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2024-08-24T03:29:51.129235

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UNITED STATES of America, Plaintiff-Appellee, v. Arthur NASSER, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Richard W. HAUFF, Defendant-Appellant. Nos. 18600, 18601. United States Court of Appeals, Seventh Circuit. March 5, 1973. As Modified on Denial of Rehearing April 16, 1973. Maurice J. Walsh, Sherman C. Magidson, Terence Mac Carthy, Federal Defender Program, Chicago, Ill., for defendant-appellant. James R. Thompson, U. S. Atty., Robert A. Filpi, and William T. Huyck, Asst. U. S. Attys., Chicago, Ill., for plaintiff-appellee. Before FAIRCHILD, STEVENS and SPRECHER, Circuit Judges. FAIRCHILD, Circuit Judge. Appellant • Arthur Nasser is an attorney, and between September, 1955 and May, 1963, he was employed by the U. S. Internal Revenue Service. He served first in the enforcement division and later in the Tax Court division of the office of regional counsel. In December, 1965, he was indicted for violations, after leaving government service, of a conflict of interest statute, and Nasser and Richard Hauff (not a federal employee) were indicted for conspiracy to cause violation of the same statute. Count I charged that from December, 1968 until August, 1964, Nasser knowingly acted as attorney for August Circella in connection with an investigation of the 1958 and 1959 federal income tax liability of Cireella, a matter in which Nasser had participated personally and substantially as an employee of IRS. The jury failed to agree on this count, and it was then dismissed, on motion of the government. Count II was a similar charge involving the collection of Hauff’s 1958 liability, and Count III a similar charge involving an investigation of Hauff’s 1959 liability. The jury found Nasser guilty of both counts. Count IV charged that beginning in December, 1963 Nasser, Hauff, and Circella conspired knowingly to have Nasser act as attorney for Hauff and Cireella (not a defendant) in matters in which Nasser had participated personally and substantially as an employee of IRS. The jury found both Nasser and Hauff guilty on this count. I. Claims that the Statute is Unconstitutional, at least as applied to Nasser. A. Vagueness. Appellants argue that § 207(a) violates the due process clause of the fifth amendment because of vagueness in that the employee must decide at his own risk (1) whether he participated “substantially” in a matter while he was employed; and (2) whether the mode of participation is encompassed by the words “or otherwise.” We believe that the language of the statute is sufficiently definite to permit a fact finder to decide on the basis of the evidence whether defendant’s participation fell within the proscribed conduct. Avoiding conflicts of interest is a traditional ethic of the legal profession. The standards are matters of common understanding and practice among attorneys. This statute proscribes perhaps as precisely as possible an unethical practice that can manifest itself in infinite forms. As the Supreme Court said of a different statute in United States v. Petrillo, 332 U.S. 1, 7, 67 S.Ct. 1538, 1542, 91 L.Ed. 1877 (1946): “We think that the language Congress used provides an adequate warning as to what conduct falls under its bah, and marks boundaries sufficiently distinct for judges and juries fairly to administer the law in accordance with the will of Congress. That there may be marginal cases in which it is difficult to determine the side of the line on which a particular fact situation falls is no sufficient reason to hold the language too ambiguous to define a criminal offense.” B. Bill of Attainder. Appellants argue that § 207(a) is a bill of attainder in violation of Article I, section 9 of the constitution because it is a legislative act that imposes “punishment” on a group without a judicial trial. They emphasize, both with respect to their bill of attainder claim, and the ex post facto argument later discussed, that the “punishment” to which they refer is not the penal sanction which would be judicially imposed for a completed violation of § 207(a), but “the disqualification which former employees in general, and Nasser, as a practicing attorney in particular, suffer as a result of their former employment by the Government.” The group punished by § 207(a), as they see it, consists of all government employees, and the punishment imposed is the restriction of their practice of law or similar activity after leaving the government so as to exclude representation of others in government matters in which the particular employee participated personally and substantially when he was an employee. We are unable to agree with the analysis that this particular restriction is a punishment legislatively imposed upon a specified group. Rather, the statute is within the classification of a rule of general applicability for the accomplishment-of a legitimate legislative purpose. The purpose of protecting the government, which can act only through agents, from the use against it by former agents of information gained in the course of their agency, is clearly a proper one. The restriction, against acting as agent or attorney for another in a matter in which the person participated personally and substantially as an officer or employee, is equally clearly a wholly rational means of pursuing that purpose. Appellants rely on United States v. Brown, 381 U.S. 437, 85 S.Ct. 1707, 14 L.Ed.2d 484 (1965), a case in which the Supreme Court struck down a law as a bill of attainder. That law disqualified all present and recent (within five years) members of the Communist Party from holding union office. The Court identified as a proper legislative purpose the exclusion from union office of persons likely to incite political strikes. The law did not provide for a judicial or quasi-judicial determination of which persons would have such intent, but was itself a legislative judgment that members of the specified group would have it and therefore constituted a bill of attainder. The Court deemed it impossible to rely upon a supposition that membership or recent membership in the Communist Party was “merely an equivalent, shorthand way of expressing those characteristics which render likely the incitement of political strikes.” P. 456, footnote 31, 85 S.Ct. p. 1719. It happened, also, that in Brown the Court explained why § 32 of the Banking Act of 1933, 12 U.S.C. § 78, is not a bill of attainder, although it may be said to impose a restriction upon those who fulfill certain specifications, as in the case now before us. Persons engaged in certain types of securities transactions are disqualified, by § 32, from serving at the same time as an officer, director, or employee of a member bank of the federal reserve system. After noting that the banking act provision does not inflict a deprivation upon a political group, the Court said it did not incorporate a judgment censuring any group of men, but was based on a conclusion “that the concurrent holding of the two designated positions would present a temptation to any man — not just certain men or members of a certain political party,” and established an objective standard of conduct. The conclusion underlying § 207(a), before us, that one who, after leaving government employment, acts for another in a matter in which he participated while in such employment, is likely to use against the government an advantage gained out of being the government’s agent is a common sense conclusion similar to the one underlying the banking act provision considered by the Court. We have no difficulty in finding that § 207(a) is comparable, and deeming it a generally applicable rule of conduct rather than a bill of attainder. C. Ex Post Facto Law. When appellant Nasser became an employee of the United States, and during most of his service, he was subject to 18 U.S.C. § 284, 62 Stat. 698, a restriction on his practice of law or similar activity in the event of leaving government employment. A few months before he left, however, Congress revised and reenacted § 284 as § 207(a), effective in January, 1963. The difference has been described in Senate Report No. 2213, Sept. 29, 1962, 2 U.S.Code Congressional and Administrative News, 1962, p. 3861, in part as follows : “Section 207 replaces title 18, United States Code, section 284 dealing with postemployment activities. The latter prohibits a former employee of the Government, for a 2-year period following the termination of his employment, from prosecuting a claim against the United States involving any subject matter directly connected with which he was employed . “Subsection (a) of section 207 provides that a former Government officer or employee . . . shall be permanently barred from acting as attorney or agent for anyone other than the United States in any matter in which the United States is a party or is interested and in which he participated personally and substantially in a governmental capacity. Thus, in addition to replacing the present 2-year disqualification with a lifetime bar, section 207(a) strengthens present law by going beyond claims for money or property to the whole range of matters in which the Government has an interest.” Appellants argue that § 207(a) as applied to Nasser is an ex post facto law in violation of Article 1, section 9 of the constitution because it more closely restricts post-employment activity than did the law in effect during most of his period of employment. For reasons similar to those discussed with respect to the bill of attainder claim, we do not view the restriction on post-employment activity related to activity during employment as punishment for having been a government employee before the law was enacted. As appellants argue, disqualification from practicing a profession, on account of offensive activity, may constitute punishment therefor and a law newly prescribing such disqualification on account of activity occurring before the law was passed may be an ex post facto law. Cummings v. Missouri, 71 U.S. (4 Wall.) 277, 18 L.Ed. 356 (1867), and Ex parte Garland, 71 U.S. (4 Wall.) 333, 18 L.Ed. 366 (1867). But where there is a sufficiently rational relationship between the past activity and the public interest in excluding unworthy people, the disqualification is not a punishment and a law newly imposing it is not an ex post facto law. Ex parte Garland, p. 379; Hawker v. New York, 170 U.S. 189, 18 S.Ct. 573, 42 L.Ed. 1002 (1898); Cases v. United States, 131 F.2d 916 (1st Cir., 1942) cert. denied sub nom„ Velazquez v. United States, 319 U.S. 770, 63 S.Ct. 1431, 87 L.Ed. 1718 (1943); Smith v. United States, 312 F.2d 119 (10th Cir., 1963). § 207(a) does not disqualify former government employees from all or a segment of the practice of law. It disqualifies only from particular cases where Congress could rationally make the judgment that participation would be evil as a result of an individual’s previous activity as a government employee in the same matter. Appellants’ argument that the disqualification itself was new implies that if § 207(a) had not been passed, Nasser would have been free to participate, after termination of his employment, as attorney in a government matter in which he had substantially participated as a government employee. Although § 207(a) provided penal sanctions which did not previously exist, we point out that Mr. Nasser would in any event have been restricted by the ethics of his profession from accepting private employment in a matter in which he had substantial responsibility while a public employee. II. The theory of the case. The government contended in support of Count II that in 1962, while an IRS employee, Nasser had participated personally and substantially in the matter of Hauff’s income tax liability for 1958. In April, 1962, he reviewed a proposed notice of deficiency and fraud penalty for 1958, together with related files, and recommended that the notice issue. In October, 1962, he prepared a memorandum answering a legal question involving the 1958 assessment. The government also claimed in support of Count III participation in the matter of Hauff’s liability for 1959. Hauff had filed no return for that year and Mr. Gerard, another IRS attorney, recommended criminal prosecution. In order to coordinate the two matters, Gerard and Nasser met in April and September, 1962, and discussed the Hauff case. Thus Nasser’s participation relied on with respect to Hauff’s 1959 liability, and Count III, was incidental to his activity concerning Hauff’s 1958 liability. The participation relied on with respect to Circella’s liability, and Count I, was also incidental. The Hauff file disclosed substantial payments and other transactions in a business venture in which Hauff and Circella were associated, and there was no claim that Nasser dealt with any other matter concerning Circella. As already noted, the jury disagreed as to Count I, and it was dismissed. Nasser left IRS May 17, 1963. In December, 1963, after Hauff sought assistance, Nasser asked Mr. Roche, another attorney, to become associated in representing Hauff concerning his ’58 liability. There is substantial evidence from which it can be inferred that for some months Nasser gave the legal advice in the matter and Roche’s function was limited to appearances at conferences and applying Nasser's advice. There is evidence that Nasser said he was concerned about possible conflict of interest. The defense interpretation of the evidence is that Nasser did not act as attorney, but ■ secured Roche for Hauff in order to avoid possible conflict. There was also evidence that Nasser prepared Hauff’s 1959 return, submitted February 24, 1964, and an accompanying explanatory letter. An expert gave his opinion that the return, the letter, and a power of attorney to Roche, were each prepared on the same typewriter, respectively, as some other document shown to have been authored by Nasser. They were prepared at a secretarial service which performed services for Nasser, but not Hauff. Roche did not prepare them. We deem the evidence, when viewed in the light most favorable to the government, sufficient to support the verdict. Questions raised by appellants concerning electronic surveillance involve some of the proof of Nasser’s access to the IRS files on Hauff in 1962; and there are claims of error with respect to evidence on other points. Bruton questions are raised because of testimony relating statements by Hauff tending to incriminate Nasser. Hauff did not take the stand. The government contends that such statements by Hauff were in furtherance of the conspiracy charged and shown. Appellants also argue that as a matter of law they could not be guilty of conspiracy to violate § 207(a). III. The propriety of the conspiracy charge and conviction. § 207(a) prescribes a penalty for an ex-employee who acts as attorney for a client, under specified circumstances, if he acts knowingly, but does not prescribe a penalty for the client, whether he acts knowingly, wilfully, or otherwise. The essential question presented is whether, when a client agrees with an ex-employee of the government that the ex-employee shall act as attorney or agent in a matter from which he is foreclosed by § 207(a), and the client (as well as the ex-employee) has guilty knowledge and purpose, both may properly be found guilty of conspiring to cause a violation of § 207(a). Count IV was arguably broader in that it charged a conspiracy among Nasser, Hauff, Circella, and unknown others, to have Nasser act as attorney for Hauff and Circella. There was evidence that Hauff brought Circella to Nasser to obtain representation and that Nasser arranged with Roche to appear for Circella, under circumstances from which it could be inferred that Nasser was really acting as the attorney. We do not understand, however, that the government attempts to sustain the conviction on the theory that the jury found that Nasser and Hauff conspired to have Nasser act unlawfully as attorney for Circella, i. e., ex-employee and A conspiring to have B employ the ex-employee as his attorney in a forbidden matter. Such an interpretation of the verdict would be dubious in that the jury could not agree that Nasser acted unlawfully for Circella. Moreover the case was not really argued nor submitted on that theory. The instructions permitted a verdict of guilty on Count IV if the jury found that Hauff knowingly and wilfully agreed that Nasser act as his attorney. There was no instruction that in order to find Nasser and Hauff guilty, the jury must find that Nasser and Hauff knowingly and wilfully agreed that Nasser act unlawfully as attorney for Circella. In enacting § 207(a), Congress made it an offense for the ex-employee knowingly to act as agent or attorney for a client in a matter of the type specified. Agreement by the client that the ex-employee act as attorney is impliedly required. So far as § 207(a) goes, it is immaterial whether the client had knowledge of the facts which would make the ex-employee guilty of the offense, and the client is not made guilty of an offense under any circumstances. The government argues that if the client has guilty knowledge, an element it need not prove under § 207(a), the agreement that the ex-employee shall act for the client becomes a conspiracy in violation of 18 U.S.C. § 371. Thus the ex-employee, when he acted as attorney for a client who had guilty knowledge, would be guilty not only of a violation of § 207(a), and exposed to a $10,000 fine and two years’ imprisonment, but also of a violation of § 371, and exposed additionally to a $10,000 fine and five years’ imprisonment, and the client would be guilty of the latter and exposed to that penalty. Of course it is possible that an ex-employee may violate § 207(a) when his client is ignorant of the fact that the ex-employee was such, or had participated in the matter as such, but we are strongly inclined to believe, in the nature of things, that where an ex-employee acts knowingly and unlawfully, his client will often know the facts. The client’s knowledge of those facts will frequently have been the motive for the retainer. Appellants argue that the case falls within one of the exceptions to the rule that a substantive offense and a conspiracy to commit it are separate and distinct offenses: (1) “where the agreement of two persons is necessary for the completion of the substantive crime and there is no ingredient in the conspiracy which is not present in the completed crime” (the Wharton rule); and (2) “where the definition of the substantive offense excludes from punishment for conspiracy one who voluntarily participates in another’s crime.” Pinkerton v. United States, 328 U.S. 640, 643, 66 S. Ct. 1180, 1182, 90 L.Ed. 818 (1946). The Wharton rule operates to prevent conviction both of conspiracy and the substantive offense where the substantive offense could not have been committed without concerted action, so that the conspiracy is really identical with or included within the substantive offense. This is most clearly illustrated in dueling, adultery, and bigamy. See Perkins, Criminal Law 535 (1957). The government points out that in our case, the guilty knowledge of the client is an essential ingredient of conspiracy, but not of the substantive offense. The second exception really turns upon a construction of legislative intent. In Gebardi v. United States, 287 U.S. 112, 53 S.Ct. 35, 77 L.Ed. 206 (1932), cited in Pinkerton, the Supreme Court had before it the Mann Act, now 18 U. S.C. § 2421. One defendant was a man who had clearly violated the Act by transporting a woman for an immoral purpose. The other defendant was the woman, who had consented to the journey and the purpose. They were convicted of conspiracy, and the Supreme Court reversed. Having construed the Mann Act so as not to punish the woman transported even though she consented, the Court concluded there was “an affirmative legislative policy to leave her acquiescence unpunished,” precluding punishment via the conspiracy statute. And in the absence of any proof that the man conspired with others than the woman transported, his conviction could not stand. We see, as the government argues, that there are bases for difference between the legislative attitude toward a woman transported for immoral purposes with her consent and toward a person who purposefully, in order to advance his own interests, seeks representation from an ex-employee of the government in a matter in which the latter participated when he was an employee. But in evaluating the intent of Congress in failing to prescribe a penalty in § 207(a) for the client, regardless of his degree of guilty knowledge or culpable intent, we think it more reasonable to read the omission as precluding punishment for the client than as leaving punishment for the client with guilty knowledge, up to a much greater maximum than that provided by § 207(a) for the ex-employee, to the operation of the conspiracy statute. We conclude that Hauff could not be guilty of conspiracy with Nasser, nor Nasser with Hauff, solely by reason of their agreement, knowing and wilful, that Nasser act as attorney for Hauff in the forbidden matters. Here, too, accepting the evidence that Hauff knew that Nasser’s representation of him was unlawful, it happens there was evidence that Hauff participated in devices to conceal the offense. The extent to which the Gebardi reasoning would apply to a charge as principal, under 18 U.S.C. § 2, as accessory after the fact under 18 U.S.C. § 3, or misprision of felony under 18 U.S.C. § 4, need not be considered here, those charges being absent. IV. Bruton: Right to confront witnesses. Government witnesses testified concerning a number of conversations with Hauff, in Nasser’s absence. With varying degrees of explicitness and completeness, Hauff said in these conversations that Nasser had participated as an IRS attorney in Hauff’s tax matters and was currently acting as Hauff’s attorney on the same matters. Hauff did not testify and thus Nasser had no opportunity to cross-examine Hauff. Nasser's counsel objected, but the testimony was admitted, usually with a statement by the court that each was admitted against Hauff only. Ultimately, however, the court gave an instruction that if a conspiracy has been established, the declarations of a member of the conspiracy, in furtherance of its objects, may be considered as evidence against another member of the conspiracy. The court did not identify which of Hauff’s statements might be deemed in furtherance of any conspiracy. Appellant Nasser argues that several statements by Hauff, incriminating Nasser, were not in furtherance of any conspiracy and therefore were improperly received at the joint trial under prineipies later announced in Bruton v. United States, 391 U.S. 123, 88 S.Ct. 1620, 20 L. Ed.2d 476 (1968). Bruton held that at a joint trial, proof of a confession by one defendant, incriminating his codefendant as well, makes the first defendant, in effect, a witness against the second. Unless the second defendant has had an opportunity to cross-examine the first, the second defendant will be deprived of the right to confront a witness, and the confession must be excluded, even though otherwise admissible against the defendant who gave it. Bruton is to be applied retroactively, and therefore to the instant case. Roberts v. Russell, 392 U.S. 293, 88 S.Ct. 1921, 20 L.Ed.2d 1100 (1968). Hauff’s statements, just referred to, described all the elements of the substantive offenses charged against Nasser. They clearly must have had prejudicial impact. Mrs. McAdams was an employee of Hauff in a restaurant business. She described four apparently casual conversations in which Hauff made statements incriminating Nasser. She testified to a threat by Hauff, several months later, suggesting a violent death for people who talk, but with nothing to indicate the threat related to the Nasser relationship. Hauff’s earlier statements to her about the Nasser relationship could not conceivably have been in furtherance of the conspiracy, and could properly be considered against Nasser only on the tenuous theory that they permitted an inference that the threat was designed to suppress the knowledge she had gained from the earlier remarks and was thus in furtherance of the conspiracy. Hauff’s girl friend testified that at various times she (1) aided Hauff in deception of Circella for a purpose irrelevant to this case, (2) at Hauff’s request falsely represented to Circella that she had paid Nasser his fee for representing Hauff, and (3) at Hauff’s request relayed to Circella statements about Nasser’s former government employment and current representation of Hauff. Arguably (3) may have furthered a plan to persuade Circella to have Nasser represent him, but (1) and (2) were not even arguably in furtherance of the alleged conspiracy. Circella testified to statements Hauff made to him similar to (3) and these arguably may have furthered that plan. Mr. Weber is an IRS inspector who investigates misconduct by IRS employees. He interviewed Hauff in April, 1964, and Weber described his statements. Much of what Hauff said constituted denial, or was otherwise exculpatory, but there were several admissions as well as statements which, though couched in “double talk”, could readily be interpreted as verifying Nasser’s unlawful representation of Hauff. Hauff emphasized the thought that his testimony would be essential to any case against Nasser, that both the government and Nasser needed Hauff, and that the government case would be hearsay without Hauff. He threatened to leave town if subpoenaed and to “take the ‘Fifth’ ” if found. Even though a good portion of these interviews contained denials or evasions, and denials may have been in furtherance of the alleged conspiracy, we can not agree with the government contention that Hauff’s incriminating statements to the inspector were, because of any tendency to discourage investigation, in furtherance of the conspiracy and therefore admissible against Nasser. . We surmise that, as related by the Inspector, these statements had great impact on the jury. Even if we were satisfied that a criminal conspiracy had been properly proved, Bruton would compel reversal as to Nasser because significant portions of this testimony as to Hauff’s statements, incriminating Nasser, could not be admitted at a joint trial. Of course we have decided the conviction on the conspiracy count is to be reversed, but have nevertheless considered whether, on the parallel theory of a proved agency or joint venture, Hauff’s statements could be charged against Nasser. We conclude they can not. Harrington v. California, 395 U.S. 250, 89 S.Ct. 1726, 23 L.Ed.2d 284 (1969) established that there may be a case against a defendant relying on Bruton so overwhelming that the “violation of Bruton [is] harmless beyond a reasonable doubt”, but the government has not asked nor have we deemed it appropriate to find the Bruton error harmless in this case. V. Electronic Surveillance Issues. Much of the long history of this case revolves around certain instances of electronic surveillance and the claims (1) that they were unlawful and (2) that proper procedure was not taken to determine whether evidence used at trial was tainted by any of them. The alleged offenses occurred after Nasser had left government service. The government was, however, required to prove that earlier, while still an employee, Nasser had participated in the Hauff and Circella tax matters. It happens that the government had conducted electronic surveillance of Nasser while still employed, and appellants argue they should have been given an opportunity to learn whether the surveillance led to any of the proof the government produced. The verdict in this case was rendered July 9, 1966. Just before trial, the district court had held that the surveillance did not involve a trespass and was not unlawful, applying the rules as understood before Katz v. United States, 389 U.S. 347, 88 S.Ct. 507, 19 L.Ed.2d 576, decided December 18, 1967. On July 11, 1968, in the course of defendants’ appeal, but on motion of the government, this court vacated the judgment and remanded the cause to the district court, so that there might be in camera inspection of the electronic surveillance to determine whether the convictions had been “tainted by the use of improperly obtained evidence.” While the matter was again before the district court, the Supreme Court decided that Katz was not to be applied retroactively. Desist v. United States, 394 U.S. 244, 89 S.Ct. 1030, 22 L.Ed.2d 248 (1969). Again applying pre-Katz principles, the district court held that the electronic surveillance, with one “untainted” exception, had been lawful and reimposed sentences. Defendants again appealed. In 1962 and ’63, agents of the Internal Security Division of the service, in the course of an investigation of Nasser, installed a microphone in his IRS office and attached a “C” clamp to his office phone from which his office and telephone conversations were transmitted to an office of the investigating agents. They also installed a pen register on Nasser’s home phone which recorded the numbers of outgoing calls. Certain interviews between agents and Nasser and Hauff were surreptitiously recorded. On remand, the district court found that Nasser, but not Hauff, had standing to challenge the bugging device in Nasser’s office, and that it was lawful because no trespass had been committed in planting it. See Goldman v. United States, 316 U.S. 129, 62 S.Ct. 993, 86 L. Ed. 1322 (1942). The district court found that Nasser but not Hauff had standing to challenge the pen register. It found the pen register had been installed in violation of federal wiretapping law, 47 U.S.C. § 605 (1964). It ordered that the products of this device be given to Nasser and an adversary hearing held to determine the question of taint, under Alderman. At the hearing, the court found no taint, and the finding is presently not challenged. The district court held that each defendant had standing to challenge any recorded interviews in which he was a participant. But it found these interviews lawful under the principles in force before Katz, because “a government agent could record a conversation with a defendant without his knowledge and not violate his Fourth Amendment rights.” This ruling is not challenged, and its merit need not be considered. Appellants here maintain their original assertion that the surveillance of Nasser’s office was an “indiscriminate search” in violation of the fourth and fifth amendments, and that the district court should have ordered production of the materials and granted a hearing on the question of taint. See Lopez v. United States, 373 U.S. 427, 83 S.Ct. 1381, 10 L.Ed.2d 462 (1963); cf. United States v. White, 401 U.S. 745, 91 S.Ct. 1122, 28 L.Ed.2d 453 (1971). As to the primary issue of whether the agents trespassed when planting the electronic devices, defendants emphasize that Nasser’s office was assigned to him for his exclusive use, making the entry of the agents, unauthorized by him, a trespass. We agree with defendants that a government office as well as one in the private sector is not a public area, and trespass can be committed against the one who occupies the office. This is illustrated in United States v. Blok, 88 U.S.App.D.C. 326, 188 F.2d 1019 (1951), where a supervisor’s consent to a search by local police of a government employee’s desk for evidence of a crime unrelated to the employee’s work was held invalid under the fourth amendment. In so doing, however, the court said, “No doubt a search of it without her consent would have been reasonable if made by some people in some circumstances. Her official superiors might reasonably have searched the desk for official property needed for official use.” We believe this element of work-relatedness is where the trespass line must be drawn. The surveillance in the present case was undertaken by representatives of IRS to determine whether its work was being properly performed by an IRS employee in the areas assigned to him for the purpose of such work. We conclude, because of the relationship of the surveillance activity to the work Nasser was to perform that there was no trespass involved and that under the law as it stood before Katz, there was not an unreasonable search and seizure within the fourth amendment. In United States v. Collins, 349 F.2d 863 (2d Cir. 1965), cert. denied, 383 U. S. 960, 86 S.Ct. 1228, 16 L.Ed.2d 303 (1966), the warrantless search of a Customs Service employee’s jacket by Customs agents for emeralds stolen from Customs mail was held reasonable: “We have no doubt that the search of defendant’s work area, including the surface and interior of his desk, conducted by Customs Agents McDonnell . . . was a constitutional exercise of the power of the Government as defendant's employer, to supervise and investigate the performance of his duties as a Customs employee. . . . The agents were not investigating a crime unconnected with the performance of defendant’s duties as a Customs employee.” The late entry of electronic surveillance into fourth amendment doctrines requires that we analogize seized words to seized “persons, papers and effects.” Here the words seized were related and part of Nasser’s official function, and by analogy were “things” related to Nasser’s official duties. See Berger v. New York, 388 U.S. 41, 51, 87 S.Ct. 1873, 18 L.Ed.2d 1040 (1967). Appellants rely on this court’s decision in United States v. Hagarty7 holding that an intercepted conversation between Nasser and Hagarty could not be used to convict Hagarty. Although Hag-arty (without the benefit of Desist) applied Katz retroactively, appellants argue that portions of Hagarty were independent of Katz in holding that the IRS could not conduct electronic surveillance of its own employee in his assigned office, for the purpose of detecting his failures to perform his duties. We conclude, however, that any discussion in Hagarty which might be so interpreted was predicated on Katz principles, and that, by reason of Desist, does not govern transactions occurring before December 18, 1967, the date of the Katz decision. Appellant Hauff raised the issue that the government not only must report in full all instances and surrounding circumstances of electronic surveillance which it discloses, but must also affirmatively deny that the defendant was subjected to any other electronic surveillance. And where the government admits to eavesdropping and is prepared to argue its legality, appellant maintains he is entitled to an adversary hearing at which he may cross-examine the government witness. Appellant relies on a “general reading” of Alderman v. United States, 394 U.S. 165, 89 S.Ct. 961, 22 L.Ed.2d 176 (1969), for the claim that the government must formally and affirmatively state that it has disclosed in full. We do not find this in Alderman because that case dealt with the procedure to be followed “when an illegal search has come to light.” Id. at 183, 89 S.Ct. at 972. Furthermore, the rationale of Alderman was not “ . . . lack of confidence in the integrity of government counsel or the trial judge, but only [that] the in camera procedures at issue there would have been an inadequate means to safeguard a defendant’s Fourth Amendment rights.” Taglianetti v. United States, 394 U.S. 316, 317, 89 S.Ct. 1099, 1101, 22 L.Ed.2d 302 (1969). The problem of insuring access to information in the hands of the government which it has a duty to disclose would be an important issue in a proper case. But we do not believe this is the case, both because the appellant came forward with no substantial basis for doubting that the government engaged in unreported unlawful eavesdropping, and because we have reviewed the record of the suppression hearing and find, in the testimony, reason to believe that the government did disclose in full. Summarizing so far, we agree with the government that the records produced from the bugging device in Nasser’s office need not be disclosed to appellants; the questions concerning the pen register materials have been resolved; and there is no challenge with respect to recordings of interviews between appellants and representatives of the government. Appellants do not press, on appeal, the argument made in the district court that the interception of telephone messages in Nasser’s office by means of the “C” clamp violated 47 U.S.C. § 605 and entitled Nasser to a taint hearing on the material. Accordingly, we do not decide the point. After the trial, appellants discovered Administrative Circular No. 41 from the Secretary of the Treasury, dated June 9, 1961. It states a policy against monitoring telephone calls to or from Department offices, and provides that the right to use mechanical or electronic recording equipment shall be subject to prior approval of the Secretary or the Under Secretary. The government counters with a memorandum from the Secretary, dated June 20, 1961, which asks that chiefs of Treasury enforcement agencies be advised “that Administrative Circular No. 41 is not intended to affect investigative techniques currently employed by them in pursuance of their responsibility under existing laws and regulations.” In the absence of material amplifying those two documents, we conclude that Circular No. 41 was not directed at surveillance in the course of, internal investigations such as employed in Nasser’s office. VI. Claims of Procedural Error before and at trial. Appellants make a number of other arguments concerning procedural steps. Some of the questions would be unlikely to be presented in the same posture in the event of a retrial. In one instance, we do agree that the district court made an erroneous ruling. Circella was a government witness. The defense suggested that his testimony was motivated by a promise of immunity. On cross-examination he admitted meeting with Inspector Weber on a number of occasions in company with Circella’s attorney. He said he did not remember the matter of immunity coming up and that the government had not made any promises to him for testifying. The defense called the attorney as a witness and asked if he had been present at the meeting of Circella and the representatives of the government. He refused to answer on the ground of his client’s instructions to assert the attorney-client privilege, and the court sustained his position. We think it clear that the communications in the course of those meetings were not privileged. Leathers v. United States, 250 F.2d 159, 166 (9th Cir. 1957), citing Wigmore on Evidence, 3d Ed., Vol. 8, p. 602, § 2311. The judgments are reversed and the causes remanded for further proceedings consistent with this opinion. STEVENS, Circuit Judge (dissenting in part). The lawyer, not the client, is primarily responsible for avoiding conflicts of interest. Indeed, in numerous situations the client may be unaware of the potential conflict; in others, he might reasonably assume that the conflict is unobjectionable. In such cases, compliance with § 207(a) is solely the responsibility of the lawyer; since the client’s consent is then merely an element of the lawyer’s crime, it does not create a conspiracy. Cf. Gebardi v. United States, 287 U.S. 112, 119-123, 53 S.Ct. 35, 77 L.Ed. 206. But there are cases in which the client’s involvement is of critical importance. If the client knows the disqualifying chapter in the lawyer’s history, and also is conscious of the illegal character of the employment, and nevertheless retains him, it is probable that he is motivated by a desire to obtain an advantage that the law specifically forbids. In such a case the client’s intent, unlike the mere acquiescence of the concubine, characterizes a bargain which is more corrupt than the substantive offense itself. Such a bargain, in my opinion, is a conspiracy within the meaning of 18 U.S.C. § 371. United States v. Holte, 236 U.S. 140, 145, 35 S.Ct. 271, 59 L.Ed. 504. In this case the jury found that the lawyer and his client were partners in such a corrupt bargain. Comments by the client acknowledging the retainer and its illegal character were therefore against his penal interest and admissible against the lawyer. See Rule 804(b)(4) and Advisory Committee note thereon, Rules of Evidence for the United States Courts and Magistrates. Cf. Chambers v. Mississippi, 410 U.S. 284, 93 S.Ct. 1038, 35 L.Ed.2d 297. Hauff’s declarations to Weber, Hanel, McAdams, and Circella, which were only admitted against Hauff, would not violate Nasser’s right of confrontation as interpreted in Bruton v. United States if they were either admissible against Nasser “under traditional rules of evidence,” see 391 U.S. 123, 128 n. 3, 88 S.Ct. 1620, 20 L.Ed.2d 476, or if their trustworthiness is otherwise supported by adequate “indicia of reliability.” See Dutton v. Evans, 400 U.S. 74, 89, 91 S. Ct. 210, 27 L.Ed.2d 213 (opinion of Mr. Justice Stewart). Since it seems unlikely that the impact of Hauff’s declarations on the jury was disproportionate to their reliability, I question the validity of the Bruton objection to most of those declarations. I concur in part IA, IB, IC, V and VI of Judge Fairchild’s opinion. . 18 U.S.C. § 207(a) (1964) provides, “Whoever, having been an officer or employee of the executive branch of the United States Government, of any independent agency of the United States, . . . after his employment has ceased, knowingly acts as agent or attorney for anyone other than the United States in connection with any judicial or other proceeding, application, request for a ruling or other determination, contract, claim, controversy, charge, accusation, arrest, or other particular matter involving a specific party or parties in which the United States is a party or has a direct and substantial interest and in which he participated personally and substantially as an officer or employee, through decision, approval, disapproval, recommendation, the rendering of advice, investigation, or otherwise, while so employed, . . . “Shall be fined not more than $10,000 or imprisoned for not more than two years, or both . . . ” . See ABA Code of Professional Responsibility, D.R. 9-101(B), ABA Canon 36, 7 Am.Jur.2d 141, Attorneys at Law § 158. . Chadwick v. United States, 141 F. 225 (6th Cir. 1905), relied on by the government, dealt with a statute providing a penalty for an officer of a bank who wilfully certified a check when there were not sufficient funds on deposit. Mrs. Chadwick, not an officer, was convicted of conspiring with an officer unlawfully to certify her check. The court held that the Wharton rule did not apply because the officer may be guilty “without the guilty complicity of the drawer or any other person.” The court did not directly address the Gebardi type question of whether Congress’ omission to provide a penalty under any circumstances for a person seeking certification of such a cheek indicated an intent that such person not be punished for such request. Considering the differences between the situations dealt with in the statute before the court in Chadwick and the statute here, it does not seem that the answers need be the same. . The two defendants in Bruton apparently had not both been charged with conspirmg to commit the offense of which both were convicted. We think, however, that the principle of Bruton necessarily applies to a joint trial of defendants charged with conspiracy. If the jury hears of an out of court declaration of defendant Mo. 1, not in furtherance of a conspiracy independently established and not otherwise admissible against defendant No. 2, but inculpating defendant No. 2, an instruction to the jury to disregard the declaration as to defendant No. 2 is not an adequate substitute for his constitutional right of cross-examination. . This IRS surveillance of Nasser was also involved in United States v. Hagarty, 388 F.2d 713 (7th Cir. 1968). . The Supreme Court had not yet decided Alderman v. United States, 394 U.S. 165, 89 S.Ct. 961, 22 L.Ed.2d 176 (1969), under which an in camera inspection of unlawfully obtained materials would not have sufficed. . 388 F.2d 713 (7th Cir. 1968). . See Nardone v. United States, 308 U.S. 338, 341, 60 S.Ct. 266, 84 L.Ed. 307, 312 (1932); Gordon v. United States, 438 F.2d 858, 865-866 (5th Cir. 1971). . Gebardi involved mere “concurrence without more,” see 287 U.S. at 120, 121, 122, 123, 53 S.Ct. 35; Holte was distinguished, not overruled. In this case, however, the client’s wrongful intent is not an element of the lawyer’s substantive offense.

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UNITED STATES of America v. Hilton BENN, Jr., Appellant. UNITED STATES of America v. James W. HUNT, Appellant. Nos. 71-1501, 71-1547. United States Court of Appeals, District of Columbia Circuit. Argued June 5, 1972. Decided Dec. 1, 1972. As Amended March 8, 1973. Rehearing Denied March 19, 1973. Mr. H. Stewart Dunn, Jr., Washington, D. C. (appointed by this Court), for appellant in No. 71-1501. Mr. Julian H. Singman, Washington, D. C. (appointed by this Court), for appellant in No. 71-1547. Mr. Harry J. McCarthy, Asst. U. Atty., with whom Messrs. Harold H. Titus, Jr., U. S. Atty., John A. Terry, and John G. Gill, Jr., Asst. U. S. Attys., were on the brief, for appellee. Mr. Thomas A. Flannery, U. S. Atty. at the time the record was filed, also entered an appearance for appellee. Before BAZELON, Chief Judge, Justice CLARK, of the Supreme Court of the United States and WILKEY, Circuit Judge. Sitting by designation pursuant to Title 2,8, U.S.C. § 294(a). BAZELON, Chief Judge: Appellants were indicted for rape while armed, rape, and assault with a dangerous weapon. The court dismissed the rape charges and appellants were convicted of assault with intent to commit rape while armed and assault with a dangerous weapon. Appellant Hunt was also convicted on charges of carrying a dangerous weapon. The issues are: (1) whether the trial judge erred in failing to order a psychiatric examination of the mentally retarded prosecutrix for the purpose of the court’s determination of competency or to aid the jury in assessing the credibility of her testimony; (2) whether, in any case, the judge erred in determining that the prosecutrix was a competent witness as a matter of law; and (3) whether appellants were properly convicted on charges of assault with intent to commit rape while armed and assault with a dangerous weapon, arising from the same transaction. I. Appellants were arrested in a blind alley by police officers responding to a report that a woman in the alley was screaming for help. At trial, the neighbor who had reported the incident testified that, having been awakened by screams, she saw two men leading a young woman into the alley. After calling and directing police to the alley, she saw two men, dressed similarly to those she had seen earlier, being taken from the scene by the police. The arresting officers testified that when they entered the alley, appellants were crouched over a nude girl, but upon seeing policemen they straightened up and walked away from her. The victim was described as appearing frightened and nervous and having a bruise over her eye, scratches and handmarks on her neck, and dirt in her hair. She told the officers that both appellants had raped her and that Hunt had struck her on the head with a gun. The police recovered a switchblade knife from appellant Benn and a revolver was found next to one of the victim’s discarded shoes. Other items of her clothing as well as her purse and its contents were scattered about the alley. The prosecution’s primary witness, the complainant, is a mentally retarded girl of 18. In order to determine her competency, the trial judge held a hearing out of the presence of the jury at which the girl’s father testified that her memory was at times inconsistent and admitted that she did fantasize but that her flights of fancy were always innocuous and she never totally fabricated anything. She is usually able to accurately describe what she has observed and would be likely to retain an impression of a traumatic event, he claimed. On voir dire examination, the prosecutrix expressed an understanding of the meaning of an oath and related a comprehensible narrative of the events surrounding the crime. The judge reserved final ruling on the girl’s testimony pending an evaluation of the degree of corroborative evidence produced, holding only that she had the “rudimentary qualifications to tell what she recalls.” (Tr. 90-1). At trial, the prosecutrix testified that she had been seized by the appellants and dragged screaming into the alley. They removed her clothes and assaulted her. Hunt hit her in the face with a gun; Benn threatened.her with a knife and tried to choke her. In attempting to explain what appellants had done to her, the complainant was unable to define rape but did graphically describe appellants’ acts. After hearing substantial evidence corroborating her testimony, the court found the complainant to be a competent witness. The jury was allowed to hear her testimony as well as evidence concerning her mental condition, albeit with a cautionary instruction. Although the prosecutrix was examined by a physician on the night of the alleged rape, the doctor did not testify at trial. Without medical or any other corroborative evidence of penetration, the trial judge dismissed the rape charges and submitted to the jury the lesser included offense of assault with intent to commit rape while armed. II. The competency of the witness to testify before the jury is a threshold question of law committed to the trial court’s discretion. It remains for the jury, of course, to assess the credibility of the witness and the weight to be given her testimony. Competency depends upon the witness’ capacity to observe, remember, and narrate as well as an understanding of the duty to tell the truth. It also requires an assessment of the potential prejudicial effects of allowing the jury to hear the testimony. Mental retardation may be so severe, capabilities so impaired, and the testimony so potentially prejudicial that it should be barred completely by the judge. Or there may be sufficient indications of a witness’ capacity and of the reliability of her testimony that it should be heard and assessed by the jury, albeit with a cautionary instruction. A mentally defective rape prosecutrix presents a particularly difficult problem for both judge and jury. It is generally agreed that sexual assault charges by mentally abnormal girls should be subjected to great scrutiny. There is real danger of contrivance or imagination — the events may seem real to the girl even though they exist only in her own mind. Yet that testimony may arouse enough sympathy to make an innocent man the real victim. To assist the court in making its competency decision, to aid the jury in assessing credibility, or to serve both purposes, the trial judge may order a psychiatric examination to obtain expert testimony concerning the degree and effect of a witness’ disability. Wigmore has suggested that the danger of false accusations and the potential for prejudicial impact is so severe in sexual assault cases that every sex offense complainant should be examined. We think, however, that any such rigid rule is precluded by countervailing considerations. For example, a psychiatric examination may seriously impinge on a witness’ right to privacy; the trauma that attends the role of complainant to sex offense charges is sharply increased by the indignity of a psychiatric examination; the examination itself could serve as a tool of harassment; and the impact of all these considerations may well deter the victim of such a crime from lodging any complaint at all. Since there is no exact measure for weighing these kinds of dangers against the need for an examination, the decision must be entrusted to the sound discretion of the trial judge in light of the particular facts. In the present case the trial court found that the prosecutrix demonstrated an understanding of her duty to tell the truth and a capability to observe and remember. A comprehensible narrative does emerge from the sum of her testimony. Also, as the cautious trial judge noted before allowing the witness to testify, there was substantial corroboration to her testimony giving extrinsic assurance of its reliability. Finally, the judge had the benefit of the girl’s father’s testimony as to her retardation to assist him. Accordingly, the trial judge’s determination of the prosecutrix’s competency, without a psychiatric examination, will not be disturbed. The dangers which must be considered in determining whether a mentally retarded rape prosecutrix is a competent witness must also be considered by the jury in assessing her credibility, particularly since “the jury’s estimate of the truthfulness and reliability of a given witness may well be determinative of guilt or innocence. .” The jury may be aided in its task by the results of a psychiatric examination, even when such an examination is not necessary to the judge’s determination of competency. When an examination should be ordered to aid the jury is also a judgment, involving a balancing of need against dangers, which is committed to the discretion of the trial judge. Here, the strong indications of reliability of the prosecutrix’s testimony weigh heavily against the need for an examination. Also, the jury was not left to make its credibility decision without information as to the witness’ defect; it had the frank and comprehensive testimony of the girl’s father to assist it. In these circumstances, we cannot say that the trial judge erred in failing to order a psychiatric examination of the witness to aid the jury. III. The applicable rule for determining whether there has been a merger of two charges arising from the same act or transaction was set out in Blockburger v. United States, 284 U.S. 299, 304, 52 S.Ct. 180, 182, 76 L.Ed. 306 (1932): [W]here the same act or transaction constitutes a violation of two distinct statutory provisions, the test to be applied to determine whether there are two offenses or only one is whether each provision requires proof of an additional fact which the other does not. The elements of assault with intent to commit rape while armed are: 1) an assault, 2) with an intent to have intercourse and to achieve penetration against the victim’s will, using such force or threat of force as is necessary to overcome her resistance, 3) while “armed with . . . any pistol ... or other dangerous or deadly weapon.” The proof of these elements would also be proof of the elements of the charge of assault with a dangerous weapon: 1) an assault, 2) with a criminal intent, albeit a more general one, and 3) with a dangerous weapon. The assault with a dangerous weapon count therefore merges with and becomes a lesser included offense to the charge of assault with intent to commit rape while armed, barring the conviction on the lesser offense. Accordingly, the convictions rendered under 22 D.C.Code -§ 502 are vacated and appellants’ other convictions are affirmed. IV The writer of this opinion, speaking for himself, believes that another matter deserves comment. Although appellants do not raise the issue, the record before us suggests the possibility that appellants have been denied their constitutional rights to the effective assistance of counsel. As indicated earlier, a physician at D.C. General, a municipal hospital, examined the prosecutrix, at the instance of the police, shortly after the alleged assault. No one, however, called him to testify at appellants’ trial. This apparently disturbed the conscientious and perceptive trial judge who inquired as to the physician’s absence. The following disquieting colloquy ensued: THE COURT: . . . [T]he thing that concerns me is the fact that although corroboration in a circumstance like this is normally obtained by the testimony of a physician who examined the girl at the hospital. That physician has not been offered as a witness. Now, I take it from that no one of the three felt the testimony of that physician would strengthen his ease. Of course, the Government has the burden of proof beyond a reasonable doubt on this issue as well as any other issue of fact in this type of case. I am wondering why the Government did not call the doctor. THE PROSECUTOR: May I tell you, your Honor? THE COURT: Why certainly. THE PROSECUTOR: I talked to the doctor on the phone. In fact, I subpoenaed him and he never showed up yesterday. He called and left his phone number where he could be reached.- There was a completely negative medical report, completely negative as to bruises and scratches, abrasions, lacerations around the face, negative in all respects, completely negative as to any abnormality of mental health. I talked to the doctor on the phone and confronted him with the photographs [sic] I had told him I had photographs, described the mental condition as I knew it of the defendant. He conceded to me he had absolutely no idea that night she was retarded. He told me his method of operation was to ask alleged rape victim what injuries she had and only then would he look at them. I combined this with the knowledge that has been public in the papers recently [sic] and other prosecutors that the doctors at D. C. General are giving negative medical reports of rape victims so they won’t be called to court. THE COURT: Does your office have some responsibility? THE PROSECUTOR: Yes. Your Honor. THE COURT: Why don’t you assume that responsibility? Tr. 227-28. Unfortunately, the record suggests more questions than it answers. We are left to speculate as to why counsel failed to elicit the examining physician’s exculpatory testimony. It is, of course, possible to construct a scenario in which that decision was a wise tactical choice. It is equally possible to conjecture that counsel failed to investigate the question of the physician’s examination or were simply indifferent to the needs of their clients' cases. Which explanation comports with reality remains unknown. I am well. aware that there are dangers in attempting to second-guess the professional judgment of trial counsel. But to make the right to the effective assistance of counsel viable requires some assurance that counsel’s trial decisions actually reflect an exercise of his professional judgment. The question is not whether counsel would have done better by different choices, but only whether his trial decisions were informed, deliberate, and rational. In the circumstances of this case, I believe that the decision not to call the examining physician demands some assurance that counsels’ choice met this standard rather than reflecting counsels’ ignorance or indifference. My brethren point out, however, that there may have been strategic reasons for defense counsel not calling the physician. As I understand it, their disposition rests on the view that they cannot find on the record before us in this case sufficient indication that the standard has not been met. The Court of Appeals for the Third Circuit recently dealt with an ineffectiveness claim arising out of the unexplained failure of either defense or the prosecution to present a medical report- of the examination of the prosecutrix of a rape charge. Admitting that “there may indeed be various reasons why it was not offered,” the court refused to be lured into the quagmire of constructing after-the-fact explanations to rationalize counsel’s conduct. The court remanded the case because such surmise “cannot take the place of proof.” Evidence of the inadequacy of trial counsel will often be outside the trial record — in some cases precisely because counsel has been ineffective. For example, when counsel has failed to conduct an investigation, the record may be barren of mention of the witnesses he would have called or defenses he would have raised had he done so. It may be that only the inquiry of the attentive trial judge will bring to light the question of effectiveness of counsel. But, in such circumstances, appellant may ventilate a claim of ineffectiveness without being relegated to collateral attack. A meritorious ineffectiveness claim is available on a motion for a new trial. The claim may be supported by evidence dehors the record without a showing of due diligence. Accordingly, I would affirm appellants’ convictions (except those rendered under 22 D.C.Code § 502). V Nor is the effectiveness of defense counsel the only problem that concerns me in this matter. The court today acknowledges that the charge of rape could not be sustained without the testimony of the examining physician. Plainly, the prosecutor intended neither to call the doctor nor to move for dismissal of the rape charges. It would therefore appear that the prosecution was prepared to gain a conviction without evidence it knew to be essential. In addition, as the colloquy described above shows, the prosecutor advised the court that “. . . the doctors at D. C. General [are] giving negative medical reports [on] rape victims so they won’t be called to court.” Every citizen has an obligation to come forward with evidence crucial to a criminal prosecution. According to government counsel, there was not only a disregard for that duty, but also an unjustifiable circumvention of legal and professional responsibilities by doctors on the staff of a public hospital. This situation demands an immediate, careful, and impartial inquiry by a representative of the Department of Justice into what action has been taken to insure that the offending doctors, their supervisors, and those city officials charged with the administration of the hospital properly fulfill their responsibilities. WILKEY, Circuit Judge, with whom concurs Mr. Justice CLARK. We concur in Parts I, II and III of Judge Bazelon’s opinion which speaks for the unanimous court. We disagree with Parts IV and V in which Judge Bazelon suggests that a new trial might be appropriate in this case due to the alleged inadequacy of trial counsel. Since our view of the point raised differs from that expressed by Judge Bazelon, we feel obligated to say why. Judge Bazelon’s concern arises from the failure of the physician who examined the rape victim to appear. “The conscientious and perceptive trial judge” inquired as to the physician’s absence and commented: Now, I take it from that no one of the three felt the testimony of that physician would strengthen his case. Of course, the Government has the burden of proof beyond a reasonable doubt on this issue as well as any other issue of fact in this type of case. We suggest that those two sentences of Judge Gasch should have assuaged all of our dissenting colleague’s fears. The Government does bear the burden of proof beyond a reasonable doubt. Without the testimony of a physician, it is much more difficult than otherwise to prove a charge of rape, and the trial court here recognized that by dismissing the original charges of rape while armed and simple rape. The appellants were convicted of assault with intent to commit rape while armed, a lesser included offense, which may very well have been required because of the absence of the m'edical testimony. When Judge Bazelon says “we are left to speculate as to why, counsel failed to elicit the examining physician’s exculpatory testimony,” he not only ignores Judge Gasch’s statement, he does not give sufficient credit to the astuteness of defense counsel. Without any medical testimony in the record, each defense counsel knew he was highly likely to get his client off on the serious charges of rape while armed or simple rape, and this did occur. Both defense counsel were informed of the physician’s negative written report after examination of the victim. Each confronted the probability that if he introduced the report, it would be followed by the Government’s putting the doctor himself on the stand. Defense counsel had heard the colloquy between the prosecutor and the court, to the effect that the prosecutor “talked to the doctor on the phone and confronted him with the photographs [sic] I had told him I had photographs, described the mental condition as I knew it of the defendant. He conceded to me he had absolutely no idea that night she was retarded.” If the defense had offered either the physician’s negative report or the physician himself, the physician would have been drastically embarrassed by photographs showing the bruised and cut condition of the face of the victim in contrast to his own completely negative report as to bruises, scratches, etc. The jury might have believed the doctor in contrast to a police officer witness, if that were all the prosecution had to offer, but the photographs would have forced the doctor into admitting in front of the jury what he had told the prosecutor. He conceded to me he had absolutely no idea that night she was retarded. He told me his method of operation was to ask alleged rape victim what injuries she had and only then would he look at them. I combined this with the knowledge that has been public in the papers recently [sic] and other prosecutors that the doctors at D.C. General or [sic] giving negative medical reports of rape victims so they won’t be called to court. The physician’s negative report on indicia of rape itself would thus likewise have been impeached, and who knows that the doctor would then have said? Certainly defense counsel did not. Given this situation as to the physician’s possible testimony, both defense counsel made a calculated trial tactical judgment and did not offer either the physician’s report or the physician in person. It is not for this Court to say whether a witness who was never called would be convincing or not — to do so would not only infringe on defense counsel’s and the jury’s role but would also, amount to little more than idle speculation. The doctor’s testimony was definitely a double-edged sword. The defense counsels’ tactics paid off by securing the dismissal of the rape while armed and the rape charges; a different tactic may have made sure of the conviction of the defendants for rape while armed, a much more serious offense. It is obvious that the trial judge, one of the most experienced in the courtroom of any on our District bench, thoroughly understood the situation in regard to the trial strategy of the prosecutor and the two defense counsel, made inquiry of it, saw that the defense was fully informed of all the facts, and very properly left it up to two experienced counsel as to what in the best interest of their clients they desired to do about it. In light of the colloquy between bench and counsel, in light of the complete revelation by the prosecution to the ■ defense not only of the physician’s report but also of his comments in the telephone conversation, we cannot understand Judge Bazelon’s intimation that counsel’s “trial decisions were [not] informed, deliberate and rational.” How could counsel have been better informed ? ' What now will be gained by a remand to the trial court — except the prolongation of the time before these defendants embark upon the punishment a judge and jury have found they deserve? We have noted that the two defense counsel have been admitted to the bar for 16 and 8 years, respectively, and judging from this record are not novices at defending criminal cases. We have examined their closing arguments and, while neither would rank as a classic at the bar, the facts, issues, and dramatis personae of this case hardly called for the intellectual and forensic powers of a Webster or Darrow. All convictions, except those rendered ' under 22 D.C.Code § 502, are Affirmed. . 22 D.C.Code ¶¶ 2801, 3202. . 22 D.C.Code ¶ 2801. . 22 D.C.Code ¶ 502. . 22 D.C.Code ¶¶ 501, 3202. . 22 D.C.Code ¶ 3204. . She was unable, however, to make any facial identifications. Tr. 60. . The witness said that “Both of them stuck their privates in me between my legs.” Tr. 191. . The physician’s failure to testify is discussed later in this opinion. See Tr. 227-28. . Doran v. United States, 92 U.S.App.D.C. 305, 306, 205 F.2d 717, 718, cert. denied, 346 U.S. 828, 74 S.Ct. 49, 98 L.Ed. 352 (1953). . District of Columbia v. Armes, 107 U.S. 519, 521-522, 2 S.Ct. 840, 27 L.Ed. 618 (1882); In re Penn, 143 U.S.App.D.C. 248, 251-252, 443 F.2d 663, 666-667 (1970). . Watson, Psychiatry for Lawyers at 95 (1968); Weihofen, Testimonial Competence and Credibility, 34 Geo.Wash.L. Rev. 53, 74 (1965); see e. g. Overholser, The Psychiatrist and the Law 53-54 (1953); 3 Wigmore, Evidence 924(a) (3d ed. 1940). . The basis for ordering such examinations stems from the trial court’s inherent power to conduct those inquiries necessary to a full and fair adjudication. State v. Butler, 27 N.J. 560, 143 A.2d 530 (1958); see United States v. Klein, D.C.D.C., 271 F.Supp. 506 (1967); aff’d sub nom, Hamilton v. United States, 139 U.S.App.D.C. 368, 433 F.2d 526 (1970); Ballard v. Superior Court, 64 Cal.2d 159, 49 Cal.Rptr. 302, 410 P.2d 838 (1966). Although the trial counsel’s passing reference to “scientific evidence or medical evidence” (Tr. 38-39) does not constitute a motion for the court-ordered examination of the witness, such a motion was unnecessary since the court may sua sponte call its own expert witnesses. Fed.R.Crim.P. 28(a). . 3 Wigmore, Evidence 924(a) (3d ed. 1940); accord ABA Committee on Improvement of the Law of Evidence, Report (1937-38) ; Guttmacher, Psychiatric Evaluation of Offenders, 2 Bull. World Health Org. 243 (1950). . Wilson v. United States, 106 U.S.App.D.C. 226, 227, 271 F.2d 492, 493 (1959) (rejecting the Wigmore proposal). . After conducting an examination of the prosecutrix and hearing testimony from her father out of the presence of the jury, the judge found that she had the “rudimentary qualifications to tell what she recalls” ; she was clearly in a position to observe and seems to have recalled with some clarity the events which were the subject of her testimony. . See Proposed Rules of Evidence, Notes to ¶ 6-01, 46 F.R.D. 285 (1969). . Napue v. Ill., 360 U.S. 264, 269, 79 S.Ct. 1173, 1177, 3 L.Ed.2d 1217 (1959); cf. Giles v. Md., 386 U.S. 66, 87 S.Ct. 793, 17 L.Ed.2d 737 (1967). . People v. Russel, 69 Cal.2d 187, 193-195, 70 Cal.Rptr. 210, 216-218, 443 P.2d 794, 800-801, cert. denied, 393 U.S. 864, 89 S.Ct. 145, 21 L.Ed.2d 132 (1968). But cf. State v. Falcetano, 107 N.J.Super. 375, 258 A.2d 391 (1969). . See, e. g., Gore v. United States, 357 U.S. 386, 78 S.Ct. 1280, 2 L.Ed.2d 1405 (1958). . United States v. Bryant, 137 U.S.App.D.C. 124, 133, 420 F.2d 1327, 1336 (1969); Allison v. United States, 133 U.S.App.D.C. 159, 163, 409 F.2d 445, 449 (1969). . 22 D.C.Code ¶ 3202. . See United States v. Hill, 152 U.S.App.D.C. 213, 470 F.2d 361 (1972) (assault with a dangerous weapon conviction vacated when appellant also convicted of assault with intent to kill while armed as a result of the same event) ; United States v. Bryant, 137 U.S.App.D.C. 124, 132, 420 F.2d 1327, 1335 (1969) (assault is a lesser included offense to assault with intent to commit rape); cf. United States v. Hooper, 139 U.S.App.D.C. 171, 432 F.2d 604 (1970). . Compare Ingram v. United States, 122 U.S.App.D.C. 334, 353 F.2d 872 (1965) with United States v. Hill, 152 U.S.App.D.C. 213, 470 F.2d 361 (1972). In Ingram this Court held that there was not a merger of charges of assault with a dangerous weapon and assault with intent to kill arising out of the same act. Since the former count requires proof of the use of a dangerous weapon and the latter proof of an intent to kill, “each provision requires proof of an additional fact which the other does not.” Blockburger v. United States, 284 U.S. 299, 304, 52 S.Ct. 180, 182, 76 L.Ed. 306 (1934). Thus separate convictions were permissible. We also held, however, that convictions on both counts would support concurrent but not consecutive sentences, because doubts as to whether Congress meant to pyramid punishments should be resolved not only in favor of lenity but also consistent with a reasonable legislative intent. But cf. 23 D.C.Code § 112 (Supp. V 1972). In Hill, we held that convictions on charges of both assault with a dangerous weapon and assault with intent to kill while armed would result in the lesser charge being vacated even though, as here, concurrent sentences had been imposed. . We do not find it necessary to remand these cases to the District Court for re-sentencing on the greater offense. The cases in which we have followed such a procedure have involved convictions under the Federal Bank Robbery Act, 18 U.S.C. § 2113, hence been governed by Prince v. United States, 352 U.S. 322, 77 S.Ct. 403, 1 L.Ed.2d 370 (1957). United States v. Parker, 143 U.S.App.D.C. 57, 442 F.2d 779 (1971); Bryant v. United States, 135 U.S.App.D.C. 138, 417 F.2d 555 (1969). . My brothers speculate that photographs showing the “bruised and cut” condition of the victim’s face could have “drastically embarrassed” the physician. Opinion of Judge Wilkey, infra at of 155 U.S.App.D.C., at 1136 of 476 F.2d. But the following colloquy indicates that there is a serious question as to what these photographs do show: THE PROSECUTOR: Directing your attention to Government’s Exhibit No. 11 for identification, what, if any injuries did you — was intended to be shown? THE COURT: Doesn’t the picture speak for itself? % 5;* I am sure that is the rule . [as to laying the foundation for the introduction of photographs]. * * M: * # The Court will ask whether the picture is a fair and accurate representation of what you saw? THE POLICE PHOTOGRAPHER: These pictures show partly what was taken and due to the condition of the camera, it didn’t show fully exactly the darkness of the bruise, how it was, the size of the bruise, especially the one over her left eye. Tr. 150. . The doctor would have reported not only that there was no indication of penetration but also that there were no signs of a struggle on the person of the victim. The prosecutrix testified that she had been struck in the face with a pistol by Hunt and choked by Benn. Police witnesses corroborated this story by describing a bruise over the victim’s eye, allegedly a result of the pistol whipping, and scratch marks on her neck, as might have resulted from an attempted strangling. The physician’s contrary testimony could conceivably have not only created a substantial doubt as to the truthfulness of the complainant, the prosecution’s key witness, but also refuted the contention that there was an assault. There may, of course, be an assault without physical contact, but the prosecution in this case sought to prove a physical striking and resulting injuries. Hunt was linked to the gun found at the scene primarily by the prosecutrix’s testimony about his use of the weapon to strike her and the corroborating evidence of her facial injury. The physician’s testimony as to the lack of any such mark might have been exculpatory as to this element of the prosecution’s case as well. . See United States v. Mitchell, 104 U.S.App.D.C. 57, 65-66, 259 F.2d 787, 795-796 (1958) (Judge Fahy dissenting) (the court cannot bar inquiry into counsel’s exercise of his professional judgment and yet protect the client’s constitutional right); State v. White, 5 Wash.App. 283, 487 P.2d 243, 246 (1971) (in examining the acceptable boundaries of the exercise of judgment by counsel, the court could find ineffectiveness if counsel’s choice of trial tactics was not deliberate, no reasonable lawyer would have so acted, or the decision was a result of ignorance of the law or inadequate preparation). . Since, as my colleagues recognize, the charge of rape was never a threat, the defense had nothing to lose and everything to gain by directing all their efforts to the single purpose of securing an acquittal on the lesser included offenses. . My brothers observe that the defense counsel “are not novices at defending criminal cases.” Opinion of Judge Wilkey, infra, at - of 155 U.S.App.D.C. at 1137 of 476 F.2d. But counsels’ experience is hardly proof of effectiveness. The issue is what they did in this case. And I find little else in the record of this case that is reassuring as to counsels’ effectiveness. When asked how long he needed for his summation, one of the defense attorneys engaged in the following exchange with the court: THE COURT: I will give you— COUNSEL: I would like to move my car before 5 :00. THE COURT: I will allow ten minutes for each defendant unless you want more. COUNSEL: No, I think that enough. THE COURT : If you want it, you may have it. COUNSEL: I think I will be stretching it in ten minutes. . I hope the Court of Appeals doesn’t look upon the summation as a Hammond situation. ... I have enough trouble with the Court of Appeals that I was hollering and I gave a Hammond argument. THE COURT: I am not asking you to talk for a half an hour..... Tr. 236-7 When counsel finally gave his argument, it was little more than pro forma. . Opinion of Judge Wilkey, infra, at 16-18. . United States ex rel. Kent v. Maroney, 435 F.2d 1020 (3d Cir. 1970). . Brubaker v. Dickson, 310 F.2d 30 (9th Cir. 1962). See also, United States v. Washington, 154 U.S.App.D.C. _, 475 F.2d 357 (1973). . See, e. g., United States v. Thompson, 154 U.S.App.D.C. _, 475 F.2d 931 (1973); United States v. Moore, 432 F.2d 730, 739 (3d Cir. 1970); Tucker v. United States, 235 F.2d 238 (9th Cir., 1956). . People v. Ibarra, 60 Cal.2d 460, 34 Cal. Rptr. 863, 386 P.2d 487 (1963) (Justice Traynor, writing for the court, found counsel had been ineffective where he failed to move for the suppression of evidence due to a misapprehension of the applicable law) ; see, Plummer v. United States, 104 U.S.App.D.C. 211, 260 F.2d 729 (1958) (Judge Bazelon dissenting) (the dissent would have remanded the case for a hearing as to the reason for an unexplained failure to assert an insanity defense) . . In United States v. Simpson, 154 U.S.App.D.C. _, 475 F.2d 934 (1973) (Bazelon, Chief Judge, dissenting), the dissent suggested a mechnical device, a preparation report to be submitted by counsel before his client pleads or at the close of trial after the verdict had been rendered, to provide the trial and appellate courts with information about counsel’s effectiveness. See Id. at _, 475 F.2d at 940 and Appendix. . United States v. Benjamin Thompson, 154 U.S.App.D.C. _, 475 F.2d 931 (1973); United States v. Smallwood, 153 U.S.App.D.C. 387 at 392, 473 F.2d 98 (1972) at 103 (Bazelon, Chief Judge concurring); see Fed.R.Crim.P. 33; Marshall v. United States, 141 U.S.App.D.C. 1, 5 n. 11, 436 F.2d 155, 159, n. 11 (1970). The judgment as to whether there is a meritorious claim warranting such a motion should be made by appellate counsel on the basis of an investigation rather than by this court on the basis of pure speculation. . The pendency of an appeal does not inhibit the filing of a motion for a new trial, thus limiting its usefulness to appellate counsel. Fed.R.Crim.P. 33 states, . . if an appeal is pending the court may grant the motion only on remand of the case.” It is, however, settled law in criminal cases that the motion can be made without a remand and, if the district court indicates that it will grant the motion, then a motion for remand is made in the appellate court. Thus, when counsel on appeal finds an ineffectiveness issue as to which there is an inadequate record, he should file a motion for a new trial in the district court before the appeal is heard in this court. See Smith v. Pollin, 90 U.S.App.D.C. 178, 179, 194 F. 2d 349, 350 (1952).

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UNITED STATES of America v. Walter J. CHAVIS, Jr., Appellant. No. 72-1532. United States Court of Appeals, District of Columbia Circuit. Argued March 7,1973. Decided April 4, 1973. Robert H. Turtle, Washington, D. C. (appointed by this Court) for appellant. Richard C. Johnson, Washington, D. C. (also appointed by this Court), was on the brief for appellant. Richard L. Beizer, Asst. U. S. Atty., with whom Harold H. Titus, Jr., U. S. Atty., John A. Terry, and Robert J. Higgins, Asst. U. S. Attys., were on the brief for appellee. Before McGOWAN, TAMM and WILKEY, Circuit Judges. WILKEY, Circuit Judge: Appellant was charged with four counts of assault with intent to commit armed robbery and related offenses. There is little doubt on the facts, and appellant did not contest at trial and does not contest here that he committed the acts with which he is charged. His sole defense was that he was legally insane at the time of the offensé. His appeal is based on the allegation that he did not receive adequate psychiatric assistance to prepare this defense. Due to the absence in the record of certain critical information, we cannot determine at this time whether appellant was improperly denied psychiatric assistance. We therefore remand the case to the trial court to develop evidence and permit explanation of certain points presently obscured. I. Evidence and Trial Court Action Appellant has a history of psychological instability. In 1969 a military doctor recommended that he be released from the Army in part because of an observed propensity toward psychiatric illness. In 1970, after undergoing an operation, appellant was confined to the psychiatric ward of a Veterans Administration hospital because of violent, irrational outbursts. He was diagnosed as having an “anti-social personality” and being a “borderline schizophrenic.” On one occasion following his discharge from the VA hospital police had to be called to subdue appellant who was acting in an irrational manner. He was immediately taken to the psychiatric ward of the D. C. General Hospital where he spent 16 days; appellant’s admission was based upon a conclusion that he was “mentally ill.” Following his discharge appellant allegedly experimented with various drugs, including LSD. On 5 January 1971, four months after being released from the psychiatric ward of D. C. General, appellant committed the acts which led to his arrest. In April 1971 appellant’s counsel moved to have appellant examined pursuant to 24 D.C.Code § 301 to determine his competency to stand trial and his mental condition as of the date of the charged offenses. The motion was granted and appellant spent 15 days being examined in St. Elizabeths, a Government-operated psychiatric hospital. The St. Elizabeths report stated that appellant was competent to stand trial and was not suffering from a mental disease or defect on the date of the offense. In November 1971 appellant’s attorney moved for a second examination in order to verify the initial findings of the first court-ordered examination, and to permit the defense to determine if grounds existed to assert a defense of insanity. The motion was granted and appellant was referred to Legal Psychiatric Services, an agency of the Government. Appellant was examined for about 50 minutes by Dr. Maguigad of LPS, who reported that, while appellant was presently competent to stand trial, he had been “suffering from Schizophrenia Undifferentiated Type which substantially imparied [sic] his behavior at. the time of alleged offense. . . . ” Following this report appellant’s attorney wrote a letter ex parte to the trial judge, moving to have Maguigad appointed to serve as a defense witness under the provisions of 18 U.S.C. § 3006A, which provides for the allocation of money to pay for expert witnesses for indigent defendants. This request apparently was made because defense counsel felt that additional examinations by Dr. Maguigad would be necessary for him to serve as an effective witness, and that consultation between the doctor and defense counsel would be necessary in order to prepare an effective presentation to the jury. The trial judge took no action on the motion until a March 1972 calendar call, at which time appellant’s attorney in open court and before the prosecutor inquired as to the disposition of his request. Upon hearing that appellant had requested expert assistance, the prosecutor vigorously opposed the motion as being unnecessary and a waste of money in light of the psychiatric examinations already undertaken. The court ruled that Dr. Maguigad could not be appointed under § 3006A, ostensibly because there might be an apparent conflict of interest between his role as a court-appointed independent expert and his acting as a defense witness under § 3006A. Appellant immediately applied alternatively for another expert to be appointed; the Government opposed this as well. The court declined to appoint another doctor, saying: We are not going to continually appoint more and more psychiatrists. This is it. He has been examined by two psychiatrists .... Your motion is denied. The stated basis for appellant’s desire to receive more examinations from either Dr. Maguigad or another doctor was that counsel believed that Dr. - Maguigad’s 50-minute examination would have little weight in the jury’s mind when countered by the 15 days of examinations conducted by St. Elizabeths, the results of which supported the Government’s position. Indeed, appellant’s fears were borne out at trial. The Government seriously impeached Dr. Maguigad, both on his qualifications as an expert and his familiarity with the case. At the conclusion of the cross-examination of Dr. Maguigad, appellant’s attorney moved for a mistrial on the ground that appellant had been unlawfully denied psychiatric assistance sufficient to prepare an adequate defense. The trial court denied the motion. The jury subsequently found appellant guilty on all counts and appellant was sentenced to a jail term. II. Failure to Appoint Under Section S006A A. The Statutory Scheme 18 U.S.C. § 3006A is designed to provide indigent defendants in criminal cases with representation and expert service. It is clear that the Act comprehends within its definition of “expert services” the assistance of a psychiatric expert in preparing and presenting an insanity defense. The test to be applied in determining whether the court should provide such service consists of two factors: whether the defendant is financially unable to obtain the required service himself, and whether the service is necessary to the preparation and presentation of an adequate defense. A defendant’s indigency and need for assistance under § 3006A is to be determined by an ex parte proceeding. There is no dispute in this case that appellant is financially unable to obtain the required service himself. The case turns on whether or not the service requested is necessary to an adequate defense. The purpose and nature of a § 3006A appointment is entirely different from an examination conducted by an order of the court. The latter is conducted to serve the court in a completely nonpartisan manner. While the opinions of such an expert may assist one side or the other in a case, this is not the primary purpose for the expert’s appointment. The expert appointed under § 3006A, however, is not originally and primarily an aide to the court, but rather is intended to serve the interests of the defendant. The Fifth Circuit has noted this distinction in analyzing the effect of examinations conducted under provisions analogous to the statute under which defendant was referred to St. Elizabeths and sent to PLS: Sec. 4244 concerns examination to determine if the defendant is competent to stand trial. The court appoints a psychiatrist who examines the accused and reports to the court. Rule 28 authorizes the court to appoint its own expert witness, who is expected to be neutral and detached. He advises the parties of his findings. See Rule 28 and Wright, Federal Practice and Procedure, § 452. The § 3006A(e) expert fills a different role. He supplies expert services “necessary to an adequate defense,” which embraces pretrial and trial assistance to the defense as well as availability to testify. His conclusions need not be reported to either the court or the prosecution. It has been established in this Circuit that under some circumstances § 3006A commands that psychiatric examinations be ordered and that the statute envisions that experts will aid in the preparation for trial as well as testify at the trial itself. Heretofore it has not been necessary to delineate the precise parameters of the requirements and the trial court’s discretion in making such appointments. It is clear that court-ordered psychiatric examinations such as the first two conducted in this case are not necessarily sufficient so that no examinations need be provided under § 3006A. The Eighth Circuit, for example, in United States v. Schultz, held that the trial judge had abused his discretion in refusing to order the appointment of a § 3006A expert. In that case the defendant had a history of psychopathic behavior. Likewise in Schultz the defendant was committed for observation in a Government hospital to determine his competency to stand trial. This report indicated that defendant was competent but that defendant suffered from some form of psychological disturbance. After noting that this was apparently a case of first impression, the court held that it was error under these circumstances for the trial court to deny defendant’s request under § 3006A for psychiatric assistance in preparing its case. It cannot be true, however, that a defendant always has a right to a psychiatrist under § 3006A. Under some circumstances the court would have the responsibility to prevent abuses from defendants asking for multiple examinations. Thus the Fifth Circuit has noted that “[t]he functions of the two [types of] appointments are different, but the court has a responsibility to prevent abuse of the availability of appointive processes.” The answer to this question of when psychiatric assistance is “necessary” depends upon two variables. First, a judge should consider the likelihood that an insanity defense is warranted. Obviously a court should not be required to appoint a psychiatrist if there is absolutely no reason to think that such a plea would be successful. A trial judge’s evaluation of this factor could, among other things, be based upon a prior medical history of psychological imbalance, testimony by those acquainted with the defendant regarding his actions and apparent mental state, or the judge’s own evaluation of the defendant’s demeanor. Second, the judge should consider whether the defendant has received sufficient psychiatric assistance from other sources; an adequate defense under some circumstances could be prepared based on the findings, assistance and testimony of a court-appointed psychiatrist. The issue does not revolve around the technical fact of under what provision a psychiatrist is appointed, but rather the substantive issue of whether the defendant received the assistance “necessary to an adequate defense.” Such assistance could come from the testimony and aid of court-appointed psychiatrists, independent charitable institutions, or even a concerned independent psychiatrist who is donating his time to the ends of justice. These and other sources of psychiatric assistance might, under some circumstances, provide a defendant with the expert assistance needed to prepare “an adequate defense” and thereby render an appointment under § 3006A “unnecessary.” The record before us in this case provides ample information regarding the likelihood that an insanity defense might be warranted. A fairly complete description of appellant’s psychiatric history was presented at trial and was the subject of substantial enlightening debate by the attorneys. This court is, therefore, able to evaluate this element of “need” in reviewing the trial court’s refusal to appoint a psychiatrist under § 3006A. There is, however, relatively much heat but little light in the record regarding the second element to be considered —whether appellant actually received expert assistance sufficient for the preparation of an adequate defense. We know from the record that Dr. Maguigad did testify at trial on behalf of defendant. This standing alone does not necessarily mean that defendant received the psychiatric assistance necessary to an adequate defense. As every trial lawyer knows, there is much more to presenting a defense than simply presenting testimony. Some testimony is more convincingly presented than other, and no lawyer would rely on a witness to simply “tell his story.” Particularly with expert witnesses, ample pretrial study by the expert and consultation between lawyer and witness are usually invaluable. The record also reflects that defendant’s lawyer strenuously protested that Dr. Maguigad had been either unwilling or unable to examine defendant aside from the initial 50-min-ute interview, to spend time familiarizing himself with defendant’s medical history, or to consult with defendant’s lawyer regarding the substance of what would be testified to at trial. On the state of the record before us we do not know if these allegations are true or, if true, whether they affected the quality of the defense to such an extent that it must be described as “inadequate.” In order to illuminate the situation we remand the case for further proceedings to develop facts through adversary proceedings on certain elements of the case. B. Areas of Inquiry To assist the trial judge and attorneys in this inquiry we outline the areas and issues which are necessary to be explored. It is not our intention to limit inquiry to these matters; the proceeding should inquire into any and all matters that would be relevant to determining the obscured issues in this case. 1. With regard to Dr. Maguigad: (a) His relations with appellant.-— Did he have further consultations with appellant prior to trial? If so, what was the nature of these consultations? If not, why did he not have further consultations? Was Dr. Maguigad asked by appellant’s attorney to examine appellant further? Did Dr. Maguigad ever state that further examinations would be necessary or desirable in rendering his expert judgment at trial? Does he now so believe? If appellant could have paid for additional examinations, would he have examined the appellant further ? (b) His relationship with appellant’s attorney. — Did Dr. Maguigad consult with appellant’s lawyer in the preparation of appellant’s defense ? If so, what were the time, nature, and extent of those consultations? If not, why not? Did appellant’s lawyer request that Dr. Maguigad consult with him prior to trial? If appellant could have have paid for Dr. Maguigad’s consultation prior to trial, under those circumstances would he have consulted with appellant’s lawyer? (c) Nature of Dr. Maguigad’s relationship with LPS. — Does Dr. Maguigad work for LPS full-time or does he have a separate practice? If Dr. Maguigad had examined appellant further or consulted with appellant’s lawyer, would he have been paid by LPS for his services? Would LPS have received the compensation? If he did not examine or consult, was it because of any policy on the part of LPS that forbids more than one examination of a patient referred by a court? If Dr. Maguigad had examined appellant again, would it have been in his capacity as an employee of LPS or as a private practitioner? 2. With regard to what efforts appellant’s trial counsel made to obtain further consultation and assistance from Dr. Maguigad: Did he ask that Dr. Maguigad consult with him regarding the preparation of the case? If so, what was Dr. Maguigad’s response? Did appellant’s counsel have any contact with any other employee of LPS on this matter? If so, what was the nature and extent of this contact? 3. There are some matters that can best be elucidated by the head or another officer authorized to speak for Legal Psychiatric Services. Does LPS have a policy regarding the extent of time its doctors may spend with a patient referred by court? Does LPS have a policy that prohibits its doctors from taking as outside patients anyone first examined by that doctor as a referral by a court? Does LPS permit its doctors to consult with attorneys in the preparation of a defense that is based in part on a report rendered pursuant to a court order? Is the doctor paid by LPS for such services? It is obvious that at least Dr. Maguigad, appellant’s trial counsel, and an authoritative representative of Legal Psychiatric Services will need to be examined. III. Need for an Ex Parte Hearing Section 3006A states that eligibility for appointment under the section will be determined in an ex parte proceeding. The Fifth and the Tenth Circuits have repeatedly held that failure to accord an ex parte hearing is reversible error. We agree that the statutory scheme means that not to provide an opportunity for an ex parte hearing on the matter does constitute error. We are satisfied that the 15 February-1972 letter of appellant’s trial counsel to the trial judge was an ex parte submission of the issue to the trial judge. The matter was only raised at the 20 March 1972 calendar call because the request had not yet been acted on. The attendance and participation of the prosecutor at the disposition of appellant’s request was in violation of the statute’s requirements. Trial counsel did not, however, object at the time to the presence of the prosecutor, or to the prosecutor’s repeated intervention in a matter which by the plain language of the statute was definitely none of his business. However, as noted above, we do not yet know to what extent, if any, appellant was prejudiced by the failure to appoint a psyciatrist. It seems likely that the degree to which appellant’s rights were affected by the failure to conduct an ex parte hearing may be closely related to the degree of prejudice caused by the failure to appoint a psychiatrist under § 3006A. We, therefore, reach no conclusion and make no holding on this issue at this time. IV. Assault with a Dangerous Weapon Appellant was charged and convicted of both “assault with intent to rob while armed” and “assault with a dangerous weapon.” It has been recently established in this Circuit that assault with a dangerous weapon is a lesser included offense of assault with intent to rob while armed. At this time we therefore vacate appellant’s conviction for assault with a dangerous weapon. V. Conclusion Appellant’s conviction for assault with a dangerous weapon is hereby vacated. We express no opinion at this time on the validity of the convictions on the remaining three counts. The record in this case is remanded to the District Court for a supplementary evidentiary inquiry on the matters discussed in Part II of this opinion. After receipt of the supplementary record this court will decide all remaining issues. So ordered. . Walter J. Chavis, Jr., was indicted in the United States District Court for the District of Columbia on 6 April 1971, on four counts of (1) assault with intent to commit robbery while armed (22 D.C. Code §§ 501 & 3202) ; (2) assault with intent to commit robbery (22 D.C.Code § 501) ; (3) assault with a dangerous weapon (22 D.C.Code § 502) ; and (4) carrying a dangerous weapon (22 D.C.Code 3204). . Services other than counsel. — Counsel for a defendant who is financially unable to obtain investigative, expert, or other services necessary to an adequate defense in his case may request them in an ex parte application. Upon finding, after appropriate inquiry in an ex parte proceeding, that the services are necessary and that the defendant is financially unable to obtain them, the court shall authorize counsel to obtain the services on behalf of the defendant. The court may, in the interests of justice, and upon a finding that timely procurement of necessary services could not await prior authorization, ratify such services after they have been obtained. 18 U.S.C. § 3006A(e) (1970). . Tr. at 7. . Defendant’s trial counsel at the hearing on 20 March 1972 was no doubt well aware of our decision of 3 June 1971 in United States v. Schappel, 144 U.S.App.D.C. 240, 445 F.2d 716, in which we had upheld a trial court’s determination from conflicting psychiatric testimony that the defendant was not mentally incompetent at the time of the robbery, on precisely the same ground feared by defense counsel here, i. e., that the examination at St. Elizabeths by the experts holding the accused competent was much more thorough and over a longer period of time than that afforded the defense experts, whose opinion was that the accused was incompetent. Further, the Government prosecutor in Chavis was the same counsel who had prevailed as Government appellee’s counsel in Schappel on this argument. . Appellant argues that having argued against permitting an appointment under § 3006A on the grounds that the previous examination was adequate, and that Dr. Maguigad was highly qualified, at trial the Government should not be permitted to impeach Dr. Maguigad, particularly in regard to his professional qualifications. This is one of several issues with which we shall deal after receiving the additional evidence developed by the trial court on remand. . This proposition is true in all Circuits that have ruled on the subject and we do not understand the Government to contradict this. United States v. Theriault, 440 F.2d 713, 715-716 (5th Cir. 1971); United States v. Taylor, 437 F.2d 371, 377 (4th Cir. 1971); United States v. Schultz, 431 F.2d 907, 911-912 (8th Cir. 1970). . The statute is as follows : Upon finding, after appropriate inquiry in an ex parle proceeding, that the services are necessary and that the defendant is financially unable to obtain them, the court shall authorize counsel to obtain the services on behalf of the defendant. 18 U.S.C. § 3006A(e) (1970) (emphasis added). . The text of the statute under which appellant was referred to St. Elizabeths and later to PLS makes it clear that its provisions are designed to aid the court: If it appears to a court having jurisdiction of— (1) a person arrested or indicted for, or charged by information with, an offense, or (2) a child subject to a transfer motion in the Family Division of the Superior Court of the District of Columbia pursuant to section 16-2307, that, from the' court’s own observations or from prima facie evidence submitted to it and prior to the imposition of sentence, the expiration of any period of probation, or the hearing on the transfer motion, as the case may be, such person or child (hereafter in this subsection and subsection (b) referred to as the “accused”) is of unsound mind or is mentally incompetent so as to be unable to understand the proceedings against him or properly to assist in his own defense, the court may order the accused committed to the District of Columbia General Hospital or other mental hospital designated by the court, for such reasonable period as the court may determine for examination and observation and for care and treatment if such is necessary by the psychiatric staff of said hospital. If, after such examination and observation, the superintendent of the hospital, in the case of a mental hospital, or the chief psychiatrist of the District of Columbia General Hospital, in the ease of District of Columbia General Hospital, shall report that in his opinion the accused is of unsound mind or mentally incompetent, such report shall be sufficient to authorize the court to commit by order the accused to a hospital for the mentally ill unless the accused or the Government objects, in which event, the court, after hearing without a jury, shall make a judicial determination of the competency of the accused to stand trial or to participate in transfer proceedings. If the court shall find the accused to be then of unsound mind or mentally incompetent to stand trial or to participate in transfer proceedings, the court shall order the accused confined to a hospital for the mentally iU. 24 D.C.Code § 301(a) (Supp. V, 1972). . Godbold, Circuit Judge, in United States v. Theriault, 440 F.2d 713, at 715 (5th Cir. 1971). In Theriault the defendant had been examined by a psychiatrist on the authority of 28 Fed.R.Crim.P. and 18 U.S.C. § 4244 (1970). Appellant here was examined under the provisions of 24 D.C.Code § 301(a) (Supp. V, 1972) because the provisions of that statute in this context displace the statute and rule in-, volved in the Fifth Circuit case. See 24 D.C.Code § 301(h) (Supp. V, 1972). The D.C. provision and the generally applicable federal scheme are sufficiently simiar, however, so that in this context the Fifth Circuit’s rationale is applicable to our case. . United States v. Schappel, 144 U.S.App.D.C. 240, 243 n. 7, 445 F.2d 716, 719 n. 7 (1971). . 431 F.2d 907 (8th Cir. 1970). . United States v. Theriault, supra, 440 F.2d at 715 n. 3. . See text of statute at footnote 2, supra. . Marshall v. United States, 423 F.2d 1315, 1318 (10th Cir. 1970); United States v. Theriault, 440 F.2d 713, 715 (5th Cir. 1971); United States v. Hamlet, 456 F.2d 1284 (5th Cir. 1972) (per curiam); United States v. Sutton, 464 F.2d 552 (5th Cir. 1972) (per curiam). . United States v. Benn, 155 U.S.App.D.C. _, 476 F.2d 1127 (1972).

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UNITED STATES of America v. Carl M. REED, Appellant. UNITED STATES of America v. Curtis HOSTON, Appellant. Nos. 23044, 23661. United States Court of Appeals, District of Columbia Circuit. Argued Feb. 25, 1971. Decided March 9, 1973. Marilyn Cohen, Washington, D. C., for appellant in No. 23,044. Paul J. Spiegelman, Washington, D. C. (appointed by this court) also argued for appellant. James L. Kurtz and Henry F. Harding, Washington, D. C. (both appointed by this court) were on the brief for appellant. Barbara Bowman and John Perazich, Washington, D. C., also entered appearances for appellant in No. 23,044. Marilyn Cohen, Washington, D. C., for appellant in No. 23,661. Nathan L. Silberberg, Washington, D. C. (appointed by this court) also argued for appellant in No. 23,661. Brian W. Shaughnessy, Asst. U. S. Atty., with whom Thomas A. Flannery, U. S. Atty. at the time the brief was filed, John A. Terry and David C. Woll, Asst. U. S. Attys., were on the brief, for appellees. Roger C. Spaeder, Asst. U. S. Atty., also entered an appearance for appellee in No. 23,044. Before BAZELON, Chief Judge, and WRIGHT, McGOWAN, TAMM, LEVENTHAL, ROBINSON, MacKINNON, ROBB and WILKEY, Circuit Judges, sitting en banc. . The unqualified character of that language has unquestionably created difficulties for the sentencing courts. Its literalness might be taken to require YCA disposition in virtually every case, since a conscientious judge, who has wrestled with all the information available to him and who regretfully inclines to the view that an adult sentence is the better course, may feel that he cannot honestly make a finding that the defendant would derive no conceivable benefit of any kind from the other alternative. We noted in Coefield, however, that this language occurs in the context of a statute in which Congress has manifested no intention to foreclose absolutely the exercise of discretion by the sentencing judge. And in Coefield, recognizing the infinite variety of factors which may frequently look in opposite directions in the same case, we disclaimed any purpose “to spell out all the grounds that might form a basis for an affirmative ‘no benefit’ finding.” McGOWAN, Circuit Judge: These two criminal appeals were consolidated with a third — No. 24,085, United States v. Coefield, 155 U.S.App.D.C. _, 476 F.2d 1152, decided February 6, 1973,—for hearing and disposition by the court en banc. The reason for this grouping of the cases for en banc treatment was that each involved a challenge to the imposition of an adult sentence as distinguished from commitment under the Federal Youth Corrections Act, 18 U.S.C. § 5005 et seq.; and the court thought it important to resolve definitively a recurring problem which has characterized the administration of that statute. The court has now spoken to this end in Coefield; and it remains to decide these two companion appeals in the light of the principles enunciated in that decision. As in Coefield, we affirm the convictions in each case, vacate the sentences, and remand for further proceedings consistent with this opinion. I No. 23,044 Appellant Reed was initially indicted in 1968 under D.C.Code provisions for armed robbery, robbery, assault with a dangerous weapon, and carrying a dangerous weapon, all in connection with the holdup of a tavern. On September 9, 1969, he pleaded guilty to the robbery count. On the basis of a pre-sentence report which noted that Reed was eighteen years old, had no prior criminal record, was “at the crossroads of life and what is done to him at this particular time will most likely determine which way he is going to go in the future,” the court committed him to treatment and supervision in a youth facility under Section 5010(b) of the Youth Corrections Act. On November 1, 1969, appellant’s pro se motion to withdraw his guilty plea was granted. He was then tried under the original indictment before a jury, with a different judge from the one who had taken his guilty plea. He was convicted of armed robbery, assault with a dangerous weapon, and carrying a dangerous weapon. Despite his counsel’s plea for leniency in light of his youth and record, and despite a second presentence report recommending treatment in a youth institution, the court, without comment, sentenced appellant to from three to nine years in a penal institution. The entire substantive portion of the sentencing proceedings is as follows: [DEFENSE ATTORNEY:] . . . I would like to say on behalf of Mr. Reed he is a very young man. Apparently he had no involvements with the law as a juvenile and it is rather surprising and rather somewhat shocking that he should get involved in this type of a case. I did have some contact or some information respecting his employment while he was out on bond and it would seem to be good. Apparently some other people think somewhat highly of him. This particular case unfortunately, as Your Honor knows, he did enter a plea and for what reason he withdrew that plea, I don’t know. I have an idea perhaps that maybe upon learning that the fellow that was arrested with him, the juvenile that was arrested with him, got over in Juvenile Court might have motivated him to think that maybe he could get something similar. All in all I ask Your Honor to be as lenient as you feel that you can under the circumstances. THE COURT: Mr. Reed, do you have anything to say before the Court imposes sentence in your case ? THE DEFENDANT: No, I don’t. THE COURT: In Criminal Case 545-68 the Court sentences the defendant Carl M. Reed to be incarcerated for a period of not less than three nor more than nine years in a penal institution to be designated by the Attorney General or his authorized representative. You have ten days within which to note an appeal. [DEFENSE ATTORNEY:] Thank you, Your Honor. No. 23,661 Appellant Hoston was, on July 30, 1969, found guilty by a jury of armed robbery, assault with a dangerous weapon, and carrying a dangerous weapon— charges growing out of a robbery of an A & P Store. Following his conviction, appellant was on October 22, 1969, committed by the trial judge, under Section 5010(e) of the Youth Corrections Act, for a 60-day period of observation, study, and report. Earlier, in the month after his conviction, appellant had sought and received authority from the District Court for a psychological evaluation by Mr. Harold Grant, Staff Psychologist of the Offender Rehabilitation Project. Appellant came before the trial judge for sentencing on December 12, 1969. Those proceedings in their entirety are as follows: THE COURT: Mr. (Defense Counsel), I arranged for my chambers to make available to you the report from the Youth Center. Have you had a chance to see it ? [DEFENSE COUNSEL]: I have, Your Honor. THE COURT: I have also before me, in addition to that, the Offender Rehabilitation Report and a psychological study by Grant, as well as the presentence report. I have been over these matters with some care. Is there anything you wish to say to me before sentence is imposed ? [DEFENSE COUNSEL]: No, your Honor, just to stress that once again this was the Defendant’s first serious offense and that my understanding is that he did cooperate fully with the authorities in getting together these reports. THE COURT: What is the status of his other armed robbery case ? [DEFENSE COUNSEL]: I understand, Your Honor, from my conversation with his counsel in that case, that that is being set down for trial and will be tried in the near future. THE COURT: Mr. Hoston, is there anything you wish to say to the Court? DEFENDANT HOSTON: No, sir. THE COURT: Well, I have studied this material, Mr. Hoston, with some care. I do not think you should go to the Youth Center. I am going to give you an adult sentence: Three to sixteen years on Counts 1, 4 and 7; three to nine years on Counts 3, 6, 9, 10, 11 and 13; one year on Count 16; all of these sentences to run concurrently. Now I imagine that you will be held here pending your other trial at the local jail. That is the sentence of the Court. [DEFENSE COUNSEL]: Thank you, Your Honor. The presentence report that was before the court showed appellant as having no juvenile arrests or convictions; two minor adult arrests but no convictions; and one arrest for carrying a dangerous weapon shown as “no disposition.” He was reported as having a light narcotics habit; and the recommendation was as follows: “This individual brings to the Court a prior community record free of law violation and adequate community circumstances, completion of high school graduation requirements, minimal employment experience and mild narcotics addition. He is perceived as an individual possessed of community and personal resources, given proper guidance and support, if and only if an abrupt attitude change should occur within the very near future.” The 5010(e) report included a full psychological examination and a proposed course of treatment for appellant. Its conclusion was stated in these terms: “The staff is of the opinion that Mr. Curtis Hoston should be sentenced under the Youth Corrections Act, 5010b, and returned to the Youth Center for training and treatment.” This court is not informed as to the nature of the psychological study prepared by Mr. Grant of the Offender Rehabilitation Project. II In Coefield this court en banc described the comprehensive character of the Youth Corrections Act, and the patent purpose it exhibited on the part of Congress to do everything possible to save youthful offenders from lives of hopeless criminality. It noted that this purpose came into its sharpest focus in the admonition of Section 5010(d) that the sentencing court may impose an adult sentence only “[I]f the court shall find that the youth offender will not derive benefit from treatment under subsection (b) or (c) . . .” We concluded, building upon this court’s earlier decisions in United States v. Waters, 141 U.S.App.D.C. 289, 437 F.2d 722 (1970), and United States v. Ward, 147 U.S.App.D.C. 149, 454 F.2d 992 (1971), that this requisite statutory finding may not bp “left to implication,” but must appear explicitly in the sentencing record as an essential condition precedent to the legality of an adult sentence. From these premises Coefield went on to say that it would not be enough for the sentencing court simply to track the statutory language. The basis for its finding must appear in a statement of the reasons why it has decided against a Youth Corrections Act commitment and in favor of adult punishment. We were at some pains in Coefield to recognize that that election remains within the discretionary range of the judge’s sentencing function but, as this court said in Waters, it is a discretion “circumscribed by the findings of fact in the individual case which the District Judge is required to make. . . .” We also were careful to note in Coefield that, in respect of the statement of the reasons giving rise to the finding, “. . . we are not seeking to elicit any litany or prescribed formula”; and we enumerated what we conceived to be the essential elements of the exercise of the sentencing function when a defendant eligible by reason of his age alone for possible disposition under the Youth Corrections Act, stands before the bar of the court. Given conscious and conscientious attention by the sentencing judge to these elements, we saw no reason to envisage a “large number of appeals calling for review of sentences which call for consideration of the Youth Corrections Act.” The awesome and difficult task of sentencing continues to be vested in the one man who is best circumstanced to discharge it wisely, that is to say, the trial judge. The Youth Corrections Act does not change that, nor does it contemplate wholesale appellate intrusion into that process. What Congress has done, out of its urgent concern for saving the young while there is still time, is to require of the sentencing court in one limited but highly important area of sentencing the exposure on the record of the factors which informed and shaped the particular exercise of its discretion. An appellate court can only be concerned with the rationality of those factors in relation to the Congressional objectives. Where that rationality is present and visible, its function is at an end. III The sentencing circumstances in the case of appellant Reed are very like those involved in Coefield in the sense that the sentencing court made no reference whatsoever to the Youth Corrections Act alternative. This was despite the fact that there were before the court two presentence reports which were favorable to Reed’s rehabilitation prospects. Indeed, the second and later of such reports expressly recommended disposition of Reed as a youth offender. It is true that defense counsel in his plea for leniency made no specific reference to the Youth Corrections alternative, but it does not appear from the record whether he had been given access to the presentence report or knew what its recommendation was. We cannot tell from the record in the case before us whether the trial court had the Youth Corrections Act in mind at all, much less what its reasons, if any, were for electing to impose an adult sentence in preference to a YCA commitment. There is, in any event, a complete absence — even in the bare statutory language — of the finding required by the Act as a condition precedent to giving Reed an adult sentence. Our analysis in Coefield, therefore, makes imperative the vacation of the sentence in No. 23,044, and the remand of the case for resentencing in which due heed will be taken of that analysis. IV In the case of appellant Hoston, there was no want of awareness of the Youth Corrections Act. The sentencing court promptly upon conviction invoked Section 5010(e) and made a 60-day commitment for observation and study. When that was complete and the report received, the court immediately made it available to defense counsel. When the matter came on for hearing, the court referred to its careful study of that report, the presentence report, and the psychological study made by the Offender Rehabilitation Project. The court’s conclusion was, however, stated simply to be that “I do not think you (Hoston) should go to the Youth Center.” There is every reason to believe from this record that the court did give serious consideration to the possibility of a YCA commitment. It did not in terms, however, purport to make the statutory finding required by Section 5010(d), except as the unamplified statement of what it had decided to do may be claimed to be such a finding. There is not available to us from this record any indication of the reasons which impelled the court to its conclusion. This is not to say that there were no such reasons, but only that we have no way of knowing what they were. In Coefield we said that where a sentencing court acts to get a 5010(e) report, and, after considering it in the light of such other relevant data as may be before him, follows its recommendation, a further recital of reasons may well be unnecessary. But we said also that “. . . [where] the judge imposes a sentence contrary to the recommendation in a report following a referral under section 5010(e), the need for more detailed statement of reasons is more obvious.” We think this latter principle laid down in Coefield is determinative here. The handling in this instance of the Youth Corrections Act alternative was a model of correct and enlightened procedure up to the point of its uninformative termination. That alone inevitably gave rise to an appeal point founded on the requirements of the statute, and one which we are in no position to dispose of on this record. Accordingly, appellant Hoston, although under appreciably different circumstances from those which characterized the sentencing of appellant Reed, is entitled to the same disposition of his appeal. In Nos. 23,044 and 23,661, the convictions are affirmed, the sentences vacated, and the eases remanded for new sentencing proceedings consistent herewith. It is so ordered. ROBB, Circuit Judge (concurring): Without questioning the propriety of the sentences imposed by the district judges I acquiesce in the remand of these cases. MacKINNON, Circuit Judge (concurring in part and dissenting in part): For reasons set forth in my dissent in No. 24,085—United States v. Coefield, 155 U.S.App.D.C. , 476 F.2d 1152, decided February 6, 1973, I concur in the disposition of Reed’s case (No. 23,044) and dissent from the disposition of Hoston’s case (No. 23,661). . Appellant Reed presented character witnesses in his defense at trial, and argues on appeal that reversible error flowed from the court’s failure to instruct the jury-on the significance to be attached to such evidence. There was no defense request for such an instruction and no objection to its omission, but, pretermitting the question of whether the point is properly cognizable on appeal, we find that no substantial rights were affected in the light of the strong proofs of guilt adduced by the prosecution and the insubstantial character of the character testimony. Kotteakos v. United States, 328 U.S. 750, 66 S.Ct. 1239, 90 L.Ed. 1557 (1946). Neither do we find any abuse of discretion, in the circumstances shown by this record, in the trial court’s refusal to interrupt the trial indefinitely in order to enable appellant to try to find a witness. The indications were that the testimony of such witness would have been cumulative at best, and, at worst, contradictory of that given by appellant. It also seemed quite unlikely that the witness could be found. Appellant Hoston’s only challenge to his conviction, as distinct from his sentence, is a claim that the trial judge intervened too actively in the questioning of witnesses. Our reading of the transcript establishes that the point is wholly lacking in merit. . One alleged accomplice in this crime, Winestock, pleaded guilty to robbery; and another, Shade, was tried with appellant and found guilty of armed robbery and assault with a dangerous weapon. Shade’s appeal to this court raised no sentencing issue, and his conviction was affirmed (No. 23,660, decided January 11, 1971). When Winestock came before the court for sentencing, the following colloquy occurred: THE COURT: Mr. Winestock, do you have anything you want to say to me? THE DEFENDANT: Yes, Your Honor. 1 would appreciate if I was sent back to the Youth Center. They have a lot there to offer me, you know. THE COURT: Well, I have, as you know, had you at the Youth Center for an evaluation study under 5010(e). You need some help, but you are making good progress and you are working at it. The Court is going to sentence you to eight years under 5010(c) of the Youth Corrections Act. Now I want to make sure you understand the nature of that sentence, Mr. Winestock. That allows them to hold you a longer period than 5010(b), if it was necessary, but it still is indeterminate. It depends on the progress you make. You work at it. I think you are making progress. That is the sentence of the Court. . The presentenee report before the court in Coefield was not favorable in its conclusion. Despite that fact, we felt obliged to vacate the adult sentence since the court said nothing as to the Youth Corrections Act. . At the time of sentencing the court inquired as to “the status of his (Hoston’s) other armed robbery case,” and was told by defense counsel that it was to be tried in the near future. The reference presumably is to an indictment returned on June 10, 1969, charging an offense to have been committed on April 14, 1969 —at a time when appellant Hoston was out on bond awaiting trial in the case on appeal before us. Hoston went to trial on this latter charge on May 5, 1971. He was convicted by a jury and was sen-fenced by a trial judge different from the one who presided in the case before us to an adult sentence to be served concurrently with the sentence imposed in this case. An appeal of that conviction to this court resulted in an affirmance (No. 71-1860, decided September 28, 1972). In that appeal no issue was raised with respect to the sentence, perhaps because at the time Hoston was convicted in that case he was ineligible for YCA commitment by reason of age.

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UNITED STATES of America v. William T. COEFIELD, Appellant. No. 24085. United States Court of Appeals, District of Columbia Circuit. Feb. 6, 1973. Marilyn Cohen, Washington, D. C., for appellant. Neal M. Mayer, Washington, D. C. (appointed by this court) also argued for appellant. Brian W. Shaughnessy, Asst. U. S. Atty., for appellee. Charles H. Roistacher, Asst. U. S. Atty., with whom Thomas A. Flannery, U. S. Atty. at the time the brief was filed, and John A. Terry, Asst. U. S. Atty., were on the brief, also argued for appellee. John S. Ransom, Asst. U. S. Atty., also entered an appearance for appellee. Before BAZELON, Chief Judge, FAHY, Senior Circuit Judge, and WRIGHT, McGOWAN, TAMM, LEVENTHAL, ROBINSON, MacKINNON, ROBB and WILKEY, Circuit Judges, sitting en banc. FAHY, Senior Circuit Judge: The appeal is from a judgment of conviction of robbery in violation of 22 D.C. Code § 2901 (1967), as amended, (Supp. V, 1972). After the appeal was heard by a division of the court it was reheard by the court en banc to consider important and recurring problems arising from the administration of the Federal Youth Corrections Act. 18 U.S.C. §§ 5005-5026 (1970). I. APPEAL FROM THE CONVICTION Appellant testified that he engaged in conversation with two young ladies on the street, who in no way complained of his company as the three walked together toward a bus stop. Indeed, it is not disputed that they exchanged telephone numbers. Both ladies testified that at the bus stop one of the ladies reached into her slacks for bus fare, and when she removed a $10.00 bill, appellant snatched it and ran. Upon conviction of the robbery thus ascribed to appellant he was sentenced to imprisonment of two to six years, to be served consecutively to any sentence then being served. Appellant claims on appeal, as he did at trial, of an unnecessarily suggestive photographic identification by the two ladies, from which it is said to follow, under the “poisonous tree” doctrine of Wong Sun v. United States, 371 U.S. 471, 83 S.Ct. 407, 9 L.Ed.2d 441 (1963), that subsequent lineup and in-court identifications were inadmissible as stemming from the photographic identifications. At the conclusion of a hearing on a motion to suppress the identification evidence, the District Court, we think correctly, ruled that the lineup and in-court identifications were admissible as based on a source independent of the photographic identifications. We accordingly affirm the conviction and turn to consideration of the sentence. II. CONSIDERATION OF COE-FIELD’S POSSIBLE SENTENCE UNDER THE YOUTH CORRECTIONS ACT Because appellant was 20 years of age at the time of his conviction, a discussion arose at oral argument of the appeal as to a possible remand of the case for reconsideration of the sentence under the Youth Corrections Act. Appellant’s counsel was unable then to advise the court as to his client’s wishes in that regard. As arranged, however, he filed a memorandum after argument advising the court that appellant was amenable to consideration of his sentence under the Act. The Government in a responding memorandum took the position that a remand was unnecessary, contending that the sentencing court, by imposing an adult sentence consecutive to the other adult sentence of two to six years appellant was already serving, implicitly found that appellant would not derive benefit from a sentence under the Act. In passing the Youth Corrections Act, Congress provided the federal sentencing judge with four alternatives. The first allows the judge to suspend imposition or execution of sentence entirely and place the youth offender on probation. 18 U.S.C. § 5010(a). The second allows the judge upon finding that the convicted person is a youth offender and that the offense is one punishable by imprisonment under other applicable provisions of law, to sentence the youth offender to the custody of the Attorney General for treatment and supervision in a special youth facility. 18 U.S.C. § 5010(b). Under this alternative, the youth offender must be unconditionally discharged no later than six years after the date of his conviction. 18 U.S.C. § 5017(c). Because the maximum-limitation of commitment under the second alternative may not be sufficient time in the judgment of the court for full rehabilitation of the youth offender, the judge may sentence the youth offender to commitment in a youth institution but specify the term, which may exceed six years but may not exceed the maximum period authorized by law for any applicable penalty. 18 U.S.C. § 5010(c). Under the fourth alternative, the court, provided it finds that the youth offender will not derive benefit from treatment by commitment to a youth institution under either the second or third alternatives noted above (18 U.S.C. § 5010(b) or (c)), may sentence him under any other applicable penalty provision. 18 U.S.C. § 5010(d). The court in selecting among these several alternative sentences has available to assist him, and the sentence to be served is subject to, the additional statutory provisions, and operation under them, outlined hereinafter in Part III of this opinion. Since appellant was not placed on probation, or sentenced under either the second or third alternative above outlined, the question arises whether there has been a finding as required by section 5010(d) that he would not derive benefit from treatment under subsections (b) and (c), resulting in his sentence as an adult under the fourth alternative. In construing section 5010(d) in United States v. Waters, 141 U.S. App.D.C. 289, 291; 437 F.2d 722, 724 (1970), we held: Under the Youth Corrections Act, § 5010(d), the court must affirmatively find that the youth offender will not benefit from rehabilitative treatment before the offender can be sentenced as an adult pursuant to the statute governing the offense for which he was convicted. (Footnote omitted.) [Emphasis in original.] Likewise, in United States v. Ward, 147 U.S.App.D.C. 149, 454 F.2d 992 (1971), in reserving its ruling on appellant Ward’s motion for summary reversal, the court remanded the record to the District Court for elucidation of its reasoning why Ward could be denied sentencing under the Act notwithstanding the fact that the sentencing court recommended he be sent to “ ‘an institution where they usually send youth offenders such as Petersburg, Virginia, or some institution of that type.’ ” 147 U.S.App.D.C. at 151, 454 F.2d at 994. The purposes of Congress in requiring an affirmative finding under section 5010(d) are explained in Judge Wilkey’s opinion for the court in Waters, are restated in Ward, and need not be repeated here at length. We note, however, the recognition that the trial judge retains discretion “to deny such rehabilitative treatment to those youths in the exceptional case where the judge determines that the special youth treatment afforded by the Act would be of no value.” 141 U.S.App.D.C. at 291, 437 F.2d at 724. Not only was there no finding of no benefit in Waters, but as in Ward the failure of the sentencing court to sentence under the Act was accompanied by a recommendation based on Waters’ youth. Since this was inconsistent with the failure to sentence under the Act, this court required the sentence as an adult to be vacated and the case remanded for resentencing pursuant to the finding requirements of section 5010(d). The court added: [W]e believe that this discretion [of the sentencing court] is circumscribed by the findings of fact in the individual case which the District Judge is required to make either explicitly or implicitly. 141 U.S.App.D.C. at 292, 437 F.2d at 725; and see, to like effect, Ward, 147 U.S.App.D.C. at 151, 454 F.2d at 994. These references to an implicit finding are advanced by the government now to support the adult sentence of Coefield. But the sentencing transcript contains no reference whatever to the Act nor does any reference to it appear in the presentence report submitted to the judge. It would seem, therefore, necessary to remand the case to the District Court for reconsideration of the sentence unless we are to imply the “no benefit” finding. This we are unable to do. In the first place, the record does not support such an implication. The fact that Coefield was already serving an adult sentence not imposed under the Act, does not establish by implication the requisite finding. The papers before us indicate that appellant has been quite successfully serving out his previous sentence, having completed high school equivalency during the sentence, and that he is now participating in a rehabilitative furlough program under which he is released for short periods of time. In addition, it appears from the presentence report of the first robbery that prior to sentencing for that offense appellant was confined for at least a part of the time under a program of work release, and responded favorably. From such a record we can draw no clear inference that the trial judge found no benefit. Given Coefield’s promising response to the correctional program and his earlier history free of encounters with the law, an equally compelling inference is that the judge failed to consider the Youth Corrections Act. True, Coefield’s record is not all favorable, but its hopeful indications strongly suggest that now is hardly the time to place him for two to six more years in an environment where there is greater likelihood that his responsive attitude toward rehabilitation could be reversed. To avoid the “degenerative and needless transformation of many of these young persons into habitual criminals” is the purpose of the Act. There is an additional reason why the finding of no benefit should not be left to implication, as now set forth in Part III. III. STANDARDS OF SENTENCING UNDER THE ACT 1. The ambiguity illustrated by the Coefield sentence' has led the court en banc to give further consideration to the question whether the finding required by section 5010(d), as a condition to an adult sentence, should be left to implication. The passing reference in Waters to this possibility, a reference not necessary to the court’s decision, we think must give way to the statements in Waters that as a condition to an adult sentence the court is required affirmatively to find that the youth offender would not benefit from rehabilitative treatment, and, also, that the judge’s discretion “is circumscribed by the findings of fact in the individual ease which the District Judge is required to make.” The main thrust of the opinion thus is definitely toward explicitness, and we now adopt that as the rule; for when a youth offender is sentenced as an adult, and nothing more appears, it cannot be said with certainty that the Act was considered and a negative finding with respect to its possible benefits was made. Cf. Hubb v. United States, 298 A.2d 512 (D.C.1972). 2. The present consideration of the Act by the court en banc also furnishes an especially appropriate occasion for the adoption of some further guides in administering the Act, centering upon the relation of section 5010(d) to the Act as a whole. No federal statute having to do with sentencing compares in comprehensiveness with the Youth Corrections Act. In addition to the four alternative sentences available to the judge in the case of a youth offender, outlined in Part II, supra, a number of special provisions have been made available for assisting the judge, the youth, and the public, emphasizing the distinctive character of the sentencing of a youth offender, as compared with the larger freedom of the sentencing judge in adult cases. United States v. Bryant, 143 U.S.App.D.C. 53, 442 F.2d 775, cert. denied, 402 U.S. 932, 91 S.Ct. 1534, 28 L. Ed.2d 866 (1971). A special Division is created under the Board of Parole to assist in administering the Act. Section 5005. The Division functions under the Attorney General and in collaboration with the Director of the Bureau of Prisons. Sections 5005, 5007. The Director shall provide classification centers and agencies, which shall make a complete study of each committed youth offender. Section 5014. A report of the findings of the centers or agencies, with their recommendations for the youth’s treatment, goes to the Director and to the Division. Ibid. At least one member of the Division shall interview the committed youth, “review all reports concerning him, and make such recommendations to the Director and to the Division as may be indicated.” Ibid. On the basis of the report and recommendations the Director has a choice of recommendations : conditional release under supervision, transfer or allocation to another agency or institution for treatment, or confinement for treatment under conditions believed best designed for the protection of the public. Section 5015. Periodic examination of all committed youth offenders, and reports to the Director as to each, are required, and the Director shall report to the Division as the Division may require, as also shall probation officers and supervisory agents with respect to each youth under their supervision. Section 5016. Details are set forth as to the authority of the Division, upon notice to the Director, to release conditionally under supervision a committed youth offender, and with respect to recommendations in this regard by the Director to the Division. Section 5017(a). The periods of detention before discharge, with the differences due to whether the youth offender has been committed under sections 5010(b) or 5010(c), are contained in sections 5017(c) and (d). Revocation by the Division of its previous orders is permitted by section 5018, except an order of unconditional discharge. Committed youth offenders at liberty under supervision or conditionally released are supervised as detailed in section 5019. Such attentiveness by Congress to this correctional system for youth offenders, developed over a period of many years of congressional study, calls for no less attentiveness on our part in administering the legislation, such as was given by .this court in Waters. We there pointed out that only in “the exceptional ease where the judge determines that the special youth treatment afforded by the Act would be of no value,” 141 U.S.App.D.C. at 291, 437 F.2d at 724, may a youth offender be sentenced other than under the Act, and then only upon the basis of an affirmative finding in the individual case that a sentence under the Act would not have the rehabilitative benefit contemplated by the Act where, for example, the judge, on the basis of a prior sentence under the Youth Corrections Act, which was followed by a subsequent offense, reached a decision, perhaps based on the section 5010(e) report, that the defendant would not derive rehabilitative benefit from a second sentence under the Act. This is an illustrative example, and is not the only or exclusive basis upon which a “no benefit” finding can be made ; we have not attempted to spell out all the grounds that might form a basis for an affirmative “no benefit” finding. The approach in Waters and Ward would seem to presuppose a statement of reasons by the sentencing judge if these special provisions are not being utilized and the youth offender is sentenced as an adult. To require reasons to be stated is clearly not inconsistent with those decisions; and we now deem this to be essential to a knowledgeable administration of the Act as intended by Congress. When, however, prior to imposing a sentence, the judge has availed himself of the assistance afforded by section 5010(e), and after considering the report in light of the other data before him, follows its findings or recommendation in imposing sentence, additional reasons need not be stated, although, of course, the judge is not precluded from adding reasons of his own. On the other hand when section 5010(e) is not invoked, or the judge imposes a sentence contrary to the recommendation in a report following a referral under section 5010(e), the need for more detailed statement of reasons is more obvious. In providing for reasons to be stated by the District Court we are not seeking to elicit any litany or prescribed formula. We do consider it essential, however, to assure in every case: firstly, that the District Judge manifest not only an awareness that the Act is applicable to the case, but also an accurate understanding of the scope of his discretion under the Act; secondly, that the District Judge has been informed of the pertinent facts relating to the individual defendant before him, either by evidence coming to his attention in the trial, by a presentence report, or by a recommendation and report made under section 5010(e); and thirdly, that the District Judge, by his statement of reasons where required, has given consideration and related the facts of the individual case to the applicable law. If these requirements are satisfied, there should be no large number of appeals calling for review of sentences which call for consideration of the Youth Corrections Act. 3. We add that none of the existing rights of a person convicted of crime and which pertain to the sentenceing process, including the right of allocution, are impaired by the Act, and reasonable opportunity to the youth offender, if requested, to adduce evidence bearing on the sentence to be imposed, shall not be denied. IV. APPELLATE REVIEW 1. The sentence of a youth offender as an adult is reviewable for legal error, such, for example, as a failure to utilize the Act because when sentenced the offender has reached the age of 22, although when the verdict or finding of guilt was rendered he was in the youth offender range of 18 to 22 years. Such an error was the basis of decision in United States v. Carter, 225 F.Supp. 566 (D.D.C.1964), opinion by Judge Youngdahl, recently followed by our court in United States v. Carmichael, 152 U.S.App.D.C. 197, 469 F.2d 937 (1972), and now reaffirmed in Coefield’s ease. 2. Review is also permissible, as heretofore illustrated by both Waters and Ward, to determine whether the sentencing process has conformed with the standards set forth in those cases. These standards we have now amplified as above set forth when the youth offender is sentenced as an adult and not under subsection (b) or (c) of section 5010. In such event the finding required to be made under section 5010(d) as a condition to an adult sentence is to be explicit — “affirmative” as said in Waters — and must be supported by reasons from which it can be determined that it is consistent with the purposes of the Act. The judgment of conviction is affirmed. The sentence is vacated and the case is remanded to the District Court for further proceedings consistent with this opinion. APPENDIX The Senate Report, states that the “purpose of the proposed legislation is to provide a new alternative sentencing and treatment procedure for persons under the age of 24 . . . ” S.Rep. No. 1180, 81st Cong., 1st Sess. 1 (1949). Reliable statistics demonstrate, beyond possible doubt, that the period in life between 16 and 23 years of age is the focal source of crime. It is during that period that habitual criminals are spawned. H.R.Rep. No. 2979, 81st Cong., 2d Sess. at 2 (1950), U.S.Code Cong. & Admin.News 1950, at 3984 (hereinafter cited as H.R.Rep.). It is believed that by its provision the problem of crime will be met at its fo- ■ cal point, namely, before the traits of the habitual criminal are allowed to develop. . H.R.Rep. at 1, U.S.Code Cong. & Admin.News 1950, at 3983. Congress seemed convinced that adult penal institutions were failing: Again, reliable statistics demonstrate, with reasonable certainty, that existing methods of treatment of criminally inclined youths are not solving the problem. A large percentage of those released ... return to antisocial conduct and ultimately become hardened criminals. H.R.Rep. at 2, U.S.Code Cong. & Admin.News 1950, at 3985. Congress also seemed convinced that such facilities were corruptive of the youths placed in them: By herding youth with maturity, the novice with the sophisticate, the impressionable with the hardened, and by subjecting youth offenders to the evil influences of older criminals and their teaching of criminal techniques, without the inhibitions that come from normal contacts and counteracting prophylaxis, many of our penal institutions actively spread the infection of crime and foster, rather than check it. H.R.Rep. at 2-3, U.S.Code Cong. & Admin.News 1950, at 3985. Congress found that young people between the ages of 16-22, especially, were hopeful subjects for rehabilitation: Most of the causes which contribute to antisocial conduct of youth offenders in the period between adolescence and maturity disappear when the youth reaches full maturity. H.R.Rep. at 3, U.S.Code Cong. & Admin.News 1950, at 3985. The problem for Congress was therefore, to provide a successful method and means for treatment of young men between the ages of 16 and 22 who stand convicted in our Federal courts and are not fit subjects for supervized probation — a method and means that will effect rehabilitation and restore normality, rather than develop recidivists. H.R.Rep. at 3, U.S.Code Cong. & Admin.News 1950, at 3985. Congress believed it found the alternative in a very successful English program: [the program proposed] is not experimental. It is based on the principles and procedures developed under what is known as the Borstal system in England, which has been in successful operation since 1894. H.R.Rep. at 3, U.S.Code Cong. & Admin. News 1950, at 3985. Congress found that the Borstal system had a rate of recidivism of only 8.1 percent. H.R.Rep. at 6. Treatment under the Act was not intended to be only for those who were certain to be rehabilitated or benefited. H.R.Rep. at 3. Thus, a variety of facilities were to be provided, with various degrees of control and security as well as different programs: “[The Borstal system] now embraces 13 institutions. Some are walled. Others are completely open. Each institution has its own particular specialty.” H.R.Rep. at 5, U.S. Code Cong. & Admin.News 1950 at 3987. In an early version of the bill this was specifically provided for as well as in the statute as finally enacted: treatment in institutions of maximum security, medium security or minimum security types, including training schools, hospitals, farms, forestry and other camps. . 18 U.S.C. § 5011. There is a provision also for allowing the Attorney General to choose among public and private facilities and programs. 18 U.S.C. § 5013. In the 1943 Senate Hearings, Senator Kilgore stated the general understanding and expectation that about 10 percent or less of youth offenders would be sentenced to adult imprisonment. At that time the category of youth offenders included persons under 24 years. 1943 S. Hearings at 13. Judge Parker in explaining a provision in 1943, the language of which in pertinent part is identical with section 5010(d) as enacted, stated: We are dealing with them [youth offenders] in a more liberal way than we are with older offenders, in that we require, whatever the sentence given by the law be, that the judge shall have the discretion — he does not have to give them the benefit of this, but can sentence them like anybody else. You find some boys of 18 years who ought to be sentenced like anybody else — but instead of sentencing them to the sentence prescribed in the statute, he can send them to the Youth Authority Section for a period of 6 years. 1943 S. Hearings at 12. During the intervening years subsequent to the 1943 Hearings and prior to the enactment of the Act, Congress, in order to extend the scope of the Act to youth offenders of even more doubtful rehabilitative possibilities added to the 1943 version of the proposed bill what is now section 5010(c), so that those youths who might not have qualified for treatment under section 5010(b) because of the inadequacy of the six year limitation, could be sentenced under the Act. ROBB, Circuit Judge (concurring): I concur in Judge Fahy’s opinion, with one reservation. I reject any suggestion or implication that the Youth Corrections Act authorizes this court to disturb a lawful sentence imposed by a district judge in the exercise of his discretion and upon the basis of his informed evaluation of the defendant. The review of sentences is not our business, and so long as the district judge exercises his discretion responsibly, after considering the facts and the statute, we may not substitute our judgment for his. The standards we have formulated must not lead to appellate intrusion into the sentencing process. MacKINNON, Circuit Judge (dissenting) : In my view this case should not be remanded to consider Coefield’s eligibility for a youth sentence because Judge Robinson adjudged an adult sentence for him a little over two months before he was sentenced by Judge Green. The imposition of an adult sentence of a youth offender when such sentence amounts to a final judgment involves an implicit finding that the youth offender would not benefit from Youth Act treatment. Moreover, ten months after Judge Green sentenced appellant, Judge Robinson denied a motion specifically requesting a Youth Act sentence and this decision is final. It was not appealed. This forecloses the subsequent litigation of that issue between the parties. In addition since the statute only provides that the sentencing judge shall “find” that the youth offender will not derive benefit, this does not require a statement of “reasons.” I Appellant Coefield was born on December 31, 1948. On July 31, 1968 he committed two robberies, by snatching, in which he obtained a total of $45. The victims were both women. His indictment for such offenses charging robbery in violation of D.C.Code § 22-2901 was returned on September 30, 1968 (Criminal No. 1548-68). During the time he was released from custody awaiting trial he committed a similar robbery by snatching on April 26, 1969 in which he stole $10. Again the victim was a woman. The second indictment, which was for this offense, was returned on July 29, 1969. Appellant was tried on the first indictment by a jury before Judge Aubrey E. Robinson, Jr., found guilty on both counts and on December 16, 1969 was sentenced to serve an adult sentence of two (2) to six (6) years concurrently on each count. He appealed this conviction and made a motion for release on work release program pending appeal. In denying said motion on September 15, 1970, Judge Robinson found: [T]his Court concludes that the defendant is a sophisticated predator and a danger to the public and would continue to be so if released. . Coefield’s appeal to this court on the first indictment was • dismissed sua sponte on November 2, 1970 by Judges Spottswood Robinson III and Robb when counsel’s motion for leave to withdraw was granted. Appellant was tried on the second indictment by a jury before Judge June L. Green on December 17, 1969, the day after he was sentenced on the charges of the first indictment. A guilty verdict was returned on this charge of the second indictment and Judge Green adjudged another adult sentence for him on March 3, 1970 (two months and 18 days after he was awarded an adult sentence by Judge Robinson) of imprisonment of two (2) to six (6) years, to run consecutively to the adult sentence on the first indictment. By petition dated November 1, 1971 appellant requested that his adult sentence adjudged by Judge Robinson be modified to one under the Federal Youth Corrections Act. This motion effectively raised the issue as to his eligibility for a Youth Corrections Act sentence. The motion was denied by order on December 21, 1971. No appeal was taken from this order, so that judgment is final. II It thus appears that when appellant came on for sentencing before Judge Green on March 3, 1970 he was already-serving an adult sentence which had been adjudged by Judge Robinson only two months and 17 days previously on December 16, 1969. In imposing sentence on the second indictment, apart from facing the practical impossibility of imposing a concurrent or consecutive Youth. Corrections Act sentence, Judge Green had the right to rely upon the regularity of Judge Robinson’s sentence and that regularity necessarily included a finding by Judge Robinson that appellant would “not derive benefit from treatment under [the Youth Corrections Act]” 18 U.S.C. § 5010(d). The decision by Judge Robinson to impose an adult sentence made it unnecessary for Judge Green to reconsider the appellant’s eligibility for a Youth Corrections Act sentence as that issue had been necessarily involved in Judge Robinson’s decision just two and one-half months before and Coefield is collaterally estopped from raising the issue in a subsequent action. The doctrine of collateral estoppel is an aspect of the broader principle of res judicata; it applies to both civil and criminal proceedings, and extends to facts necessarily involved in an issue or necessarily implied by a judgment, Sealfon v. United States, 332 U.S. 575, 578, 68 S.Ct. 237, 92 L.Ed. 180 (1948), Pena-Cabanillas v. United States, 394 F.2d 785, 786 (9th Cir. 1968) as well as to facts actually decided. If there were any doubt as to the conclusive nature of the first sentence on file issue of Coefield’s eligibility for YCA treatment, that doubt was completely removed by Judge Robinson’s order of December 21, 1971 which denied a specific motion to modify appellant’s sentence so as to impose one under the Youth Corrections Act. That same issue cannot again be raised by appellant. I thus see no necessity to discuss any of the considerations treated by the opinion of the majority. Ill The majority opinion imposes the requirement for the future that the sentencing court state the “reasons” upon which it may base its finding that the youth offender will not derive benefit from treatment under [the Youth Corrections Act] .... 18 U.S.C. § 5010(d). The Youth Corrections Act, however, only requires that [T]he court shall find that the youth offender will not derive benefit from [youth] treatment under subsection (b) or (c) . 18 U.S.C. § 5010(d) (Emphasis added.) “Reasons differ from findings in that reasons relate to law, policy, and discretion rather than facts.” 2 K. Davis, Administrative Law § 16.12 (1958). The opinion of the majority in requiring “reasons” thus imposes a requirement not imposed by Congress and goes even further than the Supreme Court went in S.E.C. v. Chenery Corp., 318 U.S. 80, 95, 63 S.Ct. 454, 87 L.Ed. 626 (1943), where it refused to enforce “formal requirements” upon an administrative agency. And courts have always been permitted wider latitude in this respect than administrative agencies. I thus see no justification for placing our trial courts in an administrative straight jacket on sentencing youth offenders, which incidentally involves a subject over which we have very little control. It is accordingly my conclusion that the majority opinion in this respect exceeds our authority. IV I also dissent specifically from the statement at page 1155, supra, that: The fact that Coefield was already serving an adult sentence not imposed under the Act, does not establish by implication the requisite finding. This fails to give adequate consideration to the prior judgment and completely overlooks the effect of the contemporaneous sentence and judgment on the issue of “no benefit.” Judge Green’s trial began the day after Coefield was sentenced on the first offense and she was not ignorant of his sentence thereon. She confirmed her awareness of his prior sentence by fashioning her sentence to run consecutively to the prior sentence. The prior sentence was also referred to by counsel at the time of allocution. While a sentence which was adjudged long after a prior adult sentence, for some purposes, might not be controlled by an implicit “no benefit” finding in a prior offense because of changed circumstances, such is not this case. The two sentences here were practically contemporaneous, with no material intervening circumstance, except that appellant was convicted upon a second indictment which charged his third offense. This additional conviction was not a factor likely to cause any fair-minded judge to impose more lenient punishment. In addition, I would refrain from relying upon the claimed conduct of appellant while serving his sentence in prison as a basis of our interfering in the sentencing function of the trial court. We are in no position to evaluate a prisoner’s conduct in prison. We have no jurisdiction to impose our judgment or philosophy as to sentences. Such matters are for the trial court and the Parole Board and the facts necessary to such a determination are not a proper part of this record on appeal. It is improper for the majority opinion to rely upon the sketchy facts here presented. ' In conclusion, I repeat that I see no reason to remand this case to the trial court to consider the eligibility of this appellant for a Youth Corrections Act sentence when appellant was given an adult sentence by another court shortly, before the instant sentence and when the identical issue as to whether appellant was entitled to an adult sentence was raised on motion in the first case and determined adversely to appellant by Judge Aubrey E. Robinson, Jr. shortly after appellant’s sentence by Judge Green. . There was additional testimony from the ladies that appellant called on the telephone several days later, “asking us about his ten dollars. When were we going to give him his ten dollars back,” and that appellant wanted to meet the girls somewhere. . Appellant at the time was serving sentence of two to six years for another pickpocketing robbery of $40.00. . Our source for this information is the memorandum submitted by appellant’s counsel subsequent to oral argument. It is not questioned by the Government. . H.R.Rep.No.2979, 81st Cong., 2d Sess. 1 (1950), U.S.Code Cong. & Admin.News 1950, p. 3983. . As repeated in Ward, the judge “may resort to the adult sentence ‘only if the applicable facts in the individual case meet the statutory requirements,’ ” 147 U.S.App.D.C. 151, 454 F.2d 994, in accordance with the intention of Congress. . This section reads as follows: (e) If the court desires additional information as to whether a youth offender will derive benefit from treatment under subsections (b) or (c) it may order that he be committed to the custody of the Attorney General for observation and study at an appropriate classification center or agency. Within sixty days from the date of the order, or such additional period as the court may grant, the Division shall report to the court its findings. Added Sept. 30, 1950, c. 1115, § 2, 64 Stat. 1087. . Where the court sentences under the Act, without more, the possibility of challenge to the sentence is so remote that we need not now dwell upon whether more might be required in an exceptional situation we do not envisage. . See footnote 7 and text at p. 1157, both supra. . The Court of Appeals for the Fourth Circuit has recently approved our Waters and Ward decisions in the following language : In two recent cases the District of Columbia Circuit has held that under “§ 5010(d), the court must affirmativetively find that the youth offender will not benefit from rehabilitative treatment before the' offender can be sentenced as an adult . . . ” United States v. Waters, 141 U.S.App.D.C. 289, 437 F.2d 722, 724 (1970); United States v. Ward, 147 U.S.App.D.C. 149, 454 F.2d 992 (1971). We agree with these decisions and have concluded to follow them. In the instant case the district court made no finding that Cox would not benefit from treatment as a youth offender; and when on motion under 28 U.S.C.A. § 2255, the absence of the finding was urged as a ground warranting relief, the district court found as a fact that “[i]n sentencing Petitioner, the court made no finding that Petitioner would not benefit from treatment under [the Act],” and specifically rejected the holding of Waters on the ground that the legislative history of the Act made it clear that the Act was not intended to remove the discretion of the district judge whether or not to sentence a convicted youthful offender under the statute governing his offense or under the Act. Irrespective of the legislative history, the language of the Act is quite specific. It requires a finding that a youth offender will not benefit from treatment under the Act before the district court “may” sentence the youth as an adult. We agree with the language in Waters that “[w]hile the District Court does have discretion to sentence a 19-year-old ‘youth offender’ under either the applicable statutory offense provision or the Youth Corrections Act, we believe this discretion is circumscribed by the findings of fact in the individual case which the District Judge is required to make either explicitly or implicitly,” 437 F.2d at 725, and “[w]hile the District Court is given discretion in regard to sentencing, that discretion must be exercised in accordance with the intention of Congress underlying the statutory provisions . . . ”, 437 F.2d at 727. Like Ward, the implications which can be drawn from the failure to make an explicit finding in this case are too uncertain for us to conclude that there was an implicit finding that Cox would not benefit from sentencing under the Act, especially when the district court found that it had made no finding. Earl French Cox, Jr. v. United States, 473 F.2d 334, 344 (4th Cir. 1972) (Reheard en banc, December 7, 1972). . We attach an Appendix containing portions of the legislative history of the Act, as furnishing additional background for our opinion. . The age as finally approved was 18 to 22 years, . S. 895, The Federal Corrections Act, Title III, § 2, proposed 78th Cong., 1st Sess. (1943). Hearing on S. 895 Before the Subcomm. of the Senate Comm, on the Judiciary, 78th Cong., 1st Sess. at 3 (1943) (hereinafter cited as 1943 S. Hearings) . . The 1943 provision read as follows: If the court shall find the youth offender will not derive benefit from treatment and should not be committed to the Authority under subsection (a), then the court may sentence the youth offender under any other applicable penalty provision. . . . Federal Corrections Act, Title III, § 1(c), 1943 S. Hearings at 3. Section 5010(d) reads: If the court shall find that the youth offender will not derive benefit from treatment under subsection (b) or (c), then the court may sentence the youth offender under any other applicable penalty provision. . It should also be noted that the sentence adjudged by Judge Robinson of two to six years would mean that appellant would be 22 years, 11 months and 16 days of age before he would have served the minimum portion of his sentence on the charges of the first indictment. An offender to be eligible for sentencing under the Youth Corrections Act must be under the age of 22 years at the time of conviction, 18 U.S.C. § 5006(e). The obvious intent of this provision was to place a top ceiling on the age when an offender could enter the youth correction treatment program. Appellant here could not enter the program on his second sentence at a minimum until he was 15 days short of his 23rd birthday and he might be considerably older before he would have fully served his sentence. Thus, while he would satisfy the literal requirements of the statute that he be under 22 at the time of conviction he would not satisfy the real objective that Congress had in mind when it imposed the 22 year age limitation, i. e., that the youth offender not be above 22 when he starts serving his Youth Act sentence. . Since most courts, including the Supreme Court, often decide cases without opinions, administrative opinions can hardly be a requirement of due process of law. The Court of Claims once asserted that the requirement of written opinions is a “cardinal principle of Anglo-Saxon jurisprudence.” Of this dictum Professor Radin has written that “the word ‘cardinal,’ the word ‘principle’ and the word ‘Anglo-Saxon’ are somewhat excessive.” Professor Radin points out that courts in California, Arkansas, and Montana have held statutory requirements of written judicial opinions to be unconstitutional, and courts in eight states have interpreted such requirements to be directory and not mandatory. For compelling unwilling agencies to prepare opinions, due process is a much less promising weapon than section 8(b) of the Administrative Procedure Act which, for determinations required by statute to be made on the record after opportunity for agency hearing, requires not only findings and conclusions but also a statement of “the reasons or basis therefor . . . . ” 2 K. Davis, Administrative Law § 16.13 (1958). . It conceivably may be argued from the reference to Fed.R.Crim.P. 35 in Judge Robinson’s denial of the motion to impose a youth sentence, that the trial court merely did not consider Coefield to have been “illegally sentenced,” and still did not consider the YCA. But this argument refuses to recognize the even more obvious implication that in the denial by the trial court of Coefield’s specific motion to sentence him under the Youth Corrections Act, the court found that Coefield was not eligible under the statute for YCA treatment, because if he had been eligible, the court was required to sentence him under the YCA. I would conclude from Judge Robinson’s citation of Fed.R.Crim. P. 35 that he considered “an illegal sentence” was not involved because he had properly considered Coefield’s eligibility for Youth Corrections Act treatment.

