee Agnes’ further claim that his warrantless arrest was made without probable cause is without merit.
The order of the district court will be vacated and the case remanded for further disposition consistent with this opinion.
It should be noted at this juncture that the agents involved had prior to the pick-up of the statue identified Louis Martin Agnes as a possible suspect and had placed the house under complete surveillance on the date in question, at approximately 10:30 A.M., some 5 hours before the statue arrived at the South Ninth Street address. [District court’s footnote 2.]
. The opinion is reported at 343 P.Supp. 625 (E.D.Pa.1972). Our statement of facts omits the district court’s references to the notes of testimony page numbers.
. In Johnson police had smelled opium fumes outside a hotel room door. The Court noted that they might disappear, but stated such disappearance would be insignificant:
But they [the fumes] were not capable at any time of being reduced to possession . . . The evidence of their existence before the search was adequate and the testimony of the officers to that effect would not perish from the delay of getting a warrant.
333 U.S. at 15, 68 S.Ct. at 369.
. Vale is read the same way in Note, Police Practices and the Threatened Destruction of Tangible Evidence, 84 Harv.L.Rev. 1465, 1468 (1971).
. It might be noted that the agents could have seized the contraband and arrested Agnes at the airport, when he picked up the statue. No warrant would have been necessary at that time.
. 18 U.S.C. § 3109 provides :
The officer may break open any outer or inner door or window of a house, or any part of a house, or anything therein, to execute a search warrant, if, after notice of his authority and purpose, he is refused admittance or when necessary to liberate himself or a person aiding him in the execution of the warrant.
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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{
"author": "COLEMAN, Circuit Judge: WISDOM, Circuit Judge",
"license": "Public Domain",
"url": "https://static.case.law/"
}
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UNITED STATES of America, Plaintiff-Appellee, v. Teodoro DAVILA-NATER, Defendant-Appellant.
No. 73-2324.
United States Court of Appeals, Fifth Circuit.
Feb. 5, 1973.
Rehearing and Rehearing En Banc Denied March 26, 1973.
Wisdom, Circuit Judge, dissented and filed opinion.
Joseph A. Calamia, John L. Fashing, El Paso, Tex., for defendant-appellant.
William S. Sessions, U. S. Atty., San Antonio, Tex., Edward S. Marques, Asst. U. S. Atty., El Paso, Tex., for plaintiff-appellee.
Before WISDOM, BELL and COLEMAN, Circuit Judges.
COLEMAN, Circuit Judge:
A few minutes before closing time, August 5, 1971, when only one woman employee was present at either facility, the State National Bank of El Paso and the El Paso National Bank were simultaneously robbed by three men. The total amount taken was $36,176.94. Both banks were located in the same building, with a common lobby, on the grounds of the William Beaumont Hospital.
It was later developed that the offense had been committed by Teodoro Davila-Nater (Davila) (age 24), Jose Felix Hernandez (age 25), and Juan Jesus Martinez (age 26).
Hernandez and Martinez pleaded guilty, in one count, to the robbery of the State National Bank. The counts with reference to the El Paso National Bank were dismissed.
A jury convicted Davila of violating 18 U.S.C. § 2113(a), the Bank Robbery statute, in that on August 5, 1971, he robbed the El Paso National Bank of $22,500 in money. He was also convicted of violating 18 U.S.C. § 2113(d) in that he assaulted and put in jeopardy the life of a bank employee by the use of a gun.
He was acquitted of the robbery of State National Bank. His co-defendants testified that Davila never physically entered the space assigned to that bank, although they, in furtherance of the common enterprise, did so. See 18 U.S. C. § 2, Principals.
When the case came to trial, both Hernandez and Martinez described not only the genesis of the criminal plan but also its execution, including a detailed resume of Davila’s performance at the scene. Angel Sanchez was one of Davi-la’s friends, who loaned him the car in which he got out of El Paso and ultimately landed in Puerto Rico. Sanchez testified that on more than one occasion, both before going to Puerto Rico and after his return, Davila privately told him of his part in the robbery, including the use of a gun.
In this staté of affairs, the appellant sought refuge behind a strongly implemented psychiatrical defense that at the time of the robbery he was suffering from a mental disease or defect from which he lacked substantial capacity either to appreciate the wrongfulness of his conduct or to conform his conduct to the requirements of the law, Blake v. United States, 5 Cir., 1969, 407 F.2d 908. This is the ground over which the trial was fought vehemently to a finish.
Davila was sentenced to concurrent terms of fifteen years each, to be eligible for parole at the discretion of the Board, 18 U.S.C. § 4208(a>(2). Apparently no one directed the attention of the court to the fact that this was an erroneous sentence. See Burger v. United States, 5 Cir., 1972, 454 F.2d 723, and the three prior decisions of this Court therein cited. Separate penalties under the various sections of the Federal Bank Robbery statute are improper, whether imposed consecutively or concurrently.
Within the foregoing context we shall discuss individually the errors assigned in search of reversal.
I. Mrs. Rosch’s Unexpected Change of her Identification Testimony
When the robbery occurred Mrs. Bernice Ruth Rosch was the teller on duty at the El Paso National Bank.
At a pre-trial hearing, the prosecution made it known that Mrs. Rosch could not identify the robber or robbers.
In his opening statement, the Assistant United States Attorney, informed the jury:
“I don’t expect any identity from the two ladies that will be taking the stand as to who was the ones that held them up. The identification will come, I feel and believe, through the testimony that will be given to this jury by the other two individuals that held up the bank. As the Court indicated to you at the beginning of the case, Jose Felix Hernandez has plead guilty to the offense. Juan Jesus Martinez has also plead guilty to the offense, and they are going to come into this courtroom and tell you today that this Defendant Davila-Nater was the third individual involved in this robbery.”
Mrs. Rosch soon took the stand. She had been an employee of the El Paso National Bank for a total of thirty-one years. On August 5, 1971, she had been working at the Beaumont Branch as relief for a male employee who was on vacation. She then described the robbery. Then came the surprise:
“Q. I will ask you to take a look at the Defendant Davila. Can you identify him as being the man that held you up, Mrs. Rosch?
“A. He was one of them, yeah.
“Q. He was one of the men? Do you recall if he was the one that actually held you up ?
“A. Well, I wouldn’t want to say that, sir.”
Mrs. Rosch then agreed that she had viewed a lineup but did not then identify the defendant.
On cross examination:
“Q. [D]o you remember seeing the Defendant there at the lineup at that time?
“A. Yes.
“Q. My question is, at that lineup, Mrs. Rosch, you never made any indication or did you ever say that this Defendant appeared to be one of the men involved in the bank robbery, isn’t that true, that you never did ?
“A. I did not, but that isn’t true, that I didn’t think it sir.
“Q. I see. But you were asked several times if anyone in that lineup was involved — just a moment, let me finish my question, was involved in the bank robbery and if so, would you please point him out, and weren’t you asked that question very carefully ?
“A. I was asked that question once and I said that the first one on the end looked familiar to me.
“Q. And do you recall in which position the Defendant was ?
“A. He was the third in the lineup.
“Q. The third in the lineup? And at no time — my question is, at no time did you tell — I am not asking what you thought, I am asking what you told in response to the question by the Federal Bureau of Investigation man, did you tell me or Mr. Turtle (emphasis added) that this Defendant appeared to be one of the men? Can you answer that ‘yes’ or ‘no’ ?
“A. No.
“Q. Did you tell us ?
“A. I did not tell you.
“Q. All right you kept your own reservations to yourself, is that what you are saying.
“A. That is what I am saying.
“Q. Wasn’t it explained to you by Mr. Turtle that it was very important, the process and necessity of a lineup ?
“A. He explained it to me and told me this fellow said I could not identify him.
“Q. Before the lineup, Mrs. Rosch, weren’t you told that it was very important that you be careful to properly examine, observe and then make your identification known or non-identification known ?
“A. Right.
“Q. And isn’t it a fact that this is the first time that you have told anyone that this Defendant appears . to be or is the man that robbed you that day or took part in the robbery.
“A. I told the District Attorney and the FBI agent as we left that the third fellow on the lineup, this Davila did look familiar but his heighth was so that I was thrown off. [Davila was the fourth man],
“Q. Did you tell Mr. Eddie — have you talked with Mr. Edward Marquez concerning this case, the District Attorney that just interrogated you here ?
“A. I talked to him.
“Q. Did you tell him that you could and you were going to identify Teodoro Davila-Nater as being one of the men involved in this bank robbery or did you tell him that you could not identify him?
“A. I told him I could identify him.
“MR. CALAMIA: Your Honor, I am going to invoke the theory and holding of Brady vs. Maryland so that if there is anything incorrect in this testimony I expect the United States Attorney to make it known to the Court and to the jury.”
The record reveals that at the noon recess the prosecution informed defense counsel that Mrs. Rosch had, indeed, told him that she could not identify the defendant and that he was willing to take the stand and would so testify. It may be hindsight, but it seems strange to us that apparently it never occurred to either counsel that the prosecutor could have quickly filed a written stipulation of these facts and it could have been read to the jury. No one suggested this course. Failing this approach, the United States Attorney could, of course, have entered a verbal stipulation.
What actually happened was that, considerably later, defense counsel, without stating his purpose, asked to call the United States Attorney as a witness. Whereupon the Court announced, “I won’t permit you to call the District Attorney”.
Thereafter, the defense called the F. B.I. agent, Eugene Patrick Turtle, Jr., who testified that Mrs. Rosch did not identify Davila at the lineup but was not specifically asked whether she had (as she stated) told him later that she could identify Davila.
In the closing arguments to the jury the prosecutor made no reference to Mrs. Roseh’s testimony, but defense counsel dwelt on it at some length:
“The Government makes an opening statement saying neither lady can identify him and they put on Mrs. Rosch and she said she told the District Attorney that she was going to identify him and she said T told the FBI agent and the District Attorney on the day of the lineup that I thought, yes, it was the number three man in the lineup. I didn’t say it in front of the defense counsel but I told the FBI and I told the United States Attorney as we were going out.’ The Government knew that the facts were otherwise. The Government did not get up and say ‘Wait a minute, I want to clear this up for the jury. [Mrs. Rosch never told me that. She never told me she was going to identify the Defendant.’ Why? Because why would I have said in my opening statement that neither of my witnesses are going to identify the Defendant? We had to call the FBI agent, and Mr. Calamia asked him, under subpoena duces tecum ‘may I look at your record?’ And he is an honest man and he said she did not identify the Defendant, that she identified number one. ‘She never told me later that it was number three.’
“Well, Mr. Davila wasn’t even number three in that lineup. He was number four. Now this is the type of evidence the Government has. The witness takes the stand and they come in and they know this is the one that has been accused. It is very easy to turn over and say, ‘Yeah, that is him.’
“I say that part of her testimony should be given no consideration, now any person when they are sitting in that box, occupying the stand as a Government witness, and it is so easy to turn and say ‘Yes, that is him.’ Because they know who the lawyers are and they have talked with the Government and they have seen what has gone on and they came in and were sworn and the Government put on evidence that this bank meets all the requirements to come within this law, and I wonder and doubt, and I don’t believe they have proved that.”
Appellate counsel now argues most vigorously that his inability to impeach Mrs. Rosch by the testimony of the Assistant United States Attorney denied his client a fair trial.
He cites Mooney v. Holohan, 294 U.S. 103, 55 S.Ct. 340, 79 L.Ed. 791, a case in which the prosecution knew before the trial that false testimony would be used; Napue v. Illinois, 360 U.S. 264, 79 S.Ct. 1173, 3 L.Ed.2d 1217, where the statement was elicited from a witness that nothing had been promised him, when, in fact, it had, and this perjury was concealed; Alcorta v. Texas, 355 U.S. 28, 78 S.Ct. 103, 2 L.Ed.2d 9, in which the witness was cautioned by the prosecution not to reveal evidence known to be favorable to the defendant; Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215, in which the prosecution withheld a statement beneficial to the defendant and which had been requested, and Giglio v. United States, 405 U.S. 1972, 92 S.Ct. 763, 31 L.Ed.2d 104, requiring that favorable evidence known to any prosecutor in the office had to be revealed.
These eminently sound cases are not altogether analogous to the one now before us, although they undoubtedly fall in the same general category as this case. They indisputably stand for the principle that prosecutors must not, by commission or omission, wilfully commit acts causing a defendant to be denied an opportunity for' a fair trial under due process of law.
Upon mature consideration, however, of the episode hereinabove described, we are convinced that, within the four corners of this case, it was harmless beyond a reasonable doubt:
1. The prosecutor told the jury at the very outset that he did not expect Mrs. Rosch to be able to identify the defendant ;
2. The evidence was undisputed that Mrs. Rosch did not identify the defendant at the lineup;
3. Mrs. Rosch specifically declined to say that Davila was the one who actually robbed her;
4. There was no effort to attack the in-court identification except to try to impeach as to what had been told the prosecutor;
5. Without stating his reasons, defense counsel moved to put the prosecutor on the witness stand, a procedure not ordinarily looked upon with favor because the trial of a defendant, in the absence of the most compelling reasons, is not to be converted into a trial of the prosecutor, including the possible issue of his veracity in the midst of a trial which he is required to conduct;
6. There were other preferable methods by which the matter could have been handled, but which were not requested;
7. The point in controversy was whether the witness had told the District Attorney that she could identify the defendant, whereas, that official had already assured the jury that he did not expect such an identification, a statement he most surely would not have made if he had been informed to the contrary;
8. And it was a matter about which the defense took telling advantage in the closing argument.
In the main, however, these are prefa-torial observations.
The consideration which brads the nail is the fact that both of Davila’s confederates described his participation in detail. His friend, the automobile lender, recounted Davila’s privately expressed admissions of guilt. No witness testified to an alibi or, in any other manner, that Davila was not present and participating in the robbery.
Vigilant counsel for Davila argues, however, that since the jury acquitted the defendant of robbing the State National Bank, for which the sole eyewitness identification came only from his co-defendants, and since he was convicted as to El Paso National, about which Mrs. Rosch testified, then her testimony was the cause of the conviction. This argument would be most persuasive if Mrs. Rosch had not refused to say, on the witness stand, that she identified Davila as the one who actually robbed her (that is, El Paso National).
From the record as a whole, viewing this incident in its entirety, and considering the overwhelmingly strong evidence of Davila’s participation, we are of the view that what Mrs. Rosch swore she had told the District Attorney could not have influenced the jury on this issue. It was thus harmless beyond a reasonable doubt.
It is well established in this Circuit that an error which might have been prejudicial in a close case does not require reversal when the evidence of defendant’s guilt is strong, United States v. Lipscomb, 5 Cir., 1970, 435 F.2d 795, cert. denied 401 U.S. 980, 91 S.Ct. 1213, 28 L.Ed.2d 331, rehearing denied 402 U.S. 966, 91 S.Ct. 1635, 29 L.Ed.2d 131; Loftis v. Beto, 5 Cir., 1971, 450 F.2d 599.
The problem now before us has Constitutional overtones, but in Harrington v. California, 395 U.S. 250, 89 S.Ct. 1726, 23 L.Ed.2d 284 (1969), a capital case, the Supreme Court declined to reverse for a Bruton error because the direct evidence of guilt was so overwhelming that the asserted error was harmless beyond a reasonable doubt.
We now consider a much more difficult issue.
II. DAVILA’S MENTAL STATUS
This Court has rarely, if ever, had an opportunity to review a more extensive controversy as to a defendant’s mental status at the time of an alleged offense.
The psychological and psychiatrical evidence was impressive. To avoid prolonging this opinion beyond that necessary to a decision, we now synopsize.
When the government rested and a motion for an instructed verdict of not guilty had been denied, the defense came forward with its proof of mental status as of the day of the alleged robbery.
If there is some evidence supporting a defendant’s claim of insanity, the issue must be submitted to the jury. Once the hypothesis of insanity is established, the burden is on the prosecution to prove by the evidence beyond a reasonable doubt that the defendant was sane at the time of the commission of the alleged crime and was possessed of the requisite criminal intent, Blake v. United States, 5 Cir., En Banc, 1969, 407 F.2d 908.
A. Evidence of Mental Status for the Defendant
The first witness for the defendant was his mother, Mrs. Isabel Maria Na-ter, a social worker in Puerto Rico. The defendant was born September 24, 1946. He had been married four times. One marriage lasted nineteen days, one lasted two months, and a third lasted only a day. He was graduated from high school in Baja Vega, Puerto Rico, in 1963. As a child he was depressed because of the absence of his father, from whom his mother had been divorced when the defendant was three years of age. Defendant was obsessed with a desire to become a soldier and also to have a son. He enlisted in the Army, with her consent, 1964; trained at Fort Bliss, El Paso. He served in Korea and received an honorable discharge in 1966. He re-enlisted in 1967, shortly after he had married a girl in El Paso. After-wards, he was in a military hospital in Columbus, Georgia, [for injuries sustained in a parachute jump]. He went AWOL and spent several months in Puerto Rico before the F.B.I. came for him. He went AWOL a second time and ultimately received a discharge under conditions other than honorable (undesirable). The mother took the son to a psychiatrist, Dr. Marcos Rosado Del Valle, in Puerto Rico, March 12, 1970. He disappeared on March 22 before he was to see the psychiatrist again on March 24. Mrs. Nater was of the opinion that on March 12, 1970, the defendant was “of unsound mind”. He came back to Puerto Rico in August, 1971 [right after the alleged bank robbery].
On cross examination, Mrs. Nater testified :
“Q. Mrs. Nater, did your son at any time discuss the examination conducted by the psychiatrist while he was in the Army?
“A. I remember one occasion among many where he was examined by a psychiatrist in the Army. He talked to me something about it.
“Q. All right. Can you tell this jury whether or not at that time the psychiatrist found him to be sane ?”
Defendant objects on the ground that the psychiatrist “is not here to be examined”. Objection overruled.
“A. No, they found another disability, according to the doctor.
“Q. What did your son tell you about that examination, Mrs. Nater?
“A. My son was AWOL three or four times repeatedly after an accident, according to my information, because I was always seeking information from the Army. They would always take him to a psychiatrist of the Army and the psychiatrist of the Army would examine him and would treat him. At Puerto Rico he was seen by a psychiatrist as I have already said, at Ft. Buchanan.
“Q. Mrs. Nater, I asked you one question, and the question was did your son ever tell you what the psychiatrist said about this mental capacity while he was in the Army? Did your son ever discuss this with you ?
“A. No, not that.
“Q. That is all I am asking. Were you aware what the psychiatrists have said? Have you had a chance to see his Army medical records?
“A. Yes, sir.
“Q. All right. Your Honor at this point, I move Mr. Calamia tender to me the medical records he obtained from the District Clerk about his medical — may I have that, please?”
Counsel for defendant [Mr. Cal-amia] :
“That is what we object to, Your Honor. We object to the reports signed by Kenneth M. Berc and Elmo M. Vinas, Jr., to the diagnosis and findings, because those are legal— those are medical conclusions and opinions that are not admissible and are hearsay since these people who made this report are not here to be cross examined. This portion of the report is hearsay and I move that it not be admitted.
“THE COURT: This is proved up. The Court will admit the entire record, including this.”
Whereupon, Government’s Exhibit 4, duly certified by the National Archives and Record Service of the General Services Administration and by the Chief of the National Personnel Record Center at St. Louis was admitted into evidence.
Mrs. Nater was then asked whether she was able to identify Government Exhibit 4 as being personnel records of her son, Teodoro Davila-Nater. She stated that she had seen the records, including the report of Dr. Kenneth M. Berc, Psychiatrist.
The report, read to the jury, reads as follows:
“. . . seen for psychiatric evaluation on 12 December, 1969. The subject related that he has been AWOL three times. He feels that he can’t cope with the Army anymore because of his many problems back home. He has had three court mar-tials and one Article 15. He has no civilian convictions.
“Mental status examination reveals a well-oriented male with intact memory for recent, remote, and immediately past events. Judgment was intact in terms of simple actual situations. There was no evidence of fault disorder, delusions, or hallucinations. Affect was stable and appropriate.
“Diagnosis: Emotionally unstable personality.
“Findings: This man was and is mentally responsible both to distinguish right from wrong and adhere to the right. This man has the mental capacity to understand and participate in the board proceedings. This man has no disqualifying mental or physical disease or defect sufficient to warrant discharge through medical channels. This condition is not amenable to hospitalization, treatment, disciplinary action, training, or reclassification to another type of duty. This enlisted man will continue to be a noneffective soldier throughout his tour of duty.
“Recommendations: 1. Psychiatri-cally cleared for any administrative or disciplinary action.
“2. It is recommended that Teodo-ro Davila-Nater, Private, [ XXX XX XXXX ] be separated from the service under the provisions of AR 635-212.”
The next witness for the defendant was his sister, Mrs. Isabel Maria Davila, age twenty-seven, the divorced mother of three, then living with her mother in Puerto Rico. She testified that in November, 1969, she found her brother trying to hang himself with a rope to a tree of their yard in Puerto Rico. She called her grandmother and they got him down. Later, he told his sister that he had killed her mother [untrue]. The sister was later recalled to testify to another hanging episode in the laundry of the home, in which he was again saved by his sister and grandmother. She said she forgot about this incident when she was first on the witness stand.
[When Davila was examined at Springfield in February, 1972, he denied ever attempting suicide, as will be seen later].
At this point, Dr. Marcos Rosado Del Valle, age 46, took the stand. He was a graduate in medicine of the University of Mexico and had completed a three year residency in psychiatry at the University of Puerto Rico. He saw the defendant on March 12, 1970, for one hour. He diagnosed him as a borderline patient, disorder of the character. On May 12, and May 14, 1972, nine months after the robbery, for a total of two and one half hours, he saw the defendant in jail at El Paso. No psychological tests were administered, but the doctor had the benefit of the Army report (Government’s Exhibit 4) already alluded to. From his observation, and despite anything contained in that report, the psychiatrist was of the opinion, to a reasonable medical certainty, that on May 14, 1972, Davila had “a disturbance of the personality with anti-social conduct, with a reaction of depressive-manic, an effective psychotic”.
He was further of the opinion that on August 5, 1971, Davila was psychotic and going through an episode of mania —was mentally ill within the requirements of Blake.
The next witness called by the defense was Dr. R. G. Bennett, a board certified psychiatrist, who, from 1943 to 1951, had been a consultant psychiatrist for McNeil Island Federal Penitentiary. Dr. Bennett had interviewed members of the family, including the former in-laws and the ex-wife. He saw Davila September 30, 1971, October 3, 1971, and December 9, 1971. He had studied Dav-ila’s military and hospital records. He thought that on September 30 the defendant was “perhaps mildly depressed to near normal, no illusion of systems”. By December 9 he considered that Davi-la “had a sociopathic personality disorder, but this may have just been the symptom of something more”. He felt that Davila had been manic depressive, with periods of remission since 1967.
Dr. Bennett’s testimony concluded:
“I feel it is highly probable that he was ill at that time [August 5, 1971] and he lacked substantial capacity to either appreciate the criminality or wrongfulness of his conduct or conform his conduct to the requirements of the law.”
On cross examination, the doctor testified:
“No, I did not find him psychotic at the time I saw him [September 30, 1971].
It was at this point that the defense took a highly significant step. Counsel for Davila, on redirect, asked Dr. Bennett if he had “had an opportunity to look at Dr. Fain’s report from Springfield, Missouri, in this case?” He responded in the affirmative and said that he disagreed with the diagnosis.
On re-cross, Dr. Bennett said he had also considered Government’s Exhibit 4 [the military records; the report of Dr. Kenneth Berc] but that Davila might have been in remission at that time.
The next witness called by the defense was Dr. Milton Raskin, board certified psychiatrist, who had examined Davila the week before [May 11, 1972]. He had looked at the military hospital records. He found Nater to be a manic depressive. His opinion was that on August 5, 1971, the defendant suffered from a mental disease or defect, within the rule of Blake.
On cross examination, Dr. Raskin stated that “he had seen the report from the Bureau of Prisons, Springfield, Missouri, that of Dr. Fain and the other doctors that examined this defendant at Springfield”, as well as the Berc report of December 17, 1969, and that Davila told him of his arrest for rape in Chicago on October 18, 1966, “a bum rap”.
At this point the defense rested.
B. The Prosecution Evidence of Mental Status
The government called Dr. J. Edward Stern, a board certified psychiatrist. On September 28, 1971, and again on September 80, 1971, he had subjected Davila to an electroencephalographic [E.E.G.] test. The results were normal.
Dr. Ivan C. Smiley, a board certified radiologist, had interpreted a brain scan of the defendant and found it to be normal.
Dr. Clarence G. Hackett, a clinical psychologist, Ph.D. in psychology from Purdue University, a fellow of the American Psychological Association, at the request of Dr. R. J. Bennett [above mentioned] had administered to Davila the Welchler Adult Intelligence Scale Test, the Bonder Gestalt Test, and the Rorschach Test.
The Rorschach test had shown that Davila showed no evidence “of any thinking disorder or really of any serious mental or emotional disturbance”. He did feel from “interview and testing” that Davila had “an antisocial personality disorder”. He saw no evidence that Davila was a manic depressive. There was nothing in the examination to suggest that on August 5, 1971, the defendant had been unable to understand or comprehend the wrongful nature of his conduct and was quite capable of understanding the requirements of the law. Dr. Hackett had “no basis” for thinking that Davila on the day of the robbery suffered from any impairment of thinking or inability to conform to the law.
C. The Springfield Report
The District Court ordered the defendant admitted to the United States Medical Center for Federal Prisoners at Springfield, Missouri, for an evaluation of his competency to stand trial, 18 U.S. C. § 4244, and for an opinion as to “responsibility at the time of the alleged offense”. The Medical Center was directed to provide copies of its report to the Court, to the United States Attorney, and to defense counsel.
The defendant was admitted to the facility on February 10, 1972 and discharged March 21, with copies of the reports to the court and counsel on both sides. These reports constituted Government Exhibit 6, about which there was so much objection in the court below, and here.
The report of the psychiatric staff examination was signed, for the staff, by Dr. H. Wayne Glotfeltz, then Chief, Psychiatric Service. Omitting the preliminaries, that report was as follows:
“Since admission to the Medical Center medical, physical and psychiatric examinations have been performed. The physical examination was essentially negative except for the history of former drug use, Marijuana, and a question of pulmonary tuberculosis. The sputum culture was normal flora. Routine blood, urine and VDRL were within normal limits. His blood type Rh factor is 0 positive. The skull x-ray and chest x-ray were within normal limits. The psychiatric opinion was passive-aggressive personality trait disturbance, inadequate personality with passive-aggressive trends.
“On February 24, 1972, he was examined by a consulting psychologist who found no evidence of an active psychotic process.
“On psychological examination it showed chronic personality disorder, characterized by poor impulsive control.
“On March 2, 1972, he was interviewed by the staff, and discussed his activities of the past, and the alleged charges against him. He gave the staff no information that would indicate that any time in the past he had been considered incompetent or irresponsible. He lists his employment as a gigolo and has apparently been very successful living off various women who have supported him. In the future he would like to go to Spain and finish school as his grandfather who is quite wealthy in Puerto Rico stated he would assist him.
“Therefore, if a competency hearing should be held the staff would recommend that he be adjudicated as competent and responsible.”
Attached to this staff report was the written psychiatric examination report of Dr. H. B. Fain. This report mentioned no opinion as to Davila’s mental responsibility on the day of the robbery or at any other time, although its terms negated, without specifically saying so, any psychotic condition.
At the trial, Dr. H. B. Fain, chief of psychiatry at the Springfield Medical Center (deputy chief at the time Davila was there) took the stand for the prosecution. Dr. Rochman had given the defendant a physical examination and neurological screening. Dr. Murney had performed a battery of psychiatric tests, object tests, written tests, general intelligence tests, the revised Benet test, the Bender Gestalt test, the Minnesota Mul-ti-Facet Personality Inventory, which includes the neurotic scale, the schizophrenic scale and the organic scale, and the Rorschach psycho-diagnostic test.
At this point, the defense objected to any statement of the conclusions reached by Dr. Murney because he was not in court and not available for cross examination. The objection was overruled, the trial court holding that Dr. Fain could “state any reports that he had from the staff members that helped him conduct this examination”.
Dr. Fain then stated that Dr. Mur-ney’s conclusions were that the tests suggested
“Characterogical problems with a neurotic overlay, and that there was some elevation on the neurotic triad which would indicate that this patient being tested had a lot of feelings of sexual inadequacy, that he also was somewhat anxious and had some depressive signs. He worries about his physical health a great deal.
“But he did not find evidence of thought disturbance or psychosis, and we have his written report, which is a part of the official record.”
Dr. Fain had, he said, used that report in arriving at his opinion of the subject’s mental status.
Then, again over objection, Dr. Fain stated that the psychiatric staff came to the conclusion that Davila had the capacity to understand the charge, that he could cooperate with counsel and assist in his defense.
On the Revised Intelligence Test, Dav-ila had scored an IQ of 98 and on the Welchler Adult Intelligence Scale he had scored 105 which is within average intelligence range.
Dr. Fain further testified as follows:
“On the morning of February 24, 1972, Mr. Davila arrived for his interview unescorted from his assignment within the institution. He proved to be oriented in all spheres and capable of expressing himself in a rational and coherent manner, despite minor problems in using the English language.
“He impressed me as being bright, alert and responsive. From the outset he took the definite position that he had been falsely accused of the offense and that he can definitely prove that he was in Puerto Rico at the time the alleged offense occurred. Initially in the interview I got the impression that he was totally unaware of the circumstances or any of the individuals involved in the alleged crime but as the interview progressed I learned he knew both of the other individuals charged with the crime.”
•X- -X- * * -X *
“He does demonstrate the presence of neurotic problems but as far as I can determine there is no evidence of psychotic process.”
By way of opinion as to Davila’s mental status on the day of the robbery, Dr. Fain stated:
“My opinion is that there was nothing in our study that would indicate that he lacked substantial capacity to appreciate the wrongfulness of his act or could not conform his conduct to the requirements of the law.”
This closed the evidence on the insanity issue.
III. THE DECISION ON THIS POINT
We have given an elaborate description of the testimony on the insanity issue and the trial maneuvers incident thereto because diligent counsel for the defendant has assigned no less than twenty trial errors which he says should justify a reversal. Two of these errors have been discussed ante. All assignments have been carefully considered but we shall now discuss only those which, in our opinion, merit discussion for the appropriate disposition of the appeal.
The really important assignment is stated as follows:
“Did the District Court violate Dav-ila-Nater's rights of confrontation, of cross-examination and to have hearsay evidence excluded by admitting into evidence Government’s Exhibits 4 and 6 and testimony on other medical reports and in permitting the government to offer testimony and to cross-examine witnesses in regards to these matters without limiting instructions insofar that said exhibits, evidence, testimony and cross-examination permitted the substantive use of reports and testimony which contained diagnostic or expressions of opinions and findings or conclusions of doctors not .present to testify ?”
This attack, of course, is levelled against the army psychiatric report, signed by Dr. Bere, page 17 ante, and the staff report signed by Dr. Glotfeltz, page 23 ante. The report of Dr. Fain was introduced, but he appeared and testified. It must also be noted that the report signed by Dr. Glotfeltz, no longer with the Springfield Medical Center, was specifically denominated at its top in capital letters as the “REPORT OF PSYCHIATRIC STAFF”. Dr. Fain was a member of that staff, indeed its deputy chief, and had become chief between his dealings with Davila and his appearance on the stand.
•The Springfield report had been furnished to defense counsel in March, before the trial began in May. The mother of the defendant and all the doctors had seen it. The defense doctors had considered it in connection with their own views, although they disagreed with it. The defense injected the report, by reference, in its re-direct examination of Dr. Bennett, page 20 ante. This was before the government introduced the report on re-direct when Dr. Fain testified.
It is true that opinions as to sanity contained in hospital records are not admissible under the Business Records Act, 28 U.S.C. § 1732, and such an opinion is receivable only if. the expert rendering it is made available for cross examination, Birdsell v. United States, 5 Cir., 1965, 346 F.2d 775, 779. But the rule does not stop there. Expert witnesses available for cross examination may use such records as the basis for an opinion without the proponent having to call every person who made a recorded observation, Id. at 779.
More specifically, a physician making a diagnosis must necessarily rely on observations and tests made by others and recorded by them. Records sufficient for diagnosis in the hospital ought to be enough for opinion testimony in the courtroom, Id. at 779, 780.
We next consider a similar situation in United States v. Harper, 5 Cir., 1971, 450 F.2d 1032.
Part II of that opinion demonstrates that there was no error in permitting Dr. Fain to say that he had Davila for the purpose of determining his competency to stand trial, that there was no error in reading to defense doctors the statements of doctors from Springfield by way of cross examination or impeachment, that there is a difference between admitting such reports directly as proof of matters they contain and doing so for impeachment purposes.
The opinion concluded with the following highly important language:
Although medical reports containing expert opinions as to the defendant’s sanity may not be admitted directly into evidence, they may be used by other experts in arriving at a conclusion as to the defendant’s sanity. E. g., Jenkins v. United States, 1962, 113 U.S.App.D.C. 300, 307 F.2d 637 (en banc); Rule 703, Proposed Rules of Evidence for United States Courts and Magistrates, 51 F.R.D. 315, 404 (1971). And if an expert witness considers such reports in reaching his conclusions, it is open to both sides to question him about what weight he gave the reports and why. See Brown v. United States, 1967, 126 U.S.App.D.C. 134, 375 F.2d 310, 318; Smith v. United States, 1965, 122 U.S.App.D.C. 300, 353 F.2d 838, 842 & n. 7; Birdsell v. United States, 5 Cir. 1965, 346 F.2d 775, 779; Rule 705, Proposed Rules of Evidence for United States Courts and Magistrates, 51 F.R.D. 315, 406 (1971).
The reason for that rule is clear. The issue of the defendant’s insanity, when raised as a defense to a criminal prosecution, is to be decided by the jury on the basis of all the evidence. Therefore, although expert opinion evidence on the issue cannot be arbitrarily ignored, it is not binding upon the jury. Rather it is only advisory in nature. Indeed, it is the jury’s function to assess the credibility of the expert witnesses and the weight to be given to their testimony. Mims v. United States, 5 Cir. 1967, 375 F.2d 135, 140-143. In a case such as this, in which expert witnesses express different conclusions as to the defendant’s mental condition at the time of the alleged offense, it is important that the jury know upon what facts the expert witness bases his conclusion. As we have said on several occasions, “expert opinion as to insanity rises no higher than the reasons upon which it is based.” E. g., Nagell v. United States, 5 Cir., 1968, 392 F.2d 934, 936.
Thus, where, as here, an expert witness bases his conclusion as to the defendant’s sanity on reports of other physicians, it is entirely proper that the jury know which opinions he credited, which he rejected, and why. As long as the jury is instructed that such hearsay opinions are being introduced solely to test the credibility of the expert witness and not to prove the truth of the matters contained therein, the use of such opinions for that limited purpose does not violate the confrontation clause of the 'Sixth Amendment.
United States v. Harper, 5 Cir., 1972, 460 F.2d 705, was another bank robbery case, in which the defendant pleaded insanity.
In that case, a psychiatrist from the Medical 'Center at Springfield, where Harper had been committed for examination, testified that, in his opinion, Harper was sane. Dr. Moreau had access to appellant’s medical records and to a report prepared (as in the case now before us) by Dr. Murney. Our en banc decision in United States v. Williams, 5 Cir., 1971, 447 F.2d 1285, was cited to the effect that expert testimony may be based on sources of information of a type reasonably relied on by experts in forming their opinions or inferences on the subject. Birdsell, supra, was likewise cited and discussed in the following clear and meaningful language;
In addition, we held in a closely analogous case, Birdsell v. United States, 5 Cir. 1965, 346 F.2d 775, cert. den. 382 U.S. 963, 86 S.Ct. 449, 15 L.Ed.2d 366 (1965), reh. den. 383 U.S. 923, 86 S.Ct. 900, 15 L.Ed.2d 680 (1966), that although it is preferable for the doctor who examined the defendant to testify, a psychiatist who has reviewed all of the records and attended a staff conference with the examining doctor is qualified to give his opinion as to whether the defendant was sane at the time of the commission of the crime. Here, Dr. Moreau based his opinion upon a brief psychiatric staff examination of the appellant at which Dr. Moreau was present, medical reports which consisted of a psychological examination, routine laboratory tests and electroencephalogram, and a staff evaluation. We therefore find no reversible error occurred by allowing Dr. Moreau to testify, even though Dr. Murney was present and available to testify.
Counsel for appellant says the incurable vice is that the jury received no limiting instructions as to the use of these reports. We are of the opinion, however, that this requirement was not applicable to the two Springfield reports. The main report showed specifically that it was a staff report. Dr. Fain was a member of the staff, although a deputy chief. He had personally signed the second, attached report. He was available for cross examination on both reports. The reports had been extensively referred to on all sides prior to admission, which took place on the re-direct examination of Dr. Fain.
The army records of the psychiatrical examination of December 12, 1969, are, of course, different. None of the army doctors were present for cross examination. The trial record reveals, however, that this report was extensively referred to for purposes of cross examination and attempted impeachment, and it was considered by defense psychiatrists as a part of their opinion forming process. Moreover the defense turned the report to its own advantage, by witnesses and otherwise, as a basis for showing the rapid mental deterioration suffered by Davila after 1969. The focal issue was Davila’s condition two years later, August 5, 1971. We are simply unable to perceive where the absence of the limiting instructions prejudiced the defendant, considered within the context of this wide ranging foray into Davila’s mental status over a long period of time. It was simply a paper, dealing with Davila’s condition two years before the event, whereas, the jury had seen and heard in person a long array of experts, possessed of the most imposing credentials, grappling over the mental status as it existed on robbery day. This small pebble in the road is not enough to overturn the whole wagon.
IV. FAILURE TO CHARGE ON THE PRESUMPTION OF INNOCENCE
Appellant says that he is entitled to reversal because the trial judge failed to charge on the presumption of innocence. He cites Helton v. United States, 5 Cir., 1956, 231 F.2d 654:
“It is necessary to consider only the first specification of error to the effect that the district court erred in failing to charge on the presumption of innocence. Appellant’s exception to such failure duly reserved must be sustained. Coffin v. United States, 156 U.S. 432, 15 S.Ct. 394, 39 L.Ed. 481.”
In the case now before us, before any testimony was heard, the trial court made the following statement to the jury:
“That the defendant is presumed to be. innocent until and unless his guilt is established beyond a reasonable doubt.”
At the conclusion of the ease the Court told the jury:
“As I told you in the beginning, and I will tell you again, in a criminal case there is no obligation of the defendant to prove his innocence. The burden of proving the guilt of the defendant rests on the prosecution, that burden never shifts. The burden cannot be sustained unless and until proof is offered by the Government in the case that convinces you beyond a reasonable doubt of the guilt or insanity of the defendant.”
In his opening argument the United States Attorney told the jury that the defendant was “cloaked in the presumption of innocence, so that the burden of proving his guilt is upon the Government”. He further said, “It is not until the evidence produced by the United States is sufficient beyond a reasonable doubt that this cloak of innocence is removed from this Defendant. That is one protection that he has”.
Of course, counsel do not instruct the jury on the law, but we do not have here such a case as Helton, where there was no instruction on the presumption of innocence. The trial judge told the jury, at the outset, of the presumption of innocence. At the close he said, “As I told you in the beginning, and I will tell you again, in a criminal case there is no obligation of the defendant to prove his innocence”. To say that this jury tried this case while unaware of the presumption of innocence would be to indulge in appellate speculation, although this is a good place to emphasize that trial judges should 'be careful to give the instruction on the presumption of innocence at the close of the case, so as to leave no room for controversy on this subject.
V. THE SUFFICIENCY OF THE EVIDENCE
Appellant says that the evidence was insufficient as a matter of law to establish beyond a reasonable doubt that Davila was not insane within the meaning of Blake. We disagree. See United States v. Roberts, 5 Cir., 1972, 470 F.2d 1190.
The jury had to choose between the conflicting opinions of expert witnesses, which it did. It was entitled to consider that immediately after the robbery and the division of the proceeds Davila fled the Country, to Puerto Rico, from which it could be reasonably inferred that he was well aware that he had committed a crime and was getting out of the way as speedily as possible. Morever, the jury was entitled further to consider that he knew enough of the nature of what he had done to inquire upon his return whether the situation had “cooled”, etc. These were facts, not opinions.
The judgment of conviction is affirmed.
The case, as heretofore indicated, will be remanded for the imposition of a lawful sentence.
Affirmed and remanded.
WISDOM, Circuit Judge
(dissenting) :
I respectfully dissent.
I would hold that the trial judge exceeded the bounds of judicial discretion in refusing to permit the prosecuting attorney to take the stand to correct apparently perjured testimony offered by his own witness.
This case is freakish but one that involves the broad principle overriding all rules of the game in a system based on the fiction that a trial is a duel between two equal adversaries. That principle is the concept of fundamental fairness. It is what due process is all about. Brady ' v. Maryland, 1963, 373 U.S. 83, 83 S.'Ct. 1194, 10 L.Ed.2d 215 rests squarely on it.
In Brady the Supreme Court held that “suppression by the prosecution of evidence favorable to an accused upon request violates due process where the evidence is material either to guilt or to punishment, irrespective of the good faith or bad faith of the prosecution.” 373 U.S. 87, 83 S.Ct. 1196. But, the Court says, the prosecutor did not suppress any evidence; he made it known to the defendant’s counsel and to the trial judge; and the trial judge, after weighing competing values, properly exercised discretion in declining to allow the prosecutor to testify.
This reasoning does violence' to the principle of fundamental fairness in trial process. If the prosecutor had withheld the information, unquestionably Brady would have controlled this case. The referee’s ruling here had the same effect of suppressing evidence favorable to the accused as if the evidence had been withheld by the prosecutor.
A criminal trial is unlike a football game. The referee’s decision to allow a fifth down is not subject to review. The trial judge’s ruling is more a clearly erroneous call than a judgment call, but in this contest even the referee’s judgment calls are subject to review.
Defense counsel fully protected the defendant’s rights. He entered an objection, based on Brady, as soon as Mrs. Rosch gave the disputed testimony. During the recess that followed the prosecutor offered to testify that contrary to what Mrs. Rosch had said, she had not told him that she could identify Davila-Nater. When the trial resumed, defense counsel called the prosecutor as a witness. The trial judge refused to allow him to take the stand. Defense counsel objected. The prosecutor was in court: there was no obligation to substitute a stipulation for live testimony and there is no reason to think that the trial judge would have permitted the admission of any stipulation, written or oral, after having refused to allow the prosecutor to testify.
There is no doubt that the ruling prejudiced the defendant. Mrs. Rosch’s testimony surprised the defense counsel. In his opening statement the prosecutor had said that Mrs. Rosch would not identify Davila-Nater. If he had been allowed to take the stand his testimony would have shattered or at least cast doubt on the credibility of the only eyewitness who was not a co-conspirator. It is meaningful indeed that the jury acquitted the defendant of the charges based on the second robbery — when the teller was unable to make an ir.-court identification.
I would reverse for a new trial. The district judge’s ruling was such an abuse of discretion as to violate the principle of fundamental fairness that constitutes the core of procedural due process.
. Appellant assigns twenty errors. We have, of course, considered them all. We omit discussion of those which, in 'our opinion, are without merit or fall within the prescription of our Local Rule 21.
. We do not detail the case history or the reasons upon which the various medical witnesses relied. To do so would be to compile a corpus juris of psychiatrical procedures, conflicts of expert opinion, et cetera. The significant factor is that in arriving at their conclusions the psychiatrists considered the reports from the Army and from Springfield.
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UNITED STATES of America, Plaintiff-Appellee, v. Roy P. ALLISON, Defendant-Appellant.
No. 72-1454.
United States Court of Appeals, Fifth Circuit.
Feb. 2, 1973.
John C. Ciolino, George M. Leppert, New Orleans, La., for defendant-appellant.
Gerald J. Gallinghouse, U. S. Atty., Patrick C. McGinity, Mary Williams, Cá-zalas, Asst. U. S. Attys., New Orleans, La., for plaintiff-appellee.
Before RIVES, WISDOM and RONEY, Circuit Judges.
RONEY, Circuit Judge:
This case involves the use of a defendant’s grand jury testimony by the prosecution in its case in chief against him in a criminal trial. Because we find no theory of evidence that will support the admission of the entire 160 page transcript of the testimony given by defendant before the grand jury, we reverse and remand for a new trial.
Defendant Roy P. Allison, a Police Juror of St. Tammany Parish, Louisiana supervised the parish clean-up work necessitated by the devastation of Hurricane Camille in 1969. Because the parish had been declared a disaster area, the United States Government reimbursed the parish for clean-up expenditures. In a two count indictment, Allison was charged (1) with conspiring to defraud the United States, in violation of 18 U.S.C.A. § 371, by submitting to the St. Tammany Police Jury accounting statements that fraudulently overstated the amount of labor, time, equipment, and personnel employed in cleaning hurricane debris from the public roads of the parish, and (2) with knowingly and willfully submitting a false accounting to the United States Corps of Engineers, in violation of 18 U.S.C.A. § 1001. He was found guilty by a jury on both counts and was sentenced to two years in prison on each count, with the sentences to run consecutively.
The procedure the Government followed in this case appears to be novel. At the trial, early in the presentation of the Government’s ease, two prosecuting attorneys read into evidence, before the jury, the complete transcript of Allison’s testimony before the grand jury, one attorney representing the United States Attorney, and the other representing the answering defendant Allison. The transcript was replete with prejudicial and irrelevant evidence. In rapid-fire fashion, Allison was several times asked complex, multifaceted questions about his hurricane clean-up activities but was not given time to answer. In response to many other questions from the United States Attorney, Allison frequently replied that he did not know or did not remember the requested information. All of this testimony — the unanswered questions and the answers that revealed nothing but uncertainty, lack of knowledge, or failure of memory — was read to the jury.
The harmfulness of this procedure is readily apparent. Without regard to any answers which he may have given that would tend to prove some relevant fact at issue in the trial, it gave the Government an opportunity to put before the jury many questions left unanswered by Allison, questions that may have been improper and objectionable in an adversary proceeding, and to demonstrate to the jury Allison’s uncertainty and inconsistency as to information that was either irrelevant, or, if relevant, could not be proved by his answers. .Much of the testimony would have little probative force except to prove Allison’s uncertainty about facts that the Government thought he ought to be certain about. This approach to the use of the testimony was revealed on oral argument of this appeal when the Government argued that the testimony “was put into evidence to show how he could not remember various relevant facts, was inconsistent, etc.” and that the “grand jury testimony showed how uncertain Allison was about many aspects of these transactions.”
At the threshold, it is quite apparent that whether or not Allison knew or could remember particular facts, or was uncertain or inconsistent, at the time he testified before the grand jury, is fundamentally irrelevant to the Government’s case in chief. Allison’s behavior before the grand jury is simply not logically connected to, and can therefore have no bearing upon, the ultimate proof required of the Government. His demeanor and his ability or inability to answer the questions propounded to him by the United States Attorney have no probative value for proving he committed the crimes charged. The Government has- cited no case which states otherwise, either by explicit holding or by dictum.
Whether the grand jury testimony could be used in rebuttal to impeach Allison’s trial testimony need not be decided here. Allison had not testified when this evidence was admitted, and we are persuaded that his decision to testify at the trial may have been precipitated in part by the harmful implications of his grand jury testimony or, in view of the unanswered questions, his lack of testimony.
The controlling issue in this case is that of relevancy. Allison makes no broad attack on the general admissibility of grand jury testimony. He does not argue that the testimony was inadmissible because it was secret. The Government, though, argues as if the decision as to secrecy or nonsecrecy under Rule 6(e), F.R.Crim.P., determines admissibility. Such reasoning amounts to a legal non seqwitur. Simply because evidence may be disclosed under Rule 6 (e) does not make it otherwise admissible. Further, he admits that the hearsay rule does not prevent the admission of grand jury testimony for impeachment, as an admission, or for the purpose of proving perjury. Under proper circumstances, grand jury testimony may be admitted under the prior reported testimony exception to the hearsay rule. See 2 F. Wharton, Criminal Evidence §§ 470-92 (12th ed. 1955); C. McCormick, Evidence §§ 230-38 (1954). Finally, the case has no self-incrimination ramifications. Because Allison testified only after being fully warned that his grand jury testimony could be used against him in later proceedings, he waived his Fifth Amendment privilege to refuse to be a witness against himself.
Although the record does not reveal the trial court’s reasons for overruling Allison’s objections to the introduction of the evidence, a District Court has wide discretion in determining relevance and materiality, and its ruling should not be disturbed in the absence of an abuse of discretion. United States v. Garr, 461 F.2d 487 (5th Cir. 1972); O’Brien v. United States, 411 F.2d 522 (5th Cir. 1969); Shale v. United States, 388 F.2d 616 (5th Cir.), cert. denied, 393 U.S. 984, 89 S.Ct. 456, 21 L.Ed.2d 445 (1968); 3 Orfield, Criminal Procedure Under the Federal Rules § 26:440 (1966). Where the proffered evidence is of substantial probative value, and will not tend to prejudice or to confuse, all doubt should be resolved in favor of admissibility. Holt v. United States, 342 F.2d 163 (5th Cir. 1965).
Evidence in criminal trials must be “strictly relevant to the particular offense charged.” Williams v. New York, 337 U.S. 241, 247, 69 S.Ct. 1079, 1083, 93 L.Ed. 1337 (1949). The admission of irrelevant facts that have a prejudicial tendency is fatal to a conviction, even though there was sufficient relevant evidence to sustain the verdict. Williams v. United States, 168 U.S. 382, 18 S.Ct. 92, 42 L.Ed. 509 (1897); Hall v. United States, 150 U.S. 76, 14 S.Ct. 22, 37 L.Ed. 1003 (1893).
The determination of relevancy is not automatic or mechanical. Courts cannot employ a precise, technical, legalistic test for relevancy; instead, they must apply logical standards applicable in every day life. See 1 Wig-more on Evidence § 27 at 406 (3d ed. 1940). The relevancy or irrelevancy of particular evidence, therefore, turns on the facts of the individual case. Relevancy has been variously defined, but, reduced to its essentials, relevancy describes the logical relationship between a proffered item of evidence and a proposition that is material or provable in a given case. See United States v. Craft, 407 F.2d 1065 (6th Cir. 1969); C. McCormick, supra, § 152 (“the tendency of the evidence to establish a material proposition”); 1 F. Wharton, supra, § 148; 1 Wigmore, supra, § 12. According to Rule 401, Rules of Evidence for United States Courts and Magistrates, 56 F.R.D. 183, 215 (1972), relevant evidence means “evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.” Thus, evidence is relevant when it is persuasive or indicative that a fact in controversy did or did not exist because the conclusion in question may be logically inferred from that evidence. Cf. Butler v. Watkins, 80 U.S. (13 Wall.) 456, 20 L.Ed. 629 (1871).
Applying these standards to the present case, we find a large portion of the grand jury testimony most certainly not relevant to the proof of any fact in controversy. The prejudicial effect of the irrelevant portions of the transcript requires that the conviction be reversed and that the case be remanded for a new trial.
The Government’s reliance on United States v. Capaldo, 402 F.2d 821 (2d Cir. 1968), cert. denied, 394 U.S. 989, 89 S.Ct. 1476, 22 L.Ed.2d 764 (1969), is misplaced. In Capaldo, specific inculpatory portions of the defendant’s grand jury testimony were read to the jury. This testimony was admissible as an admission inconsistent with defendant’s plea of not guilty. The entire transcript was not put into evidence, so the Capaldo court had no occasion to consider the admissibility of irrelevant portions.
The Government argues that the error here, if any, was harmless and should not be viewed as prejudicial. We disagree. The Government put the testimony into evidence for the purpose of influencing the jury, and we cannot conclude that it was not successful.
We do not here decide whether, on remand, the Government may find portions of the testimony that can be admitted as admissions or might be relevant to precise questions in issue and that can be admitted into evidence without the prejudicial confusion caused by admitting the transcript as a whole. These determinations of specificity and relevancy we leave to the sound discretion of the District Court on retrial.
Reversed and remanded.
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Richard GARNER et al., Plaintiffs-Appellants. v. HALLIBURTON COMPANY, a Delaware corporation, Defendant-Appellee.
No. 72-1442.
United States Court of Appeals, Tenth Circuit.
Feb. 26, 1973.
Rehearing Denied March 26, 1973.
Don Manners, Oklahoma City, Okl. (Murray E. Abowitz, Bethany, Okl., on the brief), for plaintiffs-appellants.
Truman B. Rucker, of Rucker, Tabor, McBride & Hopkins, Tulsa, Okl. (Donald G. Hopkins, of Rucker, Tabor, McBride & Hopkins, Tulsa, Okl., and John B. Cooper, Duncan, Okl., on the brief), for defendant-appellee.
Before HILL and DOYLE, Circuit Judges, and O’CONNOR, District Judge.
WILLIAM E. DOYLE, Circuit Judge.
The plaintiffs above named filed actions in the district court of Creek County, Oklahoma. These individual actions were removed to the United States District Court for the Northern District of Oklahoma, and subsequently were transferred from that court to the United States District Court for the Western District of Oklahoma where pretrial proceedings were carried out and finally the case was tried. Following a four-day trial, the district court granted the motions of Halliburton Company for directed verdicts. Final judgments were entered in favor of Halliburton and against the several plaintiffs, and these are the judgments which have been appealed and which are now before us.
I.
The claims of the plaintiffs were based on personal injuries suffered when a flash fire occurred at the scene of an oil and gas well which had been drilled to a depth of 17,200 feet and which was in the process of being abandoned by Humble Oil, the owner. The plaintiffs were workmen who, at the time of injury, were engaged in making preparations for the salvaging of the casing. Richard Garner and Thomas S. Snuggs were employed by Helmerich and Payne International Drilling Company. Billy L. Mains and Jack Pearse were employees of the Nichols Casing Crew.
Humble Oil and Refining Company, the owner, had contracted with several other companies to carry out the drilling operation on the well which had been designated as the K. B. Cornell Number. One. In addition to Helmerich and Payne and the Nichols Crew, there were several other companies which had rendered service or furnished supplies under contracts with Humble. Included was the defendant Halliburton which delivered and placed some cement in the hole during the course of the drilling.
The actual drilling of the well commenced on October 1, 1968 and continued for four and one-half months, until February 16, 1969. As of this time the well had been drilled to 17,200 feet, but without successfully encountering commercial quantities of oil or gas. Humble determined to abandon it at that point.
The incident here in question occurred on March 2, 1969, at which time the flash fire occurred. The crew was preparing to pull the casing. Great hydraulic pressure had been applied to the casing resulting in dislodging it when the fire occurred.
In essence, the plaintiffs’ claims against Halliburton were based on a cementing job which occurred some time prior to the March 2 incident.
On November 30, 1968, Halliburton had been called by Humble to deliver 800 sacks of specified cement containing a described retarder and 200 sacks of specified cement which contained a described friction reducer. All of this was pumped down the casing at a point at which the well had been drilled to the 12.180 foot level. The plaintiffs’ theory is that this cementing job was defective and that it permitted the gas below the 12.180 foot level to escape and that this in turn caused the fire that produced the injuries.
The legal theories of plaintiffs were, first, that Halliburton was negligent in carrying out its contract; secondly, that there was a breach of implied warranty of fitness and, finally, that there was strict liability. The major factual issue was whether the gas originated above or below the 12,180 foot level.
n.
The judge found that the evidence overwhelmingly established that the gas actually originated above the 12,180 foot level and thus was above the cement which Halliburton had set. If the plaintiffs failed to establish that the gas came from below the 12,180 foot level, there would be a complete absence of a causal factor, and it would follow, of course, that Halliburton’s cement could have had nothing to do with the injuries. But even if the gas originated below the mentioned level, Halliburton would not be liable under an implied warranty unless it were established that the cement was faulty and that there was indeed an implied warranty under the Uniform Commercial Code to contain the gas (the plaintiffs seem to tie their claims of implied warranty to this statute), and unless it was also shown that the cementing was for the purpose of containing the gas. The trial court found that this was not the purpose and, therefore, that Halliburton had not undertaken a duty to protect plaintiffs and others similarly situated from the escape of gas from the well.
Another aspect of the trial court’s lengthy oral comments on the evidence and law given just prior to the direction of verdicts was that the appellants had not proven that the cement mix was unfit for use at the 12,180 foot level. Appellants felt that the temperature at the bottom of the well was 224 degrees and thus above the boiling level of water. The court found that under the pressure that was present at the time, that the water would boil not at 212 degrees but 400 degrees. The court also found that the cement was proven to have been good hard cement, this being apparent from the cuttings which resulted from the drilling through the cement plug and from pressure tests conducted by Humble both before and after the drilling of the plug.
As to the appellants’ contention that Halliburton was negligent in failing to run a temperature test following the pumping of cement into the hole, the court ruled that this test was not the obligation of the cement contractor, but of the operator.
As to the further negligence contention of appellants’ based on the failure of the float mechanism, the trial court pointed out that the purpose of the float was to maintain pressure and that a backup system of maintaining pressure was employed so that this situation was not shown to have been capable of spoiling the cement.
On breach of warranty, the trial court found that the Humble-Halliburton contract clearly excluded all warranties, and the court also found that there had never been an implied warranty that the cement was fit to control gas. It further found that the purpose of the contract in this regard limited the scope of the implied warranty. Evidence showed that the purpose of the cement was not to control the gas and prevent the migration of liquids. Accordingly, the trial court found that there was no breach of warranty.
On the theory of strict liability, the court said that there was no proof of causation, but the court said that it was beyond doubt that the gas that burned the plaintiffs had originated above the cement job. As we perceive it, the plaintiffs in now urging strict liability are seeking to recover under § 402A(2) of Restatement of the Law of Torts 2d, and this aspect of the plaintiffs’ case will be discussed hereafter.
III.
The well in question was a wildcat drilling operation and because of this fact the effort was exclusively Humble’s. The drilling was commenced on October 1, 1968. The initial hole was 15 or 16 inches in diameter and approximately 4,000 feet deep. Surface casing 13% inches wide was placed inside the hole and was cemented at this 4,000 foot depth. Thereafter, a 12% inch bit was used to drill the hole to a depth of 12,-180 feet which was designated as the intermediate or protective string. A nine and five-eighths casing was then run from the top of the hole to this bottom point. Mud was circulated throughout the casing and up the annulus. Evidence shows that the purpose of this circulation of mud was to allow cuttings to be examined so as to determine the type of strata being drilled. Another purpose was to hold back pressure in any formation that would likely be exposed through the drilling. Weight is added to the mud in order to keep the pressure up. As indicated, the cement was poured down the nine and five-eighths pipe under pressure so that it rose up the annulus for approximately 3,000 feet. One hundred and two feet of cement was left inside the casing. After waiting a period for the cement to harden, the plug was drilled out and 1,500 pounds per square inch of pressure was applied to the entire string of casing. No leak of mud around the casing seal appeared as a result of this test. Humble was apparently satisfied that the cement was properly bonded and that the casing would be able to withstand heavier mud. Thereafter, an 8% inch bit was used in order to drill the hole to a depth of 17,200 feet.
When the well reached this latter depth without discovering any commercial gas or oil, Humble decided to abandon the well and the preparations described above were commenced in March 1969, and the unfortunate incidents producing injury to the plaintiffs occurred.
Reviewing the trial court’s action in directing verdicts, we have been called on to search the record in a quest for substantial evidence in support of any one or more of the plaintiffs’ theories. Unfortunately for the plaintiffs our quest has not been productive, and so we must conclude that the action of the trial court in directing verdicts was fully justified. A brief description of the testimony on the liability issue presented on behalf of the plaintiffs will demonstrate this.
James Melton, mechanical engineer, testified as to the action of heat on chemicals. He testified that a temperature of 224 degrees fahrenheit (which was the accepted temperature at the 12.180 foot level) would boil water out of the cement mixture. But when he was cross-examined he said that water does not boil well under pressure and he acknowledged that the pressure at 12,-180 feet was great.
He also said that if the cement did harden, a temperature of 224 degrees fahrenheit would not cause it to crumble or deteriorate. He also admitted on cross-examination that the Bariod mud log revealed numerous places above the 12.180 foot level where trip gas was shown. These are pockets of gas that are encountered in the course of a movement of the drilling equipment.
Albert N. Gist is an engineer whose deposition, was taken by Halliburton. The deposition was offered on behalf of plaintiffs.
He said that Humble and not Halliburton determined the type of cement, although the graduated amounts of the ingredients were based on a recommendation from Halliburton.
The purpose, according to him, of cementing a well was 1) to stabilize the casing; 2) to guard weak formations against higher mud pressures; and 3) to control gas and oil. The court noted that he was talking about the use of cement generally and not its purpose in this instance.
Mr. Gist was of the opinion that the gas which produced the harm here came from a level above that at which the cement was placed, that is, 12,000 feet. This was predicated on his view that the cement was good and that if the gas came from below this level there would have been greater pressure on the well head. He conceded that his opinion as to lack of pressure was based on a slight determination. He did, however, state that if the cement job was sufficient the gas from below the 12,000 foot level could not have reached the surface.
He was asked how the gas could get up between the two casings where it was burning, and he stated that it would migrate through the mud; that eventually gas will migrate to the top of a mud column; and that there was a lot of open hole between the top of the cement and the surface of the ground.
The plaintiffs as part of their case offered this deposition and undoubtedly they tendered it because of the fact that Mr. Gist said that cement was used generally to control gas and oil.
The plaintiffs’ best witness was one Benny Joe Bailey, who had worked as a production and drilling engineer for a major oil company and had reached this position on the basis of experience rather than formal training.
Mr. Bailey said that if the float shoe does not hold, the cement will back up into the pipe. The float collar and shoe were furnished by Halliburton. It was brought out, however, that the log showed that 900 pounds of pressure was applied and this would raise the cement 2700 feet up the side of the pipe.
He also said that the pressure could hold for 30 minutes (this was in reference to the test that was performed), but the cement could fail later due to its being loosened as a result of the renewed drilling.
He stated, in addition, that there was high pressure gas at 12,200 feet and that if it were to go to the surface it would proceed up the annular space, but that if it were cemented off properly this could not occur.
On cross-examination Mr. Bailey testified that 15 percent of the cement poured into the pipe was lost in the formation. He acknowledged that this would leave 2700 feet of cement up the side of the casing and that it was only necessary to leave 1000 feet up the side of the casing. He also acknowledged that mud was used to control gas.
The testimony of Melton and of Gist contributed little to the plaintiffs’ contention 1) that the cement job was faulty, and 2) that this was the proximate cause of the escape of the gas which produced the fire which injured the plaintiffs. Melton merely described conditions which would produce faulty concrete, and the Gist testimony, considered in the light most favorable to the plaintiffs, was that cement is indeed used to contain gas.
The Gist testimony that the cement, if properly installed, would have contained the gas below the 12,000 foot level perhaps comes closer than any of the remaining evidence of the plaintiffs to- developing a tenable theory. At the same time, Gist was definitely of the opinion that the gas which ignited originated above the 12,000 foot level, and so this testimony is, in the final analysis, of little value because, as the trial court said, the overwhelming weight of the evidence establishes that the cement did not fail and that the gas came from above the 12,000 foot level.
IV.
A. THE ALLEGED DEFECTIVE CONDITION — THE THEORY THAT THE CONCRETE FAILED
Plaintiffs’ case is wholly dependent on proof that the cement job at the 12,000 foot level was inadequate and that because of this gas escaped some months later after the concrete was drilled. This followed the drilling of the well by Helmerich and Payne International Drilling Company for an additional 5000 feet, and after enormous pressure was applied in preparation for the pulling of the casing.
The plaintiffs-appellants’ theory that the cement failed and that this allowed gas originating below the 12,000 foot level to escape has little more than a speculative basis. The evidence shows nothing more than theorizing from the occurrence itself. There is no evidence that Halliburton failed to carry out its task in accordance with accepted standards, and there is no actual proof that the cement did not jell, so to speak. On the contrary, the evidence shows that from the cuttings in connection with the drilling through the cément soon after it was installed that the cement was hard. Further, the pressure tests which were carried out after the installation established that it had hardened.
Regardless of whether the action is thought of in terms of liability for negligence or implied warranty under the Uniform Commercial Code or implied warranty under § 402A(2) or as a strict liability case, it is essential that there be evidence to establish that the defendant acted or failed to act in relationship to the plaintiffs in such a manner as to create an unreasonable risk of harm or so as to have committed a breach of an implied warranty of suitability, or the defendant must have created a defective condition unreasonably dangerous to the user or consumer. The failure of the evidence to establish the existence of a dangerous or hazardous condition renders the case insufficient.
B. IMPLIED WARRANTY
We have had occasion to take up so-called products liability cases under Oklahoma law previously. The ease from Oklahoma which we look to is Marathon Battery Company v. Kilpatrick, 418 P.2d 900 (Okl.1965), a carefully researched and extensively analyzed opinion. Plaintiff there was injured while holding a battery which he had purchased from a sales agent of Marathon, the manufacturer. While holding the battery it exploded causing extensive injury. The Oklahoma Supreme Court rejected the contention of defendant as to the inadequacy of the evidence as to defectiveness, holding that the liability was established when it was shown that plaintiff was injured while using the battery for the purpose intended, and was injured as the result of a defect as to which he was not aware and could not have ascertained by examination. In Marathon, the existence of a defect could not be questioned, for as in Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57, 27 Cal.Rptr. 697, 377 P.2d 897 (1962), cited and relied on in Marathon, the manner of the happening (i. e. the explosion), established the defective character, for a product such as a six-volt storage battery which is to be used for storing electrical energy and making it available when needed does not ordinarily explode unless it has a defect.
The same was true in a case considered by this court, Speed Fastners, Inc. v. Newsom, 382 F.2d 395 (10th Cir. 1967). There a powder-loaded gun was being used to drive studs through a steel I-beam for the purpose of attaching wood to it. The head and shank of the stud separated and the shank richocheted out of the wood and struck the plaintiff. It was held that the dangerousness of the product was demonstrated by the misfiring and the consequent striking of the plaintiff. The tool was being used for the purpose for which it was manufactured. In both of these cases and in our most recent products liability case, White Motor Corporation v. Stewart, 465 F.2d 1085 (10th Cir. 1972), the defect was evidenced, if not by direct testimony, by circumstances which left no room for doubt that the product was defective. But in our case circumstances are inconclusive and the result remains problematical.
C. NEGLIGENCE
The case here is no better when judged on a negligence theory, for here again it is essential that the plaintiffs establish that the defendant’s conduct fell below the standard established by law for the protection of others against unreasonable risk of harm. Thus, the plaintiffs’ evidence, whether direct or circumstantial, has to show that the defendant created a condition which was hazardous to the plaintiffs. Here the theory of plaintiffs is that it was defective cement which created a hazardous condition. But we do not know that the cement was defective. We only know that gas escaped. The cement looms as the least likely possibility. See Restatement of the Law of Torts 2d §§ 281-82 dealing with the elements of a cause of action for negligence and the standard by which negligence is determined. A claim based upon the negligence standards assumes that there will be evidence as to the hazardous condition which will allow the trier of the fact to determine whether liability flows from it, but where the evidence leaves the judge in doubt as to what produced it, and the thing does not speak for itself whereby the doctrine of res ipsa loquitur could come into play, there is no way to rule that the cause is sufficient.
D. IMPLIED WARRANTY — U.C.C.
The plaintiffs encounter even further difficulty when they invoke the Oklahoma Uniform Commercial Code provisions, and at trial they sought to recover under the implied warranty of fitness section, 12A Okl.Stat.Ann. § 2-315. The judge repeatedly pointed out that an action which arises under that section must proceed within a somewhat rigid famework, that is, the plaintiff must show that he came within the use which the buyer had in mind for the product.
In the case at bar the plaintiffs introduced evidence only as to the general use of cement at this level. The parties to the contract, Humble and Halliburton, offered testimony that the sole objective of the cement was to stabilize the casing. It seems clear that if an injured person proceeds under the above section of the Uniform Commercial Code in Oklahoma, he must bring himself within the objects of the sale.
E. THE DEARTH OF EVIDENCE TO ESTABLISH PROXIMATE CAUSE
A further deficiency in the plaintiffs’ case is the lack of effective proof connecting Halliburton with injuries to the plaintiffs. Not only was the fire remote in time from Halliburton’s cement job, it was remote in space as well, the cement being 12,000 feet from the surface and not subject to inspection. Subsequent events also contributed to the remoteness. Halliburton was on the job for a very short time. Subsequent to Halliburton’s departure, the drilling continued to the 17,000 foot level and after that there were preparations for the pulling of the casing. In addition, the trial court found that the overwhelming evidence established that the gas which caused the harm originated above the 12,000 foot level. The numerous pockets encountered in the course of the drilling, together with the other circumstances, render the plaintiffs’ hypothesis a mere possibility and one which was much less likely than the opposing hypothesis that Humble and its subcontractor who were in possession at all times were responsible for the escape of the gas and the fire. The cause is, of course, an element common to each and all of the claims asserted by the plaintiffs.
* * * * -x- *
Finally, the difficulty which we see in the case is that the plaintiffs depend on the surrounding circumstances to establish liability and yet they have no basic fact sufficiently strong to give rise to the inferences which are indispensable to an action sounding in any of the theories that are advanced. Here the circumstances do not bespeak the fault of Halliburton. Indeed, the circumstances are consistent with the conclusion that no one was at fault because many factors could cause gas to escape from a well such as the K. B. Cornell Number One. In this respect the case is vastly different from Marathon, supra, Speed Fastners, supra, and White Motor, supra. In each of these cited cases there was fault in the air, so to speak, and also fault attributable to the defendant. The case at bar is deficient in both areas.
We conclude that the trial court was correct in granting the defendant’s motion for directed verdicts.
The judgment is affirmed.
. A daily log which shows the chemical testing which was made on the drilling mud each day.
. In Utley v. Standard Magnesium & Chem. Co., 478 P.2d 953, 955 (Okl.1970), the Oklahoma Supreme Court declared that implied warranty of fitness for a particular purpose must he specifically pleaded and proved.
. There is no particular reason why an injured person would need to or find it advantageous in most instances to proceed under Uniform Commerce Code pro- . visions since Oklahoma has in the Marathon Battery ease, supra, accepted the essential elements of strict liability, even though it does not designate it as such but rather calls it implied warranty.
. Professor Prosser sums up the problem of inconclusive circumstances with respect to the defendant’s connection in the course of the discussion of res ipsa ns follows:
It is never enough for the plaintiff to prove merely that he has been in-jurd by the negligence of someone unidentified. Even though there is beyond all possible doubt negligence in the air, it is still necessary to bring it home to the defendant. On this too the plaintiff has the burden of proof by a preponderance of the evidence; and in any case where it is clear that it is at least equally probable that the negligence was that of another, the court must direct the jury that the plaintiff has not proved his case. The injury must either be traced to a specific instrumentality or cause for which the defendant was responsible, or it must be shown that he was responsible for all reasonably probable causes to which the accident could be attributed. Accordingly res ipsa loquitur is held not to apply where a chair is thrown from an unidentified window in the defendant’s hotel, or where the presence of such an object as a bolt on a railway platform might easily have been due to the act of a third party, or where gas or water or electricity escape from fixtures controlled in part by another.
Prosser on Torts (3rd ed.) at 222. See also the numerous cases in 33 A.L.R.2d 791; Restatement of Torts 2d 328(d), comment on clause (b) of subsection (1) ; and 58 Am.Jur.2d 55-58 §§ 480-81.
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{
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UNITED STATES of America, Plaintiff-Appellee, v. Herbert GURTNER, Defendant-Appellant.
No. 72-2167.
United States Court of Appeals, Ninth Circuit.
Feb. 5, 1973.
Robert H. Sanders, Los Angeles, Cal., for defendant-appellant.
William D. Keller, U. S. Atty., David H. Anderson, Curtis B. Rappe, Eric A. Nobles, Asst. U. S. Attys., Los Angeles, Cal., for plaintiff-appellee.
Before KOELSCH, CHOY and GOODWIN, Circuit Judges.
CHOY, Circuit Judge:
Gurtner appeals his conviction by a jury for the wilful failure to file federal income tax returns (26 U.S.C. § 7203) for the calendar years 1964 and 1965. We affirm.
Gurtner raises two issues on appeal. The first is that the trial court should have stricken the testimony of John Foulk, a private accountant whom Gurt-ner consulted in April, 1967, because his conversations with Foulk were privileged attorney-client communication. We reject this contention because Gurt-ner has not proven that an attorney-client relationship existed and even if this testimony were privileged, Gurtner waived the privilege.
The burden of establishing the existence of an attorney-client relationship rests on the claimant of the privilege who resists disclosure of shielded communication. In re Bonanno, 344 F.2d 830, 833 (2nd Cir. 1965). Gurtner has not sustained this burden. Foulk did have a working relationship with Gurtner’s attorney and the attorney advised Gurtner to consult with Foulk, but that alone did not make the communications between Foulk and Gurtner privileged. “What is vital to the privilege is that the communication be made in confidence for the purpose of obtaining legal advice from the lawyer. If what is sought is not legal advice but only accounting service, as in Olender v. United States, 210 F.2d 795, 805-806 (9th Cir. 1954), [cert. denied, 352 U.S. 982, 77 S.Ct. 382, 1 L.Ed.2d 365 (1956)], see Reisman v. Caplin, 61-2 U.S.T.C. ¶ 9673 (1961), or if the advice sought is the accountant’s rather than the lawyer’s, no privilege exists.” United States v. Kovel, 296 F.2d 918, 922 (2nd Cir. 1961); accord, United States v. Judson, 322 F.2d 460, 462 (9th Cir. 1963). Gurtner did not prove that Foulk was acting as a consultant for his attorney. Moreover, even if we assumed that Foulk was the agent of an attorney, not all consultations with such agents are privileged. Gurtner’s consultations with Foulk for the purpose of preparing tax returns did not fall within the privilege. Such consultations, even with an attorney who is preparing the returns, are not privileged. Olender, supra, 210 F.2d at 806; Canaday v. United States, 354 F.2d 849, 857 (8th Cir. 1966); Couch v. United States, 405 U.S. 1038, 92 S.Ct. 1311, 31 L.Ed.2d 579 (1973).
Even if there was an attorney-client relationship, Gurtner’s failure to make a timely objection to Foulk’s testimony constituted a waiver of the privilege. Gurtner failed to raise any objection to the testimony of Foulk when the witness was on the stand. The issue was not raised until Gurtner himself was being cross-examined. “[T]he burden is on the defendant to take his objection at the earliest possible opportunity when, by so doing he can enable the trial judge to take the most efficacious action.” Holden v. United States, 388 F.2d 240, 242 (1st Cir.), cert. denied, 393 U.S. 864, 89 S.Ct. 146, 21 L.Ed.2d 132 (1968). The district court properly ruled that the motion to strike was untimely.
In addition, the failure to assert the privilege when the evidence was first presented constituted a voluntary waiver of the right. Steen v. First National Bank, 298 F. 36, 41 (8th Cir. 1924); United States v. Jacobs, 322 F.Supp. 1299, 1303 (C.D.Cal.1971). Once the subject matter is disclosed by a knowing failure to object there is nothing left to protect from disclosure.
Gurtner’s second assignment of error attacks the following jury instruction:
The word ‘wilful’ as used herein means an act or omission which is voluntary and intentional, with a bad purpose or without grounds for believing that one’s act is lawful or without reasonable cause, or capriciously or with a careless disregard whether one has the right to so act. That is to say, the wilfulness required for this offense here charged does not entail the purpose to evade tax or to defraud. It entails no purpose other than to evade the law’s requirements, (emphasis supplied).
The trial judge also instructed the jury that:
Knowingly means an act is done knowingly if done voluntarily and intentionally and not because of mistake or accident or other innocent reason.
The purpose is, of course, adding the word knowingly, is to insure that no one will be convicted because of a mistake or accident or other innocent reason.
Gurtner objected to the phrase “or with a careless disregard whether one has a right to so act,” and, for the first time, on appeal he also challenges the use of the word “capricious.” Gurtner notes that the term “wilful” as used in § 7203 does not include carelessness, inadvertence or negligence. United States v. Leuschner, 336 F.2d 246 (9th Cir. 1964). He contends that the disputed phrase in the instruction permitted the jury to convict him for mere carelessness. We disagree. We have in the past specifically upheld this instruction. Abdul v. United States, 254 F.2d 292 (9th Cir.), cert. denied, 364 U.S. 832, 81 S.Ct. 44, 5 L.Ed.2d 58 (1958). Abdul has been repeatedly reaffirmed in subsequent cases. United States v. Fahey, 411 F.2d 1213 (9th Cir.), cert. denied, 396 U.S. 957, 90 S.Ct. 430, 24 L.Ed.2d 422 (1969).
We recognize that at least two other circuits have taken the opposite position. United States v. Vitiello, 363 F.2d 240 (3rd Cir. 1966); Haner v. United States, 315 F.2d 792 (5th Cir. 1963). We, however, are of the opinion that the disputed instruction, given together with the other instructions mentioned above, properly conveyed the notion to the jury that something more than mere negligence must be shown for an act to be wilful. But since the disputed clause has been the subject of frequent appeals, we believe it advisable for the district court in future cases under § 7203 to omit from the instruction the passage “or capriciously or with a careless disregard whether one has the right to so act.”
Affirmed.
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UNITED STATES of America, Plaintiff-Appellee, v. Donald Garriga CHAPMAN and Richard Lee Scott, Defendants-Appellants.
No. 71-3473.
Summary Calendar.
United States Court of Appeals, Fifth Circuit.
Feb. 20, 1973.
Rehearing Denied April 3, 1973.
Herbert A. Bargeon, Jr., Orlando, Fla. (Court-appointed), for Chapman.
John V. Holmes, Orlando, Fla. (Court-appointed), for Scott.
John L. Briggs, U. S. Atty., Jacksonville, Fla., Kendell W. Wherry, Asst. U. S. Atty., Orlando, Fla., for plaintiff-appellee.
Before JOHN R. BROWN, Chief Judge, and GOLDBERG and MORGAN, Circuit Judges.
Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir., 1970, 431 F.2d 409, Part I.
JOHN R. BROWN, Chief Judge:
Upholding this conviction of appellants Chapman and Scott under a four count indictment in which they were charged with conspiracy to commit, on June 19, 1969, the burglary of the Post Office at Fern Park, Florida (18 U.S.C. § 2115), damage to government property (18 U.S.C. § 1361), and theft of government property (18 U.S.C. § 641) depends, as now so often, on the validity of the search of Scott’s car while it was in the sole possession of Chapman. Finding the search to have been legal under the .circumstances we affirm.
The search occurred during the arrest of Chapman by an FBI agent on an outstanding warrant charging Post Office burglary in Alabama some six months previously.
On June 19, 1969 Appellants, in the company of two others, burglarized the Post Office at Fern Park, Florida. The group split up following the burglary. Defendant Chapman had possession of defendant Scott’s car when he was observed by agent Bolyard of the FBI at a Holiday Inn Motel near Pensacola, Florida on June 23, 1969, some four days after the break-in. Agent Bolyard was having lunch with Sergeant Powell of the Escambia County Sheriff’s Department at the Holiday Inn Motel on that date.
Agent Bolyard testified as follows. Arriving to eat lunch the agent recognized the car, a 1965 Ford, which he knew belonged to defendant Scott. This aroused his suspicion, because he had confidential information that the car contained burglary tools, and that it had been used in connection with another Post Office break-in some six months earlier in Alabama, the one for which defendant Chapman had already been indicted and for which he would soon be arrested pursuant to the outstanding warrant.
Following lunch, Agent Bolyard observed Chapman as he placed a suitcase in the trunk of the ear. He knew of the outstanding warrant for Chapman’s arrest, but he was not absolutely certain, although he stood some forty to fifty yards from the Scott car as Chapman placed the suitcase in the trunk, that the person in question was Chapman. He and Sergeant Powell got in Powell’s car and drove to the point in the parking lot where the Scott car was located. They observed the car leaving the parking lot following another car and followed them. Tailing the car in traffic for 10 to 15 minutes they moved alongside of the Scott car were Agent Bol-yard was able to make a positive identification of Chapman. They pulled the cars to the curb on this busy street. Indeed, the curbing of the cars created a traffic jam and began backing up traffic in both directions. Agent Bolyard placed Chapman under arrest for the Alabama burglary. Agent Bolyard did not then know of the Fern Park burglary that had transpired four days prior to his arrest of Chapman.
Chapman got out of the automobile and was frisked for weapons. The car was still running and Agent Bolyard reached in and turned off the key. Agent Bolyard placed Chapman in the custody of Sergeant Powell and then began a search of the car. He found an automatic pistol on the transmission hump of the car in the front seat wrapped in a wool cap so that it was not visible as he opened the car door. He took the keys from the car, opened the trunk and looked over the items in the trunk among which were a number of possible burglary tools, and Chapman’s suitcase which contained the evidence— a sheet of Holiday Inn stationery from an Inn near the Fern Park Post Office which catalogued the loot taken at the burglary there — that led to Scott’s arrest. Since the stopping had occurred on a heavily traveled street and traffic congestion was developing the car was then taken to the Escambia County Sheriff’s Office where a further search was made. The agent had been looking for burglary tools and hoped also to find stolen money orders along with a stolen validating stamp, taken in the Alabama burglary for which. Chapman was arrested.
It cannot be disputed that the evidence obtained in this search and the leads which this evidence provided to the Government’s investigatory efforts provided an important part of the Government’s case against Appellants for the Fern Park Post Office burglary. The only question then, is the legality of the searches.
Appellants do not contend that Agent Bolyard lacked probable cause for stopping or arresting Chapman. They contend, however, that the searches of the car without a warrant were illegal.
The validity of the first search, which occurred on the highway, like any search without a warrant is subject to the existence of probable cause plus exigent circumstances.
Where, as here, an automobile has been stopped in the middle of a busy public thoroughfare and an unchallengable arrest is made on the basis of an outstanding warrant, the immediate exploratory inspection of the automobile reveals hand weapons prudent officers know to be used in burglaries, and the officer has particularized, well-grounded information that the car was employed in the Alabama burglary and its contents include both the fruits and the instrumentalities of crime, the authorities allow us to hold that there was both probable cause and the requisite exigent circumstances. See, Chambers v. Maroney, 1970, 399 U.S. 42, 90 S.Ct. 1975, 26 L.Ed.2d 419 and United States v. Ragsdale, 5 Cir., 470 F.2d 24 [1972]. Our conclusion is bolstered by the fact, which was known to the arresting officer, that the car did not belong to the driver and might be subject to an attempted or actual removal by its owner appellant Scott.
Chambers further compels us to hold that if the intrusion of privacy on the highway was justified then the later inventory at the station house is unchallengable, 399 U.S. 42, 52, 90 S.Ct. 1975, 1981, 26 L.Ed.2d 419, 429.
The Court’s rationale was that since the officers could, under the circumstances, immobilize the car and prevent anyone from using it (i. e., seize the car) until a warrant was obtained, as long as probable cause was clearly present there was little practical difference between an immediate search and one conducted after awaiting a warrant.
Given this assumption the Court held that removal of the vehicle to the station house for reasons of convenience and safety, and there completing the search that had permissibly begun at the roadside — without benefit of a warrant— was not unreasonable nor constitutionally impermissible. 399 U.S. 42, 52, 90 S.Ct. 1975, 1981, 26 L.Ed.2d 419, 429 (note 10).
There is nothing in Coolidge v. New Hampshire, 1971, 403 U.S. 443, 91 S.Ct. 2022, 29 L.Ed.2d 564 which weakens our conclusion that exigent circumstances existed. Coolidge did not question the validity of Chambers, supra, and the Court relied heavily in Coolidge on the facts that the Defendant’s car was not on a public highway and the objects searched for “were neither stolen nor contraband nor dangerous,” 403 U.S. 443, 460, 91 S.Ct. 2022, 2035, 29 L.Ed.2d 564. Furthermore, in Coolidge the car was immobilized in a private driveway while Defendant was incarcerated and there was absolutely no reason for the police not obtaining a valid warrant prior to going out to Defendant’s house to seize the car. Here, like in Chambers, there was no reasonable opportunity prior to the seizure for a warrant to be obtained.
Chambers teaches us that where “exigent circumstances” plus probable cause exist, a car may be searched without a warrant when it is stopped on a public highway and an arrest is made. The finding that probable cause existed is clearly supported and since we find that the requisite “exigent circumstances” existed here, we are unable to say that this search was invalid.
Affirmed.
. Apparently the driver of the second car was arrested also. The testimony suggesting this, given by Agent Bolyard, indicates that the second car was left locked at the scene of Chapman’s arrest.
. Agent Bolyard had discovered a second pistol under the seat of the car. Ammunition for botli weapons was found in the glove compartment. In the trunk lie found oxygen and acetelyne tanks, cutting torches and various other tools along with sundry items of personal property.
. United States v. Edwards, 5 Cir., 1971, 441 F.2d 749 — having a similar fact situation — strongly suggests that this conclusion is sound.
. Cf. United States v. Miles, 5 Cir., 1971, 445 F.2d 974, 975, decided before Coolidge, which states that under Can-oil, infra, “police officers may search without a warrant any automobile that they have probable cause to believe contains contraband” citing Chambers, supra.
However, we need not explore the absolute parameters of valid searches under Chambers, supra or delve the limits of the forbearer Carroll v. United States, 1925, 267 U.S. 132, 45 S.Ct. 280, 69 L.Ed. 543. See Judge Heaney’s opinion in United States v. Bozada, 8 Cir., 1972, 473 F.2d 389 [1972] where he undertakes to analyze Carroll and Chambers, before and after Coolidge v. New Hampshire, 1971, 403 U.S. 443, 91 S.Ct. 2022, 29 L.Ed.2d 564. Boeada’s facts make it inapplicable to determination of the issues presented here and we therefore intimate no approval or disapproval as to its reasoning or result.
. This was specifically stated as a principle of law in United States v. Edwards, supra note 3, 441 F.2d at 754.
. United States v. Collins, 1971, 142 U.S.App.D.C. 100, 439 F.2d 610, which was the opinion of only one member of the panel, is clearly distinguishable on its facts. That case involved an armed robbery. The robbery had occurred six days earlier and a small coin box and a large amount of change were all that had been taken. Further, the court specifically found that the officers — who retrieved a small coin purse containing heroin from under Collins’ foot — had no reasonable basis to believe that he had participated in any crime of which they had knowledge. Finally, the Court there chose to treat the search as a search of the Appellant’s person rather than as a search of the automobile.
. The search in Coolidge was pursuant to a warrant which the Court found to be invalid.
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UNITED STATES of America, Respondent-Appellee, v. John William SHERMAN, Petitioner-Appellant.
No. 71-2120.
United States Court of Appeals, Ninth Circuit.
Feb. 1, 1973.
Hufstedler, Circuit Judge, dissented and filed opinion.
John William Sherman, in pro. per.
Sidney I. Lezak, U. S. Atty., Vinita Jo Neal, Asst. U. S. Atty., Portland, Or., for respondent-appellee.
Before DUNIWAY, HUFSTEDLER and CHOY, Circuit Judges.
DUNIWAY, Circuit Judge:
On September 3, 1969 Sherman pled guilty to a charge of violating the Dyer Act, 18 U.S.C. § 2312. Later he moved to vacate his conviction under 28 U.S.C. § 2255, alleging that the record of the proceedings at the taking of his plea did not show that he was advised of his right against compulsory self-incrimination. This, he says, is contrary to the decision in Boykin v. Alabama, 1969, 395 U.S. 238, 89 S.Ct. 1709, 23 L.Ed.2d 274, and Rule 11, F.R.Crim.P. as interpreted in McCarthy v. United States, 1969, 394 U.S. 459, 89 S.Ct. 1166, 22 L.Ed.2d 418. The district court denied the motion, and Sherman appealed.
On March 2, 1972 we filed an opinion reversing the denial of Sherman’s motion. On the government’s petition for rehearing, we vacated that opinion. Having now concluded that Sherman’s guilty plea was properly taken, we affirm the order of the district court.
The record does not show that Sherman was advised, eo nomine, of his right against compulsory self-incrimination. However, no decision of the Supreme Court imposes such a requirement. In McCarthy, the Court held only that district courts must adhere strictly to the provisions of Rule 11, and that failure to do so requires that the defendant be afforded an opportunity to re-plead. 394 U.S. at 466, 472, 89 S.Ct. 1166. Neither the Rule nor the opinion state that the trial judge must specifically inform the defendant of his Fifth Amendment rights. In Boykin, the appellant had been convicted on a guilty plea in a proceeding of which there was no record. The Court held that such a plea violates due process because a guilty plea waives several constitutional rights, and prior cases had required that the waiver of similar rights be spread upon the record. It therefore seemed anomalous to allow a guilty plea to be taken with'no formal inquiry as to its voluntariness. The Court’s precise holding was "that there was reversible error ‘because the record does not disclose that the defendant voluntarily and understandingly entered his pleas of guilty.’ ” 395 U.S. at 244, 89 S.Ct. at 1713.
In short, neither McCarthy nor Boykin requires that a defendant be specifically advised of all of his constitutional rights by the trial court if his plea is to be valid. Nor do we think that due process or Rule 11 impose such a requirement. A criminal defendant possesses a great number of rights which he is foreclosed from asserting by the entry of a guilty plea, see United States v. Frontero, 5 Cir., 1971, 452 F.2d 406, 415. Requiring a specific waiver of every one would only sow the seeds for later collateral attack. See Boykin v. Alabama, supra, 395 U.S. at 244, 89 S.Ct. 1709.
The three rights emphasized by the Supreme Court in the cited cases —the right against self-incrimination, the right to a jury trial, and the right to confront witnesses — do provide guidance for district courts in determining whether a guilty plea is knowingly and intelligently entered. Among other things, the court must ascertain that the defendant knows that he is not required to plead guilty, and that if he chooses not to do so the government will be put to its proof before a jury, at which time he may cross-examine witnesses and put on a defense. While this inquiry must be fully developed on the record, it need not assume any predetermined, ritualistic form. See McCarthy v. United States, supra, 394 U.S. 465-466 n. 20, 89 S.Ct. 1166; United States v. Tabory, 4 Cir., 1972, 462 F.2d 352, 353; United States v. Frontero, supra, 452 F.2d at 413-414; United States v. Berlin, 7 Cir., 1971, 437 F.2d 901.
A plea of guilty is the most complete form of self-incrimination. By the plea, the defendant admits that he is guilty of the offense charged. Indeed, Rule 11 requires that the court be “satisfied that there is a factual basis for the plea.” It is therefore essential that the defendant know that he has a right not to plead guilty, and that the record show that he knows it. Here, the record makes it perfectly clear that Sherman knew that he had that right. We see no need to go farther and attach to such knowledge the talismanic phrase “right not to incriminate himself.” He certainly knew that he had a right not to plead guilty, and that by pleading guilty he was incriminating himself.
The district court had previously entered a plea of not guilty on Sherman’s behalf, and he petitioned to withdraw that plea after extensive consultations with his counsel, with whom he was “entirely” satisfied. In his written and signed petition, Sherman recited:
“(5) I understand that I may plead ‘Not Guilty’ to any offense charged against me. If I choose to plead ‘Not Guilty’ the Constitution guarantees me (a) the right to a speedy and public trial by jury, (b) the right to see and hear all witnesses called to testify against me, (c) the fight to, use the power and process of the Court to compel the production of any evidence, including the attendance of any witnesses in my favor, and (d) the right to have the assistance of a lawyer at all stages of the proceedings.
(10) I know that the Court will not permit anyone to plead ‘GUILTY’ who claims to be innocent and, with that in mind and because I am ‘GUILTY’ and make no claim of innocence, I wish to plead ‘GUILTY’ and respectfully request the Court to accept my plea of ‘GUILTY’ and to have the Clerk enter my plea of ‘GUILTY’ as follows:
Guilty as charged in the indictment.
(11) I OFFER MY PLEA OF ‘GUILTY’ FREELY AND VOLUNTARILY AND OF MY OWN ACCORD AND WITH FULL UNDERSTANDING OF ALL THE MATTERS SET FORTH IN THE INDICTMENT AND IN THIS PETITION AND IN THE CERTIFICATE OF MY LAWYER WHICH IS ATTACHED TO THIS PETITION.”
In the certificate referred to, his lawyer stated:
“(6) In my opinion the plea of ‘GUILTY’ as offered by the defendant in paragraph (10) of the petition is voluntarily and understandingly made. I recommend that the Court accept the plea of ‘GUILTY.’ ”
Sherman told the trial judge that he had reg,d the petition, had gone over it with his attorney, and that the facts stated in the petition were true. In open court, in response to several questions by the court, Sherman stated that no threats had been made to him, that he knew the penalty for violation of the Dyer Act, and that he did not expect leniency. He freely admitted that he was guilty, and discussed the details of the crime at some length. Finally, the court informed him that if he did not plead guilty he could have a jury trial, confront the witnesses against him, and summon witnesses in his own behalf. Nonetheless, he persisted in his desire to plead guilty. In view of this record, we cannot conclude that Sherman’s plea was not intelligently entered merely because the words “self-incrimination” were not used.
Affirmed.
HUFSTEDLER, Circuit Judge
(dissenting) :
I dissent because I believe that the record does not establish compliance with Rule 11, as that rule was interpreted in McCarthy v. United States (1969) 394 U.S. 459, 89 S.Ct. 1166, 22 L.Ed.2d 418.
Rule 11 provides in pertinent part that “The court . . . shall not accept [a plea of guilty] without first addressing the defendant personally and determining that the plea is made voluntarily with understanding of the nature of the charge and the consequences of the plea.” This version of the rule, requiring a personal colloquy, is a product of a 1966 amendment. Before the amendment, not all judges personally addressed the defendant, and there was common confusion over the matter. (E. g., compare United States v. Diggs (6th Cir. 1962) 304 F.2d 929 with Meeks v. United States (5th Cir. 1962) 298 F.2d 204.)