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UNITED STATES of America v. William C. HURT a/k/a Charles W. Hurt, Appellant. UNITED STATES of America v. Robert L. HUFF, Appellant. Nos. 72-1015, 72-1016. United States Court of Appeals, District of Columbia Circuit. Argued Dec. 11, 1972. Decided March 21, 1973. Erwin G. Krasnow, Washington, D. C., with whom Michael Yourshaw, Washington, D. C. (both appointed by this court), was on the brief, for appellant in No. 72-1015. William W. Beckett, Washington, D. C. with whom James A. Sheridan, Washington, D. C. (both appointed by this court), was on the brief, for appellant in No. 72-1016. Joseph E. di Genova, Asst. U. S. Atty., with whom Harold H. Titus, Jr., U. S. Atty., and John A. Terry, Asst. U. S. Atty., were on the brief, for appellee. Before McGOWAN, Circuit Judge, HARRISON L. WINTER, Circuit Judge for the Fourth Circuit, and MacKINNON, Circuit Judge. Sitting by, designation pursuant to 28 U.S.C. § 291(a) (1970). PER CURIAM: Appellants William C.' Hurt and Robert Huff were indicted for first degree murder (D.C.Code § 22-2401) and convicted of second degree murder (D.C. Code § 22-2403) after a joint trial. We have consolidated their appeals, and for the reasons expressed below affirm both convictions. I. On August 21, 1970 at approximately midnight Richard Mitchell was stabbed to death in the parking lot of the Golden Gate Lounge at 8th and K Streets, N.W. by two assailants. There were at least four witnesses to the stabbing — Nathaniel Black, Charles Thomas, Patricia Tierney and Diane Evans, all of whom viewed the incident from approximately 30 feet. The police arrived at the parking lot at 12:30 a. m. and broadcast a radio “lookout” for the two suspects at approximately 12:55 a. m. The radio “lookout” described the two suspects as Negro males, one 6 feet 2 inches tall, weighing 180 pounds, wearing khaki shirt and trousers and named “Charles.” The second suspect was described as 5 feet 4 inches tall, weighing 120 pounds, and wearing a red shirt and khaki trousers. The “lookout” also noted that they were last seen running west on K Street, and were believed to live in the vicinity of 1004 Massachusetts Avenue, N.W. At 1:15 a. m. appellants were spotted by a patrol wagon as they walked near 10th and Massachusetts Avenue, N.W., approximately five blocks from the murder scene. The officer in the patrol wagon noticed that one of appellants (Hurt) was tall and had on khaki shirt and pants, while the shorter one (Huff) had on a brown or tan pullover shirt over a red T-shirt and dark pants. When the officer asked Hurt his name he replied “Charles.” At this point the officer noticed blood on the pants and shoes of Hurt. He asked both appellants to accompany him to the parking lot at the murder scene and they both complied. At the police station the clothes of both appellants were taken for evidence because they contained quantities of a substance suspected to be blood. Huff’s shoes and hat were found to have blood on them, as were Hurt’s trousers and boots. The blood on Huff’s right shoe was identified as type AB. The blood on the victim’s pants was also identified as type AB. Neither Huff nor Hurt had type AB blood. On August 25, 1970 a lineup was held at which time Patricia Tierney identified Hurt but not Huff, while Nathaniel Black was unable to identify either appellant. Counsel for appellants were present at this lineup. On August 16, 1971, a year later, Black was able to identify Hurt from a picture of the lineup shown to him in the U.S. Attorney’s office. Tierney again identified Hurt from this same photograph on September 16, 1971, shortly before trial. Also on that day Charles Thomas identified both Hurt and Huff from the lineup picture. Neither counsel for appellants was present at these photo identification sessions. On the day of the trial Huff moved to sever his trial and this motion was denied. Thereafter, the judge held a Simmons hearing on the admissibility of the photo identification of Huff made by Thomas. After examination of Thomas the court ruled that it would permit him to testify having found nothing suggestive in the pretrial photographic identification (Tr. 15,18). II. Both appellants argue first that plain error was committed by admission of evidence based upon the pretrial photographic identifications. Huff maintains that it was plain error for the trial court not to suppress all of Thomas’ identification testimony because (1) the pretrial photographic identification of Huff by Thomas was so unfair as to violate due process, (2) it was made without the presence of counsel, (3) there was no independent basis for the in-court identification, and (4) Thomas should have been required to attend a lineup. Hurt raises the first two arguments with respect to the identification testimony of Black. Since none of these objections were raised at trial, we consider them now under our authority to notice plain error. We find no plain error with respect to the photographic identification evidence introduced here. First, it is asserted that the totality of the circumstances surrounding the pretrial photographic identifications by Black and Thomas were so unfair as to constitute a denial of due process. Appellants both rely on the recent case Neil v. Biggers, 409 U.S. 188, 93 S.Ct. 375, 34 L.Ed.2d 401 (1972) wherein the Supreme Court reviewed, inter alia, its four prior decisions on the scope of due process protection in the context of suggestive identification procedures. The Court stated: We turn, then, to the central question, whether under the “totality of the circumstances” the identification was reliable even though the confrontation procedure was suggestive. As indicated by our cases, the factors to be considered in evaluating the likelihood of misidentification include the opportunity of the witness to view the criminal at the time of the crime, the witness’ degree of attention, the accuracy of the witness’ prior description of the criminal, the level of certainty demonstrated by the witness at the confrontation, and the length of time between the crime and the confrontation. 93 S.Ct. at 382. Appellants contend that an application of these factors to the photographic identifications here reveals that there was a violation of due process. However, as Biggers makes clear, these factors are to be considered only after an identification procedure has already been determined to be suggestive. The factors are to be used to determine whether, irrespective of the suggestivity of the procedure, there are sufficient indicia to conclude that the identification was reliable. In the case of the photographic identifications by Black and Thomas there have been no allegations nor facts indicating any suggestivity, and with respect to Thomas’ identification the Simmons hearing specifically found none. While the passage of a year between the crime and the pretrial photographic identification would certainly dim a witness’ memory this fact alone cannot support a conclusion that appellants’ due process rights have been violated. United States v. King, 149 U.S.App.D.C. 61, 63-64, 461 F.2d 152, 154-155 (1972). We have reviewed the totality of the circumstances and do not find that there is “a very substantial likelihood of irreparable misidentification.” Simmons v. United States, 390 U.S. 377, 384, 88 S.Ct. 967, 971, 19 L. Ed.2d 1247 (1968). Appellants’ second argument that the photographic identifications violated their right to counsel must also fail. We have held that United States v. Ash, 149 U.S.App.D.C. 1, 461 F.2d 92, cert. granted, 407 U.S. 909, 92 S.Ct. 2436, 32 L.Ed.2d 682 (1972) shall have only prospective application, i. e., it applies only to photographic identifications made after March 1, 1972. United States v. Gillum, 150 U.S.App.D.C. 121, 463 F.2d 957 (1972). Further, we find no merit in Hurt’s attempts to distinguish the facts surrounding Black’s identification from United States v. Brown, 149 U.S.App.D.C. 43, 461 F.2d 134 (1972). Huff’s claim that the Simmons hearing did not elicit an independent basis for Thomas’ in-court identification is without merit. No independent basis is required unless the identification is found to be suggestive, and there was no such finding here. Finally, Huff implies that Thomas should have been compelled to attend a corporeal lineup rather than merely making a photographic identification. We note that there is no absolute constitutional right to a lineup. United States v. King, 149, U.S.App.D.C. 61, 64, 461 F.2d 152, 155 (1972). At the time the lineup was held on August 25, 1970 Thomas was unknown to the police conducting the investigation. While a promptly held lineup conducted soon after Thomas’ discovery by the police may have produced a more reliable identification, we find that the failure to hold such a lineup did not violate due process. III. The second argument raised by both appellants is that it was reversible error for the court not to have severed their trials under Fed.R.Crim.P. 14. We have previously noted the scope of the judge’s discretion in such matters in United States v. Gambrill, 146 U.S.App.D.C. 72, 449 F.2d 1148 (1971). There we stated: The decision to grant a severence of defendants properly joined for trial is one over which the trial court possesses great discretion and exercise of that discretion will be reversed on appeal only when it is shown to have been clearly abused. The general rule is that defendants charged with jointly committing a criminal offense are to be jointly tried. 146 U.S.App.D.C. at 83, 449 F.2d at 1159 (footnotes omitted). Hurt contends that he was prejudiced by the mere presence of Huff in the court room, because Hurt was the taller defendant and two witnesses testified that the “taller” man did the stabbing. Since the two witnesses who had previously known Hurt testified that the “shorter” man did the stabbing, Hurt feels that this testimony would have been more readily received by the jury had he been tried alone. While this latter proposition may be true, “[t]he mere fact that appellant might have had a better chance of acquittal if tried separately . . . does not establish his right to a severance.” Robinson v. United States, 93 U.S.App.D.C. 347, 350, 210 F.2d 29, 32 (1954). See also, United States v. Wilson, 140 U.S.App.D.C. 220, 227, 434 F.2d 494, 501 (1970). Hurt and Huff both argue that they were prejudiced by their joint trials because of the “irreconcilable defenses” that each asserted. Huff relied on an alibi defense, while Hurt maintained that Huff and he were both drinking at the Golden Gate Lounge, and that Huff and the victim had gone into the parking lot by themselves. Both appellants rely on our statement in Rhone v. United States, 125 U.S.App.D.C. 47, 365 F.2d 980 (1966) that [pjrejudice from joinder of defendants may arise in a wide variety of circumstances as, for example, where the defendants present conflicting and irreconcilable defenses and there is a danger that the jury will unjustifiably infer that this conflict alone demonstrates that both are guilty. 125 U.S.App.D.C. at 48, 365 F.2d at 981 (emphasis added). We do not feel that either appellant has demonstrated nor do we find that prejudice to this degree was present because of the joinder of their trials. Cf. United States v. Robinson, 139 U.S.App.D.C. 286, 289, 432 F.2d 1348, 1351 (1970). Both appellants took the stand, and each of their conflicting defenses was subject to the scrutiny of the other’s cross-examination. Huff’s alibi defense was not contradicted solely by the testimony of his co-defendant, but Huff was placed at the murder scene by the testimony of witness Thomas and also the evidence of the victim’s type blood on appellant Huff’s shoe. This testimony and evidence would have been admissible against Huff even in a separate trial. Further, we note that the jury was instructed on a number of occasions to consider the evidence individually against each defendant (Tr. 479, 503, 521). IV. Huff makes two other arguments which we dispose of briefly. First, he maintains there was no probable cause for his arrest and therefore the clothing seized thereafter should have been suppressed sua sponte by the court. It is basically his argument that he was arrested only because he was in the company of Hurt, who had been more accurately described in the radio “lookout.” He argues that there was insufficient evidence related directly to himself to constitute probable cause. However, we cannot merely consider the radio “lookout” and evidence as it related solely to Huff. “Probable cause is a plastic concept whose existence depends on the facts and circumstances of the particular case.” Bailey v. United States, 128 U.S.App.D.C. 354, 357-358, 389 F.2d 305, 308-309 (1967). The fact is that the radio “lookout” was for two suspects, and since the two were arrested together we must view the presence of probable cause in light of all the evidence as it related to both defendants. Huff was arrested five blocks from the murder scene approximately an hour after the stabbing wearing a red T-shirt and brown pants, both described in the radio “lookout” (Tr. 186, 188, 349-51), in the presence of a suspect who not only fit the “lookout” description quite accurately but answered to the name given and had visible blood on his clothes and shoes. Under these circumstances a discrepancy of 6 inches in height and 40 to 50 pounds in weight between the “lookout” description and Huff’s actual description cannot negate all of the other indicia of probable cause. We find that no plain error was committed when the trial court did not sua sponte 'suppress Huff’s clothing and shoes taken after his arrest. Finally, Huff contends that the court abused its discretion by admitting into evidence a photograph of the murder victim when the photograph was irrelevant and inflammatory. We find, however, that the photograph did have probative value when it was introduced, and was therefore admissible. Harried v. United States, 128 U.S.App.D.C. 330, 336, 389 F.2d 281, 287 (1967). Given the blood on appellant’s shoe, it was relevant and material to show the amount of blood on the ground around the victim’s body. Further, having examined the photograph, we find nothing inflammatory about it. The convictions of both appellants are therefore Affirmed. . The record does not disclose Hurt’s actual height and weight at the time of the murder. Huff testified he was 5' 10%" and weighed 163 at that time (Tr. 350). . At trial Black stated, “I couldn’t identify anyone that night. The lights were kind of dim” (Tr. 74). . The trial judge stated that since Hurt was going to take the stand, his testimony would be subject to Huff’s cross-examination and therefore he could see no prejudice (Tr. 4). . A Simmons hearing (Simmons v. United States, 390 U.S. 377, 88 S.Ct. 967, 19 L.Ed.2d 1247 (1968) is conducted prior to an in-eourt identification to determine first,, whether the pretrial identification has been violative of due process or the right to counsel, and second, if a violation is found, the court determines whether there is an independent source for the in-eourt identification which would nonetheless support its admissibility. These procedures were outlined in Clemons v. United States, 133 U.S.App.D.C. 27, 34, 408 F.2d 1230, 1237 (1968). . Fed.R.Crim.P. 52(b). . Coleman v. Alabama, 399 U.S. 1, 90 S.Ct. 1999, 26 L.Ed.2d 387 (1970); Foster v. California, 394 U.S. 440, 89 S.Ct. 1127, 22 L.Ed.2d 402 (1969); Simmons v. United States, 390 U.S. 377, 88 S.Ct. 967, 19 L.Ed.2d 1247 (1968); Stovall v. Denno, 388 U.S. 293, 87 S.Ct. 1967, 18 L.Ed.2d 1199 (1967). . Tr. 15. . See note 4, supra. Even though the court need not have found an independent basis for Thomas’ identification, the record of the Simmons hearing indicates that an independent basis did exist. See Tr. 10-14. . Tr. 6. . Fed.R.Crim.P. 14 provides: If it appears that a defendant or the government is prejudiced by a joinder of offenses or of defendants in an indictment or information or by such joinder for trial together, the court may order an election or separate trials of counts, grant a severance of defendants or provide whatever other relief justice requires. In ruling on a motion by a defendant for severance the court may order the attorney, for the government to deliver to the court for inspection in camera any statements or confessions made by the defendants which the government intends to introduce in evidence at the trial. . Both Charles Thomas and Patricia Tierney knew Hurt prior to the stabbing. . Since the suppression issue has been raised for the first time on appeal, it is being considered under a plain error standard. Washington v. United States, 134 U.S.App.D.C. 223, 225, 414 F.2d 1119, 1121 (1969). . See part I and note I, supra. . At trial after Huff’s attorney objected that the photograph was too prejudicial and emotional, the trial judge admitted the photograph stating, “I find it quite the opposite. ... I don’t find it inflammatory. There is no picture of the man’s head. I think the position of the blood in and around the area is going to be part of the circumstantial proof. Therefore, I will be willing to receive it” (Tr. 216-17).

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UNITED STATES of America v. Charles MAYNARD, Appellant. UNITED STATES of America v. Kermit N. GILBERT, Appellant. Nos. 24938, 24939. United States Court of Appeals, District of Columbia Circuit. Argued March 10, 1972. Decided March 26, 1973. Ruth L. Prokop, Washington, D. C. (appointed by this court), for appellant in No. 24,938. Preston Brown, Washington, D. C. (appointed by this court), for appellant in No. 24,939. James A. Adams, Asst. U. S. Atty., with whom Thomas A. Flannery, U. S. Atty., at the time the brief was filed, John A. Terry and Richard N. Stuckley, Asst. U. S. Attys., were on the brief, for appellee. Harold H. Titus, Jr., U. S. Atty., and John F. Evans, Asst. U. S. Atty., also entered appearances for appellee. Before BAZELON, Chief Judge, and McGOWAN and LEVENTHAL, Circuit Judges. BAZELON, Chief Judge: Charles Maynard and Kermit Gilbert were jointly tried and convicted of the assault and armed robbery of one Paul Gueory. During the course of their trial, evidence was admitted that Maynard’s sole defense witness, Mrs. Constance Kemper, had been charged with obstruction of justice for her alleged efforts to persuade Gueory not to identify her brother, the appellant Gilbert. On the grounds that the admission of this evidence was error and worked substantial prejudice to Maynard's defense, we reverse Maynard’s conviction. Gilbert contends that handwritten notes taken during a police interview of Gueory should have been available to his defense under the Jeneks Act, 18 U.S.C. § 3500 (1970), and Brady v. Maryland. These notes were delivered to the United States Attorney’s office, but were unavailable at the time of trial. Since the record fails to disclose the reason for their disappearance, or any inquiry into the effect thereof, we remand Gilbert’s case for a hearing to develop these facts and to consider the issues raised under the Jeneks Act, Brady, and this court’s decision in United States v. Bryant. In addition, we direct the trial court to consider whether the impeachment of Constance Kemper through reference to her arrest for obstruction of justice was prejudicial error as to Gilbert. The reasons for our decision follow. I. The relevant facts concerning the crimes for which Maynard and Gilbert were charged, as told by the victim Gueory, are as follows: Around noon on October 18, 1969, as Gueory was returning to his rooming house at 1775 T Street, N.W., he overheard that a group of men on the street was looking for one Earl Robinson who resided at the same address. Gueory recognized the appellant Gilbert, although he did not then know him by name, as being among the group discussing Robinson. As soon as Gueory reached his room and opened his window, someone in the street group fired a shot in his direction. Gueory spent the rest of the day in his room with his girlfriend Doris Green and other friends, and admitted shooting heroin at ten or eleven at night. At approximately one in the morning of October 19, Gueory left his room to go to the Manhattan Bar on the corner of Eighteenth and T streets. As he crossed an alley on Eighteenth, Gilbert and another man approached him. Gueory wanted to tell them that he had nothing to do with Earl Robinson, but was hit by Gilbert with a gun and was attacked by three other men all carrying weapons. One of these men robbed him of the cash he was carrying. Gilbert threatened to kill Gueory, while Gueory continued to deny that he had anything to do with Earl Robinson. The four assailants forced Gueory back to his rooming house and he showed them the room belonging to Robinson. As the attacker whom Gueory later identified as the appellant Maynard kicked open Robinson’s door, Gueory attempted to climb the stairs to his own room. He heard Gilbert yell “Where in the hell do you think you’re going?” and was immediately struck in the legs by a shotgun blast. He continued to crawl up the stairs and was helped into his room by Doris Green. To this story, Doris Green added only that she had identified Gilbert sitting in front of the rooming house around midnight on that evening and that she knew her cousin, Earl Robinson, had taken something belonging to Gilbert. After Gueory was shot, she escaped from the rooming house via a bathroom window and telephoned for an ambulance. Gueory was taken to Freedman’s Hospital. II. The Government’s case against the appellant Maynard rested solely on the identification of Maynard by Gueory and Gueory’s testimony concerning a conversation he held with Maynard while still in the hospital. Gueory testified that he by chance recognized Maynard, whom he did not know before the attack, when Maynard was visiting another patient in Freedmen’s Hospital. At the time, Gueory reported this to no one, but several days later Maynard again visited the hospital, this time in the company of a woman who identified herself to Gueory as being Gilbert’s sister, Constance Kemper. According to Gueory’s testimony, the .sister proceeded to show him a picture of Gilbert and asked him not to identify the picture if the police showed it to him. She told him that if he agreed, he would be well taken care of, that she would bring some “goodies” or “five green apples” which Gueory understood to mean money. Gueory further testified about a bedside conversation he held with Maynard, which proceeded substantially as follows : Gueory accused Maynard of being one of his assailants, which Maynard denied. Thereupon Gueory said to Maynard “You had a .45, didn’t you?” to which Maynard replied no, he had a .38. Gueory stated that he could have Maynard arrested right then, and Maynard replied, “Yeah, I know you can.” Gueory then told Maynard that he had no animosity and did not want to press any charges. After his release from the hospital, Gueory made a full statement concerning this visit to Detective Dean Caldwell, who had been questioning .him since the shooting. Maynard was arrested on November 21, 1969. At trial, Maynard did not take the stand to testify in his own behalf. His primary defense witness was Gilbert’s sister, Mrs. Kemper, who contradicted Gueory’s version of the events at the hospital bedside. Mrs. Kemper stated that Gilbert’s trial counsel had asked her to take a picture of Gilbert to the hospital to see if Gueory could identify him as one of the assailants. Maynard accompanied her from the lawyer’s office. Mrs. Kemper stated that Maynard and Gueory did not converse at all, and that as she spoke with Gueory, Maynard walked away to visit another patient. Her version of the substance of her discussion with Gueory also differed from Gueory’s. Mrs. Kemper denied that she offered Gueory a bribe. She said Gueory recognized the picture of Gilbert but would not respond when asked if Gilbert shot him. She did get him to agree to sign a statement that Gilbert had not shot him. When asked on the stand what had resulted from this hospital visit, Mrs. Kemper responded: “I was charged with obstruction of justice. And I would never do anything to jeopardize myself, my family, or my job.” The Government attempted to impeach Mrs. Kemper with her grand jury testimony to the effect that, contrary to her testimony at trial, Gueory had specifically denied that Gilbert had shot him. III. Appellant Maynard’s principle contention on appeal arises out of the trial judge’s ruling to admit evidence that Mrs. Kemper had been arrested and charged, but not convicted, for obstruction of justice. The Government specifically requested such a ruling, and indicated that it would ask Mrs. Kemper a direct question to this effect during her cross-examination. The theory uncler which the Government sought the admission of such evidence was that it indicated her bias, or motive for testifying in an exculpatory manner. Counsel for Maynard strenuously objected on the ground that the prejudice resulting from the admission of the charge would far outweigh its probative thrust. The trial court ruled that the evidence would be admitted on the Government’s theory, at which point Maynard’s defense counsel made the tactical decision to raise the issue of the arrest during his direct examination of Mrs. Kemper. He therefore elicited the testimony quoted supra,. Maynard now contends that the admission of this statement was reversible error. As a general rule it is improper to impeach a witness by showing an outstanding indictment without a final conviction. The reasons behind this rule are that the mere fact of arrest or indictment is still consistent with innocence; an indictment involves repetition of someone else’s assertion of the witness’ guilt; and it raises a confusing, collateral issue to the case at trial. In certain situations, however, external facts from which may be inferred a specific bias, or motive to testify in a particular way, are admissible to impeach a witness — e. g., facts which show a familial, employment, or litigious relationship. Since the range of facts from which bias may be inferred is vast, hard and fast rules permitting or excluding specific types of impeachment evidence might be unwise. Thus it may be argued in some cases that the pendency of an indictment against a witness produces a discernible motivation to falsify testimony such as: ill feeling for the person who procured the indictment; interest in currying a favorable disposition from the prosecution; or, as in this case, the self-serving need to exculpate oneself concerning the events charged as a crime. The Government argues that the trial court’s decision to admit the arrest evidence to impeach Mrs. Kemper was not error, since the scope of cross-examination to elicit bias must be broad and is within the discretion of the trial judge. Further, the use of an indictment to show this particular type of bias has been approved in other Circuits. As there appears to be no direct precedent in this Circuit, however, we are persuaded by appellant’s argument that the prejudicial effect of the admission of the arrest and charge in this case outweighed its probative substance. Admission of these facts was simply not necessary to show that Mrs. Kemper had good reason to testify as she did. Gueory’s own testimony had already revealed to the jury all the facts on the basis of which Mrs. Kemper could be charged with a crime. Her motive for denying Gueory’s accusations and for testifying about her own actions in an exculpatory manner was unmistakeable. Finally, her being charged with a crime was probative of no more than that the prosecutor, or the grand jury, chose to believe Gueory and not Mrs. Kemper. In this context, the extra impeachment provided by proof of the arrest and indictment is marginal. One can say that showing that this witness was under indictment evidenced a more forceful motive to exculpate herself than the general need to avoid incrimination. One can speculate that such a witness would be particularly spiteful against the person (Gueory) who got her into such difficulty, and give testimony accordingly. But the additional proof of interest is marginal, and it must be weighed against the very substantial prejudice to defendant Maynard from the admission of this evidence. Knowledge of an arrest and indictment weighs heavily in the minds of laymen and casts the shadow of doubt on the witness’ veracity. This was particularly unjustified in Maynard’s case since Mrs. Kemper’s arrest did not give her a specific motive to falsify her testimony about Maynard’s conversation with Gueory. What Maynard said and did was unrelated to her alleged bribery attempt. Therefore, admission of her arrest served the purpose against Maynard for which such evidence is excluded in this Circuit — that of general impeachment of the witness’ truthfulness. For these reasons, admission of this evidence over the objection of Maynard’s counsel was error. We disagree with the trial court’s characterization of any prejudice which might have resulted as “minimal.” After a careful scrutiny of the entire record, we are not assured that “the judgment was not substantially swayed by the error.” Mrs. Kemper was Maynard’s principal defense witness. It was her word against Gueory’s. It seems highly probable that the jury would be swayed by the knowledge that she was charged with obstruction of justice into discrediting her crucial testimony about the hospital confrontation. Therefore, Maynard’s substantial rights to a fair trial were prejudiced and his conviction must be reversed. We close by taking note of a problem of procedure. We are holding that Maynard is entitled to a reversal on the ground of the error of the trial judge in ruling that his witness, Mrs. Kemper, was subject to impeachment by a showing of her arrest and indictment, even though that fact was elicited by Maynard himself. Maynard’s counsel did what he could to dilute, but he could not remove the prejudicial impact of the ruling. His offer of the evidence was in submission to the ruling of the District Court. Defense Counsel objected to the prosecution’s proposal, fully argued the matter to the trial judge, was bound by the ruling. As counsel he was under a restraint against rearguing a point that had been fully argued. We think he was fairly entitled to treat the ruling as definite and complete, and to do what he fairly could to limit the prejudicial impact of the ruling. IV. Appellants Gilbert and Maynard contend that the rough notes taken by Detective Caldwell during his initial interrogation of Gueory in the hospital should have been made available to the defense under Brady v. Maryland and the Jencks Act. Trial counsel for both appellants repeatedly requested production. At the pre-trial hearing to suppress Gueory’s identification of Maynard, Detective Caldwell testified that Gueory first responded to his questions about the shooting on October 20, 1969. At that time Gueory also indicated that he did not want to prosecute. Caldwell testified that during this interview Gueory identified one assailant by the name “Big” Gilbert, and described the others as follows: “Another was a Negro male of about six foot with a bush haircut and had glasses on. The other two subjects, he said, were short. He had never seen them in his life. He didn’t know any of them.” Caldwell further testified that he had taken rough notes consisting of at least four or five pages, that he would have written down any descriptions given to him, and that he had turned over these notes to the Assistant United States Attorney in charge of the case a few months before trial. At the conclusion of the direct examination of Gueory, which included his identification of both appellants, counsel for Maynard and Gilbert moved to strike Gueory’s testimony on the ground that the rough notes had not been produced. A search of the Government’s file had revealed no notes, and the Assistant United States Attorney prosecuting the case stated that they must have been “thrown away.” The trial court did not rule that the notes would not be subject to production, but stated that he would not hold up the cross-examination of Gueory at that time. If the documents were located, Gueory would be re-called for additional cross-examination. The trial court’s only statement at trial concerning the Government’s duty, and failure, to preserve and produce such notes was that the Government should make every effort to locate them and that there “would be no conspiracy to withhold it.” Further inquiry into the disappearance of the notes took place during a hearing on appellants’ motions for a new trial on October 14, 1970. The court at that time ruled that Detective Caldwell’s notes were not producible under the Jencks Act because the contents of the notes had not been clarified, and because there was no indication that Gueory had adopted or approved Caldwell’s transcription of his statements pursuant to section (e) (1) of the Jencks Act. These reasons, and the Government’s assertion in its brief that it is “highly speculative” that these rough notes contained substantially verbatim statements producible under section (e) (2) of the Act, do not meet the thrust of appellants’ arguments and this court’s ruling in United States v. Bryant. First, defense counsel did attempt to clarify the contents of the notes as discussed above. It appears that the notes might well have contained Gueory’s statements of a descriptive nature, or statements about “Big” Gilbert which might have been favorable to the defense. This court has previously discussed the importance of such notes and the information they might contain. Second, while it is clear that the duty of the Government to produce notes under the Jencks Act and under Brady cannot be definitely resolved because the notes cannot be scrutinized, the trial court’s inquiry should not founder on impossibility. In Bryant, this court held that the Government’s “duty of disclosure is operative as a duty of preservation” which extends to all “discoverable” evidence, defined as including all evidence which “might” have to be produced under Brady or the Act. Bryant further held that “sanctions for non-disclosure based on loss of evidence will be invoked in the future unless the Government can show that it has promulgated, enforced and attempted in good faith to follow rigorous and systematic procedures” for preserving evidence. Since there were no such regular procedures in force at times relevant to these cases, as in Bryant the trial court must employ a case-by-case determination of the degree of bad faith, negligence or inadvertence which led to the nondisclosure of arguably discoverable evidence. It is particularly important to note that the police officer preserved the notes and transmitted them to the United States Attorney’s Office. Thus the usual administrative reasons which might have once justified, or at least excused, the police department’s failure to preserve such notes are not applicable. The trial court below failed to focus on whether a different or higher duty to preserve evidence ought to apply to the prosecutorial branch of the Government. If the notes were “thrown away” and not just lost, this showing of bad faith, negligence or inadvertence cannot be ignored. “a stenographic, mechanical, electrical, or other recording, or a transcription thereof, which is a substantially verbatim recital of an oral statement made by said witness to an agent of the Government and recorded contemporaneously with the making of such oral statement.” Further, there was no consideration of the appropriate sanction which might have been applied in light of a violation of the duty of preservation. The Jencks Act calls for exclusion of the testimony of the witness whose statements were recorded. What portion of Gueory’s testimony would be affected must be determined. It has also been suggested that in a case where notes have been discarded, the “absence of notes may be . best handled by instructing the jury with an adaptation of the kind of instruction used in case of a missing witness, that the jury is free to infer that the missing original notes would have been different from the testimony at trial and would have been helpful to defendant.” The trial judge is in the best position to determine what the circumstances of this case require, after consideration of the actions of the United States Attorney and the importance for the impeachment of Gueory which the notes might have served. Accordingly, it is necessary that appellant Gilbert’s case be remanded for an inquiry into these points; to determine whether a sanction for nonproduction should have been imposed; and to determine whether Gilbert must receive a new trial. If appellant Maynard is re-tried, the trial court must undertake a similar inquiry if Gueory testifies and if Detective Caldwell’s notes are not produced. V. Appellant Gilbert urges that his trial should have been severed from Maynard’s because of their antagonistic defenses. Gilbert’s motions for severance prior to trial, on the first day of trial, at the conclusion of the Government’s case, and his motion for a new trial were all denied. Under Rule 14 of the Federal Rules of Criminal Procedure the court may grant severance if a defendant is “prejudiced” by joinder. This determination rests largely within the discretion of the trial court and the standards for review in this court were set forth recently: In order to demonstrate abuse of discretion by a trial judge, one must show more than the fact that co-defendants whose strategies were generally antagonistic were tried together. . At the very least, it must be demonstrated that a conflict is so prejudicial that differences are irreconcilable, and “that the jury will unjustifiably .infer that this conflict alone demonstrates that both are guilty.” According to Gilbert’s argument, the source of the conflict is that Maynard’s defense required use of Mrs. Kemper as a witness to rebut Gueory’s testimony incriminating Maynard. Once she was on the stand, admission of her arrest for obstructing justice lent credibility to Gueory’s version of the entire hospital visit and caused the jury to infer Gilbert's guilt from Gueory’s version of the desperate bribery attempt. Since Gilbert would not have called upon Mrs. Kemper in a separate trial, the prejudicial impact of the arrest evidence was a result of the joinder and should have been avoided through severance. However, our decision that the admission of the indictment was erroneous in the first place would appear to shift the focus of this claim. The real issue is whether admission of the arrest to impeach Mrs. Kemper was as substantially prejudicial to Gilbert as it was to Maynard. The evidence implicating Gilbert in the attack on Gueory was stronger than was the case against Maynard. Balanced against this, Gilbert presented an alibi defense in his own behalf which was corroborated by three companions. Whether admission of Mrs. Kemper’s arrest swayed the jury in these circumstances is a difficult question on which we do not have the full benefit of argument or of the trial court’s consideration. Therefore, in the context of the remand of Gilbert’s case it would be appropriate for the trial court to direct an inquiry into this issue and to determine whether on this ground Gilbert must be awarded a new trial. We have considered the other issues raised by Maynard and Gilbert and find them to be without merit. Should Maynard be re-tried, the Legal Aid investigator’s report will be available to him. Accordingly, the judgment in No. 24,938, United States v. Maynard, is reversed and No. 24,939, United States v. Gilbert, is remanded pursuant to this opinion. . Maynard was convicted of armed robbery, 22 D.C.Code §§ 2901, 3202 and assault with a dangerous weapon, 22 D.C.Code § 502. Gilbert was convicted of assault with intent to kill while armed, 22 D.C. Code §§ 501, 3202, armed robbery, 22 D.C. Code §§ 2901, 3202 and assault with a dangerous weapon, 22 D.C.Code § 502. . 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963). . 142 U.S.App.D.C. 132, 439 F.2d 642, aff’d after remand 145 U.S.App.D.C. 259, 448 F.2d 1182 (1971). . Transcript at pp. 113-186. Unless otherwise noted, citation to Transcript will refer to the dates of the trial, September 24, 25, 28, 29, 1970. . Transcript at p. 65. . Transcript at pp. 200-208. . Transcript at pp. 137-139. . Maynard’s only other defense witness was Detective Caldwell who testified about Maynard’s arrest. Transcript at pp. 272-274. . Transcript at p. 294. . Transcript at p. 278. . Transcript at pp. 279-280. . Transcript at p. 280. . Michelson v. United States, 335 U.S. 469, 482, 69 S.Ct. 213, 93 L.Ed. 168 (1948); Sanford v. United States, 69 U.S.App.D.C. 44, 98 F.2d 325 (1938); 3A Wigmore, Evidence § 980a (Chadbourn rev. 1970). See also Fenwick v. United States, 102 U.S.App.D.C. 212, 252 F.2d 124 (1958); Beasley v. United States, 94 U.S.App.D.C. 406, 218 F.2d 366 (1954), cert. denied, 349 U.S. 907, 75 S.Ct. 584, 99 L.Ed. 1243 (1955); Campbell v. United States, 85 U.S.App.D.C. 133, 176 F.2d 45 (1949). Cf. Lee v. United States, 125 U.S.App.D.C. 126, 368 F.2d 834 (1966). . See 3A Wigmore, Evidence § 949 (Chadbourn rev. 1970). Accord, United States v. Kinnard, 150 U.S.App.D.C. 386, 465 F.2d 566 (1972). . See, e. g., the examples cited in United States v. Lester, 248 F.2d 329, 334-335 (2d Cir. 1957). . Alford v. United States, 282 U.S. 687, 51 S.Ct. 218, 75 L.Ed. 624 (1931). . See Terminal Transport Co. v. Foster, 164 F.2d 248 (5th Cir. 1947), a civil case for wrongful death which involved the impeachment of the alleged wrong-doer with the fact that he had been indicted for killing the victim. The court gave no reasons for approving this type of impeachment, but cited two Alabama Supreme Court cases. Terminal Transport was cited for illustrative purposes only in United States v. Lester, supra note 15, 248 F.2d at 334. . Although Maynard relies heavily on McGill v. United States, 106 U.S.App.D.C. 136, 270 F.2d 329 (1959) that case involves a witness for the prosecution with charges pending against him which might influence him to curry the favor of the government in his testimony. In McGill, the trial court would only permit cross-examination about promises of leniency. This court upheld that ruling, stating “[b]ias cannot be shown simply by testimony of an arrest . . . where no conviction has resulted and where no showing is made of promises of leniency or the like.” 106 U.S.App.D.C. at 137, 270 F.2d at 330. The type of bias referred to differs considerably from the type of bias the Government was trying to show in Mrs. Kemper, a defense witness. . Cf. United States v. Colonial Motor Inn, Inc., 440 F.2d 1227 (1st Cir. 1971). . At appellants’ hearing on their motions for a new trial, the trial court expressed some uncertainty about this ruling; but concluded that even if the court were wrong, the prejudice was minimal. The court’s basis for this conclusion appears to be that Gueory himself was discredited by extensive cross-examination into his drug addiction. See Transcript for October 14, 1970, at pp. 99-100. . Kotteakos v. United States, 328 U.S. 750, 765, 66 S.Ct. 1239, 1248, 90 L.Ed. 1557 (1946). See also Campbell v. United States, supra note 13, 85 U.S.App.D.C. at 135-136, 176 F.2d at 47-48. . Transcript at 7, 135, 143-145. With regard to the P.D. Form 251 referred to cursorily in appellant Maynard’s brief, the very existence of this so-called “missing” document was not proven. . Transcript at p. 12. Caldwell initially stated that Gueory could not offer any descriptions of his assailants, Transcript at p. 6, but later indicated that in fact descriptions had been given. . Transcript at p. 13. . Transcript at pp. 9, 51. . Transcript at p. 14. . Transcript at p. 7. Caldwell also testified that he thought photostatic copies were made and turned over to defense attorneys. Transcript at p. 10. . Transcript at p. 145. . Transcript at p. 144. . Transcript at p. 145. . Section (e) (1) of the Jencks Act defines a “statement” which must be produced by the Government as follows: “a written statement made by said witness and signed or otherwise adopted or approved by him.” . Section (e) (2) defines a statement as follows: . United States v. Bundy, 153 U.S.App.D.C. 191, 472 F.2d 1266 (1972); see also United States v. Hines, 147 U.S.App.D.C. 249, 455 F.2d 1317, 1336 (dissenting opinion of Chief Judge Bazelon). . 142 U.S.App.D.C. at 141, 439 F.2d at 651. . 142 U.S.App.D.C. at 142, n. 21, 439 F.2d at 652 n. 21. . 142 U.S.App.D.C. at 142, 439 F.2d at 652. It was noted in Bundy, supra note 33, that the Metropolitan Police promulgated preservation procedures. 153 U.S.App.D.C. at 192, 472 F.2d 1267, n. 3. . United States v. Bundy, supra note 33, 153 U.S.App.D.C. at 193, 472 F.2d at 1268 (concurring opinion of Judge Leventhal). . The factors to be considered upon remand were stated in Bryant as follows: “the District Court should weigh the degree of negligence or bad faith involved, the importance of the evidence lost, and the evidence of guilt adduced at trial in order to come to a determination that will serve the ends of justice.” 142 U.S.App. D.C. at 143, 439 F.2d at 653. . Transcript at pp. 103, 226, and Transcript of October 14, 1970, at p. 97. . United States v. Robinson, 139 U.S.App.D.C. 286, 289, 432 F.2d 1348, 1351 (1970), citing Robinson v. United States, 93 U.S.App.D.C. 347, 210 F.2d 29 (1954) and Rhone v. United States, 125 U.S.App.D.C. 47, 48, 365 F.2d 980, 981 (1966). . Gueory claimed to have identified Gilbert by sight at the time of the crime, and Gilbert was also identified by Doris Green. In addition, there was evidence from Gueory that just prior to trial Gilbert had approached him suspiciously. Transcript at pp. 302-304. . Transcript at pp. 192-208.

f2d_476/html/1180-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

SHU FUK CHEUNG, Petitioner, v. IMMIGRATION AND NATURALIZATION SERVICE, Respondent. No. 72-1482. United States Court of Appeals, Eighth Circuit. Argued Feb. 13, 1973. Decided April 20, 1973. Bruce W. Okney, Minneapolis, Minn., made argument for petitioner. Richard I. .Chaifetz, Atty., Dept, of Justice, Washington, D. C., made argument for respondent. Before LAY and BRIGHT, Circuit Judges, and NICHOL, District Judge. Chief Judge, District of South Dakota, sitting by designation. PER CURIAM. Petitioner, Shu Fuk Cheung, appeals the Board of Immigration Appeals’ affirmance of the Special Inquiry Officer’s decision finding him in violation of 8 U.S.C.A. Sec. 1251(a)(2), and ordering his deportation to Hong Kong. On- August 17, 1971, petitioner was apprehended at the Foo Chu Cafe in Minneapolis, Minnesota, during an area control-illegal entry check made by two Immigration Service investigators. The investigators interviewed the petitioner with regard to his immigration status and determined that he could not satisfactorily substantiate his right to be in the United States. Petitioner was arrested and escorted to the Immigration Service offices where a sworn statement was taken. Through the services of an interpreter, petitioner was advised of his constitutional rights to remain silent and to have counsel present. Cheung signed a waiver of these rights. Questioning by the investigators elicited petitioner’s landing permit and a number of interpreted verbal responses which an investigator incorporated into a handwritten affidavit signed by petitioner, providing the basis for detaining Cheung for possible deportation. On August 18, 1971, a hearing on an order to show cause why Shu Fuk Cheung should not be deported was continued at petitioner’s request to afford him an opportunity to obtain counsel. Cheung appeared at the reconvened hearing on September 21, 1971, represented by counsel. At his attorney’s direction Cheung remained silent to all inquiries. Thus the only testimony and evidence produced was the government's. Petitioner Cheung contends that his apprehension during an area control search by immigration officers, who entered the restaurant knowing only that the restaurant employed oriental persons and served oriental food, was illegal. He also urges that the government failed to sustain its burden of proof on the issue of deportability. Both issues were decided adversely to petitioner by the Board of Immigration Appeals. We affirm. The scope of this court’s review is limited to the administrative record, and the findings of fact therein are taken as conclusive “if supported by reasonable, substantial, and probative, evidence on the record considered as a whole” 8 U.S.C.A. Sec. 1105a; Au Yi Lau v. United States Immigration and Naturalization Service, 144 U.S.App.D.C. 147, 445 F.2d 217, 219 (1971). The paucity of the immediate record is attributable to the decision of petitioner’s counsel to instruct his client to remain mute before the Special Inquiry Officer. It is upon that record that this court reviews petitioner Cheung’s appeal. The administrative record is barren of any of the surrounding circumstances preceding the apprehension which petitioner contends is illegal. Counsel for petitioner presumes that the seizure took place in the kitchen of the cafe, that the officers were without authority to enter that kitchen, and that the sole purpose for the officers’ presence in the kitchen was for an area control-illegal entry check. The record is lacking any factual basis for these assertions. The record produced by the administrative process and presently before this court for review is void of any evidence to support Cheung’s complaint that he was seized, interrogated and arrested unconstitutionally. The record reveals that the immigration officers apprehended Cheung during an area control-illegal entry check of an oriental cafe. His answers to their inquiries were, evidently, of such an unsatisfactory nature that an arrest was made. Even from the sketchy record now before us we can conclude that Cheung must have been detained temporarily for this interview. Congress specifically vested the Immigration and Naturalization Service (INS) with statutory powers enabling interrogation of suspected aliens for possible violations of immigration laws. This statutory authority grants to immigration officers the right to seek to interrogate individuals reasonably believed to be of alien origin. The underlying rationale of that decision was that the minimal invasion of the privacy of the individual approached for questioning was justified by the special needs of immigration officials to make such interrogations. This allowance for mere questioning, which assumes the individual’s cooperation, is analogous to decisions which have contemplated the same scope of authority for police officers (footnotes omitted). Au Yi Lau v. United States Immigration and Naturalization Service, 144 U.S.App.D.C. 147, 445 F.2d 217, 222 (1971), accord, Cheung Tin Wong v. United States Immigration and Naturalization Service, 468 F.2d 1122 (D.C.Cir. 1972). The record does not disclose a constitutional deprivation in petitioner Cheung’s apprehension. This court’s finding that petitioner’s apprehension was not illegal leaves the second issue for review without merit. The evidence introduced before the Special Inquiry Officer consisted of the Order to show cause issued by the District Director, petitioner’s signed affidavit, petitioner’s Crewmans Landing Permit, and petitioner’s Seaman’s Identity Book. Cheung contends the first three items were secured pursuant to an illegal detention and arrest and should be excluded as the fruits of an unconstitutional search and seizure. The Seaman’s Book, bearing an “excellent photograph” of the petitioner, was obtained from the government’s administrative file and received over petitioner’s objection as to foundation. On the basis that the record failed to substantiate petitioner’s constitutional claim we find the first three exhibits admissible. “In deportation hearings, rules of evidence applicable in courts of law need not be followed. The admission of evidence which a court would regard as legally insufficient does not vitiate deportation proceedings.” United States v. O’Rourke, 211 F.2d 609, 611 (8th Cir. 1954); see also Ah Chiu Pang v. Immigration and Naturalization Service, 368 F.2d 637, 639 (3rd Cir. 1966). These exhibits show that petitioner was born in China and had entered the United States on January 15, 1970, as a nonimmigrant crewman authorized to remain in America for as long as his ship remained in port, not to exceed 29 days. He has remained in the United States continuously since that date and possesses no authority to do so. This proof standing unrefuted is fatal to petitioner’s appeal. The deportation order is affirmed. . One reason for checking a cafe such as this one, as noted by the District of Columbia Court of Appeals in Cheung Tin Wong v. United States Immigration & Naturalization Service, 468 F.2d 1123, 1127 (D.C.Cir. 1972), is that many illegal entrants find employment in and around food service establishments, particularly those specializing in their native cuisine and where other employees are likely to be conversant in their native language. . 8 U.S.C.A. See. 1357 (a) (1) provides: (a) Any officer or employee of the Service authorized under regulations prescribed by the Attorney General shall have power without warrant— (1) to interrogate .any alien or person believed to be an alien as to his right to be or to remain in the United States;

f2d_476/html/1182-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, an Agency of the United States, Plaintiff-Appellee, v. Quinn HOGAN, Defendant-Appellant. No. 71-1902. United States Court of Appeals, Seventh Circuit. Argued Jan. 16, 1973. Decided March 29, 1973. Douglas W. Graham, Chicago, Ill., for defendant-appellant. Merrill Shepard, Donald Page Moore, Kael B. Kennedy, Chicago, Ill., for plaintiff-appellee. Before SWYGERT, Chief Judge, DUFFY, Senior Circuit Judge, and SPRECHER, Circuit Judge. SPRECHER, Circuit Judge. Defendant Quinn Hogan appeals from a jury verdict giving the plaintiffs a $20,000 judgment against him for conspiracy to defraud. We reverse. Plaintiff Federal Savings and Loan Insurance Corporation, a federal agency (FSLIC), became the owner of the property, assets and causes of action of Service Savings and Loan Association, an IIliois savings and loan institution in Summit, Illinois, in September, 1965, as a result of an agreement under which plaintiff enabled Service Savings to pay its depositors and creditors in full. Thereafter, on February 3, 1967, plaintiff FSLIC filed a complaint in the Northern District of Illinois against various officers and directors of Service Savings, along with others, charging the defendants with a civil conspiracy to mismanage and defraud Service Savings. Hogan was not named in this complaint. On July 17, 1969, FSLIC filed its second amended complaint, again naming various officers and directors of Service Savings as defendants, and this time also including Hogan as a defendant. The second amended complaint alleged a conspiracy to defraud Service Savings in conjunction with loans to three properties. The first of these properties was Vernon Hills, Inc., or the Vernon Hills Country Club. Hogan was the president of Vernon Hills. Service Savings loaned Vernon Hills $700,000 in November, 1960. The loan was refinanced and increased to $850,000 in November, 1961. Service Savings’ security for the loan was a first mortgage on the Vernon Hills Country Club property. Vernon Hills filed a bankruptcy petition in December, 1962. In June, 1963, Service Savings discovered that the legal description of the property included in its mortgage on Vernon Hills included only twelve holes of the eighteen hole golf course supposedly covered by the mortgage. Service sought reformation of the mortgage to include the whole eighteen holes on the ground of mutual mistake of fact arising from a scrivener’s error. This petition was later amended to include allegations of fraud and deceit. The FSLIC filed an answer to Service Savings’ reformation petition, alleging that it owned the property sought to be included in the reformation as assignee of the prior owner, Hillside Savings and Loan Association. The Special Master who heard the petitions found that no mutual mistake of fact had been proved, that fraud by the debtor, Vernon Hills, or any of its agents had not been proved, and that the proof was insufficient that the parties intended to include the additional property within that covered by the mortgage. Reformation was therefore denied. The Special Master’s findings were approved by both the District Court and this Court. In re Vernon Hills, Inc., 348 F.2d 4 (7th Cir. 1965). Unsuccessful in its efforts to achieve title to a complete eighteen hole course in the bankruptcy court, Service Savings, through its assignee FSLIC, purchased the remaining property in May, 1966 for $120,000. It then filed suit, although not until 1969 was Hogan added as a defendant, alleging a conspiracy to defraud Service Savings and claiming as its damages on the Vernon Hills transaction the $120,000 paid for the remainder of the golf course. Count I of the FSLIC’s complaint names as defendants, in addition to Hogan, William and Edward Szarabajka, president and executive vice president of Service Savings respectively; Joseph Nowak, attorney for Service Savings; Edward Kowalko and Joseph Racina, members of the board of directors of Service Savings; Vernon Sherman, a real estate investor and developer and a member of the board of directors of another defendant, the Virginia Corporation; Louis Sherman, identified in the complaint only as an attorney and father of Vernon Sherman; Jerome Morris, an attorney and the president and sole owner of defendant Virginia Corporation; John Parrish, a mortgage broker; the Virginia Corporation, a corporation engaged in the lending business; and Kenneth Russ and Harry Prince, each engaged in the business of lending money. These defendants were alleged to have conspired to defraud and mismanage Service Savings in a multitude of ways, but the specific acts charged to be in furtherance of the conspiracy may be generally summarized as follows: (1) causing Vernon Hills to pay large sums of money as bribes to defendants William Szarabajka and Nowak in order to obtain a loan from Service Savings; (2) concealing from Service Savings the fact that defendant Vernon Sherman was insolvent and unemployed; (3) causing a co-conspirator to prepare and certify appraisals which would attribute a fraudulent and excessive value to the Vernon Hills security property as well as another security property known as River-woods; (4) causing fraudulent Mulhern appraisals to be placed in the files of Service Savings in order to persuade the plaintiff and examining authorities that the Vernon Hills and Riverwoods loans were made on adequate security and not because of bribes; (5) causing the defendant Vernon Sherman to pay large sums of money as bribes to Nowak and the two Szarabajkas in order to obtain the Riverwoods loan; (6) causing the diversion of more than $150,000 in Vernon Hills, Riverwoods, and Ramlin Rose (another real estate venture) loan proceeds in order to pay the costs of inducing certain money brokers to deposit enough money in Service Savings to fund these loans. Additional allegations detailed the alleged fraud and bribery in connection with the Riverwoods and Ramlin Rose loans. The 35-page complaint charges Hogan by name with agreeing with others to make a cash bribe in exchange for the Vernon Hills loan, introducing Vernon Sherman to those who could procure the Riverwoods loan for him, agreeing with others to help cause Service Savings to make the Riverwoods loan, and accepting a new car and cash from Riverwoods proceeds in return for help in arranging the Riverwoods loan. Prior to trial defendants William and Edward Szarabajka and John Parrish defaulted through failure to answer the charges against them. In addition, the district judge instructed the jury that the evidence regarding a conspiracy in the Vernon Hills transaction was to be considered only against Hogan and Nowak, and that no evidence had been presented tying any of the other defendants to this alleged conspiracy. On February 8, 1971, the jury returned a verdict absolving Nowak of any liability with regard to the Vernon Hills transaction but holding Hogan liable for $20,000 on this transaction, and absolving Hogan of any liability with regard to the Riverwoods loan but holding Nowak, Vernon Sherman and Jerome Morris liable in the sum of $150,000 on this transaction. Additional verdicts were returned finding liability in favor of the plaintiff and against certain defendants, not including Hogan, on Count II of the complaint. The district judge denied Hogan’s post-trial motions for relief based on collateral estoppel in consequence of the prior decision denying reformation of the mortgage and absence of any proof on the issue of damage. We have concluded that Hogan was entitled to assert his claim of collateral estoppel although not pleaded as an affirmative defense and that, in the alternative, if the fraud issue in the earlier case differed in any respect from that asserted in the trial in this case then plaintiff failed to prove any damage. Plaintiff FSLIC argues that'the trial court’s ruling denying Hogan’s estoppel claim was correct on several grounds. It argues that the claim is barred by Hogan’s failure to comply with Fed.R. Civ.P. Rule 8(c), which requires that defenses such as estoppel be pleaded affirmatively. FSLIC also argues that collateral estoppel is not applicable here because the fraud issues in the two cases were different. Other defenses, such as lack of mutuality, are also raised. Fed.R.Civ.P. Rule 8(e) requires that a party responding to a preceding pleading “set forth affirmatively estoppel . . . and any other matter constituting an avoidance or affirmative defense.” It is undisputed that Hogan did not comply with this rule nor properly seek to amend his pleadings during the trial when it became apparent that he desired to offer the earlier case in his defense. The courts have, however, relaxed the pleading requirement in the interests of justice in various instances, such as where the facts underlying the claim of res judicata have been pleaded by the plaintiff in his complaint, Sylk v. United States, 331 F.Supp. 661 (E.D.Pa. 1971), and where the plaintiff’s own evidence discloses the facts or proof, Bradford Audio Corp. v. Pious, 392 F.2d 67, 73 (2nd Cir. 1968), 2A Moore, Federal Practice ¶ 8.27 [3] at 1853-54 (2d ed. 1972). Furthermore, Rule 15(b), Fed.R.Civ.P., specifically provides that “When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues.” The issue decided by the bankruptcy referee, and affirmed by both the district court and the Seventh Circuit, in the earlier Vernon Hills case was whether the mistake in the land description which was part of Service Savings mortgage on the Vernon Hills Country Club was the result of fraud on the part of Vernon Hills or any of its agents. But as plaintiff FSLIC itself states, the issue raised by the pleadings “concerning Hogan is whether he participated in a fraud in inducing by bribery and other means the granting of the loans secured by the mortgage.” (Plaintiff’s brief at 23; emphasis in original.) Thus, to the extent that the proof at trial was limited to proof on this issue there was neither any need, nor would it have been appropriate, for Hogan to raise the defense of collateral estoppel pursuant to the earlier case. To the extent, however, that Hogan’s liability in this case rests upon his participation in the preparation of a fraudulent mortgage, the prior judgment, being inconsistent with that holding, is relevant and collateral estoppel is an appropriate defense. Furthermore, the fact that the issue of fraud in the mortgage was raised by the plaintiff during the course of the trial, and not in the pleadings, precludes plaintiff from asserting Fed.R.Civ.P. Rule 8(c) as a bar to Hogan’s estoppel claim, because the issue was necessarily then tried with the express consent of the plaintiff. Fed.R.Civ.P. Rule 15(b); Bradford Audio Corp. v. Pious, supra, 392 F.2d at 73-74; 3 Moore, Federal Practice ¶ 15.13 [2] at 987-88 (2d ed. 1972). Neither can the lack of mutuality bar Hogan’s estoppel claim. Hogan was not a party to the reformation petition, except to the extent that he was in privity with the corporate debtor as president of Vernon Hills. The claim in the earlier case seeking reformation on the ground of fraud in the mortgage by Vernon Hills or its agents was asserted by Service Savings, and FSLIC, the plaintiff in this action, sues only as the assignee of Service Savings. But “the trend in the federal courts is away from the rigid requirements of mutuality. . . ” IB Moore, Federal Practice ¶ 0.412 at 74 (1972 Supp.). As the Supreme Court noted in repudiating the doctrine of mutuality in certain patent litigation (where the doctrine had previously been asserted to have special validity), in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 324, 91 S.Ct. 1434, 1440, 28 L.Ed.2d 788 (1971): “Many state and federal courts rejected the mutuality requirement, especially where the prior judgment was invoked defensively in a second action against a plaintiff bringing suit on an issue he litigated and lost as plaintiff in a prior action. The trend has been apparent in federal-question cases.” (Footnotes omitted.) In that case the Court also quoted approvingly Judge Friendly’s citation in Zdanok v. Glidden Co., 327 F.2d 944, 954 (2nd Cir.), cert. denied, 377 U.S. 934, 84 S.Ct. 1338, 12 L.Ed.2d 298 (1964), of Bentham’s statement of over a century ago that the concept of mutuality of estoppel was “destitute of any semblance of reason, and ... ‘a maxim which one would suppose to have found its way from the gaming-table to the bench’. . . .” Blonder-Tongue, supra, 402 U.S. at 322-323, 91 S.Ct. at 1439. We hold, in line with the many other courts which have reached the same conclusion, that, at least when used “defensively,” mutuality of estoppel should not be required. See Zdanok v. Glidden Co., supra, 327 F.2d at 954-956; Bruszewski v. United States, 181 F.2d 419 (3rd Cir.), cert. denied, 340 U.S. 865, 71 S.Ct. 87, 95 L.Ed. 632 (1950); Bernhard v. Bank of America, 19 Cal.2d 807, 811-813, 122 P.2d 892, 894-895 (1942). See generally, cases and articles cited in Blonder-Tongue, supra, 402 U.S. at 322-327, 91 S.Ct. 1434. Inasmuch as Hogan’s claim of collateral estoppel was not barred by Rule 8(c) or lack of mutuality, the issue is whether the fraud question decided by the earlier case is identical to at least one issue in this case. As stated above, we agree with the plaintiff that the pleadings in this ease did raise a different question, namely, whether Hogan participated in a conspiracy to defraud Service Savings by means of bribery. Our difficulty with accepting this difference as conclusive on the issue before us arises from the following facts: (1) plaintiff argued the defective mortgage to the jury as at least part of the basis for holding Hogan liable for fraud; (2) the trial court’s instructions clearly contemplate liability based on an allegedly fraudulent mortgage; (3) the jury’s verdict is inconsistent with finding that Hogan’s liability was based on a bribery conspiracy; and (4) if the basis of the judgment against Hogan is that he obtained a loan because of bribes, and that judgment is not based on fraud in the misdescription of a mortgage, then the jury was given no basis upon which to assess damage. Although plaintiff argues to this court that the basis for Hogan’s liability was not fraud in a mortgage description, during closing argument to the jury plaintiff’s attorney alluded repeatedly to the defective deed and the twelve-hole golf course. The district court’s instructions to the jury also clearly contemplated liability based upon a fraudulent mortgage. In his description of Count I, the trial judge stated that the complaint charged the defendants with a conspiracy to defraud Service Savings, in part, “by making false and fraudulent pretenses, representations and promises to it, . . . ” He also instructed the jury that the measure of damages in the Vernon Hills transaction “is the amount which the plaintiff paid on May 31, 1966, to purchase six holes of the Vernon Hills golf course, with interest at the rate of five per cent, from May 31, 1966.” Neither of these instructions is consistent with any theory except fraud through the defective land description. The jury, as might be expected following the instructions, reached a verdict inconsistent with a theory of conspiracy to obtain loan funds through bribery. While holding Hogan liable for $20,000, it found the person actually alleged to have taken the bribes, Service Savings’ attorney Nowak, not liable for any amount. If the jury was basing its finding of liability against Hogan on a theory of bribery conspiracy, it almost certainly would have also found liability in the person alleged to have taken the bribe and to have handled all negotiations between Hogan and Service Savings. This conclusion is supported by the fact that the jury failed to find Hogan liable on the plaintiff’s bribery theory with regard to the other transactions, in none of which could Hogan have been liable on any other theory. We conclude that Hogan’s claim of estoppel should have been allowed inasmuch as plaintiff tried its case to the jury at least in part based on fraud in the mortgage, the theory of damages was based entirely on the defective mortgage, and the jury almost certainly followed these instructions. Even if we should be mistaken in our belief that estoppel was appropriate here, however, we would have to reverse this judgment on the basis of the fact that the only evidence of damage was the cost of acquiring the land not covered by the defective mortgage. Plaintiff’s argument that estoppel is not appropriate in this case because the allegedly fraudulent mortgage is not in is> sue is inconsistent with measuring damages on the basis of the defective land description. No other evidence on the issue of damages having been presented, the jury was without any proper instruction on damage. Reversed. . All references, unless otherwise indicated, refer to the second amended complaint, filed July 17, 1969. . Hogan, appearing pro se in a complicated, multi-party case in which the other defendants were represented by accomplished counsel, was obviously at a disadvantage in his attempt to present evidence. (There is in fact very little evidence in the record either offered by or about Hogan, despite the fact that the record on appeal includes 27 volumes of depositions, 6 volumes of exhibits and 6000 pages of transcript.) Nevertheless, Hogan did ask for a directed verdict on the ground of collateral estoppel and attached a copy of the Seventh Circuit opinion in the earlier Vernon Hills case to his petition. He also sought post-trial relief on this ground, at that time attaching additional exhibits. . We must also be mindful of the Supreme Court’s repeated warning that “[t]he Federal Rules reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits.” Foman v. Davis, 371 U.S. 178, 181-182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962); Conley v. Gibson, 355 U.S. 41, 48, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Fed.R.Civ.P. Rule 1 itself provides that the federal rules are to be construed “to secure the just, speedy, and inexpensive determination of every action.” . See Currie, “Mutuality of Collateral Estoppel : Limits of the Bernhard Doctrine,” 9 Stan.L.Rev. 281 (1957). . In a memorandum decision on the defendant’s post-trial motions, the district court held that the Seventh Circuit opinion in the earlier Vernon Hills case showed that the petition before the special master was limited to the issue of mistake and that the issue of fraud was not decided. Federal Savings and Loan Ins. Corp. v. Szarabajka, 330 F.Supp. 1202, 1206 (N.D.Ill.1971). We do not agree. The Court of Appeals opinion discusses the issue of fraud fully, Concluding that the issue ultimately turned on determinations of credibility of witnesses made by the trier of fact. 348 F.2d at 8-9. . We note that showing the cost of acquiring the land, by itself, without evidence of the price obtained on resale, would not in any event be sufficient proof of damage.

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

William C. LANDSTROM, d/b/a Landstrom Gravel Co., Plaintiff-Appellee, v. CHAUFFEURS, TEAMSTERS, WAREHOUSEMEN & HELPERS LOCAL UNION NO. 65 OF the INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN & HELPERS OF AMERICA, Defendant-Appellant. No. 334, Docket 72-1906. United States Court of Appeals, Second Circuit. Argued Jan. 15, 1973. Decided March 30, 1973. Peter P. Paravati, Utica, N. Y., for defendant-appellant. James L. Burke, Elmira, N. Y., for plaintiff-appellee. Before FRIENDLY, Chief Judge, and OAKES and TIMBERS, Circuit Judges. OAKES, Circuit Judge: This appeal is by a local union held liable for $60,000 compensatory damages under § 303 of the Labor Management Relations Act of 1947, 29 U.S.C. § 187, for unfair labor practices as defined in § 8(b) (4) (ii) (B) of the Act, 29 U.S.C. § 158(b) (4) (ii) (B). The appellee, a' non-union gravel and ready-mix concrete contractor in Ithaca, New York, alleged that he lost jobs as a result of appellant’s threats to shut down major area contractors if they subcontracted gravel or concrete work to appellee. The questions raised by the appeal relate to (1) sufficiency of the evidence of a violation of § 8(b) (4) (ii) (B); (2) sufficiency of the evidence concerning the charge pertaining to, and excessiveness of, damages; and (3) the admission of evidence on matters not set forth in appellee’s answers to interrogatories. We resolve the questions of liability in appellee’s favor but reverse and remand for a new trial on the issue of damages. Appellee’s business is a small one, on the outskirts of Ithaca, where he has a gravel pit, a transit mix concrete plant, three concrete mixers (one standby), about five dump trucks, and eight regular employees. After trying unsuccess-, fully in 1967 to organize the plant, the appellant union picketed it for two weeks in the spring of 1969. Apparently the picketing was stopped after both the union and appellee had filed charges with the NLRB. These charges were later dropped by mutual agreement before May 23, 1969. After that date, for the most part, the course of conduct on which this suit was brought ensued. Taking the evidence in the light most favorable to the party prevailing before the jury, it appears that appellee had started to supply sand, gravel, or in one case ready-mix concrete to a number of contractors in the period 1969-1971 when he was told by the contractors or their representatives to stop making delivery. There was testimony from those coerced as follows: (1) John Card, assistant superintendent for Dyer Fitts Construction Company in charge of the Cornell Student Housing Project, testified that he stopped appellee from making deliveries to his site because the appellant’s business agent “told me I better not use Landstrom’s trucks delivering on that job . . . that he might shut the job down, our part of the work down.” (2) James Cartwright, executive secretary of the Cortland-Ithaca Building Exchange, a contractors’ group, testified that he had several meetings with Mr. Michaels, the business agent of the appellant, who told him that the union “would quite possibly have to picket” the job sites of members of the Exchange who dealt with Landstrom. Acting on this information, Cartwright advised the Exchange’s membership “they should anticipate some type of work stoppage” if they utilized Landstrom material or service. One of the contractors to whom Cartwright said he told this was Mr. McGuire of the firm of Stewart and Bennett. (3) Mr. McGuire, whose employer was the prime contractor on the Spencer-Van Etten School project, corroborated Cartwright, saying that he recalled being informed by Cartwright that “there was a possibility that the job could have trouble, pickets and so forth,” if Landstrom was used. As a result of Cartwright’s statement, although Landstrom was low bidder, he did not get the 6-7,000 yard concrete contract for the school. (4) Donald H. Brown, general superintendent of Streeter Associates, another contractor, testified that he had a conversation with Michaels before the Inlet Park job, in the course of which Michaels told him, “You must realize we don’t have an agreement with Landstrom and if you use him you would be violating your contract with us.” As a result of that conversation, according to Brown, Streeter did not order gravel from Landstrom that would have otherwise been ordered. Brown also implied that because of the “groundwork [that] had been laid” in discussion with Michaels about the Inlet Park job, Landstrom did not get the contract to supply gravel on the Unex Press job, Brown also testified, however, that another supplier — Paully Mancini & Son — did haul gravel that was bought at the Landstrom pit to the Unex Press job. (5) Elwood Marshall, plant foreman of a Landstrom sand supplier, RumseyIthaca Company, testified that Michaels “came to us and told us not to load any of the Landstrom trucks,” and that “if we loaded trucks, he was going to shut the place down.” As a result of Michaels’ intervention with Rumsey-Ithaca, Landstrom had to find another, more expensive, supplier of sand. (6) Rhaeto Pfister, president of Lynch Excavating Trucking Corporation, who had the excavating contract at the Ithaca College dormitories, testified that he stopped deliveries by Landstrom after “[t]he Teamsters informed us that if Bill Landstrom continued to deliver gravel that . . . I am not sure if he said picketing, or he would pull his men off, there would be a strike. Something to the effect that we would have a shutdown.” He also testified as to a similar threat by Michaels in connection with the excavating contract at Cornell Student Complex at Cornell University and as to his “other jobs,” including jobs at Tompkins Hospital and BOCES School. Pfister’s testimony was subsequently corroborated by the testimony of his then excavation superintendent, William J. Mobbs. (7) John H. Boniface, Assistant Vice President of A. Frederick & Sons, contractors on the First' National Bank job at Ithaca, testified that he had employed Landstrom on that job but then had a call from Michaels. The substance of Michaels’ message was that “if [Boniface] continued, . . . using the non-union equipment, [Michaels] would put pickets on that job.” Boniface, however, used Landstrom anyway, without further consequences. (8) Peter Giacobbi of Giacobbi Excavating and Grading Contractors Incorporated said he conferred with Michaels who told him Landstrom was “not union at all” and that thus he could not use Landstrom on the Northeast School Job, one involving some 8,373 cubic yards of gravel. (9) William Schlobohna, plumbing superintendent of J & B Plumbing & Heating, testified that he had had to stop using Landstrom for hauling a small amount of gravel for a water main ditch in downtown Ithaca when Michaels told him that Landstrom’s gravel was “nonunion” and that Michaels “would shut down the job if I continued to use it.” The principal line of defense to all of this evidence was that there was a “subcontractor’s clause” in the contracts between the union and the general contractors which required that subcontractors pay their employees the same as the general contractor paid its employees. By using Landstrom, the union argued, a general contractor was violating that clause. Thus Michaels, when asked whether he had ever threatened to shut down any of the contractors for using Landstrom, testified that he had merely “told them I was going to go to the grievance procedure,” by which he explained that he meant “I contacted my legal attorney, I find out what I can do legally, outside of giving him the seventy-two hour notice or three day notice and withdrawing my men”’ In essence, however, the jury disbelieved Michaels’ testimony that he did not tell Card, Pfister, Mobbs, Boniface, Marshall, or Schlobohna that he was going to picket their jobs or shut them down. While there is no indication that Landstrom was a subcontractor, as opposed to being a supplier, even if he were, the clause could only be enforced through the courts, NLRB v. Local 445, 473 F.2d 249 at 252 (2d Cir., 1973), since the clause was clearly “secondary.” See Orange Belt Painters District Council No. 48 v. NLRB, 117 U.S.App.D.C. 233, 328 F.2d 534, 537-538 (1964). Here there was a jury issue under § 8(b)(4)(ii)(B) in that the jury rationally could have found that appellant threatened or coerced a number of general contractors and others with the object of forcing them “to cease using, selling, ... or otherwise dealing in the products of any other producer, . . or to cease doing business with any other person . . . .” There was evidence from which the jury could have found the appellee’s conduct was “unmistakably and flagrantly secondary” and caused a severe disruption of Landstrom’s business relationships with contractors not involved in the primary labor dispute. NLRB v. Local 825, Operating Engineers, 400 U.S. 297, 304-305, 91 S.Ct. 402, 27 L.Ed.2d 398 (1971). See Note, Secondary Boycotts: The New Scope and Application of the “Cease Doing Business” Requirement of Section 8(b)(4) (B), 71 Colum.L.Rev. 1077, 1087 (1971); 12 B.C.Ind. & Comm.L.Rev. 1255 (1971). Thus, appellant’s contention that the evidence was insufficient to support the jury’s finding of a § 8(b) (4) (ii) (B) violation must be rejected. Appellant makes a somewhat confused subsidiary argument in reference to the Cornell Student Housing and Rumsey-Ithaca job which also applies to the statement made by Michaels to Cartwright of the Building Exchange and repeated by Cartwright to McGuire so as to deprive appellee of the Spencer-Van Etten School contract. As we understand it, appellant relies on the proviso to § 8(b) (4) (ii) (B) and Sailor’s Union of the Pacific (Moore Dry Dock), 92 NLRB 547 (1950), approved in Local 761, Electrical Workers v. NLRB, 366 U.S. 667, 81 S.Ct. 1285, 6 L.Ed.2d 592 (1961), and argues that since the alleged threats relating to those three projects occurred during the pendency of a primary dispute between Landstrom and the union, the union could properly picket (and implicitly threaten to picket) Landstrom wherever he was working until the primary dispute was ended in the spring of 1969. The jury could well have found, however, that the threats that occurred in the spring of 1969 went beyond a threat of picketing in conformity with Moore Dry Dock standards, for Michaels’ words were ominous and threatening and included an explicit or implied threat to shut the neutral contractor down if he continued to deal with Landstrom. The Moore Dry Dock rules are only evidentiary aids to the finder of fact and can be overcome by other evidence of illegal secondary purpose. NLRB v. Northern California District Council of Hod Carriers, 389 F. 2d 721, 725 (9th Cir. 1968). But more important, the issue was not raised below, the court’s charge did not deal with it, and no objection was taken to any failure to charge on this question. We would add that as we read the record, the most appellant might have been entitled to in any event was a charge in respect only to the three jobs mentioned above. Coneededly such a charge might have affected the damages substantially, but having permitted the case to be submitted otherwise, appellant cannot now be heard to complain. Appellant’s final argument on liability is that as to the A. Frederick job, by leaving the gravel in different piles Landstrom was doing on-site work. Hence the argument is this Was work performed by a subcontractor, not a supplier, and subject to the subcontractor clause of the contractor’s labor contracts and the construction industry proviso to § 8(e), 29 U.S.C. § 158(e). But the work Landstrom performed on this particular job is no different from the delivery of concrete by mixing and pouring it at the job site, which we held not to be subcontracting in NLRB v. Teamsters Local 294, 342 F.2d 18, 21-22 (2d Cir. 1965). Relative to damages, the only evidence consisted of Landstrom’s uncontroverted testimony that his profit (the excess of selling price over cost) on the sale of gravel picked up at his pit was 25 cents per yard, on the sale of gravel delivered by his trucks to a work site approximately 75 cents per yard, and with regard to concrete at the Spencer-Van Etten school job (the only one involving the sale of concrete) $8.95 per yard. Briefly stated, there was evidence from which the jury could find that, multiplying the numbers of yards of gravel lost on the various jobs by the “profits” above stated, together with a “lost profit” for 5400 yards of concrete at $8.95 per yard or $48,330, the total damage on this basis was $74,625.25. Appellant argues, however, that as a matter of law the evidence on damages was insufficient because appellee had the burden of proof of damages, Jodice v. Calabrese, 80 LRRM 2681 (S.D.N.Y., June 6, 1970), was free to and did use his employees and materials on other jobs, and made no showing of a general loss of profits. H. L. Robertson & Associates, Inc. v. Plumbers Local 519, 74 LRRM 2689 (S.D.Fla., Dec. 9, 1969) , aff’d, 429 F.2d 520 (5th Cir. 1970) (per curiam). It is now clear that, irrespective of state law, only compensatory damages are recoverable 303 actions. Teamsters Local 20 v. Morton, 377 U.S. 252, 260-261, 84 S.Ct. 1253, 12 L.Ed.2d 280 (1964). It is equally clear that damages in a § 303 action need not be proven to a certainty, but only to an approximation inferable reasonably and justly. Flame Coal Co. v. UMW, 303 F.2d 39 (6th Cir.), cert. denied, 371 U.S. 891, 83 S.Ct. 186, 9 L.Ed.2d 125 (1962); UMW v. Patton, 211 F.2d 742 (4th Cir.), cert. denied, 348 U.S. 824, 75 S.Ct. 38, 99 L.Ed. 649 (1954). See also Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 567-568, 51 S.Ct. 248, 75 L.Ed. 544 (1931) (loss of business from Sherman Act violation). But here, with one minor exception, appellee produced no evidence of out of pocket expense as in Gulf Coast Building & Supply Co. v. Electrical Workers Local 480, 428 F.2d 121 (5th Cir.), cert. denied, 400 U.S. 942, 91 S.Ct. 240, 27 L.Ed.2d 246 (1970), or Burns Brothers Plumbers, Inc. v. Groves Ventures Co., 412 F.2d 202 (6th Cir. 1969). There was no evidence produced that appellee did not or could not have employed his material elsewhere and used his trucks and men in connection with other projects not interfered with by appellant — no evidence that his men and equipment were idled by appellant’s activity. The most that was shown is a lost gross profit, but not a loss of net income. The proof of damage here thus falls far short of that adduced by the general contractor in Abbott v. Pipefitters Local 142, 429 F.2d 786, 789-790 (5th Cir. 1970) (proof of average profit over three year period and less profit on particular job, coupled with proof that losses were not attributable to factors other than picketing). See also Sheet Metal Workers Local 223 v. Atlas Sheet Metal Co., 384 F.2d 101 (5th Cir. 1967); Teamsters Local 984 v. Humko Co., 287 F.2d 231 (6th Cir.), cert. denied, 366 U.S. 962, 81 S.Ct. 1922, 6 L.Ed.2d 1254 (1961). While there is ample proof that as a result of appellant’s unlawful activity appellee sustained lost profits on some gravel that he could have sold at the pit and some that he could have delivered, there is no proof that the same gravel — surely the most fungible and widely used of minerals — was not sold elsewhere or in any event delivered elsewhere in the ordinary course of business by the use of Landstrom’s men and equipment. Thus, appellee did not sustain his burden of proving actual damage. Since we must remand in respect to alleged losses of profits in any event, it is unnecessary to determine whether the court’s response to a jury question in respect to Landstrom’s claim for damages should have been framed in substantially the same terms as Landstrom’s attorney’s summation. We do hold, however, that appellant’s belated objections to evidence relating to liability and damages on the Spencer-Van Etten, Morris Chain and Unex Press jobs on the ground that they were not specifically mentioned in appellee’s answers to interrogatories are unavailing. Reference was made in the interrogatory answers to claimed damages of $62,500 in respect to Stewart and Bennett, the Spencer-Van Etten contractors, and in connection with the Unex Press project there was a general answer of claimed damages of $25,000 on additional jobs; appellant cannot now claim, having failed to press for further specification before trial, that he was surprised by this evidence. Landstrom’s deposition could have been, but was not taken. The Morris Chain project of which appellant now complains was not material since no claim for damages in respect to it was made. Judgment affirmed as to liability, reversed and remanded for new trial on damages only, costs to neither party. . Section 8 provides in pertinent part: (b) It shall be an unfair labor practice for a labor organization or its agents'— (4) . . . (ii) to threaten, coerce, or restrain any person . . . where . an object thereof is' — • (B) forcing or requiring any person to cease using, selling, handling, transporting, or otherwise dealing in the products of any other producer, processor, or manufacturer, or to cease doing business with any other person, or forcing or requiring any other employer to recognize or bargain with a labor organization as the representative of his employees unless such labor organization has been certified as the representative of such employees under the provisions of section 159 of this title: Provided, That nothing contained in this clause (B) shall be construed to make unlawful, where not otherwise unlawful, any primary strike or primary picketing[.] . Appellee originally also sued Michaels and Lawrence Small, Secretary-Treasurer of the appellant. These suits were dismissed by consent prior to trial. . On the validity of such clauses, see Truck Drivers Local 413 v. NLRB, 118 U.S.App.D.C. 149, 334 F.2d 539, cert. denied, 379 U.S. 916, 85 S.Ct. 264, 13 L.Ed.2d 186 (1964). . Section 8(b) (4) (ii) (B) makes an explicit exception with respect to primary disputes. See note 1 supra. See generally United Steelworkers v. NLRB, 376 U.S. 492, 84 S.Ct. 899, 11 L.Ed.2d 863 (1964); Typographical Union No. 37 v. NLRB, 131 U.S.App.D.C. 1, 401 F.2d 952 (1968); NLRB v. Northern California District Council of Hod Carriers, 389 F.2d 721 (9th Cir. 1968). . The pertinent portion of the charge as to appellant’s defenses read as follows: The defendant Union, on the other hand, denies that its officers many [sic] any threats to anyone as testified to by the various witnesses produced by the plaintiff. The defendant contends that on various occasions its president advised contractors with whom the Union had .agreements that it would resort to the lawful procedure set forth in those agreements to enforce the Union’s rights under them. The Union concedes that in the course of a dispute with the plaintiff in the spring of 1969 it posted pickets at its place of business. They deny threatening to picket or strike on any other or in connection with anyone else. You will recall that there is evidence that various charges and counter-charges were filed with the National Labor Relations Board as a result of which the pickets were withdrawn and the matter was resolved in some manner. The defendant further denies that its actions taken in connection with the plaintiff had any object or purpose or intent to require or force any of the contractors or the Rumsey-Ithaca Corporation to cease doing business with the plaintiff. Finally, the defendant denies that the plaintiff suffered any injury to his business and property as a proximate result of any unfair or unlawful labor practice. The defendant further maintains that it was only seeking to enforce its rights under three contracts which were introduced into evidence .... Obviously, this did not suffice to place the Moore Dry Dock issue before the jury. . (e) It shall be an unfair labor practice for any labor organization and any employer to enter into any contract or agreement, express or implied, whereby such employer ceases or refrains or agrees to cease or refrain from handling, using, selling, ti-ansporting or otherwise dealing in any of the products of any other employer, or to cease doing business with any other person, and any contract or agreement entered into heretofore or hereafter containing such an agreement shall be to such extent unenforcible [sic] and void: Provided, That nothing in this subsection shall apply to an agreement between a labor organization and an employer in the construction industry relating to the contracting or subcontracting of work to be done at the site of the construction, alteration, painting, or repair of a building, structure, or other work .... . Our understanding of what happened on the damage and other issues in this case below is hampered by a transcript that contains numerous uncorrectod errors, followed by briefs and appendices that are most unhelpful (and as regards the briefs in violation of Fed.R.App.P. 28, in numerous respects). To the best of our understanding, it appears that the trial court’s charge as to Landstrom’s claims was somewhat different from the testimony adduced because in connection with the BOCES School, appellant’s counsel in summation and the court spoke of twenty-seven hundred yards of gravel used there, as to which Landstrom would have delivered only one-half, making a loss of $1,-012.50. The testimony of Mr. Pfister at pages 150 et seq. of the transcript, however, was that the total yardage on the project was twenty-two thousand seven hundred yards of which Landstrom would have delivered at least one-half. On this basis the loss sustained would have been $8,512.50. This discrepancy in the charge of $7,500 in favor of appellant was not objected to by appellee and may have been due to a mistake in transcribing the testimony rather than counsel’s computations. . For mason sand Landstrom had to purchase at a higher cost — $222.50.

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UNITED STATES of America, Plaintiff-Appellee, v. Waverly THOMPSON, Defendant-Appellant. No. 72-1138. United States Court of Appeals, Seventh Circuit. Argued Oct. 30, 1972. Decided March 8, 1973. Rehearing En Banc Denied April 9, 1973. Jerome Rotenberg, Chicago, 111., for defendant-appellant. James R. Thompson, U. S. Atty., William T. Huyck and Terry Gordon, Asst. U. S. Attys., Chicago, Ill., for plaintiff-appellee. Before KNOCH, Senior Circuit Judge, and CUMMINGS and PELL, Circuit Judges. KNOCH, Senior Circuit Judge. Defendant-Appellant, Waverly Thompson, has taken this appeal from his conviction in a jury trial on an indictment which charged, in one count, that he and three co-defendants had conspired, in violation of Title 18 U.S.C. § 371, to transport forged securities in interstate commerce and, in seven other counts, that one co-defendant, Dayo Nagel, had committed substantive violations, aided and abetted by this defendant and co-defendants George Wright and Ionia Coleman, in violation of Title 18 U.S.C. §§ 2 and 2314. Defendant was sentenced to serve five years on each count, to run concurrently. The conspiracy alleged included a program entailing theft of eight blank checks of the Apex Smelting Company by Ionia Coleman, an employee of Apex, who was to give these cheeks to her brother, George Wright, who, in turn, would give them to defendant, Waverly Thompson. These checks were to be forged and falsely completed to appear to be cheeks issued by Apex. George Wright and defendant would cause the checks to be sent to Dayo Nagel, in North Dakota, who would negotiate them. These checks would return to Chicago from Bismarck, North Dakota, in interstate commerce. Dayo Nagel was to divide the proceeds with the other defendants. A part of the alleged conspiracy was concealment of the purpose of and the acts done in furtherance thereof. Co-defendants George Wright and Ionia Coleman pleaded guilty to all counts and codefendant Dayo Nagel pleaded nolo contendere to Count One. All three testified at the trial of this defendant. Mrs. Coleman testified that she told her brother George Wright about the lax security at Apex and the ease of acquiring Apex checks and that she said she could cover thefts at the time she reconciled the Apex bank statements. On December 12, 1970, a Saturday, she did in fact steal about eight blank checks with copies of authorized signatures and stickers for the envelopes. Her brother told her that defendant had said the name on the checks would be Nagel Grain and Seed Company. George Wright testified that defendant spoke of having an outlet and asked him whether he could acquire checks, whereupon George Wright told defendant about his sister and it was agreed that defendant’s source “in the north” would get one-half of the proceeds with one-fourth going to Mrs. Coleman and the last quarter split between defendant and Mr. Wright. Dayo Nagel testified that he had a conversation in Chicago late in November or early in December 1970, in the course of which defendant said he “had some things going” and could probably assist Mr. Nagel who needed between $30,000 and $35,000 for his feed business in North Dakota. On or about December 10, 1970, Mr. Nagel received a telephone call from defendant who spoke about a check and thought he might have something to send Mr. Nagel. The following Sunday, evidently December 13, 1970, defendant again telephoned Mr. Nagel, told him to return $10,000 of the proceeds of a $20,000 check, being sent him. Mr. Nagel received an Apex check for $20,000 payable to his company on December 16, 1970, which he deposited in his company’s account at the Dakota National Bank in Bismarck, North Dakota. This check was apparently the check to which Mr. Wright referred when he testified that he received a blank Apex check, together with a canceled Apex check and stickers from his sister which he took with him when he visited defendant, with whom he agreed to make out the check for $20,000. On instructions of defendant, Mr. Wright said he typed the check as payable to “Nagel’s Grain and Feed Company in Bismarck, North Dakota,” and forged the signature. The two men drove to a post office and Mr. Wright mailed the check.' Also at defendant’s request, Mr. Wright drove to North Dakota in an automobile rented by defendant to pick up $10,000. The same day, December 18, 1970, Mr. Nagel received telephoned instructions from defendant to deliver $10,000 in cash to defendant's messenger. He made that delivery. He also mailed a check for $2,500 directly to defendant which came back canceled, bearing endorsement in defendant’s name. Defendant met Mr. Wright at the latter’s home in Chicago and indicated dissatisfaction with the $1,300 he had received as his share. When, a few days later, Mr. Wright brought defendant the seven remaining blank Apex checks, already filled out and forged, defendant said other arrangements had been made and he would call Mr. Wright when the funds were received. However, no more money came to Mr. Wright. Mr. Nagel received and deposited another Apex check payable to Nagel Grain and Feed Company in the amount of $25,000 on December 22, 1970. In a telephone conversation on December 28, 1970, defendant asked him to take only one-third of the proceeds of these checks which in future would be handled by them alone. Accordingly Mr. Nagel withdrew $17,000 from his account, $16,700 of which he delivered to defendant in Chicago, in return receiving five more Apex checks in amounts of $16,000 to $25,000. He deposited a $25,000 check on December 30, 1970, an $18,000 check on January 4, 1971 and three checks totaling $60,639 on January 5, 1971, in another bank, Farmers and Merchants Bank of Sheyenne, North Dakota. Meanwhile Mrs. Coleman’s job had changed and she was no longer in a position to handle the checks returned from the bank. She told her brother early in January 1971 and he told defendant who said that nothing could now be done about that. On January 11, 1971, Mr. Nagel was arrested on a State charge of intent to defraud the Dakota National Bank of Bismarck. When Mr. Nagel was released on bond, he came to Chicago where he met with defendant and Mr. Wright who testified to a conversation wherein Mr. Nagel said he delivered between $27,000 and $29,000 which he wanted back to deposit in his own account. Mr. Wright had denied all knowledge of this money. Mr. Nagel also testified that in this conversation Mr. Wright had denied receiving his share of the $17,000. Defendant contends that the Court failed fully to instruct the jury on the essential elements of the conspiracy charged in the indictment. Defendant sees one such vital element as knowledge relating to the interstate character of the securities. The instruction with which defendant finds fault read: Count 1 of the indictment No. 71 CR 509 charges the crime of conspiracy to commit the offense of transporting into interstate commerce falsely made and forged securities, knowing the securities to have been falsely made and forged. To convict the defendant Waverly Thompson of this offense, the government must prove beyond a reasonable doubt the existence of a conspiracy to commit the offense of transporting into interstate commerce falsely made and forged securities, knowing the securities to have been falsely made and forged. Defendant’s interpretation of this instruction strikes us as somewhat strained but we have considered it with great care. Defendant argues that this instruction allowed a conviction on the finding that defendant knew only that the securities were falsely made and forged. Although no objection was stated at the time, defendant asserts a right to raise this point on appeal on the ground that the alleged error is so fundamental, touching the Trial Court’s responsibility for instructing the jury upon the essential elements of the offense on which defendant was being tried. Defendant cites Screws v. United States, 1945, 325 U.S. 91, 107, 65 S.Ct. 1031, 89 L.Ed. 1495 and other cases to support his raising objection to the instruction at this late date. In urging that we consider knowledge of interstate transportation to be an essential ingredient of the offense, defendant cites a number of Second Circuit decisions including United States v. Giuliano, 1965, 348 F.2d 217, 221; United States v. Vilhotti, 1971, 452 F.2d 1186, 1189, 1190 (where the Court drew a distinction between the substantive offense for which knowledge of interstate commerce need not be charged and conspiracy to commit the offense.) The Court quotes Judge Learned Hand in United States v. Crimmins, 2 Cir., 1941, 123 F.2d 271, 273, that one may drive past a traffic light of whose existence he is ignorant, but not conspire to drive past a light unless one knows it is there. We do not find this line of reasoning particularly apt with respect to the statutes here involved. Defendant also cites United States v. Bollenbach, 1945, 147 F.2d 199, 201, 2 Cir., rvsd. 1946, 326 U.S. 607, 609, 66 S. Ct. 402, 404, 90 L.Ed. 350. The erroneous charge in that case read: . . . possession of stolen property in another state than that in which it was stolen shortly after the theft raises a presumption that the possessor was the thief and transported stolen properly in interstate commerce. . . We are not here dealing with presumptions. The Second Circuit position is again stated in the recent case of United States v. Fields, 1972, 466 F.2d 119, 121, which defendant has brought to our attention as additional authority. The Ninth Circuit, however, holds to the contrary. In United States v. Roselli, 1970, 432 F.2d 879, 890-891, cert. den. 1971, 401 U.S. 924, 91 S.Ct. 883, 27 L.Ed.2d 828, the Court expressly held that knowing use of interstate facilities was not an essential element of either the substantive offense or the conspiracy to violate § 2314. The Ninth Circuit found nothing in the legislative history indicating a purpose to limit the statute to violators who specifically intended to utilize interstate facilities and felt that the natural import of the statute’s wording was to the contrary, that § 2314 was aimed at the evils of theft, fraud and counterfeiting and that suppression of movement of the fruits of these crimes was the means not so much of regulating interstate commerce as of suppressing the crimes within a constitutional exercise of federal power. We find extremely persuasive the reasoning of the Ninth Circuit (432 F.2d at page 892) that proof of knowledge of the federal jurisdictional element is not required for conviction of the offense. As an example, the Court uses the first paragraph of § 2314, which requires as a jurisdictional element of the offense that the value of the securities exceed $5,000, and points out that it would be no defense that the accused mistakenly thought the securities were worth only $2,000. This Court affirmed the convictions of violating § 1951 (the Hobbs Act) where it was contended that the evidence was insufficient in that it failed to show defendant’s intention or even knowledge that interstate commerce would be affected by the conspiracy. United States v. Battaglia, 7 Cir., 1968, 394 F.2d 304, 312, vacated and remanded on other grounds, sub nom. Giordano v. United States, 1969, 394 U.S. 310, 89 S.Ct. 1163, 22 L.Ed.2d 297 (ultimately affirmed again 432 F.2d 1115, cert. den. 401 U.S. 924, 91 S.Ct. 868, 27 L.Ed.2d 828) where Judge Cummings cited with approval this Court’s earlier decision in United States v. Pranno, 1967, 385 F.2d 387, cert. den. 390 U.S. 944, 88 S.Ct. 1028, 19 L.Ed.2d 1132, that it was necessary only to prove that defendants conspired to commit extortion and that the natural effect of carrying out their threat, whether they were conscious of it or not, would affect commerce. We affirmed the conviction in United States v. Cerone, 1971, 452 F.2d 274, cert. den. 405 U.S. 964, 92 S.Ct. 1168, 31 L.Ed.2d 240, in the face of a similar challenge respecting Title 18 U.S.C. § 1952, use of interstate facilities to further unlawful gambling, on the ground that ample proof had been adduced of defendant’s knowledge that interstate facilities would be used. In Cerone, we expressly reserved the decision whether to adopt the Ninth Circuit view. We need not make that decision in this case either. We fully agree with the government that use of interstate facilities under the particular facts of this case was so vital a factor in the defendants’ scheme that if the jury did not believe defendant was aware of that fact, the jury could not possibly have found him guilty. Even assuming that defendant’s interpretation of the instruction is correct, it could not have led the jury into believing that it could convict this defendant, in the circumstances of this case, without deciding that he was well aware of the necessary use of interstate facilities. Defendant sees prejudicial results from the Trial Judge’s instruction to weigh with great care the testimony of accomplices, wherein he told the jury that George Wright, Ionia Coleman and Dayo Nagel were accomplices; thus, defendant contends, the Court virtually directed a verdict of guilty instead of allowing the jury to decide whether defendant was an aider and abettor of those three as charged in the indictment. We agree that the better description of the three witnesses would have been as “alleged accomplices,” but, as in United States v. Fellabaum, 7 Cir., 1969, 408 F.2d 220, 227, cert. den. sub nom. Pyne v. United States, 396 U.S. 818, 90 S.Ct. 55, 24 L.Ed.2d 69 and United States v. Pritchard, 7 Cir., 1972, 458 F.2d 1036, 1040, cert. den. 407 U.S. 911, 92 S.Ct. 2434, 32 L.Ed.2d 685 we find this instruction harmless error in the circumstances of this case. The jury cannot have failed to discern that the purpose of the instruction was to alert it to the need for caution in weighing the testimony, all to the benefit of the defendant. As the government notes, this was not a weak case. In addition to the testimony of the three named witnesses, there was a stipulation that defendant had deposited in his own account a check drawn on Dakota National Bank, signed, “Nagel Grain and Seed Company, Dayo D. Nagel,” and that calls were placed between October 9, 1970 and February 3, 1971, to telephones registered to Dayo Nagel and the Bismarck Motor Hotel from a telephone registered to defendant. The various canceled checks and their endorsements were put in evidence. A contract for rental of an automobile signed December 17, 1970, imprinted with a credit card number registered to defendant, showed mileage which also served to substantiate some of the testimony of Messrs. Nagel and Wright. In United States v. Balodimas, 7 Cir., 1949, 177 F.2d 485, 487, on which defendant relies, the alleged accomplices were neither co-defendants nor unindicted co-conspirators. The judgment was reversed because this Court found “not justified by the record” the Trial Judge’s instruction to the jury that the witnesses had openly admitted being violators and taking part in the commission of the crime. Defendant sees as error the admission of statements which he characterizes as “post-conspiracy declarations of other co-defendants.” Both George Wright and Dayo Nagel testified to a conversation which one placed late in January 1971 and the other early in February 1971. Mr. Nagel had been arrested, as indicated, on a State charge which he described as “with intent to defraud the Dakota National Bank of Bismarck” which apparently grew out of an insufficiency of funds in the Apex account to cover the forged Apex checks. He had come to Chicago in an attempt to secure funds to exonerate himself on the State charge after defendant had promised to help him. We cannot agree that Mr. Nagel’s arrest on the State charge terminated the conspiracy charged in the federal indictment. Mr. Wright testified, over objection of defendant, that at the conversation in question, Mr. Nagel explained that if he could recover the $27,000 to $29,000 he had previously delivered he could put it back into his account, and Mr. Wright had denied all knowledge of that sum. Mr. Nagel himself testified, also over objection, that George Wright said he had not received his share of the $17,000. As indicated, there had been earlier testimony that $10,000 had been delivered to Mr. Wright in Bismarck. Mr. Nagel had replied that he was not interested in that, but that he wanted the money back. Thus each of these witnesses testified to the fact of his own statement, as well as to the statement of the other, and both were present in court and available for cross-examination. These statements were thus mere repetition of earlier testimony that Mr. Nagel gave Mr. Wright $10,000 and defendant $16,700. We fail to see any prejudicial effect. The statements, in our opinion, concerned events occurring clearly within the course of the conspiracy. In defendant’s view, his sentence was unduly harsh. He compares it with the lenience shown his co-defendants who were all granted probation for three years, with Counts 2 to 8 of the indictment being dismissed as to Dayo Nagel. He notes that George Wright had a record of two prior convictions for burglary. Defendant sees only one possible explanation: that he has been penalized for exercising his Constitutional right to trial by jury. The record discloses that defendant was formerly a policeman in Chicago. The Trial Judge specifically indicated that defendant seemed to have secured most of the money from this operation. The testimony shows that defendant was the principal director of the actions taken. It was he who established the outlet for the checks. He supplied the name and address of the payee. He showed George Wright how to make out the checks. He directed him to go to North Dakota, made the arrangements for the car and issued the telephone instructions to Mr. Nagel in North Dakota. He did secure most of the spoils and did so at the expense of his fellow conspirators contrary to their original agreement. Defendant was convicted of violations of Title 18 U.S.C. §§ 371 and 2314. The maximum imprisonment under § 371 is five years and under § 2314, ten years. A sentence of five years on each count to run concurrently is well within the limits of the statute. A show of lenience to those who exhibit contrition by admitting guilt does not carry a corollary that the Judge indulges a policy of penalizing those who elect to stand trial. United States v. Lehman, 7 Cir., 1972, 468 F.2d 93, 110. The Judgment of the District Court is affirmed. Affirmed.

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UNITED STATES of America, Plaintiff-Appellant, v. The INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL UNION NO. 520 et al., Defendants-Appellees. No. 72-1524. United States Court of Appeals, Seventh Circuit. Argued Jan. 26, 1973. Decided April 18, 1973. Henry A. Schwarz, U. S. Atty., East St. Louis, Ill., David L. Norman, Asst. Atty. Gen., Frank Petramalo, Jr., Atty., U. S. Dept. of Justice, Washington, D. C., for plaintiff-appellant. Harold Gruenberg, St. Louis, Mo., for defendants-appellees. Before SWYGERT, Chief Judge, and STEVENS and SPRECHER, Circuit Judges. SPRECHER, Circuit Judge. This appeal constitutes another chapter in the attempt to implement equal employment opportunities in the highway construction industry in Madison and St. Clair Counties, Illinois. In United States v. United Brotherhood of Carpenters and Joiners of America, Local 169, 457 F.2d 210 (7th Cir. 1972), we held that the carpenters’ union, one of the six principal craft unions involved in highway construction (teamsters, laborers, carpenters, cement masons, ironworkers and operating engineers) had engaged in past discrimination; that courts have the power and duty to eliminate the vestiges of past discrimination; that the carpenters’ union was bound to comply with a State-of-Illinois-promulgated plan (Ogilvie Plan) intended to implement employment rights guaranteed by Title VII of the Civil Rights Act of 1964; that part of the carpenters’ union’s past discrimination stemmed from a “jump-up” referral system which resulted in few blacks being referred out for jobs; and that the district court should fashion appropriate relief, considering “in view of any further evidence he may wish to hear, the requirement of improvements in the hiring hall referral system, possibly on a first-in, first-out basis” 457 F.2d at 221. In Southern Illinois Builders Association v. Ogilvie, 471 F.2d 680 (7th Cir. 1972), we held that the Ogilvie Plan was constitutional; that the three unions attacking the plan in that case (operating engineers, ironworkers and cement masons) had engaged in discrimination in the highway construction industry in Madison and St. Clair Counties; that those unions had entered consent decrees which compelled them to cooperate with the Ogilvie Plan; and that the obligation to take affirmative action in regard to equal opportunity employment “imports more than the negative obligation not to discriminate.” The present phase of the problem arises as a result of the district court’s refusal to modify the consent decree reIating to operating engineers and the dissolution of the decree by the court on April 3, 1972. This cause was instituted against the operating engineers by the Attorney General on behalf of the United States on January 17, 1969, seeking relief for alleged violations of Title VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000e et seq.) and for interfering with the implementation of Presidential Executive Order 11246, which forbids racial discrimination in employment opportunities. Thereafter, on May 13, 1969, the parties settled the case by entering into a consent decree which was approved by the district court. Under the terms of the decree, a regular referral list on which applicants were assigned permanent seniority numbers, based on the length of service under the collective bargaining system, was compiled. The applicant with the lowest permanent number was given preference for job opportunities over other members. The decree also provided that the operating engineers shall “cooperate with any . . . government agency in the establishment and operation of any apprenticeship, skill improvement, or on-the-job. training programs . and . . . shall exercise all efforts to see that such programs are operated in a nondiscriminatory manner.” The Ogilvie Plan, which provided a program for the recruitment, placement and training of minority group members in the highway construction industry, was promulgated on June 3, 1970. The operating engineers’ consent decree also provided that “on or after April 1, 1971, defendant may move for the dissolution of this decree and, unless plaintiff shows good cause otherwise, the decree shall be dissolved at that time." On May 18, 1971, the operating engineers moved to dissolve the consent decree. On June 4, 1971, the government moved to modify or supplement the decree on the ground that the referral system provided for in the decree perpetuated past discrimination and praying for “a referral system based on a first in, first out method of referral, whereby applicants register and are referred out in a rotating order as work becomes available, or some other referral system which does not perpetuate past discriminatory practices.” An evidentiary hearing with respect to the two motions was held on November 22, 1971. The evidence showed that in 1968 the operating engineers had 1124 members in construction work and none were black. At the time of the hearing the union membership had increased to about 2000 members of whom 90 were black. However, the seniority roster used for work referral purposes listed equipment operators in chronological order based on their length of experience under the bargaining agreement. The list showed the first black operator as No. 1192. The majority of blacks were concentrated in the 1700 through 2000 number range. The district court found as a result of the evidentiary hearing that “the union entered into a ‘gentlemen’s agreement’ whereby it would provide employment opportunities to 20% in the aggregate of referrals to highway construction to be taken from minority applicants.” Union records kept during a period (April 1-June 30, 1971) when the “gentlemen’s agreement" was in effect showed that (1) 8% of union referrals were of black members, resulting in jobs 77% of the time; (2) 92% of union referrals were of white members, resulting in jobs over 99% of the time; (3) the average length of jobs was favorable to blacks (10.31 days) as opposed to whites (9.06 days) but of 327 referrals of jobs expected to last all summer 304 went to white and 23 to black applicants. The district court concluded in its order of April 3, 1972 that “[t]he ‘gentlemen’s agreement’ by which the union agreed to be bound provides definite affirmative action to correct the alleged evils which were the basis for the action being filed initially.” It is clear from the record that past discrimination by the operating engineers would be perpetuated by the “regular” referral system specified in the original consent decree. While the union may be in utter good faith in maintaining the so-called “gentlemen’s agree, ment,” it is too casual and indefinite a way to assure the affirmative action required to eliminate past discrimination. In United States v. International Brotherhood of Electrical Workers, Local No. 38, 428 F.2d 144, 151 (6th Cir.), cert. denied, 400 U.S. 943, 91 S.Ct. 245, 27 L.Ed.2d 248 (1970), Judge Edwards said: “As we have indicated, after this suit was filed by the Attorney General, but before trial, a new administration was elected to office in Local 38. The District Judge found that the new officers favor voluntary compliance with the Civil Rights Act of 1964 and have taken steps to bring past discriminatory practices to án end. These facts, however, do not in our opinion warrant the District Court’s refusal to retain jurisdiction of this case or its refusal of affirmative relief. The record of compliance is very brief — particularly as compared to the long record of discrimination — and even that record has been written under the impact of this litigation. . . . Assuming, as the District Judge plainly did, and as we do, that the new leadership is in utter good faith, it has no mean task ahead in eliminating ingrained discriminatory practices of past decades. In many respects a more specific court order, plus retention of jurisdiction, might serve to support the stated objectives of the new administration of Local 38. And, in any event, such relief is authorized by the Act and called for in this record.” We conclude that the dissolution order of April 3, 1972 should be vacated, and that the consent decree entered on May 13, 1969 should be reinstated, except that the court shall determine in what manner paragraph 4 thereof shall be modified to incorporate a plan of referral which will dissipate the effects of past discrimination. The district court should consider, in view of any further evidence it may wish to hear, whether this objective can only be achieved through some first-in, first-out or other type of referral basis or whether it can be satisfied by formal incorporation in the reinstated consent decree of the terms of the “gentlemen’s agreement” or some modification thereof. Judgment vacated and remanded for further proceedings. . In 1970, black persons constituted 22.4% of the population of St. Clair County and 69.2% of the population of East St. Louis, the. principal metropolitan area in St. Clair County. . The fact that the Ogilvie Plan became effective after the consent decree was originally entered, and the experience thereunder, including the “supplementary list” for referrals within East St. Louis, which was superseded by the “gentlemen’s agreement,” convince us that the referral provisions of the original decree must be reexamined by the district court in the light of that experience in order to eliminate past discrimination by affirmative action.

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Marsha Lee WALLIN, as Administratrix of the Estate of Carl R. Wallin, Deceased, Plaintiff-Appellant, v. Allen Ernest FULLER and Nationwide Mutual Insurance Company, Defendants-Appellees. No. 72-1132. United States Court of Appeals, Fifth Circuit. April 20, 1973. Jack Crenshaw, Maultsby Waller, Montgomery, Ala., for plaintiff-appellant. Richard Ball, Montgomery, Ala., for def endants-appellees. Before RIVES, WISDOM and RONEY, Circuit Judges. WISDOM, Circuit Judge: This case presents the question whether a trial court should instruct a jury on a theory of liability not mentioned in the pretrial order but supported by evidence introduced at the trial without objection. The district court declined so to instruct the jury. We reverse and remand for a new trial. Carl Wallin was killed on August 16, 1970, when his Volkswagen, which he was driving, collided with a Pontiac driven by Allen Fuller on a two-lane highway near Lowndesboro, Alabama. Wallin held a policy of insurance with Nationwide Mutual Insurance Company, which contained a standard uninsured motorist clause. Fuller was an uninsured motorist within the meaning of this clause. Marsha Lee Wallin, widow of Carl Wallin, brought suit in. federal district court seeking a declaratory judgment against Nationwide under the policy, alleging that Fuller’s negligence had caused the collision. On September 20, 1971, the district court held a pretrial hearing and entered an order specifying the issues agreed upon by the plaintiff, Mrs. Wallin, and defendant, Nationwide. The plaintiff’s theory of recovery, as recited in the pretrial order, was that Fuller negligently drove onto his left side of the highway, thus causing the collision with Wallin’s ear. The defendant denied that Fuller had been negligent. Further, the defendant contended that Wallin had been contributorily negligent in pulling out onto his left-hand side of the highway to pass another car when there was insufficient room to pass. Most of the plaintiff’s case at the trial was devoted to showing that the collision had occurred in Wallin’s right-hand lane, and that Fuller therefore had been on the wrong side of the road. Mrs. Wallin, the plaintiff, identified photographs which she had taken showing that the left side had been torn off Wallin’s Volkswagen. The plaintiff also submitted the testimony of two investigating officers, who stated that the point of impact was on Wallin’s right side of the road. The defense offered the deposition of George Mayes, who had been riding in Fuller’s car at the time of the accident, and called Fuller himself to the stand. Both Mayes and Fuller testified that Wallin had pulled out to pass, and that the cars had collided while Wallin was still in the left lane and Fuller was in his right lane. The testimony of both Mayes and Fuller revealed a possibility that, even if Wallin had been contributorily negligent, Fuller might have been guilty of subsequent negligence or wanton conduct. Under Alabama law a showing of subsequent negligence or wantonness defeats a defense of contributory negligence. Counsel for the defendant made no objection to the admission of any of this testimony at the trial. Mayes, the passenger, testified at his deposition that Fuller did not slow down when he first became aware that Wallin was trying to pass; that he finally shouted at Fuller to slam on his brakes; and that Fuller then applied his brakes and skidded into Wallin. The defense took the deposition of Mayes on September 8, 1971, before the pretrial hearing. The plaintiff’s attorney was present at this deposition, but made no mention of the issues of subsequent negligence and wanton conduct either at the pretrial hearing or when the deposition was introduced into evidence at the trial. Fuller, called as a witness by the defense, gave testimony on cross-examination by the plaintiff’s attorney that tended to corroborate Mayes’s version of the events. On recross, asked by the plaintiff’s attorney whether the accident would not have happened if he had slowed down the least little bit, Fuller replied: “I guess not.” Counsel for the defendant made no objection to any of this examination by the plaintiff’s lawyer. Neither attorney drew the court’s attention to the fact that this testimony might show subsequent negligence or wanton conduct, or to the fact that the pretrial order precluded these issues, until after both sides had rested. The defendant then submitted requested written charges to the court. The plaintiff’s attorney objected to one of these charges on the ground that it failed to include the issues of subsequent negligence and wanton conduct, and requested leave to amend the pleadings to include these issues. The trial court denied leave to amend, applying the standard of Rule 16 of the Federal Rules of Civil Procedure that, where the issues have been narrowed by a pretrial order, amendment will be permitted only when necessary to prevent “manifest injustice.” The court proceeded to submit the case to the jury without instructions as to the legal effect of subsequent negligence or wanton conduct. The jury found for the defendant. The court then denied the plaintiff’s motion for a new trial, and the plaintiff brought this appeal. The pretrial conference serves the purposes of expediting litigation and eliminating surprise at the trial. Rule 16 of the Federal Rules of Civil Procedure establishes that the pre-trial order ordinarily governs the course of the trial. Under the Rule 16 “manifest injustice” standard, the question whether to permit amendment of the pretrial order in the course of the trial is generally a matter within the discretion of the trial judge, and an appellate court will intervene only if the trial judge has acted arbitrarily. See Ely v. Reading Co., 3 Cir. 1970, 424 F.2d 758; McKey v. Fairbairn, 1965, 120 U.S.App.D.C. 250, 345 F.2d 739; Case v. Abrams, 10 Cir. 1965, 352 F.2d 193. Unbending adherence to the strictures of Rule 16 would, however, frustrate another broad policy of the Federal Rules favoring liberality of amendment. This policy is principally embodied in Rule 15, which deals with amendments to the pleadings. It is unlikely that the pretrial order under Rule 16 was intended to make the pleadings, and therefore Rule 15, obsolete. See Commentary, The Pre-Trial Order, 4 Fed.Rules Serv. 16.3, at 906 (1941) ; Note, Federal Pre-Trial Practice: A Study of Modifications and Sanctions, 51 Geo.L.J. 309, 312 (1963). Even though the parties have the advantage of discovery before the pretrial conference, events not anticipated at the pretrial stage may often occur at the trial. See Clark, To an Understanding Use of Pre-Trial, 29 F.R.D. 454, 459 (1961); Clark v. United States, 1952, D.Or., 13 F.R.D. 342, 345-346. And attorneys would be reluctant to enter agreements at the pretrial conference if later amendments were strictly forbidden. Courts have therefore widely recognized that Rule 16 must be read in light of Rule 15, and that in some circumstances the policy of Rule 15 should moderate the strictures of Rule 16. Bucky v. Sebo, 2 Cir., 1953, 208 F.2d 304, 305; Brooks v. Wootton, 2 Cir. 1966, 355 F.2d 177; Dering v. Williams, 9 Cir. 1967, 378 F.2d 417; Blackwell v. Regal Cab Co., 1963, 114 U.S.App.D.C. 397, 316 F.2d 398; Meadow Gold Products Co. v. Wright, 1960, 108 U.S.App.D.C. 33, 278 F.2d 867; see Rosden v. Leuthold, 1960, 107 U.S.App.D.C. 89, 274 F.2d 747; 3 J. Moore, Moore’s Federal Practice ¶ 15.13[1], at 982 (1972); 6 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 1491, at 455-56 (1971); Christenson, The Pre-Trial Order, 29 F.R.D. 362, 375 (1961). At a minimum the accommodation of Rule 16 to Rule 15 should mean that the more liberal standard of Rule 15 should apply when one of the parties seeks amendment to conform the pleadings to the issues actually raised by the evidence introduced at the trial. Monod v. Futura, Inc., 10 Cir. 1969, 415 F.2d 1170, 1173-1174; McDowall v. Orr Felt & Blanket Co., 6 Cir. 1944, 146 F.2d 136, 137; Mayfield v. First Nat’l Bank, 6 Cir. 1943, 137 F.2d 1013, 1016-1017. Rule 15(b) provides that when issues outside the pleadings are tried by express or implied consent of the parties, “they shall be treated in all respects as if they had been raised in the pleadings” (Emphasis added.) Amendment is thus not merely discretionary but mandatory in such a case. 3 J. Moore, ¶ 15.13 [2] at 996. The trial court erred in applying Rule 16 rather than Rule 15(b). Under the standards of Rule 15(b) the defendant impliedly consented to the trial of issues outside the pretrial order, and the pleadings should therefore have been amended. A substantial quantity of evidence tending to establish subsequent negligence or wanton conduct was brought before the jury, through the deposition of Mayes and the testimony of Fuller, without objection by defense counsel. Indeed, both Mayes and Fuller were defense witnesses, and Fuller was himself a defendant. Cf. Vogrin v. Hedstrom, 8 Cir. 1955, 220 F.2d 863, cert. denied, 1955, 350 U.S. 845, 76 S.Ct. 86, 100 L.Ed. 753. Having deposed Mayes well in advance of the trial, defense counsel cannot complain of having been unaware that the evidence might tend to establish subsequent negligence and wantonness. In these circumstances the failure of the defense to seek to limit the evidence during the trial in accordance with the pretrial order establishes consent to the trial of these issues. See Pan-American Casualty Co. v. Reed, 5 Cir. 1957, 240 F.2d 336; 3 J. Moore, ¶ 15.13 [2] at 994; 6 C. Wright & A. Miller, § 1493 at 463-65. The possibility of prejudice to the opposing party may of course be reason to find a lack of consent to amendment under Rule 15(b). See 6 C. Wright & A. Miller, § 1493 at 468. Any danger of prejudice to the defendant in this case could have been averted by the trial court. All witnesses to the accident had testified, as had the investigating officers. It would not have been impractical for the court to have reopened the trial, recalled the witnesses, and granted a short continuance if necessary to enable the defendant to prepare and present a defense. See Meadow Gold Products Co. v. Wright, 1960, 108 U.S.App.D.C. 33, 278 F.2d 867; Brooks v. Wootton, 2 Cir. 1966, 355 F.2d 177; Central Distributors, Inc. v. M.E.T. Inc., 5 Cir. 1968, 403 F.2d 943. The defendant, Nationwide Mutual, argues that the testimony of Mayes and Fuller was relevant to the issues of negligence and contributory negligence, and that therefore the admission of this evidence without objection cannot establish consent to the trial of any other issues. It is true that part of this testimony tended to rebut the plaintiff’s theory that the collision occurred on Wallin’s right side of the road, and tended to show that Wallin might have been contributorily negligent in pulling out to pass. But the testimony as to Fuller’s failure to apply his brakes, and the conversation between Mayes and Fuller, was not relevant to the plaintiff's theory of recovery, which was founded solely on the theory that Fuller was on the wrong side of the road. Nor did it establish or rebut the contention that Wallin was contributorily negligent. This evidence was much more strongly relevant to the theories of subsequent negligence and wanton conduct, and this should have been apparent to defense counsel. Nationwide also points out that the trial court instructed the jury to consider whether Wallin created an immediate hazard, and told the jury that a finding of impact in Wallin’s right lane would not itself show negligence. In sum, Nationwide contends that the jury was instructed to consider fully in light of all the evidence whose negligence was the proximate cause of the accident, and that this in effect substituted for an instruction on subsequent negligence and wantonness. We cannot agree that these instructions were an adequate substitute for full instructions on subsequent negligence and wantonness. Even if the jury had found Wallin’s negligence to be a proximate cause of the accident, a showing of subsequent negligence on the part of Fuller might still have entitled the plaintiff to recovery. See W. Prosser, Handbook of the Law of Torts § 66, at 427-28 (4th ed. 1971). Nor, in view of the testimony of Mayes and Fuller, can we agree with Nationwide’s contention that there was insufficient evidence of subsequent negligence to present a jury question. Certainly the plaintiff’s attorney should have raised these issues at the pretrial conference. He attended the deposition of Mayes, and was thus well aware before the pretrial conference that there was some evidence of subsequent negligence and wanton conduct. Where a party is aware of an issue before a pretrial conference, his failure to raise it there may in some circumstances be grounds for denying later amendment. See McKey v. Fairbairn, 1965, 120 U.S.App.D.C. 250, 345 F.2d 739; Marble v. Batten & Co., 1964, D.D.C., 36 F.R.D. 693. But the failure of the plaintiff’s counsel in this case to raise these issues before or during the trial is offset by the failure of the defendant’s attorney to attempt to exclude any of the evidence. We find no reason to conclude that the plaintiff’s attorney was acting in bad faith by trying to smuggle in issues for the purpose of surprising the defense at the trial. See McDowall v. Orr Felt & Blanket Co., 6 Cir. 1944, 146 F.2d 136; Burton v. Weyerhaeuser Timber Co., 1941 D.Or., 4 Fed.Rules Serv. 16.32. Case 2. Moreover, we are reluctant to penalize the plaintiff for the errors of her attorney. See Link v. Wabash R. R. Co., 1962, 370 U.S. 626, 646-648, 82 S.Ct. 1386, 8 L.Ed.2d 734 (Black J., dissenting); Ferrell v. Trailmobile, Inc., 5 Cir. 1955, 223 F.2d 697; Clark, 29 F.R.D. at 456-457; Note, 51 Geo.L.J. at 341-45. We therefore hold that the district court erred in applying the standards of Rule 16 rather than Rule 15(b), and that under Rule 15(b) the plaintiff was entitled to amendment. The judgment of the district court is reversed and the case is remanded for a new trial. . See, e. g., Birmingham Ry., Light & Power Co. v. Jung, Ala.S.Ct.1909, 161 Ala. 461, 49 So. 434. . At his deposition, Mayes testified in part on direct examination by defendant’s attorney: “Q No, what did Fuller do when he saw the Volkswagen there? “A You mean what he did right then? “Q Yeah, what did Fuller do from the time that you saw that Volkswagen? “A What he did looked like he wasn’t never going to hit on his brakes or nothing. “Q Who? “A I told him, I said, “Slam on your brakes. Do something.” I say, “Don’t you see the man over in our lane?” He hit his brakes and we skidded right on into him. ^ sj; On cross-examination by the plaintiff’s attorney: “Q All right. Now, when that Volkswagen pulled out onto the Fuller side of the road Fuller didn’t even see it, did he? At least he didn’t act like he saw it, did he? “A He did’t act like he saw it. He say “What’s the man trying to do?” X say, “You see what he’s trying to do, he’s trying to go around.” I say, Don’t you see him?” “Q And you are the one told him to put on his brakes, aren’t you? “A You say I the one told him to put on his brakes? “Q Yes. “A Well, I tell you like this— “Q (Interrupting) Fuller didn’t even put on his brakes until you told him to, did he? “A Till I told him to? “Q Yes. “A Well, he was going to slam on his brakes, that’s what he say. “Q He said he was going to but he still hadn’t done it until you told him to, had he? “A Well, I told him to hit his brakes, yes. “Q When you told him to hit his brakes that’s when he hit his brakes? “A That’s when he hit his brakes. “Q He didn’t hit his brakes until you told him to, did he? “A But he seen the car. “Q He seen the car but he didn’t hit his brakes until you told him to? “A That’s right. * * * * * On redirect: “Q Just a couple of questions, Mr. Mayes. On the question about when you first saw the Volkswagen I understood you to say that the first thing that happened was that Mayes said, “Look at that fellow, what’s he think lie’s doing”, or something like that, is that right? “A No, I said this. “Q You said that? “A I said that and Fuller said, “What he think he’s doing?” Well, he acted like he didn’t want to slam on his brakes, you know, could see him all the time. “Q And you said slam on the brakes? “A Yeah, I said, “Slam on your brakes. What you going to do, run into him? Thats when he slammed on his brakes. * * sjs * % . On cross-examination Fuller testified in part as follows: Q Did you see him when he first started to pull out? A Yes, sir. Q All right. Did you slow down when you saw him first start to pull out? A No, sir. Q You did not. Is Mayes correct when he said you kept driving until he said what you going to do, drive into him? A That’s right. Q That’s right. You just kept going 60 miles an hour in the rain, didn’t you? A Yes, sir. Q You didn’t slow up a bit? A No, sir. Q You didn’t give him time to get in behind that other car, did you? A No, sir. Q He tried to get in there behind that other car, didn’t he? A Yes, he did. Q You kept going right straight on into him until Mayes told you what you going to do, run on into him, and that is when you slammed on your brakes, isn’t it? A That’s right. sit . Rule 16. Pre-Trial Procedure; Formulating Issues In any action, the court may in its discretion direct the attorneys for the parties to appear before it for a conference to consider (1) The simplification of the issues; (2) The necessity or desirability of amendments to the pleadings; (3) The possibility of obtaining admissions of fact and of documents which will avoid unnecessary proof; (4) The limitation of the number of expert witnesses; (5) The advisability of a preliminary reference of issues to a master for findings to be used as evidence when the trial is to be by jury; (6) Such other matters as may aid in the disposition of the action. The court shall make an order which recites the action taken at the conference, the amendments allowed to the pleadings, and the agreements made by the parties as to any of the matters considered, and which limits the issues for trial to those not disposed of by admissions or agreements of counsel; and such order when entered controls the subsequent course of the action, unless modified at the trial to prevent manifest injustice. The court in its discretion may establish by rule a pre-trial calendar on which actions may be placed for consideration as above provided and may either confine the calendar to jury actions or to non-jury actions or extend it to all actions. . Rule 15. Amended and Supplemental Pleadings (a )¡ Amendments. A party may amend his pleading once as a matter of course at any time before a responsive pleading is served or, if the pleading is one to which no responsive pleading is permitted and the action has not been placed upon the trial calendar, he may so amend it at any time within 20 days after it is served. Otherwise a party may amend his pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires. A party shall plead in response to an amended pleading within the time remaining for response to the original pleading or within 10 days after service of the amended pleading, whichever period may be the longer, unless the court otherwise orders. (b) Amendments to Conform to the Evidence. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence. * * * * * In addition to Rule 15, Rule 54(c) states that “every final judgment 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.” Rule 1 requires that the rules construed to secure the “just” determination of every action.

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2024-08-24T03:29:51.129235

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UNITED STATES of America, Plaintiff-Appellee, v. Eugene William CLAY, Defendant-Appellant (two cases). Nos. 72-1964 and 72-2639. United States Court of Appeals, Ninth Circuit. April 2, 1973. James J. Brown (argued), Las Vegas, Nev., for defendant-appellant. Alice A. Wright, Asst. U. S. Atty. (argued), William C. Smitherman, U. S. Atty., Patricia Whitehead, Asst. U. S. Atty., Phoenix, Ariz., for plaintiff-appellee. Before BROWNING and CARTER, Circuit Judges, and JAMESON, District Judge. Honorable William J. Jameson. United States District Judge, for the District of Montana, sitting by designation. JAMES M. CARTER, Circuit Judge: Clay was convicted by a jury and sentenced on two counts: (1) aiding and abetting the importation of 100 pounds of marijuana, in violation of 21 U.S.C. §§ 952(a) and 960(a)(1), and (2) possessing the marijuana with intent to distribute the same, in violation of 21 U.S. C. § 841(a)(1). On appeal from the conviction in No. 72-1964, Clay raises three issues: (1) the sufficiency of the evidence on both counts; (2) whether the trial court erred in its instructions on reasonable doubt; and (3) whether the trial court erred in denying a motion for a bill of particulars. We affirm in Case No. 72-1964. In No. 72-2639, Clay moved for a new trial on the basis of newly-discovered evidence and the trial court denied the motion. He appealed from the ruling. We affirm in Case No. 72-2639. I. The Sufficiency of the Evidence The facts adduced at trial, largely from the testimony of government agents, amply support the convictions. Briefly summarized, the facts show that narcotics agents received information that a white 1964 Ford carrying marijuana would cross the border from Mexico into Gadsden, Arizona, on October 16, 1971. Such a vehicle was seen in the parking lot of a bar in Gadsden, and shortly thereafter Clay drove up, parking his 1967 Malibu near the Ford. The Ford was driven by an unnamed Mexican, to whom Clay spoke. The Ford then departed Gadsden toward the south and the border. It was later seen returning north from the border, and trailed to Denny’s Restaurant in Yuma. There, it parked next to Clay’s 1967 Malibu. Clay was present as the Mexican loaded the Malibu with sacks that later turned out to be the marijuana in question. Clay then crossed the parking lot, entered another car owned by him — a 1959 Ford Ranchero — and drove it to a Mobil truck stop. Clint Daniels, the co-defendant, was in a nearby cafe, and Clay was observed sitting with Daniels. Clay then departed in his Ranchero, and Daniels later left in Clay’s 1967 Malibu. Daniels was followed and stopped by agents who seized the marijuana. We are unable to say that the evidence was insufficient to support the convictions. Especially we note that Clay conversed with the Mexican two times within a few hours, met with Daniels who later was arrested with the contraband, and was present while the contraband was loaded into his own car. II. The Instruction on Reasonable Doubt The complete instruction on reasonable doubt was as follows: “The burden of proof in this case rests with the prosecution from beginning to end of trial to establish beyond a reasonable doubt every fact essential to the conviction of the defendant. The defendant has no burden to sustain. The defendant is not required to prove his innocence. It is enough that his evidence, if, when taken with the prosecution’s, raises a reasonable doubt as to his guilt, and in that case he must be acquitted. Now, a reasonable doubt means precisely what the term implies. It is a doubt based upon reason. It does not mean every conceivable kind of doubt, it does not mean a doubt which is imaginery or fanciful or one that is capricious or speculative. It simply means an honest doubt that appeals to reason and is founded upon reason. If in this case, after you have considered all the evidence, you have such a doubt in your mind as would cause you or any other prudent man or woman to hesitate in some matter of grave concern in your own lives, then you have such a doubt as the law contemplates by the term ‘reasonable doubt.’ A defendant can not be convicted unless his guilt of the crime charged is established to a moral certainty and beyond a reasonable doubt, but the law does not require such a degree of proof as, excluding the possibility of error, produces absolute certainty, because such proof is rarely, if at all, possible. Moral certainty alone is required, that is that degree of proof which produces conviction in an unprejudiced mind. Now, a reasonable doubt may arise not only from the evidence produced but also from a lack of evidence. Since the burden is upon the prosecution to prove the accused guilty beyond a reasonable doubt of every essential element of the crime charged, a defendant has the right to rely upon failure of the prosecution to establish such proof. A defendant may also rely upon evidence brought out on cross-examination of witnesses for the prosecution. The law does not impose upon a defendant the duty of producing any evidence. You are to consider the strong probabilities of the case. A conviction is justified only when such probabilities exclude all reasonable doubt as I have defined that term for you. And whenever, after a careful consideration of all the evidence, your minds are in that state where a conclusion of innocence is indicated equally with a conclusion of guilty, or if there is a reasonable doubt as to whether the evidence is so balanced, the conclusion of innocence then must be adopted. And without it being restated or repeated, you are to understand that the requirement that a defendant’s guilt be shown beyond a reasonable doubt is to be considered in connection with and as accompanying all the instructions-that are given to you.” Clay contends that the italicized portion of the instruction above (1) interjected a preponderance concept, and (2) by inference it places on the defendant the burden to produce some evidence and therefore tended to confuse the jury on the Government’s burden of proof. Appellant relies in part on the following eases where somewhat similar language, in combination with other errors in instructions, was found to require reversal. United States v. Link (3 Cir. 1953) 202 F.2d 592, 594 (“. . . if you find the evidence . . . equally balanced . . . you must acquit .” “. . . [Y]ou put [the evidence] in the scales and you weigh it in your minds [and if you] believe that the evidence . . . is as equally consistent with . . . innocence . as it is with . . . guilt, you must acquit . . . . ”); United States v. Hughes (2 Cir. 1968) 389 F.2d 535, 537, cert. den., 396 U.S. 867, 90 S.Ct. 145, 24 L.Ed.2d 120 (1969) (“. . . if you find that the evidence . is as consistent with innocence as with guilt, or that it is more likely that the defendant is innocent than guilty, then you should acquit him.”); United States v. Guglielmini (2 Cir. 1967), 384 F.2d 602, 606 (emphasis deleted) (“. . . if you find a probability of innocence, reasonably, then you have a reasonable doubt.”). In our case the instruction on burden of proof beyond a reasonable doubt ran seven paragraphs. In six places therein the court referred to the Government’s burden to prove the defendant guilty beyond a reasonable doubt. In two places the court stated the defendant had no burden to sustain. In' the next to last paragraph the court used the quoted language, “[If] your minds are in a state where a conclusion of innocence is indicated equally with a conclusion of guilty or if there is a reasonable doubt as to whether the evidence is so balanced, the conclusion of innocence then must be adopted.” In the same paragraph immediately before the quoted language the court stated, “A conviction is justified only when such probabilities exclude all reasonable doubt .” and immediately following the quoted language, in the final paragraph the court again stated “the requirement that a defendant’s guilt be shown beyond a reasonable doubt . . . ” We do not approve the questioned language or any reference to a balancing test in an instruction on burden of proof beyond a reasonable doubt. But considering the whole instruction there was no reversible error. Attempts to enlarge upon the standard instruction on burden of proof and reasonable doubt can lead to error and are often more confusing than helpful. In Holland v. United States, 348 U.S. 121, 75 S.Ct. 127, 99 L.Ed. 150 (1950), there was assigned as error a refusal to give an instruction that when the Government’s evidence is circumstantial it must be such as to exclude every reasonable hypothesis other than that of guilt. The court stated “. . . that where the jury is properly instructed on the standards for reasonable doubt, such an additional instruction ... is confusing and incorrect . . . .’’Id. at 139-140, 75 S.Ct. at 137. Accord, United States v. Nelson (9 Cir. 1969), 419 F.2d 1237. District Judges would be well advised to review their standard instruction on burden of proof and reasonable doubt and eliminate all references to “probabilities” or “balancing of evidence” as such language was used in Link, Hughes and Guglielmini, supra. III. The Denial of the Motion for a Bill of Particulars Clay’s motion for a bill of particulars requested information as to the day, time, and place of the commission of the offenses alleged in the indictment, and his role or participation therein. To deny or grant a bill and the extent thereof rests in the sound discretion of the trial court and its decision will not be disturbed absent an abuse of discretion. Wong Tai v. United States, 273 U.S. 77, 82, 47 S.Ct. 300, 71 L.Ed. 545 (1927); Cooper v. United States (9 Cir. 1960), 282 F.2d 527, 532. Although the court denied the motion for the bill, it granted Clay full discovery. We find no abuse of discretion. IV. The Motion for a New Trial A trial court has the power to deny a motion for new trial, without remand to it, while the case is on appeal. United States v. Hays (9 Cir. 1972), 454 F.2d 274; United States v. Frame (9 Cir. 1972), 454 F.2d 1136, cert. den., 406 U.S. 925, 92 S.Ct. 1794, 32 L.Ed.2d 126. The motion was based on an affidavit of Daniels, who was a co-defendant and a fugitive at the time of trial. Daniels, in his affidavit, attempted to clear Clay and take the entire blame for the offense. In part, the affidavit stated: “I saw Gene [Clay] at Denny’s in Yuma and switched cars with him. I had previously made arrangements to pick up my marijuana there and Gene [Clay] arrived when we were making the switch.” The movant must show, among other things, that the new evidence is not merely cumulative, and would probably produce an acquittal. Pitts v. United States (9 Cir. 1959), 263 F.2d 808, 810, cert. den., 360 U.S. 919, 79 S.Ct. 1438, 3 L.Ed.2d 1535; Gallegos v. United States (9 Cir. 1961), 295 F.2d 879, 881; United States v. Cousins (9 Cir. 1970), 429 F.2d 1271, 1272, cert. den., 400 U.S. 904, 91 S.Ct. 143, 27 L.Ed. 396, and United States v. Martinez (9 Cir. 1970), 436 F.2d 12, 15, cert. den., 401 U.S. 959, 91 S.Ct. 969, 28 L.Ed.2d 244 (1971). The proposed evidence was cumulative and rather than probably producing an acquittal, it tended to further incriminate Clay. Nor was the court required to hold an evidentiary hearing. Clay cites cases from other circuits holding that in certain circumstances an evidentiary hearing should be held. No Ninth Circuit cases are cited. Assuming the trial court, in its discretion, may hold an evidentiary hearing, we hold that the trial court here did not abuse that discretion. Judgment is affirmed. Bail is revoked now.

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James A. GORSO v. BELL EQUIPMENT CORPORATION, a corporation, v. The MARLEY COMPANY, a corporation and Societe de Construction Mecaniques de Bugey and Tichauer et Cie. Appeal of SOCIETE DE CONSTRUCTION MECANIQUES DU BUGEY and Tichauer et Cie, in No. 71-2035, (five cases). Jack CHICONELLA v. BELL EQUIPMENT CORPORATION, a corporation, v. The MARLEY COMPANY, a corporation and Societe de Construction Mecaniques du Bugey and Tichauer et Cie. Clyde A. TEVIS v. BELL EQUIPMENT CORPORATION, a corporation, v. The MARLEY COMPANY, a corporation and Societe de Construction Mecaniques du Bugey and Tichauer et Cie. Harry J. PHILLIPS v. BELL EQUIPMENT CORPORATION, a corporation, v. The MARLEY COMPANY, a corporation and Societe de Construction Mecaniques du Bugey and Tichauer et Cie. Amedio VITALE v. BELL EQUIPMENT CORPORATION, a corporation, v. The MARLEY COMPANY, a corporation; Societe de Construction Mecaniques du Bugey, and Tichauer et Cie. Nos. 71-2035 to 71-2039. United States Court of Appeals, Third Circuit. Argued Dec. 14, 1972. Decided March 2, 1973. As Amended April 5, 1973. Kim Darragh and Raymond H. Conaway, of Meyer, Darragh, Buckler, Bebenek & Eck, Pittsburgh, Pa., for appellant. James E. Coyne, Lancaster, Mentzer, Coyne & Duffy, Pittsburgh, Pa., for appellee. Before SEITZ, Chief Judge, and ALDISERT and ROSENN, Circuit Judges. OPINION OF THE COURT SEITZ, Chief Judge. This appeal arises out of the denial by the district court, 330 F.Supp. 834, of a motion to dismiss two impleaded defendants for lack of personal jurisdiction. The district court certified the question for interlocutory appeal pursuant to 28 U.S.C. § 1292(b), and this court accepted the appeal. Pennsylvania law applies since federal jurisdiction here is predicated upon diversity of citizenship. Appellants are two French companies, Societe de Construction du Bugey and Tichauer et Cie. The former manufactures a tower crane used in the construction industry; the latter is its exclusive world sales agent. These two companies were impleaded by the original defendant and present appellee, Bell Equipment Corporation. Bell is a New York corporation which previously represented appellants in the United States as their national sales agent. Bell has maintained an office in Pennsylvania at all times relevant to this suit. Through Bell, one of appellants’ tower cranes was sold in December, 1965 to the Marley Company, a Kansas corporation engaged in construction. It was delivered in February, 1966 to a Marley jobsite in Beverley, Ohio and was used on that site until its completion in early 1968. That February, it was moved to a new jobsite at Huff, Pennsylvania. Bell aided Marley in setting up the crane at both the Beverley and the Huff sites. In October, 1968, while being used at Huff, the crane collapsed and injured several workers, plaintiffs herein. The French companies are not registered to do business in the Commonwealth of Pennsylvania nor do they maintain an office in the state. At the time of the sale of the crane, they possessed a national sales agent, Bell; but apparently neither of the two cranes of appellant Societe’s manufacture which Bell sold in the United States was sold or delivered in Pennsylvania. However, Bell maintained an office in Pennsylvania throughout this period. By the summer of 1968, Bell had terminated its relationship with appellants. However, even though it had ceased to represent the two French firms, it continued to service in Pennsylvania the crane which it had sold to Marley. While the crane was being used at Huff, individual delivery on six orders was made to the jobsite from the Societe factory in France by appellant Tichauer. Five of these orders had been placed by Marley on December 1, 1967, some three months prior to the removal of the crane to Pennsylvania; we believe these five orders constitute one transaction. A sixth order was also placed; however, on the record before us, it is impossible to determine when it was made. For purposes of our decision, we will assume it was made subsequent to the crane’s removal to the Huff jobsite and represents a separate transaction. Marley was forced to order these parts directly from appellants in France because by that time, Bell had ceased to represent the two French firms. No solicitation by appellants was involved; rather, Bell had advised Marley to contact appellants directly since there was no domestic distributor of the parts These parts were ordered from, and invoiced to, Marley's central office in Kansas City, Missouri. They were drop-shipped to the Pennsylvania construction site. After a hearing, the district court concluded that sufficient contacts existed between Pennsylvania and appellants for personal jurisdiction to lie consistent with both constitutional and state statutory requirements. In reviewing this determination, two questions are posed: (1) whether state statutory requirements in fact have been met; and (2) if so, whether personal service can be made upon appellants consistent with due process requirements of the Fourteenth Amendment. I. THE EVOLUTION OF THE PENNSYLVANIA STATUTE. In 1968, Pennsylvania amended the terms of its “long-arm” statute as applied to foreign corporations so as to extend its reach. It presently states: For the purposes of determining jurisdictions of courts within this Commonwealth, the doing by any corporation within this Commonwealth of a series of similar acts for the purpose of thereby realizing pecuniary benefit or otherwise accomplishing an object, or doing a single act in this Commonwealth for such purpose, with the intention of thereby initiating a series of such acts, shall constitute “doing business.” For the purposes of this subsection, the shipping of merchandise directly or indirectly into or through this Commonwealth shall be considered the doing of such an act in this Commonwealth. 15 P.S. § 2011(C). This was the final step in a series of legislative responses to successive judicial interpretations of amendments to the “long-arm” statute. In each case, the state courts had construed the legislative purpose as not intending to extend jurisdiction over a foreign corporation in a specified instance even though it was constructively present within the state. Each time, the legislature thereafter had amended the statute so as to broaden its scope. For our purposes, only the last two amendments of the statute need be examined. The first amendment in 1963 involved the companion statute to § 2011(C) — § 2011(B) [15 P.S. § 2011(B) (1967)]. Previous to the amendment, the statute had read, in part: Any foreign business corporation which shall have done any business in this Commonwealth, without procuring a certificate of authority to do so from the Department of State, shall be conclusively presumed to have designated the Secretary of the Commonwealth as its true and lawful attorney authorized to accept, on its behalf, service of process in any action arising [out of acts or omissions of such corporation] within this Commonwealth. . Based upon this language, the Supreme Court of Pennsylvania had held that before jurisdiction over a foreign corporation would lie, the tortious activity sued upon must have arisen out of an act or omission by the foreign corporation while it was actually present within the state. Rufo v. Bastian-Blessing Co., 405 Pa. 12, 173 A.2d 123 (1961). The legislative response in 1963 was to amend § 2011(C) by striking out the requirement of “acts or omissions” within the Commonwealth — the language upon which the state supreme court had predicated its decision. The second, and most recent, step came in response to judicial interpretations of the “doing business” and “entry” requirements found in the predecessor of § 2011(C). The Superior Court of Pennsylvania construed the statute as not extending jurisdiction over a foreign lamp manufacturer which dealt through independent contractors in Pennsylvania. Cecere v. Ohringer Furniture Co., 208 Pa.Super. 138, 220 A.2d 350 (1966). This decision was based upon the interpretation the Supreme Court of Pennsylvania had given these terms. See, e.g., Miller v. Kiamesha-Concord, Inc., 420 Pa. 604, 218 A.2d 309 (1966). The superior court concluded that although the Commonwealth had the constitutional power to reach the defendants, the legislative intent, as interpreted by the state supreme court, was not to extend state jurisdiction to those limits permissible under due process. Two years later, in 1968, the legislature passed the current version of § 2011(C). It deleted the “entry” requirement and stipulated that “the shipping of merchandise directly or indirectly into or through this Commonwealth shall be considered ‘doing business.’ ” In so doing, the legislature eliminated the requirement of an actual corporate presence as a condition precedent to the exercise of jurisdiction over a foreign corporation. Rather, it made jurisdiction depend upon whether the corporation derived revenues from activity within the state; the distribution and marketing system which it set up for deriving those revenues was rendered immaterial for jurisdictional purposes. An additional factor which has been seen as influencing the passage of the 1968 amendment was the adoption by the Supreme Court of Pennsylvania of the position of § 402A, Restatement of Torts 2d, on strict liability in tort for defective products. The supreme court thereby sought to provide better protection for state residents against defective products. Webb v. Zern, 422 Pa. 424, 220 A.2d 853 (1966). The passage of the amendment complemented these efforts by providing a local forum for suits against foreign manufacturers of such products. II. JUDICIAL INTERPRETATIONS OF THE 1968 AMENDMENT. Since its passage, the Supreme Court of Pennsylvania has not had occasion to consider the new amendment and to define conclusively its scope. However, the federal district courts and the Superior Court of Pennsylvania each have had cases presenting the issue. Of the two eases considered by the superior court, only one provides any guidance; the other diverged onto the issue of whether the foreign corporation could be served consistent with due process mandates. The superior court case relevant for our consideration involved a contract between a foreign corporation and an announcer for one of its subsidiary corporations. The court held the plaintiff had failed to show that either the subsidiary corporation was merely a paper corporation for purposes of convenience or that more than one of these contracts with the parent corporation had been executed with employees of the subsidiary. Therefore, since only the one transaction was shown to have occurred involving the foreign corporation within the Commonwealth, and since there was no basis in the record for piercing the “corporate veil” between the subsidiary and the foreign parent, the latter was not “doing business” within the Commonwealth for purposes of the statute. Lit v. Storer Broadcasting Co., 217 Pa.Super. 186, 269 A.2d 393 (1970). Of those federal district courts which have considered the new amendment, a case before the District Court for the Eastern District of Pennsylvania was most closely analogous to our own. In that case, a crane manufactured by a Swedish company and similar in design to appellants’ was being used on a construction project in Philadelphia. While being used on this site, it collapsed and injured several people. As here, the manufacturer had a national distributor; but none of its cranes had been sold in Pennsylvania. The crane which collapsed had been brought in by the purchaser — also a construction company, but only after it had been used on several other jobsites. Service was attempted on the Swedish company, which challenged the jurisdiction of the court. On these facts, the district court held the manufacturer amenable to service. The court focused upon the statutory stipulation that the “[shipment] of merchandise . . . indirectly into this Commonwealth” satisfied the “doing business” requirement. The court concluded that under this language, any product for which there is a national distributor has been “indirectly shipped” into the Commonwealth by the manufacturer whenever it is subsequently brought into the Commonwealth. For purposes of determining whether this indirect shipment has occurred, it is irrelevant who brought the instrumentality into the state. Further concluding the Supreme Court of Pennsylvania had liberally construed the term “doing business” — which had been in the statute prior to the 1968 amendment, the court held the addition of the “indirect shipment” language in the amendment to extend jurisdiction of the state courts to the constitutional limit. Therefore, as to any manufacturer with a national distributor, should his product be brought subsequently into the Commonwealth and while there cause injury due to defective design and/or manufacture, statutory prerequisites for jurisdiction over that manufacturer on a suit arising out of the injury would be satisfied. Benn v. Linden Crane Co., 326 F.Supp. 995 (E.D.Pa.1970). This theory, adopted by the district court in Benn and urged upon us by appellee Bell herein, has been characterized as the “stream of commerce” theory. Its basic premise is that by having a national distributor, the manufacturer has put his product into the national “stream of commerce.” Under this theory, the manufacturer need only: (1) have a national distributor; and (2) be able to reasonably foresee that his product might be used anywhere. Therefore, for purposes of a subsequent injury, he is constructively doing business in every state and cannot complain should he thereby become amenable to one state’s jurisdiction. If his product should come into a state, and because of the manufacturer’s tortious conduct cause injury in that state, he is consequently subject to that state’s jurisdiction regardless of who transported the instrumentality of the injury into the state. Applying this to the instant case, appellants did have a national distributor and could reasonably foresee that a construction crane would not be permanently affixed to any site but rather would be transported from jobsite to jobsite. Therefore, under this theory, the subsequent transportation of the crane into the Commonwealth by Marley constituted an “indirect shipment” by appellants for purposes of the statute. Central to this concept of “stream of commerce” is the definition given the term “place of the tort.” For these purposes the place of the tort is not where the defective design or manufacture of the product occurred; instead, it is the site at which the tortious conduct culminates in injury. Thus, the defectively designed or manufactured product carries the manufacturer’s tortious conduct with it. When that defect finally causes injury, the manufacturer is constructively considered to have committed the tortious act at the site of the injury because that is where the latent defect bloomed into a tort. In fact, this concept of “place of tort” has been adopted in Pennsylvania. See, e.g., Wilk v. Ensign Bickford Co., 421 Pa. 161, 218 A.2d 778 (1966). Therefore, appellee Bell’s contention that the cause of the injury here being sued upon was defective design and/or manufacture of the crane alleges a corporate act by appellants within Pennsylvania. The district court in the instant case adopted the theory set out in the Benn opinion as its own and refused to dismiss appellants for lack of jurisdiction. 330 F.Supp. 834, 836 (W.D.Pa.1971). III. THE STATUTORY REQUIREMENT OF “DOING BUSINESS” WITHIN THE COMMONWEALTH. For jurisdiction to lie under § 2011(C), a foreign corporation must do a “series of similar acts for the purpose of thereby realizing pecuniary benefit or otherwise accomplishing an object, or a single act in this Commonwealth, . . . with the intention of thereby initiating a series of such acts.” The last interpretation rendered this language was in 1967, a year before the current amendment. In construing the “series . . . or a single act” language, which has remained unchanged into the current statute, the court stated: “The statute contemplates a systematic course of conduct as contrasted with isolated or sporadic occurrences (Greco v. Bucciconi Engineering Co., 246 F. Supp. 261 (W.D.Pa.1965)).” Myers v. Mooney Aircraft, Inc., 429 Pa. 177, 185, 240 A.2d 505, 510 (1967). In Bueciconi, the decision cited by the court, the district court concluded that the state supreme court had construed the “doing business” requirement as not extending state jurisdiction to the constitutional limit. The 1968 amendment eliminated the requirement of an actual presence or “entry” into the Commonwealth. Additionally, it added the “shipment” language so as to extend jurisdiction over foreign corporations regardless of the vagaries of each individual company’s distribution and marketing system. However, neither of these changes affected the actual context surrounding the "doing business” requirement. Therefore, we conclude the validity of the definition of “doing business” rendered by the Supreme Court of Pennsylvania in the Myers decision was unaffected by the subsequent amendment. Because the legislature in the 1968 amendment did not change the wording in light of the state supreme court’s decision in Myers, we are constrained to say the current Pennsylvania statute was not intended to extend the jurisdiction of the Pennsylvania courts to the maximum consistent with constitutional due process. Having concluded the state statute does not reach the constitutionally permissible limit, our determination becomes whether, within the parameters of the state statute as previously defined by the state supreme court, appellants were doing business within the Commonwealth. First, because of the 1968 amendment, it is immaterial whether Bell be classified as an agent or an independent contractor. Second, we note no sales of appellants’ crane have been made in Pennsylvania. Third, although Bell maintained an office in the Commonwealth at all times relevant to this case, the relationship between appellants and appellee Bell had terminated before the instant cause of action arose. Appellants thereby ended their contacts with the Commonwealth through Bell. This cessation of contacts with the state assumed a finality since there appears to have been no new national distributor appointed and since there had been no prior sale within the state. Therefore, the record establishes that prior to the collapse of the crane, appellants Societe and Tichauer had ceased to perform through an agent “a series of similar acts for the purpose of thereby realizing pecuniary benefit . or . a single act . . . for such purpose, with the intention of thereby initiating a series of such acts” within Pennsylvania. Thus, we conclude that statutory prerequisites for “doing business” by appellants under the terms of the 1968 amendment cannot be satisfied through the terminated agency of appellee Bell. The acts of appellants within this Commonwealth since their termination of the business relationship with Bell remain to be considered. These are: (1) the tortious act of appellants within the Commonwealth, to wit, the collapse of the crane allegedly due to defective design and/or manufacture; and (2) the delivery of spare parts into Pennsylvania proximous in time to the collapse of the crane. The Bueciconi case — the decision of the federal district court cited with approval by the Supreme Court of Pennsylvania in Myers — provides perspective on whether these post-termination acts were sufficient to establish the requisite contacts with the state for purposes of “doing business.” There, a machine of defendant’s manufacture had been brought into Pennsylvania although defendant company itself had no business dealings within the state. As here, no sale had been made within the Commonwealth. Subsequently, the user had problems with the machines; in order to iron them out, the president of the defendant company made several trips into the state. This, the district court had held, did not constitute “doing business” for purposes of the statute in the absence of other indicia of “doing business.” In the language of the Supreme Court of Pennsylvania, this would be “isolated or sporadic occurrences” rather than a “systematic course of conduct.” We note that as in the instant case, the tort occurred in Pennsylvania and was consequently an additional act of the defendant company within the Commonwealth under the “place of tort” theory. Although there were six deliveries within the state, they represented no more than two transactions between the parties, one of which culminated some time before the crane was removed to Pennsylvania. We believe the five separate deliveries within the Commonwealth pursuant to the December 1 transaction represented one “shipment” for purposes of § 2011(C), and the sixth delivery pursuant to the second transaction represented a second “shipment.” In this context, we are unprepared to say the two shipments of spare parts into the state combined with the constructive tortious conduct within the state together demonstrated a systematic course of conduct within Pennsylvania by appellants. Rather, they are no more than sporadic occurrences and resultantly, are insufficient to satisfy statutory prerequisites for the exercise of personal jurisdiction by the state courts in the absence of a prior in-state sale. Since federal jurisdiction in the instant ease is predicated upon diversity of citizenship, the district court here can reach no farther than could a state court. Therefore, we are constrained to hold that personal jurisdiction does not lie over these appellants under the terms of the Pennsylvania “long-arm” statute. Having so concluded, it is unnecessary to consider whether service can be effected upon these appellants consistent with the dictates of the Due Process Clause of the Fourteenth Amendment. IV. CONCLUSION. In conclusion, we hold appellants conducted insufficient activities within the Commonwealth as to render them amenable to personal service under the terms of the Pennsylvania “long-arm” statute, 15 P.S. § 2011 (Purdon Supp. 1972). Therefore, the district court erred in denying appellants Soeiete and Tichauer’s motion to dismiss for lack of personal jurisdiction. Accordingly, the order of the district court will be reversed and the case remanded to the district court for further proceedings. . Marley was also impleaded by Bell but is not involved in the instant appeal. . As with Marley, the plaintiffs are not involved in the instant appeal. . There appears to be no dispute as to the operative facts. In addition to the recitation of facts in the district court’s opinion, elements of our statement of facts have been gleaned from the interrogatories, depositions, and exhibits filed in the district court. . DiLido Hotel v. Nettis, 215 Pa.Super. 284, 257 A.2d 643 (1969). . We note that had appellants effected a sale of one of their cranes within the Commonwealth, each of these elements might have assumed a distinctly different importance for purposes of satisfying state statutory prerequisites for the exercise of jurisdiction. . Subsequent to the filing of this opinion, appellee Bell’s counsel brought to our attention a new amendment to § 2011(C), effective February 15, 1973. The new act reiterates the bases for jurisdiction in § 2011(C), discussed in this opinion. Additionally, it has a new subsection providing that the jurisdiction of the courts of the Commonwealth is to extend to the maximum allowed under the Constitution of the United States. 42 P.S. § 8309(b) (Pardon’s Stat.Legis.Supp.1973). The contested service was effected under the now repealed statute; however, the provisions for effecting service under both the old and the new statutes are the same. Compare 15 P.S. § 2011(B) (1967) with 42 P.S. § 8307 (Purdon Stat. Legis.Supp.1973). From this, appellee Bell urges that it has made effective service under the terms of the new statute, and that the new statute is to be retroactively applied to the instant case. However, the only service which has been effected is that made under the prior statute, which we have held not to reach appellants. We do not believe that ineffective service under the old statute can be validated merely by the subsequent passage of a new jurisdictional statute with more inclusive provisions. Since Bell has not attempted service under the new statute, we need not consider any remaining issues on retroactive versus prospective application nor on the constitutional efficacy of such service if made.

f2d_476/html/1223-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

George M. HEDLA et al., etc., Appellees, v. Blaine McCOOL et al., etc., Appellants. George M. HEDLA et al., etc., Appellants, v. Blaine McCOOL et al., etc., Appellees. Nos. 71-1985, 71-2017. United States Court of Appeals, Ninth Circuit. April 10, 1973. Richard A. Helm (argued), Edward W. Tucker, Burr, Pease & Kurtz, Anchorage, Alaska, for Blaine McCool and others. Allen McGrath (argued), McGrath & Flint, Anchorage, Alaska, for appellee George M. Hedía. Before MERRILL, DUNIWAY and TRASK, Circuit Judges. TRASK, Circuit Judge: These appeals are from judgments on claims and counterclaims arising from a contract between Hedla & Sherwood (accountants) and McCool & McDonald (architects). The district court awarded $12,587 plus costs and attorneys’ fees to accountants and denied relief to architects. The court obtained jurisdiction because of diversity of citizenship under 28 U.S.C. § 1332. The appeal is before us by virtue of 28 U.S.C. § 1291. Little dispute exists as to the basic facts although some of the collateral issues are not as clear. Architects and accountants entered into a written agreement on or about September 2, 1964, for architectural services to be performed for accountants. Neither McCool nor McDonald was an architect licensed by the State of Alaska at the date of the signing of this agreement. The contract was for the construction of a building at a cost of approximately $96,000. Although the cost figure was not stated in the contract, it was discussed and understood. When the plans were completed, they were delivered to accountants so that construction bids could be obtained. The low bid amounted to the sum of $195,544.20 including the cost of some basement and foundation work already completed and the cost of some ceramic tile already purchased. Efforts of the architects to redesign in order to bring the building cost to a figure approximating the accountants’ proposal were unavailing. Because of the disparity between the estimated cost and the low bid the accountants notified the architects that they were terminating the contract and would employ another architect. This they did, but lost the expected use of the building for approximately a year because of the delay. A statute of the State of Alaska provides that it is unlawful for a person to practice or offer to practice architecture in the state unless he is registered and licensed. Alleging breach of contract, the architects sued for recovery of fees and infringement of common law copyright because accountants had made use of the architects’ plans. The accountants asserted in defense that the contract was unenforceable because architects were unlicensed, and filed a third party action against the architects for damages caused by delay and improper design. On cross motions for summary judgment, the defense of unenforceability of the contract because of the failure of the architects to be licensed in Alaska, was sustained. The trial court also dismissed the counts of the complaint based upon common law copyright and wrongful appropriation of plans. The architects’ complaint was thus dismissed in its entirety. Finally, the trial court granted the accountants’ motion for summary judgment as to the liability of the architects for failure to furnish useable plans pursuant to the contract. Trial was held before the court on the only issue remaining which was the amount of damages sustained by the accountants. Those damages were fixed at $30,030 for loss of building use, less $17,443 which the accountants would have had to pay for expenses had the building been in use, or a net sum of $12,587 plus attorneys’ fees and costs. The court denied recovery for the cost of ceramic tile which accountants had purchased for the new building but did not use, because no evidence was produced as to its present value. The architects appeal from the summary judgment which denied them all relief upon their complaint, and from the money judgment entered against them. The accountants appeal from the refusal of the court to award recovery to them for the cost of the tile and to award prejudgment interest. We believe the trial court was correct in all particulars and affirm. Architects contend that if they do not perform much work within the state and have no continuous business there, the Alaska statute does not apply. They point out that because the work on the plans was done principally, if not completely, in Seattle where they were licensed, they were not practicing professional architecture “in the state.” Reliance is placed upon Gaisford v. Neuschatz, 201 So.2d 635 (Fla.Dist.Ct.App. 1967) and Johnson v. Delane, 77 Idaho 172, 290 P.2d 213 (1955). The Alaska professional code, however, has a provision which will not permit such a narrow construction. Section 08.48.190 states: “A registered professional . architect who is not a resident of the state or does not have an established place of business in the state but who possesses the qualifications required by this chapter shall qualify under this chapter before he may solicit business for, enter into contracts for, or perform professional services requiring registration or a permit.” In addition, the evidence disclosed this was not an isolated transaction. Architects also point out that because their plans were submitted to and approved by an engineer registered in Alaska they are not in violation of the laws of Alaska. They point to Dick Weatherston’s Associated Mechanical Services, Inc. v. Minnesota Mutual Life Insurance Co., 257 Minn. 184, 100 N.W.2d 819 (1960), in support of their position. In that case, however, the unlicensed architect had been employed as a contractor, not as an architect. All of his plans and designs were submitted to the owner’s licensed architects for approval. The case here more closely parallels Food Management, Inc. v. Blue Ribbon Beef Pack, Inc., 413 F.2d 716 (8th Cir. 1969), where the court held that the company was practicing engineering and architecture within the state because the firm with which they were associated and which was licensed, was not performing the entire service and was not in charge of the work. The rule relied upon by accountants has solid support in the authorities as being for the protection of the public. Snodgrass v. Immler, 232 Md. 416, 194 A.2d 103 (1963); Lapuk v. Blount, 2 Conn. Cir. 271, 198 A.2d 233 (1963); Hickey v. Sutton, 191 Wis. 313, 210 N.W. 704 (1924); see Restatement of Contracts § 598, comment a at 1110 (1932). The differences in conditions in Alaska from those in the “lower 48” justify the requirement of an Alaskan license as a matter of state policy for the protection of its citizens. After the contract had been terminated, the accountants employed a licensed Alaskan architect and gave him the plans. This included the floor plans prepared by the accountants in the first instance and given to the architects. The Alaskan architect incorporated about 15% of the unlicensed architects’ plans in his own work product in preparing new plans which would be within the accountants’ proposed cost range. Architects claim the right to recover damages for infringement of their common law copyright and the appropriation of their work. Architects rely principally on Ashworth v. Glover, 20 Utah 2d 85, 433 P.2d 315 (1967), and Vic Alexander & Associates v. Cheyenne Neon Sign Co., 417 P.2d 921 (Wyo.Sup.Ct.1966), to support this claim. In neither of those cases does there appear to have been an illegal contract. Here, however, there was an illegal contract, and that illegal contract must necessarily be relied upon to recover in any theory of common law copyright or quantum meruit. In other eases cited by architects an illegal contract was involved, but the court allowed recovery because suit was brought not upon the illegal contract but upon a separate contract. That situation does not prevail here. In Ryan v. Mike-Ron Corp., 226 Cal.App.2d 71, 37 Cal.Rptr. 794 (1964), relief was granted even though there had been an illegal contract. It did so because it felt that justice could be done without disserving the public interest. Architects’ reliance on Ryan overlooks the fact that the contract there was not prohibited by statute and only a small part of the consideration for the bargain involved motor vehicles, the sale of which required particular formalities in the contract. The court recognized the general rule which is applicable here. “As a general rule, however, a guilty party to an illegal contract cannot recover in quasi contract for the benefit conferred.” 37 Cal.Rptr. at 796. There is no reason to expect that the courts of Alaska would not follow/the general rule. In such cases where there appear to be no state decisions we give great deference to the judgment of the district court for an assessment of what might be expected were the state court to rule upon the problem. Bigjoe v. Pioneer American Insurance Co., 446 F.2d 28 (9th Cir. 1971). We have no reason here to believe his judgment was not correct. The final matters for consideration concern the right of the accountants to recover damages for loss of use of the building and for the cost of tile which accountants bought and did not use, together with the claim of offset by the architects. Generally if a contract is illegal, neither party may recover on it. Associated Press v. Taft-Ingalls Corp., 340 F.2d 753 (6th Cir.), cert. denied, 382 U.S. 820, 86 S.Ct. 47, 15 L.Ed.2d 66 (1965); Harriman v. Tetik, 56 Cal.2d 805, 17 Cal.Rptr. 134, 366 P.2d 486 (1961). The court leaves the parties where they are on the theory that it will not aid either wrongdoer. Singleton v. Foreman, 435 F.2d 962 (5th Cir. 1970); Whitney v. Continental Life & Accident Co., 89 Idaho 96, 403 P.2d 573 (1965). However, where one of the parties is ignorant of the illegality he is not precluded from the recovery of damages by the nonperformance of the bargain by the other. Singleton v. Foreman, supra, 435 F.2d at 969; Redke v. Silvertrust, 6 Cal.3d 94, 98 Cal.Rptr. 293, 490 P.2d 805 (1971). Said the trial court with reference to knowledge of illegality by the accountants : “At no time since either the beginning of this case, some four years past, or the ruling by this Court declaring the contract illegal, have defendants ever asserted, except during oral argument on their motion for summary judgment, one day before trial, that plaintiffs (accountants) knew of or even supposed that defendants were not licensed to practice architecture within the State of Alaska. Since defendants have failed to raise this issue in a timely manner, little justification exists to present it at this late date as a genuine issue in this case. Therefore defendants may be afforded relief for damages, if any, sustained under the illegal contract.” C.T. at 244-45. The architects in their brief before this court assert that the accountants were aware of the fact that architects were not licensed. Appellants’ Brief at 27. The statement is not documented and we have not found any evidence to support it. The accountants deny the truth of the statement in their brief and assert there is no evidence to support it. On such a record the court’s finding of liability for the architects’ breach of the agreement and award of damages for loss of use is justified. This total was in the sum of $12,587. The testimony on the basis of which computation was made was conflicting. We do not find that it was clearly erroneous. Accountants also sought recovery for the cost of ceramic tile which was purchased for the building but never used. The tile belongs to the accountants and is in their possession. No evidence was offered to establish the present value so that any loss could be computed. The court was therefore correct in denying recovery for this item. In a final effort to obtain relief, the architects argue that if they are unable to recover affirmatively against the accountants for the value of their services rendered on the contract, or in quantum meruit, then they should be permitted to offset accountants’ recovery in the amount the architects would have been entitled to recover had the contract been enforcible. Reliance is placed upon three California decisions to support this position. Apart from the decisions, the basic difficulty with the architects’ position is that the court made no finding of any amount which they would have been entitled to recover had the contract been enforcible. They were employed to produce plans for the construction of a building approximating a certain cost. They failed to do so. Under those circumstances they would not have been permitted to recover anything under the contract. The California eases permitting offset were decided under a statute different from that which was in force in Alaska. Culbertson v. Cizek, 225 Cal.App.2d 451, 37 Cal.Rptr. 548, 560 (1964); Steinwinter v. Maxwell, 183 Cal.App.2d 34, 6 Cal.Rptr. 496 (1960); S & Q Construction Co. v. Palma Ceia Development Organization, 179 Cal.App. 2d 364, 3 Cal.Rptr. 690, 692 (1960). They were cases where a contractor, not an architect, was seeking equitable offset for work done. Accountants point out that the California statute requiring licensing of a contractor is one which is malum prohibitum and not malum in se. Steinwinter v. Maxwell, supra, 6 Cal. Rptr. at 499. In the present case a fine or imprisonment may be imposed upon an architect for violation of the licensing laws. Alaska’s statute is not simply prohibitory, but rather reflects a sufficiently grave policy against illegality which justifies denial of relief to the architects under the circumstances of this case. The accountants claim for prejudgment interest was disallowed. Under the doctrine of State v. Phillips, 470 P.2d 266 (Alaska 1970), prejudgment interest should be awarded, “unless for some reason peculiar to an individual case such an award of interest would do an injustice.” 470 P.2d at 274. Here the court disallowed prejudgment interest. Among the court’s findings of fact was the finding that “[t]he delays in the prosecution of this suit are not chargeable to either party.” C.T. at 275. We do not find the court’s ruling with respect to prejudgment interest is clearly erroneous. The judgment is affirmed. . “Registration required. It is unlawful for a person to practice or to offer to practice professional engineering or professional architecture in the state unless he is registered and licensed.” AS 08.48.150. There is also a statute which makes it a misdemeanor for an unauthorized person to practice professional architecture in the state. Either fine or imprisonment may be imposed. AS 08.48.400. . The trial judge stated in his memorandum and order that the accountants made no claim for a refund of $1,941.44 which constituted the amount paid by them to the architects as partial payment for architectural services. Among factors that are influential in determining whether restitution or some other judicial remedy will be granted to a party who has rendered part of an illegally bargained-for exchange are : “the degree of criminality or evil, the comparative innocence or guilt of the parties, the extent of public harm involved, the moral quality of the conduct of the parties, and the severity of the penalty or forfeiture that will result from refusal of relief.” 6A Corbin on Contracts § 1534' at 818; accord, Restatement of Restitution § 140. Following an evaluation of the factors in this case, we agree with the trial court’s conclusion that the equities are sufficiently satisfied by permitting the situation to remain as it is.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

UNITED STATES of America, Appellee, v. Angel DOMENECH, Appellant. No. 585, Docket 72-2258. United States Court of Appeals, Second Circuit. Argued Feb. 15, 1973. Decided April 12, 1973. Alfred Lawrence Toombs, New York City, for appellant. John J. Kenney, Asst. U. S. Atty., S. D.N.Y. (Whitney North Seymour, Jr., U. S. Atty., John D. Gordan III, and John W. Nields, Jr., Asst. U. S. Attys., S.D. N.Y., of counsel), for appellee. Before FRIENDLY, Chief Judge, OAKES, Circuit Judge, and DAVIS, Judge. Of the United States Court of Claims, sitting by designation. DAVIS, Judge: Appellant Angel Domenech was indicted, with co-defendants Morales and Pereira, for conspiring to distribute and possess with intent to distribute over 100 grams of heroin (count 1), and for the substantive offense of distributing and possessing the same amount of narcotics (count 2). Domenech was tried alone before a jury, acquitted of conspiracy but convicted of the substantive offense. He was sentenced as a young adult offender (18 U.S.C. § 4209) to treatment and supervision under 18 U.S.C. § 5010(b) until discharged under 18 U.S.C. § 5017(c). On this appeal he does not challenge the sufficiency of the evidence which it is unnecessary' to recite in detail. For present purposes, it is enough that there was proof that Domenech delivered in the presence of federal agents a wrapped package which turned out to contain heroin, and there was also evidence of prior separate discussions concerning a narcotics transaction between the agents and (i) Pereira and Domenech, (ii) Pereira and Morales, (iii) Pereira alone, and (iv) Domenech alone. Appellant and his wife presented exculpatory evidence to the effect that he knew nothing about any heroin transaction (he denied having had the conversations to which the agents had testified), he simply delivered the package on request as a favor, and thought it contained marijuana. The first of the appeal points is that Pereira, appellant’s brother-in-law, who was summoned by the defense, should have been compelled by the court to testify even though he made it clear when first called that he would claim his privilege against self-incrimination. The trial judge excused him without requiring any questions to be put. Pereira, whom appellant assumed would be a helpful witness (see note 3, infra), had shortly before pleaded guilty to the conspiracy count but had not yet been sentenced (see note 1, supra); the second (substantive offense) count was still outstanding against him but was fully expected to be dismissed upon senteneing. Appellant’s contention is that the witness, having already pleaded guilty and been convicted, could no longer rely with justification on the Fifth Amendment privilege (cf. United States v. Gernie, 252 F.2d 664, 670 (2d Cir.), cert. denied, 356 U.S. 968, 78 S.Ct. 1006, 2 L.Ed.2d 1073 (1958); United States v. Romero, 249 F.2d 371, 375 (2d Cir. 1957)), and should have been directed to testify. We hold, however, that the court below committed no error in excusing Pereira. There is some doubt, in the first place, whether appellant is in a position to complain since his counsel neither asked the judge to direct Pereira to answer questions or to rule that the privilege was improperly asserted. Counsel appeared to acquiesce in Pereira’s statement that he would not testify. In any event, the claim of privilege was well-taken. Count 2 still remained open against Pereira and his testimony, whether or not it helped Domenech, could very well have further incriminated himself on that offense. Though it was very likely that count 2 would be dismissed, that had not yet occurred and Pereira can hardly be faulted for taking the most cautious position. Even on the conspiracy charge to which he had pleaded guilty, evidence compelled at Domenech’s trial could well hamper a possible attempt by the witness to withdraw his plea before sentence. See State v. Tyson, 43 N.J. 411, 204 A.2d 864, 866-867 (1964), cert. denied, 380 U.S. 987, 85 S.Ct. 1359, 14 L.Ed.2d 279 (1965). Moreover, under the existing precedents it was open to the State of New York to prosecute Pereira on the same heroin transaction (Bartkus v. Illinois, 359 U.S. 121, 79 S.Ct. 676, 3 L.Ed.2d 684 (1959)), and his Fifth Amendment privilege included a right against self-incrimination under the state penal laws. See Kastigar v. United States, 406 U.S. 441, 456-457, 92 S. Ct. 1653, 32 L.Ed.2d 212 (1972); United States v. Chandler, 380 F.2d 993, 997 (2d Cir., 1967). In short, if Pereira had refused a direct order to testify, a contempt judgment against him could not be allowed to stand since in no way would it be perfectly clear that the answers would not possibly incriminate. Hoffman v. United States, 341 U.S. 479, 488, 71 S.Ct. 814, 95 L.Ed. 1118 (1951); United States v. Chandler, supra. Appellant urges that the Government deliberately left count 2 open against Pereira in order to insure that he would not testify for appellant. There is no adequate proof of this charge; leaving the remaining counts open until sentence on the counts to which an accused has pled is the common practice — a reasonable procedure which avoids complexities where the defendant moves before sentence to set aside his guilty plea. In this instance the possible consequence of following the normal usage was to give Pereira a good excuse for refusing to take the stand, and thus of avoiding the dilemma, on the one hand, of a possible perjury charge or a feared impact on his sentence if he testified favorably to Domenech, or, on the other, of giving evidence against his close relative. But we see no escape from holding that Pereira had a constitutional right to act as he did, and, in the absence of any proof of deliberate manipulation or pre-arrangement by the United States Attorney, there is no penalty we can or should impose on the Government because the witness’s exercise of his right, for his own purposes, may have redounded to the prosecutor’s advantage. The second issue is whether the court below erred in giving the “Allen” charge when the jury reported itself in disagreement after some hours of deliberation. This court has consistently and recently upheld normal versions of the “Allen” instruction (see, e. g., United States v. Birrell, 447 F.2d 1168, 1173 (2d Cir., 1971), cert. denied, 404 U.S. 1025, 92 S.Ct. 675, 30 L.Ed. 675 (1972); United States v. Bowles, 428 F.2d 592, 595 (2d Cir.), cert. denied, 400 U.S. 928, 91 S.Ct. 193, 27 L.Ed.2d 188 (1970); United States v. Hynes, 424 F.2d 754 (2d Cir.), cert. denied, 399 U.S. 933, 90 S.Ct. 2270, 26 L.Ed.2d 804 (1970)) and we are of course bound by those rulings. There is no occasion to consider whether en banc reconsideration should now be had of this general area (see United States v. Martinez, 446 F.2d 118, 119-120 (2d Cir.) cert. denied, 404 U.S. 944, 92 S.Ct. 297, 30 L.Ed.2d 259 (1971)) since appellant did not, at the trial, challenge the “Allen” charge as such, but only a single one of the trial judge’s statements. The disputed sentences were: “This case, if the jury disagrees, will be retried. Another jury will be chosen from the same sources that you were and it will hear probably the same evidence.” Appellant attacks this remark on the ground that Pereira could be compelled to testify after his sentencing and that his evidence on a retrial would be materially different from the testimony introduced at the trial just completed. By-passing the point that Pereira might still be able to claim his privilege even after sentencing, particularly because of the possibility of state prosecution, see supra, the immediate answer is that a retrial would probably take place before Pereira’s sentencing; Morales, who failed to turn up for his joint trial with appellant but did appear later that day, was in fact tried a very few days later (see note 1, supra) and in all likelihood a retrial of Domenech would have been scheduled for the same time. In these circumstances, the challenged part of this “Allen” charge was not a misrepresentation, and though it is not to be commended for general use it does not appear in this instance to have been unfairly coercive. On the morning on which the judge was to give his charge, one of the jurors was 10 minutes late; over a defense objection, the court replaced this absent juror with an alternate and then discharged the tardy juror when she appeared shortly after the charge was begun. This episode raises the third point on appeal. Given the current conditions of transportation in the City of New York, some other presiding officers might have waited a bit longer, but we certainly cannot say that the judge abused his discretion by insisting on going ahead after 10 minutes. Nor is there any basis for finding an undue impact on the jury either in the mere act of excusing the juror or in the way it was done. We would have to strain much too far to discern any bias or prejudice against the defendant in this episode. Lastly, appellant complains of statements made by Pereira to the agents in Domenech’s absence which were admitted subject to connection. Although there was no specific later ruling by the trial court, appellant failed to move to strike the evidence at the close of the prosecution’s case, and took no exception to the charge which told the jury it could consider the testimony. This being so, we find no error. There was in fact ample independent evidence of Domenech’s connection with the conspiracy and, as the case comes to us, we must assume that the judge was satisfied of that connection, under the rule of United States v. Geaney, 417 F.2d 1116, 1120 (2d Cir., 1969), cert. denied, 397 U.S. 1028, 90 S.Ct. 1276, 25 L.Ed.2d 539 (1970). The status of the evidence aliunde is not vitiated by the fact that it came from the same federal agents who testified to the disputed declarations. There is no such disqualifying rule of law, and, especially in the light of the conviction on count 2, we cannot accede to appellant’s broadside contention that the jury’s acquittal on the conspiracy charge shows that it must have disbelieved everything the agents said on the stand. The result is that neither singly nor in combination do the challenged acts of the trial court amount to reversible error. Affirmed. . Pereira previously pleaded guilty to the conspiracy count (see infra) and Morales did not appear for the scheduled trial. He was tried a few days later and pleaded guilty to one count after that trial began. . This language apparently followed the charge sustained in United States v. Thomas, 282 F.2d 191, 195 (2d Cir., 1960), except that that instruction did not qualify “the same evidence” by “probably”. . When Pereira was interrogated by the same trial judge on his guilty plea, shortly before Domenech’s trial, he made statements which could be understood as tending to exculpate Domenech. In particular he denied the one overt act in the conspiracy count which referred to a conversation between Pereira and Domenech. . Since the case was scheduled to go to the jury that day, the trial court may have wanted to avoid, as much as possible, a night sitting. As it turned out, the verdict was not returned until 9 p. m.

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

John W. MERRIAM, Appellant, v. Robert L. KUNZIG, Administrator, General Services Administration et al. No. 72-1686. United States Court of Appeals, Third Circuit. Argued Dec. 7, 1972. Decided Feb. 16, 1973. As Amended April 13, 1973. Rehearing Denied April 27, 1973. C. Clark Hodgson, Jr., Stradley, Ronon, Stevens & Young, Philadelphia, Pa., for appellant. Kent Frizzell, Asst. Atty. Gen., Dept, of Justice, Washington, D. C., Carl J. Malone, U. S. Atty., Warren D. Mulloy, Asst. U. S. Atty., Philadelphia, Pa., Robert A. Prince, Asst. Gen. Counsel, General Services Administration, George R. Hyde, Rembert A. Gaddy, Anthony Borwick, Eva R. Datz, Attys., Dept, of Justice, Washington, D. C., for appellees. Before VAN DUSEN, GIBBONS and HUNTER, Circuit Judges. OPINION OF THE COURT GIBBONS, Circuit Judge. This is an appeal from an order of the district court dismissing the complaint of appellant Merriam on defendants’ motion for summary judgment for lack of standing. Merriam is one of two unsuccessful bidders on a solicitation for bids to furnish leasehold office space to the General Services Administration (GSA). That agency and several of its officials are defendants. Merriam seeks to have set aside an award made by GSA to Gateway Center Corporation (Gateway) for a twenty year lease of a new office building to be constructed in Philadelphia, and to have enjoined the execution of the proposed lease. GSA’s Solicitation for Offers for leasehold space was issued on September 30, 1970, to Merriam, to Gateway and to twenty-four other prospective offerors in the Philadelphia metropolitan area. Five bids were received. One was withdrawn and another was determined to be nonresponsive. On February 18, 1971, the Administrator of GSA authorized the making of the disputed award to Gateway. On February 19, 1971, Merriam, pursuant to 4 C.F.R. §§ 20.1-20.12 (1972), protested the award to the General Accounting Office, which on September 16, 1971, advised him through counsel that it could not rule authoritatively on the protest at that time. As soon as he was so advised Merriam commenced this lawsuit. On November 17, 1971, he moved for a preliminary injunction restraining the GSA from executing a lease pending determination of the cause, and, pursuant to Rule 57, Fed.R.Civ.P., for a prompt hearing. The government defendants made a cross motion for summary judgment, raising, among others, the issue of Merriam’s standing to sue. They also requested that the court defer decision on Merriam’s motions until the standing issue was resolved. This, of course, would have left GSA free pendente lite to execute the disputed lease. At a pretrial conference on December 9, 1971, however, Merriam withdrew his motion for a preliminary injunction on the representation of the Government that no lease would be executed with Gateway until the construction of the proposed building had been completed. The district court soon thereafter stayed all proceedings. On February 7, 1972, over Merriam’s objection, it entered an order which provided in part: “. . . because the defendant has advised the Court that the General Accounting Office is reviewing its lease construction practices, including the present bid protest, it is hereby ORDERED that the Court will stay its hand for 30 days pending receipt of the results of such review.” The General Accounting Office review was not completed until March 17, 1972. In the meantime Gateway’s building was under construction, but no lease had been executed. The March 17, 1972 ruling by the Deputy Comptroller General of the United States was to the effect that the award to Gateway was improper in several respects to which more specific reference will be made hereafter, but that because Gateway had made substantial construction progress in reliance on GSA’s assurance that it had complied with the governing law, the Comptroller General would not initiate any question “. . . with respect to payments under existing leases. However, we must advise that we have no alternative to raising objection to payments under any lease executed after the date of this decision without proper regard for the restriction against leasing buildings to be erected for the Government, where the restriction is operative both at the time of lease execution and at the time of payment.” The quoted language of the March 17, 1972 ruling may be understood in the context of the next preceding paragraph of the ruling, which explained that GSA’s improper leasing practices- were not confined to the isolated circumstances of a single lease transaction, and that the magnitude and seriousness of the problem created by GSA’s administration of its leasing program required that the entire matter be referred to Congress for possible corrective legislative action. Thus, the General Accounting Office position seems to have been (1) that the award to Gateway was illegal, (2) thát it would not challenge payments under existing leases, and (3) that as to leases not yet in existence it recognized that Congress could authorize future payments even though the award may have been improper. The ruling does not disclose, whether the General Accounting Office was aware of the actual Gateway-GSA situation; that is, that the Government had represented that it would not execute a lease until the building was complete, and no lease had yet been executed. The March 17, 1972 ruling was brought to the attention of . the district court by stipulation. It then took up and granted the Government’s motion for summary judgment, 347 F.Supp. 713, on the ground that Merriam lacked standing, as an unsuccessful bidder, to challenge an illegal award. This appeal followed. Merriam’s Legal Contention The Solicitation by GSA was made under the authority of the Federal Property and Administrative Services Act of 1949, as amended, 40 U.S.C. § 490(h) (1): “The Administrator is authorized to enter into lease agreements . . . which do not bind the Government for periods in excess of twenty years . . . on such terms as he deems to be in the interest of the United States and necessary for the accommodation of Federal agencies in buildings and improvements which are in existence or to be erected by the lessor for such purposes. . . . ” This general leasing authority is limited, however, by a statute, 41 U.S.C. § 11(a), applicable to all public contracts: “No contract or purchase on behalf of the United States shall be made, unless the same is authorized by law or is under an appropriation adequate to its fulfillment. . . . ” Merriam contends that the leasing authority of GSA has, since 1963, been further limited by provisions reenacted annually. The statute in effect on September 30, 1970, was the Independent Offices Appropriations Act, 1971, Pub.L. No. 91-556, 84 Stat. 1442, which provides : “No part of any appropriation contained in this Act shall be used for the payment of rental on lease agreements for the accommodation of Federal agencies in buildings and improvements which are to be erected by the lessor for such agencies at an estimated cost of construction in excess of $200,000 or for the payment of the salary of any person who executes such a lease agreement: Provided, That the foregoing proviso shall not be applicable to projects for which a prospectus for the lease construction of space has been submitted to the Congress and approval made in the same manner as for public buildings construction projects pursuant to the Public Buildings Act of 1959 [40 U.S.C. §§ 601-15].” In preparing the Solicitation which resulted in the disputed award, GSA recognized that it was bound by the quoted provision of the Independent Offices Appropriations Act, 1971, the obvious purpose of which was to prevent without prior congressional approval the financing of new building construction on the credit of the United States by the use of government leases. In the Solicitation GSA made reference to the fact that each year since 1963 the lease construction prohibition had appeared in the Independent Offices Appropriations Act. It provided that if the bid were for a building to be erected by the lessor the bid must remain open for an additional 120 days beyond that normally specified to afford the Government adequate time to obtain congressional approval. It then provided: “(1) For the purpose of this solicitation, buildings . . . ‘which are to be erected by the lessor’ do not include: (b) New buildings . . . the construction status of which, on the date of issuance of the solicitation, met all of the following conditions: i. Title to the site was vested in the offeror or he possessed such other interest in and dominion and control over the site to enable starting construction. ii. Design was complete. iii. Construction financing fully committed. iv. A building permit for construction of the entire building, extension or addition had been issued. v. Actual construction is currently in progress or a firm construction contract with a fixed completion date has been entered into.” It is undisputed that at the time of the solicitation the Gateway site was a vacant lot in an urban renewal area in the city of Philadelphia, and that the proposed Gateway lease was never submitted to Congress. Merriam’s complaint alleges (1) that Gateway met none of the five criteria set forth in the Solicitation, (2) that the five criteria are in any event an improper interpretation of the Independent Offices Appropriations Act, and (3) that Gateway’s representations in response to the Solicitation were false and were known to the officials of GSA to be false when they arbitrarily, capriciously and unlawfully accepted Gateway’s bid. Because the case was dismissed for lack of standing none of these issues were decided by the district court. The Government’s Position On appeal the Government advances three arguments. First, it urges that congressional action since the award to Gateway has rendered this case moot. Next it urges that the district court correctly ruled that Merriam lacked standing. Finally, it urges that no statute has been violated by the award or would be violated by the proposed lease. The Mootness Contention On July 13, 1972, Congress passed an appropriations act for certain independent agencies, including the GSA, for the fiscal year ending June 30, 1973. Pub.L. No. 92-351, 86 Stat. 471. If the building is finished before June 30, 1973, that act will apply to the initial rental payments. The 1973 appropriations act, like that of the year before, Pub.L. No. 92-49, 85 Stat. 108, omits the lease-construction prohibition upon which Merriam relies. This, the Government urges, makes Merriam’s case moot, because the prohibition against payments contained in the Independent Offices Appropriations Acts for the previous nine years ceased prior to the execution of the Gateway lease. The Government’s contention must be read, however, in the light of another congressional action. In June of 1972, prior to the passage of the 1973 appropriations act on which the Government relies, Congress passed the Public Buildings Amendments of 1972. Pub.L. No. 92-313, 86 Stat. 216. Prior to these amendments, the Public Buildings Act of 1959, 40 U.S.C. §§ 601-615, had provided that in order to insure equitable distribution of public buildings throughout the United States, with limited exceptions, no appropriation for the construction or acquisition of a public building in excess of $100,000 would be made unless the construction or acquisition had first been approved by resolutions of the Committees on Public Works of the Senate and the House of Representatives. 40 U.S.C. § 606(a). This provision made no reference to leases on buildings to be constructed. To fill that obvious loophole, from 1963 through 1971 the Independent Offices Appropriations Acts contained the provision, upon which Merriam relies, that any lease for a building to be erected by the lessor must be submitted to the appropriate subcommittee in the same manner as, under the Public Buildings Act of 1959, for an acquisition or construction. Pub.L. No. 92-313 amended 40 U.S.C. § 606(a) by making it applicable not only to acquisition and construction but to leases. The amendment to § 606(a) differs in approach from that taken for nine years in the Independent Offices Appropriations Act in two respects. First, it applies § 606(a) to all leases, and not merely to leases for buildings to be erected by the lessor. Second, it makes § 606(a) applicable to leases depending upon the amount of annual rental ($500,000) rather than, as formerly, upon the cost of construction. The Act in relevant part now provides: “No appropriation shall be made to lease any space at an average annual rental in excess of $500,000 for use for public purposes if such lease has not been approved by resolutions adopted by the Committee on Public Works of the Senate and House of Representatives, respectively. For the purposes of securing consideration for such approval, the Administrator shall transmit to the Congress a prospectus of the proposed facility. . . ." The Conference Report on that part of Pub.L. No. 92-313 states: “This section amends section 7 of the Public Buildings Act of 1959 to require the Administrator of G.S.A. to submit a prospectus for approval by the House and Senate Public Works Committees whenever he proposes to secure leased space for which he proposes an average annual rental in excess of $500,000.” Conf.Rep. No. 92-1097, 1972 U.S.Code Cong.&Ad.News, 92d Cong. 2d Sess. (Temp.Ed. No. 6) 2119. The proposed Gateway lease involves annual rental far in excess of $500,000.00. The Government’s position is that since only an award to Gateway, not a lease with it, was made while the Independent Offices Appropriations Act, 1971 was in effect that Act has no application. Since only that statute, now expired, is referred to in the complaint, the case is moot. Since the district court dismissed before Merriam had an opportunity to supplement his pleadings by reference to Pub.L. No. 92-313, the Government is technically correct that no reference is made to the later enactment. But equating the absence of a reference to the later enactment with mootness borders, we think, on the frivolous. We must, of course, take judicial notice of statutes applicable to the cause. 5 J. Moore, Federal Practice ¶ 43.09, at 1369 & n. 17 (2d ed. 1971), Merriam contends that the proposed lease would, without congressional approval, violate Pub.L. No. 92-313, and that the February 18, 1971 award to Gateway without congressional approval, violated the Independent Offices Appropriations Act, 1971. On the merits the Government contends that Pub.L. No. 92-313 is inapplicable and that the Independent Offices Appropriations Act, 1971 did not apply to, or at least did not bar, the award. That controversy is very much aliye. Standing The district court recognized that Merriam, as an unsuccessful bidder, and as a landlord about to lose Government tenants to Gateway, having been deprived by an unlawful award to another of a potentially valuable business relationship with the Government, adequately met the amount in controversy requirement of 28 U.S.C. § 1331(a). The court recognized, as well, that the complaint set forth a present controversy arising under a law of the United States. It held, however, that in addition to a genuine controversy arising under the laws of the United States, pressed by a party asserting injury in fact to him, there was a separate standing requirement. Such standing, the court held, must be conferred by some federal statute which brings the party asserting the injury in fact within a protected zone of interest. The district court, in short, applied to the unsuccessful bidder on a federal contract the requirement that he be a Hohfeldian plaintiff. See W. Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning I & II, 23 Yale L.J. 16 (1913), 26 Yale L.J. 710 (1917). It found no federal statute conferring a right of action. Therefore it dismissed the complaint. Chief reliance was placed upon Perkins v. Lukens Steel Co., 310 U.S. 113, 125, 60 S.Ct. 869, 84 L.Ed. 1108 (1940) and Tennessee Electric Power Co. v. T.V.A., 306 U.S. 118, 137-138, 59 S.Ct. 366, 83 L.Ed. 543 (1939). Those cases, in turn, hark back to Frothingham v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078 (1923). In adopting this position, the district court rejected a settled line of authorities in the District of Columbia Circuit recognizing the standing of unsuccessful bidders on federal contracts, to which specific reference will be made shortly. These authorities were rejected on the ground that their analysis of Supreme Court authority since Perkins v. Lukens Steel Co., supra, was tacitly rejected by the Court in the recent case of Sierra Club v. Morton, 405 U.S. 727, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972). We hold that Merriam, as a landlord about to lose government tenants and as an unsuccessful bidder, does have standing to seek judicial review of a government contract award. In Scanwell Laboratories, Inc. v. Shaffer, 137 U.S.App.D.C. 371, 424 F.2d 859 (1970) Judge Tamm made an extensive analysis of the issue whether an unsuccessful bidder on a federal government contract had standing to challenge an award. No purpose would be served by burnishing that analysis by repetition. It suffices to point out that he recognizes the substantial changes made, since the decision in Perkins v. Lukens Steel Co., supra, first by the Supreme Court in FCC v. Sanders Brother Radio Station, 309 U.S. 470, 60 S.Ct. 693, 84 L.Ed. 869 (1940) and Scripps-Howard Radio, Inc. v. FCC, 316 U.S. 4, 62 S.Ct. 875, 86 L.Ed. 1229 (1942), and next by Congress when it enacted Section 10 of the Administrative Procedure Act. 5 U.S.C. § 702. The holding in Scanwell is best set forth by a quotation: “The public interest in preventing the granting of contracts through arbitrary or capricious action can properly be vindicated through a suit brought by one who suffers injury as a result of the illegal activity, but the suit itself is brought in the public interest by one acting essentially as a ‘private attorney general’.” 424 F.2d at 864. Thus, a bidder who has suffered sufficient injury in fact to meet the case or controversy test of Article III may, in pursuit of a vindication of that injury, assert not only his own rights but those of the public. The District of Columbia Circuit still follows Scanwell. See Constructores Civiles de Centroamerica v. Hannah, 148 U.S.App.D.C. 159, 459 F.2d 1183 (1972); Wheelabrator Corp. v. Chafee, 147 U.S.App.D.C. 238, 455 F.2d 1306 (1971); M. Steinthal & Co. v. Sea-mans, 147 U.S.App.D.C. 221, 455 F.2d 1289 (1971); Ballerina Pen Co. v. Kunzig, 140 U.S.App.D.C. 98, 433 F.2d 1204 (1970), cert. denied, 401 U.S. 950, 91 S.Ct. 1186, 28 L.Ed.2d 234 (1971); Blackhawk Heating & Plumbing Co. v. Driver, 140 U.S.App.D.C. 31, 433 F.2d 1137 (1970). Merriam meets the standing test adopted by the District of Columbia Circuit. Assuming for the moment, as the Government contends, that both the Independent Offices Appropriations Act and the Public Buildings Amendments of 1972 were designed to protect no zone of interest within which he falls, Merriam may nevertheless assert the public interest provided he has suffered injury in fact. In addition to the destruction of a present and a future potentially profitable relationship with the Government, an injury which the district court acknowledged, Merriam also suffered loss of the costs incurred in preparing and submitting his proposal. Such an injury has been recognized as compensable by the Court of Claims when an unsuccessful bidder seeks judicial review of an allegedly illegal award in that court. Keco Industries, Inc. v. United States, 428 F.2d 1233, 192 Ct.Cl. 773 (1970). Bid preparation costs are not specifically alleged here, although under 28 U.S.C. § 1346(a)(2) the district court would have jurisdiction to consider such claims if less than $10,000. We mention the possibility of such a claim not to reject the district court’s basis for finding the necessary allegation of injury in fact in the loss of a potentially profitable relationship, but to show that Merriam has suffered more than an intangible or speculative loss. Thus, the district court’s reliance, in rejecting Merriam’s standing, upon Sierra Club v. Morton, supra is misplaced. That case is an application of the “injury in fact” test. That test requires “that the party seeking review be himself among the injured.” 405 U.S. at 735, 92 S.Ct. at 1366. The Supreme Court’s analysis in Sierra Club v. Morton is actually quite similar to that of Judge Tamm in Scanwell: “Taken together, Sanders and ScrippsHoward thus established a dual proposition: the fact of economic injury is what gives a person standing to seek judicial review under the statute, but once review is properly invoked, that person may argue the public interest in support of his claim that the agency has failed to comply with its statutory mandate.” (footnote omitted) 405 U.S. at 737, 92 S.Ct. at 1367. Sierra Club v. Morton rejects a construction of the Administrative Procedure Act which would recognize standing to seek judicial review in persons not having a direct stake in the outcome. But it recognizes that those, such as unsuccessful bidders, who do have such a direct stake, may assert not only their own interest, but that of the public at large. The Sierra Club holding in no way reflects upon the authorities in the District of Columbia Circuit which recognize the standing of an unsuccessful bidder. The Government argues, however, that Scanwell and the cases following it are inconsistent with Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970) and Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970). These cases establish a dual test for judicial review of federal agency action. (1) The plaintiff must satisfy Article III by alleging injury in fact; (2) he must also establish that he falls within the zone of interest protected by the statute or regulation upon which he relies. Neither Merriam nor any other unsuccessful bidder, it is urged, can meet the second test, because all of the statutes or regulations with respect to government procurement are intended solely for the protection of the Government, and no one outside the Government falls within their zone of interest. We do not accept the Government’s contention. Government procurement is usually made under the authority of the Armed Services Procurement Act of 1947, 10 U.S.C. §§ 2301-14 or the Federal Property and Administrative Services Act of 1949. 41 U.S.C. §§ 251-60. The latter statute applies to GSA. 41 U.S.C. § 252(a)(1). It sets forth procurement procedures both for contracts made after advertising for bids and for negotiated contracts. In this case the GSA advertised for bids. 41 U.S.C. § 253 provides: “Whenever advertising is required— (a) The advertisement for bids shall be made a sufficient time previous to the purchase or contract, and specifications and invitations for bids shall permit such full and free competition as is consistent with the procurement of types of property and services necessary to meet the requirements of the agency concerned. . (b) All bids shall be publicly opened at the time and place stated in the advertisement. Award shall be made with reasonable promptness by written notice to that responsible bidder whose bid, conforming to the invitation for bids, will be most advantageous to the Government, price and other factors considered: Provided, That all bids may be rejected when the agency head determines that it is in the public interest so to do.” Accord, 10 U.S.C. § 2305(c), applicable to military procurement. It is noteworthy that 41 U.S.C. § 253(b) permits the rejection of all bids in the public interest, and permits the acceptance of any bid conforming to the invitation to bids found to be most advantageous to the Government, but does not permit the acceptance of a bid not conforming to the invitation to bids. This is consistent with the announced policy in 41 U.S.C. § 253(a) of drawing specifications and invitations which shall permit full and free competition. Patently the statute protects not only the Government’s interest in securing advantageous contracts, but also the interests of those responding to the Government’s invitation to do business with it. Merriam, as a bidder, is within the zone of interest protected by the applicable procurement statute. See Shannon v. HUD, 436 F.2d 809 (3d Cir. 1970); Superior Oil Co. v. Udall, 133 U.S.App.D.C. 198, 409 F.2d 1115 (D.C. Cir. 1969). Any doubt that Congress intended that bidders be included within the zone of interest of the procurement statutes may be resolved, we think, by the interpretation of these statutes made by the General Accounting Office. That office is the agent of Congress in policing governmental expenditures. It has adopted regulations which expressly recognize the standing of unsuccessful bidders to challenge an award. 4 C.F.R. §§ 20.1-20.12. Indeed, the very solicitation here in issue was the subject of a proceeding in the General Accounting Office. No statute has made the GAO remedy exclusive, or its determination final. Cf. 5 U.S.C. §§ 551 et seq. It would be anomalous indeed if the courts declined to recognize the same zone of interest recognized by the General Accounting Office, the congressional agent. Whatever justification there may be for imposing, in addition to the case or controversy requirements of Article III, a zone of interest requirement for standing to seek judicial review of agency action, must be found in some notion of separation of powers. When the congressional agent interprets the governing procurement statutes as permitting review of executive agency action the separation of powers justification does not apply. There is, of course, the issue of harmful injunctive interference with executive branch decisions. But that problem is not one of standing, but of balancing the equities. See Page Communications Engineers, Inc. v. Resor, No. 24,784 (D.C. Cir., Dec. 4, 1970). There is, too, the issue of appropriate standards for judicial review of government contracting decisions. But again, that problem is not one of standing, but of developing standards of review for the varying factual situations likely to be presented. See A. G. Schoonmaker Co. v. Resor, 144 U.S.App.D.C. 250, 445 F.2d 726 (1971); Note, Judicial Review and Remedies for the Unsuccessful Bidder on Federal Government Contracts, 47 N.Y.U.L.Rev. 496 (1972). On the record before us neither issue is presented. One other point should be mentioned. Merriam alleged injury not only to a prospective but to a present advantageous relationship with the Government. Some cases have recognized that such an existing relationship is sufficient to supply the missing “legal right” element thought to be necessary, in addition to injury in fact, before an unsuccessful bidder’s standing would be recognized. See Gonzalez v. Freeman, 118 U.S.App.D.C. 180, 334 F.2d 570 (1964); Copper Plumbing & Heating Co. v. Campbell, 110 U.S.App.D.C. 177, 290 F. 2d 368 (1961). On this basis, too, Merriam may be considered to have met any dual test for standing which may be applicable. We hold, then, that the district court erred in dismissing Merriam’s claim for lack of standing. The Merits of the Claim On this appeal the Government briefed only mootness and standing. At oral argument, however, government counsel urged that the district court judgment should be affirmed because it was in any event entitled to summary judgment. This contention was based upon the assertion that neither the Independent Offices Appropriations Act, 1971 nor the Public Buildings Amendments of 1972 applied to the disputed lease. We have referred above to the legislative background of both statutes. The Government’s point with respect to the Independent Offices Appropriations Act is that since the lease with Gateway has not yet been executed and that statute has expired, execution of the lease ■now could not be a violation. Its point with respect to the Public Buildings Amendments of 1972 is that that statute was not intended to have retroactive application, either to leases already signed, or to agreements to make leases entered into prior to its effective date. This sophisticated analysis, whereby the Gateway lease would simply slip through the cracks between the two statutes, misses the thrust of Merriam’s complaint. When GSA prepared its solicitation for bids it said that the Independent Offices Appropriations Act applied, and that before approval of a lease for a new building could be made without congressional approval the offeror must meet five specified criteria. The award to Gateway is objected to not only because the lease was not submitted to Congress for approval, but also because the award without such approval is to a bidder who did not meet the advertised specifications. There is, as well, his contention that the award was fraudulent. The expiration of the Independent Offices Appropriations Act simply cannot cure the agency’s disregard of its own advertised specifications, or dispose of the fraud allegation. Thus, in rejecting the Government’s contention that it is entitled to summary judgment we need not pass upon its sophisticated but dubious interpretation of the two statutes. Finally, the Government urges that the proceeding before the General Accounting Office forecloses relief. As we pointed out above, that office ruled that Gateway did not meet the advertised specifications, but said it would not apply its ruling to existing leases. All that was before the district court, when its opinion was prepared was the text of the March 17, 1972 ruling by the General Accounting Office. There is no way of telling, for example, whether the General Accounting Office was aware that the Government had agreed, in this case, that it would not execute the Gateway lease until, construction was completed, thereby avoiding a decision on Merriam’s preliminary injunction application. Certainly the present record is-not ripe for summary judgment by an appellate court as to the propriety of the General Accounting Office ruling in such circumstances. Moreover, it is the action of GSA of which Merriam seeks judicial review. In this recently developing area of law it is not yet clear what precise role the General Accounting Office will be held to play. See Wheelabrator Corp. v. Chafee, supra, 455 F.2d at 1313-1317. Possibly it will ultimately be found appropriate to impose on top of the procurement agency’s procedures a rule requiring exhaustion of administrative remedies available in the General Accounting Office. Such a rule would postpone final judicial review until that agency acted on a bid protest, but might be coupled with the recognition that a federal court could preserve the status quo by a preliminary injunction in an appropriate case in the interim. Cf. 29 U.S.C. § 160(e). But such issues cannot be decided in a vacuum. The district court’s decision dismissing for lack of standing left such a vacuum. Our holding is limited to these propositions. (1) The case is not moot. (2) The plaintiff has standing to sue. (3) We cannot on the present record grant summary judgment to the Government. The judgment of the district court will be reversed and the cause remanded for further proceedings. Before SEITZ, Chief Judge, VAN DUSEN, ALDISERT, ADAMS, GIBBONS, ROSENN and HUNTER, Circuit Judges. OPINION ON PETITION FOR REHEARING PER CURIAM: The appellees in their petition for rehearing assert that the award of a contract to Gateway Center Corporation (Gateway) was a negotiated contract, and that statutory provisions relating to advertising for bids are irrelevant to such contracts. Throughout this case, until the petition for rehearing, the parties, the district court, and this court have treated the issues on the assumption that the plaintiff-appellant was a bidder who responded unsuccessfully to an advertisement for bids. The record establishes that there was an advertisement soliciting bids, and the defendants' moving papers refer repeatedly to acceptance of Gateway’s bid. The General Accounting Office treated the dispute as one involving acceptance of a bid solicited by advertising. The procurement in question does not appear to fall within any exception to the general rule that “[a] 11 purchases and contracts for property and services shall be made by advertising. . . .”41 U.S.C. § 252 (c). The Armed Services Procurement Act, 10 U.S.C. § 2302(2), defines negotiate to mean a contract without formal advertising. The Federal Property and Administrative Services Act of 1949, 41 U.S.C. §§ 251-60, does not contain a definitions section, but 41 U.S.C. § 254(c) implies that negotiated contracts are those accomplished without advertising. Our holding is limited to a reversal of a grant of summary judgment, however, and does not foreclose the district court from considering a different theory of defense to the action on a different record if it deems that course to be proper. As was suggested in note 7 to the panel opinion, the district court must also consider whether Merriam may have standing even aside from the Federal Property and Administrative Services Act of 1949. The petition for rehearing will be denied. ADAMS, Circuit Judge (dissenting sur the denial of the petition for rehearing en banc): In my view, this case raises two distinct legal problems: (1) whether the plaintiff has standing in the Article III sense; and (2) whether he has a substantive legal claim cognizable in a federal court. By combining the discussion of these two questions under the general heading “standing,” the panel’s opinion may well have obscured the significance of the second issue. Under the title “standing,” the panel first concludes that the plaintiff has suffered injury in fact. The panel then proceeds, under the same heading, to consider whether the plaintiff is protected by (falls within the “zone of interest” of) the statute in question. Noting that the statute “does not permit the acceptance of a bid not conforming to the invitation to bids,” the opinion concludes regarding the “zone of interest” issue: “Patently the statute protects not only the Government’s interest in securing advantageous contracts, but also the interests of those responding to the Government’s invitation to do business with it. Merriam, as a bidder, is within the zone of interest protected by the applicable procurement statute.” (footnotes and citations omitted). I am not convinced that the plaintiff has satisfactorily demonstrated that he or any interest or legal right of his was intended by Congress to be protected by the statute in question. At the same time, a careful review of the relevant case law has persuaded me that the panel’s analysis of the important issues presented in this appeal may lead to uncertainty in an area of the law already too well known for its lack of guidance. For these reasons, and because of the effect the improper resolution of this second issue may be thought to have upon the role of federal courts in our system of government, I respectfully dissent from the Court’s decision not to reconsider en banc this important aspect of the present appeal. In view of the vast literature on the standing doctrine, it would serve little purpose to repeat what others have already said, except to point out that the standing inquiry focuses upon whether the particular plaintiff “has a sufficient personal interest in getting the relief he seeks. . . . ” Putting that question to one side, I am troubled by the panel’s approach to determining whether Congress has revealed any interest in protecting a party such as this plaintiff. When Congress has not explicitly provided in a given legislative enactment for judicial review of agency action either generally or at the behest of a particular class of litigants (i. e., private individuals), the question may arise whether one seeking to challenge the validity of an agency’s action may do so in the courts despite the legislative silence. Although this problem may not logically appear to raise a typical standing issue, courts have often sought to resolve it, under the standing rubric, by inquiring whether the plaintiff has a “legally protected interest” or “legal right.” For example, in Tennessee Electric Power Company v. TVA nineteen power companies attempted to attack the constitutional validity of the Tennessee Valley Authority. Despite the financial harm the plaintiffs had suffered, the Supreme Court concluded that they had no right derived from either common law or statute to be free from competition. To bring such a suit, the “right invaded [must be] a legal right, — one of property, one arising out of contract, one protected against tortious invasion, or one founded on a statute which confers a privilege.” As Justice Frankfurter later explained the doctrine in a different case: “A litigant ordinarily has standing to challenge governmental action of a sort that, if taken by a private person, would create a right of action cognizable by the courts ... Or standing may be based on an interest created by the Constitution or a statute. . . . But if no comparable common law right exists and no such constitutional or statutory interest has been created, relief is not available judicially.” Within two years of the Termes see Electric Power decision, the Supreme Court journeyed into the area of determining what a plaintiff must show in order to satisfy the “legally protected interest” test. In FCC v. Sanders Brothers Radio Station, an owner of a radio station sought judicial review of the grant of an operating license to an applicant. The Court held that the section of the Federal Communications Act permitting an appeal by any “person aggrieved or whose interests are adversely affected by any decision of the Commission” provided standing for the plaintiff to challenge the grant of the license to its competitor. The Supreme Court did so, however, only (a) after examining the relevant legislative history and (b) in view of the express provision in the statute for judicial review. In 1968, the Supreme Court examined standing to challenge agency action in Hardin v. Kentucky Utilities Company. In that case, a private power company sought review of the TVA’s expansion of services into the complainant’s market area by alleging that such expansion violated a statute. Although the Tennessee Valley Authority Act contains no express provision for judicial review, the Supreme Court inspected the legislative history in order to determine whether the plaintiff could rely upon implied protection from the regulatory statute. Inferring from the legislative history that the “primary purpose” of the statute was to benefit the plaintiff’s interest, the Court held that such implicit congressional intent justified judicial review. The Supreme Court has even more recently probed the requisites for judicial review of agency action. In Association of Data Processing Service Organizations v. Camp, the Comptroller of the Currency issued a ruling permitting national banks to provide data-processing service to their customers. An association of companies offering computer services throughout the country filed suit challenging the ruling on the ground that the National Banking Act gives national banks only such “incidental powers as shall be necessary to carry on the business of banking. . . . ” Examining the standing issue in two parts, the Supreme Court first concluded that the petitioners had suffered “injury in fact.” In the second part of its standing analysis, the Court proceeded to determine “whether the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute ... in question.” Quoting from a First Circuit opinion that discussed the legislative history and purpose of § 4 of the Bank Service Corporation Act of 1962, prohibiting bank service corporations from engaging “in any activity other than the performance of bank services for banks,” the Supreme Court held that “§ 4 arguably brings a competitor within the zone of interests protected by it.” The critical issue here is essentially the same as the question presented in the cases discussed above: whether Congress, in enacting the statute or statutes involved, intended them to protect the interest asserted by the particular litigant in each case. Placed in the factual setting of this appeal, that question becomes whether Congress intended to provide one seeking a government contract with judicial recourse when an alleged violation of that asserted interest by a federal administrative agency is set forth in a claim for judicial relief. In grappling with this problem, it is not sufficient to hold merely that the plaintiff has standing to sue, since that holding may, in effect, say only that he has been injured in fact by the agency action of which he complains. Rather, the Court must at some point, if the result reached is to conform to the tests fashioned by the Supreme Court, also hold that the plaintiff is protected by the statute in question, as illuminated by its legislative history, and that the statute permits him to seek judicial relief. Put simply, it is not enough for a plaintiff to come to a federal court and claim that he has been injured by action taken by a federal agency. Instead, he must also demonstrate that he has a cause of action to redress such injury — that he has a right, enforceable in the federal courts, not to be harmed by the agency’s allegedly unlawful action. As quoted above, supra, the panel states, and indeed holds, that Congress did intend for a private party, allegedly aggrieved by the action of the GSA, to be heard by a federal district court. What concerns me about such conclusion is that it is little more than just that — a conclusion not shown to be based, at least so far as the opinion reveals, upon the underlying purposes or legislative history of the statute. In order to draw the inference that Congress intended for this kind of case to be heard by a federal court, I believe something more must be developed than the mere fact that the statute prohibits what the agency has allegedly done. What the panel has said still does not adequately answer the question whether Congress intended to protect those, who like the plaintiff, are disappointed in not receiving a government contract, and to provide them with a private right of action in the district court. •To shirk the process of ascertaining legislative intent when a statute is silent, or at most ambiguous, under the empire of a belief that the result sought is beneficent, may prove unfruitful in the fullness of time. In addition, I believe it appropriate to note that footnote 7 of the panel’s opinion creates, at least for me, considerable conceptual misgivings. As developed above, in my view the plaintiff can properly sue, in the circumstances of this case, only if he can show that he has a cause of action under the statute in question. Suggesting that the Court might hold that, even assuming he is not within the 2;one of interest Congress intended to protect, he will be permitted to sue in any event seems to indicate that the Court is no longer following the standards laid down by the Supreme Court. This step — constituting a considerable modification of the standards established by the Supreme Court — should be taken, if at all, only by the Court en banc. While I agree that “[i]n Hohfeldian sense a legal right can have its origin elsewhere than in a statute,” I pereeive nothing in this case from which such a right might arise. True, as that footnote indicates, the government, if it receives a bid, does have the power to bind the bidder to a contract. Under Professor Hohfeld’s analysis, however, a duty is correlative to a right not to a power. Imposing upon the government a duty of fair dealing must, then, have been suggested by the panel as a matter of policy. While such a policy may well be wise, it is not, in my view, one which a federal court should impose sua sponte, at least without guidance from Congress, and certainly not one for us to erect simply in order to provide disappointed contractors with a federal cause of action. During the last few years the federal courts have experienced an extraordinary increase in volume far more than what ought to have been expected from population growth alone. As Chief Judge Friendly has recently indicated in his excellent treatise on federal jurisdiction, it may be that, if federal courts are to handle best the tasks most appropriately given them, a solution must be sought not by creating more judge-ships, but by slowing up judicial intake and certainly not by staking out additional areas of jurisdiction without very careful consideration. Apropos the present ease, Chief Judge Friendly has said: “One need only consider the explosion of litigation under the SEC’s Rule 10b-5, the proxy rules, and the new sections dealing with tender offers ... to realize the impact that any such regulatory law can have once a right of private action is implied.” Jurisdictional questions, like the one posed in this case, treated in isolation from the judicial system to which they relate, become, perhaps, sterile formalisms. But such underlying questions are matters of substance in the working of our federal system and in the effective conduct of the business of the courts. I am apprehensive that the effect of the panel’s opinion may well be to deluge the federal courts with a host of grievances by disappointed contractors and perhaps by myriad other litigants allegedly injured by agency action they claim is in violation of some statute or rule. The Court should not lightly ascribe to Congress the intention to open new vistas of judicial review. And this, in my judgment, is precisely what the Court has done in this case. For the above reasons, I dissent from the Court’s decision not to reconsider this case en banc. . Independent Offices Appropriations Act, 1963, 1964, 1965, 1966, 1967, 1988, 1969, 1970, 1971; Pub.L. No. 87-741, 76 Stat. 716; Pub.L. No. 88-215, 77 Stat. 425; Pub.L. No. 88-507, 78 Stat. 640; Pub.L. No. 89-128, 79 Stat. 520; Pub.L. No. 89-555, 80 Stat. 663; Pub.L. No. 90-121, 81 Stat. 341; Pub.L. No. 90-550, 82 Stat. 937; Pub.L. No. 91-126, 83 Stat. 221; Pub.L. No. 91-556, 84 Stat. 1442. . Explaining the purpose of the lease construction provision in the Independent Offices Appropriations Act, 1963, Pub.L. No. 87-741, 76 Stat. 716, where it first appeared, the House Appropriations Committee said: “The General Services Administration wants to build several new buildings in the District of Columbia under a lease construction program to provide 1 million square feet of additional space. The entire space in each building is to be rented by the Government. With this procedure the Committee disagrees since they are completely financed new buildings under lease construction contracts. The Committee believes that the Government should own the buildings instead of giving somebody a ten to fifteen year payout. The concern of the Committee is that lease construction is clearly the most expensive method of providing Government space. Under this method the Government . . . never obtains title to the property. A limitation on use of funds for lease construction projects costing over $200,000 lias therefore been included in the bill. . . .” H.R.Rep. No. 2050, 87th Cong., 2d Sess. 13 (1962). . The General Accounting Office regulations respecting bid protests did not at the time contain time limitations for the filing of protests, the submission of comments by the agency involved, or the ruling by the Comptroller General. These defects were remedied by new regulations issued at 36 Fed.Reg. 24791 (Dec. 23, 1971) effective January 23, 1972. See 4 C.F.R. §§ 20.1-20.12. The new regulations also provide: “§ 20.4. Withholding of award. When notice is given the agency that a protest has been filed with the General Accounting Office, award shall not be made prior to a ruling on the protest by the Comptroller General, unless there has first been furnished to the General Accounting Office a written finding by the head of the agency, his deputy, or an Assistant Secretary (or equivalent), specifying the factors which will not permit a delay in the award until issuance of a ruling by the Comptroller General.” . The district court does mention that in the event of a decision requiring new bidding, if Gateway is permitted to rebid, the Government’s strong preference for Gateway’s site over that of Merriam would dictate its choice. Merriam, on the other hand, contends that Gateway should be disqualified from bidding because of its alleged fraud. . There is nothing in the legislative history of this provision which indicates- that “property” does not include rental space. Originally the statute said “supplies”, but this was changed by the 1952 amendments to the Federal Property and Administrative Services Act of 1949. Act of July 12, 1952, ch. 703, § 1(m), 66 Stat. 594; Sen. Rep. No. 2075, 1952 U.S.Code Cong. & Ad.News, 82d Cong. 2d Sess. 2121. . But see Lind v. Staats, 289 F.Supp. 182 (N.D.Cal.1968). . Even assuming that Merriam did not fall within a zone of interest protected by 41 U.S.C. § 253, we would be inclined to hold that his standing as a litigant should nevertheless be recognized. In a Hohfeldian sense a legal right can have its origin elsewhere than in a statute. When the Government solicits proposals to which bidders in good faith take the trouble to respond, the actual relationship between solicitor and bidder is not the same as before. The bidder has placed in the hands of the representatives of the Government the power to bind him to a contract. It is not too much to find a correlative obligation of fair dealing within the terms of the solicitation; an obligation sufficient to confer standing to enforce that obligation. . The motion for summary judgment was argued on April 21, 1972. On April 25, 1972, after the argument but before the decision, the parties filed a stipulation making the March 17, 1972 ruling a part of the record. The district court opinion was filed on June 26, 1972. On that date a certificate of GAO was filed, to which is attached certain documents on file in that office in the Merriam bid protest procedure. The circumstances of the filing do not appear of record. The certificate does not establish that the documents attached comprise the entire GAO record. The district court opinion makes reference only to documents included in the record up to the date of the stipulation. . In the cases permitting suit, exhaustion of such administrative remedies has been disposed of by considering them inadequate or by deeming them essentially exhausted already. See 3 Gov’t Cont.Rep. ¶ 24,095 at 12,044-45 (1972). . Slip op. at 1239-1241. . Id. at 1241. . This dissenting opinion does not deal with the important issue whether the GSA employed a procedure involving bidding as distinguished from negotiation. . See, e. g., Scott, Standing in the Supreme Court—A Functional Analysis, 86 Harv.L.Rev. 645 (1973); Jaffe, Standing Again, 84 Harv.L.Rev. 633 (1971); Davis, The Liberalized Law of Standing, 37 U.Chi.L.Rev. 450 (1970); Davis, Standing: Taxpayers and Others, 35 U.Chi.L.Rev. 601 (1968); Jaffe, The Citizen as Litigant in Public Actions; The Non-Hohfeldian or Ideological Plaintiff, 116 U.Pa.L.Rev. 1033 (1968). . H. Hart & H. Weehsler, The Federal Courts and The Federal System 174 (1953); see Flast v. Cohen, 392 U.S. 83, 99-100, 88 S.Ct. 1942, 1952, 20 L.Ed.2d 947 (1968): “The question is whether the person whose standing is challenged is a proper party to request an adjudication of a particular issue and not whether the issue itself is justiciable.” . I am not inclined to dissent from the Court’s decision not to reconsider whether the plaintiff has standing in an Article III sense. In addition, because I dissent here only from the decision of this Court denying the petition for rehearing en banc, I express at this time no views upon the merits of this case as a whole or upon the panel’s ultimate resolution of the issue which this dissenting opinion addresses. This dissenting opinion deals only with the approach to the overall “standing question” which the panel has taken. . See Jaffe, Standing Again, 84 Harv.L. Rev. 633 (1971). Thus, a distinction must be made between those cases in which judicial review is sought of an act of a governmental agency which Congress has expressly made subject to review in the courts (statutory review) and those cases in which review is sought by means of a general jurisdictional grant (non-statutory review). See Scott, Standing in the Supreme Court — A Functional Analysis, 86 Harv.L.Rev. 645, 647-648 (1973); compare, e. g., FCC v. Sanders Bros. Radio Station, 309 U.S. 470, 60 S.Ct. 693, 84 L.Ed. 869 (1940) (statutory review) with, e. g., Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970) (non-statutory review). For examples of statutes expressly subjecting agency action to judicial review, see e. g., Federal Trade Commission Act, 15 U.S.C. § 45(c) (1970); Federal Power Act, 16 U.S.C. § 8251(b) (1970); Federal Aviation Act, 49 U.S.C. § 1486(a) (1970) ; Interstate Commerce Act, 49 U.S.C. § 1 (1970); National Labor Relations Act, 29 U.S.C. § 160(f) (1970); Securities Act of 1933, 15 U.S.C. § 77i(a) (1970); Investment Company Act of 1940, 15 U.S.C. § 80a-42(a) (1970); Federal Communications Act, 47 U.S.C. § 402(b) (6) (1970). The statutory and non-statutory review situations must be separately analyzed because in the former Congress has expressed a policy that at least under some circumstances the agency’s action shall be subject to judicial review, while in the latter a court does not have even that much guidance. In the present case, no relevant statute expressly provides for judicial review, and thus the plaintiff has sued under 28 U.S.C. § 1331 (federal question jurisdiction). . Courts frequently treat a host of different kinds of problems as raising standing issues. Familiar are cases involving (1) whether the plaintiff has in fact suffered injury, see Sierra Club v. Morton, 405 U.S. 727, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972); Flast v. Cohen, 392 U.S. 83, 94-101, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968); (2) whether a plaintiff may properly sue on the basis of another person’s rights, see NAACP v. Alabama, 357 U.S. 449, 458, 78 S.Ct. 1163, 2 L.Ed. 2d 1488 (1958); Barrows v. Jackson, 346 U.S. 249, 255-259, 73 S.Ct. 1031, 97 L.Ed. 1586 (1953). The present case, on the other hand, concerns, apart from the Article III “injury in fact” issue, whether the plaintiff can establish the existence of a legal right which the GSA has allegedly violated. If he cannot so demonstrate, dismissal for failure to state a claim or cause of action is a more appropriate judicial response, in my view, than dismissal for lack of standing. The Supreme Court, however, has treated the problem as one of “standing,” and, therefore, throughout this opinion, I shall analyze it in the same terms. See, e. g., Investment Co. Institute v. Camp, 401 U.S. 617, 91 S.Ct. 1091, 28 L.Ed. 367 (1971); Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970); Perkins v. Lukens Steel, 310 U.S. 113, 60 S.Ct. 869, 84 L.Ed. 1108 (1940). . See Perkins v. Lukens Steel, 310 U.S. 113, 125, 60 S.Ct. 869, 84 L.Ed. 1108 (1940); Alabama Power Co. v. Ickes, 302 U.S. 464, 58 S.Ct. 300, 82 L.Ed. 374 (1938) . . 306 U.S. 118, 59 S.Ct. 366, 83 L.Ed. 543 (1939) . . Id. at 137-138, 59 S.Ct. at 369. . Joint Anti-Facist Refugee Comm. v. McGrath, 341 U.S. 123, 152-153, 71 S.Ct. 624, 638, 95 L.Ed. 817 (Frankfurter, J., concurring). . 309 U.S. 470, 60 S.Ct. 693, 84 L.Ed. 869 (1940). . 47 U.S.C. § 402(b) (1964). It should be noted that in view of this provision Sanders should be analyzed as a statutory review case. See note 6, supra. . 309 U.S. at 476-477, 60 S.Ct. 693. . 390 U.S. 1, 88 S.Ct. 651, 19 L.Ed.2d 787 (1968). . Tennessee Valley Authority Act of 1933 § 15d(a), 16 U.S.C. § 831n-4(a) (1964); see U.S. at 3 n. 1. . 390 U.S. at 6-7, 88 S.Ct. 651. . 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed. 2d 184 (1970). For additional recent cases on the subject, see Investment Co. Institute v. Camp, 401 U.S. 617, 91 S.Ct. 1091, 28 L.Ed.2d 367 (1971); Arnold Tours, Inc. v. Camp, 400 U.S. 45, 91 S.Ct. 158, 27 L.Ed.2d 179 (1970) (per curiam); Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970); Flast v. Cohen, 392 U.S. 83, 88 S.Ct. 1942, 20 L. Ed.2d 947 (1968). . 12 U.S.C. § 24 (seventh) (1970). . 397 U.S. at 152, 90 S.Ct. 827. . Id. at 153, 90 S.Ct. at 830. . Id. at 155, 90 S.Ct. 827, quoting Arnold Tours, Inc. v. Camp, 408 F.2d 1147, 1153 (1st Cir. 1969). . 12 U.S.C. § 1864 (1970). . 397 U.S. at 156, 90 S.Ct. at 831. The Court went on to discuss “whether judicial review of the Comptroller’s action has been precluded,” id. and held that it had not. Id. at 157, 90 S.Ct. 827. Justice Brennan disagreed with the Data Processing majority’s approach to the standing question, arguing that a plaintiff has standing if he has suffered “injury in fact,” the Article III test. See Barlow v. Collins, 397 U.S. 159, 168, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970) (Brennan, J., concurring and dissenting). He would treat the reviewability of agency action question as a totally separate inquiry. Id. at 173, 90 S.Ct. 832. . Compare Investment Co. Institute v. Camp, 401 U.S. 617, 640, 91 S.Ct. 1091, 28 L.Ed.2d 367 (Harlan, J., dissenting); Barlow v. Collins, 397 U.S. 159, 174-175, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970) (Brennan, J., concurring and dissenting). . Compare Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970) (two-pronged standing test) with Barlow v. Collins, 397 U.S. 159, 170-173, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970) (Brennan, J., concurring and dissenting) (Article III standing test) and Flast v. Cohen, 392 U.S. 83, 99-100, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968). . Although the Supreme Court may search for only slight evidence that Congress intended to protect a plaintiff’s interests, it at least looks for some indicia. See Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 155, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970); Hardin v. Kentucky Utilities Co., 390 U.S. 1, 88 S.Ct. 651, 19 L.Ed.2d 787 (1968). The Court of Appeals for the District of Columbia Circuit, which permits judicial review for those seeking to do business with the government, has done so only after examining the legislative history and purpose of the relevant statutes involved in each case. See Constructores Civiles de Centroamerica, S. A. v. Hannah, 148 U.S.App.D.C. 159, 459 E.2d 1183 (1972); Ballerina Pen Co. v. Kunzig, 140 U.S.App.D.C. 98, 433 F.2d 1204 (1970), cert. denied, 401 U.S. 950, 91 S.Ct. 1186, 28 L.Ed.2d 234 (1971); Scanwell Laboratories v. Shaffer, 137 U.S.App.D.C. 371, 424 F.2d 859 (1970). . Id.; see also Barlow v. Collins, 397 U.S. 159, 174-175, 90 S.Ct. 832, 25 L. Ed.2d 192 (Brennan, X, concurring and dissenting). . Panel opinion, n. 7. It should be noted that others, discussing the question whether to have standing a plaintiff must have Hohfeldian status, have done so only in the context of examining the minimum Article III standards. See Jaffe, The Citizen as Litigant in Public Actions: The Non-Hohfeldian or Ideological Plaintiff, 116 U.Pa.L.Rev. 1033 (1968). In a similar vein, Professor Scott has recently urged courts, while expanding “access standing,” not to over-liberalize the standards for “decision standing.” Scott, Standing in the Supreme Court — A Functional Analysis, 86 Harv.L.Rev. 645 (1973). . H. Friendly, Federal Jurisdiction: A General View 16 (Columbia Univ. Press 1973). . Id. . Id. at 110-111. . After a most exhaustive and scholarly functional treatment of the standing doctrine, Professor Scott concludes that: “. . .a predictable reaction [to the wholesale opening of federal court doors] will be a much stronger tendency for Congress to enact a variety of preelusion provisions. The ultimate result of this kind of process is to push us to more all-or-nothing choices when it comes to judicial review, and that seems inherently undesirable.' . . But it would be regrettable if the erosion of access standing were thought to carry with it an automatic expansion of the policymaking role of the courts, for in that event the doors of the courts might come to be closed more often, not by judicial abdication, but by legislative fiat.” Scott, Standing in the Supreme Court — A Functional Analysis, 86 Harv.L.Rev. 645, 689-690 (1973).

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

UNITED STATES of America, Plaintiff-Appellee, v. Robert Edward JOHNSON, Defendant-Appellant. No. 30656. United States Court of Appeals, Fifth Circuit. March 20, 1973. Fred L. Banks, Jr., Jackson, Miss., Howard Moore, Jr., Peter E. Rindskopf, Atlanta, Ga., for defendant-appellant. Robert E. Hauberg, U. S. Atty., E. Donald Strange, Daniel E. Lynn, Joseph E. Brown, Jr., Asst. U. S. Attys., Jackson, Miss., for plaintiff-appellee. Before JOHN R. BROWN, Chief Judge, GEWIN and MORGAN, Circuit Judges. JOHN R. BROWN, Chief Judge: The only thing unusual about this direct criminal appeal from conviction for failing to obey a lawful order of a Selective Service Board (a violation of 50 U.S.C.A. App. § 462), is that the Defendant here overcame the well-established presumption of regularity and validity normally attaching to official acts of Selective Service Boards and created a jury issue where usually there is none — and in fact, there really was none in this case (see note 21, infra). Since the Government was not. relying exclusively on the presumption and offered other probative evidence .that the Defendant had not been ordered to alternative service in lieu of induction into the Armed Services out of sequence, and because we reject other arguments less strenuously urged by the Defendant, we affirm the judgment of conviction based on a jury finding of guilt, but remand for resentencing. No Show At Jackson Robert Edward Johnson was classified 1-0 (conscientious objector not available for military duty) by Selective Service Local Board No. 23 of Grenada, Mississippi. Pursuant to 50 U.S.C.A. App. § 456(j), and as an alternative to military service, he was ordered by his Board to work at the Mississippi State Hospital in Whitfield, Mississippi. His work at Mississippi State Hospital proved unsatisfactory and, accordingly, he was dismissed. Subsequently he was reassigned to Rush Memorial Hospital in Meridian, Mississippi, and when employment there was terminated for poor performance, the State Director of Selective Service ordered him transferred to the University of Mississippi Medical Center in Jackson, Mississippi. On January 31, 1969, after he had served some 16 months of his two-year obligation, Johnson failed to report to the University of Mississippi Medical Center as ordered by the State Director. Thereafter he was prosecuted for a violation of 50 U.S.C.A. App. § 462, by an indictment charging that he did “knowingly, wilfully, unlawfully and feloniously fail, neglect and refuse to” obey the orders of his local Selective Service Board. From a jury verdict of guilty and a five-year sentence, this appeal has been taken. The Indictment Sufficeth Johnson first claims that the indictment was fatally defective for two reasons. Specificity First, Johnson protests that the indictment did not measure up to requisite standards of specificity. Relying on Lowenburg v. United States, 10 Cir., 1946, 156 F.2d 22 and United States v. Farinas, S.D.N.Y., 1969, 299 F.Supp. 852, he argues that the indictment was insufficient because it did not allege specific duties he failed to perform. Assuming, without deciding, that we would follow these decisions of sister Circuits, these cases simply do not touch this record. In Lowenburg, the indictment alleged no specific order which had been disobeyed, but rather, only the general refusal of Defendant “to work and perform duties.” Actually, Lowenburg was tried specifically for refusing to burn stumps and remove dirt therefrom. The Court held that the indictment was wholly insufficient to apprise Defendant that that specific act was to be the subject of prosecution. Likewise in Farinas, the indictment alleged that Defendant “did fail, neglect and refuse to obey the orders of representatives of the Armed Forces of the United States * * Again, the specific order disobeyed was not set out and the indictment was held fatally deficient for that reason. Unlike those cases, the indictment here specifies the particular criminal act for which Defendant was to be tried. The indictment alleged that “on or about January 31, 1969” Johnson did “knowingly, wilfully, unlawfully and feloniously fail, neglect, and refuse to report for and remain in employment with the University of Mississippi Medical Center at Jackson, Mississippi, for twenty-four consecutive months or until such time as released or transferred by proper authority as ordered * * (Emphasis supplied). Clearly that indictment fully informed the Defendant of the specific act for which criminal liability was sought to be imposed — complete with time, place and circumstance. If a precedent need be marshaled, United States v. Wagoner, 7 Cir., 1944, 143 F.2d 1, cert. denied, 323 U.S. 730, 65 S.Ct. 67, 89 L.Ed. 586 is more than enough. In Wagoner the indictment alleged that the Defendant “unlawfully, knowingly, wilfully, and feloniously failed and refused to present himself for and submit to registration * * This indictment was held to state a “clear, definite, and general offense,” and to be legally sufficient to withstand a due process challenge. If the word “registration” in that indictment is changed to the phrase “civilian employment at Mississippi State Hospital,” the indictment here becomes virtually identical. Punishable Offense Johnson’s second attack on the indictment is that no offense under the statute was made out since the order violated was not that of the local Selective Service Board, as alleged, but rather an order of the State Director of Selective Service. That exact contention was before this Court and decided in Davis v. United States, 5 Cir., 1968, 400 F.2d 577, cert. denied, 394 U.S. 908, 89 S.Ct. 1019, 22 L.Ed.2d 219. Although Johnson strenuously urges that the Davis ease is not applicable here, we disagree. The Order To Report For Civilian Work issued by Local Board No. 23 to Johnson specifically directed “you are ordered to report for employment pursuant to the instructions of the local board, to remain in employment for twenty-four consecutive months or until such time as you are released or transferred by proper authority.” (Emphasis supplied.) As we pointed out Davis, the State Director had authority to transfer Appellant to other civilian work after his discharge from the Mississippi State Hospital under Selective Service System Local Board Memorandum No. 64 issued March !, 1962, Section 8(b). Thus, on the Davis approach, the failure to obey a lawful command of the State Director — a command which the Director was authorized to issue — was simultaneously a failure to obey the order'of the draft board, as charged in the indictment. This indictment specifying precise dates and identifying particular places (University of Mississippi Medical Center) satisfied the underlying requirements that it “inform the accused of the nature of the charges against him, with such specificity and particularity that the accused is enabled to undertake and prepare an adequate defense.” United States v. Levinson, 6 Cir., 1968, 405 F.2d 971, 977; United States v. Debrow, 1953, 346 U.S. 374, 74 S.Ct. 113, 98 L.Ed. 92; Hagner v. United States, 1932, 285 U.S. 427, 52 S.Ct. 417, 76 L.Ed. 861. And attributing the State Director’s order to the Board related to its legal effect and did not mislead the Defendant as to the charges he faced. Was Order Out of Order? Johnson next asserts that his conviction should be reversed because the Government did not prove that he was ordered to report for alternative service in the proper sequence. The issue considered here has never been before this Court in precisely the form presented in this particular appeal. We observe initially that this is a criminal prosecution. Johnson has been sentenced to five years in prison. It is an obvious rudiment of due process that in a criminal prosecution every essential element of the offense must be proved beyond a reasonable doubt. Implicit in the charge that Defendant failed to obey an order of the local draft board is the allegation that the underlying order was lawful. Johnson could not be punished for disobeying an unlawful order of the Board. Thus, since Johnson cannot be punished unless he failed to obey a lawful order of the Board, the lawfulness of the order is necessarily an element of the crime charged. The order to report for alternative service was not lawful if it was issued contrary to controlling rules and regulations governing the Selective Service System. One of these — a particularly important one — sets forth the order in which Selective Service registrants are to be inducted or ordered to alternative duty in lieu of military service. 32 C.F. R. § 1660.20(a) (b)(c)(d) and § 1631.7(a). Adherence to the proper order of call is of more than mere technical importance. Manifestly, it affects substantial rights of the registrants. United States v. Baker, 9 Cir., 1969, 416 F.2d 202, 204. Moreover, Congress, the President, and the American people have expressed clear intent that the draft, when utilized, be conducted with as much servitude to objectivity as is humanly possible. We deem it of particular significance, for example, that Congress affirmatively mandated and reiterated in each of the four paragraphs of 32 C.F.R. § 1660.20 that “such order [to alternative service] shall not be issued prior to the time that the registrant would have been ordered to report for induction if he had not been classified in Class I-O, unless he has volunteered for such work.” See note 8, supra. With possible consequences to those selected so awful and the opportunities for even good faith but inadvertent exercise of subjective choices undeniably present, it is certainly essential that objective standards spelled out in the law be scrupulously respected. The order of call — as it stood in 1967 — required that (i) delinquents (oldest first) be called to report first, (ii) volunteers (in the order in which they volunteered) be selected next, and (iii) unmarried nonvolunteers (ages 19 through 26) be called next “in the order of their dates of birth with the oldest being selected first.” We have to determine what has been shown with respect to this sequence in the present case. As a necessary general rule, the element of lawfulness of an order is established by a presumption that the local Board performed its duty in a regular and therefore legally valid manner. Greer v. United States, 5 Cir., 1967, 378 F.2d 931; Lowe v. United States, 5 Cir., 1968, 389 F.2d 51; Pique v. United States, 5 Cir., 1968, 389 F.2d 765; Campbell v. United States, 5 Cir., 1968, 396 F.2d 1. The presumption derives from the administrative necessity for such a rule. Quite obviously it would be completely unworkable to require the Government to present detailed affirmative proof in every case proving not only the technical validity of every act involved in or leading to the order in question, but the underlying validity of the structure of the local Board itself. The rule is born of necessity and a recognition of experience-proved assurance that the Board can be relied upon to discharge its duties with complete fairness and careful adherence to the regulations. Thus, in the normal case it is quite permissible to presume compliance with the predicating regulations and thereby establish that element of the offense charged. On the other hand, there is always the possibility that either by mistake or in very rare and isolated cases by capricious and arbitrary discrimination, the Board may undermine the validity of the order to service by a failure to comply with Selective Service law and regulations. In the usual case, absent a showing that either of these elements is likely present (mistake or design), the Government need not affirmatively demonstrate the lawfulness of the order to service — that element is established by the presumption. But where the registrant is able to show a substantial likelihood that the order to service was irregular, and thereby overcome the presumption, that element of the offense is in issue and the validity of the order must be established beyond a reasonable doubt. Adding Opportunity And Motive Recognizing that once the presumption is dissipated by probative evidence to the contrary, and that once such evidence had been tendered, the presumption standing alone would no longer be sufficient to convict, Johnson set out to demonstrate a substantial likelihood that his order to call was irregular. Specifically, the strategy was to show a substantial likelihood that the Board, motivated in part at least by a desire to terminate Johnson’s persistent civil rights activities in Grenada, had acted with undue haste to remove him from the community, ordering him to alternate service before another registrant who should have gone first. We can only conclude, from the jury’s pronouncement of guilty, after full and proper instruction on the issue of order of call that the strategy failed. Step One- — -The Board’s Awareness The first step in this approach was to demonstrate the Board’s keen awareness of and reaction to certain civil rights activities in which Johnson was involved. Johnson had been a civil rights activist in Grenada. As putative leader of the Black people there, his vigorous participation in the civil rights movement had been well-publicized. He had brought and successfully maintained a civil rights action against various Judges in Grenada which resulted in an injunction prohibiting theretofore common systematic exclusion of Blacks from petit and grand jury panels. In late January and early February 1967 Johnson had been involved in a controversial courtroom incident with manifest civil rights implications which was only recently finally resolved when the United States Supreme Court summarily reversed his resultant contempt conviction. And all of this was “town talk” and “in all of the papers.” In this context, certain documents in Johnson’s Selective Service file were presented to the jury. The first of these was a letter from the Executive Secretary of Local Board 23 to the State Director of Selective Service: “Colonel Weeks, this registrant is one of the leaders here at Granada who has been working as a civil rights worker all summer and has been out of one thing into another. You can see who receives copies of his letters * * *” (referring to various national civil rights leaders, including Dr. Martin Luther King, Jr.). The second item suggesting that the Board may have been desirous of removing Johnson from the local scene with the greatest dispatch was another letter from the Executive Secretary. In March of 1967, when the Selective Service was drafting no one younger than 19% years the Executive Secretary wrote the State Director for permission to order Johnson to service that next month — despite the fact that Johnson was then only 18% years old and Selective Service regulations then specifically prohibited taking anyone younger than 19. The Executive Secretary was also concerned that Johnson had not been reclassified from 1-0 into a draft-eligible class and stressed, in her letter, that Appellant had “NOT” been re-classified into I-A or I-A-O. Once Johnson had been ordered to alternative service and he had been securely removed from the Grenada civil rights struggle, the Executive Secretary expressed her relief in a letter to the State Director concluding that this is “another one behind us, I hope.” Step Two — The Older Registrant Having established by the probative evidence the possibility that the Board was overly anxious to remove Johnson from the local scene — and clearly this evidence only tentatively suggested this possibility and in no way conclusively demonstrated improper action of the Board' — the defense proceeded to solicit information about specific registrants. The highlight of the defense came when the Executive Secretary, during cross-examination, testified that there was at least one other registrant — a Mr. Dick-man — who was classified I-O by Local Board No. 23, was older than Johnson, had taken (and presumedly passed) his physical examination, and yet was passed over when Johnson was ordered to alternative service. The Dickman evidence is skeletal and inconclusive, but the crucial testimony was as follows: “Q. And he was older than the Defendant ? A. That’s right. Q. And under the regulations— A. He went for a physical examination. Q. .Under the regulations he should have been called ahead of the Defendant, isn’t that right? A. I would have to check records but he took his physical examination.” On the other hand, the Executive Secretary had repeatedly testified that Johnson was not taken out of sequence and that no other qualified registrant in the available pool had been passed over when Johnson was ordered to report for alternative service. “Q. As I recall my question was at the time this Defendant was sent his order to report for work on September 20th, 1967 was he call in due course along with other registrants in that age group ? ****** A. It was. (TR 48-49). ****** A. At that time we just take them in order as they come. His number, we do not pass over, or we do not skip over them. (TR 76). ****** Q. You would go through and select six men in class I-A and one person that was classified as I-O. A. Provided he fell in order. We did not reach and get him, he had to fall in sequence, he had to fall in order. Q. And you followed that procedure, notwithstanding the notice from the Selective Service System only asked for a I-A, is that right, is that right? A. That’s right. (TR 78). ###### A. No, we would not substitute, we went right down the line in order, he had to fall in sequence. We took the oldest man’s date of birth and when we came to him and he was a I-O, he was ordered to work in lieu of induction, but he was not pulled out of order. (TR 79). * * * * * * Q. Now its true isn’t it that the relationship of the Defendant’s civil rights activities passed to his selective service status is the question of whether or not he ought to be placed in classification of I-AO, so he could be inducted in the next call isn’t that right? A. If that was in sequence,’ if that was in sequence he would not have been called at all unless he was in sequence. (TR 96). * * * * * * Q. And your purpose here was to arrange, to organize the early induction of the registrant was it not? A. Oh no indeed, we did not arrange the early induction of the registrant. Q. But if he had been classify as I-AO— A. He would have been ordered just like any other registrant, in sequence. (TR 96). * * * * * * Q. But there were older registrant who had been found accepted? A. Not in class I-O. Q. What about in class I-AO or I-A ? A. I would have to go back and check my records, but as far as I can remember there were none. (TR 101). ****** A. We have available pool of I-A men and when we receive a call at that time we take the oldest one first and come right down the line in sequence, and that is the way we would do. (TR 101). * * * -» * * A. When we reached him we ordered him in order. (TR 102). At this point, it became a jury question. The jury could credit the Executive Secretary’s testimony to the effect that Johnson was not taken out of order, or it could infer from the testimony about Dickman and the evidence of the letters in Johnson’s file that the order to report for alternative service was not duly and lawfully issued. The trial Court carefully instructed the jury on this element of the offense, twice charging the jury that if the Government failed to carry its burden to prove beyond a reasonable doubt that Johnson’s order to call was regular and lawful, it must acquit him. “Now you will thus be called upon to decide, (1) as to whether or not the Defendant was called up ahead of older previously qualified conscientious objectors or was called in regular order in his classified category or not. The Defendant contends that he was called out of order and you will decide from the evidence in the case whether he was or was not called out of order. The burden of proof is upon the government to prove that he was not called out of order.” “I charge you that should you find from the evidence at the time the Defendant was ordered to report for civilian service as a conscientious objector that other registrants older than the Defendant and who were classified 1-0 and had been previously found acceptable were passed over that you must acquit the Defendant.” Moreover, the charge did not include a presumptive instruction giving the Government any advantage on this issue. The jury had to weigh the direct and circumstantial evidence and determine whether or not the Government had discharged its burden of proving, beyond a reasonable doubt, that Johnson had been taken in the proper sequence. They having done so and having found that the order of call was regular (as is inferentially manifest by the verdict) this Court will not set that jury verdict aside. It requires no citation of authority to hold that a jury, fully and properly instructed has the exclusive responsibility to resolve issues of fact created by conflicting evidence and inferences. Not only will appellate Judges not assume the roles of super-draft boards, super-school boards, super-prison administrators, or super-legislators, we are also constitutionally prohibited from anointment as super-jurors. Segregated Draft Boards As a final substantive argument Johnson asserts that the exclusion of Blacks from local Selective Service Boards in Mississippi deprived him of due process of law in violation of the Fifth Amendment and 50 U.S.C.A. App. § 455(a). The record contains a stipulation that at no time during Johnson's lifetime has any member of the Black race served on Local Board No. 23 in Grenada, Mississippi, or on any of the Appellate Boards of the State of Mississippi. Although we have withheld decision in this case awaiting action by this Court en banc in United States v. Lemmons, No. 29149; United States v. Adams, No. 30868; and Smith v. Leach, 5 Cir., 468 F.2d 624, as well as other cases consolidated therewith which have now been disposed of without reaching this question, the simple answer in Johnson’s case is that Johnson can show no prejudice from the alleged discriminatory practices because he received from the Board the precise classification which he requested — I-O. This washes it all out. He has nothing to complain about because he got all that he asked for, could have received or could have wanted even if the draft board had been composed exclusively of members of his race. Johnson also alleges that the judgment of conviction must be vacated by reason of the District Court’s pronouncement of sentence immediately upon receipt of the jury verdict and the Court’s refusal to have a presentence investigation conducted as the Defendant had specifically requested. Of course, so long as the sentence is within the statutory limits, we give very great if not controlling deference to the discretion of the trial Judge. Thomas v. United States, 5 Cir., 1966, 368 F.2d 941; Mount v. United States, 5 Cir., 1964, 333 F.2d 39, cert. denied, 379 U.S. 900, 85 S.Ct. 188, 13 L.Ed.2d 175; Herman v. United States, 5 Cir., 1961, 289 F.2d 362, cert. denied, 368 U.S. 897, 82 S.Ct. 174, 7 L.Ed.2d 93. While it is not the function of this court to review the length of sentences imposed by district courts, it is observed that the appellant has served a substantial part of his period for alternate service. He expressly requested a pre-sentence report and gave some indication of his willingness to work in other Mississippi hospitals. The defendant was sentenced to the statutory maximum immediately after the jury returned its verdict. Under the provisions of Rule 35 F.R.Crim.P. the district court may reduce the sentence within 120 days after receipt by that court of a mandate issued upon affirmance of the judgment on appeal. Needless to say, the reduction of a valid sentence after affirmance is within the discretion of the trial court. Substantial time has elapsed since the appellant was sentenced. Considerations based on compassion and mercy are to be determined by the trial court. We are confident that the distinguished trial judge in this case will give due consideration to all legitimate factors to be considered if a reduction in sentence is sought. See Lott v. United States, 5 Cir., 1962, 309 F.2d 115, 126. AFFIRMED. . Cf. Oestereich v. Selective Service Board, 1968, 393 U.S. 233, 89 S.Ct. 414, 21 L.Ed.2d 402; Wells v. United States, 5 Cir., 1946, 158 F.2d 932, cert. denied, 330 U.S. 827, 67 S.Ct. 867, 91 L.Ed. 1276; Greer v. United States, 5 Cir., 1967, 378 F.2d 931; Yates v. United States, 1 Cir., 1968, 404 F.2d 462, rehearnig denied, 1969, 407 F.2d 50. . The order, dated September 20, 1967, stated that he was to present himself for alternative service on October 4, 1967. . The specific order of the Board allegedly violated is discussed in text, infra. . Newsom v. United States, 5 Cir., 1964, 335 F.2d 237; Colt v. United States, 5 Cir., 1946, 158 F.2d 641; A.L.I. Model Penal Code, § 1.12(1) (Proposed Official Draft 1962). . Franks v. United States, 9 Cir., 1954, 216 F.2d 266; United States v. Atherton, 9 Cir., 1970, 430 F.2d 741; Goetz v. United States, 9 Cir., 1954, 216 F.2d 270; Palmer v. United States, 9 Cir., 1968, 401 F.2d 226. . Cf. United States v. Lybrand, E.D.N.Y., 1967, 279 F.Supp. 74, 81-82. . Estep v. United States, 1946, 327 U.S. 114, 66 S.Ct. 423, 90 L.Ed. 567; Carson v. United States, 5 Cir., 1969, 411 F.2d 631, cert. denied 396 U.S. 865, 90 S.Ct. 143, 24 L.Ed.2d 119; Olvera v. United States, 5 Cir., 1955, 223 F.2d 880; Imboden v. United States, 6 Cir., 1952, 194 F.2d 508, cert. denied, 343 U.S. 957, 72 S.Ct. 1052, 96 L.Ed. 1357. The Olvera case, coming out of this Circuit, provides particularly strong language to this effect: “It is of the essence of the validity of board orders and of the crime of disobeying them that all procedural requirements be strictly and faithfully followed, and that a showing of failure to follow them with such strictness and fidelity will invalidate the order of the board and a conviction based thereon.” 223 F.2d at 882. . § 1660.20 Determination of type of civilian work to be performed and order by the local board to perform such work. (a) When a registrant in Class I-O has been found qualified for service in the Armed Forces after his armed forces physical examination or when such a registrant has failed to report for or to submit to armed forces physical examination, he shall, within ten days after a Statement of Acceptability (DD Form No. 62) has been mailed to him by the local board or within ten days after he has failed to report for or submit to armed forces physical examination, submit to the local board three types of civilian work contributing to the maintenance of the national health, safety, or interest as defined in section 1660.1, which he is qualified to do and which he offers to perform in lieu of induction into the Armed Forces. If the local board deems any one of these types of work to be appropriate, it will order the registrant to perform such work, but such order shall not be issued prior to the time that the registrant would have been ordered to report for induction if he had not been classified in Class I-O, unless he has volunteered for such work. (b) If the registrant fails to submit to the local board types of work which he offers to perform, or if the local board finds that none of the types of work submitted by the registrant is appropriate, the local board shall submit to the registrant by letter three types of civilian work contributing to the maintenance of the national health, safety, or interest as defined in § 1660.1 which it deems appropriate for the registrant to perform in lieu of induction. The registrant, within ten days after such letter is mailed to him by the local board, shall file with the board a statement that he either offers to perform one of the types of work submitted by the board, or that he does not offer to perform any of such types of work. If the registrant offers to perform any one of the three types of work, he shall be ordered by the local board to perform such work in lieu of induction, but such order shall not be issued prior to the time that the registrant would have been ordered to report for induction if he had not been classified in Class I-O unless he has volunteered for such work. (c) If the local board and the registrant are unable to agree upon a type of civilian work which should be performed by the registrant in lieu of induction the State Director of Selective Service for the State in which the local board is located, or the representative of such State Director, appointed by him for the purpose, shall meet with the local board and the registrant and offer his assistance in reaching an agreement. The local board shall mail to the registrant a notice of the time and place of this meeting at least 10 days before the date of the meeting. If agreement is reached at this meeting, the registrant shall be ordered by the local board to perform work in lieu of induction in accordance with such agreement, but such order shall not be issued prior to the time that the registrant would have been ordered to report for induction if he had not been classified in Class I-O, unless he has volunteered for such work. (d) If, after the meeting referred to in paragraph (c) of this section, the local board and the registrant are still unable to agree upon a type of civilian work which should be performed by the registrant in lieu of induction, the local board, with the approval of the Director of Selective Service, shall order the registrant to report for civilian work contributing to the maintenance of the national health, safety, or interest as defined in § 1660.1 which it deems appropriate, but such order shall not be issued prior to the time that the registrant would have been ordered to report for induction if he had not been classified in Class I-O, unless he was volunteered for such work. . § 1631.7 Action by local board upon receipt of notice of call. (a) Each local board, upon receiving a Notice of Call on Local Board (SSS Form No. 201) from the State Director of Selective Service (1) for a specified number of men to be delivered for induction, or (2) for a specified number of men in a medical, dental, or allied specialist category to be delivered for induction, shall select and order to report for induction the number of men required to fill the call from among its registrants who have been classified in Class I-A and Class I-A-0 and have been found acceptable for service in the Armed Forces and to whom the local board has mailed a Statement of Acceptability (DD Form No. 62) at least 21 days before the date fixed for induction : Provided, That a registrant classified in Class I-A or Class I-A-0 who is a delinquent may be selected and ordered to report for induction to fill an induction call notwithstanding the fact that he has not been found acceptable for service in the Armed Forces and has not been mailed a Statement of Acceptability (DD Form No. 62) : And provided further, That a registrant classified in Class I-A or Class I-A-0 who has volunteered for induction may, if an appeal is not pending in his case and the period during which an appeal may be taken has expired, be selected and ordered to report for induction notwithstanding the fact that he has not been found acceptable for service in the Armed Forces and regardless of whether or not a Statement of Acceptability (DD Form No. 62) has been mailed to him. Such registrants, including those in a medical, dental, or allied specialist category, shall be selected and ordered to report for induction in the following order: (1) Delinquents who have attained the age of 19 years in the order of their dates of birth with the oldest being selected first. (2) Volunteers who have not attained the age of 26 years in the sequence in which they have volunteered for induction. (3) Nonvolunteers who have .attained the age of 19 years and have not attained the age of 26 years and who (A) do not have a wife with whom they maintain a bona fide family relationship in their homes, in the order of their dates of birth with the oldest being selected first, or (B) have a wife whom they married after the effective date of this amended subparagraph and with whom they maintain a bona fide family relationship in their homes, in the order of their dates of birth with the oldest being selected first. (4) Nonvolunteers who have attained the age of 19 years and have not attained the age of 26 years and who have a wife whom they married on or before the effective date of this amended subparagraph and with whom they maintain a bona fide family relationship in their homes, in the order of their dates of birth with the oldest being selected first. (5) Nonvolunteers who have attained the age of 26 years in the order of their dates of birth with the youngest being selected first. (6) Nonvolunteers who have attained the age of 18 years and 6 months and who have not attained the age of 19 years in the order of their dates of birth with the oldest being selected first. In selecting registrants in the order of their dates of birth, if two or more registrants have the same date of birth they shall, as among themselves, be selected in alphabetical order. . See authorities and discussion in United States v. Lybrand, supra, 279 F.Supp. at 78-79. . In 1967, Selective Service regulations provided for drafting older registrants first. That order was later changed, of course, and younger men were being selected first until the suspension of the draft in January, 1973. . Yates v. United States, supra, note 1; Keene v. United States, 10 Cir., 1959, 266 F.2d 378, 380. . See, Oestereich v. Selective Service Board, supra. . “In a large draft board area perfect proof that no person exists who should have been drafted before the defendant but was not, would be improbable. On the other hand, there exists the possibility that capricious or arbitrary action was taken by a local board; a defendant has little opportunity to obtain proof of discrimination ; and there is no chance or procedure to review this issue before the agency. There ought, therefore, to be a means of exerting constant pressure on the local boards to adhere faithfully to the order of call regulation.” Yates v. United States, supra, 404 F.2d at 466. . Clearly the status of being a civil rights worker affords no special status under the Selective Service System. On the other hand, it would be less than juridically perceptive not to recognize the possibility of the Selective Service System being used to suppress or punish unpopular political activity. The Courts have therefore been particularly alert and diligent whenever sensitive and vulnerable First Amendment civil rights have been involved in Selective Service cases. See, e. g., Oestereich; Greer, supra, Wolff v. Selective Service Board No. 16, 2 Cir., 1967, 372 F.2d 817; Gutknecht v. United States, 1970, 396 U.S. 295, 90 S.Ct. 506, 24 L.Ed.2d 532; Wills v. United States, 9 Cir., 1967, 384 F.2d 943; National Student Associated v. Hershey, 1969, 134 U.S.App.D.C. 56, 412 F.2d 1103; United States v. Spock, 1 Cir., 1969, 416 F.2d 165. . Johnson v. Mississippi, 1971, 403 U.S. 212, 91 S.Ct. 1778, 29 L.Ed.2d 423. . Cf. United States v. Cabbage, 6 Cir., 1970, 430 F.2d 1037, in which the I-A classification of the Defendant was held to be unlawful because the Selective Service file on him contained an irrelevant, prejudicial and impermissible summary of an FBI report charging that he was trying to organize black power followers and was being closely watched by the FBI. . The Executive Secretary was closely cross-examined on the meaning of each of these letters, but was unable to recall what she may have had in mind or what was the purpose of the quoted passages. At one point she could only comment “I’m sure it was of no importance,” explaining the reference to Johnson’s civil rights activities and their relation to Selective Service considerations. . There is a suggestion that in these actions the secretary was violating 32 C.F.R. § 1622.1(d) : “In classifying a registrant there shall be no discrimination for or against him because of his race, creed, or color, or because of his membership or activity in any labor, political, religious, or other organization. Each such registrant shall receive equal justice.” It is not the classification of Johnson, however, which is here called in question, but rather the subsequent order to report to alternative civilian service. Johnson was eventually classified I-O, as he had requested so the alleged racial or ideological bias did not have any effect. . Personal interest, bias or prejudice, may disqualify a local board member from participating in a particular case. See Haven v. United States, 9 Cir., 1968, 403 F.2d 384, 387, cert. dismissed, 1969, 393 U.S. 1114, 89 S.Ct. 926, 22 L.Ed.2d 120; United States v. Fielder, E.D.Mich., 1954, 136 F.Supp. 745; United States v. Cabbage, supra, note 17 (in which the reclassification of the Defendant was enjoined until the Selective Service Board reconstituted itself in accordance with the applicable regulations). . As it turns out, Dickman was not passed over in the September call as Johnson attempted to show. In the first place, the Executive Secretary testified that Dick-man was classified into Class I-O on August 22, 1967. The Regulation setting forth the order of call states that “suoh registrants * * * shall be selected and ordered to report for induction in the following order : * * * ” (emphasis added). The “such” refers to registrants “who have been classified in Class I-A and Class I-A-0 [and Class I-O] and have been found acceptable for service in the Armed Forces and to whom the local hoard has mailed a statement of acceptability (DD Form No. 62) at least 21 days before the date fixed for induction * * *” 32 C.F.R. § 1631.7(a) (eraphasis added). Additionally, the order to report for a physical examination would have to be mailed to the registrant and the results of the examination would have to be forwarded to the Board. In view of these facts it would have been virtually impossible for a registrant classified on August 22 to have been mailed a Statement of Acceptability at least 21 days before the succeeding September 20. More conclusively, it turns out that the Executive Secretary’s above quoted testimony about Dickman was mistaken. In post submission review of the record, the Court noticed potentially significant typographical errors in the transcript and remanded the case to the District Court for certification of a corrected record. To substantiate its version of what was actually said the Government introduced into the record the list of conscientious objectors to which the Executive Secretary was referring during her testimony. Our appellate examination of that document, now before us as a part of the record on appeal, reveals that there were five Dick-mans on the register of conscientious objectors of Local Board No. 23 and the Secretary, in apparent confusion from the rigorous cross-examination, misread the log. The Dickman who was older than Appellant (Daniel E.) had been classified into IV-D on July 20, 1967, well before the time Johnson was ordered to report for alternate service. The Dickman who was classified into I-O on August 22, 1967 and into IV-D some nine months, later (Douglas Lee) was born in 1949 and was therefore younger than Johnson. The jury, however, was unaware of this fact. Of course, we have not assumed to evaluate this or in any way consider it as to Johnson’s attack. But he cannot complain in that we recite since the record before the jury presented a picture much more helpful to him. . Of course, this instruction could have been worded more deftly to again place the burden clearly on the Government on this element, but in view of (i) the former instruction specifically placing the burden on the Government on this element and (ii) generally placing the burden on the Government on every issue, and (iii) in the absence of any objection to the manner in which this instruction was rephrased, the wording of this instruction did not constitute prejudicial error, if it was error.

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VIRGIN ISLANDS HOTEL ASSOCIATION (U.S.), INC., a corporation, Appellant, v. VIRGIN ISLANDS WATER & POWER AUTHORITY. No. 72-1996. United States Court of Appeals, Third Circuit. Argued Jan. 19, 1973. Decided April 12, 1973. Evelyn N. Cooper, Isherwood & Colianni, Christiansted, St. Croix, V. I., for appellant. Ronald H. Tonkin, Atty. Gen. of the Virgin Islands, Sidney H. McKenzie, III, Asst. Atty. Gen., St. Thomas, V. I., Wallace L. Duncan, Duncan & Brown, Washington, D. C., for appellee. Before VAN DUSEN and ADAMS, Circuit Judges, and BARLOW, District Judge. OPINION OF THE COURT VAN DUSEN, Circuit Judge. This is the second time that these parties, the Virgin Islands Hotel Association (the Hotel Association) and the Virgin Islands Water and Power Authority (the Authority), are before this court. On the first occasion, in Virgin Islands Hotel Ass’n v. Virgin Islands Water & Power Authority, 465 F.2d 1272 (3d Cir. 1972), this court upheld with modification an injunction the district court had issued against the Authority. By order of October 3, 1972, the district court vacated that injunction, and the Hotel Association appeals. We affirm the October 1972 order of the district court. I. BACKGROUND It is necessary only to summarize the facts stated in our earlier opinion and in the first opinion of the district court, reported at 54 F.R.D. 377 (D.V.I.1972). In the late fall of 1971, the Authority became worried that its revenues would soon fail to provide the coverage over interest required by its outstanding debt instruments, with devastating impact on its ability to procure additional needed financing. On November 10, 1971, it issued a press release indicating its intention to raise electric rates by from about 19% for residential users to about 25% for large power users. Public hearings were held one week later, and on December 3 the Authority put the proposed increases into effect. The Hotel Association was understandably upset, since its members are classified as “large power” users. It immediately sought an injunction against the rate increase. The district court ruled that the Authority had violated 30 V.I.C. § 105(a) (12) in two ways. First, because the Authority did not have at its disposal information on the cost of providing electricity to its various classes of customers, the Authority had failed “to determine . . . reasonable rates.” Second, the public hearings held pursuant to this section 105(a) (12) were altogether inadequate. Among other defects, notice to the public was too short to allow adequate preparation time and the reports the Authority relied on were not made available publicly until the first public hearing. The district court, on February 4, 1972, ordered the Authority to rescind the increases, to have made an appropriate study of costs (called a “rate” study), and to hold proper public hearings on the proposed increases. However, to avoid possible disruption, the court stayed this injunction for ten months. By decision of June 28, 1972, this court, although ruling that the Authority’s determination of rates is not subject to judicial review, held that review is available when the Authority has “ignored a plain statutory duty, exceeded its jurisdiction, or committed constitutional error.” 465 F.2d at 1275. “The rate fixing procedure created by 30 V.I. C. § 105(a) (12) contemplates a meaningful public hearing at which interested persons can present their views and present evidence in support thereof. Concomitant with such a hearing are the essential requirements of adequate notice, dissemination to the public of the facts and figures on which the Authority relies, and an opportunity afforded to those attending the hearing to rebut such facts and figures.” Id. at 1276. This court agreed with the district court that the Authority’s hearings did not comply with these requirements. This court did not, however, agree that § 105(a) (12) imposed any duty “to make rate studies as such,” id. at 1276, and modified the district court injunction accordingly. To comply with this court’s mandate, the Authority commissioned new reports from R. W. Beck & Associates and from D.S.S. Engineering, Inc. (hereinafter D.S.S.); it also had Jackson & Moreland prepare an update of the report they had prepared earlier. On July 5, 1972, the Authority issued a press release stating, inter alia, that new hearings would be held and that the earlier Jackson &. Moreland study was available to the public. Beginning on August 12, 1972, the Authority had published in the local newspapers notices that new public hearings would be held on September 11, 12 and 13. The Authority made the Beck and the Jackson & Moreland reports available to the public on August 8, the D.S.S. report on August 28. The Authority held these hearings as scheduled. At each hearing various officials of the Authority commented on the proposed rate increases, and representatives from the three engineering firms summarized and discussed the contents of their reports. In accordance with the procedure announced at the beginning of each meeting, all persons could submit written questions, which would be answered by either an official of the Authority or a representative from one of the firms. In addition, all persons could submit written statements or, at the conclusion of the Authority’s presentation, deliver oral statements. According to an affidavit of the Authority’s Executive Director, “All questions which were asked were responded to. In addition, any person desiring to make a statement with regard to the proposed subject rate increases were [sic] permitted to do so.” The Secretary of the Hotel Association’s St. Thomas-St. John Chapter testified at the September 12 hearing held on St. Thomas. In addition, counsel for the Hotel Association and an expert the Association had hired, Constance W. Bary, attended the September 13 hearing held at Christiansted on St. Croix. Counsel objected to the testimony not being sworn and not being subject to oral cross-examination. Counsel had no written questions to submit, but was allowed to give orally an “offer of proof” of what the Hotel Association would have established if an opportunity for cross-examination had been granted. Admitting that Mr. Bary had not been contacted until September 7, such counsel also requested that the hearing be adjourned until November 9. This adjournment would give the Authority time to prepare, and for Mr. Bary to review, data which counsel said were necessary to examine the reasonability of rates. Counsel and Mr. Bary then stated that without such data the Hotel Association was unable to demonstrate the unreasonableness of the proposed rates. Following the hearings, the Authority determined that the rates it had proposed the previous December were reasonable. The Authority then filed a motion in the district court to vacate the injunction. The district court, after considering the Hotel Association’s allegations of substantive and procedural infirmities, vacated the injunction by its October 1972 order. II. PROCEDURAL ISSUES The Hotel Association argues either that the September 1972 hearings did not comply with 30 V.I.C. § 105(a)(12) as interpreted by this court in deciding the previous appeal or that, assuming compliance, the statute itself fails to provide the due process of law required by 48 U.S.C. § 1561 (1970). Specifically, the Hotel Association urges that the notice of the hearings and the prior dissemination of the engineering studies were inadequate; that these deficiencies were perpetuated by the denial of the adjournment it requested; that the hearings themselves should have been trial-type, rather than legislative-type; that they should have been conducted by an impartial hearing officer; and that in making its final decision the Authority improperly relied on evidence not in the record. “Whether [due process] requires that a particular right obtain in a specific proceeding depends upon a complexity of factors. The nature of the alleged right involved, the nature of the proceeding, and the possible burden on that proceeding, are all considerations which must be taken into account.” Hannah v. Larche, 363 U.S. 420, 442, 80 S.Ct. 1502, 1515, 4 L.Ed.2d 1307 (1960). Accord, Goldberg v. Kelly, 397 U.S. 254, 263, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970); Marine Space Enclosures, Inc. v. Federal Maritime Commission, 137 U.S.App.D.C. 9, 420 F.2d 577, 589-590 (1969). While this court, in its prior opinion, did not state precisely how many days in advance the schedule of the new hearings had to be announced or the reports disseminated, it stressed the importance of notice and dissemination adequate under the circumstances. To be considered, for example, was the complex nature of the data. The Hotel Association now complains that notice of about one month was too short. What the Hotel Association in effect asks us to ignore is the district court’s injunction which had been stayed for only ten months. As of June 28, when this court handed down its affirmance of that injunction, it was clear to all concerned that the Authority would have to hold new hearings. Moreover, the July 5th press release was sufficient to warn the Hotel Association of the need to retain its expert. Thus, the Hotel Association has only itself to blame for waiting until the end of August before seeking an expert qualified to present its case. Similarly, the question whether or not the public had enough time to evaluate the three engineering studies should be considered in light of the ability of the public under these circumstances to have been ready for the reports. We are not prepared to reverse the decision of the district court and rule as a matter of law that notice and dissemination were inadequate. The Hotel Association’s request for a two-month adjournment was properly denied, particularly since the Hotel Association did not' make the request sooner, for example, when the schedule of meetings was announced, but at the last meeting held. Moreover, the argument the Authority presented to the district court, that any additional delay would seriously hamper the sale of new bonds, is a persuasive factor. The Hotel Association’s most telling argument is that the hearings should have been conducted not as legislative hearings but as adversary proceedings. The chief difference between the two modes as regards this case is that a trial-type hearing typically permits oral cross-examination of witnesses. Our earlier opinion did not decide this question. The Administrative Procedure Act, 5 U.S.C. § 551 et seq. (1970), is instructive. Rule-making proceedings are controlled by § 553, which requires only that interested parties be given adequate notice of the proposed rule, see § 553(b), and “an opportunity to participate in the rule making through submission of written data, views or arguments with or without opportunity for oral presentation,” § 553(c). The procedure for adjudication is set out in §§ 554 and 556, under which “[a] party is entitled to present his case or defense by oral or documentary evidence, to submit rebuttal evidence, and to conduct such cross-examination as may be required for a full and true disclosure of the facts,” § 556(d). If the Administrative Procedure Act governed the Authority’s rate-making, the appropriate proceeding would be rule-making, because the rates in question have only prospective application. § 551(4); Law Motor Freight, Inc. v. CAB, 364 F.2d 139, 143-144 (1st Cir. 1966); see Jones v. District of Columbia, 116 U.S.App.D.C. 301, 323 F.2d 306, 308-309 (1963). A second distinction which has been relied on by the federal courts is whether the proposed agency action affects a small or a large number of persons. Compare Bi-Metallic Investment Co. v. State Board of Equalization, 239 U.S. 441, 36 S.Ct. 141, 60 L.Ed. 372 (1915), with Londoner v. Denver, 210 U.S. 373, 28 S.Ct. 708, 52 L.Ed. 1103 (1908). The two rationales underlying this distinction are that decisions affecting large numbers of persons are likely to be more concerned with general policies than with specific facts and that permitting many persons to cross-examine each witness would make proceedings totally unmanageable. See United States v. Florida East Coast Railway Co., 410 U.S. 224, 93 S.Ct. 810, 35 L.Ed.2d 223 (1973). In the present case, of course, the proposed increases affected every person in the Virgin Islands. We do not know, however, that there would have been a multitude of cross-examiners at the September hearings if cross-examination had been available. A third factor, somewhat overlapping the second, is whether the facts in question are “legislative” or “adjudicative.” See 1 K. C. Davis, Administrative Law Treatise, § 702 (1958). That is, will the agency decision depend chiefly on policy considerations or on specific, especially historical facts which are provable or disprovable? The Authority’s decision here appears to have been made, as 30 V.I.C. § 105(a) provides, in reliance on both types of facts — for example, the costs of providing electric service to its various classes of customers and “making the benefits [of water and electric power systems] available to the inhabitants of the Virgin Islands in the widest economic manner consistent with sound fiscal management, and by this means to promote the general welfare and increase commerce and prosperity. ...” § 105(a). While Professor Davis would thus suggest that cross-examination would be appropriate at least as to the adjudicative facts, a number of courts have held in cases which, like the one before us, involved complex and technical factual controversies, that written submissions, possibly supplemented by oral argument, suffice. United States v. Florida East Coast Railway Co., supra; Phillips Petroleum Co. v. F. P. C., 475 F.2d 842 (10th Cir. 1973); National Air Carriers Association v. CAB, 141 U.S.App.D.C. 31, 436 F.2d 185, 191-194 (1970); American Airlines, Inc. v. CAB, 123 U.S.App.D.C. 310, 359 F.2d 624 (1966); cases cited note 10. One recent case countenances the restriction that questions be submitted in writing. International Harvester Co. v. Ruckelshaus, 478 F.2d 615 (D.C.Cir., 1973), at p. 18-23. On the other hand, the absence here of any specific statutory procedures such as the Administrative Procedure Act necessitates greater leeway than those courts had. The present case does not compel us to hold that cross-examination will never be required in hearings under 30 V.I.C. § 105(a) (12). Instead, we rely on the failure of the Hotel Association to have demonstrated the inadequacy of written questions, which were permitted. The Hotel Association could easily have informed itself of this aspect of the Authority’s procedures by attending the September 11 meeting. In fact, a representative of the Hotel Association did attend the September 12 meeting on St. Thomas and no doubt could have told counsel in time to prepare for the September 13 hearing that questions had to be in writing. We have carefully examined the Hotel Association’s “offer of proof” at the September 13 hearing, and no reason appears to us that the points there raised could not have been formulated in written questions. Consequently, we hold that the Hotel Association has not shown that it was prejudiced, and on this basis we decline to reverse the district' court. See Woodbury v. McKinnon, 447 F.2d 839, 844 (5th Cir. 1971); Citizens for Allegan County, Inc. v. FPC, 134 U.S.App.D.C. 229, 414 F.2d 1125, 1134 (D.C.Cir. 1969). The Hotel Association’s other two procedural claims can be quickly disposed of. First, it did not appear that the officials who conducted the hearings in any way intimidated counsel for the Hotel Association or otherwise deprived it of privileges available to other participants. Moreover, because the Board of the Authority had the responsibility for the final decision on the rate increases, it is not at all evident how having a trial examiner take testimony would have altered that decision in any way. Second, in claiming that the Authority went beyond what was in the record at the hearings, the Hotel Association relies on certain language in the resolution in which the Authority adopted the increases. We find that the Hotel Association’s interpretation of this language is contrary to its obvious meaning. III. SUBSTANTIVE ISSUES The Hotel Association contends that the Authority did not have adequate information on which to determine whether or not the rates were reasonable. The essence of this argument is that the Authority does not know how to allocate various expenses between water and power distribution and does not know, how much it costs it to supply power to the various types of power users. However, the three engineering studies introduced at the hearings seem to provide just this type of information. The Hotel Association has clearly failed to demonstrate the type of statutory violation subject to review by this court. See V. I. Hotel Association v. V. I. Water & Power Authority, supra, 465 F.2d at 1274. Finally, we note that the Hotel Association did not attempt to establish in the Authority’s September 1972 hearings or in the subsequent district court proceeding, and does not now urge, that the increase in electric rates is confiscatory. At the district court proceeding held on December 21, 1971, where the Hotel Association challenged the first set of hearings held by the Authority, there was uneontradicted testimony by various witnesses that the electric power bills of Virgin Islands hotels accounted for between four and eight percent of all operating costs (including debt service). See N.T. 136, 143, 145-146, 153. With the proposed increase in mind, the district court at that time computed that the rate increases would increase overall operating costs by about two percent, an amount which it concluded was not going to put the hotels out of business. N.T. 175-176. The October 3, 1972, order of the district court will be affirmed. ADAMS, Circuit Judge (concurring). I concur in the result reached by the majority opinion in this case. The appellant raises two contentions in this appeal: (1) that the procedures are inconsistent with the due process clause of the Constitution, and (2) that the procedure employed by the Virgin Islands Water & Power Authority contravenes the statute under which the rate increases were to be approved. The opinion in United States v. Florida East Coast Railway Co., 410 U.S. 224, 93 S.Ct. 810, 35 L.Ed.2d 223 (1973), is the most recent pronouncement by the Supreme Court regarding the type of proceeding acceptable when an administrative agency promulgates a new rate schedule. It makes clear that, at this time, there is no requirement of a traditional adversary hearing in a broad rate-making context; such a deficiency is not violative of due process. In the present case, we are dealing with rate-making proceedings conducted pursuant to a statutory plan of the legislature of the Virgin Islands, as interpreted by this Court. Virgin Islands Hotel Ass’n v. Virgin Islands Water & Power Authority, 465 F.2d 1272 (3d Cir. 1972). The import of our earlier decision was that in rate-making proceedings pursuant to the statute in question a “meaningful hearing” must be afforded those who would challenge the proposed rates. The parameters of such a hearing have not yet been delineated with any particularity. Although as stated above, the traditional adversary “trial-type” proceedings do not appear to be mandated by the Constitution, I believe that in matters as important as the establishment of utility rates for large groups of citizens and businesses, a greater degree of precision and equity can be achieved when those opposing the proposed rates have an adequate opportunity to review the proposal with its supporting data, and an occasion to test the proposed rate and its underlying bases through the medium of cross-examining those responsible for its promulgation. Perhaps in the context of utility rate-making these would be central ingredients of a truly “meaningful” hearing. The proper resolution of this case, however, does not require that we reach the more difficult question, i. e., were the proceedings in this case so deficient so as not to comport with the concept of “meaningful hearing.” As the majority opinion points out, counsel for the Hotel Association did not object to the amount of time alloted for study of the proposal at the time of its dissemination. In addition, counsel did not establish, certainly on the record, the various inquiries or lines of inquiry the Hotel Association would have propounded had they been given the opportunity to cross-examine the proponents of the rate, nor did counsel avail himself of what opportunity for questioning was afforded him. For these reasons, I concur in the result reached in this case. . This affidavit was submitted with the Authority’s Motion to Vacate Injunction. The Hotel Association neither filed a counter-affidavit nor disputed these assertions at the September 1972 hearings held on the motion. . Transcript of September 13 hearing at Christiansted, at 74-75; September 29 bearing on Motion to Vacate Injunction, at 7-9. . Transcript of September 13 hearing at Christiansted, at 7-12. . Id. at 51-57. . Id. at 59. . Id. at 63, 67-71. . We note that the Authority’s decision as to rates concerns rates which the members of the Hotel Association must pay. That factor distinguishes this case from cases such as Morgan v. United States, 298 U.S. 468, 56 S.Ct. 906, 80 L.Ed. 1288 (1936), where an arm of the Government fixed prices that regulated persons could charge to customers. The distinction is that the latter situation is much more fraught with the potential for taking without just compensation and, consequently, places heavier demands on procedural due process. We recognize, however, that there could be such a taking in the present situation. . September 29, 1972, hearing on Motion to Vacate Injunction, at 9. Counsel for the Authority reiterated the desirability of a prompt resolution in oral argument before this court. Apparently one practical, and perhaps legal, requirement of selling these municipal bonds is an opinion letter from counsel that there is no litigation in progress which would materially affect the bonds. . The Hotel Association also is dissatisifed with the failure of the testimony to be sworn. Because the persons who testified did so in their professional capacities, it does not seem particularly significant that they were not under oath. . Law Motor Freight also holds that, as regards setting agency policy for the future, 5 U.S.C. § 553 provides due process of law. Accord, NLRB v. Delaware Valley Armaments, Inc., 431 F.2d 494, 499 (3d Cir. 1970); California Citizens Band Association, Inc. v. United States, 375 F. 2d 43, 50 (9th Cir. 1967). . This court is reluctant to hold that cross-examination is never needed, since the Authority has such broad discretion not subject to judicial review, see 465 F. 2d at 1274, and since, in the view of several commentators, cross-examination of experts on technical matters can contribute significantly to the decision-making process. Robinson, The Making of Administrative Policy: Another Look at Rulemaking and Adjudication and Administrative Reform, 118 U.Pa.L.Rev. 485, 521-524 (1970); Spritzer, Uses of the Summary Power to Suspend Rates: An Examination of Federal Regulatory Agency Practices, 120 U.Pa.L.Rev. 39, 95-97 (1971); Comment, Public Participation in Federal Administrative Proceedings, 120 U.Pa.L.Rev. 702, 743-744 (1972). However, as noted at page 1269 above, several federal cases have held that cross-examination is not mandated in such a situation. . The Hotel Association made no attempt to offer similar data at the September 1972 district court hearing. . In United States v. Florida East Coast Ry., supra, the railroad challenged the establishment by the Interstate Commerce Commission of incentive per diem rates on freight cars. These rates were promulgated after a hearing which did not include several of the elements of an adversary proceeding. Upholding the implementation of the rates, the Court stated that the Commission’s procedures satisfied the requirements of the Administrative Procedure Act, 5 U.S.C. § 551 et seq. and were “not inconsistent with prior decisions of this Court.” 410 U.S. at 246, 93 S.Ct. at 821. Several of these earlier decisions, e. g., Morgan v. United States, 304 U.S. 1, 58 S.Ct. 773, 82 L.Ed. 1129 (1938); Ohio Bell Telephone Co. v. Public Utilities Commission, 301 U.S. 292, 57 S.Ct. 724, 81 L.Ed. 1093 (1937); ICC v. Louisville & Nashville R. Co., 227 U.S. 88, 33 S.Ct. 185, 57 L.Ed. 431 (1913), had been thought by some to indicate that due process in rate-making procedures included a requirement of “trial-type” hearings. Justice Douglas, dissenting in Florida Fast Coast Ry. Co. asserted: “I do not believe it is within our traditional concepts of due process to allow an administrative agency to saddle anyone with a new rate, charge, or fee without a full hearing that includes the right to present oral testimony, cross-examine witnesses and to present oral argument.” 410 U.S. at 247, 93 S.Ct. at 822. . 465 F.2d at 1275. . An impartial presiding officer at any proceeding would also appear to be an important element in insuring a “meaningful” hearing. In the present case the proceedings were chaired by the Vice-Chairman of the Water & Power Authority with the aid of an Assistant Attorney-General of the Virgin Islands. Although in view of the disposition of this case, this factor does not render these hearings other than a “meaningful hearing,” my concern with an arrangement that places the control of the proceeding in the hands of the proponent of the rate increase, and the proponent’s counsel, must be noted.