McCarthy construed Rule 11 to require the United States District Court to interrogate the defendant personally to ascertain if he knowingly and intelligently waived his constitutional rights, including his right to a jury trial, his right of confrontation, and his privilege against self-incrimination. 394 U.S. at 466, 89 S.Ct. 1166. If a plea is taken “without fully adhering to the procedure provided for in Rule 11,” a defendant is entitled to plead anew. 394 U.S. at 463-464, 89 S.Ct. at 1169.
When compliance with Rule 11 is not in issue because the plea is taken in state court (Boykin v. Alabama (1969) 395 U.S. 238, 89 S.Ct. 1709, 23 L.Ed.2d 274) or because the Rule 11 proceeding was conducted before McCarthy was decided (Halliday v. United States (1969) 394 U.S. 831, 89 S.Ct. 1498, 23 L.Ed.2d 16), the validity of the plea rests on compliance with the less rigorous demands of due process. The Court did not impose the personal interrogation requirement of Rule 11 as a constitutional standard. Compliance with due process can be established from an examination of the whole record; it is not confined to the colloquy between the court and the defendant as is true of post-McCarthy Rule 11 proceedings. (Boykin v. Alabama, supra; Halliday v. United States, supra at 832, 89 S.Ct. 1498; see also 394 U.S. at 834-835, 89 S.Ct. 1498 (Harlan, J., concurring).)
Appellant’s plea was taken after McCarthy was decided. Our inquiry, therefore, is whether the district court’s interrogation of appellant complied with post-McCarthy Rule 11. All pertinent parts of the Rule 11 colloquy are set forth below:
“THE COURT: How many times have you talked to Mr. Allen (defense counsel) about this case?
THE DEFENDANT: Quite a few, sir.
THE COURT: Do you think you have talked to him sufficiently to be able to make an intelligent determination of what you want to do ?
THE DEFENDANT: Yes,- I do, Your llonor.
THE COURT: How do you want to plead to the indictment, guilty or not guilty ?
THE DEFENDANT: Guilty, Your Honor.
THE COURT: Are the facts stated in that indictment true ?
THE DEFENDANT: They are, Your Honor.
[In response to the court’s questions about the facts of the crime, Sherman confessed that he bought the car with a check he knew was bad.]
THE COURT: Did you receive a petition to enter a plea of guilty ?
THE DEFENDANT: I did, your Honor.
THE COURT: Did you read it?
THE DEFENDANT: Yes, I did, sir.
THE COURT: Did you go over it with Mr. Allen?
THE DEFENDANT: I did.
THE COURT: Are the facts stated in the petition true?
THE DEFENDANT: Yes, sir.
THE COURT: How old are you ?
THE DEFENDANT: I am 27, Your Honor.
THE COURT: Mr. Allen, did you go over the facts with him ?
MR. ALLEN: Yes, I did, Your Honor.
THE COURT: Are you satisfied that he is guilty?
MR. ALLEN: lam.
THE COURT: You can sign that petition, if you so desire. Of course, you know if I don’t accept your plea of guilty, you can have a trial before a jury and the Government would have to bring witnesses against you and you would be entitled to witnesses on your own behalf?
THE DEFENDANT: I do, Your Honor.
THE COURT: I will accept the plea of guilty.”
Nothing on the face of the colloquy indicates that Sherman knew that he had any right to remain silent and that he voluntarily chose to yield that right. The majority opinion equates knowledge of a defendant that he has a right not to plead guilty with knowledge of a defendant that he has a right not to testify at all. Proof of knowledge of a right not to plead guilty carries no implication that a person knew about his Fifth Amendment right. For example, could a Miranda warning be given by asking a person in custody if he knew that he did not have to plead guilty if he were charged with the offense about which he was being interrogated?
I agree completely with the majority opinion’s observation that a Rule 11 colloquy need not assume “any predetermined, ritualistic form.” I also agree that no magic words need be incanted to reveal from the colloquy that a defendant knowingly yielded his right not to testify against himself. But, in my view, McCarthy requires that it appear from some language in the colloquy that a defendant knew that he could remain entirely silent and knew that he could not plead guilty unless he confessed to the crime, and that he voluntarily gave up the right and testified against himself. Sherman’s knowledge of two of the rights stressed in McCarthy — the right to a jury trial and the right to confront witnesses — unmistakably appears in the colloquy. The exchange contains nothing about the third' — the right against self-incrimination.
The majority opinion implies that the requirements of Rule 11 can be met by the court’s referring to a petition signed by the defendant. I disagree. Under McCarthy, statements other than those addressed orally to the court cannot be relied upon to cure deficiencies in a Rule 11 interrogation. 394 U.S. at 467, 89 S.Ct. 1166; id. at 477, 89 S.Ct. 1166 (Black, J., concurring). (Compare the Rule 11 hearing invalidated by McCarthy, 394 U.S. at 472-474, 89 S.Ct. 1166, with the colloquy in Sherman’s case.)
Even if I assumed, arguendo, that Rule 11 could be satisfied by incorporating a defendant’s statements in a written petition to the court, the assumption would not save Sherman’s plea because the petition reveals no more about Sherman’s knowledge of his Fifth Amendment privilege than did his colloquy with the court.
I would set aside the plea for failure to comply with Rule 11.
. Of course, the court must adhere to the requirements of Rule 11. Whether these requirements are essential to due process is by no means clear. See Note, The Supreme Court — 1968 Term, 83 Harv.L. Rev. 60, 183-87 (1969).
. Sherman told the judge that he had talked sufficiently with his lawyer to be able to make an intelligent determination of what he wanted to do, that no pressure had been put on him, that no promises had been made that the court was going to be lenient with him, and that he wished to plead guilty. The court then discussed the offense with Sherman in detail. Sherman stated that he knew the penalty and what it was. The colloquy then continued as follows :
“THE COURT: Did you receive a petition to enter a plea of 'guilty?
THE DEFENDANT: I did, Your Honor.
THE COURT: Did you read it?
THE DEFENDANT: Yes, I did, sir.
THE COURT: Did you go over it with Mr. Allen?
THE DEFENDANT: I did.
THE COURT: Are the facts stated in tiie petition true?
THE DEFENDANT : Yes, sir.
THE COURT: How old are you?
THE DEFENDANT: I am 27, Your Honor.
THE COURT: Mr. Allen, did you go over the facts with him?
MR. ALLEN: Yes, I did, Your Honor.
THE COURT : Are you satisfied that he is guilty?
MR. ALLEN: I am.
THE COURT: You can sign that petition if you so desire. Of course, you know if I don’t accept your plea of guilty, you can have a trial before a jury and the Government would have to bring witnesses against you and you would be entitled to witnesses on your own behalf?
THE DEFENDANT: I do, Your Honor.
T.HE COURT: I will accept the plea of guilty.”
We find nothing in McCarthy v. United States, supra, or in any other decision, which even hints at the notion that it is not proper for the court, during the Rule II colloquy, to refer to and rely in part on a petition such as the one that Sherman signed, at least where, instead of merely referring to it, the court asks questions about it as the court did in this case.
. It may well be impossible to ascertain whether the defendant knows that he could get a jury trial and have the opportunity to confront witnesses against him without using those precise words. Ilowever, wo are not faced with that question here. Moreover, we agree with the Supreme Court of California that it is salutary for a trial judge to specifically inform a defendant that he need not plead guilty. See In re Tahl, 1969, 1 Cal.3d 122, 81 Cal.Rptr. 577, 460 P.2d 449. We do not agree that this is required by due process, so long as the record makes it clear that the defendant knows that he need not enter the plea.
. Before McCarthy, we had reached similar results in applying Rule 11. E. g., Heiden v. United States (9th Cir. 1965) 353 F.2d 53; Freeman v. United States (9th Cir. 1965) 350 F.2d 940; Castro v. United States (9th Cir. 1968) 396 F.2d 345.
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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{
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Charles A. SCHICKE et al., Appellants, v. George ROMNEY, Secretary of Housing and Urban Development, and City of Norwalk, Appellees.
No. 283, Docket 72-1849.
United States Court of Appeals, Second Circuit.
Argued Dec. 8, 1972.
Decided Feb. 20, 1973.
John Keogh, Jr., Norwalk, Conn. (John A. Mottalini and Keogh, Candee & Burkhart, Norwalk, Conn., on the brief), for appellants.
Anthony J. Steinmeyer, Atty., Dept, of Justice, Washington, D. C. (Harling-ton Wood, Jr., Asst. Atty. Gen., and Walter H. Fleischer, Atty., Washington, D. C., Stewart H. Jones, U. S. Atty., for the D. Conn., on the brief), for appel-lees.
Before LUMBARD, SMITH and MANSFIELD, Circuit Judges.
LUMBARD, Circuit Judge:
This is an appeal from an order of the District Court of Connecticut, reported at 346 F.Supp. 417 (D.Conn.1972), granting summary judgment in favor of defendant George Romney, Secretary of Housing and Urban Development (HUD), and the City of Norwalk, and dismissing this suit for declaratory and injunctive relief by 48 residents of the City of Norwalk, Connecticut. Prior to granting summary judgment, Chief Judge Blumenfeld also granted Secretary Romney’s motion for a protective order prohibiting the taking of his deposition by the plaintiffs. Plaintiffs had brought suit seeking á declaratory judgment that the approval by Secretary Romney of the conversion of 43 acres of property, originally acquired by the City of Norwalk as parkland under the Open-Space Land Program of the Housing Act of 1961, as amended, 42 U.S.C. §§ 1500-1500e (1964 ed., Supp. V), to use as the site for the Norwalk Community College was illegal and invalid. They also had sought to enjoin the Secretary from approving the city’s pending application for the conversion of 14 additional acres to be used for the same purpose and to enjoin the city from conveying any portion of the land in question to the state. For the reasons stated below, we reverse and remand to the district court for further proceedings not inconsistent with this opinion.
I
In November 1965 the City of Nor-walk, at a total cost of $1.5 million, acquired for use as a park approximately 196 acres of land, known as the Gallaher Estate, situated partly in the northeastern portion of Norwalk and partly in the adjoining town of Wilton. The federal government, pursuant to the Open-Space Land provisions of the Housing Act of 1961, as amended, reimbursed the City for one-half of the purchase price, or $750,000. Under the Act the Secretary of HUD is authorized to make grants to states and local public bodies of up to 50% of the total cost of acquiring and developing permanent open-space land. The state of Connecticut, under its own open-space program, paid $375,000 or 25%'of the cost, while the City of Nor-walk paid the remaining 25%.
In 1967 Norwalk initiated plans to withdraw 57 acres of this property from open-space designation so that it could be used as the site for the Norwalk Community College. The City wished to substitute 29.9 acres of property, known as the Taylor Farm, located approximately six miles from the Gallaher Estate and adjacent to the Norwalk public beach on Long Island Sound. Section 1500c of the statute permits the conversion of open-space land to other uses with the approval of the Secretary of HUD, if he finds that certain conditions are met. The section specifies that approval shall not be given unless (1) the conversion is “essential to the orderly development and growth of the urban area involved”; (2) the conversion is “in accord with the then applicable comprehensive plan” for the area; (3) “open-space land of at least equal fair market value” is substituted for the converted land; and (4) open-space land of “as nearly as feasible equivalent usefulness and location” is substituted.®
Pursuant to these provisions the Secretary, on November 10, 1969, approved the conversion of 42 acres of the Gallaher property and the substitution of the Taylor Farm. An application to convert 14 additional acres is still pending.
II
The plaintiffs, all of whom own property in close proximity to the Gallaher Estate, started suit on behalf of all residents, property owners, and taxpayers in the northeastern part of the City of Norwalk against the City and the federal government to invalidate the conversion of the Gallaher Estate and the substitution of the Taylor Farm. They contend (1) that Secretary Romney did not personally make the four determinations required by § 1500c before he approved the conversion of the open-space land in question; (2) that he did not consider all relevant factors when making the findings necessary to his decision, including, inter alia, the finding that the conversion was in accord with the Norwalk “comprehensive plan”; and (3) that his decision approving the conversion was arbitrary, capricious, an abuse of discretion, and not in accordance with law. 5 U.S.C. § 706(2) (A) (1964 ed., Supp. V). See Schicke v. United States, 346 F.Supp. 417, 419-420 (D.Conn. 1972). They also claim that the Secretary and the City of Norwalk acted in bad faith.
On May 25, 1971, the District Court denied the Secretary’s motion to dismiss the action for lack of jurisdiction over the subject matter and failure to state a claim on which relief can be granted. In light of the Supreme Court’s decision in Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), the court at the same time reserved decision on the Secretary’s motion for summary judgment in order to allow the parties additional time to submit any further material which might be relevant to the consideration of the motion.
On October 7, 1971, Judge Blumenfeld again postponed decision on the federal defendant’s motion for summary judgment because of the apparent incompleteness of the administrative record filed with the court. However, on November 24, 1971, on the basis of the .entire administrative record which was then before him, he denied the motion for summary judgment. He found that the record was not adequate for reviewing the Secretary’s decision because the Secretary had failed to make any formal findings.
On January 24, 1972, the Secretary filed formal findings with the court and renewed the motion for summary judgment. The findings consisted of a “Determination of the Secretary upon Application for Conversion of Open Space Land Pursuant to § 704 of the Housing Act of 1961,” dated January 11, 1972, which stated that the Secretary had made the necessary findings when he originally gave his approval of the conversion more than two years before, and named the portions of the administrative record on which he had relied. On the basis of the Secretary’s motion and supporting evidence the City of Nor-walk, on February 3, 1972, also moved for summary judgment.
In order to oppose the Secretary’s motion, the plaintiffs, on February 3, 1972, filed a notice of deposition of Secretary Romney. Thereafter, the Secretary moved for a protective order prohibiting the taking of his deposition. Although the plaintiffs formally objected to the district court hearing the motion for a protective order and the motions for summary judgment at the same time, the motions were argued together on April 14, 1972. In an opinion, dated May 3, 1972, the district court granted Secretary Romney’s motion for a protective order, granted his motion for summary judgment, and granted the City of Norwalk’s motion for summary judgment.
Subsequently, the plaintiffs made a motion to reargue based on newly discovered evidence. This motion was denied and final judgment was entered dismissing the action on June 14, 1972.
III
Appellants claim on appeal that the district court’s grant of summary judgment cannot stand because the district court should not have granted Secretary Romney’s motion for a protective order. Appellants allege that in denying them the opportunity to depose Secretary Romney, the district court deprived them of the information in the Secretary’s possession that was necessary to oppose effectively the motions for summary judgment. Cf. Subin v. Goldsmith, 224 F.2d 753, 760 (2d Cir. 1955).
Appellants also contend that even on the record as it now stands, the district court was incorrect in granting summary judgment because there already exist several genuine issues of material fact. F.R.Civ.P. 56(c). For example, appellants assert that the Secretary’s “Determination,” dated January 11,1972, leaves unclear whether the Secretary personally made the four required findings. Since the authority to approve conversion of open-space land to other uses had not been delegated, the Secretary was obliged personally to approve this conversion. See 31 Fed.Reg. 7358 (1966). Appellants urge that a letter, dated December 2, 1969, sent to a member of the family of one of the plaintiffs by Harrison Knapp, Director of the Community Relations Division of the Department of Housing and Urban Development, contains the implication that the Secretary did not make the findings himself.
Appellants further contend that, considering the administrative record and the Secretary’s formal findings, there are genuine issues of material fact about whether the Secretary made each of the four required findings on the basis of all of the relevant factors. Appellants assert (1) that the Secretary, in reaching his conclusion that the proposed conversion was “essential to the orderly development and growth of the urban area involved,” may have relied on a non-existent State of Connecticut requirement that Community Colleges must have a campus of at least 100 acres; (2) that the Secretary had no way in which to verify that the conversion was “in accord with the then applicable comprehensive plan,” since Nor-walk’s comprehensive plan was not included in the administrative record; (3) that the Secretary could not make an accurate finding that the substituted open-space land was of equivalent fair market value on the basis of the HUD appraisals, because they were “confusing” and “inconclusive”; and (4) that, in making his finding that the substituted land would be “of as nearly as feasible equivalent usefulness and location,” the Secretary relied to too great an extent on the representations of local officials.
Finally, appellants argue that there is a factual issue about whether the defendants were acting in bad faith in the administrative proceedings. The basis for this claim is that there is some indication in the administrative record that, at the time of the original acquisition of the Gallaher Estate under the Open-Space Program, the City already intended to use part of the property for the site of a community college and that the Commissioner of the Urban Renewal Administration (predecessor of the Secretary of Housing and Urban Development) was aware of this plan.
IV
In Citizens to Preserve Overton Park v. Volpe, supra, the Supreme Court dealt at length with the standard of judicial review of informal agency action. The Supreme Court stated that the proper standard of review is determined by § 706 of the Administrative Procedure Act, 5 U.S.C. § 706 (1964 ed., Supp. V), and that since neither the substantial evidence test nor de novo review is authorized, a reviewing court is limited to setting aside informal agency-action that does not comply with constitutional, statutory, or procedural requirements or is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Citizens to Preserve Overton Park v. Volpe, supra,, 401 U.S. at 414, 91 S.Ct. at 822. See 5 U.S.C. §§ 706(2) (A), (B), (C), (D) (1964 ed., Supp. V). In applying this standard the court must conduct a substantial inquiry, “a thorough, probing, in-depth review” of the administrative action, Citizens to Preserve Overton Park v. Volpe, supra at 415, 91 S.Ct. at 823, and to do so, it must have before it the full administrative record which was before the agency and on which the agency determination was based. Id. at 419, 91 S.Ct. 814.
We find that in one important respect the Secretary’s decision to approve the conversion of the Gallaher Estate was deficient and, therefore, that the judgment of the district court must be reversed. The administrative record in this ease fails to show that the Secretary has followed the mandate of the statute in certifying that the conversion-substitution involved here was consistent with any comprehensive plan which the City might have had.
The Open-Space Land Program was enacted to help preserve open-space land in the vicinity of urban areas and to encourage local governmental bodies to plan for the most efficient use of this increasingly scarce resource. “[Adequate comprehensive area planning is an essential feature of the [open-space] program.” See 1961 U.S. Code Cong. & Admin.News, p. 1973. According to the Congressional declaration of findings and purpose, there is a pressing need for “better coordinated local efforts to beautify and improve open space and other public land throughout urban areas to facilitate their increased use and enjoyment by the Nation’s urban population.” 42 U.S.C. § 1500(b) (1964 ed., Supp. V). It is apparent, therefore, that the statute is intended to assure that state and local governments formulate complete and effective programs to guarantee the satisfactory preservation and full utilization of park and recreational land in and near our metropolitan areas.
To implement this policy the statute specifies that before the Secretary may enter into contracts to make grants under § 1500a, he must first find “that such assistance is needed for carrying out a unified or officially coordinated program, meeting criteria established by him, for the provision and development of open-space land as part of the comprehensively planned development of the urban area.” 42 U.S.C. § 1500b(a) (1964 ed., Supp. V). According to the Senate report on the proposed measure, what § 1500a envisions is “not just . the preparation of comprehensive plans for long-range development, but also . . . such matters as the scheduling of public facilities construction, the provision of appropriate land-use regulations, and the coordination of development activities proposed by different jurisdictions within the urban area.” See 1961 U.S. Code Cong. & Admin.News, p. 1974. Before federal funds are expended to acquire open-space land, the Secretary must “assure” himself “that local governing bodies are preserving a maximum of open-space land, with a minimum of cost, through the use of existing public land; the use of special tax, zoning, and subdivision provisions; and the continuation of appropriate private use of open-space land through acquisition and leaseback, the acquisition of restrictive easements, and other available means.” 42 U.S.C. § 1500b(b) (1964 ed., Supp. V).
Recognizing that changing patterns of development in urban areas may demonstrate that open-space land acquired with federal funds might better be used for other public purposes, the statute in § 1500c provides for conversion of open-space land to other uses with the approval of the Secretary. However, a substantial risk exists that communities that are confronted with the need for new public facilities will wish to utilize existing open-space land as a cheaper alternative to undergoing the high cost of acquiring private land. See 1961 U.S. Code Cong. & Admin.News, p. 1975. To prevent undermining the goals of the open-space program in this way, § 1500c requires that the Secretary first make a series of determinations before giving his approval — including a finding that the conversion is “in accord with the then applicable comprehensive plan” for the land. See 42 U.S.C. § 1500c (1964 ed., Supp. Y).
This requirement assures that the important statutory policy of promoting local planning efforts as a means of fostering the orderly development of urban areas and the effective utilization of existing and to-be-acquired open-space land will continue to be carried out. Accordingly, the Secretary must conduct a review of local planning efforts before making the finding that the conversion is in accord with the local comprehensive plan. The Secretary or members of his department must make a detailed study of the same items that the Secretary is intended to consider under § 1500b when making an initial grant to acquire open-space land. At the very least, such an examination requires that the Secretary or members of his department have inspected, and be thoroughly familiar' with, the contents of whatever documents comprise the locality’s comprehensive plan.
The “Determination” submitted to the district court contains the Secretary’s findings pursuant to § 1500c of the Act. The Secretary states in the “Determination” that “The proposed conversion was in accord with the applicable comprehensive plan for the area.” (Italics in original.) The Secretary further states that in making this finding he relied on three items in the record. The first item is a letter, dated January 22, 1968, from Norwalk Mayor Frank Zullo to William Davis, Acting Assistant Regional Administrator for Metropolitan Development of HUD. This letter contains a statement by Mayor Zullo that “Both the Gallaher and Taylor lands are reserved for open space in our city’s comprehensive plan,” and a reference to the fact that “the location of the college next to the Gallaher park will thus be in accord with our Master Plan of Parks.”
The Secretary also relied on a memorandum, dated January 6, 1969, from Mr. Frank Batstone, Acting Director of Planning, to Mr. William Davis. This one-page memorandum states that the regional office has “considered the relevant development proposals incorporated in Norwalk’s comprehensive development plan and open-space acquisition plan and program” and concludes that “the conversion is in accord with the development policies which are part of the City’s Comprehensive Plan.” The final item referred to in the Secretary’s “Determination” is a letter, dated June 4, 1969, from Mr. Richard Carpenter, Planning Director of the South Western Regional Planning Agency to Mayor Zullo. This letter contains a resolution of the South Western Regional Planning Agency endorsing the proposed conversion-substitution because, among other reasons, the exchange will not impair the City of Norwalk or the regional open-space programs.
It is readily apparent that there is no evidence in the administrative record that the Secretary or his subordinates have ever known what the Norwalk comprehensive plan was composed of or have ever conducted their own independent examination of it. Obviously, the two letters from local officials — Mayor Zullo and Mr. Carpenter — do not satisfy the Secretary’s obligation. It may be that if HUD were in possession of the relevant documents and someone in the Department had become acquainted with their contents, the assistance of local officials might be of some help in interpreting them; but the bare, unsupported conclusions of local officials do not fulfill the statutory obligation of HUD and the Secretary to ascertain that there is in fact a plan or plans which may fairly be considered as a “comprehensive plan” as that term is meant in the governing statute.
In his “Determination” the Secretary also says that he relied on the letter from Mr. Frank Batstone to Mr. William Davis in which Mr. Batstone states that the regional office has “considered” Norwalk’s “relevant” development proposals and has decided that the conversion is “in accord” with them. However, this letter, like the other two, contains no explanation of the nature or content of the Norwalk comprehensive plan. The letter is a brief, one-page statement of the regional office’s conclusions and contains no report of the facts which were relied upon, the factors which were considered, or the reasoning on which the conclusions were based. Thus, the letter leaves in doubt whether the regional staff itself ever saw anything in the nature of a comprehensive plan or whether they merely relied on statements by local officials. Furthermore, the remainder of the administrative record is silent on this matter. Nowhere in the documents submitted to the district court is there a copy of any comprehensive plan, a statement of what the plan contains, or a reference to where it is to be found.
At oral argument we asked counsel for appellees what the plan consisted of and they were unable to inform us. It was only in a supplemental memorandum submitted by the City of Norwalk, dated December 12, 1972, that the first faint glimmer of light was shed on this matter. It appears that a single comprehensive plan for Norwalk does not exist, but that there are a series of master plans, such as the Master Plan of Parks, of Schools, of Transportation, as well as subdivision regulations and zoning regulations. Thus there is some question about whether these documents constitute a “comprehensive plan” which meets the statutory criteria. Of course, without the plan itself and the Secretary’s detailed findings with respect to it, this court is in no position to decide this issue.
None of plaintiffs’ other contentions are persuasive. Plaintiffs claim that the Secretary did not personally make all of the findings required by § 1500c. However, the Secretary has stated that he did make the required determinations before giving his approval of the conversion request, and he has set out in his “Determination” the portions of the administrative record on which he relied. Except for the finding regarding the local comprehensive plan, plaintiffs have adduced no credible evidence to indicate that he did not do so and, therefore, the district court’s finding that there is no genuine issue of fact as to this matter must stand.
We also find that plaintiffs have raised no genuine question about the merits of the three findings that do not concern the local comprehensive plan. For example, the Secretary’s finding that the land which was to be substituted for the converted open-space land had an equivalent fair market value has ample support. The administrative record contains four appraisals from which, upon analysis, HUD officials concluded that the two parcels had an equal fair market value. Contrary to plaintiffs' contentions, there is nothing “confusing” or “inconclusive” about any of these appraisals.
Similarly, the findings that the proposed conversion was “essential to the orderly development and growth of the urban area” and that the substituted land was “of as nearly as feasible equivalent usefulness and location” are supported by the record. Plaintiffs have offered no convincing arguments against, nor do we perceive any objections to, the Secretary’s conclusion that Norwalk’s desire to improve its local community college — the first in the state —-by moving it from its temporary quarters to a permanent facility with a campus of its own is consistent with the orderly development and growth of the area. The substitution of the Taylor Farm, which is closer to the low income and minority group population of Nor-walk, has the additional benefit that it will apparently enhance the recreational opportunities available to these groups. Thus, the plaintiffs’ suggestion that the Secretary may have relied on a mistaken representation that Connecticut law requires all community college campuses to be at least 100 acres does not raise any serious question in our minds in light of the other substantial reasons for the Secretary’s approval.
The fact that Taylor Farm is located near Long Island Sound and closer to the more populated areas of Norwalk so that it will enhance the recreational opportunities for low-income and minority groups also strongly supports the finding that the substituted land is of equivalent usefulness and location to the Gal-laher property. In addition, it must be remembered that since only a portion of the Gallaher property is being converted, a large part of the open-space potential of that property remains unimpaired. Although appellants object that local proponents of the proposed conversion have stressed these same considerations, this fact does not detract from the Secretary’s conclusion, which was based on the independent analysis of these factors by HUD officials. See memorandum from Mr. William Davis to Mr. Arthur Davis (June 27, 1969).
We conclude, therefore, that the Secretary’s findings on these three matters are supported by the record and that the district court properly ruled with regard to them that the Secretary’s conclusions did not constitute a clear error in judgment and that plaintiffs have not raised any genuine disputes about material facts. We also agree, for the reasons stated in the district court opinion, that the facts alleged by the plaintiffs concerning any prior knowledge of government officials at the time the property was first acquired by the city of the plan to construct Norwalk Community College on a portion of the Gallaher site do not present a triable issue of whether the defendants were acting in bad faith in the administrative proceedings. We note, in addition, that there would not appear to be any impropriety in an initial grant of federal funds to acquire open-space land meeting the statutory requirements when certain government officials know that the locality may one day seek to convert a portion of the land in question to use as the site for a community college, if as here such a conversion proposal must first be submitted to the proper administrative authority for review on the merits for compliance with the relevant statutory conversion criteria, including the requirement of substitution of open-space land “of as nearly as feasible equivalent usefulness and • location.” Possibilities of this nature necessarily are frequently discussed and considered; that this is so is no evidence of bad faith.
Since the Secretary’s finding that the proposed conversion is consistent with local comprehensive planning is without support in the record, we reverse the judgment of the district court with regard to both defendants and remand the case for further proceedings. On remand, the district court must determine whether the Secretary has complied with the statutory mandate of § 1500c with respect to the local comprehensive plan. In this connection it may be that the district court should allow plaintiffs the opportunity to pursue all reasonable means of discovery including the taking of depositions. However, we cannot delineate the precise limits of proper discovery on remand. We leave this to the district judge’s discretion, noting only that we see no objection to plaintiffs’ deposing the Secretary if that should be necessary to a determination of whether the Secretary obeyed the statutory mandate concerning the comprehensive plan. In any event, there must be full inquiry to ascertain the basis of the Secretary’s action with reference to any comprehensive plan.
We note, however, that even if the district court concludes that the Secretary failed to follow the mandate of § 1500c in making a determination of the conversion’s consistency with the comprehensive plan, both the Secretary and the City of Norwalk may still desire to proceed with the conversion-substitution at issue here. Should this be the case, the district court may, in its discretion, permit the current Secretary the opportunity, if he so desires, to make a new determination of the question based on a proper analysis of the plan.
Reversed and remanded for further proceedings not inconsistent with this opinion.
. Originally, the only federal defendant named in the suit was the United States government, but on November 0, 1970, the district court granted plaintiffs’ motion to join Secretary Romney as a defendant. The United States was subsequently dropped as a defendant. See Memorandum of Decision, dated May 25, 1971.
. The amended complaint also named the State of Connecticut as a defendant and raised additional claims against the City of Norwalk. See footnote 9 infra. In a Memorandum of Decision, dated May 25, 1971, the district court granted the state’s motion to dismiss and limited the claims against the City of Norwalk to those arising under the federal statutes. See footnote 9 infra. Plaintiffs have not appealed from this order.
. 42 U.S.C. § 1500a(a) (1904 ed., Supp. Y) provides:
(a) In order to encourage and assist in the timely acquisition and development of land to be used as permanent open-space land, as defined herein, the Secretary of Housing and Urban Development ... is authorized to enter into contracts to make grants to States and local public bodies to help finance the acquisition of title to, or other permanent interests in, such land, and the development, for open-space uses, of land acquired under this chapter. Tbe amount of any such grant shall not exceed 50 per centum of the total cost, as approved by the Secretary, of such acquisition and development.
. The campus was to consist of 57 acres from the Gallaher Estate and 25 acres from the adjacent Cranbury Elementary School.
. § 1500c. Conversions to other uses.
No open-space land for the acquisition of which a grant has been made under this chapter shall, without the approval of the Secretary, be converted to uses other than those originally approved by him. The Secretary shall approve no conversion of land from open-space use unless lie finds that such conversion is essential to the orderly development and growth of the urban area involved and is in accord with the then applicable comprehensive plan, meeting criteria established by him. The Secretary shall approve any such conversion only upon such conditions as he deems necessary to assure the substitution of other open-space land of at least equal fair market value and of as nearly as feasible equivalent usefulness and location.
. As amended in 1970, the statute now provides :
No open-space land for the acquisition of which a grant has been made under section 1500a of this title shall be converted to uses not originally approved by the Secretary without his prior approval. Prior approval will be granted only upon satisfactory compliance with regulations established by the Secretary. Such regulations shall require findings that (1) there is adequate assurance of the substitution of other open-space land of as nearly as feasible equivalent usefulness, location, and • fair market value at the time of the conversion; (2) the conversion and substitution are needed for orderly growth and develop- ' ment; and (3) the proposed uses of the converted and substituted land are in accord with the then applicable comprehensive plan for the urban area, meeting criteria established by the Secretary.
. Although the City of Norwalk initially requested that the Taylor Farm be substituted for 57 acres of the Gallaher property, it subsequently agreed to scale down the requested conversion to 43 acres of the Gallaher Estate. Other property was then found to substitute for the 14 additional acres.
. All of the plaintiffs allege that they will suffer direct monetary loss ranging from $6,000 to approximately $15,000 from the proposed conversion because of the reduction in property values in the area. All but one of them allege damages in excess of $10,000.
. The amended complaint also named the State of Connecticut as a defendant and asserted that the state’s approval of the proposed conversion was in violation of section 7-131Í of the Connecticut General Statutes. The complaint further alleged that approval of the conversion by the City was violative of section 1-1.89 of the Norwalk City Charter. By way of additional relief, the complaint sought a declaratory judgment that the state and the city acted illegally and invalidly in approving the conversion, that the city acted illegally and invalidly in offering the land to the state, and that the state acted improperly in agreeing to purchase the property. They also sought to enjoin the State of Connecticut from purchasing the land and constructing a community college thereon. However, in its Memorandum of Decision, dated May 25, 1971, the district court granted Connecticut’s motion to dismiss for lack of a federal question upon which to sustain jurisdiction and limited the plaintiffs’ claims against Norwalk to those arising under the federal statute. The plaintiffs have not appealed from this order.
. See footnote 11 infra.
. It was this letter which formed the basis for the motion to reargue filed May 8, 1972. See footnote 14 infra.
. 5 U.S.C. § 706 (1904 ed., Supp. V) provides:
Scope of review
To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall—
(1) compel agency action unlawfully withheld or unreasonably delayed; and
(2) hold unlawful and set aside agency action, findings, and conclusions found to be—
(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
(B) contrary to constitutional right, power, privilege, or immunity;
(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;
(D) without observance of procedure required by law;
(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or
(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.
In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error.
. The letter also contains the following-comments by Mayor Zullo:
“I cannot emphasize too strongly that in a city such as ours, with a low and raxxidly diminishing amount of vacant land, you buy the land when and where it is available, not always according to the dictates of an ideal xxlan sometimes incapable of realization. You buy the amount available if you can afford it, and then you try to fit it into a reasonable scheme for community benefit. Sometimes the scheme should be altered, as circumstances and resources change. That is what has been done in this case . . . . ”
. Plaintiffs allege that the following- letter from Harrison Knapp, Director of the Community Relations Division of HUD, to one of the plaintiffs, which formed the basis for the motion to rear-gue, implies that the Secretary did not make the necessary findings:
Dear Mr. Konstantin:
Secretary Romney has asked me to respond to your letter of November 19. Although I appreciate your concern about the location of the Community College, the Department of Housing and Urban Development did not make the decision. It was a local decision by the officials of Norwalk. I think you should go down to the Norwalk Redevelopment Agency and let Mr. Jay Van Coevering know how you feel about this matter. He is the Redevelopment Administrator of the Norwalk Rede- - velopment Agency located at 141 East Avenue.
Good luck to you!
Sincerely,
/s/ HARRISON KNAPP
Harrison Knapp
Director
Community Relations Division
As Chief Judge Blumenfeld found, this letter has no bearing on whether the Secretary personally made the required findings, since the letter is clearly referring to the initial site selection, which is a purely local matter, and not the ultimate federal government approval.
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UNITED STATES of America, Appellee, v. Jerry Lee HOLLIDAY, Appellant.
No. 72-1603.
United States Court of Appeals, Tenth Circuit.
Submitted Jan. 9, 1973.
Decided Feb. 27, 1973.
Joe Boatman, Muskogee, Okl., on the brief, for appellant.
Richard A. Pyle, U. S. Atty., and Robert D. McDonald, Asst. U. S. Atty., on the brief, for appellee,
Before SETH, HOLLOWAY and DOYLE, Circuit Judges.
SETH, Circuit Judge.
Defendant appeals from a judgment of conviction entered on a jury verdict for possession of non-tax-paid distilled spirits in violation of 26 U.S.C. §§ 5205(a)(2) and 5604(a)(1).
• Defendant raises two issues on appeal. The first concerns the validity of a search warrant, the execution of which resulted in the seizure of evidence used against him at trial. The second issue concerns the voluntariness of an oral confession made by defendant at the scene of the arrest.
On January 31, 1972, the search warrant in dispute was executed at the residence of the defendant and his wife. The search resulted in the discovery and seizure of forty-two gallons of non-tax-paid whiskey. Prior to trial, the defendant moved to have this evidence suppressed on the grounds that the affidavit underlying the search warrant was insufficient to support a finding of probable cause. The motion to suppress was denied and the evidence was introduced at trial.
The affidavit reads:
“On Friday, January 28, 1972, I received information from a confidential informant whom I believe and had been reliable in the past, that Jerry Holiday [sic] had an illicit distillery behind his residence at Counts, Oklahoma, and was a distributor of non-taxpaid distilled spirits at the residence. Jerry Holiday has a record and reputation with Alcohol, Tobacco and Firearms Investigators for being a violator of the internal revenue liquor laws. On Saturday, January 29, 1972, I received information from the same informant that a blue 1969 Ford pickup truck, Arizona license plate No. 6734, with a wood tool box in the back had picked up a load of nontax-paid distilled spirits at the Jerry Holiday residence at Counts, Oklahoma, during the night of Friday, January 28, 1972, enroute to Oklahoma City. On Sunday, January 30, 1972, I received information from Special Investigator James Wheeler of the Oklahoma City Branch Office that the [sic] and other investigators had arrested Walter Gordon and seized a load of nontaxpaid distilled spirits which was contained in the above-described truck in Oklahoma City during the night of Saturday, January 29, 1972.”
Defendant contends that the affidavit was insufficient because (1) it did not reveal the underlying circumstances under which the informant obtained his information ; (2) it did not state the time or date on which the informant received the information, and (3) the affiant’s knowledge of defendant’s reputation, by itself, is insufficient to support a finding of probable cause.
At the outset, it is apparent that affidavits for search warrants must be tested in a common sense and realistic manner, and warrants issued thereon should not be interpreted hyperteehnically. United States v. Ventresca, 380 U.S. 102, 85 S.Ct. 741, 13 L.Ed.2d 684 (1965); United States v. Berry, 423 F.2d 142 (10th Cir.). Nevertheless, the Fourth Amendment requires that the facts as set forth in the underlying affidavit be sufficient to allow a neutral magistrate to reasonably conclude that probable cause for the search exists.
The essential information in the present affidavit was obtained by the affiant through an unidentified informant. The rules to be followed in testing the validity of such information were announced in Aguilar v. Texas, 378 U.S. 108, 84 S.Ct. 1509, 12 L.Ed.2d 723 (1964):
“Although an affidavit may be based on hearsay information and need not reflect direct personal observations of the affiant, Jones v. United States, 362 U.S. 257, 80 S.Ct. 725, 4 L.Ed.2d 697, the magistrate must be informed of some of the underlying circumstances from which the informant concluded that the narcotics were where he claimed they were, and some of the underlying circumstances from which the officer concluded that the informant, . . . was ‘credible’ or his information ‘reliable.’
Defendant properly concedes that the affidavit is sufficient to establish that the informant was “credible.” However, defendant contends that the affidavit reveals no underlying circumstances from which to conclude that the informant’s information in this case is accurate.
Spinelli v. United States, 393 U.S. 410, 89 S.Ct. 584, 21 L.Ed.2d 637 (1969), is relied upon by defendant for the proposition that an affidavit is insufficient if it does not state how the informant received his information, i. e., whether by personal observation or by some other person. This reliance is misplaced. Neither the Supreme Court’s opinion in Spinelli nor the Constitution make this information an absolute requirement for a valid affidavit,
“ . . . In the absence of a statement detailing the manner in which the information was gathered, it is especially important that the tip describe the accused’s criminal activity in sufficient detail that the magistrate may know that he is relying on something more substantial than a casual rumor circulating in the underworld or an accusation based merely on an individual’s general reputation.” Spinelli, supra, at 416, 89 S.Ct. at 589.
As an example, the Court alluded to its prior opinion in Draper v. United States, 358 U.S. 307, 79 S.Ct. 329, 3 L.Ed.2d 327 (1959), in which the informant had not revealed the way in which he had obtained his information but did supply such detailed facts that, when corroborated, they amounted to probable cause. Likewise, in the instant case, although the informant did not state the manner in which he had received his information, the information was of such detail that when it was corroborated by the affiant on the following day, probable cause had been established. Therefore, the affidavit executed after this corroboration had occurred was not vitiated by the informant’s failure to disclose the source of his information.
Defendant next contends that the affidavit is insufficient because it does not state when the informant received his information. Without this information, he argues, there is no way to determine whether or not the facts in the affidavit are too stale to support the warrant. Certainly, “ . . . the element of time is crucial to the concept of probable cause.” United States v. Johnson, 461 F.2d 285 (10th Cir.). Under some circumstances, the absence of the date on which the informant received his information would be fatal to the warrant. Roseneranz v. United States, 356 F.2d 310 (1st Cir.); United States v. Boyd, 422 F.2d 791 (6th Cir.). See also Spinelli v. United States, 382 F.2d 871 (8th Cir.), rev’d on other grounds, 393 U.S. 410, 89 S.Ct. 584, 21 L.Ed.2d 637 (1969).
We agree that the date on the affidavit, standing by itself, does not justify the inference that the information contained therein was received near that date. Where, however, the undated information is factually interrelated with other, dated information in the affidavit, then the inference that the events took place in close proximity to the dates actually given may be permissible. United States v. Bridges, 419 F.2d 963 (8th Cir.); Dixon v. State of Florida, 403 F.2d 49 (5th Cir.). In this case, the informant told the affiant on January 29, 1972, that the specifically described vehicle containing a load of illicit whiskey was en route to Oklahoma City. The next day, January 30, the affiant learned from another federal agent that the vehicle described by the informant had been stopped in Oklahoma City on the previous night, thus bearing out the accuracy of informant’s story. On Monday, January 31, 1972, the search warrant was issued and executed. Under these circumstances, it is clear that the magistrate was entitled to assume that the informant’s information was fresh enough to meet probable cause standards. Therefore, the failure to include in the affidavit the date on which the informant received his information did not, on this set of facts, vitiate the warrant.
Since we have concluded that probable cause for the warrant existed independent of affiant’s knowledge of the defendant’s reputation, defendant’s final point of error relating to the search warrant need not be considered.
Secondly, defendant contends that his oral confession made at the scene of his arrest was involuntary and, thus, inadmissible at his trial. However, defendant never objected to the admissibility of the confession, either at the motion to suppress or at the trial itself. Therefore, review by this court is precluded unless the result was a plain error which resulted in manifest injustice. United States v. Sluder, 457 F.2d 708 (10th Cir.). The admission of the confession was not erroneous. United States v. Tafoya, 459 F.2d 424 (10th Cir.); United States v. Adams, 470 F.2d 249 (10th Cir.).
The judgment of conviction is affirmed.
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Clifford August THOMPSON, Jr., Defendant-Appellant. v. UNITED STATES of America, Plaintiff-Respondent.
No. 71-2939.
United States Court of Appeals, Ninth Circuit.
Feb. 7, 1973.
Duniway, Circuit Judge, dissented in statement.
William L. Hanson (argued), Seattle, Wash., for defendant-appellant.
Charles F. Mansfield, Asst. U. S. Atty. (argued), Thomas P. Giere, Susan Barnes, Asst. U. S. Attys., Stan Pitkin, U. S. Atty., Seattle, Wash., for plaintiff-respondent.
Before TRASK and DUNIWAY, Circuit Judges, and BATTIN, District Judge.
Honorable James F. Pattin, United States District Judge, District of Montana, sitting by designation.
BATTIN, District Judge:
Thompson appeals the lower court’s finding that he violated the Military Selective Service Act of 1967 by failing to accept induction into the Armed Forces of the United States. Thompson contends that he was improperly denied a conscientious objector classification by his local board and therefore that his conviction should be reversed. Three interdependent questions are presented on appeal: (1) Whether the appellant raised the defense of improper denial of conscientious objector status; (2) if so, whether he presented a prima facie case for that classification to his local board; and (3), if so, whether the local board had a basis in fact for its denial of the classification.
The court finds that, although appellant properly raised the defense and in fact presented a prima facie case for conscientious objector classification, the local board had a basis in fact for denying the classification, and thus affirms Thompson’s conviction.
Thompson registered with the Selective Service early in 1966. He did not then claim to be a conscientious objector. Through August 20, 1970, he was typically classified by the System as “II-S” — a deferred student. On August 13, 1970, one week before the expiration of his II-S deferment, Thompson took the first step in applying for Conscientious Objector status by requesting a Form 150. The form was returned on September 15, 1970.
On September 23, 1970, the local board granted a courtesy interview with Thompson, after which they denied him conscientious objector status on the ground that his
“. . . position of conscientious objector is very recently arrived at, and we conclude that his beliefs are not deeply held, but merely express a desire to avoid military service.”
The first question denominated presents no obstacle to decision. The defense was raised in appellant’s motion to dismiss the indictment and runs true through the trial. Having exhausted his administrative remedies, the appellant could and did properly raise the defense of improper denial of conscientious objector status. That defense, if established, precludes conviction under the section Thompson is charged with violating.
Appellate examination of the failure of the defense of improper denial of a draft classification is often said to involve the narrowest of reviews. We must examine the record properly before the local board to determine whether rejection of the registrant’s claim was justified. Such rejection can be validly based upon either of two criteria: that the registrant failed to present a prima facie case for the classification or that there existed a “basis in fact” which allowed the board to disbelieve the claim of the registrant. Whether a prima facie case was established, and, alternatively,. whether there was a basis in fact for its rejection, are questions of law. If a prima facie ease is established, the board, to legally deny the classification, must state a “basis in fact”, which is discernable from the records and information properly before it.
In this regard, a prima facie case is one which paints the applicant as a person whose convictions, based upon religious training and belief, including all sincere religious beliefs, substantially rests upon a belief in a Power or Being or a faith to which all is subordinate or upon which all else is totally dependent and which requires him to oppose war in all forms. These convictions can be “spurred by deeply held moral, ethical, or religious beliefs, . . .” but may not be political, sociological or philosophical, and they need not be “religious” in an orthodox or parochial sense. If the applicant depicts himself to the local board as having the requisite beliefs, he is entitled to the classification unless there exists some basis in fact upon the strength of which the board denies the classification.
Examination of Thompson’s file leads us to conclude that he was properly denied conscientious objector status. The local board concluded that the registrant was not sincere in his beliefs and the court below agreed with that conclusion. That conclusion presupposes that the beliefs proffered by Thompson prima facie qualify him for the statutory exemption. In view of the course we follow, we will accept, arguendo, the board’s conclusion without further examination.
That leaves for determination the question of whether a basis in fact can be gleaned from the record which was before the board and which justifies their rejection of Thompson’s claim. Although this court is not to act as a “super draft board”, it is nonetheless our task “in cases such as this is to search the record for some affirmative evidence to support the local board’s overt or implicit finding that a registrant has not painted a complete or accurate picture of his activities.” There must be some affirmative evidence properly before the board which substantially blurs the picture the registrant has painted and thus casts doubt on his sincerity. Although some circuits require the local board to briefly summarize those facts which result in a conclusion that the registrant is insincere, we have not yet required delineation of the bases of their conclusions. The local board here has satisfied the requirements we established in Haughton and followed in Cordero regarding the cause of rejection.
Our very narrow role here is to determine whether the board could infer insincerity from the evidence before it. “. . . [T]he board’s action is entitled to the support of any inference of sham or insincerity on the part of the registrant . . .” from which the conclusion could be drawn.
“The ‘basis in fact’ which will support the board’s decision means more than suspicion and speculation, Dickinson v. United States, 346 U.S. 389, 74 S.Ct. 152, 98 L.Ed. 132 (1953), but it need not rise to the level of substantial evidence. Maynard v. United States, 409 F.2d 505, 506 (9th Cir. 1969). All that is required, where the registrant has made out a prima facie case for exemption, is that ‘there be some proof that is incompatible with the registrant’s proof of exemption.’ [Citations omitted.]”
We find several indications of insincerity in the record upon which the board could have acted. The timing of the claim and certain inconsistencies in its assertion provide support for the inferences of insincerity drawn by the board. Acts or statements inconsistent with the claim can form a basis in fact for rejection of the claim.
Moreover, both the local board and the trial court before whom Thompson appeared concluded that his claim was not sincerely asserted. Those conclusions weigh heavily here and undoubtedly rest on the inconsistency and untimeliness of the claimed beliefs.
The timing of the appellant’s claim for exemption has been pointed to by the government as justifying the denial by the local board. The timing of the claim for exémption, although a factor which the board may consider, is not alone sufficient to justify a conclusion of insincerity. Lateness is a factor, when considered with other relevant fae-tors, which may justify a conclusion of insincerity.
Inconsistencies in the presentation of Thompson’s claim also support the board’s finding of insincerity. Here, while claiming “late crystalization”, Thompson also professes to have been a conscientious objector all his life. The file reflects that three of his protagonists thought him a conscientious objector since high school days, and, although those are not his comments, they are reinforcement of his statement that he had been a conscientious objector all of his life. Having so long held these beliefs, Thompson waited until he was on the threshold of induction to express them to the local board. It is not that there was absent an opportunity to do so. He could have expressed them when he registered with the System in 1966. During the passage of more than four years between registering and asserting the claim, on numerous occasions Thompson corresponded with his local board concerning various matters. None of these letters indicated that he believed himself qualified for conscientious objector status. While we cannot and do not suppose he had a duty to so notify the board while he was classified II-S, several occasions passed during his sporadic educational endeavors when that classification was about to lapse and which presented him with an opportunity to assert to the board the beliefs which he argues qualify him for exemption and which he says he has held all of his life.
Doubt of Thompson’s sincerity is not without foundation in either the timing of his claim nor in his statements to and before the local board. The inconsistency in and timing of his claim are more than sufficient to persuade the board and later the trier of fact that his beliefs were not sincere.
The arguments put forth by appellant concerning the conduct of the board are unavailing. Our review of the record fails to reflect that the procedures employed were in any manner irregular, arbitrary or capricious.
After long and thoughtful deliberation of this case, we must agree with lower court that there is a basis in fact for the rejection of Thompson’s claim and thus affirm his conviction.
DUNIWAY, Circuit Judge
(dissenting) :
I dissent. I am unable to distinguish this case from United States v. Andersen, 9 Cir., 1971, 447 F.2d 1063. I would reverse on the authority of that case.
. 50 U.S.C.App. § 451 et seq.
. Appellant’s selective service file [admitted into evidence at the trial], noted as Government’s Exhibit “One”, at page 94. This page is a copy of the record by the board of the courtesy interview conducted September 23, 1970. [Hereinafter cited as “E.l”.]
. McGee v. United States, 402 U.S. 479, 91 S.Ct. 1565, 29 L.Ed.2d 47 (1971).
. McGee, supra note 3; McKart v. United States, 395 U.S. 185, 89 S.Ct. 1657, 23 L.Ed.2d 194 (1969); Salamy v. United States, 379 F.2d 838 (10th Cir. 1967); Witmer v. United States, 348 U.S. 375, 75 S.Ct. 392, 99 L.Ed. 428 (1955).
. United States v. Haughton, 413 F.2d 736 (9th Cir. 1969); Kessler v. United States, 406 F.2d 151 (5th Cir. 1969), respectively.
. Witmer, supra note 4.
. United States v. Seeger, 380 U.S. 163, 85 S.Ct. 850, 13 L.Ed.2d 733 (1965).
. United States v. Welsh, 398 U.S. 333, 344, 90 S.Ct. 1792, 1798, 26 L.Ed.2d 308 (1970), Seeger, supra note 7 at 380 U.S. 165, 85 S.Ct. 850, 13 L.Ed.2d 733.
. The conclusion of the board hereinbefore set out does not reject Thompson’s claim as failing to bring him within the statutory criteria. The board’s rejection presupposes that a prima faoie case was established.
. Transcript of proceedings, p. 68, line 15.
. Witmer, supra note 4.
. Dickinson v. United States, 346 U.S. 389, 396, 74 S.Ct. 152, 157, 98 L.Ed. 132 (1953).
. Batterton v. United States, 260 F.2d 233 (8th Cir. 1958).
. There are circuits which require a written explanation of the basis in fact where exemption is denied on the grounds of sincerity :
“It would . . . appear to be desirable practice that the board, if it is denying the status claimed because of its belief in the lack of sincerity in the applicant, should state that fact and at least briefly summarize in the record those facts, whether they be inconsistencies in action or written statements, shifty or evasive demeanor, appearance of unreliability, lateness of claim or any other factors reasonably causing the board to reach its conclusion.” United States ex rel. Hemes v. McNulty, 432 F.2d 1182, 1187 (7th Cir. 1970); United States v. Rutherford, 437 F.2d 182, 184 (8th Cir. 1971); Rothfuss v. Resor, 443 F.2d 554, 559, f.n. 8 (5th Cir. 1971); United States v. Stetter, 445 F.2d 472, 482 (5th Cir. 1971); United States v. Andrews, 446 F.2d 1086, 1087 (10th Cir. 1971).
We cannot help but endorse that plan for, while it may require board members to express comment on the character of the sons of their neighbors, it is not particularly burdensome to the board and alleviates the doubts which an appellate or district court feels upon an examination of an otherwise blank record. Such doubts lead to extenuated litigation and preclude meaningful review, for, as was held in Sicurella v. United States, 348 U.S. 385, 392, 75 S.Ct. 403, 99 L.Ed. 436 (1955), if the basis of the board’s denial is not clear, then a court cannot act to affirm. See also Haughton, supra note 5.
Although we here have gone a step further by endorsing our sister circuit’s suggestion that the record reflect the basis of a finding of insincerity, that does not dispose of this case. We do not request formal findings of fact, a notion already rejected in United States v. Willson, 452 F.2d 529, 532 (9th Cir. 1971), we merely suggest that local boards point out the circumstances leading to their conclusion regarding insincerity. This is not a new suggestion, United States v. Mount, 438 F.2d 1072 (9th Cir. 1970), and seems to be one which flows naturally from the holding in Haughton, supra note 5. We are unwilling to reverse the conviction in this case merely because we are forced to examine the whole record which was before the local board. Where, as here, there are recorded statements by the board of its conclusions regarding the sincerity of the registrant which are otherwise supportable on the record, the case is susceptible to decision. See United States v. Kember, 437 F.2d 534, 536 (9th Cir. 1971), cert. den., 402 U.S. 923, 91 S.Ct. 1392, 28 L.Ed.2d 662.
. United States v. Haughton, 413 F.2d 736 (9th Cir. 1969).
. United States v. Cordero, 439 F.2d 716 (9th Cir. 1971).
. United States v. Hayden, 445 F.2d 1365, 1372 (9th Cir. 1971) (citations omitted).
. United States v. Kember, 437 F.2d 534, 535, note 1 (9th Cir. 1970), cert. den., 402 U.S. 923, 91 S.Ct. 1392, 28 L.Ed.2d 662.
. Parrott v. United States, 370 F.2d 388, 392 (9th Cir. 1960), cert. den,, sub nom. Lawrence v. United States, 387 U.S. 908, 87 S.Ct. 1690, 18 L.Ed.2d 625 (1967).
. United States v. Henderson, 411 F.2d 224, 227 (5th Cir. 1969), cert. den., 399 U.S. 916, 90 S.Ct. 2204, 26 L.Ed.2d 574; United States ex rel. Hemes, supra note 14, 432 F.2d at 1187; Salamy v. United States, 379 F.2d 838, 841 (10th Cir. 1967); Rothfuss, supra note 14, 443 F.2d at 558. Although the Fifth Circuit in Rothfuss, at 558, seems to conclude that this court would find lateness of a claim to be conclusive on the question of sincerity, that is not how we read Speer v. Hedrick, 419 F.2d 804, 806 (9th Cir. 1969), and Bishop v. United States, 412 F.2d 1064, 1068 (9th Cir. 1969).
. E.1, pp. 84, 85, and 87.
. E.1, p. 93.
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NATIONAL LABOR RELATIONS BOARD, Petitioner, v. DAYTON MOTELS, INC., d/b/a Holiday Inn of Dayton, Respondent.
No. 72-1078.
United States Court of Appeals, Sixth Circuit.
Argued Oct. 11, 1972.
Decided Feb. 14, 1973.
Edwards, Circuit Judge, filed opinion concurring in part and dissenting in part.
John C. Getreu, Director, Region 9, N. L.R.B., Cincinnati, Ohio, Jay E. Shank-lin, N.L.R.B., Washington, D. C., for petitioner ; Marcel Mallet-Prevost, Asst. Gen. Counsel, Robert A. Giannasi, N.L. R.B., Washington, D. C., on brief.
Charles A. Lawrence, Jr., Memphis, Tenn., for respondent; Elbert H. Coles, McKnight, Hudson & Coles, Memphis, Tenn., on brief.
Before WEICK, EDWARDS and MILLER, Circuit Judges.
WEICK, Circuit Judge.
This case is before the Court on thé Board’s application for enforcement of its order reported at 192 NLRB No. 112, against Dayton Motels, Inc., doing business as Holiday Inn of Dayton (Company), which application was filed pursuant to Section 10(e) of the National Labor Relations Act (Act) as amended. 29 U.S.C. § 160(e). The Company has cross-petitioned for non-enforcement.
The Board found that the Company, shortly prior to the expiration of the collective bargaining agreement with the Union, violated Section 8(a)(1) of the Act by interrogating and threatening employees, by soliciting employees to repudiate the Union, by soliciting an employee not to attend a Union meeting, and by promising benefits to employees who did not engage in the strike called by the Union. The Board also found that the Company violated Section 8(a)(5) of the Act by withdrawing recognition from the Union and by thereafter refusing to bargain with the Union as the representative of its employees.
The Board ordered the Company to cease and desist from its unfair labor practices, to reinstate discharged striking employees, to bargain with the Union as the exclusive representative of its employees, and to post appropriate notices.
We uphold the Board’s order only with respect to the Section 8(a)(1) unfair labor practices. We decline to enforce the order of the Board with respect to the Section 8(a)(5) alleged violation, and remand for further proceedings.
SECTION 8(a)(1) VIOLATIONS
We are of the opinion that, on the record before us, the findings of the Board with respect to Section 8(a)(1), violations are supported by substantial evidence. NLRB v. Howell Automatic Mach. Co., 454 F.2d 1077 (6th Cir. 1972).
The only colorably valid attack that the Company makes against the finding of Section 8(a)(1) violations is that the predominance of activities was attributable to Collins and Branham, neither one of whom was a supervisor. Simply stated, the Company’s position is that these activities took place near the end of the term of the agreement, and regardless of the anti-union nature of these employees’ activities, their acts cannot be imputed to the Company since they were not supervisory employees of the Company.
The argument falls short of a successful attack on the Section 8(a)(1) violations found by the Board, for two reasons. First, the activities of the Executive Housekeeper, who was a supervisor, alone would be sufficient to support a finding that Section 8(a) (1) was violated by the Company. Second, strict principles of agency are not applicable where management uses an employee who is a union member, for effectuating its own interests. If there is a connection between management and the employee’s actions, either by way of instigation, direction, approval, or at the very least acquiescence, then the acts of the employee will be imputed to the Company. Boyle’s Famous Corned Beef Co. v. NLRB, 400 F.2d 154 (8th Cir. 1968).
The Board found that employees Collins and Branham had close ties with management; in fact, they customarily delivered to other employees work instructions from management. Furthermore, while the Company perhaps did not actually direct the activities of Collins and Branham, at least it acquiesced in the anti-union efforts Thus, under the expanded agency principles applicable to Section 8(a)(1) the acts of these union-members employees are imputed to the Company and support the Board’s order directed to these activities.
SECTION 8(a)(5) VIOLATIONS
In June, 1970, three months prior to expiration of the collective bargaining agreement with the Union, the Company received a request from the Union to negotiate for a new collective bargaining agreement. The Company did not respond to this request and thereafter refused to meet with the Union for purposes of bargaining. However, on September 16, 1970, the expiration date of the agreement, a Union representative came to the Inn and met with the Company’s attorney. In the course of this meeting the Company’s attorney advised the Union representative of the Company’s position, that the Union did not represent a majority of its employees.
It was then suggested by the Company’s attorney that an election be conducted in order to give its employees an opportunity to express their desires concerning representation by the Union. This proposal was rejected by the Union representative. On the day following, the Unioii called a strike against the Company.
The Board found that the Company violated Section 8(a)(5) of the Act by refusing to bargain with the Union in June, 1970. The validity of this finding of the Board (and the resultant order of the Board that the Company bargain with the Union) depends on (1) whether the Union actually represented a majority of the employees, or (2) whether the Company had a good-faith doubt of the Union’s majority status when it refused to bargain.
In order to establish that an employer’s withdrawal of recognition and refusal to bargain with an incumbent union transgresses Section 8(a)(5) of the Act, the burden of proof is upon the Board to show that the union actually represented a majority of the employees in an appropriate unit. Machinists Lodges 1746 & 743 v. NLRB, 135 U.S.App.D.C. 53, 416 F.2d 809 (1969).
Failure to prove a majority-status of the Union relieves an employer of any duty to bargain. Maphis Chapman Corp. v. NLRB, 368 F.2d 298, 303 (4th Cir. 1966).
Furthermore, even if the Union is proved to be actually representative of a majority, the employer is not guilty of a Section 8(a)(5) violation if the employer had a reasonably-grounded belief that the Union did not represent an un-coerced majority of its employees. Pulley v. NLRB, 395 F.2d 870 (6th Cir. 1968); NLRB v. John S. Swift Co., 302 F.2d 342 (7th Cir. 1962). A good-faith doubt exculpates the employer even if the Union in fact represented a majority of the employees. NLRB v. Ben Duth-ler, Inc., 395 F.2d 28 (6th Cir. 1968).
The 1967 agreement between the Company and the Union is relevant to the two aspects of Section 8(a)(5) above stated. First, the Board did not order that an employee vote should be taken in order to determine whether the Union actually represented a majority of the employees; rather, the Board relied on the doctrine that an existing agreement creates a presumption of majority status of the Union. Second, the Board excluded evidence offered by the Company tending to prove that the collective bargaining agreement was procured by means of coercive tactics of a company supervisor who was collaborating with the Union, and evidence tending to prove the fraudulent concealment of this fact from the Company by the Union when the Union presented the authorization cards to the Company to persuade the Company to recognize the Union. The reason given by the Board for exclusion of the evidence was that it also proved an unfair labor practice of the Union, proof of which was barred by the six-months’ time limitation in Section 10(b) of the Act.
This same statute precluded the Company from taking any action after it discovered the complicity of its supervisor and the fraud of the Union, when such discovery was made more than one year after the agreement was signed.
There seems to be no question but that the expiring agreement does give rise to a rebuttable presumption of majority status of the Union. Terrell Mach. Co. v. NLRB, 427 F.2d 1088 (4th Cir. 1970).
However, giving full recognition to the weight of the presumption, this does not help the Board because even if in fact the Union actually represented a majority of employees in the bargaining unit, the Company would still have a complete defense if it had a good-faith doubt about such representation. NLRB v. Ben Duthler, Inc., 395 F.2d 28 (6th Cir. 1968).
Section 10(b) of the Act provides in part as follows:
“ . . . Provided, That no complaint shall issue based upon any unfair labor practice occurring more than six months prior to the filing of the charge with the Board . . . ”
Literally, this section applies only to the filing of complaints with the Board. On its face it appears to be a statute of limitations on the institution of proceedings directed at unfair labor practices, and not to have any application to the defense of an unfair labor practice charge. However, it was recognized that the policy of the preventing stale unfair labor practice charges under Section 10(b) of the Act could easily be circumvented if the limitations provision was read narrowly.
Accordingly, the Supreme Court expanded considerably the effect of Section 10(b) of the Act, in Local Lodge No. 1424 (Bryan Mfg. Co.) v. NLRB, 362 U.S. 411, 80 S.Ct. 822, 4 L.Ed.2d 832 (1960). In that ease the company had committed a putative unfair labor practice by signing a collective bargaining agreement with a union which did not in fact represent a majority of the employees at that time. More than six months subsequent thereto, an unfair labor practice charge was filed with the Board. The complaint alleged that an independent unfair labor practice had been committed within the six-month-limitation period by the company’s continued operation under the invalid agreement. The Court recognized that while the enforcement of the supposedly-invalid agreement was in a sense an independent unfair labor practice, it was entirely dependent on the initial time-barred unfair labor practice, and thus it was, in effect, a resurrection of a stale claim. The Court held that evidence of the time-barred unfair labor practice was inadmissible, and that the complaint based on the enforcement of the agreement must therefore fail.
In our case, however, the Company’s defense is not dependent on the time-barred unfair labor practice. The evidence was offered, to be considered along with other evidence, of its good-faith doubt about the majority status of the Union.
Bryan, supra, cannot be read as preventing the use of all evidence relating to events transpiring more than six months prior to the filing of an unfair labor practice charge. Justice Harlan so stated in the opinion which he wrote for the Court:
“It is doubtless true that § 10(b) does not prevent all use of evidence relating to events transpiring more than six months before the filing and service of an unfair labor practice charge. However, in applying rules of evidence as to the admissibility of past events, due regard for the purposes of § 10(b) requires that two different kinds of situations be distinguished. The first is one where occurrences within the six-month limitations period in and of themselves may constitute, as a substantive matter, unfair labor practices. There, earlier events may be utilized to shed light on the true character of matters occurring within the limitations period; and for that purpose § 10(b) ordinarily does not bar such evidentiary use of anterior events.” (362 U.S. at 416, 80 S.Ct. at 826)
Thus, these earlier events may be utilized to shed light on what occurred within the limitation period. In the present case these events were admissible as background evidence reflecting on the mental attitude or good-faith doubt of the Company officials that the Union ever represented a majority of its employees. In no way does this constitute an attack on the validity of the expiring agreement or on the presumption created thereby, which attack was barred by Section 10(b) of the Act. All that is shown is that the circumstances surrounding the agreement gave the Company good reason to believe that the Union never did represent the uncoerced choice of a majority of its employees. The fact that this evidence could have been the basis of an unfair labor practice charge in 1967 is coincidental and ought not to render the evidence inadmissible for another purpose.
If the Board’s argument in the present case were adopted, employers, in reaching a rational decision as to whether the Union continued to represent a majority of its employees, could not consider any events which occurred more than six months previously, if those events might possibly have constituted an unfair labor practice.
Hence, as the Board would have it, an employer who had to decide, at the expiration of an initial contract, whether to continue recognition of an incumbent Union, would have to approach the problem in the following manner: The employer would first look at the events surrounding the initial recognition of the Union to see if those events could cast doubt on the representative status of the Union. He would then have to decide whether those facts also would have supported an unfair labor practice charge. If they did not reach the level of proscription under the Act, he could take them into account. If they constituted an unfair labor practice, he could not use them in making his decision.
Such an artificial standard is obviously impractical and one which is well nigh impossible to be complied with. It would substantially impair, if not obliterate, the efficacy of the defense of good-faith doubt. Bryan did not involve the exclusion of evidence of good-faith doubt. There the attack was made on the validity of the agreement.
Reliance on NLRB v. United Mine Workers of America, 422 F.2d 115 (6th Cir. 1969), is misplaced. In that ease it was sought in a Section 7 charge to invalidate the agreement because such agreement had been procured by an unfair labor practice. This was a direct attack on the agreement, which attack was not made within the time specified in Section 10(b) and was therefore barred.
As pointed out above, we may assume that the expiring agreement in the present case was perfectly valid. It did not deprive the Company of its right, when asked to negotiate a new agreement upon expiration of the old one, to show that it had a good-faith doubt about the Union ever representing a majority of its employees.
NLRB v. Tragniew, Inc., 470 F.2d 669 (9th Cir., decided Sept. 8, 1972) does not help the Board, but on the contrary it supports the Company’s position. There the Court said:
“As contended by Tragniew, Section 10(b) does not bar all evidence of events outside the statutory six-month period, which bears upon lack of majority representation within that period. It was permissible for the Trial Examiner to admit evidence as to the manner in which Local 399 obtained and operated under its collective bargaining agreements.” (Emphasis added).
This is exactly what the Company, by the excluded evidence, attempted to prove. Footnote 4 in Tragniew cites the language of Bryan which we previously quoted.
The Board relies on NLRB v. Den-ham, 469 F.2d 239 (9th Cir. 1972), decided by the Ninth Circuit about two months after Tragniew. Denham goes further than any previous decision which has come to our attention. It holds that events within the Section 10(b) limitation period are inadmissible for any purpose, including consideration on the issue of good-faith doubt. We do not believe that Bryan supports that conclusion.
In any event, irrespective of Tragniew and Denham, it was competent for the Company to show that it discovered, more than one year after the collective bargaining agreement was signed, the complicity of its supervisor and the concealment by the Union of its misconduct.
In NLRB v. Patterson Menhaden Corp., d/b/a Gallant Man, 389 F.2d 701 (5th Cir. 1968), the Court held that statements by a boat captain that he would not hire crew members for the next season if they voted for the union, which statements were barred by Section 10(b) to establish an unfair labor practice, were nevertheless admissible as background evidence to corroborate other evidence offered by the Board. While this ease permitted the Board to make use of events barred by Section 10(b), there is no good reason why the same rule should not extend to the employer.
The Court stated:
“The Board held that these pre-election statements could not constitute an 8(a)(1) violation since they occurred more than six months before the charge was filed. 29 U.S.C.A. § 160(b). They were properly used, however, as background evidence to corroborate other evidence adduced with respect to the pending and viable charges which pending charges might in and of themselves constitute an unfair labor practice depending on employer motive.” (389 F.2d at 702-703) (Emphasis added).
In other words, the evidence was used only to “shed light” on a present unfair labor practice charge.
Similarly, the Company in the present case seeks only to shed light on its good-faith doubt defense to the unfair labor practice charge. The Board erred in excluding such evidence. Accordingly, we remand this case to the Board with instructions to receive evidence on the circumstances surrounding the procurement of Union authorization cards in 1967, and to consider such evidence, along with other events subsequent thereto, on the issue of whether the Company did in fact have a good-faith doubt as to the majority status of the Union.
Enforcement granted only as to the Section 8(a)(1) violation; enforcement denied as to Section 8(a)(5), and remanded for further consideration.
EDWARDS, Circuit Judge,
concurring in part and dissenting in part.
In this case respondent company and the union entered into a labor agreement to run for three years, beginning September 16, 1967. Three months before the date for expiration of the agreement, the union requested negotiations for renewal, and the company informed it that it would no longer recognize the union as bargaining representative for its employees, since it felt the union did not represent a majority. Coincidentally there were numerous efforts by two supervisory employees to persuade the employees to sign statements indicating that they repudiated the union.
At the expiration of the agreement, the union called a strike and filed unfair labor practice charges, claiming 8(a)(1) (coercion) and 8(a>(5) (refusal to bargain) violations. 29 U.S.C. § 158(a)(1), (5) (1970). The Hearing Examiner who heard the testimony found 8(a)(1) violations in the interference and coercion by the supervisory employees, and the Board seeks enforcement of same. The opinion of the court finds substantial evidence to support these findings and grants enforcement of the 8(a)(1) order, and I concur.
The real dispute in the case, however, concerns respondent’s contention that it was entitled to show at the hearing before the Hearing Examiner that the original agreement of September 16, 1967, was procured as a result of the influence of a supervisory employee who it is claimed organized the employees into the union concerned. The Hearing Examiner refused to admit this evidence on the basis of Section 10(b), 29 U.S.C. § 160(b) (1970). This section provides that “no complaint shall issue based upon any unfair labor practice occurring more than six months prior to the filing of the charge with the Board . . . .”
On its face this section simply bars complaints pertaining to unfair labor practices over six months old. But the United States Supreme Court has interpreted it also as a rule of evidence concerning the admissibility of past events which would constitute unfair labor practices.
In the Bryan Manufacturing Co. case Justice Harlan spelled out the applicable Supreme Court rule:
It is doubtless true that § 10(b) does not prevent all use of evidence relating to events transpiring more than six months before the filing and service of an unfair labor practice charge. However, in applying rules of evidence as to the admissibility of past events, due regard for the purposes of § 10(b) requires that two different kinds of situations be distinguished. The first is one where occurrences within the six-month limitations period in and of themselves may constitute, as a substantive matter, unfair labor practices. There, earlier events may be utilized to shed light on the true character of matters occurring within the limitations period; and for that purpose § 10(b) ordinarily does not bar such evidentiary use of anterior events. The second situation is that where conduct occurring within the limitations period can be charged to be an unfair labor practice only through reliance on an earlier unfair labor practice. There the use of the earlier unfair labor practice is not merely “evidentiary,” since it does not simply lay bare a putative current unfair labor practice. Rather, it serves to cloak with illegality that which was otherwise lawful. And where a complaint based upon that earlier event is time-barred, to permit the event itself to be so used in effect results in reviving a legally defunct unfair labor practice. Local 1424, IAM v. NLRB (Bryan Mfg. Co.), 362 U.S. 411, 416-417, 80 S.Ct. 822, 826-827, 4 L.Ed.2d 832 (1960). (Footnote omitted.)
The rule of the Bryan Mfg. Co. case has been extended by this court and others to apply to bar evidence sought to be introduced to defend alleged unfair labor practices. NLRB v. District 30, UMW, 422 F.2d 115 (6th Cir. 1969), cert. denied, 398 U.S. 959, 90 S.Ct. 2173, 26 L.Ed.2d 543 (1970); NLRB v. Tragniew, Inc., 470 F.2d 669 (9th Cir. 1972); Lane-Coos-Curry-Douglas Counties Bldg, v. NLRB, 415 F.2d 656, 659, n. 7 (9th Cir. 1969).
The crucial point in our present case is that the evidence as to which the court remands this case is clearly evidence of “a legally defunct unfair labor practice” and hence barred by the language employed above by Mr. Justice Harlan to describe “the second situation.”
A labor agreement, once negotiated, is entitled to a presumption of validity and there is a presumption that once a union majority has been recognized, it continues until there is proof that the majority has been dissipated or that the employer has “a reasonably grounded good faith doubt of [the union’s] majority support.” Terrell Machine Co. v. NLRB, 427 F.2d 1088, 1090 (4th Cir.), cert. denied, 398 U.S. 929, 90 S.Ct. 1821, 26 L.Ed.2d 91 (1970); Bally Case & Cooler, Inc. v. NLRB, 416 F.2d 902 (6th Cir. 1969), cert. denied, 399 U.S. 910, 90 S.Ct. 2201, 26 L.Ed.2d 562 (1970). Without the admission of the evidence of the claimed invalidity of the original agreement, the Board’s finding of an unfair labor practice in respondent’s refusal to negotiate is clearly supported by substantial evidence — a conclusion which I do not believe my colleagues dispute.
I would grant enforcement of the 8(a)(5) order also.
. Certainly the fact of supervisory coercion is very relevant to a decision as to whether the Union was the choice of a majority of employees. It has been consistently held that, absent a Sec. 10(b) problem, there can be no refusal to bargain in violation of Sec. 8(a)(5) if the purported representative of the employees was not freely designated as such by a majority of the employees. NLRB v. Heck’s, Inc., 386 F.2d 317 (4th Cir. 1967); NLRB v. H. Rohtstein & Co., 266 F.2d 407 (1st Cir. 1959).
. The Report of the House Committee on Education and Labor on H.R. 3020, states: “It has not been unusual for the Board in the past to issue complaints years after an unfair labor practice was alleged to have occurred, and after records have been destroyed, witnesses have gone elsewhere and recollections of the events in question have become dim and confused.” Rep.No.245, 80th Cong. 1st Sess., p. 40.
. The doctrine that evidence inadmissible for one purpose can be admitted for another purpose is firmly established in the law. Livergood v. S. J. Groves & Sons Co., 361 F.2d 269, 274 (3d Cir. 1966); 1 Wigmore, Evidence, Sec. 13 (3d ed. 1940).
. This result was also reached in a number of other cases where a union sought to defend against a Sec. 8(b)(7) charge of unlawful recognitional picketing by attacking the underlying time-barred agreement between the company and the incumbent union. International Hod Carriers, etc. Loeal 1298 (Roman Stone Const. Co.), 153 NLRB 659 (1965) ; Lane-Coos-Curry-Douglas Counties Bldg. & C.T.C. v. NLRB, 415 F.2d 656 (9th Cir. 1969).
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Marie WILCOX et al., Appellants-Plaintiffs, v. COMMERCE BANK OF KANSAS CITY, a corporation, Appellee-Defendant.
No. 72-1494.
United States Court of Appeals, Tenth Circuit.
Argued and Submitted Nov. 13, 1972.
Decided Feb. 20, 1973.
Rehearing Denied March 19,1973.
Ronald L. Gold, Shawnee Mission, Kan., for appellants.
Thomas J. Wheatley, Kansas City, Mo. (Maurice J. O’Sullivan, Jr., and Edward M. Boddington, Jr., Kansas City, Kan., on the brief), for appellee.
Before LEWIS, Chief Circuit Judge, McWILLIAMS, Circuit Judge, and CHRISTENSEN, Senior District Judge.
. Of the District of Utah, sitting by designation.
CHRISTENSEN, Senior District Judge.
Appellee is a large commercial bank which operates for its area a franchise credit card system known as BankAmericard. Appellants are holders of such credit cards of the bank. Their complaint in the district court was “on behalf of themselves and all other credit card holders” of appellee for alleged violations of the federal Truth in Lending Act, 15 U.S.C. § 1637(a)(1) and (4) and (b)(2), (5) and (6), and for the relief provided by 15 U.S.C. § 1640(a)(1) and (2). The merits of the named plaintiffs’ claims were not reached as the district court denied their motion for determination that the case could be maintained as a class action. Appellants sought in this court and were granted an interlocutory appeal of such denial upon appropriate indication from the trial court that it was of the opinion that the order of denial involved a controlling question of law as to which there was substantial ground for differ-enees of opinions and that an immediate appeal from the order may materially advance the ultimate determination of the litigation. 28 U.S.C. § 1292. The sole question before us is whether the court below abused its discretion in refusing to permit the suit to be maintained as a' class action pursuant to Rule 23, Fed.R.Civ.P.
Those similarly situated on whose behalf the action purportedly was brought number approximately 180,000 persons. There is no question but that appellee’s business involves an “open end consumer credit plan” covered by the Act and that plaintiffs and members of the proposed class are cardholders under said plan. Plaintiffs’ second amended complaint, on the basis of which the class action aspect of the ease was proposed and terminated, clearly alleged violations of the Act as against plaintiffs and the members of the proposed class and on their behalf sought damages of at least $100.00 for each class member and as to each violation totaling “in excess of One Million Dollars per month” within the one-year period of limitations provided in the Act. It has been pointed out by appellee that since five separate violations as to each member of the class are alleged, each presumably occurring monthly, its penalty exposure might exceed one billion dollars.
The basic problem of the amenability of civil suits for violation of the Truth in Lending Act to class action treatment has been before numerous district courts with varying results. Insofar as we are aware no court of appeals has yet squarely decided the issue, although it is known that several appeals presenting it are now pending elsewhere.
The reasoning of the court below in denying class action status in this case is similar to that by which other district courts'have reached the same conclusion, Judge O’Connor points out in his memorandum decision that in order to maintain their suit as a class action plaintiffs must satisfy the four requirements of Rule 23(a) and any one of the three subdivisions of Rule 23(b). The requirements of Rule 23(a) were found to have been met. The remaining question in the court’s view was whether subdivision (b)(3), “the only one of the three subdivisions which might apply to plaintiffs”, was satisfied as well. Attention was focused upon whether the class action was “superior to” other available methods “because that issue appears to be dispositive of the case”.
Impressed with Judge Frankel’s reasoning in the leading case of Ratner v. Chemical Bank New York Trust Company, 329 F.Supp. 270 (S.D.N.Y.1971), the trial court found that case, and Rogers v. Coburn Finance Corp. of Dekalb, 53 F.R.D. 182 (N.D.Ga.1971), to be more persuasive than Katz v. Carte Blanche Corporation, 52 F.R.D. 510, 53 F.R.D. 539 (W.D.Pa.1971), another leading case sustaining the propriety of class action proceedings under similar circumstances. Factors the court reemphasized were the special and particular authorization of the Act, 15 U.S.C. § 1640(e), creating a species of “private attorney general” to participate prominently in enforcement; the minimum damages of $100 plus costs and attorney’s fees recoverable without proof of any actual damages; the huge potential liability for alleged violations of the Act should the class action be maintained to its conclusion; the lack of any need or justification for class action proceedings in the circumstances of a Truth in Lending case; and the “absurd and stultifying extreme” the case would assume as a class action in spite of the essentially inconsistent remedy prescribed by Congress as a means of private enforcement. Exercising that “considerable discretion of a pragmatic nature” required by the “broad and open ended terms” of Rule 23, Judge O’Connor determined that a class action in this case was not superior to the statutory method of individual recoveries. He, as did Judge Frankel in Ratner, considered the available statutory remedy vis-a-vis the “horrendous, possibly annihilating punishment, unrelated to any damage”, which would be a likely product of cases such as this if permitted to proceed as class actions. He also advanced further reasons to the same effect “inherent in the purposes of a class action” and exemplified by current criticisms of the operation of Rule 23, He indicated his view that the application of class action treatment to Truth in Lending cases would be an over-extension of the Rule.
This latter aspect of the opinion below doubtlessly inspired appellants’ basic thesis that the ruling was a policy decision which cavalierly denied class action status to such actions generally despite their being within, or even required by, the criteria laid down in Rule 23. In variation of this theme appellants say that the decision flies in the face of the established rule that “if there is to be any error made, let it be in favor and not against the maintenance of the class action”; that the trial court failed to consider criteria established by the Rule itself; that it improperly considered the merits of the case in arriving at its de-cisión, and that the Truth in Lending Act has not been exempted expressly or impliedly from the application of Rule 23.
Apart from any inherent incongruity between the remedies provided by the Truth in Lending Act and Rule 23, we agree that there is nothing in the Act itself, the Rule, or the notes of the Advisory Committee on Rules of Civil Procedure with respect to it which expressly or impliedly precludes class actions in this type of case. The legislative history of the Act throws scant light on the problem. To find any congressional intent to preclude at all events treatment of such cases under Rule 23 would be a work of clairvoyance and not of construction or interpretation.
On the other hand, notwithstanding the likelihood that most if not all of the requirements expressed in the Rule would be present, there is nothing to suggest a congressional intent that Truth in Lending cases should always, or generally, be handled as class actions. Any automatic application of the Rule irrespective of its realistic implications would be just as improbable as a matter of congressional intent as the total preclusion of its use in consumer suits of this nature. If we were to hazard a reconstruction of pertinent congressional intent from the enactment of the Truth in Lending Act, it would be that a mandate for general class action treatment of all of these cases, on the one hand, or for none of these cases as class action, on the other, was not intended in view of a congressional confidence in case by case determinations by qualified and informed trial judges with a wide general discretion and specific leeway under Rule 23 itself to avoid inferior, unfair or senseless applications of it.
We cannot agree that Esplin v. Hirschi, supra, dictates a position in this circuit inhospitable to such a discretion as to Truth in Lending cases. That case turned primarily upon whether common questions were predominant in a securities case where class action treatment was not unusual and in which it threatened no far-reaching consequences one way or another. This court was there persuaded that class action treatment, contrary to the views of the trial judge, was called for. Judge Hill’s opinion in Esplin has been widely cited in not only justification but encouragement of class action treatment in appropriate cases and continues to represent the considered views of this court. But its doctrine should not be extended to limit unreasonably the sound discretion of trial courts in eases such as this, where discretion may be the key to a realistic administration of Rule 23, particularly with respect to a determination of the most fair and efficient procedure. One of the reasons expressed in that case for a liberal application of the Rule was the retained power of the trial court later to establish sub-classes or even to abrogate the class status should developments indicate; here, developments were not likely to change the situation and the overriding considerations which would justify if not require a changed view had class action treatment been undertaken were before the trial court at the threshold.
Appellants also say that the trial court failed, contrary to the teachings of Esplin, to weigh the four non-exhaustive factors listed in subdivision (b)(3)(A), (B), (C), and (D), of Rule 23. The trial judge did in fact refer to these in his memorandum decision and there is nothing to indicate that he did not give proper appraisal to all of the pertinent factors enumerated by the Rule. He expressly approved the reasoning of Judge Frankel in Ratner which in turn had specifically quoted the subdivisions referred to as among the premises of his conclusions that the class action device was not shown as a superior one in that Truth in Lending case. The Rule requires the court as the basis for approving a class action to find that common questions of fact predominate and that a class action is superior, and the matters following this requirement are of course to be considered in the latter connection. But as Esplín points out, they are non-exhaustive. Nothing that we have said requires the inclusion by rote in findings or otherwise of the detailed subject matters of these non-exhaustive considerations in either granting or denying class action treatment so long as they do not on the record negate the basic finding of the trial court, which is not the case here.
There is less reason for appellants’ attack upon the sufficiency of the form of the trial court’s findings for not expressly covering the question of whether common questions of fact or law predominated. Appellants say that “the authorities on federal procedure” hold that the court must make two findings, the first of which is whether questions of law or fact are common and predominate over individual ones, and that “[a]s the district court must rule on both requirements of (b) (3) . the absence of a consideration whether questions of law or fact common to the class predominate over individual ones is clearly a further abuse of the trial court’s discretion.” We cannot agree. In denying class action status it was sufficient for the trial court to determine on an adequate record and for good reasons stated that the procedure was not superior to other procedures irrespective of whether the common issues of fact or law were predominant.
Katz v. Carte Blanche Corporation, 52 F.R.D. 510 (W.D.Pa.1971), supra, is relied upon by appellants as primary support for its position that in the circumstances of this ease the trial court was obliged to approve class action proceedings. We agree, as there held, that a plaintiff’s burden of satisfying the prerequisite of the rule for the maintenance of the class action does not involve convincing demonstration of the merits of his underlying cause of action. But we cannot agree that the trial court in ruling upon whether a class action should be maintained must close its eyes to possible consequences as they relate to the superiority or inferiority of such procedure in terms of fairness and efficiency. We are not called upon to say that Katz necessarily was in error in determining in the exercise of the trial court’s discretion at least for the time being that a class action was maintainable. But even in that case it is obvious that the court justifiably entertained substantial reservations. See 53 F.R.D. 539, 544 n. 11. It is to be hoped that the sequel of that decision will prove both fair and efficient. But at least until better established its pattern should not be indiscriminately thrust upon trial judges who entertain different views for sufficient reasons within their own discretion. Nor do we find convincing another case emphasized by appellants because the opinion was written by an assigned Circuit Judge, LaMar v. H & B Novelty & Loan Company, 55 F.R.D. 22 (D.Ore.1972). Except for citation of Katz on another point the decision does not take notice of the special problems in Truth in Lending cases.
Appellants have cited Fujishima v. Board of Education, 460 F.2d 1355 (7th Cir. 1972), in support of their contention that the court may not deny class status because there is no “need” for it if the prerequisites and conditions of the Federal Rules are met. The interpretation of that case, which involved subdivision (b) (2) of the Rule, is an oversimplification as applied to (b)(3) cases such as this. Within the criteria of the Rule, the “need” for class action treatment in a sense may be considered a vital, if not determinative, consideration as need inevitably relates to the problems of superiority, fairness and efficiency. These latter considerations may not be applied mechanically without a consideration of relative needs or necessities.
Reasons can be assigned but they often light up unexpressed counter reasons. To find the existence of reasons within the Rule is often indeterminate for still the Rule requires the weighing of one reason against another or against consideration of common sense and practicality. Many of the reasons assigned for the granting or denial of class action status are quite ambivalent and hardly sufficient one way or another in and of themselves: Appellants say that the enormity of the class dictates class action treatment; appellee responds that its very size militates against such a treatment. Appellee argues that because of the shocking exposure to annihilating liability the class action device here should not be utilized to seal such a doom; appellants that if there is such grave liability, congressional policy would be impermissibly frustrated if it were not enforced in the most effective and comprehensive fashion. Appellants assert that the lower court considered policy beyond the scope and authorization of the Rule; appellee that the Rule itself has explicit in it the policy of denying class action treatment when it would not be “superior to other available methods for the fair and efficient adjudication of the controversy”. And it could be added that while provision in the Act for the award of attorney’s fees as well as costs furnishes encouragement and practicality for individual actions, the cumulative consequence might be more horrendous to a defendant in view of this should all cardholders proceed and succeed individually than if they combined in a class action entailing a single fee.
These points and counterpoints serve only to emphasize the perplexity of our problem; they do not solve it. There may be no wholly satisfactory solution but we believe an acceptable one can be found in the present context by sustaining the authority of the trial court to employ realism and good sense in denying class action status.
We are of the opinion that it was within the sound discretion of the court below to avoid results thus appearing procedurally unnecessary and overwhelming. The exercise of such discretion related not only to the appellee but to the Rule itself, which bears the seeds of its own destruction through unrealistic applications within its theoretical span.
The fairness to be taken into consideration in arriving at a decision of course is procedural fairness. No one has suggested that with reference to the substantive rights of individual debtors there should not be full recognition. To approve a class action and then to cut down or dilute the right of recovery for the members of the class before the court to avoid their burdensome accumulation would involve substance. To leave debtors to their individual remedies rather than to invoke the class action procedure involves the question of procedural fairness which the Rule entrusts to the sound discretion of the trial judge. Within that discretion, we believe, is the attaching of determinative weight to the reality that if class action treatment were applied in this case where the complaint contains no indication of any actual damages in substantial or provable amount, this aggregated relief would be oppressive in consequence and difficult to justify. We do not consider it untenable to reject a single and unvarying answer to the problem in favor of this less rigid one. That the present emphasis upon discretion could lead to inconsistent results, and indeed has among the courts, is no insurmountable objection; the practicality of interpretation has furnished helpful testing ground through varying ideas of judges in many other contexts and this same type of testing can most profitably proceed in this area until, if ever, some more acceptable and general solution by amendments to the Rules or clarification by statute emerges. No such preferable solution within the power of a reviewing court occurs to us or has been called to our attention. Class action treatment in the context and under the circumstances now before us is not mandated. A decision one way or another "is not so decisive of the right of recovery as to make it incumbent upon this court to insist here that those who have not chosen to proceed individually must be given the opportunity to proceed as members of a class.
Yet we cannot agree that under all circumstances the class action device necessarily would be incompatible with Truth in Lending cases. Where overriding reasons for preclusion are not present, there see.ms no reason why the use of this procedural device may not be appropriate and desirable within the sound discretion of the trial courts. Creditors disregarding their responsibilities under the Act and causing damages to members of a class however limited or extensive should have no assurance that their accumulated responsibility cannot be enforced through this means. In such event a finding by the trial court to this effect may be entitled to the same respectful consideration we have found the decision of Judge O’Connor warrants. It is conceivable that there may be cases of this nature where thz class action procedure is so manifestly superior or inferior that an appellate court on review would be warranted in reversing the trial court’s determination to the contrary. We have no such problem before us. There may be some who understandably will feel uncomfortable with what might be regarded as excessive power on the part of trial courts to make such decisions with the persuasive effect here recognized. Indeed it might be comforting to all of us in a way if each decision on review could clatter out of a slot brightly and clearly minted whenever governing symbols seemed to match, without the necessity of pondering over more imponderable but significant indications. Yet our whole system of justice is importantly geared to the balancing of judgment across variant and numerous circumstances by judges who must be entrusted from the very difficulties of remote comparison and the superior perception of firsthand impression to a wide discretion. The discretion of the court below was not abused.
The results reached here are consistent both with the provisions of the Truth in Lending Act and Rule 23. Any other view might be inimical to both. Moreover, there seems no reasonable alternative. We cannot accept the alternative of mechanically or generally applying class treatment to these eases. If it were supposed that the only remedy would be submission of the matter to the Advisory Committee on Rules of Civil Procedure in hope of clarification there appears little that could be done by it but to recommend the express exemption of Truth in Lending cases from class action treatment, or class action treatment in all such cases, or that trial courts be permitted in the exercise of sound discretion to determine within broad and open-ended guidelines whether that means is superior to other available methods for the fair and efficient adjudication of the controversy on a case by case basis. And the latter seemingly most sensible alternative would bring us full circle back to the present rule which, however it may be criticized otherwise, seems most practical in this respect.
Indeed the Rule generally may be at the crossroads, many knowledgeable lawyers and some judges maintaining that it should be completely scrapped; others that it should be substantially revised or reformed; and still others that it should be even more liberally administered to effectuate or promote societal objectives bearing little relationship to economics or practicality. We believe that the solution may well be to continue straight ahead for a time under the present Rule, but to smooth out to a degree the formal obstacles that may be unduly obstructing trial courts on the firing line in realistic and practical applications within their sound discretion and in view of superior opportunity to observe the battle conditions ease by case. It would be worse in the long run to maim or kill the Rule with universal but improvident kindness than to limit on a case by case basis within sound judicial discretion its application to situations offering sensible results.
Hence we conclude that the action of the trial court in denying the motion for maintenance of the suit as a class action was within its sound discretion and should not be disturbed.
Affirmed.
. “§ 1637. Open end consumer credit plans — Required disclosures by creditor.
“(a) Before opening any account under an open end consumer credit plan, the creditor shall disclose to the person to whom credit is to be extended each of the following items, to the extent applicable:
“(1) The conditions under which a finance charge may be imposed, including the time period, if any, within which any credit extended may be repaid without incurring a finance charge.
“(4) Where one or more periodic rates may be used to compute the finance charge, each such rate, the range of balances to which it is applicable, and the corresponding nominal annual percentage rate determined by multiplying the periodic rate by the number of periods in a year.
“Statement required with each billing cycle
“(b) The creditor of any account under an open end consumer credit plan shall transmit to the obligor, for each billing cycle at the end of which there is an outstanding balance in that account or with respect to which a finance charge is imposed, a statement setting forth each of the following items to the extent applicable :
“ (2) The amount and date of each extension of credit during the period, and, if a purchase was involved, a brief identification (unless previously furnished) of the goods or services purchased.
“(5) Where one or more periodic rates may be used to compute the finance charge, each such rate, the range of balances to which it is applicable, and, unless the annual percentage rate (determined under section 1606(a) (2) of this title) is required to be disclosed pursuant to paragraph (6), the corresponding nominal annual percentage rate determined by multiplying the periodic rate by the number of periods in a year.
“(6) Where the total finance charge exceeds 50 cents for a monthly or longer billing cycle, or the pro rata part of 50 cents for a billing cycle shorter than monthly, the total finance charge expressed as an annual percentage rate (determined under section 1606(a) (2) of this title), except that if the finance charge is the sum of two or more products of a rate times a portion of the balance, the creditor may, in lieu of disclosing a single rate for the total charge, disclose each such rate expressed as an annual percentage rate, and the part of the balance to which it is applicable.”
(See also the Regulations of the Federal Reserve Board, 12 C.F.R. Part 226.)
. “§ 1640. Civil liability — Failure to disclose.
“(a) Except as otherwise provided in this section, any creditor who fails in connection with any consumer credit transaction to disclose to any person any information required under this part to be disclosed to that person is liable to that person in an amount equal to the sum of
“(1) twice the amount of the finance charge in connection with the transaction, except that the liability under this paragraph shall not be less than $100 nor greater than $1,000; and
“(2) in the case of any successful action to enforce the foregoing liability, the costs of the action together with a reasonable attorney’s fee as determined by the court.”
. Ruling on plaintiffs’ motion for summary judgment on the issue of liability was deferred pending the determination of class action status. See generally, Annot., Civil Remedies of Consumer for Violation of Truth in Lending Act (15 U.S.C. §§ 1601-1644, 1661-1665), 11 A.L.R.Fed. 815 (1972).
. Based on Rule 23(c)(1), Fed.R.Civ.P.: “As soon as practicable after the commencement of an action brought as a class action, the court shall determine by order whether it is to be so maintained. An order under this subdivision may be conditional, and may be altered or amended before the decision on the merits.”
. See Wilcox v. Commerce Bank, 55 F.R.D. 134 (D.Kan.1972).
. Appellants’ brief enumerates also the questions of whether a denial properly could be based on grounds “outside the face of Rule 23” and whether the Truth in Lending Act “has been exempted by either Congress or the United States Supreme Court from Rule 23”. As hereafter explained, these queries are really encompassed by the main issue. But they need not be considered separately or in the abstract and, indeed, should not be, since they imply assumptions not involved necessarily in the action of the lower court, i. e., that it failed to consider criteria established by the Rule or that its decision could be justified only if such actions as this had been expressly or impliedly excluded from the application of Rule 23 under all circumstances.
. 15 U.S.C. § 1602(i) defines such a plan as one “prescribing the terms of credit transactions which may be made thereunder from time to time and under the terms of which a finance charge may be computed on the outstanding unpaid balance from time to time thereunder.”
. “The term ‘cardholder’ means any person to whom a credit card is issued or any person who has agreed with the card issuer to pay obligations arising from the issuance of a credit card to another person.” 15 U.S.C. § 1602(in).
. Specifically, appellants asserted that the appellee bank witii respect to the named plaintiffs and each member of the class deliberately and wilfully violated the Act and implementing regulations in that it failed to disclose the nominal annual percentage rates on cash advances as required by 15 U.S.C. § 1637(a)(4), failed to disclose accurately the period in which a finance charge could be avoided as required by § 1637(a)(1), failed to disclose adequately transactions, during the cycle as mandated by § 1637 (b) (2), and prior to October, 1971, failed to disclose the nominal annual percentage rate in cases where a finance charge was not imposed for amounts over $900 corresponding to the periodic rates as required by § 1637 (b) (5) and (6). The Second Amended Complaint contains no allegations or other indication that any members of the proposed class suffered any actual damages by reason of any of these alleged violations, it being alleged with respect to damages only “[t]hat each plaintiff is entitled to a minimum of $100.00 up to $1,000.00 per month as provided for in Section 130 (15 U.S.C. § 1640) for each month that plaintiffs had an outstanding balance. . . . ”
. See 15 U.S.C. § 1640(a) note 3, supra.
. “15 U.S.C. § 1640(e). Jurisdiction of courts.
“Any action under this section may be brought in any United States district court, or any other court of competent jurisdiction, within one year from the date of the occurrence of the violation.”
. Class actions held proper:
Berkman v. Westinghouse Electric Corp., Civil No. 69C 2056 (N.D.Ill., filed June 25, 1970). 4 CCH Consumer Credit Guide ¶ 99,268 (1972).
Douglas v. Beneficial Finance Co. of Anchorage, 334 F.Supp. 1166 (D.Alas. 1971).
Eleando v. McGinnis Used Cars, Civil No. 70-63 TUC (D.Ariz., filed Apr. 28,1971). Flickinger v. Horseshoe Development Company, Civil No. 11-334-C-1 (S.D.Iowa, filed March 10, 1972).
Joseph v. Norman’s Health Club, Inc., 336 F.Supp. 307, (E.D.Mo., 1971) (four consolidated cases).
Katz v. Carte Blanche Corp., 52 F.R.D. 510, 53 F.R.D. 539 (W.D.Pa.1971).
Lamar v. H & B Novelty & Loan Co., 55 F.R.D. 22 (D.Or.1972).
Martin v. Family Publications Service, Inc., Civil No. 5829 (D.Vt., filed June 30, 1970).
Richardson v. Time Premium Co., Civil No. 70-1814-Civ-JLK (S.D.Fla., filed Feb. 5, 1971).
Smith v. International Magazine Service of Mid Atlantic, Inc., Civil No. 71-16-F (N.D.W.Va., filed Oct. 29, 1971), 4 CCH Consumer Credit Guide ¶ 99,249 (1972). Zachary v Chase Manhattan Bank, 52 F.R.D. 532 (S.D.N.Y.1971).
Class Actions Held Improper:
Allerton v. Century Credit Corp., Civil No. 70-1614-Civ-PF (S.D.Fla., filed Aug. 2, 1971), 4 CCH Consumer Guide ¶ 99,-271. Alsup v. Montgomery Ward & Co., Inc., 57 F.R.D. 89 (N.D.Cal.1972) (two consolidated cases).
Boggs v. Alto Trailer Sales, Inc., Civil No. 71-1271 (E.D.La., filed Aug. 8, 1972). Buford v. American Finance Co., 333 F.Supp. 1243 (N.D.Ga.1971), (nine consolidated cases).
Castaneda v. Family Publications Service, Inc., Civil No. C-2317 (D.Colo., filed July 2, 1971).
Garza v. Chicago Health Clubs, 56 F.R.D. 548 (N.D.Ill.1972).
Gerlach v. Allstate Insurance Co., 338 F.Supp. 642 (S.D.Fla.1972).
Goldman v. The First National Bank of Chicago, (N.D.Ill.1972), 56 F.R.D. 587 (N.D.Ill.1972).
Grubb v. Dollar Loan Co., Civil Actions Nos. 15550, 15976 (N.D.Ga., filed May 26, 1972).
Haynes v. Logan Furniture Mart, Inc., No. 70C 1827 (N.D.Ill., Sept. 20, 1972). Kenney v. Landis Financial Group, Inc., 349 F.Supp. 939 (N.D.Iowa 1972).
Kriger v. European Health Spa, Inc., of Milwaukee, Wis., 56 F.R.D. 104 (E.D.Wisc.1972).
Moon v. Courtesy Finance Co., Civil No. 15087 (N.D.Ga.).
Mourning v. Family Publications Service, Inc., 4 CCH Consumer Credit Guide ¶ 99,632 (S.D.Fla.1971).
Ratner v. Chemical Bank New York Trust Co., 329 F.Supp. 270 (S.D.N.Y.1971), 54 F.R.D. 412 (S.D.N.Y.1972). Rodriguez v. Family Publications Service, Inc., 57 F.R.D. 189 (C.D.Cal.1972). Roesel v. The Fulton National Bank of Atlanta, Civil Action No. 15376 (N.D.Ga., filed May 25, 1972).
Rogers v. Coburn Finance Corp. of De-Kalb, 53 F.R.D. 182 (1971), vacated, filed Dec. 1, 1971), order terminating class action [reinstating order in 53 F.R.D. 182], 54 F.R.D. 417 (N.D.Ga.1972). Shields v. First Nat’l Bank of Arizona, 56 F.R.D. 442 (D.Ariz.1972).
Smith v. Customers Loan Corp., Civil No. 15253 (N.D.Ga., filed Aug. 10, 1971). Syna v. Diners Club, Inc., 49 F.R.D. 119 (S.D.Fla.1970).
. Informal inquiry of clerks’ offices reveals that of the decisions referred to in note 13 only Smith, Lamar and Syna have been appealed. Insofar as has been learned arguments in these appeals have not yet been heard.
. 55 F.R.D. 134.
. Fed.R.Civ.P. 23. Class Actions
“(a) Prerequisites to a Class Action. One or more members of a class may sue or be sued ns representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
“(b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition :
“(1) The prosecution of separate actions by or against individual members of the class would create a risk of
“(A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or
“(B) adjudications with respect to individual members of the class which would as a practical matter be disposi-tive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or
“(2) the party opposing the dass has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunc-tive relief or corresponding declaratory relief with respect to the class as a whole; or
“(3) The court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) The interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.
. Ratner v. Chemical Bank New York Trust Co., 54 F.R.D. 412, 416 (S.D.N.Y.1972), supra. See also Marvin E. Frankel, “Some Preliminary Observations Concerning Civil Rule 23”, 43, F.R.D. 39 (1967) : “The Rule — quite deliberately, I think — tends to ask more questions than it answers. It is neither a set of prescriptions nor a blue print. It is, rather, a broad outline of general policies and directions. As the commentators have said, it confides to the district judges a broad range of discretion.”
. Citing the Report and Reeommendations of the Special Committee on Rule 23 of the Federal Rules of Civil Procedure, American College of Trial Lawyers (March 15, 1972, pp. 5-6), Judge Edenfield’s comment on the use of the Rule in Buford v. American Finance Company, 333 F.Supp. 1243, 1251 (N.D.Ga.1971), Judge Lumbard’s dissent in Eisen v. Carlisle & Jacquelin, 391 F.2d 555, 571 (2d Cir. 1968), and an observation by Professor Wright with reference to this court’s opinion in Esplin v. Hirschi, 402 F.2d 94, 9.9 (10th Cir. 1968), that if such “receptive spirit” encourages “courts to allow maintenance of class actions in controversies that are unmanageable by this device, the rule may come into disrepute even for the cases to which it is well suited.” C. Wright, Law of Federal Courts § 72, p. 307 (1970).
. One of the decisions most recently published on the subject is Shields v. First National Bank of Arizona, 56 F.R.D. 442, (D.Ariz.1972). In that case Judge Cop-ple, in disapproving class action treatment of a comparable proceeding, referred extensively to Judge O’Connor’s opinion and held in line with it not that the Act should not be enforced but that its application under these circumstances is inappropriate. As did Judge O’Connor, 55 F.R.D. 134, 135, he found the special factors in such cases to go beyond and control the “four non-exliaustive considerations found in subdivision (b) (3) of the Rule itself.” Judge Copple noted that these subdivisions were “suggestive, not exhaustive.” 56 F.R.D. at 445.
. Esplin v. Hirschi, 402 F.2d 94, 101 (10th Cir. 1968), supra.
. Insofar as we have been able to determine there is in the legislative history of the Act no allusion to the possibility of class actions in Truth in Lending cases. Administrative enforcement is emphasized. House report No. 1040 of the Committee on Banking and Currency, to which was referred H.R. 11601 containing the disclosure provisions in question, emphasizes administrative enforcement stating: “Xour committee believes that administrative enforcement of the credit disclosure features of the bill is fundamental to its legislative purpose . . . For the relatively unsophisticated consumer, particularly those of modest means, administrative enforcement will provide their only protection against unscrupulous merchants or lenders. Such consumers neither will have the means for instituting their own civil suits, nor adequate knowledge or experience to enable them to file a complaint through proper channels to obtain redress through the Attorney General in a criminal action. Administrative enforcement can provide the broad and effective application of the principle of disclosure called for in the bill.” 2 U.S.Code Congressional and Administrative News, 90th Congress, Second Session 1968, p. 1975. The committee report later refers to the civil and criminal penalties to be provided by the bill without any notice being taken of the possibility of class actions and with renewed emphasis upon administrative enforcement: “While primary enforcement of the bill would be accomplished under the administrative enforcement section discussed above, further provision is made for the institution of civil action by an aggrieved debtor.” Ibid., p. 1976. Appel-lee’s brief, however, cites in support of its position that the Act does not contemplate class actions for its enforcement, a statement of Senator Frank E. Moss (D.-Utah), Chairman of the Consumer Subcommittee of the Senate Commerce Committee, made while conducting hearings on later legislation, the Consumer Protection Act of 1969. Senator Moss, who was actively involved in the Truth in Lending legislation, remarked to a witness, Assistant Attorney-General Richard McLaren;^"! do not believe class actions are permissible under Truth-in-Lending.” Mi'. McLaren responded by stating that the civil right of action provided for by the Act was subject to the Federal Rules of Civil Procedure and therefore amenable to class action. Senator Moss replied, “My recollection did not bring that up. Perhaps you may want to annotate that for us, if you could, and send it for the record.” Mr. Mc-Laren’s letter of Feb. 26, 1970, printed in the record of the subcommittee hearings, reiterates the opinion he expressed to Senator Moss. Hearings Before the Consumer Subcommittee of the Senate Committee on Commerce on S. 2246, S. 3092 and S. 3201, 91st Cong., 1st & 2d Sess., ser. 91-43, pt. 1, at 27 (1970).
. “In final analysis, resolution of the question now presented reverts to the ‘fair and efficient adjudication’ problem. The trial judge will have to face this problem in a realistic way. He should be afforded the greatest latitude in the exercise of his judgment after a careful factual exploration as to how this result can be attained.” City of New York v. International Pipe and Ceramics Corp., 410 F.2d 295, 300 (2d Cir. 1969).
. “In arriving at these determinations the court is directed to weigh four non-exhaustive factors: the interest of the class members in individually controlling separate suits, the extent and nature of litigation already pending, the desirability of concentrating litigation in a particular forum, and the difficulties likely to be encountered in managing a class action.” Esplin v. Hirschi, 402 F.2d 94, 98 n. 7 (10th Cir. 1968), supra. See also Eisen v. Carlisle & Jacquelin, 391 F.2d 555 (2d Cir. 1968), cited in Esplin, wherein it is stated that “ . . . the dismissal in limine of a particular proceeding as not a proper class action is justified only by a clear showing to that effect and after a proper appraisal of all the factors enumerated on the face of the rule itself.”
. Judge O’Connor noted that Rule 23(b) (3) requires findings both on the predominance of common questions of law or fact, and on the superiority of a class action as a method of adjudicating the controversy. However, he elected only to “consider whether a class action is ‘superior to’ other available methods, because that issue appears to be dispositive of the case.” Supporting this view that the required finding of superiority or inferiority is dispositive is the case of Dolgow v. Anderson, 43 F.R.D. 472, 488 (E.D.N.Y.1968), wherein Judge Weinstein declared: “Once the court has decided that a class action is superior to other available procedural devices, the crucial prerequisite for the maintenance of a class action under subdivision (b) (3) is the requirement that there be ‘questions of law or fact common to the members of the class’ and that such questions must ‘predominate over any questions affecting only individual members.’ ”
. Of course more than a frivolous or insubstantial claim must be indicated and a motion for summary judgment or to dismiss on the pleadings is available to test the merits of the claim. See Duhart v. Carlson, 469 F.2d 471 (10th Cir. 1972).
. In agreement with this view Wright reflects that “the rule does not indicate the weight to be given to each factor or require that the action be dismissed if particular conclusions are reached as to any or all of them. Clearly, no single element is determinative. The enumeration simply provides some guidelines to assist a judge in deciding whether a class action best serves the interests of the litigants and the court. When applying these factors, the judge should reflect on the wisdom of allowing the action to be maintained as a class suit.” Citing Philadelphia Elec. Co. v. Anaconda Am. Brass Co., 43 F.R.D. 452, 459 (E.D.Pa. 1968), Prof. Wright includes in his treatise the suggestion that proposed class actions be evaluated in terms of the strain on courts required to process large numbers of claims, the importance of making known in advance those who will be bound by the judgment, avoiding solicitation of claims, avoiding modification of the applicable period of limitation, and advancing, or at least not prejudicing, recognized goals of public policy. 7A Wright & Miller, Federal Practice and Procedure § 1780, pp. 64-65.
. “Students of the Rule have been led generally to recognize that its broad and open-ended terms call for 'the exercise of some considerable discretion of a pragmatic nature. Appealing to that kind of judgment, defendant points out that (1) the incentive of classaction benefits is unnecessary in view of the Act’s provisions for a $100 minimum recovery and payment of costs and a reasonable fee for counsel; and (2) the proposed recovery of $100 each for some 130,000 class members would be a horrendous, possibly annihilating punishment, unrelated to any damage to the purported class or to any benefit to defendant, for what is at most a technical and debatable violation of the Truth in Lending Act. These points are cogent and persuasive.” Ratner v. Chemical Bank New York Trust Company, 54 F.R.D. 412, 416 (S.D.N.Y.1972).
. “Finally the amended rule is in jeopardy from those who embrace it too enthusiastically just as it is from those who approach it with distaste.” C. Wright, Law of Federal Courts, § 72, p. 307.
. The Advisory Committee in notes accompanying the Amended Rule states: “Subdivision (b) (3) encompasses those cases in which a class action would achieve economies of time, effort, and expense, and promote uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.” 39 F.R.D. 69, 102-103
. Cf. Sims v. Parke Davis & Co., 334 F.Supp. 774 (E.D.Mich.), aff’d 453 F.2d 1259 (6th Cir. 1971), cert. denied, 405 U.S. 978, 92 S.Ct. 1196, 31 L.Ed.2d 254 (1972), holding that a class action under Rule 23 cannot be brought for violations of the Fair Labor Standards Act because 29 U.S.C. § 216(b) limits the binding effect of judgments to those who have filed written consent to become parties to the suit. See also Maguire v. Trans World Airlines, Inc., 55 F.R.D. 48 (S.D.N.Y.1972).
. See Statement of Black, J., dissenting from U.S. Supreme Court’s Order of Feb. 28, 1966, adopting the present version of Fed.R.Civ.P. 23, 383 U.S. ' 1031, 1035-1037 (1966).
. Thereby either absolutely precluding a type of enforcment which Congress did not see fit to preclude, or indiscriminately requiring it, when Congress in passing the Act had refrained from so doing.
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{
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"license": "Public Domain",
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Will WRIGHT, Petitioner-Appellant, v. S. Lamont SMITH, Warden, Georgia State Prison, Reidsville, Georgia, Respondent-Appellee.
No. 72-2249.
United States Court of Appeals, Fifth Circuit.
Feb. 14, 1973.
Edward T. M. Garland, Eric Welch, Atlanta, Ga., for petitioner-appellant.
Arthur K. Bolton, Atty. Gen., W. Hen-sell Harris, Jr., Dorothy T. Beasley, Asst. Attys. Gen., Atlanta, Ga., for respondent-appellee.
Before JOHN R. BROWN, Chief Judge, and THORNBERRY and MORGAN, Circuit Judges.
THORNBERRY, Circuit Judge:
On August 8, 1967, a predominantly white grand jury in Fulton County, Georgia, indicted Will Wright, a Negro, for murder. On September 13, 1967, having been convicted by an all-white jury, Wright was sentenced to life imprisonment. On this appeal from the district court’s denial of his petition for a writ of habeas corpus, Wright challenges the composition of his grand and petit juries, alleging that the method of juror selection systematically excluded Negroes and poor persons and was based on a numerically inadequate cross-section of the community. We affirm the judgment below.
Wright’s grand and petit juries were selected in the following manner. The Fulton County Jury Commissioners mailed a racially neutral questionnaire to each individual who filed a county property tax return for that year. When the questionnaires were returned, the Jury Commissioners excluded the names of those who, on the basis of the information supplied by the questionnaires, were exempt or disqualified from jury service. The remaining names were placed on a racially neutral master jury list. A judge drew jurors’ names from this list at random; each name was placed in the jury box on a slip of paper indistinguishable from the others.
In theory, this system was a good one. Every person who owned any real or personal property was required to file a county property tax return, regardless of whether, after subtracting exemptions, he would be subject to a net tax liability. Given Georgia’s comprehensive definition of personal property, few, if any, Georgia residents were not required to file a county tax return. Thus, the pool of prospective jurors (i. e., the tax returns) was — hypothetically—numerically comprehensive and was selected without regard to wealth. Furthermore, the system afforded no opportunity for racial discrimination, because questionnaires were sent to all persons filing tax returns without regard to race and because the questionnaires themselves disclosed nothing about a resident’s race.
In practice, however, this system produced less than ideal results, owing largely to the fact that only about one-half of the adult residents of Fulton County filed tax returns in 1965. larger percentage of the white population than of the black population filed returns, resulting in the overrepresentation of whites in the pool of prospective jurors. Thus, although whites outnumbered blacks in Fulton County by a ratio of two to one (68 percent white to 32 percent black), among those who filed returns and thereby entered the pool of prospective jurors, whites outnumbered blacks by more than five to one (84 percent white to 16 percent black). Wright’s grand jury and the petit jury panels actually drawn for his trial contained roughly the same percentage of blacks as did the tax returns. There were, according to the testimony of the jury clerk, “three or four” Negroes on Wright’s grand jury, meaning that the grand jury that indicted Wright was 13 or 17 percent black. And although the jury that convicted Wright was lily-white, there were “between seven and twenty-one” Negroes on the five petit jury panels from which Wright’s trial jury was chosen, the percentage of blacks on the jury panels thus ranging from roughly 12 percent to 35 percent. In short, there was no significant disparity between the percentage of blacks in the pool of prospective jurors A (16 percent) and the percentage of blacks on Wright’s grand jury and his petit jury panels. Bearing these facts in mind, we turn now to appellant’s contentions.
In order to have made a prima facie showing of systematic exclusion of blacks from his grand and petit juries, appellant had the burden of proving, first, that the opportunity for racial discrimination existed by reason of the use of a racially biased source of potential jurors, and, second, that the use of such an “infected source” produced a significant disparity between the percentages of blacks in the source and the percentage on the grand jury and petit jury panels. Alexander v. Louisiana, 405 U.S. 625, 92 S.Ct. 1221, 31 L.Ed.2d 536 (1972); Whitus v. Georgia, 385 U.S. 545, 87 S.Ct. 643, 17 L.Ed.2d 599 (1967); Jones v. Smith, 5th Cir., 1969, 420 F.2d 774. In the instant case, appellant has shown neither. We have seen above that the percentages of blacks on the grand jury (13 or 17 percent) and on the petit jury panels (12 to 35 percent) were not significantly lower than the percentage of blacks in the pool of prospective jurors (16 percent); in fact, the percentage of blacks on the grand jury and the petit jury panels may have been higher than in the pool. Moreover, the system used in selecting grand and petit jurors in appellant’s prosecution afforded little, if any, opportunity for racial discrimination. Racially neutral questionnaires were sent to all persons filing tax returns; the Jury Commissioners excluded exempt or disqualified persons from the list without regard to race; the remaining names were placed in the jury box on indistinguishable slips of paper. This system contrasts starkly with the use of such an “infected source” as multi-colored tax returns bound into the tax digest by race, the method used in Georgia until shortly before the instant prosecution was brought, and a system which has been consistently condemned. It is true that there was a significant disparity between the percentage of blacks in Fulton County and the percentage of black grand and petit jurors; but this disparity was due not to the use of a racially biased source of potential jurors, but rather to the fact that a greater percentage of whites than of blacks fortuitously filed tax returns and thereby entered the pool of prospective jurors. Absent proof that selection procedures are biased, proof of disparity between racial percentages in the population and on the juries is not sufficient to shift the burden of explanation to the state. Alexander, supra, 405 U.S. at 630, 92 S.Ct. at 1225.
We also reject appellant’s contention that use of tax returns as the source of potential jurors resulted in systematic exclusion of poor persons from his grand and petit juries. Appellant argues that use of the tax returns automatically excluded persons owning less than a minimum amount of property. This is not true, because wealth did not determine whether a person was required to file a tax return. Every person who owned property (and it is difficult to imagine persons whose possessions would not be included in the all-embracing Georgia definition of property) was required to file a tax return, regardless of whether the value of his possessions exceeded the exemptions provided by Georgia law. Whatever else may have caused roughly half of the Fulton County population to refrain from filing returns and thus from entering the pool of prospective jurors, it was not poverty. Moreover, this court has on at least two occasions in the past upheld the nondiscriminatory use of tax returns as a source of potential jurors. Donlavey v. Smith, 5th Cir. 1970,. 426 F.2d 800; Roach v. Mauldin, 5th Cir. 1968, 391 F.2d 907, cert. denied, 393 U.S. 1095, 89 S.Ct. 884, 21 L.Ed.2d 786 (1969).
There remains appellant’s contention that, apart from considerations of racial or economic discrimination, the tax returns afforded a numerically inadequate cross-section of the community, because tax returns represented only about half of the Fulton County residents eligible for jury service. In Turner v. Fouche, 396 U.S. 346, 90 S.Ct. 532, 24 L.Ed.2d 567 (1970), the Court suggested that a state has a duty to select prospective jurors from as comprehensive a list as possible; and a panel of this court, in Broadway v. Culpepper, 5th Cir. 1971, 439 F.2d 1253, hinted that the numerical inadequacy of the juror pool might be the basis for prospective remedial relief, plaintiffs having demonstrated a significant disparity between racial percentages in the population and in the prospective juror pool (in that case, the group of registered voters who had returned information questionnaires to the jury commissioners). While fully recognizing that the knowing use of a numerically inadequate source of potential jurors will often deny an accused his right to a jury selected from a fairly representative cross-section of the community, we hold that appellant in this case did not make a burden-shifting prima facie showing that his grand and petit jurors were selected from a numerically inadequate pool. First, we have no way of knowing exactly what percentage of the adult population of Fulton County actually entered the pool of prospective jurors. Although only 168,000 tax returns were filed out of a population of 339,-000, some of these returns must have been filed jointly by couples both of whom were twenty-one years of age or older. See footnote 5 supra. Depending on how many of these joint returns were filed, the pool of tax returns could represent vastly more than roughly one-half of the adult population. Secondly, even disregarding the joint return factor, a pool of one-half the adult population is nowhere near as suspect as was the pool in Broadway, supra, which reflected only about one-quarter of the adult population. Under these circumstances, and considering the absence from this case of racial or economic discrimination, we must reject appellant’s claim that his grand and petit juries were not chosen from a fairly representative cross-section of the community.
Affirmed.
. Wright was paroled on March 26, 1972.
. After Wright’s indictment and trial, Georgia law was changed to require the use of voter registration lists, rather than tax returns, as the basic source of of potential jurors, and to require that the voter registration list be supplemented if it does not reflect a fairly representative cross-section of a county’s population. Ga.Acts 1968, p. 533, codified in Ga.Code Ann. § 59-106 (Supp.1972).
. At the times in question, Georgia law exempted up to $2,000 of the value of a home, Ga.Code Ann. § 92-219; $300 of the value of personal property such as clothing, furniture, domestic animals and tools, Ga.Code Ann. § 92-239; land held for charitable, religious, educational, or other eleemosynary purposes, Ga.Code Ann. § 92-130; and property owned by certain foreign corporations, Ga.Code Ann. § 92-201.
. Ga.Code Ann. § 92-102 provides as follows :
For the purposes of taxation, “personal property” shall be construed to include goods, chattels, moneys, credits and effects, whatsoever they may be; ships, boats, and vessels, whether at home or abroad, and capital invested therein; bonds and other securities of corporations of this or of other States; stock of corporations of other States; bonds, notes or other obligations of other States, and' of the counties, municipalities or other subdivisions thereof; money due on open account or evidenced by notes, contracts, bonds, or other obligations, secured or unsecured.
. Of the 168,003 tax returns filed in 1965, an unknown number were filed jointly by husband and wife. If both husband and wife were twenty-one years of age or older, each joint return would represent two potential jurors, rather than one. Thus, much more than one-half of the Fulton County adult population may have been represented in the total returns filed.
. Testimony in the district court revealed that there were no criminal sanctions for failure to file a county tax return, and that the supervising tax clerk of The Fulton County Tax Commissioner’s Office believed that his office was inadequately staffed to enforce the filing requirement by assessing penalties against those persons failing to file.
. The foregoing statistics may be summarized as follows (percentages are approximate) :
Group Normhite or Negro White Total
Fulton County 108,013 231,045 339,058
Adult Population (1960) (32%) (68%) (100%)
1965 Tax Returns 26,518 (16%) 141,485 (84%) 168,003 (100%)
Percentage of each race filing tax returns 24.5% 61%
Appellant’s Grand Jury 3 or 4 (13% or 17%) 19 or 20 (83% or 87%) 23 (100%)
Appellant’s Petit Jury Panels (5 panels of 12) 7 to 21 (12% to 35%) 39 to 53 (65% to 88%) 60 (100%)
Appellant’s Petit Jury 0 (0%) 12 (100%) 12 (100%)
. Indeed, some jurors for the period during which appellant was indicted and tried had been selected through reliance on the infamous multi-colored tax returns, but that system was abandoned and a complete group of jurors chosen by means of racially neutral questionnaires after the Jury Commissioners were informed that the old method was unconstitutional. For a discussion of this hasty change in the manner of selecting jurors, and approval of the method used in the instant case, see Lumpkin v. Smith, N.D.Ga.1970, 309 F.Supp. 1325, rev’d. on other grounds, 5th Cir. 1971, 439 F.2d 1084.
. E. g., Whitus v. Georgia, 385 U.S. 545, 87 S.Ct. 043, 17 L.Ed.2d 599 (1967); Colson v. Smith, 5th Cir. 1971, 438 F.2d 1075; Davis v. Smith, 5th Cir. 1970, 430 F.2d 1256; Jones v. Smith, 5th Cir. 1969, 420 F.2d 774; Peters v. Rutledge, 5th Cir. 1968, 397 F.2d 731; Vanleeward v. Rutledge, 5th Cir. 1966, 369 F.2d 584. Cf. Labat v. Bennett, 5th Cir. 1966, 365 F.2d 698, cert. denied, 386 U.S. 991, 87 S.Ct. 1303, 18 L.Ed.2d 334 (1967) (indirect discrimination through exclusion of daily wage earners).
. In Gibson v. Blair, 5th Cir. 1972, 467 F.2d 842, another panel of this court held that a prima facie case of discriminatory jury selection was established by proof that “a significant disparity exists between the percentage of blacks chosen for jury duty and the percentage of blacks eligible for jury duty in the population from which jurors are drawn.” 467 F.2d at p. 844. We do not believe that this opinion, by suggesting that proof of a racially biased selection method is not part of a prima facie case, is in conflict with what we hold in the instant case. First, all of the cases cited in Blair as supporting that proposition involved not only a significant disparity in racial percentages, but also either a racially biased selection system (e. g., jurors selected through reliance on personal knowledge of jury commissioners who knew few, if any, Negroes ; automatic exclusion of predominantly Negro economic classes) or a history of decades during which no members of racial minorities had sat on juries. Secondly, the primary question before the court in Blair was not whether a prima facie case had been established, but rather whether the state trial court had erroneously excluded all evidence except that tending to show intentional discrimination by the jury commissioners. Significantly, the court in Blair pointed out that the record before it, containing proof of discrepancy between racial percentages without more, did not establish racial discrimination in the general venire of Washington Parish, 467 F.2d at 844.
. Cf. Brown v. Allen, 344 U.S. 443, 73 S.Ct. 397, 97 L.Ed. 469 (1953), upholding the use of a list of county property and poll taxpayers as the most comprehensive available source of potential jurors,
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{
"author": "WALLACE, Circuit Judge:",
"license": "Public Domain",
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SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. UNITED FINANCIAL GROUP, INC., formerly known as USI Group, Inc., et al., Defendants-Appellants.
No. 72-1334.
United States Court of Appeals, Ninth Circuit.
Jan. 17, 1973.
Garry P. McMurry (argued), Patrie J. Doherty, of McMurry, Sherry & Nichols, Portland, Or., Roger V. Holm, Richard Bartlett, of Bartlett & Holm, Portland, Or., David L. Cunningham, R. J. Wolf, of Cunningham, Wolf & Churchill, San Francisco, Cal., for defendants-appellants.
David Ferber, Sol. (argued), Gerald Boltz, Michael A. Macchiaroli, Harvey L. Pitt, Special Counsel, Jack Redden, G. Bradford Cook, General Counsel, Securities & Exchange Commission, Washington, D. C., Sidney I. Lezak, U. S. Atty., Portland, Or., for plaintiff-appellee.
Before CHAMBERS, MERRILL and WALLACE, Circuit Judges.
WALLACE, Circuit Judge:
This case is before us on an interlocutory appeal authorized by 28 U.S.C. § 1292(a)(1) and (2). United Financial Group, Inc. (hereinafter “UFG”), et al. appeal from the ruling of the district court in favor of the Securities and Exchange Commission (hereinafter “SEC”) granting a preliminary injunction and appointing a receiver pendente lite. Our opinion is limited to the issues of whether there is subject matter jurisdiction and whether the district judge abused his discretion in granting the relief mentioned. We affirm.
UFG is a Delaware corporation with its headquarters in Novato, California. The individual appellants are officers and directors of UFG and of various of the appellant companies owned by UFG. UFG is a holding company owning and, from its home base in the United States, controlling quite a large number of service and investment companies incorporated in foreign countries. Such investment companies are commonly referred to as “offshore mutual funds.” Most of such funds, including the ones here, have very substantial investments in companies and property in the United States. Many offshore mutual funds were created subsequent to the passage of the Foreign Investors Tax Act of 1966, 80 Stat. 1541, which made certain tax advantages available to foreign investors and to the companies in which they invested so long as such companies were not engaged in a domestic business.
Although appellants insist that all offers and sales of shares in the mutual funds of the various investment companies were confined to foreigners, there is evidence in the record to the contrary. A 1969 UFG-complex shareholder list disclosed a number of shareholders with addresses in the United States. Appellants advertised in overseas editions of American newsweeklies, which are read widely by Americans residing and traveling abroad. An American serviceman swore that, in response to such an advertisement, he was sold mutual fund shares of one of the appellant companies. A doctor employed by the Veterans Administration who was temporarily living in the Philippines was sold shares after having been informed that such a sale to American citizens temporarily living abroad was not illegal. An American citizen employed overseas by one of the appellant companies swore that she was sold shares in the company and that no purchase restrictions with regard to citizenship were brought to her attention. There is also clear evidence that an offer to exchange shares of one of the appellant companies for shares of another of the appellant companies or for interest in land owned by a third appellant company was made to an American citizen, addressed to him at his residence in the United States.
In short, there are American owners of the shares of some of the appellant companies, and there have been offers and sales of stock to American citizens. Coupled with the other evidence before the district court that the complex of foreign companies was in fact directed and controlled as an integrated whole from the United States, that appellants obtained money from investors by means of untrue statements and omissions of material facts, and that the mails and other facilities of interstate commerce of the United States were used in preparation and distribution of prospectuses, to set up sales meetings and to consummate investment transactions, there was sufficient evidence for subject matter jurisdiction under § 22(a) of the Securities Act of 1933 and § 27 of the Securities Exchange Act of 1934. Compare Schoenbaum v. Firstbrook, 405 F.2d 200, 206 (2d Cir. 1968), rev’d on other grounds, 405 F.2d 215 (2d Cir. 1968) (en banc), cert. denied sub nom. Manley v. Schoenbaum, 395 U.S. 906, 89 S.Ct. 1747, 23 L.Ed.2d 219 (1969); SEC v. Gulf Intercontinental Finance Corp., 223 F.Supp. 987, 994-996 (S.D.Fla.1963).
Although there was a showing of only a few instances involving American investors relative to the total sales volume, jurisdiction may not be resolved by a mere tallying of domiciles of shareholders. The relative number of American citizen shareholders vis-a-vis alien shareholders is not determinative of whether United States courts may assert jurisdiction. In this case, focus should be upon appellants’ activities within the United States and the impact of those activities upon American investors. Here, there was a showing of very substantial activities by appellants within the United States and a showing that, as a result of those activities, at least three American investors now hold nearly $10,000 worth of stock for which there appears to be no market and which appellants have declined to redeem although requested to do so. Since the securities laws have always been construed very broadly to promote the remedial purposes behind them, we find unpersuasive the argument that jurisdiction should be declined because only a very few instances of sales to American citizens have been shown, especially given the practical difficulties present in this case. “That the jurisdictional hook need not be large to fish for securities law violations is well established.” Lawrence v. SEC, 398 F.2d 276, 278 (1st Cir. 1968).
An alternate theory of jurisdiction advanced by respondent is based solely upon appellants’ use of the facilities of interstate commerce. If accepted without qualification, there would be jurisdiction in every case regardless of whether American investors were involved. Such a theory is squarely at odds with appellants’ argument of improper extraterritorial application of legislation. Although the “interstate commerce facilities use” theory may have some merit, it is unnecessary to our decision in this case and we, therefore, express no opinion as to its soundness.
Appellants argue that § 30(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78dd(b), protects them from application of that Act. The section provides:
The provisions of this chapter or of any rule or regulation thereunder shall not apply to any person insofar as he transacts a business in securities without the jurisdiction of the United States, unless he transacts such business in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate to prevent the evasion of this chapter.
Since the Commission has not exercised its rule-making power under this section, the argument runs, the appellants’ activities are exempt from regulation. The difficulty with such a position is that it overlooks the key phrase of “without the jurisdiction of the United States.” (Emphasis added.) Appellants’ argument has apparently construed “jurisdiction” to mean “territorial limits.” It is clear from prior decisions, and we so hold, that it has no such meaning. Another difficulty with appellants’ position is that they neglect to take into account the fact that offers and sales were made to United States citizens and that substantial activities were carried on by them in the United States in order to facilitate the sales of securities abroad. We therefore hold that in the circumstances of this ease, § 30(b) has no application.
Appellants also insist that they were denied due process of law by not being allowed a full evidentiary hearing on the question of subject matter jurisdiction. The basic flaw in such an argument is that, at the time of the hearings, they did not offer to call any witnesses or to introduce any evidence on the question. Apparently content to treat the issue as purely a matter of law, appellants merely filed briefs on the question. Twice the trial judge demonstrated his concern that appellants receive due process by denying the SEC’s motions for a preliminary injunction, emphasizing that the appellants should have a “fair opportunity to be heard on the issuance of a preliminary injunction.”
Since we have found that jurisdiction was proper, the only remaining issue is whether the judge abused his discretion in granting a preliminary injunction and in appointing a receiver. Washington Capitols Basketball Club, Inc. v. Barry, 419 F.2d 472, 475-476 (9th Cir. 1969); Jones v. Board of Regents, 397 F.2d 259 (9th Cir. 1968). “An abuse of discretion is a plain error, discretion exercised to an end not justified by the evidence, a judgment that is clearly against the logic and effect of the facts as are found.” Bowles v. Quon, 154 F.2d 72, 73 (9th Cir. 1946). A prima facie case of the probable existence of fraud and mismanagement was demonstrated by the SEC. Such a showing is sufficient to call into play the equitable powers of the court. SEC v. Keller Corp., 323 F.2d 397, 403 (7th Cir. 1963). The district court has broad powers and wide discretion to frame the scope of appropriate equitable relief. International Manufacturing Co. v. Landon, Inc., 327 F.2d 824 (9th Cir. 1964); SEC v. Keller Corp., supra. Under the circumstances, we cannot say that the trial court abused its discretion.
. Appellants also contend that the SEC has consistently led the offshore fund community to believe that it did not seek to regulate offshore funds and that, if the SEC now wishes to change its position, regulation of the industry as a whole is the necessary approach rather than “piecemeal litigation.” However, since such an argument does not go to the legal merits of the jurisdictional question, we find it unnecessary to reach that issue,
. Section 22(a) of the Securities Act of 1933, 15 U.S.C. § 77v(a), and Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, provide generally that district courts of the United States shall have jurisdiction of violations of the securities laws and the SEC rules promulgated thereunder. The SEC charged UFG with violations of Sections 5(a) and (c) and 17 (a) of the Securities Act of 1933, 15 U.S.C. §§ 77e(a) and (c) and 77q(a) ; of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) ; and of Rule 10b-5, 17 C.F.R. § 240.10b-5.
. For example, in McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), a Texas life insurance company had only one policyholder in California and yet assertion of personal jurisdiction by California was held not to violate due process.
. SEC v. Capital Gains Research Bureau, 375 U.S. 180, 195, 84 S.Ct. 275, 11 L.Ed.2d 237 (1963); SEC v. C. M. Joiner Leasing Corp., 320 U.S. 344, 350-351, 64 S.Ct. 120, 88 L.Ed. 88 (1943); Prudential Ins. Co. of America v. SEC, 326 F.2d 383, 386 (3d Cir.), cert. denied, 377 U.S. 953, 84 S.Ct. 1629, 12 L.Ed.2d 497 (1964).
. As of the day this case was heard, appellants had not yet complied with a subpoena duces tecum for a current shareholder list (among other records) ordered by a federal court some time ago in the case of SEC v. USI Group, Inc., No. C-71-1511 (N.D.Cal.1971).
. The theory is that the United States has a direct interest in the use to which the facilities of interstate commerce are put, and that, because of its plenary power over the use of the facilities of interstate commerce, Congress may outlaw any use, however incidental, which is connected with fraudulent purposes.
. Given our ruling in this ease, we also find it unnecesary to render an opinion as to the appropriateness of asserting jurisdiction on the ground of a national interest in protecting this country’s reputation abroad or on the ground that the activities of the appellants have an adverse economic impact upon this country’s economy.
. Schoenbaum v. Firstbrook, 405 F.2d 200, 207-208 (2d Cir. 1968), rev’d on other grounds, 405 F.2d 215 (2d Cir. 1968) (en banc), cert. denied sub nom. Manley v. Schoenbaum, 395 U.S. 906, 89 S.Ct. 1747, 23 L.Ed.2d 219 (1969); Roth v. Fund of Funds, Ltd., 405 F.2d 421 (2d Cir. 1968), cert. denied, 394 U.S. 975, 89 S.Ct. 1469, 22 L.Ed.2d 754 (1969).
. Affidavits and depositions presented by the SEC showed, among other indications, the following:
Prospective investors were never furnished with audited financial reports. Although told of the purported assets of the UFG complex, investors were never told of intra-affiliate transactions that had not been negotiated at arms-length, nor of the arbitrary valuation of the assets of UFG-affiliated companies, nor of the deteriorating financial condition of the complex and the inability of affiliates to pay off loans, nor of the foreclosure or threatened foreclosure of various assets, nor of the insolvency of various affiliated companies. United States Investment Service (USIS) investors were told that an investment of $10,000 would yield $383,000 within 20 years and that the effect of delaying investing for one year would result in a $64,000 penalty, even though there was no basis upon which such a representation could be made. United States Investment . Plan (USIP) advertised a guaranteed income through USIS, but failed to disclose how this income could be guaranteed and that the guarantee was not backed by liquid investments. USIP also stated to prospective investors that money invested went into choice securities, bank deposits and California real estate when, in fact, USIP was investing public-investor funds in speculative securities without a market and in undeveloped real estate.
United Growth Fund (UGF) failed to disclose to prospective investors that the market price for its shares was nonexistent and that the price was arbitrarily fixed by the complex. UGF also failed to disclose that in some instances the value of real estate held by it bad not been determined by arms-length transactions but had been arbitrarily fixed. UGF’s investments, like those of USIP, were primarily in real estate or in securities of speculative companies which could not be traded. UGF’s prospectus failed to disclose the problem of liquidating these assets in time of need. It held itself out as a fund which did not charge a commission and advertised that invested capital would earn profits immediately. It failed, however, to disclose that a commission was in fact paid to USIS and that almost all income UGF derived from the public’s investment in it went back to UFG.
. We note also that the district court stayed its order for 15 days in order to preserve the appellants’ claims on appeal. Prior to the expiration of the 15-day stay, appellants sought and obtained from this Court an additional 10-day stay of the district court’s order. On the same day this Court granted them the additional stay, appellants caused one of the corporate appellants (Standard Growth Properties, Inc.) to transfer valuable assets to a newly created corporation, which new company immediately filed a petition in bankruptcy. As a result of these facts, this Court vacated its prior stay of the district court’s order.
The trial judge also may well have been impressed with the finding of a California Superior Court judge in a related lawsuit involving these appellants that they <s . . . are not proceeding in good faith, [in seeking to set aside a default judgment] but, on the contrary, have adopted a consistent program of evasion and confusion in the development of a very considerable series of corporations, interlocking directorates, subsidiary corporations, overlapping stock ownerships, overlapping operative and controlling officers, and confusing management programs. All of these appear to have been and have been, in fact, adopted, developed and devised for the purpose of avoiding responsibility and evading the jurisdiction of any court which might seek to hold them or any of them to their possible trust and/or contract obligations or for liabilities otherwise incurred in their business transactions.” Goddard v. Pollock, No. 60567 (Cal.Super.Ct., Marin Co., Nov. 24, 1971).
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{
"author": "PER CURIAM:",
"license": "Public Domain",
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UNITED STATES of America, Plaintiff-Appellee, v. Harry William THERIAULT, Defendant-Appellant.
No. 71-3332.
United States Court of Appeals, Fifth Circuit.
Jan. 26, 1973.
Certiorari Denied May 14, 1973.
See 93 S.Ct. 2278.
James W. Tarlton, III, Mobile, Ala. (Court-appointed), for defendant-appellant.
Charles S. White-Spunner, U. S. Atty., Irwin W. Coleman, Jr., Asst. U. S. Atty., Mobile, Ala., for plaintiff-appellee.
Before RIVES, WISDOM and RO-NEY, Circuit Judges.
PER CURIAM:
Defendant’s conviction for escaping from the federal unit of the Mobile City Jail, in violation of 18 U.S.C.A. § 751, is affirmed.
The outcome of the trial was for all practical purposes contingent upon the validity of the defense of insanity. We previously reversed a prior conviction for failure of the trial court to authorize a government paid psychiatrist under the provisions of 18 U.S.C.A. § 3006A(e). United States v. Theriault, 440 F.2d 713 (5th Cir. 1971). At the second trial, the prosecution’s psychiatrist testified that, at the time of the escape, defendant was not insane under the standards of Blake v. United States, 407 F.2d 908 (5th Cir. 1969). Defendant’s psychiatrist did not testify to the contrary. The evidence presented a factual issue which the jury resolved against the defendant.
The several points which defendant raises on this appeal are without merit.
(1) The trial court’s instructions, when read as a whole, did not confuse the burden of the Government to establish defendant’s sanity, and the court’s comments on the defense psychiatrist’s testimony were accompanied by clear instructions that any comments he made on the evidence could be disregarded.
(2) Defendant sought to represent himself, but the district judge, familiar from prior trials with defendant’s propensity for courtroom disruption, appointed “stand-by” counsel who participated in portions of the trial, principally at times when the defendant was excluded from the courtroom by the trial judge in an attempt to control defendant’s contemptuous and disruptive conduct. This procedure appears to have been a good common sense way to handle the situation where the defendant was insisting upon representing himself but was obviously incapable of doing so throughout the entire trial.
(3) Although defendant’s theory was that his insanity was based in his fear of being returned to Parchman Prison in Mississippi, where he claims to have been subjected to brutal treatment, we perceive no error in the court’s refusal to require the Government to produce statements of witnesses and reports upon which the Government relied to intervene in a suit against Parchman concerning prison conditions. The Jencks Act specifically states that such materials are not discoverable, 18 U.S.C.A. § 3500(a), and since defendant’s incarceration was in 1960-1965 and 1967, while the Government report concerned acts alleged to have occurred in 1971, the report was not clearly relevant. Although we are not certain that the point is being raised on this appeal, we would hold that the Government reports, both state and federal, were properly excluded from evidence because they were irrelevant.
(4) Defendant having failed to show either surprise or prejudice, there was no abuse of discretion in allowing the prosecution to amend its bill of particulars.
(5) The law is clear that it is unnecessary to trace a prisoner by documentation from the courtroom to the place from which he escaped in order to sustain an escape conviction, so the argument that the evidence was insufficient to show that he was in the Mobile Jail is without merit.
(6) As to the appeal from the contempt sentences which resulted from some hundred occasions when the defendant directly challenged the trial court’s authority with abusive and disrespectful demeanor, we repeat our comment in another case involving this same defendant that “the careful, restrained, moderate and responsible way the Judge —who was not then, nor had he been, engaged in an embroilment or running controversy with Appellant — handled this situation which was then interfering with the efficient operation of the court comported with Illinois v. Allen, 1970, 397 U.S. 337, 90 S.Ct. 1057, 25 L.Ed.2d 353 and Mayberry v. Pennsylvania, 1971, 400 U.S. 455, 91 S.Ct. 499, 27 L.Ed.2d 532.”
Affirmed.
. The escape here occurred several days after the defendant had been convicted for another escape from federal custody by breaking out of this same institution. This Court affirmed that conviction but remanded for resentencing. Theriault v. United States, 434 F.2d 212. (5th Cir. 1970). On his appeal from the new sen-tonco, we affirmed. United States v. Theriault, 467 F.2d 486 (5th Cir. 1972).
. United States v. Harper, 450 F.2d 1032 (5th Cir. 1971).
. Kyle v. United States, 402 F.2d 443 (5th Cir. 1968).
. Mitchell v. United States, 404 F.2d 609 (5th Cir. 1968).
. United States v. Chapman, 455 F.2d 746 (5th Cir. 1972); United States v. DeCicco, 415 F.2d 799 (5th Cir. 1969).
. United States v. Theriault, supra, note 1.
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{
"author": "FEINBERG, Circuit Judge:",
"license": "Public Domain",
"url": "https://static.case.law/"
}
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Martin FARNARJIAN, Plaintiff-Appellant, v. AMERICAN EXPORT ISBRANDTSEN LINES, INC., Defendant-Appellee.
No. 437, Docket 72-1598.
United States Court of Appeals, Second Circuit.
Argued Jan. 29, 1973.
Decided Feb. 20, 1973.
Edward M. Katz, New York City (Abraham E. Freedman, New York City, on the brief), for plaintiff-appellant.
Stephen K. Carr, New York City (Haight, Gardner, Poor & Havens, Stephen C. Pascal, New York City, on the brief), for defendant-appellee.
Before ANDERSON, FEINBERG and MULLIGAN, Circuit Judges.
FEINBERG, Circuit Judge:
Plaintiff Martin Farnarjian appeals from a judgment for defendant American Export Isbrandtsen Lines, Inc. after a trial in the United States District Court for the Southern District of New York before a jury and Judge Richard H. Levet. Refreshingly, Farnarjian raises only one point on appeal, that the district court erred in charging the jury on proximate cause. Although the charge was incorrect, we find that the error did not prejudice plaintiff’s substantial rights. Accordingly, we affirm the judgment of the district court.
I
Plaintiff’s action joined in familiar fashion a negligence claim under the Jones Act, 46 U.S.C. § 688, and a claim of unseaworthiness under general maritime law. Plaintiff had been employed aboard defendant’s vessel as a saloon messman. On November 7, 1968, he slipped and fell on a soapy deck in the officers’ messroom while walking to the pantry to get hot water to clean the deck. The theory of plaintiff’s case was that the action of his superior, the Chief Steward, in unnecessarily spreading soapy water over the entire messroom deck was negligent and also rendered that part of the ship unseaworthy. Defendant claimed that it was plaintiff’s duty to keep the deck clean and dry, that plaintiff had failed to do his own job properly, that the Chief Steward had spread the soapy water on only part of the deck to demonstrate how the job should be done, and that he had exercised due care in so doing.
The trial was on the liability issue only. The key issues concerned what the Chief Steward had done: In his effort to instruct plaintiff by example, had he covered the entire deck with soapy water, as plaintiff claimed, or only a part of it, as defendant claimed; was the Chief Steward negligent, and was the ship unseaworthy because of an unreasonable accumulation of soapy water ? There was no issue as to whether and how plaintiff had fallen. The question was whether this was the fault of defendant or of plaintiff, or of no one at all.
The issue regarding the judge’s charge arose in the following way. Plaintiff requested the court to charge that plaintiff’s burden was to prove that defendant’s negligence “played some part, however slight, in causing the occurrence in which plaintiff was injured.” For that proposition, plaintiff cited Rogers v. Missouri Pacific R. R., 352 U.S. 500, 77 S.Ct. 443, 1 L.Ed.2d 493 (1957), and DeLima v. Trinidad Corp., 302 F.2d 585 (2d Cir. 1962). The judge did use the “however slight” language once in his charge, though not in reference to causation, and five times said, in effect, that defendant would be liable if its negligence or the unseaworthiness of the vessel was a proximate cause, in whole or in part, of plaintiff’s fall. The “in whole or in part” language also appeared in two interrogatories submitted to the jury, which are reproduced in the margin. However, in the course of explaining various legal terms, the court charged as follows:
Now what is a proximate cause? An act or an omission to act is a proximate cause of an event that is a substantial factor in bringing about that event. Thus, if you find that the plaintiff has proved by a fair preponderance of the credible evidence that the defendant’s acts or omissions were a substantial factor in bringing about the plaintiff’s alleged accident, the requirement of a proximate cause is satisfied. However, a showing of negligence, without proof of a proximate cause, is, as I have attempted to show you, insufficient.
Stating it in another way, a proximate cause is that cause which in a natural and continuous sequence, unbroken by any efficient intervening cause, is a substantial factor in bringing about the injury. [Emphasis added.] '
Proximate cause was not otherwise defined, although, as indicated above, it was frequently qualified by the “in whole or in part” language.
At the conclusion of the charge, and outside the presence of the jury, counsel for plaintiff excepted to the court’s charge, stating:
MR. KATZ: Your Honor defined proximate cause as an act or omission constituting a substantial factor in causing the injury. I am not a hundred per cent sure, but I think that the charge should have been whether it played a part, however small, in causing the injury, not—
THE COURT: We considered that. I had my clerk check it just before we started out today. I can’t agree with you. AH right. I deny the application. That’s all.
The jury was then given special interrogatories. See note 2 supra. The first question combined proximate causation with the issue of negligence, and the second joined it with the issue of unseaworthiness. The jury answered both questions in the negative, returned a general verdict for defendant and was not required to answer the remaining questions, dealing with contributory negligence.
II
Relying on the authorities cited above, plaintiff argues that the court’s definition of proximate cause in this case was wrong. We agree with plaintiff. There is simply no place in a Jones Act charge for the “substantial factor” language in defining proximate cause, however sensible that phrase may be in other contexts. The Jones Act incorporates by reference the language of the Federal Employers’ Liability Act, which makes an employer liable in damages for injury to an employee “resulting in whole or in part from” the employer’s negligence. 45 U.S.C. § 51. The cases have emphasized this language in a variety of contexts. See, e. g., Rogers v. Missouri Pacific R. R., supra, 352 U.S. at 506, 77 S.Ct. at 448 (inquiry, on sufficiency issue, whether “employer negligence played any part, even the slightest,” in the injury); DeLima v. Trinidad Corp., supra, 302 F.2d at 587-588, (error to refuse to charge that employer is liable if his negligence “played any part, even the slightest, in producing an injury to plaintiff”); accord, Ammar v. American Export Lines, Jnc., 326 F.2d 955, 958-959 (2d Cir.), cert. denied, 379 U.S. 824, 85 S.Ct. 48, 13 L.Ed.2d 34 (1964), reh. denied, 379 U.S. 985, 85 S.Ct. 640, 13 L.Ed. 2d 579 (1965); Page v. St. Louis Southwestern Ry., 312 F.2d 84, 87-92 (5th Cir. 1963). To say that an employer’s negligence was a “substantial factor” in causing an employee’s injury is not the same as saying that the negligence played “any part at all.” The two concepts are simply incompatible, and joining them is at best confusing. Therefore, we would be inclined to reverse the judgment below were it not for two of defendant’s arguments.
The first of these is based on the judge’s repeated statements in his charge that plaintiff was required only to show that defendant’s negligence, if proved, was the proximate cause, “in whole or in part,” of the accident, and on the use of the interrogatories, which again repeated this standard. See note 2 supra. Defendant, therefore, asserts that the charge, taken in context, was proper. Defendant also argues that on the facts of this case the error, if any, in the charge could not have made any difference.
There is some force to the first contention, see Domeracki v. Gulf Oil Corp., 202 F.Supp. 89, 91-92 (E.D.Pa.1962), and the second is quite persuasive. In regard to the latter, the real question for the jury in this case was, as indicated above, whether the Chief Steward had acted improperly. There was no question that plaintiff’s fall had been caused by the soapy water on the deck. The issues were whether its presence there was due to negligence of the Chief Steward and whether it rendered the ship unsea-worthy ; and the court carefully and correctly defined negligence and unseaworthiness. Cause was not an issue in the case since no cause of the accident other than the condition of the deck was ever suggested. Under these circumstances, we do not believe that any “substantial rights” of plaintiff were prejudiced by the error in the charge. Fed. R.Civ.P. 61. Plaintiff’s argument to the contrary is that there was conflicting testimony as to whether the Chief Steward had wet the entire deck or just part of it and that if the jury believed the latter, it might have concluded “that, although this condition played some part, however slight, in causing plaintiff’s injury, it did not rise to the level of constituting a substantial factor in bringing it about.” The difficulty with this argument is that if the Chief Steward wet only a small portion of the deck, there was no basis at all for finding negligence or unseaworthiness.
The judgment of the district court is affirmed.
. The judge charged:
Under the negligence doctrine, a ship owner is liable for negligence when the owner, knowingly or carelessly, breaches any duty, however slight, to the plaintiff. [Emphasis added.]
. 1. Has Plaintiff proved by a fair preponedrance of the credible evidence that defendant was negligent because of an unreasonable accumulation of soapy water on the saloon messroom deck on board the SS Exchester as the same existed on November 7, 1968 and that such negligence was a proximate cause, in whole or in part, of the accident sustained by plaintiff on November 7, 1968?
Yes
No
2. Has plaintiff proved by a fair preponderance of the credible evidence that the SS Exchester was unseaworthy because of an unreasonable accumulation of soapy water on the saloon messroom deck as the same existed on November 7, 1968 and that such unseaworthiness was a proximate cause, in whole or in part, of the accident sustained by plaintiff on November 7, 1968?
Yes
No
. Throughout the transcript, the word “proximate” frequently appears as “approximate.” The parties agree that this is a reporter’s error. We have not perpetuated it.
. See 1 Committee on Pattern Jury Instructions, Ass’n of Supreme Court Justices, New York Pattern Jury Instructions — Civil, PJI 2:70, at 148-49 (B. Meyer ed. 1965); id. at 57-58 (Supp. 1971).
. Except for plaintiff’s contributory negligence, which the jury never relied upon according to its answers to the interrogatories.
. Brief for Plaintiff-Appellant, at 11.
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{
"author": "FREY, District Judge: KOELSCH, Circuit Judge",
"license": "Public Domain",
"url": "https://static.case.law/"
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John JANSKY, stockholder in Def. Standard, who is suing Individually on his own behalf and on behalf of Standard and all other stockholders who are not defendants herein, Plaintiff-Appellants, v. O. N. MILLER, as Director, Chairman of the Board of Directors, Chief Executive Officer, all of Standard; Standard Oil Company of California, a corporation (“Standard”), Defendants-Appellees.
No. 26171.
United States Court of Appeals, Ninth Circuit.
Feb. 5, 1973.
Koelsch, Circuit Judge, concurred specifically and filed opinion.
John Jansky, Esq., in pro. per.
Noble K. Gregory (argued), Anthony P. Brown, of Pillsbury, Madison & Su-tro, San Francisco, Cal., for defendants-appellees.
Before KOELSCH and ELY, Circuit Judges, and FREY, District Judge.
Honorable William C. Frey, United States District Judge, District of Arizona, sitting by designation.
FREY, District Judge:
The plaintiff, John Jansky, filed his own complaint against the defendants-appellees. The defendants moved to dismiss the complaint upon the grounds that it failed to state^ a claim upon which relief could be granted. The District Court granted the motion. The defendant refused to amend his complaint, choosing to stand on it; judgment was entered and plaintiff appealed.
Plaintiff’s whole case before this Court is stated on page 7 of his opening brief:
“In a nutshell, the proxy solicitation material of Miller and Standard — now before this Court — violates numerous provisions of the SEC Rule 14a, and thereby Section 14(a) of the 1934 SEC Act. The entire proxy solicitation is nothing but a fraudulent scheme to give Miller proxies to reelect himself, by means of deliberate suppression of facts which Miller was required to disclose. The non-disclosure deprived stockholders of an informed choice whether or not to remove Miller instead of reelecting him. The District Court was in error when dismissing the action. There being no facts in dispute, the decision below should be reversed, and the District Court directed to enter judgment in favor of stockholder.”
This Court’s conclusion, even more briefly summarized, is that plaintiff’s complaint and his briefs fail to establish any violations of SEC Rules or the “1934 SEC Act”. He has failed to state any claim upon which relief could be granted. The District Court properly dismissed his complaint. Plaintiff sought to have all proxies solicited by Standard (and presumably the election at which they were voted) voided because the solicitation material failed to include his personal feud-type charges against defendant Miller. A cause of action filed in California Superior Court contains twenty-seven (27) causes of action which are the basis of the present resolution.
This case involves a proxy statement sent out by the management of Standard Oil Company of California, hereinafter referred to as Standard. Plaintiff-appellant sought to have the following resolution placed in the proxy statement mailed out by Standard:
“Resolved that, O. N. Miller be removed from office of Director of the Company, not re-elected, and disqualified to serve as Director of the Company.”
Standard refused to insert the above resolution in the proxy statement on the grounds that the resolution was an election matter and Standard had the right to exclude it under Rule 14a-4(b), Security and Exchange Commission Regulations, (17 C.F.R. 240.14a-4(b) and 8(c)(2) ).
Standard, however, did include in its proxy under “Other Matter”, the following: “The Company has been advised by a stockholder that he intends to present two proposals to the meeting, if either or both of such proposals, is in fact presented, and is in order, the proxy holders will not vote proxies solicited hereby on such proposals.” This appears to have been done as the result of a ruling in the form of a letter from the Securities and Exchange Commission, which letter was included in plaintiff’s complaint, as an exhibit. Standard thereby did something it did not have to do, i. e., inform the stockholders that the appellant intended to present two matters, one of which is the above resolution. But in so informing them, it failed to fully inform the stockholders of the issue by omitting any mention of the nature of plaintiff’s proposals. Even conceding, arguendo, that Standard’s oblique reference to the Resolution in the proxy material was somewhat misleading, we are convinced, in Mr. Justice Harlan’s words, that “the defect [did not have] ... a significant propensity to affect the voting process .” Mills v. Electric Auto-Lite Co., 396 U.S. 375, 384, 90 S.Ct. 616, 621, 24 L.Ed.2d 593 (1970). As amplified by Judge Friendly in General Time Corp. v. Talley Industries, Inc., 403 F.2d 159, 162 (2d Cir. 1968), cert. denied, 393 U.S. 1026, 89 S.Ct. 631, 21 L.Ed.2d 570 (1969), this test of materiality “is whether, taking a properly realistic view, there is a substantial likelihood that the misstatement or omission may have led a stockholder to grant a proxy .” contrary to the manner in which he would have in the absence of the misstatement or omission.
If we take what seems to be plaintiff’s view, that Standard was soliciting proxies to abstain from voting on plaintiff’s proposals and that Rule 14a-4 and 14a-8 required more than Standard set out in their form of proxy and proxy statement and therefore Standard’s proxy solicitation statement was misleading under Rule 240.14a-9, plaintiff still has not stated any claim because plaintiff did not seek or solicit any proxies himself although he contends he filed the schedule called for in Rule 14a-ll. Further, if Standard had not inserted any statement concerning the plaintiff’s proposal, it could have voted the proxies against his proposal instead of abstaining. It is undisputed that the plaintiff’s resolution is an election matter. Such matter need not be included in the proxy statement, Rule 240.14a-8(a).
Plaintiff contends such election matter must be included in the proxy statement by virtue of the application of Rule 14a-4(a) and 14a-4(b)(l). Thus, he argues, it must be identified clearly and impartially and separately. Rule 14a-4(a), where applicable at all, merely relates to identifying matters “intended to be acted upon, whether proposed by the management or by security holders.” Since the proxy statement clearly indicated no action was to be taken on plaintiff’s proposals, further identification was not necessary and the rule not applicable.
Rule 14a-4(b)(l) is likewise inapplicable, it provides:
“Means shall be provided in the form of proxy whereby the person solicited is afforded an opportunity to specify by ballot a choice between approval or disapproval of each matter or group of related matters referred to therein as intended to be acted upon, other than elections to office. A proxy may confer dis-cretionai'y authority with respect to matters as to which a choice is not so specified provided the form of proxy states in bold face type how it is intended to vote the shares represented by the proxy in each case.” (Emphasis supplied).
Standard initially felt that plaintiff’s proposal was submitted under Rule 240.-14a-8 and therefore complied with Rule 240.14a-8(d) as shown by the exhibits attached to plaintiff’s complaint. Thus, if we take the view as the Securities and Exchange Commission apparently did in its said letter of March 10, 1970, that plaintiff’s proposals fall within the scope of Rule 14a-8, then Rule 14a-8(e)(2) comes into play and justifies the exclusion of plaintiff’s proposals. It appears, in spite of plaintiff’s denials in his brief in this case and his argument submitted to the trial judge, that plaintiff has exhibited a personal feud with defendants.
Plaintiff’s opening brief presents seven questions which he feels are pertinent.
There is no need to detail them here nor to treat them separately. They are all resolved by the foregoing discussion except whether Rule 14a-6 has been complied with.
To dispose of this issue we must point out that for purposes of this case there are two types of Standard stockholders. One type consists of members of Standard’s Stock Plan for Employees; the other type consists of stockholders not members of such Stock Plan. Both types received Standard’s proxy statement. However, the Stock Plan members received a proxy card and letter from the trustee of such Stock Plan, Crocker Citizens National Bank, which differed from that sent out by Standard to the stockholders who were not members of the Stock Plan.
Plaintiff contends that Standard is responsible for the material sent out by Crocker Citizens National Bank, and that such material has not been filed with Pacific Coast Stock Exchange and such material otherwise violates SEC Rule 14a-9.
The conclusions of plaintiff with respect to these allegations are not supported by the regulations he cites. However, plaintiff fails to state any cause of action by virtue of his allegations with respect to these matters. He hasn’t alleged any harm or damage to anyone by virtue of any such acts of Crocker, assuming only for argument that Crocker in some way violated a pertinent rule or law.
There is nothing in the record to indicate any control by Standard over Crocker nor anything by which we can conclude Standard is responsible for what Crocker did or didn’t do. Further, under Rule 14a-2 Crocker’s solicitations are exempt.
Whether Crocker did or did not file anything with the Pacific Coast Stock Exchange is not pertinent or material to the issue before this Court which is whether plaintiff’s complaint against these defendants states a cause of’ ’action upon which relief may be granted. Crocker is not a party to this action.
This appeal simply involves whether plaintiff’s complaint states a proper claim. From a close review of the complaint, giving full consideration to plaintiff’s arguments, it is not clear what cause of action plaintiff feels he has upon which relief may be granted. His complaint contains many allegations, generally personal in nature; however, he alleges nothing which could be of significant impact on the voting process. There are no allegations relevant to actionable harm or damage or loss to himself or anyone else. His complaint is deficient within the purview of Mills v. Electric Auto-Lite Co., (1970) 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593, and J. I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 which he cites in his opening brief.
Nothing contained in plaintiff’s briefs would justify treating his complaint as stating a valid cause of action.
Judgment affirmed.
KOELSCH, Circuit Judge
(concurring specially):
The court points out and relies upon several bases for decision. It may well be that each is valid. However, I prefer to rest my concurrence upon one which I consider to be incontrovertibly disposi-tive and to express no view concerning any of the others.
As the court indicates, and as I read the relevant rules and regulations of the S.E.C., the solicitor of a proxy must duly advise the shareholder of the power he seeks; he need not state what he does not seek. Consistent with this interpretation, Rule 14a-4(a)(3) (Sec. 240.14a-4) provides in terms that the proxy form must “identify clearly and impartially the subject matter with respect to which the power has been granted.” Standard and Miller complied with these administrative requirements; surely they may not be faulted for gratuitously doing more.
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{
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UNITED STATES of America, Plaintiff-Appellee, v. Gene Roy TREXLER, Defendant-Appellant.
No. 72-2889
Summary Calendar.
United States Court of Appeals, Fifth Circuit.
Feb. 13, 1973.
Certiorari Denied June 4, 1973.
See 93 S.Ct. 2759.
William F. Russell, Lubbock, Tex. (Court-appointed), for defendant-appellant.
Frank D. MeCown, U. S. Atty., W. E. Smith, Asst. U. S. Atty., Fort Worth, Tex., for plaintiff-appellee.
Before GEWIN, AINSWORTH and SIMPSON, Circuit Judges.
Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al., 5 Cir. 1970, 431 F.2d 409, Part I.
AINSWORTH, Circuit Judge.
This is an appeal from a conviction for making false statements to a federally insured bank to influence the action of the bank, 18 U.S.C. § 1014 (1971), in which appellant Gene Roy Trexler raises three points, two about jury instructions on intent and the third on the failure of the Government to prove a fact mentioned in the indictment. We affirm.
In operating a used car business Trex-ler financed the purchase of used cars by pledging the title of each car to a bank insured by the Federal Deposit Insurance Corporation. When he sold a ear, the bank would return the title and he would transfer it to the purchaser. Then by agreement Trexler was obliged to pay the bank with the proceeds from the sale.
On April 6, 1972, Trexler was indicted on seven counts when he did not turn over the proceeds of several sales to the bank. Two of the counts were dismissed prior to trial, and he was convicted on the other five counts.
In point one the appellant emphasizes that the crime charged requires that the defendant make a false statement, so he contends that jury instructions should have limited the jury’s consideration to affirmative acts. We find that it was proper, however, for the District Judge to instruct the jury that for the purpose of deducing the defendant’s intent to commit the crime, the jury could consider what “a defendant does or fails to do.” See United States v. Wilkinson, 5 Cir., 1972, 460 F.2d 725, 730. Appellant’s reliance on United States v. Diogo, 2 Cir., 1963, 320 F.2d 898, is misplaced. In that case the Court concluded that a prosecution for false representations, as opposed to concealment, cannot “be grounded upon the omission of an explanation.” 320 F.2d at 905. Unlike Diogo, the District Judge in the present case required the jury to find that defendant made a false statement before it could find him guilty. At one point the District Judge said the jury must find that the defendant “committed the act of making a false statement.” At another point the Judge said, “The intent to mislead or defraud the bank and the falsity of the statement must be present at the time the statement is made or communicated to the bank.” We believe the instructions were adequate under the circumstances.
In point two appellant complains about the following jury instruction made by the Trial Judge: “Now, it is reasonable to infer that a person ordinarily intends the natural and probable consequences of his knowing acts.” While we do not permit a jury charge which shifts the burden of proof to the defendant through the use of a presumption, this Circuit does approve an instruction permitting the jury to infer intent from the natural and probable consequences of a defendant’s acts. United States v. Wilkinson, 5 Cir., 1972, 460 F.2d 725, 729-31; Estes v. United States, 5 Cir., 1964, 335 F.2d 609, 615-617, cert. denied, 379 U.S. 964, 85 S.Ct. 656, 13 L.Ed.2d 559, reh. denied, 380 U.S. 926, 85 S.Ct. 884, 13 L.Ed.2d 814 (1965); Mann v. United States, 5 Cir., 1963, 319 F.2d 404, 409; Harrison v. United States, 5 Cir., 1960, 279 F.2d 19, 24-25.
The final point is relevant to only two of the five counts. In the indictment Trexler allegedly told the bank he would “pay to the bank the amount of the value received by the defendant from the alleged purchaser of such automobile, whereas, in truth and in fact, after obtaining . . . title [from the bank], the defendant did not pay to the bank the value of such automobile, and the bank was therefore defrauded of the value of the above described automobile.” For the loans involved in these two counts the bank was not actually defrauded, because the bank itself eventually covered its loss by seizing funds which the defendant had in another account in the bank. As a general rule, the Government cannot broaden an indictment so as to convict the defendant on different facts from those charged in the indictment. Stirone v. United States, 361 U.S. 212, 215-216, 80 S.Ct. 270, 272, 4 L.Ed.2d 252 (1960); Ex parte Bain, 121 U.S. 1, 7 S.Ct. 781, 30 L.Ed. 849 (1887); United States v. Davis, 5 Cir., 1972, 461 F.2d 83, 90-91 (1972). But the Government need not prove all facts charged in the indictment as long as it proves other facts charged in the indictment which do satisfy the essential elements of the crime. Stevens v. United States, 6 Cir., 1953, 206 F.2d 64, 66. In the present case, the' indictment charges sufficient other facts to satisfy the statute under which the defendant was convicted. The statute, 18 U.S.C. § 1014, only requires proof of a false statement made “for the purpose of influencing in any way the action” of the bank. The indictment charges that the defendant made a false statement “for the purpose of influencing the action of such bank in releasing from the bank’s possession to the defendant a title.” This was sufficient. Accordingly, the Judge properly instructed the jury that “[ajctual loss is not an element of the offense.”
Affirmed.
. At other places the Judge elaborated on the failure to act:
In determining the issue as to intent, the jury is entitled to consider any statements made and acts done or omitted by the accused. . . .
. . . The jury may draw the inference that the accused intended all the consequences which one standing in like circumstances and possessing like knowledge should reasonably have expected to result from any intentional act or conscious omission.
. To assure that the burden of proof remained with the Government, the District Judge gave the following instructions:
Now, the burden of proving a defendant guilty beyond a reasonable doubt of every essential element of the crime charged rests upon the government. This burden is upon the government throughout the trial. It never shifts.
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{
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1st Lt. Richard G. CONWAY, M.D., Petitioner-Appellant, v. Lt. General A. D. SURLES, Commanding General, Sixth United States Army, Presidio of San Francisco, California; Hon. Robert Froehlke, Secretary of the Army, Respondents-Appellees.
No. 72-1050.
United States Court of Appeals, Ninth Circuit.
Feb. 5, 1973.
Rehearing Denied March 2, 1973.
Michael H. Weiss (argued), John T. Hansen, of Hansen, Jaffe & Weiss, San Francisco, Cal., for petitioner-appellant.
Stephen D. Petersen, Capt., Staff Army Judge Advocate (argued), San Francisco, Cal., James L. Browning, U. S. Atty., F. Steele Langford, John Coo-ney, Asst. U. S. Attys., San Francisco, Cal., for respondents-appellees.
Before TRASK and CHOY, Circuit Judges, and ANDERSON, District Judge.
The Honorable J. Blaine Anderson, United States District Judge for the District of Idaho, sitting by designation.
CHOY, Circuit Judge:
Conway appeals from the district court’s denial of a petition for a writ of habeas corpus. Conway, a physician, requested that his draft board classify him as a conscientious objector. The request was denied and he was classified I-A on May 25, 1971. That decision was affirmed by the appeals board. Conway contended that the classification was erroneous, but since he had exhausted all appeals within the Selective Service System he was ordered for induction.
Attached to the induction order was a letter from the Army informing Conway that if he desired to volunteer for a commission as a reserve commissioned officer in the Army Medical service, he could apply for it. Conway’s induction was held in abeyance while he considered applying for the commission. Conway decided to apply for the commission rather than be inducted. On November 30, 1971 he accepted the appointment tendered by the President through the Army and took the oath of office.
Six days later Conway filed the petition for a writ of habeas corpus alleging that he was in the custody of the U. S. Army unlawfully by reason of his improper classification by the Selective Service System. The district court dismissed the petition after concluding that section 10(b)(3) of the Selective Service Act [50 U.S.C.App. § 460] precluded any judicial review in this case. The relevant portion of the Act states:
“No judicial review shall be made of the classification or processing of any registrant by local boards, appeal boards, or the President, except as a defense to a criminal prosecution instituted under section 12 of this title, after the registrant has responded either affirmatively or negatively to an order to report for induction, or for civilian work.”
The district court concluded that by accepting the commission Conway had neither “affirmatively or negatively” responded to the order to report for induction and therefore was barred from the use of the writ. We disagree with this interpretation of § 10(b)(3) because it is inconsistent with the Congressional intent behind the statute.
The Supreme Court has in the past decided that this section cannot sustain a literal reading. Oestereich v. Selective Service Board No. 11, 393 U.S. 233, 238, 89 S.Ct. 414, 417, 21 L.Ed.2d 402 (1968). However, the difficulties presented by the imprecision of the draftsman’s language can be resolved by a review of the section’s background and legislative history. Oestereich, supra at 246, 89 S.Ct. 414 (Stewart, J., dissenting) . Congress passed this section in an attempt to prevent the judiciary from entering into the selective service classification processes at a premature stage. “Both the House and Senate committees were ‘disturbed by the apparent inclination of some courts to review the classification action of local or appeal Boards before the registrant had exhausted his administrative remedies.’ ” Oestereich, supra at 244, fn. 7, 89 S.Ct. at 420 (Harlan, J., concurring).
Thus “§ 10(b)(3) is purely procedural, specifying when substantive rights may be asserted.” Oestereich, supra at 249, 89 S.Ct. at 423, (Stewart J., dissenting). Congress inserted the clause “after the respondent has responded either affirmatively or negatively to an order to report for induction” to establish at what time it would be appropriate for a court to intervene. Congress was not attempting to limit the scope of judicial review. The statute only limits preinduction review.
Conway did exhaust his administrative remedies. Granting his habeas corpus petition would not do violence to the finality provision embodied in § 10(b)(3). Conway’s acceptance of a commission after the receipt of an induction order was an affirmative response to the induction order and judicial review of his classification at this time is not precluded by § 10(b) (3).
However, this does not necessarily mean that his petition should be granted. A writ of habeas corpus is available only when a petitioner is being unlawfully detained. The Army contends that even if Conway’s induction order were invalid, it could lawfully continue to detain him. The Army maintains that the basis for its detention is not the allegedly invalid induction order, but rather Conway’s voluntary application for and acceptance of a commission.
Conway, however, contends that the Army would not have tendered him a commission had he not been selected for induction; nor would he have accepted the commission, but for the compulsion of the induction order that he contends is illegal.
Army regulations seem to support Conway’s first contention that the tender of his commission was contingent on the existence of an outstanding, valid induction order. If so, then we think there would be a sufficient connection between his present detention and his induction order, so that an invalid induction order would taint his detention.
On the record before us we cannot determine that the Army did in fact rely upon the legality of the induction order in effecting the tender of Conway’s commission. Therefore, we remand the case so that the district court can make this determination. In the light of our disposition of this case it is unnecessary for us to pass on Conway's alternate contention that he would not have accepted the commission but for the compulsion of the induction order; but if necessary this issue could also be considered on remand.
Reversed and remanded.
. “No one, we believe, suggests that § 10 (b) (3) can sustain a literal reading. For while it purports on its face to suspend the writ of habeas corpus as a vehicle for reviewing a criminal conviction under the Act, everyone agrees that such was not its intent.” Oestereich, supra, at 238, 89 S. Ct. at 417.
. The legislative history clearly shows Congress’s motivation in enacting this section. The Senate Armed Services Committee stated that “[u]ntil recently, there was no problem in the observance of the finality provision. In several recent cases, however, district courts have been brought into selective service processing prematurely. The committee attaches much importance to the finality provisions and reemphasizes the original intent that judicial review of classifications should not occur until after the registrant’s administrative remedies have teen exhausted and the registrant presents himself for induction.” (emphasis added) S.Rep.No.209, 90th Cong., 1st Sess., 10 (1967).
A similar statement of intent was included in the report of the House Armed Services Committee:
“The committee was disturbed by the apparent inclination of some courts to review the classification action of local or appeal boards before the registrant had exhausted his administrative remedies. Existing law quite clearly precludes such a judicial review until after a registrant has been ordered to report for induction and has responded either affirmatively or negatively to such an order. In view of this inclination of the courts to prematurely inquire into the classification action of local boards, the committee has rewritten this provision of the law so as to more clearly enunciate this principle. The committee was prompted to take this action since continued disregard of this principle of the law by various courts could seriously affect the administration of the Selective Service System.” H.R.Rep.No.267, 90th Cong., 1st Sess., 30-1 (1967), U.S. Code Cong. & Admin.News 1967, p. 1333.
. In certain extreme cases such as Oestereich, supra the statute has been construed so as not to preclude even pre-induction review. But it is clear that pre-induction review would not have been permissible in the instant case. Fein v. Selective Service Board. No. 7, 405 U.S. 365, 92 S.Ct. 1062, 31 L.Ed.2d 298 (1972).
. Army Regulation: No. 601-54, Processing and Commissioning of Medical Specialist Registrants. Ch. 1, 1-1. Purpose. This regulation prescribes the pro-eedures to be followed by area commanders and by The Surgeon General as Executive Agent in processing doctors of medicine all of whom are hereinafter referred to as medical specialists and who are liable for induction into the Armed Forces under the Military Selective Service Act of 1967 . . . (emphasis supplied). See also paragraphs 1-3, 2-1, 2-6 (b), 3-3, 3 — 4 and 3-8 which also tend to support the conclusion that the offer of the commission to Conway was significantly intertwined with the disputed induction order.
. The district court will of course also have to find that Conway’s classification was improper before his petition could be granted. We do not consider this aspect of the case.
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{
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"license": "Public Domain",
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John Wayne REEVES and Sherry Marie Reeves, wife, Plaintiffs-Appellants, v. POWER TOOLS, INC. and Omark Industries, Inc., Defendants-Appellees.
No. 72-1558.
United States Court of Appeals, Sixth Circuit.
Feb. 22, 1973.
James F. Schaeffer, Memphis, Tenn., for plaintiffs-appellants.
Leo Bearman, Jr., and W. Frank Crawford, Memphis, Tenn., for defendants-appellees; Law Firm of Leo Bear-man, Leo Bearman, Jr., Memphis, Tenn., and James E. Leary, W. Frank Crawford, Thomason, Crawford & Hendrix, Memphis, Tenn., on brief.
Before PECK and LIVELY, Circuit Judges, and MORTON, District Judge.
Honorable L. Clure Morton, United States District Judge for the Middle District of Tennessee, sitting by designation.
LIVELY, Circuit Judge.
This diversity action was filed by appellants Reeves to recover for serious personal injuries which the husband suffered when a cartridge exploded in a powder-activated tool which he was using in his employment as a sheet metal worker. Reeves was employed by Southern States Contractors, which is not a party to this action, and had several years’ experience using various types of power tools. One of the appellees is Power Tools, Inc., (Power Tools) which owned the tool being used by John Reeves and had furnished it to Reeves’ employer in consideration of an agreement by the employer to purchase all its requirements of studs and cartridges from Power Tools. At the conclusion of the case for the plaintiffs the District Court directed a verdict in favor of Omark, and the case proceeded with Power Tools as the only defendant. After lengthy deliberation the jury was unable to make a verdict and was discharged. Appropriate motions were made by the various parties, and upon reconsideration the court denied the plaintiffs’ motion for a new trial as to Omark and granted the motion of Power Tools for judgment notwithstanding the verdict. Mr. and Mrs. Reeves have appealed both rulings.
The group of which Reeves was a part was engaged in hanging ducts on a building at Memphis State University when the injury occurred. Reeves testified that he noticed one of the hangers was crooked and determined that it would be necessary to replace it. The procedure used involved standing on a stepladder and placing a new stud in the ceiling. This was accomplished by use of a powder-activated tool manufactured by Omark and referred to by the witnesses as a “gun”. The tool resembled a grease gun in appearance and was used to make strong fastenings directly to concrete or steel without the necessity of drilling holes. It had a firing chamber similar to that of a rifle or pistol and used specially loaded blank cartridges. The gun was held flush against the surface to which a fastening was being made and special fasteners were propelled into the concrete or steel. When the muzzle end was pressed against the surface, this cocked the mechanism, and a trigger was used to fire it. The tool was loaded by opening or “breeching” it where it was hinged, between the handle and the firing chamber. The fastener or stud was then inserted, followed by the cartridge, and the tool was closed before use. The cartridges were rim fired and there was an automatic extractor which partially removed the spent shell so that the operator could complete removal by hand.
Appellant John Reeves testified that he climbed a stepladder, loaded the gun with a stud and a shell, pressed it against the ceiling and pulled the trigger. Instead of firing, the gun just “clicked”. He then opened it and discovered that the cartridge was still in the chamber and the extractor had by-passed it and was behind the live shell. He testified that he tried to close the gun, “bumping” it once or twice and that as he reopened it the shell went off. He testified that he was never able to close it completely after the misfire occurred.
The particular tool involved in the accident had been loaned by Power Tools to appellant’s employer on August 20, 1969, and had been purchased from Omark by Power Tools on April 17, 1967. It was the only gun being used on this particular job and two or three men were using it. The workmen had earlier experienced some difficulty with the gun and a field representative of Power Tools had used sandpaper or emery cloth inside the chamber to break up carbon deposits and had cleaned it at the work site. The tool was locked up at night in a “gang box”. When further trouble developed, the same representative picked up the tool one Friday afternoon and took it to the shop of Power Tools. He completely disassembled the gun and cleaned it throughly before returning it the following Monday morning. Ten working days later the accident occurred. This employee of Power Tools testified that it was his job to keep the tools of his employer repaired and in service until some part became worn, at which time they were taken out of service.
Omark delivered printed safety instructions, including procedures in case of misfire, with every new tool. However, Power Tools never loaned new tools and the president of Southern States as well as Reeves and his immediate supervisor testified that no one had ever given them any written safety instructions. No mention of misfire procedures was made to Reeves, who said he had been told only that the tools were dangerous and he should be careful. He had never experienced a misfire in nearly seven years of using powder-activated tools and had never seen an extractor bypass a cartridge, leaving it in the chamber. The printed safety rules directed that in case of misfire, the operator wait fifteen seconds, then pull the trigger again. If the tool did not fire the second time, he was to keep it in place against the surface, open the breech, remove the cartridge and dispose of the cartridge by putting it in a bucket of water. Appellant testified that when the gun misfired, he removed the tool from the ceiling and opened it almost immediately and then attempted to force it closed with the live shell still in the chamber and the extractor above it.
A number of experts testified. Two who were called by the plaintiffs stated that they had taken the tool apart after the accident and found several abnormalities in it. The chamber was “bell-mouthed” or larger at the top than at the bottom and the extractor shaft had a slight bow in it, giving it more play than normal. They both testified that it was possible to fire a cartridge which had been bypassed by slamming the extractor against the rim. It was agreed, however, that the spring on the extractor would not return it to its normal position with sufficient force to ‘cause firing. These two witnesses stated that the enlargement of the chamber and bow in the extractor rod caused the extractor to fail to eject the live cartridge, but the cause of the misfire itself was not shown.
In granting the motion for a directed verdict as to Omark, the District Court held that the plaintiffs had failed to prove the absence of any tampering or opportunity for tampering with the tool and cartridge after they left Omarlt’s control. To recover from a manufacturer under the doctrine of strict liability a plaintiff in Tennessee must show that the product was in a harmful condition when it left the manufacturer’s control. Ford Motor Company v. Lonon, 217 Tenn. 400, 420, 398 S.W.2d 240 (1965). In the Lonon case, the Supreme Court of Tennessee adopted Section 402A of 2 Restatement (Second) Torts (1965). If there is no direct proof of its condition when it left the manufacturer’s control the burden is on the plaintiff to show by a clear preponderance of the evidence that there was no opportunity for the product to have been tampered with after it left such control. Barbeau v. Roddy Manufacturing Company, 431 F.2d 989 (6th Cir. 1970); Coca-Cola Bottling Works v. Crow, 200 Tenn. 161, 166, 291 S.W.2d 589 (1956). The court ruled that the plaintiffs had failed to sustain this burden of proof.
The second theory on which the case had proceeded against Omark was the failure of a duty to warn of the dangers associated with the use of the tool. Neither Reeves nor his immediate supervisor ever saw the printed instructions or received any specific warning about misfires. In Trimble v. Irwin, 59 Tenn.App. 465, 441 S.W.2d 818 (1968), the Tennessee Court held:
“An adequate warning is one calculated to bring home to a reasonably prudent user of the product the nature and the extent of the danger involved in using the product.” 441 S.W.2d at 822.
The District Court found that when Omark delivered to Power Tools the printed instructions with respect to procedures to be followed in event of a misfire, it had a right to expect the warnings to be passed along to the ultimate user.
We believe the trial judge properly disposed of the claims against Omark. There was not sufficient evidence of a defect in the cartridge which misfired and then exploded to justify submitting any issue to the jury related to it. With respect to the tool, or “gun”, the record shows that it was not new, that it had been serviced at least once by Power Tools and that the defects were more likely related to long use than to a harmful condition when it left Omark’s control. There being no evidence of its condition at that time, appellants were required to show a lack of opportunity for tampering thereafter. This they did not do. We also agree that Omark adequately discharged its duty to warn of the dangerous nature of the tool by distributing printed instructions complete with, diagrams and illustrations with each new tool that it sold or delivered. Thus, looking at the evidence and reasonable inferences in the light most favorable to appellants, DeGarmo v. City of Alcoa, 332 F.2d 403 (6th Cir. 1964), Judge Wellford properly concluded that no jury issue existed as to the appellee Omark.
The claim against Power Tools is more difficult. There is no dispute that Power Tools furnished the tool involved in the accident, that it never delivered to Reeves or his superiors at Southern States the printed safety rules prepared by Omark and that its employee cleaned and serviced the tool approximately ten days before the accident. This employee testified that he did not notice that the chamber was bell-mouthed or that the extractor shaft was bowed and he had no instrument to measure the chamber. After inspection he determined that the tool was “Okay” and took it back to Reeves on the job site. One of the complaints which had caused the representative of Power Tools to examine the tool was that the extractor was not working properly, that at times it was ripping the rim off the used cartridges.
The District Court held that even if these acts and omissions of Power Tools constituted negligence, this negligence created a “static” condition of danger which was safe until the appellant tried to bump or slam the chamber shut and then reopened it. The following language from Friendship Telephone Co. v. Russom, 43 Tenn.App. 441, 450, 309 S.W.2d 416, 421 (1958), was cited in support of this finding:
“Some cases do draw a distinction between the ‘cause’ of harm and the ‘condition’ in which the harm happened. It is said that if defendant’s act created only a passive, static condition which made the harm possible, he is not liable. .
“So far as the distinction has any validity at all, it must refer to the type of case where the forces set in operation by the defendant have come to rest in a position of apparent safety, and some new force intervenes. But even in such cases, it is not the distinction between ‘cause’ and ‘condition’ which is important, but the nature of the risk and the character of the intervening cause.”
The judge concluded that appellant’s “injuries were the result of his own conscious act which was sufficiently unpredictable so as not to come within the scope of defendant Power Tools’ reasonable apprehension.” He did not hold that Reeves’ conduct in “bumping” and reopening the tool constituted contributory negligence, but that it constituted an intervening act which was independent and conscious. Ford Motor Co. v. Wagoner, 183 Tenn. 392, 192 S.W.2d 840 (1946). Although Reeves had some seven years experience with power tools and had owned several firearms, he had never been confronted with a misfire or instructed on safety precautions in the event of such a happening. Although he knew that there was a general danger in handling powder-activated tools, the record does not warrant a holding that he must have recognized the precise danger which confronted him when his tool failed to fire.
The defense of independent intervening act does not absolve a tort feasor from liability unless the forces set in operation by him have come to rest in a position of apparent safety before the new force intervenes. Power Tools, as supplier of the tool to appellant’s employer had a duty at least to pass on the warning of danger it had received from the manufacturer. 2 Restatement (Second) Torts § 388 (1965); Trimble v. Irwin, supra, at 822. As the owner-lender of the tool who undertook to maintain it in good working order, Power Tools cleaned and tested it approximately ten days before the accident and did not notice the defects which were found to exist upon expert examination of the tool after the accident.
Judgment notwithstanding the verdict is not proper unless the evidence is such that there can be but one reasonable conclusion as to the proper verdict. It should not be granted if there is a conflict in the evidence, and credibility of evidence is not to be considered in passing on a motion for judgment. Greer v. United States, 408 F.2d 631 (6th Cir. 1969); Moore’s Federal Practice, Par. 50.07(2) (Second Edition). We believe that if this test is applied to the record in the present case there is evidence from which a properly instructed. jury could find that there existed a duty upon Power Tools to warn appellant of the danger of improper handling of the tool following a misfire. Furthermore, a jury could properly find that the defects in the tool should have been discovered by Power Tools when it had the tool in its possession for maintenance. 2 Restatement (Second) Torts (1965) § 403. The jury could further have found that failure to discover the defects created the condition which led directly to appellant’s injury, and that the forces set in motion by the failure to warn of the very danger which appellant faced when the tool misfired had not become static, but were still operating when he undertook to reactivate the tool by forcing it closed. In short, we find that jury issues existed as to whether the acts or omissions of Power Tools were such as to create liability to appellant and also whether the conduct of appellant after the tool misfired constituted an intervening act which was independent and conscious. Ginsburg v. Insurance Company of North America, 427 F.2d 1318 (6th Cir. 1970). Upon another trial, if the evidence is substantially the same, these issues should be presented to the jury along with all other issues properly developed.
The judgment is affirmed as to the appellee Omark Industries, Inc. and reversed as to the appellee Power Tools, Inc. A new trial is granted as to all issues between appellants and appel-lee Power Tools, Inc. Appellants shall pay the costs taxed in their appeal from the judgment in favor of Omark and ap-pellee Power Tools, Inc. shall pay the costs taxed in the appeal from the order granting it judgment notwithstanding the verdict.
. Sec. 402A. Special Liability of the Seller of Product for Physical Harm to User or Consumer
(1) One who sells any product in a defective condition unreasonably dangerous to the user or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property if
(a) the seller is engaged in the business of selling such a product, and
(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.
(2) The rule stated in Subsection (1) applies although
(a) the seller has exercised all possible care in the preparation and sale of his product, and
(b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.