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Betsy A. JENNINGS et al., Appellants, v. Ilus W. DAVIS et al., Appellees. No. 72-1590. United States Court of Appeals, Eighth Circuit. Submitted March 16, 1973. Decided April 20, 1973. Philip C. Ehli, and Ben E. Pener, Kansas City, Mo., filed appendix and appellants’ brief. Manfred Maier, Kansas City, Mo., filed brief of appellees, Lewis, Carr and Divilbliss. Harry P. Thomson, Jr., and George E. Leonard, Kansas City, Mo., filed brief and supplemental appendix of appellees, Davis, Kelly, Gilmore, Wells and Willits. Before MATTHES, Chief Judge, and ROSS and STEPHENSON, Circuit Judges. STEPHENSON, Circuit Judge. This is an appeal from a dismissal of appellants’ civil rights action under 42 U.S.C. § 1983 for failure to state a claim upon which relief can be granted. The complaint alleges that on November 20, 1969, appellant, Mrs. Jennings, was arrested on a speeding violation by a Kansas City, Missouri, police officer and was directed to report to the 63d street police station; that at the station appellant overheard two police officers “talking, bragging and ridiculing the behavior of traffic violators that they had arrested”, which remarks caused appellant to feel “humiliated, frightened and intimidatedthat appellant inquired of these officers why they “were not out arresting murderers and thiefs who were out committing all these crimes right under their noses;” and that Noffke, a civilian clerk at the station, thereupon committed an assault and battery upon appellant and engaged in an unlawful search and seizure of her person, all in violation of her constitutional rights. Appellant alleged that she suffered physical and emotional injuries requiring hospitalization, seeking actual and punitive damages.' She and her husband joined common law tort violations in separate counts with this § 1983 action. Appellants subsequently were allowed to dismiss the suit without prejudice with respect to Noffke, whom they believed to be “judgment proof” and to have been discharged by the Board of Police Commissioners. This appeal is from a dismissal under Rule 12(b) (6) of the Federal Rules of Civil Procedure of the § 1983 claim against the remaining defendants, who are: The five members of the Board of Police Commissioners of the Kansas City Police Department; Clarence M. Kelley, the Chief of Police; Carr, the desk sergeant and Lewis, a patrolman at the 63d street station; and Divilbiss, the arresting officer. All defendants, save Noffke, moved to dismiss the complaint under Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Each attached an affidavit to his motion. The Chief of Police and the Board of Police Commissioners members each stated, under oath, that he had no personal knowledge of the incident, was not present at the time and did not direct or order the arrest or subsequent action relating to appellant. Lewis stated that although he was present at the time of the incident, he was in no way involved in any act directed toward appellant and had no supervisory authority. Carr stated that he was present but did not direct, order or become involved in the incident and was unable to intervene. Divilbiss admitted giving appellant a speeding summons but stated he was not present and had no knowledge of the incident. The trial court, D.C., 339 F.Supp. 919, dismissed the complaint against the Chief of Police and the Board members holding that, as a matter of law, where damages are sought under § 1983 “the doctrine of respondeat superior is not available to impose vicarious liability upon a defendant who has no personal involvement in the alleged deprivation of plaintiff’s federally-protected rights.” In a separate ruling the trial court dismissed the cause against Divilbiss, Lewis and Carr, holding that under the facts alleged in the complaint, no constitutionally protected right had been violated by the three. Although the action was dismissed under Rule 12(b) (6), matter outside the pleadings was presented by way of affidavits and exhibits which were not excluded by the trial court. Under Rule 12(b), the dismissal constitutes disposition by summary judgment as provided in Rule 56 on the basis that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. Carter v. Stanton, 405 U.S. 669, 92 S.Ct. 1232, 31 L.Ed.2d 569 (1972); Minnesota Bearing Company v. White Motor Corporation, 470 F.2d 1323 (CA8 1973) and Abramson v. Mitchell, 459 F.2d 955 (CA8 1972). 42 U.S.C. § 1983, of course, must “be read against the background of tort liability that makes a man responsible for the natural consequences of his actions.” Monroe v. Pape, 365 U.S. 167, 187, 81 S.Ct. 473, 484, 5 L.Ed.2d 492 (1961). THE ARRESTING OFFICER We affirm the trial court’s dismissal of the complaint with respect to patrolman Divilbiss. The only allegation in the complaint in regard to this appellee was that Divilbiss arrested appellant for speeding on the day of the incident and told her to report to the 63d street station. The appeal with respect to this defendant is patently frivolous. THE POLICE CHIEF and BOARD MEMBERS We agree with the trial court’s holding that this action is not maintainable against the appellees under the doctrine of respondeat superior, nor do we find the complaint sufficient on any other basis of liability. The appellants admittedly placed heavy reliance upon the respondeat superior theory in pursuing this action. We, of course, are to afford remedial statutes such as § 1983 a liberal construction, but expressly reject the application of the doctrine on this set of facts, as have the vast majority of federal courts in cases such as this. See, e. g., Adams v. Pate, 445 F.2d 105 (CA7 1971); Madison v. Gerstein, 440 F.2d 338 (CA5 1971); Dunham v. Crosby, 435 F.2d 1177 (CA1 1970); Campbell v. Anderson, 335 F.Supp. 483 (D.Del.1971); Sanberg v. Daley, 306 F.Supp. 277 (N.D.Ill.1969) and Jordan v. Kelly, 223 F. Supp. 731 (W.D.Mo.1963). But, compare, Carter v. Carlson, 144 U.S.App.D.C. 388, 447 F.2d 358 (1971), rev’d on other grounds, 409 U.S. 418, 93 S.Ct. 602, 34 L.Ed.2d 613 (1973) and Hill v. Toll, 320 F.Supp; 185 (E.D.Pa.1970). The respondeat superior principle holds liable the “innocent” master (with the infamous “deep pocket”) for the torts committed by his servant in the course of his employment. The modern justification for respondeat superior is that it is . a rule of policy, a deliberate allocation of a risk. The losses caused by the torts of employees, which is a practical matter are sure to occur in the conduct of the employer’s enterprise, are placed upon that enterprise itself, as a required cost of doing business. They are placed upon the employer because, having engaged in an enterprise which will, on the basis of all past experience, involve harm to others through the torts of employees, and sought to profit by it, it is just that he, rather than the innocent injured plaintiff, should bear them; and because he is better able to absorb them, and to distribute them, through prices, rates or liability insurance, to the public, and so to shift them to society, to the community at large. Added to this is the makeweight argument that an employer who is held strictly liable is under the greatest incentive to be careful in the selection, instruction and supervision of his servants, and to take every precaution to see that the enterprise is conducted safely, (emphasis added) W. Prosser, Law of Torts, 458-459 (4th ed. 1971). With such justification in mind the “master” of course, is and can only be the municipality employing the appellees. It is the city who set the enterprise in motion, who “profits” from the appellees’ labor and who, if held liable in such instances, can by its powers of taxation spread the resulting expenditures amongst the community at large. Kansas City, however, is not a defendant in this action, nor could it be under § 1983. Monroe v. Pape, 365 U.S. 167, 187-192, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961). We also believe that appellants’ claim cannot succeed on the theory of negligence. The two requisites for a § 1983 cause of action are: (1) an allegation that the conduct complained of subjected the complainant to a deprivation of rights, privileges, or immunities secured by the Constitution and laws of the United States, and (2) an allegation that the conduct complained of was done or caused to have been done by a person acting under the color of law. Basista v. Weir, 340 F.2d 74, 79 (CA3 1965). Generally, liability for negligence arises only from affirmative action. Where, however, one has an affirmative duty to act and he fails to act accordingly, he may be held liable for his nonfeasance if his omission is unreasonable under the circumstances. Huey v. Barloga, 277 F.Supp. 864, 872 (N.D.Ill.1967). Appellants have not alleged any affirmative conduct so their claim against the appellees obviously is grounded upon nonfeasance. But no Board member or the Chief is alleged to have been present at this incident or to have had the duty, opportunity, or the ability to intervene in order to prevent Noffke’s alleged unreasonable search and seizure of Mrs. Jennings. And to extend the general duty of these appellees to prudently select, educate and supervise police department employees to an isolated, spontaneous incident such as this would be beyond reason. CARR and LEWIS Carr was the Desk Sergeant and Lewis a patrolman who the complaint alleged were both present at the 63d street station when Noffke seized and searched Mrs. Jennings. Nothing further is alleged in the complaint with respect to these police officers. While the complaint against these appellees might be sufficient to withstand a motion to dismiss under a negligence theory, as previously indicated we here treat the motion as one for summary judgment. Carr in his affidavit stated that he was neither involved in the incident nor was he “able to intervene between plaintiff and defendant Noffke at the time of the alleged occurrence.” The trial court thereupon issued an order for the appellants to show cause why the action should not be dismissed “In view of the absence of any factual allegations tending to implicate defendants ... in a deprivation of the federally-protected rights of Betsy Jennings.” In such instance, appellants could not then rest upon the mere allega-' tions of their pleadings, but should have “set forth specific facts showing that there is a genuine issue for trial.” See Rule 56(e). Since appellants did not so respond, summary judgment could appropriately be entered against them. We further find that the trial court did not abuse its discretion in dismissing the pendant state claims against the appellees. United Mine Workers of America v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). Affirmed. . Rule 12(b) reads in pertinent part: If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56. . It has not been shown that under the circumstances of this case, the doctrine could be applied in Missouri state courts. See 42 U.S.C. § 1988. . Both were bystanders at the incident and one or both may have had a duty to intervene (assuming the opportunity existed) in order to prevent the alleged deprivation of Mrs. Jennings’ constitutional right to be free from unreasonable searches and seizures. See, Byrd v. Brishke, 466 F.2d 6 (CA7 1972). See also, Via v. Cliff, 470 F.2d 271, 275-276 (CA3 1972). . Lewis in his affidavit admitted that he was present at the station but stated he “was in no way involved in any act directed toward plaintiff nor had he any supervisory authority.” . Rule 56(e) provides in pertinent part: [A]n adverse party may not rest upon the mere allegations of denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.

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John H. BEGLEY and Lawrence J. Sinnott, Plaintiffs-Appellees, v. FORD MOTOR COMPANY, Defendant-Appellant, and Empire Lincoln-Mercury, Inc., Defendant. No. 321, Docket 72-1775. United States Court of Appeals, Second Circuit. Argued Jan. 15, 1973. Decided April 12, 1973. William F. McNulty, New York City (Daniel J. Coughlin and Anthony J. McNulty, New York City, on the brief), for defendant-appellant Ford Motor Co. Harold M. Hershman, New York City (Murray Weitman, Marvin H. Leieher and Hershman & Leieher, New York City, on the brief), for plaintiff s-appellees. Before FRIENDLY, Chief Judge, and OAKES and TIMBERS, Circuit Judges. TIMBERS, Circuit Judge: Plaintiffs John H. Begley and Lawrence J. Sinnott commenced this diversity action in the Southern District of New York to recover damages for personal injuries sustained as the result of an automobile collision on the Connecticut Turnpike on April 22, 1966. Plaintiffs claimed that the 1965 Lincoln Continental in which they were riding home from work (Begley driving, Sinnott a front seat passenger) collided with the rear of another automobile, both proceeding eastbound, at the Greenwich toll station when the Lincoln’s brakes failed to operate. The brake failure allegedly was caused by defective brake fluid supplied by defendant Ford Motor Company (Ford) through one of its dealers, Eastman Motors of Greenwich (Eastman Motors), the brakes having been tested a month prior to the accident by-defendant Empire Lincoln-Mercury, Inc. (Empire). Plaintiffs’ claims - against Ford were based on negligence and breach of warranty in the manufacture of the brake fluid. After a five day jury trial before Lloyd F. MacMahon, District Judge, verdicts in favor of Begley and Sinnott in amounts of $25,000 and $14,000, respectively, were returned against Ford. The jury also returned a defendant’s verdict in favor of Empire. Only Ford has appealed. The issues raised on appeal are simple and straightforward. They involve the sufficiency of the evidence, the admissibility of certain expert testimony, and the propriety of portions of the jury charge. Finding no reversible error, we affirm. I. There was evidence at the trial from which the jury could have found as follows. The Lincoln involved in the accident was owned by Great Lakes Carbon Corporation, of which Sinnott was an officer and Begley an employee. The vehicle was assigned to Sinnott for his use. It had been purchased from Eastman Motors in April 1965. Shortly after the purchase, Sinnott on several occasions complained to the service department of Eastman Motors that the brakes would not function until the pedal was close to the floorboard. On October 19, 1965, Eastman Motors made certain modifications to the braking system of the vehicle. This was done pursuant to a General Sales Bulletin, referred to as “Campaign L65-07”, which Ford issued in September 1965 to its dealers and sales representatives. Sin-not took the vehicle back to Eastman Motors on January 11, 1966, at which time he complained that the brakes “were catching too close to the floor”. On the morning of March 21, 1966 — one month before the accident here involved —the vehicle experienced total brake failure on the East River Drive while in bumper to bumper traffic. It was taken to Empire’s service station in mid-Manhattan where the braking system was checked and some new brake fluid which had been furnished by Ford was added to the existing fluid. Employees of both Eastman Motors and Empire testified at the trial that they had received numerous complaints concerning the braking mechanism — particularly “a low brake pedal” — on other 1965 Lincoln Continentals. Plaintiffs’ principal witness at the trial was Roger Harvey, an expert in chemical engineering. Harvey had inspected the vehicle on May 25, May 27 and August 31, 1966, and had tested a specimen of brake fluid taken from the vehicle. He determined that the brake fluid contained 4.4 per cent water by volume which in his opinion indicated that the fluid was in a defective condition. He testified that, due to an excess of water, the boiling point of the brake fluid was only 250-280 degrees Fahrenheit rather than the normal 550 degrees. This meant, according to Harvey, that when the brakes became heated the water in the fluid would boil, thus creating a vapor lock in the hydraulic system; and the vapor lock would prevent the brakes from operating properly. II. Ford’s first contention is that plaintiffs failed to establish a prima facie case against it in either negligence or breach of warranty. Specifically, Ford argues that plaintiffs failed to show that the brake fluid which Harvey determined was defective was in that condition when supplied by Ford to its dealers. In short, Ford says that there was insufficient evidence for submission of the case to the jury. We disagree. After examining the record as a whole and viewing the proof in the light most favorable to plaintiffs, we are satisfied that the case was properly submitted to the jury. Park v. Village of Waverly, 457 F.2d 1139, 1140 (2 Cir. 1972), citing Hannan v. Schmitt, 18 A.D.2d 854, 855, 236 N.Y.S.2d 107, 108 (3d Dept. 1963) (court “must take the view of the proof most favorable to the verdict.”) Plaintiffs’ essential claim is that Ford breached its implied warranty that the brake fluid supplied to its dealers was fit for the purpose of bringing the vehicle to a halt under normal driving conditions. See Conn.Gen.Stat., §§ 42a-2-314 and 42a-2-315 (Rev.of 1958); Corneliuson v. Arthur Drug Stores, Inc., 153 Conn. 134, 136-40, 214 A.2d 676, 678-80 (1965); Torrance v. Durisol, Inc., 20 Conn.Supp. 62, 64-65, 122 A.2d 589, 591 (Super.Ct.1956) (breach of warranty); and Basko v. Sterling Drug, Inc., 416 F.2d 417, 424-29 (2 Cir. 1969); Mitchell v. Miller, 26 Conn.Supp. 142, 145-50, 214 A.2d 694, 696-98 (Super.Ct.1965) (strict tort liability). Plaintiffs adduced substantial evidence, through the testimony of Harvey, that the brake fluid which he tested was defective and not fit for the purpose of stopping the vehicle. Ford argues that, since brake fluid is hygroscopic (absorbs water), the water content of the fluid could have been increased after it left Ford’s possession, through no negligence of Ford, and before it was tested by Harvey. Viewing the evidence in the light most favorable to plaintiffs, as we must at this stage, plaintiffs adduced sufficient evidence to indicate that such absorption did not occur after the accident. Following the accident, the vehicle was kept inside a Greenwich garage. The sample tested by Harvey was first removed from the vehicle with a clean, dry battery syringe. An insurance investigator delivered the fluid to an attorney who, after marking it for identification, delivered it to Harvey in a clean, dry glass bottle sealed with a metallic cap. There also was evidence that it was the inherent characteristics of the fluid itself, and not water absorption, which caused the fluid to be defective. Harvey testified that in his opinion a substantial amount of water could not be absorbed; and that the water in the fluid came from a breakdown under heat and pressure of the ethers which made up the chemical composition of the fluid. There also was evidence of prior difficulties with this vehicle, as well as with other 1965 Lincoln Continentals, which were symptomatic of defective brake fluid. Such evidence, goes a considerable distance toward establishing that the fluid sold by Ford was defectiye. We are satisfied that there was sufficient evidence in support of each of the essential elements of plaintiffs’ case to warrant its submission to the jury. See Kridler v. Ford Motor Company, 422 F. 2d 1182, 1184 (3 Cir. 1970). We so hold. III. Ford next contends that the trial judge should have stricken the testimony of plaintiffs’ expert witness, Harvey, on the ground that no proper foundation had been laid for his testimony. We find no merit in this claim. Ford’s essential argument here is that there was insufficient evidence that the brake fluid tested by Harvey was the same fluid which was in the vehicle at the time of the accident. As we have stated above, there was evidence that the fluid tested was that removed from the vehicle. Moreover, there was evidence that the fluid was removed and transported in a manner which would not allow substantial absorption of water. While there was some conflicting evidence as to the chain of possession of the jar and as to the cleanliness of the equipment used, that goes to the weight rather than the admissibility of the evidence. Scott v. Spanjer Bros., Inc., 298 F.2d 928, 931-32 (2 Cir. 1962); Kridler v. Ford Motor Company, supra, 422 F.2d at 1186-87; Obolensky v. Saldana Schmier, 409 F.2d 52, 55 (1 Cir. 1969). A trial judge necessarily has broad discretion in determining the adequacy of the foundation for expert testimony, and particularly the point in the trial when such foundation becomes adequate. We are satisfied that the trial judge here did not abuse his discretion in denying Ford’s motion to strike the testimony of plaintiffs’ expert witness. IV. Ford’s final contention is that the trial judge’s charge was so confusing and prejudicial as to require a new trial. We disagree. The court did state at several points in its charge that the jury might find that the brake mechanism was defective. In discussing the claim of negligence, for example, the court said, “I do not say . . . that these brakes were defective, but that is the question essentially which you have to decide.” And on the breach of warranty claim, the court instructed the jury that “you have to ask yourself whether this brake was defective because Ford Motor Company failed to exercise a reasonable degree of care to make sure that this product was reasonably fit for its intended use.” In response to the exception taken by Ford’s counsel at the conclusion of the charge, the court gave the following brief supplemental instruction: “Counsel has called my attention to the fact that I said to you, ‘[I]f you find that the brake mechanism was defective, you could find negligence or breach of warranty’. It is true that the only evidence in this case is that the mechanism itself was not defective. There was some testimony to the effect that the fluid was wrong fluid, that it boiled at too low a boiling point and formed a vapor lock which caused brake failure. That is my recollection. Of course it is your recollection that controls.” Since there was no evidence as to any defect in the braking system other than the defective brake fluid, Ford contends that the court’s charge improperly permitted the jury to find such a defect. We do not agree. The charge taken as a whole properly instructed the jury that plaintiffs’ claim was that the braking system, of which the brake fluid was an integral part, was defective. Although at times the court referred generally to defective brakes and a defective brake mechanism, it was made clear that the only basis in the evidence for plaintiffs’ claims of negligence and breach of warranty was the defective brake fluid. Furthermore, since the main charge came immediately after the summations of counsel, the jury surely knew, even before the court’s charge, that plaintiffs’ claims related only to the defective brake fluid. It was well within the trial judge’s discretion in charging the jury not to superimpose a further summary of the essential claims of the parties. We hold that the trial judge correctly charged the jury. Affirmed. . Ford was subpoenaed to bring to the trial in May 1972 its records of complaints concerning the braking mechanism on the 1965 Lincoln Continentals. Frank Graves, of the Inspection Service Division of Ford, testified that records of complaints more than two years old had been destroyed and no" record had been kept of documents destroyed. Ford was aware that the instant lawsuit had been commenced on April 21, 1967, within one year of the accident. . In the instant case, as in Park v. Village of Waverly, supra, 457 F.2d at 1140 n. 1, the parties agree that state law should be applied in determining whether the case should have been submitted to the jury. In the context of motions in diversity cases for a directed verdict or for judgment n. o. v., both the Supreme Court and our Court have declined to decide whether the state or federal standard as to the sufficiency of the evidence is controlling. See Simblest v. Maynard, 427 F.2d 1, 4-5 (2 Cir. 1970), and authorities there cited. Compare Boeing Company v. Shipman, 411 F.2d 365 (5 Cir. 1969) (en banc). Since the New York courts would regard this as a procedural question on which they would apply their own law, it is appropriate here to rely on the New York standard. As in Park v. Village of Waverly, supra, there is no contention that application of the federal rather than the state standard would require a different result. . There appears to have been no evidence adduced at trial tending to show that Ford had not exercised reasonable care in the manufacture or testing of the brake fluid. It therefore was error for the court to send the negligence cause of action to the jury with the instructions it gave. Nevertheless, we are satisfied that this was harmless error. The court’s instructions on negligence and breach of warranty were virtually identical, except for the additional element in the negligence action of a need to prove lack of reasonable care. The jury could not have found for the plaintiffs on the negligence theory without also finding a breach of warranty. . Since the defective brake fluid apparently was sold to plaintiffs in Connecticut, Connecticut law governs in determining what must be shown by plaintiffs to recover against Ford, assuming the breach of warranty action is a contract action. Even if the action is regarded as sounding in tort, Connecticut law would apply since the accident occurred in Connecticut and involved Connecticut residents. Although it appears that the brake fluid was manufactured outside the state, we consider Connecticut’s contacts to be more significant. See Pearson v. Northeast Airlines, Inc., 309 F.2d 553 (2 Cir. 1962) (en banc); McQuaide v. Bridgeport Brass Company, 190 F.Supp. 252 (D.Conn. 1960); Babcock v. Jackson, 12 N.Y.2d 473, 240 N.Y.S.2d 743, 191 N.E.2d 279 (1963). . Ford argues, as a related claim, that allowing Harvey to testify subject to connection impaired Ford’s ability to cross-examine him. New aspects of the trial of a case are more clearly within the discretion of the judge than the order of proof. It is not uncommon to allow a party to offer evidence subject to connection. We find no abuse of discretion in that respect here. See McCormick on Evidence § 58 (1954). . Counsel for Ford failed to submit any requests to charge before his summation and before the court charged the jury. It was not until after the charge had been given that counsel for Ford submitted his requests to charge. This late submission failed to comply with Fed.R.Civ.P. 51, which requires that if requests to charge are to be submitted that must be done at the close of the evidence. The late submission here also ignored the specific order of the court that requests to charge be submitted before the opening of the trial.

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Herminio H. GALLEGOS, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee. No. 72-1851. United States Court of Appeals, Fifth Circuit. May 24, 1973. Rehearing Denied June 19, 1973. John Hugh Buck, Houston, Tex., (Court-appointed), for petitioner-appellant. William S. Sessions, U. S. Atty., San Antonio, Tex., Ronald F. Ederer, Asst. U. S. Atty., El Paso, Tex., for respondent-appellee. Before JOHN R. BROWN, Chief Judge, and WISDOM, GEWIN, BELL, THORNBERRY, COLEMAN, GOLDBERG, AINSWORTH, GODGOLD, DYER, SIMPSON, MORGAN, CLARK, IN-GRAHAM and RONEY, Circuit Judges. PER CURIAM: The Government has confessed error in the use of the supplemental information filed in the district court based upon a violation of 26 U.S.C.A. § 2593(a) in view of the privilege against self-incrimination. The opinion of a panel of this Court published September 14, 1972, 466 F.2d 740, is therefore withdrawn and the cause is remanded to the district court for such further proceedings as may be appropriate. GOLDBERG, Circuit Judge, with whom JOHN R. BROWN, Chief Judge, joins, specially concurring: Without any semblance of reluctance, I concur in the remand of this case for the reasons set forth in the per curiam opinion of the en banc court. I would only add, without intimating any necessity therefor, that my concurrence is predicated upon the proposition that the per curiam opinion neither confirms nor repudiates the original panel opinion reported at 466 F.2d 740. . The en banc court thus remands at this time only on the third of the three grounds on which the original panel remanded the case. See 466 F.2d at 742.

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James E. BAKER et al., Petitioners-Appellants, v. Dr. George J. BETO, Director, Texas Department of Corrections, Respondent-Appellee. No. 72-2471. United States Court of Appeals, Fifth Circuit. May 14, 1973. James DeAnda, Philip Kent Maxwell, Corpus Christi, Tex., Ed Idar, Jr., San Antonio, Tex., Frances T. Cruz, Houston, Tex., Mario Obledo, Alice Daniel, William Bennett Turner, San Francisco, Cal., for petitioners-appellants. Crawford Martin, Atty. Gen., W. Barton Boling, Asst. Atty. Gen., Austin, Tex., for respondent-appellee. John W. Clark, Jr., Dallas, Tex., for American Bar Assn., amicus curiae. 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: The Court on its own motion having determined to consider this cause en banc, It is ordered that the submission of this cause to a panel of Judges Goldberg, Ainsworth and Ingraham on December 6, 1972 is hereby vacated, and that the above entitled cause shall be heard en banc on briefs with oral argument at a date hereafter to be fixed. The Clerk shall set a briefing schedule for the filing of supplemental briefs.

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J. D. SANDERS, Petitioner-Appellant, v. W. J. ESTELLE, Director, Texas Department of Corrections, Respondent-Appellee. No. 73-1335 Summary Calendar. United States Court of Appeals, Fifth Circuit. May 23, 1973. Alan S. Dale, Houston, Tex. (Court-appointed), for petitioner-appellant. John L. Hill, Atty. Gen., E. Bruce Curry, Asst. Atty. Gen., Austin, Tex., for respondent-appellee. Before BELL, GODBOLD and INGRAHAM, 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. PER CURIAM: Appellant, a Texas state prisoner serving life for murder with malice, assigns as error only four of the several contentions previously asserted in three separate federal habeas petitions. The assignments of error are based on two instances of alleged improper and prejudicial argument by the state prosecutor ; the failure of the state trial court to make available to appellant the transcript of the testimony of a witness before the grand jury so as to develop inconsistencies in the trial testimony of the witness; and lastly, the concealment of exculpatory evidence by the state. The district court found no merit in these contentions. We conclude that the findings of fact and conclusions of law entered by the district court against appellant are amply supported in fact and in law. The judgment against appellant is therefore due to be and it is

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Henry Buford HUDSON, Plaintiff-Appellant, v. NATIONAL SOCIAL SECURITY PROGRAM and Weinberger, Caspar W., Secretary of Health, Education and Welfare, Defendants-Appellees. No. 73-1540 Summary Calendar. United States Court of Appeals, Fifth Circuit. June 1, 1973. Rehearing Denied June 14, 1973. Henry Buford Hudson, pro se. Anthony J. P. Farris, U. S. Atty., Helen M. Eversberg, Robert Darden, Asst. U. S. Attys., Houston, Tex., for defendants-appellees. Before WISDOM, AINSWORTH and CLARK, Circuit Judges. Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of N. Y., 431 F.2d 409, Part I (5th Cir. 1970). PER CURIAM: This appeal is frivolous and entirely without merit. It is therefore Dismissed. . See Local Rule 20.

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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. May 30, 1973. Roland R. Parent, Miami, Fla., Joseph J. Magrath, New York City, for defendants-appellants. Adams, George & Wood, Miami, Fla., for Atlantic Mut. Thomas J. Schulte, Suarez, Carricate & Freire, Miami, Fla., for Int’l Fwdrs. Before BELL and THORNBERRY, Circuit Judges, and GROOMS, District Judge. ON PETITION FOR REHEARING PER CURIAM: Appellee urges on petition for rehearing that it proceeded in the district court on its insurable security interest as a creditor or lien holder, U.C.C., Article 2, § 501 (2), or in the alternative, as assignee from the buyer for the purpose of collecting the claim against the insurance company. Our prior decision in this matter is premised on the supposition that appellee had no insurable interest in the shipment, whether by title or security interest and thus lacked standing. It is implicit in our decision that the insurance was purchased for the buyer to accommodate the C.I.F. shipment by appellee, the seller, and not for appellee’s own interest. It is now apparent that the principal question in the ease and one that has not been answered is whether appellee was insured at all. If so, the subsequent question will be to identify such insurable interest as appellee may have, if any. So that these questions may be reached we vacate our holding that appellee lacked standing as well as the judgment of the district court and remand with direction that these questions be determined. Vacated and remanded with direction. . 19A Florida Stat.Ann. § 672.2-501(2): “The seller retains an insurable interest in goods so long as title to or any security interest in the goods remains in him . . .” . 474 F.2d 8 (5 Cir., 1973).

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AK-SAR-BEN PIZZA HUT, etc., et al., Appellants, v. STATE OF NEBRASKA DEPARTMENT OF ROADS, Appellees. No. 73-1028. United States Court of Appeals, Eighth Circuit. Submitted May 18, 1973. Decided May 18, 1973. Royce N. Harper, Sp. Asst. Atty. Gen., Lincoln, Neb., for appellants. D. Nick Caporale, Omaha, Neb., for appellees. Before MATTHES, Chief Judge, and LAY and STEPHENSON, Circuit Judges. ORDER BY THE COURT. Upon due consideration of the proceedings in the district court, the briefs of the parties and argument of counsel, the court is convinced that the district court lacked jurisdiction of the subject matter of this action in that there was not a substantial federal question involved and no other basis for federal jurisdiction. Accordingly, the judgment granting the temporary injunction is reversed and the cause is remanded with directions to the district court to forthwith vacate the temporary injunction and dismiss the action for lack of jurisdiction. Our mandate shall issue immediately.

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COMMITTEE TO SAVE NORTH DAKOTA, INC., et al., Appellants, v. Rogers C. B. MORTON, etc., et al., Appellees. No. 73-1198. United States Court of Appeals, Eighth Circuit. Submitted May 18, 1973. Decided May 18, 1973. Bruce E. Bohlman, Grand Forks, N. D., for appellants. Terrence L. O’Brien, Atty. Dept, of Justice, Washington, D. C., for appellees. Before MATTHES, Chief Judge, and LAY and STEPHENSON, Circuit Judges. ORDER BY THE COURT. This cause is pending before the court on an appeal from the order of the United States District Court denying a temporary injunction. The appellants have filed a motion to remand or in the alternative for an injunction pending disposition of the appeal. Upon due consideration of the files and the papers before the court, and after hearing oral argument of counsel, it is ordered that the motion for an injunction addressed to this court should be and the same is denied. It is further ordered that the cause be remanded to the United States District Court with directions to promptly hear evidence on any motions which the plaintiffs may file, including a motion for a temporary injunction and for an order staying the awarding of any future construction contracts until such time as the court may have an opportunity to hear the case on the merits and to grant appropriate relief.

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Guadalupe GUAJARDO, Jr., Plaintiff-Appellee, v. Dr. George J. BETO, Director, Texas Department of Corrections, Defendant-Appellant. No. 72-3351. United States Court of Appeals, Fifth Circuit. May 14, 1973. John L. Hill, Atty. Gen., Gilbert J. Pena, Asst. Atty. Gen., Austin, Tex., for defendant-appellant. Richard J. Trabuls, Harry Reasoner, Houston, Tex. (court-appointed), for plaintiff-appellee. Jack Greenberg, Stanley A. Bass, New York City, amicus curiae. 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: The Court on its own motion having determined to consider this cause en banc, It is ordered that the above entitled cause shall be heard en banc with oral argument on a date hereafter to be fixed.

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Guadalupe GUAJARDO, Jr., Petitioner-Appellant, v. C. L. McADAMS, Warden, Wynne Unit, Texas Department of Corrections, Respondent-Appellee. No. 73-1497. United States Court of Appeals, Fifth Circuit. May 14, 1973. Harry Reasoner, Richard J. Trabulsi, Houston, Tex. (Court-appointed), for petitioner-appellant. John L. Hill, Atty. Gen., Gilbert J. Pena, Asst. Atty. Gen., Austin, Tex., for respondent-appellee. 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: The Court on its own motion having determined to consider this cause en banc, It is ordered that the above entitled cause shall be heard en banc with oral argument on a date hereafter to be fixed.

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James E. CUNNINGHAM, Petitioner-Appellant, v. Jim ROSE, Warden, Defendant-Appellee. No. 72-1954. United States Court of Appeals, Sixth Circuit. Argued April 20, 1973. Decided May 17, 1973. Marvin Berke, Chattanooga, Tenn. (Court-appointed), for petitioner-appellant. R. Jackson Rose, Asst. Atty. Gen., Nashville, Tenn., for defendant-appellee; David M. Pack, Atty. Gen., of counsel. Before CELEBREZZE, PECK and KENT, Circuit Judges. PER CURIAM. This is an appeal from the denial of a writ of habeas corpus. The appellant was convicted of rape. The jury imposed the death sentence which was commuted to a 99-year term by the Governor of Tennessee. All the issues presented were carefully considered by District Judge Frank W. Wilson, and disposed of in a carefully prepared opinion. Judge Wilson concluded in his opinion that the admission of the confessions of each of the four defendants was error within the meaning of Bruton v. United States, 391 U.S. 123, 88 S.Ct. 1620, 20 L.Ed.2d 476 (1968), but that such error was harmless. Schneble v. Florida, 405 U.S. 427, 92 S.Ct. 1056, 31 L.Ed.2d 340 (1972). We are not satisfied that the use of the confessions under the circumstances of this case was in fact error within the meaning of Bruton, but conclude that if there was such error the District Judge was eminently correct in concluding that on this trial record the error was harmless. Judgment affirmed.

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Charles W. HOBACK, Petitioner-Appellee, v. STATE OF ALABAMA, Respondent-Appellant. No. 72-2805. United States Court of Appeals, Fifth Circuit. May 18, 1973. William J. Baxley, Atty. Gen., Herbert H. Henry, Asst. Atty. Gen., Montgomery, Ala., for respondent-appellant. Frank W. Riggs, Montgomery, Ala., for petitioner-appellee. Before WISDOM, DYER and INGRAHAM, Circuit Judges. PER CURIAM: The district court was correct in granting the petition for writ of habeas corpus. Affirmed. . The conditions attached by the district court to the granting of the writ are not before us on appeal, and we are therefore not called upon nor do we pass judgment upon them.

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PANDUIT CORPORATION, Plaintiff-Appellee, v. STAHLIN BROS. FIBRE WORKS, INC., Defendant-Appellant. Nos. 72-1479, 72-2032. United States Court of Appeals, Sixth Circuit. Argued April 12, 1973. Decided May 22, 1973. John D. Simpson, A. James Valliere, Hill, Sherman, Meroni, Gross & Simpson, Chicago, Ill., Richard L. Spindle, W. K. Van’t Hof, Schmidt, Heaney, Howlett & Van’t Hof, and Schmidt, Smith & Howlett, Grand Rapids, Mich., for defendant-appellant. Roy E. Petherbridge, John M. O’Neill, Petherbridge, O’Neill & Lindgren, Chicago, Ill., Randall G. Litton, Price, Heneveld, Huizenga & Cooper, Grand Rapids, Mich., for plaintiff-appellant. Before PECK, McCREE and KENT, Circuit Judges. PER CURIAM. These appeals relate to the alleged infringement of a patent which the trial court had found to be valid and infringed in prior litigation between these parties. That judgment was affirmed. 298 F.Supp. 435 (W.D.Mich., 1969), aff’d. 430 F.2d 221 (6th Cir. 1970), cert. denied 401 U.S. 939, 91 S.Ct. 932, 28 L.Ed. 2d 218 (1971). The proceedings resulting in these appeals involved the appellee’s challenge to certain modifications of the appellant’s device made in an effort to avoid the claims of the patent previously found to be valid. The trial court concluded that there was infringement of the patent by the modified device and found the appellant in contempt of court. We conclude that the District Judge’s findings were free from error. Appellant now claims that it was prevented from introducing evidence of pri- or art and further claims that the trial court did not consider the pertinent prior art. A careful examination of the transcript of the trial convinces us that these claims are completely without merit. For the reasons herein stated and for the reasons stated in the opinion of District Judge Noel P. Fox, 338 F.Supp. 1240 (1972), the judgment of the District Court is affirmed.

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David BUCKNER et al., Plaintiffs-Appellants, v. GOODYEAR TIRE AND RUBBER COMPANY et al., Defendants-Appellees. No. 72-2697. United States Court of Appeals, Fifth Circuit. May 17, 1973. David H. Hood, Jr., Bessemer, Ala., Nathaniel Jones, New York City, for plaintiff s-appellants. William F. Gardner, Birmingham, Ala., Clarence F. Rhea, Gadsden, Ala., for defendants-appellees. Before BELL, DYER and INGRAHAM, Circuit Judges. PER CURIAM: We affirm the judgment of the district court and adopt its carefully considered and well-written opinion, 339 F.Supp. 1108. Affirmed.

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Buddy Lloyd COX et al., Plaintiffs-Appellants, v. INTERNATIONAL LONGSHOREMEN’S ASSOCIATION; LOCAL 1273, et al., Defendants-Appellees. No. 72-3194. United States Court of Appeals, Fifth Circuit. May 18, 1973. Anthony J. P. Farris, U. S. Atty., James G. Gough, Wayne H. Paris, Asst. U. S. Attys., Houston, Tex., Walter H. Fleischer, Thomas J. Press, Morton Hollander, Attys., Dept, of Justice, Washington, D. C., for plaintiffs-appellants. Chris Dixie, Robert Eikel, Houston, Tex., for defendants-appellees. Before WISDOM, DYER and INGRAHAM, Circuit Judges. PER CURIAM: We are in agreement with the well reasoned opinion of the district court, Cox, et al. v. International Longshoremen’s Association, Local 1273, et al., 343 F. Supp. 1292 (S.D.Tex., 1972), and its judgment is affirmed.

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Otis MINAFEE, Petitioner-Appellant, v. Clarence JONES, Sheriff, Dallas County Jail, Texas, et al., Respondents-Appellees. No. 72-3114 Summary Calendar. United States Court of Appeals, Fifth Circuit. May 17, 1973. E. Eldridge Goins, Dallas, Tex. (Court-appointed), for petitioner-appellant. Henry Wade, Crim. Dist. Atty., John B. Tolle, Asst. Dist. Atty., Dallas, Tex., John L. Hill, Atty. Gen., Austin, Tex., for respondents-appellees. Before WISDOM, AINSWORTH and CLARK, 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: In this habeas corpus proceeding involving a Texas state conviction for robbery with firearms, appellees state in their brief to this Court that they were not required by the district court to respond to appellant’s application for habeas corpus and did not make an appearance in district court. They agree that the case is governed by our prior holding in Gerzin v. Beto, 5 Cir., 1972, 459 F.2d 671, and aver that appellant’s brief raises several questions which are not in the record before this Court. They contend that there is also a substantial question not raised by appellant and that is whether or not appellant has exhausted his available state remedies. Finally, appellees agree that this cause should be remanded to the district court for proper determination of these questions. Under the circumstances it is proper that the cause be remanded to the district court for further proceedings. Vacated and remanded to the district court for further proceedings.

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Harrison VIGER, Plaintiff-Appellee, v. GEOPHYSICAL SERVICES, INC., et al., Defendants-Appellants, Hanover Insurance Company et al., Defendants-Appellees. No. 72-3594 Summary Calendar.* United States Court of Appeals, Fifth Circuit. April 19, 1973. Rehearing and Rehearing En Banc Denied June 12, 1973. Boris F. Navratil, Baton Rouge, La., for defendants-appellants. W. Garney Griggs, Houston, Tex., for appellees. Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges. PER CURIAM: We are not persuaded that in this seaman’s suit for damages, maintenance and cure the district court’s findings of fact are clearly erroneous. Nor do we perceive any error in the legal principles applied by the district court which led to the conclusion of liability on the part of Continental Insurance Company as insurer of the time charterer Geophysical Services, Inc. We therefore approve and adopt the opinion of the district court, D.C., 338 F.Supp. 808. Affirmed. . We are not called upon to consider the impact of the Oceanographic Research Vessels Law, 46 U.S.C.A. § 441 et seq., because it was neither raised nor considered by the district court.

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Louis A. LAPIDES, Plaintiff-Appellee, v. ARMORFLEX CHEMICAL CORPORATION, Defendant, Albert D. Greenfield et al., Movants-Appellants. No. 72-2032. United States Court of Appeals, Fifth Circuit. May 17, 1973. Ralph H. Bearden, Jr., Miami, Fla., for appellants. Lawrence G. Nusbaum, Hollywood, Fla., for appellee. Before BELL, GOLDBERG and SIMPSON, Circuit Judges. PER CURIAM: The judgment denying .the motion to quash the levy in this matter is affirmed. The stock which is the subject matter of the levy in question was being held in trust to secure indebtedness due appellants, appellee, and others by the judgment debtor. Appellee Lapides obtained the judgment which gave rise to the levy by suit on the portion of the debt due him. Our affirmance is without prejudice to appellants’ and other beneficiaries under the trust seeking relief in the district court as to the subject matter of the levy on the basis of their respective interests, if any, in the debt pro tanto to the interest of Lapides as his interest is reflected in the judgment.

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The UNITED STATES of America v. The CREEK NATION. Appeal No. 8-72. United States Court of Claims. April 13, 1973- Paul M. Niebell, Washington, D. C., attorney of record, for appellee. Roberta Swartzendruber, Washington, D. C., with whom was Asst. Atty. Gen. Kent Frizzell, for appellant. Before COWEN, Chief Judge, DURFEE, Senior Judge, and DAVIS, SKELTON, NICHOLS, KUNZIG and BENNETT, Judges. DURFEE, Senior Judge. The United States, defendant-appellant, has taken an interlocutory appeal from a decision and Interlocutory Order of the Indian Claims Commission, 26 Ind.Cl.Comm. 410 (1971), Commissioner Blue separately concurring and Commissioner Kuykendall dissenting. In its petition plaintiff claimed additional compensation under Section 2, Clauses 3 or 5 of the Indian Claims Commission Act of 1946 for 5,200,000 acres of land in AÍabama which it ceded to the United States by the Treaty of March 24, 1832, 7 Stat. 366. The Creeks have a compensable interest in the 5,-200,000 acres of land; title is not in issue. The principal consideration for this land was some 2,187,200 acres of the same land reserved from the cession for the temporary use, and promised fee title possession (or value thereof), by individual Creek chiefs and family heads. Agreeing with plaintiff on both theories of recovery advanced, the Commission ruled that the United States as a matter of law was liable for the fair market value of the full 5,200,000 acres of land ceded, thereby holding appellant liable for the value of the 2,187,200 acres of the cession which were reserved for chiefs and family heads of the Creek Nation. The United States “is not objecting to paying the difference between the treaty consideration and fair market value of the 3,012,800 acres not returned to the individual Creeks.” Rather, appellant argues, and the dissenting opinion agrees, that the land which the treaty reserved to chiefs and family heads should have been excluded from the area for which the Comission granted compensation, and that plaintiff cannot claim additional compensation for these lands selected by individuals. Two issues are presented: (1) whether the Commission erred in holding that the Creek claim with regard to the 2,-187,200 acres was not barred by collateral estoppel due to a prior decision, Creek Nation v. United States, 77 Ct.Cl. 226 (1933), based upon the Creek Jurisdictional Act of 1924, 43 Stat. 139; and (2) whether error was made in holding that the part of the claim disputed is not a composite of individual Indian claims but rather a tribal claim within the jurisdiction of the Commission and this court. We affirm. Before considering the issues, it is necessary to state what this appeal does not involve. Appellant has not disputed any of the findings of the Commission on grounds of lack of substantial evidence. Therefore, we take these findings as conclusive to the extent not inconsistent with the findings in the 1933 Creek case as hereafter explained. Although the Government has argued that the legal conclusion of a lack of fair and honorable dealings is not supported by the facts, we find no merit to this argument given the findings of the Commission. The history of the Creeks pertinent to our decision follows. In the year 1790 the Creek Nation exercised the right of occupancy over a wide area of land located in a part of the present States of Alabama, Georgia and Mississippi. Such right of occupancy was recognized by the United States. By various treaties thereafter made the Creeks ceded most of their tribal domain to the United States, and in 1826 were confined to a comparatively small domain in eastern Alabama and western Georgia. By Treaty of January 24, 1826, proclaimed April 22, 1826, the Creek Nation ceded to the United States all of its domain located in the State of Georgia. After the Treaty of 1826, these Indians were confined to a small domain in eastern Alabama, containing about 5,200,000 acres. As additional consideration for the cession of tribal lands in 1826, the United States agreed to purchase lands west of the Mississippi River where a portion of the Creek Nation intimated it would settle. About 1827 or 1828 some of the Creeks did move to and settle upon lands west of the Mississippi in Indian Territory assigned the Creek Nation along and between the Verdigris, Arkansas, and Canadian Rivers. Thereafter, in the Federal Government’s view “[t]he extension of the state laws of Alabama to include the Creek area and the influx of white settlors made it necessary that the (remaining) Creek Indians should remove west of the Mississippi.” At about this point in time begins the sequence of events which the Commission found determinative in establishing a lack of fair and honorable dealings, and afforded evidence of duress and unconscionable consideration. In 1829 the State of Alabama, which had achieved statehood in 1819, extended its jurisdiction over the Creek country and divided the Indian land into counties. In 1831 the Alabama legislature incorporated a town within the Creek country as white men settled in Indian territory. On the 16th of January 1832, the civil and criminal jurisdiction of Alabama was extended over all the Indian territory within her limits. The courts of revenue and roads were enjoined to establish such highways, bridges, and ferries, within the territory in which the Indians might live, as they should think the public good required. * * * All laws and customs used, enjoyed, and practiced by the Creeks within the limits of the State, contrary to her constitution and laws, were abolished. And it was further enacted that if the Indians should meet in council, and make any laws for the tribe contrary to the laws and constitution of Alabama, such Indians should, upon conviction, be imprisoned in the common jail of the county. * * * These laws excited the animosity of all the Indians, but more especially that of the chiefs. They destroyed their oligarchical form of government, and struck down their power at a blow. * * * Roads were to be cut in every direction through their territory; white men were permitted to purchase and take possession of their improvements. * * * There is no doubt, and appellant has not disputed, that these intrusions by the State of Alabama were contrary to Federal law. Cf. Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 8 L.Ed. 483 (1832). The Federal Government had ample authority under the intercourse law of March 30, 1802, 2 Stat. 139, to protect the Creek Nation from physical intrusion upon Creek lands by white settlers. Consistent with its own policy of Indian removal from the East, the Federal Government determined it would not oppose Alabama’s actions. The press of white settlers to overtake Indian lands in the Eastern United States had found expression in a formal declaration of policy by Congress in the Act of May 28, 1830, 4 Stat. 411, that Indian tribes were to be removed from their ancestral homes in the East to lands west of the Mississippi River by seeking agreement of tribes for the exchange of their eastern lands for lands in the West. As a coercive inducement to obtain the agreement of the Creeks, the Federal Government told the Creeks that it was powerless to prevent the extension of the Alabama laws over (and as a consequence thereof the influx of white settlers into) Creek lands. Secretary of War John H. Eaton on May 30, 1829, instructed General William Carroll in this manner : A crisis in our Indian affairs has arrived. Strong indications are seen of this in the circumstances of the legislatures of Georgia and Alabama extending their laws over the Indians within their respective limits. * * * The President is of the opinion that the only mode left for the Indians to escape the effects of such enactments, and consequences more destructive, and which are consequent on their contiguity to the whites, is for them to emigrate. * * * * * * * * * * * [Ascertain upon whom, as pivots, the will of the Cherokees and Creeks turns. * * * Open to each a view of his danger and the danger that threatens his people. This may be made up of references * * * to the inefficiency of their own laws for their advancement; and finally, to the fact that these will be superseded and trodden under by the exercise over them of the laws of the States. [Emphasis added.] Further evidence of this misrepresentation, tantamount to duress, which propelled the Creeks toward giving up the bulk of their remaining tribal lands, is contained in a letter dated November 1, 1831, from Secretary of War Lewis Cass to the Creek Chiefs: Your great father, the President, has not unlimited power. He is bound by the Constitution and laws, and after examining these, he is satisfied, that he can not prevent the States from this exercise of their authority. So long, however, as they refrained from doing this, the General Government took charge of your whole concerns. But the State of Alabama having now included you in the great mass of her citizens, I trust you will yield careful obedience to her laws. It should be remembered that the Creeks who had remained in Alabama after 1828 had a fixed intention to remain there rather than move West. The Alabama land was the last enclave of ancestral lands left to the Creeks and the religious significance of the land cemented the Creek intention to remain there. In April 1831 the Creek Chiefs wrote to the Secretary of War: With considerable reluctance, we have been compelled to refuse a compliance with his (the President’s) wishes toward removing to the west; our aged fathers and mothers beseech us to remain upon the land that gave us birth, where the bones of their kindred are buried, so that when they die they may mingle their ashes together. They view a removal as the worst evil that can befall them. In December 1831 the Creeks sent a delegation to Washington to request that white intruders be removed and that the laws of Alabama not operate over them. They received no relief. In an apparent concession to the steadfast intention of the Creeks to remain in Alabama, the Federal Government advanced the idea to the Creek Chiefs that each chief and each Creek head of family in Alabama would be given fee simple title to separate sections of the ancestral lands. This idea of promising fee title to individual members of the tribe in return for a tribal cession of the 5,200,000 acres was the outgrowth of the strategy of removal first enunciated by President Andrew Jackson in an address to the Creeks on March 23,1829, when he said: I have sent my agent and your friend, Col. Crowell, * * * to consult with you upon the subject of your removing to the land I have provided for you west of the Mississippi. * * * Should any incline to remain and come under the laws of Alabama, land will be laid off for them and their families in fee. Col. John Crowell, who had the confidence of the Creek Chiefs, discussed the presentation to the Creeks of the idea of individual reservations in a letter to Secretary of War Cass, dated January 25, 1832: Sir: I had an interview with the two head chiefs of this (Creek) nation yesterday and explained to them fully (as I have frequently done) their situation; and as they still seemed determined not to come into any arrangement with the Government, which had for its object their removal west of the Mississippi, I advised them to make a proposition to the Government for reservations of land to be granted to the heads of each family in fee, as the only mode by which they could be protected where they now are; * * * [Emphasis added.] The Creek Nation acquiesced in the individual reserve arrangement only because, in the words of the Commission, * * * jt anticipated that the provision for individual reservations would allow tribal members to remain on land which they held sacred.” 26 Ind.Cl. Comm. 410, 465. Indian Agent Crowell wrote to Secretary of War Cass on March 20, 1832: I have been in council with the delegation, and explained your basis of an arrangement in relation to reservations, and at one time had lost all hope of getting them to agree to anything like your propositions; but they have finally come to the conclusion that they will agree to your basis in relation to reserves, * * * [Emphasis added.] The treaty was concluded on March 24, 1832, 7 Stat. 366, and was ratified and proclaimed on April 4, 1832, from The which date it became effective, most important provisions follow: Article I. The Creek tribe of Indians cede to the United States all of their land, East of the Mississippi river. Article II. The United States engage to survey the said land as soon as the same can be conveniently done, after the ratification of this treaty, and when the same is surveyed to allow ninety principal Chiefs of the Creek tribe to select one section each, and every other head of a Creek family to select one half section each, which tracts shall be reserved from sale for their use for the term of five years, unless sooner disposed of by them. A census of these persons shall be taken under the direction of the President and the selections shall be made so as to include the improvements of each person within his selection, if the same can be so made, and if not, then all the persons belonging to the same town, entitled to selections, and who cannot make the same, so as to include their improvements, shall take them in one body in a proper form. And twenty sections shall be selected, under the direction of the President for the orphan children of the Creeks, and divided .and retained or sold for their benefit as the President may direct. Provided however that no selections or locations under this treaty shall be so made as to include the agency reserve. Article III. These tracts may be conveyed by the persons selecting the same, to any other persons for a fair consideration, in such manner as the President may direct. The contract shall be certified by some person appointed for that purpose by the President, but shall not be valid ’till the President approves the same. A title shall be given by the United States on the completion of the payment. Article IV. At the end of five years all the Creeks entitled to these selections and desirous of remaining shall receive patents therefor in fee simple, from, the United States. Article V. All intruders upon the country hereby ceded shall be removed therefrom in the same manner as intruders may be removed by law from other public land until the country is surveyed, and the selections made; excepting however from this provision those white persons who have made their own improvements, and not expelled the Creeks from theirs. Such persons may remain ’till their crops are gathered. After the country is surveyed and the selections made, this article shall not operate upon that part of it not included in such selections. But intruders shall, in the manner before described, be removed from these selections for the term of five years from the ratification of this treaty, or until the same are conveyed to white persons. *■ * •» * -X- * Article XII. The United States are desirous that the Creeks should remove to the country west of the Mississippi, and join their countrymen there; and for this purpose it is agreed, that as fast as the Creeks are prepared to emigrate, they shall be removed at the expense of the United States, and shall receive subsistence while upon the journey, and for one year after their arrival at their new homes — Provided however, that this article shall not be construed so as to compel any Creek Indian to emigrate, but they shall be free to go or stay, as they please. It should be noted that Article II of the Treaty does not give outright fee title to each chief or family head. Rather, Article II gives to each chief and family head the “use” of the selected section or half section for a term of five years with the option to sell, retaining the proceeds, and, according to Article III in the event of such a sale the seller of the tract is assured a “fair consideration.” After five years of use, the individual Indian chief or family head would receive fee title, assuming he had not sold the land. After proclamation of the Treaty of April 4, 1832, the surveying and location of the Creek reserves began. Numerous intruders swarmed upon the land. Many Creeks were threatened away from their land by trespassers. “It does not appear, however, that the failure to remove these persons interfered seriously either with the survey of the land or the location of individual reserves to the Indians.” Creek Nation v. United States, 77 Ct.Cl. 226, 252 (1933). In the 1933 Creek decision, supra, at 252, the court concluded: * * * Plaintiff’s contention, therefore, that the failure of the Government to remove the intruders made the carrying out of the terms of the treaty an utter impossibility is not sustained in so far as Article II of the treaty is concerned. Following the negotiation of the Treaty of 1832 speculators formed companies and entered the Creek country with a view to purchasing individual Indian reservations. Many schemes were used to obtain these reserves. Offices for the certification of sales of reserves were set up in October 1833, pursuant to Article III of the Treaty. Certifying agents began certifying contracts as soon as the locations were completed in 1834. Soon after they began their work, complaints were made that gross frauds were being practiced upon the Indians by speculators. As the result of these complaints, in April 1834, R. J. Meigs, of Tennessee, was appointed by the direction of the President, to make a general investigation of the frauds in the sale of the Creek reserves. Meigs’ investigation confirmed the former reports of citizens and Government officials within the Creek country, that great frauds had been perpetrated against the Indians in the sale of their lands. In his final report to the Secretary of War, dated November 12, 1834, Meigs stated: [T]he frauds complained of, admit of the following classifications: 1. The reserves have sold, in some instances, without ever having seen their lands, believing that they never would be shown them, and fearing that none had been assigned them. 2. Some have been persuaded to sign a paper to enable a pretender friend to guard them against being cheated, which paper was nothing less than a deed. They have been induced to have these papers certified by the representation, that they would not answer the avowed purpose without the agent’s certificate. And they have been persuaded, when the agent should put the question — ‘Have you sold your land?’ —to answer affirmatively, as this was a mere formal question, which the agent must ask. 3. In many cases, the reservee’s signature has been procured, while he was drunk, a few dollars in cash or goods being given him to bind the bargain, and when sober, he has been made to believe, that when an Indian puts his hand to paper, he is obliged to have it certified. Note. — in Dr. McHenry’s office, if the person, who procures a signature, enters his name on the books as a purchaser, the Indian is not permitted to sell to any other, nor are others permitted to bid. This is the main engine, by which the purchaser is enabled to convince the Indian that he is bound to consummate a contract when his signature has been once procured. And that it is a most powerful engine of fraud, a man must be excessively blind not to perceive. 4. Some reservees have been allured by all those means usually resorted to, to contract debts in the stores, and then frightened by threats of imprisonment, etc., to sign deeds for the sale of their lands, for insufficient prices. 5. Some have sold for inadequate prices, on promises that they should have what the land should be valued to; and then the purchaser procures a valuation to be made by his own tools. 6. The money delivered to the Indian in the presence of the agent has been taken back, by the purchaser, by violence or fraud, and always secretly. [Emphasis added.] The court in the 1933 Creek case focused on two kinds of frauds: * * * The investigations revealed that many fraudulent practices had been resorted to by purchasers in procuring contracts of sale, the two principal methods through which most of the frauds were consummated being: (1) By taking the true Indian owner of a reserve before the agent, presenting a contract of sale for a fair consideration, paying the purchase money to the Indian in the presence of the agent, the money so paid being after-wards obtained from the Indian by fraud or force of the pretended purchaser, and (2) by taking an Indian who had sold his land, or had never owned any, before the agent and having him impersonate the real owner of a reservation, and thereby procure the certification of a contract of sale * * *. 77 Ct.Cl. at 253, 254. The certification of sales was suspended, investigations of the frauds followed and numerous contracts were can-celled. Hostilities on the part of the Indians in the spring of 1836 terminated completion of the investigation, cancellation, and recertification. The sequel is well recorded in the findings of fact XIII and XIV of the court in the 1933 Creek case, swpra, at 243-244: XIII. * * * A majority of the Creeks remained friendly and took no part in the hostilities against the whites, but the depredations committed by those unfriendly were so extensive and the difficulty of restoring and maintaining law and order so great, that the Federal Government decided it was necessary to remove the whole Nation to its country west of the Mississippi River, and with the exception of about 600 Creek warriors who had enlisted in the Federal service against the Seminóles, and the families of such warriors, the whole tribe, under a military escort, was removed during the summer and fall of 1836. These warriors and their families were removed to the West after the termination of Seminole hostilities in 1837. XIV. Immediately after hostilities in the Creek country had subsided, Thomas H. Crawford and Alfred Balch were commissioned under a House resolution to investigate “the causes of hostilities” and “any other transactions connected with the contracts for the sale of Creek lands,” and to make “the inquiries necessary to do justice to the Indians and to the parties claiming to have purchased their lands.” * * * Commissioners Crawford and Balch were instructed “to include in their report only the eases in which they have instituted inquiries into unapproved contracts, on representations, or their belief of fraud in the original contracts,” and that they take cognizance in approved contracts “only when specific allegations of fraud in a particular contract are made to them by respectable persons.” * * * The great body of Indians having already emigrated, Commissioners Crawford and Balch were largely limited in their inquiries to the testimony of white men residing in the country who were acquainted with the general facts and circumstances under which sales were made in the winter of 1835, when the impersonation frauds reached their height. The testimony heard by them was as a rule more general in its character then directed to specific cases. They investigated and adjudicated more than 1,000 cases and made recommendations in respect to each of them. Their reports confirmed the findings previously made by certifying agents, by Colonel Hogan, and other investigators, that glaring frauds had been perpetrated on the Indians in the sale of their reserves. [Emphasis added.] Because of the removal of the Creek Indians to the West and their consequent inability to sell their reserves, and the reserves of deceased Creek Indians, the Act of March 3, 1837, 5 Stat. 186, was passed. This Act provided: That the President of the United States may, and he is hereby authorized to, cause all the reserves belonging to the Creek Indians by virtue of the provisions of the treaty of March twenty-fourth, eighteen hundred and thirty-two, which shall remain unsold on the fourth day of April next, to be sold at public auction in the Creek country; after giving at least sixty days notice of the time, place, and terms of sale in the public prints, and to cause patents to be issued to the purchasers of said reserves. The Act of 1837 provided that the proceeds from the sale at auction of each reserve were to go to the Indian entitled thereto. I. COLLATERAL ESTOPPEL ISSUE It has been noted that the Treaty of 1832 is the subject of a former decision of the Court of Claims in Creek Nation v. United States, 77 Ct.Cl. 226 (1933). That decision is res judicata as to legal or equitable claims which could have been brought in the Court of Claims under the Creek Jurisdictional Act of 1924, 43 Stat. 139. See Blackfeet and Gros Ventre Tribes v. United States, 127 Ct.Cl. 807, 119 F.Supp. 161, cert. denied, 348 U.S. 835, 75 S.Ct. 58, 99 L.Ed. 658 (1954); Choctaw Nation v. United States, 121 F.Supp. 206, 128 Ct.Cl. 195 (1954); Assiniboine Indian Tribe v. United States, 121 F.Supp. 906, 128 Ct.Cl. 617, cert. denied, 348 U.S. 863, 75 S.Ct. 88, 99 L.Ed. 680 (1954). The claims which could be brought under the 1924 Act were limited: * * * Jurisdiction be, and is hereby, conferred upon the Court of Claims * * * to hear, examine, and adjudicate and render judgment in any and all legal and equitable claims arising under or growing out of any treaty or agreement between the United States and the Creek Indian Nation * * *. In the instant case, plaintiff brought its action under Section 2, Clauses 3 and 5, of the Indian Claims Commission Act of 1946; these new causes of action did not exist under the 1924 Jurisdictional Act. United States v. Seminole Nation, 173 F.Supp. 784, 146 Ct.Cl. 171 (1959); Otoe and Missouria Tribe of Indians v. United States, 131 F.Supp. 265, 131 Ct.Cl. 593, cert. denied 350 U.S. 848, 76 S.Ct. 82, 100 L.Ed. 755 (1955); Western (Old Settler) Cherokee Indians v. United States, 114 Ct.Cl. 716 (1949). Although the principle of res judicata does not bar plaintiff’s action, Creek Nation v. United States, 168 Ct.Cl. 483, 490 (1964), appellant asserts that plaintiff is collaterally estopped as to certain factual issues determined and legal conclusions reached in the 1933 Creek decision and that such estoppel bars plaintiff from recovering under the new cáuses of action created by the 1946 Act. The starting point of our inquiry is the Supreme Court’s decision in Commissioner v. Sunnen, 333 U.S. 591, 597-598, 68 S.Ct. 715, 719, 92 L.Ed. 898 (1948), where collateral estoppel was distinguished from res judicata:- But where the second action between the same parties is upon a different cause or demand, the principle of res judjcata is applied much more narrowly. In this situation, the judgment in the prior action operates as an estoppel, not as to matters which might have been litigated and determined, but “only as to those matters in issue or points controverted, upon the determination of which the findings or verdict was rendered.” (Citations omitted). * * * But matters which were actually litigated and determined in the first proceeding cannot later be relitigated. * * * In this sense, res judicata is usually and more accurately referred to as estoppel by judgment, or collateral estoppel. The doctrine of collateral estoppel must be used with its limitations carefully in mind so as to avoid injustice. Sunnen, supra, at 599, 68 S.Ct. 715. The Supreme Court noted these limitations on the doctrine: * * * [A] subsequent modification of the significant facts or a change or development in the controlling legal principles may make that [prior] determination obsolete or erroneous, at least for future purposes * * *. That principle [collateral estoppel] is designed to prevent repetitious lawsuits over matters which have once been decided and which have remained substantially static, factually and legally. It is not meant to create vested rights in decisions that have become obsolete or erroneous with time * * *. 333 U.S. at 599, 68 S.Ct. at 720. In the 1964 Creek decision, supra, we had occasion to consider the collateral estoppel principles of Sunnen in relation to the effect of prior determinations under the Creek Jurisdictional Act of 1924 upon later claims brought under the Indian Claims Commission Act of 1946. We asked in that 1964 Creek decision, supra, 168 Ct.Cl. at 491: Has the Indian Claims Commission Act so changed ‘the legal atmosphere as to render the rule of collateral es-topped inapplicable.’ [Sunnen] at 600 [68 S.Ct. 715] ? We think that to a certain extent, and under certain circumstances, it has so changed the legal climate. In the case now before us the “legal climate” has been changed so as to make collateral estoppel inapplicable. We agree with appellant that the fact that “treaty revision” and “fair and honorable dealings” were not, in so many words, statutory bases for recovery in the prior 1933 litigation between the parties does not, ipso facto, prevent the application of the doctrine of collateral estoppel in the instant case. But the creation of these new causes of action did raise new issues which were not, and to some extent need not be, actually litigated by the parties and necessary to the decision of the court in its 1933 Creek decision. Commissioner Kuykendall in his dissent from the Commission’s decision miscast these issues as breach of treaty. 26 Ind.Cl.Comm. at 445. The new issues do not involve questions of the breach of the 1832 Treaty provisions, and the Commission’s decision which we are now reviewing expressly disavowed resting upon an ultimate finding of a breach of treaty. In the 1933 Creek case the legal question was whether or not the United States had violated its 1832 Treaty obligations to the Creek Nation. In the 1933 case the “ * * * matters in issue or points controverted, upon the determination of which the finding * * * was rendered” were ultimately two in number: (1) whether the Government failed to remove white intruders from the Creek lands in violation of Article V of the Treaty with the result of vitiating Articles II and III of the Treaty and (2) whether the true allottees under the Treaty were defrauded and prevented from the “fair consideration” for sale of their allotment as promised in Article III of the Treaty. 77 Ct.Cl. at 249, 250. Plaintiff is estopped to relitigate these issues, and insofar as the Commission reconsidered these issues it erred. The classic statement of the applicable rule is found in Southern Pacific R. R. Co. v. United States, 168 U.S. 1, 48-49, 18 S.Ct. 18, 27, 42 L.Ed. 355 (1897): The general principle announced in numerous cases is that a right, question, or fact distinctly put in issue, and directly determined by the court of competent jurisdiction, as a ground of recovery, cannot be disputed in a subsequent suit between the same parties or their privies; and, even if the second suit is for a different cause of action, the right, question, or fact once so determined must, as between the same parties or their privies, be taken as conclusively established, so long as the judgment in the first suit remains unmodified. * * * Accord Sunnen, supra, 333 U.S. at 597598, 68 S.Ct. 715 (1947); United States v. Munsingwear, Inc., 340 U.S. 36, 38, 71 S.Ct. 104, 95 L.Ed. 36 (1950); Partmar Corp. v. Paramount Pictures Theatres Corp., 347 U.S. 89, 101, 74 S.Ct. 414, 98 L.Ed. 532 (1954); Edgar v. United States, 171 F.Supp. 243, 145 Ct.Cl. 9, 12 (1959). The ultimate issues involving intruders and frauds in providing fair consideration for the sale of allotments, as well as the underlying evidentiary or “mediate” findings necessary to resolution of these issues, do not, however, operate to collaterally estop plaintiff altogether. Section 2, Clause 3, of the Indian Claims Commission Act permits “ * * * claims which would result if the treaties, contracts, and agreements between the claimant and the United States were revised on the ground of fraud, duress, unconscionable consideration, mutual or unilateral mistake, whether of law or fact, or any other ground cognizable by a court of equity * * 25 U.S.C. § 70a. The Commission examined and found facts amounting to duress in the deceptions practiced upon the Creeks, funneling them towards treaty negotiation and acquiescence in, and eventually insistence upon, the individual reservations arrangement; the United States patently misrepresented that it was helpless in the face of Alabama exercising jurisdiction over the Creek lands and people. The issue of duress and the evidentiary facts necessary to determination of this issue were not considered by the court in its 1933 Creek decision. Nor did the 1933 Creek decision address itself to the issue of unconscionable consideration beyond examination of the related but narrower question of whether the United States had met its Article III obligation that allottees receive in hand a “fair consideration” if they chose to sell their allotments. The court in 1933 did not consider whether the principal consideration, consisting of individual allotments to chiefs and family heads with an option to sell before a patent was issued, was eonscionable in view of the foreknowledge of the United States that individually the allottees in reality would never get to keep their ancestral lands but would fall prey to speculators, who would frighten, dupe, drunken, or coerce them into selling and/or subsequently rob them of the purchase price. The Creeks were vulnerable individually, and the United States knew it. The Commission found: “The United States knew that those (individual reserve and sale) provisions wpuld not be effective to allow those Creeks who desired to remain in their homeland.” And a later investigator of Creek hostilities noted: That provision of the treaty which principally concerns this report, which was the charter of Creek reservations, and the origin of all the difficulty that has fallen upon the Government and the Indians, relates to portions of the ceded territory set apart for Creek use, and formed the chief consideration of the cession. It was a most unfortunate stipulation, which it required no great foresight to see might give birth to dishonest practices, that the weakness of the Indian would make successful, and must be productive of embarrassment on every side. The apprehension was strongly entertained and expressed by the then Chief Magistrate, then whom no man was more capable of forming a correct judgment. The proposition was declined and opposed; objections, which subsequent events have shown to be too well founded, urged, but pressed in vain upon the deluded Creek, whose misguided pertinacity was doubtless, fortified by those who were looking forward to the consummation of the frauds their imaginations had even thus early devised. Expostulation was fruitless, and the Government was compelled to yield the only condition upon which the Creeks would negotiate. It should be remembered that it was the President of the United States who first proposed the idea of individual fee titles to the Creeks; and it was United States’ Agent Crowell who first pressed the idea upon the Creeks. That the Creeks were later encouraged to give up all their lands and move west of the Mississippi because of the dangers inherent in the individual reservations proposal and that the Creeks insisted upon the individual reserves, does not mitigate the culpability of the United States in providing unconscionable consideration. It was the United States that had first firmly engendered in the unsophisticated Creeks “ * * * the delusive hope that they would settle on their reserves, and cultivate and hold them for their own separate use like the whites.” The 1933 Creek decision focused only on the midpoint between fraudulently induced sales and subsequent theft of the purchase price from the hapless Creek allottee. If at the time of the certification of the sale it appeared that the true owner of the allotment had received “fair consideration,” then the United States had met its treaty obligations, and the 1933 court so found and concluded. As to Investigator Meigs’ recitation of the way individual Indians after a sale were plied with whiskey, often by the purchaser himself, and “ * * * gotten into a humor to be wheedled out of his money by a loan or otherwise * * the 1933 court said: It was not within the power of the Government to protect the Indians from such fraudulent and deceptive practices, nor was there any liability on the part of the Government growing out of the Treaty to do so. * * * 77 Ct.Cl. at 254-255. The court was quite right in saying that there was no liability under the terms of the treaty that the United States attempt to interdict such frauds. Moreover, the court was properly observing its own jurisdictional limitations by searching only for wrongs “arising under or growing out of any treaty or agreement.” 43 Stat. 139. The Commission today is not limited to such a narrow search nor is plaintiff thus limited in the issues it may (and did) raise. Any legal conclusions of the court in 1933 that the Government had done “all it could do” to protect the Creeks were made within the ambit of its jurisdictional limitations at that time. Our decision in United States v. Creek Nation, 427 F.2d 743, 192 Ct.Cl. 425 (1970) buttresses our decision today. In that case we reversed the Commission and held that res judicata, barred plaintiff as to litigating issues relating to a taking claim which could have been brought under a prior jurisdictional act. However, we affirmed the Commission in holding that the United States was liable under Clause 3 of Section 2 of the Indian Claims Commission Act where the Commission made findings on the theretofore unlitigated issue of mutual or of unilateral mistake. In an unconscionable consideration claim on a cession treaty under Section 2, Clause 3, of the 1946 Act, the Commission compares the consideration promised by the treaty to the then fair market value of the cession to determine whether that consideration is conscionable. If not, the treaty is treated as revised so that its consideration matches the then fair market value, and judgment is entered for the difference in consideration received and value. See Nez Perce Tribe of Indians v. United States, 176 Ct.Cl. 815 (1966), cert. denied, 386 U.S. 984, 87 S.Ct. 1285, 18 L.Ed.2d 233 (1967); Osage Nation of Indians v. United States, 119 Ct.Cl. 592, 97 F.Supp. 381, cert. denied, 342 U.S. 896, 72 S.Ct. 230, 96 L.Ed. 672 (1951). We think the Commission properly found the consideration unconscionable under the facts and circumstances of this case, and it was not estopped from doing so. Plaintiff’s Section 2, Clause 5, claim also raised new issues not heretofore passed upon. In regard to such a claim we have said: In claims brought under clause 5, based on ‘fair and honorable dealing,’ the situation is different from that in which the Indians ask for a revision of a treaty or agreement under clause 3. Since, under the Choctaw [Choctaw Nation of Indians v. United States] case, 318 U.S. 423, 63 S.Ct. 672, 87 L.Ed. 877 and Choctaw and Chickasaw Nation [Choctaw and Chickasaw Nations v. United States], 179 U.S. 494, 21 S.Ct. 149, 45 L.Ed. 291, the Indians could not have had their claims heard from the viewpoint of fair and honorable dealings, absent specific language in the jurisdictional act permitting this, the issue of such fairness could not have been considered by the courts prior to passage of the Indian Claims Commission Act. Although certain facts may have been decided by the court, the findings cannot raise an estoppel as to an issue not litigated. * * * [T]/ie act commands the Commission to examine all of the facts presented to determine whether in the broad moral sense, the conduct of the Government in its dealings with the Indians was fair and honorable. [Emphasis added.] 168 Ct.Cl. 483, 494-495. The Section 2, Clause 5, claim of plaintiff-appellee raised the issues, among others, of the bad faith treaty bargaining of the United States, abuse of fiduciary relationship, and broader questions of the morality of the entire course of conduct of the United States towards the Creeks, including the fairness of the eventual removal of all Creeks in 1837 before a single patent could be issued to any of them. Although some of the evidentiary findings of the court in its 1933 Creek decision bore upon the question of “fair and honorable dealings,” such findings could “ * * * not raise an estoppel as to an issue not litigated. * * * ” Appellant has suggested that our decision should be controlled by United States v. Creek Nation, 196 Ct.Cl. 639 (1971), cert. denied, 406 U.S. 929, 92 S.Ct. 1771, 32 L.Ed.2d 132 (1972), where we held the doctrine of collateral estoppel barred relitigation of issues previously litigated, relying on an earlier holding in Creek Nation v. United States, 168 Ct.Cl. 512 (1964). These cases are distinguishable. In 196 Ct.Cl. 639 and 168 Ct.Cl. 512, although the causes of action were new, the issues and facts advanced under the new causes of action had been thoroughly explored and disposed of in prior litigation. Plaintiffs in those cases had failed to demonstrate it had anything of substance in support of its new pleas that was not offered, considered, and decided adversely to it in the former actions. Appellant and the dissent of Commissioner Kuykendall have emphasized that the record in this case before the Commission and before us now is identical to the record before the court in 1933. The fact that the numerous documents offered and received in evidence are the same is alone not determinative of whether collateral estoppel applies. The parties and the court in 1933 did not focus on the configuration of evidentiary facts going to the issues raised by plaintiff through the “treaty revision” and “fair and honorable dealings” claims. The mere fact that such evidence was in the record in 1933 is not enough. The seminal test is: * * * the judgment in the prior action operates as an estoppel, not as to matters which might have been litigated and determined, but “only as to those matters in issue or points controverted, upon the determination of which the finding or verdict was rendered.” (Citation omitted). Sunnen, supra, 333 U.S. at 598, 68 S.Ct. at 719. Commissioner Kuykendall in his dissent argued that the facts found in the prior litigation show on their face that the dealings were fair and honorable and no new and substantial factual question on the issue was raised, citing Creek Nation v. United States, 168 Ct.Cl. 483, 495 (1964). Therefore, he argues, estoppel results. We do not agree that the facts formerly found on their face establish fair and honorable dealings, and it is also clear that new and substantial factual questions concerning fair and honorable dealings have been raised. II. THE TRIBAL CLAIM ISSUE Appellant contends that the 2,187,200 acres of individual reserves should be deducted from the 5,200,000 acres of Creek tribal lands ceded. Where reserves or grants to individual tribal members are bargained for by the tribe and are actually received by the reserves or grantees, they usually have been deducted from the acreage for which the tribe is to be compensated. Citizens Band of Potawatomi Indians v. United States, 391 F.2d 614, 179 Ct.Cl. 473, cert. denied, 389 U.S. 1046, 88 S.Ct. 771, 19 L.Ed.2d 839 (1968); Absentee Shawnee Tribe of Oklahoma v. United States, 165 Ct.Cl. 510 (1964); Cherokee Freedmen v. United States, 161 Ct.Cl. 787 (1963). In ruling that a tribal claim with respect to the full 5,200,000 acres was presented, the Commission took cognizance of the fact that in this ease, unlike Potawatomi, supra, there was not a bona fide attempt to settle individual Indians on allotment. 26 Ind.Cl.Comm. at 417. The Commission found, and we think properly concluded, that it was known, or should have been known, that the patents were not likely to vest in the Creeks. Also in support of the result obtained in this case, the Commission relied upon one of its former decisions in Citizens Band of Potawatomi Indians v. United States, 14 Ind.Cl.Comm. 518, 566 (1964), where it said: [T]hese individual grants were a part of the over-all agreement embodied in the treaty, and were necessary to its successful negotiation. In the absence of proof of any wrongdoing by defendant in making these individual grants, they will not be included in the area to be valued. Thereafter, the Commission went on to say: Testing the facts of the transaction in the present case against this rationale, the Commission finds such evidence of wrongdoing by the defendant, and therefore a different result is required. (Footnote omitted). 26 Ind.Cl.Comm. at 413. Although we do not go as far as the Commission in its Potawatomi decision, supra, in holding that “any wrongdoing by defendant in making these individual grants” [Emphasis added] will require a different result, we hold that under the facts and circumstances of this case where the whole individual-reserves scheme constituted unconscionable treaty consideration, the tribe can present a valid claim under the Indian Claims Commission Act. This is not a case where individuals are seeking compensation for frauds committed against them individually, such as in Shawnee, supra. The Shawnees did not complain of the treaty by which they ceded their lands to the United States, and the wrongs being complained of in Shawnee were confined to wrongs done “in inducing requests for allotment, or in the process of selection, allotment, and sale.” Shawnee, supra, 165 Ct.Cl. at 516-517. And unlike Shawnee, the complaint in this case is not of “individual losses to separate members * * * who * * * were caused to give up their individual allotments for less than fair value.” Shawnee, supra, at 515. Nor is this a case of individuals who are complaining of individual losses resulting from being omitted from the roll of allottees entitled to an allotment, such as in Cherokee Freedmen, supra. In that case the claims “were dependent upon the individual facts and circumstances pertinent to the particular person * * Cherokee Freedmen, supra, 161 Ct.Cl. at 789. As Commissioner Blue summarized in his concurring opinion: The rights which have been allegedly violated are those of the tribe. The 5,200,000 acres involved was tribal property. The treaty by which it was ceded to the United States was negotiated by representatives of the tribe on behalf of the tribe. Although rights of individuals may also have been violated, the wrongdoings complained of were only to the tribe. 26 Ind.Cl. Comm. at 434. The capstone is that with the Creeks, no individual member had an opportunity to secure a patent, as all were removed because of their tribal membership. 26 Ind.Cl.Comm. at 419. We believe the Commission correctly concluded that a tribal claim for additional compensation was presented for the 5,200,000 acres of land ceded to the United States by the Treaty of 1832. The Treaty will be deemed revised to eliminate the individual reserve provisions, and treated as a cession of the entire tract under Article I of the Treaty. This case should proceed to a determination of the fair market value of the entire 5,200,000 acres ceded by the Creeks. Defendant is entitled to an offset of other actual monetary consideration received by the tribe or its members as called for by the treaty. Affirmed. SKELTON, Judge (dissenting): In 1930 the plaintiff, Creek Nation, sued the United States to recover the value of the identical 2,187,200 acres involved in this case upon practically the same grounds that it alleges here. In that ease, Creek Nation v. United States, 77 Ct.Cl. 226 (1933), the plaintiff claimed that it had a legal and equitable claim against the United States for the value of this land because the government had not completely performed the duties it owed to the Creek Nation under the provisions of the treaty of 1832. The present suit is maintained on the same record as the prior suit. There has been no additional evidence submitted. Nevertheless, the court, in connection with its construction of the Indian Claims Commission Act of 1946, is allowing the Creek Nation to recover the value of the same 2,187,200 acres of land involved in the 1933 suit, notwithstanding the fact that its claim for the value of this land was flatly rejected by the court in 1933. There are no new facts, no new evidence, nor any new questions here that were not presented in the prior case. We have new terms in the present case, such as “unconscionable consideration” and “fair and honorable dealings,” but when these phrases are reduced to their basic meanings, it is clear, at least to me, that the same claims, in substance and effect, were made in the 1933 suit. The Congress could not have intended that such claims could be relitigated when it enacted the Indian Claims Commission Act. The court, in allowing the Creek Nation to recover in this case on claims that the court rejected in no uncertain terms 40 years ago, is, in my opinion, a reversal of its prior opinion without any new facts or issues that justifies such action after such a long lapse of time. Such a judgment will require the payment out of public funds of millions of dollars without justification under the facts or the law. In the present su-it, the Creek Nation bases its suit on two main claims, namely, (1) that the Indians who selected reserved tracts of land received “unconscionable consideration” for such land when it was sold by them to white settlers, and (2) that the Indians did not receive “fair and honorable dealings” from the government in connection with the sale by them of their tracts of land. A discussion of these claims follow. The treaty of 1832 provided in Article III with reference to the consideration' to be received by the Indians for the land involved here, in pertinent part, as follows: Article 111. These tracts may be conveyed by the persons selecting the same, to any other persons for a fair consideration, in such manner as the President may direct. The contract * * * shall not be valid ’till the President approves the same. * * * [Emphasis supplied.] In the 1933 suit the plaintiff claimed that various individual Indians had been defrauded in the sale of their selected lands by white men by the use of various fraudulent schemes and devices, and that because the government did not prevent such practices, the Indians did not receive a “fair consideration” for their land and the government was liable for the value of the land. This court rejected this claim and denied recovery. In the present suit the Indians are urging the same claim on the same facts. Admittedly, they couch their claim here in different words by saying they received an “unconscionable consideration” instead of failing to receive a “fair consideration.” I see no basic difference between these terms. One has to engage in semantic reasoning to hold otherwise. If an Indian does not receive a fair consideration for his land, it must be concluded that the consideration was unfair. An unfair consideration paid to an Indian for his land is the same as an unconscionable consideration. Consequently, it is clear that this issue was alleged, raised and decided in the 1933 decision of this court. The plaintiff is collaterally estopped from again asserting it in this case. The other ground relied on by the plaintiff for recovery in the present case is that the government did not engage in “fair and honorable dealings” with the Indians because it did not prevent the Indians from being defrauded out of their lands by the white settlers, and because of such neglect of duty the government is liable for the value of such lands. This same claim was made by the plaintiff in the 1933 suit, although the term “fair and honorable dealing” was not used in that litigation. The claim was couched in different language in that case, but the meaning was the same. There the plaintiff claimed that the government had a duty under the treaty of 1832 to protect the Indians from fraudulent acts of white men in connection with the sale of Indian land, Treaty of 1832 to protect the Indians received a fair consideration for the sale of their lands. The plaintiff claimed that the government failed to carry out the provisions of the treaty in these respects and by reason thereof, did not deal fairly with the Indians and as a consequence, the government was liable for the value of the land. This court rejected this claim in the prior suit. The plaintiff is collaterally estopped from again alleging the same claim in the present case. The facts found in the 1933 suit show that the dealings were fair and honorable and that the United States did everything it could to protect the Indians in the sale of their land to the white settlers. No new and substantial factual question has been raised on this issue in the present case. We held in Creek Nation v. United States, 168 Ct.Cl. 483, 495 (1964): * * * Where the facts found in the prior litigation show on their face that the dealings were fair and honorable under the circumstances and no new and substantial factual question on the issue is raised, the Commission can, of course, entertain a motion for summary judgment on behalf of the Government. * * * The above-cited case states the correct rule, and, if applied here, it is dispositive of this issue in favor of the government. Nevertheless, the court by its process of semantic reasoning holds that the term “fair and honorable dealings” is somehow different to the claim asserted by the plaintiff and rejected by the court in the prior suit on this issue. I cannot agree. In the prior suit this court held: * * * It [The Creek Nation] has no legal or equitable claim of any kind or character against the United States growing out of the treaty of 1832. * * * [77 Ct.Cl. at 263.] This broad, comprehensive, and all inclusive decision of the court covered every legal or equitable claim “of any kind or character,” and certainly included the claims now being asserted by the plaintiff, both as to “unconscionable consideration” as well as to “fair and honorable dealings.” As stated above, the court has, in my opinion, engaged in an exercise of semantics to hold otherwise in the present suit. The government contends in the present suit that the claim being asserted is not a tribal claim but is a claim of individual Indians. I think the government is right. The Creek Nation did not suffer any loss as a tribe when the individual Indians were defrauded in connection with the sale of their lands. The loss was that of the individual Indian and not a tribal one. We have often held that we do not have jurisdiction of the claims of individual Indians. That rule should be applied here. As a matter of fact, the Indian Claims Commission Act, 60 Stat. 1049, 25 U.S.C. §§ 70, 70a, 70i, denies jurisdiction to the Commission and to this court of claims of individual Indians. See Cherokee Freedmen v. United States, 161 Ct.Cl. 787 (1963); Minnesota Chippewa Tribe v. United States, 315 F.2d 906, 161 Ct.Cl. 258 (1963). I agree completely with the dissenting opinion of the Honorable Jerome K. Kuykendall, Chairman of the Indian Claims Commission, in this case (26 Ind.Cl.Comm. 410), both as to the facts and the law. I have concluded that I cannot improve on his opinion, and, accordingly, I adopt it with minor changes, as the remainder of my dissenting opinion in this case as follows: I cannot agree with the court’s decision in this case that the Creek Nation is entitled to pursue an unconscionable consideration claim for 5,200,000 acres of Alabama Creek land ceded under the treaty of March 24, 1832, 7 Stat. 366, so as to include the 2,187,200 acres that were reserved for individual Creeks who wished to remain in Alabama. The prime issue of course is whether under our Act the United States can be held liable for the fair market value for this 2,187,200 acres of allotted lands when the record shows that, after the 1832 treaty had been concluded, many Creek Indians either did not receive a fair consideration in disposing of their allotments, or were euchred out of their lands by unscrupulous land speculators and other sharpsters. As the court sees it, the United States did not fulfill its 1832 treaty obligations to the Creek Nation because it failed adequately to protect Creek allottees from improvidently disposing of their lands. Thus, the court reasons, the sum total of all the unfortunate post treaty happenings resulted in a failure of the 1832 treaty consideration to the Creek Nation, and, therefore, the court can revise the 1832 treaty under sec. 2 clause 3 of our Act by ignoring the reserve provisions in Article 2 of the treaty and treating the reserve lands as having been ceded to the United States and, ergo, plaintiff is now free to pursue an unconscionable consideration claim, not only for the 3,012,800 acres ceded outright to the United States, but for the entire 5,200,000 acres. In the alternative, the court would allow recovery under sec. 2 clause 5 of the Act on the basis that the government’s conduct toward the Creek Nation violated the standards of “fair and honorable dealings.” Forty years ago the Creek Nation filed suit in the Court of Claims to recover the value of the same 2,187,200 acres of reserve lands, and upon substantially the same grounds, namely, that the United States failed in its obligations to the Creeks under the 1832 treaty. In that 1933 case, Creek Nation v. United States, the Court of Claims, after entering detailed findings of fact and an opinion, concluded that the United States had fulfilled its 1832 treaty obligations, and that, * * * It [Creek Nation] has no legal or equitable claim of any kind or character against the United States growing out of the treaty of 1832. * * * [77 Ct.Cl. at 263.] I do not suggest that the decision of the Court of Claims in the 1933 Creek case is a bar to the instant suit on grounds of res judicata, even though the record in the 1933 Creek case is the record in this case, and the parties are the same. However, I do suggest that certain factual determinations and legal conclusions made by the Court of Claims in the 1933 Creek case, do have an estoppel effect which the Commission was not at liberty to ignore. Again, as it did in the 1933 Creek case, the plaintiff alleges as a basis for recovery that the defendant failed completely to perform the duties owed to its Indian ward, the Creek Nation, under the provisions of the 1832 Creek treaty. The alleged failure to perform is, according to the plaintiff, the direct result of many wrongful acts committed by the United States either before or after the conclusion of the 1832 treaty, all of which wrongful acts resulted in the loss of the Creek reserved area. Where, as in this case, an area of land is reserved by treaty out of Indian tribal land that is ceded to the United States under the same instrument, it is treated as not being ceded, since the act of ceding and the act of reserving are contemporaneous. ' If the reserved area is a tribal reserve, then a tribal interest is maintained, and any subsequent disposition of this tribal area may, under the Indian Claims Commission Act, give rise to a separate cause of action by the tribe apart from any cause of action involving the ceded area. In this case we are not dealing with a tribal reserve, but with the individual reserves. Individual reserve areas are not the subject of communal ownership, but connote ownership in severalty. The Court of Claims has already spoken on the matter of individual reserves, and the nature and substance of the interests that are involved. In the case of Absentee Shawnee Tribe v. United States, the Shawnee Tribe, by the treaty of May 10, 1854, 10 Stat. 1053, ceded to the .United States a large tract of land west of the State of Missouri, and the United States contemporaneously ceded back 200,000 acres to the Shawnees. Out of this 200,000 acres the Shawnees were to select and choose in the manner described in the treaty, individual tracts to be held in severalty. In a suit filed before the Commission it was alleged that, during the Civil War period, trespassers and intruders entered and occupied the Shawnee reserve area, and that the United States failed adequately to protect the Indians in their possession. It was further alleged that, * * * [T]he Federal Government improperly induced and allowed these Indians to select individual allotments from the group land and sell their individual tracts to white settlers for a nominal consideration, and (v) as a result of these improprieties (including misfeasance by government agents) the Black Bob Indians were wrongfully deprived of their treaty land through this chain-process of selection, allotment, and sale. [Footnote omitted.] [165 Ct.Cl. at 514.] The Court of Claims concluded that the Shawnee tribal claim seeks to redress individual wrongs as contrasted to a tribal injury, and that such individual wrongs are not compensable under the Indian Claims Commission Act. In summing up the court went on to say: We come back, then, to the point that — since the right to select was vested, personal, and individual — any wrongs done in inducing requests for allotment, or in the process of selection, allotment, and sale, were individual and personal wrongs to the particular Shawnees who were bilked or defrauded. Improper inducement of an individual to exercise his right to an allotment might be an injury to him, but it would not trench upon any group rights; a fortiori the same can be said for improperly induced selections or sales. As a unit, Black Bob’s Settlement had no more interest in these transactions than did the entire Shawnee Nation in the process by which the “severalty” Shawnees acquired and sold their individual allotments. See Ponca Tribe v. United States, 6 Ind.Cl.Comm. 409 (1958). Even if we were to find the defendant guilty of all the nonfeasance and malfeasance the petitioners assert, we would have to hold that the victims were the individual Shawnees, not the group as such. [165 Ct.Cl. at 516-17.] I find little if anything of substance that would distinguish the facts and claims asserted in the Shawnee ease from the Creek matter now before us. The court and the plaintiff suggest that the instant case is different on various grounds, such as: it was wrong for the United States to negotiate for the removal of the Creek Nation to the Indian Territory in spite of the avowed removal policy of the government as enunciated under the Act of May 28, 1830; it was wrong for the United States to misrepresent to the Creeks that Alabama had the authority to extend its laws over them;. and, since the United States had obligated itself to the plaintiff tribe under the 1832 treaty “that its members would receive patents to their reserves or a fair consideration for them,” it was wrong for the United States to conclude the 1832 treaty when the Government at all times knew the difficulties individual Creeks would encounter in handling their allotments. The plaintiff herein has placed great emphasis upon the fact that the President had decided in the late 1820’s that it was in the best interest of the Creek Nation to remove the tribe to a new home in the Indian territory. The passage of the 1830 Removal Act, swpra, gave the President the authority to exchange Indian lands owned by the United States in any state for lands west of the Mississippi River not included in any state. The fact that in 1830 the United States, in an exercise of plenary power, declared by statute a new Indian policy, which on its face may offend or go contrary to the wishes of certain tribes, including the Creeks, does not in and of itself give the plaintiff tribe any claim or cause of action under our Act. Such new policy might set the stage, but it is only the execution of that policy that could infringe upon tribal rights. As Judge Davis so aptly observed in his concurring opinion in the case of Gila River Pima-Marieopa Indian Community v. United States: * * But it would be wrong for judges to read into the Indian Claims Commission Act, passed almost twenty-five years ago, currents of thought which are emerging today but were not infused into that 1946 statute. The Act was not designed to grant compensation for all the detriment accruing to the Indians by our ongoing policy towards them but, rather, had the more limited goal of paying for specific deprivations of lands or property or rights protected by treaty, statute, or then-existing law. The instances cited in the Congressional history are of that kind. There is no intimation at all in the legislative background that the “fair and honorable dealings” clause was a catch-all allowing monetary redress for the general harm — psychological, social, cultural, economic — done the Indians by the historical national policy of semi-apartheid. Coupled with this removal policy the Commission insists that: [I]n order to induce the Creeks to cede their lands, the Federal Government misrepresented to the Creeks the authority of Alabama to extend its laws over them. The matter of permitting individual Creeks to remain in Alabama first came to light in a talk to the Creek Nation by President Andrew Jackson on March 23, 1829. After recounting the increasing conflicts between the, white settlers and the Indians, President Jackson advised the Creeks that he was sending his emissary Colonel John Crowell to consult with them upon the subject of their removal to the Indian territory where they could join that part of the Creek Nation that had already emigrated. President Jackson then went on to say: I have instructed Colonel Crowell to speak the truth to you, and to assure you that your father, this President, will deal fairly and justly with you and whilst he feels a father’s love for you, he advises your whole nation to go to the place where he can protect and foster you. Should any incline to remain and come under the laws of Alabama, land will be laid off for them and their families in fee. My children, listen: My white children in Alabama have extended their law over your country. If you remain on it, you must be subject to that law. If you remove across the Mississippi, you will be subject to your own laws and the care of your father, the President. It is obvious to me that President Jackson was discussing the problems of individual Creek Indians who desired to remain in Alabama. Whether or not Alabama could properly extend its laws over Creek tribal lands is irrelevant with respect to any Creek allottee who had the right to freely alienate his allotment or obtain a patent. A Creek allot-tee under the 1832 treaty did not hold tribal land; he was the sole owner, and, like any other individual Alabama land owner, he would be subject to Alabama laws. I do not read into President Jackson’s statement that he was acknowledging or acquiescing in the extension of Alabama laws over tribal lands belonging to the Creek Nation. I see no case for misrepresentation. The fact of the matter is that the United States had already committed itself to the removal of the entire Creek Nation to the Indian territory where a portion had already emigrated pursuant to the Creek Treaty of January 24, 1826, 7 Stat. 286. In this instance the Government had no reason to challenge the right of Alabama to extend its jurisdiction. I now reach the question of whether the United States fulfilled its 1832 treaty obligations to the Creeks, and I answer this in the affirmative by referring to certain conclusions reached by the Court o'f Claims in the 1933 Creek ease. The United States was well aware at the time of the 1832 treaty, that many of the potential Creek allottees, not being versed in the art of bargaining and selling real estate, would, if left to their own devices suffer dire consequences at the hands of white land speculators. As the Court of Claims found and subsequently noted in its opinion in the 1933 Creek case: * * * The commissioners who negotiated the treaty on the part of the Government foresaw the dangers, both to the Indians and to the Government, of the inclusion of this provision in the treaty, and expostulated in vain against it, but the Indians considered it the most important consideration in the treaty to them, and without the provision would not enter into the treaty. * * * [77 Ct.Cl. at 251] The court then went on to say that, even after the 1832 treaty had been concluded, the United States tried unsuccessfully to negotiate a new treaty with the Creeks whereby the Indians would cede their reserves and the Government would “obligate” itself to sell the reserves in the open market at an early date and “ * * * pay to each individual entitled to a section or half-section under the treaty of 1832, whatever his particular section or half-section should be sold for.” The Indians would not accept this proposition. The plaintiff herein insists, as it did in the 1933 case, that the many intruders who moved into the Creek lands at the time of the 1832 treaty, made it virtually impossible for the United States to carry out its treaty obligations to the Creek Nation. In like manner the court in its opinion has emphasized how important it was to the Creeks that the United States remove all the intruders from the Creek lands. It is also clear from the record that the United States was unable to remove physically all the trespassers, squatters, and other interlopers who had flocked to the subject area. The Court of Claims examined the record on this score, and concluded that the Government’s failure to remove trespassers did not interfere seriously either with the survey of the land or the location of the individual reserves to the Indians, and that the, * * -x- plaintiff’s contention, therefore, that the failure of the Government to remove the intruders made the carrying out of the terms of the treaty an utter impossibility is not sustained in so far as article II of the treaty is concerned. [77 Ct.Cl. at 252] Article III of the 1832 treaty obligated the United States to approve only those contracts of sale which called for payment of a fair consideration to the Indian seller. The record herein shows that the United States promulgated rigid regulations governing such sales in order to insure, as far as possible, the payment of a fair consideration. Despite these regulations, frauds were perpetuated upon Indians by (1) either relieving the Indian seller of his money by fraud after the sales contract had been approved and the purchase money paid, or (2) impersonating the true Indian owner in order to obtain an approved contract of sale. As to the first method of defrauding the Indians the Court of Claims had this to say: It is not within the power of the Government to protect the Indians from such fraudulent and deceptive practices, nor was there any liability on the part of the Government growing out of the treaty to do so. The Indians, under the treaty, had the right to dispose of their reservations. The Government under article III of the treaty, obligated itself to protect them in the disposal of their reserves to the extent that they received a fair consideration for the same. The Government prohibited the sale of lands for less than, in the opinion of the certifying agents, they were worth, and saw to it that the Indians in all cases received the contract consideration for their lands. When the Government did this it did all that it could do, or that it was obligated to do, under article III of the treaty. What disposition individual Indians selling reserves made of the money received by them, subsequent to its receipt, was beyond the reach of the Government. The land belonged to the Indians and the money received by them from its sale was theirs, and after the money was paid to them and the conveyance approved, the Government had discharged its full obligation to the plaintiff under article III. [77 Ct.Cl. at 254-255.] As to the second method of defrauding the Indians by impersonation, the Court of Claims on the record before us found that only a small percentage of the total contracts of sale were procured in this manner, and that the sales were subsequently set aside. [77 Ct.Cl. at 257.] In my opinion the plaintiff is es-topped in this case to deny many of the conclusions reached on the record by the Court of Claims in the 1933 Creek case, with respect to the Government’s obligations under the 1832 treaty and its overall conduct and dealings with the Creek Nation and the Creek Indians during the negotiations and the carrying out of the provisions of the 1832 treaty — all of which matters bear heavily upon the question of whether the plaintiff can maintain in this case an “unconscionable consideration” claim for the reserve area under section 2 clause 3 of the Act, or a “fair and honorable dealings” claim under section 2 clause 5 of the Act. The fact that “fair and honorable dealings” was not, in so many words, a statutory basis for recovery in the prior litigation between the parties does not, ipso facto, prevent the application of the doctrine of collateral estoppel in the instant case. The correct way to approach such a problem is set forth by the Court of Claims in Creek Nation v. United States, 168 Ct.Cl. 483 (1964) at page 495: The Commission should make a preliminary determination as to whether a plea of unfair and dishonorable dealings raises a new and substantial issue that was not or could not be decided in prior litigation. Where the facts found in the prior litigation show on their face that the dealings were fair and honorable under the circumstances and no new and substantial factual question on the issue is raised, the Commission can, of course, entertain a motion for summary judgment on behalf of the Government. See the companion case decided today, Appeal No. 10-63, The Creek Nation v. United States post, p. 512. There are also cases in which the claim based on fair and honorable dealings was recognized by a rule of law or equity in prior litigation; in such eases, clause 5 has no application. Blackfeet and Gros Ventre Tribes v. United States [119 F.Supp. 161], 127 Ct.Cl. 807, 818 (1954), cert. denied, 348 U.S. 835 [75 S.Ct. 58, 99 L.Ed. 658] (1954). In other substances, the act requires the Commission to hear the Indians’ claim of unfair and dishonorable dealings on the merits. Unless this be done, there is a failure to fulfill the objective of the act to give the Indians a full day in court on all issues not adjudicated by a competent body. The facts found in the prior litigation show on their face that the dealings were fair and honorable under the circumstances and no new and substantial question on the issue has been raised. In fact the factual record now before us is the same record which was before the Court of Claims in the prior Creek case, swpra. The repeated and specific assertions of the Court of Claims that the government had acted in the best interest of the plaintiff at all times and had done all it could do to protect it and its members, prevent us from concluding otherwise. Since there is no new evidence of record, and, since the plaintiff has had its day in court on the question of the defendant’s 1832 treaty obligations to the Creek Indians with respect to the reserve lands, I would let the case go forward for determination of the fair market value of the 3,012,800 acres of land actually ceded by the Creek Nation under the 1832 treaty. I would deny any recovery by the Creek Nation of the value of the 2,187,200 acres involved in the case, and to that extent would reverse the decision of the Indian Claims Commission. COWEN, Chief Judge, and BENNETT, Judge, join in the foregoing dissenting opinion. . The United States admitted in its answer to plaintiff’s petition, filed November 16, 1955 (Defendant’s Answer, Second Defense, paragraph 10), that the Creeks had recognized title to the 5,200,000 acres. . Appellant’s reply brief, p. 4. . Treaty of August 7, 1790; 7 Stat. 35, 2 Kapp. 25. . 7 Stat. 286; 2 Kapp. 264. . Defendant’s Answer to plaintiff’s Petition, p. 2, paragraph 10. . Report of A. Batch, Commissioner on the causes of the Creek hostilities, to Benjamin F. Butler, Secretary of War, January 14, 1837, Cong.Doc.Series #304, 24th Cong., 2d Sess., H.Ex.Doc. #154 at 9-10. See Finding 3, 26 Ind.Cl.Comm. at 458-459. . Finding 4, 26 Ind.Cl.Comm. 410, 459. . Id. at 459-461, quoting from Indian Office Letter Book No. 5, Series 2, at 456-459. . Finding 5, 26 Ind.Cl.Comm. 410, 461, quoting from Indian Office Letter Book No. 7, Series 2, at 447. . Finding 7, 26 Ind.Cl.Comm. 410, 465, quoting from S.Doc.No.512, 23rd Cong., 2d Sess., Vol. II, at 424 (1835). . Plaintiff’s Exhibit 1, Indian Office Letter Book No. 5, Series 2, at 375. Footnote 7, supra. . Finding 5, 26 Ind.Cl.Comm. 410, 462, quoting from Plaintiff’s Exhibit 1; Creek Nation v. United States, Ct.Cl. No. L-168, Call Papers, at 27. . Finding 5, 26 Ind.Cl.Comm. 410, 462-463, quoting from Plaintiff’s Exhibit 3; S.Doc.No.512, 23rd Cong., 2d Sess., Vol. III, 269-270 (1835). . Finding 14, 26 Ind.Cl.Comm. at 472-473. . See Creek Nation v. United States, 63 Ct.Cl. 270, 272, cert. denied, 274 U.S. 751, 47 S.Ct. 765, 71 L.Ed. 1332 (1927) for an analysis of the 1924 Jurisdictional Act. An act involving a different tribe but the same jurisdictional language is analyzed in Crow Tribe v. United States, 284 F.2d 361, 151 Ct.Cl. 281, 298-299 (1960). . “* * * [O]ur result does not rest on finding a specific breach of the treaty.” 26 Ind.Cl.Comm. 410, 416, n. 4. . Cromwell v. County of Sac, 94 U.S. 351, 353, 24 L.Ed. 195 (1876). . An issue which produced an altogether separate and alternative ground for the 1933 Greek decision was whether the Creek Nation had waived all tribal claims against the United States by the Treaty of 1856. 77 Ct.Cl. 226, 263. The parties do not raise this issue on appeal. . Report of T. Hartley Crawford on the frauds charged to have been perpetrated in the transfer of Creek Indian lands to J. R. Poinsett, Secretary of War, May 11, 1938. Cong.Doc. Series 331, 25th Cong., 2d Sess., H.Ex.Doc. #452 at 6-7. (Plaintiff’s Exhibit 4). . Finding 24, 20 Ind.Cl.Comm. at 48S. . Footnote, 19, supra, at 5. . Footnote 6, supra, at 11. . Plaintiff’s Exhibit #1: Creek Nation v. United States, Ct.Cl. No. L-168, Call Papers, at 107. . “The Commission shall hear and determine the following claims against the United States on behalf of any Indian tribe, band, or other identifiable group of American Indians residing within the territorial limits of the United States or Alaska: * * * and (5) claims based upon fair and honorable dealings that are not recognized by any existing rule of law or equity. * * * ” 25 U.S.C. § 70a. . Citizen Band of Potawatomi Indians, 391 F.2d 614, 179 Ct.Cl. 473 (1967) aff’g in part, rev’g in part, Docket No. 217, 15 Ind.Cl.Comm. 232 (1965). “ * * * As to the ‘grants’ not located within the community, it has been the practice of the Indian Claims Commission not to include in the area for which compensation is to be allowed, lands which, though ceded to the United States under one provision of a treaty, were by subsequent treaty provisions to be granted by the United States to third parties. [Citations omitted.] With this practice we concur.” Id. at 623, 179 Ct.Cl. at 490-491. . 165 Ct.Cl. 510 (1964) (aff’g, Docket 334-A, 12 Ind.Cl.Comm. 161 (1963), aff’g in part, rev’g in part, Docket 334-B, 12 Ind.Cl.Comm. 180 (1963)). . 4 Stat. 411. . 427 F.2d 1194, 1200, 190 Ct.Cl. 790, 802 (1970) (aff’g. Docket Nos. 236-K, et al., 20 Ind.Cl.Comm. 131 (1968). . Commission’s Finding 5. . Pl.Ex. 1, Printed record, Court of Claims, Creek Nation v. United States, 77 Ct.Cl. 226. . Id. at 252. . Creek Nation v. United States, supra, 77 Ct.Cl. 226 (1933).

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

BORDO PRODUCTS COMPANY v. The UNITED STATES. No. 223-69. United States Court of Claims. April 13, 1973. Don S. Harnack, Chicago, Ill., attorney of record, for plaintiff. McDermott, Will & Emery, Chicago, Ill., of counsel. Jane C. Bergner, Washington, D. C., with whom was Asst. Atty. Gen. Scott P. Crampton, for defendant. Joseph Kovner, Washington, D. C., of counsel. Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG, and BENNETT, Judges. OPINION PER CURIAM: This case comes before the court on plaintiff’s motion, filed March 12, 1973, for judgment pursuant to Rule 141(b), requesting that the court adopt the recommended decision of Trial Commissioner Lloyd Fletcher filed November 29, 1972, under Rule 134(h), as modified by order of February 22, 1973, defendant having withdrawn its notice of intention to except thereto. The court has considered the case without oral argument of counsel and since it agrees with the trial commissioner’s recommended decision, as hereinafter set forth, it grants plaintiff’s motion and adopts the decision as the basis for its judgment in this ease. Therefore, it is concluded that plaintiff is entitled to recover and judgment is entered for plaintiff with the amount of recovery to be determined pursuant to Rule 131(c) in accordance with the decision. OPINION OF COMMISSIONER FLETCHER, Commissioner: This income tax refund suit requires the court, once again, to enter an area which has been aptly described by Judge Nichols as “devoid of blackletter law, as is true of any tax inquiry seeking the ‘substance’ of a given transaction.” Jack Daniel Distillery v. United States, 379 F.2d 569, 580, 180 Ct.Cl. 308, 326 (1967). The area is frequently referred to as the “debt-equity distinction,” and the hundreds of court decisions involving it “defy symmetry.” Tyler v. Tomlinson, 414 F.2d 844, 847 (5th Cir. 1969). In the context of the present case, the primary question before the court is whether losses suffered by plaintiff, Bordo Products Company (Bordo), upon the failure of C. M. Pitt & Sons Company (Pitt) to repay some $740,000 loaned it by Bordo qualifies as bad debt under Section 166 of the Internal Revenue Code. Alternatively, says Bordo, in the event these loans or advances do not meet the test of bad debt under Section 166, the advances to Pitt should be deductible as ordinary and necessary business expenses under Section 162 or losses under Section 165(a). Defendant, on the other hand, views the advances made by Bordo to Pitt as having been made to obtain an equity interest in Pitt with an investment motive and thus constituted capital contributions to Pitt. A secondary question is whether Bordo is entitled to claimed deduction for additional depreciation expenses, abandonment losses, salary and travel expenses, legal and accounting fees, and escrow and settlement expenses, all of which were related to the transactions between Pitt and Bordo which are described in detail in the findings of fact but which now will only be summarized. During the years 1958 through 1961 (and for some time prior thereto), Bordo, from its Chicago headquarters, was engaged in the importation, packaging, and resale of dates through a national organization of food brokers. In addition, Bordo also produced and marketed a full line of citrus products from its citrus plant in Florida. The citrus operation was considerably larger than the date operation, although the latter produced by far the larger profit margin. During these years, plaintiff’s principal competitor in the wholesale date market was Dromedary, a division of the National Biscuit Company. Along with dates, Dromedary also marketed glacé fruits, cake mixes, and other related food items. Originally, Dromedary had marketed these products through a national food broker organization, but in the first quarter of 1958, Dromedary advised substantially all of its brokers that it was changing its method of marketing and that future sales of these products would be handled by the parent corporation. Accordingly, Dromedary’s brokers were terminated as of the end of the year 1958. This termination action by Dromedary became common knowledge in the wholesale date and glacé fruit business during the spring of 1958. In late April of that year, Bordo began actively to solicit Dromedary’s brokers, and by the end of May had succeeded in obtaining the services of over thirty of the former Dromedary brokers. All of these newly acquired brokers had formerly marketed both dates and glacé fruits for Dromedary, and they advised Bordo that they would be interested in continuing to market a line of glacé fruits and peel since it was common for the same buyers to purchase both dates and glacé fruits. Bordo’s management tended to agree and reasoned that there were several advantages to having a line of glacé fruits to 'sell along with its dates. 1) Such a development would no doubt increase the importance of the Bordo account with its newly acquired brokers, thus stimulating the sale of dates. 2) Increased date sales would enable Bordo to secure additional volume discounts in purchasing bulk dates from abroad. 3) Additional profits should be realized from selling refuse citrus peel to a glacé fruit concern rather than to a cattle food processor as had been the custom. 4) Freight costs could be cut by pooling shipments of glacé fruits and dates. 5) Sales of glacé fruit under the Bordo label should provide increased revenues for Bordo. Accordingly, in the summer of 1958, Bordo’s management looked for sources of glacé fruits and related products to supplement its date line with its food brokers. A former Dromedary broker advised Bordo that C. M. Pitt & Sons Company might constitute a good source of supply of glacé fruit and related products. Pitt, a Maryland corporation, maintained its principal office and place of business in Baltimore at all times relevant to this action. Its principal activity during the years 1958 through 1961, and for some time prior thereto, was the production and sale of glacé fruit, dates, cherries, fountain products, flavors, and currants. In 1958, it enjoyed an excellent reputation in the trade as a quality manufacturer and had recently taken occupancy, under a 20-year lease, of a new plant built to its specifications. In January of 1959, Arthur Koch, a Bordo vice president, conferred with William Pitt, Sr., president and majority stockholder of Pitt, and another Pitt official at Bordo’s Chicago headquarters. Mr. Pitt brought with him financial reports covering his firm’s last five years of operations. In March 1959, Bordo’s president, Adolph Ketzler, its auditor, George V. Rountree, C.P.A., and other Bordo employees visited the Pitt facility in Baltimore. During these negotiations, Pitt advised Bordo that it was desirous of obtaining both long- and short-term credit, additional sales volume of glacé fruit products and assistance in the area of financial management. Bordo advised Pitt that it needed a recognized source of glacé fruits for its brokers, an eastern seaboard location to obtain economies in the marketing of its packaged dates, and a market for its citrus byproducts. Bordo’s investigation of Pitt disclosed that Pitt’s line of credit with the Fidelity Baltimore National Bank (Baltimore Bank) had been discontinued in 1959, and that as a consequence, Pitt had been forced to factor some of its receivables. Pitt’s credit needs were greatest in March through September, its months of inventory buildup. In contrast, Bordo manufactured its citrus products primarily during the months of November through March and borrowed heavily during that period. From an examination of Pitt’s financial statements, it was clear that during the 1950’s Pitt’s profit margins had eroded until it had sustained an operating loss in 1957 and 1958. The operating losses in those two years had depleted Pitt’s working capital. Pitt’s profit (loss) from operations as a percentage of net sales showed a decline from 2.14 percent to (7.08 percent) in the years 1954 through 1958. Additionally, Pitt’s current ratio (current assets to current liabilities), a factor which Bordo found important in evaluating its own performance, had declined from 5.-99:1 in 1954 to 1.16:1 in 1958. In March 1959, George Rountree, Bordo’s accountant, a recognized expert in the field of accounting for the food processing industry, prepared a comprehensive document entitled “The C. M. Pitt and Sons Company Baltimore, Maryland Sales, Production and Cash Budgets Year Ending December 31, 1959.” Budget figures were prepared for three levels of sales, $2,400,000, $2,700,000, and $3,000,000. Net income on these three levels of sales was projected to be $140,000, $171,000, and $209,000, respectively. In March 1959, Bordo applied for and obtained its seasonal, 2.2 million-dollar line of unsecured credit from its primary banking affiliation, the Harris Trust and Savings Bank of Chicago. Bordo described in detail its negotiations with Pitt to Robert Rodgers, an official of that bank, who had handled the Bordo account since 1942. Rodgers understood that the Fidelity Baltimore National Bank would be extending a $200,000 line of credit to Bordo and that Bordo would guarantee the bank’s $450,000 line to Pitt. He thought that, in addition, Bordo would be making a $200,000 advance to Pitt. Rodgers’ understanding that Bordo would provide Pitt with sales and managerial assistance and his receipt of an opinion from counsel that Bordo would not become liable on Pitt’s 20-year plant lease with the Chatim Corporation were important factors in his ultimate decision to recommend approval of Bordo’s credit application. On April 8, 1959, Bordo and Pitt entered into a written agreement whereby Bordo obligated itself to furnish Pitt a 5 percent 5-year term loan of $200,000. As security, Bordo obtained a chattel mortgage on substantially all of Pitt's office and plant equipment (net book value $297,208.58). There were certain preconditions to Bordo’s $200,000 loan. Pitt restructured and realigned its management team in order to facilitate success. Upon Bordo’s advice, Pitt’s board of directors created and staffed the position of controller in order to insure improved financial recordkeeping, as Pitt’s system of accounting had been characterized by Bordo’s accountant as inadequate and outdated. Pitt’s common stockholders entered into an agreement with Bordo whereby Bordo was granted a five-year option to purchase all (945) or any portion of Pitt’s outstanding common stock at par value ($100 per share). Pitt underwent a recapitalization whereby Pitt’s 8 percent first (1,021 shares outstanding) and second (authorized but unissued) preferred capital stock classes were eliminated. A class of 5 percent preferred stock was issued in their place and offered to holders of first preferred on a one-for-one basis. Bordo informally agreed to make available to Pitt production advances, as needed, and management assistance in the area of financial controls. Bordo’s management projected that Pitt would require $450,000 to $850,000 of such financing in the months of April through September 1959. Pitt and Bordo informally agreed that Pitt would sell Bordo glacé fruit under both Bordo’s and Pitt’s label at dealer’s cost, less 10 percent. Bordo anticipated no direct profit on its sales of glacé fruit, but contemplated a proportional reduction in its overhead, as well as stimulation of its date sales. Pitt also agreed to purchase Bordo’s refuse peel for use in glacé fruit production and promised to make available warehouse space in its Baltimore facility for the storage of Bordo’s dates. Bordo advanced $876,000 to Pitt in calendar year 1959 in exchange for unsecured 51/2 percent cognovit demand notes. These advances were based upon Pitt’s cash needs to produce inventory for the 1959 selling season and were to enable Pitt to keep its other creditors on a current basis. Throughout this period, Pitt prepared and submitted to Bordo monthly cash flow statements detailing Pitt’s situation. At Bordo’s request, a telex machine was installed at Pitt as a means of facilitating communication. Ray Watkins, a Bordo employee, spent 124 workdays during 1959 at the Pitt plant. He set up accounting, cost, and financial systems for Pitt; audited Pitt’s first six months’ operations; worked on production control; and assisted Arthur Koch who spent 45 workdays in 1959 at the Pitt facility. In July 1959, George Rountree, Bordo’s accountant, prepared a revised budget for 1959. This budget was less optimistic than his prior projections, and contemplated a $76 net loss for the year (net operating gain $18,718). However, the news was far from totally negative. Even based upon concededly conservative assumptions, the revised budget forecast that Pitt would be able to repay all its existing and projected 1959 borrowings by the close of that calendar year. In August 1959, however, Bordo became uneasy about Pitt’s condition. Pitt was experiencing production problems, and Bordo’s Arthur Koch expressed concern whether Pitt would be able to make timely delivery of its products. Bordo’s Florida general manager and plant superintendent both spent time at the Pitt plant reviewing its production facilities. Bordo’s executives thought it would be prudent to exert Bordo’s influence as a creditor to force out Pitt’s general manager and with Pitt, Sr.’s agreement, began to search for a professional manager from another company. Toward the end of the month, Bordo began to doubt that Pitt’s sales would be as high as predicted in the revised budget. Bordo contacted its Baltimore attorneys to determine its creditor’s remedies. Bordo’s attorneys responded in the following manner: It will be seen that if Pitt should make payments or transfer assets to Bordo on account of its existing debts and if bankruptcy proceedings should be started against Pitt within four months thereafter, any payments which may be made to Bordo or any property which may be transferred to Bordo on account of prior loans at a time when Bordo has knowledge of the insolvency of Pitt, may be set aside by a bankruptcy trustee thereafter appointed as voidable preferences and Bordo may be required to repay any amounts so received, so that money can be divided among the creditors in accordance with the Bankruptcy law. It is important, therefore, if any payments are to be made to Bordo, that no Petition in Bankruptcy can be filed against Pitt within a period of four months after any such payments are made. To that end, if Pitt is to begin liquidating its assets so as to make payments to Bordo on account of its debt, we strongly recommend that all general creditors of Pitt be paid in the ordinary course of business, and that no unpaid indebtedness be allowed to exist which would form the basis for a Petition in Involuntary Bankruptcy. In accordance with its attorneys’ advice, Bordo never demanded repayment and advanced another $60,000 in September 1959 to permit Pitt to keep its other creditors on a current basis. By yearend, Pitt had repaid $390,000 of the 1959 production advances. Through contacts in the food industry, Bordo located one Lawrence Weitz, a man exceptionally well-qualified in the production of glacé fruit and an experienced executive. Weitz was interviewed in Baltimore for the general managership of Pitt by Bordo’s Ketzler, Koch, and Watkins and by Pitt’s controller, Fred Coover. Upon Bordo’s advice, Pitt’s president offered Weitz the position ; Weitz accepted and began work at Pitt in December of 1959. Unhappily, Pitt’s 1959 audit report, available February 1, 1960, revealed a net loss of $264,103. This figure did not take into account the interest owing on Bordo’s advances. In fiscal 1959, Bordo received $941.66 interest from Pitt and waived interest of $28,697.58. Bordo never accrued this interest on its books, financial statements, or tax returns. While a net loss of $76 (net operating gain of $18,718) had been projected as early as July, Bordo’s management was surprised and displeased with the actual results. Mr. Rodgers of the Harris Bank indicated that his bank would be reluctant to continue its line of credit to Bordo unless Bordo got the Pitt operation under control and made sure that Pitt’s management problems were corrected. In early 1960, Bordo learned from Weitz that although Pitt’s building was new, much of its plant equipment was old, poorly designed or otherwise inappropriate. Pumps and other equipment were damaged by corrosion and were often leaking because they were made of materials other than stainless steel. These and other equipment defects produced food discoloration, contamination, and similar quality control problems. Additionally, it appeared that Pitt was losing up to $100 per day in sugar syrup due to a defect in a machine fitting. Early in 1960 Bordo’s accountant furnished Bordo with an appraisal of Pitt’s “Company Procedures.” The report stated that as of January 18, 1960, Pitt’s accounts were not balanced; its bank statements were not reconciled; its social security records were not up to date; its commissions payable were not properly analyzed, and its inventory records were inaccurate. The report also criticized Pitt’s lack of a fixed billing policy and poor customer credit evaluation procedures. Other problems at Pitt came to the attention of Bordo management in late 1959 and early 1960: 1) It appeared that in some cases Pitt had purchased five, ten, or even fifteen times its raw material requirements in order to avail itself of a small noncompensating volume discount. Much of the material purchased was of a quality higher than that needed to be competitive, and even then Pitt failed to follow up with suppliers who furnished defective products. 2) Pitt’s quality control procedures were inadequate as there was a tendency to test products only on completion, rather than at each step in processing. Errors were caught only after large batches had been defectively manufactured. 3) There was no systematic program for analyzing Pitt’s product mix to determine a) why some items were declining in sales; b) whether new products or formulations could be developed; and c) whether each of Pitt’s many low-volume products was profitable to the corporation. 4) It appeared that Pitt’s income in 1959 had been affected by a price war which had developed in the glacé fruit business. Intense price competition was initiated by such nationally advised firms as S and W Fine Foods, Inc., and the National Biscuit Company (Dromedary) . In February 1960, Bordo’s management reappraised its position with respect to Pitt. They consulted Weitz, George Rountree, and Rodgers of the Harris Bank. Weitz expressed the opinion that under his supervision Pitt could break even in 1960, without reference to the interest on or the balance of Bordo’s 1959 advances still outstanding. Bordo saw that it had two alternatives: 1) enforcing its rights as a creditor to the fullest extent, advancing no more money to Pitt and demanding immediate repayment of existing advances, or 2) letting the existing advances remain outstanding and extending additional credit in order to permit Pitt to operate in rehabilitated form in 1960. Bordo determined to finance Pitt through the fall of 1960 in the then reasonable belief that its 1960 advances would be repaid by the end of the 1960 selling season. Bordo hopefully anticipated that Pitt would then be in a position to generate enough profits so as to be able to repay Bordo in full. Bordo advanced $865,000 in cash to Pitt during the calendar year 1960 in exchange for interest bearing, unsecured demand notes. Like their 1959 counterparts, these advances were used to finance Pitt’s 1960 inventory. As was the case with the 1959 advances, Bordo did not intend to profit from the interest it charged Pitt, since the rate which Bordo paid the Baltimore bank for the money was substantially equivalent to the rate which Bordo charged Pitt for these same funds. Bordo expected that the continued availability of a source of glacé fruit would stimulate date sales as had been the case in 1959. Advice from Weitz on Pitt’s six months’ operating results caused Bordo’s management to conclude that Pitt would operate at least on a break-even basis in 1960. Sometime during the first week of October, Weitz informed Bordo that based upon the third quarter inventory, it now seemed that Pitt would suffer a loss for the year. Upon notification of this fact, Bordo requested that Pitt take all possible steps to reduce cash expenditures until the fourth quarter operating results were ascertained. Bordo made no further advances to Pitt after October 5, 1960. During the months October through December 1960, Pitt repaid $280,000 in production advances and made a single payment of $20,000 on the loan secured by the chattel mortgage. In addition, Pitt paid $10,112.45 interest on production advances to Bordo in fiscal 1960. Bordo returned this interest to Pitt, and never accrued interest on these advances to Pitt on its books, financial statements or tax return.., Pitt paid interest on its chattel mortgage once on April 14, 1960, in the amount of $1,019.18. There were no interest expense accruals on Pitt’s books after June 30, 1960. Pitt’s 1960 report disclosed net sales of $2,050,492 and a net loss of $348,539 after waiver by Bordo- of interest due it in 1960 in the amount of $46,971. Pitt’s book liabilities exceeded its assets by $201,570. The prices charged for Pitt’s products were reduced approximately 8% percent during 1960. This reduction was essentially a consequence of the above-mentioned price war which was begun in 1959 by industry leaders. If Pitt had maintained the same level of prices in 1960 as it had charged in 1959 and it had not been forced to meet Dromedary’s policy of prepaying freight on Christmas shipments of glacé fruit, $200,000 of Bordo’s loss probably would have been eliminated. After learning of these results, Bordo officials conferred with Messrs. Weitz, Rodgers, and Rountree. Rodgers advised that his bank would not continue its line of credit to Bordo unless Bordo stopped advancing money to Pitt. As a condition to Bordo’s own inventory financing, Rodgers insisted that Bordo take steps to liquidate the funds it had lent Pitt. Rountree was of the opinion that Pitt’s indebtedness to Bordo could be collected, with at worst a loss of $151,000. He recommended that Pitt be sold as a going concern. Bordo representatives were elected to Pitt’s board with a view to facilitating Pitt’s sale or liquidation. Bordo was advised by its Baltimore attorneys that its losses would be increased if it allowed Pitt to be thrown into bankruptcy by its general creditors. Bordo was advised to see that Pitt was liquidated in a manner so as to maintain all of its creditors other than Bordo on a current basis. Bordo supervised the liquidation of Pitt’s assets, and Pitt vacated its plant by August 31, 1961. During the period January 1 to September 30, 1961, Pitt repaid $510,811.40 of the amount owed Bordo. Pitt’s landlord, the Chatim Corporation, filed an action for damages totaling one million dollars against Pitt and Bordo on April 9, 1962. Chatim alleged that Pitt had broken its lease, and also alleged improper action on the part of Bordo, due to alleged responsibility for the breaking of Pitt’s lease to Chatim. This action was dismissed with prejudice following Bordo’s compromise payment to Chatim of $22,500. Insofar as pertinent to the present controversy, Section 166(a) of the 1954 Internal Revenue Code provides as follows: (1) Wholly Worthless Debts. — There shall be allowed as a deduction any debt which becomes worthless within the taxable year. The apparent simplicity of this provision is entirely delusive. In the present context, the problem is the meaning of the statutory word “debt.” Defendant, as pointed out above, contends that Bordo’s loans to Pitt were in reality merely “advances” of capital contributions for the purpose of acquiring an “equity” interest in Pitt, and hence no debtor-creditor relationship between the two corporations ever came into being. Plaintiff, to the contrary, asserts that under the circumstances of the case, Bordo’s “advances” were clearly intended to be loans to Pitt both in form and substance. This question of whether a particular corporate obligation is “debt” or “equity” has been presented to this court on a number of prior occasions. See Affiliated Research, Inc. v. United States, 351 F.2d 646, 173 Ct.Cl. 338 (1965); American Processing and Sales Co. v. United States, 371 F.2d 842, 178 Ct.Cl. 353 (1967); Jack Daniel Distillery v. United States, 379 F.2d 569, 180 Ct.Cl. 308 (1967); Liflans Corp. v. United States, 390 F.2d 965, 182 Ct.Cl. 825 (1968); and Sayles Finishing Plants, Inc. v. United States, 399 F.2d 214, 185 Ct.Cl. 196 (1968). Experience with § 166 and § 163(a) (allowing a deduction for interest on “indebtedness”) has not proven that the terms “debt” and “equity” are well understood and need no further definition. On the contrary: There is no dearth of eases in this province of tax law. So large is their number and disparate their facts, that for every parallel found, a qualification hides in the thicket. At most they offer tentative clues to what is debt and what is equity for tax purposes; * * * (American Processing and Sales Co., supra, 371 F.2d at 848,178 Ct.Cl. at 362-363.) In Liflans Corp. v. United States, supra, 390 F.2d 968, 182 Ct.Cl. at 831-832, this court identified five factors which it called “basic to the debt-equity distinction”, and in Cuyuna Realty Co. v. United States, 382 F.2d 298, 302, 180 Ct.Cl. 879, 886 (1967) eight “indicia of contributions to capital” were listed. Other courts have listed as many as fifteen, and a recent commentator has listed at least 25 “evidentiary factors.” In the final analysis, each case must be reviewed with an eye to its “unique factual flavor,” and as a composite of “many diverse external elements pointing in the end to what is essentially a subjective conclusion.” American Processing and Sales Co., supra, 371 F.2d at 848, 178 Ct.Cl. at 363. The Formal Rights of Creditors as Opposed to those of Stockholders Classic definitions of debt emphasize the necessity for a fixed or determinable time when the debtor can be unconditionally required to make repayment. Undeniably, the April 8, 1959 mortgage agreement provided a definite schedule for the repayment of the $200,000 advance. The 1959 and 1960 production advances were all evidenced by issue-dated cognovit demand notes and thus were comfortably within the ambit of the classic definition since Bordo could demand repayment at any time. In his article cited in footnote 7, supra, Mr. Plumb makes the following pertinent observation at 418: A demand note, although it sets no definite time for payment, does have an ascertainable due date which is within the control of the purported creditor- [citing cases], and therefore may be recognized as debt if other factors are favorable [citing cases]. It is clear that both the $200,000 loan secured by the chattel mortgage and the 1959-1960 unsecured production advances evidenced by demand notes provided Bordo with the usual rights of a creditor upon default. The 1959 and 1960 demand notes contained no provisions compromising Bordo’s position as a creditor, and no subsequent agreements were executed subordinating either those notes or the $200,000 mortgage loan. While subordination may negate “an important characteristic of a debtor-creditor relationship: the right to share with general creditors in corporate assets upon dissolution or liquidation” (Liflans Corp., supra, 390 F.2d at 971-972, 182 Ct.Cl. at 837) the absence of subordination has been recognized as evidence of debt. Royalty Service Corp. v. United States, 178 F.Supp. 216, 220 (D.Mont.1959). Interest on both the $200,000 loan and the 1959 and 1960 production advances was payable unconditionally, a factor indicative of debt. Liflans, supra, 390 F.2d 965, 182 Ct.Cl. at 832. The Government has stressed repeatedly the admitted fact that Bordo did not contemplate making a direct profit from the interest generated by its advances to Pitt. It is not denied that the funds borrowed from the Baltimore bank by Bordo were loaned to Pitt at approximately the same rate as the bank charged to Bordo. Most lenders, of course, do intend to profit directly from the interest charged, and the interest rate is adjusted in accordance with the risk undertaken. Absent countervailing considerations, the failure to charge a rate of interest commensurate with the risk undertaken points to the conclusion that a capital contribution is involved. Here, other factors are involved, however, and this court has recognized as a “commercial commonplace” certain instances where the quid pro quo is other than a direct profit on the money advanced. American Processing and Sales Co., supra, 371 F.2d 842, 178 Ct.Cl. at 379; see also, George E. Warren Corp. v. United States, 141 F.Supp. 935, 938, 135 Ct.Cl. 305, 309 (1956), and Byerlite Corp. v. Williams, 286 F.2d 285, 290-291 (6th Cir. 1960). In the instant case, by its dealings with Pitt, Bordo looked toward a more profitable market for its citrus by-products, increased volume discounts on dates purchased from abroad, and reduced freight charges brought about by the pooling of date and glacé fruit shipments. Most importantly, Bordo looked toward the stimulation of date sales which it considered would be brought about by furnishing its newly acquired brokers with a recognized glacé line. At page 13 of its brief to the commissioner, defendant discusses Bordo’s management assistance to Pitt, stating: «■ * * * * * While there is some disagreement between the parties as to the degree to which Bordo supervised Pitt’s operations in 1959 and 1960, it is clear from both the testimony and the exhibits that Bordo did participate to a substantial extent in Pitt’s operations. Defendant contends that such participation is sufficient to support a holding that Bordo’s unpaid advances to Pitt were equity as a matter of law. [Emphasis supplied.] * -X- -X- * -X- * It is true that courts have listed participation in management as one of the factors to be considered in making the debt-equity distinction, e. g. Berkowitz v. United States, 411 F.2d 818, 820 (5th Cir. 1969). See, Plumb, supra, at 447-450. However, this factor while meriting close scrutiny can hardly be considered as converting the entire question to one of law. The validity of loans even to a controlled corporation is well established. George E. Warren Corp., supra, 141 F.Supp. 935, 135 Ct.Cl. at 312; Wilshire & Western Sandwiches, Inc. v. Commissioner, 175 F.2d 718, 721 (9th Cir. 1949); Byerlite Corp. v. Williams, supra. Indeed, as noted in Plumb, supra, at 447: ****** * * * it is still almost, correct to say, as one court said long ago, that “The question of voting rights and a voice in management of the company has frequently been discussed but has never been stressed in the determination of the issue.” Citing Jordan Co. v. Allen, 85 F.Supp. 4377 443 (M.D.Ga.1949). Even if defendant’s statement of the law were correct, its factual predicates are hardly supported in the record. While the loan agreement and chattel mortgage contain some creditor-type language restricting Pitt’s conduct as a corporate entity, neither agreement grants Bordo a voice in the management of Pitt’s affairs, nor does any subsequent agreement. The substance does not betray the form as defendant urges. From the outset of the negotiations, it was recognized that Pitt was in serious need of assistance in the area of financial management, and that Bordo’s management would endeavor to furnish it. On Bordo’s advice, Pitt hired a controller. Bordo’s Ray Watkins spent considerable time at Pitt’s plant in 1959 where he set up accounting, cost, and financial systems for Pitt, audited Pitt’s operations for the first six months of 1959, worked on production control, and assisted Bordo’s vice president, A. L. Koch. It is true that during times of unexpected disappointment in Pitt’s operations during August and September of 1959, Koch spent considerable time at the Pitt plant and that he was frequently consulted with respect to overall policy guidance. This fact is partly attributable to the unforeseen inability of Pitt’s general manager to produce an acceptable product at a competitive price and partly to Bordo’s concern as Pitt’s largest creditor for firsthand information on the condition of its debtor. With the prior agreement of Pitt, Sr., Bordo was instrumental in procuring the services of an experienced manager in the glacé fruit field, Lawrence Weitz. Once Weitz had been employed by Pitt as its genera] manager, Bordo’s involvement in Pitt’s operations dramatically declined since Bordo had the utmost confidence in Weitz’s managerial abilities. Even after giving the matter the close scrutiny it deserves, it can only be concluded that Bordo’s advice and participation in management activities were no more than should be expected of a large creditor sincerely worried about its debtor’s inefficient operations and bad financial plight. Factors Indicating an Intention to Create a Debtor-Creditor Relationship The names ascribed to the Bordo-Pitt documents in question were “loan agreement,” “chattel mortgage,” and “demand notes.” “While the form of the instrument is not controlling, it is relevant and entitled to consideration.” Liflans Corp., supra, 390 F.2d at 969, 182 Ct.Cl. at 832. See, also, Crawford Drug Stores, Inc. v. United States, 220 F.2d 292 (10th Cir. 1955). Whatever the nomenclature, of course, any instrument is vulnerable to a challenge that its form does not comport with its substance. On this record, it is believed that the form and substance of the Bordo-Pitt transaction coincide. Defendant devotes a significant portion of its brief to the contention that “plaintiff’s declarations of subjective intent are irrelevant and immaterial.” Defendant’s case citations do not support its conclusion, but rather confirm that such declarations are relevant and will be considered but with the caveat that they will never be determinative by reason of being infected with a self-interest that cannot prevail over inferences drawn from objective acts. Cf. Rombach v. United States, 440 F.2d 1356, 1359, 194 Ct.Cl. 530, 534 (1971). The fact that a party has sought to protect its creditor status by obtaining security enhances the possibility that its advances will be considered debt rather than capital contributions. See, Ackerson v. United States, 277 F.Supp. 475, 477 (W.D.Ky.1967). Bordo’s initial $200,000 advance was secured by a chattel mortgage on substantially all of Pitt’s office and plant equipment with a net book value of $297,208.58. Defendant makes much of the fact that the 1959 and 1960 advances evidenced by numerous demand notes were unsecured. Defendant suggests that a true creditor would have sought “ * * * the minimal protection of an inventory financing lien * * *.” However, on this record, I have concluded that, by assuring itself through monthly cash flow and production reports that its 1959 and 1960 production advances were being converted into inventory, and by effective restrictions in the mortgage documents of Pitt’s ability to encumber its assets, Bordo was behaving in the manner of a true creditor as distinguished from an equity investor. Only by virtue of 20-20 hindsight is it now possible for defendant to suggest other means whereby Bordo’s attorneys might have more effectively protected Bordo’s rights against Pitt. Proportional holdings of debt and stock have always been considered as indicative of equity rather than debt. American Processing and Sales Co., supra, 371 F.2d 842, 178 Ct.Cl. at 363; Liflans Corp., supra, 390 F.2d 965, 182 Ct.Cl. at 836-837; Affiliated Research, Inc., supra, 351 F.2d 646, 173 Ct.Cl. at 344-345. However, it is also clear from Liflans that something more than this single factor must be present, and this would seem consistent with the fact that a viable debt may be recognized even where the debtor is a controlled corporation. Byerlite, supra; George E. Warren Corp., supra. It is better to characterize the impact of such a fact as rendering the transaction “suspect” and subject to “close scrutiny.” Sayles Finishing Plants, Inc., supra, 399 F.2d 214, 185 Ct.Cl. at 208; George E. Warren Corp., supra, 141 F.Supp. 935, 135 Ct.Cl. at 312. It is reasoned that the holder of proportionate amounts of debt and equity will not force repayment of the debt if such enforcement would jeopardize its equity interest. Tyler v. Tomlinson, supra, 414 F.2d at 849. Bordo owned 125 shares of Pitt Common and 50 shares of Pitt Preferred, as well as an option to purchase the remaining 820 shares of Common at $100 per share. Defendant argues that there was thus an identity of interest between Bordo’s and Pitt’s shareholders which indicates that the “1960 advances were not conceived of as debt,” citing P. M. Finance Corp. v. Commissioner, 302 F.2d 786 (3d Cir. 1962); Indian Lake Estates, Inc. v. Stewart, 448 F.2d 574 (5th Cir. 1971); Foresun, Inc. v. Commissioner, 348 F.2d 1006 (6th Cir. 1965); Motel Co. v. Commissioner, 340 F.2d 445 (2d Cir. 1965); Wilbur Security Co. v. Commissioner, 279 F.2d 657 (9th Cir. 1960); cf. Brown Shoe Co., Inc. v. Commissioner, 339 U.S. 583, 70 S.Ct. 820, 94 L.Ed. 1081 (1950). None of defendant’s cases present a fact situation truly comparable to the transaction in question. These cases primarily stand for the proposition that the “non-issuance of shares of stock * * * is not necessarily controlling in determining the character of the transaction for tax purposes.” Foresun, Inc., supra, 348 F.2d at 1009; see Indian Lake Estates, Inc., supra, 448 F. 2d at 579. While it is true that the value of Bordo's stock option could be expected to increase with the success of Pitt’s business, it is unreasonable to assume on this record that Bordo would therefore have risked its very substantial loans and advances merely to shore up a potential equity position. The most the Government can expect from the existence of the option is that this will cause the court to scrutinize closely all other factors. Failure of a creditor to insist on regular interest payments has been viewed as a pertinent factor in making the debt-equity distinction. Tyler v. Tomlinson, supra, 414 F.2d at 849. In 1959 Bordo received a total of $941.66 interest from Pitt. It waived interest of $28,697.58. Bordo never accrued this interest on its books, financial statements, or tax returns. Failure of a creditor to insist on repayment of an installment of a note when due or an inappropriate delay in making demand in the case of a demand note is also indicative of concern for an equity investment, Tyler v. Tomlinson, Id. at 849; Cuyuna Realty Corp., supra, 382 F.2d 298, 180 Ct.Cl. at 886. However, intent at the time the advances were made is an important consideration, and subsequent unexpected economic developments may well explain the fact of forbearance. Liflans Corp., supra, 390 F.2d 965, 182 Ct.Cl. at 830-831. Here, Pitt's inability to make interest payments and to repay production advances was caused by unexpected production problems, lower than anticipated sales, and spiraling manufacturing costs. The advice of Bordo’s attorneys was also important in Bordo’s decision not to make an immediate demand for its production advances or to declare the $200,000 loan in default. In August of 1959, Bordo’s attorneys advised it to see that Pitt’s general creditors were paid in the ordinary course of business in order to insure that a petition for involuntary bankruptcy was not filed against Pitt. Such an eventuality, they advised, would have rendered any payments to Bordo voidable preferences if made within four months of Bordo’s knowlege of Pitt’s insolvency. Additionally, such an eventuality would have interfered with the orderly liquidation of Pitt’s inventory. Thus, Bordo advanced Pitt an additional $60,000 in September 1959 in compliance with its attorneys’ advice. The question whether Bordo’s decision to forbear and continue advances in 1960, once 1959 adverse results were known, was a creditor’s decision or an equity investment will be discussed below. Factors Bearing on the Reasonableness or Economic Realities of of the Transaction This court and others have mentioned the purported debtor’s inability to obtain funds from an outside lender under the same conditions as a factor in making the debt-equity distinction. Cuyuna Realty Co., supra, 382 F.2d 298, 180 Ct.Cl. at 886; Lynch v. United States, 337 F.Supp. 1297, 1299 (N.D.Ga. 1971). While it may be an adverse fac- . tor, the inability of a purported debtor to procure such a loan is not an unfailing bar to bad debt treatment for the purported creditor. Brighton Recreations, Inc. v. Commissioner, 20 T.C.M. 127, 135 (1961); American Processing and Sales Co., supra, 371 F.2d 842, 178 Ct.Cl. at 370. In the present case, it has been found, over plaintiff’s objection, that the Baltimore bank had curtailed its line of credit to Pitt in 1959. That is at least one reason why Pitt sought the financial and other arrangements with Bordo which have been described at length herein. Ordinarily, this fact would weigh against plaintiff’s claim. However, it is to be remembered that in this case the motivation and effective rate of return to Bordo was much higher than the 5, 5%, or 5% percent interest charged. Bordo contemplated that substantial indirect profits and other benefits would inure to it from this transaction. Thus, the availability of loans to Pitt from outside sources at the 5-5% percent rate with the security offered is not particularly material. Plumb, supra, ftn. 7, at 526 states: * -X- * * *x* * Perhaps the most obvious criterion of whether payment of a purported debt may reasonably be expected is the . projection of the sources from which payments may be made. In general, there are only four possible sources for consideration: (1) liquidation of assets, (2) profits from the business, (3) cash flow, and (4) refinancing with another lender. * * -X- -X- -X- * Pitt and Bordo predicted that Pitt would realize a substantial profit in 1959. There was no question in the minds of the respective managements that there would be funds for the repayment with interest of both the $200,000 loan installment and projected production advances. It is true that in July 1959, Bordo’s accountant prepared a revised budget for Pitt projecting a net loss of $76. Even based upon concededly conservative assumptions, however, the revised budget forecast a cash flow sufficient to repay all existing and projected advances with interest at the conclusion of Pitt’s selling season. Thus, as plaintiff contends, the absence of a sinking fund is without significance. Unhappily, Bordo’s and Pitt’s reasonable projections were frustrated by unexpected events: lower than anticipated sales, production problems, and spiraling manufacturing costs. Early in 1960, Bordo was faced with a Hobson’s choice between asserting immediately its creditor’s rights (which no doubt would have meant liquidation of Pitt) or forbearing its right and continuing to advance funds on the same basis as in the previous year. The decision had to be made before Pitt was called upon to commit funds for raw materials. Defendant contends that “ * * * Bordo would be repaid only if Pitt’s 1960 selling season were successful; if the season were not successful, Bordo anticipated that it would not be repaid.” If this were true, Bordo’s advances would surely have been “at the risk” of Pitt’s business, and more likely capital contributions than debt. However, defendant errs factually. The predicted cash flow from a breakeven year would have been sufficient to repay 1960 production advances and the mortgage debt installment, with interest. Plaintiff’s decision to continue was based upon the reasonable belief that Pitt’s new general manager could control the production problems and wasteful expenditures which had plagued Pitt in the previous year. The first six months’ results supported Bordo’s predictions, but third-quarter results indicated that Pitt would again suffer a loss. A buyer for the firm was sought both by Bordo and Pitt principals but without success. Rightly or wrongly Bordo was again advised to see that Pitt’s general creditors were paid in the ordinary course in order to avoid the problem of voidable preferences. This was also necessary to insure the orderly disposition of Pitt’s inventory. It is significant that the decision to continue advancing funds to Pitt in 1960 was reviewed by Bordo’s bankers. It will be remembered that the Harris Bank was also consulted when Bordo initially considered the transaction and after problems developed in August of 1959. Rodgers of the Harris Bank made it quite clear at trial that he would not have recommended to his bank an advance of funds to Bordo for its own inventory financing in 1960 if he had fully understood that Bordo planned to commit funds to Pitt other than on a short term basis until Pitt’s inventory was liquidated. Any other type of commitment would have reduced Bordo’s own working capital and reduced its ability to pay back its own seasonal borrowing to the Harris Bank. From the foregoing consideration of all the many factors involved, Bordo’s status as a creditor of Pitt emerges clearly. Accordingly, upon Pitt’s ultimate failure to repay the loan balance of approximately $740,000, Bordo suffered a bad debt loss within the meaning of section 166. There remains only the secondary question of whether, in addition, Bordo is entitled to deductions for certain depreciation expenses, abandonment losses, salary and travel expenses, legal and accounting fees, and stock escrow and settlement expenses, all connected directly to the Bordo-Pitt transaction. The facts with respect to these several items are detailed in findings 84 through 89. (See commissioner’s report of November 29, 1972.) It is sufficient here to note only salient facts as to the major items. The depreciation expense and abandonment loss arose out of machinery and equipment admittedly owned by Bordo but loaned by it to Pitt; the salary and travel expenses were those of Bordo’s officials incurred in traveling to Baltimore for consultation with Pitt’s officials; and the legal and accounting fees related mainly to Pitt’s liquidation and the defense of a lawsuit filed against both Pitt and Bordo by Pitt’s landlord, a lawsuit ultimately settled by Bordo. Defendant agrees that the resolution of this issue “is directly related to the determination of the debt-equity issue.” Since the latter issue has been resolved in favor of plaintiff, it logically follows that this secondary issue must likewise be resolved for plaintiff. However, of “additional concern here,” says defendant, is whether Bordo received the benefit of these expenses so as to be entitled to their deduction. In defendant’s view only Pitt benefited from these expenses. This specious argument deserves but little comment. From the record it is entirely clear that, while Pitt was indeed an incidental beneficiary of these expenses, it was Bordo who primarily benefited therefrom. Therefore, Bordo, not Pitt, is the taxpayer entitled to the deduction. Plaintiff is entitled to judgment with the exact amount of recovery to be determined pursuant to Rule 131(c). NICHOLS, J., concurs in the result. CONCLUSION OF LAW Upon the findings of fact and the foregoing opinion, which are adopted by the court and made a part of the judgment herein, the court concludes as a matter of law that plaintiff is entitled to recover, and judgment is entered to that effect, with the determination of the amount of recovery to be reserved for further proceedings under Rule 131(c) in accordance with this opinion. Whereas the court adopts the commissioner’s separate findings of fact, which are set forth in his report filed November 29, 1972, they are not printed herein since such facts as are necessary to the decision are contained in his opinion. . Whether or not these statements included the statement for 1958 is not clear from the record, as the 1958 statement bears the date January 27, 1959. However, it is certain that this report was seen by Bordo prior to the finalization of the agreement described below. . Because the holders of 125 of the common shares dissented to the above arrangements, a Bordo stockholder purchased the shares from the shareholders at par prior to the execution of the agreement. In June of that year Bordo acquired these 125 shares from its stockholder at par. . When a trustee holding 50 of Pitt’s first preferred shares refused to consent to the above transaction, his shares were purchased by Bordo at $60 per share. . Freight and brokerage charges, cash discounts and administrative costs eliminated the possibility of a direct profit. . But see John Kelley Co. v. Commissioner, 326 U.S. 521, 530, 66 S.Ct. 299, 90 L.Ed. 278 (1946). . Tomlinson v. 1661 Corp., 377 F.2d 291, 296 (5th Cir. 1967). . Plumb, The Federal Income Tax Significance of Corporate Debt: A Critical Analysis and a Proposal, 26 Tax L.Rev. 369, 411-412 (1971). This brilliant analysis of the debt-equity area of tax law stands in a class by itself. The article is the most comprehensive treatment of the subject to date. . One recent decision compared the “often intuitive and subjective” process here involved to the problem of judicially defining pornography, of which Mr. Justice Stewart said, “perhaps I could never succeed in intelligibly doing so. But I know it when I see it. * * * ” Sansberry v. United States, 70-1 U.S.T.C. ¶9216 (S.D.Ind.1970), citing Mr. Justice Stewart’s concurring opinion in Jacobellis v. Ohio, 378 U.S. 184, 197, 84 S.Ct. 1676, 12 L.Ed. 2d 793 (1964). See also, Waldemar J. Coliz, 22 T.C.M. 1775, 1785 (1963). . In Sayles Finishing Plants, Inc., supra, 399 F.2d at 218, 185 Ct.Cl. at 203, the court characterized the following from Gilbert v. Commissioner, 248 F.2d 399, 402 (2d Cir. 1957), ns a “well-stated definition of debt”: “The classic debt is an unqualified obligation to pay a sum certain at a reasonably close fixed maturity date along with a fixed percentage in interest payable regardless of the debtor’s income or lack thereof. While some variation from this formula is not fatal to the taxpayer’s effort to have the advance treated as a debt for tax purposes, * * * too great ’ a variation will of course preclude such treatment.” . Finding 33 (note 4). (See commissioner’s report of November 29, 1972.) . The loan agreement and the recorded chattel mortgage, both dated April 8, 1959, contained standard default clauses for the protection of Bordo as mortgagee. . Jewel Tea Co., Inc. v. United States, 90 F.2d 451, 453 (2d Cir. 1937); United States v. South Georgia Ry. Co., 107 F.2d 3, 5 (5th Cir. 1939). . In fact, the loan agreement contained clauses which had precisely the opposite effect. . “Subordination to general creditors is not necessarily indicative of a stock interest. Debt is still debt despite subordination.” Kraft Foods Co. v. Commissioner, 232 F.2d 118, 125-126 (2d Cir. 1956); accord, Jack Daniel Distillery, supra, 379 F.2d 569, 180 Ct.Cl. at 328-329; Commissioner v. O. P. P. Holding Corp., 76 F.2d 11, 12 (2d Cir. 1935). . “The question always is whether the transaction under scrutiny is in fact what it appears to be in form; a marriage may be a joke; a contract may be intended only to deceive others; an agreement may have a collateral defeasance.” Chisholm v. Commissioner, 79 F.2d 14, 15 (2d Cir. 1935), cert. denied, Helvering v. Chisholm, 296 U.S. 641, 56 S.Ct. 174, 80 L.Ed. 456 (1935). . No proof has been offered concerning the ability or inability of Pitt to obtain credit from another source.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