. § 403
“Chattel known to be dangerous — One who as an independent contractor makes, rebuilds, or repairs a chattel for another and turns it over to the other, knowing or having reason to know that his work has made it dangerous for the use for which it is turned over, is subject to the same liability as if he supplied the chattel.”
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UNITED STATES of America, Plaintiff-Appellee, v. Randall Scott ADKINS, Defendant-Appellant.
No. 72-2336.
United States Court of Appeals, Ninth Circuit.
Jan. 5, 1973.
Duniway, Circuit Judge, dissented and filed opinion.
Don H. Marmaduke (argued), of Mar-maduke, Aschenbrenner, Merten & Salt-veit, Portland, Or., for defendant-appellant.
D. Richard Hammersley, Asst. U. S. Atty. (argued), Joseph E. Buley, Asst. U. S. Atty., S. I. Lezak, U. S. Atty., for plaintiff-appellee.
Before HAMLIN and DUNIWAY, Circuit Judges, and JAMESON, District Judge.
Honorable W. J. Jameson, United States Senior District Judge for the District of Montana, sitting by designation.
JAMESON, District Judge:
Randall Scott Adkins appeals his conviction by the court sitting without a jury of failing to submit to induction in violation of 50 U.S.C.App. § 462. The sole issue is whether his local board violated Selective Service Regulations dealing with the Extended Priority Selection Group (32 C.F.R. § 1631.6(d)(5)) in ordering his induction after April 1, 1971.
Adkins was classified II-S from December, 1967 to December, 1970, when he was reclassified I-A. On January 1, 1971 he was transferred to the Extended Priority Selection Group. On February 5, 1971 he reported for his physical examination and was found acceptable.
On February 11, 1971 the board received a letter from Adkins requesting SSS Form 150, Special Form for Conscientious Objector. This form, which contains the statement, “Complete and return within 30 days”, was mailed to Adkins on the same day. The form was never returned. On February 16, 1971 Adkins was notified of his acceptability for induction.
On April 19, 1971, without any request from Adkins, the board reopened and reviewed his status and retained him in I-A. After a reopening and reclassification a registrant has 30 days to appeal. (32 C.F.R. §§ 1625.13, 1626.2) On May 24, 1971 Adkins was ordered to report for induction on June 7, 1971. On June 2, 1971, he again requested SSS Form 150, and it was mailed to him the same day. On June 8 he reported for induction but refused to submit.
Appellant contends that § 1631.6(d) (5), supra, required that his induction be scheduled for a date prior to April 1, 1971 or that on that date he be transferred to a lower priority selection group.
This court has construed the meaning of the exception in § 1631.6(d)(5) supra permitting an order “to report for induction as soon as practicable” in two recent cases — United States v. Lewis, (unpublished), No. 72-1927 (9th Cir.) decided September 8, 1972, and United States v. Bowen, 467 F.2d 470 (9th Cir.) decided September 29, 1972.
In Lewis we affirmed the district court, incorporating by reference its opinion filed January 21, 1972, 5 SSLR 3134(D.Or.Cr. 71-276). Factually Lewis is similar to this case. In August the local board sent Lewis a SSS Form 150, which he did not return. On December 29, 1970, the board reviewed his II-S status and classified him I-A. On January 12, 1971 he was placed in the Extended Priority Selection Group. On March 2, without a request from Lewis, the board reopened his classification and retained him in I-A. On April 5 he was ordered to report for induction on April 27.
Assuming “that the circumstances' covered by the exception were intended primarily to remedy delays initiated by the registrant,” the court held that it did not follow “that a brief delay caused by board action renders an induction order void”, and suggested that the judicial construction for which Lewis contended “would deny meaning to the words ‘as soon as practicable’ and would frustrate the intent behind the exception.” The court continued in part:
“In the absence of evidence that the board acted arbitrarily, or reopened the defendant’s file for the sole purpose of extending his vulnerability, I must assume that the board acted in good faith and reviewed the file because it had some legitimate reason to do so.” United States v. Lewis, supra.
In Bowen we upheld an order to report for induction on April 26, 1971 where the registrant had appealed his I-A classification following denial of his conscientious objector claim, pointing out that “Bowen was not inducted prior to April 1 because his appeal caused the ‘inability of the local board to act’ in sufficient time” and that the board did “order Bowen to report ‘as soon as practicable.’ ” We again recognized that a local board “has reasonable discretion to direct its operations in accord with its own procedures” and presumed “that the board acted regularly and in the usual course of its business.” United States v. Bowen, supra, 467 F.2d at 472. In Bowen we also reviewed cases in other circuits interpreting the regulation and upholding post April 1 inductions.
Adkins, as did Bowen, relies heavily on United States v. Born, 338 F.Supp. 444 (W.D.Mich.1972), the only case to hold that an induction after April 1 was beyond the jurisdiction of the board. As we pointed out in Bowen, Born is distinguishable: “There, a delay of almost three months was found to have been due solely to board mismanagement.” United States v. Bowen, supra, 467 F.2d at 472.
Adkins’ Selective Service File does not show when the board met in March, 1971. The Government stated in its brief that the board met on March 15. This was 31 days from the date Form 150 was mailed. Particularly in view of the statements in the Form and accompanying notice, the board could reasonably wait at least 30 days to give Adkins an opportunity to complete and return the Form. Allowing time for receipt of communications by mail, we can not say that the board acted unreasonably in deferring action until its April meeting.
While the board was not required to reopen Adkins’ case at its April 19 meeting, there is no evidence that it abused its discretion in doing so. It could not then order induction for another 30 days. On May 24 Adkins was ordered to report on June 7.
While the delay here was longer than in Lewis and Bowen, we again recognize the “necessary administrative flexibility” available to local boards in their efforts to comply with § 1631.6(d)(5). As in Bowen, we “presume that the board acted regularly and in the usual course of its business.” In the absence of any showing of bad faith or mismanagement by the board, or of any prejudice to the registrant, we conclude that Adkins’ local board proceeded with reasonable dispatch to comply with the regulations and that Adkins “was inducted as soon as practicable.”
Affirmed.
DUNIWAY, Circuit Judge:
I dissent. Had Adkins’ board ordered him to report for induction at its April 19 meeting, I would be inclined to agree with the result reached by the majority. However, it did not do so. I would hold that in this case the board failed to comply with the mandate of 32 C.F.R. § 1631.6(d) (5) to issue an induction order “as soon as practicable” after April 1.
Although the majority is correct in stating that Adkins’ file, the only evidence introduced at his trial, is silent regarding a March meeting of his board, the Government has conceded on this appeal that the board met on March 15, one full day after the time within which Adkins was to complete the Form 150 had expired. However, no action was taken at that meeting, despite the fact that the board could have issued an induction order to Adkins. Rather, it waited until April 19, reopened his classification sum, sponte, and retained him in I-A.
No explanation has been offered for this action. The only possible authority for the April 19 reopening is 32 C.F.R. § 1652.2, which provides that a local board “may” reopen on its own motion “if such action is based upon facts not considered when the registrant was classified which, if true, would justify a change in the registrant’s classification. .” The only additional “fact” in Adkins’ file was that over two months before, he had requested a Form 150, which he never returned. By no stretch of the imagination could this request satisfy the requirements of § 1652.2. Thus, under the regulation, Adkins’ board had no authority to reopen his classification on April 19. This being so, there can be no presumption that it acted properly. It follows that there need be no showing such as the majority would require, that there was “bad faith or mismanagement by the board.”
In the usual case, there will be no claim that a reopening was erroneous, because the resulting delay in induction works to the advantage of the registrant. Here, however, the shoe is on the other foot. The prejudice to Adkins is obvious: his exposure as a member of the Extended Priority Selection Group (EPSG) has been extended to half a year. The EPSG regulations create an extraordinary liability to induction which can only have an unsettling effect upon the life of the registrant. While the regulations were not intended to place local boards in a stráStjacket, an open-ended period of vulnerability is precisely the evil which they were designed to prevent.
Moreover, to require a showing of bad faith or mismanagement on the part of the board would, as a practical matter, eliminate the “as soon as practicable” requirement altogether. This ease is a perfect example of how the majority’s interpretation would permit a' local board to play fast and loose with its regulations, issuing an induction order whenever it got around to it. I would hold that “as soon as practicable,” while not an inflexible requirement, obliges the board to act properly and expeditiously after April 1.
Despite the fact that United States v. Lewis, 9 Cir., 1972, incorporating by reference D.Or., 1972, supra, involved a sua sponte reopening of the registrant’s classification with a consequent delay in induction, it is not in point here. In that case it does not appear that the board’s power to reopen on its own motion was challenged. More importantly there the board’s action took place on March 1, well before the obligation to proceed “as soon as practicable” accrued. An induction order was issued promptly upon the expiration of the appeal period. Lewis is thus easily distinguished on its facts.
No court has interpreted the “as soon as practicable” requirement in circumstances even remotely similar to those of this case. With one exception, which, although it resulted in reversal of the registrant’s conviction, is distinguish-lidity of induction orders issued either in March or early April, with induction able, prior cases have involved the va-scheduled for April. Thus, the sole issue of consequence in those cases was whether April 1 is an absolute cutoff date for induction of members of the EPSG. Recognizing that there is often considerable jockeying by registrants immediately prior to induction, and that it is unreasonable to impose inflexible deadlines upon local boards, the cases have uniformly rejected such arguments. I agree with the results of those cases, but they are not relevant here.
In sum, Adkins’ board would receive all of the judicial deference and room for administrative flexibility to which it is entitled if we were to hold that it was not required to issue an induction order on March 15. The further delay occasioned by its improper action on April 19 was unjustified. I would reverse Adkins’ conviction.
. 32 C.F.R. § 1631.6(d)(5) :
“(5) Members of the Extended Priority Selection Group who have not been issued orders to report for induction and originally scheduled for a date prior to April 1 shall forthwith be assigned to the lower priority selection group to which they would have been assigned had they never been assigned to the Extended Priority Selection Group; except that members of the Extended Priority Selection Group who would have been ordered to report for induction to fill the last call in the first quarter of the calendar year but who could not be issued orders shall remain in the Extended Priority Selection Group and shall be ordered to report for induction as soon as practicable. Circumstances which would prevent such an order shall include but not be limited to those arising from a personal appearance, appeal, preinduction physical examination, reconsideration, judicial proceeding, or inability of the local board to act.”
The same regulation was formerly § 1631.7(d)(5). By amendment the numbering but not the language has been changed.
. A “Notice to Registrant”, transmitting Form 150, reads in part:
“ * * * The specified thirty-day period is normally sufficient for the completion and filing of this form, together with any supporting letters or affidavits from your minister or priest, teachers or counselors, family or friends, which you may wish to offer to the members of your local board.
“Although you should make a timely filing, your claim to conscientious objection is a matter that will be taken up by your board at a later date. * * ”
. Smith v. Tarr, 444 F.2d 251 (2 Cir. 1971); Lawton v. Tarr, 446 F.2d 787 (4 Cir. 1971) cert. denied, 405 U.S. 924, 92 S.Ct. 969, 30 L.Ed.2d 796 (1972); Schemanski v. Tarr, 331 F.Supp. 65 (N.D.Ill.1971).
. There is no entry in the board’s “Minutes of Action” between February 16, 1971 and April 19, 1971. Nor was any evidence offered at the trial with respect to a March meeting of the board.
. United States v. Born, supra 338 F.Supp. at 447; United States v. Lewis, supra.
. While we do not approve of unnecessary delays by draft boards, particularly in the light of the aim and purpose of § 1631.6(d)(5), we cannot say that this board’s inaction exceeded the scope of flexibility granted. Clearly it did not amount to “irregular, unjustifiable and lawless conduct.” United States v. Born, supra 338 F.Supp. at 447.
. Appellant does not argue that he was prejudiced, but rather that the board failed to comply with Selective Service Regulations. Had the board acted in March, Adkins would have been called for induction at an earlier date. The board’s failure to act in March and the reclassification of Adkins in April simply lengthened the time during which he could assert a claim for conscientious objector status.
. “As a matter of public record, the board met on Monday, March 15.” (Brief of appellee, p. 4.)
. In this regard I find it significant that one of the President’s goals in instituting the lottery system was to place precise limits upon a registrant’s period of prime draft vulnerability so as to reduce the uncertainty that accompanies it. See S.Rep. 91-531, 91st Cong. 1st Sess., quoted in 1969 U.S.Code Cong. & Admin.News, pp. 1318, 1321. The EPSG regulations were promulgated in connection with the lottery system. Exec.Order No. 11,563, 3 C.F.R. 972, 974-975 (1966-70 Comp.).
. The exception is United States v. Born, W.D.Mich., 1972, 338 F.Supp. 444. I do not mean to suggest that the conduct of Adkins’ board approached the level of mismanagement present in that case. The majority and I part company with respect to whether such misconduct is necessary.
. United States v. Bowen, 9 Cir., 1972, 467 F.2d 470 (March 15 induction order, induction scheduled for April 26); United States v. Lewis, supra (April 5 and April 27); Lawton v. Tarr, 4 Cir., 1971, 446 F.2d 787 (April 5 and April 21); Smith v. Tarr, 2 Cir., 1971, 444 F.2d 251 (March 24 and April 15); Schemanski v. Tarr, N.D.Ill., 1971, 331 F.Supp. 65 (April 5 and April 16). In Levine v. Selective Service Local Bd. No. 18, 2 Cir., 1972, 458 F.2d 1281, there was a dispute as to whether the board had opened the registrant’s classification on March 1 following an interview held on February 23 to discuss his claim for an occupational deferment. An induction order had been issued on April 26, requiring him to report on May 13. While reversing a district court order dismissing the complaint so that the factual issue could be determined, the court observed that, if the board did reopen on March 1, “it would appear that the issuance was ‘as soon as practicable’.” Id. at 1285. Not only was this dictum, but it was clear that the board would have been justified in reopening before April 1, and there was nothing to indicate that it did not issue the order at its first meeting thereafter.
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UNITED STATES of America, Appellee, v. Harry F. SEUSS, Defendant, Appellant.
Nos. 72-1226, 72-1227.
United States Court of Appeals, First Circuit.
Heard Dec. 11, 1972.
Decided Feb. 16, 1973.
Certiorari Denied June 4,1973.
See 93 S.Ct,. 2751.
A. David Mazzone, Boston, Mass., with whom Donahue & Donahue, Richard K. Donahue, Lowell, Mass., Moul-ton, Looney, Mazzone, Falk & Markham and Robert D. City, Boston, Mass., were on brief, for appellant.
James B. Krasnoo, Asst. U. S. Atty., with whom James N. Gabriel, U. S. Atty., was on brief, for appellee.
Before COFFIN, Chief Judge, ALD-RICH and McENTEE, Circuit Judges.
COFFIN, Chief Judge.
Defendant, a meat inspector for the United States Department of Agriculture, was convicted on two counts of accepting a gift, money, or other thing of value from a person, firm, or corporation engaged in interstate commerce, under 21 U.S.C. § 90, now 21 U.S.C. § 622, and one count of conspiring to defraud the government of the honest, conscientious, and valuable performance of meat inspection functions, under 18 U.S.C. § 371. He attacks the statute as vague, the conviction as invalid for lack of proof that he accepted a thing of value from a statutorily defined offeror, and the admission of evidence with regard to the conspiracy count of 49 acts which occurred before the five-year period prior to indictment subject to scrutiny under the statute of limitations, 18 U.S. C. § 3282.
The evidence revealed a practice on the part of Colonial Provision Co., Inc., a meat processing company engaged in interstate commerce, to give meat inspectors, including defendant, meat products and other things of value on request. A quality control analyst of Colonial testified that on the two occasions made the subject of the substantive counts he personally prepared an inventory document with defendant’s initials on it and ordered and delivered food to defendant. He also stated that he and defendant violated federal sampling procedures on several occasions. Both the plant superintendent and the executive vice-president testified to the existence of the company policy and their authorization and personal approval, respectively, of the particular transactions involved. After defense motions to dismiss and for acquittal were denied, the case went to the jury which convicted defendant on two of the three substantive counts submitted to it and on the conspiracy count. The defendant appeals from the convictions and the concurrent sentences of two years imprisonment and suspended fines of $1,000 imposed by the court.
Appellant raises a sophisticated vagueness claim. He admits that the words of the statute are perfectly clear ■ — receiving a thing of value from a person, firm, or corporation engaged in interstate commerce. But he claims that they are so broad — e. g., covering birthday gifts hand-delivered by a mother who lives in New Hampshire to her son living in Massachusetts and promotional mailings that include free pencils, calendars or the like — -that Congress could not have intended to prohibit all matters literally covered. Thus, he concludes, an inspector has no way of knowing exactly which receipts are banned and which permissible. The government counters that the statute is generally clear, that there can be no doubt that it covers one who, like defendant, is a meat inspector who accepts meat products from a meat processing company, and that even if the gift-bearing interstate-travelling mother is arguably covered, one as to whom the statute clearly applies may not challenge the statute’s vagueness as to other, marginal cases.
Though the defendant challenges the statute for vagueness, see Goguen v. Smith, 471 F.2d 88 (1st Cir. 1972), we find that a reasonable, if not obvious, construction of the statute avoids any possible vagueness problems which are alleged to inhere in its overbreath. United States v. Harriss, 347 U.S. 612, 74 S.Ct. 808, 98 L.Ed. 989 (1954).
Part 3 of the statute, under which defendant was convicted, provides:
“[A]ny inspector, deputy inspector, chief inspector, or other officer or employee of the United States authorized to perform any of the duties prescribed by this subchapter [now sub-chapter I of Chapter 12 (Meat Inspection) of Title 21] . . . who shall receive or accept from any person, firm, or corporation engaged in interstate or foreign commerce any gift, money, or other thing of value, given with any purpose or intent whatsoever, shall be deemed guilty of a felony . . . .” 21 U.S.C. § 90, now 21 U.S.C. § 622.
We have found no judicial construction of this provision, which has been on the books for over half a century, but we draw support for our interpretation from the legislative purpose, the regulations promulgated by the Department of Agriculture to govern “employee responsibilities and conduct,” 7 C.F.R. §§ 0.-735-1 et seq., and the general bribery statute for federal officials, 18 U.S.C. § 201.
First, and most significantly, we think it clear that the statute prohibits the officials authorized to perform the prescribed inspection duties from accepting things of value in connection with or arising out of the performance of their official duties. This common sense interpretation stems first from consideration of the legislative purpose. The Meat Inspection Act of 1907, 34 Stat. 1264, passed in response to the unsanitary conditions in the meat packing industry, revealed in Upton Sinclair’s expose, “The Jungle”, was designed to insure that meat products sold to the consumer be clean and safe. A system of federal inspection was created and the inspectors subjected to strict regulation lest their corruption — or the appearance of it — undermine the quality of meat or the public’s trust in their supervision of meat quality. The statute’s amendment in 1967, which expanded the scope and severity of federal regulation, did not affect, except for two minor, technical changes, the instant criminal provision, or its purpose of preventing corruption of the regulators. P.L. 90-201, 81 Stat. 584, 1967 U.S.Code Cong. & Admin. News, pp. 636-658, 2188-2213. Although food purity statutes must be read broadly to protect the public from adulterated food, United States v. Wiesenfeld Warehouse Co., 376 U.S. 86, 84 S.Ct. 559, 11 L.Ed.2d 536 (1964); United States v. Cassaro, Inc., 443 F.2d 153 (1st Cir. 1971), and to insure public confidence in governmental regulation, they need not be stretched to cover more than their obvious purpose. Congress could not have thought that inspectors would be less rigorous in their scrutiny, nor the public less certain of their diligence, because they received birthday gifts from members of their family.
This self-evident construction of Congressional intent is reflected in the Department’s personnel regulation regarding “Gifts, entertainment and favors”, 7 C.F.R. § 0.735-12. The regulation first proscribes broadly the receipt by an employee of any thing of monetary value from one who (1) “[h]as, or is seeking to obtain, contractual or other . financial relations with the Department”, (2) “[cjonducts operations or activities that are regulated by the Department” or (3) “T'hjas interests that may be substantially affected by the performance or nonperformance of [the employee’s] duty.” Subsection (b) of the regulation then explains that this broad prophylactic rule shall not be interpreted to prohibit:
“(1) Acceptance of any of the usual courtesies in an obvious family or personal relationship (such as those between the employee and his parents, spouse, children, or close personal friends) when the circumstances make it clear that it is those relationships rather than the business of the persons concerned which are the motivating factors.”
or
“(4) The exchange of usual social courtesies which are wholly free of any embarrassing or improper implications.”
This regulation, and others concerning conflict of interest and relations to those regulated (§§ 0.735-13, 14, 21), thus recognize that meat inspectors are normal social beings — with family and friends — and that while some of their intimates may be persons engaged in commerce (a phrase discussed below), the exchange of gifts is a function of their personal rather than business lives. Although the regulations specifically direct each employee’s attention to all the statutory provisions, including the instant one, relevant to their duties, § 0.-735-24, we need not rest on these regulations, which are part of an internal personnel manual designed primarily as the basis for departmental disciplinary proceedings, see § 0.735-5, as the definitive construction of this criminal statute. See Champlin Refining Co. v. Corporation Comm’n of Okl., 286 U.S. 210, 242-243, 52 S.Ct. 559, 76 L.Ed. 1062 (1932). It is enough to note that the Department has already drawn the basic distinction which we find in the statute.
Our interpretation is also supported by 18 U.S.C. § 201, the general federal bribery statute and its construction in United States v. Irwin, 354 F.2d 192 (2d Cir. 1965), to which defendant refers us to pinpoint what he claims is the inadequacy of the statute before us. In Irwin, the court considered §§ 201(f) and (g) which prohibit, respectively, the giving to or accepting by a public official of anything of value “for or because of any official act performed or to be performed by such public official”. As the court there properly noted, those words, indicating a causal relationship to specific acts, could well be read as requiring a specific intent to alter official conduct. 354 F.2d at 197. Use of such words in § 622, which defendant suggests would provide adequate warning, would, however, destroy the explicit Congressional purpose not to require any intent in Part 3. Although words such as those we suggest above, requiring an objective jury determination that the gifts are in connection with or arising out of the performance of official duties, could concededly have been used here without subverting the no-intent clause, Congress might have thought such a phrase surplusage, in light of the statute’s evident meaning.
The defendant could not complain, nor did he, that the evidence here was insufficient to prove connection with his official duties or that the court’s instructions were erroneous because of the omission of a reference to this requirement. The evidence here was abundant in this regard and rendered the district court’s omission, obviously understandable in light of the lack of prior interpretation of this statute, harmless. Naturally, district courts in the future will, given our interpretation, instruct the jury that to convict they must find, beyond a reasonable doubt, a connection with official functions, although of course proof may, as with other elements, be by circumstantial evidence.
We turn then to defendant’s second and more impressive argument. He claims that since Part 1 of § 622, which covers the giving of intentional bribes, refers to “any person, firm, or corporation, or any agent or employee of any person, firm, or corporation” and Part 2, which covers the receipt of intentional bribes, refers to “any person, firm, or corporation, or officers, agents, or employees thereof”, the limitation in Part 3 to “any person, firm, or corporation engaged in interstate or foreign commerce” — without any mention of employees, agents, or officers — must mean that only businesses or proprietors of businesses engaged in interstate commerce are covered. Although his suggestion is facially plausible and attractive, we believe that it would improperly and unnecessarily restrict the intended scope of this statute. Defendant’s proposal would mean that even though the government had established a gift by an employee of a company engaged in interstate commerce, it would further have to prove that the employee was acting as the agent of his employer who was the real donor. But this agency element would defeat Congress’ purpose in avoiding even the appearance of impropriety, for it would mean that even acceptance of a car from a pool of employees of a meat packing concern, purporting to be a birthday gift, could not be punishable unless the government could present some proof that this gift was pursuant to the urging, suggestions, direction, or policy of the company’s board, officers, or supervisors. The mere fact that there is abundant proof of such a corporation policy in the case before us is no justification for so restricting the statute. Nor is such a narrow interpretation necessary to prevent improper application of this section to one who is a gift-bearing personal friend of the inspector but who happens to work for a corporation, such as an airline, engaged in interstate or foreign commerce. The requirement that there be a nexus between the donor’s interests or occupation and the inspector’s official functions, see n. 4 supra, is adequate protection.
Finally, reading the phrase “person engaged in interstate commerce” in Part 3 to cover employees, officers, and agents of a business engaged in interstate commerce, neither introduces a novel use of the phrase, see, e. g., 29 U.S.C. §§ 206(a), 207(a)(1), nor renders meaningless Congress’ more limited enumeration in this part. Parts 1 and 2 require a showing of specific intent to corrupt. A corporation or firm is not normally thought capable of such a mental state. For that reason, Congress felt obliged to enumerate the natural persons who could be shown to bear the evil purpose. In Part 3, Congress eliminated all intent requirements. It was thus unnecessary to specify particular agents and similarly unnecessary to restrict the term “person” to proprietors, as was done in the earlier parts.
Lastly, the defendant complains because proof of 49 acts which were said to have occurred before the relevant date set by the statute of limitations was admitted into evidence. Although the district court denied defendant’s motion to dismiss the conspiracy count because of its allegation of these 49 pre-statute of limitations overt acts, it permitted evidence of those acts to be introduced only to prove the nature and continuity of the conspiracy. The defendant admits that the pre-statute of limitations evidence was admissible “to show the nature of the scheme and the intent”, but only “if it is connected up with the scheme existing when the overt acts were performed”, properly citing United States v. Blosser, 440 F.2d 697, 699 (10th Cir. 1971), for the proposition. See also United States v. Borelli, 336 F.2d 376, 385 (2d Cir. 1964).
We do not disagree with the proposition but fail to see how it advances defendant’s case. It is true that at the time of the overt acts in 1967 (which also formed the basis for the substantive counts), defendant was not assigned to Colonial, as he had been in the first six months of 1965 when most of the pre-statute of limitations acts occurred. But the indictment was not limited to a conspiracy to corrupt his behavior only during the period of the alleged conspiracy or to corrupt him only by payments at the time he was assigned to Colonial. Rather it alleged a general conspiracy to defraud the government of the honest performance of defendant’s official duties free from the acceptance of things of value. The evidence as to the offer and acceptance of things of value by defendant in both 1965 and 1967, his violation of several federal sampling procedures in 1965, the rotating assignment, of meat inspectors to particular plants for six months, and the possibility that during an assignment to one plant, an inspector might work at another, was sufficient to allow the jury to infer that there was one conspiracy, starting in 1965 and continuing into 1967, and that the transfers in 1967 could have been either payments for past acts or inducements to misconduct in the future should defendant work at the Colonial plant again. In the absence of any evidence indicating defendant’s withdrawal from the conspiracy, or any evidence indicating such “a change in operations” as to vitiate any inference of agreement drawn from prior acts, Borelli, supra, 336 F.2d at 385, we do not see how the admissibility of the pre-statute of limitations evidence was erroneous.
Judgments affirmed.
. To avoid confusion in subsequent cases, we will refer to this statute by its present designation, 21 U.S.C. § 622, although the renumbering and the two minor amendments to this section, see n. 5 infra, did not become effective until after the dates of the events in this case.
. The government also argues that the defendant may not raise the issue because he failed to raise it before the trial court, by either a motion to dismiss or as a ground for his motion for acquittal. However, Fed.R.Crim.P. 12(b)(2) provides that “Lack of jurisdiction or the failure of the indictment or information to charge an offense shall be noticed by the court at any time during the pendency of the proceeding.” The defense of failure of an indictment to charge an offense includes the claim that the statute apparently creating the offense is unconstitutional. 8 Moore’s Federal Practice U 12.03 [2]. That objection may be raised for the first time on appeal. Carlson v. United States, 296 F.2d 909 (9th Cir. 1961).
. Although the statute is written as one sentence, the parties have properly subdivided it for purposes of analysis into three, informally designated parts. Part 1 proscribes the giving or offering by any person, firm, or corporation, or any agent or employee of such, of money or other thing of value to an official authorized to perform the dirties prescribed by the Meat Inspection Act, with “intent to in-influenee” that official “in the discharge of any duty” under the Act. Part 2 is a parallel provision prohibiting the atí-ceptance by such official of a thing of value from a person, firm, or corporation, or officers, agents, or employees thereof, “given with intent to influence his official action”. Part 3, in contrast, specifically eliminates all intent requirements, and limits the covered donors to any person, firm, or corporation engaged in interstate or foreign commerce. See discussion infra. The indictments, which used the phrase regarding engagement in commerce and failed to allege any intent, obviously were intended to charge a violation of Part 3.
. We do not mean by this to include within the statute’s ban gifts which could be merely used in connection with the performance of official duties, such as a watch, given by one whose occupation or interests display no nexus to the inspector’s functions, such as a friend who works for an airline. It is the donor, rather than the gift, which must be related to the official functions.
. The word “commerce” was substituted for the words “interstate or foreign commerce” and the word “Secretary” for the title “Secretary of Agriculture”, because both of the new terms were defined for purposes of the Act in the amended definitional section, 21 U.S.C. § 601. See 1967 U.S.Code Cong. & Admin.News, pp. 637, 641-642.
. The regulations were promulgated pursuant to Executive Order 11222 of May 8, 1965 and 5 C.F.R. § 735.104, which provide for agency regulations defining the ethical restraints on employees. Although § 622 also provides for summary discharge of those violating its proscriptions, the statute is essentially a criminal one and the Secretary of Agriculture is not given authority to define its meaning or terms.
. We have already indicated we believe that the statute on its face is clear and gives meat inspectors adequate notice of what conduct is prohibited. We note in addition that the regulations were originally promulgated on June 18, 1966, 31 F.R. 8528, before the dates of the substantive offenses and the overt acts of the conspiracy committed by the defendant.
. Tlie absence of a requirement that the government prove intent, either of the donor to influence official conduct, or of the recipient to alter his performance, does not mean that the statute is one of strict liability. The receiving or accepting official must, as the indictment stated and the district court instructed, at least do so knowingly — i. e., be aware that the transfer is one of value and the transferor one engaged in interstate commerce. Of course, as with other mental elements, the jury may infer its presence from the surrounding circumstances. But certainly Congress could not have intended to punish one who receives a birthday gift from an acquaintance, unaware that the latter was coerced or bribed into giving it by a meat processor, or one who wins a raffle prize, not knowing that the game was fixed in his favor.
. Defendant suggests another horrible— that he could be prosecuted for receiving in the mail an unsolicited promotional circular containing a free pen or calendar. This fear is insubstantial for two reasons. First, there would be insufficient evidence of connection with official duties. As we noted in n. 4 supra,, it is not enough to show that the gift is useable in connection with the performance of inspection functions, as so many common gifts are — pens, watches, suits, ties, and the like. The person must bear some connection to the recipient’s official life. Second, we think the statute was obviously not intended to cover trivial gratuities like a pen. Again the regulation, from which defendant seems to have garnered his hypothetical horribles, indicates what we take to be the self-evident reading of the statute:
“Acceptance of unsolicited advertising or promotional material, such as pens, pencils, note pads, calendars, and other things of nominal value.”
is not prohibited. 7 C.F.R. § 0.735-12 (b) (3) [emphasis added]. We would only add that wo doubt that solicitation of a ball-point pen because one’s own ran dry, even from a meat processor in the course of a plant inspection tour, would be punishable.
. Should we be wrong in this interpretation, and the term “person” in Part 3 be limited to proprietors, the defendant would not gain. There was abundant evidence here that the three employees named in the indictment wore acting on behalf of Colonial Provision. All testified to the general policy of the corporation to give meat products to meat inspectors, described the general procedures designed to implement that policy and their use in the particular transactions involved. Moreover, two were in policy-making positions and authorized or approved both the general corporate policy and the particular transactions alleged. There was no hint of a personal, non-corporate motivation or reason for any of these employees to provide defendant with the meat products.
Nor coul'd the indictment be said to fail to charge an offense under the statute according to the more restricted interpreta- ■ tion, see n. 2 supra. Even if, pursuant to that view, it would be preferable to have alleged that the individuals were employees of a corporation engaged in interstate commerce, we could not say that this indictment failed to state an offense, given that a corporate gift could only be established by proof of the conduct of the corporate employees or agents.
Finally, the court’s instruction could not be said to be erroneous, not to mention plainly erroneous, since no objections were preserved. The court instructed that there were five elements to the offense —the third of which was that “Colonial Provision Company was engaged in interstate commerce in meat and meat products” and the fourth that the defendant “accepted something of value from employees of the Colonial Provision Company.”
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{
"author": "WALLACE, Circuit Judge:",
"license": "Public Domain",
"url": "https://static.case.law/"
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Douglas A. BULLIS et al., Plaintiffs-Appellants, v. TWENTIETH CENTURY-FOX FILM CORPORATION, a Delaware corporation, Defendant-Appellee.
No. 72-1211.
United States Court of Appeals, Ninth Circuit.
Feb. 15, 1973.
W. Patrick O’Connor (argued), A. William Barlow, Honolulu, Hawaii, for plaintiffs-appellants.
William L. Fleming (argued), of Cades Schutte Fleming & Wright, Honolulu, Hawaii, for defendant-appellee.
Before ELY, CHOY and WALLACE, Circuit Judges.
WALLACE, Circuit Judge:
Plaintiffs-appellants sued their employer to recover damages for burns sustained in a fire. The fire occurred on board a mock-up vessel used by Twentieth Century-Fox Film. Corporation in the filming of the movie “TORA! TORA! TORA!” The mock-up had been constructed upon three floating barges and was designed to resemble the battleships USS Nevada and USS Arizona. About March 12, 1969, the defendant moved the mock-up from the shipyard where it was built to the vicinity of Ford Island at Pearl Harbor. It remained in that area until early May, 1969, when it was dismantled.
On April 12, 1969, the plaintiffs, all off-duty servicemen, were cast as extras in the filming of a battle scene. They were hired for that day only, and the record does not indicate that any of them worked for the defendant on a previous day or on a day subsequent to the day of their injuries. They were to portray crewmen of the USS Nevada during an attack and to act confused while running up and down ladders between decks of the superstructure.
The plaintiffs went aboard the mockup and were told about special-effects explosions and their locations. Shortly the mock-up was underway, under tow by a tug to a position a few hundred yards offshore. About an hour later, the filming began and lasted for five minutes. During the action, the plaintiffs were burned by the explosion of a nearby “fireball bomb,” a device rigged to propel flaming gasoline after an initial explosion. They were given prompt medical attention and transferred to hospitals. The mock-up redocked half an hour later after a two-hour voyage of about 500 yards.
In their suit, the plaintiffs alleged that their employer had been negligent in its direction of their acting and had failed to provide them with a safe and seaworthy place to work. Jurisdiction was alleged under diversity of citizenship, general maritime law (unseaworthiness) and the Jones Act, 46 U.S.C. § 688. After discovery, the defendant-employer moved for summary judgment, arguing that, as a matter of law, the plaintiffs were not seamen within the meaning of the Jones Act. Consequently, Fox argued, they were relegated to a compensation remedy under state or federal law. The trial judge granted the motion for summary judgment. This appeal followed; we affirm.
Plaintiffs argue that they are, in fact, Jones Act seamen. ■ Both parties agree that the classic three-part test of seaman status applies.
There are three essential elements in the term “seaman” as used in the Jones Act. First, the vessel on which the claimant is employed must be in navigation. Second, there must be a more or less permanent connection with the vessel, and third, the claimant must be aboard primarily to aid in navigation. Bodden v. Coordinated Caribbean Transport, Inc., 369 F.2d 273, 274 (5th Cir. 1966).
See also Offshore Co. v. Robison, 266 F.2d 769 (5th Cir. 1959); McKie v. Diamond Marine Co., 204 F.2d 132 (5th Cir. 1953); Puget Sound Freight Lines v. Marshall, 125 F.2d 876, 879 (9th Cir. 1942); Norris, Maritime Personal Injuries §§ 7-8 (2d ed. 1966). However, though the test seems simply stated, the result “depends largely on the facts of the particular case and the activity in which [the claimant] was engaged at the time of the injury.” Desper v. Starved Rock Ferry Co., 342 U.S. 187, 190, 72 S.Ct. 216, 218, 92 L.Ed. 205 (1952).
The facts in this care are unique. The plaintiffs were obviously extra actors, but were they also Jones Act seamen? Fox concedes that the mock-up was in navigation at the time of the accident, but challenges the plaintiffs’ assertion that they satisfy the second and third elements of the test. Admittedly the Jones Act should be liberally construed “to accomplish its beneficient purposes.” Cosmopolitan Shipping Co. v. McAllister, 337 U.S. 783, 790, 69 S.Ct. 1317, 1321, 93 L.Ed. 1692 (1949). See also Williams v. Tide Water Associated Oil Co., 227 F.2d 791, 794 (9th Cir. 1955), cert. denied, 350 U.S. 960, 76 S.Ct. 348, 100 L.Ed. 834 (1956). As a result of that policy, courts have held diverse persons to be seamen, including a bartender, a telephone operator, a clerk, and a musician.
The second requirement for seaman status is that there be a more or less permanent connection with the vessel. Significantly the connection may be less permanent, but it cannot be temporary or transitory. In this case, the plaintiffs were to act for about five minutes while on board a mock-up for a cruise of some two hours. Thus their relation to the mock-up “was purely transitory — both in point of work to be done and the time of its duration.” Thibodeaux v. J. Ray McDermott & Co., 276 F.2d 42, 47 (5th Cir. I960). In no sense were they permanently attached to it; and consequently they cannot be Jones Act seamen. Since we have determined that the plaintiffs fail the second requirement, we need not discuss the third.
Though neither party raised the issue, the trial court’s summary judgment also dismissed the plaintiffs’ claim founded upon the alleged unseaworthiness of the mock-up. The duty to provide a safe place to work, that is, to furnish a vessel reasonably fit for its intended use, extends to those “doing a seaman’s work and incurring a seaman’s hazards.” Seas Shipping Co. v. Sier-acki, 328 U.S. 85, 99, 66 S.Ct. 872, 880, 90 L.Ed. 1099 (1946). The warranty is not available to passengers or to others who are not doing the work traditionally performed by seamen. The plaintiffs have not shown that their work was the type of work traditionally done by the ship’s crew. Consequently they were not entitled to a warranty of seaworthiness, and the trial judge correctly dismissed this claim also.
Affirmed.
. The only similar case is In re Famous Players Lasky Corp., 30 F.2d 402 (S.D.Cal.1929). There the claimants were employed by the film company as seamen to sail a ship during the making of a movie. Although they acted in the movie, the court found that they were also “seamen in the true sense of that word” since they did “handle, reef, and steer” the ship. Id. at 404. The present plaintiffs merely acted.
. The J. S. Warden, 175 F. 314 (S.D.N.Y.1910).
. Keefe v. Matson Nav. Co., 46 F.2d 123 (W.D.Wash.1930).
. The Sultana, 23 F.Cas. 379 (No. 13,602) (D.Mich.1857).
. The Sea Lark, 14 F.2d 201 (W.D.Wash. 1926).
. The requirement might be better phrased as a permanent attachment. See Norton v. Warner Co., 321 U.S. 565, 573, 64 S.Ct. 747. 88 L.Ed. 931 (1944).
. Thibodeaux was a welder; he had worked on board the barge McDermott No. 5 for four days prior to his death. See also Rotolo v. Halliburton Co., 317 F.2d 9, 13 (5th Cir.), cert. denied, 375 U.S. 852, 84 S.Ct. 111, 11 L.Ed.2d 79 (1963).
. The plaintiffs emphasize the short life of the mock-up (about two months). They argue that their relationship is thus more substantial. To relate permanency to the life of the vessel distorts the question. Had the mock-up sunk during the events of April 12, 1969, or had it remained afloat in film use for another two years, the result should be no different. The connection required depends upon the relationship of the claimant to the vessel and not upon the duration of the vessel’s life.
. One court has suggested that the permanency requirement is the fundamental distinction between seamen and longshoremen. A. L. Mechling Barge Line v. Bassett, 119 F.2d 995, 998 (7th Cir. 1941). See also Weiss v. Central R.R., 235 F.2d 309, 313, 315 (2d Cir. 1956) (Lumbard, J., dissenting).
. It is not inconceivable that an actor, under certain circumstances, might be a seaman in the same manner as a musician or bartender might qualify. See cases cited at nn. 5-8, supra. For example, if a cruise ship advertised a nightly Shakespearean festival en route, then the festival actors might well be seamen. They would probably contribute “to the function of the vessel or to the accomplishment of its mission.” Offshore Co. v. Robison, 266 F.2d 769, 779 (5th Cir. 1959). Such was not the case here.
. Mitchell v. Trawler Racer, Inc., 362 U.S. 539, 550, 80 S.Ct. 926, 4 L.Ed.2d 941 (1960).
. Kermarec v. Compagnie Generale Trans-atlantique, 358 U.S. 625, 79 S.Ct. 406, 3 L.Ed.2d 550 (1959).
. See United Pilots Ass’n v. Halecki, 358 U.S. 613, 617-618, 79 S.Ct. 517, 3 L.Ed.2d 541 (1959); Pope & Talbot, Inc. v. Hawn, 346 U.S. 406, 413, 74 S.Ct. 202, 98 L.Ed. 143 (1953); Partenweederei, MS Belgrano v. Weigel, 299 F.2d 897, 901-902 (9th Cir.), cert. denied, 371 U.S. 830, 83 S.Ct. 49, 9 L.Ed.2d 67 (1962).
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{
"author": "HAYNSWORTH, Chief Judge: WINTER, Circuit Judge",
"license": "Public Domain",
"url": "https://static.case.law/"
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Mrs. Susan COHEN, Appellee, v. CHESTERFIELD COUNTY SCHOOL BOARD and Dr. Robert F. Kelly, Appellants, Equal Employment Opportunity Commission, Amicus Curiae.
No. 71-1707.
United States Court of Appeals, Fourth Circuit.
Resubmitted Jan. 2,1973.
Decided Jan. 15, 1973.
Certiorari Granted April 23,1973.
See 93 S.Ct. 1925.
Winter, Circuit Judge, dissented and filed opinion in which Craven, and Butzner, Circuit Judges, joined.
Samuel W. Hixon, III, Richmond, Va. (Williams, Mullen & Christian, Richmond, Va., and Frederick T. Gray, Robert E. Eicher, Richmond, Va., Oliver D. Rudy and Morris E. Mason, Chesterfield, Va., on brief), for appellants.
Philip J. Hirschkop, Alexandria, Va. (John B. Mann, Richmond, Va., on brief), for appellee.
John de J. Pemberton, Jr., Acting Gen. Counsel, Julia P. Cooper, Chief, Appellate Section, Ed Katze, Dist. Atty., Washington District Office, Washington, D. C., on brief, for E. E. O. C.
Before HAYNSWORTH, Chief Judge, and WINTER, CRAVEN, BUTZNER, RUSSELL, FIELD and WIDENER, Circuit Judges, en banc.
HAYNSWORTH, Chief Judge:
In this action brought under 42 U.S.C. § 1983, the plaintiff challenges the maternity leave regulation of the Chesterfield County School Board on the ground that it deprives her of her rights to due process and to equal protection of the laws guaranteed under the Fourteenth Amendment to the Constitution. The challenged rule requires, with limited flexibility, that teachers who become pregnant must go on maternity leave at the end of the fifth month of pregnancy. This appeal is taken from the District Court’s decision that the maternity leave rule deprived Mrs. Cohen of equal protection: “Because pregnancy, though unique to women, is like other medical conditions, the failure to treat it as such amounts to discrimination which is without rational basis, and therefore is violative of the equal protection clause of the Fourteenth Amendment.” Cohen v. Chesterfield County School Board, E.D.Va., 326 F.Supp. 1159, 1161.
When Mrs. Cohen became pregnant she was a social studies teacher at Mid-lothian High School in Chesterfield County. Her contract with the School Board required her to comply with all state and local school laws and regulations. In compliance with the Board’s maternity provisions, Mrs. Cohen notified the Board on November 2, 1970 that she was pregnant and that her estimated date of delivery was April 28, 1971. With the written opinion of her obstetrician that she could work as long as she chose, she requested an extension until April 1, 1971 of the date she would stop teaching. The School Board denied this request, granting her leave effective December 18, 1970. In a subsequent personal appearance before the Board, Mrs. Cohen made an alternate request of an extension until January 21, 1971 — the end of the semester. This request, supported by a recommendation of her principal, was also denied. The District Court found that the basis of the denials of the requested extensions was that “the School Board had a replacement available, and felt it proper to abide by its regulation.”
The plaintiff asserts no claim of arbitrariness in the denial of the alternative request of an extension until January 21, 1971. She has made no attempt to show that a qualified replacement would have been as readily available then, or in April, as in December. She stands squarely on a broader constitutional claim which would entirely exclude school officials from participation in the decision on the date of the maternity leave. That is for her, alone, to determine, she says, else she is subject to impermissible discrimination based upon sex.
We conclude, first, that the regulation is not an invidious discrimination based upon sex. It does not apply to women in an area in which they may compete with men. Secondly, school officials have a duty to provide, as best they can, for continuity in the instruction of children and, to that end, they have a legitimate interest in determining reasonable dates for the commencement of maternity leaves and a right to fix them.
We do not accept Mrs. Cohen’s premise that the regulation’s provision which denies her, with the advice of her doctor, the right to decide when her maternity leave will begin is an invidious classification based upon sex which may be justified only by some compelling state interest./Sueh invidious discriminations are found in situations in which the sexes are in actual or potential competition. , A statutory preference for men over women in the appointment of administrators was recently stricken by the Supreme Court as quite unjustified by considerations of administrative convenience.
Only women become pregnant; only women become mothers. But Mrs. Cohen’s leap from those physical facts to the conclusion that any regulation of pregnancy and maternity is an invidious classification by sex is merely simplistic. The fact that only women experience pregnancy and motherhood removes all possibility of competition between the sexes in this area. No man-made law or regulation excludes males from those experiences, and no such laws or regulations can relieve females from all of the burdens which naturally accompany the joys and blessings of motherhood. Pregnancy and motherhood do have a great impact on the lives of women, and, if that impact be reasonably noticed by a governmental regulation, it is not to be condemned as an invidious classification.
We are not accustomed to thinking, as sex classifications, of statutes making it a crime for a man forcefully to ravish a woman, or, without force, carnally to know a female child under a certain age. Military regulations requiring all personnel to be clean shaven may be suspect on other grounds, but not because they have no application to females. Prohibition or licensing of prostitution is a patent regulation of sexual activity, the burden of which falls primarily on females, but it has not been thought an invidious sex classification. What of regulations requiring adult women sunning themselves on a public beach to keep their breasts covered? Is that an invidious discrimination based upon sex, a denial of equal protection because the flat and hairy chest of a male lawfully may be exposed?
The situation confronting us is not unlike that which occasioned the memorable lament of Anatole France, “the law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.” Concern that the weight of the law falls more heavily upon the poor has been with us for years. Undoubtedly, some laws are directed to offenses which are unlikely to be committed by the wealthy, but there are also crimes which no poor person could commit. If the rich are unlikely to find spaces beneath bridges havens of rest, poor people are unlikely to find an opportunity to embezzle the funds of a national bank or to perpetrate a stock fraud. There are some laws which are not likely to be violated by the rich; there are others which are not likely to be violated by the poor. France stated his lament as he looked at some of such laws from the perspective of the poor, but the law may hold all of us accountable for antisocial conduct despite the differences in the temptations which confront us.
How can the state deal with pregnancy and maternity in terms of equality with paternity? It cannot, of course. The disabilities and preoccupations of maternity are visited but slightly upon the father. However sympathetic he may be, it is she who must shoulder the principal problems of pregnancy, the labors of childbirth and the care and feeding of the child in the early months of its life.
Pregnancy and maternity are sui generis, and a governmental employer’s notice of them is not an invidious classification by sex.
Still, the regulation must serve some reasonable objective. We think it does.
Here we may take note of the fact that Mrs. Cohen attempts to confine her attack to the rules under which the time of commencement of maternity leave is determined. There she likens pregnancy to illness and other physical disability, contending that failure to treat pregnancy as other disabilities is an unwarranted discrimination.
We think our view should encompass the whole regulation.
There are obvious difficulties in the way of drawing a perfect analogy, as Mrs. Cohen would, between the several conditions contemplated by the maternity leave regulations and physical disabilities.
In the first place, the maternity leave policy of this school system covers an indefinite period of time, after delivery, when the young mother may wish to breast feed her baby or otherwise devote herself primarily to its care. A few weeks after a normal delivery, a healthy young mother is suffering no physical disability. If she chooses to remain on maternity leave for some months thereafter, she does so because of a temporary preference for child-care over a return to teaching and not because of anything remotely resembling illness or physical incapacity.
Even pregnancy is not like illnesses and other disabilities. In this age of wide use of effective contraceptives, pregnancy is usually voluntary. No one wishes to come down with mononucleosis or to break a leg, but a majority of young women do wish to become pregnant, though they seek to select the time for doing so. Female school teachers, like other young women, plan to become pregnant.
Unlike most illnesses and other disabilities, too, pregnancy permits one to foresee its culmination in a period of confinement and to prepare for it. The employer of the pregnant woman need not wait until the clock has struck to search for a replacement. Unexpected illnesses and disabilities may compel resort to a pool of substitute teachers available for short periods of employment, but pregnancy assures an opportunity to secure a more permanent replacement. As planning precedes most pregnancies, planning for the arrangements they necessitate may go hand in hand with them.
That circumstance supplies the justification for the rule that puts the starting of maternity leave, after the fifth month of pregnancy, within the control of school officials rather than in that of each pregnant teacher.
Eighty per cent of the teachers employed in this school system are women. The system is large enough that the Board knows that a certain number of its teachers will become pregnant each year. It knows that many of them will be unable to perform teaching duties over a period of several or many months, while some will be unwilling to do so for several months after the baby’s delivery. The pregnant teacher’s absence is not only predictable; it is of much longer duration than absences caused by such relatively transitory things as respiratory infections and digestive upsets.
Extended absences of teachers can occasion highly objectionable discontinuity in the education of children. When an extended absence is foreseen, the interest of the children is served by the employment of a regular replacement rather than dependence upon a succession of substitutes. That interest is furthered by the rule which starts the maternity leave at the end of the fifth month of pregnancy with the provision that the superintendent may postpone the time upon the teacher’s request and with the approval of her doctor and her principal. Placing ultimate control in school officials rather than in each individual teacher, affords an opportunity for useful planning and specific commitments to replacement teachers, who, otherwise, might not be available.
Mrs. Cohen, in her contract, agreed to abide by the regulations. Her effort to avoid them insofar as she dislikes them in their application to her should not prevail, for the regulations are not without reason. Their purpose may reasonably be regarded as contributing to the better education of the pupils by enabling school officials to arrange a larger degree of continuity in their instruction.
Reversed.
WINTER, Circuit Judge
(dissenting):
Because I disagree with the conclusion of the majority and because the majority’s decision, if it prevails, may well be relied on to invalidate an aspect of the implementation of the Equal Employment Opportunity Act, Title VII of the Civil Rights Act of 1964, 42 U.S.C.A. § 2000e-2(a),1 respectfully dissent.
The majority concludes that the regulation does not discriminate against women as such; it only discriminates between pregnant teachers and other teachers. “It [the regulation] does not apply to women in an area in which they compete with men.” As to the pregnant school teacher, so the argument runs, the discrimination is permissible because of the need to provide continuity of education in the classroom. Stated otherwise, a uniform date for the beginning of maternity leave is necessary to avoid disruption in the classroom by a sudden and unpredictable need to replace a teacher who delivers prematurely or who suffers a complication of pregnancy necessitating her absence from the classroom.
While superficially appealing, I am not persuaded by this argument and I think it a disingenuous one to be advanced on this record. The record is clear that there is not a high incidence of risk of premature delivery or complications of pregnancy in the beginning of the third trimester of pregnancy — the date that the regulation establishes as the beginning of maternity leave. And on the facts of this case, one can reasonably infer that continuity of the educational process would have been better preserved had Mrs. Cohen been permitted to complete the semester rather than to subject her students to a new teacher at an illogical and avoidable breaking point in the curriculum.
But there is a more fundamental defect in the majority’s opinion. That the regulation is a discrimination based on sex, I think is self-evident. The inescapable truth is as Chief Judge Brown of the Fifth Circuit has stated, dissenting from denial of a motion for rehearing in banc in Phillips v. Martin-Marietta Corporation, 416 F.2d 1257, 1259 (5 Cir. 1969), a case in which an employer who was willing to hire men with preschool-age children for a certain position but not women was held not to have violated Title VII of the Civil Rights Act of 1964:
The distinguishing factor seems to be motherhood versus fatherhood. The question then arises: Is this sex-related? To the simple query the answer is just as simple: Nobody — and this includes Judges, Solomonic or life tenured — has yet seen a male mother. A mother, to oversimplify the simplest biology, must then be a woman.
Chief Judge Brown’s analysis was echoed by Judge Wisdom, also in dissent in Schattman v. Texas Employment Commission, 459 F.2d 32, 42 (5 Cir. 1972), a case asserting the validity of a Texas regulation requiring a pregnant state employee to begin maternity leave not later than two months before her predicted delivery date: “Female employees are the only employees . . . who become pregnant; it follows that they are provisionally dismissed from work on account of their sex . . . .”
I need not concern myself with the applicable test to discriminate validly on the basis of sex — whether “rational relationship to a state objective,” Reed v. Reed, 404 U.S. 71, 76, 92 S.Ct. 251, 254, 30 L.Ed.2d 225 (1971); Dandridge v. Williams, 397 U.S. 471, 485, 90 S.Ct. 1153, 25 L.Ed.2d 491 (1970), or a compelling state interest, Shapiro v. Thompson, 394 U.S. 618, 89 S.Ct. 1322, 22 L.Ed.2d 600 (1969) — because under either, I think the regulation denies equal protection. The record is literally devoid of any reason, medical or administrative, why a pregnant teacher must accept an enforced leave by the end of the fifth month of pregnancy if she and her doctor conclude that she can perform her duties beyond that date. Of course her employer is entitled to reasonable notice of when the teacher and her doctor conclude her leave should begin, so as to enable the employer to provide an adequate substitute, but it would seem that in most instances notice of not more than thirty days would be ample for that purpose. If I put aside instances where a teacher, male or female, suffers a sudden illness or the need for emergency surgery, and where presumably the teacher has little or no notice of impending prolonged absence, I cannot find in the record, nor can I imagine, any justification for requiring greater certainty as to the effective leave date of a pregnant teacher than of any other teacher, male or female, who may be absent for a prolonged period as a result of elective surgical procedure.
To give an example of my last statement, prostatitis is peculiarly a male disease and in this sense sex related. A prostatectomy which may be required as a result of prostatitis or other chronic disease of the prostate, is rarely performed as an emergency surgicial procedure. Rather, within a reasonable time range, the date for a prostatectomy is scheduled for a date suiting the availability of the hospital and the convenience of the surgeon and the patient. Under general sick leave regulations, a male teacher planning to undergo a prostatectomy is not required to give advance notice of the contemplated operation or to begin sick leave at any specific date, even at a semester break if one should intervene, prior to the operation, or to seek permission to continue work until the operation. Lest it be thought that an elective prostatectomy among male teachers is a rare event, I stress that the general sick leave requirements contain no requirement of notice, a mandatory beginning of sick leave or continuation of employment after notice until surgery for any elective surgery for any teacher, male or female. Yet it cannot be said that the disruptive effect on the students or the burden on the school administration is any less in the case of any elective surgery than the disruption and burden occasioned by a pregnant teacher’s absenting herself to deliver. Indeed, it would be greater since the pregnant teacher would have been required to give notice of her impending confinement and thus school officials would have had ample time in which to find a replacement. To me, the discrimination is obvious.
I agree with the Sixth Circuit’s decision in LaFleur v. Cleveland Board of Education, 465 F.2d 1184 (1972) holding invalid, as a denial of equal protection of the laws, a maternity leave regulation which, like that in the case at bar, required a teacher to begin maternity leave not later than five months before the expected date of normal birth of her child, but which, incidentally, required only two weeks notice of the fact of pregnancy and prohibitied the teacher’s return to her duties earlier than three months after the child’s birth. Both the enforced leave before and after birth were held impermissible, because there was lacking, as here, medical evidence or any other valid reason to support the extended period of mandatory leave. While the court recognized that continuity of classroom instruction and relief of burdensome administrative problems would both be served if the regulation were upheld, it concluded that these problems were no more acute with respect to pregnant teachers than other teachers, male or female, who suffered other actual disabilities; and moreover, that administrative convenience could not be permitted to override “the determinative issues of competence and care” (Stanley v. Illinois, 405 U.S. 645, 657, 92 S.Ct. 1208, 1215, 31 L.Ed.2d 551 (1972)). Rejected also was the argument that the teacher was bound by her employment contract which required adherence to the regulation because “constitutional protection does extend to the public servant whose exclusion . is patently arbitrary or discriminatory.” Wieman v. Updegraff, 344 U.S. 183, 192, 73 S.Ct. 215, 219, 97 L.Ed. 216 (1952).
Additional support for my views is found in Robinson v. Rand, 340 F.Supp. 37 (D.Colo.1972); Doe v. Osteopathic Hospital of Wichita, 333 F.Supp. 1357 (D.Kan.1971); Williams v. School District (N.D.Cal.1972); Monell v. Dept. of Social Services (S.D.N.Y.1972); Bravo v. Board of Education, 345 F.Supp. 155 (N.D.Ill.1972); Heath v. Westerville Board of Education, 345 F.Supp. 501 (S.D.Ohio 1972). There is a contrary dictum in the split decision in Schattman v. Texas Employment Commission, supra, indicating that a maternity leave regulation requiring leave to begin not later than two months before the expected delivery date would be valid; but, without expressing any view on the correctness of the dictum, I agree with the Sixth Circuit in LaFleur that Schattman is distinguishable from the instant case on its facts.
CRAVEN and BUTZNER, JJ., authorize me to say that they join in this opinion.
. Mrs. Cohen’s complaint sought relief also under the Equal Employment Opportunity Act, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2(a) :
“It shall be an unlawful employment practice for an employer—
(1) to fail or refuse to hire or to discharge any individual, or otherwise to ^discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; * *
At the time of the proceedings below, however, state agencies and educational institutions were specifically exempted from the Act. 42 U.S.C. § 2000e(b) ; 42 U.S.C. § 2000e-l. Subsequent to oral argument, these exemptions were repealed by the Equal Employment Opportunity Act of 1972, P.L. 92-261, signed by the President March 24, 1972 and effective immediately. Rules and practices of the defendant in effect when the defendant was exempt from the Equal Employment Opp. Act cannot be the basis for a violation of that Act. This opinion accordingly is limited to consideration of the rights and liabilities of the parties under the Equal Protection Clause of the Fourteenth Amendment.
. The maternity leave provisions of the Chesterfield County School Board provides :
“a. Notice in writing must be given to the School Board at least six (6) months prior to the date of expected birth.
b. Termination of employment of an expectant mother shall become effective at least four (4) months prior to the expected birth of the child. Termination of employment may be extended if the superintendent receives written recommendations from the expectant mother's physician and her principal, and if the superintendent feels that an extension will be in the best interest of the pupils and school involved,
c. Maternity Leave
1. Maternity leave must be requested in writing at the time of termination of employment.
2. Maternity leave will be granted only to those persons who have a record of satisfactory performance.
3. An individual will be declared eligible for re-employment when she submits written notice from her physician that she is physically fit for full-time employment, and when she can give full assurance that care of the child will cause minimal interference with job responsibilities.
4. Re-employmont will be guaranteed no later than the first day of the school year following the date that the individual was declared eligible for reemployment.
5. All personnel benefits accrued, including seniority, will be retained during' maternity leave unless the person concerned shall have accepted other employment.
6. The school system will have discharged its responsibility under this policy after offering re-employment for the first vacancy that occurs after the individual has been declared eligible for re-employment.
. Reed v. Reed, 404 U.S. 71, 92 S.Ct. 251, 30 L.Ed.2d 225.
. A. France, The Red Lily (1894).
. 18 U.S.C. §§ 644, 656.
. 35 U.S.C. §§ 78n, 78ff.
. Her reasoning would seem to invalidate the provision for extended post-delivery leave during which the teacher-mother has a continuing guarantee of reemployment.
. Of course, all pregnancies among teachers, as with other women, are not voluntary. See Love’s Labor Lost: New Conceptions of Maternity Leave, 7 Harv.Civ. Rights — Civ. Liberties L.Rev. 260, 283-84, 288.
. Since we conclude that continuity in instruction reasonably supports the rule we need not consider other personalized reasons advanced in support of the regulation.
. In addition to Mrs. Cohen, two others began maternity leave in December, 1970.
. There is no built-in protection against arbitrary application of the rule in particular cases. If extension were denied when no replacement was available or within weeks of the end of the school year, a different case would be presented.
. Concurring in Healy v. James, 408 U.S. 169, 202, 92 S.Ct. 2338, 2356, 33 L.Ed.2d 266, Mr. Justice Rehnquist wrote:
“Cases such as United Public Workers v. Mitchell, 330 U.S. 75, 67 S.Ct. 556, 91 L.Ed. 754 (1947), and Pickering v. Board of Education etc., 391 U.S. 563, 88 S.Ct. 1731, 20 L.Ed.2d 811 (1968), make it equally clear that the government in its capacity as employer also differs constitutionally from the government in its capacity as the sov-eign executing criminal laws.”
. See, McGowan v. Maryland, 366 U.S. 420, 426, 81 S.Ct. 1101, 6 L.Ed.2d 393.
. The point is being widely litigated with diverse results. See, e. g., Schattman v. Texas Employment Commission, 5 Cir., 459 F.2d 32; LaFleur v. Cleveland Bd. of Educ., N.D.Ohio, 326 F.Supp. 1208; Doe v. Osteopathic Hospital of Wichita, D.Kansas, 333 F.Supp. 1357; Robinson v. Rand, D.Colo., 340 F.Supp. 37; Williams v. School District, N.D.Calif., 340 F.Supp. 438; Monell v. Dept. of Social Services, S.D.N.Y.; Danielson v. Bd. of Educ. of the City Univ. of N. Y., S.D. N.Y.; Bravo v. Bd. of Educ., N.D.Ill, 345 F.Supp. 155; Cerra v. East Stroudsburg Area School District, 3 Pa.Cmwlth. 665, 285 A.2d 206.
. In addition to seeking redress of an alleged denial of equal protection, plaintiff’s complaint sought relief under the Equal Employment Opportunity Act, Title VII of the Civil Rights Act of 1964, 42 U.S.C.A. § 2000e-2(a) :
It shall be an unlawful employment practice for an employer—
(1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual witli respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin ;
At the time of the proceedings below, however, state agencies and educational institutions were specifically exempted from the Act. 42 U.S.C.A. § 2000e(b) ; 42 U.S.C.A. § 2000e-I. Subsequent to oral argument, these exemptions were repealed by the Equal Employment Opportunity Act of 1972, P.L. 92-261, signed by the President March 24, 1972 and effective immediately. On April 5, 1972, the Equal Employment Opportunity Commission adopted guidelines (a) declaring that exclusion of employees “from employment . . . because of pregnancy is in prima facie violation of Title VII” (29 C.F.R. § 1604.10(a), and (b) requiring employers to treat disabilities caused by pregnancy and childbirth like other temporary disabilities (29 C.F.R. § 1604.-10(b)).
Although rules and practices of the defendant in effect when the defendant was exempt from the Act cannot be the basis for a violation of that Act, even though, as the amicus correctly points out, they are entitled to “great deference” in interpreting the Act, Griggs v. Duke Power Co., 401 U.S. 424, 434, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971), the majority’s holding is to the effect that constitutionally discrimination between pregnant women and other women and men, on account of pregnancy, is permissible. It would seem to follow that a contrary regulation would be in excess of the statutory grant of authority.
. The record belies the benevolent purpose of the school officials ascribed to them by the majority: The principal of Mrs. Cohen’s school had previously requested that she be permitted to teach until the end of the first semester, January 21, 1971. From the standpoint of minimizing disruption of the education process of her students, this would seem to have been a sensible request. However, blind adherence to the regulation, or the board’s convenience in providing a replacement, or possibly the replacement’s convenience in beginning work, was permitted to prevail. The board itself never articulated the reason for rejecting the recommendation of one who could be expected to have more intimate and accurate knowledge of the needs of the pupils affected than it.
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UNITED STATES of America, Appellee, v. Wayne Douglas KING, Defendant, Appellant.
No. 72-1372.
United States Court of Appeals, First Circuit.
Heard Jan. 4, 1973.
Decided Feb. 16, 1973.
Lawrence E. Katz, Cambridge, Mass., by appointment of the Court, with whom Haroz, Katz, Rockwell & Sager, Cambridge, Mass., was on brief, for appellant.
Robert B. Collings, Asst. U. S. Atty., with whom James N. Gabriel, U. S. Atty., was on brief, for appellee.
Before COFFIN, Chief Judge, Mc-ENTEE and CAMPBELL, Circuit Judges.
COFFIN, Chief Judge.
This appeal is another chapter in the litigation we considered in United States v. King, 455 F.2d 345 (1st Cir. 1972) (King I), and more broadly governed by the principles we announced in United States v. Griglio, 467 F.2d 572 (1st Cir. 1972). It represents the increasing scope and depth of inquiry stimulated by the order of call defense. Hopefully, because of the recent change in the nation’s approach to acquiring its military manpower, it is one of the last of its genre.
When appellant was before us in King I, we remanded the case to the district court for a hearing before the court or a magistrate to receive documentary evidence concerning the bypass of sixty-one older registrants. There having been ten younger (not eleven as we erroneously said, 455 F.2d at 351) registrants who were ordered on January 16, 1969 for induction with appellant, the government had the burden of showing that at least fifty-one of the older registrants were properly bypassed. Hearing was held before a magistrate, who concluded that fifty-six were properly bypassed. The district court found that “50 or more” were properly bypassed. Although the government admits that it must meet its burden of proof as to 51 registrants, in light of the error just noted, the district court was correct in thinking that only 50 more need be established, since the defendant had conceded at the original trial that one of the 61 under challenge was not improperly bypassed. Thus, since the government has conceded five, it must still prove the propriety of the bypass of 50 of the 55 registrants still in dispute to sustain the conviction. Conversely, appellant must prove improper the bypass of six or more to overturn the conviction.
On this appeal, appellant challenges only 27 registrants. More than one ground is asserted for the allegedly improper bypass of some of these registrants. There are two major groups, accounting for 25 of the registrants: a group of 18 registrants who, because of their wives’ pregnancies, were put in an “awaiting Board action” category pending reclassification into Class III-A, and a group of 10 older registrants (including three members of the former group) whose physical examinations were delayed, to appellant’s alleged prejudice. Two other registrants are challenged on separate grounds.
We take as our standard for measuring error that which we enunciated in Griglio, supra, 467 F.2d at 577:
“. . . we will not deem a violation of a regulation as applied to third persons a deprivation of due process as to a registrant unless it is apparent that favoritism to another or discrimination against the registrant was intended, or unless the violation is so flagrant and serious that, whether intended or not, concern for fair and efficient administration justifies the sanction of voiding an induction adversely affected by the violation.”
Our review in this case indicates no purposeful discrimination, or, except as to two registrants, violation of a serious or flagrant nature.
The group of 18 fatherhood dispositions is variously attacked. All 18 were challenged because of the action of board employees, pursuant to a board directive, in placing the registrants then I- A in a category called “awaiting Board action” upon receipt of a letter indicating pregnancy. The evidence was not presented to the board until the birth occurred. There is here no assertion that board employees acted without board authority. We see no flagrant error or any prejudice in the failure of the board to review these files more promptly. The fact is that, as of January 16, 1969, all 18 qualified for a III-A deferment. As to 13 of the 18, appellant challenges the legal sufficiency of the medical diagnoses of pregnancy, for lack of reference to a medical test, as required by 32 C.F.R. § 1623.30(c)(3). As to one, the child had been born as of January 16, 1969 and as to the others later birth records verify their indisputable status as expectant fathers as of the same date. We are not persuaded by appellant’s reliance on technical defects in documents to prove the nonexistence of a condition which later events proved to have existed.
As to five of the 18, who held a II- S classification before and slightly after the effective date of the Military Selective Service Act of 1967, appellant argues that they were ineligible for a fatherhood deferment because they were “classified in Class II-S after [such] date.” 32 C.F.R. § 1622.30(a) (1967). While we agree with the appellant that the regulation could have been written more precisely — e. g., “classified into Class II-S”, “granted a II-S classification”, or “requested and received a II-S classification”, see Gregory v. Tarr, 436 F.2d 513, 517 (6th Cir. 1971), or, on the other hand, “holding a II-S classification”, we cannot deem unreasonable the Selective Service System’s interpretation of its own regulation, United States v. Groupp, 459 F.2d 178 (1st Cir. 1972), to mean only new classification action into II-S rather than the continuation of a pre-existing status. The regulation was designed to reflect Congressional concern that registrants could avoid the draft entirely by “pyramiding” deferments under the Act. Gregory, supra. We see the argument that this policy could be applied equally well to those receiving a II-S deferment in January, 1967 as to those receiving one in July, 1967. But it is equally reasonable to conclude that the President may have felt that those relying on the prior Congressional and administrative policy should not have their reasonable expectations disturbed.
Two of the 18 registrants filed a statement of preinduction order pregnancy after they were ordered to report. In both cases, the induction orders were “cancelled” apparently pursuant to a telephone conversation with state headquarters. Appellant challenges those cancellations as illegal. The relevant regulation, 32 C.F.R. § 1622.30(c)(3), provided at the time that:
“(3) No registrant shall be placed in Class III-A under paragraph (a) of this section because he has a child which is not yet born unless prior to the time the local board mails him an order to report for induction which is not subsequently cancelled there is filed with the local board the certificate of a licensed physician [Emphasis added.]
Although the regulations authorize the State Director to “postpone” an induction “for good cause, at any time after the issuance of an Order to Report for Induction”, 32 C.F.R. § 1632.2, the only provision for “cancellation” of an order to report is to be found in § 1625.14, which states that “The reopening of the classification of a registrant by the local board shall cancel any Order to Report for Induction.” In light of the careful use of these separate terms, we cannot equate them. See Davis v. United States, 410 F.2d 89 (8th Cir. 1969). Thus, the appellant correctly states that the orders in these two eases could have been validly cancelled only if the affected registrants’ classifications were properly reopened.
For that determination, we must fall back on the oft-litigated language of § 1625.2:
“the classification of a registrant shall not be reopened after the local board has mailed to such registrant an Order to Report for Induction unless the local board first specifically finds there has been a change in the registrant’s status resulting from circumstances over which the registrant had no control.”
Here the Executive Secretary’s testimony clearly showed that the local board did not first make a specific finding to that effect; the staff placed the registrants in “awaiting Board action” status after receiving the letters and the matters were not placed • before the board until after appellant’s induction. Moreover, even if we assume that the board had made a general finding and that such a general finding satisfies this regulation, we still would find error. As all of the cases on point indicate, late assertion of a pre-existing pregnancy does not satisfy the requirements of § 1625.2 for a post-induction order change in status resulting from circumstances beyond one’s control. United States v. Watson, 442 F.2d 1273, 1281-1282 (8th Cir. 1971); United States v. Hulphers, 421 F.2d 1291, 1293 (9th Cir. 1969); Morgan v. Underwood, 406 F.2d 1253, 1255 (5th Cir. 1969). See also United States v. Walker, 424 F.2d 1069 (1st Cir. 1970) (late assertion of pre-existing conscientious objector claim does not satisfy § 1625.2). Thus the reopening and cancellation was improper, and the government has failed to show that these two registrants were properly bypassed.
Attacks on four more of the 18 fathers are insubstantial and merit no discussion.
The group of 10 registrants whose physical examinations were not scheduled so speedily as registrant’s consists of three subgroups. Three of these were in the group we have discussed, which awaited board action for a probable III-A classification. These, we have held, were properly bypassed.
As to a second subgroup of five registrants, older than appellant but not classified I-A until several months after him, appellant presents the sophisticated argument that they should have been called for physicals earlier than they were and, if they had been called with anything approaching the speed with which appellant was processed, and had been found acceptable, as two of them ultimately were (the other three never being subjected to examination), they would have been called for induction before him. His argument is premised on § 1628.11(b) which provides:
“The local board shall, so far as is practicable, select and order to report for armed forces physical examination . registrants [who have been classified in Class I-A] who are non-volunteers in the order of their liability for service.” >
He urges that the order of call is mandatory or that at least in the absence of a showing of impracticability in each particular case, the failure to follow this order of call for physicals is a serious and flagrant violation of the regulation which leads to an improper and prejudicial bypass of older registrants. The government on the other hand contends first that, as we said in King I, supra, 455 F.2d at 353-354, it “need only introduce such documents as are required to establish that the registrant should not have been ordered to undergo examination prior to King”, but that in any case, if it need go further, its burden is met if it shows the order of call for physicals “basically followed the regulations”.
We refuse to follow either suggested extreme. At the time of our comments in King, we were thinking of the more typical claim — that an older registrant classified I-A before the defendant was not ordered for a physical before him— and not of this more sophisticated claim as to those classified I-A after the defendant. Now that we are aware, we hold that a defendant may invoke § 1628.11(b) and its order-of-call provisions. As to appellant’s first contention, it is clear that the order is not mandatory ; the words “as far as is practicable” are not surplusage. Addressing his second contention, we also do not think that the requirement of impracticability is as strict as he suggests. It is one thing to require, as courts have repeatedly done, strict adherence to the statutorily-mandated order of call for inductions. We have canvassed in Griglio the reasons for that approach. But it does not follow that we must also insist on the same punctilio as to physicals, or other required steps, which, though necessary to the ultimate issuance of the orders to report for induction are not determinative of their issuance or ordering. While we would not tolerate purposefully discriminatory ordering of. physicals, or substantial though unintentional skewing of the order, we will not require particularistic explanations of impracticability when only five out of 421 orders for physicals in an eight-month period are shown to have been out of order.
The third subgroup of registrants includes two who had their physicals transferred to another board. The reports on those physicals did not arrive at the appellant’s board for some months. The appellant points to no irregularity, but only to the length of time involved.
Finally, the cases of two additional registrants, alleged to have been improperly bypassed for other reasons, do not merit prolonging this review. Since we find that only two registrants were improperly bypassed, the government has satisfied its burden of proof and the conviction must be sustained.
Affirmed.
. Appellant raised, in his post-hearing memorandum, the issue that there has been an overcall, 47 registrants having been called in his month to fill a request for 43. Were this issue before us and decided for appellant, the government would have to prove that 55 of the 61 challenged registrants, or 54 of the remaining 55, were properly bypassed. Defendant, however, was made aware of this discrepancy at the original trial, when the government introduced as an exhibit the Delivery List for February, 1969, which stated that the “number called for” was 43 but the “number listed from this board” was 47. His failure to raise this issue before the close of even the second hearing deprived the government of an opportunity to introduce evidence to justify the call of 47. We therefore do not consider this challenge.
. Here, as in the overcall argument, appellant added a ground after it could be exposed to contrary evidence — the argument that, even if their deferment was proper, putting these men into a I-A “awaiting Board action” category rather than into the III-A category had the effect of inflating the quota expected from appellant’s board. The government denies appellant’s assertion. We do not entertain the argument.
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NATIONAL LABOR RELATIONS BOARD, Petitioner, v. SUNNYLAND REFINING COMPANY, a Wholly Owned Subsidiary of Kane-Miller Corporation, Respondent.
No. 72-2919
Summary Calendar.
United States Court of Appeals, Fifth Circuit.
March 1, 1973.
Marcel Mallet-Prevost, Asst. Gen. Counsel, N. L. R. B., Washington, D. C., Walter C. Phillips, Director, Region 10, N. L. R. B., Atlanta, Ga., for petitioner.
Joseph P. Carey, Industrial Relations, Kane-Miller Corp., New York City, for respondent.
Before WISDOM, GODBOLD and RONEY, Circuit Judges.
Rule 18, 5 Cir., Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir., 1970, 431 F.2d 409, Part I.
WISDOM, Circuit Judge:
The NLRB seeks enforcement of its order that the respondent, Sunnyland Refining Co., cease and desist from violating sections 8(a)(5) and 8(a)(1) of the National Labor Relations Act, 29 U.S.C. §§ 158(a)(5) and by refusing to bargain with the certified representative of its employees. The company’s sole contention is that the board incorrectly determined the appropriate unit. The case turns on the correctness of the Board’s excluding certain dual function employees from the unit. See Berea Publishing Co., 1963, 140 N.L.R.B. 516. We grant enforcement.
I.
Sunnyland Refining Co., a wholly owned subsidiary of Kane-Miller Corp., maintains a plant at Birmingham, Alabama, where it is engaged in the manufacture, sale, and distribution of oleomargarine and related products. On October 20, 1971, the Teamster Local Union 612 filed a representation petition with the board requesting certification as the bargaining representative of a unit consisting of the company’s truckdrivers, mechanics, and tiremen employed at the Birmingham plant. The proposed unit included 34 shipper-drivers, a truck mechanic, his helper, and a tireman, all of whom work in the plant’s transportation department. The record indicates that the shipper-drivers spend an average of four days and nights per week on the road and make almost exclusively interstate deliveries. All shipper-drivers are ICC qualified and carry ICC log books. When they are not driving, most perform plant work incidental to their driving duties, such as loading and unloading trucks and labeling margarine. In general, however, the shipper-drivers have almost no time available for plant work. All are paid on a weekly salary basis.
The company contended that the unit should include 20 plant employees who both drive trucks and perform production and maintenance work unrelated to their driving duties. These “dual function” plant employees deliver about 15% of the company’s product, compared with the 60% delivered by the shipper-drivers and the 15% picked up by customers. Most of their deliveries are intrastate, and each dual function plant employee spends almost one day a week driving. The remaining time is spent in production and maintenance work. All dual function plant employees work a 40 hour week from 7:00 a. m. to 4:00 p. m. Fourteen of the dual function plant employees who drive are paid on an hourly basis; six are on salary. Only one of the dual function employees is on the same pay scale as the shipper-drivers.
On December 14, 1971, the board’s acting regional director, after a hearing, approved the union’s proposed unit. The director found that the shipper-drivers operate primarily interstate, while the dual function plant employees operate almost exclusively intrastate. Furthermore, the shipper-drivers spend almost all of their time away from the plant, while the dual function plant employees work primarily in the plant. The shipper-drivers and the dual function employees have separate supervision, are paid differently, and use different lounge facilities. The director concluded that the unit should consist of: “All shipper drivers at the Company’s Birmingham, Alabama plant including the mechanic, the mechanic’s helper and the tireman, but excluding all other employees. .” The board later upheld the director’s decision and ordered an election among the members of the unit. On January 10, 1972, an election was held in which a majority of the employees voted in favor of the union, and on January 18, the board certified the union as the collective bargaining agent for the unit. The company refused to bargain with the union.
II.
The company contends that the board departed from its prior decisions by refusing to include the 20 dual function plant employees in the unit because they spend less than 50% of their time performing work similar to the shipper-drivers’. The company points to the acting regional director’s statement in issuing his decision: “The fact that the twenty dual-function employees do some driving is insufficient to rebut the presumptive appropriateness of the unit sought by the Petitioner where, as here, they devote less than 50% of their time performing driving duties.” The company argues that this holding is inconsistent with Berea Publishing Co., 1963, 140 N.L.R.B. 516, 519, in which the board stated: “[W]e now believe that a dual function employee devoting less than fifty-one percent of his time to unit work may have sufficient interest to be included in the unit.”
We perceive no inconsistency between Berea and the present- case. The company reads Berea as requiring inclusion of dual function employees who devote less than 50% of their time to unit work. The board, however, held only that dual function employees cannot be excluded solely on the ground that they do not work with the unit more than 50% of the time. It did not hold that such employees must always be included in the unit. In each case, the question is whether the employees have a sufficient interest in the unit’s conditions of employment to be included in the unit. Berea Publishing Co., swpra.
In making this determination, the board must consider a number of factors, including (1) differences in methods of compensation, (2) different hours of work, (3) different employment benefits, (4) separate supervision, (5) degree of dissimilar qualifications, training and skills, (6) differences in job functions, (7) amount of working time spent away from the plant, (8) infrequency or lack of contact with other employees, (9) lack of integration with the work functions of other employees or interchange with them, and (10) the history of bargaining. Kalamazoo Paper Box Corp., 1962, 136 N.L.R.B. 134; E. H. Koester Bakery Co., 1962, 136 N.L.R.B. 1006; Ore-Ida Foods, Inc., 1964, 146 N.L.R.B. 464. In the present case, the board had to consider how similar the driving done by the plant employees is to the driving done by the shipper-drivers and how much driving the plant employees do.
There was ample indication that, weighing all pertinent factors, the dual function plant employees should have been excluded from the proposed unit. The intrastate driving duties occasionally performed by these employees was the only significant factor favoring their inclusion. In determining whether this alone was sufficient to overcome the other substantial differences and establish a true community of interest with the shipper-drivers, the regional director properly noted that the driving duties of the dual function plant employees were minimal and constituted only a small percentage of their working week. In these circumstances, inclusion in the unit was not warranted. See Giordano Lumber Co., Inc., 1961, 133 N.L.R.B. 205; Ballentine Packing Co., 1961, 132 N.L.R.B. 923; St. John’s Associates, 166 N.L.R.B. 287 enforced, 2 Cir. 1968, 392 F.2d 182.
Berea may also be distinguished on another basis. In Berea, the question confronting the board was whether particular employees were properly excluded from the unit. The board’s decision re-established the policy that dual function and part-time employees should be treated alike in terms of voting eligibility. In the present case, however, we are confronted with the question whether two separate bargaining units are appropriate. In such circumstances, the proper scope of inquiry is the aggregate similarities or dissimilarities between the conditions of employment of the two groups of employees. The percentage of working time that the dual function plant employees devote to driving duties is relevant to that question.
We conclude that the board’s order is supported by substantial evidence and that the dual function plant employees were properly excluded from the unit. The order of the board must be enforced.
Enforced.
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LERER REALTY CORPORATION and Apex Supply Company, Plaintiffs-Appellees, v. MFB MUTUAL INSURANCE COMPANY, Defendant-Appellant.
No. 72-1254.
United States Court of Appeals, Fifth Circuit.
Feb. 14, 1973.
Rehearing Denied April 10, 1973.
Rehearing and Rehearing En Banc Denied April 20, 1973.
Goldbold, Circuit Judge concurred in part and dissented in part and filed opinion.
R. B. Cousins, Larry L. Gollaher, Dallas, Tex., James L. Fetterly, Robert M. Wattson, Minneapolis, Minn., for defendant-appellant.
Bill C. Hunter, Timothy J. Vineyard, Dallas, Tex., for plaintiffs-appellees.
Before GODBOLD, DYER and CLARK, Circuit Judges.
PER CURIAM:
Lerer Realty Corporation and Apex Supply Company (Lerer) recovered a jury verdict in their suit on a windstorm insurance policy issued by MFB Mutual Insurance Company (MFB). On this appeal MFB contends that Lerer’s expert witnesses were not qualified to express the opinions which went to the jury; Lerer didn’t meet its burden of proving its building was damaged exclusively by wind not contributed to by rain; and, alternatively, that actual cash value, not replacement cost, was the policy measure of recovery. We affirm on witness qualification and the sufficiency of the evidence, but modify the measure and amount of damages awarded.
Lerer owned a warehouse building which was discovered in a collapsed condition following a nighttime wind and rainstorm. There were no witnesses. No adjacent buildings showed wind damage. Clogged drainage outlets in a parapet around the warehouse’s relatively flat roof could have caused an accumulation of rainwater. Lerer produced a meteorologist who testified that the storm system in the vicinity on this evening was capable of producing a tornado vortex and that his examination of the site disclosed evidence that a vortex had touched down at Lerer’s building. Lerer also sponsored one witness who was a graduate structural engineer (now engaged in business as a building contractor) and another witness who was a graduate civil engineer. They testified that neither rain nor any accumulation of rooftop water caused or contributed to the collapse. The structural engineer-building contractor further opined that a strong negative pressure force on the exterior of the building — a tornado —had caused the damage.
MFB produced the testimony of a meteorologist to the effect that no tornadic vortex had occurred on the night in question and that there was no evidence of vortex contact at the Lerer building site. MFB also obtained the testimony of a professional consulting engineer who expressed the opinion that rainwater was probably the proximate cause but certainly a contributing cause of the damage.
The determination of the qualifications of an expert witness is committed to the sound discretion of the trial judge and that discretion will not be disturbed in the absence of a clear showing of abuse. Eastburn v. Ford Motor Company, 471 F.2d 21 (5th Cir. 1972). No precedential purpose would be served by detailing the minutiae of the bases for each witness’s observations. It is sufficient to say that an examination of the record indicates no abuse of discretion in the admission of all of these expert opinions. Clearly the resulting clash of these informed beliefs created issues for jury resolution under Boeing Company v. Shipman, 411 F.2d 365 (5th Cir. 1969). It is not necessary to reach or rule on whether Lerer had the burden of proving not only that a covered loss (wind damage) occurred, but also that an exception to coverage (rain or rainwater) had not contributed.
The policy liability was limited to actual cash value, not to exceed repair or replacement cost. By endorsement MFB extended the indemnification agreement to cover the cost, as of the date of loss, of replacement in a new condition with materials of like size, kind and quality, subject to the following conditions: (1) The repair, rebuilding or replacement had to be made within a reasonable time; (2) Total liability was not to exceed (a) the cost of repair, or (b) the cost to rebuild, or (c) the actual expenditure incurred in rebuilding, repairing or replacing. A reading of this “Repair or Replace” endorsement in context with the primary liability proviso of the policy discloses a clear and unambiguous undertaking to pay the insured the actual cash value of the damaged property at the time of loss, less depreciation, unless the insured actually repaired, rebuilt or replaced within a reasonable time. If restoration is made, then, and only then, the liability of MFB would be calculated under the endorsement.
Pursuant to the special verdict procedure of Rule 49, Federal Rules of Civil Procedure, the jury found that: Lerer’s delay in beginning repairs, replacement or rebuilding (two and one-half years as of the time of trial) was not unreasonable under the terms of the policy; 119,400 dollars was the replacement cost of the building; 73,000 dollars was the value of the building prior to damage; and 12,000 dollars was the value of the building after damage. Acting upon an interpretation of the policy language which would permit recovery of restoration costs without regard to actually restoring the structure, the trial court entered judgment for Lerer for 119,400 dollars. Judgment should have been entered for the actual cash value of the property destroyed. Thanks to the enlightening specificity of the special verdicts, we can readily calculate the actual cash value of the property destroyed — 73,000 dollars minus 12,000 dollars — á net of 61,000 dollars. Accordingly, we direct the district court to modify the final judgment to provide that Lerer (and Apex) recover from MFB the sum of 61,000 dollars with interest calculated as initially provided, and trial court costs. As modified, the judgment is affirmed.
The costs of this appeal shall be divided between the appellant and the appel-lees.
Affirmed as modified.
GODBOLD, Circuit Judge
(concurring in part and dissenting in part):
I concur in the majority opinion to the extent that it upholds the introduction of expert testimony and submission of the case to the jury, but I dissent from that portion modifying the damages.
The insurer, MFB, construes its policy provisions to mean that repair or replacement is a condition precedent to indemnification under the endorsement. An available and opposite construction is that the insurer must pay replacement costs unless the insured fails to replace within a reasonable time. Under this latter construction, MFB’s obligation under the endorsement continues until passage of a reasonable time without repair or replacement. Implicitly rejecting MFB’s construction and embracing the opposing view, the trial court submitted the following special interrogatory to the jury:
Do you find from a preponderance of the evidence that it has been a reasonable time for the plaintiffs not to have repaired, replaced, or rebuilt the building in question since its damage on May 6, 1969 ?
ANSWER “It has been a reasonable time for plaintiffs not to have repaired” or “It has not been a reasonable time for plaintiffs not to have repaired”
ANSWER It has been a reasonable time for plaintiffs not to have repaired.
Since the jury found that a reasonable time had not expired, the trial court awarded replacement costs to Lerer Realty. The majority reverse the implicit adoption by the trial judge of the construction favoring the insured and adopt, as a matter of law, the construction favoring MFB.
Boiled to its essence the issue is whether actual repair or replacement is a condition precedent or a condition subsequent to MFB's obligation under the endorsement. If actual repair or replacement within a reasonable time is a condition precedent, then the insurer’s obligation under the endorsement has never arisen. If, however, its obligation vests upon loss only to be divested upon passage of a reasonable time without repair or replacement, the insurer must lose on the strength of the jury’s finding that a reasonable time had not expired. The issue is to be viewed with the realization that the sole purpose of the endorsement is to extend to the insured, under certain conditions, coverage for replacement cost rather than actual cash value of the property lost. For this more extensive coverage the insured pays an additional premium.
With the issue so framed, I set out the crucial portions of the endorsement, which is stated in full in a footnote to the majority opinion:
[Tjhis Policy is hereby extended to indemnify the Insured for the difference between the actual cash value of such property and the cost ... of replacement in a new condition, all subject to the following conditions:
1. If property damaged or destroyed ... is not repaired, rebuilt, or replaced . . . within a reasonable time after loss or damage, this Company shall not be liable for more than the actual cash value of the property destroyed.
Under the wording of this endorsement, failure to repair or replace within a reasonable time is a condition subsequent. The endorsement has language indicating that the obligation is vested (“This Policy is hereby extended”) followed by language indicating that the obligation may become divested upon the occurrence of a subsequent condition (“all subject to the following conditions”). The endorsement consists, then, of language that “giveth” followed by language that “taketh away” upon expiration of a period of time. This type construction, particularly use of provisos such as “but if,” “provided however,” or “subject to the condition that,” traditionally has connoted conditions subsequent. See generally Restatement, Property § 157 (1936). Therefore, by its endorsement the insurer created a defeasible obligation that ceases only upon the expiration of a reasonable time. While research has disclosed no Texas insurance cases directly concerned with this issue, analogous language in deeds, trusts, and other instruments has been construed by Texas courts to create a condition subsequent. See, e. g., City of Dallas v. Etheridge, 152 Tex. 9, 253 S.W.2d 640, 641-642 (1952); Stevens v. Galveston, H. & S. A. Ry., 212 S.W. 639, 643-645 (Tex. Comm’n App., 1919, jdgmt adopted).
The obligation under the endorsement was subject to a second condition:
2. The total liability of the Company under this Policy for loss to property included under this endorsement shall not exceed the smallest of the following:
a. the cost to repair, or
b. the cost to rebuild or replace, all as of the date of loss, on the same site, with new materials of like size, kind and quality, or
c. the actual expenditure incurred in rebuilding, repairing or replacing on the same or another site.
As I read this provision, MFB’s obligation, construed at a time when actual replacement or repair has not been made but before expiration of a reasonable time, is the smallest of “a.” or “b.” In this case that amount is the amount awarded by the court below.
I think the Texas trial judge’s implicit acceptance of the insured’s construction and his like rejection of MFB’s construction was correct. But if I am in error, what is crystal clear is that there are two possible constructions. Ambiguous contracts of insurance are construed in Texas most strongly against the insurer. See 32 Tex.Jur.2d, Insurance § 60 (2d ed. 1962), and numerous cases cited therein. This requires affirmance.
Not only is the condition subsequent construction required, either as the single clear construction or as the necessary choice of an ambiguous contract, but also it comports with simple fairness. MFB’s construction permits the insurer, in some circumstances, by its own act of denying coverage, to decrease the amount of its potential liability under an endorsement the purpose of which is to increase that potential liability. If the insured is not financially strong enough to effect replacement through his own resources, he does not have the benefit of the increased coverage for which he paid. One need not be clairvoyant to predict that the Texas courts will not adopt a construction giving to an insurer any such leverage over the insured and bonus for denying coverage.
. The specific policy language pertinent here was as follows :
Subject to Article 6.13 of the Texas Insurance Code — -1951, V.A.T.S., liability hereunder shall not exceed the actual cash value of the property at the time of loss, ascertained with proper deduction for depreciation ; nor shall it exceed the amount it would cost to repair or replace the property with material of like kind and quality within a reasonable time after the loss, without allowance for any increased cost of repair or reconstruction by reason of any ordinance or law regulating construction or X'epair, and without compensation for loss resulting from interruption of business or manufacture, nor shall it exceed the interest of the insured, or the specific amounts shown under “Amount of Insurance.”
In pertinent part, the “Repair or Replace” endorsement reads:
It is understood and agreed, subject to all the terms, conditions and stipulations of the Policy to which this endorsement is attached, not in conflict herewith, that in case of loss or damage to:
All property covered under this Policy
this Policy is hereby extended to indemnify the Insured for the difference between the actual cash value (ascertained with proper deduction for depreciation) of such property at the time of loss or damage and the cost, as of the date of loss, of replacement in a new ¡condition with materials of like size, {kind and quality, all subject to the following conditions:
1. If property damaged or destroyed is useless to the insux'ed or is not repaired, rebuilt or replaced on the same or another site within a reasonable time after the loss or damage, this Company shall not be liable for more than the actual cash value (ascertained with proper deduction for depreciation) of the property destroyed.
2. The total liability of this Company under this Policy for loss to property included under this endorsement shall not exceed the smallest of the following:
a. the cost to repair, or
■ b. the cost to rebuild or replace, all as of the date of loss, on the same site, with new materials of like size, kind and quality, or
c. the actual expenditure incurred in rebuilding, repairing or replacing on the same or another site.
. Compare the endorsement in Bourazak v. North River Ins. Co., 379 F.2d 530 (7th Cir. 1967), which was described by the court as follows :
“The Extended Coverage clause provided that if the building were completely rebuilt the insurer would be liable for the repair or replacement cost, not exceeding $22,500; that the insurer would not be liable for loss ‘unless and until actual repair or replacement is completed,’ and that any claim for such additional liability must be made ‘within 120 days after loss.’ ”
Id. at 531.
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f2d_474/html/0416-01.html
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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TEXACO, INC., Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Mrs. James R. Dougherty, et al., Intervenors. CONSOLIDATED GAS SUPPLY CORPORATION, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Mrs. James R. Dougherty et al., Intervenors. James M. FORGOTSON, Sr., an Independent Natural Gas Producer, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Mrs. James R. Dougherty et al., Texaco, Inc., Intervenors. PUBLIC SERVICE COMMISSION OF the STATE OF NEW YORK, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Texaco, Inc., Intervenor. INDEPENDENT NATURAL GAS ASSOCIATION OF AMERICA, Petitioner, v. FEDERAL POWER COMMISSION, Respondent. WARREN PETROLEUM CORPORATION, Petitioner, v. FEDERAL POWER COMMISSION, Respondent. TENNESSEE GAS PIPELINE COMPANY, a Division of Tenneco, Inc., Petitioner, v. FEDERAL POWER COMMISSION, Respondent. PHILLIPS PETROLEUM COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Texaco, Inc., Intervenor. TEXACO, INC., Petitioner, v. FEDERAL POWER COMMISSION, Respondent.
Nos. 71-1560, 71-1561, 71-1603, 71-1612, 71-1627, 71-1647, 71-1722, 71-1727 and 71-1729.
United States Court of Appeals, District of Columbia Circuit.
Argued Oct. 25, 1972.
Decided Dec. 12, 1972.
Rehearing Denied Feb. 5,1973.
Fahy, Senior Circuit Judge, filed dissenting opinion.
Mr. Michael J. Manning, Atty., F.P.C., for respondent. Messrs. Gordon Gooch, Gen. Counsel, Leo E. Forquer, Solicitor, and George W. McHenry, Jr., First Asst. Solicitor, F.P.C., were on the brief, for respondent. Mr. J. Richard Tiano, First Asst. Solicitor, F.P.C., at the time the record was filed, also entered an appearance for respondent.
Mr. Benjamin F. Vaughan, III, Austin, Tex., with whom Mr. R. James George, Jr., Austin, Tex., was on the brief, for intervenors Mrs. James R. Dougherty and others.
Messrs. J. Donald Annett, Houston, Tex., and Kirk W. Weinert, Washington, D. C., were on the brief for petitioners in No. 71-1560 and No. 71-1729 and In-tervenor, Texaco, Inc.
Messrs. Norman A. Flaningam, Charles R. Brown, and Richard J. Connor, Washington, D. C., were on the brief, for petitioners in No. 71-1561.
Mr. Edward H. Forgotson, was on the brief, for petitioners in No. 71-1603.
Messrs. Norman A. Flaningam, Charles R. Brown, and Richard J. Con-nor, Washington, D. C., were on the brief, for petitioners in No. 71-1561.
Messrs. L. Dan Jones and William I. Powell, Washington, D. C., .filed a brief on behalf of the Independent Petroleum Assn, of America, as amicus curiae urging affirmance.
Messrs. Philip R. Ehrenkranz, Washington, D. C., and Clyde 0. Martz, Denver, Colo., filed a brief on behalf of Anderson Oil Co. and others and Hicker-son Oil Co., and others as amici curiae urging affirmance.
Mr. Richard A. Solomon, Washington, D. C., with whom Messrs. Peter H. Schiff, Albany, N. Y., and Saul W. Baern-stein, were on the brief, for petitioner in No. 71-1612.
Mr. Christopher T. Boland, Washington, D. C., with whom Messrs. Robert G. Hardy and Jerome J. McGrath, Washington, D. C., were on the brief, for petitioner in No. 71-1627, also argued for petitioners in Nos. 71-1561 and 71-1722.
Mr. John T. Ketcham, Washington, D. C., with whom Messrs. Kenneth Heady, Bartlesville, Okl., Warren M. Sparks, Tulsa, Okl., Charles E. McGee and Robert J. Haggerty, Washington, D. C., were on the brief, for petitioner in Nos. 71-1647 and 71-1727, also argued for petitioners in Nos. 71-1560 and 71-1729.
Before FAHY, Senior Circuit Judge, and ROBINSON and WILKEY, Circuit Judges.
WILKEY, Circuit Judge:
Petitioners seek review of orders of the Federal Power Commission in Docket No. R-393, a rulemaking proceeding instituted by a Notice entitled “Exemption of Small Producers From Regulation.” These orders exempted all existing and future sales by “small producers” from direct rate regulation. Small producers could, thereunder, contract for the sale of their gas at any obtainable rates. The Commission proposed indirectly to control such rates by regulating, under standards set forth in the orders, the costs allowed to be incorporated in the rates of large producers and pipelines on resale of gas which originated with small producers. Even if resale rates were found excessive because the cost of small producer gas was “unreasonably high,” small producers would be under no duty to refund the absorbed excess to the large producers and pipelines. Since we conclude that the Commission exceeded its authority under the Natural Gas Act, the orders in . Docket No. R-393 must be set aside.
I. The Ends
Our conclusion herein challenges neither the Commission’s motives nor its opinion that some form of deregulation of small producers might benefit the consumers of natural gas. The orders represent an imaginative attempt to deal with problems of enormous magnitude. A critical gas shortage, which has been judicially recognized, faces the nation. The Federal Power Commission is confronted with an ever-increasing regulatory burden — and limited resources. These combine to produce administrative delay and threaten the Commission’s ability adequately to control natural gas prices.
Since small gas producers have historically accounted for as much as 80% of new exploration, but have less ready access to the necessary capital than do large producers, after thorough study the Commission concluded that generally beneficial exploration activity would be encouraged by assuring stable revenue flows to small producers. From deregulation of small producers, realization of their full contract prices at market levels would become a certainty. Since the small producers only account for 10.5% of the gas put into pipelines, the FPC felt that any cost hike resulting from deregulation would have a minimal effect on consumers. Obviously, any step towards deregulation would lessen the Commission’s administrative load.
This court also recognizes that the Commission was engaged, in good faith, in what it felt was a valid extrapolation from judicial comments as to which solutions to these problems would be acceptable. In FPC v. Hunt, Justice Clark made the following suggestion for dealing with the Commission’s docket congestion:
[T]he techniques of the National Labor Relations Board might be studied with a view to determining whether its exemption practices . . . might be helpful in the solution of the Commission’s problems.
In more recent cases, this court has explicitly encouraged experimentation to meet the threat of a gas shortage. Given traditional judicial deference to the agency’s expertise, the FPC obviously concluded that it would be allowed to embark upon, and later evaluate, an experimental approach to achieving the purposes of the Natural Gas Act.
II. The Means
However, Congress has prescribed limits on the Commission’s authority. The orders considered here can be upheld only if they comply with the specific provisions of the Natural Gas Act. The Commission may, of course, classify different types of producers, alter some filing requirements, and “make the pragmatic adjustments which may be called for by particular circumstances.” However, the FPC must act “within the ambit of [its] . . . statutory authority.” The Commission may not ignore the command of Section 4 (15 U.S.C. § 717c(a)):
All rates and charges made, demanded, or received by any natural-gas company for or in connection with the . sale of natural gas subject to the jurisdiction of the Commission . . . shall be just and reasonable, and any such rate or charge that is not just and reasonable is hereby declared to be unlawful. [Emphasis added.]
The Commission must also heed similar language in Section 5 (15 U.S.C. § 717d):
Whenever the Commission, after a hearing had upon . . . complaint of any State, municipality, State commission, or gas distributing company, shall find that any rate, charge or classification demanded, observed, charged, or collected by any natural-gas company in connection with any . sale of natural gas, subject to the jurisdiction of the Commission . is unjust, unreasonable, unduly discriminatory, or preferential, the Commission shall determine the just and reasonable rate, charge, classification ... or contract to be thereafter observed and in force, and shall fix the same by order . [Emphasis added.]
Ever since Phillips Petroleum Co. v. Wisconsin, the Commission, even against its own will, has had a judicially recognized duty to assume “jurisdiction over the rates of all wholesales of natural gas in interstate commerce” to insure that all such rates comply with the statutory standard.
A.
We cannot accept the Commission’s argument that it may shirk this duty. To the extent that the Commission argues that Justice Clark’s dicta in Hunt imply that exemption of a class of producers from the statutory standard would be permissible, we note that reliance cannot be placed on the NLRB as a model. The National Labor Relations Act specifically permits the Labor Board to decline to exercise its own jurisdiction. In contrast, as evidenced by Philips, the Natural Gas Act does not give the Commission any such power. Only this year the Supreme Court specifically contrasted the FPC and the NLRB, suggesting that the former’s jurisdiction will be broadly construed so that there are no “gaps” in the Natural Gas Act’s “comprehensive and effective regulatory scheme.” Further, the trials and experimentations which this court has previously approved have always been trials of new procedures consistent with the terms of the Natural Gas Act, not experimental attempts to amend, avoid or ignore these provisions.
The Commission relies heavily on Permian Basin Area Rate Cases to support the proposition that it may exempt small producers from certain requirements. However, the “exemptions” approved there were from detailed filing requirements, not from all regulation. The Court in Permian specifically noted that “the exemptions created by the Commission” were “fully consistent with the terms and purposes of its statutory responsibilities.”
Thus the Commission’s power, under Section 16 of the Natural Gas Act, to “classify persons and matters within its jurisdiction” and to “prescribe different requirements for different classes” cannot validate this exemption of small producers. The Commission can only classify “[f]or the purposes of its rules and regulations.” It can only prescribe rules and regulations “to carry out the provisions of this chapter.” Section 16 thus does not give the Commission independent powers. Rather, it provides for implementation of the core sections of the Act, such as Section 4.
B.
Nor can we accept the Commission’s argument that it has met its obligation to insure, the statutory standard of “just and reasonable” rates by indirectly controlling small producer prices through regulation of large producers and pipelines. That argument might have some merit if the Commission had provided that small producer rates could only be passed along on resale as legitimate costs if they met the “just and reasonable” standard. In essence, that is what the Commission was allowed to do in Permian. There, specific and direct regulation of small producer rates was held unnecessary because all such rates were required to be below the area ceiling rate — a rate level already determined by the Commission to be “just and reasonable.”
Here, however, the Commission set forth a different sort of guideline for its indirect regulation. The novel tests proposed are nowhere spelled out in the Act or in any decision applying the Act. Small producer rates can only be passed along to consumers if they are not
unreasonably high, considering appropriate comparisons with highest contract prices for sales by large producers or the prevailing market price for intrastate sales in the same producing areas.
Whether or not these two factors would establish precise boundaries on acceptable rates, the Commission has clearly tied its determination to factors which it does not regulate or which derive solely from market forces. Large producers can, of course, contract for any prices, presumably in the hope that such payments may eventually be allowed under the regulatory scheme as legitimate costs actually incurred. Intrastate sale prices are at no point subject to regulation by the Commission.
The Commission has a duty to insure that all rates are “just and reasonable.” At best, the indirect controls it has proposed will insure that the small producer rates which are passed on to consumers are below levels set by private contracting parties (or potentially by state regulation which is not necessarily tied to the federal standard). Nothing at all insures that those levels will be “just” or “reasonable.” That is the essential flaw in the Commission’s plan. That is the point at which the FPC abdicates its regulatory responsibility in derogation of the purposes and mandatory terms of the statute. Indirect “regulation” by such novel “standards” is worse than an exemption simpliciter. Such an approach retains the false illusion that a government agency is keeping watch over rates, pursuant to the statute’s mandate, when it is in fact doing no such thing.
One variant of the “indirect regulation” argument might contend that, while the Commission would no longer be regulating rates, the market mechanism itself would, in effect, dictate small producer prices which were “just and reasonable.” However, though ingenious on a semantic level, that argument ignores the essential difference between a regulated and an unregulated industry. Put simply, the latter is governed by the market while the former, by definition, is the subject of active governmental control.
More importantly, such a post hoc rationalization does not coincide with the Commission’s own view of its Order. The FPC flatly concedes that “[t]he Commission’s order does not purport to determine the just and reasonable rates for sales by small producers.” To the contrary, the Commission’s basic contention all along has been that the “just and reasonable” standard was not mandatory and that the FPC can simply choose not to regulate rates. It strains credulity to assert that the Commission meant to achieve just and reasonable rates through normal market forces, while in the very same Orders it refused to let pipelines and large producer plant operators pass on these “just and reasonable” rates without further review under new non-statutory standards. Since the Commission itself has not been confident enough to conclude that the market will necessarily yield rates that comply with the statute, this court can hardly uphold the Orders on that ground.
Our dissenting colleague believes that “[t]he Commission has made a judgment which I think is within the ambit of its competence and expertise not to require small producers to be bound to the area rate . . ., on an experimental basis.” (P. 425) But the “area rates” are the previously Commission-determined “just and reasonable” rates, from which, no matter how one phrases it, the small producers will be exempt, even though on an experimental basis. It is significant that the Notice for this rule-making proceeding was frankly titled “Exemption of Small Producers from Regulation.” Our dissenting colleague correctly notes that the Order which issued carried the title “Order Establishing Blanket Certificate Procedure for Small Producer Sales and Providing Relief from Detailed Filing Requirements.” This rose by another name carries the same thorns.
Judge Fahy notes that the Commission intends to review the results of its experiment. Presumably, if that review showed unjust and unreasonable rates developing, the Commission would consider reinstating the regulatory scheme. However, even if it did so, the rates charged during the interim period would not have been subject to regulation. It seems most unlikely that any “further action to protect consumers” could legally reimburse those who made payments, valid under the Commission’s own rules during that experimental period, were we to approve those rules here.
The Commission further defended its decision on the grounds that, given their limited percentage of the market, a rise in small producer prices will have no great effect on consumers. We doubt that the effect of potentially allowing greater than area ceiling rates for 10.5 % of the gas sold can be considered de min-imis. In any case, the long-range impact of these orders on consumers lies more in the principle they establish than in any immediate effect on prices. We think it undeniable that the Commission could, under its theory of this case, proceed to establish another class of “medium” producers, and provide the same or different appropriate exemptions for this new class, and Commission counsel so conceded in oral argument. Likewise, the Commission could, again by its own fiat, change the definition of small producer to include those with greater volumes of jurisdictional sales.
If Order No. 428 is upheld, no limit appears which could halt gradual erosion of the statutory standard’s applicability. Given the Commission’s self-professed distaste for regulation, a decision upholding its approach here might soon yield further FPC decisions which made the instances where rates were determined by the “just and reasonable” standard the exception rather than the rule.
Whatever the wisdom of the policy at this critical juncture of our national energy source problems, we cannot hold that tiowregulation is the statutory equivalent of regulation. Only Congress can knowingly prescribe nonregulation for small producers in lieu of the existing statutory scheme of regulation found by the Supreme Court in Phillips to be mandatory under the Natural Gas Act for all producers.
III. Means to the Desired End
All of this is not to say that a proper regulatory determination, within the letter and spirit o.f the Natural Gas Act, could not set a just and reasonable rate for small producers higher than that for large producers. Given the special problems and practices of small producers, such a result is certainly conceivable. But the small producers cannot be exempted from the regulatory scheme, and have their prices tied to the free market, by administrative agency fiat.
Nor is the scheme saved by the laudable purpose of the Commission, described by our dissenting colleague: “The Commission is attempting to learn whether under this program the small producers, relieved of much of the burden of regulation required of other classifications, can improve their exploratory efforts while charging rates which on review will nevertheless prove to be just and reasonable and which will not adversely affect the consumer interests protected by the Act.” (P. 425) With all due respect to Judge Fahy and the Commission, what it is doing is experimenting to see if, after all, nonregulation of the small producers, letting market forces shape the price structure, will not in the long run be better both for industry and consumer. Whether this be so or not, the place for authorizing such experiments outside the present language of the Act is in Congress. And, as noted immediately above in Part II, the means adopted by the Commission here are capable of being employed to the complete subversion of the regulatory scheme.
The Power Commission has made a conscientious and intelligent effort to cope with an enormous national problem. Where the Commission has failed is not in its diligence and its expertise. It has simply failed because the methods adopted do not square with its duties under the Natural Gas Act. This court’s role, in regard to the actions of regulatory commissions, is to insure that such bodies comply with applicable legislation. The Commission’s imagination and ingenuity here simply outran the statute. The place to bring these resources to bear is in Congress. If exemption is advisable, and the Commission appears to have made a powerful case that it is, Congress should have a receptive ear. In the interim, this court cannot ignore the statute or excuse the Commission from its duty.
Accordingly, the orders of the Commission in Docket No. R-393 are set aside.
So ordered.
FAHY, Senior Circuit Judge,
dissenting:
I agree with the court that all rates and charges of any natural-gas company subject to the jurisdiction of the Natural Gas Act, which includes the small producers here involved, shall be just and reasonable and, if not, that they are unlawful. But we have no particular rate or charge before us for scrutiny as to its justness or reasonableness. Order No. 428 of the Commission, before us for review, was made in a rule-making proceeding duly conducted. It passed upon no particular rate or charge of any or all small producers. It laid down certain guides within which small producers may contract for sales of their gas. It is properly entitled by the Commission as an “Order Establishing Blanket Certificate Procedure for Small Producer Sales and Providing Relief from Detailed Filing Requirements.” The Commission explicitly relies upon the Supreme Court decision in Permian Basin Area Rate Cases, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968), to the effect that under section 16 of the Act, for purposes of its rules and regulations, the Commission may “classify persons and matters within its jurisdiction and prescribe different requirements for different classes of persons or matters.” It cannot be questioned that it is within the power of the Commission separately to classify small producers. The question really is whether the rules or regulations applied to this classified group are within the Act. More precisely, as it seems to me, the question is whether we can hold, on the record before us, that the type of regulation of prices adopted by the Commission has led or will lead inevitably to unjust or unreasonable rates charged by small producers to purchasers of gas from them, notwithstanding
[a] presumption of validity . attaches to each exercise of the Commission’s expertise, and those who would overturn the Commission’s judgment undertake “the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences” . . . [It] must be free, within the limitations imposed by pertinent constitutional and statutory commands, to devise methods of regulation capable of equitably reconciling diverse and conflicting interests.
Permian, supra, 390 U.S. at 767, 88 S.Ct. at 1360.
The Commission has made a judgment which I think is within the ambit of its competence and expertise not to require small producers to be bound to the area rate and certain filing requirements, on an experimental basis. A higher rate than that previously fixed for the industry in the area may be just and reasonable for the small producer as a separate classification within the area. The Commission is attempting to learn whether under this program the small producers, relieved of much of the burden of regulation required of other classifications, can improve their exploratory efforts while charging rates which on review will nevertheless prove to be just and reasonable, and which will not adversely affect the consumer interests protected by the Act. The Order provides :
We intend to review the prices established in new contracts or contract amendments relating to sales by small producers to assure the reasonableness of the rates charged by such producers pursuant to the action we are taking herein. In the event we determine that this approach is inimical to the interests of consumers, we shall take further action to protect consumers.
The Commission is attempting “to reach an accommodation of conflicting interests, through experimentation, that will result in the proper alleviation of the gas shortage.” Public Service Commission of the State of New York v. FPC, 151 U.S.App.D.C. 307, 467 F.2d 361 (1972).
I do not think the Commission has abdicated its responsibility to insure that rates of small producers will be just and reasonable. It does not appear from the record before us that any such price that might be charged is necessarily unjust or unreasonable. It is the Commission’s assumption, given the small percentage of gas sales the small producers account for, and given their situation within the industry, that the rates to be collected from their sales of gas under this new plan will in fact be just and reasonable. The record before us does not rebut this assumption. Moreover, consumer protection is promised, and I cannot now hold that the promise will not be fulfilled. The Commission states:
The action taken here in our view does not constitute deregulation of sales by small producers. We will continue to regulate such sales but will do so at the pipeline level by reviewing the purchased gas costs of each pipeline with respect to small producer sales. We shall also provide certain other safeguards against unreasonably high small producer prices, as hereinafter discussed, to assure adequate protection of the consumer.
I have considered the contention that Order No. 428 discriminates against large producers vis-a-vis pipelines, but I find in this, as in other contentions made, no reason to depart from my basic position that as the matter now comes before the court the Order should not be set aside.
I would, however, modify Order No. 428 in one respect. I would strike its provisions prohibiting refunds to pipelines and large producers, leaving open to the Commission to exercise such authority as it has to protect large producers and pipelines in the event the Commission finds they have been charged unreasonably high prices by small producers. As thus modified I would affirm Order No. 428 and its alphabetical series. Should such a modification temper to a degree the charges of small producers, I think that result must be accepted as required by the public interest represented by the Act. I do not think such possible tempering would go so far as to defeat the purposes of Order No. 428.
I respectfully dissent.
. The Commission’s original Order No. 428 was issued on 18 March 1971. It was subsequently modified by Order No. 428-A, issued 9 April 1971, and Order No. 428-B, issued 15 July 1971.
. Issued 23 July 1970. It should be noted that some of the petitioners challenge the sufficiency of that notice. Since all important objections were raised and considered prior to the action of the Commission in Order No. 428-B, we do not agree that further publication is required by the Administrative Procedure Act. In any event, given our disposition of these cases, that issue, need not be reached.
. Joint Appendix (hereafter “J.A.”) at 1. The resulting Order 428 was entitled “Order Establishing Blanket Certificate Procedure For Small Producer Sales and Providing Relief From Detailed Filing Requirements.” As this opinion will explain, the actual terms of this order belie its title’s suggestion that its effect is more limited than that implied by the broad title of the Notice of Proposed Rulemak-ing.
. Small producers are defined as those with jurisdictional sales of less than 10,000,000 Mcf of gas per year. Such producers would be required to submit annually a document setting forth pertinent information concerning their jurisdictional sales.
. See Southern Louisiana Area Rate Cases v. FPC, 428 F.2d 407, 437 (5th Cir. 1970), cert. denied, 400 U.S. 950, 91 S.Ct. 241, 27 L.Ed.2d 257.
. 376 U.S. 515, 527, 84 S.Ct. 861, 868, 11 L.Ed.2d 878 (1964).
. Public Service Commission v. FPC, 151 U.S.App.D.C. 307 at 313, 467 F.2d 361 at 367 (decided March 29, 1972), (rehearing denied May 19, 1972); Public Service Commission v. FPC, 149 U.S.App.D.C. 421 at 425, 463 F.2d 824 at 828 (Decided May 16, 1972).
. Federal Power Commission v. Natural Gas Pipeline Co., 315 U.S. 575, 586, 62 S.Ct. 736, 743, 86 L.Ed. 1037 (1942).
. FPC v. Natural Gas Pipeline Co., supra.
. The Supreme Court has described “the fixing of ‘just and reasonable’ rates” as “the heart of the new regulatory system.” FPC v. Hope Natural Gas Co., 320 U.S. 591, 611, 64 S.Ct. 281, 292, 88 L.Ed. 333 (1944).
. 347 U.S. 672, 682, 74 S.Ct. 794, 799, 98 L.Ed. 1035 (1954). (Emphasis added.) It should be noted that Justice Clark, in dissent, conceded that “[o]n its face, this language brings every gas operator, from the smallest producer to the largest pipeline, under federal regulatory control.” 347 U.S. 672, 691, 74 S.Ct. 794, 804 (emphasis added).
. 29 U.S.C. § 160(a).
. FPC v. Louisiana Power & Light Co., 406 U.S. 621, 631, 92 S.Ct. 1827, 32 L.Ed.2d 369 (1972).
. Deregulation is decidedly not one of the “policy decisions of the type [the FPC] . . . was created to make.” See Public Service Commission v. FPC, 467 F.2d 361, 367.
. 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968).
. Id. at 787, 88 S.Ct. at 1370. (Emphasis added.)
. However, in that event, we might have greater problems with the validity of subjecting the pipelines and large producers, who have made mirefundable payments to small producers, to the risk of later Commission determination, under such an imprecise standard, that the rates paid could not be passed along as legitimate costs. The Commission itself, in Order No. 428-B, recognized that it would be desirable for “the pipelines to know in advance the boundaries within which they could freely contract with small producers.” J. A. at 246. Unfortunately, in the case at bar, the Commission chose a “more concrete guide” witli no relation to the mandatory statutory standard.
Judge Fahy has suggested modification of the Order to strike its provisions prohibiting refunds from small producers and to leave open the Commission’s authority to protect large producers and pipelines from unreasonably high small producer prices. That approach would only compound the uncertainty and risk for all concerned. Moreover, it would defeat the basic purpose of the Order — encouraging exploration by assuring small producers of a steady flow of funds under their contract rates.
. When the Commission says on pages 16 and 17 in its brief that the only difference in its new scheme from that which the Supreme Court approved in Permian in 1968 is that now the small producers are allowed to exceed the area rate ceiling determined to be just and reasonable, then of course the Commission is saying that the whole issue in the lawsuit is no different from Permian. That just isn’t so. The absence of such a “just and reasonable” limit is the big difference. Order No. 428 not only allows small producers to exceed the reasonable and just area rate ceilings — it allows them to do so on the basis of the free market, which is the antithesis of regulation.
. J.A. at 142. These standards apply to both pipelines and large producers. In addition, large producers may reflect their increased payments in rate increases only if the contract price differential between their purchase and resale prices is “consistent with prevailing price differentials in the area.” J.A. at 140.
. In the different context of individual ratemaking proceedings, this court has insisted that the Commission’s determinations be “anchored” to factors with some meaningful relationship to what is “just and reasonable.” See City of Chicago v. FPC, 147 U.S.App.D.C. 312, 458 F.2d 731, 750 (1971), cert. denied, 405 U.S. 1074, 92 S.Ct. 1495, 31 L.Ed.2d 808 (1972); and City of Detroit v. FPC, 97 U.S.App.D.C. 260, 230 F.2d 810 (1955), cert. denied, 352 U.S. 829, 77 S.Ct. 37, 1 L.Ed.2d 48 (1956). As the court noted in City of Detroit, a new Commission approach to regulation is not invalid merely because it departs from the traditional rate-base or cost-of-service methods. However, even granting the legitimacy of indirectly regulating small producer rates, the standards set forth in Order No. 428 have not been demonstrated to have any relationship at all to the statutory standard.
. To the extent that new sales are covered by the blanket small producer certificates, the Commission has also abandoned any attempt to scrutinize the rates involved in such sales against Section 7’s standard of “public convenience and necessity.” Were that the only effect of Order 428, we might have a different case. If there remained a potential for future review under the standards of Sections 4 and 5, the “public convenience and necessity” might indeed be served by temporarily allowing certification of rates meeting the novel standards proposed by the FPC. Indeed, rates are “not . . . the only factor bearing on the public convenience and necessity.” Atlantic Refining Co. v. Public Service Commission, 360 U.S. 378, 391, 79 S.Ct. 1246, 1255, 3 L.Ed.2d 1312 (1959). Unlike the situation in Atlantic Refining, small producer rates would probably not set a pattern for the whole industry. However, the Commission here abandoned any future rate review under the “just and reasonable” standard. In'its more recent rulemaking Orders Nos. 455 and 455-A, the Commission seems to have admitted that it has no such power. Those Orders, consolidating the Section 4 and Section 7 tests in an optional certificate procedure for new gas sales, also sought to assure producers of certain receipt of their certified contract rates. In that context, the Commission conceded that “[w]e cannot bind a future Commission not to invoke the prospective operation of Section 5, nor do we attempt to do so.” Mimeo, pp. 9-10. In marked contrast is the Commission’s statement regarding Order No. 428: “We seek to assure the small producer that when he enters into a new contract for the interstate sale of gas, the provisions of his contract will not be subject to change.” We conclude that Order No. 455 contains the more correct view of the statutory limits on the Commission’s power.
. Commission’s Brief at p. 35.
. Joint Appendix at p. 136.
. A de minimis effect on consumer prices seemed to weigh with the Court in Permian with regard to one of the approved “exceptions.” 390 U.S. 747, 786-787, n. 56, 88 S.Ct. 1344, and accompanying text (1968).
. The Congress could itself classify small producers, exempt them from regulation for a designated period of time, and meanwhile order the Commission to gather empirical data to see if this is beneficial to the industry and to consumers of natural gas. While we do not reach the details of the Commission’s plan here, we should note that the different parties pointed out various inequities, each from its own point of view. The Commission might be well advised to make certain refinements in its overall plan before recommending it to Congress. In particular, the standards to be applied to resale by non-exempt producers and pipelines would benefit from greater precision — so that these businesses could know in advance what their position would ultimately be and would not have to rely on the good will of the Commission for their economic salvation.
. 15 U.S.C. § 717(o) (1970).
. Permian, supra, 390 U.S. at 787, 88 S.Ct. at 1370, where the Supreme Court stated:
The problems and public functions of the small producers differ sufficiently to permit their separate classification, and the exemptions created by the Commission for them are fully consistent with the terms and purposes of its statutory responsibilities. It is not without relevance that this Court has previously expressed the belief that similar arrangements would ameliorate the Commission’s administrative difficulties.
. Recently, in PPC v. Louisiana Power and Light Co., 406 U.S. 621, 642, 92 S.Ct. 1827, 1839, 32 L.Ed.2d 369 (1972) the Court referred to the Commission’s authority under section 16 of the Act as follows:
[T]he Commission must possess broad powers to devise effective means to meet these responsibilities. PPC and other agencies created to protect the public interest must be free, “within the ambit of their statutory authority, to make the pragmatic adjustments which may be called for by particular circumstances.” . . . Section 16 of the Act assures the PPC the necessary degree of flexibility. ... In applying this section, we have held that “the width of administrative authority must be measured in part by the purposes for which it was conferred. . . . ' Surely the Commission’s broad responsibilities therefore demand a generous construction of its statutory authority.”
. The court is not bound by Commission counsel’s response during argument that the Commission could establish a class of “medium” producers for regulation similar to that which Order No. 428 applies to small producers.
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{
"author": "SPOTTSWOOD W. ROBINSON, III, Circuit Judge:",
"license": "Public Domain",
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Ralph NADER et al., Appellants, v. Earl H. BUTZ, Secretary of Agriculture, et al.
No. 72-1418.
United States Court of Appeals, District of Columbia Circuit.
Aug. 21, 1972.
Mr. William A. Dobrovir, Washington, D. C., was on the motion for summary reversal for appellants.
Messrs. Alan S. Rosenthal and Irwin Goldbloom, Attys., Dept, of Justice, were on the motion for summary affirmance for appellees.
Before FAHY, Senior Circuit Judge, and ROBINSON, Circuit Judge.
SPOTTSWOOD W. ROBINSON, III, Circuit Judge:
This appeal is from an order of the District Court dismissing a suit attacking the level of price support established for milk and milk products during the 1971-72 marketing year. The basis for dismissal was the court’s view that the subsequent setting of the price support level for the marketing year 1972-73 rendered the action moot. We conclude that, in present circumstances, it cannot be said that the challenged determination for 1971-72 did not affect the determination for 1972-73, and we find that appellants were deprived of an opportunity to show that in fact it did. We accordingly reverse the order terminating the litigation for mootness.
The Secretary of Agriculture is statutorily authorized and required to fix for each marketing year the level of price support, as a percentage of parity, for milk, butterfat and the products of each. On March 12, 1971, it was announced that the price support level for the marketing period from April 1, 1971, through March 31, 1972, would be $4.66 per hundredweight, as it has been for the preceding year. Two weeks later, on March 25, 1971, however, the 1971-72 level was raised to $4.93.
Appellants filed in the District Court a complaint, later amended, seeking a judgment declaring that the March 25 determination was unlawful and an injunction against the continuance of price support during 1971-72 at any level higher than the $4.66 figure. Appellants alleged that the March 25 increase was influenced by exertions of pressure by members of Congress and by the promise or expectation of political contributions from dairy interests. Appellants further alleged that dairy organizations had contributed $35,000 between March 22 and March 24 and an additional $287,500 since then. Appellants sought discovery of the political-contribution practices of these organizations, and of a nexus between them and the March 25 decision.
On March 9, 1972, during the pen-dency of the suit in the District Court, it was announced that the $4.93 price support level would be continued for the marketing year beginning on April 1 following. Shortly thereafter, appellees moved to dismiss the suit for mootness, pointing out that the March 25, 1971, order had expired by its own terms, and appellants moved to amend their complaint to encompass the new price support determination as well as the old. The District Court denied appellants’ motion, granted appellees’ and dismissed the suit as moot. This appeal followed, and both parties have moved for summary disposition.
In consequence of the constitutional limitation of federal court jurisdiction to “cases” and “controversies,” litigation becomes moot whenever it tenders for judicial resolution no more than an abstract or hypothetical question. Beyond that, a court may decline to adjudicate an action which, although not moot in the constitutional sense, presents no concrete controversy. It is unnecessary to consider whether the price support determination for 1972-73 merely continued the 1971-72 level in force or whether it technically supplanted the prior level. If the former, no ar-
gument is required to demonstrate that the controversy over improper influence did not become abstract. But even if the sequence of events produced an independent decision for 1972-73, there remained the question whether the improprieties charged to the 1971-72 determination might also have tainted the 1972-73 determination. If so, the controversy involving the older price support level did not evaporate upon formulation of the newer.
It is not so evident that the 1972-73 price support level was uninfluenced by the 1971-72 level that the matter could be disposed of without further exploration. There is substantial indication by the Department of Agriculture itself that the economic impact of a price support level is apt to endure considerably longer than the marketing year for which it is established. Moreover, the circumstances confronting this appeal lend support to the thesis that the level set for 1971-72 may have had repercussions for the level eventuating for 1972-73. It appears that for at least the past decade, the price support level for milk has generally been higher, but never lower, than it was for the preceding year. The economic facts seem self-evident, and in all important respects the 1972-73 determination is identical with that for 1971-72. Indeed, in the words of the Secretary, the 1971-72 level was "continued” for 1972-73, notwithstanding some change in economic conditions during the interim.
In this milieu, it could not be ruled as a matter of law that the 1972-73 price support determination was unaffected by the 1971-72 determination which was the original target of appellants’ action. By the same token, the improprieties appellants alleged as to the earlier decision were not negated simply by rendition of the later decision. In sum, if the 1971-72 level remained at the original $4.66 figure, the 1972-73 level may well have been lower than $4.93. Appellants asked the District Court for a chance to implicate the 1972-73 level, and it was error to dismiss their suit without affording them an opportunity to do so. It goes without saying that we intimate nothing whatever as to any other aspect of the case.
The order of dismissal for mootness is reversed, and the case is remanded to the District Court for further proceedings.
Reversed and remanded.
. 7 U.S.C. § 1446(c) (1970). The parity price is computed by a statutory formula designed to give the supported commodities the same purchasing power, in terms of goods and services purchased by farmers, that the commodities possess in a specified base period. 7 U.S.C. § 1301(a) (1970). The Secretary is required to take into consideration a number of factors in making his determination, 7 U.S.C. § 1421(b) (1970), and, to the extent practicable, to announce the level of price support for milk prior to the beginning of the marketing year, 7 U.S.C. § 1426 (1970).
. Commodity Credit Corp. Docket MCP 98a, Milk Price Support Program, 1971-72 (approved by Secretary of Agriculture Mar. 22, 1971).
. 36 Fed.Reg. 8237 (1971). See also Commodity Credit Corp. Docket MCP 98a, Amendment 1, Milk Price Support Program, 1971-72 (approved by Secretary of Agriculture May 25, 1971).
. Appellants are Ralph Nader, Public Citizens, Inc., the Federation of Homemakers, and the Consumers Association of the District of Columbia.
. The defendants-appellees here, were the Secretary of Agriculture and the Commodity Credit Corporation. The latter is the governmental instrumentality implementing the mechanism of price supports for agricultural products. See 7 U.S.C. §§ 1424, 1446a, 1446a-l (1970).
. D.C. Federation of Citizens Ass’ns v. Volpe, 148 U.S.App.D.C. 207, 221, 222, 459 F.2d 1231, 1245, 1246 (1971).
. 37 Fed.Reg. 6567 (1972).
. See 7 U.S.C. § 1421(d) (1970).
. See Fed.R.Civ.P. 15(a).
. Appellees also moved for summary judgment, supporting their motion by affidavits categorically denying appellants’ allegations of impropriety and offering an explanation of the basis for the price support level established on March 25, 1971. Since the District Court dismissed appellants’ action for mootness, it did not reach the motion for summary judgment. Thus we have no occasion on this appeal to reach it either.
. Appellants seek summary reversal and appellees summary affirmance. See Natural Resources Defense Council v. Morton, 148 U.S.App.D.C. 5, 10, 458 F.2d 827, 832 (1972); United States v. Allen, 133 U.S.App.D.C. 84, 85, 408 F.2d 1287, 1288 (1969).
. U.S.Const. art. Ill, § 2.
. See, e. g., Powell v. McCormack, 395 U.S. 486, 496, 89 S.Ct. 1944, 23 L.Ed.2d 491 (1969); Sibron v. New York, 392 U.S. 40, 57, 88 S.Ct. 1889, 20 L.Ed.2d 917 (1968).
. See, e. g., Alton & S. Ry. v. Machinists Int’l, 150 U.S.App.D.C. 36, 463 F.2d 872 (1972). And see United States v. Hooper, 139 U.S.App.D.C. 171, 173, 432 F.2d 604, 606 (1970).
. Ford Motor Co. v. United States, 335 U.S. 303, 313, 69 S.Ct. 93, 93 L.Ed. 24 (1948); Walling v. James V. Reuter, Inc., 321 U.S. 671, 674, 64 S.Ct. 826, 88 L.Ed. 1001 (1944); Southern Pac. Co. v. ICC, 219 U.S. 433, 452, 31 S.Ct. 288, 55 L.Ed. 283 (1911); Burrell v. Martin, 98 U.S.App.D.C. 33, 38 n. 16, 232 F.2d 33, 38 n. 16 (1955); Confederacion de la Raza Unida v. City of Morgan Hill, 324 F.Supp. 895, 897 (N.D.Cal.1971). These decisions are but applications of the broader doctrine that dissolution of a governmental act does not moot a challenge if it is outlived by adverse consequences to the litigant. See Benton v. Maryland, 395 U.S. 784, 790-791, 89 S.Ct. 2056, 23 L.Ed.2d 707 (1969); Street v. New York, 394 U.S. 576, 579-580, 89 S.Ct. 1354, 22 L.Ed.2d 572 n. 3 (1969); Sibron v. New York, supra note 13, 392 U.S. at 53-58, 88 S.Ct. 1889; Carafas v. LaVallee, 391 U.S. 234, 237-238, 88 S.Ct. 1556, 20 L.Ed.2d 554 (1968); Ginsberg v. New York, 390 U.S. 629, 633-634, 88 S.Ct. 1274, 20 L.Ed.2d 195 (1968). While that principle is perhaps more frequently applied in criminal cases, it also does service in civil jurisprudence. See Justin v. Jacobs, 145 U.S.App.D.C. 355, 357, 449 F.2d 1017, 1019 (1971); Hudson v. Hardy, 137 U.S.App.D.C. 366, 368, 424 F.2d 854, 856 (1970).
. Economic Research Service, U.S. Dep’t of Agriculture, Impacts of Alternative Dairy Price Support Levels 1 (1972), inserted in the Congressional Record at 118 Cong.Rec. E2327-30 (daily ed. Mar. 9, 1972). This publication was a report to the Agricultural Stabilization and Conservation Service and it states :
The decision on the price support level for milk in the 1972-73 marketing year will have impacts on production, sales, Government costs, dairy farm income, and consumer costs for dairy products. These effects will extend over a number of years.
Id. at 1.
. The price support level for milk has gradually risen from $3.11 for 1962-63 to $4.93 for 1972-73. In two instances it lias remained constant for all or parts of consecutive marketing years, but in all other instances it has increased from year to year.
. The economic facts seem self-evident. An elevation of the price support level for milk in turn increases the prices paid to dairy farmers for milk they produce, raises the price consumers pay for milk and milk products, and increases the outlay of taxpayers’ money.
. As announced on March 25, 1971, the price support level for milk was $4.93 and the support purchase prices for butter were 68.75 cents in the east and 67.75 cents in the west, for chedder cheese 54.75 cents, and for nonfat dry milk 31.07 cents. The figures, as announced on March 9, 1972, for 1972-73, were identical tor each item.
. 37 Fed.Reg. 6567 (1972). See also U.S. Dep’t of Agriculture News Release No. 854-72 at 2 (March 9, 1972).
. Milk production costs had risen, so that the $4.93 figure, which represented 85% of parity in 1971-72, represented only 79% in 1972-73.
. Appellees point out that appellants’ proposed amendment did not allege that the determination for marketing year 1972-73 was itself improperly motivated. That consideration is beside the point. If the 1972-73 decision was significantly influenced by an invalid decision for 1971-72, appellants’ lawsuit did not become moot. See cases cited supra note 15.
. Fed.R.Civ.P. 15(a) specifies that “leave [to amend] shall be freely given when justice so requires.” And see, e. g., Christensson v. Hogdal, 91 U.S.App.D.C. 251, 255, 199 F.2d 402, 406 (1952) (rule is liberal, permitting amendments to change relief sought at least where scope of relief is diminished and defendant suffers no prejudice) ; Archbold v. McLaughlin, 181 F.Supp. 175, 177 (D.D.C.1960) (“ . . . the practice is to permit amendments freely to cure defective or imperfect pleadings, particularly to remedy objections raised on motions to dismiss.”).
. In this view, it is unnecessary to consider whether appellants’ action survived appellees’ mootness objection on any other basis.
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Caselaw Access Project
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{
"author": "FAHY, Senior Circuit Judge:",
"license": "Public Domain",
"url": "https://static.case.law/"
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Booker T. HINES et al., Appellants, v. CITY FINANCE COMPANY OF EAST-OVER, INC., et al.
No. 71-1498.
United States Court of Appeals, District of Columbia Circuit.
Argued Sept. 11, 1972.
Decided Nov. 22, 1972.
Miss Marilyn Fisher, Washington, D. C. , with whom Miss Maribeth Halloran, Washington, D. C., was on the brief for appellants.
Mr. Harry L. Ryan, Jr., Washington, D. C., with whom Mr. Harry Protas, Chevy Chase, Md., was on the brief for appellees.
Before FAHY, Senior Circuit Judge, and TAMM and WILKEY, Circuit Judges.
FAHY, Senior Circuit Judge:
On January 29, 1971, Booker T. Hines and Cora M. Hines, the appellants, individually and on behalf of all others similarly situated, filed an action in the District Court against City Finance Co. of Eastover, Inc., a Maryland corporation, appellee, and against Aaron J. Rehr and James H. Pinkus. The substance of the original complaint was to obtain relief primarily directed to the defendant corporation. Appellants alleged that City Finance made loans to them and to numerous other persons in this jurisdiction requiring the payment of interest in excess of the statutory limit of 8 percent, 28 D.C.Code § 3301 (1967), as amended, (Supp. V, 1972). It was also alleged that appellee corporation was unlawfully doing business in this jurisdiction without the certificate of authority to do so required by 29 D.C.Code § 933 (1967), was illegally loaning money for more than 6 percent without the license required by 26 D.C.Code § 601 (1967), and was illicitly charging credit life insurance without the necessary license in violation of 35 D.C.Code § 1363 (Supp. V, 1972). Appellees Rehr and Pinkus were sued as trustees on the deeds of trust executed as security for the loans made to the Hines.
Appellants sought declaratory judgments that City Finance had violated these statutory provisions and that therefore the loans were null and void and unenforceable. They requested the court to cancel the notes and deeds of trust, and to order an accounting and the return of all monies paid on such notes by the class. Appellants also requested injunctive relief, pendente lite and permanently, to prohibit further collection on all such notes, to restrain the enforcement of all deeds of trusts securing such notes, and to enjoin City Finance from maintaining any suits in the District of Columbia.
On March 23, 1971, appellants filed an Amended Complaint adding allegations set forth in the margin, seeking to bring the activities of the corporate appellee within the prohibitions of 18 U.S.C. § 1962 (the Organized Crime Control Act of 1970).
January 29, 1971, the day the original complaint was filed, was a Friday. The Monday following, February 1, the District of Columbia Reorganization Act of 1970 became effective. This circumstance led the District Court on April 14, 1971, to certify the case to the Superior Court of the District of Columbia. The Court relied upon the following provision of the District of Columbia Code:
In a civil action begun in the United States District Court for the District of Columbia before the effective date of the District of Columbia Reorganization Act of 1970 (other than an action for equitable relief), where it appears to the satisfaction of the court at or subsequent to any pretrial hearing but before trial thereof that the action will not justify a judgment in excess of $10,000 and does not otherwise invoke the jurisdiction of the court, the court may certify the action to the Superior Court for trial.
11 D.C.Code § 922(a) (Supp. V, 1972). The appeal is from the April 14 order of certification.
Were the allegations of the Amended Complaint accepted as a well pleaded additional cause of action the contention of appellants is that notwithstanding the Amended Complaint was filed subsequent to the effective date of the Reorganization Act, the action “otherwise” invoked the jurisdiction of the District Court and, therefore, under 11 D.C.Code § 922(b)(2) (Supp. V, 1972), having been filed within the thirty-month period subsequent to the effective date of the Reorganization Act, was not certifiable to the Superior Court. We need not decide the problems thus presented, for the reasons now to be stated.
We think the original complaint itself sets forth “an action for equitable relief” within the meaning of 11 D.C. Code § 922(a) (Supp. V, 1972) and, therefore, having been filed prior to the effective date of the Reorganization Act, was not certifiable to the Superior Court.
Several interpretations of “an action for equitable relief” are possible. We do not construe this provision for retention of jurisdiction by the District Court as intended to cover what is essentially a legal action, which seeks equitable relief only of a character incidental to the main legal thrust of the action. On the other hand, if substantial equitable relief is sought as such, the District Court should have retained jurisdiction even though legal relief is also sought. Otherwise, certification of the case to the Superior Court defeats the plain purpose of Congress to have the District Court decide the basis alleged for equitable relief.
In reorganizing the jurisdiction of the local and federal courts in the District of Columbia, Congress, while intending to give “the local courts jurisdiction over all purely local matters,” S.Rep.No. 91-405, 91st Cong., 1st Sess., at 5 (1969), recognized “the need for staging the transfer of jurisdiction in an orderly progression, to assure an orderly development of the court receiving the judicial business.” Id. at 5. Congress was also aware of the past limitations of the equity jurisdiction of the local courts in civil matters, Hearings on S.1066, S. 1067, S.1214, S.1215, S.1711 and S.2601, before the Senate Comm, on the District of Columbia and the Subcomm. on Improvements in Judicial Machinery, of the Senate Comm. of the Judiciary, 91st Cong., 1st Sess., Pt. 3, 562 at 576-583 (1969) (Report of the Ad Hoc Comm. assigned to Study the History and Jurisdiction of the D.C. Court System), and of the need to expand its equity jurisdiction in civil matters, id. at 1205-1206, 1216-1217 (Statement and remarks of the Hon. Harold H. Greene, C. J., District of Columbia Court of General Sessions). Congress was aware also of the practical problems of manageability: “ ‘A court is not a commodity that can be produced fullbloom . . .’ As I gather, what you [Chief Judge Greene] are proposing here is an increase of better than 50 percent in the size of your court, an increase in the jurisdiction . perhaps as much as 100 percent . . . when admittedly you have administrative problems in your own court right now.” Id. at 1220 (Remarks of Senator Joseph D. Tydings, Chairman).
It thus appears that, while the legislative history is silent concerning Congress’ specific intent in enacting the “equitable relief” exception to transferability, it is nevertheless clear that Congress as part of its plan for an orderly transition did not authorize the certification to the Superior Court of those actions for independent equitable relief which were initiated in the District Court prior to the effective date of the Act, notwithstanding the fact that the Superior Court has obtained jurisdiction over local actions for equitable relief.
The original complaint is not limited to a monetary or other legal claim, with only incidental equitable relief requested. We note first that its subtitle is “For declaratory, injunctive and other equitable relief.” In Paragraph 1 it is then alleged that the action is brought pursuant to 28 U.S.C. §§ 2201 and 2202 (1970) (which are concerned with declaratory relief) and “the general equitable powers of the court.”
A fair characterization of the various requests for relief, with the appropriate causes of action alleged, would be that appellants sought, because of the violation of 28 D.C.Code § 3301 (1967), as amended, (Supp. V., 1972), the usury provision, and aside from any monetary claims, declaratory and affirmative equitable relief, including cancellation of the notes and deeds of trusts, and injunctions pendente lite and permanently against the enforcement of the notes or execution of the deeds of trust. For violation of the licensing provisions of the D.C.Code, sections 26-601, 29-934 and 35-1363, appellants requested not only declaratory judgments that these provisions have been violated, and, therefore, that the notes were null and void and unenforceable, an aeeoünting and restitution of all monies paid on the allegedly illegal transactions, but also that City Finance be enjoined from maintaining an action in the District of Columbia, since it was doing business there without a license as required by 29 D.C.Code § 934. There is another aspect of the case which lends support to our view that it involves equitable relief. The complaint prays for declaratory judgments that the usury and licensing provisions of the D.C.Code have been violated, which would seem inevitably to involve the possibility of injunctive relief as incident to such judgments, if rendered, so as to prevent future violations. Such relief would be available under the prayer for “such other and further relief” as the court may deem proper.
Thus, the trial court would have been seriously involved in deciding matters involving substantial and independent equitable relief. Isaacson v. House, 216 Ga. 698, 119 S.E.2d 113 (1961) and McNish v. General Credit Corp., 164 Neb. 526, 83 N.W.2d 1 (1957); see also, Hill v. Hawes, 79 U.S.App.D.C. 168, 144 F.2d 511 (1944) and the cases cited in footnote 5, supra. Under the predecessor transfer provisions the requests for equitable relief involved in this case would have been sufficient to preclude certification of the action to the Court of General Sessions. We think Congress intended that such actions if begun in the District Court prior to the effective date of the Reorganization Act should remain there, notwithstanding the fact that the Superior Court now has jurisdiction in equity.
We feel obliged to give effect to the jurisdictional dividing line laid down by Congress. We add that the original complaint carries with it the Amended Complaint insofar as certification is concerned, for the latter cannot be separated from the former on that issue. Jurisdiction of the case being retained in the District Court by reason of the original complaint, it follows that the Amended Complaint, which in its substantive allegations stated no cause of action within the exclusive jurisdiction of the Superior Court, was not, separately from the original complaint, certifiable to that court.
Since the District Court will retain jurisdiction the motion of plaintiffs for an Order Certifying Class Action under Rule 23(b)(2) or (b)(3), F.R.Civ.P., remains to be acted upon by that court, see note 6, supra, along with all else still to be decided.
Reversed and remanded for further proceedings not inconsistent with this opinion.
. Pursuant to Rule 23, F.R.Civ.P.
. Appellants allege that they were charged 16.5% interest.
. “Defendant corporation as principal has received and is receiving income from plaintiffs and other members of the class, derived through collection of unlawful debts incurred in connection with the business of lending money at an interest rate that is at least twice the legal rate. Defendant corporation has directly or indirectly used or invested the proceeds of such income in the operation of its enterprise which is engaged in and affects interstate commerce. Defendant corporation has, therefore, violated 18 U.S.C. § 1962 (Organized Crime Control Act, Title IX, 1970) for which violation plaintiffs and other members of the class are entitled to equitable relief and to recover threefold their damages and the costs of this suit."
. If it is deemed that for the purposes of transfer the time of the Amended Complaint relates back to the date of the original complaint then section 922(a) controls.
. A borrower may elect to seek equitable relief from a usurious transaction, Royall v. Yudelevit, 106 U.S.App.D.C. 1, 268 F.2d 577 (1959), to enjoin the enforcement of transfer of a usurious instrument, Topping v. Trade Bank of New York, 86 F.2d 116 (2d Cir. 1936) and Wilhelmson v. Bentley, 25 Neb. 473, 41 N.W. 387 (1889), to enjoin the foreclosure or sale of a mortgage or deed of trust securing the usurious loan, Anderson v. Curls, 309 S.W.2d 692 (Mo.App. 1958), to order the cancellation of such notes and deeds of trust, Cook v. Young, 225 Ga. 26, 165 S.E.2d 727 (1969) and to restore to the borrower what the lender may not equitably retain, Associated Stores, Inc. v. Industrial Loan & Investment Co., 202 F.Supp. 251 (D.N.C. 1962), cert. denied, 379 U.S. 830, 85 S.Ct. 60, 13 L.Ed.2d 39 (1964) and Plitt v. Kaufman, 188 Md. 606, 53 A.2d 673 (1947).
. The complaint sought cancellation of deeds of trust securing loans of defendant corporation to plaintiffs, and on this basis alleged that title to real estate was involved. Prior to the April 14 order of certification, however, the deeds of trust on the property of the Hines were released of record. Assuming arguendo that the release of the deeds of trust securing the loans to the individual plaintiffs mooted any part of the case based on the theory that it involved title to real estate insofar as the individual plaintiffs were concerned, there is the question to be decided whether in this respect the action could still be maintained on behalf of the class, of which the individual plaintiffs were members when the action was initiated. See Cypress v. Newport News General & Nonsectarian Hosp. Ass’n, 375 F.2d 648, 657 (4th Cir. 1969); Jenkins v. United Gas Corp., 400 F.2d 28 (5th Cir. 1968); and Vaughan v. Bower, 313 F.Supp. 37, 40 (D.Ariz.), affirmed, 400 U.S. 884, 91 S.Ct. 139, 27 L.Ed.2d 129 (1970). And see United States v. W. T. Grant Co., 345 U.S. 629, 632-633, 73 S.Ct. 894, 97 L.Ed. 1303 (1953).
. See, Miller v. Peoples Contractors, Ltd., 257 A.2d 476 (D.C.App.1969) in which the court ordered full restitution as a penalty for a violation of a licensing requirement.
. The predecessor transfer provisions contained the same exception to certification. P.L. 88-241, § 1, 77 Stat. 490 (1963); P.L. 88-60, § 3, 77 Stat. 78 (1963); P.L. 87-873, § 3, 76 Stat. 1171 (1962); Act of July 26, 1956, ch. 744, § 1, 70 Stat. 676; and Act of April 1, 1942, ch. 207, § 5(a), 56 Stat. 193.
. See Geesling v. Fletcher, 154 A.2d 347 (D.C.Mun.App.1959) in which the court held that an action for injunctive relief which did not involve more than $3000.00 was nevertheless not transferable from the District Court to the Municipal Court where the provision for certification ex> cepted actions for equitable relief.
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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NATIONAL LABOR RELATIONS BOARD, Petitioner, v. SHIP SHAPE MAINTENANCE CO., INC., Respondent.
No. 71-1849.
United States Court of Appeals, District of Columbia Circuit.
Argued May 22, 1972.
Decided Dec. 1, 1972.
Wilbur K. Miller, Senior Circuit Judge, dissented in part and concurred in part.
Mr. Jonathan G. Axelrod, Atty., N. L. R. B., with whom Mr. Marcel Mallet-Prevost, Asst. Gen. Counsel, and Mrs. Nancy M. Sherman, Atty., N. L. R. B., were on the brief, for petitioner.
Mr. Michael E. Jaffe, Washington, D. C., for respondent. Messrs. Allen G. Siegel and Lee M. Modjeska, Washington, D. C., were on the brief for respondent.
Before WILBUR K. MILLER, Senior Circuit Judge, and McGOWAN and Mac-KINNON, Circuit Judges.
MacKINNON, Circuit Judge:
The National Labor Relations Board (Labor Board) has petitioned this court for enforcement of a remedial order entered against the Ship Shape Maintenance Company (hereinafter the “Company”), which resulted from the Labor Board’s finding that the Company had violated certain unfair labor practice provisions of the National Labor Relations Act, as amended (N.L.R.A.). The Company has challenged both the sufficiency of the evidence supporting the Labor Board’s unfair labor practice determinations and the propriety of a portion of the Board’s remedial order. For the reasons discussed below, we grant enforcement of the Labor Board’s order, as modified by our rejection of its proposed bargaining order.
I
The Company is a Maryland corporation which provides janitorial services in approximately 35 office buildings in Washington, D. C. On October 19, 1969, the Company obtained the contract to clean the building at 500-550 12th Street, S.W. (hereinafter the “500-550 building”), and it commenced work at this location on the evening of October 20. The nature of the Company’s business is such that it generally has a high rate of employee turnover. It employs approximately 600 persons at all of its locations. During 1969, it employed about 1800 different individuals, only 300 of whom were relatively permanent employees, to fill these 600 positions. Between January 1, 1970, and July 9, 1970, it employed 149 different persons at the 500-550 building, with an average work complement of 35-40.
Before the Company obtained the 500-550 building contract, Service Employees International Union, Local 536, AFL-CIO (hereinafter the “Union”) had been engaged in a campaign to organize the employees of the predecessor supplier of janitorial services there. When the Company assumed its cleaning duties, the Union altered its organizing campaign to concentrate on the new Company personnel. Within several days, the Union obtained authorization cards ostensibly signed by 17 Company employees.
On October 24, the Union wrote to the Company, claiming to represent a majority of the 28 statutory “employees” at the 500-550 building and demanding recognition. The Company did not respond to the Union’s request. Simultaneous with its letter to the Company, the Union filed a representation petition with the appropriate Regional Office of the Labor Board, requesting a representation election among the Company employees at the 500-550 building. The Regional Office mailed notification of the Union’s petition to the Company on October 27.
Sometime during November, 1969, Company President James Netterstrom decided to utilize the 500-550 building as a training facility for new employees, before transferring them to other locations where the Company performs janitorial services. However, at no time did Netterstrom or the Company’s attorneys reveal to the Labor Board or to the Union that the Company considered the 500-550 building to be a training site and that, consequently, employees would work there only temporarily prior to being reassigned to other Company locations. Nor did the Company ever disclose this decision to the realty management firm with which it had contracted to clean the 500-550 building, or to the Company employees working there.
On December 2, the Company and the Union executed a stipulation for certification consent election agreement, which was approved by the Board’s Regional Director on December 3, covering the 500-550 building employees of the Company. This stipulation limited voting eligibility to those employees working in the proposed unit during the week ending November 22, excluding “any employees who have since quit or been discharged for cause.” The election was scheduled for the evening of January 9, 1970, in the basement storeroom of the 500-550 building.
On December 5, 1969, Netterstrom mailed to the Regional Office the list of employees required under the Labor Board’s “Excelsior” doctrine. This list, which contained 32 names, purported to cover the Company’s employees at the 500-550 building as of November 22, 1969.
By January 2, 1970, one week before the scheduled representation election, 16 of the 32 persons named on the Excelsior list had left the Company’s employ for reasons not at issue here. On the evening of January 2, 15 of the 16 persons on the Excelsior list who were still in the company’s employ worked their final shift at the 500-550 building. Three of these persons quit on that day, and two more were terminated for reasons not relevant here. The remaining 11 persons on the Excelsior list were informed on January 2 that they were being transferred to other Company locations. One other employee who had been hired into the 500-550 building unit after November 22, 1969, and who was therefore not on the Excelsior list or eligible to vote in the representation election, was also included in the transfer order.
All but one of the 11, a supervisor, were ordered to report on Monday evening, January 5, to one or another of the other buildings where the Company performed cleaning services. Two of these employees did not report for work as ordered, and they never worked for the Company again. Eight reported to their new assignments on January 5, and were working at their new locations on the date of the January 9 election. Subsequently, one of these eight quit at the end of January, 1970, and another quit in March, 1970. During the week of January 5, 1970, the Company performed its chores at the 500-550 building with a full complement of approximately 30 employees, all of whom had been hired after the November 22, 1969, representation election eligibility date.
On January 9, 1970, the Labor Board’s election agent endeavored to conduct the scheduled representation election, despite notification from the Company’s attorney that it considered none of the employees on the Excelsior list eligible to vote, due to the fact that all of the named individuals were no longer employed at the 500-550 building. Only one person named on the Excelsior eligibility list appeared, . and she was only permitted to cast a challenged ballot. No other persons voted in the election.
Shortly after the election, the Union filed timely objections to conduct which allegedly affected the results of the election. On January 19, 1970, the Union filed an unfair labor practice charge with the Labor Board, alleging violations of sections 8(a)(1), (3), and (5) of the N.L.R.A., and a complaint was issued pursuant to this charge. The election objections were consolidated with the unfair labor practice complaint “for the purpose of hearing, ruling and decision by a Trial Examiner.”
In July, 1970, a hearing was held before Trial Examiner Benjamin Blackburn, wherein the above-described factual circumstances were presented. Company President Netterstrom admitted during his testimony that not he, but Melvin Shumaker, general manager, operations manager, and Company vice president, made the actual decision to transfer the employees in question. Netterstrom indicated that only Shu-maker really had personal knowledge of the particular reasons underlying individual transfer selections. However, despite the fact that the General Counsel of the Labor Board subpoenaed Shumaker, he did not appear in response to the subpoena; neither was he called as a witness by the Company.
The Trial Examiner determined that the Company violated sections 8(a)(1) and (3) of the N.L.R.A., by transferring 10 employees on January 2, 1970, from the 500-550 building in order to remove all remaining eligible voters from the proposed unit and thus preclude the holding of the Board representation election on January 9, 1970. The Trial Examiner, however, dismissed the section 8(a)(5) part of the complaint, since he concluded that only 14 of the 17 authorization cards proffered by the Union were in fact valid, thus causing the Union to fall one vote short of the requisite majority of the 28 statutory “employees” who were found to have been employed in the appropriate unit on the date the rejected demand for recognition had been made by the Union.
The Labor Board completely affirmed the Trial Examiner’s 8(a) (1) and (3) determination, concerning the Company’s discriminatory transfer of all eligible voters on January 2. However, it reversed the Examiner’s section 8(a)(5) finding. The Board validated all 17 of the Union’s proffered authorization cards, and it concluded that the Company violated section 8(a)(5) by refusing to accede to the Union’s demand for recognition in October, 1969.
The Labor Board adopted the Trial Examiner’s proposed remedial order which ordered the Company to cease and desist from violating the N.L.R.A. and which affirmatively ordered the Company (1) to offer those employees who were discriminatorily transferred in violation of the Act and who were still in the Company’s employ, immediate transfer back to their former positions at the 500-550 building, discharging, if necessary, presently employed persons; (2) to make whole all eight discriminatorily transferred employees who remained in the employ of the Company following their transfer, for any losses they may have sustained as a direct result of the Company’s illegal action; (3) to bargain, upon request, with the Union concerning the wages, hours, and working conditions of the employees in the appropriate bargaining unit at the 500-550 building; and (4) to post appropriate notices.
The immediate enforcement action was necessitated by the Company’s refusal to comply with the Labor Board’s remedial order.
II
The Company has asserted that there is insufficient evidence in the record to support the Labor Board’s unfair labor practice findings. However, we conclude that there is adequate factual basis for the 8(a)(1) and (3) determination of the Board, which adequately supports the modified remedial order which we are enforcing.
Although there is no direct evidence of the Company’s illegal discriminatory intent with respect to its preelection transfer of all. of the eligible voters who then remained in the 500-550 building unit, there is substantial evidence in the record considered as a whole to support its 8(a)(1) and (3) determination. See section 10(e) of the N.L.R.A., 29 U.S.C. § 160(e) (1970); Universal Camera Corp. v. N. L. R. B., 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951). See also International Union, United Automobile, Aerospace and Agricultural Implement Workers v. N. L. R. B., 129 U.S.App.D.C. 196, 200, 392 F.2d 801, 805 (1967), cert. denied, 392 U.S. 906, 88 S.Ct. 2058, 20 L.Ed.2d 1364 (1968).
It would indeed be the unusual case in which the link between the [discriminatory action] and the [protected] activity could be supplied exclusively by direct evidence. Intent is subjective and in many cases the discrimination can be proven only by the use of circumstantial evidence. Furthermore, in analyzing the evidence, circumstantial or direct, the Board is free to draw any reasonable inferences.
N. L. R. B. v. Melrose Processing Co., 351 F.2d 693, 698 (8th Cir. 1965).
The Company was aware of the Union’s claimed majority status concerning the 500-550 building employees by the latter part of October, 1969. Sometime in November of 1969, Company President Netterstrom decided to utilize this building as a training facility, which would necessitate the regular transfer of the employees working there to other building locations as they became adequately trained. Nevertheless, when the Company thereafter conferred with Union representatives and a Labor Board agent to arrange for the representation election requested by the Union, the Company did not inform them of the new personnel policy at the 500-550 building, notwithstanding the fact that the new policy’s concomitant high rate of regular turnover might greatly affect the composition of the proposed unit. Since the agreed-upon election date of January 9, 1970, was approximately a month and a half after the November 22, 1969, voter eligibility date, it should have been obvious to the Company that its new policy could affect the election — as subsequent events demonstrated — and it was reasonable for the Trial Examiner and the Labor Board to view the Company’s silence on this point as some evidence of bad faith on its part.
The timing and actual composition of the transfers similarly support the Labor Board’s determination regarding sections 8(a)(1) and (3). Only one week before the scheduled representation election, the Company transferred every single eligible voter out of the 500-550 building unit, yet only one ineligible employee was included in the transfer order. This is certainly strong indication of a Company desire to frustrate entirely the holding of the scheduled election, thereby depriving the Union and the employees of the representation opportunity which they sought. Furthermore, as the Labor Board properly recognized, it was justifiable for it to draw an adverse inference from the fact that Shumaker, the Company official with actual knowledge of the specific reasons for the particular transfers, refused to appear to testify, despite the fact that he was subpoenaed. See International Union, United Automobile, Aerospace and Agricultural Implement Workers v. N. L. R. B., 148 U.S.App.D.C. 305, 311-315, 459 F.2d 1329, 1335-1339 (1972) and cases cited therein; N. L. R. B. v. A.P.W. Products Co., 316 F.2d 899, 903 (2d Cir. 1963).
We therefore find that substantial evidence on the record considered as a whole supports the Labor Board’s 8(a)(1) and (3) determination, concerning the Company’s unlawful effort to frustrate the holding of the representation election which the-Union had requested.
Ill
Although we have affirmed the Labor Board’s finding regarding sections 8(a) (1) and (3), and are therefore enforcing the portions of its remedial order pertaining to this unfair labor practice violation, we are unable to grant enforcement to the Board’s proposed bargaining order.
The controlling principles to be applied concerning the propriety of bargaining orders in eases of this type, were enunciated by the Supreme Court in N.L.R.B. v. Gissel Packing Co., 395 U.S. 575, 89 S.Ct. 1918, 23 L.Ed.2d 547 (1969). Although the Court approvingly noted the Labor Board’s recognition of the fact that “secret elections are generally the most satisfactory — indeed the preferred ■ — -method of ascertaining whether a union has majority support,” it indicated that bargaining orders based upon majority authorization card support would be appropriate in certain situations to remedy section 8(a)(5) violations which were accompanied by other independent unfair labor practices. See 395 U.S. at 610-615, 89 S.Ct. 1918, 23 L.Ed.2d 547. However, the Court expressly noted that bargaining orders would not be appropriate in all such cases, and it carefully delineated the factors which the Labor Board must consider in determining whether a bargaining order should issue in a particular case.
[T]he Board can properly take into consideration the extensiveness of an employer’s unfair practices in terms of their past effect on election conditions and the likelihood of their recurrence in the future. If the Board finds that the possibility of erasing the effects of past practices and of ensuring a fair election * * * by the use of traditional remedies, though present, is slight and that employee sentiment once expressed through cards would, on balance, be better protected by a bargaining order, then such an order should issue * * *.
The Court emphasized that “there is still a third category of minor or less extensive unfair labor practices, which, because of their minimal impact on the election machinery, will not sustain a bargaining order.” 395 U.S. at 615, 89 S.Ct. at 1940.
When the Gissel Packing standards are applied to the facts of the instant case, it becomes apparent that the Labor Board’s bargaining order was improperly issued, and it must therefore be denied enforcement. The violation of sections 8(a)(1) and (3) which the Company committed was not of such a substantial nature, considering all of the relevant circumstances, to warrant issuance of a bargaining order.
We are cognizant of the fact that the Company’s discriminatory transfer of all eligible voters one week before the representation election scheduled for January 9, 1970, effectively rendered the meaningful holding of that particular election impossible. However, this does not mean that the effects of this unfair labor practice were sufficiently pervasive and lingering to warrant a determination that a subsequent election could not be held which would be reasonably free from the adverse influence of the Company’s unlawful action.
No overt anti-union animus on the part of the Company was demonstrated to any of its employees. All of them were merely informed that they were being transferred to other Company locations as a result of an apparently valid change in Company operating procedures. Furthermore, it is important to note that the record indicates no history of other anti-union behavior on the part of the Company. Under these circumstances, there is clearly no reason to believe that there will be any further unfair labor practice violations by the Company in the future. We therefore conclude that “the possibility of erasing the effects of past practices and of ensuring a fair election * * * by the use of traditional remedies,” which we herein enforce, is so strong as to warrant our rejection of the Labor Board’s proposed bargaining order in favor of the “preferred” election process. See N.L.R.B. v. Gissel Packing Co., supra, 395 U.S. at 602, 614, 89 S.Ct. 1918, 23 L.Ed.2d 547. Other considerations support our determination.
It must be carefully remembered that the Gissel Packing decision “placed bargaining orders based on a card majority in a special category: an extraordinary remedy available to the Board to overcome the polluting effects of the employer’s unfair labor practices on the electoral atmosphere. * * * It is not, therefore, the type of remedy which is automatically entitled to enforcement at any time after the occurrence of the unfair labor practice.” N.L.R.B. v. American Cable Systems, Inc., 427 F.2d 446, 448 (5th Cir.), cert. denied, 400 U.S. 957, 91 S.Ct. 356, 27 L.Ed.2d 266 (1970). See Clark’s Gamble Corp. v. N.L.R.B., 422 F.2d 845, 847 (6th Cir.), cert. denied, 400 U.S. 868, 91 S.Ct. 100, 27 L.Ed.2d 108 (1970). Although normal employee turnover in a proposed bargaining unit is not generally sufficiently ground for refusing to enforce an otherwise valid bargaining order, we believe that the extraordinary rate of turnover indigenous to the Company’s 500-550 building operations greatly strengthens our conclusion that the adverse effects of the Company’s unfair labor practice violation concerning sections 8(a)(1) and (3) should be reasonably and adequately dissipated, prior to the holding of a new representation election, through the utilization of the traditional remedies which we are enforcing, thereby obviating the necessity for resort to a bargaining order. Furthermore, the rights of the large number of employees hired subsequent to the Company’s commission of the unfair labor practice violation must be considered.
“[T]he purpose of a remedy must be restoration of the status quo to the greatest extent practicable; however the basic purpose of restoring the status quo is to redress the injury done to employees.” Local 57, International Ladies Garment Workers Union v. N.L.R.B., 126 U.S.App.D.C. 81, 86, 374 F.2d 295, 300, cert. denied, 387 U.S. 942, 87 S.Ct. 2074, 18 L.Ed.2d 1328 (1967), and see cases cited therein. Where a remedial order has the primary effect of negating the rights of current employees rather than furthering them, it defeats, rather than effectuates, the policies of the N.L.R.A. In the instant case, enforcement of the Labor Board’s proposed bargaining order would impose representation upon a current unit of employees, the vast majority of whom were neither employed by the Company at the time of its unfair labor practice violation nor meaningfully affected by its commission. Such enforcement would ignore the fact that the N.L. R.A expressly protects the right of employees to refrain from organizational activities if they so desire.
We believe that the proposed bargaining order would not be remedial, but rather only punitive — i. e., it would merely punish the Company for its unfair labor practice indiscretion. “It has been established, however, that the purpose of Board remedies is to rectify the harm done the injured workers, not to provide punitive measures against errant employers. ‘[T]he power to command affirmative action is remedial, not punitive.’ Republic Steel Corp. v. NLRB, 311 U.S. 7, 12 * * * (1940).” Local 57, International Ladies Garment Workers Union v. N.L.R.B., 126 U.S.App.D.C. 81, 89, 374 F.2d 295, 303, cert. denied, 387 U.S. 942, 87 S.Ct. 2074, 18 L.Ed.2d 1328 (1967). See Local 60, United Brotherhood of Carpenters and Joiners of America v. N.L.R.B., 365 U.S. 651, 655, 81 S.Ct. 87, 6 L.Ed.2d 1 (1961). We are therefore unable to grant enforcement to the Labor Board’s proposed bargaining order.
The remedial order of the Labor Board is hereby enforced, except with respect to those portions imposing a direct bargaining obligation upon the Company. The case is otherwise remanded to the Board with instructions for it to schedule an appropriate representation election for the Company’s 500-550 building unit on an expeditious basis.
Judgment accordingly.
WILBUR K. MILLER, Senior Circuit Judge:
I dissent from Section II of the majority opinion, and concur in Section III thereof.
. Ship Shape Maintenance Co., Inc., 189 NLRB No. 58, 1971 CCH NLRB ¶ 22,879 (1971).
. See section 2(3) of the N.L.R.A., 29 U.S.C. § 152(3) (1970), for the statutory definition of the term “employee.”
. Some of these other Company locations have already been organized, while others have not.
. The bargaining unit was defined to include :
All employees employed by the Employer at its 500-550 12th Street, S.W., Washington, D.C. location working as maids, porters, janitors, charwomen, waxers and buffers but excluding office clerical employees, guards and supervisors as defined in the Act.
The Company conceded that this unit was appropriate for collective bargaining, and the Labor Board agreed.
. In Excelsior Underwear, Inc., 150 NLRB 1236 (1966), the Board announced a new practice of requiring employers to provide the names and addresses of eligible employees to candidate labor organizations prior to Board representation elections. This policy was approved by the Supreme Court in N.L.R.B. v. Wyman-Gordon Co., 394 U.S. 759, 89 S.Ct. 1426, 22 L.Ed.2d 709 (1969).
. This supervisor was told on January 2 to report for work at another building on January 7, instead of January 5. She reported to the new location as ordered, but quit about a week later for reasons immaterial to this case. See note 10, infra.
. Two or three other employees of the Company appeared at the polls, but after ascertaining that they had all been hired after the November 22, 1969 eligibility date, the Labor Board election agent informed them that they were ineligible to vote.
. 29 U.S.C. § 158(a) (1970) provides:
(a) It shall be an unfair labor practice for an employer—
(1) to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 157 of this title;
(3) by discrimination in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization: . . .
* # ;}; *
(5) to refuse to bargain collectively wit]» the representatives of his employees, subject to the provisions of section 159(a) of this title.
The pertinent part of 29 U.S.C. § 357 (1970) is set out in note 30, infra.
. Under the Labor Board's Irving Air Chute rule, where the Board has held an election which the union has failed to win, pre-election violations of sections 8(a)(1) or (5) of the Act will not be remedied by a bargaining order, which the Union requested in the instant case, unless the election is set aside. Irving Air Chute Co., Inc., Marathon Division, 149 NLRB 627, 629-630 (1964), enfd., 350 E.2d 170 (2d Cir. 1965). This is the reason the Union filed objections seeking to hnve the January 9, 3970 representation election set aside.
. The eleventh transferee was a “supervisor” within the meaning of section 2(11) of the N.L.R.A., 29 U.S.C. § 152 (11) (1970), who was therefore ineligible to vote in the “employee” representation election. Section 2(3) of the Act, 29 U.S.C. § 152(3) (1970) defines “employee” so as to expressly exclude “any individual employed as a supervisor.”
. The Trial Examiner concluded that 3 of the proffered authorization cards were not adequately authenticated.
. The Labor Board based its bargaining order in substantial part upon its finding of a section 8(a)(5) violation by the Company. Although the Trial Examiner had recommended dismissal of the section 8(a) (5) portion of the complaint, due to his determination that the Union had not obtained authorization cards from a majority of unit employees, he had still recommended issuance of a bargaining order, since he concluded that such a remedy was necessary to rectify the continuing effects of the Company’s violation of sections 8(a) (1) and (3) of the Act. In its decision, the Labor Board expressly indicated that, contrary to the view of the Trial Examiner, the facts of this case did not warrant issuance of a bargaining order based upon the 8(a)(1) and (3) violation alone. See Ship Shape Maintenance Co., Inc., 189 NLRB No. 58, 1971 CCH NLRB ¶ 22,879 (1971) slip op. at 2 n. 3, 5.
. Since we are denying enforcement of the bargaining order portion of the Labor Board’s remedial order (see Part III of this opinion, infra), there is no need for us to resolve the highly controversial section 8(a) (5) refusal to bargain findings which formed the basis for the Labor Board’s bargaining order. The Board’s 8(a) (1) and (3) determination, which we herein affirm, forms an adequate basis to support the remaining parts of the remedial order which we are wholly enforcing. See note 18, infra.
. We must remember that “‘[t]he judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body’ * * * [, for] the findings of the Board and the Trial Examiner, especially when, as in the instant case, they [have] concurred], are not lightly to be disregarded.” International Union, United Automobile, Aerospace and Agricultural Implement Workers v. N.L.R.B., 129 U.S.App.D.C. 196, 200, 392 F.2d 801, 805 (1967), cert. denied, 392 U.S. 906, 88 S.Ct. 2058, 20 L.Ed.2d 1364 (1968).
. See, e. g., N.L.R.B. v. Sutherland Lumber Co., 452 F.2d 67, 69 (7th Cir. 1971): “The abruptness of a discharge and its timing are persuasive evidence as to motivation.” See also N.L.R.B. v. Montgomery Ward & Co., 242 F.2d 497, 502 (2d Cir.), cert. denied, 355 U.S. 829, 78 S.Ct. 40, 2 L.Ed.2d 41 (1957). We believe that this same reasoning is applicable to a pre-election transfer of all eligible voters from a proposed bargaining unit.
. See, e. g., N.L.R.B. v. Dinion Coil Co., 201 F.2d 484, 486 (2d Cir. 1952), wherein the court indicated that “the fact that * * * more than 90% of those discharged * * * were members of the union suffices to make not unreasonable the Board’s inference that respondent discriminated against union members * * * ”. In the instant case, over 90% . of those notified on January 2, 1970, that they were being transferred to other locations were eligible to vote in the representation election scheduled for January 9, 1970. The inference which could reasonably be drawn from this fact supports the Labor Board’s conclusion that the Company’s pre-election transfer decision was motivated, at least in part, by a desire to frustrate the statutory right of the eligible employees to take part in the scheduled representation election. See note 17, infra.
. Although the Company has attempted to justify the imbalance between eligible and ineligible voters in the transfer group by arguing that the eligible voters had been at the training site (i. e., the 500-550 building) for a greater length of time than had been the ineligible personnel, we believe that the over-all record adequately supports the Labor Board’s adverse interpretation regarding this factor. Very strong support for the Board’s determination derives from the fact that none of the eligible voters had been provided with any pre-transfer indication that they might be so transferred. It is also informative that neither the Union nor the Board election agent was informed of the new Company policy prior to the time of its actual implementation one week before the scheduled representation election. Finally, the adverse inference which could reasonably be drawn from Shumaker’s refusal to testify concerning the specific reasons for the particular transfers provides additional support for the Board’s determination.
. It is clear that the portions of the Board’s remedial order which we herein enforce are within the area of broad remedial discretion provided it in section 10(e) of the N.L.R.A., 29 U.S.C. § 160 (e) (1970). See Phelps Dodge Corp. v. N.L.R.B., 313 U.S. 177, 194, 61 S.Ct. 845, 85 L.Ed. 1271 (1941); Virginia Electric & Power Co. v. N.L.R.B., 319 U.S. 533, 540, 63 S.Ct. 1214, 87 L.Ed. 1568 (1943); Amalgamated Clothing Workers of America v. N.L.R.B., 125 U.S.App.D.C. 275, 281, 371 F.2d 740, 746 (1966); Office and Professional Employees International Union, Local 425 v. N.L.R.B., 136 U.S.App.D.C. 12, 19-20, 419 F.2d 314, 321-322 (1969). See note 13 and accompanying text, supra.
. 395 U.S. at 602, 89 S.Ct. 1918, at 1934, 23 L.Ed.2d 547.
. Although the Gissel Packing decision also noted that in “exceptional” cases where there have been extremely pervasive and substantial unfair labor practice violations, a bargaining order might properly be ordered by the Labor Board even in the absence of a section 8(a) (5) refusal to bargain violation, and without need of inquiry into the question of majority status, where such a remedial order would be the only available, effective remedy (see 395 U.S. at 613-614, 89 S.Ct. 1918, 23 L.Ed.2d 547), the Board expressly found that the instant case did not constitute such an exceptional situation to warrant application of this particular principle. See Ship Shape Maintenance Co., Inc., 189 NLRB No. 58, 1971 CCH NLRB ¶ 22,-879 (1971) slip op. at 2 n. 3. See also note 12, supra.
. 395 U.S. at 614-615, 89 S.Ct. at 1940 (emphasis supplied). See New Alaska Development Corp. v. N.L.R.B., 441 F.2d 491, 494 (7th Cir. 1971).
. Under the principles enunciated in Gissel Paching, “[t]he employer’s subjective motivation is [not] of controlling importance. Instead, attention must be focused on the casual relationship between the unfair practices and the election process.’* N.L.R.B. v. Drives, Inc., 440 F.2d 354, 364 (7th Cir. 1971), cert. denied, 404 U.S. 912, 92 S.Ct. 229, 30 L.Ed.2d 185 (1972).
. Although we recognize that it is generally for the Labor Board, and not the reviewing courts, to make the determination of whether the circumstances of a particular case warrant issuance of a remedial bargaining order, see N.L.R.B. v. Gissel Packing Co., 395 U.S. 575, 612, 89 S.Ct. 1918, 23 L.Ed.2d 547 (1969); Pranks Brothers Co. v. N.L.R.B., 321 U.S. 702, 704, 64 S.Ct. 817, 88 L.Ed. 1020 (1944), we believe that our immediate resolution of the bargaining order issue is proper with respect to the case at bar, due to the simplicity of the factual circumstances involved and our desire to avoid further delay through needlessly protracted litigation. See N.L.R.B. v. Kostel Corp., 440 F.2d 347, 352 (7th Cir. 1971).
. For the purposes of our evaluation of the appropriateness of the Labor Board’s proposed bargaining order under the Gis-sel Paelcing rules, we assume, arguendo, the correctness of the Board’s section 8(a) (5) determination. However, since we conclude that the factual circumstances of the instant case do not warrant enforcement of the proposed bargaining order even accepting the Board’s 8(a) (5) findings, we need not — and do not — resolve that complex and controversial refusal to bargain issue. See note 13, supra.
. Some of the other Company locations are in fact already organized.
. See Franks Brothers Co. v. N.L.R.B., 321 U.S. 702, 703-705, 64 S.Ct. 817, 88 L.Ed. 1020 (1944); N.L.R.B. v. Brown Specialty Co., 436 F.2d 372, 375 (7th Cir. 1971).
. Between January 1 and July 9 of 1970, the Company employed 149 different individuals at the 500-550 building, with the average work complement being only 35-40.
. In some unfair labor practice cases, “[t]he interests of the employees do not necessarily parallel the union’s and, therefore, should be separately considered.” N.L.R.B. v. Drives, Inc., 440 F.2d 354, 366-367 (7th Cir. 1971), cert. denied, 404 U.S. 912, 92 S.Ct. 229, 30 L.Ed.2d 185 (1972). This admonition is particularly apropos to the case at bar, since the Union never represented a substantial majority of the employees in the 500-550 building unit, even if all 17 of the proffered authorization cards were accepted — an issue not decided — and there has been extremely rapid post-unfair labor practice employee turnover.
. Section 10(c) of the N.L.R.A., 29 U.S.C. § 160(c) (1970), only authorizes the Labor Board to require an unfair labor practice violator “to take such affirmative action * * * as will effectuate the policies of [the N.L.R.A.] * * * ” (emphasis supplied). Regarding the remedial authority of the Board, see eases cited in note 18, supra.
. Section 7 of the Act, 29 U.S.C. § 157 (1970), provides, inter alia:
Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of suoh activities * * * [emphasis supplied] .
. Sections 1(b) and 2(c) of the Labor Board’s proposed order must therefore be deleted. See Ship Shape Maintenance Co., Inc., 189 NLBB No. 58, 1971 CCH NLRB ¶ 22,879 (1971) slip op. at 7-10.
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In the Matter of the Conviction of James J. Laughlin, Appellant. James J. LAUGHLIN, Appellant, v. UNITED STATES of America.
Nos. 22996, 71-1142.
United States Court of Appeals, District of Columbia Circuit.
Argued June 12, 1972.
Decided Dec. 19, 1972.
Rehearing Denied March 1,1973.
Certiorari Denied June 11, 1973.
See 93 S.Ct. 2784.
Mr. James J. Laughlin, pro se.
Mr. James F. McMullin, Asst. U. S. Atty., with whom Messrs. Harold H. Titus, Jr., U. S. Atty., and John A. Terry, Asst. U. S. Atty., were on the brief, for appellee in No. 71-1142. Mr. Oscar Alt-shuler, Asst. U. S. Atty;, also entered an appearance for appellee in No. 71-1142.
Mr. Edmund L. Jones, Washington, D. C. , with whom Messrs. Milton W. King and Preston C. King, Jr., Washington, D. C., were on the brief for appellee Committee on Admissions and Grievances for the United States District Court.
Before MacKINNON and WILKEY, Circuit Judges, and WILLIAM J. JAMESON, Senior United States District Judge for the District of Montana.
Sitting by designation pursuant to Title 28, U.S.C. Section 294(d).
PER CURIAM:
On appellant’s motion we heard argument on these two cases together because they are both based on the appellant’s long-continuing efforts to reverse his criminal convictions and resulting disbarment.
In No. 22,996 (the disbarment proceeding), Mr. Laughlin appeals from the December 20, 1969 order of the United States District Court for the District of Columbia disbarring him from the practice of law in the District of Columbia. His disbarment was based on final judgments of conviction entered in that court in two criminal cases: (1) on July 26, 1965 in Criminal No. 600-63, for conspiracy to obstruct justice and attempting to influence a witness in a criminal trial, and (2) on July 8, 1966 in Criminal No. 406-65, for perjury committed before the grand jury.
In No. 71-1142 (a coram nobis proceeding) Mr. Laughlin appeals from orders entered by the District Court on December 9, 1970 dismissing his complaint for collateral review of his two criminal convictions styled as a writ of error coram nobis, and on December 24, 1970 denying a motion for reconsideration of the foregoing that was based on an affidavit of personal bias by the trial judge against appellant. We affirm each of the orders of the District Court from which appeals were taken.
I. No. 22,996 — The Disbarment Proceeding
In his brief on this appeal, appellant contends that the Committee on Admissions and Grievances is not bound by the judgments of conviction in the District Court for the criminal offenses, as affirmed by this court, but rather that the Committee can itself assess those judgments and reach an independent decision of their validity and thereby reinstate appellant to active practice. He cites no authority in support of this assertion; indeed he pursues it no further than to state it and move on to his attack on the merits of his convictions.
Nonetheless, the proposition is at least an arguable one, for the controlling statute at the time of his convictions was not mandatory in its language:
When a member of the bar of the United States District Court for the District of Columbia is convicted of an offense involving moral turpitude, and a duly certified copy of the final judgment of the conviction is presented to the court, the name of the member so convicted may thereupon, by order of the court, be struck from the roll of the members of the bar, and he shall thereafter cease to be a member thereof.
However, at the time of his disbarment the statute had been amended to make its language mandatory. Section 199 of the District of Columbia Court Reform and Criminal Procedure Act of 1970 amended D.C.Code § 11-2103 to cover the transition period between the date of its enactment, July 29, 1970, and April 1, 1972, when supervision of the local bar was shifted from the U.S. District Court to the District of Columbia Court of Appeals. The amended statute, in effect on the date of appellant’s disbarment, provides:
If a final judgment of conviction is certified to the court, the name of the member of the bar so convicted shall be struck from the roll of the members of the bar and he shall thereafter cease to be a member. Upon the granting of a pardon to a member so convicted, the court may vacate or modify the order of disbarment.
We need not decide, however, which of these statutes controlled the District Court’s exercise of its supervisory powers over the local bar, nor whether appellant’s construction of even the non-mandatory version is correct. Appellant conceded at oral argument that this appeal rests wholly on our evaluation of the propriety of his criminal convictions, and that if we deny his appeal in the coram nobis proceeding, No. 71-1142, then this appeal, too, must fail. Since his convictions were for obstruction of justice and perjury, two offenses which belie the basic character qualification required of a lawyer, his concession recognized the reality of his situation. We find no error either in his convictions or in the District Court’s orders appealed from in No. 71-1142 and the order of the District Court disbarring appellant is therefore affirmed.
II. No. 71-11U2 — The Coram Nobis Proceeding
A. Background
In Criminal No. 741-61, United States v. Forte, appellant served as counsel for Forte who was being tried on charges of procuring and attempting to procure abortions for a Jean Smith. The trial resulted in an acquittal of Forte on February 20, 1963.
During Forte’s trial appellant and Forte alleged that the arresting officer, Samuel Wallace, had attempted to “shake-down” Forte, and they demanded a grand jury investigation of Wallace’s alleged solicitation of bribery. During the course of the grand jury investigation subsequently held, one of the officers who had investigated the original abortion charges, Mrs. Bernice Gross, revealed the involvement of appellant and Forte in attempts to have her solicit false testimony from Mrs. Smith at Forte’s trial. After these relevations, Mrs. Gross was pressured into making several recorded telephone conversations with appellant. When he was called to testify before the grand jury, however, appellant denied having ever known or spoken with Mrs. Gross:
“Q. Do you even know Bernice Gross ?
“A. No, I wouldn’t say I know her if I saw her on the street. I heard her name because it came out during the trial. I would not know her if I met her on the street.
“Q. Have you ever talked to Bernice about this case ?
“A. At no time.
“Q. Ever talked to her on the telephone at all?
“A. No.”
United States v. Laughlin, 222 F.Supp. 264 (D.D.C.1963). The grand jury returned two indictments against appellant. In Criminal No. 599-63 (the perjury indictment) he was charged with perjury for his grand jury testimony regarding his knowledge of Mrs. Gross. In Criminal No. 600-63 (the obstruction and conspiracy indictment) he was charged with conspiracy to obstruct justice and with influencing and attempting to influence a witness in a criminal trial with respect to his and Forte’s and Mrs. Gross’ attempts to obtain false testimony from Mrs. Smith in connection with Forte’s triál.
No. 599-63, the perjury charge, came on for trial before Judge Youngdahl. After playing the tape recordings of the calls between Mrs. Gross and appellant in open court, cross-examination of her revealed that she had been coerced into making the recorded calls by threats of prosecution if she did not cooperate. Upon revelation of this information Judge Youngdahl ruled that the recordings were inadmissible and declared a mistrial. United States v. Laughlin, 222 F.Supp. 264 (D.D.C.1963).
Appellant then filed a motion to dismiss the indictments in both Nos. 599-63 and 600-63 because of the impropriety of the recorded telephone calls and the fact that they had all been played before the grand jury. On November 13, 1963 Judge Curran ruled on these motions, denying the motion regarding No. 600-63 (the conspiracy and obstruction indictment), but granting the motion to dismiss the indictment for perjury in No. 599-63. United States v. Laughlin, 223 F.Supp. 623 (D.D.C.1963). Judge Curran reasoned that without the recordings the Government in the perjury trial could present only the uncorroborated testimony of Mrs. Gross, and “[pjerjury cannot be proved by the uncorroborated testimony of one witness, since .the falsity of one person’s oath cannot be established by another person’s oath alone.” 223 F.Supp. at 625.
The Government requested reconsideration of this order arguing primarily that the telephone company records of the calls constituted sufficient corroboration of Mrs. Gross’ testimony concerning the calls to warrant at least trial on the question rather than dismissal of the indictment. Judge Curran denied this request, finding that the bare telephone records established no more than that calls were made between two numbers, and such records did not provide sufficient corroboration of the identity of the persons who had been parties to those calls to meet the special independent corroboration test for a perjury conviction. United States v. Laughlin, 226 F.Supp. 112 (D.D.C.1964). An appeal from this decision was noted, but was subsequently dismissed on the Government’s own motion.
In No. 600-63, the conspiracy and obstruction indictment, trial was had before Judge Hart. In this trial the tape recordings were admitted over appellant’s objections, Judge Hart having ruled that Mrs. Gross’ consent was freely given and not coerced. The resulting conviction was reversed by this court on appeal. Laughlin v. United States, 120 U.S.App.D.C. 93, 344 F.2d 187 (1965). We held that under the doctrine of collateral estoppel the issue of Mrs. Gross’ consent and the admissibility of the recordings had been decided adversely to the Government by Judges Youngdahl and Curran in the earlier perjury trial and that it was reversible error to have admitted them in the trial on the conspiracy and obstruction charges.
On retrial of the conspiracy and obstruction charges before Judge Jones, appellant was again convicted in No. 600-63. This conviction was affirmed on appeal in a long and carefully considered opinion authored by Judge Coffin of the First Circuit sitting by designation with a panel of this court. Laugh-lin v. United States, 128 U.S.App.D.C. 27, 385 F.2d 287 (1967). A petition for rehearing en banc was denied by the entire court, and the Supreme Court denied certiorari, 390 U.S. 1003, 88 S.Ct. 1245, 20 L.Ed.2d 103 (1968).
Following dismissal of the perjury indictment in No. 599-63, new proceedings were initiated before a different grand jury. Neither the tainted tape recordings nor the telephone company records were presented before this grand jury, yet a new perjury indictment was nonetheless returned in No. 406-65 on the basis of new independent evidence. Trial on this indictment before then District Judge Spottswood Robinson resulted in a conviction which was affirmed by this court. Petitions for rehearing en banc and for certiorari before the Supreme Court were denied. Laughlin v. United States, 128 U.S.App.D.C. 35, 385 F.2d 295 (1967), cert. denied, 390 U.S. 1003, 88 S.Ct. 1245, 20 L.Ed.2d 103 (1968).