HEAVEN HILL DISTILLERIES, INC. v. The UNITED STATES. No. 372-68. United States Court of Claims. April 13, 1973. As Amended May 24, 1973. David Sachs, New York City, for plaintiff; John Tarrant, Louisville, Ky., attorney of record. Myer Galanter, Louisville, Ky., Paul J. Bschorr, New York City and Tarrant, Combs, Blackwell & Bullitt, Louisville, Ky., of counsel. Joseph Kovner, Washington, D. C., with whom was Asst. Atty. Gen. Scott P. Crampton, for defendant; Gilbert E. Andrews, Jr. and James C. Bergner, Washington, D. C., of counsel. Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG, and BENNETT, Judges. OPINION PER CURIAM: The ultimate issue is whether plaintiff corporation, a distiller of bourbon whiskey, may currently deduct in its fiscal years 1962-64 the expenses of “carrying charges” for storing the whiskey in barrels in its warehouses while it ages and awaits customers, rather than adding such carrying charges to the cost of its bulk whiskey inventory and deferring recovery of the charges to ultimate sale or disposition. While the plaintiff expensed all such carrying charges, including those associated with the storage of whiskey sold in bulk to others (about 95 percent of its production), the present claim relates only to those carrying charges associated with the whiskey which plaintiff owned, i. e. which it bottled on its own account and under its own labels for wholesale disposition by the case, or which it sold in bulk after the year of production. In deciding this question, the dispositive issue is whether the aging of the whiskey is part of its manufacturing or production process. If it is not, defendant concedes it has no defense. Since its inception in 1946 the plaintiff has engaged in distilling, storing during the aging period, and selling bourbon whiskey in the State of Kentucky. After distillation the raw (“cistern”) whiskey is entered into 50 or 51 gallon white oak barrels which have been charred on the inside. The barrels are then stored in plaintiff’s warehouses, which have no temperature or humidity controls. While the barrels are thus stored their contents, through chemical interaction between the whiskey and the charred interior surfaces of the barrels, gradually change in color, aroma, and taste. This is' the aging process which takes place automatically without human or mechanical intervention, except for routine checking of the barrels for leaks, random sampling before bottling, and sporadic rotation of some barrels in the warehouses whenever time permits, although rotation is not necessary to proper aging and many barrels are not disturbed. Each barrel in storage bears a separate serial number and the date when it is filled with raw whiskey and placed in the warehouse. That is the production date. Similar data is carried in plainiff’s inventory records. Because of the progressive chemical change that occurs in the barreled whiskey while aging in storage, each age acquires a distinctive quality with respect to its color, aroma, and taste that differentiates it from other barreled whiskey which has been in storage for a lesser or greater period of time. Whiskey stored for 2 years is called straight whiskey, and for 4 years or more it is called bonded whiskey when bottled and labeled. Approximately 95 percent of plaintiff’s production is sold in bulk to purchasers, some of it being bottled for them. The rest is retained and bottled by plaintiff under its own labels for wholesale case disposition. Heaven Hill labels are applied only to whiskey which is at least 4 years of age. The bulk whiskey is salable from the moment it is barreled and stored. During the tax years in suit from 67 to 77 percent was sold to customers during the first year of storage, and kept in storage for the customer until it reached the age desired, whereupon it was delivered in that form to the customer or, at the customer’s direction and cost, bottled for him by plaintiff. The customer pays plaintiff storage charges from the date of purchase, which yields plaintiff a profit over its storage costs. When plaintiff offers its bulk whiskey for sale the quoted prices vary according to the posted age of the product. Generally the price increases with the product’s age. The difference in price approximates the accumulated storage charges for the longer period. But the chief determinant of price is the competitive factor of market supply and demand. Over the years there has been wide fluctuation in the price of bulk whiskey. Older bourbon whiskey is assessed an ad valorem tax by the State of Kentucky at a’higher value than younger whiskey. The State determines the value for tax purposes, which increases for each year of age, but whiskey of the same age and type by all producers in the State is assessed the same value. There is no necessary correlation between the assessed value of the whiskey for state tax purposes and its market value. Since its incorporation in 1946 the plaintiff has consistently accounted for its bulk whiskey inventories by recording the average production cost of each barrel produced. Plaintiff’s recorded production cost has included everything except the warehouse cost for the aging period, which warehouse cost the plaintiff has charged off to ordinary and necessary business expense under section 162 of the 1954 Code, or its predecessor counterpart. The warehouse cost per barrel is known. Only the warehouse costs attributable to the bulk whiskey inventory which plaintiff owns and bottles for its own account are in issue here, as stated before. The warehouse costs for bulk whiskey owned by plaintiff’s customers and left to age in plaintiff’s facilities are also currently deducted as expense on plaintiff’s books, but these deductions are not part of our problem. Plaintiff’s certified public accountant has certified its financial statements, which expensed the warehouse costs, as being in accordance with generally accepted accounting principles and fairly presenting the results of plaintiff’s operations, i. e., its net income. The approval of plaintiff’s consistent practice of expensing its warehouse costs rather than adding them to inventory was based on the assumption that the storing of bulk whiskey while it aged was not part of the production or manufacturing process of bourbon whiskey, but represented only storage costs of a finished, salable product. On audit of plaintiff’s Federal income tax returns for fiscal years 1962 through 1964 the Commissioner of Internal Revenue determined that the storage costs were costs of production not to be deducted as period costs but deferred until sales of the inventory by capitalization or additions to inventory costs incurred in the year for goods held for future sale. Deficiencies were assessed and paid as itemized in findings 36 and 37, infra, claims for refund duly filed and disallowed, and this suit followed. The plaintiff does not consider the storage interlude of its bourbon whiskey business to be manufacturing, or production, primarily because the product becomes salable the moment it is barreled and placed in the warehouse, two-thirds of total production being sold in the first year before it is matured enough to please the palate. Defendant contends that the storage phase (which it terms “maturation period,’’ the costs of which are accordingly “maturation costs”) is a continuation of the manufacturing process because whiskey of a particular age is a separate and distinct production from whiskey of any other age, and this distinction is recognized by the trade, the public, and by plaintiff in its pricing and record-keeping. The theory being, it is supposed, that older whiskey appeals to the more lucrative carriage trade, while greener whiskey has a less exacting constituency. Under the circumstances peculiar to this plaintiff’s method of doing business, which may not necessarily apply to other members of the bulk bourbon industry whose procedures may differ in significant respects for all the record shows, we hold that the period from the deposit of the barreled bourbon whiskey in the plaintiff’s warehouses to the time of its withdrawal therefrom constitutes storage rather than manufacturing, even though the whiskey is maturing the while. The necessary consequence of this conclusion is that the whiskey is a finished, salable (though not appetizing) manufactured product at the commencement of its storage. There is no fixed all-purpose definition of the term “manufacture.” See Duke Power Co. v. Clayton, 274 N.C. 505, 513-514, 164 S.E.2d 289, 295 (1968); 55 C.J.S. Manufactures § 1a (1948). See also the variety in 26 Words and Phrases (1953) under “Manufacture.” Etymologically the term compounds from the latin words “manu” and “facere”, literally, to make by hand. Machinery is metaphorically a mechanized extension of the human hand. In an industrial society manufacturing is no longer represented by the handcrafted products of an earlier cottage industry age, but rather is characterized by the production of goods in quantity through the concentrated employment of multiple labor, much material, and relatively large amounts of capital in the form of structures, divers machines, and abundant finances. Manufacture is not a technical word but has a common, ordinary, but elastic meaning. Sharpe v. Hasey, 134 Wis. 618, 620-621, 114 N.W. 1118, 1119 (1908). Its meaning varies too according to the context in which it is employed. For example, where it is used in a statute which extends or denies the benefits of a license or tax exemption to such classification, or in a customs provision applying a different duty to imported manufactures, it becomes important to apply a liberal or a strict construction according to the legislative purpose of the measure. The dictionary definition is of secondary value in the interpretive process. In the present case, the term is not used in the relevant tax statute, but nevertheless is involved in implementation of the statutory intent. The most comprehensive judicial analysis of the term “manufacturing” exposed by research is found in In re I. Rheinstrom & Sons Co., 207 F. 119 (E.D.Ky.1913), aff’d 221 F. 829 (C.A. 6), appeal dismissed, 239 U.S. 11, 36 S.Ct. 1, 60 L.Ed. 119 (1915), where in concluding that the elaborate processing of Maraschino cherries constituted manufacturing with regard to establishing creditor priorities under a bankruptcy statute, the court painstakingly sifted and analogized numerous precedents.. Written 60 years ago, no case before or since Rheinstrom has made such a major effort. The message of much of the lengthy discussion there is that the processing and manipulation of agricultural or natural products into a form suitable for sale in the market does not constitute manufacture, so long as the article sold is the processed but recognizable form of the original or natural product, despite the labor and machinery necessary to achieve that result. But where the transformation of the product is too pronounced, and the processing too involved, as in the ease of Rheinstrom’s Maraschino cherries, then the end product may become a manufacture, having abandoned its original characteristics en route. Thus the roasting, grinding and blending of raw coffee beans for commercial sale was held not to be manufacturing, nor the mixing of several varieties of tea into a blend for sale. People ex rel. Union Pac. Tea Co. v. Roberts, 145 N.Y. 375, 40 N.E. 7 (1895). And the purchase, slaughtering and sale of sheep /and lambs, with byproducts of wool, hides, and rendered tallow (fat being chemically transformed through heat) was held not to be manufacture. “At most, they were merely prepared for market and preserved until sold.” People ex rel. New England Dressed Meat & Wool Co. v. Roberts, 155 N.Y. 408, 412, 50 N.E. 53, 54 (1898). Grass cut into hay, then dried in the open and stored in a warehouse for a month before baling and shipment, in the course of which processing the native starch converted to sugar through natural forces to make a more nutritive fodder, was held not to be manufacture in the context of a customs law imposing a tariff on manufactured imports. Frazee v. Moffitt, 18 F. 584 (N.D.N.Y.1882). The court there found that * [T]he drying and any conversion of starch into sugar are mere incidents of the necessary cutting to enable it to be stored for food x- * *. Dried apples would not be called a manufactured article, though the apple is peeled and cored and sliced, and dried by exposure to the sun and manipulation. The substance of dried applies is still apples. * * * [18 F. at 587.] In commenting on this case, Rheinstrom, supra, 207 F. at p. 142, observed that if there is a change made in converting grass into hay, * * * [I]t is nature and not the farmer that makes the change, and hence the farmer cannot be said to be a maker * * *. He simply manipulates the grass, so that nature can do her work better. * * * [S]o far as there is a making, it is nature which does the making. * * * Rheinstrom repeats this observation in equivalent language at p. 154. Note the similarity to the aging of whiskey in storage without manipulation or attention, and through the working of natural forces, quite comparable in principle to the sun-drying of apples or the starch-to-sugar metamorphosis in stored hay. Even though whiskey in storage is, unlike less animate objects, in a state of internal flux and slow betterment while it rests in its congenial surroundings, nevertheless it at all times remains whiskey, and in plaintiff’s practice at any and all times it is a salable if not an agreeably potable product when first it is distilled and barreled. It need not be ready to imbibe in order to be ready for sale. The distiller aims at the wholesaler as his target of sale, the wholesaler at his retailer, and the retailer at the drinker. (In its later life, whiskey is said in jest to have more public enemies and private friends than any known liquid comestible.) Only to the retailer and the consumer is the readiness of the product for normal consumption a matter of immediate concern, for the wholesaler’s interest is primarily in the potential consumer attributes of the basic product, and he buys from the producer on the strength of that potential whether it is achieved at the moment of sale or not. In Anheuser-Busch Brewing Ass’n v. United States, 207 U.S. 556, 28 S.Ct. 204, 52 L.Ed. 336 (1908), aff’g 41 Ct.Cl. 389 (1906), in ruling that the extensive chemical processing given to imported corks before their use as stoppers in exported bottled beer was not “manufacture” in the meaning of a statute authorizing the deduction (“drawback”) of the duty paid on imported components of exported products, the Supreme Court said at p. 562: * * * Manufacture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labor, and manipulation. But something more is necessary * * *. There must be transformation; a new and different article must emerge, “having a distinctive name, character, or use.” * * * A cork put through the claimant’s process is still a cork. * * * Rheinstrom, supra, 207 F. at p. 149, dialectically criticizes this statement in Anheuser-Busch. By transliteration of the cork situation to the whiskey one, whiskey is still whiskey after storage, albeit with a transformation in color, taste and aroma, but surely no more of a transformation than occurred to the AnheuserBusch corks, which were actually given much more manipulation of a “manufacturing” nature than the inert storage treatment accorded the whiskey. Nor was the change made in the corks by manipulation any more pronounced than the transformation in the stored whiskey. In each case the basic substance to which the cork and aging were collateral, namely, beer and whiskey respectively, were manufactured products. In each case the product was changed so it could be used, with this difference: whereas the corks in their pristine imported condition could not be used as corks until thoroughly processed, our plaintiff’s whiskey was usable for the purpose intended by its maker, namely, sale in bulk, at any time after when in raw state it was entered in the barrels, for plaintiff was in the business of bulk sales which did not require the whiskey to be potably aged at the time of sale. Granted that this case is confined to the particular whiskey which the plaintiff did not sell in bulk but held and bottled on its own account for sale in case lots; nevertheless that area of its business was only incidental to its principal business. So far as is disclosed, the plaintiff had no program to set aside a particular portion of its annual production for its own use, but ostensibly left that decision to depend on the amount that was not disposed of to bulk purchasers. The issue of whether whiskey aging in barrels subsequent to the distillation process was “work in process” has been considered in three recent cases. The first was Jack Daniel Distillery v. United States, 379 F.2d 569, 180 Ct.Cl. 308 (1967). The question arose in a somewhat different context than the instant one, specifically how the distiller’s inventory of whiskey in barrels was to be valued at the time of sale of all the distiller’s assets. The plaintiff in Jack Daniel contended that, once distilled, the whiskey was a distinct product, and that even while aging the whiskey could not be fairly valued without taking into account the prospective value of the right to bottle the whiskey product under the Jack Daniel label. ' The Internal Revenue Service contended that the aging whiskey in barrels was still “work in process”; and that until it had aged the requisite length of time it was not yet the distinct whiskey product identified under the Jack Daniel label. Thus the defendant argued that the tangible asset, aging whiskey in barrels, should be valued without addition of the value of the right to affix thereto the intangible label. The Court of Claims rejected defendant’s contentions. The court agreed that the whiskey in barrels had some characteristics of “work in process”, in that the distiller allowed it to age a certain number of years before bottling it for sale; nonetheless the court found that the whiskey in barrels was unlike “work in process” in many respects. The parties had agreed that Jack Daniel whiskey was, when sold at retail, a distinct product unlike any other whiskeys, including bourbon whiskeys. The court found that the distinct qualities of the Jack Daniel product were generated at the time of the actual distilling process, prior to the barrelling of the whiskey. The aging or maturing of the whiskey was a natural process that did not add anything to the Jack Daniel whiskey that was unlike other whiskeys. The barreled product, while aging, was a “product” that had an ascertainable liquidation value whether or not it had aged to the point at which the distiller normally bottled it. Thus the court found that the whiskey in barrels did not fit the usual concept of “work in process”; and the court agreed with the plaintiff in Jack Daniel that the whiskey was already a distinct product that could not fairly be valued, even on the first day in barrels, without considering the value of the right to use the distinctive Jack Daniel label. It would seem that the factual analysis in Jack Daniel would a fortiori support plaintiff’s position in Heaven Hill, since the instant plaintiff’s whiskey, while it may have its devoted clientele, is not substantially unlike other bourbon whiskeys but is considered a salable product even in the raw state. In Jack Daniel it was not disputed that the distiller held all of its whiskey until aged a specified amount of time, and sold all of the whiskey under its own label as a distinct whiskey product. In the present case, the fact that plaintiff sells almost all of its whiskey in bulk at virtually any point in the time during which the whiskey is aging, two-thirds of it within the first year of storage, and that it holds some whiskey at least 4 years for bottling under its own label, would seem to reflect consumer preferences rather than the distiller’s desire to create a distinct “aged whiskey” product. A somewhat different result from that of Jack Daniel, was reached by the Tax Court in George L. Schultz, 50 T.C. 688 (1968) aff’d per curiam, 420 F.2d 490 (3d Cir. 1970), a case relied on here by defendant. In Schultz, the taxpayer purchased as an investment whiskey certificates covering numerous barrels of raw whiskey which he left in the possession of the distiller, originally planning (by his own admission) to leave the whiskey in storage until it had aged 4 to 5. years (although he ultimately sold it at a loss somewhat earlier). The court expressed its opinion that the storage of the whiskey while aging constituted part of the manufacturing process, albeit the aging process was a natural one not caused or aided by human instrumentality. The actual holding of the Tax Court, however, was that since the taxpayer had admittedly originally sought to acquire 4-year old whiskey, the storage and related expenses constituted part of the costs of acquisition of the capital asset, i. e., 4-year old (or older) bourbon. Thus, the Tax Court held that the storage costs should be capitalized rather than deducted annually as expenses. Despite the assertions of defendant to the contrary, the Schultz case is readily distinguishable from the facts of the instant case. The taxpayer in Schultz was not in the bourbon business or industry, but was an admitted speculator engaged in a limited investment transaction ; and his original intent was to hold the whiskey until it had aged at least 4 years for sale at that time. Indeed, in affirming in Schultz, the Court of Appeals for the Third Circuit stressed that they were affirming on the facts of that case. Further, Schultz has since been distinguished as above in a case involving a distributor of bourbon whiskey, see Van Pickerill & Sons, Inc. v. United States, 445 F.2d 918, 921-922 (C.A. 7, 1971). An issue closely analogous to ours was considered by the United States Court of Appeals for the Seventh Circuit in Van Pickerill & Sons, Inc., supra. There the taxpayer was a wholesale liquor dealer who was also the exclusive distributor in certain counties of southern Illinois of a particular brand of bourbon whiskey. Taxpayer would purchase raw or “white” whiskey from the distiller, but the seller-distiller would retain possession of the whiskey in barrels in his warehouse until it had aged 4 or 5 years to conform to consumer tastes. The seller-distiller would pass on the storage costs, insurance charges, and ad valorem taxes assessed by the State of Kentucky, to the buyer-wholesaler on a regular basis. The taxpayer consistently deducted these assessments annually as expenses, but the Commissioner of Internal Revenue determined that this method of accounting did not clearly reflect taxpayer’s income, under section 471 of the Code. The Commissioner argued that the aged whiskey ultimately sold by the taxpayer was a different product from the raw whiskey initially purchased; thus the storage and related costs should be added to the cost of the goods at the time of sale rather than deducted annually. The court rejected the Government’s contentions in affirming the (unreported) decision of the trial court in favor of the taxpayer. There, as in the instant case, the expert accounting testimony on both sides, taken as a whole, supported both accounting methods as clearly reflecting income, without indicating that either was the “best” method. The court noted that the taxpayer’s method of accounting for these expenditures was widely used in the trade. As for the Government’s “matching” theory, the same as the one urged in the instant case, the court stated: * * * [I] t appears that the decision by the Commissioner is more an expression of preference for capitalizing these charges rather than a determination that taxpayer’s consistent use of its methods will not reasonably reflect income in the long run. * * * [Id. at 921.] The court distinguished Schultz, supra, on the basis that that case involved a one-time speculator in bulk bourbon rather than one regularly engaged in the trade. The court concluded: We realize that taxpayer’s inventory of unbottled aging whiskey has some characteristics of work in progress. Yet, the applicable Code section and regulations appear designed to afford taxpayers the type of flexibility exercised * * * [by this taxpayer]. [Id. at 922.] While the decision in Van Pickerill is not binding on this court, the reasoning of that case is entirely persuasive, and is not distinguished merely because that taxpayer was a wholesaler and the instant plaintiff is a distiller. With this preface as background, three principal reasons occur why the storage of plaintiff’s whiskey did not amount to manufacture or production. In the first place, during its storage the whiskey was having nothing done to it to promote or create its aging; instead it was doing something to itself through natural forces. If this is an epigrammatic formula it is also true, and it corresponds to the situation of the hay which, during storage, is through natural forces converting its starch into sugar to enhance its utility. As with the hay, no manipulation by labor or material occurs to the whiskey during storage which is the efficient cause of the chemical change taking place in the product. The pot is being stirred by the invisible hand of nature. Second, in the plaintiff’s scheme of things the storage phase is intermediate between the distillation and barreling stage on the one end, and the sale or disposition stage on the other. This intermediate aging stage is more closely identified with the sales phase than with the manufacturing phase, for when the plaintiff places its newly filled barrels of raw whiskey in its warehouses it is symbolically placing its merchandise on the shelves of its shop for sale as a finished product. Once it is barreled and stored it awaits sale, and various factors may affect its salability, including supply and demand, age, source, quality, reputation of its maker, etc. These are only selling factors. With the plaintiff the sale of nonpotable raw whiskey in bulk is its business raison d’etre, and its bottling of its own whiskey on its own account is a minor sideline. Third, is the concept expressed in Van Pickerill & Sons, Inc., supra, that where, as in this case, the correct tax status of the disputed costs is closely in balance and they can reasonably be considered not to be part of production or manufacturing, and the taxpayer has consistently so treated' them, the Code and the applicable regulations authorize that treatment. As a general proposition, a taxpayer is not restricted to using any particular method of accounting. Section 446(a) of the Internal Revenue Code of 1954, 26 U.S.C. § 446(a) (1970). However, section 446(b) of the Code provides in pertinent part: * * * [I]f the method [of accounting] used does not clearly reflect income, the computation of taxable income shall be made under such method as, in the opinion of the Secretary or his delegate, does clearly reflect income. With particular reference to inventories, section 471 of the Code provides: Whenever in the opinion of the Secretary or his delegate the use of inventories is necessary in order clearly to determine the income of any taxpayer, inventories shall be taken by such taxpayer on such basis as the Secretary or his delegate may prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income, (emphasis added). Turning to the regulations prescribed by the Internal Revenue Service, section 471 of the Code is discussed at 26 C.F.R. § 1.471-2 (1972). Subsection (a) of the regulation reiterates that inventory accounting must conform “as nearly as may be” to the best accounting practice in the industry, and must clearly reflect income. Subsection (b) provides the following guidelines: It follows, therefore, that inventory rules cannot be uniform but must give effect to trade customs which come within the scope of the best accounting practice in the particular trade or business. In order clearly to reflect income, the inventory practice of a taxpayer should be consistent from year to year, and greater weight is to be given to consistency than to any particular method of inventorying or basis of valuation so long as the method or basis used is substantially in accord with §§ 1.471-1 through 1.471-9. An inventory that can be used under the best accounting practice in a balance sheet showing the financial position of the taxpayer can, as a general rule, be regarded as clearly reflecting his income, (emphasis added). Of the regulatory provisions cited in the above quoted paragraph, defendant relies on 26 C.F.R. § 1.471-3(c) (1972), which provides in general terms that the cost of an inventory includes “(1) the cost of raw materials and supplies entering into or consumed in connection with the product, (2) expenditures for direct labor, (3) indirect expenses incident to and necessary for the production of the particular article * * The statutory scheme strongly reflects a congressional intent to allow flexibility to taxpayers in accounting for expenditures, especially where, as here, the expenditure cannot with assurance be described as a production cost. If the substantial expert accounting testimony presented by both parties at trial shows anything, it shows that highly qualified professional accountants can differ radically as to the “best” method of accounting for the costs at issue here. It is undisputed that plaintiff has consistently followed its present practice of expensing the storage costs since its incorporation in 1946. Section 1.471-2 (b) of defendant’s own regulations, quoted supra, explicitly provides that consistency is to be given the greatest weight in determining whether a particular method of inventorying clearly reflects income. The expert testimony on both sides conceded that either method here, plaintiff’s or that urged by defendant, is in accord with generally accepted principles of accounting. That plaintiff’s method does conform to generally accepted accounting principles is entitled to at -least some probative weight. See John Wanamaker Philadelphia, Inc. v. United States, 359 F.2d 437, 441, 175 Ct.Cl. 169, 177 (1966). It is also undisputed that defendant accepted plaintiff’s method of accounting for these expenditures on its returns from 1946 through 1961. As this court stated in Kennecott Copper Corp. v. United States, 347 F.2d 275, 303, 171 Ct.Cl. 580, 628 (1965). The fact that the Commissioner of Internal Revenue is not estopped by previous action in relation to similar expenditures from applying a different treatment to the expenditures in the instant case does not mean that his earlier action or similar outlays is wholly without significance. * * * The question is not estoppel of the Commissioner, but the persuasiveness of prior experience in determining the classification of the * * * expenditures [at issue] as expenses * * *. (emphasis added). It has also been squarely held in this court that storage expenditures similar in nature to those at issue here can be deducted as expenses rather than added to inventory costs or costs of acquisition of capital assets. Higgins v. United States, 75 F.Supp. 252, 110 Ct.Cl. 204 (1948) (storage costs of turpentine). Taken as a whole, the expert accounting testimony on behalf of plaintiff does not urge that plaintiff’s method of accounting for the costs is the only or the best method of treating these expenditures ; rather it indicates that both methods are in accord with generally accepted accounting principles; that both methods are widely used in the bourbon distilling industry; and that either or both methods will clearly reflect income over a time if consistently applied. The testimony on behalf of the defendant does not undermine these basic propositions, but rather urges that adding the costs to inventory costs is better under the “matching” theory, which in turn reflects a “trend toward realism.” Yet the latter testimony seems to reflect not what the best accounting practice in the industry actually is, but rather reflects the preference of the defendant’s accounting witnesses, and the Internal Revenue Service, for what the best accounting practice should be. Fairly considered, there is not much to choose from between these opposing points of view, and the determination defendant urges be made would not seem to be appropriate for this court based only on a preference of the Internal Revenue Service. This being so, the better view is to rely on the flexible approach evidencd in the Code, and resolve the issue in favor of the instant plaintiff since, if there is doubt as to the production-related status of the expenses involved, the plaintiff’s position is certainly reasonable and substantial and has been long and consistently maintained. Cf. Cincinnati, New Orleans and Texas Pac. Ry. v. United States, 424 F.2d 563, 191 Ct. Cl. 572 (1970). The mere fact that, as our findings show, “each bourbon whiskey of a different age, or year’s production, is a qualitatively different and unique product”, does not contradict this conclusion. Many products which are the same for common-sense, over-all, and tax purposes can be called “qualitatively different and unique” for marketing or chemical purposes. Proper tax treatment need not be dominated by such a description. The equi-balance of the accounting evidence, the reasonableness of plaintiff’s position, and the consistency of its treatment of the disputed costs outbalance this simple characterization of each year’s bourbon as different. Since plaintiff has established the correctness of its position, it follows that it is entitled to recover a tax refund in the full amount of its claim ($65,071.76), with interest thereon as provided by law. This opinion incorporates the greatest part of the opinion prepared by Trial Commissioner C. Murray Bernhardt, with modifications and additions by the judges. . Defendant prefers to use its private label of “maturation period” for this phase, and to term as “maturation costs” the associated expenses rather than the here synonymous terms of storage or carrying charges. Any of the terms are applicable. Names do not change nature. . The Third Circuit stressed that the entire transaction had to be considered, that storage and like charges are normally deductible as ordinary expenses but “they are not deductible where they are incurred as an integral part of a capital transaction”, and that the Tax Court’s determination “that the pre-payments here made were incurred as part of a capital transaction is essentially a factual determination” which was not clearly erroneous.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

J. O. JOHNSON, INC. v. The UNITED STATES. No. 308-72. United States Court of Claims. April 13, 1973. Robert A. Schnur, Milwaukee, Wis., attorney of record, for plaintiff; Michael, Best & Friedrich, Milwaukee, Wis., of counsel. Kenneth R. Boiarsky, Washington D. C., with whom was Asst. Atty. Gen. Scott P. Crampton, for defendant; Gilbert E. Andrews, Jr., Washington, D. C., of counsel. Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG and BENNETT, Judges. ON DEFENDANT’S MOTION TO DISMISS BENNETT, Judge. Defendant has moved to dismiss count II of the petition on the grounds that plaintiff has failed to state a claim upon which relief may be granted. The question is whether plaintiff’s claim for the recovery of sums paid in satisfaction of an accumulated earnings tax is barred by plaintiff’s failure to file a timely claim for refund. Specifically, this motion concerns the issue of the applicability of section 6511(a) [Limitations on Credit or Refund] of the Internal Revenue Code (IRC) to a claim by a corporate taxpayer for the refund of an overpayment of accumulated earnings taxes. While the precise issue involved was not handled in the body of the opinion in Alexander Proudfoot Co. v. United States, 454 F.2d 1379, 197 Ct.Cl. 219 (1972), the matter was disposed of in footnote 7 of that opinion. The plaintiff now wishes the court to reconsider the conclusion it reached in that footnote. The facts are as follows: On June 15, 1965, the plaintiff filed a corporate tax return for the fiscal year ending March 31, 1965. On October 9, 1967, the IRS District Director notified the plaintiff that certain deficiencies had been proposed with respect to the 1965 return, including an accumulated earnings tax deficiency (IRC § 531 et seq.). A formal notice of deficiency was sent to the taxpayer on February 28, 1969, which included a deficiency of $22,628.34 in accumulated earnings taxes. By September 24, 1969, the plaintiff made the last payment on the amount owed which included $5,409.97 in interest computed from June 15, 1965, the date the original return was filed. On September 13, 1970, the taxpayer filed a claim for refund of the $5,409.97 paid in interest, which claim was finally disallowed by the IRS on October 29, 1971. Thereafter on November 29, 1971, the plaintiff filed a separate claim for refund of the principal of the accumulated earnings tax paid. This latter claim has never been formally acted upon by the IRS. In the petition to the court, the taxpayer's count I seeks a refund of the interest paid on the accumulated earnings tax, and is not presently at issue. Count II seeks refund of the tax itself and is the subject of the defendant’s motion to dismiss the petition. The defendant contends that section 7422(a) of the IRC of 1954 requires the filing of a refund claim before a plaintiff can maintain a suit to recover the amount sought. The procedure for filing such a refund claim is' controlled in pertinent part by section 6511(a) of the 1954 Code which reads as follows: Sec. 6511. Limitations on credit or refund. (a) Period of limitation on filing claim. — Claim for credit or refund of an overpayment of any tax imposed by this title in respect of which tax the taxpayer is required to file a return shall be filed by the taxpayer within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid. Claim for credit or refund of an overpayment of any tax imposed by this title which is required to be paid by means of a stamp shall be filed by the taxpayer within 3 years from the time the tax was paid. [Emphasis added.] Regardless of whether the 2- or the 3-year period is applied to these facts, this plaintiff’s filing of the claim for refund of the principal tax on November 29, 1971, was too late. As a result, the claim for refund was ineffective, requiring the dismissal of the suit under the requirements of section 7422(a). The plaintiff’s principal defense to the Government’s motion is the assertion that the accumulated earnings tax is not a tax “in respect of which * * '>:' the taxpayer is required to file a return,” making section 6511(a) inapplicable. Therefore, the time limitation that should govern this suit is the general 6-year statute of limitations (28 U.S.C. § 2401), with which the plaintiff has complied. The real focus of this problem is the language in section 6511(a) which states: “* * * or if no return was filed by the taxpayer [the claim for refund must be filed], within 2 years from the time the tax was paid.” Both sides recognize that the accumulated earnings tax is not self-assessing in nature and is only levied after the return has been filed and an administrative determination has been made that the accumulation is in excess of the amount required for the reasonable needs of the business (§§ 533, 537). See, Motor Fuel Carriers, Inc. v. United States, 420 F.2d 702, 705, 190 Ct.Cl. 385, 390 (1970). To this extent, the accumulated earnings tax is not the type of tax that is reported on the return, which the plaintiff contends is the only type of tax covered by 6511(a). Plaintiff interprets the clause above to apply only to taxes for which a return is required, but in which no return was in fact filed. Since there is no place on the return in which to account for the accumulated earnings tax, no return was required with respect to this tax and the 2-year time limit applicable to taxes for which a return is required but not filed does not apply to the accumulated earnings tax. The defendant would read the language of the clause quite literally to include any tax for which no return is actually filed whether required or not. Such a reading would, of course, include a subsequent assessment of an accumulated earnings tax. This was the interpretation given 6511(a) by this court in footnote 7 of the opinion in Alexander Proudfoot: * * * § 6511(a) was obviously intended to cover all taxes, whether or not a return is required, and its wording can easily carry that understanding since it expressly provides for the case where “no return was filed by the taxpayer.” [454 F.2d at 1382, n. 7, 197 Ct.Cl. at 225, n. 7.] The plaintiff has presented an impressive array of arguments to undercut the footnote holding in Alexander Proudfoot and to otherwise seek to avoid the application of section 6511(a) to the count II claim for refund. These arguments will be detailed individually, but it should first be noted that a reversal of the footnote holding would likewise erode to some extent the basis for that over-all decision. In Alexander Proudfoot the plaintiff sought only the refund of the pre-notice deficiency interest paid with respect to an accumulated earnings tax assessment. Following the decision by this court in Motor Fuel Carriers, Inc., supra, it was clear that pre-notice deficiency interest could not be lawfully claimed by the IRS with respect to the accumulated earnings tax. The court included the claim for refund of the deficiency interest within the operation of section 6511(a) and found the claim to have been filed too late to be effective. This conclusion was reached in part because the “interest demand would be as much governed by § 6511 as the claim for the tax itself, and could not be separated out from the requirement of a proper and timely administrative claim.” 454 F.2d at 1382, 197 Ct.Cl. at 226. “The hair goes with the hide.” This, of course, presumes that the tax (here the accumulated earnings tax) is within section 6511(a) which is precisely the proposition being challenged by the present plaintiff. Plaintiff first goes through a thorough grammatical exercise to indicate that its reading of.section 6511(a) is proper and reasonable. This, of course, does not mean that the defendant’s reading is ipso facto unreasonable. It simply becomes a choice of what is most reasonable. Plaintiff urges that the language in S.Rep. No. 1622, 83d Cong., 2d Sess. (3 U.S.Code Cong. & Admin. News, p. 5235 (1954)), emphasizes that section 6511(a) was to apply only to those taxes “in respect of which a taxpayer is required to file a return.” This is nothing more than a restatement of the wording in the section itself and seems to add nothing to the problem of assigning a given meaning to the section. Plaintiff next argues that, at most, the language in section 6511(a) is ambiguous and the language should be interpreted in favor of the taxpayer since the Government’s construction would result in an extension of the meaning of the statute, which would run contrary to the normal judicial trend to read tax statutes narrowly and strictly. While it seems that plaintiff’s point is well taken, it is likewise clear that other factors come into play when any court must interpret a tax statute, for example, consistency and harmony with other related sections. In this case as the defendant points out, and as the court pointed out in Alexander Proudfoot, 454 F.2d at 1384, 197 Ct.Cl. at 229, the plaintiff’s reading of section 6511(a) to exclude those taxes assessed by the IRS after the return is filed but not part of the return itself, would render section 7422(a) almost meaningless with respect to this group of assessments. Section 7422(a) makes the filing of a claim for refund or credit a condition precedent to the maintenance of any suit for the recovery of any wrongfully assessed tax, penalty, or “of any sum alleged to have been excessive or in any manner wrongfully collected.” [Emphasis added.] Clearly section 7422(a), with its all-inclusive “any sum” term, would include the assessment for the accumulated earnings tax; yet, if this tax were outside the time limitations imposed by section 6511(a), the claim for refund and petition to this court could be filed anytime within 6 years of either the payment or the date of the return. Plaintiff contends that such a result is warranted by the peculiar nature of the accumulated earnings tax. In particular, it points out that the major purpose for having the shorter periods for filing claims for refunds as defined in section 6511(a) is to allow the Government sufficient time to make an administrative investigation of the merits of the taxpayer’s claim before deciding to contest it. Union Pac. R. R. v. United States, 389 F.2d 437, 442-443, 182 Ct.Cl. 103, 109 (1968). Such a purpose would be unnecessary with respect to the accumulated earnings tax where, by necessity, an administrative investigation is carried out before the tax is ever assessed. Once again the plaintiff’s point is well taken, but it does not seem to carry as far as plaintiff argues. The filing of a claim for a refund is designed in part to give the IRS adequate notice of the nature and extent of the intended claim. United States v. Felt & Tarrant Mfg. Co., 283 U.S. 269, 272, 51 S.Ct. 376, 75 L.Ed. 1025 (1931). It likewise appears that the shorter refund period is aimed at allowing the IRS to isolate the areas of controversy and limit the scope of the impending litigation. Union Pac. R. R. v. United States, 389 F.2d at 442, 182 Ct.Cl. at 108. The fact that the Government agents had undertaken an administrative determination prior to assessment of the tax does not mean that additional determinations would not be required once the nature and extent of the claimed refund becomes known. Thus, even in the area of the accumulated earnings tax the shorter refund period would serve a valid purpose. The Supreme Court in United States v. A. S. Kreider Co., 313 U.S. 443, 447, 61 S.Ct. 1007, 1010, 85 L.Ed. 1447 (1941), has said, in addition, that the shorter limitation statute for tax refunds was a congressional recognition of the fact “that suits against the United States for the recovery of taxes impeded effective administration of the revenue laws, * Allowing plaintiffs, seeking refunds of this type, to have 6 full years in which to file their claims, where no clear reason for such exceptional treatment is apparent in either the Code or in fact, would seem to run contrary to the usual Code pattern and apparently congressional intent as well. Additional support for this view may be found in the treatment of other additions to the tax in IRC section 6659. As the plaintiff correctly points out, section 6659 is not, by its own terms, applicable to section 531 et seq. (accumulated earnings tax) assessments. But, since Motor Fuel Carriers, swpra, this court has treated accumulated earnings tax assessments as additions to the tax. Those additions to the tax covered by section 6659 are to be “assessed, collected and paid in the same manner as taxes,” while any reference to the word “tax” is to include additions to the tax. The general policy which would justify the treatment of these additions to the tax as though they were the tax itself would likewise cover the claim now before the court. There are as many reasons to apply the limitation period of section 6511(a) to section 531 et seq. taxes as there are to apply those limitations to taxes specifically enumerated on the return itself. The taxpayer’s final arguments assume arguendo that section 6511(a) applies to this case. First, plaintiff urges that this claim was filed within 3 years of the return if the word “return” in this context is read to mean the document by which the Government notified the taxpayer of the deficiency. The plaintiff argues that such a definition is the most reasonable since the tax did not become due until that date (February 28, 1969). While plaintiff’s argument on this point might make some sense in the abstract, there is no support for the position in the statute. It seems fairly clear that the word “return” as it is used in section 6511(a) refers to the income tax return, which in this case was filed by the taxpayer in 1965. There appears to be no sound reason for the court to define it otherwise. The plaintiff’s last argument urges that the filing of the claim for refund on September 13, 1970, for the pre-notice deficiency interest served notice on the Government that the assessment of the principal was likewise being contested. This is a distortion of the “hair goes with the hide” analogy. The reverse is not necessarily true where, as in Alexander Proudfoot, the claim sought only the refund of interest, not the principal. The language of the decision of this court in Union Pac. R. R., 389 F.2d at 442, 182 Ct.Cl. at 108, would seem to require a higher standard of notice than this plaintiff’s September 13, 1970 claim for refund of the interest provided. “It is an undisputed general rule that a ground for refund neither specifically raised by, nor comprised within the general language of, a timely formal or informal application for refund to the Internal Revenue Service cannot be considered by a court in which a suit for refund is subsequently initiated.” Plaintiff’s failure to raise the claim for the refund of the principal tax in the September 13, 1970 claim would seem to prevent it from relying on that claim at this point. There is, finally, one further interpretation of the language of section 6511(a) which bears examination. The defendant argues that this section, covering all taxes “in respect of which” a return is filed, covers assessments for accumulated earnings taxes despite the fact that these taxes are not paid or reported as part of the return itself. The tax is assessed based on figures and statements that are part of the return and to this extent it is a tax “in respect of which” the taxpayer has filed a return. The plaintiff does not answer this argument, and it need not be pursued one way or another since there is other language in section 6511(a), discussed supra, which brings this taxpayer’s claim within that section. For all of the above reasons the court grants the defendant’s motion to dismiss count II of the plaintiff’s petition for failure to state a claim upon which relief may be granted. The plaintiff has filed a motion for summary judgment with respect to count I of its petition, which motion is not presently before the court since it is now subject to a partial suspension of proceedings granted February 12, 1973. Should it become necessary, the merits of count I of the plaintiff’s petition will be examined in a later proceeding. . On February 12, 1973, the court allowed plaintiff’s motion for a partial suspension of the proceeding with respect to count I in order to permit settlement discussions to continue. . “Sec. 7422. Civil actions for refund. “(a) No suit prior to filing claim, for refund. — Mo suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary or his delegate, according to the provisions of law in that regard, and the regulations of the Secretary or his delegate established in pursuance thereof.” . The Government argues that since section 7422(a) makes the filing of a claim for refund a condition precedent to maintaining the suit, the taxpayer’s cause of action would not accrue and the 6-year statute of limitations would not begin to run until the claim for refund was filed. This would permit a taxpayer to delay the filing of suits with respect to this type of tax for many years. . See note 1, supra.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

BANK OF PALM BEACH & TRUST COMPANY and Marie E. Bardsley, Executors of the Will of Chester T. Bardsley and Marie Bardsley, et al. v. The UNITED STATES. No. 308-69. United States Court of Claims. April 13, 1973. Elliott Manning, New York City, attorney of record, for plaintiffs. Richard D. Silvester, Tax Div., U. S. Dept, of Justice, Washington, D. C., with whom was Asst. Atty. Gen., Scott P. Crampton, for defendant. Gilbert E. Andrews and Theodore D. Peyser, Jr., Washington, D. C., of counsel. Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG and BENNETT, Judges. OPINION KASHIWA, Judge. Plaintiffs are taxpayers who claim refunds of federal income taxes paid by them with respect to the calendar year 1960, plus statutory interest. They were all partners, or bear some relationship to individuals who were partners, of Salomon Bros. & Hutzler (hereinafter referred to as “Salomon”), a Wall Street brokerage firm, during Salomon’s fiscal year ending September 30,1960. Salomon made payments aggregating $60,130.84 to the widow of Sydney J. Carter, the latter being an employee who died on March 1, 1960. Salomon deducted said payments on its Form 1065 for the fiscal year 1960. The deductions were disallowed by the Government on the returns of the various plaintiffs who, after paying their respective assessments, filed their timely petition in this court. We hold for the plaintiffs for reasons hereinafter stated. At issue is the deductibility by the partnership of said payments totaling $60,130.84 made during its fiscal year ending September 30, 1960, to Mrs. Dorothy T. Carter, widow of a deceased employee, Sydney J. Carter. Mr. Carter had been employed by Salomon since 1922, and, at the time of his death, was serving as the head of the firm’s institutional contract department. For some years prior to his death Mr. Carter had been one of Salomon’s so-called “percentage men.” Percentage men are employees who earn a specified salary plus a share of the profits. During Salomon’s fiscal year ending September 30, 1960, Mr. Carter’s salary was $15,000 per year plus .55 percent of the firm’s net profits. Mr. Carter’s compensation for the three years prior to the year of his death was as follows: Fiscal year ending Salary Share of Total com- September 30 profits pensation 1959 $14,000 $16,026.94 $30,026.94 1958 14.000 47,500.17 61,500.17 1957 13.000 5,907.00 18,907.00 Shortly after Mr. Carter’s death on March 1, 1960, Salomon’s administrative committee made a decision to pay to his widow the amounts that would have been paid to him as salary and a share of the profits if he had lived until the end of the fiscal year ending September 30, 1960. The salary continuation checks paid to Mrs. Carter began on March 22, 1960, and continued until September 30, 1960. Their total amount was $8,653.80. On September 30, 1960, the firm sent Mrs. Carter two checks in the total amount of $51,477.04, representing the share of the firm’s profits or bonus fund to which Mr. Carter would have been entitled had he survived to that date. Salomon filed a Form 1099 with resect to the bonus fund payments made to Mrs. Carter, declaring the amount paid to be “Salaries, Fees, Commissions, or Other Compensation.” Salomon did not file either a Form 1099 or a Form W-2 with respect to the salary continuation payments made to Mrs. Carter. These payments were reflected in the journal entries to a miscellaneous and sundry items expense account. No employment taxes were withheld from either the bonus fund or the salary continuation payments. Before discussing the merits of this case, it is proper that we consider the effect, if any, of the recent decision of the United States Court of Appeals, Second Circuit, in Estate of Carter v. Commissioner of Internal Revenue, 453 F.2d 61 (2d Cir. 1971), rev’g 29 CCH TCM 1407 (1970). Estate of Carter basically involved the wife’s side of the identical transaction between Salomon and Mrs. Carter which we have before us. The Second Circuit, in a two-to-one decision, held that the payments received by Mrs. Carter were excludable from her income under the provisions of section 102(a) of the Internal Revenue Code of 1954, as amended. It is our view that the law is clear that the fact that the Court of Appeals has permitted Mrs. Carter to treat the payments in question as a gift is not determinative for purposes of the present case since the authorities recognize that, at least prior to the passage of section 274(b) of the Code, a payment might be excludable by the recipient and nevertheless deductible by the employer. See, e. g., Fifth Avenue Coach Lines, Inc., 31 T.C. 1080, 1093-1094 (1959), rev’d on other issues 281 F.2d 556 (2d Cir. 1960); Weyenberg Shoe Mfg. Co., 23 CCH TCM 1997, 2003 (1964). In the hallmark case of Commissioner v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960), the Supreme Court stated: * * * The taxing statute does not make nondeductibility by the transferor a condition on the “gift” exclusion; * * *. Specifically, the trier of fact must be careful not to allow trial of the issue whether the receipt of a specific payment is a gift to turn into a trial of the tax liability, or of the propriety, as a matter of fiduciary or corporate law, attaching to the conduct of someone else. The major corollary to the Government’s suggested “test” is that, as an ordinary matter, a payment by a corporation cannot be a gift, and, more specifically, there can be no such thing as a “gift” made by a corporation which would allow it to take a deduction for an ordinary and necessary business expense. * * * [W] e find no basis for such a conclusion in the statute; * * *. [363 U.S. at 287-288, 80 S.Ct. at 1198.] [Emphasis supplied.] In fact, the Court of Appeals, itself, in Estate of Carter, was careful to point out that the question of whether the payments were a gift to the recipient was not determinative on the question of whether the payments could be deducted by the employer. 453 F.2d 69, n. 14, and 70. Since symmetry of treatment with respect to the recipient and the payor is not required, it may appear that the defendant is being “whipsawed” in those situations in which the widow (er) is entitled to exclude the payments as gifts while the company is allowed to deduct the very same payments. The passage of section 274(b) in 1962 prevents any such whipsaw in the future, at least in cases in which the item was excludable by the widow (er) only on the basis of section 102. In fact, the very passage of section 274(b) indicates that prior to its enactment the fact that payments by an employer might be considered to be a gift to the recipient did not necessarily mean that the employer could not deduct the payment from income under section 162(a). Section 274(b) limits the deduction which a business may take for gifts in any taxable year to $25 per do-nee. The term “gift” is defined to include any “item excludable from gross income of the recipient under section 102. * * * ” It appears clear that the provision was added, at least in part, to reverse the line of cases prior to its passage which permitted the recipient to treat the payments as gifts and the employer to deduct the payments as “ordinary and necessary expenses.” Section 274(b) is, of course, inapplicable to the instant case since the payments were made to Mrs. Carter in 1960. This case involves simply the deductibility by a business partnership of payments made, without legal obligation, to the widow of a deceased key employee who was not related by blood or marriage to any member of the firm. It is our view that the amount in issue is deductible pursuant to section 162 since the dominant motivation prompting the payments was a business motivation. See also section 404(a). The aspects of this dominant business motivation include the award of additional compensation as well as a general policy directed toward the increased morale of similarly situated employees. This basic, motivational test has been described by the United States Supreme Court in Commissioner v. Duberstein, supra,, in the following language: * * * We take it that the proper criterion, established by decision here, is one that inquires what the basic reason for his conduct was in fact— the dominant reason that explains his action in making the transfer. * * * [363 U.S. at 286, 80 S.Ct. at 1197.] * * * For the Court has shown that the mere absence of a legal or moral obligation to make such a payment does not establish that it is a gift. Old Colony Trust Co. v. Commissioner, 279 U.S. 716, 730 [49 S.Ct. 499, 504, 73 L.Ed. 918], And, importantly, if the payment proceeds primarily from “the constraining force of any moral or legal duty,” or from “the incentive of anticipated benefit” of an economic nature, Bogardus v. Commissioner, 302 U.S. 34, 41 [58 S.Ct. 61, 65, 82 L.Ed. 32], it is not a gift. And, conversely, “[w]here the payment is in return for services rendered, it is irrelevant that the donor derives no economic benefit from it.” Robertson v. United States, 343 U.S. 711, 714 [72 S.Ct. 994, 996, 96 L.Ed. 1237]. A gift in the statutory sense, on the other hand, proceeds from a “detached and disinterested generosity,” Commissioner v. LoBue, 351 U.S. 243, 246 [76 S.Ct. 800, 803, 100 L.Ed. 1142]; “out of affection, respect, admiration, charity or like impulses.” Robertson v. United States, supra, at 714 [72 S.Ct. 994], * * * [Footnote omitted.] [363 U.S. at 285, 80 S.Ct. at 1196.] With respect to whether the expenditures constitute additional compensation, the parties have spent considerable effort analyzing the holding of Fifth Avenue Coach Lines, Inc., supra, a leading case with respect to the issue of the deductibility by an employer of death benefit payments made to the family of a deceased employee. In that case, the payments were made to the widow over a period of ten years and amounted to approximately $90,000. The court found that the payments made to the * * * widow were intended in part as additional compensation for past services rendered * * *, in part to show gratitude for such past services, and in part to aid in the support of * * * [the deceased’s] widow. [31 T.C. at 1094.] The court held that these mixed motives would support the deduction of the payments by the employer under section 23 of the 1939 Code providing for the deduction of “ordinary and necessary expenses.” The “ordinary and necessary expenses” deduction was re-enacted in a substantially similar form as section 162(a) of the 1954 Code. The Tax Court noted, in the alternative, that " * * [T]o be deductible, the payments need not be in the nature of additional compensation. * * * [31 T.C. at 1096.] The Government appears to argue that for a payment to be considered as additional compensation, the facts of the case must disclose that the deceased was seriously undercompensated during his years with the company, as was the situation in Fifth Avenue Coach Lines, Inc. We disagree with the Government’s analysis. If the amount paid to the widow is not, in reality, a disguised gift or dividend, and if the additional compensation is not unreasonable, the company is free to review its history with respect to the deceased employee and conclude that additional compensation is warranted. There is no one salary immutably indicated for a business position. Reasonable parameters for salary payments are especially indicated when the employee is to a large extent rewarded under a contingency based on profit. Cases which have held that the company was paying additional compensation when no significant under-compensation for previous years was established include J. Aron and Co., Inc., 22 CCH TCM 788 (1963); John B. Canepa Co., 22 CCH TCM 1770 (1963); Oppenheimer Casing Co., 22 CCH TCM 1082 (1963). The payments were made with respect to Mr. Carter’s past services and not Mrs. Carter’s present needs. We find that additional compensation treatment is even more clearly warranted with respect to those amounts which, by means of moral obligation, had “accrued” to the deceased’s bonus account. While, of course, it is true that the company was not legally obligated to pay any bonus if the percentage man was not actually employed by the company at the end of the fiscal year, Mr. Carter had nonetheless lived through five months of the fiscal year and the bonus allocable to this period was $21,449. Had he lived to the end of the year, this amount plus the remainder of the bonus would have vested. We find further confirmation for our view that the $60,130.84 in payments constitute additional compensation by an analysis of the treatment of the payments by Salomon itself. While it is true that a party cannot change the basic nature of a payment by calling it what it is not, it is also true that the action of the petitioner is relevant in determining intent. The intent of Salomon, the party making the payment, is of central importance. Commissioner v. Duberstein, supra. In a letter dated February 1, 1961, set out below, sent by Salomon to Nathan Berkman & Company, Mrs. Carter’s accountants, we note that Salomon informed Berkman that Salomon viewed the bonus payments from its own tax standpoint as additional compensation. This is made clear by the fact that a Form 1099 was filed. On the Form 1099 the bonus payment aspect of the payments made to Mrs. Carter were designated under the heading of “Salaries, Fees, Commissions, or Other Compensation.” While the body of this letter contains phrasing which, if read in isolation, might indicate a donative intent, we deem the letter of very limited probative value for the same reason the Tax Court expressed in the trial of the widow’s side of this transaction: While the statement of the partner at the meeting and the letter drafted subsequent to the meeting warrant our consideration, we consider these factors to be of only slight probative value in establishing the intent of the firm at the time the decision to make the payments to Mrs. Carter was reached by the committee. The statements of the partner were made and the letter was written after the decision to make the payments had been made and implemented and at a time when the income tax consequences of the payments were being considered by Mrs. Carter (and her accountants) who had a strong interest in having the payments classified as a gift. In these circumstances we cannot attach more than a slight weight to the statements of the partner and the letter as indicative of the firm’s intention to make a gift. ****** * * * while expressions of sorrow and high regard mitigate language which characterizes payments as compensation, it is not inconsistent to express sorrow and at the same time to pay additional compensation. * * * [Estate of Sydney J. Carter, 29 CCH TCM 1407, 1411-1412 (1970).] Another aspect of the dominant business motivation prompting the payments was the desire by Salomon to secure a legitimate business benefit, an increase in employee morale. Because of the fact that Mr. Carter was the first of the percentage men to die while in the employ of Salomon, petitioners’ evidence has necessarily been directed to the company’s response to the subsequent deaths of six other percentage men. While evidence of this type is not conclusive, it provides an indication of intent in an area where formal plans do not always exist. The parties have stipulated that 31. The Administrative Committee, in authorizing the payments was also motivated by a desire to boost employee morale, which it was hoped would result from the other employees’ awareness of the payments to Mrs. Carter. Carter was very popular with the employees of Salomon and it was thought by some of the members of the Administrative committee that if some form of recognition payments were made to Mrs. Carter, the other employees would be pleased. * * * The facts as stipulated go on to state that while no formal announcement was made of this decision, as a consequence of the “office grapevine” the facts with respect to the payments became generally known to Salomon’s other percentage men. As further indication that the business benefit of increased morale was contemplated by the taxpayer, the stipulation reveals that since Carter’s death, six percentage men have died. Except for two cases, the families of each have received payments equal to a continuation of the deceased’s salary for the remainder of the fiscal year in which he died and an additional amount equal to the deceased’s share of profits for the fiscal year from the firm’s bonus fund. The two exceptional instances involved situations in which the deceased died toward the very beginning of the fiscal year, and in one of these two cases a payment of $5,000 was made. The bonus (not including continuation of salary) for each of the four cases in which percentage men died at a time other than the very beginning of the fiscal year amounted to $102,779.99, $98,337.-61, $32,934.49, and $19,760.69. The measurement in each of these four cases was the amount the employee would have received had he lived until the end of the company’s fiscal year. The payments made to Mrs. Carter were computed in precisely the same manner and there is no indication that her general circumstances, if in fact she was in a less secure financial position, were taken into account. Normally, the financial condition of the family of the deceased percentage man is not investigated by Salomon. The partners in our case were generally aware of Mrs. Carter’s financial condition, including the fact that she was entitled to the sum of $52,337.68 as a distribution from the firm’s profit-sharing plan. This latter amount was paid to Mrs. Carter, as the named beneficiary, by check enclosed in a letter dated September 29, 1960. However, there has been no showing by the Government that the payments made to Mrs. Carter were in response to her financial condition. In fact, other than what was generally known by the partners about Mr. and Mrs. Carter, there was no specific inquiry made into her financial affairs before (or after) the payments were made. This failure has been deemed significant, on the recipient’s side of the issue, in several cases. Fritzel v. United States, 339 F.2d 995 (7th Cir. 1964); Cronheim’s Estate v. Commissioner, 323 F.2d 706 (8th Cir. 1963); Roy I. Martin, 36 T.C. 556 (1961), aff’d 305 F.2d 290 (3d Cir. 1962), cert. denied, 371 U.S. 904, 83 S.Ct. 209, 9 L.Ed.2d 165 (1962); Margaret H. D. Penick, 37 T.C. 999 (1962). While the company did not adopt an ironclad policy as to the automatic consequences on the death of a percentage man, it is clear that, in general, a post-death payment was contemplated as a means of increasing employee morale. Although Salomon did not legally obligate itself to make such payments, or consider the payments to Mrs. Carter as a binding and immutable precedent to be followed upon the death of all other percentage men, this does not alter the fact that the general policy, to which the Government has, in effect, stipulated, did exist. In addition, the fact that Salomon would probably not have made the payments if Mr. Carter were not survived by a wife and son is not crucial in determining whether Salomon was generally pursuing a policy of increasing employee morale. The employee in such cases is, typically, most concerned with his surviving wife and children. An employee without such dependents would more likely be far less concerned with whether, say, an estate, the distributees of which are composed of third cousins, is adequately funded. Thus, a more flexible policy is clearly sensible with respect to increasing employee morale. While this case, as in all the death benefit cases we have researched, contains a multiplicity of motives — -some favoring gift treatment, others favoring business treatment — we conclude that the totality of factors indicate that Salomon’s dominant motive in continuing the salary and bonus payments through the end of the fiscal year was proximately related to business. The payments were additional compensation and made to increase employee morale. The payments were made on the basis of Mr. Carter’s having survived to the end of the fiscal year during which he died, a fairly common formulation in these death-benefit cases. We hold that this constitutes a reasonable formulation under section 162, especially since he did not die at the very beginning of the fiscal year. Accordingly, plaintiffs are entitled to recover and judgment is entered for plaintiffs with the amounts of recovery to be determined pursuant to Rule 131(c). DAVIS, Judge (concurring in the result) : I join the judgment on the ground that the payments to Mrs. Carter were (at the least) business-motivated gifts, deductible for 1960 under section 162 of the Code. I am satisfied that, if gifts, the amounts paid were, as the court’s opinion makes clear, sufficiently colored by business purposes to be deductible by the payor.. Because of that conclusion, I need not and do not reach the separate question, discussed in the court’s opinion, whether these sums were not gifts at all but additional compensation for Mr. Carter’s work. This opinion contains all the essential findings of fact which the parties have stipulated pursuant to Rule 134 (b) (2) of the Rules of this court. . “Sec. 102. Gifts and inheritances. “ (a) General rule. “Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.” . Unless otherwise stated, all references to statutory provisions of the tax law are to the Internal Revenue Code of 1954, as amended. . “Sec. 274. Disallowance of certain entertainment, etc., expenses. ***** “(b) Gifts. “(1) Limitation. No deduction shall be allowed under section 162 or section 212 for any expense for gifts made directly or indirectly to any individual to the extent that such expense, when added to prior expenses of the taxpayer for gifts made to such individual during the same taxable year, exceeds $25. For purposes of this section, the term “gift” means any item excludable from gross income of the recipient under section 102 which is not excludable from his gross income under any other provision of this chapter, but such term does not include— % }j< sfi ifc “(2) Special rules. “(A) In the case of a gift by a partnership, the limitation contained in paragraph (1) shall apply to the partnership ns well as to each member thereof. “(B) For purposes of paragraph (1), a husband and wife shall be treated as one taxpayer.” . In the Technical Explanation to the House bill, the following appears: “Any item which is excludable from gross income under a provision of chapter 1 of the code other than section 102 is not a “gift” within the meaning of subsection (b) (1). To illustrate the applicability of subsection (b)(1), a payment by an employer to a deceased employee’s widow which is excludable from her income by reason of the gift exclusion provision, section 102, will not be deductible by the employer in excess of $25, whereas the treatment by an employer of a payment to a deceased employee’s widow which constitutes an employee’s death benefit ex-cludable by the recipient under section 101(b) of the code will not be affected by this provision. * * * ” [H.R.Rep.No. 1447, 87th Cong., 2d Sess., p. A31 (1962-3 Cum.Bull., p. 529).] The Senate Report Technical Explanation contains similar language: “Any item which is excludable from gross income under a provision of chapter 1 of the code other than section 102 is not a “gift” within the meaning of subsection (b) (1). To illustrate the applicability of subsection (b)(1), a payment by an employer to a deceased employee’s widow which is excludable from her income by reason of the gift exclusion provision, section 102, will not be deductible by the employer in excess of $25, whereas the treatment by an employer of a payment to a deceased employee’s widow which is not a gift but which constitutes an employee’s death benefit excludable by the recipient under section 101(b) of the code will not be affected by this provision. * * * ” [S.Rep.No.1881, 87th Cong., 2d Sess., p. 170 (1962-3 Cum.Bull., p. 874).] . “Sec. 162. Trade or business expenses. “(a) In general. “There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including— “(1) a reasonable allowance for salaries or other compensation for personal services actually rendered The Government has conceded that the payment satisfied the “ordinary” requirement of section 162 and makes its stand on the “necessary” requirement. The United States Supreme Court has held that an expenditure is “necessary” if it is “appropriate and helpful” to the business. Commissioner v. Heininger, 320 U.S. 467, 471, 64 S.Ct. 249, 88 L.Ed. 171 (1943). . The plaintiffs have noted that applicability of the section 404(a) (5) deferred compensation plan. However, both plaintiffs and defendant agree that to be deductible under section 404(a) and Treas.Reg. § 1.404(a)-12, the expense must still satisfy the “ordinary and necessary” requirement of section 162. The problem in this case is not whether the payments have the effect of a “plan” ; nor is the problem one of “timing,” since the payments were made during the same year that the nonforfeitable right of the beneficiary to the payments arose. Rather, in light of the Government’s concession that the payments were “ordinary,” the case can be disposed of upon a showing that the payments were “necessary.” . We note, in passing, that the Government has relied on many cases in which the issue was whether the payments constituted a dividend. Since Mr. Carter was an employee of Salomon and not a partner, and since Mrs. Carter was not even an employee during any recent period, the analogy to the “dividend” cases is greatly weakened. If the deceased was a major or controlling stockholder in the company, payments by the company to the widows of such controlling persons could hardly have any appearance of being an arm’s-length business transaction. In certain of these cases, the death benefit payments have been held to be constructive dividends. See, e. g., Lengsfield v. Commissioner, 241 F.2d 508 (5th Cir. 1957); Barbourville Brick Co., 37 T.C. 7 (1961). In other cases involving close corporations and decedents who were majority stockholders, deductions of death payments made to their families have been disallowed on the grounds that the payments were not “ordinary and necessary expenses.” See, e. g., Interstate Drop Forge Co., 22 CCH TCM 701 (1963). See also Vesuvius Crucible Co., 24 CCH TCM 750 (1965). Clearly, however, there is strong reason to find payments not to be “ordinary and necessary expenses” when they are made by a close corporation only to the families of deceased officers and directors, who also happen to be major stockholders. In the Fifth Avenue Ooaeh Lines case, for example, the court stated: “ * * * neither [deceased] nor his widow were stockholders * * * and the rule of close scrutiny * * * is not applicable here. * * * ” [31 T.C. at 1093.] For other cases in which deduction was disallowed, and the deceased had been a principal stockholder, see, e. g., Allen Industries Inc. v. Commissioner, 414 F.2d 983 (6th Cir. 1969); Loewy Drug Co. v. United States, 356 F.2d 928 (4th Cir. 1966); Schner-Block Co. v. Commissioner, 329 F.2d 875 (2d Cir. 1964); Republic Engineers, Inc., 54 T.C. 702 (1970). . “In connection with the preparation of Dorothy T. Canter’s [Mr. and Mrs. Carter were also known as “Canter”] Federal income tax return for 1960, you have asked us to furnish you with the basis upon which we made two payments of $21,-448.76 and $30,028.28 to her. “Mrs. Canter’s husband had been an employee of this firm for many years. He died on March 1, 1960. After a review of his employment contract, we concluded that there was no obligation to make any post-mortem payments to Mr. Carter’s estate or to his widow. “Mr. Canter had worked for us for many years and we held him in the highest personal regard. Accordingly, the partners determined to give some tangible expression to that feeling by making the above payments in his honor to his widow. “This firm does not have any established policy or plan for making payments to the widows of contract employees such as Mr. Carter. As a matter of fact, Mr. Canter’s death presented us for the first time with this situation.” The postcript of this letter provided: “We have filed form 1099 showing the above figures and sent copy to Mrs. Canter.” . The Government in the instant case seeks to make much of the fact that the representatives of Salomon “hoped” that Carter’s widow would receive “gift” treatment. The point which the Government has failed to appreciate in this case is that Salomon did not consider that “gift” treatment to Mrs. Carter was inconsistent with its own “deduction” claim. Certainly, the state of the law was that there was no necessary inconsistency. In addition, Salomon had been advised by counsel that the letter written to the accounting firm, supra, footnote 8, would not jeopardize its right to the deduction. . In Plastic Binding Corp., 26 CCH TCM 687, 690-691 (1967), it was said: “In ascertaining the dominant motive, we must carefully examine all the surrounding circumstances, including the statements of the parties at the time the payments were made. Though we must give proper weight to such statements, we must also recognize that the parties have engaged in some ‘window dressing’, and we must look through the window and find out what was behind it. * * * ” [Footnote omitted.]

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

AMF INCORPORATED v. The UNITED STATES. No. 217-72. United States Court of Claims. April 13, 1973. Eric R. Fox, Washington, D. C., attorney of record for plaintiff; Ivins, Phillips & Barker, Washington, D. C., of counsel. Theodore D. Peyser, Washington, D. C., with whom was Asst. Atty. Gen., Scott P. Crampton; Gilbert E. Andrews, Jr., Washington, D. C., of counsel. Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG, and BENNETT, Judges. ON DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS AND PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT NICHOLS, Judge: Plaintiff brings this action to recover the sum of $356,372.25 or such greater amount as is refundable, representing income tax and interest thereon, paid by the plaintiff for the calendar years 1961, 1962 and 1963. The case is before us on defendant’s motion for judgment on the pleadings and plaintiff’s motion for summary judgment. There is no issue of fact. We hold that defendant must prevail. On or about March 1, 1961, taxpayer sold, at par, convertible debentures having an aggregate face amount of $39,911,100. Each debenture had a face amount of $100. They were due on March 1, 1981, and bore interest at the rate of 4% per cent per annum. They were convertible into the taxpayer’s common stock at the rate of five-sixths of one share for each $100 debenture through March 1, 1971, and at a somewhat lesser rate thereafter. The conversion rate was subsequently adjusted for a two-for-one stock split approved on April 18, 1961. The taxpayer alleged in its petition that as of the date of issuance, the value of the conversion right was $3,591,999 and the value of the debt was $36,319,101. In its motion the Govenment accepted these figures for the purposes of that motion only. The sole issue in this case is the taxpayer’s assertion that the value of the conversion rights measures or reflects a debt discount amortizable for the years 1961, 1962 and 1963. The current Treasury Regulation on Income Tax, § 1.163-3(a) (1) (as did the Regulation in effect at the time of the transactions in question, § 1.61-12(c)(3)) provides that “If bonds are issued by a corporation at a discount, the net amount of such discount is deductible * * * over the life of the bonds.” For the purpose of determining the payee’s gain, original issue discount was defined at the time of the transaction in IRC of 1954 § 1232(b)(1) of the Code as “ * * * the difference between the issue price and the stated redemption price at maturity”, and issue price was defined in § 1232(b)(2) as “the initial offering price to the public * * * at which price a substantial amount of such bonds or other evidences of indebtedness were sold.” To sustain plaintiff’s position would require us to depart from that definition. It is an established rule of law that discount is a form of interest, i. e., a cost of obtaining capital. Helvering v. Union Pacific R. Co., 293 U.S. 282, 55 S.Ct. 165, 79 L.Ed. 363 (1934); Erie Lackawanna R.R. v. United States, 422 F.2d 425, 190 Ct.Cl. 682 (1970); Chock Full O’Nuts Corp. v. United States, 453 F.2d 300 (2d Cir. 1971). It follows that for there to be a discount there must be an added cost to the issuer, over and above the stated interest, for the use of the payee’s capital. The question presented is whether under the circumstances of this case there was such added cost. We hold that there was not and that therefore taxpayer cannot recover. In support of its contention, taxpayer argues that the transaction in question constituted an economic loss and as such an increased cost of obtaining capital. We are told that if the taxpayer had sold the conversion feature of the debenture separately it would have surely obtained some consideration for it. Thus during the life of the debenture the holder obtaining something of value without having to pay any separate consideration for it. Therein, lies an alleged economic loss and the added cost for the use of the holder’s capital. Taxpayer draws an analogy between the transaction in question and the case of a bond issued with a detachable warrant and points out that in the latter case a discount for the value of the warrant is permitted. Taxpayer’s contention fails and a comparison to the ease of the bond issued with a warrant demonstrates why it must. In the case of the debenture issued with a conversion feature the holder may either convert his debenture into stock or redeem the debenture at the end of the prescribed period, one or the other but not both. The issuer will not in any event incur costs over and above the face value of the debenture plus the stated interest. If the holder elects to convert, the issuer pays nothing. On the other hand, in the case of the bond issued with a warrant, the holder may exercise either or both of his options. He may for example, exercise his warrant or sell it and still redeem his bond at the end of the period. The issuer of the bond issued at par with a warrant is faced with the possibility of incurring an economic detriment over and above the stated interest. The difference involved when a debenture is issued with a conversion feature is how the issuer will pay for the capital received. Certainly there may be economic consequences to the issuer for choosing not to sell the conversion feature separately but any such “loss” will likely be reflected, as it was here, in a lower interest rate on the debenture. If there was a more profitable mode-of accomplishing the taxpayer’s motives he would have taken advantage of it. This court will not correct the taxpayer’s business judgment. Of importance also is the matter of consistency of treatment of the parties to the transaction. § 1232(b) (2) defines issue price as the initial offering price to the public, therefore, a holder of a debenture issued at par need not report any income from a “discount” resulting from the inclusion of a conversion feature. It would be inconsistent to permit the issuer of that same debenture to claim that the bond was sold at a discount. Taxpayer points to the treatment afforded a bond issued at a premium with a conversion feature under Regulation § 1.61-12(c) (2). In that case the amount of the bond price allocable to the conversion feature must be deducted from the premium to determine the amount of the premium the issuer is receiving to offset interest. Taxpayer argues that the treatment of a premium under § 1.61-12(c)(2) is inconsistent with the treatment the Government would apply to the case of a discount. Taxpayer’s observation may be well taken but defendant answers that the parties on both sides of the transaction involving the bond premium or discount are treated consistently in both cases. It is more important that the parties to the transaction involving a bond issued with a conversion feature, issuer and holder, be treated consistently with one another. Since § 1232(b)(2) precludes the possibility of the holder recognizing a discount in the case of bond issued at par, consistency of treatment for all parties to the transaction directs that the issuer also be precluded from recognizing a discount for the same bond. The asserted inconsistencies between the sections dealing with different types of transactions are matters for Congress to consider. The parties have discussed two recent cases: Chock Full O’Nuts, supra, and Hunt Foods & Industries, Inc. v. Commissioner, 57 T.C. 633 (1972), pending on appeal (9th Cir.). Both of these cases dealt with the question presented in this case and both lend support to our conclusion. It would be superfluous to quote all the reasons they adduce. Any not mentioned here may be deemed incorporated by reference. Chock Full O’Nuts is very nearly on all fours with the case at bar. In that case the corporation issued convertible debentures at a conversion rate somewhat different than those issued by our taxpayer. Aside from that difference, the facts of the cases and the arguments made by the parties are very much the same. Judge Mansfield writing for the court noted as we do that the language of § 1232(b) (1) does not support the contention that there can be a discount where a bond is offered at par, and went on to say at p. 304 of 453 F.2d: Furthermore, if we look to the substance of the transaction * * * the taxpayer has failed to satisfy its burden of showing that the amount of the issue price allocable to the conversion feature represents a cost of borrowing money that must without qualification be paid. * * * The parties in the case at bar discuss the retroactivity of Treasury Regulations §§ 1.163-3 and 1.1232-3 issued in 1968. Defendant points out that these Regulations were issued to cover the years in question and clearly bar taxpayer’s recovery in this case. We agree with the Second Circuit opinion in Chock Full O’Nuts, that the matter of retroactivity of the 1968 Regulations is not of import in view of the language of the Statute and Regulation in effect at the time of the transactions in question. We do not depend on the 1968 Regulations to hold that taxpayer cannot recover in this case. The Tenth Circuit has recently issued an opinion in the case of National Alfalfa Dehydrating & Milling Co. v. Commissioner, 472 F.2d 796 (1973). The issue in that case was the question of discount where $50 face value debentures were issued in exchange for $50 par value stock having a fair market value 'of under $50. That court held, with one dissent, that there could be a discount. Although the majority takes issue with certain decisions of ours, we have not cited those cases here only because we do not regard them as relevant under the facts of this case. Since the decision of the Tenth Circuit has no bearing on the question at bar, we do not consider that it is in conflict with the decision in this case. For the reasons above, we hold that plaintiff cannot recover. Defendant’s motion is granted, plaintiff’s is denied. Plaintiff’s petition is dismissed.

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

60 CCPA ALBERT E. PRICE, INC., Appellant, v. The UNITED STATES, Appellee. Customs Appeal No. 5507. United States Court of Customs and Patent Appeals. May 3, 1973. Allerton deC. Tompkins, New York City, atty. of record, for appellant. Harlington Wood, Jr., Asst. Atty. Gen., Andrew P. Yance, Chief, Customs Section, Michael S. O’Rourke, New York City, for United States. Before MARKEY, Chief Judge, RICH, BALDWIN, and LANE, Judges, and ALMOND, Senior Judge. ALMOND, Senior Judge. This is an appeal by the importer from the decision and judgment of the United States Customs Court, 68 Cust.Ct. 50, C.D. 4334 (1972), wherein certain spice cabinets were held to have been properly classified under item 206.-97 of the Tariff Schedules of the United States (TSUS) as household utensils of wood and assessed with a duty of 16% per centum ad valorem. The involved merchandise consists of “Thoma-Wood Wall Spice Set wood cabinet with louver door hutch with two drawers at bottom.” Appellant in its protest alleged that the merchandise in issue should have been classified under item 727.35, TSUS, as other, wood furniture dutiable at the rate of 10.5 per centum ad valorem. In overruling appellant’s claim, the trial court held that Sprouse Reitz & Co. v. United States, 67 Cust.Ct. 209, 332 F.Supp. 209, C.D. 4276 (1971), was stare decisis of the issues presented. The statutes involved are: Tariff Schedules of the United States Classified: Household utensils and parts thereof, all the foregoing not specially provided for, of wood: * ****** * * * 206.97 Other................................... 16%% ad val. Claimed: Furniture, and parts thereof, not specially provided for: * ' * * * * * * * * * Of wood: ****** * * * * Other: 727.35 Furniture other than chairs................ 10.5% ad val. Headnote 1, schedule 7, part 4, Sub-part A: 1. For the purposes of this sub-part, the term “furniture” includes movable articles of utility, designed to be placed on the floor or ground, and used to equip dwellings, offices, restaurants, libraries, schools, churches, hospitals, or other establishments, aircraft, vessels, vehicles, or other means of transport, gardens, patios, parks, or similar outdoor places, even though such articles are designed to be screwed, or bolted, or otherwise fixed in place on the floor or ground; and kitchen cabinets and similar cupboards, seats and beds, and sectional bookcases and similar sectional furniture even though designed to be fixed to the wall or to stand one on the other; . . . A careful analysis of headnote 1, sub-part A, part 4, schedule 7, TSUS, persuades us that the evidence of record fell short of establishing that the imported merchandise was embraced within the statutory definition of furniture. The Tariff Classification Study, schedule 7, page 242 states that “The concept of furniture embraced in this subpart is stated as a definition in Headnote 1.” It is obvious that spice cabinets or racks such as we have in the instant importation are not “movable articles of utility designed to be placed on the floor or ground * * Furthermore, we agree with the conclusion reached by the Customs Court in Sprouse Reitz & Co., supra, that “it would be farfetched to say that they are kitchen cabinets or cupboards.” We find nothing to indicate that the articles in issue are known or even thought of as kitchen cabinets or that they were ever offered through any means to the public as furniture. We deem it pertinent to note that the importation in issue consists of two models, W-1151 being 15% x 11% x 2% inches and W-1152 being 15% x 16% x 2% inches, each consisting of shelves enclosed by two louvered doors above two drawers. We think it would strain credulity to consider an article only 2% inches deep to be a kitchen cabinet or anything similar thereto. The court below was correct in its conclusion that the small, decorative articles in issue were not similar in any way to kitchen cabinets. We share the view so aptly expressed by the Customs Court that: * * * the headnote discussion of furniture was, on its face, intended to certify the inclusion of furniture which was permanently fastened to the premises, either on the floor or on the walls, as opposed to furniture which was movable at will. In this respect, kitchen cabinets and similar cupboards were mentioned as examples of furniture which were capable of permanent placement. The mention of kitchen cabinets was not intended to expand the term “furniture” to articles of lesser substantiality than full size, genuine kitchen cabinets. We agree with the Customs Court that “We are unable to conclude that the instant spice cabinets are more than household articles of a convenient and useful nature. It does not follow that they are furniture within the common meaning of that term.” We hold therefore that the imported merchandise was properly classified under item 206.97 of the Tariff Schedules of the United States as household utensils of wood. The judgment of the Customs Court is affirmed. Affirmed. BALDWIN, Judge (dissenting). The term “furniture” as it is used in item 727.85 is defined by Headnote 1, schedule 7, part 4, subpart A, to include “kitchen cabinets and similar cupboards * * The question before us is whether the merchandise at bar is included within that statutory definition. Webster’s Third New International Dictionary (1961 ed.) gives the following definitions: cabinet * * * 1: a box for storing chiefly small articles usu[ally] closed by a hinged or sliding door, fitted with shelves or drawers, and suitably finished as an item of home, office, or laboratory furniture: a: an upright case or cupboardlike repository for utensils, materials, or documents conveniently accessible for use (a bathroom wall [cabinet] for medicines, bandages, and toilet articles) (cards alphabetically arranged in rows of file [cabinets]) (installation of a [cabinet] sink in the kitchen) * * * cupboard * * * la: a board or shelf for cups and dishes * * * 3: a closet with shelves to receive cups, dishes, or food; also: any small closet The main reason the majority and the Customs Court considered the merchandise not to be kitchen cabinets was because of its size. Clearly there is no difference in function between the merchandise at bar and whatever larger cabinets the majority considers the term “kitchen cabinets” to be limited to. In my view, any difference in size is one of degree rather than a difference in kind. Nor is it important whether the merchandise was offered to the public as “kitchen cabinets” or as “furniture.” We can safely assume that the merchandise was offered to the public as spice cabinets. The question is not what they are offered as but what they are, i. e., do they fit within the statutory definition of “furniture.” Accepting, arguendo, the view that the cabinets at bar are not “kitchen cabinets,” no reason is apparent why they are not “similar cupboards” within the meaning of the statutory definition. The entire function of the merchandise is to receive and store containers of food. Again the only possible basis for finding that the cabinets are not “similar cupboards” is the difference in size. Yet the size difference is not such as would prevent the cabinets from performing the function of cupboards. Moreover, the merchandise at bar is finished in the same manner that other wood furniture is finished, and it is just as suitable for permanent placement as any kitchen cabinet, bathroom cabinet, bookcase, or any other furniture designed to be fixed to the wall. I would reverse the decision of the Customs Court.

f2d_476/html/1357-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Application of E. I. DuPONT DeNEMOURS & CO. (Assignee of Horizon Industries Corporation). Patent Appeal No. 8866. United States Court of Customs and Patent Appeals. May 3, 1973. Eugene L. Grimm, Wilmington, Del., atty. of record, for appellant. Gerald A. Hapka, Washington, D. C., of counsel. S. Wm. Cochran, Washington, D. C., for Commissioner of Patents. Jack E. Armore, Washington, D. C., of counsel. Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges, and WATSON, Judge, United States Customs Court, sitting by designation. MARKEY, Chief Judge. This appeal is from the decision of the Trademark Trial and Appeal Board, 166 USPQ 351 (1970), affirming a refusal to register DuPont’s “inark RALLY for a combination polishing, glazing and cleaning agent for use on automobiles on the basis of likelihood of confusion under section 2(d) of the Lanham Act with Horizon’s registered mark RALLY for an all-purpose detergent. We reverse. The application now before us was originally filed by Horizon. DuPont had earlier filed for registration of RALLY for a combination wax and cleaning agent for automobiles. That application was refused in view of Horizon’s registration. DuPont appealed and the board affirmed. While its appeal was pending, DuPont purchased Horizon’s mark for the automobile product, the present application and the good will of that business. Because Horizon retained RALLY for all-purpose detergent, an agreement designed to avoid conflict was entered into on the same day. Boundaries of use of the marks were established, permitting the sale of products “incidentally usable” in the other party’s market but prohibiting any promotion as “especially suited for use in such market.” DuPont’s realm was the “automotive aftermarket.” Horizon’s encompassed the “commercial building or household market.” The examiner, aware of the assignment and agreement, nonetheless refused registration, citing Horizon’s registration and describing the issue as “ruled upon” in the board’s earlier decision. The board affirmed, holding: It is our opinion that despite any agreement between the parties the public interest cannot be ignored, and when the goods of the parties are as closely related as those here involved, their sale under the identical mark “RALLY” would be likely to result in confusion, mistake, or deception, cf. In re Avedis Zildjian Co., 157 U.S. p. 2517 [394 F.2d 860, 55 CCPA 1126] (CCPA, 1968); and In re Continental Baking Company, 156 U.S. p. 2514 [390 F.2d 747, 55 CCPA 967] (CCPA, 1968). * *' * The mere fact that registrant may have precluded itself from selling an automobile cleaner under the mark “RALLY” does not overcome the likelihood of confusion as set forth in Section 2(d) of the Trademark Statute. OPINION Our decision turns on the application of Sec. 2(d) to the facts before us. DuPont, having an unquestioned right to use, argues that the “right to register follows the right to use,” particularly where the right on its goods is exclusive, Horizon having given up use of the mark in DuPont’s market. The Patent Office solicitor denies such a broad relationship in the rights to use and register and emphasizes the duty of the Patent Office “to guard the public interest” against confusion. Both parties have cited prior opinions of this court. We are thus presented with a welcomed opportunity to set forth a reliable guide for decision-making in cases involving Sec. 2(d). It need hardly be said that concepts expressed in our prior opinions and inconsistent with what we say here may be considered no longer viable in this court. The Statute We begin with interpretation of the Lanham Act (Chapter 22, Title 15) as it applies here. The legislative history of the Act as a whole describes its objectives as making registration “more liberal,” dispensing with “mere technical prohibitions and arbitrary provisions” and modernizing the trademark statutes “so that they will conform to legitimate present-day business practice.” The basic goal of the Act, which dealt with a good deal more than registration, was “the protection of trademarks, securing to the owner the good will of his business and protecting the public against spurious and falsely marked goods.” Accordingly, we consider the pre-Lanham Act decisions presented here to be inapt. Sec. 2 (15 U.S.C. § 1052), in pertinent part reads: No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it * * * * * * (d) Consists of or comprises a mark which so resembles a mark registered in the Patent Office or a mark or trade name previously used in the United States by another and not abandoned, as to be likely, when applied to the goods of the applicant to cause confusion, or to cause mistake or to deceive: * * * Under the statute the Commissioner must refuse registration when convinced that confusion is likely because of concurrent use of the marks of an applicant and a prior user on their respective goods. The phrase “on account of its nature” in Sec. 2 clearly applies to the “resembles” element of See. 2(d). But the question of confusion is related not to the nature of the mark but to its effect “when applied to the goods of the applicant.” The only relevant application is made in the marketplace. The words “when applied” do not refer to a mental exercise, but to all of the known circumstances surrounding use of the mark. The Decisional Process The ultimate question of the likelihood of consumer confusion has been termed a question of fact. Coca-Cola Company v. Snow Crest Beverages, Inc., 162 F.2d 280 (1st Cir. 1947), cert. den. 332 U.S. 809, 68 S.Ct. 110, 92 L.Ed. 386 (1947). If labeled a mixed question or one of law, it is necessarily drawn from the probative facts in evidence. As so often . said, each case must be decided on its own facts. There is no litmus rule which can provide a ready guide to all cases. In testing for likelihood of confusion under Sec. 2(d), therefore, the following, when of record, must be considered : (1) The similarity or dissimilarity of the marks in their entireties as to appearance, sound, connotation and commercial impression. (2) The similarity or dissimilarity and nature of the goods or services as described in an application or registration or in connection with which a prior mark is in use. (3) The similarity or dissimilarity of established, likely-to-continue trade channels. (4) The conditions under which and buyers to whom sales are made, i. e. “impulse” vs. careful, sophisticated purchasing. (5) The fame of the prior mark (sales, advertising, length of use). (6) The number and nature of similar marks in use on similar goods. (7) The nature and extent of any actual confusion. (8) The length of time during and conditions under which there has been concurrent use without evidence of actual confusion. (9) The variety of goods on which a mark is or is not used (house mark, “family” mark, product mark). (10) The market interface between applicant and the owner of a prior mark: (a) a mere “consent” to register or use. (b) agreement provisions designed to preclude confusion, i. e. limitations on continued use of the marks by each party. (c) assignment of mark, application, registration and good will of the related business. (d) laches and estoppel attributable to owner of prior mark and indicative of lack of confusion. (11) The extent to which applicant has a right to exclude others from use of its mark on its goods. (12) The extent of potential confusion, i. e., whether de minimis or substantial. (13) Any other established fact probative of the effect of use. Where the Patent Office follows such process, it is not abandoning its duty under Sec. 2(d) or allowing individuals to take the law into their own hands. Consideration of evidence emanating from the only place where confusion can occur, i. e. the marketplace, is not related to who decides but to the process of deciding. The required inquiry, though more sweeping, is not unlike that provided for in Patent Office Rule 2.41 wherein the applicant is specifically invited to submit all evidence, including letters from the trade or public, tending to show that the mark, otherwise merely descriptive, distinguishes the goods. The evidentiary elements are not listed above in order of merit. Each may from case to case play a dominant role. In Schenley Distillers, Inc. v. General Cigar Co., Inc., 427 F.2d 783, 57 CCPA 1213 (1970), and in McKesson & Robbins, Inc. v. P. Lorillard Co., 120 USPQ 306 (TTAB 1959), element (9) led to a finding that confusion was unlikely when the same mark was used on a beverage and a tobacco product. In John Walker & Sons, Limited v. Tampa Cigar Company, Inc., 124 F.Supp. 254 (S.D.Fla.1954), aff’d, 222 F.2d 460 (5th Cir. 1955) element (5) made confusion likely when the same mark was used on beverages and tobacco. See, also, Carling Brewing Company, Inc. v. Phillip Morris, Inc., 277 F.Supp. 326 (N.D.Ga.1967) and Geo. A. Dickel Co. v. Stephano Brothers, 155 USPQ 744 (TTAB 1967) involving beverages and tobacco. We find no warrant, in the statute or elsewhere, for discarding any evidence bearing on the question of likelihood of confusion. Reasonable men may differ as to the weight to give specific evidentiary elements in a particular case. In one case it will indicate that confusion is unlikely; in the next it will not. In neither case is it helpful or necessary to inject broad maxims or references to “the public interest” which do not aid in deciding. Only the facts can do that. In every case turning on likelihood of confusion, it is the duty of the examiner, the board and this court to find, upon consideration of all the evidence, whether or not confusion appears likely. That determination ends the decisional process. Decision Applying the above criteria, and after a thorough review of the entire record, we are convinced that confusion is not likely. The agreement and assignment herein constitute far more than mere “consent.” They play, in this case, a dominant role. The record of DuPont’s original application, like so many, included only the application, specimens, reference mark and descriptions of goods. From these the examiner made a judgment, necessarily subjective and requiring assumptions. The only facts were identical marks on “related” goods. Confusion appeared likely and registration was refused. The present application, however, was rejected without proper consideration, in our view, of all the evidence. The examiner said the earlier decision had “ruled upon” the issue and referred to the “public interest” as though likelihood of confusion were established. The board, also citing the public interest, found confusion likely “despite any agreement.” It has been said that agreement evidence may resolve “doubt,” In re Harvey Aluminum (Inc.), 161 USPQ 366 (TTAB 1969) or may be useful when the issue is “debatable,” In re Vim Corp., 161 USPQ 58 (TTAB 1969), but there are only two practical possibilities. Either there is no indication of likely confusion, in which case the registration promptly issues, or there is some indication that confusion may be likely. In the latter case, the question must remain open (i. e., “debatable”) until any or all of the elements listed above have been reviewed and studied, the final decision being made on the basis of the entire record. In considering agreements, a naked “consent” may carry little weight. Absent more, the consenter may continue or expand his use. The consent may be based on ignorance or misconception of the law. The facts may show, on the other hand, that consent could exist only in the absence of any real likelihood of confusion. The weight to be given more detailed agreements of the type presented here should be substantial. It can be safely taken as fundamental that reputable businessmen-users of valuable trademarks have no interest in causing public confusion. The genius of the free competitive system is the paralleling of the interest of the entrepreneur and the consuming public so far as possible. Altruism aside, it is in his pecuniary interest, indeed a matter of economic survival, that the businessman obtain and 'retain customers, the very purpose and function of a trademark, and that he avoid and preclude confusion. Millions of advertising dollars are spent daily for that precise purpose. The history of trademark litigation and the substantial body of law to which it relates demonstrate the businessman’s alertness in seeking to enjoin confusion. In so doing he guards both his pocketbook and the public interest. Thus when those most familiar with use in the marketplace and most interested in precluding confusion enter agreements designed to avoid it, the scales of evidence are clearly tilted. It is at least difficult to maintain a subjective view that confusion will occur when those directly concerned say it won’t. A mere assumption that confusion is likely will rarely prevail against uncontroverted evidence from those on the firing line that it is not. The parties here agreed to restrict themselves in effect to the general purpose cleaning market (Horizon) and the automobile market (DuPont). Horizon is subject to suit for breach of contract and infringement if it promotes its RALLY products for cleaning automobiles. DuPont can be sued if it promotes its RALLY products in general cleaning. The fact that the goods of one party “could be used” in the field of the other is too conjectural and too widely applicable to form the sole basis of decision, particularly where, as here, the parties have agreed to avoid the promotion of such cross-use. The mere fact of diverse marketing emphasis alone may not in every case preclude confusion. Without more, it may well be that purchasers active in both markets and familiar with products sold under a particular mark could attribute to the same source closely related goods sold under the same mark. The agreements herein, however, considered as a whole and notwithstanding certain phrases subject to contrary interpretation, evidence that confusion will be unlikely. As we read them, the very purpose and aim of the present agreements the avoidance of public confusion. Under provision 6 of the assignment the parties agreed “to take any further actions and execute any further agreements needed to carry out the spirit and intent of this agreement.” The words of this court in a concurrent use proceeding, In re Beatrice Foods, Co., 429 F.2d 466, 57 CCPA 1302 (1970) are particularly apt: * * * there can be no better assurance of the absence of any likelihood of confusion, mistake or deception than the parties’ promises to avoid any activity which might lead to such likelihood. It is reasonable to conclude that experienced businessmen fully and continuously alert to each others’ products, labels, trade channels and advertising and parties to the agreements before us, will be quick to act against confusion. We cannot believe that Horizon would have sold its automotive business, assigned its mark and entered into the agreement of that DuPont would have accepted and paid for the assignment and entered into the agreement, if either thought for a moment that purchasers would seriously be confused as to source. Dollars were at stake. Decisions of men who stand to lose if wrong are normally more reliable than those of examiners and judges. We have no hesitancy in holding, therefore, under the facts of this case, that confusion is not likely to stem from concurrent use of RALLY by Horizon and DuPont on their respective goods under the terms of their agreement. Accordingly, the decision of the board must be reversed. From all of the foregoing, it can be seen that the arguments presented in this and prior cases regarding the effect of a right to use and the need for protection of the public interest against confusion provide of themselves inadequate guides in determining likelihood of confusion under Sec. 2(d). Right to Use — Right to Register Decisional maxims like “the right to register follows the right to use,” sometimes defended as “reflecting the realities of the marketplace,” founder on their non-universality of application and the existence of Sec. 2(d). As attractive as that approach appears in In re National Distillers Products Co., 297 F.2d 941, 49 CCPA 854 (1962) and in the dissents in Ultra-White Company, Inc. v. Johnson Chemical Industries, Inc., 465 F.2d 891, 59 CCPA _ (1972), In re Avedis Zildjian Co., 394 F.2d 860, 55 CCPA 1126 (1968) and In re Continental Baking Co., 390 F.2d 747, 55 CCPA 967 (1968), it is recognized as a goal and that the phrase “as nearly as possible” must be read into it. Clearly, a right to use is not a right to confuse. The rights to use and register are not identical. Alfred Dunhill of London, Inc. v. Dunhill Tailored Clothes, Inc., 293 F.2d 685, 49 CCPA 730 (1961), cert. den., 369 U.S. 864, 82 S.Ct. 1030, 8 L.Ed.2d 84 (1962). Many marks, including those described in Sec. 2(a), (b), and (c), merely descriptive terms and those on labels defective under other laws (Rule 2.69), might all be used but not registered. Although a naked right to use cannot always result in registration, the Act does intend, as we said above, that registration and use be coincident so far as possible. Post-Lanham Act opinions relating to Sec. 2(d) which maintain an iron curtain between the rights to use and register do not contribute to stability in the law. Treating those rights as totally divorced entities only perpetuates the “arbitrary provisions” respecting confusion that the Congress thought it was eliminating more than twenty-five years ago. The Public Interest Whether offered in response to a right-to-use argument or against any of the evidentiary considerations listed above, citation of “the public interest” as a basis for refusal of registration is a bootless cry. We need add little to the shattering of that shibboleth in the concurring opinion in National Distillers, supra, and in the dissents in Ultra-White, Zildjian and Continental Baking, supra. Writers and scholars listed in those reported opinions have also shown the fallacy in the notion that the Patent Office is somehow guarding the public against confusion when it refuses a registration. After a likelihood of confusion is found (and the case thus decided) citation of the public interest is unnecessary. The Patent Office does have a guardianship role under Sec. 2(d). It lies not in a negative, nay-saying of refusal alone, but in the protection of a mark by registering it and then rejecting later improper attempts, of which the registrant is unaware, to register it or a similar mark. Refusal to register cannot prevent confusion. At most, it might discourage further use. Refusal can, under certain circumstances, encourage potential confusion. Absence of a registration of RALLY for auto cleansers in the present case may, for example, lead others to adopt and use that or a similar mark for auto cleansers. Granting a registration will not produce confusion. Use alone can do that and neither we nor the Patent Office can grant or deny a right to use. Presumably, everything the Patent Office and this court does is in the public interest. We find no place for “the guardianship of the public interest” as support for refusals to register under See. 2(d). Conclusion What we have said under the heading “decisional process,” supra, which has been in effect or in part followed on occasion in the past by this and other courts and by the Patent Office, and the elimination of considerations regarding right to use and the public interest should in time lead, we believe, to increased conformity of the register with the realities of use in the marketplace, and to the greater stability sought in the Act. ' Reversed. BALDWIN, J., dissents. . Serial No. 307,711, filed September 19, 1968. . Reg.No.675,713, issued March 17, 1959. . Serial No. 270,842, filed May 8, 1967. . Decision of Trademark Trial and Appeal Board, abstracted at 160 USPQ 830 (1968). . S.Rep.No.1333, 79th Cong., 2d Sess. (1946) in U.S.Code Cong.Service, 79th Cong., 2d Sess. at 1274-1278 (1946). . Skookum Packers Association v. Pacific Northwest Canning Co., 45 F.2d 912, 18 CCPA 792 (1930); Van Camp Sea Food Co., Inc. v. Westgate Sea Products Co., 48 F.2d 950, 18 CCPA 1311 (1931); Jacob Ries Bottling Works, Inc. v. The Coca-Cola Co., 138 F.2d 56, 31 CCPA 706 (1943). . See the decisions listed in “Appendix A” to Judge Smith’s dissenting opinion in In re Continental Baking Co., 390 F.2d 747 at 753, 55 CCPA 967 at 976. . We are aware, of course, of our part in encouraging this very cry. In re Contimental Baking Co., above. . That a rejected applicant might elect to abandon use, and thus reduce the potential for confusion, is a matter of the applicant’s choice. Cf. Glenwood Laboratories, Inc. v. American Home Products Corp., 455 F.2d 1384, 59 CCPA _ (1972).

f2d_476/html/1365-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Application of David M. GOODMAN. Patent Appeal No. 8875. United States Court of Customs and Patent Appeals. May 10, 1973. David M. Goodman, pro se. S. Wm. Cochran, Washington, D. C., for the Commissioner of Patents; R. V. Lupo, Eugene F. Desmond, Washington, D. C., of counsel. Before MARKEY, Chief Judge, and RICH, ALMOND, BALDWIN, and LANE, Judges. MARKEY, Chief Judge. This is an appeal from the decision of the Board of Appeals affirming the examiner’s rejection for obviousness under 35 U.S.C. § 103 of claims 12, 39, 42-48, 51-54, 56-61, and 64-70 of appellant’s application serial No. 345,197, filed February 17, 1964, entitled “High-Sensitivity Beam-Index and Heaterless Cathode Ray Tubes.” We affirm as to some claims and reverse as to others. The Invention The invention relates to an index signal detecting means for color cathode ray tubes of the type wherein a single electron beam scans strips of different col- or-producing phosphors on the target screen. The detected signals are used to “index” or synchronize the sequential switching action necessary in such a tube to obtain an image having its colors in registration. Three major embodiments are disclosed. These differ mainly in the positioning and shape of an optical fiber detector (or receiver) that is employed and are grouped generally as follows by appellant : I. One embodiment relates to a color television tube with specially shaped, internally and externally disposed light pipe members. An index-type target screen on the tube faceplate includes repeating groups of red, green, and blue phosphor strips and interspersed indexing strips. Electromagnetic radiation emanates from the indexing strips and spreads out into the interior of the tube as a beam travels across the screen. A light pipe of glass which is either itself scintillating (emitting a flash of light in response to an ionizing particle or photon) or else has its end coated with a scintillating material is disposed in the neck of the tube to pick up the radiation and convert it to optical signals. The latter pass to the end of the tube and are picked up by a second, external light pipe surrounding conventional electrical pin connectors and conveyed to an indexing device. In one modification, the faceplate glass has the same index of refraction for the signal as the indexing strips. An electron gun bombards all of the strips. The index signals are “light-piped” within the faceplate, and through the tube envelope including the neck section that surrounds the pin connectors. An external light pipe with an end surrounding the pin connectors transmits the signals to beam indexing means. II. A second embodiment involves forming the index strips of portions of light pipes contiguous with the target screen. The contiguous portions are coated with an electron sensitive index phosphor (scintillator) or may be made from a scintillating glass. Signals in the indexing portions are conveyed by external portions of the pipes to an indexing means. III. A third embodiment relates to an index signal detector of a scintillating material having a decay time constant “not much greater than four nanoseconds.” For completeness, all of the independent claims 12, 39, 42, 44, 47, 51, and 56 are set out as representative: 12. A cathode ray tube having an envelope with an electron gun section for providing a scannable electron beam and a target screen comprising electron-sensitive scintillating optical fibers disposed along, and not perpendicular to, the target screen on the side thereof which is to be impinged upon by the electron beam. 39. In combination: (1) a line-screen color cathode ray tube of the beam-index variety having a target screen which furnishes index signals indicative of the position thereon of the impinging cathode rays, with (2) index-signal deriving means comprising a scintillator which generates electromagnetic radiation in the optical frequency range as a consequence of excitation by the index signals, said scintillator having a decay time constant not much greater than four nanoseconds. 42. In combination: a cathode ray tube having a target screen within an envelope containing a cylindrical-like neck section having a vacuum tight end section through which a plurality of electrical pin connectors, are hermetically sealed, and an externally disposed hollow cylindrical-like light pipe means positioned with one end proximate said end section and surrounding the pin connectors, thereby to pick up optical radiation transmitted through the envelope of the tube from said target screen. 44. A color cathode ray tube of the beam index variety comprising an envelope containing a target screen and an electron gun, said screen containing different color generating elements together with index signal generating elements, in combination with means for transmitting optical signals representative of the index signals, said means comprising a hollow cylindrical light pipe positioned to surround the electron gun and also positioned adjacent to and concentric with the interior surface of the envelope of the tube. 47. A cathode ray tube having an envelope with an electron gun section for providing a scannable electron beam and a target screen including optical fibers disposed along, and not perpendicular to, the target screen wherein a glass-like electron-sensitive scintillator material is adhered to the optical fibers on the side thereof which is to be impinged upon by the electron beam. 51. In a beam index apparatus comprising a scannable beam of energy, a target screen, and a control system responsive to the position of the beam on the target screen for controlling the excitation of the target screen, the improvement of the target screen comprising: a plurality of light pipe elements located substantially parallel to the target screen on the side thereof facing the scanning beam of energy, whereby optical index signals generated at the target screen as a result of excitation by the scanning beam are transmitted through the light pipes to exit terminals where they are used to synchronize the control system. 56. A beam index multi-color display device comprising: means for developing a scannable beam of energy; a target screen adapted to be impinged upon by the beam of energy; means for scanning the beam across the target screen; means associated with the target screen for generating optical index signals which indicate the position on the target screen of the beam of energy; means responsive to the optical index signals for controlling the beam of energy thereby to synchronize the energization of the target screen; including light pipe means positioned with respect to the target screen so that the optical index signals generated as a result of excitation at different regions of the target screen are transmitted through the light pipe means in a direction substantially parallel to the target screen to a peripheral region thereof. For purposes of this appeal, it is unnecessary to discuss the additional recitations in the dependent claims except for claim 66. The feature of that claim significant here is that it adds to claim 56 a recitation that the light pipe means comprises “a plurality of elongated light pipes disposed on the interior surface of the faceplate.” The Prior Art The following patents were cited: Bradley et aI. 2,749,449 June 5, 1956 Goodman 2,915,659 Dec. 1, 1959 Bradley 3,027,219 March 27, 1962 Knocklein 3,198,881 Aug. 3, 1965 (filed 3-19-62) Bradley et al. discloses a color television tube with vertical indexing strips separating recurring triplets of red, green, and blue color phosphors on the inside surface of the screen. The indexing strips scintillate in response to electron bombardment to produce signals. The inside of the tube is coated with a material that reflects the signals through a lens in the tube envelope to a sensor serving as part of an indexing means. Goodman ’659 relates to a cathode ray tube having spaced radiation-emitting index rings on its screen interior. An elongated light pipe which may be hollow is disposed in the neck portion of the tube, extending from a point where the conical portion of the tube envelope begins to the base of the tube adjacent the pin connections. The end of the light pipe detects signals emanating from the rings as the electron beam sweeps across them. The signals are transmitted through the pipe to means disposed outside the tube for indexing. Bradley discloses parallel scintillating filaments or light pipes disposed over the outside of the faceplate. A phosphor screen is deposited on the inside of the faceplate. A “collimating structure” is disposed between the light pipes and the faceplate. The “collimating structure” includes vertical baffles that insure that any excited spot on the screen can illuminate only one or two adjacent light pipes. The light pipes scintillate in response to radiation from the screen and transmit signals to a film for recording. Knoeklein discloses a film scanning transmission system using fiber optics in a cathode ray tube. The tube includes a plurality of light pipes with their inner ends arranged in a circle to be scanned by the electron beam of the tube. From there the pipes flare out so that their outer ends form a straight line. A recess etched in the individual inner ends of the light pipes is filled with a phosphor “scintillator” material. The intensity of the electron beam can be varied in response to a video signal so as to produce an optical image on the linearly disposed ends of the pipes and photographic film may be exposed to that image to record the video signal. OPINION Appellant argues that his own patent, Goodman ’659, is an “improper reference” in the apparent belief that he could, by amending the present application to refer to two of his other patents, negate the use of Goodman ’659 as prior art. However, appellant has not pointed out how the subject matter of the appealed claims is continuously supported throughout the chain which includes those two patents and the present application. Nor is such support apparent to us. Under these circumstances, amending the present application to include “a specific reference to the earlier filed application[s]” (35 U.S.C. § 120) would not entitle appellant to an effective filing date antedating the Goodman ’659 reference. In rejecting claim 39, the examiner held it obvious to use a scintillating material as disclosed by Bradley on the light pipe of Goodman ’659 to convert the index signals therein to visible light. The board held that a person skilled in the art would have found Bradley to suggest both the change in frequency of the signals and a manner of making the change. We agree. Moreover, it is apparent that rapid decay of signals is essential for clear indications of the instants at which the beam is in the various index positions. Therefore, we agree with the solicitor that the four nanoseconds limitation in claim 39 “amounts to nothing more than the obvious selection of a parameter to fit the intended use” and will affirm the rejection. Claim 12 was held unpatentable over Bradley in a prior board decision in the prosecution of this application and in the decision on appeal. Claims 47 and 48 were held unpatentable on the same grounds as claim 12 in the decision on appeal. The rejection of claim 12 was grounded in the position that it would be obvious to locate the light pipes of Bradley on the inside of the tube instead of the outside. However, Bradley employs the “collimating structure” on the faceplate exterior to focus light passing through the faceplate from various points on the phosphor screen onto corresponding limited areas of the light pipe assembly. Bradley makes no suggestion that the light pipes or “optical fibers” be disposed on the inside, that is, “the side thereof to be impinged upon by the electron beam.” Further, no reason for so modifying the location of the pipes of Bradley and no indication of how such a change might be made is supplied by either the examiner or the board. Claims 47 and 48 include the same limitation. Therefore the rejection of claims 12, 47 and 48 must be reversed. Claims 51-54 and 66-70 also require that plural light pipes be disposed on the interior and parallel to the screen. Bradley and Bradley et al. were applied to these claims, the latter as an alternative to Goodman ’659. We agree that Bradley’s disclosure of parallel light pipes outside its tube would have made it obvious to modify Bradley et al. or Goodman ’659 by providing light pipes outside their tubes. However, we find no suggestion in any of these references that such parallel light pipes be provided inside the tube. Knocklein was further relied on as to claims 66-70, but the terminals of its bundle of light pipes are, in effect, the screen. On the record here, we cannot see that Knocklein suggests that the light pipes of Bradley be disposed on the interior of the screens of Bradley et al. or Goodman ’659. Accordingly, the rejection of claims 51-54 and 66-70 must be reversed. The examiner, applying the same art as that applied to claims 51-54, correctly observed as to claims 56-61, 64 and 65: The claims set no restrictions on which side of the target screen the light pipes are to be positioned, and they do not require the light pipes to be attached to the target screen. We have determined above that the cited combination of prior art patents would have made obvious a structure employing light pipes outside the tube. Appellant has pointed to no other limitations as defining over the prior art. Thus, we will sustain the rejection of claims 56-61, 64 and 65. Claims 42-46 were rejected as obvious over Goodman ’659 with Knocklein and Bradley et al. further applied to claims 44-46. The board regarded these claims as directed to obvious modifications of the light pipes of Goodman ’659. The essence of appellant’s position seems to be, as set out in his brief before the board, that “there is no good reason expressed [in Goodman ’659] why this light pipe should be hollow except for the present teaching where the hollow cylinder also surrounds the feed-through pins.” However, the reference expressly states that its pipe, conveying the index signals, illustrated as a rod, “may also' be in the form of a hollow cylindrical pipe.” We agree that modifications of the light pipes of Goodman ’659 to the shape of a hollow pipe would have been obvious particularly in the absence of any evidence showing an unobvious result. Accordingly, we affirm the rejection of claims 42-46. Appellant argues that “prior art” of his own and of certain others is evidence to support patentability. However, he does not point out any way in which that prior art establishes non-obviousness. Appellant further argues that the issuance of his foreign patents on the instant disclosure is evidence of patentability. It has long been established that that argument has no pertinence to the determination of obviousness. See In re Larsen, 292 F.2d 531, 49 CCPA 711 (1961). For the foregoing reasons the rejection of claims 39, 42-46, 56-61, 64 and 65 is affirmed and the rejection of claims 12, 47, 48, 51-54, and 66-70 is reversed. Modified. . Patent No. 3,081,414 filed March 20, 1959, issued March 12, 1963, and Patent No. 3,567,985 filed June 2, 1966, issued March 2, 1971 which is stated to be a continuation of application serial No. 212,612 filed July 26, 1962. . On the earlier occasion, the instant case came before the board with some claims rejected on art and others for undue multiplicity. Although the board sustained the rejection of certain claims, it reversed the rejection of others including the rejection of undue multiplicity. The latter action brought about further prosecution before the examiner that resulted in the board decision now before us.

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Application of William L. ELLIS. Patent Appeal No. 8860. United States Court of Customs and Patent Appeals. April 26, 1973. Francis D. Thomas, Jr., Washington, D. C., attorney of record, for appellant. S. Wm. Cochran, Washington, D. C., for the Commissioner of Patents; John W. Dewhirst, Washington, D. C., of counsel. Before MARKEY, Chief Judge, RICH, BALDWIN, and LANE, Judges, and WATSON, Judge, United States Customs Court, sitting by designation. BALDWIN, Judge. This appeal is from the decision of the Patent Office Board of Appeals, sustaining the examiner’s rejection of claims 1-5, all the claims in appellant’s application. The Invention The claimed invention relates to floor gratings, and can be sufficiently understood from a reading of claim 1 with reference to appellant’s Figure 3: 1. A floor grating, comprising: a plurality of main support members [12], a plurality of secondary support bars [16] supported by said members and extending in fixed parallel spaced relation therebetween, a plurality of closely spaced wire rod members [18] secured to said secondary load bearing support bars and extended in parallel relation transversely thereacross for providing a walking surface thereover, said secondary load bearing support bars being sufficiently deep and closely spaced to support said' wire rod members for pedestrian traffic without undue flexing therebetween, and said wire rod members being spaced in the order of Vs inch or less apart and having an exposed upper surface area more than one-half the open spacing therebetween for providing a substantially contiguous walking surface for pedestrian traffic there-over and the passage of snow and dirt therethrough. Claim 2 requires that the wire rod- members be tapered, to more readily pass dirt and debris. Claims 3-5 differ from claim 2 in respects unnecessary to describe in detail here. The Rejection The claims were rejected under 35 U. S.C. § 103 as being unpatentable over a patent to Schulz in view of a patent to Trixner. Schulz deals with structural gratings which may be used for ceilings, walls, flooring for bridges, etc. While most of Schulz’s gratings are filled with concrete in use, Schulz discloses an alternate opening grating not filled with concrete in Figure 8: Trixner deals with non-clogging shoe scrapers. The application states: The scraper is advantageously constructed so that the gaps cannot be clogged and the individual cleaning elements can be easily removed and replaced, which greatly facilitates cleaning after extensive use and removal of worn individual scraper elements. According to the invention this result is obtained by detachably inserting the channel-shaped rods which receive the rubber elements in corresponding slots in the flat perpendicular rods, and by providing the scraper elements, made of rubber or the like, with a cross section which is tapered from the surface downward. One embodiment of the scraper is shown in Figure 3: The examiner considered that it would have been obvious to closely space the wire rod mémbers of Schulz in view of the Trixner patent. The board affirmed, stating: It is a matter of notorious knowledge that floor gratings are made with their bars sufficiently close to permit easy walking thereon, such as not to permit woman’s narrow heels to be caught therein. In our opinion, the expedient of placing the cross-bars in Fig. 8 of Schulz in close proximity to each other would have been an obvious variant even on the part of persons with less than ordinary skill in the art, particularly in view of Trixner where similar cross members 5 are spaced much closer. The precise spacing is deemed an obvious variant in degree. * * * Opinion Appellant contends that the two references should not be combined because they are from non-analogous arts. Appellant contends that the Patent Office classification of Schulz’s patent was in “Roads and Pavements,” that the classification of Trixner’s patent was under “Brushing, Scrubbing and General Cleaning,” and that the skilled in the art “would not expect to find grid or grating structures which are installed in floors under the art ‘Brushing, Scrubbing and General Cleaning.’ ” To this the Solicitor responds: [A]ppellant is in error in his belief (Br-3) that Schulz is classified in the “Roads and Pavements” art. On the contrary, Schulz is classified with the “Static Structures” art (Class 52), in an area providing for structures having exposed surfaces for increasing friction or reducing wear caused by pedestrian traffic. Also of significance is the fact that the official search notes for this area of Class 52 direct the searcher to Class 15-238, where Trixner is classified, for related art. * * * While we find the diverse Patent Office classification of the references to be some evidence of “non-analogy,” and likewise find the cross-reference in the official search notes to be some evidence of “analogy,” we consider the • similarities and differences in structure and function of the inventions disclosed in the references to carry far greater weight. Cf. In re Heldt, 433 F.2d 808, 812, 58 CCPA 701, 706-707 (1970). Here the structural similarities and the functional overlap between pedestrian gratings and shoe scrapers of type shown by Trixner are readily apparent. We conclude that, at the very least, the arts to which the Schulz and Trixner patents belong are reasonably pertinent to the art with which appellant’s invention deals. See In re Antle, 444 F.2d 1168, 1171-1172, 58 CCPA 1382, 1387 (1971). We have carefully considered appellant’s other arguments. However, we are convinced on the record before us that it would have been obvious for one skilled in the art to arrange the wire rod members of Schulz in closer proximity, as shown by Trixner’s scraper rods, should it be desired to avoid the catching of women’s heels in pedestrian gratings. Accordingly, the decision of the board is affirmed. Affirmed. . Serial No. 618,203, filed February 23, 1967. . U.S. Patent No. 2,031,007, issued February 18, 1936. . Austrian Patent No. 175,037, published May 26, 1953.

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DAVID CRYSTAL, INC., Appellant, v. SHARON RAY CORP., Appellee. Patent Appeal No. 8913. United States Court of Customs ■ and Patent Appeals. April 19, 1973. Ronald L. Panitch, Edward C. Gonda, Seidel, Gonda & Goldhammer, Philadelphia, Pa., attorneys of record, for appellant. A. Robert Theibault, Wilkinson, Mawhinney & Theibault, Washington, D. C., attorneys of record, for appellee. Raymond J. Mawhinney, Washington, D. C., of counsel. Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges, and ALMOND, Senior Judge. PER CURIAM. This appeal is from the decision of the Trademark Trial and Appeal Board, abstracted at 167 USPQ 699 (1970), dismissing appellant’s oppositions to appellee’s applications to register GOLD CRYSTAL for cosmetic preparations, FIRE CRYSTAL for cosmetic preparations, and OCEAN CRYSTAL for cosmetic preparations. Appellant relied on its prior registrations of trademarks including the word CRYSTAL for ladies’ and misses’ dresses, dress ensembles, coats, suits, blouses, skirts, men’s wear, fabrics, piece goods, and the like, and alleged likelihood of confusion. In view of the similarity of the issues joined by the parties in these three oppositions, the three proceedings were consolidated and moved to final hearing before the board on the same record. The board dismissed all three oppositions in one decision. The board found that in its opinion the sale of cosmetic preparations and wearing apparel under the marks here involved is not reasonably likely to cause confusion in trade as to the origin of the goods. The board found that while opposer’s name and mark DAVID CRYSTAL and the CRYSTAL marks derived therefrom have become distinctive in the apparel field, it does not follow therefrom that the distinctiveness of the CRYSTAL marks extends into the cosmetic and toiletries field. We agree. Having considered the decision of the board, all of the arguments presented by the parties, and the record before us, we affirm. Affirmed. . Application No. 292,722 filed March 7, 1968. . Application No. 292,724 filed March 7, 1968. . Application No. 292,725 filed March 7, 1968. . Reg. No. 404,730 Dec. 21, 1943 Reg. No. 535,038 Dec. 19, 1950 Reg. No. 556,557 Mar. 25, 1952 Reg. No. 645,442 May 14, 1957 Reg. No. 649,785 Aug. 6, 1957 Reg. No. 650,556 Aug. 20, 1957 Reg. No. 658,088 Feb. 4, 1958 Reg. No. 706,704 Nov. 1, 1960 Reg. No. 726,035 Jan. 2, 1962 Reg. No. 756,133 Sept. 3, 1963 Reg. No. 760,386 Nov. 19, 1963 Reg. No. 764,347 Feb. 4, 1964 Reg. No. 841,287 Dec. 26, 1967

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DAVID CRYSTAL, INC., Appellant, v. ESTEE LAUDER, INC., Appellee. Patent Appeal No. 8924. United States Court of Customs and Patent Appeals. April 19, 1973. Ronald L. Panitch, Edward C. Gonda, Seidel, Gonda & Goldhammer, Philadelphia, Pa., attorneys of record, for appellant. Alex Friedman, New York City, attorney of record, for appellee. Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges, and ALMOND, Senior Judge. PER CURIAM. This appeal is from the decision of the Trademark Trial and Appeal Board, reported at 167 USPQ 411 (1970), dismissing appellant’s opposition to appellee’s application to register CRYSTAL PAVILION for cosmetic skin lotion. Appellant relied on its prior registrations of marks including the word CRYSTAL for ladies’ and misses’ dresses, dress ensembles, coats, suits, blouses, skirts, men’s wear, fabrics, piece goods, and the like, and alleged likelihood of confusion. Having considered the decision of the board, all of the arguments presented by the parties, and the record before us, we affirm. We agree with the board that the marketing of a cosmetic skin cream under the mark CRYSTAL PAVILION would not suggest to purchasers that it originates from or is any way associated with the producer of DAVID CRYSTAL or CRYSTAL clothing. Affirmed. . Application No. 300,809 filed June 19, 1968. . Reg. No. 404,730 Dec. 21, 1943 Reg. No. 535,038 Dec. 19, 1950 Reg. No. 556,557 Mar. 25,1952 Reg. No. 645,442 May 14, 1957 Reg. No. 649,785 Aug. 6, 1957 Reg. No. 650,556 Aug. 20, 1957 Reg. No. 658,088 Feb. 4, 1958 Reg. No. 706,704 Nov. 1,1960 Reg, No. 726,035 Jan. 2, 1962 Reg. No. 756,133 Sept. 3,1963 Reg. No. 760,386 Nov. 19, 1963 Reg. No. 764,347 Feb. 4, 1964 Reg. No. 841,287 Dec. 26,1967

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DAVID CRYSTAL, INC., Appellant, v. HELENE CURTIS INDUSTRIES, INC., Appellee. Patent Appeal No. 8943. United States Court of Customs and Patent Appeals. April 19, 1973. Ronald L. Panitch, Edward C. Gonda, Seidel, Gonda & Goldhammer, Philadelphia, Pa., attorneys of record, for appellant. Lewis D. Konigsford, Chicago, Ill., attorney of record, for appellee. Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges, and ALMOND, Senior Judge. PER CURIAM. This appeal is from the decision of the Trademark Trial and Appeal Board, reported at 168 USPQ 124 (1970), dismissing appellant’s opposition to appellee’s application to register ICE CRYSTALS for bath oil. Appellant relied on its prior registrations of trademarks including the word CRYSTAL for ladies’ and misses’ dresses, dress ensembles, coats, suits, blouses, skirts, men’s wear, fabrics, piece goods, and the like, and alleged likelihood of confusion. Having considered the decision of the board, all of the arguments presented by the parties, and the record before us, we affirm. We agree with the board that the respective marks neither look nor sound alike, and we agree that there is no reasonable likelihood of confusion or mistake. Affirmed. . Application No. 292,271 filed March 1, 1968. . Reg. No. 404,730 Dec. 21, 1943 Reg. No. 535,038 Dec. 19, 1950 Reg. No. 556,557 Mar. 25, 1952 Reg. No. 645,442 May 14, 1957 Reg. No. 649,785 Aug. 6, 1957 Reg. No. 650,556 Aug. 20, 1957 Reg. No. 658,088 Feb. 4, 1958 Reg. No. 706,704 Nov. 1, 1960 Reg. No. 726,035 Jan. 2, 1962 Reg. No. 756,133 Sept. 3, 1963 Reg. No. 760,386 Nov. 19, 1963 Reg. No. 764,347 Feb. 4, 1964 Reg. No. 841,287 Dec. 26, 1967

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Stanford I. FEIGELMAN and Eugene Aristoff, Appellants, v. John W. MYERS and William C. Lanning, Appellees. Patent Appeal No. 9203. United States Court of Customs and Patent Appeals. April 26, 1973. Jacques M. Dulin, Molinare, Allegretti, Newitt & Witcoff, Chicago, Ill., for appellants. L. Malcolm Oberlin and Louis N. French, Young & Quigg, Washington, D. C., for appellees. PER CURIAM: Appellees have filed a motion to dismiss this appeal on the ground that it is interlocutory in nature and therefore not within the jurisdiction of the court. The motion is opposed by appellants. We grant the motion to dismiss. In Myers v. Feigelman, 455 F.2d 596, 59 CCPA 834 (1972), this court reversed the decision of the Board of Patent Interferences and remanded the case to the board for consideration of the suppression and concealment issue which had been properly before the board, but had not been resolved. Remand was “to allow the board to make a fully focused inquiry into this difficult question.” Appellants filed a motion with the board asking for a reopening of the testimony period. This appeal is on the denial of that motion by the board. Appellants urge that the board’s refusal to reopen the testimony period constitutes a failure to comply with the court’s mandate. That position is devoid of merit. The court only required the board to resolve the issue it had not ruled on previously. The court’s opinion does not suggest that appellants were entitled to introduce additional evidence into the record. There is no indication that appellants were to be placed in a better position than they would have been in had the board resolved the issue earlier, as it could have, on the record before it. We agree with appellees that this appeal does not arise out of a final decision of the board. See Knickerbocker Toy Co. v. Faultless Starch Co., 467 F.2d 501, 59 CCPA _ (1972). The appeal is accordingly dismissed. It is so ordered.