Appellant subsequently filed Civil Action No. 1441-69, pursuant to 28 U.S.C. § 2255, collaterally attacking both his convictions in Nos. 600-63 and 406-65, and the substantiality of the direct review of those convictions in this court. This motion to vacate and set aside his two convictions and sentences was separated, and Judge Jones denied the request with regard to .No. 600-63, and Judge Robinson (acting pursuant to 28 U.S.C. § 291(c)) denied it as to No. 406-65. The opinions of both Judges Jones and Robinson are set out in the appendix to the Government’s brief on this appeal.
Both judges found that virtually all of the many contentions raised by appellant had been previously raised, argued, and decided at trial, on direct appeal, on the petition for rehearing, or at all three stages. Judge Rob'inson carefully examined the doctrine concerning collateral challenges under Section 2255 raising previously litigated issues and concluded
that my function is not to reconsider those claims if, in the exercise of a sound discretion, I should conclude that “the ends of justice would not be served by reaching the merits of the [present] application.”
Brief for appellee at 24 (citing Kaufman v. United States, 394 U.S. 217, 89 S.Ct. 1068, 22 L.Ed.2d 227 (1969) and quoting from Sanders v. United States, 373 U.S. 1, 15, 83 S.Ct. 1068, 10 L.Ed.2d 148 (1963)). Applying this standard to the Section 2255 motion before him with regard to the perjury conviction, he held:
In sum, all of petitioner’s current contentions have received extensive attention, at both the trial and the appellate levels, save only the complaint as to appellate review, and the latter seems clearly unavailing. It bears repeating that petitioner has had the advantage of duplicate scrutiny, at both levels, of the points common to the perjury and conspiracy cases. Thus trial and appellate judges in some number have examined petitioner’s current claims, and with complete unanimity have found them wanting. With the exhaustive consideration already given petitioner’s arguments, and with the single exception hereinafter considered, I am unable to see how the ends of justice will be served by still another undertaking to reexamine their merits in the light of legal principles that have since remained unchanged.
Brief for appellee at 25 (footnotes omitted). That one exception was the applicability of decisions of the Supreme Court, rendered subsequent to the appeals in the perjury conviction, that arguably affected appellant’s case. After examining this point, Judge Robinson rejected it too and denied appellant’s Section 2255 motion.
B. The Present Appeal
On August 20, 1970 appellant filed Civil Action No. 2503-70 attacking his convictions in a complaint styled as a writ of error coram nobis. Included in the complaint were allegations that Judge Jones had been improperly influenced by Judge Hart (whom appellant had previously charged with bias and personal prejudice against himself), so, with Judge Robinson now sitting on this court, the case was assigned to Judge Pratt rather than either of the trial judges as would have normally been the ease.
The Government filed a motion to dismiss the complaint on October 15, 1970, and on December 9 Judge Pratt granted the motion as follows:
Granted — assuming jurisdiction, the issues raised with one possible exception (appellate review) have all been raised in § 2255 motions decided by Jones, J. and S. Robinson, J. There must be an end to litigation and that point has been reached in these cases.
Appellant filed a motion for reconsideration of Judge Pratt’s December 9 order, and for reassignment of the case to another judge. The motion for reassignment was based on appellant’s attached “Affidavit of Bias and Prejudice.” Both motions were denied by Judge Pratt on December 24, 1970 with the notation: “Denied — supporting affidavit a fabrication.” This appeal from the December 9 and 24 orders followed.
1. Jurisdiction.
One ground alleged by the Government’s motion for dismissal was that the District Court was without jurisdiction to hear the case as a writ of error coram nobis. There is room for confusion on this point. Federal Rule of Civil Procedure 60(b) expressly abolished the writ of coram nobis in civil litigation in the federal courts, and the Reviser’s Note to 28 U.S.C. § 2255 reported that: “This section restates, clarifies and simplifies the procedure in the nature of the ancient writ of error coram nobis.” However, Section 2255 applies only to prisoners presently in federal custody and the Supreme Court, in essence, revived the writ in criminal cases in which federal custody had terminated by holding in United States v. Morgan, 346 U.S. 502, 74 S.Ct. 247, 98 L.Ed. 248 (1954), that Section 2255 did not wholly replace coram nobis.
Since appellant is no longer held in actual custody under his sentences, the Government contended below that appellant’s supervision under his parole board constitutes federal custody that makes Section 2255 rather than coram nobis the exclusive source of jurisdiction in the District Court. They urged a dismissal without prejudice to filing a new Section 2255 motion. In granting his dismissal on the merits, Judge Pratt “assum[ed] jurisdiction,” presumably, though not expressly, by treating the papers as a Section 2255 motion. The Supreme Court in Kaufman v. United States, 394 U.S. 217, 230-231, 89 S.Ct. 1068, 22 L.Ed.2d 227 (1969), adopted the broad rationale in support of collateral review expressed by Judge Wright’s dissent in Thornton v. United States, 125 U.S.App.D.C. 114, 123, 368 F.2d 822, 831 (1966). Under such rationale and the Reviser’s intent in drafting Section 2255 to make that Section a restatement of the coram nobis procedures, any fine, technical distinction between coram nob-is and Section 2255 may properly be resolved by treating the two as substantially equivalent alternatives wherever, as here, this can be accomplished without contravening the express terms or doctrines of either procedure.
2. The standard of review.
Treating the case as a Section 2255 motion, the standards governing repetitive 2255 actions prescribed in Sanders v. United States, 373 U.S. 1, 83 S.Ct. 1068, 10 L.Ed.2d 148 (1963), and extensively discussed in Judge Robinson’s opinion on appellant’s prior 2255 motion, control our review of Judge Pratt’s order:
Controlling weight may be given to denial of a prior application for federal habeas corpus or § 2255 relief only if (1) the same ground presented in the subsequent application was determined adversely to the applicant on the prior application, (2) the prior determination was on the merits, and (3) the ends of justice would not be served by reaching the merits of the subsequent application.
-X- -X X X X
(3) Even if the same ground was rejected on the merits on a prior application, it is open to the applicant to show that the ends of justice would be served by permitting the redetermination of the ground. If factual issues are involved, the applicant is entitled to a new hearing upon showing that the evidentiary hearing on the prior application was not full and fair; we canvassed the criteria of a full and fair hearing recently in Townsend v. Sain, [372 U.S. 293, 83 S.Ct. 745, 9 L.Ed.2d 770,] supra, and that discussion need not be repeated here. If purely legal questions are involved, the applicant may be entitled to a new hearing upon showing an intervening change in the law or some other justification for having failed to raise a crucial point or argument in the prior application. Two further points should be noted. First, the foregoing enumeration is not intended to be exhaustive; the test is “the ends of justice” and it cannot be too finely particularized. Second, the burden is on the applicant to show that, although the ground of the new application was determined against him on the merits on a prior application, the ends of justice would be served by a redetermination of the ground.
373 U.S. at 15-17, 83 S.Ct. at 1077-1078 (footnotes omitted). Thus for any ground of relief that was presented in appellant’s prior Section 2255 action and determined on the merits therein, rede-termination of that ground was dependent upon Judge Pratt’s exercise of his sound discretion to find that the “ends of justice” would be served thereby. Accordingly, we can reverse his decision on such grounds only upon finding an abuse of that discretion.
One of the points argued by appellant before this court was that Judge Pratt erred in failing to accord a hearing on this action. As set forth in note 11, supra, and the preceding paragraph, no hearing is required where the District Court finds either that the files and records of the case conclusively determine the issues raised, or that the grounds for relief have been previously determined on the merits and the “ends of justice” do not require redetermination. It is clear that Judge Pratt found both of these conditions satisfied and we hold that appellant has not carried his burden under Sanders of showing that that decision was in error. We conclude that no hearing was required in the circumstances of this case. Under Sanders, we need go no further, but we do so that we will consider all appellant’s argument, even though repetitious, in the hope of reaching a final decision.
3. Disposition of this appeal.
Appellant’s long, discursive, and frequently irrelevant briefs and memoranda present a serious challenge to careful, logical analysis. Yet even our most minute examination of the extensive materials filed in this case has failed to reveal a single point or issue that has not been argued, considered, and decided at some previous point — and generally in many such points — in appellant’s litigation. The sole remaining question to be decided is whether Judge Pratt abused his discretion by not finding that the ends of justice required re-determination of any of these issues.
As for the factual issues presented here, appellant has wholly failed to demonstrate that he has been denied a full and fair hearing on these questions. In his prior Section 2255 action no hearing was accorded by either of the two trial judges because of their findings that the files and records of the case conclusively disclosed that appellant was entitled to no relief. Both judges dismissed as wholly frivolous appellant’s contention that the direct appellate review of his convictions was in any way inadequate, and in the opinion reviewing the conspiracy conviction was an express finding that “the trial was conducted in an exemplary manner, with notable concern to protect the appellants’ rights.” 128 U.S.App.D.C. at 35, 385 F.2d at 295. We believe Judge Pratt properly concluded that no further review of any factual issues was necessary.
Only one of the legal questions raised by appellant here presents even an arguable claim for redetermination. Appellant contends that Ashe v. Swenson, 397 U.S. 436, 90 S.Ct. 1189, 25 L.Ed.2d 469 (1970), decided subsequently to all prior proceedings except Judge Robinson’s Section 2255 opinion (and not mentioned therein), requires reconsideration of his collateral estoppel arguments. We find, however, that the issues decided in Ashe do not alter the principles of the collateral estoppel doctrine in any respect that would require reconsideration of the appellant’s convictions.
Ashe decided only (1) that the doctrine of collateral estoppel is embodied within the Fifth Amendment’s double jeopardy protection, and (2) that in applying the doctrine to a criminal conviction rendered on a general verdict, the evidence and arguments at trial must be closely examined to determine what specific factual issues were contested and decided thereby, thus establishing the estoppel. Here, the estoppel appellant seeks to establish concerns issues which were expressly considered and ruled upon by Judge Curran in deciding appellant’s motions to dismiss the indictments in Nos. 599-63 and 600-63. Thus there is no question of seeking to interpret a general verdict — the issues are clearly focused and were expressly decided in the proceedings before Judge Curran. 223 F.Supp. at 625-26. The other issue decided by Ashe is not relevant here at all.
We are left, then, with a simple issue concerning the application of the basic principle of collateral estoppel— “that when an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit.” Ashe, supra, 397 U.S. at 443, 90 S.Ct. at 1194. This was precisely the doctrine applied by this court in reversing appellant’s first conspiracy conviction in No. 600-63, 120 U.S.App.D.C. at 95-98, 344 F.2d at 189-192, and in affirming his second conspiracy conviction, 128 U.S.App.D.C. at 33, 385 F.2d at 293.. It is also precisely the theory unsuccessfully urged by appellant at trial and on direct appeal from his perjury conviction in No. 406-65, and in his Section 2255 action with regard to all his convictions in both Nos. 600-68 and 406-65. Ashe has no effect whatsoever on this aspect of the doctrine and thus presents no intervening change in the law that would require re-determination of an issue that has already been so exhaustively examined in this litigation.
III.
Having reached the foregoing conclusions we comment briefly on the points raised in appellant’s current briefs which we have fully considered.
First, appellant contends that the Committee on Admissions and Grievances has the right to take issue with the judgments rendered in the criminal convictions if it is shown that they were entered in disregard of appellant’s rights. The general rule is that a judgment of conviction in federal court for a felony is binding upon the District Court and the Circuit Court of Appeals and is not subject to collateral attack in a disbarment proceeding. However, a collateral attack upon the judgments of conviction, of the type appellant postulates, is not involved here because we find that said judgments were not “entered in disregard of appellant’s constitutional rights.” Other aspects of the point are fully discussed and disposed of at pages 446-447, supra.
Second, appellant contends that the Government was collaterally es-topped from offering the telephone company record cards of the alleged long distance telephone calls between Mrs. Gross’ telephone and various Laughlin telephones because the same records were ruled inadmissible in the earlier perjury case, United States v. Laughlin, 226 F.Supp. 112 (D.D.C.1964). This exact point was raised in the earlier case, Laughlin v. United States, 128 U.S.App.D.C. 27, 33, 385 F.2d 287, 293 (1967) and we there pointed out the court in the perjury trial
held only that the telephone record cards did not constitute convincing corroboration. But that is not to say that they do not constitute permissible corroboration in a nonperjury case.
We see no reason to alter our prior decision.
Third, is a claim that the grand jury was biased “due to false information given the grand jury by the prosecutor.” This claim is fully discussed and decided adversely to appellant at 128 U.S.App.D.C. at 31-32, 385 F.2d at 291-292. We there held that no general bias of the grand jury was shown to exist, that what is alleged as bias was basically a natural reaction by the jury to believing the evidence which incriminated appellant, and that since there was ample competent evidence before the grand jury to support the indictment he was not substantially prejudiced by any inadmissible evidence. We have reevaluated our prior holding and adhere thereto.
Fourth, appellant claims the indictment in the conspiracy and obstruction ease should have been dismissed because the recordings of the telephone conversations were played for the grand jury and thus tainted the indictment. As we pointed out in our prior decision (128 U.S.App.D.C. at 31, 385 F.2d at 291), the indictment was presumptively valid, was supported by ample substantial evidence before the grand jury, was substantiated at trial by ample valid evidence and that appellant suffered no ultimate prejudice. We accordingly adhere to our prior decision on this point.
Fifth, appellant again argues that the trial court in the conspiracy and obstruction case committed reversible error when it allegedly refused to instruct the jury as to his theory of the case to the extent that it is supported by the evidence and the law, but a claim that the jury should be instructed to acquit the defendant if the defense testimony denying guilt is believed can hardly be elevated to the status of a “theory.” What is required before the theory of the case rule comes into play is a more involved theory involving “law” or fact, or both, that is not so obvious to any jury. This was the gist of our earlier holding on this point (128 U.S.App.D.C. at 34 n. 4, 385 F.2d at 294 n. 4), and nothing has been added that convinces us we should change our decision.
Sixth, with respect to appellant’s argument that the Government improperly disclosed some income tax information in connection with the grand jury proceeding, see our discussion of this point in note 12, supra, and particularly the federal regulation which permitted such use of the information in a case where the United States, as here, is interested in the result.
Finally, we set • forth the appendices from the August 8, 1969 opinion of Judge Jones in the conspiracy and obstruction case, and the October 20, 1970 opinion of Judge Spottswood W. Robinson III in the perjury case, specifying the prior instances when points raised in their respective cases had been previously raised.
IV
For the reasons set forth above we are constrained to conclude that these appeals, as well as the coram nobis proceedings in the District Court, were wholly without merit. Appellant’s indiscriminate and repetitive challenges to convictions that have already been exhaustively scrutinized for any indicia of impropriety border on an abuse of the judicial process but are understandable when one considers the vital effect of the convictions and disbarment upon appellant. As a result, he is deprived, late in life, of his ability to practice his profession. We appreciate fully the seriousness of the situation in which he has placed himself but we find no basis to justify our arriving at a different disposition of his case. While the ancient rule relied upon by Judge Pratt — “there must be an end to litigation” — surely must fall in cases where significant changes in the law or newly discovered facts or errors are revealed, such is not this case which raises no new facts, law, or arguments.
The orders of the District Court denying the writ of error coram nobis and denying reconsideration in No. 71-1142, and the order of disbarment in No. 22,996, are hereby
Affirmed.
. D.C.Code § 11-2103 (1967) (emphasis added).
. July 29, 1970, Pub.L. 91-358, Title I, Part E, § 199(b)(1), 84 Stat. 597.
. The new D.C.Code section covering disbarment from the D.C. Court of Appeals for criminal convictions is also mandatory in its terms. D.C.Code § 11-2503 (1967 ed., Supp. V 1972).
. Pub.L. 91-358, § 199(b)(1), 84 Stat. 597, printed at note following D.C.Code § 11-2503 (1967 ed. Supp. IV 1971) (emphasis added).
. In its literal terms appellant’s argument cannot be correct because the Committee had no power to disbar or reinstate. Their function was simply to make investigations and recommendations to the District Court. It was solely the court which had the power to alter appellant’s status as a member of the bar. The Committee could, however, arguably have lent its support and its substantial influence before the court on behalf of appellant if his construction of the statute were correct.
. The indictment had included similar counts regarding a Dorothy Birge, but the counts were severed and appellant represented Forte only with respect to the charges involving Mrs. Smith.
. Appellant had filed an untimely affidavit of personal bias and prejudice against Judge Hart during the first trial, and the case was reassigned for the second trial.
. 28 U.S.C. note following- § 2255.
. See Owensby v. United States, 353 F.2d 412, 416-417 (10th Cir. 1965), cert. denied, 383 U.S. 962, 86 S.Ct. 1234, 16 L.Ed.2d 305 (1966); Thomas v. United States, 106 U.S.App.D.C. 234, 238, 271 F.2d 500, 504 (1959); Mathias v. United States, 246 F.Supp. 116, 118-119 (E.D.N.C.1965), rev’d on other grounds, 369 F.2d 43 (4th Cir. 1966).
. Further support for considering Judge Pratt’s assumption of jurisdiction as his having treated the papers as a Section 2255 motion comes from the nature of appellant’s complaints. Gormn nobis was available at common law only to correct errors of fact in very limited situations, United States v. Morgan, 346 U.S. 502, 507-11 (1954), and though the range of errors has been greatly broadened, the writ remains limited to the correction of factual errors. See 7 J. Moore, Federal Practice U 60.14 (1971); 18 Am.Jur.2d, Coram Nobis §§ 1-3 (1965). The bulk of appellant’s contentions here, however, relate to challenged conclusions of law— e. g. applicability of the doctrine of collateral estoppel, legality of the prosecutor’s actions before the grand jury, pro-, priety of jury instructions, etc. — that could not have been reached through coram nobis. Section 2255 does provide an avenue for such challenges.
. The Court in Sanders noted
that these rules are not operative in eases where the second or successive application is shown, on the basis of the application, files, and records of the case alone, conclusively to be without merit. ... In such a case the application should be denied without a hearing.
373 U.S. at 15, 83 S.Ct. at 1077 (citation omitted). A denial without hearing based on a finding “that the files and records conclusively resolved these issues” constitutes a determination on the merits of such grounds. Id. at 16, 83 S.Ct. at 1077.
. The two other points most urgently argued in appellant’s papers were squarely considered and rejected in prior proceedings, and appellant has raised neither new arguments nor intervening changes in the law to support reconsideration of them here. The contention that Judge Jones improperly denied a requested instruction on the defense theory of the case was expressly rejected on appeal. 128 U.S.App.D.C. at 34 & n. 4, 385 F.2d at 294 & n. 4. The contention that the Assistant U. S. Attorney’s revelation of income tax information to a grand jury witness was illegal under Int.Rev.Code of 1954 § 7213 was expressly rejected in Judge Robinson’s opinion denying Section 2255 relief. Brief for appellee at 20-21 & n. 33. In any event, such use of income tax information is expressly authorized by Treas.Reg. § 301.6103 (a)-1(h) (Cum.Pocket Supp.1967). The regulation authorizes personnel of the Internal Revenue Service to furnish income tax returns of individuals to United States Attorneys for official use in proceedings before a United States grand jury or in litigation in any court and for use in preparation for such proceedings or litigation if the United States is interested in the result. This is sufficiently broad to authorize disclosure of the contents of relevant income tax returns to juries and Government witnesses in such proceedings. The aforesaid regulation was added by T.D. 6543, 26 F.R. 563, Jan. 20, 1961.
. In re Tinkhoff, 101 F.2d 341 (7th Cir. 1938), cert. denied, 308 U.S. 552, 60 S.Ct. 99, 84 L.Ed. 464 (1939); In re Braverman, 148 F.Supp. 56 (D.Md.1957); see also, In re Teitelbaum, 13 Ill.2d 586, 150 N.E.2d 873, 875, cert. denied, 358 U.S. 881, 79 S.Ct. 121, 3 L.Ed.2d 111, reh. denied, 358 U.S. 923, 79 S.Ct. 287, 3 L.Ed.2d 242 (1958); In re Welansky, 319 Mass. 205, 65 N.E.2d 202, 204 (1946).
. It is reversible error for a trial court to refuse to instruct the jury on the defendant’s theory of the case when pi-op-erly requested by counsel and when the theory is supported by the evidence. Bird v. United States, 180 U.S. 356, 361-362, 21 S.Ct. 403, 45 L.Ed. 570 (1901). Salley v. United States, 122 U.S.App.D.C. 359, 360, 353 F.2d 897, 898 (1965); Levine v. United States, 104 U.S.App.D.C. 281, 282, 261 F.2d 747, 748 (1958); Marson v. United States, 203 F.2d 904, 912 (6th Cir. 1953).
. See note 12, supra.
.
Civil Action No. 1441-69
Criminal No. 600-63
APPENDIX I
Appellant’s Brief Petition Reply for Amicus Brief Rehearing Brief
1. Unlawful Tape Recordings Were Played Before the Grand Jury ...................... 23 4 13-15 3-23
2. Grand Jury Bias...........23-29 4 33-34
3. Violation of Criminal Statutes In The Procurement of Evidence ......................33-35 7-11 7-15 6-23
4. Coercion of a Government Witness ...................36-37 11-14 16-17 24r-32
5. Fundamental fairness.......42-44 14
6. Failure to adhere to Department of Justice Directive .... — 7
7. Public Policy..............40-41 14 —
8. Collateral Estoppel (Receipt In Evidence of Telephone Records) ......................19-22 3-4 16 —
9. No proof of conspiracy.....45-46 14-15
10. The Matter of other offenses ..................... 8-15 1-2 16 —
(Reading paragraph 6 of Count 1 to the Jury)
11. Failure to Instruct on Defendant’s Theory of the Case...................... 47 17 4-6
.
Civil Action No. 144-69
Criminal No. 406-65
APPENDIX
PRESENT POINTS RAISED ON PRIOR APPEAL
Appellant’s Brief Appellee’s Brief Reply Brieii Petition For Rehearing
1. Governmental Eavesdropping .................. ..... 12-15 18-21 1-7 5-11
22 1A-15
2. Grand Jury Bias....... .....20-21 30-34 19-26 11-14
3. Violations in Procuring Evidence ................. .....12-15 18-21 1-7 5-11
4. Coercion of Government Witness .................. ..... 17-18 21-23 15-19 14-16
5. Fundamental Fairness ... .....15-17
6. Department of Justice Directive................... .....12-15 1-7 11-14
7. Public Policy........... ..... 15-17
8. Collateral Estoppel...... .....19 23-29 12-13 1-2
14
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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NATIONAL LABOR RELATIONS BOARD, Petitioner, v. ADVANCED BUSINESS FORMS CORPORATION, Respondent.
No. 145, Docket 72-1332.
United States Court of Appeals, Second Circuit.
Argued Nov. 9, 1972.
Decided Jan. 3, 1973.
Bertram T. Kupsinel, Atty., NLRB, Washington, D. C. (Peter G. Nash, Gen. Counsel, Marcel Mallet-Prevost, Asst. Gen. Counsel, Robert A. Giannasi and Alan D. Cirker, Attys., NLRB, Washington, D. C., on the brief), for petitioner.
Alfred T. DeMaria, New York City (Kirlin, Campbell & Keating, -New York City, on the brief), for respondent.
Before FRIENDLY; Chief Judge, MANSFIELD and TIMBERS, Circuit Judges.
TIMBERS, Circuit Judge:
This petition to enforce an order of the National Labor Relations Board, 194 N.L.R.B. No. 52 (1971), is another instance where the Board’s order in large measure is not challenged. Of the numerous provisions of the trial examiner’s recommended order of August 17, 1971, adopted by the Board on November 24. 1971, less than 20% are challenged by the Company in the proceedings on the instant petition by the Board to enforce its order.
The petition before us presents only-two essential issues by virtue of the Company’s limited challenge of the Board’s order:
(1) Whether there was substantial evidence to support the Board’s determination that the Company violated Section 8(a)(3) of the Act in discharging employee Barbara Fasano because of her union activities.
(2) Whether there was substantial evidence to support the Board’s determination that the Company violated Section 8(a)(5) of the Act in failing to bargain collectively in good faith with the Union.
For the reasons stated below, we hold that there was substantial evidence to support the Board’s determination on issue (1), but not on issue (2). We enforce the Board’s order in all respects, except that we deny enforcement as to those provisions of the order dependent upon the Board’s finding of a violation of Section 8(a) (5).
I.
The essential facts as found by the trial examiner may be summarized as follows.
The Company, a New York corporation, operates a small printing plant at Ronkonkoma, New York. It is engaged in the printing, sale and distribution of business forms and related products. Prior to early February 1971, its president was James Orrach. It is a wholly owned subsidiary of Retrieval Control Systems, the president of which is John Montague.
One department of the Company — the pressroom and preparatory department (referred to together as the prep department) — is at the center of this controversy. This department does the art work and photography for the Company, and makes the plates that are run on the presses. The size of the department fluctuates between 11 and 14 employees.
Prior to September 1970, the prep department did not have union representation. Two department employees, who apparently were angry with management, arranged for a meeting on September 12 with Julius Seide, a business representative of the Union. Nine prep department employees attended the meeting. Some of them signed union bargaining authorization cards.
On September 16, Seide filed with the Board’s regional office a petition for certification as the bargaining representative of the employees of the Company’s prep department. A copy of the petition was served on the Company on September 18. That same day, four pressmen — Walter Yarosz, Eugene Sannuto, Joseph Kirklewski, and Carl Pis-cani — were laid off. All four had attended the September 12 meeting and had signed union authorization cards. Arthur Kunzweiler, supervisor of the prep department, participated in the decision to lay off the men. At the hearing he admitted being aware at the time of the discharge that the four men were union sympathizers.
On October 13, Seide and President Orrach entered into an Agreement for Consent Election which provided that the Board’s regional director would conduct an election on November 4 among the prep department employees. In the afternoon of October 13, Orrach called a meeting of all prep department employees. At the meeting, he stated that the Company did not really want the Union, “that he thought they had a pretty good company, they had pretty good benefits, and if anybody had any gripes they should have come to him and discussed them.” Similar statements were made at another meeting called by Orrach on October 30, five days before the election.
As the election approached, the Company’s tactics in opposition to the Union became more questionable. On November 2, Orrach and Kunzweiler threatened employee George Najdek as he was operating one of the presses. While checking the operation of Najdek’s press, which apparently was not functioning properly, Orrach told Najdek that “[i]f the Union gets in, I will have to lay you off.” Orrach also reminded Najdek to attend a Union meeting scheduled for that evening. Seide conducted the scheduled Union meeting that evening at a local tavern. While it was in progress, Or-rach entered and sat at the bar. After a short while, Seide approached Orrach and spoke to him briefly. Shortly thereafter Orrach left the premises. The next day, Orrach talked with Kunzweiler on the plant floor in the prep department within the hearing of Najdek and another employee, Barbara Fasano. In the course of the conversation, Orrach stated that “[ajnyone seen at the meeting last night won’t be here for long.” After making the statement, Orrach turned and grinned in Fasano’s direction, indicating that the remark applied to her.
The election was held as scheduled on November 4. It resulted in 7 votes for the Union, 3 against, and 1 challenged ballot. That evening after work several employees celebrated the Union victory at a local bar. Orrach entered the bar and insulted the celebrants. He then approached Fasano and asked her why she had voted for the Union. When Fasano replied that she believed that it was right, Orrach argued with her, asking, “What did you think you would benefit out of it?” and, “If you want more pay, why didn’t you ask me ? How much do you want? Fifty dollars?” At a later date; November 16, Orrach remarked to two other employees that he would “get rid of the people one by one, all the people that try to hurt him and all the people that voted for the Union.”
On November 6, the Company instituted several changes which adversely affected the working conditions of the employees. These changes were made without notification to or bargaining with the Union. On the same day, Naj-dek was laid off. On November 11, eight employees, including Fasano, called in sick to protest Naj dek’s discharge. When Fasano returned to work the next day, Kunzweiler made sarcastic comments about her absence. On November 20, Fasano was discharged. The circumstances surrounding her discharge will be discussed more fully below.
On November 19, the Company and the Union began negotiations for a collective bargaining agreement. At the outset, Company negotiators Orrach and Ralph Bartell informed Union negotiator Seide that any agreements reached would have to be ratified by John Montague, president of the parent company. A form of association contract used by Printing Industries of Metropolitan New York, Inc. served as the basic framework from which the parties negotiated. At bargaining sessions held on December 2, 22 and 28, and January 28, 1971, the parties discussed and reached tentative agreement on most of the economic terms such as wage increases. At the December 28 meeting, the Company requested a maintenance-of-membership clause in lieu of the union security clause contained in the standard association contract. This became the main point in dispute between the parties; the Union insisted on the union security clause and the Company was firmly opposed to it.
Prior to the next bargaining session on March 12, 1971, Orrach was relieved of his duties as president of the Company. Montague replaced him in the negotiations. Montague apparently had been kept informed of the progress of the negotiations. The parties met again on April 8 and 16. At the April 16 meeting, Seide proposed a compromise union security plan. Montague wanted to reject the compromise immediately. At Bartell’s suggestion, however, they requested time to consider the compromise plan.
On April 21, Bartell called Seide and told him, “We have a contract. We got to get together and work out all of the details.” Seide and Bartell met on April 23 and drew up a handwritten document setting forth all the tentative agreements theretofore reached, as well as the compromise union security provision as proposed by the Union. They arranged to meet with Montague on April 27 to review and to sign the contract. When Seide arrived at Bartell’s office on April 27 for the scheduled meeting, Bartell informed him that he had just received a telephone call from Montague who had stated that he would not sign “any contract”.
On April 30, Seide informed several employees that Montague had refused to sign a contract. Seide concluded that they had no alternative but to strike. On May 3, an undisclosed number of employees did go on strike. On May 14, while the strike was in progress, the parties, at the request of the Suffolk County Labor Commissioner, met at the Commissioner’s office for further negotiations. After some persuading by the Commissioner, Seide renewed the compromise union security proposal in order to get a signed contract. Montague consulted with his employees and informed the Union that he would not agree to the compromise proposal. For aught that appears in the record before us, no collective bargaining agreement was ever signed.
An evidentiary hearing was held before a trial examiner at Brooklyn, New York, on May 17 and 18,1971. The hearing resulted from various charges filed by the Union and certain employees against the Company during the period from November 23, 1970 to February 22, 1971, followed by the filing of various pleadings which in turn were consolidated and amended from time to time through the hearing itself.
On August 17,1971, the examiner filed his decision which included findings of fact, conclusions of law and a recommended order. He found that the Company had violated § 8(a)(1) of the Act by threatening employees with discharge or other reprisals because of their union activities, coercively questioning employees concerning their union sympathies, and engaging in surveillance of employee union activity; that the Company had violated § 8(a)(3) and (1) of the Act by discharging employees Yarosz, Kirklewski and Sannuto on September 18, Najdek on November 6, and Fasano on November 20 because of their union activities, and by instituting adverse changes in working conditions after the union election in retaliation against the employees voting for the Union; that the Company had violated § 8(a) (5) and (1) of the Act by unilaterally instituting adverse changes in employment conditions and by its conduct in the collective bargaining process of repudiating on April 27 all agreements reached by the parties through several months of bargaining; and, finally, that the May 3 strike was caused by the Company’s refusal to bargain in good faith and its other unfair labor practices.
On November 24, 1971, the Board filed its decision and order, 194 N.L.R.B. No. 52, which affirmed the rulings, findings and conclusions of the trial examiner and adopted his recommended order. The order required the Company to cease and desist from the unlawful conduct found and from in any other manner discriminating against employees or interfering with, restraining or coercing them in the exercise of their statutorily protected rights. The order affirmatively required the Company to offer reinstatement to the discriminatorily discharged employees and to make them whole; upon application, to offer full reinstatement to the employees who struck on May 3, 1971, and to make them whole; upon request, to bargain collectively with the Union in good faith; to restore any of the employment conditions which were unlawfully changed after the election; and to post appropriate notices.
In view of the substantiality of the supporting evidence, the Company understandably did not take exceptions to the examiner’s findings, and of course does not challenge the Board’s determinations, that the Company violated § 8(a)(1) by threatening and coercively questioning employees, and by surveilling their union activity; that it violated § 8(a) (3) and (1) by discharging ■ employees Yarosz, Kirklewski, Sannuto and Najdek, and by making adverse changes in working conditions after the election; or that it violated § 8(a)(5) by making adverse changes in the employee’s working conditions without consulting the Union.
The Company’s efforts coercively to discourage its employees from voting for the Union were numerous and flagrant, and were amply supported by the proof before, the examiner. It is equally clear that the discharge of the employees named above, without apparent lawful reason, shortly after they had performed acts in support of the Union, and following threats of discharge for Union activity, constituted violations of § 8(a) (3). NLRB v. Scoler’s Inc., 466 F.2d 1289, 1291-92 (2 Cir. 1972). And there can be no doubt that the changes made by the Company in employee working conditions were made without Union participation in violation of § 8(a)(5).
The Company does challenge, however, the Board’s determinations that Barbara Fasano was discriminatorily discharged in violation of § 8(a) (3), and that the Company failed to negotiate in good faith on the collective bargaining agreement in violation of § 8(a) (5). To these provisions of the Board’s order, we now turn.
II.
Section 8(a)(3) of the Act makes it unlawful for an employer to discourage or to encourage membership in any labor organization by discrimination in regard to hire or tenure of employment, or any term or condition of employment. The critical question under this provision is what motivated the employer to discharge or otherwise change the employment conditions of the employee. NLRB v. Melrose Processing Co., 351 F.2d 693, 697-700 (8 Cir. 1965). Section 8(a)(3) does not deny an employer the right to discharge an employee for genuine economic reasons or for unsatisfactory work performance. NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 45-46 (1937). The existence of a valid ground for discharge is not sufficient, however, if it was merely a pretext or if the discharge was based in part on an unlawful ground. NLRB v. Dorn’s Transportation Co., 405 F.2d 706, 713 (2 Cir. 1969); NLRB v. Pembeek Oil Corp., 404 F.2d 105, 109-10 (2 Cir. 1968), vacated on other grounds and remanded sub nom. Atlas Engine Works, Inc. v. NLRB, 395 U.S. 828 (1969).
The issue here is whether there was substantial evidence to support the Board’s conclusion that Fasano’s discharge was motivated at least in part by the Company’s discrimination because of her union activities. See Universal Camera Corp. v. NLRB, 340 U.S. 474, particularly at 476, 491-92 (1951); NLRB v. Great Dane Trailers, Inc., 388 U.S. 26, 34-35 (1967). In reviewing a decision of the Board on this issue, we have said that its ruling on motivation “cannot lightly be overturned”. United Aircraft Corp. v. NLRB, 440 F.2d 85, 91-92 (2 Cir. 1971); NLRB v. Gladding Keystone Corp., 435 F.2d 129, 131-32 (2 Cir. 1970). We hold that the Board’s decision here was based on substantial evidence.
The Company introduced at the hearing some evidence which indicates that Fasano was an inefficient and insolent employee. She was hired on September 29, 1970, shortly after the Union established its first foothold in the Company. She was hired to make plates and to operate the cameras. Although she performed well during the first few weeks of employment, her performance deteriorated thereafter. She spoiled an unusually high percentage of the plates on which she worked. She required more supervision than an average employee. While she never actually refused to work, she, unlike other employees, often had to be ordered to perform her work. We believe that Fasano’s conduct, while an adequate ground for discharge, was not so intolerable as to demand it. NLRB v. Park Edge Sheridan Meats, Inc., 341 F.2d 725, 728 (2 Cir. 1965). Moreover, there was sufficient evidence to provide a reasonable basis for inferring that in fact this ground alone did not lead to her discharge.
Fasano was actively involved in promoting the Union. She attended the November 2 organizational meeting of the Union which was interrupted by the appearance of Orrach. She voted for the Union on November 4. When Orrach asked her at the victory celebration that night why she did so, she explained that she felt that it was “right”. On November 11, she and seven other employees called in sick to protest the discharge of Najdek. Her supervisor, Kunzweiler, knew of her participation in the “sickout”. The Company certainly was aware of her strong support of the Union. NLRB v. Pembeek Oil Corp., supra, 404 F.2d at 110.
Several facts disclosed by the record support the Board’s conclusion that the Company was motivated by antiunion considerations in discharging Fasano. On November 3, within her hearing and presence, Orrach threatened to discharge employees who had attended the Union meeting the previous evening. His glance toward Fasano and “little grin” indicated that she in particular was to be a target of the Company. Following the Union election on November 4, Orrach questioned and argued with her about her support of the Union. On November 12, the day after the sick-out, Kunzweiler made sarcastic remarks about her participation in that protest. For example, he instructed her to perform her job if she was not “too sick today”. We believe this indicated that the Company intended to watch Fasano’s work extra-carefully in order to find a pretext on which to discharge her. On November 16, Orrach warned two other employees that he would “get rid of” Union supporters. Four days later Fasano was discharged. “The abruptness of a discharge and its timing are persuasive evidence as to motivation.” NLRB v. Montgomery Ward & Co., 242 F.2d 497, 502 (2 Cir.), cert. denied, 355 U.S. 829 (1957). The closeness in time of Orraeh’s threat and Fasano’s discharge strongly suggests that the latter was the effectuation of the former. Finally, the Company’s numerous other unfair labor practices designed to defeat unionism support the inference that Fasano’s discharge was for union activity. NLRB v. Midtown Service Co., 425 F.2d 665, 671 (2 Cir. 1970).
We hold that there was substantial evidence to support the Board’s determination that the valid grounds for discharge asserted by the Company were not alone the cause of Fasano’s discharge, and that her discharge was motivated at least in part by unlawful discrimination on the part of the Company.
III.
Section 8(a)(5) of the Act makes it unlawful for an employer “to refuse to bargain collectively with the representatives of his employees.” Collective bargaining is defined in § 8(d) as “the mutual obligation ... to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment, or the negotiation of an agreement, or any question arising thereunder, and the execution of a written contract incorporating any agreement reached if requested by either party, but such obligation does not compel either party to agree to a proposal or require the making of a concession : .” The Act does not require that an employer yield a position fairly maintained, NLRB v. Herman Sausage Co., 275 F.2d 229, 231 (5 Cir. 1960), or that the parties actually reach an agreement. NLRB v. Israel Putnam Mills, 197 F.2d 116 (2 Cir. 1952).
The issue before us is whether there was substantial evidence to support a conclusion either that the Company in its collective bargaining negotiations engaged in a specific practice which constitutes a per se violation of § 8(a)(5) or that the Company’s entire course of conduct in the negotiations clearly shows a lack of good faith. We hold that there was not sufficient evidence to support either conclusion.
A per se violation of § 8(a)(5) may occur when a company misleads the union into believing that an agreement has been reached as to the terms of a collective bargaining contract and only formal execution remains, NLRB v. Mayes Bros. Inc., 383 F.2d 242 (5 Cir. 1967); or when an employer has reached a complete agreement with the union and its refusal to sign frustrates the whole concept of collective bargaining, H. J. Heinz Co. v. NLRB, 311 U.S. 514, 523-26 (1941). The Board here determined that the Company violated § 8(a)(5) when on April 27, Montague, acting for the Company, refused to sign a written contract embodying the tentative agreements reached over six months of negotiations and thereby indicated a refusal to enter into any agreement at all with the Union. In support of this conclusion, the Board relied primarily upon evidence that on April 27 Montague said he would not sign “any contract”.
In our view, the Board attributes unjustifiable significance to this vague and ambiguous statement by Montague. Moreover, the events which occurred before and after this statement indicate that the reasonable interpretation of it is that the Company was refusing to sign the proposed agreement merely because it contained the union security clause. Montague refused to sign “any contract” V with a union security clause. The Company had bargained in apparent good faith for months before this statement. It had reached agreement with the Union on most of the economic issues. At the I same time, the Company consistently had I opposed the union security clause. This lends support to the conclusion that it was this clause that caused Montague to reject the specific contract proposed by the Union. Indeed, when the parties continued negotiations after April 27, the only provision in dispute was the union security clause. Seide’s testimony also severely undermines the Board’s conclusion. He testified at one point that Montague had merely refused to sign the particular contract that had been prepared. He also testified that he understood that Montague had refused to sign the contract because one of his employees refused to join the Union under any circumstances. We fail to find substantial evidence to support the Board’s decision that this statement was a repudiation of six months of bargaining and an absolute refusal to sign any contract.
There was some testimony that^ the Company had reached an oral agreement with the Union on the union security clause ■ issue, and then repudiated its agreement. The courts have not yet established whether such conduct alone is sufficient to support a finding that a company has refused to bargain in good . faith. This is not a situation such asj that in NLRB v. Industrial Wire Products Corp., 455 F.2d 673 (9 Cir. 1972), where the company repeatedly changed its mind on various provisions that had been agreed on. We believe that repudiation of an agreement on a single issue, without more, does not under the circumstances presented here manifest a lack of good faith. In any event, the record here does not show that the Company reached an agreement, oral or otherwise, on the union security clause issue. Bartell was the only negotiator for the Company to indicate agreement on that issue. But he did not have the authority to bind the Company. We do not agree with the Board that Montague must have approved the compromise proposed before Bartell would tell Seide that they had “a contract”. Bartell may well have acted on his own or misunderstood Montague. We find insufficient evidence to support the Board’s conclusion that the Company reached an agreement with the Union on the security clause issue.
We recognize of course that a company’s “entire course of conduct” or “the totality of the circumstances” may show a lack of good faith in violation of § 8(a)(5), although none of its specific acts amounted to proscribed conduct. NLRB v. Fitzgerald Mills Corp., 313 F.2d 260, 264-67 (2 Cir.), cert. denied, 375 U.S. 834 (1963); NLRB v. Industrial Wire Products Corp., supra, 455 F.2d at 677-78. The appropriate standard is whether the circumstances clearly indicate “a desire not to reach an agreement with the union”. NLRB v. Reed & Prince Mfg. Co., 205 F.2d 131, 134 (1 Cir. 1953), cert. denied, 346 U.S. 887 (1953). Here there was not sufficient evidence from which it fairly could be concluded that the Company had no intention of reaching an accord with the Union.
The Company’s unfair labor practices did show resentment and hostility toward the Union. We have held that evidence of general antiunion animus is admissible to prove lack of good faith in the collective bargaining process. NLRB v. Patent Trader, Inc., 415 F.2d 190, 197 (2 Cir. 1969). But here the Company’s apparent' cooperation and sincere efforts in the contract negotiations demonstrated that the Company did not allow its dislike for the Union to affect its conduct at the bargaining table. Accordingly, we believe that its unfair labor practices carry little, if any, weight in proving a violation of § 8(a) (5).
The Company was represented in the negotiations by a person who did not have authority to enter into a binding agreement. While a company has the right to conduct negotiations in this way, the use of a negotiator without authority to bind the company is some evidence of a lack of good faith. NLRB v. Coletti Color Prints, Inc., 387 F.2d 298, 304 (2 Cir. 196V). We have held, however, that it requires more than proof that the bargaining representative of the company was not empowered to enter into a binding agreement to support a determination that the Company violated § 8(a)(5). NLRB v. Fitzgerald Mills Corp., supra, 313 F.2d at 267.
Finally, the Company adamantly refused to agree to the union security clause despite the Union’s willingness to compromise on that provision. It sometimes may be necessary for the Board or a court to examine the reasonableness of the parties’ positions on specific issues to determine whether, under all the circumstances, a particular bargaining position was taken to frustrate negotiation generally and thus to prevent agreement. NLRB v. Reed & Prince Mfg. Co., supra, 205 F.2d at 134. By the express terms of § 8(d) of the Act, the obligation to bargain “does not compel either party to agree to a proposal or require the making of a concession”. NLRB v. American Nat’l Ins. Co., 343 U.S. 395, 402-04 (1952). A party thus is entitled to stand firm on a position if he reasonably believes that it is fair and proper or that he has sufficient bargaining strength to force agreement by the other party. See NLRB v. General Electric Co., 418 F.2d 736, 766-70 (2 Cir. 1969) (Friendly, J., dissenting), cert. denied, 397 U.S. 965 (1970). The Board of course cannot ignore a patently unreasonable position. Moreover, if other circumstances indicate that a party was determined not to reach an agreement, the Board may consider the reasonableness of his positions on particular issues to determine whether he was attempting to frustrate negotiation. Neither of these situations, however, is present here. We find insufficient evidence to establish lack of good faith bargaining by the Company, as indicated by the totality of the circumstances.
We hold that there was not sufficient substantial evidence to support the Board’s determination that the Company failed to bargain collectively in good faith with the Union.
We enforce the Board’s order in all respects, except that we deny enforcement of paragraphs 1(b), 2(b) and 2(e) of the order.
. This case is a striking illustration of the desirability of amending Section 10(e) of the National Labor Relations Act, 29 U.S.C. § 160(e) (1970), to provide that an order of the Board shall become effective within a reasonable period after it is issued unless a petition to review is filed by an aggrieved person pursuant to Section 10(f) of the Act. See Friendly, Federal Jurisdiction: A General View, Part IX (Carpentier Lectures, Columbia University School of Law, November 13-16, 1972, to be published by the Columbia University Press in January 1973) ; and see 1 Recommendations and Reports of the Administrative Conference of the United States, Recommendation No. 10 and pp. 238-67 (1970).
In the instant case, the violations to which the Board’s order is directed occurred during a period of 17 to 27 months ago. Aside from the fact that approximately 80% of the Board’s order is not challenged, the Company informs us in its brief that “ [bargaining with the Union has resumed and numerous negotiating sessions have taken place”, and that “[d]uring the pendency of this appeal . the Company has ceased operations due to its financial inability to continue operations and, therefore, no longer operates the business corporation involved in this appeal.” This does not render the case moot, however, because the Company’s liability for back pay for Fasano and the replaced strikers is dependent upon our decision.
In connection with the Company’s statement that it has gone out of business, the record shows that the Company (Advanced Business Forms Corporation) was a wholly owned subsidiary of Retrieval Control Systems, a publicly held company whose president, John Montague, participated actively on behalf of Advanced Business Forms Corporation in the collective bargaining negotiations referred to in this opinion below.
. Advanced Business Forms Corporation (the Company).
. National Labor Relations Act, 29 U.S.C. § 151 et seq. (1970) (the Act).
. New York Printing Pressmen & Offset Workers Union No. 51, International Printing Pressmen and Assistants’ Union of North America, AFL-CIO (the Union).
. A summary of the provisions of the Board’s order and the Board’s determinations, including those not challenged by the Company, are set forth below at pp. 462-463.
. The termination of Piscani was never involved in this case.
. Two of the employees — Kirklewski and Sannuto — were reinstated on November 16 and 30, respectively.
. Thereafter, on November 18, the Board’s regional director certified the Union as the bargaining representative for the prep department employees.
. Among other insults, Orrach shouted to the bartender, “Don’t serve these queers.”
. Employees lost the privilege of listening to the radio in the darkroom; the lunch period was moved to an inconvenient time; outside telephone calls no longer could be made from the plant telephone, nor could incoming calls be received on the plant telephone; and strippers in the prep department for the first time were required to maintain time sheets for every job performed. The Board found that each of these changes in working conditions were in violation of § 8(a) (3) and (1), including the last item as to which the Board reversed the trial examiner. See note 14 infra.
. Bartell was employed by the Printing Industries of Metropolitan New York, Inc., an association of employers that negotiates an association-wide contract on behalf of its members. In the instant negotiations, however, Bartell acted solely as a negotiator for the Company and not for the association.
. Under a maintenance-of-membership clause, all employees who are members of the union at the time the bargaining agreement is entered into, and those who of their own volition thereafter become members, are required, as a condition of employment, to maintain their union membership for the duration of the agreement. Employees are not required, however, to join the union. On the other hand, the union security clause contained in the standard association contract made union membership compulsory.
. We discuss below in more detail the question whether there was substantial evidence to support the Board’s determination that this statement by Montague indicated a refusal to enter into any agreement or a refusal to sign the particular contract with the union security clause in it.
. The Board reversed only the examiner’s determination that the Company had not violated § 8(a)(3) and (1) by requiring after the election that prep department strippers keep time sheets for every job performed. See note 10 stipra.
. The consequences to an employee of being discharged under the pretext of poor work performance are too serious to allow the discharge to stand when an improper motive entered into the employer’s decision to discharge. Moreover, other employees —particularly those barely holding their jobs — are likely to be discouraged from supporting a union if they reasonably believe that it will cost them their jobs.
. In operating a platemaker, which burns a negative onto a plate, it is possible to “spoil” a plate so that it cannot be used in the presses. Bach spoiled plate cost the Company between $3.20 and $5.50.
. The Company cites several decisions for the proposition that evidence of an employer’s general hostility to a union does not support a finding that an individual discharge was in violation of § 8(a)(1) and (3) of the Act. NLRB v. Shepherd Laundries Co., 440 F.2d 856 (5 Cir. 1971); NLRB v. Monroe Auto Equipment Co., 368 F.2d 975 (8 Cir. 1966). The thrust of such decisions is that an employer’s general antiunion policy, without more, does not prove an unlawful motive as to a specific discharge. It is clear in the instant case that the Company’s general antiunion animus was only one of several facts which indicate an improper motive for the discharge of Fasano.
. Other examples of proscribed tactics that constitute a per se violation of § 8(a) (5) are set forth by Judge Friendly in NLRB v. General Electric Company, 418 F.2d 736, 767 (2 Cir. 1969) (dissenting opinion), cert. denied, 397 U.S. 965 (1970).
. The Board concluded that the strike beginning May 3, 1971 was an unfair labor practice strike caused by the Company’s refusal to bargain collectively in good faith and the Company’s other unfair labor practices. We disagree. Since we have held that there was insufficient evidence to support the Board’s determination that the Company refused to bargain collectively in good faith, the only possible remaining peg for the Board’s finding of an unfair labor practice strike were the Company’s “other unfair labor practices”. We find no evidence which indicates that the unfair labor practices six months before the strike played any part whatsoever in the decision to strike. We hold that the Board’s finding of an unfair labor practice strike is not supported by substantial evidence and we decline to enforce that part of the Board’s order based upon such finding.
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{
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Mildred COURTNEY, Administratrix of the Estate of John R. Courtney, Deceased, Plaintiff-Appellant, v. ISLAND CREEK COAL COMPANY, Defendant-Appellee.
No. 72-1560.
United States Court of Appeals, Sixth Circuit.
Argued Dec. 8, 1972.
Decided March 1, 1973.
Ronald W. May, Pikeville, Ky., for plaintiff-appellant. Damon Vaughn, Madisonville, Ky., on brief.
Carroll Morrow, Moore, Morrow, Fry-mire & McGaw, Madisonville, Ky., for defendant-appellee.
Before EDWARDS and LIVELY, Circuit Judges, and CECIL, Senior Circuit Judge.
LIVELY, Circuit Judge.
This is an appeal from summary judgment in favor of the Defendant Island Creek Coal Company. The facts are not in dispute.
The decedent, John R. Courtney, was employed by Cementation Company of America while working on land owned by the Island Creek Coal Company in Union County, Kentucky. Cementation had a contract with Island Creek to make two air shafts and sink a slope from which coal could be removed in connection with the construction of a new mine on the property of Island Creek.
Cementation was an independent contractor and Island Creek had no right to exercise supervision as to the manner or method in which the work was done. The contract required Cementation to comply with all state and federal safety regulations and Island Creek had the right to impose other safety regulations which were not in excess of those of the state and federal authorities. Island Creek reserved the right to inspect the work as it progressed, to terminate the contract if Cementation failed to supply a sufficient number of skilled workmen or equipment or materials, or if it should persistently disregard applicable laws or ordinances.
At the time of the fatal accident employees of Cementation, including Appellant’s decedent, were removing temporary air vents from one of the shafts which had previously been constructed. The employees .were working on a platform or work deck which was suspended by cables and raised and lowered by a hoist located on the surface of the ground. The platform had no outside guardrails and no toe boards, and the employees of Cementation wore neither safety belts nor lifelines. The hoist belonged to Cementation and was being operated by its employees and under the direction of its superintendent. Decedent fell to his death when the work deck or scaffold on which he was standing was tipped at an angle. As an employee of Cementation, decedent was covered by workmen’s compensation.
Although Island Creek made no inspection of the hoist, cable or platform, several of its supervisory employees, including its chief supervisory engineer, had observed the deck from which the decedent fell and knew that it was not equipped with guardrails or toe plates and that the employees of Cemen-tation wore no safety belts. Island Creek had never called these facts to the attention of any representative of Ce-mentation.
At the time that decedent met his death, the construction of the mine was not complete and no coal had been removed from the mine. Island Creek had applied for a license to construct the new mine and had filed with the Kentucky Department of Mines and Minerals several maps showing the construction of the new mine and the location of the proposed air shafts. The license had been issued and representatives of the Department of Mines had conducted several inspections of the property prior to the date of the accident.
Jurisdiction is based on diversity of citizenship, and our decision is controlled by the law of Kentucky. It is settled in Kentucky that one who engages an independent contractor is not legally responsible for the torts or negligence of such a contractor unless the work involves a special danger to others. It must either be a nuisance or be inherently dangerous. Jennings v. Vincent’s Adm’x., 284 Ky. 614, 145 S.W.2d 537 (1940); City of Hazard Municipal Housing Commission v. Hinch, 411 S.W.2d 686 (Ky.1967); Olds v. Pennsalt Chemicals Corporation, 432 F.2d 1033 (6th Cir. 1970). This rule has been applied to a number of cases in which scaffolding was involved and it has been consistently held that scaffolding is not an inherently dangerous instrúmentality and its use is not an inherently dangerous activity. Nashville Bridge Co. v. Marsh, 212 Ky. 728, 279 S.W. 1099 (1926); Simmons v. Clark Construction Co., 426 S.W.2d 930 (Ky.1968); Grogan v. United States, 341 F.2d 39 (6th Cir. 1965). No Kentucky cases have been cited, or discovered by independent research, in which an injury resulted by reason of a fall from a work platform or scaffolding being used in the construction of an underground coal mine.
The Appellant maintains that the meaning of “inherently dangerous” has been greatly expanded by the decision in Rietze v. Williams, 458 S.W.2d 613 (Ky. 1970). In that case an invitee of an apartment building tenant was permitted to recover from the building manager who had permitted an independent contractor to install a hot water heater in the building in violation of the plumbing code of Kentucky. The evidence indicated that the Plaintiff had been injured by hot water which escaped from the heater. The Kentucky Court of Appeals stated its reasoning as follows:
In effect the plumbing code here involved placed in the inherently dangerous category an installation which did not conform to the specified safety requirements, and the person who undertakes to make such an installation is responsible for compliance regardless of whom he employs to perform the work. 458 S.W.2d at 618.
The only other case where the Rietze rule appears to have been applied was one involving suit against a landlord by an employee of a tenant. In Kidd v. Price, 461 S.W.2d 565 (Ky.1971), the Kentucky Court of Appeals held that a landlord cannot escape responsibility for violation of safety regulations in an installation on his property by having the tenant do the work. However, it was further held that the landlord is not an insurer of the safety of every plumbing installation made by a tenant for the tenant’s benefit, and that a jury question was presented as to whether the landlord knew, or should have known, of the defect.
' The significance of the Rietze and Kidd decisions in the present ease is that Appellant maintains that applicable safety regulations required guardrails and toe boards on the work platform from which decedent fell, and that failure to so equip the platform placed it in the inherently dangerous category. Prior to the date of the accident in which Appellant’s decedent met his death, the Kentucky Department of Labor had adopted safety regulations identified as LAB 65-1 which applied to the construction industry. These regulations required that elevated work platforms be equipped with guardrails and toe boards and further provided that the owner of a project, as well as the contractors, should be responsible for compliance. These safety standards for the construction industry were issued pursuant to Chapter 338 of Kentucky Revised Statutes (KRS).
As the Appellee points out, however, KRS 338.010(3) provides that this Chapter shall not apply to “. places of employment subject to the jurisdiction of the department of mines and minerals . . . .” Appellee maintains and the District Court held, that when Island Creek applied for and received a license to construct a new mine on its property and filed required maps, it became subject to the jurisdiction of the Department of Mines and Minerals. However, the mine safety regulations which are set forth in KRS Chapter 352 apply only to commercial mines. A commercial mine is defined in KRS 351.010(1) (e) as meaning “any coal mine from which coal is mined for sale, commercial use or exchange.” Since it was admitted that no coal had been removed from Appellee’s new mine at the time of the accident, the District Court held it was not a commercial mine and was not subject to the mining regulations which prescribe safety standards for hoists and cages used for raising and lowering persons in mines.
Appellant forcefully argues that the legislature only intended to exempt places of employment subject to the jurisdiction of the Department of Mines and Minerals from the general safety standards of the construction industry in those situations where the Department of Mines is involved in active inspection, supervision and enforcement of its own regulations. She further maintains that the site of the accident in the present case was under the jurisdiction of the Department of Mines and Minerals in only the most technical sense. She would have us treat the accident location as a construction site subject to the general rules of safety applicable to the construction industry and hold that the exemption contained in KRS 338.010(3) applies only to completed mines which are under the active control of the Department of Mines and Minerals.
There is apparently no legislative history available to assist in determining this question. It cannot be said with any certainty that the legislature would not have intended this apparent hiatus in the application of safety regulations, because KRS 338.010(3) contains numerous other exemptions in addition to the one referring to places of employment subject to the jurisdiction of the Department of Mines and Minerals. However, it is clear that the standards of safety promulgated by the Kentucky Department of Labor were intended for the protection of workers in the construction industry. Cementation, the employer of the decedent Courtney, was not a mining company. It was a general contractor which was incidentally engaged in a project involving the opening of a new mine. Nevertheless, the Department of Mines and Minerals, as well as the Federal Bureau of Mines, made an investigation of the accident. In his report to the Department, the Kentucky inspector gave a detailed account of the accident and made specific recommendations for the prevention of similar accidents in the future. One of these recommendations was that all suspended work decks be equipped with guardrails on all sides.
We have concluded that it is not necessary to decide whether the new mine of Island Creek was under the jurisdiction of the Department of Mines and Minerals. Assuming that the granting of the license and the several inspections were not sufficient to make it a place of employment exempt from the general standards of safety under KRS 338.010(3), still other determinations must be made in reaching our final decision; The Kentucky Court of Appeals has long held that miners working for an independent contractor who operates under a lease from the owner of the coal mine, cannot recover from the owner of the premises for personal injuries or death which occur while working in the mine. Turner, Administratrix v. Lewis and Baker, 282 S.W.2d 624 (Ky.1955); Blair v. Boggs, 265 S.W.2d 795 (Ky.1954); Stearns Coal and Lumber Company v. Spradlin, 176 Ky. 405, 195 S.W. 781 (1917). While none of these opinions makes a specific finding on the question of whether work in a coal mine is inherently dangerous, nevertheless, the consistent refusal to permit recovery against the owner of the premises by an employee of an independent contractor who is operating a mine is tantamount to the finding that such work is not inherently dangerous.
In two reported cases involving non-mining employees working in or about mines, the same result has been reached. In Cumberland Coal Company v. Lee, 119 S.W. 746 (Ky.1909), an injured employee of an independent contractor who was hired to drive an entry in an existing mine was permitted to recover from the mine owner only because the owner had undertaken an obligation to keep the entry propped and in a reasonably safe condition. The Court held in Carter Coal Company v. Howard, 169 Ky. 87, 183 S.W. 244 (1916), that an employee of a third person hired by the mine owner to remove timber from the premises could only recover from the mine owner if his employer was not an independent contractor.
KRS 13.081 provides that each agency may adopt reasonable regulations to implement administration of the functions assigned to it by law and shall adopt such regulations as are necessary to the proper execution of those functions. This statute further provides that the power to adopt regulations to implement a particular function is limited by the terms of the grant of authority under which the function was assigned. While administrative regulations which have been duly adopted and properly filed have the full effect of law, Harrison’s Sanitarium, Inc. v. Commonwealth of Kentucky, 417 S.W.2d 137 (Ky.1967), nevertheless, by the terms of KRS 13.081 the purpose of such regulations is limited to an implementation of administration of the functions assigned to the agency issuing the regulations. It has been held that the state legislature may delegate to administrative agencies an administrative discretion in the application of law enacted by it. The same», cases hold, however, that the legislature may not delegate its power to enact laws. Veail v. Louisville and Jefferson County Metropolitan Sewer District, 303 Ky. 248, 197 S.W.2d 413 (1946); Craig v. O’Rear, 199 Ky. 553, 251 S.W. 828 (1923). Furthermore, Section 28 of the Constitution of the Commonwealth of Kentucky forbids delegation of the power belonging to one department of government to any person or collection of persons belonging to another department. The Department of Labor is part of the executive department of the government of Kentucky and has no power to legislate. It was beyond the power of the Industrial Safety Board in promulgating the standards of safety for the construction industry to change the settled law of Kentucky by making the owner of premises liable to an employee of an independent contractor for injuries suffered while working on the premises. That portion of the regulation which attempted to make the owner of the premises equally liable with the employer for enforcement of safety standards exceeded the bounds of administrative implementation. The powers of an administrative agency created to perform one specific function are by nature limited and any doubt concerning the existence of a particular power should be resolved against such agency. Henry v. Parrish, 307 Ky. 559, 211 S.W.2d 418 (1948).
The Appellants do not argue that the administrative regulations created a third party action against the owner of the premises in this case, but they do maintain that when the standards of safety were violated, under the holding in Rietze v. Williams, supra, the work which the decedent was performing became “inherently dangerous,” thus permitting this action against Island Creek. A close examination of that opinion does not support the position of the Appellants. In Rietze the Plaintiff was a very young child who was visiting in the apartment of a tenant of the Defendant. As between a landlord and his tenant (or invitees of the tenant) there can be no doubt that the landlord is liable for injuries resulting from his noncompliance with applicable safety laws and regulations. As the Kentucky Court stated the proposition:
Whatever may be the rights and liabilities as between the landlord and a negligent contractor, we think the purpose and policy of the law is that the innocent tenant (and, through him, his invitee) is entitled to rely on the landlord. 458 S.W.2d at 618.
The Court then went on to state that a landlord may not escape liability to his tenant for injuries resulting from negligent work because it was performed by an independent contractor. The ease cited in support of the general proposition that failure to comply with the plumbing code placed the installation in the inherently dangerous category also dealt with the claim of a disinterested third party rather than the employee of an independent contractor. City of Hazard Municipal Housing Commission v. Hinch, supra. That case involved damage from blasting which has long been considered an inherently dangerous activity. No mention was made in the Rietze opinion of any previous case involving claims by employees of an independent contractor against the owner of the premises upon which the injury took place. Absent a clear intent to overrule previous decisions such as Jennings v. Vincent’s Adm’x., supra; Nashville Bridge Co. v. Marsh, supra, and Simmons v. Clark Construction Co., supra, or explicit inclusion of such cases within the rule we think the Court of Appeals of Kentucky would limit the decision in Rietze. Where an installation or mechanism is the property of an independent contractor and is under the sole control of such contractor, a failure to comply with the standards of safety applicable to such installation or mechanism does not, of itself, render it “inherently dangerous” for the purpose of permitting an injured employee of the independent contractor to recover from the principal or the owner of the premises. Simmons v. Clark Construction Co., 426 S.W.2d 930 (Ky.1968).
One other contention should be answered briefly. It is maintained that the contract provisions which gave Island Creek the right to terminate the contract with Cementation for breaches of applicable laws and regulations imposed upon Island Creek a duty, not to Cementation, but to the decedent, to take steps to obtain a correction of the safety defects which it admittedly knew existed. The District Court pointed out the similarities between the contract in this case and that in Grogan v. United States, supra, and observed that the same argument had been made in Gro-gan. We do not find any provision in the contract between Island Creek and Cementation which imposed affirmative obligations on Island Creek to take steps for the safety of Appellant’s decedent.
The judgment of the District Court is affirmed.
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{
"author": "PER CURIAM.",
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UNITED STATES of America, Appellee, v. CITY OF BELLEVUE, NEBRASKA, Appellant.
No. 72-1003.
United States Court of Appeals, Eighth Circuit.
Submitted Sept. 12, 1972.
Decided Jan. 10, 1973.
As Modified on Denial of Rehearing and Rehearing En Bane March 1, 1973.
David S. Lathrop, Omaha, Neb., for appellant.
Eva R. Datz, Atty., Appellate Section, Land and Natural Resources Div., Dept, of Justice, Washington, D. C., for appel-lee.
Before BRIGHT and STEPHENSON, Circuit Judges, and TALBOT SMITH, District Judge.
Hon. Talbot Smith, Senior United States District Judge, Eastern District of Michigan, sitting by designation.
PER CURIAM.
The case before us is unique. Neither diligence of counsel nor our independent research had disclosed a case on all fours. What we have presented is an attempt by the City of Bellevue, Nebraska, to annex a SAC (Strategic Air Command) base, indeed, its headquarters, and its adjacent housing area, referred to in the record as the “Capehart housing area.”
The Offutt Air Base was described in the opinion of the District Court (permanently enjoining the annexation) as “the headquarters of the Strategic Air Command, to which is assigned the overwhelming majority of the nuclear deter-rant power of the free world.” From this base, the record discloses, the proper authorities plan, manage, direct and control the “Strategic Nuclear Deterrant capacity of the free world; all of the B52 aircraft, all of the Minute Men and Titan missiles . . . ” Here the Army, Navy, Air Force and foreign representatives sit together and “plan and coordinate the targeting of all the nuclear weapons that the free world has under its control.” From here also is controlled the Flying Command Post, which is in the air 24 hours per day, and here is stationed the Wing which processes “all of the recognizance [sic. reconnaissance] data” collected by SAC and other military agencies both photographic and electronic, as well as the “Air Weather Control,” that collects meteorological data, from world-wide sources, including satellites, processes such data, and distributes throughout SAC (the Strategic Air Command) and the United States Air Force, world wide. In addition, there are certain Groups whose missions are classified.
The Air Base itself is under the exclusive legislative jurisdiction of the Federal government. U.S.Const. Art. I, § 8, cl. 14. The Capehart housing area, on the other hand, although owned by the United States, is subject to the legislative jurisdiction of the State of Nebraska. So far as federal (as distinguished from state) law is concerned, the City of Bellevue has the power and the authority to annex the realty in question and it may “tax and regulate in those areas to the extent permitted by the Congress of the United States.” Howard v. Comm’rs of the Sinking Fund of the City of Louisville, 344 U.S. 624, 73 S.Ct. 465, 97 L.Ed. 617 (1953); Evans v. Cornman, 398 U.S. 419, 90 S.Ct. 1752, 26 L.Ed.2d 370 (1970). There is no challenge before us as to these matters.
In view of the unique and peculiar nature of the area, militarily dominated and oriented as it is, having little community of interest with near-by Bellevue, providing in substantial part to our necessary community facilities, the inevitable threshold question arises as to why annexation would be sought. The sole purpose, held the District Judge, was to increase Bellevue’s revenues. If Bellevue could include as a part of its population count the 12,000 persons residing in the barracks and quarters on the Offutt Base and in the Capehart area, it could obtain “a larger share of Nebraska state tax receipts that are distributed to municipalities on a per capita basis.” Such was the Government’s allegation, found by the trial court to be supported by a record “replete” with evidence thereof. We have held repeatedly that we do not set aside the findings of fact by a trial judge sitting without a jury unless it is -clear that they are without adequate evidentiary support. Manning v. Jones, 349 F.2d 992 (8th Cir., 1965); Jackson v. Hartford Accident and Indemnity Co., 422 F.2d 1272 (8th Cir., 1970); cert. denied, 400 U.S. 855, 91 S.Ct. 86, 27 L.Ed.2d 92 (1970). Here there was substantial evidence in the record supporting such findings.
The legal effect of this factual finding was examined by the Nebraska Supreme Court in Witham v. City of Lincoln, 125 Neb. 366, 250 N.W. 247 (1933), and the rule thereon stated as follows:
This court has held that a municipality cannot annex property for revenue purposes, as appears to have been done in the case at bar. Joerger v. Bethany Heights, 97 Neb. 675, 151 N.W. 236; Village of Osmond v. Smathers, 62 Neb. 509, 87 N.W. 310 (250 N.W. at 249).
Thus, it was the conclusion of the District Court upon such authority that the annexation was invalid as far as for an unlawful purpose.
The appellant, however, urges to us that the cases cited in support of the holding all pertained to “strictly agricultural land that was rural in nature,” and argues that all of the cases cited stand merely for the proposition that “Annexation of agricultural land, rural in character, cannot be accomplished for tax purposes only” pointing out that the statutes of Nebraska now exempt agricultural land from annexation. From this the conclusion tendered is that the doctrine of the Witham case supra, that a municipality cannot annex property for revenue purposes, no longer is the Nebraska law.
The argument is ingenious but not persuasive. The proscription against annexation for revenue purposes only is not so restricted. It finds widespread application in both case and statutory law. Thus, the sister state of Iowa provides by statute that an annexing municipal corporation must show that it is capable of extending substantial services and benefits not theretofore enjoyed “so that the proposed annexation will not result merely in increasing the revenue from taxation” of such municipal corporation, and the Supreme Court of Oregon has enjoined a proposed annexation by the City of Estacada of the “River Mill Plant” of its General Electric Company where the “inclusion of plaintiff’s property was unreasonable and where the annexation was employed for the sole purpose of enhancing the revenues of the city . . . ” Moreover, and returning to Nebraska law, we find no intimation in the opinions relied upon to so restrict the salutary doctrine to the degree that appellant suggests. The more accurate view is well expressed in Basis of Annexation of Territory by Municipal Corporations, 21 Iowa L.R. 128, 133 (1935), wherein it is said, “The courts have not allowed municipalities, under the guise of annexing adjoining property, to acquire territory simply for the purpose of raising revenue, and especially have the courts scrutinized the proceedings to determine the existence of this element when agricultural land was involved.” See, generally, McQuillin on Municipal Corporation, 3rd Ed., Annexation, §§ 7.10-7.23, particularly the latter.
The lower court relied also upon the warning expressed in Howard v. Comm’rs of the Sinking Fund of the City of Louisville, swpra, with respect to the annexation of federally owned land on which a Naval Ordnance Plant was located, stating that “It is friction, not fiction, to which we must give heed.”' In view of the nature of the property here sought to be annexed, being the headquarters, of the Strategic Air Command, the court felt a “potential for friction” with the City of Bellevue pressing upon the Court, indeed that the interests of the United States in its national security outweighed any interests of the City of Bellevue in acquiring the property. The appellant, on the other hand, points to the present lack of friction in the Capehart area and stresses that the court referred to “potential danger that may arise from city ordinances yet to be passed.” In view of the abundance of litigation as to federal-state-municipal powers and functions with respect to annexed military reservations, see Hammack, Annexations of Military Reservations by Political Subdivisions, 11 Mil.L.R. 99 (1961), we cannot say that the court’s apprehensions were unfounded. But in the view we have taken of the case as to the unlawfulness of annexation for revenue purposes only, we do. not reach this point. Nor do we consider the problem of annexation, vel non, of Capehart housing area. The annexation here authorized by the municipality, and enjoined by the lower court, consisted of both the above described base and the housing area adjacent thereto. Our affirmance rests on the fact that the base area is included in the annexation. We reiterate that whether the city of Bellevue might annex the Capehart house area alone is not a matter now before us, nor do we intend to decide that issue.
Affirmed.
. The opinion, United States v. City of Bellevue, Nebraska is reported in 334 F.Supp. 881 (D.Neb., 1971).
. Offutt Housing Co. v. County of Sarpy, 351 U.S. 253, 76 S.Ct. 814, 100 L.Ed. 1151 (1956).
. Nebraska Reissue of Revised Statutes, 1943, § 16-117.
. I.C.A. § 362.26, para. 6.
. Portland General Electric Co. v. City of Estacada, 194 Or. 145, 241 P.2d 1129 (1952).
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SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. GLENN W. TURNER ENTERPRISES, INC., et al., Defendants-Appellants.
No. 72-2544.
United States Court of Appeals, Ninth Circuit.
Feb. 1, 1973.
See also, D.C., 355 F.Supp. 1402.
Jeffrey A. Tew (argued), Miami, Fla., Charles R. Mowry, of Dardano, Mowry & Hanson, Portland, Or., Clarke C. Brown, Salem, Or., Theodore I. Kos-koff, Bridgeport, Conn., Bruce Jarman, Salem, Or., John A. Burgess, Montpelier, Vt., for defendants-appellants.
David Ferber, Solicitor (argued), James E. Newton, Jack H. Bookey, Francis N. Mithoug, Jerry King, Attys., Richard E. Nathan, Asst. Gen. Counsel, Securities and Exchange Comm., Washington, D. C., for plaintiff-appellee.
Before DUNIWAY, HUFSTEDLER, and TRASK, Circuit Judges.
DUNIWAY, Circuit Judge:
This is an appeal from an order, 348 F.Supp. 766, granting the Securities and Exchange Commission a preliminary injunction. The injunction prohibits offering and selling by appellants of certain of their “Adventures” and “Plans”, and also any withdrawal by appellants of funds from the assets of the corporate defendants other than in the regular course of business. Dare To Be Great, Inc. (Dare), a Florida corporation, is a wholly owned subsidiary of Glenn W. Turner Enterprises, Inc. The individual defendants are, or were, officers, directors, or employees of the defendant corporations.
The trial court’s findings, which are fully supported by the record, demonstrate that defendants’ scheme is a gigantic and successful fraud. The question presented is whether the “Adventures” or “Plan” enjoined are “securities” within the meaning of the federal securities laws. Of the five that Dare offers — Adventures I, II, III, and IV, and the $1,000 Plan — the court held that Adventures III and IV and the $1,000 Plan are securities. We affirm.
I. The Adventures and the $1000 Plan — the facade.
The five courses offered by Dare ostensibly involve two elements. In return for his money, the purchaser is privileged to attend seminar sessions and receives tapes, records, and other material, all aimed at improving self-motivation and sales ability. He also receives, if he purchases either Adventure III or IV or the $1,000 Plan, the opportunity to help to sell the courses to others; if successful he receives part of the purchase price as his commission. There is no doubt that this latter aspect of the purchase is in all respects the significant one.
Adventure I costs $300. The purchaser receives one portable tape recorder, twelve tape recorded lessons, and certain written material in notebooks. He is entitled to attend a 12-16 hour group session.
Adventure II includes Adventure I, and costs $700. The purchaser receives twelve more tape recorded lessons. He is offered approximately 80 hours of group sessions.
Adventure III includes Adventures I and II, and costs $2,000. The purchaser receives six more tape recordings, one notebook of written material called “The Fun of Selling,” and a limited amount of written instructions and material, as well as thirty more hours of group sessions. The purchaser also receives a different sort of benefit. After fulfilling a few nominal requirements he becomes an “independent sales trainee,” empowered to sell the Adventures. He receives $100 for each Adventure I, $300 for each Adventure II, and $900 for each Adventure III that he sells.
Adventure IV costs $5,000, and includes Adventures I, II and III. The purchaser receives six more tapes, the opportunity for thirty more hours of group sessions, the opportunity to attend two other week-long courses in Florida, at his own expense, and he may or may not receive a movie projector with six cartridge-type films. He also is now empowered to sell all of the Adventures to others. For selling Adventure IV he gets $2,500.
Finally, there is the $1,000 Plan. For this sum the purchaser receives the tape cassettes sold in Adventure II, but not the accompanying written material. He also receives some additional sales instruction, and may be entitled to a 24-hour group session. He may also sell the Plan, if he brings two individuals to the person who sold him the Plan, and if these two also purchase the Plan from the first seller. If that occurs, he may then sell the Plan on his own, receiving $400 for each additional sale that he makes. If one brings three people into the scheme, he may sell the $1,000 Plan without buying it himself, and would earn the same $400 commission for each additional sale that he makes.
II. The Adventures and the Plan in operation.
It is apparent from the record that what is sold is not of the usual “business motivation” type of courses. Rather, the purchaser is really buying the possibility of deriving money from the sale of the plans by Dare to individuals whom the purchaser has brought to Dare. The promotional aspects of the plan, such as seminars, films, and records, are aimed at interesting others in the Plans. Their value for any other purpose, is, to put it mildly, minimal.
Once an individual has purchased a Plan, he turns his efforts toward bringing others into the organization, for which he will receive a part of what they pay. His task is to bring prospective purchasers to “Adventure Meetings.”
A. The meetings.
These meetings are like an old time revival meeting, but directed toward the joys of making easy money rather than salvation. Their purpose is to convince prospective purchasers, or “prospects,” that Dare is a sure route to great riches. At .the meetings are employees, officers, and speakers from Dare, as well as purchasers (now “salesmen”) and their prospects. The Dare people, not the purchaser-“salesmen”, run the meetings and do the selling. They exude great enthusiasm, cheering and chanting; there is exuberant handshaking, standing on chairs, shouting, and “money-humming”. The Dare people dress in expensive, modern clothes; they display large sums of cash, flaunting it to those present, and even at times throwing it about; they drive new and expensive automobiles, which are conspicuously parked in large numbers outside the meeting place. Dare speakers describe, usually in a frenzied manner, the wealth that awaits the prospects if they will purchase one of the plans. Films are shown, usually involving the “rags-to-riches” story of Dare founder Glenn W. Turner. The goal of all of this is to persuade the prospect to purchase a plan, especially Adventure IV, so that he may become a “salesman”, and thus grow wealthy as part of the Dare organization. It is intimated that as Glenn W. Turner Enterprises, Inc. expands, high positions in the organization, as well as lucrative opportunities to purchase stock, will be available. After the meeting, pressure is applied to the prospect by Dare people, in an effort to induce him to purchase one of the Adventures or the plan. The sale is sometimes closed by the purchaser who brought the prospect to the meeting, but primarily, by Dare salesmen, specialists in the “hard sell.”
The format of the meeting is preordained. A script created by Dare is strictly adhered to. The format applies even to the sale, there being a standard procedure for inducing the prospect to sign his name to the agreement and to part with his money. While no express guarantee of success is made at the meetings, and the statement is made that the purchaser must expect to work, the impression which is fostered is of the near inevitability of success to be achieved by anyone who purchases a plan and follows Dare’s instructions.
Dare also arranges, in addition to the Adventure Meetings, “GO Tours,” or “Golden Opportunity Tours.” Prospects are taken by plane or bus to one of Dare’s regional centers where further meetings and sales efforts are undertaken. A significant effort is made during the trip itself to sell the plans to prospects. Much the same atmosphere as at the meetings pervades the trip-exuberant shouting, chanting, handshaking, relating of success stories, and lavish displays of cash.
In a scheme such as this, the possibility that a market will become “saturated” is a real one. Saturation has in fact occurred in some markets, but this is not mentioned at the meetings. Few, if any, purchasers of these plans have achieved any success remotely approaching that described by defendants and their agents.
B. The role of the purchaser-salesman.
Once he has bought a plan that empowers him to help sell the plans to others, the task of the purchaser is to find prospects and induce them to attend Adventure Meetings. He is not to tell them that Dare To Be Great, Inc. is involved. Rather, he catches their interest by intimating that the result of attendance will be significant wealth for the prospect. It is at the meetings that the sales effort takes place. The “salesman” is also told that to maximize his chances of success he should impart an aura of affluence, whether spurious or not — to pretend that through his association with Dare he has obtained, wealth of no small proportions. The training that he has received at Dare is aimed at educating him on this point. He is told to “fake it ’til you make it,” or to give the impression of wealth even if it has not been attained. He is urged to go into debt if necessary to purchase a new and expensive automobile and flashy clothes, and to carry with him large sums of money, borrowing if necessary, so that it can be ostentatiously displayed. The purpose of all this is to put the prospect in a more receptive state of mind with respect to the inducements that he will be subject to at the meetings.
III. The Adventures and Plans as Securities.
The district court held that Adventures III and IV, and the $1,000 Plan were securities under the Securities Act of 1933, 15 U.S.C. § 77a et seq. and the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. The definitions of security that are found in each Act are almost identical. Both definitions include the terms “investment contract,” “certificate of interest or participation in any profit-sharing agreement,” and any “instrument commonly known as a ‘security’.” The district court held that the plans in question fell into all three categories of securities. Because we find them to be investment contracts, we need not decide whether the other definitions are applicable as well.
The 1933 and 1934 Acts are remedial legislation, among the central purposes of which is full and fair disclosure relative to the issuance of securities, SEC v. W. J. Howey Co., 1945, 328 U.S. 293, 299, 66 S.Ct. 1100, 90 L.Ed. 1244; Tcherepnin v. Knight, 1967, 389 U.S. 322, 337, 88 S.Ct. 548, 19 L.Ed.2d 564. It is a familiar canon of legislative construction that remedial legislation should be construed broadly, Tcherepnin v. Knight, supra, 389 U.S. at 337, 88 S. Ct. 548. The Acts were designed to protect the American public from speculative or fraudulent schemes of promoters. For that reason Congress defined the term “security” broadly, and the Supreme Court in turn has construed the definition liberally. In SEC v. Joiner Corp., 1943, 320 U.S. 344, 64 S.Ct. 120, 88 L.Ed. 88, the Court stated: “However, the reach of the Act does not stop with the obvious and commonplace. Novel, uncommon, or irregular devices, whatever they appear to be, are also reached if it be proved as matter of fact that they were widely offered or dealt in under terms or courses of dealing which established their character in commerce as ‘investment contracts,’ or as ‘any interest or instrument commonly known as a “security” 320 U.S., Id. at 351, 64 S.Ct. at 123. In SEC v. W. J. Howey Co., supra, the Court stated that the definition of a security “embodies a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.” 328 U-S. Id. at 299, 66 S.Ct. at 1103. And in the recent case of Tcherepnin v. Knight, supra, the Court stated, “[I]n searching for the meaning and scope of the word ‘security’ in the Act, form should be disregarded for substance and the emphasis should be on economic reality.” Id. at 336, 88 S.Ct. at 553. We approach the definition of a “security” with these admonitions in mind.
In SEC v. W. J. Howey Co., supra, the Supreme Court set out its by now familiar definition of an investment contract:
“The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others.” Id. at 301, 66 S.Ct. at 1104.
In Howey the Court held that a land sales contract for units of a citrus grove, together with a service contract for cultivating and marketing the crops, was an investment contract and hence a security. The Court held that what was in essence being offered was “an opportunity to contribute money and to share in the profits of a large citrus fruit enterprise managed and partly owned by respondents.” Id. at 299, 66 S.Ct. at 1103. The purchasers had no intention themselves of either occupying the land or developing it; they were attracted only “by the prospects of a return on their investment.” Id. at 300, 66 S.Ct. at 1103. It was clear that the profits were to come “solely” from the efforts of others.
For purposes of the present case, the sticking point in the Howey definition is the word “solely,” a qualification which of course exactly fitted the circumstances in Howey. All the other elements of the Howey test have been met here. There is an investment of money, a common enterprise, and the expectation of profits to come from the efforts of others. Here, however, the investor, or purchaser, must himself exert some efforts if he is to realize a return on his initial cash outlay. He must find prospects and persuade them to attend Dare Adventure Meetings, and at least some of them must then purchase a plan if he is to realize that return. Thus it can be said that the returns or profits are not coming “solely” from the efforts of others.
We hold, however, that in light of the remedial nature of the legislation, the statutory policy of affording broad protection to the public, and the Supreme Court’s admonitions that the definition of securities should be a flexible one, the word “solely” should not be read as a strict or literal limitation on the definition of an investment contract, but rather must be construed realistically, so as to include within the definition thoge schemes which involve in substance, if not form, securities. Within this context, we hold that Adventures III and IV, and the $1,000 Plan, are investment contracts within the meaning of the 1933 and 1934 Acts.
Strict interpretation of the requirement that profits to be earned must come “solely” from the efforts of others has been subject to criticism. See, e. g., State of Hawaii v. Hawaii Market Center, Haw.1971, 485 P.2d 105. Adherence to such an interpretation could result in a mechanical, unduly restrictive view of what is and what is not an investment contract. It would be easy to evade by adding a requirement that the buyer contribute a modicum of effort. Thus the fact that the investors here were required to exert some efforts if a return were to be achieved should not automatically preclude a finding that the Plan or Adventure is an investment contract. To do so would not serve the purpose of the legislation. Rather we adopt a more realistic test, whether the efforts made by those other than the investor are the undeniably significant ones, those essential managerial efforts which affect the failure or success of the enterprise.
In this case, Dare’s source of income is from selling the Adventures and the Plan. The purchaser is sold the idea that he will get a fixed part of the proceeds of the sales. In essence, to get that share, he invests three things: his money, his efforts to find prospects and bring them to the meetings, and whatever it costs him to create an illusion of his own affluence. He invests them in Dare’s get-rich-quick scheme. What he buys is a share in the proceeds of the selling efforts of Dare. Those efforts are the sine qua non of the scheme; those efforts are what keeps it going; those efforts are what produces the money which is to make him rich. In essence, it is the right to share in the proceeds of those efforts that he buys. In our view, the scheme is no less an investment contract merely because he contributes some effort as well as money to get into it.
Let us assume that in Howey, supra, the sales and service agreements had provided that the buyer was to buy and plant the citrus trees. Unless he did so, there would be no crop to cultivate, harvest and sell, no moneys in which he could share. The essential nature of the scheme, however, would be the same. He would still be buying, in exchange for money, trees and planting, a share in what he hoped would be the company’s success in cultivating the trees and harvesting and marketing the crop. We cannot believe that the Court would not have held such a scheme to be an investment contract. So here. Regardless of the fact that the purchaser here must contribute something besides his money, the essential managerial efforts which affect the failure or success of the enterprise are those of Dare, not his own.
Our holding in this case represents no major attempt to redefine the essential nature of a security. Nor does our holding represent any real departure from the Supreme Court’s definition of an investment contract as set out in Howey. We hold only that the requirement that'profits come “solely” from the efforts of others would, in circumstances such as these, lead to unrealistic results if applied dogmatically, and that a more flexible approach is appropriate.
Affirmed.
. The district court found that defendant Sant had not been linked to these proceedings.
. Although mention of “money-humming” is made at several points in the record, we are not certain what this activity entails, nor do we venture to guess.
. On at least some occasions prospects are told to acquire the necessary money through bank loans, by not being candid about the purpose of the loan, and by making simultaneous applications to a number of banks without informing each bank that more than one application is being made.
. The Securities Act of 1933 defines “security” as:
“. . . any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of dejwsit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a ‘security’, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.” 15 U.S.C. § 77b (1).
The Securities Exchange Act of 1934 defines “security” as:
“. . . any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, or in general, any instrument commonly known as a ‘security’ or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to any purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or banker’s acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.” 15 U.S.C. § 78c(a) (10).
. The broad purpose of the Securities Act of 1933 was stated in the report of the Senate Committee on Banking and Currency, S.Rep. Xo. 47, 73d Cong., 1st Sess. 1 (1933):
“The aim is to prevent further exploitation of the public by the sale of unsound, fraudulent, and worthless securities through misrepresentation; to place adequate and true information before the investor; to protect honest enterprise, seeking capital by honest presentation, against the competition afforded by dishonest securities offered to the public through crooked promotion; . . . . ”
. A sample listing of eases in which diverse schemes have been held to involve securities includes: Continental Marketing Corp. v. SEC, 10 Cir., 1967, 387 F.2d 466, cert. denied, 1968, 391 U.S. 905, 88 S.Ct. 1655, 20 L.Ed.2d 419 (beavers); Roe v. United States, 5 Cir., 1961, 287 F.2d 435, cert. denied, 368 U.S. 824, 82 S.Ct. 43, 7 L.Ed.2d 29 (mineral leases); Los Angeles Trust Deed & Mortgage Exch. v. SEC, 9 Cir., 1961, 285 F.2d 162, cert. denied, 366 U.S. 919, 81 S.Ct. 1095, 6 L.Ed.2d 241 (mortgages and deeds of trust); Penfield Co. of California v. SEC, 9 Cir., 1944, 143 F.2d 746, cert. denied, 323 U.S. 768, 65 S.Ct. 121, 89 L.Ed. 614 (whiskey sales contracts); SEC v. Crude Oil Corp. of America, 7 Cir., 1937, 93 F.2d 844 (crude oil sales contracts).
. A common enterprise is one in which the fortunes of the investor are interwoven with and dependent upon the efforts and success of those seeking the investment or of third parties. See, e. g., Los Angeles Trust Deed & Mortgage Exch. v. SEC, 9 Cir., 1961, 285 F.2d 162, 172, cert. denied, 366 U.S. 919, 81 S.Ct. 1095, 6 L.Ed.2d 241.
. We note that under the laws of three states defendants’ promotions have been held to be securities: Hurst v. Dare To Be Great, Inc., D.Ore. (Civ.No. 71-160, Jan. 12, 1972); State of Idaho v. Glenn Turner Enterprises, Inc., Dist.Ct. 4th Jud. Dist.Ida. (Civ. No. 47773, March 28, 1972); Frye v. Taylor, Dist. Ct. of Appeal, 4th Dist. Fla., 1972, 263 So.2d 835.
. See, e. g., Georgia Market Centers, Inc. v. Fortson, 1969, 225 Ga. 854, 171 S.E.2d 620; Gallion v. Alabama Market Centers, Inc., 1968, 282 Ala. 679, 213 So.2d 841. Compare State of Hawaii v. Hawaii Market Center, 1971, 485 P.2d 105.
. See Coffey, The Economic Realities of a “Security”: Is There a More Meaningful Formula?, 18 W.Res.R.Rev. 367 (1967) wherein Professor Coffey proposes new guidelines for determining the existence of a security.
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Walter F. HURST, Plaintiff-Appellee, v. DARE TO BE GREAT, INC., a corporation, et al., Defendants-Appellants. Walter F. HURST, Plaintiff-Appellant, v. DARE TO BE GREAT, INC., a corporation, et al., Defendants-Appellants.
Nos. 72-1720, 72-1662.
United States Court of Appeals, Ninth Circuit.
Feb. 1, 1973.
John J. Haugh (argued), of O’Con-nell, Goyak & Haugh, Portland, Or., for Walter F. Hurst.
William E. Hanson (argued), Charles R. Mowry, of Dardano, Mowry & Hanson, Portland, Or., for Dare To Be Great, Inc.
John H. Socolofsky, Asst. Atty. Gen. (argued), Lee Johnson, Atty. Gen. Salem, Or., for amicus curiae.
Before DUNIWAY, HUFSTEDLER and TRASK, Circuit Judges.
DUNIWAY, Circuit Judge:
In this case, plaintiff Hurst bought from Dare To Be Great, Inc. (Dare) its Adventure IV, which is described in our opinion in SEC v. Glenn W. Turner Enterprises, Inc., 9 Cir., 1973, 474 F.2d 476, filed today. Disillusioned with what he got, Hurst sued for the return of his money under the diversity jurisdiction. The trial judge held that Adventure IV is an investment contract within the meaning of Oregon Revised Statutes, eh. 59, and gave judgment for Hurst. Both parties appeal.
1. The appeal of Dare.
The trial judge held that purchasers of Adventure IV were contributing sufficiently to the product development and promotion of Dare to bring the case within the ambit of State ex rel. Healy v. Consumer Business System, Inc., Or.App., 1971, 482 P.2d 549, which adopted for Oregon the risk capital test of Silver Hills Country Club v. Sobieski, 1961, 55 Cal.2d 811, 13 Cal.Rptr. 186, 361 P.2d 906. He so held notwithstanding the fact that Dare had a “product” in being when it began soliciting business in Oregon.
In diversity cases, where state law controls, we will not overrule the district court’s interpretation of state law unless it is clearly wrong, particularly if the highest state court has not passed on the matter. Turnbull v. Bonkowski, 9 Cir., 1969, 419 F.2d 104, 106; Insurance Company of North America v. Thompson, 9 Cir., 1967, 381 F.2d 677, 681. We owe, and we give deference to the local judge’s opinion as to the law of his state. To do so here is particularly appropriate because Judge Goodwin is a former member of the Oregon Supreme Court. We are not persuaded that Judge Goodwin’s opinion as to the Oregon law is wrong.
2. The appeal of Hurst.
The action was for rescission. Hurst paid Dare $5,000, and sought to recover that sum. The court awarded $4,300, finding that Hurst had received benefits worth $700. This finding we hold to be clearly erroneous. All that Hurst received were the “kits” for Adventures I and II plus attendance at a 6-day “school” in Reno. The record demonstrates that these are worthless. Hurst paid his own expenses for the Reno trip; he got nothing of value from it. He had previously taken another trip to Reno, before he bought Adventure IV. He did not pay for it, but neither did Dare. It was paid for by another of Dare’s victims, who had become a “salesman.” If the tape recorder and carrying case that Hurst received have value, it is more than offset by the cost of his second trip to Reno to take the “course” for which he had paid. Judgment should have been for the full $5,000.
On the issue of damages, the judgment is vacated, and the case is remanded with directions to give judgment for $5,000 damages. In all other respects, the judgment is affirmed.
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2024-08-24T03:29:51.129235
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{
"author": "MANSFIELD, Circuit Judge:",
"license": "Public Domain",
"url": "https://static.case.law/"
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Irving STOLBERG, Plaintiff-Appellant, v. MEMBERS OF the BOARD OF TRUSTEES FOR the STATE COLLEGES OF the STATE OF CONNECTICUT et al., Defendants-Appellees.
No. 217, Docket 72-1726.
United States Court of Appeals, Second Circuit.
Argued Dec. 6, 1972.
Decided Jan. 29, 1973.
Louis M. Winer, New Haven, Conn. (Tyler, Cooper, Grant, Bowerman & Keefe, Irving S. Schloss, New Haven, Conn., of counsel), for plaintiff-appellant.
Sidney D. Giber, Asst. Atty. Gen. (Robert K. Killian, Atty. Gen., F. Michael Ahern, Asst. Atty. Gen., Hartford, Conn., of counsel), for defendants-appel-lees.
Before LUMBARD, FEINBERG and MANSFIELD, Circuit Judges.
MANSFIELD, Circuit Judge:
Irving Stolberg, formerly an Assistant Professor of Geography at Southern Connecticut State College (“SCSC”), appeals from a judgment in his favor in his action under the Civil Rights Act, 42 U.S.C. § 1983, against the former President of SCSC and members of the Board of Trustees for the State Colleges of Connecticut based on their nonrenewal of his teaching contract and consequent denial of tenure, allegedly in violation of his First Amendment and Due Process rights. The district court, M. Joseph Blumenfeld, Chief Judge, sitting without a jury, found defendants’ action to have been in retaliation for Stolberg’s exercise of his First Amendment rights and awarded him reinstatement with tenure and no loss of seniority and $9,000 to cover his salary loss. However, he denied additional compensatory damages, punitive damages or attorneys’ fees. The court found it unnecessary, in view of its disposition of the First Amendment claims, to decide whether Stolberg had also been denied procedural due process.
Stolberg here contends that the district court should have decided his due process claims and should have awarded him additional compensatory damages for humiliation, emotional distress and injury to his reputation, plus punitive damages and attorneys’ fees. We affirm except as to the denial of attorneys’ fees, which we reverse, and we remand for determination and award of reasonable attorneys’ fees.
The findings of the district court, made in an unreported decision, are not disputed. They reveal an unpleasant picture, characterized by reactionary and rather high-handed conduct on the part of a college president toward a faculty member, approved by some trustees and tolerated by others. Beginning with the 1966-1967 school year Stolberg, a graduate of the University of California at Los Angeles, with a distinguished academic record, was employed by SCSC as an Assistant Professor. Under existing regulations and practice at SCSC, teachers who satisfactorily completed three years in probationary status were entitled to tenure.
In February, 1968, as part of his active participation in discussions regarding international political affairs, particularly our country’s involvement in the war in Vietnam, Stolberg sent to his fellow faculty members at SCSC an invitation to support a Peace Program and Memorial Service to be held in New Haven relating to that war. Two months earlier Stolberg had sent a letter to the President of Albertus Magnus College in New Haven suggesting that she had arbitrarily suspended a number of students and offering the mediation services of The American Association of University Professors, a local chapter of which Stolberg was then President.
Dr. Hilton C. Buley, President of SCSC, whose views apparently differed sharply from those of Stolberg, whom he seems to have regarded as subversive, did not take kindly to Stolberg’s communications. Buley promptly notified Stol-berg that his contract would not be renewed for the coming year, 1968-1969, which would have been his third year on the faculty.
Stolberg unsuccessfully appealed President Buley’s decision to the personnel committee of the Board of Trustees for the State College and subsequently requested the Board to reconsider his case, claiming that the committee’s procedures did not comport with the requirements of due process. The Board then sought advice from the State Attorney General, who expressed the opinion that the Board proceedings upholding Buley’s decision were not legally sound in view of the appeal clause in the Board’s Personnel Policies. President Buley thereupon volunteered to rescind Stolberg’s termination, and Stolberg continued on the faculty during the 1968-69 term. Buley, however, sought to have the clause repealed with the intention of dismissing Stolberg thereafter.
The Board, fearing discontent among the faculty, decided against repeal of the appeal procedure in December, 1968. Nonetheless, on February 27, 1969, Bu-ley again notified Stolberg, without reasons, that his contract would be terminated at the end of the term and tenure thereby denied, despite recommendations from the chairman and members of the geography department that he be given tenure. Stolberg again appealed to the Board’s Personnel Committee and was allowed to appear personally before them, although he received no notice of any charges against him. Dr. Buley appeared ex parte before the Board two weeks later, without notice to Stolberg, and listed several “incidents” as the basis for the latter's dismissal.
The Board subsequently affirmed Bu-ley’s decision on June 13, 1969. This action was filed by Stolberg on December 15, 1969. At no time during the course of administrative or judicial proceedings regarding Stolberg’s termination was his competence as an instructor questioned.
At the conclusion of the trial, at which no defense was presented, Chief Judge Blumenfeld held that the “incidents” listed by Buley had been makeweights and that the real reason for not renewing Stolberg's teaching contract was his previous exercise of his First Amendment rights, a constitutionally impermissible basis for dismissal, Pickering v. Board of Education, 391 U.S. 563, 88 S.Ct. 1731, 20 L.Ed.2d 811 (1968). Judge Blumenfeld directed the Board of Trustees to reinstate Stolberg as a faculty member at SCSC with tenure and without loss of seniority, and awarded judgment in the sum of $9,000 against Dr. Buley and certain of the individual members of the Board to compensate Stolberg for his intervening salary loss. Neither the relief granted nor the basis on which it was predicated are challenged on appeal by the defendants. Stolberg, however, challenges the sufficiency of the relief granted in his favor, for the above stated reasons.
We conclude that it was entirely proper for Chief Judge Blumenfeld not to adjudicate appellant’s additional claim that he was deprived of his livelihood through procedures lacking in due process. Though Stolberg claims he suffered additional harm, based on a due process denial, through loss of an earlier opportunity to clear himself before the Board of Trustees of unsupported charges against him, made ex parte to the Board by Dr. Buley, any resulting injury to reputation would have been compensable, if proved, and fully remediable as a consequence of the non-renewal of his teaching contract in retaliation for his lawful exercise of his First Amendment rights. See Donovan v. Reinbold, 433 F.2d 738, 743 (9th Cir. 1970); Lee v. Southern Home Sites Corp., 429 F.2d 290, 293 (5th Cir. 1970); cf. Sullivan v. Little Hunting Park, Inc., 396 U.S. 229, 238-240, 90 S.Ct. 400, 24 L.Ed.2d 386 (1969).
Thus a decision of the due process claim was not necessary to accord Stol-berg whatever relief he was entitled to on that claim. The most he lost by reason of the court’s failure to decide it was the inability to achieve the personal satisfaction of obtaining a finding that his Due Process as well as his First Amendment rights had been violated. This would not mandate a decision. Furthermore, the subsequent decisions of the Supreme Court in Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972), the pen-dency of which was noted by Judge Blu-menfeld, and in Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972), confirmed the district court’s observation that the serious question of what procedural process is due before administrators of public educational institutions may decline to renew contracts of tenured and nontenured teachers, involves complicated sub-issues that are not easily answered. Under these circumstances, it was entirely proper for Judge Blumenfeld not to “anticipate a question of constitutional law in advance of the necessity of deciding it,” Ashwander v. TVA, 297 U.S. 288, 346-347, 56 S.Ct. 466, 483, 80 L.Ed. 688 (1936) (Brandies, J., concurring).
We turn then to the question of the sufficiency of the relief granted Stolberg. The district court found that following his dismissal from SCSC he was almost immediately able to secure another position at a lower salary as an instructor of geography at another college and was elected to the Connecticut House of Representatives from the district encompassing SCSC. The award to him of $9,000 in compensatory damages represented the difference in earnings between the salaries he would have earned at the two colleges. Additional compensatory damages for humiliation, distress, and injury to reputation were denied for failure of proof and because any such damage would be “wholly speculative.” We agree.
We do not find Judge Blumenfeld’s findings to be clearly erroneous, Rule 52, F.R.Civ.P. Neither medical evidence of pain and suffering nor evidence of damage to Stolberg’s reputation in his community was introduced, save Stolberg’s own testimony of being upset over the whole course of events. Although he testified that he had encountered public damage to his reputation, had been hindered in his election campaign efforts and in his effectiveness later as a State legislator, and had experienced disruption of personally valuable relationships with his former students, other factors, including the relative ease with which he obtained a new position elsewhere and his successful election to the State legislature, tended to negate or minimize any such harm.
The credibility to be accorded the evidence was for Judge Blumenfeld, and it is obvious that some of the alleged injury was too speculative to be compensable in any event. Donovan v. Reinbold, supra, 433 F.2d at 743, relied on by appellant, merely indicates that a district court may award damages for emotional or mental distress found to have resulted from loss of a public job to which the holder had an unusual dedication and from which he has been unconstitutionally dismissed, and not that such a finding is to be presumed or found solely on the basis of the plaintiff’s testimony.
Similarly we affirm the denial-of punitive damages. At the end of the trial in December, 1971, counsel for the trustees stated in open court that the trustees were at that point willing to offer appellant tenure. Largely from this statement, Judge Blumenfeld concluded that an award of exemplary damages against these State officials was unnecessary to secure “full compliance with constitutional requirements” and might, to the public’s detriment, unnecessarily deter responsible citizens from agreeing to serve in the voluntary capacity of members of the Board. While punitive damages may, in an appropriate case, be awarded for violation of 42 U.S.C. § 1983, even in the absence of actual damages, see Basista v. Weir, 340 F.2d 74, 86-88 (3d Cir. 1965); Mansell v. Saunders, 372 F.2d 573, 576 (5th Cir. 1967); Caperci v. Huntoon, 397 F.2d 799 (1st Cir.), cert. denied, 393 U.S. 940, 89 S.Ct. 299, 21 L.Ed.2d 276 (1968), failure to award such relief will not be lightly overturned. Whether the standard to be applied in the first instance for determination of whether punitive damages should be allowed is restricted to instances where “willful or malicious violations of Constitutional rights” are proved, Sexton v. Gibbs, 327 F.Supp. 134, 142-143 (N.D.Tex.), affd., 446 F.2d 904 (5th Cir. 1971), or where “a defendant has acted wilfully and in gross disregard for the rights of the complaining party,” Lee v. Southern Home Sites Corp., supra, 429 F.2d at 294 (action under 42 U.S.C. §§ 1981, 1982), or should be extended to instances where the defendant acted with knowledge that he was violating the plaintiff’s rights or with reckless disregard of whether he was violating such rights, see Adickes v. S. H. Kress & Co., 398 U.S. 144, 233-234, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) (opinion of Brennan, J.), appellate review of the district court’s determination should necessarily be circumscribed.
“The allowance of such damages inherently involves an evaluation of the nature of the conduct in question, the wisdom of some form of pecuniary punishment, and the advisability of a deterrent. Therefore, the infliction of such damages, and the amount thereof when inflicted, are of necessity within the discretion of the trier of the fact.” Lee v. Southern Home Sites Corp., supra, 429 F.2d at 294.
Here Judge Blumenfeld concluded that the award of punitive damages would be unwarranted, unwise and unnecessary. There was ample support for his exercise of discretion.
The failure to award reasonable attorneys’ fees rests on a somewhat different footing, and we believe that such relief should have been granted. With respect to the issue of whether to award attorneys’ fees, the emphasis is not placed solely on whether the defendants should suffer pecuniary punishment or be additionally deterred. Rather the objective is to assure that the plaintiff, and others who might similarly be forced to great expense to vindicate clear constitutional claims, are not deterred from securing such vindication by the prospect of costly, protracted proceedings which have become necessary only because of the obdurate conduct of the defendants. It is especially important to assure that a healthy climate of free expression is not inhibited “in the community of American schools,” Shelton v. Tucker, 364 U.S. 479, 487, 81 S.Ct. 247, 251, 5 L.Ed.2d 231 (1960).
The circumstances of this case persuade us that an award of counsel fees is necessary to protect against the possibility that other faculty members might be reluctant to engage in activities protected by the First Amendment or might forgo the vindication of their rights to do so in a court of law. Such a result would be destructive of the educational process in a free society. When, as here, the constitutional right is one of great importance and proof of an intentional and serious violation is clear and definite, enforcement should not be inhibited by reason of litigation costs.
The district judge denied attorneys’ fees primarily on the ground that the only purpose to be served in awarding damages was individual redress, see Arroyo v. Walsh, 317 F.Supp. 869, 873 (D.Conn.1970). He concluded that such an award was rendered unnecessary because the trustees were willing to offer Stolberg tenure at the end of the trial and because the court had now issued a ruling for the future guidance of the defendants. However, application of established principles to the district court’s own findings shows that the standard for awarding attorneys’ fees was fully met.
Although the award of attorneys’ fees is restricted to the exceptional case, see, e. g., Bell v. School Board, 321 F.2d 494, 500 (4th Cir. 1963), the standard is whether “bringing of the action should have been unnecessary and was compelled by the school board’s unreasonable, obdurate obstinacy,” Bradley v. School Board, 345 F.2d 310, 321 (4th Cir.), vacated on other grounds, 382 U.S. 103, 86 S.Ct. 224, 15 L.Ed.2d 187 (1965); Monroe v. Board of Commissioners, 453 F.2d 259, 263 (6th Cir.), cert. denied, 406 U.S. 945, 92 S.Ct. 2045, 32 L.Ed.2d 333 (1972). The Supreme Court has furthermore recognized that “a federal court may award counsel fees to a successful plaintiff where a defense has been maintained ‘in bad faith, vexatiously, wantonly, or for oppressive reasons,’ 6 Moore’s Federal Practice 1352 (1966 ed.).” Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 402 n. 4, 88 S.Ct. 964, 966, 19 L.Ed.2d 1263 (1968) (per curiam). Because suit clearly should have been unnecessary in this case and was compelled by defendants’ conduct, counsel fees should have been awarded.
Stolberg was originally notified by Dr. Buley in February, 1968, that his contract would not be renewed, for reasons that were found to be constitutionally improper and which have never been seriously contested by defendants. Judge Blumenfeld found that at the hearing on Stolberg’s first appeal to the Board of Trustees he was “questioned solely about his political and moral convictions. There was no discussion of his competency as a teacher.” Despite the subsequent advice of the Attorney General that the appeal proceedings were not legally sound, and the observation of the Board’s Personnel Committee in December, 1968, that “in the absence of evidence more convincing than that presented last year, the Committee concluded that it could not support the President (Buley) in dismissing Irving Stolberg,” the committee in June, 1969, did affirm the second dismissal of Stol-berg. Furthermore, the dismissal followed an ex parte appearance of Dr. Bu-ley, at which he listed several “incidents” as the basis for dismissal, all later found by Judge Blumenfeld to be a mere facade.
When Stolberg was ultimately forced to sue for reinstatement in December, 1969, his suit was vigorously opposed through extensive discovery proceedings and until the end of the trial two years later, in December, 1971. It was not until that point, some 3% years after the first improper failure to renew Stol-berg’s contract, that the defendants, after failing to present any defense to appellant’s case, finally offered to reinstate him with tenure.
Nor was the belated offer of reinstatement delayed because of any doubt about the legal rights of appellant at the time of the Board’s initial decision to approve dismissal. Compare Kelly v. Guinn, 456 F.2d 100, 111 (9th Cir. 1972); Monroe v. Board of Commissioners, supra, 453 F.2d at 263. Rather the situation was governed by the well established principle, recently reaffirmed in Perry v. Sindermann, 408 U.S. 593, 598, 92 S.Ct. 2694, 2698, 33 L.Ed.2d 570 (1972), where the Supreme Court stated that it had “twice before . specifically held that the non-renewal of a nontenured public school teacher’s one-year contract may not be predicated on his exercise of First and Fourteenth Amendment rights. Shelton v. Tucker, supra [1960]; Keyishian v. Board of Regents, supra [1967].”
Judge Blumenfeld, in considering whether defendants were state officials who had a defense of good faith to an action for damages under § 1983, cf. Pierson v. Ray, 386 U.S. 547, 555, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967), found it unnecessary to decide that question because “the court does not find that the defendants here have established that they acted in good faith.” Under these circumstances, where the constitutional rights of the appellant were clear at the time of the appellees’ conduct, as well as at the time of suit, where the long course of vindication of those rights caused by the appellees should, as a consequence, have been unnecessary, and where the award of fees will help prevent inhibition of the future exercise of such rights at public institutions by other public employees, the financial burden of litigation should be removed “from the shoulders of the plaintiff seeking to vindicate the public right.” Knight v. Auciello, 453 F.2d 852 (1st Cir. 1972). See also Lee v. Southern Home Sites Corp., 444 F.2d 143, 147-148.
Affirmed in part, reversed in part, and remanded for determination of reasonable attorneys’ fees. The costs of this appeal are awarded to appellant.
. After such additional sums had been denied at trial, appellant moved under Rules 52 and 59, F.R.Civ.P., for amendment of Chief Judge Blumenfeld’s findings and judgment to include these items of relief. The motion was denied.
. Stolberg v. Members of the Board of Trustees, Civil No. 13,591 (D.Conn. Feb. 29, 1972).
. The district judge was also concerned that since the members of the Board of Trustees serve voluntarily the award of attorneys’ fees and punitive damages would, if granted, inhibit responsible citizens from performing valuable services for public institutions. The Assistant State Attorney General represented at the oral argument of this appeal that if attorneys’ fees were assessed against the defendants he would seek to have them reimbursed by the State. See Conn. Gen. Stats. § 10-235 (1972 Supp.). In any event, we do not believe that this factor should prevent the necessary protection of the clear First Amendment freedoms of faculty members at the State colleges.
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f2d_474/html/0491-01.html
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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{
"author": "CLARK, Circuit Judge:",
"license": "Public Domain",
"url": "https://static.case.law/"
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INGERSOLL-RAND COMPANY, Plaintiff-Appellant-Cross Appellee, v. BRUNNER & LAY, INC., Defendant-Appellee-Cross Appellant.
No. 72-2026.
United States Court of Appeals, Fifth Circuit.
Feb. 20, 1973.
Rehearing and Rehearing En Banc Denied April 4, 1973.
Richard S. Banick, Miami, Fla., John M. Calimafde, New York City, Carl R. Horten, Princeton, N. J., for plaintiff-appellant.
John H. Oltman, Fort Lauderdale, Edward C. Vandenburgh, Arlington Heights, Fla., for defendant-appellee.
Before GODBOLD, DYER and CLARK, Circuit Judges.
CLARK, Circuit Judge:
Invalidity for obviousness is the broad subject of this patent appeal. A subsidiary issue is joined on the trial court’s application of the doctrine of file wrapper estoppel. The imitator who was successful in the court below cross-appealed from the court’s refusal to award it attorney’s fees. Because we reverse the trial court’s determination of obviousness and its invocation of an estoppel against the patentees, the attorneys’ fee issue is eliminated; but the case must be remanded for an accounting.
United States Letters Patent No. 3,424,479 issued to J. D. Ditson and James F. Cantrel, the assignors of the plaintiff, Ingersoll-Rand Company, on a coupling and rod system for rock drills. The present action was instituted to enjoin the defendant, Brunner & Lay, Inc., from manufacturing and marketing a drill rod which was alleged to infringe Claims 4 and 5 of the 479 patent. No issue was raised as to the novelty or utility of the device covered by these patent claims. Nor is infringement an issue on this appeal. The complaint sought injunctive relief against continued infringement and an accounting for damages. Brunner & Lay counterclaimed for declaratory judgment of patent invalidity and sought general relief. Brunner & Lay now contends that In-gersoll-Rand’s assignors were guilty of fraud in the procurement of the patent and that the trial court abused its discretion in refusing to allow Brunner & Lay to recover attorneys’ fees incurred in defense of the litigation.
Background of the Patent
A percussion drilling rod, as described in the patent claims, is a thick steel tube usually 10 feet in length and iy2 inches in outside diameter, which forms a connection between a hammer on one end and a bit on the other end in an equipment system used to drill holes into rock formations for the purpose of setting dynamite charges. A simple analysis of the physics of the system discloses that rapid hammer blows are struck on the upper end of the drilling rod, which then drives the bit attached to its lower end into the dense material being drilled. As heavier and more efficient hammers and better bits were developed and deeper hole capacity was required, rods were strengthened and were provided with threaded sections at both ends to facilitate attachment to the hammer and bit and to enable interconnection between drill rods. Modern day drill rods not only transmit the enormous force of the rapid heavy hammer blows to the bit, but also serve to carry a stream of air down their bore and through the center of the bit to blow chips and debris back up and out of the hole.
Technology which brought improvements at the hammer and bit ends, made rod breakage due to metal fatigue and wear of threads the most acute equipment problems in this field. When drill rod breaks occurred the equipment operator either had to abandon the broken rod and bit and start a new hole with new equipment, or he had to retrieve the broken section and recondition or replace it. Rods with worn threads similarly had to be reconditioned or replaced. Prior to the marketing of present patented rod, the two principal solutions were to (1) use rods made of relatively low strength steel, which, while subject to breakage, could be reconditioned at the job site by cutting additional threads; or (2) use rods of high strength treated steel which did not break as often, but could only be reconditioned at a machine shop. Although breakage may occur at any point throughout the length of the rod, most breakage failures and wear outs oc-cured within the threaded areas at the ends.
The Patent in Issue
In May of 1965, J. D. Ditson applied for a patent on a coupling and drill rod system. On January 11, 1966, a eontinu-ation-in-part patent application was filed by Ditson and James F. Cantrel with the verified explanation that Cantrel had conceived and reduced a portion of the invention to practice. This joint application eventuated in the grant of the 479 patent to Ditson and Cantrel. The claims in issue here (see footnote 3 above) taught the construction of a drill rod which had a continuous roll-formed thread with a groove in its crest over the entire length of the rod. Illustrative diagrams from the patent grant are appended to this opinion.
Pertinent to the claims involved here, the specifications of the patent provided that among the objects of the invention was to provide a system which would enable the use of high strength rods that could be reconditioned in the field. Other advantages in greater inherent strength and more efficient transmission of energy were said to result from the manner in which the rod and its accompanying coupling member would operate. Specifically, the uniformity of cross-section was described as advantageous in eliminating stress raising factors and possible causes of premature rod failure associated with points of variation in rod cross-section. The process of reconditioning a failed or broken rod was stated to be simplified because it required only the cutting off of the failed or broken portion with a steel saw. This was said to enable the rod manufacturer to initially employ special materials and unusual heat treatment and finishing processes in the fabrication of the rod without consideration of the field reconditioning problems that had previously limited use of such strengthening processes and materials.
The Standard of Review
Graham v. John Deere Co., 383 U.S. 1, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966), blocks out the equation to guide our detailed fact-law analysis of the trial court’s conclusion that claims 4 and 5 of the 479 patent were erroneously allowed upon an obvious device.
While the ultimate question of patent validity is one of law, Great A. & P. Tea Co. v. Supermarket Equipment Corp., supra, 340 U.S. at 155, 71 S.Ct. at 131, the § 103 condition, which is but one of three conditions, each of which must be satisfied, lends itself to several basic factual inquiries. Under § 103, the scope and content of the prior art axe to be determined; differences between the prior art and the claims at issue are to be ascertained; and the level of ordinary skill in the pertinent art resolved. Against this background, the obviousness or nonobviousness of the subject matter is determined. Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc., might be utilized to give light to the circumstances surrounding the origin of the subject matter sought to be patented. As indicia of obviousness or nonobviousness, these inquiries may have relevancy.
Here the controlling facts are undisputed. Our task is to set them into the formula standard and calculate the result.
The Prior Art
The art involved is that of metallurgy, in general, and the formation of steel rods for percussion drilling, in particular.
Early in the history of development of percussion drilling systems, practitioners used a rod constructed of twisted steel which could be sharpened on one end to serve the function of a bit. Many of such twisted rods were commonly twisted throughout the length of the rod. The nearest example is U.S. Patent No. 236,774 issued to Butler, et al in 1881. The diagrams accompanying this patent are set out in the appendix. The specifications of the Butler patent taught that the rod could be initially formed by rolling before being twisted. It was further provided that the spiral form would aid in freeing the hole of chips, and that the uniformity of rod contour and strength would enable the continued use of any unbroken portion either as a bit end or for insertion into the hammer without forging. Other patents covering or describing twisted drill rods are British Patent No. 26810 to Christiansen and U.S. Patent No. 2,733,943 to Nater. However, no twisted drill rods are shown to have taught any twisting process accurate enough to permit the use of the resulting twists for threading to other drill rod sections and no such twisted rods were shown to now be in use in the particular area of percussion drilling here involved.
Drilling rods with threaded sections at each end to accommodate coupling to hammer, bit, and each other were previously patented. An early example is Patent No. Re. 17,557 to Thurston which shows end threading of a sinuous or un-dulatory contour, designed for use with a straight coupling so as to seat each rod end snugly against its opposite piece. This thread and coupling configuration is similar to that illustrated by Ditson and Cantrel but was specified to extend only for the length of the coupling or a thread width beyond. Nevertheless, both Thurston and the No. 1,952,996 U.S. Patent to Landgx’af illustrated threads which extended beyond the length of the coupling. Karlsson had also obtained U.S. Patent No. 3,211,484, which taught the utility of a rod with two separate sections of threads interrupted by an unthreaded interval of the same diameter as the adjacent rod. The diagrams accompanying Karlsson are appended.
The technique of roll-forming threads on regular piping and the technique of applying an external thread throughout the length of a piece of such piping had also been patented to Finch (U.S. No. 2,669,469) and Boyer (No. 1,904,675), respectively. Boyer’s diagram is appended. His patent also emphasized the advantage of easy reconditioning at remote sites by the use of only a saw to square off ends of the lengths to be fitted together.
It was known in the art of roll-forming threads that as the dies of the forming machine were pressed into the material on which the threads were to be formed, metal was pushed (plastically deformed) from the valley of the thread toward the peak during the process. On some materials this displaced metal was known to move from the valley toward each adjacent peak in waves, which could be left at each side of the peak to form a groove — by interrupting the rolling process, or could be pushed on to close and fold inward at the peak.— thereby leaving only a barely visible or microscopic seam at the peak upon completion of rolling.
The provision for lubrication of the coupled joint by means of a groove on the thread surface had previously been patented to Roehrenwerke A. G. by Italian Patent No. S13,952. Heat treating and a finishing technique known as car-burizing, which greatly strengthen streel rods, were well known to the prior art and both procedures had been widely applied to drill rod manufacture.
Expressed in terms of the claims here involved, each of the following elements or processes in drill road manufacture had been disclosed by patents or in practice: (1) an elongated body, with (2) a full length axial bore; (3) a roll-formed helical attachment thread, with (4) a helix angle of less than 15 degrees; and (5) a groove on the thread to carry lubricant.
The Presumption of Patent Validity
One otherwise an infringer who assails the validity of a regularly issued patent bears a heavy burden of persuasion. We have variously recognized this burden to be akin to the fraud standard of clear and convincing evidence and to the criminal law standard of proof beyond a reasonable doubt, but, at a minimum, greater than a mere preponderance of the evidence. Hobbs v. United States Atomic Energy Commission, 451 F.2d 849 (5th Cir. 1971); Stamicarbon, N. V. v. Escambia Chemical Corp., 430 F.2d 920 (5th Cir.), cert. denied 400 U.S. 944, 91 S.Ct. 245, 27 L.Ed.2d 248 (1970).
This presumption of patent validity is weakened and may be overcome where the evidence discloses that the examiner did not have the best prior art before him during the prosecution of the application. Beckman Instruments, Inc. v. Chemtronics, Inc., 439 F.2d 1369 (5th Cir.), cert. denied 400 U.S. 956, 91 S.Ct. 354, 27 L.Ed.2d 264 (1970). However, where, as here, it is shown that the patent office considered prior art as close to the patented invention as any suggested to the court, the court should be extremely reluctant to substitute its opinion for the expertise of the patent office. Hobbs, supra, 451 F.2d at 863.
The Nonobviousness of the Differences
Uniquely, the drilling rod disclosed by the 479 patent was to be continuously threaded from end to end and its geometry was required to be uniform. In addition, an incomplete roll-forming process was to be used to form the continuous thread on the rod in which the thread was to be formed, so as to leave a gap or groove at its peak rather than the usual closed seam produced when this process of thread formation is carried to completion. Such combination uniformity of cross-section and unusual thread formation produced the synergistic result which must obtain when combinations of known elements are brought together in a new nonobvious combination. Anderson’s Black Rock, Inc. v. Pavement Salvage Co., 396 U.S. 57, 90 S.Ct. 305, 24 L.Ed.2d 258 (1969). Ag Pro, Inc. v. Sakraida, 474 F.2d 167 (5th Cir. 1973).
This novel configuration not only enabled the rod manufacturer to strengthen the rod by post-manufacturing treatment at his plant without precluding easy field reconditioning, it also increased the rod’s resistance to fatigue failure by eliminating any point of change in cross-section dimension at which the unique stresses of percussion drilling could concentrate to crack and destroy the rod.
Despite the fact that most of the principal elements of the 479 rod were well known in the prior art, to combine them and add the novelty of full length threading, as did Ditson and Cantrel, required that a person ordinarily skilled in the prior art must ignore that most rod failures occurred in the threaded sections and that the design of a rod with threads throughout its length would probably aggravate rather than lessen its tendency to fail in heavy use. Such a known disadvantage in old devices that would naturally discourage the search for a new invention in this direction, is a reliable indicator of nonobviousness. United States v. Adams, 383 U.S. 39, 86 S.Ct. 708, 15 L.Ed.2d 572 (1966).
While the art of roll-forming threads contained the knowledge that this process could be stopped at an early stage of completion and that the result would be to leave a gap or groove at the crest of the threads, it also taught that normal use of his thread-forming process called for it to be carried further to the point which left only a barely visible, or invisible seam or crevice. The trial court held that the patent examiner was apparently not aware that this was a necessary result of the roll-threading technique. Such an attribution of lack of expertise to patent office examiners without support in the record is error. Hobbs v. United States Atomic Energy Commission, supra, 451 F.2d at 863. In any event, the strengthening effect of the inventors’ choice to require that the roll formation be stopped short, leaving a visible gap or groove at the thread crest for this application, was the essence of the invention here. There is no showing whatsoever that this technique of applying the roll-forming art to produce the strength desired should have been obvious to one of ordinary skill.
The district court also concluded that the threading of a drill rod for its full length merely carried the prior art concept of creating one or two sets of threads at each end of a rod to the next obvious stage. The problem for this conclusion is that no proof was adduced that this had ever been done, attempted or suggested. Cf. Laitram Corp. v. Deepsouth Packing Co., 443 F.2d 928, 934 (5th Cir. 1971). On the other hand, the proof of frequent failure in the threaded portions of the rods clearly negates the court’s unsupported conclusion.
All of the secondary considerations similarly tend to establish nonobviousness. The acceptance of the fully threaded rod was rapid and widespread. Assuming that imitation is the sincerest form of flattery converts Brunner & Lay’s president to Ingersoll-Rand’s best witness, for he conceded that promptly upon learning of the widespread use and acceptance of Ingersoll-Rand’s rod he attempted to copy it. His first attempt at imitation was unsuccessful because he bought equipment which cut rather than rolling the thread form. However, when he finally perfected his infringement, he then reproduced Ingersoll-Rand’s advertising copy almost verbatim to extol the virtues of his new product. The record is uncontradicted that commercial success was the immediate consequence of the marketing of this device. Similarly the record demonstrates that there was both a need for this type rod and a failure of others to develop it. These factors reenforce the conclusion of nonob-viousness. Hobbs v. United States Atomic Energy Commission, supra 451 F.2d at 864.
File Wrapper Estoppel
In the course of the prosecution of this patent application, the patent examiner on more than one occasion disallowed claims reading on drill rods which were roll-threaded throughout the length of the rod. Ditson and Cantrel took no appeal from this decision but rather, continued to modify their rod claims until the examiner finally allowed the present Claims 4 and 5, which provided not only for the fully roll-threaded rod but for the thread to be so formed as to have a continuous groove along its crest. The court held the plaintiff, as assignee, estopped to contend that the formation of a thread on a drill rod throughout its length, which was formed by the roll threading process, was a patentable, nonobvious advance in the art. This deduction of estoppel was erroneous.
It is, of course, well-settled that an invention is to be construed not only in light of the claims but also with reference to the file wrapper or prosecution history in the patent office. Graham v. John Deere Co. of Kansas City, supra, 383 U.S. at 33, 86 S.Ct. at 702. An estoppel may arise from the applicant’s conduct during the prosecution of his patent application. The essence of this doctrine of file wrapper estoppel is that an applicant who has limited or modified a claim in order to avoid its rejection by the patent office may not thereafter expand the claim by including subject matter thus excluded or any equivalent thereof, or by omitting limitations he has thus been caused to add. 60 Am.Jur.2d 534, Patents § 384.
Normally file wrapper estoppel is invoked when the holder of a valid patent claims infringement by a device which reads only upon the claim as disallowed. That is not the case here. The purpose of amendments required by the patent office is to limit and define the scope of the invention in the light of the prior art cited by the patent office against it. When the amendatory language is accepted by the patent office and a patent is issued thereon, the language of the specification and claims, as thus modified, approved by the patent office, defines the invention and constitutes the grant. Williams Bit and Tool Co. v. Christensen Diamond Products Co., 399 F.2d 628 (5th Cir. 1968).
In sum, a patentee who is estopped from attempting to enlarge the scope of his monopoly by asserting infringement by a competitor’s product which is only covered by the rejected patent claim, is not precluded from contending that the patent claim before amendment was erroneously rejected by the patent office for the purpose of showing that his patent as issued is non-obvious. The action of a patent applicant in voluntarily narrowing his claim to conform to the opinion of the patent examiner furnishes no basis in fact or reason for inferring that he has admitted the invalidity of the patent as issued, in whole or in part. International Cellucotton Products Co. v. Sterilek Co., 94 F.2d 10 (2nd Cir. 1938).
Invention by Cantrel
The finding by the district court that Cantrel contributed nothing to the device described in Claims 4 and 5 is clearly erroneous. Not only does the presumption of patent validity carry the initial burden of establishing his standing as a co-inventor, but also an examination of the file wrapper and the deposition and testimonial evidence discloses his participation in the creation of the patented device. No contrary evidence appears in the record.
Conclusion
The judgment of the district court is reversed and the cause is remanded for further proceedings not inconsistent with this opinion.
Reversed and remanded.
. 35 U.S.C.A. § 103:
A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the i>rior art are .such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. Patentability shall not be negatived by the manner in which the invention was made.
. 35 U.S.C.A. § 2S5.
. Disregarding slight semantic differences, the claims are substantially identical. Claim 4 reads:
A drill rod comprising an elongated body including a bore axially therethrough and having a single, spiral, single pitch, attachment thread which is roll formed on said body to extend circumferentially therearound continuously throughout the length of said body, the helix angle of said attachment thread being less than 15 degrees, and a single continuous groove on the crest of said attachment thread continuously throughout its length.
. 35 U.S.C.A. §§ 101, 102.
. Brunner & Lay stipulated that at least a portion of its production fell within all the parameters of the claims in issue. The court made no finding on the extent of this infringement because of its conclusion that the patent was invalid.
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{
"author": "CLARK, Circuit Judge:",
"license": "Public Domain",
"url": "https://static.case.law/"
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DIXIE FINANCE COMPANY, INC., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee. EMPIRE MORTGAGE & INVESTMENT CO., Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee. Ernest STEWART, and Harriet B. Stewart et al., PetitionersAppellees, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant.
Nos. 72-1417, 72-1509 and 71-3602.
United States Court of Appeals, Fifth Circuit.
Feb. 5, 1973.
E. Michael Masinter, Kent E. Mast, Atlanta, Ga., for Dixie Finance Co., Inc.
John W. Stokes, Jr., U. S. Atty., Julian M. Longley, Jr., Asst. U. S. Atty., Atlanta, Ga., Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwaeks, Gordon S. Gilman, Attys., Tax Div., Dept, of Justice, Washington, D. C., for the United States.
Edward R. Kane, Atlanta, Ga., for Empire Mortgage & Investment Co.
Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwaeks, Atty., Tax Div., U. S. Dept, of Justice, Lee H. Henkel, Jr., Acting Chief Counsel, Bobby D. Burns, Gordon S. Gilman, Attys., Internal Revenue Service, Washington, D. C., for United States.
Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwaeks, Gordon Gilman, Attys., Tax Div., Dept, of Justice, K. Martin Worthy, Chief Counsel, Chris J. Ray, Internal Revenue Service, Washington, D. C., for C. I. R.
Edward R. Kane, Atlanta, Ga., for Stewart.
Joseph B. Brennan, Atlanta, Ga., for Whitehurst and others.
Before MORGAN, CLARK and IN-GRAHAM, Circuit Judges.
CLARK, Circuit Judge:
These three appeals (one from the district court and two from the Tax Court) arise from two separate purchases by Dixie Finance Co., Inc., [Dixie] of the stock of small loan companies. All three appeals involve the same question — the proper allocation of the price paid to the stockholders between that which was paid for their stock and that which was paid for agreements not to compete. Since Dixie made the separate purchases from unrelated sellers, the facts of each transaction are set out separately.
The Empire Transaction
Dixie agreed to purchase from Empire Mortgage & Investment Co. [Empire] the capital stock of its four loan company subsidiaries. In addition, Empire and its officers gave to Dixie certain covenants not to compete. The price, based upon a formula applied to the accounts receivable of the four loan companies, as determined before the sale, was 312,497.41 dollars, of which 152,952.40 dollars was allocated to the stock, and the remainder, 159,545.01 dollars was allocated to the covenant not to compete and goodwill. Shortly after the agreement was executed Dixie reviewed the accounts receivable of the four companies and concluded that accounts in the amount of approximately 33,000 dollars were worthless. Thereupon, Dixie began negotiations with Empire for a reduction of the purchase price by a like amount. Dixie’s success in these negotiations, however, was limited, since Empire agreed to a reduction of the price only in the amount equal to one-half of the amount by which the accounts receivable were over-valued. Moreover, Empire required as the price of its consent a modification of the purchase and sale agreement so as to reduce the value formerly assigned to the covenant not to compete to no more than one dollar.
Empire, proceeding on the theory that the modified contract was controlling as to the amount paid for the covenant not to compete, did not include in its tax return for the year at issue any amount of ordinary income as proceeds from its covenant not to compete. Dixie, on the other hand, assigned on its books the amount of 159,545.01 dollars to Empire’s covenant not to compete. Thus, on its income tax returns filed for the fiscal years ended March 31, 1961 through March 31, 1964, it claimed significant deductions based on the amortization of the amounts assigned to the covenant.
The Commissioner, in the separate proceedings below, took the inconsistent positions that both of the taxpayers were in error, and prevailed in each. On this appeal, the Government, though it has now in effect taken the position of a stakeholder, advances as its preferred position the decision of the district court in the Dixie Finance case, which concluded that no more than one dollar should be allocated to the covenant.
The Stewart Transaction
The second transaction, wholly separate from the Empire transaction discussed above, involved the purchase by Dixie of all of the outstanding stock of Friendly Loan Company and its subsidiaries and affiliates. The stock was purchased from a number of individuals, including Ernest Stewart. Though the total consideration paid to the stockholders was only 650,000 dollars, Dixie contends that, of this amount, 526,150 dollars was allocated by contract to the covenant not to compete. Stewart and the other selling stockholders contend, however, that the allocation of such a large amount to the covenant not to compete does not accord with economic reality. They further contend that Dixie never told the Friendly stockholders that any part of the 650,000 dollars was being paid for other than the Friendly stock, that the covenant not to compete was passed around to the stockholders for execution only after the execution of the stock purchase agreement, that most of the stockholders did not read it, and that there was no discussion of the income tax consequences of the agreement not to compete.
As in the Empire transaction, Dixie amortized that amount which was allocated under its construction of the contract to the covenant not to compete, thus receiving a deduction for income tax purposes. Stewart and the other selling shareholders, on the other hand, reported the entire proceeds of the sale as proceeds from the sale of a capital asset, and allocated no part of the sales price to the ordinary income-producing covenant.
Once again, the Government took inconsistent positions in separate proceedings, and contested each taxpayer’s allocation. The Government prevailed as to Dixie, since the district court found that no portion of the 650,000 dollar purchase price should be allocated to the covenant not to compete. The Government was unsuccessful in the Tax Court, however, since that court likewise found that no part of 650,000 dollars should be allocated to the covenant. Thus, Stewart and the other selling shareholders were allowed to treat the entire amount they received for the sale of the Friendly stock as the proceeds from the sale of a capital asset. Though the Government appeals from the Tax Court decision in favor of the selling shareholders, it takes the position on this appeal that the Tax Court decision should be reversed only if the judgment of the district court in the Dixie case is reversed as to this issue.
The Merits
The Government’s position, simply stated, is that while the Commissioner is not bound by the form in which the taxpayer chooses to cast his transaction, but for tax purposes may look to the substance, the taxpayer must generally accept the tax consequences which follow from the form he has chosen. Thus, the Government would bind Dixie to the terms of the modified contract with Empire which assigned not more than one dollar to the covenant not to compete and at the same time would challenge Dixie’s contractual allocation as to the Stewart transaction, where the agreement recited that 526,150 dollars was paid for the covenant not to compete. Of course, under a strict interpretation of its theory, the Government could also attempt to hold Stewart and the other selling shareholders to the allocation of 526.150 dollars by urging the reversal of the Tax Court decision without regard to this court’s decision as to Dixie, but it chooses not to do so reasoning that it only seeks to prevail on one construction of each transaction. Similarly, the Government has used its prerogative to successfully challenge the contractual allocation as to Empire in the Tax Court, but is now willing for its victory in that forum to be reversed if this court will affirm its success over Dixie in the district court.
Initially, we note our agreement with the first half of the Commissioner’s statement of the applicable law. The parties cannot contractually preclude the Commissioner from attacking an allocation which has no basis in economic reality. See, e.g., Comm’r v. Court Holding Co., 324 U.S. 331, 65 S.Ct. 707, 89 L.Ed. 981 (1945); Gregory v. Helvering, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596 (1935); Redwing Carriers, Inc. v. Tomlinson, 399 F.2d 652 (5th Cir. 1968); Schulz v. Comm’r, 294 F.2d 52 (9th Cir. 1961).
The district court in the Dixie case found that there was no substantial economic basis for the allocation of 526.150 dollars to the Stewart, et al. (Friendly) covenant not to compete. The following more-than-sufficient evidence was presented to support this finding. The consideration for the alleged non-competition agreement was distributed to the stockholders in proportion to their stock holdings. No extra consideration was given to those persons whose competition would be expected to have the most adverse effect on Dixie Finance; indeed, two stockholders who had refused to sign the noncompetition document were paid on the same basis as those who signed. There was no effort to police the agreement to insure that Dixie received the benefit contracted for. While the amount allocated to the covenant was far in excess of any reasonable value which the covenant might have to Dixie, the amount allocated to stock purchase was less than its fair market value. The court further found that there was no evidence in the record to support its restructuring of the covenant in any smaller amount. On the basis of this clear showing that the contractual allocation had no basis in economic reality, we affirm the determination of the district court in Dixie’s case that no part of the 650,000 dollars should be allocated to the Stewart, et al. covenant not to compete.
On the same reasoning we also affirm the decision in the case of Stewart, et al. which refused to allocate any part of the 650,000 dollars to the value of the “covenant” given by Stewart and the other selling shareholders. In addition we would note that the Tax Court’s decision on the merits in the Stewart, et al. case is consonant with this court’s decisions in Barran v. Comm’r, 334 F.2d 58 (5th Cir. 1964), and Balthrope v. Comm’r, 356 F.2d 28 (5th Cir. 1966).
We also accept as substantially correct the Commissioner’s statement of the second half of the rule as to the tax consequences of contractual obligations • — -the taxpayer must generally accept the tax consequences which follow from the form he has chosen. This court has said that “when parties to this type of transaction specifically contract for the covenants and give them an assigned value, strong proof must be adduced to overcome the declaration.” Barran v. Comm’r, supra, 334 F.2d at 63; Balthrope v. Comm’r, supra, 356 F.2d at 32. In this ease it is uncontradicted that Dixie and the Empire stockholders in arms-length dealings allocated, 51,419.17 dollars to a covenant not to compete and 108,125.29 dollars to “covenant not to compete and goodwill.” The complicating factor is that eight months later that agreement was amended so that not more than one dollar was allocated to the covenant not to compete.
In this situation where the parties have expressed not one but two different allocations, how is one to be chosen over the other? This court opts for that allocation which most truly reflects the intention of the parties in an arms-length, good faith bargaining situation. Here there is no showing that the initial bargain was a subterfuge nor is it shown that any event occurred in the eight-month interval between the execution of the agreement and its modification which would have reduced the initial value of the covenant to virtually nothing. The modification, as found by the Tax Court in the Empire ease, was no more than “an afterthought and a sham and bears no relationship to the realities or substance of the situation.” Moreover, the contemporaneous allocation of the purchase price seems to be more nearly in accord with economic reality. The only evidence adduced to support the district court’s conclusion that the parties’ agreement allocating 51,419.17 dollars to the covenant was unrealistic is the later modification of that agreement.' We have already rejected the basis for this post hoe reasoning. The district court erred in rejecting Dixie’s claim based on the original contractual allocation of 51,419.17 dollars.
This court must also resolve the ambiguity which the parties constructed into their original document. In addition to the 51,419.17 dollars allocated to the covenant not to compete, 108,125.29 dollars was allocated to “covenant not to compete and goodwill.” Though Dixie has succeeded in showing that the district court was in error in concluding that the allocation of 51,419.-17 dollars to the covenant had no basis in fact, it has made no such showing that the court was in error as to the claimed 108,125.29. On this appeal Dixie has not attempted to meet its burden of breaking this lump sum down into its separate component parts, nor has it shown why two allocations were made to a single covenant not to compete. We affirm the district court’s decision that no part of the 108,125.29 is allocable to any covenant not to compete.
It follows from the discussion above that the Tax Court’s determination that Empire received 51,419.17 dollars for the covenant not to compete should likewise be affirmed.
Our reversal in part of the district court’s decision as to Dixie requires that we remand the cause to that court for consideration of the other claims raised by the Government which that court found unnecessary to consider in light of its decision that Dixie take nothing.
The decision of the Tax Court appealed from in Ernest Stewart v. Comm’r, No. 72-3602, is affirmed.
The decision of the Tax Court appealed from in Empire Mortgage Co. v. Comm’r, No. 72-1509, is affirmed.
The decision of the District Court for the Northern District of Georgia appealed from in Dixie Finance Co. v. United States, No. 71-1417, is affirmed in part, reversed in part, and remanded.
. The covenant not to compete agreement breaks down the total of $159,545.01 into two separate categories as follows:
Item Amount
Covenant not to compete $ 51,419.17
Covenant not to compete and goodwill 108,125.29
The breakdown of these categories totals $159,544.46. The difference of 55 cents between this amount and the' amount set forth in the sales agreement apparently results from a mathematical error.
. Dixie chose to litigate in the District Court for the Northern District of Georgia, while Empire sought relief in the United States Tax Court.
. Stewart and the other selling shareholders raised their contentions in consolidated proceedings in the United States Tax Court. As stated in n. 2 above, Dixie litigated in the District Court.
. For the purpose of this decision we need not decide whether the decision in Comm’r v. Danielson, 378 F.2d 771 (3d Cir.), cert. denied 389 U.S. 358, 88 S.Ct. 94, 19 L.Ed.2d 123 (1967), is consistent with the decisions of this court in Barran and Balthrope, supra. Danielson holds that a party to an agreement fixing an explicit amount for the covenant not to compete may not attack the agreement “absent proof of the type which would negate it in an action between the parties.” 378 F.2d at 775. The Tax Court found that the agreement in this case did not constitute an enforceable contract not to compete.
. Goodwill is a capital asset, and amounts received therefor in excess of the seller’s basis are treated as capital gains. Comm’r v. Killian, 314 F.2d 852 (5th Cir. 1963). Since the good will is deemed to have no measurable useful life, the purchaser is not allowed to amortize and deduct the purchase price of the goodwill. See Treasury Regulation, 26 C.F.R. § 1.167 (a)-3.
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{
"author": "TUTTLE, Circuit Judge:",
"license": "Public Domain",
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UNITED STATES of America, Plaintiff-Appellee, v. Omer Thomas CARON, Defendant-Appellant.
No. 72-2049.
United States Court of Appeals, Fifth Circuit.
Feb. 28, 1973.
Rehearing Denied March 29, 1973.
Henry Gonzalez, Tampa, Fla., for defendant-appellant.
John L. Briggs, U. S. Atty., Jacksonville, Fla., Bernard H. Dempsey, Jr., Claude H. Tison, Jr., Asst. U. S. Attys., Tampa, Fla., for plaintiff-appellee.
Before TUTTLE, WISDOM and SIMPSON, Circuit Judges.
TUTTLE, Circuit Judge:
The sole issue in this case is whether evidence procured by means of a wiretap may be introduced by the government for impeachment purposes without a prior determination by the trial court that the wiretap was lawful. We affirm on the basis of Walder v. United States, 347 U.S. 62, 74 S.Ct. 354, 98 L.Ed. 503 (1954).
The facts are as follows. On June 10, 1971, a two count indictment was returned against appellant Caron, charging that he had on two occasions given false testimony in an appearance before a federal grand jury on April 7, 1971. Count One of the indictment alleged that Caron had committed perjury by denying that he had ever done any bookmaking, Count Two, that Caron had perjured himself by denying that he knew a Howard Gardner.
Trial of the case commenced on March 27, 1972. Following the prosecution’s case in chief Caron took the stand as the sole witness in his defense. Although he admitted that at the time of his appearance before the grand jury he was well-acquainted with Howard Gardner, he stated that if he had denied knowing him, it had been a mistake. As to the allegation in Count One of the indictment, Caron, on direct examination, testified as follows:
“Q: Mr. Caron, you are a gambling man, aren’t you?
A: Yes.
Q: What is it that makes you want to gamble? Why do you gamble?
A: It is a form of relaxation.
Q: Is it your business ?
A: No, sir.
Q: Have you ever been engaged in the business where you take bets from anybody that comes along ?
A: No.
Q: Did you ever take any bet that you can remember that you ever laid off, in the meaning of the expression ‘Lay off’?
A: No.
Q: You didn’t. Did you deal with anybody else?
A: Yeah.
Q: —In laying off bets or dividing up a bet?
A: No, sir.
Q: Were these man-to-man or head-to-head bets?
A: Yeah, they were.
Q: Was there any charge, ‘vigo-rish,’ percentage with any of those men?
A: No. No charge.
•X- *X* * *X* -X- *
Q: Mr. Caron, are you a bookmaker?
A: No, I am not.”
On cross-examination Caron further denied that he was engaged in bookmaking, though he admitted that he knew one alleged bookmaker, a Louis Figuere-do, and that he had placed two or three wagers with Figueredo during the 1971 football season. Thereafter, the prosecutor, on the basis of tape recordings which the government had procured by means of a wiretap on Figueredo’s telephone in November and December, 1971, asked Caron a series of questions as to whether Caron, on specified dates, had had telephone conversations with Figu-eredo in which they discussed the current lines on games, laying off wagers, and the like. Caron was unable to recall many of the alleged conversations, but he denied having engaged in at least three of them as to which he had been questioned.
In rebuttal and for impeachment purposes the government then sought to introduce into evidence the tape recordings of the intercepted telephone conversations. The district court, over Caron’s objection, ruled that the government would be permitted, without a prior evi-dentiary hearing on the validity of the wiretaps, to introduce in rebuttal the recordings of any conversation about which Caron had been asked and which he had denied having engaged in. Recordings of conversations which he had professed not to remember would not be admitted. Under this limitation the government played to the jury the tapes of two conversations, one on November 13, 1971, the other on December 8, 1971. The two voices were identified as those of Caron and Figueredo and an expert witness testified that the substance of their conversations consisted of the argot of professional bookmakers.
The jury found Caron guilty on both counts of the indictment and he now appeals, contending that the procedure followed in admitting the tapes into evidence was constitutionally infirm.
We note at the outset that by categorically denying on direct examination that he was a bookmaker, Caron effectively opened the door to the questions which the prosecutor put to him concerning his connections with Figueredo. Thus, it is evident that if the tape recordings were the product of a valid wiretap, their use for impeachment purposes would have been proper. The question here, of course, is whether such use is nonetheless proper in the absence of any determination by the trial court that the wiretap in question was lawful. In the light of Walder v. United States, supra, we must answer that question in the affirmative, for, under the holding in that case, even if it had been found that the wiretap was unlawful, use of the tape recordings solely for impeachment purposes would not have been proscribed.
In the Walder case the petitioner had been indicted in 1950 on a narcotics charge, but the indictment was dismissed when his motion to suppress the physical evidence, on the grounds that it had been procured through an illegal search and seizure, was granted. Subsequently in 1952 Walder was again indicted for violations of the narcotics laws. He testified on direct examination that he had never possessed any narcotics and the government sought to impeach this broad assertion by introducing the testimony of one of the officers who had participated in the prior illegal search and seizure and also of the chemist who had analyzed the narcotics seized at that time. The trial court admitted the evidence solely for impeachment purposes and thus, the question which eventually reached the Supreme Court was whether the defendant’s assertion “on direct examination that he had never possessed any narcotics opened the door, solely for the purpose of attacking the defendant’s credibility, to evidence of the heroin unlawfully seized in connection with the earlier proceeding.” 347 U.S. at 64, 74 S.Ct. at 355. The Court said:
“It is one thing to say that the Government cannot make an affirmative use of evidence unlawfully obtained. It is quite another to say that the defendant can turn the illegal method by which evidence in the Government’s possession was obtained to his own advantage, and provide himself with a shield against contradiction of his untruths. Such an extension of the Weeks doctrine would be a perversion of the Fourth Amendment.
Take the present situation. Of his own accord, the defendant went beyond a mere denial of complicity in the crimes of which he was charged and made the sweeping claim that he had never dealt in or possessed any narcotics. Of course, the Constitution guarantees a defendant the fullest opportunity to meet the accusation against him. He must be free to deny all the elements of the case against him without thereby giving leave to the Government to introduce by way of rebuttal evidence illegally secured by it, and therefore not available for its case in chief. Beyond that, however, there is hardly justification for letting the defendant affirmatively resort to perjurious testimony in reliance on the Government’s disability to challenge his credibility.”
347 U.S. at 65, 74 S.Ct. at 356.
We think that the case before us falls squarely within the holding of Walder. Caron contends, notwithstanding, that the Walder rationale was effectively discredited by the decision in Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), but whatever doubts we might at one time have entertained in this respect were put to rest by the Court’s more recent holding in Harris v. New York, 401 U.S. 222, 91 S.Ct. 643, 28 L.Ed.2d 1 (1971) in which Walder, if ever it had been faltering, was revitalized.
We consider then whether the result in this case should be affected by the fact that, unlike Walder, evidence procured pursuant to an invalid wiretap is subject to a statutory exclusion under Title III of the Omnibus Crime Control Act of 1968. 18 U.S.C. §§ 2510 et seq. Section 2515 of the Act provides:
“Whenever any wire or oral communication has been intercepted, no part of the contents of such communication and no evidence derived therefrom may be received in evidence in any trial ... if the disclosure of that information would be in violation of this subchapter.”
We note that in the legislative history of the Act Congress made it clear that the above-quoted provision should not be construed as requiring exclusion of the evidence in circumstances such as those before us. The Senate Report on the bill states:
“Section 2515 of the new chapter imposes an evidentiary sanction to compel compliance with the other prohibitions of the chapter. It provides that intercepted wire or oral communications or evidence derived therefrom may not be received in evidence in any proceeding before any court. .
* * * * * *
The provision must, of course, be read in light of section 2518(10) (a) discussed below, which defines the class entitled to make a motion to suppress. It largely reflects existing law. It applies to suppress evidence directly or indirectly obtained in violation of this chapter, [citations omitted]. There is, however, no intention to change the attenuation rule, [citations omitted]. Nor generally to press the scope of the suppression role [sic] beyond present search and seizure law. See Walder v. United States, 347 U.S. 62, 74 S.Ct. 354, 98 L.Ed. 503 (1954).” S.Rep.No.1097, U.S.Code Cong., and Admin.News (90th Cong., 2d Sess., 1968), pp. 2184-2185. (Emphasis added).
We conclude, therefore, that there was no error in the procedure followed by the district court.
The judgment is affirmed.
. Compare Walder v. United States, supra, with Agnello v. United States, 269 U.S. 20, 46 S.Ct. 4, 70 L.Ed. 145 (1929). We would point out that the questions concerning Figueredo and the telephone conversations of November and December, 1971 were plainly as to matters collateral to the issues raised by the indictment and for which Caron was on trial, to wit, whether Caron had given false testimony to the grand jury in April, 1971.
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UNITED STATES ex rel. Frank L. FERRARI, Relator-Appellant, v. Robert J. HENDERSON, Superintendent, Auburn Correctional Facility, Respondent-Appellee.
No. 567, Docket 72-2233.
United States Court of Appeals, Second Circuit.
Argued Jan. 30, 1973.
Decided Feb. 23, 1973.
Meredith M. Brown, New York City (Debevoise, Plimpton, Lyons & Gates, New York City, of counsel), for relator-appellant.
llene J. Slater, Asst. Atty. Gen., New York City (Louis J. Lefkowitz, Atty. Gen. and Samuel A. Hirshowitz, First Asst. Atty. Gen., New York City, of counsel), for respondent-appellee.
Before ANDERSON, FEIÑBERG and MULLIGAN, Circuit Judges.
MULLIGAN, Circuit Judge:
This is an appeal from an order dated January 21, 1972 of the United States District Court for the Western District of New York, Hon. Harold P. Burke, District Judge, which denied the relator’s application for a writ of habeas corpus pursuant to 28 U.S.C. § 2254. On October 30, 1972, this court granted appellant’s motion for a certificate of probable cause, for leave to proceed in forma pauperis and for the assignment of counsel.
The appellant Ferrari was indicted on June 17, 1966 in Monroe County, New York, for two separate burglaries. Under Indictment No. 250 appellant and two others were charged with two counts of burglary in the first degree and one count of petit larceny in violation of the former New York Penal Law. The incident involved the breaking and entering of a dwelling in the night time, armed with a gun, while there were occupants within. After a jury trial, the appellant was convicted on all counts.
On the day of sentencing, January 12, 1967, appellant pleaded guilty to Indictment No. 251 which charged him and the same two confederates with burglary in the third degree and grand larceny in the first degree, in violation of the Penal Law of the State of New York. This incident, involving the breaking and entering of a store and the larceny of some $2500 in cash and clothing, was committed in a different town three days after the first burglary, and involved different victims. There is no question that these were separate transactions and that indictments 250 and 251 charged separate and unrelated crimes.
Hon. John J. Conway, the County Court Judge who had presided at Ferrari’s trial, first sentenced the appellant for the crime charged in Indictment No. 251. As a second felony offender, Ferrari received a sentence of 5 to 15 years’ imprisonment. As to Indictment No. 250, he was given a suspended 15 to 30 year sentence on one count of first degree burglary. Sentence was suspended on the remaining two counts of that indictment. The 15 year minimum sentence was mandatory under section 1941(1) of the former Penal Law since Ferrari had been previously convicted of burglary in third degree, and Judge Conway had imposed a three year suspended sentence on him in 1964.
Ferrari successfully attacked his conviction under Indictment No. 251 in a New York State habeas corpus proceeding on the theory that his plea had been stricken prior to the imposition of sentence. On June 27, 1968 the assistant district attorney moved for the dismissal of Indictment No. 251 on the ground that the only inculpatory evidence was the defendant’s confession which was deemed inadmissible under Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). The prosecutor immediately moved for the resentencing of Ferrari under Indictment No. 250. Re-sentencing under this indictment was mandated since the suspended sentence initially imposed by Judge Conway was illegal under section 2188(c) of the former Penal Law which provided that a sentence may not be suspended if the conviction was for a felony committed with a weapon. Judge Conway resen-tenced Ferrari to a term of 15 to 30 years’ imprisonment on the first count, a suspended sentence of 15 to 30 years on the second count and a suspended sentence on the third count.
Appellant appealed the resentencing procedure but the Appellate Division, Fourth Department, affirmed without opinion. (People v. Ferrari, 31 A.D.2d 890, 299 N.Y.S.2d 122 (1969)), and on April 1, 1969 leave to appeal to the Court of Appeals was denied. Appellant had also appealed his actual conviction under Indictment No. 250, but this conviction was affirmed on December 4, 1969. (People v. Ferrari, 33 A.D.2d 893, 308 N.Y.S.2d 325 (4th Dep’t 1969)) and leave to appeal was denied on March 20, 1970. Appellant then sought a writ of habeas corpus in the state courts alleging that his resentenc-ing under Indictment No. 250 violated his right against double jeopardy and denied him due process of law. By order entered on March 13, 1970 Justice Blauvelt, Supreme Court, Cayuga County, denied the application on the merits. This order was affirmed on October 22, 1970 (People ex rel. Ferrari v. Deegan, 35 A.D.2d 781 (4th Dep’t 1970)) and permission to appeal to the Court of Appeals was denied on December 9, 1970.
Appellant’s next step was to seek ha-beas corpus relief in the United States District Court for the Western District of New York, which relief was denied by the order of Judge Burke which is appealed here.
On appeal principal reliance is placed on the argument raised in the state courts and below that appellant was denied due process by being resentenced to a prison term in place of the suspended sentence. The theory of appellant is that Judge Conway’s resentencing was prompted by his vindictiveness against Ferrari who had successfully attacked his conviction under Indictment No. 251 in the state habeas corpus proceeding. The authority relied upon is North Carolina v. Pearce, 395 U.S. 711, 89 S.Ct. 2072, 23 L.Ed.2d 656 (1969), where the Supreme Court announced :
Due process of law, then, requires that vindictiveness against a defendant for having successfully attacked his first conviction must play no part in the sentence he receives after a new trial. And since the fear of such vindictiveness may unconstitutionally deter a defendant’s exercise of the right to appeal or collaterally attack his first conviction, due process also requires that a defendant be freed of apprehension of such a retaliatory motivation on the part of the sentencing judge.
In order to assure the absence of such a motivation, we have concluded that whenever a judge imposes a more severe sentence upon a defendant after a new trial, the reasons for his doing so must affirmatively appear. Those reasons must be based upon objective information concerning identifiable conduct on the part of the defendant occurring after the time of the original sentencing proceeding. And the factual data upon which the increased sentence is based must be made part of the record, so that the constitutional legitimacy of the increased sentence may be fully reviewed on appeal.
395 U.S. at 725-726, 89 S.Ct. at 2080-2081 (footnote omitted).
The rationale of Pearce is patent. A defendant is entitled to attack his conviction without fear of retaliation by the judge’s imposition of a harsher sentence on retrial. The inapplicability of Pearce to this case is evident. After Ferrari successfully attacked his conviction under Indictment No. 251, the charge was dismissed by Judge Conway on the motion of the assistant district attorney because his confession was inadmissible under Miranda. This was hardly evidence of malice. The assistant district attorney then moved to resentence Ferrari under Indictment No. 250. This motion had to be granted since the suspended sentence for the armed burglary was illegal under then section 2188(c) of the Penal Law. Judge Conway had no alternative and the record clearly indicates this as his first reason for revoking the suspended sentence. Moreover, the initial 15 year minimum sentence was, as we have pointed out, mandated by statute. In short, Judge Conway exercised no discretion and his action cannot be termed retaliatory. In Tipton v. Baker, 432 F.2d 245 (10th Cir. 1970), which appellant urges is closely in point, the court indicated that it doubted that due process would be violated if the higher sentence involved no exercise of the court’s discretion, but was the result of a requirement of law. 432 F.2d at 249-250.
Appellant urges that this first announced reason of the court is really a “makeweight” and argues in his reply brief “Indeed, it is entirely likely that the sentencing judge knew of the possible illegality of the suspended sentence all along, but did not wish to raise the point unless and until appellant challenged his other conviction.” (footnote omitted) While ardor in behalf of a client is commendable, in this case the Machiavellian conduct suggested on the part of this respected jurist is insupportable and illogical. Judge Conway could have sentenced Ferrari to 15 to 30 years in jail under Indictment No. 250 in the first place — in fact it was mandated. His sentencing him to the lesser term of 5 to 15 years’ imprisonment under Indictment No. 251 was assuredly an act of benevolence not malevolence. To suggest now that it was all a clever ploy to keep Ferrari from attacking his conviction, is in the mildest possible terms, totally incredible.
Judge Conway further announced that his second reason for resentencing Ferrari to a jail term was that he had originally suspended the sentence because the defendant was simultaneously sentenced to imprisonment for another burglary, but that guilty “plea turned out to be an invalid plea.” This of course merely states the obvious — Judge Conway would not have suspended sentence if Ferrari was not to go to jail at all. The belief of a judge, that a defendant whose sentence for burglary he had suspended three years before, who had not been found guilty by a jury of an armed burglary and larceny, and who had pleaded guilty to another separate burglary, should spend time in prison is hardly to be characterized as “vindictive” or “retaliatory.” This, in combination with the unquestioned fact that the suspended sentence was illegal and the sentence later imposed was mandated, convincingly demonstrate that there are no Pearce due process problems here.
Appellant next argues that the resentencing under Indictment No. 250 constitutes a violation of his Fifth Amendment right against double jeopardy. We find no double jeopardy problem here since the correction of an illegal sentence by the imposition of a legal sentence, even when this increases punishment, cannot be considered as multiple punishment for the same offense. Bozza v. United States, 330 U.S. 160, 166-167 & n. 2, 67 S.Ct. 645, 91 L.Ed. 818 (1947); United States v. Solomon, 468 F.2d 848, 852 n. 8 (7th Cir. 1972); United States v. Evans, 459 F.2d 1134, 1136 (D.C.Cir. 1972). Appellant also contends that his imprisonment under Indictment No. 251 was in effect a punishment for both burglaries since the sentencing was a “package deal” and therefore the resentencing under Indictment No. 250 constitutes an impermissible increase of sentence on a term he had already begun to serve. Appellant offers no authority for this proposition. Ferrari’s sentence to imprisonment was specifically and unambiguously for his burglary third conviction under Indictment No. 251 and not for the separate and unrelated crimes under Indictment No. 250 where the heavier sentence was improperly suspended.
Appellant’s final point is that having served time from January 12, 1967 until June 27, 1968 in State prison for the crime charged in Indictment No. 251, the time served should be credited toward his sentence under Indictment No. 250. The procedural difficulty for the court is, as the respondent State of New York points out, that the appellant has not raised this point in the State Court or indeed in the court below. He cannot appropriately raise it here for the first time. 28 U.S.C. § 2254(b); Picard v. Connor, 404 U.S. 270, 92 S.Ct. 509, 30 L.Ed.2d 438 (1971); United States ex rel. Nelson v. Zelker, 465 F.2d 1121, 1123-1125 (2d Cir. 1972). We suggest that he address this argument, which has strong equitable appeal, to the State Court.
Affirmed.
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{
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FINANCIAL INDUSTRIAL FUND, INC., a Maryland corporation, PlaintiffAppellee, v. McDONELL DOUGLAS CORPORATION, a Maryland corporation, Defendant-Appellant.
Nos. 71-1387-71-1389.
United States Court of Appeals, Tenth Circuit.
Argued and Submitted March 13, 1972.
Decided Feb. 20, 1973.
Rehearing Denied April 5, 1973.
See also D.C., 315 F.Supp. 42.
Edwin S-. Kahn, Denver, Colo. (James L. White, John Fleming Kelly, and Bruce W. Sattler, Denver, Colo., and Holland & Hart, Denver, Colo., of counsel, with him on the briefs), for defendant-appellant.
Leland E. Modesitt, Denver, Colo. (John J. King, Jr., Ward E. Terry, Jr., and Richard H. Shaw, Denver, Colo., with him on the briefs), for plaintiff-appellee.
Before LEWIS, Chief Judge, and HILL, SETH, HOLLOWAY and BARRETT, Circuit Judges, sitting en banc (McWILLIAMS and DOYLE, Circuit Judges, having recused themselves).
PER CÜRIAM.
The plaintiff, Financial Industrial Fund, Inc., a mutual fund or management investment company, brought this damage action against McDonnell Douglas Corporation, and against the underwriter of Douglas, Merrill Lynch, Pierce, Fenner & Smith, Inc. The action is based on Rule 10b-5 of the Securities and Exchange Commission. Trial was to a jury which rendered verdicts against the defendants in the amount of $712,500.00. An appeal was taken initially by the several defendants, but the appeal as now perfected concerns only the plaintiff and the defendant, McDonnell Douglas Corporation.
The defendants moved for directed verdict at the close of plaintiff’s case and at the close of defendants’ case. These were denied. The defendants also moved for judgments notwithstanding the verdict and for a new trial. These were also denied.
Certain corporate changes in Douglas took place following the events here involved, but these are not significant for the purposes of this opinion. The defendant-appellant was engaged• at the pertinent time in the manufacture of aircraft, and of various vehicles and systems for the space program.
The events which gave rise to the complaint relate to the purchase by Financial Industrial Fund of shares of the common stock of Douglas. A decision by plaintiff to buy 100,000 shares was reached on June 21st, 1966, and the actual purchases in the open market or over the counter began early in the morning of June 22d. That morning by 9:15 a. m., Denver time some 57,000 shares were bought. Plaintiff’s officer who was instrumental in reaching the decision to buy was surprised at the large number of shares offered, and he ordered that purchases stop. Nevertheless some 23,000 additional shares were purchased the following morning of June 23d. No purchases were made from Douglas or Merrill Lynch.
On June 24th plaintiff heard of the announcement to the press by Douglas that its earnings for the last six months period were twelve cents per share. The issues in this appeal center around this special earnings statement. This earnings figure for the period was far below estimates made by independent market analysts and brokers prior to such date and known to plaintiff. The plaintiff had not consulted with Douglas or Merrill Lynch before the purchase. The regular quarterly earnings statement for Douglas was not due until its scheduled time in mid-July. This fact was known generally to investors including the plaintiff. The public markets reacted to the special earnings statement of Douglas of June 24th by beginning a substantial decline. Plaintiff then contacted Douglas and engaged a market specialist to analyze the position of Douglas. Plaintiff on June 30th reached a decision to sell the shares of Douglas and the 80,000 shares were sold between July 1st and 8th for a price substantially below the purchase price.
The appeal presents no issues concerned with any direct purchase and sale of stock between Financial Industrial Fund and Douglas, nor any issue of inside dealing or of “tipping” by Douglas. The plaintiff is in the position of any purchaser in the open market, and the information with which the case is concerned was public information. The plaintiff being a mutual fund is in the business of making money by the investment of the money of others, and as such holds itself out as an expert or professional as to investments.
The case was originally heard by a panel of this court, but it was decided to hear the case en banc with the parties to give particular attention to the issues herein treated. It was necessary for two judges to recuse themselves from hearing the case en banc. In view of the fact these two judges cannot participate, and in view of the inability of the panel to agree on the issue as to the proper statute of limitations to apply, that issue is not here decided. It is expected that the issue of which limitations period to apply will again arise in the near future in an interlocutory appeal, and a full court then can act.
' The record shows that on May 27, 1966, the president of Douglas was advised that the Aircraft Division of the company was experiencing delays in deliveries by its suppliers of components, and that the work force was not as efficient as had been expected. A group of corporate officials was sent to determine the extent of the problems, and it reported back on May 31st that the delivery of some eighteen airplanes in the process of assembly could not be made until the next fiscal year. On June 1st an announcement of the delay was made to the press. This concluded with a statement that earnings for the fiscal year would be adversely affected.
The company had just completed the call of existing convertible debentures, most of which were converted to common stock as the prevailing market price of the stock made it favorable for the holders to so convert. On June 1st the directors approved the issuance of new debentures with Merrill Lynch as the underwriter. In connection therewith, a preliminary prospectus was soon prepared and issued (June 7th) which showed the first five months earaings (December through April) to be slightly below the same period for the prior fiscal year. The quarterly financial analysis was underway as was an evaluation of the stages of completion of some 381 airplanes in the process of manufacture.
Profit figures from the Aircraft Division were given on June 14th to an officer in the comptroller’s office who was assembling the data for regular financial reports. These figures showed a loss for the division of several million dollars for the month of May. This official and the company comptroller went the next day to discuss the matter further at the Aircraft Division and decided to call in the company’s outside auditors for consultation as to whether inventory revaluations should be made under the circumstances. On June 17th the president of Douglas sent fifty to seventy engineering, estimating, and accounting officials to the Aircraft Division to investigate the situation. This group reported back on June 20th that the expected six months earnings figure for the entire company would be about forty-nine cents. Meetings with the outside auditors to consider the finding were held on the next day and the day following. After the second meeting on June 22d it was decided that a substantial inventory writedown was required in view of the losses, and this would reduce the six months earnings figure from the forty-nine cents previously reported to the president to a figure of twelve cents. The president then on the next day ordered a press release to be prepared relating to the earnings so determined for the past six months. This was done the same day in time to be made public before the opening of the New York Stock Exchange on June 24th. The market price of Douglas stock declined $2.75 per share to $76.00 on the 24th. By the time plaintiff had sold its shares of Douglas in question (July 8th), the stock closed at $64.50 per share.
The record showed that the market price of the common stock of Douglas fluctuated in its fiscal year of 1965 between $71.75 and $24.50 per share, and in the following fiscal year to June it fluctuated between $108.61 and $68.68. Earnings also fluctuated widely over the same period and prior thereto, as did annual gross sales. At the time in issue, Douglas had a backlog of orders for airplanes which was substantial.
Defendant Douglas argues that the elements of an action under Rule 10b-5 were not shown. Specifically, defendant urges that the plaintiff failed to show facts to meet the scienter standards or requirements, which were applicable to a complaint alleging a failure to issue the special earnings statement at an earlier time. Defendant urges that under the evidence the trial court did not apply the correct standard in ruling on its motion for a directed verdict and judgment n. 0. v. Defendant also urges here that incorrect instructions were given by the trial court relating to the same matters.
There has been much written on the matter of scienter in actions under Rule 10b-5, and especially in the departure from the initial pure fraud concepts. The movement toward modified scienter requirements and the use of negligence language has been fully described. It would serve no useful purpose to analyze it further here. The change has taken place in many jurisdictions. See the decisions of this court hereinafter considered; also, Parrent v. Midwest Rug Mills, Inc., 455 F.2d 123 (7th Cir.); City National Bank of Fort Smith, Ark. v. Vanderboom, 422 F.2d 221 (8th Cir.); Ellis v. Carter, 291 F.2d 270 (9th Cir.).
We have considered the arguments that to move the standards entirely into the negligence field may likewise move the statutory basis for Rule 10b-5 out from under section 10b, which has no negligence language.
This court in Gilbert v. Nixon, 429 F.2d 348 (10th Cir.), considered an appeal which raised claims based on Rule 10b-5 and also on section 12(2) [15 U.S.C. § 77Z(2)]. The court there referred to the statutory standards in section 12(2) and held a similar test to be applied in the combined claim. In Mitchell v. Texas Gulf Sulphur Co., 446 F.2d 90 (10th Cir.), a Rule 10b-5 ease, we referred to the holding in Gilbert v. Nixon, and there said that the defendant, Texas Gulf Sulphur, did not sustain its burden of proving that it did not know the statement in issue was false, “ . nor was it demonstrated that with due diligence TGS could not have known of the faultiness of the statement.” See also Allen v. H. K. Porter Co., 452 F.2d 675 (10th Cir.). The Mitchell case was decided after the case before us now.
In these same decisions, Mitchell v. Texas Gulf Sulphur Co., 446 F.2d 90 (10th Cir.), and Gilbert v. Nixon, 429 F.2d 348 (10th Cir.), we have expressed the requirement that the plaintiff must also exercise good faith in its purchase, due diligence, and demonstrate reliance on the acts or inaction of the defendant.
The case before us does not present any significant new issues except those which arise from the different nature of the event upon which the cause of action is based. Here the plaintiff complains that the special earnings report of defendant should have been issued some days before it was. We are thus concerned only with the issue of the timing of the special statement on earnings. This is silence at the time of the occurrence of the operative events in the corporation’s business until the statement was issued, and more particularly the issue becomes whether the silence of defendant at the date or dates of the stock purchases by plaintiff here give rise to a cause of action under Rule 10b-5. This matter of silence is somewhat different from instances where a financial or other type of statement is released and the issue is whether the statement is correct, because in the latter there is a reasonably direct way to test the statement against the facts as they existed, all of which involve objective matters. However, where the silence is at issue, the proof must be directed to the corporate and individual reactions to the facts showing a change in corporate circumstances, and how the decision was reached to issue a statement at a particular time. In these considerations the evidence, as indicated in this record, is well within the decisional processes of the corporate financial specialists and corporate management. The silence or the timing are matters which require the court or the jury to examine how these decisions were arrived at by using many subjective factors and by excluding hindsight.
Thus was the management correct in here evaluating the significance of the slowdown in the aircraft manufacturing process as to extent and impact on earnings during a particular period so as to require the issuance of a special earnings statement? Secondly, was this process conducted with reasonable dispatch considering the need to ascertain the details as to the particular problems, to relate them to other earnings, and to arrive at a conclusion with confidence that the statement when issued would be correct? These factors take us so much farther within the corporate deci-sional processes than do misleading statements actually issued.
Since the timing decision is one concerned fundamentally and almost exclusively with matters of discretion and the exercise of business judgment, it is appropriate to consider the rationale of the “business judgment” rule. This has long developed in actions brought against corporate officers and directors by stockholders and former stockholders concerning decisions of such, officials calling for the exercise of their discretion as to significant corporate matters, made in good faith. Briggs v. Spauld-ing, 141 U.S. 132, 11 S.Ct. 924, 35 L.Ed. 662; Herald Co. v. Seawell, 472 F.2d 1081 (10th Cir.). See Fletcher, Cyclopedia of Corporations, § 1039. The business judgment rule has been expressed in a variety of ways but it may be stated that the directors and officers of a corporation will not be held liable for errors or mistakes in judgment, pertaining to law or fact, when they have acted on a matter calling for the exercise of their judgment or discretion, when they have used such judgment and have so acted in good faith. The reason for the rule is stated to be that in order to make the corporation function effectively, those having management responsibility must have the freedom to make in good faith the many necessary decisions quickly and finally without the impairment of having to be liable for an honest error in judgment. The rule itself, of course, is not directly applicable, and it is not to be so applied here, but the reasons for it are considered as extended to the corporate entity. The Second Circuit in Securities & Exchange Comm’n v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir.), said in a footnote that the timing of the disclosure of material facts “ . . . is a matter for the business judgment of the corporate officers entrusted with the management of the corporation within the affirmative disclosure requirements promulgated by the exchanges and by the SEC.” The court there held a valid corporate purpose was served by withholding information from the public on the discovery of ore in a test drilling, thus a matter within the “business judgment” of management. Thus considering the factors compelled to be evaluated in this silence case as revealed in the record before us, we must hold that the decision of the officers or directors, and the corporate decision of the defendant to issue an earnings statement on other than the customary date for such statements, and the timing of such statement was a matter of discretion.
On another point, we held in Mitchell v. Texas Gulf Sulphur Co., 446 F.2d 90 (10th Cir.), that the information about which the issues revolve must be “available and ripe for publication” before there commences a duty to disclose. To be ripe under this requirement, the contents must be verified sufficiently to permit the officers and directors to have full confidence in their accuracy. It also means, as used by the Second Circuit, that there is no valid corporate purpose which dictates the information be not disclosed. As to the verification of the data aspect, the hazards which arise from an erroneous statement are apparent, especially when it has not been carefully prepared and tested. It is equally obvious that an undue delay not in good faith, in revealing facts, can be deceptive, misleading, or a device to defraud under Rule 10b-5.
Some further brief references to the record are necessary to demonstrate the application of law to the facts before us. The executive vice-president of the plaintiff fund testified as to the news report on the purchase by United Airlines of twenty-four Douglas DC-8 jets for two hundred million dollars. He said that his company had been considering the purchase of either Boeing or Douglas stock since the end of 1965, “ . . . and this particular release indicating that United had purchased another $220 million of Douglas Aircraft jets triggered me to call a meeting of the investment committee of Financial Programs and suggest to the director of research who had been following this company personally that it now seemed like an appropriate time to purchase the stock.” He continued to say that he was of the opinion that Douglas could make more money on this particular airplane than on the newer DC-9. He also testified that the purchase began the next day, and he expected that it would take several weeks to purchase 100,000 shares of Douglas. He testified as to the wide fluctuations in the price of Douglas stock. He said also:
“Prior to June 24 we thought that Douglas Aircraft Company would report a profit for the second fiscal quarter ending May 1966.”
and
“The report of June 24th for the six months ending May 31st, when compared with the five months ending April 30th, indicated that there was a very major loss in the month of May of 1966.”
This officer of plaintiff also testified that he was aware that Douglas “ . . . had some problems as early as April 1966.” He described these problems as slow deliveries of engines and landing gear assemblies to Douglas from suppliers which caused delays in production. He was aware and took into account the Douglas report of June 1st of a slowdown in manufacture and delivery of planes with an adverse effect on 1966 earnings. He testified he also was aware in early 1966 of the labor problem Douglas was having, and the effect of the war on delivery of components. As to the earnings figure compiled by plaintiff he said a wide range was necessary because: “The very nature of Douglas business made their earnings volatile.” He expected the United order to be reflected in earnings the following year. He said also that the purchase was with the intention of a long-term holding. The record shows that plaintiff employed some ten persons as stock analysts, but no report was received from them as to this purchase.
The officials of Douglas testified that at the annual meeting on April 20, 1966, the stockholders were told that earnings would be better for the coming year (1966) than for the previous year which was $3.15 per share. Then in the latter part of May the president became concerned with the profits in the Aircraft Division, and a financial review was begun. The president organized a group of officials to look into the matter over the Memorial Day weekend and report on May 31st. This was done and the group reported that costs were up and earnings would drop for the year to about $2.00 per share. The company then on June 1st issued a statement which did not give an estimated dollar figure for earnings as it was a company policy not to do so, but stated that there would be delays in the delivery of DC-8s and DC-9s and this would have an adverse effect on 1966 earnings.
The president of Douglas testified that about June 17th, new estimates of earnings were given him out of a continuing discussion of the matter. A new group was then formed to investigate the aircraft costs and earnings and this group submitted an estimated figure on June 20th of forty-nine cents. He testified that the study and concern continued and on the evening of the 23d of June, the company financial group and the auditors worked on the figures again preparatory to a press release to be made the next day. This last analysis revised the prior figures and arrived at the twelve-cent figure after an inventory write-down. This was included in the press release of June 24th.
The principal Douglas official in the section concerned with financing testified that on June 14th, for the first time the decline in earnings was serious and became apparent to him. He had that day received figures by telephone from the Aircraft Division as part of its periodic report due the day before. This telephone report was a listing of figures and showed a very large loss for the month of May — much more than had been anticipated. This official with the company comptroller visited the Aircraft Division the next day to find out what had happened to the prior cost estimates. The matters were discussed and the outside auditors were called in to advise whether a write-down of the inventory would be required. This was decided to be done, and it further reduced the earnings. Management was advised and steps were taken as above described, culminating with the issuance of the special earnings statement.
The plaintiff put in considerable testimony directed to the five months earning figure (December through April 1966) contained in the preliminary prospectus prepared in anticipation of the issuance of new debentures authorized by the board of Douglas on June 1st. This showed figures from which earnings for that period of eighty-five or eighty-nine cents per share could be derived. The principal accounting officer of Douglas testified that this was a correct figure for the period covered. The serious loss in May plus the large resultant write-down of inventory produced the figure for the six months ending May 30th which was also correct, and thus there was no inconsistency. The May loss plus the write-down had a significant effect on the six-month figure used in the June 2’4th release. This witness, having been questioned as to the known existence of delays in the delivery to it by suppliers, and of labor problems, said of translating these general conditions into figures:
“A And that is the point of time when you make this estimate. That’s what I am trying to get at, that there is no way to reach those things. You know you have a situation, but the only point you can measure it and put numbers and dollars on it is that particular point of time when you have gone through the detail of building up your cost estimates and arrived at your final estimates.
“Q And your point of time, according to your view of it, is at that time, as of May, and no other time ?
“A Exactly.”
An important factor in the proof was the matter of the call of the old issue of convertible debentures in which both Douglas and Merrill Lynch participated. At the effective date the debentures could be converted to stock on the basis of $77.00 per share of stock to be issued by the company. The market price was above that figure at the time and virtually all debenture holders so converted.
As indicated above the principal executives of Douglas did the preliminary work on a new larger issue of debentures some time in April and secured formal board approval on May 1st. Merrill Lynch was the underwriter for this issue. In this capacity Merrill Lynch participated in the preparation of the necessary preliminary prospectus and the data for the registration. Both worked with the data for these purposes. Merrill Lynch was thus furnished financial information during the pertinent period up to and including the special earnings statement of June 24th. Merrill Lynch had a real interest in the financial condition of Douglas at this period, and apparently .had full information. The record shows that Douglas gave Merrill Lynch the opportunity to withdraw, but it did not do so. Merrill Lynch is not a party to this appeal and thus the issues and the record are considered only as to Douglas.
It is apparent that a decline in earnings at the pertinent time would cause problems in connection with both issues of debentures for Douglas and more so for Merrill Lynch. The record shows there existed as to Douglas a strong motive for it to withhold information as to a decline in earnings. This proof is clear in the record and occupies, with the inferences sought to be drawn, a considerable part of the record.
In the setting of this motive the record shows: the known slowdown in the assembly of planes with delays expected in the finished product; the investigation, and the public announcement of May 1st of the slowdown with the warning that it would “ . have an adverse effect on earnings” for the current period. The problem in May was indicated and management reacted against on the 14th of June when the May figures began to come in, showing a serious financial impact in May. However, there is nothing in the record other than speculation that the extent of the May loss could have been determined and translated into figures at an earlier date to develop a statement ripe for publication. The record thus shows without contradiction as to the defendant McDonnell Douglas as a matter of law that there was exercised good faith and due diligence in the ascertainment, the verification, and the publication of the serious reversal of earnings in May.
Much of the earnings decline was caused by the large write-down of inventory, and the need for this as a proper accounting measure is not challenged by plaintiff. There were questions by plaintiff as to the timing of the write-down but the decision was not seriously challenged.
Furthermore there was no showing by plaintiff of the reliance required nor facts to meet the standard of due diligence on its part. It is apparent that an earnings statement issued by a corporation at any but the expected time which shows any substantial change is bad news for someone who had been recently in or out of a fluctuating market.
To prevail the plaintiff in this silence case had the burden of proof to establish that it exercised due care in making its stock purchase, that the defendant failed to issue the special earnings statement when sufficient information was available for an accurate release (or could have been collected by the exercise of due diligence), and to show there existed a duty owed by the defendant to the plaintiff to so disclose as to do otherwise would be a violation of Rule 10b-5, and upon inaction under such showing plaintiff relied to its detriment. The defendant as a separate defense could show either good faith or the exercise of good business judgment in its acts or inaction. The evaluation of the significance of the change in defendant’s earnings as it might affect the corporation, its stockholders, or persons considering the purchase of stock, called for the exercise of discretion, and upon a showing of the exercise of due care in the gathering and consideration of the facts, a presumption arose that the evaluation made was in the exercise of good business judgment although subsequent events might show the decision to have been in error.
Mention should be made of our decision in Mitchell v. Texas Gulf Sulphur Co., 446 F.2d 90 (10th Cir.), where there was no direct holding as to the standard of care required of the defendant as to the contents of a statement actually issued because the statement there concerned was obviously and intentionally misleading, as the trial court and this court indicated. So we did not there expressly require that the defendant meet a burden of showing due care although such would have been a defense. The burden of showing lack of due care in such circumstances is part of the plaintiff’s case.
Under the standards herein set out, the trial court should have granted the motion of defendant Douglas for judgment notwithstanding the verdict. We have considered the evidence most favorably'to the plaintiff, and have given it the benefit of all reasonable inferences which may be drawn from the evidence. Gulf Ins. Co. v. Kolob Corp., 404 F.2d 115 (10th Cir.); Giblin v. Beeler, 396 F.2d 584 (10th Cir.); Jamaica Time Petroleum, Inc. v. Federal Ins. Co., 366 F.2d 156 (10th Cir.); Peter Kiewit Sons Co. v. Clayton, 366 F.2d 551 (10th Cir.). In so doing we have separated the evidence relating to Merrill Lynch from that relating to Douglas. The evidence as to Douglas, as indicated above, shows the presence of a strong motive to delay the publication of figures showing a decline in earnings, but there is no proof that there was such a delay within the legal standards set forth above. There was speculation and innuendo, but no facts. Thus under the standards heretofore set forth by this court and herein described, the trial court should have granted defendant’s motion for judgment n.o.v. We point out that our decision in Mitchell v. Texas Gulf Sulphur Co., 446 F.2d 90 (10th Cir.), was after the trial in this case, also that a full expression of the law applicable to these unusual circumstances has not been heretofore made by this court.
The judgment is reversed and the case remanded with directions to enter judgment for the defendant, McDonnell Douglas Corporation, notwithstanding the verdict.
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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{
"author": "OAKES, Circuit Judge:",
"license": "Public Domain",
"url": "https://static.case.law/"
}
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UNITED STATES of America, Appellee, v. Gabriel INFANTI and Nathan Kurtz, Appellants.
Nos. 457, 458, Dockets 72-2086, 72-2087.
United States Court of Appeals, Second Circuit.
Argued Dec. 13, 1972.
Decided Feb. 27, 1973.
Henry J. Boitel, New York City, for appellant Infanti.
John L. Pollok, New York City (Le-nefsky, Gallina, Mass, Berne & Hoffman, New York City, on the brief), for appellant Kurtz.
Harold F. McGuire, Jr., Asst. U. S. Atty. (Whitney North Seymour, Jr., U. S. Atty., S.D.N.Y., S. Andrew Schaffer, Howard Wilson, John W. Nields, Jr., Asst. U. S. Attys., of counsel), for appel-lee.
Before KAUFMAN, ANDERSON and OAKES, Circuit Judges.
OAKES, Circuit Judge:
Appellants were convicted on August 15, 1972, of the offense of transportation in foreign commerce of four stock certificates, knowing the certificates to have been stolen, in violation of 18 U.S. C. § 2314 and § 2. The certificates were small in number but large in value: one certificate was for 29,371 shares of American Telephone & Telegraph stock and three certificates were for a total of 15,274 shares of Boeing stock; the aggregate market value was about $2 million. Conviction was after a trial by jury, and each appellant received two-year suspended sentences and a $5,000 fine. They argue insufficiency of the evidence, improper venue in the Southern District of New York, and, an argument we hear quite often, lack of a speedy trial under the sixth amendment.
The four certificates were registered in the street name “Cede & Co.” used by the Stock Clearing Corporation, a subsidiary of the New York Stock Exchange. They were stored at one of the Stock Clearing Corporation’s vaults, either in its building at 44 Broad Street, New York, or at one of nine other locations. Periodic inventories revealed that the AT&T certificate was missing on September 5, 1969, and the Boeing certificates were missing on September 19, 1969. After further searches failed to reveal the certificates, a notice was sent out on September 30 to members 'of the exchange that these certificates were missing.
Meanwhile, on September 27, two round-trip tickets were purchased at Newark for appellants Kurtz and Infanti to travel via TWA Flight 740 on the 28th from Kennedy Airport to Frankfurt, Germany; the return trip was open-ended, i. e., no specific date or flight for the return was reserved. A Telex message was sent by co-defendant Joseph Seiller to a Max Sperber, informing him of the arrival on the 29th in Frankfurt at 8:15 a. m. of “Mr. Gabriel Infanti” on the specific TWA flight. The Telex went on to state that Infanti “has been instructed to expect to be picked up at the airport by you”; that he would bring with him the four certificates, “endorsed in blank according to law,” along with a “corporate resolution showing that the president of the owner’s corporation is authorized to sign these certificates”; that Infanti was supposed to receive $825,000 (U.S.) or “40 per cent of Monday market quotation whichever is higher in cash or bankers draft and fly back.” The Telex was sent under the cable address ORFI-COEAST, an acronym for Organization for International Finance and Commerce or Orfico International, Inc., a firm of which Seiller was president and the letterhead of which contained a Grand Central Station post office box and a Manhattan telephone number. The cable went on to give instructions on how the proceeds of the sale of blue chip stocks at a 60 per cent discount were to be divided and also warned Sperber not to disclose too much information to Infanti so as "to avoid that [sic] he can walk into some office in [Frankfurt] and make a deal without our knowledge.”
Kurtz, a New Jersey lawyer, and In-fanti arrived in due course and checked into the Frankfurter-Hof Hotel, obtaining a relatively small room, Room 407. There they were joined by Sperber and his prospective customer, one Abdul Chbib, who according to a German police inspector, ran “a sort of agency for a sheikdom,” and ultimately by a Helmut Moerth, who was Chbib’s representative at the Frankfurt office of Merrill Lynch, Pierce, Fenner & Smith. Sper-ber discussed with Moerth whether it was possible to sell “certificates in Mr. Chbib’s account with Merrill Lynch which were not made out in Mr. Chbib’s name.” Moerth said this was theoretically possible, but he would have to check the certificates to see whether they were in negotiable form and that he would like to check the certificate numbers. He was shown the certificates bearing handwritten endorsements by Cede & Co. and “president Ralph something.” He was also shown two plain pieces of paper without any letterhead, one of which said that the bearer was empowered to sell the certificates, and the other specifically that these certificates could be sold in the name or in the account of Mr. Chbib. The letters purported to be signed by- Cede & Co. by its president, and — despite the fact that Cede & Co. was not a corporation — purported to bear a corporate seal. When Moerth started to write down the certificate members, Infanti retrieved the certificates and said, “No, I have to get in touch with my principals before I can allow you to do this.” Later in the day Chbib and Sperber went to Moerth’s office with a paper on which the certificate numbers and share amounts were listed. Merrill Lynch proceeded to check them by cabling their New York office which then contacted the Stock Clearing Corporation which in turn issued on Tuesday, September 30, its previously described “Lost Securities Notice” and an order preventing transfer of the certificates.
Infanti and Kurtz went to London, checked into a hotel without advance reservations, telephoned Chbib on the 30th, stayed a few days, exchanged their Frankfurt-New York return tickets for London-New York tickets, and upon their arrival at Kennedy on October 3 were arrested and searched. Neither had the certificates. On being interrogated, Kurtz denied that he had ever had the certificates in his possession and falsely stated that he had left New York on September 25 and gone to England on the 26th. One of the defendant’s own exhibits, a letter from Seiller of ORFICO to one Scholz in Wiesbaden written on September 29 said in part, “Today you should be busy with the clients of our member being in Frankfurt to sell their shares and you should be able to collect the various amounts of money which we have given instructions to Mr. Sperber to pay.”