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HOLIDAY MAGIC, INC., Appellant, v. HOLIDAY, INC., Appellee. Patent Appeal No. 8907. United States Court of Customs and Patent Appeals. May 3, 1973. John P. Sutton, Limbach, Limbach & Sutton, San Francisco, Cal., attorneys of record, for appellant. Thomas B. Graham, New York City, attorney of record, for appellee. Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges, and ALMOND, Senior Judge. LANE, Judge. This appeal is from the decision of the Trademark Trial and Appeal Board, reported at 167 USPQ 118 (1970), sustaining appellee’s opposition to appellant’s application to register HOLIDAY TAN with a background design for suntan cream. In its application, appellant disclaimed the word TAN apart from the entire mark. The opposer relied on its prior trademark use of the word HOLIDAY on its lines of cosmetics, toilet preparations, and skin creams. Both sides took testimony. The board concluded that there was no real distinction between the trade channels for the respective goods. The board found that when considered in their entireties, applicant’s mark so resembles opposer’s HOLIDAY that there would be a likelihood of confusion or mistake. The board adhered to its decision on reconsideration. We affirm. Appellant contends that the board refused to consider the HOLIDAY TAN mark in its entirety and chose to ignore the fact that appellant has registered the sunburst and snowflake design which forms the background design for its HOLIDAY TAN mark. The board did consider the appellant’s mark in its entirety and in its decision stated: [T]he background design of applicant’s mark would have little or no impact on purchasers of its product, who ask for goods by word mark rather than by background design. Since the word “TAN” is obviously descriptive of a tanning lotion and has therefore been disclaimed, its incorporation in applicant’s mark is insufficient to distinguish it from opposer’s “HOLIDAY” despite the existence of various third-party registrations of or including “HOLIDAY.” Appellant has argued before us that its mark is more than mere words and that cosmetics are selected visually as much as being asked for by words. We agree. Both designs and words produce visual impressions when goods are being selected. However, we conclude that appellant’s mark for suntan cream, considered in its entirety, when compared with appellee’s prior use of the term “HOLIDAY” in connection with its sales of skin creams, would be likely to cause confusion, or to cause mistake, or to deceive. Appellant already has prima facie rights in its sunburst and snowflake design, by its registration No. 896,125, August 4, 1970, for suntan cream. The “DAIRY CHARM” ease, cited by appellant, Cooperative Quality Marketing, Inc. v. Dean Milk Company, 314 F.2d 552, 50 CCPA 1138 (1963), is clearly distinguishable in that the word portions of the respective marks in that case were quite different, “DAIRY CHARM FROM FARMER TO CONSUMER” for butter, opposed by “COUNTRY CHARM” for dairy products. We agree with the board’s affirmance sustaining the opposition and therefore affirm. Affirmed.

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60 CCPA The UNITED STATES, Appellant, v. F. W. MYERS & CO., INC., Appellee. Customs Appeal No. 5481. United States Court of Customs and Patent Appeals. May 3, 1973. Harlington Wood, Jr., Asst. Atty. Gen., Andrew P. Vance, Chief, Customs Section, Patrick D. Gill, New York City, for the U. S. Barnes, Richardson & Colburn, New York City, attorneys of record, for appellee; James S. O’Kelly, New York City, of counsel. Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges, and ALMOND, Senior Judge. RICH, Judge. This appeal is from the decision of the United States Customs Court, Third Division, in F. W. Myers & Co. v. United States, 67 Cust.Ct. 75, C.D. 4256 (1971), sustaining appellee’s protests against the classification of certain crawler tractors imported from Canada under TSUS 692.-35 as “Tractors * * * Other,” and holding the imported tractors classifiable free of duty under item 692.30 TSUS as “Tractors suitable for agricultural use * * We affirm. The imported crawler tractors were of two types, the J-5 and the Muskeg M (the latter hereinafter referred to simply as the “Muskeg” tractors). The parties stipulated that the J-5 tractors are in fact “suitable for agricultural use” thus narrowing the issue to whether the Muskeg tractors are “suitable for agricultural use.” The J-5 tractors are similar to the Muskeg tractors and are important here, however, because the parties have, by stipulation, incorporated an earlier case, F. W. Myers & Co. v. United States, 59 Cust.Ct. 445, C.D. 3182 (1967), in which it was held that both the J-5 and Muskeg tractors were “suitable for agricultural use” and thus free of duty within item 692.30. The Customs Bureau has thus acepted the decision in the prior case with respect to the J-5’s, but now disagrees with respect to the Muskegs. The lower court here found the incorporated case to have established that the basic construction of the J-5 and Muskeg tractors was the same, reviewed the record and decision in that case and the testimony of the witnesses presented by appellant in this case, and concluded that: The difference between the J-5 and Muskeg tractor is in degree and not in kind. Plaintiff has met the suitability for agricultural usage test. It, therefore, follows that the protests must be sustained. The Customs Court noted that the “Explanatory Notes” to the Tariff Classification Study dated November 15, 1960, at pp. 325-26 show that item 692.30 changed the prior treatment of tractors chiefly used for agricultural purposes by providing for tractors “suitable for agricultural use.” The parties agree with the Customs Court’s analysis of the history of item 692.30 as indicating that the item changed the prior concept of “chief use” to one of “suitability for use,” and both admit that “suitable for use” means “actually, practically, and commercially fit.” Keer, Maurer Co. v. United States, 46 CCPA 110, C.A.D. 710 (1959). In Keer, Maurer, this court said (p. 114): The words “suitable for use,” as applied in the Customs law means “actually, practically, and commercially fit” for such use. Kahlen v. United States, 2 Ct.Cust.Appls. 206, T.D. 31947; United States v. Lorsch & Co., 8 Ct. Cust.Appls. 109, T.D. 37222; United States v. Amerman & Patterson, et al., 9 Ct.Cust.Appls. 244, T.D. 38205; United States v. Geo. S. Bush & Co., Inc., et al., 26 CCPA 145, C.A.D. 8; Coro, Inc. v. United States, 41 CCPA 215, C.A.D. 554. Such suitability does not require that the merchandise be chiefly used for the stated purpose, United States v. Lorsch & Co., supra, but it does require more than “ * * evidence of a casual, incidental, exceptional, or possible use. * * * ” Kahlen v. United States, supra. We have reviewed the evidence of record including the testimony in the incorporated case and by the appellant’s witnesses in this case and have concluded that the evidence fully supports the findings by the Customs Court below that the basic construction of the Muskeg and J-5 tractors is the same and the Muskeg tractors are actually, practically, and commercially fit for agricultural purposes, and such findings are not clearly contrary to the weight of the evidence. United States v. F. W. Myers & Co., 45 CCPA 48, C.A.D. 617 (1958). The Customs Court quoted the following statement from its opinion in the incorporated case: The unrefuted evidence that the involved tractors are used on farms for spreading manure and lime and other fertilizer, used in sugar bushes for gathering maple sap, used for plowing, used to pull hay balers, used for seeding, used to pull harvesters in harvesting corn, and used in disk harrowing is sufficient to show that said tractors are actually, practically, and commercially fit for agricultural purposes. Appellant, in contending that the records failed to establish a substantial use of the Muskeg tractors in agriculture, asserts that the statement in the incorporated case relied upon by the Customs Court does not represent findings of the court in the incorporated case with respect to the Muskeg, tractors, but represents that court’s findings with respect to the J-5 tractors, which appellant maintains are substantially different from the Muskegs. With respect to this question, whether the record in the incorporated case supports the findings of the Customs Court here that the Muskeg tractors, as opposed to the J-5’s, are suitable for use on farms we have reviewed the record and are satisfied that the evidence supports appellee’s view that at least some of the witnesses in the incorporated ease were testifying to the use of both types of tractors or the Muskegs alone in agricultural pursuits, and that there is ample support in the record for the finding of the court below that the Muskegs are actually, practically, and commercially fit for agricultural purposes. The judgment of the Customs Court is affirmed. Affirmed. . As appellant states it, “the additional power, tractive capability and flotation of the Muskeg, causing it to be a far more expensive vehicle, is what dedicates the Muskeg to the more rigorous non-agricultural use to which the records establish it is overwhelmingly put.” . Appellant has noted that there are involved in the present case “differing models of the Muskeg tractor itself,” some of which models may not have been involved in the prior case, but it lias not argued tliat any such model differences represent differences in the suitability of tiie Muskegs for agricultural pursuits. The importations here involve some “Carrier” models of the Muskegs which are basically the same as the regular Muskeg tractors except that the engine is located closer to the front of the frame. The incorporated case may have involved only the regular Muskeg tractors.

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Application of Michel JUILLARD and Jean Legros. Patent Appeal No. 8881. United States Court of Customs and Patent Appeals. May 3, 1973. Herman Hersh, McDougall, Hersh & Scott, Chicago, Ill., attorneys of record, for appellants; Keith V. Rockey, Chicago, Ill., George A. Degnan, Arlington, Va., of counsel. S. Wm. Cochran, Washington, D. C., for the Commissioner of Patents; Jack E. Armore, Washington, D. C., of counsel. Before MARKEY, Chief Judge, and RICH, ALMOND, BALDWIN and LANE, Judges. BALDWIN, Judge. This appeal is from the decision of the Patent Office Board of Appeals, affirming the examiner’s rejection under 35 U.S.C. § 103 of claims 1, 3-7 and 9-12, all of the claims in appellants’ application. We affirm. The Invention Appellants’ invention concerns the addition of a particular type of alumina to polymers and copolymers of polyvinyl chloride. Product claim 7 is sufficiently representative: 7. A polymeric plastic material formed of a polymer or copolymer of polyvinyl chloride and an alumina in the form of a hydrargillite uniformly distributed throughout the plastic material in an amount within the range of 0.05 to 10 per cent by weight of the plastic material and in which the alumina has a pseudo-hexagonal lamella and a BET specific area within the range of 30 to 50 m2/g, a diameter within the range of 500 to 2000 A and a thickness within the range of 100 to 300 A. It is contended that the addition of that particular type of alumina to the polymers has at least two beneficial effects: increase in impact strength and decrease of the “gellification” time. Claim 1 states “In the method of increasing the rate of gellification of polyvinyl chloride comprising working the polyvinyl chloride * * * ” having 0.5 to 10 weight percent of the form of alumina specified in claim 7 uniformly distributed throughout the polymer. It is unnecessary to detail here the additional recitations found in claims 3-6 and 9-12. The Prior Art Yngve relates to fillers for use in certain vinyl resins, particularly “conjoint” polymers of vinyl chloride with vinyl acetate. The patent states: According to this invention, it has been found that plastic compositions containing finely divided or colloidal aluminum hydrates intimately associated with the vinyl resins are characterized by the desired properties of increased impact strength and attractive surface luster. Data is presented showing that resin compositions containing alumina in various amounts from 5% to 20% had greater impact strength than the same resin composition without any alumina. Yngve states that the alumina used “may be selected from any of the grades available * * No particular method of incorporating the alumina into the resin is mentioned. Michel et al. (Michel) relates to a method of producing the alumina hydrargillite in the form of crystals of high chemical purity. Concerning the crystals obtained, which are referred to as “lamellar bod[ies] of regular structure,” Michel states: Their maximum dimensions in the plane, directly measured according to photographs on the electronic microscope actually range from 200 to 1000 A. and, from measurements of their specific surfaces, their thickness can be deduced and has been found to vary form [sic] 100 to 200 A. The patent also states that “this alumina variety is used as a filming agent and as a charge and pigment.” Schildknecht describes the use of two-roll mills in high polymer processing. The reference states that thermoplastic resins, including vinyl chloride resins, are often compounded on mills. The Rejection Claims 1 and 3-6 were rejected as unpatentable, under section 103 of the statute, over Yngve in view of Schildknecht. Claims 7 and 9-12 were rejected under that section as unpatentable over Yngve, alone or in view of Michel. The examiner was of the view that it would have been obvious to use the Michel alumina as the alumina in Yngve. The examiner stated that appellants had failed to show that the combination of the hydrargillite claimed with polyvinyl chloride resins gives unexpected results as compared with the combination of other aluminas with polyvinyl chloride resins. The board agreed with and amplified the examiner’s position. With regard to the rejection of process claims 1 and 3-6, the board said: By combining Yngve with Schildknecht, the Examiner’s position appears to be that, although Yngve does not say how he incorporates the hydrated alumina in the resin, one having ordinary skill would normally do so by the most widely used ways of blending or compounding such materials and that these ways involve working, as shown by Schildknecht. His conclusion is that the invention as a whole would have been obvious to a person having only ordinary skill in the art. Absent some evidence that the contendedly unobvious results are unique to the particular alumina hydrate employed, or at least that they are not shared by the alumina hydrates available prior to Michel et al., we agree with this conclusion, and will sustain the rejection. Opinion The evidence in this record that the claimed invention would have been obvious is clearly sufficient to establish a prima facie case. Yngve calls for the combination of any available grade of alumina with his polyvinyl chloride film, and the high grade hydrargillite described in Michel would seem eminently-suited for such use. We must also conclude that the case for obviousness has not been rebutted by appellants. In In re Freeman, 474 F.2d 1318 (C.C.P.A.1973), we said: In order for a showing of “unexpected results” to be probative evidence of non-obviousness, it falls upon the applicant to at least establish: (1) that there actually is a difference between the results obtained through the claimed invention and those of the prior art, In re Klosak, 455 F.2d 1077, 59 CCPA 862 (1972); and (2) that the difference actually obtained would not have been expected by one skilled in the art at the time of invention, Id.; In re D’Ancicco, 439 F.2d 1244, 58 CCPA 1057 (1971). In that case we found that the evidence presented met the above conditions and was thus probative on the question, but was insufficient to rebut a strong evidentiary case for obviousness. Here we find that appellants have failed to establish that the evidence they present is probative on the question of obviousness. Appellants contend that their evidence demonstrates unexpected results both with regard to impact strength and to a reduction in gellification time. Appellants’ main case concerning impact strength deals with a comparison of certain test results reported in their specification with test results reported in the Yngve patent. As the board stated: [T]he data in the specification herein is not directly comparable to that in the patent since it would be reasonable to expect differences in physical properties explainable on the basis of differences in composition or molecular weight of resin, presence or absence of plasticizers or amounts of the latter, etc., all of which are uncontrolled when trying to compare what appellants have done with what the reference reports. While appellants ostensibly agree that no direct comparison can be made, at one point in their brief they attempt to give the impression that the only reason the tests are not directly comparable is that the test results are reported in different units. We have examined the description of the tests presented in the record. We agree with the differences in conditions noted by the board and further note that there are significant differences in the testing methods themselves, such as the way in which the samples are prepared. The record is devoid of affidavits of experts or other competent evidence as to why the results of the tests might be comparable at all under these circumstances. Thus, so far as the record shows, the alumina used in Yngve might even be unexpectedly superior to appellants’ alumina. Moreover, even were we to accept appellants’ contention that “a comparison can be made as to the trends caused by variations in the amounts of alumina of Yngve and appellants,” the most that could be said is that appellants have established a difference between the effect of their alumina and the effect of Yngve’s alumina. The record contains nothing, other than attorney’s arguments, which would indicate that the difference would not have been expected by the skilled in the art. Appellants’ specification does show that a particular resin composition having 10% of their alumina had substantially higher impact strength than the same composition containing 10% of an alumina known as “Boehmite.” However, again the record is lacking in competent evidence — concerning the nature of Boehmite, and that the difference found would have been unexpected — and attorney’s arguments cannot take the place of evidence. As to “gellification” times, nothing is presented showing the effect of appellants’ alumina as compared with any prior art alumina. Thus appellants have failed to establish any difference over the prior art, much less any unexpected difference. Cf. In re Klosak, supra, 455 F.2d at 1080, 59 CCPA at _. The decision of the board is affirmed. Affirmed. . Serial No. 588,666, filed September 30, 1966. . The board stated that this recited lower limit was an “obvious error” and presumed for purposes of the appeal that the correct range is 0.5-10 percent. We have also so assumed. . U.S. Patent No. 2,370,280, issued February 27, 1945. . U.S. Patent No. 3,411,876, issued November 19, 1968, on an application filed May 25, 1964. . Schildknecht, Polymer Processes, pp. 700-01 (1956). . Certain alleged admissions in appellants’ specification were relied on as an alternative to reliance on the Michel patent. The view we take of the case renders it unnecessary to consider this alternate ground of rejection.

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Application of Irby Cullen JONES, Jr., et al. Patent Appeal No. 8864. United States Court of Customs and Patent Appeals. May 3, 1973. Glwynn R. Baker, Midland, Mich., Atty., of record, for appellants. Stephen Hoynak, Midland, Mich., of counsel. S. Wm. Cochran, Washington, D. C., for the Commissioner of Patents. Fred E. McKelvey, Washington, D. C., of counsel. Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges, and WATSON, Judge, United States Customs Court, sitting by designation. LANE, Judge. This appeal is from the decision of the Patent Office Board of Appeals, adhered to on reconsideration, affirming the rejection of claims 1, 2, 3 and 5 of appellants’ application serial No. 562,476, filed July 5, 1966, entitled “Method of Extracting Dissolved Ingredients from a Slurry,” for obviousness under 35 U.S.C. § 103. We affirm. The method of extracting dissolved ingredients from a slurry claimed by appellants comprises in general the following steps: continuously passing the slurry into the upper portion of an open column, effecting a countercurrent flow of an extraction liquid, removing from the lower portion a slurry free of one solute, and removing from the upper portion a liquid containing the solute. Claim 1 reads (paragraphing ours): 1. A method of extracting dissolved ingredients from a slurry of a solid and a fluid containing solute dissolved therein comprising continuously passing said slurry into the upper portion of an open column having no structural elements to obstruct the free fall of slurry, effecting continuous, counter-current, non-turbulent flow in said column of an extraction liquid which is miscible with, and a solvent for at least one solute contained in, the fluid of said slurry, removing from a lower portion of said column a slurry substantially free of at least one solute contained in the slurry entering the said column and, removing liquid containing the extracted solute from said column at a point above the entry point of said slurry and at a rate greater than the feed rate of said extraction liquid into the column. The other appealed claims depend from claim 1 and add that the slurry is aqueous and the extracting liquid is water, or that the slurry contains NaOH and NaCl, or that the method is carried out at ambient temperature and pressure. Appellants’ application does not illustrate any extraction apparatus but in example it describes an open column 24 feet, 3% inches long and 1.99 feet in diameter with a drain to remove extracting fluid as it overflows from the column, with a slurry feed line extending downward 2 feet, 9 inches into the top of the column, and with an extraction liquid feed line extending to a sparger about 15 inches from the bottom of the column. The column bottom is described as conical in shape and connected to a valved line used to control the flow rate of slurry therethrough. In other examples, the specification describes the use of a glass column 4 inches inside diameter and 10 feet high with feed lines and valves, and the use of a column having an inside diameter of about 6 inches and 23 feet high. The appealed claims do not recite these specific structural details. The references relied on by the board and the only ones we need consider are: Barnard et al. (Barnard) 3,278,275 Oct. 11, 1966 (on an application filed Feb. 14,1963) Goerg 3,309,177 Mar. 14, 1967 (on an application filed Aug. 5, 1963) Barnard discloses a process for removing sodium hydroxide from a sodium hydroxide slurry. The specification states that an aqueous slurry of salt and caustic is fed into the top of a column, that water is supplied to the bottom of the column, and that an aqueous salt solution containing substantially all of the caustic of the original slurry feed mixture is removed from the top of the column. The column illustrated in Barnard includes a plurality of transverse trays each of which supports a number of vertical riser tubes and has a number of downcomer holes therein. Goerg discloses apparatus for counter-current washing of solids with liquids. The apparatus includes a vertically mounted column into which the mother liquor is introduced at the top. The column is provided in its lower portion with an inlet for the washing liquid. There is a discharge conduit near the top for removing solid-free mother liquor and washing liquid. There is a discharge conduit at the bottom for the removal of solid materials and washing liquid. The Goerg apparatus includes a perforated transverse plate called a settling bottom. Goerg contemplates using the apparatus to remove impurities from sodium chloride slurries. The board found that Goerg uses an essentially unobstructed tower and that the rising aqueous wash liquid displaces the mother liquor via an upper discharge conduit. The board held that since the Goerg process accomplishes the same result as appellants’ method, any agitation is immaterial and found that appellants’ method provides at least some degree of agitation at the point of entry of the wash water. The board found that appellants had merely omitted the Goerg transverse plate and its function and concluded that Goerg and appellants both displace the mother liquor by a rising flow of aqueous wash liquid. Appellants contend that their method requires the use of an open column which is free of obstructions such as plates or baffles and requires nonturbulent flow. The Goerg apparatus provides a vertical wash vessel in which there are no baffles, plates or other structural elements projecting inwardly from the inner surface of the column wall in that portion of the vessel between the upper inlet opening and the “sprinkler-like distributor” through which the washing liquid is introduced. We do not find the presence of the settling bottom in the Goerg apparatus to render appellants’ claimed subject matter nonobvious, assuming that such a structure is precluded from appellants’ claims. It appears that Goerg intended nonturbulent flow, and although appellants allege that the Goerg process would have turbulent flow, they have provided neither explanation nor evidence tending to support such a contention. We agree that it would have been obvious to omit the settling bottom and lose whatever advantages might flow from its use. The distributor in Goerg corresponds to the “sparger” described by appellants, and it is concluded that there is no difference in agitation of the liquids in the absence of evidence to the contrary. Appellants’ contention that the art does not show removal of the liquid containing the extracted solute from the column at a point above the entry point of the slurry is not sound. Goerg teaches provision of an upper inlet opening which extends below the upper discharge conduit so that slurry enters the vessel below the conduit through which extracted solute is discharged. Appellants also contend that Barnard does not teach removal of the liquid containing the extracted solute at a rate in excess of the rate at which water is introduced into the open column. The Barnard drawing discloses the introduction of water at the top of his column at the rate of 182.7 pounds per minute, the removal of water at the bottom of the column at the rate of 75.8 pounds per minute, and the introduction of the wash water at the bottom of the column. The aqueous salt solutions removed from the top of the column include the difference between 182.7 and 75.8, or 106.9 pounds of water per minute in excess of the flow of wash water into thé bottom of the column. It is concluded that the disclosures of Goerg and Barnard make out a persuasive case of obviousness. While the board decisions do not specifically mention the affidavit of record asserting commercial success and fulfillment of long-standing needs, we think it apparent that the bare allegations of the affidavit provide no evidentiary support for suh contentions. The decision of the board is affirmed. Affirmed.

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60 CCPA The UNITED STATES, Appellant, v. NOVELTY IMPORTS, INC., Appellee. Customs Appeal No. 5505. United States Court of Customs and Patent Appeals. May 3, 1973. Harlington Wood, Jr., Asst. Atty. Gen., Andrew P. Vance, Chief, Customs Section, John A. Gussow, New York City, for the United States. Serko & Sklaroff, New York City, attorneys of record, for appellee; Murray Sklaroff, New York City, of counsel. John S. Rode, New York City, of counsel, amicus curiae. Before MARKEY, Chief Judge, RICH, BALDWIN, and LANE, Judges, and ALMOND, Senior Judge. RICH, Judge. This is an interlocutory appeal under 28 U.S.C. § 1541(b), as amended, and Rule 13.2 of the Customs Court, from an order of the United States Customs Court in Novelty Imports, Inc. v. United States, 68 Cust.Ct. 362, C.R.D. 72-7, 341 F.Supp. 1228 (1972), denying appellant’s motion to vacate a decree nisi and an order which had dismissed the civil action with respect to only two of the several entries contained therein upon a motion of appellant to dismiss the entire civil action. We affirm. The Facts The facts pertinent to this appeal are not in dispute. Several denied protests of appellee were included in a consolidated “single civil action” pursuant to 28 U.S.C. § 1582(d). With respect to two of the entries, No. 1110266 and 751722, liquidated duties had not been paid at the time of filing the summons, as required by 28 U.S.C. § 1582(c). Appellant moved to dismiss the action pursuant to this provision. In an order dated October 22, 1971, Judge Rao, characterizing appellant’s motion as a “motion to dismiss the civil action as to entries 1110266 and 751722,” dismissed it only with respect to the two entries as to which liquidated duties had not been paid. Appellant sought rehearing of this order requesting, inter alia, an interlocutory order permitting application to this court for review of the denial of appellant’s motion to dismiss the entire civil action. The Customs Court, per Judge Rao, denied appellant’s motion to dismiss the entire civil action, but granted appellant’s request and included a statement in the order permitting this interlocutory appeal. OPINION Judge Rao, in the memorandum accompanying the order of the Customs Court, correctly framed and decided the issue as being, “whether under 28 U.S.C. § 1582, as amended by the Customs Courts Act of 1970, this court may entertain jurisdiction of a civil action combining a number of denied protests covering several entries when liquidated duties have not been paid as to some of the entries.” The memorandum reproduces and reviews in detail the language of the statute and its legislative history and reaches the conclusion that neither the language of the statute nor the legislative history indicates that Congress intended to change the prior law such that “a joinder of a number of denied protests in a single summons would imperil the entire action if liquidated duties had not been paid as to any one entry.” The Customs Court thus held that “joinder under section 1582(d) does not merge the causes of action so that all duties as to all entries must be paid as a condition precedent to the court’s jurisdiction over the entire civil action.” We fully agree with the reasoning and conclusion of Judge Rao’s well reasoned memorandum, and adopt them as our own. The appellant’s argument here is essentially the same made before the Customs Court, and we find it to be fully answered. Apropos also, we think, is the reasoning of Judge Watson in denying a motion to dismiss a consolidated action under the same set of facts in E. S. Novelty Co. v. United States, 68 Cust.Ct. 374, C.R.D. 72-10 (1972), as well as the following observations which he made: This problem has been more troublesome than the length of this memorandum may indicate. After considerable reflection, I have decided that it is proper to dismiss only the portion of the civil action constituting the claim which contains the jurisdictional defect. I reach this conclusion primarily because I detect in this statute behind all procedures and forms, an underlying intent to allow the tariff treatment of each entry of merchandise or even each category of merchandise to give rise to a distinct legal claim. It happens that considerations of convenience and economy permit the combination of legal claims at various levels, such as the existence of numerous categories of merchandise (found in one entry) in one protest or the joining of numerous entries in one protest or the joining of numerous protests in one civil action. Nevertheless, the tariff treatment of the single entry or the single category of merchandise remains for me the most fundamental and indivisible circumstances which can give rise to legal claims. It is inconceivable that a separate and genuine legal claim can be destroyed by deficiencies in other claims with which it has become associated. It would be unjust if the mode in which an otherwise unimpaired claim reaches the court becomes a determinative factor. It would be intolerable if a statute whose fundamental purpose is to provide for administrative and judicial review was interpreted in a way which limited such review on artificial and technical grounds. So long as a valid protest has been filed and the duties paid on a given entry or category of merchandise, the plaintiff is entitled to judicial review of the tariff treatment of that entry or category. [Footnotes omitted.] All we would add is the observation that — to borrow a phrase from Solicitor General Griswold — statutes should not be given a “wooden and even perverse construction.” The order of the Customs Court is affirmed. Affirmed. . The Customs Court’s denial, in the same order, of an alternative motion to quash the summons and dismiss the civil action pursuant to the decree nisi, is, according to appellant, not the subject of this appeal. . § 1582. Jurisdiction of the Customs Court * * * * * (d) Only one civil action may be brought in the Customs Court to contest the denial of a single protest. However, any number of entries of merchandise involving common issues may be included in a single civil action. Actions may be consolidated by order of the court or by request of the parties, with approval of the court, if there are common issues. . § 1582. Jurisdiction of the Customs Court (c) The Customs Court shall not have jurisdiction of an action unless (1) either a protest has been filed, as prescribed by section 514 of the Tariff Act of 1930, as amended, and denied in accordance with the provisions of section 515 of the Tariff Act of 1930, as amended, or if the action relates to a decision under section 516 of the Tariff Act of 1930, as amended, all remedies prescribed therein have been exhausted, and (2) except in the case of an action relating to a decision under section 516 of the Tariff Act of 1930, as amended, all liquidated duties, charges or exactions have teen, paid at the time the action is filed. [Emphasis added.] . The Customs Court noted : Under prior statutes it has been held that each invoice and entry is to be deemed and treated as a separate transaction for the appraisement of merchandise and the assessment of duties. Sampson v. Peaslee, 61 U.S. 571, 20 How. 571, 15 L.Ed. 1022 (1858); Omega Import Co. v. United States, 52 Cust.Ct. 425, Reap.Dec. 10671 (1964), rehearing den. 52 Cust.Ct. 472, Reap. Dec. 10695 (1964). It has been the practice of this court, under former section 515 of the Tariff Act of 1930, to dismiss protests only with respect to those entries as to which duties had not been paid, . “ * * * that section 1582(c) is an explicit limitation of the jurisdiction of the court; that it created an absolute ground for dismissal of an action when all duties have not been paid at the time of filing the action, and that to allow severance of entries wherein duties had not been paid, while proceeding on the balance, would be a substantial departure from the explicit meaning of the statute.

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The ASSOCIATED GENERAL CONTRACTORS OF AMERICA, INC., OKLAHOMA CHAPTER-BUILDER’S DIVISION, Plaintiff-Appellant, v. LABORERS INTERNATIONAL UNION OF NORTH AMERICA, Local 612, Defendant-Appellee, and Laborers International Union of North America, Intervenor-Appellee. No. 10-2. Temporary Emergency Court of Appeals. April 12, 1973. Edward E. Soule, Oklahoma City, Okl. (Lytle, Soule & Emery, Oklahoma City, OkL, with him on the brief), for appellant. Jules Bernstein, Washington, D. C. (Robert J. Connerton and Arthur M. Schiller, Washington, D. C., and Maynard Ungerman, Tulsa, Okl., with him on the brief), for appellees. Paul T. Michael, Atty., Civ. Div., Dept. of Justice, Washington, D. C. (Harlington Wood, Jr., Asst. Atty. Gen., and William E. Nelson and William C. White, Attys., Dept, of Justice, Washington, D. C., with him on the brief), for the United States, amicus curiae. C. W. Schwoerke, Oklahoma City, Okl., atty. for individual members of Local 612, amicus curiae. Before CHRISTENSEN, VAN OOSTERHOUT, and ESTES, Judges. CHRISTENSEN, Judge. In connection with the Phase II program for stabilization of wages in the construction industry, there has been presented here the unique questions of whether agencies charged with responsibility for requiring conformance to established standards had authority to disapprove a collective bargaining agreement in its entirety, or at all, because the wage increase it would have provided was too small rather than too large, and whether the other reasons assigned to support the agency action were collateral or otherwise so insufficient as to cast this question in no different light. Unfortunately jurisdictional and procedural problems of first impression in the context of the Economic Stabilization Acts have complicated the case and in one respect have precluded its final disposition here. The latter problems can be properly understood only in light of the largely undisputed facts of the case and the controlling law and regulations. Indeed they become significant largely because the court below failed to recognize the limitations of agency authority under the peculiar legal and factual situation involved. We have elected, therefore, to reserve discussion of what ordinarily are regarded as threshold issues until later. FACTS The record indicates that for 25 years or more Local 612 of the Laborers International Union of North America has collectively bargained and concluded agreements with the Oklahoma Chapter —Builders’ Division of the Associated General Contractors of America, Inc. (AGC), all with little or no work stoppage. The Local’s parent International Union (International) has in recent years established a District Council having jurisdiction over the entire State of Oklahoma in an attempt to unify the bargaining efforts of its locals in the state. Apparently Local 612 has resisted affiliation with the District Council of the International Union, at least insofar as preserving its practice of directly bargaining with AGC. This is a problem not before us. The Local and AGC formally signed a collective bargaining agreement on March 13, 1972. International claimed before the trial court that this collective bargaining agreement was invalid because the Local was not represented by a proper bargaining agent. The trial court did not resolve this issue and we do not reach it here. The parties to the collective bargaining agreement forwarded the agreement the day of its execution to the Laborers National Craft Board (Craft Board) to obtain its approval of the wage increase of 5.5% therein provided. Upon receipt of the agreement the Craft Board’s research director sent a copy of the proposed agreement to the International’s general counsel along with a memorandum dated March 20, 1972, suggesting that the International take the agreement out of the hands of the Craft Board because, among other reasons, of Local’s failure to negotiate through the District Council, and that certain other provisions be included in conformity with District Council policies. The Craft Board then received a letter dated March 22, 1972, from the President of the Union’s District Council for Oklahoma which asserted that it, the Council, was the sole bargaining agent for all of its affiliated unions, that the agreement submitted by the AGC and the Local was invalid and that no action could be taken on it by the Craft Board. In a letter dated April 7, 1972, from the Board’s management co-chairman to AGC’s business manager, it was stated that the “ ‘results of recent negotiations’ between the Building Division and Local 612 ... do not square with the current recommendations of the Craft Board insofar as the restructuring of bargaining in the State of Oklahoma is concerned.” The statement continued: “Since we are seeking the special consideration which the CISC [Construction Industry Stabilization Committee] may give to agreements which provide for significant changes in the geographical structure of bargaining, including the development of wage zones under one agreement in the firm belief such changes would promote stabilization of collective bargaining and the effective utilization of manpower and management resources, the management’s side of the Laborers’ Craft Board finds the joint petition from the Oklahoma Chapter and Laborers’ Local 612, Oklahoma City, not in conformance with these objectives and will not look favorably on your petition.” The Craft Board, over the signatures of both co-chairmen by letter dated June 29, 1972, notified AGC’s business manager that it rejected the proposed agreement for the following specific reasons: “The proposed agreement failed to meet the Craft Board criteria for Oklahoma on the following counts. First, the agreement covers a three-year period and would stand as an absolute bar to necessary restructuring. Second, the agreement fails to narrow the economic gap between Tulsa and Oklahoma City and indeed, widens the margin. Third, we have reservations concerning the fact that no provisions have been made for welfare and pen- sion benefits. Even though the rest of Oklahoma is covered by agreements calling for these benefits negotiated by the Oklahoma Laborers’ District Council and the Oklahoma Chapter, AGC. “The Craft Board also raised a question concerning the representative status of the Committee purportedly representing the interests of Local Union 612.” The CISC then reviewed the Board’s action and communicated its agreement therewith in a letter to the Craft Board dated July 13, 1972. Rather than submit to the agency requests to renegotiate the contract with the District Council as Local 612's bargaining agent, AGC sought judicial relief by the filing of the action below. THE ACTION BELOW No. 72-544 Civil, the above-entitled case in which this appeal is being prosecuted, was commenced in the district court August 8, 1972. Without concerning itself with the trusteeship problem involved in a prior action, No. 70-520 mentioned hereafter, the complaint alleged the negotiation in good faith of “a valid collective bargaining agreement” between the AGC and the Local, the claims of others that it was “not valid and . . . binding on the defendant and its members” and prayed for a judgment declaring the contract to be valid, and for general relief. Plaintiff AGC took the position that it was not concerned with the intra-union squabble involved in the prior action and relied exclusively upon the asserted lack of authority of the Craft Board and the CISC to disapprove the collective bargaining agreement for the reasons stated. The prior action had been filed Oct. 20, 1970 by five Local members against the Local, and certain of its officers together with the Oklahoma Laborers District Council, and sought by an amended complaint termination of a trusteeship the International had imposed upon the Local. On the grounds that the cases involved common questions of fact and law, the district court ordered their consolidation for the purposes of trial. Following trial to the court of the consolidated actions, the judgment of the trial court segregated the relief granted as between the two cases, holding as to No. 70-520 Civil that the injunction it had theretofore granted against the operation of the trusteeship in question should be dissolved and that the parties were “restored to their respective positions as of the time the preliminary injunction was issued”; as to the issues in No. 72-544 Civil (involved in the present appeal) the trial court held “that the purported contract of March 13, 1972, between Local 612 of Laborers’ International Union of North America and the Associated General Contractors of America, Inc., Oklahoma Chapter— Builder’s Division is void and unenforceable.” In discussing the latter action the district court observed that “it was instituted pursuant to Section 301(a) of the Labor Management Relations Act of 1947, 29 U.S.C. § 185, which authorizes the federal district courts to entertain ‘[sjuits for violation of contracts between an employer and a labor organization . . . without respect to the amount in controversy or without regard to the citizenship of the parties’ ”, citing Black-Clawson Co., Inc. v. International Association of Machinists, 313 F.2d 179, 181-182 (2d Cir. 1962) as to declarations of rights. The trial court stated: “It is clear that in the instant case the task of fashioning the applicable ‘common law of labor contracts,’ see United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 579, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960), must be undertaken in contemplation of the imposition of comprehensive economic controls over the economy by the Federal government.” The court noted that “at the time the alleged contract was signed the parties were aware that the contract was subject to review by the Laborers National Craft Board. . . .” Holding, therefore, that the contract was entered into subject to “a condition subsequent” it said that the refusal of the agencies to approve the agreement rendered the agreement of “no force and effect.” Its reasoning in upholding the action of the Board and CISC was so broadly worded as to render these agencies virtual bargaining agents for the parties. ISSUES Aside from jurisdictional and procedural problems and the general question of the validity of the agreement to the extent this may have depended upon the identity of the union representatives negotiating it, significant issues before the trial court appear to have been: 1. Whether the Craft Board and CISC had authority to reject a negotiated agreement for a wage increase which did not exceed the “general wage and salary standard” established by the Pay Board, because in their judgment its terms would hinder “restructuring” of collective bargaining, provide an increase too low when wages of surrounding areas were considered, certain fringe benefits which the Board thought desirable had not been included in, or superimposed upon, the agreement of the parties, the agencies were “unsure” of the representative status of one of the bargaining parties, or for any other assigned reason. 2. Whether included in the authority of the agencies to pass upon wage increases in question was the power to reject, or to require renegotiation of, the terms of collective bargaining agreements in their entirety. 3. If the plaintiffs were found entitled to prevail on these issues and thus to be entitled to a declaratory judgment accordingly, how could a declaration of the invalidity of the agencies’ rejection of the contract be rendered efficacious in view of the Executive Order provision that unless and until an increase has been approved by the agencies involved it is illegal to put such an increase into effect, and other authorized consequences to follow the certification of the agencies’ disapproval by the Secretary of Labor. The foregoing issues were not insubstantial. They presented questions not resolved below nor to be avoided here in any view that denial of relief could be summarily sustained on general principles and with the idea that all procedural difficulties could thereby be avoided in the interest of expedition. They were not subject to being brushed aside by generalizations concerning declarations of rights under a collective bargaining agreement by virtue of the Labor Management Relations Act of 1947, the restructuring of labor-management negotiations through the fashioning of an applicable common law of labor contracts, or an application of other criteria designed expressly for increases beyond the 5.5% standard or not included at all in criteria for evaluating wage increases pursuant to then existing regulations issued under the Economic Stabilization Act. To render this plain, and in an attempt to avoid abortive proceedings on remand, it is necessary to review in some detail the not uncomplicated but in reality definitive rules and regulations which are controlling in this case. THE REGULATORY FRAMEWORK We must begin with a more detailed consideration of the governing statute, and the relevant orders, regulations, rulings and other administrative expressions. The Economic Stabilization Act of 1970 (P.L. 91-379, 84 Stat. 799, Aug. 15, 1970), as amended (P.L. 92-210, 85 Stat. 743, Dee. 22, 1971), authorized the President to issue such orders and regulations as he deemed appropriate to stabilize wages and salaries at levels not less than those prevailing on May 25, 1970. Section 1(a) of Executive Order 11640, issued January 27, 1972, provides that “. . .no person shall, directly or indirectly, pay or agree to pay, in any transaction, wages or salaries in any form, or to use any means to obtain payment of wages and salaries in any form, higher than those permitted hereunder, whether by retroactive increase or otherwise.” By § 203(b)(2) of the Economic Stabilization Act, as amended, the President was authorized to “provide for the making of such general exceptions and variations as are necessary to foster orderly economic growth and to prevent gross inequities, hardships, serious market disruptions, domestic shortages of raw materials, localized shortages of labor, and windfall profits. . . .” In his Executive Order 11588, providing for the Stabilization of Wages and Prices in the Construction Industry, April 3, 1971, the President ordered as follows: “Section 1(a). A Construction Industry Stabilization Committee . is hereby established to assure generally conformance of any increase in any wage or salary in the construction industry to the provisions of this order. “Section 2. Associations of contractors and national and international unions shall jointly establish craft dispute boards ... to determine whether wages and salaries are acceptable in accordance with the criteria established in section 6 “Section 3(a). It shall be the responsibility of each board, in relation to the craft or branch over which it has jurisdiction, to provide advice and assistance in an effort to resolve any unresolved collective bargaining disputes involving wages and salaries and to promptly examine every collective bargaining agreement negotiated on or after the date of this order to determine, in accordance with the criteria established in section 6, whether wage and salary increases in the agreement are acceptable and may thus be approved. The board shall make determinations within a reasonable time and shall notify the parties and the Committee of action taken. When it is determined by the board that a wage and salary increase is not acceptable, the board shall also notify the Secretary of Labor. “Section 6. [Revoked on- October 15, 1971, by Sec. 14(c) Executive Order 11627; revocation continued by Executive Order 11640; supplanted by “Substantive Policies” of Pay Board Amended Order No. 2 on April 24, 1972. ] “Section 11(b). The term ‘wage or salary’ shall mean, for the purpose of this order, all wage or salary rate schedules and economic benefits established pursuant to a collective bargaining agreement in the construction industry.” Pay Board Order 2, Amended, filed April 24, 1972, some six weeks after the collective bargaining agreement was signed and submitted to the Craft Board, authorized CISC to administer pay board regulations applicable to collective bargaining agreements in the construction industry, and to administer the CISC “Substantive Policies” which were submitted to replace the criteria in Section 6, Executive Order 11588. Those relevant to this case include the following: “(2) No agreement is automatically entitled to the ‘general wage and salary standard’ [5.5% annual increase] or the exceptions thereto of the Pay Board. Moreover, the application of equal percentage adjustments to all crafts in any locality is often not a practical basis for stabilization; on occasion cents-per-hour developments among some or all crafts may be more appropriate. “(3) Pending final resolution of treatment of fringe benefits exempt under section 203(g) of the Economic Stabilization Act Amendments of January 9, 1971, these benefits, together with all other benefits, will be considered in determining economic adjustments subject to the review of the CISC. “(4) In the application of exceptions in individual cases providing for adjustments in excess of the ‘general wage and salary standard,’ the following principles are to be applied: “(c) In general, any restoration appropriate historic relationships among crafts or localities should spread over a period of 2 or 3 years more. The CISC in reviewing historical relationships will also give attention to clear evidence of changing historical relationships over the past decade. “(e) The CISC may give special consideration to agreements which provide for significant changes in geographical structure of bargaining, including the development of wage zones under one agreement, where such changes would promote the stabilization of collective bargaining and the effective utilization of manpower and management resources. “(6) In the consideration of all applications in 1972, the CISC recognizes the necessity to show continued retardation in the rate of increases permitted for 1972 as measured by Pay Board standards. The CISC shall also apply this principle to agreements extending into 1973 and 1974. “(7) The CISC is to continue to apply its policy on economic adjustments which are broader than wages and fringe benefits, that is, which would include the money value of all economic adjustments including work rules. “(8) The CISC is to seek to improve the role of the craft boards and to enhance their contribution to the improvement of collective bargaining and procedures for dispute settlements in the industry.” Provisions contained in 29 C.F.R. Part 2001, in effect as of January 1, 1972, add little more light to the role of the craft boards, although the provisions of § 2001.30 appear to be based on Section 6 of the Executive Order 11588, which section was revoked on Oct. 15, 1971, by Executive Order 11627: “§ 2001.5 Jurisdiction. “Each such [craft] Board shall have jurisdiction, with respect to wage and salary increases negotiated or being negotiated in the appropriate craft or branch in any locality— “(a) To provide advice and assistance in an effort to resolve any unresolved collective bargaining disputes involving wages or salaries; and “(b) To consider and determine, subject to the provisions of the Executive order and this part, whether the wages and salaries provided in any labor contract negotiated for the craft or branch are acceptable in accordance with the criteria set forth in § 2001.-30. “§ 2001.30 Acceptability of wage or salary increases. “Determinations by a Board as to whether any wage or salary increases are acceptable shall be based on the following criteria and these criteria will be applied by the Committee in reviewing any matters before it: “(a) Acceptable economic adjustments in labor contracts negotiated on or after March 29, 1971, will be those normally considered supportable by productivity improvement and cost of living trends, but not in excess of the average of the annual median increases in wages and benefits over the life of the contract negotiated in major construction settlements in the period 1961 to 1968. . . . “(b) Equity adjustments in labor contracts negotiated on or after March 29, 1971 may, where carefully identified, be considered over the life of the contract to restore traditional relationships among crafts in a single locality and within the same craft in surrounding localities.” Thus, all wage and salary increases and related economic adjustments in the construction industry required the approval of CISC and the appropriate craft board. The validity of these regulations has not been questioned. Nor can it be gainsaid that no agreement had automatic entitlement to the 5.5% standard. Yet agreements within the 5.5% standard were not properly subject to all of the criteria applicable to higher increases, and CISC and the craft boards had general advisory and assistance functions which were not wage increase criteria at all except to the extent that they might lend dimension and symmetry to the criteria specified. The agency appears not only to have applied unauthorized criteria to the collective bargaining agreement in question but to have parlayed its advisory and assistance functions virtually into bargaining authority. And it seems to have utilized its extended powers to reject the agreement as a whole because it was not properly negotiated, among other criticisms, notwithstanding that its main objection to the wage increase specifically appeared to be that it was too little rather than too much. Executive Order No. 11588 established CISC “to assure generally conformance of any increase in any wage or salary in the construction industry to the provisions of this order.” (Sec. 1(a).) The craft boards were to be established “to determine whether wages and salaries are acceptable in accordance with the criteria established in section 6.” (Sec. 2.) While each board, in relation to the craft or branch over which it had-jurisdiction was given responsibility “to provide advice and assistance” in an effort to resolve any unresolved collective bargaining disputes involving wages and salaries, beyond this advisory and assistance function and separate from it, each was charged with the additional responsibility “to promptly examine every collective bargaining agreement . and to determine in accordance with the criteria established in Section 6, whether wage and salary increases in the agreement are acceptable and may thus be approved.” We make no point of the absence of any specific criteria because of the revocation of Section 6 of Executive Order No. 11588 and the nonexistence of its replacing Pay Board Order at the particular time the agreement in question was executed and submitted. We shall assume that it was reasonable to apply criteria expressed thereafter and in existence at the time of the Craft Board ruling. (Sec. 3(a).) But one will search in vain to find in Section 6 the inclusion among the criteria referred to of the advisory and assistance functions of the boards. Nor is there to be found in the replacement Pay Board Order No. 2 any transformation of these advisory and assistance functions into criteria for approving or disapproving proposed wage increases within the 5.-5% standard. With reference to increases beyond the “standard 5.5%”, the boards were granted power to consider restorations to appropriate historical relationships among crafts and agreements providing for significant changes in the geographical structure of bargaining. But as to increases within the standard the CISC and the Boards were directed to consider only whether insufficient retardation in the rates of increase or other economic adjustments in the agreement justified rejection of an increase. There is no contention that there were other economic benefits in the agreement that represented an increase in addition to wages. In fact, one of the objections of the Craft Board was that fringe benefits were not included. Nor is there a record of any objection, except as an afterthought expressed at the trial by a representative of the Craft Board, going to the question of rate of increase retardation. Even there the objection was directed to the three-year term of the contract rather than to any consideration of the wage rate as such. Not only did the Board apparently fail to consider this point but its concern about widening the gap between Tulsa and Oklahoma City indicated its desire to see the contract provide for larger successive increases rather than smaller. We are mindful of the broad delegation of power to the President for the purposes of economic stabilization and the broad redelegation of power that has occurred in other contexts. But neither the President nor the Pay Board delegated to the agencies involved here any such general power to establish criteria different than those specified and hereinbefore discussed for disapproving pay increases within the standard of 5.-5%. It is neither a narrow nor a grudging construction to draw distinctions clearly delineated by controlling regulations, nor did the agencies have license to disregard them. According the powers of the agencies their full effect and recognizing related powers reasonably to be implied therefrom, there was nothing in the agency ruling of record from which the trial court could have properly concluded that they acted within their powers or other than arbitrarily. The Court in appropriate, proceedings and with the necessary parties before it must set aside board decisions which rest upon erroneous legal foundations ; and misapplication of criteria governing board actions may comprise an insufficient foundation. The undisputed evidence before the district court threw no different light upon the rulings and indeed reinforced the conclusion that the controlling reasons for disapproving the contract were beyond the criteria delimiting the authority of the boards. The trial court’s opinion rested upon a similar erroneous basis and in its failure, shared by the agencies, to draw a distinction in criteria between increases within and in excess of the standard established by the Pay Board. The great deference to which administrative interpretations ordinarily are entitled may not prevail over misapplications of the nature indicated. What we have said about the agencies’ authority applies to that authority existing at the time of the rulings in question. We are mindful that in Phase III of the stabilization program the general powers of the CISC have been broadened and emphasized. We indicate no view as to what effect these new provisions might have had if they had been in force at some pertinent time, nor as to their possible effect during Phase III. Nor do we consider the related question of whether the new provisions would be within the authorization of the Economic Stabilization Acts themselves were they to be extended to the enforced regulation of collective bar-gaming conditions apart from economic factors. As this court heretofore has noted in a different case we do not consider that the changes in the regulations should somehow influence our judgment as to the application of prior ones since here, even more than there, it is likely “that a justifiable change in policy considerations brought .about the alterations.” JURISDICTION — SUFFICIENCY OF PLEADINGS The complaint in the district court alleged that jurisdiction existed by virtue of 29 U.S.C. § 185, and the trial court agreed. Our jurisdiction is derivative through that of the district court and it is the court’s duty to assure itself of its own jurisdiction as well as that of the trial court. The jurisdictional foundations of the case as initially laid in the complaint did not expressly involve matters within this court’s appellate jurisdiction. Aside from the question of the validity of the Craft Board’s action it may be assumed that the issues of whether the validity of the entire collective bargaining agreement was subject to a “condition subsequent” as a matter of contract, and whether the agreement as such was invalid because negotiated by improper union representatives, were within the reach of jurisdiction afforded to the district court by' the Labor-Management Relations Act. The controversy between the parties which was ultimately adjudicated by the trial court involved the validity of agency orders issued in reliance upon regulations under the Economic Stabilization Act as amended. As to the latter problem our jurisdiction is clear except for the question of pleadings, since the case as presented to the trial court and decided by it arose under the Act and its regulations. We need not pause to consider any theory of pendant jurisdiction in the present context since if the allegations of jurisdiction in the complaint are inaccurate or incomplete for their reference solely to the Labor-Management Relations Act, they may be deemed amended to refer to the provisions of the Economic Stabilization Act in conformance with the proof, and our jurisdiction thus sustained of record. Another pleading difficulty arises from the fact that the action below was filed obviously as a friendly suit, both the AGC and the Local joining during the proceedings in the position that the action of the Craft Board and CISC in rejecting their contract was unauthorized and void. The allegations in the complaint concerning a case of actual controversy within the purview of the Declaratory Judgment Act are exceedingly questionable for sufficiency; and until the International intervened the adversary nature of the proceedings was most dubious. There is no question, however, that after that intervention the case became highly adversary and that it became on the issues there drawn and developed among the parties and now argued here with the assistance of amicus curiae a case or controversy entitled to treatment as such within the contemplation of the statute. Again, the pleadings may be deemed amended and supplemented in conformance with the proof, to set aside any question of their insufficiency. EXHAUSTION OF ADMINISTRATIVE REMEDIES In City of New York v. New York Telephone Company, 468 F.2d 1401 (Emm.App.1972), Chief Judge Tamm, speaking for this court, considered the necessity of the exhaustion of available administrative remedies before resort to the courts in eases arising under the Economic Stabilization Act of 1970, as amended. It was recognized that unlike its predecessors the Emergency Control Act of 1942 and the Defense Production Act of 1950, the present system shifts “some of the emphasis from the administrator to the district court in the development of factual issues.” Yet in considering the later acts and their legislative history the conclusion was reached that the exhaustion requirement fully extended into this area unless administrative remedies were found to be inadequate on a case by case basis. The opinion concluded: “It is clear to us that there is an adequate administrative remedy here which must be pursued initially. Should we find the administrative remedy inadequate in the context of a particular factual situation or circumstance, we shall not hesitate to speak up. As the Congress has built the Economic Stabilization skeleton, and as the Executive has put some regulatory meat on its bones, so we too must fulfill our constitutional duty of breathing life into this golem-like creature, for it is all too clear that judicial review of esoteric questions involving the economy of a nation can only be meaningful where the administrative review is meaningful.” (468 F.2d at p. 1406.) We find in the present case that to the extent administrative remedies may not have been exhausted they were inadequate to preclude recourse to the district court. Administrative review of the Craft Board decision by CISC was contemplated and, indeed, accomplished but was not meaningful because of the summary approval of the Craft Board ruling by CISC through application of the unauthorized criteria. Unlike the system of agency adjudication involved, in City of New York v. New York Telephone Company, supra, in which review of price decisions was contemplated and actually in progress at the time suit was initiated in the district court, no provision had been made in the construction wage context- for administrative review of CISC decisions, which were to be treated as effective and implemented forthwith. We find this situation to invoke an exception to the general rule of City of New York and contemplated thereby. Accordingly, we hold that recourse to the district court was not precluded by the exhaustion rule, and the conclusion of the case on the basis of the existing administrative record, and in light of evidence before the trial court is proper. We have here an example of how an Economic Stabilization Act case within our appellate jurisdiction can become needlessly complicated, its expedition frustrated and controlling issues masked: Jurisdiction was laid under a statute not applicable to the principal controversy before us; the original parties were not shown actually to have been in an adverse position respecting the issue of the validity of agency action ; the original pleadings did not adequately disclose this issue; the consolidation of the case with another having only a tangential relationship and invoking the appellate jurisdiction of another court further obscured the issues and complicated review; the relief specifically requested, a declaration of the validity of the collective bargaining agreement in question as between the parties, did not come to grips with the problem as to which the judgment of this court is now sought — the absence of an affirmative order of the Craft Board accepted by CISC approving the pay increases provided in that agreement; and, finally, failure to name as parties the agencies which had refused such an order and whose approval (or its equivalent) was requisite to collection of the increased pay under the agreement however valid that agreement may have been otherwise as between the parties. We do not assume to criticize the parties, much less the court, for these irregularities for likely with no prior exposure they were dealing with a unique legislative and executive creature, borrowing Judge Tamm’s metaphor, whose functioning in judicial context there still has been limited opportunity for us to delineate and none heretofore from the trial procedure standpoint. Even though in the interest of expedition and in view of the circumstances mentioned above and in the margin we have been able, and considered it proper, to surmount most of these insufficiencies, we must not fail to emphasize that similar forbearance may not be forthcoming or even possible in future cases, so that counsel seeking prompt decisions on the merits may not be ensnared. However, we have been unable to scale one procedural obstacle without sacrificing an essential principle or confronting an impasse of remedy, to which we now turn. ABSENCE OF THE AGENCIES AS PARTIES As heretofore observed, neither the CISC nor the Craft Board was made a party to these proceedings. Enough already has been stated to make plain that a serious question concerning the validity of the agency action precludes bypassing problems of remedy by affirmance of the trial court’s judgment. On the other hand, however, as obvious as the invalidity of agency action might otherwise appear, a final disposition here to this effect would be clouded by lack of opportunity for the agencies as parties to be heard before the district court and by the prospective ineffectiveness of any declaratory judgment pronouncing the collective bargaining agreement valid between the parties whereas the real problem, if there is ultimately determined to be merit in plaintiff’s position, is the failure of the Craft Board or CISC to affirmatively approve the pay increase therein provided. Granted that any final declaratory judgment could be implemented or enforced by proceedings supplemental to that judgment, this would be possible only as between the parties. In this particular case there are certain factors which appear to minimize the importance of agency joinder and which may have led to the overlooking of the problem heretofore. The statutory provisions for intervention and review, while referring to plaintiffs in various contexts, contain no express designation of parties defendant; functions exercised under the Economic Stabilization Act in proceedings involving the validity of orders as distinguished from regulations are excluded from the operation of the various provisions of the Administrative Procedure Act; the agency action in question was completed and any alteration pendente lite even though the agencies were parties could have been deemed improper; in connection with other special regulatory systems adjudications concerning the validity of agency determinations have been conducted without joining the agencies themselves as parties; and in a couple of cases decided by this court accepting or otherwise considering the effect of agency action neither the United States nor the agencies were parties. The revision to Rule 19, Fed.R.Civ.P., ameliorates the old “indispensable party’’ concept as a jurisdictional immutable and permits actions to proceed in the absence of desirable parties to a practical extent. The intervention of the International which provided fifty percent of the Craft Board’s membership, the appearance of a member of the Craft Board as a witness before the district court, and the appearance here of the United States as amicus curiae afford indication that we have had the benefit of the agency viewpoint. Yet none of these considerations persuades us that this ease can be disposed of without remand. There are obvious distinctions between this case and cases cited in the margin arising under other statutes providing for specific types of review, some by contract. The cases previously in this court as noted have not involved a declaration of the invalidity of agency orders or they have included the United States as party plaintiff. Absence from the Economic Stabilization Act Amendments .of 1971 of express provision for the joinder in appropriate cases before the district courts of officers or agencies whose orders are in question is of no significance since such requirement is a general and fundamental one applicable alike here and to proceedings under the Administrative Procedure Act which also contains no express requirement in this respect. While the agencies in this case may not be regarded as being indispensable for every purpose so as to have required dismissal' of the áction in their absence, they should be made parties by reason of subdivision (a) (1) of Rule 19 before this litigation can be concluded. To further breathe life into the legal system with which we are concerned and as a correlative of the principle applied in City of New York we hold that in the absence of equivalent representation or other extraordinary circumstance which we cannot now anticipate no order of an economic stabilization program agency should be mandated or subjected to invalidation in any judicial proceedings unless that agency has been made party to such proceedings. In furtherance of a simplified and expeditious procedure we consider that the Laborers National Craft Board and the Construction Industry Stabilization Committee may be joined as such without naming the individual members. The public treasury not being involved, the United States as such and the persons and agencies through which agency authority was delegated do not appear indispensable since there has been left to the agencies named full decisional responsibility. Reversed and remanded for further proceedings not inconsistent with this opinion. . Section 203(a) (1) of the Economic Stabilization Act of 1970, 84 Stat. 799-800 (P.L. 91-379, August 15, 1970), as amended and extended by the Economic Stabilization Act Amendments of 1971, 85 Stat. 743, (P.L. 92-210, December 22, 1971); Exec. Order No. 11,588, 3 C.F.R. 147 (1971), as extended and amended by § 14 of Exec. Order No. 11,627, 3 C.F.R. 218, 224 (1971); Exec. Order No. 11,640, 37 F.R. 1213, January 27, 1972, as amended by Exec. Orders Nos. 11660 and 11674; Pay Board Order No. 2, Amended, filed April 24, 1972, 37 F.R. 8140. . Its decision is reported in Gordon v. Laborers’ International Union of No. America, 351 F.Supp. 824 (W.D.Okl. 1972) . . If the trial court’s view, concerning the sweeping authority of the particular agencies over the negotiation of collective bargaining agreements had been valid, all of the procedural difficulties likely could have been surmounted and dis-positive action taken here because the position of appellants below and on appeal would have presented no substantial question requiring remand for further proceedings. But should we return the case now without at least a general indication of our opinion to the contrary, a mere conformance by the trial court with the required procedure likely would leave any new judgment as questionable on the merits as the present one now appears to be. This would seem to be inconsistent with the charge to this court to “exercise its powers and prescribe rules governing its procedure in such manner as to expedite the determination of cases over which it has jurisdiction under this title. . . .” § 211(b)(1), Economic Stabilization Act Amendments of 1971. . Rule 42(a) Fed.R.Civ.P. The pleadings in No. 70-520 have not been brought before us, and we are left to gather various circumstances concerning it from the district court’s memorandum decision. Nor is the transcript before us complete as to No. 70-520, portions being omitted seemingly because they related exclusively to that case. While all of the exhibits were noted as having been received for the purposes of both cases, the testimony of the witnesses was segregated to some extent between them, a portion pertaining particularly to the older case not having been admitted for the case in which this appeal was taken. In any event, we see no relationship between the earlier action and the problems now before us, since the contract in question here was entered into during a time when International’s trusteeship was not yet in existence and there has been no contention made before us that the representatives of the Local were not proper agents for the negotiation of the collective bargaining agreement, . The substance of its decision in the suit before us is indicated by the following conclusions of the trial court: “Accordingly, the court concludes that the contract was entered into by the parties subject to the condition subsequent that it be approved by the Craft Board and/or the CISC and that, by reason of their refusal to approve the agreement, it was rendered void and of no force and effect. “The Chapter appears to suggest that this court should ignore the action of the Craft Board and CISC with respect to this contract on the ground that those agencies acted in excess of their powers. However, the court concludes that such action was wholly consistent with the authority of these agencies under the relevant legislation and regulations. “The Court further concludes, contrary to the contention of the Chapter, that in examining and reviewing proposed collective bargaining settlements, both the Craft Board and the CISC are authorized to disapprove agreements and make recommendations with regard to bargaining subjects which go well beyond the limited area of wages. Hence Section 11(b) of Executive Order 11588 declares that ‘[t]he term “wage or salary” shall mean, for the purpose of this order, all wage or salary rate schedules and economic benefits established pursuant to a collective bargaining agreement in the construction industry.’ (Emphasis added.) To adopt the notion advanced by the Chapter that the agencies are limited solely to reviewing the wage provisions of collective bargaining agreements would require the court to close its eyes to the express provisions of the control legislation and implementing orders as well as to the realities of collective bargaining in the construction industry. Hence, if the powers of these agencies were to be read narrowly, parties to collective bargaining agreements might avoid the strictures of the controls by merely concentrating on obtaining benefits outside the narrow ambit of hourly wages. But such was clearly not the intent of Executive Order 11588 nor of the other related governing regulations which sought to empower these agencies to impose effective controls upon collective bargaining in the construction industry. Indeed, in the instant case, the agencies indicated their concern regarding such bargaining subjects as fringe benefits, contract duration as well as the impact of the settlement on employment in surrounding geographical areas.” (See Gordon v. Laborers’ International Union of No. America, 351 F.Supp. 824, 835-836 (W.D.Okl.1972), supra.) . 6 C.F.R. § 201.10: “Effective on and after November 14, 1971, the general wage and salary standard (hereinafter referred to as the ‘standard’) is established as 5.5 percent. The standard shall apply to any wage and salary increase payable with respect to an appropriate employee unit pursuant to an employment contract entered into or modified on or after November 14, 1971, or to a pay practice established, modified or administered with discretion on or after November 14, 1971. Except as otherwise provided in the Regulations under this title or by decision of the Pay Board, the standard shall be used to compute the maximum permissible annual aggregate wage and salary increase. The appropriateness of the standard will be reviewed periodically by the Pay Board to insure that it is generally fair and equitable, that it calls for generally comparable sacrifice by business and labor as well as other segments of the economy and that it takes into account such factors as changes in productivity and the cost of living as well as other factors consistent with the purposes of the Act.” The general language in subdivision 201.10(c) following the quoted language, contrary to the inference drawn in the brief of amicus curiae, seems to us to render even clearer by its heading “Increases other than standard” and by its reference to the “Pay Board or its delegate”, that the broader authority of the Pay Board over increases within the standard had not been delegated to craft boards or the CISC. . Executive Order 11588 : “Sec. 4(c) Unless and until an increase in wage or salary has been approved in accordance with the provisions of sections 3(a) and 4 of this order, it shall be a violation of this order to put such wage or salary increase into effect. “Sec. 5. Upon a determination by a board or the Committee [CISC] that a proposed wage or salary increase is not acceptable and certification of that determination by the Secretary of Labor, the following actions shall be- taken: “(a) In implementing the provisions of the Davis-Bacon Act of March 3, 1931 (46 Stat. 1494, as amended) and related statutes the provisions of which are dependent upon determinations by the Secretary requiring similar wage standards, the Secretary of Labor and all states shall not take into consideration any wage or salary increase in excess of that found to be acceptable in making determinations under that Act and related statutes. “(b) in order to assure that unacceptable wage rates shall not be utilized in Federal or federally-related construction, the heads of all Federal departments and agencies, subject to the direction and coordination of the Secretary of Labor: “(1) shall review all plans for construction and financial assistance for construction in localities in which wage or salary increases have been certified by the Secretary of Labor to be unacceptable and shall, on the basis of that review, determine whether such plans can be approved or continued; and “(2) shall review current and prospective construction contracts for Federal construction and for construction on projects receiving Federal financial assistance in the area affected by a certification by the Secretary of Labor and shall, on the basis of such review, determine whether such contracts can be awarded or continued. “(c) The Committee and the boards shall make public their determinations, specifying the craft and area affected and the wages or salaries deemed unacceptable. “(d) Any other action authorized by law to carry out the purposes and policy of this order shall be available to the Secretary of Labor to assure the stabilization of wages and prices in the construction industry.” [This subsection revoked by Executive Order 11627.] . To uphold the Board’s action on this basis could create in principle a jurisdictional conflict with the National Labor Relations Board, which expressly provides for resolution of agent and unit disputes in its Rules and Regulations: “Procedure under Section 9(c) of the Act for the Determination of Questions Concerning Representation of Employees and for Clarification of Bargaining Units and for Amendment of Certifications Under Section 9(b) of the Act,” 29 C.E.R. Part. 102, Subpart C. Refusal to sign an agreement when one has been reached by appropriate representations may itself be an unfair labor practice. See H. J. Heinz Co. v. N.L.R.B., 311 U.S. 514, 61 S.Ct. 320, 85 L.Ed. 309 (1941). . Both counsel for tiie International and for the government stated their belief, upon query from the bench, that even though a collective bargaining agreement contained a wage increase lower than the standard it could be rejected by the Board on grounds that it should have been accompanied by other provisions or should have been negotiated by other collective bargaining agents ; and counsel for International flatly argued that for insufficiency of an increase alone the Board had power to reject a collective bargaining agreement. . See letter of April 7, 1972, from the Board’s management co-chairman, and letter of June 29, 1972, from the full Board to AGO setting out specific reasons for the Board’s action, cited at pages 4 and 5, supra; also note 15, infra. . In Section 3(a) of Executive Order 11588 it is declared to be the responsibility of the boards to “provide advice and assistance in an effort to resolve any unresolved collective bargaining disputes involving wages and salaries” and to promptly examine every collective bargaining agreement in accordance with the criteria of section 6. Section 6 was revoked on October 15, 1971, by Executive Order 11627 and the Substantive Policies of the CISC, contained in Pay Board Order No. 2, Amended, were, by their own terms, to “constitute a complete substitute for the standards set forth in sections 6(a) and (b) of Executive Order 11588. . ” Substantive Policy 4 lists principles to be applied in ruling on exceptions in individual cases providing for adjustments in excess of the standard and of these, 4(c) and 4(e) would involve CISC in collective bargaining. Policy No. 4(c) authorizes CISC to become involved in restorations to appropriate historic relationships; 4(e) instructs CISC to give special consideration to agreements which provide for significant changes in the geographical restructuring of bargaining. Substantive Policy 8 empowers OISO to seek to enhance the boards’ contribution to the improvement of collective bargaining and procedures for dispute settlement in the industry. Section 6 of the Executive Order 11588, replaced by these Substantive Policies, listed as criteria to be applied in determining acceptability of wage and salary increases, certain acceptable economic and equity adjustments, without reference to the boards’ involvement in collective bargaining. There is no indication that the role of the boards in resolving collective bargaining disputes involving wages and salaries (Executive Order 11588) corresponds to the role of the boards suggested in Substantive Policy 8 of contributing to the improvement of collective bargaining, although the provisions of the executive order restricting the boards’ involvement in collective bargaining disputes to those “disputes involving wages and salaries” would seem naturally to govern any provisions of the Pay Board order. A further complication arises in the fact that the Substantive Policies were not filed, and presumably did not become effective, until March 24, 1972, well after the contract was submitted for examination but before the Board issued its official rejection, and that Section 6 had been revoked on October 15, 1971. . Substantive Policy No. 6: “In consideration of all applications in 1972, the CISC recognizes the necessity to show continued retardation in the rate of increases permitted for 1972 as measured by Pay Board standards. The CISC shall also apply this principle to agreements extending into 1973 and 1974.” . Substantive Policy No. 7 : “The CISC is to continue to apply its policy on economic adjustments which are broader than wages and fringe benefits, that is, which would include the money value of all economic adjustments including work rules.” . Mr. Paul B. Richards, management co-chairman of the Craft Board testified in response to a series of questions about the Board’s ruling on the element of retardation in the submitted agreement: “I explained to you, Counsellor, I did not vote on the basis of the wages before me, but on the basis of the general principles presented by the contents of that contract.” See also further testimony of Mr. Richards on the reasons for the Board’s action quoted at footnote 18, infra. . As revealed in the record the wage increases proposed in the agreement at issue here brought the current rate of $4.03 up to $4.25, effective June 1, 1972; to $4.50, effective June 1, 1973; and to $4.75, effective June 1, 1974, each increase amounting to approximately 5.5%. In Tulsa, the current rate in 1971 of $4.55 (an increase of 9.6% over 1970) was increased to $4.65 in 1972. Approved increases for Lawton and Stillwater locals for 1972 amounted to 18% and 17%, respectively. On oral argument it was represented without contradiction that the Tulsa contract was submitted to the Board after submission of the Oklahoma City contract and approved ns to its proposed increase before the Board took action on the Oklahoma City agreement. . See U. of So. Calif. v. Cost of Living Council, 472 F.2d 1065 (Emm.App. 1972). . See N.L.R.B. v. Brown, 380 U.S. 278, 85 S.Ct. 980, 13 L.Ed.2d 839 (1965). . In his testimony, Dr. Richards, management co-chairman of the Board said, among other things: “Q. Tell us, please, Mr. Richards, exactly what the objection is that your Board finds with this contract. “A. Well, I expressed my objections for the management members of the Board, as expressed to Mrs. Leslie [AGC business manager] April 7, 1972— “A. The basic objection is that it is a long term agreement. “Q. What are your other objections? “A. The other objections are basically that you don’t have a uniform welfare and pension system in the state. There is not a master agreement for all the Laborers’ Locals in the state, and there are many bargaining elements rather than a single bargaining element for a single trade in the state. “A. We disapproved for a number of reasons, one of which went to the question of the state-wide pension, health and welfare. “Q. What are the other reasons you turned it down? “A. I explained to you that we turned it down on the basis of its length of term. “Q. Is there any other reason? “A. The management side of the Board thought that it did not exhibit retardation, as mandated by the policy of the Construction Industry Stabilization Committee. “A. ' Well, let me go back in history. We had looked over the state of Oklahoma far prior to this case coming before us, and the Craft Board had considered this a state where restructuring should take place, and they had come up with a plan for the restructuring of Oklahoma within the terms and framework of the Executive Order. “The fact is that Local 612 agreement did not meet that plan, and therefore it was rejected on basis it did not meet the restructuring program and the plan of the Laborers’ National Craft Board. “Q. Then this case went to that Board [CISC]. Did they hear any new evidence of any kind? “A. No, sir, as I explained now several times, the Laborers’ National Craft Board did the courtesy to the CISC of providing a copy of our rejection letter to the AGC and 612.” . Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 65 S.Ct. 1215, 89 L.Ed. 1700 (1945); United States v. International Brotherhood of Electrical Workers, Local No. 11, 475 F.2d 1204 (Em.App. (1973); Univ. of So. California v. Cost of Living Council, 472 F.2d 1065 (T.E.C.A.1972), cert. denied, 410 U.S. 928, 93 S.Ct. 1364, 35 L.Ed.2d 590 (1973); United States v. Lieb, 462 F.2d 1161 (Em.App.1972). . N.L.R.B. v. Brown, 380 U.S. 278, 85 S.Ct. 980, 13 L.Ed.2d 839 (1965) supra; Atchison, T. & S. F. Ry. Co. v. United States, 284 U.S. 248, 52 S.Ct. 146, 76 L.Ed. 273 (1932); Conklin Pen Co. v. Bowles, 152 F.2d 764 (Em.Ct.1946); Federal Trade Commission v. Crowther, 139 U.S.App.D.C. 137, 430 F.2d 510 (1970); Scanwell Laboratories, Inc. v. Shaffer, 137 U.S.App.D.C. 371, 424 F.2d 859 (1970); In re Hooper’s Estate, 359 F.2d 569 (3d Cir.), cert. denied, Marine National Exchange Bank, Executor v. Government of the Virgin Islands, 385 U.S. 903, 87 S.Ct. 206, 17 L.Ed. 2d 133 (1966). In the latter case it is noted that “administrative action is arbitrary if it is taken without any authority of law or upon a misconstruction of the statutory authority under which it purports to act.” Notwithstanding the general exclusion by Section 207 of stabilization functions from the operation of the Administrative Procedure Act with certain exceptions primarily relating to the issuance of regulations, the power of the court to correct arbitrary action is implicit in Section 211(d)(1), Economic Stabilization Act Amendments of 1971, 85 Stat. 743 (P.L. 92-210, December 22, 1971). . The basic executive authorization for Phase III, Executive Order 11695, January 11, 1973, continues the CISC and the boards as before, with the added provisos that they shall perform “such functions with respect to the stabilization of wages and salaries in the construction industry as the Chairman of the [Cost of Living] Council may delegate to [them].” (Sec. 5.) On that same day, Cost of Living Council Order No. 16 made a Delegation of Authority to CISC, charging it in carrying out its functions to “give particular attention to improving the collective bargaining process in the construction industry and to the rationalization of the wage structure within geographic areas and between crafts within a particular area.” And a White House Fact Sheet released to accompany Executive Order No. 11695 states that the CISC “will continue its work with the twin goals of improving the bargaining structure in the industry and achieving additional progress in bringing the rate of growth in this sector into line with the general wage growth in the economy.” Cost of Living Council Release No. 213, February 26, 1973, states that “[t]he fundamental objective of policy for the 1973 collective bargaining season is to move toward viable long-run arrangements for dispute settlement in each branch of the industry and toward more effective collective bargaining in the public interest.” It continues: “The period of controls, as envisaged in Executive Order 11588, should be used to make a major contribution to the resolution of some of the major longer-term problems of the industry through effective cooperation between labor, contractors and the government. Among the most significant of these long-run problems has been: (a) the need for procedures at the national level to facilitate the settlement of disputes over the terms of local or regional collective bargaining agreements, (b) broadening the geographical structure of negotiations in some localities and for some crafts, (c) development of special wage rates for some branches of the industry, (d) review of some managerial and labor practices and contract provisions in some localities as they affect costs, (e) greater coordination of collective bargaining negotiations among crafts and associations in some localities, and (f) improvement in the quality of information available for collective bargaining among local and national parties.” It is clear from these documents that the delegation of authority to CISC during Phase III includes a clear mandate to make improvement of collective bargaining a “fundamental objective.” . Univ. of So. Calif. v. Cost of Living Council, 472 F.2d 1065 (Emm.App.1972). . “(a) Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce . . . may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.” . See, e. g., Buell v. Sears, Roebuck and Co., 321 F.2d 468 (10th Cir. 1963). . The trial court seems to have based its decision at least in part upon the application of such a condition-subsequent-by-contract theory which now appears unwarranted; however the gist of its determination was that the refusal of the agencies to approve the agreement, including the pay increase, was within their authority and thus valid. In any event such problems and the question of whether a collective bargaining agreement has been validly entered into in the first instance have been held to be so related to the subject of “suits for violation of” labor contracts as to permit their resolution by district courts by virtue of § 185 notwithstanding their relationship to possible unfair labor practices within the exclusive cognizance of the Labor Relations Board. See United Steelworkers of Am., AFL-CIO v. Rome Indus., Inc., 437 F.2d 881 (5th Cir. 1970); Warrior Constructors v. International U. of Op. Eng., Local 926, 383 F.2d 700 (5th Cir. 1967); Heavy Cont’rs Ass’n v. International Hod Car., L. No. 1140, 312 F.Supp. 1345 (D. Nebr.1969); Lewis v. Splashdam By-Products Corporation, 233 F.Supp. 47 (W.D.Va.1964); Todd Shipyards Corp. v. Industrial U. of Marine & Ship Wkrs., 232 F.Supp. 589 (E.D.N.Y.1964). . Economic Stabilization Act Amendments of 1971, § 211, Judicial Review: “(a) The district courts of the United States shall have exclusive original jurisdiction of cases or controversies arising under this title, or under regulations or orders issued thereunder, notwithstanding the amount in controversy 11 . Fed.R.Civ.P. 15(b) Amended and Supplemental Pleadings: Amendments to Conform to the Evidence: “When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues. 11 28 U.S.C. § 1653: “Amendment of pleadings to show jurisdiction. “Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.” Cf. United States v. Lieb, 462 F.2d 1161, 1168 (Emm.App.1972). . 28 U.S.C. § 2201: “In a case of actual controversy within its jurisdiction, except with respect to Federal taxes, any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.” See International Longshoremen’s Association, AFL-CIO v. Seatrain Lines, Inc., 326 F.2d 916 (2d Cir. 1964). . 468 F.2d at 1403-1406. . On the contrary, Executive Order 11588 dated March 15, 1971, Section 5, authorized the immediate implementation and enforcement by the Secretary of Labor of any “determination by a [craft] board or the [Construction Industry Stabilization] committee that a proposed wage or salary increase is not acceptable. . ” That the omission of provision for any administrative review of CISC decisions was not an oversight is plainly shown by Cost of Living Council Order No. 22 effective March 1, 1973, which provides for a review or reconsideration of initial decisions regarding pay adjustments, but which expressly provides that “[t]he authority delegated in this Order shall not include any authority which has been delegated to the Construction Industry Stabilization Committee pursuant to Cost of Living Council Orders Numbers 16 and 20 or to the Administrator for Pay Board Matters pursuant to Cost of Living Council Order Number 21. A similar exception was contained in Cost of Living Council Order No. 16 providing authority for the Administrator for Pay Board- Matters to rule on requests for review or reconsideration in the period of transition of authority between Phases II and III. . Cf. Scanwell Laboratories, Inc. v. Shaffer, 137 U.S.App.D.C. 371, 424 F.2d 859, (1970); Koepke v. Fontecchio, 177 F.2d 125 (9th Cir. 1949). . We do not find that any of these problems were called to the attention of the trial court and, in fact, counsel for the parties in their arguments before this court indicated satisfaction with the procedural and jurisdictional posture of the case and inferred that we were in a position to finally dispose of the case on its merits one way or the other. The government as amicus curiae stated in its brief that “the record is adequate to support the district court decision [but] if this court feels that the record is inadequate in this regard, the case should be remanded for further proceedings so that the Government can be made a party to the suit.” It is in view of this failure to raise the points below that we have gone as far as feasible to avoid having our decision turn upon them. . 28 U.S.C. § 2202: “Further necessary or proper relief based on a declaratory judgment or decree may be granted, after reasonable notice and hearing, against any adverse party whose rights have been determined by such judgment.” . Economic Stabilization Act Amendments of 1971: “§ 209. Whenever it appears to any person authorized by the President to exercise authority under this title that any individual or organization has engaged, is engaged, or is about to engage in any acts or practices constituting a violation of any order or regulation under this title, such person may request the Attorney General to bring an action. . . “§ 210(a). Any person suffering legal wrong because of any act or practice arising out of this title, or any order or regulation issued pursuant thereto, may bring an action in a district court of the United States. . “§ 211(a). The district courts of the United States shall have exclusive original jurisdiction of cases or controversies arising under this title. . “§ 211(d)(2). A district court of the United States or the Temporary Emergency Court of Appeals may enjoin temporarily or permanently the application of a particular regulation or order issued under this title to a person who is a party to litigation before it. ff . §§ 207(a) and 211(d)(1) of Economic Stabilization Act Amendments of 1971, supra. . See United States v. McCrillis, 200 F.2d 884 (1st Cir. 1952); Senderowitz v. Clark, 162 F.2d 912 (Emm.App.1947). . See, e. g., Templeton v. Atchison, T. & S. F. Ry. Co., 84 F.Supp. 162 (W.D.Mo. 1949), affd. Brotherhood of Railroad Trainmen v. Templeton, 181 F.2d 527 (8th Cir. 1950); Edwards v. Capital Airlines, Inc., 84 U.S.App.D.C. 346, 176 F.2d 755 (1949); Western Fruit Growers, Inc. v. Beilman Produce Co., Inc., 75 F.Supp. 334 (M.D.Pa.1948). See also Order of Ry. Conductors of America v. Penn. R. Co., 323 U.S. 166, 65 S.Ct. 222, 89 L.Ed. 154 (1944); Transport Wkrs. U. of Amer. v. Amer. Airlines, Inc., 413 F.2d 746 (10th Cir. 1969); Kansas Gas & Electric Co. v. City of Independence, Kansas, 79 F.2d 32 (10th Cir. 1935). . McGuire Shaft & Tunnel Corp. v. UMW Local 1791, 475 F.2d 1209 (Em.App. 1973); City of N. Y. v. N. Y. Telephone Co., 468 F.2d 1401 (T.E.C.A.1972), supra,. However, these did not involve challenge to the validity of agency action.” . “Rule 19 — Joinder of Persons Needed for Just Adjudication “(a) Persons to be Joined if Feasible. A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties. . “(b) Determination by Court Whenever Joinder not Feasible. If a person as described in subdivision (a) (l)-(2) hereof cannot be made a party, the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable. See Provident Bank v. Patterson, 390 U.S. 102, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968), reversing Provident Tradesmens B. & T. Co. v. Lumbermens Mut. Co., 365 F.2d 802 (3d Cir. 1966). . See, e. g., United States v. IBEW Local 11, 475 F.2d 1204 (Emm.App.1973); United States v. Chicago Blackhawk Hockey Team, Inc., 468 L.Ed.2d 221 (Emm.App.1972). . Cf. Order of Railway Conductors of America v. Pa. R. Co., 323 U.S. 166, 65 S.Ct. 222, 89 L.Ed. 154 (1944). The agency rulings of course have been established, but the agencies as parties should be afforded reasonable opportunity to explain them before the district court in any light they believe would be consistent with their validity; and upon the determination of validity or invalidity by the district court they manifestly should be heard as to the form of the declaration and any supplemental relief that might be necessary to effectuate the judgment. . 468 F.2d at pp. 1402-1406. . In two other cases in this court agency action has been challenged and the United States has not been a party. In each the defendants apparently were sued as agencies rather than as individual members comprising the agencies. Univ. of So. Calif. v. Cost of Living Council, 472 F.2d 1065 (Emm.App.1972); Mass Retailing Institute, Inc. v. Cost of Living Council, 468 F.2d 948 (Emm.App.1972). While the distinction between suing an agency officer and his agency may be important for some purposes, such as proper service of summons, Fed.R.Civ.P. 4(d) (1) and (5), avoidance of sovereign immunity, the assertion of personal liability, etc., such a distinction need not be controlling in this case in the absence of developing practical difficulties of which prospect we are not now aware. The precedents already established satisfy us that agency intervention is practical through participation by attorneys for the Department of Justice as in prior cases. . The key principle was framed in Williams v. Fanning, 332 U.S. 490, 68 S.Ct. 188, 92 L.Ed. 95 (1948): “The superior officer is an indispensable party if the decree granting the relief sought will require him to take action, either by exercising directly a power lodged in him or by having a subordinate exercise it for him.” See also Johnson v. Kirkland, 290 F.2d 440 (5th Cir.), cert. denied, 368 U.S. 889, 82 S.Ct. 142, 7 L.Ed.2d 88 (1961). The high court had earlier held that local officers may be mere agents and subordinates of the superior officer, and that where the superior’s “are the hands which would be tied” he should be made a party defendant. Gnerich v. Rutter, 265 U.S. 388, 44 S.Ct. 532, 68 L.Ed. 1068 (1924), Cf. May v. Maurer, 185 F.2d 475 (10th Civ. 1950). The case before us now involves no challenge to the regulations, but only to a determination of agencies purportedly acting within those regulations. The Craft Board and CISC determinations are final; provision has not been made for administrative review by any superior agency. Cost of Living Council Order No. 22, which delegates authority to the Administrator for the Office of Wage Stabilization to issue decisions and orders with respect to eases involving pay adjustments under the regulations of the Cost of Living Council, specifically exempts CISC decision-making authority from the reach of that provision, as heretofore noted. If the Craft Board and/or CISC approve the AGC contract, no other agency or official in the government is permitted to act administratively on the matter. Section 4, Cost of Living Council Order No. 6. Any judicial action in the nature of an injunction or mandamus to compel approval would expend itself only on the Craft Board or the CISC, rendering superior officials or agencies unnecessary parties.

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Dr. Ina BRADEN, on behalf of herself and all others similarly situated, Appellant, v. The UNIVERSITY OF PITTSBURGH and Wesley W. Posvar. No. 72-1220. United States Court of Appeals, Third Circuit. Argued Feb. 5, 1973. Decided April 11, 1973. David Berger, Philadelphia, Pa., Harold Gondelman, Baskin, Boreman, Wilner, Sacks, Gondelman & Craig, Pittsburgh, Pa., Sylvia Roberts, Baton Rouge, La., for appellant. James M. Arensberg, Charles C. Arensberg, Tucker Arensberg & Ferguson, Pittsburgh, Pa., Ketchum & Ketchum, Burlingame, Cal., for appellees. Myra Anderson Ketchum, Burlingame, Cal., for amicus curiae. Before BIGGS and GIBBONS, Circuit Judges, and HUYETT, District Judge. OPINION OF THE COURT BIGGS, Circuit Judge. The original complaint and the amended complaint allege that the plaintiff, Dr. Ina Braden, a woman, is employed by the corporate defendant, University of Pittsburgh, as an assistant professor in the Learning Resources Division of the University’s Dental School; that the individual defendant, Dr. Wesley W. Posvar, is the Chancellor of the University; that Dr. Braden has brought this action on her own behalf and on behalf of all women currently or previously employed by the University “in professional positions” from January 1968 to the time of the filing of the suit. Without referring to allegations relating to class suits, Rule 23 Fed.R. Civ.Proc., the complaint, Count I, alleges in substance that the defendants have enacted and effected policies and practices of unlawful and systematic exclusion of and discrimination against women by hiring them at lower rank and lesser pay than similarly-trained and qualified men, failing to promote women as they promote men, failing to grant tenure as is granted to men, failing to equalize conditions of employment, substantially excluding women from graduate faculty and administrative positions having policy-making functions, harassing, threatening and employing other punitive measures, including the discharge of women, including the plaintiff, and failing to reappoint women, including the plaintiff, who have been engaged in attempts to bring facts concerning inequities in the employment of women to the attention of the Chancellor and other officials. Dr. Braden alleges that she has been employed as an assistant professor in the Dental Behavior Science Department from September 1968 to the present and that she has been actively engaged in the dissemination of information regarding the unequal employment status of women at the University of Pittsburgh and has been chairman of the University Committee for Women’s Rights. Count II incorporates paragraphs 1 and 3 through 14 of Count I, and is based primarily on 42 U.S.C. § 1983. Count III alleges the defendant University is a contractor or subcontractor as provided in Executive Order 11246 as amended by Executive Order 11375, pertaining to discrimination on the basis of sex by government contractors and subcontractors, and again alleges discrimination and the absence of a day care center for minor children of female employees. Dr. Brad-en nowhere alleges that she has a child to be cared for in a day care center. Count IV alleges discrimination in violation of the Pennsylvania Equal Pay Act, 43 P.S. § 336.1 et seq. The original complaint, filed July 9, 1971, in respect to jurisdiction, states: “1. This Court has jurisdiction of this action under the Act of September 3, 1954, c. 1263, Section 42, 68 Stat. 1241, as amended, 28 U.S.C. Section 1343. 2. This action is brought and these proceedings are instituted under R.S. Section 1979, 42 U.S.C. Section 1983.”; and “13. Defendant, by the acts, practices and conduct alleged herein, has, under color of law, subjected and caused to be subjected plaintiff and the members of the class to the deprivation of rights, privileges, and immunities secured by the Constitution and the laws of the United States in violation of R.S. Section 1979, 42 U.S.C. Section 1983. Defendant has violated rights guaranteed to plaintiff and the members of the class under, inter alia, the following provisions of law: (a) the First and Fourteenth Amendments of the Constitution of the United States-, . . .” (Emphasis added.) On December 16, 1971 the plaintiff was permitted to amend her complaint. In her motion she states that she brought action under 42 U.S.C. § 1983, but that she desires to state a cause of action arising under 42 U.S.C. § 1981, and also desired to add an additional party defendant, viz., Wesley W. Posvar, the Chancellor of the University of Pittsburgh. Leave was granted, and the amended complaint was filed also as a class action. No clean copy of the complaints were filed and it is difficult to summarize their substance, but it is clear that there is reliance in the-amended complaint, as in. the original complaint, on the First and Fourteenth Amendments of the Constitution and upon alleged violations of §§ 1981 and 1983. The complaints conclude with prayers that the defendants establish non-discriminatory hiring, payment, opportunity, and promotional plans and programs, and seek to enjoin the defendants from continuing the alleged illegal acts and practices alleged in the complaints and to require the payment of damages with interest, costs of suit and a reasonable attorney’s fee. The defendants filed an answer denying all major relevant allegations. The last paragraph of the answer consists of a motion to dismiss. The district judge filed a memorandum of law and held in substance that the action could not be maintained under 42 U.S.C. § 1981 because § 1981 applied only to Negroes and that the Commonwealth did not have sufficient connection with the University to be able to maintain the action under § 1983., The last issue tendered is, we believe, governed by Burton v. Wilmington Parking Authority, 365 U.S. 715, 725, 81 S.Ct. 856, 862, 6 L.Ed.2d 45 (1961), and it must be decided whether the Commonwealth, in the language of Mr. Justice Clark, “has so far insinuated itself into a position of interdependence” with the University that it must be recognized as a joint participant in the challenged activity, i. e., discriminating against women. Stated conversely, can the activities of the University be considered to be so purely private as to fall outside the scope of the Fourteenth Amendment. It would perhaps be possible for us to decide this last issue on the present record but we think we should not do so. Very important constitutional questions are presented and the Supreme Court has repeatedly informed us that such difficult issues should not be decided except upon a full record and after adequate hearing. Polk Co. v. Glover, 305 U.S. 5, 59 S.Ct. 15, 83 L.Ed. 6 (1938); Bordens Farm Products v. Baldwin, 293 U.S. 194, 55 S.Ct. 187, 79 L.Ed. 281, concurring opinion, 293 U.S. 213, 55 S.Ct. 193, 79 L.Ed. 290 (1934); Villa v. Van Schaick, 299 U.S. 152, 57 S.Ct. 128, 81 L.Ed. 91 (1936). See also Honeyman v. Hanan, 300 U.S. 14, 25, 57 S.Ct. 350, 81 L.Ed. 476 (1937); Patterson v. Alabama, 294 U.S. 600, 607, 55 S.Ct. 575, 79 L.Ed. 1082 (1935); Rescue Army v. Municipal Court, 331 U.S. 549, 67 S.Ct. 1409, 91 L.Ed. 1666 (1947); DeBacker v. Brainard, 396 U.S. 28, 90 S.Ct. 163, 24 L.Ed.2d 148 (1969), and Cowgill v. California, 396 U.S. 371, 90 S.Ct. 613, 24 L.Ed.2d 590 (1970). In the view that we take of this case we deem it undesirable to pass upon the issues presented by § 1981 and Executive Order 11246 as amended by Executive Order 11375 at this time since we will vacate and remand the judgment for further consideration and a more ample record, as suggested hereinafter. To decide now the applications of § 1981 and the Executive Order but not the application of § 1983 would be to truncate the case, and if an order were entered sustaining or rejecting the position of the district court in respect to these issues, it would not be appealable to the Supreme Court for it would not be a final judgment and major issues would be left unanswered as well as the issue of possible pendent jurisdiction. The deficiencies in the record are notable. For example, 24 P.S. § 2510-204(a) and (b) provide that the Trustees of the University of Pittsburgh shall consist of 36 members, (a) “one of whom shall be the Chancellor of the University . . . and the Governor of the State, the Superintendent of the Department of Public Instruction, and the Mayor of the City of Pittsburgh,” and. (b) that 12 of the trustees shall be designated Commonwealth Trustees, and 4 shall be appointed by the Governor, 4 by the President Pro Tempore of the Senate and 4 by the Speaker of the House (with the advice and consent of the Senate). The law provides, therefore (if this interpretation be correct, though we are in doubt concerning it), that, omitting the Chancellor of the University but including the Mayor of the City of Pittsburgh, 3 of the trustees appointed in addition to the 12 Commonwealth trustees are agents of government. It follows, therefore, that if the provisions of the statute have been carried out, at least 15 of the trustees are in fact government connected. Subsection (a) provides for 36 members of the Board of Trustees, but all those members specified in subsections (a), (b), and (c) total 40. We find this statute exceedingly ambiguous, and since it has been in effect since 1966, we should have the advantage of knowing how it has been construed, how many trustees there really are, and how they are selected.. We cannot decide this case in a semi-vacuum. We do not know, for example, the number of trustees which the University actually has, their names, their tenure of office, and who and what they are, their occupations and connections, and whether or not they are paid for their services or meetings or receive salaries or emoluments, and if so, by whom are these emoluments or salaries paid and what do they amount to. Non con-stat that the 20 or 24 trustees to be elected pursuant to 24 P.S. § 2510-204(c) have actually been selected or are in office, or that the 15 government-connected trustees were in fact serving or were in office at the times complained of by the plaintiff. Neither are we informed as to the by-laws according to which the 20 or 24 “public” trustees were selected or indeed as to any bylaws of the board of trustees. We are not informed as to what constitutes a quorum of the trustees. We do not even know how the Chancellor is selected. The sums of money contributed by the Commonwealth to the University are not in evidence. In this connection, we have before us an appellant’s “appendix" which attempts to use statements in a brief as record evidence and treats these statements as admissions. Our reference is to the inclusion in this appendix of a portion of the defendants’ brief which states at p. 17: “In the University’s fiscal year 1965-66 9.3% came from the State; in 1966-67 25.8%; in 1968-69 32.1%; in 1969-70 34.5.%” We have repeatedly stated that statements in briefs unless specifically admitted by the adversary side cannot be treated as record evidence. United States v. Bowles, 331 F.2d 742, n. 11 at 746 (1964); Williams v. Murdoch, 350 F.2d 840 (1965). We do not know how much of the Commonwealth grants were expended for particular purposes and what those purposes were or how much went into the general fund of the University. We have no knowledge of the voting record of the trustees on any issues or the attitude of individual members of the board as shown by their voting. We do not have any of the resolutions of the board before us or any statement by any member of the board, including the Chancellor, as to what is the attitude of the University respecting the employment of women as teachers or professors. There are other items upon which the record should be able to enlighten us which are not included in the district court opinion. The distinction between public and private educational corporations is a very old one, see Trustees of Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518, 4 L.Ed. 629 (1819), and the balance can be a delicate one. One cannot overlook Mr. Justice Clark’s statement in Burton, supra, at 722, 81 S.Ct. at 860: “Only by sifting facts and weighing circumstances can the nonobvious involvement of the State in private conduct be attributed its true significance.” (emphasis added). Compare Cooper v. Aaron, 358 U.S. 1, 4, 78 S.Ct. 1401, 3 L.Ed.2d 5 (1958). We do not have enough facts before us to determine the extent of the involvement of the Commonwealth in the conduct of the University, so that such conduct can be given its true significance. The issue, as Mr. Justice Clark said and as we have stated, is whether the Commonwealth has “insinuated itself” into the affairs of the University in such a way that the University’s “conduct cannot be considered to be so ‘purely private’ as to fall without the scope of the Fourteenth Amendment.” The balance here is a delicate one. The district court dismissed the complaint, and since matter outside the pleadings was presented and not excluded by the court, “[T]he [district] court was therefore required by Rule 12(b) of the Federal Rules of Civil Procedure to treat the motion to dismiss as one for summary judgment and to dispose of it as provided in Rule 56. Under Rule 56, summary judgment cannot be granted unless there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.” Carter v. Stanton, 405 U.S. 669, 671, 92 S.Ct. 1232, 1234, 31 L.Ed.2d 569 (1972). See also United States ex rel. Jones v. Rundle, 453 F.2d 147, 150 (3 Cir. 1971). It is notable that 24 P.S. § 2510-202(6), states: “[I]t is hereby declared to be the purpose of this act to extend Commonwealth opportunities for higher education by establishing [the] University of Pittsburgh as an instrumentality of the Commonwealth to serve as a State-related institution in the Commonwealth system of higher education.” The use of the word “instrumentality” suggests agency. See, "Webster’s New International Dictionary of the English Language, 2d ed., and “Agency” and “Instrumentality,” Words & Phrases, Permanent ed. (1955 and 1960). There was no discussion contained in the opinion of the district judge respecting this unusual provision nor was it discussed by counsel. We have found nothing similar to it in any of the cases cited to us. Upon analogy to government boards and agencies the views of the trustees respecting this unusual provision, i. e., how they interpret it — might be of great value in resolving the difficult issue presented. As was said by Judge Friendly in Powe v. Miles, 407 F.2d 73, 83 (2 Cir. 1968), “The confiding of certain duties to private individuals no more insulates the State * * * [utilizing private trustees to administer a state activity] than in Kerr v. Enoch Pratt Free Library, supra [149 F.2d 212 (4 Cir. 1945)].” , This is an important case and we are entitled to a carefully prepared record after full hearing in the trial court and to the views of the trial court upon such a record. The judgment will be vacated and the case remanded with directions to proceed in accordance with this opinion. GIBBONS, Circuit Judge (concurring) . Whether as a grant of a motion under Fed.R.Civ.P. 12(b) or as a grant of summary judgment, the order dismissing the complaint must be reversed insofar as the complaint relies on 42 U.S.C. § 1983. At the least, whether the University of Pittsburgh is engaged in state action is a substantial factual question. Possibly, in view of Pa.Stat.Ann. tit. 24, §§ 2510-201 to -211 (Supp.1972) there is state action as a matter of law. I would, however, affirm the dismissal of the charge based on 42 U.S.C. § 1981 since I do not believe this statute can be stretched, as the appellant claims, to the point of reaching private sex discrimination. . The defendants assert that the allegations of the complaints are too general and unspecific to maintain a cause of action under the Civil Rights statutes. It is true that the complaints contain vague and general allegations, but that the alleged failure to rehire the plaintiff was because of alleged discrimination is sufficiently clear. . In disregard of the injunctive relief she has requested, the plaintiff has asked for a trial by jury. See amended complaint, p. 1. . Reported at 343 F.Supp. 836. . 42 U.S.C. § 1983 (1970) provides: “Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.” Federal courts have jurisdiction in section 1983 actions under 28 U.S.C. § 1343 (3) and (4) (1970). See United States v. Price, 383 U.S. 787, 794 n. 7, 86 S.Ct. 1152, 16 L.Ed.2d 267 (1966). U.S.Const. Amend. XIV, § 1, provides in part: “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” . The court held that no private right to sue was afforded the plaintiff under Executive Order 11246 as amended by Executive Order 11375, and that there was no pendent jurisdiction to enable Dr. Braden to sustain her action under the Pennsylvania Equal Pay Act, supra, since he had dismissed the counts based on the Federal Acts and the Executive Order. The position of the district judge with regard to the pendent jurisdiction issue is clearly correct if in fact there was no federal jurisdiction. We do not decide this question in light of the disposition of this case. . Prior to the foregoing quotation, the Supreme Court also stated at 725, 81 S.Ct. at 861: “As the Chancellor pointed out, in its lease with Eagle the Authority could have affirmatively required Eagle to discharge the responsibilities under the Fourteenth Amendment imposed upon the private enterprise as a consequence of state participation. But no State may effectively abdicate its responsibilities by either ignoring them or by merely failing to discharge them whatever the motive may be. It is of no consolation to an individual denied the equal protection of the laws that it was done in good faith. Certainly the conclusions drawn in similar cases by the various Courts of Appeals do not depend upon such a distinction. By its inaction, the Authority, and through it the State, has not only made itself a party to the refusal of service, but has elected to place its power, property and prestige behind the admitted discrimination.” Insofar as State action is concerned, see the excellent article, “Private Universities : The Courts and State Action Theories,” 29 Washington & Lee L.Rev., 320 (1972), and “The Supreme Court, Foreword : ‘State Action,’ ” 41 Harv.L. Rev. 84 (Nov. 1967). We adhere to the view that Burton is controlling. . We will assume that the Chancellor of the University is paid a salary. . This document is not so designated, but since the appellees filed an appendix which is designated as theirs, we take the document to which we have referred to be the appellant’s appendix. . A similar provision is in the Temple University-Commonwealth Act, 24 P.S. § 2510-1 et seq., in particular § 2510-2. But it should be observed that the Temple Act also provides, 24 P.S. § 2510-2, the following: “That Temple University owns and maintains land, buildings, and other facilities which are used, together with land and buildings owned by the Commonwealth of Pennsylvania, for higher education, which land, buildings and other facilities are under the entire control and management of the board of trustees.” No similar provision appears in the University of Pittsburgh-Commonwealth Act. The Indiana University of Pennsylvania Act, 24 P.S. § 2510-101 et seq., contains no provision similar to the “instrumentality” provision of § 2510-202, University of Pittsburgh, or § 2510-2, Temple University. . If the University is a state agency, the cause of action based on 42 U.S.C. § 1983 cannot be maintained for in United States ex rel. Gittlemacker v. County of Philadelphia, 413 F.2d 84, 86 (1967), we stated: “Because the County of Philadelphia, by virtue of the City-County Consolidation Amendment to the Pennsylvania Constitution, is merged into the city, we have the threshold question to meet: is the city a ‘person’ under the Civil Bights Act’s provisions that ‘Every person who * * * subjects * * * any citizen of the United States * * * to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable * * *.’ This issue was directly answered by the Supreme Court in Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961), which held that a municipality was not such a ‘person’ contemplated by the Civil Bights Act of 1871 [now 42 U.S.C. § 1983]. Accordingly, there can be no claim upon which relief can be granted under the Civil Bights Act of 1871 against a municipality. Similarly, because Philadelphia General Hospital is a city-owned institution which operates as part of city government (Philadelphia Home Buie Charter, § 3-100 (f), § 3-903) it stands on the same footing as the municipal defendant. We conclude it was appropriate to dismiss the action against these two defendants.” (Note omitted.) The same principle was again enunciated in Lehman v. City of Pittsburgh, 474 F.2d 21 (3 Cir. 1973), as follows: “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 pot 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. 1973).” See also, Fischer v. Cahill, Governor, 474 F.2d 991 (3 Cir. 1973); Anthony v. Cleveland, 355 F.Supp. 789 (D.Haw.1973), and Wolfe v. O’Neill, 336 F.Supp. 1255 (D.Alaska 1972). This, however, would not necessarily prevent the plaintiff’s cause of action' from being maintained under the Fourteenth Amendment, Brown v. Board of Education, 347 U.S. 483, 486-496, 74 S.Ct. 686, 98 L.Ed. 873 (1954), and Chancellor Posvar is an appropriate defendant not subject as a party to the limitations of Gittlemacker. The relationship between the University and the Commonwealth is, however, the very point at issue and we feel we should not dispose of it on the present record for the reasons indicated herein. . We note as a further difficulty disclosed by the record in adjudicating this case that there were several hearings before the district judge but transcripts of those hearings are not part of the record before us.

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Caselaw Access Project

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UNITED STATES of America, Plaintiff Appellee, v. Jeffrey Karl SCHULZ, Defendant-Appellant. No. 72-2645. United States Court of Appeals, Ninth Circuit. March 6, 1973. Rehearing Denied March 27, 1973. James G. Seely, Jr. (argued), San Francisco, Cal., for defendant-appellant. James H. Daffer, Asst. U. S. Atty. (argued), Chester G. Moore, III, Michael Field, Asst. U. S. Attys., James L. Browning, Jr., U. S. Atty., San Francisco, Cal., for plaintiff-appellee. Before HAMLEY, BROWNING and WRIGHT, Circuit Judges. HAMLEY, Circuit Judge: Jeffrey Karl Schulz appeals from a judgment of conviction for failing to report for induction in violation of 50 U. S.C. App. § 462(a). We affirm. Schulz’ Local Board 19, Napa, California, classified him I-A on August 31, 1966. On October 13, 1966, the board ordered him to report for a pre-induction physical examination on November 1, 1966. Schulz reported and was found acceptable for military service. On February 26, 1970, the local board ordered Schulz to report for induction on March 17, 1970. Of the eight men called for that month, Schulz was the sixth in order of priority. He did not report on that date. On August 18, 1970, the local board mailed Schulz a continuing duty order with a reporting date of September 9, 1970. Again he did not report. On October 8, 1971, the local board mailed Schulz another continuing duty order, with a reporting date of November 9, 1971. Once more Schulz did not report. It is for this last failure to report that Schulz was prosecuted and convicted. Schulz’ only defense is that the February 26, 1970, induction order is invalid because he was prematurely called. He asserts that his call was premature because, on February 26, 1970, there were at least three other registrants of his draft board who had a higher induction priority (lower lottery number) than Schulz and who were fully available for induction except for the fact that they had not been physically examined on February 2, 1970, as they should have been under the applicable regulation. Schulz contends that the by-passing of these higher priority registrants for physical examinations resulted from a violation of the regulation (32 C.F.R. § 1628.11(b) (1970)) which sets forth the order in which men are to be called for physical examinations. Under this regulation, registrants, other than volunteers, are to be called for physical examination in the order of their liability for induction. Prior to January 1, 1970, the order of liability for induction was based on the oldest-first system. Beginning on that date, the order of liability was determined by the random selection system, such that the lower the lottery number the greater the induction liability. Despite this change effective January 1, 1970, Schulz’ local board did not call men for physical examinations in lottery-number order until April, 1970, but, until then, called men for physical examinations in the oldest-first order in force prior to January 1, 1970. The result was that, on February 26, 1970, when the local board ordered Schulz to report for induction on March 17, 1970, there were eight registrants of that board with higher induction priorities who would have then been subject to induction but for the fact that they had not been called for physical examinations under the system which became effective January 1, 1970. Since at least United States v. Baker, 416 F.2d 202, 204 (9th Cir. 1969), this court has recognized order-of-call defenses in Selective Service cases such as this. Ordinarily these defenses involve instances in which, it was asserted, higher-priority registrants would have been available for induction ahead of the defendant, were it not for improper processing of those registrants by the local board. In United States v. Smith, 443 F.2d 1278 (9th Cir. 1971), we undertook to specify the elements which must be present to establish such a defense. We said: “A registrant may rely upon improper processing of higher priority registrants in defending a criminal prosecution if he can establish (1) that his local board violated a specific regulation, and (2) that the result was to delay significantly the time when higher priority registrants became fully acceptable for induction.” 443 F.2d, at 1280 The Government argues that, notwithstanding the facts recited above concerning the processing of Schulz and the eight other registrants, there was here no violation of a regulation nor any significant delay in the processing of the higher priority registrants. As indicated above, Schulz contends that the local board violated 32 C.F.R. § 1628.11(b), because it did not call higher-priority registrants for physical examinations “in the order of their liability for service” which, after December 31, 1969, was by lottery number instead of oldest first. But the Government calls attention to the fact that this regulation qualifies this required local board procedure by the words “so far as is practicable.” In an effort to establish a factual basis for the contention that it was not practicable for the Napa local board to switch over from the oldest-first to the lottery system prior to April, 1971, the Government called Mrs. Jessie Lee as a witness. In late 1969 and early 1970, Mrs. Lee was executive secretary of the San Mateo, California local board, which had a roster of thirty-six thousand active registrants. Until shortly before the trial in July, 1972, and for some time prior thereto, she had been an administrative assistant with the Regional Council’s Office for Selective Service. Mrs. Lee explained that in switching to the lottery system it was necessary for a local board to take the file of each active registrant, determine the date of birth of the registrant, and then place on the file the random sequence number as established at the December, 1969, drawing of lottery numbers. Mrs. Lee testified that for her San Mateo local board it was necessary to close the local board office for four days in order to accomplish this change-over. Mrs. Lee had no familiarity with the switch-over problem of the Napa local board. On the basis of her expertise, she was asked to estimate how much work would have been required for the Napa local board to make this switchover, Mrs. Lee was unable to provide an estimate. Mrs. Lee testified that h.er San Mateo local board construed the State Director of Selective Service’s instructions on the Physical Examination Calls on Local Board for January, February and March, 1970, as authorizing local boards to continue calling registrants for physical examinations on the oldest-first basis through those months. The instruction on the Physical Examination Call dated January 7, 1970, reads: “In filling the attached requisition for pre-induction processing the local board will first order registrants who were born after January 1, 1944 and on or before December 31, 1950. The balance of the requisition will be filled out by ordering registrants born after December 31, 1950, the oldest first. “REGISTRANTS AVAILABLE FOR PHYSICAL EXAMINATION WILL BE SELECTED IN ACCORDANCE WITH SECTION 1628.11 OF SELECTIVE SERVICE REGULATIONS.” The collateral registrants here in question were in the first category described in these instructions, and all in that category had been assigned lottery numbers in the December, 1969, drawing. The instructions did not advise the local board to call registrants in that category for physical examinations in the oldest-first order. While the instructions did not expressly advise that those in this category were to be called for examination according to lottery number, this was implicit in the final sentence, quoted above, referring to section 1628.11 of the Selective Service Regulations. Giving application to that regulation, the conclusion is compelled that local boards were instructed to call registrants in the first category for physical examination in the order of their liability for service (by lottery number) “so far as practicable.” Mrs. Lee testified that no local board in California ordered any physical examination on a lottery-number basis before April 1, 1970. Thus Mrs. Lee, and local boards who entertained her view of the meaning of these instructions, were mistaken in believing local boards had been given blanket authorization to continue physical examination calls in order of oldest-first through March, 1970. Mrs. Lee also testified that no local board in Northern California ordered any physical examinations on a lottery-number basis before April 1, 1970. On cross-examination, however, Mrs. Lee conceded that she had no personal knowledge to support this statement. She had merely assumed that this was the case apparently on the basis of the instructions on the Physical Examination Calls and possibly a memorandum issued by the State Director instructing the larger local boards to close for a few days in March of 1970 in order to make the change to the lottery system. We are forced to conclude from what is said above that the Government did not prove that the Napa local board acted pursuant to instructions from the State Director in failing to call the eight collateral registrants for physical examinations by February 2, 1970, and did not prove that it was not practicable for the Napa board to so call them by that date. This brings us to the Government’s alternative contention that, even if there was improper processing of higher-priority registrants, the order-of-call defense, as outlined in United States v. Smith, 443 F.2d 1278, 1280 (9th Cir. 1971), was not established because the result of such impropriety was not to delay significantly the time when higher priority registrants became fully accept^ able for induction. All eight of the collateral registrants became fully acceptable for induction on March 11, 1970, and all were mailed orders to report for induction on March 23, 1970. Thus Schulz’ original induction order of February .26, 1970 (to report for induction on March 17, 1970), preceded the availability of the collateral registrants for induction by not more than two weeks. In all likelihood, then, the impropriety of the local board’s procedure resulted in Schulz being sent an induction order one month prematurely, namely in February instead of March, 1970. The trial court erred in failing to recognize that, under the circumstances, of this case, the local board acted improperly, even though the initial induction order was entered only one month prematurely. In our view, however, the trial court’s failure to acquit on this ground was harmless error. It is true that the Smith and Baker opinions contain some language tending to indicate that the failure to acquit where there is any prematurity whatever in issuing the initial induction order is reversible error. However, in neither of those cases was the question of harmless error presented or discussed. In our case that issue is plainly before us, although couched in terms of whether the delay in processing other registrants was “significant,” rather than in the familiar term “harmless error.” In terms of its effect upon Schulz, the improper processing by the board, as we have seen, resulted in issuing the initial induction order (to report for induction on March 23, 1970) one month prematurely. But the prematurity of this initial order did not prejudice Schulz in the slightest. He was not prosecuted for failing to report on that date, but for failure to report on November 9, 1971, under a continuing duty order. Schulz’ period of military service was not enlarged. He makes no claim that, by reason of the prematurity of the initial order, he was deprived of the right to file a conscientious objector application. Nor is there any showing of intentional discriminatory treatment or favoritism. The order-of-call defense is just and proper when kept within reasonable bounds. But when it extends to the examination of local board procedures affecting collateral registrants twice or more removed from the defendant (not involved here) or takes account of relatively minor delays where no substantial prejudice is shown, it loses its force as an instrument of equity and becomes a hollow technicality. See United States v. Brudney, 463 F.2d 376, 378 (9th Cir. 1972); United States v. Griglio, 467 F.2d 572 (1st Cir. 1972). We so view Schulz’ order-of-call defense in the context of this case. Affirmed. . 32 C.F.R. § 1628.11(b) (1970) reads in pertinent part: “In complying with such Physical Examination Call . . . , the local board shall mail an Order To Report For Armed Forces Physical Examination . . . to registrants who have been classified in Class I-A, Class I-A-O, and Class I-O . . . The local board shall, so far as is practicable, select and order to report for armed forces physical examination such registrants who are nonvolunteers in the order of their liability for service.” . While apparently not called in lottery number order, all eight of these challenged registrants received pre-induction physical examinations on March 11, 1970, and all were mailed orders to report for induction on March 23, 1970. . We also indicated, in Smith, that even where no regulation has been violated, if there has been intentional delay, discriminatory treatment, or favoritism, a defense may be established. Smith, 443 F.2d at 1280. . However, as indicated in note 2, above, all eight of the collateral registrants here in question took their physical examinations on March 11, 1970, but apparently not on a lottery-number basis. . In United States v. Baker, 416 F.2d 202, 205 (9th Cir. 1969), we held that where an order of call issue is presented in a case such as this, the Government has the burden of proof to justify by affirmative evidence the by-passing of the other registrants. . Except as to its bearing on the question of harmless error, to be discussed below, we disregard the fact, noted at the outset of this opinion, that Schulz was convicted of failing to report for induction on November 9, 1971, under a continuing duty order.

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UNITED STATES of America, Plaintiff-Appellant, v. Walter C. ROBSON, DefendantAppellee. No. 72-3114. United States Court of Appeals, Ninth Circuit. April 13, 1973. Stephen V. Wilson, Asst. U. S. Atty. (argued), William D. Keller, U. S. Atty., Eric A. Nobles, Asst. U. S. Atty., Los Angeles, Cal., for plaintiff-appellant. Clyde R. Maxwell (argued), Los Angeles, Cal., for defendant-appellee. Before DUNIWAY and WRIGHT, Circuit Judges, and RENFREW, District Judge. Of the Northern District of California. EUGENE A. WRIGHT, Circuit Judge: The government has appealed from an order of the district court suppressing certain exhibits. Respondent taxpayer was indicted on three counts of income tax evasion [26 U.S.C. § 7201] charging him with willfully failing to report more than $100,000 in taxable income for the calendar years 1965,1966, and 1967. During the trial below the government attempted to introduce into evidence three handwritten transcripts of some of respondent Robson’s business records taken by an Internal Revenue Agent in the office of Robson’s accountant with Robson’s approval. Respondent moved to suppress these exhibits, but the motion was untimely. The court indicated that while it agreed with respondent on the merits of his motion it could not order suppression at that time since such an order would not preserve the government’s right to appeal. At the court’s suggestion, respondent moved for a mistrial, followed by a motion for suppression. Both motions were granted, and the government’s right to appeal under 18 U.S.C. § 3731 was preserved. Inquiry into respondent’s tax matters dated from a telephone call to the local IRS office in March 1968. The caller, a young woman who stated that she was engaged to Robson in 1967, reported that he might be guilty of income tax evasion. She indicated the kind of business practice used and described some assets owned by Robson, including a boat, two automobiles and two lots. She also gave the names of banks where he did business. The informant indicated that she was filing a claim for a reward should any back taxes be assessed against and collected from respondent as a result of her information. According to established IRS procedure, this information was taken over the phone by a special agent of the Intelligence Division assigned to receive such intelligence information items from the public. The information item was subsequently evaluated by another agent in the Intelligence Division to determine if the item had potential for an Intelligence Division criminal investigation. In light of the fact that there were no prior information items in the files with respect to Robson, and also because the information given by the informant was vague on several key points, this agent decided that the item did not warrant a criminal investigation by the Intelligence Division. Again according to established procedures, the information item was then forwarded to the Audit Division for its evaluation. The Audit Division evaluated this information item in light of respondent’s returns for the years in question and apparently decided that an audit was in order to determine the existence of any additional tax liability. After the referral to the Audit Division, the informant called in again. This time she related that Robson had bragged that he had embezzled approximately $80,000 from one business during the previous year. She also indicated that by her estimate Robson had taken approximately $250,000 over the last three years. This information was not acted upon by Intelligence Division, but was instead simply forwarded to Audit Division to be added to the previous item. Agent Larry Koba of the Audit Division was assigned the Robson case. His assignment was to examine Robson’s tax affairs for the relevant years in order to determine the correct tax liability. His instructions were no different than those given him in examining any other return. Specifically, he was given no special instructions regarding fraud. On June 24, 1968, Agent Koba wrote to Robson indicating that the latter’s tax returns for 1965 and 1966 had been assigned to Koba for examination. Koba asked Robson to call and to arrange for a mutually convenient time for Koba to examine the books and records used by Robson in the preparation of his returns. Subsequently Robson’s accountant, Mr. Gillmore, called Koba to arrange for an appointment. The record discloses that Agent Koba at no time informed Robson of his Fifth and Sixth Amendment rights. Nor was Robson informed by Agent Koba of the criminal potential inherent in his investigation, or of Robson’s right under the Fourth Amendment to demand a warrant before submitting his records for examination. After auditing the records, Koba concluded that Robson had received over $100,000 in income that had not been reported in his returns. Pursuant to standing orders to refer any case to the Intelligence Division upon the discovery of an indication of fraud during the course of an audit, Agent Koba referred the Robson case to the Intelligence Division. That Division then conducted a criminal investigation, and this prosecution ensued. During the trial below, the government attempted to introduce into evidence three handwritten transcripts of Robson’s business records taken by Agent Koba during the course of his examination of the records. The district court granted respondent’s motion to suppress, on the following reasoning: The reason I am granting the motion, Mr. Wilson, is that it appears to me from the evidence in this case — and I take the word from a question asked by you — that the audit, the civil audit, stemmed solely from, for no other reason but, the investigative report and the conduct of the special agents in notifying the Revenue agents of the possible tax fraud of Mr. Robson. The proximate causation, the sole causation, the only reason, and not a single other reason, why there was a civil audit of Mr. Robson stemmed solely from the acts of the special agent. At that time the Government had one of two choices to make. The Government could have gone ahead and conducted an audit and would have at that time been limited in its remedies to civil relief. But if the Government did not want to limit its remedy to civil relief, it then had an obligation to inform the taxpayer and the taxpayer’s agents of his right to refuse the examination of his books. The government, under the facts of this case, did not have the right to exercise its options after the fact. The option had to be exercised before there was an examination of Mr. Robson’s books. If the Revenue agents had examined the books as a result of another practice or procedure or there had been another cause or there had been another reason why the books were audited, my ruling, of course, would have been different. But when the sole cause of the audit is a result of the efforts of the special agents, then the Revenue agent is acting as the agent of the special agent and the Fourth Amendment and Fifth Amendment rights of the defendant have been violated, primarily the Fourth Amendment. On the facts of this case, there are four possible grounds for the suppression of these exhibits: (1) under the Fifth and Sixth Amendments because Robson was not warned of his Miranda-type rights; (2) under the Fifth Amendment because the IRS agents violated due process by not following their internal regulations directing them to give certain warnings to taxpayers suspected of criminal violations; (3) under the Fourth Amendment because Robson's consent to the search was induced by trickery, deceit, or misrepresentations of Agent Koba; or (4) under the Fourth Amendment because Robson’s consent to the search was not a “knowing and voluntary” waiver of his right to demand a warrant. FIFTH AND SIXTH AMENDMENTS Miranda-Type Warning In Kohatsu v. United States, 351 F.2d 898 (9th Cir. 1965), we held that where agents of the Intelligence Division had properly identified themselves and disclosed their purpose to audit tax returns, they were under no duty to advise the taxpayer of his Fifth Amendment rights or of the criminal nature of the investigation. We reaffirm that holding, and refuse to follow the only circuit to adopt a contrary view, the Seventh. This court has repeatedly refused to extend the Miranda rule beyond its stated limits. Simon v. United States, 421 F.2d 667 (9th Cir. 1970). As we stated in Simon: “Absent custody in the conventional sense, we have declined to fault a government agent and reverse a conviction for failure to give a Miranda type warning unless the facts clearly demonstrated that the appellant was ‘deprived of his freedom by the authorities in any significant way.’ ” Id. at 668. Here respondent was not deprived of his freedom in any way and accordingly we hold that Agent Koba was under no duty to inform respondent of his Miranda-type rights, including the fact that the investigation could have potential criminal consequences. The fact that Agent Koba had an informant’s tip suggesting possible tax evasion in no was distinguishes the instant case. Feichtmeir v. United States, 389 F.2d 498 (9th Cir. 1968). FIFTH AMENDMENT Due Process On October 3, 1967, approximately one year before Agent Koba initiated his investigation, the Internal Revenue Service issued News Release No. 897, which stated in relevant part as follows: In response to a number of inquiries the Internal Revenue Service today described its procedures for protecting the Constitutional rights of persons suspected of criminal tax fraud, during all phases of its investigations. Investigation of suspected criminal tax fraud is conducted by Special Agents of the IRS Intelligence Division. This function differs from the work of Revenue Agents and Tax Technicians who examine returns to determine the correct tax liability. Instructions issued to IRS Special Agents go beyond most legal requirements to assure that persons are advised of their Constitutional rights. On initial contact with a taxpayer, IRS Special Agents are instructed to produce their credentials and state: “As a special agent, I have the function of investigating the possibility of criminal tax fraud.” If the potential criminal aspects of the matter are not resolved by preliminary inquiries and further investigation becomes necessary, the Special Agent is required to advise the taxpayer of his Constitutional rights to remain silent and to retain counsel. Respondent would have us say that Koba was acting as an agent of the Intelligence Division at the time of his initial contact with Robson and during the audit of his records. Assuming arguendo that the failure of the IRS to follow its procedures designed to protect the rights of taxpayers amounts to a violation of due process under the principle of United States ex rel. Accardi v. Shaughnessy, 347 U.S. 260, 74 S.Ct. 499, 98 L.Ed. 681 (1954), we find nothing in the record before us indicating that Koba was an agent of the Intelligence Division. Koba made the same type of civil audit that he conducted in all cases, regardless of the initial impetus for the audit. He had no instructions from the Intelligence Division, had no interim conferences with its representatives, and was under no obligation to report to it unless his audit uncovered an indication of fraud. In short, the investigation conducted by Koba was completely independent of the Intelligence Division, except for the fact that the informant’s tip that led to the audit originally came from that Division. That fact, however, in the context of this investigation, is meaningless. Every informant’s tip received by the IRS comes through the Intelligence Division. However, not every tip results in an Intelligence Division investigation. Such is the case here. The Intelligence Division concluded that the information in the tip did not warrant a criminal investigation, and none was conducted. The resulting investigation conducted by Koba was of no greater scope than a routine civil audit to determine tax liability. Accordingly, we conclude that the trial court was in error in concluding from these undisputed facts that Koba was an agent of the Intelligence Division. Having decided that, we hold that there was no violation of due process in Koba’s failure to give the warnings required of special agents of the Intelligence Division. FOURTH AMENDMENT Deceit, Trickery, and Misrepresentation It is a well established rule in this and other circuits that a consent search is unreasonable under the Fourth Amendment if the consent was induced by the deceit, trickery or misrepresentation of the Internal Revenue agent. Gouled v. United States, 255 U.S. 298, 41 S.Ct. 261, 65 L.Ed. 647 (1921); United States v. Bland, 458 F.2d 1 (5th Cir. 1972); United States v. Jaskiewicz, 433 F.2d 415 (3rd Cir. 1970); United States v. Prudden, 424 F.2d 1021 (5th Cir. 1970); Spahr v. United States, 409 F.2d 1303 (9th Cir. 1969); Cohen v. United States, 405 F.2d 34 (8th Cir. 1968); Kohatsu v. United States, supra; United States v. Sclafani, 265 F.2d 408 (2nd Cir. 1959). Respondent urges that the failure of Agent Koba to advise Robson or his accountant that the true purpose of his audit was to verify an informant’s tip as to the crime of tax evasion constituted deceit and trickery sufficient to vitiate Robson’s consent to the search of his records. We disagree. In applying the principle first announced in Gouled v. United States, supra, we have consistently held that the failure of an IRS agent, be he Special or Revenue, to warn a taxpayer that an audit may have potential criminal ramifications does not render the search unreasonable. Spahr v. United States, supra; Kohatsu v. United States, supra; accord, United States v. Bland, supra; United States v. Stamp, 458 F.2d 759 (D.C. Cir. 1971); United States v. Striding, 437 F.2d 765 (6th Cir. 1971); United States v. Jaskiewicz, supra; United States v. Prudden, supra; Cohen v. United States, supra. However, the IRS agent must not affirmatively mislead the taxpayer into believing that the investigation is exclusively civil in nature and will not lead to criminal charges. Cohen v. United States, supra. The record undisputedly disclosed that Agent Koba did not represent his audit to be simply “civil” in nature. In fact, Agent Koba did not indicate to Robson that he intended to conduct a “civil” audit; rather, he told Robson that his tax returns “have been assigned to me for examination.” We therefore find that Agent Koba made no affirmatively misleading statements concerning the potential consequences of his audit. Respondent would have us hold, however, that Koba’s silence as to the criminal potential of his audit was an affirmative misrepresentation of the true nature of the audit. As the Fifth Circuit recently stated in United States v. Prudden, supra, 424 F.2d at 1032: “Silence can only be equated with fraud where there is a legal or moral duty to speak or where an inquiry left unanswered would be intentionally misleading.” None of these factors was present here. As noted above, Agent Koba was under no duty to mention the possible criminal consequences of his audit, and the record discloses no intimation that Koba was ever queried as to the scope of his investigation. We therefore hold that Robson’s consent to the search of his records was not induced by Agent Koba’s deceit, trickery, or misrepresentation, and that the exhibits cannot be suppressed on that theory. FOURTH AMENDMENT Waiver of Right to Demand Warrant It is undisputed that Agent Koba did not inform Robson of his Fourth Amendment right to demand a warrant before making his records available for audit. It is also undisputed that Robson, through his agent Gillmore, did affirmatively consent to Koba’s search of his records. The question we must decide is whether Robson’s consent amounted to a “knowing and voluntary” waiver of his right to demand a warrant. At the outset we note our reaffirmanee today of the holding of Kohatsu v. United States, supra, that the fruits of an IRS agent’s search need not be suppressed because of his failure to warn the taxpayer of his Fifth Amendment right not to disclose anything that might incriminate him. A fortiori, one might conclude that Agent Koba’s failure to warn respondent simply that he had a right to demand a warrant also would not dictate suppression. That is the result we reach. This circuit has often considered the question of the waiver of a right to demand a warrant in the criminal search context. Bustamonte v. Schneckloth, 448 F.2d 699 (9th Cir. 1971), cert. granted, 405 U.S. 953, 92 S.Ct. 1168, 31 L.Ed.2d 230 (1972); Schoepflin v. United States, 391 F.2d 390 (9th Cir. 1968); Cipres v. United States, 343 F.2d 95 (9th Cir. 1965). We said in Cipres v. United States, supra at 97, that: “ . . . [A] waiver cannot be conclusively presumed from a verbal expression of assent. The court must determine from all the circumstances whether the verbal assent reflected an understanding, uncoerced, and unequivocal election to grant the officers a license which the person knows may be freely and effectively withheld. . . ." The factual situation in this case is different from that in the foregoing cases, and we think that the rule quoted is not applicable here where there really was no search in the usual sense in which that word is used. We base our decision on the distinction we have recognized elsewhere between an administrative and a criminal search. United States v. Thriftimart, 429 F.2d 1006 (9th Cir. 1970); United States v. Schafer, 461 F.2d 856 (9th Cir. 1972); United States v. Alfred M. Lewis, Inc., 431 F.2d 303 (9th Cir. 1970). Agent Koba’s search is almost identical to the administrative searches involved in Thriftimart and Lewis, to the extent that Fourth Amendment rights are involved. In those cases we upheld searches of business premises by agents of the Food and Drug Administration which uncovered unsanitary conditions leading to criminal charges against the defendants under the Federal Food, Drug and Cosmetic Act. The defendants argued that since they were not warned they had a right to refuse entry absent the showing of a warrant and since there was no proof they knew they had such a right, the consent given was not an “uncoerced, and unequivocal election to grant the officers a license which the person knows may be freely and effectively withheld.” We held for the first time in Thriftimart that an administrative search is to be treated differently than a criminal search. The primary reason for this distinction was held to be: “In a criminal search the inherent coercion of the badge and the presence of armed police make it likely that the consent to a criminal search is not voluntary. Further, there is likelihood that confrontation comes as a surprise for which the citizen is unprepared. ...” 429 F.2d at 1009. We found that these circumstances were not present in an administrative search, and accordingly we held that: “ . . . [T]he absence of coercive circumstances and the credibility of a consent given to an inspection justify a departure from the Schoepflin rule in eases of administrative inspection. Here, the managers were asked for permission to inspect; the request implied an option to refuse and presented an opportunity to object to the inspection in an atmosphere uncharged with coercive elements. The fact that the inspectors did not warn the managers of their right to insist upon a warrant and the possibility that the managers were not aware of the precise nature of their rights under the Fourth Amendment did not render their consent unknowing or involuntary. . . . Their manifestation of assent, no matter how casual, can reasonably be accepted as waiver of warrant.” 429 F.2d at 1010. [Footnotes omitted.] We find this reasoning persuasive in disposing of the instant case. In the context of Fourth Amendment rights, respondent had nothing to gain by demanding a warrant. The audit of his records was inevitable. Further, his consent was given in a totally noncoercive atmosphere. Respondent was asked by letter to call Agent Koba to arrange for an appointment for an examination of his books. We hold therefore that Robson’s consent to the search of his records can reasonably be accepted as a waiver of warrant, even though the record does not disclose that Robson was aware of the precise nature of his Fourth Amendment rights. We conclude that the district court' erred in ordering suppression of the three exhibits. Accordingly, the order of the district court is reversed and the cause is remanded to that court for further proceedings. . The books in themselves were complete. Agent Koba concluded, however, that Robson’s disbursements greatly exceeded his acknowledged receipts for the years in question. On the basis of this information, Koba made the calculation of the additional tax due. . United States v. Dickerson, 413 F.2d 1111 (7th Cir. 1969). . Cf. Mathis v. United States, 391 U.S. 1, 88 S.Ct. 1503, 20 L.Ed.2d 381 (1968). . The Fourth Circuit has so held in United State v. Heffner, 420 F.2d 809 (1970). . See also, United States v. Hammond, 413 F.2d 608 (5th Cir. 1969); Kohatsu v. United States, supra.

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Anthony VAN DE WALLE, Plaintiff-Appellee, v. AMERICAN CYANAMID COMPANY, Defendant-Appellant. No. 72-2406. United States Court of Appeals, Fifth Circuit. April 23, 1973. Rehearing Denied May 18, 1973. Ralph S. Johnson, New Orleans, La., for defendant-appellant. Charles R. Maloney, New Orleans, La., for plaintiff-appellee. Before GEWIN, SIMPSON and RO-NEY, Circuit Judges. GEWIN, Circuit Judge: Late one Sunday evening in August 1970 Anthony Van De Walle was grievously injured in an accident which occurred while he was en route from his home to his place of employment. Alleging that his accident arose in the course of his employment, Van De Walle brought this diversity suit against his employer, American Cyanamid Company, seeking total and permanent disability benefits under the Louisiana Workmen’s Compensation Act. After a bench trial the district court awarded a substantial judgment in favor of Van De Walle from which American Cyanamid appeals. Since we cannot agree with the district court’s application of the controlling law in reaching its decision that the accident which befell Van De Walle occurred in the course of his employment, we reverse. On the date of his accident Van De Walle had completed approximately three years of service as a draftsman at American Cyanamid’s chemical manufacturing plant in Waggaman, Louisiana. His residence was located in Violet, Louisiana, and he customarily drove the thirty-five miles to appellant’s plant in his own ear. Because the chemical manufacturing done at the Waggaman plant had a deleterious impact on the equipment used in the process, the plant could not function continuously for more than twelve months or so without undergoing a major overhaul. When a major overhaul became necessary, American Cyanamid would begin an operation known as a “turnaround” during which particular units of the plant would be temporarily shut down so that the equipment could be serviced and repaired. As soon as a turnaround commenced, the plant’s employees were required to switch from their regular eight hour a day work schedule to an around-the-clock format under which each employee was on duty for a twelve hour shift. The scheduling of shifts was somewhat flexible in that each worker was informally consulted as to what hours he would prefer. Since American Cyanamid classified any work performed in addition to the requisite forty hours a week as overtime, part of each twelve hour shift in a turnaround was overtime work for which an employee was entitled to be paid at the standard time and a half rate. Once begun, a turnaround continued until all essential maintenance work was completed, usually a period of from seven to ten days. Thus turnarounds were in a sense extraordinary procedures of uncertain duration, but they were planned in advance and of necessity occurred with some regularity. Ordinarily Van De Walle worked eight hours of the day, five days of the week, from Monday through Friday. But on the Friday preceding the Sunday evening in question, American Cyanamid began another turnaround at its Waggaman plant. Although Van De Walle’s vacation had been scheduled to start after he finished work on Friday, he decided to forego it and accordingly arranged with his immediate supervisor and a co-employee named Gonzales to return at midnight to begin a twelve hour shift lasting until noon Saturday. On Saturday Van De Walle agreed to continue working the midnight to noon shift; however, he also made a special arrangement with Gonzales whereby he would relieve Gonzales an hour early on Sunday night at 11:00 p. m. As a result of the turnaround and his understanding with Gonzales, Van De Walle was en route to the Waggaman plant on Sunday night. A flat tire forced him to stop his car while crossing a river bridge, and while repairing it, he was struck by another vehicle sustaining serious injuries. At the time of Van De Walle’s accident, American Cyanamid had in effect a policy of paying its personnel a travel allowance for unscheduled emergency trips to the plant. This policy was described in a “Standard Practice Instruction” which clearly stated that each employee was expected to provide his own transportation to and from the plant for his normal work schedule and for all previously scheduled overtime. Trips to and from the plant in a privately owned automobile were compensable if an individual was called in an emergency by his supervisor or department head and asked to report to the plant during off-scheduled hours. Although American Cyanamid did not pay its employees a travel allowance for trips to and from the plant during turnarounds and in spite of Gonzales’ testimony that he did not turn in a travel voucher for his trips to the plant during this turnaround, the district court concluded that a turnaround was the kind of emergency contemplated by the “Standard Practice Instruction” and that under it Van De Walle had been entitled to travel expenses for his Sunday night trip to the plant. On this basis, and because Van De Walle would not have been on his way to work when the accident occurred but for the turnaround, the district court decided that the accident did arise in the course of his employment and awarded judgment in Van De Walle’s favor. Under the Louisiana Workmen’s Compensation Act a worker is entitled to compensation if he is accidentally injured during the course of employment. As stated in the leading case of Kern v. Southport Mill, an employee is covered by the Act if when injured he was “then engaged about his employer’s business and not merely pursuing his own business or pleasure.” From these broad guidelines Louisiana courts have fashioned a more specific rule to the effect that an accident occurring while the employee is en route to or from work is not usually considered as within the course of his employment. This rule is apparently grounded upon the premise that the employment relationship is usually suspended from the time the employee quits work to go home until he resumes his job the following day; during the off hours he is on his own. But this rule is not without at least one well-established and pertinent exception which arises when the rule’s underlying premise is absent. If the employer has assumed an interest in the transportation of his workmen to and from work because it serves some useful purpose of his other than simply having employees on the job, then the employment relationship is no longer confined to the job premises and may extend to travel to and from home. Thus the cases hold that when an employee is routinely furnished transportation to or from work as part of the employment agreement, he is covered by the Act if an accident befalls him during transportation. The agreement to furnish transportation indicates that the worker is still on his master’s business while traveling to and from work. This exception to the usual rule is available not only when the employer provides transportation as such but also when he pays a travel allowance in lieu thereof, and it matters not whether the transportation agreement is expressly stated or is merely implicit in the working arrangement. But in no event is the exception applicable when the employment relationship does not encompass travel to and from work and the employer receives no special benefit from it. For the Act’s purpose is to protect workers from the hazards that accompany their job and not to insure them against the common perils of life. Turning to the matter at hand, after carefully considering the record and the contentions of the parties, we are forced to conclude that we would abort the purpose of Louisiana’s Workmen’s Compensation Act were we to permit its coverage to be extended to Van De Walle’s accident. It is undisputed that when injured he was en route to work. Based on its determination that under company policy Van De Walle was due a travel allowance for his trip, the district court held that his injuries were compensable under the exception to the general rule concerning travel to and from work. But American Cyanamid’s “Standard Practice Instruction” without qualification states that a travel allowance is to be paid only for unscheduled emergency trips to and from the plant, and Van De Walle’s Sunday night shift had been previously scheduled in informal discussions with his supervisor and Gonzales. Although the turnaround then in effect was undoubtedly not the routine operation, it was neither unfamiliar nor unexpected, and it can hardly be characterized as an “emergency” as that term is commonly used. The turnaround did nothing more than provoke a temporary change in the hours which the employees worked. It did not create an exception to the normal company policy under which employees were expected to provide their own transportation to and from work. The district court’s ruling to the contrary was plain error. The only difference between the trip to the plant on which Van De Walle was injured and those he made while the plant was on its normal schedule is that the former was made on Sunday night. We cannot perceive any significance in this difference. Van De Walle was not entitled to travel expenses for his trip, and it was of no special unusual benefit to his employer. Turnarounds at the plant occurred at certain intervals when overhauling and repairs were necessary and the practice was considered a usual and normal requirement in the operation of the plant. Van De Walle was simply on his way to work, albeit at an odd hour. In these circumstances his case falls within the general rule that injuries sustained while en route to or from work are not within the course of employment. The judgment of the District Court is vacated and the case is remanded with directions to enter judgment for the appellant. Vacated and remanded with directions. . LSA-R.S. 23-1021 et seq. . LSA-R.S. 23-1031. . 174 La. 432, 141 So. 19, 21 (1932). . Boutte v. Mudd Separators, Inc., 236 So.2d 906, 908 (La.App. 3d Cir. 1970). . Gardner v. Industrial Indemnity Co., 212 So.2d 452, 455 (La.App. 1st Cir. 1968). . Welch v. Travelers Insurance Co., 225 So.2d 623, 626 (La.App. 1st Cir. 1969). Accord Boutte v. Mudd Separators, Inc., 236 So.2d 906, 908 (La.App. 3d Cir. 1970) and Gardner v. Industrial Indemnity Co., 212 So.2d 452, 455 (La.App. 1st Cir. 1968). . Gardner v. Industrial Indemnity Co., 212 So.2d 452, 457 (La.App. 1st Cir. 1968). . Gardner v. Industrial Indemnity Co., 212 So.2d 452, 455 (La.App. 1st Cir. 1968), citing with approval Tavel v. Bechtel Corp., 242 Md. 299, 219 A.2d 43. . The district court found that: “The situation of a ‘turn around’ had an emergency atmosphere about it in that it was not a regular, everyday procedure. It was a procedure that may last three days, four days, five days, six days, seven days or ten days. There was no particular designated amount of time alloted for this ‘turn around’. . . . * * * * * The court finds that the ‘turn around’ activity that was being followed by the defendant, as interpreted by their own ‘standard practice instruction’ should have covered the travel allowance for the plaintiff as an emergency trip. The ‘turn around’ situation at the Fortier plant is such that it should fit the definition of ‘emergency’ as used within the standard practice instructions.”

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FEDERAL TRADE COMMISSION, Petitioner, v. PepsiCo, INC., Respondent. No. 803, Docket 73-1381. United States Court of Appeals, Second Circuit. Argued March 13, 1973. Decided April 3, 1973. Gerald Harwood, Atty., Washington, D. C. (James T. Halverson, Acting Gen. Counsel, Harold D. Rhynedance, Jr., Asst. Gen. Counsel, Vincent Tricarico, Atty., F. T. C., Washington, D. C., of counsel), for petitioner. Edward F. Howrey, Washington, D. C. (Howrey, Simon, Baker & Murchison, Washington, D. C., Mudge, Rose, Guthrie, Alexander & Mitchell, New York City, John J. Kirby, Jr., Milton Black, James G. Frangos, Thomas R. Esposito, New York City, Richard T. Colman and G. Joseph King, Washington, D. C., of counsel), for respondent. Before HAYS, MULLIGAN and OAKES, Circuit Judges. MULLIGAN, Circuit Judge: This is an original action by the Federal Trade Commission (Commission) for a preliminary injunction and other relief pursuant to the All Writs Act (28 U.S.C. § 1651(a)). The Supreme Court has held in FTC v. Dean Foods Co., 384 U.S. 597, 86 S.Ct. 1738, 16 L.Ed.2d 802 (1966), that the Courts of Appeals have jurisdiction to issue preliminary injunctions to prevent the consummation of mergers upon, a showing that effective remedial orders would otherwise be virtually impossible, thus rendering a final divestiture decree after a Commission determination, futile. The stated purpose of the petition here is to preserve the status quo pendente lite of Rheingold Corporation (Rheingold) in aid of this Court’s jurisdiction under Section 11(c) of the Clayton Act (15 U.S.C. § 21(c)) and Section 5(c) of the Federal Trade Commission Act (15 U.S.C. § 45(c)), to review final orders of the Federal Trade Commission. The Commission urges that the acquisition by PepsiCo, Inc. (PepsiCo) of 83% of the stock of Rheingold will eventually be determined to violate Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act. The Commission further takes the position that its ability to enter an effective order will “probably” be gravely impaired unless Rheingold’s separate existence is maintained and the independence of its present management preserved. I PepsiCo is primarily engaged in the manufacture and distribution of beverage concentrates and syrups and the production and distribution of soft drinks (soft drink business). PepsiCo is a diversified company and is engaged in other services and sales not here pertinent. The soft drink business of PepsiCo essentially consists of manufacturing soft drink concentrates, bottled either by PepsiCo or its franchised independent bottlers. Its products are merchandised under the trade names Pepsi-Cola, Diet Pepsi-Cola, Patio, Teem and Mountain Dew. In 1971, PepsiCo had net sales of $1.3 billion and a net income after taxes of about $63 million. In that year it was the second largest seller of soft drink concentrates nationwide, occupying 16.3% of the market. The Coca Cola Company heads the soft drink industry with an estimated 42% share of the market in 1971. Rheingold is primarily engaged in the manufacture and distribution of beer which accounts for about 70% of its sales. It also manufactures and distributes soft drink concentrates and syrup and produces and merchandises soft drinks. Its soft drink business constitutes about 30% of its sales but accounts for 75% of its profits. Rheingold is a franchised independent bottler for PepsiCo in southern California, Puerto Rico, Mexico, and Florida. In 1971 Rheingold had net sales of about $230 million, making a net profit after taxes of about $4 million. Rheingold acquired the Grapette Company, a soft drink concentrate manufacturer, in August, 1970, changing its name to Flavette. Flavette then purchased two small soft drink companies, Dr. Wells and Mason & Mason. Flavette, excluding Mason & Mason’s root beer, also utilized independent franchised bottlers and serves a geographic area containing some 50 million people. Since 1970 Flavette has franchised some 81 independent bottlers. The soft drink concentrate business is presently highly concentrated and growing, with total sales increasing from $353 million in 1967 to $450 million in 1971. Coca Cola and PepsiCo combined to control some 58.3% of the business. The top four companies in 1971, account for 70.6% of the industry. The Federal Trade Commission takes the position that the soft drink business is not easily entered. Soft drinks are made from concentrates which are typically sold and distributed by franchised bottlers who are responsible for the promotion of the business in the franchised territory and who normally own the facilities for bottling and canning the concentrate. New entrants face the barrier of competing against well-established brands which are prolifically advertised. It is estimated that an annual expenditure of $50 million for advertising expenses over a 5 to 8 year period is necessary to establish a new product on a nationwide scale. The Commission also argues that obtaining adequate bottling and canning facilities plus the acquisition of technical know-how present barriers for prospective entrants into the business. PepsiCo first published its offer to purchase 1,600,000 shares of common stock of Rheingold on October 25, 1972. This offer was later amended to purchase all shares in excess of 1,600,000 if they were tendered before the close of business on November 16, 1972. On November 15, the Federal Trade Commission commenced complaint proceedings, urging that the acquisition violated Section 7 of the Clayton Act (15 U.S.C. § 18) as well as Section 5 of the Federal Trade Commission Act (15 U.S.C. § 45). The Commission did not seek at this point to enjoin the tender offer. PepsiCo and the Commission then entered into the negotiation of a hold-separate agreement. The Commission agreed in the interim not to file any action requiring PepsiCo to hold Rheingold assets separate until December 4, 1972 and PepsiCo agreed not to assume or exercise actual control over Rheingold if its tender offer proved successful. The offer was successful and PepsiCo now owns 83% of the shares of Rheingold which it acquired for a cash investment of some $57 million. On December 1, 1972, the Commission withdrew its complaint for the purpose of entering into a consent order. PepsiCo made an offer on January 15, 1973 subsequently modified on January 30, 1973, but the proposal was rejected by a 3-2 vote of the Commission. The matter was returned to the adjudicatory process on February 7, 1973 and PepsiCo notified the Commission on March 2, 1973 that it was terminating the hold-separate agreement of November 16, 1972. II As a result of the 5-4 holding of the Supreme Court in FTC v. Dean Foods Co., supra, we are placed in the unenviable position of predicting whether there has been a violation of the antitrust laws involved without the benefit of any agency determination or a record which would provide the derailed economic and corporate data normally available in comparable litigation. It is established, however, that the first test which we must apply is whether or not the Commission has established a “reasonable probability” that the respondent is in violation of the statute. FTC v. OKC Corp., 1970 CCH Trade Cas. ¶ 73,288 (5th Cir., July 8, 1970); see United States v. Ingersoll-Rand Co., 320 F.2d 509, 523-524 (3d Cir. 1963); United States v. IT&T, 306 F.Supp. 766, 774 (D.Conn.1969), appeal dismissed, 404 U. S. 801, 92 S.Ct. 20, 30 L.Ed.2d 34 (1971); United States v. Atlantic Richfield Co., 297 F.Supp. 1061, 1067 (S.D.N.Y.1969); cf. Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). In our view, the Federal Trade Commission has sustained its burden with respect to this aspect of the case. This is basically a horizontal merger since PepsiCo in acquiring Rheingold has purchased a subsidiary (Flavette) competing with PepsiCo in the soft drink business. Flavette’s share of the national soft drink non-cola market is about 1% and about .3% if cola drinks are included. Anti-trust concern here is prompted by the undoubted fact that PepsiCo stands Number 2 in the national soft drink market where four companies control 70.6% of the business. The Supreme Court in a series of eases, United States v. Continental Can Co., 378 U.S. 441, 461-462, 84 S.Ct. 1738, 12 L.Ed.2d 953 (1964); United States v. Aluminum Co. of America, 377 U.S. 271, 279, 84 S.Ct. 1283, 12 L.Ed.2d 314 (1964); United States v. Philadelphia Nat’l Bank, 374 U.S. 321, 365 n. 42, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963), and our own Court recently in Stanley Works v. FTC, 469 F.2d 498, 507-508 (1972), have held that even slight aggregations are viewed with suspicion in a highly concentrated market. In Stanley Works, four leading companies dominated only 50% of the market. The acquisition by a company, which controlled 1% of the market, of a competitor with a market share of 22 to 24% was found to be in violation of Section 7 of the Clayton Act and not de minimis. There are two other factors which weigh the balance here in the Commission’s favor. The number of bottlers has steadily declined from 5,400 in 1948 to 2,300 in 1971 as the result of combinations. Moreover between 1958 and 1972 PepsiCo has acquired ten bottlers which were previously its independent franchisees. We have examined the opinions of the Supreme Court since the 1950 amendment to Section 7 of the Clayton Act and recall as a practical consideration Mr. Justice Stewart’s comment in his dissenting opinion in United States v. Von’s Grocery Co., 384 U.S. 270, 301, 86 S.Ct. 1478, 1495, 16 L.Ed.2d 555 (1966): “The sole consistency that I can find [in the Supreme Court cases] is that in litigation under § 7, the Government always wins.” We appreciate that the Commission here need not establish any actual anti-competitive effects but only an incipiency. The reasonable probability of establishing probable as distinguished from actual competitive injury, is in our view predictable here in light of the concentration of the industry and the difficulty of new entry which requires bottling facilities and huge advertising outlays. III The Commission seeks a preliminary injunction which will effectively prevent PepsiCo from exercising and assuming control over Rheingold until the issuance of a final order in the administrative proceeding. The exercise of this control, in the view of the Commission, is incompatible with the preservation of Rheingold as an entity having the capabilities and resources for becoming an important competitor through Flavette in the production and sale of soft drink concentrates. The agency urges that PepsiCo will be primarily interested in the sale of its own cola concentrates and to the extent that it is interested in selling non-cola drinks it will be faced with a conflict between pushing its own PATIO line and the Flavette brands. Moreover, the Commission is concerned that PepsiCo will dispose of the beer business of Rheingold and that this would deprive Flavette of the benefit of Rheingold’s total resources in its efforts to establish itself as a “toehold” competitor in the soft drink concentrate industry. While granting that Flavette’s business is a small part of Rheingold’s overall operation, the Commission believes that its competitive potential rests upon Rheingold’s full resources and therefore a divestiture limited to disposing of the offending lines of commerce alone could not provide effective relief. Admitting that PepsiCo will be harmed at this stage of the proceeding if it is required to refrain from exercising control of Rheingold, the Commission has advised that it will set up an expedited time schedule ensuring that all administrative proceedings, including the Commission’s final decision, will be concluded by September 10, 1973. It therefore urges this Court to enjoin PepsiCo from taking any steps to assume or exercise control of Rheingold, from taking any other action which will change or influence the present directors or management of Rheingold, diminish its operations, change its corporate structure or dispose of any of its assets. Under FTC v. Dean Foods Co., supra, the Supreme Court has held that an injunction can issue only if the Commission can show that “an effective remedial order, once the merger was implemented, would otherwise be virtually impossible, thus rendering the enforcement of any final decree of divestiture futile.” 384 U.S. at 605, 86 S.Ct. at 1743 (emphasis added). While the Commission has persuaded us that there is a reasonable probability that the merger here will violate Section 7 of the Clayton Act, we are totally unpersuaded that a remedial divestiture order will ultimately be “virtually impossible” of achievement. The Commission is proceeding on the premise that divestiture of the entire Rheingold company will be the only effective remedy. On the contrary we see no reason why such drastic relief at least at this stage, should be presumed appropriate. Assuming that the Commission is successful in its adjudicatory proceeding, whether the divestiture should be total or partial must depend upon the facts in each case. It is clear here that the only offending assets are the subsidiary businesses of Flavette and Mason & Mason which represent a minor though profitable segment of Rheingold’s business. The Commission’s major if not sole argument that total divestiture is necessary, is that Flavette will need the total resources of Rheingold plus the expressed determination of its incumbent management to break into the soft drink industry. The record before us gives scant support, if any, to the proposition that the present Rheingold management has that capacity. Rheingold’s share in the beer market is declining. It lost money in 1972 on its beer operation and projects a loss of between $2 million and $7 million in 1973. No final budget plan has been developed in fact for the 1973 brewery operation. We have examined affidavits before us which indicate that Rheingold’s cash position is precarious. Rheingold’s earnings per share have declined from $1.84 in 1970 to $1.25 in 1971 and are estimated at $.45 per share in 1972. In December, 1972, Rheingold announced the omission of its regular quarterly cash dividend. Rheingold has emphasized its beer business and Flavette is not prospering. Fíavette has incurred losses of more than a half million dollars from the time of its acquisition by Rheingold in the fall of 1970 to December 31, 1972. Its share in the total soft drink concentrate market has declined from .5% in 1968 to .3% in 1971. The Commission in oral argument suggested that the present management of Rheingold was contemplating the acquisition of another regional beer manufacturer, Piéis, as a possible means of increasing its business. It is somewhat anomalous that the Commission should cite an obvious horizontal merger, which it admittedly has not studied, as a basis for preserving Rheingold. The Commission also cites as persuasive the statement of Rheingold’s Chairman on the Flavette acquisition that combination of selling beer and soft drinks “provides Rheingold with a good deal of clout in the supermarkets.” The antitrust significance of this sort of “clout” also seems to have escaped the agency which is charged with the enforcement of Section 3 as well as Section 7 of the Clayton Act. We must balance the equities when a supplicant seeks injunctive relief and we find that PepsiCo has invested $57 million in acquiring an 83% interest in a company, including substantially all of the stock of a management which the Commission insists remain at the helm. PepsiCo is opposed to a Piels acquisition as imprudent and detrimental to the interests of PepsiCo as well as the minority stockholders of Rheingold. We of course cannot predict whose business judgment is sounder but the Commission is in no better position. It did not seek to enjoin the acquisition of the shares by PepsiCo and in view of the fait accompli of 83% control and the staggering investment made, we are not persuaded that we should deprive PepsiCo of its corporate managerial responsibilities particularly when incumbent management has divested itself of its stock interests. While it is elementary that PepsiCo’s intentions in acquiring Rheingold are not to be considered in determining whether a Section 7 Clayton Act violation occurred, it is helpful to examine them now in light of the extraordinary relief which is sought. PepsiCo very probably has no interest in the beer business and in fact urges that its acquisition was motivated by Rheingold’s diversion of the income from the soft drink bottling business to salvage its beer business, to the detriment of its PepsiCo franchises in Puerto Rico, Mexico City and California. PepsiCo argues that Rheingold was not properly expanding and exploiting certain territorial markets which could be profitable to PepsiCo. PepsiCo further urges that it will make capital investments and operational changes which will maximize the earnings potential not only of Rheingold but Flavette. PepsiCo states flatly that third parties have already indicated an interest in purchasing Flavette. We therefore do not find that Flavette’s viability as a competitor in the soft drink business will be at all assured by the perpetuation of Rheingold as it is presently constituted and managed. Nor are we persuaded that the separation of Flavette if it is eventually ordered, will be virtually impossible of achievement. While we are fully aware of the fact that there may well be a difference between promise and performance, any doubt in our mind is dissipated by PepsiCo’s willingness to enter into a hold-separate agreement to preserve and protect the Rheingold concentrate and domestic soft drink bottling assets so that the Commission and this Court, in the event that a violation of Section 7 shall be found, will be able to order effective divestiture relief. To this end PepsiCo has advised that the Flavette subsidiaries and the Mason & Mason root beer concentrate operations will be operated as a separate identifiable business entity, that the presently utilized trademarks and trade names will be preserved and protected by that entity and will be continued to be used by it to identify the products involved. In the event of a divestiture order, the business entity will have assets, facilities and equipment and a sales and distribution system equal to that which it had before the acquisition of PepsiCo. Even if divestiture of the franchised bottling operation in the United States is ordered, PepsiCo has agreed that assets, facilities and equipment, sales and distribution systems will be equal to or better than before the PepsiCo acquisition. Moreover, PepsiCo has announced its agreement to continue to sell Flavette through Rheingold bottlers and to guarantee that Flavette sales will increase at at least the industry rate during the pendency of the complaint. Realistically in view of the necessity of Rheingold to deal with labor problems, the banking industry and the business community during this crucial period, it would appear to us to be totally inequitable to prevent PepsiCo from now guiding and operating this company when long range decisions vitally affecting its stockholders must be made. At the same time we see no great hardship in requiring PepsiCo to continue the Rheingold beer operation and to maintain its assets until such time as the expedited administrative proceedings are terminated, In the light of all the circumstances, we conclude that no preliminary injunction should issue here on the condition that the proposed hold-separate agreement be promptly entered into by the parties. We add two further conditions : First, that the proposed escape clause giving PepsiCo the unilateral option of terminating the agreement on 30 days’ prior written notice to the Commission be eliminated. Second, that the new management agree not to divest Rheingold of its beer business or assets or any part thereof pending the resolution of the expedited action promised by the FTC for its administrative proceedings. The Commission and PepsiCo are directed to enter into such an agreement and the temporary restraining order of this Court will be thereupon dissolved. Jurisdiction is retained for the purpose of enabling any of the parties to this proceeding to apply to this Court for such orders and directions as may be necessary for the construction or carrying out of this order, for the modification of any provisions thereof, and for the enforcement of and compliance therewith and punishment for violations thereof. . Section 7, 15 U.S.C. § 18 provides in relevant part: No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly. . Section 5(a)(1), 15 U.S.C. § 45(a)(1) provides: Unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce, are declared unlawful. . Since Rheingold is also a franchised bottler of PepsiCo there are vertical dimensions here as well. PepsiCo states that pursuant to a 1968 consent order negotiated with the Commission, Docket No. 8606, PepsiCo is permitted to purchase its own franchised bottlers even though they are engaged in the concentrate business. In view of our disposition of this matter, the point is not material. . At this stage of the proceedings there is no indication of any particular geographic market (section of the country) in which PepsiCo and Rheingold through Flavette are actually competing. Moreover, the “line of commerce” or product market may eventually be narrowed in litigation. The complaint of the FTC in its definitional paragraph defines soft drinks and concentrates to include all non-alcoholic carbonated beverages. Whether cola drinks are sufficiently non-interehangeable in terms of price, quality and use so as to constitute a separate relevant product market, is a question which has not been determined or even briefed, yet both parties make reference to a non-cola market. On the basis of the complaint, we can only assume that the geographic market is nationwide, that the product market is all carbonated soft drinks and that Flavette’s share is .3%. . We are not unaware that the Merger Guidelines of the United States Department of Justice define a highly concentrated market as one in which the shares of the four largest firms amount to approximately 75% or more. However, this action has been initiated by the Federal Trade Commission, not the Department of Justice. It is further noted that the top four companies which controlled 66.3% of the business in 1965 controlled 70.6% of the industry in 1971. . The particular significance of Section 5 of the Federal Trade Commission Act as a basis for relief here is not apparent either from an examination of the complaint or the brief of the Commission before us. It may eventually articulate its views. See FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 92 S.Ct. 898, 31 L.Ed.2d 170 (1972). In the meantime we assume that the violation of Section 7 of the Clayton Act also constitutes a violation of Section 5. Stanley Works v. FTC, supra, 469 F.2d at 499 n. 2. . The Commission’s brief seems to argue that all it must establish is that an ultimate effective order will probably be effectively impaired unless Rheingold’s separate existence and incumbent management is preserved. The Supreme Court has placed a much greater burden on the Commission. It must establish no probability here but “virtual impossibility.” In view of the extraordinary nature of the remedy proposed, the burden is justifiably imposed. . While complete divestiture is “simple, relatively easy to administer, and sure” (United States v. E. I. du Pont de Nemours & Co., 366 U.S. 316, 331, 81 S.Ct. 1243, 1252, 6 L.Ed.2d 318 (1961)), it is not necessarily the most appropriate means for restoring competition. A primary concern is whether the offending line of commerce, if disassociated from the merged entities, can survive as a viable, independent entity. See, e. g., OKC Corp. v. FTC, 455 F.2d 1159 (10th Cir. 1972) (partial divestiture inappropriate since the offending line of commerce could not survive independently). See also Comment, Divestiture of Illegally Held Assets: Observations on its Scope, Objective, and limitations, 64 Mich.L.Rev. 1574, 1587-1588 (1966). Many other factors, however, are relevant and must be considered. United States v. Reid Roller Bit Co., 274 F.Supp. 573, 584-592 (W.D.Okl.1967) (partial divestiture appropriate). . United States v. Ingersoll-Rand Co., supra, 320 F.2d at 525; United States v. Atlantic Richfield Co., supra, 297 F.Supp. at 1073-74.

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Caselaw Access Project

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2024-08-24T03:29:51.129683

UNITED STATES of America, Appellee, v. Edward HURSE, Appellant. No. 72-1266. United States Court of Appeals, Eighth Circuit. Submitted Nov. 16, 1972. Decided April 20, 1973. Samuel Raban, St. Louis, Mo., for appellant. Robert B. Schneider, Asst. U. S. Atty., St. Louis, Mo., for appellee. Before MATTHES, Chief Judge, ROSS, Circuit Judge, and VAN PELT, Senior District Judge. Senior District Judge for the District of Nebraska sitting by designation. PER CURIAM. This case involves an appeal from a conviction, upon a jury verdict, of guilty to a charge of possession of an unregistered shotgun, in violation of 26 U.S.C. §§ 5861(d), 5871 (1970). Prior to his trial, appellant filed a motion to suppress, pertaining to a shotgun seized by the police, on the ground that the police lacked probable cause to make an entry into appellant’s quarters to arrest him, the arrest having taken place without a warrant. During the suppression hearing, the police testified that a reliable informant had delivered to them heroin allegedly purchased from appellant; the informant also told them that appellant had answered the door with a shotgun. The motion was overruled. The appellant’s request for the name of the informant, on the ground that his testimony was favorable to appellant, was denied. The prior appeal resulted in remand by this court. The order of remand directed the district court to hold a hearing on the probable cause issue, and stated, in part: “[T]he identity of the informant should be disclosed to the court and the court should satisfy itself on the issue of probable cause for the initial entry.” Pursuant to this order, the district court conducted an evidentiary hearing in camera at which the informant was examined by the district judge in the absence of all persons except an official court reporter, who reported the informant’s testimony and thereafter transcribed the same. The testimony of the informant was sealed and transmitted to this court. The informant testified at the in camera hearing that he did not enter the building where appellant was residing, that he did not purchase narcotics that evening from appellant, and that he had had no contact with the police involved in the raid after the time they sent him to appellant’s home. In order to resolve the conflict in testimony between the informant and the officers, a further proceeding, which in effect was a supplemental suppression hearing, was held by the court for the purpose of examining the police officers who were present at the scene of the arrest and seizure. At this hearing the attorneys for appellant were present and were afforded the opportunity to, and they did in fact, examine and cross-examine the five police officers who testified. The appellant, however, was not personally present at this hearing. A colloquy between the judge and appellant’s attorneys led the court to believe that counsel for the appellant were not “raising the issue of the defendant not being present . . . .” After the hearing the district court filed a memorandum and supplemental findings in which the court concluded, “that the police officers had probable cause to believe that a felony [sale of narcotics] had just been committed and had probable cause to make the initial entry to the premises . for the purpose of demanding admission to defendant’s apartment . in order to arrest him.” The findings were certified to this court for action in accordance with its opinion. In his second appeal, appellant argued, among other things, that the district court committed prejudicial error in holding the supplemental evidentiary hearing and taking the testimony of the police officers in his absence. This court concluded that “this supplemental suppression hearing was a critical stage of the proceedings and that the defendant was entitled to be personally present” and entered an “Order of Remand For Limited Purpose”. The purpose of the order was to provide an evidentiary hearing, at which appellant would be present, and for a certification of findings and conclusions by the district court to this court. In accordance with this order, the district court conducted another evidentiary hearing of the police officers in the presence of appellant and his counsel. The court examined seven police officers who had participated in the seizure and arrest [including one person, Glen Vaughn, who was no longer with the police force]. Each person testifying was excluded from the courtroom prior to testimony. Although in each case the testimony exhibited minor, non-material variations from the prior testimony, the testimony of each at the hearing was consistent with their past statements. The district court filed a written memorandum and supplemental findings. In it he made express findings that the police officers gave marked money to the informant, who entered the building in which appellant’s apartment was located and later returned with five clear gelatin capsules containing heroin. The court also found that the informant stated that he had purchased heroin from appellant and that appellant was armed. The court then held: “Upon the whole record, including the in camera proceedings and the supplemental proceedings, the court finds and concludes that the police officers had probable cause to believe that a felony had just been committed and had probable cause to make the initial entry to the premises . for the purpose of demanding admission to defendant’s Apartment . . in order to arrest him.” An attempt was made to impeach the testimony of one police officer. The trial judge specifically stated that he believed the testimony of that officer and that the attempted impeachment had failed. The findings and conclusions were then certified to this court. Appellant has filed an additional brief raising the same general issue previously presented as to probable cause and in addition claims he did not have a fair and impartial trial because of the trial court’s action “calling and examining its own witnesses and cross-examining the defendant’s witnesses.” In considering these findings and conclusions of the court below, we recognize that the district court has the discretion to weigh the credibility of the witnesses and to determine from the evidence on the record as a whole whether these officers had probable cause to make the initial entry and subsequent arrest. Miller v. United States, 354 F.2d 801 (8th Cir. 1966). As we stated in United States v. Shoemaker, 429 F.2d 530, 531 (8th Cir. 1970), “issues of credibility must be resolved by triers of fact and not by this court.” We hold that the district court’s findings are supported by substantial evidence, and that the court correctly denied the motion to suppress. There was more than ample evidence from which the court could and did make findings that the events took place in the manner testified to at the original suppression hearing. In addition, the court carefully considered the inconsistencies and variations in the testimony of the officers before making its findings. The findings made by the court support its holding that the police officers had probable cause to believe that a crime had been committed. Cf. Spinelli v. United States, 393 U.S. 410, 89 S.Ct. 584, 21 L. Ed.2d 637 (1969). We find nothing improper in the trial judge’s examination of witnesses. Cf. Miller v. United States, supra. He was under explicit directions from this court and it was only natural that he endeavored to procure a complete record in which all relevant facts were disclosed. We are appreciative of his meticulous findings. We have examined the other issues raised by appellant and find them to be insubstantial. The judgment of conviction is affirmed. . United States v. Hurse, 453 F.2d 128 (8th Cir. 1971). . At this hearing the defense called a St. Louis Police Department Criminologist and the Records Clerk Supervisor of the St. Louis Police Department. The Criminologist’s testimony, where pertinent, is supportive of the findings of the District Court. The Supervisor was called for the purpose of introducing into evidence the police report of the seizure and arrest.

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Caselaw Access Project

2024-08-24T03:29:51.129235

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BOYD CONSTRUCTION COMPANY, Plaintiff-Appellee-Cross Appellant, v. T. L. JAMES & COMPANY, INC., Defendant-Appellant-Cross Appellee. No. 72-1582. United States Court of Appeals, Fifth Circuit. April 17, 1973. William S. Stone, New Orleans, La., Dorrance Aultman, Hattiesburg, Miss., for defendant-appellant-cross appellee. Vardaman S. Dunn, Jackson, Miss., for plaintiff-appellee-cross appellant. Before AINSWORTH and GODBOLD, Circuit Judges, and RUBIN, District Judge. AINSWORTH, Circuit Judge: This diversity action stems from a dredging subcontract between plaintiff Boyd Construction Company and defendant T. L. James & Company, Inc. The District Judge decided that James delayed an unreasonable time in completing the subcontract and awarded damages to Boyd. The District Judge denied, as unsupported by the evidence, James’s counterclaims (1) for additional quantum meruit compensation due to the difficulties of dredging the materials encountered and (2) for standby costs. James appeals from the award in favor of Boyd and from the denial of its counterclaims. Boyd cross-appeals and contends that the District Judge’s award was inadequate. We affirm. Boyd obtained the prime contract from the United States Corps of Engineers involving a channel on the Verdigris River near Tulsa, Oklahoma. This necessitated excavation of some 10,700,000 cubic yards at Boyd’s bid price of 21 cents per cubic yard. Boyd’s equipment proved inadequate to handle the last million cubic yards. After James assured Boyd that it could clear this remaining area in three months, Boyd hired James to bring in its dredge. As compensation, Boyd agreed to pay a price of 38 cents per cubic yard plus a lump sum of $27,700 for mobilization and demobilization of the dredging equipment. Additionally, Boyd agreed to pay “James $96.00 per hour for each and every hour of stand-by time which is caused as a result of being shut-down by or because of Boyd or its operation or by the owner, except where such shut-down is caused by James.” The central issue in this ease revolves around the length of time taken by James to complete the work. On November 18, 1968, James began work. The work was not completed until July 19, 1969. In the absence of a written contractual provision as to the time for completion, the law implies a reasonable time. See generally 1 A. Corbin, Corbin on Contracts § 96 (1963); 3 A. Corbin, Corbin on Contracts § 593 (1960); 1 W. Jaeger, Williston on Contracts § 38 (3d ed. 1957). The District Judge found that James continued for “a period of four months more than was reasonably required,” thereby entitling Boyd to damages of $50,000. In reviewing factual determinations, we do not retry the case. See Williams v. Nat’l Surety Corp., 5 Cir., 1958, 257 F.2d 771, 772-773. According to Rule 52(a), Federal Rules of Civil Procedure, “Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses.” After reviewing the record we are not left with a definite and firm conviction that any mistake has been committed. See Chaney v. City of Galveston, 5 Cir., 1966, 368 F.2d 774, 776. James’s main contention is that the material dredged was different from that specified in the contract. According to the contract, “the material to be dredged shall consist primarily of sand, silt and some clay and shall not include the removal or dredging of any rock, boulders or other solid objects.” Each day of the dredging James’s field engineer estimated the composition of the dredged material. At the trial this data was summarized according to what was found during two separate periods: Sand Gravel Clay Silt Stone November 18, 1968— March 8,1969 23.4 33.6 26.6 10.1 6.3 March 8,1969— July 19, 1969 51.8 8.9 21.1 17.8 0.4 During the first period when 416,459 cubic yards were dredged, 60.1 per cent of the material was sand, silt, and clay, and during the second period when 695,706 cubic yards were dredged, 90.7 per cent was sand, silt, and clay. Accordingly, the composition met the contractual provision that the material would consist “primarily” of sand, silt, and clay. Clay accounted for only 26.6 per cent in the first period and 21.1 per cent in the second period, so it met the contractual limitation of “some” clay. Stone accounted for 6.3 per cent in the first period and 0.4 per cent in the second period, so there may be some doubt about this material. The District Judge was persuaded that the contract provision was only intended as assurance that the job would not abound in the removal of solid objects and that the quantity of stone dredged was no more than might be reasonably expected on such a project. We cannot say that this conclusion was clearly erroneous. Gravel is not expressly mentioned in the contract, so the contract is ambiguous on the question whether it is a prohibited substance. The contract was drafted by James’s counsel after a thorough inspection by its engineers at the site where the gravel was visible. The District Court properly found that Boyd did not misrepresent the nature of the work. Therefore, the contractual ambiguity should be construed against James. See generally 3 A. Corbin, Corbin on Contracts § 559 (1960); 4 W. Jaeger, Williston on Contracts § 621 (3d ed. 1961). Accordingly, the composition of the dredged material provides neither an excuse for James’s delay nor a basis for James’s counterclaim. James further contends that it was entitled to standby time when it was allegedly ordered to wait until the water height in the river subsided before dredging the last “plug” of dirt. Though there is conflicting evidence on this point, there is adequate evidence in the record to support the District Judge’s finding that James elected to wait for its own convenience so as to facilitate dismantling and loading its dredging equipment. Since the contract states that standby payments are not available when the delay was caused by James, this counterclaim was also properly denied. There is no merit to James’s concern over dredging some 100,000 cubic yards more than the 1,000,000 cubic yards specified in the contract. As the express language of the contract says, a million cubic yards was the minimum figure. “There shall be a minimum of one million cubic yards of dredging.” Furthermore, he was paid at the contract price of 38 cents per cubic yard for the additional dredging. The final question concerns the quantum of Boyd’s damages for the delay of four months. Boyd’s summary on appeal reflects expenses as follows: Four months payroll $ 19,246.03 Four months rent — dragline 15,000.00 Four months rent — Cat. D6 7,622.00 Four months rent — Cat. D8 14,420.00 Four months salary — Project Manager 6,243.42 Total payroll and rent 62,531.45 Add 10% — Overhead 6,253.14 Total Four Months Cost $ 68,784.59 The District Judge disallowed the items pertaining to the 10 per cent overhead and the Project Manager’s salary. Then he evidently rounded off the balance to $50,000. We cannot say this calculation was clearly erroneous. Affirmed.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

UNITED STATES of America, Appellee, v. William ECHOLS, a/k/a Steve Page, Appellant. No. 72-1577. United States Court of Appeals, Eighth Circuit. Submitted March 16, 1973. Decided April 20, 1973. Allen I. Harris, St. Louis, Mo., for appellant. Richard K. Coffin, Sp. Atty., U. S. Dept. of Justice, St. Louis, Mo., for appellee. Before MATTHES, Chief Judge, and ROSS and STEPHENSON, Circuit Judges. MATTHES, Chief Judge. We are again confronted, as we were in United States v. Burton, 475 F.2d 469 (8th Cir. 1973), 1973, with a controversy over the warrantless search of the luggage of an airline passenger and the question whether contraband found incident thereto was improperly admitted into evidence. A three-count indictment charged that appellant, also known as Steve Page, (1) knowingly delivered to Trans World Airlines (TWA), a common carrier, a travel bag containing a Smith & Wesson model 19-2 .357 magnum loaded revolver and a box of cartridges for shipment in interstate commerce from Los Angeles, California to St. Louis, Missouri, in violation of 18 U.S.C. § 922(e); (2) knowingly and intentionally possessed with intent to distribute 200.45 grams of cocaine in violation of 21 U.S.C. § 841(a)(1); and (3) unlawfully, knowingly and intentionally possessed 18.17 grams of marihuana in violation of 21 U.S.C. § 844(a). The undisputed evidence on the motion to suppress, which was considered both before and during trial, revealed these relevant and operative facts. On February 2, 1972, at approximately 9:50 a.m. (PST), appellant, using the assumed name of Steve Page, purchased in Los Angeles, California a one-way ticket for TWA Flight # 136 which was .scheduled to depart from Los Angeles at 9:55 a.m. and arrive in St. Louis at approximately 3:05 p.m. (CST). Appellant was unable to produce any identification upon the request of the ticket agent. Thereupon the latter informed the TWA Public Relations Representative of appellant’s failure to furnish identification. The TWA representative would not permit appellant to board Flight # 136 because appellant’s behavior comported with the Federal Aviation Administration security profile and for the additional reason that he could not produce identification. Appellant informed the TWA representative that a brown “Lark” travel bag had already been placed on the aircraft for transportation to St. Louis. Appellant produced the baggage check number and the representative made a record thereof. David M. Gentry, Director of Customer Service for TWA, accompanied Flight # 136 in order to provide service to passengers in flight and after deplaning. The flight departed from Los Angeles and arrived in St. Louis as scheduled. Gentry and Terry Vaughn, TWA Customer Service Agent at St. Louis, discovered appellant’s unclaimed luggage bearing the claim check number which had been furnished to Gentry. The unclaimed travel bag was opened by Vaughn for the alleged purpose of identifying the owner so that the bag could either be returned to him or held for his arrival in St. Louis. Upon opening the travel bag, the magnum revolver and box of cartridges described in the indictment were found in the tie compartment. Thereupon, a deputy United States marshal was alerted and upon ex-animation he, too, observed the revolver and cartridges and seized both. In the meantime, appellant, sometime before 12:25 p.m. (PST), surrendered his ticket for Flight # 136, secured a refund, and purchased a ticket under his correct name for TWA Flight # 194. On this occasion, appellant produced two identification cards. Flight # 194 arrived at the St. Louis airport at approximately 5:35 p.m. (CST). After deplaning, appellant was met in the air terminal area by a deputy United States marshal and placed under arrest. On February 3, 1972, appellant was taken to the office of the United States marshal in the United States Court House in St. Louis for processing and investigatory purposes. While on an elevator, one of the deputy marshals, who was carrying a bathrobe belonging to appellant, discovered that the robe contained a rather sizeable bulge. Upon further exploration, the deputy marshal found plastic bags containing cocaine and marihuana, the subjects of Counts I and II, in the lining of the bathrobe. An analysis revealed a quantity of 187.-65 grams of high purity cocaine, possessing a strength of 14.17%, an additional 12.8 grams of very pure cocaine of 63.5% strength, 17.45 grams of marihuana, and .72 grams of hashish. A special agent of the Bureau of Narcotics and Dangerous Drugs testified that the cocaine had a value of approximately 1200,000. The district judge sentenced appellant to the custody of the Attorney General or his authorized representative for treatment and study pursuant to 18 U. S.C. § 4208(b) and ordered that the Director of the Bureau of Prisons furnish the court with the result of the study within three months in order that the court might consider further disposition of the case. As long ago as 1921, in Burdeau v. McDowell, 256 U.S. 465, 41 S.Ct. 574, 65 L.Ed. 1048, the Supreme Court ruled that the provision of the fourth amendment forbidding unreasonable searches and seizures applied only to governmental action, and not the actions of private individuals. The holding in Burdeau has been recently cited with approval in Coolidge v. New Hampshire, 403 U.S. 443, 487, 91 S.Ct. 2022, 29 L.Ed.2d 564 (1971). Appellant, conceding that his travel bag was opened and searched by an agent of the airline, seeks to circumvent the private label by contending that the TWA employee was acting at the behest or in the capacity of a federal official. Our recent case of United States v. Burton, supra, in which this court confirmed the private character of an airline search', is dispositive of the present case. In that case, defendant purchased an airline ticket and, at the same time, checked two bags for flight. The ticket agent, suspicious because defendant fit the security profile, and the weight distribution of one of his bags seemed unusual, searched the bag and found a gun. A federal marshal was notified, and defendant arrested. In Burton, we recognized the general rule that searches of packages or luggage by airline employees are invulnerable to fourth amendment attack so long as the search is conducted by the carrier for its own purposes and without the instigation or participation of government agents. Clayton v. United States, 413 F.2d 297 (9th Cir. 1969), cert. denied, 399 U.S. 911, 90 S.Ct. 2204, 26 L.Ed.2d 565 (1970); Wolf Low v. United States, 391 F.2d 61 (9th Cir.), cert. denied, 393 U.S. 849, 89 S.Ct. 136, 21 L.Ed.2d 119 (1968); Gold v. United States, 378 F.2d 588 (9th Cir. 1967); Corngold v. United States, 367 F.2d 1 (9th Cir. 1966); United States v. Blum, 329 F.2d 49 (2d Cir.), cert. denied, 377 U.S. 993, 84 S.Ct. 1920, 12 L.Ed.2d 1045 (1964). In the present case the search of appellant’s travel bag was conducted solely by a TWA employee for the purpose of obtaining idéntifieation of the owner of the luggage. The employee was acting pursuant to a TWA regulation authorizing the precise conduct in which he was engaged. There is not a scintilla of evidence that any government agent requested that the search be made, was present when the travel bag was opened, or had any knowledge concerning the activity until after the gun had been discovered. In sum, we hold that the district court properly denied appellant’s motion to suppress and permitted the magnum revolver, ammunition, and packages of drugs to be introduced into evidence. There remains for consideration the contention that the government failed to show that appellant possessed an intent to distribute the cocaine. 21 U.S.C. § 841(a)(1). This claim is without substance and does not merit extensive discussion. ’ Confronted with an identical question, the Fifth Circuit reasoned, “The question of the validity of the inference turns on whether the amount of cocaine was such as will support an inference of intent to distribute as distinguished from mere possession for personal use.” United States v. Mather, 465 F.2d 1035, 1037 (5th Cir. 1972). In that case, the court decided that possession of 197.75 grams of cocaine worth $2,500 delivered was sufficient to justify the inference. Here, appellant possessed 199.73 grams worth $200,000. The record does not reveal whether appellant was an addict, nor could his counsel enlighten us on this matter at oral argument. See also United States v. Ortiz, 445 F.2d 1100 (10th Cir.), cert. denied, 404 U.S. 993, 92 S.Ct. 541, 30 L.Ed.2d 545 (1971); United States v. Cerrito, 413 F.2d 1270 (7th Cir. 1969), cert. denied, 396 U.S. 1004, 90 S.Ct. 554, 24 L.Ed.2d 495 (1970). We conclude that the case was in all respects properly decided and hence we affirm.

f2d_477/html/0040-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Betty B. BURGESS, Individually and as Administratrix of the Estate of S. Reed Burgess, Jr., deceased, Appellant, v. CHARLOTTESVILLE SAVINGS AND LOAN ASSOCIATION, Appellee. No. 72-2272. United States Court of Appeals, Fourth Circuit. Argued Feb. 6, 1973. Decided April 9, 1973. J. Robert Brame, III, Richmond, Va. (Robert H. Patterson, Jr., Richmond, Va., McGuire, Woods & Battle, Ellen V. Nash and Nash & Edelson, Charlottesville, Va., on brief), for appellant. Stephen H. Helvin, Charlottesville, Va. (William A. Parks, Hot Springs, Va., B. B. Woodson, Charlottesville, Va., Garland M. Harwood and Shewmake & Gary, Richmond, Va., on brief), for appellee. Before HAYNSWORTH, Chief Judge, and RUSSELL, and WIDENER, Circuit Judges. RUSSELL, Circuit Judge: The plaintiff and her deceased husband solicited a loan from the defendant Savings and Loan Association. In the loan application prepared by the defendant was the provision: “Credit life, accident, health or loss of income insurance is not required to obtain this loan. No charge is made for such .insurance and no such insuranee is provided unless the borrower signs the appropriate statement below. Credit Life & Disability Income Ins. is available at a cost of $5,585.00 for the 25 year term of the initial policy. $11.95 Per Month.” This provision was incorporated in the loan application, as a result of Regulations issued by the Federal Reserve System under authority of the Truth in Lending Act, 15 U.S.C., Section 1601. Though the plaintiff and her husband signed the form, immediately following the paragraph quoted above, thereby indicating their desire to procure credit life insurance to protect their loan, no steps were thereafter taken by the defendant to procure such insurance. A few weeks after the loan was completed, the husband died and the plaintiff individually and as administratix of her husband’s estate demanded of the defendant payment under the credit life insurance she and her husband .had indicated in their loan application they desired. When that demand was refused, suit followed in the state court. Plaintiff’s action, as stated in her original complaint, was basically one to recover for breach of a contract to procure life insurance. In setting forth such cause of action in her complaint, the plaintiff included among her allegations the form of notice required by Federal Reserve Regulation Z under the Truth in Lending Act, which has already been quoted, and based one count in her action on the claim that the failure of the defendant to “procure the creditor life insurance as stated in its disclosure * * * violated Regulation Z and the Truth-in-Lending Act”. Because of this claim made under the Truth in Lending Act, the defendant removed the action to the federal court as one “arising under the * * * laws * * * of the United States”. After removal, the plaintiff moved to amend her complaint to incorporate a cause of action in tort for negligent failure to procure insurance. The motion was denied on the ground that the Virginia Courts, deemed controlling as the law of the place of the contract, did not recognize as a tortious wrong such a right of action, citing Hayes v. Durham Life Insurance Company (1957) 198 Va. 670, 96 S.E.2d 109 and Justice v. Prudential Insurance Company of America (4th Cir. 1965) 351 F.2d 462, decided by this Court on the basis of Virginia law. The Court, after finding federal jurisdiction on the ground that the case “involve [d] construction and interpretation of federal law, to-wit, the federal Truth-In-Lending Act”, dismissed the action, D.C., 349 F.Supp. 133, holding there was no evidence that a contract to procure insurance was ever formed. From that decree, the plaintiff has appealed. At the threshold, we are confronted with the question of federal jurisdiction. It is- not enough that neither party has questioned federal jurisdiction. Because they are courts of limited jurisdiction, “[I]t has often been held that federal courts must be alert to avoid overstepping their limited grants of jurisdiction. At any stage of a litigation, including the appellate, subject-matter jurisdiction may be questioned. By failing to do so, the parties cannot confer jurisdiction by consent. If the court perceives the defect, it is obligated to raise the issue sua sponte.” McCorkle v. First Pennsylvania Banking and Trust Co. (4th Cir. 1972) 459 F.2d 243, 244, note 1. As stated in the order of the District Court, federal subject-matter jurisdiction in this case is predicated entirely on the claim that the suit “arises under” federal law. Such a claim of federal question jurisdiction is to be resolved on the basis of the allegations of the complaint itself. To sustain it, the complaint must, however, contain allegations “affirmatively and distinctly” establishing federal grounds “not in mere form, but in substance” and “not in mere assertion, but in essence and effect.” Mere conclusory allegations in the complaint are insufficient to support jurisdiction. As on eCourt has well expressed it, “[I]f the concept of ‘federal question’ is to have any meaning, the court must look beyond the verbiage of a complaint to the substance of the plaintiff’s grievance, and dismiss the action, where no real basis for federal jurisdiction exists.” Thus, “[T]he mere assertion in a pleading that the case is one involving the construction or application of the federal laws does not authorize the District Court to entertain the suit” nor does federal jurisdiction attach on the bare assertion that a federal right or law has been infringed or violated or that the suit “takes its origin in the laws of the United States.” To satisfy the statutory jurisdictional requirement, a federal right must be a “real and substantial” issue in the case and “must be an element of the plaintiff’s cause of action” (Italics in opinion). It is often true that, “[A] mere incidental or collateral federal question may appear, or may lurk in the background of the record, but this is not a sufficient or adequate basis upon which federal jurisdiction may attach.” Simply stated, an. action arises under federal law only if it “really and substantially involves a dispute or controversy respecting the validity, construction or effect of such a law, upon the determination of which the result depends.” In ascertaining whether there is a real federal issue upon “which the result depends”, the Courts have observed “the distinction between controversies that are basic and those that are collateral, between disputes that are necessary and those that are merely possible” and federal question jurisdiction attaches only “to cases where the plaintiff’s cause of action, the rule of substance under which he claims the right to have a remedy, is the product of federal law.” (Italics added.) It is plain that, giving effect to the principles just stated, federal subject-matter jurisdiction is absent in this case. The real basis on which plaintiff plants her cause of action is an alleged contract or agreement to procure insurance, the breach of which, under her theory, gave rise to an action both in contract and in tort under the law of Virginia. It is true the alleged agreement had its “origin” in a notice form intended by the defendant as compliance with the Act and the Regulations issued by the Federal Reserve System. That, however, was purely coincidental. Whether the form was one designed to comply with the Truth in Lending Act or not was unimportant; the basic issue in the case was whether the language used by the defendant in its form of loan application was sufficient to be the basis for the creation of a contractual right and that issue, all .parties agree, is determinable solely by Virginia law, not federal law.' In no sense can it be said that the plaintiff’s cause of action is grounded on the Truth in Lending Act or will be dependent on a construction of that Act. Nor can it be converted into an action involving the construction of that Act merely by a conclusory allegation to that effect. The Truth in Lending Act is a “disclosure” law. And, since the purpose of the Act is to permit the borrower, with full knowledge of costs, to make comparisons the disclosure must precede final closing of loan. It is the obligation to disclose, not the duty of subsequent performance, towards which the Act is directed. For failure to make disclosure as required, the Act provides its own remedy. Section 1640, 15 U.S.C. Obviously, the defendant complied fully with the Act: It made a full and exact disclosure. The plaintiff does not complain to the contrary. She accordingly has no basis for an action under the Truth in Lending Act for failure to disclose the cost of credit life insurance. She has not, by her own statement of her cause of action, any right to the statutory remedy authorized for a violation of the Truth in Lending Act. Though not essential to the determination of this case, a proper construction of the Act indicates that any private action for violation thereof is limited to the statutory remedy and can provide no basis for other relief. Cf., Jordan v. Montgomery Ward & Co. (8th Cir. 1971) 442 F.2d 78, 81-82, cert. denied 404 U.S. 870, 92 S.Ct. 78, 30 L.Ed.2d 114; Wheeler v. Adams Company (D.C.Md.1971) 322 F.Supp. 645, 659. Accordingly, any claim for relief under the Truth in Lending Act in the present action would be purely fictitious. To repeat: Her action is for failure to perform on what she claims was an offer by the defendant to procure and an acceptance of that offer by her and her deceased husband. Such action involves a construction of the language in the form used by the defendant to give the disclosure required under the Truth in Lending Act, it is true, but not for the purpose of determining whether that language represents sufficient compliance with the Act (and thus a construction of federal law) but for the purpose of determining whether such language will under the law of Virginia constitute a valid contract to procure. Such an action presents no federal question upon which the result of the action will depend. The District Court should remand the cause to the State Court. Remanded with instructions to the District Court to remand the cause to the State Court from which it was removed. . 12 C.F.R., Section 226.1. . On the Truth in Lending Act generally, see Note, 51 N.C.L.Rev. 592 (1973). The Act and the Regulations issued thereunder are, also, discussed in Mourning v. Family Publications Service, Inc. (5th Cir. 1971) 449 F.2d 235, 238-249, cert. granted 405 U.S. 1062, 92 S.Ct. 1492, 31 L.Ed.2d 792. . 28 U.S.C. § 1441(b). . See Annotation, 29 A.L.R.2d 171; Butler v. Scott (10th Cir. 1969) 417 F.2d 471, 473. . Cf., however, Travelers Insurance Company v. Turner (1971) 211 Va. 552, 178 S.E.2d 503. . Barnhart v. Western Maryland Ry. Co. (4th Cir. 1942) 128 F.2d 709, 714, cert. denied 317 U.S. 671, 63 S.Ct. 75, 87 L.Ed. 538. . Cuyahoga Co. v. Northern Ohio Co. (1920) 252 U.S. 388, 397, 40 S.Ct. 404, 64 L.Ed. 626; Stanturf v. Sipes (8th Cir. 1964) 335 F.2d 224, 229. . Martinez v. Southern Ute Tribe (10th Cir. 1960) 273 F.2d 731, 734; Mantin v. Broadcast Music (9th Cir. 1957) 244 F.2d 204, 206. . Trauss v. City of Philadelphia (D.C. Pa.1958) 159 F.Supp. 672, 676. . Malone v. Gardner (4th Cir. 1932) 62 F.2d 15, 18; McCartney v. State of West Virginia (4th Cir. 1946) 156 F.2d 739, 741; Kilgore v. McKethan (5th Cir. 1953) 205 F.2d 425, 426, cert. denied 346 U.S. 924, 74 S.Ct. 311, 98 L.Ed. 417; Polhemus v. American Medical Ass’n. (10th Cir. 1944) 145 F.2d 357, 359. . Russo v. Kirby (2d Cir. 1971) 453 F.2d 548, 551; Swank v. Patterson (9th Cir. 1944) 139 F.2d 145, 146. . Shulthis v. McDougal (1912) 225 U.S. 561, 569, 32 S.Ct. 704, 706, 56 L.Ed. 1205; Barnhart v. Western Maryland Ry. Co., supra, at 713-714 (128 F.2d). . McCartney v. State of West Virginia, supra, at 741 (156 F.2d). . McCorkle v. First Pennsylvania Banking and Trust Co., supra, at 250 (459 F.2d); McCartney v. State of West Virginia, supra, at 741 (156 F.2d); Gully v. First Nat. Bank (1936) 299 U.S. 109, 112, 57 S.Ct. 96, 81 L.Ed. 70. . Screven County v. Brier Creek Hunting & Fishing Club (5th Cir. 1953) 202 F.2d 369, 370, cert. denied 345 U.S. 994, 73 S.Ct. 1136, 97 L.Ed. 1402; Warrington Sewer Company v. Tracy (3d Cir. 1972) 463 F.2d 771, 772. . Shulthis v. McDougal, supra, at 569 (225 U.S.), 32 S.Ct. 706; Barnhart v. Western Maryland Ry. Co., supra, at 713-714 (128 F.2d); Malone v. Gardner, supra, at 18 (62 F.2d). . Gully v. First National Bank, supra, at 118 (299 U.S.), 57 S.Ct. 100. . Wechsler, Federal Jurisdiction and the Revision of the Judicial Code, 13 Law & Contemp.Prob. 216, 225 (1948). . Section 1005(b), 15 U.S.C. . Its purpose is “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.” Section 1601, 15 U.S.C. . Bissette v. Colonial Mortgage Corporation (D.D.C.1972) 340 F.Supp. 1191, 1192-1193; see, Ratner v. Chemical Bank New York Trust Company (D.C.N.Y.1971) 329 F.Supp. 270, 273 and 276; Bostwick v. Cohen (D.C.Ohio 1970) 319 F.Supp. 875, 877; Buford v. American Finance Company (D.C.Ga.1971) 333 F.Supp. 1243, 1245. . See Bostwick v. Cohen, supra, at 878 (319 F.Supp).

f2d_477/html/0045-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

UNITED STATES of America, Plaintiff-Appellee, v. William FANNING et al., Defendants-Appellants. No. 72-1896. United States Court of Appeals, Fifth Circuit. April 11, 1973. Rehearing and Rehearing En Banc Denied May 29, 1973. Klyde Robinson, Charleston Heights, S. C., for Fanning. Donald I. Bierman, Miami, Fla., for Marmorstein. Edward R. Shohat, Miami, Fla., for Dixon. Warren E. Magee, Washington, D. C., Theodore Klein, Miami, Fla., for Von Zamft. Robert W. Rust, U. S. Atty., Lloyd G. Bates, Jr., Asst. U. S. Atty., Miami, Fla., Peter M. Shannon, Jr., Atty. Criminal Div., Dept. of Justice, 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. ALDRICH, Circuit Judge: Appellants, and others, were convicted, after a joint trial, of conspiracy to misapply funds of a national bank and of making false entries in bank records with intent to defraud. 18 U.S.C. §§ 371, 656 and 1005. Following affirmance, sub nom., Gordon v. United States, 5 Cir., 1971, 438 F.2d 858, cert. denied, 404 U.S. 828, 92 S.Ct. 63, 30 L.Ed.2d 56, they moved for dismissal of the indictment, new trial, and reduction of sentence. These motions being denied after an evidentiary hearing, they appeal. We affirm. Appellants Von Zamft and Fanning complain that the government’s use of electronic surveillance illegally interfered with their attorney-client relationship. One of the government witnesses at the trial was David Phillips. Phillips, a lawyer, was chairman and counsel of the bank and in these capacities participated in some of the overt acts enumerated in the indictment. In affidavits submitted at the hearing these appellants stated that Phillips had on occasion acted as their personal counsel, representing them with respect to business transactions. They further stated that during part of the period covered by the indictment he counseled them concerning the government’s investigation of the bank. This, coneededly, ended prior to the indictment. Phillips did not represent any defendant at any stage of the criminal proceedings. It appears that during the investigation, which commenced while the conspiracy was still ongoing, government agent Brody approached Phillips for information concerning it, and Phillips concluded to cooperate. At one interview he told the agent that he planned to tape-record conversations in his office in order to prevent persons involved in the conspiracy from changing “their stories in an effort to implicate him further in the case.” Brody replied that he would not participate in the recording operation. Phillips subsequently gave him several statements, but Brody testified at the hearing that he never listened to any recordings, never took possession of any, and in fact did not know whether the information received from Phillips stemmed from any conversation that had been taped. At the trial Phillips gave only the most limited testimony, the court apparently making it clear that it would not receive anything touching an attorney-client relationship. On this basis there is nothing to the claim of illegal electronic governmental surveillance. In the light of the testimony of the agent, the court’s findings that the government “neither participated nor encouraged this and . did not in any way utilize any information, if any, so obtained,” are amply warranted. Appellants, perhaps understandably, but quite uncommendably, ignore this. Moreover, even if the government had participated, the consent of one party to the conversations— here Phillips — eliminates any claim of illegality relating to the recording per se. See United States v. White, 1971, 401 U.S. 745, 91 S.Ct. 1122, 28 L.Ed.2d 453; United States v. Avila, 5 Cir., 1971, 443 F.2d 792, cert. denied, 404 U.S. 944, 92 S.Ct. 295, 30 L.Ed.2d 258; United States v. Castillo, 5 Cir., 1971, 449 F.2d 1300. The fact that one of Phillips’ roles was personal attorney to appellants would raise a problem if they could show he divulged privileged communications that contributed to their convictions. Passing the serious question that the communications in all likelihood involved plans to carry out illegal activities, and hence were outside the privilege, Clark v. United States, 1933, 289 U.S. 1, 15, 53 S.Ct. 465, 77 L.Ed. 993, appellants failed to show that information given the government by Phillips stemmed from attorney-client communications at all. Cf. United States v. Bartlett, 8 Cir., 1971, 449 F.2d 700, 703-704, cert. denied, 405 U.S. 932, 92 S.Ct. 990, 30 L.Ed.2d 808. It is not enough to show, on the one hand, interchange between Phillips and appellants and, on the other hand, interchange between Phillips and the agent; appellants were obliged to link the two together and, further, to show prejudice therefrom. Alderman v. United States, 1969, 394 U. S. 165, 183, 89 S.Ct. 961, 22 L.Ed.2d 176. Correspondingly, there is no merit in appellants’ claim that they were denied effective assistance of counsel. As we stated in United States v. Zarzour, 5 Cir., 1970, 432 F.2d 1, at 3: “[A]n intrusion by the government upon the confidential relationship between a criminal defendant and his attorney, either through surreptitious electronic means or through an informant, is a violation of the Sixth Amendment right to counsel. . However, there must be an intrusion.” Even more fundamental, having been informed by Phillips prior to the indictment that he was no longer representing them, appellants were not even under the impression that he was representing them at any critical stage. Kirby v. Illinois, 1972, 406 U.S. 682, 92 S.Ct. 1877, 32 L.Ed.2d 411. In this posture these appellants repetitively seek to counter by claiming that at no time have they ever seen Phillips’ statements. The claim is totally unwarranted. While the court (understandably, we think) made no finding on this point, our reading of the record persuades us that the Phillips statements called for under the Jencks Act, 18 U.S. C. § 3500, were distributed, and that appellants had ample opportunity to make the showing necessary to support their contention. Agent Brody testified at the hearing that he saw government counsel deliver Phillips’ statements to defense counsel at the trial. Moreover, the record at the trial reveals that government counsel requested and received an afternoon recess to prepare the statements for distribution and that no objections were made the following morning that would suggest he had not completed his obligations. Appellants make much of the demand, but no mention of the speaking silence thereafter. We note, further, that when the jury retired for deliberation of appellants’ verdicts and Phillips was recalled for further testimony by another defendant who was trying his case to the judge alone, the attorney for that defendant made reference to Phillips’ statements, and indeed, asked a question concerning the “bugging” activities. And, finally, we note that at the hearing it appeared that at least some of the statements were present in the courtroom and that all of them, according to Agent Brody, were on the rostrum of the United States Attorney’s office, and available to the court, The claim that the statements were never available is wholly unsupported by the record. Appellant Dixon charges that the district court erred in not releasing the grand jury testimony of codefendant Von Zamft made during an investigation of a theft of securities in the Southern District of New York, see post. It appears that at the hearing a defendant who has not appealed requested the judge to inspect in camera the New York testimony to see if.it was relevant; the judge did so, and found nothing of potential value. In view of the fact that no defendant — Von Zamft himself has made no objection regarding the discovery of his testimony — ever requested the court to turn the material over without inspecting it in camera, appellant Dixon’s charge that he had a right to see the testimony without prior screening is too late. More basic, the government is correct in stating that it would be impracticable and unproductive to require delivery of all statements made at any time in any jurisdiction by a defendant. Where, as here, the testimony relates to an extraneous investigation, and no showing of a “particularized need” is made, cf. Menendez v. United States, 5 Cir., 1968, 393 F.2d 312, cert. denied, 393 U.S. 1029, 89 S.Ct. 639, 21 L.Ed.2d 572, an in camera inspection is the most a defendant is entitled to. The motions for reduction of sentences are also without merit, assuming an appeal lies. Von Zamft, in an affidavit, states that he was promised by prosecutors in New York that he would not have to serve any time if he cooperated in their prosecution of the securities theft case. Von Zamft did in fact cooperate in the case, which took place after his conviction and sentencing in Florida, and the New York prosecutors communicated the details of the cooperation to the judge below. The letter does not disclose, however, and the government denies, that any promise was made respecting the Florida sentence. Indeed, it is at least questionable that any binding promise could have been made by government officials in one jurisdiction with respect to a sentence already pronounced in another jurisdiction. We may add that even had a promise been proved, appellant’s claim is a far cry from Santobello v. New York, 1971, 404 U.S. 257, 92 S.Ct. 495, 30 L.Ed.2d 427, where the prosecutor reneged on a promise to recommend sentence after securing petitioner’s return promise to plead guilty. No such reliance is involved here. Affirmed. . At the hearing, instead of the sweeping claim of never seeing any of Phillips’ statements, appellants claimed that at trial they did not see the statement relating to Phillips’ decision to tape-record conversations in his office. The extent of their proof was that, although remembering receipt of many Jencks Act statements throughout the trial, attorneys for appellants had no “recollection” of receiving the particular statement referring to the recording operation. . At trial the government was ordered to turn over all grand jury statements of defendants with respect to the investigation of the bank fraud conspiracy, and it did so. . It may be that any New York “deal” related to Yon Zamft’s New York conviction in connection with the securities theft. In that case the court sentenced Von Zamft to a term concurrent with his Florida sentence, and subject to any modification of that sentence.

f2d_477/html/0049-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

SOUTHERN RAILWAY COMPANY, Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant. No. 72-3299. United States Court of Appeals, Fifth Circuit. April 18, 1973. Rehearing and Rehearing En Banc Denied May 25, 1973. Richard G. Greer, Kenneth C. Pollock, Atlanta, Ga., for defendant-appellant. James D. Maddox, Rome, Ga., for plaintiff-appellee. Before AINSWORTH, GODBOLD and CLARK, Circuit Judges. CLARK, Circuit Judge: Though the parties disagree as to the proper conclusions and inferences to be drawn, the evidentiary facts in this diversity case are undisputed. In June of 1968 Sharon Santolla graduated from high school in Tazewell, Virginia, where she lived with her parents. After graduation, she went to Marietta, Georgia, to stay with her sister, Carol Averill, and her brother-in-law, Wallace Averill, seeking work for the summer in Georgia prior to starting college in Virginia in the fall. She obtained employment at Six Flags Over Georgia Amusement Park in Mabelton, Georgia, on July 30, 1968. She was hired to work daily, except Friday, on the five o’clock p. m. to ten o’clock p. m. shift. She usually worked a double shift from eight o’clock a. m. until ten o’clock p. m. Wallace Averill allowed her to use one of his cars, a 1958 Karman Ghia, to drive to and from work. On every working day for approximately twenty-five days she used the car for that purpose with Averill’s knowledge and consent and without asking for separate permission each day. She never used the car or requested permission to use it for any other purpose. She purchased gasoline and some tires for the automobile while she was using it. Sharon only drove the car to and from her place of work but no one else used the car while she was at work. On the morning of August 29, 1968, Sharon was involved in a collision with a Southern Railway train, in which Bruce C. Clark, a passenger in the automobile, was injured. Subsequently, Clark brought suit against Sharon and the Southern Railway Company. As a result of a settlement agreement, Clark recovered a joint and several verdict and judgment in the sum of 70,000 dollars against Sharon and the Railway Company. The Averill automobile was covered by a liability insurance policy written by Gulf Insurance Company. Gulf paid 10,000 dollars, the limit under its primary policy, into court. The remainder of the judgment, 60,000 dollars, was paid by Southern Railway. Southern Railway brought this action against State Farm Mutual Automobile Insurance Company for statutory contribution, alleging that State Farm is liable under policies of insurance issued by it to Sharon’s father. Both parties moved the court below for summary judgment. The court granted Southern Railway’s motion and we affirm. We note at the outset our approval of the district court’s holding that Southern Railway could maintain this action against State Farm. No useful purpose would be served by a lengthy discussion of that issue here in light of the district court’s opinion set out at 357 F.Supp. 810. State Farm’s second defense to liability is more substantial. The insurance company admits that at the relevant time Sharon’s father, G. L. Santolla, was the insured under two insurance policies issued by State Farm, which provided “non-owned automobile” coverage, and it has abandoned' on this appeal its trial court contention that Sharon was not a member of her father’s household at the time of the accident. It contends, however, that Sharon was not covered by the policy while operating the Averill automobile because the vehicle was furnished to her for regular use. The district court ruled that the undisputed facts conclusively established that the Karman Ghia was not furnished Sharon for her regular use. Under Georgia law, even where the basic facts are undisputed, as these are, the trier of fact is entitled to draw inferences or overall conclusions of fact as to whether the proof demonstrates “regular use.” See State Farm Mutual Automobile Insurance Company v. Bates, 107 Ga.App. 449, 130 S.E.2d 514 (1963); California Insurance Company v. Blumberg, 101 Ga.App. 587, 115 S.E.2d 266 (1960). Federal law compels the same result. Cf. Necaise v. Chrysler Corp., 335 F.2d 562 (5th Cir. 1964); United States v. Fewell, 255 F.2d 496 (5th Cir. 1958); Texas Company v. Savoie, 240 F.2d 674, rehearing denied, 242 F.2d 667 (5th Cir.), cert. denied, 355 U.S. 840, 78 S.Ct. 49, 2 L.Ed.2d 51 (1957). In this case the trial judge held that as a matter of law the undisputed evidence compelled the conclusion that the automobile was not furnished to Sharon for her regular use. It is unnecessary for this court to review the correctness of this decision, for in this non-jury case the judge was the trier of fact. There was ample evidence to support his decision construed as a factual determination. In Grace v. Hartford Accident & Indemnity Co., 324 F.Supp. 953 (N.D.Ga.), aff’d, 440 F.2d 411 (5th Cir. 1970), a district court judge learned in Georgia law found that an automobile provided by an employer for an employee’s virtually unrestricted usage for a period of time anticipated to span at least one month was not furnished for “regular use” within an identical sort of policy term. Moreover, Sharon’s entitlement to the car and her expectation of continued use were considerably more speculative and contingent than those of the employee in Grace. See also State Farm Mutual Automobile Insurance Co. v. Bates, supra; National-Ben Franklin Insurance Co. v. Prather, 109 Ga.App. 459, 136 S.E.2d 499 (1964). Though it disagrees with the inferences and conclusions of the trial judge, State Farm has not demonstrated that there is any real dispute as to the evidentiary facts or that it has further or more probative evidence to present in this case which would call for this court to remand for a formal trial. In these circumstances a remand for a. hearing would be no more than a useless formality and a waste of judicial energy. Any error was harmless. F.R.Civ.P. 61. Affirmed. AINSWORTH, Circuit Judge (dissenting) : I respectfully dissent. In my view, the District Court committed error in denying the motion of appellant State Farm Mutual Automobile Insurance Company for summary judgment, and in granting the motion of appellee Southern Railway Company for summary judgment. On the basis of the undisputed facts which are set forth in the majority opinion, it appears as a matter of law that Sharon Santolla was furnished the 1958 Karman Ghia automobile for her regular use and was so engaged in that use at the time of the accident sued upon. Accordingly, there was no coverage by State Farm on its policy of liability insurance. The judgment should be reversed. . Contribution. — In cases of joint, joint and several, or several liabilities of two or more persons, where all are equally bound to bear the common burden, and one has paid more than his share, he shall be entitled to contribution from the others; and whenever the circumstances are such that an action at law will not give a complete remedy, equity may entertain jurisdiction. Ga.Code Ann. § 37-303 (1962). . The policy provides that: “non-owned automobile” means an automobile or trailer not owned by or furnished for the regular use of either the named insured or any relative other than a temporary substitute automobile ; . A district judge’s determinations on questions involving the law of his state are entitled to great weight. Petersen v. Klos, 433 F.2d 911 (5th Cir. 1970).

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Mickey M. JEFFRIES, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee. No. 71-1480. United States Court of Appeals, Ninth Circuit. March 30, 1973. L. R. Bretz (argued), Bretz & Gabriel, Great Falls, Mont., for plaintiff-appellant. Otis L. Packwood, U. S. Atty. (argued), William A. Brolin, Asst. U. S. Atty., Butte, Mont., for defendant-appellee. Before KOELSCH and CARTER, Circuit Judges, and HARRIS, District Judge. The Honorable George B. Harris, Senior United States District Judge, Northern District of California, sitting by designation. HARRIS, District Judge: Jeffries brought this Federal Tort Claims Act case for injuries sustained when he was hurt in a mining accident in Montana. Following trial, the district court judge found against Jeffries and in favor of the Government. Jeffries appeals. The facts may be summarized as follows. The Government, in the course of the construction of a dam on the Kootenai River near Libby, Montana, found it necessary to escavate some seven miles of tunnel as part of the relocation of the Great Northern Railroad. Such work was begun in June, 1966. In order to facilitate such excavation, the Government, through its Corps of Engineers, let a contract for construction to Walsh-Groves, a joint venture. The contract required, inter alia, that the contractor establish a safety program, comply with Corps of Engineers Safety Manual EM 385-1, and complete the work subject to inspection by Corps inspectors to insure compliance with the terms of the contract. Jeffries was employed by Walsh-Groves as a miner. He worked on the crown deck (upper deck) of a multileveled movable scaffold called a “jumbo.” To accomplish the excavation, the jumbo would be moved to the face of the tunnel. Miners on the four levels of the jumbo would simultaneously drill holes into the face of the tunnel and load such holes with explosives. The jumbo would then be moved back, the loads fired, and the debris loosened by the blast removed and the operation repeated. After a blast and before drilling was resumed, the tunnel was inspected to determine if any loose rock remained in the crown or walls of the tunnel, and any rock so found was “barred down,” meaning that miners with steel bars pried out the loose rock. On May 7, 1967, about a half hour prior to the end of his shift, Jeffries left his position at the face of the tunnel where he had been drilling in order to get some needed drill steel. At a point about twenty feet from the face of the tunnel a rock of substantial size and weight fell upon Jeffries. On each shift a Corps safety inspector actually inspected the operations. He worked along with the Walsh-Groves employees and when he saw any dangerous practice he would give orders directly to the men to stop it. After each blast the inspector checked the crown for loose rock. On these inspections he was accompanied by one of the Walsh-Groves supervisory personnel. If the inspector thought there was a need to bar down loose rock, he would directly order the miners to do it. On the day in question Corps Inspector Trees had inspected the portion of the crown from which the rock fell, in the company of a Walsh-Groves supervisory employee. Neither the inspector nor the supervisory employee found a dangerous condition. It was the practice in some sections of the tunnel, including the portion here in question, to place screens on the crown of the tunnel to prevent loose rock from falling. The screens were fastened by rock bolts which held them in place and also stabilized the crown. Screens had not been placed over that portion of the crown from which the damaging rock fell. Although there were contradictory accounts from the witnesses at trial, the district court judge found that no rock bolt had been drilled into the rock which fell. Jeffries raises three specifications of error on appeal. The first concerns the Pre-Trial Order in the case. Prior to trial, the parties prepared a Pre-Trial Order which included certain stipulations of fact. It was presented to the district court judge, but he did not read or approve it at that time. Following trial, it became apparent to the judge that certain of the stipulated facts no longer remained tenable in view of the evidence' adduced at trial. He thereupon entertained the motion of the Government to amend the Pre-Trial Order. Such motion was granted with respect to two amendments only, consisting of deletion of: It was a duty of the Government Inspectors if they saw a dangerous condition to warn the man or men involved and/or their supervisor, and deletion of: At about this time Edgar R. Payne and Argol Drollinger had driven a rock bolt into a mud fault in the overhead. The evidence revealed that the use of the word “duty” in the first sentence deleted was improper in that an obligation, rather than a legal duty, was what the judge found the Government owed. As to the second sentence deleted, the evidence was in conflict, but as noted above, the court made a specific finding contrary to the proposed stipulation. Jeffries claims that the court should not have permitted such amendment after trial, although he makes no specific claims of prejudice and apparently was not hampered in the full presentation of his position at trial. Rule 16 of the Federal Rules of Civil Procedure provides that a Pre-Trial Order when entered controls the subsequent course of the action “unless modified at the trial to prevent manifest injustice.” Certainly under this standard a Pre-Trial Order is not an inexorable decree and may, under proper circumstances, be modified. See Phoenix Mut. Life Ins. Co. of Hartford, Conn. v. Flynn, 83 U.S.App.D.C. 381, 171 F.2d 982, 983 (1948); 3 Moore’s Federal Practice Para. 16.20 at 1136, 1138. The proper approach to be taken was outlined in Central Distributors, Inc. v. M. E. T., Inc., 403. F.2d 943, 945, 946 (5th Cir. 1968): It has been suggested that proper treatment of the pre-trial order after entry requires an appropriate balance between firmness to preserve the essential integrity of the order, and adaptability to meet changed or newly discovered conditions or to respond to the special demands of justice. [Footnote omitted.] * * * * * * A stipulation of counsel originally designed to expedite a trial should not be rigidly adhered to when it becomes apparent that it may inflict manifest injustice upon one of the subscribers thereto. [Citation omitted.] See also Washington Hospital Center v. Cheeks, 129 U.S.App.D.C. 339, 394 F.2d 964, 965-966 (1968). We find that Jeffries was not prejudiced by the amendments here complained of and that they were properly granted to prevent manifest injustice. Jeffries’ next specification of error concerns the claim that the United States should have been held liable here under the “Good Samaritan Doctrine”; because the Government gratuitously undertook to assume the duty of protecting those situated such as Jeffries from harm, it is liable for- its negligence in such undertaking. The Good Samaritan Doctrine, which is recognized under the applicable law of Montana, is a theory of liability encompassed by the Federal Tort Claims Act. Roberson v. United States, 382 F.2d 714, 718 (9th Cir. 1967). Roberson, the leading case on the issue now under consideration, distinguished the two forms of the Good Samaritan Doctrine as described in the Restatement of Torts, Second. Restatement of Torts, Second, § 323 provides for liability in the “two-person” situation. Restatement of Torts, Second, § 324A, the “three-person” section primarily relied on here, provides: One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking, if (a) his failure to exercise reasonable care increases the risk of such harm, or (b) he has undertaken to perform a duty owed by the other to the third person, or (c) the harm is suffered because of reliance of the other or the third person upon the undertaking. Under Roberson, supra at 721, the following elements are necessary to a claim under § 324A: (1.) The actor, in this case the Government, must undertake, gratuitously or for consideration, to render services to another; (2.) The services so rendered must be of a kind which the actor should recognize as necessary for the protection of third persons [in this case those situated like the plaintiff]; (3.) The actor must fail to exercise reasonable care in the performance of his undertaking; (4.) The failure to exercise reasonable care must result in physical harm to the third persons or their things; and (5.) The actor’s failure to exercise such care must (a) increase the risk of such harm, or (b) the undertaking must have been to perform a duty owed by the other to the third persons, or (c) the harm must be suffered because of the reliance of the other or the third persons upon the undertaking. In Roberson, this Court held that the first element of the test had not been satisfied because by merely conducting a safety inspection program the Government was not undertaking a legal duty to render services. In Roberson, as here, the contract under which the Government had arranged for the contractor therein to build a dam obligated the contractor to provide for the safety of its employees and reserved to the Government the right of inspection. The contractor there was requested to comply with applicable safety regulations and the Government could inspect to insure compliance with such regulations. There, too, the Government utilized a safety management officer and assistants. The district court here found Roberson to be fundamentally indistinguishable and thus controlling. That conclusion was correct. In finding a failure of proof on the first element of the “three-person” Good Samaritan test, the Roberson Court relied upon the line of cases holding that the Government’s reservation of a right of inspection does not, without more, impose upon it a legal duty such as to render it liable for injuries suffered by the employees of its independent contractors. Numerous cases support the position taken in Roberson— and by the district court here — that reservation of such right of inspection or actual inspection, without more, does not subject the Government to liability. See, e. g., Lemley v. United States, 317 F.Supp. 350, 359-361 (N.D.W.Va.1970), affirmed, 455 F.2d 522 (4th Cir. 1971); Craghead v. United States, 423 F.2d 664, 666 (10th Cir. 1970); Irzuk v. United States, 412 F.2d 749, 751 (10th Cir. 1969); Gowdy v. United States, 412 F.2d 525, 529 (6th Cir. 1969), cert. den., 396 U.S. 960, 90 S.Ct. 437, 24 L.Ed.2d 425 (1969), reh. den., 396 U.S. 1063, 90 S.Ct. 750, 24 L.Ed.2d 756 (1970); Wright v. United States, 404 F.2d 244, 247 (7th Cir. 1968); United States v. Page, 350 F.2d 28, 30-31 (10th Cir. 1965), cert. den., 382 U.S. 979, 86 S.Ct. 552, 15 L.Ed.2d 470 (1966); Kirk v. United States, 270 F.2d 110, 116-117 (9th Cir. 1959); Richardson v. United States, 251 F.Supp. 107, 111 (W.D.Tenn. 1966). Jeffries tries to distinguish Roberson by the contention that there is here evidence that the Government assumed a duty for the benefit of third persons, namely the employees of Walsh-Groves, but the district court found to the contrary and such finding is not clearly erroneous. Although the Government may have had somewhat more direct control and supervisory power here than in Roberson, such influence also existed in other cases cited above wherein the Government was nevertheless held not liable. See Gowdy v. United States, supra; Wright v. United States, supra; Richardson v. United States, supra. Jeffries’ third specification of error is predicated upon the extra-hazardous nature of the activity undertaken by the Government. Jeffries recognizes that under Dalehite v. United States, 346 U.S. 15, 45, 73 S.Ct. 956, 97 L.Ed. 1427 (1953), the Government cannot be liable without fault under the Federal Tort Claims Act simply by virtue of engaging in extrahaxardous activity. Rather, Jeffries’ theory is that the Government’s undertaking of such activity imposed upon it a non-delegable duty of due care. The case law, however, does not support Jeffries’ position. There is substantial doubt as to whether the “nondelegable duty” theory is available under the Federal Tort Claims Act. See United States v. Page, supra, 350 F.2d at 33-34. Moreover, on the facts of this case, the applicable law of Montana would appear to deny recovery. See Ashcraft v. Montana Power Company, 480 P.2d 812, 813 (Mont.1971). Affirmed.

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UNITED STATES of America, Appellant, v. Jack ROBERTS et al., Appellees. UNITED STATES of America, Appellant, v. Charles Bishop SMITH et al., Appellees. UNITED STATES of America, Appellant, v. Jerome LEAVITT and Norman Shabas, Appellees. UNITED STATES of America, Appellee, v. Michael POSNER, Appellant. Nos. 72-1514, 72-1637, 72-1729 and 72-1799. United States Court of Appeals, Seventh Circuit. Argued Jan. 11, 1973. Decided April 3, 1973. James R. Thompson, U. S. Atty., William T. Huyck, Asst. U. S. Atty., Chicago, Ill., John J. Robinson, Appellate Section, Crim.Div., U. S. Dept. of Justice, Washington, D. C., for United States. Gerald M. Werksman, William J. Stevens, Chicago, Ill., Thomas L. Robinson, Memphis, Tenn., Andrew A. Bucci, Providence, R. I., Michael B. Nash, J. Dillon Hoey, Barry J. Freeman, Nicholas M. Karzen, Jerome Rotenberg, Richard B. Caifano, Barry Goodman, Edward M. Genson, Richard H. Devine, Chicago, Ill., for Roberts, and others. Before SWYGERT, Chief Judge, and KILEY and CUMMINGS, Circuit Judges. PER CURIAM. These appeals involve the question whether motions to suppress the content of intercepted telephone communications should have been granted in these four cases. Numerous persons were indicted for conducting an illegal gambling business in violation of 18 U.S.C. § 1955 and making related interstate telephone calls in violation of 18 U.S.C. § 1952. The defendants filed motions to suppress evidence obtained by court-ordered wire interception. In part, the motions challenged the procedure used by the Department of Justice in authorizing the submission of the applications for the wire interception orders to the court. In Nos. 72-1514, 72-1637, and 72-1729, the motions to suppress were granted, and the Government appeals therefrom pursuant to 18 U.S.C. §§ 3731 and 2518 (10) (b). In No. 72-1799 the district court denied the motion to suppress, whereupon the defendant Michael Posner entered a plea of guilty, specifically reserving, however, the right to appeal the denial of his motion to suppress. This reservation of his right to appeal on a non-jurisdictional ground was made by agreement with the prosecutor and with the acquiescence of the trial court, and defendant Posner is now appealing pursuant to the reservation. The applicable statute, 18 U.S.C. § 2516(1), provides in pertinent part that “The Attorney General, or any Assistant Attorney General specially designated by the Attorney General, may authorize an application to a Federal judge” for an order authorizing the interception of oral or wire communications by the FBI in certain instances. In Nos. 72-1514 and 72-1637, Attorney General Mitchell did not authorize or designate an Assistant Attorney General to authorize these applications. The authorizations in question were made by Sol Lindenbaum, Executive Assistant to the Attorney General, who affixed the Attorney General’s initials as per the latter’s standing grant of authority to act when he was unavailable. Mr. Lindenbaum concluded from his “knowledge of the Attorney General’s actions on previous cases that he would approve the request if submitted to him.” For the reasons persuasively stated by Judge Sobeloff in United States v. Giordano, 469 F.2d 522 (4th Cir. 1972), certiorari granted, 411 U.S. 905, 93 S.Ct. 1530, 36 L.Ed.2d 194, we conclude that the statute empowered only the Attorney General or a specially designated Assistant Attorney General — both of whom, in contradistinction to Mr. Lindenbaum, are subject to the political process of Senate confirmation — personally to authorize such applications. When Mr. Lindenbaum initially authorized the applications, he affixed the Attorney General's initials to memoranda addressed to Assistant Attorney General Will Wilson, stating that “ [pursuant to the powers conferred on me by Section 2516 of Title 18, United States Code, you are hereby specially designated to exercise those powers for the purpose of authorizing David M. Quinn to make the above-described application.” Mr. Wilson, however, did not personally authorize the application, but delegated to Deputy Assistant Attorneys General the authority to sign his name to letters of authorization for attorneys in the field. This is exactly what they did. Had the initial authorization of the application actually been made by the Attorney General (or a specially designated Assistant Attorney General), we would agree with the Government that the purported “special designation” of Mr. Will Wilson was really not the exercise of the alternative contemplated by the statute (the Attorney General never exercised this statutory prerogative) but a delegation to perform a ministerial function, which the Assistant Attorney General could subdelegate. Moreover, although the applications submitted to the trial judge identified Assistant Attorney General Will Wilson as the authorizing officer specially designated by the Attorney General, we would not be inclined to elevate form over substance to find a violation of 18 U.S.C. § 2518(1) (a) and (4) (d), requiring the identity of the authorizing officer be transmitted to the court if there had been an initially proper authorization. However, the fact is simply that in Nos. 72-1514 and 72-1637 there was no proper authorization at all; neither the Attorney General nor any Assistant Attorney General specially designated by the former authorized the wiretap applications. Therefore, the Government’s arguments against finding a violation are founded on a non-existent premise and are unavailing, Finally, as in Giordano, supra, the Government argues that even if there were “technical errors in the procedure used,” the “drastic remedy of suppression of evidence” is unwarranted. Were it ours to decide whether or not judicially to fashion a rule of exclusion in this circumstance, we might agree with the Government. However, 18 U. 5. C. §§ 2515 and 2518(10)(a) are patently clear in expressing the Congressional judgment that these intercepted communications may not be received in evidence. United States v. Giordano, supra at 531. Therefore, the motions to suppress were properly granted in Nos. 72-1514 and 72-1637. In No. 72-1729, the Attorney General personally approved the wiretap applications. However, Judge McMillen held that the wiretap evidence as to Leavitt and Shabas must be suppressed because the wiretaps were the progeny of the illegal wiretaps involved in No. 72-1637. We agree. 18 U.S.C. § 2515 provides that “no evidence derived” from any intercepted wire or oral communication “may be received in evidence in any trial * * * if disclosure of that information would be in violation of this chapter.” Implementing that Section, 18 U.S.C. § 2518(10) (a) provides that any aggrieved person may move to suppress “evidence derived” from an unlawfully intercepted communication, and if the motion is granted the contents of the wiretap “or evidence derived therefrom, shall be treated as having been obtained in violation of this chapter.” Taken together, these Sections required Judge McMillen to grant the motions of Leavitt and Shabas because the Government admitted that they were both overheard on the properly suppressed Smith wiretaps (in No. 72-1637) which prompted the wiretap applications in No. 72-1729. Once again, the basis for exclusion is the statutory mandate that evidence derived from an illegal wiretap be suppressed and not a judicially fashioned exclusionary rule or “fruit of the poisonous tree” doctrine arrived at by balancing the respective interests involved. While the statutory command may not be read to press the scope of suppression beyond that existing under present search and seizure law, the statute embodies the decision to suppress unlawfully obtained interceptions and evidence derived therefrom. We think it no unusual extension of the scope of suppression under existing law to conclude that the wiretap evidence in No. 72-1729 was derived from the Smith wiretap. In No. 72-1799, involving Michael Posner, the last of the seven Detroit and Chicago wiretap orders was illegal because the interception authorization was signed by Mr. Lindenbaum instead of by the Attorney General or a specially designated Assistant Attorney General. The Government admits that some of the information supporting the first Chicago wiretap order application was obtained from the four Detroit court-authorized wiretaps. Three of those interception authorizations were signed by the Attorney General. The Government proved that the remaining one (dated April 3, 1970) was telephonically approved by the Attorney General; that satisfied Section 2516(1). Therefore, only the evidence obtained from the final Chicago wiretap was subject to suppression. The district court must now decide if the evidence obtained from the six legal orders supported the guilty plea of Posner apart from evidence obtained through the illegal order of June 5, 1970. If so, his conviction will stand. Orders in Nos. 72-1514, 72-1637, and 72-1729 affirmed. In No. 72-1799 the judgment is reversed and remanded for further proceedings consistent herewith. . In No. 72-1799 the indictment was for a conspiracy to violate 18 U.S.C. § 1952. . In No. 72-1637, the notice of appeal was filed within 30 days of the district court’s denial of the Government’s motion to reconsider. The notice of appeal was timely filed. See United States v. Healy, 376 U.S. 75, 77-80, 84 S.Ct. 553, 11 L.Ed.2d 527. . The internal Justice Department procedure followed here is set forth in United States v. Pisacano, 459 F.2d 259, 263 (2d Cir. 1972), and United States v. Giordano, 469 F.2d 522, 525-526 (4th Cir. 1972), certiorari granted 411 U.S. 905, 93 S.Ct. 1530, 36 L.Ed.2d 194. . See also United States v. Robinson, 468 F.2d 189 (5th Cir. 1972), remanded for an evidentiary hearing to determine whether the wiretap applications were properly authorized under 18 U.S.C. § 2516(1), 472 F.2d 973 (5th Cir. 1973; en banc); per contra, see United States v. Pisacano, 459 F.2d 259 (2d Cir. 1972); United States v. Becker, 461 F.2d 230, 235-236 (2d Cir. 1972). . United States v. Ceraso, 467 F.2d 647, 651 (3d Cir. 1972); United States v. Cox, 462 F.2d 1293, 1300 (8th Cir. 1972); United States v. Becker, 461 F.2d 230, 235 (2d Cir. 1972). . See cases cited in note 5, supra. . 18 U.S.C. § 2515 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, hearing, or other proceeding in or before any court, grand jury, department, officer, agency, regulatory body, legislative committee, or other authority of the United States, a State, or a political subdivision thereof if the disclosure of that information would be in violation of this chapter.” 18 U.S.C. § 2518(10) (a) provides in pertinent part: “Any aggrieved person in any trial, hearing, or proceeding in or before any court, department, officer, agency, regulatory body, or other authority of the United States, a State, or a political subdivision thereof, may move to suppress the contents of any intercepted wire or oral communication, or evidence derived therefrom, on the grounds that— “(i) the communication was unlawfully intercepted; “ (ii) the order of authorization or approval under which it was intercepted is insufficient on its face; or “(iii) the interception was not made in conformity with the order of authorization or approval. Such motion shall be made before the trial, hearing, or proceeding unless there was no opportunity to make such motion or the person was not aware of the grounds of the motion. If the motion is granted, the contents of the intercepted wire or oral communication, or evidence derived therefrom, shall be treated as having been obtained in violation of this chapter.” . We need not pass on the propriety of granting Shabas’ motion on the additional ground that he was not mentioned by name in either order authorizing the wiretaps. But see United States v. Kahn, 471 F.2d 191 (7th Cir. 1972). . Smith v. United States, 117 U.S.App.D.C. 1, 324 F.2d 879 (1963), certiorari denied, 377 U.S. 954, 84 S.Ct. 1632, 12 L.Ed.2d 498, on which the Government relies, is not analogous. There the court properly held that testimony of an eyewitness to a crime need not be suppressed because the police had learned his identity from defendants during their illegal detention. Here Leavitt’s and Shabas’ private communications were invaded by wiretaps which emanated from the earlier illegal ones, and the contents of these communications were sought to be used against them. As then Judge Burger pointed out in Smith, even though the source of the witness’ identity was tainted, “[t]he fact that the name of a potential witness is disclosed to police is of no evidentiary significance, per se, since the living witness is an individual human personality whose attributes of will, perception, memory and volition interact to determine what testimony he will give. The uniqueness of this human process distinguishes the evidentiary character of a witness from the relative immutability of inanimate evidence.” Id. at 881-882 (footnotes omitted). However, overhearing Leavitt and Shabas on the unlawful wiretaps was not without evidentiary significance; indeed those interceptions gave rise to probable cause for the wiretaps order directly against those defendants. Moreover, the utterances of the defendants themselves cannot be equated with the testimony of an occurrence witness. . United States v. Pisacano, 459 F.2d 259, 263 (2d Cir. 1972). . Since the constitutionality of Title III of the Omnibus Crime Control Act was not raised below as a ground for suppression, we decline to consider it. See United States v. Wright, 466 F.2d 1256, 1259 (2d Cir. 1972).

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GOVERNMENT OF the VIRGIN ISLANDS v. Edwin RUSSELL, Jr., Appellant. No. 72-2031. United States Court of Appeals, Third Circuit. Argued Jan. 29, 1973. Decided April 18, 1973. Russell B. Johnson, Christiansted, St. Croix, V. I., for appellant. Mary W. Mercer, Asst. Atty. Gen., Charlotte Amalie, V. I., for appellee. Before MARIS, VAN DUSEN and ROSENN; Circuit Judges. OPINION OF THE COURT MARIS, Circuit Judge. This is an appeal by the defendant from a judgment of the District Court of the Virgin Islands, 9 V.I. 144, affirming, on appeal from the municipal court, his conviction in that court on a charge of aggravated assault and battery upon a police officer. The defendant asserted in the district court and asserts here that he was denied the right to a jury trial by the municipal court. Admittedly, he did not demand such a trial, a demand which, if made, would have required the transfer of the case to the district court for trial, since jury trials are not held in the municipal court. The defendant was represented by counsel in the municipal court, as he has been in all later stages of the case. It seems clear from the record that his counsel and he were aware of his right to a jury trial since immediately after sentence his counsel moved for dismissal of the case on the ground that this right had been denied. As the district court said in its opinion on appeal (9 V.I. at p. 147), “This promptitude suggests, far more than a mere silent record would do, that the defense was at all times cognizant of its right to a jury trial upon demand.” The defendant urged in the district court and urges here that the district court should have applied to his case the rule which it had announced in the case of Government of the Virgin Islands v. Osorio, 1971, 8 V.I. 596, which was also an appeal from the municipal court. In the Osorio case the district court held that it was the duty of the judge of the municipal court, in the kind of a criminal case in which the defendant would be entitled to demand a jury trial, to advise the defendant of his rights in that regard even though he was represented by counsel. The district court in the present case held that the rule of the Osorio case would not be applied retroactively here. In Government of the Virgin Islands v. Parrott, 1973, V.I., 476 F.2d 1058, this court held that in order to obtain a jury trial in the Virgin Islands it is necessary for the defendant to make demand therefor as provided by section 26 of the Revised Organic Act and that only if the defendant is not represented by counsel is it necessary for the court to inform him of his right to a jury trial upon demand. When a member of the bar in good standing has been retained or appointed to represent the defendant, that lawyer may be relied upon by the court to inform his client of his rights. Indeed, this is one of the principal purposes of his retainer or appointment. In this regard we do not agree with the view taken by the district court in the Osorio case or with the rule announced in that case, except in those cases in which the defendant is not represented by counsel. Rule 7 of the Rules Governing the Municipal Court provides that the practice and procedure in that court shall conform as nearly as may be to that in the district court in like causes, except where there is an express provision in the law or the rules to the contrary. A charge of a misdemeanor such as is here involved is a like cause since the district court has concurrent jurisdiction of it under sections 22 and 23 of the Revised Organic Act and 4 V.I.C. §§ 32, 74. The procedure of the district court in this connection is specified by its Rule 12 and is that the defendant must file a written demand for a jury not less than five days before the date set for the trial if he desires a jury trial. This requirement can be complied with by a defendant who is represented by counsel as readily in the municipal court as in the district court. If such a demand is filed in the municipal court the case must, of course, thereafter be transferred to the district court for trial since the municipal court is not presently authorized by law to conduct jury trials. In the case before us the defendant, although represented by counsel, did not demand a jury trial as he was required to do if he desired such a trial. The court was, therefore, entitled to proceed on the assumption that he was satisfied with a trial by the judge of the municipal court. It follows that the municipal court did not err in denying the defendant’s motion, made immediately after sentence, to dismiss the proceedings for failure to grant him a jury trial and that the district court rightly affirmed the judgment of the municipal court. The judgment of the district court will be affirmed.

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SCOTT-GROSS COMPANY, INC., Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent. No. 72-1680. United States Court of Appeals, Sixth Circuit. Argued April 10, 1973. Decided April 13, 1973. Samuel Milner, Lexington, Ky., Natalie S. Wilson, Eblen, Howard & Milner, Lexington, Ky., on brief, for petitioner. John M. Flynn, N. L. R. B., Peter G. Nash, General Counsel, Patrick Hardin, Associate General Counsel, Marcel Mallet-Prevost, Asst. General Counsel, Leonard M. Wagman, Stuart M. Rosenblum, Attys., N. L. R. B., Washington, D. C., on brief, for respondent. Before PECK, McCREE and MILLER, Circuit Judges. ORDER PER CURIAM: We consider the petition of Scott-Gross Company, Inc., to review and set aside an order of the National Labor Relations Board issued June 12, 1972 and reported at 197 NLRB No. 75. The Board has cross-applied for enforcement of the order. The Board found that the company had violated Section 8(a)(1) of the Act by coercive interrogation, threats, promises of benefits and by compelling the writing of letters disavowing the union to coerce employees into abandoning the union. The Board also found violations of Section 8(a)(3) and (1) resulting from the laying off of four employees who had been active in an organization attempt. The Board also found that the company committed a further unfair labor practice by refusing to recognize and bargain with the union which had the support of a majority of the employees in what was determined to be an appropriate unit. The Board ordered the company to cease and desist from continuing the unfair labor practices, to post appropriate notices and to bargain with the union. The company concedes that there is evidence in the record to support the findings of 8(a)(1) and 8(a)(3) violations. It contends that there is no evidentiary basis for the finding of an 8(a) (5) violation and contends that the bargaining order should not have issued. We conclude from our examination of the record that there is ample support for the finding of the 8(a)(5) violation and that the bargaining order is proper under the principles enunciated in N. L. R. B. v. Gissel Packing Co., 395 U.S. 575, 89 S.Ct. 1918, 23 L.Ed.2d 547 (1969). We find no merit in the other issues presented by the company and determine that the petition to review will be denied and the order will be enforced.

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UNITED STATES of America, Plaintiff-Appellee, v. James Delmore DEATON, Defendant-Appellant. No. 72-3666 Summary Calendar. United States Court of Appeals, Fifth Circuit. April 11, 1973. Maynard E. Cush, Shreveport, La. (Court-Appointed), for defendant-appellant. Donald E. Walter, U. S. Atty., Shreveport, La., for plaintiff-appellee. Before WISDOM, AINSWORTH and CLARK, Circuit Judges. Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of N. Y., 431 F.2d 409, Part I (5th Cir. 1970). PER CURIAM: On direct appeal, this court affirmed Deaton's conviction for violation of 18 U.S.C. § 1072, but finding separate consecutive sentences on each count of the indictment to be multiplicitous, we remanded for resentencing. United States v. Deaton, 468 F.2d 541 (5th Cir. 1972). The appellant has now been resentenced to a single term of three years. Deaton contends that the imposition of this sentence was improper because others involved in the same offense received lesser sentences. We reject this contention since the sentence is within the statutory limits and Deaton has demonstrated no abuse of judicial discretion which would entitle him to relief. See, e. g., United States v. Johnson, 476 F.2d 1257, 1258 (5th Cir. 1973); United States v. Bristol, 473 F.2d 439, 444-445 (5th Cir. 1973); Rodriguez v. United States, 394 F.2d 825 (5th Cir. 1968). Deaton also asserts that the new sentence is in derogation of his constitutional rights because, had he been properly sentenced initially, he would have been eligible for parole consideration prior to the date of resentencing; whereas the initial improper sentence has precluded his application for such release up to now. The mere fact that at the time of resentencing the appellant had been in federal custody for more than one-third of maximum sentence possible on remand does not entitle him to immediate release. Thompkins v. U. S. Board of Parole, 427 F.2d 223 (5th Cir. 1970). Nor does the fact that he was erroneously barred from earlier consideration for parole entitle him, as a matter of law, to release before he has served the full sentence properly imposed on resentencing. Deaton’s eligibility for parole prior to the completion of the sentence now imposed must be determined by the Board of Parole under 18 U.S.C. § 4201-4203. The judgment of the district court upon remand is affirmed.

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PLAYSKOOL, INC., Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent. CHICAGO JOINT BOARD, RETAIL, WHOLESALE AND DEPARTMENT STORE UNION, AFL-CIO and Retail, Wholesale and Department Store Union, AFL-CIO, Petitioners, v. NATIONAL LABOR RELATIONS BOARD, Respondent. Nos. 72-1186, 72-1195. United States Court of Appeals, Seventh Circuit. Argued Jan. 22, 1973. Decided March 16, 1973. Rehearing Denied in No. 72-1186 April 23, 1973. As amended April 25, 1973. Francis Heisler, Mark L. Schwartz-man, Robert C. Claus, John P. Jacoby, Chicago, Ill., for petitioner. Marcel Mallet-Prevost, Asst. Gen. Counsel, John D. Burgoyne, Atty., N. L. R. B., Washington, D. C., for respondent. Before CASTLE, Senior Circuit Judge, and FAIRCHILD and CUMMINGS, Circuit Judges. CASTLE, Senior Circuit Judge. This case raises a much-litigated question as to the application and extension by the National Labor Relations Board of its Midwest Piping doctrine. The Board found that Playskool, Inc. violated § 8(a)(1) and (2) of the National Labor Relations Act, 29 U.S.C. §§ 158(a)(1) and 158(a)(2) (1970) by recognizing the Retail, Wholesale and Department Store Union (RWDSU) when another union, the United Furniture Workers, was also seeking recognition for the same units of employees. The Board also found that RWDSU violated § 8(b)(1)(A) of the Act by accepting such exclusive recognition. On this appeal Playskool and RWDSU seek review of the Board’s order pursuant to § 10(f) of the NLRA; the Board has filed a cross-application for enforcement of its order, which is reported at 195 NLRB No. 89 (1971). Since 1952, the United Furniture Workers of America have attempted to organize employees at certain Playskool plants in the Chicago area. On several occasions during this time, United has demanded that Playskool recognize it as the exclusive representative of these employees and has offered to demonstrate its majority support through a showing of authorization cards. Each time Playskool has insisted upon a Board-eon-ducted representation election instead of a card check, and each time United has lost the resulting election. The last such elections occurred in November and December, 1968, when United mustered 148 votes out of 494 eligible voters, approximately 29.9% of the total. Subsequent to this loss, United has engaged in continued organizational activity at Playskool’s Chicago plants, although the extent of both this activity and the company’s knowledge of it are disputed in this appeal. At the very least, United has confronted Playskool employees at their plant gates, solicited authorization cards, and held meetings. The Retail, Wholesale and Department Stor Union instituted its own campaign to organize Playskool employees in March, 1969. Utilizing home visits, inside-the-plant campaigning, and organizers who spoke the native Spanish language of certain employees, this union solicited signed cards authorizing RWDSU to bargain on behalf of individual employees. In April, 1969, company supervisors learned of RWDSU’s campaign and decided that Playskool would not oppose that union because of its reputation as a “good union” that did not process many grievances or instigate many strikes. Later that month RWDSU requested Playskool to agree to a card check to verify its claim that it represented a majority of Playskool employees. After company approval, the Illinois Department of Labor’s Conciliation Service was requested to check RWDSU’s cards against a company-prepared list of employees’ names, clock numbers and addresses. On the basis of its examination the Conciliation Service announced that RWDSU had obtained valid authorization cards from at least 300 of the 500 employees listed. On May 2, the company and RWDSU executed a recognition agreement; they later agreed to the terms of a collective bargaining contract which contained union security provisions. United filed a complaint against Playskool and RWDSU in June of 1969 which charged the two with violating the NLRA by executing a recognition agreement while United was also trying to obtain such recognition for the same employees. After hearing testimony and reviewing the evidence, the Trial Examiner issued his decision on June 22, 1971 which found no Midwest Piping violation. The Trial Examiner stated that § 8(a)(2) of the Act and the Midwest Piping doctrine could be violated only when an employer recognized one of two competing unions while the rival union raised a “question concerning representation,” and that such a “question” was established when the rival union demonstrated (1) that it had obtained a “substantial representation among the employees, normally amounting to 30%,” and (2) that it had demanded or requested recognition from the employer. Since United had met neither prerequisite, and since RWDSU had demonstrated that it represented an uncoerced majority of Playskool employees, the Trial Examiner concluded that United had not raised a “question concerning representation,” and that consequently Playskool was free to recognize RWDSU. A panel of the National Labor Relations Board overruled the Trial Examiner and found that Playskool and RWDSU had violated the Act by their execution of a recognition agreement when United also sought to obtain recognition from Playskool. The panel disagreed with the Trial Examiner’s enumeration of the prerequisites that a rival union must meet to establish a “question concerning representation” and to preclude employer recognition of a competing union after a showing of authorization cards. The Board said: the sole requirement necessary to raise a question concerning representation within the meaning of the Midwest Piping doctrine, as modified by the Board, is that the claim of the rival union must not be clearly unsupportable and lacking in substance. The Board found that United had raised a question concerning representation by obtaining the required minimum of signatures to petition for an election in November and December of 1968, by polling 29.9% in the election, and by soliciting members after the election. The Board also concluded that the card check conducted by the Illinois Conciliation Service was not an “accurate barometer of the employees’ sentiments” because United had not participated in the card cheek and because some employees had evidently signed authorization cards for both RWDSU and United. On this appeal Playskool and RWDSU challenge the findings of the Board on two grounds: (1) substantial evidence does not support its conclusion that United conducted an organization campaign among Playskool employees and notified the company of its continued interest in representing them prior to the execution of the recognition agreement with RWDSU, and (2) as a matter of law, Playskool and RWDSU did not violate the Act because United did not present a substantial representation claim. Our disposition of the second issue renders any decision on the first largely superfluous, for we find that Playskool did not violate the Act by its recognition of RWDSU after an impartial third party had certified that the union represented a majority of Playskool employees. I. The Applicable Law Section 8(a) (2) of the National Labor Relations Act, 29 U.S.C. § 158(a)(2) makes it an unfair labor practice for an employer to “dominate or interfere with the formation or administration of any labor organization. . . ” A significant application of this statutory language occurred in Midwest Piping and Supply, Inc., 63 N.L.R.B. 1060 (1945), where each of two competing unions presented the employer with a claim that it represented the majority of his employees and each filed a petition for an N.L.R.B. election to determine the issue of majority support. Before the election could be held, one of the unions presented authorization cards to the employer which purportedly proved that the union represented a majority of his employees. The Board found that recognition of this union by the employer amounted to a breach of his duty of neutrality and constituted a violation of § 8(a) (2). As the petitioners correctly represented at oral argument, the Board and the Circuit Courts of Appeals which have reviewed Board decisions have disagreed upon the application and extension of the Midwest Piping doctrine. The Board has held that this doctrine precludes recognition of any union upon the basis of a card showing when another union has raised a “question concerning representation.” The Board has not precisely defined the minimum amount of support a union must show to raise such a question, but it has held that an election between two competing unions must be held if the claim of the rival is “not clearly unsupportable and lacking in substance.” (See the Board decision in the instant case, reported at 195 N.L. R.B. No. 89.) Nor is it necessary for the rival union to present any claim to the employer that it currently has majority support, for the employer’s knowledge of organizing activity is apparently sufficient to raise the question. The courts, on the other hand, have generally refused to find a violation of § 8(a)(2) where an employer has recognized one of two unions competing for exclusive recognition on the basis of a clear demonstration of majority support. N.L.R.B. v. Peter Paul, Inc., 467 F.2d 700 (9th Cir. 1972), Modine Manufacturing Co. v. N.L.R.B., 453 F.2d 292 (8th Cir. 1971), American Bread Co. v. N.L.R.B., 411 F.2d 147 (6th Cir. 1969), Iowa Beef Packers v. N.L.R.B., 331 F.2d 176 (8th Cir. 1964). The courts have reasoned that, in extending recognition to a union on such a showing, the employer has not “coerced or interfered with” the minority union, but has merely obeyed the duty imposed upon him to recognize the agent which his employees have designated. N.L.R.B. v. Indianapolis Newspapers, Inc., 210 F.2d 501, 503 (7th Cir. 1954). Thus, many decisions recognize that, however important the need to preserve the integrity of the Board’s election machinery, courts must protect the right of employees to select and bargain through their own representative without undue delay. Courts have also sought to implement the congressional purpose of promoting labor peace underlying the National Labor Relations Act, and have accepted a majority showing by the victorious union as a means of terminating the instability inherent in a representation contest and preventing a minority union from frustrating the majority will in order to gain campaigning time. N.L.R.B. v. Peter Paul, Inc., 467 F.2d at 702, N.L.R.B. v. Indianapolis Newspapers, Inc., 210 F.2d at 503, Getman, The Midwest Piping Doctrine: An Examination of the Need for a Reappraisal of Labor Board Dogma, 31 U.Chi.L.Rev. 292, 305 (1964). The courts have, however, recognized exceptions to the right and duty of an employer to recognize one of two competing unions which has demonstrated its support by a majority of employees. Where it can be shown that a union’s majority support was due to unlawful coercion or deception, the courts have refused to accept the union’s majority status and have held that the employer’s recognition constituted a violation of § 8(a)(2). Oil Transport Co. v. N.L.R.B., 440 F.2d 664, 665 (5th Cir. 1971), N.L.R.B. v. Tower Iron Works, Inc., 366 F.2d 189, 191 (1st Cir. 1966), N.L.R.B. v. Air Master Corp., 339 F.2d 553, 557 (3d Cir. 1964). On this appeal, the policy reasons of recognizing the free choice of employees and preserving labor peace lead us to adhere to the view of judicial decisions which have refused to find a violation of the Midwest Piping doctrine where one union has made a. valid demonstration of majority support among unrepresented employees. Accordingly, our first inquiry is whether RWDSU represented a majority of Playskool employees at the time it was recognized on May 2; our second inquiry is whether this majority was due to any unlawful activity on the part of Playskool or RWDSU. II. The Evidence in the Record The Board has argued that, even if this court should accept the view of previous circuit decisions that a convincing demonstration of majority status by one of two competing unions prior to recognition of that union precludes the finding of an 8(a)(2) violation, the evidence fails to show that RWDSU had the support of a majority of Playskool employees. It contends that (1) the union could not prove at the time of the Board hearing which cards it had given to the Illinois Conciliation Service and whether these cards were valid, and (2) authorization cards solicited in an inter-union representation contest are inherently unreliable because of the pressure upon employees to sign such cards for more than one union. The recoi'd indicates that, pursuant to their agreement for a card check by the Illinois Conciliation Service, Playskool submitted a list of the names of 500 employees and RWDSU produced in excess of 300 authorization cards. On May 2, 1969 the Conciliation Service announced that RWDSU had proven its majority support through at least 300 valid cards. After this card check, the union commingled the cards with other undated cards at its offices. When the Board attempted to enforce a subpoena for these cards one year later, the union could only produce 347 cards which it believed that it had submitted to the Conciliation Service. The Trial Examiner found that the General Counsel had the burden of showing that RWDSU did not in fact submit 300 valid cards to the Illinois Conciliation Service, and that he had not met this burden. Although the Trial Examiner found that some of the 347 cards had been backdated and that the signatures on others had been forged, he concluded that at least 296 of them were valid and that this number supported the earlier determination of RWDSU’s majority status by the Conciliation Service. The Board found that the forgery of signatures and the commingling of cards after the card check made it “impossible to determine at this time whether or not the RWDSU did, in fact, represent a majority on May 2, when it was accorded recognition by Playskool.” These facts, together with its belief that authorization cards obtained during an inter-union campaign are unreliable, led it to conclude that the May 2 card check did not establish RWDSU’s majority status. Our disagreement with the Board’s decision rests on legal and evidentiary grounds. There is no dispute that the Illinois Conciliation Service — an impartial body with some expertise in labor representation matters — certified to Playskool that RWDSU represented a majority of its employees on May 2, 1969. The record suggests no reason why Playskool should have doubted this finding at that time; nor did the Board cite any proof in its opinion that such a majority did not exist at that time. We believe that if the Board wished to establish that RWDSU had presented an insufficient number of valid cards on May 2, 1969 or that the cards were invalid because some RWDSU supporters had also signed United authorization cards, it had the burden of proving these facts. Modine Manufacturing Co. v. N.L.R.B., 453 F.2d 292, 296 (8th Cir. 1971); see also International Ladies Garment Workers Union v. N.L.R.B., 366 U.S. 731, 739-740, 81 S.Ct. 1603, 6 L.Ed.2d 762 (1961); Intalco Aluminum Corp. v. N.L.R.B., 417 F.2d 36 (9th Cir. 1969). But substantial evidence does not support the Board’s refusal to find that RWDSU had majority support from Playskool employees on May 2, 1969. No witness testified that RWDSU had less than 300 cards, and, despite some deficiencies in the list of employee names which the Trial Examiner found insubstantial, the Board has not contended that the company had significantly more than 500 employees. There is some evidence that both unions were guilty of forging and backdating authorization cards. We do not condone or accept such despicable conduct, and we recognize that evidence of such alteration should prevent any forged card from being counted for determining a union’s majority support. But substantial evidence does not support any conclusion or inference that a sufficient number of cards presented by RWDSU were altered or were signed by people who also signed United cards so that it appears that RWDSU represented less than a majority of Playskool employees when it entered into the recognition agreement on May 2, 1969. Accordingly, Playskool was justified in concluding that United was “no genuine contender” and that no real “question concerning representation” existed. St. Louis Independent Packing Co. v. N.L.R.B., 291 F. 2d 700, 704 (7th Cir. 1961), Cleaver-Brooks Mfg. Corp. v. N.L.R.B., 264 F.2d 637, 642 (7th Cir.), cert. denied, 361 U. S. 817, 80 S.Ct. 58, 4 L.Ed.2d 63 (1959), N.L.R.B. v. Indianapolis Newspapers, Inc., 210 F.2d 501, 503 (7th Cir. 1954). The Board has also argued that, even if this court should find that RWDSU had possessed a card majority on May 2, 1969, Playskool’s recognition was invalid because of the partiality Playskool demonstrated toward RWDSU and the deception it practiced upon United. The record shows that Playskool had vigorously opposed United’s attempts to solicit support in prior years, but did not oppose RWDSU’s campaign. We find, as did the Trial Examiner, that Playskool was within its rights in engaging in such differential treatment and that § 8(c) of the Act allowed it some freedom in expressing its opinions about various unions to its employees. Coppus Engineering Corp. v. N.L.R.B., 240 F.2d 564, 571 (1st Cir. 1957). The record also shows that Playskool notified the Illinois Conciliation Service in arranging the card check that “no other union, at this time has claimed to represent” its employees. The Board argues that Playskool’s failure both to notify the Conciliation Service of United’s organizing activities and to insure United’s participation in the card check prevented “a reliable resolution of the two unions’ conflicting representation claims.” Although we agree that the better practice would have been to attempt to obtain United’s participation in the May 2 card check, we do not think United’s absence tainted Playskool’s recognition of RWDSU in this case. In telling the Conciliation Service that no union other than RWDSU had claimed to represent its employees at that time, Playskool was making a mere statement of fact, for United at that time had made no claim that it had either maintained or increased the 29.9% support it received in the 1968 elections. It is true that United could not obtain another Board-conducted election until November or December, 1969, and that it did not know whether Playskool would recognize RWDSU through an authorization card check. But these are the risks which United assumed by petitioning for the 1968 elections and which it could overcome only by attempting to obtain more authorization cards than RWDSU to prevent its recognition before another election could be held. We perceive in § 9(c)(3) a congressional attempt to reduce the instability inherent in labor campaigning by limiting the frequency of representation elections. The Board, however, is attempting to use § 9(c)(3) in this case as an excuse of United’s lethargy in securing authorization cards and for its failure to present a formal claim to Playskool that it wished to represent the company’s employees. In effect, the Board’s approach would prolong the instability of a campaign struggle between two unions in such a situation throughout the one year hiatus between elections until another election could be held. We decline to accept such a result and hold that Playskool was correct in signalling an end to the inter-union campaign by recognizing RWDSU on May 2, 1969. N.L.R.B. v. Indianapolis Newspapers, Inc., 210 F.2d 501, 503 (7th Cir. 1954). We conclude, therefore, that Playskool and RWDSU were not guilty of interfering with the free choice of Playskool employees by execution of their recognition agreement, but were merely recognizing the employees’ choice of a bargaining representative. We deny enforcement of the Board’s order. Since the Board’s opinion did not reach the question of whether Playskool violated the proviso to § 8(a)(3) of the Act by not allowing newly-hired employees a 30-day period in which to join RWDSU, we remand this case to the Board for further consideration of this issue. Enforcement denied. FAIRCHILD, Circuit Judge (dissenting). With all respect, I am unable to excuse the employer’s failure to disclose to the Illinois Conciliation Service the substantial, and continuing interest of and support for United. Under the circumstances nondisclosure must have been purposeful. This impropriety colors and combines with the other ways in which the employer sought to smooth the path for the union it admittedly preferred. Together I think they support the conclusion that the employer unfairly contributed to and could not rely upon the attainment by the Retail Union of apparent majority status. . The Board found that at least one employee quit her job in order to avoid paying dues to RWDSU and held that the company violated section 8(a)(3) of the Act by threatening her with dismissal for failing to pay such dues. The Board reasoned that, since the recognition of RWDSU was illegal, any contract negotiated with RWDSU was also illegal. The propriety of the Board’s finding of the 8(a) (3) violation, then, depends upon whether the recognition of RWDSU was valid under the Midwest Piping doctrine. . The Board requires a showing of support by 30% of the employees in a bargaining unit to establish a “question of representation” for invoking Board election procedures pursuant to § 9 (c) (1) of the Act. But in-American Bread Co., 179 N.L.R.B. 85, 88 (1968), the Board intimated that the production of one authorization card by a rival union might be sufficient to raise a question concerning representation within the meaning of the Midwest Piping doctrine. . The courts, then, usually take a different initial approach than does the Board. The Board looks first to the support held by the minority union and finds a “question concerning representation” if the claim of that union is “not clearly unsupportable”; the courts look first to the support held by the majority union and find that no “question concerning representation” exists if that union has the validly-obtained support of an employee majority and the rival union is thus shown to be “no genuine contender.” . Among the 347 cards that RWDSU submitted in response to the subpoena, the Trial Examiner found that at least thirty-eight were signed after the card check had been conducted, four contained unauthorized signatures, and seven were mailed too late for the union to receive in time for the card check. . In Intalaco Aluminum, the Board sustained this burden of proof by establishing that the recognized union’s apparent card majority had been destroyed by employee defections. In the instant case the Board made no such attempt to attack the validity of the RWDSU card majority, even though it could compare the 296 cards which the Trial Examiner found were obtained by RWDSU prior to May 2, 1969 with the cards allegedly solicited by United. ■ We do not accept the Board’s reading of St. Louis Independent Packing Co. v. N.L.R.B., 291 F.2d 700 (7th Cir. 1961), to place the burden of proof upon the employer to show that the union be recognized had majority support once the Board has proven that a “question concerning representation” existed. St. Louis Packing involved a different factual situation where an employer continued to recognize an incumbent union that had made no acceptable showing of current support when an outside union had successfully petitioned for a Board-conducted election. We express no opinion in this case whether every extension of recognition to a union on the basis of a valid, uncoerced majority showing will preclude the finding of a § 8(a)(2) violation, no matter what support the minority union has obtained. Different factual, legal and policy considerations may be involved in such cases. . Petitioners argue persuasively in their brief that of the more than 100 cards which United presented to the Board to demonstrate its support among Playskool employees, more than half were suspect because they contained altered dates, forged signatures, and erroneous corroborating information. . Section 9 (c) (3) of the Act provides: No election shall be directed in any bargaining unit or any subdivision within which in the preceding twelve-month period, a valid election shall have been held. Whenever United had offered to prove its majority support through a showing of authorization cards prior to the 1968 elections, Playskool had refused the offer and had insisted on a Board-conducted election. . . .

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BANK of the SOUTHWEST, Plaintiff-Appellant, v. NATIONAL SURETY COMPANY, Defendant-Appellee. No. 72-1858. United States Court of Appeals, Fifth Circuit. April 6, 1973. Edwin L. Davis, Dallas, Tex., for plaintiff-appellant. James A. Knox, Charles J. McGuire, Dallas, Tex., for defendant-appellee. Before GEWIN, SIMPSON and RO-NEY, Circuit Judges. RONEY, Circuit Judge: Plaintiff Bank seeks recovery under a Bankers Blanket Bond for losses sustained on three collateral loan transactions. The Court ruled as a matter of law that none of the collateral pledged for the loans was forged, counterfeit, or stolen within the Bond’s meaning and that the coverage for loss of money through false pretenses did not apply to these loan transactions. The Court granted the defendant bonding company summary judgment as to one loan and judgment notwithstanding a jury verdict as to the other two. We affirm. The facts are undisputed. In November and December, 1969, Lou Levine represented himself as a wholesale automobile dealer and received from the Bank the following loans, with the alleged security and instruménts noted: Amount of Loan Alleged Security Instrument Surrendered $7,000 1970 Cadillac Tax Collector’s Receipt for Title Application (“white slip”) $6,000 1969 Continental 1. License Receipt 2. Certificate of Title 3. Application for Corrected Texas Certificate of Title $24,000 1,000 shares of Resalab, Inc. 1. Goodbody & Co. Confirmation Slip 2. Trust Receipt 3. Collateral Pledge 4. Assignment and Power of Attorney Shortly after the loans were made, plaintiff discovered that these instruments did not give it any rights to the alleged security. Levine never delivered the stock to the Bank as agreed, but converted it to his own use. When the loans were not paid; the Bank suffered losses in the amount of $37,000. Plaintiff had obtained from National Surety Corporation a standard Bankers Blanket Bond for indemnification against certain losses. National Surety, alleging that the Bank’s losses were not covered by the Bond, refused indemnification. Plaintiff argues that indemnification was required under Insuring Agreements B, C, and E. Coverage -B generally covers loss of property from bank premises through robbery, burglary, theft and false pretenses. Coverage C covers loss of property through robbery, larceny, theft, or otherwise while it is in transit in custody of any person acting as a messenger. Coverage E covers losses by any securities, documents or other written instruments counterfeited or forged as to signature or stolen. Contrary to plaintiff’s contention that Agreement B provides indemnification for all of the losses because the money was obtained from the Bank on false pretenses, the District Court correctly held that such coverage was made inapplicable by the “loan exclusion clause.” This clause specifically excludes from indemnification under Coverage B any (e) loss resulting from the complete or partial non-payment of, or default upon, (1) any loan or transaction in the nature of, or amounting to, a loan made by or obtained from the Insured . . . whether procured in good faith or through trick, artifice, fraud or false pretenses unless such loss is covered under Insuring Agreements (A), (D), or (E). Since the money was obtained from the Bank in the form of loans, Insuring Agreement B is inapplicable even if the loans were obtained under false pretenses. Maryland Casualty Co. v. State Bank & Trust Co., 425 F.2d 979 (5th Cir. 1970); East Gadsden Bank v. United States Fidelity & Guaranty Co., 415 F.2d 357 (5th Cir. 1969). The contention that Insuring Agreement C covers the loss from the $24,000 loan against Resalab stock is without merit. The theory that Levine was acting as the Bank’s “messenger” within the meaning of Coverage C lacks any support in the facts. There is no evidence that the stock was in transit to the Bank when Levine converted it to his own use. In any event, had Levine delivered the stock, he would have been acting on his own behalf, not as a messenger within the meaning of this provision of the Bond. The provision of Insuring Agreement E insuring against losses by written instruments “forged as to signatures” does not cover the “white slip” delivered to the Bank on the Cadillac loan. We have previously held that, to come within the forgery protection of Coverage E, it is essential that the document have a “non-genuine signature.” See American National Bank & Trust Co. of South Pasadena v. Fidelity & Casualty Co. of New York, 431 F.2d 920 (5th Cir. 1970). The “white slip” contained no actual or facsimile signature, and the typed name of an official served not as a signature, but as an identification of the Dallas Tax Assessor/Collector. As to the claim that the instruments delivered to the Bank on the Continental and Cadillac loans were “counterfeit” or “stolen,” under Coverage E of the Bond, the District Court first submitted this issue to a jury. After the jury found on special interrogatories that such instruments were counterfeit and stolen, however, the Court entered a judgment for defendant notwithstanding the verdict. On the undisputed facts, we think the Court correctly determined that the instruments were neither counterfeit nor stolen within the meaning of Coverage E. “Counterfeit” is specifically defined in the subject Bond: The word “counterfeited” as used in this Insuring Agreement shall be deemed to mean only an imitation of a security document or other written instrument . . . which is intended to deceive and to be taken for an original. The courts have often accepted this definition and held that there must be or must have been original instrument that the alleged counterfeit document attempts to imitate. Capitol Bank of Chicago v. Fidelity & Casualty Co. of N. Y., 414 F.2d 986 (7th Cir. 1969); Exchange Nat’l Bank of Olean v. Ins. Co. of North America, 341 F.2d 673 (2d Cir. 1965), cert. denied, 382 U.S. 816, 86 S.Ct. 37, 15 L.Ed.2d 63; State Bank of Poplar Bluff v. Maryland Cas. Co., 289 F.2d 544 (8th Cir. 1961). To recover for a loss on any documents which are “stolen,” within the meaning of Coverage E of the Bond, the Bank must be in a situation where it could be required to give up the allegedly stolen document to the rightful owner. See Maryland Casualty, supra. $7,000 Cadillac Loan. The alleged security for this loan was the 1970 Cadillac, and the instrument surrendered was a Tax Collector’s Receipt for Title Application No. V-460376 (“white slip”). It was stipulated that the genuine Application No. V-460376 had been issued not to Levine, but to Arturo Rodriguez, and described not a 1970 Cadillac, but a 1969 Mercury. Thus, the “white slip” held by plaintiff was not an imitation of an authentic original document and was not “counterfeit” within the coverage of Insuring Agreement E. Nor was there any evidence at trial that Levine stole the “white slip.” In any event, since it did not have to be returned to a true owner, this document was not “stolen” within the Agreement’s meaning. $6,000 Continental Loan. The alleged security for this loan was the 1969 Lincoln Continental, and the instruments surrendered were a License Receipt No. RRP-971, a Certificate of Title No. 51492028, and a related Application for Corrected Texas Certificate of Title. Levine had previously sold this automobile and delivered his original title certificate to the purchaser. He then obtained the Title Certificate given to the Bank by falsely swearing to the Texas Highway Department that he had lost his original copy. Both the License Receipt and the Title Certificate were authentic, albeit the product of fraudulent misrepresentations to the State authorities. Thus, neither could have been “counterfeit.” Neither can any loss suffered from the Continental loan be covered by application of Insuring Agreement E’s provisions for stolen documents. The procurement of the License Receipt and Title Certificate by fraud do not render them “stolen” since they do not have to be returned to a true owner. Such instances were specifically excluded from coverage in the Bond’s provisions for loans procured by “trick, artifice, fraud or false pretenses.” In Union Banking Co. v. United States Fidelity & Guaranty Co., 4 Ohio App.2d 397, 213 N.E.2d 191 (Ohio App.1965), a virtually identical scheme and identical standard Bond were considered, and the Ohio Court held that, as a matter of law, there was no coverage under Insuring Agreement E. Affirmed.