I. The Sufficiency of the Evidence.
The recital of the facts above is enough to answer appellant Infanti’s argument that the evidence against him was insufficient because it showed him to be “merely a messenger” having “no substantive knowledge of the transaction.” The jury may be taken to have inferred that Infanti, acting as Seiller’s agent, was to transfer $2 million in certificates of two major listed companies and receive in return less than 40 per cent of their value. From Infanti’s possession of the stolen certificates without a reasonable explanation the jury was entitled to infer that he knew the certificates were stolen. United States v. Minieri, 303 F.2d 550, 554-555 (2d Cir.), cert. denied, 371 U.S. 847, 83 S.Ct. 79, 9 L.Ed.2d 81 (1962). This is not a case where the defendant made any showing that the transportation of securities was a regular part of his occupation, see Freije v. United States, 386 F.2d 408 (1st Cir. 1967), cert. denied, 396 U.S. 859, 90 S.Ct. 129, 24 L.Ed.2d 111 (1969), so as to dispel the inference that he knew these particular certificates were stolen. Furthermore, Infanti’s guilty knowledge may also be inferred from the facts that the sale was to be at such a large discount from the market price, cf. United States v. Rosenthal, 454 F.2d 1252, 1254 (2d Cir.), cert. denied, 406 U.S. 931, 92 S.Ct. 1801, 32 L.Ed.2d 129 (1972), that Infanti quickly withdrew the certificates from Moerth when the latter started to copy down the certificate numbers, that the accompanying documents were of a questionable nature and that the overall circumstances of a sale of large listed companies’ stocks to a representative of an Arab sheikdom in a Frankfurt, Germany, hotel room were surreptitious. Cf. United States v. DeKunchak, 467 F.2d 432, 436 (2d Cir. 1972).
The question of the sufficiency of the evidence as to Kurtz is, however, far more difficult. In this regard it is of the utmost importance to bear in mind that a conspiracy count against Kurtz was dismissed and the Government withdrew an aiding and abetting charge, 18 U.S.C. § 2, so that Kurtz’s conviction was solely on the substantive charge of transporting stolen securities, 18 U.S.C. § 2314. From the evidence, viewed in the light most favorable to the Government, the jury could have inferred that Kurtz accompanied Infanti to Frankfurt, was in the hotel room in Frankfurt during the discussion with Sperber, Moerth and Chbib, and then hurriedly and without pre-planning went to London with Infanti after the negotiations for the sale of the stolen securities had broken off. But there is a total lack of evidence that Kurtz had actual possession of the stolen stock certificates at any time, and thus the inference of knowledge that the securities were stolen raised by possession applicable to Infanti is not applicable to him. Nor can the inference be raised by arguing, as the Government seeks to argue, that Kurtz was in constructive possession of the stolen securities. There was no evidence that Kurtz could set the price for the securities, that he had the final say as to their means of transfer or that he was able to assure their delivery. Proof of at least one of these indicia of dominion and control is necessary before a finding of constructive possession can be made. See United States v. Steward, 451 F.2d 1203, 1207 (2d Cir. 1971); United States v. Febre, 425 F.2d 107, 111 (2d Cir.), cert. denied, 400 U.S. 849, 91 S.Ct. 40, 27 L.Ed.2d 87 (1970). Kurtz’s presence in the room with the stolen securities is not sufficient to establish his actual or constructive possession of them. Cf. United States v. Kearse, 444 F.2d 62 (2d Cir. 1971).
Thus, the Government must rely on evidence other than Kurtz’s actual or constructive possession to establish that he knew the securities were stolen. It is true that the circumstances of the proposed stock transfer were surreptitious and it would have been obvious to Kurtz, a lawyer, that Infanti’s dealings were less than legitimate. But Kurtz’s presence in the hotel room and the lack of evidence of his participation in the conversations that occurred there — at some point Infanti said to him, “Not now, Nat,” or words to that effect — do not establish the conclusion beyond a reasonable doubt that he was aware that the securities were stolen. Cf. United States v. Garguilo, 310 F.2d 249, 253 (2d Cir. 1962); United States v. Minieri, supra, 303 F.2d at 557 (aiding and abetting not proven from presence where an illegal act occurs). Without some further evidence of the quality of his participation, Kurtz’s presence where illegal activity was being transacted does not establish his knowledge of the nature of the activity. See United States v. Cianchetti, 315 F.2d 584, 588 (2d Cir. 1963). The trip to London, as unplanned as it may have been, could have been at Infanti’s insistence without explanation to Kurtz about the aborted transfer of stolen securities. Kurtz made no attempt to hide his activities in London (or in Frankfurt for that matter) as might be expected were he aware of the illegal purpose of Infanti’s European trip. While phone calls were placed to Chbib from London, there is no evidence that Kurtz placed them. There was a reference in a Telex by Seiller to his agent Scholz on September 29 to “clients,” but this is not sufficient to establish Kurtz’s guilty knowledge, for there is no evidence that the “clients” referred to included Kurtz or that the “clients” had any knowledge the securities were stolen. Finally, Kurtz’s false exculpatory statement given to an Assistant United States Attorney that he. was in Germany on September 26 as opposed to September 29 — even though made only a few days later — may well have been a simple mistake in light of the fact that Kurtz apparently made no other efforts to conceal his European activities. Cf. United States v. Euphemia, 261 F.2d 441, 442 (2d Cir. 1958). When viewed in that light, the exculpatory statement is insufficient to establish a jury question on Kurtz’s guilt.
Kurtz’s conviction is therefore reversed. Since we have found the evidence of Inf anti’s, guilt sufficient, however, we must consider the other issues raised by him.
II. Venue.
The venue question presents some difficulty since prosecution was undertaken in the Southern rather than the Eastern District of New York. The statute, however, permits venue to be laid “in any district from, through or into which” foreign commerce moves. 18 U.S.C. § 3237(a) (emphasis added). While Stock Clearing Corporation’s office and building were at 44 Broad Street in Manhattan, and it had at least one vault there, we do not know in which of its ten vaults these certificates were stored, or where those vaults are, so that we cannot say for a certainty that the certificates were stolen from the Southern District. We may infer, however, that Seiller’s office was in Manhattan from his letterhead containing a Grand Central Station box number and a Manhattan telephone number, and that the certificates were at some time in his possession there, since Seiller made the arrangements under which the securities were to be delivered. Furthermore, Seiller described the securities in a letter to Scholz on September 24 as being “on hand,” additional evidence for the inference they were at one time located in his Manhattan office. There was a sufficient basis for the finder of fact to conclude that the stolen certificates were at one point located in Manhattan and thus venue in the Southern District of New York was proper. Cf. United States v. DeKunchak, supra, 467 F.2d at 437. United States v. Bozza, 365 F.2d 206 (2d Cir. 1966), heavily relied on by appellant, is inapposite for, as stated in United States v. DeKunchak, supra, 467 F.2d at 438, Bozza interpreted only the first paragraph of 18 U.S.C. § 3237 and not the second paragraph which is at issue here.
III. Speedy Trial.
Appellant Infanti’s speedy trial argument in his brief is based upon the sixth amendment as interpreted in Barker v. Wingo, 407 U.S. 514, 92 S.Ct. 2182, 33 L.Ed.2d 101 (1972), and upon Fed.R.Crim.P. 48(b). Since these two claims are substantially coterminous, United States v. Singleton, 460 F.2d 1148, 1152 (2d Cir. 1972), petition for cert, pending, No. 72-5068, both require a balancing of the length of the delay, the reason for it, the defendant’s assertion of his right and the prejudice to the defendant. Barker v. Wingo, supra, 407 U.S. at 530, 92 S.Ct. 2182. This court has made a similar inquiry most recently in United States v. Counts, 471 F.2d 422 at 426-427 (2d Cir. 1973), United States v. Fasanaro, 471 F.2d 717, (2d Cir. 1973), and United States v. Saglimbene, 471 F.2d 16 (2d Cir. 1972). Here the length of time from arrest to indictment was 21 months and from arrest to trial 28 months, neither extraordinary. See United States v; Saglimbene, supra (six years from indictment to trial held not undue). So far as appears the reason for the delay was neither negligence nor inefficiency on the part of the Government, much less a deliberate effort to delay the trial, see Barker v. Wingo, supra, 407 U.S. at 531, 92 S.Ct. 2182, but rather the somewhat complex nature of the case and congested Southern District dockets. Cf. United States v. Stein, 456 F.2d 844, 848 (2d Cir.), cert. denied, 408 U.S. 922, 92 S.Ct. 2489, 33 L.Ed.2d 333 (1972). Witnesses included not only a police inspector and a securities representative from Frankfurt but a hotel manager from London and a TWA passenger records chief and the evidence was largely circumstantial. Appellant Infanti was arrested on October 3, 1969, and indicted on June 23, 1971. He did not, however, assert his speedy trial claims until August of 1971 indicating that he did not view the 22-month delay between arrest and indictment as a terribly serious deprivation. Barker v. Wingo, supra, 407 U.S. at 531, 92 S.Ct. 2182. Apparently, however, he viewed the ten and one-half month delay between indictment and trial differently as he complained of it within a month and one-half.
Appellant claims prejudice in that one witness who could have testified that appellant scheduled a business trip to London in July or August, 1969, died, but this death occurred only nine months after appellant’s arrest so that this witness would not have been available at trial even if it had taken place much sooner. One Sheldon Schwartz, to whom Kurtz placed a call in New Jersey from London, who is said to have been a “key witness for the defense,” also died before trial but some time after arrest. Only in the brief on appeal, however, is it suggested that “[presumably he could have testified to the origin of the stock and appellants’ lack of knowledge that they were stolen”; nowhere below was a similar claim made. We infer from a question put by Kurtz’s lawyer to the United States Attorney who interrogated Kurtz after his arrest that Schwartz was in the “insurance and estate planning business” and conceivably was the individual who gave Infanti the securities on behalf of Seiller who, by his own statement, was unknown to In-fanti (and presumably Kurtz). But there is no evidence in the record — neither Infanti nor Kurtz testified — to indicate that Schwartz was in fact the go-between. The assertion of prejudice in this regard is not substantiated. Cf. United States v. Fasanaro, supra, 471 F.2d at 718. An examination of the entire record reveals that the lapses in a few prosecution witnesses’ memories probably aided rather than hurt the defendants’ case. Cf. United States v. Stein, supra, 456 F.2d at 849. Finally Infanti asserts prejudice from the destruction in the regular course of business of airline records which he claims would have shown tickets for the flight from Frankfurt to London. Since round trip tickets from New York to Frankfurt had been purchased, however, two days before the flight from Frankfurt to London, it is difficult to see what possible effect ticket records for the flight from Frankfurt to London would have. Nowhere, is it claimed that reservations were made for the London trip in advance of the departure for Frankfurt; such a claim would hardly be credible in light of the direct round-trip ticket purchase in any event. Weighing all of the Barker v. Wingo factors we find neither a sixth amendment nor a Rule 48(b) violation.
Belatedly on oral argument and by post-argument letter to the court a claim is raised under the Second Circuit Rules Regarding the Prompt Disposition of Criminal Cases (“the Rules”) and the point is made that the chronology in this case closely resembles that in United States v. Scafo, 470 F.2d 748, at 750-751 (2d Cir. 1972), where we remanded for further findings in respect to the motion under the Rule 5(h) exception. See also United States v. Valot, 473 F.2d 667 (2d Cir. 1973). Here, however, no motion under our Rules was made below. We see no reason to treat the motion grounded under the sixth amendment and Fed.R.Crim.P. 48(b) as one also under our Rules. The Rules are designed only to insure prosecutorial readiness for trial; the constitutional guarantee and Rule 48(b) protect against the loss of speedy trial rights from whatever cause. Here, the Government filed a notice of readiness. There is every reason to believe both the Government counsel and the court below would have treated the motions to dismiss for failure to prosecute quite differently had they been grounded specifically on our Rules. Indeed, our Rules provide “failure of a defendant to move for discharge prior to plea of guilty or trial shall constitute waiver of . rights [under the Rules].” Rule 8.
Judgment affirmed as to Infanti; reversed as to Kurtz.
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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{
"author": "FRIENDLY, Chief Judge:",
"license": "Public Domain",
"url": "https://static.case.law/"
}
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CARTER-WALLACE, INC., Plaintiff-Appellant, v. William N. OTTE, as Trustee in Bankruptcy of Davis-Edwards Pharmacal Corp., Defendant-Appellee.
No. 297, Docket 72-1406.
United States Court of Appeals, Second Circuit.
Argued Sept. 14, 1972.
Decided Nov. 14, 1972.
Certiorari Denied June 4, 1973.
See 93 S.Ct. 2753.
Edward J. Ross, New York City (Breed, Abbott & Morgan, New York City, of counsel), George B. Finnegan, Jr., New York City (Jerome G. Lee, John D. Foley, George P. Hoare, Jr., Stephen R. Smith, and Morgan, Finnegan, Durham & Pine, New York City, of counsel), for plaintiff-appellant.
Charles R. Brainard, New York City (Richard K. Parsed, Paul H. Heller, Stuart J. Sinder, George E. Badenoch, Kenyon & Kenyon, Reilly, Carr & Chapin, and Robert P. Herzog, New York City, of counsel), for defendant-appellee.
American Patent Law Assn, Arlington, Ya. (Donald R. Dunner, Washington, D. C., Ellsworth H. Mosher, Arlington, Va., and John W. Brumbaugh, New York City, of counsel), filed a brief as amicus curiae.
Before FRIENDLY, Chief Judge, and LUMBARD and FEINBERG, Circuit Judges.
FRIENDLY, Chief Judge:
In Carter-Wallace, Inc. v. Davis-Edwards Pharmacal Corp., 443 F.2d 867 (2 Cir. 1971), we reversed a preliminary injunction issued by Judge Dooling in the District Court for the Eastern District of New York, restraining Davis-Edwards Pharmacal Corp. (Davis-Edwards), then a debtor in arrangement proceedings under Ch. XI of the Bankruptcy Act, from its conceded infringement of Claim 4 of United States Patent 2,724,720, owned by Carter-Wallace. Claim 4 was on a new composition of matter, meproba-mate, which became a highly successful drug widely known by its trade-names, Miltown and Equanil. Our reversal was based on the settled rule that, in the absence of prior adjudication of validity or long acquiescence, “an injunction pen-dente lite in a patent suit should not go except when the patent is beyond question valid and infringed.” Simson Bros., Inc. v. Blancard & Co., 22 F.2d 498, 499 (2 Cir. 1927). The majority’s discussion of the patent went only so far as to hold that it was not “beyond question valid we emphasized, 443 F.2d at 880, 884, that we were in no way intimating our view of the proper resolution of the issue of patent validity. Familiarity with our earlier opinion is here assumed.
On remand, a trial on the merits of the patent issues was conducted before Judge Dooling. In a carefully considered and necessarily lengthy opinion, 341 F.Supp. 1303, 173 U.S.P.Q. 65 (E.D.N.Y.1972), Judge Dooling found the patent claim for meprobamate invalid, dismissed the complaint, and directed that final judgment be entered on the claim of patent infringement, F.R.Civ.P. 54(b). From this ruling Carter-Wallace has appealed.
I. Mootness
Before we reach the issue of the validity of the meprobamate patent, we must consider two preliminary issues raised by Carter-Wallace. The first is its motion to dismiss its own appeal as moot. Understandably, Carter-Wallace does not wish simply a dismissal of the appeal but seeks also an order vacating the judgment of the district court. We will assume that under United States v. Munsingwear, Inc., 340 U.S. 36, 39-40, 71 S.Ct. 104, 95 L.Ed. 36 (1950), it would be entitled to such an order if the ease has in fact become moot.
Carter-Wallace’s motion is grounded upon a series of events occurring since the trial. During the past winter, storm damage and water seepage at Davis-Edwards’ Connecticut plant apparently contaminated its entire stock of pharmaceuticals. In January 1972, state health authorities, acting in conjunction with the Food and Drug Administration, seized and condemned these drugs, including all of Davis-Edwards’ meprobamate, as having become unfit for pharmaceutical manufacture. As a result, Davis-Edwards ceased operations and, on April 12, 1972, was adjudicated a bankrupt. All of its tangible assets have now been sold. The trustee in bankruptcy is thus left with a bank account with a balance of approximately $61,000, subject to liens which he expects to settle for no more than $21,000, and a savings account of some $5600. Priority claims against the bankrupt estate Vastly exceed these assets. Davis-Edwards’ only other assets are an insurance claim, of unspecified amount and apparently subject to a security interest, arising out of the storm damage to its plant and consequent contamination of its physical inventory; and its counterclaims against Carter-Wallace for antitrust violations, which Carter-Wallace deems valueless in light of Judge Mansfield’s observations when the case was last here, 443 F.2d at 894, and the disposition of similar defenses raised by the United States in the action against it by Carter-Wallace in the Court of Claims, Carter-Wallace, Inc. v. United States, 449 F.2d 1374, 196 Ct.Cl. 35 (1971) (Davis, J.).
Shortly after it was apprised of these facts, Carter-Wallace moved on June 15, 1972, to dismiss its appeal and vacate the judgment below, contending that since it would be impossible for Davis-Edwards to resume infringement before the patent expires on November 22,1972, and since Carter-Wallace cannot recover monetary damages, the case has become moot. This motion was heard before a panel of this court on June 27, 1972, and referred to the panel hearing the merits of the appeal.
Carter-Wallace’s argument overlooks two critical points. First, its claim for damages for infringement subsequent to the filing of the Chapter XI petition ranks as an administration expense entitled to a first priority under § 64a of the Bankruptcy Act. See 443 F.2d at 874. Although there appears to be one claim of about $47,000 of higher priority, if Carter-Wallace should prevail on this appeal it seems likely that it could recover some small amount as its share among the first priority claims. Second, and more important, it became clear at oral argument that the trustee’s savings account of $5600 represents the balance of the fund which we had directed, 443 F.2d at 884, be established by Davis-Edwards in the amount of 5% of the gross proceeds of its sales of meprobamate from the date of the preliminary injunction, February 25, 1971, to be held in escrow for Carter-Wallace’s benefit should it prevail on the merits. To be sure, this is exceedingly small meal when compared to the possible effect .of a contrary decision as collateral estoppel, under Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971), in Carter-Wallace’s suit against the United States, and the problems a contrary decision may create in the defense of an action brought in the District of New Jersey by Zenith Laboratories on behalf of itself and other purchasers of meprobamate, in which plaintiffs will doubtless also seek to avail themselves of collateral estoppel. Indeed, any possible recovery is much smaller than the expense of prosecuting this appeal. But we cannot see how we can hold this appeal to be moot when reversal would enable the appellant to collect something, however small. Moreover, if this were relevant, we do not regard the equities as being so impressively in Carter-Wallace’s favor as it contends. Carter-Wallace has long been aware of Davis-Edwards’ weak financial condition; indeed, when the case was last here, it was Carter-Wallace that argued that the defendant’s insolvency justified the preliminary injunction it had been awarded. See 443 F.2d at 874. Yet it was Carter-Wallace that chose to pursue this impecunious infringer in the last years of the patent, to push ahead with the trial on the merits against an insolvent defendant, and to take up many days of judicial time with a prosecution which, even on the facts then known, could not of itself have warranted the large expense.
II. Fairness of Trial
Carter-Wallace also contends that the procedure allowed by Judge Dooling at the trial was such gross error, and so prejudiced the plaintiff, as to warrant summary reversal without consideration of the merits. To put this contention in its proper perspective, the circumstances which led to the procedure must be understood.
At the hearing with respect to the grant of a preliminary injunction, and on the appeal therefrom, Davis-Edwards, despite its precarious financial condition, was represented by experienced patent counsel, as its trustee again is on this appeal. However, although these lawyers did agree to handle the antitrust issues, contemplating that most of these would be presented by a motion for summary judgment, Davis-Edwards was unable to retain them to undertake the trial on the merits of the patent issues. Thus, William H. Bisnoff, house counsel for Davis-Edwards and defense counsel of record, was left to present the claims of patent invalidity without having prae-tieed patent law, without having had significant previous involvement in this litigation, and with little time to prepare for the trial. Mr. Bisnoff sought postponement of trial of the patent issues until after resolution of the antitrust issues, but this motion was denied by Judge Dooling in light of the direction of this court on the prior appeal, 443 F.2d at 874, 884, induced by Car ter-Wallace’s expressed fears as to inability to collect damages for continuing infringement, that the trial be conducted expeditiously.
Faced with a situation in which the attorney for a Chapter XI debtor was not proficient in patent law but the patent issue had been explored in depth in a trial of Carter-Wallace’s infringement action against the United States before a Commissioner of the Court of Claims, the court permitted an unusual procedure. Most of Carter-Wallace’s witnesses appeared in person; they gave substantially the same testimony which they had given in the Court of Claims, except for a few instances where they clarified their positions on matters that had been developed on their cross-examination there. But Davis-Edwards was allowed to offer the Government’s cross-examination in the Court of Claims as its cross-examination, and to present its entire case-in-chief through the use of the testimony of the Government’s witnesses in the Court of Claims action, with the judge often summarizing the testimony into the record and Questioning counsel about it. Similarly, the exhibits presented in the Government’s cross-examination and case-in-chief in the Court of Claims were marked into evidence, with the court again often questioning counsel about them.
Although Carter-Wallace apparently claims that admission of any of this material from the Court of Claims action is patent error warranting summary reversal, the issue can be narrowed rather quickly. We see no possible impropriety in the admission of the exhibits, mostly prior art references and other records whose authenticity is not challenged. Admission of each exhibit was separately considered by Judge Dooling, with full opportunity for Carter-Wallace to object, and Carter-Wallace has not pointed to any specific ruling which it claims to be erroneous. We likewise find little difficulty in the use of the Government’s cross-examination in the Court of Claims. Nothing would have prevented counsel for Davis-Edwards from reading the questions the Government had asked and, if the witness gave a different answer, reading into the record as impeachment the response he had previously made in the Court of Claims. Nor can Carter-Wallace object to admission of the cross-examination as substantive evidence rather than impeachment, for Judge Dooling carefully offered it the opportunity to withdraw or modify any of the answers previously given. Moreover, we fail to see how allowing use of the previous cross-examination of its own witnesses could possibly have prejudiced Carter-Wallace. Knowledge that one’s witnesses would be asked only the same questions as on a previous trial would seem to be a trial lawyer’s dream; indeed, Carter-Wallace freely admitted that its witnesses had modified their direct testimony so as, to “clarify” problems explored by the Government’s cross-examination.
The issue is thus confined to the propriety of the receipt by the district court of the testimony of the Government’s witnesses in the Court of Claims as defendant’s case-in-chief in this action. It is highly debatable whether Carter-Wallace made a sufficient objection to the use of this testimony. However, we think that the substantial question raised warrants futher discussion and, in light of our view of the merits of this question, we see no reason to rely solely on our doubts over the sufficiency of plaintiff’s objection.
Davis-Edwards contends that the use of the testimony of the Government’s witnesses in the prior action met the three essentials to the use of previous testimony, namely, (1) that the pri- or proceeding must have involved substantially the same issue; (2) that the party against whom the testimony is sought to be used (or someone having a similar interest) had a fair opportunity and adequate motive to cross-examine the witness; and (3) that the witness is unavailable. See McCormick, Evidence §§ 255-57 (Cleary ed. 1972). The first two conditions were clearly met here. Davis-Edwards claims that the third requirement was satisfied by evidence that none of the witnesses lived within the reach of the court’s subpoena power under F.R.Civ.P. 45(e). Certainly the general rule is that lack of power of the court to compel attendance at trial is sufficient proof of unavailability. See McCormick, supra,, § 253, at 609; 5 Wig-more, Evidence § 1404 (3d ed. 1940). But Carter-Wallace argues that this principle does not apply “to expert witnesses whose opinions could under no circumstances be obtained through court process.”
Carter-Wallace’s reliance on the court’s alleged lack of power to compel expert testimony is misplaced. The weight of authority holds that, although it is not the usual practice, a court does have the power to subpoena an expert witness and, though it cannot require him to conduct any examinations or experiments to prepare himself for trial, it can require him to state whatever opinions he may have previously formed. Boynton v. R. J. Reynolds Tobacco Co., 36 F.Supp. 593 (D.Mass.1941); United States v. 284,392 Square Feet of Floor Space, 203 F.Supp. 75 (E.D.N.Y.1962) (dictum); see 4 Moore, Federal Practice ¶ 26.66 [1], at 26-469 (1972); 8 Wigmore, supra, § 2203(2) (c). Since the witnesses involved here had previously testified as to their opinions, it would seem that they could have been subpoenaed to repeat their testimony here. In any event, even if Carter-Wallace were correct that a court cannot require expert witnesses to appear, this argument would seem to lead to the conclusion that an expert witness is “unavailable” even if he is within the 100 mile radius of the court’s usual subpoena powers, rather than to the result Carter-Wallace seeks.
Still, we agree there is something unusual about the use of the prior testimony of an expert witness that calls for further scrutiny of his unavailability. First, unlike the typical witness whose involvement with the case may depend on the fortuity of his observing a particular event and whose presence at trial is often involuntary, a party ordinarily has the opportunity to choose the expert witness whose testimony he desires and invariably arranges for his presence privately, by mutual agreement, and for a fee. Although a requirement of an attempt to secure the voluntary attendance of a witness who lives beyond the subpoena power of the court is not ordinarily imposed before prior testimony can be used in civil litigation, see 5 Wigmore, supra, § 1404; Barber v. Page, 390 U.S. 719, 723, 88 S.Ct. 1318, 20 L.Ed.2d 255 (1968), we think that such a requirement is particularly appropriate when dealing with the testimony of expert witnesses whose earlier attendance is almost invariably secured by such voluntary arrangements.
Moreover, even the unavailability of a particular expert witness should not without more allow the use of his prior testimony in a second action. It must be recognized that the general preference of the federal rules, as expressed in F.R.Civ.P. 43(a), is for oral testimony so that there will be an opportunity for live cross-examination and observation of the demeanor of the witness. While the use of previous testimony is a well-established exception to this rule, it is an exception based on the necessity of using the prior testimony when the alternative is loss of that testimony entirely. See 5 Wigmore, supra, § 1402, at 148. When the ordinary witness is unavailable, his unique knowledge of the facts will be lost unless the use of his prior testimony is allowed. But the expert witness generally has no knowledge of the facts of the case. Instead, he is called upon to express a professional opinion upon the facts as they are presented to him, often expressing his opinions in the form of answers to hypothetical questions. Thus, even if one particular expert is unavailable, there is no need to use his previous testimony to prevent the loss of evidence, because there will usually be other experts available to give similar testimony orally. It seems to us, therefore, that before the former testimony of an expert witness can be used, there should be some showing not only that the witness is unavailable, but that no other expert of similar qualifications is available or that the unavailable expert has some unique testimony to contribute.
Although there has been no showing here that attempts were made to secure the voluntary attendance of the Government’s witnesses in the Court of Claims or that there were no other witnesses who could have provided the same information, we do not believe that reversal is warranted in the circumstances of this case. Undoubtedly one reason that there was no such showing was Carter-Wallace’s failure to press its objection in sufficient detail to force Davis-Edwards to go beyond its proof that the witnesses all resided beyond the 100 mile limit, see note 7 swpra. Second, if Judge Doo-ling had been aware of the requirements we have set out above, we do not think it would have been an abuse of discretion to admit the the prior testimony on a showing that Davis-Edwards’ insolvency made any attempt to secure the voluntary appearance of these witnesses futile. Moreover, it seems likely that the Government’s pharmacology expert, Dr. O’Leary, who testified at length on the obviousness of meprobamate and who was by far the most important of the witnesses whose testimony is in question, would have been found to be an “unavailable expert, [who] has some unique testimony to contribute,” supra, since his doctoral dissertation, written at about the same time as the discovery of meprobamate, involved a study of the relevant prior art and the testing of new compounds in a search for meprobamate-like properties. Dr. O’Leary’s failure to suggest meprobamate in his thesis formed the basis of extensive cross-examination in the Court of Claims and is one of the prime arguments of Carter-Wallaee in favor of the non-obviousness of the drug.
Most important, however, Carter-Wallace has failed to show that it has been prejudiced by the use of the Court of Claims testimony. Carter-Wallace knew from the beginning of the trial that Davis-Edwards would rely on the previous testimony and had the rare opportunity to tailor its case to the defense that would be presented. The only instance of possible prejudice to which Carter-Wallace points was the judge’s inability to observe the alleged breakdown of Dr. O’Leary when, in the hearing before the Commissioner of the Court of Claims, he was confronted with his doctoral dissertation. We cannot believe that this would have altered the result, especially since the trier of fact was a sophisticated judge, having many years of trial experience at the bar and on the bench, whose opinion and questions during trial reveal an extraordinary understanding of this esoteric subject matter.
We would not wish to be understood as thinking, any more than did the district judge, that the procedure followed below was a model, or even a desirable, form for the trial of a patent case. But the judge was confronted with a difficult problem and solved it in a way we cannot find to have been defective. To be sure, it would have been better if the issue of validity had been first decided by the Court of Claims, whose commissioner had seen and heard the witnesses, and we do not view with favor the efforts the Government is said to have made to avoid this. But, as on the issue of mootness, Carter-Wallace’s discomfiture is largely of its own making, arising from its determination to press its claim for infringement against this insolvent in-fringer, with little prospect of any monetary gain, despite the red flags raised in our previous opinion, rather than await the decision of the Court of Claims.
Carter-Wallace urges us to consider the collateral estoppel effect that will attach to a finding of invalidity by this court, see Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, supra, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 and the requirement that the patentee have “a fair opportunity proeedurally, substantively and eviden-tially to pursue his claim the first time.” 402 U.S. at 333, 91 S.Ct. at 1445. Decision whether the unorthodox form of the trial should deprive the judgment of effect as collateral estoppel is more appropriately a matter for courts where such effect is asserted.
III. Validity of the Meprobamate Patent
We therefore turn to the merits. In view of the elaborate statement of the facts by the district court, we can greatly abbreviate our own. The parent application, filed on July 29, 1950, was, as Judge Dooling stated, “simplicity itself,” 341 F.Supp. at 1313. The application sought patents on a class of organic compounds as new compositions of matter. As said by the district court, id.:
The invention was described as pro-panediol dicarbamates, that is, 1,3-propanediol dicarbamates with disub-stitution of alkyl or aryl radicals having one to six carbon atoms at the middle carbon of the propane chain. The disubstituted radicals can be the same or different ones. So far as properties and implied uses were concerned, the application said simply “we have discovered that the 2,2-disubsti-tuted-1,3-propanediol diearbamates of the invention possessed marked anti-convulsant properties.”
Example 6 of the application detailed the preparation of 2-methyl-2-n-propyl-l,3-propanediol dicarbamate, the compound at issue here.
The prosecution of the application took the familiar course of rejection by the Examiner, submission of arguments and affidavits, and, in this instance, a final rejection on March 12, 1953. A continuation-in-part (CIP) application was filed on August 3, 1953. Again we adopt the characterization by the district court, 341 F.Supp. at 1318:
The new application disclosed and claimed as a group 3 propanediol dicarbamates, 2-methyl-2-isopropyl-l,3-propanediol dicarbamate, 2-ethyl-2-phenyl-1,3-propanediol dicarbamate and 2-methyl-2-n-propyl-l,3-propane-diol dicarbamate (meprobamate).
. The specification adds to the disclosure of anticonvulsant properties a disclosure of “marked paralyzing action on voluntary muscles,” which emphasizes that the paralysis is produced without loss of consciousness or impairment of vital functions, such as respiration and heart action. The discussion indicates that the structure most sensitive to the effects of the drugs in the central nervous system are the interneurons. The application states that meprobamate is similar to mephenesin in numerous respects but is of much longer duration of action, and is more effective in oral administration ; without explicitly saying that meprobamate shares all of such uses, it is then said that mephenesin is widely used “in the treatment of muscle spasm, anxiety and many disorders of the nervous system.”
The patent issued on the CIP application on November 22, 1955.
If the case hinged solely on whether it was obvious “to a person having ordinary skill in the art to which said subject matter pertains,” 35 U.S.C. § 103, that nature would permit the arrangement of atoms comprising meprobamate and that chemists could synthesize the compound, the answer would be easy. Although meprobamate was undeniably a new composition of matter, 341 F. Supp. at 1306, the state of the prior art of chemical synthesis was such as to make the compound “chemically obvious,” to use Judge Dooling’s expression, 341 F.Supp. at 1337. As noted in our earlier opinion, 443 F.2d at 876, the 1,3-propanediol, which has long been known in the art, can be written as
The parent diol of meprobamate, a disubstituted 1,3-propanediol with a methyl group, CH3, substituted for Ri, and a normal propyl group, C3H7, substituted for R2, was first disclosed in a 1913 article in a German journal by Adolf Franke. The diol was brought to the attention of researchers in the art by the work of Dr. Berger just prior to the synthesis of meprobamate. Dr. Berger’s 1949 article, which has generally been referred to in this litigation as Berger I, was a study of the pharmacological properties of a group of disubstituted 1,3-propanediols, where the Ri and R2 of the propanediol were replaced by various combinations of ethyl, methyl, propyl, and other related groups; in particular, Berger I reported the pharmacological properties of 2-methyl-2-n-propyl-1,3-propanediol.
The only remaining step in the synthesis of meprobamate was the carbamation of the terminal hydroxyls of the pro-panediol, that is, the replacement of the X and X¹ of the propanediol by carba-mate groups, each in the form
But no one skilled in the art would have doubted the feasibility of doing this. As Judge Dooling observed, 341 F.Supp. at 1337, the pro-panediols “could be carbamated as countless alkyl moieties had been carbamated” since the early 1900’s. More recently, a 1948 British patent issued to William Baird, et al., taught a new process for the synthesis of organic polycarbamates through reaction with phosgene. One of Baird’s examples specifically disclosed the carbamation of 1,3-propanediols, and, since the patented process applied to dicarbamation of any such radical, “substituted or not,” the Baird patent clearly comprehended the synthesis of meproba-mate. Although the Baird process was not explicitly followed in the synthesis of meprobamate by Drs. Berger and Ludwig, the process actually used “appears not to differ radically from the method suggested in the patent,” 341 F.Supp. at 1338.
However, the obviousness that such a compound could be made, as thousands of other variants could also be, does not necessarily dispose of the issue. Chemists do not invent new compounds just for fun. As this court has observed in a decision upholding the validity of a patent on a new chemical compound even though the compound was “the end product of a fairly simple series of chemical reactions,” Schering Corp. v. Gilbert, 153 F.2d 428, 431 (2 Cir. 1946), it must be “kept in mind that such things must be evaluated not alone by the degree of the change but also by reference to the purpose sought to be accomplished.” 153 F.2d at 432. The Court of Customs and Patent Appeals has similarly rejected the contention that the obvious chemical structure of a new compound should bar patentability as a new composition of matter. In re Papesch, 315 F.2d 381, 50 CCPA 1084 (1963). The doctrine which that court has evolved, as approved by the Court of Appeals for the District of Columbia Circuit in Commissioner of Patents v. Deutsche Gold-und-Silber Scheideanstalt Vormals Roessler, 130 U.S.App.D.C. 95, 397 F.2d 656, 661 (1968), holds that:
Obvious molecular modification coupled with a showing of novel [or unexpected] properties or superiority of known properties can establish pat-entability.
Davis-Edwards here challenges the validity of this doctrine, and Judge Dooling, in the latter part of his opinion, agreed that it was too liberal a test of patentability, resulting in the grant of patent monopolies exceeding the scope of the actual invention. The court below argued that chemical obviousness should bar patentability of the new compound as a new composition of matter, and that the discovery of novel or unexpected properties should entitle the inventors only to a patent on the uses to be made of these properties. Although Judge Dooling’s remarks have been expressly rejected by the Court of Customs and Patent Appeals, see In re Murch, 464 F.2d 1051, 1055 (1972), and have provoked the American Patent Law Association to filing a brief in this court as amicus curiae, we find it unnecessary to consider the question he raised. For we hold, as did the court below, that the patent for meprobamate is invalid for obviousness even under the more liberal standard of Papesch.
Carter-Wallace asserts that, once this standard is applied, the day is won since, as is in effect conceded, it was not obvious to a person having ordinary skill in the art that the change in molecular structure which resulted in meprobamate would produce one of the most effective tranquilizers the world has known. But the premise does not lead so swiftly to the conclusion. An essential link in the argument, and one that existed in the cases oh which Carter-Wallace relies, see Illinois Tool Works, Inc. v. Continental Can Co., 397 F.2d 517, 520 (7 Cir. 1968); Technicon Instruments Corp. v. Coleman Instruments Corp., 385 F.2d 391, 393 (7 Cir. 1967); In re Zenitz, 333 F.2d 924, 52 CCPA 746 (1964), is that the novel, unexpected, or superior nonobvious property must be disclosed in the patent application or at least in supporting documents in order to be relied upon as a basis for patentability. Abbott v. Coe, 71 App.D.C. 195, 109 F.2d 449, 450 (1939); Tinnerman Products, Inc. v. George K. Garrett Co., 292 F.2d 137, 140 (3 Cir.), cert. denied, 368 U.S. 833, 82 S.Ct. 58, 7 L.Ed.2d 35 (1961).
Admittedly the initial application made no reference to the utility of meprobamate as a tranquilizer. But this would not be fatal, if the CIP application adequately disclosed this property. It is true that a February, 1952, article by Dr. Berger fully disclosed the synthesis of meprobamate and its anticonvulsant properties. Davis-Edwards argues that this forecloses issuance of a patent on the drug as a new composition of matter if, as it contends, the 1950 application did not establish patent-ability. But we agree with Judge Rich, In re Kirchner, 305 F.2d 897, 49 CCPA 1234 (1962), that under 35 U.S.C. § 120, the failure of the 1950 application to qualify for patentability would not preclude use of the initial filing date with respect to a new property disclosed in a CIP application provided that the original patent application showed the novelty and utility required by § 101, as was the case here. See also Indiana General Corp. v. Lockheed Aircraft Corp., 408 F.2d 294 (9 Cir. 1968). Whatever may be the proper scope of the relation-back doctrine, it surely covers a ease where, as here, the only intervening publication —and that by the inventor — disclosed nothing more than the initial patent application.
Carter-Wallace’s problem is not the 1952 Berger article but the failure of the CIP application adequately to disclose the tranquilizing property of meprobamate. While the specifications say the patented, compounds “possess marked anti-convulsant and other properties,” the only other property expressly disclosed is of “a marked paralyzing action on voluntary muscles.” Carter-Wallace argues that disclosure of the tranquilizing property is implicit in two other statements in the specifications. First, it points to language where the specifications explain that the compounds overcome the drawback of very short duration of action that had limited the pharmaceutical utility of mephene-sin, which is described as “a widely used drug of value in the treatment of muscle spasm, anxiety and many disorders of the nervous system,” and relies heavily on the word “anxiety.” Even if we accept for the moment Carter-Wallaee’s claim — which is disputed by Davis-Edwards — that use in the treatment of anxiety would be a sufficient teaching of tranquilizing properties of the kind possessed by meprobamate, which calms without dulling the senses as opposed to the dulling effect of the sedatives used prior to 1955 in the treatment of anxiety, we are unable to agree that this is a disclosure of meprobamate’s tranquilizing property. The specifications do not say that meprobamate shares this property of mephenesin; they merely say that the action of meprobamate “is similar to that of mephenesin in numerous respects,” and do not specify in which respects the two drugs are similar or, aside from the difference in duration of action, in which they may differ. We fail to see how this language can be regarded as an adequate disclosure when it is as consistent with the absence of tranquilizing properties as it is with their presence.
Second, Carter-Wallace points to the statement in the specifications that “[t]he structure most sensitive to the effect of the drugs in the central nervous system are the interneurons.” Carter-Wallace explains that the tranquilizing effect of meprobamate follows from its effect on the interneurons because the limbic system and the thalamus of the brain, the centers of human emotion, have relatively large concentrations of interneurons. While this may be a persuasive post hoc explanation of mepro-bamate’s tranquilizing action in light of current scientific understanding, it is building too much on too little to claim that the statement in the specifications would have made it apparent to the average worker in the art at the time that meprobamate was an effective tranquilizer. Perhaps the best refutation of Carter-Wallace’s argument is contained in the next sentence of the specifications: “This [effect on the interneu-rons] may be of therapeutic value.” How can it be seriously contended that the tranquilizing effect of meprobamate would be clear from the disclosure of its effect on the interneurons when the inventors themselves were uncertain whether or not this effect was of therapeutic value and were unable to state what that therapeutic value might be? On the other hand, if the inventors were aware of the drug’s tranquilizing properties, such vague disclosure would be inexcusable.
Even if we were willing to agree that meprobamate’s tranquilizing properties were “intimated” in the specifications, as the district court suggested, 341 F.Supp. at 1322, so limited a disclosure would not be adequate to justify issuance of a patent on the basis of these properties. The trade-off made in the patent laws is the grant of a 17-year monopoly in return for a non-obvious invention coupled with a specification “in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains ... to make and use the same.” 35 U.S.C. § 112. Although the primary purposes of requiring this degree of disclosure may be to insure that the invention can be reconstructed and that the boundary separating legitimate experimentation from infringement is clear, see Norton Co. v. Bendix Corp., 449 F.2d 553, 555 (2 Cir. 1971), both of which are fulfilled here, similar reasoning justifies a high standard of disclosure when a property of an obvious chemical compound is relied upon to establish patentability under the Pap-esch doctrine. In the absence of such disclosure the public will not obtain the benefit of the particular use which justified the grant of the patent. Applying this standard, we conclude that nothing in the specifications of the CIP application would have led the typical skilled worker in the art to use meprobamate as a tranquilizer.
However, our refusal to accept Carter-Wallaee’s argument as to the disclosure in the CIP application does not end the case in Davis-Edwards’ favor. All we have established up to this point is that the synthesis of meprobamate was chemically obvious and that, assuming argu-endo that the Papesch doctrine of establishing patentability on the basis of unexpected properties provides a proper standard, Carter-Wallace nevertheless cannot take advantage of the compound’s property as a tranquilizer in support of patentability because of the lack of adequate disclosure. There remains the question whether the utility of mepro-bamate as an anticonvulsant and muscle-paralyzant, clearly disclosed in the CIP application, was obvious as that term is used in § 103.
Although the issue is by no means free from doubt, we have concluded that the revelant prior art had progressed to such a point — in no small part through the efforts of Dr. Berger before his retention by Carter-Wallace— that the development of meprobamate as an anticonvulsant and paralyzant was “obvious . . . to a person having ordinary skill in the art,” 35 U.S.C. § 103. There is, of course, a conceptual difficulty in applying that time-worn phrase to an art so abstruse as this. Judge Medina spoke to the problem when he said in Indiana General Corp. v. Krystinel Corp., 421 F.2d 1023, 1030-1031 (2 Cir.), cert. denied, 398 U.S. 928, 90 S.Ct. 1820, 26 L.Ed.2d 91 (1970), that “experimentation is of the essence of the art involved in this lawsuit” since “the practitioners of- this art are, and of necessity must be highly educated, sophisticated persons who generally have at their disposal laboratory facilities and staffs of competent assistants.” In such an art a development cannot be regarded as unobvious simply because it was not the first, or even the second or third, structural change of which a researcher would think. On the other hand, a development should not be regarded as obvious merely because it lay somewhere along the general stream of the prior art, although years of labor might be needed to achieve it. “[T]he inspiration-perspiration process of the laboratory,” Eli Lilly & Co. v. Generix Drug Sales, Inc., 460 F.2d 1096, 1103 (5 Cir. 1972), is as deserving of reward as the flash of genius, and surely more so than dumb luck. Where to draw the line between these extremes is among the most unrewarding of judicial tasks, necessary though it be. It is largely, as Judge L. Hand said, “to substitute our ignorance for the acquaintance with the subject of those who were familiar with it,” Reiner v. I. Leon Co., 285 F.2d 501, 504 (2 Cir. 1960), and to do this — no matter how hard we try to resist — with the bias afforded by the brilliance of hindsight.
We start from the fact that at least since Dr. Berger’s study of the properties of mephenesin, a substituted 1,2-propanediol, in 1946, it was known that propane derivatives had anticonvulsant and muscle-parályzant effects. The practical utility of mephenesin, however, was severely limited, as previously noted, by its very short duration of action. As Dr. Berger testified, “the discovery of meprobamate was the product of a prolonged and determined search for a product that would have essentially the properties which he found in mephenesin, but would have them in a higher degree, and would be effective over a longer period after administration.” 173 U.S.P.Q. at 77.
This search was significantly advanced by Dr. Berger’s first 1949 article, entitled “Anticonvulsant Action of 2-Substituted-l,3-Propanediols.” After referring to the paralyzing and anticon-vulsant properties of mephenesin, he explained that his earlier published research “suggested the examination of the anticonvulsant properties of 2-substi-tuted-1,3-propanediols.” The results of Dr. Berger’s examination were very encouraging. He reported that the 2,2-diethyl-1,3-propanediol, called DEP, possessed outstanding anticonvulsant properties. He also found that several other of the disubstituted 1,3-propane-diols had anticonvulsant activity on the order of that of mephenesin. Particularly relevant for present purposes is Dr. Berger’s finding that the 2-methyl-2-n-propyl-1,3-propanediol, the parent diol of meprobamate, was also more effective as an anticonvulsant than mephenesin, requiring the lowest mean protective dose, except for the 2,2-diethyl-l,3-propane-diol, to protect against convulsions induced by metrazol. Dr. Berger’s stated conclusion was that DEP and other substituted 1,3-propanediols possessed pharmacological properties similar to mephenesin although having a weaker paralyzing and more powerful anticon-vulsant action.
Still, the disubstituted 1,3-propane-diols of Berger I shared the major drawback of mephenesin, for they too were of quite limited duration of action. But another 1949 article by Dr. Berger (with Richard F. Riley), which has been generally referred to in this litigation as Berger II, carried the matter further. It suggested that the relatively short duration of mephenesin might be due to the rapid oxidation of the terminal hy-droxyl and that consequently it might be desirable to protect the group involved by esterification. Accordingly, a sample ester, mephenesin acid succinate, was prepared and tested. The test results seemed to confirm Dr. Berger’s theory. The mephenesin acid succinate shared the anticonvulsant and muscle-paralyzant action of its parent diol, though this action was less intense. Most important, the succinate ester did indeed have a longer duration of action than the diol. As Dr. Berger concluded, “[t]he study of other organic esters of [mephenesin] therefore appears warranted.”
The suggestion of the prior art that esterification might be the answer to the short duration of action of mephenesin and the disubstituted 1,3-propanediols was greatly strengthened by an article by Hine, Christensen, Murphy and Davis, also published in 1949. This article was in part a study of the effects of esteri-fication on muscle-paralyzant activity. Although Hiñe, et al., concluded that “[e]sterification of the free hydroxy groups had a varying effect on potency,” the article was “pointed in its insist-énce,” 173 U.S.P.Q. at 83, that “[t]he outstanding effect of esterification was the increase in the duration of paralyzing activity.”
The prior art had . thus placed the disubstituted 1,3-propanediols high on the list of anticonvulsants and paralyzants with effectiveness greater than or equal to mephenesin, and had ranked the parent diol of meprobamate second among these propanediols. Clearly further experimentation with these compounds was indicated. Moreover, the prior art had strongly suggested esterification as an effective method for protecting the terminal hydroxyls of the 1,3-propanediols from too rapid oxidation in the system and thus prolonging the duration of action of the compounds.
Carter-Wallace correctly points out, however, that there are hundreds of esters other than carbamates that might have been tried in. an attempt to prolong the duration of action of the parent diols, and that therefore the prior art suggestion of “esterification” does not, without more, lead to the carbamation of the diols and thus to meprobamate. But at this point the long history of central nervous system (CNS) depressant effects associated with numerous carbamate compounds becomes relevant. Paul Binet in 1893 had reported the CNS depressant ■effects of urethane, or ethyl carbamate. This report, together with the observations of Mies in 1924, indicated that urethane had anticonvulsant and muscle-paralyzant effects. A 1900 German patent disclosed Hedonal, or methyl-n-propyl carbinol carbamate, as a CNS depressant, and a 1948 study by Spielman found that Hedonal had significant anti-convulsant properties. Similarly, a 1912 United States patent issued to Thron taught that emylcamate, or 1-ethyl-l-methyl propyl carbamate, had CNS depressant effects; testing after the discovery of meprobamate confirmed that it too had anticonvulsant and muscle-paralyzant action.
But the prior carbamate art taught more than the mere fact that these car-bamate compounds had CNS depressant effects. As Judge Dooling found, 341 F.Supp. at 1309, there was a consciousness from the beginning of the cited prior art, particularly in Binet’s 1893 article, that union of a carbamate with another moiety which independently evinces a CNS depressant effect “might in some way contribute to a whole CNS depressant effect.” Thus, the carbamate prior art certainly lent credence to the statement of Dr. O’Leary, the defendant’s expert witness, that a researcher interested in esterification would be “most interested” in the carbamate esters.
Carter-Wallace argues that in fact this carbamate prior art led away from the selection of the carbamate ester in efforts to prolong the effectiveness of the 1,3-propanediols. The early writings did not distinguish anticonvulsant, muscle-paralyzant, and other selective CNS depressant properties. Instead, the car-bamates were described as possessing sedative-hypnotic action, then a broad term embracing what are now perceived as a wide range of specific CNS depressant effects. The anticonvulsant and muscle-paralyzant effects described in the early writings thus appeared to be mere side effects of large dosage of consciousness-dulling sedatives. Since these sedative-hypnotic properties would be undesirable in an ideal anticonvulsant or muscle-paralyzant, see 341 F.Supp. at 1310-1311, and since researchers would be unwilling to risk introducing these properties into the relatively selective action of the propanediols, Carter-Wallace argues that the prior art effectively ruled out the choice of the carbamate ester.
Judge Dooling rejected this conclusion that Carter-Wallace reaches, and instead took a position midway between the poles advanced by the experts of the parties. He found, 341 F.Supp. at 1311-1312, that although “it is not possible to say that the state of the art was such as to make carbamate esterification of the propane-diols of Berger I the preeminent suggestion of the art or the evident first choice of the investigator interested in improved and prolonged mephenesin-like properties,” still “[c]arbamate esterifi-cation of substituted propanediols was among the suggestions with which the prior art was enriched.”
There is ample evidence to support this finding. The district court was entitled to give weight to the testimony presented by Davis-Edwards which indicated that the chance that the general CNS depressant effects of the carbamates would enhance the activity of the parent diols justified the risk that earbamation would introduce undesirable side effects. Equally important is the objective evidence in the record which clearly shows that researchers in the art had not ruled out the carbamates. A group of men at the Squibb Institute for Medical Research had also been working in this field at about the same time as Dr. Berger; indeed, they had supplied Dr. Berger with some of the disubstituted 1,3-propanediols on which he had based his 1949 article. In a pair of 1950 articles referred to in this litigation as Yale I and Yale II, both conceded to be prior art on the issue of obviousness, the Squibb group reported the synthesis of both mephenesin monoearbamate and DEP monocarbamate, among others, in a search for compounds with muscle-paralyzant activity. Thus, we conclude that the prior art pointed sufficiently in the direction of dicarbamation of the disubstituted 1,3-propanediols that the development of meprobamate was obvious in 1950 to persons having ordinary skill in this extraordinary art.
Carter-Wallace advances a number of arguments in an unpersuasive attempt to show that the properties of meproba-mate were sufficiently unexpected to make the compound patentable under the Papesch approach. First, it argues that the properties of meprobamate were unexpected because predictions of pharmacological activity from chemical structure are simply not meaningful in this area, pointing to a number of carbamate esters of substituted propanediols which are not active anticonvulsants or muscle-relaxants. While this may be generally true, the conclusion that meprobamate would be likely to have anticonvulsant and muscle-paralyzant activity of long duration was far more than a mere prediction from its chemical structure. It was rather the result of a specific suggestion of the prior art of a solution for the troublesome short duration of prior art compounds, a suggestion based not on abstract reasoning from chemical structure but on a persuasive theoretical explanation of why longer duration of action could be expected. That a number of carbamate esters lack anticonvulsant activity does not change the conclusion that carbamate esterification of the pro-panediols was an obvious step. The experimentation which is the essence of this art need not require a guarantee of success before a step can be obvious; in any event, the fact is that quite a few of the carbamate esters of the propanediols did reveal the expected longer duration of action of pharmacological activity.
Carter-Wallace also argues that even if meprobamate’s increased duration of action over its parent diol could have been predicted, its superior pharmacological intensity was unexpected and establishes the compound’s patentability. The 1949 article of Hiñe et al., however, had reported that esterification “had a varying effect on potency. In some instances it was increased, while in others it was decreased.” Moreover, the carba-mate prior art had suggested that car-bamation might contribute to the CNS depressant activity of the propanediol. Thus, although meprobamate has approximately twice the pharmacological strength of its parent diol, this result is hardly so far out of the range of results that could have been contemplated by researchers as to warrant patentability. As Judge Dooling found, 341 F.Supp. at 1335, the anticonvulsant and muscle-paralyzant activity of meprobamate “was [not] significantly different from that of the prior art products that were structurally related. The kind of anticon-vulsant [and muscle-paralyzant] activity is unchanged, the increment in intensity is not startling, and it appears to dissipate over time in a way that suggests a quantitative effect rather than an alteration in mode of activity.”
The final contrary argument proffered by Carter-Wallace is the failure of other interested parties to take the step required to discover meprobamate, a factor which, we should note, the Supreme Court has characterized as a “secondary consideration,” Graham v. John Deere Co., 383 U.S. 1, 17, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966). Particular reference is made to the failure of the Squibb group, and of Dr. O’Leary, whose doctoral dissertation at the University of Rochester subsequent to Dr. Berger’s departure found nothing, after two years of work, which constituted an improvement over mephenesin or DEP.
One answer is that this is not a case where the directly relevant prior art was old and there had been long and unsuccessful struggles to meet the unfilled need. As the district court said, 341 F.Supp. at 1335, “here the argument . is all but completely forestalled by the appearance at the last moment” of much of the relevant prior art. The two Berger articles and the Hine article were published in 1949; the two Yale articles were published in 1950; mepro-bamate was discovered in July, 1950. Compare Graham v. John Deere Co., supra, 383 U.S. at 36, 86 S.Ct. 684 (where the gap was four years), with Schering Corp. v. Gilbert, supra, 153 F.2d at 431 (nineteen years). Another point, particularly relevant to Squibb, is that the prospect of developing a commercially successful anticonvulsant and paralyzant from the substituted propanediols under study was not as alluring as Carter-Wal-laee would make it seem. Meprobamate did not fill any long-felt need as an anti-convulsant. Phenobarbital, for example, an accepted prior art anticonvulsant, has both a longer duration of action and a far greater intensity than meprobamate. Meprobamate has found only a very limited utility as an anticonvulsant, in the treatment of petit mal epilepsy and tetanus. If Squibb had had any inkling that the various propanediols it prepared for Berger had utility as a tranquilizer, its failure to move forward would indeed be significant. But it had none, and neither did Berger at the time of the invention.
As for Dr. O’Leary, his thesis was only a study of the compounds available to him, most of which were provided by the Squibb group. He did not synthesize any compounds, nor did he in any way direct the design of the compounds provided to him by Squibb. Moreover, the primary purpose of his thesis was to learn the methodology of pharmacological testing. The limited purpose of the thesis obviously influenced the research he did; while he consulted much of the prior art, his bibliography shows no awareness of the articles of the Squibb group or of Hine or of the early carba-mate art. Thus, we see nothing in the failure of the Squibb group or Dr. O’Leary which alters our conclusion that meprobamate was obvious as an anticonvulsant and muscle-paralyzant. In light of this holding, we are not required to pass on other objections raised by Davis-Edwards, notably, that the patent contains a claim known to be invalid at the time the CIP application was filed and which has still not been disclaimed, and that Carter-Wallace breached its duty to disclose relevant prior art to the Patent Office.
The judgment that claim 4 of the patent is invalid is affirmed.
ON PETITION FOR REHEARING
Carter-Wallace has petitioned this court for reconsideration of our decision of November 14, 1972, p. 529, holding its patent on the drug meprobamate to be invalid. It argued that our ruling that the patent application failed to disclose meprobamate’s tranquilizing properties, and therefore that those properties could not be considered in assessing the validity of the patent, at 540-543, was a finding of fact on an issue which the district court, because of its differing view of the applicable law, had not considered and on which no expert testimony had been presented. It asked that the case be remanded to the district court to take further evidence and make findings on what it contends to be this newly determinative issue. We called upon appellee to answer. After careful consideration, we find no infirmity in our decision.
The adequacy of a patent application’s disclosure is a mixed question of law and fact, on which the court must ultimately apply a legal standard to a complex set of facts. There can be no doubt that expert testimony will often aid in understanding the underlying factual context. But the resolution of the legal issue is for the court, Minnesota Mining & Mfg. Co. v. Carborundum Co., 155 F.2d 746, 749 (3 Cir. 1946); Watson v. Bersworth, 102 U.S.App.D.C. 187, 251 F.2d 898, 900, cert. denied, 356 U.S. 972, 78 S.Ct. 1135, 2 L.Ed.2d 1146 (1958), and when it is clear that the disclosure of the patent application does not meet the statutory standard, expert assistance is not necessary either in the district court or on review,. Cf. Kohn v. Eimer, 265 F. 900, 902 (2 Cir. 1920).
That is the case here. This issue was fully briefed by both parties and we had the benefit of Judge Dooling’s exhaustive findings of fact, 341 F.Supp. 1303, based in large part on expert testimony concerning the relevant chemical concepts, in reaching our decision. We saw then, and we see now, no need for a remand. There is simply no room for plausible argument that the tranquilizing property of - meprobamate was disclosed in the patent application in accordance with the standard set out in section 112. Carter-Wallace relied only on the anticonvul-sant and muscle-paralyzant properties of meprobamate to establish patentability before the Patent Office, did not urge the tranquilizing property as an additional basis of patentability, and did not establish this property as it would have been obliged to do if it had relied upon it. It is apparent that neither of the Patent Examiners — who possessed considerable expertise in this field and were under a statutory obligation to conduct an independent examination of the merits of the application — understood the application to disclose the drug’s tranquilizing effect. At no point in the Patent Office proceedings was the tranquilizing property mentioned. At no point did the Patent Office have the opportunity to evaluate what is now claimed to be this basis of patentability against the relevant prior art.
Moreover, correspondence cited by Davis-Edwards lends support to its argument that Dr. Berger himself regarded the CIP application as disclosing only anticonvulsant and muscle-paralyzant properties. His letter to Carter-Wallace’s patent counsel, on which the CIP application was largely based, made no mention of the drug’s use in the treatment of anxiety. In light of this correspondence, and the fact that meproba-mate’s effect on the interneurons is as relevant to its muscle-relaxant or muscle-paralyzant property as it is to the tranquilizing property, we are convinced that the few sentences on which Car ter-Wallace bases its argument of disclosure were intended as, and were understood as, part of the patent’s discussion of meprobamate’s muscle-relaxant property.
Indeed, the petition for rehearing does not claim that there is anything in the patent application which clearly teaches meprobamate’s tranquilizing properties. Instead, Carter-Wallace suggests that some skilled workers in the art might have been led to experiment with meprobamate as a tranquilizer on the basis of the application’s reference to “anxiety” and its disclosure of meprobamate’s longer duration of action. But this is not sufficient. We reiterate that a high standard of disclosure is required before a novel property of an otherwise obvious chemical compound can be relied upon to establish patentability. A disclosure is not adequate if it is merely a suggestion of the art which might lead others to hit upon the property relied upon for patentability. The disclosure of a patent should, upon issuance, immediately add a patentable invention to the existing fund of knowledge in the field; it must do more than merely suggest experimentation which would lead to the discovery of the patentable property.
This is not new law; this court has said much the same thing many times before. Thus, in Harries v. Air King Products Co., 183 F.2d 158 (2 Cir. 1950), we held that the patented invention was limited to the disclosure of radio vacuum tubes which utilized an electron stream of comparatively great length, and that the patent did not cover tubes in which the ratio of the length of the electron stream to its cross-section was large, notwithstanding the patentee's argument that this latter property was implicitly disclosed in the text and diagrams of the patent application. Judge Learned Hand’s words are in point here-:.v
Even though it were possible that a person skilled in the art might see that it was not absolute length, but the ratio of length to cross-section that was important, we should not be justified in validating such an expansion of the original; it is the sort of artful extrapolation against which courts have over and over set their faces. ... A patent must be a certain guide; not a congeries of pregnant suggestions.
Similarly, the Court of Customs and Patent Appeals has long followed the rule of Brand v. Thomas, 96 F.2d 301, 303, 25 CCPA 1053 (1938):
Lack of clear disclosure is not supplied by a- speculation as to what one skilled in the art might do or might not do if he followed the teaching of the inventor. The disclosure should be clearer than to suggest that one skilled in the art might construct the device in a particular manner.
We see nothing in the decisions of the District Court of the Southern District of New York or of this court in a previous litigation involving the meproba-mate patent, Carter-Wallace, Inc. v. Riv-erton Laboratories, Inc., 304 F.Supp. 357 (S.D.N.Y.1969), aff’d, 433 F.2d 1034 (2 Cir. 1970), which is inconsistent with our conclusion. While Carter-Wallace relies on statements of both courts seeming to accept that the tranquilizing properties of meprobamate had been disclosed, see 304 F.Supp. at 361; 433 F. 2d at 1040, in neither court was there dispute that these properties had been disclosed. It is thus neither surprising nor significant that these courts mentioned in passing Carter-Wallace’s characterization of the disclosure of the patent application; it is more' significant that this court, in its description of the continuation in part application, 433 F. 2d at 1036, noted only the disclosure of anticonvulsant and muscle-paralyzant properties. Carter-Wallace also points to a statement by the district judge in Riverton which it claims “excused” the failure of the patent application to specify meprobamate’s tranquilizing properties on the ground that human testing had not been completed and therefore “[n]o positive representation of such use could have been made at that time.” 304 F.Supp. at 365. But this statement was made in the context of Riverton’s claim that the failure to disclose that the drug was intended for human use was a fraud on the patent office which made the patent invalid. Judge Can-nella merely held that the failure to disclose “such [intended human] use” was not fraudulent; no question of the adequacy of the disclosure for purposes of patentability was presented, nor was the question of disclosure of tranquilizing properties in particular at issue. At most, Judge Cannella’s remark might be construed as indicating his belief that no “positive representation” of human use could have been expected at that time. But this would not excuse the failure to disclose meprobamate’s tranquilizing property; in any event, a reasonable excuse for failing to make a disclosure is not the equivalent of making one.
The petition for rehearing is denied.
. Judge Mansfield, dissenting, thought that “Carter ha[d] satisfied the burden imposed by the Simson Bros, rule.” 443 F.2d at 886.
. The judge had previously severed defendant’s counterclaims for anti-trust violations, discussed by Judge Mansfield at 443 F.2d at 894. See 341 F.Supp. at 1340.
.. Appellee also includes among its assets its right to recover payments from Carter-Wallace, if the patent is held to be invalid, for meprobamate purchased before it began to infringe. Apart from doubt as to the validity of this theory of recovery, see Troxel Mfg. Co. v. Schwinn Bicycle Co., 465 F.2d 1253 (6 Cir. 1972), this potential asset adds nothing to the assets available to Carter-Wallace should it ultimately recover on its patent infringement claim; Carter-Wallace’s argument that it cannot benefit from a reversal is not answered by arguing that it may lose from an affirmance.
. Because the majority reversed the grant of the preliminary injunction on the ground that the patent was not “beyond question valid,” it had no occasion to consider the antitrust phase of the case.
. Apparently the fund had once amounted to nearly $10,000 but, after the district court’s decision, the referee in bankruptcy allowed the trustee to invade the escrow account, allegedly on the basis of a misrepresentation that we had affirmed the holding of invalidity. In view of our conclusion on the merits, we need not pursue this question beyond noting that the referee should not have allowed such invasion without at least giving Carter-Wallace notice and opportunity to be heard.
. Judge Dooling clearly gave Carter-Wallace the right to present all its witnesses in person if it so desired. When Davis-Edwards moved early in the trial to have the entire record of the Court of Claims proceeding accepted in evidence, the judge denied the motion, saying:
“Mr. Bisnoff, it would seem to me that I can't require them to try the case on that record, and that they can certainly put in the plaintiff’s case as they wish.”
And when counsel for the defendant persisted in setting out the grounds for his motion. Judge Dooling cut him off, saying:
“that is his right [to present testimony viva voce]. I have ruled. He may put in his case.”
. Carter-Wallace’s only objection on hearsay grounds to the introduction of testimony from the Court of Claims record came at the beginning of the trial, when defendant moved the court to accept the entire record of the Court of Claims action. This objection was sustained by the court so as to allow the plaintiff to present its case as it wished. The court ruled, however, that the defendant could renew its motion when it was time to present its ease, at which time the plaintiff might “feel differently [and] not even oppose your motion to put in some parts or all of the Court of Claims record as your defense.” Carter-Wallace’s only other objection during the course of the trial came when Davis-Edwards sought to introduce the Government’s cross-examination of Carter’s first witness. This objection was limited to the alleged immateriality of much of this cross-examination and the delay and confusion that its admission would produce. No objection on hearsay grounds to the use of the cross-examination was made; in any event, as we have held above, any such objection would not have been meritorious. Most important, Carter-Wallace did not object at all, despite many opportunities to do so, at the critical point when Davis-Edwards introduced the testimony of the Government’s witnesses in the Court of Claims as its defense.
. Davis-Edwards argues that the prior testimony is admissible under the laws of New York, which, if true, would be an alternative ground for holding it admissible in this action. F.R.Civ.P. 43(a). Defendant relies on N.Y.Civ.Prac.Law § 4517 (McKinney supp. 1972), which states in relevant part:
In a civil action, if a witness’ testimony is not available because of absence beyond the jurisdiction of the court to compel apearance by its process . . . his testimony, taken or introduced in evidence at a former trial . . . may be introduced in evidence by any party upon any trial of the same subject-matter in the same or another action between the same parties ....
The requirement that the action be between the same parties has been held to mean only that the party against whom it is sought to introduce the testimony is the same as the party against whom the evidence was first introduced. Healy v. Rennert, 9 N.Y.2d 202, 213 N.Y.S.2d 44, 173 N.E.2d 777 (1961). Defendant’s argument is further bolstered by an apparently. long-forgotten decision of the Appellate Division of the New York Supreme Court, Wallach v. Manhattan Ry., 105 App.Div. 422, 94 N.Y.S. 574 (1st Dep’t 1905), which holds that a party can use the former testimony of a now-deceased expert witness notwithstanding the availability of other experts. But there is a suggestion in the New York case law that before the prior testimony of an unavailable witness can be used there must be some showing of efforts to secure his voluntary attendance, Longacre v. Yonkers R.R., 191 App.Div. 770, 182 N.Y.S. 373 (2d Dep’t 1920), and there has been no consideration whether this requirement is particularly appropriate when expert testimony is involved. Since this hurdle is one that must be surmounted even under New York law, we prefer to rest our holding on grounds more generally applicable to the federal courts.
. The facts of this case do not require us to determine whether disclosure only in supporting documents is sufficient.
. The court below held that Carter-Wallace could rely only on the disclosure of anticonvulsant utility in the original application as a ground for establishing the non-obviousness of its discovery of meprobamate. So general a ruling would fail to recognize the significance of § 120 and the benefit of the earlier filing date that it accords. Moreover, we find no authority for such a position. The court cited only In re Herr, 304 F.2d 906, 909, 50 CCPA 705 (1962). But the holding in Herr was that disclosure of an additional property in an affidavit in support of the application could not be relied upon to establish patentability when the property was not disclosed in the application itself, a holding whieh, we should note, has been substantially eroded by later decisions of the C.C.P.A., see In re Khelghatian, 364 F.2d 870, 53 CCPA 1441 (1966). Importantly, the property upon which reliance was placed was not disclosed in any application; no continuation-in-part application had been filed; and the case did not involve the relation-back of additional disclosures in a CIP application. Indeed, when the applicant in Herr did disclose the additional properties in a new application, the compound was found patentable, with the C.C.P.A. rejecting the argument that the rejection of the initial application foreclosed patentability on grounds of res judicata. In re Herr, 377 F.2d 610, 54 CCPA 1315 (1967).
. Carter-Wallaee’s argument is somewhat analogous to the argument unsuccessfully advanced by the patent applicant in Brenner v. Manson, 383 U.S. 519, 531-532, 86 S.Ct. 1033, 16 L.Ed.2d 69 (1966). There it was argued, that the tumor-inhibiting effects of the compound which was the end-product of the process sought to be patented were sufficiently disclosed by reference to an adjacent homologue which had this property, the argument being that the compound in question would be likely to have similar properties. The Supreme Court upheld the rejection of this argument by the Patent Office and held that utility had not been sufficiently disclosed.
. Dr. Berger testified that the tranquilizing properties of meprobamate were discovered through experiments with Java and rhesus monkeys in July, 1952. After administration of meprobamate, these monkeys, normally quite aggressive and difficult to handle, were markedly more docile. In contrast to their usual behavior, they could be handled without biting, and would accept food from, humans and eat it peacefully in front of observers. If this is so, there is no reason why Dr. Berger could not have amended the patent application to add the tranquilizing property and specify the results of his experiments before the rejection in March, 1953, or included this information in the August, 1953, CIP application. Though we can only speculate as to the reason, the simple fact is that he did not.
. In terms of the second diagram above, DEP is synthesized through substitution of ethyl radicals, each in the form C2H5, fer both Ri and R2, leaving the terminal hydroxyls unchanged.
. Carter-Wallace also argues tliat the properties of meprobamate were unexpected because, unlike prior art anticon-vulsants, it acts selectively without dulling the senses. The proper comparison, however, is not to the prior art anticon-vulsants, but to the parent diol of meprobamate. The diol was known to have selective mephenesin-like properties and Dr. Berger’s work with mephenesin acid succinate had indicated that esters would share the selective properties of their parent diols. Although there may have been some possibility that carba-mate esterification would destroy this selectivity, it is hardly sufficiently unexpected that it did not.
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Clyde A. PERKINS, Plaintiff-Appellee, v. STANDARD OIL COMPANY OF CALIFORNIA, a corporation, Defendant-Appellant.
No. 71-1515.
United States Court of Appeals, Ninth Circuit.
Feb. 12, 1973.
Certiorari Denied June H, 1973.
See 93 S.Ct. 2778.
Francis R. Kirkham, Richard J. MacLaury, Thomas J. Klitgaard, of Pillsbury, Madison & Sutro, San Francisco, Cal., Wayne Hilliard, of Mc-Colloch, Dezendorf, Spears & Lubersky, Portland, Ore., for defendant-appellant.
Bruce Hall (argued), Ernest Bony-hadi, of Rives, Bonyhadi, Hall & Epstein, Portland, Ore., George R. Kucik (argued), Earl W. Kintner, James P. Mercurio, of Arent, Fox, Kintner, Plot-kin & Kahn, Washington, D. C., Roger Tilbury, of Tilbury & Kane, Portland, Ore., for plaintiff-appellee.
Before HAMLEY, KOELSCH, and DUNIWAY, Circuit Judges.
KOELSCH, Circuit Judge.
This appeal presents several questions concerning the District Court’s allowance of attorneys’ fees in a private antitrust action. We modify the District Court’s judgment and affirm.
Perkins, the appellee herein, obtained a jury verdict against appellant Standard Oil Company of California for damages in the sum of $336,404.67 in a suit alleging violations of section 2 of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13. Pursuant to section 4 of the Clayton Act, 15 U.S.C. § 15, the trial court trebled the award to $1,009,213.71, and entered judgment for that amount. In addition, as authorized by section 4, the court awarded Perkins the usual taxable costs and allowed him $289,000 for the services of his attorneys in prosecuting the suit. On Standard’s appeal, this court reversed the District Court’s, judgment on the merits and remanded the cause for a new trial. Standard Oil Co. of California v. Perkins, 396 F.2d 809 (9th Cir. 1968). Perkins successfully petitioned for certiorari to the Supreme Court, which reversed our judgment and ordered the trial court’s verdict and judgment reinstated. Perkins v. Standard Oil Co. of California, 395 U.S. 642, 89 S.Ct. 1871, 23 L.Ed.2d 599 (1969).
In his certiorari petition, Perkins had not mentioned attorneys’ fees for services rendered either in this court or in the Supreme Court, and the Court’s mandate was accordingly silent on the subject. Standard, following the Court’s denial of its petition for rehearing, 396 U.S. 871, 90 S.Ct. 36, 24 L.Ed.2d 126, paid Perkins the amount of the reinstated judgment. Perkins then filed an application in the District Court requesting that court to award him attorneys’ fees for services rendered him on the appeal to this court and in the Supreme Court proceedings. District Judge Bel-loni denied the application. Perkins then filed a notice of appeal of that decision to this court; at the same time, he also filed two separate petitions directly in this court, one seeking fees in the previous appeal to this court, and the other seeking fees in the Supreme Court proceedings. We granted the petition for fees in the previous appeal to this court, allowing Perkins $2,500. However, we deemed ourselves foreclosed from making an award for services in the Supreme Court because of the silence of the Court’s mandate on the matter of fees; accordingly, we dismissed the pending appeal from the District Court and denied Perkins’ original application in this court for the same relief.
Perkins then filed two petitions for certiorari, one to review our dismissal of his appeal, the other to review our deni-, al of his original application. Both petitions were granted and, in a brief per curiam opinion, the Supreme Court held that section 4 does authorize the award of counsel fees for appellate services, and that the Court’s “. . . failure to make explicit mention in [its earlier] mandate of attorneys’ fees simply left the matter open for consideration by the District Court, to which the mandate was directed.” Perkins v. Standard Oil Co. of California, 399 U.S. 222, 223, 90 S.Ct. 1989, 1990, 26 L.Ed.2d 534 (1970).
On remand, Judge Belloni, after conducting a hearing on the matter, awarded Perkins the sum of $250,000 for attorneys’ fees in the first Supreme Court proceedings, in which the Court had ordered reinstatement of the trial court’s judgment. He also allowed $25,000 for counsel fees arising out of the second Supreme Court proceedings, in which the Court reversed the District Court’s disallowance of attorneys’ fees on appeal. And, finally, Judge Belloni allowed $14,180 in fees for services of Perkins’ attorneys in the attorney fee-application proceedings in the District Court. Perkins v. Standard Oil Co. of California, 322 F.Supp. 375 (D.Or.1971).
Standard objects to the allowance of $250,000 for the first Supreme Court proceedings as excessive and an abuse of discretion. In addition, Standard objects to the remaining allowances on two grounds: first, that section 4 does not create a right to recover attorneys’ fees for services in a proceeding, ancillary to the damage suit, to recover additional attorneys’ fees for services on appeal of the main action; and, second, that if such awards are authorized, the awards made in this case were excessive.
1. The Services in the Main Case.
This is not the usual situation, where an appellate court is faced with an attack on the trial court’s allowance of attorneys’ fees for services at trial. Here we must review the District Court’s appraisal of the worth of services rendered in another court, the Supreme Court. Accordingly, we believe that the District Court’s determination, at least with respect to the necessity for and the quality and value of the work, need not be accorded the deference that would be given to decisions which involved matters within the “first-hand” knowledge of the District Court and which come within its special competence. Moreover, as indicated above, the appraisal involved in this branch of the appeal was made not by the original trial judge, but rather by another District Judge, who necessarily lacked the trial judge’s intimate knowledge of the proceedings, the issues in the original suit, and the intricacies in the presentation of these issues on the appeal. The latter fact alone provides a basis for exercising “somewhat more latitude in determining whether there has been • an abuse of discretion than would be true in the usual case . . .,” Twentieth Century Fox Film Corp. v. Goldwyn, 328 F.2d 190, 221 (9th Cir. 1964), cert. denied, 379 U.S. 880, 85 S.Ct. 143, 13 L.Ed.2d 87. In combination, the two factors discussed above dictate that our review of the District Court’s allowances be much broader than it might be were we reviewing allowances made for services in the District Court itself.
There can be no doubt that plaintiff’s counsel devoted a considerable amount of time to the certiorari proceedings and that the services were of substantial value. Time spent by counsel and the success of their efforts are among the nine factors this court noted in calculating the award in Twentieth Century Fox Film Corp. v. Goldwyn, supra. However, Goldwyn concerned fees for trial services, and some of the factors in Goldwyn are of doubtful or no relevance here. Moreover, recognition must be given to essential differences in the nature of the services performed by appellate counsel, as compared to those rendered by trial counsel. Anti-trust litigation is most complex at the initial stages. It is then that counsel must ferret out the evidence, settle upon legal theories appropriate to recovery, and then make a trial record accordingly. Appellate services, on the other hand, are of a derivative nature, performed within the frame of the case as developed at trial. We do not suggest that appellate litigation may not be complex. The record in the first Perkins’ appeal was voluminous, and numerous factual matters were asserted in the certiorari proceedings, all requiring extensive record research by Perkins’ counsel in their preparation of the petition and brief in the Supreme Court. And the legal theories were both novel and complex, extending the coverage of section 2 of the Clayton Act. With respect to the trial phase of the same case, however, the presentation in the Supreme Court proceedings was more of an elaboration, or refinement, of those theories propounded in the trial court and on the appeal to this court.
For these reasons, we believe that in assessing “a reasonable attorney’s fees” for appellate services, a court must keep in mind that the appeal is not a separate lawsuit, but rather a continuation of a lawsuit which has progressed considerably by the time counsel commences .work on the appeal. Accordingly, the amount allowed for attorneys’ services on appeal should generally be less than that awarded for services at the trial of the same case.
We are mindful that the “. . . apparent purpose behind this part of section 4 [is] to award the successful plaintiff a reasonable attorney’s fee so that his tréble damage recovery would not be unduly diminished by the payment to his attorneys.” Farmington Dowel Products Co. v. Forster Mfg. Co., 421 F.2d 61, 88 (1st Cir. 1970). The clear import of the Supreme Court’s second Perkins’ decision [399 U.S. 222, 90 S.Ct. 1989, 26 L.Ed.2d 534] is that the additional fee allowance for appellate services serves to further encourage private antitrust enforcement by preventing undue shrinkage of damage awards by the fees of counsel retained to protect the awards in the appellate courts. However, this does not mean that the allowance for appellate services need fully reimburse the plaintiff for his counsel fees on appeal. “[T]he imposition of this penalty was [not] meant to turn in any way on the nature or amount of the plaintiff’s fee arrangement, a fortuity wholly unrelated to defendant’s illegal conduct.” Farmington Dowel Products Co. v. Forster Mfg. Co., supra, 421 F.2d at 90. The ultimate question in every inquiry into the fee award is what contribution the defendant should make toward the fees of plaintiff’s counsel. Twentieth Century Fox Film Corp. v. Goldwyn, supra, 328 F.2d at 221.
The District Court found that Perkins’ attorneys spent 2914.05 hours in the first Supreme Court proceeding. Approximately 900 of these hours were contributed by his local counsel in Portland, Oregon, who had represented him in the trial and in the appeal to this court. The remaining time, approximately 2,000 hours, was contributed by a Washington, D. C. firm retained to handle the matter in the Supreme Court. The Washington firm managed the Supreme Court litigation, wrote the briefs, and argued before the Court; the Portland attorneys provided assistance in the preparation of. the record and the petition for certiorari. The District Court found that this arrangement did not result in any unnecessary duplication of effort. 322 F.Supp. at 376.
Even if we accept the District Court’s findings, we note that the court’s allowance of $250,000 reflects an overall hourly rate in excess of $85 for the services of all attorneys who participated in the appeal. This includes the time of all associates, as well as partners, and the time of the Portland attorneys, whose role in the Supreme Court proceedings was largely in support of the Washington attorneys, who had primary responsibility in the matter. Over 90 percent of the time spent by the Washington firm was spent by associates (1866 v. 131 hours for partners’ time), and over 30 percent of the total lawyer hours expended in the case were by the Portland attorneys. While we agree with the District Court that the novelty and complexity of the case and the quality and success of the attorneys’ work justify more than a minimum fee award, we are of the opinion that the court’s award is excessive and should be reduced to take into account the percentages of the total time contributed, respectively, by partners and associates of the Washington firm, primary counsel in the proceedings, and by the Portland attorneys, whose role was secondary to that of the Washington lawyers. In our view, an allowance of attorneys’ fees at an overall rate of $40 per hour more properly reflects consideration of the relative contributions of the three groups of attorneys and the nature and difficulty of the case. Accordingly, the allowance for attorneys’ fees in the first Supreme Court proceedings is reduced to the sum of $116,562.
2. Fees in the Ancillary Proceedings.
A primary purpose of section 4 of the Clayton Act is to encourage private persons to undertake the enforcement of the antitrust laws in order to more effectively carry out Congressional policy against illegal monopolies and restraints of trade. Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 139, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968); Karseal Corp. v. Richfield Oil Corp., 221 F.2d 358 (9th Cir. 1955). The provision in section 4 insuring a successful plaintiff a reasonable attorney’s fee is consistent with this purpose in that it insulates, at least to some extent, the plaintiff’s damage recovery from the costs incurred in obtaining the recovery, and places this cost burden on the defendant whose violation of the antitrust laws is established. The obligation for attorneys’ fees, in addition to trebled damages, acts as a further deterrent to violations of the antitrust laws and, to that end, we think it extends not only to the trial stage and to the “appellate stages of a successfully prosecuted private antitrust action,” [Perkins v. Standard Oil Co. of California, 399 U.S. 222, 223, 90 S.Ct. 1989, 26 L.Ed.2d 534 (1970)], but also to ancillary proceedings for such fees.
(A) We are of the opinion that the $25,000 allowed by the District Court to Perkins for his attorneys’ services in the second Supreme Court proceeding is excessive.
The issue which generated the latter certiorari proceedings was one which Perkins might have urged in the Supreme Court when the main case was before the court. Considerable time and effort might thus have been saved, and the question laid to rest at that time. Be that as it may, we think the allowance made by the District Court was excessive, particularly in view of the fact that the second certiorari proceeding involved only the issue of Perkins’ right to recover fees on appeal, and the fact that a majority of the 292 hours spent on the second appeal was contributed by associates. Again we are satisfied that an allowance at an overall rate of $40 per hour more nearly reflects a reasonable balancing of the factors discussed earlier, in setting the “contribution [to] be made by the defendant toward the fees of plaintiff’s counsel,” [Twentieth Century Fox Film Corp. v. Goldwyn, supra, 328 F.2d at 221] than does the effective rate of $85 reflected in the District Court’s award.
Accordingly, the allowance for fees in the second Supreme Court proceeding is reduced from $25,000 to the sum of $11,-680.
(B) With respect to the allowance for services in the District Court proceedings, we cannot say that the District Judge abused his discretion. As noted earlier, considerably more weight must be given to a determination made by the judge directly involved in a proceeding than to a determination by a reviewing judge or court based upon a “cold” record. The sum in question reflected approximately 338 hours, spent for the most part in taking depositions, collecting affidavits, presenting arguments, and participating in the discussion of factual issues with the judge in two hearings. The judge applied separate rates for partners and associates, setting each rate after considering the experience of the participating attorneys and the quality of their work. The award of $14,180 is thus affirmed.
(C) Finally, we allow Perkins $1500, that being a reasonable sum, for the services of his attorneys on this appeal.
The judgment is modified in accordance with the foregoing opinion and, as modified, is affirmed. Neither party shall recover costs.
. District Judge William G. East was the trial judge in the original proceedings.
. Our award of $2,500 for services of Perkins’ counsel in the first appeal to this court was not challenged in these petitions for certiorari.
. See Part 2 of this opinion, in which the question of fees awarded for services in the District Court is considered.
. The factors noted in Goldwyn were: (1) whether plaintiff’s counsel had the benefit of a prior judgment or decree in a case brought by the Government; (2) the standing of counsel at the bar; (3) time and labor spent; (4) magnitude and complexity of the litigation; (5) responsibility undertaken; (6) the amount recovered ; (7) the knowledge the court has of the conferences, arguments that were presented and of work shown by the record to have been done by attorneys for the plaintiff prior to trial; (8) what it would be reasonable for counsel to charge a victorious plaintiff; and (9) what contribution shall be made by the ' defendant toward the fees of plaintiff’s counsel. 328 F.2d at 221.
. As disclosed earlier in this opinion, Perkins was awarded $289,000 in fees for his attorneys’ services at trial. That allowance has been paid, and is not in any way involved in this appeal.
. We entertain serious doubts that new counsel can be brought into a case at the appellate stage without some duplication of effort, for which the defendant should not be held chargeable,
. The $40 hourly “overall” rate is an average of three hourly rates, one for each group of attorneys, weighted by their contribution to the total attorney hours. The partners in the Washington firm contributed 131 hours, appi-oximately 5 percent of the total time; the AVashington associates contributed 1,866 hours, approximately 65 percent of the total; and the Portland attorneys contributed the remaining 30 percent of the hours. Considering the secondary role of the Portland attorneys in the Supreme Court proceedings, we think their time should be assessed at a minimum rate of $30 per hour. The time of the Washington firm’s attorneys, however, can properly be assessed at augmented rates, to take into account the difficulty, magnitude and success factors discussed above, and the firm’s primary responsibility for the ease. Working from the base rates of $50 and $30 for, respectively, partners and associates (these figures were used by the District Court in assessing fees for services of an ordinary nature in that court), an allowance of $80 for partners’ time and $40 for associates’ time is a reasonable hourly charge to be assessed against the defendant. These three rates, weighted by the percentage of total time contributed by each group of attorneys, provide an average rate of approximately $40 for all attorneys participating in the Supreme Court proceedings.
This rate compares with the effective hourly rate allowed by the original trial judge for fees in the trial proceedings. The total fee allowance there amounted to $289,000, and the time spent by counsel was approximately 6,300 hours, for an average effective hourly rate of approximately $46.
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f2d_474/html/0555-01.html
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Caselaw Access Project
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2024-08-24T03:29:51.129235
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2024-08-24T03:29:51.129683
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{
"author": "RONEY, Circuit Judge:",
"license": "Public Domain",
"url": "https://static.case.law/"
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RENUART-BAILEY-CHEELY LUMBER AND SUPPLY COMPANY, Plaintiff-Counter Defendant-Appellant, v. PHOENIX OF HARTFORD INSURANCE COMPANY, Defendant-Counter Claimant-Appellee.
No. 71-3184.
United States Court of Appeals, Fifth Circuit.
Oct. 4, 1972.
As Amended on Denial of Rehearing Feb. 8, 1973.
Michael R. Storace, Miami, Fla., for appellant.
Steven R. Berger, Miami, Fla., for ap-pellee.
Before TUTTLE, MORGAN and RO-NEY, Circuit Judges.
RONEY, Circuit Judge:
In this diversity case the district court granted summary judgment for defendant, Phoenix of Hartford Insurance Company. The court held that Phoenix rightfully refused coverage under a policy of public liability insurance on the ground that the insurance company did not receive timely notice of an accident from its insured, Renuart-Bai-ley-Cheely Lumber and Supply Company (RBC). RBC settled the claim against it and then brought this separate action against Phoenix claiming insurance coverage. Our review is limited solely to the question of whether summary judgment was proper in the circumstances of this case. We hold that there were important issues of fact that should have been resolved, vacate the judgment, and remand the case for further proceedings.
On December 5, 1964, John S. Evans purchased a Dewalt table saw from the warehouse of RBC in Miami, Florida. He intended to take his purchase home in his own station wagon. At that point there arises a factual dispute which was not resolved by the district court but which may have substantial significance in our view of the case.
RBC asserts the following: the manager of the RBC warehouse, John Fuller, instructed Percy Brown, an employee of RBC, to assist Evans in carrying the saw to his station wagon. When they arrived at the automobile which was parked on the near side of the public street parallel to the entrance of RBC, Brown asked Evans if he wanted help putting the saw into the station wagon. Evans declined Brown’s assistance. Brown then left the immediate area of the automobile and went to a nearby coffee shop. As Brown emerged from the coffee shop, he saw Evans dismantling the legs from a table to which the saw was attached and observed the saw fall on Evans. No employee of RBC was assisting Evans.
Phoenix, however, claims that the employee, Brown, was ordered by the warehouse manager to place the saw inside the automobile and that he was in the active process of doing this when the saw fell on Evans, causing serious injuries which required hospitalization.
Upon the report of Brown to his supervisor and after making an investigation, the insurance department of RBC determined that the accident had not occurred on RBC property and that no employees of RBC had been involved. Considering itself in no way involved in the accident, RBC did not make a report of the incident at that time to its liability carrier, Phoenix.
Although Evans, the injured customer, was not interviewed by RBC when its non-involvement was determined, he subsequently became employed by RBC as a result of a merger with another company. At no time during such employment did he express to any RBC employees any thought that RBC was liable for his injuries.
Thereafter, Evans terminated his employment with RBC. He then sued for his injuries in a state court on the theory that RBC’s employees had negligently caused his injuries. The suit was filed two days short of the four year statute of limitations. When RBC received the suit papers it notified Phoenix of the accident and the pending litigation. RBC claims that that is the first time it knew there had been an occurrence for which it might be liable. Initially undertaking to defend the suit, Phoenix later declined coverage and two weeks before the trial date declined to defend. The suit was later settled in favor of Evans for $12,030.
Alleging diversity jurisdiction, RBC then sued Phoenix in federal court for the amount paid in settlement, plus attorneys’ fees and costs. A motion for summary judgment in favor of RBC was denied. After other pleadings were filed, Phoenix moved for summary judgment. The district court, in a brief order, granted summary judgment for Phoenix, apparently on the ground that, as a matter of law, the four year delay between the accident and the notice given Phoenix made the notice untimely under the requirements of the policy. From this judgment RBC appeals.
We think that summary judgment was improperly granted. The controlling determination is whether the notice was given “as soon as practicable” under the terms of the policy. As a condition to covering the insured’s liability to third parties, the policy provides:
“In the event of an occurrence, written notice . . . shall be given by or for the Insured to the company or any of its authorized agents as soon as practicable.”
The policy further provides that no action shall lie against the company unless there has been full compliance with this term of the policy. The term “occurrence” is defined in the definitions section of the policy as:
“Occurrence means an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”
In Hendry v. Grange Mutual Casualty Co., 372 F.2d 222, (5th Cir. 1967), we considered the application of Florida law to an insurance policy containing a similar notice provision. There we recited the applicable standard for a case of this kind:
“The Rule in Florida appears to be that the term ‘as soon as practicable’ as used in the notice provision of the insurance policy means that notice is to be given within a reasonable time in view of all the facts and circumstances of each particular case. Morton v. Indemnity Ins. Co. of North America, 137 So.2d 618 (Fla.2d Dist.Ct.App.1962), State Farm Mut. Auto. Ins. Co. v. Ranson, 121 So.2d 175 (Fla.2d Dist.Ct.App.1960).
: All of the Florida eases bearing upon the question of the requirement of notice being given to the insurer seem to be uniform in the proposition that what is a reasonable time depends upon the surrounding circumstances and is ordinarily a question of fact for the jury. Hartford Acc. & Indem. Co. v. Mills, 171 So.2d 190 (Fla.lst Dist.Ct.App.1965), American Fire & Cas. Co. v. Collura, 163 So.2d 784 (Fla.2d Dist.Ct.App.1964), Employers Cas. Co. v. Vargas, 159 So.2d 875 (Fla.2d Dist.Ct.App.1964).
Whether notice was given ‘as soon as practicable’ in view of all of the facts and circumstances of the instant case and whether there was a waiver of written notice were certainly questions of fact to be determined by the jury, and the able trial Judge was correct in submitting these issues to the jury in his well worded charge.”
372 F.2d at 225-226.
The primary determination to be made is the time when the insured is first charged with knowledge that there had been an “occurrence” in which it was involved. If the insured made a reasonable determination that there had been no such occurrence, then certainly it would have no duty to report the “non-occurrence” to the insurance company. The facts and circumstances as they were then known or could have been known to RBC upon such investigation as it should have made, as the situation then existed, should control the decision as to whether its actions were reasonable. The conduct of RBC should not be judged by the harsh standard of hindsight. It would not be “practicable” to report an occurrence until the company knew or, by doing those things that it should have done under the circumstances, would have known, that an occurrence within the terms of the policy had occurred. The reasonable time within which the report should have been made would not commence until then. RBC says that it had no occasion to report the occurrence, when it occurred, because it thought it was not involved. Phoenix says that RBC knew it was involved, and therefore should have reported the occurrence. It is this critical fact issue that must be resolved on remand.
It is important to distinguish this situation from a case in which an insured knows that it is involved in an accident but decides that it is not liable, and therefore does not report the occurrence to its insurance carrier. Such a determination by an insured does not relieve it of the obligation to report the occurrence. Florida law clearly provides that an insured cannot prevail where he has failed to render notice because of his own determination of non-liability. Niesz v. Albright, 217 So.2d 606 (Fla.App.1969); Deese v. Hartford Accident & Indemnity Co., 205 So.2d 328 (Fla.App.1967).
Phoenix argues that the four year delay in giving notice is not “as soon as practicable” as a matter of law. The short answer to this is that Florida does not have such a per se time rule but instead grounds each decision on the facts and circumstances of the particular case. Hendry v. Grange Mutual Casualty Co., supra; Tiedtke v. Fidelity & Casualty Co. of New York, 222 So.2d 206 (Fla.1969); Continental Casualty Co. v. Shoffstall, 198 So.2d 654 (Fla.App.1967); Employers Casualty Co. v. Vargas, 159 So.2d 875 (Fla.App.1964).
Vacated and remanded.
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