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

COMMANDER LEASING CO., a partnership, et al., Plaintiffs-Appellants, v. TRANSAMERICA TITLE INSURANCE COMPANY, a California corporation, et al., Defendants-Appellees. No. 72-1171. United States Court of Appeals, Tenth Circuit. Argued Sept. 21, 1972. Decided April 6, 1973. Dale Tooley, Denver, Colo. (Hugh J. McClearn, Van Cise, Freeman, Tooley & McClearn, Denver, Colo., on the brief), for plaintiffs-appellants. Patrick M. Westfeldt, Denver, Colo. (Haradon Beatty, Denver, Colo., and Holland & Hart, Aspen, Colo., on the brief), for defendants U.S. Life Title Ins. Co. of Dallas and Lawyers Title Ins. Corp. Aldo G. Notarianni, Denver, Colo. (Stephen Susman, Denver, Colo., Fulbright, Crooker & Jaworski, Houston, Tex., on the brief), for defendant Stewart Title Ins. Co. Edward B. Towey, Denver, Colo. (James J. Zak, Denver, Colo., on the brief), for defendants Title Ins. Co. of Minnesota and Land Title Guarantee Co. William H. Orrick, San Francisco, Cal. (Orrick, Herrington, Rowley & Sutcliffe, San Francisco, Cal., Richard M. Davis, Robert H. Harry, Donald E. Phillipson, and Davis, Graham & Stubbs, Denver, Colo., on the brief), for defendant Transamerica Title Ins. Co. Charles H. Haines, Jr., Grant, Shafroth, Toll & McHendrie, Denver, Colo., and John T. Loughlin, John C. Christie, Jr., Bell, Boyd, Lloyd, Haddad & Burns, Chicago, Ill., for defendant Chicago Title Ins. Co. Christian J. Allison, Denver, Colo., for defendant Pioneer Nat. Title Ins. Co. Edward I. Haligman, Atler, Haligman & Atler, Denver, Colo., for defendant Denver Abstract Co., d/b/a Titles, Inc. Hugh A. Burns, Dawson, Nagel, Sherman & Howard, Denver, Colo., for defendants American Title Ins. Co., First American Title Ins. Co., St. Paul Title Ins. Corp., and Standard Title Ins. Co. Francis S. Mancini and Charles J. Hafertepen, Denver, Colo., for defendant Commercial Standard Ins. Co. Before LEWIS, Chief Judge, and JONES and McWILLIAMS, Circuit Judges. Of the Fifth Circuit, sitting by designation. McWILLIAMS, Circuit Judge. The issues here to be resolved are whether the “business of title insurance” is the “business of insurance” within the meaning of that phrase as used in the McCarran-Ferguson Act and whether the State of Colorado “regulates” the business of title insurance to the end that by reason of the McCarran-Ferguson Act the Sherman and Clayton Acts are not applicable to certain title insurance companies doing business in Colorado. The McCarran-Ferguson Act will hereinafter be referred to as the McCarran Act. The trial court in granting the defendant’s pre-trial motions to dismiss held that the business of title insurance was the “business of insurance” and that the State of Colorado did regulate the title insurance business to the end that under the McCarran Act a private antitrust action would not lie against certain title insurance companies doing business in Colorado. We agree with this holding. The plaintiffs in this proceeding are Commander Leasing Co., a partnership, and Richard B. Eichenberger and Hilda J. Eichenberger, individually and on behalf of others similarly situated. Commander alleged that it had purchased title insurance from one of the defendants, namely, Transamerica, for six years. The Eiehenbergers alleged that they had purchased title insurance both from Transamerica and one of the other defendants, namely, Lawyers Title Insurance Corporation. Two of the fourteen defendants, namely, Denver Abstract Co., doing business as Titles, Inc., and Land Title Guarantee Company, are Colorado corporations which serve as local agents for foreign title insurance companies and are otherwise engaged in what plaintiffs characterize as the “business of providing title proof and assurance.” The remaining twelve defendants are title insurance companies formed under the laws of states other than Colorado but qualified to do business in Colorado and which, according to the plaintiffs, are engaged in the “business of providing title proof and assurance and abstracting.” We note that throughout their complaint the plaintiffs steer away from using the word “insurance” in describing the defendants’ activities and, no doubt for euphemistic reasons, seem to prefer to use the word “assurance.” This distinction is in our view of no great import. Jurisdiction is based on 15 U.S.C. §§ 15 and 26, the plaintiffs seeking treble damages and injunctive relief. The action is sought to be maintained as a class action under Fed.R.Civ.P. 23(a), and in this regard it is alleged that “since July 9, 1965, thousands of persons have purchased title proof and assurance and abstracting from defendants in connection with real estate transactions within the State of Colorado * * *.” By way of general allegations, the plaintiffs aver that prior to 1950 abstracts of title, certified to the date of each transaction by an abstract company, were utilized in connection with proof of title in real estate transactions in Colorado, but that since that time the use of abstracts of title has sharply declined and the “use of so-called title insurance as title proof and assurance” has sharply increased. In this same general connection it is alleged that • the abstract companies have now to a large extent been purchased or acquired by the title insurance companies, with certain of the defendants having thus acquired numerous abstract companies. It is then generally alleged that the defendants now have “a monopoly of title information and have conspired to fix uniform and excessive prices for abstracting and for so-called title insurance, to limit competition and to retire abstracts of title in favor of so-called title insurance.” The plaintiffs go on to allege that the “title proof and assurance” sold by defendants is not “insurance” and is not regulated by state law. The complaint then sets up five claims for relief. We shall refer to each. Before doing so, we note that underlying the entire complaint is plaintiffs’ belief that in their purchase of title insurance from the defendants they have been charged a noncompetitive, monopolistic price. So, regardless of the fact that the complaint sets up five separate claims, and regardless of the further fact that the complaint asks for injunctive relief as well as treble damages, plaintiffs’ constant target is the allegedly noncompetitive and excessive charge made by the several defendants for their title insurance. Plaintiffs’ first claim is directed against all defendants and in essence is a claim for price fixing based on § 1 of the Sherman Act, 15 U.S.C. § 1. A bit more specifically, plaintiffs allege in this claim that the defendants have conspired to fix, and have in fact fixed, arbitrary and noncompetitive charges for the issuance of their title insurance policies. Plaintiffs’ second claim is also directed against all defendants and is based on § 2 of the Sherman Act, 15 U.S.C. § 2, charging that the defendants through their acquisitions of abstract companies and otherwise have conspired to obtain a monopoly in “title proof and assurance and abstracting within the State of Colorado” for the purpose of eventually terminating the use of abstracts of title in favor of title insurance. It is further alleged that as a direct result of defendants’ monopolistic activities plaintiffs and their class have been overcharged for title insurance. Plaintiffs’ third claim is likewise directed against all defendants and is based on the Robinson-Patman Act, 15 U.S.C. § 13, for alleged price discrimination. In this regard, it is alleged that the defendants have sold their title insurance to plaintiffs at a so-called “regular rate,” which was substantially greater than the so-called “subdivider rate” charged others. Plaintiffs’ fourth claim seeks relief from all defendants and is based on Colorado statutory law prohibiting illegal restraint of trade and unlawful conspiracy. CRS 55-4-1, 2 and 8. Again, plaintiffs allege that they have been overcharged as a result of defendants’ actions. Plaintiffs’ fifth and final claim is against one defendant only, namely, Transamerica Title Insurance Company, and is based on Transamerica’s allegedly unlawful acquisition in Colorado of ab-tract companies and title insurance companies in violation of § 7 of the Clayton Act and § 2 of the Sherman Act, as well as in violation of CRS 55-4-1 et seq. Again, plaintiffs’ complaint is that as a result of Transamerica’s activities they, the plaintiffs, have been overcharged in their purchase of title insurance. The defendants by either motions to dismiss or by answer raised the issue as to whether by virtue of the McCarran Act, 15 U.S.C. §§ 1011-1015, the federal antitrust laws are applicable to the business of title insurance in Colorado. As indicated, the trial court, after full argument and briefing of the matter, granted the several motions to dismiss. In so doing, the trial court reasoned as follows: (1) Title insurance is “insurance” within the meaning of that word as used in the McCarran Act; (2) the State of Colorado has “not only” regulated the title insurance business, but has done so in “great detail”; (3) therefore, insofar as the plaintiffs’ claims are based on federal antitrust acts, which included plaintiffs’ first, second, third and fifth claims, such are “subject to the exclusion or are barred by the McCarran Act”; and (4) plaintiffs’ fourth claim based on an alleged violation of the Colorado antitrust and restraint of trade laws should be dismissed for lack of pendent jurisdiction. The trial court in entering its judgment dismissing the action did so without prejudice to the right of the plaintiffs, or any of them, to file an amended complaint based on alleged violations of federal and state antitrust laws in connection with “abstracting service furnished separate and apart from the issuance of a title [insurance] policy * * (Emphasis added.) In this regard, the trial court viewed the complaint insofar as it related to abstracting services as one aimed at “abstracting service furnished in connection with the issuance of a title insurance policy” and opined that any abstracting service furnished by the defendants leading up to the issuance of a title insurance policy as not being a “separate business,” but a “condition precedent” to the issuance of- the title policy. This particular matter will be examined in more detail later. It is sufficient now to simply note that it was for this reason that the trial court’s judgment preserved the right to plaintiffs to file an amended complaint based on federal and state antitrust violations in connection with the furnishing of abstracting services not connected with the issuance of a title insurance policy, such activity in the trial court’s opinion not being covered by the McCarran Act. No such amended complaint was ever filed and the plaintiffs now appeal the dismissal of their action. In this court, the plaintiffs present six points: (1) The defendants’ activities, and particularly their charge for processing and examining evidence of title, do not constitute the “business of insurance” and in any event such activities are not regulated by the State of Colorado; (2) any purported regulation by the State of Colorado is a sham and mere pretense, therefor the McCarran Act is inapplicable; (3) if not a sham and mere pretense, the purported regulation by the State of Colorado is not “effective” or “meaningful”; (4) in no event is plaintiffs’ fifth claim barred by the McCarran Act; (5) the McCarran Act is not available to two of the fourteen defendants, namely, the two domestic corporations serving as agents for foreign title insurance companies; and (6) the trial court should have entered final orders with respect to pending settlements. Before considering each of these matters, a bit of historical background may help. In 1868 the Supreme Court in Paul v. Virginia, 75 U.S. 168, 19 L.Ed. 357 (1868), held that the issuance of a policy of insurance, even though the parties thereto were domiciled in different states, was not interstate commerce, but only a simple contract of indemnity against loss and subject to regulation by the state. In line with this pronouncement it was thereafter generally assumed that the Sherman Act and other federal antitrust laws were inapplicable to the insurance business. However, that assumption proved to be erroneous when the Supreme Court in United States v. South-Eastern Underwriters Association, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944), held that a fire insurance company which conducted a substantial part of its business across state lines was engaged in interstate commerce and subject to the Sherman Act. The reaction of Congress to the South-Eastern decision was the prompt enactment of the McCarran Act, set forth above. The effect of this Act was to permit continued regulation by the several states of the business of insurance to the end that such business was exempt from the provisions of the Sherman and Clayton Acts, including the Clayton Act’s 1936 amendments, known as the Robinson-Patman Act,- to the extent that such business was regulated by state law. It is first argued by plaintiffs that the trial court erred in holding that the “business of title insurance” was included within the meaning of the phrase “business of insurance” as the latter is used in the McCarran Act. In support of this phase of their argument, counsel zeroes in on the fact that when the defendants issue a policy of title insurance only a part of the fee charged therefor is a “premium” charge, with the balance of the fee constituting a so-called “service charge.” For illustrative purposes, it is said that the “regular rate” which all of the defendants charge for issuance of a title insurance policy in the amount of $5,000 is $75, with only $14 of that amount representing a so-called premium charge, and the balance thereof, namely, $61, being a service charge covering the expense incurred by the title insurance company in connection with “procuring and examining evidence of title” which precedes the issuance of any title insurance policy. Like the triai court, we are of the view that the business of title insurance cannot be thus fragmented in the manner sought by counsel. In United States v. Home Title Insurance Company, 285 U.S. 191, 52 S.Ct. 319, 76 L.Ed. 695 (1932), the Supreme Court, in an admittedly different context, held that a title insurance company was an “insurance company.” In so holding the Court recognized that “preliminary” to the issuance of a title insurance policy the title insurance company prepared abstracts and conducted an examination of the title and that its fee for a title insurance policy was based on a scale dependent on the face amount of the policy and “included fees for examinations, searches, and other sources incident to the transaction.” Similarly, in Real Estate Title Ins. Co. v. District of Columbia, 82 U.S.App.D.C. 170, 161 F.2d 887 (1947), it was held that a title insurance company was an insurance company and in so doing rejected the argument that a title insurance company was a mere title examiner. In thus holding, it was observed that the business of the title insurance company there under consideration consisted solely of issuing either “certificates of title” or “title policies” to real estate, plus “such further incidental transactions as relate to these main objectives.” SEC v. National Securities, Inc., 393 U.S. 453, 89 S.Ct. 564, 21 L.Ed.2d 668 (1969), which will be referred to in more, detail later, has bearing on this particular phase of the controversy. In that case, the Supreme Court indicated that the fixing of insurance rates was a part and parcel of the “business” of insurance and the Court then went on to state that “other activities of insurance companies [which] relate so closely to their status as reliable insurers * * * must be placed in the same class.” Examination of evidence of title preparatory to issuance of a title insurance policy would certainly seem to fall easily into this latter category. Our attention has not been directed to any case where the business of title insurance has been held to constitute the business of insurance within the meaning of that phrase as used in the McCarran Act. However, based on the foregoing authority, we agree that title insurance is insurance as that word is used in the McCarran Act, and our conclusion is in nowise altered by the fact that prior to the issuance of a title insurance policy the defendants make an examination of title and include in the rate ultimately charged the purchaser of such insurance a charge therefor. The McCarran Act exempts the “business of insurance” from the antitrust provisions of the Sherman and Clayton Acts if such be regulated by the state wherein the alleged violations occurred. We must now turn to Colorado law to ascertain whether the defendants are regulated in that state. In 1969, the Colorado Legislature enacted The Title Insurance Code of Colorado which now appears as a separate article in the chapter on insurance. CRS 72-26-1 et seq. By this enactment the State brought together in one place its regulation of both domestic title insurance companies and foreign title insurance companies doing business within the State. This particular article provides for what appears to us as a rather comprehensive set of regulations for title insurance companies and specifically provides that title insurance rates shall be regulated in the manner provided for regulation of casualty and surety insurance as provided for in CRS 72-12-1 et seq. Prior to 1969, the provisions of CRS 31-12-1, et seq., regulated domestic title and guaranty companies with such companies being subject to regulation by the State Bank Commissioner. Prior to 1969, foreign title insurance companies were subject to the rate regulations contained in CRS 72-12-1 et seq. Both domestic and foreign title insurance companies are and have been subject to the general regulatory powers vested in the State Insurance Commissioner by the provisions of CRS 72-1-1 et seq. The foregoing Colorado statutes directly regulate the business of title insurance. To round out the picture, Colorado has enacted statutes relating to unfair methods of competition in the business of insurance which are found in CRS 72-14-1 et seq. Finally, the State of Colorado has an unfair practices act and an illegal restraint of trade act which are applicable to the business of title insurance. CRS 55-2-1 et seq. and CRS 55-4-1 et seq. Action under these particular statutes maybe instituted by the State for injunctive relief or by private parties who have been injured for damages. We do not deem it necessary to further elaborate in this regard. Suffice it to say, we agree fully with the trial court’s belief that the “State of Colorado not only has regulated the title insurance business but has done so in great detail.” In their complaint, the plaintiffs have characterized the State of Colorado’s purported regulation of the title insurance business as a “mere sham and a pretense” and not affording “effective” and “meaningful” regulation. Such represents an effort to bring the plaintiffs within certain language in Federal Trade Commission v. National Casualty Co., 357 U.S. 560, 78 S.Ct. 1260, 2 L.Ed.2d 1540 (1958), which would indicate that the McCarran Act would not bar federal regulation when the state regulation was a “mere pretense.” However, plaintiffs’ conelusory allegation of “pretense and sham” does not stand up when the aforementioned Colorado regulatory statutes are examined. In this general connection, language appearing in Prudential Insurance Co. v. Benjamin, 328 U.S. 408, 66 S.Ct. 1142, 90 L.Ed. 1342 (1946), is appropos. In that case, the Supreme Court in discussing the McCarran Act comments as follows : “Obviously Congress’ purpose was broadly to give support to the existing and future state systems for regulating and taxing the business of insurance. This was done in two ways. One was by removing obstructions which might be thought to flow from its own power, whether dormant or exercised, except as otherwise expressly provided in the Act itself or in future legislation. The other was by declaring expressly and affirmatively that continued state regulation and taxation of this business is in the public interest and that the business and all who engage in it ‘shall be subject to’ the laws of the several states in these respects. “Moreover, in taking this action Congress must have had full knowledge of the nation-wide existence of state systems of regulation and taxation; of the fact that they differ greatly in the scope and character of the regulations imposed and of the taxes exacted ; and of the further fact that many, if not all, include features which, to some extent; have not been applied generally to other interstate business. Congress could not have been unacquainted with these facts and its purpose was evidently to throw the whole weight of its power behind the state systems, notwithstanding these variations.” (Emphasis added.) Ohio AFL-CIO v. Insurance Rating Board, 451 F.2d 1178 (6th Cir. 1971), cert. denied, 409 U.S. 917, 93 S.Ct. 215, 34 L.Ed.2d 180 (1972), is also helpful in resolution of the present controversy. That ease involved a suit for injunctive relief and treble damages for violation of the Sherman Act based on the fixing of prices for automobile insurance premiums. The trial court dismissed the action for lack of jurisdiction over the subject matter under the McCarran Act. In upholding this action, the Sixth Circuit rejected the claim that the Ohio scheme of regulation was “deficient,” with the following comment: “An ideal type of regulation may possibly envision the removal of the alleged deficiencies in the Ohio statutes referred to by the appellant. Yet the question before us is not whether the Ohio method of regulation compares favorably with the regulation of other states, or whether it is an ideal manner in which to regulate the business of insurance. We are confident that Congress in enacting the McCarran Act did not intend to impose a uniform standard of regulation upon all of the states. It is our view that the congressional intent was to leave to the judgment of each state the specifics of regulation which it should see fit to adopt. Suffice it to say at this point that we are confident that the comprehensive plan adopted by Ohio is fully adequate to meet the requirements of regulation contemplated by the McCarran Act.” Application of the foregoing leads us to conclude that our present task is to determine only whether the State of Colorado has regulated the business of title insurance, and not to determine whether this regulation could be better and more effectively done. Before considering plaintiffs’ next contention that under no circumstance can the McCarran Act bar their fifth claim, we would make further reference to SEC v. National Securities, Inc., supra. In that case, the SEC brought a 10(b) proceeding against an insurance company based on alleged misrepresentations made by the insurance company in connection with a proposed merger with another insurance company. The state there in question, namely, Arizona, had enacted certain statutes regulating the relationship between an insurance company and its shareholders. The trial court dismissed the proceeding on the basis of the McCarran Act and the Ninth Circuit affirmed. 387 F.2d 25 (9th Cir. 1967). In reversing, the Supreme Court had occasion to reexamine the McCarran Act and in so doing made the following pertinent comment: “Given this history, the language of the [McCarran] statute takes on a different coloration. The statute did not purport to make the States supreme in regulating all the activities of insurance companies; its language refers not to the persons or companies who are subject to state regulation, but to laws ‘regulating the business of insurance.’ Insurance companies may do many things which are subject to paramount federal regulation; only when they are engaged in the ‘business of insurance’ does the statute apply. Certainly the fixing of rates is part of this business; that is what SouthEastern Underwriters was all about. The selling and advertising of policies * * * and the licensing of companies and their agents * * * are also within the scope of the statute. Congress was concerned with the type of state regulation that centers around the contract of insurance, the transaction which Paul v. Virginia held was not ‘commerce.’ The relationship between insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement — these were the core of the ‘business of insurance.’ Undoubtedly, other activities of insurance companies relate so closely to their status as reliable insurers that they too must be placed in the same class. But whatever the exact scope of the statutory term, it is clear where the focus was —it was on the relationship between the insurance company and the policyholder. Statutes aimed at protecting or regulating this relationship, directly or indirectly, are laws regulating the ‘business of insurance.’ “In this case, Arizona is concerning itself with a markedly different set of problems. It is attempting to regulate not the ‘insurance’ relationship, but the relationship between a stockholder and the company in which he owns stock. This is not insurance regulation, but securities regulation. It is true that the state statute applies only to insurance companies. But mere matters of form need not detain us. The crucial point is that here the State has focused its attention on stockholder protection; it is not attempting to secure the interests of those purchasing insurance policies. Such regulation is not within the scope of the McCarran-Ferguson Act.” We do not read SEC v. National Securities, Inc., supra, as dictating a reversal of the judgment entered in the instant case, as has been suggested. In that case the holding was that the McCarran Act did not bar an action brought by the SEC under the Securities and Exchange Act against an insurance company which was seeking a merger with another insurance company and in its attempt to secure the merger was making misrepresentations and omissions of material facts in communications sent the shareholders in the company sought to be thus merged, notwithstanding the fact that the state there involved had state law regulating the relationship between insurance companies and their shareholders. In so holding, the Supreme Court noted that the contemplated merger of two insurance companies was not a part and parcel of the “business of insurance.” We are not here concerned with any merger problem and in our view it does not follow from SEC v. National Securities, Inc., supra, that the McCarran Act does not bar an action brought by a policyholder of title insurance against various title insurance companies based on an alleged overcharge for the policy thus purchased, the overcharge allegedly resulting from price fixing, price discrimination and monopolistic practices by the title insurance companies thus sued, assuming of course that the state in question regulates the business of title insurance. And, as indicated, we are of the view that the McCarran Act does bar such proceeding by a policyholder. We shall next proceed to a consideration of plaintiffs’ contention that under no circumstance can the McCarran Act bar its fifth claim. As indicated, the fifth claim is directed against Transamerica only, and is grounded on Transamerica’s acquisition of stock and assets of abstract companies and other title insurance companies which was claimed to have been in violation of § 7 of the Clayton Act, 15 U.S.C. § 18, § 2 of the Sherman Act, 15 U.S.C. § 2, and CRS 55-4-1 et seq., and to have resulted in an overcharge to the plaintiffs for title insurance sold them by the defendants. So, the fifth claim, as is true with all of the claims, is tied directly into the charges made by the defendants for title insurance. And, as was stated in SEC v. National Securities, Inc., supra, “[c]ertainly the fixing of rates is part of this business [of insurance] * * *." Such being the case, we see no reason for handling the fifth claim any differently than the first three claims. - All claims stem from the rate charged for title insurance, the separate claims merely asserting that the overcharge resulted from either price fixing, or price discrimination or illegal and monopolistic practices, with the end result always being an alleged overcharge. So, regardless of the particular activity of the several defendants complained about in the separate claims, the entire complaint boils down to a charge that the plaintiffs paid a noncompetitive rate for title insurance purchased from the defendants. It is on this general basis that we believe the McCarran Act applies to all of the claims set forth in the complaint. In sum, then, (1) in our view the business of title insurance is included in the phrase “business of insurance” and such is not altered by the fixed “service charge” included within the rate charged by defendants for their title insurance; (2) the charges made by these, defendants to plaintiffs and others for title insurance is a definite part of the business of insurance', (3) the State of Colorado has regulated the business of title insurance, both directly and indirectly; and (4) therefore the McCarran Act is a bar to the present proceeding which is grounded on an alleged overcharge by defendants for title insurance sold to the plaintiffs. The plaintiffs also argue that the two Colorado corporations, namely, the Denver Abstract Company, doing business as Titles, Inc., and Land Title Guarantee Company, are not title insurance companies, as such, but only local agents for foreign title insurance companies, and that accordingly these two defendants should not in any event have been dismissed from the case. In this regard, the plaintiffs appear to contend that as to these two defendants their only complaint relates to abstracting services, and not the issuance of title insurance. As noted above, the trial court in its order of dismissal granted the plaintiffs the right to file an amended complaint grounded solely on antitrust violations in connection with abstracting services. This was not done. Hence, in the present posture of the case, we assume, as did the trial court, that the complaint against these two particular defendants is tied into the business of issuing title insurance. In applying the McCarran Act, we see no reason to distinguish between a principal and an agent. It would appear to us that an insurance agent, as well as an insurance company, is engaged in the “business of insurance.” One phase of this controversy gives us some concern, but such relates to a matter that is not really before us. Certain of the defendants apparently entered into a settlement with the plaintiffs, with such settlements being given preliminary approval by the trial court. These settling defendants at the same time were actively pushing their respective motions to dismiss. Before the trial court made any final approval of these proposed settlement agreements, the motions to dismiss came on for hearing and, as indicated, were granted and a judgment of dismissal entered. In this court, the defendants who settled their cases ask us to affirm the dismissal order , but at the same time remand the matter to the trial court for its final approval of the settlement agreements. As indicated, we are of the firm view that the only matter before us at this time is the propriety of the trial court’s dismissal of the action based on the provisions of the McCarran Act. Judgment affirmed. . “§ 1011. Declaration of policy “Congress declares that the continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or, taxation of such business by the several States.” “§ 1012. Regulation by State law; Federal law relating specifically to insurance; applicability of certain Federal laws after June SO, 1948 “(a) The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business. “(b) No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business' of insurance: Provided, That after June 30, 1948, the Act of July 2, 1890, as amended, known as the Sherman Act, and the Act of October 15, 1914, as amended, known as the Clayton Act, and the Act of September 26, 1914, known as the Federal Trade Commission Act, as amended, shall be applicable to the business of insurance to the extent that such business is not regulated by State law.”

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Oswald M. McCRORY and Rose Marie McCrory, Individually, etc., Plaintiffs-Appellants, v. Alce HALL, Defendant, Government Employees Insurance Company, Intervenor-Appellee. No. 72-3688 Summary Calendar. United States Court of Appeals, Fifth Circuit. April 17, 1973. Vicent P. McCauley, Columbus, Ga., for plaintiffs-appellants. Howell Hollis, Columbus, Ga., for intervenor-appellee. John T. Laney III, William G. Scranton, Jr., Columbus, Ga., for Alce Hall. Before WISDOM, AINSWORTH and CLARK, 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. AINSWORTH, Circuit Judge. McCrory filed a claim with his insurer, Government Employees Insurance Company, to invoke the uninsured motorist provision in his policy after he was injured in an automobile accident with Hall which occurred on the Fort Benning Military Reservation in Georgia. Government Employees Insurance Company intervened in McCrory’s suit against Hall, as provided for by Georgia law, alleging that Hall was not an uninsured motorist at the time of the collision, and that, therefore, MeCrory’s uninsured motorist coverage was not activated. Government Employees .Insurance Company was granted summary judgment, from which McCrory appeals. The sole issue presented for review is whether the Georgia uninsured motorist statute requires that an automobile be insured by at least one liability policy in the face amount of no less than $10,000 to prevent its designation as an uninsured motor vehicle. The question presented has not been interpreted before by the Georgia courts. We are asked to determine whether the Georgia uninsured motorist statute requires that a motorist involved in a collision in Georgia have an automobile liability policy in the face amount of at least $10,000, or whether it requires that we have an aggregate of $10,000 automobile liability insurance available, to preclude his being deemed an uninsured motorist. The question is precipitated by the fact that defendant Hall, a citizen of Louisiana, carried two automobile liability policies, issued in Louisiana, on his automobile, each in the face amount of $5,000. McCrory urges that the Georgia uninsured motorist statute requires a single policy for at least $10,000. Government Employees Insurance Company contends that the aggregate amount of $10,000 of automobile liability insurance satisfies the statute. Under McCrory’s interpretation, Hall’s automobile would be uninsured in the amount of $5,000 on each policy, and McCrory could recover a total of $10,000 from his own policy with Government Employees Insurance Company under the uninsured motorist provision. Under the insurance company’s interpretation, Hall’s automobile would not be an uninsured motor vehicle and McCrory’s uninsured motorist coverage would not be activated. Two sections of the Georgia uninsured motorist statute are pertinent. The first, Ga.Code § 56-407.1 (a), sets forth the requirements for uninsured motorist coverage. The second, Ga.Code § 56-407.1(b), defines an uninsured motor vehicle. The pertinent statutory provisions are as follows: § 56-407.1 (a). No automobile liability policy or motor vehicle liability policy shall be issued or delivered in this State to the owner of such vehicle, or shall be issued or delivered by any insurer licensed in this State, upon any motor vehicle then principally garaged or principally used in this State, unless it contains an indorsement or provisions undertaking to pay the insured all sums which he shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle, within limits exclusive of interests and costs which shall . . . be no less than (i) $10,000 because of bodily injury to or death of one person in any one accident, .... . . . . . . (b) As used in this section, the term “uninsured motor vehicle” means a motor vehicle . as to which there is (i) no bodily injury liability insurance and property damage liability insurance or as to which there is bodily injury liability insurance and property damage liability insurance with limits less than the amounts specified in subsection (a) of this section, .... Sections (a) and (b) deal with two distinct classes of automobile owners or drivers. Section (a) prohibits issuance or delivery of an automobile liability policy in Georgia to the owner of a Georgia vehicle, or to one who principally uses the vehicle in Georgia, unless the policy contains uninsured motorist coverage for at least $10,000. This section establishes a state policy that Georgia drivers shall have available to them a minimum amount of automobile liability insurance compensation. Section (b), however, is directed to a different class of automobile owners or drivers: non-Georgia drivers, or those who have not complied or could not comply with section (a). By definition, an uninsured motorist has less than $10,000 liability insurance on his automobile. This section has within its purview out-of-state drivers who are beyond the reach of section (a). Thus while section (a) declares that “No automobile liability policy [emphasis added] . . . shall be issued or delivered in this State” unless it contains a minimum of $10,000 uninsured motorist coverage, section (b) defines an uninsured motor vehicle as one for which there is “no bodily injury liability insurance [emphasis added] and property damage liability insurance or as to which there is . insurance with limits less than the amounts specified in subsection (a) . . . .” We find nothing in the statute compelling the interpretation of “insurance,” as used in section (b), to mean “single policy of insurance.” The insurance must be within the amounts specified in subsection (a), not in the form specified by section (a). Section (a) is directed toward a class of insureds whose policies are subject to regulation by Georgia law. Section (b) speaks in terms of insureds outside the regulation of Georgia law. Thus section (b) insureds, or uninsureds, cannot be compelled to hold the type of policy Georgia requires for its own citizens. A Georgia state court has interpreted the purpose of the uninsured motorist statute as follows: ... the purpose of the Uninsured Motorist statute is to place the insured in the same position as if the tortfeasor had the $10,000 minimum coverage. State Farm Mutual Auto. Ins. Co. v. Murphy, 226 Ga. 710, 714, 177 S.E.2d 257, 260 (1970). We find that the purpose of the statute is to provide the Georgia insured accident victim with a guarantee of the availability of a minimum of $10,000 compensation. We do not find that under section (b) this minimum must be the face amount of a single policy, but, rather, under section (b), automobile liability policies may be aggregated to constitute the $10,000 minimum. Since Hall’s automobile liability policies aggregate to provide $10,000 coverage, Hall is not an uninsured motorist under the Georgia statute, and McCrory has no claim against Government Employees Insurance Company for uninsured motorist coverage. Affirmed. . Ga.Code § 56-407.1 (d) provides that In eases where the owner or operator of any vehicle causing injury or damages be known, and either or both be named as defendants in any action for such injury or damages, a copy of such action and all pleadings thereto shall be served as prescribed by law upon the insurance company issuing the policy as though such insurance company were actually named as a party defendant. . . . [T] he insurance company issuing the policy shall have the right to file pleadings, and take other action allowable by law in the name of either.the known owner or operator or both or itself. See also State Farm Mutual Automobile Ins. Co. v. Brown, 114 Ga.App. 650, 152 S.E.2d 641 (1966), holding that intervention by the insurer who provided uninsured motorist coverage is procedurally proper. . Defendant Hall is not a party to this appeal. . It is plain on the face of § 56-407.1 (a) that policies issued or delivered pursuant to section (a) must provide uninsured motorist coverage for at least $10,000 in a single policy,

f2d_477/html/0090-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Leo ROSEN et al., Appellants, v. PUBLIC SERVICE ELECTRIC AND GAS COMPANY. Leo ROSEN et al. v. PUBLIC SERVICE ELECTRIC AND GAS COMPANY, Appellant. Morgan SWEENEY and Utility Co-Workers Association, Appellants, v. PUBLIC SERVICE ELECTRIC AND GAS COMPANY. Morgan SWEENEY and Utility Co-Workers Association v. PUBLIC SERVICE ELECTRIC AND GAS COMPANY, Appellant. Nos. 71-1893 to 71-1896. United States Court of Appeals, Third Circuit. Argued Sept. 26, 1972. Decided March 8, 1973. George Duggan, Parsonnet, Parsonnet & Duggan, Newark, N. J., for appellants in Nos. 71-1893 and 71-1895, and cross-appellees in Nos. 71-1894 and 71-1896. Luke A. Kiernan, Jr., Newark, N. J., for appellee in Nos. 71-1893 and 1895 and for cross-appellants in Nos. 71-1894 and 71-1896. John de J. Pemberton, Jr., Acting Gen. Counsel, Julia P. Cooper, Chief, Appellate Section, Lutz Alexander Prager, Atty., E. E. O. C., Washington, D. C., for amicus curiae. Before STALEY, VAN DUSEN and ROSENN, Circuit Judges. OPINION OF THE COURT STALEY, Circuit Judge. These are cross appeals from the judgment of the United States District Court for the District of New Jersey. That court found two versions of the Public Service Electric and Gas Company (“company”) pension plans, which discriminated between employees on the basis of sex, violative of Title VII, § 703(a)(1) of the Civil Rights Act of 1964 (“Act”), 42 U.S.C. § 2000e-2(a)(1). Charges in the captioned cases were originally filed separately with the Equal Employment Opportunity Commission (“EEOC”). After the administrative remedies provided under the 1964 Act were exhausted, suits were brought in the district court. The eases were consolidated there after this court vacated a summary judgment in favor of the defendant and remanded the first of these actions. The district court held both plans to be violative of the Act and ordered the company to cease and desist from discriminating between men and women as to retirement benefits. However, no award of compensatory damages was made. The plaintiffs have appealed from the denial of monetary relief; the company has cross appealed from the remainder of the judgment. A pension plan was first instituted by the company in 1911. According to its terms a female was permitted to retire on full pension at age sixty if she had completed twenty years of service. A male, in order to receive full benefits, was required to have attained the age of sixty-five and to have served at least twenty-five years. Early retirement was available to a man at sixty only if he had served thirty years and then only at a reduced pension. Women were discriminated against in that their mandatory retirement age was sixty-five whereas their male counterparts could continue working until age seventy. The first plan was revised as the result of collective bargaining between the defendant and representatives of its employees. The revised version which took effect on May 1, 1967, perpetuated the discriminatory features of the 1911 plan only to the extent that it favored women hired prior to its effective date. The controversial section provides: “* * * in the case of a female employee who retires under the provisions of this Section 4, no reduction in the amount of the pension shall be made on account of service prior to May 1, 1967.” Under this plan the mandatory retirement age for all is seventy. STANDING On appeal the standing of the plaintiffs to maintain this suit is questioned. Standing “concerns * * * the question whether the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question.” Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 830, 25 L.Ed.2d 184 (1970). The substantive issues must be considered to ascertain whether “there is a logical nexus between the status asserted and the claim sought to be adjudicated.” Flast v. Cohen, 392 U.S. 83, 102, 88 S.Ct. 1942, 1953, 20 L.Ed.2d 947 (1968). Standing for purposes of the Civil Rights Act of 1964 was intended by Congress to be defined as broadly as is permitted by Article III of the Constitution. Hackett v. McGuire Brothers Inc., 445 F.2d 442 (C.A.3 1971). Rosen, the company contends, lost standing to contest the alleged discriminatory practices when he retired. We do not agree. He was an active employee when this action was commenced and does not lose standing merely by accepting his pension. Hackett, supra; see Jenkins v. United Gas Corp., 400 F. 2d 28 (C.A.5, 1968). As one who was subject to the discriminatory provisions of the pension plans under consideration he has standing. Sweeney, an active male employee, also has a sufficient personal stake in the outcome of this case to assure that concrete adverseness will occur. See Kalur v. Resor, 335 F.Supp. 1 (D.D.C.1971). The company urges that the union has standing to represent neither the active employees nor the pensioners. Since both these classes are represented by other plaintiffs, we need not decide whose rights the union, as bargaining representative of the company’s employees, has standing to assert.- See Title VII of the Civil Rights Act, 8 Duq. L.Rev. 1(1969). DISCRIMINATION Section 703(a)(1) of the Civil Rights Act of 1964 states that it is an unlawful employment practice to discriminate on the basis of sex “against any individual with respect to his compensation, terms, conditions, or privileges of employment.” 42 U.S.C. § 2000e-2(a) (1); see Employment — Sex Discrimination, 12 A.L.R. Fed. 15 (1972). Whether retirement plans fall within the purview of the above language is the threshold question in this case. We answer it in the affirmative. The EEOC which is charged with the responsibility of administering the Act has issued the following guideline. “It shall be an unlawful employment practice for an employer to have a pension or retirement plan which establishes different optional or compulsory retirement ages based on sex, or which differentiates in benefits on the basis of sex.” 37 Fed.Reg. 6837 (1972). Such an administrative interpretation is entitled to great deference. Griggs v. Duke Power Co., 401 U.S. 424, 433-434, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971); Udall v. Tallman, 380 U.S. 1, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965). That the guideline was not promulgated until after this suit was initiated is of no moment. Rights which came into being when the Act was passed are not abrogated by administrative interpretation. Bartmess v. Drewrys U.S.A., Inc., 444 F.2d 1186 (C.A.7), cert. denied, 404 U.S. 939, 92 S.Ct. 274, 30 L.Ed.2d 252 (1971). A reading of the statute convinces us that the commission’s interpretation furthers the legislative purpose of the Act and is consistent with the plain meaning of the language employed. “Congress intended to strike at the entire spectrum of disparate treatment of men and women resulting from sex stereotypes.” Sprogis v. United Air Lines, Inc., 444 F.2d 1194, 1198 (C.A.7), cert. denied, 404 U.S. 991, 92 S.Ct. 536, 30 L.Ed.2d 543 (1971). Persuasive, also, is the fact that the language in the Labor-Management Relations Act, 29 U.S.C. § 159(a), similar to that employed in § 703(a)(1) of the Civil Rights Act of 1964, has been held to include retirement benefits. Inland Steel Co. v. NLRB, 170 F.2d 247 (C.A.7 1948), cert. denied, 336 U.S. 960, 69 S.Ct. 887, 93 L.Ed. 1112 (1949). We hold, therefore, that § 703(a)(1) of the Act prohibits discrimination with respect to retirement benefits on the basis of sex. Other courts are in agreement with us on this point. Bartmess, supra; Fillinger v. East Ohio Gas Co., (E.D.O.1971). Clearly the plans in question violate the Act. They differentiate between men and women solely on the basis of sex, and such discrimination is prohibited. Rosenfeld v. Southern Pacific Co., 444 F.2d 1219 (C.A.9, 1971); Lansdale v. Air Line Pilots Association International, 430 F.2d 1341 (C.A.5, 1970); Bowe v. Colgate-Palmolive Co., 416 F.2d 711 (C.A.7, 1969); but cf. Gruenwald v. Gardner, 390 F.2d 591 (C.A.2), cert. denied, 393 U.S. 982, 89 S.Ct. 456, 21 L.Ed.2d 445 (1968). We find no merit in the company’s argument that the revised plan is valid because it resulted from collective bargaining. "The rights assured by Title VII are not rights which can be bargained away — either by a union, by an employer, or by both acting in concert.” Robinson v. Lorillard Corp., 444 F.2d 791, 799 (C.A.4), cert. dismissed, 404 U.S. 1006, 92 S.Ct. 573, 30 L.Ed.2d 655 (1971); see United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965); United States v. St. Louis-San Francisco Ry. Co., 464 F.2d 301 (C.A.8, 1972), cert. denied 409 U.S. 1116, 93 S.Ct. 913, 34 L.Ed.2d 700 (1973). Nor, as the company contends, does the revised plan’s provision for gradually phasing out the discrimination bring it into compliance with the Act. See 37 Fed.Reg. 6837 (1972); United States v. H. K. Porter Co., 296 F.Supp. 40 (N.D.Ala.1968). The revised plan, according to the company, merely preserves pre-existing rights of females which cannot be diminished. This may be true. The apparent effect of § 15 of the pension plan and Article XVII of the collective bargaining agreement is to bar the company from reducing the benefits of females. However, the company is not precluded from raising men’s benefits to the level of women in order to achieve equality. Such adjustments have been recognized as a proper means of achieving that end. Hays v. Potlatch Forests, Inc., 465 F.2d 1081 (C.A.8, 1972). REMEDY On appeal the plaintiffs argue that compensatory damages should have been awarded to males who retired early under either of the discriminatory plans. With this we agree. Section 706(g) provides that the court “may enjoin * * * and order such affirmative action as may be appropriate.” 42 U.S.C. § 2000e-5(g). “This grant of authority should be broadly read and applied so as to effectively terminate the practice and make its victims whole.” Bowe v. Colgate-Palmolive Co., 416 F.2d 711, 721 (C.A.7, 1969). The relief is intended to restore those wronged to their rightful economic status absent the effects of the unlawful discrimination. Robinson v. Lorillard Corp., 444 F.2d 791 (C.A.4), cert. dismissed, 404 U.S. 1006, 92 S.Ct. 573, 30 L.Ed.2d 655 (1971). We are under a duty to render relief which will eliminate the “discriminatory effects of the past as well as bar like discrimination in the future.” Louisiana v. United States, 380 U.S. 145, 154, 85 S.Ct. 817, 822, 13 L.Ed.2d 709 (1965); see Smith v. Young Men’s Christian Association, 462 F.2d 634 (C.A.5, 1972). Male employees did retire early under both versions of the pension plan. These men now receive reduced pensions whereas women who retired under identical circumstances receive full benefits. The effective date of Title VII of the Civil Rights Act of 1964 was July 2, 1965. Men who have retired since that date with annuities reduced below those which they would have received had they been women must be compensated for the losses they sustained and are sustaining due to the discriminatory reduction in the amount of pensions on account of service prior to May 1, 1967, the effective date of the revised retirement plan, and after the effective date of the Act. Further, since we are of the view that the pension rights of active women employees which accrue before May 1, 1967, cannot be diminished, we hold that the retirement credit of males similarly situated must be increased for the relevant period between July 2, 1965, and May 1, 1967. This must be done to cure the effects of discrimination since the effective date of the Act. Other courts have invoked equitable powers under the Act to bring one group of employees up to the economic level of another. Victims of sex discrimination have been awarded three years’ wages which were lost due to early retirement. Fillinger v. East Ohio Gas Co., (N.D.O. 1971). Overtime benefits have been extended to male employees where state law required that women receive overtime pay. Hays v. Potlatch Forests, Inc., 465 F.2d 1081 (C.A.8, 1972); see Schaeffer v. San Diego Yellow Cabs, Inc., 462 F.2d 1002 (C.A.9, 1972). Further, the relief to be granted in the instant case is consistent with this court’s decisions under the Equal Pay Act which serves the' same fundamental purpose as the Civil Rights Act of 1964. See Hodgson v. Wheaton Glass Co., 446 F.2d 527 (C.A.3, 1971). In Hodgson we affirmed the judgment which awarded damages to effectuate the equalization of wage rates. For the foregoing reasons this cause will be remanded to the district court for a determination of the damages consistent with this opinion. . Rosen v. Public Service Electric and Gas Co., 328 F.Supp. 454 (D.N.J.1971). . Section 2000e-2(a) provides in pertinent part: “It shall be an unlawful employment practice for an employer. — -(1) to fail or refuse to hire or 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. * * * ” . The EEOC was permitted to file briefs as amicus curiae and to participate in oral argument. . Rosen v. Public Service Electric and Gas Co., 409 F.2d 775 (C.A.3 1969). The attack on the first pension plan was initiated by filing a charge of discrimination with the EEOC on November 15, 1965. On March 9, 1966, following unsuccessful conciliatory efforts by the commission, suit was entered in the first of the captioned cases. Subsequently, the complaint was amended to include in its scope the discriminatory feature of the modified pension plan. On appeal, this court remanded the first case with the suggestion that it be consolidated with a second suit filed on September 20, 1968, which raised the same issues as the amendment. . The court found that employees had retired under both plans. “ * * * The defendant’s records disclose that during the period in question, being November 15, 1965, to the present, the following number of employees retired early: 6 females, 48 males.” Rosen v. Public Service Electric and Gas Co., 328 F.Supp. 454, 467 (D.N.J.1971). . The 1911 plan in pertinent part provided as follows: “Section 3. Each male employee may at his option retire at age sixty-five or thereafter upon, completion of twenty-five years of service, and must retire at age seventy. Each female employee may at her option retire at age sixty or thereafter upon completion of twenty years of service, and must retire at age sixty-five. “Section 4. Each employee who retires under the provision of this Pension Plan relating to normal retirement for age shall be paid for life, in monthly installments, a pension computed at the annual rate of 1% of the average annual wage or salary of such employee for the five years of highest earnings within the last ten years of the employee’s service, multiplied by the number of years, and any fraction of a year, of the employee’s service. “Section 5. Each male employee may at his option retire at age sixty or thereafter but before attainment of age sixty-five upon completion of thirty years of service. “Section 6. Each male employee who retires under the provisions of this Pension Plan relating to early retirement shall be paid for life, in monthly installments, a pension computed at the annual rate of 1% of the average annual wage or salary of such employee for the five years of highest earnings within the last ten years of the employee’s service, multiplied by the number of years, and any fraction of a year, of the employee’s service, and reduced by one-half of 1% for each month that such employee is less than age sixty-five at the time of his retirement.” . The revised plan provides the following with regard to pension benefits : “Section 3. Normal Retirement for Age. “(1) Each employee may at his or her option retire at age sixty-five or thereafter, and must retire at age seventy. “(2) Each employee who retires under the provisions of this Section 3 shall be paid for life, in monthly installments, a pension computed at the annual rate of 1% of the average annual compensation of such employee for the five years of highest earnings within the last ten years of the employee’s service, multiplied by the number of years, and any fraction of a year, of the employee’s service. “Section 4. Early Retirement. . “(1) Each employee may at his or her option retire at age sixty or thereafter, but before attainment of age sixty-five upon completion of twenty years of service. “(2) Each employee who retires under the provisions of this Section 4 shall be paid for life, in monthly installments, a pension computed at the annual rate of 1% of the average annual compensation of such employee for the five years of highest earnings within the last ten years of the employee’s service, multiplied by the number of years, and any fraction of a year, of the employee’s service, and reduced by one-quarter of 1% for each month that such employee is less than age sixty-five at the time of retirement, and by an additional one-quarter of 1% for each month that such employee is less than age sixty-two at the time of retirement, except that in the case of a female employee who retires under the provisions of this Section 4, no reduction in the amount of the pension shall be made on account of service prior to May 1, 1967.” . Unions have the apparent right to assert their members’ rights in suits under the Civil Rights Act of 1964. See Rosen v. Public Service Electric and Gas Co., 409 F.2d 775, 780, n. 19 (C.A.3, 1969); Local 186 v. Minnesota Mining and Mfg. Co., 304 F.Supp. 1284 (N.D.Ind.1969). Retirement benefits of those employees who are not currently employed and have already retired are not a mandatory subject of collective bargaining under the NLRA. Allied Chemical & Alkali Workers of America, Local No. 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157, 92 S.Ct. 383, 30 L.Ed.2d 341 (1971). However, it does not naturally follow, as the company implies, that a union loses all interest in the fate of its members once they retire. . A Senate Report referring to § 706(g) stated that “The provisions of this subsection are intended to give the courts wide discretion exercising their equitable powers to fashion the most complete relief possible.” Cong.Rec. 3462, March 6, 1972. . “Between July 1, 1965 and May 1, 1967 there were early retirements on pension by some male employees, members of the plaintiff Union, as well as during the period from May 1, 1967 to the date of the Stipulation.” Rosen v. Public Service Electric and Gas Co., 328 F.Supp. 454 (D.N.J.1971). . Plaintiffs have not on appeal asserted all the potential claims of members of the class, such as the right of women employees who were involuntarily retired at age 65 to recover damages. In view of the policy underlying F.R.Civ.P. 23(a) (4) and 23(e), the district court on remand should consider directing notice to all class members in accordance with 23 (d) (2).

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

AETNA INSURANCE COMPANY, Plaintiff, v. Wallis HARTSHORN, d/b/a Hartshorn Enterprises, et al., Defendants-Appellees, Claims, Inc., Defendant-Appellant. No. 72-1193. United States Court of Appeals, Fifth Circuit. May 1, 1973. Sam Gross, San Antonio, Tex., Caplan & Barsky, Detroit, Mich., for defendant-appellant. Joel H. Klein, San Antonio, Tex., for Outlet Co. Sylvan Alter, San Antonio, Tex., for Atlas Rand, Ampex, Trans Am. Edward V. Dylla, San Antonio, Tex., for Greentree. Leslie J. Bretz, San Antonio, Tex., for Monarch and Modern Elec. Les Mendelsohn, San Antonio, Tex., for Mercury Rec. Marvin C. Beck, San Antonio, Tex., for Sherman Elec. Leo E. Eickhoff, Jr., Marlin L. Gilbert, San Antonio, Tex., for Bell. John J. Clayton, San Antonio, Tex., for Barco. Philip F. Benson, San Antonio, Tex., for Allied Rec. Joe Warren Jones, San Antonio, Tex., for Mikado and Central Dist. William S. Frank, Houston, Tex., for Santone Sales. Henry Valdespino, Asst. U.S. Atty., San Antonio, Tex., for Internal Revenue. Earle J. Cobb, Jr., San Antonio, Tex., for Hartshorn, Durflinger & J. Andrews Smith. Edward E. DeWees, Jr., San Antonio, Tex., for Adell Corp., Les Ferguson & AVCO Broadcasting & Texas Star Broadcasting. Richard C. Keene, San Antonio, Tex., for Aetna Ins. Co. Before TUTTLE, WISDOM and SIMPSON, Circuit Judges. SIMPSON, Circuit Judge: Because a busy district judge considered and disposed of the merits of cases which were properly before him for the single function of ruling on a Motion to Consolidate several pending actions without first affording appellant Claims, Inc. (Claims) prior notice that such disposition might take place we are constrained to reverse and remand. The due process requirements of the Fifth Amendment of notice and opportunity to be heard were simply ignored in the rush to take final action. On November 1, 1969, defendant-appellee Hartshorn, d/b/a Hartshorn Enterprises, a Texas corporation, suffered a fire loss which was insured under insurance policies issued by plaintiff Aetna Insurance Company for damage to property, and Aetna Fire Underwriters Insurance Company for loss of business due to fire (collectively hereinafter, Aetna). Hartshorn brought suit in Texas state court against Aetna to collect the $50,725.46 allegedly due under the fire damage policy. A number of Hartshorn’s creditors also instituted suits in state court and in federal court against Aetna to recover claimed portions of the insurance proceeds. In view of the multiplicity of suits instituted and threatened against Aetna, Aetna paid a total of $52,601.05 due under both policies ($50,725.46 fire damage, $1,875.59 for business loss) into the Registry of the court below and filed an interpleader action under 28 U.S.C. Section 1335 to determine which claimants were entitled to receive the money. Aetna also sought a temporary restraining order pursuant to 28 U.S.C. Section 2361 enjoining creditors with claims against Hartshorn from perfecting any actions against Aetna pending determinations of entitlement to the proceeds. Among the twenty-one defendants named in Aetna’s complaint was defendant-appellant Claims, a Michigan corporation, whose claim against Hartshorn was for $5,072.55. This represented 10% of the fire damage loss, and was a fee claimed by Claims for investigating the claims against Hartshorn arising as a result of the fire. Aetna filed its Motion to Consolidate all of the pending actions below on September 7, 1971, and a Motion in Opposition of Consolidation was filed the next day by Hartshorn Enterprises, Inc., one of the named defendants to the inter-pleader suit. The court thereupon sent notice to counsel for all parties, including Claims’ attorney, a Mr. Seymour Caplan of Detroit, Michigan, that a “hearing on pending motions” was to be conducted on October 7, 1971, before the presiding judge in San Antonio, Texas. Upon receipt of the court’s notice, Mr. Caplan telephoned Mr. Earle Cobb, Jr., the San Antonio attorney who represented Hartshorn Enterprises, to inquire as to the nature of the pending motions referred to in the court’s notice. Mr. Cobb accurately indicated that the reference was to the Motion to Consolidate the actions then on file and the Motion in Opposition thereto. Upon being so informed, Mr. Caplan concluded that since he did not oppose consolidation of the pending claims, his presence at the hearing was unnecessary. He so stated his position to Mr. Cobb. Starting October 7 and continuing until the following morning, a hearing was held in San Antonio pursuant to the court’s notice. Although not entirely clear the record indicates that the attorneys for all other parties were present, but Mr. Caplan, Claims’ attorney, was absent. His absence was explained to the court by Mr. Cobb or at least an explanation was attempted, to which the trial judge paid scant heed, (see Note 1, infra). The proceedings on October 7 quickly passed the consolidation motion stage and turned informally into a general conference between court and the attorneys present as to settlement of all pending suits and claims. Counsel were directed to work up a schedule of settlement and a proposed judgment, as well as preparing necessary preliminary orders. Adjournment was taken to October 8 to permit preparation of papers. Final disposition resulted by agreement of all matters in controversy between those present and represented. The entire insurance proceeds before the court were divided by the final judgment between these parties, the claim of Claims, Inc. being expressly disallowed. The judgment found that Claims’ interest in the Registry funds was subordinate to the judgments, liens and assignments of the other creditors, ordered the clerk of the court to disburse the monies to these priority creditors, and adjudged that Aetna had fully satisfied its obligations to defendant-appellee Hartshorn under both insurance policies. The judgment directed that Claims take nothing. Defendant-appellant Claims appeals alleging the district court erred in dismissing its claim against the funds with prejudice because it had no notice of final hearing or opportunity to be heard. The Due Process clause of the Fifth Amendment shields the individual against arbitrary exercise of governmental power by its guarantee that fundamental principles of justice and fair play not be violated. Two such fundamental principles, or minimal requirements, are adequate notice and opportunity to be heard or to defend. One thing that is clear from this sketchy record is that Claims was never on notice that the merits of its claim would be decided on October 7. The notice of the hearing limited its scope to hearing of “pending- motions”. The Motion to Consolidate and the Motion in Opposition thereto were the only motions then pending before the court. Certainly, by failing to attend the hearing or otherwise interpose an objection defendant-appellant Claims waived any objections it may have had as to those motions. F.R.Civ.P. 12(h). Indeed, such was its intention as expressed by its attorney to Mr. Cobb. It was not opposed to the Motion to Consolidate. We express no view whatever as to the merits. This reversal may produce nothing for Claims since it may well be proper in a hearing on the merits to deny Claims access to any portion of the insurance proceeds. But Claims is entitled to its day in court, which it has never had. This means it is entitled to try to prove up and to argue the merits of its claim, after notice and opportunity to be heard. Because defendant-appellant Claims, Inc., was misinformed and misled by the court — albeit innocently — as to the nature and purpose of the October 7 and 8 hearing, and was not present to assert its alleged interest in the insurance proceeds, we reverse the final judgment entered by the district court and order that full hearing on the merits be held with adequate notice to all parties. Reversed and remanded. . We reproduce from the Appendix a portion of the colloquy as to disposition of the claim of Claims, Inc., when court was reconvened on October 8. “MR. COBB : (HARTSHORN’S ATTORNEY) I don’t know whether the Court can help or not, I think perhaps the Court can. Mr. Keene has described the judgment which has been drawn up, we haven’t examined it yet, again, assuming I have understood it correctly, the defendant Hartshorn would have to object to the judgment on two grounds, first, that one of the creditors that was interpled and that is a party to this case has not been provided for; and second, as the matter has turned out, the second insurance company, the Eire Underwriters Insurance Company, is paying a mere eighteen hundred dollars for a settlement of the business interruption policy, and this is not acceptable in view of the fact that all the creditors are not provided for. THE COURT: Well, now, the only creditor that is outstanding is the one you mentioned ? MR. COBB: This is the only one in the suit. Now, my client is left with a number of creditors that have been suing him and harassing him, and it is my suggestion to these creditors that they forego the additional eighteen hundred dollars for the business interruption policy, accept their position of the amount that was entered into court, and then let us proceed on our business interruption policy. THE COURT: Now, wait a minute, about this one creditor that has been referred to, how much does his claim amount to? MR. COBB : $5,200.00, I believe. MR. KEENE: (AETNA’S ATTORNEY) The one creditor, Your Honor, is entitled Claims, Inc., which is a public adjuster which was retained by the Hartshorns to arrive at figures for the determination of the value of the losses, and their service all came up after the fire, and it is based not upon a sum certain but upon a percentage of any proceeds which may be recovered by the Hartshorns. And I would also point out to the Court that Mr. Cobb speaks about a mere $1,875.00 only being paid by the business interruption policy; by the terms of this judgment, the insurer also gives up any right to recover their costs and attorney’s fees, which they are entitled to under the federal inter-pleader statute, and that too amounts to a considerable amount. THE COURT: Well, you have to remember that here under the law I would have to allow a big fee to him, unless he waived it, I would have had to allow a fee for him, and you could imagine what that would be, if we had to go down and painfully go through all the creditors on this thing, and I want you to keep in mind that this is a settlement and everybody gives up something when they settle. MR. COBB: I am keeping that in mind, Your Honor, and— THE COURT: There could have been a big interpleader fee here, and I want it fixed so your client will probably have to end up still owing some people, because he probably did owe some people independently of this suit, he shouldn’t kick about what he owes, and he can’t expect — unless he really just hits an oil well, so to speak, in these two losses here — he can’t expect to liquidate everything that he really owed, so he has to give up something, I contemplated that you would end up still owing some people that might even sue him, but they wouldn’t be covered by the inventory suit that the main policy is about, and I think if you will keep that in mind, instead of a mere eighteen hundred, why you cam add five thousand, as of today, as an interpleader fee today, that would run it up to about seven thousand dollars, and then take it from there as to how much more it would have been. MR. COBB: Well, this is assuming a couple of things, though, that I don’t think are necessarily a fact. First, we deny that the insurance company; had the right to interplead these funds in the first place, this suit had been filed in the State Court— THE COURT: Well, yes, but by the time you got through with that, and you should be wrong, you just made money for the interpleader. MR. COBB: That is true, but they claim they are giving up attorney’s fees, well, we are giving up the balance of our claim on the inventory policy too, it is not all one way, but we are between the rock and the hard place on this point, because it is not equitable for my client to agree to a judgment which prefers. some creditors over the others, and particularly where a creditor is involved in this lawsuit. THE COURT: As I understand it, you were going to compile a list of the creditors? MR. COBB: That is right, and one was excluded. THE COURT: And I figured when the judgment was entered, that checks would be written to pay those people off so they could go home with the money, and I contemplated that you would end up owing some people, that is true, but under this settlement you got the matter settled. MR. COBB: There is no question about that. THE COURT: But I contemplated that both lawsuits be settled — well, not just one, but the three that are in front of me, that all lawsuits would be settled, and that you probably would end up owing a few general creditors. You will have to talk to your client and have him reconcile himself to the fact that he still had to pay some people some money. MR. COBB: If we include the other creditor that has intervened into this lawsuit, we may be able to work this thing out, but my client cannot agree to exclude a creditor that is involved in this lawsuit merely by reason of the fact that he is not here. THE COURT: Well, if he is not here he is in default in not being here, then, he has been notified to be here. MR. COBB : Well, I understood — well, I don’t know about that, that may be the case. THE COURT: If he is in default he is out of luck. MR. COBB: If the Court wants to enter the judgment over our objection on that basis. THE COURT: Well, I am going to— if he has been served and didn’t appear today, why, I will enter the judgment against him by default, or he can — or, if you had any better suggestion, I can enter it without' prejudice against proceeding against your client, but it is with prejudice against everybody else, because they are here, and if he toas notified to be here and he didn’t show to press his claim, why, that is just too bad, he just lost out, maybe your client can work out out a settlement with him. MR. COBB : With that understanding I’d like to examine the judgment. (Emphasis supplied) ■ Certainly, Claims was in default, as pointed out by the judge, but it could only be held to have foregone opposing the consolidation of the several suits. In no sense was Claims in default as to its claim against the Registry interpleader fund. . No supersedeas was sought as to the judgment appealed from. It may be difficult for the trial to provide a solvent source of payment of Claims’ claim, if it is upheld on the merits. Hartshorn’s liquidity is doubtful. But Aetna is solvent and was a party to the proceedings below. The trial court should award money recovery where it finds liability to exist upon reexamination of the positions taken by the parties. We assume that the judgment has been satisfied by full payout of the deposited funds.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Leon JOHNSON, Plaintiff-Appellee, v. R. J. GREER, Defendant-Appellant. No. 72-2541. United States Court of Appeals, Fifth Circuit. April 2, 1973. Rehearing Denied April 24, 1973. James Greenwood, III, Houston, Tex., for defendant-appellant. John K. Meyer, Houston, Tex., for plaintiff-appellee. Before ALDRICH, SIMPSON .and CLARK, Circuit Judges. Hon. Bailey Aldrich, Senior Circuit Judge of the First Circuit, sitting by designation. CLARK, Circuit Judge: Johnson brought this action under 42 U.S.C. § 1983, contending that Greer, as Administrator of the Psychiatric Diagnostic Clinic, falsely imprisoned him and thereby denied him his constitutional right to liberty and due process of law. Johnson sought damages for deprivation of freedom and for a shoulder injury suffered when orderlies attempted to administer medication to Johnson while he was detained at the Clinic. The jury found for Johnson on most of the Fed.R.Civ.P. 49(a) special verdict issues submitted to them, separately assessing the damages for false imprisonment at 700 dollars and the damages resulting from the shoulder injury at 11,300 dollars. Judgment accordingly was entered. There is an adequate basis in law and in record proof to support the finding of false imprisonment. However, the jury was given ah improper test to use in determining if Johnson’s shoulder injury was a proximate result of such false imprisonment. We therefore affirm in part, vacate in part, and remand for a new trial as to all damage verdicts. Although the exact details of the preliminary encounter are unclear, Johnson either volunteered himself or was taken into the custody of the police complaining of hearing voices and music which were in fact imaginary. It further appears that he requested the police officers to lock him up somewhere where he would not hear the voices and music. These officials placed him in a cell where he was examined by a psychiatrist who concluded that he was suffering from toxic delirium. On the basis of this examination and diagnosis, the police procured an emergency protective custody warrant from a Justice of the Peace. Pursuant to that warrant Johnson was admitted to the Clinic which Greer administers. Under Texas statutes, which supplied Greer’s whole authority to take Johnson into custody, Johnson could have been detained under this emergency warrant for a period not to exceed 24 hours. After the expiration of 24 hours further necessary detention could have been authorized by an order of the appropriate court. Though Johnson was ultimately detained for approximately five consecutive days, no further order from any court was obtained during that period. We find no merit in Greer’s contention that Johnson was not unlawfully detained at the Clinic. After the 24-hour detainment authorized by the initial warrant had expired, Greer was under an obligation either to seek authorization from the Texas courts to detain Johnson for a further period of time, as required by the Texas statute, or to release him. While it may well be that Greer had the right to detain Johnson for a reasonable period of time to obtain the necessary court order, the jury found in response to a special verdict question that his delay in procuring the warrant became unreasonable at a time 24 hours after his initial authorization to retain Johnson had expired (i. e., after Johnson had been detained for a total of 48 hours). Since it is admitted that Greer was acting “under color of law” as Administrator of the Clinic, his actions in depriving Johnson of his constitutional right to liberty provide ample basis for this action under 42 U.S.C. § 1983. See Dowsey v. Wilkins, 467 F.2d 1022 (5th Cir. 1972); Whirl v. Kern, 407 F.2d 781 (5th Cir. 1972), cert. denied, 396 U.S. 901, 90 S.Ct. 210, 24 L.Ed.2d 177 (1969). Our jurisdiction in this action is to be exercised under the statutory and decisional laws of the United States “so far as such laws are suitable to carry the same into effect; but in all cases where they are not adapted to the object, or are deficient in the provisions necessary to furnish suitable remedies” the laws of Texas shall govern. 42 U.S.C. § 1988. Bell v. Hood, 327 U.S. 678, 684, 66 S.Ct. 773, 777, 90 L.Ed. 939 (1946). See also Sullivan v. Little Hunting Park, Inc., 396 U.S. 229, 90 S.Ct. 400, 24 L.Ed.2d 386 (1969) and Brazier v. Cherry, 293 F.2d 401 (5th Cir. 1961). We see no deficit in the federal law as to efficacy or remedy and base our decision accordingly. It is no defense to this action that Greer may have intended only to protect Johnson and others from possible injury. [G]ood intentions which do not give rise to a reasonable belief that deten-* tion is lawfully required cannot justify false imprisonment whether the action is founded in tort or under Section 1983. ... As a corollary, the plaintiff need not show malice or ill-will to prove his action under Section 1983. All that is required is that he demonstrate state action which amounts to an actual deprivation of Constitutional rights or other rights guaranteed by law. Dowsey v. Wilkins, supra, 467 F.2d at 1025. Rather than adhering to the statutory procedure and obtaining a court order to detain Johnson, Greer failed to even attempt to follow the provisions of that law intended to protect the rights and liberty of those who are or are thought to be mentally ill. We affirm the judgment of the court below insofar as it adjudged Greer liable to Johnson for false imprisonment. However, because of the ultimate disposition of the case, we vacate the portion of the final judgment assessing damages for this wrong and remand that issue for retrial. The more difficult question in this case is that of Greer’s responsibility for the injuries suffered by Johnson during his confinement. Well after the expiration of the 48 hour period of reasonable detention found by the jury, Johnson was injured in an altercation with two orderlies at the Clinic. During this incident, which apparently occurred when Johnson irrationally resisted the administration of medication, he received the shoulder injuries of which he complains. On this appeal Greer contends that even if he was guilty of falsely imprisoning Johnson, such imprisonment was not a proximate cause of Johnson’s shoulder injury. Casting his argument in terms of foreseeability, as he did in his objection to the instruction given by the court below, he argues that no reasonable man could have anticipated that physical injury would be a proximate result of Johnson’s imprisonment. This was not the legal standard which governed this phase of the case in the trial court. The only formula which the jury instruction fixed for testing Greer’s liability for Johnson’s shoulder injury was the following: An injury or damage is proximately caused by an act, or a failure to act, whenever it appears from the evidence in the case, that the act or omission played a substantial part in bringing about or actually causing the injury or damage; and that the injury or damage was either a direct result or a reasonably probable consequence of the act or omission. This does not mean that the law recognizes only one proximate cause of an injury or damage, consisting of only one factor or thing, or the conduct of only one person. On the contrary, many factors or things, or the conduct of two or more persons, may operate at the same time, either independently or together, to cause injury or damage; and in such a case, each may be a proximate cause. Thus that court evidently agreed with those courts and treatises which indicate that the tort feasor in a false imprisonment action may be liable for damages which are not anticipated, apprehended or foreseen, so long as they are natural and probable or direct .consequences of the intentional tort. While requiring the consequences to be “reasonably probable” or the result to be “direct” may have been intended as no more than another means of expressing foreseeability, we hold that this instruction erroneously advised the jury as to the standard of causal relationship between action and injury which would establish the defendant’s liability. In Whirl v. Kern, supra, this court noted in dealing with a Section 1983 action and a pendent state false imprisonment claim that the injury must be proximately related to the wrong, 407 F.2d at 797, and in Anderson v. Nosser, 456 F.2d 835, 841 (5th Cir. 1972) (en banc) the court applied a test of foreseeability in a Section 1983 action founded on the imposition of summary punishment without due process of law. Neither of these eases, however, focused on the proper rule to be applied in determining whether the injury was proximately related to the wrong or a foreseeable consequence thereof. Thus, we look for guidance to “the prevailing view [of tort law] in this country” in determining the proper federal rule to apply to this case. Pierson v. Ray, 386 U.S. 547, 555, 87 S.Ct. 1213, 1218, 18 L. Ed.2d 288 (1967); Whirl v. Kern, supra, 407 F.2d at 791. In detailing our reasoning to the answer to the basic question — for what injuries should such a tort feasor be held responsible — we will not attempt to reconcile all of the varying judicial pronouncements on the subject, which differ more in semantics than in substance. The best start for an exposition of our reasoning is with this excerpt from a leading text writer: The term “proximate cause” is applied by the courts to those more or less undefined considerations which limit liability even where the fact of causation is clearly established. The word “proximate” . . . means nothing more than near or immediate; and when it was first taken up by the courts it had connotations of proximity in time and space which have long since disappeared. It is an unfortunate word, which places an entirely wrong emphasis upon the factor of physical or mechanical closeness. For this reason “legal cause” or perhaps even “responsible cause” would be a more appropriate term. * * * * * * It is quite possible, and often helpful, to state every question which arises in connection with “proximate cause” in the form of a single question: was the defendant under a duty to protect the plaintiff against the event which did in fact occur? Such a form of statement does not, of course, provide any answer to the question, or solve anything whatever; but it does serve to direct attention to the policy issues which determine the extent of the original obligation and of its continuance, rather than to the mechanical sequence of events which goes to make up causation in fact. The question becomes particularly helpful in cases where the [question is] ... whether the interests of the plaintiff are entitled to legal protection at the defendant’s hands against the invasion which has in fact occurred. Or, again reverting, whether the conduct is the “proximate cause” of the result. The circumlocution is unavoidable, since all of these questions are, in reality, one and the same. W. Prosser, Law of Torts 282-83 (1964) (footnotes omitted). We focus our opinion not on the metaphysical “but for” sequence of events preceding Johnson’s injury but rather on the question of whether the principles of logic, fairness, and justice dictate the defendant should be held liable in a given situation. The cases are in accord that even a willful or intentional tort feasor does not become an insurer of the safety of those whom he has wronged. For example, if the Clinic had been destroyed by an earthquake, no one could rationally contend Greer should be liable for injuries befalling Johnson. On the other hand, the courts have generally held that where the acts of a defendant constitute an intentional tort or reckless misconduct, as distinguished from mere negligence, the aggravated nature of his action is a matter which should be taken into account in determining whether there is a sufficient relationship between the wrong and plaintiff’s harm to render the actor liable. Specifically, the factors to be taken into account are the tort feasor’s intention to commit a wrongful act, the degree of his moral wrong in so acting, and the seriousness of the harm intended. See Restatement of Torts, Second, § 435B; Prosser, supra, at 302. The touchstone for deciding the scope of the defendant’s liability in a false imprisonment action properly brought under a federal statute is the intent and object of the officer in detaining the plaintiff. While, as we have iterated, mere good intentions do not in themselves create a defense to the action, see Dowsey v. Wilkins, supra, justice, fairness, and sound policy coalesce to indicate that an officer acting under color of law without malice or bad intent should be liable only for those injuries which an ordinarily prudent man would reasonably foresee would result from his actions. On the other hand, officers acting with malice or bad intent ought additionally to be held responsible for those injuries which have a more attenuated causal relationship to their willful misconduct. Thus, in a false imprisonment action brought under Section 1983, the tort feasor acting under color of law with malice or bad intent must be held responsible for all injuries which could have been prevented by the exercise of the utmost caution characteristic of very careful men, though even he remains insulated from injuries caused by wholly unforeseen accidents occurring without his agency. Nor is he responsible for injuries against which no human care or foresight could guard and which are not caused in any degree by his gross neglect or intentional conduct. ' In addition to this objection based on the role of foreseeability in the definition of proximate cause, Greer directs another argument at the district court’s instruction quoted above. The jury found that Johnson’s physical injuries were proximately caused by his unlawful detention at the Clinic. The jury also found, however, that Johnson was mentally ill and was likely to cause injury to himself or others unless restrained. Though these two responses are not necessarily inconsistent, Greer urges that together they serve to point up a serious flaw in the court’s instructions. Greer contends that there was no finding by the jury and no evidence on which any finding could be based that his actions in any way increased the already existing risk of injury that Johnson’s mental state was causing. Neither the bare fact that Johnson was injured while in Greer’s care, nor the fact that it was foreseeable that some injury might occur during the hospitalization of a person who is disoriented and experiencing hallucinations, are sufficient to affix tort liability for an otherwise unintentional injury in the circumstances present here. The correct rule of law to be applied to this case is indicated by analogy in the Restatement of Torts, Section 870. A person who does any tortious act for the purpose of causing harm to another or to his things or to the pecuniary interest of another, is liable to the other for such harm if it results, except where the harm results from an outside force the risk of which is not increased by the defendant’s act. [Emphasis added.] Comment “g” to that section amplifies this rule. Even where the defendant’s act is in fact a cause of harm, in the sense that the harm would not otherwise have occurred, he is not liable to a person whom he intended to harm and who has been harmed, unless from the standpoint of a reasonable man, his. act has in some degree increased the risk of that harm. Though this section of the Restatement deals expressly with the necessary causal relationship between an intentional wrong and a resulting intended injury, a fortiori the principle applies where, as here, an unintended injury results from an intentional tort. The causal standard for liability for unintended injuries certainly should be no stricter than that applied in situations where the particular harm is intended. In light of the jury’s finding that Johnson was liable to injure himself and others unless restrained, the trial court’s instruction which defined the conditions of Greer’s liability for injury is defective in that it didn’t charge that the jury was required to determine whether Greer’s actions increased the risk of injury. Greer could only be held liable if, using whatever standard of care he was bound to use, it was reasonably foreseeable that his action of improperly holding Johnson at the Clinic during his period of hallucinations would increase the risk of danger to Johnson. The evidence is such that a reasonable minded juror could have found that since Johnson was likely to hurt himself or others because of his condition, the risks associated with confinement at the Clinic did not increase Johnson’s hazard of harm. Under the. Seventh Amendment Greer is entitled to have this issue of fact determined by a jury as a prerequisite to the imposition of liability for this injury. In other circumstances, the flexible and illuminating special verdict procedure followed here might also have allowed us to safely affirm the damage award with respect to false imprisonment and leave only the shoulder injury issues for retrial. However, the only sure course to preserve the jury process for both parties demands that the false imprisonment damage issue be also resubmitted since its amount could well be varied by the ultimate result of what is found as to the injury, i. e., should the jury conclude that Greer’s actions were such that he should not be held liable for Johnson’s shoulder injury or that Johnson’s risk of physical harm was not increased by the detention, they well may determine that the amount of damages to be awarded on account of the detention alone should be altered. Affirmed in part, vacated in part, and remanded. . Vernon’s Tex.Rev.Civ.Stat.Ann. art. 5547-27 (Supp.1972). Vernon’s Tex.Rev.Civ.Stat.Ann. art. 5547-66 (1958).

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Lourdes CABUCO-FLORES, Petitioner, v. IMMIGRATION & NATURALIZATION SERVICE, Respondent. Genevieve L. MANGABAT, Petitioner, v. IMMIGRATION & NATURALIZATION SERVICE, Respondent. Nos. 72-1333, 72-1818. United States Court of Appeals, Ninth Circuit. April 13, 1973. George Haverstick (argued), San Diego, Cal., for petitioner. Charles Gordon, Asst. Atty. Gen. (argued), Crim. Div., Dept. of Justice, Washington, D. C., Harry D. Steward, U. S. Atty., Robert H. Filsinger, Asst. U. S. Atty., San Diego, Cal., Joseph Surreck, Regional Counsel, I&NS, San Pedro, Cal., Stephen Suffin, I&NS, San Francisco, Cal., for respondent. Before BROWNING, HUFSTEDLER, and WALLACE, Circuit Judges. BROWNING, Circuit Judge: These petitions for review raise a common question under section 241(f) of the Immigration and Nationality Act, 8 U.S.C. § 1251(f), an ameliorative statute providing that in some circumstances fraud or misrepresentation by an entering alien who has close family ties with a citizen or lawfully admitted permanent resident may be waived as a ground for deportation. The issue is whether section 241(f) applies to deportation of a temporary visitor on the ground that the visitor has overstayed the period authorized. We hold that it does not. Both petitioners are aliens, citizens of the Philippine Islands. Each entered the United States as a nonimmigrant visitor for a stipulated period. After entry, each bore a child, a United States citizen by birth. Deportation proceedings were commenced against each on the ground that she had remained longer than permitted by her visa, and was therefore deportable under section 241(a) (2) of the Act, 8 U.S.C. § 1251(a) (2). Each defended on the ground that she was saved from deportation by section 241(f) because when she applied for her visitor’s visa she fraudulently concealed an intention to remain in the United States permanently. The Board of Immigration Appeals rejected the defense as to petitioner Mangabat on the ground that section 241(f) applies only to persons who enter as immigrants and not to those who enter as nonimmigrants. The Board rejected the defense as to petitioner Cabuco-Flores on the ground that her testimony established that she intended to remain permanently only if she could do so lawfully and thus failed to establish the requisite fraud. We sustain the deportation orders on another ground, namely, that the charge of remaining after the expiration of the period permitted by each petitioner’s visitor’s visa was not waived by section 241(f) because it did not depend directly or indirectly upon the asserted misrepresentation in obtaining the visa. Literally, section 241(f) waives deportation of aliens only “on the ground that they were excludable at the time of entry as aliens who have sought to procure, or have procured visas or other documentation, or entry into the United States by fraud or misrepresentation,” in violation of section 212(a) (19), 8 U. S.C. § 1182(a) (19). The Supreme Court rejected a literal reading of section 241(f) in Immigration Service v. Errico, 385 U.S. 214, 217. 87 S.Ct. 473, 476, 17 L.Ed.2d 318 (1966), noting that by consistent administrative interpretation the section “waives any deportation charge that results directly from the misrepresentation regardless of the section of the statute under which the charge was brought” (emphasis added). Thus, while not limited to the single ground for deportation found in section 212(a) (19), section 241(f) is properly invoked only when the fraud is “germane to the charge” upon which deportation is sought, Muslemi v. Immigration & Naturalization Service, 408 F.2d 1196, 1198 (9th Cir. 1969) (see also Hames-Herrera v. Rosenberg, 463 F.2d 451, 454 (9th Cir. 1972); Jolley v. Immigration & Naturalization Service, 441 F.2d 1245, 1251-1252, 1254 (5th Cir. 1971); Loos v. Immigration & Naturalization Service, 407 F.2d 651, 654 (7th Cir. 1969); Tsaconas v. Immigration & Naturalization Service, 397 F.2d 946 (7th Cir. 1968)), and the charge relates to entry. Hames-Herrera v. Rosenberg, supra; Khadjenouri v. Immigration & Naturalization Service, 460 F.2d 461, 462 (9th Cir. 1972); Ferrante v. Immigration & Naturalization Service, 399 F.2d 98, 104 (6th Cir. 1968); Tsaconas v. Immigration & Naturalization Service, supra. Section 241(f) applies only to that fraud or misrepresentation which the government must prove to establish the ground relied upon for deportation; in some circumstances it excuses such fraud. It does not make the alien’s fraud an affirmative defense, independently exculpatory without regard to the proof required to establish the ground for deportability relied upon by the government. In these cases petitioners were ordered deported because the period of their authorized temporary stays had expired. The government’s case was completed upon proof that petitioners were admitted as nonimmigrant visitors for a temporary period, the period had elapsed, and petitioners had not departed. The charge had nothing to do with petitioners’ entry; lawfulness of their entry was assumed. Proof that petitioners’ visas were procured by fraud was irrelevant to the charge. Giving full effect to the section 241(f) waiver, the government’s proof of the ground relied upon for deportation was unimpaired. Accordingly, the orders of deportation are not barred by section 241(f). This interpretation is consistent with the section’s language. It is also in harmony with the section’s purpose, for Congress intended no more than to grant relief to aliens “facing exclusion or deportation because they had gained entry through misrepresentation.” Immigration Service v. Errico, supra, 385 U.S. at 220-221, 87 S.Ct. at 478. It avoids the anomalous consequence that an alien may escape deportation simply by “substituí [ing] for his own convenience a ground not involved in the deportation proceedings.” Ntovas v. Ahrens, 276 F.2d 483, 484 (7th Cir. 1960). See also Tsaconas v. Immigration & Naturalization Service, supra, 397 F.2d 946, 948. It avoids the constitutional question raised by petitioner Cabuco-Flores, who points out that if section 241(f) is held to apply, but the factual determination of the Board in her case is upheld, petitioner Mangabat will be allowed to remain in this country, while petitioner Cabuco-Flores, whose situation is in all respects the same except that she did not enter with a fraudulent intent, will be deported. This construction averts the wholesale frustration of statutory limitations on immigration foreseen by the government, which suggests that a fraudulent intent to remain cannot be detected at the time of entry, nor disproved during a deportation proceeding. Finally, this construction limits the impact of the apparent inconsistency between section 241(f)’s automatic waiver where fraud is involved, and the severely limited conditions under which aliens having close family ties in the United States can be relieved of various other grounds of deportation. See section 244 of the Act, 8 U.S.C. § 1254; section 212(e), 8 U.S.C. § 1182(e); section 212(h), 8 U.S.C. § 1182(h). The holding of Muslemi v. Immigration & Naturalization Service, supra, is not to the contrary, and, as suggested earlier, its rationale supports the result we reach here. Muslemi was not charged with overstaying; indeed, he was notified that deportation proceedings were to be instituted against him one day before his temporary visa expired. 408 F.2d at 1198. Deportation was sought on the ground that he had entered without an immigrant visa and was therefore excludable under section 212(a) (20), 8 U.S.C. § 1182(a) (20), and deportable under section 241(a)(1), 8 U.S.C. § 1251(a)(1). 408 F.2d at 1197. To prove its charge, the government was required to establish that Muslemi entered the United States as an immigrant, that is, as one who intended to remain in this country permanently. The government was required to prove that Muslemi had obtained his temporary visitor’s visa by fraudulently misrepresenting his intentions. Thus, the “misrepresentation was germane to the deportation charge” (408 F.2d at 1199) — waiver of the fraud barred proof essential to that charge. The rule we adopt is also consistent with Lee Fook Chuey v. Immigration & Naturalization Service, 439 F.2d 244 (9th Cir. 1971). Lee Fook Chuey entered the United States under a false claim of citizenship derived from his father. He was ordered deported on the charge that he was an alien, who entered without inspection in violation of section 241(a)(2), 8 U.S.C. § 1251(a)(2). Obviously, proof of this charge required the government to establish that petitioner’s claim of citizenship was false. Section 241(f) was therefore determinative. However, Vitales v. Immigration & Naturalization Service, 443 F.2d 343 (9th Cir. 1971), cannot be reconciled with our present holding: Section 241(f) was held to bar Vitales’ deportation on the' ground that she had overstayed the period permitted by a nonimmigrant visitor’s visa obtained by fraudulently concealing an intention to remain in this country permanently. The Supreme Court granted certiorari in Vitales. 404 U.S. 983, 92 S.Ct. 450, 30 L.Ed.2d 366 (1971). Thereafter, petitioner left the country voluntarily. The Supreme Court vacated the judgment of this court, and remanded with instructions to dismiss the petition. 405 U.S. 983, 92 S.Ct. 1245, 31 L.Ed.2d 449 (1972). This court’s decision in Vitales is therefore no longer binding precedent. See United States v. Munsingwear, Inc., 340 U.S. 36, 39-41, 71 S.Ct. 104, 95 L.Ed. 36 (1950). The orders of the Board are affirmed. . Section 241(f) of the Act, 8 U.S.C. § 1251 (f) reads: The provisions of this section relating to the deportation of aliens within the United States on the ground that they were excludable at the time of entry as aliens who have sought to procure, or have procured visas or other documentation, or entry into the United States by fraud or misrepresentation shall not apply to an alien otherwise admissible at the time of entry who is the spouse, parent, or a child of a United States citizen or of an alien lawfully admitted for permanent residence. . See Bong Youn Choy v. Barber, 279 F.2d 642, 645-646 (9th Cir. 1960). . “The statutory waiver excuses charges which are incidental to the misrepresentation, such as perjury, improper quota charge, entry without inspection, and lack of proper documents (when waiver can be simultaneously granted). However, the mere fact that the alien claims to have made a misrepresentation at the time of entry does not excuse him from deportation validly ordered on another charge, not related to the misrepresentation” (footnotes omitted). Gordon & Rosenfield, Immigration Law & Procedure § 4.7c, 4-41. See also Ntovas v. Ahrens, 276 F.2d 483, 484 (7th Cir. 1960) (decided under § 7 of the 1957 Act). See note 5. . See also Rutledge v. Esperdy, 200 F.Supp. 231 (S.D.N.Y.1961), affirmed on the basis of district court’s opinion 297 F.2d 532 (2d Cir. 1961), decided under § 7 of the 1957 Act. See note 5. . The Court was referring to § 7 of the 1957 Act, Pub.Law 85-316, 71 Stat. 639. “The present § 241(f) is essentially a re-enactment of § 7 of the 1957 Act. The legislative history leaves no doubt that no substantive change in the section was intended.” Immigration Service v. Errico, 385 U.S. 214, 223, 87 S.Ct. 473, 479, 17 L.Ed.2d 318 (1966). . In view of the dictum to the contrary in Chung Wook Myung v. Immigration & Naturalization Service, 468 F.2d 627, 628 n. 1 (9th Cir. 1972), this opinion has been circulated to all the active members of the court. No judge has requested that the case be heard in bane.

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UNITED STATES of America, Plaintiff-Appellee, v. James Willie SANDERS, Defendant-Appellant. No. 72-3608 Summary Calendar. United States Court of Appeals, Fifth Circuit. April 6, 1973. Clayte Binion, III, Fort Worth, Tex., court-appointed, for defendant-appellant. Frank D. McCown, U. S. Atty., W. E. Smith, Asst. U. S. Atty., Fort Worth, Tex., for plaintiff-appellee. Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, 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: The sole question in this appeal is whether Appellant’s Fourth and Sixth Amendment rights were violated by admission into evidence against him a palmprint taken while he was legally in the custody of law enforcement officers on another matter, but after he had requested counsel before further questioning on this matter. We think not and therefore affirm the lower court’s decision. The record reveals, and Appellant admits, that he was legally in the custody of law enforcement officials stemming from arrest on another unrelated matter. It is undisputed, then, that the custodial officers were well within their authority, and not without Appellant’s rights, to require that he submit to fingerprinting independent of the presence or absence of warnings to accused of his rights to counsel and to remain silent. United States v. Gibson, 5 Cir., 1971, 444 F.2d 275. Neither can it be argued that the Fourth Amendment erected any obstacle to the taking Appellant’s fingerprint exemplars under the facts present here. The obtaining of physical evidence from a person involved a potential Fourth Amendment violation at two different levels — the “seizure” of the “person” necessary to bring him into contact with government agents and the subsequent search for and seizure of the evidence. United States v. Dionisio, 1973, 410 U.S. 1, 93 S.Ct. 764, 35 L.Ed. 67. Here the fact Appellant was legally under arrest at the time his palmprint exemplar was taken removes the first level of potential Fourth Amendment infringement. As for the second level, the Supreme Court noted in Davis v. Mississippi, 1969, 394 U.S. 721, 89 S.Ct. 1394, 22 L.Ed.2d 676, that while the seizure of the person is clearly subject to Fourth Amendment “reasonableness”, the taking of physical evidence in the nature of fingerprinting, or as here palmprints, “involves none of the probing into an individual’s private life and thoughts that marks an interrogation or search.” Appellant, upon being apprised of his constitutional rights, properly invoked his Sixth Amendment right to have counsel present before further questioning. The record shows that the interrogation ceased at that point. The taking of Appellant’s palmprints in the absence of counsel did not violate his constitutional rights. We have written that “the taking of the fingerprints exemplar is not such a critical stage of the criminal proceedings as would entitle appellant to the assistance of counsel.” Pearson v. United States, 5 Cir., 1968, 389 F.2d 684, 686. Furthermore, we think the present appeal analogous to one heard by the D.C. Circuit where they wrote that “[N]ot only is .the taking of the exemplars not a critical stage of the proceedings entitling an accused to the assistance of counsel, but appellant has pointed to no function counsel could perform, were he present, save the futile advice not to give the sample.” Lewis v. United States, 1967, 127 U.S.App.D.C. 269, 382 F.2d 817, 819. The trial court did not err in admitting into evidence Appellant’s palmprint. There it ends. Affirmed.

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Leo P. McCURNIN, Jr., Plaintiff-Appellee, v. KOHLMEYER & COMPANY and Jack D. Drake, Defendants-Appellants. No. 72-3175 Summary Calendar. United States Court of Appeals, Fifth Circuit. Feb. 13, 1973. See also D.C., 340 F.Supp. 1338. Charles Kohlmeyer, Jr., Earl S. Eichin, Jr., New Orleans, La., for defendants-appellants. Peter G. Burke, Paul M. Haygood, New Orleans, La., for plaintiff-appellee. Before JOHN R. BROWN, Chief Judge, 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. PER CURIAM: Federal jurisdiction over this case initially was grounded upon a joinder of claims arising under the Commodities Exchange Act, the Securities Act of 1933 and the Securities Exchange Act of 1934 with a diversity claim arising under the Louisiana law of agency. The trial court below determined that none of the customer’s (Appellee) federal claims had merit, but, it asserted pendent jurisdiction over the state claim and proceeded to find that the customer was entitled to recovery from the broker (Appellant) under prevailing Louisiana law. We affirm. The dispute between the parties arose out of trading in the commodity market by McCurnin, the customer. The broker, Kohlmeyer and Company, through its employee Drake, also a co-Appellant, purchased cotton futures for customer at a price in excess of that authorized. He suffered a net loss in the transaction of $26,725. Upon learning of the unauthorized purchase McCurnin did not immediately and affirmatively repudiate the transaction, at least not by clear and unambiguous conduct. A period of three days elapsed before his market position was liquidated and thus before the full extent of the loss was realized. The broker contends that the customer’s delay and.his accompanying conduct subsequent to learning of the unauthorized purchase clearly manifested his intention to ratify the purchase and, furthermore, this delay was violative of his duty to mitigate damages. The trial court, in a thorough and well reasoned opinion, 347 F.Supp. 573, rejected these arguments. The Judge found that the broker’s conduct was violative of two codal Articles of the Louisiana Law of Mandate, La. Civil Code Articles 3010 and 3003. In response to the contention that the customer ratified, the trial Judge wrote: “The conclusion that McCurnin failed to repudiate is mistaken. McCurnin had manifested his displeasure to Drake. He had been informed — misinformed — by Drake that there was nothing he could do but complete the transaction. It is true that Drake’s optimism about the market had made both McCurnin and Drake sanguine that all might turn out well, but this false hope was never transmuted by McCurnin into approval of Drake’s actions.” The Court held that the burden of proving ratification was on the broker and an intention to ratify an unauthorized act cannot be inferred when the conduct can be otherwise explained. For ratification to be implied, it must be shown that the principal actually had knowledge of the material and pertinent facts. Here the judge was entitled to conclude that the customer’s error, whether error of law or fact, was clearly induced by the broker. The court held that the customer’s effort to repudiate the unauthorized transaction was defeated by the broker. Though the trial court agreed that the customer owed a duty to minimize his damages, it found that he had acted with reasonable promptness under the circumstances. Immediately upon learning that the broker required that he liquidate his position before they would consider making any adjustment, Mc-Curnin ordered the cotton futures sold. These were essentially all factual questions. The Judge found the facts. There it ends. Affirmed. . As a discussion of the basis alleged for these federal claims and the reasons for the trial court’s rejection of them would add nothing to the disposition of this appeal, we abstain analysis. . In deciding to assume pendent jurisdiction of the state claim the trial court correctly made the following determinations : (i) that the federal question raised was not “unsubstantial and frivolous;” (ii) that the state claims arose from identical facts on which the federal remedies were sought; and (iii) that since the case had been fully tried, it was in the interest of justice as well as judicial economy that the issue be decided on what was already a complete record. . The suit below was for $15,286.45. This was the amount of his credit balance at the time of the loss. The broker counterclaimed for $11,438.55, the amount remaining due if the customer had to bear the loss. . Article 3010 of the Louisiana Civil Code provides: “Art. 3010. The attorney cannot go beyond the limits of his procuration; whatever he does exceeding his power is null and void with regard to the principal, unless ratified by the latter, and the attorney is alone bound by it in his individual capacity.” Article 3003 of the Louisiana Civil Code provides in part: “Art. 3003. The attorney is responsible, not only for unfaithfulness in his management, but also for his fault or neglect.”

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David J. POWERS, a minor, by and through his Father and Next Friend, Edward J. Powers, Appellant, v. Cherry E. WONG and K. C. Wong, Appellees. No. 72-1355. United States Court of Appeals, Eighth Circuit. Submitted Jan. 10, 1973. Decided March 13, 1973. Thomas J. Walsh and Michael R. O’Malley, Omaha, Neb., for appellant. Stephen G. Olson, Omaha, Neb., on brief for appellees. Before MATTHES, Chief Judge, BRIGHT, Circuit Judge, and TALBOT SMITH, District Judge. Hon. Talbot Smith, Senior United States District Judge, Eastern District of Michigan, sitting by designation. PER CURIAM. This case involves a collision between an automobile owned and used by defendants Cherry E. Wong and K. C. Wong, driven by defendant Cherry Wong, and a motorcycle owned and driven by plaintiff David J. Powers. The collision occurred as plaintiff was driving north on Highway 73-75 in Sarpy County, Nebraska, at the intersection with Chandler Road. Issues of negligence, contributory negligence and comparative negligence were submitted to the jury over plaintiff’s objections and the jury returned a verdict less in amount than plaintiff’s admitted special damages. Plaintiff filed Motion for a New Trial alleging that there was error in the Court’s submission to the jury of the issues of defendant’s negligence and of plaintiff’s contributory negligence, and comparative negligence, “but mainly asserts that the Court erred in submitting the question of contributory negligence to the jury.” As we held in Mittlieder v. Chicago & Northwestern Ry. Co., 413 F.2d 77 (8th Cir. 1969), “In determining the sufficiency of the evidence to submit the issue to the jury, the Nebraska standard enunciated in Howell v. Robinson Iron & Metal Co., 173 Neb. 445, 113 N.W.2d 548 (1962), that the conclusion must be ‘reasonably’ supported by circumstantial evidence is equivalent to the federal standard applicable in like circumstances that the conclusion should be within the range of ‘reasonable probability’.” (Footnote omitted) So far as the appellee is concerned, her conduct was obviously negligent. She proceeded to cross the highway after having observed from her stopped position that oncoming vehicles were only some 100 yards away (approximately 5 seconds of their estimated travel time). She entered the intersection without making sufficient observation of the oncoming vehicles (which had the right-of-way) to estimate their speed, and after such entry, as she proceeded forward, she (in her own words) “took [her] eyes off the Volkswagon and the motorcycle.” Lieutenant King’s, driver of the Volkswagon, evasive action was a swerve to his left, plaintiff’s was the application of his brakes (leaving 29 feet of skidmark), plus a swerve to the right, which, unfortunately, was not sufficient, impact occurring on defendant’s right door. We have searched the record and the briefs in our attempt to discover just what plaintiff did under these circumstances to reasonably justify a charge of contributory negligence. It is argued that Lieutenant King did not see the defendant’s vehicle until it entered his lane, “nor did the plaintiff, David Powers,” though there is no transcript reference in substantiation of Powers’ lack of comprehension and it is conceded by appellee that he had “no recollection at all of the happening of the accident.” Defendant argues, also, that although Lieutenant King was decelerating as he approached “this congested intersection”, the plaintiff was not. But the record is clear that although this is a dangerous and unusual intersection, far from being “congested”, the traffic “was extremely light” and there were no cars ahead. The reason that Lieutenant King was decelerating was not because of an approaching congested intersection but because he and the motorcycle had been side by side for about two miles and “Just before the accident, I had begun to decelerate because I don’t like to drive directly beside anyone. However, if the motorcycle was ahead of me at the time of the accident, it was only a split-second ahead.” We are constrained to hold, on the basis of this record, and viewing all of the evidence, together with reasonable inferences therefrom, in the light most favorable to the prevailing party, that there was insufficient evidence of contributory negligence to go to the jury. The case is reversed and remanded for new trial on the issue of damages only. . Memorandum and Order upon plaintiff’s Motion for New Trial. . Appendix 31 . Appendix 32

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Jean BAKER, Petitioner-Appellant, v. The SHERIFF OF SANTA FE COUNTY and the United States Marshal, Respondents-Appellees. No. 72-1849. United States Court of Appeals, Tenth Circuit. Submitted March 27, 1973. Decided April 25, 1973. E. Douglas Latimer, Marchiondo & Berry, Albuquerque, N. M., for petitioner-appellant. Victor R. Ortega, U. S. Atty., Albuquerque, N. M., for respondents-appellees. E. Douglas Latimer filed a memorandum in opposition to summary affirmance on behalf of appellant. Before LEWIS, Chief Judge, and PICKETT and McWILLIAMS, Circuit Judges. PER CURIAM. In 1967 Jean Baker, as a result of plea bargaining, entered pleas of guilty and sentence was imposed by the United States District Court for the Southern District of Florida. She commenced service of the sentence at the Federal Reformatory in Alderson, West Virginia from which she escaped in 1969 to the State of New Mexico where she was apprehended by federal authorities over two years later. Upon her arrest she sought state habeas corpus relief to retain her presence in New Mexico, and that action was removed to the United States District Court for the District of New Mexico. The amended federal habeas corpus petition alleged that the guilty pleas were prompted by promises that she would not be released to the custody of Switzerland officials for extradition purposes. Mrs. Baker is a Swiss citizen and an admitted escapee from a Swiss prison. In sum, the contention is that the plea bargain agreement was breached thereby rendering the pleas involuntary and the resulting confinement unlawful. The proceedings in the federal district court included an evidentiary hearing and were concerned primarily with the question of jurisdiction to entertain an action challenging the voluntariness of the Florida federal sentence. The court determined that it lacked jurisdiction to grant the requested relief and dismissed the petition for writ of habeas corpus. We agree. 28 U.S.C. § 2255 provides, in part: “An application for a writ of habeas corpus in behalf of a prisoner who is authorized to apply for relief by motion pursuant to this section, shall not be entertained if it appears that the applicant has failed to apply for relief, by motion, to the court which sentenced him, or that such court has denied him relief, unless it also appears that the remedy by motion is inadequate or ineffective to test the legality of his detention.” A federal prisoner seeking relief from his federal sentence has Section 2255 as his exclusive remedy. Duval v. Willingham, 390 F.2d 203 (10th Cir. 1968), cert. denied, 393 U.S. 877, 89 S.Ct. 175, 21 L.Ed.2d 149. “ ‘[T]he sole purpose [of Section 2255] was to minimize the difficulties encountered in habeas corpus hearings by affording the same rights in another and more convenient forum,’ [citation] (italics supplied) ;....” Kaufman v. United States, 394 U.S. 217, 221, 89 S.Ct. 1068, 1071, 22 L.Ed.2d 227 (1969). It is elementary that the remedy under Section 2255 is entirely adequate and effective to challenge the voluntariness of a guilty plea. We are unimpressed with the urging that this is a case of first impression, seeking specific enforcement of the plea bargain agreement, or that an escapee is not “in custody under sentence” for Section 2255 to apply. Our initial review of this case prompted its assignment to the summary calendar and notice of our contemplated summary disposition and an opportunity to oppose in a memorandum addressing the issue herein was extended. The retained attorney has submitted the memorandum. We have now carefully and thoroughly reviewed the files and records in this cause and are convinced that the judgment of the district court is correct. Affirmed.

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Virgil Gilbert LAWSON, Plaintiff-Appellant, v. W. J. ESTELLE, Director, Texas Department of Corrections, Defendant-Appellee. No. 72-3629 Summary Calendar. United States Court of Appeals, Fifth Circuit. March 23, 1973. Rehearing Denied May 18, 1973. Virgil Gilbert Lawson, pro se. Crawford C. Martin, Atty. Gen., Guy C. Fisher, Asst. Atty. Gen., Austin, Tex., for defendant-appellee. Before GEWIN, COLEMAN and MORGAN, 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. PER CURIAM: The district court denied the petition of Lawson, a Texas state prisoner, for the writ of habeas corpus. We affirm. Appellant was convicted upon trial by jury of burglary and recidivism, and was sentenced to life imprisonment. The conviction was affirmed on direct appeal, Lawson v. State, Tex.Cr.App. 1972, 482 S.W.2d 210. In his habeas petition filed in the court below, appellant contended that evidence was introduced at this trial which was the product of an illegal search and seizure. He alleged that he was arrested by officers who were at the scene to arrest others; that the police at that time had no knowledge of the crime for which appellant was subsequently convicted; that the evidence was taken from appellant’s automobile without probable cause. As the district court found, and as the trial transcript reveals, the facts are as follows: Police, armed with a warrant, went to an apartment house to arrest a Judy Patterson. After arresting her and another woman on a narcotics charge and while still in the apartment, appellant and his codefendant, Norris, approached. One of the women yelled, “Police”, and the two men fled, but were pursued and apprehended by police. During the chase appellant threw away a money sack from which money spilled. Meanwhile, an officer who had remained in the parking lot had observed appellant and Lawson park their automobile, open the trunk, and remove something. They left the lot, leaving the trunk open. The officer observed an open suitcase, tools and other items in the trunk. After appellant was arrested, the officers went to the auto and removed items including burglary tools and a screwdriver taken from the store appellant had burglarized. Under the evidence, there was no illegal search and seizure and the evidence was admissible under the “plain view” doctrine, Harris v. United States, 1968, 390 U.S. 234, 88 S.Ct. 992, 19 L. Ed.2d 1067; Patterson v. Stynchcombe, 5 Cir., 1971, 440 F.2d 787; Walker v. Beto, 5 Cir., 1971, 437 F.2d 1018. Appellant also contended that he was denied counsel to present oral argument on his pro se brief on direct appeal. The contention is utterly frivolous. The appellant was represented by court-appointed counsel on direct appeal who presented oral argument on appeal. On a motion for a rehearing, counsel waived oral argument. Appellant was not deprived of any constitutional right. There being no clear error in the findings of the district court, the judgment below is Affirmed.

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Billy Homer FERGUSON, Petitioner-Appellant, v. A. L. DUTTON, Warden, Georgia State Prison, Reidsville, Ga., Respondent-Appellee. No. 71-1827 Summary Calendar. United States Court of Appeals, Fifth Circuit. March 21, 1973. Walter H. Wingfield, Atlanta, Ga., C. Ronald Ellington, Athens, Ga. (Court Appointed), for petitioner-appellant. Arthur K. Bolton, Atty. Gen. of Ga., Dorothy T. Beasley, Atlanta, Ga., for respondent-appellee. Before JOHN R. BROWN, Chief Judge, and INGRAHAM and RONEY, 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. PER CURIAM: Appellant, Billy Homer Ferguson, a white man, presently under sentence of life imprisonment as a result of his conviction for first degree murder, here appeals from the District Court’s denial of his petition for habeas corpus. Although several other substantial consti-tutional questions are raised, the gravamen of Appellant’s complaint concerns the systematic exclusion of Blacks from the grand jury that indicted him and the petit jury that convicted him. Consistent with the then controlling rule in this Circuit the District Court held that Ferguson, a white man, did not have standing to complain of the systematic exclusion of Blacks from his Douglas County, Georgia, grand and petit juries. But the tenor of the law was greatly altered by the opinion of the United States Supreme Court in Peters v. Kiff, 1972, 407 U.S, 493, 92 S.Ct. 2163, 33 L.Ed.2d 83, holding as follows: “If [white] petitioner’s allegations are correct, and Negroes were systematically excluded from his grand and petit juries, then he was indicted and convicted by tribunals that fail to satisfy the elementary requirements of due process, and neither the indictment nor the conviction can stand.” This Court has recently determined that the state courts should be given a first opportunity to pass on the validity of a habeas petitioner’s Peters v. Kiff challenge to the jury array. In Mosley v. Smith, 5 Cir., 1973, 470 F.2d 1320 we held: “In line with the settled doctrine of requiring exhaustion of state remedies prior to seeking federal relief, we decline and the District Court should decline to consider this question absent exhaustion of the state habeas corpus remedy which is presently available to Appellant. Ga.Code, § 50-127 (Acts 1967, pp. 835, 836).” Accordingly, we remand to the District Court to allow the question to be presented to the courts of Georgia. Remanded. . See Mosley v. Smith, 5 Cir., 1968, 404 F.2d 346; Woodruff v. Breazeale, M.D. Miss., 1967, 291 F.Supp. 130, affirmed, 5 Cir., 1968, 401 F.2d 997. See also this Court’s decision in Peters v. Kiff, 5 Cir., 1971, 441 F.2d 370, reversed, 1972, 407 U.S. 493, 92 S.Ct. 2163, 33 L.Ed.2d 83. . In his excellent brief, Petitioner suggests that the exhaustion doctrine is inappropriate for this particular case. “Like Peters, Ferguson first raised the issue of systematic exclusion in a petition for habeas corpus found in the Federal District Court, having made no objection at trial. Like Peters, Ferguson clearly cannot be deemed to have waived his right to object to discriminatory jury selection. Similarly, Ferguson has satisfied the requirement that he exhaust state remedies, since recent and unambiguous decisions of the Georgia Supreme Court foreclose such claims in the Georgia courts unless timely presented. Strauss v. Grimes, 1967, 223 Ga. 834, 158 S.E.2d 404; Brawner v. Smith, 1969, 225 Ga. 296, 167 S.E.2d 753; Cobb v. State, 1962, 218 Ga. 10, 126 S.E.2d 231.” The short answer to this argument is that the very similarity between Peters and Ferguson which Petitioner so effectively demonstrates compels us to give the state of Georgia an opportunity to construe the effect of Peters v. Kiff on a Georgia case. Mobley v. Dutton, 5 Cir., 1967, 380 F.2d 14; Mobley v. Smith, 5 Cir., 1971, 443 F.2d 846; Milton v. Wainwright, 5 Cir., 1968, 396 F.2d 214. Cf. Wynn v. Smith, 5 Cir., 1971, 446 F.2d 341, 344-347.

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SPLENDOUR SHIPPING & ENTERPRISES COMPANY, INC., et al., Plaintiff-Appellant, v. BOARD OF COMMISSIONERS OF the PORT OF NEW ORLEANS, Defendant-Appellee. No. 72-1535. United States Court of Appeals, Fifth Circuit. May 1, 1973. Paul A. Nalty, New Orleans, La., for plaintiff-appellant. Cornelius G. Van Dalen, New Orleans, La., for defendant-appellee. Before TUTTLE, WISDOM and SIMPSON, Circuit Judges. PER CURIAM: The suit below arose from a collision between the vessel Ocean Splendour and the Florida Avenue Bridge, which spans the New Orleans Industrial Canal in Orleans Parish, Louisiana. The Ocean Splendour is owned by petitioner, Splendour Shipping and Enterprises Company (Splendour), a Liberian corporation, and the bridge is owned and operated by the Board of Commissioners of the Port of New Orleans (Dock Board). Splendour sued in admiralty for recovery of damages to its vessel, Ocean Splendour, and sought to have the Florida Avenue Bridge declared a “hazard to navigation.” The Dock Board moved for a dismissal of the complaint on the grounds that as an agency of the State of Louisiana the Dock Board enjoys sovereign immunity from suit in tort. Judge Heebe of the district court denied the motion to dismiss, but certified the question of the Board’s sovereign immunity from suit in tort for immediate interlocutory appeal to this Court under Title 28, U.S.C., Section 1292(b). This Court granted leave to appeal from the interlocutory order. We withheld decision pending decision of this Louisiana law question by the Supreme Court of Louisiana in a related case. According controlling weight to that court’s ruling, which has now been declared, we affirm. The lower court’s decision correctly anticipated the view taken by the highest court of Louisiana. In a companion case arising out of the same collision, the Dock Board brought suit against Splendour in a Louisiana court for damages to the bridge; Splendour reconvened against the Dock Board for the damages to its vessel. Splendour’s reconventional demand was dismissed by the state trial court on the grounds that the Dock Board, as an agency of the State of Louisiana, enjoys sovereign immunity from suit in tort; the Louisiana Court of Appeal for the Fourth Circuit affirmed, Board of Commissioners v. Splendour Shipping & Enterprises Co., Inc., La.App.1971, 255 So. 2d 869. On January 15, 1973, the Supreme Court of Louisiana reversed, Board of Commissioners of the Port of New Orleans, An Agency of the State of Louisiana, La.Sup.Ct.1973, 273 So.2d 19. The Supreme Court of Louisiana held that since the doctrine of sovereign immunity in Louisiana was a creation of the judiciary, it could be judicially abolished. Noting that the doctrine of sovereign immunity is unfair, that it tends toward governmental irresponsibility, and that it violates the policy of the Louisiana Constitution, Id., slip. op. at 16-17, the Supreme Court of Louisiana held “. . . that the Board of Commissioners of the Port of New Orleans, and other such boards and agencies, are not immune from suit for tort.” Id., slip. op. at 18. Since the Dock Board clearly does not enjoy sovereign immunity from suit in tort as a matter of state law, it may not assert that defense to an action brought in federal court, cf. Centraal Stikstof Verkoopkantoor, N. V. v. Alabama State Docks Department, 5 Cir. 1969, 415 F.2d 452, 457. Further, this Court has held that a federal court is not barred by the Eleventh Amendment from asserting jurisdiction over the Dock Board based on diversity of citizenship, C. H. Leavell & Co. v. Board of Commissioners of the Port of New Orleans, 5 Cir. 1970, 424 F.2d 764. A different result is not mandated when the admiralty jurisdiction of a federal court is invoked. Affirmed.

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Van Ray MILLS, Petitioner-Appellant, v. Dr. George BETO, Director, Texas Department of Corrections, Respondent-Appellee. No. 72-3052. United States Court of Appeals, Fifth Circuit. April 9, 1973. Rehearing and Rehearing Eh Banc Denied May 10, 1973. Van Ray Mills, pro se; Donald L. Kraemer, Staff Counsel for Inmates, Tex. Dept. of Correction, Huntsville, Tex., for petitioner-appellant. John L. Hill, Atty. Gen., Howard Fender, Lang A. Baker, Asst. Attys. Gen., Austin, Tex., for respondent-appellee. Before AINSWORTH, GODBOLD and CLARK, Circuit Judges. AINSWORTH, Circuit Judge: This is an appeal by Van Ray Mills, appellant, from the denial of habeas corpus in a Texas state criminal matter. The facts are succinctly stated by respondent Beto, Director of the Texas Department of Corrections, in his brief as follows: In 1954, while imprisoned in the State of Oklahoma, Appellant was charged in Grayson County, Texas, with the criminal offense of forgery and passing. The Texas authorities issued an arrest warrant on this charge and also lodged a detainer against him at the Oklahoma State Penitentiary. In December, 1958, Appellant escaped from the Oklahoma State Penitentiary and fled to Grayson County, Texas, where he committed an armed robbery and stole an automobile. Appellant was captured in Grayson County, Texas, three days after his escape from the Oklahoma Penitentiary. In January of 1959, Appellant was indicted in Grayson County, Texas, for the theft and armed robbery committed after his escape and also for the 1954 offense of forgery and passing. On January 19, 1959, Appellant entered a plea of guilty in the 15th District Court of Grayson County, Texas, to all three of these offenses and was sentenced to ten years for theft of the automobile, twenty-five years for robbery by assault, and seven years for the 1954 forgery and passing indictment. These sentences were to run concurrently. Subsequently, in response to a request from the Governor of Oklahoma, the Governor of Texas executed an unconditional warrant for the extradition of Appellant to Oklahoma on the charges of assault with intent to kill in connection with his escape from the Oklahoma Penitentiary and also to complete the service of his original sentence in Oklahoma. In 1967, Appellant completed serving his original sentence as well as the sentence assessed in connection with his escape. Because of the detainer lodged in 1954 by Texas relating to the forgery and passing charge, the Oklahoma Penitentiary authorities notified the Sheriff of Grayson County, Texas. Appellant signed a waiver of extradition and returned to Texas. Appellant’s contentions are twofold. First, he contends that when Texas permitted his extradition to Oklahoma under an unconditional warrant, its action constituted a waiver of jurisdiction and is equivalent to a pardon or commutation of sentence. Secondly, that the failure of Texas to give him “good time” credit on his Texas sentence for the period of incarceration in the Oklahoma Penitentiary deprived him of constitutional rights under the Fourteenth Amendment. On his first contention appellant relies most strongly on our decision in Shields v. Beto, 5 Cir., 1967, 370 F.2d 1003, to the effect that the unconditional release to Oklahoma before expiration of his Texas sentence constituted a waiver of jurisdiction. However, we held in Shields that delivery of the prisoner to Louisiana authorities by Texas before expiration of the prisoner’s Texas sentence constituted a waiver of jurisdiction over Shields, “especially where the surrendering sovereign (Texas) showed no interest in the return of the prisoner, either by agreement between the sovereigns, by detainer, or any other affirmative action taken by it following his release in Louisiana.” 370 F.2d at 1005-1006. Texas showed no interest in Shields until a lapse of 28 years after he was extradited by Texas to Louisiana, and 18 years after he was paroled from the Louisiana Penitentiary, free to go as he pleased. See also Bilton v. Beto, 5 Cir., 1968, 403 F.2d 664, 665. In the present case, differing from Shields, appellant upon his release by Oklahoma was placed in custody of Texas police officers who were waiting at the jail house door to return him to Texas to serve his sentence there. He was not free even for a moment. He was released to Texas authorities because of the pendency of the original 1954 detainer placed by Grayson County, Texas, officials. There is no indication whatsoever here that Texas had abandoned its interest in appellant or that it intended to waive jurisdiction in his case. The facts are all to the contrary. Texas’ action, therefore, in releasing defendant to Oklahoma cannot be inferred as a waiver of jurisdiction or the granting of pardon or commutation of sentence. There is no merit to appellant’s second contention that he was entitled to “good time” credit on his Texas sentence for the period while he was incarcerated in Oklahoma. Texas did accord him “straight time” for the period served in Oklahoma but declined to credit him with “good time” for that period. See Bilton v. Beto, 5 Cir., 1968, 403 F.2d 664; Beto v. Sykes, 5 Cir., 1966, 360 F.2d 411; McGinnis, Commissioner v. Royster, 410 U.S. 263, 93 S.Ct. 1055, 35 L.Ed.2d 282. Affirmed.

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TUPPERWARE COMPANY, a division of Dart Industries, Inc., Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent. No. 72-1784. United States Court of Appeals, Sixth Circuit. April 17, 1973. Newell N. Fowler and Arnold E. Perl, Fowler, Young & Perl, Memphis, Tenn.; Jack G. Hall, Los Angeles, Cal., for petitioner. Marcel Mallet-Prevost, Asst. Gen. Counsel, N. L. R. B., Washington, D. C., John J. A. Reynolds, Jr., Director, Region 26 N. L. R. B., Memphis, Tenn., for respondent. Before WEICK, MILLER and KENT, Circuit Judges. ORDER This case is before this Court upon the petition of Tupperware Company for review of an order entered by the National Labor Relations Board finding it guilty of violating Section 8(a)(3) and (1) of the National Labor Relations Act, by discharging its employee Wade Richardson because of his union activities. The Board requests the court to deny the petition for review and to enter an order of enforcement of its order. The sole question before the court is whether there is substantial evidence in the record as a whole to support the finding of the Board that the employee was discharged because of his union activities. Having fully examined the record, we are of the opinion that the Board’s order is supported by substantial evidence. The petition of the company for review will therefore be denied and the Board’s order against the company finding it guilty of violating the Act will be enforced.

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Edelmira Legarreta de URIAS, Plaintiff-Appellee, v. EL PASO CITY LINES, Defendant-Appellant. No. 72-3507 Summary Calendar. United States Court of Appeals, Fifth Circuit. April 18, 1973. Schuyler B. Marshall, James L. Gallagher, El Paso, Tex., for defendant-appellant. Ben A. Endlich, D. Clark Hughes, El Paso, Tex., for plaintiff-appellee. Before WISDOM, AINSWORTH and CLARK, Circuit Judges. Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of N. Y., 431 F.2d 409, Part I (5th Cir. 1970). PER CURIAM: Mrs. Urias was injured when she was pinned between an iron fence surrounding a reboarding area at the international border and a streetcar operated by El Paso City Lines [El Paso]. The trial judge found that El Paso was negligent in that it made no effort to ensure that transit system passengers used the gate provided for their safe passage, even though it knew that sixty percent of its passengers followed the hazardous path between the fence and the streetcar tracks. While the court correctly submitted the question of the plaintiff’s contributory negligence to the jury, which returned a verdict in favor of Mrs. Urias, it erred in refusing to also submit the defendant’s requested volenti issue to the jury; thus we must vacate and remand for a new trial. There was sufficient evidence from which the jury could have concluded that Mrs. Urias knew of the danger, appreciated its nature and extent, and nevertheless voluntarily encountered the risk. Though Mrs. Urias testified that she did not hear or see the streetcar, there was ample evidence from which the jury could conclude that, in spite of her denial, she knew of the proximity of the streetcar to the fence. According to El Paso’s witnesses, the streetcar was moving toward the reboarding area at a slow rate of speed, with its bell clearly ringing. Further, the movement of the streetcar made a substantial amount of noise. Other passengers heard the streetcar approaching and stepped back.. The front end of the streetcar had already passed the fence into the reboarding area when the plaintiff suddenly seemed to rush or hurry through the small opening between the end of the fence and the streetcar. In sum, the testimony presented a jury question as to whether Mrs. Urias was kware of the oncoming streetcar but unsuccessfully attempted to beat it. Texas law is well settled that the defense of contributory negligence and volenti non fit injuria are two independent and separate legal theories, either of which constitutes a defense to a negligence action. See J & W Corp. v. Ball, 414 S.W.2d 143 (Tex.1967); Halepeska v. Callihan Interests, Inc., 371 S.W.2d 368 (Tex.1963); McKee v. Patterson, 153 Tex. 517, 271 S.W.2d 391 (1954); Messick v. General Motors Corp., 460 F.2d 485 (5th Cir. 1972). Under the facts of this case the defendant was entitled to have not one but both of these issues submitted to the jury. Moreover, we are unable to say that reasonable men considering all of the evidence in the case could have drawn no conclusion other than that of the defendant’s negligence. Boeing v. Shipman, 411 F.2d 365 (5th Cir. 1969). A lengthy recital of the facts is unnecessary. Suffice it to say that an examination of the record in this case demonstrates that, as in most negligence cases, the question was one for the jury. See Taylor v. Bair, 414 F.2d 815 (5th Cir. 1969). Should the evidence be substantially similar on retrial the issue should be submitted for jury determination. Vacated and remanded.

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Thomas C. EWERT et al., Plaintiffs-Appellees, v. WROUGHT WASHER MFG. CO., a corporation, Defendant-Appellant. No. 72-1175. United States Court of Appeals, Seventh Circuit. Argued March 1, 1973. Decided April 3, 1973. Rehearing Denied May 2, 1973. Albert H. Petajan, Barton M. Peck, Milwaukee, Wis., for defendant-appellant. Harold C. Nystrom, Associate Sol., Bobbye D. Spears, Atty., U. S. Dept. of Labor, Washington, D. C., Morton Hollander, Chief, App. Section, U. S. Dept. of Justice, Washington, D. C., David J. Cannon, U. S. Atty., Milwaukee, Wis., for plaintiffs-appellees. Before FAIRCHILD, STEVENS, Circuit Judges, and CAMPBELL, Senior District Judge. . Senior District Judge Campbell of the Northern District of Illinois is sitting by designation. PER CURIAM. This is an appeal by defendant from a judgment for plaintiffs, opinion reported, Ewert v. Wrought Washer Mfg. Co., 335 F.Supp. 512 (E.D.Wis.1971). We affirm, relying, as did the district court, on Accardi v. Pennsylvania R. Co., 383 U.S. 225, 86 S.Ct. 768, 15 L.Ed.2d 717 (1966) and Eagar v. Magma Copper Co., 389 U.S. 323, 88 S.Ct. 503, 19 L.Ed. 2d 557 (1967). According to the collective bargaining agreement in Eagar, the length of paid vacation and the amount of holiday pay depended upon seniority; eligibility for vacation at the time applied for was conditioned on presence at work a percentage of the immediately preceding year and on the date of application; holiday pay was conditioned on being on the payroll for the preceding three months. Similarly, in the case before us, the length of vacation was dependent on seniority; eligibility in a given calendar year required presence at work to a specified extent in the preceding calendar year. The district court seems to have said that contractual vacation rights are always perquisites of seniority, and that there could be no contractual provision under which vacation rights would fall into the class of other benefits. “We believe, however, that Eagar, in holding that vacation benefits are perquisites of seniority, dictates that resort cannot be had to the collective bargaining agreement to determine the nature of those benefits.” 335 F.Supp. 514. Government counsel, appearing for plaintiff, does not argue so broadly, and stresses the relationship between seniority and vacation rights in the collective bargaining agreement in this case. Several court of appeals decisions have held that Eagar required classifying vacation rights as perquisites of seniority. Locaynia v. American Airlines, Inc., 457 F.2d 1253 (9th Cir. 1972) and cases therein cited. Two have held that, under particular contracts, vacation rights are not perquisites of seniority. Dugger v. Missouri Pacific Railroad Company, 276 F.Supp. 496 (S.D.Tex.1967), decided before Eagar, but affirmed after Eagar, 403 F.2d 719 (5th Cir. 1968), cert. denied 395 U.S. 907, 89 S.Ct. 1752, 23 L.Ed.2d 222; Kasmeier v. Chicago, Rock Island and Pacific Railroad Co., 437 F.2d 151 (10th Cir. 1971). Whatever one may conclude about the correctness of Dugger and Ka,smeier with respect to the contracts there considered, we have no difficulty in concluding, under Eagar’s application of Accardi, that the vacation rights under the contract in this case are perquisites of seniority. Accordingly it is unnecessary to decide that there are no conceivable contractual provisions under which vacation rights are so purely additional compensation for services actually rendered, and so independent of seniority that Eagar would not apply. Much of what was said in Foster v. General Motors Corp., 191 F.2d 907 (7th Cir. 1951), relied on by defendants, is no longer correct in the light of Eagar, and the rationale expressed for Connett v. Automatic Electric Company, 323 F.Supp. 1373 (N.D.Ill.1971), must also yield. The judgment is affirmed.

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UNITED STATES of America, Plaintiff-Appellee, v. William CRAIG, Defendant-Appellant. No. 72-1922. United States Court of Appeals, Sixth Circuit. Argued Feb. 15, 1973. Decided April 25, 1973. Cornelius Pitts, Detroit, Mich., for defendant-appellant. William C. Ibershof, Asst. U. S. Atty., E. D. Mich., Detroit, for plaintiff-appellee; Ralph B. Guy, Jr., U. S. Atty., on brief. Before PHILLIPS, Chief Judge, MILLER, Circuit Judge, and Mc-ALLISTER, Senior Circuit Judge. McALLISTER, Sénior Circuit Judge. Defendant was convicted on two counts of selling narcotics. There were two government witnesses who were special agents — one, the buyer in the transaction, and the other, the witness of the sales. The defendant appeals the conviction and raises two issues. It appears that a woman, who was a narcotic-user herself, was the go-between. She had been arrested on the charge and was out on bail. Through her, the special agents learned of the man who had procured narcotics for her and had used them while with her on many occasions. One of the special agents had been introduced to defendant and to the woman go-between by another spécial agent. The agent, with the woman go-between, referred to as an informant, went to see defendant at his home. According to the agent’s testimony, he asked defendant if he could purchase heroin from him and defendant answered that he could. Defendant told the agent that the heroin was of good quality; that the charge would be $350.-00 an ounce; and if the heroin were found unsatisfactory, a refund would be made. They then went to a certain house where the agent gave defendant the money and, in turn, received the narcotics. The two agents testified to similar transactions in which defendant afterward sold additional heroin to them. In some instances the woman go-between, or informer, was in the car with defendant and one or the other of the agents when they drove to the house where defendant procured the narcotics. Defendant testified that when he went to the house mentioned to secure the narcotics, the money for the purchase of the narcotics was handed to the go-between, or informer, and she turned the money over to the defendant. In addition, the defendant stated that when he procured the narcotics from the house, he handed them to the go-between, who then handed them over to the agent. The defendant also stated he was told by the go-between that the special agént was an out-of-town dealer in narcotics and she wanted defendant to get some drugs for her to give to the agent in return for the money received from the agent and handed to the defendant. Moreover, and this point is pertinent, the defendant stated that for his services in procuring the narcotics, he received some drugs for himself, and that “it helps when you haven’t got no money and you haven’t had no drugs that day, to run into somebody who is looking for some nice drugs.” Defendant also said that he and the go-between and the agent all engaged in discussion about the narcotics and their prices. Defendant claims that upon his request, the Government was required to produce the informant in court. We do not agree. The government is not ordinarily compelled to call all witnesses competent to testify including special agents or informers. United States v. Mosby, 422 F.2d 72, 74 (C.A. 8), cert. denied 399 U.S. 914, 90 S.Ct. 2217, 26 L.Ed.2d 571. The evidence upon which the appellant was convicted was secured by government agents personally and was in no way dependent on any informer. United States v. Key, 371 F.2d 421, 423 (C.A.6). The Government was not required to produce the informer under the circumstances of this case; and we find defendant’s contention in this regard to be without merit. Defendant also claims error because, during the jury deliberations, the trial judge, in answer to a question from the jury as to whether it could recommend leniency, stated it could not make such a recommendation. However, the judge, in his response, stated that sentencing was solely the function of the judge, but that the processing of sentencing was carried out very carefully, with three judges taking part in a consultation and, after a discussion of the case, with the Probation Department. We are of the opinion that the judge’s statement in no way influenced the jury or pressured it into believing that leniency would be granted. See, however, United States v. Davidson, 367 F.2d 60, 64 (C.A.6) as a cautionary suggestion in cases similar to the instant case, and Smith v. United States, 230 F.2d 935, 940, where this Court declared: “It is best simply to advise the jury that they have nothing to do with the penalty.” Erwin v. United States, 242 F.2d 336 (C.A.6) was an embezzlement case. The trial judge instructed the jury that if it should appear that the defendant did not receive any money “ ‘that would be a circumstance that should be taken into consideration by the Court in determining what sentence should be imposed.’ ” The Court said: “We do not consider this reversible error, in the instant case; but in other cases, according to circumstances or the language of the instructions, such language might well be suggestive and prejudicial; and it is good practice for a trial court not to refer to the possibilities of sentencing in his instructions.” In accordance with the foregoing, the judgment is affirmed.

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Lera H. STARK, Appellant, v. UNITED STATES of America, Appellee. William P. STARK, Appellant, v. UNITED STATES of America, Appellee. Nos. 72-1579, 72-1580. United States Court of Appeals, Eighth Circuit. Submitted Feb. 16, 1973. Decided April 12, 1973. Rehearing Denied May 9, 1973. John I. Wassberg, Kansas City, Mo., for appellant. Joseph M. McManus, Atty., Tax Div., Dept. of Justice, Washington, D. C., for appellee. Before LAY and BRIGHT, Circuit Judges, and NICHOL, District Judge. Sitting by designation. PER CURIAM. We are presented with the question whether, in order to claim the $3,000 gift tax exclusion pursuant to 26 U.S.C. § 2503(b), a taxpayer might satisfy his burden of proving that an income interest in a trust has “ascertainable value,” by reference to the actuarial tables found in Treas.Reg., 26 CFR § 25.2512-5 (c). The taxpayers made gifts of the stock of a closely held corporation to three trusts, for the benefit of each of the taxpayers’ three minor grandchildren. The beneficiaries were to receive the net income from the trusts until each reached the age of 30, at which time the beneficiaries could terminate the trusts and receive the trust corpus. The parties agree that the gifts of the shares of stock to the trusts constitute gifts of future interests and thus are not subject to the annual exclusion, but the taxpayers claim that their making the gifts of the income from the stock entitles each to the annual exclusion of $3,000 for each beneficiary of the trusts pursuant to § 2503(b). The taxpayers based their asserted right to the exclusions on the argument that the right of the beneficiaries to the net income of the trusts was a present interest and was capable of valuation by the use of the actuarial tables prepared by the Commissioner in Treas.Reg. § 25.2512-5 (c). The Government argued that since the stock of the corporation had never been publicly traded and since no dividends had been paid on the stock since 1950, the taxpayers had not established an “ascertainable value” for the right to the income from the stock held in trust. The undisputed evidence indicates, and the district court specifically found, that there was little possibility that any income would be forthcoming to the beneficiaries from the trusts in question. Under these circumstances, we hold that the income interest had no ascertainable value, and that the taxpayers cannot be allowed to assert a value for the income interest simply by using the actuarial tables of Treas.Reg. § 25.2512-5(c). Van Den Wymelenberg, supra, 397 F.2 at 443; Fischer, supra, 288 F.2d at 574; Morgan, supra, 42 T.C. at 1080; Hamm, supra, 20 CCH Tax Ct.Mem. at 1814; Newmaker, supra, 12 CCH Tax Ct.Mem. at 232. See Mercantile-Safe, supra, 311 F.Supp. at 670; Pettus, supra, 54 T.C. at 112. Rosen v. Comm’r, 397 F.2d 245 (4th Cir. 1968), cited and relied upon by appellant, is distinguishable. The district court opinion recites the facts in detail and demonstrates the correctness of the Government’s position in this case. We, therefore, affirm on the basis of that opinion. Stark v. United States, 345 F.Supp. 1263 (W.D.Mo.1972). . In order for a gift to be subject to the § 2503(b) exclusion, two requirements must be satisfied. First, the gift must not be a gift of a future interest, as that term is defined in Treas.Reg., 26 CFR § 25.2503-3(a). Second, the gift must have an “ascertainable value.” This requirement of ascertainable value is one judicially imposed. See, e. g., Van Den Wymelenberg v. United States, 397 F.2d 443 (7th Cir.), cert. denied, 393 U.S. 953, 89 S.Ct. 377, 21 L.Ed.2d 364 (1968); Fischer v. Comm’r, 228 F.2d 574 (3d Cir. 1961); Funkhouser’s Trusts v. Comm’r, 275 F.2d 245 (4th Cir.), cert. denied, 363 U.S. 804, 80 S.Ct. 1237, 4 L.Ed.2d 1147 (1960); Mercantile-Safe Deposit and Trust Co. v. United States, 311 F.Supp. 670 (D.Md.1970); Pettus v. Comm’r, 54 T.C. 112 (1970); Morgan v. Comm’r, 42 T.C. 1080 (1964), aff’d, per curiam, 353 F.2d 209 (4th Cir. 1965), cert. denied, 384 U.S. 918, 86 S.Ct. 1364, 16 L.Ed.2d 439 (1966); Hamm v. Comm’r, 20 CCH Tax Ct.Mem. 1814, Dec. 25, 193(M) (1961), aff’d on other grounds, 325 F.2d 934 (8th Cir. 1963); Newmaker v. Comm’r, 12 Tax Ct.Mem. 232, Dec. 19, 499(M) (1953).

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Darrell G. NIMNICHT, Plaintiff-Appellant, v. DICK EVANS, INC., et al., Defendants-Appellees. No. 72-3125 Summary Calendar. United States Court of Appeals, Fifth Circuit. March 19, 1973. Darryl J. Tschirn, C. T. Williams, Jr., New Orleans, La., for plaintiff-appellant. John O. Charrier, Jr., New Orleans, La., for defendants-appellees. Before GEWIN, COLEMAN 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. PER CURIAM: This is a seaman’s action for damages for personal injuries sustained while working on a barge off the coast of Louisiana. Darrell G. Nimnicht was employed by Dick Evans, Inc. on Lay Barge No. 23 owned by J. Ray McDermott and Company, Inc. On February 13, 1970, Nimnicht was assigned to remove a small hand-operated hydraulic pump from a gondola cart on a total saturation diving system aboard Barge No. 23. The diving system was owned by Evans. This gondola cart was used to move a diving bell into position so that the divers could be transferred from the system to the bell and vice-versa. While in the process of removing this pump, Nimnicht sustained an injury to his back. Alleging the unseaworthiness of the barge and negligence of his employer, Nimnicht filed suit under the Jones Act and General Maritime Law against Evans, McDermott, and McDermott’s insurer, Travelers Insurance Company. The case was submitted to the jury on interrogatories. On the special interrogatories submitted to it, the jury found that Nimnicht was a seaman but that his employer was not negligent and that the barge was not unseaworthy. Nevertheless, in response to another interrogatory pertaining to compensatory damages, the jury entered an award of $13,500. In addition, the jury made certain findings regarding maintenance and cure which are not on appeal here. The relevant interrogatories answered by the jury are as follows: 1. Was plaintiff, Darrell G. Nimnicht, injured aboard McDermott Barge #23 on February 13, 1970? A. Yes. 2. Was plaintiff a seaman or a member of the crew of Mc-Dermott #23? A. Yes. 3. Was the barge McDermott #23 unseaworthy ? A. No. 5. Did Dick Evans own, operate, control or have an operational interest in the barge in question? A. Yes. 6. Was the defendant, Dick Evans, Inc., through its employees, negligent ? A. No. 9. Was the plaintiff, Darrell Nimnicht, negligent? A. No. 11. Without any reduction for negligence on the part of the plaintiff, if any, what amount do you find will fairly and adequately compensate plaintiff for the damages he sustained ? A. $13,500. After receiving the verdict responding to the interrogatories, the trial court pointed out to the jury that finding no negligence or unseaworthiness on the part of appellees there was no party which could be held liable to pay the damage award. Then, the Court, acting on the authority of Rule 49(b) F.R.Civ.P., entered judgment for appellees. Appellant moved for a new trial on the ground that the inconsistent verdicts evinced confusion on the part of the jury. Motion denied. He appeals. We affirm. There was no objection to the form of the interrogatories as propounded to the jury. It, therefore, is too late to complain on appeal, Wyoming Construction Company v. Western Casualty & Surety Company, 10 Cir., 1960, 275 F.2d 97, cert. denied 362 U.S. 976, 80 S.Ct. 1061, 4 L.Ed.2d 1011, Halprin v. Mora, 3 Cir., 1956, 231 F.2d 197. This leaves only the question of whether the trial court proceeded correctly in entering judgment for the appellees, notwithstanding the response to Interrogatory 11. For the answer to this we look to Rule 49(b), F.R.Civ.P., which provides: “The court may submit to the jury, together with appropriate forms for a general verdict, written interrogatories upon one or more issues of fact the decision of which is necessary to a verdict. The court shall give such explanation or instruction as may be necessary to enable the jury both to make answers to the interrogatories and to render a general verdict, and the court shall direct the jury both to make written answers and to render a general verdict. When the general verdict and the answers are harmonious, the appropriate judgment upon the verdict and answers shall be entered pursuant to Rule 58. When the answers are consistent with each other but one or more is inconsistent with the general verdict, judgment may be entered pursuant to Rule 58 in 'accordance with the answers, notwithstanding the general verdict, or the court may return the jury for further consideration of its answers and verdict or may order a new trial. When the answers are inconsistent with each other and one or more is likewise inconsistent with the general verdict, judgment shall not be entered, but the court shall return the jury for further consideration of its answers and verdict or shall order a new trial.” This case presents a situation in which the answers to the special interrogatories were consistent with each other but inconsistent with the findings as to the quantum of damages. Under Rule 49(b) the trial court had three alternatives: (1) to enter judgment in accordance with the special answers, notwithstanding the general verdict, (2) to return the jury for further deliberation, or (3) to order a new trial. The trial court chose the first alternative, holding, in effect, that the answers to the special interrogatories inexorably negated the award of damages. We are of the opinion that those findings left the District Court with no room to adopt any other course. In the absence of unseaworthiness or negligence, damages could not be awarded. The jury should not have responded to Interrogatory No. 11. The fact that it mistakenly did so could not change the answers to the prerequisite questions, upon which any damages at all had to live or die. The judgment of the District Court is Affirmed.

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RIDGEWOOD LAND COMPANY, INC., Petitioner-Appellee-Cross Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant-Cross Appellee. No. 72-2949. United States Court of Appeals, Fifth Circuit. March 23, 1973. Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Atty., Tax Div., U. S. Dept. of Justice, Lee H. Henkel, Jr., Chief Counsel, Raymond W. Sifly, Atty., Internal Revenue Service, Robert S. Watkins, Dept. of Justice, Tax Div., Washington, D. C., for appellant. Charles L. Brocato, Hugh C. Montgomery, Jackson, Miss., for appellee. Before WISDOM, GEWIN and COLEMAN, Circuit Judges. PER CURIAM: This case is here on briefs and oral argument in the appeal of the Commissioner of Internal Revenue from a decision of the Tax Court of the United States, filed January 19, 1972. The issue is whether, under the particular facts of the case, profits realized on 80.90 acres of land sold under direct threat of condemnation for public purposes are due to be taxed as ordinary income rather than as long-term capital gains. The Tax Court found as facts: (1) that Ridgewood Land Company, Inc., acquired the property in 1962, for development and sale to customers in the ordinary course of its business; (2) that on October 12, 1965, while the land was yet in an undeveloped state, the Mississippi State' Highway Department authorized its condemnation so as to acquire “fill dirt” for use on a highway construction project; and that (3) after Ridge-wood learned that its original plans could not be accomplished because of the impending condemnation, it changed those intentions and thereafter held the acreage for investment. Therefore, said the Tax Court, the acreage was a capital asset at the time of its sale to the construction contractor who expected to use it for the aforesaid purposes of the State Highway Department. Finding ourselves in agreement with the decision of the Tax Court on this point, its Judgment is affirmed. The taxpayer cross appeals the finding that the acreage was not originally acquired for investment. It is not necessary that we reach or decide that issue. On both appeal and cross-appeal, the Judgment of the Tax Court is Affirmed.

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UNITED STATES of America, Plaintiff-Appellee, v. Thomas DAVIDSON, Defendant-Appellant. No. 72-1869. United States Court of Appeals, Sixth Circuit. Decided April 30, 1973. Lee Larson, Isaac Schulz, Squire, Sanders & Dempsey, Cleveland, Ohio, for defendant-appellant. Frederick M. Coleman, U. S. Atty., Cleveland, Ohio, for plaintiff-appellee. Before McCREE, MILLER and KENT, Circuit Judges. PER CURIAM. This is an appeal from conviction after a trial without a jury for violation of 50 U.S.C. App. § 462(a), knowingly failing and neglecting to submit to induction into the Armed Forces of the United States. Appellant’s brief, which was filed January 15, 1973, presents as one of the issues on appeal the contention that there had been no waiver of a jury trial in writing with the approval of the court and the consent of the Government as required by Rule 23 of the Federal Rules of Criminal Procedure. Appellee has not filed its brief within the time stipulated by Rule 31, Federal Rules of Appellate Procedure, and the appeal has been referred to a panel of this court under Rule 3(e) of the Rules of the United States Court of Appeals for the Sixth Circuit. A careful examination of the record on appeal, including the docket entries and the transcript of testimony, does not reveal a waiver of jury trial. Accordingly, the judgment is reversed and the case is remanded for a new trial. See United States v. McCurdy, 450 F.2d 282 (9th Cir. 1971). Reversed and remanded.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Arthur L. PERRY, Plaintiff-Appellant, v. APEX SMELTING CO., Defendant-Appellee. No. 72-1961. United States Court of Appeals, Sixth Circuit. Argued April 4, 1973. Decided May 1, 1973. Charles B. Lyon, Donnelly, Maky, Renner & Otto, Cleveland, Ohio, for plaintiff-appellant. Gerald Palmer, Cleveland, Ohio, for defendant-appellee; Barry L. Springel, Jones, Day, Cockley & Reavis, Cleveland, Ohio, on brief. Before PHILLIPS, Chief Judge, and EDWARDS and PECK, Circuit Judges. PER CURIAM. Appellant appeals from a summary-judgment entered on defendant’s motion in plaintiff’s suit for damages against his employer, Apex Smelting Co. Plaintiff claims that he provided the company with an invention for pouring metal more efficiently which the company appropriated to its own use without any compensation to him. His complaint is phrased as an action for damages resulting from defendant’s appropriation of a trade secret belonging to him and as an action for damages resulting from unjust enrichment. We do not read the plaintiff’s deposition, when it is taken as a whole, as an admission by the plaintiff that he expected no consideration for submitting his invention to the company. The summary judgment for defendant on the trade secret claim is affirmed. The summary judgment as to plaintiff’s unjust enrichment action is reversed and the case is remanded for trial on that count.